Marketing: An Introduction

Fifteenth Edition

Chapter 11
Retailing and Wholesaling

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Objectives Outline
11.1 Explain the role of retailers in the distribution channel
and describe the major types of retailers.
11.2 Discuss how retailers are using omni-channel marketing
to meet the cross-channel shopping behavior of today’s
digitally connected consumers.
11.3 Describe the major retailer marketing decisions.
11.4 Discuss the major trends and developments in retailing.
11.5 Explain the major types of wholesalers and their
marketing decisions.

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First Stop: Walmart: A Battle between
Titans in the New World of Retail

Walmart has invested heavily

to build its omni-channel
capabilities to better serve
today’s mobile-first, omni-
channel consumers.

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Objective Outline 11.1
Explain the role of retailers in the distribution channel and
describe the major types of retailers.

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Retailing: Connecting Brands with
Consumers
• Activities involved in selling goods or services directly to
consumers for their personal use
– Retailer: Business whose sales come primarily from
retailing

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The Shifting Retailing Model
• Shopper marketing: Focusing the entire marketing
process toward turning shoppers into buyers as they
approach the point of sale
• Omni-channel retailing: Creating a seam-less cross-
channel buying experience that integrates in-store, online,
and mobile shopping

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Types of Retailers
• Retailer classification can be based on
– Amount of service offered
– Breadth and depth of the product lines
– Relative prices charged
– Way they are organized

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Amount of Service
Self-service retailers
• Serve customers who are willing to perform their own
locate-compare-select process
Limited-service retailers
• Carry more shopping goods about which customers need
information
• Provide more sales assistance
Full-service retailers
• Carry more specialty goods
• Assist customers in every phase of the shopping process

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Major Store Retailer Types (1 of 2)
Type Description Examples
Specialty A store that carries a narrow product line with a deep assortment, such RE I, Sunglass Hut,
store as apparel stores, sporting-goods stores, furniture stores, florists, and Sephora,
bookstores. Williams-Sonoma
Department A store that carries several product lines—typically clothing, home Macy’s, Sears, Neiman
store furnishings, and household goods—with each line operated as a Marcus
separate department managed by specialist buyers or merchandisers..
Supermarket A relatively large, low-cost, low-margin, high-volume, self-service Kroger, Publix, Safeway,
operation designed to serve the consumer’s total needs for grocery and SuperValu.
household products.
Convenience A relatively small store located near residential areas, open 24/7, and 7-Eleven, Circle K,
store carrying a limited line of high-turnover convenience products at slightly Speedway, Sheetz
higher prices.
Superstore A very large store that meets consumers’ total needs for routinely Walmart Supercenter,
purchased food and nonfood items. This includes supercenters, SuperTarget, Meijer
combined supermarket and discount stores, and category killers, which (discount stores); Best Buy,
carry a deep assortment in a particular category. Petco, Staples, Bed Bath &
Beyond (category killers)
Discount A store that carries standard merchandise sold at lower prices with Walmart, Target, Kohl’s
store lower margins and higher volumes.
Off-price A store that sells merchandise bought at less-than-regular wholesale Mikasa (factory outlet); T J
retailer prices and sold at less than retail. These include factory outlets owned Maxx (independent off-price
and operated by manufacturers; independent off-price retailers owned retailer); Costco, Sam’s
and run by entrepreneurs or by divisions of larger retail corporations; Club, B J’s (warehouse
and warehouse (or wholesale) clubs selling a limited selection of goods clubs).
at deep discounts to consumers who pay membership fees.

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Major Store Retailer Types (2 of 2)
Discounter Dollar General, the
nation’s largest small-box
discount retailer, makes a
powerful value promise for the
times: “Save time. Save
money. Every day.”

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Major Types of Retail Organizations
Type Description Examples
Corporate Two or more outlets that are commonly owned and Macy’s (department
chain controlled. Corporate chains appear in all types of retailing stores), Target
but they are strongest in department stores, discount stores, (discount stores),
food stores, drugstores, and restaurants. Kroger (grocery
stores), CV S
(drugstores)

Voluntary Wholesaler-sponsored group of independent retailers Independent Grocers

chain engaged in group buying and merchandising. Alliance (IG A),
Western Auto (auto
supply), True Value
(hardware)

Retailer Group of independent retailers who jointly establish a central Associated Grocers
cooperative buying organization and conduct joint promotion efforts. (groceries), Ac e
Hardware (hardware)

Franchise Contractual association between a franchisor (a McDonald’s, Subway,

organization manufacturer, wholesaler, or service organization) and Pizza Hut, Jiffy Lube,
franchisees (independent businesspeople who buy the right Meineke Mufflers, 7-
to own and operate one or more units in the franchise Eleven
system).

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Objective Outline 11.1 Summary
• Retailing—selling goods or services directly to final
consumers
• Shopper marketing—turning shoppers into buyers
• Omni-channel retailing—integrates in-store, online, and
mobile shopping
• Retailers classified by amount of service, product line sold,
and relative prices
• Corporate and contractual retail organizations

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Objective Outline 11.2
Discuss how retailers are using omni-channel retailing to
meet the cross-channel shopping behavior of today’s
digitally connected consumers.

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Omni-Channel Retailing: Blending In-
Store, Online, Mobile, and Social
Media Channels (1 of 2)
• In this age of websites, smartphones, mobile apps, social
media, and other things digital, shopping typically involves
a dazzling array of channels and platforms.
• Omni-channel consumers readily research products and
prices online, shopping digitally from home, from work, in
stores, or anywhere in between.
• The boundaries between in-store and online retailing are
rapidly blurring.

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Omni-Channel Retailing: Blending In-
Store, Online, Mobile, and Social
Media Channels (2 of 2)
Omni-channel marketing:
Used-car giant CarMax
makes the entire used-car
buying experience simple and
seamless across its digital
and store shopping channels.

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Objective Outline 11.3
Describe the major retailer marketing decisions.

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Figure 11.1
•
Retailer Marketing Strategies

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Segmentation, Targeting,
Differentiation, and Positioning
Decisions (1 of 2)
• Target markets must be segmented and defined.
• Retailers then decide how to differentiate and position
themselves in those markets.

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Segmentation, Targeting,
Differentiation, and Positioning
Decisions (2 of 2)
Retail targeting and
positioning: Lush Fresh
Handmade Cosmetics
succeeds by carefully
positioning itself away from its
larger competitors. It makes
premium beauty products by
hand from the freshest
possible natural ingredients.

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Product Assortment and Services
Decision
• Retailers must determine three product variables.
– Product assortment
– Services mix
– Store atmosphere

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Price Decision
• Price policy must fit the retailers’
– Target market and positioning
– Product and service assortment
– Competition
– Economic factors
• Retailers practice either
– Everyday low pricing (EDL P)
– High-low pricing

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Promotion Decision
• Retailers use various combinations of the five promotion
tools:
– Advertising
– Personal selling
– Sales promotion
– Public relations (P R)
– Direct and social media marketing

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Place Decision
• Locations should be accessible to the target market in
areas that are consistent with the retailer’s positioning.
• Shopping center: Group of retail businesses built on a
site that is planned, developed, owned, and managed as a
unit

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Types of Shopping Centers
• Regional shopping center
• Community shopping center
• Neighborhood shopping center
• Power center
• Lifestyle center

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Objective Outline 11.3 Summary
• Major retailer marketing decisions
– Segmentation and targeting
– Store differentiation and positioning
• Retail marketing mix decisions
– Product and services assortment
– Price, promotion, and place

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Objective Outline 11.4
Discuss the major trends and developments in retailing.

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Retailing Trends and Developments (1 of 4)
• Disruption and uncertainty caused by COVID-19
• Tighter consumer spending
– Impact of the Great Recession on consumers
 Changed spending patterns
– Impact of the Great Recession on retailers
 Cost-cutting, price promotions, bankruptcy
 New value pitches in positioning
• New retail forms, shortening retail life cycles, and retail
convergence

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Retailing Trends and Developments (2 of 4)
• Rise of megaretailers
– Offer better merchandise selections, good service, and
strong price savings to consumers
– Have shifted the balance of power between retailers
and producers
• Growth of direct, online, mobile, and social media retailing
– Availability of a variety of nonstore alternatives

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Retailing Trends and Developments (3 of 4)
• Growing importance of retail technology
– Produce better forecasts
– Control inventory costs
– Interact digitally with suppliers
– Send information between stores
– Sell to customers within stores

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Retailing Trends and Developments (4 of 4)
• Sustainable retailing
– Promoting more environmentally responsible products
– Launching programs to help customers be more
responsible
– Working with channel partners to reduce their
environmental impact
• Global expansion of major retailers
– Escaping saturated home markets

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Objective Outline 11.4 Summary
• Major trends and developments in retailing
– New economic realities—thrift-minded consumers
– New retail forms and retail convergence
– Rise of mega retailers
– Growth of direct, online, mobile, and social media
retailing and retail technology
– Green retailing and global expansion of major retailers

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Objective Outline 11.5
Explain the major types of wholesalers and their marketing
decisions.

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Wholesaling (1 of 2)
• Involves all the activities in selling goods and services to
those buying for resale or business use
– Wholesaler: A firm engaged primarily in wholesaling
activities

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Wholesaling (2 of 2)
Many of the nation’s largest
and most important
wholesalers—like Grainger—
are largely unknown to final
consumers. But they are very
well known and much valued
by the business customers
they serve.

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Channel Functions Performed by
Wholesalers
• Selling and promoting
• Buying and assortment building
• Bulk breaking
• Warehousing
• Transportation
• Financing
• Risk bearing
• Market information
• Management services and advice

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Table 11.2 (1 of 3)
Major Types of Wholesaler
Type Description

Merchant Independently owned businesses that take title to all merchandise handled. There are full-service Wholesalers and
wholesalers limited-service wholesalers.
Full-service Provide a full line of services: carrying stock, maintaining a sales force, offering credit, making deliveries, and providing
wholesalers management assistance. Full-service wholesalers include wholesale merchants and Industrial distributors.
Wholesale Sell primarily to retailers and provide a full range of services. General merchandise wholesalers carry several merchandise
merchants lines, whereas general line wholesalers carry one or two lines in great depth. Specialty wholesalers specialize in carrying
only part of a line.
Industrial Sell to manufacturers rather than to retailers. Provide several services, such as carrying stock, offering credit, and providing
distributors delivery. May carry a broad range of merchandise, a general line, or a specialty line.
Limited-service Offer fewer services than full-service wholesalers. Limited-service wholesalers are of several types:
wholesalers
Cash-and-carry Carry a limited line of fast-moving goods and sell to small retailers for cash. Normally do not deliver..
wholesalers
Truck wholesalers Perform primarily a selling and delivery function. Carry a limited line of semiperishable merchandise (such as milk, bread,
(or truck jobbers) snack foods), which is sold for cash as deliveries are made to supermarkets, small groceries, hospitals, restaurants, factory
cafeterias, and hotels.
Drop shippers Do not carry inventory or handle the product. On receiving an order, drop shippers select a manufacturer, who then ships
the merchandise directly to the customer. Drop shippers operate in bulk industries, such as coal, lumber, and heavy
equipment.
Rack jobbers Serve grocery and drug retailers, mostly in nonfood items. Rack jobbers send delivery trucks to stores, where the delivery
people set up toys, paperbacks, hardware items, health and beauty aids, or other items. Rack Jobbers price the goods,
keep them fresh, set up point-of-purchase displays, and keep inventory records.
Producers’ Farmer-owned members that assemble farm produce for sale in local markets. Producers’ cooperatives Often attempt to
cooperatives improve product quality and promote a co-op brand name, such as Sun-Maid raisins, Sunkist oranges, or Diamond nuts.
Mail-order or web Send catalogs to or maintain websites for retail, industrial, and institutional customers featuring jewelry,
wholesalers cosmetics, specialty foods, and other small items. Its primary customers are businesses in small outlying areas.

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Table 11.2 (2 of 3)
Major Types of Wholesaler

Do not take title to goods. The main function is to facilitate buying and selling,
Brokers and
agents for which they earn a commission on the selling price. Generally specialize by
product line or customer type.
Brokers Bring buyers and sellers together and assist in negotiation. Brokers are paid
by the party who hired the broker and do not carry inventory, get involved in
financing, or assume risk. Examples include food brokers, real estate
brokers, insurance brokers, and security brokers.
Agents Represent either buyers or sellers on a more permanent basis than brokers
do. There are four types:
Manufacturers’ Represent two or more manufacturers of complementary lines. Often used in
agents such lines as apparel, furniture, and electrical goods. A manufacturer’s agent
is hired by small manufacturers who cannot afford their own field sales forces
and by large manufacturers who use agents to open new territories or cover
territories that cannot support full-time salespeople.
Selling agents Have contractual authority to sell a manufacturer’s entire output. The selling
agent serves as a sales department and has significant influence over prices,
terms, and conditions of sale. Found in product areas such as textiles,
industrial machinery and equipment, coal and coke, chemicals, and metals.

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Table 11.2 (3 of 3)
Major Types of Wholesaler

Type Description

Purchasing agents Generally have a long-term relationship with buyers and make purchases for
them, often receiving, inspecting, warehousing, and shipping the merchandise to
buyers. Purchasing agents help clients obtain the best goods and prices
available.
Commission Take physical possession of products and negotiate sales. Used most often in
merchants agricultural marketing by farmers who do not want to sell their own output. Take
a truckload of commodities to a central market, sell it for the best price, deduct a
commission and expenses, and remit the balance to the producers.
Manufacturers’ and Wholesaling operations conducted by sellers or buyers themselves rather than
retailers’ branches operating through independent wholesalers. Separate branches and offices can
and offices be dedicated to either sales or purchasing.

Sales branches and Set up by manufacturers to improve inventory control, selling, and promotion.
offices Sales branches carry inventory and are found in industries such as lumber and
automotive equipment and parts. Sales offices do not carry inventory and are
most prominent in the dry goods and notions industries.
Purchasing offices Perform a role similar to that of brokers or agents but are part of the buyer’s
organization. Many retailers set up purchasing offices in major market centers,
such as New York and Chicago.

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Figure 11.2
Wholesaler Marketing Strategies

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Trends in Wholesaling
• Need for greater efficiency
• Demands for lower prices
• Sorting out suppliers who are not adding value based on
cost and quality
• Blurring distinction between large retailers and wholesalers
• Increased use of technology to contain costs and boost
productivity

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Objective Outline 11.5 Summary
• Wholesaling—selling goods or services to those buying
for the purpose of resale or business use
• Wholesalers fall into three groups:
– Merchant wholesalers
– Brokers and agents
– Manufacturers’ and retailers’ branches and offices

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Final Thoughts
Online retailing is now an everyday and growing part of life.
Consider the ramifications on the traditional mom-and-pop
brick-and-mortar retail store.
How can they effectively compete?

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