Types of Retail Formats

Introduction

VARIETY AND ASSORTMENT

Variety is the breadth of merchandise. It is an indication of the

number of merchandise categories a retailer offers.

Assortment is the depth of the merchandise. Each different item of merchandise is called a SKU (stock keeping units). Example: Both hyper markets and toy stores sell toys. Hypermarket sells many other categories of merchandise in addition to toys. (Greater Variety) Stores specializing in toys stock more types of toys. (more
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SKUs).

Food Retailers

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TYPES OF FOOD RETAILERS

Supermarket e.g More, Reliance Fresh, Food Bazar, Hypercity Percentage Food 70-90 Size (000 Sq. ft) SKUs (000)s Variety 20-50 20-30 Average Hypermarket e.g BB, Vishal Megamart Warehouse Club e.g Metro cash and carry 60 100-150 20 Broad Convenience Store e.g Twenty four seven, in and out, convenio 90 2-3 2-3 Narrow

60-70 100-300 In lacs Broad

Assortment

Average

Average
40-60 Low

Shallow
10-15 Low

Shallow
1-2 High

No. of Checkout 6-10 lines Prices

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Average

CONVENTIONAL SUPERMARKETS
Self-service food store offering groceries, meat and produce with

limited sales of nonfood items and general merchandise.

In US, about 50% of the conventional supermarkets are very promotional. On each day, they advertise that weeks sale items in local papers. This is called as High-Low strategy. The other half of the conventional supermarkets use very few promotions and sell almost all merchandise at the same price every day. This is called EDLP policy.
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CONVENTIONAL SUPERMARKETS
Typically, every day prices in these supermarkets are lower than

regular prices in promotional supermarkets.

EDLP stores keeps costs low. (Their advertisement costs would be just about one-fourth of the advertisement costs of the high low formats)

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HYPERMARKETS
Hypermarkets are large stores with a combination of food and

general merchandise.
Hypermarket sells items ranging from groceries, hardware, sports equipment, furniture, computers and electronics. It will have deeper assortment Typically, hypermarkets will be deep discounters

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WAREHOUSE CLUBS
A warehouse club is a store that offers limited assortment of food

and general merchandise with Warehouse Style stores on

wholesale basis. Merchandise in warehouse clubs is about half-food and half general merchandise. Warehouse clubs reduce prices by using low-cost locations and store designs. They reduce inventory holding costs by carrying a limited assortment of fast-selling items.
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WAREHOUSE CLUBS
Warehouse clubs have 2 types of members- wholesale members

who own small businesses and individual members who purchase

for their own use. Typically, members pay an annual fee. In general, wholesale members represent less than 30% of the customer base but account for over 70% of the sales.

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CONVENIENCE STORES Convenience stores provide a limited variety and assortment of merchandise at a convenient location
Typical store size would be 2,000 to 3,000 square foot with speedy checkout.

They are the modern version of the neighborhood mom-and-pop

grocery / general store. Convenience stores charge higher prices than supermarkets. Milk, eggs and bread once represented the majority of their sales but now almost all convenience stores in non-urban stores sells

gasoline, which accounts for over 55% of annual sales.

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TRENDS IN FOOD RETAILING

The primary trend is the increasing level of dominance from hypermarkets because of aggressive pricing and one-stop shop experience.

Supermarkets and convenience stores are gradually losing their

hold. Competition is also coming from other sources like Drug Chains

(Wal-greens and CVS) which carry many grocery essentials.

Convenience stores have recently started developing new concepts by investing in meal solutions.
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General Merchandise Retailers

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GENERAL MERCHANDISE RETAILERS

Major types of general merchandise retailers are: Discount Stores e.g Walmart Specialty Stores , Sells only one type of item e.g Mobile store

Category Specialists: Discount specialty stores

Home Improvement Centers: Furnitures, kitchen and bathroom fittings ( Home town, Home stop)

Department Stores: Target SEC A, SS, Lifestyle, Central etc.

Drug Stores e.g Apolo Off-price stores e.g Brand factory, Loot mart
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Value Retailers: target low income group customers

CHARACTERISTICS OF DIFFERENT GENERAL MERCHANDISE RETAILERS

Type
Discount Specialty Category Specialists

Variety
Broad Narrow Narrow

Assortment
Average to Shallow Deep Very Deep Very Deep

Price
Low High Low Low

Size (in 000 sq.ft)

100-300 4-12 50-120 80-120

SKUs (000s)
In lacs 5 20-40 20-40

Home Narrow Improvement Centers Department Stores Drug Stores Broad Narrow

Average Very Deep

Average to High Average to High

100-200 3-15

100 10-20

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CHARACTERISTICS OF DIFFERENT GENERAL MERCHANDISE RETAILERS

Type Off-price stores Value Retailers Variety Average Average Assortment Deep but varying Average and varying Price Low Low Size (in 000 sq.ft) 20-30 7-15 SKUs (000s) 50 3-4

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DISCOUNT STORES

A discount store is a retailer that offers a broad variety of merchandise at low prices (hypermarkets are also called as Discount stores)

They offer both private labels and national brands, but these
brands are less fashion-oriented than brands in departmental stores.

Major discount stores in US are Walmart, Kmart and Target

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TRENDS IN DISCOUNT STORE RETAILING

The most significant trend in discount store retailing is the Walmart-led push toward hyper-markets that carry grocery items. Being a one-stop shop, discount stores face competition from all

categories of stores Supermarkets, specialty stores, department

stores etc. To respond to this competitive environment, discount stores have

created more attractive shopping environments, placed more

emphasis on apparel, and developed strong private-label merchandise programs.
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SPECIALTY STORES

A Specialty store concentrates on a particular merchandise (Eg. Electronics items). They have a deep assortment but very little variety.

They typically operate in a small store and the number of SKUs

will be around 5000.

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CATEGORY SPECIALISTS

Category specialist can be considered as a sort of discount specialty store. They are also called as Category Killers. By offering a complete assortment in a category at low prices, category specialists can kill a category of merchandise for other retailers. Department stores and full-line discount stores located near category specialists often reduce their offering in the category because consumers are drawn to the deep assortment and low prices at the category killer.
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HOME IMPROVEMENT CENTERS

Its a category specialist offering equipment and material used to make home improvements. The largest U.S. home improvement chains are Home Depot, Menard and Lowes. While merchandise in home improvement centers is displayed in warehouse atmosphere, salespeople are available to assist customers in selecting merchandise. Since the needs for home improvement merchandise vary considerably across the country, there are opportunities for differentiation.
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DEPARTMENT STORES

They are generally the biggest in terms of both size and number of SKUs. They carry a broad variety and deep assortment. In some situations, departments in a department store or discount store are operated by an independent company (Leased department or concessionaires) Departmental stores are known for their strength in fashion or branded merchandise. To create excitement, apparel is displayed on mannequins, attention is drawn to displays with theatrical lightning and lot of salespeople.
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DRUGSTORES

Drugstores are specialty stores that concentrate on health and personal grooming merchandise. Pharmaceuticals often represent over 50% of sales and an even

greater percentage of their profits.

The largest drugstore chains in the US are Walgreen, Eckerds. Drugstores are experiencing sustained sales growth because the

aging population requires drugs.

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OFF-PRICE RETAILERS

Off-price retailers offer an inconsistent assortment of brand-name, fashion oriented goods at low prices. They follow unique buying and merchandising practices.

Most merchandise is bought opportunistically from manufacturers

or other retailers with excess inventory at the end of the season. The merchandise may be in odd sizes or unpopular colors and styles

and it may have minor defects.

Typically, merchandise is purchased at one-fifth to one-fourth of the original price.
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OFF-PRICE RETAILERS

Due to this pattern of opportunistic buying, customers cant be confident that the same type of merchandise will be in stock each time they visit the store.

Two types of off-price retailers are closeout and outlet stores.

Close-out retailers are stand alone off-price retailers. Outlet stores are off-price retailers owned by manufacturers or

by department or specialty stores. If they are owned by

manufacturers, they are referred as factory outlets.

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VALUE RETAILERS

Value retailers are those who specifically target low-income consumers and are located in lower-income urban or rural areas and are much smaller than traditional discount stores.

Their typical size is about 9000 to 10,000 sq.ft.

They are one of the fastest-growing segments in retailing. Dollar General and Family Dollar store are some of the major value

retailers.

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