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CHAPTER 2CHAPTER 1CHAPTER 1CHAPTER 2

Types of RetailersCHAPTER 2

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CHAPTER 2CHAPTER 1CHAPTER 1CHAPTER 2The World of Retailing

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CHAPTER 2CHAPTER 1CHAPTER 1CHAPTER 2Questions

• What trends shape today’s retailers?• What are the different types of retailers?• How do retailers differ in terms of how they meet the

needs of their customers?• How do service retailers differ from merchandise

retailers?• What are the types of ownership for retail firms?

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CHAPTER 2CHAPTER 1CHAPTER 1CHAPTER 2General 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

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CHAPTER 2CHAPTER 1CHAPTER 1CHAPTER 2

• Retailers Use Different Retail Mixes-merchandise: variety (breadth) / assortment (depth)-services-store design, visual merchandising-location-pricing

• Infinite Variations• Some combination of retail mixes

satisfy the needs of significant segments and persist over time.

Types of Retailers

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CHAPTER 2CHAPTER 1CHAPTER 1CHAPTER 2Bag Borrow or Steal

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CHAPTER 2CHAPTER 1CHAPTER 1CHAPTER 2Retailer Characteristics

• Variety (breadth)• Assortment (depth)• Services Offered• Prices and the cost of offering breath and depth of

merchandise and services

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CHAPTER 2CHAPTER 1CHAPTER 1CHAPTER 2Merchandise 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)

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CHAPTER 2CHAPTER 1CHAPTER 1CHAPTER 2

• Retailers differ in the services they offer customers• EMS offers assistance in

selecting the appropriate kayak and repairing them

VS• Outdoorplay.com and • Wal-Mart: doesn’t

provide any services

Services Offered

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CHAPTER 2CHAPTER 1CHAPTER 1CHAPTER 2

Prices and the cost of offering breath and depth of merchandise and services

• Stocking a deep and broad assortment (like EMS) is costly for retailers.

Many SKUs

Inventory Investment Cost

Because the retailer must have backup stock for each SKU in addition to holding the inventory

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CHAPTER 2CHAPTER 1CHAPTER 1CHAPTER 2

Mom and Pop StoresConvenience Stores

SupermarketsSupercenters

Department StoresSpecialty StoresDiscount Stores

Category SpecialistsOff-Price RetailersWarehouse Clubs

Value Retailers

Types of Merchandise Retailers

Food Retailers General Merchandise Retailers

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CHAPTER 2CHAPTER 1CHAPTER 1CHAPTER 2Sales and growth rate for retail sectors

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CHAPTER 2CHAPTER 1CHAPTER 1CHAPTER 2Food Retailers

• Channel preference for food shopping channel where grocery purchasers do most of their food shopping• Supermarkets• Supercenters• Warehouse Clubs• Convenience Stores

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CHAPTER 2CHAPTER 1CHAPTER 1CHAPTER 2Characteristics of Food Retailers

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CHAPTER 2CHAPTER 1CHAPTER 1CHAPTER 2

• Conventional supermarkets• 30,000 SKU

• Limited assortment supermarkets (extreme value food retailers)• 2000 SKU• Offer one or two brands and sizes• Designed to maximize efficiency and

reduce costs• Offer merchandise at 40-60% lower

prices than conventional supermarkets

Supermarkets

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CHAPTER 2CHAPTER 1CHAPTER 1CHAPTER 2ALDI: German’s Wal-Mart

ALDI provides quality merchandise at low prices by reducing its assortment in order to control store operating expenses

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CHAPTER 2CHAPTER 1CHAPTER 1CHAPTER 2Trends in Supermarket Retailing

• Competition from Discount Stores

• Changing Consumption Patterns

Efficient

Distribution Lower Costs Lower Prices

Time Pressure Eating Out More Meal Solutions

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CHAPTER 2CHAPTER 1CHAPTER 1CHAPTER 2

• Emphasize Fresh Perishables• Wegmans

• Target health conscious and ethnic consumers

• Provide a better in-store experience

• Offer more private label brands

Conventional Supermarket Survival Pack

Chef-crafted meals on the go at EatZi’s

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CHAPTER 2CHAPTER 1CHAPTER 1CHAPTER 2Supercenters and Warehouse Clubs

Supercenters

• The fastest growing retail category

• Large stores (150,000 – 220,000 square feet) that combine a supermarket with a full-line discount store

• One-stop shopping experience

Warehouse Clubs

• Offer a limited and irregular assortment of food and general merchandise with little service at low prices

• Use low-locations, inexpensive store design, little customer service

• Low inventory holding costs by carrying a limited assortment of fast selling items

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CHAPTER 2CHAPTER 1CHAPTER 1CHAPTER 2Convenience Store

• Tailors assortments to local market• Makes more convenient to shop• Offers fresh, healthy food• Fast, casual restaurants• Financial services available• Opening smaller stores closer to consumers (like

airports)

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CHAPTER 2CHAPTER 1CHAPTER 1CHAPTER 2General Merchandise Retailers

• Department Stores• Specialty Stores• Category Specialists• Home Improvement Centers• Discount Stores• Drugstores• Off-Price retailers• Extreme Value Retailers

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CHAPTER 2CHAPTER 1CHAPTER 1CHAPTER 2

Characteristics of General Merchandise Retailers

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CHAPTER 2CHAPTER 1CHAPTER 1CHAPTER 2

• 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

Issues in Department Store Retailing

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CHAPTER 2CHAPTER 1CHAPTER 1CHAPTER 2

• First Tier: Upscale, high fashion chains with exclusive designer merchandise and excellent customer service• Nordstrom, Neiman Marcus, Saks

• Second Tier: Retailers sell more modestly priced merchandise with less customer service• Macy’s

• Third Tier: Value oriented caters to more price conscious customer• JCPenney, Sears, Kohl’s

Three Tiers of Department Stores

Rob Melnychuk/Getty Images

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CHAPTER 2CHAPTER 1CHAPTER 1CHAPTER 2

• 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

Department Stores:What To Do With an Eroding Market

Royalty-Free/CORBIS

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CHAPTER 2CHAPTER 1CHAPTER 1CHAPTER 2

• Only Big Left• Wal-Mart, Target

• Wal-Mart’s Dominance• Differentiate Strategy

• Wal-Mart = Low Price and Good value

• Target = More Fashionable Apparel

• Competition from Category Specialists• Toys-R-Us, Best Buy, Sports

Authority

Issues in Discount Store Retailing

McGraw-Hill Companies, Inc.Gary He, photographer

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CHAPTER 2CHAPTER 1CHAPTER 1CHAPTER 2

• Mall-Based Apparel Retailers• Decline in Mall Shopping and

Apparel Sales• Lack of New Fashions• Less Interest in Fashion• Increased Price Consciousness

• Lifestyle Formats • Abercrombie and Fitch

Issues in Specialty Store Retailing

McGraw-Hill Companies, Inc./Andrew Resek, Photographer

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CHAPTER 2CHAPTER 1CHAPTER 1CHAPTER 2Specialty Store Retailers

McGraw-Hill Companies, Inc./Andrew Resek, Photographer

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CHAPTER 2CHAPTER 1CHAPTER 1CHAPTER 2

• Consolidation• Walgreens, CVS, Rite-Aid

• Competition• Supermarkets, Discount Stores and

Mail-in orders

• Evolution to a New Format• Stand Alone Sites with Drive Thru

Windows• offering more frequent purchase

food items

• Improved systems provide personalized service

Issues in Drug Store Retailing

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CHAPTER 2CHAPTER 1CHAPTER 1CHAPTER 2

• Deep and Narrow Assortments

• Destination Stores• Category killers• Low Price and Service• Wholesaling to Business

Customers and Retailing to Consumers

• Incredible Growth

Category Specialists

Bass Pro Shops

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CHAPTER 2CHAPTER 1CHAPTER 1CHAPTER 2Category Specialists

Sephora, France’s leading perfume/ cosmetic chain LVMH’s division

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CHAPTER 2CHAPTER 1CHAPTER 1CHAPTER 2

Category Specialists: Home Improvement Centers

Home Depot and Lowes act as both:

Retailer and Wholesaler

Consumer Business

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CHAPTER 2CHAPTER 1CHAPTER 1CHAPTER 2

• Displayed in a warehouse atmosphere

• Customer Service: How to select and how to use merchandise

• Competition focuses on price, effort to differentiate and services provided

Home Improvement Centers

Ryan McVay/Getty Images

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CHAPTER 2CHAPTER 1CHAPTER 1CHAPTER 2Issues in Extreme Value Retailing

• Focuses on Lower Income Consumers• Names mostly imply good value not $1 price points• Low Cost Location• Limited Services• One of the Fastest Growing Retail Segments

• Dollar Tree • Family Dollar• Dollar General • 99 Cents Only Store

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CHAPTER 2CHAPTER 1CHAPTER 1CHAPTER 2Off-Price Retailers

• Close-out retailers• Offer an inconsistent assortment of brand name

merchandise at low prices• TJX companies (T.J. Maxx, Marshalls)• Ross Stores, Burlington Coat factory, Big Lots, Tuesday

Morning

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CHAPTER 2CHAPTER 1CHAPTER 1CHAPTER 2Services Retailing

• Intangibility• Problems in Evaluating Service Quality• Performance of Service Provider

• Simultaneous Production and Delivery• Importance of Service Provider

• Perishability• No Inventory, Must Fill Capacity

• Inconsistency of the Offering• Importance of HR Management

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CHAPTER 2CHAPTER 1CHAPTER 1CHAPTER 2 Examples of Service Retailers

Type of Service Service Retail Firms

Airlines American, Delta, British Airways, Singapore Airways

Automobile maint/repair Jiffy Lube, Midas, AAMCO

Automobile rental Hertz, Avis, Budget, Alamo

Banks Citibank, NCNB, Bank of America

Child care centers Kindercare, Gymboree

Credit cards American Express, VISA, Mastercard

Education University of Florida, Babson College

Entertainment parks Disney, Universal Studios, Six Flags

Express package delivery Federal Express, UPS, US Postal Service

Financial services Merrill Lynch, Dean Witter

Fitness Jazzercise, Bally’s, Gold’s Gym

Health Care Humana, HCA

Home maintenance Chemlawn, MiniMaid, Roto-Rooter

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CHAPTER 2CHAPTER 1CHAPTER 1CHAPTER 2Merchandise/Service Continuum

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CHAPTER 2CHAPTER 1CHAPTER 1CHAPTER 2

• Independent, Single Store Establishments• Wholesale-sponsored

voluntary group

• Corporate Retail Chains

• Franchises

Types of Retail Ownership

(c) Brand X Pictures/PunchStock

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CHAPTER 2CHAPTER 1CHAPTER 1CHAPTER 2

Retailers Using Franchise Business Model

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CHAPTER 2CHAPTER 1CHAPTER 1CHAPTER 2

• 30 – 40% of US Retail Sales• Franchisee Pays Fixed Fee

Plus % of Sales• Franchisee Implements

Program• Why is this Ownership Format

Efficient?

Franchising

The McGraw-Hill Companies, Inc./Jill Braaten, photographer