Chapter 2. Store-Based Retailing. Types of Retailers. SIC System for Classifying Retailers by Type of Merchandise

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Chapter 2 Store-Based Retailing Irwin/McGraw-Hill PPT2-1 Types of Retailers Use Different Mixes merchandise Variety (Breadth) Assortment (Depth) services store design, visual

1 Chapter 2 Store-Based Retailing Irwin/McGraw-Hill PPT2-1 Types of Retailers Use Different Mixes merchandise Variety (Breadth) Assortment (Depth) services store design, visual merchandising location pricing Infinite Variations Survival of the Fitness -- Formats that Satisfy the Needs of Significant Segment PPT2-2 SIC System for Classifying Retailers by Type of Merchandise

2 PPT2-3 Sales by SIC Category Source: U.S. Department of Commerce, 1998 Census of Retail Trade. PPT2-4 Merchandise Offering Variety (breadth of Merchandise) The number of merchandise categories offered by a retailer Assortment (Depth of Merchandise) The number of different items (SKUs) offered in a merchandise category PPT2-6 Trends in the Retail Industry Growing Diversity of Formats Category Specialist Electronic Retailers Increasing Industry Concentration Globalization

PPT2-7 Types of Retailers General Merchandise Retailers Department Stores Specialty Stores Discount Stores Category Specialists Off-Price Retailer Warehouse Club PPT2-12 Characteristics of General

3 PPT2-7 Types of Retailers General Merchandise Retailers Department Stores Specialty Stores Discount Stores Category Specialists Off-Price Retailer Warehouse Club PPT2-12 Characteristics of General Merchandise Retailers PPT2-13 Department Stores Competition from Discount Stores on Price, Specialty Stores on Service, Depth of Assortment Lower Cost By Reducing Services (?)/effect on Sales(?) Focus on Apparel, Soft Home Improve Services Develop Private Labels, Exclusive Brands Summary: Focus on reducing costs, increasing efficiency Efficient Consumer Response (ECR) CPFR (Collaboration, Planning, Forecasting, Replenishment)

4 PPT2-14 General Merchandise Discount Stores Big Three -- Wal-mart, Kmart, Target Competition from Category Specialists -- Toys R Us, Circuit City, Sports Authority Continue to Reduce Costs More Focus on Apparel - Higher Margins PPT2-15 Specialty Stores Mall-Based Apparel Retailers --Decline in Mall Shopping and Apparel Sales Lack of New Fashions Less Interest in Fashion Increase Price Consciousness Lifestyle Formats respond (Old Navy, Ramparts) PPT2-16 Category Specialists Deep and Narrow Assortments, Destination Stores Incredible Growth Low Price and Service Wholesaling to Business Customers and Retailing to Consumers (Circuit City)

5 PPT2-17 Drug Stores Competition from Supermarkets and Discount Stores - Pharmaceuticals Stand-Alone Sites with Drive-In Windows Convenience Store Front End PPT2-18 Off-Price Retailers (Apparel) Warehouse Clubs (Food, Hard Goods) Opportunistic Buying -- Price not Brand Hurt by Sales in Department Stores Buying First Line Merchandise Improved Efficiency and Large Packs by Supermarkets Warehouse Clubs Focus More on Business Customers PPT2-19 Hypermarkets Disappearing Hypermarkets strong internationally, but not in U.S. Zoning laws in Europe Weak infrastructure to support retailing in Asia, Latin America

6 PPT2-20 Summary Many New Types of Retailers, Increased Diversity to Meet Diverse Needs Most People Shop at All Types Depending on Situations - Growth in Cross-Shopping. Much like cosmetic promotions PPT2-21 Services vs. Merchandise Retailers Intangibility - Problems in Evaluating Service Quality Simultaneous Production and Delivery - Importance of Service Provider Perishability - No Inventory, Must Fill Capacity to fill orders Inconsistency of the Offering - Importance of HR Management PPT2-22 Services Retailers Provide Tangible Cues About Quality SEE PHOTOS ON PAGE 62 OF THE TEXTBOOK

7 PPT2-23 All Retailers -- Develop Strategy, Location Merchandise Retailers -- Inventory Control and Merchandise Management Important Services Retailers -- Store Operations and Human Resource Management Important PPT2-24 Examples of Services Retailers Type of Service Service Retail Firms Airlines American, Delta, British Airways, Singapore Airways Automobile maint/repair Jiffy Lube, Midas, AAMCO Automobile rental Hertz, Avis, Budget, Alamo Banks Citibank, NCNB, Bank of America Child care centers Kindercare, Gymboree Credit cards American Express, VISA, Mastercard Education University s/colleges;how do they generate extra $? Entertainment parks Disney, Universal Studios, Six Flags Express package delivery Federal Express, UPS, US Postal Service Financial services Merrill Lynch, Dean Witter Fitness Jazzercise, Bally s, Gold s Gym Health Care Humana, HCA Home maintenance Chemlawn, MiniMaid, Roto-Rooter PPT2-25 Examples of Services Retailers Type of Service Service Retail Firms 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 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 Friday s, Wendy s, Pizza Hut U-Haul, Ryder Weight Watchers, Jenny Craig Blockbuster Lenscrafter, Pearle

PPT2-26 Merchandise/Service Continuum PPT2-27 Types of Retail Ownership Independent, Single Store Establishments - Consumer Owned Cooperatives - Wholesaler Owned Cooperatives Corporate Chains

8 PPT2-26 Merchandise/Service Continuum PPT2-27 Types of Retail Ownership Independent, Single Store Establishments - Consumer Owned Cooperatives - Wholesaler Owned Cooperatives Corporate Chains Franchises PPT2-28 Trends In Corporate Chains Consolidation - Wal-Mart, Kmart, Target Dominant Discount Stores - Walgreens, CVS, Eckerd Dominant Drug Stores - Office Depot, Staples, Office Max Dominant Office Supply Category Killers Focus - Stick to Your Knitting

PPT2-29 Theories of Retail Institution Change CYCLICAL THEORIES Wheel of retailing (price/service) EVOLUTIONARY THEORIES Dialectic process (retailer) PPT2-30 Wheel of Retailing PPT2-31 The

Self-service Low rent location Spartan facilities SYNTHESIS Discount department store Average margins Average turnover Moderate prices Limited services Suburban locations Modest facilities

9 PPT2-29 Theories of Retail Institution Change CYCLICAL THEORIES Wheel of retailing (price/service) EVOLUTIONARY THEORIES Dialectic process (retailer) PPT2-30 Wheel of Retailing PPT2-31 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 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.

10 PPT2-36 Franchiser Benefits Continuous market Market information Money Royalty fees Sales of of products Rental and lease fees License fees Management fees PPT2-37 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. PPT2-38 Franchiser 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.

11 PPT2-39 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.

Retailing and Wholesaling

Retailing and Wholesaling Chapter 14 PowerPoint slides Express version Instructor name Course name School name Date Learning Objectives 14.2 After studying this chapter, you should be able to: Explain