Deck 12: Retailers, Wholesalers, and Their Strategy Planning

Question 1

The Marketing Plan Coach software on the text website includes a sample marketing plan for Hillside Veterinary Clinic. Look through the "Marketing Strategy" section.
a. What kind of retail operation is the vet clinic? Does it fit any of the types described in this chapter?
b. How could Hillside make use of a website?
c. The marketing plan notes future plans to offer kennel (boarding) services and pet supplies. How will this change Hillside's current strategy? Does the marketing plan provide a good sense of what needs to be done? Do you have other recommendations for Hillside?

Answer 1

HVC fits the description of a limited line store - that specializes in lines of related products. It might be considered a specialty shop - a type of limited-line store. These types of retail outlets typically offer a limited assortment and high levels of service.
As the marketing plan notes, HVC currently does not have its own website. A website could be a useful source of information for customers. There could be links to other resources on pet care. HVC might develop an e-newsletter that could be posted on its website - and linked to e-mails sent to interested customers. This could remind customers about annual pet care needs - for example, the need for refills of heartworm prevention medications.
The addition of kennel services to HVC's product offering should be pursued with care. There are clearly operational issues, but from a marketing standpoint it would be extremely important that the kennel services be consistent with the clinic's current positioning (which focuses on "compassionate care"). This could require more service and staff than many kennels now provide - and that could raise costs and prices. As long as HVC feels there is a large enough local target market that is less price sensitive and more interested in service, the kennel could be a success.

Question 2

Compare and contrast the marketing mix and target market for a bike shop in your community with the online bicycle retailer Performance Bicycle (www.performancebike.com). Use your best judgment to identify each retailer's primary target market and some of its Product, Place, Promotion, and Price decisions.

Answer 2

The target market for the performance bike is the youth who are keen on biking and who make informed purchases. The customers of the online bike retailer are likely to be aware of their needs and various features of the bikes' parts available in the stock. Realistic information, indication of price, delivery period and customers' experience with the product are critical in the buying decisions. The online merchant must carry the required inventory and must ship within the indicated period. The customer can order the parts online and can receive goods at their place of choice.
A traditional bike retailer generally sells assembled bikes of various brands, and the customer will get the delivery of the bike immediately on payment. The recommendations of the retail seller are vital for the purchase decisions. The product range, pricing, and after sales service of the bike retailer is critical for the buyers' decisions and are different from that of the performance bike (online part seller). The bike retailer may have to carry inventory of major bicycle brands meant for all ages and different purposes.

Question 3

What sort of a "product" are specialty shops offering? What are the prospects for organizing a chain of specialty shops?

Answer 3

In marketing, the product offered to the final consumer undergoes a series of chain which starts from the manufacturer and ends up to final consumer. The series of chain includes participants like manufacturer, wholesaler, retailer and customer. Retailers are the mediators between the wholesalers and the customers who actually distribute the product to the customers. Retailers engage in all the activities required for the sale of a product. Retailers operates in two ways i.e. either from the stores or without a store using online method. The retailers offered the product to the customers in many ways depends upon the target market. The type of offerings include supermarkets, general store, specialty store, convenience store and online stores. Online offering of products is the latest strategy adopted by retailers.
Specialty stores are one of the type of retail store which provides a specific product to the customers. Specialty stores is also a retailing strategy focuses on a particular type of customers. The retailers have the full knowledge about the preferences of the customers on a specified product. Specialty stores offers the type of products which are unique for the customers in terms of quality, availability or brand. The products are purchased less frequently and compare with the alternative products in the market. Customers has to make a plan before purchasing the products from the specialty stores. Thus the kind of products offered by the specialty stores are also refer as the shopping products. Shopping products include mobiles, computers, cameras, clothing, furniture, sports equipment's, washing machines etc.The manufacturers also take the advantage of specialty stores by launching a new product in small quantity to the specialty stores. Manufacturers face less risk in producing the product in smaller quantities and offered to the customers before distributing to the large stores. Specialty stores helps in providing the feedback to the manufacturers for the new product line. By offering a particular product to the consumers, the specialty stores also make an image of exclusivity in the market.
Retail chains includes supermarkets and departmental stores where almost all the products are available for the customers. Specialty shops offer only a particular type or brand of products to the customers. The chain of specialty shops refer to the different stores located at different location offering the same special product to customers. The success of chain of specialty shops depends upon the showroom display, community to be served and the ability to attract the customers. The method of offering the product should be same in all the chains of the specialty shop. The chain of specialty stores should obtain products from wholesalers so that timely demand of customers can be fulfilled. The specialty shops should be organized in such a way so that customers get attracted and approach easily for the product.

Question 4

Distinguish among discount houses, price-cutting by conventional retailers, and mass-merchandising. Forecast the future of low-price selling in food, clothing, and appliances. How will the Internet affect that future?

Question 5

Discuss a few changes in the market environment that you think help to explain why telephone, mail-order, and Internet retailing have been growing so rapidly.

Question 6

What are some advantages and disadvantages to using the Internet for shopping?

Question 7

Apply the wheel of retailing theory to your local community. What changes seem likely? Will established retailers see the need for change, or will entirely new firms have to develop?

Question 8

What advantages does a retail chain have over a retailer who operates with a single store? Does a small retailer have any advantages in competing against a chain? Explain your answer.

Question 9

Many producers are now seeking new opportunities in international markets. Are the opportunities for international expansion equally good for retailers? Explain your answer.

Question 10

Discuss how computer systems affect wholesalers' and retailers' operations.

Question 11

Consider the evolution of wholesaling in relation to the evolution of retailing. List several changes that are similar and several that are fundamentally different.

Question 12

Do wholesalers and retailers need to worry about newproduct planning just as a producer needs to have an organized new-product development process? Explain your answer.

Question 13

SELECTING CHANNEL INTERMEDIARIES
Art Glass Productions, a producer of decorative glass gift items, wants to expand into a new territory. Managers at Art Glass know that unit sales in the new territory will be affected by consumer response to the products. But sales will also be affected by which combination of wholesalers and retailers Art Glass selects. There is a choice between two wholesalers. One wholesaler, Giftware Distributing, is a merchant wholesaler that specializes in gift items; it sells to gift shops, department stores, and some mass-merchandisers. The other wholesaler, Margaret Degan Associates, is a manufacturers' agent that calls on many of the gift shops in the territory.
Art Glass makes a variety of glass items, but the cost of making an item is usually about the same-$5.20 a unit. The items would sell to Giftware Distributing at $12.00 each-and in turn the merchant wholesaler's price to retailers would be $14.00- leaving Giftware with a $2.00 markup to cover costs and profit. Giftware Distributing is the only reputable merchant wholesaler in the territory, and it has agreed to carry the line only if Art Glass is willing to advertise in a trade magazine aimed at retail buyers for gift items. These ads will cost $8,000 a year.
As a manufacturers' agent, Margaret Degan would cover all of her own expenses and would earn 8 percent of the $14.00 price per unit charged the gift shops. Individual orders would be shipped directly to the retail gift shops by Art Glass, using United Parcel Service (UPS). Art Glass would pay the UPS charges at an average cost of $2.00 per item. In contrast, Gift-ware Distributing would anticipate demand and place larger orders in advance. This would reduce the shipping costs, which Art Glass would pay, to about $.60 a unit.
Art Glass' marketing manager thinks that Degan would only be able to sell about 75 percent as many items as Giftware Distributing-since she doesn't have time to call on all of the smaller shops and doesn't call on any department stores. On the other hand, the merchant wholesaler's demand for $8,000 worth of supporting advertising requires a significant outlay.
The marketing manager at Art Glass decided to use a spreadsheet to determine how large sales would have to be to make it more profitable to work with Giftware and to see how the different channel arrangements would contribute to profits at different sales levels.
a. Given the estimated unit sales and other values shown on the initial spreadsheet, which type of wholesaler would contribute the most profit to Art Glass Productions?
b. If sales in the new territory are slower than expected, so that the merchant wholesaler was able to sell only 3,000 units-or the agent 2,250 units-which wholesaler would contribute the most to Art Glass' profits? ( Note: Assume that the merchant wholesaler only buys what it can sell; that is, it doesn't carry extra inventory beyond what is needed to meet demand.)c. Prepare a table showing how the two wholesalers' contributions to profit compare as the quantity sold varies from 3,500 units to 4,500 units for the merchant wholesaler and 75 percent of these numbers for the manufacturers' agent. Discuss these results. ( Note: Use the analysis feature to vary the quantity sold by the merchant wholesaler, and the program will compute 75 percent of that quantity as the estimate of what the agent will sell.)

Question 14

How do you think a retailer of Maytag washing machines would react if Maytag set up a website, sold direct to consumers, and shipped direct from its distribution center? Explain your thinking.

Question 15

What risks do merchant wholesalers assume by taking title to goods? Is the size of this risk about constant for all merchant wholesalers?

Question 16

Why would a manufacturer set up its own sales branches if established wholesalers were already available?

Question 17

What is an agent wholesaler's marketing mix?

Question 18

Why do you think that many merchant wholesalers handle competing products from different producers, whereas manufacturers' agents usually handle only noncompeting products from different producers?

Question 19

What alternatives does a producer have if it is trying to expand distribution in a foreign market and finds that the best existing merchant wholesalers won't handle imported products?

Question 20

Discuss the future growth and nature of wholesaling if chains, scrambled merchandising, and the Internet continue to become more important. How will wholesalers have to adjust their mixes? Will wholesalers be eliminated? If not, what wholesaling functions will be most important? Are there any particular lines of trade where wholesalers may have increasing difficulty?