MKT 300 Ch. 15 (Retailers, Wholesalers, and Direct Marketers)

Explain the wheel of retailing.
The wheel of retailing is the hypothesis that each new type of retailer gains a competitive foothold by offering lower prices than current suppliers and maintains profits by reducing or eliminating services. Once established, the innovator begins to add more services. Its prices gradually rise, making it vulnerable to new low-price retailers. This turns the wheel again.
Describe the five key strategies for selecting target markets.
A retailer starts to define its strategy by selecting a target market. The target market dictates, among other things, the product mix, pricing strategy, and location strategy. Retailers deal with consumer behavior at the most complicated level, and a clear understanding of the target market is critical. Strategies for selecting target markets include merchandising, customer services, pricing, location/distribution, and promotional strategies.
Describe how the four elements of the marketing mix apply to retailing strategy.
A retailer must first identify a target market and then develop a product strategy. Next, it must establish a customer service strategy. Retail pricing strategy involves decisions on markups and markdowns. Location is often the determining factor in a retailer’s success or failure. A retailer’s promotional strategy and store atmosphere play important roles in establishing a store’s image.
Explain the concepts of retail convergence and scrambled merchandising.
Retail convergence is the coming together of shoppers, goods, and prices, resulting in the blurring of distinctions among types of retailers and the merchandise mix they offer. Similar selections are available from multiple sources and are differentiated mainly by price. Scrambled merchandising refers to retailers’ practice of carrying dissimilar product lines in an attempt to generate additional sales volume. Retail convergence and scrambled merchandising have made it increasingly difficult to classify retailers.
Describe the three functions performed by wholesaling intermediaries.
The functions of wholesaling intermediaries include creating utility, providing services, and lowering costs by limiting contacts.
Describe the two major types of independent wholesaling intermediaries and the appropriate situations for using each.
Independent wholesaling intermediaries can be divided into two categories:

1. merchant wholesalers
2. agents and brokers.

The two major types of merchant wholesalers are full-function merchant wholesalers, such as rack jobbers; and limited-function merchant wholesalers, including cash-and-carry wholesalers, truck wholesalers, drop shippers, and mail-order wholesalers. Full-function wholesalers are common in the pharmaceutical, grocery, and hardware industries.

The food, coal, lumber, cosmetics, jewelry, sporting goods, and general-merchandise industries sometimes use limited-function wholesalers. Agents and brokers do not take title to the products they sell; this category includes commission merchants, auction houses, brokers, selling agents, and manufacturers’ reps. Companies seeking to develop new sales territories, firms with unrelated lines, and smaller firms use manufacturers’ reps. Commission merchants are common in the marketing of agricultural products. Auction houses are used to sell tobacco, used cars, livestock, furs, and fruit. Brokers are prevalent in the real estate, frozen foods, and used machinery industries.

Describe the six basic types of direct marketing and nonstore retailing.
Direct marketing is a distribution channel consisting of direct communication to a consumer or business recipient. It generates orders and sales leads that may result in future orders. Because direct marketing responds to fragmented media markets and audiences, growth of customized products, and shrinking network broadcast audiences, marketers consider it an important part of their planning efforts. Although most U.S. retail sales take place in stores, nonstore retailing activities such as direct mail, direct selling, direct-response retailing, telemarketing, Internet retailing, and automatic merchandising are important in marketing many types of goods and services.
Explain how the Internet has altered the retailing, wholesaling, and direct marketing environments.
The Internet has affected every aspect of marketing, including how supply networks operate and how relationships are formed with customers. The Internet has allowed retailers to enhance their merchandising mix and their customer service by, among other things, giving them access to much broader selections of goods. Successful wholesalers have carved out a niche as a source of expertise offering faster, more efficient, Web-enabled distribution and fulfillment. Direct marketers have merged their traditional catalog or direct-mail programs with an Internet interface that allows for faster, more efficient, and more frequent contact with customers and prospects.
Activities involved in selling merchandise to ultimate consumers.
wheel of retailing
Hypothesis that each new type of retailer gains a competitive foothold by offering lower prices than current suppliers charge, the result of reducing or eliminating services.
stock-keeping unit (SKU)
Offering within a product line, such as a specific size of liquid detergent.
Amount a retailer adds to the cost of a product to determine its selling price.
Amount by which a retailer reduces the original selling price of a product.
planned shopping center
Group of retail stores planned, coordinated, and marketed as a unit.
Combination of physical characteristics and amenities that contribute to a store’s image.
convenience retailer
Store that appeals to customers by having an accessible location, long hours, rapid checkout, and adequate parking.
specialty retailer
Store that combines carefully defined product lines, services, and reputation to persuade shoppers to spend considerable shopping effort there.
limited-line store
Retailer that offers a large assortment within a single product line or within a few related product lines.
category killer
Store offering huge selections and low prices in single product lines.
general merchandise retailers
Store that carries a wide variety of product lines.
department store
Large store that handles a variety of merchandise, including clothing, household goods, appliances, and furniture.
mass merchandiser
Store that stocks a wider line of goods than a department store, usually without the same depth of assortment within each line.
discount house
Store that charges low prices but may not offer some services.
Giant one-stop shopping facility offering wide selections of grocery items and general merchandise at discount prices, typically filling up 200,000 or more square feet of selling space.
Large store, usually smaller than a hypermarket, that combines groceries with discount store merchandise.
retail convergence
Situation in which similar merchandise is available from multiple retail outlets, resulting in the blurring of distinctions between types of retailers and merchandise offered.
scrambled merchandising
Retailing practice of combining dissimilar product lines to boost sales volume.
Channel intermediary that takes title to goods it handles and then distributes those goods to retailers, other distributors, or B2B customers.
wholesaling intermediaries
Comprehensive term that describes wholesalers as well as agents and brokers.
merchant whole saler
Independently owned wholesaling intermediary that takes title to the goods it handles; also known as an industrial distributor in the business goods market.
rack jobber
Full-function merchant wholesaler that markets specialized lines of merchandise to retail stores.
truck wholesaler (truck jobber)
Limited-function merchant wholesaler that markets perishable food items.
drop shipper
Limited-function merchant wholesaler that accepts orders from customers and forwards those orders to producers, which then ship directly to the buyers.
mail-order wholesaler
Limited-function merchant wholesaler that distributes catalogs instead of sending sales personnel to contact customers.
commission merchants
Agent wholesaling intermediary that takes possession of goods shipped to a central market for sale, acts as the producer’s agent, and collects an agreed-upon fee at the time of the sale.
Agent wholesaling intermediary that does not take title to or possession of goods in the course of its primary function, which is to bring together buyers and sellers.
selling agent
Agent wholesaling intermediary for the entire marketing program of a firm’s product line.
manufacturers’ representative
Agent wholesaling intermediary who represents manufacturers of related but noncompeting products and receives a commission on each sale.
direct marketing
Direct communications, other than personal sales contacts, between buyer and seller, designed to generate sales, information requests, or store or website visits.
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