Page 455 - Foundations of Marketing

422 Part 5 | Distribution Decisions

face-to-face sales presentations at home or in the workplace. There are different types of wholesalers. Merchant whole-
Automatic vending is the use of machines to dispense products. salers are independently owned businesses that take title to
goods and assume ownership risks. They are either full-service
5. Examine franchising and its benefits and wholesalers, offering the widest possible range of wholesal-
weaknesses. ing functions, or limited-service wholesalers, providing only

Franchising is an arrangement in which a supplier grants a some marketing services and specializing in a few functions.
dealer the right to sell products in exchange for some type of Full-service merchant wholesalers include a variety of types.
consideration. Franchise use is increasing. Franchising offers General-merchandise wholesalers offer a wide, but relatively
several advantages. It enables a franchisee to start a business shallow product mix. Limited-line wholesalers offer exten-
with limited capital and benefit from the business experience sive assortments within a few product lines. Specialty-line
of others. Franchised outlets are generally more successful wholesalers carry only a single product line or a few items
and have lower failure rates than independently owned busi- within a line. Finally, rack jobbers own and service display
nesses. The franchisee can obtain guidance and advice from racks in supermarkets and other stores. Limited-service mer-
the franchiser at little or no cost. Also, the franchisee receives chant wholesalers include various types as well. Cash-and-
materials to use in local advertising and can benefit from carry wholesalers sell to small businesses, require payment in
national promotional campaigns. cash, and do not deliver. Truck wholesalers sell a limited line
Franchise arrangements also have several drawbacks. of products from their own trucks directly to customers. Drop
The franchiser can dictate many aspects of the business. shippers own goods and negotiate sales, but never take pos-
Franchisees must pay to use the franchiser’s name, products, session of products. And mail-order wholesalers sell to retail
and assistance. Franchisees often must work very hard, put- and business buyers through direct-mail catalogs.
ting in long days without breaks. In some cases, franchise Agents and brokers negotiate purchases and expedite
agreements are not uniform, meaning one franchisee may pay sales in exchange for a commission, but they do not take title
more than another for the same services. Finally, the franchiser to products. Usually specializing in certain products, they can
gives up control when entering into a franchise agreement. provide valuable sales expertise. Agents represent buyers or
sellers on a permanent basis and brokers are intermediaries that
6. Understand the nature and functions of buyers and sellers employ temporarily to negotiate exchanges.
wholesalers. Manufacturers’ agents offer customers the complete product lines

Wholesaling consists of all transactions in which products of two or more sellers. Selling agents market a complete product
are bought for resale, making other products, or general busi- line or a producer’s entire output and perform every wholesaling
ness operations. Wholesalers are individuals or organizations function except taking title to products. Commission merchants
that facilitate and expedite wholesale exchanges. For pro- are agents that receive goods on consignment from local sellers
ducers, wholesalers are a source of financial assistance and and negotiate sales in large, central markets.
information. By performing specialized accumulation and Manufacturers’ sales branches and offi ces are owned by
allocation functions, they allow producers to concentrate on manufacturers. Sales branches sell products and provide sup-
manufacturing products. Wholesalers provide retailers with port services for the manufacturer’s sales force in a given
buying expertise, wide product lines, efficient distribution, location. Sales offi ces carry no inventory and function much
and warehousing and storage. as agents do.

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Key Concepts

retailing 397 supermarkets 400 traditional specialty community shopping
retailer 397 superstores 401 retailers 402 center 406
general-merchandise hypermarkets 401 category killer 403 regional shopping center
retailer 398 warehouse clubs 401 off-price retailers 403 406
department stores 398 warehouse showrooms neighborhood shopping superregional shopping
discount stores 400 402 center 405 center 406
convenience store 400

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