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In this presentation, I want to discuss some of the other kinds of retailers, as well as
wholesalers. First, we have eTailing. Simply put, this is retailing online. This has grown
due to low cost of entry! Besides the lower overhead costs associated with online retailing,
however, there is another advantages: the long tail. This is when an online retailer
is able to sell not only the popular products, but the obscure ones or infrequently purchased
ones as well. How can they do this? Because every website is one click away from linking
a browser to someone selling something. This is the philosophy of Amazon.com. Indeed, 30%
of their book sales are on books that are not even in the "Top 100,000" most popular
titles! How do they do it? Partnerships with hundreds of thousands of other retailers -- some
big, many small! When one shops in a brick 'n mortar retailer, they are limited to purchasing
what is on hand. In the online realm, there are no four walls limiting your product offering!
The online retailing realm is causing even more problems for the brick n mortar retailers:
it's called "showrooming". This is when an in-store shopper price compares using their
cell phone or tablet while in the store and ends up purchasing online instead - often
while still in the store! The only way to combat this is for the brick n mortar retailer
to offer added-value in the store that cannot be emulated online such as quality customer
service and exclusive product deals. This is another reason so many retailers are offering
their own private brands such as Costco's Kirkland brand. These can't be found elsewhere
online for less! Next, we have "Pop up" stores, which are not described in the text! These
are temporary store locations often used during holiday seasons by Halloween and Christmas
retailers. The retailer usually rents a space for one or two months in a mall. Sometimes,
well-known retailers, like Target, might open up such temporary locations in order to reach
more market segments during the holidays. When Target introduced their Missoni line
of products, they opened a pop up store in Manhattan with great fanfare and sold-out
within hours of its opening. Franchising is another type of retailing activity. In fact,
it makes up approximately one-third of all retail sales! This is a contractual agreement
between a franchisor and franchisee to conduct business under the franchisor's name and following
their business model. This is a good option for budding entrepreneurs if they have enough
financial resources to afford the franchisee fees. But, this may be the biggest challenge
to overcome. For instance, to become a McDonalds franchisee, the potential franchisee must
have a minimum of $750,000 of non-borrowed personal resources! Once a franchisee is successful
with a single location, they can sometimes get a multi-franchisor agreement for an exclusive
geographic area to open as many locations as they deem effective. This is why you might
see two of the same franchises located across the street from each other. One might work
well for morning traffic patterns and the other for evening traffic patterns. On such
a busy street, right-hand turn access is very important. Finally, there are wholesalers.
These are hard to define, but the text uses the U.S. Bureau of Census definition: Activities
of those persons or establishments that sell to retailers and other merchants, or to industrial,
institutional, and commercial users, but do not sell in large amounts to final consumers.
Wholesalers have been under intense pressure to prove their value as retailers and manufacturers
started to bypass them when the Internet took off in the late 1990s. Manufacturers realized
they could reach end users of their product directly by selling off of their own website.
Simultaneously, retailers like Walmart started to realize that they could reduce the markups
in the channel by purchasing directly from manufacturers instead of through wholesalers.
In order to survive, wholesalers had to become experts in logistics and partner with online
eTailers to take over this function of their business. One great example of this is Ingram
Micro. They handle many of the shipments made for Amazon.com. They do this "behind the scenes"
and do not attempt to brand themselves with consumers. Rather, when a shipment is made
by Ingram Micro on behalf of Amazon.com, all of the labeling and paperwork only identify
the shipment as coming from Amazon.com. This allows Amazon to focus on their business core
competency: online retailing instead of what Ingram Micro does - logistics.