mm unit 4point2

Logistic and Wholesaling

Course: MBA

Subject: MM II

Unit: 4

Managing Retailing ,Wholesaling and Logistics

Major retailer types are

1. Specialty store: These carry narrow product line

with deep assortment viz., apparel stores, sporting goods stores etc. Examples can be Raymonds store or Nike store for shoes

2. Department store: These carry several product lines like clothing, home furnishings, household goods etc. Example can be Local stores with variety having local consumers etc

3. Supermarket: These have relatively large, low cost, low margin, high volume, self service operation serving total

needs for food, laundry and household maintenance products.

Managing Retailing ,Wholesaling and Logistics…

• Major retailer types are….

4 Convenience Store: These are relatively small stores located nearby residential areas and open 7 days a week for long hours and carry limited line of convenience products at slightly higher prices.

5 Discount Store: These sell standard merchandise at lower prices with lower margins and higher volumes almost regularly. They carry mostly national brands viz., Big Bazaar, Adani’s Hypermarket etc


Marketing Decisions in RetailingRetailers and retailing as a whole need to take decisions inmany areas. These areas are as follows:1. Target Market: It is important because it helps in product

assortment, store décor, advertising messages and media, price and service levels. It needs to be regularly modified on the basis of periodic marketing research

2. Product assortment and procurement: It should match the target market’s shopping expectationsThe breadth and depth of the product assortment must be properly developed and modified at times, if required.


• Marketing Decisions in Retailing…

3. Services and Store atmosphere: Service mix consists of pre-purchase services which draws a customer to the store.It can be mail orders, window display etc. Post-purchase services include shipping and delivery, gift wrapping, complaints handling etc. Ancillary services include services which m,ake a visitor comfortable while in store like car parking , cheque cashing etc Store atmosphere should embody an ambience that suits the target market and draws consumers towards purchase.


• Marketing Decisions in Retailing…4. Price Decision: Prices are a key positioning factor in retailing

of all types. High volumes and high margins are targeted by retailers but every time this does not happen. Tactics on pricing can be in the form of low prices on some items to serve as traffic builders. Somewhere, instead of ‘sales pricing’ on some items, retailers adopt EDLP (Every day low pricing).

5. Promotion Decision: Promotion tools in large numbers are available. These can be print ads,special sales, money-saving coupons, frequent shopper reward programs etc.


• Marketing Decisions in Retailing…

6. Place Decision: The location is a very significant decision in retailing sector. It involves a combination of market survey or research and also a vision for the future. It breaks down into selecting regions of the country, then identifying cities with regions and then particular sites within the cities. Retailers can locate their stores in the central business district, a regional center, a community shopping center, a shopping lane or mall or even in a large store.


Retailing comprises all the activities involved in sellinggoods or services directly to final consumers for personal,

non-business use. It can be done by a company directly orindirectly through the distribution network. The companyneeds to know activities related to retailing and make itmore business oriented from time to time. Retailers can provide various levels of service to consumers on the basisof locate-compare-select process and the degree of

involvement in it. It can be self-service, self selection, limited service or full service.


• Trends in Retailing In the recent past, various trends have emerged in retail

sector. These are as follows: 1. New retail forms and combinations: It basically consists of

store in a store concept 2. Retail store competition: Here, a particular chain’s stores

compete with one another and the company encourages it. 3.Competition as well as cooperation between Store based

and non-store based retailing: Retailers compete with online buying-selling business as well as compliment the two depending upon there joint utilities


• Trends in Retailing….

4.Growth of Giant retailers: Big players in retailing give distinct advantages to customers like good service, immense volumes and varieties and appealing prices. This they do due to superior information systems, logistics quality and buying power

5.Technological innovations: Retailers use all modern tools and techniques through computers to do all the activities in and out of the store to give a good experience to all its publics viz., suppliers, customers, government etc.


• Trends in Retailing….

6. Retailers spreading globally: Shear scales of operations and size have made global retail operations a reality and many players are flourishing in it. Examples are Wal Mart, K Mart , Benetton, IKEA home furnishings etc.


• Private Labels in Retail: Retailers and wholesalers develop their own brand which comes to be known as private label brand.

1. Prominent names in this direction are Benetton, The Body Shop, and Marks and Spencer.

2. Private labels can be found in many categories.

3. One a store becomes known, it tries to further distinguish itself by coming up with its own unique brand.

4. Established manufacturers should take it as a threat or an unavoidable reality and go ahead?


Wholesaling: It includes all the activities involved in selling goods or services to those who buy for resale ( retailers) or businessuse( industrial buyers). They are also called distributors.Wholesale transactions are usually larger than retail transactions, and wholesalers usually cover a larger tradearea than retailers.

Wholesalers sell to retailers and every wholesalercommands and coordinates retailers under his trade area.


Wholesaling….

Wholesalers usually perform one or more of the

following functions

1. Selling and promoting at the trade level to retailers in the trade area.

2. Buying and assortment building for the convenience of the customers( retailers) as well as consumers( end-users).

3. Bulk breaking for reducing costs to its buyers (retailers)


• Wholesaling….functions…..4. Warehousing: It holds inventories and saves costs for

suppliers (manufacturers) as well as customers( retailers).5. Transportation: Wholesalers provide quick delivery to the

buyers due to the closeness which they have with them. 6. Financing: They grant credit to their buyers and pay in time

to their suppliers after ordering early. 7. Risk bearing: This they do by taking the responsibility

through title as well unexpected activities like theft, damage, spoilage, and obsolescence


• Wholesaling….functions…..

8. Market Information: Due to their expert knowledge over time, they supply information to suppliers and customers regarding competitor’s activities, new products, price developments and so on.

9. Management Services and counseling: Wholesalers provide professional guidance to retailers as well as industrial customers in various aspects of their work.


The Growth and types of Wholesaling:Wholesaling growth can be attributed to a number ofReasons viz., 1. Growing larger production houses at distance from

principal buyers2. Production in advance of orders rather than in response to

specific orders3. Increase in the levels of intermediaries4. Increasing need for adapting products to the needs of

intermediaries and final users in terms of quantities, packages and forms.


The Growth and types of Wholesaling……

The major types of wholesalers are as follows:

1. Merchant wholesalers: They are independently owned businesses taking title to the merchandise they handle.

2. Full-service wholesalers: They are bigger version to the above

3. Limited-service wholesalers: Cash and carry wholesalers selling a limited line of fast moving goods to small retailers for cash.


The Growth and types of Wholesaling…..4. Brokers and agents: Brokers bring buyers and sellers together

and assist in negotiation and paid by the party hiring them. Agents represent buyers or sellers on a more permanent basis. They are small businesses with a few skilled people.

5 .Manufacturers and retailers branches and offices; Many times companies set up there own wholesaling centers in select locations and sell directly to retailers from there.

6. Specialized wholesalers: These operate in specialized products and functions viz., agriculture assembly, petroleum bulk plants and terminals as well as auction companies.


Wholesaler Marketing Decisions: Wholesaler-distributors

have to face challenge in recent times from various areas

viz., competition, demanding customers, new technologies

and more direct-buying programs by large industrial,

institutional and retail buyers etc. This has made them give

importance to certain decisions.

1. Target market: Within the market, the wholesaler can chose a target group of customers by size or type or even need or service required. They can give importance more to more business generating customers and less or careful importance

to less business generating customers.


• Wholesaler Marketing Decisions…2. Product assortment and services: Products and orders

carrying them are required to be stored as inventory and moved on further to retailers for business. Wholesalers manage this processing so that minimum inventory is required and movement is more, besides not much storage space is left idle also. Moreover, services provided by wholesalers are also adjusted according to requirement from time to time.

3. Price decision: Wholesalers earn their margin on sales to retailers and cost to company. They at times guide price changes to bring benefit to retailers as well as increased volumes to companies/suppliers


• Wholesaler Marketing Decisions…4. Promotion decision: Although not much direct promotion is

considered relevant to wholesalers, but they do participate in some form of promotion. t can be developing an image on the line of retailers, trade advertising and publicity.

5. Place decision: Progressive wholesalers have given importance to their locations and area of operations in a big way which was not done earlier. They are improving materials handling procedures and costs by developing automated warehouses and improving their supply capabilities through advanced information systems.


Trends in Wholesaling: Certain complaints of

manufacturers vis-à-vis wholesalers are, non-aggressive

promotion, acting as mere order takers, reluctant to

carry. enough inventory, and improper feedback to

suppliers vis à-vis market developments.

This has made visionary wholesalers adapt and virtually

work with suppliers with the objective of overall collective

growth.


• Physical Distribution has now been expanded into the broader concept of supply chain management (SCM).

• Supply Chain Management precedes physical distribution: It involves procuring the right inputs( raw materials, components, and capital equipment); converting them efficiently into finished products; and dispatching them to the final destinations.

• We can go even broader by studying as to how suppliers obtain their inputs.

• All this study leads to improving this whole movement of various movables leading to maximizing returns and minimizing costs( not necessarily in monetary terms


• This line of thinking and working makes a company identify superior suppliers and distributors and also helping them improve their performance. It ultimately helps in reducing various costs to company

Market Logistics: It is a sophisticated process which involves

infrastructure planning to meet demand, thereafter directing and controlling physical flows of materials and finished goods from origin points to use points and meeting customer requirements at a profit.


Market Logistics…….

Steps in Market Logistics are as follows:

1. Decision on value proposition to be given to the customers; It relates to delivery time, ordering and billing accuracy

2. Decision on best channel design and network strategy to reach to the customers; It can be a mix or a uniform channel structure across various markets

3. Operationalizing excellent sales forecasting, management of warehouses, transportation and materials

4. Implementing business solutions( orders) through best information systems, equipment, policies and procedures


Integrated Logistics System: This involves many important activities and their

integration into business solution on a continuous basis.

These activities are materials management, material

flow systems, and physical distribution supported

strongly by Information Technology.

Information Systems play a crucial role in managing

market logistics effectively and in cost effective

manner. Market logistics , if managed properly can bring

down the cost incurred significantly.


Market-Logistics Objectives:It is easier said than done. It involves lot of conflictingobjectives to come together which makes the task verycomplex. Maximizing customer service and minimizingdistribution cost simultaneously is impossible. So, instead of looking at these two important facets as isolatedactivities, the company should look at them as parts of abig whole and then plan. Instead of taking unavoidableexpenses as costs, company should consider them asInvestments which would any how give multiplying returnsin future.


Market-Logistics Objectives…As Market Logistics activities involve trade-offs, decisionsmust be taken on a total system basis. The variousservice outputs expected by customers are on-timedelivery, strong willingness to meet emergency needs, careful handling of merchandise, willingness ofsupplier to take back defective goods and replenishthem with proper goods.


Market-Logistics Objectives…The company must research and allocate relativeimportance of each of these service outputs. Different executives responsible for these service outputs should bemade clear of this varying degrees of importance for everyoutput. Sum total of these costs will indicate the totalmarket logistics cost for the order/s. Its minimization shouldbe done keeping in mind that its an investmentCost reduction will take place by reducing cost/s of one ormore components on the basis of research and experience.This exercise varies from company to company as natureand product offerings also vary between them


Market-Logistics Decisions Market logistics require certain decisions to be taken.

These are as follows:

1. Processing of orders in such a manner that order to payment cycle is shortened i.e., the elapsed time between receipt of order, delivery and payment received

2. Warehousing locations in the form of storage warehouses, distribution warehouses and automated warehouses besides the numbers in each category


Market-Logistics Decisions….

3. Inventory to be maintained by knowing how much

sales and profits would increase as a result of carrying larger inventories and promising faster order-fulfillment times.

4. Shipping modes and processes which are going to affect product pricing, on-time delivery performance, and the condition of goods when they arrive, thereby impacting customer satisfaction.


Market-Logistics dynamism for future: a. Market Logistics should be given importance as a separate

function in organizations with a senior executive at Vice President level handling it independently in coordination with other departments.

b. At frequent and regular intervals this Senior Executive should hold meetings with sales and operations people reviewing inventory, operating costs, customer service and satisfaction and make appropriate changes in production schedules if required.

c. IT and other technological tools are making this function dynamic day by day.

Sources:-

• Koshy and kotler, Marketing Management

mm unit 4point2

Marketing

convenience store

store atmosphere

specialty store

raymonds store

store dcor

discount store

nike store

department store