Marketing Management, 12/e

A South Asian Perspective

16
Managing Retailing,
Wholesaling, and Logistics

Kotler

Koshy

Keller

Jha

Chapter Questions
What major types of marketing
intermediaries occupy this sector?
What marketing decisions do these
marketing intermediaries make?
What are the major trends with marketing
intermediaries?

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Retailing

Includes all the activities involved in

selling goods or services directly
to final consumers for personal,
nonbusiness use.

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The following kinds of retail formats are

found in India:

Mom-and-pop stores: These are generally family-owned businesses catering to small sections of society. They
are small, individually run and handled retail outlets.

Category killers: Small specialty stores have expanded to offer a range of categories. They have widened their
vision in terms of the number of categories. They are called category killers as they specialize in their fields, such
as electronics (Best Buy) and sporting goods (Sport Authority).

Department stores: These are the general merchandise retailers offering various kinds of quality products and
services. These do not offer full service category products and some carry a selective product line. K Raheja's
Shoppers Stop is a good example of department stores. Other examples are Lifestyle and Westside. These
stores have further categories, such as home and dcor, clothing, groceries, toys, etc.

Malls: These are the largest form of retail formats. They provide an ideal shopping experience by providing a mix
of all kinds of products and services, food and entertainment under one roof. Examples are Sahara Mall, TDI Mall
in Delhi.

Specialty Stores: The retail chains, which deal in specific categories and provide deep assortment in them are
specialty stores. Examples are RPG's Music World, Mumbai's bookstore Crossword, etc.

Discount stores: These are the stores or factory outlets that provide discount on the MRP items. They focus on
mass selling and reaching economies of scale or selling the stock left after the season is over.

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Hypermarkets/ Supermarkets: These are generally large self-service outlets, offering a variety
of categories with deep assortments. These stores contribute 30% of all food and grocery
organized retail sales. Example: Big Bazaar.

Convenience stores: They are comparatively smaller stores located near residential areas. They
are open for an extended period of the day and have a limited variety of stock and convenience
products. Prices are slightly higher due to the convenience given to the customers.

E-tailers: These are retailers that provide online facility of buying and selling products and
services via Internet. They provide a picture and description of the product. A lot of such retailers
are booming in the industry, as this method provides convenience and a wide variety for
customer. But it does not provide a feel of the product and is sometimes not authentic. Examples
are Amazon.com, Ebay.com, etc.

Vending: This kind of retailing is making incursions into the industry. Smaller products such as
beverages, snacks are some the items that can be bought through vending machines. At present,
it is not very common in India.

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Functions Performed by Retailers

In the process of acting as a link between the wholesaler (or the manufacturer) and the
consumer, a retailer performs many functions:
1. Buying and Assembling:
It has been said that a retailer stocks wide variety of products to meet the requirements of a large
number of customers. For this purpose, the retailer has to assemble products of different
manufacturers from different wholesalers through the process of buying. In buying these products
he has to be cautious. He has to find out the best and cheapest source of supply. Then he has to
select only such of the goods offered which would suit the need of his customers. He must
purchase only in quantities enough to meet the demands of his customers.
2. Warehousing and storing:
Products thus assembled have to be stored by the retailer so that they are held in reserve stocks
out of which consumers requirements are met without any interruption by selling in small
quantities.
3. Selling:
The ultimate purpose of retailing business is to sell these products to the consumers. Though a
retailer is sometimes referred to as buying agent of consumers, producers and manufacturers
regard retailer as a means of dispersing goods to the market and drawing income into their hands
so that they can continue their business of production.

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4. Assumption of Risk:
The retailer has to bear the risk of physical deterioration of goods and fall in value. A retailer has to
stock goods in anticipation of demand from his customers. This stock must always be sufficient to
meet any demand from the customers. This fact involves risk to the extent of the stocks held by
any retailer. Firstly, the products stored are subject to the usual risks of flood and other natural
calamities. Secondly, there are the risks of flood and other natural calamities. Secondly, there are
the risks of spoilage and deterioration due to the very nature of goods. Then there is the risk of
change in fashion.
5. Grading and Packing:
Retailers have to sort out in different lots goods or products left ungraded by the producer or the
wholesaler. Also, they must make arrangements for proper packing of goods which are sold loose.
6. Financing:
Often retailers have to grant credit to consumers. Credit sale in effect means facilitating the flow of
products through the marketing channel to its ultimate goal. Thus retailers contribute in financing
the marketing process.
7. Supply of Market Information:
Retailers, being in touch with the consumers, are most favourably situated to study consumers'
behavior, changes in the tastes, fashions and demand etc. Thus they collect valuable information
pertaining to the problems of marketing.
8. Advertising:
Retailers display goods in their stores.

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Table 16.1 Major Retailer Types

Specialty store
Department store
Supermarket
Convenience store

Discount store
Off-price retailer
Superstore
Catalog showroom

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Levels of Retail Service

Self-service
Self-selection
Limited service
Full service

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Nonstore Retailing
Direct selling
Direct marketing
Automatic vending
Buying service

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Major Types of Corporate Retail

Organizations
Corporate chain store
Voluntary chain
Retailer cooperative
Consumer cooperative
Franchise organization
Merchandising conglomerate

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Retailers Marketing Decisions

Target market
Product assortment
Service/store atmosphere
Price
Communication
Location

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Retail Category Management

Define the category
Figure out its role
Assess performance
Set goals
Choose the audience
Figure out tactics
Implement the plan
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Retailer Services Mix

Prepurchase services
Postpurchase services
Ancillary services

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Location Decision
Central business areas
Downtown shopping centers
Community shopping centers
Neighborhood markets
Location within a larger store

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Indicators of Sales Effectiveness

Number of people passing by location
Percentage who enter store
Percentage of those who enter who also
buy
Average amount spent per sale

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Trends in Retailing
New retail forms and combinations
Growth of intertype competition
Competition between store-based and nonstore-based retailing
Growth of organized retailers
Decline of middle market retailers
Growing investment in technology
Global presence of major retailers

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Wholesaling

Wholesaling is the buying/handling of

products and services and their
subsequent resale to institutional users
and in some cases to final consumers.

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Following functions are performed by

wholesalers:

(i) Enable manufacturers and service providers to distribute locally

without making customer contacts.
(ii) Provide a trained sales force.
(iii) Provide marketing and research supports for manufacturers,
service providers and retail or institutional consumers.
(iv) Purchase large quantities, thus reducing total physical
distribution costs.
(v) Provide warehousing and delivery facilities.
(vi) Provide credit facilities for retail and institutional customers,
whenever required.
(vii) Provide adjustments for defective merchandise.
(viii) Take risks by being responsible for theft, deterioration and
obsolescence of inventory. Wholesalers who take title of ownership
of products and services usually perform all the above tasks.

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Types of Wholesaling:

(i) Manufacturer Wholesaling:

In this case a firm has its own sales offices and wholesale activities are done at these offices. Sales office may be
conveniently located in a market place. This type of arrangement is preferred when the manufacturer desires
more control on marketing and/or customers who may be few in number and each is a key account.
(ii) Merchant Wholesaling:
Merchant wholesalers buy, take title and take possession of products for further resale. Merchant wholesalers
may perform full range distribution tasks. They provide credit, store and deliver products, after merchandising and
promotion assistance, have a personal sales force, offer research and training support and provide all necessary
information to customers and provide installation and after-sales services. This class is very commonly prevalent
in durable consumer goods, pharmaceuticals and grocery items etc. Merchant wholesalers demand higher
compensation for performing large number of functions.
(e) Agents and Brokers:
They perform various wholesale tasks, but do not take title of products, unlike merchant wholesalers. Agents and
brokers enable a manufacturer to expand sales volume because of their special expertise and experience in the
field.
Such agents and brokers may work for many firms and carry non competitive and complementary products in
exclusive territories. Agents have little say on marketing and pricing. This class is prevalent in steel, cement,
automobile and white goods. Voltas Ltd. works as wholesale agent for many white goods manufacturers.

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Wholesaling Functions

Selling and promoting

Buying and
assortment building
Bulk breaking
Warehousing

Transportation
Financing
Risk bearing
Market information
Management services
and counseling

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Major Wholesaler Types

Merchant
Full service
Limited service

Brokers and agents

Manufacturers
Specialized

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Wholesalers Marketing Decisions

Target market
Product assortment
Price
Promotion
Place

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Market Logistics Planning

Deciding on the companys value
proposition to its customers
Deciding on the best channel design and
network strategy
Developing operational excellence
Implementing the solution

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Market Logistics Decisions

How should orders be handled?
Where should stock be located?
How much stock should be held?
How should goods be shipped?

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Transportation Factors
Speed
Frequency
Dependability
Capability
Availability
Traceability
Cost

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