Retailing and Vertical Marketing System

Retailing and Vertical Marketing System

(1) Fully Independent Vertical Marketing System.

• Retailers who ultimately helps the firms serve their customers are also independent in terms of what to retail from their stores.
• Manufacturer or the wholesalers do not have any control over the retailers in terms of the type, quantity and territorial aspects of retailing of any product.
• Manufacturer of customer good for a mass market generally try to reach out their customer through such fully independent VMS. The advantage is that it offer a low cost access to market
• The degree to which the manufacturers can excise control over such channel partners is very low and this is a disadvantage.

(3) Partially integrated VMS

4 Elements of Marketing mix

(2) Fully integrated VMS

• Manufacturer integrated forward- Attempts to reach their customers or retailers directly by a process.
• Retail integrates backward- Gets access to supply chain that improves its ability and efficiency to serve the customers.
• The manufacturers, typically invest resources to create a channel by way of company-owned stores manned by their employes.
• The main advantage is that they have a complete control over the retailing function and also have an opportunity to gain competitive advantage out of the retailing operations.
• A direct contact with their customers give them better feedback and a great opportunity to learn the market trend and hence an opportunity to serve their customers better than their channel partners would have done.

• Place
• Manufacturers/Service Providers
• Wholesalers
• Retailers

In a partially integrated system, two of the three channels partners ( Manufacturer and Wholesaler, and Wholesalers and the retailers) combine their operations in order to harness better efficiency out of the VMS. The manufacturers or wholesalers or even the retailers attempt to achieve partial integration by way of a contractual arrangement. Such contractual arrangement might take one or more the following.

(a) Wholesaler-sponsored Group of Retailers.

(c) Franchises

• The wholesalers provide the retailers services such as store design and layout, store site and location analysis including trade area analysis, inventory management, assistance in promotional activities, and employee training programs.

(b) Retailers-owned Cooperatives

Franchisors (The Firm) - under this contractual arrangement, transfer the right to the franchisee to sell the product of the franchisor.

Franchisees (Retailer/Businessman) - are required to carry out the business independently using their own knowledge about the local market and the business acumen.

Licensing

• retailers owned cooperatives are owned and organized by the member retailers and offer various services to the member retailers in order to help them complete better with the cooperate chain of stores by harnessing competitiveness through scale economics.