Store - based Retailing

What are the different types of store based retailers

?
How do retailers differ in terms of their retail
mixes ?
What are the trends in the structure of the retail

industry ?
How do services retailers differ from merchandise

retailers ?...
What are the types of ownership for retail firms ?

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 Types of Retailers
Four elements of the retail mix are used for
classifying retailers:-
1. The type of merchandise sold
2. The variety & assortment of merchandise
sold
3. The level of customer service..
4. Price of the merchandise

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 1. Type of Merchandise
Standard Industrial classification system of retailers in the US:-
Building material, Hardware Drug store
General Merchandise Liquor stores
Food Stores Used merchandise
Auto dealers, Gas stations Misc. shopping stores
Apparel and accessories Non store retailers
Home furniture , furnishings Fuel dealers
Eating & drinking places

Miscellaneous Misc.

Catalog houses , Vending machines, Direct selling

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 2. Variety and assortment

Variety is the number of merchandise

categories a retailer offers
Variety is often referred to as the breadth of
merchandise
Assortment is the number of different items in
a merchandise category
Assortment is referred to as the depth of
merchandise
SKU : Stock Keeping Unit: Each different item
of merchandise is called an SKU

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 3. Level of Customer Services
Retailers differ in the services they offer to
their customers
A bicycle shop normally provides
Assistance in selecting the appropriate bicycle
Adjusting the bicycle to suit the customer
requirements
Repairing

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 3. Level of Customer Services
Toys R Us and Wal-Mart dont provide these
services
These retailers may however provide a
different set of services like
accepting personal cheques,
providing parking,
displaying merchandise,
home delivery and
gift wrapping etc.

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Types of retailers another
classification

1. Food Retailers
a. Conventional Super markets
b. Big Box Food Retailers
c. Convenience stores
2. General Merchandise Retailers
a. Department stores
b. Discount stores

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Types of retailers another
classification

c. Specialty stores
d. Drug stores
e. Category specialists
f. Home improvement centers
g. Off-Price retailers
h. Hypermarkets
3. Services retailing

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 1.Food Retailers

a. Conventional Supermarkets
These are self service stores - offering
Groceries,

Meat and

Produce with limited sales of nonfood items

like health and beauty aids and general

merchandise

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 1.Food Retailers

b. Big-Box Food Retailers- these are of 4 types

1). Superstores Large supermarkets (20-50K
sq.ft)
2). Combination stores Are food-based retailers
(30100K sq.ft),

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 1.Food Retailers

2). Combination stores

In these stores - over 25% of sales are from

non-food merchandise like

Flowers,
Health & beauty aids,
Kitchen utensils,
Film developing,
Prescription drugs and
Video-tape rentals

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 1.Food Retailers

3). Supercenters are 150-200K sq.ft stores

They combine a superstore ( a large super market)
and a full line discount store
Supercenters are the fastest growing retail category
They sell grocery at low prices to build store traffic
and
Enjoy higher margins on general merchandise items

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 1.Food Retailers

4). Warehouse club- are about 100K sq.ft

Offers a limited assortment of food and general
merchandise
Very little service

Low prices to ultimate consumers and small businesses

Have simple interiors and concrete floors

Aisles are wide so forklifts can move merchandise with

ease
Largest warehouse chains are
Costco Club $ 24.3 billion p.a

Sams Warehouse( Division of Wal-Mart) $ 22.9 billion

BJs Wholesale Club $ 3.6 billion

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 1.Food Retailers
c. Convenience stores
Provide a limited variety and assortment of merchandise

At a convenient location

2000-3000 sq.ft store with speedy checkout

They are the modern version of the neighborhood

mom-and-pop grocery store

Over half the items purchased here are consumed

within 30 minutes of purchase

Due to their high sales, they receive material every day

from their suppliers

They offer a limited assortment & variety ..contd

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 1.Food Retailers
Charge higher prices than super markets
Gasoline accounts for almost 55% of annual
sales
Dairy & baked goods represent less than 20%
of in-store sales
Major in-store categories are
Tobacco products 29%
Food service 14%
Beer 13%..
Packaged soft drinks 12%

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 Problems in Food retailing
Adapting to changing food consumption patterns
Emphasis is now shifting to prepared meals
Example, EatZis , a Dallas based chain combines
convenience stores with take out restaurant in 8000 sq.
ft of space
Customers can park, walk in, pick up tonights dinner and
tomorrows breakfast and be back in the car in 10
minutes
Competing effectively against discount stores
Discount stores offer lower price due to
More efficient distribution systems,
More focused on reducing inventory
Concentrate on fast moving items only

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2. General Merchandise Retailers

The major types of General Merchandise stores

are:-
Department stores

Full-line Stores

Specialty Stores

Drug Stores

Category Specialists

Home improvement centers

Off price retailers

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2. General Merchandise Retailers

Department stores
Are retailers that carry a broad variety and

deep assortment
Offer considerable customer services and

Are organized into separate departments for

displaying merchandise
Each department within the store has a

specific selling space..

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2. General Merchandise Retailers
A POS (point of sale) terminal to transact
and record sales and
Sales people to assist customers

The department store often resembles a

collection of specialty stores

The major departments are :-
Womens , mens , and children clothing and

accessories
Home furnishings & furniture

Kitchenware and small appliances

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2. General Merchandise Retailers

The largest department store chains in US are :-

Sears :$ 33.5 bn annual sales
JC Penny: $ 19.3 bn
Federated department stores : $ 15.8 bn..
The May Company : $ 13.1 bn
Issues in Department store retailing :-
Increased competition from discount stores

and specialty stores- has lead to stagnation in

sales

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2. General Merchandise Retailers
Discount stores offer better price, and have started
selling more fashionable apparel
Specialty stores provide better service and merchandise

assortments
Solutions
Working closely with vendors to ensure better in-stock

position on fashion merchandise

Altering merchandise mix

Improving customer service

Focusing more on apparels: developing privatelabel

merchandise

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2. General Merchandise Retailers

Discount stores
Full line discount store
Is a retailer that offers a broad variety of
merchandise
Limited service and low prices

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2. General Merchandise Retailers

Discount stores
The big three full-line discount stores chains that
contribute to 85% of US sales made by full-
line discount stores are:-
Wal-Mart Stores ($59 bn-1998 annual sales)
Kmart ( $29 bn)
Target (a division of Dayton Hudson $22.5
bn)

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2. General Merchandise Retailers

Issues in Full-line Discount store retailing

Here the main competition comes from
specialty stores-who focus on a single
category of merchandise
To respond to this competition, Full-line Discount
stores are taking the following steps:-
Creating more attractive shopping
environments
Placing more emphasis on apparel
Developing private label merchandise..
Increasing store visits by- offering easily
accessible convenience store merchandise
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2. General Merchandise Retailers

Specialty stores
A traditional specialty store concentrates on a
limited number of complementary
merchandise categories and
Provides a high level of service ..
In an area typically < 8000 sq ft
Life style retailing
In response to declining interest in high
fashion apparel, specialty stores are adapting
this concept called Life style retailing

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2. General Merchandise Retailers
Specialty stores
Life style retailing
Life style retailing tailors merchandise to the life
style of a specific group of customers
In addition to apparel, now they sell makeup,
perfumes, watches, jewelry, candles, and picture
frames etc. in a urban atmosphere
Drug Stores
Are specialty stores that concentrate on health
and personal grooming merchandise
Pharmaceuticals often represent 50% of drug
store sales and even greater percentage of their
profits

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2. General Merchandise Retailers

Specialty stores
Category specialists
Life style retailing tailors merchandise to the
life style of a specific group of customers..
Is a discount store that offers a narrow
variety but deep assortment of merchandise

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2. General Merchandise Retailers

Specialty stores
Home improvement Centers
Is a category specialist that offers equipment
and material used by
Do it yourselfers and
Contractors
To make home improvements

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2. General Merchandise Retailers
Specialty stores
Off- price Retailers
They offer
An inconsistent assortment of brand name ,
Fashion- oriented soft goods
At low prices - due to their unique buying &
merchandising practices
They can buy at low prices because they dont ask
their suppliers for ad allowances, return privileges, or
delayed payments

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2. General Merchandise Retailers

Specialty stores
Hypermarkets
Very large retail stores offering low prices
They combine discount store and superstore
food retailer in one warehouse like building

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2. General Merchandise Retailers
Measure up to 300,000 sq ft larger than 6
football fields
Stock over 50,000 different items
They are unique in terms of store design, low
operating margins, low prices and a huge
size of general merchandise assortment
Annual revenues are typically over $100
million per store

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 3. Services Retailing
Services retailing involves firms selling primarily services
rather than merchandise
They are a large part of the retail industry
Types of retailers Service/ Merchandise Continuum
Wholesale clubs- products only
Supermarkets-do-
Category specialists- do
Specialty department stores-do-
Optical centers- selling service/ merchandise - specs
Restaurant- selling service/merchandise - food
Airline- services only
Banks/University -services only

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Differences between services and merchandise
retailers

There are 5 four important differences:-

Intangibility

Simultaneous production & consumption- no

economies of scale can be achieved as in

production
Perishability- no storage possible

Variability- Inconsistency of the offering to

customers
Inseparability

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 Types of ownership
1.Independent , Single- store establishments
A) Retail sponsored cooperative are owned and

operated by small , independent retailers to

improve operating efficiency and buying power
B) Wholesale sponsored voluntary cooperative

group operated by a wholesaler offering a

merchandise program to small independent
retailers on a voluntary basis
Services offered by them include:-
Buying, warehousing,& distribution

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 Types of ownership

In addition to the above they also offer following

services to their members:-
Store design and layout

Site selection

Book keeping and inventory management

systems..
Employee training programs

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 Types of ownership
2.Corporate retail chains
Operating multiple retail units
Under common ownership

Having centralized decision making- in

strategy making &implementation

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 Types of ownership
2.Corporate retail chains
Franchising is a contractual agreement between a
franchisor and a franchisee to operate a retail unit using
A name and a fomat developed and supported by the
franchisor
Approximately one third of all US retail sales are made
by franchises
Consumer cooperatives customers own and operate the
retail establishment
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