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Trends in the Retail Industry

Growing Diversity of Formats

Category Specialist

Supercenters (superstores)

Electronic Retailers

Increasing Industry Concentration

Enabled by:

Efficient Distribution Systems

Efficient Information and Communication Systems

Centralization of Decision-Making

Globalization

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Globalization

Factors that have encouraged globalization Maturation of Domestic Markets

Skills in the management of information and

distribution systems

Removal of Trade Barriers

Homogenization of tastes across the world

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Retailer Characteristics

Price-Cost Tradeoff

Discount Store vs Department Store.

Providing more services, greater assortment increases costs

Type of Merchandise - North American Industry

Classification System (NAICS) codes

Variety and Assortment

Variety (breadth) - number of merchandisecategories a retailer offers

Assortment (depth) - number of different items(SKUs) in a merchandise category

Customer Services Offered

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Food Retailers

Conventional Supermarkets - Self-Service Food

stores 30 40 K SKUs

Big-box food retailers

supercenters - 150,000 - 220,000 sq. ft stores offer a variety of food and nonfood merchandise (superstore +

discount store)

hypermarkets

generally offer more food items than supercenters.

warehouse clubs

Convenience stores

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Full-Line Discount Stores

Big Three -- Wal-mart, Kmart, Target

Competition from Category Specialists --

Toys R Us, Circuit City, Sports Authority

Continue to Reduce Costs

More Focus on Apparel and Electronics -

Higher Margins

Greater competition against department stores

Why is Toys R Us Doing Badly?

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Specialty Stores

Limited number of complementary merchandisecategories.

Examples

Sephora cosmetics and perfume specialty store

Hot Topics

Mall-Based Apparel Retailers

Decline in Mall Shopping and Apparel Sales

Lack of New Fashions

Less Interest in Fashion Increase Price Consciousness

Lifestyle Formats (Old Navy, Ramparts)

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Department Stores

Three categories1. Upscale high fashion chains - Neiman Marcus

2. 2ndtier Macys

3. 3rdtier Sears, JC Penney, Kohls

Carry Broad Variety

Offer considerable customer services

Organized into separate departments

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Department Stores

Competition from Discount Stores on Price,Specialty Stores on Service, Depth ofAssortment

Lower Cost By Reducing Services (?)

More Sales (?)

Focus on Apparel, Soft Home

Improve Services

Develop Private Labels, Exclusive Brands

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Drug Stores

Competition from Supermarkets and DiscountStores - Pharmaceuticals

Also mail-order pharmacies.

Stand-Alone Sites with Drive-In Windows

Convenience Store Front End

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Extreme Value Retailers

Dollar General

Family Dollar Stores

They are small full-line general merchandisediscount stores.

Limited merchandise assortment and very lowprices.

Much smaller than traditional discount stores

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Home Improvement Centers

There are exaples of category specialists

Home Depot, Lowes

How does the aging of the baby-boom

generation influence their strategy?

Should such stores attempt to attract women

customers? Why?

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Warehouse Clubs (Food, Hard Goods)

Sell limited assortment of products items atvery low prices and in large packs

(quantities).

Often attract higher income customers

Supermarkets now compete by selling items

in large packs and by improved efficiency.

Warehouse Clubs Focus More on BusinessCustomers

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Hypermarkets

Very large retail store offering low prices

Hypermarkets strong internationally, but not

in U.S.

Strict zoning laws in metropolitan areas inEurope.

Few retail alternatives in Latin America and Asia

US consumers find them too time consuming

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Summary

Many New Types of Retailers, IncreasedDiversity to Meet Diverse Needs

Most People Shop at All Types Depending on

Situations - Growth in Cross-Shopping

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Non-store retailers in Japan

Very popular in Japan. People use cell phones to make payments

http://www.isop.ucla.edu/eas/japan/2minute/vendingmachines.htm

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Services vs. Merchandise Retailers

Intangibility- Problems in Evaluating Service Quality

-Performance of Service Provider

Simultaneous Production and Delivery- Importance of Service Provider

Perishability-No Inventory, Must Fill Capacity

Inconsistency of the Offering-Importance of HR Management

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All Retailers -- Develop Strategy, Location

Merchandise Retailers -- Inventory Control and

Merchandise Management Important

Services Retailers -- Store Operations andHuman Resource Management Important

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Services vs. Merchandise Retailers

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Types of Retail Ownership

Independent, Single Store Establishments- Retail-SponsoredCooperative is an organization

owned & operated by small independent retailers

- Wholesale-Sponsored Voluntary Cooperative isan organization operated by a wholesaler

Corporate Chains Franchises

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What is Franchising?PPT2-25

Franchising is a contractual agreementbetween a franchisor and the franchisee

that allows the franchisee to operate a retail

outlet using the name and format developed

and supported by the franchisor.

Why is it popular?

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Reasons for Franchising Growth

Technological advances

Profitable utilization of capital resources

Attainment of the American Dream

Demographic expansion

Product/service consistency

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Trends In Corporate Chains

Consolidation - Why?- Lower merchandise costs.

- Amortize fixed costs (IT, Promotion over larger

sales volume).

Focus - Stick to Your Knitting

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