Principles of Marketing

🛍️Principles of Marketing Unit 18 – Retailing and Wholesaling

Retailing and wholesaling are crucial links in the distribution chain, connecting manufacturers to consumers. Retailers sell directly to end users through various channels, while wholesalers sell in bulk to other businesses. Both add value through functions like inventory management and providing product assortments. The retail landscape has evolved with e-commerce and omnichannel strategies. Brick-and-mortar stores now compete with online retailers, leading to innovative approaches like experiential retail and pop-up shops. Wholesalers face challenges from retailer consolidation and manufacturers selling directly to consumers.

What's the Deal with Retailing and Wholesaling?

  • Retailing involves selling products directly to end consumers through various channels (brick-and-mortar stores, online, catalogs)
  • Wholesaling involves selling products in bulk to retailers or other businesses who then resell to end consumers
    • Wholesalers often purchase directly from manufacturers and sell to retailers
    • Wholesalers typically do not sell directly to end consumers
  • Retailing and wholesaling are crucial components of the distribution process, connecting manufacturers to end consumers
  • Retailers and wholesalers add value through various functions (breaking bulk, providing assortments, holding inventory, providing services)
  • Retailing and wholesaling have evolved significantly with the rise of e-commerce and omnichannel strategies
  • The relationship between retailers and wholesalers can be complex, with power dynamics shifting based on market conditions and bargaining power
  • Retailers and wholesalers face challenges such as intense competition, changing consumer preferences, and supply chain disruptions

Key Players in the Distribution Game

  • Manufacturers produce goods and sell them to wholesalers or directly to retailers
  • Wholesalers purchase goods in bulk from manufacturers and resell them to retailers
    • Types of wholesalers include merchant wholesalers, agents and brokers, and manufacturer sales branches and offices
  • Retailers sell goods directly to end consumers through various channels (stores, online, mobile)
    • Types of retailers include department stores, specialty stores, supermarkets, convenience stores, and e-tailers
  • Distributors are intermediaries that help move products from manufacturers to retailers or end consumers
  • Logistics providers offer services such as transportation, warehousing, and inventory management to facilitate the distribution process
  • Consumers are the end users who purchase goods from retailers for personal or household use
  • Government agencies regulate and monitor the distribution process to ensure fair competition and consumer protection

Retail Strategies: From Brick-and-Mortar to Click-and-Order

  • Brick-and-mortar retailing involves selling products through physical stores
    • Advantages include the ability to touch and try products, immediate gratification, and personal service
    • Challenges include high overhead costs, limited reach, and competition from online retailers
  • E-commerce involves selling products through online channels (websites, mobile apps)
    • Advantages include lower overhead costs, wider reach, and 24/7 availability
    • Challenges include shipping costs, returns management, and building trust with customers
  • Omnichannel retailing combines brick-and-mortar and online channels to provide a seamless customer experience
  • Pop-up stores are temporary retail spaces used to generate buzz, test new products, or enter new markets
  • Experiential retailing focuses on creating engaging and memorable in-store experiences to differentiate from online competitors
  • Subscription-based retailing involves customers paying a recurring fee for regular product deliveries (meal kits, beauty boxes)
  • Retail pricing strategies include everyday low pricing, high-low pricing, and dynamic pricing based on demand and competition

Wholesale Magic: Supplying the Suppliers

  • Wholesalers buy goods in bulk from manufacturers and resell them to retailers or other businesses
  • Wholesalers often specialize in specific product categories (grocery, electronics, apparel)
  • Wholesalers provide value-added services such as product assortment, bulk breaking, financing, and market information
  • Wholesalers help manufacturers reach a wider market by selling to multiple retailers
  • Wholesalers help retailers manage inventory by providing just-in-time delivery and flexible ordering options
  • Wholesalers face challenges such as intense price competition, consolidation among retailers, and disintermediation by manufacturers selling directly to retailers
  • Wholesale pricing strategies include cost-plus pricing, market-based pricing, and volume discounts for larger orders

Location, Location, Location: Where to Set Up Shop

  • Retail location decisions involve choosing the best sites to reach target customers and maximize sales
  • Factors to consider in retail location decisions include demographics, competition, accessibility, and lease terms
  • Types of retail locations include downtown areas, shopping centers, strip malls, and freestanding sites
  • Site selection techniques include geographic information systems (GIS), customer surveys, and traffic counts
  • Trade area analysis involves defining the geographic area from which a store draws customers
  • Retail gravity models help predict the attractiveness of different locations based on factors such as size and distance
  • Online retailers face different location considerations, such as the placement of distribution centers and delivery networks

The Customer Experience: More Than Just Buying Stuff

  • Customer experience encompasses all interactions a customer has with a retailer, from pre-purchase to post-purchase
  • Factors that influence customer experience include store atmosphere, product assortment, pricing, customer service, and after-sales support
  • Retailers use customer journey mapping to understand and optimize the customer experience across different touchpoints
  • In-store technologies such as mobile apps, digital signage, and self-checkout can enhance the customer experience
  • Personalization involves tailoring the customer experience based on individual preferences and behaviors
  • Loyalty programs reward customers for repeat purchases and encourage long-term relationships
  • Customer feedback and reviews provide valuable insights for improving the customer experience

Tech Takeover: How Digital is Changing the Game

  • E-commerce has disrupted traditional retailing by providing consumers with convenient, 24/7 access to a wide range of products
  • Mobile commerce involves selling products through mobile devices and apps
  • Social commerce involves selling products through social media platforms (Instagram, Facebook)
  • Augmented reality (AR) and virtual reality (VR) technologies enable customers to visualize products in different settings
  • Artificial intelligence (AI) and machine learning help retailers personalize recommendations, optimize pricing, and improve demand forecasting
  • Blockchain technology has potential applications in supply chain transparency, product authentication, and loyalty programs
  • Internet of Things (IoT) devices such as smart shelves and sensors can help retailers optimize inventory management and store operations
  • Sustainability and ethical sourcing will become increasingly important as consumers demand more environmentally and socially responsible products
  • Direct-to-consumer (DTC) brands will continue to disrupt traditional retail by selling products directly to consumers online
  • Subscription-based models will expand beyond traditional categories (meal kits, beauty products) into new areas such as clothing and home goods
  • Experiential retailing will become more prevalent as retailers seek to differentiate themselves from online competitors
  • Personalization will become more sophisticated, using AI and machine learning to provide highly targeted recommendations and experiences
  • Voice commerce, using smart speakers and virtual assistants, will grow as consumers become more comfortable with voice-based interactions
  • Retailers will focus on creating seamless, omnichannel experiences that blend online and offline channels
  • Wholesalers will face pressure to provide more value-added services and support to help retailers compete in a rapidly changing market


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© 2024 Fiveable Inc. All rights reserved.
AP® and SAT® are trademarks registered by the College Board, which is not affiliated with, and does not endorse this website.