Chapter 2

Types of Retailers
RETAIL
MANAGEMENT:
MANAGEMENT
A STRATEGIC
8th Edition
APPROACH,
Mr.
RMB
9th Edition

BERMAN
BERMAN EVANS TEMPLATE

EVANS

Chapter Objectives
Determine the types of retailers.
Determine how do retailers differ in terms of
how they meet the needs of their customers.
Describe the trends that shapes todays
retailers.
Differentiate service retailers and
merchandise retailers.
Describe the types of ownership for retail
firms

2-2

RETAILER
CHARACTERISTICS
The type of retailer a consumer chooses to
patronize depends on the benefits the
consumer is seeking.
As consumer needs and competition
change, new retail formats are created and
existing formats evolve.
The most basic characteristic used to
describe the different types of retailers is
their retail mix.
2-3

RETAILER
CHARACTERISTICS
Retail mix are the elements retailers use to
satisfy their customers needs.
Four elements of the retail mix: the types of
merchandise and/or services offered, the
variety and assortment of merchandise, the
level of customer service, and the price of
the merchandise.
2-4

Types of Merchandise
The United States, Canada, and Mexico
have developed a classification scheme,
called the North American Industry
Classification Systems (NAICS), to collect
data on business activity in each country.
Every business is assigned a hierarchical,
six-digit code based on the type of products
and services it sells.

2-5

Variety and Assortment

Variety is the number of merchandise
categories a retailer offers.
Assortment is the number of different items
offered in a merchandise category.
Variety is often referred to as the breadth of
merchandise and assortment referred to as
the depth of merchandise.
Each different item of merchandise is called a
stock-keeping unit (SKU).
2-6

Services Offered
Customers expect almost all retailers to
provide certain services: displaying
merchandise, accepting credit cards,
providing parking, and being open at
convenient hours.
Some retailers charge customers for other
services such as home delivery and gift
wrapping.

2-7

Prices and the Cost of Offering

Merchandise and Services
Stocking a deep and broad assortment, is
appealing to customers but costly for
retailers.
Similarly, services attract customers to the
retailer, but they also are costly.
To make a profit, retailers that offer broader
variety, deeper assortments and/or
additional services need to charge higher
prices.
2-8

FOOD RETAILERS

Supermarkets
A conventional supermarket is a large,
self-service retail food store offering
groceries, meat and produce as well as
some nonfood items, such as health and
beauty aids and general merchandise.
Stores are designed to maximize efficiency
and reduce costs.
2-10

Trends in Supermarket
Retailing
To compete successfully against intrusions
by other food retailing formats, conventional
supermarkets are differentiating their
offerings by (1) emphasizing fresh
perishables, (2) targeting health-conscious
and ethnic consumers, (3) providing better
value with private-label merchandise and (4)
providing a better shopping experience.

2-11

Trends in Supermarket
Retailing
Fresh merchandise the areas around the
outer walls of a supermarket, known as the
power perimeter, that include the dairy,
bakery, meat, florist, produce, deli and
coffee bar.
They are promoting fresh merchandise with
cooking exhibitions and action stations.
2-12

Trends in Supermarket
Retailing

Health/Organic Merchandise Fair trade

is the practice of purchasing from factories
that pay workers a living wage, considerably
more than the prevailing minimum wage ad
offer other benefits such as onsite medical
treatment.
Private-label Merchandise the benefits to
customers include having more choices and
finding the same ingredients and quality.
2-13

Trends in Supermarket
Retailing
The benefits of private-label brands to
retailers include increased store loyalty, the
ability to differentiate themselves from the
competition, lower promotional costs and
higher gross margins compared with
national brands.

2-14

Trends in Supermarket
Retailing
Improving the shopping experience
creating an enjoyable shopping experience
through better store ambience and customer
service is another approach that
supermarkets use to differentiate
themselves from low-cost, low-price
competitors.

2-15

Supercenters
Large stores that combine a supermarket
with a full-line discount store.
However, supercenters are very large, so
some customers find them inconvenient
because it can take a long time to find the
items they want.
Hypermarkets are also large, combination
food and general merchandise stores.

2-16

Supercenters
Both hypermarkets and supercenters are
large, carry grocery and general
merchandise categories, offer self-service
and are located in warehouse-type
structures with large parking facilities.
However, hypermarkets carry a larger
proportion of food items and have a greater
emphasis on perishables

2-17

Supercenters

Supercenters have a larger percentage of

nonfood items and focus more on dry
groceries.

2-18

Warehouse Clubs
Retailers that offer a limited and irregular
assortment of food and general merchandise
with little service at low prices for ultimate
consumers and small businesses.
It can offer low prices because they use lowcost locations, have inexpensive store designs
and offer little customer service; they further
keep inventory holding costs low by carrying a
limited assortment of fast-selling items.

2-19

Convenience Stores
Provide a limited variety and assortment of
merchandise at a convenient location in 3,000
to 5,000 sq. ft. stores with speedy checkout.
Offer limited assortments and variety and they
charge higher prices than supermarkets.
To increase convenience, convenience stores
are opening smaller stores close to where
consumers shop and work.
2-20

GENERAL MERCHANDISE
RETAILERS

Department Stores
Retailers that carry a broad variety and deep
assortment, offer customer services and
organize their stores into distinct departments for
displaying merchandise.
To deal with their eroding market share,
department stores are (1) attempting to increase
the amount of exclusive merchandise they sell,
(2) undertaking marketing campaigns to develop
strong images for their sore stores and brands
and (3) expanding their online presence.
2-22

Full-Line Discount Stores

Retailers that offer a broad variety of
merchandise, limited service and low
prices.
Offer both private labels and national
brands.

2-23

Specialty Stores
Concentrate on a limited number of
complementary merchandise categories and
provide a high level of service.
Tailor its retail strategy toward very specific
market segments by offering deep but
narrow assortments and sales associate
expertise.

2-24

Drugstores
Specialty stores that concentrate on health
and personal grooming merchandise.
The major drugstore chains are offering a
wider assortment of merchandise, including
more frequently purchased food items, the
convenience of drive-through windows for
picking up prescriptions and in-store medical
clinics.
2-25

Category Specialists
Big-box stores that offer a narrow but deep
assortment of merchandise.
Most category specialists predominantly use
a self-service approach but they offer
assistance to customers in some areas of
the stores.

2-26

Category Specialists
By offering a complete assortment in a
category, category specialists can kill a
category of merchandise for other retailers
and thus are frequently called category
killers.

2-27

Extreme-Value Retailers
Small discount stores that offer a limited
merchandise assortment at very low prices.
Primarily target low-income consumers.
These customers want well-known brands
but cannot afford to buy the large-size
packages offered by full-line discount stores
or warehouse clubs.

2-28

Off-Price Retailers
Also known as closeout retailers, offer an
inconsistent assortment of brand-name
merchandise at a specific discount off the
manufacturers suggested retail price
(MSRP).
Able to sell brand-name and even designer
label merchandise at 20 to 60% lower than
the MSRP because of their unique buying
and merchandise practices.
2-29

Off-Price Retailers
Most merchandise is bought
opportunistically from manufacturers that
have overruns, canceled orders, forecasting
mistakes causing excess inventory, closeouts and irregulars. They also buy excess
inventory from other retailers.
Closeouts are end-of-season merchandise
that will not be used in the following
seasons.
2-30

Off-Price Retailers
Irregulars are merchandise that has minor
mistakes in construction
Outlet stores are owned by manufacturers
or retailers. Those owned by manufacturers
are also referred to as factory outlets.

2-31

SERVICES RETAILING

Service Retailing
Service retailers or firms that primarily sell
services rather than merchandise, are a
large and growing part of the retail industry.

2-33

Differences between Services

and Merchandise Retailers
Intangibility
Simultaneous production and
consumption
Perishability
Inconsistency

2-34

TYPES OF OWNERSHIP
Independent, Single-Store Establishments
Corporate Retail Chains operates multiple
retail units under common ownership and usually
has centralized decision making for defining and
implementing its strategy.
Franchising contractual agreement between a
franchisor and a franchisee that allows the
franchisee to operate a retail outlet using a name
and format developes and supported by the
franchisor.
2-35

End of Chapter 2
Thank you for listening