Basic Marketing: A Global Managerial Approach

Perreault−McCarthy: Basic
Marketing: A
Global−Managerial
Approach, 14/e

13. Retailers, Wholesalers
    and Their Strategy
    Planning

Text © The McGraw−Hill

Companies, 2002

Retailers, Wholesalers, and Their Strategy Planning 365

Convenience (food)

stores must have the

right assortment

Vending machines

are convenient

Single-line

mass-merchandisers

are coming on strong

Some Retailers Focus on Added Convenience

Convenience (food) storesare a convenience-oriented variation of the conven-

tional limited-line food stores. Instead of expanding their assortment, however,

convenience stores limit their stock to pickup or fill-in items like bread, milk, beer,

and eat-on-the-go snacks. Stores such as 7-Eleven and Stop-N-Go aim to fill con-

sumers’ needs between major shopping trips to a supermarket and many of them are

competing with fast-food outlets. They offer convenience, not assortment, and often

charge prices 10 to 20 percent higher than nearby supermarkets. However, as many

gas stations have been converted to convenience stores and other retailers have

expanded their hours, intense competition is driving down convenience store prices

and profits.^15

Automatic vendingis selling and delivering products through vending machines.

Although the growth in vending machine sales is impressive, such sales account for

only about 1.5 percent of total U.S. retail sales. Yet for some target markets this

retailing method can’t be ignored.

The major disadvantage to automatic vending is high cost. The machines are

expensive to buy, stock, and repair relative to the volume they sell. Marketers of

similar nonvended products can operate profitably on a margin of about 20 percent.

The vending industry requires about 41 percent to cover costs—so they must charge

higher prices.^16

In-home shopping has been around for a long time, but it’s become a lot more

varied and a lot more popular over the years. In the U.S., it started in the pio-

neer days with door-to-door selling—a salesperson going directly to the

consumer’s home. Variations on this approach are still important for firms like

Amway and Mary Kay. It meets some consumers’ need for convenient personal

Shop at home—in a

variety of ways

New mass-

merchandising formats

keep coming

The warehouse club is another retailing format that quickly gained popularity.

Sam’s Club and Costco are two of the largest. Consumers usually pay an annual

membership fee to shop in these large, no-frills facilities. Among the 3,500 items

per store, they carry food, appliances, yard tools, tires, and other items that many

consumers see as homogeneous shopping items and want at the lowest possible price.

The rapid growth of these clubs has also been fueled by sales to small-business cus-

tomers. That’s why some people refer to these outlets as wholesale clubs. However,

when half or more of a firm’s sales are to final consumers, it is classified as a retailer,

not a wholesaler.^13

Since 1980 some retailers—focusing on single product lines—have adopted the

mass-merchandisers’ approach with great success. Toys “R” Us pioneered this trend.

Similarly, PayLess Drugstores, B. Dalton Books, Ikea (furniture), Home Depot

(home improvements), Circuit City (electronics), and Office Depot attract large

numbers of customers with their large assortment and low prices in a specific product

category. These stores are called category killers because it’s so hard for less spe-

cialized retailers to compete.^14

It’s reasonable to think about the move to 24-hours-a-day online selling—by the

established retailers, new firms that never relied on stores, or both—as a next step

in the evolution of mass-merchandising. But we’ll have a more complete basis for

evaluating the strengths and limitations of selling and shopping on the Web if we

first look at some retailers who have targeted consumers who want more conven-

ience, even if the price is higher.