Key Retailing and Wholesaling Definitions
Core Retailing Concepts
Retailing: All the activities involved in selling goods or services directly to final consumers for their personal, nonbusiness use.
Retailer: A business whose sales come primarily from retailing.
Retailer Classifications
According to Services Provided
- Specialty stores: Offer a narrow product line with a deep assortment.
- Department stores: Carry a wide variety of product lines.
- Convenience stores: Stock a limited line of high-turnover goods.
- Superstores: Provide a large assortment of food and non-food goods.
- Category killers: Feature a deep assortment in a specific category with knowledgeable sales staff.
According to Prices Charged
- Discount store: A retail operation that sells standard merchandise at lower prices by accepting lower margins and selling at higher volume.
- Off-price retailer: A retailer that buys at less-than-regular wholesale prices and sells at less than retail. Examples include factory outlets, independents, and warehouse clubs.
- Independent off-price retailer: An off-price retailer that is either independently owned and run or is a division of a larger retail corporation.
- Factory outlet: An off-price retailing operation owned and operated by a manufacturer, normally carrying the manufacturer’s surplus, discontinued, or irregular goods.
- Warehouse club: An off-price retailer selling a limited selection of brand-name grocery items, appliances, clothing, and other goods at deep discounts to members who pay annual membership fees.
According to Organizational Approach
- Chain stores: Two or more outlets that are commonly owned and controlled.
- Franchise: A contractual association between a manufacturer, wholesaler, or service organization (a franchisor) and independent businesspeople (franchisees) who buy the right to own and operate one or more units in the franchise system.
Wheel-of-Retailing Concept
Wheel-of-retailing concept: This concept states that new types of retailers usually begin as low-margin, low-price, low-status operations but later evolve into higher-priced, higher-service operations, eventually becoming like the conventional retailers they replaced.
Core Wholesaling Concepts
Wholesaling: All the activities involved in selling goods and services to those buying for resale or business use.
Wholesaler: A firm engaged primarily in wholesaling activities.
Key Wholesaler Functions
- Selling and promoting: Involves the wholesaler’s sales force helping the manufacturer reach many smaller customers at a lower cost.
- Buying and assortment building: Involves the selection of items and building of assortments needed by their customers, saving the customers work.
- Bulk breaking: Involves the wholesaler buying in larger quantities and breaking them into smaller lots for its customers.
- Warehousing: Involves the wholesaler holding inventory, reducing its customers’ inventory cost and risk.
- Risk bearing: Involves the wholesaler absorbing risk by taking title and bearing the cost of theft, damage, spoilage, and obsolescence.
- Market information: Involves the wholesaler providing information to suppliers and customers about competitors, new products, and price developments.
- Management services and advice: Involves wholesalers helping retailers train their sales clerks, improve store layouts, and set up accounting and inventory control systems.
Types of Wholesalers
- Merchant wholesalers: This is the largest group of wholesalers and includes:
- Full-service wholesalers: Provide a full set of services.
- Limited-service wholesalers: Provide fewer services and specialized functions.
- Brokers and agents: Do not take title to goods, perform a few functions, and specialize by product line or customer type.