Retailing extremes in size

The extremes in size, its retailing are similar to those that predominate in wholesaling. Exhibit dramatically illustrates some of the variations in size and number of retailers per person that exist in some countries. The retail structure and the problems it engenders because real difficulties for the international marketing firm selling consumer goods. Large dominant retailers can be sold direct but there is no adequate way to directly reach small retailers who, in the aggregate handle a great volume of sales. In Italy, official figures show there are 865,000 retail stores, or one stores for every 66 Italians. Of the 340,000 food stores, fewer than 1,500 can be classified as large. Thus middlemen are a critical factor in adequate distribution in Italy.

Underdeveloped countries present similar problems. Among the large supermarket chains in South Africa there is considerable concentration. Of the country’s 31,000 stores, 1,000 control 60 percent of all grocery sales, leaving the remaining 40 percent of sales among 30,000 stores. To reach the 40 percent of the market served by those 30,000 stores may be difficult. In black communities in particular retailing is on a small scale – cigarettes are often sold singly, and the entire fruit inventory may consist of four apples in a bowl.

Retailing around the world has been in a state of active ferment for several years. The rate of change appears to be directly related to the stage and speed of economic development and even the least developed countries are experiencing dramatic changes. Supermarkets of one variety or another are blossoming in developed and underdeveloped countries alike. Discount houses that sell everything from powdered milk and canned chili to Korean TVs and VCRs are thriving and expanding worldwide.

Direct marketing

Selling directly to the consumer through the mail, by telephone pr door to door is often the approach of choice in markets with insufficient or underdeveloped distribution systems. The approach of course, also works well in the most affluent markets. Amway, operating in 42 foreign countries, has successfully expanded into Latin America and Asia with its methods of direct marketing. Companies that enlist individuals to sell their products are proving to be especially popular in Eastern Europe and other countries where many people are looking for ways to become entrepreneurs. In the Czech Republic, for example, Amway Corporation signed up 25,000 Czechs as distributors and sold 40,000 starter kits at $83 each in its first two weeks of business. Avon is another American company that is expanding dramatically overseas.

Direct sales through catalogs have proved to be successful way to enter foreign markets. In Japan, it has been an important way to break the trade barrier imposed by the Japanese distribution system. For example, a US mail order company, Shop America teamed up with Seven Eleven Japan to distribute catalogs in its 4,000 stores. Shop America sells items such as compact discs, Canon cameras and Rolex watches for 30 to 50 percent less than Tokyo stores, a Canon Auto boy camera sells for $260 in Tokyo and $180 in the Shop America catalog.

Many catalog companies are finding they need to open telephone service centers in a country to accommodate customers who have questions or problems. Hanna Andersson for example received complaints that it was too difficult to get questions answered and to place orders by telephone so it opened a service center with 24 telephone operators to assist customers who generate over $5 million in sales annually. Many catalog companies also have active Web sites that augment their catalog sales.

Resistance to change

Efforts to improve the efficiency of the distribution system, new types of middlemen and other attempts to change traditional ways are typically viewed as threatening and are thus resisted. A classic example is restructuring of the film distribution business being causes by the fast changing technologies of digitization and piracy. Laws abound that protect the entrenched in their positions. In Italy, a new retail outlet must obtain a license form a municipal board composed of local trades’ people. In a two year period some 200 applications were made and only 10 new licenses granted. Opposition to retail innovation is everywhere, yet in the face of all the restrictions and hindrances self service discount merchandising liberal store hours and large scale merchandising continue to grow because they offer the consumer convenience and a broad range of quality product brands at advantageous prices. Ultimately the consumer does prevail.

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