Chapter 2:Types of RetailersJoel Whelchel &Sarah Skinner

Overview Retailer Characteristics Retail Mix Food Retailers General Merchandise Services Retailing Services Vs. Merchandise Retailer Types of Ownership

Retailer Characteristics Convenience

Shopping locally Benefits the community

Internet Wal-Mart.com, Ebay.com Free shipping with in-store pick

up Mobile Phones

Reservations Quick and easy

Location

Catalogs Send to another address

Retail Mix Four Elements:

Type of Merchandise Variety & Assortment Customer Service Price

Retail MixTypes of Merchandise:

North American Industry Classification System Collects data on business activity in each country

6 digit classification Merchandise retailers: sectors 44 & 45 Most service retailers: sectors 71 & 72

17% of all US retail sales are for motor vehicles and parts.

Department stores account for 7%.

Retail MixVariety & Assortment/Services Offered

The # of merchandise categories a retailer offers; Breadth.

The # of different items offered in a merchandise category; Depth.

SKU Store or specific item within

Services: Display, credit/debit cards, parking, hours Scheels has specialists for each area

Advantages/Disadvantages of breadth & depth Cheaper Costly to retailers & consumers

Food Retailers Supermarkets

Conventional Limited Assortment

Supercenters Warehouse Clubs Convenience Stores

Food RetailersConvention

al Supermark

et

Limited-Assortmen

t Supermark

et

Supercenter

WarehouseClub

Convenience

Store

% of Food 70-80 80-90 30-40 60 90

Size (sq. ft.)

35-40 7-10 160-200 100-150 3-5

SKUs (000)

30-40 1-1.5 100-150 20 2-3

Variety Avg. Narrow Broad Broad Narrow

Assortment

Avg. Shallow Deep Shallow Shallow

Ambience Pleasant Minimal Avg. Minimal Avg.

Service Modest Limited Limited Limited Limited

Prices Avg. Lowest Low Low High

Gross Margin (%)

20-22 10-12 15-18 12-15 25-30

Food RetailersTrends Supercenters/Warehouse Clubs Discount Stores Convenience Stores

Fresh Merchandise Health/Organic Merchandise Ethnic Merchandise Private-Label Merchandise Improving Shopping Experience

Food RetailersSupermarkets:

Conventional Large, self-service, groceries, health & beauty, general

merchandise Perishables: account for 44% supermarket sales 30,000-40,000 SKUs Emphasize fresh perishables, target health-conscious/ethnic

consumers, provide better value with private-label merchandise, & better shopping experiences.

Offering organic, natural, fair-trade, ethnic, & private-label goods

Food RetailersSupermarkets cont’d:

Limited-assortment/Extreme-value food retailers:

2,000 SKUs 1 or 2 brands, private-label Shipped on crates; no unloading No credit cards 40% lower prices

Food RetailersSupercenters

Large, 185,000 sq. ft.., inconvenient to some Wal-Mart: 81% total supercenter sales Non-food items purchased on impulse Carry higher % of non-food, focused on dry goods

Hypermarkets 100,000 to 300,000 sq. ft.. Food 60-70%, merchandise 30-40% Not common in the US, similar to supercenters Carry higher % of food, greater emphasis on fresh foods

Warehouse Club 100,000 to 150,000 sq. ft.. Limited & irregular assortment of good & general merchandise Little service at low prices Costco, Sam’s Club Buy in bulk, 2 members (Wholesale & Individual)

Food RetailersConvenience Stores

3,000 to 5,000 sq. ft.. Fast services Limited varieties, higher prices Offering more fresh food, casual

restaurant foods, new services Opening smaller stores closer to schools,

work places, & airports

General Merchandise Department Stores Specialty Stores Category Specialists Home Improvement Centers Discount Stores Drugstores Off-Price retailers Extreme Value Retailers

General Merchandise

General MerchandiseDepartment Stores

Broad variety & deep assortment, distinct departments

Major departments: Women’s, Men’s, Children’s apparel, cosmetics,

home furnishings, kitchenware, small appliances.

Specific selling space Major brands Multi-channel retailing Better relationships with their key customers

General Merchandise

Three Tiers of Department Stores:

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, Dillards

Third Tier: Value oriented caters to more price conscious customer

JCPenney, Sears, Kohl’s

General MerchandiseFull-Line Discount

Broad variety, limited service, low prices Offer both Private-label & national brands Wal-Mart alone is 67% of discount store

retail sales Competition from category specialists

that focus on a single category of merchandise. Staples, Best Buy, Lowes.

General MerchandiseSpecialty Stores

Limited number of merchandise with a high level of service

Tailor in retail strategy. Offerdeep but narrowassortments.

General MerchandiseDrugstores

Concentrate on health and personal grooming Prescriptions 70% sales

Category Specialists Offer narrow but deep assortment of

merchandise Self-service Category killers Toys R’ Us, Borders, Cabela’s, PetSmart

General MerchandiseExtreme-Value

Discount, limited assortment, low price Target low-income consumers Family Dollar

Off-Price Inconsistent assortment of brand-name merchandise

at significant discount TJ Maxx, Overstock.com 20-60% lower prices

Outlet stores Closeouts Irregulars

Services RetailingFirms that primarily sell services rather than merchandise.

Services Retailing

Services Vs. Merchandise Retailers Intangibility

Problems in evaluating service quality Performance of service provider

Simultaneous Production and Consumption Importance of service provider

Perishability No inventory, must fill capacity

Inconsistency Importance of HR management

Types of Ownership Independent, Single-Store Establishment Corporate Retail chains Franchises

Types of OwnershipsIndependent, Single-Store Establishment

Owner managed Very flexible Wholesale-sponsored voluntary cooperative

group Organization operated by a wholesaler offering

a merchandising program to small, independent retailers on a voluntary basis. Provide advice on store design/layout, site selection, bookkeeping & inventory management systems, an employee training programs.

Types of OwnershipCorporate Retail Chains

Operates multiple chain units Ranges in size

Franchising Contractual agreement between franchisor and

franchisee 40% of all US retail sales are supported by the franchisor Combines advantages of owner-managed businesses

with the efficiencies of centralized decision making. Franchisees are more motivated to make their stores

successful because they receive the profits Franchisor is motivated to develop new products and

systems because it receives royalty on sales.

Wiki Group 3Assignment 1 Types of Ownership

Compare the types of ownership and make a list of advantages and disadvantages of:

Independent, Single Store Establishments Examples: Shangri-La Clothing, Black Hills Bagels

Corporate Retail Chains Examples: Target, Wal-Mart, Safeway

Franchising Examples: McDonald’s, Subway, Ace Hardware

Use a digital story telling method or multimedia to illustrate the advantages & disadvantages.

(Blabberize, Comic Life, Prezi…) Post to Wiki!

Wiki Groups 4 & 5Assignment 2 Visit 2 different general merchandise retailers and

compare their characteristics such as retail mix, merchandise or services provides, the variety and assortment, level of customer service, and price. Choose from any of the three:

Department Stores (Ex. Macy’s & JCPenny) Full-Line Discount Stores (Ex. Best Buy & Bed Bath &

Beyond) Specialty Stores (Ex. Hot Topic & Claire’s)

Use a digital story telling method or multimedia(Blabberize, Comic Life, Prezi…) Post to Wiki!

Wiki Groups 6 & 7Assignment 3 Compare and contrast the intangibility,

simultaneous production and consumption, perishability, and inconsistency between a service retailer and merchandise retailer.

Example: Supermarkets and Restaurants

Use a digital story method or multimedia to post your findings.

(Blabberize, Comic Life, Prezi…) Post to Wiki!

Group 2 choose any one of the three assignments!