Chapter 2Chapter 2

Retail FormatsRetail Formats

Faiza Nasir

Retail formats?Retail formats?

Merchandise’s DivisionMerchandise’s Division

Product WidthProduct Width

Product LengthProduct LengthProduct DepthProduct Depth

SKUs?SKUs? A common term for a unique numeric identifier, used to refer to a

specific product in inventory or in a catalog.

Inventory control count that represents one or more items that will be sold together. For example, a retail bed store would consider one bed frame with four wheels equal to one SKU (even though the frame and the wheels come from different suppliers), because a frame is never sold without wheels, and wheels are never sold alone. Conversely, a frame, a box spring, and a mattress would be considered three SKUs, because any of the three items might be sold separately.

Warehousing item that is unique because of some characteristic (such as brand, size, color, model) and must be stored and accounted for separate from other items. Every SKU is assigned a unique identification number (inventory or stock number) which is often the same as (or is tied to) the item’s UPC.

Store vs. Store vs.

Non-Store formatsNon-Store formats

Store Formats by LocationStore Formats by Locationa) Chain storea) Chain store Multi-locationalMulti-locational Operates multiple outlets under common ownershipOperates multiple outlets under common ownership Engages in some level of centralized or coordinated purchasing Engages in some level of centralized or coordinated purchasing

and decision makingand decision makingb) High street format:b) High street format: A retail chain that seeks to locate itself in busy shopping areas A retail chain that seeks to locate itself in busy shopping areas

(generally less than 2,000 sft, with no parking facilities and (generally less than 2,000 sft, with no parking facilities and focused merchandise categories)focused merchandise categories)

c) Destination format:c) Destination format: Independent retail stores located specifically in an area with Independent retail stores located specifically in an area with

alluring propositions (usually large in size, with ample alluring propositions (usually large in size, with ample concessions, huge parking space, wide merchandise categories)concessions, huge parking space, wide merchandise categories)

d) Convenience store format:d) Convenience store format: Accessible carrying wide array of consumable goods (less than Accessible carrying wide array of consumable goods (less than

5,000 sft, extended hours, parking for few vehicles, convenience 5,000 sft, extended hours, parking for few vehicles, convenience merchandise)merchandise)

Competitive State of ChainsCompetitive State of Chains

AdvantagesAdvantages Bargaining powerBargaining power Cost efficienciesCost efficiencies Efficiency from Efficiency from

computerization, computerization, sharing warehouse sharing warehouse and other functionsand other functions

Defined management Defined management philosophyphilosophy

Considerable efforts Considerable efforts in long-run planningin long-run planning

DisadvantagesDisadvantages Limited flexibilityLimited flexibility Higher investment Higher investment

costscosts Complex managerial Complex managerial

controlcontrol Limited Limited

independence among independence among personnelpersonnel

Convenience Store Strategy MixConvenience Store Strategy Mix

Location:Neighborhood

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

Prices:Average to

Above average

Atmosphere &Services:Average

Promotion:Moderate

Store Formats by OwnershipStore Formats by Ownershipa) Independenta) Independent Generally higher level of independent retailers existsGenerally higher level of independent retailers exists 50% of these are run by owners and their families50% of these are run by owners and their families Why so many? Ease of entryWhy so many? Ease of entry

b) Franchise:b) Franchise: A contractual agreement between a franchisor and a retail A contractual agreement between a franchisor and a retail

franchisee, which allows the franchisee to conduct business franchisee, which allows the franchisee to conduct business under an established name and according to a given under an established name and according to a given pattern of businesspattern of business

Franchisee pays an initial fee and a monthly percentage of Franchisee pays an initial fee and a monthly percentage of gross sales in exchange for the exclusive rights to sell gross sales in exchange for the exclusive rights to sell goods and services in an areagoods and services in an area

Competitive State of IndependentsCompetitive State of Independents

AdvantagesAdvantages Flexibility in formats, Flexibility in formats,

locations, and strategylocations, and strategy Control over investment Control over investment

costs and personnel costs and personnel functions, strategiesfunctions, strategies

Personal imagePersonal image Consistency and Consistency and

independenceindependence Strong entrepreneurial Strong entrepreneurial

leadershipleadership

DisadvantagesDisadvantages Lack of bargaining Lack of bargaining

powerpower Lack of economies of Lack of economies of

scalescale Labor intensive Labor intensive

operationsoperations Over-dependence on Over-dependence on

ownerowner Limited long-run Limited long-run

planningplanning

Competitive State of FranchisingCompetitive State of Franchising

AdvantagesAdvantages small capital requiredsmall capital required acquire well-known acquire well-known

namesnames operating/management operating/management

skills taughtskills taught cooperative marketing cooperative marketing

possiblepossible exclusive selling rightsexclusive selling rights less costly per unitless costly per unit

DisadvantagesDisadvantages oversaturation could oversaturation could

occuroccur franchisors may franchisors may

overstate potentialoverstate potential locked into contractslocked into contracts agreements may be agreements may be

cancelled or voidedcancelled or voided royalties are based royalties are based

on sales, not profitson sales, not profits

From the Franchisor’s PerspectiveFrom the Franchisor’s Perspective

BenefitsBenefits national or global national or global

presence possiblepresence possible qualifications for qualifications for

franchisee/ franchisee/ operations are set operations are set and enforcedand enforced

money obtained at money obtained at deliverydelivery

royalties represent royalties represent revenue streamrevenue stream

Potential ProblemsPotential Problems potential for harm to potential for harm to

reputationreputation lack of uniformity lack of uniformity

may affect customer may affect customer loyaltyloyalty

ineffective franchised ineffective franchised units may damage units may damage resale value, resale value, profitabilityprofitability

potential limits to potential limits to franchisor rulesfranchisor rules

Store Formats by Store Formats by Merchandise CategoryMerchandise Category

a) Family storea) Family store Store dealing in all categories of related item (For e.g. apparel Store dealing in all categories of related item (For e.g. apparel

store offering merchandise to suit the wardrobe of a family)store offering merchandise to suit the wardrobe of a family)b) Specialty format:b) Specialty format: Narrow product lines with good depth. Specializing in a given type Narrow product lines with good depth. Specializing in a given type

of merchandise, offering attentive customer services.of merchandise, offering attentive customer services.c) Department store format:c) Department store format: Large in size having several departments working as SBUs Large in size having several departments working as SBUs d) Super market format:d) Super market format: Departmentalized, specializing in foodstuff, grocery and limited Departmentalized, specializing in foodstuff, grocery and limited

non-food categories, free access displays so that customers can non-food categories, free access displays so that customers can pick from shelves.pick from shelves.

e) Emporium:e) Emporium: Selling a variety of a particular group of merchandise (sari Selling a variety of a particular group of merchandise (sari

emporium).emporium).

Merchandise:Very narrow width and

extensive depth of assortment; average to

good quality

Prices:Competitive to Above average

Atmosphere andServices:

Average to excellent

Promotion:Heavy use of displaysExtensive sales force

Specialty Store Strategy MixSpecialty Store Strategy Mix

Department Store Strategy MixDepartment 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

Atmosphere andServices:

Good to excellent

Promotion:Heavy ad and catalog

use; direct mail; personal selling

Conventional Supermarket Conventional Supermarket Strategy MixStrategy Mix

Location:Neighborhood

Merchandise:Extensive width

and depth of assortment;

average quality; manufacturer,

private, & generic brands

Prices:Competitive

Atmosphere andServices:Average

Promotion:Heavy use of

newspapers, flyers, and coupons

Store Formats by SizeStore Formats by Size

a) Superstore formata) Superstore format Single-level large store, twice the size of a supermarket, offers Single-level large store, twice the size of a supermarket, offers

non-traditional goods and services like pharmacy, flower shop, non-traditional goods and services like pharmacy, flower shop, bookstore, salad bar, bakery etc.bookstore, salad bar, bakery etc.

b) Shopping Mall:b) Shopping Mall: Spread over a large area, arrangement of retail stores and places Spread over a large area, arrangement of retail stores and places

for leisure activities.for leisure activities.c) Shopping Center:c) Shopping Center: Plaza combining five or more tenant spaces developed under one Plaza combining five or more tenant spaces developed under one

building.building.d) Hypermarket:d) Hypermarket: Wide variety, offering in large quantities in each category selling Wide variety, offering in large quantities in each category selling

huge volumes at low margins.huge volumes at low margins.

Store Formats by PriceStore Formats by Pricea) Discount formata) Discount format Bazaar format, believing in discounts more often.Bazaar format, believing in discounts more often.b) EDLP format:b) EDLP format: Specialize in a particular merchandise line, assuring consistently Specialize in a particular merchandise line, assuring consistently

low prices.low prices.c) Category killer format:c) Category killer format: Large specialty store having enormous selection of its product Large specialty store having enormous selection of its product

category at relatively low prices.category at relatively low prices.d) Factory-outlet format:d) Factory-outlet format: Owned and operated by the manufacturerOwned and operated by the manufacturere) Warehouse format:e) Warehouse format: Large sale of discontinued merchandise, has large width and Large sale of discontinued merchandise, has large width and

depth in many categories it retails.depth in many categories it retails.f) Single-price denomination format:f) Single-price denomination format: Scrambled merchandise at just one price point, generally at a low Scrambled merchandise at just one price point, generally at a low

one.one.

Discount Store Strategy MixDiscount Store Strategy Mix

Merchandise:Extensive width and

depth of assortment; average togood quality (overruns,

irregulars, cut-sizes)

Prices:25% or more below

MRP

Atmosphere/ Services:Slightly below

average to average

Promotion:Heavy on newspapers;price-oriented; selling

Factory Outlet Strategy MixFactory Outlet Strategy Mix

Merchandise:Moderate width and

poor depth of assortment;

low continuity (cancelled orders, discontinued

merchandise)

Prices:Very Low

Atmosphere/ Services:Very low

Promotion:Little

Warehouse Store Strategy MixWarehouse 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

Atmosphere andServices:

Low

Promotion:Little or none

Store Formats by ConcessionsStore Formats by Concessions

a) Stopover store formata) Stopover store format Like petrol pump, offers instant use or ready-to-eat categories of Like petrol pump, offers instant use or ready-to-eat categories of

merchandise.merchandise.b) Kiosk:b) Kiosk: Small freestanding pavilionSmall freestanding pavilionc) Alliances:c) Alliances: With brands that customers trustsWith brands that customers trusts

Bazaars?Bazaars? SeasonalSeasonal StructuredStructured Un-structuredUn-structured ThematicThematic

Scalability and Scalability and its importanceits importance