DIPLOMA COURSE

BAET 210
MODULE IN WHOLESALE AND RETAIL
SALES MANAGEMENT
2nd Semester, AY 2020-2021

Prepared by:

JEFERSON C. ENOPOSA
Instructor

STRICTLY FOR CLASS USE ONLY

____________________________________________________________________________
MDM-Sagay College, Inc.
: National Highway, Poblacion 2, Sagay City, Negros Occidental
Tel.# 488-0531/ email: mdm_sagay2000@gmail.com.
 WHOLESALE AND RETAIL SALES
LESSON 1: Retail and types of retailers

LEARNING OUTCOMES:
1. Understand what is a retail
2. Enumerate the different types of a retailer

MOTIVATION

What do you think is a retail and the types of retailer in marketing management?

Source: https://www.thebalancesmb.com/what-is-retail-2892238
Retail is a very broad term that encompasses a huge industry, employing millions of
people and generating trillions of dollars per year in sales revenue. Retail is the sale of goods to
consumers—not for them to sell, but for use and consumption by the purchaser.

TEACHING POINTS

What Is Retail?

Retail involves the sale of merchandise from a single point of purchase directly to a
customer who intends to use that product. The single point of purchase could be a brick-and-mortar
retail store, an internet shopping website, or a catalog.
Retailing is all about attracting consumers through product displays and marketing. Inventory must
be kept, shelves must be kept full, and payments have to be collected. Retailers are more than
places to purchase merchandise, however—they provide manufacturers an outlet so that they can
focus on creating their products.

Who is a Retailer?
A retailer is that last point in the value chain that directly interacts with the customer to deliver the
value. For that matter, in the context of retailing and retail management, I will refer to all the
customers as ‘shoppers’.
Now, if you realize, for a shopper like you since the retailer is the interaction point for your brand, the
retailer becomes a part of the brand itself.

How Does Retailing Work?

Retailers rely on a system that supplies them with merchandise to market to consumers. To
acquire inventory and ensure they have the products they want to sell, relationships must be
established with businesses that operate within the retail supply chain.

The retail supply chain consists of manufacturers, wholesalers, retailers, and the consumer (end-
user). The wholesaler is directly connected to the manufacturer, while the retailer is connected to
the wholesaler.

The roles of the key players in a typical retail supply chain are:

 Manufacturers: Produce goods using machines, raw materials, and labor

 Wholesalers: Purchase finished goods from the manufacturers and sell those goods to
retailers in large bulk quantities

 Retailers: Sell the goods in small quantities to the end-user at a higher price, theoretically
at the manufacturer’s suggested retail price

 Consumers: Buy the goods from the retailer for personal use
What are the different types of retailers?

Now, there are quite a lot of ways you can classify the different types of retail businesses. I spent
some time doing a classification of retailers that covers the entire canvas comprehensively.

The different types of retailers can be broadly classified as:

 Food Retail

 General Merchandise

Each of these two has further classifications. I have captured the most important ones in the
image below.
Food Retail

Food Retail is a categorization of the retail stores which includes all the stores that keep any kind
of food item. So, a store like Loupe’s or Prince Hypermart comes under food retail. Whereas, a
store like Sagay Shoppers, which sells electronics, does not come in the category. The further
classification within food retail is:

A. Convenience Stores

This store format is based upon the idea of, as the name suggests, convenience. These are small
stores that offer a limited assortment of products.

One of the finest examples of Convenience stores is the 7-Eleven stores. Their store location
density is amazing. This is the first characteristic for convenience stores. They are everywhere for
everyone. For a marketer, this is should be a point to be noted for you. If you have a product
which is for everyone, with no demographic classification or restrictions per se, then convenience
stores really do a good job of getting near to the customers.

B. Warehouse Club

These are large stores which aim to provide products in a larger volume to small businesses/small
retailers and individuals. Imagine this, a warehouse club is a retailer, not a wholesaler, but is
extremely economical in terms of price among all the retailer types.

C. Supermarkets

Supermarkets are bigger than the convenience stores and supermarkets are pretty much like
convenience stores that operate in a much large store size than them.

Usually, supermarkets, warehouse clubs, and hypermarkets (which I will be explaining just after
this) attract people from far off areas. Supermarkets do offer discounts but these discounts are
lesser comparable to what a shopper will get at a Hypermarket or obviously at Warehouse clubs.

D. Hypermarket

Hypermarkets or what you may also call Supercenters are really big shopping stores. As a matter
of fact, you may say that Hypermarkets are different from Supermarkets but then that difference is
only in terms of the food assortment. A hypermarket has a lower percentage of food as compared
to a supermarket. Whereas, in terms of absolute volume the food items (including groceries) are
usually more than you would find in a supermarket.

General Retailers

When we discussed what the different types of retailers are, I mentioned that Food Retailers are
those which carry any kind of food items. On the other hand, General Retailers is a method of
classification and it also may comprise stores that carry food items.

A. Discount Stores

Any store that positions itself as a discount player falls into the category of Discount Stores. A
Bazaar should have crossed your mind when you read that. A Bazaar certainly is an example of a
discount store.
B. Specialty Stores

These are stores that specialize in servicing a particular segment of customers. For that purpose,
they will keep a deep range of complementary items and would target the customer accordingly.

If you begin to think, even a store like the Apple store is a specialty store. It does target an
extremely specific segment and keeps all the complementary products like iPhone, iPads, Macs
and even the accessories. Same is the case with Victoria’s Secret store.

C. Category Specialists

Better known as ‘Category Killers’, these stores focus on just one product category and really kill
in that! Well, that means that their product assortment depth in that category is just unbeatable.

D. Departmental Stores

See Departmental Stores as a store which has many departments. Seriously, that is one of the
best ways I have come up with to really understand departmental stores.

So, a departmental store can be visualized as a store that is departmentalized where each of
those departments can be seen as a separate store.

E. Off-price Retailers

These are retailers that offer inconsistent items of a brand or multiple brands at prices as low as
40-60% of the Maximum Retail Price. This is because Off-price retailers buy the stock which other
retailers don’t want to sell or can’t sell.
F. Value Retailers
Finally, we have the Value Retailers. These are the retailers who offer items that have a low price.
But take caution here. It would be wrong to confuse the value retailers with discount stores.
Discount stores offer discounts on products however Value retailers offer inherently low priced
products. Naturally, such stores should and are located in areas with customers who like to buy
low prices products.
Learning Check 1.1

Name: ______________________________________________________ Score: ____________

Name of Professor: ____________________________________________ Date: _____________
Course/Year/Section: _______________________

Multiple Choice. Choose the letter of the best answer. Write the chosen letter on a separate sheet
of paper.
1. It is a type of retailer that offer a limited assortment of products.
a. Supermarkets
b. Value Retailers
c. Convenience Stores
d. Discount Stores

2. There are the key players in a typical retail supply chain, EXCEPT FOR.
a. Manufacturers
b. Consumers
c. Merchandiser
d. Retailers

3. It is a type of a retailer which includes all the stores that keep any kind of food item.
a. Off price retailers
b. General retailers
c. Food retailers
d. All of the above

4. A ____________ is that last point in the value chain that directly interacts with the customer
to deliver the value.

a. Food retailers
b. General retailers
c. Retailers
d. Consumer

5. These are retailers that offer inconsistent items of a brand or multiple brands at prices as low
as 40-60% of the Maximum Retail Price. First Generation

a. Off price retailers

b. General retailers
c. Food retailers
d. All of the above

6-10: Enumerate the supply chain in retailing.

LESSON 2: Wholesale and retail mix
LEARNING OUTCOMES:
1. Understand what a wholesale is.
2. Learn what is a retail mix
3. Explain how to build a sustainable competitive advantage.
MOTIVATION:

Instruction: Given the rambled letters in the box below. List at least three (3) terms related to
wholesale and retail mix. Write your
answer on the space M O D E M S U O P L Y U N M T O S provided.
O O W E R S E P P L Y U N O T O S
U P O W E R S U P P L Y U N I T O
S O W E T H E Q N E T U N I T O S
E G R S R T U P P L Y U N T T O S
P H W E R N E T W L OU S O T O S
P R M O T H E R B O A R D R T OS
P S W H R S U I P L Y A N I T O S
P K E E R S W P P L Y M N I TO S

1. ___________________________
2. ___________________________
3. ___________________________
PRESENTATION
In the previous discussion, you learned about the retail, the two different types of a retailers.
In this lesson, you will learn about wholesale, retail mix and how to build a sustainable competitive
advantage.
TEACHING POINTS
Wholesale and retail mix
Wholesale refers to two possible business models. A business may buy goods in large quantities directly from
manufacturers, warehouse them, and resell them. Or wholesale may refer to businesses that produce their
own products and sell them directly to retailers, who then sell products to the end user.
Benefits of Wholesale
 Save Money
By buying products in bulk you can save money through discounts that wholesale get with larger
orders. This means that you can get products for less while selling them for more. Depending on
how much you invest initially you can get ahead of competitors through buying and selling in sheer
volume.
 Build a Network of Suppliers
Those in wholesale need a good network of suppliers and manufacturers that they can rely on.
Deliveries must be on time, products
must be to a high standard, and
relationships honored, to make sure that
business runs smoothly for a
wholesaler. This means that supplier
relationships should be positive and well
maintained so that your brand is
established and sustainable
Types of Wholesale
 Merchant Wholesalers
This is the most common wholesale types. Merchant wholesalers engage in purchasing larger
volumes of products which they sell in smaller quantities for a slightly higher price. Merchant
wholesalers do not manufacture their own products but they have in-depth knowledge of products to
know when is the right time to start selling them to retail businesses in different industries.
 Brokers
Brokers typically don’t own the products they’re selling; they are the intermediary between a
wholesale operator and their clients. A broker negotiates a good deal between the two parties and
works off a sales commission structure.
 Sales and Distribution
Instead of relying on wholesale businesses finding a manufacturer, a manufacturer could hire people
to actively represent them to wholesalers. This means that a manufacturer will reach out to
wholesale operators to offer their products to them, creating wholesale deals that are tailored to
individual cases.

What Is the Difference Between a Distributor, Wholesaler and Retailer?

A product has to come a long way until it reaches a paying customer. Wholesalers, distributors, and
retailers are all middlemen that are featured in the supply chain and make that journey possible.
Each has its own purpose and set of responsibilities that define their role in the network.

Distributor is an independent agent that enters into an agreement with a manufacturer to sell their
products to wholesalers or retailers. Distributors often face limitations from manufacturers and are
not allowed to sell other product lines or competing products, however, that often boils down to the
type of industry and agreement that’s put into place. Typically, distributors carry a very large amount
of stock and often have the capacity to warehouse goods for up to a year. Whenever a manufacturer
is approached by a potential new buyer, they have to deal with the chosen distributor that becomes
their direct point of contact.

Wholesaler is a middleman that buys in bulk from a distributor and resells at a wholesale price to a
retailer. Wholesalers can specialize in a certain type of product, such as women’s shoes, or carry a
wide range of stock destined for retailers in various different industries. Wholesalers who only stock
non-competing products are deemed distributors. Besides breaking bulk orders into smaller
quantities, wholesalers can also assemble goods as part of the process. Wholesalers typically tend
to warehouse products for shorter periods of time compared to distributors, most commonly for up to
six months.

Retailers are for-profit businesses that sell directly to consumers for the purpose of consumption
and not resale. To make a profit, a retailer needs to find a wholesaler or a distributor that sells
products at the right price point and in the right quantities. Generally, retailers make money by
purchasing goods from wholesalers in small quantities at a wholesale price and reselling them at a
relatively high price to cover for advertising costs and other expenses, such as staff salaries, rent,
utility bills, etc.

The Retail Mix

So how do we take our retail planning strategy and put it into an actionable plan? Part of the
success of any retailer is taking that strategic plan and breaking it apart into actionable and
meaningful steps that will lead to success. A well thought out and planned retail mix provides the
retailer with a focused position and helps differentiate them from the competition. A retail mix,
defined, is the marketing plan put in place to address key factors such as location, price, personnel,
services, and goods. The retail mix is also referred to as the “6 Ps.”

One important thing to keep in mind is that any competitive advantages you have in your strategy
should help form your retail mix. In addition, the retail mix should always have the target market in
mind. The retail mix will differ based on the store and the type of product offered to the customer.

Discussing and evaluating your retail mix in the organization offers a number of benefits. First, you
are addressing the needs of your target market. In essence it forces the retailer to make the
customer top of mind and foremost in all strategy decisions. It also allows for a business planning
strategy within the retailer. By approaching all six components the retailer is ensuring they are able
to meet the needs of the customer using all these components. Lastly, it allows the retailer to
respond to competition.
Let’s now take a look at the components of the retail mix that are ultimately the pieces of the
retailer’s strategy.
1. Price
What is my pricing strategy? What is my markup strategy and
how does that affect my overall retail price? You must make sure
you calculate your retail price based on the markup you receive
and not the costs involved. You also want to think about
profitability and relate this back to the goals of your area as well as
your organization.

2. Promotion
What promotional tools will you use to influence the consumer’s purchase decision and, overall, their
intention to purchase? This is where you also want to make sure
you include a budget that shows where resources are allocated
as well as a time table for the promotional activities. Remember
to include specific examples of your proposed promotional
activities. Some examples include online promotions, print
advertising, and any television advertising.

3. Place
What are the hours of operation for your store? How many employees do you need and when do
you need them? This is where you can also include a general
description of the responsibilities of each associate along with
some type of detailed info on the organization’s structure. This
could also be dependent upon the area in which you are located
as well as the needs of the customer.

4. Product
What type of product do you intend to carry? What is the depth
(how much you will carry of an item) as well as the
breadth (number of SKUs) you will carry in your
assortment? What is your anticipated turn as well as
inventory levels? Later we will discuss in more detail
the importance of inventory turnover and how it
contributes to profitability. This is where you want to
make sure you have adequate inventory levels to meet
customer demand. Too much product could lead to
excessive markdowns which deteriorates profitability
while too little desired merchandise might lead to missed
sales opportunities. Does your product meet your
customer’s needs?
5. Presentation
Will you have a free-standing location? Will you be located
in the mall? How is the location you have chosen a good fit
for your target market? It is during this time you will also
want to provide a thorough trade analysis that shows the population in the area and how they are a
good fit for your business.
6. Personnel
How are you selling to your customers? What kind of internal
marketing supports your sales team? What are the graphics that
set your store apart? What does the signage look like inside and
outside of your store? These are all key elements you want to
consider.

Developing Sustainable Competitive Advantage for Retailers

Today’s business environment is very competitive. It’s now a lot easier and cheaper to
start a business, particularly with technology enabling business to be conducted online and
internationally to win customers in foreign markets.
Any business effort taken by a retailer from time to time can be a reason for competitive advantage
but some advantages are sustainable over a long period of time, while others are of trial nature.
Sustainable advantages are usually hard nut to crack. A retailer puts its full energy to keep
competitors away from the market.
By providing, the same quality goods and services and by following the same price
policy, any retailer can be in and out of retailing competition. If a retailer is successful due to its wide
merchandise assortments, its competitors can be provide wider and deeper merchandise to attract
the customers. This phenomenon does not come under the concept of sustainable competitive
advantage.
Building a sustainable competitive advantage means besides developing private/ store brands,
lucrative offers and customer service, retailers should create certain advantages that enable them to
survive against all odds as and when presented by its competitors.

Five steps to get a sustainable competitive advantage

At its most basic level, there are three key types of sustainable competitive advantage.

 Cost advantage: the business competes on price.

 Value advantage: the business provides a differentiated offering that is perceived to be of
superior value.
 Focus advantage: the business focuses on a specific market niche, with a tailored offering
designed specifically for that segment of the market.

Most small businesses don’t have the market share and buying power to effectively compete on
price and are not big enough to be all things to all customers in a market.

Therefore, to successfully compete, small businesses need to develop a sustainable competitive

advantage that is based on providing superior value to a specific niche.
Five steps to developing a sustainable competitive advantage:

1. Understand the market and its segments. Look for those niches that aren’t well serviced by
competitors and can be profitably targeted and sold to.

2. Develop an understanding of what customers really want and establish a value proposition that
grabs their attention.

3. Work out the key things that you need to do really well to support and deliver the value
proposition. For example, service levels, quality, branding, pricing, et cetera.

4. Understand what your strengths and core competencies are and how you can use these in
innovative ways to provide value to your chosen market.

5. Design your business model to support and deliver the value proposition.

At the end of this process, you will have a very clearly defined statement of:

 Who you will be selling to (customers and market segments);

 Why they will buy from you and not your competitors (the value proposition); and
 The key things you need to excel at to be able to consistently deliver your value proposition.

Once you’ve found your sustainable competitive advantage, you should use it in many ways, to the
business’ benefit.

Using your sustainable competitive advantage in your sales and marketing makes it easier for your
customers to understand why they should part with their dollars and give them to you rather than
your competitors.

Knowing one’s competitive advantage is difficult for its competitors. To begin with, even for a retailer,
it is difficult to identify its own competitive advantages. Particularly, competitive advantage is your
unique skills and inherent resources devoted/dedicated to your business that competitors cannot
predict easily.

Though competitors continuously try to weaken these advantages, successful retailers sustain these
advantages by building strong cover against them. In nutshell, building a sustainable competitive
advantage is the path to survive for long.

Retailers throughout the globe basically have seven key areas to develop sustainable
competitive advantage:

(1) Customer loyalty

(2) Store location

(3) Human resource management

(4) Distribution and information systems

(5) Unique merchandise

(6) Vendor relations

(7) Customer service
 These respective areas are explained as follows:
1. Customer Loyalty:
Loyal customers are long-term assets for a retail organization. They have emotional bond with a
retailer and regularly visit the retailer. From a retailer’s point of view, customer loyalty means that
customers are committed to purchase merchandise and services as and when required from the
retailer with resistance of competitors’ move. To retain loyal customers is not an easy task.
It requires dedicated floor staff, efficient customer service and unique merchandise. For example,
loyal customers will continue to shop at ‘Prince’ even if ‘Loupe’s’ opens a store nearby and offers
low price policy and gift packs with every purchase.

2. Store Location:
The selection of location for a retail store is one of the most crucial strategic decisions a typical
retailer makes. Since most of the retail sales in India take place at stores, utmost care should be
taken before taking a site location decision. A good location not only reduces distribution cost to
considerable extent but also attracts more customers. No matter what quality merchandise a store
offers, customer service or attractive pricing, every retailer has to compete over these success
elements: location.

Therefore, before making a decision about a particular location, retailer should go through the
detailed locational analysis considering various factors, like financial, political and socio-cultural
forces. A retailer should understand that store location decision is a long- term strategic decision,
which is irreversible and cannot be changed once decided upon. A good location reduces day-to-day
loading, unloading and distribution cost. Consequently, extreme care and proper planning is
essential to select the most suitable location.

Store location decisions ultimately decide the future and overall profitability of the organization. Not
only in the retailing organizations but ideal location is required for non- retailing organizations too.
Buying a good location does not only assure success, but undoubtedly is must for smooth flow and
accomplishment of day-to-day operations like loading and unloading of goods etc. Therefore, it is
advisable that utmost planning should be taken care of. Retailer must understand that each
individual is a case in itself.
3. Human Resource Management:

Human resource management plays a vital role in success of retailing. Despite technological
advancements, retailers still rely on people (human resources) to perform the fundamental retail
activities such as procurement, displaying merchandise and providing service to customers.
Retailers know the importance of hardworking and loyal employees.

Committed employees are critical assets to the retailers. Recruiting and retaining good employees
have never been an easy task. No two employees are akin in their basic mental abilities, skills,
personality, intelligence, energy levels, interests, aspirations etc.

Depending upon these, they behave differently in same set of circumstances. Therefore, managing
human resource is always a challenging task for a retailer or store manager. But by the way of
understanding employees’ problems, developing, and motivation and by providing appropriate
incentives, retailers/store managers can gain competitive advantage.

4. Distribution and Information Systems:

All retailers wish that they should supply exactly the same quality, quantity and price what their
customers need. They take all possible steps to supply the goods well in time and at prices which
are lesser than their competitors. Some retailers instead of using low price policy provide additional
facilities (margin) to lure customers such as wide merchandise assortments under one roof, even
better customer service and visual presentations.

Retailers achieve these efficiencies by way of developing error free and latest distribution and
information systems network. An efficient distribution and information system has two benefits for
customers: (1) fewer stock outs, and (2) assortment of merchandise that customers want, where
they wish to, for a retailer (store manager, these benefits translate into increased sales, higher
inventory turnover, and lower mark downs.

For example, Wal-Mart being a largest retailer in the world has the largest data warehouse enabling
its vendors like Proctor & Gamble to plan merchandise assortments on a store- by-store, format-by-
format and category-by-category basis. This is the efficiency of Wal- Mart’s distribution and
information system that makes its retailers possible to offer low cost merchandise across the globe
perhaps the secret of Wal-Mart’s success in the world of retailing.

5. Unique Merchandise:

Technological advancement, borderless economies and free flow of goods across the countries
have enabled a retailer to procure any good and sell it in their stores, whenever and wherever they
want, but in order to keep themselves ahead in the retailing race, many retailers get competitive
advantage through development of personal/private/store brands.

These products are designed, produced and marketed exclusively by the retailer and are sold by
that retailer only. For example, if someone want to buy ‘Avon’ cosmetics, you can buy it from SM
supermarket.

6. Vendor Relations:

Having good vendor relations is another success key of retailing.

Successful retailers develop strong relationships with their vendors and get competitive edge over
competitors under following ways:

(i) By obtaining special selling rights to sell merchandise in a particular region where they have
monopoly bird position.

(ii) To obtain special terms/conditions rights that are not available to competitors who lack good
vendor relations and

(iii) To obtain popular/fast moving merchandise in short supply/short notice. The longer the
relationship exists, the longer the competitive advantage retailers will get.

7. Customer Services:

Good customer service has today become an integral part of the retail industry. In retailing, where
floor staff has to directly interact with the customers, customer service acts as lifeblood. With the

sales promotion and lucrative offers you can increase the temporary sales but out of these

customers if half or some of the customers do not come back then your store will not survive for long

time.

Good customer service is intended to bring back these customers voluntarily and then sending back

with smiling faces. Smiling faces means after buying something, they have good feedback about

your store. Even in some cases, they recommend your stores to others for shopping by sharing their

good experiences. Yes, this is always possible. It is the mouth advertisement which multiplies your

customer base within a short span of time.

Good floor staff does not mean that you can sell anything to anyone, but it will be your image in the

minds of the customers that decides whether or not you can sell something to them. The image is

largely influenced by the service provided by the floor staff and the experience of the customers with

them. A satisfied customer is bound to tell others about his experiences, as will a dissatisfied

customer.

The strength of good customer service is to develop a long-lasting rapport with customers – a link

that individual customer feels that he would like to pursue in the coming time. How you develop such

a long term relationship depends on your intention and perseverance. Remember that the secret of

forming good relationship is the customer service with full dedication and without any greed. By this

way, you will be known by what you do, not what you say to customers.

Learning Check 1.2

Name: ______________________________________________________ Score: ____________

Name of Professor: ____________________________________________ Date: _____________
Course/Year/Section: _______________________

Complete the table below: Fill in the blank. Write the letter of the correct answer on the separate
sheet of paper.

ASSESSMENT

Name: ______________________________________________________ Score: ____________

Name of Professor: ____________________________________________ Date: _____________
Course/Year/Section: _______________________

Enumeration. Answer the following question:

1. What are the 6P’s in retail mix?

2. What are the benefits of wholesale?
3. What are the types of wholesale?
4. What are the three key types of sustainable competitive advantage?
5. What are the seven key areas to develop sustainable competitive advantage?
6-10. Explain what is the difference between wholesale and retail sales management?