Stores & Nonstore

7/30/2019 Stores & Nonstore

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Stores & Nonstores


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Types of Retailers

Use Different Mixes

merchandise Variety (Breadth)

Assortment (Depth)

services

store design, visual merchandising

location

pricing

Infinite Variations

Survival of the Fitness -- Formats that

Satisfy the Needs of Significant Segment

PPT2-1


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Categorizing Retailers

Census Bureau

Number of Outlets

Margin versus Turnover

Location

Size

LO3


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LO3

LowTurnover

HighTurnover

High Margin

Low Margin

High-Margin/Low-Turnover

Retailers

High-Margin/High-Turnover

Retailers

Low-Margin/Low-Turnover

Retailers

Low-Margin/High-Turnover

Retailers

Retailers Classified byMargin and Turnover


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SIC System for Classifying

Retailers by Type of

Merchandise

PPT2-2


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Sales by SIC Category

PPT2-3

Source: U.S. Department of Commerce, 1998 Census of Retail Trade.


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Merchandise Offering

Variety (breadth of Merchandise)

The number of merchandise categories offered by

a retailerAssortment (Depth of Merchandise)

The number of different items (SKUs) offered in

a merchandise category

PPT2-4


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Types of Retailers

Food Retailers

Mom and Pop Stores

Convenience stores

Supermarkets

Supercenters

General MerchandiseRetailers

Department Stores

Special ty Stores

Discount Stores

Category Special is ts

Off-Price Retailer

Warehouse Club

PPT2-7


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Shopping Patterns byTypes of Retail Outlets

Outlet % Shopping Number of Weekly

Weekly Trips Spending

Supermarkets 100 2.4 $ 72.82

General merchandise 68 1.3 32.53discount stores

Fast-food restaurants 65 1.9 16.32

Drug stores 39 1.2 18.70

Convenience stores 37 2.4 19.72

Wholesale clubs 27 1.7 75.12

Specialty food stores 9 1.0 23.70

Source: Consumers Are Skeptical Again, 63rd Annual Report of the Grocery Industry, Progressive Grocer, April 1996, p.42.

PPT2-8


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Trends in the Retail Industry

Growing Diversity of Formats

New retail formats (category specialist &supercenters

Non store retailing & Electronic Retailers Increasing Industry Concentration

Centralization of Decision-Making

Information and Communication Systems

Globalization

Private labels

PPT2-6


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E-tailingLO2

E-tailing is one of the most

dynamic areas of retailingaccounting for more than 20

billion dollars in 2000 and

estimated to rise to over 100billion by 2005. Bluefly, a

leading on-line retailer since

its launch in Sept. 1997

continues to find success in

the on-line format.


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E-tailingLO2

Although the opportunities

in e-tailing can beenormous. E-tailers, such

as eToys, which closed its

web site in February of2001, have found that the

competition is intense and

sustaining a competitive e-

tail enterprise is

challenging.


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U.S. On-line Sales Forecast

Category 2000 2003

#1 Books $1.9 $ 4.9#2 Computers 5.2 10.2#3 CDs .6 2.6#4 Apparel 1.4 6.7#5 Tickets 7.8 13.6

LO2


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LO2

Category Killers

Just For Feet, the category killer in the

athletic footware and apparel sector foundedin 1977, cruised through the 1990s.However, Just For Feet has suffered

financial setbacks from alack of adapting tochanges in the evolvingretail landscape.

LO4 E hibit 4 6


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Future Changes in Retail Competition:

Supercenters

LO4: Exhibit 4.6

Number of Supercenters by Retailer

1998 1999 2000Wal-Mart 564 721 894Meijer 117 127 144

Kroger 105 126 135Kmart 102 105 115Target 14 16 31

LO4


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Leading U.S. Retailers by Sales

Wal-Mart

K-Mart

Sears

A&P

$200B

$30B

$10B

$ 8B

$ 7B$ 6B$ 5B$ 4B$ 3B$ 2B$ 1B

$800m$500m$300m$200m

1900 20 30 40 50 60 70 80 90 2000

LO4

LO4


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The Relationship of Price Versus

Nonprice Actions and Demand Curve

LO4

Price

Quantity

PriceD2

D1

Pricing Actions movethe consumer up anddown the currentdemand curve.

Non-price Actionsseek to shift thedemand curve to rightand make it moreinelastic.

Quantity

LO4


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Global Competition in Theme Park Industry

LO4

California theme park giantDisneyland saw competitionincrease dramatically with

the introduction of Legoland

from Danish competitorLego. Today, competition inthe theme park industry is

global and intense.

LO4


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Future Changes in Retail Competition

LO4

Integration of Technology1. Supply Chain Management2. Customer Management3. Customer Satisfaction

LO4


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LO4

Increasing Use of Private Labels1. Helps in protecting retailer niche2. Sets retailer apart from competition

LO4


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Arizona Jeans Co.LO4

JCPenney has built significant store

loyalty through the introduction anddevelopmentof the private

label brandArizonaJeans Co.

MQ4


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Managerial Question

Should retailers advertise the fact that they

are the owners of the private label brand(s)

they sell?

MQ4

LO4


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LO4

Private Label Branding Strategies

1. Developing a partnership with well-known celebrities,

noted experts, and institutional authorities.

2. Developing a partnership with traditionally higher-end

suppliers to bring an exclusive variation on their highlyregarded brand name to the market.

3. Reintroducing products with strong name recognition

that have fallen from the retail scene.

4. Branding an entire department or business; not just a

product line.

LO4


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Kmart and Martha StewartLO4

Kmart and Sears have

joined together withwell known celebrity,Martha Stewart, to

employ a private labelbranding strategy toposition themselves inthe marketplace.

LO3


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Evolution of Retail Competition

LO3

1. The Wheel of Retailing

2. The Retail Accordion

3. Retail Life Cycle

LO3


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Evolution of Retail CompetitionLO3

Wheel of Retailing TheoryNew types of retailers enter the market as

low-status, low-margin, low-price

competitors and take market share awayfrom established retailers. These newretailers gradually acquire more elaboratefacilities, becoming less efficient, and are

replaced by new low-status, low-margin,low-price retailers.

LO3


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Wheel of RetailingLO3

Some would argue that McDonalds has

become a victim of the wheel of retailing.When McDonalds started out, it served a

select menu. Over the years, the McDonalds

product offering has expanded to the

inclusion of playgrounds, thus opening theway for new, low-cost fast-food providers,such as Checkers.

LO3


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The Retail Accordion

Wide Assortment

Wide Assortment

NarrowAssortment

Time

LO3


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The Retail AccordionRetail institutions evolve from outlets that

offer wide assortments to specializedstores that offer narrow assortments andcontinue repeatedly through the pattern.

LO3


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The Retail Life CycleRetail institutions pass through anidentifiable cycle which includes:

1. Introduction2. Growth3. Maturity

4. Decline

E l i f R il C i i

LO3


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Evolution of Retail Competition:

The Retail Life Cycle

IntroductionBegins with an aggressive, bold

entrepreneur who is willing and able to

develop a different approach to retailing ofcertain products. During this stage profits

are low, despite increasing sales levels.

E l i f R il C i i

LO3


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GrowthSales and profits increase, validating theentrepreneurs good idea. New retailers

enter the market and begin to copy theretailers idea. Late in this stage both

market share and profitability approach

their maximum levels.

E l i f R il C i i

LO3


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MaturityMarket share stabilizes and profits declinebecause:

1. managers used to managing simplesmall retail outlets must now manage large

complex firms,

2. industry has over expanded, and3. competitive assaults by new retailformats.

E l ti f R t il C titi

LO3


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DeclineThe once promising idea is no longer

needed in the marketplace. As a result,market share and profits fall.

Retail Institutions in their Various

LO3: Exhibit 4.5


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Retail Institutions in their VariousStages of the Retail Life Cycle

Introduction

E-tailing (1990s)

Supercenters (1990s)

Growth

Food Courts (1980s)

Airport-based

Retailers (1980s)

Maturity

Warehouse Clubs (1970s)

Department Stores (1860s)

Supermarkets (1930s)

Convenience Stores (1960s)

Category Killers (1970s)

Decline

Variety Stores (1890s)

Factory Outlet Malls

(1970s)

Documents

Stores & Nonstore