1. Module 2: Retail Environment Analysis
Retail Management
Module 2: Retail Environment Analysis

2. Retailer Classification

3. Structural Organization of Retailers
Five Primary Ownership Types:
Corporate chain: multiple stores, central ownership, and consistent standards operating on a large scale
Independent store: buy products through wholesalers which apply an upcharge for warehousing and handling product
Wholesaler: product distributors focused on supply chain and logistics
Franchise: owned by individual business owners who have contracted with larger company
Co-op: when several independent retailers join together to consolidate purchases, increasing buying power

4. Advantages and Disadvantages of Retailer Types
Club and Warehouse Stores: offer greatest value, but require memberships and have high priced items
Mass Merchandisers: low prices, but busy
Convenience and Drug Stores: limited selection
Discount and Dollar Stores: low prices but less known brands
Natural and Organic Stores: array of unique items at high price
Specialty Retailers
Online Retailers
Traditional Grocers: wide assortment, but not low prices
Club and Warehouse Stores: BJ’s, Costco, Sam’s Club offer lowest price per unit and carry only about 10% of the total number of products available in a typical grocery store
Mass Merchandisers: Wal-Mart, Target, and Kmart provide shoppers with one-stop shop by offering multiple categories, a broad selection, and deep inventory creating contact efficiency
Convenience and Drug Stores: opportunistic food retailers, offering single-serve portions, smaller package sizes, and high velocity items
Discount and Dollar Stores: Aldi’s, Dollar Tree are no-frills value formats that primarily stock shelf-stable, packaged food. Staffing is minimal
Natural and Organic Stores: Whole Foods, Sprouts, Trader Joe’s cater to health-conscious shoppers, offering generally priced foods at a significant premium to traditional grocery products
Specialty Retailers: on the rise as alternative to mass merchandisers and online retailers, such as bakers and butchers
Online Retailers: Wal-Mart offers at home delivery, also companies like Blue Apron and Hello Fresh send meal preparation kits
Traditional Grocers: primary retail outlet for food sales (grocery stores and supermarkets)

5. Food Retailers

6. Changes in Food Retailing
Convenience: is the store nearby? Is there ample parking? Will they have what I need? Customer Service: is this a place I like to shop? Is the store clean? Are the staff available/helpful, can I get in and out quickly Groceries have moved to whole host of other channels, where non-traditional formats use groceries to increase store traffic and revenue

7. Variety and Assortment of Goods in Food Retail
Categories such as soup divided into several segments & sub-segments, which can be further divided into brands and into Stock Keeping Units
Segments and sub-segments: dry soup (ramen), ingredients
Leading brands: Campbell’s, Progresso
Retailers make assortment decisions at category, segment, brand, & SKU level
Family Dollar vs. Sam’s Club
Limit to how much differentiation there will be by company

8. Current Trends in Food Retail
Rise of healthy food Single living through food Diversity in food The future is convenient Home automation Cost pressure
Rise of healthy food: baby boomers have become more focused on diet and the role that food plays in managing wellness (sugar-free, fat-free, low-sodium products)
Single living: those who have put off life events want smaller pack size and flexible packaging
Diversity in food: cultural changes mean food and flavor variety
Future is convenient: online grocery delivery and subscription services
Home automation: appliances can communicate, impacting the way people shop for food
Cost pressure: wage inflation is a concern, efforts for large companies to reduce labor costs

9. Service and Merchandise Retailers

10. Assortment Levels and Types of Retailers
Department stores: offer broad assortments of products with multiple departments separating product categories
Category specialist: retailers that specialize in one category of products (Office Depot, Toys R Us)
Specialty stores: specific type of products they sell (florists, locksmiths, hardware stores)
Full line discount stores: retailers that provide name-brands at lower cost
Drug stores: smaller variety, but have depth in assortment of health products
Off-price stores: high quality products at cheap prices

11. Adapting to the Current Landscape
Lack of product differentiation is reason some retailers have developed private label or store brand items Merchandise retailers: focus more on product quality to differentiate themselves from competition Customer service: focus of service retailers

12. Types of Service Retailers
No service, such as Amazon Go concept stores that don’t have associates or check lanes Self-service, such as most grocery shopping experiences: product available on-shelf for shopper’s selection Full-service: accepting multiple forms of payment, delivery services, recommendations, allowing returns, allowing special orders, providing customer loyalty programs
cost is increased labor, requires premium pricing

13. Store-Based Strategy Mixes

14. Wheel of Retailing
Entry: retailer penetrates a new market, ex: low prices, low retailer margins, low customer awareness
focus on streamlining operations to support new venture
Growth: retailer has foothold in new market and seeks to expand
higher prices and retailer margins, improved customer awareness
Maturity: retailer operates at full capacity
robust infrastructure, capabilities, and service
Decline: retailer is vulnerable to lower cost operations
doesn’t mean retailer will fail

15. Scrambled Merchandising
Retail tactic in which retailer broadens assortment to include items that are generally outside their focus Adds to shopping experience rather than distracting Risk comes when unexpected items are included in assortment that confuse shoppers. Can detract from experience and tarnish retailer’s brand image
Furthermore, if the new products aren’t appreciated or shopped, they can risk high inventory, leading to markdowns and write-offs

16. Evolving Through Mergers, Diversification, and Downsizing
Throughout 1990s, retail food industry underwent period of consolidation Consolidation lead to long-term trend where sales are concentrated among fewer number of retailers (1992, 20 largest food retailers accounted for 39.2% of grocery sales; 2000, 54.7%, 2016, 66.6%) Mergers and Acquisitions: transactions in which ownership of companies & business organizations are combined
Merger is legal consolidation of two entities into one
Acquisition occurs when one entity takes ownership of another’s
M&A’s can help organizations grow, shrink, or change nature of business

17. Competitive Analysis

18. Obtaining Information on Competition
Industry:
Government reports, white papers, industry publications
Specific competitors:
Press releases, financial reporting, weekly circulars, store visits
US federal government publishes information on industry trends or you can set up Google Alerts to track competition Begin with weekly circulars published by competitors and evaluate their items or spend time visiting competition

19. NAICS Codes and Direct Competitors
North American Industry Classification System: Common codes:
445110: supermarkets and grocery stores
445120: convenience stores
445220: fish and seafood markets
445230: fruit and vegetable markets
446110: pharmacies and drug stores
452311: warehouse clubs and supercenters
452319: all other general merchandise stores

20. Quick Review
Over 20 years, groceries have moved from grocery stores and supermarkets to whole host of other channels
Existing grocery formats are competing with host of new competitors
Pressure of e-commerce will continue, and mobile technology has changed shopper behavior
Demographic changes in population: baby-boomers are reflecting interest in health and wellness
Wage pressure: cost of labor is concern but companies are trying to ease these pressures
Many reasons to be optimistic for future of retail: moving into period of experiential shopping, rise in specialty stores