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Chapter 14

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Chapter 14- Wholesaling, Retailing, and Physical Distribution - CHANNEL OF DISTRIBUTION/ MARKETING CHANNEL is a sequence of marketing organizations that directs a product from the producer to ultimate user -MIDDLE MAN/ MARKETING INTERMEDIARY: a marketing organization that links a producer and a user within a marketing channel. Concern with transfer of ownership of products - MERCHANT MIDDLEMAN: actually takes title to products by buying them - FUNTIONAL MIDDLE MAN: helps in transfer of products but does not take title to the products Channels for Consumer Products - Producer to consumer (direct channel) - Producer to Retailer to Consumer - a retailer is a middleman that buys from producers or other middlemen and sells to customers - Producer to Wholesaler to Retailer to Consumer - a wholesaler is a middleman that sells products to other firms. These firms may be retailers industrial users, or other wholesalers - Producer to Wholesaler to Retailer to Consumer - agents are functional middlemen that do not take title to products and that are compensated by commissions paid by producer MARKET COVERAGE - Intensive Distribution: use of all available outlets for a product. Producer wants to give its product widest possible exposure in marketplace - Selective Distribution: only a portion. Ex: Best buy - Exclusive Distribution: use of a single retail outlet. Supply-chain management: long-term partnership among channel members working together to create a distribution system that reduces inefficiencies, costs and redundancies while creating a competitive advantage and satisfying customers. Category Management: retailer ask a supplier in a particular category how to stock shelves Vertical Channel Integration: the combining of two or more stages of a distribution channel under a single firm’s management Vertical Marketing System: a centrally managed distribution channel resulting from vertical channel integration Three types: Administered (one of channel members dominates other members perhaps b/c of size), Contractual (defined by contracts or other legal measures), Corporate (actual ownership is the vehicle by which production and distribution are joined. Wholesalers’ Services to Retailers - wholesalers help retailers by buying in large quantities and then selling to retailers in smaller quantities by delivering goods to retailers - also provides: promotion (major source of display materials) , market information (they accumulate information about consumer demand, prices, supply conditions, new developments within trade), financial aid Wholesalers’ Services to Manufacturers

- Providing an instant sales force, reducing inventory costs, assuming credit risks, furnishing market information Three types of Wholesalers: Merchant Wholesalers: middle man that purchases goods in large quantities and then sells them to other wholesalers or retailers and to institutional, farm, government, professional, or industrial users. - full-service wholesaler - general-merchandise wholesaler - limited-line wholesaler: stocks only a few product lines, but carries numerous product items within each line - specialty-line wholesaler - limited-line wholesaler Commission merchants (a middle man that carries merchandise and negotiates sales for manufacturers, agents (a middle man that expedites exchanges, represents a buyer or a seller, and often is hired permanently on a commission bases, and brokers (a middle man that specializes in a particular commodity. Usually temporary) Manufacturers’ sales branch and sales offices Manufacturer’s sales branch Manufacturer’s sales office Independent retailer: firm that only operates one retail outlet Chain retailer: company that operates more than one retail outlet. Usually buy merchandise in larger quantities Department Stores: large retail that employs 25 people + and sells at least home furnishing, appliances, family apparel, and household linens and dry goods. Ex: Sears, JC Penny Discount Stores: self-service general-merchandise outlet that sells product at lower-than usual prices ex: K Mart, Wal-Mart, Target Catalog Showroom: retail outlet that displays well-known brands and sells them at discount prices through catalogs within the store Warehouse Showroom: a large low-cost building with a large on premises inventory and minimal service Convenience Store: small food store that sells a limited variety of products but remains open well beyond normal hours Supermarket: is a large self-service store that sells primarily food and household products Superstore: a large retail store that carries not only food and nonfood products ordinarily found in supermarkets, but also additional product lines Warehouse Clubs: a large-scale members-only establishment that combines features of cash-andcarry wholesaling with discount retailing. Sales volume is 4-5 times that of a typical department store. Ex: Costco Traditional Specialty Stores (limited line retailers): carries a narrow product mix with deep product lines Single line retailers: if they carry depth in one particular category. Small retail store. Ex: Gap. Radio Shack, Foot Locker Off-Price Retailers: is a store that buys manufacturers’ seconds, overruns, returns, and off-season merchandise at below-wholesale prices and sells them to customers at deep discounts. Sells limited lines of national-brand and designer merchandise, usually clothing, shoes, or housewares. Ex: T.J Max

Category Killers: very large specialty store that concentrates on a single product line and competes on the basis of low prices and product availability. Ex: Home Depot, Best Buy, Toy’s R Us Nonstore retailing: a type of retailing whereby consumers purchase products without visiting a store. Uses direct selling, direct marketing, and vending machines Direct Selling: marketing of products to customers through face-to face sales presentations at home or in the workplace. “door-to-door” selling. Instead of that, they identify customers by mail. Telephone, internet, or at shopping malls and then set up appointments. “party plan”: one customer will act as a host and invite friends and coworkers to view merchandise in a group setting where the sales person demonstrates the products. Advantage= demonstrate the product in the customer’s homes. Very expensive form of retailing. Direct Marketing: use of telephone, internet, and nonpersonal media to communicate product and organizational information to customers who then can purchase products via mail, telephone, or the internet. Can occur through Catalog Marketing, direct-response marketing, telemarketing, television, home shopping and online marketing. Catalog Marketing: customers select through catalog and place order by mail, telephone or internet Direct-response marketing: a type of marketing in which a retailer advertises a product and makes it available through mail, telephone, or online orders. ex: tv commercials, newspaper, magazines, billboards Telemarketing: related to phone. Television home shopping: presents products to tv viewers who can buy them at toll-free number and paying with credit card. Most popular = jewelry Online Retailing: makes products available to buyers through computer connections Automatic Vending: use of machines to dispense products. Less than 2% of all retail sales. Planned shopping center is one of four types: lifestyle, neighborhood, community, or regional Lifestyle Shopping Center: is a shopping center that has open-air-environment shopping center with upscale chain specialty stores. Emphasis on architecture. Mostly found in affluent neighborhoods. Neighborhood shopping center: consists of several small convenience and specialty stores. Might include small grocery stores, drugstores, gas stations, and fast foods. Serve customers less than 10 min a way. Community Shopping Center: includes one or two department stoes and some specialty stores, along with convenience stores. Attracts consumers from longer distances. Regional Shopping Center: containing large department stores, numerous specialty stores, restaurants, movie theaters and sometimes even hotels. Physical Distribution: all those activities concerned with the efficient movement of products from producer to the ultimate user. Includes: Inventory Management, Order processing, warehousing, materials handling, and transportation Inventory Management: process of managing inventories in such a way as to minimize inventory costs, including both holding costs and potential stock out costs Holding costs: costs of storing products until they are purchased Stock out costs: are costs of sales lost when items are not in inventory

Order Processing: activities involved in receiving and filling customer’s purchase orders Warehousing: involved in receiving and storing goods and preparing them for reshipment Includes: receiving goods, identifying goods, sorting goods, dispatching goods to storage, holding goods, recalling, picking and assembling goods, dispatching shipments -generally, only companies that deal in large quantities of goods can justify private warehouses. Materials Handling: actual physical handling of goods in warehouses as well as during transportation Carrier: a firm that offers transportation services Common carrier: available to all shippers Contract carrier: available to one or several shippers. Do not serve general public Private carrier: owned and operated by the shipper Freight forwarders: shippers can hire these agents to handle its transportation. They pick up shipments from shipper, ensure that goods are loaded on selected carriers, and assume responsibility for safe delivery of the shipments to their destinations 6 major criteria used for selecting transportation: Cost, speed, dependability, load flexibility, accessibility, frequency Railroads, Trucks, airplanes, waterways, pipelines

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