Types of Retailers

1. Chapter 2 Types of Retailers

2. Questions • What trends shape today’s retailers? • What are the different types of retailers? • How do retailers differ in terms of how they meet the needs of their customers? • How do service retailers differ from merchandise retailers? • What are the types of ownership for retail firms?

3. General Trends in Retailing • New Types of Retailers • Increased Concentration • Globalization • Growth In Services Retailer • Demise of Pure Electronic Retailers (Webvan, eToys, etc) • Growth in Use of Multi-Channel Retailing by Traditional Retailers • Increase Use of Technology to Reduce Cost; Increase Value Delivered

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

5. New Types of Retailers • Category Specialists -PETsMART -Bed, Bath and Beyond • CarMax and Auto Nation • Netflix, eBay, Priceline, Travelocity

6. Bag Borrow or Steal

7. Different Retail Mixes • Merchandise: variety (breadth) • Assortment (depth) • Services • Store design, visual merchandising • Location • Pricing

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

9. NAICS Codes for Retailers

10. Merchandise Offering Variety(breadth of merchandise): wide vs. narrow - The number of merchandise categories Assortment(depth of merchandise): deep vs. shallow -the number of items in a category (SKUs)

11. Variety and Assortment of Kayaks in Different Retail Outlets

12. Services offered Retailers differ in the services they offer customers • EMS offers assistance in selecting the appropriate kayak and repairing them VS • Outdoorplay.com and • Wal-Mart: doesn’t provide any services

13. Illustration of Variety and Assortment

14. Variety and Assortment of Coffee Makers

15. Variety and Assortment of Bicycle

16. In-Store Digital Camera Comparison ShoppingBest Buy vs. Wal-Mart

17. SKUs for Digital Cameras

18. Prices and the cost of offering breath and depth of merchandise and services Stocking a deep and broad assortment (like EMS) is costly for retailers. Many SKUs Because the retailer must have backup stock for each SKU in addition to holding the inventory Inventory Investment Cost

19. Sales and growth rate for retail sectors

20. Food Retailers Channel preference for food shopping channel where grocery purchasers do most of their food shopping • Supermarkets • Supercenters • Warehouse Clubs • Convenience Stores

21. Characteristics of Food Retailers

22. Types of Food Retailers

23. Supermarkets • Conventional supermarkets • 30,000 SKU • Limited assortment supermarkets (extreme value food retailers) • 2000 SKU • Offer one or two brands and sizes • Designed to maximize efficiency and reduce costs • Offer merchandise at 40-60% lower prices than conventional supermarkets • Save-A-Lot, ALDI (German’s Wal-Mart)

24. ALDI: German’s Wal-Mart ALDI provides quality merchandise at low prices by reducing its assortment in order to control store operating expenses

25. ALDI’s Strategy • 4,100 stores in Germany and 6,600 worldwide, including 800 stores in 26 US states Cheap.. Only two brands of toilet paper and one brand of pickles • STRATEGY: Stores sell less products ALDI exclusive label High quality of products at cheaper prices • HOW? Strong control over quality and price Simplify shipping and handling Reduce labor costs by keeping limited store staff, etc.

26. Save-A-Lot Save-A-Lot’s limited assortment format means that stores carry the most frequently purchased grocery items in the most popular sizeand variety The company carries high quality exclusive brands – many produced by the same manufacturers of leading name brands – and an assortment of nationally branded items. This allows Save-A-Lot to offer savings of up to 40% compared to conventional grocery stores – without asking shoppers to sacrifice quality. Used by permission of Save-A-Lot

27. Trends in Supermarket Retailing Competition from Discount Stores Changing Consumption Patterns Efficient Distribution Lower Costs Lower Prices Time Pressure Eating Out More Meal Solutions

28. Conventional Supermarket Survival Pack • Emphasize Fresh Perishables • Wegmans • Target health conscious and ethnic consumers • Provide a better in-store experience • Offer more private label brands Chef-crafted meals on the go at EatZi’s

29. Supercenters and Warehouse Clubs Supercenters Warehouse Clubs • The fastest growing retail category • Large stores (150,000 – 220,000 square feet) that combine a supermarket with a full-line discount store • One-stop shopping experience • Offer a limited and irregular assortment of food and general merchandise with little service at low prices • Use low-locations, inexpensive store design, little customer service • Low inventory holding costs by carrying a limited assortment of fast selling items

30. Convenience Store • Tailors assortments to local market • Makes more convenient to shop • Offers fresh, healthy food • Fast, casual restaurants • Financial services available • Opening smaller stores closer to consumers (like airports)

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

32. Characteristics of General Merchandise Retailers

33. 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 Issues in Department Store Retailing

34. Three Tiers of Department Stores • First Tier: Upscale, high fashion chains with exclusive designer merchandise and excellent customer service Nordstrom, Neiman Marcus, Saks • Second Tier: Retailers sell more modestly priced merchandise with less customer service Macy’s • Third Tier: Value oriented caters to more price conscious customer JCPenney, Sears, Kohl’s Rob Melnychuk/Getty Images

35. Department Stores: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

36. Issues in Discount Store Retailing • Only Big Left Wal-Mart, 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 McGraw-Hill Companies, Inc./Gary He, photographer

37. Mall-Based Apparel Retailers Decline in Mall Shopping and Apparel Sales -Lack of New Fashions -Less Interest in Fashion -Increased Price Consciousness Lifestyle Formats – Abercrombie and Fitch Hot Topics Issues in Specialty Store Retailing McGraw-Hill Companies, Inc./Andrew Resek, Photographer

38. Specialty Store Retailers McGraw-Hill Companies, Inc./Andrew Resek, Photographer

39. Consolidation – Walgreens, CVS, Rite-Aid Competition from Supermarkets, discount Stores and mail-in orders Evolution to a New Format -Stand Alone Sites with Drive Thru Windows -offering more frequent purchase food items Improvedsystems provide personalized service in the pharmacy Issues in Drug Store Retailing

40. Deep and Narrow Assortments Destination Stores Category killers Low Price and Service Wholesaling to Business Customers and Retailing to Consumers Incredible Growth Category Specialists Bass Pro Shops

41. Category Specialists Sephora, France’s leading perfume/cosmetic chain LVMH’s division

42. Category Specialists: Home Improvement Centers Home Depot and Lowes act as both: Retailer and Wholesaler ConsumerBusiness

43. Home Improvement Centers • Displayed in a warehouse atmosphere • Customer Service: How to select and how to use merchandise • Competition focuses on price, effort to differentiate and services provided Ryan McVay/Getty Images

44. Focuses on Lower Income Consumers Names mostly imply good value not $1 price points Low Cost Location Limited Services One of the Fastest Growing Retail Segments Issues in Extreme Value Retailing Dollar Tree Family Dollar Dollar General 99 Cents Only Store

45. Off-Price Retailers • Close-out retailers • Offer an inconsistent assortment of brand name merchandise at low prices TJX companies (T.J. Maxx, Marshalls. HomeGoods) Ross Stores, Burlington Coat factory, Big Lots, Tuesday Morning

46. Types of Non-store Retailers

47. Electronic Retailing • Many retailers operate from virtual storefronts on the World Wide Web, usually maintaining little or no inventory, ordering directly from vendors to fill customer orders • 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

48. 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

49. Low Start Up Cost Evolution of Multi-Channel Offering Hard to compete with large well established firms Increasing Mail Costs Clutter from other Catalogs General merchandise catalogs like JC Penney Specialty Catalogs like Victoria Secret Issues in Catalog Retailing

50. Issues in Direct Selling • Completely bypasses retailers and wholesalers • Manufacturers set up their own channels to sell their products directly to consumers • 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