Classifying Retail Institutions

1
Chapter 4 and 5

• Classifying Retail Institutions
• Types of Ownership and Strategy Mixes

RETAIL MANAGEMENT A STRATEGIC APPROACH
2
Agenda

• Administrative items
• Newswatch Assignment (posted discussed on March
  11)
• Grade re-weighting
• Take home midterms distributed next class due
  5pm March 11 in SCHW 346
• Final Exam Date Announced April 20th _at_ 7pm
• Important Update Tiffany Co. sues Costco!
• Cineplex case
• Classifying retail institutions and some
  important concepts

3
Ownership Forms

• Independent
• Chain
• Franchise
• Contractual arrangement between two parties that
  allows franchisee exclusively to conduct business
  under the franchisors name according to their
  business processes in exchange for a fee and
  often a sales
• Leased department
• Vertical marketing system
• Consumer cooperative

Less than four outlets
Four or more outlets
These concepts (and inherent pros/cons) should
not be unfamiliar Choosing the right form of
ownership is integral to retail success Requires
correct balance with strategy and image
4
Leased Departments

• In-store locations leased to third parties
• Why would a department store want to lease space?
• Fit with broad market appeal
• Provide a one-stop environment for shoppers
  without the investment
• Hiring, training employees managing department
  cost of inventory (risky in unfamiliar
  product/service line) acquiring specialized
  skill
• May increase traffic
• Generates rental income
• Reduces store costs
• Risks??

5
Leased Departments
6
(No Transcript)
7
Franchise Exercise

• Would you be interested in becoming a Subway
  Franchisee? Why or why not?

8
Subway FranchiseeReasons For CEO pitch

• Franchising reputation
• 1 Global Franchising Opportunity 2009
• 1 Franchise since 2001 (Entrepreneur Magazine)
• 15 of 20 times named top on Franchise 500 list
• Franchisees buy more franchises (70)
• Commitment to franchising model (virtually all
  locations are franchised)
• Growth potential (ECO-STORE and satellite stores
  retail format development international growth
  market development)
• Well recognized brand name 36,000 restaurants
  in 98 countries
• Strength of partnerships (i.e, Wal-Mart)
• Perhaps current franchisees happy (only one store
  for sale in all of Canada)
• Franchisee training program and support
• Recognized for customer service customers rate
  it 1
• Product image quality
• Personal motives healthy alternative

9
Subway FranchiseeReasons Against

• Costs a little daunting 115K-258K start-up
  (certainly not the most expensive, though)
• Private company limited financial information
  available
• Franchisee testimonials limited
• Market saturation?
• 36,158 restaurants in 98 countries (gt2700 in
  Canada) eclipsed McDonalds in restaurants in
  US (cannabalization)
• Growth model in North America is retail format
  development (cannabalization possible)
• 70 franchisees buy new franchises (to prevent
  cannabalization of their own business by
  corporation?)
• Commitment to support very vague
• Personal fit ? the frantrepreneur?

10
Business Qualifications Sought by McDonalds for
Potential Franchisees
Personal Integrity
Financial resources
Entrepreneurial Spirit
Ideal Franchisee
Ability to motivate and train
Willingness to complete training
Willingness to devote time
Ability to manage finances
11
Vertical Marketing Systems
Fully Integrated
Independent
Partially Integrated
12
Think of some other examples.
13
Chapter 4 Takeaways

• No one form of business ownership is better than
  another in absolute terms
• The decision to use a particular form of business
  ownership is relative and must be made with the
  retailing concept (goal oriented, value driven,
  customer focus, coordinated effort) and strategy
  in mind
• Which leads us to Chapter 5
• Classifying stores based on strategy mix

14
Destination or Parasite?

• Destination Status is earned by retailers who
  become dominant in some way. Consumers go out of
  their way to shop at such distinctive stores.
• Destination status may be earned by
• Being price oriented and cost efficient
• Being upscale
• Being convenient
• Offering a dominant assortment
• Offering superior customer service
• Being innovative or exclusive

15
Figure 5-1 The Wheel of Retailing
16
Figure 5-2 Retail Strategy Alternatives
17
Figure 5-4 Retail Life Cycle
18
Scrambled Merchandising by a Shoe Store
Shoppers Drug Mart Banking
19
How Retail Institutions are Evolving

• Mergers, Diversification, Downsizing
• Multi-channel Retailing
• Cost-Containment and Value-Driven Retailing

20
Reference Slides (Chapter 5)
21
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

22
Food Based Retailers
23
Convenience Store Strategy Mix
Location Neighborhood
Prices Average to Above average
Atmosphere and Services Average
Merchandise Medium width and low depth of
assortment average quality
Promotion Moderate
24
Conventional Supermarket Strategy Mix
Location Neighborhood
Prices Competitive
Atmosphere and Services Average
Merchandise Extensive width and depth of
assortment average quality manufacturer,
private, and generic brands
Promotion Heavy use of newspapers, flyers, and
coupons
25
Food-Based Superstore Strategy Mix
Location Community shopping center or isolated
site
Prices Competitive
Atmosphere and Services Average
Merchandise Full assortment plus health and
beauty aids and general merchandise
Promotion Heavy use of newspapers, flyers
26
Combination Store Strategy Mix
Location Community shopping center or isolated
site
Prices Competitive
Atmosphere and Services Average
Merchandise Full assortment plus health and
beauty aids and general merchandise
Promotion Heavy use of newspapers, flyers
27
Box Store Strategy Mix
Location Neighborhood
Prices Very low
Atmosphere and Services Low
Merchandise Low width and depth of assortment
few perishables few national brands
Promotion Little or none
28
Warehouse Store Strategy Mix
Location Secondary site, often in industrial area
Prices Very low
Atmosphere and Services Low
Merchandise Moderate width and low depth of
assortment emphasis on manufacturer
brands bought at discount
Promotion Little or none
29
General Merchandise Retailers
30
Specialty Store Strategy Mix
Location Business district or shopping center
Prices Competitive to Above average
Atmosphere and Services Average to excellent
Merchandise Very narrow width and extensive
depth of assortment average to good quality
Promotion Heavy use of displays Extensive sales
force
31
Traditional Department Store Strategy Mix
Location Business district, shopping center or
isolated store
Prices Average to Above average
Atmosphere and Services Good to excellent
Merchandise Extensive width and depth of
assortment average to good quality
Promotion Heavy ad and catalog use direct
mail personal selling
32
Full-line Discount Store Strategy Mix
Location Business district, shopping center or
isolated store
Prices Competitive
Atmosphere/ Services Slightly below average to
average
Merchandise Extensive width and depth of
assortment average to good quality
Promotion Heavy on newspapers price-oriented
selling
33
Variety Store Strategy Mix
Location Business district, shopping center or
isolated store
Prices Average
Atmosphere/ Services Below average
Merchandise Good width and some depth of
assortment below-average to average quality
Promotion Use of newspapers
34
Off-Price Chain Strategy Mix
Location Business district, shopping center or
isolated store
Prices Low
Atmosphere/ Services Below average
Merchandise Moderate width and poor depth of
assortment average to good quality low
continuity
Promotion Use of newspapers brands not
advertised limited selling
35
Factory Outlet Strategy Mix
Location Out of the way site or discount mall
Prices Very Low
Atmosphere/ Services Very low
Merchandise Moderate width and poor depth of
assortment low continuity
Promotion Little
36
Membership Club Strategy Mix
Location Isolated store or secondary site
Prices Very Low
Merchandise Moderate width and poor depth of
assortment low continuity
Atmosphere/ Services Very low
Promotion Little some direct mail
37
Flea Market Strategy Mix
Location Isolated store
Prices Very Low
Merchandise Extensive width and poor depth of
assortment low continuity variable quality
Atmosphere/ Services Very low
Promotion Limited