FASHION RETAIL INDUSTRY Retailing Management 8th Edition Levy Weitz Chapter 2 Types of Retailers To develop and implement their retail strategy retailers need to understand the nature of competition in the market place Benefits of retailers reflected in nature of the RETAIL MIX used to satisfy consumers needs 1 9 million retailers in U S o Different types of retailers offer unique benefits to satisfy consumers needs o As needs change new retail formats are created and existing formats evolve to satisfy needs o Many retailers are broadening assortments and creating overlap INCREASED COMPETITION Retailers Classified Through 1 Type of products services offered 2 Variety assortment of products 3 Level of customer services 4 Price point NORTH AMERICAN INDUSTRY CLASSIFICATION SYSTEM NAICS collects data on business activity in United States Canada Mexico each business assigned hierarchical 6 digit code base on type of products services offered VARIETY BREADTH number of merchandise categories a retailer offers ASSORTMENT DEPTH number of different items offered in each merchandise category STOCK KEEPING UNITS SKUs each item of merchandise has a unique SKU Barcode Customers expect all retailers to provide certain services such as displaying merchandise accept credit cards provide parking convenient hours of operation home delivery gift wrapping returns lay away Repairs stocking a deep broad assortment of merchandise appealing to consumers and costly for retailers inventory investment increases because retailer must have stock to back up every SKU services also costly to make a profit retailers that offer broader variety deeper assortment and additional services MUST CHARGE HIGH PRICE FOOD RETAILERS Conventional Supermarkets Super Centers Warehouse Clubs Convenience Stores Extreme Value Retailers CONVENTIONAL SUPERMARKET large self service food store offering groceries meat produce as well as nonfood items such as health beauty and general merchandise carry about 30 00 SKUs LIMITED ASSORTMENT EXTREME VALUE RETAILER stock about 2 000 SKUs trim costs and offer lower costs i e Aldi Save A Lot Dollar General Dollar Tree target low income consumer POWER PERIMETER area around the outer walls that hold fresh merchandise categories such as dairy produce meat deli bakery etc FRESH SUPERMARKET food stores focusing on the power perimeter merchandise smaller and more convenient than traditional supermarkets SUPER CENTERS large stores 185 000 sq ft that combine a supermarket with a full discount store i e Walmart HYPERMARKET large stores 100 000 300 000 sq ft combine 60 70 food merchandise with 30 40 general merchandise stock fewer SKUs than supercenters not common in U S BIG BOX large store limited service WAREHOUSE CLUBS large stores 100 000 150 000 sq ft offer limited irregular assortments of food and general merchandise with little service and low prices for ultimate consumers and small businesses Memberships include wholesale and individual consumers i e Sam s Club Costco customers can stock up on large amounts of basics low prices because of low cost rent locations inexpensive designs and little service CONVENIENCE STORES provide limited variety assortment at convenient location 3 000 5 000 sq ft offer speedy checkout purchase can be made quickly higher prices than supermarkets supercenters increasing competition with conventional supermarkets because of their broader assortments of food and general merchandise at attractive prices Supercenter Warehouse clubs have superior operating efficiencies that allow lower costs prices TO COMPETE they must DIFFERENTIATE offerings by Emphasizing fresh perishables Targeting health conscious ethnic consumers Providing better value through private label merchandise Providing better shopping experiences FAIR TRADE practice of purchasing from factories that pay workers a living wage and benefits LOCAVORE MOVEMENT focused on reducing the carbon footprint cause by the transportation of food throughout the world General Merchandise Retailers Department Stores Full Line Discount Stores Specialty Stores Drug Stores Category Specialists Category Killers Off Price Closeout Retailers Factory Outlet Stores DEPARTMENT STORES Retailer carries broad variety deep assortment offer services organize stores in distinct departments for displaying merchandise not as convenient located in large malls 3 TIERS 1 Upscale high fashion chains with exclusive designer merchandise and high degree of excellent customer service i e Neiman Marcus Bloomingdales Saks 5th Ave 2 Modestly priced merchandise with less customer service i e Macy s Dillards 3 Value oriented for price conscious consumer minimal customer service i e Kohl s Sears JCP FULL LINE DISCOUNT STORES offer broad variety of merchandise limited services and low prices i e Walmart Target and Kmart SPECIALTY STORES concentrate on a limited number of complementary merchandise categories and provide a high level of service i e Victoria s Secret Sephora tailor retail strategy towards specific groups by offering deep but narrow assortments and sales associate expertise DRUGSTORES specialty stores concentrate on health personal grooming merchandise most sales come from prescription pharmaceuticals i e Walgreens CVS Rite Aid CATEGORY SPECIALISTS big box stores offer narrow but deep assortment of merchandise self service approach i e Staples Best Buy Lowes CATEGORY KILLERS offer complete assortment of merchandise in a category OFF PRICE CLOSEOUT RETAILERS offer inconsistent assortments of brand name merchandise and significant discount off of suggested retail price i e TJ Maxx Marshalls Burlington Coat Factory Overstock com CLOSEOUTS end of season merchandise that will not be used in following seasons IRREGULARS merchandise with minor construction mistakes FACTORY OUTELT STORES off price retailers owned by manufacturers retailers opportunity to improve revenue from irregulars production overruns and merchandise returns sells excess merchandise at lower discounted price SERVICE RETAILERS firms that primarily sell services Differences between Product and Service Retailers Intangibility services are performances actions Simultaneous production consumption service providers create deliver service as customer is consuming it Perishability services are perishable must match supply and demand Inconsistency services provided by people cannot create identical experiences Types of Ownership WHOLESALE SPONSORED VOLUNTARY COOPERATIVE GROUP