Chapter 2

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  • Chapter 2

    1. 1. CHAPTER 2 1 Types of Retailers CHAPTER 02Retailing Management 8e McGraw-Hill/Irwin All rights reserved. 2- © The McGraw-Hill Companies,The McGraw-Hill Companies, Inc. All rights reserved. Copyright © 2012 by
    2. 2. The World of Retailing CHAPTER 2 1 2-
    3. 3. Questions CHAPTER 2 1• What trends shape today’s retailers?• What are the different types of retailers?• How do retailers differ in terms of how they meet the needs of their customers?• How do service retailers differ from merchandise retailers?• What are the types of ownership for retail firms? 2-
    4. 4. General Trends in Retailing CHAPTER 2 1• New Types of Retailers• Increased Concentration• Globalization• Growth In Services Retailer• Demise of Pure Electronic Retailers (Webvan, eToys, etc)• Growth in Use of Multi-Channel Retailing by Traditional Retailers• Increase Use of Technology to Reduce Cost; Increase Value Delivered 2-
    5. 5. NAICS Codes for Retailers CHAPTER 2 1 2-
    6. 6. Types of Retailers CHAPTER 2 1• 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 2-
    7. 7. Bag Borrow or Steal CHAPTER 2 1 2-
    8. 8. CHAPTER 2 1 2-
    9. 9. CHAPTER 2 1• Variety (breadth)• Assortment (depth)• Services Offered• Prices and the cost of offering breath and depth of merchandise and services 2-
    10. 10. 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-
    11. 11. Merchandise Offering CHAPTER 2 1Variety (breadth of merchandise): wide vs. narrow - The number of merchandise categoriesAssortment (depth of merchandise): deep vs. shallow -the number of items in a category (SKUs) 2-
    12. 12. 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.outdoorplay 2-
    13. 13. Illustration of Variety andAssortment CHAPTER 2 1 Lady Foot Locker Sports AuthorityActive SKUs: 44 N/AClassics SKUs: 44 N/AConverse SKUs: 25 N/AElite Running SKUs: 22 N/AFitness N/A SKUs: 1Running SKUs: 44 SKUs: 39Trail Running N/A SKUs: 7Training SKUs: 22 SKUs: 2Walking SKUs: 11 SKUs: 12 2-
    14. 14. Prices and the cost of offering breathand depth of merchandise and CHAPTER 2 1• Stocking a deep and broad assortment (like EMS) is costly for retailers. Many SKUs Because the retailer must have backup stock for each SKU in addition to holding the inventory Inventory Investment Cost 2-
    15. 15. Prices and the cost of offering breathand depth of merchandise and CHAPTER 2 1• Stocking a deep and broad assortment (like EMS) is costly for retailers. Many SKUs Because the retailer must have backup stock for each SKU in addition to holding the inventory Inventory Investment Cost 2-
    16. 16. Types of Merchandise Retailers CHAPTER 2 1 Food Retailers General Merchandise Retailers Department Stores Specialty Stores Mom and Pop Stores Discount Stores Convenience Stores Category Specialists Supermarkets Supercenters Off-Price Retailers Warehouse Clubs Value Retailers 2-
    17. 17. Sales and growth rate for retailsectors CHAPTER 2 1 2-
    18. 18. 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-
    19. 19. Characteristics of Food Retailers CHAPTER 2 1 2-
    20. 20. 2-18Supermarkets CHAPTER 2 1 2-
    21. 21. 2-19Vons CHAPTER 2 1 2-
    22. 22. 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 2-
    23. 23. 2-21ALDI: German’s Wal-Mart CHAPTER 2 1 ALDI provides quality merchandise at low prices by reducing its assortment in order to control store operating expenses 2-
    24. 24. 2-22Walmart No, Aldi Yes? CHAPTER 2 1 2-
    25. 25. ALDI’s Strategy CHAPTER 2 18,500 worldwide, including 1000 stores in 26 US states90 percent of population in Germany shop at AldiCheap..Only two brands of toilet paper and one brand of pickles STRATEGY:Stores sell less productsALDI exclusive labelHigh quality of products at cheaper prices HOW?Strong control over quality and priceSimplify shipping and handlingReduce labor costs by keeping limited store staff, etc. 2-
    26. 26. 2-24Save-A-Lot CHAPTER 2 1 2-
    27. 27. 2-25Save-A-Lot CHAPTER 2 1 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. Used by permission of Save-A-Lot This allows Save-A-Lot to offer savings of up to 40% compared to conventional grocery stores – without asking shoppers to sacrifice quality. 2-
    28. 28. Trends in Supermarket Retailing CHAPTER 2 1• Competition from Discount Stores Efficient Lower Costs Lower Prices Distribution• Changing Consumption Patterns Time Pressure Eating Out More Meal Solutions 2-
    29. 29. ConventionalSupermarket Survival Pack CHAPTER 2 1 • Emphasize Fresh Perishables • Wegmans • Target health conscious and ethnic consumers • Offer more private labelChef-crafted meals on the go at EatZi’s brands • Provide a better in-store 2-
    30. 30. Supercenters and WarehouseClubs CHAPTER 2 1 Supercenters Warehouse Clubs • The fastest growing retail • Offer a limited and irregular category assortment of food and • Large stores (185,000 general merchandise with square feet) that combine a little service at low prices supermarket with a full-line • Use low-locations, discount store inexpensive store design, • One-stop shopping little customer service experience • Low inventory holding costs by carrying a limited assortment of fast selling items 2-
    31. 31. 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-
    32. 32. Three Tiers of DepartmentStores 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 Rob Melnychuk/Getty Images 2-
    33. 33. Characteristics ofGeneral Merchandise Retailers CHAPTER 2 1 2-
    34. 34. Issues in Department StoreRetailing 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-
    35. 35. Department Stores:What To Do With an Eroding CHAPTER 2 1• Department stores are: • attempting to increase the amount of exclusive merchandise they sell Royalty-Free/CORBIS • undertaking marketing campaigns to develop strong images for their stores and brands • building better relationships with their 2-
    36. 36. Issues in Full-line Discount StoreRetailing CHAPTER 2 1• Only Big Left • Wal-Mart, Target• Wal-Mart’s Dominance• Differentiate Strategy • Wal-Mart = Low Price and Good McGraw-Hill Companies, Inc. Gary He, photographer value • Target = More Fashionable Apparel• Competition from Category Specialists • Toys-R-Us, Best Buy, Sports 2-
    37. 37. Issues in Specialty StoreRetailing 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 McGraw-Hill Companies, Inc./Andrew Resek, Photographer• Manufacturers opening their own stores 2-
    38. 38. Specialty Store Retailers CHAPTER 2 1 McGraw-Hill Companies, Inc./Andrew Resek, Photographer 2-
    39. 39. 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-
    40. 40. 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-
    41. 41. Category Specialists CHAPTER 2 1• Deep and Narrow Assortments• Destination Stores• Category killers• Low Price and Service• Wholesaling to Business Customers and Retailing to Consumers Bass Pro Shops• Incredible Growth 2-
    42. 42. Category Specialists CHAPTER 2 1 Sephora, France’s leading perfume/ cosmetic chain LVMH’s division 2-
    43. 43. 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-
    44. 44. 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-
    45. 45. 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-
    46. 46. 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-
    47. 47. Examples of Service Retailers CHAPTER 2 1Type of Service Service Retail FirmsAirlines American, Delta, British Airways, Singapore AirwaysAutomobile maint/repair Jiffy Lube, Midas, AAMCOAutomobile rental Hertz, Avis, Budget, AlamoBanks Citibank, NCNB, Bank of AmericaChild care centers Kindercare, GymboreeCredit cards American Express, VISA, MastercardEducation University of Florida, Babson CollegeEntertainment parks Disney, Universal Studios, Six FlagsExpress package delivery Federal Express, UPS, US Postal ServiceFinancial services Merrill Lynch, Dean WitterFitness Jazzercise, Bally’s, Gold’s GymHealth Care Humana, HCAHome maintenance Chemlawn, MiniMaid, Roto-Rooter 2-
    48. 48. Merchandise/Service Continuum CHAPTER 2 1 2-
    49. 49. 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-
    50. 50. Retailers UsingFranchise Business Model CHAPTER 2 1 2-
    51. 51. Franchising CHAPTER 2 1• 30 – 40% of US Retail Sales• Franchisee Pays Fixed Fee Plus % of Sales• Franchisee Implements Program• Why is this Ownership Format Efficient? The McGraw-Hill Companies, Inc./Jill Braaten, photographer 2-
    52. 52. Reasons for Franchising Growth CHAPTER 2 1 2-
    53. 53. Reasons for Franchising Failure CHAPTER 2 1 2-
    54. 54. Franchisor Positionsin the Marketing Channel CHAPTER 2 1 2-
    55. 55. Franchisor Benefits CHAPTER 2 1 2-
    56. 56. Franchisee Benefits CHAPTER 2 1 2-
    57. 57. Franchisor Advantages/Disadvantages CHAPTER 2 1 2-
    58. 58. Franchisee Advantages/Disadvantages CHAPTER 2 1 2-
    59. 59. Franchising Trendsfor the New Millennium CHAPTER 2 1 2-
    60. 60. Keywords CHAPTER 2 1• assortment The number of SKUs within a merchandise category. Also called depth of merchandise.• breadth of merchandise The number of different merchandise categories within a store or department.• category killer A discount retailer that offers a narrow but deep assortment of merchandise in a category and thus dominates the category from the customers’ perspective. Also called a category specialist.• category specialist A discount retailer that offers a narrow but deep assortment of merchandise in a category and thus dominates the category from the customers’ perspective. Also called a category killer.• convenience store A store that provides a limited variety and assortment of merchandise at a convenient location in a 2,000- to 3,000-square-foot store with speedy checkout.• conventional supermarket A self-service food store that offers groceries, meat, and produce with limited sales of nonfood items, such as health and beauty aids and general merchandise.• department store A retailer that carries a wide variety and deep assortment, offers considerable customer services, and is organized into separate departments for displaying merchandise. 2-
    61. 61. Keywords CHAPTER 2 1• depth of merchandise The number of SKUs within a merchandise category. Also called depth of merchandise.• discount store A general merchandise retailer that offers a wide variety of merchandise, limited service, and low prices.• franchising A contractual agreement between a franchisor and a franchisee that allows the franchisee to operate a retail outlet using a name and format developed and supported by the franchisor.• full-line discount store Retailers that offer a broad variety of merchandise, limited service, and low prices.• hypermarket Large (100,000–300,000 square feet) combination food (60–70 percent) and general merchandise (30–40 percent) retailer.• North American Industry Classification System (NAICS) Classification of retail firms into a hierarchical set of six-digit codes based on the types of products and services they produce and sell.• off-price retailer A retailer that offers an inconsistent assortment of brand- name, fashion-oriented soft goods at low prices.• specialty store A type of store concentrating on a limited number of complementary merchandise categories and providing a high level of service. 2-
    62. 62. Keywords CHAPTER 2 1• stock-keeping unit (SKU) The smallest unit available for keeping inventory control. In soft goods merchandise, an SKU usually means a size, color, and style.• supercenter Large store (150,000 to 220,000 square feet) combining a discount store with a supermarket.• supermarket A conventional supermarket is a large, self-service retail food store offering groceries, meat, and produce, as well as some nonfood items, such as health and beauty aids and general merchandise.• value retailers Small, full-line discount stores that offer a limited merchandise assortment at very low prices.• variety The number of different merchandise categories within a store or department.• warehouse club A retailer that offers a limited assortment of food and general merchandise with little service and low prices to ultimate consumers and small businesses.• wholesale-sponsored voluntary cooperative group An organization operated by a wholesaler offering a merchandising program to small, independent retailers on a voluntary basis. 2-

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