TYPES OF RETAILERS

TYPES OF RETAILERS

Over time, different types of retailers have emerged and prospered because they have attracted and maintained a significant customer base.

FOOD RETAILERS

Supermarkets Supercenters Warehouse Clubs Convenience Stores Box(Limited-Line) Store

SUPERMARKETS

A Conventional supermarket is a self-serviced food store offering groceries, meat, and produce with limited sales of non food items, such as health and beauty aids and general merchandise.

Whereas conventional supermarkets carry about 30,000 SKUs, Limited assortment supermarkets, also called extreme value food retailers, only stock 1,250 SKUs.

Rather than carrying twenty brands of laundry detergent, limited assortment stores offer one or two brands and sizes, one of which is a store brand. Stores are designed to maximize efficiency and reduce costs.

SUPERCENTERS

The fastest growing retail category, are large stores that combine a supermarket with a full-line discount store.

By offering board assortments of grocery and general merchandise products under one roof, super centers provide a one-stop shopping experience.

Hypermarkets: are also large combination food and general merchandise stores. Hypermarkets typically stock fewer SKUs than supercenters - between 40,000 and 60,000 items ranging from groceries, hardware, and sports equipment to furniture and appliance to computers and electronics.

WAREHOUSE CLUBS Warehouse clubs are 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.

Warehouse clubs are large (at least 100,000-150,000 square feet) and typically located in low-rent districts. They have simple interiors and concrete floors.

Warehouse clubs can offer low prices because they use low-cost locations, inexpensive store designs, and little customer service and keep inventory holding costs low by carrying a limited assortment of fast selling items.

Most warehouse clubs have two types of members: wholesale members who own small businesses and individual members who purchase for their own use.

CONVENIENCE STORES Convenience stores provide a limited variety

and assortment of merchandise at a convenient location in 2,000- 3,000 square foot stores with speedy checkout.

They are the modern version of the neighborhood mom-and pop grocery/general store. Customers can shop very quickly.

Due to their small size and high sales, convenience stores typically receive deliveries every day.

Convenience stores only offer limited assortments and variety, and they charge higher prices than supermarkets.

BOX(LIMITED-LINE) STORE

The Box (Limited-Line) Store is a food based discounter that focuses on a small selection of items, moderate hours of operation (compared to other supermarkets), few additional services, and limited manufacturer brands.

There stock usually less items, few or no refrigerated perishables, and few sizes and brands per item. Items are displayed in cut cases. Customers do their own bagging.

Box stores depend on low –priced private-label brands. They aim to price merchandise 20 to 30 percent below supermarkets.

GENERAL MERCHANDISE RETAILERS

Department stores Full-line discount stores Specialty stores

Drug storesCategory SpecialistsHome improvement centers

Off-price retailers Extreme value retailers Factory Outlet Stores Hypermarkets Variety Store Flea Market

DEPARTMENT STORES Department stores are retailers that carry a

broad variety and deep assortment, offer customer services, and organize their stores into distinctly separate departments for displaying merchandise.

Traditionally, department stores attracted customers by offering a pleasing ambience, attentive service, and a wide variety of merchandise under one roof.

They sold both soft goods (apparel and bedding) and hard goods (appliances, furniture, and consumer electronics).

But now most department stores focus almost exclusively on soft goods.

FULL-LINE DISCOUNT STORES

Full-line discount stores are retailers that offer a broad variety of merchandise, limited service, and low prices.

Discount stores offer both private and national label, but these brands are typically less fashion oriented than the brands in department stores.

Target is becoming one of the most successful retailers in terms of sales growth and profitability. Target succeeds because its stores offer fashionable merchandise at low prices in a pleasant shopping environment.

SPECIALTY STORES

Specialty stores concentrate on a limited number of complementary merchandise categories and provide a high level of service in relatively small stores.

Specialty stores tailor their retail strategy toward a very specific market segment by offering deep but narrow assortments and sales associate expertise.

Because specialty retailers focus on specific market segments, they are vulnerable to shifts in consumer tastes and preferences.

DRUGSTORES

Drugstores are specialty stores that concentrate on health and personal grooming merchandise.

Drugstores, particularly the national chains, are experiencing sustained sales growth because the aging population requires more prescription drugs.

Drugstores are also being squeezed by considerable competition from pharmacies in discount stores and supermarkets, as well as from prescription mail-order retailers.

Drugstore retailers are using systems to allow pharmacists time to provide personalized service.

CATEGORY SPECIALISTS

Are big box discount stores that offer a narrow but deep assortment of merchandise.

These retailers are basically discount specialty stores.

Most category specialists use a self-service approach, but some specialists in consumer durables offer assistance to customers.

HOME IMPROVEMENT CENTERS

One of the largest and most successful types of category specialist is the home improvement center.

A home improvement center is a category specialist offering equipment and material used by do-it-yourselfers and contractors to make home improvements.

OFF-PRICE RETAILERS Offer an inconsistent assortment of brand

name merchandise at low prices. Off-price retailers sell brand name and even

designer label merchandise at low prices through their unique buying and merchandising practices.

Most merchandise is bought opportunistically from manufacturers or other retailers with excess inventory at the end of the season.

Due to this pattern of opportunistic buying, customers can’t be confident that the same type of merchandise will be in stock each time they visit the store.

EXTREME VALUE RETAILERS Are small, full-line discount stores that offer a

limited merchandise assortment at very low prices.

Extreme value retailers are one of the fastest growing segments in retailing. Like limited assortment food retailers, extreme value full-line retailers reduce costs and maintain low prices by offering a limited assortment and operating in low-rent, urban, or rural locations.

FACTORY OUTLET STORES Outlet Stores are off-price retailers owned by

manufacturers or by department or specialty store chains and are frequently referred to as factory outlets.

A factory outlet is a manufacturer–owned store selling manufacturer closeouts, discontinued merchandise, irregulars, cancelled orders, and sometimes, in season, first quality merchandise.

They closely resemble shopping centers, both in terms of size, layout, and in carefully controlled tenant mix, with manufacturers operating separate units on a single co-coordinated site.

HYPERMARKETS A hypermarket is a very large retail store

offering low prices. It combines a discount store and superstore

food retailer in one warehouse like building. Hypermarkets can be up to 300,000 square

feet and stock over 50,000 different items. All hypermarkets are based on three

concepts of: one stop shopping, ample free parking and a discount pricing strategy.

VARIETY STORE

A variety store handles a wide assortment of inexpensive and popularly priced goods and services, such as stationary, gift items, women’s accessories, health and beauty aids, light hardware, toys, house ware and confectionery items.

They do not carry full product lines, may not be departmentalized and do not deliver products.

Transactions are often on a cash basis. There are often displays and few salespeople.

FLEA MARKET A flea market has many retail vendors offering a

range of products at discount prices in plain surroundings.

It is rooted in the centuries old tradition of street selling -shoppers touch, sample and haggle over the prices of items.

Price-conscious consumers who find that other retail formats have upgraded merchandise and customer service or raised prices frequent them.

Many flea markets are located in nontraditional sites not normally associated with retailing: racetracks, stadiums and arenas.

NON STORE RETAILERS Types of retailers that

operate primarily through non-store channels

ELECTRONIC RETAILERS

Electronic Retailing (also called e-tailing, online retailing, and Internet retailing) is a retail format in which the retailers communicate with customers and offer products and service for sale over the Internet.

Internet continues to provide opportunities for entrepreneurs in the retail industry, it is now primarily used by traditional retailers as a tool to complement their store and catalog offerings, grow their revenues, and provide more value for their customers.

Most of the retailers that sell merchandise exclusively over the Internet target niche markets – markets that are so small and dispersed that they cannot be economically serviced by stores.

CATALOG AND DIRECT-MAIL RETAILERS

Catalog retailing is a non-store retail format in which the retail offerings are communicated through a catalog, whereas direct-mail retailers communicate with their customers using letters and brochures.

In 2003, $125 billion of merchandise and services were sold through catalogs, and over 17 billion catalogs were distributed in the United States.

The merchandise categories with the greatest catalog sales are apparel, gifts, books, and home décor.

DIRECT SELLING Direct selling is a retail format in which

salespeople, frequently independent businesspeople, contact customers directly in a convenient location, either at the customer’s home or at work; demonstrate merchandise benefits and/or explain a service; take an order; and deliver the merchandise or perform the service.

Direct selling is a highly interactive form of retailing in which considerable information is conveyed to customers through face-to face discussions with salespeople.

TELEVISION HOME SHOPPING

Television home shopping is a retail format in which customers watch a TV program that demonstrates merchandise and then place orders for the merchandise by telephone.

The three forms of electronic home shopping retailing are o Cable channels dedicated to television

shopping o Infomercials o Direct-response advertising

VENDING MACHINE RETAILING

Vending machine retailing is a non-store format in which merchandise or services are stored in a machine and dispensed to customers when they deposit cash or use a credit card.

Vending machines are placed at convenience, high-traffic locations, such as in the workplace or on university campuses, and primarily contain snacks and drinks.

OWNERSHIP BASED

Independent, Single-Store Establishments

Corporate Retail Chains Franchising Leased Department Consumer Co-operatives

INDEPENDENT, SINGLE-STORE ESTABLISHMENTS

Retailing is one of the few sectors in our economy in which entrepreneurial activity is extensive.

Many of these retail start-ups are owner managed, which means management has direct contact with customers and can respond quickly to their needs.

Small retailers are also very flexible and can therefore react quickly to market changes and customer needs.

CONT.

To better compete against corporate chains, some independent retailers join a wholesale-sponsored voluntary cooperative group, which is an organization operated by a wholesaler offering a merchandising program to small, independent retailers on a voluntary basis.

In addition to buying, warehousing, and distribution, these groups offer members services such as advice on store design, and layout, site selection, bookkeeping and inventory management systems, and employee training programs.

CORPORATE RETAIL CHAINS

A retail chain is a company that operates multiple retail units under common ownership and usually has centralized decision making for defining and implementing its strategy.

FRANCHISING Franchising is 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.

In a franchise contract, the franchisee pays a lump sum plus a royalty on all sales for the right to operate a store in a specific location. The franchisee also agrees to operate the outlet in accordance with procedures prescribed by the franchisor.

LEASED DEPARTMENT A Leased Department is a department in a

retail store rented generally by a manufacturer. The lessee is responsible for all aspects of business and pays the store a rent.

The store may impose operating restrictions for the leased department to ensure the overall consistency.

The leased departments choose to operate in categories that are generally on the fringe of the store’s major product lines, such as in-store beauty salons, banks, photographic studios and food courts.

CONSUMER CO-OPERATIVES

A Consumer Cooperative is a retail firm in which a group of consumers invest in the enterprise. The officers are elected.

Consumer-members share the profits or savings that accrue. Such retailers are many in number but small in size and are most popular in food retailing.

They are started mainly to guard against the malpractice that many retailers indulge in and either charge higher prices or offer inconsistent quality of merchandise.