Priciples of Marketing

by Philip Kotler and Gary Armstrong

Chapter 13
Retailing and Wholesaling

PEARSON
Objective Outline

Retailing
1 Explain the role of retailers in the distribution channel
and describe the major types of retailers.

Retailer Marketing Decisions

2 Describe the major retailer marketing decisions.
Objective Outline

Retailing Trends and Developments

3 Discuss the major trends and developments in
retailing.

Wholesaling
4 Explain the major types of wholesalers and their
marketing decisions.
Retailing

Retailing Retailing includes all the activities involved in selling

products or services directly to final consumers for their
personal, nonbusiness use.

But most retailing is done by retailers, businesses

whose sales come primarily from retailing.

In fact, many marketers are now embracing the concept of

shopper marketing, using point-of-purchase promotions and
advertising to extend brand equity to “the last mile” and
encourage favorable point-of-purchase decisions.

The dramatic growth of digital shopping, or combined

digital and in-store shopping, has added a new
dimension to shopper marketing.
Types of Retailers
 They can be classified in terms of several characteristics.
Amount of Service
• Different types of customers and products require different
amounts of service.
Product Line
• Retailers can also be classified by the length and breadth of their
product assortments.
Relative Prices
• Retailers can also be classified according to the prices they
charge.
Organizational Approach
• Retail stores band together under some form of corporate or
contractual organization.
Amount of Service
 Retailers may offer one of three service levels:
Self-service Limited-service
retailers retailers

They serve customers who• are willing

They to more sales assistance
provide
perform their ownFull-service
locate-compare-select
because they carry more shopping goods
process to save timeretailers
or money.about which customers need information.
• Their increased operating costs result in
• They usually carry more specialty goods
higher prices.
for which customers need or want
assistance or advice.
• They provide more services, which
results in much higher operating costs.
• These higher costs are passed along to
customers as higher prices.
Product Line

Specialty • It carries a narrow product line with a deep

store assortment within that line.

• It carries a wide variety of product lines,

Department each operated as a separate department
store managed by specialist buyers or
merchandisers.
• It’s a large, low-cost, low-margin, high-
volume, self-service store that carries a
Supermarket wide variety of grocery and household
products.
• It’s a small store, located near a residential
Convenience area, that is open long hours seven days a
store week and carries a limited line of high-
turnover convenience goods.
Product Line

• It’s a store much larger than a regular

Superstore supermarket that offers a large assortment of

routinely purchased food products, nonfood
items, and services.

Category • It’s a giant specialty store that carries a very

killer deep assortment of a particular line.

Service • It’s a retailer whose product line is actually a

service; examples include hotels, airlines,
retailer banks, colleges, and many others.
Relative Prices
 Retailers that feature low prices are discount stores and “
off-price” retailers.

Discount store

It’s a retail operation that sells standard

merchandise at lower prices by accepting
lower margins and selling at higher volume.
Off-price
retailer

It’s a retailer that buys at less-than-regular

wholesale prices and sells at less than retail.
Relative Prices
 The three types of off-price retailers:
Independent
off-price
retailers
Warehouse club
It’s an off-price retailers that is either
independently owned and run or is a
It’s an off-price retailer that sells a limited
division of a larger retail corporation.
selection of brand-name grocery items,
Factory outlet
appliances, clothing, and other goods at
deep discounts to members who pay annual
It’s an off-price retailing operation that is
membership fees.
owned and operated by a manufacturer and
normally carries the manufacturer’s surplus,
discontinued, or irregular goods.
Organizational Approach
 Retail stores band together under some form of corporate
or contractual organization.

Corporate
chain

Two or more outlets that are commonly

owned and controlled.

Voluntary chain

A wholesaler-sponsored group of
independent retailers that engages in group
buying and common merchandising.
 Organizational Approach
 Retail stores band together under some form of corporate
or contractual organization.
Retailer
cooperative
Franchise
A group of independent retailers that bands
together to set up a jointly owned, central
A contractual
wholesale operation and conduct joint association between a
merchandising and promotion manufacturer,
efforts. wholesaler, or service
organization (a franchisor) and independent
businesspeople (franchisees) who buy the
right to own and operate one or more units
in the franchise system.
Retailer Marketing Decisions
 Retailers face major marketing decisions about segmentat
ion and targeting, store differentiation and positioning, a
nd the retail marketing mix.
 Segmentation, Targeting, Differentiation, a
nd Positioning Decisions
Retailers
Retailers
Sho uld
mustmust
Shothe
first first
ulds to
segment
the
resfo
segment
tocus
and and
re foocus
n upsca
o n upsca
le, le,
define define
midscale, their
midsca their
o rle,target
do owns
r dotarget
markets
cawnsca markets
le s holeppersand
s hoppersand
? Do ? Do
ta rg etthen
then decide
targ decide
s hoetppershowwahow
s hoppers they vathey
ntwa will
nt
riety, will
v ariety,
depthdepth
o f of
a s so rtment,
a s so rtment,
differentiate co and
differentiate nv enience,
conv enience,
position
and o r lo w
position o r lo w
pricesprices
? ?
themselves
themselves
in these
in these
markets.
markets.

Until
Until
they
they
defin
defin
ee
and
and
profi
profi
lele
their
their
mar
mar
kets,
kets,
retai
retai
lers
lers
cann
cann
ot
ot
mak
mak
ee
consi
consi
stent
stent
decis
decis
ions
ions
abou
abou
tt
prod
prod
uct
uct
asso
asso
rtme
rtme
nt,
nt,
servi
servi
ces,
ces,
prici
prici
ng,
ng,
adve
adve
rtisi
rtisi
ng,
ng,
store
store
déco
déco
r,r,or
or
any
any
of
of
the
the
othe
othe
rr
decis
decis
ions
ions
that
that
must
must
supp
supp
ort
ort
their
their
posit
posit
ions.
ions.
Product Assortment and Services Decision
 Retailers must decide on three major product vari
ables: product assortment, services mix, and store
atmosphere.
The retailer’s product assortment should differentiate it while matching
target shoppers’ expectations.

The service mix can also help set one retailer apart from another.

The store’s atmosphere is another important element in the reseller’s

product arsenal.
Price Decision
 A retailer’s price policy must fit its target market
and positioning, product and service assortment, t
he competition, and economic factors.

Some retailers use no price promotions at all, competing instead

on product and service quality rather than on price.
Still other retailers practice high-low pricing─charging higher prices
on an everyday basis, coupled with frequent sales and other price
promotions, to increase store traffic, create a low-price image, or
attract
Othercustomers who will
retailers practice buy other
everyday lowgoods at full
pricing prices.
(EDLP), charging
constant, everyday low prices with few sales or discounts.
Promotion Decision
 Retailers use any or all of the five promotion tool
s─advertising, personal selling, sales promotion,
public relations (PR), and direct marketing─to re
ach consumers.
 Place Decision
Regional
Shopping centeroften
 Retailers point toshopping
criticalcenter
factors
retailing su
ccess : location, location,
It, theand location
largest and most！dramatic shopping
It’s a group of retail businesses built on a
center, has from 50 to more than 100 stores,
site that is planned, developed, owned,
Lifestyle and
centers
Power centers including two or more full-line department
managed as a unit.
stores.
They are huge unenclosed They are smaller,
shopping open-air malls with upscale
centers
Community stores, Neighborhood
convenient
consisting of a long strip of retail stores, locations, and nonretail
shopping center activities, shopping
such as a playground, skating rink,
including large, free-standing anchors.
hotel50dining centers
It contains between 15 and retail establishments,
stores. and a movie theater.
It normally contains a branch of a
They are generally contain between 5 and
department store or a variety store, a
15 stores.
supermarket, specialty stores, professional
offices, and sometimes a bank.
Retailing Trends and Developments
 Retailers operate in a harsh and fast-changing en
vironment, which offers threats as well as opport
unities.
 They need to take the following retailing develop
ments into account as they plan and execute their
competitive strategies.
Tighter Consumer Spending
 When reacting to economic difficulties, retailers must be
careful that their short-run actions don’t damage their lon
g-run images and positions.
 Instead of relying on cost-cutting and price reductions, ret
ailers should focus on building greater customer value wit
hin their long-term store positioning strategies.
New Retail Forms, Shortening Retail Life C
ycles, and Retail Convergence
 Wheel-of-retailing concept is a concept that suggests ne
w types of retailers usually begin as low-margin, low-pric
e, low-status operations but later evolve into higher-price,
higher-service operations, eventually becoming like the c
onventional retailers they replaced.
The Rise of Megaretailers
 The rise of huge mass merchandisers and specialty supers
tores, the formation of vertical marketing systems, and a r
ash of retail mergers and acquisitions have created a core
of superpower megaretailers.
 With their size and buying power, these giant retailers can
offer better merchandise selections, good service, and str
ong price savings to consumers.
Growth of Direct and Online Retailing
 Today, thanks to advanced technologies, easier-to
use and enticing online sites and mobile apps, im
proved online services, and the increasing sophist
ication of search technologies, online retailing is t
hriving.
Growing Importance of Retail Tech
nology
 Progressive retailers are using advanced IT and software
systems to produce better forecasts, control inventory cos
ts, interact electronically with suppliers, send information
between stores, and even sell to customers within stores.
 They have adopted sophisticated systems for checkout sc
anning, RFID inventory tracking, merchandise handling, i
nformation sharing, and customer interactions.
Green Retailing
 Today’s retailers are increasingly adopting environmental
ly sustainable practices.
 They are greening up their stores and operations, promoti
ng more environmentally responsible products, launching
programs to help customers be more responsible, and wor
king with channel partners to reduce their environmental i
mpact.
Global Expansion of Major Retailers
 Retailers can face dramatically different retail environme
nts when crossing countries, continents, and cultures.
 Simply adapting the operations that work well in the hom
e country is usually not enough to create success abroad.
 Instead, when going global, retailers must understand and
meet the needs of local markets.
Wholesaling
Selling and
Transportation
promoting
 Wholesaling includes all the activities involved i
n selling goods and services to those buying them
Buying and
for resale or business use.
assortment Financing
building
 Firms engaged primarily in wholesaling activities
are called wholesalers.
Bulk breaking Risk bearing
 Wholesalers add value by performing one or mor
e of the following channel functions:
Market
Warehousing
information
Management
services
and advice
Types of Wholesalers
 Wholesalers fall into three major groups:

Manufacturers’
Merchant
Agent & Broker
sales branches
wholesaler
and offices
•• It’s an independently owned wholesale business
• Broker
This type is aofwholesaler
wholesaling who doesn’t
is that donetake
in title to
that
goods takes
andtitle to the
whose merchandise
function is toand it handles.
bring buyers
manufacturers’ sales branches offices by and
• They
sellers are the largest singleingroup of wholesalers,
sellers together
or buyersand assist
themselves negotiation.
rather than through
• accounting
Agent for roughlywho
is a wholesaler
independent
50 percent of all
wholesalers. represents buyers or
wholesaling.
sellers on a relatively permanent basis, performs
only a few functions, and doesn’t take title to
goods.
Wholesaler Marketing Decisions
 As with retailers, their marketing decisions include choic
es of segmentation and targeting, differentiation and posit
ioning, and the marketing mix─product and service assort
ments, price, promotion, and distribution.
Segmentation, Targeting, Differentiation, a
nd Positioning Decisions
 Like retailers, wholesalers must segment and define their
target markets and differentiate and position themselves e
ffectively─they cannot serve everyone.
 They can choose a target group by size of customer (for e
xample, large retailers only), type of customer (convenien
ce stores only), the need for service (customers who need
credit), or other factors.
Marketing Mix Decisions
• Price is also an important wholesaler decision.

• Like retailers
Wholesalers may,wholesalers must
in turn, cut their decide
margins on lines
on some product
to keep
and service
important assortments, prices, promotion, and p
customers.
lace.
• Although promotion can be critical to wholesaler success, most
 Wholesalers
wholesalers areadd customerminded.
not promotion value though the prod
• ucts
Manyandare behind
servicesthe times
they in personal selling; they still see
offer.
selling as a single salesperson talking to a single customer
instead of as a team effort to sell, build, and service major
accounts.

• Finally, distribution (location) is important.

• Wholesalers must choose their locations, facilities, and Web
locations carefully.
Trends in Wholesaling

• Progressive wholesalers constantly watch for better ways to

meet the changing needs of their suppliers and target
customers.
• They recognize that their only reason for existence comes
from adding value, which occurs by increasing the efficiency
and effectiveness of the entire marketing channel.

• Fortunately, the increased use of computerized, automated,

and Internet-based systems will help wholesalers contain the
costs of ordering, shipping, and inventory holding, thus
boosting their productivity.
The End