1. CHAPTER 2
1
Types of
Retailers
CHAPTER 02
Retailing Management 8e
McGraw-Hill/Irwin
All rights reserved. 2-
© The McGraw-Hill Companies,The McGraw-Hill Companies, Inc. All rights reserved.
Copyright © 2012 by

2. The World of Retailing
CHAPTER 2
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3. Questions
CHAPTER 2
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• What trends shape today’s retailers?
• What are the different types of retailers?
• How do retailers differ in terms of how they
meet the needs of their customers?
• How do service retailers differ from
merchandise retailers?
• What are the types of ownership for retail
firms?
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4. General Trends in Retailing
CHAPTER 2
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• 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
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5. NAICS Codes for Retailers
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6. Types of Retailers
CHAPTER 2
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• Retailers Use Different Retail
Mixes
-merchandise: variety
(breadth) / assortment (depth)
-services
-store design, visual
merchandising
-location
-pricing
• Infinite Variations
• Some combination of retail
mixes satisfy the needs of 2-

7. Bag Borrow or Steal
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8. CHAPTER 2
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9. CHAPTER 2
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• Variety (breadth)
• Assortment (depth)
• Services Offered
• Prices and the cost of offering breath and
depth of merchandise and services
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10. Retailer Characteristics
CHAPTER 2
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• Variety (breadth)
• Assortment (depth)
• Services Offered
• Prices and the cost of offering breath and
depth of merchandise and services
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11. Merchandise Offering
CHAPTER 2
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Variety (breadth of merchandise): wide vs. narrow
- The number of merchandise categories
Assortment (depth of merchandise): deep vs. shallow
-the number of items in a category (SKUs)
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12. Services Offered
CHAPTER 2
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• Retailers differ in
the services they
offer customers
• EMS offers
assistance in
selecting the
appropriate kayak
and repairing
them
VS
• http://
www.outdoorplay
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13. Illustration of Variety and
Assortment CHAPTER 2
1
Lady Foot Locker Sports Authority
Active SKUs: 44 N/A
Classics SKUs: 44 N/A
Converse SKUs: 25 N/A
Elite Running SKUs: 22 N/A
Fitness N/A SKUs: 1
Running SKUs: 44 SKUs: 39
Trail Running N/A SKUs: 7
Training SKUs: 22 SKUs: 2
Walking SKUs: 11 SKUs: 12
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14. Prices and the cost of offering breath
and depth of merchandise and CHAPTER 2
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• Stocking a deep and broad assortment (like
EMS) is costly for retailers.
Many SKUs
Because the retailer must have backup stock for each SKU
in addition to holding the inventory
Inventory Investment Cost
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15. Prices and the cost of offering breath
and depth of merchandise and CHAPTER 2
1
• Stocking a deep and broad assortment (like
EMS) is costly for retailers.
Many SKUs
Because the retailer must have backup stock for each SKU
in addition to holding the inventory
Inventory Investment Cost
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16. Types of Merchandise Retailers
CHAPTER 2
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Food Retailers General Merchandise Retailers
Department Stores
Specialty Stores
Mom and Pop Stores Discount Stores
Convenience Stores
Category Specialists
Supermarkets
Supercenters Off-Price Retailers
Warehouse Clubs
Value Retailers
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17. Sales and growth rate for retail
sectors CHAPTER 2
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18. Food Retailers
CHAPTER 2
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• Channel preference for food shopping channel
where grocery purchasers do most of their
food shopping
• Supermarkets
• Supercenters
• Warehouse Clubs
• Convenience Stores
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19. Characteristics of Food Retailers
CHAPTER 2
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20. 2-18
Supermarkets
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21. 2-19
Vons
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22. Supermarkets
CHAPTER 2
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• Conventional supermarkets
• 30,000 SKU
• Limited assortment
supermarkets (extreme value
food retailers)
• 2000 SKU
• Offer one or two brands and sizes
• Designed to maximize efficiency
and reduce costs
• Offer merchandise at 40-60%
lower prices than conventional
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23. 2-21
ALDI: German’s Wal-Mart
CHAPTER 2
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ALDI provides quality merchandise at low prices by reducing its
assortment in order to control store operating expenses
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24. 2-22
Walmart No, Aldi Yes?
CHAPTER 2
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25. ALDI’s Strategy
CHAPTER 2
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8,500 worldwide, including 1000 stores in 26 US states
90 percent of population in Germany shop at Aldi
Cheap..
Only two brands of toilet paper and one brand of pickles
 STRATEGY:
Stores sell less products
ALDI exclusive label
High quality of products at cheaper prices
 HOW?
Strong control over quality and price
Simplify shipping and handling
Reduce labor costs by keeping limited store staff, etc.
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26. 2-24
Save-A-Lot
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27. 2-25
Save-A-Lot
CHAPTER 2
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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.
Used by permission of Save-A-Lot
This allows Save-A-Lot to offer savings
of up to 40% compared to
conventional grocery stores – without
asking shoppers to sacrifice quality.
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28. Trends in Supermarket Retailing
CHAPTER 2
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• Competition from Discount Stores
Efficient
Lower Costs Lower Prices
Distribution
• Changing Consumption Patterns
Time Pressure Eating Out More Meal Solutions
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29. Conventional
Supermarket Survival Pack CHAPTER 2
1
• Emphasize Fresh
Perishables
• Wegmans
• Target health conscious and
ethnic consumers
• Offer more private label
Chef-crafted meals on the go at EatZi’s brands
• Provide a better in-store
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30. Supercenters and Warehouse
Clubs CHAPTER 2
1
Supercenters Warehouse Clubs
• The fastest growing retail • Offer a limited and irregular
category assortment of food and
• Large stores (185,000 general merchandise with
square feet) that combine a little service at low prices
supermarket with a full-line • Use low-locations,
discount store inexpensive store design,
• One-stop shopping little customer service
experience • Low inventory holding costs
by carrying a limited
assortment of fast selling
items
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31. Convenience Store
CHAPTER 2
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• Tailors assortments to local
market
• Makes more convenient to
shop
• Offers fresh, healthy food
• Fast, casual restaurants
• Financial services available
• Opening smaller stores closer
to consumers (like airports)
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32. Three Tiers of Department
Stores CHAPTER 2
1
• First Tier: Upscale, high
fashion chains with
exclusive designer
merchandise and excellent
customer service
• Nordstrom, Neiman Marcus,
Saks
• Second Tier: Retailers sell
more modestly priced
merchandise with less
customer service
• Macy’s
• Third Tier: Value oriented Rob Melnychuk/Getty Images
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33. Characteristics of
General Merchandise Retailers CHAPTER 2
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34. Issues in Department Store
Retailing CHAPTER 2
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• Competition
• 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
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35. Department Stores:
What To Do With an Eroding CHAPTER 2
1
• Department stores
are:
• attempting to increase
the amount of
exclusive merchandise
they sell Royalty-Free/CORBIS
• undertaking marketing
campaigns to develop
strong images for their
stores and brands
• building better
relationships with their
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36. Issues in Full-line Discount Store
Retailing CHAPTER 2
1
• Only Big Left
• Wal-Mart, Target
• Wal-Mart’s Dominance
• Differentiate Strategy
• Wal-Mart = Low Price and Good McGraw-Hill Companies, Inc.
Gary He, photographer
value
• Target = More Fashionable
Apparel
• Competition from Category
Specialists
• Toys-R-Us, Best Buy, Sports 2-

37. Issues in Specialty Store
Retailing CHAPTER 2
1
• Mall-Based Apparel
Retailers
• Decline in Mall Shopping
and Apparel Sales
• Lack of New Fashions
• Less Interest in Fashion
• Increased Price
Consciousness
• Lifestyle Formats
• Abercrombie and Fitch
• Victoria’s Secrets
McGraw-Hill Companies, Inc./Andrew Resek, Photographer
• Manufacturers opening
their own stores 2-

38. Specialty Store Retailers
CHAPTER 2
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McGraw-Hill Companies, Inc./Andrew Resek, Photographer
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39. CHAPTER 2
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• Consolidation
• Walgreens, CVS, Rite-Aid
• Competition
• 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
• Improved systems provide
personalized service
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40. Issues in Drug Store Retailing
CHAPTER 2
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• Consolidation
• Walgreens, CVS, Rite-Aid
• Competition
• 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
• Improved systems provide
personalized service
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41. Category Specialists
CHAPTER 2
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• Deep and Narrow
Assortments
• Destination Stores
• Category killers
• Low Price and Service
• Wholesaling to
Business Customers
and Retailing to
Consumers Bass Pro Shops
• Incredible Growth
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42. Category Specialists
CHAPTER 2
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Sephora, France’s leading perfume/
cosmetic chain LVMH’s division
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43. CHAPTER 2
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• 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
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44. Issues in Extreme Value Retailing
CHAPTER 2
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• 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
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45. Off-Price Retailers
CHAPTER 2
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• Close-out retailers
• Offer an inconsistent assortment of brand
name merchandise at low prices
• TJX Companies (which operates T.J.Maxx, Marshalls,
Winners, HomeGoods, TKMaxx, AJWright, and
HomeSense),
• Ross Stores,
• Burlington Coat Factory,
• Big Lots.
• http://www.Overstock.com and http://
www.Bluefly.com
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46. Services Retailing
CHAPTER 2
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• Intangibility
• Problems in Evaluating Service Quality
• Performance of Service Provider
• Simultaneous Production and Delivery
• Importance of Service Provider
• Perishability
• No Inventory, Must Fill Capacity
• Inconsistency of the Offering
• Importance of HR Management
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47. Examples of Service Retailers
CHAPTER 2
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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 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
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48. Merchandise/Service Continuum
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49. Types of Retail Ownership
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• Independent,
Single Store
Establishments
• Wholesale-
sponsored voluntary
group
• Corporate Retail
Chains
• Franchises (c) Brand X Pictures/PunchStock
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50. Retailers Using
Franchise Business Model CHAPTER 2
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51. Franchising
CHAPTER 2
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• 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
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52. Reasons for Franchising Growth
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53. Reasons for Franchising Failure
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54. Franchisor Positions
in the Marketing Channel CHAPTER 2
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55. Franchisor Benefits
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56. Franchisee Benefits
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57. Franchisor Advantages/
Disadvantages CHAPTER 2
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58. Franchisee Advantages/
Disadvantages CHAPTER 2
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59. Franchising Trends
for the New Millennium CHAPTER 2
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60. Keywords
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• assortment The number of SKUs within a merchandise category. Also called
depth of merchandise.
• breadth of merchandise The number of different merchandise categories within
a store or department.
• category killer A discount retailer that offers a narrow but deep assortment of
merchandise in a category and thus dominates the category from the customers’
perspective. Also called a category specialist.
• category specialist A discount retailer that offers a narrow but deep assortment
of merchandise in a category and thus dominates the category from the
customers’ perspective. Also called a category killer.
• convenience store A store that provides a limited variety and assortment of
merchandise at a convenient location in a 2,000- to 3,000-square-foot store with
speedy checkout.
• conventional supermarket A self-service food store that offers groceries, meat,
and produce with limited sales of nonfood items, such as health and beauty aids
and general merchandise.
• department store A retailer that carries a wide variety and deep assortment,
offers considerable customer services, and is organized into separate
departments for displaying merchandise. 2-

61. Keywords
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• depth of merchandise The number of SKUs within a merchandise category. Also
called depth of merchandise.
• discount store A general merchandise retailer that offers a wide variety of
merchandise, limited service, and low prices.
• franchising A contractual agreement between a franchisor and a franchisee that
allows the franchisee to operate a retail outlet using a name and format developed
and supported by the franchisor.
• full-line discount store Retailers that offer a broad variety of merchandise,
limited service, and low prices.
• hypermarket Large (100,000–300,000 square feet) combination food (60–70
percent) and general merchandise (30–40 percent) retailer.
• North American Industry Classification System (NAICS) Classification of retail
firms into a hierarchical set of six-digit codes based on the types of products and
services they produce and sell.
• off-price retailer A retailer that offers an inconsistent assortment of brand-
name, fashion-oriented soft goods at low prices.
• specialty store A type of store concentrating on a limited number of
complementary merchandise categories and providing a high level of service.
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62. Keywords
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• stock-keeping unit (SKU) The smallest unit available for keeping inventory
control. In soft goods merchandise, an SKU usually means a size, color, and style.
• supercenter Large store (150,000 to 220,000 square feet) combining a discount
store with a supermarket.
• supermarket 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.
• value retailers Small, full-line discount stores that offer a limited merchandise
assortment at very low prices.
• variety The number of different merchandise categories within a store or
department.
• warehouse club A retailer that offers a limited assortment of food and general
merchandise with little service and low prices to ultimate consumers and small
businesses.
• wholesale-sponsored voluntary cooperative group An organization operated
by a wholesaler offering a merchandising program to small, independent retailers
on a voluntary basis.
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