Chap002 (Version 2)

Chapter 2
Types of Retailers
McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
Questions
■ 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?
2-2
General Trends in Retailing
■ New Types of Retailers

■ Increased Concentration
■ Globalization
■ Growth In Services Retailer
■ Growth in Use of Multi-Channel Retailing by
Traditional Retailers
■ Increase Use of technology
2-3
Types of Retailers
■ Retailers Use Different Retail Mixes

-merchandise: variety (breadth) /
assortment (depth)
-services
-store design, visual merchandising
-location
-pricing
2-4
New Types of Retailers
■ Category
Specialists
-PETsMART
-Bed, Bath and
Beyond
■ CarMax and
Auto Nation
■ Netflix, eBay,
Priceline,
Travelocity
2-5
Bag Borrow or Steal
2-6
Different Retail Mixes
■ Merchandise: variety (breadth)

■ Assortment (depth)
■ Services
■ Store design, visual merchandising
■ Location
■ Pricing
2-7
Types of Merchandise Retailers
Food Retailers General Merchandise Retailers
Mom and Pop Stores Department Stores

Convenience Stores Specialty Stores
Supermarkets Discount Stores
Supercenters Category Specialists
Off-Price Retailers
Warehouse Clubs
Value Retailers
2-8
North American lndustry Classification
System Codes (NAICS)
■ The US Census Bureau uses a classification

scheme to collect data on business activity in
the US, Canada, and Mexico. It classifies all
business into 6-digit business.
■ 44, 45 => Merchandise
■ 448 => clothing and accessories
■ 4481=> clothing
■ 4482=> shoes
■ 44811=> men’s clothing
■ 44812=> women’s clothing
2-9
Merchandise Offering
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)
2-10
Services offered
Retailers differ in the services

they offer to customers
 Banks offer deposits,
investments plans, loans and
mortgages, interests rates etc.
 Wal-Mart: doesn’t provide any

services
2-11
Prices and the cost of offering breath and
depth of merchandise and services
Stocking a deep and broad assortment 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
2-12
Food Retailers
Channel preference for food shopping

channel where grocery purchasers do most
of their food shopping
■ Supermarkets
■ Supercenters
■ Warehouse
Clubs
■ Convenience
Stores
2-13
Supermarkets
■ 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 supermarkets
 Save-A-Lot, ALDI (German’s Wal-Mart)
2-14
ALDI: German’s Wal-Mart
ALDI provides quality merchandise at low prices by reducing its

assortment in order to control store operating expenses
2-15
Save-A-Lot
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.
2-16
Trends in Supermarket Retailing
Competition from Discount Stores
Efficient
Lower Costs Lower Prices
Distribution
Changing Consumption Patterns
Time Pressure Eating Out More Meal Solutions
2-17
Conventional Supermarket Survival Pack
■ Emphasize Fresh Perishables

 Wegmans
■ Target health conscious and
ethnic consumers
■ Provide a better in-store
experience
■ Offer more private label brands
Chef-crafted meals on the go at EatZi’s
2-18
Convenience Store
■ Tailors assortments to local market, e.g. Circle K

in Ocean neighborhood
■ Makes more convenient to shop
■ Offers fresh, healthy food
■ Fast, casual restaurants
■ Financial services available, e.g. ATM machines
■ Opening smaller stores closer to consumers, try
to reach to every neighborhood and contact
points, e.g. airport, schools
2-19
Question to start the class
■ If you are thinking to purchase a birthday gift to

your friend, what kind of retailers would you
choose to go?
■ Department store
■ Discount Store
■ Specialty store
■ Category Killer
■ Drug store
■ Home Improvement Center ……Or
■ Buying On line?
2-20
Types of General Merchandise Retailers
■ Department Stores
■ Specialty Stores
■ Category Specialists
■ Home Improvement Centers
■ Discount Stores
■ Drugstores
■ Extreme Value Retailers
2-21
Three Tiers of Department Stores
■ First Tier: Upscale, high fashion chains

with exclusive designer merchandise and
excellent customer service
Landmark, Four Seasons
■ Second Tier: Retailers sell more modestly

priced merchandise with less customer
service
New Yaohan
■ Third Tier: Value oriented caters to more

price conscious customer Rob Melnychuk/Getty Images
Watsons, Mannings
2-22
Department Stores:
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 Royalty-Free/CORBIS
■ undertaking marketing campaigns

to develop strong images for their
stores and brands
■ building better relationships with

their key customers
2-23
Full-line discount stores
■ A retailer that offers a broad variety of

merchandise, limited service and low prices.
They offer both private and national brands.
■ Wal-Mart is converting from discount stores to

supercenters in order to fight off competition.
■ Target is offering more fashionable apparels at

low prices with a pleasant atmosphere.
2-24
Issues in Specialty Store Retailing
■ Limited merchandise with deep

assortment
■ Specific market segments
■ Professional associate expertise
■ Zara and H&M (fast fashion)
■ Cheap and chic offering new, fresh
merchandise 2-3 times per week
McGraw-Hill Companies, Inc./Andrew Resek, Photographer
2-25
Specialty Store Retailers
McGraw-Hill Companies, Inc./Andrew Resek, Photographer
2-26
Drug stores
■ On Special stores that concentrate on health

and personal merchandise
■ Aging population requires more prescription
■ Ways to survive:
■ Extend to wider assortment of merchandise,
more frequent purchase food items, drive-
through windows for picking up prescriptions,
offer personal services by pharmacists
2-27
Category Specialists
■ Deep and Narrow

Assortments of a category,
Destination Stores
■ Category killers
■ Low Price and self-Service
■ Dominance allows low
prices and buying benefits
■ Wholesaling to Business
Customers and Retailing to
Consumers
■ Incredible Growth Bass Pro Shops
2-28
Category Specialists
Sephora,
France’s leading perfume/cosmetic chain
LVMH’s division
2-29
Category Specialists:
Home Improvement Centers
Home Depot and Lowes act as both:
Retailer and Wholesaler
Consumer Business
2-30
Home Improvement Centers
■ Displayed in a warehouse
atmosphere
■ Customer Service: How to
select and how to use
merchandise
■ Competition focuses on price,
effort to differentiate and
services provided
Ryan McVay/Getty Images
2-31
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
2-32
Types of Non-store Retailers
2-33
Issues in Vending Machine Retailing
■ Automatic Merchandising
 About $25 billion worth of convenience goods are sold to Americans through 4.7 million
vending machines
■ Sales growth has been declining due to higher prices and healthier eating habits
(sodas, candy and snacks)
■ New technology may help sales growth, in locations where people like to stay
longer e.g.
■ Trend of placing machines in captive consumer locations like DVD rentals,
games station
2-34

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Chapter 2

■ What trends shape today’s retailers?

■ New Types of Retailers

■ Retailers Use Different Retail Mixes

■ Merchandise: variety (breadth)

Food Retailers General Merchandise Retailers

Mom and Pop Stores Department Stores

■ The US Census Bureau uses a classification

Variety (breadth of merchandise): wide vs. narrow

Assortment (depth of merchandise): deep vs. shallow

Retailers differ in the services

 Wal-Mart: doesn’t provide any

Stocking a deep and broad assortment is costly for

Inventory Investment Cost

Channel preference for food shopping

ALDI provides quality merchandise at low prices by reducing its

Save-A-Lot’s limited assortment format

The company carries high quality

Used by permission of Save-A-Lot

Competition from Discount Stores

Changing Consumption Patterns

Time Pressure Eating Out More Meal Solutions

■ Emphasize Fresh Perishables

■ Tailors assortments to local market, e.g. Circle K

■ If you are thinking to purchase a birthday gift to

■ First Tier: Upscale, high fashion chains

■ Second Tier: Retailers sell more modestly

■ Third Tier: Value oriented caters to more

To deal with an eroding market

Department stores are:

■ attempting to increase the amount

■ undertaking marketing campaigns

■ building better relationships with

■ A retailer that offers a broad variety of

■ Wal-Mart is converting from discount stores to

■ Target is offering more fashionable apparels at

■ Limited merchandise with deep

McGraw-Hill Companies, Inc./Andrew Resek, Photographer

■ On Special stores that concentrate on health

■ Deep and Narrow

Home Depot and Lowes act as both:

Retailer and Wholesaler

■ Focuses on Lower Income Consumers

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