CHAPTER 2 1 Types of Retailers CHAPTER 02 Retailing Management 8e McGraw-Hill/Irwin 2-1 © 2012 by The McGraw-Hill Companies, Inc. All rights reserved. © The McGraw-Hill Companies,Copyright All rights reserved. Retailer Characteristics CHAPTER 2 1 • Variety (breadth) • Assortment (depth) • Services Offered • Prices and the cost of offering breath and depth of merchandise and services 2-2 Merchandise Offering CHAPTER 2 1 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) 2-3 Services Offered CHAPTER 2 1 • Retailers differ in the services they offer customers • EMS offers assistance in selecting the appropriate kayak and repairing them VS • http://www.outdoor play.com and • Wal-Mart: doesn’t provide any services 2-4 Types of Merchandise Retailers Food Retailers Mom and Pop Stores Convenience Stores Supermarkets Supercenters CHAPTER 2 1 General Merchandise Retailers Department Stores Specialty Stores Discount Stores Category Specialists Off-Price Retailers Warehouse Clubs Value Retailers 2-5 Food Retailers CHAPTER 2 1 • Channel preference for food shopping channel where grocery purchasers do most of their food shopping • Supermarkets • Supercenters • Warehouse Clubs • Convenience Stores 2-6 Supermarkets CHAPTER 2 1 • 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 2-7 Trends in Supermarket Retailing CHAPTER 2 1 • Competition from Discount Stores Efficient Distribution Lower Costs Lower Prices • Changing Consumption Patterns Time Pressure Eating Out More Meal Solutions 2-8 Conventional Supermarket Survival Pack CHAPTER 2 1 • Emphasize Fresh Perishables • Wegmans Chef-crafted meals on the go at EatZi’s • Target health conscious and ethnic consumers • Offer more private label brands • Provide a better in-store experience 2-9 Supercenters and Warehouse Clubs CHAPTER 2 1 Supercenters (Hypermarkets) Warehouse Clubs • The fastest growing retail category • Large stores (185,000 square feet) that combine a supermarket with a full-line discount store • One-stop shopping experience • 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 2-10 Convenience Store CHAPTER 2 1 • 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) 2-11 Issues in Department Store Retailing CHAPTER 2 1 • 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 2-12 Three Tiers of Department Stores CHAPTER 2 1 • 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 Rob Melnychuk/Getty Images 2-13 Issues in Specialty Store Retailing CHAPTER 2 1 • 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 • Victoria’s Secrets • Manufacturers opening their own stores McGraw-Hill Companies, Inc./Andrew Resek, Photographer 2-14 Issues in Drug Store Retailing CHAPTER 2 1 • 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 2-15 Category Specialists • Deep and Narrow Assortments • Destination Stores • Category killers • Low Price and Service • Wholesaling to Business Customers and Retailing to Consumers • Incredible Growth CHAPTER 2 1 Bass Pro Shops 2-16 Issues in Extreme Value Retailing CHAPTER 2 1 • 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 2-17 Off-Price Retailers CHAPTER 2 1 • Close-out retailers • Offer an inconsistent assortment of brand name merchandise at low prices • TJX Companies (which operates T.J.Maxx, Marshalls, Winners, HomeGoods, TKMaxx, AJWright, and HomeSense), • Ross Stores, • Burlington Coat Factory, • Big Lots. • http://www.Overstock.com and http://www.Bluefly.com 2-18 Services Retailing CHAPTER 2 1 • 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 2-19 Examples of Service Retailers CHAPTER 2 1 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 2-20 Merchandise/Service Continuum CHAPTER 2 1 2-21 Types of Retail Ownership CHAPTER 2 1 • Independent, Single Store Establishments • Wholesale-sponsored voluntary group • Corporate Retail Chains • Franchises (c) Brand X Pictures/PunchStock 2-22 Retailers Using Franchise Business Model CHAPTER 2 1 2-23 Franchisor Advantages/Disadvantages CHAPTER 2 1 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. 2-24 Franchisee Advantages/Disadvantages CHAPTER 2 1 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. 2-25