2. 2-2
Questions
■ 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?
3. 2-3
General Trends in Retailing
■ New Types of Retailers
■ Increased Concentration
■ Globalization
■ Growth In Services Retailer
■ Demise of Pure Electronic Retailers
■ Growth in Use of Multi-Channel Retailing by
Traditional Retailers
■ Increase Use of Technology to Reduce Cost;
Increase Value Delivered
4. 2-4
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.
6. 2-6
Types of Merchandise Retailers
Mom and Pop Stores
Convenience Stores
Supermarkets
Supercenters
Department Stores
Specialty Stores
Discount Stores
Category Specialists
Off-Price Retailers
Warehouse Clubs
Value Retailers
Food Retailers General Merchandise Retailers
7. 2-7
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)
10. 2-10
Variety and Assortment of Coffee Makers
Makers Less Than
8 Cups
Makers Greater Than
10 Cups
Specialty Makers
Linens N’
Things
Brands Black and Decker
Cuisinart, Mr. Coffee, Black and
Decker, Faberware, Braun,
Hamilton Beach, Krups, Sunbeam
Braun, Keurig,
Breville, Krups
# SKUs 2 SKUs 19 SKUs 7 SKUs
Price
Range
$19.99-19.99 $29.99-199.99 $59.99-249.99
Average
Price $19.99 $83.67 $157.13
Target
Brands
Black and Decker, Mr.
Coffee
Mr. Coffee, Black and Decker,
Hamilton Beach, Delonghi,
Kitchen Aid, Bunn, Chefmate
Keurig, Mr. Coffee,
Delonghi, Philips
# SKUs 4 SKUs 16 SKUs 5 SKUs
Price
Range
$10.48-$29.99 $9.49-$119 $29.99-99.99
Average
Price
$22.61 $51.83 $74.99
12. 2-12
SKUs for Digital Cameras
Wal-Mart Best Buy
Model
Megapixel
s Price Model
Megapixel
s Price
Snapshooter Standard
Canon Powershot
SX100 8 299.96
Canon Powershot
A560 7 149.99
Fujifilm FinePix Z10 7 139.84 HP M53BNDL 6 179.99
Fujifilm FinePix Z5 6 162
HP Photosmart
M547 6 99.99
Kodak C813 8 119.77
Kodak Easyshare
C613 7 99.99
Kodak Easyshare
C613 6 89.88
Kodak Easyshare
C613P 6 99.99
Kodak Easyshare
V1003 10 149.34
Kodak Easyshare
M753 7 129.99
Pentax Optio M30 7 169.84 Nikon CoolPix L11 6 109.99
Polaroid i733LP 7 99.88 Olympus FE-340 8 199.99
Samsung S730 7 99.77
Sony Cybershot
DSC-S700 7 149.99
Samsung S850 8 129.77
Sony Cybershot
DSC-W55 7 179.99
13. 2-13
Prices and the cost of offering breath and
depth of merchandise and services
Stocking a deep and broad assortment is costly for
retailers.
Many SKUs
Inventory Investment Cost
Because the retailer must have backup stock for each SKU
in addition to holding the inventory
14. 2-14
Food Retailers
■ Supermarkets
■ Supercenters
■ Warehouse
Clubs
■ Convenience
Stores
Channel preference for food shopping
channel where grocery purchasers do most
of their food shopping
17. 2-17
Types of Food Retailers
Conventional
Supermarket
Limited
Assortment
Supermarket
Supercenter Warehouse
Club
Convenience
Store
Percentage Food 70-80 80-90 30-40 60 90
Size (000 sq ft) 20-30 7-10 150-220 100-150 2-3
SKUs (000) 20-40 1-1.5 100-150 20 2-3
Variety average narrow broad broad narrow
Assortment average shallow deep shallow shallow
Ambiance pleasant minimal average minimal average
Service modest limited limited limited limited
# of checkout lines 6-10 2-4 20-30 10-15 1-2
Prices average lowest low low high
Gross Margin % 20-22 10-12 15-18 12-15 25-30
18. 2-18
Supermarkets
■ 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
19. 2-19
ALDI: German’s Wal-Mart
ALDI provides quality merchandise at low prices by reducing its
assortment in order to control store operating expenses
20. 2-20
Trends in Supermarket Retailing
Competition from Discount Stores
Changing Consumption Patterns
Efficient
Distribution
Lower Costs Lower Prices
Time Pressure Eating Out More Meal Solutions
22. 2-22
Supercenters and Warehouse Clubs
■ The fastest growing retail
category
■ Large stores (150,000 –
220,000 square feet) that
combine a supermarket
with a full-line discount
store
■ One-stop shopping
experience
Supercenters
■ 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
Warehouse Clubs
23. 2-23
Convenience Store
■ 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)
24. 2-24
Types of General Merchandise Retailers
■ Department Stores
■ Specialty Stores
■ Category Specialists
■ Home Improvement Centers
■ Discount Stores
■ Drugstores
■ Off-Price retailers
■ Extreme Value Retailers
26. 2-26
Category Specialists
■ Deep and Narrow
Assortments
Destination Stores
■ Category killers
■ Low Price and Service
■ Wholesaling to
Business Customers
and Retailing to
Consumers
■ Incredible Growth
32. 2-32
Electronic Retailing
■ Many retailers operate from virtual storefronts on the
World Wide Web, usually maintaining little or no
inventory, ordering directly from vendors to fill customer
orders
■ Primarily used by traditional retailers to compliment store
and catalog offerings
■ Exclusive e-tailers target small and dispersed niche
markets
33. 2-33
What are Amazon and eBay?
■ 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
34. 2-34
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
■ Inconsistency of the Offering
Importance of HR Management
38. 2-38
Franchising
The McGraw-Hill Companies, Inc./Jill Braaten, photographer
■ Franchisee Pays Fixed Fee
Plus % of Sales
■ Franchisee Implements
Program
■ Why is this Ownership
Format Efficient?
39. 2-39
Reasons for Franchising Growth
Technological advances
Profitable utilization of capital resources
Demographic expansion
Product/service consistency
41. 2-41
Franchisor Benefits
Continuous marketContinuous market
Market informationMarket information
MoneyMoney
Sales of productsSales of products
Rental and lease feesRental and lease fees
License feesLicense fees
Management feesManagement fees
Royalty fees
42. 2-42
Franchisee Benefits
Initial Services
Market survey and site selection, facility design and
layout, lease negotiation advice, financing advice,
operating manuals, management training programs,
and employee training.
Continuous Services
Field supervision, merchandising and promotional
materials, management and employee retraining,
quality inspection, national advertising, centralized
purchasing, market data and guidance, auditing and
record keeping, management reports, and group
insurance plans.
43. 2-43
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.
44. 2-44
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 corporate-
owned outlets, and high royalties, fees, costs on
equipment, supplies, merchandise, rental/lease rates
and mandatory participation in promotional and
support services.
