Chapter 5 Retail Institutions by StoreBased Strategy Mix

Chapter 5 Retail Institutions by Store-Based Strategy Mix

Chapter Objectives 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 To discuss some ways in which retail strategy mixes are evolving 5 -2

Chapter Objectives_2 To examine a wide variety of foodoriented retailers involved with storebased strategy mixes To study a wide range of general merchandise retailers involved with store -based strategy mixes 5 -3

Retailer Strategy Mix • A strategy mix is the firm’s particular combination of: ¯store location, ¯operating procedures, ¯goods/services offered, ¯pricing tactics, ¯store atmosphere, ¯customer services, and ¯promotional methods This is a special effort to create the strategy 5 -4

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 Focus is to strive to be dominant in some way 5 -5

Wheel of Retailing • Theory to explain how new retailers or forms of retailing begin • Retail innovators begin as low price operators with low costs and low profit requirements. Overtime, the innovators upgrades to better products and better facilities. They then become vulnerable to new innovators. 5 -6

Figure 5. 1 The Wheel of Retailing High end Strategy High prices Excellent facilities Upscale consumers Medium Strategy Moderate Prices Improved facilities Broader base of value and service Low end Strategy Low prices Limited facilities 5 -7

Three Basic Strategic Positions ¯Low end ¯Medium ¯High end 5 -8

Figure 5. 2 Retail Strategy Alternatives Low End Strategy • Low rental location • No services • Spartan Fixtures • Simple retail personnel organization • Price emphasis in promotion • Most products visible • Self-service • High sales per store personnel 5 -9 High End Strategy • High rental shopping • center • Elaborate services Credit, gift wrapping, • Elaborate fixtures • Elaborate personnel organization • No price emphasis • Product demonstrations • Spacious interior • products in back room

Scramble Merchandise • Scrambled merchandising occurs when a retailer adds goods and services that may be unrelated to each other and to the firm’s original business • Popular because it allows ways to improve profits and revenues • Name the different retailers that have done this ? 5 -10

Figure 5. 3 Scrambled Merchandising by a Shoe Store Slippers Shoes Handbags Umbrellas hats Slippers Shoes Socks Original merchandise Sandals Socks Scramble Merchandise gloves Sandals Shoe Polish 5 -11 Sweaters Rubber galoshes Shoe Polish Rubber galoshes

Retail Life Cycle • Retail institutions pass through identifiable life stages ¯introduction ¯growth ¯maturity ¯decline 5 -12

Figure 5. 4 Retail Life Cycle concepts states that retail institutions pass through identifiable life stages: Introduction growth, maturity and decline Intro Stage Growth Maturity Decline Different stores or store formats which fit into these stages now are outline on page 108 in text 5 -13

How Retail Institutions are Evolving ¯ Mergers, Diversification, Downsizing ¯ Cost-Containment and Value-Driven Retailing Merging allows firms to jointly maximize resources, enlarge customer base, improve productivity and bargaining power Diversifications allows firms to become active in retail firms outside their normal operations or add stores in different goods/service categories. 5 -14

Mergers, Diversification, and Downsizing ¯ Mergers: combination of separately owned firms (e. g. , Sears and Lands’ End) ¯ 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 -15

Cost Containment and Value Driven Retailing • Cost containment is about reducing costs in order to offer lower prices • Strategy is used because of intense competition in the market 5 -16

Methods for Cost Containment ¯ Standardizing procedures, store layouts, store size, and product offerings ¯ Using secondary locations ¯ Placing stores in smaller communities ¯ Using inexpensive construction materials ¯ Using plainer fixtures and displays ¯ Buying refurbished equipment ¯ Joining cooperative buying and advertising ¯ Creatively financing inventories 5 -17

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 -18

Convenience Store Strategy Mix Location: Neighborhood Merchandise: Medium width and low depth of assortment; average quality 5 -19 Prices: Average to Above average Atmosphere and Services: Average Promotion: Moderate

Conventional Supermarket Strategy Mix Location: Neighborhood Prices: Competitive Merchandise: Extensive width and depth of assortment; average quality; manufacturer, private, and generic brands Atmosphere and Services: Average 5 -20 Promotion: Heavy use of newspapers, flyers, and coupons

Food-Based Superstore Strategy Mix Location: Community shopping center or isolated site Merchandise: Full assortment plus health and beauty aids and general merchandise 5 -21 Prices: Competitive Atmosphere and Services: Average Promotion: Heavy use of newspapers, flyers

Combination Store Strategy Mix Location: Community shopping center or isolated site Merchandise: Full assortment plus health and beauty aids and general merchandise 5 -22 Prices: Competitive Atmosphere and Services: Average Promotion: Heavy use of newspapers, flyers

Box Store Strategy Mix Location: Neighborhood Merchandise: Low width and depth of assortment; few perishables; few national brands 5 -23 Prices: Very low Atmosphere and Services: Low Promotion: Little or none

Warehouse Store Strategy Mix Location: Secondary site, often in industrial area Merchandise: Moderate width and low depth of assortment; emphasis on manufacturer brands bought at discount 5 -24 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 -25 Prices: Competitive to Above average Atmosphere and Services: Average to excellent Promotion: Heavy use of displays Extensive sales force

Traditional Department Store Strategy Mix Location: Business district, shopping center or isolated store Merchandise: Extensive width and depth of assortment; average to good quality 5 -26 Prices: Average to Above average Atmosphere and Services: Good to excellent Promotion: Heavy ad and catalog use; direct mail; personal selling

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 -27 Prices: Competitive Atmosphere/ Services: Slightly below average to average Promotion: Heavy on newspapers; price-oriented; selling

Variety Store Strategy Mix Location: Business district, shopping center or isolated store Merchandise: Good width and some depth of assortment; below-average to average quality 5 -28 Prices: Average Atmosphere/ Services: Below average Promotion: Use of newspapers

Off-Price Chain Strategy Mix Location: Business district, shopping center or isolated store Merchandise: Moderate width and poor depth of assortment; average to good quality; low continuity 5 -29 Prices: Low Atmosphere/ Services: Below average Promotion: Use of newspapers; brands not advertised; limited selling

Factory Outlet Strategy Mix Location: Out of the way site or discount mall Merchandise: Moderate width and poor depth of assortment; low continuity 5 -30 Prices: Very Low Atmosphere/ Services: Very low Promotion: Little

Membership Club Strategy Mix Location: Isolated store or secondary site Merchandise: Moderate width and poor depth of assortment; low continuity 5 -31 Prices: Very Low Atmosphere/ Services: Very low Promotion: Little; some direct mail

Flea Market Strategy Mix 5 -32 Location: Isolated store Prices: Very Low Merchandise: Extensive width and poor depth of assortment; low continuity; variable quality Atmosphere/ Services: Very low Promotion: Limited