Perreault−McCarthy: Basic
Marketing: A
Global−Managerial
Approach, 14/e
- Retailers, Wholesalers
and Their Strategy
Planning
Text © The McGraw−Hill
Companies, 2002Retailers, Wholesalers, and Their Strategy Planning 373The large number of retailers (1,113,137) might suggest that retailing is a field
of small businesses. To some extent this is true. As shown in Exhibit 13-5, when
the last census of retailers was published over 62 percent of all the retail stores in
the United States had annual sales of less than $1 million. But that’s only part of
the story. Those same retailers accounted for only about 10 cents of every $1 in
retail sales!
The larger retail stores—those selling more than $5 million annually—do most
of the business. Less than 10 percent of the retail stores are this big, yet they account
for over 65 percent of all retail sales. Many small retailers are being squeezed out of
business. On the other hand, they do reach many consumers and often are valuable
channel members. But their large number and relatively small sales volume make
working with them expensive. They often require separate marketing mixes.^23The main way for a retailer to achieve economies of scale is with a corporate
chain. A corporate chainis a firm that owns and manages more than one store—
and often it’s many. Chains have grown rapidly and now account for about half of
all retail sales. You can expect chains to continue to grow and take business from
independent stores. The reason is simple: Size matters.
Large chains use central buying for different stores. This allows them to take
advantage of quantity discounts or opportunities for vertical integration—includ-
ing developing their own efficient distribution centers. They can use EDI and
computer networks to control inventory costs and stock-outs. They may also spread
promotion, information technology, and management costs to many stores. Retail
chains also have their own dealer brands. Many of these chains are becoming
powerful members—or channel captains—in their channel systems. In fact, the
most successful of these big chains—like Home Depot and Wal-Mart—control
access to so many consumers that they have the clout to dictate almost every detail
of relationships with their suppliers.^24Competitive pressure from corporate chains encouraged the development of both
cooperative chains and voluntary chains. Cooperative chainsare retailer-sponsored
groups—formed by independent retailers—that run their own buying organizations
and conduct joint promotion efforts. Cooperative chains face a tough battle. Some,
like True Value Hardware, are still adapting as they identify the weakness of cor-
porate chains. For example, ads remind consumers that they don’t need to waste a
half-hour lost in a big store to pick up some simple item.A few big retailers do
most of the businessRetailer Size and Profits
Ethical issues
may ariseBig chains are building
market cloutMost retailers face intense competitive pressure. The desperation that comes with
such pressure has pushed some retailers toward questionable marketing practices.
Critics argue, for example, that retailers too often advertise special sale items to
bring price-sensitive shoppers into the store or to a website but then don’t stock
enough to meet demand. Other retailers are criticized for pushing consumers to trade
up to more expensive items. What is ethical and unethical in situations like these,
however, is subject to debate. Retailers can’t always anticipate demand perfectly,
and deliveries may not arrive on time. Similarly, trading up may be a sensible part
of a strategy—if it’s done honestly.
In retailing, as in other types of business, the marketing concept should guide
firms away from unethical treatment of customers. However, a retailer on the edge
of going out of business may lose perspective on the need to satisfy customers in
both the short and the long term.^22Independents form
chains too