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Chapter 14: Retailing, Direct Marketing, and Wholesaling
CLASS EXERCISES
Class Exercise 1: Strategic Issues in Retailing
The objective of this class exercise is to help students understand strategic issues in retailing by
developing an original retail store concept.
Prompt for students:
Assume that you have been given ample funds to invest in a new retail venture. Be as creative as possible.
1. Determine the type of retail store you want to open. Be specific about the characteristics of the store
type. Include product assortment, target market(s), service level, and price level.
2. Where will you locate?
a. Be sure to consider
• Ease of movement in, around, and out of the location
• Size and shape of the building
• Likely terms of rent or lease
• Surrounding stores
b. Choose whether to locate in a free-standing store or in a
• Traditional business district
• Neighborhood shopping center
• Community shopping center
• Regional shopping center
• Superregional shopping center
• Lifestyle shopping center
• Power shopping center
3. Describe your product assortment in terms of depth, width, and quality. Which products will be the
most important to consumers? Will consumers want other complementary products when they shop?
Answers:
1. Students will typically develop specialty store ideas, since they recognize the difficulty of going head
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Chapter 14: Retailing, Direct Marketing, and Wholesaling
3. Although it is difficult for students to think of an entire product assortment, they should go beyond
Class Exercise 2: Types of Wholesalers
The objective of this exercise is to improve students’ recognition of various types of wholesalers.
Prompt for students:
Fill in the blank for the type of wholesaler that meets each set of requirements.
Type of
Wholesaler
Takes
Possession of
Products
Delivers
Merchandise to
Customers
Provides Credit
Takes Title to
Products
Common
Products
Carried
1. ________
No
No
No
No
Used in industrial
equipment
2. ________
No
No
Yes
Yes
Building
materials
3. ________
Sometimes
Yes
Yes
No
Textiles
4. ________
Yes
No
Sometimes
Yes
Office supplies
5. ________
Yes
No
No
Yes
Groceries and
office supplies
6. ________
Yes
Yes
No
Yes
Perishables
7. ________
Yes
Yes
Sometimes
No
Agricultural
commodities
8. ________
Sometimes
Sometimes
No
No
Apparel and
accessories
Answers:
Class Exercise 3: Selling Products
In this chapter, students learned about a variety of means for selling products. Each form of retailing,
direct marketing, or wholesaling has advantages and disadvantages based on product type and
organizational goals.
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Chapter 14: Retailing, Direct Marketing, and Wholesaling
Consider the following scenario:
Matt and Ashley are two recent college graduates. They loved living in the small city where they attended
school but were having difficulty finding jobs in the area. They began brainstorming about products they
felt would be viable businesses to serve the needs of students and the broader community. Here is the list
they came up with:
• Concierge Service: Provide laundry pick up and drop off, shopping services, bill paying services,
travel planning, and a host of other services for busy students.
• Rent a Bike: A service with a number of bikes available at various locations on and off campus.
People could rent the bikes by joining the service and swiping their membership card at a kiosk
where the bikes are stored. The bike could be returned to any kiosk in town.
• Cereal Bar Restaurant: This restaurant would offer only cereal. People would enter the restaurant
and pay one fee based on bowl size. They could then fill the bowl from cereal dispensers located on
an island in the middle of the store. Juice, milk, and stir-ins, such as fruit and chocolate chips,
would be available for an additional fee.
Answer the following questions:
1. What form of selling is best for each idea? For example, is retailing a good means of selling this
product? If so, where should the shop be located?
2. Would franchising work for their ideas? How would they go about beginning a franchise or buying
an existing franchise?
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Chapter 14: Retailing, Direct Marketing, and Wholesaling
CHAPTER QUIZ
1. A ___________ is a retail establishment that combines a supermarket and a discount store in one
location.
a. superstore
b. department store
c. category killer
d. hypermarket
e. megamarket
2. ATMs are an example of
a. remote retailing.
b. automatic vending.
c. bank marketing.
d. telemarketing.
e. online retailing.
3. Hannah owns and operates a scrapbooking supply business which supplies paper and related supplies
to various craft stores in the area. She takes title to the supplies and assumes all risks associated with
ownership. Hannah is a(n)
a. agent.
b. wholesaler agent.
c. merchant wholesaler.
d. functional middleman.
e. rack jobber.
4. What is the most expensive form of retailing?
a. specialty retailing
b. direct marketing
c. telemarketing
d. direct selling
e. online retailing
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Chapter 14: Retailing, Direct Marketing, and Wholesaling
ANSWERS TO ISSUES FOR DISCUSSION AND REVIEW
1. What value is added to a product by retailers? What value is added by retailers for producers
and ultimate consumers?
Retailers add value to products in several ways. Image enhances the value of the product. Through its
2. What are the major differences between discount stores and department stores?
3. In what ways are traditional specialty stores and off-price retailers similar? How do they
differ?
4. What major issues should be considered when determining a retail site location?
©2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessibl e website, in whole or in part.
5. Describe the three major types of traditional shopping centers. Give an example of each type in
your area.
Students’ answers may vary based on the area in which they live. Following are major types of
amusement centers, or upscale restaurants.
6. Discuss the major factors that help to determine a retail store’s image. How does atmosphere
add value to products sold in a store?
©2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly acces sible website, in whole or in part.
7. How is door-to-door selling a form of retailing? Some consumers believe that direct-response
orders bypass the retailer. Is this true?
8. If you were opening a retail business, would you prefer to open an independent store or own a
store under a franchise arrangement? Explain your preference.
Students’ answers will vary. There are advantages to both owning an independent store and owning a
9. What services do wholesalers provide to producers and retailers?
8. What is the difference between a full-service merchant wholesaler and a limited-service
merchant wholesaler?
11. Drop shippers take title to products but do not accept physical possession of them, whereas
commission merchants take physical possession of products but do not accept title. Defend the
logic of classifying drop shippers as merchant wholesalers and commission merchants as
©2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessibl e website, in whole or in part.
9. Why are manufacturers’ sales offices and branches classified as wholesalers? Which
independent wholesalers are replaced by manufacturers’ sales branches? By sales offices?
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Chapter 14: Retailing, Direct Marketing, and Wholesaling
ANSWERS TO DEVELOPING YOUR MARKETING PLAN
The information obtained from these questions should assist students in developing various aspects of
their marketing plans found in the Interactive Marketing Plan exercise at www.cengagebrain.com.
1. Considering your product’s attributes and your target market’s (or markets’) buying
behavior, will your product likely be sold to the ultimate customer or to another member of
the marketing channel?
2. If your product will be sold to the ultimate customer, what type of retailing establishment
is most suitable to your product? Consider the product’s characteristics and your target
3. Discuss how the characteristics of the retail establishment, such as location and store
image, have an impact on the consumer’s perception of your product.
This question asks students to discuss how the characteristics of the retail establishment, such as
4. Are direct-marketing or direct-selling methods appropriate for your product and target
market?
5. If your product will be sold to another member in the marketing channel, discuss whether
a merchant wholesaler, agent, or broker is most suitable as your channel customer.
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Chapter 14: Retailing, Direct Marketing, and Wholesaling
©2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessibl e website, in whole or in part.
Students will have to decide whether a merchant wholesaler, agent, or broker is most suitable as their
channel customer. Not all students will opt to sell to a channel intermediary. In fact, it is likely that
most students will prefer to sell to the ultimate consumer.
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Chapter 14: Retailing, Direct Marketing, and Wholesaling
COMMENTS ON VIDEO CASE 14: L.L.BEAN: OPEN 24/7, CLICK OR
BRICK
Summary
L.L.Bean’s outdoorsy image and innovative products, combined with a century-old reputation for
standing behind every item, have made its stores popular shopping destinations around the world and
around the Web. The company creates over 50 catalogs targeting different consumers, which facilitates
shopping via the phone and the online store. The company’s flagship store in Freeport, Maine, provides a
variety of customer services as well as a pleasant atmosphere that includes a café. The L.L.Bean online
store offers a vast inventory that can be shipped directly to a customer or to their local store.
Questions for Discussion
1. What forms of direct marketing does L.L.Bean employ? Which additional forms of direct
marketing should L.L.Bean consider using?
2. Do you think L.L.Bean’s website will ever entirely take the place of its mail-order catalog?
Why or why not?
Students’ answers will vary based on how they feel about actual paper materials. However,
is enjoyable to many customers.
3. What type(s) of location do you think would be most appropriate for future L.L.Bean stores,
and why?
Students’ answers will vary, but the most common answers will probably include the following
points: