Chapter 16 – Managing Retailing,

Wholesaling and Logistics

Prepared By:
Sujay Soni – Roll no. 25
R. K. Singh – Roll no. 32

18-1
Successful marketing
strategies requires
integrating retailers,
wholesalers, and
logistical organizations.
What is retailing????
 Retailing covers all the activities involved in the
sale of goods and/or services to final consumers.

 Any organization selling to final consumers –

whether it is a manufacturer, wholesaler or retailers
is called retailer

 It is defined on the basis on purpose of use and not

on the quantity.
1. Convenience of buying

2. Variety of selection

3. Quality of products – freshness, purity, craftsmanship

4. Courtesy of salespersons

5. Integrity – reputation for fairness in dealings

6. Services offered – delivery, credit , returned –goods privileges

7. Value offered for money.

 Convenience Stores – is a convenient place to shop , either centrally
located “downtown” or in the neighborhood. Easy parking, Fast
check out and easy to find products add to the convenience. Such
stores meets the requirement of nearby people. E.g. nearby Grocery
stores

 Shopping Stores – attract customers from greater distances because of

the width and depth of their assortments. Such stores are having
displays, demonstration, information and knowledgeable sales clerk.
E.g V – Mart, Westside etc.

 Specialty Stores – are those form which customers have developed a

strong attraction. Due to the reasons like level of service, selection or
reputation, customers will constantly buy at these stores. E.g
Pantaloon, Raymonds etc.
Product Class Store type

Convenience Shopping Specialty

Convenience Will buy any brand Shop around to find Prefer store. Brand
at most accessible better service may be important
store and/or lower prices

Want some Want to compare Prefer store but

selection but will both products and insist on adequate
settle for stores mixes assortment
Shopping
assortment at most
accessible store

Prefer particular Prefer particular Prefer both store

product but like product but still and product
Specialty place convenience seeking best total
too product and mix
 The image of the retail stores in the mind of
customers is more important than the
products it cater.

 Retailer’s strategy planning must consider

potential customers’ attitude towards both
the product and stores.
 In order to get success in retailing, the retailer must consider the following
facts:
1. Selection of Proper Goods: The first essential condition or the success of a
retailer’s business is that he should be able to select proper goods which can
meet the requirement of his customers. For proper selection he should exercise
his foresight, use his past experience and keep in view the changing fashions.
2. Perfect Knowledge about Goods: A retailer should have through knowledge
about the goods he deals in only then he will be able to satisfy his customers
and answer their questions.
3. Sales Policy: He should adopt the policy of buying in bulk and increase his
sales by satisfying himself with a lower margin of profit instead of charging
higher prices and limiting his sales. By this policy he can also face any local
competition from other retailers in the market.
4. Adequate Capital: Adequate capital is vital for the success of any business. A
retailer should command adequate capital at his disposal because he has to
allow some credit facilities also to his customers.
5. Selection of suitable Business Location: It is very necessary that a
suitable business location should be selected. The place should be easily
accessible to the customers. What should be a suitable location will
depend on the nature of goods he deals in.
6. Necessary Business Education: He should be well versed with the art of
a salesmanship underlined the habits and temperament of his customers.
7. Attractive Display and Advertisement: He should arrange things in an
attractive style as to attract more customers. Goods should be
prominently displayed. He should also advertise.
8. To provide Credit Facility: In modern times providing credit facilities
has also become necessary. For this, the retailer should know that
financial position of his customers and their habits also.
 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.
1. Specialty Shop
2. Departmental Shops
3. Supermarkets
4. Catalogue showroom retailers
5. Discount houses
6. Convenience stores
7. Automatic vending
8. Telephone and mail ordering
9. Door to door Selling
 A limited line store with distinct personality.

 Caters to certain type of customers whom the management

or sales person knows well

 Familiarity simplifies buying, speed turnover, cuts the cost

of obsolescence & style changes of customers.

 Deals in high quality sports good, exclusive clothing or

leather goods”.
 Organized into many separate departments

 Each department is like separate limited line specialty stores

 Vide variety of products

 Provides additional services like credit, goods return and

home delivery.

 Some market segments can be reached through departmental

stores only

 E.g 7 seas mall, Wall mart, More

 Multi products lines

 Price discounts is the cornerstone

 Self service

 Profit comes from high volume sales and not from high
traditional mark ups

 Higher level of convenience.

 E.g Subhiksha, Big – Bazaar, Reliance fresh

 Sells the products out of catalogues & displays

 Tend to focus on well known manufacturers brand.

 E.g. Jewelers showroom, Boutiques, cars showrooms.

 Offers hard goods like cameras, TV appliances at substantial
price cuts.

 Mainly developed to clear the old lots of manufacturers of

non moving items.

 E.g Annual sale of various garment manufacturers.

 Limited assortment (Product Lines)

 Prices are higher than supermarkets

 “Pick up” and “fill in” items like bread, milk, ice cream, beer
etc.

 E.g 6 to Ten shops

 Vending machines are used

 Higher initial cost and considerable operating costs.

 Provides easy access to products

 Mainly used in public places

 E.g Amul, Pepsi, Espresso Coffee. ATMs

 Shopping from any place of convenience, home,
office, gardens etc.
 Mainly used for specialized goods
 Retail stores don’t want to carry the items having
very few customers
 Flourishing in Rural areas where shopping options
are less
 E.g Tele shopping, Asian sky shop.
 Old but effective method
 Cover less than 1% of total retailing
 Meets the needs of Convenience and personal attention
 Useful to force new products in markets
 Expensive method of selling
 Difficulty in contacting is more.
 E.g. Ureka Forbes.
 Target Market
 Product Assortment and Procurement
 Breadth
 Depth
 Product-differentiation Strategy Possibilities
 Feature exclusive national brands that are not available
at competing retailers
 Feature mostly private branded merchandise

 Feature blockbuster distinctive merchandise events

 Feature surprise or ever-changing merchandise

 Feature the latest or newest merchandise first

 Services and Store Atmosphere
 Pre purchase services include accepting telephone
and mail orders, etc.
 Post purchase services include shipping
and delivery, etc.
 Ancillary services include general information,
check cashing, parking, etc.
 Arrangement, lightings, Labelling
 Price Decision
 High-markup, lower volume
 Low-markup, high volume
 Promotion Decision
 Place Decision
 General business districts (Downtown)
 Regional shopping centers
 Community centers
 A location within a larger store
 Benefits available to corporate houses
coming in the retail business are
 Economies of Scale

 Huge investment

 Brand name

 Qualified Staff

 Market details in depth

18-27
 Always develop the retailing marketing
strategy keeping in mind the needs and
mind set of Indian Women.

 78% of retailing business is done by women

and balance 22% of retailing is influenced
by women in one or other aspect.
Wholesalers are primarily engaged in buying
merchandise for resale to retailers, industrial ,
commercial, institutional users, export, or acting as
agents in such transactions.
 Selling and promoting: Wholesalers’ sales forces help manufacturers reach
many small customers at a low cost. The wholesaler has more contacts and is
often more trusted by the buyer than the distant manufacturer.
 Buying and Assortment Building: Wholesalers can select items and build
assortments needed by their customers, thereby saving the consumers much
work.
 Bulk Breaking: Wholesalers save their customers money by buying in carload
lots and breaking bulk.
 Warehousing: Wholesalers hold inventories, thereby the inventory costs and
risks of suppliers and customers.
 Transportation: Wholesalers can provide quicker delivery to buyers because
they are closer than the producers. Wholesalers make transportation
arrangement from the premises of manufacturers to their godowns and from
their godowns to the retail stores. They often maintain their own fleet of
vehicles for this purpose.
 Financing: Wholesalers finance their customers by giving credit, and
they finance their suppliers by ordering early and paying bills on time,
They generally purchase goods in cash basis from the manufacturers
and sometimes also given advance to the manufacturers. Thus, the
manufacturers need not wait till their products are sold. The
wholesalers help the retailers by selling the goods on credit.
 Risk Bearing: Wholesalers absorb risk by taking title and bearing the
cost of theft, damage, spoilage, and obsolescence. These risks may
occur on account of change in prices and demand spoilage of goods
and bad debts.
 Market Information: Wholesalers give information to suppliers and
customers about competitors, new products and price development.
 Concentration on production
 Helpful in Large Scale Production
 Distribution Facilities
 Helpful in Demand Analysis and Forecasting
 Financing
 Warehousing Facilities
 Advantage of Advertisement
 Help in price determination
 Purchasing facilities
 Low Inventory
 Risk Taking
 Financial Assistance
 Information about new products
 Benefits of Specialization
 Stability in Prices
 Transport Facility
 Consultancy Services

18-33
Based on the criterion of taking title of goods, Wholesalers can
be divided into two types:

1.Merchant Wholesalers: own (take title to) the goods they sell. It
actually owns –“takes title to”- for some period of time before
selling to its customers

2.Agent middlemen: are wholesalers who do not own the goods they
sell. Their main purpose is to help in buying and selling. They
usually provide even fewer functions than the limited function
wholesalers. In certain trades, however they are extremely valuable.
They may operate at relatively low cost sometimes 2 to 6 percent of
their selling price.
A. Service Merchant Wholesalers

The categories under this are:

1.General merchandise wholesalers- carry a wide variety of non perishable

items such as hardware, electrical supplies, plumbing supplies, furniture,
drugs, cosmetics and automobile equipment.

2.SingleLine (or general line) Wholesalers- Carry a narrower line of

merchandise than general merchandise wholesalers. For example, they
might carry only groceries, or wearing apparel, or certain types of industrial
tools or supplies.

3.Specialty
Wholesalers- carry a very narrow range of products. A consumer
goods specialty wholesaler might carry only health foods or oriental foods
B. Limited Function wholesalers: Provides only some wholesaling functions.
E.g. some functions like Anticipate needs, carries stock, Delivery goods,
Grant credit, Provides information & advice.
 Drop shippers- own the goods and they sell but do not actually handle,
stock or deliver them. They get orders from wholesalers, retailers or
industrial users and pass these orders on to producers. As drop shippers do
not have to handle goods their operating costs are lower.
 Truck Wholesalers- specialize in delivering goods which they stock in
their own truck. Handling perishable products in general demand –
tobacco, candy potato chips, and salad dressings, truck wholesalers may
provide almost the same functions as full service wholesalers.
 Mail order wholesalers- sell out of catalogs which may be distributed
widely to smaller industrial customers or retailers. These wholesalers
operate in the hardware, jewelry, sporting goods, and general merchandise
lines.
1. Manufacturer’s Agent sells similar products for several non competing
manufacturers for a commission on what is actually sold. Such agents work
almost as members of each company’s sales force but they are really independent
middlemen. Manufacturer’s agents account for more than half of all agent
middlemen,
2. Brokers bring buyers and sellers together. Brokers usually have a temporary
relationship with the buyer and seller while a particular deal is negotiated. Their
“product” is information about what buyers need and what supplies are available.
They aid in buyer seller negotiation. If the transaction is completed, they earn a
commission from whichever party hired them.
3. Commission merchants handle goods shipped to them by seller, complete the sale
and send the money minus their commission to each seller. Commission
merchants are common in agricultural markets where farmers must ship to big
city central markets. They need someone to handle the goods there as well as to
sell them.
4. Selling agent take over the whole marketing job of manufacturers not just the
selling function. A selling agent may handle the entire output of one or more
producers even competing producers with almost complete control of pricing.
Wholesaler marking functions

 Target Market
 Product Assortment and Services

 Price Decision

 Promotion Decision

 Place Decision
Market Logistics

 It includes planning the infrastructure to

meet demand,
 Implementing and consulting the physical
flow of materials to destination at profit.
Market Logistics = Physical distribution +
Material management + Material Flow
System
 Market Logistics

 Supply Chain Management (SCM):-

“SCM starts before physical distribution, it means strategically
procuring the right inputs (raw materials, components and
capital equipments), converting them efficiently into finished
products and dispatching them to final destinations.”
Market Logistics
 Market logistics planning has four steps:
 Deciding on the company’s value
proposition to its customers
 Deciding on the best channel design and
network strategy for reaching the customers
 Developing operational excellence in sales forecasting, warehouse
management, transportation management, and materials
management
 Implementing the solution with the best information systems,
equipment, policies, and procedures
 Market Logistics

 Integrated logistics systems (ILS)

ILS = Conventional LS + IT

e.g. Bar code system, Satellite tracking etc.

 Market Logistics

 Market-logistics Objectives
“Getting right goods to the right places at the right
time for the least cost”

> Customer service = 1/ Distribution cost

Market Logistics

 Market-logistics Decisions
1. Order Processing
 Order-to-payment cycle
2. Warehousing
 Storage warehouses- Near production unit, long
period of time
 Distribution warehouses- near service point, for
short period of time
Market Logistics

3. Inventory
 Inventory cost increases at an accelerating rate as
the customer service level approaches 100%
 Order (reorder) point
 Order-processing costs
 Inventory-carrying costs
Figure 18.2: Determining Optimal Order Quantity
Market Logistics

 Just-In-Time production (JIT)

4. Transportation
 Modes
 rail
 Road
 Shipping
 Pipeline
 Train-ship
 Air-truck
 Containerization- putting the goods in boxes to easy the
transportation
The 1-800-Flowers.com site makes
online ordering easy
Market Logistics

 Organizational Lessons
 Companies should appoint a senior vice president of
logistics to be the single point of contact for all
logistical elements
 The senior vice president of logistics should hold
periodic meetings with sales and operations people
to review inventory, etc.
 New software and systems are the key to achieving
competitively superior logistics performance in the
future