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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:
1. Broker
Class Exercise 3: Selling Products and Services
In this chapter, you learned about a variety of means for selling products and services. Each form of
retailing, direct marketing, or wholesaling has advantages and disadvantages based on product type and
organizational goals.
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 and
364 Chapter 16: Retailing, Direct Marketing and Wholesaling
Answer the following questions:
9. What form of selling is best for each idea? For example, is retailing a good means of selling this
product/service? If so, where should the shop be located?
Chapter 16: Retailing, Direct Marketing and Wholesaling 365
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?
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ANSWERS TO DISCUSSION AND REVIEW QUESTIONS
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?
Discount stores are self-service, general merchandise outlets which regularly offer brand-name
merchandise at low prices. Department stores are large retail organizations characterized by wide
3. In what ways are traditional specialty stores and off-price retailers similar? How do they
differ?
Traditional specialty retailers and off-price retailers are similar in that both are specialty retailers.
4. What major issues should be considered when determining a retail site location?
Because of its inflexible nature, the location of a retail outlet is one of the most important strategic
issues a retailer must address. Location dictates the limited geographic trading area from which a
Chapter 16: Retailing, Direct Marketing and Wholesaling 367
5. Describe the three major types of traditional shopping centers. Give an example of each type in
your area.
a. Neighborhood shopping centers consist of small grocery stores, gas stations, and fast-food
restaurants. They serve consumers who live within a ten-minute drive from the center. A typical
neighborhood shopping center might have a Safeway supermarket, an Eckerd drugstore, and a
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?
A retail store’s image is a functional and psychological picture in the consumer’s mind. A store must
project an image acceptable to its target market. Seven factors contribute to a retail store’s image:
a. Atmospherics are physical elements in a store’s design that appeal to consumers’ emotions and
encourage them to buy
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7. How is door-to-door selling a form of retailing? Some consumers believe direct-response orders
bypass the retailer. Is this true?
Door-to-door selling is a form of retailing because it involves an exchange with ultimate consumers.
8. If you were opening a retail business, would you prefer to open an independent store or to own
a store under a franchise arrangement? Explain your preference.
There are advantages to both owning an independent store and owning a store under a franchise
9. What services do wholesalers provide to producers and retailers?
For producers, wholesalers serve as an extension of the producer’s sales force. Wholesalers also
fastest delivery at the lowest cost, they create time and place utilities.
8. What is the difference between a full-service merchant wholesaler and a limited-service
merchant wholesaler?
A merchant wholesaler is an independently owned business that takes title to goods, assumes risks
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 wholesale merchants and commission merchants as agents.
Drop shippers are classified as wholesale merchants because they take title and assume risk of
9. Why are manufacturers’ sales offices and branches classified as wholesalers? Which
independent wholesalers are replaced by manufacturers’ sales branches? By sales offices?
Manufacturers’ sales offices and branches are classified as wholesalers by the U.S. Census of
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ANSWERS TO APPLICATION QUESTIONS
1. Juanita wants to open a small retail store that specializes in high-quality, high-priced children’s
clothing. What types of competitors should she be concerned about in this competitive retail
environment? Why?
Juanita is opening a specialty store (with a narrow and deep assortment). Because Juanita is selling
2. Location of retail outlets is an issue in strategic planning. What initial steps would you
recommend to Juanita (see Marketing Application 1) when she considers a location for her
store?
When choosing a location, Juanita should evaluate the relative ease of movement to and from the site,
3. Visit a retail store you shop in regularly or one in which you would like to shop. Identify the
store, and describe its atmospherics. Be specific about both exterior and interior elements, and
indicate how the store is being positioned through its use of atmospherics.
4. Contact a local retailer you patronize, and ask the store manager to describe the store’s
relationship with one of its wholesalers. Using your text as a guide, identify the distribution
activities performed by the wholesaler. Are any of these activities shared by both the retailer
and the wholesaler? How do these activities benefit the retailer? How do they benefit you as a
consumer?
5. Based on the information provided in the question text, if you were considering becoming a Five
Guys franchisee in your region, what would be the best location?
Student answers will vary, but they should choose a location with a high volume of both pedestrian
370 Chapter 16: Retailing, Direct Marketing and Wholesaling
ANSWERS TO INTERNET EXERCISES
Walmart
Walmart provides a website where customers can shop for products, search for a nearby store, and even
preorder new products. The website lets browsers see what is on sale and view company information.
Access Walmart’s company website at www.walmart.com.
1. How does Walmart attempt to position itself on its website?
Walmart’s “Save money. Live better.” slogan is reflected everywhere on its website. Every page and
2. Compare the atmospherics of Walmart’s website to the atmospherics of a traditional Walmart
store. Are they consistent? If not, should they be?
Atmospherics are the physical elements in a store’s design that appeal to consumers’ emotions and
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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?
Students’ answers will vary because they have all selected different products, which will be
2. If your product will be sold to the ultimate customer, what type of retailing establishmen t is
most suitable to your product? Consider the product’s characteristics and your target
market’s buying behavior. Refer to Table 16.1 for retailer types
The different types of general merchandise retailing establishments are department store,
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.
The student will have to decide whether a merchant wholesaler, agent, or broker is most suitable
372 Chapter 16: Retailing, Direct Marketing and Wholesaling
COMMENTS ON THE CASES
VIDEO CASE 16.1: 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 Freemont, Maine, provides
a variety of customer services as well as 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?
Direct marketing is the use of the telephone, Internet, and nonpersonal media to communicate product
2. Do you think L.L. Bean’s website will ever entirely take the place of its mail-order catalog?
Why or why not?
Student answers will vary based on how they feel about actual paper materials. However, L.L. Bean’s
3. What type(s) of location do you think would be most appropriate for future L.L. Bean stores,
and why?
Student answers will vary, but the most common answers will probably be:
Chapter 16: Retailing, Direct Marketing and Wholesaling 373
CASE 16.2: TESCO FRESHENS UP FRESH & EASY’S RETAIL
STRATEGY
Summary
This case examines Tesco’s foray into the U.S. market with its Fresh & Easy neighborhood markets.
What makes Fresh & Easy stand out is its moderate size—between a small local convenience store
and a very large supermarket. These stores stock their shelves with the kinds of healthy options
people need to make their daily meals. The idea was based in sound market research, but the most
recent recession was timed such that the Fresh & Easy brand did not take off as Tesco had hoped.
Fresh & Easy also found itself competing with Trader Joe’s, Whole Foods, and other fierce rivals.
Questions for Discussion
1. What type of store is Fresh & Easy? Knowing that Fresh & Easy falls into this classification
of retailers, what does that say about Fresh & Easy’s marketing efforts?
Fresh & Easy falls somewhere between a convenience store and a supermarket. The retailer
offers fresh foods not often found at convenience stores, but does not have the wide variety that a
2. Based on Fresh & Easy’s retail positioning and marketing situation, what types of loc ations
should it seek out as it expands its store network?
Because Fresh & Easy stores are relatively small and are positioned as convenience stores with
3. A few grocery retailers offer online shopping for customers’ convenience. Should Fresh and
Easy offer online shopping? Explain.
Students should consider the advantages and disadvantages of adding this option for customers in
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STRATEGIC CASE 6: GAMESTOP PLAYS TO WIN
Summary
GameStop is a popular videogame retail chain with outlets in 17 different countries. GameStop was
founded in 1996 and has undergone aggressive expansion to reach its current tally of nearly 6,500
stores. Its brick-and-mortar stores are complemented by a website where customers can order or
download games and register for tournaments. Like many retailers, GameStop brings in most of its
revenues from holiday shopping during the last few months of each year. One of the things that make
GameStop so popular with its customers is its game trade-in policy, wherein customers can receive
an in-store credit for their old games. GameStop has excelled at anticipating customers’ desires.
Questions for Discussion
1. What role does physical distribution play in GameStop’s retailing strategy?
GameStop relies on a sophisticated physical distribution system to get new games to its stores (or
2. Why would video game marketers such as Sony prefer dual distribution? What does this
mean for GameStop’s marketing efforts?
Sony and other video-game marketers use dual distribution because they want their products
3. How does GameStop create time, place, possession, and form utility for customers who want
to buy used video games?
GameStop creates time utility by having used video games available when customers want them
4. Do you think GameStop should market used video games via vending machines placed on
college campuses? Why or why not?
Students who believe GameStop should market used games via vending machines in college
Chapter 16: Retailing, Direct Marketing and Wholesaling 375
INSTRUCTIONS FOR ROLE-PLAY TEAM CASE
ROLE-PLAY TEAM CASE EXERCISE 6: REDRIVERSHOPS.COM
This role-play team case exercise is designed to simulate actual marketing decision making in the real
world. Students take on assigned roles and then participate in a team discussion of the case.
Preparation
Break the class into teams of 5. The entire team should read the Background section.
Each student will take on a role of a particular employee within the organization. Even though all of the
roles are printed in the textbook, each student should focus on only his/her assigned role and represent
Team Meeting
Students should try to accurately represent the motivations and interests of their individual roles during a
team discussion (15-45 minutes depending on class activities). Teams should discuss each of the issues in
the case and complete any activities mentioned in the Background section.
The issues for RRS.com include:
• RedRiverShops.com has yet to show a profit due to high start-up costs and faces intense
competition from Amazon.com and eBay.
This case will require students to complete the following activities:
• Discuss the advantages, disadvantages, or even the feasibility of merging RSS.com with
Class Discussion (optional)
After the team meetings, instructors may choose to have teams discuss their findings and solutions