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Types of Retailers Chapter 2 McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.

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Presentation on theme: "Types of Retailers Chapter 2 McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved."— Presentation transcript:

1 Types of Retailers Chapter 2 McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.

2 2-2 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?

3 2-3 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

4 2-4 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.

5 2-5 Different Retail Mixes ■ Merchandise: variety (breadth) ■ Assortment (depth) ■ Services ■ Store design, visual merchandising ■ Location ■ Pricing

6 2-6 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 RetailersGeneral Merchandise Retailers

7 2-7 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)

8 2-8 Food Retailers ■Supermarkets ■Supercenters ■Warehouse Clubs ■Convenience Stores Channel preference for food shopping channel where grocery purchasers do most of their food shopping

9 2-9 Characteristics of Food Retailers

10 2-10 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 Save-A-Lot, ALDI (German’s Wal-Mart)

11 2-11 ALDI: German’s Wal-Mart ALDI provides quality merchandise at low prices by reducing its assortment in order to control store operating expenses

12 2-12 ALDI’s Strategy  4,100 stores in Germany and 6,600 worldwide, including 800 stores in 26 US states 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.

13 2-13 Trends in Supermarket Retailing Competition from Discount Stores Changing Consumption Patterns Efficient Distribution Lower CostsLower Prices Time PressureEating Out MoreMeal Solutions

14 2-14 Conventional Supermarket Survival Pack Chef-crafted meals on the go at EatZi’s ■Emphasize Fresh Perishables Wegmans ■Target health conscious and ethnic consumers ■Provide a better in-store experience ■Offer more private label brands

15 2-15 Supercenters and Warehouse Clubs ■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 Supercenters ■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 Warehouse Clubs

16 2-16 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)

17 2-17 Types of General Merchandise Retailers ■Department Stores ■Specialty Stores ■Category Specialists ■Home Improvement Centers ■Discount Stores ■Drugstores ■Off-Price retailers ■Extreme Value Retailers

18 2-18 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

19 2-19 Department Stores : What To Do With an Eroding Market Royalty-Free/CORBIS To deal 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

20 2-20 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, Circuit City, Sports Authority McGraw-Hill Companies, Inc./Gary He, photographer

21 2-21 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 Hot Topics McGraw-Hill Companies, Inc./Andrew Resek, Photographer

22 2-22 Specialty Store Retailers McGraw-Hill Companies, Inc./Andrew Resek, Photographer

23 2-23 Issues in Drug Store Retailing ■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 ■Improved systems provide personalized service in the pharmacy

24 2-24 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

25 2-25 Category Specialists Sephora, France’s leading perfume/cosmetic chain LVMH’s division

26 2-26 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

27 2-27 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

28 2-28 Types of Non-store Retailers

29 2-29 Electronic Retailing ■Many retailers operate from virtual storefronts on the World Wide Web, usually maintaining little or no inventory, ordering directly from vendors to fill customer orders ■History of frenzied investments and false predictions of retail dominance ■Primarily used by traditional retailers to compliment store and catalog offerings ■Exclusive e-tailers target small and dispersed niche markets

30 2-30 What are Amazon and eBay? ■ – 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

31 2-31 Issues in Catalog Retailing ■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

32 2-32 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

33 2-33 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

34 2-34 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

35 2-35 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

36 2-36 Merchandise/Service Continuum

37 2-37 Types of Retail Ownership (c) Brand X Pictures/PunchStock ■Independent, Single Store Establishments Wholesale-sponsored voluntary group ■ Corporate Retail Chains ■ Franchises

38 2-38 Retailers Using Franchise Business Model

39 2-39 Franchising The McGraw-Hill Companies, Inc./Jill Braaten, photographer ■30 – 40% of US Retail Sales ■Franchisee Pays Fixed Fee Plus % of Sales ■Franchisee Implements Program ■Why is this Ownership Format Efficient?

40 2-40 Reasons for Franchising Growth Technological advances Profitable utilization of capital resources Attainment of the “American Dream” Demographic expansion Product/service consistency

41 2-41 Reasons for Franchising Failure Inept management Fraudulent activities Market saturation

42 2-42 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.

43 2-43 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.

44 2-44 Franchising Trends for the New Millennium Sustained growth Enduring plus un-imagined applications International expansion Increasing tensions Greater emphasis on financial returns

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