Retailer is a person who specializes in selling certain types of goods and/or services to consumers for their personal use  Connecting link between wholesalers and consumers  A merchant middleman  Sells directly to consumers  Deals in small quantity  Deals in variety of goods

          Collection and assembling of variety of goods Undertakes risk Give credit facility to customers Collect market information Undertake promotion Attracts consumers Gives guidance to consumers Buyers need not hold stock Convenience Creates time, place and possession utility

RETAILING-Retailing includes all activities involved in selling goods or services to the final consumers for their personal, non-business use- Kotler “The set of activities that markets products or services to final consumers for their own personal or household use. It does this by organizing their availability on a relatively large scale and supplying them to consumers on a relatively small scale”  The word ‘Retail’ is derived from the French word with the prefix ‘Re’& the verb ‘tailer’ meaning to cut again.  Retailing includes all the activities involved in selling services directly to final consumers for personal, non-business use.  A retailer or retail store is any business enterprise whose sales volume comes primarily from retailing.

      It is that part of marketing which creates time, place and possession utility A legal activity, social activity and economic activity A system and goal oriented activity It includes services also Buy products from distant places Sell to many different consumers


All activities involved in the sale of goods or services to final consumer It includes Predominantly food stores(non-specialized and specialized) Predominantly non-food stores( non specialized non-food stores, textiles and leather ,household items, some other etc)  Other types(mail order, door-to-door, vending machine, repairing, multi level marketing )    

Managerial functions of planning, implementing and controlling retail programs to achieve predetermined objectives.

Strategic planning Organizing Staffing Implementing Controlling

 The origins of retail are as old as trade itself.  The peddler who provided people with basic goods & necessities was one of the earliest forms of retail trade.  In 17th Century existed a Flea Market- a place where vendors came to sell their goods in the Suburbs of Paris.  The Greek cities are witness to “the Agora” or the market which existed then to serve the needs of the local populace SOCIAL DEVELOPMENTS & ITS EFFECT  Two important developments of the 18th Century-: the provision of Railroads & Telegraphs . Wholesale business developed  In1852 the first departmental store: Bon Marche was set up in Paris with Money back guarantee on purchases.  Montgomery ward launched the world’s first mail order catalogues.  The Industrial Revolution.  Self-Service Retail stores started in 1916.  The development of Super-Markets & Convenience Markets.  Specialty Stores, Malls & other formats.  The rise of the Web


SERVICES TO CONSUMERS:         The retailer stocks different varieties of goods. The retailer sells goods in small quantities to the consumers as & when they require. Consumer’s can choose from a variety of goods displayed in his shop. He supplies information to the consumer about the arrival of new products. The retailer is an expert & specialist in the distribution of consumer goods. The retailer sells goods to regular customers on credit. The retailer renders after sales- services & arranges for home-delivery. He generally establishes his shop near the customers.

SERVICES TO MANUFACTURERS/WHOLESALERS:  The retailer looks after the entire process of distribution, which enables manufacturers to concentrate on production.  By advertising & displaying goods, the retailer creates demand for the product.  As the retailer is in close touch with customers, he collects the necessary market information & supplies the same to manufacturer through wholesaler.  He finds customers for the new products introduced in the market. CLASSIFICATION OF RETAILERS  Retailers range from small, independent, owner-operated etc…  The basic classification done is based on Store based, Non-store based & Services retailing.  The Store based is classified further on the basis of form of Ownership &Merchandise offered.

Classification of Retail Formats

Store based Retailing

Non-Store Retailing
Merchandise offered Convenience stores Supermarkets Hypermarkets Specialty stores Departmental stores Off price retailers Factory outlets Catalogue showrooms Direct selling Mail order Tele marketing Automated Vending

Services Retailing
Banks Car Rentals Providers of various services

Form of Ownership Independent retailer Chain retailer Franchise Leased Departments Consumer cooperatives


ON THE BASIS OF OWNERSHIP  INDEPENDENT RETAILER: One who owns & operates only one retail outlet, which is managed by the owner & a few other local hands or family members.  The ease of entry into retail market.  Has an advantage of having a one to one rapport with most of his customers. Bargaining power with the suppliers is limited. No advantage of Economies of Scale

 CHAIN RETAILER/CORPORATE RETAIL CHAIN : When two or more outlets are under a common ownership, it is called a retail chain. They are characterized by similarity in the merchandise offered to the consumer, the ambience, advertising etc.  Has bargaining power with the suppliers.  Cost effectiveness is possible in promotions. Not always possible to have rural/urban preferences. Ability to give attention to each of the stores becomes fairly restricted.

 FRANCHISE: A right to market a product or provide a service in a specified area. Such a right is provided by a manufacturer to a wholesaler or a retailer through some form of written agreement.  The exclusive right to sell the product or use of trade name in certain areas is ussually in exchange for an initial fee.  The manufacturer or Supplier who grants franchise to an individual or group is known as franchiser. The individual or group (wholesaler or retailer) to whom the company (franchiser) grants an exclusive right to market its product or service or use of its name in a certain territory is known as franchisee.

Advantages to Franchiser He is able to expand his business through franchised outlets.  He receives regular income from franchises who pay a percentage of their Gross revenue.  He can have a control over the pricing, advertising & selling of his products by their franchisee. Advantages to Franchisee-

5  The risk is reasonably low.  He can capitalize the good names of the franchiser with comparatively small investment.  He gets support of all kinds from the franchiser including promotional assistance & marketing guidance.  As he invests money, he automatically gets an incentive & takes interest & also enjoys independence in operations.  With the booking of a large manufacturer he can secure funds from banks & financial institution. Disadvantages to Franchiser- For day-to-day operation, the franchiser has to rely on the ability & efficiency of the franchisee. - The effectiveness of franchising is much less than direct retailing by the manufacturer himself. Disadvantages to Franchisee- Owning a franchisee is no guarantee of wealth. It is not necessarily the cheapest. According to some analysts, it costs 10 – 30 % more to buy a franchise than to open a business independently. - All franchisees are not largely profitable. Some franchisees barely survive. - The franchiser utilize franchisees in early stages to undertake sale of his products but when distribution channel is set up the franchiser pushes franchisee & takes over the outlet. - Franchisers may take important decisions without consulting franchisees. - Most franchise agreements are one sided - in favor of the franchiser.  LEASED DEPARTMENTS: They are also called shop-in-shops, as a section of a dept in Retail store is leased/rented to an outside party.  It is a good method for expanding his product offering to the customers.  A new trend in India by setting up small retail outlets in high traffic areas like Malls.  The main aim is to be available to consumer near his place of work/home. The stores display only a fraction of the merchandise/products sold in the anchor stores.

 CONSUMER CO-OPERATIVES: A retail institution owned by its member customers. The co-operative may also arise largely because of dissatisfied consumers whose needs are not being fulfilled by the existing retailers. As the members of the co-operative largely run these co-operatives, there is a limitation on their growth opportunities.

ON THE BASIS OF MERCHANDISE OFFERED This deals with the Target Market that they cater to.  CONVENIENCE STORES: These are relatively small stores located near residential areas & offer a limited line of convenience products like eggs.  The Food Marketing Institute defines this retail format “ as a small local store selling mainly groceries, open until late at night or even 24hrs/day & is abbreviated to c-store.

6  They are not so popular in India, but has started to come up at petrol pumps like H.P Speed mart and In & Out can be termed as convenience stores.  They target customers who want to make their purchase quickly.

 SUPERMARKETS: These are large, low margin, high volume, self-service operations designed to meet the needs for food, groceries & other non-food items. 30% of grocery market is in this form.  Supermarkets in India are growing fast.  Variations of this business model have emerged-: 1) A superstore-: which is larger than a conventional supermarket with at least 25,000 items & more non- foods. 2) A combination store-: which is a superstore & full-line pharmacy with GM/HBC products accounting for at least 15% of Sales. Characteristics of supermarket  It is a large store with enough moving space & parking ground.  Located in the main shopping area.  Deals in good items & household items.  Similar goods are kept together in separate department.  Self-service is the basis.  Credit facility is not available. Advantages:  Its operating expenses are low, due to self- service, it is profitable also.  The consumers get goods of standard quality at lower price.  Well- to- do customers can park their cars in the space provided. Disadvantages:  It cannot keep those articles which require the assistance of salesman to sell.  A customer cannot buy all products he needs from a supermarket as he is provided with a limited range of products.  Customers do not get credit facilities & customer services are absent.  HYPERMARKET : The word “hypermarket” is derived from the French word ‘hypermarche’, which is a combination of a supermarket & a department store.  The cheapest prices will be for the articles.  Hypermarkets are designed to attract customers from a significantly large area with their low price offers, unique range & offers  A wide range of products including food & non-food products.  SPECIALTY STORES A store specializing in a particular type of merchandise or single product of durable goods (i.e., Home furniture, household goods, consumer electronics/domestic appliances).

7  These are characterized by a narrow product line with deep assortments in that product line.  They concentrate on apparel, jewellery, fabrics sporting goods etc..  They have a clearly defined target market & their success lies in serving their needs. E.g.: Proline fitness station & Gautier furniture.

 DEPARTMENTAL STORES: Aristide Boucicaut, son of a successful hat maker founded the first department store ”Bonmarche” in Saint-Germain, Paris in 1838.  The store lured shoppers by selling different types of goods all under one roof.  The General stores eventually became department store as small towns became cities.  The store layouts made shopping easier for consumers, irrespective of their social/economic background.  They offered new customer services never seen before such as restaurants, reading rooms, wrapping services, rest rooms, new types of merchandise & so forth. E.g.: Shopper’s stop, Westside & Lifestyle.  OFF PRICE RETAILERS: The merchandise is sold at less than retail prices. They buy manufacturer’s seconds, overruns & off season at a deep discount. The merchandise may be in odd sizes, unpopular colors or with minor defects.  These stores may be manufacturer owned or departmental store.  These outlets are usually seen by the parent company as a means of increasing the business. The factory outlets in case are owned by manufacturer, and then it will stock only company merchandise. This format largely depends on volume sales to make money.

 CATALOGUE SHOWROOMS:  They usually specialize in hard goods such as house ware, jewellery etc.  A customer walks into the retail showroom & goes through the catalogue of the products that he would like to purchase.  Some stores require the customer to write out the product code number & hand it over to the clerk who arranges for the product from warehouse for inspection & purchase.  The sizes of retail outlets have changed to large & are called Big Box. BIG- BOX RETAIL MODELS:  Discount department stores- Ranging from 80,000sq.ft. to 130,000sq.ft. .They offers a wide variety of merchandise including automotive parts & services etc.

8  Category killers- Ranging from 20,000sq.ft. to 120,000sq.ft. They are specialty retailer who offers a very large selection in the chosen product category & economical prices. They focus only on one category. E.g.: Toys R Us  Outlet stores- Ranging from 20,000sq.ft. to 80,000sq.ft. They are typically the discount arms of major department stores such as Nordstorm Rack & J.C. Penny Outlet.  Warehouse clubs- Ranging from 104,000sq.ft. to 170,000sq.ft. offer a variety of goods in bulk, at wholesale prices. They provide a limited number of product items. E.g: Costco Wholesale, Sam’s Club. OTHER FORMATS:  Super warehouse store- A hybrid warehouse /superstore with 50,000-plus items & the full range of service departments, featuring high- quality perishable & reduced prices.  Limited assortment store- A low- price outlet with minimal service & fewer than 2,000 items. It features numerous private label- products & is popular among food stamp recipients, seeking to stretch their limited dollars.  Supercenter- A large food-drug combination store & mass- merchandiser. These average more than 170,000sq.ft. & typically devote up to 40% of the store to grocery items, which are often sold at loss-leader prices.  Wholesale club- A retail/wholesale hybrid that offers consumers & small businesses, a limited & economical selection of food & non- food products. These measure about 120,000sq.ft; 60-70% of the space is devoted to bulk sizes of both Grocery and GM/HBC products. MAJOR NON-STORE RETAILER TYPES: NON STORE RETAILING       Direct marketing Mail Order Business Tele Marketing Automated vending Internet marketing Direct selling


Direct selling refers to sale of products to ultimate consumers through face to face sale
at home or in the work place. it is traditionally called door to door selling.


Better ware and Avon cosmetics

Shortest and time saving method. Saving of middlemen profit. Personal touch with customers.


Direct touch with market feelings.

Limited market coverage Increased administration burden and costs Large investments for showroom and for maintaining sales force. More risks.

Direct marketing refers to the techniques used to get consumers to make a purchase
,office or other non retail setting.

from their home

Direct marketing is an attempt to approach consumers directly. It is a personal approach to
consumers.it is much more personal than mass advertising.so it is a key part of the development of relationships with customers. Advantages of Direct marketing Benefits to customers

Convenience Saving in time Choice Product information
Benefits to sellers

Reduction in operating costs Consumer information Customer relationship Privacy Evaluation of media and messages

Competing with existing intermediaries Cost: In direct marketing initial acquisition cost is high
Forms of Direct marketing

Catalogue marketing Direct response marketing Television home shopping Kiosk marketing Tele marketing


Online marketing
Catalogue marketing: In this marketing an organization provides a catalogue from which customers
make selections and place orders by mail or telephone.

 Direct response marketing: This occurs when a retailer advertises a product and makes it available
through telephone orders.

Example: A news paper or magazine advertisements for series of children’s book available by filling
out the form in the ad or calling a toll free number.

Television home shopping: This was developed with the advent of cable tv. tv viewers tuning in to a
cable shopping channel see a ‘show’ where products are demonstrated by a ‘host’.

Consumers can call the host while the show is in tv to ask questions about the product or purchase it.

Kiosk marketing: Kiosks marketing simply refers to marketing through kiosks. Kiosks are
information and ordering machines placed in stores, airport and in other location. These machines provide information about the product and customers can order any product or item through it.

Eg:Car Max

the used car superstore in USA uses a kiosk with a touch screen computer to guide consumers through the vast inventory of as many as 1000 cars and trucks. TELE MARKETING  The use of the telephone as an interactive medium for promotion and sales.  Telemarketing will grow to become a $480 billion+ business by 2009? Business to business telemarketing sales will leap to $268.3 billion from $220.3 billion in 2005. The Direct Marketing Association, www.the-dma.org’s most recent report forecasts business to consumer telemarketing revenues will climb to $212.9 billion from $182.3 billion in 2005. Inbound telemarketing  Publish, display and mention your phone numbers in catalogs, direct mail, emails, faxes, print ads, on websites and in DRTV/radio spots to generate orders and leads. Cross-sell/up-sell callers to boost revenues. Make your CRM strategy gain results by presenting targeted offers on inbound telemarketing calls. Outbound telemarketing  Call customers and prospects to sell products and services, generate and qualify leads, prompt them to visit stores and showrooms and set appointments. Give existing buyers heads-up on hot deals. Turn outbound customer care calls into outbound telemarketing calls by cross-selling/upselling targeted offers. Business to Business Telemarketing  Use outbound telemarketing to acquire customers, qualify prospects and pass hot leads to sales reps and deal closers. Rely on inbound telemarketing to acquire and qualify buyers for followup by your sales reps, close sales, process orders and cross-sell/upsell offers. Business to Consumer Telemarketing

11  People depend on your outbound telemarketing and inbound telemarketing programs to buy goods and services. Present attractive, targeted offers to prospects and existing customers with outbound telemarketing calls. Get the most out of print ads, DRTV and infomercial inbound telemarketing with cross-sells/upsells. Automated Telemarketing  Automated telemarketing, using interactive voice response (IVR) is an effective, inexpensive way to process large numbers of inbound telemarketing calls. Outbound telemarketing using IVR delivers offers quickly at low cost, generating inbound telemarketing leads and sales. VENDING MACHINES  During the early 1880s, the first commercial coin-operated vending machines were introduced in London, England and dispensed post cards. English publisher and bookshop owner, Richard Carlisle invented a vending machine for selling books, around the same time.  In 1888, the Thomas Adams Gum Company introduced the very first vending machines to the United States. The machines were installed on the elevated subway platforms in New York City and sold Tutti-Fruiti gum. In 1897, the Pulver Manufacturing Company added animated figures to its gum machines as an added attraction.

Coin-operated Restaurants  Vending machines soon offered everything including; cigars, postcards, stamps, etc. In Philadelphia, a completely coin-operated restaurant called Horn & Hardart was opened in 1902 and stayed opened until 1962. Sodas & Cigarettes in Vending Machines  In the early 1920's, the first automatic vending machines started dispensing sodas into cups. In 1926, an American inventor named William Rowe invented the cigarette vending machine. Famous Vending Machines  A company called Vendorlator Manufacturing Company of Fresno California made a series of classic vending machines during the 40s and 50s that mostly sold coca-cola and pepsi. Famous Vendorlators included the VMC 27 and the VMC 33. Advantages

It involves no running cost.so it is economical. It is very convenient for customers.it is found in a variety of handy locations such as college
dormitories, it is open 24 hours a day.

It eliminates the use of sales people.it requires small space for its installation.
The machine does not get tired but provides faithful services round the clock. The machine is best suited for selling small sized products,having low unit value and low unit value
and low margin of profit, which it is inconvenient and expensive to sell through regular stores. Disadvantages

Separate vending machines are required for each product.the machines are costly .hence huge capital
investment is needed.


The product should be standardized. The machines require feeding from time to time. They do n t take back the products once sold.

There is no scope for bargaining. The machine may stop running due to mechanical faults and cause nuisance to consumers. The customer has to procure the specific type of coin for inserting into the machine. This may not
always be convenient ONLINE MARKETING

On line marketing is conducted through interactive online computer system which link consumers
with sellers electronically. Many retailers are setting up home page on the internets World Wide Web to disseminate information about their companies and products. Internet marketing (E-Commerce)

E- commerce simply refers to buying and selling of goods and services through internet. It is a process
of making business transactions by two or more parties through computer and some type of network.


B 2 B – Business to Business (whole sale & retail) B 2 C – Business to Consumer ( consumer & retailer C 2 B – Consumer to Business B 2 G – Business to Government G 2 C – Government to Consumer
Advantages & disadvantages of internet marketing
Positives:  Ease of Entry.  Low overhead  Geographic Flexibility  You can be almost any where in the world as long as you have an internet connection. Your business is open 24 hours a day and seven days a week.  You do not have to deal with a boss

13  Almost of us have dealt with some pretty arrogant, mean, and stupid bosses but when you in the internet marketing business you call the shots.  You do not have to deal with co. workers  You can set your own hours  When you have a regular job you have to work 9-5 or when your employer tells you to come to work. In internet marketing you have more flexibility in your schedule.  You do not have to deal with employees  Employees can be a pain. Employees can be very demanding and you have to worry if they are going to come to work on time and it cost you more money because you have to pay your employees those benefits Negatives:  Can leave the businessman feeling isolated:  This is very common. Because the World Wide Web is faceless (In most cases), it can appear cold and inhuman. This can leave you feeling isolated and very inward. Not a nice feeling at all. Everyone likes to socialize and meet people, but in this case, its quite difficult to, in business anyway.  Hard to tell if people are lying:  There is so much information on the world wide web now, it's sometimes hard to tell the difference between crap and quality  Information Overload:  Once again we get to the part of there being a lot of information on the world wide web. There can be too much good information too. There can be a lot of competition for an industry, this can leave you more confused than if there were presented with loads of crap. You might not be able to tell who to chose. If you are a veteran of the net, you wont have much to worry about, however if you're a newbie then this is a problem. MAIL ORDER BUSINESS

It is a kind of trade where business is done through post or mail. Customers do not visit the seller’s
shop. The seller advertises his goods through press and by sending cards and catalogs. Orders are received from customers through post and the goods also are sold through post. Characteristics

It’s a large scale Retailing Business is done through post It can be started with moderate amount of capital There is no need to store a large stock of goods There is no personal contact between buyer and seller
To the seller It can cover a wide market There is no expense for sales men As no credit sales were allowed, there is no fear of bad debts It can be started with a limited amount of a capital. Hence risk is considerably less

14 To the customer (Buyer) Consumers get article at their doors Consumers who are residing in remote areas are greatly benefited They get products at lower price because of selling expense

To the seller The expenditure in advertisement in publicity is high There is no personal contact with the buyers The seller is not in a position to clear the objections raised by customers To the Buyer Buyer cannot inspect the goods before buying Customers do not get credit facilities Price of articles are high due to increased advertising There is no opportunities for customers to select goods according to their tastes SERVICE MARKETING  Service marketing can be defined as the process of identifying ,pricing,promoting and providing of the right services in the right time to the customers with a view to satisfy their requirements and objectives of the service provider. SIGNIFICANCE OF SERVICE MARKETING      Creation and expansion of job opportunities An optimal utilization of resources Paving avenues for the formation of capital Increasing the standard of living Environment –friendly technology

TYPES        Bank marketing Insurance marketing Transport marketing Tourism marketing Hotel marketing Education marketing Hospital marketing and others

BANK MARKETING  It is application of modern marketing principles in the banking organizations. It is a managerial approach to market the banking services. It is a social process to sub serve the social interests. Users of bank marketing

15  General users: Persons having an account in the bank and using the banking facilities at the terms and conditions fixed by bank.  Industrial Users: The industrialists, entrepreneurs having an account in the bank and using credit facilities. INSURANCE MARKETING  It is the application of marketing principles by the insurance organizations and to professionalize the process of marketing in such a way that the organizations start believing in the principles of making things happen.

    It is a managerial process. It is a process of formulating the marketing mix. It is a device to make possible customer orientation. It is an attempt to help profit maximization.

TRANSPORT MARKETING  Transport marketing focuses our attention on practising modern marketing principles in the transportatrion services so that the transportat generating organisations succeed in satisfying the users and maintaining the commercial viability. TOURISM MARKETING  Tourism marketing is an integral effort to satisfy tourists and more so it is a device to transform the potential tourists inti the actual tourists.  Tourism marketing is a managerial process to promote business.

Advantages  Helping to preserve, retain and enrich our cultural heritages.  Bringing socio economic benefits to the community and the state, specially in terms of expanding the employment opportunities.  Motivating the private sector to develop the superstructure.  Promoting the use of sophisticated information technologies to improve the quality of services. HOTEL MARKETING  It is the application of marketing princioles in the hotel industry so that the hotel services are made internationally competitive Users  The different categories of users availing the service of hotel industry are,  Pilgrims

16  Students  Officials  Intellects& sportsmen

It took 10 years for the first 2500 organized retail stores to emerge in India; the next 2500 could easily get added in the next 5 years OPPORTUNITIES IN INDIA • % of organized retailing

• • • •

Consumption Rate Retail Space Increase in supermarket sales Prediction-by 2010

Size of organized and unorganized sector


SOME USEFUL STATISTICS • More than half of all the tea consumed in India, is in the rural households • Over 18 lakh new households enter the shampoo market every month • Cooking oils and vanaspati account for as much as third of the rural expenditure on FMCG products • As many as third of all retail outlets stock loose, unpacked provisions • The population of just one state in India,viz UP, is as much as the population of Brazil which is the fifth largest country in the world THE THREATS • Shortage of real estate • Obsolete rental laws • Lack of finance option • Unplanned cities • Corruption • Increasing energy cost • Lack of skilled manpower • Lack of adequate infrastructure






NEW FORMS OF RETAILING • Mail order retailing • Internet retailing • Multi-level marketing ADVANTAGES OF ORGANIZED RETAILING • Wider choices for consumers • Comfortable shopping • Increased employment opportunities • Stable prices for farmers • Better quality products • Benefit to tourism • Better realization of taxes • Economic growth and new opportunities DISADVANTAGES OF ORGANISED RETAILING • Poor income distribution • Bad effects on small retailers • Monopoly • Impulsive consumption • Affects socialism


• New retail forms and combinations • Growth of intertype of competition • Growth of giant retailers • Growing investment in technology • Global presence of major retailers • Selling experiences not just goods WHEEL OF RETAILING Describes the evolution of retail institutions as a wheel like or cyclic progression *retail innovators enter the market as low priced, low margin, low status operators *competitive pressure cause the retailer to add more high priced variety, more services and more attractive store surroundings * this result in loss of the original price-conscious consumers, making way for new low price innovators to enter the market

Wheel of retailing

RETAIL LIFE CYCLE-SIMILAR TO PRODUCT LIFE CYCLE  Introduction-slow growth rate-limited resources and experience  Rapid growth-as efficiency and experience increase  Maturity-due to increased cost and competition  Decline-decrease in market share and profitability and ultimately leads to withdraw


RETAIL LIFE CYCLE  But it also refers to changes in the structure of retail institutions over time eg. Super centers are in the introduction stage, on-line shopping is in the growth stage,supermarkets are in the maturity stage and conventional store are in the decline stage


Vertical Marketing System-VMS is an organized form of channel control involving any number of intermediaries. The channels are manufactures , wholesalers and retailers  A channel may be completely or partially integrated. A fully integrated channel has all stages of production and distribution under one ownership or control. It is more common to have partial integration (forward or backward), such as producer-wholesaler, producer-retailer, or wholesaler-retailer. ADVANTAGES OF VMS 1. More cost-effective 2. Profitable distribution alternatives 3. Less inter firm conflict 4. Economies of scale 5. Better bargaining power in negotiations 6. Guaranteed supply The three major forms of VMS are Corporate, Administered and Contractual.  Corporate backward integration occurs when retailers own producers or wholesalers that precede them in the channel (e.g., Kroger own processing facilities). In corporate forward integration, manufacture own their own retail or wholesale outlets This VMS is useful where product is of high price and the product is not of frequent use.  An Administered VMS closely resembles a conventional marketing channel, where each member remains independently owned and autonomous but collaborates with the others in marketing activities (e.g., Procter & Gamble Co. and retailers). This VMS is useful where the product is of low price, where the product is a consumer perishable good, and the product is frequently used.  A Contractual VMS consist of independently owned firms at different levels of production and distribution that integrate their programs through a formal contract. e.g., franchises.

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