Types of Retailers

The World of Retailing

Distribution Channel

The Retailers Role in a Supply

Chain
Retailers are the final business
within a supply chain which links
manufacturers to consumers.
A Supply Chain is a set of firms that
make and deliver a given set of
goods and services to the ultimate
consumer.

Manufacturing, Wholesaling
and Retailing
Vertical Integration firm performs more
than one set of activities in the channel
Ex: retailer invests in wholesaling or
manufacturing

Backward Integration retailer performs

some distribution and manufacturing
activities
Ex: JCPenney sells Arizona jeans (Private Label)

Manufacturing, Wholesaling
and Retailing
Forward Integration manufacturers
undertake retailing activities
Ex: Ralph Lauren (New York Jones, Liz
Claiborne) operates its own stores

Large retailers engage in both

wholesaling and retailing
Ex: Wal-Mart, Lowes, Safeway, Brown Shoe
Company

Do Retailers Add Value?

Provide Assortment

Buy other products at the same time

Break Bulk

Buy it in quantities customers want

Hold Inventory

Buy it at a convenient place when you

want it
Offer Services

Decision Variables for

Retailers
Customer
Service
Merchandis
e
Assortment

Store Design
and Display

Retail
Strate
gy
Pricing

Location
Communicati
on Mix

Trends in Retailing
Increasing Industry
Concentration

Globalization

Growing
Diversity
of
Formats(New
types of
retailers)

Increasing Concentration
Discount Stores
Wal-Mart, Target and Kmart

New Types of Retailers

Category Specialists
-PetsMart
-Bed, Bath and Beyond
Wal-Mart Supercenters
-Supermarket + Discount Store
E bay, Priceline, Travelocity

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

Merchandise Offering

Classification by Type of Merchandise

Types of Retailers
Food Retailers
Mom and Pop Stores
Convenience Stores
Supermarkets
Supercenters
Hypermarkets(A-Z)

General Merchandise Retailers

Department Stores
Specialty Stores
Discount Stores
Category Specialists
Off-Price Retailers
Warehouse Clubs

Types of Food Retailers

Issues in Food Retailing

Competition from Discount Stores
Efficient
Distribution

Lower Costs

Lower Prices

Changing Consumption Patterns

Time Pressure

Eating Out More

Meal Solutions

Types of General Merchandise

Retailers

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

Characteristics of General Merchandise

Retailers

Many New Types of retailers,

Increased
Diversity to Meet Diverse Needs
Most People Shop at All Types Depending
on Situations Growth in Cross-Shopping

Non-store Retail Formats

Electronic Retailing
Catalog and Direct Mail
Direct Selling
Shopping
Machines

Television Home
Vending

Types of Retail Ownership

Independent, Single Store
Establishments
Consumer Owned CooperativesApna
Bazaar, Sahakari Bhandar
Wholesaler Owned Cooperatives-GCCF- Amul
Corporate Chains -Wal-Mart, Target
Franchise Business Model-KFC, Dominos,
VLCC, GATI, ADLABS

Trends in Ownership
Initial concentration on One Format
and gradually move to multiple
formats
Growth in Services Franchising

 There are approximately 1150 national and international

business format franchise systems in India in 2007.
Around 8 to 10 per cent Indian franchise systems have
entered international markets.
There are an estimated 70, 000 units operating in business
format franchises.
The growth rate in franchised units from 2005-06 to 200607 was 30 to 35 per cent for the last 4-5 years.
Some 500000 persons are employed in business format
franchise organizations.
Franchising contributed less than 4 per cent to Indias
Gross Domestic Product (GDP) in 2007.
Annual turnover is approximately us$ 4 billion.

Reasons for Franchising

Growth
Technological advances
Profitable utilization of capital resources

Demographic expansion
Product/service consistency

Types of Franchise Systems

Theories of Retail Institution Change

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

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

Wheel of Retailing

Accordion theory
This
theory
focuses
on
the width of
product
assortment
sold by retail
outlets
and
claims
a
generalspecificgeneral
cycle.
The
cycle begins
by
retailers
selling a wide
assortment of

The Dialectic Process

Thesis
Department store
High margin
Low turnover
High price
Full service
Downtown location
Plush facilities
Antithesis
Discount store
Low margin
High turnover
Low price
Self-service
Low rent location
Spartan facilities

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

Natural process-Retail lifecycle:

A new retail format passes through the stages of birth, growth,
maturity and decline as industries and products do. A new retail
format that enjoys a competitive advantage over existing formats
grows rapidly.
Attracted by the growth potential of the new format, competitors
enter the business during the growth phase, and there is intense
competition among the retailers of the new format.
The players develop ambitious plans of expansion and seek to
open their stores in new geographical areas. There is intense
competition during maturity, and a new retail format may start
replacing it during its decline stage. The three theories explain
the evolution of retail formats, but the decline and demise of a
retail format is not inevitable. Retailers have to learn to anticipate
changes in environment and adapt to them.