Chapter 2
Types of Retailers
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)
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Variety and Assortment of Kayaks in
Different Retail Outlets
2-4
Characteristics of Food Retailers
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SUPERMARKETS
■ A conventional supermarket is a large, selfservice 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
Efficient
Distribution
Lower Costs
Lower Prices
Changing Consumption Patterns
Time Pressure
Eating Out More
Meal Solutions
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■ Conventional supermarkets are differentiating
their offerings
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Fresh Merchandise
Health/Organic Merchandise
Ethnic Merchandise
Private-Label Merchandise
■ Improving the shopping experience
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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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Characteristics of
General Merchandise Retailers
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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 fullline 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 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
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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
2-18
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 Growth
Bass Pro Shops
2-20
Issues in Extreme Value Retailing
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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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Off-Price Retailers
■ Close-out retailers
■ Offer an inconsistent assortment of brand name
merchandise at low prices
TJX companies (T.J. Maxx, Marshalls. HomeGoods)
Ross Stores, Burlington Coat factory, Big Lots, Tuesday
Morning
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Types of Non-store Retailers
2-23
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
2-24
Issues in Catalog Retailing
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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
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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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Merchandise/Service Continuum
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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
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Inconsistency of the Offering
Importance of HR Management
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Types of Retail Ownership
■ Independent, Single Store
Establishments
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Wholesale-sponsored
voluntary group
■ Corporate Retail Chains
■ Franchises
(c) Brand X Pictures/PunchStock
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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 corporateowned outlets, and high royalties, fees, costs on
equipment, supplies, merchandise, rental/lease rates
and mandatory participation in promotional and
support services.
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