What’s Important:

Chapter 16
Steve Williams
Agenda
 Retailing
 Private Labels
 Wholesaling
 Market Logistics
Retailing…
 “All the activities in selling goods or services
directly to final consumers for personal,
nonbusiness use”
My Retailing Takeaways
 Retailing has changed
◦ Used to…
 Convenient locations, special or unique goods,
greater/better service vs. competitors, and store credit
cards
◦ National brands offered everywhere
◦ Bank credit cards work everywhere
◦ Customers are smarter shoppers
 Desire to pay minimum for product
My Retailing Takeaways
 New age
◦ Strong differentiation and private labels
◦ Whole Foods & Trader Joe’s
 Whole Foods
 Bright and well staffed markets
 Bountiful and seductive food displays
 Largest organic and natural foods grocer in the country (mostly private
label)
 Massive information on the food they sell
 2004-2006 showed double digit growth in overall sales
 Trader Joe’s
 Opened before Whole Foods (1958 vs. 1980)
 Niche market: “gourmet food outlet discount warehouse hybrid”
 Constantly rotating, upscale goods at below average cost
 80% private labels vs.16% in normal market
 Regional tasting panels yield different foods at different markets
Private Labes
 Private label brand
◦ AKA reseller, store, house, or distributor brand
◦ “a brand that retailers and wholesalers develop”
◦ Wal-Mart’s Ol’Roy dog food
My Private Label Takeaways
 Some stats
◦ 1/5 items sold in stores is private label
◦ 41% say they frequently buy store brands
◦ 72% say national brands are not worth the extra cost
◦ 68% say private labels are “extremely good value
 Socioeconomic Strata
◦ “smart” shopping vs. being “ripped off”
 Not a Recessionary Phenomenon
◦ Consumers gain knowledge of private labels
◦ Growth during the recession
◦ Consumers become loyal to private labels when economy
recovers
Wholesaling
 “all the activities in selling goods or services
to those who buy for resale or business use”
My Wholesaling Takeaways
 AKA distributors
 B2B
◦ Less focus on promotion, atmosphere, and location
 Benefits of Wholesalers
◦ Connections with local, small businesses
◦ Build stock for end customer
◦ Buy in bulk and reduce unit cost
◦ Hold inventories
◦ Quick delivery-close by vs. distant manufacturer
◦ Act as the bank for businesses
◦ Reduce risk (theft, damage, spoilage, obsolescence)
◦ Collect competitor data
◦ Generally knowledgeable (training, layouts, accounting, inventory,
etc)
Market Logistics
 “planning the infrastructure to meet demand,
then implementing and controlling the
physical flows of materials and final goods
from points of origin to points of use, to
meet customer requirements at a profit”
My Market Logistic Takeaways
 4 steps to planning
◦ 1) Decide on value to customer
◦ 2) Decide on channel design and network for
reaching customers
◦ 3) Develop efficiency in planning activities
◦ 4) Implementing best solutions
◦ Often have large tradeoffs
 One shipping method is cheapest but slower
 One shipping container is cheaper but less protective
 Low inventories are ideal but may lead to back orders
My Market Logistic Takeaways
 4 factors in decision making
◦ 1) How should we handle orders (order processing)
 Need to shorten order-to-payment cycle
 Longer cyclelower customer satisfactionless profit
◦ 2) Where should we keep the stock (warehousing)
 Aim for central, large location
◦ 3) How much stock should we hold (inventory)
 Major cost driver
 Reduce to cut costs
 Less is better, but risky
 Dell optimized with build-to-order
◦ 4) How should we ship our goods (transportation)
 Fast speed: Rail, truck, or air
 Low cost: waterway or pipeline
 Companies commonly combine two to maximize
Summary
 Retailing
◦ Major changes require strong differentiation with crucial
use of private labels
 Private Labels
◦ Growing in popularity as quality meets national brands
for less cost
 Wholesaling
◦ B2B environment provides many benefits to
manufacturer and end customer (retailers)
 Market Logistic
◦ Planning and decision making processes that are
commonly negatively related
Questions?