Retail formats

Made for Retail Management students of BBA/MBA , collected from various web sites and text books

1. RETAIL FORMATS Dr. Kirti Shivakumar

2. WHAT IS RETAIL MIX ???

3. RETAIL MIX Retailing mix refers to the various features of retail strategy planning. Often called "the 6 Ps," retailing mix details a retail business' approach to its products, promotion efforts, personnel, presentation, place and price. Retailing mix helps a business define its strategy and carry out operations according to its goals

4. . Retail mix is a marketing plan that responds to a set of varying factors, such as location, pricing, personnel needs and offered services and goods. A retail mix plan targets strategies to attract customers and influence their purchasing ability. Retail mix also includes signage, placement of goods within the location and price discounts.

5. Retail Formats The retail format is the store ‘package’ that the retailer presents to the shopper. A format is defined as a type of retail mix, used by a set of retailers. Store Formats are formats based on the physical store where the vendor interacts with the customer. It is the mix of variables that retailers use to develop their business strategies and constitute the mix as assortment, price, transactional convenience and experience.

6. Classification of retail stores Store-Based Retailing Non-Store Retailing Form of Ownership Independent retailer Chain Retailer Franchise Leased Departments Vertical Marketing System Consumer Cooperatives Merchandise Offered Convenience Store Supermarkets Hypermarkets Specialty Stores Department Stores Off Price Retailers Full line discount store Warehouse store Variety Store Factory Outlets Catalogue Showrooms Membership Club Flea Market Direct Selling Direct Marketing Automated Vending World Wide Web Other Emerging Retail formats Based on Location High Street Destination Convenience

7. Ownership Ownership Independent Chain Franchise Leased department Vertical marketing system Consumer cooperative

8. Ownership Ownership stores are further classified on the basis of :- Type of Merchandise and/or Services Sold Variety /Assortment of Merchandise Sold Level of Customer Service Price of the Merchandise

9. Type of Merchandise and/or Services Sold NAICS – a six digit code based on the type of products and services it produces and sells , first two digits identify the firms business sector and the remaining four digits identify various subsectors . ( applicable in US / Mexico and Canada) The  NAICS  industry  codes  define establishments based on the activities in which they are primarily engaged. Division G - Retail Trade Code Industry Title Count * 52 Building Materials, Hrdwr , Garden Supply & Mobile Home Dealers 114,776 53 General Merchandise Stores 71,278 54 Food Stores 270,331 55 Automotive Dealers and Gasoline Service Stations 258,083 56 Apparel and Accessory Stores 178,568 57 Home Furniture, Furnishings and Equipment Stores 188,887 58 Eating and Drinking Places 684,475 59 Miscellaneous Retail 698,584

10. Variety /Assortment of Merchandise Sold Variety - A merchandising strategy in which a retailer stocks a large number of different products. A wide variety is used to draw in customers looking for an array of goods, but does not mean that the retailer will offer many different iterations ( types) of a specific product. For example, a convenience store may offer a wide variety of products, but a limited number of choices within a particular product range . Assortment - The number and type of products displayed by retailers for purchase by consumers. The two major components of an assortment strategy are the depth of products offered (how many variations of a particular product a store carries), and the width of the product variety (how many different types of products a store carries ). A  deep assortment of products means that a retailer carries a number of variations of a single product (the opposite being a narrow assortment); a wide variety of products means that a retailer carries a large number of different products (the opposite being a narrow variety ).

11. Level of Customer Service Customer service is the act of taking care of the customer's needs by providing and delivering professional, helpful, high quality service and assistance before, during, and after the customer's requirements are met.  Customer service  is meeting the needs and desires of any customer. Some characteristics of good customer service include : Promptness : Promises for delivery of products must be on time. Delays and cancellations of products should be avoided. Politeness : Saying 'hello,' 'good afternoon,' 'sir', and 'thank you very much' are a part of good customer service. For any business, using good manners is appropriate whether the customer makes a purchase or not. Professionalism : All customers should be treated professionally, which means the use of competence or skill expected of the professional. Professionalism shows the customer they're cared for. Personalization : Using the customer's name is very effective in producing loyalty. Customers like the idea that whom they do business with knows them on a personal level.

12. Price of the Merchandise Off Price retailers Off-price retailers are retailers who provide high quality goods at cheap prices. They usually sell second-hand goods, off-the-season items etc . Category Specialists' Discount stores that specialize in a particular category are called category specialist retailers. They are also known as discount specialty stores. MSRP

13. Type of Ownership Stores - Independent An Independent retailer owns a single retail unit . run entirely by the owners and/or their families and have no or few paid workers . most of these outlets are basic mom-and-pop stores with very basic offerings, fixed prices, and no ambience . highly competitive stores due to cheap land prices and labour. Most of these stores save tax as they belong to the small industry sector .

14. Advantages of Independent Stores great deal of flexibility in choosing retail formats and locations . target smaller consumer segments rather than mass markets. Detailed specifications can be set for determining best location , product assortments, prices, store hours, and other factors consistent with their target segment. low investments in terms of lease, fixtures, workers and merchandise. independents often act as specialists and acquire skills in a niche for a particular goods/service category. Decision-making in these stores is usually centralised strong entrepreneurial drive as they have personal investment in the business, success or failure has huge implications consistent in their efforts as they generally adopt just one strategy.

15. Advantages of Independent Stores limited bargaining power with suppliers Reordering may also be tough if minimum order requirements are too high for them to qualify . Due to low economies in buying and maintaining inventory, the transportation, ordering, and handling costs are higher. labour intensive, sometimes with little computerisation . Ordering, taking inventory, marking items, ringing up sales and bookkeeping may be done manually often disruption when the owner is ill, on vacation, or retires. allocate limited amount of time and resources to long term planning. To offset the disadvantage of economies, these retailers offer complementary merchandise and services. Often while all stores in the chain offer the same merchandise, independents can provide merchandise compatible with local market needs.

16. Chain A chain retailer operates multiple outlets (store units) under common name. Chain store (s) or  retail chain  are  retail outlets that share a brand and central management, and usually have standardized business methods and practices. In  retail , dining, and many service categories,  chain businesses have come to dominate the market in many parts of the world. Retail chains can range from two stores to retailers with over 1,000 stores . Rahejas -owned Shoppers Stop runs about 75 stores while Aditya Birla owned  Pantaloons has more than 100 outlets.   Reliance Footprint , operates 200 stores across 100 cities. As on March 31, it operated 2,621 stores across 200 cities, with 12.5 million sq ft space.

17. Advantages of Chain stores enjoy strong bargaining power with suppliers due to the volumes of purchases. They generally bypass wholesalers. Many of them buy directly from the manufacturers. Suppliers service the orders from chains promptly and extend a higher level of proper service and selling support. New brands reach these stores faster. Most of these chains sell private labels Chains achieve efficiency due to the centralisation of purchasing and warehousing and computerisation . Wider geographic coverage of markets allows chains to utilize all forms of media. Most of the chains invest considerable time and resources in long term planning, monitoring opportunities and threats.

18. Disadvantages and Challenges Chain retailers suffer from limited flexibility, as they need to be consistent throughout in terms of prices, promotions, and product assortments. Chain retailers have high investments in multiple leases, fixtures, product assortments and employees. Due to their spread, these retailers have reduced control, lack of communication and time delays . Thus , such retailers focus on managing a specific retail format for a better strategic advantage and increased profitability. Some chain retailers capitalise on their widely known image and adopt flexibility to market changes.

19. Franchising Franchising is a contractual agreement between a franchiser and a franchisee that allows the franchisee to operate a retail outlet using a name and format developed and supported by the franchiser . In a franchise contract the franchisee pays a lump sum plus a royalty on all sales for the right to operate a store in a specific location. The franchisee also agrees to operate the outlet in accordance with procedures prescribed by the franchisers . The franchiser provides assistance in locating and building the store, developing the products and/or services sold, management training and advertising . types of franchising: product/ trademark and business format.

20. Types of Franchising PRODUCT/ TRADEMARK FRANCHISING franchisees acquire the identities of the franchiser by agreeing to sell the latter’s product and/or operate under the latter’s names. independent in their operation. They may draw certain operating rules in consultation with the franchiser . BUSINESS FORMAT FRANCHISING ARRANGEMENT the two parties have a synergetic relationship. The franchiser provides assistance in strategic and operation issues besides the right to sell goods and services. The franchisees can take advantage of prototype stores, standardized product lines and cooperative advertising.

21. Structural arrangements in retail franchising (A) MANUFACTURER- RETAILER; where a manufacturer the right to sell goods and related services through a licensing agreement as in the case of automotive dealers and petroleum products dealers . (B) WHOLESALER- RETAILER; which may take the form of a voluntary franchise system as in consumer electronic stores or co-operative where a group of retailers set up a franchise system and share the ownership and operations of a wholesaling organization. ( C) SERVICE SPONSOR RETAILER, where a service firm licenses individual retailers to let them offer specific service package to consumers, such as auto rental, hotels and fast food restaurants.

22. Leased Department A Leased Department is a department in a retail store rented generally by a manufacturer. The lessee is responsible for all aspects of business and pays the store a rent . The store may impose operating restrictions for the leased department to ensure the overall consistency. The leased departments choose to operate in categories that are generally on the fringe of the store’s major product lines, such as in-store beauty salons , banks, photographic studios and food courts.

23. Advantages and Challenges for the store owner Leased departments help the stores in generating greater traffic and providing one stop shopping . benefit from expertise of lessees in personal management, merchandise displays, the recording of items, as store personnel might lack the merchandising ability to handle and sell certain goods and services. regular source of revenue and reduces costs as leased departments pay for inventory and personal expenses. may also be a source of conflict with lessees as leased departments may use operating procedures which conflict with those of the stores. may adversely affect stores’ images and customers may blame problems on the host stores rather than on the lessees.

24. Advantages and Challenges for the Lessee ( LDO) The leased department operators benefit as the main store generates immediate sales for leased departments. This arrangement reduces expenses through economics of scale (like pooled advertising) and shared facilities (like security equipment and display windows). Also lessees’ images are aided by there relationships with popular stores . However , there may be inflexibility due to the restrictions imposed by the operations of the main store. There is always the fear that the stores may raise the rent or may not renew leases when they expire even if lessees are successful.

25. VERTICAL MARKETING SYSTEM CHANNEL TYPE CANNEL FUNCTIONS OWNERSHIPS Independent Manufacturing Independent Systems Partners 2. Partially Integrated Two channel members Systems Wholesaling own all facilities and perform all functions 3. Fully All functions are Integrated performed by a single Systems Retailing channel member

26. CONSUMER CO-OPERATIVES Consumer co-operatives exist for three basic reasons: They feel that they can operate a store as well or may be better than any other retailer They believe that existing retailers are inadequately fulfilling customers need for healthful, environmentally safe products They assume that existing retailers make excessive profits and they can sell merchandise for lower prices Advantages For protecting interest of general consumers; making consumer goods available at a reasonable price; Source goods directly from the producers or manufacturers; eliminates middlemen in the distribution process. Kendriya Bhandar , Apna Bazar , Sahkari Bhandar ,Employees consumer co-operative societies;

27. Store Format based on Location Location HIGH STREET FORMAT DESTINATION FORMAT CONVENIENCE STORE

28. STORE FORMAT BY LOCATION 1. High Street Format It is Located in busy shopping area. Area is less than 2000 square feet. No parking facility Focused Merchandised Category Example: M. G. Road in Bangalore

29. 2.DESTINATION FORMAT Huge Parking space Wide merchandise category They are Independent retail store with alluring proposition for the customer to visit the store with the primary intention of shopping there

30. 3. CONVENIENCE STORE Located in the catchment area of target customers Extended hours of operation Less than 5000 square feet 24X7 convenience stores situated close to homes to generate high footprints snacks, grocery type items & confectionary Merchandise include: beverages, ready to eat These store carry a limited stock of daily use goods with a special focus on food products eg. In & Out petrol pump outlets.

31. Store-based Retail Strategy Mix Store-based Retail Strategy Mix Food –oriented Retailers Convenience store Conventional supermarket Food -based superstore Combination store Box (limited line) store Warehouse store General Merchandise Retailers Specialty store Variety store Traditional department store Full –line discount store Off-price chain Factory outlet Membership club Flea market

32. CLASSIFICATION BASED ON MERCHANDISE OFFERED FOOD ORIENTED RETAILERS CONVENIENCE STORES: It is usually a food-oriented retailer that is well located, is open for long hours and carries a moderate number of items. This type of retailer is small, has average to above average prices and average services and average atmosphere. Milk, eggs, bread, newspaper, tobacco products, soft drinks, magazines, video rentals, etc are the major category occupants. Store size ranges from 3000 to 8000 sq. ft. Ex. Mom n Pop stores.

33. CONVENTIONAL SUPERMARKET These are large, low cost, low margin, high volume, self service retailers designed to meet the needs for food, groceries and other non-food items. They rely on high inventory turnover. Their profit margins are low. The size of the store ranges from 8000 to 20000 sq. ft. Ex. Kroger, Safeway, Foodworld , Adani supermarket, Subhiska , Nilgiri’s , Reliance Fresh.

34. FOOD BASED SUPERSTORE A food based superstore is a larger and more diversified than a conventional supermarket but usually less diversified and smaller than a combination store. Some supermarkets merged with general merchandise store or drug store. They are typically 25000 to 50000 sq feet of total space. 20-25 % revenues comes from garden supplies, small household appliances, flowers, etc. They stimulate impulse purchases.

35. COMBINATON STORE A combination store combines supermarket and general merchandise sales in one facility. 25-40% revenues from general merchandise. They are from 30000 to 100000 sq feet. the combination of economy supermarket with discount department store is called super center . Examples: Wal-mart , K-mart.

36. HYPERMARKET Also called as supercentre , this format is a blend of economy supermarket with discount department store. They offer both food and non-food items like grocery, clothes, jewellery , cycles, sports items, books, CDs, furniture, etc. This format was pioneered by Carrefour in France. This ranges from 80,000 to 2,20,000 sq. ft. The cheapest price will normally be found in these stores. Across the world hypermarkets are a part of retail park with other shops, cafeteria and restaurants. Other facilities include photo processing shop, pharmacy shops. They are usually located in the outskirts of major towns and cities. Ex. SIB, Big Bazaar, Adani Hypermarket.

37. BOX STORE This is a food based discounter that focuses on a a small section of items, moderate working hours, few services and limited manufacturer’s brands. They have less than 1500 SKUs. Items are displayed in cut cases. Customers do their own bagging. They aim to price at 20-30% below supermarkets. Example: Aldi.

38. WAREHOUSE STORE A warehouse store is a food-based discounter offering a moderate number of food items in a no frill setting. They appeal to one stop shoppers. These stores concentrate on special discount purchases from manufacturer brands. They use cut-case displays, provide little service, post prices on shelves and are located in industrial districts. Potential problem is lack of brand continuity. They temporarily or permanently run out of brands. Here customers pack their own goods. They work on volumes and their gross margins are far lower than supermarkets or hypermarkets. Largest stores are called super warehouse. Their sizes can be 15000 to 50000 square feet. Ex. Cub Foods

39. GENERAL MERCHANDISE RETAILERS SPECIALITY STORE A specialty store concentrates on selling one product/ service line such as apparel and accessories, toys, furniture. They have a deep assortment in their chosen category and tailor their strategy to selective market segment. Personal attention, store ambience and customer service are the prime importance to the retailer. They operate in an area which is under 8000 sq. ft. Ex. The Gap, Mango, Levis, Wills Lifestyle, Big & Tall, Adidas, Nike, Style Spa, Proline fitness station.

40. CATEGORY KILLERS Also called as Power Retailer. This is a new type of specialty retailer which offers a very large selection of chosen category . They stock deep and dominate the chosen category. Ex. Planet Sports, Crossword, Nalli Sarees , Sales India, Croma , E-planet.

41. DEPARTMENT STORE TRADITIONAL DEPARTMENT STORE: A traditional department store is a large retail unit with an extensive assortment of goods and services that is organized into separate departments for buying, promotion, customer service and control. They generally serve as anchor stores in malls and is usually part of a chain. Apparel and home furnishing are the two most common product categories. Size varies from 20,000 to 40,000 sq. ft.

42. DEPARTMENT STORE… Merchandise quality is moderate to quite good. Pricing is moderate to above average. Customer service is medium to high level. Ex. Marks & Spencer, Sears, J.C. Penny, Westside, Globus, Pyramid, Pantaloons, Shopper’s Stop, Lifestyle.

43. FULL-LINE DISCOUNT STORE It conveys the image of high volume, low cost, fast turnover outlet selling a broad merchandise for less than conventional prices. Products are sold via self service. Non durable goods feature from private brands and durable goods are from well known national brands. Less fashion sensitive merchandise are carried. Ex. Mega Mart.

44. DOLLAR STORE/ VARIETY STORE US based My Dollar Store started operation in Mumbai through franchise arrangement with Sankalp Retail Value. Floor Space: 4000 Sq. Feet Merchandise: Cleaning, Health & Beauty, Hardware, Plastic ware, Kitchen ware & confectionary etc.

45. OFF-PRICE CHAIN An off-price chain features brand name, sometime designer labels of women wear, cosmetics, accessories, footwear,etc and sell them at every day low prices in an efficient, limited service environment. They have centralized check-outs, no gift wrapping and charge separately for alterations. Ex. T.J. Maxx

46. FACTORY OUTLET A factory outlet is a manufacturer-owned store selling manufacturer closeouts, discontinued merchandise, irregulars, cancelled orders and sometime in season fresh merchandise at at lower rate. They sell merchandise at up to 60% less than MRP due to low operating cost, low rent, limited display and cheap fixtures. Also sell in cartons. Ex. Levis factory outlet, Pantaloon factory outlet, etc.

47. MEMBERSHIP CLUB A membership club is a retail format where consumers have to be members to be able to buy merchandise at a wholesale price. Here the members pay a certain amount of annual fee. Their operating strategy includes inexpensive isolated locations, opportunistic buying, little or no advertising, plain fixtures, wide aisles, very low prices. Ex. Sam’s and Costco

48. FLEA MARKET A flea market has many retail vendors offering a range of products at discount prices in plain surroundings. They are located in non-traditional sites like stadiums, racetracks,etc. Here, individual retailers rent space on a daily or weekly basis. At any flea market, price haggling are encouraged. Ex. Rose Bowl

49. CATALOGUE SHOWROOMS A catalogue retailer specializes in hard goods such as houseware , jewellery , consumer electronics. The customer walks into this retail showroom and goes through the catalogue of the product that would like to purchase. The product is then arranged to be bought from the warehouse for inspection and purchase. Ex. Argos, Service Merchandise and Best Products.

50. Non store-based Retail strategy mix and Nontraditional retailing Direct marketing Direct selling Vending machine World Wide Web Other emerging retail formats

51. NON-STORE RETAILING DIRECT MARKETING : Is a form of retailing in which a customer is first exposed to goods or service through a non personal medium such as direct mail, newspaper, broadcast or television and then orders are placed by mail, phone or computer. There are three forms: Mail order retailing/ catalogue retailing. Television retailing. E- tailing

52. DIRECT SELLING Direct selling includes both personal contact with consumers in their homes and offices and phone solicitations initiated by a retailer. 1500 crore market in India growing @ 28% p.a. Profile of products purchased from Direct Selling: (IN %) HOUSEHOLD GOODS 68.9 PERSONAL CARE PRODUCTS 12.4 FAMILY PRODUCTS 14.4 BUSINESS AIDS 3.59 FOOD PRODUCTS 0.71 Ex. Oriflame , Amway, Avon, Herbalife , Tupperware, Eureka Forbes Controlled by IDSA.

53. AUTOMATED VENDING Ex. Tata Coffee, Jiffy, ATMs. AIRPORT RETAILING Ex. Travel Requisition Shop

54. E-Retailers

55. VIDEO KIOSKS The video kiosk is a free standing, interactive, electronic computer That displays products and related information on a video screen. It often uses a touch screen for consumers to make selection. Example: McDonald, Wills Lifestyle.