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Ryerson University
Retail Management
RMG 200
Brent Barr

Ch: 2 Types of Retailers TRENDS IN THE RETAIL INDUSTRY Some of the most important changes involve: Changing consumer preferences Increasing industry concentration Globalization of retail The use of multiple channels to interact with customers Increasing competition in the Canadian marketplace The growing importance of technology to retail success The blurring of retail channels Retail branding Growing Diversity of Retail Formats The initial category specialists in toys, consumer electronics, and home improvement supplies have been joined by a host of new specialists including Sport Chek, Bed Bath and Beyond, PETsMART Grocery stores such as Loblaws are adding pharmacies and clothing and home dcor products to expand their retail mix Many new types of retailers coexist with traditional retailers Increasing Industry Concentration Number of different types of retailers has grown, the number of competitors within each format is decreasing The Canadian marketplace is powered by a small number of large retailers who dominate in their specific retail category (eg. Walmart, Shoppers Drug Mart, Best Buy, Future Shop, Costco) Trend toward a blurring of retail channels will continue (eg. Drugstores move into high end cosmetics and grocery stores invaded pharmacy business) RETAILER CHARACTERISTICS A. Price-Cost Trade Off The difference between the retail mixes of department and discount stores illustrates the trade-off retailers make between the price and assortment of merchandise they sell and the services they offer to their customers B. Type of Merchandise North American Industry Classification System (NAICS): Classification of retail firms into a hierarchical set of six digit codes based on the types of products and services they produce and sell o First two digits firms sector o Remain four digits various subsectors C. Variety and Assortment Even if retailers sell the same type of merchandise, they might not compete directly because they appeal to different customer needs and thus offer different assortments and varieties of merchandise and services Variety (breadth of merchandise): the number of different merchandise categories within a store or department (eg. Shoes, appliances, apparel, and cosmetics) Assortment (depth of merchandise/stock): the number of SKUs within a merchandise category (eg. Running shoes, dress shoes, childrens shoes, walking shoes) SKU (stock keeping unit): the smallest unit available for keeping inventory control. In soft goods merchandise, a SKU usually means size, colour, and style D. Customer Services Eg. Bicycle stores offer assistance in selecting appropriate bicycle, adjusting bicycles to fit individual Eg. Accepting credit and debit payment, provide parking, being open in convenient hours E. Cost of Offering Breadth and Depth of Merchandise and Services Stocking a deep assortment is appealing to customers but costly for retailers Services attract customers to the retailer, but theyre also costly Retailers to offer broader variety, deeper assortments, and/or additional services need to charge higher 2rocess Retailers use different retail mixes to set themselves apart including: The types of merchandise sold (variety and assortment) The level of customer service The value is a combination of price and quality Communicate the stores position Place which includes location, store layout, and design GENERAL MERCHANDISE RETAILERS Types of general merchandise retailers include: Discount stores Specialty stores Category specialists Department stores Home improvement centers Off-price retailers Value retailers Issues Discount Stores Discount store: a general merchandise retailer that offers a wide Face intense variety of merchandise, limited service, and low prices (aka mass competition from merchandiser, full line discount store) specialty stores tat o Offers both private labels and national brands, but these focus on single brands are typically less fashion-oriented than brands in category of department stores merchandise Full line discount store: retailers that offer broad variety of merchandise, limited service, and low prices Specialty Stores Specialty store: store concentrating on a limited number of They are vulnerable to complementary merchandise categories and providing a high level shifts in consumer of service in an area typically under 744 square meters (eg. West tastes and preferences 49, Sephora) because specialty retailers focus on specific market segments Category Category specialist/killer: a discount retailer that offers a narrow Competition between Specialist/Killer but deep assortment of merchandise in a category and thus specialists in each dominates the category from the customers specialist (Eg. Bass category becomes Pro Shops Outdoor World) intense as firms They can use their buying power to negotiate low prices and are expand into regions assured of supply when items are scarce originally dominated Department stores located near category specialists often have to by another firm reduce their offerings in the category because consumers are drawn to the deep assortment and low prices at the category killer Often operate in big box format 1860-13 950 square meters home improvement center: a type of category specialist offering equipment and material used by do it yourselfers and construction contractors to make home improvements Department Department store: A retailer that carries a wide variety and deep Overall sales and Stores assortment, offers considerable customer services, and is organized recent market shares into separate departments for displaying merchandise. Can be has fallen categorized into three tiers: Decline value for o Upscale, high fashion chains with exclusive designer perceived value service merchandise and excellent customer service (eg. Holt Renfrew) Increase competition o Retailers that sell modestly priced merchandise with less from discount and customer service (eg. The Bay) specialty stores o Value oriented third tier caters to more price conscious Difficult to get to consumers (eg. Sears) because they are Leased department: an area in retail store leased or rented to an located in large malls independent company. The leaseholder is typically responsible for all retail mix decisions involved .in operating the department and pays the store a percentage of its sales as rent (eg. Beauty salons, pharmacies, shoes, jewelry, furs, photography studios) Drugstores Drugstore: specialty retail store that concentrates on Experiencing sustained pharmaceuticals and health and personal grooming merchandise sales growth because the gaining population requires more prescription drugs and profit margins for prescription pharmaceuticals are higher than for other drugstore merchandise Competition from pharmacies in discount
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