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2-1 TYPES OF RETAILERS CHAPTER 02. 2-2 General Trends in Retailing New types of retailers Globalization Growth in services retailing Growth in omnishopping.

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Presentation on theme: "2-1 TYPES OF RETAILERS CHAPTER 02. 2-2 General Trends in Retailing New types of retailers Globalization Growth in services retailing Growth in omnishopping."— Presentation transcript:

1 2-1 TYPES OF RETAILERS CHAPTER 02

2 2-2 General Trends in Retailing New types of retailers Globalization Growth in services retailing Growth in omnishopping by traditional retailers Increase use of technology to reduce cost; Increase value delivered

3 2-3 NAICSNAICS Codes for Retailers

4 2-4 Retailers Use Different Retail Mixes -merchandise: variety (breadth) / assortment (depth)variety assortment -services -store design, visual merchandising -location -pricing Types of Retailers

5 2-5 Retailers Use Different Retail Mixes -merchandise: variety (breadth) / assortment (depth)variety assortment -services -store design, visual merchandising -location -pricing Infinite Variations Some combination of retail mixes satisfy the needs of significant segments and persist over time. Types of Retailers

6 2-6 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)SKUs

7 2-7 Services Offered Retailers differ in the services they offer customers – Wheelworks offers assistance in selecting the appropriate bicycle as well as bicycle repairs. – Wal-Mart, however, doesn’t provide any additional services.

8 2-8 Prices and the cost of offering breath and depth of merchandise and services Stocking a deep and broad assortment (like Wheelworks) is costly for retailers. Many SKUsSKUs Inventory Investment Cost Because the retailer must have backup stock for each SKU in addition to holding the inventory

9 2-9 Illustration of Variety and Assortment Lady Foot LockerSports Authority ActiveSKUs: 44N/A ClassicsSKUs: 44N/A ConverseSKUs: 25N/A Elite RunningSKUs: 22N/A FitnessN/ASKUs: 1 RunningSKUs: 44SKUs: 39 Trail RunningN/ASKUs: 7 TrainingSKUs: 22SKUs: 2 WalkingSKUs: 11SKUs: 12

10 2-10 Food Retailers Channel preference for food shopping channel where grocery purchasers do most of their food shopping – Supermarkets – Supercenters – Warehouse Clubs – Convenience Stores

11 2-11 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

12 2-12 ALDI: German’s Wal-Mart ALDI provides quality merchandise at low prices by reducing its assortment in order to control store operating expenses

13 2-13 ALDI’s Strategy  8,500 worldwide, including 1000 stores in 26 US states  90 percent of population in Germany shop at Aldi Cheap.. Only two brands of toilet paper and one brand of pickles  STRATEGY: Stores sell less products ALDI exclusive label High quality of products at cheaper prices  HOW? Strong control over quality and price Simplify shipping and handling Reduce labor costs by keeping limited store staff, etc.

14 2-14 Trends in Supermarket Retailing Competition Supercenters Warehouse Clubs Convenience Stores Extreme Price Retailers Convenience Stores Drug Stores Changing Consumption Patterns Time PressureEating Out MoreMeal Solutions Distribution Costs Prices

15 2-15 Characteristics of Food Retailers

16 2-16 Supermarkets Conventional supermarkets – Perishables (meat, dairy, produce, and baked goods) account for 30% of supermarket sales 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

17 2-17 ALDI ALDI provides quality merchandise at low prices by reducing its assortment in order to control store operating expenses

18 2-18 Supercenters and Warehouse Clubs Supercenters (Hypermarkets)Hypermarkets The fastest growing retail category Large stores (185,000 square feet) that combine a supermarket with a full-line discount storefull-line discount store One-stop shopping experience 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

19 2-19 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)

20 2-20 Emphasize Fresh Perishables Wegmans Target health conscious and ethnic consumers Offer more private label brands Provide a better in-store experience Conventional Supermarket Survival Pack Chef-crafted meals on the go at EatZi’s

21 2-21 Characteristics of General Merchandise Retailers

22 2-22 Characteristics of General Merchandise Retailers

23 2-23 Department Store Retailing Broad variety Deep assortment Customer service Merchandise displayed into distinct departments Soft goods Hard goods

24 2-24 Issues in Department Store Retailing Competition – Discount stores on price – Specialty stores on service, depth of assortment Lower cost by reducing service – Centralized cash wraps More sales – Customers wait for sale Focus on apparel and soft home Develop private labels and exclusive brands

25 2-25 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

26 2-26 Department stores are: – Attempting to increase the amount of exclusive merchandise they sell – Increase private-label merchandise – Expand multichannel and social media presence Department Stores: What To Do With an Eroding Market

27 2-27 Issues in Full-line 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

28 2-28 Specialty Store Retailers McGraw-Hill Companies, Inc./Andrew Resek, Photographer What challenges do specialty store retailers face?

29 2-29 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 – Victoria’s Secrets Manufacturers opening their own stores McGraw-Hill Companies, Inc./Andrew Resek, Photographer

30 2-30 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

31 2-31 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

32 2-32 Category Specialists Sephora, France’s leading perfume/ cosmetic chain LVMH’s division

33 2-33 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

34 2-34 Off-Price Retailers Close-out retailers Offer an inconsistent assortment of brand name merchandise at low prices TJX Companies (which operates T.J.Maxx, Marshalls, Winners, HomeGoods, TKMaxx, AJWright, and HomeSense), Ross Stores, Burlington Coat Factory, Big Lots. and

35 2-35 Issues in Full-line Discount Store Retailing Broad variety, limited services, and low prices 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

36 2-36 Category Specialists Deep and narrow assortments Destination stores Category killers Low price and service Intense competition Wholesaling to business customers and retailing to consumers Incredible growth Bass Pro Shops

37 2-37 Issues in Specialty Store Retailing Concentrate on a limited number of complementary merchandise categories Narrow but deep assortments Sales associates expertise Among the most profitable and fastest growing firms in the world Growing interest in resale stores McGraw-Hill Companies, Inc./Andrew Resek, Photographer

38 2-38 Issues in Drug Store Retailing Specialty stores that concentrate on health and beauty care 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

39 2-39 Issues in Extreme Value Retailing Focuses on lower income consumers Names mostly imply good value not $1 price points Low cost location Limited services More private-label options and impulse buys Adding food services One of the fastest growing retail segments – Dollar Tree – Family Dollar – Dollar General

40 2-40 Off-Price Retailers Close-out retailers Offer an inconsistent assortment of brand name merchandise at low prices Brand name and designer-label merchandise at % lower than MSRP Offer closeouts and irregulars TJX Companies (which operates T.J.Maxx, Marshalls, Winners, HomeGoods, TKMaxx, AJWright, and HomeSense), and


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