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Types of Retailers. Chapter 2 . The World of Retailing. Increasing Industry Concentration. Growing Diversity of Formats. Globalization. General Trends in Retailing. New Types of Retailers Increased Concentration Globalization Growth In Services Retailer

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the world of retailing
The World of Retailing

Increasing Industry Concentration

Growing Diversity of Formats


general trends in retailing
General Trends in Retailing
  • New Types of Retailers
  • Increased Concentration
  • Globalization
  • Growth In Services Retailer
  • Demise of Pure Electronic Retailers (Webvan, eToys, etc)
  • Growth in Use of Multi-Channel Retailing by Traditional Retailers
  • Increase Use of Technology to Reduce Cost, Increase Value Delivered
merchandise offering
Merchandise Offering
  • Variety(breadth of merchandise)

The number of merchandise categories

  • Assortment(depth of merchandise)

The number of items in a category (SKUs)

Jack Star/PhotoLink/Getty Images

C Squared Studios/Getty Images

Stockbyte/Punchstock Images





types of retailers1
Types of Retailers

Food Retailers

Mom and Pop Stores

Convenience Stores



General Merchandise Retailers

Department Stores

Specialty Stores

Discount Stores

Category Specialists

Off-Price Retailers

Warehouse Clubs

food retailers
Food Retailers

Primary Shopping Format for Food Sales Growth Rates by Retail Format

limited assortment supermarkets
Limited Assortment Supermarkets

Save-A-Lot’s limited assortment format

means that stores carry the most

frequently purchased grocery items in

the most popular size and variety

The company carries high quality

exclusive brands – many produced by the

same manufacturers of leading name

brands – and an assortment of nationally

branded items.

This allows Save-A-Lot to offer savings of up to 40% compared to conventional grocery stores – without asking shoppers to sacrifice quality.

Used by permission of Save-A-Lot

conventional supermarket survival pack
Conventional Supermarket Survival Pack

Emphasize Fresh Perishables

Target health conscious and ethnic consumers

Provide a better in-store experience

Offer more private label brands


Food Retailers


-Cars, highways and TV to build brands

-Knowledgeable customers – self service

-Perishable vs. packaged goods

Big Box Retailers

-Warehouse Clubs



Convenience Stores

convenience stores fight competition
Convenience Stores Fight Competition
  • Tailors associates to local market
  • Stores are more convenient to shop
  • Offers fresh food
  • Fast, casual restaurants
  • Financial services available
  • Opening smaller stores closer to consumers – like airports

Issues in Food Retailing

Competition from Discount Stores

Changing Consumption Patterns



Lower Costs

Lower Prices

Time Pressure

Eating Out More

Meal Solutions

types of general merchandise retailers
Types of General Merchandise Retailers
  • Department Stores
  • Specialty Stores
  • Category Specialists
  • Home Improvement Centers
  • Discount Stores
  • Drugstores
  • Off-Price retailers
  • Extreme Value Retailers
issues in department store retailing

-Discount Stores on Price

-Specialty Stores on Service, Depth of Assortment

Lower Cost by Reducing Services (?)

-Centralized Cash Wraps

More Sales (?)

-Customers Wait for Sale

Focus on Apparel and Soft Home

Develop Private Labels and Exclusive Brands

Issues in Department Store Retailing
three tiers of department stores
Three Tiers of Department Stores

First Tier: upscale, high fashion chains with exclusive designer merchandise and excellent customer service.

Example: Nordstrom, Neiman Marcus, Bloomingdales, Saks

Second Tier: Retailers sell more modestly

priced merchandise with less customer service:

Example: Macy’s

Third Tier: Value oriented caters to more price conscious customer

Example: JCPenney, Sears, Kohl’s

Rob Melnychuk/Getty Images

what to do with an eroding market
What To Do With an Eroding Market
  • To deal with an eroding market Department stores are:
  • attempting to increase the amount of exclusive merchandise
  • they sell
  • undertaking marketing campaigns to develop strong images
  • for their stores and brands
  • building better relationships with
  • their key customers



Issues in Discount Store Retailing

  • Only Big Three Left

Wal-Mart, Kmart, Target

  • Wal-Mart’s Dominance
  • Differentiate Strategy

Wal-Mart = Low Price and Good value

Target = More Fashionable Apparel

  • Competition from Category Specialists

Toys-R-Us, Circuit City, Sports Authority

McGraw-Hill Companies, Inc./Gary He, photographer

issues in specialty store retailing
Mall-Based Apparel Retailers

Decline in Mall Shopping and Apparel Sales

-Lack of New Fashions

-Less Interest in Fashion

-Increase Price Consciousness

Lifestyle Formats – Abercrombie and Fitch and Hot Topics

Issues in Specialty Store Retailing

McGraw-Hill Companies, Inc./Gary He, photographer

issues in drug store retailing
Consolidation – Walgreens, CVS, Rite-Aid

Competition from Supermarkets, discount Stores and mail-in orders

Evolution to a New Format

-Stand Alone Sites with Drive Thru Windows

-offering more frequent purchase food items

Improvedsystems provide personalized service in the pharmacy

Issues in Drug Store Retailing

Keith Brofsky/Getty Images

category specialists
Deep and Narrow Assortments Destination Stores

Low Price and Service

Wholesaling to Business Customers and Retailing to Consumers

Incredible Growth

Category Specialists

Ryan McVay/Getty Images

issues in home improvement centers
Issues in Home Improvement Centers

Home Depot and Lowes act as both:

Retailer and Wholesaler


home improvement centers
Home Improvement Centers

Displays are warehoused

Customer Service: How to select and how to use merchandise

Competition focuses on price, effort to differentiate and services provided

Ryan McVay/Getty Images

issues in extreme value retailing
Focuses on Lower Income Consumers

Names mostly imply good value not $1 price points

Low Cost Location

Limited Services

One of the Fastest Growing Retail Segments

Dollar Tree Family Dollar

Dollar General 99 Cents Only Store

Issues in Extreme Value Retailing

Stockbyte/Punchstock Images

non store retail formats
Electronic Retailing

Catalog and Direct Mail

Direct Selling

Television Home Shopping

Vending Machines

Non-store Retail Formats


Ryan McVay/Getty Images

electronic retailing
Electronic Retailing
  • History of frenzied investments and false predictions of retail dominance
  • Primarily used by traditional retailers to compliment store and catalog offerings
  • Exclusive e-tailers target small and dispersed niche markets

Randy Allbritton/Getty Images

what are amazon and ebay
What are Amazon and eBay?
  • Amazon.com – Merchandise to consumers. Provides website development and fulfillment services to other retailers
  • eBay – Acts as a mall or other shopping center providing a “place” for buyers and sellers to meet

Don Farrall/Getty Images

issues in catalog retailing
Low Start Up Cost

Evolution of Multi-Channel Offering

Hard to compete with large well established firms

Increasing Mail Costs

Clutter from other Catalogs

General merchandise catalogs like JC Penney

Specialty Catalogs like JC Whitney, Victoria Secret

Issues in Catalog Retailing
issues in direct selling
Issues in Direct Selling
  • Providing information and demonstrations is costly
  • Party plan system: merchandise is demonstrated in a party atmosphere
  • Multi-level network: Master distributors sell to distributors who sell merchandise
  • Pyramid schemes: Firm sells to other distributors and little if any merchandise goes to end users
issues in television home shopping
Issues in Television Home Shopping
  • Consumers watch cable stations, infomercials or direct response ads
  • Few consumers watch regularly
  • Most purchases made by small proportion of viewers
  • Customers can’t examine merchandise
  • Customers must wait for merchandise to come on
  • Sells mostly jewelry, apparel, cosmetics, kitchenware, exercise equipment


issues in vending machine retailing
Issues in Vending Machine Retailing
  • Sales growth has been declining due to higher prices and healthier eating habits
  • New technology may help sales growth
  • Vending machines are beginning to accept credit
  • Trend of placing machines in captive consumer locations

Ryan McVay/Getty Images


Services vs. Merchandise Retailers


-Problems in Evaluating Service Quality

-Performance of Service Provider

Simultaneous Production and Delivery

-Importance of Service Provider


-No Inventory, Must Fill Capacity

Inconsistency of the Offering

-Importance of HR Management


Type of ServiceService 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 of Florida, Babson College

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

Examples of Service Retailers

examples of service retailers

Type of Service Service Retail Firms

Hotels and motels Hyatt, Sheraton, Marriott, Days Inn

Income tax preparation H & R Block

Insurance Allstate, State Farm

Internet access/Elec info. American On-Line, CompuServe

Movie theaters AMC, Loews/Sony, Universal

Real estate Century 21, Coldwell Banker

Restaurants TGI Friday’s, Wendy’s, Pizza Hut

Truck rentals U-Haul, Ryder

Weight loss Weight Watchers, Jenny Craig

Video rental Blockbuster, Hollywood Video

Vision centers Lenscrafter, Pearle

Examples of Service Retailers

Types of Retail Ownership

  • Independent, Single Store Establishments
    • Wholesaler Owned Cooperatives
  • Corporate Chains
  • Franchises

(c) Brand X Pictures/PunchStock



30 – 40% of US Retail Sales

Franchisee Pays Fixed Fee Plus % of Sales

Franchisee Implements Program

Why is This Ownership Format Efficient?

The McGraw-Hill Companies, Inc./Jill Braaten, photographer

reasons for franchising growth

Technological advances

Profitable utilization of capital resources

Attainment of the “American Dream”

Demographic expansion

Product/service consistency

Reasons for Franchising Growth
types of franchise systems










Types of Franchise Systems
reasons for franchising failure

Inept management

Fraudulent activities

Market saturation

Reasons for Franchising Failure
franchisor positions in the marketing channel

Manufacturer - retailer

Manufacturer - wholesaler

Wholesaler - retailer

Service sponsor - retailer

Franchisor Positions in the Marketing Channel
franchisor benefits

Continuous market

Market information


Royalty fees

  • Sales of products

Rental and lease fees

  • License fees

Management fees

Franchisor Benefits
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.

Franchisee Benefits
franchisor advantages disadvantages


Rapid expansion, highly motivated franchisees do a good job, additional profits by selling franchisees products and services.


Company-owned units may be more profitable, less control then independent retailers over advertising, pricing, personnel practices, etc.

Franchisor Advantages/Disadvantages
franchisee advantages disadvantages


Established/proven product/service, business and technical assistance, and reduction in risk.


Loss of control since only semi-independent, franchisee outlets may compete with corporate-owned outlets, and high royalties, fees, costs on equipment, supplies, merchandise, rental/lease rates and mandatory participation in promotional and support services.

Franchisee Advantages/Disadvantages
franchising trends for the new millenium

Sustained growth

Enduring plus un-imagined applications

International expansion

Increasing tensions

Greater emphasis on financial returns

Franchising Trends for the New Millenium
which types of retailers will be the first to pursue global markets
Which Types of Retailers Will Be the First to Pursue Global Markets?

Discount Stores

Category Specialists

Department Stores


Services Retailers

increasing concentration
Increasing Concentration

53% of sales

85% of sales

Discount Stores

Wal-Mart, Target and Kmart

Drug Stores

Walgreens, CVS, Rite-Aid and Eckerds

why is the retail industry becoming more concentrated
Why Is the Retail Industry Becoming More Concentrated?

Traditionally retailers have been local businesses.

  • Why are bigger firms emerging?
  • Why are least concentrated sectors food retailers and services retailers?