Retail MarketingNotes
(Retail Classification)

Retail Notes, Classification Issues

Why do we classify retailers?
Establishment of benchmarks for setting objectives
Establishment of benchmarks for evaluation of progress
Establishment of benchmarks for troubleshooting
Establishment of benchmarks for development of solutions

Classification Types
Each grouping has its own reasons for analysis
Ownership:  responsibilities, standardization across outlets
Store type:  relationship of merchandise mix to customer expectations
Services vs goods:  intangible vs. tangible
Non-store:  methods for building relationships

Ownership Types
Pro's: It’s easy to start (e.g. SBA) but many small businesses fail
Control without stockholder input
Can concentrate on one single location
Clear image

Con's:  Costs can not be spread out, riskiness
Cannot gain economies of scale
Labor intensive

Examples in Revitalizing Downtowns

Chains
Pro's: Multiple outlets under common ownership
Efficiencies
Bargaining power
Working through volume purchases
Greater customer exposure

Con's: Inflexibility
High investments
Uniformity but . . .
Reduced control
E.g. Cooper Hospital Family Practices

Franchising
Efficiencies through volume
Greater customer exposure
Expenses shared by franchisees
Prototype stores in business format franchising
Consider the Appendix - what should you know
before investing?
Sheraton Inns change to Four Points was protested by
some franchisees as changing the firm

Need to control franchisees
Need for uniformity with ability to be flexible - e.g. McDonalds
Uniform standards for franchisees - FTC
Can own and operate with little experience
Oversaturation?
E.g. Midas Muffler
www.midasfran.com

Leased Departments
Lets a retailer sell products in which they have little expertise
Expands your merchandise mix, but can eliminate nonprofitable depts
Let’s you try out a product with less risk
Personnel and displays managed by leasing dept

Control of merchandise by owner of department
e.g. Kmart originally used watches, cameras, jewelry,
and still uses shoes depts leased to Meldisco
Image problems can be created for the store
Hours, procedures, etc may not be desirable

Elements of Retail Classification
Sure, they seem obvious, but . . .
Knowing the benchmarks within your store category
enables you to spot problems as well as track progress
Retail assortment (depth and width)
Promotional strategy
Amount of consumer search
Pricing strategy
All must be consistent

Key Concepts
Wheel of Retailing:  low-end retailer upgrades
from low prices, simple assortments
to medium retail mix, possible up to high end mix

Gasoline initially was sold in containers from general stores
and hardware dealers - it was a sideline

1907-1910: evolution of a filling station
1920’s:  nationally branded-gasoline, early dealers were
split-pump, and sold up to 5 different brands
1930’s: intense price competition, giveaways
- china, glassware, silverware
Legal restrictions brought price stabilization
1990’s:  WaWa pairing with convenience stores

Retail Consistency
Note that there are sets of consistent expectations at
low, middle, and high ends
All the elements of the retail mix should match
Scrambled Merchandising -adding goods and services unrelated
to each other and to the firm’s original business
- often high margin, fast-selling items - may be competitive move
How can we determine if we have the correct mix?
 E.g. WaWa’s convenience stores plus gasoline stations - large square footage

Evaluation of Resource Use
Too often, decisions are made by focusing on one element of the retail mix
Could funds allocated to one purpose be better used on another?
EG too much spent on weekly supplement vs. better merchandising
Retail Life Cycle - progression through innovation, growth, maturity, decline

There are very specific combinations and relationships
that signal success or failure
These help the firm to take its mission and translate them into
objectives, retail strategic mixes, and evaluations
These operationalize “retail consistency”
The discussions that follow provide typical number of assortment
items, types of items, square footage of prototype or successful
stores, types of services, etc.
Deviation can create success or failure

Key Concepts: Width and Depth of Assortment

Retail Expectations lead to categories for analysis Is One Element of the Retail Mix at Cross Purposes?
eg Burger Chef - opened at the same time as McDonalds
Kept costs down - perhaps too much
converted old gas stations - were not attractive in comparison to McDonalds
no seating
no variety

What is the Match with Consumer Expectations?
eg. Do store hours match the schedules in the community?
What knowledge do your customers need?
Are your customers trying to cut expenses?
Do your customers feel comfortable in the store?

W.T. Grant - an Example
founded 1906, 1972 good growth
Danger signals: earning on 3 yr. decline
Increase in long-term debt
Increase in Sales/Square Foot
Inventory was increasing as a percent of sales
New Stores were not showing growth

What is a Solution?
In actuality, Grants expanded too rapidly
Lack of planning
Added big-ticket items, no consumer trust of brands - would
you want a “Bradford” refrigerator
from a dusty variety store?
Lack of store image, lack of cleanliness
eg variety image vs. refrigerators

What Happened?
1975 Bankruptcy
1976 Liquidation