RETAIL MANAGEMENT

(chapter 2)
I. Retailer Characteristics

Retailer is a wide range based in our economy, from a small vendor to big corporations. Aim
with the same goal to effectively satisfies a group of customers as an essential stakeholder in
marketing.
The most basic characteristics used to describe different types of retailers is the retail mix,
the elements used by retailers to satisfy customers’ needs

Types of Retailers

Offers unique benefits, so consumers patronize different retail types depend on different needs.
As consumer needs and competition have change, new retail formats have been created and
continue to evolve.
When this new format emerges and prosper, it can create attraction to the competitors.

NAICS

Stands for the North American Industry Classification System, a classification scheme
developed by the US, Canada, and Mexico, for which to collects data on business activity in
each country.

Hierarchical 6-digit Code

A code that based on the type of products and services it produces and sells.
The first two digits identify the firm’s business sector,
and the remaining four digits identify various subsectors.
EXAMPLE TABLE:

Food and Women’s

Beverage Stores Clothing Stores
Electronics and Clothing
Appliances accessories
Stores stores
Clothing and Clothing Stores Other Clothing
Accessories Store Stores
General Shoe Stores Shoe Stores
Merchandise
Stores
Health and Jewelry and Jewelry Stores
Personal Care Luggage
Stores
Furniture and Luggage and
Home Furnishing Leather Goods
Stores

Variety and Assortment

Variety represents the number of merchandise categories a retailer offers.

Assortment is the number of different items in a merchandise category. Variety is often
referred to as the breadth of merchandise carried by a retailer.

SKU (stock keeping unit)

Is name called of different items of merchandise, that separated according to their brands and
companies and etc.

Prices and the Cost of Offering Breadth and Depth of Merchandise and Services

Services attract customers to the retailer, but they’re also costly. More salespeople are needed
to provide information and assist customers, alter merchandise to meet customers needs, and
demonstrate merchandise.
To make a profit, retailers that offer broader and deeper assortments and services need to
charge higher prices.
A critical retail decision involves the trade-off between the costs and benefits of maintaining
additional inventory or providing additional services.
II. FOOD RETAILERS

The food retailing landscape is changing dramatically. Twenty years ago, consumers
purchased food primarily at conventional supermarkets. Now conventional supermarkets
account for only 61% of food sales. The fastest growing segment of the food retail market is
the remaining 39% of food sales made by supercenters, warehouse clubs, convenience
stores, and new concepts such as limited assortment supermarkets.

Supermarkets

A conventional supermarket is a self-service food store offering groceries, meat, and produce
with limited sales of nonfood items, such as health and beauty aids and general merchandise.
Whereas conventional supermarket carries about 30,000 SKUs, limited assortment
supermarkets, also called extreme value food retailers.

Supercenters

The fastest growing retail category, are large stores that combine a supermarket with a full-
line discount store.
Provide a one-stop shopping experience that attract more customers in preferring to drive
farther to shop in markets that offers least selection of goods.

Hypermarkets

A large market for about 100,000-300,000 sq. ft, combination of food and general
merchandise. This type of market typically stock fewer SKUs than supercenters between
40,000- 60,000 items ranging from groceries, hardware, and sports equipment’s to furniture
and appliances to computers and electronics.

Warehouse Clubs

Retailers that offer a limited and irregular assortment of food and general merchandise with
little service at low prices ultimate consumers and small businesses.
Typically located in low- rent districts, have a simple interior and concrete floors.
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
Warehouse clubs have two types of members;
Wholesale members, who own small businesses
Individual members, who purchase for their own use.
 Convenience Stores

Provide a limited variety and assortment of merchandise at a convenient location in 2,000-

3,000 sq. foot stores with speedy checkout. They are the modern version of the neighborhood
mom-and-pop grocery/general store.
Enable consumers to make purchase quickly, without having to search through a large store
and wait in a long checkout line.
Typically receive deliveries every day, due to their small size and high sales store.

III. GENERAL MERCHANDISE RETAILERS

The major types of general merchandise retailers are department stores, full-line discount
stores, specialty stores, category specialists, home improvement centers, off-price retailers,
and extreme value retailers.

Department Stores

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.
Department stores chains can categorize into three tiers;
 First Tier – include upscale, high fashion chains with exclusive designer
merchandise and excellent customer service.
 Second Tier – traditional department stores, in which retailers sell more modesty
priced merchandise with less customer service.
 Third Tier – a value-oriented tier caters to more price- conscious consumers.

Full-Line Discount Stores

Retailers that offer a broad variety of merchandise, limited service, and low prices. Discount
stores offer both private labels and national brands, but these brands are typically less fashion
oriented than the brands in department stores.

Specialty Stores

Concentrate on a limited number of complementary merchandise categories and provide a

high level of service in relatively small stores.
Tailor their retail strategy toward a very specific market segment by offering deep but narrow
assortments and sales associate expertise.
Full-Line Discount Stores

Retailers that offer a broad variety of merchandise, limited service, and low prices. Discount
stores offer both private labels and national brands, but these brands are typically less fashion
oriented than the brands in department stores.

Drugstores

Also known as specialty stores that concentrate on health and personal grooming
merchandise. Experiencing sustainable sales growth because the aging population requires
more prescription drugs.
Although the profit margins for prescription pharmaceuticals are higher than for other drug
merchandise, these margins are shrinking due to government health care policies.

Category Specialists

A 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 aid customers.
By offering a complete assortment in a category at low prices, category specialists can “kill”
a category of merchandise for other retailers and thus are frequently called category killers.

Extreme Value Retailers

Full-line discount stores that offer a limited merchandise assortment at very low prices. Like
limited assortment food retailers, extreme value full-line retailer reduces costs and maintain
low prices by offering a limited assortment and operating in low-rent, urban, or rural
locations.

Off-Price Retailers

Offer an inconsistent assortment of brand name merchandise at low prices, and some off-price
retailers complement their opportunistically bought merchandise with merchandise purchased
at regular wholesale prices.
Two special types of off-price retailers are closeout and outlet stores;
 Closeout Retailers – sell a broad but inconsistent assortment of general merchandise
as well as apparel and soft home goods.
 Outlet Stores – owned by manufactures or department or specialty store chain, and
that usually found in one of the fastest growing types of malls, and allow
manufacturers some control over where their branded merchandise is sold at
discount prices.
IV. NONSTORE RETAILERS

In the preceding sections, we examined retailers whose primary channel is their stores. The
major non-store channels are the Internet, catalogs and direct mail, direct selling, television
home shopping, and vending machines.

Electronic Retailers

Also called as e-tailing, online retailing, and internet retailing, a retail format in which the
retailers communicate with consumers and offer products and services for sale over the
internet.
The prospects for electronic retailing were so bright, especially this generation that using of
electronics gadgets is rampant, that people consider as part of the daily lives.
Continue to grow much faster than retail sales.

Catalog and Direct-Mail Retailers

A non-store retail format in which the retail offering is communicated to a costumer through a
catalog, whereas direct-mail retailers communicate with their costumers using letters and
brochures.

Types of Catalog and Direct-Mail Retailers

1. General Merchandise Catalog Retailers

Offer a broad variety of merchandise in catalogs that are periodically
mailed to their customers.

2. Specialty Catalog Retailers

Focus on specific categories of merchandise, such as fruit, gardening
tools, and seeds and plants

Direct Selling

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 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. However, providing
this high level of information, including extensive demonstrations is costly.
 Television Home Shopping

A retail format in which customers watch a TV program that demonstrate merchandise and
then place orders through telephone or provided contact number.

Three forms of Electronic Home Shopping Retailing

1. Cable Channels – dedicated to television shopping

2. Infomercials – TV programs typically 30mins. Long, that mix entertainment

with product demonstration and then solicit orders placed by mobile or
telephone

3. Direct-response Advertising – includes advertisements on TV and radio that

describe products and provide an opportunity for consumers to order them.

Vending Machine Retailing

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.
Usually placed at convenient, and primarily contain snacks or drinks.
Technological development in vending machine design may result in long-term sales growth.

V. SERVICES RETAILING

Retailer who deal with products that are categorized as services. Many organizations such
as banks, health spas, legal clinics, entertainment firms, and may be involved in hotel
industries, hospitals, restaurants, salons, airlines, movie theater, or colleges.
Service retailing requires the participants to offer quality services to keep and attract new
customers
 DIFFERENCES BETWEEN SERVICES & MERCHANDISE RETAILERS

While service retailers offer simultaneous production and delivery, merchandise retailers
provide separate production and delivery. Merchandise retailers depend on their customers
for tangible goods to earn profit or collect revenue

There are four important differences in the nature of the offering provided by services and
merchandise retailers;
1. Intangibility - the delivered services are non-physical customers
cannot see, touch, of feel. Therefore, the level of appreciation of its
value, attributes, and outcomes are significantly low since they can
only be experienced when they are bought.

2. Simultaneous Production and Consumption – products are typically

made in a factory, stored and sold by a retailer, and then used by
consumers in their homes or consume at the same time.

3. Perishability - the creation and consumption of services are

inseparable, services are perishable. They can’t be saved, stored or
resold, this is contrast to merchandise that can be held in inventory
until a customer is ready to buy it.

4. Inconsistency – products can be produced by machines with very tight

quality control, the service provided with an identical performance to
assured that costumer satisfaction will be acquired

VI. TYPES OF OWNERSHIP

Independent, Single-Store Establishments

Typically rely on their owner-managers capabilities to make the broad range of necessary
retail decisions, and this is more effective in terms of flexibility in reacting quickly to market
changes and customer needs.
.

Corporate Retail Chains

A company that operated multiple retail units under common ownership and usually that
centralized decision making for defining and implementing its strategy. Larger size
corporation having with its broader management base, which people who specialize in specific
retail activities.

Franchising

A contractual agreement between a franchisor and a franchisee that allows the franchise to
operate a retail outlet using a name and format developed and supported by the franchisor.
.