MT303 Unit 3

Welcome to MT- 303 Store Management Seminar Dear Students, The Seminar will start promptly at the Schedule Time. Remember that the system saves a transcript of everything in the Chat, if you wish to talk among yourselves you may do so, or you may use the Private Chat Option. Dr. Nardi

Welcome to MT- 303 Store Management Unit 3- Seminar Professor: Dr. Nardi TYPES OF RETAILERS Note: This seminar will be recorded by the instructor.

Agenda  Announcements  Unit 2 – Review  Unit 3 Topics  Trends in Retail  Types of Retailers  Non-retailers  Services  Types of Ownership  Unit 3 – Assignments  Wrap Up

Announcements  Good work your discussion posts and quizzes.  Start working on your Research Papers  Never to early…..  Our Usual Reminder:  Before a question please type ?? Or //

Unit 2  How did it go?  Time management?  Questions : Grades  Review?  Getting familiar with it?  Project/Written assignment  Have you started doing research?  Have you approached a Store Manager?  Other questions? Concerns?

Review from Last Week  What is retailing?  Distribution  Types  Selective, Intensive, exclusive  Supply Chain  How retailers add value?  Retail differences across the world.  Ethical issues in retail  Career opportunities in retail.  Relationship Management

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2-9 General Trends in Retailing  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

2-10 Types of Retailers  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.

2-11 Types of Merchandise Retailers Mom and Pop Stores Convenience Stores Supermarkets Supercenters Department Stores Specialty Stores Discount Stores Category Specialists Off-Price Retailers Warehouse Clubs Value Retailers Food RetailersGeneral Merchandise Retailers

2-12 NAICS Codes for Retailers

2-13 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)

2-14 Variety and Assortment of Kayaks in Different Retail Outlets

2-15 Services offered Retailers differ in the services they offer customers  EMS offers assistance in selecting the appropriate kayak and repairing them VS  Outdoorplay.com and Outdoorplay.com  Wal-Mart: doesn’t provide any services

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2-17 Prices and the cost of offering breath and depth of merchandise and services Stocking a deep and broad assortment (like EMS) is costly for retailers. Many SKUs Inventory Investment Cost Because the retailer must have backup stock for each SKU in addition to holding the inventory

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2-19 Food Retailers ■Supermarkets ■Supercenters ■Warehouse Clubs ■Convenience Stores Channel preference for food shopping channel where grocery purchasers do most of their food shopping Food retailers

2-20 Supermarkets  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  Save-A-Lot, ALDI (German’s Wal- Mart)

2-21 Trends in Supermarket Retailing Competition from Discount Stores Changing Consumption Patterns Efficient Distribution Lower CostsLower Prices Time PressureEating Out MoreMeal Solutions Trends in Supermarket retailing

2-22 Conventional Supermarket Survival Pack Chef-crafted meals on the go at EatZi’s  Emphasize Fresh Perishables  Wegmans  Target health conscious and ethnic consumers  Provide a better in-store experience  Offer more private label brands

2-23 Supercenters and 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 Supercenters ■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 Warehouse Clubs

2-24 Convenience Store  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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2-26 Types of General Merchandise Retailers  Department Stores  Specialty Stores  Category Specialists  Home Improvement Centers  Discount Stores  Drugstores  Off-Price retailers  Extreme Value Retailers Types of General Merchandise Retailers

2-27 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  More Sales (?) -Customers Wait for Sale  Focus on Apparel and Soft Home  Develop Private Labels and Exclusive Brands Issues in Department Store Retailing

2-28 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  Third Tier: Value oriented caters to more price conscious customer JCPenney, Sears, Kohl’s

2-29 Department Stores : What To Do With an Eroding Market To deal 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

2-30 Issues in 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, Circuit City, Sports Authority Issues in Discount Store Retailing

2-31 Issues in Specialty Store Retailing  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 Hot Topics Issues in Specialty Store Retailing

2-32 Specialty Store Retailers McGraw-Hill Companies, Inc./Andrew Resek, Photographer

2-33 Issues in Drug Store Retailing  Consolidation – Walgreens, CVS, Rite-Aid  Competition from 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 in the pharmacy Issues in Drug Store Retailing

2-34 Category Specialists  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 Category Specialists

2-35 Category Specialists Sephora, France’s leading perfume/cosmetic chain LVMH’s division

2-36 Category Specialists: Home Improvement Centers Home Depot and Lowes act as both: Retailer and Wholesaler Consumer Business

2-37 Home Improvement Centers  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

2-38 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 99 Cents Only Store Issues in Extreme Value Retailing

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2-40 Off-Price Retailers  Close-out retailers  Offer an inconsistent assortment of brand name merchandise at low prices TJX companies (T.J. Maxx, Marshalls. HomeGoods) Ross Stores, Burlington Coat factory, Big Lots, Tuesday Morning

2-41 Types of Non-store Retailers

2-42 Electronic Retailing  Many retailers operate from virtual storefronts on the World Wide Web, usually maintaining little or no inventory, ordering directly from vendors to fill customer orders  History of frenzied investments and false predictions of retail dominance  Primarily used by traditional retailers to compliment store and catalog offerings  Exclusive e-tailers target small and dispersed niche markets

2-43 What are Amazon and eBay?  – Merchandise to consumers. Provides website development and fulfillment services to other retailers  eBay – Acts as a mall or other shopping center providing a “place” for buyers and sellers to meet Don Farrall/Getty Images

2-44 Issues in Catalog Retailing  Low Start Up Cost  Evolution of Multi-Channel Offering  Hard to compete with large well established firms  Increasing Mail Costs  Clutter from other Catalogs  Specialty Catalogs like Victoria Secret  General merchandise catalogs like JC Penney Issues in Catalog Retailing

2-45 Issues in Direct Selling  Completely bypasses retailers and wholesalers  Manufacturers set up their own channels to sell their products directly to consumers  Party plan system: merchandise is demonstrated in a party atmosphere  Multi-level network: Master distributors sell to distributors who sell merchandise  Pyramid schemes: Firm sells to other distributors and little if any merchandise goes to end users

2-46 Issues in Television Home Shopping  Consumers watch cable stations, infomercials or direct response ads  Few consumers watch regularly  Most purchases made by small proportion of viewers  Customers can’t examine merchandise  Customers must wait for merchandise to come on  Sells predominately jewelry, apparel, cosmetics, kitchenware, and exercise equipment

2-47 Issues in Vending Machine Retailing  Automatic Merchandising  About $25 billion worth of convenience goods are sold to Americans through 4.7 million vending machines  Sales growth has been declining due to higher prices and healthier eating habits  New technology may help sales growth  Trend of placing machines in captive consumer locations

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2-49 Services vs. Merchandise Retailers ■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 Services vs. Merchandise Retailers

Characteristics of Service Retailing Intangibility No patent protection possible Difficult to display/communicate service benefits Service prices difficult to set Quality judgment is subjective Some services involve performances/experiences

Characteristics of Service Retailing Inseparability Consumer may be involved in service production Centralized mass production difficult Consumer loyalty may rest with employees

Characteristics of Service Retailing Perishability Services cannot be inventoried Effects of seasonality can be severe Planning employee schedules can be complex

Characteristics of Service Retailing Variability Standardization and quality control hard to achieve Services may be delivered in locations beyond control of management Customers may perceive variability even when it does not actually occur

2-54 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 Examples of Service Retailers

2-55 Examples of Service Retailers Type of Service Service Retail Firms Hotels and motels Hyatt, Sheraton, Marriott, Days Inn Income tax preparation H & R Block Insurance Allstate, State Farm Internet access/Elec info. American On-Line, CompuServe Movie theaters AMC, Loews/Sony, Universal Real estate Century 21, Coldwell Banker Restaurants TGI Friday’s, Wendy’s, Pizza Hut Truck rentals U-Haul, Ryder Weight loss Weight Watchers, Jenny Craig Video rental Blockbuster, Hollywood Video Vision centers Lenscrafter, Pearle

Consumer Perceptions of Service Retailing

Lessons in Service Retailing

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2-59 Merchandise/Service Continuum

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2-61 Types of Retail Ownership  Independent, Single Store Establishments  Wholesale-sponsored voluntary group  Corporate Retail Chains  Franchises

2-62 Retailers Using Franchise Business Model

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Unit 3 Assignments

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Wrap Up  Discussion: Remember 1 Answer AND at least 2 Peer to Peer Comments per Question. Answer ALL Questions. Post on Three (3) separate days – First post by Saturday.  Remember you have assignments due this week.  Due on Tuesday by 11:59 PM E.T. Late? Let me know BEFORE!  Pending Assignments?  Get them to me ASAP – contact me for instructions on how to make them up or follow my instructions if I already contacted your.  Last day for Unit 1 assignments- Tuesday of Unit 3

Contact  you can contact me through my through AOL Instant Messaging my AOL IM name is nknardi, (put me on your buddy list) Office Hours or through the “Instructor’s Office” link under the Course Home page

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Thanks  Thank you for Attending!!!!  See you in the Discussion Thread Questions and in Next Week’s Seminar

Next Week – Unit 4 Multi-Channel Retailing