1. 5th Edition

2. Chapter 2 Types of Retailers McGraw-Hill/Irwin
Levy/Weitz: Retailing Management, 5/e
Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved.

3. Introduction to Retailing
The World of Retailing
Introduction to Retailing
Types of Retailers
Multi-Channel Retailing
Customer Buying Behavior

4. Trends in Retailing Increasing Industry Concentration
Growing Diversity of Formats
Globalization

5. New Types of Retailers Category Specialists -PetsMart
-Bed, Bath and Beyond
- Michaels
CarMax and Auto Nation
Wal-Mart Supercenters
-Supermarket + Discount Store
Ebay, Priceline, Travelocity

6. Increasing Concentration
53% of sales
85% of sales
Drug Stores
Walgreens, CVS, Rite-Aid and Eckerds
Discount Stores
Wal-Mart, Target and Kmart

7. Globalization of Wal-Mart

8. Types of Retailers Retailers Use Different Retail Mixes
-merchandise: variety (breadth) / assortment (depth)
-services
-store design, visual merchandising
-location
-pricing
Infinite Variations
Survival of the Fitness – Some combination of retail mixes satisfy the needs of significant segments and persist over time.

9. Classification by Type of Merchandise

10. Sales by Merchandise Category

11. Merchandise Offering Variety (breadth of merchandise)
- The number of merchandise categories
Assortment (depth of merchandise)
-the number of items in a category (SKUs)

12. Variety and Assortment of Bicycles

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

14. Shopping Patterns by Types of Retail Outlets
Outlet % Shopping Number of Weekly
Weekly Trips Spending
Supermarkets $ 72.82
General merchandise discount stores
Fast-food restaurants
Drug stores
Convenience stores
Wholesale clubs
Specialty food stores
Source: “Consumers Are Skeptical Again,” “63rd Annual Report of the Grocery Industry,” Progressive Grocer, April 1996, p.42.

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

16. Types of Food Retailers

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

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

19. Characteristics of General Merchandise Retailers

20. Issues in Discount Store Retailing
Only Big Three Left – Wal-Mart, Kmart, 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

21. Issues in Specialty Store Retailing
Mall-Based Apparel Retailers:
Decline in Mall Shopping and Apparel Sales
-Lack of New Fashions
-Less Interest in Fashion
-Increase Price Consciousness
Lifestyle Formats – Banana Republic and Hot Topics

22. Category Specialists Deep and Narrow Assortments – Destination Stores
Low Price and Service
Wholesaling to Business Customers and Retailing to Consumers
Incredible Growth
Increased Competition with National Expansion and Consolidation

23. 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

24. Issues in Drug Store Retailing
Consolidation – Walgreens, CVS, Rite-Aid, Eckerds
Competition from Supermarkets and Discount Stores – Pharmaceuticals
Evolution to a New Format
-Stand Alone Sites with Drive Thru Windows
-Convenient Store Front End

25. Issues in Off-Price Retailing
Opportunistic Buying
Hurt By Sales in Department Stores
Buying First Line Merchandise

26. Issues in Value Retailing
Target Lower Income Families
Low Cost Low Prices
-Low Cost Location
-Limited Services
One of the Fastest Growing Retail Segments

27. Many New Types of retailers, Increased Diversity to Meet Diverse Needs
Summary
Many New Types of retailers, Increased Diversity to Meet Diverse Needs
Many New Types of retailers, Increased Diversity to Meet Diverse Needs
Most People Shop at All Types Depending on Situations – Growth in Cross-Shopping

28. Non-store Retail Formats
Electronic Retailing
Catalog and Direct Mail
Direct Selling
Television Home Shopping
Vending Machines

29. Types of Nonstore Retailers

30. Sales by Non-store Format
2005

31. Issues in Catalog Retailing
Low Start Up Cost
Evolution of Multi-Channel Offering
-Electronic Channel, Stores
Increasing Mail Costs
Clutter from other Catalogs

32. 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

33. Examples of Service Retailers
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

34. 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
Long-distance telephone AT&T, MCI, Sprint
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
Vision centers Lenscrafter, Pearle

35. Merchandise/Service Continuum

36. Types of Retail Ownership
Independent, Single Store Establishments
Consumer Owned Cooperatives
Wholesaler Owned Cooperatives
Corporate Chains
Franchises

37. Trends in Ownership Concentration on One Format
Growth in Services Franchising

38. Franchising 30 – 40% of US Retail Sales
Franchisee Pays Fixed Fee Plus % of Sales
Franchisee Implements Program
Why is This Ownership Format Efficient?

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

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

41. Reasons for Franchising Failure
Inept management
Fraudulent activities
Market saturation

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

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

44. 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.

45. 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.

46. Franchisee Advantages/Disadvantages
Established/proven product/service, business and technical assistance, and reduction in risk.
Disadvantages
Loss of control since only semi-independent, franchisee outlets may compete with corporate-owned outlets, and high royalties, fees, costs on equipment, supplies, merchandise, rental/lease rates and mandatory participation in promotional and support services.

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

48. Theories of Retail Institution Change
CYCLICAL THEORIES
Wheel of retailing (price/service) Accordion Theory (assortment)
EVOLUTIONARY THEORIES
Dialectic process (retailer) Natural selection (customer)

49. Wheel of Retailing

50. The Dialectic Process Department store
THESIS
Department store
High margin Low turnover High price Full service Downtown location Plush facilities
SYNTHESIS
Discount department store
Average margins Average turnover Moderate prices Limited services Suburban locations Modest facilities
ANTITHESIS
Discount store
Low margin High turnover Low price Self-service Low rent location Spartan facilities
Source: Reprinted with the permission of Macmillan College Publishing Company from Retailing, 4th Edition, by Dale M. Lewison. Copyright © 1991 by Macmillan College Publishing Company, Inc.