Chapter 18

Managing Retailing, Wholesaling, and Market Logistics

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Kotler on Marketing
Successful go-tomarket strategies require integrating retailers, wholesalers, and logistical organizations.

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Chapter Objectives
In this chapter, we focus on the following questions about each marketing intermediary:
What major types of organizations occupy this sector? What marketing decisions do organizations in this sector make? What are the major trends in this sector?

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Retailing

Types of Retailers
Retail life cycle
Pass through stages of growth & decline Older retail forms took many years to reach maturity Newer retail forms reach maturity much more quickly

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Major Retailer Types

Specialty Store: Narrow product line with a deep assortment. A clothing store would be a single-line store; a mens clothing store would be a limited-line store; and a mens custom-shirt store would be a superspecialty store. E.g. The Body Shop. Department Store: Several product linestypically clothing, home furnishings, and household goodswith each line operated as a separate department managed by specialist buyers or merchandisers. Supermarket: Relatively large, low-cost, low-margin, high volume, self-service operation designed to serve total needs for food, laundry, and household products. Convenience Store: Relatively small store located near residential area, open long hours, seven days a week, and carrying a limited line of high-turnover convenience products at slightly higher prices, plus takeout sandwiches, coffee.

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Retailing
Levels of Service
Wheel-of-retailing
Conventional retail stores increase their services & raise prices to cover costs, this provide opportunity for new store forms to offer lower prices & less service, ultimately meeting different consumer preferences.

Four levels of service:

Self-service Self-selection Limited service Full service Sales people are ready to assist in every phase of the locate compare select process.
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Retailing
Nonstore retailing (telemarketing & Internet Selling) Categories of nonstore retailing
Direct selling Direct marketing Telemarketing Television direct-response marketing (tele brands) Electronic shopping (Amazon.com) Automatic vending Buying service (Storeless retailer serving a specific clientele)

Corporate Retailing (PSO Company operated outlets)

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Major Types of Retail Organizations

Corporate Chain Store: Two or more outlets commonly owned and controlled, employing central buying and merchandising, and selling similar lines of merchandise. Their size allows them to buy in large quantities at lower prices, and they can afford to hire corporate specialists to deal with pricing, promotion, merchandising, inventory control, and sales forecasting. Voluntary Chain: A wholesaler-sponsored group of independent retailers engaged in bulk buying and common merchandising. Retailer Cooperative: Independent retailers who set up a central buying organization and conduct joint promotion efforts. Consumer Cooperative: A retail firm owned by its customers. In consumer coops residents contribute money to open their own store, vote on its policies, elect a group to manage it, and receive investment dividends.

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Retailing
Marketing Decisions Target Market Product Assortment and Procurement
Breadth Depth

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Retailing
Trends in Retailing
1. 2. 3. 4. 5. 6. 7. New retail forms and combinations Growth of intertype competition Growth of giant retailers Growing investment in technology Global presence of major retailers Selling an experience, not just goods Competition between store-based and non-store-based retailing
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Wholesaling
Wholesalers functions:
Selling and promoting
Wholesalers sales force help manufacturers reach many small business customers at low cost.

Buying and assortment building

Select items & build the assortments their customer need saving the customers considerable work.

Bulk breaking
Achieve saving for their customers by buying in bulk & breaking bulk in smaller units.

Warehousing
Holding inventories thereby reducing inventory costs & risks to suppliers & customers.
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Wholesaling
Transportation
Provide quicker delivery to buyers as they are close to buyers.

Financing
Finance customers by granting credit & finance suppliers by ordering early & paying bills on time

Risk bearing
Absorb risk by taking title & bearing the cost of theft, damage, spoilage & obsolescence.

Market information
Supply information to suppliers & customers regarding competitors.

Management services and counseling

Help retailers improve their operations by training sales clerks, helping in store layouts & displays.
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Major Wholesaler Types

Merchant Wholesalers: Independently owned businesses that take title to the merchandise they handle. They are called jobbers, distributors, or mill supply houses and fall into two categories: full service and limited service. Full-Service Wholesalers: Carry stock, maintain a sales force, offer credit, make deliveries, and provide management assistance.

There are two types of full-service wholesalers: (1) Wholesale merchants sell primarily to retailers and provide a full range of services.
(2) Industrial distributors sell to manufacturers rather than to retailers and provide several servicescarrying stock, offering credit, and providing delivery.

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Wholesaling
Wholesaler Marketing Decisions
Target Market Product Assortment and Services Price Decision Promotion Decision Place Decision

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Wholesaling
Trends in Wholesaling
Four ways to strengthen relationships with manufacturers
Sought clear agreement about their expected function in the marketing channel Gained insight into the manufacturers requirements by visiting their plants Fulfill commitments by meeting volume targets Identify and offer value-added services to help their suppliers
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Market Logistics
Supply chain management (SCM)
Involves procuring right inputs, converting them efficiently into finished products & dispatching them to final destinations.

Value network

Demand chain planning

Company should first think of the target market & then design the supply chain backward to that point.

Market logistics
Involves planning the infrastructure to meet demand, then implementing & controlling the physical flows of materials & final goods from points of origin to the points of use, to meet customer requirements at profit.
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Market Logistics
Market logistics planning has four steps:
Deciding on the companys value proposition to its customers Deciding on the best channel design and network strategy for reaching the customers Developing operational excellence in sales forecasting, warehouse management, transportation management, and materials management Implementing the solution with the best information systems, equipment, policies, and procedures

Integrated logistics systems (ILS)

Involves materials management, material flow systems & physical distribution supported by information technology.

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Market Logistics
Market-logistics Objectives
Maximizing customers service & minimizing distribution cost is not simultaneously possible.

Market-logistics Decisions
Order Processing
Most companies are trying to shorten the order to payment cycle.

Order-to-payment cycle

Warehousing
Production & consumption cycles rarely match.
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Market Logistics
Inventory
Inventory cost increases at an accelerating rate as the customer service level approaches 100%. Order (reorder) point
Management must know at what stock level to place a new order.

Order-processing costs
How much to order, the larger the quantity ordered, the less frequently an order has to be placed. The company needs to balance order-processing costs & inventory carrying costs.

Inventory-carrying costs
Larger the average stock carried, higher the inventory carrying cost. 18-19
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Market Logistics
Just-In-Time production (JIT)

Transportation
Containerization
Piggyback: Use of rail & trucks Fishyback: Water & trucks Trainship: Water & rail Airtruck: Air & trucks Private carrier Contract carrier Common carrier: Provides services between predetermined points on a scheduled basis & is available to all shippers at standard rates.

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Market Logistics
Organizational Lessons
Companies should appoint a senior vice president of logistics to be the single point of contact for all logistical elements The senior vice president of logistics should hold periodic meetings with sales and operations people to review inventory, etc. New software and systems are the key to achieving competitively superior logistics performance in the future

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