chpt 2 - retail formats
TRANSCRIPT
Chapter 2Chapter 2
Retail FormatsRetail Formats
Faiza Nasir
Retail formats?Retail formats?
Merchandise’s DivisionMerchandise’s Division
Product WidthProduct Width
Product LengthProduct LengthProduct DepthProduct Depth
SKUs?SKUs? A common term for a unique numeric identifier, used to refer to a
specific product in inventory or in a catalog.
Inventory control count that represents one or more items that will be sold together. For example, a retail bed store would consider one bed frame with four wheels equal to one SKU (even though the frame and the wheels come from different suppliers), because a frame is never sold without wheels, and wheels are never sold alone. Conversely, a frame, a box spring, and a mattress would be considered three SKUs, because any of the three items might be sold separately.
Warehousing item that is unique because of some characteristic (such as brand, size, color, model) and must be stored and accounted for separate from other items. Every SKU is assigned a unique identification number (inventory or stock number) which is often the same as (or is tied to) the item’s UPC.
Store vs. Store vs.
Non-Store formatsNon-Store formats
Store Formats by LocationStore Formats by Locationa) Chain storea) Chain store Multi-locationalMulti-locational Operates multiple outlets under common ownershipOperates multiple outlets under common ownership Engages in some level of centralized or coordinated purchasing Engages in some level of centralized or coordinated purchasing
and decision makingand decision makingb) High street format:b) High street format: A retail chain that seeks to locate itself in busy shopping areas A retail chain that seeks to locate itself in busy shopping areas
(generally less than 2,000 sft, with no parking facilities and (generally less than 2,000 sft, with no parking facilities and focused merchandise categories)focused merchandise categories)
c) Destination format:c) Destination format: Independent retail stores located specifically in an area with Independent retail stores located specifically in an area with
alluring propositions (usually large in size, with ample alluring propositions (usually large in size, with ample concessions, huge parking space, wide merchandise categories)concessions, huge parking space, wide merchandise categories)
d) Convenience store format:d) Convenience store format: Accessible carrying wide array of consumable goods (less than Accessible carrying wide array of consumable goods (less than
5,000 sft, extended hours, parking for few vehicles, convenience 5,000 sft, extended hours, parking for few vehicles, convenience merchandise)merchandise)
Competitive State of ChainsCompetitive State of Chains
AdvantagesAdvantages Bargaining powerBargaining power Cost efficienciesCost efficiencies Efficiency from Efficiency from
computerization, computerization, sharing warehouse sharing warehouse and other functionsand other functions
Defined management Defined management philosophyphilosophy
Considerable efforts Considerable efforts in long-run planningin long-run planning
DisadvantagesDisadvantages Limited flexibilityLimited flexibility Higher investment Higher investment
costscosts Complex managerial Complex managerial
controlcontrol Limited Limited
independence among independence among personnelpersonnel
Convenience Store Strategy MixConvenience Store Strategy Mix
Location:Neighborhood
Merchandise:Medium width and low depth of assortment; average quality
Prices:Average to
Above average
Atmosphere &Services:Average
Promotion:Moderate
Store Formats by OwnershipStore Formats by Ownershipa) Independenta) Independent Generally higher level of independent retailers existsGenerally higher level of independent retailers exists 50% of these are run by owners and their families50% of these are run by owners and their families Why so many? Ease of entryWhy so many? Ease of entry
b) Franchise:b) Franchise: A contractual agreement between a franchisor and a retail A contractual agreement between a franchisor and a retail
franchisee, which allows the franchisee to conduct business franchisee, which allows the franchisee to conduct business under an established name and according to a given under an established name and according to a given pattern of businesspattern of business
Franchisee pays an initial fee and a monthly percentage of Franchisee pays an initial fee and a monthly percentage of gross sales in exchange for the exclusive rights to sell gross sales in exchange for the exclusive rights to sell goods and services in an areagoods and services in an area
Competitive State of IndependentsCompetitive State of Independents
AdvantagesAdvantages Flexibility in formats, Flexibility in formats,
locations, and strategylocations, and strategy Control over investment Control over investment
costs and personnel costs and personnel functions, strategiesfunctions, strategies
Personal imagePersonal image Consistency and Consistency and
independenceindependence Strong entrepreneurial Strong entrepreneurial
leadershipleadership
DisadvantagesDisadvantages Lack of bargaining Lack of bargaining
powerpower Lack of economies of Lack of economies of
scalescale Labor intensive Labor intensive
operationsoperations Over-dependence on Over-dependence on
ownerowner Limited long-run Limited long-run
planningplanning
Competitive State of FranchisingCompetitive State of Franchising
AdvantagesAdvantages small capital requiredsmall capital required acquire well-known acquire well-known
namesnames operating/management operating/management
skills taughtskills taught cooperative marketing cooperative marketing
possiblepossible exclusive selling rightsexclusive selling rights less costly per unitless costly per unit
DisadvantagesDisadvantages oversaturation could oversaturation could
occuroccur franchisors may franchisors may
overstate potentialoverstate potential locked into contractslocked into contracts agreements may be agreements may be
cancelled or voidedcancelled or voided royalties are based royalties are based
on sales, not profitson sales, not profits
From the Franchisor’s PerspectiveFrom the Franchisor’s Perspective
BenefitsBenefits national or global national or global
presence possiblepresence possible qualifications for qualifications for
franchisee/ franchisee/ operations are set operations are set and enforcedand enforced
money obtained at money obtained at deliverydelivery
royalties represent royalties represent revenue streamrevenue stream
Potential ProblemsPotential Problems potential for harm to potential for harm to
reputationreputation lack of uniformity lack of uniformity
may affect customer may affect customer loyaltyloyalty
ineffective franchised ineffective franchised units may damage units may damage resale value, resale value, profitabilityprofitability
potential limits to potential limits to franchisor rulesfranchisor rules
Store Formats by Store Formats by Merchandise CategoryMerchandise Category
a) Family storea) Family store Store dealing in all categories of related item (For e.g. apparel Store dealing in all categories of related item (For e.g. apparel
store offering merchandise to suit the wardrobe of a family)store offering merchandise to suit the wardrobe of a family)b) Specialty format:b) Specialty format: Narrow product lines with good depth. Specializing in a given type Narrow product lines with good depth. Specializing in a given type
of merchandise, offering attentive customer services.of merchandise, offering attentive customer services.c) Department store format:c) Department store format: Large in size having several departments working as SBUs Large in size having several departments working as SBUs d) Super market format:d) Super market format: Departmentalized, specializing in foodstuff, grocery and limited Departmentalized, specializing in foodstuff, grocery and limited
non-food categories, free access displays so that customers can non-food categories, free access displays so that customers can pick from shelves.pick from shelves.
e) Emporium:e) Emporium: Selling a variety of a particular group of merchandise (sari Selling a variety of a particular group of merchandise (sari
emporium).emporium).
Merchandise:Very narrow width and
extensive depth of assortment; average to
good quality
Prices:Competitive to Above average
Atmosphere andServices:
Average to excellent
Promotion:Heavy use of displaysExtensive sales force
Specialty Store Strategy MixSpecialty Store Strategy Mix
Department Store Strategy MixDepartment Store Strategy Mix
Location:Business district, shopping
center or isolated store
Merchandise:Extensive width and
depth of assortment; average to
good quality
Prices:Average to
Above average
Atmosphere andServices:
Good to excellent
Promotion:Heavy ad and catalog
use; direct mail; personal selling
Conventional Supermarket Conventional Supermarket Strategy MixStrategy Mix
Location:Neighborhood
Merchandise:Extensive width
and depth of assortment;
average quality; manufacturer,
private, & generic brands
Prices:Competitive
Atmosphere andServices:Average
Promotion:Heavy use of
newspapers, flyers, and coupons
Store Formats by SizeStore Formats by Size
a) Superstore formata) Superstore format Single-level large store, twice the size of a supermarket, offers Single-level large store, twice the size of a supermarket, offers
non-traditional goods and services like pharmacy, flower shop, non-traditional goods and services like pharmacy, flower shop, bookstore, salad bar, bakery etc.bookstore, salad bar, bakery etc.
b) Shopping Mall:b) Shopping Mall: Spread over a large area, arrangement of retail stores and places Spread over a large area, arrangement of retail stores and places
for leisure activities.for leisure activities.c) Shopping Center:c) Shopping Center: Plaza combining five or more tenant spaces developed under one Plaza combining five or more tenant spaces developed under one
building.building.d) Hypermarket:d) Hypermarket: Wide variety, offering in large quantities in each category selling Wide variety, offering in large quantities in each category selling
huge volumes at low margins.huge volumes at low margins.
Store Formats by PriceStore Formats by Pricea) Discount formata) Discount format Bazaar format, believing in discounts more often.Bazaar format, believing in discounts more often.b) EDLP format:b) EDLP format: Specialize in a particular merchandise line, assuring consistently Specialize in a particular merchandise line, assuring consistently
low prices.low prices.c) Category killer format:c) Category killer format: Large specialty store having enormous selection of its product Large specialty store having enormous selection of its product
category at relatively low prices.category at relatively low prices.d) Factory-outlet format:d) Factory-outlet format: Owned and operated by the manufacturerOwned and operated by the manufacturere) Warehouse format:e) Warehouse format: Large sale of discontinued merchandise, has large width and Large sale of discontinued merchandise, has large width and
depth in many categories it retails.depth in many categories it retails.f) Single-price denomination format:f) Single-price denomination format: Scrambled merchandise at just one price point, generally at a low Scrambled merchandise at just one price point, generally at a low
one.one.
Discount Store Strategy MixDiscount Store Strategy Mix
Merchandise:Extensive width and
depth of assortment; average togood quality (overruns,
irregulars, cut-sizes)
Prices:25% or more below
MRP
Atmosphere/ Services:Slightly below
average to average
Promotion:Heavy on newspapers;price-oriented; selling
Factory Outlet Strategy MixFactory Outlet Strategy Mix
Merchandise:Moderate width and
poor depth of assortment;
low continuity (cancelled orders, discontinued
merchandise)
Prices:Very Low
Atmosphere/ Services:Very low
Promotion:Little
Warehouse Store Strategy MixWarehouse Store Strategy Mix
Location:Secondary site, often in
industrial area
Merchandise:Moderate width and
low depth of assortment; emphasis on
manufacturer brandsbought at discount
Prices:Very low
Atmosphere andServices:
Low
Promotion:Little or none
Store Formats by ConcessionsStore Formats by Concessions
a) Stopover store formata) Stopover store format Like petrol pump, offers instant use or ready-to-eat categories of Like petrol pump, offers instant use or ready-to-eat categories of
merchandise.merchandise.b) Kiosk:b) Kiosk: Small freestanding pavilionSmall freestanding pavilionc) Alliances:c) Alliances: With brands that customers trustsWith brands that customers trusts
Bazaars?Bazaars? SeasonalSeasonal StructuredStructured Un-structuredUn-structured ThematicThematic
Scalability and Scalability and its importanceits importance