Summary
Summary Marketing 314 Summaries
- Course
- Marketing 314 (MM314)
- Institution
- Stellenbosch University (SUN)
Comprehensive summaries of chapters 1 - 6 and 12 - 16.
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DOPE NOTESChapter 1:
Retail F nctions
MARKETING 314
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,In od c ion
Retailing refers to the process of purchasing products from other
organisations with the intent of reselling them to the final customer, generally
without transformation, and rendering services incidental to the sale of
merchandise
Retailers have developed into sophisticated and complex companies that
often coordinate or even own value chains from the production stages right
through to customer sales
The retailing process itself is the final step in the distribution of merchandise.
As with all services, it produces an intangible outcome
o It is therefore initially less evident what value a retailer creates
o Therefore marketing and retail researchers have long tried to explain
what added value retailers provide
Advantage of using intermediaries (such as retailers) is given by the Baligh-
Richa effec :
o Based on the fact that integrating an intermediary into the distribution
channel (between suppliers and consumers) helps ed ce n mbe of
nece a con ac between different actors in the system
The use of independent intermediaries in a value chain has been explained by
the an ac ion co heo :
o Explains the existence of firms in general and the level of vertical
integration with differing transaction costs in particular
o In this perspective, suppliers use intermediaries if the transaction cost
of dealing with an independent retail channel is lower than the internal
cost of coordinating these transactions internally
T adi ional Re ail F nc ion
1. Ca alog e of F nc ion
To answer the question of why retailers exist, different lists or catalogues of
retail functions have been proposed
The following explanation does not follow any of these specifically, instead, a
list of functions is derived that retailers usually perform in the value chain
between producers and consumers as a synthesis of the abovementioned
sources
2. C ea ing an A o men
One of the benefits a retailer provides in the value chain is goods sorting
This creates value, because manufacturers typically produce a large quantity
of a limited variety of goods, whereas consumers usually demand only a
limited quantity of a wide variety of goods
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, Retailers provide the customer with an assortment of products and services,
thereby offering a ie
Thus, while manufacturers can specialise in producing a very limited product
range, retailers make a broad product range available for the consumer,
which lets consumers:
o Choose between different products in a single category
o Combine their purchases and buy items across several product
categories in the same store, fulfilling the increasing need for one-
stop-shopping
Creating assortment is also a marketing function since it facilitates the
consumer s search process
3. B eaking B lk
Retailers offer customers different lo i e than manufacturers usually
prefer to ship
To reduce transportation costs and transaction costs, manufacturers
usually have the necessary infrastructure and systems to ship full
truckloads, pallets or at least cases of products, while consumers only
want to buy single packages of a product
Thus, retailers buy products in large quantities, then break down these
large shipments ( break bulk ) to offer quantities that fit typical
consumption patterns
4. B idging Space and Time
The system joining manufacturers and consumers usually has geographic and
temporal gaps that must be overcome. Closing these gaps is a further function of
retailers.
Bridging Space
Manufacturers usually produce a specific product in a central location, while
final consumption takes place in households across the country
Retailers help carry out this pa ial decen ali a ion by offering products in
stores that are close to the customer
Large retailers have broad ma ke co e age with a network of stores, so the
consumer can easily reach one
The added value retailers provide to this logistical function has increased over
time:
o With retailers setting up their own distribution centres, they now take
responsibility for an even larger part of the journey from production
facility to the consumer
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, o In the interplay with manufacturers, retailers now often try to obtain
logi ic leade hip
In recent years, retailers are increasingly going one step further downstream
o With the increasing use of online retailing, retailers manage the
delivery of products to individual households, thereby bridging the final
part of the supply chain
Bridging Time
Consumers want to be able to buy (and consume) products when they wish,
while production is often carried out in batches or at least not immediately
before purchase
This temporal gap is overcome by retailers holding in en o
As a part of the logistics process, retailers stock products in their warehouses
and on their store shelves making products available to consumers when
they want them
Here retailers expend a lot of effort on minimising the inventory in the supply
chain while still ensuring products remain in stock in their stores
5. C ea ing Demand
Creating demand includes market analysis, evaluating and identifying
consumer needs and providing this information to suppliers
Retailers p e en good to the consumer in their stores, mostly on shelves
but also in other display forms
These measure increase demand and would be difficult for manufacturers to
carry out without stores
Online shops can also present products and create demand, provide
customer-specific advice and set specific prices which stimulate the customer
to buy products
Retailers often have knowledgeable salespeople who can give advice to help
customers choose
Brick-and-mortar retailers and online shops both carry out promotional
activities and conduct many other activities to stimulate demand
A part of this function is sometimes labelled info ma ional ma ke
decen ali a ion since it includes transferring knowledge about products,
trends and technologies from the manufacturer to the customer
6. Ca ing o T an ac ion
Every purchase involved ordering, pricing and paying for goods & services
Retailers carry out these functions and typically reduce costs here through
standardisation and routines
Routinisation: product offered at certain price in store, paid for at checkout
and product possession transfers to consumer
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