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Retail Formats

• PROF.C.VIGNALI PhD

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Presentation Layout

• Introduction to current shopping trends,
• Factory Outlet Retailing background,
  characteristics and functional strategies,
• Discount/warehouse club background,
  characteristics and functional strategies,
• Franchising background, characteristics and
  functional strategies,
• Conclusions

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Introduction

• Shopping is considered to be a leisure
  experience. (Newby 1993)
• Consumer trends change according to
• - age, demographics, economics,
  technology, car ownership
• Consumer is now price and value conscious.

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Introduction

• Nowadays, there is a diverse array of retail
  formats, such as
• Chain stores
• Supermarkets
• Discount stores
• Factory Outlets
• Franchises
• Internet

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Factory Outlet Retailing

• Background
• Factory outlet format originates from USA
• Principle manufacturers selling brand name
  products at a discounted price.
• First outlet in UK Hornsea, 1992
• Format Large site containing several units
  and other amenities, i.e. restaurants, play areas.

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Factory Outlet Retailing

• Background cont.
• Largest outlet in UK Cheshire Oaks
• Contains approx. 140 retail units
• Most common items sold at these outlets include
  designer label clothing, crockery and homewares.

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Factory Outlet Retailing

• Characteristics
• Good quality brands at discounted prices
• Allows manufacturer to sell surplus stock
• Leisure amenities offered encourage the people to
  spend the day there.

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Factory Outlet Retailing

• Disadvantages
• Forces in place by government to restrain their
  development.
• Transport links poor for those without cars
• Takes away trade from town centre retailers

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Factory Outlet Retailing

• Functional Strategies
• Popular brands, discounted prices
• Out-of-town locations
• Amenities i.e, ample parking, fast food, toilets,
  play parks
• Out-of-town location reduces operating
  costs/distribution channel is shortened

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Factory Outlet Retailing

• Retail Example Cheshire Oaks
• Contains
• Spacious food court
• 2 full service restaurants
• Stores include, DKNY, Burberry, MS, Next
• Tourist information centre
• 3,000 free car parking spaces
• First class road and rail links

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Discount/Warehouse Club

• Definition
• Discount/warehouse clubs can be described as
  cash and carries for the general public.
  Brassington et al 2001

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Discount/Warehouse Club

• Background
• Adopted from USA to the UK in 1993
• Require membership
• Large scale premises
• Offer extremely low cost products inc
  housewares, furniture, car parts, appliances

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Discount/Warehouse Clubs

• Characteristics
• Extremely low prices
• Low gross margins
• Appeal to price conscious consumers small
  retailers who cannot purchase from larger
  distributors

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Discount/Warehouse Club

• Disadvantages
• Availability of stock unreliable
• High degree of self-service
• Little assistance available in-store
• No delivery options available

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Discount/Warehouse Club

• Functional Strategies
• Great range of product line in limited
  sizes/styles
• Situated in industrial areas
• Layout concrete floors, aisles wide for
  forklifts, merchandise displayed on pallets
• All payments must be cash
• Customers responsible for transporting their
  purchases

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Discount/Warehouse Club

• Retail Example CostCo
• First US style warehouse club in UK
• Trades from over 360 outlets in 7 countries
• Provides supplies for small-medium sized
  businesses
• Provides quality goods at lowest possible prices

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Franchising

• Definition
• Franchising is an arrangement whereby a supplier
  grants a dealer the right to sell products in
  exchange for some type of consideration. Dibb et
  al 2000

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Franchising

• Background
• Franchiser receives percentage of sales in return
  for providing equipment, marketing, branding etc.
• Organisations which franchise inc McDonalds,
  Mercedes Benz, Toyota, the Body Shop
• Franchising accounts for approx. 1/3 of all
  retail sales

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Franchising

• Characteristics
• Possibly easier to finance
• Access to extensive advertising
• Access to lower costs and possibly centralised
  buying
• Few start up problems
• Use of well-known trademark or trade name

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Franchising

• Disadvantages
• Onerous reporting requirements
• Possible exaggeration of franchiser advantages
• Costs of franchise other fees may reduce profit
  margins
• Inflexibility due to restrictions imposed by
  franchiser

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Franchising

• Functional Strategies
• Larger, well established franchise operation have
  ad campaigns and solid trading name
• Good franchisers will offer training programmes
• Good franchisers will help secure funding for the
  investment

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Franchising

• Retail Example McDonalds
• Committed to franchising as way of doing business
• 70 of restaurants worldwide are franchises
• Worldwide number 1 franchise
• Member of the British Franchise Association

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Conclusions

• Factory outlet Retailing
• Must continue to attract regular customers, i.e.
  provide additional amenities
• May seriously affect the likelihood of
  traditional town centres

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Conclusions

• Warehouse/Discount Clubs
• Growth inevitable, but government may inhibit
  growth
• May be situated in town centres, this may draw
  back attention to these areas

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Conclusions

• Franchising
• Threat from internet shopping
• Franchising will continue as consumers still want
  the leisure activity of shopping

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Bibliography

• Dibb et al (2000)Marketing Concepts Strategies
• CIM Coursebook 2002-2003
• - Marketing Operations
• - Marketing in Practice
• - Marketing Environment
• 3. Brassington et al (2000) Principles of
  Marketing

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Journals

• International journal of retailing distribution
  management
• - Volume 30, No. 5, 2002
• - Volume 23, No. 1, 1995
• - Volume 24, No. 6, 1996
• - Volume 22, No. 1, 1994

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Websites

• www.mcdonalds.com
• www.british-franchise.org
• www.frain.org.za
• www.costco.co.uk