Chapter 2: Types of Retailers

Category Specialist Characteristics

Variety: Narrow Assortment: Very deep Service: Low to high Prices: Low Location: Stand-alone, power strip centres

Pyramid Scheme

When a firm and its program are designed to sell merchandise and services to other distributors rather than to end users.

Hudson's Bay

Wide and shallow Many merchandise categories and a limited assortment in each category

Big-Box Stores

Large, limited-service retailers.

Walmart

Narrow and deep Limited number of merchandise categories and a large assortment in each category

Combination Stores

Retailers that sell both food and nonfood items.

m-commerce

The purchase of products and services through mobile devices.

Buying Local, Going Green

-Consumers want to con- sume in a responsible, sustainable way. -Retailers are responding by embracing the issues and helping customers and suppliers do the same.

Ubiquitous Connectivity

-Critical for retailers to integrate digital opportunities into the shopping experience -Shoppers expect interactive, value-added experiences anytime, anywhere and through any channel

Empowered, Discriminating Consumers

-Increased access to information helps consumers make informed decision -Product information, price comparisons, and user reviews -Able to share their experiences with a wide audience -Consumers putting pressure onto retailers to add meaningful value to what they can find for themselves (online & in store)

Services vs. Merchandise Retailers (Differences)

-Intangibility -Simultaneous production and delivery -Perishability -Inconsistency of the offering

Issues in Category Specialists

-Intense direct competition -Differentiation -Focus on service -Wholesaling to business customers and retailing to consumers -Available locations -Increased competition with national expansion and consolidation

Issues in Specialty Store Retailing

-Mall-Based apparel retailers -Decline in mall shopping and apparel sales -Lack of new fashions -Less interest in fashion due to aging population -Increase price consciousness

To deal with eroding market share, department stores are:

1. Attempting to increase the amount of exclusive merchandise they sell 2. Undertaking marketing campaigns to develop strong images for their stores and brands 3. Expanding their online presence

Growing Diversity of Retail Formats

1. Empowered, Discriminating Consumers 2. Ubiquitous Connectivity 3. Buying Local, Going Green 4. Explosion of Consumer Data 5. New Age of Marketing 6. Scientific Retailing 7. Growing Retailer Power 8. Maturing Retail Technologies 9. Blurring Boundaries Among Channels, Formats and Brands 10. Challenged Store Economics

Retailer Characteristics (4)

1. Type of merchandise/services offered 2. Breadth and Depth of merchandise offered 3. The level of customer service 4. The price of the merchandise

Franchising

A contractual agreement between a franchisor and a franchisee that allows the franchisee to operate a retail outlet using a name and format developed and supported by the franchisor.

Category Specialist (Category Killer)

A discount retailer that offers a narrow but deep assortment of merchandise in a category and thus dominates the category from the customers' perspective. Also called category killer. Ex. Bass Pro Shops

Retail Chain

A firm that consists of multiple retail units under common ownership and usually has some centralization of decision making in defining and implementing its strategy. Ex. Pottery Barn

Discount Store

A general merchandise retailer that offers a wide variety of merchandise, limited service, and low prices. Offer both private labels and national brands. Also called mass merchandiser and full-line discount store. Ex. Target, Walmart, Giant Tiger

Superstore

A large supermarket between 35,000 and 45,000 square feet in size

Vending Machine Retailing

A nonstore format in which merchandise or services are stored in a machine and dispensed to customers when they deposit cash or use a credit card.

Catalogue Channel

A nonstore retail format in which the retailer communicates directly with customers using catalogues sent through the mail. Access and Convenience for consumers Retailers use a multi-channel strategy by integrating the internet Many merchandise categories from general to very specific Success factors: -Customer data -Visual appeal -Personalized service

Direct Selling

A retail format in which a salesperson, frequently an independent distributor, contacts a customer directly in a convenient location (either at a customer's home or at work), demonstrates merchandise benefits, takes an order, and delivers the merchandise to the customer. Face-to-Face interaction -Demonstration, take orders, delivery

Television Home Shopping

A retail format in which customers watch a TV program demonstrating merchandise and then place orders for the merchandise by phone; also called teleshopping. T-Commerce or Teleshopping Cable channels dedicated to television shipping - The Shopping Channel Infomercials Direct-response advertising

Multilevel System

A retail format in which people serve as master distributors, recruiting other people to become distributors in their network.

Electronic Retailing

A retail format in which the retailers communicate with customers and offer products and services for sale over the Internet; also called e-tailing, online retailing, and Internet retailing -Broader & Deeper Assortments -Information that is comprehensive and timely -Personalization -Interactive

Department Store

A retailer that carries a wide variety and deep assortment, offers considerable customer services, and is organized into separate departments for displaying merchandise. Tier 1: Nordstrom, Holt Renfrew Tier 2: The Bay Tier 3: Sears

Off-Price Retailer

A retailer that offers an inconsistent assortment of brand-name, fashion-oriented soft goods at low prices. Two types: -Closeout retailers -Outlets Ex. Marshall's, Winners, HomeGoods, Burlington, Big Lots

Conventional Supermarket

A self-service food store that offers groceries, meat, and produce with limited sales of nonfood items, such as health and beauty aids and general merchandise. Success factors include: -Fresh merchandise -Targeting health-conscious & ethnic shopper -Better in-store experience - cooking exhibitions and food tasting -Private label brands - differentiation, lower costs and higher margins

Maturing Retail Technologies

A wide range of maturing technologies is allowing companies to streamline backroom functions and increase efficiency, helping to offset higher labour costs.

Direct Response Advertising

Advertisements on TV and radio that describe products and provide an opportunity for customers to order them.

Issues in Drug Store Retailing

Aging Population requires more prescription drugs Competition from Supermarkets and Discount Stores - Pharmaceuticals Evolution to a New Format (Shoppers Drug Mart, London Drugs, Jean Coutu) - Cosmetics and Beauty products Stand Alone Sites with Drive Thru Windows Convenient Store Front End

Services Retailing Trends

Aging population will require health services Increase spend on health & fitness by all population segments Time strapped families have money and will pay for services that will 'free' up time Merchandise - Service integration

Merchandise/Service Continuum

All goods/no services Warehouse club Supermarket Category specialist Specialty/department store Optical centre Restaurant Airline Banks/University

Leased Department

An area in a retail store leased or rented to an independent company. The leaseholder is typically responsible for all retail mix decisions involved in operating the department and pays the store a percentage of its sales as rent.

Wholesale-Sponsored Voluntary Cooperative Group

An organization operated by a wholesaler offering a merchandising program to small, independent retailers on a voluntary basis.

Issues in Department Store Retailing

Competition -Discount stores on price -Specialty stores on service, depth of assortment -Reduction in overall sales Lower cost by reducing services Centralized POS & wrapping Customers wait for sale Focus on apparel and soft goods Develop private labels and exclusive brands

Closeout Retailers

Broad but inconsistent assortment Acquire from closing or bankruptcy General merchandise, clothing and home furnishings Ex. Liquidation world

Scientific Retailing

By applying smart algorithms and deep, data-driven analytics to the massive amounts of data, retailers will be able to maximize all aspects of their business, including pricing, assortments, shelf displays, staffing, and warehouse space.

North American Industry Classification System (NAICS)

Classification scheme between the US, Canada ,and Mexico to collect data on business activity in each country Classification of retail firms into a hierarchical set of six-digit codes based on the types of products and services they produce and sell.

Issues in Food Retailing

Competition from other types of retailers: -Department, Drug and Convenience store - food items on the shelves -Assortment and price Changes in consumer consumption patterns: -Time strapped -Eating out more -Ready to eat options

Types of Food Retailers

Conventional Supermarkets Big-Box Food Retailers Supercentres, Hypermarkets and Warehouse Clubs Convenience Stores

Customer Services

Customers expect retailers to provide some services: -Accepting credit and debit payment -Providing parking -Convenient hours. Some retailers charge customers for additional services, such as home delivery and gift wrapping. Retailers that cater to service-oriented consumers offer most of these services at no charge.

Nonstore Retail Formats

Electronic Retailing (e-tailing, online retailing and internet retailing) Catalogue Channel Direct Selling Television Home Shopping Vending Machine Retailing

Breadth and Depth of merchandise offered

Even if retailers sell the same type of merchandise, they might not compete directly because they appeal to different customer needs and thus offer different assortments and varieties of merchandise and services.

Locavore Movement

Focuses on reducing the carbon footprint caused by the transportation of food throughout the world

Value Retailers

General merchandise discount stores that are found in low-income urban or rural areas and are much smaller than traditional discount stores, less than 9000 square feet. They specialize in giftware, party, and craft items rather than consumables. Limited services One of the Fastest Growing Retail Segments Ex. Dollarama

Types of Retail Ownership

Independent, single store establishments Corporate Retail Chains Franchising

Hypermarkets

Large combination food (60-70 percent) and general merchan- dise (30-40 percent) retailers. - Typically stock fewer SKUs than supercenters - Carry a larger proportion of food items than do supercenters and have a greater emphasis on perishables (produce, meat, bakery items) - Not common in US Ex. Carrefour

Supercenters

Large stores (160 000 to 200 000 square feet) combining a discount store with a supermarket. Ex.Walmart - Larger percentage of nonfood items and focus on dry groceries (like cereal and canned goods)

Multichannel Retailer

Retailer that sells merchandise or services through more than one channel.

Expanding Retail Breadth

New retail formats have emerged (ex. box stores, Ikea, etc.) Same merchandise can be purchased from a wide variety of retailers. -this brings more price pressure to stores to offer lower prices New specialty format retailers in the marketplace: -Sport Check - apparel -Bed Bath & Beyond - home decor -PETsMART - pet supplies Established retailers have added to their merchandise mix: -Loblaw's - pharmacies, clothing (Joe Fresh) -Shoppers Drug Mart - grocery products -Canadian Tire - kitchen and bath accessories The internet has created an opportunity for a new set of retailers to enable consumers to buy on line (Ex. Kijiji)

Depth of Merchandise

Number of different items in a merchandise category. Depth of merchandise is the number of items within each product line. The number of SKUs within a merchandise category; also called assortment and depth of stock. Ex. the shoe department in the department store will offer a large assortment of shoes (running shoes, dress shoes, children's shoes, walking shoes).

Variety (Breadth of Merchandise)

Number of merchandise categories a retailer offers. Breadth of merchandise means that the retailer carries a number of different product lines. Ex. Large department stores carry a wide range of different types of products (shoes, appliances, apparel, and cosmetics).

Outlet Stores

Off-price retailers owned by a manufacturer or a department or specialty store chain. Clustered together in geographic area Focus on clothing Location offers climate controlled environment, food, parking and bargains

Issues in Off-Price Retailing

Opportunistic buying (Winners & Marshall's) Hurt by sales in department stores Buying first line merchandise

Services Retailers

Organizations that offer consumers services rather than merchandise. Examples include banks, hospitals, health spas, doctors, legal clinics, entertainment firms, and universities.

Factory Outlets

Outlet stores owned by a manufacturer.

Challenged Store Economics

Physical stores turning into showrooms in the minds of consumers and the rise of online buying are forcing retailers to rethink their costly real-estate assets and merchandising formats.

Convenience Stores

Provide a limited variety and assortment of merchandise at a convenient location with speedy checkout.

Fair Trade

Purchasing practices that require producers to pay workers a living wage, well more than the prevailing minimum wage, and offer other benefits, such as on-site medical treatment.

Warehouse Clubs

Retailers that offer a limited and irregular assortment of food and general merchandise with little service at low prices for ultimate consumers and small businesses Ex. Costco, Sam's Club

Party Plan System

Salespeople encourage people to act as hosts and invite friends or co-workers to a "party" at which the merchandise is demonstrated. The host or hostess receives a gift or commission for arranging the meeting. Ex. Party Light

Omni-Channel Retailing

Seamless integration between all channels so that shoppers can shop any way they want with the exact same results.

Blurring Boundaries Among Channels, Formats and Brands

Shoppers Drug Mart is selling food; Loblaws has in-house bank branches; and Indigo has Starbucks cafés in store. Retailers are evolving into a more integrated business model where all channels share a common strategy for profitable growth.

In-Store Kiosks

Spaces located within stores containing a computer connected to the store's central offices or to the Internet.

Drugstore

Specialty retail store that concentrates on pharmaceuticals and health and personal grooming merchandise.

Specialty Store

Store concentrating on a limited number of complementary merchandise categories and providing a high level of service in an area typically under 8000 square feet. Ex. Pro Hockey Life

Limited-Assortment Supermarkets

Supermarkets offering a limited number of SKUs; also called extreme-value food retailers. Ex. M&M Meats

Infomercials

TV programs, typically 30 minutes long, that mix entertainment with product demonstrations and solicit orders placed by telephone from consumers

Power Perimeter

The area around the outside walls of a supermarket that has fresh-merchandise categories Ex. dairy, meat, florist, produce, deli, and coffee bar

Explosion of Consumer Data

The enormous amount of data generated by points of sale, social media, corporate websites, and tracking URLs is greater than the ability of many retailers to exploit the potential value of this input.

Stock-Keeping Unit (SKU)

The smallest unit available for keeping inventory control. In soft goods merchandise, a SKU usually means size, colour, and style. Each item of merchandise is called an SKU. Ex. An original scent, 33 ounce box of Tide laundry detergent with bleach; white, button-down-collar Tommy Hil ger shirt, size 16-33.

Growing Retailer Power

Top 5 grocery stores in Canada now have 67 percent share of the market -Loblaw Companies Ltd. dominating with 29.9 percent. Canadian Tire's recent acquisition of the Forzani Group is a critical component of its strategy to maintain leading market share in sporting goods in Canada, with the entry of mass merchant Target into the Canadian market in spring 2013.

General Merchandise Retailers

Types of general merchandise retailers include: -Discount stores -Specialty stores -Category specialists -Department stores -Home improvement centres -Off-price retailers -Value retailers

Extreme Value Retailer Characteristics

Variety: Average Assortment: Average and varying Service: Low Prices: Low Location: Urban, strip

Off-Price Retailer Characteristics

Variety: Average Assortment: Deep but varying Service: Low Prices: Low Location: Outlet malls

Department Store Characteristics

Variety: Broad Assortment: Deep to average Service: Average to high Prices: Average to high Location: Regional malls

Discount Store Characteristics

Variety: Broad Assortment: Average to shallow Service: Low Prices: Low Location: Stand-alone, power strip centres

Drug Store Characteristics

Variety: Narrow Assortment: Very deep Service: Average Prices: Average to high Location: Stand alone, strip centres

Home Improvement Centre Characteristics

Variety: Narrow Assortment: Very deep Service: Low to high Prices: Low Location: Stand-alone, power strip centres

Specialty Store Characteristics

Variety: Narrow Assortment: Deep Service: High Prices: High Location: Regional malls

New Age of Marketing

With increasing amounts of data available on customers, their online activities, and their purchasing patterns, retailers will be able to create more targeted marketing campaigns.