Business Models in Retail- Jayati Singh

Classification of retail storesStore-Based RetailingNon-Store RetailingForm of OwnershipIndependent retailerChain RetailerFranchiseLeased DepartmentsVertical Marketing SystemConsumer CooperativesMerchandise OfferedConvenience StoreSupermarketsHypermarketsSpecialty StoresDepartment StoresOff Price RetailersFull line discount storeWarehouse storeVariety StoreFactory OutletsCatalogue ShowroomsMembership ClubFlea MarketDirect SellingDirect MarketingAutomated VendingWorld Wide WebOther Emerging Retailformats

Based on LocationHigh StreetDestinationConvenience

STORE FORMAT BY LOCATION1. High Street FormatIt is Located in busy shopping area.Area is less than 2000 square feet.No parking facility Focused Merchandised CategoryExample: M. G. Road in Bangalore

2.DESTINATION FORMATHuge Parking spaceWide merchandise categoryThey are Independent retail store with alluring proposition for the customer to visit the store with the primary intention of shopping there

3. CONVENIENCE STORELocated in the catchment area of target customersExtended hours of operationLess than 5000 square feet24X7 convenience stores situated close to homes to generate high footprintssnacks, grocery type items & confectionary Merchandise include: beverages, ready to eatThese store carry a limited stock of daily use goods with a special focus on food products eg. In & Out petrol pump outlets.

CLASSIFICATION BASED ON OWNERSHIPINDEPENDENT RETAILERADVANTAGES:Flexibility in choosing retail formats and locationsDecision making is centralizedLow investment costIndependents have independenceEasily sustain consistency

DISADVANTAGES:Less bargain power with suppliersCannot gain economies of scaleVery little computerizationRelatively high cost of advertisingOver dependence on ownerLimited amount of time and resources allotted to long-run planning

CHAIN RETAILERADVANTAGES:Bargaining power with suppliersAchieve cost efficiencies by being wholesales themselvesComputerizedCan take advantage of variety of media optionsDefined management philosophiesLong term planning, opportunities and threats are carefully monitored DISADVANTAGESLesser flexibilityInvestments may be highManagerial control can be hardLimited independence in jobs

FRANCHISINGFranchising is a retail organization form in which small businessescan benefit by being a part of a large, multiunit chain-type retail institution .Two types of franchising:Product/Trademark and Business format franchising.Archie's/Gasoline stationsMcDonaldsThree structural arrangements dominate franchising:Manufacturer-retailerGasoline stations/Exxon, Mobil, FordWholesaler-retailer1.VoluntaryAuto accessory store2.CooperativesService sponsor retailerKFC, McDonalds, Holiday Inn

LEASED DEPARTMENTFrom the stores perspectiveADVANTAGES:Skilled manpower to handle merchandiseMarket can be enlarged by providing one stop customer shopping% of revenues is received regularlyStock servicing, display etc is the responsibility of the licensee

DISADVANTAGES:Operating procedures may be conflictingStores image may get adversely affectedCustomers tend to blame the store for any pitfall

LEASED DEPARTMENT..CONTFor leased operators ADVANTAGES:Immediate sales because of stores established imageSome costs are reduced through shared facility.Volume saving in print/ media ads

DISADVANTAGES:Inflexibility since working style may differGoods/services line are restrictedStore may raise the rent or may not renew leaseIn-store location may not generate expected sales.

VERTICAL MARKETING SYSTEMCHANNEL TYPECANNEL FUNCTIONSOWNERSHIPSIndependent ManufacturingIndependentSystemsPartners

2.PartiallyIntegrated Two channel membersSystemsWholesalingown all facilities and perform all functions

3.FullyAll functions areIntegrated performed by a singleSystems Retailing channel member

CONSUMER CO-OPERATIVESConsumer co-operatives exist for three basic reasons:They feel that they can operate a store as well or may be better than any other retailerThey believe that existing retailers are inadequately fulfilling customers need for healthful, environmentally safe productsThey assume that existing retailers make excessive profits and they can sell merchandise for lower prices

CLASSIFIACATION BASED ON MERCHANDISE OFFEREDFOOD ORIENTED RETAILERS

CONVENIENCE STORES:It is usually a food-oriented retailer that is well located, is open for long hours and carries a moderate number of items. This type of retailer is small, has average to above average prices and average services and average atmosphere.Milk, eggs, bread, newspaper, tobacco products, soft drinks, magazines, video rentals, etc are the major category occupants.Store size ranges from 3000 to 8000 sq. ft.Ex. Mom n Pop stores.

CONVENTIONAL SUPERMARKETThese are large, low cost, low margin, high volume, self service retailers designed to meet the needs for food, groceries and other non-food items.They rely on high inventory turnover. Their profit margins are low.The size of the store ranges from 8000 to 20000 sq. ft.Ex. Kroger, Safeway, Foodworld, Adani supermarket, Subhiska, Nilgiris, Reliance Fresh.

FOOD BASED SUPERSTOREA food based superstore is a larger and more diversified than a conventional supermarket but usually less diversified and smaller than a combination store.Some supermarkets merged with general merchandise store or drug store.They are typically 25000 to 50000 sq feet of total space.20-25 % revenues comes from garden supplies, small household appliances, flowers, etc.They stimulate impulse purchases.

COMBINATON STOREA combination store combines supermarket and general merchandise sales in one facility.25-40% revenues from general merchandise.They are from 30000 to 100000 sq feet. the combination of economy supermarket with discount department store is called super center.Examples: Wal-mart, K-mart.

HYPERMARKETAlso called as supercentre, this format is a blend of economy supermarket with discount department store.They offer both food and non-food items like grocery, clothes, jewellery, cycles, sports items, books, CDs, furniture, etc. This format was pioneered by Carrefour in France.This ranges from 80,000 to 2,20,000 sq. ft.The cheapest price will normally be found in these stores.Across the world hypermarkets are a part of retail park with other shops, cafeteria and restaurants.Other facilities include photo processing shop, pharmacy shops.They are usually located in the outskirts of major towns and cities.Ex. SIB, Big Bazaar, Adani Hypermarket.

BOX STOREThis is a food based discounter that focuses on a a small section of items, moderate working hours, few services and limited manufacturers brands.They have less than 1500 SKUs.Items are displayed in cut cases.Customers do their own bagging.They aim to price at 20-30% below supermarkets.Example: Aldi.

WAREHOUSE STOREA warehouse store is a food-based discounter offering a moderate number of food items in a no frill setting.They appeal to one stop shoppers.These stores concentrate on special discount purchases from manufacturer brands. They use cut-case displays, provide little service, post prices on shelves and are located in industrial districts.Potential problem is lack of brand continuity.They temporarily or permanently run out of brands.Here customers pack their own goods.They work on volumes and their gross margins are far lower than supermarkets or hypermarkets.Largest stores are called super warehouse.Their sizes can be 15000 to 50000 square feet.Ex. Cub Foods

GENERAL MERCHANDISE RETAILERSSPECIALITY STOREA specialty store concentrates on selling one product/ service line such as apparel and accessories, toys, furniture. They have a deep assortment in their chosen category and tailor their strategy to selective market segment.Personal attention, store ambience and customer service are the prime importance to the retailer.They operate in an area which is under 8000 sq. ft.Ex. The Gap, Mango, Levis, Wills Lifestyle, Big & Tall, Adidas, Nike, Style Spa, Proline fitness station.

CATEGORY KILLERSAlso called as Power Retailer.This is a new type of specialty retailer which offers a very large selection of chosen category .They stock deep and dominate the chosen category.Ex. Planet Sports, Crossword, Nalli Sarees, Sales India, Croma, E-planet.

DEPARTMENT STORETRADITIONAL DEPARTMENT STORE:A traditional department store is a large retail unit with an extensive assortment of goods and services that is organized into separate departments for buying, promotion, customer service and control.They generally serve as anchor stores in malls and is usually part of a chain.Apparel and home furnishing are the two most common product categories.Size varies from 20,000 to 40,000 sq. ft.

DEPARTMENT STOREMerchandise quality is moderate to quite good. Pricing is moderate to above average. Customer service is medium to high level.Ex. Marks & Spencer, Sears, J.C. Penny, Westside, Globus, Pyramid, Pantaloons, Shoppers Stop, Lifestyle.

FULL-LINE DISCOUNT STOREIt conveys the image of high volume, low cost, fast turnover outlet selling a broad merchandise for less than conventional prices.Products are sold via self service.Non durable goods feature from private brands and durable goods are from well known national brands.Less fashion sensitive merchandise are carried.Ex. Wal-Mart.

DOLLAR STORE/ VARIETY STORE

US based My Dollar Store started operation in Mumbai through franchise arrangement with Sankalp Retail Value. Floor Space: 4000 Sq. Feet Merchandise: Cleaning, Health & Beauty, Hardware, Plastic ware, Kitchen ware & confectionary etc.

OFF-PRICE CHAINAn off-price chain features brand name, sometime designer labels of women wear, cosmetics, accessories, footwear,etc and sell them at every day low prices in an efficient, limited service environment.They have centralized check-outs, no gift wrapping and charge separately for alterations.Ex. T.J. Maxx

FACTORY OUTLETA factory outlet is a manufacturer-owned store selling manufacturer closeouts, discontinued merchandise, irregulars, cancelled orders and sometime in season fresh merchandise at at lower rate.They sell merchandise at up to 60% less than MRP due to low operating cost, low rent, limited display and cheap fixtures.Also sell in cartons.Ex. Levis factory outlet, Pantaloon factory outlet, etc.

MEMBERSHIP CLUBA membership club is a retail format where consumers have to be members to be able to buy merchandise at a wholesale price.Here the members pay a certain amount of annual fee.Their operating strategy includes inexpensive isolated locations, opportunistic buying, little or no advertising, plain fixtures, wide aisles, very low prices.Ex. Sams and Costco

FLEA MARKETA flea market has many retail vendors offering a range of products at discount prices in plain surroundings.They are located in non-traditional sites like stadiums, racetracks,etc.Here, individual retailers rent space on a daily or weekly basis.At any flea market, price haggling are encouraged.Ex. Rose Bowl

CATALOGUE SHOWROOMSA catalogue retailer specializes in hard goods such as houseware, jewellery, consumer electronics.The customer walks into this retail showroom and goes through the catalogue of the product that would like to purchase.The product is then arranged to be bought from the warehouse for inspection and purchase.Ex. Argos, Service Merchandise and Best Products.

NON-STORE RETAILINGDIRECT MARKETING:Is a form of retailing in which a customer is first exposed to goodsor service through a non personal medium such as direct mail, newspaper, broadcast or television and then orders are placed by mail, phone or computer.There are three forms:Mail order retailing/ catalogue retailing.Television retailing.E- tailing

DIRECT SELLINGDirect selling includes both personal contact with consumers in their homes and offices and phone solicitations initiated by a retailer.1500 crore market in India growing @ 28% p.a.Profile of products purchased from Direct Selling: (IN %) HOUSEHOLD GOODS68.9PERSONAL CARE PRODUCTS12.4FAMILY PRODUCTS14.4BUSINESS AIDS3.59FOOD PRODUCTS0.71

Ex. Oriflame, Amway, Avon, Herbalife, Tupperware, Eureka ForbesControlled by IDSA.

AUTOMATED VENDINGEx. Tata Coffee, Jiffy, ATMs.

AIRPORT RETAILINGEx. Travel Requisition Shop

E-Retailers

VIDEO KIOSKSThe video kiosk is a free standing, interactive, electronic computer That displays products and related information on a video screen.It often uses a touch screen for consumers to make selection.Example: McDonald, Wills Lifestyle.