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Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall
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Chapter Objectives
Identify ways how retail institutions are classified.
Describe retail institutions characterized by ownership. Describe definition of classification by strategy mix. Describe the wheel of retailing, scrambled
merchandising and retail life cycle. Examine characteristics of institutions with store-based strategy mixes. Contrast the service-based retailing with goods-based retailing.
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Classifications of Retailers
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Forms of Ownership
1. Independent 2. Chain
3. Franchise
4. Leased department 5. Vertical marketing system 6. Consumer cooperative
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1. Independent Retailers
2.2 million independent U.S. retailers Account for one-third of total store sales 70% of independents operated by owners and their families Why so many?
Ease of entry
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Disadvantages Lack of bargaining power with suppliers Lack of economies of scale Labor intensive operations less
computerization
Over-dependence on
2. Chain Retailers
Operate multiple outlets under common ownership Engage in some level of centralized or coordinated purchasing and decision making In the U.S., there are roughly 110,000 retail chains operating about 900,000
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Disadvantages
Limited flexibility Higher investment
by computerization, warehouse sharing, and other functions Defined management philosophy Considerable efforts in long-run planning
Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall
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3. Franchising
Franchise is a contractual agreement between a franchisor and a retail franchisee that allows the franchisee to conduct business under an established name and according to a given pattern
of business Franchisee pays an initial fee and a monthly percentage of gross sales in exchange for the exclusive rights to sell goods and services in an area
Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall
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Franchise Formats
Product/ Trademark Business Format franchisee acquires franchisee receives the identity of a assistance: location, franchisor by agreeing quality control, to sell products accounting systems, and/or operate under startup practices, the franchisor name management training franchisee operates common for autonomously restaurants, real 2/3 of retail estate franchising sales
Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall
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Financial resources
Strong credit Ideal Franchisee Customer and employee focus Willingness to complete training
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Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall
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and grants franchises to individual retailers Cooperative: A group of retailers sets up a franchise system and shares the ownership and operations of a wholesaling organization
Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall
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Disadvantages over-saturation could occur franchisors may overstate potential contractual confinement agreements may be cancelled or voided royalties are based on sales, not profits
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Potential Problems potential for harm to reputation lack of uniformity may affect customer loyalty ineffective franchised units may damage resale value, profitability potential limits to franchisor rules
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4. Leased Departments
A leased department is a department in a retail store that is rented to an outside party
The proprietor is responsible for all aspects of its
business and pays a percentage of sales as rent The department store sets operating restrictions to ensure consistency and coordination Examples ?
Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall
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Potential Pitfalls lessees may negate store image procedures may conflict with department store problems may be blamed on department store rather than lessee
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Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall
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6. Consumer Cooperatives
Retail firm owned by customer members
EXAMPLES: Koperasi polis
How/why started?
Advantages/Disadvantages
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www.skm.gov.my
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Malaysian Cooperatives
up to 31 December 2010. The total number
of registered co-operatives has increased from 7,215 in 2009 to 8,146 in 2010, an increase of 14.3 per cent with membership of 6.6 million.
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Destination Retailer
A destination store is a retail operation that consumers find attractive for particular reasons and are therefore willing to make a special trip solely for the purpose of shopping at that location. Typically, destination stores are unique in certain respects in order to entice shoppers to come to them, even if the distance or location is not convenient.
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efficient Must be upscale Must be convenient Should offer a dominant assortment Should offer superior customer service Must be innovative or exclusive
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Wheel of retailing
A better known theory of retailing wheel of
Wheel of retailing-contd..
They may move to better up market locations, start carrying higher quality products or add services and ultimately emerge as a high cost price service retailer. 4. By this time newer competitors as low price, low margin, low status emerge and these competitors too follow the same evolutionary process. 5. The wheel keeps on turning and department stories, supermarkets, and mass merchandise went through this cycles.
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consciousness Beware of the dangers in upgrading target markets Old segment gets sticker shock and new segment does not accept retailers revised positioning Do not create opening for new cost-conscious retailer to emerge Employ customer benefit costing to weigh the cost and benefits of specific service upgrades Use unbundled pricing to separately charge for select services such as delivery, installation etc.
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Scrambled Merchandising
Scrambled merchandising occurs when a retailer adds goods and services that may be unrelated to each other and to the firms
original business
Scrambled Merchandising increases the intertype competition which is competition between the retailers who sell similar particular merchandise while using different formats, such as discount and department stores.
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size, and product offerings Using secondary locations Placing stores in smaller communities Using inexpensive construction materials Using plainer fixtures and displays Buying refurbished equipment Joining cooperative buying and advertising Creatively financing inventories
Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall
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General Merchandise
Specialty store Traditional department Full-line discount store Variety store Off-price chain Factory outlet Membership club Flea market
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supermarket Food-based superstore Combination store Box (limited-line) store Warehouse store
Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall
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Promotion: Moderate
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Prices: Competitive
Atmosphere and Services: Average Promotion: Heavy use of newspapers, flyers, and coupons
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Merchandise: Full assortment plus health and beauty aids and general merchandise
Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall
Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall
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Prices: Competitive
Atmosphere and Services: Average Promotion: Heavy use of newspapers, flyers
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Merchandise: Full assortment plus health and beauty aids and general merchandise
Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall
Box store
Is a retail store that sells a limited assortment of basic grocery items, often, as at a warehouse, displayed in their original cartons in order to lower costs and prices.
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Merchandise: Low width and depth of assortment; few perishables; few national brands
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Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall
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Specialty store
A store that concentrates on selling one good or service line such as young women's apparel
It usually carries a narrow but deep assortment of the chosen category and tailors the strategy to the given market segment Apparel, personal care , auto supply, home furnishings, electronic books etc
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Merchandise: Very narrow width and extensive depth of assortment; average to good quality
Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall
Category killer
A large retail chain store that is dominant in
its product category. This type of store generally offers an extensive selection of merchandise at prices so low that smaller stores cannot compete. Also known as Big Box store
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Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall
Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall
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other retail stores. They acquire out-of-season products and distressed merchandise from other retailers, including bankruptcies, and from manufacturers having production overruns. Off-price stores can threaten retailers carrying name-brand merchandise at full retail prices.
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Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall
Promotion: Little
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Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall
Merchandise: Extensive width and poor depth of assortment; low continuity; variable quality
Promotion: Limited
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Thank You
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