1. Types of Retail Business
Retail Lesson 2
Types of Retail Business

2. Types of retailers

3. Lesson Objectives You will be able to:
Explain the NAICS categories for the retail industry
Name the types of business organization
Identify the types of retail business ownership
Describe how competition affects retail evolution

4. NAICS Codes
NAICS
North American Industry Classification System
Used to categorize industries on the North American continent
Helps to easily compare business statistics by industry

5. The Retail Industry
NAICS uses 12 categories and code numbers for the retail industry
These categories classify retailers by the products they sell
A particular retail stores competition would most likely come from another store in their category

6. NAICS Retail Industry Categories
Code
Category
Approximate Number of Stores
441
Motor Vehicle and Parts Dealers
123,000
442
Furniture and Home Furnishings
64,000
443
Electronics and Appliance
44,000
444
Building Material and Garden Equipment and Supplies Dealers
93,000
445
Food and Beverage Stores
149,000
446
Health and Personal Care Stores
83,000
447
Gasoline Stations
127,000
448
Clothing and Clothing Accessories Stores
157,000
451
Sporting Goods, Hobby, Book, and Music Stores
69,000
452
General Merchandise Stores
37,000
Miscellaneous Store Retailers
130,000
454
Non-store Retailers
45,000
Source: U.S. Census Bureau 2002

7. Motor Vehicle and Parts Dealers
Industries in the Motor Vehicle and Parts Dealers subsector retail motor vehicles and parts from fixed point-of-sale locations.
Establishments in this subsector typically operate from a showroom and/or an open lot where the vehicles are on display.

8. Furniture and Home Furnishings Stores
Industries in the Furniture and Home Furnishings Stores subsector retail new furniture and home furnishings from fixed point-of-sale locations.
Establishments in this subsector usually operate from showrooms and have substantial areas for the presentation of their products.
Many offer interior decorating services in addition to the sale of products.

9. Electronics and Appliance Stores
Industries in the Electronics and Appliance Stores subsector retail new electronics and appliances from point-of-sale locations.
Establishments in this subsector often operate from locations that have special provisions for floor displays requiring special electrical capacity to accommodate the proper demonstration of the products.

10. Building Material and Garden Equipment and Supplies Dealers
Industries in the Building Material and Garden Equipment and Supplies Dealers subsector retail new building material and garden equipment and supplies from fixed point-of-sale locations.
Establishments in this subsector have display equipment designed to handle lumber and related products and garden equipment and supplies that may be kept either indoors or outdoors under covered areas.

11. Food and Beverage Stores
Industries in the Food and Beverage Stores subsector usually retail food and beverages merchandise from fixed point-of-sale locations.
Establishments in this subsector have special equipment (e.g., freezers, refrigerated display cases, refrigerators) for displaying food and beverage goods.

12. Health and Personal Care Stores
Industries in the Health and Personal Care Stores subsector retail health and personal care merchandise from fixed point-of-sale locations.
Establishments in this subsector are characterized principally by the products they retail, and some health and personal care stores may have specialized staff trained in dealing with the products.

13. Gasoline Stations
Industries in the Gasoline Stations subsector retail automotive fuels (e.g., gasoline, diesel fuel, gasohol) and automotive oils or retail these products in combination with convenience store items.
These establishments have specialized equipment for the storage and dispensing of automotive fuels.

14. Clothing and Clothing Accessories Stores
Industries in the Clothing and Clothing Accessories Stores subsector retail new clothing and clothing accessories merchandise from fixed point-of-sale locations.
Establishments in this subsector have similar display equipment and staff that is knowledgeable regarding fashion trends and the proper match of styles, colors, and combinations of clothing and accessories to the characteristics and tastes of the customer.

15. Sporting Goods, Hobby, Book, and Music Stores
Industries in the Sporting Goods, Hobby, Book, and Music Stores subsector are engaged in retailing and providing expertise on use of sporting equipment or other specific leisure activities, such as needlework and musical instruments.
Book stores are also included in this subsector.

16. General-Merchandise Retailers
Industries in the General Merchandise Stores subsector retail new general merchandise from fixed point-of-sale locations.
Establishments in this subsector are unique in that they have the equipment and staff capable of retailing a large variety of goods from a single location.
This includes a variety of display equipment and staff trained to provide information on many lines of products.

17. Miscellaneous Store retailers
Industries in the Miscellaneous Store Retailers subsector retail merchandise from fixed point-of-sale locations.
Establishments in this subsector include stores with unique characteristics like florists, used merchandise stores, and pet and pet supply stores as well as other store retailers.

18. Non-Store Retailers
Industries in the Non-store Retailers subsector retail merchandise using methods, such as the broadcasting of infomercials, the broadcasting and publishing of direct-response advertising, the publishing of paper and electronic catalogs, door-to-door solicitation, in-home demonstration, selling from portable stalls and distribution through vending machines.
Establishments in this subsector include mail-order houses, vending machine operators, home delivery sales, door-to-door sales, party plan sales, electronic shopping, and sales through portable stalls (e.g., street vendors, except food).
Establishments engaged in the direct sale (i.e., non-store) of products, such as home heating oil dealers and newspaper delivery service providers are included in this subsector.

19. Retail Sales Associates
Retail sales associates include both those who sell retail merchandise, such as clothing, furniture, and automobiles, (called retail salespersons) and those who sell spare and replacement parts and equipment, especially car parts, (called parts salespersons).
Both groups help customers find the products they want and process customers’ payments.

20. Variety of Merchandise
Most retailers carry merchandise that can be listed in more than one of the category lists.
Merchandise Variety
The product or merchandise lines that a retailer carries
Example: Clothing retailer sells jackets, pants, shirts
Merchandise Assortment
The Number of items within a merchandise line
Example: Shirt category could include woven shirts, knit shirts, and sweaters

21. Types of retail ownership

22. Business Organization
Retail business fall into one of three categories:
Single Proprietorship (Sole Proprietorship)
Partnership
Corporation

23. Single (sole) Proprietorship
A type of business entity that is owned and run by one individual and in which there is no legal distinction between the owner and the business.
The owner receives all profits (subject to taxation specific to the business) and has unlimited responsibility for all losses and debts.
Every asset of the business is owned by the proprietor and all debts of the business are the proprietor's.

24. Partnership
An agreement between two or more persons to go into business together
Each person contributes money, property, labor or skill, and expects to share in the profits and losses of the business.

25. 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 (shareholders) who become the owners of a corporation

26. Independent Stores
A store that is owned privately, having one location.
Generally, stores of this type are individually owned, owned by a family, or owned by two partners who usually live in the community.
Often, entrepreneurs begin their career in independent stores
Person who takes the risk of opening a new business, often acting as the manager and operator of the business

27. Independent Stores Close contact with customers
Can respond quickly to changes in needs of customers
Prices are typically hire
Usually cannot take advantage of buying in large quantities to receive discount prices
Advantages
Disadvantages

28. Chain Stores
Stores that have at least two locations and are owned by one company or person
Local, regional, national, or international

29. Chain Stores Can purchase in higher quantity at better discounts
Usually lower prices
Offer a wide variety of items
Cannot respond as quickly to customer needs and wants
Advantages
Disadvantages

30. Store Groups Owned by large companies or corporations
Different stores operate independently of one another
Example:
Sears Holding Company
Owns both K-Mart and Sears retail stores

31. Manufacturer Retail Stores
Retail stores are owned by a manufacturer
Manufacturer owns a store in a mall to sell its products

32. Franchise Business
Agreement or contract between the franchisor and the franchisee to sell a company’s goods or services at a designated location
Franchisor
Business that leases its trade name and operating 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

33. Pros and Cons of Franchise
Benefit of name recognition
Support and advice from the franchisor
Initial fee smaller than what it would cost to start an independent business
Cons
Royalty Payments. For as long as you are a franchisee, you will have to pay some percentage of the monthly gross back to the franchisor, reducing your profit potential.
Limited Creativity and Flexibility. You must use the franchisor’s system, follow their rules.

34. Other Types of Stores Cooperatives Voluntary Chain Stores
Stores that are owned by a group of people who sell products only to the people who belong to the cooperative
Voluntary Chain Stores
A group of retail stores that carry similar products
Lease Department
Part of a larger retail operation. (Jewelry section in department store)
Lease Dealerships
Retail company owns the building and land where a business is located
Dealer must purchase from the retail company (gas stations)