types of retailers chapter 2. 2-2 types of retailers ■retailers use different retail mixes...
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2-2
Types of Retailers
■ 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.
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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)
SUPERMARKETS
■ A conventional supermarket is a large, self-service retail food store offering groceries, meat, and produce, as well as some non-food items, such as health and beauty aids and general merchandise.
■ Whereas conventional supermarkets carry about 30,000 SKUs, limited-assortment supermarkets, or extreme-value food retailers, only stock about 2,000 SKUs.
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Trends in Supermarket Retailing
Competition from Discount Stores
Changing Consumption Patterns
Efficient
Distribution Lower Costs Lower Prices
Time Pressure Eating Out More Meal Solutions
■ Conventional supermarkets are differentiating their offerings
Fresh Merchandise Health/Organic Merchandise Ethnic Merchandise Private-Label Merchandise
■ Improving the shopping experience Open-air market designs Cooking and nutrition classes Demonstrations Baby-sitting services Food tasting
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Supercenters and Hypermarkets
■ Supercenters are large stores that combine a supermarket with a full-line discount store. By offering broad assortments of grocery and general merchandise products under one roof, supercenters provide a one-stop shopping experience.
■ Hypermarkets offer a combination of food and general merchandise stores.
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Warehouse Clubs
■ 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.
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Convenience Stores
■ Provide a limited variety and assortment of merchandise at a convenient location with speedy checkout.
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Department Stores
■ Retailers that carry a broad variety and deep assortment, offer customer services, and organize their stores into distinct departments for displaying merchandise.
■ Each department within the store has a specific selling space allocated to it, as well as salespeople to assist customers.
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Full-Line Discount Stores
■ Offer a broad variety of merchandise, limited service, and low prices. Discount store offer both private labels and national brands.
■ Walmart, Target, and Kmart are the largest full-line discount store chains.
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Specialty Stores
■ Concentrate on a limited number of complementary merchandise categories and provide high level of service.
■ They tailor their retail strategy toward very specific market segments by offering deep but narrow assortments and sales associate expertise.
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Three Tiers of Department Stores
■ First Tier: Upscale, high fashion chains with exclusive designer merchandise and excellent customer serviceNordstrom, 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 customerJCPenney, Sears, Kohl’s
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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
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Issues in Specialty Store Retailing
■ 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
Hot Topics
McGraw-Hill Companies, Inc./Andrew Resek, Photographer
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Issues in Drug Store Retailing
■ Consolidation – Walgreens, CVS, Rite-Aid
■ Competition from 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 in the pharmacy
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Category Specialists
■ Deep and Narrow Assortments Destination Stores
■ Category killers■ Low Price and Service■ Wholesaling to
Business Customers and Retailing to Consumers
■ Incredible GrowthBass Pro Shops
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Issues 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 DollarDollar General 99 Cents Only Store
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Off-Price Retailers
■ Close-out retailers■ Offer an inconsistent assortment of brand name
merchandise at low pricesTJX companies (T.J. Maxx, Marshalls. HomeGoods)Ross Stores, Burlington Coat factory, Big Lots, Tuesday
Morning
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What are Amazon and eBay?
■ http://www.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
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Issues in Catalog Retailing
■ Low Start Up Cost■ Evolution of Multi-Channel Offering■ Hard to compete with large well established firms■ Increasing Mail Costs■ Clutter from other Catalogs■ General merchandise catalogs like JC Penney■ Specialty Catalogs like Victoria Secret
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Issues in Direct Selling
■ Completely bypasses retailers and wholesalers Manufacturers set up their own channels to sell their products
directly to consumers
■ 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
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Issues in Television Home Shopping
■ Consumers watch cable stations, 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 predominately jewelry, apparel, cosmetics,
kitchenware, and exercise equipment
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Issues in Vending Machine Retailing
■ Automatic Merchandising About $25 billion worth of convenience goods are sold to
Americans through 4.7 million vending machines■ Sales growth has been declining due to higher prices and
healthier eating habits■ New technology may help sales growth■ Trend of placing machines in captive consumer locations
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Services vs. Merchandise Retailers
■ 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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Types of Retail Ownership
(c) Brand X Pictures/PunchStock
■ Independent, Single Store Establishments
Wholesale-sponsored voluntary group
■ Corporate Retail Chains■ Franchises
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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.
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Franchisee Advantages/Disadvantages
Advantages
Established/proven product/service, business and technical assistance, and reduction in risk.
Disadvantages
Loss of control since only semi-independent, franchisee outlets may compete with corporate-owned outlets, and high royalties, fees, costs on equipment, supplies, merchandise, rental/lease rates and mandatory participation in promotional and support services.