Retailing and Wholesaling

Wholesaling

Definitions
• Wholesaling
– All activities involved in selling goods and services to those buying for resale or business use.

• Wholesaler
– A firm engaged primarily in wholesaling activity.

Wholesaling
• Wholesalers add value by performing the following functions:
– – – – – – – – – Selling and promoting Buying and assortment building Bulk-breaking Warehousing Transportation Financing Risk bearing Market information Management services and advice

Wholesaling Types of Wholesalers • Merchant Wholesalers • Brokers and Agents • Manufacturers’ and retailers’ branches and offices • Full-service wholesalers – Wholesale merchants – Industrial distributors • Limited-service wholesalers – – – – – – Cash-and-carry wholesalers Truck wholesalers (jobbers) Drop shippers Rack jobbers Producer’s cooperatives Mail-order wholesalers .

• Brokers – Bring buyers and sellers together and assist in negotiation • Agents – – – – Manufacturers’ agents Selling agents Purchasing agents Commission merchants .Wholesaling Types of Wholesalers • Merchant Wholesalers • Brokers and Agents • Manufacturers’ and retailers’ branches and offices • Brokers and agents do not take title of the goods.

these individuals are employees of the organization . however.Wholesaling Types of Wholesalers • Merchant Wholesalers • Brokers and Agents • Manufacturers’ and retailers’ branches and offices • Sales branches and offices – Branches carry inventory: lumber. parts – Offices do not carry inventory: dry goods • Purchasing officers – Perform roles similar to brokers and agents. auto equipment.

Wholesaling • Wholesaler Marketing Decisions – Target market and positioning • Targeting may be made on the basis of size of customer. facilities . need for service – Marketing mix decisions • • • • Product and service assortment Pricing: usually markup standard percent Promotion: largely disorganized and unplanned Place: location. type of retailer.

Wholesaling • Trends in Wholesaling – Price competition is still intense – Successful wholesalers must add value by increasing efficiency and effectiveness – The distinction between large retailers and wholesalers continues to blur – More services will be provided to retailers – Many wholesalers are going global .

Retailing .

2.Learning Goals 1. . 3. Know the major types of wholesalers and the marketing decisions they face. Know the major types of retailers and marketing decisions they face. Understand the roles of retailers and wholesalers in the marketing channel.

Case Study Wal-Mart • Current annual sales approximately $260 billion • Value proposition is “Always Low Prices. Always!” • Wal-Mart executives spend at least two days a week visiting stores to stay connected with customers • The first to call employees “associates” to denote the partnership • Wal-Mart maintains low prices by keeping a sharp eye on costs including “tough” buying practices • Technological advances in distribution and communications systems help efficiency and lowers costs • Lower advertising as a percentage of sales helps keep costs low .

• Retailer – Business whose sales come primarily from retailing. .Definitions • Retailing – All activities involved in selling goods or services directly to final consumers for their personal. non-business use.

Retailing Types of Retailers • Specialty Stores • Department Stores • Supermarkets • Discount Stores • Convenience Stores • Off-Price Retailers • Superstores .

Retailing Retailers Are Classified By: • • • • Amount of service Product lines Relative prices Organizational approach • Self-service retailers – Customers are willing to selfserve to save money – Convenience stores and fast moving shopping goods • Limited-service retailers – Most department stores • Full-service retailers – Salespeople assist customers in every aspect of shopping experience – High-end department stores and specialty stores .

Retailing Retailers Are Classified By: • • • • Amount of service Product lines Relative prices Organizational approach • • • • • • Specialty stores – Narrow product lines with deep assortments Department stores – Wide variety of product lines Supermarkets Convenience stores – Limited line Superstores – Food. and services Category killers – Giant specialty stores . nonfood.

Marshall’s – Factory outlets • Levi Strauss. Costco . Reebok – Warehouse clubs • Sam’s Club.Retailing Retailers Are Classified By: • • • • Amount of service Product lines Relative prices Organizational approach • Discount stores – Low margins are offset by high volume • Off-price retailers – Independent off-price retailers • TJ Maxx.

Retailing • Corporate chain stores – Commonly owned / controlled Retailers Are Classified By: • • • • Amount of service Product lines Relative prices Organizational approach • • • • Voluntary chains – Wholesaler-sponsored groups of independent retailers Retailer cooperatives – Groups of independent retailers who buy in bulk Franchise organizations – Based on something unique Merchandising conglomerates – Diversified retailing lines and forms under central ownership .

store’s atmosphere – Price – Promotion – Place (location) .Retailing • Retailer Marketing Decisions – Target marketing and positioning – Product assortment. service mix.

television. phone. online shopping – Retail convergence • The merging of consumers. products.Retailing • The Future of Retailing – New retail forms and shortening retail life cycles • Wheel-of-retailing concept – Growth of non-store retailing • Mail-order. prices. and retailers .

Retailing • The Future of Retailing – Rise of mega-retailers – Growing importance of retail technology – Global expansion of major retailers – Retail stores as “Communities” or “Hangouts” .

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Challenges & Opportunities in Indian Retail Industry .

Agenda Retailing : An overview Indian retail The change factor FDI in Indian retailing Why FDI ? How FDI ? FDI in Indian retailing .

6 trillion sales annually Indian retailing  Largest employer after agriculture .8%* of population  Highest outlet density in world Around 12 mn outlets  Still evolving as an industry Long way to go An overview  .Retailing: An overview  Retailing  World’s largest private industry US$ 6.

Metro.Retailing: An overview  An overview Wal-Mart  Topmost global Fortune 500 company(3 Consecutive Years)  Annual Sales of over US$ 250 bn  India’s two largest retail player turnover around US$ 158 mn (Bata) and US$ 102 mn (Shoppers Stop) Fortune 100  9 Retailers  Carrefour. Target. Kmart-Sears. Kroger. Ahold. Albertsons’  . Home Depot.

Evolution of Indian retail Historic/Rural Reach Traditional/Pervasive Reach Government Supported Modern Formats/ International Exclusive Brand Outlets Hyper/Super Markets Department Stores Shopping Malls PDS Outlets Khadi Stores Cooperatives Convenience Stores Mom and Pop/Kiranas Weekly Markets Village Fairs Melas Source of Entertainment Neighborhood Stores/Convenience Availability/ Low Costs / Distribution Shopping Experience/Efficiency .

 Evasion of taxes  Difficulty in enforcing tax collection mechanisms  No monitoring of labor laws Formal Retailing Sector  Typically large retailers  Greater enforcement of taxation mechanisms  High level of labor usage monitoring .Evolution of Indian retail  Indian retail  Informal retailing Sector  Typically small retailers.

Bata. Zodiac etc Multi-brand outlets Vijay Sales. Dedicated brand outlets Nike. Hiranandani (Haiko). Viveks etc Manufacturers/ Exporters  Pantaloons. Reebok. DLF (DT cinemas) etc. Weekender . etc  ITC: Wills Life Style  Rahejas (ShoppersStop).Categories of Indian retail  Indian retail    Corporate Houses  Tatas: Tata Trent  RPG group: Food World. Health and Glow.

Classifying Indian retail  Indian retail  Modern Format retailers  Supermarkets (Foodworld)  Hypermarkets (Big Bazaar)  Department Stores (Shoppers Stop)  Specialty Chains (Ikea)  Company Owned Company Operated Traditional Format Retailers  Kiranas: Traditional Mom and Pop Stores  Kiosks  Street Markets  Exclusive /Multiple Brand Outlets .

Large Indian retailers  Hypermarket     Big Bazaar Giants Shoprite Star Lifestyle Pantaloons Pyramids Shoppers Stop Trent Fame Adlabs Fun Republic Inox PVR  Department store      Indian retailers  Entertainment     .

9%* growth in real disposable income in ’99-’03. Growing high and middle income population  Growing at a pace of over 10%* per annum over last decade Affordability growth  Falling interest rates  Easier consumer credit  Greater variety and quality at all price points .The changing Indian consumer  Indian consumer   Greater per capita income  Increase in disposable income of middle class households  20.

The changing Indian consumer  The urban consumer  Getting exposed to international lifestyles  Inclined to acquiring asset  More discerning and demanding than ever No longer need-based shopping  Shopping is a family experience Changing Mindset  Increasing tendency to spend  Post Liberalization children coming of age 100 mn 17-21 year olds*. Greater levels of education Indian consumer    . Tend to spend freely.

Challenges in the Industry  Low domestic competition  Because of fragmented nature of industry  Industry Challenges  Lack of exposure to global best practices  Low entry barriers for unorganized retailing  Moderate entry barriers for organized retailing Wholesale system under-invested leading to 20-40% wastage Non level playing field issues  Wide differences in treatment of small and large retailers  .

Challenges……     Real Estate Costs Supply Chain Inconsistency Poor Infrastructure Lack of Skilled Manpower issues .

3% for 2003-2008  Sales from large format stores would rise by 24-49%**  Formal and modern format retailing would enjoy rapid growth  Anticipated growth . ft.Opportunities Market size  Current market size is roughly US$ 286 bn*  96% of the 12 Million stores are less than 500 Sq.  Forecast Growth rate for the retailing industry is roughly 8.

Growth factors  Growth factors Growth determining factors  Government Policy  Infrastructure development  GDP growth  Employment generation and job creation In several new sunrise industries Implies greater purchasing power .

T Kearney Retail Development Index  Advantage India India   Russia China .The Indian advantage  India ranked 1st in the Global A.

Billion 6422 980 Retail Rs. Music & Gifts Others Total 115 1159 10360 15 111 476 13 10 5 . Billion 50 185 Retail as % of Total 1 19 Food & Grocery Textiles & Apparel Jewelry & Watches Consumer durables Pharmaceuticals Home Solutions 554 415 364 351 30 43 10 32 5 10 3 9 Books.THE SIZE OF THE OPPORTUNITY Products Total Retail Organised Organised Rs.

except in:  Private labels  Hi-Tech items / items requiring specialized after sales service  Medical and diagnostic items  Items sourced from the Indian small sector (manufactured with technology provided by the foreign collaborator)  For 2 year test marketing (simultaneous commencement of investment in manufacturing facility required) .FDI in Indian retailing  FDI in Retail not permitted Current Indian FDI Regime  FDI not permitted in retail trade sector.

 Leading food retailer in India now  Mc Donalds  Current FDI .  No FDI restrictions in the retail sector pre1997  Foodworld  51:49 JV between RPG and Dairy Farm International.FDI in Indian retailing  Metro Group of Germany  Cash-and-carry wholesale trading  Proposal faced strong opposition Entities established prior to 1997  Allowed to continue with their existing foreign equity components.

International retailers in India: Strategies  How they are present  Franchise  International company gives name and technology to local partner. Pizza Hut. Gets royalty in return  In case master franchise is appointed for region or country. It also has right to retail in India . he has right to appoint local franchisees Nike. Mango Manufacturing  Company sets up Indian arm for production  Bata India. Marks and Spencer. Tommy Hilfiger.

International retailers in India: Strategies  How they are present  Distribution  International company sets up local distribution office  Supply products to Indian retailers to sell  Also set up franchised outlets for brand Swarovski. Hugo Boss Wholesale trading  Cash and Carry operations  100% FDI permitted  Metro Cash n Carry .

Why FDI?    Benefits of FDI Improve competition Develop the market Greater level of exports due to increased sourcing by major players  Sourcing by Wal-Mart from China improved multifold after FDI permitted in China  Similar increase in sourcing observed for Metro in India  Provides access to global markets for Indian producers .

Why FDI?  Investment in technology   Benefits of FDI  Cold storage chains solve the perennial problem of wastage Greater investment in the food processing sector technology Better operations in production cycle and distribution Greater level of wages paid by international players usually More product variety Newer product categories Economies of scale to help lower consumer price Increased purchasing capacity of consumers  Better lifestyle      .

and other enticements .How FDI ?  FDI should be allowed in stages  Initial stages: 26% FDI  2 yrs 2 yrs 2 yrs Establishment Phase: 49% FDI Mature Phase: 100% FDI  How FDI ?  FDI policy  No incentives needed to attract FDI  Market size and potential are sufficient inducers  No need for costly tax breaks. import duty exemptions. land and power subsidies.

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