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Chapter 13 - Retailing and Wholesaling
13-21
d. Strip mall.
e. Power center.
• Is a variation of the strip mall with multiple anchor stores like Home
Depot or Best Buy.
f. Multichannel retailers.
• Combining formats offers consumers a broad spectrum of benefits and
experiences.
3. Retail Communication.
a. A retailer’s communication activities play an important role in:
• Positioning a store.
• Creating its image.
b. Image is “the way in which the store is defined in the shopper’s mind” and
consists of:
• Functional qualities, which refers to mix elements, such as:
– Price ranges. – Breadth of merchandise lines.
• A store’s image is based on:
– Consumers’ impressions of the corporation that operates it.
– The category or type of store.
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c. Closely related to the concept of image is the store’s atmosphere or ambiance.
• Retailers believe sales are affected by:
• This concept leads many retailers to use shopper marketing:
– Is the use of displays, coupons, product samples, and other brand
communications to influence shopping behavior in a store.
– Can also influence behavior:
• A retail store tries to:
– Attract its target audience with what it seeks from the buying
experience.
– Reinforce the beliefs and the emotional reactions buyers seek.
• Shopping experience is a consumer’s perception of the store encounter
and can be a major source of retailer differentiation.
4. Merchandise Management
a. Retail buyers who manage product line breadth and depth are familiar with:
• The needs of the target market.
• The alternative products available from the various manufacturers that
want to sell their products in a store.
b. Category management:
• Is a popular approach to managing the assortment of merchandise.
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• A category manager would consider the following:
– Trade deals, order costs, and the between-brand effects of price range
changes to…
– Determine brand assortment, order quantities, and prices.
c. Retailers use metrics to assess the effectiveness of a store or retail format.
• Customer measures.
– The number of transactions per customer.
• Store and product measures.
– The level of inventory. – Inventory turnover.
• Financial measures.
– Gross margin. – Return on sales.
– Sales per employee. – Markdown percentage.
• The two most popular measures for retailers are:
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USING MARKETING DASHBOARDS
Why Apple Stores May Be the Best in the United States!
Sales per Square Foot and Same-Store Growth Percent
Information related to (1) sales per square foot and (2) same store sales growth can be
displayed in a marketing dashboard.
Your Challenge.
[See UMD16StoreSalesSqFtGrowth.xls]
Your Findings.
You decide to collect sales information for Target, Neiman Marcus, Best Buy,
Your Actions.
The results of your investigation indicate that Apple stores’ sales per square foot are
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LEARNING REVIEW
13-9. How does original markup differ from maintained markup?
13-10. A huge shopping strip mall with multiple anchor stores is a __________ center.
13-11. What is a popular approach to managing the assortment of merchandise in a
store?
V. THE CHANGING NATURE OF RETAILING [LO 13-5]
• Retailing is the most dynamic aspect of a channel of distribution.
• New retailers enter a market and search for a new position that will attract customers.
A. The Wheel of Retailing
• [Figure 13-4] The wheel of retailing is a concept that describes how new forms
of retail outlets enter the market.
a. [Box 1] These outlets:
b. [Box 2] Next:
• Fixtures and embellishments are gradually added to the stores to increase
c. [Box 3] Then, as time passes:
d. [Box 4] This opens an opportunity for a new form of retail outlet:
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• In 1955, McDonald’s:
a. Originally opened late and closed early.
• Today, McDonald’s:
a. Offers an extensive menu.
[Video 13-4: McDonald’s Video]
• In some cases, the wheel has come full circle: Taco Bell is now opening small,
limited-offering outlets in gas stations, discount stores, and other venues.
• The wheel of retailing also applies to discount stores:
B. The Retail Life Cycle
[Figure 13-5] The retail life cycle describes the process of growth and decline that
retail outlets, like products, experience. Its four stages are:
• Early growth.
a. The retail outlet first emerges, with a sharp change from existing competition.
• Accelerated development.
a. Market share and profit achieve their greatest growth rates.
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• Maturity.
a. Some competitors drop out.
• Decline.
a. Profit and market share fall rapidly.
b. These retailers need to discourage their customers from moving to:
C. Data Analytics
• Described as the “new science of retailing.”
• Combination of data from wearable technology and growth of multichannel
marketing complement the substantial amount of data already collected through
scanners and loyalty card systems.
• Use of data analytics can benefit retailers:
a. Understanding how consumers use multiple channels, information sources,
and payment options can help predict shopping behavior.
LEARNING REVIEW
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13-12. Using the wheel of retailing, describe the characteristics of a new retail form that
has just entered the market.
13-13. Market share is usually fought out before the __________ stage of the retail life
cycle.
13-14. What is the new science of retailing?
Answer: Data analytics has been described as the new science of retailing. The use of
VI. WHOLESALING (LO 13-6)
Many retailers depend on intermediaries that engage in wholesaling activities—selling
products and services for the purposes of resale or business use.
A. Merchant Wholesalers
• Merchant wholesalers:
a. Are independently owned firms that take title to the merchandise they handle.
b. Are also called industrial distributors.
• Full-service wholesalers. Two major types exist:
a. General merchandise (or full-line) wholesalers.
• Carry a broad assortment of merchandise.
b. Specialty merchandise (or limited-line) wholesalers.
• Offer a relatively narrow range of products.
• Have an extensive assortment within the product lines carried.
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• Limited-service wholesalers. Four major types exist:
a. Rack jobbers.
• Furnish the racks or shelves that display merchandise in retail stores.
b. Cash and carry wholesalers.
• Take title to merchandise.
• Sell only to buyers who:
– Call on them.
• Carry a limited product assortment.
• Do not:
– Make deliveries.
• Examples: Electric and office supplies and groceries.
c. Drop shippers or desk jobbers.
• Own the merchandise they sell.
• Do not physically handle, stock, or deliver it.
d. Truck jobbers.
• Are small wholesalers that:
– Have a small warehouse from which they…
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– Stock their trucks for distribution to retailers.
B. Agents and Brokers
• Agents and brokers:
a. Do not take title to merchandise.
• Producers use two types of agents:
a. Manufacturer’s agents or manufacturer’s representatives.
• Work for several producers.
• Carry noncompetitive, complementary merchandise in an exclusive
territory.
b. Selling agents.
• Represent a single producer.
• Brokers are independent firms or individuals whose principal function is to bring
buyers and sellers together to make sales.
a. Brokers, unlike agents:
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• Examples: Seasonal food products and real estate.
b. A food broker:
C. Manufacturer’s Branches and Offices
• Manufacturer’s branches and sales offices:
a. Are wholly owned extensions of the producer that perform wholesaling
activities.
b. Are used when there are:
• Two types exist:
a. Manufacturer’s branch office.
b. Manufacturer’s sales office.
LEARNING REVIEW
13-32
13-15. What is the difference between merchant wholesalers and agents?
13-16. Under what circumstances do producers assume wholesaling functions?
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APPLYING MARKETING KNOWLEDGE
1. Discuss the impact of the growing number of dual-income households on (a) nonstore
retailing and (b) the retailing mix.
Answers:
a. Nonstore retailing. Nonstore retailing alternatives such as online retailing are growing
as a convenient way for two-income households to shop. Television home shopping,
direct mail, and catalogs also provide convenient retailing alternatives to these
households.
b. The retailing mix. Retailers will have to adjust their mix in terms of store hours and
2. In retail pricing, retailers often have a maintained markup. Explain how this
maintained markup differs from original markup and why it is so important.
3. What are the similarities and differences between the product and retail life cycles?
Answers:
a. Similarities. The retail and product life cycles are similar in that they consist of four
stages over which market share and profit (from sales) are matched. In the first stage of
b. Differences. Differences relate to nomenclature. The first stage of the product life
cycle is introduction as opposed to the retail life cycle’s early growth. The second
stage of the PLC is growth versus the retail life cycle’s accelerated development.
4. How would you classify Walmart in terms of its position on the wheel of retailing
versus that of an off-price retailer?
Chapter 13 - Retailing and Wholesaling
5. Develop a chart to highlight the role of each of the four main elements of the retailing
mix across the four stages of the retail life cycle.
Answer:
RETAIL MIX
RETAIL LIFE CYCLE
EARLY
GROWTH
ACCELARATED
DEVELOPMENT
MATURITY
DECLINE
GOODS AND
SERVICES
Offer breadth or
depth
Expand line on
breadth or depth
Maintain
Shrink to
profitable items
PRICING
Skimming
pricing
Penetration
pricing
Price discounting
Flexible-pricing
Bundle pricing
Loss-leader
pricing
COMMUNICATIONS
Focus on
awareness
Highlight
competitive
advantages
Focus on
specials to keep
customers
Limited
PHYSICAL
DISTRIBUTION
Few locations
Expand number
of outlets
Maintain
Shrink number
of outlets
6. Breadth and depth are two important components in distinguishing among types of
retailers. Discuss the breadth and depth implications of the following retailers
discussed in this chapter: (a) Nordstrom, (b) Walmart, (c) L.L. Bean, and (d) Best
Buy.
Answers:
a. Nordstrom. As a department store, it has moderate breadth, with a large-but-not-
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7. According to the wheel of retailing and the retail life cycle, what will happen to
factory outlet stores?
8. The text discusses the development of online retailing in the United States. How does
the development of this retailing form agree with the implications of the retail life
cycle?
Answer: Online retailing really is slightly over a decade old. It began in earnest during the
mid-1990s when higher Internet speeds became wide spread, transactions became secure,
and consumers became more comfortable browsing and shopping for products. However,
the number of online retailers has recently declined. This may be due in part to the dot-
9. Comment on this statement: The only distinction among merchant wholesalers and
agents and brokers is that merchant wholesalers take title to the products they sell.
