Chapter 5
Retail Institutions by Store-Based
Strategy Mix
Chapter Objectives
To describe the wheel of retailing,
scrambled merchandising, and the retail
life cycle, and show how they can help
explain the performance of retail
strategy mixes
To discuss some ways in which retail
strategy mixes are evolving
5-2
Chapter Objectives_2
To examine a wide variety of foodoriented retailers involved with storebased strategy mixes
To study a wide range of general
merchandise retailers involved with
store-based strategy mixes
5-3
Retailer Strategy Mix
• A strategy mix is the firm’s particular
combination of:
store location,
operating procedures,
goods/services offered,
pricing tactics,
store atmosphere,
customer services, and
promotional methods
This is a special effort to create the strategy
5-4
Earning Destination Retailer Status
Be price oriented and cost efficient
Be upscale
Be convenient
Offer a dominant assortment
Offer superior customer service
Be innovative or exclusive
Focus is to strive to be dominant in some way
5-5
Wheel of Retailing
• Theory to explain how new retailers or forms
of retailing begin
• Retail innovators begin as low price
operators with low costs and low profit
requirements. Overtime, the innovators
upgrades to better products and better
facilities. They then become vulnerable to
new innovators.
5-6
Figure 5.1 The Wheel of Retailing
High end Strategy
High prices
Excellent facilities
Upscale consumers
Medium Strategy
Moderate Prices
Improved facilities
Broader base of value and service
Low end Strategy
Low prices
Limited facilities
5-7
Three Basic Strategic Positions
Low end
Medium
High end
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Figure 5.2 Retail
Strategy Alternatives
Low End Strategy
• Low rental location
• No services
• Spartan Fixtures
• Simple retail personnel
organization
• Price emphasis in
promotion
• Most products visible
• Self-service
• High sales per store
personnel
5-9
High End Strategy
• High rental shopping
• center
• Elaborate services
Credit,gift wrapping,
• Elaborate fixtures
• Elaborate personnel
organization
• No price emphasis
• Product demonstrations
• Spacious interior
• products in back room
Scramble Merchandise
• Scrambled merchandising occurs when a
retailer adds goods and services that may
be unrelated to each other and to the firm’s
original business
• Popular because it allows ways to improve
profits and revenues
• Name the different retailers that have done
this ?
5-10
Figure 5.3 Scrambled Merchandising
by a Shoe Store
Handbags
Slippers
Shoes
Umbrellas
hats
Slippers
Shoes
Socks
Original
merchandise
Sandals
Socks
Scramble
Merchandise
gloves
Sandals
Shoe
Polish
5-11
Sweaters
Rubber galoshes
Shoe
Polish
Rubber
galoshes
Retail Life Cycle
• Retail institutions pass through
identifiable life stages
introduction
growth
maturity
decline
5-12
Figure 5.4 Retail Life Cycle
Retail Life Cycle concepts states that retail institutions pass
through identifiable life stages: Introduction growth, maturity
and decline
Intro Stage
Growth
Maturity
Decline
Different stores or store formats which fit into these stages
now are outline on page 108 in text
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How Retail Institutions are Evolving
Mergers, Diversification, Downsizing
Cost-Containment and Value-Driven
Retailing
Merging allows firms to jointly maximize resources,
enlarge customer base, improve productivity and
bargaining power
Diversifications allows firms to become active in retail
firms outside their normal operations or add stores in
different goods/service categories.
5-14
Mergers, Diversification, and
Downsizing
Mergers: combination of separately owned
firms (e.g., Sears and Lands’ End)
Diversification: retailers become active in
businesses outside their normal operations
(e.g., Limited Brands)
Downsizing: unprofitable stores are closed
or divisions are sold off (e.g., Kmart)
5-15
Cost Containment and
Value Driven Retailing
• Cost containment is about reducing costs in
order to offer lower prices
• Strategy is used because of intense
competition in the market
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Methods for Cost Containment
Standardizing procedures, store layouts,
store size, and product offerings
Using secondary locations
Placing stores in smaller communities
Using inexpensive construction materials
Using plainer fixtures and displays
Buying refurbished equipment
Joining cooperative buying and advertising
Creatively financing inventories
5-17
Table 5.1 Store-Based Retail
Strategy Mixes
Food Oriented
General Merchandise
 Convenience store
 Conventional
supermarket
 Food-based
superstore
 Combination store
 Box (limited-line)
store
 Warehouse store
 Specialty store
 Traditional department
 Full-line discount store
 Variety store
 Off-price chain
 Factory outlet
 Membership club
 Flea market
5-18
Convenience Store Strategy Mix
Location:
Neighborhood
Merchandise:
Medium width
and low depth
of assortment;
average quality
5-19
Prices:
Average to
Above average
Atmosphere and
Services:
Average
Promotion:
Moderate
Conventional Supermarket
Strategy Mix
Location:
Neighborhood
Prices:
Competitive
Merchandise:
Extensive width
and depth
of assortment;
average quality;
manufacturer,
private, and generic brands
Atmosphere and
Services:
Average
5-20
Promotion:
Heavy use of
newspapers, flyers,
and coupons
Food-Based Superstore
Strategy Mix
Location:
Community shopping
center or isolated site
Merchandise:
Full assortment plus health
and beauty aids and
general merchandise
5-21
Prices:
Competitive
Atmosphere and
Services:
Average
Promotion:
Heavy use of
newspapers, flyers
Combination Store
Strategy Mix
Location:
Community shopping center
or isolated site
Merchandise:
Full assortment plus health
and beauty aids and
general merchandise
5-22
Prices:
Competitive
Atmosphere and
Services:
Average
Promotion:
Heavy use of
newspapers, flyers
Box Store Strategy Mix
Location:
Neighborhood
Merchandise:
Low width and depth of
assortment; few
perishables; few national
brands
5-23
Prices:
Very low
Atmosphere and
Services:
Low
Promotion:
Little or none
Warehouse Store Strategy Mix
Location:
Secondary site, often in
industrial area
Merchandise:
Moderate width and
low depth of
assortment; emphasis on
manufacturer brands
bought at discount
5-24
Prices:
Very low
Atmosphere and
Services:
Low
Promotion:
Little or none
Specialty Store Strategy Mix
Location:
Business district or
shopping center
Merchandise:
Very narrow width and
extensive depth of
assortment; average to
good quality
5-25
Prices:
Competitive to
Above average
Atmosphere and
Services:
Average to excellent
Promotion:
Heavy use of displays
Extensive sales force
Traditional Department Store
Strategy Mix
Location:
Business district, shopping
center or isolated store
Merchandise:
Extensive width and
depth of
assortment; average to
good quality
5-26
Prices:
Average to
Above average
Atmosphere and
Services:
Good to excellent
Promotion:
Heavy ad and catalog
use; direct mail;
personal selling
Full-line Discount Store Strategy
Mix
Location:
Business district, shopping
center or isolated store
Merchandise:
Extensive width and
depth of
assortment; average to
good quality
5-27
Prices:
Competitive
Atmosphere/ Services:
Slightly below
average to average
Promotion:
Heavy on newspapers;
price-oriented; selling
Variety Store Strategy Mix
Location:
Business district, shopping
center or isolated store
Merchandise:
Good width and
some depth of
assortment;
below-average
to average quality
5-28
Prices:
Average
Atmosphere/ Services:
Below average
Promotion:
Use of newspapers
Off-Price Chain Strategy Mix
Location:
Business district, shopping
center or isolated store
Merchandise:
Moderate width and
poor depth of
assortment;
average to good quality;
low continuity
5-29
Prices:
Low
Atmosphere/ Services:
Below average
Promotion:
Use of newspapers;
brands not advertised;
limited selling
Factory Outlet Strategy Mix
Location:
Out of the way site
or discount mall
Merchandise:
Moderate width and
poor depth of
assortment;
low continuity
5-30
Prices:
Very Low
Atmosphere/ Services:
Very low
Promotion:
Little
Membership Club Strategy Mix
Location:
Isolated store or
secondary site
Merchandise:
Moderate width and
poor depth of
assortment;
low continuity
5-31
Prices:
Very Low
Atmosphere/ Services:
Very low
Promotion:
Little;
some direct mail
Flea Market Strategy Mix
5-32
Location:
Isolated store
Prices:
Very Low
Merchandise:
Extensive width and
poor depth of
assortment;
low continuity;
variable quality
Atmosphere/ Services:
Very low
Promotion:
Limited