Type
Solution Manual
Book Title
Principles of Marketing 17th Edition
ISBN 13
978-0134492513

978-0134492513 Chapter 13 Lecture Notes Part 1

June 3, 2019
Chapter 13
RETAILING AND WHOLESALING
MARKETING STARTER: CHAPTER 13
WALMART: The World’s Largest Retailer—the World’s Largest Company
Synopsis
Walmart’s phenomenal success has resulted from an unrelenting focus on bringing value to its customers. Day in and
day out, Walmart lives up to its promise: “Save money. Live better.” It rang up an incredible $482 billion in sales
last year—more than double the sales of competitors Costco, Target, Sears, Kmart, Macy’s, JCPenney, and Kohl’s
combined. Walmart isn’t just out to deliver customer value. Its mission is to lower the cost of living for the world. To
accomplish this mission, Walmart offers a broad selection of carefully selected goods at “unbeatable low prices.”
Just how does Walmart make money with such low prices? Walmart is a lean, mean, distribution machine. Superior
management, sophisticated technology, and bargaining power that come with its size have all contributed to the
lowest cost structure in the retail world. Walmart’s growth has slowed as it has reached such an enormous size. But it
isn’t taking its eye off the ball. To reignite growth, Walmart is pushing into new, faster-growing product and service
lines, including organic foods, store brands, in-store health clinics, and consumer financial services. It’s also pushing
its expansion into international markets and online sales. Based on its obsession with customer value, Walmart is
determined to keep making its slogan, “Save money. Live better.” a reality for as many people as possible.
Discussion Objective
A brief, focused discussion of the Walmart story will clarify students’ understanding of the strategy that has made
this unimaginably large retailer the world’s largest company. It’s easy to take Walmart for granted, but make sure
that students consider the fact that it’s the world’s largest company. Walmart’s obsession with delivering customer
value is well summarized by its promise: “Save money. Live better.”
Starting the Discussion
To get the discussion rolling on Walmart’s strong positioning and how it’s led to such amazing success, head to
Walmart’s YouTube channel (www.youtube.com/walmart). Here, you’ll find an extensive selection of video clips,
from current advertisements that emphasize the “Save money. Live better.” slogan as well as customer testimonials
addressing Walmart’s sustainability efforts. You can also find an assortment of recent Walmart ads, testimonials, and
other information at www.walmart.com. Both sites contain enough material to last for hours. So, you’ll need to pare
it down to selected pages and clips that facilitate discussion based on the questions below. This short discussion will
reveal that Walmart stands for much more than just low prices. Although some students will turn up their noses at
Walmart, many customers feel strongly about how the retailer really does help them live better. Use the following
questions to help guide the discussion.
Discussion Questions
1. What is Walmart’s “Save Money. Live Better.” slogan all about? (Have students quickly lay out the basics
of Walmart’s strategy. Open the Walmart YouTube channel or www.walmart.com. Everyone gets the
everyday low prices part of Walmart’s positioning. But make sure that the discussion brings out how that
“low price” strategy makes people’s lives better. Perhaps show some of the ads from the Walmart YouTube
channel and discuss how “low price” translates into “living better.” And, be sure to explore how much
Walmart has saved American families.
2. Does Walmart’s message work for you? Do people feel as strongly about Walmart as they do about, say,
Target? (Many students will perceive that people shop at Walmart only for functional reasons such as
one-stop shopping and low prices. But some of the “Dear Walmart” clips under the “Our Stories” tab on
Walmart’s YouTube channel reflect the strong emotional connections people have with Walmart because of
its “Save Money. Live Better.” strategy. People don’t go to Walmart only because it’s cheap. Regular
customers are really into Walmart and its unique shopping experience.)
Copyright© 2018 Pearson Education
3. How does Walmart do it? (Pull out the operations model by which Walmart delivers on its promise. Smart
buying and a world-class IT system create operational excellence and a low cost structure. Walmart passes
the savings on to customers. But, it’s what these low costs mean to customers that really matters—lower
prices that let them live better.)
4. Why did the authors choose Walmart to introduce the chapter on retailing? (What better example than the
world’s largest retailer for illustrating the breadth of retailing concepts discussed in the chapter. Walmart’s
extraordinarily strong targeting, positioning, and marketing mix have provided it with an unbeatable
competitive advantage. It’s not just about low prices. The giant retailer really does help people to save
money so that they can live better.)
CHAPTER OVERVIEW
Use Power Point Slide 13-1 here
This chapter is a continuation of the prior chapter on marketing channels; it provides more detail
on retailing and wholesaling, two very important concepts in the value delivery network.
Retailers can be classified according to several characteristics, including the amount of service
they offer, the breadth and depth of their product lines, the relative prices they charge, and how
they are organized.
The major decisions retailers make are centered on target market and positioning, product
assortment and services, price, promotion strategies, and where they are located.
The wheel of retailing concept says that many new retailing forms begin as low-margin,
low-price, low-status operations. They challenge established retailers, and then the new retailers’
success leads them to upgrade their facilities and offer more services. In turn, their costs
increase, and eventually they become like the conventional retailers they replaced. The cycle
begins again.
There are many types of wholesalers, including merchant wholesalers, agents and brokers, and
manufacturers’ sales branches and offices.
CHAPTER OBJECTIVES
Use Power Point Slide 13-2 here
1. Explain the role of retailers in the distribution channel and describe the major types of
retailers.
2. Describe the major retailer marketing decisions.
3. Discuss the major trends and developments in retailing.
4. Explain the major types of wholesalers and their marketing decisions.
CHAPTER OUTLINE
Copyright© 2018 Pearson Education
p. 366 INTRODUCTION
Day in and day out, giant Walmart lives up to its promise:
“Save money. Live better.” Its obsession with customer
value has made Walmart not only the world’s largest
retailer but also the world’s largest company.
Walmart is the number-one seller in several categories of
consumer products, including groceries, clothing, toys,
CDs, and pet care products.
What’s behind this spectacular success? First and foremost,
Walmart is passionately dedicated to its long-time,
low-price value proposition and what its low prices mean
to customers: “Save money. Live better.”
Walmart is a lean, mean, distribution machine; it has the
lowest cost structure in the industry. Low costs let the giant
retailer charge lower prices but still reap high profits.
Even as it brushes up its image, in no way will Walmart
ever give up its core low price value proposition. After all,
Walmart is and always will be a discount store.
p. 367
Photo: Walmart
Opening Vignette Questions
1. Do you believe that Walmart engages fairly
with its competitors in the marketplace? Defend
your answer.
2. What specific advantages does Walmart’s
distribution system provide the company?
3. Do you believe that the company’s mission
really is to “lower the world’s cost of living”?
Explain.
4. Besides offering low prices, what does Walmart
do better than its competitors to attract
customers?
p. 368
PPT 13-3
PPT 13-4
Explain the role of retailers in the distribution channel
and describe the major types of retailers.
RETAILING
Retailing includes all the activities involved in selling
products or services directly to final consumers for their
personal, nonbusiness use.
Retailers are businesses whose sales come primarily from
Learning Objective
1
p. 368
Key Terms:
Retailing, Retailer
Copyright© 2018 Pearson Education
PPT 13-5
p. 369
p. 369
PPT 13-6
PPT 13-7
p. 369
retailing.
Many marketers are now embracing the concept of
shopper marketing, the idea that the retail store itself is an
important marketing medium.
The “First Moment of Truth” is the critical three to seven
seconds that a shopper considers a product on a store shelf.
Today’s consumers are increasingly omni-channel buyers,
who make little distinction between in-store and online
shopping and for whom the path to a retail purchase runs
across multiple channels. Omni-channel retailing
involves creating a seamless cross-channel buying
experience that integrates in-store, online, and mobile
chopping.
Types of Retailers
Retailers can be classified in terms of several
characteristics, including the amount of service they offer,
the breadth and depth of their product lines, the relative
prices they charge, and how they are organized.
Amount of Service
Self-service retailers serve customers who are willing to
perform their own “locate-compare-select” process to save
time or money.
Limited-service retailers provide more sales assistance
because they carry more shopping goods about which
customers need information.
Full-service retailers include high-end specialty stores and
first-class department stores. Salespeople assist customers
in every phase of the shopping process.
Product Line Classifications
Specialty stores carry narrow product lines with deep
assortments within those lines.
Department stores carry a wide variety of product lines.
In recent years, department stores have been squeezed
p. 368
Key Term:
Shopper Marketing
p. 369
Photo: Shopper
marketing
p. 369
Key Term:
Omni-channel
retailing
p. 369
Key Term:
Specialty store,
Department store
p. 370
Table 13.1: Major
Store Retailer
Types
p. 370
Copyright© 2018 Pearson Education
between more focused and flexible specialty stores on the
one hand, and more efficient, lower-priced discounters on
the other.
Supermarkets are the most frequently visited type of retail
store.
Supermarkets are facing slow sales growth because of
slower population growth and an increase in competition
from discounters and specialty food stores. They also have
been hit hard by the rapid growth of out-of-home eating in
the past 20 years.
Supermarkets’ share of the packaged foods sales plunged
from 53 percent in 1998 to 37 percent in 2012.
Convenience stores are small stores that carry a limited
line of high-turnover convenience goods.
Superstores are much larger than regular supermarkets and
offer a large assortment of routinely purchased food
products, nonfood items, and services.
Supercenters (called hypermarkets in some countries) are
very large combination food and discount stores.
Category killers are superstores that are actually giant
specialty stores like Best Buy and Home Depot.
Service retailers include hotels and motels, banks, airlines,
colleges, hospitals, movie theaters, tennis clubs, bowling
alleys, restaurants, repair services, hair salons, and dry
cleaners.
Service retailers in the United States are growing faster
than product retailers.
p. 370
Key Term:
Supermarket
p. 371
Key Terms:
Convenience store,
Superstore,
Category killer,
Service retailer
Assignments, Resources
Use Discussion Questions 13-1 here
Use Think-Pair-Share 1 here
Use Outside Example 1 here
Troubleshooting Tip
Retailing is generally not a difficult concept for
students. However, the different types of retailers
should be thoroughly explained to the students to
ensure their understanding. Table 13.1 is an
Copyright© 2018 Pearson Education
excellent resource in this regard.
p. 371
PPT 13-8
PPT 13-9
p. 373
PPT
13-10
PPT 13-11
PPT
13-12
p. 373
PPT
13-13
PPT
13-14
Relative Prices
Discount stores sell standard merchandise at lower prices
by accepting lower margins and selling higher volume.
Off-price retailers offer products to fill the ultralow-price,
high-volume gap by pricing lower than discount stores.
There are three main types of off-price retailers.
1. Independent off-price retailers are either
independently owned and run or divisions of larger
retail corporations.
2. Factory outlets are manufacturer-owned and
operated stores—sometimes grouped together in
factory outlet malls and value-retail centers.
3. Warehouse clubs (or wholesale clubs or
membership warehouses) operate in huge, drafty,
warehouse-like facilities and offer few frills.
Organizational Approach
Corporate chains are two or more outlets that are
commonly owned and controlled.
They have many advantages over independents.
Their size allows them to buy in large quantities at
lower prices and gain promotional economies.
They can hire specialists to deal with areas such as
pricing, promotion, merchandising, inventory
control, and sales forecasting.
There are three forms of contractual associations.
1. Voluntary chain—a wholesaler-sponsored group of
independent retailers that engages in group buying
and common merchandising.
2. Retailer cooperative—a group of independent
retailers that bands together to set up a jointly
owned, central wholesale operation and conducts
joint merchandising and promotion efforts.
3. Franchisethe main difference between franchise
organizations and other contractual systems is that
franchise systems are normally based on some
p. 371
Key Term:
Discount store
p. 372
Photo: Dollar
General
p. 372
Key Terms:
Off-price retailer,
Independent
off-price retailer,
Factory outlet,
Warehouse club
p. 373
Key Term:
Corporate Chains
p. 373
Table 13.2: Major
Types of Retail
Organizations
p. 373
Key Term:
Franchise
p. 374
Photo: Costco
p. 375
Photo: Franchising,
H&R Block
Copyright© 2018 Pearson Education
PPT
13-15
unique product or service; on a method of doing
business; or the trade name or goodwill the
franchisor has developed.
Franchises now command approximately 45 percent of all
retail sales in the United States.
Review Learning Objective 1: Explain the role of
retailers in the distribution channel and describe the major
types of retailers.
Assignments, Resources
Use Discussion Question 13-3 here
Use Real Marketing 13.1 here
Use Small Group Project 1 here
Use Think-Pair-Share 2 here
PPT
13-16
p. 376
PPT
13-17
PPT
13-18
p. 377
PPT
13-19
p. 378
Describe the major retailer marketing decisions.
Retailer Marketing Decisions
Segmentation, Targeting, Differentiation, and
Positioning Decisions
Retailers must first segment and define their target markets
and then decide how they will differentiate and position
themselves in these markets. Too many retailers fail to
define their target markets and positions clearly.
In contrast, successful retailers define their target markets
well and position themselves strongly.
Product Assortment and Services Decision
Retailers must decide on three major product variables.
1. Product assortment should differentiate the retailer
while matching target shoppers’ expectations.
2. Services mix can help set one retailer apart from
another.
3. Store atmosphere is another important element in
the resellers product arsenal.
Price Decision
Learning Objective
2
p. 376
Figure 13.1:
Retailer Marketing
Strategies
p. 377
Photo: In-N-Out
Burger
p. 378
Photo: Restoration
Hardware
Copyright© 2018 Pearson Education
p. 379
PPT
13-20
p. 379
PPT
13-21
Most retailers seek either:
High markups on lower volume (most specialty
stores); or
Low markups on higher volume (mass
merchandisers and discount stores).
Other pricing decisions:
Everyday low pricing (EDLP)—charging constant,
everyday low prices with few sales or discounts.
“High-low” pricing—charging higher prices on an
everyday basis, coupled with frequent sales and
other price promotions to increase store traffic,
clear out unsold merchandise, create a low-price
image, or attract customers who will buy other
goods at full prices.
Troubleshooting Tip
The decisions retailers need to make will be easily
understood with a review of Figure 13.1. It is very
clear in this figure that the marketing mix elements
studied earlier in the text are being applied in a
retail environment. Explain how the type of retail
organization chosen affects the marketing mix, and
vice versa.
Copyright© 2018 Pearson Education

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