3 Types of Retailers Retailers Use Different Retail Mixes -merchandise: variety (breadth) / assortment (depth)-services-store design, visual merchandising-location-pricingInfinite VariationsSome combination of retail mixes satisfy the needs of significant segments and persist over time.
4 Merchandise Offering Variety (breadth of merchandise): wide vs. narrow - The number of merchandise categoriesAssortment (depth of merchandise): deep vs. shallow-the number of items in a category (SKUs)
5 Variety and Assortment of Kayaks in Different Retail Outlets
7 Trends in Supermarket Retailing Competition from Discount StoresChanging Consumption PatternsEfficientDistributionLower CostsLower PricesTime PressureEating Out MoreMeal Solutions
8 Save-A-LotSave-A-Lot’s limited assortment format means that stores carry the most frequently purchased grocery items in the most popular size and varietyThe company carries high quality exclusive brands – many produced by the same manufacturers of leading name brands – and an assortment of nationally branded items.This allows Save-A-Lot to offer savings of up to 40% compared to conventional grocery stores – without asking shoppers to sacrifice quality.
9 Characteristics of General Merchandise Retailers
10 Three Tiers of Department Stores First Tier: Upscale, high fashion chains with exclusive designer merchandise and excellent customer serviceNordstrom, Neiman Marcus, SaksSecond Tier: Retailers sell more modestly priced merchandise with less customer serviceMacy’sThird Tier: Value oriented caters to more price conscious customerJCPenney, Sears, Kohl’s
11 Issues in Department Store Retailing Competition-Discount Stores on Price-Specialty Stores on Service, Depth of AssortmentLower Cost by Reducing Services (?)-Centralized Cash WrapsMore Sales (?)-Customers Wait for SaleFocus on Apparel and Soft HomeDevelop Private Labels and Exclusive Brands
12 Issues in Discount Store Retailing Only Big LeftWal-Mart, TargetWal-Mart’s DominanceDifferentiate StrategyWal-Mart = Low Price and Good valueTarget = More Fashionable ApparelCompetition from Category SpecialistsToys-R-Us, Circuit City, Sports Authority
13 Issues in Specialty Store Retailing Mall-Based Apparel RetailersDecline in Mall Shopping and Apparel Sales-Lack of New Fashions-Less Interest in Fashion-Increased Price ConsciousnessLifestyle Formats –Abercrombie and FitchHot TopicsMcGraw-Hill Companies, Inc./Andrew Resek, Photographer
14 Issues in Drug Store Retailing Consolidation – Walgreens, CVS, Rite-AidCompetition from Supermarkets, discount Stores and mail-in ordersEvolution to a New Format-Stand Alone Sites with Drive Thru Windows-offering more frequent purchase food itemsImproved systems provide personalized service in the pharmacy
15 Category Specialists Deep and Narrow Assortments Destination Stores Category killersLow Price and ServiceWholesaling to Business Customers and Retailing to ConsumersIncredible GrowthBass Pro Shops
16 Category Specialists: Home Improvement Centers Home Depot and Lowes act as both:Retailer and WholesalerConsumer Business
17 Issues in Extreme Value Retailing Focuses on Lower Income ConsumersNames mostly imply good value not $1 price pointsLow Cost LocationLimited ServicesOne of the Fastest Growing Retail SegmentsDollar TreeFamily DollarDollar General99 Cents Only Store
18 Off-Price Retailers Close-out retailers Offer an inconsistent assortment of brand name merchandise at low pricesTJX companies (T.J. Maxx, Marshalls. HomeGoods)Ross Stores, Burlington Coat factory, Big Lots, Tuesday Morning
20 What are Amazon and eBay? – Merchandise to consumers. Provides website development and fulfillment services to other retailerseBay – Acts as a mall or other shopping center providing a “place” for buyers and sellers to meetDon Farrall/Getty Images
21 Issues in Catalog Retailing Low Start Up CostEvolution of Multi-Channel OfferingHard to compete with large well established firmsIncreasing Mail CostsClutter from other CatalogsGeneral merchandise catalogs like JC PenneySpecialty Catalogs like Victoria Secret
22 Issues in Direct Selling Completely bypasses retailers and wholesalersManufacturers set up their own channels to sell their products directly to consumersParty plan system: merchandise is demonstrated in a party atmosphereMulti-level network: Master distributors sell to distributors who sell merchandisePyramid schemes: Firm sells to other distributors and little if any merchandise goes to end users
23 Issues in Television Home Shopping Consumers watch cable stations, infomercials or direct response adsFew consumers watch regularlyMost purchases made by small proportion of viewersCustomers can’t examine merchandiseCustomers must wait for merchandise to come onSells predominately jewelry, apparel, cosmetics, kitchenware, and exercise equipment
24 Issues in Vending Machine Retailing Automatic MerchandisingAbout $25 billion worth of convenience goods are sold to Americans through 4.7 million vending machinesSales growth has been declining due to higher prices and healthier eating habitsNew technology may help sales growthTrend of placing machines in captive consumer locations
26 Services vs. Merchandise Retailers IntangibilityProblems in Evaluating Service QualityPerformance of Service ProviderSimultaneous Production and DeliveryImportance of Service ProviderPerishabilityNo Inventory, Must Fill CapacityInconsistency of the OfferingImportance of HR Management
27 Types of Retail Ownership Independent, Single Store EstablishmentsWholesale-sponsored voluntary groupCorporate Retail ChainsFranchises(c) Brand X Pictures/PunchStock
28 Franchisor Advantages/Disadvantages Rapid expansion, highly motivated franchisees do a good job, additional profits by selling franchisees products and services.DisadvantagesCompany-owned units may be more profitable, less control then independent retailers over advertising, pricing, personnel practices, etc.
29 Franchisee Advantages/Disadvantages Established/proven product/service, business and technical assistance, and reduction in risk.DisadvantagesLoss 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.