Retailing and Wholesaling

1) Retailing includes all activities involved in selling, renting, and providing goods and services to ultimate consumers for personal, family, or household use.

2) Retailing is an important marketing activity. Not only do producers and consumers meet through retailing actions, but retailing also creates customer value and has a significant impact on the economy.

3) The utilities provided by retailers create value for consumers.

4) The utilities provided by retailers create value for consumers. Time, place, possession, and form utilities are offered by most retailers in varying degrees, but one utility is often emphasized more than others, depending on the retailer.

5) In addition to the four utilities offered by most retailers in varying degrees, consumers may seek additional utilities such as entertainment, recreation, or information.

6) A commonly used method of classifying retail outlets is by form of ownership.

7) One of the most common forms of retail ownership is the independent business, owned by an individual. The advantage of this form of ownership for the owner is that he or she can be his or her own boss. For customers, the independent store can offer convenience, quality personal service, and lifestyle compatibility.

8) A(corprate chain is a form of ownership that involves multiple outlets under common ownership. 

10) Contractual systems involve independently owned stores that band together to act like a chain. Three kinds include retailer-sponsored cooperatives, wholesaler-sponsored voluntary chains, and franchises.

11) Franchising is a type of contractual system.

12) Franchising is attractive for the franchisee because it offers the franchisee the opportunity to enter into a well-known, established business where managerial advice is provided.

13) Level of service refers to degree of service provided to the customer.

14) Self-service is an extreme end of the level-of-service continuum because the customer performs many functions and little is provided by the outlet.

15) Warehouse stores, gas stations, and grocery stores typically provide limited service.

16) Specialty stores and department stores are frequently categorized by full-service.

17) The assortment of each item a store carries is referred to as its depth of product line.

18) Example: A Woman's Place is a retail store, created and staffed by women, that offers products and services relating to maternity needs. It carries in stock 3,000 items for expectant mothers in all dress sizes. This is an example of the depth of product line a Woman's Place carries.

19) Stores that carry a considerable assortment (depth) of a related line of items are called limited-line stores.

20) Stores that carry tremendous depth in one primary line of merchandise are single-line stores.

21) Limited- and single-line stores are often referred to as specialty outlets.

22) A type of retail outlet that focuses on one type of product at very competitive prices and often dominates the market is called a catdgory killer.

23) The variety of different items a store carries is referred to as breadth of product line.

24) General merchandise stores are stores that carry a broad product line with limited depth.

25) Scrambled merchandising involves offering several unrelated product lines in a single store.

26) Six forms of nonstore retailing include automatic vending, direct mail and catalogs, television home shopping, online retailing, direct selling, and telemarketing.

27) Vending machines make it possible to serve customers when and where stores cannot. Newspapers have long been available from vending machines, but hot and cold drinks, snacks, and small convenience products are all sold as well.

28) Prices in vending machines tend to be higher because maintenance and operating costs are high.

29) Direct mail and catalog retailing are examples of nonstore retailoring.

30) Television home shopping programs typically attract women over age 35.

31) Online retailing allows consumers to search for, evaluate, and order products through the Internet. For many consumers, the advantages of this form of retailing are the 24-hour access, the ability to comparison shop, in-home privacy, and variety.

32) One of the biggest problems online retailers face is that nearly two-thirds of online shoppers make it to “checkout” and then leave the website to compare shipping costs and prices on other sites. Of the shoppers who leave, 70 percent do not return. One way online retailers are addressing this issue is to offer consumers a comparison of competitors’ offerings.

33) Online retailers are trying to improve the online retailing experience by adding interactive activities to their websites, such as car manufacturers like BMW, Mercedes, and Jaguar, that encourage website visitors to “build” a vehicle by selecting colors, packages, and options and then view the customized virtual car.

34) The term for the form of direct marketing that involves using the telephone to interact with and sell directly to consumers is telemarketing.

35) As the use of telemarketing grows, consumer privacy has become a greater concern.

36) Direct selling is often called door-to-door retailing. In response to the changes in the United States, many direct sellers are implementing a market development strategy, expanding into other countries with their current product lines.

37) Direct selling is likely to continue to grow in markets where there is a lack of effective distribution channels.

38) The retailing mix is used to develop a retail strategy. This includes (1) goods and services, (2) physical distribution (such as store location); (3) communications tactics (such as whether to use catalogs), (4) pricing.

39) Markup is how much should be added to the cost the retailer paid for a product to reach the final selling price.

40) Original markup is the difference between retailer cost and the initial selling price.

41) Example: A retailer bought a pair of designer eyeglass frames for $16. She sets the initial selling price at $48 dollars. The final selling price was $34. The original markup is $32.

Rationale: Original markup is the difference between retailer cost ($16) and the initial selling price ($48) or $32.

42) Maintained markup is the difference between retailer cost and the initial selling price.

43) Example: A retailer buys a painting for $200. She sets the price at $450. When the painting doesn't sell after two months, she raises the price to $800 to appeal to a different market. The painting sells for $800 the next day. The maintained markup is $600.

Rationale: Maintained markup is the difference between retailer cost ($200) and the final selling price ($800) or $600. This is also called the gross margin.

44) Markdowns occur when the item does not sell at the original price, and a price adjustment is necessary—the situation described here. Often new models or styles force the price of existing models to be marked down.

45) Emphasizing consistently low prices and eliminating most markdowns or sales is called an everyday low pricing strategy.

46) Breakage and theft of merchandise by customers and employees is termed shrinkage.

47) Off-price retailing is the sale of brand name merchandise at lower than regular prices.

48) Off-price retailing involves selling brand-name merchandise at lower than regular prices. The difference between the off-price retailer and a discount store is that off-price merchandise is bought by the retailer from manufacturers with excess inventory at prices below wholesale prices, whereas the discounter buys at full wholesale price but takes less of a markup than do traditional department stores.

49) Interesting Info: Over 50 percent of retail theft is committed by retail employees. Retailers lose almost 2 percent of their sales to theft each year. The most popular time for thefts to happen is between 3 pm and 6 pm. Many stores attempt to discourage consumers from shoplifting with magnetic detectors, locked cases and other deterrents.

50) The term central business district refers to the oldest retailing setting, a community's downtown area.

51) Regional shopping centers are 50 to 150 stores that typically attract customers who live or work within a 5- to 10-mile range.

52) Regional shopping centers commonly has two or three anchor stores.

53) Gas stations, hardware stores, laundries, grocery stores and pharmacy outlets are commonly found in a strip location.

54) A strip location is a cluster of stores that serves people who are within a five to ten minute drive.

55) A huge shopping strip with multiple anchor (or national) stores is called a power center.

56) Multichannel retailers utilize and integrate a combination of traditional store formats and nonstore formats such as catalogs, television, and online retailing. The use of multiple channels allows these retailers to offer a broader spectrum of benefits and experiences. Many people describe the Internet as more a transactional medium than a relationship-building medium.

57) A retailer’s communication activities can play an important role in positioning a store and creating its image.

58) Caategory management assigns a manager with the responsibility for selecting all products that consumers in a market segment might view as substitutes for each other, with the objective of maximizing sales and profits in the category.

59) An advanced form of category management is known as CMAR or consumer marketing at retail.

60) The wheel of marketing is a concept that describes how new retail outlets enter the market as low-status, low-margin stores and gradually add improvements that raise their prices and status; they then face new low-status, low-margin competitors.

61) The process of growth and decline that retail outlets, like products, experience is described by the retail life cycle.

62) The retail life cycle is the process of growth and decline that retail outlets, like products, experience over time. Early growth is the stage when a retail outlet first appears, with a sharp departure from existing competition. Market share rises gradually, although profits may be low because of start-up costs. In the next stage, accelerated development, both market share and profit achieve their greatest growth rates. Usually multiple outlets are established as companies focus on the distribution element of the retailing mix. In this stage some later competitors may enter. The key goal for the retailer in this stage is to establish a dominant position in the fight for market share. The battle for market share is usually fought before the maturity phase, and some competitors drop out of the market. New retail forms enter in the maturity phase, stores try to maintain their market share, and price discounting occurs. The key goal for a retailer in the accelerated development phase of the retail life cycle is to establish a dominant position in the fight for market share because of the intense competition.

63) Many retailers depend on intermediaries that engage in wholesaling activities—selling products and services for the purposes of resale or business use.

64) Merchant wholesalers are independently owned firms that take title to the merchandise they handle.

65) The general merchandise wholesaler carries a broad assortment of merchandise and performs all channel functions.

66) The specialty merchandise wholesaler offers a relatively narrow range of products but has an extensive assortment within the product lines carried.

67) Cash and carry wholesalers are limited-service wholesalers.

68) There are four major types of limited-service wholesalers: (1) Rack jobbers furnish the racks or shelves that display merchandise in retail stores and perform all channel functions. They sell on consignment to retailers. (2) Cash and carry wholesalers take title to merchandise but sell only to buyers who call on them, pay cash for merchandise, and furnish their own transportation for the merchandise. They carry a limited product assortment and do not make deliveries, extend credit, or supply market information. (3) Drop shippers or desk jobbers own the merchandise they sell but do not physically handle, stock, or deliver it. They simply solicit orders from retailers and other wholesalers and have the merchandise shipped directly from a producer to a buyer. (4) Truck jobbers are small wholesalers that have a small warehouse from which they stock their trucks for distribution to retailers. They usually handle limited assortments of fast-moving or perishable items that are sold for cash directly from trucks in their original packages.

69) The key difference between merchant wholesalers and agents and brokers ais that merchant wholesalers take title to merchandise and agents and brokers do not.

70) Manufacturer's agents work for several producers and carry noncompetitive, complementary merchandise in an exclusive territory.

71) Selling agents are agents who represent a single producer and are responsible for the entire marketing function of that producer.

72) Brokers are independent firms or individuals whose main function is to bring buyers and sellers together to make sales.

73) Manufacturer's branches and sales are wholly owned extensions of the producer that perform wholesaling activities.

74) A manufacturer's sales office does not carry inventory, typically performs only a sales function, and serves as an alternative to agents and brokers.