Chapter 15 Retailing 1 Retailing a Retailing All the activities directly related to the sale of goods and services to the ultimate consumer for personal non business use has enhanced the quality of our daily livess b Role of Retailing i U S retailers employ nearly 25 million people ii Retailers account for 11 6 of U S employment iii Retailing accounts for 13 of U S businesses iv Retailers ring up almost 4 trillion in sales nearly 40 of U S GDP Industry is dominated by a few giant organizations such as Wal Mart v c Types of Stores Their Characteristics i Type of Retailer Service Assort Level ment Department Store Broad Mod Hi High Mod Hi High Broad Department Store Specialty Store High Narrow Supermarket Supermarket Low Broad Low Broad Convenience Store Low Med Narrow Drugstore Drugstore Low Mod Medium Low Mod Medium Full line Discounter Mod Low Med Broad Specialty Discounter Mod Low Med Broad Warehouse Clubs Low Broad Off price Retailer Low Med Narrow Low High Restaurant Narrow Gross Price Margin Mod High Mod High Mod High Mod High High Mod High Low Moderate Low Moderate Mod High Mod High Moderate Low Moderate Mod Low Mod Low Mod Low Mod Lo low Low Low very low Low Low Low High Low High d Classification of Ownership i Interdependent Retailers Owned by a single person or partnership and not part of a larger retail institution 1 Example Local florists ethnic food markets ii Chain Stores A store that is part of the same stores owned and operated as a group by a single organization 1 Administrative tasks are handled by the home office for the entire chain a Examples GAP Starbucks iii Franchises To right to operate a business or to sell a product 1 Owned and operated by individuals but are licensed by a larger supporting organization 2 Example Subway Quiznos e Level of Service Full Service vs Self Service f Product Assortment Classification based on Breadth Depth of a product i Specialty stores like Best Buy carry single product lines with considerable depth ii Full line discounters carry broad assortments of merchandise with limited depths i Gross Margin The amount of money the retailer makes as a of sales after the cost of g Price goods sold is subtracted 2 Major Types of Retail Operations a Department Store A store housing several departments under one roof each department is treated as a separate buying center i Each department is headed by a buyer or department head who selects merchandise 1 Buyer A department head who selects the merchandise for his or her department and may also be responsible for promotion personnel ii Central management sets broad policies about the types of merchandise carried price ranges advertising programs credit policies etc b Specialty Stores A retail store specializing in a given type of merchandise i Carries a deeper but narrower assortment of specialty merchandise than a department c Supermarkets Large departmentalized self service retailer that specializes in food and some store non food items i Scrambled Merchandising The tendency to offer a wide variety of nontraditional goods d Drugstores A retail store that stocks pharmacy related products and services as its main draw and services under one roof i Example CVS e Convenience Stores A miniature supermarket carrying only a limited line of high turnover convenience goods typically located near residential areas and open 24 hours 7 days f Discount Stores A retailer that competes on the basis of low price high turnover and high i Customer pays a surcharge for convenience ii Example Wawa volume i Categories of Discount Stores 1 Full Line Discounters A retailer that offers consumers very limited service and carries a broad assortment of well known nationally branded hard goods a Example Wal Mart largest b Hard Goods Appliances tools etc c Mass Merchandising A retailing strategy using moderate to low prices on large quantities of merchandise and lower levels of service to stimulate high turnover of products d Supercenter Retail store that combines groceries and general merchandise goods with a wide range of services i Example Target 2 Specialty Discount A retail store that offers a nearly complete selection of single line merchandise and uses self service discount prices high volume and high turnover a Category Killer A specialty discount store that heavily dominate their merchandise segment i Best Buy in electronics Office Depot in Office Supplies 3 Warehouse Membership Clubs Limited service merchant wholesalers that sell a limited selection of brand name appliances household items and groceries on a cash and carry basis to members a Example BJ s Costco 4 Off Price Retailer A retailer that sells at prices 25 or more below traditional department store prices because it pays cash for its store and usually doesn t ask for return privileges a TJ Max Ross Homegoods b Factory Outlet Off price retailer that is owned and operated by a manufacturer i Example Nordstrom Rack g Restaurants Straddle the line between retail and service establishments i Sell tangible products food drink but also services food prep food service ii Many could be considered specialty retailers 3 Non Store Retailing Shopping without visiting a store a Automatic Vending The use of machines to offer goods for sale i Vending is the most pervasive retail business in the U S with 11 5 million vending machines selling billions of dollars worth of goods annually b Direct Retailing The selling of products by representatives who work door to door office to c Direct Marketing Techniques used to get customers to make a purchase from their home office or at home sales parties office or other non retail setting i Telemarketing The use of the telephone to sell directly to consumers ii Direct Mail iii Catalogs Mail Order d Electronic Retailing Online shopping and 24 hour shop home networks i Online Retailing A type of shopping available to customers with personal computers and access to the internet ii Accounts for roughly 8 of total retail sales 4 Franchising Franchisor grants to a franchisee the business rights to operate or sell a product a Franchisor The originator of a trade name product methods of operation and the like that grants operating rights to another party to sell its product b Franchisee An individual or business that is granted the right to sell another party s product c Basic Forms of Franchising i Product Trade Name Franchising Dealer agrees to sell in products provided by a ii Business Format Franchising An ongoing business
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