TYPES OF

RETAILERS
 Retailer Characteristics

The most basic characteristics used to describe different

types of retailers is the retail mix, the elements used by
retailers to satisfy their customers’ needs.

Four elements of the retail mix are particularly useful for

classifying retailers-
•the type of merchandise and/ or services sold
•the variety and assortment of merchandise sold
•the level of customer service
•the price of the merchandise
Type of Merchandise-Merchandise Coding
The United States, Canada, and Mexico have developed a
classification scheme, called the North American Industry
Classification System (NAICS), to collect data on business
activity in each country.

Every business is assigned a hierarchical, six-digit code based

on the type of products and services it produces and sells. The
first two digits identify the firm’s business sector, and the
remaining four digits identify various sub sectors.
Category-448-Clothing & clothing accessory stores
4481-Clothing Stores
44811-Men’s Clothing Stores
 Variety and Assortment

• Variety represents the number of merchandise categories,

a retailer offers.
• Assortment is the number of different items in a
merchandise category.
• Variety is often referred to as the breadth of
merchandise carried by a retailer; assortment is referred to
as the depth of merchandise.
• Each different item of merchandise is called as SKU
(stock keeping unit).
 Services Offered
Retailers also differ in the services they offer customers. Customers expect
almost all retailers to provide certain services:
• displaying merchandise,
• accepting credit cards,
• providing parking,
• being open at convenient hours.
Some retailers charge customers for other services, such as home delivery
and gift wrapping. Retailers that cater to service-oriented consumers offer
customers most of these services at no charge.
Prices and the Cost of Offering Breadth
and Depth of Merchandise and Services
When a retailer offers customers many SKU’s, its inventory
investment increases because the retailer must have backup stock
for each SKU.
Services attract customers to the retailer, but they’re also costly.
More salespeople are needed to provide information and assist
customers. Alter merchandise to meet customers’ needs, and
demonstrate merchandise.
Child care facilities, rest rooms and dressing rooms take up
valuable store places that could be used to stock and display
merchandise.
Offering credit, or installment payments requires a financial
investment that could be used to buy more merchandise.
Prices and the Cost of Offering Breadth
and Depth of Merchandise and Services
To make a profit, retailers that offer broader and deeper
assortments and services need to charge higher prices.

Department stores have higher prices because they have

higher costs due to stocking a lot of fashionable
merchandise, discounting merchandise when errors are
made in forecasting consumer tastes and having expensive
mall locations.

In contrast, discount stores appeal to customers who are

looking for lower prices and are less interested in services
but want to see a wide range of merchandise brands and
models.
 Food Retailers
• Supermarkets
• Supercentres
• Hypermarkets
• Warehouse Clubs
• Convenience Stores
 Supermarkets
A conventional supermarket is a self-service food store
offering groceries meat, and produce with limited sales of
nonfood items, such as health and beauty aids and general
merchandise.

Perishables like meat and produce account for 44 percent of

supermarket sales and typically have higher margins than
packaged goods. The Largest supermarket chains in the United
States and are Kroger, Albertson’s Safeway, Ahold USA, and
Pubix.

Whereas conventional supermarkets carry about 30,000

SKUs, limited assortment supermarkets, also called extreme
value food retailers, only stock 1,250 SKUs. The two largest
limited assortment supermarket chains in the United States are
Save-A-Lot and ALDI.
 Supercentres

Supercentres, the fastest growing retail category, are

large stores (150,000-220,000 square feet) that combine
a supermarket with a full-time discount store. Wal-Mart
operates over 2,000 supercentres in the United States.
 Hypermarkets
Hypermarkets are also large (100,000-300,000 square feet)
combination food (60-70 percent) and general merchandise (30-40
percent) stores.

Hypermarkets typically stock fewer SKUs than supercentres-

between 40,000 and 60,000 items ranging from groceries, hardware, and
sports equipments to furniture and appliances to computers and
electronics.

Hypermarkets are not common in the United States, though

hypermarkets and supercentres are similar. Both hypermarkets and
supercentres are large, carry grocery and general merchandise
categories, offer self-service, and are located in warehouse-type structure
with large parking facilities.

However , hypermarkets carry a larger proportion of food items than

supercentres with a greater emphasis placed on perishables- produce,
meat, fish and bakery .
 Warehouse Clubs

Warehouse Clubs are retailers that offer a limited and irregular

assortment of food and general merchandise with little service at low
prices for ultimate consumers and small businesses. Warehouse clubs are
large ( atleast 100,000-150,000 square feet) and typically located in low-
rent districts.
They have simple interiors and concrete floors. Warehouse clubs can
offer low prices because they use low-cost locations, inexpensive store
designs, and little customer service and keep inventory holding costs low
by carrying a limited assortment of fast selling items .

In addition , they buy merchandise opportunistically. Most warehouse

clubs have two types of members; wholesale members who own small
businesses and individual members who purchase for their own use.
 Convenience Store
Convenience Store provide a limited variety and assortment of
merchandise at a convenient location in 2,000-3,000 square foot stores
with speedy check-out.

They are then modern version of the neighborhood mom-and-pop

grocery/general store. Convenience stores enable consumers to make
purchases quickly, without having to search through a large store and wait
in a long checkout line. Over half the items bought are consumes within 30
minutes of purchase.

Due to their small size high sales, convenience stores typically

receive deliveries every day. Convenience stores operators also are
tailoring their merchandise assortments to cater to the need of local
markets. To increase convenience , convenience stores are opening
smaller stores close to where consumers shop and work.
 Characteristics of Food Retailers
Conventional Limited Supercentre Warehouse Convenience
Supermarket Assortment Club Store
Supermarket
Percentage 70-80 80-90 30-40 60 90
Food
Size (000sq ft) 20-30 7-10 150-220 100-150 2-3

SKUs (000) 20-40 1-1.5 100-150 20 2-3

Variety Average Narrow Broad Broad Narrow
Assortment Average Shallow Deep Shallow Shallow
Ambience Pleasant Minimal Average Minimal Average
Service Modest Limited Limited Limited Limited
Prices Average Lowest Low Low High
 Trends in Food Retaining
Although conventional supermarkets still sell a majority of food
merchandise, they are under substantial competitive pressure, Everyone
wants a price of the food pie.
Supercentres are rapidly attracting conventional supermarket customers
with their broader assortments of food and general merchandise at attractive
prices.
To complete successfully against intrusions by other food retaining formats,
conventional supermarkets are differentiating their offering by
(1) emphasizing fresh perishables,
(2) targeting health –conscious and ethnic consumers,
(3) providing a better in-store experience, and
(4) offering more private label brands. For example , fresh merchandise categories,

Conventional supermarkets are also offering more natural , organic, low-fat-

sugar, and low-salt merchandise for the growing segment of consumers who
are health conscious or have dietary restrictions that they must follow.
General Merchandise Retailers

•Department Stores
•Discount Stores
•Speciality Stores
•Category Stores
•Home Improvement Centers
•Drugstores
•Off-Price Stores
•Extreme Value Stores
 Department Stores
Department stores are retailers, that carry a broad variety and deep
assortment, offer customer services, and organize their stores into
distinctly separate departments for displaying merchandise. The largest
department store chains in the United States are Macy’s ( part of
Federated Department Stores), Sears, JC Penney and Kohl’s

Traditionally , department stores attracted customers by offering a

pleasing ambience, attentive services, and a wide variety of merchandise
under one roof.
They sell both soft goods ( apparel and bedding) and hard goods
( appliances, furniture, and consumer electronics). But now most
department stores focus almost exclusively on soft goods. The major
departments are women’s men’s and children’s apparel and accessories;
home furnishings; cosmetics; and kitchenware and small appliances
Each department within the store has a specific selling space
allocated to it, a POS terminal to transact and record sales, and
salespeople to assist customers. The department store often resembles a
collection of specialty shops.
 Department Stores
Department store chains can be categorized into three tiers-

The first tier includes upscale, high fashion chains with

exclusive designer merchandise and excellent customer
service.

The second tier of upscale traditional department stores,

in which retailers sell more modestly priced merchandise with
less customer service,

The value-oriented third tier-Sears, JC Penney and

Kohl’s- caters to more price-conscious consumer.
 Full –Line Discount Stores

Full-line discounts stores are retailers that offer a broad

variety of merchandise , limited service ,a and low prices.
Discount stores offer both private labels and national
brands, but these brands are typically less fashion oriented
than the brands in department stores.
The big three full-line discount store chains are Wal-
Mart, Kmart, , and Target, which account for 84 percent of
the sales in this retail format.

The most significant trend in this sector ins Wal-Mart’s

conversion of discount stores to supercentres.
 Specialty Stores

Specialty stores concentrate on a limited number of

complementary merchandise categories and provide a
high level of service in relatively small stores .
 Drugstores

Drugstores are specialty stores that concentrate on

health and personal grooming merchandise,
Pharmaceuticals often represent over 50 percent of
drugstores sales and an even greater percentage of their
profits.
 Home Improvement Centre
• Category specialists offering equipments and material used
by do-it-yourselfers and contractors to make home
improvements.

• Like warehouse clubs and office supply category

specialists, home improvement centres operate as retailers
when they sell merchandise to consumers and as
wholesalers when they sell merchandise to contractors and
other businesses.
 Category Specialists

Category Specialists are big box discount stores that offer a

narrow but deep assortment of merchandise. These retailers are
basically discount specialty stores.

Most category specialists use a self-service approach but some

specialists in consumer durables offer assistance to customers.

By offering a complete assortment in a category at low prices,

category specialists can “kill” a category of merchandise for other
retailers and thus are frequently called category killers. Due to
their category dominance, the use their buying power to negotiate
low prices and are assured of supply when items are scarce.
 Extreme Value Retailers

Extreme value retailers are small, full –line

discount stores that offer a limited merchandise
assortment at very low prices. The largest extreme value
retailers are dollar General And Family Dollar stores.

Like limited assortment food retailers, extreme value

full-time retailers reduce costs and maintain low prices by
offerings a limited assortment and operating in low-rent ,
urban, or rural locations.
 Off-Price Retailers
Off-Price Retailers offer an inconsistent assortment of brand name
merchandise at low prices. Off-price retailers sell brand name and
even designer label merchandise at low prices through their unique
buying and merchandising practices. Most merchandise is bought
opportunistically from manufacturers or other retail merchandising
practices.

Most merchandise is bought opportunistically from

manufacturers or other retailers with excess inventory at the end of
the season. The merchandise might be in odd sizes or unpopular
colors and styles, or it may be irregulars ( having minor mistakes in
construction), Typically, merchandise is purchased at one-fifth to one-
fourth of the original wholesale price.

Due to this pattern of opportunistic buying , customers can’t be

confident that the same type of merchandise will be in stock each
time they visit the store. Different bargains will be available on each
visit.
 General Merchandise Retailers
Type Variety Assortment Service Prices Size SKUs(000)
(000 sq.ft)
Department Broad Deep to Average to Average to 100-200 100
stores average high high
Discounts Broad Average to Low Low 60-80 30
stores shallow

Specially Narrow Deep High High 4-12 5

stores
Category
specialists

Home Narrow Very deep Low to high Low 80-120 20-40

Improvement
centres

Drugstores Narrow Very Deep Average Average to 3-15 10-20

high
Off-price Average Deep but Low Low 20-30 50
stores varying
Extreme Average Average Low Low 7-15 3-4
value and varying
retailers
 Nonstore Retailers

The major nonstore channels are the Internet, catalogs,

direct mail, direct selling, television home shopping, and
vending machines.
 Electronic Retailers

Electronic retailing (also called e-tailing, online

retailing, and Internet retailing) is a retail format in which
the retailers communicate with customers and offer
products and services for sale over the Internet.
Catalog and Direct-Mail Retailers

Catalog retailing is a nonstore retail format in which the

retail offering is communicated to a customer through a
catalog , whereas direct-mail retailers communicate with
their customers using letters and brochures.
 Direct Selling

Direct selling is a retail format in which salespeople

frequently independent businesspeople, contact customers
directly in a convenient location either at the customer’s home
or at work; demonstrate merchandise benefits and/ or explain
a service; take an order; and deliver the merchandise or
perform the service.

Direct selling is a highly interactive form of retailing in

which considerable information is conveyed to customers
through face-to-face discussions with sales people. However,
providing this high level of information , including extensive
demonstrations, is costly.
 Television Home Shopping

Television home sopping is a retail format in

which customers watch a TV program that
demonstrates merchandise and then place
orders for the merchandising by telephone.
 Vending Machine Retailing

Vending machine retailing is a nonstore format in

which merchandise or services are stored in a machine
and dispensed to customers when they deposit cash or
use a credit card. Vending machines are placed at
convenient , high-traffic locations , such as in the
workplace or on university campuses, and primarily
contain snacks or drinks.
 Services Retailing

Service retailers, firms selling primarily services rather

than merchandise, are a large and growing part of the retail
industry.
 Differences between Services
& Merchandise Retailers

Four important differences in the nature of the offering

provided by services and merchandise retailers are

(1) intangibility,
(2) simultaneously production and consumption,
(3) perishablity, and
(4) inconsistency of the offering to customers.
 Types of Ownership

• Independent, Single-Store Establishments

• Corporate Retail Chains

• Franchising
 The Indian Retail Space
Retailer Original Formats Later Formats

RPG Retail Supermarket (Food world) Hypermarket (Spencer’s).

Specialty store (Health & Glow)

Piramal’s Department Store (Pyramid Mega store) Discount store (TruMart)

Pantaloon Retail Small format outlets (Shoppe) Department store Supermarket (Food Bazar),
(Pantaloon) Hypermarket (Big Bazar)
Mall (Central)

K. Raheja Group Department store (Shopper’s Stop) Supermarket (TBA),

Specialty store (Crossword) Hypermarket (TBA)

Tata/ Trent Department store (Westside) Hypermarket (Star India Bazaar)

Specialty (Croma)
Others Discount store (Apna Bazaar), Supermarket (NIlgiri’s), Specialty Electronics (Vivek’s, Vijay Sales)

Source : KPMG in India analysis 2005