Chapter 2 Types of Retailers

The World of Retailing Increasing Industry Concentration Growing Diversity of Formats Globalization

General Trends in Retailing New Types of Retailers Increased Concentration Globalization Growth In Services Retailer Growth in Use of Multi-Channel Retailing by Traditional Retailers Increase Use of Technology to Reduce Cost, Increase Value Delivered

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

Globalization of Wal-Mart

Conventional Supermarket Survival Pack Emphasize Fresh Perishables Target health conscious and ethnic consumers Provide a better in-store experience Offer more private label brands

Food Retailers Supermarkets Big Box Retailers Convenience Stores -Cars, highways and TV to build brands -Knowledgeable customers – self service -Perishable vs. packaged goods Big Box Retailers -Warehouse Clubs -Supercenters -Hypermarkets Convenience Stores

Convenience Stores Fight Competition Tailors associates to local market Stores are more convenient to shop Offers fresh food Fast, casual restaurants Financial services available Opening smaller stores closer to consumers – like airports

Issues in Food Retailing Competition from Discount Stores Changing Consumption Patterns Efficient Distribution Lower Costs Lower Prices Time Pressure Eating Out More Meal Solutions

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

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

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 Royalty-Free/CORBIS

Issues in Extreme Value Retailing Focuses on Lower Income Consumers Names mostly imply good value Low Cost Location Limited Services One of the Fastest Growing Retail Segments Stockbyte/Punchstock Images

Non-store Retail Formats Electronic Retailing Catalog and Direct Mail Direct Selling Television Home Shopping Vending Machines Royalty-Free/CORBIS Ryan McVay/Getty Images

Electronic Retailing 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 Randy Allbritton/Getty Images

What are Amazon and eBay? Amazon.com – 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

Issues in Direct Selling Providing information and demonstrations is costly 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

Issues in Television Home Shopping Consumers watch cable tv, 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 mostly jewelry, apparel, cosmetics, kitchenware, exercise equipment Royalty-Free/CORBIS

Issues in Vending Machine Retailing Sales growth has been declining due to higher prices and healthier eating habits New technology may help sales growth Vending machines are beginning to accept credit Trend of placing machines in captive consumer locations Ryan McVay/Getty Images

Types of Nonstore Retailers

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

Types of Retail Ownership Independent, Single Store Establishments Wholesaler Owned Cooperatives Corporate Chains Franchises (c) Brand X Pictures/PunchStock

Reasons for Franchising Growth Technological advances Profitable utilization of capital resources Attainment of the “American Dream” Demographic expansion Product/service consistency

Types of Franchise Systems Territorial Operating Mobile Distributorship Co-ownership Co-management Leasing/Licensing Manufacturing Service

Reasons for Franchising Failure Inept management Fraudulent activities Market saturation

Franchisor Positions in the Marketing Channel Manufacturer - retailer Manufacturer - wholesaler Wholesaler - retailer Service sponsor - retailer

Franchisor Benefits Continuous market Market information Money Sales of products Rental and lease fees License fees Management fees Royalty fees

Franchisee Benefits Initial Services Market survey and site selection, facility design and layout, lease negotiation advice, financing advice, operating manuals, management training programs, and employee training. Continuous Services Field supervision, merchandising and promotional materials, management and employee retraining, quality inspection, national advertising, centralized purchasing, market data and guidance, auditing and record keeping, management reports, and group insurance plans.

Franchisor Advantages/Disadvantages Rapid expansion, highly motivated franchisees do a good job, additional profits by selling franchisees products and services. Disadvantages Company-owned units may be more profitable, less control then independent retailers over advertising, pricing, personnel practices, etc.

Franchising Trends for the New Millenium Sustained growth Enduring plus un-imagined applications International expansion Increasing tensions Greater emphasis on financial returns

Which Types of Retailers Will Be the First to Pursue Global Markets? Discount Stores Category Specialists Department Stores Supermarkets Services Retailers

Why Is the Retail Industry Becoming More Concentrated? Traditionally retailers have been local businesses. Why are bigger firms emerging? Why are least concentrated sectors food retailers and services retailers?