5 Chapter 5 Retail Institutions by Store-Based Strategy Mix

Chapter 55Retail Institutions by Store-Based Strategy Mix

5-2

Chapter Objectives

To describe the wheel of retailing, scrambled merchandising, and the retail life cycle, and show how they can help explain the performance of retail strategy mixes

To discuss some ways in which retail strategy mixes are evolving

5-3

Chapter Objectives_2

To examine a wide variety of food-oriented retailers involved with store-based strategy mixes

To study a wide range of general merchandise retailers involved with store-based strategy mixes

5-4

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

5-5

Earning Destination Retailer Status

Be price oriented and cost efficientBe upscale Be convenientOffer a dominant assortment Offer superior customer serviceBe innovative or exclusive

Focus is to strive to be dominant in some way

5-6

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.

5-7

Figure 5.1 The Wheel of Retailing

Medium StrategyModerate Prices

Improved facilitiesBroader base of value and service

Low end StrategyLow prices

Limited facilities

High end StrategyHigh prices

Excellent facilitiesUpscale consumers

5-8

Three Basic Strategic Positions

Low endMediumHigh end

5-9

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

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

5-10

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 ?

5-11

Figure 5.3 Scrambled Merchandising by a Shoe Store

ScrambleMerchandise

Original merchandise

ShoesSlippers

Socks

Shoe Polish Rubber galoshes

Sandals

SlippersHandbags

Shoes

Umbrellas hats

gloves

Sweaters

Rubber galoshes

Sandals

Shoe Polish

Socks

5-12

Retail Life Cycle

• Retail institutions pass through identifiable life stagesintroductiongrowthmaturitydecline

5-13

Figure 5.4 Retail Life Cycle

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

5-14

How Retail Institutions are Evolving

Mergers, Diversification, DownsizingCost-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.

5-15

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)

5-16

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

5-17

Methods for Cost ContainmentStandardizing procedures, store layouts, store

size, and product offeringsUsing secondary locationsPlacing stores in smaller communities Using inexpensive construction materialsUsing plainer fixtures and displaysBuying refurbished equipmentJoining cooperative buying and advertisingCreatively financing inventories

5-18

Table 5.1 Store-Based Retail Strategy Mixes

Food Oriented Convenience store Conventional

supermarket Food-based

superstore Combination store Box (limited-line)

store Warehouse store

General Merchandise Specialty store Traditional department Full-line discount store Variety store Off-price chain Factory outlet Membership club Flea market

5-19

Convenience Store Strategy Mix

Location:Neighborhood

Merchandise:Medium width and low depth of assortment; average quality

Prices:Average to

Above average

Atmosphere andServices:Average

Promotion:Moderate

5-20

Conventional Supermarket Strategy Mix


Merchandise:Extensive width

and depth of assortment; average quality; manufacturer,

private, and generic brands

Prices:Competitive


Promotion:Heavy use of

newspapers, flyers, and coupons

5-21

Food-Based Superstore Strategy Mix

Location:Community shopping center or isolated site

Merchandise:Full assortment plus health

and beauty aids and general merchandise

Prices:Competitive



newspapers, flyers

5-22

Combination Store Strategy Mix

Location:Community shopping center

or isolated site

Merchandise:Full assortment plus health

and beauty aids and general merchandise

Prices:Competitive



newspapers, flyers

5-23

Box Store Strategy Mix


Merchandise:Low width and depth of

assortment; fewperishables; few national

brands

Prices:Very low

Atmosphere andServices:

Low

Promotion:Little or none

5-24

Warehouse Store Strategy Mix

Location:Secondary site, often in

industrial area

Merchandise:Moderate width and

low depth of assortment; emphasis on

manufacturer brandsbought at discount

Prices:Very low


Low

Promotion:Little or none

5-25

Specialty Store Strategy Mix

Location:Business district or

shopping center

Merchandise:Very narrow width and

extensive depth of assortment; average to

good quality

Prices:Competitive to Above average


Average to excellent

Promotion:Heavy use of displaysExtensive sales force

5-26

Traditional Department Store Strategy Mix

Location:Business district, shopping

center or isolated store

Merchandise:Extensive width and

depth of assortment; average to

good quality

Prices:Average to

Above average


Good to excellent

Promotion:Heavy ad and catalog

use; direct mail; personal selling

5-27

Full-line Discount Store Strategy Mix




depth of assortment; average to

good quality

Prices:Competitive

Atmosphere/ Services:Slightly below

average to average

Promotion:Heavy on newspapers;price-oriented; selling

5-28

Variety Store Strategy Mix



Merchandise:Good width and some depth of assortment;

below-average to average quality

Prices:Average

Atmosphere/ Services:Below average

Promotion:Use of newspapers

5-29

Off-Price Chain Strategy Mix




poor depth of assortment;

average to good quality;low continuity

Prices:Low

Atmosphere/ Services:Below average

Promotion:Use of newspapers;

brands not advertised;limited selling

5-30

Factory Outlet Strategy Mix

Location:Out of the way site

or discount mall



low continuity

Prices:Very Low

Atmosphere/ Services:Very low

Promotion:Little

5-31

Membership Club Strategy Mix

Location:Isolated store or

secondary site



low continuity

Prices:Very Low


Promotion:Little;

some direct mail

5-32

Flea Market Strategy Mix

Location:Isolated store



low continuity; variable quality

Prices:Very Low


Promotion:Limited

Documents

5 Chapter 5 Retail Institutions by Store-Based Strategy Mix