“WHY WE BUY” ANALYSIS PROJECT
Mitty
Ch2SNTypesofRetailers-BrickMotar.pptRetailing Today
- Many formats/types of retailers
- No one best way of retailing
- 95 % of retailers are small businesses with only a single location
- Competition is at an all-time high
- Competition, Buyouts, Mergers, etc.
- Retail “Survivors” are doing it
Better, Cheaper, Newer and Faster
CHAPTER 2
Types of Retailers
Not just big box retailers!
95 percent of retailers are small businesses with only a single location, and no other industry has more companies with fewer than 100 employees.
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Retailing Today
- Ecommerce is growing faster than traditional retail
- However, the majority of retail sales still come from stores
- Online retail currently accounts for roughly ____ % of total retail sales (excluding automobiles and fuel)
- Analysts predict online retail to increase to ____ % by 2022
- Many online brands (including Amazon) are investing in brick & mortar locations
Not just big box retailers!
95 percent of retailers are small businesses with only a single location, and no other industry has more companies with fewer than 100 employees.
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Retailing Today
- Growth in retail requires
- Imagination
- Better Systems
- Consumer-Value
- Profit
- Retailers battle other sectors (travel, leisure, entertainment, healthcare, financial services and telecommunications) for consumer’s time & money
Retailers need to have a strategy
Competitive Advantage
+
Retail Format
+
Target Market
=
Retail Strategy
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Retailers must have a strategy to survive
Comp. Adv. = Reason to buy from you instead of another
Retail Format = how/where customers buy from you
Target Market = Knowing who your customers are & focusing on their needs)
Types of Retailers = Retail Format
Ways to distinguish and describe
Retail Formats:
- Product Assortment
- Hard Lines (non-apparel, non-fashion) vs. Soft lines (fashion/apparel, accessories (handbags, jewelry, footwear)
- Depth & Breadth
- _____________________
- The # of items in a category (SKUs)
- _____________________
- The # of merchandise categories
- Customer Service Level
- Ambiance
- Location & Size of store
- Pricing Strategy and Profit Margin Strategy
“Brick & Mortar” Retail Formats
(or “types” of Retailers)
- Discount Stores
- Super Centers
- Off-price Stores
- Warehouse Stores
- Department Stores
- Mass Merchandisers/Low-end Department Stores
- Specialty Stores
- Small Format
- Large Format
- Drug Stores
- Home Improvement
- Convenience Stores
- Food Retailers
- Co-ops
- Franchises
Discount Stores
- Product Assortment
~Soft & Hard Goods
~______ Breadth
______ Depth
~Mid to Low overall quality
- Customer Service Level
~Low
~Checkouts Centrally located
- Ambiance
~Low
- Location & Size of store
~Usually Freestanding; some anchors at malls
- Pricing Strategy and Profit Margin Strategy
~Price competitive; advertises often
~Low profit margin
% vs. $
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Low profit MARGIN, but reaches profit $ by VOLUME
Upscale : Target & Shopko
Lower end: Wal-Mart, K-mart
Discount stores
- Strategy
- Increase volume through increased convenience
- Low-prices on selected products (not all)
- Private label products next to national brands
SUPER CENTERS
Growing assortments (adding/growing grocery)
One stop shopping (banking, health clinics, etc.)
SMALLER FORMAT
- Limited assortments in urban markets
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½ of goods sold at Target are private labels and are grwoing at a faster rate than national brands
Department Stores
- 3 Tiers
- Product
~ Soft & Hard Goods
Some with only soft
~National Brands
~Private Label Brands
~Usually Upscale Quality
~Wide Breadth
~Assortment Depth varies by store and department. Hardlines: mostly shallow Softlines: average to deep
- Customer Service
~Mid - High
~Check outs within departments
- Ambiance
~Pleasant/High
- Location
~Usually Anchors at Malls
~But being creative in finding other locations
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Nordstrom’s only soft
Customer Service: own Credit Card service, layaway, gift wrapping, bridal registry, coat check, sales associates,
Ambiance: Lighting, Carpet, Music, Piano, smells, clean, soft,
Location: Flagship, corporate &/or largest
May Co (Foley’s, Lord & Taylor, Hecht’s, Kaufmann’s, Robinson’s, Famous-Barr, Filenes)
Federated (Bloomingdales, Lazarus, Rich’s Burdines, The Bon)
Saks (Saks 5th Ave, Bergners, Carson Pirie Scott, Boston Sotre, Younkers, Herbegers, etc.
Might have leased Departments
Shoes, Jewelry, Maternity, Hair Salon are common ones
Dept. Stores (continued)
Pricing Strategy & Profit Margin
~Full Mark-up
~Frequent Promotional Sales
~High Profit Margin
- Other Characteristics
~Vendor “shops”
~ Leased Departments
Issues in Department Store Retailing
- Competition
- Discount stores on price
- Specialty stores on service, depth of assortment
- Lower cost by reducing service
- Centralized cash wraps
- More promotional sales
- Customers wait for sale
- Focus on apparel and soft home
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- Department stores are:
- Attempting to increase the amount of exclusive merchandise they sell
- Increase ____________________ merchandise
- Expand omni-channel and social media presence
- Elevate the in-store experience
Department Stores:
What To Do With an Eroding Market
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- Product Assortment (Depth & Breadth)
~Bigger focus on their own private label merchandise (aka: house brands, store brands)
~Broad mix of Product Categories
(May include major appliances)
- Customer Service Level
~Low (more self-service than other dept. stores)
- Ambiance
~Mid range
“Lower-end Department Stores”
3rd tier
- Location & Size of store
~Free standing, strip malls or anchors at mid to lower range malls
- Pricing Strategy and Profit Margin Strategy
~Varies: Every day low prices
~ Advertise often, has many promotional sales
~Mid to low profit margin %
Off-Price Retailers
Could also be:
Outlets (found at “Outlet Malls”
Close-out stores (like Big Lots)
Single-price stores
Key determinant:
Extreme Value Retailing
- Focuses on lower income consumers
- Assortment may include known ____ products
- Often in small sizes making the product less expensive (however, the per ounce or per item in package may be higher)
- Names mostly imply good value
- Low cost location
- Limited services
- More private-label options and impulse buys
- Adding food services
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Warehouse Clubs
Low Customer Service
+ Low Ambiance
+Low Operating Expenses
=
Low Prices for Consumers
- “Clubs”
~Need a membership
~Can buy in large bulk
~Assortments constantly changing
Specialty Stores
- Product Assortment (Depth & Breadth)
~Limited # of items; specialize in a category or classification of merchandise
- Customer Service Level
~Mid to High
~Check outs usually centrally located
Small Specialty Retailers
Focus on a few products that are related
- Narrow product variety-but deep assortment (Narrow Breadth, Deep Depth)
- Or a wider breadth with products that relate, but towards a very focused target customer
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Small Specialty Spotlight
- Specialized primary products: fragrance, lotion, candles
- One of the most successful ”mall-based” retailers
- Not typically an online purchase
- Fast-moving consumer good as it is used up and replaced by customers
- Emphasizes seasonality promoting specific candles and fragrances that are designed with summer, fall, winter and spring in mind
What is Fast Fashion?
Who are the some of the top retailers in “Fast Fashion”?
trendy, inexpensive versions of runway looks that shoppers wear for one season, or one occasion, and often toss
(focus on trend right over quality)
Consumers who prefer quality over quantity.
A new generation of consumers are increasingly adopting a "buy less, but better”
What shift in consumer mindset could hinder the growth of “fast fashion” retailers?
Drug Stores
- Opportunities
- Growth of age group market (55+) that requires/desires pharmaceutical drugs
- Growth in locations, smaller neighborhood stores
- Growth of HBA’s, quick food and convenience items
- In-store lab services, optical and a longer list of patient care services
Pharmaceuticals are approx. 50% of sales
Drug Stores
- Threats
- Discount stores adding pharmacies (+ competition)
- Fewer new drugs being introduced
- Drug pricing increases
- Healthcare laws
Convenience Stores
- Product Assortment
~Food & non-food
~May sell gasoline (but not always)
~Shallow depth, Varied breadth
- Location
~Convenient locations (corners; by busy roads)
Pricing Strategy and Profit Margin Strategy
- High Mark-up & Margin on in store items
Convenience Stores
- What are the current threats to convenience stores?
- Other retailers that are adding __________ at some of their locations (Wal-mart, Cosco, Kroger, Sam’s Club)
- What are current opportunities for convenience stores?
Convenience Stores
- What are current opportunities for convenience stores?
- in mobile “______________” food
- Busy, time deprived customers
- Quick, but healthy alternatives, more fresh foods
- the ambiance
Category Killers
“Big Box Retailers”
- “Large Format Specialty Stores”
- Single merchandise __________ that have broadly related classifications
- Deep and broad assortment with the category
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Toys R Us
Best Buy
Barnes & Noble
Borders
Galyan’s
Sportmart
Category Killer:
Home Improvement Stores
aka DIY stores
Largest:
- _____________
- Lowe’s
- Menards
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Category Killer:
Home Improvement Stores
aka DIY stores
Why has this format done so well lately?
- Consumers wanting/feeling like they can do home improvements
- Great job at omni-channel
- “click-and-collect” = customers order online and pick up in store
- Consumers spending more time at home
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Supermarkets
- Who are the biggest?
#1 =
Threats
- Other types of retailers offering food items
- Amazon & buyout of Whole Foods
- _________________ _____________ offering healthy and time saving alternatives
- Expanding growth of low cost providers: Aldi & Lidl
- ___________ services
- For example: Blue Apron, Hello Fresh, Purple Carrot & Sun Basket & others
Non food retailers adding food (convenience stores, discount stores, off-price stores)
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Supermarkets
- Opportunities
- Offerings target to ethnic markets
- Order online & delivery
- Offerings for health conscious
- Ready-to-go meal kits
- Private brands
- Better in-store experience
- New formats
- Small-store formats in urban areas
- Mall locations (Grocers moving into vacated dept store locations)
Co-op Stores
2 types
1)
- Employees of the store own & run the store
- Earn shares or dividends from the profits
- OR increase wages so no left over profit at EOY
- OR leftover profits go to charity or organization (ie. political group, university)
2)
- Shoppers can buy a membership into the co-op
- Members get special deals + voting rights
Many FOOD Co-ops
Franchises
- Franchisees pay the parent company fees and _______ and often a percent of their total sales
- Franchisees often have many set rules by the parent company to follow
- In return, the franchisee usually gets the following services:
Location analysis
Store development, including lease negotiations
Store design & equipment purchasing
Initial employee & management training
Advertising & merchandising advice
Standardized procedures & operations
Centralized _____________________________products
Financial assistance in starting the store
An exclusive territory in which to operate
This is the biggest factor/reason in purchasing/operating a franchise
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