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Midterm

RMG 200 Study Guide - Midterm Guide: North American Industry Classification System, Shoppers Drug Mart, Stock Keeping Unit


Department
Retail Management
Course Code
RMG 200
Professor
Brent Barr
Study Guide
Midterm

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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 décor 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 firm’s 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, children’s 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

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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 they’re also costly
Retailers to offer broader variety, deeper assortments, and/or additional services need to charge higher
2
rocess
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 store’s 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
variety of merchandise, limited service, and low prices (aka mass
merchandiser, full line discount store)
o Offers both private labels and national brands, but these
brands are typically less fashion-oriented than brands in
department stores
Full line discount store: retailers that offer broad variety of
merchandise, limited service, and low prices
Face intense
competition from
specialty stores tat
focus on single
category of
merchandise
Specialty Stores
Specialty store: store concentrating on a limited number of
complementary merchandise categories and providing a high level
of service in an area typically under 744 square meters (eg. West
49, Sephora)
They are vulnerable to
shifts in consumer
tastes and preferences
because specialty
retailers focus on
specific market
segments
Category
Specialist/Killer
Category specialist/killer: a discount retailer that offers a narrow
but deep assortment of merchandise in a category and thus
dominates the category from the customers’ specialist (Eg. Bass
Pro Shops’ Outdoor World)
They can use their buying power to negotiate low prices and are
assured of supply when items are scarce
Department stores located near category specialists often have to
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
Competition between
specialists in each
category becomes
intense as firms
expand into regions
originally dominated
by another firm

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Department
Stores
Department store: A retailer that carries a wide variety and deep
assortment, offers considerable customer services, and is organized
into separate departments for displaying merchandise. Can be
categorized into three tiers:
o Upscale, high fashion chains with exclusive designer
merchandise and excellent customer service (eg. Holt Renfrew)
o Retailers that sell modestly priced merchandise with less
customer service (eg. The Bay)
o Value oriented third tier caters to more price conscious
consumers (eg. Sears)
Leased department: an area in retail store leased or rented to an
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)
Overall sales and
recent market shares
has fallen
Decline value for
perceived value service
Increase competition
from discount and
specialty stores
Difficult to get to
because they are
located in large malls
Drugstores
Drugstore: specialty retail store that concentrates on
pharmaceuticals and health and personal grooming merchandise
Experiencing sustained
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
stores and
supermarkets
Off price
retailers
Off price retailer: a retailer that offers an inconsistent assortment
of brand name fashion oriented soft goods at low prices. Two
special types of off price retailers are:
o Closeout retailer: off price retailer that sells a broad but
inconsistent assortment of general merchandise as well as
apparel and soft home goods, obtained through retail
liquidations and bankruptcy proceedings
o Outlet store: off price retailer owned by a manufacturer or a
department or specialty store chain
Factory outlet: outlet store owned by a manufacturer
Value retailers
Value retailer: general merchandise discount stress that are found
in either low income urban or rural areas and are much smaller
than traditional discount stores, less than 837 square meters
(eg. Dollarama)
Specialize in giftware, party, and craft items rather than
consumables
Pop-Up Stores
Temporary stores that respond to customers by reaching out in
nontraditional ways and locations such as unfinished space
FOOD RETAILERS
Combination store: a retailer that sells both food and nonfood items
Conventional Supermarkets
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