Retail Management Module 2 Retail Environment Analysis Retailer

Retail Management Module 2: Retail Environment Analysis

Retailer Classification

Learning Outcomes: Retailer Classification • 2. 1 List the classification characteristics of various types of retailers by ownership • 2. 1. 1 Match a retailer with its structural organization based on its classification • 2. 1. 2 Match a retailer with its advantages and disadvantages based on its classification

Practice Question 1 In this module, we’ll study the retail environment analysis. A retailer is the last step of the supply chain. It is where consumers go to obtain goods and services. To best meet consumers’ needs, there are many types of retail formats, reflecting different scopes and strategies. Write for five minutes all of the answers you can think of to the following question: Why evaluate different types of retail institutions?

Five Primary Ownership Types: 1. Corporate chain: multiple stores, central ownership, and 2. 3. 4. 5. consistent standards operating on a large scale Independent store: buy products through wholesalers which apply an upcharge for warehousing and handling product Wholesaler: product distributors focused on supply chain and logistics Franchise: owned by individual business owners who have contracted with larger company Co-op: when several independent retailers join together to consolidate purchases, increasing buying power

Retailer Types: Advantages & Disadvantages Club and Warehouse Stores: offer value, require memberships Mass Merchandisers: low prices, busy Convenience and Drug Stores: limited selection Discount and Dollar Stores: low prices, lesser: known brands Natural and Organic Stores: array of unique items at high price Specialty Retailers: offers alternative to mass merchandisers Online Retailers: home delivery Traditional Grocers: wide assortment, local

Practice Question 2 Serving communities in the Pacific Northwest with over 60 stores in Washington and Oregon, QFC Supermarkets is an example of what kind of retailer?

Food Retailers

Learning Outcomes: Food Retailers • 2. 2. 3 Discuss the current trends affecting food retailers • 2. 3 Compare and contrast service and merchandise retailers

Changes in Food Retailing Retailers aren’t just competing with one another through the items they offer and the pricing they set. Instead, they’re competing on a whole host of other criteria, such as convenience and customer service. Convenience: is the store nearby? Is there ample parking? Will they have what I need? Customer Service: is this a place I like to shop? Is the store clean? Are the staff available/helpful, can I get in and out quickly

Variety and Assortment of Goods in Food Retail Categories are divided into several segments & sub-segments, which can be further divided into brands and into Stock Keeping Units (SKU) • • Segments and sub-segments: dry soup (ramen), ingredients Leading brands: Campbell’s, Progresso Retailers make assortment decisions at category, segment, brand, & SKU level • Family Dollar vs. Sam’s Club

Current Trends in Food Retail Increased interest in healthy food More single-person households Developing diversity food choices Increasing convenience services Popularization of home automation Wage inflation is a growing concern

Service and Merchandise Retailers

Learning Outcomes: Service and Merchandise Retailers • 2. 3. 1 Assess the variety and assortment levels of goods for each type of merchandise retailer • 2. 3. 2 Describe the choices each type of merchandise retailer is currently making to adapt in the current landscape • 2. 3. 3 Name an assortment of service retailer types

Assortment Levels and Types of Retailers Department stores: Category specialist: Specialty stores: Full line discount stores Drug stores Off-price stores

Activity Full line discount stores are retailers that provide name-brand products at a lower cost than other stores. What is an example of a full-line discount store near you? What do they sell? How are they different from a specialty store and a department store? Discuss your thoughts with a partner, and take notes about your contrast and comparisons.

Adapting to the Current Landscape Lack of product differentiation is reason some retailers have developed private label or store brand items Merchandise retailers: focus more on product quality to differentiate themselves from competition Customer service: focus of service retailers

Types of Service Retailers No service versus Self-service Full-service • Accepting multiple forms of payments, such as cash, check, or credit card • Offering delivery services • Making recommendations or providing demonstrations, such as offering recipes, cooking classes, or product samples • Allowing exchanges or returns • Allowing special orders • Providing customer loyalty programs

Store-Based Strategy Mixes

Learning Outcomes: Store-Based Strategy Mixes • • • 2. 4 Discuss store-based strategy mixes 2. 4. 1 Identify the four levels on the wheel of retailing 2. 4. 2 Explain the retail life cycle 2. 4. 3 Define scrambled merchandising 2. 4. 4 Discuss how a retail institution can evolve through mergers, diversification, and downsizing

Wheel of Retailing Entry: retailer penetrates a new market, ex: low prices, low retailer margins, low customer awareness • focus on streamlining operations to support new venture • higher prices and retailer margins, improved customer awareness • robust infrastructure, capabilities, and service • doesn’t mean retailer will fail Growth: retailer has foothold in new market and seeks to expand Maturity: retailer operates at full capacity Decline: retailer is vulnerable to lower cost operations

Retail Tactic: Scrambled Merchandising broadens assortment to include items that are generally outside their focus Adds to shopping experience rather than distracting Risk comes when unexpected items are included in assortment that confuse shoppers. Can detract from experience and tarnish retailer’s brand image

Evolving Through Mergers, Diversification, and Downsizing Throughout 1990 s, retail food industry underwent period of consolidation Consolidation lead to long-term trend where sales are concentrated among fewer number of retailers (1992, 20 largest food retailers accounted for 39. 2% of grocery sales; 2000, 54. 7%, 2016, 66. 6%) Mergers and Acquisitions: transactions in which ownership of companies & business organizations are combined

Competitive Analysis

Learning Outcomes: Competitive Analysis • 2. 5 Evaluate the elements of a competitive analysis • 2. 5. 1 State the places retail managers should go to obtain information on their competition • 2. 5. 2 Use NAICS codes to determine direct competitors

Obtaining Information on Competition Collecting from Industry • Government reports • white papers • industry publications Specific competitors: • • Press releases, financial reporting, weekly circulars, store visits

NAICS Codes and Direct Competitors North American Industry Classification System: https: //www. naics. com/ Common codes: • • 445110: supermarkets and grocery stores 445120: convenience stores 445220: fish and seafood markets 445230: fruit and vegetable markets 446110: pharmacies and drug stores 452311: warehouse clubs and supercenters 452319: all other general merchandise stores

Quick Review • • • Over 20 years, groceries have moved from grocery stores and supermarkets to whole host of other channels Existing grocery formats are competing with host of new competitors Pressure of e-commerce will continue, and mobile technology has changed shopper behavior Demographic changes in population: baby-boomers are reflecting interest in health and wellness Wage pressure: cost of labor is concern but companies are trying to ease these pressures Many reasons to be optimistic for future of retail: moving into period of experiential shopping, rise in specialty stores