2.Retail Institutions

8/2/2019 2.Retail Institutions

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Retail Institutions

andTypes of Retailers


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About Retail Institutions

A retail institution refers to basic format or structure of a

business.

Classification of Retail Institutions

a) Based on Ownership

b) Store-based retail strategy mix

c) Non store-based retail strategy mix and Non-traditionalretailing


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Contd..

Ownership

Store-based retail

strategy mix

Non store-based retail

strategy mix and

Non-traditional

retailing

Independent

Chain

Franchise

Direct Marketing

Direct Selling

Vending Machine

World Wide Web

Food Oriented Retailers:

Convenience store,

Conventional Supermarket,

Supercenter, Hypermarket,

Warehouse store

General Merchandise

Retailer:

Specialty store, CategorySpecialists, Department

store, Discount stores,

Off-price chain, Factory

Outlet, Drug Stores

These classifications are not mutually exclusive.


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Ownership based Retail Institutions


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Independent

An independent retailer owns only one retail unit. The management has

direct contact with the customers and can quickly respond to their needs.

Advantages:

Flexibility of choosing the retail format and retail location.

Devising a strategy becomes easier.

Investment costs are low.

They are able to sustain consistency in their work.

Better customer relationship management.


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Contd..

Disadvantages

In bargaining with distributors, they do not posses much power because

they buy in small quantities.

Cannot gain economies of scale in buying and maintaining inventory

because they have financial constraints.

Operations are often handled manually with little computerization. Limited advertisements.

Unequal distribution of work.

Limited time given to planning because of over-involvement of owner

into daily operations.


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Chain Stores

A chain retailer operates multiple outlets under common ownership. Itusually engages in some level of centralized purchasing and decision

making.

Advantages

They have the bargaining power due to their volume of purchase.

Achieve cost efficiency due to performing the wholesale functions themselves.

Efficiency in multiple stores is attained by shared warehousing facilities; large

purchases, SOPs, centralized decision making etc.

Work faster with the use of computers while ordering merchandise, forecasting

etc.

Can advertise


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Contd..

Disadvantages May or may not be consistent in their strategy.

Investments are high.

Loose control of the management.

Personnel may have limited independence.


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Franchising

It involves a contractual arrangement between a franchisor and a retail

franchisee, which allows the franchisee to conduct a given business under

established name and according to a given pattern of business.

The franchisee pays an initial fee and a monthly share of gross sales inexchange for the exclusive rights to sell goods and services in a specified

area.

Franchising is a retail organizational form in which small businesses can

benefit being a part of a large retail institution.


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Types of Franchising

Product/Trademark franchising:

In this type franchisees operate independently of their franchisors.

The franchisee adhere to certain rules and regulations but sets store

operating hours, store location criteria, store facilities and display etc.

Business format franchising:

Involves more interactive relationship between the franchisee and

franchisor.

Franchisees receives assistance on site location, quality control, start-uppractices, management training and responding to problems.


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Advantages to the franchisee:

Franchisees can own retail enterprise with relatively lower

capital investment.

Franchisees acquire well known name and good service lines. SOPs and management skills may be taught to the franchisees.

Cooperative marketing used , that could not be afforded

otherwise.

Franchisee purchases may be less costly per unit due to the

volume bought by the overall franchise.

Disadvantages to the franchisee:

Over saturation can occur if there are too many franchisees

situated at one location.

Franchisee may get locked into contract provisions whereby

the purchases must be made through franchisors or certain

approved vendors.

Franchisee agreement can be of short duration.

Under most of the contracts, royalties are percentage of gross

sales, regardless of franchisee profits.


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Advantages to the franchisor:

Global presence

Less investment

After franchisee have paid for their franchised outlets, franchisor still

receive royalties

Franchisees are not owners, they have greater incentive to work hard.

Thus, benefiting the franchisor

Disadvantages to the franchisor:

Franchisee could harm the overall reputation, if they do not adhere to

the company standards.

Lack of uniformity among the outlets can adversely affect the

customer loyalty. Intra-franchise competition is not desirable

Ineffective franchised units affect the profitability of the franchisor.


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Store Based Retail Strategy Mixes


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Food Oriented Retailers

Type of

Retailer

Size(000 sq.

ft.)

Location Merchandise Prices Services Promotion

Convenience

Store

2 - 3 Neighbourhood Medium width

and low depth

of assortment;

average quality

Average Average Moderate

Conventional

Supermarket

20 -

50

Neighbourhood Extensive

width and

depth of

assortment;

averagequality;

manufacturer,

and generic

brands

Average Average Heavy use

of

newspaper,

flyers and

coupons,self-service


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Contd..

Type of

RetailerSize (000

sq. ft.)Location Merchandise Prices Services Promotion

Supercenters 150-

220

Community

shopping

centre or

isolated site

Wide variety of

food (30-40 %)

and non-food

merchandise

(60-70%)

Low Average to

high

Moderate

Hypermarket 100 -

300

Community

shopping

centre or

isolated site

Wide variety of

food (60 70

%) and general

merchandise

(30-40%)

Low Average Low

Warehouse

store

100 -

150

Secondary

site, often in

industrial

area

Moderate width

and low depth;

emphasis on

manufacturer

brands bought

at discounts

Very

low

Low Little or

none


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General Merchandise Retailers

Type of

Retailer

Size(000

sq. ft.)


Specialty

Stores

4 -

12

Business

district or

shopping

centers

Very narrow

width of

assortment;

extensive

depth of

assortment;

average to

good quality

Competitive

to above

average

Average

to

excellent

Heavy use

of displays,

may have

extensive

sales force.

Category

Specialists

50 -

120

Stand

alone,

power stripcenters

Narrow

variety but

very deepassortment

Low Low to

high

Low to

Moderate

Department

Store

100 -

200

Regional

Malls, Stand

alone

Broad variety,

average to

deep

assortment

Average to

high

Average

to high

Average to

high, direct

mail,

catalog use


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Contd..

Type of

Retailer

Size(000 sq.

ft.)


DiscountStore

60 -80

Standalone,

power strip

centers

Broad variety,Low to average

assortment

Low Low Heavy use ofnewspaper ads,

price oriented

messages

Factory

outlets

20 -

30

Outlet

malls

Average variety,

deep butvarying

assortment

Low Low Use of

newspapers,brands not

advertise,

limited

workforce

Value

retailers

7 - 15 Urban, strip Average variety,

average andvarying

assortment

Low Low Average to high

Drug

Stores

3 - 15 Stand

alone, strip

centers

Narrow variety,

average to deep

assortment

Averag

e to

high

Average Low to average


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Non Store-based Retail Strategy Mix


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Direct Marketing

It is a form of retailing in which a customer is first exposed to a good or

service through a non-personnel medium (such as direct mail, broadcast or

cable TV, radio, magazine, newspaper etc.) and then orders by mail, phone

(usually a toll free number), fax or by computer.

Direct marketing can be divided into two broad categories:

General: General marketing firms offer a full line of products from

clothing to house ware.

Specialty: Specialty firms focus on narrow product lines.


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Advantages of Direct Marketing

Reduced costs: startup cost, inventory cost, location cost, sales force cost.

Possibility of offering lower prices.

Shopping convenience for the customers.

Specific consumer segments can be pin pointed using mailers.

A store based retailer can supplement its regular business and expand itsgeographic area.


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Disadvantages

Products cannot be examined prior to purchase.

Prospective entrants may underestimate the costs. Catalog preparation,

printing and mailing can be an expensive job.

The most popular catalogues draw purchases from less than 10% of

recipients.

Clutter exists

Some firms have given a bad name to the industry due to late deliveries and

providing damaged goods.


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Direct Selling

It includes both personal contact with consumers in their homes (and other

non-store locations such as offices) and phone solicitations initiated by a

retailer.

Examples: Carpet selling, vacuum cleaner, other household products,cosmetics, books, encyclopedia etc.

It emphasizes convenience in shopping and a personal touch.


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Vending Machine

It is a retailing format involving the coin or card operated dispensing of hot

and cold beverages and food or snacks items.

It eliminates the use of sales personnel.

It allows round the clock sales.

Location of the machines can be done according customers convenience.


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World Wide Web

WWW in the field of retailing relates to online retailing.

It enables retailers world wide presence.

Enhances the retailers brand.

Provides information to the consumers.

Promotes new products.

Furnish customer service.

Cost efficient

Can announce special offers and also employment opportunities.


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Single and Multi Channel Retailing

Single-Channel Retailing:

If a firm sells to consumers through one format.

Multi-Channel Retailing:

If a firm sells to consumers by combining store and non-

store retailing- as well as using multiple store formats.


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Issues

What multi-channel cross-selling opportunities exists?

How should the product assortment strategy be adapted to eachchannel? How much merchandise overlap should exist acrosschannels?

Should prices be consistent across channels?

How can a consistent image be devised and sustained across allchannels?

What is the role of each channel?

Ensuring the distribution of products to the stores as well asdirectly to the customer.


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Advantages

The retailer can use the most appropriate channel to sell particular goods.

Enable to reach different target markets.

Enable to fulfill the customers desires.

A store based retailer can leverage tangible assets by using excess capacityin its warehouse to service catalog or web sales.

A firm can also leverage its well known brand name (an intangible asset)by selling online in geographical areas where it does not have its stores.

There is an opportunity for increased sales.


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Integrated Multi-Channel Strategy

Integrated promotions across channels.

Ensuring product consistency across channels.

Having an effective information system that can share dataacross channels.

Enacting a store pickup process for items purchased on theweb or through a catalog.

Searching for multi-channel opportunities with appropriatepartners.


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THANK YOU

Documents

2.Retail Institutions