BUS M 300 Lecture 11 Outline of Last Lecture I Spring Break Outline of Current Lecture I Retailing II Retailing Creates Value III The Wheel of Retailing IV Forms of Ownership V Online Retailing VI Wholesaling VII Agents and Brokers Current Lecture Retailing o Retailing is the process by which goods and services are sold to consumers for their personal use o Retailers provide many benefits such as Providing an assortment of merchandise often under one roof Allowing access to goods customers might never see Providing interesting environments in which to spend our leisure time Retailing Creates value o Retailing creates what economists call utility or the value a product provides for the customer Form Value utility provided by changing raw materials into a finished product Form value is created by production Marketing helps production by interpreting consumers needs These notes represent a detailed interpretation of the professor s lecture GradeBuddy is best used as a supplement to your own notes not as a substitute eg the ford company manufactures automobiles creating form value for consumers Time Value making the product available when the customer needs it eg kroger is open 24 hours allowing different market segments to shop at times best for them marketing helps retailers to understand when their products need to be available to the consumer Place Value making the product available where a customer needs it Eg bank one has hundred of branch banks through the country The ATM located in the library has more value than one located downtown Possession Value enhancing the ability of the customer to acquire and use the product over time Eg GMAC financing at the point of sale can help seal the deal Transferring of products from the manufacture to the consumer The goal is to make it easy for consumers to take possession of the product Satisfies the consumer s need to own the product and to have control over its use and consumption The Wheel of Retailing o The wheel of retailing describes how retail outlets enter the market o There are 4 stages Low Status Low Margins Medium Status Medium Margins Higher Status Higher Margins Increased Competition Forms of Ownership o Independent Retailer Most retailers are owned by individuals who account for most of the 1 5 million retail establishments in the U S The independent store can offer customers convenience quality personal service and lifestyle compatibility The Bakehouse Kilroys o Corporate Chain Involves multiple outlets under common ownership where centralization in decision making and purchasing occurs Advantages to consumers include volume discounts and multiple outlets for shopping convenience EG Chili s Fridays Target o Contractual Systems Independently owned stores that band together to act like a chain EG Associated Growers Neighborhood grocers who buy their meat from the same wholesaler o Franchises Business format franchises The franchisor provides step by step procedures and guidelines for the most likely decisions a franchisee will face EG Wendys or McDonalds Product distribution franchises These include dealerships or soft drink distributors EG Honda or Pepsi Online Retailing o Allure of Online Retailing o Search for product information in hyperspace o Retailers can update price product information continuously o Ordering is possible 24 hours a day o Time saver for many customers o Barriers to Success Barriers to Success Customers may still wait a few days to receive products by mail People need touch and feel information before buying Security concerns Concerns that inventory sold online will cannibalize store sales It may increase price competition Wholesaling o Merchant Wholesaler Independently owned firms that own the merchandise they sell Two types General Merchandise Wholesaler Carry a broad range of products and perform all channel functions Specialty Merchandise Wholesaler Offer relatively narrow range of products o Rack Jobbers Furnish the racks or shelves that display merchandise in retail stores o Cash and Carry Sell products to retail outlets who call on them o Desk Jobbers They own the merchandise they sell but do not physically handle any products o Truck Jobbers Small wholesaler who handle fast moving or perishable items Agents and Brokers o Manufacturer s Agent Works for several producers and carry a wide variety of products in an exclusive territory o Brokers Their principal function is to bring firms and individuals together to make sales