Chapter 2
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Transcript of Chapter 2
PPT 2-1
5th Edition5th Edition
PPT 2-2
McGraw-Hill/IrwinLevy/Weitz: Retailing Management, 5/e Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved.
Types of RetailersTypes of Retailers
Chapter 2Chapter 2
PPT 2-3
The World of Retailing
Introduction to Retailing
Types of Retailers
Multi-Channel Retailing
Customer Buying Behavior
PPT 2-4
Trends in Retailing
Growing Diversity of Formats
Increasing Industry Concentration
Globalization
PPT 2-5
New Types of Retailers
• Category Specialists
-PetsMart
-Bed, Bath and Beyond
- Michaels
• CarMax and Auto Nation
• Wal-Mart Supercenters
-Supermarket + Discount Store
• Ebay, Priceline, Travelocity
PPT 2-6
Increasing Concentration
Drug Stores
Walgreens, CVS, Rite-Aid and Eckerds
53% of sales
85% of sales
Discount Stores
Wal-Mart, Target and Kmart
PPT 2-7
Globalization of Wal-Mart
PPT 2-8
Types of Retailers
• Retailers Use Different Retail Mixes
-merchandise: variety (breadth) / assortment (depth)
-services
-store design, visual merchandising
-location
-pricing
• Infinite Variations
• Survival of the Fitness – Some combination of retail mixes satisfy the needs of significant segments and persist over time.
PPT 2-9
Classification by Type of Merchandise
PPT 2-10
Sales by Merchandise Category
PPT 2-11
Merchandise Offering
• Variety (breadth of merchandise)
- The number of merchandise categories
Assortment (depth of merchandise)
-the number of items in a category (SKUs)
PPT 2-12
Variety and Assortment of Bicycles
PPT 2-13
Types of Retailers
Food Retailers
Mom and Pop Stores
Convenience Stores
Supermarkets
Supercenters
General Merchandise Retailers
Department Stores
Specialty Stores
Discount Stores
Category Specialists
Off-Price Retailers
Warehouse Clubs
PPT 2-14
Outlet % Shopping Number of Weekly
Weekly Trips Spending
Supermarkets 100 2.4 $ 72.82
General merchandise 68 1.3 32.53discount stores
Fast-food restaurants 65 1.9 16.32
Drug stores 39 1.2 18.70
Convenience stores 37 2.4 19.72
Wholesale clubs 27 1.7 75.12
Specialty food stores 9 1.0 23.70
Source: “Consumers Are Skeptical Again,” “63rd Annual Report of the Grocery Industry,” Progressive Grocer, April 1996, p.42.
Shopping Patterns by Types of Retail Outlets
PPT 2-15
Food Retailers
Mom and Pops – Supermarkets -Cars, highways and TV to build brands
-Knowledgeable customers – self service
-Perishable vs. packaged goods
Big Box Retailers -Warehouse Clubs
-Supercenters
-Hypermarkets
Convenience Stores
PPT 2-16
Types of Food Retailers
PPT 2-17
Issues in Food Retailing
Competition from Discount Stores
Changing Consumption Patterns
EfficientDistribution Lower Costs Lower Prices
Time Pressure Eating Out More Meal Solutions
PPT 2-18
Types of General Merchandise Retailers
• Discount Stores
• Specialty Stores
• Category Specialists
• Home Improvement Centers
• Department Stores
• Drugstores
• Off-Price retailers
• Value Retailers
PPT 2-19
Characteristics of General Merchandise Retailers
PPT 2-20
Issues in Discount Store Retailing
• Only Big Three Left – Wal-Mart, Kmart, Target
• Wal-Mart’s Dominance
• Differentiate Strategy
-Wal-Mart = Low Price and Good value
-Target = More Fashionable Apparel
• Competition from Category Specialists
-Toys-R-Us, Circuit City, Sports Authority
PPT 2-21
Issues in Specialty Store Retailing
Mall-Based Apparel Retailers:
Decline in Mall Shopping and Apparel Sales
-Lack of New Fashions
-Less Interest in Fashion
-Increase Price Consciousness
Lifestyle Formats – Banana Republic and Hot Topics
PPT 2-22
Category Specialists
Deep and Narrow Assortments – Destination Stores
Low Price and Service
Wholesaling to Business Customers and Retailing to Consumers
Incredible Growth
Increased Competition with National Expansion and Consolidation
PPT 2-23
Issues in Department Store Retailing
• 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
PPT 2-24
Issues in Drug Store Retailing
Consolidation – Walgreens, CVS, Rite-Aid, Eckerds
Competition from Supermarkets and Discount Stores – Pharmaceuticals
Evolution to a New Format
-Stand Alone Sites with Drive Thru Windows
-Convenient Store Front End
PPT 2-25
Issues in Off-Price Retailing
• Opportunistic Buying
• Hurt By Sales in Department Stores
• Buying First Line Merchandise
PPT 2-26
Issues in Value Retailing
Target Lower Income Families
Low Cost Low Prices
-Low Cost Location
-Limited Services
One of the Fastest Growing Retail Segments
PPT 2-27
Summary
Many New Types of retailers, Increased Diversity to Meet Diverse Needs
Many New Types of retailers, IncreasedDiversity to Meet Diverse Needs
Most People Shop at All Types Dependingon Situations – Growth in Cross-Shopping
PPT 2-28
Non-store Retail Formats
Electronic Retailing
Catalog and Direct Mail
Direct Selling
Television Home Shopping
Vending Machines
PPT 2-29
Types of Nonstore Retailers
PPT 2-30
Sales by Non-store Format
2005
PPT 2-31
Issues in Catalog Retailing
• Low Start Up Cost
• Evolution of Multi-Channel Offering
-Electronic Channel, Stores
• Increasing Mail Costs
• Clutter from other Catalogs
PPT 2-32
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
PPT 2-33
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
Examples of Service Retailers
PPT 2-34
Examples of Service Retailers
Type of Service Service Retail Firms
Hotels and motels Hyatt, Sheraton, Marriott, Days Inn
Income tax preparation H & R Block
Insurance Allstate, State Farm
Internet access/Elec info. American On-Line, CompuServe
Long-distance telephone AT&T, MCI, Sprint
Movie theaters AMC, Loews/Sony, Universal
Real estate Century 21, Coldwell Banker
Restaurants TGI Friday’s, Wendy’s, Pizza Hut
Truck rentals U-Haul, Ryder
Weight loss Weight Watchers, Jenny Craig
Video rental Blockbuster
Vision centers Lenscrafter, Pearle
PPT 2-35
Merchandise/Service Continuum
PPT 2-36
Types of Retail Ownership
• Independent, Single Store Establishments
Consumer Owned Cooperatives
Wholesaler Owned Cooperatives
• Corporate Chains
• Franchises
PPT 2-37
Trends in Ownership
Concentration on One Format
Growth in Services Franchising
PPT 2-38
Franchising
30 – 40% of US Retail Sales
Franchisee Pays Fixed Fee Plus % of Sales
Franchisee Implements Program
Why is This Ownership Format Efficient?
PPT 2-39
Reasons for Franchising Growth
Technological advances
Profitable utilization of capital resources
Attainment of the “American Dream”
Demographic expansion
Product/service consistency
PPT 2-40
Types of Franchise Systems
Territorial
Operating
Mobile
Distributorship
Co-ownership
Co-management
Leasing/Licensing
Manufacturing
Service
PPT 2-41
Reasons for Franchising Failure
Inept management
Fraudulent activities
Market saturation
PPT 2-42
Franchisor Positions in the Marketing Channel
Manufacturer - retailer
Manufacturer - wholesaler
Wholesaler - retailer
Service sponsor - retailer
PPT 2-43
Franchisor Benefits
Continuous marketContinuous market
Market informationMarket information
MoneyMoney
Sales of productsSales of products
Rental and lease feesRental and lease fees
License fees License fees
Management feesManagement fees
Royalty fees
PPT 2-44
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.
PPT 2-45
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.
PPT 2-46
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.
PPT 2-47
Franchising Trends for the New Millennium
Sustained growth
Enduring plus un-imagined applications
International expansion
Increasing tensions
Greater emphasis on financial returns
PPT 2-48
Theories of Retail Institution Change
CYCLICAL THEORIESCYCLICAL THEORIES
Wheel of retailing (price/service)Accordion Theory (assortment)
EVOLUTIONARY THEORIESEVOLUTIONARY THEORIES
Dialectic process (retailer)Natural selection (customer)
PPT 2-49
Wheel of Retailing
PPT 2-50
The Dialectic Process
Department store
High marginLow turnoverHigh priceFull serviceDowntown locationPlush facilities
THESIS
ANTITHESIS
SYNTHESIS
Source: Reprinted with the permission ofMacmillan College Publishing Company fromRetailing, 4th Edition, by Dale M. Lewison.Copyright © 1991 by MacmillanCollege Publishing Company, Inc.
Discount store
Low marginHigh turnoverLow priceSelf-serviceLow rent locationSpartan facilities
Discount department store
Average marginsAverage turnoverModerate pricesLimited servicesSuburban locationsModest facilities