Retailing and Wholesaling Basics

Retailing and Wholesaling

Retailing

• A retailer is a person or business that sells goods directly to consumers for their personal use, typically in small quantities.
• Retailers serve as the final link in the supply chain, purchasing products from manufacturers or wholesalers and offering them through channels.
• Retailers provide value by offering consumers a wide selection of products and services in one place.
• They also offer competitive prices by buying products and services in large quantities at reduced unit costs.
• "The last mile" is the final stop in the consumer's path to purchase, representing a consumer's journey from attitude to action.
• The critical decision-making period for P&G products occurs within three to seven seconds on a store shelf.
• The "zero moment of truth" now extends beyond physical stores, encompassing the online search and learning process consumers undertake.
• Consumers are increasingly omni-channel buyers, blurring the lines between in-store and online shopping experiences across multiple channels.
• The key to omni-channel retailing involves integrating channels to create a seamless buying and unified shopping experience.
• Shopping now incorporates websites, smartphones, mobile apps, social media, with consumers researching products and prices online, shopping from various locations, and seeking ideas and advice on social media.

Types of Retailing

• Retailers vary in shapes and sizes, and can be classified according to several characteristics.
• Characteristics include: amount of service, product line classifications, price characteristics, and organizational characteristics.

Amount of Service Classifications

• Retailers differing based on the amount of service they offer.
• Self-service retailers: Customers independently select products with minimal staff assistance.
• Limited service retailers: Retailer that offers assistance in specific areas where customers may require additional information, while other sections are primarily self-service.
• Full-service retailers: Assist customers throughout the shopping process, with higher costs reflected in higher prices.

Product Line Classifications

• Retailers differ based on the length and breadth of their product assortments.
• Specialty stores: Retailers that focus on a specific product category, offering a deep assortment of brands, styles, or models in that narrow category.
• Department stores: Large retail establishments provide a wide range of consumer goods across various specialized departments.
• Supermarkets: Generally sell foods and household items and are the most frequently visited type of retail store, but are facing slow sales growth
• Convenience stores: Small stores with a limited line of high-turnover convenience goods.
• Superstores: Larger than regular supermarkets and offer a large assortment of food products, nonfood items, and services.
• Service retailers: Focus on selling services rather than physical products, providing expertise, experiences, or assistance to consumers.

Relative Price Characteristics

• Retailers can be classified according to the prices they charge.
• Discount stores: Sell standard merchandise at lower prices by accepting lower margins and selling higher volume.
• Off-price retailers: Offer high-quality goods at prices lower than typical retail stores and usually sell overstocked, out-of-season, or discontinued items.

Organizational Characteristics

• Retail stores are independently owned while others band together under some form of corporate or contractual organization.
• Corporate chains: Two or more outlets that are commonly owned and controlled, which enables buying in large quantities at lower prices and gain promotional economies.
• Voluntary chains: Wholesale-sponsored groups of independent retailers that engage in group buying and common merchandising.
• Retailer cooperatives: A group of independent retailers that band together to set up a joint-owned, central wholesale operation and conduct joint merchandising and promotion efforts.
• Key difference between them centers on who organizes and controls the group: voluntary chains are led by wholesalers, while retailer cooperatives are formed and governed by the retailers themselves.
• Franchises: Contractual associations between a manufacturer, wholesaler, or service organization (franchisor) and independent business people (franchisees) who buy the right to own and operate one or more units in the franchise system.
• Franchise systems are based on a unique product or service, a method of doing business, or the trade name, goodwill, or patent that the franchisor has developed.

Retailer Marketing Decisions

Retailing Strategies

• Retailers seek new marketing strategies to attract and retain customers, and assortments of various retailers now look alike.
• Service differentiations have eroded, leading customers to become more price sensitive.
• Retailers first need to segment and define target markets, then differentiate and position themselves in these markets.
• Retailers must decide on their retail marketing mix, concerning product and services assortment, price, promotion, and place.
• Retail stores are more than just an assortment of goods, successful retailers orchestrate the consumer store experience.
• Retailers select locations accessible to the target market and consistent with the retailer's positioning.

Product Assortment and Services Decision

• Retailers must decide on three major product variables.
• Product assortment should differentiate the retailer while matching target shoppers' expectations, and retailers can offer a highly targeted product assortment.
• Retailers can differentiate themselves by offering merchandise that no other competitor carries, such as store brands or national brands on which it holds exclusive rights.
• The services mix can also help set one retailer apart from another.
• Retailers want to create a unique store experience to target the market and move customers to buy.
• Many retailers practice experiential retailing, confirms that retail stores are more than simply assortments of goods.

The Store's Atmosphere

• Retailers construct an orchestrated store layout, background music and smells to shape the customers shopping experiences.
• Retailers carefully choose the colors in their logo - black (sophistication), orange (affordability), white (simplicity and purity), and blue (trust).

Price Decision

• Price policy must fit the target market and positioning, product and service assortment, competition, and economic factors.
• High markup on lower volume for most specialty stores.
• Low markup on higher volume for mass merchandisers and discount stores.

Pricing

• Increase store traffic, creating a low-price image, attract customers who would buy other goods at full price.
• Good-value pricing consists in offering just the right combination of quality and good service at a fair price.
• Everyday low pricing (EDLP) involves charging a constant everyday low price with few or no temporary price discounts.
• "High-Low Pricing" involves charging higher prices on an everyday basis but running frequent promotions to lower prices temporarily on selected items.

Promotion Decision

• Retailers use a combination of advertising (newspapers, magazines, radio, television), personal selling, sales promotion (in-store demonstrations, displays, sales, loyalty programs) public relations (new-store openings, newsletters, blogs), and direct marketing (digital catalogs, online ads, social media).
• Digital promotion lets retailers reach individual customers with carefully targeted messages.

Place Decision

• Retailers often point to three critical factors in retailing success which are location, location, location.
• The central business districts (in cities and include department and specialty stores, banks, and movie theaters) were the main form of retail cluster up until the 1950's.
• Central business districts are declining due to traffic, parking problems and people moving to the suburbs.
• A shopping center is a group of retail businesses planned, developed, owned, and managed as a unit.
• A regional shopping center, or regional shopping mall has 50 to more than 100 stores, including two or more full-line department stores.
• Community shopping center contains between 15 and 50 retail stores.
• Most shopping centers are neighborhood shopping centers or strip malls that generally contain between 5 and 15 stores, and are close and convenient for consumers.
• Lifestyle centers are smaller, open-air malls with upscale stores, convenient locations, and nonretail activities.

Retailing Trends and Developments

• Retailers operate in a fast-changing environment.
• Trends in retailing include: the rise of megaretailers, the rapid growth of direct, online, and social media retailing, the growing importance of retail technology, and the surge in green retailing.

The Rise of Megaretailers

• Involves the rise of mass merchandisers and specialty superstores, the formation of vertical marketing systems, and a rash of retail mergers and acquisitions.
• Superior information systems, buying power, and large selection.

The Rapid Growth of Direct, Online, and Social Media Retailing

• Dramatically increase of online retailing via websites, mobile apps, and social media.
• Retailers are using limited time pop-up stores to promote their brands to seasonal shoppers and create buzz in busy areas.
• Today's retail forms appear to be converging, and such convergence means greater competition and greater difficulty in differentiating the product assortments of different types of retailers.

Growing Importance of Retail Technology

• Retail technology provides better forecasts, inventory control, electronic ordering, transfer of information, scanning, online transaction processing, improved merchandise handling systems, and the ability to connect with customers.
• They have become critically important as competitive tools.
• Perhaps the most startling advances in retail technology concern connecting with consumers.
• Increases of retailers are bringing online and digital technologies into their physical stores.

Green Retailing

• Retailers are increasingly adopting environmentally sustainable practices such as greening up their stores and operations, promoting more products, launching programs to help customers be environmentally responsible.
• At the most basic level, most large retailers are making their stores more environmentally friendly through sustainable building design, construction, and operations.
• Environmentally Sustainable Practices include: store design, construction, operations, product assortment, recycling made easier, and package and distribution.

Wholesaling

• Wholesaling includes all activities involved in selling goods and services to those buying for resale or business use.
• Firms engaged primarily in wholesaling activities are called wholesalers.
• Wholesalers buy mostly from producers and sell mostly to retailers, industrial consumers, and other wholesalers.