448 Part 5 Distribution Decisions
d. U.S. marketers have begun to realize the potential of this
3. Strategic Implications of Marketing in the 21st Century
a. In the retail sector, the unstoppable march toward lower
prices has forced all retailers to re-evaluate everything from
their logistics and supply networks to their profit margins
b. Many retailers have used the power of the Internet to
strengthen such factors as store image, the merchandising
mix, customer service, and the development of long-term
relationships with customers
Assessment check questions
8.1. Describe Internet-based retailers. Internet-based retailers sell directly
8.2. Explain how the Internet has enhanced retailers’ functions. The
Internet has allowed retailers to enhance their merchandising mix and their
customer service by, among other things, giving them access to much
broader selections of goods. Direct marketers have merged their traditional
catalog or direct mail programs with an Internet interface that allows for
faster, more efficient, and more frequent contact with customers and
prospects.
ANSWERS AND TEACHING NOTES TO CHAPTER EXERCISES
Chapter 15 Assurance of Learning Review
1. Find some examples of retailers that demonstrate the concept of the wheel of retailing. Explain the
stages they went through and are in currently.
.
2. How do retailers identify target markets? Explain the major strategies by which retailers reach their
target markets.
Answer: A retailer defines its strategy by selecting a target market. The size and profit potential of a
target market and the level of competition for its business influence this decision. They identify markets
through demographic, geographic, and psychographic profiles to segment markets. The retailer then
reaches the target market based on the firm’s goals and strategic plans. It does this by creating a
3. Explain the importance of a retailer’s location to its strategy.
4. What is retail convergence?
5. Define scrambled merchandising. Why has this practice become so common in retailing?
6. What is a wholesaling intermediary? Describe the activities it performs.
7. Distinguish among the different types of manufacturer-owned wholesaling intermediaries. What
conditions might suit each one?
8. Differentiate between direct selling and direct-response retailing. Cite examples of both.
.
9. In what ways has the Internet changed direct-response retailing?
10. Define automatic merchandising and explain its role in U.S. retailing today and in the future.
Answer: Automatic merchandising involves sales through coin-operated vending machines, representing
a rapidly growing format in U.S. marketing. It’s traditionally been limited to snacks and soft drinks, but
recently other convenience products and consumer services began being offered through machines, as
Projects and Teamwork Exercises
1. Research and then classify each of the following retailers. Caution the students that retailing is
constantly changing and categories are not set in stone. Also one store might fit a number of categories.
Here are some suggestions to start a discussion. Students may agree or disagree with these
classifications:
a. Home Depot —chain store, convenience retailers, limited-line retailer
b. H &M—chain store, specialty retailer, self-selection, limited-line retailer
Point Value: 1
BUSPROG: Reflective Thinking
2. Visit a local Walmart store and observe product placement, shelf placement, inventory levels on
shelves, traffic patterns, customer service, and checkout efficiency. Discuss what makes Walmart the
world’s most successful retailer.
3. Target has become known for trendy clothes and stylish housewares, all readily available in spacious
stores at reasonable prices. Visit a local Target Store or the company’s website and compare its product
selection to that of your local hardware store or a department store. Make a list of each store’s
advantages and disadvantages, including convenience, location, selection, service, and general prices.
Do any of their product lines overlap? How are they different from each other?
4. Match each industry with the most appropriate type of wholesaling intermediary.
__d___ hardware a. drop shipper
__b___ perishable foods b. truck wholesaler
__a___ lumber c. auction house
.
5. In teams, develop a retailing strategy for an Internet retailer. Identify a target market and then suggest
a mix of merchandise, promotion, service, and pricing strategies that would help a retailer reach that
market via the Internet. What issues must Internet retailers address that do not affect traditional store
retailers?
6. With a classmate, visit two or three retail stores that compete with one another in your area and
compare their customer service strategies. (You might want to visit each store more than once to avoid
making a snap judgment.) Select at least five criteria and use them to assess each store. Why were
these criteria considered important? How do you think each store sees its customer service strategy as
fitting into its overall retailing strategy? Present your findings in detail to the class.
7. Visit a department store and compare at least two departments’ pricing strategies based on the
number of markdowns you find and the size of the discount. What, if anything, can you conclude about
the success of each department’s retailing strategy? What are the conclusions? Which retailer is more
profitable? The one who offers higher markdowns and discounts? Or the other retailer? What reasons did
students provide for the conclusion?
8. Think of a large purchase you make on a non-routine basis, such as a new winter coat or expensive
clothing for a special occasion. Where will you shop for such items? Will you travel out of your way? Will
you go to the nearest shopping center? Will you look on the Internet? Once you have made your
decision, describe any strategies used by the retailer that led you to this decision. What might make you
change your mind about where to shop for this item? Where do most students shop? What were their
reasons? What strategies did they adopt?
9. Outlet malls are a growing segment of the retail market. Visit a local outlet mall or research one on the
Internet. What types of stores are located there? How do the product selection and price compare with
typical stores? Ask students to present their findings and analyze them. Do they offer variety? Did
students think it was value-for-money or overly priced?
10. Torrid is a national chain of about 170 stores that feature clothing for plus-size women. Recommend
an appropriate retailing strategy for this type of retailer. What strategies did students suggest? What are
the benefits and pitfalls of each? Ask the class to decide on the best strategy. Which one did they
choose?
Point Value: 1
BUSPROG: Reflective Thinking
Critical-Thinking Exercises
1. The retail chain Anthropologie sells a unique mix of women’s clothing and home furnishings. Since its
founding in 1992, Anthropologie has opened stores across the United States, Canada, and Great Britain.
The retailer aims to create a shopping “experience” where its customers—independent-minded college-
educated female professionals between ages 30 and 45—can find their own look. No two Anthropologie
stores are exactly alike, and the chain does not use advertising. Visit the website at
www.anthropologie.com. How does it differentiate itself from its competitors?
2. Several major retailers have begun to test the extreme markdown strategy that lies behind popular
dollar stores such as Dollar General and Dollar Tree stores. Kroger, Walmart, and others have opened
sections in selected stores that feature items from snacks to beauty supplies priced at $1. Is this
Chapter 15 Retailers, Wholesalers, and Direct Marketers 455
.
experiment simply a test of pricing strategy? What else might motivate these retailers to offer such deep
discounts?
Answer: Student opinions will vary, but many students will see the trend toward extreme markdowns as
both a pricing strategy as well as an inventory strategy (using extreme markdowns to move excess
3. Industry watchers blame the introduction of iTunes and other online music streaming sites for the
overall decline of the retail must store. Most, however, feel that music stores will somehow remain viable.
What are some changes these retailers could make in their merchandising, customer service, pricing,
location, and other strategies to try to reinvent their business?
4. McDonald’s has traditionally relied on a cookie-cutter approach to its restaurant design. One store
looked essentially like every other—until recently. The chain has decided to loosen its corporate design
mandate to fit within special markets and to update its image with customers. Research McDonald’s
makeover efforts. What types of changes has the company made and where? How have changes in
atmospherics helped the chain with customers? Have the changes you researched modified your
perception of McDonald’s at all? If so, how?
Answer: The McDonald’s Annual Report provides some insight into this issue – and even includes photos
Ethics Exercises
1. Some economists fear what might happen to the U.S. economy if Walmart has a bad year. (So far, it
has had more than four decades of nonstop growth.) Should retailers have that much influence on the
economy? Why or why not?
2. Walmart is selective about what it sells—refusing, for instance, to carry music or computer games with
mature ratings, magazines with content that it considers too adult, or, in some of its stores, handguns.
Because of its sheer size, these decisions can influence American culture. Do you think this is a positive
or negative effect of the growth of this retailer? Why?
Answer: The exercise deals with several issues regarding Walmart, especially relating to its size. Student
opinions are likely to be sharply divided over issues ranging from local resistance to new Walmart stores
Internet Exercises
1. Shopping center trends. Read the article at the URL listed below. Review the material and prepare a
brief report on some of the major trends in shopping center development.
http://www.washingtonpost.com/business/captialbusiness/five-retail-trends-to-watch-in–
2014/2014/02/21/fca8180e–99ab–11e–b931–o204122c514b_story.html
Chapter 15 Retailers, Wholesalers, and Direct Marketers 457
.
2. Online retailing strategy. Visit Kohl’s website. Using the material in this chapter on retailing strategy,
answer the following questions:
a. How does the design and layout of of Kohl’s online store appeal to the retailer’s target market?
b. In your opinion, what is the main strategic objective of Kohl’s online store? Is it to generate revenue
independently of its brick–and–mortar stores? Or, is the online store’s main purpose to support so–
called Web–to-store shoppers (shoppers who use the web mainly to obtain product information and
prices but make actual purchases at brick-and-mortar stores)?
Answer: Kohl’s mission, as stated in store and online, is to be the leading value-oriented, family-focused,
specialty department store. Kohl’s is targeting families so the website has a simple and appealing format.
3. Wholesaling industry. Visit the website of the National Association of Wholesaler-Distributors. Click
on “About NAW” and scroll down and click on “About the Industry.” Review the data and prepare a brief
report describing the state of the U.S. wholesale distribution industry.
Case 14.1 Costco Plays Catch-Up in Online Sales—Questions for Critical Thinking
1. How can Costco.com better inform its online customers of the product variety available and the real
value of its special offers?
2. What priority do you think Costco should put on expanding its online business abroad? Is this more or
less important than improving sales from the existing e-commerce operations in the United States and
Canada? Explain your reasoning.
Answer: Students’ answers will vary. It is entirely dependent on Costco’s vision and its future plans. A
Video Case 15.2 GaGa SherBetter: Coming to a Market Near You? —Questions for Critical
Thinking
1. Experience has taught the Kings that smaller, specialty markets are the strongest retail outlets for their
GaGa SherBetter. Under what conditions might they begin to make a successful move into the larger
supermarket chains?
2. How might the right wholesaler ultimately create marketing utility for GaGa?
Answer: The right wholesaler could create marketing utility for GaGa in the following ways: providing a
Part 5 Video Case: Pushing Content into New Channels—Questions for Critical Thinking
.
1. Food Network adopts a dual distribution strategy. In your opinion, what are the benefits of this?
2. Scripps and Food Network appear to have achieved channel cooperation. However, describe a
scenario in which channel conflict might arise.
3. How does social media marketing support Food Network’s distribution strategy?
4. Do you think Kohl’s is the best choice of retail outlet for Food Network’s products? Why or why not?
Answer: Kohl’s reaches a wide range of consumers at its stores across the country (and online), pricing
its products at a point that average consumers are willing to pay. Given Food Network’s strategy of
COLLABORATIVE LEARNING EXERCISES
Walmart: Retailing Giant
Purpose:
To examine the strategy behind Walmart’s retailing success
Background:
Walmart has generated a number of controversies, but the success of their retailing approach is
undisputed. This exercise is designed to help students understand and evaluate the strategic
business philosophy that Walmart envisages.
Relationship to Text:
Chapter Overview
Estimated Class Time:
About 15 to 20 minutes
Preparation/Materials:
460 Part 5 Distribution Decisions
You may want to copy the summary of “Sam’s Rules For Building A Business,” listed below.
Exercise:
Give the students some information about Walmart. Alternatively you could ask your students to
read about Walmart and come to class. You can start this activity by having a quiz on Walmart.
The founder of Walmart, Sam Walton, was often asked about the secret behind Walmart’s
success. In his 1992 book, he shared “Sam’s Rules for Building a Business,” which the company
claims as a guiding philosophy even today.
• Commit to your business. Believe in it more than anybody else.
• Share your profits with all your associates, and treat them as partners.
• Motivate your partners. Money and ownership alone aren’t enough.
Retailing Strategy
Purpose:
To help students explore key elements of retailing strategy
Background:
Most students are far more familiar than they initially think with retailing strategy. This exercise is
designed to harness that knowledge and share it with the class.
Relationship to Text:
Retailing Strategy
Chapter 15 Retailers, Wholesalers, and Direct Marketers 461
.
Estimated Class Time:
About 20 minutes
Preparation/Materials:
This exercise works best with a whiteboard and a number of markers.
Exercise:
Brainstorm with your students a quick list of retailer categories that they are familiar with.
Possibilities include bookstores, convenience stores, after market shops (for customizing cars),
coffee shops, pet stores, clothing boutiques, gift shops, etc. Then, divide your students into
groups of five to seven people, and ask each group to choose a retailer category. Their goals are:
Promotional Strategy
Purpose:
To emphasize the importance of promotional strategies
Background:
Promotional strategies are used to primarily attract the attention of the customer and to increase
sales. Many activities can be used to promote products—advertising campaigns, product
demonstrations, direct mail campaigns, free samples—to name a few
Relationship to Text:
Promotional Strategy
Estimated Class Time:
About 45 minutes
Preparation/Materials:
None needed
Exercise:
Divide the class into groups of five and ask them to identify an innovative product that they would
like to promote. Ask each group to identify the activities that they would use to ensure the
462 Part 5 Distribution Decisions
promotion of their product. After ten minutes of discussion, each group presents its findings to the
rest of the class.
Questions for Reflection:
• Do certain activities work better with some products?
• Is relying only on technology a good thing? What about the importance of interacting with
people in real time and real situations?
Retail Atmospherics
Purpose:
To help your students identify the components of effective retail atmospherics
Background:
While we all respond—positively or negatively—to the atmosphere of retail stores, many students
Relationship to Text:
Store Atmospherics
Estimated Class Time:
About 15 minutes
Preparation/Materials:
None needed
Exercise:
Ask your students to identify local businesses that have standout retail atmosphere. Encourage
them to consider both positive and negative examples and to be as specific as possible about
what works and what doesn’t. You may want to remind them that the effectiveness of a retail
• Your classroom
• Your college or university campus
• Music store
• Vintage clothing store
• Office supply store
• Pancake restaurant
• Toy store
Questions for Reflection:
Chapter 15 Retailers, Wholesalers, and Direct Marketers 463
.
• How are atmospherics perceived differently across cultures? Why?
• Are great atmospherics enough for a competitive advantage? Why? (Think Victoria’s Secret,
Hooters, Bath and Body Works, etc.)
Vending Machines
Purpose:
To highlight the role of vending in direct marketing
Background:
Traditionally, vending machines in the U.S. have carried low end products like snack foods and
soft drinks.
Relationship to Text:
Automatic Merchandising
Estimated Class Time:
About 15 minutes
Preparation/Materials:
None needed
Exercise:
Ask your students if any of them have encountered surprising vending machines abroad. (With a
little encouragement, students from Europe and Asia often offer great examples). Then, share
with them that Japan, in particular, has used vending machines for a wide variety of merchandise:
A few examples: bags of rice, used underwear (odd!), vegetables, short anime films, religious
stickers, and beer.
Questions for Reflection:
• What are the potential downsides of automatic merchandising?
• How might technology change the vending industry in the future?