Types Of Retailers Chapter 2 PDF

Because learning changes everything.® Types of Retailers CHAPTER 2 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.  Retailer Characteristics Buying for friend...

Because learning changes everything.® Types of Retailers CHAPTER 2 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.  Retailer Characteristics Buying for friend - Online and deliver to friend’s house Buying for yourself Discount store to buy - Local store to try on inexpensive shirt Specialty store to buy the shirt of your favourite football team © McGraw Hill LLC  How these retailers survive? All these retailers survive and prosper because they satisfy a group of consumers’ needs more effectively than their competitors. As consumers needs and competition change, new retail formats are created and existing formats evolve. Many retailers are broadening their assortments, which means that their offerings overlap and competition is increasing. © McGraw Hill LLC  Basic characteristic to describe the different types of retailers Type of merchandise/services offered Retail mix Variety & assortment of merchandise offered Level of customer service Price of merchandise © McGraw Hill LLC  1. Types of Merchandise The US, Canada & Mexico developed a classification scheme, called North American Industry Classification System (NAICS), to collect data on business activity in each country. 44 & 45 (Merchandise retailers) 71 (arts, entertainment and recreation) 72 (accommodation and food services) © McGraw Hill LLC  NAICS Codes for Retailers © McGraw Hill LLC Source: “North American Industry Classification System (NAICS),” U.S. Census Bureau, www.census.gov/epcd/www/naics.html. 6  Malaysia SSM SSM MSIC 2008 CODE - ROC No Business Code Description (Malay) Description (English) 1 00000 Dormant DORMANT 2 01111e Eksport jagung Export of maize 3 01111i Import jagung Import of maize 4 01111u Eksport dan Import Penanaman jagung Export and Import of maize 5 01112e Eksport tanaman kekacang Export of leguminous crops 6 01112i Import tanaman kekacang Import of leguminous crops 7 01112u Eksport dan Import tanaman kekacang Export and Import of leguminous crops 8 01113e Eksport bijian berminyak Export of oil seeds 9 01113i Import bijian berminyak Import of oil seeds 10 01113u Eksport dan Import bijian berminyak Export and Import of oil seeds 11 01119e Eksport bijirin lain t.t.t.l. Export of other cereals n.e.c. 12 01119i Import bijirin lain t.t.t.l. Import of other cereals n.e.c. 13 01119u Eksport dan Import bijirin lain t.t.t.l. Export and Import of other cereals n.e.c. 14 01120e Eksport padi Export of paddy 15 01120i Import padi Import of paddy 16 01120u Eksport dan Import padi Export and Import of paddy 17 01131e Eksport sayur-sayuran berdaun atau berbatang Export of leafy or stem vegetables 18 01131i Import sayur-sayuran berdaun atau berbatang Import of leafy or stem vegetables 19 01131u Eksport dan Import sayur-sayuran berdaun atau berbatang Export and Import of leafy or stem vegetables 20 01132e Eksport sayur-sayuran berbuah Export of fruits bearing vegetables 21 01132i Import sayur-sayuran berbuah Import of fruits bearing vegetables 22 01132u Eksport dan Import sayur-sayuran berbuah Export and Import of fruits bearing vegetables 23 01133e Eksport tembikai Export of melons 24 01133i Import tembikai Import of melons 25 01133u Eksport dan Import tembikai Export and Import of melons 26 01134e Eksport cendawan dan truffles Export of mushrooms and truffles 27 01134i Import cendawan dan truffles Import of mushrooms and truffles 28 01134u Eksport dan Import cendawan dan truffles Export and Import of mushrooms and truffles 29 01135e Eksport benih sayuran, kecuali benih bit Export of vegetables seeds, except beet seeds 30 01135i Import benih sayuran, kecuali benih bit Import of vegetables seeds, except beet seeds 31 01135u Eksport dan Import benih sayuran, kecuali benih bit Export and Import of vegetables seeds, except beet seeds 32 01136e Eksport sayur-sayuran lain Export of other vegetables 33 01136i Import sayur-sayuran lain Import of other vegetables 34 01136u Eksport dan Import sayur-sayuran lain Export and Import of other vegetables 35 01137e Eksport ubi gula Export of sugar beet © McGraw Hill LLC  2. Variety and Assortment Variety (breadth) No. of merchandise categories a retailer offers Assortment (depth) No. of different items offered in a merchandise category v Variety and assortment also apply to a specific merchandise category rather than entire store. Stock-keeping unit (SKU) Each different item offered in a merchandise category © McGraw Hill LLC Sorbis/Shutterstock 8  Variety – Types of Milk © McGraw Hill LLC 9  Assortment – Cow Milk © McGraw Hill LLC 10  Variety and Assortment 7-Eleven: Variety: 7-Eleven offers a moderate variety of products, typically focusing on convenience items like snacks, beverages, basic groceries, and some household essentials. They may have a limited selection of each product category. Assortment: Within each category, 7-Eleven usually carries a shallow assortment. For example, they might have a few options for chips or soda brands, but not an extensive selection of flavors or sizes. Aeon: Variety: Aeon, being a larger retail chain, typically offers a much broader variety of products. They have departments for groceries, electronics, apparel, home goods, and more, catering to a wide range of customer needs. Assortment: Within each category, Aeon tends to have a deeper assortment. For instance, in the grocery section, they might offer various brands, flavors, and sizes of a particular product, providing customers with more options to choose from. © McGraw Hill LLC  3. Services Offered by Retailers © McGraw Hill LLC 12  4. Prices & Cost of Offering Breadth & Depth of Merchandise & Services Stocking a deep and broad assortment is costly for retailers. Many SKUs: Retailer must have backup stock for each SKU. Leads to rise in inventory investment cost. Services attract customers, but they are costly. More staff must be paid to provide info & assist customers Broader variety, deeper assortment requires retailer to charge higher prices to make a profit. Department stores stock more fashionable merchandise and have to reduce price when they make a mistake in guessing what the popular styles will be. © McGraw Hill LLC 13  Food Retailers Food Retailing Landscape 30 years ago, consumers purchased food primarily at conventional supermarkets, however now account for less than 45 percent of food sales. Online grocery store sales experiencing steady growth especially driven by Covid-19 lockdowns. © McGraw Hill LLC 14  Characteristics of Food Retailers Limited- Conventional Assortment Warehouse Convenience Supermarket Supermarket Supercenter Club Store Percentage food 70-80 80-90 30-40 60 90 Size (000 sq. ft.) 35-40 7-10 160-200 100-150 3-5 SKUs (000) 30-40 1-1.5 100-150 20 2-3 Variety Average Narrow Broad Broad Narrow Assortment Average Shallow Deep Shallow Shallow Ambience Pleasant Minimal Average Minimal Average Service Modest Limited Limited Limited Limited Prices Average Lowest Low Low High Gross margin (%) 20-22 10-12 15-18 12-15 25-30 © McGraw Hill LLC 15  Food Retailers Supermarkets Conventional supermarkets: Perishables (meat, dairy, produce) are almost 52% of sales. 40,000 SKUs. Eg: Lotus’s Malaysia Limited assortment supermarkets and extreme-value food retailers: 1400 SKUs. Offer one or two brands and sizes. Maximize efficiency to reduce costs via limited assortment and service offerings. Offers most merchandise at lower prices by almost 40%. Eg: 99 Speedmart © McGraw Hill LLC Ulrich Baumgarten/Getty Images 16  Food Retailers Supermarkets continued Trends in Supermarket Retailing. Increased space (virtual or physical) devoted to consumables. Because consumers typically make 3 trips per week to buy food, but less than 1 trip per week to buy nonfood items. Increase traffic and encourage sales of more profitable nonfood merchandise. Many retailers that compete with conventional supermarkets invested in state-of-the-art supply chains, assortment planning, and pricing systems (Chapter 11 & 13) © McGraw Hill LLC 17  Food Retailers Supermarkets continued Therefore, to compete successfully against intrusions by these other food retailing formats, conventional supermarkets are differentiating their offerings by Adding valuable services i.e. online ordering and delivery options Offering ready-to-eat options or heat-and-eat food Exclusive and private-label merchandise i.e. TopValu Improved shopping experience i.e. in-store restaurant in Jaya Grocer - Fresco © McGraw Hill LLC Sorbis/Shutterstock 18  Food Retailers Supercenters Supercenters are large supermarket, combined with department store. Eg: Aeon Offer broad assortments of grocery and general merchandise products under one roof Provide a one-stop shopping experience i.e. banking, telecommunication May cause inconvenience because it can take a long time to find items they want Competes with retailers in other sectors. Hypermarkets are also large, similar in design and size to supercenters. Eg: Aeon Big Carry larger proportion of food items. © McGraw Hill LLC 19  Food Retailers Warehouse Clubs Warehouse clubs offer limited and irregular assortment of food and general merchandise at low prices. Simple interiors and little service. Low inventory holding costs. Wholesale members and individual members. © McGraw Hill LLC Justin Sullivan/Getty Images 20  Food Retailers Convenience Stores Convenience stores provide a limited variety and assortment of merchandise at a convenient location in 3,000- to 5,000-square-foot stores with speedy checkout. Enables consumers to make purchases quickly. Higher prices than supermarkets. Eg: 7-eleven Online Grocery Retailers Fastest-growing segment of grocery market. Greater percentage of nonfood items compared to sales in stores. Eg: Happy Fresh, Grab Mart © McGraw Hill LLC 21  Characteristics of General Merchandise Retailers Size SKUs Type Variety Assortment Service Prices (000 sq. Location (000) ft.) Department Broad Deep to Average Average 100– 100 Regional malls stores average to high to high 200 Discount Broad Average to Low Low 60–80 30 Stand-alone, stores shallow power strip centers Category Narrow Very deep Low to Low 50–100 20–40 Stand-alone, specialists high power strip centers Specialty Narrow Deep High High 4–12 5 Regional malls stores © McGraw Hill LLC 22  Characteristics of General Merchandise Retailers Size SKUs Type Variety Assortment Service Prices (000 sq. Location (000) ft.) Home Narrow Very deep Low to Low 80–120 20–40 Stand-alone, improvement high power strip centers centers Drugstores Narrow Very deep Average Average 3–15 10–20 Stand-alone, to high strip centers Off-price Average Deep but Low Low 20–30 50 Outlet malls stores varying Extreme- Average Average and Low Low 7–15 3–4 Urban, strip value varying retailers © McGraw Hill LLC 23  General Merchandise Retailers Department Stores Broad variety, deep assortment. Offer customer services and organize their stores into distinct merchandise departments for displaying merchandise. Soft goods (cosmetics, clothing and bedding) Hard goods a.k.a. durable goods (appliances, and furniture) Three tiers: Upscale, high-fashion chains (i.e. Isetan , Metrojaya) Moderate pricing with less customer service (i.e. Parkson) Value-oriented (i.e. Mydin) © McGraw Hill LLC 24  General Merchandise Retailers Department Stores continued To address eroding market share: Increase exclusive brands. To differentiate their merchandise offerings and strengthen their image, department stores aggressively seek exclusive brands. National brand vendors sell them merchandise that is not available elsewhere, which promises to attract consumers. Increase private-label brands or store brands. Some department stores work to develop their own private-label brands or store brands. These items, developed and marketed by the retailer, are available only in its stores. Expand omnichannel presence. Department stores have become active participants in omnichannel retailing. Customers can buy or reserve products online and then pick them up at the store; if they purchase online and find that the item does not suit their needs, customers also can return many of those purchases to stores. © McGraw Hill LLC Top: Roman Tiraspolsky/Alamy Stock Photo; Bottom: Usa-Pyon/Shutterstock 25  General Merchandise Retailers Full-Line Discount Stores Broad variety, limited service, low prices. Eg: Sports Direct © McGraw Hill LLC 26  General Merchandise Retailers Category Specialists Deep, narrow assortment. Self-service approach. Eg: IKEA Category killers – consumers drawn to deep assortment and competitive prices. Intense competition. Trying to differentiate with customer service. © McGraw Hill LLC 27  General Merchandise Retailers Specialty Stores Concentrate on limited number of complementary merchandise categories. Deep but narrow assortment. Sales associate expertise, test product, various in-store services. Among most-profitable and fastest-growing firms. Eg: Sephora © McGraw Hill LLC 28  General Merchandise Retailers Specialty Stores cont’d Growing specialty store sector. Resale stores i.e. 2nd hand street Thrift stores i.e. flea market Consignment shops i.e. cash converter © McGraw Hill LLC 29  General Merchandise Retailers Drugstores Specialty store that concentrate on health and beauty care. Drugstore faces competition from pharmacies. In response to these threats, major drugstore chains: Offer wider assortment of merchandise. Offer more services with drive-through windows, curbside pick-up, in-store clinics. © McGraw Hill LLC QualityHD/Shutterstock 30  General Merchandise Retailers Extreme-Value Retailers Dollar stores. Broad variety, but shallow assortment. Target low-income consumers. Eg: P&G in India accommodate the purchasing power by manufacturing their detergent into small packets. Access the text alternative for slide images. © McGraw Hill LLC ZUMA Press Inc/Alamy Stock Photo 31  General Merchandise Retailers Off-Price Retailers Offers inconsistent assortment of brand-name merchandise. Significant price discounts – 20% to 60% lower than suggested retail price. Such retailers can buy at low prices because they don’t ask suppliers for ads allowances, return privileges, or delayed payments. Closeouts – end-of-season merchandise that will not be used in following seasons. Irregulars – merchandise with minor mistakes. Eg: perfumes, FOS Outlet stores/ Factory outlets – off-price retailers owned by manufacturers/retailers. Eg: Coach in Genting Premium Outlet Flash sale sites – online off-price retailer. Eg: Groupon © McGraw Hill LLC 32  Service Providers That Use Retailing Principles Service Providers Primarily sell services. Growing proportion of world economies. Trending services: Aging populations require additional services i.e. health care. New demands from COVID-19 i.e. telehealth operations. Two-income families i.e. grocery delivery. © McGraw Hill LLC 33  Service Providers That Use Retailing Principles Differences between Service and Merchandise Retailers Intangibility. Simultaneous production and consumption. Perishability. Inconsistency of offerings to customers. © McGraw Hill LLC 34  Intangibility Services are generally intangible -- customers cannot see, touch, or feel them. Services are performances or actions rather than objects. Intangibility introduces several challenges for service retailers. It is difficult for customers to evaluate services before they buy them, or even after they buy and consume them. Service retailers often use tangible symbols to inform customers about the quality of their services Eg: service retailers place emphasis on soliciting customer evaluations and complaints. © McGraw Hill LLC  Simultaneous Production and Consumption Products are typically made, stored and sold by a retailer; while service providers create and deliver the service as customer consuming it. The simultaneity of production and consumption creates some special problems for services retailers. Eg: eating in a restaurant First, the customers are present when the service is produced, may have an opportunity to see it produced, and in some cases, may be part of the production process. Other customers consuming the service at the same time can affect the quality of the service provided. Eg: obnoxious customer at the next table in a restaurant can make a dining experience very unpleasant Finally, the service retailer often does not get a second chance to satisfy the needs of their customers. While customers can return damaged merchandise to a store, customers that are dissatisfied with services have limited recourse. Thus, it is critical for service retailers to get it right the first time. © McGraw Hill LLC  Perishability Because the creation and consumption of services is inseparable, services are perishable. They can't be saved, stored, or resold. This contrasts with merchandise, which can be held in inventory until a customer is ready to buy it. In addition, the demand for a service varies considerably over time. Thus, service retailers often have times when their services are underutilized and other times when they have to turn customers away because they cannot accommodate them. Service retailers use a variety of programs to match demand and supply. They also attempt to make customer waiting time more enjoyable. Eg: Haidilao makes waiting time enjoyable © McGraw Hill LLC  Inconsistency Merchandise is often produced by machines with very tight quality control. Because services are performed by people, no two services will be identical. Thus, an important challenge for service retailers is providing consistently high- quality services. Eg: same hair artist may not be able to produce 2 exactly same hair design © McGraw Hill LLC  Types of Ownership Independent, Single-Store Establishments Rely on owner/manager capabilities to make retail decisions. Some join wholesale-sponsored voluntary cooperative groups to engage in buying, warehousing, and distribution. Such groups also offer members services i.e. advise on store design and layout, site selection and employee training program. Eg: Cafés © McGraw Hill LLC 39  Types of Ownership 2 Corporate Retail Chains Retail chains operate multiple units under common ownership. Centralized decision-making for defining and implementing strategy. Eg: Aeon, Aeon Big, Aeon MaxValu © McGraw Hill LLC 40  Types of Ownership 3 Franchising Franchisor sells rights to use business trademark to franchisee for a fee. Drawbacks: Start-up costs. Must adhere to franchisor’s rules/guidelines. Might be required to purchase materials from franchisor. Eg: McDonalds, Chagee © McGraw Hill LLC 41 Because learning changes everything.® www.mheducation.com © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.