WHOLESALING AND RETAILING Introduction • Mostly buy from producers and sell mostly to retailers, industrial consumers, institutions and other wholesalers • Includes all activities involved in selling goods and services to those buying for resale or business use • Sale of product between businesses, as opposed to ultimate household consumers • Provides added by providing channel flows. Value of these flows are often underappreciated • Tasks are mundane, but bundled with valued services at low cost, treated as unglamorous unlike other channel members Types of Wholesaler Merchant Wholesalers • Independently owned businesses, take title to goods • Full-Service wholesalers: Provide a full line of services, carrying stock, maintaining a sales force, offering credit, making deliveries, providing management assistance. – Wholesale Merchants – sell to retailers – Industrial Distributors – Sell to manufacturers Merchant Wholesalers • Limited Service Wholesalers: Offer few services than full-service wholesalers. – Cash-and-carry wholesalers: Carry a limited line of fast-moving goods and sell to small retailers for cash. – Truck Wholesalers: Perform a selling and delivery function (semi perishables) – Drop Shippers: Do not carry inventory or handle the product. On receiving order, select a manufacturer, who ships directly to customer. Assumes title and risk from order to delivery. (coal, heavy equipment, lumber) _ Rack Jobbers: Serve grocery and drug retailers, in non-food items. Bills only goods sold by retailers, title retained. Brokers and Agents • Do not take title to goods. Facilitate buying and selling on a commission – Broker: Bringing buyers and sellers together and assisting in negotiation. Paid by the party who hired them. Do not carry inventory, do assume risk – Agents: Represent either buyer or seller on a more permanent basis than brokers do • Manufacturers’ agents • Selling agents • Purchasing agents • Commission merchants Trends in Wholesaling • Wholesale industry is facing considerable challenges • Fierce resistance to price increases and winnowing out of suppliers who are not adding value based on cost and quality • Distinction between large retailers and large wholesalers is getting blurred RETAILING RETAILING Retailing is the set of business activities that adds value to the products & services sold to the consumers for their personal or family use. • It is not only sale of products in stores but also sale of services • Not all retailing done in stores - direct sales of cosmetics, catalog sales, home shopping n/w on cable TV ,haircut RETAILING Distribution channel Manufacturing wholesaler Consumer RETAILER Retailer • Retailers are at the end of the distribution chain & involve in direct interface with the customer • Referred as intermediaries – pass on products from producers & wholesalers to customers • Provision of channel in a convenient location to provide a successful channel of distribution • Key objective: availability of right product, in right qty, at right time – successful channel Annual sales of Wal – mart, kmart.Sears are much greater than annual sales of P&G,Pepsico Functions of Retailing • Retailers perform business activities that increase the value of product & service they sell to customers • Activities: * Providing an assortment of products & services * Breaking bulk * Holding inventory * Providing services Providing an assortment of products • Supermarkets carry 15000 different items made by over 500 companies • This assortment enables customers to buy wide selection of brands,designs,sizes.colors & prices in one location • Not the case in individual manufacture’s retail outlets Breaking Bulk • To reduce transportation costs, mfrs ship whole cases of their products to retailers • Retailers then offer the products in smaller quantities tailored to individual consumers usage pattern • Breaking the large shipments into smaller consumer quantities – Breaking Bulk Holding inventory • Function of retailers – to make the availability of products when consumers want them • Consumers can have small inventory of products at home as retailers will have the availability • By maintaining inventory,retailers reduce customer’s cost of storing products Providing services • Provide services that make it easier for customers to buy & use products • Offer products on credit • Display products for ease of use by customers for purchase • Assistance provided by sales people on purchase Retailing formats in India • Malls: The largest form of organized retailing today. Located mainly in metro cities, in proximity to urban outskirts. Ranges from 60,000 sq ft to 7,00,000 sq ft and above. They lend an ideal shopping experience with an amalgamation of product, service and entertainment, all under a common roof.Examples include Shoppers Stop, Piramyd, Pantaloon. • Specialty Stores: Chains such as the Bangalore based Kids Kemp, the Mumbai books retailer Crossword, RPG's Music World and the Times Group's music chain Planet M, are focusing on specific market segments and have established themselves strongly in their sectors. • Discount Stores: As the name suggests, discount stores or factory outlets, offer discounts on the MRP through selling in bulk reaching economies of scale or excess stock left over at the season. The product category can range from a variety of perishable/ non perishable goods • Department Stores: large stores ranging from 20000-50000 sq. ft, catering to a variety of consumer needs. Further classified into localized departments such as clothing, toys, home, groceries, etc. • Hyper marts/Supermarkets: Large self service outlets, catering to varied shopper needs are termed as Supermarkets. These are located in or near residential high streets. These stores today contribute to 30% of all food & grocery organized retail sales. Super Markets can further be classified in to mini supermarkets typically 1,000 sq ft to 2,000 sq ft and large supermarkets ranging from of 3,500 sq ft to 5,000 sq ft. having a strong focus on food & grocery and personal sales. Trends in India • Retailing in India is witnessing a huge revamping exercise. • Estimated to be US$ 200 billion, of which organized retailing (i.e. modern trade) makes up 3 percent or US$ 6.4 billion. • India is rated the fifth most attractive emerging retail market: a potential goldmine • Ranked second in a Global Retail Development Index of 30 developing countries drawn up by AT Kearney. • Food and apparel retailing key drivers of growth. • Organized retailing in India has been largely an urban phenomenon with affluent classes and growing number of double-income households.
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