Retail Marketing Chapter 2: Types of Retailers

variety

The number of different merchandise categories within a store or department

value retailers

Small, full-line discount stores that offer a limited merchandise assortment at very low prices.

Examples of Service Retailers

*slide 38

Franchisee Benefits

*Slide 44, 45, 46

Services Offered

Retailers differ in the services they offer customers Services attract customers but are costly. Example: Wal-Mart: doesn't provide any services LL Bean: offers lessons, delivery

How can supermarkets differentiate themselves from competition?

**Conventional supermarkets also offering more natural, organic and fair trade foods for increasingly health and environmentally aware customers. **Fair trade means purchasing from factories that pay workers a living wage, well more than the prevailing minimum wage, and offer benefits like onsite medical treatment. **Target health conscious and ethnic customer **Private labels offered as part of supermarket strategy to demonstrate quality, value and standards. **Provide a better shopping experience

Conventional Supermarket Survival Pack

**To compete successfully with intrusions by other types of retailers, conventional supermarkets have taken steps to differentiate their offerings, such as emphasizing their "power perimeters" (areas around outside walls with fresh perishables such as dairy, produce, deli, bakery and florist)

Merchandise/service continuum

*slide 39

Franchising

30 - 40% of US Retail Sales Franchisee Pays Fixed Fee Plus % of Sales Franchisee Implements Program Why is this Ownership Format Efficient?

ALDI Strat

8,500 worldwide, including 1000 stores in 26 US states 90 percent of population in Germany shop at Aldi Cheap.. Only two brands of toilet paper and one brand of pickles STRATEGY: Stores sell less products ALDI exclusive label High quality of products at cheaper prices HOW? Strong control over quality and price Simplify shipping and handling Reduce labor costs by keeping limited store staff, etc

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.

supermarket

A conventional supermarket is a large, self-service retail food store offering groceries, meat, and produce, as well as some nonfood items, such as health and beauty aids and general merchandise.

discount store

A general merchandise retailer that offers a wide variety of merchandise, limited service, and low prices

warehouse club

A retailer that offers a limited assortment of food and general merchandise with little service and low prices to ultimate consumers and small businesses.

off-price retailer

A retailer that offers an inconsistent assortment of brand-name, fashion-oriented soft goods at low prices.

specialty store

A type of store concentrating on a limited number of complementary merchandise categories and providing a high level of service.

wholesale-sponsored voluntary cooperative group

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

Department Store

Broad variety and deep assortment Customer Service Organized in departments (Kids, Shoes, Home) Each department a "specialty" shop Examples: Macy's, Sears, JC Penney, Dillards Focus on soft goods (women's, men's, clothing) *Three Tiers: Upscale/ High Fashion (Nordstrom, Nieman's) High-end merchandise, excellent service Traditional/ Moderate Prices (Macy's, Dillards) Value (Kohl's, JC Penney) Caters to cost-sensitive

Full-Line Discount Stores

Broad variety of merchandise Limited Service Low Prices Examples: Wal-mart, Target, Kmart

North American Industry Classification System (NAICS)

Classification of retail firms into a hierarchical set of six-digit codes based on the types of products and services they produce and sell.

Off-Price Retailers

Close-out retailers Offer an inconsistent assortment of brand name merchandise at low prices TJX Companies (which operates T.J.Maxx, Marshalls, Winners, HomeGoods, TKMaxx, AJWright, and HomeSense), Ross Stores, Burlington Coat Factory, Big Lots.

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 (where goods are purchased) More Sales ...Customers Wait for Sale Focus on Apparel and Soft Home Develop Private Labels and Exclusive Brands

Drugstores

Concentrates on health and personal grooming merchandise Pharmaceuticals often 50% of sales and higher % of profits High sales growth due to aging population Shrinking pharmaceutical margins due to governmental health care policies and HMO's Increased competition as supermarkets and discounters add pharmacy counters Adding more convenient locations, with drive through windows Increased personalized service

Specialty Stores

Concentrates on limited number of complimentary merchandise categories High level of customer service Small store Tailored retail strategy towards target market Narrow but deep assortments Sales Associate expertise Increase in competitors from outside US. Growth is "fast fashion", which is cheap but hottest trend Zara H&M

Supermarkets

Conventional supermarkets Self-service food store offering groceries, meat, produce and limited non-food items 30,000 SKU

Category Specialists

Deep and Narrow Assortments Destination Stores Category killers Low Price and Service Wholesaling to Business Customers and Retailing to Consumers Incredible Growth

Department Stores:What To Do With an Eroding Market

Department stores are: attempting to increase the amount of exclusive merchandise they sell undertaking marketing campaigns to develop strong images for their stores and brands building better relationships with their key customers

Category Specialist CONTD

Example: **Office Depot Offers customers a huge selection of office supply merchandise As a result, inventory investment increases because they have to carry back up stock for each SKU Office Depot finds success by carrying a wide variety of products but must offer ample stock. Being in stock is part of their customer service.

Issues in Extreme Value Retailing

Focuses on Lower Income Consumers Names mostly imply good value not $1 price points Low Cost Location Limited Services One of the Fastest Growing Retail Segments Dollar Tree Family Dollar Dollar General

Types of Retail Ownership

Independent, Single Store Establishments Wholesale-sponsored voluntary group Corporate Retail Chains Franchises

Services Retailing

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

hypermarket

Large (100,000-300,000 square feet) combination food (60-70 percent) and general merchandise (30-40 percent) retailer

Hypermarkets

Large - 100,000 to 300,000 sf Food and General Merchandise Popular in Europe and South America, less common in US Located in large, warehouse structures

supercenter

Large store (150,000 to 220,000 square feet) combining a discount store with a supermarket.

Supermarkets CONTD

Limited Assortment Supermarket or Extreme Value Food Retailer 2,000 SKUs Offer one or two brands and sizes Designed to maximize efficiency and reduce costs Offer merchandise at 40-60% lower prices than conventional supermarkets Examples: Aldi's and Save-A-Lot

Convenience Store

Limited variety and assortment in convenient 2,000 - 3,000 sf locations Speedy checkout Higher prices Tailors assortments to local market Makes more convenient to shop Offers fresh, healthy food Fast, casual restaurants Financial services available Opening smaller stores closer to consumers (like airports) Facing increasing competition as supermarket chains/ discounters adding gasoline, typically as a saving program for frequent shoppers

Types of Retailers

Retailers Use Different Retail Mixes -**Variety - the number of merchandise categories a retailer offers. Often referred to as the breadth of merchandise. - Assortment - the number of different items in a merchandise category. Often referred to as the depth of merchandise. - SKU - each different item of merchandise (stock keeping unit)

Issues in Full-line Discount Store Retailing

Only Big Left Wal-Mart, 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, Best Buy, Sports Authority

full-line discount store

Retailers that offer a broad variety of merchandise, limited service, and low prices.

Prices and the cost of offering breadth and depth of merchandise and services

Stocking a deep and broad assortment is appealing to customers but costly for retailers (many SKU's for backup increases inventory cost)

Retailer Characteristics

The most basic characteristics of a retailer is its retail mix - the elements used to satisfy its customers' needs Four elements of retail mix: The type of merchandise sold The variety and assortment of merchandise sold The level of customer service The price of the merchandise

depth of merchandise

The number of SKUs within a merchandise category. Also called depth of merchandise.

stock-keeping unit (SKU)

The smallest unit available for keeping inventory control. In soft goods merchandise, an SKU usually means a size, color, and style

Merchandise Offering

Variety (breadth of merchandise): wide vs. narrow - The number of merchandise categories Assortment (depth of merchandise): deep vs. shallow -the number of items in a category (SKUs)

Supercenters (hypermarkets) VS. The fastest growing retail category Large stores (185,000 square feet) that combine a supermarket with a full-line discount store One-stop shopping experience Some customers find too large and inconvenient to locate items

Warehouse Offer a limited and irregular assortment of food and general merchandise with little service at low prices Use low-locations, inexpensive store design, little customer service Low inventory holding costs by carrying a limited assortment of fast selling items Wholesale / Individual members paying annual fees