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Types of retailers
Retailer Characteristics
 type of merchandise sold
 variety and assortment of merchandise
 level of customer service
 price of the merchandise
Types of Merchandise
 The US Bureau of the Census uses a
  hierarchical set of four digit codes called
  the Standard Industrial Classification
  (SIC).
 The US Bureau along with Mexico and
  Canada, adopted a new classification
  system, the North American Industrial
  Classification System (NAICS).
NAICS Code Hierarchy
Variety and Assortment
 Variety is the number of different
  merchandise categories a retailer offers
  (breadth).
 Assortment is the number of different
  items in a merchandise category (depth)
 Each different item of merchandise is
  called a stock keeping unit (SKU).
Services Offered
 Customers expect retailers to provide
  some services--accepting credit
  cards, proving parking, and displaying
  merchandise.
 Some retailers go beyond this and
  provide other services such as gift
  wrapping and home delivery, at a
  charge.
Price
 Offering more depth and breadth of
  merchandise is appealing to customers.
 Offering services attracts customers.
 To make a profit with more depth and
  breadth or services retailers must
  charge higher prices.
Sales and Growth
Rate for Retail Sectors
Food Retailers
 Conventional Supermarket
 Limited Assortment Supermarket
 Supercenter
 Warehouse Club
 Convenience Store
Characteristics of Food
Retailers
Supermarket
 Self-service
 Offer
     Groceries
     Meat
     Produce
     Limited non-food items
Supercenters
 Fastest growing sector of food retailer.
 150,000 to 200,000 sq. ft. stores that
  combine a superstore and a full-line
  discount store.
 Sell groceries at low prices to build store
  traffic.
 One stop shopping
Warehouse Clubs
 Large ( about 100,000 sq. ft.) and
  located in low rent districts.
 Little service at low prices to ultimate
  consumers and small businesses.
 Reduce costs by carrying a limited
  assortment of fast-selling items.
 Members must pay an annual fee
Convenience Stores
 Modern versions of the neighborhood
  mom-and pop stores.
 Convenient location in a 2,000 to 3,000
  sq. ft. store with a speedy checkout.
 Limited variety and assortment of
  merchandise.
 Gasoline and cigarettes account for over
  55% of annual sales.
General Merchandise Retailers
 Department stores
 Full-line discount stores
 Specialty stores
 Drug stores
 Category specialists
 Home improvement centers
 Off-price retailers.
Characteristics of General
Merchandise Retailers
Department Stores
 Broad variety and deep assortment
 Offer considerable customer services
 Organized into separate departments for
  displaying merchandise
     women’s , men’s and children’s clothing and
      accessories
     home furnishing and furniture
     kitchenware and small appliances.
Department Stores
Categorized into three tiers
   Tier One
     Upscale
     High-fashion chains
     Exclusive designer merchandise
       Neiman Marcus
       Bloomingdale’s
       Saks Fifth Avenue
Department Stores
Categorized into three tiers
   Tier Two
     Modestly priced merchandise
     Less customer service
       Macy’s
       Dillards
Department Stores
Categorized into three tiers
   Tier Three
     Value-oriented
     More price-conscious consumers
       Sears
       Kohl’s
       JCPenny
Full-Line Discount Stores
 Offers low prices
 Broad variety of merchandise both
  private labels and national brands.
 Major Players
     Walmart
     Target
     Kmart
Specialty Stores
 Narrow variety but deep assortment
 High level of service
 Target specific market segments
     Victoria’s Secret
     Levi’s
     Apple
     Polo/Ralph Lauren
Drug Stores
 Specialty stores that concentrate on
  health and personal grooming
  merchandise.
 Prescription pharmaceuticals represent
  almost 70% of sales.
     Walgreens
     CVS
     Rite Aid
Category Specialists
 Big-box store that offers a narrow variety
  but deep assortment .
 Often called “category killers”
 They can use their buying power to
  negotiate lower prices, excellent
  terms, and assured supply when items
  are scarce.
Category Specialists
Home Improvement Centers
 Combines the traditional hardware store
  and lumberyard.
 Focuses on providing material and
  information.
 Merchandise is displayed in a
  warehouse atmosphere.
 Salespeople are available to assist
  customers in seeking merchandise and
  to tell them how to use it.
Extreme-Value Retailers
 Small discount stores
 Limited merchandise assortment
 Very low prices
 Target market low-income consumers
     Dollar General
     Family Dollar
     Dollar Tree
Off-Price Retailers
 Inconsistent assortment of brand
  name, fashion-oriented soft goods at low
  prices.
 Typically, merchandise is purchased at
  one-fifth to one-fourth of the original
  wholesale price.
Services Retailing
 Sell services rather than products
 Important differences
     Intangibility
     Simultaneous Production and Delivery
     Perishability
     Inconsistency of the Offerings
Continuum of Merchandise and
Services Retailers
Types of Ownership
   Another way to classify retailers is by
    their ownership.
     Independent, Single-Store Establishment
     Corporate Chains
     Franchises
Independent, single-store
establishments
 Many retail start-ups are owner-
  managed
 Direct contact with customers
 Not bound by bureaucracies inherent in
  large retail organizations
 Very flexible
     React quickly to customer needs and market
     changes
Corporate Retail Chain
 Operates multiple retail units under
  common ownership.
 Centralized decision making for defining
  and implementing strategy.
 May be two stores or many thousand
  stores.
Franchising
 Contractual agreement between a
  franchiser and a franchisee that allows
  the franchisee to operate a retail outlet
  using a name and format developed and
  supported by the franchiser.
 More than 40 percent of all U.S. retail
  sales are made by franchisees.
Franchising
 Franchisees are motivated to make their
  store successful because they receive
  the profits after the royalty is paid.
 The franchiser is motivated to develop
  new products and systems to promote
  the franchise because it receives a
  royalty on all sales.
Retailers Using Franchise
Business Model

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Types of retailers

  • 2. Retailer Characteristics  type of merchandise sold  variety and assortment of merchandise  level of customer service  price of the merchandise
  • 3. Types of Merchandise  The US Bureau of the Census uses a hierarchical set of four digit codes called the Standard Industrial Classification (SIC).  The US Bureau along with Mexico and Canada, adopted a new classification system, the North American Industrial Classification System (NAICS).
  • 5. Variety and Assortment  Variety is the number of different merchandise categories a retailer offers (breadth).  Assortment is the number of different items in a merchandise category (depth)  Each different item of merchandise is called a stock keeping unit (SKU).
  • 6. Services Offered  Customers expect retailers to provide some services--accepting credit cards, proving parking, and displaying merchandise.  Some retailers go beyond this and provide other services such as gift wrapping and home delivery, at a charge.
  • 7. Price  Offering more depth and breadth of merchandise is appealing to customers.  Offering services attracts customers.  To make a profit with more depth and breadth or services retailers must charge higher prices.
  • 8. Sales and Growth Rate for Retail Sectors
  • 9. Food Retailers  Conventional Supermarket  Limited Assortment Supermarket  Supercenter  Warehouse Club  Convenience Store
  • 11. Supermarket  Self-service  Offer  Groceries  Meat  Produce  Limited non-food items
  • 12. Supercenters  Fastest growing sector of food retailer.  150,000 to 200,000 sq. ft. stores that combine a superstore and a full-line discount store.  Sell groceries at low prices to build store traffic.  One stop shopping
  • 13. Warehouse Clubs  Large ( about 100,000 sq. ft.) and located in low rent districts.  Little service at low prices to ultimate consumers and small businesses.  Reduce costs by carrying a limited assortment of fast-selling items.  Members must pay an annual fee
  • 14. Convenience Stores  Modern versions of the neighborhood mom-and pop stores.  Convenient location in a 2,000 to 3,000 sq. ft. store with a speedy checkout.  Limited variety and assortment of merchandise.  Gasoline and cigarettes account for over 55% of annual sales.
  • 15. General Merchandise Retailers  Department stores  Full-line discount stores  Specialty stores  Drug stores  Category specialists  Home improvement centers  Off-price retailers.
  • 17. Department Stores  Broad variety and deep assortment  Offer considerable customer services  Organized into separate departments for displaying merchandise  women’s , men’s and children’s clothing and accessories  home furnishing and furniture  kitchenware and small appliances.
  • 18. Department Stores Categorized into three tiers  Tier One  Upscale  High-fashion chains  Exclusive designer merchandise  Neiman Marcus  Bloomingdale’s  Saks Fifth Avenue
  • 19. Department Stores Categorized into three tiers  Tier Two  Modestly priced merchandise  Less customer service  Macy’s  Dillards
  • 20. Department Stores Categorized into three tiers  Tier Three  Value-oriented  More price-conscious consumers  Sears  Kohl’s  JCPenny
  • 21. Full-Line Discount Stores  Offers low prices  Broad variety of merchandise both private labels and national brands.  Major Players  Walmart  Target  Kmart
  • 22. Specialty Stores  Narrow variety but deep assortment  High level of service  Target specific market segments  Victoria’s Secret  Levi’s  Apple  Polo/Ralph Lauren
  • 23. Drug Stores  Specialty stores that concentrate on health and personal grooming merchandise.  Prescription pharmaceuticals represent almost 70% of sales.  Walgreens  CVS  Rite Aid
  • 24. Category Specialists  Big-box store that offers a narrow variety but deep assortment .  Often called “category killers”  They can use their buying power to negotiate lower prices, excellent terms, and assured supply when items are scarce.
  • 26. Home Improvement Centers  Combines the traditional hardware store and lumberyard.  Focuses on providing material and information.  Merchandise is displayed in a warehouse atmosphere.  Salespeople are available to assist customers in seeking merchandise and to tell them how to use it.
  • 27. Extreme-Value Retailers  Small discount stores  Limited merchandise assortment  Very low prices  Target market low-income consumers  Dollar General  Family Dollar  Dollar Tree
  • 28. Off-Price Retailers  Inconsistent assortment of brand name, fashion-oriented soft goods at low prices.  Typically, merchandise is purchased at one-fifth to one-fourth of the original wholesale price.
  • 29. Services Retailing  Sell services rather than products  Important differences  Intangibility  Simultaneous Production and Delivery  Perishability  Inconsistency of the Offerings
  • 30. Continuum of Merchandise and Services Retailers
  • 31. Types of Ownership  Another way to classify retailers is by their ownership.  Independent, Single-Store Establishment  Corporate Chains  Franchises
  • 32. Independent, single-store establishments  Many retail start-ups are owner- managed  Direct contact with customers  Not bound by bureaucracies inherent in large retail organizations  Very flexible  React quickly to customer needs and market changes
  • 33. Corporate Retail Chain  Operates multiple retail units under common ownership.  Centralized decision making for defining and implementing strategy.  May be two stores or many thousand stores.
  • 34. Franchising  Contractual agreement between a franchiser and a franchisee that allows the franchisee to operate a retail outlet using a name and format developed and supported by the franchiser.  More than 40 percent of all U.S. retail sales are made by franchisees.
  • 35. Franchising  Franchisees are motivated to make their store successful because they receive the profits after the royalty is paid.  The franchiser is motivated to develop new products and systems to promote the franchise because it receives a royalty on all sales.