Types of RetailersTypes of Retailers

Types of Retail OwnershipTypes of Retail Ownership

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Chapter Objectives

Explain the NAICS categories for the retail industry.

Name the types of business organization.

Identify the types of retail business ownership.

Understand how competition affects retail evolution.

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Using Categories

Retailers are as diverse as the goods and services that people need and want.

Retailers are categorized by the type of merchandise or products that a particular retailer offers.

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NAICS Codes

The use of the NAICSNAICS allows North American nations to compare business statistics by industry.

NAICS North American Industry Classification System, a system used to categorize industries in North America, developed by the United States, Canada, and Mexico

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NAICS Codes

The NAICS uses 12 categories and code numbers for the retail industry.

The 12 categories classify retailers by the types of products they sell.

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NAICS Codes

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Code Category

NAICS Retail Industry Categories

441 Motor Vehicle and Parts Dealers442 Furniture and Home Furnishing Stores443 Electronics and Appliance Stores444 Building Material and Garden Equipment and Supplies Dealers

445 Food and Beverage Stores446 Health and Personal Care Stores447 Gasoline Stations448 Clothing and Clothing Accessories Stores451 Sporting Goods, Hobby, Book, and Music Stores452 General Merchandise Stores453 Miscellaneous Store Retailers454 Non-Store Retailers

Operating an e-tail business on an electronic channel—the Web—can be costly, due to design, delivery, returns, and operating expenses.

Though Many larger dot-com companies crashed in the 1990’s, small stores like Harris Cyclery of West Newton, Massachusetts, actually increase sales using a basic Web site. Today, a third of Harris’s bicycle business rides in on the Web to get hard-to-find parts and personal service.

Describe an e-business’s home page to your class after viewing one through marketingseries.glencoe.com.

With all kinds of retail businesses opening their virtual doors in cyberspace, you could be clicking your mouse for days before finding the right stuff at the right price.

Shopping by Bot

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Shopping bots to the rescue! Thirty-six percent of Americans search the Net using nifty search engines like PriceScan, MySimon, and BizRate that comb the Web and spot good deals. Beware, however, that some merchants will pay bots for top slots.

For more information on retailing, go to marketingseries.glencoe.com.

Retail Sales Associates

Retail sales associatessales associates receive both general sales training and special product training.

sales associates retail employees who sell merchandise and products to customers

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Variety of Merchandise

Most retailers carry merchandise that falls into more than one category.

Retailers put together merchandise varietymerchandise variety that their customers want to buy.

merchandise variety the product or merchandise lines that a retailer carries

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Variety of Merchandise

Retailers also offer merchandise assortmentmerchandise assortment.

merchandise assortment the number of items within a merchandise line

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Why is the NAICS important?

How many NAICS categories are there for the retail industry?

How are store and non-store retailers alike? How are they different?

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Who Owns the Store?

The types of business ownership vary from the very small, one-owner business to the huge corporation with thousands of stockholders as owners.

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Business Organization

Retail businesses fall into one of three types of organizations:

Single proprietorshipSingle proprietorship

PartnershipPartnership

CorporationCorporation

single proprietorship a business that is owned by one person

partnership an agreement between two or more persons to go into business together

corporation a form of business for which a charter is granted by the state in which the business will be established. The corporation sells stock to investors who become the owners of the corporation.

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Types of Stores and Ownership

An independent store is often the vehicle for an entrepreneurentrepreneur to begin his or her career.

independent store a store that is owned privately, having one location

entrepreneur person who takes the risk of opening a new business, often acting as the manager and operator of the business

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Types of Stores and Ownership

The owners of chain chain storesstores are usually located some distance from the local store.

chain stores stores that have at least two locations and are owned by one company or person

Store groups are owned by large companies. Sears, Lands’ End, and Allstate Insurance are owned by one corporation, but each is operated independently.

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Types of Stores and Ownership

Manufacturer retail stores are owned by a manufacturer.

These stores might be located in malls or at factory outlet malls.

Factory stores are manufacturer retail stores located at factory outlet malls.

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Types of Stores and Ownership

The franchisefranchise system allows a business (the franchisorfranchisor) to lease its trade name or business system to another business entity (the franchiseefranchisee).

franchise agreement or contract between the franchisor and franchisee to sell a company’s goods or services at a designated location

franchisee person or persons who pay a fee to a company to operate a business under the franchisor’s trade name

franchisor a business that leases its trade name and operation system to another person, or franchisee

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Types of Stores and Ownership

Cooperatives are stores that are owned by a group of people who sell products only to the people who belong to the cooperative.

Cooperatives are also known as co-ops.

People interested in a cooperative buy stock in the business and become eligible to participate in the cooperative.

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Types of Stores and Ownership

A voluntary chain consists of a group of retail stores that carry similar products.

Lease departments are usually part of a larger retail operation.

Lease dealerships occur when a retail company owns the building and land where a business is located.

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Retail Evolution

Competition is fierce among similar types of retail businesses.

Retailers are constantly reinventing themselves and how they do business.

Retailing is in a constant state of evolution.

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Retail Evolution

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Retailer

Before

Innovationand

Reinvention

After

Retailer

What are the three types of business organization?

What is a franchise?

How is an independent store different from chain stores?

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Explain what NAICS means.

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Identify who uses the NAICS and explain what it does.

Name three of the categories identified by the NAICS.

NAICS stands for North American Industry Classification System, a system used to categorize industries on the North American continent.

1. The NAICS is used by retailers in Canada, the United States, and Mexico to classify retailers by the types of products they sell.

2. Answers should include three of the following: motor vehicle and parts dealers; furniture and home furnishings stores; electronics and appliance stores; building material and garden equipment and supplies dealers; food and beverage stores; health and personal care stores; gasoline stations; clothing and clothing accessories stores; sporting goods, hobby, book, and music stores; general merchandise stores; miscellaneous store retailers; and non-store retailers.

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Checking Concepts

continued

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Define single proprietorship and partnership.

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Compare the three types of business organization.

Define entrepreneur.

Explain the terms franchise, franchisee, and franchisor.

Single proprietorship is a business that is owned by one person. Partnership is an agreement between two or more persons to go into business together.

4. In a single proprietorship, the owner makes all of the business decisions and assumes all of the business risks. The owner also keeps all of the profits. In a partnership, the partners jointly share advantages and risks of business ownership. A corporation is a more complex form of business organization. A corporation is owned by the shareholders who buy stock in the corporation. The shareholders' liability for loss is limited to the amount of stock they have purchased.

5. An entrepreneur is the person who takes the risk of opening a new business.

6. A franchise is an agreement between a franchisor and a franchisee. The franchisee pays a fee and royalties to the franchisor for the right to lease the franchisor's trade name and operating system. Franchise is also the term used to describe the business operating under this system.

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Checking Concepts

continued

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Name and describe two types of retail business ownership other than franchise ownership.

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Critical ThinkingAnswers should include two of the following: Independent stores are owned privately; chain stores have at least two locations; group stores are usually owned by large companies or corporations (e.g., Sears Roebuck); manufacturer retail stores are retail stores owned by a manufacturer; cooperatives are stores that are owned by a group of people and sell their products only to the people who belong to the cooperative; voluntary chain stores are a group of retail stores that carry similar product offerings and form a voluntary association in order to purchase products at more favorable prices; lease departments are small businesses that make an agreement with a larger store to rent space; and lease dealerships exist when a company owns the building and land where the business is located.

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Checking Concepts

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