Retail Lesson 2Types of Retail Business

Types of retailers

You will be able to:◦ Explain the NAICS categories for the retail

industry◦ Name the types of business organization◦ Identify the types of retail business ownership◦ Describe how competition affects retail evolution

Lesson Objectives

NAICS◦ North American Industry Classification System

Used to categorize industries on the North American continent

Helps to easily compare business statistics by industry

NAICS Codes

NAICS uses 12 categories and code numbers for the retail industry◦ These categories classify retailers by the products

they sell A particular retail stores competition would

most likely come from another store in their category

The Retail Industry

NAICS Retail Industry CategoriesCode Category Approximate

Number of Stores441 Motor Vehicle and Parts Dealers 123,000442 Furniture and Home Furnishings 64,000443 Electronics and Appliance 44,000444 Building Material and Garden Equipment and

Supplies Dealers93,000

445 Food and Beverage Stores 149,000446 Health and Personal Care Stores 83,000447 Gasoline Stations 127,000448 Clothing and Clothing Accessories Stores 157,000451 Sporting Goods, Hobby, Book, and Music Stores 69,000452 General Merchandise Stores 37,000452 Miscellaneous Store Retailers 130,000454 Non-store Retailers 45,000

Source: U.S. Census Bureau 2002

Industries in the Motor Vehicle and Parts Dealers subsector retail motor vehicles and parts from fixed point-of-sale locations.

Establishments in this subsector typically operate from a showroom and/or an open lot where the vehicles are on display.

http://www.bls.gov/iag/tgs/iag441.htm

Motor Vehicle and Parts Dealers

Industries in the Furniture and Home Furnishings Stores subsector retail new furniture and home furnishings from fixed point-of-sale locations.

Establishments in this subsector usually operate from showrooms and have substantial areas for the presentation of their products.

Many offer interior decorating services in addition to the sale of products.

http://www.bls.gov/iag/tgs/iag442.htm

Furniture and Home Furnishings Stores

Industries in the Electronics and Appliance Stores subsector retail new electronics and appliances from point-of-sale locations.

Establishments in this subsector often operate from locations that have special provisions for floor displays requiring special electrical capacity to accommodate the proper demonstration of the products.

http://www.bls.gov/iag/tgs/iag443.htm

Electronics and Appliance Stores

Industries in the Building Material and Garden Equipment and Supplies Dealers subsector retail new building material and garden equipment and supplies from fixed point-of-sale locations.

Establishments in this subsector have display equipment designed to handle lumber and related products and garden equipment and supplies that may be kept either indoors or outdoors under covered areas.

http://www.bls.gov/iag/tgs/iag444.htm

Building Material and Garden Equipment and Supplies Dealers

Industries in the Food and Beverage Stores subsector usually retail food and beverages merchandise from fixed point-of-sale locations.

Establishments in this subsector have special equipment (e.g., freezers, refrigerated display cases, refrigerators) for displaying food and beverage goods.

http://www.bls.gov/iag/tgs/iag445.htm

Food and Beverage Stores

Industries in the Health and Personal Care Stores subsector retail health and personal care merchandise from fixed point-of-sale locations.

Establishments in this subsector are characterized principally by the products they retail, and some health and personal care stores may have specialized staff trained in dealing with the products.

http://www.bls.gov/iag/tgs/iag446.htm

Health and Personal Care Stores

Industries in the Gasoline Stations subsector retail automotive fuels (e.g., gasoline, diesel fuel, gasohol) and automotive oils or retail these products in combination with convenience store items.

These establishments have specialized equipment for the storage and dispensing of automotive fuels.

http://www.bls.gov/iag/tgs/iag447.htm

Gasoline Stations

Industries in the Clothing and Clothing Accessories Stores subsector retail new clothing and clothing accessories merchandise from fixed point-of-sale locations.

Establishments in this subsector have similar display equipment and staff that is knowledgeable regarding fashion trends and the proper match of styles, colors, and combinations of clothing and accessories to the characteristics and tastes of the customer.

http://www.bls.gov/iag/tgs/iag448.htm

Clothing and Clothing Accessories Stores

Industries in the Sporting Goods, Hobby, Book, and Music Stores subsector are engaged in retailing and providing expertise on use of sporting equipment or other specific leisure activities, such as needlework and musical instruments.

Book stores are also included in this subsector.

http://www.bls.gov/iag/tgs/iag451.htm

Sporting Goods, Hobby, Book, and Music Stores

Industries in the General Merchandise Stores subsector retail new general merchandise from fixed point-of-sale locations.

Establishments in this subsector are unique in that they have the equipment and staff capable of retailing a large variety of goods from a single location.

◦ This includes a variety of display equipment and staff trained to provide information on many lines of products.

http://www.bls.gov/iag/tgs/iag452.htm

General-Merchandise Retailers

Industries in the Miscellaneous Store Retailers subsector retail merchandise from fixed point-of-sale locations.

Establishments in this subsector include stores with unique characteristics like florists, used merchandise stores, and pet and pet supply stores as well as other store retailers.

http://www.bls.gov/iag/tgs/iag453.htm

Miscellaneous Store retailers

Industries in the Non-store Retailers subsector retail merchandise using methods, such as the broadcasting of infomercials, the broadcasting and publishing of direct-response advertising, the publishing of paper and electronic catalogs, door-to-door solicitation, in-home demonstration, selling from portable stalls and distribution through vending machines.

Establishments in this subsector include mail-order houses, vending machine operators, home delivery sales, door-to-door sales, party plan sales, electronic shopping, and sales through portable stalls (e.g., street vendors, except food).

Establishments engaged in the direct sale (i.e., non-store) of products, such as home heating oil dealers and newspaper delivery service providers are included in this subsector.

http://www.bls.gov/iag/tgs/iag454.htm

Non-Store Retailers

Retail sales associates include both those who sell retail merchandise, such as clothing, furniture, and automobiles, (called retail salespersons) and those who sell spare and replacement parts and equipment, especially car parts, (called parts salespersons).

Both groups help customers find the products they want and process customers’ payments.

http://www.bls.gov/ooh/Sales/Retail-sales-workers.htm

Retail Sales Associates

Most retailers carry merchandise that can be listed in more than one of the category lists.

Merchandise Variety◦ The product or merchandise lines that a retailer

carries Example: Clothing retailer sells jackets, pants, shirts

Merchandise Assortment◦ The Number of items within a merchandise line

Example: Shirt category could include woven shirts, knit shirts, and sweaters

Variety of Merchandise

Types of retail ownership

Retail business fall into one of three categories:

◦ Single Proprietorship (Sole Proprietorship)

◦ Partnership

◦ Corporation

Business Organization

A type of business entity that is owned and run by one individual and in which there is no legal distinction between the owner and the business.

The owner receives all profits (subject to taxation specific to the business) and has unlimited responsibility for all losses and debts.

Every asset of the business is owned by the proprietor and all debts of the business are the proprietor's.

Single (sole) Proprietorship

An agreement between two or more persons to go into business together

Each person contributes money, property, labor or skill, and expects to share in the profits and losses of the business.

Partnership

A form of business for which a charter is granted by the state in which the business will be established.

The corporation sells stock to investors (shareholders) who become the owners of a corporation

Corporation

A store that is owned privately, having one location.

Generally, stores of this type are individually owned, owned by a family, or owned by two partners who usually live in the community.

Often, entrepreneurs begin their career in independent stores

◦ Person who takes the risk of opening a new business, often acting as the manager and operator of the business

Independent Stores

Independent Stores

Advantages Disadvantages

Close contact with customers

Can respond quickly to changes in needs of customers

Prices are typically hire

Usually cannot take advantage of buying in large quantities to receive discount prices

Stores that have at least two locations and are owned by one company or person

Local, regional, national, or international

Chain Stores

Chain Stores

Advantages Disadvantages

Can purchase in higher quantity at better discounts

Usually lower prices Offer a wide variety of

items

Cannot respond as quickly to customer needs and wants

Owned by large companies or corporations

Different stores operate independently of one another

Example:◦ Sears Holding Company

Owns both K-Mart and Sears retail stores

Store Groups

Retail stores are owned by a manufacturer

Manufacturer owns a store in a mall to sell its products

Manufacturer Retail Stores

Agreement or contract between the franchisor and the franchisee to sell a company’s goods or services at a designated location

Franchisor◦ Business that leases its trade name and operating

system to another person, or franchisee Franchisee

◦ Person or persons who pay a fee to a company to operate a business under the franchisor’s trade name

Franchise Business

Pros◦ Benefit of name

recognition◦ Support and advice

from the franchisor◦ Initial fee smaller

than what it would cost to start an independent business

Cons◦ Royalty Payments. For

as long as you are a franchisee, you will have to pay some percentage of the monthly gross back to the franchisor, reducing your profit potential.

◦ Limited Creativity and Flexibility. You must use the franchisor’s system, follow their rules.

Pros and Cons of Franchise

Cooperatives◦ Stores that are owned by a group of people who sell

products only to the people who belong to the cooperative Voluntary Chain Stores

◦ A group of retail stores that carry similar products Lease Department

◦ Part of a larger retail operation. (Jewelry section in department store)

Lease Dealerships◦ Retail company owns the building and land where a

business is located◦ Dealer must purchase from the retail company (gas

stations)

Other Types of Stores