Types of Retailers

1. Types of Retailers CHAPTER 2

2. The World of Retailing

3. Questions • What trends shape today’s retailers? • What are the different types of retailers? • How do retailers differ in terms of how they meet the needs of their customers? • How do service retailers differ from merchandise retailers? • What are the types of ownership for retail firms?

4. General Trends in Retailing • New Types of Retailers • Increased Concentration • Globalization • Growth In Services Retailer • Demise of Pure Electronic Retailers (Webvan, eToys, etc) • Growth in Use of Multi-Channel Retailing by Traditional Retailers • Increase Use of Technology to Reduce Cost; Increase Value Delivered

5. Types of Retailers • Retailers Use Different Retail Mixes -merchandise: variety (breadth) / assortment (depth) -services -store design, visual merchandising -location -pricing • Infinite Variations • Some combination of retail mixes satisfy the needs of significant segments and persist over time.

6. Bag Borrow or Steal

7. Retailer Characteristics • Variety (breadth) • Assortment (depth) • Services Offered • Prices and the cost of offering breath and depth of merchandise and services

8. Variety(breadth of merchandise): wide vs. narrow - The number of merchandise categories Assortment(depth of merchandise): deep vs. shallow -the number of items in a category (SKUs) Merchandise Offering

9. Services Offered • Retailers differ in the services they offer customers • EMS offers assistance in selecting the appropriate kayak and repairing them VS • Outdoorplay.com and • Wal-Mart: doesn’t provide any services

10. Prices and the cost of offering breath and depth of merchandise and services • Stocking a deep and broad assortment (like EMS) is costly for retailers. Many SKUs Because the retailer must have backup stock for each SKU in addition to holding the inventory Inventory Investment Cost

11. Types of Merchandise Retailers Mom and Pop Stores Convenience Stores Supermarkets Supercenters Department Stores Specialty Stores Discount Stores Category Specialists Off-Price Retailers Warehouse Clubs Value Retailers Food Retailers GeneralMerchandise Retailers

12. Sales and growth rate for retail sectors

13. Food Retailers • Channel preference for food shopping channel where grocery purchasers do most of their food shopping • Supermarkets • Supercenters • Warehouse Clubs • Convenience Stores

14. Characteristics of Food Retailers

15. Supermarkets • Conventional supermarkets • 30,000 SKU • Limited assortment supermarkets (extreme value food retailers) • 2000 SKU • Offer one or two brands and sizes • Designed to maximize efficiency and reduce costs • Offer merchandise at 40-60% lower prices than conventional supermarkets

16. ALDI: German’s Wal-Mart ALDI provides quality merchandise at low prices by reducing its assortment in order to control store operating expenses

17. Trends in Supermarket Retailing • Competition from Discount Stores • Changing Consumption Patterns Efficient Distribution Lower Costs Lower Prices Time Pressure Eating Out More Meal Solutions

18. Conventional Supermarket Survival Pack • Emphasize Fresh Perishables • Wegmans • Target health conscious and ethnic consumers • Provide a better in-store experience • Offer more private label brands Chef-crafted meals on the go at EatZi’s

19. Supercenters and Warehouse Clubs Supercenters Warehouse Clubs Offer a limited and irregular assortment of food and general merchandise with little service at low prices Use low-locations, inexpensive store design, little customer service Low inventory holding costs by carrying a limited assortment of fast selling items • The fastest growing retail category • Large stores (150,000 – 220,000 square feet) that combine a supermarket with a full-line discount store • One-stop shopping experience

20. Convenience Store • Tailors assortments to local market • Makes more convenient to shop • Offers fresh, healthy food • Fast, casual restaurants • Financial services available • Opening smaller stores closer to consumers (like airports)

21. General Merchandise Retailers • Department Stores • Specialty Stores • Category Specialists • Home Improvement Centers • Discount Stores • Drugstores • Off-Price retailers • Extreme Value Retailers

22. Characteristics of General Merchandise Retailers

23. Issues in Department Store Retailing • Competition • Discount Stores on Price • Specialty Stores on Service, Depth of Assortment • Lower Cost by Reducing Services • Centralized Cash Wraps • More Sales • Customers Wait for Sale • Focus on Apparel and Soft Home • Develop Private Labels and Exclusive Brands

24. Three Tiers of Department Stores • First Tier: Upscale, high fashion chains with exclusive designer merchandise and excellent customer service • Nordstrom, Neiman Marcus, Saks • Second Tier: Retailers sell more modestly priced merchandise with less customer service • Macy’s • Third Tier: Value oriented caters to more price conscious customer • JCPenney, Sears, Kohl’s Rob Melnychuk/Getty Images

25. Department Stores:What To Do With an Eroding Market • Department stores are: • attempting to increase the amount of exclusive merchandise they sell • undertaking marketing campaigns to develop strong images for their stores and brands • building better relationships with their key customers Royalty-Free/CORBIS

26. Issues in Discount Store Retailing • Only Big Left • Wal-Mart, Target • Wal-Mart’s Dominance • Differentiate Strategy • Wal-Mart = Low Price and Good value • Target = More Fashionable Apparel • Competition from Category Specialists • Toys-R-Us, Best Buy, Sports Authority McGraw-Hill Companies, Inc. Gary He, photographer

27. Issues in Specialty Store Retailing • Mall-Based Apparel Retailers • Decline in Mall Shopping and Apparel Sales • Lack of New Fashions • Less Interest in Fashion • Increased Price Consciousness • Lifestyle Formats • Abercrombie and Fitch McGraw-Hill Companies, Inc./Andrew Resek, Photographer

28. Specialty Store Retailers McGraw-Hill Companies, Inc./Andrew Resek, Photographer

29. Issues in Drug Store Retailing • Consolidation • Walgreens, CVS, Rite-Aid • Competition • Supermarkets, Discount Stores and Mail-in orders • Evolution to a New Format • Stand Alone Sites with Drive Thru Windows • offering more frequent purchase food items • Improved systems provide personalized service

30. Category Specialists • Deep and Narrow Assortments • Destination Stores • Category killers • Low Price and Service • Wholesaling to Business Customers and Retailing to Consumers • Incredible Growth Bass Pro Shops

31. Category Specialists Sephora, France’s leading perfume/ cosmetic chain LVMH’s division

32. Category Specialists: Home Improvement Centers Home Depot and Lowes act as both: Retailer and Wholesaler ConsumerBusiness

33. Home Improvement Centers • Displayed in a warehouse atmosphere • Customer Service: How to select and how to use merchandise • Competition focuses on price, effort to differentiate and services provided Ryan McVay/Getty Images

34. Issues in Extreme Value Retailing • Focuses on Lower Income Consumers • Names mostly imply good value not $1 price points • Low Cost Location • Limited Services • One of the Fastest Growing Retail Segments • Dollar Tree • Family Dollar • Dollar General • 99 Cents Only Store

35. Off-Price Retailers • Close-out retailers • Offer an inconsistent assortment of brand name merchandise at low prices • TJX companies (T.J. Maxx, Marshalls) • Ross Stores, Burlington Coat factory, Big Lots, Tuesday Morning

36. Services Retailing • Intangibility • Problems in Evaluating Service Quality • Performance of Service Provider • Simultaneous Production and Delivery • Importance of Service Provider • Perishability • No Inventory, Must Fill Capacity • Inconsistency of the Offering • Importance of HR Management

37. Examples of Service Retailers Type of ServiceService Retail Firms Airlines American, Delta, British Airways, Singapore Airways Automobile maint/repair Jiffy Lube, Midas, AAMCO Automobile rental Hertz, Avis, Budget, Alamo Banks Citibank, NCNB, Bank of America Child care centers Kindercare, Gymboree Credit cards American Express, VISA, Mastercard Education University of Florida, Babson College Entertainment parks Disney, Universal Studios, Six Flags Express package delivery Federal Express, UPS, US Postal Service Financial services Merrill Lynch, Dean Witter Fitness Jazzercise, Bally’s, Gold’s Gym Health Care Humana, HCA Home maintenance Chemlawn, MiniMaid, Roto-Rooter

38. Merchandise/Service Continuum

39. Types of Retail Ownership • Independent, Single Store Establishments • Wholesale-sponsored voluntary group • Corporate Retail Chains • Franchises (c) Brand X Pictures/PunchStock

40. Retailers Using Franchise Business Model

41. Franchising • 30 – 40% of US Retail Sales • Franchisee Pays Fixed Fee Plus % of Sales • Franchisee Implements Program • Why is this Ownership Format Efficient? The McGraw-Hill Companies, Inc./Jill Braaten, photographer