Types of RetailersChapter 2

By: Amy Cole

Questions

What are the different types of retailers?

How do retailers differ in terms of how they meet the needs of their customers?

How do services retailers differ from merchandise retailers?

What are the types of ownership for retail firms?

General Trends in Retailing

New Types of Retailers Increased Concentration Globalization Growth In Services Retailer Demise of Pure Electronic Retailers

(Webvan, eToys, etc) Growth in Use of Multi-Channel Retailing by

Traditional Retailers Increase Use of Technology to Reduce Cost;

Increase Value Delivered

Retailer Characteristics

The type of retailer a consumer chooses to use depends on the benefits the consumer is seeking.

Example- You want to buy and send a sweater to your Aunt in Washington for her birthday, you may prefer to look online and conveniently have the retailer send the package to the address. On the other hand you may want to go to a department store like Gordman’s to be able to see the items and maybe try something on for yourself.

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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)

Types of Merchandise

North American Industry Classification System (NAICS)- The US, Canada, and Mexico have developed this classification scheme to collect data on business activity in each country.

Every business is assigned a hierarchical, six-digit code based on the type of products and services it sells.

Supermarkets

Conventional supermarket- is a large, self-service retail food store offering groceries, meat, and produce as well as some non food items. (30,000 SKUs)

Limited-assortment supermarkets and Extreme-value food retailers only stock about (2,000 SKUs).

SKUs- are stock-keeping units

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Characteristics of Food Retailers

Supercenters

Supercenters- are large stores that combine a supermarket with full-line discount store.

Walmart operates 2700 stores in the US accounting for 81% of total supercenter sales.

Hypermarkets- are very similar to supercenters but are more common outside the US and focus more on perishables.

Warehouse Clubs

Warehouse clubs- are 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.

Most have to types of members, wholesale members who own small business and individuals who purchase for their own use.

Convenience Stores

Convenience stores- provide a limited variety and assortment of merchandise at a convenient location in 3000 to 5000 square foot stores with speedy checkouts.

Over half the items bought are consumed within 30 minutes of purchase.

Majority of sales come from gas and cigarettes.

General Merchandise Retailers

The major types of general merchandise retailers are:

1. Department stores2. Full-line discount stores3. Specialty stores4. Home improvement centers5. Off-price retailers6. Extreme-value stores.

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Characteristics of General Merchandise Retailers

Department Stores

Department stores – are retailers that carry a broad variety and deep assortment, offer customer service and organize their stores into distinct departments for displaying merchandise.

They provide soft goods (apparel and bedding) and hard goods (appliances, furniture, and consumer electronics)

Department Stores Categorized

Tier 1 Tier 2 Tier 3

Upscale, high-fasion chains with exclusive designer merchandise and excellent customer service

Retailers sell more modestly priced merchandise with less customer service

Value-oriented , caters to more price-conscious consumers, very little customer service

Bloomingdale, Nordstrom, Saks Fifth Avenue

Macy’s and Dillards Sears, JCPenny, Kohl’s, Gordmans

Full-line Discount & Specialty Stores

Full-line discount stores- are retailers that offer a broad variety of merchandise, limited services, and low prices. They offer both private label and national brands.

Specialty stores- concentrate on a limited number of complementary merchandise categories and provide a high level of service. (Victoria’s Secret, Gamestop)

Drugstores

Drugstores- are specialty stores that concentrate on health and personal grooming merchandise. Prescription Pharmaceuticals represent almost 70% of their sales.

Large drugstores:1. Walgreens2. CVS3. Rite Aid

Category Specialists

Category specialists- are big-box stores that offer a narrow but deep assortment of merchandise.

Apparel Home Toys

Mens Warehouse

Bed Bath & Beyond

Toys “R” Us

Books Home Improvement

Pet Supplies

Barnes& Noble

Menards

PetSmartConsumer Electronics

Sporting Goods

Best Buy Cabela’s

Entertainment

Dave & Busters

Extreme-Value Retailers

Extreme-value retailers- are small discount stores that offer a limited merchandise assortment at very low prices.

Some of the extreme-value stores we have in this area are Family Dollar and Dollar General.

Off-Price Retailers

Closeout retailers- offer an inconsistence assortment of brand-name merchandise at a significant discount off the manufacture’s price.

They buy excess inventory, close-outs, and irregulars from other stores at typically ¼ to 1/5 of the original price.

Outlet stores- are off-price retailers owned by manufacturers or retailers.

Service Retailing

Service retailers- are firms that primarily sell services rather than merchandise, and are a large and growing part of the retail industry.

Differences between Services and Merchandise Retailers

Intangibility- services are less tangible than products- customers cannot touch and feel services, so it is difficult for them to evaluate before they buy.

Simultaneous Production and Consumption- services create and deliver the service as the customer is consuming it.

Perishability- Services are perishable. They cannot be saved, stored, or resold.

Inconsistency- Products made by a machine are very tight in quality, a service will never be identical because it depends on the person.

Types of Ownership

There are three major classification of retail ownership are:

1. Independent, single-store establishments

2. Corporate chains3. Franchises

Independent, Single-Store Establishments

Single-store retailers can tailor their offerings more to their customers’ needs, and corporate chains can more effectively negotiate lower prices.

Single-store retailers typically rely on their owners/managers’ capabilities to make a broad range of necessary retail decisions.

Corporate Retail Chains

Retail chain- is a company that operates multiple retail units under common ownership and usually has centralized decision making for defining and implementing its strategy.

Examples are:1. Walmart2. Target 3. Gap

Franchising

Franchising- is a contractual agreement between a franchisor and a franchisee that allows the franchisee to operate a retail outlet using a name and format developed and supported by the fanchisor.

Makes up 40% of retail sales in the US.

Food RetailersServices Retailers

Merchandise Retailer