LOGO

Chapter 2
Types of Retailers

Lecturer: Dr. Nguyen Hang Giang Anh

1
 LOGO
Learning Objectives

❖ List the different characteristics defining retailers.

❖ Categorize the various types of food retailers.
❖ Identify the various types of general merchandise
retailers.
❖ Illustrate the types of ownership for retail firms.
 LOGO
Main content

1. Retailer Characteristics

2. Food Retailers

3. General Merchandise Retailers

4. Types of Ownership

3
 LOGO

1. RETAILER
CHARACTERISTICS
 LOGO
Retail types – Consumer benefits

❖ Different types of retailers → offer unique benefits.

→ The type of retailer a consumer chooses to patronize →
depends on the benefits the consumer is seeking.
❖ All these retailers survive and prosper because they
satisfy a group of consumers’ needs more effectively
than their competitors
→ As consumer needs and competition change, new retail
formats are created and existing formats evolve.

5
 LOGO
Characteristics for classify retailers

❖ Basic characteristic used to describe the different types

of retailers is their retail mix, or the elements retailers
use to satisfy their customers’ needs.
❖ Four elements of the retail mix are useful for
classifying retailers:
▪ Type of merchandise and/or services offered,
▪ Variety and assortment of merchandise offered,
▪ Level of customer service,
▪ Price of the merchandise.
 LOGO
Types of Merchandise

❖ Staple merchandise: regular products carried by a

retailer. Ex: milk, bread, canned soup, tissues, eggs, and
housewares.
❖ Assortment merchandise: apparel, furniture, autos, and
other for which the retailer must carry a variety of products
to give customers a proper selection.
❖ Fashion merchandise: products that may have cyclical
sales due to changing tastes and lifestyles.
❖ Fad merchandise: products that generate a high level of
sales for a short time. Ex: toys and games such as Star
Wars toys

7
 LOGO
NAICS Codes for Retailers

8
 LOGO
Variety and Assortment
❖ Variety (breadth): Number of merchandise categories a
retailer offers
❖ Assortment (depth of merchandise): Number of different
items in a merchandise category
❖ Each different item of merchandise is called a stock-
keeping unit (SKU)

9
 LOGO
Level of customer service
❖ Customers expect almost all retailers to provide certain
services:
▪ displaying merchandise,
▪ accepting credit cards,
▪ providing parking,
▪ being open at convenient hours.
❖ Retailers also differ in the services they offer customers.
❖ Some retailers charge customers for other services, such
as home delivery and gift wrapping.

10
 LOGO
Price of the merchandise

❖ Providing a wide variety of merchandise and services is

appealing to customers but costly for retailers.
❖ Services attract customers to the retailer, but they also are
costly.
❖ To make a profit, retailers need to charge higher prices.
Ex: department stores have higher prices than discount
stores partially because of their higher costs.
→ Thus, a critical retail decision involves the trade-off
between the costs and benefits of maintaining additional
inventory or providing additional services.

1-11
 LOGO
Types of Merchandise Retailers

Food Retailers General Merchandise Retailers

• Department Stores (Vivo City)
• Mom and Pop Stores • Specialty Stores (narrow and deep
• Convenience Stores assortment)
• Supermarkets • Discount Stores
• Supercenters • Category Specialists
(supermarket and • Off-Price Retailers
discount store) • Warehouse Clubs
• Value Retailers (a small discount
store)
 LOGO

2. FOOD RETAILERS
 LOGO
Characteristics of Food Retailers
 LOGO
Supermarkets

❖ Conventional supermarkets
▪ a large, self-service retail food store offering
groceries, meat, dairy, and produce.
▪ Perishables (meat, dairy, produce, and
baked goods) account for 52% of
supermarket sales.
▪ 40,000 SKUs

❖ Limited-assortment supermarkets
▪ 1,400 SKUs
▪ Designed to maximize efficiency and
reduce costs
▪ Offer merchandise at lower prices than
conventional supermarkets
 LOGO
Limited-assortment supermarkets

Save-A-Lot ALDI

These provide quality merchandise at low prices by reducing

its assortment in order to control store operating expenses
 LOGO
Trends in Supermarket Retailing

❖ Supermarkets cope with competitive pressure from

Supercentres, Online retailers, Warehouse clubs,
Cconvenience stores, and even Drugstores
→ Need to offer differentiate their offerings:

Exclusive & Private-label

Merchandise

Value-added Ready-to-Eat
Services Options

Improved Shopping
Experience

Supercenters
Supercenters
▪ Large stores (160,000 to 200,000
square feet) combining
supermarket with a full-line
discount store.
▪ stock a greater percentage of
non-food items
▪ focus more on dry groceries,
such as breakfast cereal and
canned goods.
▪ One-stop shopping experience.
LOGO
Hypermarkets
▪ also large, similar in design and
size to supercenters but not
a
common in US.
▪ carry a larger proportion of food
items
▪ emphasize perishables - meat,
fish, produce and bakery items.
▪ stock fewer SKUs than do
supercenters—between 40,000
and 60,000 items.
▪ One-stop shopping experience.
 LOGO
Warehouse Clubs
❖ Large stores (100,000 to 150,000 square feet) have simple
interiors and concrete floors.
❖ Offer a limited and irregular assortment of food and general
merchandise at low prices.
▪ Use low-cost locations, inexpensive store design, little customer
service
▪ Low inventory holding costs by carrying a limited assortment of
fast selling items
❖ Two types of members: wholesale members who own small
businesses and individual members who purchase for their
own use.
 LOGO
Convenience Store
❖ Provide a limited variety and assortment of merchandise at a
convenient location.
❖ Enable consumers to make purchases quickly.
❖ Charge higher prices than supermarkets for similar products like
milk, eggs, and bread.
❖ Offer more food options appealing to on-the-go consumers.
❖ Add financial service such as cash checks, pay bills, buy tickets.
❖ Opening smaller stores closer to where consumers shop and work.
 LOGO
Online Grocery Retailers

❖ The fastest-growing segment of the overall grocery market.

❖ Before the arrival of COVID-19, 18% sales increase in 2019.

Then once the pandemic started, an estimated 35% of
consumers purchase online.

❖ Online orders placed with grocery retailers involve a greater

percentage of non-food items compared to sales in stores.

❖ Consumers thus rely on online grocers for non-perishable

items, with their lower profit margins, rather than for fresh fruit
or meats, which provide greater margins to retailers.

❖ However, delivery costs are a factor and a likely barrier to the

industry’s growth.
 LOGO

3. GENERAL
MERCHANDISE
RETAILERS
 LOGO
Characteristics of General Merchandise Retailers
 LOGO
Department Stores (1/2)

❖ Broad variety

❖ Deep assortment

❖ Customer service

❖ Merchandise displayed into distinct

departments

❖ Soft goods (nondurable or consumable

goods with shorter life span, such as
cosmetics, clothing)

❖ Hard goods (products that are expected

to last several years, such as appliances,
furniture, and consumer electronics).
 LOGO
Department Stores (2/2)
❖ Issues in Department Stores:
▪ Many consumers question the benefits and costs of shopping at
department stores.
▪ Department stores are not as convenient as discount stores.
❖ To address eroding market share, department stores are:
▪ Increase the amount of exclusive merchandise they sell.
▪ Increase their use of private-label merchandise.
▪ Expand their omnichannel.
 LOGO
Full-line Discount Store

❖ Offer broad variety, limited services, and low prices.

❖ Largest stores: Wal-Mart, Target
❖ Differentiate strategy
▪ Wal-Mart = Low price & good value, Wide product
range and Hybrid online & in stores.
▪ Target = More Fashionable Apparel at low prices.
❖ Competition from Category specialists:
▪ Toys-R-Us, Best Buy, Sports Authority
 LOGO
Category Specialists
❖ Offer a deep assortment but narrow variety.
❖ By offering a complete assortment in a category,
category specialists can dominate or “kill” a category of
merchandise for other retailers → Category killers.
❖ Competition from Warehouse Clubs → Differentiate
strategy with better customer service
 LOGO
Specialty Stores
❖ Concentrate on a limited number of complementary categories
and provide a high level of service.
❖ Offer a deep assortment but narrow variety, along with sales
associates
❖ Large stores:
▪ Williams-Sonoma leading housewares market.
▪ Sephora, France’s leading perfume and cosmetic chain.
❖ Another growing specialty store sector:
▪ Resale stores: sell secondhand or used merchandise.
▪ Thrift store: merchandise is donated and go to charity.
▪ Consignment shop: accepts used merchandise from people and
pays them after it is sold.
 LOGO
Drugstores
❖ Specialty stores that concentrate on health and beauty
care products.
❖ Largest drugstore chains: Walgreens, CVS, Rite-Aid
❖ Competition from pharmacies in discount stores & online
❖ Evolution to a new Format
▪ Offering a wider assortment: more frequent purchase food
items.
▪ Adding service: convenient drive-thru windows, in-store
medical clinics,…
 LOGO
Extreme Value Retailers (dollar stores)
❖ Small discount stores offer a broad variety but shallow
assortment of household goods and groceries.
❖ Largest stores: Dollar General and Dollar Tree.
❖ Low cost location & Limited services.
❖ Primarily target customers that want well-known brands
but cannot afford to buy the large-sized packages offered
by full-line discount stores or warehouse clubs.
❖ Despite some of these chains’ names, few just sell
merchandise for a dollar.
 LOGO
Off-Price Retailers
❖ Offer an inconsistent assortment of brand name
merchandise at a significant low prices.
▪ Brand name and designer-label merchandise at 20-60% lower
than MSRP (manufacturers’ suggested retail price)
▪ Close-out retailers (end-of-season merchandise) or irregular
(minor mistake)
❖ Largest stores: TJX Companies, Ross Stores, Big Lots and
Overstock.com
❖ A special type of off-price retailer is the outlet store.
▪ Outlet stores are off-price retailers owned by or retailers.
▪ The stores owned by manufacturers → Factory outlets.
 LOGO

5. TYPES OF
OWNERSHIP
 LOGO
Types of Ownership

❖ Independent, Single Store

Establishments
▪ Wholesale-sponsored
voluntary group
❖ Corporate Retail Chains
❖ Franchising

(c) Brand X Pictures/PunchStock

 LOGO
Retailers Using Franchise Business Model
 LOGO
Franchising

❖ 30 – 40% of US retail sales

❖ Franchisee pays
fixed fee plus % of sales
❖ Franchisee implements
program
❖ Why is this ownership format
efficient?

The McGraw-Hill Companies, Inc./Jill Braaten, photographer

 LOGO
Reasons for Franchising Growth
 LOGO
Reasons for Franchising Failure
 LOGO
Franchisor Positions in the Marketing Channel
 LOGO
Franchisor Benefits
 LOGO
Franchising Trends for the New Millennium