BUAD301 Test 3 Chapter 12 Retailers Wholesalers and Their Strategy Planning Characteristics of the evolution of mass merchandising retailers Mass merchandising concept retailers should offer low prices to get faster turnover and greater sales volume by appealing to large markets Supermarkets large stores specializing in groceries with self service and wide assortment must have annual sale of at least 2 million average 17 million 35 000 supermarkets in US planned for maximum efficiency Discount houses originated after World War II offered hard goods at substantial price cute to customers who would go to discounter s low rent sore pay cash and take care of service repair themselves from this origin that mass merchandisers developed Mass merchandisers large self service stores with many departments that emphasize soft goods and staples but still follow the discount houses emphasis on lower margins to get fast turnover ex Walmart and Target Supercenters hypermarkets very large stores that try to carry not only food and drug items but all goods and services that the consumer purchases routinely tries to meet all the customer s routine needs at a low price supermarket drugstore mass merchandiser ex Walmart and Target Warehouse club pay an annual membership fee to shop in large facility ex Costco Single product line retailers adopted mass merchandising idea Toys R Us IKEA Home Depot category killers Characteristics of how some retailers focus on added convenience and retailing on the Internet Convenience food stores must have the right assortment Convenience food stores convenience oriented variation of the conventional limited line food stores limit their stock to pickup fillin items bread milk beer often charge price 10 20 higher for convenience Automatic vending selling and delivering products through vending machines Vending machines account for 1 5 total US retail sales Door to door selling a salesperson going directly to the consumer s home less than 1 of retail sales in the US Customers shop at home with cable shopping networks catalogs and websites Online buying is more and less convenient access is 24 7 but must wait to receive Internet retailing grows by about 10 each year Internet retail still growing product Online buying has more and less information limitless product information but can t sample product or get a feel for it While prices are often lower online because there is limited sales help and no store front price can increase with shipping rates and return rates hassle Some online retailers get a seal of approval on their privacy information to ensure that credit card information and personal information is kept private helps lower risk of customers and makes them more inclined to buy Multichannel approach physical store and website Cross channel shopping gathering information online and then buying in store or vice Some placed integrate their online and physical stores with features like in store pickup versa or in store return Retailers Evolve and Change Wheel of retailing theory new types of retailers enter the market as low status low margin low price operators and then if successful evolve into more conventional retailers offering more services with higher operating costs and higher prices who are threatened but the new low status low margin low price retailers turning the wheel Department stores supermarkets and mass merchandisers go through this cycle Doesn t describe all major retailing developments Vending machines and convenience stores enter as high price high margin operations Conventional retailers specialize by product line Scrambled merchandising carrying any product lines they think they can profitably sell ex supermarkets drugstores mass merchandisers Product life cycle concept applies to retailer types Most retailers face intense competitive pressure leading towards questionable marketing practices Characteristics of retailer size and profits and differences in retailing in different nations A few big retailers do most of the business About 15 of retail stores make 75 of all retail sales Corporate chain firm that owns and manages more than one store main way for a retailer to achieve economies of scale account for half of all retail sales Big chains are building market clout Home Depot and Walmart are considered channel captains and are the most successful of the bug chains have access to so many consumers that they can dictate almost every detail of relationship with suppliers Competitive pressure from corporate chains encouraged development of cooperative chains and voluntary chains Cooperative chains retailer sponsored groups formed by independent retailers that run their own buying organizations and conduct joint promotion efforts Voluntary chains wholesaler sponsored groups that work with independent retailers ex Ace Hardware Franchise operation franchiser develops a good marketing strategy and the retail franchise holders carry out the strategy in their own units holder benefits from buying power promotion and experience of larger company while in return pays fees and commissions to follow franchise rules to continue successful strategy 1 3 of all retail sales especially popular with service retailers New retailing approaches that succeed in one part of the world are often quickly adapted to other countries distribution Consumers in less developed countries don t have the income to support mass Mass merchandising requires mass markets Retailers moving to international markets must adapt marketing strategies Online retailing varies across nations need access to Internet varies culturally Characteristics of merchant wholesalers who are the most numerous Merchant wholesalers own take title to the products they sell make up 85 of wholesale establishments Service wholesalers merchant wholesalers that provide all the wholesaling functions o General merchandise wholesaler service wholesalers that carry a wide variety of nonperishable items such as hardware electrical supplies furniture drugs cosmetics and automobile equipment serve hardware stores drugstores and small department stores o Single line general line wholesalers service wholesalers that carry a narrower line of merchandise might only carry food apparel or certain types of tools serve single and limited line stores o Specialty wholesalers carry a very narrow range of products and offer more information and service than other service wholesalers ex consumer product specialty wholesaler