Chapter 5 Retail Institutions by StoreBased Strategy Mix

Chapter 5 Retail Institutions by Store-Based Strategy Mix RETAIL MANAGEMENT: A STRATEGIC APPROACH, 10 th Edition BERMAN EVANS

Chapter Objectives þ To describe the wheel of retailing, scrambled merchandising, and the retail life cycle, and show they can help explain the performance of retail strategy mixes þ To discuss some ways in which retail strategy mixes are evolving þ To examine a variety of food-oriented retailers involved with store-based strategy mixes þ To study a range of general merchandise firms involved with store-based strategy mixes 5 -2

Retailer Strategy Mix • A strategy mix is the firm’s particular combination of: ¯ store location, store or nonstore format , place of area and kinder of site is it shopping center ¯ operating procedures; kind of personal sale , management style, store hours ¯ goods/services offered; categories, quality ¯ pricing tactics; prestige , skimming, penetration ¯ store atmosphere; physical attributes, ¯ customer services; personal attention , return policy , delivery ¯ promotional methods; displays, advertising, personal selling and sales promotion 5 -3

Earning Destination Retailer Status ¯ Be price-oriented and cost efficient ¯ Be upscale ¯ Be convenient ¯ Offer a dominant assortment ¯ Offer superior customer service ¯ Be innovative or exclusive 5 -4

Figure 5 -1: The Wheel of Retailing 5 -5

Figure 5 -2: Retail Strategy Alternatives 5 -6

Figure 5 -3: Scrambled Merchandising by a Shoe Store 5 -7

Retail Life Cycle • Retail institutions pass through identifiable life stages Sales/Profitability ¯ ¯ 5 -8 Positioning completion Introduction Low/growing concept innovation None Growth rapid /high Social Need Limited Maturity High level/Declining Broad Maker Extensive/ Saturated Decline Dropping Niche Intensive/ Consolidated

How Retail Institutions Are Evolving ¯ Mergers, Diversification, Downsizing ¯ Cost-Containment and Value-Driven Retailing through: - holding down initial investment Operating costs Cost commitment could achieved through: • Standardized operating procedures , layout and size of store • Using secondary location • Buying refurbished equipments • Using inexpensive construction materials • Placing stores in smaller communities 5 -9

Mergers, Diversification, and Downsizing ¯ Mergers: combination of separately owned firms (e. g. , Movie Gallery and Hollywood Entertainment) ¯ 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) 5 -10

Figure 5 -5: west elm from Williams-Sonoma 5 -11

Table 5 -1: Store-Based Retail Strategy Mixes Food-Oriented General Merchandise ¯ Convenience store ¯ Conventional supermarket ¯ Food-based superstore ¯ Combination store ¯ Box (limited-line) store ¯ Warehouse store ¯ Specialty store ¯ Traditional department ¯ Full-line discount store ¯ Variety store ¯ Off-price chain ¯ Factory outlet ¯ Membership club ¯ Flea market 5 -12

Convenience Store Strategy Mix Mini market Location: Neighborhood Merchandise: Medium width and low depth of assortment; average quality 5 -13 Prices: Average to Above average Atmosphere and Services: Average Promotion: Moderate

Conventional Supermarket Strategy Mix Self service supermarket Location: Neighborhood Merchandise: Extensive width and depth of assortment; average quality; manufacturer, private, and generic brands 5 -14 Prices: Competitive Atmosphere and Services: Average Promotion: Heavy use of newspapers, flyers, and coupons

Food-Based Superstore Strategy Mix Superstore Location: Community shopping center or isolated site Merchandise: Full assortment plus health and beauty aids and general merchandise 5 -15 Prices: Competitive Atmosphere and Services: Average Promotion: Heavy use of newspapers, flyers

Figure 5 -7: Supermarkets Have Come a Long Way 5 -16

Combination Store Strategy Mix Hypermarket (Carrefour) Location: Community shopping center or isolated site Merchandise: Full assortment plus health and beauty aids and general merchandise 5 -17 Prices: Competitive Atmosphere and Services: Average Promotion: Heavy use of newspapers, flyers

Warehouse Store Strategy Mix/groceries Location: Secondary site, often in industrial area Merchandise: Moderate width and low depth of assortment; emphasis on manufacturer brands bought at discount 5 -18 Prices: Very low Atmosphere and Services: Low Promotion: Little or none

Specialty Store Strategy Mix Location: Business district or shopping center Merchandise: Very narrow width and extensive depth of assortment; average to good quality 5 -19 Prices: Competitive to Above average Atmosphere and Services: Average to excellent Promotion: Heavy use of displays Extensive sales force

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 5 -20 Prices: Competitive Atmosphere/Services: Slightly below average to average Promotion: Heavy on newspapers; price-oriented; selling

Variety Store Strategy Mix/Apparel and accessories Location: Business district, shopping center or isolated store Merchandise: Good width and some depth of assortment; below-average to average quality 5 -21 Prices: Average Atmosphere/Services: Below average Promotion: Use of newspapers

Factory Outlet Strategy Mix Location: Out of the way site or discount mall Merchandise: Moderate width and poor depth of assortment; low continuity 5 -22 Prices: Very Low Atmosphere/Services: Very low Promotion: Little

Membership Club Strategy Mix Customers membership Location: Isolated store or secondary site Merchandise: Moderate width and poor depth of assortment; low continuity 5 -23 Prices: Very Low Atmosphere/Services: Very low Promotion: Little; some direct mail