Chapter 16 Managing Retailing Wholesaling Logistics


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Chapter 16 Managing Retailing Wholesaling Logistics

  1. 1. Part 6 : Delivering Value Chapter 16 – Managing Retailing, Wholesaling & Logistics
  2. 2. Retailing <ul><li>Retailing includes all the activities involved in selling goods or services directly to final consumers for personal, non business use </li></ul><ul><li>Types of Retailers: </li></ul><ul><li>Specialty store: narrow product line e.g. the body shop </li></ul><ul><li>Department store: several product lines e.g. JC Penny </li></ul><ul><li>Supermarket: low cost low margin, high volume self service for food and household products e.g. Values </li></ul><ul><li>Convenience store: small store in residential area, often open 24/7 e.g. Circle K </li></ul><ul><li>Discount store: standard merchandise, low price low margin e.g. Wal Mart </li></ul><ul><li>Off price retailer: irregular merchandise sold at less than retailer e.g. Factory Outlet </li></ul><ul><li>Superstore: huge selling space e.g. hypermarket Carrefour </li></ul><ul><li>Catalog showroom: broad selection of fast moving, brand names goods sold by catalog at discount </li></ul>
  3. 3. Retailing <ul><li>Nonstore retailing falls into 4 major categories: </li></ul><ul><li>Direct selling also called multilevel selling, network marketing. Pioneered by Amway, consists of recruiting independent businesspeople who act as distributors </li></ul><ul><li>Direct marketing e.g. telemarketing by insurance sales agent, TV home shopping, electronic shopping e.g. </li></ul><ul><li>Automatic vending including impulse goods like cigarette, soft drink, newspaper e.g. Coca cola can </li></ul><ul><li>Buying service for a lists of retailers that have agreed to give discounts in return for membership </li></ul>
  4. 4. Retailing <ul><li>Retailers’ marketing decisions are: </li></ul><ul><li>Target market e.g. wall mart with low cost low price for middle to lower social class </li></ul><ul><li>Product assortment: the retailer has to decide on product assortment breadth and depth. A restaurant can offer a narrow and shallow assortment (small lunch counters), a narrow and deep assortment (delicatessen), a broad and shallow assortment (cafetaria), or a broad and deep assortment (large restaurant) </li></ul><ul><li>Procurement: They are using computers to track inventory, order goods, analyze dollars spent on vendors and products. Supermarket chains are using scanner data to manage their merchandise mix. </li></ul><ul><li>Services and store atmosphere: retailer must decide on the service mix to offer customer  pre purchase service includes advertising, interior display, shopping hours, fiiting rooms; post purchase service includes delivery, installation, gift wrapping; and ancillary service include parking, rest room, credit, general information </li></ul><ul><li>Store activities and experience: retailers are also creating in store entertainment to attract customers who want fun and excitement </li></ul><ul><li>Price decision: retailers can achieve either high markup lower volume (fine specialty store) or low markup higher volume (discount store) </li></ul><ul><li>Communication decision: retailers use communication to generate traffic and purchases e.g. run special sales, in store food sampling and coupon </li></ul>
  5. 5. Private Labels <ul><li>A private label brand (also called reseller, store, distributor brand) is one retailers and wholesalers develop such as Benetton, the Body Shop, and Marks and Spencer </li></ul><ul><li>The retailers give more prominent display to their own brands and well stocked. </li></ul><ul><li>The retailers set up the competitive price because of the consumers’ price sensitive </li></ul><ul><li>Why do intermediaries sponsor their own brands ? </li></ul><ul><li>They are more profitable by searching for manufacturers with excess capacity who will produce the private label at low cost </li></ul><ul><li>Retailers develop exclusive store brands to differentiate themselves from competitors </li></ul>
  6. 6. Wholesaling <ul><li>Wholesaling includes all the activities involved in selling goods or services to those who buy for resale or business use </li></ul><ul><li>Manufacturers use wholesalers because of the efficiency in: </li></ul><ul><li>Selling and promoting: wholesalers help manufacturers reach many small business customers at relatively low cost and more contacts with those customers </li></ul><ul><li>Bulk breaking: wholesalers achieve savings for their customers through buying in large volume and breaking the bulk into smaller units </li></ul><ul><li>Warehousing: wholesalers hold inventories, thereby reducing inventory cost and risks to suppliers and customers </li></ul><ul><li>Financing: wholesalers finance customers by granting credit, and finance suppliers by ordering early and paying bills on time </li></ul><ul><li>Risk bearing: wholesalers absorb some risk by taking title and bearing the cost of theft, damage and obsolescence </li></ul>
  7. 7. Wholesaling <ul><li>Wholesaler marketing decisions are: </li></ul><ul><li>Target market: wholesalers need to define their target markets. They can choose group customers by size (only large retailers), type of customer (convenience food stores only), need for service (customers who need credit) or other criteria </li></ul><ul><li>Product assortment and services: wholesalers carry a full line and maintain sufficient stock </li></ul><ul><li>Price decision: wholesalers cut their margin into 3% in order to win important new customers </li></ul><ul><li>Promotion decision: wholesalers develop trade advertising, sales promotion, and publicity </li></ul><ul><li>Place decision: wholesalers located in low rent, low tax area and put little money into their physical setting offices </li></ul>
  8. 8. Market logistics <ul><li>Market logistics involve planning the infrastructure to meet demand then implementing and controlling the physical flows of materials and final goods from points of origin to points of use, to meet customer requirements at a profit </li></ul><ul><li>Market logistics planning has four steps: </li></ul><ul><li>Deciding on the company’s value proposition to its customers (what on time delivery standard should be offered) </li></ul><ul><li>Deciding on the best channel design and network strategy for reaching the customers (should the company serve customers directly or through intermediaries) </li></ul><ul><li>Developing operational excellence in sales forecasting, warehouse management, transportation management </li></ul><ul><li>Implementing the solution with the best information system, equipment, policies and procedures </li></ul><ul><li>Information system (e.g. Electronic Data Interchange) play a critical role in managing market logistics be efficiently especially in the order cycle time and low inventories </li></ul>