Retailing

and Wholesaling
 First Stop
Costco Beats Wal-Mart at its Own Game
Costco Background Why Costco Succeeds
• Performance: Costco • Value Proposition: Costco
warehouse club outsells carries an ever-changing
Wal-Mart’s Sam’s Club by assortment of high quality
60% despite having 222 goods and luxury “treasure
fewer stores. Sales have items” that Sam’s Club does
surged 66%, profits 45%, not. These one-time offerings
over the last 4 years. create a sense of shopping
• Product Offerings: Costco urgency among buyers.
offers a limited selection of • Enhanced Image: Costco has
national and private-label made discount shopping
brands at very low prices to fashionable and draws higher
members. Costs are kept income buyers. The Kirkland
low; no item is marked-up Signature store brand provides
more than 14%. Operating a quality offering for a wide
margins average only 2.8%. range of goods.

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 Retailing
• Retailing:
 Allactivities involved in selling goods or
services directly to final consumers for their
personal, nonbusiness use.
• Most retailing is done by retailers, but
nonstore retailing has recently grown by
leaps and bounds.
 Nonstore retailing includes sales made via the
internet, direct mail, catalogs, telephone, and
other direct sales methods.
 Types of Retailers

• The different types of retailers can be

classified based on:
 The amount of service they offer.
 The breadth and depth of product lines.
 The relative prices charged.
 How they are organized.

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 Types of Retailers
• Classification by the amount of service:
 Self-service retailers:
• Serve customers who are willing to perform their
own “locate-compare-select” process to save
money.
 Limited-service retailers:
• Provide more sales assistance as they carry more
shopping goods about which details are needed.
 Full-service retailers:
• Usually carry more specialty goods for which
customers need or want assistance or advice.

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 Types of Retailers
• Classification by length and breadth of
their product assortments:
 Specialty stores:
• Feature narrow product lines, with deep
assortments (e.g., Radio Shack).
 Department stores:
• Offer a wide variety of product lines of clothing,
home furnishings, household goods (e.g., Macy’s).
 Supermarkets:
• Usually carry a relatively large variety of low-cost,
low-margin groceries and consumables (e.g.,
Kroger, Safeway).

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 Types of Retailers
• Classification by length and breadth of
their product assortments:
 Convenience stores:
• Carry a limited line of high turnover convenience
goods (e.g., Circle K, 7-Eleven).
 Superstores:
• Much larger than regular supermarkets,
superstores offer a large assortment of routinely
purchased food goods, nonfood items, and services
(e.g., Wal-Mart Supercenter, Best Buy).
• Category killers are really giant specialty stores.

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 Types of Retailers

• Relative prices classification:

 Discount stores:
• Sell standard merchandise at lower prices and
margins, in return for higher volume.
 Off-price retailers:
• Buy merchandise at less-than-regular wholesale
prices which are sold at less than retail. Goods
include overruns, irregulars, and leftovers.
• Includes independent off-price retailers, factory
outlets and warehouse/wholesale clubs.

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 Types of Retailers

• Major types of retail organizations

include:
 Corporate chain stores:
• Two or more outlets that are commonly
owned and controlled.
 Voluntary chain:
• Wholesaler-sponsored group of
independent retailers engaged in group
buying and merchandising.

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 Types of Retailers

• Major types of retail organizations

include:
 Retailer cooperative:
• Group of independent retailers who set up
a central buying organization and conduct
joint promotion efforts.
 Franchise organization:
• Contractual association between a
franchisor and franchisees.

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 Retailer Marketing Decisions

• Major marketing decisions:

 Segmentation and targeting.
 Store differentiation and positioning.
 Retail marketing mix.

• Marketing decisions should create

value for targeted retail customers.

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 Retailer Marketing Decisions
• Retail strategy:
 Segmentation and targeting.
 Store differentiation and positioning.

• Retailers cannot make meaningful

decisions related to the retail marketing
mix until they first define and profile their
target market and then decide how they
will differentiate and position themselves in
these markets.

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 Retailer Marketing Decisions

• Retailer marketing mix:

 Product and service assortment
 Retail prices
 Promotion
 Distribution (location)

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 Retailer Marketing Decisions
• Retail marketing mix:
 Product assortment should differentiate the
retailer while matching target shoppers’
expectations.
 Services mix can help differentiate one
retailer from another (e.g., Home Depot’s
“how-to” classes for do-it-yourselfers).
 Store atmosphere is important as a unique
store experience can move customers to buy.
• Experiential retailing.
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 Retailer Marketing Decisions

• Price decisions:
 The price policy must fit with the target
market and positioning, the product and
service assortment, and the competition.
• Price promotions vs. EDLP
• “High-low” pricing

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 Retailer Marketing Decisions

• Promotion decisions:
 Retailers can use any or all of the
promotion tools—advertising, personal
selling, sales promotion, public relations,
and direct marketing—to reach
consumers.

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 Retailer Marketing Decisions

• Place (distribution) decisions:

 Location is the key to success.
 Retailers can locate in:
• Central business districts.
• Regional shopping centers.
• Community shopping centers.
• Strip malls (neighborhood shopping center).
• Power centers.
• Lifestyle centers.

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 Retail Trends & Developments

1. New retail forms 5. Rise of the

and shortening megaretailers.
retail life cycles. 6. Growing
2. Slowed economy importance of
and tightened retail technology.
consumer
spending.
7. Global expansion
of major retailers.
3. Growth of 8. Retail stores as
nonstore retailing. “communities” or
4. Retail “hangouts.”
convergence.

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 Wholesaling

• Wholesaling:
 Includes all activities involved in selling
goods and services to those buying for
resale or business use.
• Wholesalers add value for producers
by performing one or more channel
functions.

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 Wholesaling

Functions performed by wholesalers:

• Selling and promoting • Financing

• Buying and assortment • Risk bearing
building • Market
• Bulk-breaking information
• Warehousing • Management
• Transportation services and
advice
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 Types of Wholesalers

• Merchant Wholesaler: an independently

owned wholesaler business that takes title
to the merchandise it handles.
 Largestgroup of wholesalers.
 Account for 50% of wholesaling.
 Two broad categories:
• Full-service wholesalers.
• Limited-service wholesalers.

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 Types of Wholesalers
• Brokers and agents:
 Do not take title to goods.
 Perform only a few functions.
 Specialize by product line or customer type.

• Brokers bring buyers and sellers together.

• Agents represent buyers on a more
permanent basis.
 Manufacturers’ agents are the most common
type of agent wholesaler.

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 Types of Wholesalers

• Manufacturers’ sales branches

and offices:
 Involves wholesaling by sellers or
buyers themselves rather than through
independent wholesalers.

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 Wholesaler Marketing Decisions

• Wholesaler strategy:
 Segmentation, targeting, differentiation,
and positioning.
• Wholesaler marketing mix:
 Product assortment and services.
 Price.
 Promotion.
 Distribution (location).

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 Trends in Wholesaling
• Need for ever greater efficiency.
• Demands for lower prices.
• Winnowing out of suppliers who are not
adding value based on cost and quality.
• Distinction between large retailers and
wholesalers continues to blur.
• Wholesalers will continue to increase the
services provided to retailers.
• Wholesalers are now going global.
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