Chapter 2

Types of Retailers

The World of Retailing

Growing Diversity of Formats

Increasing Industry Concentration

Globalization

General Trends in Retailing

• New Types of Retailers

• Increased Concentration

• Globalization

• Growth In Services Retailer

• Growth in Use of Multi-Channel Retailing by Traditional Retailers

• Increase Use of Technology to Reduce Cost, Increase Value Delivered

Food Retailers

Mom and Pop Stores

Convenience Stores

Supermarkets

Supercenters

General Merchandise RetailersDepartment Stores

Specialty Stores

Discount Stores

Category Specialists

Off-Price Retailers

Warehouse Clubs

Types of Retailers

Globalization of Wal-Mart

Conventional Supermarket Survival Pack

Emphasize Fresh Perishables

Target health conscious and ethnic consumers

Provide a better in-store experience

Offer more private label brands

Food Retailers Supermarkets

-Cars, highways and TV to build brands

-Knowledgeable customers – self service

-Perishable vs. packaged goods

Big Box Retailers -Warehouse Clubs

-Supercenters

-Hypermarkets

Convenience Stores

Convenience Stores Fight Competition

• Tailors associates to local market

• Stores are more convenient to shop

• Offers fresh food

• Fast, casual restaurants

• Financial services available

• Opening smaller stores closer to consumers – like airports

Issues in Food Retailing

Competition from Discount Stores

Changing Consumption Patterns

Efficient

Distribution Lower Costs Lower Prices

Time Pressure Eating Out More Meal Solutions

Types of General Merchandise Retailers

• Department Stores

• Specialty Stores

• Category Specialists

• Home Improvement Centers

• Discount Stores

• Drugstores

• Off-Price retailers

• Extreme Value Retailers

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

What To Do With an Eroding Market

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

Royalty-Free/CORBIS

Issues in Extreme Value Retailing

• Focuses on Lower Income Consumers• Names mostly imply good value Low Cost

Location• Limited Services• One of the Fastest Growing Retail Segments

Stockbyte/Punchstock Images

Non-store Retail Formats

Electronic Retailing

Catalog and Direct Mail

Direct Selling

Television Home Shopping

Vending Machines

Royalty-Free/CORBISRyan McVay/Getty Images

Electronic Retailing

• 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

Randy Allbritton/Getty Images

What are Amazon and eBay?

• 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 Direct Selling

• Providing information and demonstrations is costly

• 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 tv, 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 mostly jewelry, apparel, cosmetics,

kitchenware, exercise equipment

Royalty-Free/CORBIS

Issues in Vending Machine Retailing• Sales growth has been

declining due to higher prices and healthier eating habits

• New technology may help sales growth

• Vending machines are beginning to accept credit

• Trend of placing machines in captive consumer locations

Ryan McVay/Getty Images

Types of Nonstore Retailers

Services vs. Merchandise Retailers

Intangibility -Problems in Evaluating Service Quality -Performance of Service ProviderSimultaneous Production and Delivery -Importance of Service Provider

Perishability -No Inventory, Must Fill CapacityInconsistency of the Offering -Importance of HR Management

Types of Retail Ownership

• Independent, Single Store Establishments

Wholesaler Owned Cooperatives

• Corporate Chains

• Franchises

(c) Brand X Pictures/PunchStock

Reasons for Franchising Growth

Technological advances

Profitable utilization of capital resources

Attainment of the “American Dream”

Demographic expansion

Product/service consistency

Types of Franchise Systems

Territorial

Operating

Mobile

Distributorship

Co-ownership

Co-management

Leasing/Licensing

Manufacturing

Service

Reasons for Franchising Failure

Inept management

Fraudulent activities

Market saturation

Franchisor Positions in the Marketing Channel

Manufacturer - retailer

Manufacturer - wholesaler

Wholesaler - retailer

Service sponsor - retailer

Franchisor Benefits

Continuous marketContinuous market

Market informationMarket information

MoneyMoney

Sales of productsSales of products

Rental and lease feesRental and lease fees

License fees License fees

Management feesManagement fees

Royalty fees

Franchisee Benefits

Initial Services

Market survey and site selection, facility design and layout, lease negotiation advice, financing advice, operating manuals, management training programs, and employee training.

Continuous Services

Field supervision, merchandising and promotional materials, management and employee retraining, quality inspection, national advertising, centralized purchasing, market data and guidance, auditing and record keeping, management reports, and group insurance plans.

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.

Franchising Trends for the New Millenium

Sustained growth

Enduring plus un-imagined applications

International expansion

Increasing tensions

Greater emphasis on financial returns

Which Types of Retailers Will Be the First to Pursue Global Markets?

Discount Stores

Category Specialists

Department Stores

Supermarkets

Services Retailers

Why Is the Retail Industry Becoming More Concentrated?

Traditionally retailers have been local businesses.

• Why are bigger firms emerging?

• Why are least concentrated sectors food retailers and services retailers?