RMG 100 Study Guide - Final Guide: Warehouse Club, Stock Keeping Unit, Gross Margin

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Bashir Hessari
1
RMG 100 Study Notes
Classification of Retail Operations
Level of Service
Product Lines
Price
Ownership
Level of Service
Product Assortment
- Variety (breadth of merchandise) The number of different merchandise
categories a retailer offers*
- Assortment (depth of merchandise) The number of items in a merchandise
category (SKU’s)*
- Each different item of merchandise is called a SKU (stock keeping unit).
-Customers like wide variety, deep assortment, and a lot of service, but some
customers appreciate having the retailer edit the assortment for them.
-Why don’t discount stores offer more services? (They appeal to a target segment
that does not want to pay the cost for more service options.)
Price
Ownership
Factory outlets
Warehouse clubs
Discount Stores
Exclusive Stores
Self Service
Full Service
LOW PRICE
HIGH PRICE
Good Value
Quality Image
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Classification of Ownership
- Independent Retailers
- Chain Stores
- Franchises
Types of Retailers
- Specialty Stores
- Department Stores
- Supermarkets
- Discount Stores
- Convenience Stores
- Off-Price Retailers
- Club Stores
- Drug Stores
- Superstores
Specialty Stores
- Concentrates on a limited number of complementary merchandise categories
and provides a high level of service in a relatively small store.
Level of service: High Assortment/Variety: Narrow/Deep Price: High Gross Margin: High
Specialty Store Issues
- 6,500 chain stores closed last year… International Council of Shopping
Centers
- Cheaper rents, shorter lease terms and fatter allowances from landlords for
outfitting stores
- Rents in new lease signing are 10.4% lower on average than the asking price
(Reis, Inc)
Specialty Discount Stores OR Category Killers!
Ex. The Home Depot, Toys R us, Ikea, Best Buy
Service Level: Low Assortment/Variety: Narrow/Deep Price: Low Gross Margin: Low
Department Stores
Ex. The Bay, Sears
Service level: High Assortment/Variety: Broad/Med-Deep Price: High Gross Margin: High
Department Store Issues
-Competition
-Discount Stores on Price
-Specialty stores on Service, Depth of Assortment
-Lower Cost by Reducing Services
- Centralized Cash Wraps
-More Sales
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Bashir Hessari
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-Customers Wait for Sale
-Focus on Apparel and Soft Home
-Develop Private Labels and Exclusive Brands
Ex. (Department stores are responding to competition by lowering their traditionally
higher prices. The Bay is, investing heavily in private label programs, creating
excitement by juxtaposing different departments in the same area, and adding new
emphasis to some consumer segments by increasing advertising and selection. They
are working closely with their vendors to ensure better in-stock positions for fashion
merchandise and still reduce average inventory levels.)
Supermarkets
-Competition: fierce, low profit on many items
-Large, self-service retailer with grocery specialty
Discount Stores
Service Level: Low Variety/Assortment: Broad/ Shallow Price: Low Gross Margin: Low
Discount Store Issues
-Wal-Mart’s Dominance
- Sophisticated supply chain management
Differentiate Strategy
-Wal-Mart = EDLP and Good Value
-Shoppers = Health and Beauty Products
Competition from Category Specialist
Convenience Stores
- Convenience products
- Often with gas stations
- Convenience stores: fill-in your “regular” shopping
- Competition (fast food also)
- 24/7 is more important
- We pay for the convenience
Retailer
Ex. Winners
Off-price Retailer Low service Narrow Line Low Prices Low margins
-Less wide; but deep.
Club Stores
- Warehouse club/ wholesale club
- No frills, members only
- Bulk purchases: price competition, homogeneous shopping goods
Drug Stores
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Document Summary

Variety (breadth of merchandise) the number of different merchandise categories a retailer offers* Assortment (depth of merchandise) the number of items in a merchandise category (sku"s)* Each different item of merchandise is called a sku (stock keeping unit). Customers like wide variety, deep assortment, and a lot of service, but some customers appreciate having the retailer edit the assortment for them. Why don"t discount stores offer more services? (they appeal to a target segment that does not want to pay the cost for more service options. ) Concentrates on a limited number of complementary merchandise categories and provides a high level of service in a relatively small store. Level of service: high assortment/variety: narrow/deep price: high gross margin: high. 6,500 chain stores closed last year international council of shopping. Cheaper rents, shorter lease terms and fatter allowances from landlords for outfitting stores. Rents in new lease signing are 10. 4% lower on average than the asking price (reis, inc)

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