CHAPTER 5:

RETAIL
INSTITUTIONS BY
STORE-BASED
STRATEGY MIX

Retail Mgt. 12e (c) 2013 Pearson Education

5-11
 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
• promotional methods

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 Figure 5-1: The Wheel of Retailing

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 The Wheel of Retailing

The Wheel of Retailing is a major hypothesis

regarding patterns of retail development in
which new types of retailers generally enter the
market as low-margin, low-status, low-price
operators, that gradually acquire more elaborate
premises and facilities and move upmarket. In
other words, the wheel of retailing, also called
the retail wheel, refers to how retailers start off
as discount stores, but start boosting their
prices as soon as they become established.
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 The Wheel of Retailing

the Wheel of Retailing is just a hypothesis

and may not be applicable to
all retailing situations. It, however, seems
to explain many retailing trends in many
countries.

©2013 Pearson Education 5-5

 Methods of Cost Containment
• Standardizing procedures, store layouts,
store size, and product offerings; centralized
buying
• Using secondary use locations (existing
store fixtures, storefronts, carpeting); placing
stores in smaller communities; using
inexpensive construction materials (honest
architecture)

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 Methods of Cost Containment (cont)
• Joining cooperative buying (meet needs,
not generate profits, they can serve
their members at low cost) and advertising
programs; increased use of the Web versus
traditional advertising and catalogs
• Self-service operations; increased use of part-
time personnel
• Reduced product proliferation (variations of
the same products like color
combinations, product sizes and
different product uses. )
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Figure 5-2: Retail Strategy Alternatives

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 Figure 5-3: Scrambled Merchandising
by a Shoe Store

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 Why Scrambled Merchandising?
• It refers to a practice by wholesalers and
retailers that carry an increasingly wider
assortment of merchandise. It occurs
when a retailer adds goods and services
that are unrelated to each other and to
the firm's original business.
• Desire for one-stop shopping format.
• Looking to increase store sales per square foot
and same store sales especially in a
recessionary period
• Looking to make up for lost sales due to Web
• Desire for cross selling opportunities
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 Retail Life Cycle
• Retail institutions pass through identifiable
life stages
• introduction
• growth
• maturity
• decline

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 Figure 5-4: The Retail Life Cycle

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 How Retail Institutions Are Evolving

• Mergers, diversification, and

downsizing
• Cost-containment and value-driven
retailing

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 Mergers, Diversification, and
Downsizing
• Mergers: combinations of separately
owned firms (e.g., Sears Holdings–
Sears, Kmart and Lands’ End)
• Diversification: retailers become active
in businesses outside their normal
operations (e.g., Nordstrom Rack, Off
Saks)
• Downsizing: unprofitable stores are
closed or divisions are sold off (e.g.,
A&P)

©2013 Pearson Education 5-14

 Table 5-1: Store-Based Retail
Strategy Mixes
Food-Oriented General Merchandise
• Convenience store • Specialty store
• Conventional • Traditional department
supermarket • Full-line discount store
• Food-based
superstore
• Variety store
• Combination store
• Off-price chain
• Box (limited-line) • Factory outlet
store • Membership club
• Warehouse store • Flea market

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©2013 Pearson Education 5-16
 Convenience Store Strategy Mix
Prices
Average to
Location
Above average
Neighborhood
Atmosphere & Services
Average
Merchandise
Medium width
and low depth Promotion
of assortment;
average quality Moderate

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Conventional Supermarket Strategy Mix
Prices
Location Competitive
Neighborhood

Atmosphere & Services

Merchandise Average
Extensive width and
depth of assortment; Promotion
average quality; Heavy use of
manufacturer, private, & newspapers, flyers, and
generic brands coupons.
©2013 Pearson Education 5-18
Food-Based Superstore Strategy Mix
Prices
Location Competitive
Community shopping
center or isolated site
Atmosphere & Services
Average
Merchandise
Full assortment plus Promotion
health and beauty aids Heavy use of
and general merchandise newspapers, flyers
©2013 Pearson Education 5-19
 Combination Store Strategy Mix
Prices
Location Competitive
Community shopping
Center or isolated site
Atmosphere & Services
Average
Merchandise
Full assortment plus Promotion
health and beauty aids Heavy use of
and general merchandise newspapers, flyers

©2013 Pearson Education 5-20

 Box Store Strategy Mix
Prices
Location Very low
Neighborhood

Atmosphere & Services

Low
Merchandise
Low width and depth of
assortment; few Promotion
perishables; few national Little to none
brands
©2013 Pearson Education 5-21
 Warehouse Store Strategy Mix
Prices
Location Very low
Secondary site, often in
industrial area
Atmosphere & Services
Low
Merchandise
Moderate width and
low depth of assortment;
emphasis on Promotion
manufacturer brands Little to none
bought at discount
©2013 Pearson Education 5-22
 Specialty Store Strategy Mix
Prices
Competitive to
Location
Above average
Business district or
shopping center
Atmosphere & Services
Average to excellent

Merchandise
Very narrow width and Promotion
extensive depth of Heavy use of displays
assortment; average to Extensive sales force
©2013 Pearson Education 5-23
 Figure 5-8: Harrods

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Traditional Department Store Strategy Mix
Prices
Average to
Location
Above average
Business district,
shopping
center or isolated store Atmosphere & Services
Good to excellent

Merchandise Promotion
Extensive width and Heavy ad and catalog
depth of assortment; use; direct mail;
average to good quality
©2013 Pearson Education 5-25
 Full Line Discount Store Strategy Mix
Prices
Location Competitive
Business district, Atmosphere & Services
shopping
Slightly below
center or isolated store
average to average

Merchandise Promotion
Extensive width and Heavy on newspapers;
depth of assortment; price-oriented; selling
average to good quality

©2013 Pearson Education 5-26

 Variety Store Strategy Mix
Prices
Location Average
Business district,
shopping center or Atmosphere & Services
isolated store
Below average

Merchandise
Good width and some Promotion
depth of assortment; Use of Newspapers
below-average to average
quality
©2013 Pearson Education 5-27
 Off-Price Chain Strategy Mix
Prices
Location Low
Business district,
shopping center or
Atmosphere & Services
isolated store
Below average

Merchandise
Promotion
Moderate width and
Use of newspapers;
poor depth of assortment;
brands not advertised;
average to good quality;
limited selling
low continuity
©2013 Pearson Education 5-28
 Factory Outlet Strategy Mix
Prices
Location Very low
Out of the way site
or discount mall
Atmosphere & Services
Very low
Merchandise
Moderate width and Promotion
poor depth of assortment; Little
low continuity

©2013 Pearson Education 5-29

 Factory Outlet Strategy
• Factory outlet as an outlet for unsold
merchandise at traditional stores
(ends, off season, returns, etc).
• Unspoken issue– making goods
especially for factory outlet (less
complaints from traditional retailers,
but issue of comparative value). Can
also diminish value of brand (Coach).

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 Factory Outlet Strategy (cont)
• Factory outlet as a means of
bypassing off-price chains; also to
control geographic distribution.
• Factory outlet as a means of attracting
another market segment that retailer
would normally not access.
• Factory outlet malls as cumulative
attraction

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 Membership Club Strategy Mix
Prices
Location Very low
Isolated store or
secondary site
Atmosphere &
Services
Very low
Merchandise
Moderate width and
poor depth of Promotion
assortment; Little, some direct mail
low continuity

©2013 Pearson Education 5-32

 Flea Market (Street Market) Strategy Mix

Prices
Location Very low
Isolated store or
secondary site
Atmosphere &
Services
Very low
Merchandise
Extensive width and
poor depth of Promotion
assortment; low Limited
continuity; variable
quality
©2013 Pearson Education 5-33