They are situated at the scattered individual locations. Retail Store can be one of the outlets in the shopping mall, shopping arcade, shopping complex, and shopping centers, where many other different retailers are located.
These stores are part of the neighbourhood cluster where other retailers are located. For example, HUB is one of the largest shopping malls in Mumbai. Many small retailers have their stalls in the general fairs or specialized fairs.
For example, a retailer can have a food stall in the shopping festivals, trade fairs and industrial exhibitions, which are general fairs and wide variety of products are sold by different types of retail shops. As well as he can have his food stall in the food festivals, which is a specialized fair and many food retailers will have their shops. The decade of the will witness many dramatic changes in retailing. Many of these changes will affect the types and classifications of existing retail institutions.
For example, a retailer that specialises in getting the consumer a product or service in the most convenient way possible could be classified as a convenience retailer. Think of how many different retailers you know that specialise in convenience products. What would you call retailers that specialise in the sale of food products?
There is some overlap among the types of retailers that exist and also some differences in the way they are classified. For example, a convenience store and a supermarket may both be classified as food retailers. It is important to understand the types of retail institutions because they have a competitive impact on business.
With this knowledge, managers are better prepared to develop comprehensive competitive analyses for use in their retail businesses. Retail professionals must strive to stay current with the numerous changes in their environments that may affect their businesses as well as their professional lives.
Remember the Wal-Mart neighbourhood market concept. One of the first decisions that the retailer has to make as a business owner is how the company should be structured.
This decision is likely to have long-term implications, so it is important to consult with an accountant and attorney to help one select preferred ownership structure. In making the choice, the following aspects need to be considered:. We now take an overview of the some basic legal forms of ownership for retailers:.
The vast majority of small businesses start out as sole proprietorships. These firms are owned by one person, usually the individual who has the day-to-day responsibility for running the business. In this case, the retailer owns all the assets of the business and the profits generated by it. He also assumes complete responsibility for any of its liabilities or debts. In the eyes of the law and the public, the retailer is one and the same with the business.
A partnership is a common format in India for carrying out business activities particularly trading on a small or medium scale. A business unit is generally carried out through a partnership. In a partnership, two or more people share ownership of a single business. As in case of proprietorships, the law does not distinguish between the business and its owners in partnership. The partners should have a legal agreement that sets forth how decisions will be made, profits will be shared, disputes will be resolved, how future partners will be admitted to the partnership, how partners can be bought out or what steps will be taken to dissolve the partnership when needed.
They must also decide up-front how much time and capital each partner will contribute, etc. A joint venture is not well defined in the law. Unless incorporated or established as a firm as evidenced by a deed, joint ventures may be taxed like association of persons, sometimes at maximum marginal rates.
It acts like a general partnership, but is clearly for a limited period of time or a single project. If the partners in a joint venture repeat the activity, they will be recognised as an ongoing partnership, and will have to file as such and distribute accumulated partnership assets upon dissolution of the entity. The LLC is a relatively new type of hybrid business structure that is now permissible in most states. It is designed to provide the limited liability features of a corporation and the tax efficiencies and operational flexibility of a partnership.
Formation is more complex and formal than that of a general partnership. The owners are members, and the duration of the LLC is usually determined when the organization papers are filed. The time limit can be continued if desired by a vote of the members at the time of expiration.
An Independent retailer operates only one retail establishment — The majority of these stores are owner or family managed. The case of entry into this type of retailing makes the independent retail store attractive to those with few capital resources. Although independent retailers make up 80 percent of all retailers, their sales represent only 40 percent of retail sales.
In addition, the owners of independent retail operations usually have many community contacts and are active in local chambers of commerce. They rely on these connections to generate business within the community. Because many independents are located in neighbourhoods and rural locations, rental expenses tend to be less than for stores located in major shopping districts.
Due to the smaller size and location, independent retailers have greater opportunities than other types of retailers to build customer relationships.
Another disadvantage is a lower level of expertise among personnel. Because independents are traditionally smaller than corporate chains, they have a smaller personnel base. They have fewer resources for hiring and training, qualified experts in each of the functional retail areas — IMC, buying, management, and accounting.
Corporate chain stores operate multiple more than one retail stores. Although the majority of chain operations are small, the bulk of sales in retailing come from the larger chain stores such as Wal-Mart, Sears, and Home Depot.
Many chain stores are divisions of larger companies. Penney Corporation owns 1, domestic and international C. The biggest advantage of operating a chain store is the ability to reduce costs through economies of scale. By purchasing in large quantities, the big chains can purchase products at reduced costs, thereby gaining the ability to pass on the lower costs to their customers. The large-volume purchases also allow these retailers to negotiate with suppliers for a lower per- product cost.
In addition to lower costs for purchases, the large chains generally use computerised systems for inventory control, ordering, and theft control. By reducing the costs associated with these functions, the chains can, once again, pass the savings on to their customers in the form of lower product and service prices. Due to their size, chains have the advantage of using information technology more efficiently than smaller retailers.
Many large chains, such as Office Depot and Target, can monitor instantly what is currently selling and what remains in inventory. Technology also allows chains to link directly with suppliers and have merchandise shipped when it falls below a given level. For example, chains can have specialists assigned to the buying function as well as the selling function. Chain store operations also have some disadvantages.
The biggest drawback is the cost associated with running a large operation. Furthermore, many chain operations are slower to respond to environmental problems due to bureaucracies typical in larger businesses. Another disadvantage is the difficulty in tailoring the product assortment to different geographic areas.
To take advantage of economies of scale, chains often purchase the same products for all their stores. Independents and chain operations come with unique sets of advantages and disadvantages. The disadvantages, when understood, can be minimised or eliminated by good management, however. A franchise is a contractual agreement between a franchisor and a franchises. Simply stated a franchisor is the owner of a franchise and can be a wholesaler, manufacturer, or service provider.
Depending on the contract, the franchises pays the franchisor a fee plus royalties, typically based on sales, for the right to own and Operate the business in a particular location generally geographical. In return, the franchisor offers the franchises expert assistance in site selection, building requirements, IMC, employee or managerial training, and advice or requirements for product or service offerings. The franchises receives all profits from the operation of the retail business after paying the royalty and thus is motivated to try to increase sales as much as possible.
Because franchisors have more expertise in their areas and have greater resources, they generally design the systems for the operation of the franchised business. In a franchise program, the parties gain from the increased size-of the organization and are able to share resources while dividing costs associated with running a retail operation.
During the past two decades, franchising has been split among product, business, and trademark franchising. The franchisor provides all assistance necessary to carry out the business functions advertising, training, site selection, accounting, planning, and other executions while at the same time listening to the needs and wants of its franchise holders.
The transportation industry, in particular the automobile industry, exemplifies both product and trademark franchising. General Motors allows its dealers to sell certain products usually divisional, such as Chevrolets or Pontiacs and to use its trademark while selling these products.
The main advantage of franchising to franchisees is that each owner franchisee can own and operate his or her own business with a smaller capital outlay than would be possible without joining the franchise team. In addition, franchising breaks down a barrier to entry into the retail market by allowing the franchises to sell established brand names and products.
Franchisees can also achieve economies of scale through their association with a larger, more powerful buying group, thereby bringing down their cost per unit. Another form of retail ownership is the leased department. A leased department consists of space in a larger retail store such as J. Penney that is rented to an outside vendor. The retail business that leases the space runs that area as if it were a small business within the larger business unit.
It is generally responsible for all retail functions in many cases including the fixtures of the leased area. In addition, the lessee pays rent for the space.
Examples of leased departments often include jewellery and shoe departments in large department stores. Because many larger stores lack the expertise for a given product line-for example, jewellery — they get the advantage of greater expertise within the store.
The stores are also assured of having a product that their customers need or want. The lessee has the advantage of established customers and customer traffic for their products and services. In addition, many costs can be reduced for the lessee, such as security and parking.
There are three major types of cooperative store arrangements also called co-ops : retail-sponsored cooperatives, wholesale-sponsored cooperatives, and consumer cooperatives. To overcome many of the disadvantages associated with being a smaller, independent retailer, some retailers band together to create a retail-sponsored cooperative, an organization that allows centralised buying and overcomes other problems involved in running a small retail operation.
Through centralised buying, member retailers can take advantage of the price savings that accompany large purchases from vendors. In addition, retailers can improve their operating efficiency by sharing methods developed by the cooperative organization. An example of a retail-sponsored cooperative is Carpet One, a national cooperative of independent floor retailers. A wholesale-sponsored cooperative is developed, owned, and run by a group of wholesalers.
The wholesaler groups generally offer integrated retail programs to smaller, independent retailers. The wholesalers may offer the independents services such as warehousing and transportation. In addition, members receive additional services many fee based such as site selection, store displays, and other merchandising methods.
An example of a wholesale- sponsored cooperative is Blooming Prairie www dot bpcoop dot com , which has been distributing natural foods throughout the Midwest since In a consumer cooperative, the consumers themselves own and operate the retail establishment.
Generally, consumer cooperatives come about because members believe they can offer products and services at a lower price than traditional retailers. Often these consumers believe there is a need in the marketplace traditional retailers are not serving. In the banking industry, consumer cooperatives have emerged in response to a perceived lack of sensitivity to the consumer by traditional banks. These cooperatives are known as credit unions.
Suppose you and your classmates have been discussing the high cost of textbooks. You decide that you can offer textbooks cheaper than the traditional publishing houses, so you go into business.
Your first job is to create a company and look for substantial company investment. You need managers and personnel to sell and buy the products textbooks. In addition, you need an accountant and perhaps some retail and marketing professionals. Finally, you may want to hire a lawyer to make sure you are compliant with all laws and regulations involved in running your business.
You need to find an acceptable site and negotiate rates for rent or purchase. In the end, you and your investors will share the profits you have earned through the development of this cooperative. You may discover that it takes a lot of time, effort, and money to sell textbooks through a cooperative and that they may not be as overpriced as you previously thought. Retail stores are often classified by the types of strategies they employ in selling their goods and services.
This section is divided into two major strategic categories:. General Merchandise Retailers :. General merchandise retailers are involved, obviously, in the sale of general, nonfood merchandise.
Almost any nonfood item falls into this category. This article discusses the major types of general merchandise retailers.
According to the U. Department stores are large retailers that carry a wide breadth and depth of products. In addition, they offer more customer service than their general merchandise competitors. Department stores often are the anchors of major shopping centres. Most, but not all, department stores are parts of a large chain. Department stores have a perceptual advantage because they use IMC more than most other types of retailers.
Department stores utilize newspapers, magazines, radio, television, and direct mail to deliver their marketing communications. Due to overstoring, most of the promotional budgets are geared to sale advertising. Couponing, historically used by grocery stores, has been used to generate sales.
Unfortunately, the use of coupons diminishes profits and creates a situation where consumers do not buy unless they receive some type of discount. In recent years, department store sales have slowed because of the appearance of specially retailers and full-line discount stores such as Target, Kmart, and Wal-Mart.
Strategies for success in department store retailing include expanded customer service, sales training for sales personnel, exciting IMC especially at point of sale , and the elimination of nonproductive, slow-selling products. A movement is under way in department store retailing to generate more research in the area of consumer information to be used to create better customer relations.
In addition, department stores have moved toward greater centralisation in their buying and IMC areas. A key to successful retailing in department stores is the use of store brand names to develop customer loyalty.
In an attempt to retain and attract new customers, department stores are being more innovative. The renovations included shopping carts, bright signage, customer price-scanner stations, and lounges. Saks Inc. Full-line discount stores can also fall under the U. Census Bureau definition of a department store. The difference between a department store and a full-line discount store lies in the service and merchandise areas.
Discount stores generally offer limited customer services but have merchandise priced below that of department stores. In addition, the products sold at some discount stores tend to be less fashionable than similar merchandise carried at larger department stores. The main strategy employed by the discounter is to develop an image of high-volume, low-cost products. Since strong national discount retail chains began in the s, they have taken a large share of the market away from traditional retailers.
This trend continues. A key factor spurring the growth of discount retailers is value consciousness. This change began in recessionary periods but has cut across all economic climates and income levels. The rise in discount retailers has been due in part to the attention they have paid to their core competencies, such as low prices and a wide selection of products. Many customers no longer see any added value in paying higher prices at traditional department stores. The department stores have lost their differentiation of quality customer service.
Thus, discount retailers have captured a significant share of the overall general merchandise market. Specialty stores carry a limited number of products within one or a few lines of goods and services. They are so named because they specialise in one type of product, such as apparel and complementary merchandise. Specialty stores utilize a market segmentation strategy rather than a typical mass marketing strategy when trying to attract customers.
They tend to create a market niche for their product assortments. Although they do not carry a large number of product lines width , they offer many products within each line depth. Specialty retailers tend to specialize in apparel, shoes, books, toys, auto supplies, jewellery, and sporting goods. Customers frequent specially stores because of the extensive assortments and personal service provided. For example, the Great American Spice Co.
The online store has over 25, recipes. In addition, specialty stores often offer a more physically comfortable shopping atmosphere.
In recent years, specially stores have seen the emergence of the category killer. Category Killers sometimes called power retailers or category specialists are generally discount specially stores that offer a deep assortment of merchandise in a particular category books, toys, shoes, sports items, etc. Therefore, many category killers have created additional retail venues that carry some of the same merchandise but are downsized to give the customer a smaller, more intimate store.
Home Depot, for example, has created a number of smaller stores called Villager Hardware to satisfy those customers who prefer the smaller store format. Off-price retailers resemble discount retailers in that they sell brand-name merchandise at everyday low prices EDLP. Off- price retailers rarely offer many services to customers.
The key strategy of off-price retailers is to carry the same type of merchandise as traditional department stores but offer prices that can be 40 to 50 percent lower. To be able to offer lower prices, off-price retailers develop special relationships with their suppliers for large quantities of merchandise. Inventory turnover is the key to a successful off-price retailing business. Because of this, the buying strategy developed and executed by off-price retailers is very aggressive.
In addition to purchasing closeouts and cancelled orders, off-price retailers negotiate with manufacturers to discount orders for merchandise that is out of season or to prepay for items to be manufactured, thus reducing the buying prices of those items.
Because off-price retailers do not ask the manufacturers for additional services such as return privileges, advertising allowances, or delayed payments, they are often able to get reduced prices for the merchandise they purchase. There are many types of off-price retailers, including outlet stores. Manufacturers, department stores, or even specially store chains can own off- price stores. Stores owned by the manufacturer are usually referred to as factory out- let stores. Follow Daphne Howland on Twitter.
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From Nedap. From Revionics. From EquipmentShare. Most retail outlets are small and have weekly sales of just a few hundred dollars. This diversity in size and earnings is reflected in the range of different ownership and management structures, discussed below. Department stores are characterized by their very wide product mixes. That is, they carry many different types of merchandise, which may include hardware, clothing, and appliances.
Each type of merchandise is typically displayed in a different section or department within the store. The s saw the evolution of the chain store movement. Because chains were so large, they were able to buy a wide variety of merchandise in large quantity discounts. The discounts substantially lowered their cost compared to costs of single unit retailers.
As a result, they could set retail prices that were lower than those of their small competitors and thereby increase their share of the market. Furthermore, chains were able to attract many customers because of their convenient locations, made possible by their financial resources and expertise in selecting locations. Supermarkets evolved in the os and s. For example, Piggly Wiggly Food Stores, founded by Clarence Saunders around , introduced self-service and customer checkout counters.
Supermarkets are large, self-service stores with central checkout facilities. They carry an extensive line of food items and often nonfood products. There are 37, supermarkets operating in the United States, and the average store now carries nearly 44, products in roughly 46, square feet of space. Discount retailers, like Ross Dress for Less and Grocery Outlet, are characterized by a focus on price as their main sales appeal.
Merchandise assortments are generally broad and include both hard and soft goods, but assortments are typically limited to the most popular items, colors, and sizes. Traditional stores are usually large, self-service operations with long hours, free parking, and relatively simple fixtures. Online retailers such as Overstock.
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