Types of Retail Ownership Types of Retailers Types of Retail Ownership 2

Chapter Objectives Explain the NAICS categories for the retail industry. Name the types of business organization. Identify the types of retail business ownership. Understand how competition affects retail evolution. 3

Using Categories Retailers are as diverse as the goods and services that people need and want. Retailers are categorized by the type of merchandise or products that a particular retailer offers. 4

NAICS Codes The use of the NAICS allows North American nations to compare business statistics by industry. NAICS North American Industry Classification System, a system used to categorize industries in North America, developed by the United States, Canada, and Mexico 5

NAICS Codes The NAICS uses 12 categories and code numbers for the retail industry. The 12 categories classify retailers by the types of products they sell. 6

NAICS Codes NAICS Retail Industry Categories Code Category Motor Vehicle and Parts Dealers 442 Furniture and Home Furnishing Stores 443 Electronics and Appliance Stores 444 Building Material and Garden Equipment and Supplies Dealers 445 Food and Beverage Stores 446 Health and Personal Care Stores 447 Gasoline Stations 448 Clothing and Clothing Accessories Stores 451 Sporting Goods, Hobby, Book, and Music Stores 452 General Merchandise Stores 453 Miscellaneous Store Retailers 454 Non-Store Retailers 7

Shopping by Bot With all kinds of retail businesses opening their virtual doors in cyberspace, you could be clicking your mouse for days before finding the right stuff at the right price. Operating an e-tail business on an electronic channel—the Web—can be costly, due to design, delivery, returns, and operating expenses. Though Many larger dot-com companies crashed in the 1990’s, small stores like Harris Cyclery of West Newton, Massachusetts, actually increase sales using a basic Web site. Today, a third of Harris’s bicycle business rides in on the Web to get hard-to-find parts and personal service. Describe an e-business’s home page to your class after viewing one through marketingseries.glencoe.com. Shopping bots to the rescue! Thirty-six percent of Americans search the Net using nifty search engines like PriceScan, MySimon, and BizRate that comb the Web and spot good deals. Beware, however, that some merchants will pay bots for top slots. For more information on retailing, go to marketingseries.glencoe.com. 8

Retail Sales Associates Retail sales associates receive both general sales training and special product training. sales associates retail employees who sell merchandise and products to customers 9

Variety of Merchandise Most retailers carry merchandise that falls into more than one category. Retailers put together merchandise variety that their customers want to buy. merchandise variety the product or merchandise lines that a retailer carries 10

Variety of Merchandise Retailers also offer merchandise assortment. merchandise assortment the number of items within a merchandise line 11

Why is the NAICS important? 1. Why is the NAICS important? How many NAICS categories are there for the retail industry? How are store and non-store retailers alike? How are they different? 2. Quick Check Answers NAICS is important because it enables nations to compare business statistics by industry; it enables retailers to get an idea about their competition. There are 12 categories and code numbers for the retail industry. Store retailers sell their products from a fixed location that customers visit to make their purchases. Non-store retailers sell their products from locations that the customer may not have to visit in order to make their purchases. For instance, a catalog retail purchase can be made from the customer’s home. 3. 12

Who Owns the Store? The types of business ownership vary from the very small, one-owner business to the huge corporation with thousands of stockholders as owners. 13

Business Organization single proprietorship a business that is owned by one person Retail businesses fall into one of three types of organizations: Single proprietorship Partnership Corporation partnership an agreement between two or more persons to go into business together corporation a form of business for which a charter is granted by the state in which the business will be established. The corporation sells stock to investors who become the owners of the corporation. 14

Types of Stores and Ownership An independent store is often the vehicle for an entrepreneur to begin his or her career. independent store a store that is owned privately, having one location entrepreneur person who takes the risk of opening a new business, often acting as the manager and operator of the business 15

Types of Stores and Ownership The owners of chain stores are usually located some distance from the local store. chain stores stores that have at least two locations and are owned by one company or person Store groups are owned by large companies. Sears, Lands’ End, and Allstate Insurance are owned by one corporation, but each is operated independently. 16

Types of Stores and Ownership Manufacturer retail stores are owned by a manufacturer. These stores might be located in malls or at factory outlet malls. Factory stores are manufacturer retail stores located at factory outlet malls. 17

Types of Stores and Ownership franchise agreement or contract between the franchisor and franchisee to sell a company’s goods or services at a designated location The franchise system allows a business (the franchisor) to lease its trade name or business system to another business entity (the franchisee). franchisor a business that leases its trade name and operation system to another person, or franchisee franchisee person or persons who pay a fee to a company to operate a business under the franchisor’s trade name 18

Types of Stores and Ownership Cooperatives are stores that are owned by a group of people who sell products only to the people who belong to the cooperative. Cooperatives are also known as co-ops. People interested in a cooperative buy stock in the business and become eligible to participate in the cooperative. 19

Types of Stores and Ownership A voluntary chain consists of a group of retail stores that carry similar products. Lease departments are usually part of a larger retail operation. Lease dealerships occur when a retail company owns the building and land where a business is located. 20

Retail Evolution Competition is fierce among similar types of retail businesses. Retailers are constantly reinventing themselves and how they do business. Retailing is in a constant state of evolution. 21

Retailer Retail Evolution Before After Innovation and Reinvention 22

What are the three types of business organization? 1. What are the three types of business organization? What is a franchise? How is an independent store different from chain stores? 2. Quick Check Answers single proprietorship, partnership, and corporation It’s an agreement or contract between the franchisor and franchisee to sell a company’s products or services at a designated location. A business [franchisor] leases its trade name to another business entity [franchisee] who pays the franchisor a fee. Chain stores have at least two locations owned by one company or person, while an independent store is privately owned; it has one location, and the owner has no agreements with merchandise groups or franchises. 3. 23

Checking Concepts Explain what NAICS means. 1. 2. The NAICS is used by retailers in Canada, the United States, and Mexico to classify retailers by the types of products they sell. 2. Answers should include three of the following: motor vehicle and parts dealers; furniture and home furnishings stores; electronics and appliance stores; building material and garden equipment and supplies dealers; food and beverage stores; health and personal care stores; gasoline stations; clothing and clothing accessories stores; sporting goods, hobby, book, and music stores; general merchandise stores; miscellaneous store retailers; and non-store retailers. 3. NAICS stands for North American Industry Classification System, a system used to categorize industries on the North American continent. 1. 2. Identify who uses the NAICS and explain what it does. Checking Concepts Answers NAICS stands for North American Industry Classification System, a system used to categorize industries on the North American continent. The NAICS is used by retailers in Canada, the United States, and Mexico to classify retailers by the types of products they sell. Answers should include three of the following: motor vehicle and parts dealers; furniture and home furnishings stores; electronics and appliance stores; building material and garden equipment and supplies dealers; food and beverage stores; health and personal care stores; gasoline stations; clothing and clothing accessories stores; sporting goods, hobby, book, and music stores; general merchandise stores; miscellaneous store retailers; and non-store retailers. Name three of the categories identified by the NAICS. 3. continued 24

Checking Concepts 4. Define single proprietorship and partnership. 5. In a single proprietorship, the owner makes all of the business decisions and assumes all of the business risks. The owner also keeps all of the profits. In a partnership, the partners jointly share advantages and risks of business ownership. A corporation is a more complex form of business organization. A corporation is owned by the shareholders who buy stock in the corporation. The shareholders' liability for loss is limited to the amount of stock they have purchased. 5. A franchise is an agreement between a franchisor and a franchisee. The franchisee pays a fee and royalties to the franchisor for the right to lease the franchisor's trade name and operating system. Franchise is also the term used to describe the business operating under this system. 7. An entrepreneur is the person who takes the risk of opening a new business. 6. Single proprietorship is a business that is owned by one person. Partnership is an agreement between two or more persons to go into business together. 4. 5. Compare the three types of business organization. Checking Concepts Answers Single proprietorship is a business that is owned by one person. Partnership is an agreement between two or more persons to go into business together. In a single proprietorship, the owner makes all of the business decisions and assumes all of the business risks. The owner also keeps all of the profits. In a partnership, the partners jointly share advantages and risks of business ownership. A corporation is a more complex form of business organization. A corporation is owned by the shareholders who buy stock in the corporation. The shareholders' liability for loss is limited to the amount of stock they have purchased. An entrepreneur is the person who takes the risk of opening a new business. A franchise is an agreement between a franchisor and a franchisee. The franchisee pays a fee and royalties to the franchisor for the right to lease the franchisor's trade name and operating system. Franchise is also the term used to describe the business operating under this system. Define entrepreneur. 6. 7. Explain the terms franchise, franchisee, and franchisor. continued 25

Checking Concepts Critical Thinking Answers should include two of the following: Independent stores are owned privately; chain stores have at least two locations; group stores are usually owned by large companies or corporations (e.g., Sears Roebuck); manufacturer retail stores are retail stores owned by a manufacturer; cooperatives are stores that are owned by a group of people and sell their products only to the people who belong to the cooperative; voluntary chain stores are a group of retail stores that carry similar product offerings and form a voluntary association in order to purchase products at more favorable prices; lease departments are small businesses that make an agreement with a larger store to rent space; and lease dealerships exist when a company owns the building and land where the business is located. 8. 8. Name and describe two types of retail business ownership other than franchise ownership. Checking Concepts Answers Answers should include two of the following: Independent stores are owned privately; chain stores have at least two locations; group stores are usually owned by large companies or corporations (e.g., Sears Roebuck); manufacturer retail stores are retail stores owned by a manufacturer; cooperatives are stores that are owned by a group of people and sell their products only to the people who belong to the cooperative; voluntary chain stores are a group of retail stores that carry similar product offerings and form a voluntary association in order to purchase products at more favorable prices; lease departments are small businesses that make an agreement with a larger store to rent space; and lease dealerships exits when a company owns the building and land where the business is located. 26

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