Ch 13 - Retailing and Wholesaling

Question 1

Identify retailers in terms of the utilities they provide.

Answer 1

Retailers provide time, place, form, and possession utilities. Time utility is provided by stores with convenient time-of-day (e.g., open 24 hours) or time-of-year (e.g., seasonal sports equipment available all year) availability. Place utility is provided by the number and location of the stores. Possession utility is provided by making a purchase possible (e.g., financing) or easier (e.g., delivery). Form utility is provided by producing or altering a product to meet the customer’s specifications (e.g., custom-made shirts).

Question 2

Explain the alternative ways to classify retail outlets.

Answer 2

Retail outlets can be classified by their form of ownership, level of service, and type of merchandise line. The forms of ownership include independent retailers, corporate chains, and contractual systems that include retailer-sponsored cooperatives, wholesaler-sponsored voluntary chains, and franchises. The levels of service include self-service, limited-service, and full-service outlets. Stores classified by their merchandise line include stores with depth, such as sporting goods specialty stores, and stores with breadth, such as large department stores.

Question 3

Describe the many methods of nonstore retailing.

Answer 3

Nonstore retailing includes automatic vending, direct mail and catalogs, television home shopping, online retailing, telemarketing, and direct selling. The methods of nonstore retailing vary by the level of involvement of the retailer and the level of involvement of the customer. Vending, for example, has low involvement, whereas both the consumer and the retailer have high involvement in direct selling.

Question 4

Specify the retailing mix actions used to implement a retailing strategy.

Answer 4

Retailing mix actions are used to manage a retail store and the merchandise in a store. The mix variables include pricing, store location, communication activities, and merchandise. Two common forms of assessment for retailers are “sales per square foot” and “same-store growth.”

Question 5

Explain changes in retailing with the wheel of retailing and the retail life cycle concepts.

Answer 5

The wheel of retailing concept explains how retail outlets typically enter the market as low-status, low-margin stores. Over time, stores gradually add new products and services, increasing their prices, status, and margins, and leaving an opening for new low-status, low-margin stores. The retail life cycle describes the process of growth and decline for retail outlets through four stages: early growth, accelerated development, maturity, and decline.

Question 6

Describe the types of firms that perform wholesaling activities and their functions.

Answer 6

There are three types of firms that perform wholesaling functions. First, merchant wholesalers are independently owned and take title to merchandise. They include general merchandise wholesalers, specialty merchandise wholesalers, rack jobbers, cash and carry wholesalers, drop shippers, and truck jobbers and can perform a variety of channel functions. Second, agents and brokers do not take title to merchandise and primarily perform marketing functions. Finally, manufacturer’s branches, which may carry inventory, and sales offices, which perform sales functions, are wholly owned by the producer.

Question 7

brokers

Answer 7

Independent firms or individuals whose principal function is to bring buyers and sellers together to make sales.

Question 8

category management

Answer 8

An approach to managing the assortment of merchandise in which a manager is assigned the responsibility for selecting all products that consumers in a market segment might view as substitutes for each other, with the objective of maximizing sales and profits in the category.

Question 9

manufacturer’s agents

Answer 9

Agents who work for several producers and carry noncompetitive, complementary merchandise in an exclusive territory. Also called manufacturer’s representatives.

Question 10

merchant wholesalers

Answer 10

Independently owned firms that take title to the merchandise they handle.

Question 11

multichannel retailers

Answer 11

Retailers that utilize and integrate a combination of traditional store formats and nonstore formats such as catalogs, television home shopping, and online retailing.

Question 12

retail life cycle

Answer 12

The process of growth and decline that retail outlets, like products, experience. Consists of the early growth, accelerated development, maturity, and decline stages.

Question 13

retailing

Answer 13

All activities involved in selling, renting, and providing products and services to ultimate consumers for personal, family, or household use.

Question 14

retailing mix

Answer 14

The activities related to managing the store and the merchandise in the store, which includes retail pricing, store location, retail communication, and merchandise.

Question 15

scrambled merchandising

Answer 15

Offering several unrelated product lines in a single store.

Question 16

shopper marketing

Answer 16

The use of displays, coupons, product samples, and other brand communications to influence shopping behavior in a store.

Question 17

telemarketing

Answer 17

Using the telephone to interact with and sell directly to consumers.

Question 18

wheel of retailing

Answer 18

A concept that describes how new forms of retail outlets enter the market.

Question 19

When Ralph Lauren makes shirts to a customer’s exact preferences, what utility is being provided?

Answer 19

form utility

Question 20

Two measures of the impact of retailing in the global economy are and .

Answer 20

the total annual sales; the number of employees working at large retailers

Question 21

Centralized decision making and purchasing are an advantage of ownership.

Answer 21

corporate chain

Question 22

What are some examples of new forms of self-service retailers?

Answer 22

New forms of self-service are being developed at convenience stores, fast-food restaurants, and even libraries.

Question 23

Would a shop for big men’s clothes carrying pants in sizes 40 to 60 have a broad or deep product line?

Answer 23

deep product line; the range of sizes relates to the assortment of a product item (pants) rather than the variety of product lines (pants, shirts, shoes, etc.).

Question 24

Successful catalog retailers often send catalogs to markets identified in their databases.

Answer 24

specialty; niche

Question 25

How are retailers increasing consumer interest and involvement in online retailing?

Answer 25

Retailers have improved the online retailing experience by adding experiential or interactive activities to their websites, allowing customers to “build” virtual products by customizing their purchases.

Question 26

Where are direct selling retail sales growing? Why?

Answer 26

Direct-selling retailers are (1) expanding into other global markets outside the United States and (2) reaching consumers who prefer one-on-one customer service and a social shopping experience rather than shopping online or at big discount stores.

Question 27

How does original markup differ from maintained markup?

Answer 27

The original markup is the difference between retailer cost and initial selling price, whereas maintained markup is the difference between the final selling price and retailer cost, which is also called the gross margin.

Question 28

A huge shopping strip mall with multiple anchor stores is a center.

Answer 28

power

Question 29

What is a popular approach to managing the assortment of merchandise in a store?

Answer 29

category management

Question 30

According to the wheel of retailing, when a new retail form appears, how would you characterize its image?

Answer 30

a low-status, low-margin, low-price outlet

Question 31

Market share is usually fought out before the stage of the retail life cycle.

Answer 31

maturity

Question 32

What is the difference between merchant wholesalers and agents?

Answer 32

Merchant wholesalers are independently owned firms that take title to the merchandise they handle. Agents do not take title to merchandise and typically perform fewer channel functions.

Question 33

Under what circumstances do producers assume wholesaling functions?

Answer 33

Producers assume wholesaling functions when there are no intermediaries to perform these activities, customers are few in number and geographically concentrated, or orders are large or require significant attention.