Chapter 2 Types of Retailers

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.

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)

Variety and Assortment of Kayaks in Different Retail Outlets

Characteristics of Food Retailers

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.

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

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

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.

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.

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

Characteristics of General Merchandise Retailers

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.

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.

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.

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

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

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

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

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

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

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

Types of Non-store Retailers

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

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

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

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

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

Merchandise/Service Continuum

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

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

Franchisor Advantages/Disadvantages 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.

Franchisee Advantages/Disadvantages 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.