Deck 14: Retailing, Direct Marketing, and Wholesaling

Question 1

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.
Compare the atmospherics of Walmart's website to the atmospherics of a traditional Walmart store. Are they consistent? If not, should they be?

Answer 1

In the traditional time, W started marketing its products and services at a lower rate so as to get higher sales volume at a lesser-profit margin. As a result, W grew and opened up many stores in many different areas. In the earlier period, Wal-Mart was not efficient enough to provide all the brands according to the demands of the customers but the recent website shows all the products as demanded and required by the customers.
The website of W shows different products with different brands and shows deals like value of the day, discount offers, one to one offers etc. The website also helps the customers to track the order and provide facility to solve queries in case of any through the help desk

Question 2

If you were opening a retail business, would you prefer to open an independent store or own a store under a franchise arrangement? Explain your preference.

Answer 2

Franchising is an arrangement in which people use the name and model of a successful business in exchange for some consideration.
Retail businesses that open under a franchise arrangement are always more successful than independent stores. The owner needs only limited capital and can benefit from the experiences gained by other franchisees.
Most franchises are nationally advertised and ensure customer traffic as soon as the store opens. Moreover, in the case of business-related problems, stores under franchise can obtain advice and guidance at hardly any cost.
Despite certain strict terms of contract, like long working hours, employee uniforms, etc., it is better to own a store under franchise than an individual store, as far as profit motive is concerned.

Question 3

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?

Answer 3

In the given case, J opens a small retail store which specializes in high quality, high prices clothes of children she should be concerned about following types of competitors:
• Speciality stores: These stores provide high customer service and specialize in providing variety of high quality products.
• Malls: These are a single outlet offering variety of products under one roof like entertainment, food and beverages, apparel and home items.
• Etailers : This offers facility to order and shop through the help of internet. The merchandise is dropped at customer address.
• Super market: These types of stores are specialized into different range of beverage and food products. They have now widened into fashion, electrical and home products too.
• Independent stores: these stores are direct retail stores of some companies where they offer wide variety of products.

Question 4

What services do wholesalers provide to producers and retailers?

Question 5

L.Bean: Open 24/7, Click or Brick
L.L.Bean, based in Freeport, Maine, began life as a one product firm selling by mail in 1912. Founder Leon Leonwood Bean designed and tested every product he sold, starting with the now-iconic rubber-soled Bean Boot. Today, the catalog business that L.L.Bean began is still going strong, along with 30 U.S. stores and a thriving online retail operation. In addition, L.L.Bean is expanding its retail presence in
Japan and China, where customers are particularly drawn to brand names that represent quality and a distinct personality. The company'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.
Although the award-winning L.L.Bean catalog swelled in size during the 1980s and 1990s, it has slimmed down over the years as the online store has grown. Now, using sophisticated marketing database systems, L.L.Bean manages and updates the mailing lists and customer preferences for its catalogs. For targeting purposes, L.L.Bean creates 50 different catalogs that are mailed to selected customers across the United States and in 160 countries worldwide. The company's computer modeling tools indicate which customers are interested in which products so they receive only the specialized catalogs they desire. Still, says the vice president of stores, "what we find is most customers want some sort of touch point," whether they buy online, in a store, by mail, or by phone.
The company's flagship retail store in Freeport, Maine, like its online counterpart, is open 24 hours a day, 7 days a week, throughout the year. Even on major holidays like Thanksgiving and Christmas, when most other stores are closed, the flagship store is open for business. It stocks extra merchandise and hires additional employees for busy buying periods, as does the online store. Day or night, rain or shine, customers can walk the aisles of the gigantic Freeport store to browse an assortment of clothing and footwear for men, women, and children; try out camping gear and other sporting goods; buy home goods like blankets; and check out pet supplies. Every week, the store offers hands-on demonstrations and how-to seminars to educate customers about its products. Customers can pause for a cup of coffee or sit down to a full meal at the in-store café. Thanks to the store's enormous size and entertaining extras, it has become a tourist attraction as well as the centerpiece of L.L.Bean's retail empire.
L.L.Bean's online store continues to grow in popularity. In fact, online orders recently surpassed mail and phone orders, a first in the company's history, and the company also offers a mobile app for anytime, anywhere access via cell phone. The web-based store is busy year-round, but especially during the Christmas shopping season, when it receives a virtual blizzard of orders-as many as 120,000 orders in a day. Unlike the physical stores, which have limited space to hold and display inventory for shoppers to buy in person, the online store can offer every product in every size and color. Customers can order via the Web and have purchases sent to their home or office address or shipped to a local L.L.Bean store for pickup. This latter option is particularly convenient for customers who prefer to pay with cash rather than credit or debit cards.
At the start of L.L.Bean's second century, its dedication to customer satisfaction is as strong as when Leon Leonwood Bean began his mail-order business so many decades ago. "We want to keep... the customer happy and keep that customer coming back to L.L.Bean over and over," explains the vice president of e-commerce.
Do you think L.L.Bean's website will ever entirely take the place of its mail-order catalog? Why or why not?

Question 6

What is the difference between a full-service merchant wholesaler and a limited-service merchant wholesaler?

Question 7

Distribution decisions in the marketing plan entail the movement of your product from the producer until it reaches the final consumer. An understanding of how and where your customer prefers to purchase products is critical to the development of the marketing plan. As you apply the information in this chapter to your plan, focus on the following issues:
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.
The information obtained from these questions should assist you in developing various aspects of your marketing plan found in the "Interactive Marketing Plan" exercise at www.cengagebrain.com.

Question 8

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 merchant wholesalers and commission merchants as agents.

Question 9

In what ways are traditional specialty stores and off-price retailers similar? How do they differ?

Question 10

Why are manufacturers' sales offices and branches classified as wholesalers? Which independent wholesalers are replaced by manufacturers' sales branches? By sales offices?

Question 11

Location of retail outlets is an issue in strategic planning. What initial steps would you recommend to Juanita (see Application Question 1) when she considers a location for her store?

Question 12

Tesco Freshens Up Fresh Easy's Retail Strategy
Tesco, the U.K. supermarket giant, is hardly a newcomer to international retailing. It's the world's third-largest retailer (behind Walmart and Carrefour) and has nearly a century of experience in its home country. Tesco embarked on a new era of global expansion in 1995 when it opened its first stores in Hungary. Within a few years, the company had stores throughout eastern Europe, as well as in Thailand and South Korea. It has added to its retail empire with new stores in China, Malaysia, India, and Japan.
By the time Tesco ventured across the Atlantic in 2007, its marketing experts had studied the U.S. retail industry for some time. They saw 4,000-square-foot convenience stores at the small end of the store spectrum. In the middle, supermarkets offered a larger assortment of foods and household items in stores of 35,000 square feet or more. At the largest stores, 200,000-square-foot superstores offered even more varieties of food and non-food products. Between these conventional store sizes, Tesco's experts identified an opportunity. "There is a gap between 4,000-square-foot stores and 35,000-square-foot-plus [stores]," explained Tesco's store design and planning director. "In Europe, that gap is filled by discount stores, but in the U.S., this segment is underserved."
Tesco set out to fill the gap with a chain of Fresh Easy neighborhood grocery stores, each about 10,000 square feet in size. The stores would be stocked with high-quality fruits and vegetables, fresh meats, prepared meals under the store brand, and household staples carrying manufacturers' brands. Instead of fancy atmospherics, elaborate displays, and expensive shopper-reward programs, the stores would be simple, self-service, and easy to navigate for in-and-out convenience. The idea was to keep overhead costs down and pass the savings along to customers in the form of low everyday prices.
Originally, Tesco planned to open as many as 1,000 stores in the first five years. It scouted locations in California, Arizona, and Nevada and built a 1.4 million-square-foot distribution center capable of supporting an extensive store network. Even though Tesco operated everything from convenience stores to superstores in other countries, it was creating an entirely new retail brand from scratch and investing $2 billion to make it work. As part of its marketing research, the company built a prototype store inside a California warehouse to test potential shopper reaction. Only then did it finalize the retail design and begin opening stores.
However, Fresh Easy's early results didn't live up to its parent's expectations. With rising unemployment and a deepening recession, consumers were cutting back on spending, even for food and other basics. Competition was another factor. Between supermarkets like Ralph's and Vons, natural-food grocers like Trader Joe's and Whole Foods, and convenience stores like 7-Eleven, the competitive environment was extremely challenging. Still, Tesco's management believed in Fresh Easy's retail positioning and saw long-term profit potential in making its mark in the U.S. market.
One year into its U.S. expansion, Tesco slowed the rate of new-store openings as it fi ne-tuned Fresh Easy's positioning. "After customers found the stores a little sterile, we warmed up the look, adding more graphics," says an official. "Family budgets being under pressure, we introduced more promotions and value packs." In addition, the chain installed higher shelving to increase the number of items available on the selling floor and began experimenting with smaller-size stores.
With these changes in place, Fresh Easy launched its first-ever ad campaign to reinforce the message of fresh foods at low prices and used public relations to spotlight its support of its local communities and environmentally friendly operations. It connected with consumers through videos on YouTube, photos on Flickr, blog posts, and Twitter tweets. The retailer also made a special effort to reach out to Hispanic consumers with a Spanish-language website and Spanish-language advertising. Store by store, it adapted the merchandise mix to include more of the foods and brands favored by Hispanic shoppers in each neighborhood.
Now the U.S. venture is nearing the break-even point as Fresh Easy stores build a loyal customer following. The economy is improving, the chain has shifted its new-store schedule into high gear, and customer feedback is positive. Looking ahead, can Fresh Easy capture the hearts and wallets of enough U.S. shoppers to assure its long-term financial success?
A few grocery retailers offer online shopping for customers' convenience. Should Fresh Easy offer online shopping? Explain.

Question 13

Distribution decisions in the marketing plan entail the movement of your product from the producer until it reaches the final consumer. An understanding of how and where your customer prefers to purchase products is critical to the development of the marketing plan. As you apply the information in this chapter to your plan, focus on the following issues:
Are direct-marketing or direct-selling methods appropriate for your product and target market?
The information obtained from these questions should assist you in developing various aspects of your marketing plan found in the "Interactive Marketing Plan" exercise at www.cengagebrain.com.

Question 14

What major issues should be considered when determining a retail site location?

Question 15

Distribution decisions in the marketing plan entail the movement of your product from the producer until it reaches the final consumer. An understanding of how and where your customer prefers to purchase products is critical to the development of the marketing plan. As you apply the information in this chapter to your plan, focus on the following issues:
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?
The information obtained from these questions should assist you in developing various aspects of your marketing plan found in the "Interactive Marketing Plan" exercise at www.cengagebrain.com.

Question 16

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.

Question 17

What value is added to a product by retailers? What value is added by retailers for producers and ultimate consumers?

Question 18

Distribution decisions in the marketing plan entail the movement of your product from the producer until it reaches the final consumer. An understanding of how and where your customer prefers to purchase products is critical to the development of the marketing plan. As you apply the information in this chapter to your plan, focus on the following issues:
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 information obtained from these questions should assist you in developing various aspects of your marketing plan found in the "Interactive Marketing Plan" exercise at www.cengagebrain.com.

Question 19

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.
How does Walmart attempt to position itself on its website?

Question 20

Describe the three major types of traditional shopping centers. Give an example of each type in your area.

Question 21

Five Guys Burgers and Fries is one of the fastest growing fast-food franchises in the United States. Started as a single burger joint by Jerry Murrell and his four sons-the "five guys"-in Alexandria, Virginia, the company now has more than 1,000 franchised outlets around the nation. Start-up costs for a Five Guys store range from about $150,000 to $300,000. A $25,000 franchising fee must also be paid, and ongoing royalties stand at 6 percent of sales.
Making a fast-food restaurant successful means selecting the right location. Indeed, to recover start-up costs and, of course, generate a profit, getting people through the door is paramount. Franchises like Five Guys, traditional and online retailers, and other types of channel members are all concerned with this idea of traffic. Once conducted almost exclusively by hand using "clickers," traffic is now measured using a variety of electronic and mechanical devices. A great advantage to online retailing is the ability to track online traffic behaviors. In the real world, many consulting companies specialize in measuring pedestrian and vehicular traffic. Most commercial real estate agents and property developers/managers use traffic data.
If you were considering becoming a Five Guys franchisee in your region, what would be the best location? What are the major factors affecting your decision?

Question 22

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?

Question 23

L.Bean: Open 24/7, Click or Brick
L.L.Bean, based in Freeport, Maine, began life as a one product firm selling by mail in 1912. Founder Leon Leonwood Bean designed and tested every product he sold, starting with the now-iconic rubber-soled Bean Boot. Today, the catalog business that L.L.Bean began is still going strong, along with 30 U.S. stores and a thriving online retail operation. In addition, L.L.Bean is expanding its retail presence in
Japan and China, where customers are particularly drawn to brand names that represent quality and a distinct personality. The company'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.
Although the award-winning L.L.Bean catalog swelled in size during the 1980s and 1990s, it has slimmed down over the years as the online store has grown. Now, using sophisticated marketing database systems, L.L.Bean manages and updates the mailing lists and customer preferences for its catalogs. For targeting purposes, L.L.Bean creates 50 different catalogs that are mailed to selected customers across the United States and in 160 countries worldwide. The company's computer modeling tools indicate which customers are interested in which products so they receive only the specialized catalogs they desire. Still, says the vice president of stores, "what we find is most customers want some sort of touch point," whether they buy online, in a store, by mail, or by phone.
The company's flagship retail store in Freeport, Maine, like its online counterpart, is open 24 hours a day, 7 days a week, throughout the year. Even on major holidays like Thanksgiving and Christmas, when most other stores are closed, the flagship store is open for business. It stocks extra merchandise and hires additional employees for busy buying periods, as does the online store. Day or night, rain or shine, customers can walk the aisles of the gigantic Freeport store to browse an assortment of clothing and footwear for men, women, and children; try out camping gear and other sporting goods; buy home goods like blankets; and check out pet supplies. Every week, the store offers hands-on demonstrations and how-to seminars to educate customers about its products. Customers can pause for a cup of coffee or sit down to a full meal at the in-store café. Thanks to the store's enormous size and entertaining extras, it has become a tourist attraction as well as the centerpiece of L.L.Bean's retail empire.
L.L.Bean's online store continues to grow in popularity. In fact, online orders recently surpassed mail and phone orders, a first in the company's history, and the company also offers a mobile app for anytime, anywhere access via cell phone. The web-based store is busy year-round, but especially during the Christmas shopping season, when it receives a virtual blizzard of orders-as many as 120,000 orders in a day. Unlike the physical stores, which have limited space to hold and display inventory for shoppers to buy in person, the online store can offer every product in every size and color. Customers can order via the Web and have purchases sent to their home or office address or shipped to a local L.L.Bean store for pickup. This latter option is particularly convenient for customers who prefer to pay with cash rather than credit or debit cards.
At the start of L.L.Bean's second century, its dedication to customer satisfaction is as strong as when Leon Leonwood Bean began his mail-order business so many decades ago. "We want to keep... the customer happy and keep that customer coming back to L.L.Bean over and over," explains the vice president of e-commerce.
What forms of direct marketing does L.L.Bean employ? Which additional forms of direct marketing should L.L.Bean consider using?

Question 24

Discuss the major factors that help to determine a retail store's image. How does atmosphere add value to products sold in a store?

Question 25

Distribution decisions in the marketing plan entail the movement of your product from the producer until it reaches the final consumer. An understanding of how and where your customer prefers to purchase products is critical to the development of the marketing plan. As you apply the information in this chapter to your plan, focus on the following issues:
If your product will be sold to the ultimate customer, what type of retailing establishment 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 information obtained from these questions should assist you in developing various aspects of your marketing plan found in the "Interactive Marketing Plan" exercise at www.cengagebrain.com.

Question 26

Develop your analytical and communication skills using the Role-Play Exercises online at www.cengagebrain.com.

Question 27

What are the major differences between discount stores and department stores?

Question 28

How is door-to-door selling a form of retailing? Some consumers believe that direct-response orders bypass the retailer. Is this true?