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Ch. 2

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  • 1. Types of Retailers Chapter 2 McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
  • 2. Bag Borrow or Steal 2-
  • 3. Types of Retailers <ul><li>Retailers Use Different Retail Mixes </li></ul><ul><li>-merchandise: variety (breadth) / assortment (depth) </li></ul><ul><li>-services </li></ul><ul><li>-store design, visual merchandising </li></ul><ul><li>-location </li></ul><ul><li>-pricing </li></ul><ul><li>Infinite Variations </li></ul><ul><li>Some combination of retail mixes satisfy the needs of significant segments and persist over time. </li></ul>2-
  • 4. Merchandise Offering <ul><li>Variety (breadth of merchandise): wide vs. narrow </li></ul><ul><li>- The number of merchandise categories </li></ul><ul><li>Assortment (depth of merchandise): deep vs. shallow </li></ul><ul><li>-the number of items in a category (SKUs) </li></ul>2-
  • 5. Variety and Assortment of Kayaks in Different Retail Outlets 2-
  • 6. Characteristics of Food Retailers 2-
  • 7. 2- Trends in Supermarket Retailing Competition from Discount Stores Changing Consumption Patterns Efficient Distribution Lower Costs Lower Prices Time Pressure Eating Out More Meal Solutions
  • 8. Save-A-Lot 2- Save-A-Lot’s limited assortment format means that stores carry the most frequently purchased grocery items in the most popular size and variety The company carries high quality exclusive brands – many produced by the same manufacturers of leading name brands – and an assortment of nationally branded items. This allows Save-A-Lot to offer savings of up to 40% compared to conventional grocery stores – without asking shoppers to sacrifice quality .
  • 9. Characteristics of General Merchandise Retailers 2-
  • 10. Three Tiers of Department Stores <ul><li>First Tier: Upscale, high fashion chains with exclusive designer merchandise and excellent customer service </li></ul><ul><li>Nordstrom, Neiman Marcus, Saks </li></ul><ul><li>Second Tier: Retailers sell more modestly priced merchandise with less customer service </li></ul><ul><li>Macy’s </li></ul><ul><li>Third Tier: Value oriented caters to more price conscious customer </li></ul><ul><li>JCPenney, Sears, Kohl’s </li></ul>2-
  • 11. Issues in Department Store Retailing <ul><li>Competition </li></ul><ul><li>-Discount Stores on Price </li></ul><ul><li>-Specialty Stores on Service, Depth of Assortment </li></ul><ul><li>Lower Cost by Reducing Services (?) </li></ul><ul><li>-Centralized Cash Wraps </li></ul><ul><li>More Sales (?) </li></ul><ul><li>-Customers Wait for Sale </li></ul><ul><li>Focus on Apparel and Soft Home </li></ul><ul><li>Develop Private Labels and Exclusive Brands </li></ul>2-
  • 12. 2- Issues in Discount Store Retailing <ul><li>Only Big Left </li></ul><ul><li>Wal-Mart, Target </li></ul><ul><li>Wal-Mart’s Dominance </li></ul><ul><li>Differentiate Strategy </li></ul><ul><li>Wal-Mart = Low Price and Good value </li></ul><ul><li>Target = More Fashionable Apparel </li></ul><ul><li>Competition from Category Specialists </li></ul><ul><li>Toys-R-Us, Circuit City, Sports Authority </li></ul>
  • 13. Issues in Specialty Store Retailing <ul><li>Mall-Based Apparel Retailers </li></ul><ul><li>Decline in Mall Shopping and Apparel Sales </li></ul><ul><ul><li>-Lack of New Fashions </li></ul></ul><ul><ul><li>-Less Interest in Fashion </li></ul></ul><ul><ul><li>-Increased Price Consciousness </li></ul></ul><ul><li>Lifestyle Formats – </li></ul><ul><li>Abercrombie and Fitch </li></ul><ul><li>Hot Topics </li></ul>2- McGraw-Hill Companies, Inc./Andrew Resek, Photographer
  • 14. Issues in Drug Store Retailing <ul><li>Consolidation – Walgreens, CVS, Rite-Aid </li></ul><ul><li>Competition from Supermarkets, discount Stores and mail-in orders </li></ul><ul><li>Evolution to a New Format </li></ul><ul><ul><li>-Stand Alone Sites with Drive Thru Windows </li></ul></ul><ul><ul><li>-offering more frequent purchase food items </li></ul></ul><ul><li>Improved systems provide personalized service in the pharmacy </li></ul>2-
  • 15. Category Specialists <ul><li>Deep and Narrow Assortments Destination Stores </li></ul><ul><li>Category killers </li></ul><ul><li>Low Price and Service </li></ul><ul><li>Wholesaling to Business Customers and Retailing to Consumers </li></ul><ul><li>Incredible Growth </li></ul>2- Bass Pro Shops
  • 16. Category Specialists: Home Improvement Centers 2- Home Depot and Lowes act as both: Retailer and Wholesaler Consumer Business
  • 17. Issues in Extreme Value Retailing <ul><li>Focuses on Lower Income Consumers </li></ul><ul><li>Names mostly imply good value not $1 price points </li></ul><ul><li>Low Cost Location </li></ul><ul><li>Limited Services </li></ul><ul><li>One of the Fastest Growing Retail Segments </li></ul>2- Dollar Tree Family Dollar Dollar General 99 Cents Only Store
  • 18. Off-Price Retailers <ul><li>Close-out retailers </li></ul><ul><li>Offer an inconsistent assortment of brand name merchandise at low prices </li></ul><ul><ul><li>TJX companies (T.J. Maxx, Marshalls. HomeGoods) </li></ul></ul><ul><ul><li>Ross Stores, Burlington Coat factory, Big Lots, Tuesday Morning </li></ul></ul>2-
  • 19. Types of Non-store Retailers 2-
  • 20. What are Amazon and eBay? <ul><li>http://www.Amazon.com – Merchandise to consumers. Provides website development and fulfillment services to other retailers </li></ul><ul><li>eBay – Acts as a mall or other shopping center providing a “place” for buyers and sellers to meet </li></ul>2- Don Farrall/Getty Images
  • 21. Issues in Catalog Retailing <ul><li>Low Start Up Cost </li></ul><ul><li>Evolution of Multi-Channel Offering </li></ul><ul><li>Hard to compete with large well established firms </li></ul><ul><li>Increasing Mail Costs </li></ul><ul><li>Clutter from other Catalogs </li></ul><ul><li>General merchandise catalogs like JC Penney </li></ul><ul><li>Specialty Catalogs like Victoria Secret </li></ul>2-
  • 22. Issues in Direct Selling <ul><li>Completely bypasses retailers and wholesalers </li></ul><ul><ul><li>Manufacturers set up their own channels to sell their products directly to consumers </li></ul></ul><ul><li>Party plan system : merchandise is demonstrated in a party atmosphere </li></ul><ul><li>Multi-level network : Master distributors sell to distributors who sell merchandise </li></ul><ul><li>Pyramid schemes : Firm sells to other distributors and little if any merchandise goes to end users </li></ul>2-
  • 23. Issues in Television Home Shopping <ul><li>Consumers watch cable stations, infomercials or direct response ads </li></ul><ul><li>Few consumers watch regularly </li></ul><ul><li>Most purchases made by small proportion of viewers </li></ul><ul><li>Customers can’t examine merchandise </li></ul><ul><li>Customers must wait for merchandise to come on </li></ul><ul><li>Sells predominately jewelry, apparel, cosmetics, kitchenware, and exercise equipment </li></ul>2-
  • 24. Issues in Vending Machine Retailing <ul><li>Automatic Merchandising </li></ul><ul><ul><li>About $25 billion worth of convenience goods are sold to Americans through 4.7 million vending machines </li></ul></ul><ul><li>Sales growth has been declining due to higher prices and healthier eating habits </li></ul><ul><li>New technology may help sales growth </li></ul><ul><li>Trend of placing machines in captive consumer locations </li></ul>2-
  • 25. Merchandise/Service Continuum 2-
  • 26. 2- Services vs. Merchandise Retailers <ul><li>Intangibility </li></ul><ul><li> Problems in Evaluating Service Quality </li></ul><ul><li> Performance of Service Provider </li></ul><ul><li>Simultaneous Production and Delivery </li></ul><ul><li> Importance of Service Provider </li></ul><ul><li>Perishability </li></ul><ul><li> No Inventory, Must Fill Capacity </li></ul><ul><li>Inconsistency of the Offering </li></ul><ul><li> Importance of HR Management </li></ul>
  • 27. <ul><li>Independent, Single Store Establishments </li></ul><ul><ul><li>Wholesale-sponsored voluntary group </li></ul></ul><ul><li>Corporate Retail Chains </li></ul><ul><li>Franchises </li></ul>2- Types of Retail Ownership (c) Brand X Pictures/PunchStock
  • 28. Franchisor Advantages/Disadvantages 2- 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.
  • 29. Franchisee Advantages/Disadvantages 2- 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.

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