5 chapter 5 retail institutions by store-based strategy mix
TRANSCRIPT
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Chapter Objectives
To describe the wheel of retailing, scrambled merchandising, and the retail life cycle, and show how they can help explain the performance of retail strategy mixes
To discuss some ways in which retail strategy mixes are evolving
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Chapter Objectives_2
To examine a wide variety of food-oriented retailers involved with store-based strategy mixes
To study a wide range of general merchandise retailers involved with store-based strategy mixes
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Retailer Strategy Mix• A strategy mix is the firm’s particular
combination of:store location, operating procedures, goods/services offered, pricing tactics, store atmosphere, customer services, and promotional methods
This is a special effort to create the strategy
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Earning Destination Retailer Status
Be price oriented and cost efficientBe upscale Be convenientOffer a dominant assortment Offer superior customer serviceBe innovative or exclusive
Focus is to strive to be dominant in some way
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Wheel of Retailing
• Theory to explain how new retailers or forms of retailing begin
• Retail innovators begin as low price operators with low costs and low profit requirements. Overtime, the innovators upgrades to better products and better facilities. They then become vulnerable to new innovators.
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Figure 5.1 The Wheel of Retailing
Medium StrategyModerate Prices
Improved facilitiesBroader base of value and service
Low end StrategyLow prices
Limited facilities
High end StrategyHigh prices
Excellent facilitiesUpscale consumers
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Figure 5.2 Retail Strategy Alternatives
Low End Strategy• Low rental location
• No services• Spartan Fixtures
• Simple retail personnel organization
• Price emphasis in promotion
• Most products visible• Self-service
• High sales per store personnel
High End Strategy• High rental shopping
• center• Elaborate services
Credit,gift wrapping, • Elaborate fixtures
• Elaborate personnel organization
• No price emphasis• Product demonstrations
• Spacious interior • products in back room
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Scramble Merchandise
• Scrambled merchandising occurs when a retailer adds goods and services that may be unrelated to each other and to the firm’s original business
• Popular because it allows ways to improve profits and revenues
• Name the different retailers that have done this ?
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Figure 5.3 Scrambled Merchandising by a Shoe Store
ScrambleMerchandise
Original merchandise
ShoesSlippers
Socks
Shoe Polish Rubber galoshes
Sandals
SlippersHandbags
Shoes
Umbrellas hats
gloves
Sweaters
Rubber galoshes
Sandals
Shoe Polish
Socks
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Retail Life Cycle
• Retail institutions pass through identifiable life stagesintroductiongrowthmaturitydecline
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Figure 5.4 Retail Life Cycle
Retail Life Cycle concepts states that retail institutions pass through identifiable life stages: Introduction growth, maturity and decline
Intro Stage Growth Maturity Decline
Different stores or store formats which fit into these stages now are outline on page 108 in text
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How Retail Institutions are Evolving
Mergers, Diversification, DownsizingCost-Containment and Value-Driven
Retailing
Merging allows firms to jointly maximize resources, enlarge customer base, improve productivity and bargaining power
Diversifications allows firms to become active in retail firms outside their normal operations or add stores in different goods/service categories.
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Mergers, Diversification, and Downsizing
Mergers: combination of separately owned firms (e.g., Sears and Lands’ End)
Diversification: retailers become active in businesses outside their normal operations (e.g., Limited Brands)
Downsizing: unprofitable stores are closed or divisions are sold off (e.g., Kmart)
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Cost Containment and Value Driven Retailing
• Cost containment is about reducing costs in order to offer lower prices
• Strategy is used because of intense competition in the market
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Methods for Cost ContainmentStandardizing procedures, store layouts, store
size, and product offeringsUsing secondary locationsPlacing stores in smaller communities Using inexpensive construction materialsUsing plainer fixtures and displaysBuying refurbished equipmentJoining cooperative buying and advertisingCreatively financing inventories
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Table 5.1 Store-Based Retail Strategy Mixes
Food Oriented Convenience store Conventional
supermarket Food-based
superstore Combination store Box (limited-line)
store Warehouse store
General Merchandise Specialty store Traditional department Full-line discount store Variety store Off-price chain Factory outlet Membership club Flea market
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Convenience Store Strategy Mix
Location:Neighborhood
Merchandise:Medium width and low depth of assortment; average quality
Prices:Average to
Above average
Atmosphere andServices:Average
Promotion:Moderate
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Conventional Supermarket Strategy Mix
Location:Neighborhood
Merchandise:Extensive width
and depth of assortment; average quality; manufacturer,
private, and generic brands
Prices:Competitive
Atmosphere andServices:Average
Promotion:Heavy use of
newspapers, flyers, and coupons
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Food-Based Superstore Strategy Mix
Location:Community shopping center or isolated site
Merchandise:Full assortment plus health
and beauty aids and general merchandise
Prices:Competitive
Atmosphere andServices:Average
Promotion:Heavy use of
newspapers, flyers
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Combination Store Strategy Mix
Location:Community shopping center
or isolated site
Merchandise:Full assortment plus health
and beauty aids and general merchandise
Prices:Competitive
Atmosphere andServices:Average
Promotion:Heavy use of
newspapers, flyers
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Box Store Strategy Mix
Location:Neighborhood
Merchandise:Low width and depth of
assortment; fewperishables; few national
brands
Prices:Very low
Atmosphere andServices:
Low
Promotion:Little or none
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Warehouse 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
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Specialty Store Strategy Mix
Location:Business district or
shopping center
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
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Traditional Department 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
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Full-line Discount Store Strategy Mix
Location:Business district, shopping
center or isolated store
Merchandise:Extensive width and
depth of assortment; average to
good quality
Prices:Competitive
Atmosphere/ Services:Slightly below
average to average
Promotion:Heavy on newspapers;price-oriented; selling
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Variety Store Strategy Mix
Location:Business district, shopping
center or isolated store
Merchandise:Good width and some depth of assortment;
below-average to average quality
Prices:Average
Atmosphere/ Services:Below average
Promotion:Use of newspapers
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Off-Price Chain Strategy Mix
Location:Business district, shopping
center or isolated store
Merchandise:Moderate width and
poor depth of assortment;
average to good quality;low continuity
Prices:Low
Atmosphere/ Services:Below average
Promotion:Use of newspapers;
brands not advertised;limited selling
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Factory Outlet Strategy Mix
Location:Out of the way site
or discount mall
Merchandise:Moderate width and
poor depth of assortment;
low continuity
Prices:Very Low
Atmosphere/ Services:Very low
Promotion:Little
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Membership Club Strategy Mix
Location:Isolated store or
secondary site
Merchandise:Moderate width and
poor depth of assortment;
low continuity
Prices:Very Low
Atmosphere/ Services:Very low
Promotion:Little;
some direct mail