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RETAIL INSTITUTIONS BY STORE-BASED STRATEGY MIX
1
©2013 Pearson Education Inc publishing as Prentice Hall 5-2
Retail Life Cycle
• Retail institutions pass through identifiable life stages• introduction• growth• maturity• decline
©2013 Pearson Education Publishing as Prentice Hall 5-3
The Retail Life Cycle
©2013 Pearson Education Inc publishing as Prentice Hall 5-4
How Retail Institutions Are Evolving
• Mergers, diversification, and downsizing
• Cost-containment and value-driven retailing
©2013 Pearson Education Inc publishing as Prentice Hall 5-5
Mergers, Diversification, and Downsizing
• Mergers: combinations of separately owned firms (e.g., Sears Holdings– Sears- department store and Kmart-discount department store)
• Diversification: retailers become active in businesses outside their normal operations (e.g., Nordstrom Rack (American upscale fashion retailer, Off Sak, fashion outlet store)
• Downsizing: unprofitable stores are closed or divisions are sold off
©2013 Pearson Education Publishing as Prentice Hall 5-6
Store-Based Retail Strategy Mixes
Food-Oriented• Convenience store• Conventional
supermarket• Food-based
superstore• Combination store• Box (limited-line)
store• Warehouse store
General Merchandise• Specialty store• Traditional department• Full-line discount store• Variety store• Off-price chain• Factory outlet• Membership club• Flea market
©2013 Pearson Education Publishing as Prentice Hall 5-7
Location
Neighborhood
Prices
Average to
Above average
Atmosphere & ServicesAverage
Merchandise
Medium width
and low depth
of assortment;
average quality
Promotion
Moderate
Convenience Store Strategy Mix
©2013 Pearson Education Publishing as Prentice Hall 5-8
Location
Neighborhood
Prices
Competitive
Atmosphere & Services
AverageMerchandise
Extensive width and depth of assortment;
average quality; manufacturer, private, &
generic brands
Promotion
Heavy use of newspapers, flyers, and
coupons.
Conventional Supermarket Strategy Mix
©2013 Pearson Education Publishing as Prentice Hall 5-9
Location
Community shopping
center or isolated site
Prices
Competitive
Atmosphere & Services
Average
Merchandise
Full assortment plus
health and beauty aids
and general merchandise
Promotion
Heavy use of
newspapers, flyers
Food-Based Superstore Strategy Mix
©2013 Pearson Education Publishing as Prentice Hall 5-10
Location
Community shopping
Center or isolated site
Prices
Competitive
Atmosphere & Services
Average
Merchandise
Full assortment plus
health and beauty aids
and general merchandise
Promotion
Heavy use of
newspapers, flyers
Combination Store Strategy Mix
©2013 Pearson Education Publishing as Prentice Hall 5-11
Location
Neighborhood
Prices
Very low
Atmosphere & Services
LowMerchandise
Low width and depth of
assortment; few
perishables; few national
brands
Promotion
Little to none
Box Store Strategy Mix
©2013 Pearson Education Publishing as Prentice Hall 5-12
Location
Secondary site, often in
industrial area
Prices
Very low
Atmosphere & Services
LowMerchandise
Moderate width and
low depth of assortment; emphasis on
manufacturer brands
bought at discount
Promotion
Little to none
Warehouse Store Strategy Mix
©2013 Pearson Education Publishing as Prentice Hall 5-13
Location
Business district or
shopping center
Prices
Competitive to
Above average
Atmosphere & Services
Average to excellent
Merchandise
Very narrow width and
extensive depth of
assortment; average to
good quality
Promotion
Heavy use of displays
Extensive sales force
Specialty Store Strategy Mix
©2013 Pearson Education Publishing as Prentice Hall 5-14
Harrods
©2013 Pearson Education Publishing as Prentice Hall 5-15
Location
Business district, shopping
center or isolated store
Prices
Average to
Above average
Atmosphere & Services
Good to excellent
Merchandise
Extensive width and
depth of assortment; average to good quality
Promotion
Heavy ad and catalog
use; direct mail;
personal selling
Traditional Department Store Strategy Mix
©2013 Pearson Education Publishing as Prentice Hall 5-16
Location
Business district, shopping
center or isolated store
PricesCompetitive
Atmosphere & Services
Slightly below
average to average
Merchandise
Extensive width and
depth of assortment; average to good quality
Promotion
Heavy on newspapers;
price-oriented; selling
Full Line Discount Store Strategy Mix
©2013 Pearson Education Publishing as Prentice Hall 5-17
Location
Business district, shopping center or
isolated store
PricesAverage
Atmosphere & Services
Below average
Merchandise
Good width and some depth of assortment;
below-average to average quality
Promotion
Use of Newspapers
Variety Store Strategy Mix
©2013 Pearson Education Publishing as Prentice Hall 5-18
Location
Business district, shopping center or
isolated store
PricesLow
Atmosphere & Services
Below average
Merchandise
Moderate width and
poor depth of assortment; average to good quality;
low continuity
Promotion
Use of newspapers; brands not advertised;
limited selling
Off-Price Chain Strategy Mix
©2013 Pearson Education Publishing as Prentice Hall 5-19
Off Price Retailing Strategy• Pay vendor quickly with no promotional
allowances, cooperative advertising funds, chargebacks, or markdown monies
• Do not promote brand name so as to anger department and specialty shops which are vendor’s traditional customers
• Buy all of vendor’s excess inventory, cancelled orders, returns regardless of color, size or style distributions
©2013 Pearson Education Publishing as Prentice Hall 5-20
Off Price Retailing Strategy (cont)
• Pay 10 to 20 percent of vendor’s traditional wholesale $500 jacket purchased for $50 and sold for $100; versus sold for $250 less allowances
• Can also arrange for vendor to produce special goods for off-price retailer to reduce loss on fabrics, and to keep subcontractors busy
©2013 Pearson Education Publishing as Prentice Hall 5-21
Location
Out of the way site
or discount mall
PricesVery low
Atmosphere & Services
Very low
Merchandise
Moderate width and
poor depth of assortment;
low continuity
Promotion
Little
Factory Outlet Strategy Mix
©2013 Pearson Education Publishing as Prentice Hall 5-22
Factory Outlet Strategy
• Factory outlet as an outlet for unsold merchandise at traditional stores (ends, off season, returns, etc).
• Unspoken issue– making goods especially for factory outlet (less complaints from traditional retailers, but issue of comparative value). Can also diminish value of brand (Coach).
©2013 Pearson Education Publishing as Prentice Hall 5-23
Factory Outlet Strategy (cont)
• Factory outlet as a means of bypassing off-price chains; also to control geographic distribution.
• Factory outlet as a means of attracting another market segment that retailer would normally not access.
• Factory outlet malls as cumulative attraction
©2013 Pearson Education Publishing as Prentice Hall 5-24
LocationIsolated store or secondary site
PricesVery low
Atmosphere & ServicesVery low
MerchandiseModerate width and
poor depth of assortment;
low continuity
PromotionLittle, some direct mail
Membership Club Strategy Mix
©2013 Pearson Education Inc publishing as Prentice Hall 5-25
Membership Club Strategy
• Costco, BJ’s and Sam’s Club are key players
• Membership fee accounts for 85 percent to 100 percent of membership outlet’s profits
• Costco- 14-16 percent gross margin versus 22 percent for supermarket and 50 percent for department store
©2013 Pearson Education Inc publishing as Prentice Hall 5-26
Membership Club Strategy (cont)
• Will not accept higher profit margin due to concern for keeping 85 percent membership retention rate
• Response to Wall Street analysts that Costco is “too good to its customers and too good to its employees.”
©2013 Pearson Education Inc publishing as Prentice Hall 5-27
LocationIsolated store or secondary site
PricesVery low
Atmosphere & ServicesVery low
MerchandiseExtensive width and
poor depth of assortment; low
continuity; variable quality
PromotionLimited
Flea Market Strategy Mix
