‘Retail Formats’

1. ‘Retail Formats’ PROF.C.VIGNALI PhD

2. Presentation Layout • Introduction to current shopping trends, • Factory Outlet Retailing; background, characteristics and functional strategies, • Discount/warehouse club; background, characteristics and functional strategies, • Franchising; background, characteristics and functional strategies, • Conclusions

3. Introduction • Shopping is considered to be a ‘leisure experience. (Newby 1993) • Consumer trends change according to; - age, demographics, economics, technology, car ownership • Consumer is now ‘price and value conscious’.

4. Introduction • Nowadays, there is a diverse array of retail formats, such as; • Chain stores • Supermarkets • Discount stores • Factory Outlets • Franchises • Internet

5. Factory Outlet Retailing Background: • Factory outlet format originates from USA • Principle – manufacturers selling brand name products at a discounted price. • First outlet in UK – Hornsea, 1992 • Format – Large site containing several ‘units’ and other amenities, i.e. restaurants, play areas.

6. Factory Outlet Retailing Background cont. • Largest outlet in UK – Cheshire Oaks • Contains approx. 140 retail units • Most common items sold at these outlets include; designer label clothing, crockery and homewares.

7. Factory Outlet Retailing Characteristics; • Good quality brands at discounted prices • Allows manufacturer to sell surplus stock • Leisure amenities offered encourage the people to spend the day there.

8. Factory Outlet Retailing Disadvantages; • Forces in place by government to restrain their development. • Transport links poor for those without cars • Takes away trade from town centre retailers

9. Factory Outlet Retailing Functional Strategies; • Popular brands, discounted prices • Out-of-town locations • Amenities i.e, ample parking, fast food, toilets, play parks • Out-of-town location reduces operating costs/distribution channel is shortened

10. Factory Outlet Retailing Retail Example – Cheshire Oaks Contains; • Spacious food court • 2 full service restaurants • Stores include, DKNY, Burberry, M&S, Next • Tourist information centre • 3,000 free car parking spaces • First class road and rail links

11. Discount/Warehouse Club Definition; “Discount/warehouse clubs can be described as cash and carries for the general public”. Brassington et al 2001

12. Discount/Warehouse Club Background; • Adopted from USA to the UK in 1993 • Require membership • Large scale premises • Offer extremely low cost products inc; housewares, furniture, car parts, appliances

13. Discount/Warehouse Clubs Characteristics; • Extremely low prices • Low gross margins • Appeal to price conscious consumers & small retailers who cannot purchase from larger distributors

14. Discount/Warehouse Club Disadvantages; • Availability of stock unreliable • High degree of self-service • Little assistance available in-store • No delivery options available

15. Discount/Warehouse Club Functional Strategies; • Great range of product line in limited sizes/styles • Situated in industrial areas • Layout – concrete floors, aisles wide for forklifts, merchandise displayed on pallets • All payments must be cash • Customers responsible for transporting their purchases

16. Discount/Warehouse Club Retail Example – CostCo • First US style warehouse club in UK • Trades from over 360 outlets in 7 countries • Provides supplies for small-medium sized businesses • Provides quality goods at lowest possible prices

17. Franchising Definition; “Franchising is an arrangement whereby a supplier grants a dealer the right to sell products in exchange for some type of consideration”. Dibb et al 2000

18. Franchising Background; • Franchiser receives percentage of sales in return for providing equipment, marketing, branding etc. • Organisations which franchise inc; McDonalds, Mercedes Benz, Toyota, the Body Shop • Franchising accounts for approx. 1/3 of all retail sales

19. Franchising Characteristics; • Possibly easier to finance • Access to extensive advertising • Access to lower costs and possibly centralised buying • Few start up problems • Use of well-known trademark or trade name

20. Franchising Disadvantages; • Onerous reporting requirements • Possible exaggeration of franchiser advantages • Costs of franchise & other fees may reduce profit margins • Inflexibility due to restrictions imposed by franchiser

21. Franchising Functional Strategies; • Larger, well established franchise operation have ad campaigns and solid trading name • Good franchisers will offer training programmes • Good franchisers will help secure funding for the investment

22. Franchising Retail Example – McDonalds • Committed to franchising as way of doing business • 70% of restaurants worldwide are franchises • Worldwide number 1 franchise • Member of the British Franchise Association

23. Conclusions Factory outlet Retailing; • Must continue to attract regular customers, i.e. provide additional amenities • May seriously affect the likelihood of traditional town centres

24. Conclusions Warehouse/Discount Clubs; • Growth inevitable, but government may inhibit growth • May be situated in town centres, this may draw back attention to these areas

25. Conclusions Franchising; • Threat from internet shopping • Franchising will continue as consumers still want the leisure activity of shopping

26. Bibliography • Dibb et al (2000)Marketing Concepts & Strategies • CIM Coursebook 2002-2003; - Marketing Operations - Marketing in Practice - Marketing Environment 3. Brassington et al (2000) Principles of Marketing

27. Journals • International journal of retailing & distribution management; - Volume 30, No. 5, 2002 - Volume 23, No. 1, 1995 - Volume 24, No. 6, 1996 - Volume 22, No. 1, 1994

28. Websites • www.mcdonalds.com • www.british-franchise.org • www.frain.org.za • www.costco.co.uk