Definition
Rack jobbers are a type of merchant wholesale distributor who provides retailers with products and offers display racks to showcase these products within the retail space. They maintain ownership of the merchandise until it is sold, at which point the retail store and the rack jobber share the profits. This system allows retailers to offer products without investing in inventory and enables specialized merchandising to enhance sales efforts.
Examples
- Magazines and Books: Rack jobbers often place magazine and book racks in supermarkets and convenience stores, replenishing titles and updating displays regularly.
- Greeting Cards: A greeting card rack jobber will manage the entire card inventory at a retail store, including seasonal updates, ensuring stock remains appealing and relevant.
- Snack Foods: A snack food rack jobber might provide racks of chips, nuts, and candies to convenience stores, monitoring sales and restocking popular items.
Frequently Asked Questions
Q: How do rack jobbers make money?
A: Rack jobbers make money by splitting the profits from merchandise sales with the retailer. They retain ownership of the goods until they are sold, allowing them to generate revenue from product placement and sales within retail spaces.
Q: What are the benefits for retailers using rack jobbers?
A: Retailers benefit from using rack jobbers as they do not need to purchase inventory upfront, and they can diversify their product offerings with minimal financial risk. Additionally, the responsibility of inventory management and display maintenance falls to the rack jobber, saving the retailer time and labor costs.
Q: Can small businesses use rack jobbers?
A: Yes, small businesses can use rack jobbers to expand their product lines without the burden of carrying significant inventory costs. This especially benefits stores that want to offer seasonal or niche products without incurring extra expense.
- Merchant Wholesalers: Entities that buy goods in bulk and sell them to retailers, resellers, or other businesses. Unlike rack jobbers, they often transfer ownership immediately upon sale.
- Consignment: An arrangement where the supplier provides goods to the seller without immediate payment, with payment made when the goods are sold. The supplier retains ownership until the point of sale.
- Drop Shippers: An entity facilitating sales where goods are shipped directly from the producer to the buyer, bypassing the physical store altogether.
Online References
- Investopedia on Rack Jobbers
- Small Business Encyclopedia: Rack Jobbers
Suggested Books for Further Studies
- Retail Management: A Strategic Approach by Barry Berman and Joel R. Evans
- Wholesaling Management Handbook by John E. Fairchild
- Retailing: Integrated Retail Management by James R. Ogden and Denise T. Ogden
Fundamentals of Rack Jobbers: Marketing Basics Quiz
### What primary role do rack jobbers play in retail?
- [ ] They manufacture goods for retailers.
- [ ] They provide financial loans to retailers.
- [x] They supply and manage merchandise displays in retail stores.
- [ ] They directly sell products to consumers without a retail intermediary.
> **Explanation:** Rack jobbers supply and manage merchandise displays within retail stores, sharing profits with the retailers.
### Who retains ownership of the merchandise until it is sold?
- [x] The rack jobber
- [ ] The retailer
- [ ] The manufacturer
- [ ] The marketing agency
> **Explanation:** The rack jobber retains ownership of the merchandise until it is sold by the retailer.
### Which of the following is a typical product handled by rack jobbers?
- [ ] Heavy construction machinery
- [ ] Real estate properties
- [x] Greeting cards
- [ ] Medical equipment
> **Explanation:** Rack jobbers typically handle products like greeting cards, which require regular inventory updates and promotional displays.
### What significant advantage do rack jobbers offer to retailers?
- [x] Reduced inventory investment
- [ ] Expansion of physical store space
- [ ] Higher exclusivity contracts
- [ ] Direct transaction with consumers
> **Explanation:** Rack jobbers alleviate the need for retailers to invest heavily in inventory, reducing financial risk and space requirements for products.
### How do rack jobbers and retailers share profits?
- [ ] The retailer keeps all profits.
- [x] Profits are shared based on agreed-upon terms.
- [ ] The rack jobber keeps all profits.
- [ ] Profits must be donated to charity.
> **Explanation:** Profits from merchandise sales are shared between the rack jobber and the retailer according to predefined agreements.
### What type of arrangement do rack jobbers typically use with retailers?
- [ ] Leasing
- [ ] Direct sales
- [x] Cooperative merchandising
- [ ] Franchising
> **Explanation:** Rack jobbers typically engage in cooperative merchandising arrangements, where they manage the stock and share revenue with the retailer.
### Why might a retailer prefer using a rack jobber?
- [ ] To increase product exclusivity.
- [x] To mitigate the financial burden of stocking inventory.
- [ ] To exclusively sell luxury items.
- [ ] To manage large-scale shipping logistics.
> **Explanation:** Retailers prefer rack jobbers to mitigate the financial burden and operational responsibilities of stocking and managing inventory.
### What industry commonly uses rack jobbers?
- [ ] Automotive manufacturing
- [ ] Digital services
- [x] Retail convenience stores
- [ ] Heavy industrial machinery
> **Explanation:** Retail convenience stores often use rack jobbers for products like snacks, magazines, and greeting cards that benefit from regular inventory updates and specific display requirements.
### Which term is closely related to rack jobbing?
- [ ] Retail buyout
- [ ] Product franchising
- [x] Consignment
- [ ] Vertical integration
> **Explanation:** Consignment is closely related as it also involves a supplier providing goods without immediate transfer of ownership, similar to rack jobbing.
### What key service does a rack jobber provide besides supplying merchandise?
- [ ] Financial lending
- [ ] Employee training
- [ ] Security services
- [x] Inventory management
> **Explanation:** Besides supplying merchandise, a key service provided by rack jobbers is inventory management, ensuring products are adequately stocked and displayed.
Thank you for learning about rack jobbers in the retail industry and for testing your understanding with our quiz. Keep exploring to enhance your knowledge in marketing and retail management!
