What is the other type of wholesaling that is done by sellers or buyers themselves rather than through independent wholesalers?

Retailer

When asked to think of a retail store, most people envision Wal-Mart. This is sensible because Wal-Mart is the World’s largest retailer. When it comes to retailing, as consumers, do we really know what they are and what they do?

In the past year, retailers have accounted for more than 4.6 trillion dollars in sales to their intended customers. Retailing plays an important role in most of todays marketing channels. Retailing is defined as “all the activities involved in selling goods or services directly to final consumers for their personal, nonbusiness use.” (Kotler & Armstrong, 2012) Retailers can be defined as “a business whose sales come primarily from retailing.” (Kotler & Armstrong, 2012)

In order to understand retailers, we must differentiate the three main characteristics of a retail store:

• Amount of service being offered

• Product line

• Relative prices

Amount of Service

A self-service retailer serves customers that are willing to perform their own locate-compare-select process in order to save time and money (Kotler & Armstrong, 2012). Stores such as Target and Safeway are considered self-service retailers because customers are able to locate products, compare brands, and make their final product selection. Customers can accomplish these three elements of shopping independently, employees are available to help individuals in need.

Stores such as the Home Depot and Best Buy offer limited-service to their customers because they offer a larger variety of products and their employees are specially trained to inform customers on the products available throughout the store. (Kotler & Armstrong, 2012). When I go to Home Depot to purchase a product for my dad, usually don’t know what I am looking for. By offering limited-service to their customers, I am able to walk in and ask an employee to help me find the product that will be most beneficial.

When dealing with high-end retail stores, such as Gucci and Bloomingdales, customers receive full-services. These types of retail stores help customers with every phase of the shopping process. Customers will pay a higher price while shopping at high-end retail stores because customers understand that quality customer service results in higher operating costs (Kotler & Armstrong, 2012).

Product Line

Another way to classify retailers is by the types of products they offer.

Specialty Stores	A retail store that carries a narrow product line with deep assortments within the line.	When I am in need of beauty supplies, I will use the specialty store Ulta. This store specializes in beauty products such as makeup, hair supplies and products, and nail products. It’s the one stop shop for everything beauty.
Department Stores	A retail store that carries a wide variety of product line, each operated as a separate department managed by specialist buyers or merchandisers.	Nordstrom is an example of a department store. They offer a wide variety of products such as, men and women clothes and shoes, kitchenware, a bedding department, and a beauty department. Nordstrom is a great place to shop during Christmas because they have something for everyone o your list.
Supermarket	A large, low-cost, low-margin, high-volume, self-service store that caries a wide variety of grocery and household products.	In my town, the only brand-name supermarket is Savemart. This store offers groceries and household products. I shop here when in need of groceries.
Convenience Store	A small store located near a residential area, that is open long hours seven days a week and carries a limited line of high-turnover convenience goods.	When wanting a greasy “gas station burrito” and a big gulp, everyone in my town goes to the Sierra Mini Mart. This convenience store is open till 2am and is open seven days a week.
Discount Store	A retail operation that sells standard merchandise at lower prices by accepting lower margins and selling at higher volume. There are two types of discount stores, “big-box” and “small-box.”	A “big-box” discount store would be Wal-Mart. This store is a place to shop when looking for a good deal on products. Wal-Mart always has low prices. A “small-box” discount store would be the 99¢ store. Here customers can shop for goods at a discounted price of $0.99 plus taxes.
Superstore	A store much larger than a regular supermarket that offers a huge assortment of routinely purchased food products, nonfood items, and services. This category also includes supercenters (combined supermarket and discount stores) and category killers (a deep assortment in a particular category).	An example of a category killer is Office Depot. This store carries a deep assortment of office and school supplies. An example of a supercenter is Super Target. Within a Super Target customers are able to purchase groceries, including a bakery and deli, along with clothes and electronics.
Off-Price Retailer	An off-price retailing operating that is owned and operated by a manufacturer and normally carries the manufacturer’s surplus, discontinued, or irregular goods. This category consists of factory outlets, independent off-price retailors, and warehouses.	Outlet malls are a great example of off-price retailers because people are able to purchase brand-name attire at a reduced price. Ross is a well-known independent off-price retailor. Here I am able to get more for my money by purchase name brand clothes at a discounted price. Costco is an example of a warehouse. Customers pay a membership fee and are able to purchase what they need at a discounted price.
Service Retailer	A retailer whose product line is actually a service.	This category includes a variety of stores including, hotels, banks, airlines, colleges, hospitals, hair solons, dry cleaning, and much more.

Relative Price

Another way retail stores can be classified is by their price range. Most retail stores offer their customers normal-quality goods at a regular price. Others offer high-quality goods at higher prices, while discount stores and “of-price” retailors feature low prices.

As defined in the chart above, discount stores offer their customers lower prices for standard merchandise. “Big-box” discounters continue to dominate the retail scene, but “small-box” discounters have recently begun to thrive, and they are now the fastest-growing retail format. Shopping at “small-box” stores is becoming more a trend due to the current economic environment (Kotler & Armstrong, 2012).

Off-price retailers purchase products at a less-than-regular wholesale price and charge consumers less than retail. There are three main categories of off-price retailers: independent, factory outlets, and warehouse clubs. Examples of these three categories are stated above in the chart.

Wholesaling

Have you ever wondered where or how retail stores receive their products? Retail stores receive their inventory from wholesalers, firms whose purpose is to supply retailers. Wholesaling is the process of selling goods and services to those buying them for resale or business use (Kotler & Armstrong, 2012).

It is important to understand why producers don’t sell directly to retailors or consumers. Using a wholesaler adds value to products by preforming one or more of the following channel functions:

• Selling and promoting: By using wholesalers, products are available to more customers at a low cost. Buyers generally feel more confortable receiving their inventory through a wholesaler rather than from a distant manufacturer.

• Buying and assortment building: Wholesalers have the opportunity to select items and build assortments based on their customer’s demands.

• Bulk breaking: In order for retailors to purchase their inventory at a fairly low cost, wholesalers buy in carload lots and then break them down into small quantities.

• Warehousing: Wholesalers hold inventories in warehouses.. This reduces inventory costs and risks for suppliers and customers.

• Transportation: Wholesalers are generally closer to their customers than producers are. Therefore, wholesalers are able to provide more timely deliveries.

• Financing: Wholesalers customers are able to pay wholesalers through a line of credit and are able to pay their suppliers on time due to the fact they ordering inventory in advance.

• Risk bearing: Wholesalers take the risk of theft, damage, spoilage, and obsolescence upon themselves.

• Market information: Due to the many contacts wholesalers have, they are able to inform their suppliers and customers about competitors, new products, and price developments.

• Management services and advice: Wholesalers offer employee training along with ways to improve store layouts and displays. They also help set up accounting and inventory control systems.

Types of Wholesalers

There are three different types of wholesalers.

1. Merchant Wholesalers: An independently owned wholesaler that takes title to the merchandise it handles. Merchant wholesalers include full-service and limited-service (Kotler & Armstrong, 2012).

2. Brokers and Agents: Brokers are wholesalers who do not take title to goods and whose function is to bring buyers and wholesalers together to assist in negotiation. Agents are wholesalers who represent buyers or sellers on a relatively permanent basis, perform only a few functions, and do not take title to goods (Kotler & Armstrong, 2012).

3. Manufacturers’ Sales Branches and Offices: Wholesaling by sellers or buyers themselves rather than through independent wholesalers (Kotler & Armstrong, 2012).

Below I have provided a visual breakdown of the different types of wholesalers.

About two years ago I had my first experience with a wholesaler. I was visiting my aunt in Oklahoma and it was time for her to purchase more inventory for the accessory store she owned. She took me with her to a big warehouse that was filled with jewelry, hats, and fashion accessories. We shopped throughout the warehouse for items my aunt could sell at her store. I was surprised at the low cost of the items throughout the warehouse, and I was delighted when my aunt let me get a pink hat for $12.

After my trip I came home and wore my new hat to school. That day I had a friend come up to me and told me she loved my hat and she was going to buy it at the boutique in town but she wasn’t willing to spend $40 on it. I was shocked when she told me how much the hat was at the boutique. This showed me how much stores mark up their prices. I purchased the hat for $12 and the store in my town was selling it for $40. In order for the store to make a profit they must buy products cheap and mark up the price when selling them. This experience taught me how important wholesalers are, and I understood that they made it possible to sell a particular hat in a small town while allowing the town boutique to make a profit.