Retailing and wholesaling – Principles of Marketing

Retailing and wholesaling

Retailing includes all the activities involved in selling goods or services directly to final consumer for their personal, non-business use. Retailers are businesses whose sales come primarily from retailing. Retailing connects brands to consumers in the final steps (“last mile” of buying process). Shopper marketing means using in-store promotions and advertising to extend brand equity to the “last mile” and encourage favourable hi-store purchase decisions.

There are different types of retailers. Self-service retailers serve customers who are willing to perform part of the service. Limited-service retailers provide some assistance in the service process, while full-service retailers assist customers in every step of the buying process.




Retailers can also be classified by the length and breadth of their product line.

1. Speciality store: a retail store that carries a narrow product line with a deep assortment within that line.
2. Department store: a retail organisation that carries a wide variety of product lines. Each line is operated as a separate department managed by specialist buyers or merchandisers.
3.  Supermarkets are large, low-cost, low-margin, high-volume and self-service stores that carry a wide variety of grocery and household products.
4. Convenience stores are mall stores, located near residential areas and that carry a limited line of high-turnover convenience goods.
5. Superstore: a store much larger than a regular supermarket that offers a large assortment of routinely purchased food products, non-food items and services.
6. Category killer: a giant speciality store that carries a very deep assortment of a particular line and is staffed by knowledgeable employees.
7. Service retailers: a retailer whose product line is actually a service.

Retailers can also be classified according to the price they charge for their goods and services.

• Discount store: a retail operation that sells standard merchandise at lower prices by accepting lower margins and selling at higher volume.
• Off–price retailers are retailers that buy at less-than-regular wholesale price and sell at less than retail.
• Independent off-price retailers are off-price retailers who are either independently owned or is a division of a larger retail corporation.
• Factory outlet: an off-price retailing operation that is owned and operated by a manufacturer and normally carries the manufacturer’s surplus discontinued or irregular goods.
• Warehouse clubs: an off-price retailer that sells a limited selection of brand name grocery items, appliances, clothing and a hodgepodge of other goods at deep discounts to members who pay annual membership fees.

Chain stores are two or more outlets that are commonly owned and controlled. Their size allows for buying in large quantities at lower prices. A franchise is a contractual association between a manufacturer, wholesaler or service organisation and independent businesspeople, who buy the right to own and operate one or more units in the franchise system. Retailers must first segment and define their target market, before deciding upon how to differentiate and position themselves in these target markets. Retailers must decide upon three major product variables: product assortment, services mix and store atmosphere. The product assortment should differentiate the retailer from competitors. The services mix can help differentiate, while the store’s atmosphere is another unique element to distinguish the retailer.

The price a retailer asks for its product must fit the target market and position of the retailer. Retailers can use all of the five promotion tools to reach their customers, namely: advertising, personal selling, sales promotion, public relations and direct marketing. The place of the products, or location, is vital in retailing success. A shopping centre is a group of retail businesses built on a site that is planned, developed, owned and managed as a unit. A regional shopping centre is large, containing more than 50 to 100 stores. A community shopping centre contains between 15 and 50 retailers. A neighbourhood shopping centre or strip mall generally holds 5 to 15 stores. Power centres are huge unenclosed shopping centres consisting of long strips of retail stores. A lifestyle centre is a smaller open-air mall with upmarket stores.

Trends in retailing

In current times, retailers are dealing with changing lifestyles and fierce competition for customer expenditure. The economic downturn provides a challenge for a lot of retailers. The wheel-of-retailing concept states that new types of retailers usually begin as low-margin, low-price, low-status operations but later evolve into higher priced, higher-service operations, eventually becoming like the conventional retailers they replaced. The rise of mega-retailers also has its influence on the environment, squeezing out small competitors. The growth of non-store retailing via advanced technologies also provides new opportunities and challenges. Retailing technologies have become important as competitive tools. There is also a trend of green retailing, where retailers are adopting environmentally sustainable practices.

Wholesaling

Wholesaling includes all the activities involved in selling goods and services to those buying for resale or business use. A wholesaler is a firm engaged primarily in wholesaling activities. Wholesalers add value by performing one or multiple of the following channel functions:

• Selling and promoting and thereby reaching many small customers.
• Buying and assortment building.
• Bulk breaking by buying in large quantities.
• Warehousing and holding stock.
• Transportation.
• Financing of customers and suppliers.
• Risk bearing.
• Providing market information.
• The management of services and giving advice.

Wholesalers fall into three major groups.

1. Merchant wholesalers are independently owned wholesale businesses that take title to the merchandise it handles. They include full-service wholesalers, who provide a full set of services and limited-service wholesalers who offer less services to their customers. Industrial distributors sell to manufacturers, while wholesale merchants sell primarily to retailers. Cash-and-carry wholesalers carry a limited line of fast moving goods. Drop shippers never carry stock, but select manufacturers who ship the product upon order.
2. Brokers and agents. A broker is a wholesaler who does not take title to goods and whose function is to bring buyers and sellers together and assist in negotiation. An agent is a wholesaler who represents buyers or sellers on a relatively permanent basis, performs only a few functions and does not take title to goods. Selling agents have contractual authority to sell a manufacturer’s entire output. Purchasing agents often have long-term relationships with buyers and make purchases for them.
3. Manufacturers’ sales branches and offices: wholesaling by seller or buyers themselves rather than through independent wholesalers.

Like retailers, wholesalers must also decide upon the product, prices, promotion and place of their services. Today’s wholesalers are facing challenges in the need for greater efficiency and changing needs of customers.