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CHAPTER
RETAILING AND
WHOLESALING
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 14-1
AFTER READING THIS CHAPTER
YOU SHOULD BE ABLE TO:
1. Identify retailers in terms of the utilities
they provide.
2. Explain the alternative ways to classify
retail outlets.
3. Describe the many methods of nonstore
retailing.
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 14-2
AFTER READING THIS CHAPTER
YOU SHOULD BE ABLE TO:
4. Develop retailing mix strategies over the
life cycle of a retail store.
5. Describe the types and functions of
firms that perform wholesaling
activities.
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 14-3
TRADING UP…AT TARGET
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 14-4
THE VALUE OF RETAILING
• Retailing
• Consumer Utilities Offered by Retailing
• The Global Economic Impact of Retailing
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 14-5
FIGURE 14-1 Which company best
represents which utilities?
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 14-6
Polo
What consumer utility is offered?
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Slide 14-7
Printemps
What is the global economic impact of retailing?
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 14-8
Concept Check
1. When Polo makes clothing cut to a
customer’s exact preferences, what
utility is provided?
A: form utility
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 14-9
Concept Check
2. Two measures of the impact of
retailing in the global economy are
total
sales and number
of employees
________
_________________.
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 14-10
CLASSIFYING RETAIL OUTLETS
• Form of Ownership
 Independent Retailer
 Corporate Chain
 Contractual Systems
• Business-Format Franchises
• Product-Distribution Franchises
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 14-11
Radio Shack
What form of retail ownership?
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Slide 14-12
CLASSIFYING RETAIL OUTLETS
• Level of Service
 Self-Service
 Limited Service
 Full-Service
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 14-13
CLASSIFYING RETAIL OUTLETS
• Type of Merchandise Line
 Depth of Product Line
• Specialty Outlets
• Category Killers
 Breadth of Product Line
• General Merchandise Stores
• Scrambled Merchandising
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 14-14
FIGURE 14-2 Breadth versus depth of
merchandise lines
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 14-15
Concept Check
1. Centralized decision making and
purchasing are an advantage of
chain
____ ownership.
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 14-16
Concept Check
2. What are some examples of new
forms of self-service retailers?
A: Delta Airline’s and the Hilton’s
self-service kiosk for customer
check-in as well as others.
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 14-17
Concept Check
3. Would a shop for big men’s clothes
carrying pants in sizes 40 to 60 have
a broad or deep product line?
A: deep product line
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 14-18
NONSTORE RETAILING
• Automatic Vending
• Direct Mail and Catalogs
• Television Home Shopping
• Online Retailing
• Telemarketing
 Do-Not-Call Registry
• Direct Selling
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 14-19
Vending Machine and L. L. Bean Catalog
What are the strengths and weaknesses
of each form of nonstore retailing?
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 14-20
QVC and mySimon
What are the strengths and weaknesses
of each form of nonstore retailing?
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 14-21
Concept Check
1. Successful catalog retailers often send
specialty
_______ catalogs to _____
niche markets
identified in their databases.
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 14-22
Concept Check
2. How are retailers increasing
consumer interest and involvement in
online retailing?
A: Retailers have improved the online
retailing experience by adding
experiential or interactive activities
to their websites through virtual
models or the ability to customize a
purchase.
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 14-23
Concept Check
3. Where are direct selling retail sales
growing? Why?
A: Direct-selling retailers are expanding
into other global markets due to a
lack of effective distribution
channels and consumer knowledge
about products and brands.
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 14-24
RETAILING STRATEGY
• Retailing Mix
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Slide 14-25
FIGURE 14-3 Elements of a retailing
strategy
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 14-26
RETAILING STRATEGY
• Retail Pricing
 Markup
• Original Markup
• Maintained Markup
• Gross Margin
 Markdown
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 14-27
RETAILING STRATEGY
• Retail Pricing
 Everyday Low Pricing
 Everyday Fair Pricing
 Benchmark or Signpost Items
 Shrinkage
 Off-Price Retailing
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 14-28
RETAILING STRATEGY
• Store Location
 Central Business District
 Regional Shopping Centers
• Anchor Stores
 Strip Location
• Power Center
 Multichannel Retailers
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 14-29
Mall of America
What kind of store location or setting?
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Slide 14-30
RETAILING STRATEGY
• Retail Communication
 Image
 Atmosphere or Ambiance
• Merchandise
 Category Management
• Consumer Marketing at Retail (CMAR)
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 14-31
Concept Check
1. How does original markup differ
from maintained markup?
A: The original markup is the difference
between retailer cost and initial
selling price whereas maintained
markup is the difference between the
final selling price and retailer cost.
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 14-32
Concept Check
2. A huge shopping strip with multiple
anchor stores is a _____
power center.
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 14-33
Concept Check
3. What is a popular approach to
managing the assortment of
merchandise in a store?
A: category management
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 14-34
THE CHANGING NATURE
OF RETAILING
• The Wheel of Retailing
• The Retail Life Cycle
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Slide 14-35
FIGURE 14-4 The wheel of retailing
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 14-36
Taco Bell
Where is it on the wheel of retailing and
the retail life cycle?
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 14-37
FIGURE 14-5 The retail life cycle
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 14-38
WHOLESALING
• Merchant Wholesalers
 Full-Service Wholesalers
• General Merchandise (Full-Line) Wholesalers
• Specialty Merchandise (Limited-Line) Wholesalers
 Limited-Service Wholesalers
• Rack Jobbers
• Cash and Carry Wholesalers
• Drop Shippers or Desk Jobbers
• Truck Jobbers
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 14-39
WHOLESALING
• Agents and Brokers
 Agents
• Manufacturer’s Agents (Representatives)
• Selling Agents
 Brokers
• Manufacturer’s Branches and Offices
 Manufacturer’s Branch Office
 Manufacturer’s Sales Office
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 14-40
Concept Check
1. According to the wheel of retailing,
when a new retail form appears, how
would you characterize its image?
A: A low-status, low-margin, low-price
outlet.
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 14-41
Concept Check
2. Market share is usually fought out
before the _______
maturity stage of the retail
life cycle.
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 14-42
Concept Check
3. What is the difference between
merchant wholesalers and agents?
A: Merchant wholesalers take title to the
merchandise they handle whereas
agents do not take title.
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 14-43
GOING ONLINE
CONSUMERS CAN NOW “SHOP
WITH THEIR BOT”
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 14-44
Going Online
1. Visit the mysimon.com and
shopping.com websites. Find the best
prices for one of the following
products: (1) Wilson tennis racket;
(2) Sony TV; and (3) Guess jeans.
mySimon
Shopping
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 14-45
Going Online
2. How did the two bots differ? What
range of prices did you obtain? What
shipping and handling charges would
apply to each purchase? Why are
different recommendation made by
the agents?
mySimon
Shopping
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 14-46
VIDEO CASE 14
MALL OF AMERICA:
SHOPPING AND A
WHOLE LOT MORE
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 14-47
VIDEO CASE 14
Mall of America
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 14-48
VIDEO CASE 14
Mall of America
1. Why has Mall of America been such a
marketing success so far?
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 14-49
VIDEO CASE 14
Mall of America
2. What (a) retail and (b) consumer
trends have occurred since Mall of
America was opened in 1992 that it
should consider when making future
plans?
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 14-50
VIDEO CASE 14
Mall of America
3. (a) What criteria should Mall of
America use in adding new facilities
to its complex? (b) Evaluate
(i) retail stores, (ii) entertainment
offerings, and (iii) hotels on these
criteria.
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 14-51
VIDEO CASE 14
Mall of America
4. What specific marketing actions
would you propose that Mall of
America managers take to ensure
its continuing success in attracting
visitors (a) from the local
metropolitan area and (b) from
outside of it?
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 14-52
SUPPLEMENTAL
LECTURE NOTE 14-1
HOW THE SEARS-KMART
MERGER CHANGES
RETAILING
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 14-53
IN-CLASS ACTIVITY 14-1
RETAIL SHOPPING ONLINE:
COMPARING PRICES FOR A
KODAK DIGITAL CAMERA
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 14-54
Kodak EasyShare-One Zoom Digital Camera
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 14-55
Retailing
Retailing includes all activities involved
in selling, renting, and providing goods
and services to ultimate consumers for
personal, family, or household use.
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 14-56
Scrambled Merchandising
Scrambled merchandising involves
offering several unrelated product lines in
a single store.
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Slide 14-57
Telemarketing
Telemarketing involves using the
telephone to interact with and sell directly
to consumers.
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 14-58
Retailing Mix
The retailing mix includes the activities
related to managing the store and the
merchandise in the store, which includes
retail pricing, store location, retail
communication, and merchandise.
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 14-59
Shrinkage
Shrinkage is the breakage and theft of
merchandise by customers and
employees.
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 14-60
Multichannel Retailers
Multichannel retailers utilize and
integrate a combination of traditional
store formats and nonstore formats such
as catalogs, television, and online
retailing.
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 14-61
Category Management
Category management is an approach to
managing the assortment of merchandise in
which a manager is assigned the responsibility
for selecting all products that consumers in a
market segment might view as substitutes for
each other, with the objective of maximizing
sales and profits in the category.
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 14-62
Wheel of Retailing
The wheel of retailing is a concept that
describes how new forms of retail outlets
enter the market.
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 14-63
Retail Life Cycle
The retail life cycle is the process of
growth and decline that retail outlets, like
products, experience, which consists of
the early growth, accelerated
development, maturity, and decline
stages.
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 14-64
Merchant Wholesalers
Merchant wholesalers are independently
owned firms that take title to the
merchandise they handle.
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 14-65
Manufacturer’s Agents
Manufacturer’s agents are agents who
work for several producers and carry
noncompetitive, complementary
merchandise in an exclusive territory.
Also called manufacturer’s
representatives.
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 14-66
Brokers
Brokers are independent firms or
individuals whose principal function is to
bring buyers and sellers together to make
sales.
Copyright © 2007 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Slide 14-67