Published on March 9, 2014
Chapter 14 Direct Marketing and Marketing Resellers: Retailers and Wholesalers 1
Objectives 1. 2. 3. 4. 5. 6. 7. 8. Explain the wheel of retailing. Discuss how retailers select target markets. Show how the elements of the marketing mix apply to retailing strategy. Explain the concepts of retail convergence and scrambled merchandising. Identify the functions performed by wholesaling intermediaries. Identify the major types of independent wholesaling intermediaries and the situations appropriate for each. Compare the basic types of direct marketing and non-store retailing. Explain how much the Internet has altered the wholesaling, retailing, and direct marketing environments. 2
What is What is Retailing?involved in selling goods or Retailing? All the activities services directly to final consumers for their personal, non-business use. Retailers - businesses whose sales come primarily from retailing. Retailers can be classified as: – Store retailers such as Giant, Bata, Isetan. – Nonstore retailers such as the mail, telephone, and Internet. (Kayla Baverly Hill, Smart Shop, vending machine) 3
What is Retailer? What is Retailer? Represent the distribution channel to most consumers Determine – – – – – – locations, store hours, quality and quantity of salespeople, store layouts, merchandise selections and return policies. 4
Wheel of Retailing Explains the patterns of change in retailing. A new type of retailer gains a competitive foothold by offering customers lower prices. Maintains profits by reducing or eliminating services. Once established the innovator adds more services and prices gradually rise. 5
Wheel of Retailing Low-end strategy • Low prices • Limited facilities and services • Price-sensitive Medium strategy • Moderate prices consumers • Improved facilities • Broader base of valueand service-conscious High-end strategy consumers • High prices • Excellent facilities and services • Upscale consumers 6
Retailing Strategy 1. Selecting a target market 2. Develop a retailing mix to satisfy the chosen market Retail Image 7
Retailing Strategy Controllable variables Selecting a target market Developing a retailing mix – Retailing mix specifies: Merchandise strategy Customer service standards Pricing guidelines Target market analysis Promotion goals Location/distribution decisions Store atmosphere Uncontrollable variables Retailing Strategy • • • • Consumers Competition Technology Economic conditions • Seasonality • Legal restrictions 8
1. Selecting Target Market Depend - on: Size and Profit Potential Level of competition 9
2. a. Merchandise strategy Category - Battle - Management seek to improve the retailer’s product category performance through more coordinated buying, merchandising, and pricing for Shelf Space slotting allowances seek pricing and concessions from manufacturers 10
2. b. Customer Service Strategy (Gift wrapping, consultation, delivery, installation, complimentary drinks, child care services etc) Depend on: Store size, type and location; Merchandise assortment; Services offered by competitors; Customer expectations, and Financial resources 11
2.c. Pricing Strategy Markup and Markdown The amount that a retailer adds to a product’s cost to set the final selling price. The amount of the markup typically results from: 1. The services performed by the retailer. 2. The inventory turnover rate. Typically state markups as percentages. Marketers determine markups based partly on their judgments. 12
2. d. Location/Distribution Strategy It depends on: Type of merchandise Financial resources Target market Site availability 13
2.e. Promotional Strategy Communicate about the store Location, Merchandise selection, Hours of operation, and Process Others 20
2.f. Store Atmospherics Strategy Combination of physical characteristics and amenities that attract customers and satisfy their shopping needs Store Exterior Interior décor - - Architectural design Window display signs entryways Store layout Merchandise presentation Lighting, Colour, Sounds, Scent, and Cleanliness 21
Defining Categories of Retailers Forms of ownership. Shopping effort (reason consumer shops). 3. Services provided to customers. 4. Product lines. 5. Locations of retail transactions. 1. 2. 22
1. Retailers by Form of Ownership Chain Stores – Chain stores are groups of retail outlets that operate under central ownership and management and handle the same product lines. Ex: GIANT hypermarket, Court Mammoth – Major advantage: economies of scale. – May advertise in a variety of media. Independent Retailers – Account for about 43 percent of all retail sales. – Traditional advantage of independent stores is friendly, personalized service. 23
2. Shopping by Store Type (shopping efforts) Convenience retailers focus their marketing appeals on accessible locations, long store hours, rapid checkout service, and adequate parking facilities. Ex. Seven-Eleven. Shopping stores include furniture stores, appliance retailers, clothing outlets, and sporting goods stores. – Consumers usually compare prices. Specialty retailers combine carefully defined product lines, services, and reputations. Ex Habib Jewels, Toys r us, Central Shoes, DaVinci etc 24
3. Classification by Services Consists of three retailer types: 1. Self-service. Ex. 7-Eleven 2. Limited Service Retailer. Ex Superstore 3. Full-service retailers. Ex. Boutique, specialty store 25
Classification by Product Lines 1. 1. 1. Specialty store typically handles only part of a single product. • Stocks in considerable depth or variety. • Typically carry convenience and shopping goods. Limited-line retailers • Customers find a large assortment of products within one product line or a few related lines. • Typically develops in areas with a large enough population to sufficiently support it. • Ex: Category Killers General Merchandise retailer • Carry a wide variety of product lines that are all stocked in some depth. • Ex: Variety store, department stores, Mass merchandise store (off price retailer, hypermarket and supercenters, and catalog retailer) 26
Classification By Product Line Classification By Product Line Store Type Specialty Stores Specialty Stores Department Stores Department Stores Supermarkets Supermarkets Convenience Stores Convenience Stores Superstores Superstores Category Killers Category Killers Hypermarkets Hypermarkets Length and Breadth of Product Assortment Narrow Product Line, Deep Assortment i.e. Narrow Product Line, Deep Assortment i.e. The Limited or Athlete’s Foot The Limited or Athlete’s Foot Wide Variety of Product Lines i.e. Clothing, Wide Variety of Product Lines i.e. Clothing, Home Furnishings, & Household Items Home Furnishings, & Household Items Wide Variety of Food, Laundry, & Household Wide Variety of Food, Laundry, & Household Products Products Limited Line of High-Turnover Convenience Limited Line of High-Turnover Convenience Goods Goods Large Assortment of Routinely Purchased Large Assortment of Routinely Purchased Food & Nonfood Products, Plus Services Food & Nonfood Products, Plus Services Giant Specialty Store that Carries aaVery Deep Giant Specialty Store that Carries Very Deep Assortment of aaParticular Line Assortment of Particular Line Huge Superstores Huge Superstores 27
What is Wholesaling? What is Wholesaling? All the activities involved in selling goods and services to those buying for resale or business use. Wholesaler - those firms engaged primarily in wholesaling activity. 29
Functions of Wholesaling Intermediaries Creating Utility: – Time, Place, Ownership, Possession Providing Services: – Buying, selling, storing, transporting, market info, financing and risk taking. Full function merchant wholesalers Lowering Cost by limiting contacts 30
Why are Wholesalers Used? Why are Wholesalers Used? Wholesalers are Often Better at Performing One or More of the Following Channel Functions: Providing Providing Services & Advice Services & Advice Market Market Information Information Risk Bearing Risk Bearing Wholesaler Functions Financing Financing Selling and Selling and Promoting Promoting Buying and Buying and Assortment Building Assortment Building Bulk Breaking Bulk Breaking Warehousing Warehousing Transportation Transportation 31
Type of Wholesaling Intermediaries Ownership Structure – Manufacturer-owned facilities Sales branch – carry inventory and process order Sales office – does not carry inventory Trade fair Merchandise mart – provides space for permanent showroom and exhibits – Independent wholesaling Intermediaries Merchant wholesaler Agents and brokers – Retailer-owned cooperatives 32
Independent Wholesaling Two types of wholesalers: – Full function merchant wholesalers – Limited function merchant wholesalers 33
Direct Marketing & Other Non Store Retailing Direct Mail Direct Selling Direct response Retailing Telemarketing Internet Retailing Automatic Merchandising (vending machine) 34
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