CHAPTER 2

Types of
Retailers
CHAPTER 2

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 The World of Retailing CHAPTER 2
1

Introduction to the World of Retailing

Types of Retailers

Multichannel Retailing

Customer Buying Behavior

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 Questions CHAPTER 2
1

• What trends shape today’s retailers?

• What are the different types of retailers?
• How do retailers differ in terms of how they meet the
needs of their customers?
• How do service retailers differ from merchandise
retailers?
• What are the types of ownership for retail firms?

Retailing Management 8e © The McGraw-Hill Companies, All rights reserved. 2-3

 General Trends in Retailing CHAPTER 2
1

• New Types of Retailers

• Increased Concentration
• Globalization
• Growth In Services Retailer
• Demise of Pure Electronic Retailers (Webvan, eToys, etc)
• Growth in Use of Multi-Channel Retailing by Traditional
Retailers
• Increase Use of Technology to Reduce Cost; Increase
Value Delivered
Retailing Management 8e © The McGraw-Hill Companies, All rights reserved. 2-4
 Types of Retailers CHAPTER 2
1

• Retailers Use Different Retail Mixes

-merchandise: variety (breadth) /
assortment (depth)
-services
-store design, visual merchandising
-location
-pricing
• Infinite Variations
• Some combination of retail mixes
satisfy the needs of significant
segments and persist over time.
Retailing Management 8e © The McGraw-Hill Companies, All rights reserved. 2-5
 Bag Borrow or Steal CHAPTER 2
1

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 Retailer Characteristics CHAPTER 2
1

• Variety (breadth)
• Assortment (depth)
• Services Offered
• Prices and the cost of offering breath and depth of
merchandise and services

Retailing Management 8e © The McGraw-Hill Companies, All rights reserved. 2-7

 Merchandise Offering CHAPTER 2
1

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)

Retailing Management 8e © The McGraw-Hill Companies, All rights reserved. 2-8

 Services Offered CHAPTER 2
1

• Retailers differ in the

services they offer
customers
• EMS offers assistance in
selecting the
appropriate kayak and
repairing them
VS
• Outdoorplay.com and
• Wal-Mart: doesn’t
provide any services
Retailing Management 8e © The McGraw-Hill Companies, All rights reserved. 2-9
 Prices and the cost of offering breath
and depth of merchandise and services
CHAPTER 2
1

• Stocking a deep and broad assortment (like EMS) is

costly for retailers.

Many SKUs

Because the retailer must have backup stock for each SKU
in addition to holding the inventory

Inventory Investment Cost

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 Types of Merchandise Retailers CHAPTER 2
1

Food Retailers General Merchandise Retailers

Mom and Pop Stores Department Stores

Convenience Stores Specialty Stores
Supermarkets Discount Stores
Supercenters Category Specialists
Off-Price Retailers
Warehouse Clubs
Value Retailers

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 Sales and growth rate for retail sectors CHAPTER 2
1

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 Food Retailers CHAPTER 2
1

• Channel preference for food shopping channel where

grocery purchasers do most of their food shopping
• Supermarkets
• Supercenters
• Warehouse Clubs
• Convenience Stores

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 Characteristics of Food Retailers CHAPTER 2
1

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 Supermarkets CHAPTER 2
1

• Conventional supermarkets
• 30,000 SKU
• Limited assortment
supermarkets (extreme value
food retailers)
• 2000 SKU
• Offer one or two brands and sizes
• Designed to maximize efficiency and
reduce costs
• Offer merchandise at 40-60% lower
prices than conventional
supermarkets

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 ALDI: German’s Wal-Mart CHAPTER 2
1

ALDI provides quality merchandise at low prices by reducing its

assortment in order to control store operating expenses

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 Trends in Supermarket Retailing CHAPTER 2
1

• Competition from Discount Stores

Efficient
Lower Costs Lower Prices
Distribution

• Changing Consumption Patterns

Time Pressure Eating Out More Meal Solutions

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 Conventional
Supermarket Survival Pack
CHAPTER 2
1

• Emphasize Fresh Perishables

• Wegmans
• Target health conscious and
ethnic consumers
• Provide a better in-store
experience
Chef-crafted meals on the go at EatZi’s • Offer more private label brands
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 Supercenters and Warehouse Clubs CHAPTER 2
1

Supercenters Warehouse Clubs

• The fastest growing retail
category
• Large stores (150,000 – 220,000
square feet) that combine a
supermarket with a full-line
discount store
• One-stop shopping experience
• 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

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 Convenience Store CHAPTER 2
1

• 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)

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 General Merchandise Retailers CHAPTER 2
1

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

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 Characteristics of
General Merchandise Retailers
CHAPTER 2
1

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 Issues in Department Store Retailing CHAPTER 2
1

• 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

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 Three Tiers of Department Stores CHAPTER 2
1

• 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
• Third Tier: Value oriented caters
to more price conscious customer
• JCPenney, Sears, Kohl’s
Rob Melnychuk/Getty Images

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 Department Stores:
What To Do With an Eroding Market
CHAPTER 2
1

• Department stores are:

• attempting to increase the
amount of exclusive
merchandise they sell
• undertaking marketing
Royalty-Free/CORBIS
campaigns to develop
strong images for their
stores and brands
• building better
relationships with their key
customers

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 Issues in Discount Store Retailing CHAPTER 2
1

• 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 McGraw-Hill Companies, Inc.
Gary He, photographer

• Toys-R-Us, Best Buy, Sports

Authority

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 Issues in Specialty Store Retailing CHAPTER 2
1

• Mall-Based Apparel Retailers

• Decline in Mall Shopping and
Apparel Sales
• Lack of New Fashions
• Less Interest in Fashion
• Increased Price Consciousness
• Lifestyle Formats
• Abercrombie and Fitch

McGraw-Hill Companies, Inc./Andrew Resek, Photographer

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 Lifestyle format CHAPTER 2
1

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 Abercrombie and Fitch Issue CHAPTER 2
1

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 Specialty Store Retailers CHAPTER 2
1

McGraw-Hill Companies, Inc./Andrew Resek, Photographer

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 Issues in Drug Store Retailing CHAPTER 2
1

• Consolidation
• Walgreens, CVS, Rite-Aid
• Competition
• Supermarkets, Discount Stores and
Mail-in orders
• Evolution to a New Format
• Stand Alone Sites with Drive Thru
Windows
• offering more frequent purchase
food items
• Improved systems provide
personalized service
Retailing Management 8e © The McGraw-Hill Companies, All rights reserved. 2 - 31
 Category Specialists CHAPTER 2
1

• Deep and Narrow

Assortments
• Destination Stores
• Category killers
• Low Price and Service
• Wholesaling to Business
Customers and Retailing
to Consumers
• Incredible Growth Bass Pro Shops

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 Category Specialists CHAPTER 2
1

Sephora, France’s leading perfume/

cosmetic chain LVMH’s division

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 Category Specialists:
Home Improvement Centers
CHAPTER 2
1

Home Depot and Lowes act as both:

Retailer and Wholesaler

Consumer Business

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 Home Improvement Centers CHAPTER 2
1

• Displayed in a warehouse
atmosphere
• Customer Service: How to
select and how to use
merchandise
• Competition focuses on
price, effort to differentiate
and services provided
Ryan McVay/Getty Images

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 Issues in Extreme Value Retailing CHAPTER 2
1

• 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
• 99 Cents Only Store
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 Off-Price Retailers CHAPTER 2
1

• Close-out retailers
• Offer an inconsistent assortment of brand name
merchandise at low prices
• TJX companies (T.J. Maxx, Marshalls)
• Ross Stores, Burlington Coat factory, Big Lots, Tuesday
Morning

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 Services Retailing CHAPTER 2
1

• 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
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 Examples of Service Retailers CHAPTER 2
1

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

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 Merchandise/Service Continuum CHAPTER 2
1

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 Types of Retail Ownership CHAPTER 2
1

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

(c) Brand X Pictures/PunchStock

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 Retailers Using
Franchise Business Model
CHAPTER 2
1

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 Franchising CHAPTER 2
1

• 30 – 40% of US Retail Sales

• Franchisee Pays Fixed Fee
Plus % of Sales
• Franchisee Implements
Program
• Why is this Ownership Format
Efficient?

The McGraw-Hill Companies, Inc./Jill Braaten, photographer

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