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Lecture 30
WHOLESALING, RETAILING & PHYSICAL DISTRIBUTION
Agents and Broker
Independent intermediary who usually represents many manufacturers and sells to wholesalers or retailers. Provides a wide range of services including shelf and display merchandising and advertising layout. Agents and brokers never actually own the merchandise they sell.
WHOLESALING
Wholesalers sell primarily to retailers, other wholesalers, and industrial or institutional users. Wholesalers provide a variety of services to customers who are buying products for resale or business use. The types of wholesale intermediaries are:
Merchant wholesalers
—independent wholesaler who takes legal possession of goods produced by a variety of manufacturers and then resells them to other businesses. Merchant wholesalers also provide storage and deliver; the merchant wholesaling industry employs 6 million people in the United States. i. Full‐Service Merchant Wholesaler‐ ‐merchant wholesaler who provides credit, marketing, and merchandising services in addition to traditional buying and selling services. Approximately 80 percent of all merchant wholesalers are full‐service merchant wholesalers. ii. Limited‐Service Merchant Wholesaler —merchant wholesaler who provides a limited range of services, sometimes only storage. iii. Drop Shipper —limited‐function merchant wholesaler who receives customer orders, negotiates^ with^ producers,^ takes^ title^ to^ goods,^ and arranges for shipment to customers. iv. Rack jobbers —limited‐function merchant wholesaler who sets up displays in retail outlets, stock inventory, and mark prices on merchandise displayed in a certain area of a store.
DISTRIBUTION STRATEGIES
A distribution strategy is a company’s overall plan for moving products to buyers and it plays a major role in the company’s success. One part of that strategy, choosing the appropriate
market coverage, depends primarily on the type of product, as convenience goods require different strategies from organizational supplies. i. Intensive distribution , where the market is saturated with a product, almost certainly needs a long distribution chain. Normally used for low‐cost consumer goods with widespread appeal such as candy and magazines. ii. Exclusive distribution severely limits the number of outlets for the item in a particular geographic area and is most often used for expensive specialty or technical products, such as Jaguar automobiles and Rolex watches. iii. Selective distribution uses a limited number of outlets and might work better for shipping goods that a buyer is likely to want to compare for features and prices. Examples are fashions and appliances.
DISTRIBUTION CONFLICTS
Channel conflict can occur when one channel member places its own success above the success of the entire channel, or when the members of a distribution channel disagree over the roles they should play or the rewards they should receive. Channel Leadership can occur when a channel member who is most powerful in determining the roles and rewards of other members. That member is called the Channel Captain. Power may come from the desirability of a producer's product, or from the large sales volume generated by a wholesaler or retailer.
RETAILING
Retailers sell to individuals who buy products for ultimate consumption and are a visible element in the distribution chain. Retailers represent the end of the distribution channel, making the sale of goods or services to final consumers. Today’s retail stores include department stores, discount stores, warehouse clubs, hypermarkets, factory outlets, category killers, supermarkets, convenience stores, and catalog stores. Retailers save consumers time and money.
Types of Retailer Outlets
i. Product Line Retailer ‐retailer featuring broad product lines.
- Department Store —large product line retailer characterized by organization into specialized departments.
- Supermarket —large product line retailer offering a variety of food and food‐related items in specialized departments. Ex., Safeway, Kroger, etc.
- Hypermarket —very large product line retailer carrying a wide variety of unrelated products.
able to analyze whether it is worth it to deliver a product in three days instead of five, if doing so reduces the cost of an item. The goal is to optimize the total cost of achieving the desired level of service by analyzing each step in the process and its relation to the other steps.
Transportation Operations
i. Major transportation modes are:
- Trucks are most frequently used and offer door‐to‐door delivery and use of public highways, but are unable to carry all types of cargo.
- Railroads are able to carry heavier and more diversified cargo, but are unable to deliver directly to the customer.
- Water carriers —Boats are the cheapest form of transport, especially for bulk items, but service is slow and infrequent, and delivery is restricted.
- Air transport is the fastest means of moving goods, but it doesn’t go everywhere, it can carry only certain types of cargo, and is unreliable and expensive.
- Pipelines , although expensive to build, are extremely economical to operate and maintain.
ii. Changes in Transportation Operations
- Inter‐modal Transportation : combined use of several different modes of transportation.
- Containerization : uses of standardized heavy‐duty containers in which many items are sealed at points of shipment and opened only at final destination.
- Physical Distribution and E‐Customer Satisfaction : New e‐ commerce companies need to focus not only on sales but also on after‐sale distribution in order to avoid customer dissatisfaction that discourages repeat sales. Order Fulfillment and E‐Customer Satisfaction : Order fulfillment begins when the sale is made: It ends with getting the product, in good condition and on time, to the customer for each sales transaction.
PROMOTION
The ultimate goal of a promotion is to increase sales. Other goals include communicating information, positioning a product, adding value, and controlling sales volume. In deciding on the appropriate promotional mix, marketers must consider the good or service being offered, characteristics of the target audience and the buyer’s decision process, and the promotional mix budget.
Promotional Objectives
Promotions experts recognize that not all objectives are sales objectives. Some communications objectives use an indirect approach to make an audience aware of a new product or change a company’s negative image. In addition to increasing sales, promotion can have four other objectives. Communicating Information Information can advise customers about a product's existence or about its features. Creating Awareness Through provided information, customers become aware with the product available in the market. Comparison After awareness, customers, make comparisons among the available products in the market. Buying decision Last step is the buying decision after which customers finally acquire the products while paying due costs.
