A retail institution refers to basic format or structure of a

business.
Classification of Retail Institutions
a) Based on Ownership
b) Store-based retail strategy mix
c) Non store-based retail strategy mix and Non-traditional
retailing

Ownership
Ownership

Independent
Chain
Franchise
Leased department
Vertical marketing system
Consumer cooperative

Food Oriented Retailers:

Convenience store,
Conventional Supermarket,
Supercenter, Hypermarket,
Warehouse store

Store-based
Store-based retail
retail
strategy
strategy mix
mix

Non
Non store-based
store-based retail
retail
strategy
strategy mix
mix and
and NonNontraditional
traditional retailing
retailing

General Merchandise
Retailer:
Specialty store, Category
Specialists, Department
store, Discount stores,
Off-price chain, Factory
Outlet, Drug Stores

Direct Marketing
Direct Selling
Vending Machine
World Wide Web

These classifications are not mutually exclusive.

An independent retailer owns only one retail unit. The

management has direct contact with the customers and can quickly
respond to their needs.

Advantages:
Flexibility of choosing the retail location.
Devising a strategy becomes easier.
Investment costs are low.
They are able to sustain consistency in their work.
Better customer relationship management.

Disadvantages
In bargaining with distributors, they do not posses much
power because they buy in small quantities.
Cannot gain economies of scale in buying and maintaining
inventory because they have financial constraints.
Limited advertisements.
Unequal distribution of work.
Limited time given to planning because of overinvolvement of owner into daily operations.

A chain retailer operates multiple outlets under common

ownership. It usually engages in some level of centralized
purchasing and decision making.

Advantages

They have the bargaining power due to their volume of purchase.

Achieve cost efficiency due to performing the wholesale
functions themselves.
Efficiency in multiple stores is attained by shared warehousing
facilities; large purchases, centralized decision making etc.
Can advertise in variety of media, from TV to magazines to
newspapers.

Disadvantages

May or may not be consistent in their strategy.

Investments are high.
Personnel may have limited independence.

It involves a contractual arrangement between a franchisor and a

retail franchisee, which allows the franchisee to conduct a given
business under established name and according to a given pattern
of business.

The franchisee pays an initial fee and a monthly share of gross

sales in exchange for the exclusive rights to sell goods and
services in a specified area.

Franchising is a retail organizational form in which small

businesses can benefit being a part of a large retail institution .

Product/Trademark franchising:

In this type franchisees operate independently of their franchisors.

The franchisee adhere to certain rules and regulations but sets store
operating hours, store location criteria, store facilities and display
etc.

Business format franchising:

Involves more interactive relationship between the franchisee and

franchisor.
Franchisees receives assistance on site location, quality control,
start-up practices, management training and responding to
problems.

Personal Integrity
Entrepreneurial
Spirit
Ability to motivate
and train
Ability to manage
finances

Financial
resources
Ideal
Franchisee

Willingness to
complete training
Willingness to
devote time

Advantages to the franchisee:

Franchisees can own retail enterprise with relatively lower
capital investment.
Franchisees acquire well known name and good service lines.
Cooperative marketing used , that could not be afforded
otherwise.
Disadvantages to the franchisee:
Over saturation can occur if there are too many franchisees
situated at one location.
Franchisee may get locked into contract provisions whereby
the purchases must be made through franchisors or certain
approved vendors.
Franchisee agreement can be of short duration.
Under most of the contracts, royalties are percentage of gross
sales, regardless of franchisee profits.

Advantages to the franchisor:

Global presence
Less investment
After franchisee have paid for their franchised outlets,
franchisor still receive royalties
Franchisees are not owners, they have greater incentive
to work hard. Thus, benefiting the franchisor
Disadvantages to the franchisor:
Franchisee could harm the overall reputation, if they do
not adhere to the company standards.
Lack of uniformity among the outlets can adversely
affect the customer loyalty.
Ineffective franchised units affect the profitability of the
franchisor.

A leased department is a department in

a retail store that is rented to an
outside party

The proprietor is responsible for all aspects

of its business and pays a percentage of
sales as rent
The department store sets operating
restrictions to ensure consistency and
coordination

Benefits

provides one-stop
shopping to
customers
lessees handle
management
reduces store
costs
provides a stream
of revenue

Potential Pitfalls

lessees may
negate store image
procedures may
conflict with
department store
problems may be
blamed on
department store
rather than lessee

Well Know Store

Reduced Costs
Economies of Scale

Inflexibility in Hours
Product Line Restrictions
Raised Rent
Sales Expectations Not Met

Owned by Consumers
Most Popular in Grocery
Retailing

 Subway

is one of the largest retail

franchisors in the world
Based on the information found under
Franchise Opportunities on the Subway
website, would you be interested in
becoming a Subway franchisee? Why or
why not?