Administrative Items  Home Depot comments  Retail Institutions Trip Itinerary Assignment Questions  Schedule Changes

Ten Thousand Villages Recap  Fair trade v. free trade Another reading And another  TTVC needs concrete goals re: sales increases  TTVC is focused on sales increases to existing customers (market penetration)  They have captured % of Cultural Creatives in Cincinnati, so to achieve sales increases they need to appeal to this audience (also beneficial because so doing is less resource intensive than attracting new customers)  Clearly CRM is an important component of this strategy  Adding patronage solidifying services is key  But we do also have to consider: Product assortment – variety! Communication of objectives to volunteers

4 and 5 Chapter 4 and 5 Classifying Retail Institutions – Types of Ownership and Strategy Mixes RETAIL MANAGEMENT: A STRATEGIC APPROACH

Ownership Forms  Independent  Chain  Franchise  Contractual arrangement between two parties that allows franchisee exclusively to conduct business under the franchisors name according to their business processes in exchange for a fee and often a % sales  Leased department  Vertical marketing system  Consumer cooperative – Less than four outlets – Four or more outlets These concepts (and inherent pros/cons) should not be unfamiliar Choosing the right form of ownership is integral to retail success Requires correct balance with strategy and image These concepts (and inherent pros/cons) should not be unfamiliar Choosing the right form of ownership is integral to retail success Requires correct balance with strategy and image

Leased Departments  In-store locations leased to third parties  Why would a department store want to lease space? Fit with broad market appeal Provide a one-stop environment for shoppers without the investment  Hiring, training employees; managing department; cost of inventory (risky in unfamiliar product/service line); acquiring specialized skill May increase traffic Generates rental income Reduces store costs  Risks??

Franchise Exercise  Would you be interested in becoming a Subway Franchisee? Why or why not? Subway Franchisee

Subway Franchisee Reasons For …  Franchising reputation #1 Global Franchising Opportunity 2009 #1 Franchise since 2001 (Entrepreneur Magazine) 15 of 20 times named top on Franchise 500 list Franchisees buy more franchises (~70%) Commitment to franchising model (“virtually all locations are franchised”)  Growth potential (ECO-STORE and satellite stores = retail format development; international growth = market development)  Well recognized brand name – 33,590 restaurants in 92 countries  Strength of partnerships (Wal-Mart)  Perhaps current franchisees happy (only one store for sale in all of Canada)  Franchisee training program and “support”  Recognized for customer service – customers rate it #1  Product image – quality  Personal motives – healthy alternative

Subway Franchisee Reasons Against …  Costs a little daunting $115K-~258K start-up (certainly not the most expensive, though)  Private company – limited financial information available  Franchisee testimonials limited  Market saturation? 32,500+ restaurants in 92 countries (>2200 in Canada); eclipsed McDonald’s in # restaurants in US (cannabalization) Growth model in North America is retail format development (cannabalization possible) 70% franchisees buy new franchises (to prevent cannabalization of their own business by corporation?)  Commitment to “support” very vague  Personal fit  the frantrepreneur?

Business Qualifications Sought by McDonald’s for Potential Franchisees Personal Integrity Willingness to complete training Financial resources Willingness to devote time Ability to manage finances Ability to motivate and train Entrepreneurial Spirit Ideal Franchisee

Vertical Marketing Systems IndependentPartially Integrated Fully Integrated Manufacturer Wholesaler Retailer Manufacturer Wholesaler Retailer Manufacturer Wholesaler Retailer

Chapter 4 Takeaways  No one form of business ownership is better than another in absolute terms  The decision to use a particular form of business ownership is relative and must be made with the retailing concept (goal oriented, value driven, customer focus, coordinated effort) and strategy in mind Which leads us to Chapter 5…  Classifying stores based on strategy mix

Destination or Parasite?  Destination Status is earned by retailers who become dominant in some way. Consumers go out of their way to shop at such distinctive stores.  Destination status may be earned by:  Being price oriented and cost efficient  Being upscale  Being convenient  Offering a dominant assortment  Offering superior customer service  Being innovative or exclusive

Figure 5-1 The Wheel of Retailing

Figure 5-2 Retail Strategy Alternatives

Figure 5-4 Retail Life Cycle

Scrambled Merchandising by a Shoe Store Shoppers Drug Mart Banking

How Retail Institutions are Evolving  Mergers, Diversification, Downsizing  Multi-channel Retailing  Cost-Containment and Value-Driven Retailing

Table 5-1 Store-Based Retail Strategy Mixes Food Oriented  Convenience store  Conventional supermarket  Food-based superstore  Combination store  Box (limited-line) store  Warehouse store General Merchandise  Specialty store  Traditional department  Full-line discount store  Variety store  Off-price chain  Factory outlet  Membership club  Flea market

Reference Slides (Chapter 5)

Food Based Retailers

Convenience Store Strategy Mix Location: Neighborhood Merchandise: Medium width and low depth of assortment; average quality Prices: Average to Above average Atmosphere and Services: Average Promotion: Moderate

Conventional Supermarket Strategy Mix Location: Neighborhood Merchandise: Extensive width and depth of assortment; average quality; manufacturer, private, and generic brands Prices: Competitive Atmosphere and Services: Average Promotion: Heavy use of newspapers, flyers, and coupons

Food-Based Superstore Strategy Mix Location: Community shopping center or isolated site Merchandise: Full assortment plus health and beauty aids and general merchandise Prices: Competitive Atmosphere and Services: Average Promotion: Heavy use of newspapers, flyers

Combination Store Strategy Mix Location: Community shopping center or isolated site Merchandise: Full assortment plus health and beauty aids and general merchandise Prices: Competitive Atmosphere and Services: Average Promotion: Heavy use of newspapers, flyers

Box Store Strategy Mix Location: Neighborhood Merchandise: Low width and depth of assortment; few perishables; few national brands Prices: Very low Atmosphere and Services: Low Promotion: Little or none

Warehouse Store Strategy Mix Location: Secondary site, often in industrial area Merchandise: Moderate width and low depth of assortment; emphasis on manufacturer brands bought at discount Prices: Very low Atmosphere and Services: Low Promotion: Little or none

General Merchandise Retailers

Specialty Store Strategy Mix Location: Business district or shopping center Merchandise: Very narrow width and extensive depth of assortment; average to good quality Prices: Competitive to Above average Atmosphere and Services: Average to excellent Promotion: Heavy use of displays Extensive sales force

Traditional Department Store Strategy Mix Location: Business district, shopping center or isolated store Merchandise: Extensive width and depth of assortment; average to good quality Prices: Average to Above average Atmosphere and Services: Good to excellent Promotion: Heavy ad and catalog use; direct mail; personal selling

Full-line Discount Store Strategy Mix Location: Business district, shopping center or isolated store Merchandise: Extensive width and depth of assortment; average to good quality Prices: Competitive Atmosphere/ Services: Slightly below average to average Promotion: Heavy on newspapers; price-oriented; selling

Variety Store Strategy Mix Location: Business district, shopping center or isolated store Merchandise: Good width and some depth of assortment; below-average to average quality Prices: Average Atmosphere/ Services: Below average Promotion: Use of newspapers

Off-Price Chain Strategy Mix Location: Business district, shopping center or isolated store Merchandise: Moderate width and poor depth of assortment; average to good quality; low continuity Prices: Low Atmosphere/ Services: Below average Promotion: Use of newspapers; brands not advertised; limited selling

Factory Outlet Strategy Mix Location: Out of the way site or discount mall Merchandise: Moderate width and poor depth of assortment; low continuity Prices: Very Low Atmosphere/ Services: Very low Promotion: Little

Membership Club Strategy Mix Location: Isolated store or secondary site Merchandise: Moderate width and poor depth of assortment; low continuity Prices: Very Low Atmosphere/ Services: Very low Promotion: Little; some direct mail

Flea Market Strategy Mix Location: Isolated store Merchandise: Extensive width and poor depth of assortment; low continuity; variable quality Prices: Very Low Atmosphere/ Services: Very low Promotion: Limited