• Document: CHAPTER 11. Retailing and Wholesaling
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CHAPTER 11 Retailing and Wholesaling Retailing Retailing can be defined as all of the activities involved in the sale of goods and services to the ultimate consumer. Although most retail sales happens in retail stores, the definition of retailing also includes orders placed at home on a computer, telephone, mail order, vending machines, and direct selling. Retailers are both customers and marketers in the channel of distribution. They market products to the ultimate consumer and are customers of wholesales and producers. Retailing The Wheel of Retailing tries to explain the patterns of changes that happen in retailing. The hypothesis behind the wheel of retailing is that new types of retailers gain a competitive foothold in the market by offering lower prices through reduction or elimination of services. Once established, the retailer adds more services and prices gradually begin to increase. Then the retailer becomes vulnerable to new low priced retailers offering minimum services entering the market. The retail cycle has finished thus resembling a wheel turning. The next slide illustrates the point. The Wheel of Retailing 4. New Outlet Enters 1. Retail Outlet Starts Low Price Low Price Limited Service Limited Service Out-of-way Location Passage Of Time 3. Retail Outlet 2. Retail Outlet Higher Prices Adds Service Higher Status Raises Prices Better Location Major Store Retailer Types Type Type description Specialty store • Carries a narrow product line with a deep assortment Department • Carries several product lines store • Each line is operated as a separate department Supermarket • Large, low-cost, low-margin, high-volume, self-service operation Convenience • Carries a limited line of high-turnover convenience products at store slightly higher prices Discount store • Sells goods at lower prices with lower margins and higher volumes Off-price • Sells merchandise bought at less-than-regular wholesale prices retailer and sold at less than retail Superstore • Very large store for routinely purchased items 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 Retailer Classification A retailer can provide consumers with different types of customer service.  Self Service Retailers require the consumer to perform many shopping activities during the purchase process.  Limited Service Retailers provide some services. Consumers are responsible for most shopping activities, but salespeople are available in departments such as lawn and garden, electronics, and jewelry.  Full Service Retailers provide many or wide range of services to the consumer. Retailer Classification Retailers vary by their product lines. Depth of Product Line means the retailer carries a large assortment of each product item. Breadth of Product Line means the retailer offers a variety of different product lines. Retailer Classification by Organizational Approach Type Description Corporate chain • Two or more outlets that are commonly owned and controlled Voluntary chain • Independent retailers engaged in group buying and merchandising • Sponsored by wholesaler Retailer • Group of independent retailers who jointly cooperative establish a central buying organization and conduct joint promotion efforts Franchise • Contractual association between a organization franchisor and franchisees Retailing Over the years, classifying retailers has gradually become more difficult because of a concept called Scrambled Merchandising, which is the retail practice of carrying dissimilar lines of products in the attempt to generate additional sales. For example, not only do drugstores carry drugs for prescriptions, but also garden supplies, gift items, groceries, hardware, housewares, magazines, music, videos, and small appliances, etc.. Retail Design In product strategy, consumer goods are mainly classified as convenience goods, shopping goods, or specialty goods based on consumer purchase patterns. This classification system can be extended to retailers by considering the reasons consumers shop at particular retail stores. Remember, all the marketing mix variables must work together. If consumers view a product as a convenience good, then the retail store needs to be designed as a convenience retailer. If co

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