5th Edition

PPT 2-1

Chapter 2 Types of Retailers

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

The World of Retailing

Introduction to Retailing

Types of Retailers

Multi-Channel Retailing

Customer Buying Behavior

PPT 2-3

Trends in Retailing

Increasing Industry Concentration

Growing Diversity of Formats

Globalization

PPT 2-4

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
PPT 2-5

Increasing Concentration

53% of sales 85% of sales

Drug Stores
Walgreens, CVS, Rite-Aid and Eckerds
PPT 2-6

Discount Stores
Wal-Mart, Target and Kmart

Globalization of Wal-Mart

PPT 2-7

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.
PPT 2-8

Classification by Type of Merchandise

PPT 2-9

Sales by Merchandise Category

PPT 2-10

Merchandise Offering
Variety (breadth of merchandise) - The number of merchandise categories

Assortment (depth of merchandise) -the number of items in a category (SKUs)

PPT 2-11

Variety and Assortment of Bicycles

PPT 2-12

Types of Retailers
General Merchandise Retailers
Department Stores Specialty Stores Discount Stores Category Specialists Off-Price Retailers Warehouse Clubs

Food Retailers
Mom and Pop Stores Convenience Stores Supermarkets Supercenters

PPT 2-13

Shopping Patterns by Types of Retail Outlets

Outlet

% Shopping

Number of Weekly Trips

Weekly Spending

Supermarkets General merchandise discount stores Fast-food restaurants Drug stores Convenience stores

100 68 65 39 37

2.4 1.3 1.9 1.2 2.4

$ 72.82 32.53 16.32 18.70 19.72

Wholesale clubs
Specialty food stores

27
9

1.7
1.0

75.12
23.70

Source: Consumers Are Skeptical Again, 63rd Annual Report of the Grocery Industry, Progressive Grocer, April 1996, p.42.

PPT 2-14

Food Retailers
Mom and Pops Supermarkets
-Cars, highways and TV to build brands
-Knowledgeable customers self service -Perishable vs. packaged goods

Big Box Retailers

-Warehouse Clubs -Supercenters

-Hypermarkets

Convenience Stores
PPT 2-15

Types of Food Retailers

PPT 2-16

Issues in Food Retailing

Competition from Discount Stores
Efficient Distribution

Lower Costs

Lower Prices

Changing Consumption Patterns

Time Pressure Eating Out More Meal Solutions

PPT 2-17

Types of General Merchandise Retailers

Discount Stores Specialty Stores Category Specialists Home Improvement Centers Department Stores Drugstores Off-Price retailers Value Retailers
PPT 2-18

Characteristics of General Merchandise Retailers

PPT 2-19

Issues in Discount Store Retailing

Only Big Three Left Wal-Mart, Kmart, Target Wal-Marts 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
PPT 2-20

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

PPT 2-21

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

PPT 2-22

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
PPT 2-23

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

PPT 2-24

Issues in Off-Price Retailing

Opportunistic Buying Hurt By Sales in Department Stores Buying First Line Merchandise

PPT 2-25

Issues in Value Retailing

Target Lower Income Families

Low Cost
-Low Cost Location -Limited Services

Low Prices

One of the Fastest Growing Retail Segments

PPT 2-26

Summary

Many New Types retailers, Increased Many New Types ofof retailers, Increased Diversity to Meet Diverse Needs Diversity to Meet Diverse Needs

Most People Shop at All Types Depending on Situations Growth in Cross-Shopping

PPT 2-27

Non-store Retail Formats

Electronic Retailing Catalog and Direct Mail Direct Selling Television Home Shopping Vending Machines
PPT 2-28

Types of Nonstore Retailers

PPT 2-29

Sales by Non-store Format

2005

PPT 2-30

Issues in Catalog Retailing

Low Start Up Cost
Evolution of Multi-Channel Offering
-Electronic Channel, Stores

Increasing Mail Costs

Clutter from other Catalogs

PPT 2-31

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
PPT 2-32

Examples of Service Retailers

Type of Service
Airlines

Service Retail Firms

American, Delta, British Airways, Singapore Airways

Automobile maint/repair
Automobile rental Banks Child care centers Credit cards Education Entertainment parks Financial services Fitness Health Care Home maintenance
PPT 2-33

Jiffy Lube, Midas, AAMCO

Hertz, Avis, Budget, Alamo Citibank, NCNB, Bank of America Kindercare, Gymboree American Express, VISA, Mastercard University of Florida, Babson College Disney, Universal Studios, Six Flags Merrill Lynch, Dean Witter Jazzercise, Ballys, Golds Gym Humana, HCA Chemlawn, MiniMaid, Roto-Rooter

Express package delivery Federal Express, UPS, US Postal Service

Examples of Service Retailers

Type of Service
Hotels and motels Income tax preparation Insurance Internet access/Elec info. Long-distance telephone Movie theaters Real estate Restaurants Truck rentals Weight loss Video rental Vision centers
PPT 2-34

Service Retail Firms

Hyatt, Sheraton, Marriott, Days Inn H & R Block Allstate, State Farm American On-Line, CompuServe AT&T, MCI, Sprint AMC, Loews/Sony, Universal Century 21, Coldwell Banker TGI Fridays, Wendys, Pizza Hut U-Haul, Ryder Weight Watchers, Jenny Craig Blockbuster Lenscrafter, Pearle

Merchandise/Service Continuum

PPT 2-35

Types of Retail Ownership

Independent, Single Store Establishments
Consumer Owned Cooperatives
Wholesaler Owned Cooperatives

Corporate Chains
Franchises

PPT 2-36

Trends in Ownership
Concentration on One Format

Growth in Services Franchising

PPT 2-37

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

PPT 2-38

Reasons for Franchising Growth

Technological advances
Profitable utilization of capital resources Attainment of the American Dream

Demographic expansion
Product/service consistency

PPT 2-39

Types of Franchise Systems

Territorial Operating

Mobile
Distributorship Co-ownership Co-management Leasing/Licensing

Manufacturing
Service
PPT 2-40

Reasons for Franchising Failure

Inept management
Fraudulent activities

Market saturation

PPT 2-41

Franchisor Positions in the Marketing Channel

Manufacturer - retailer Manufacturer - wholesaler Wholesaler - retailer Service sponsor - retailer

PPT 2-42

Franchisor Benefits
Continuous market

Market information Money Royalty fees

Sales of products Rental and lease fees License fees Management fees
PPT 2-43

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.
PPT 2-44

Franchisor Advantages/Disadvantages

Advantages

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.

PPT 2-45

Franchisee Advantages/Disadvantages
Advantages 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 corporateowned outlets, and high royalties, fees, costs on equipment, supplies, merchandise, rental/lease rates and mandatory participation in promotional and support services.

PPT 2-46

Franchising Trends for the New Millennium

Sustained growth Enduring plus un-imagined applications International expansion Increasing tensions Greater emphasis on financial returns

PPT 2-47

Theories of Retail Institution Change

CYCLICAL THEORIES Wheel of retailing (price/service) Accordion Theory (assortment)

EVOLUTIONARY THEORIES
Dialectic process (retailer) Natural selection (customer)

PPT 2-48

Wheel of Retailing

PPT 2-49

The Dialectic Process

THESIS

Department store High margin Low turnover High price Full service Downtown location Plush facilities
ANTITHESIS SYNTHESIS

Discount department store Average margins Average turnover Moderate prices Limited services Suburban locations Modest facilities

Discount store Low margin High turnover Low price Self-service Low rent location Spartan facilities
PPT 2-50

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.