Types of Retailers

1. Chapter 2 Types of Retailers

2. 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.

3. Merchandise Offering 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)

4. Variety and Assortment of Kayaks in Different Retail Outlets

5. Characteristics of Food Retailers

6. SUPERMARKETS • A conventional supermarket is a large, self-service retail food store offering groceries, meat, and produce, as well as some non-food items, such as health and beauty aids and general merchandise. • Whereas conventional supermarkets carry about 30,000 SKUs, limited-assortment supermarkets, or extreme-value food retailers, only stock about 2,000 SKUs.

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

8. Conventional supermarkets are differentiating their offerings • Fresh Merchandise • Health/Organic Merchandise • Ethnic Merchandise • Private-Label Merchandise • Improving the shopping experience • Open-air market designs • Cooking and nutrition classes • Demonstrations • Baby-sitting services • Food tasting

9. Supercenters and Hypermarkets • Supercenters are large stores that combine a supermarket with a full-line discount store. By offering broad assortments of grocery and general merchandise products under one roof, supercenters provide a one-stop shopping experience. • Hypermarkets offer a combination of food and general merchandise stores.

10. Warehouse Clubs • Retailers that offer a limited and irregular assortment of food and general merchandise with little service at low prices for ultimate consumers and small businesses.

11. Convenience Stores • Provide a limited variety and assortment of merchandise at a convenient location with speedy checkout.

12. Characteristics of General Merchandise Retailers

13. Department Stores • Retailers that carry a broad variety and deep assortment, offer customer services, and organize their stores into distinct departments for displaying merchandise. • Each department within the store has a specific selling space allocated to it, as well as salespeople to assist customers.

14. Full-Line Discount Stores • Offer a broad variety of merchandise, limited service, and low prices. Discount store offer both private labels and national brands. • Walmart, Target, and Kmart are the largest full-line discount store chains.

15. Specialty Stores • Concentrate on a limited number of complementary merchandise categories and provide high level of service. • They tailor their retail strategy toward very specific market segments by offering deep but narrow assortments and sales associate expertise.

16. 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

17. 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 Issues in Department Store Retailing

18. 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 Hot Topics Issues in Specialty Store Retailing McGraw-Hill Companies, Inc./Andrew Resek, Photographer

19. Consolidation – Walgreens, CVS, Rite-Aid Competition from 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 Improvedsystems provide personalized service in the pharmacy Issues in Drug Store Retailing

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

21. 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 Issues in Extreme Value Retailing Dollar Tree Family Dollar Dollar General 99 Cents Only Store

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

23. Types of Non-store Retailers

24. What are Amazon and eBay? • http://www.Amazon.com – Merchandise to consumers. Provides website development and fulfillment services to other retailers • eBay – Acts as a mall or other shopping center providing a “place” for buyers and sellers to meet Don Farrall/Getty Images

25. Low Start Up Cost Evolution of Multi-Channel Offering Hard to compete with large well established firms Increasing Mail Costs Clutter from other Catalogs General merchandise catalogs like JC Penney Specialty Catalogs like Victoria Secret Issues in Catalog Retailing

26. Issues in Direct Selling • Completely bypasses retailers and wholesalers • Manufacturers set up their own channels to sell their products directly to consumers • Party plan system: merchandise is demonstrated in a party atmosphere • Multi-level network: Master distributors sell to distributors who sell merchandise • Pyramid schemes: Firm sells to other distributors and little if any merchandise goes to end users

27. Issues in Television Home Shopping • Consumers watch cable stations, infomercials or direct response ads • Few consumers watch regularly • Most purchases made by small proportion of viewers • Customers can’t examine merchandise • Customers must wait for merchandise to come on • Sells predominately jewelry, apparel, cosmetics, kitchenware, and exercise equipment

28. Issues in Vending Machine Retailing • Automatic Merchandising • About $25 billion worth of convenience goods are sold to Americans through 4.7 million vending machines • Sales growth has been declining due to higher prices and healthier eating habits • New technology may help sales growth • Trend of placing machines in captive consumer locations

29. Merchandise/Service Continuum

30. Services vs. Merchandise Retailers • 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

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

32. Franchisor Advantages/Disadvantages Advantages Rapid expansion, highly motivated franchisees do a good job, additional profits by selling franchisees products and services. Disadvantages Company-owned units may be more profitable, less control then independent retailers over advertising, pricing, personnel practices, etc.

33. Franchisee Advantages/Disadvantages Advantages Established/proven product/service, business and technical assistance, and reduction in risk. Disadvantages Loss of control since only semi-independent, franchisee outlets may compete with corporate-owned outlets, and high royalties, fees, costs on equipment, supplies, merchandise, rental/lease rates and mandatory participation in promotional and support services.