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Retail Institutions
andTypes of Retailers
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About Retail Institutions
A retail institution refers to basic format or structure of a
business.
Classification of Retail Institutions
a) Based on Ownership
b) Store-based retail strategy mix
c) Non store-based retail strategy mix and Non-traditionalretailing
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Contd..
Ownership
Store-based retail
strategy mix
Non store-based retail
strategy mix and
Non-traditional
retailing
Independent
Chain
Franchise
Direct Marketing
Direct Selling
Vending Machine
World Wide Web
Food Oriented Retailers:
Convenience store,
Conventional Supermarket,
Supercenter, Hypermarket,
Warehouse store
General Merchandise
Retailer:
Specialty store, CategorySpecialists, Department
store, Discount stores,
Off-price chain, Factory
Outlet, Drug Stores
These classifications are not mutually exclusive.
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Ownership based Retail Institutions
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Independent
An independent retailer owns only one retail unit. The management has
direct contact with the customers and can quickly respond to their needs.
Advantages:
Flexibility of choosing the retail format and retail location.
Devising a strategy becomes easier.
Investment costs are low.
They are able to sustain consistency in their work.
Better customer relationship management.
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Contd..
Disadvantages
In bargaining with distributors, they do not posses much power because
they buy in small quantities.
Cannot gain economies of scale in buying and maintaining inventory
because they have financial constraints.
Operations are often handled manually with little computerization. Limited advertisements.
Unequal distribution of work.
Limited time given to planning because of over-involvement of owner
into daily operations.
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Chain Stores
A chain retailer operates multiple outlets under common ownership. Itusually engages in some level of centralized purchasing and decision
making.
Advantages
They have the bargaining power due to their volume of purchase.
Achieve cost efficiency due to performing the wholesale functions themselves.
Efficiency in multiple stores is attained by shared warehousing facilities; large
purchases, SOPs, centralized decision making etc.
Work faster with the use of computers while ordering merchandise, forecasting
etc.
Can advertise
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Contd..
Disadvantages May or may not be consistent in their strategy.
Investments are high.
Loose control of the management.
Personnel may have limited independence.
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Franchising
It involves a contractual arrangement between a franchisor and a retail
franchisee, which allows the franchisee to conduct a given business under
established name and according to a given pattern of business.
The franchisee pays an initial fee and a monthly share of gross sales inexchange for the exclusive rights to sell goods and services in a specified
area.
Franchising is a retail organizational form in which small businesses can
benefit being a part of a large retail institution.
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Types of Franchising
Product/Trademark franchising:
In this type franchisees operate independently of their franchisors.
The franchisee adhere to certain rules and regulations but sets store
operating hours, store location criteria, store facilities and display etc.
Business format franchising:
Involves more interactive relationship between the franchisee and
franchisor.
Franchisees receives assistance on site location, quality control, start-uppractices, management training and responding to problems.
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Advantages to the franchisee:
Franchisees can own retail enterprise with relatively lower
capital investment.
Franchisees acquire well known name and good service lines. SOPs and management skills may be taught to the franchisees.
Cooperative marketing used , that could not be afforded
otherwise.
Franchisee purchases may be less costly per unit due to the
volume bought by the overall franchise.
Disadvantages to the franchisee:
Over saturation can occur if there are too many franchisees
situated at one location.
Franchisee may get locked into contract provisions whereby
the purchases must be made through franchisors or certain
approved vendors.
Franchisee agreement can be of short duration.
Under most of the contracts, royalties are percentage of gross
sales, regardless of franchisee profits.
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Advantages to the franchisor:
Global presence
Less investment
After franchisee have paid for their franchised outlets, franchisor still
receive royalties
Franchisees are not owners, they have greater incentive to work hard.
Thus, benefiting the franchisor
Disadvantages to the franchisor:
Franchisee could harm the overall reputation, if they do not adhere to
the company standards.
Lack of uniformity among the outlets can adversely affect the
customer loyalty. Intra-franchise competition is not desirable
Ineffective franchised units affect the profitability of the franchisor.
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Store Based Retail Strategy Mixes
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Food Oriented Retailers
Type of
Retailer
Size(000 sq.
ft.)
Location Merchandise Prices Services Promotion
Convenience
Store
2 - 3 Neighbourhood Medium width
and low depth
of assortment;
average quality
Average Average Moderate
Conventional
Supermarket
20 -
50
Neighbourhood Extensive
width and
depth of
assortment;
averagequality;
manufacturer,
and generic
brands
Average Average Heavy use
of
newspaper,
flyers and
coupons,self-service
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Contd..
Type of
RetailerSize (000
sq. ft.)Location Merchandise Prices Services Promotion
Supercenters 150-
220
Community
shopping
centre or
isolated site
Wide variety of
food (30-40 %)
and non-food
merchandise
(60-70%)
Low Average to
high
Moderate
Hypermarket 100 -
300
Community
shopping
centre or
isolated site
Wide variety of
food (60 70
%) and general
merchandise
(30-40%)
Low Average Low
Warehouse
store
100 -
150
Secondary
site, often in
industrial
area
Moderate width
and low depth;
emphasis on
manufacturer
brands bought
at discounts
Very
low
Low Little or
none
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General Merchandise Retailers
Type of
Retailer
Size(000
sq. ft.)
Location Merchandise Prices Services Promotion
Specialty
Stores
4 -
12
Business
district or
shopping
centers
Very narrow
width of
assortment;
extensive
depth of
assortment;
average to
good quality
Competitive
to above
average
Average
to
excellent
Heavy use
of displays,
may have
extensive
sales force.
Category
Specialists
50 -
120
Stand
alone,
power stripcenters
Narrow
variety but
very deepassortment
Low Low to
high
Low to
Moderate
Department
Store
100 -
200
Regional
Malls, Stand
alone
Broad variety,
average to
deep
assortment
Average to
high
Average
to high
Average to
high, direct
mail,
catalog use
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Contd..
Type of
Retailer
Size(000 sq.
ft.)
Location Merchandise Prices Services Promotion
DiscountStore
60 -80
Standalone,
power strip
centers
Broad variety,Low to average
assortment
Low Low Heavy use ofnewspaper ads,
price oriented
messages
Factory
outlets
20 -
30
Outlet
malls
Average variety,
deep butvarying
assortment
Low Low Use of
newspapers,brands not
advertise,
limited
workforce
Value
retailers
7 - 15 Urban, strip Average variety,
average andvarying
assortment
Low Low Average to high
Drug
Stores
3 - 15 Stand
alone, strip
centers
Narrow variety,
average to deep
assortment
Averag
e to
high
Average Low to average
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Non Store-based Retail Strategy Mix
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Direct Marketing
It is a form of retailing in which a customer is first exposed to a good or
service through a non-personnel medium (such as direct mail, broadcast or
cable TV, radio, magazine, newspaper etc.) and then orders by mail, phone
(usually a toll free number), fax or by computer.
Direct marketing can be divided into two broad categories:
General: General marketing firms offer a full line of products from
clothing to house ware.
Specialty: Specialty firms focus on narrow product lines.
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Advantages of Direct Marketing
Reduced costs: startup cost, inventory cost, location cost, sales force cost.
Possibility of offering lower prices.
Shopping convenience for the customers.
Specific consumer segments can be pin pointed using mailers.
A store based retailer can supplement its regular business and expand itsgeographic area.
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Disadvantages
Products cannot be examined prior to purchase.
Prospective entrants may underestimate the costs. Catalog preparation,
printing and mailing can be an expensive job.
The most popular catalogues draw purchases from less than 10% of
recipients.
Clutter exists
Some firms have given a bad name to the industry due to late deliveries and
providing damaged goods.
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Direct Selling
It includes both personal contact with consumers in their homes (and other
non-store locations such as offices) and phone solicitations initiated by a
retailer.
Examples: Carpet selling, vacuum cleaner, other household products,cosmetics, books, encyclopedia etc.
It emphasizes convenience in shopping and a personal touch.
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Vending Machine
It is a retailing format involving the coin or card operated dispensing of hot
and cold beverages and food or snacks items.
It eliminates the use of sales personnel.
It allows round the clock sales.
Location of the machines can be done according customers convenience.
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World Wide Web
WWW in the field of retailing relates to online retailing.
It enables retailers world wide presence.
Enhances the retailers brand.
Provides information to the consumers.
Promotes new products.
Furnish customer service.
Cost efficient
Can announce special offers and also employment opportunities.
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Single and Multi Channel Retailing
Single-Channel Retailing:
If a firm sells to consumers through one format.
Multi-Channel Retailing:
If a firm sells to consumers by combining store and non-
store retailing- as well as using multiple store formats.
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Issues
What multi-channel cross-selling opportunities exists?
How should the product assortment strategy be adapted to eachchannel? How much merchandise overlap should exist acrosschannels?
Should prices be consistent across channels?
How can a consistent image be devised and sustained across allchannels?
What is the role of each channel?
Ensuring the distribution of products to the stores as well asdirectly to the customer.
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Advantages
The retailer can use the most appropriate channel to sell particular goods.
Enable to reach different target markets.
Enable to fulfill the customers desires.
A store based retailer can leverage tangible assets by using excess capacityin its warehouse to service catalog or web sales.
A firm can also leverage its well known brand name (an intangible asset)by selling online in geographical areas where it does not have its stores.
There is an opportunity for increased sales.
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Integrated Multi-Channel Strategy
Integrated promotions across channels.
Ensuring product consistency across channels.
Having an effective information system that can share dataacross channels.
Enacting a store pickup process for items purchased on theweb or through a catalog.
Searching for multi-channel opportunities with appropriatepartners.
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THANK YOU