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

374 Chapter 13

Voluntary chainsare wholesaler-sponsored groups that work with “independent”

retailers. Some are linked by contracts stating common operating procedures and

requiring the use of common storefront designs, store names, and joint promotion

efforts. Examples include SuperValu in groceries and Ace in hardware.

In a franchise operation,the franchisor develops a good marketing strategy, and

the retail franchise holders carry out the strategy in their own units.

The franchisor acts like a voluntary chain operator—or a producer. Each franchise

holder benefits from its relationship with the larger company and its experience, buy-

ing power, promotion, and image. In return, the franchise holder usually signs a contract

to pay fees and commission and to strictly follow franchise rules designed to continue

the successful strategy. Voluntary chains tend to work with existing retailers, while some

franchisors like to work with, and train, newcomers. For newcomers, a franchise often

reduces the risk of starting a new business. Only about 5 percent of new franchise oper-

ations fail in the first few years—compared to about 70 percent for other new retailers.

Franchise holders’ sales have grown fast and now account for about half of all

retail sales. One reason is that franchising is especially popular with service retail-

ers, a fast-growing sector of the economy. You can expect more growth in

franchising, but the rate will be slower than during the last 20 years.^25

Franchisors form
chains too

Small

stores

Percent of stores

Percent of total retail sales

Large

stores

Over $5

million

$2.5–$5

million

$1–$2.5

million

$500,000–

$1 million

$250,000–

$499,999

Store size (sales)

$100,000–

$249,999

$50,000–

$99,999

Less than

$50,000

Over $5

million

$2.5–$5

million

$1–$2.5

million

$500,000–

$1 million

$250,000–

$499,999

$100,000–

$249,999

$50,000–

$99,999

Less than

$50,000

2.1%

4.4%

15.2%

19.1%

21.4% 21.0%

7.7%

9.1%

.03% .13% 1.1%

2.8% 6.2%

13.3%

10.8%

65.6%

Exhibit 13-5 Distribution of Stores by Size and Share of Total U.S. Retail Sales