Week 11Marketing institutions:Seg 1 >> We're going to a dig a little bit deeper into some specific intermediaries. And we're gonna be looking at wholesalers and at retailers and at direct marketers. So we're gonna begin by talking about wholesaling,and I wanna talk what distinguishes wholesaling from retailing. And essentially, you have to look at the buyer's reason for acquiring the product.We talked about these three reasons when we talked about categorizing products as either being consumerproducts or being B2B or business products. Well, we actually use the buyer's reason for buying, or the buyer's intention for purchase, to separate wholesale transactions from retail transactions. And if the reason for the purchase is to buy a product, and you're gonna combine it with something else and you're gonna sell that product, then we say that that's a wholesale transaction.Or if you're buying the product for resale, then we say that it is a wholesale transaction. Or if the buyer is purchasing it for general business operations, we say that that's a wholesale transaction. Otherwise, it's a retail transaction. So it is the buyer's intended use of the product that helps to separate a wholesale transaction from a retail transaction.So we classify sellers as being either wholesalers or retailers primarily on the basis of whether most of their transactions are wholesale or most of their transactions are retail. There are not regulations that keeps an organization from including the name wholesale in its name or title. So a business might call itself the ABC Wholesale Company.But if most of its transactions are retail, it's a retailer. If a business claims to be a wholesale operation and then it somewhere advertises to the public and says everyone's welcome, then it's likely that quite a few ofthose sales are retail. And that means it would be a retailer.Some organizations engage in both wholesale transactions and in retail transactions. If we look at Sam's, businesspeople, business organizations can buy a membership that's for businesses. And it entitles them toa little bit more of a discount. And I believe that if you have a business card, then you do not pay sales tax, because the transaction's wholesale.At some Sam's Club operations, at some Sam's Club stores, they'll even have certain times of the day that are just for business buyers. Often, it's early in the morning. And if you have a business card, you can go in and buy certain things, if you choose to do that.And so Sam's engages in both wholesale and retail transactions. And if you ask me if it's a wholesaler or aretailer, I'd have to say, well, let's look at the dollar sales figures or the specific transactions. And if most of the transactions are retail, I'd call it a retailer.And if most of the transactions are wholesale, I'd call it wholesaler. My guess is it's probably a retailer, if we had to call it one or the other. But they actually engage in both wholesale and retail transactions. So let's talk a little bit about the various types of wholesalers.If you notice on this classification scheme, in the broadest sense, we can classify middlemen as being either merchant middlemen or functional middlemen. This category, this classification is based on just one dimension. And that dimension is that if the organization takes title to the products, meaning that theyactually own the products, then that organization or that middleman is a merchant middleman.That wholesaler is a merchant middleman if they take title to the products, meaning that they own them. And if they don't take title to the products, then that organization is a functional middleman. Possession ofthe products doesn't determine if that's a wholesaler or a retailer. So a functional middleman could take possession of the product and not title, that's possible.But we just look at ownership. If the wholesaler owns it, then we say that it's a merchant middleman. If they don't, we say it's a functional middleman. So as you can see, merchant middlemen are divided into two categories, full service wholesalers and limited function wholesalers. The full service wholesalers are wholesalers that provide a lot of services to other channel members, like quite a few services either up thechannel to the producer and/or down the channel to the retailer.And that's why they're called full-service. As you can see, full service wholesalers can be divided into three different categories. Those three categories are based upon the width of the organization's product mix. And as we go through these three, that width is reduced. So if we look at full service wholesalers thathave the widest mix, we call these general merchandise wholesalers.General merchandise wholesalers carry a number of different product lines. And their inventory, their product offering, is fairly diverse, and usually fairly large. And they serve a pretty good cross section of retailers, retailers that sell quite a few different kinds of products in different product lines. If we look at limited line wholesalers, full service wholesalers.Limited line full service wholesalers, they market maybe one line of products, or maybe two or three linesof products. But the product mix is much more narrow. Within that product mix, though, there may be considerable depth. Because they carry quite a number of different product items within each line, and werefer to those as limited line.Specialty wholesalers specialize in a part of a line. They specialize in some product items. These product items might require special handling, maybe refrigeration, that type of thing. And so they carry just certain product items, and they're called specialty, but they're still full service. An example of a specialty wholesaler would be a wholesaler called a rack jobber, R-A-C-K J-O-B-B-E-R, rack jobber.A rack jobber is referred to, is called that name, because there's a display rack involved. And that's how they got to be known as rack jobbers. So the way that this type of specialty wholesaler would operate is, they typically sell non-food items in grocery stores and supermarkets. And they will call on the store management, and they will explain what they want to do.It involves putting up a display. Store management usually wants to know how much space it takes up, because they're concerned about sales per square foot. And so they wanna make sure that the sales per square foot are promising. And so they will have a discussion about how it operates