CHAPTER 2

Types of
Retailers
CHAPTER 02

Retailing Management 8e
McGraw-Hill/Irwin © The McGraw-Hill Companies,Copyright © 2012
All rights reserved. 2-1
by The McGraw-Hill Companies, Inc. All rights reserved.
Questions CHAPTER 2
1

• What trends shape today’s retailers?

• What are the different types of retailers?
• How do retailers differ in terms of how they meet the
needs of their customers?
• How do service retailers differ from merchandise
retailers?

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General Trends in Retailing CHAPTER 2
1

•Increased Market Concentration

Large retail chains dominate the market, benefiting from
economies of scale and stronger brand recognition, often
leading to consolidation in the industry (Walmart & Carrefour)
•Globalization of Retail
Retailers expand internationally, offering products across
borders and adapting marketing strategies to diverse cultural
and consumer preferences (ikea)
•Growth of Services Retailing
Beyond selling products, retailers now focus on services like
personalized shopping, delivery, and after-sales support to
enhance customer experience (Amazon)
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General Trends in Retailing CHAPTER 2
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• Multi-Channel and Omnichannel Retailing

Traditional retailers integrate physical stores, online stores,
social media, and mobile apps to create seamless shopping
experiences (Zara and Sephora).
• Use of Technology to Reduce Costs & Increase Value
Retailers leverage tech like automated inventory systems,
self-checkouts, and data analytics to improve efficiency and
customer satisfaction (Tesco (UK) uses smart shelves and analytics)
• Investment in E-commerce and Digital Platforms
Online shopping continues to grow; retailers invest in robust
e-commerce platforms, digital marketing, and logistics
solutions
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General Trends in Retailing CHAPTER 2
1

•Integration of Artificial Intelligence (AI)

AI helps with personalized recommendations, demand
forecasting, chatbots, and targeted promotions to enhance
customer engagement. (Ralph Lauren)
•Sustainability and Ethical Retailing (Recent Trend)
Consumers increasingly value eco-friendly practices; retailers
adopt sustainable sourcing, packaging, and corporate social
responsibility initiatives (H&M Conscious line globally)
•Experiential Retailing
Stores focus on creating experiences rather than just
transactions—pop-up shops, in-store events, and interactive
displays attract customers (Apple store)
•Social Commerce and Influencer Marketing
Retailers leverage social media platforms and influencers to
directly sell products and engage younger consumers. 2-5
Types of Retailers CHAPTER 2
1

• Retailers Use Different Retail Mixes

-merchandise: variety (breadth) /
assortment (depth)
-services
-store design, visual merchandising
-location
-pricing

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Retailer Characteristics CHAPTER 2
1

• Variety (breadth)
• Assortment (depth)
• Services Offered
• Prices and the cost of offering breath and depth of
merchandise and services

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Merchandise Offering CHAPTER 2
1

Variety (breadth of merchandise): wide vs. narrow

- The number of merchandise categories

Assortment (depth of merchandise): deep vs. shallow

-the number of items in a category (SKUs)

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Services Offered CHAPTER 2
1

• Retailers differ in
the services they
offer customers
• EMS offers assistance
in selecting the
appropriate kayak
and repairing them
VS
• [Link]
[Link] and
• Wal-Mart: doesn’t
provide any services 2-9
Prices and the cost of offering breath and
depth of merchandise and services
CHAPTER 2
1

• Stocking a deep and broad assortment (like EMS) is

costly for retailers.

Many SKUs

Because the retailer must have backup stock for each SKU
in addition to holding the inventory

Inventory Investment Cost

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Types of Merchandise Retailers CHAPTER 1
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Food Retailers General Merchandise Retailers

Department Stores
Specialty Stores
Discount Stores
Convenience Stores
Supermarkets Category Specialists
Supercenters Off-Price Retailers
Warehouse Clubs
Value Retailers

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Convenience stores: Convenience stores are small retail stores CHAPTER 2
1
that focus on quick and easy purchases for everyday needs.

• Provides a limited variety and assortment of merchandise at a

convenient location with speedy checkout.
• Enable consumers to make purchases quickly without having to
search through a large store.
• They charge higher prices than supermarkets due to their location
(e.g., central urban areas means high rent) and lower sales
volume (e.g., Fewer customers and smaller purchases mean they
need higher margins to stay profitable).
• Many are open late or 24/7, which increases staffing and utility
expenses, example 7-Eleven.
• Milk, bread, eggs, soft drinks and cigarettes represent the
majority of their sales.
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Supermarkets and Grocery Stores CHAPTER 1
2

• Conventional supermarkets: Large, specializes in selling

food and related household items (e.g., perishable and
non-perishable items health and beauty).
• Example: Whole foods, Kroger and Safeway.
• Carry about 30,000 SKUs
• High variety and deep assortment
• Marketing strategy: Focus on quality and freshness in
advertising to build trust.
• Implement online grocery ordering and delivery
services.
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Limited Assortment Supermarkets CHAPTER 2
1

• Limited assortment supermarkets (or extreme value food

retailers). Example Aldi
• Only stock about 2000 SKU
• Limited Selection: Fewer choices mean simpler stocking and
less waste. They offer a few brands and sizes in each category.
• Private Label Products – Most items are Aldi-branded,
reducing costs.
• Minimal Staffing – Fewer employees help cut labor costs.
• No-Frills Shopping Experience – Basic store design keeps
overhead low. Stores are designed to maximize efficiency and
reduce costs
• This allow these stores to merchandise at prices lower than
conventional supermarket. 2-14
ALDI’s Strategy CHAPTER 1
2

▪13,800 worldwide,
▪ Approximately 60 – 70% of German shoppers buy from Aldi.
▪Aldi is the most popular discounter supermarket in Germany.
▪Customer base: the brand has a strong market position, attracting
a diverse customer base, particularly from middle-income
households.
Limited assortment: E.g., Only two brands of toilet paper and one
brand of pickles
▪ STRATEGY:
ALDI exclusive label
High quality of products at cheaper prices
▪ HOW?
Strong control over quality and price
Simplify shipping and handling
Reduce labor costs by keeping limited store staff, etc.
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Supercenters and Hypermarkets CHAPTER 2
1

• Both hypermarkets and supercenters are large (larger

than supermarkets), carry grocery and general
merchandise categories, often located in Wherehouse-
type structures with large parking facilities. Popular in
USA and Europe.
• Examples: Walmart Supercenter, Target Superstore.
Carrefour hypermarket.
• Features: combines grocery store and department
store, offers clothing, electronics, home goods, one-stop
shopping experience
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 General Merchandise Retailers
Department stores CHAPTER 1
2

• Large retail establishments that offer a broad range of products

across various categories including clothing, home goods,
electronics and cosmetics.
• The are often organized in distinct department or sections (One
stop shopping).
• They attract customers by offering a pleasing ambiance, attentive
service (e.g., Nordstorm).
• Three Categories: Upscale and High-end Fashion stores
(Nordstrom), traditional more modestly priced stores (Macys) and
value oriented (Sears) which target more price conscious
consumers.
• Marketing strategies: exclusive merchandise, strong store image,
expanding in online presence. 2-17
Category specialists CHAPTER 2
1

• Sometimes called big-box stores that offer a narrow variety

but deep assortment of merchandise.
• Example Staples: If you shop at [Link], you’ll find office
basics (pens, paper, folders) and more specialized or niche
items (specialty paper weights/textures, custom printed
items).
• Although broad, the range is still within the “office / business
/ home-work-space” domain.
• Example: Electronics: Best Buy, Home furnishings: IKEA,
Toys: Toys R US, Home improvements: Home Depot and
Lowes, Sephora – cosmetics only
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Category killer CHAPTER 1
2

• A category killer is a large retail chain that dominates one specific

product category so completely that it drives out (or “kills”)
smaller competitors in that niche. They typically do this by:

• Offering a huge assortment of products within that category

• Maintaining low prices through economies of scale

• Having convenient locations and strong brand recognition

• Goal: “Kill” competition in that category because customers go

there for everything they need in that category.
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Category killer EXAMPLE CHAPTER 2
1

• Ikea: Huge selection of furniture, home décor, and

storage solutions; often the go-to store for nearly
anything in home furnishing. Competes with smaller
furniture shops by offering variety + low prices.
• Best buy: Stocks TVs, laptops, cameras, smart home
devices, etc., from almost every major brand. Customers
often go there instead of smaller electronics shops
because it has everything under one roof.

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Specialty stores:
[Link] CHAPTER 1
2

• A specialty store is a type of retailer that:

• Focuses on a specific product category (deep rather
than broad variety)
• Offers expertise, unique variety, or quality in that
category: Pet Smart (Pet supplies and grooming options)
• Targets a specific market segment or consumer need
• Examples:
• Sephora → beauty and cosmetics;
• Foot Locker → athletic shoes
• GameStop → video games and accessories 2-21
Off-Price Retailers (Discount stores and
outlet stores)
CHAPTER 2
1

• A business model that sells high quality branded items at low

price.
• Offer an inconsistent assortment of brand name merchandise at
low prices and most merchandise is bought opportunistically
(e.g., surplus stock, past-season merchandise).
• TJX Companies, the North Face outlet.
Marketing strategies:
- Highlight discount and savings on branded items
- Use email and SMS marketing to notify customers of flash sales
and clearance events.

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Extreme value Retailers CHAPTER 1
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• Are small discount stores that charge low prices.

• They offer a broad variety but shallow assortment of
household goods, health and beauty products and
groceries.
• Examples: Dollar General and Pound Land.
• Drug stores are another type of retailers that
concentrate on health and personal grooming
merchandise.

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Warehouse clubs: is a large, membership-based retailer CHAPTER 2
1
that sells products in bulk at low prices.

• Offer products in bulk quantities at discounted prices.

• Customers typically pay a membership fee to access
these deals and buy in large quantities.
• Examples: Costco and Sam’s Club
• Inexpensive store design, located in low rent districts.
Marketing strategies:
• Irregular assortment, unpredictable merchandise
• Highlight the value of membership benefits.
• Create limited time offers.
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Online retailers (E-commerce) CHAPTER 1
2

• Operate mainly on the internet, providing customers

with the convenience of shopping from anywhere at
anytime.
• Examples: Amazon, eBay and Alibaba
Marketing strategies:
• Optimize the user experience for easy navigagtion and
online shopping.
• Use data driven personalization to recommend products
to customers

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Classify these stores: CHAPTER 2
1

• [Link]
• [Link]
• [Link]
• [Link]

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Examples of Service Retailers CHAPTER 1
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Type of Service Service Retail Firms

Airlines American, Delta, British Airways, Singapore Airways

Automobile maint/repair Jiffy Lube, Midas, AAMCO
Automobile rental Hertz, Avis, Budget, Alamo
Banks Citibank, NCNB, Bank of America
Child care centers Kindercare, Gymboree
Credit cards American Express, VISA, Mastercard
Education University of Florida, Babson College
Entertainment parks Disney, Universal Studios, Six Flags
Express package delivery Federal Express, UPS, US Postal Service
Financial services Merrill Lynch, Dean Witter
Fitness Jazzercise, Bally’s, Gold’s Gym
Health Care Humana, HCA
Home maintenance Chemlawn, MiniMaid, Roto-Rooter

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Merchandise/Service Continuum CHAPTER 2
1

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Franchising: a business arrangement where a person
(franchisee) pays to use a company’s (franchisor’s) brand, products, CHAPTER 1
2

and business system while following its rules.

•Dunkin' (formerly Dunkin’ Donuts) expands

heavily through franchising.
•Example: Many Dunkin’ stores in the Gulf
region are operated by local franchise
partners.
•Strategy: Strong focus on standardized
products + localized flavors.

Other examples: Anytime Fitness, Marriott

Hotels, The Body Shop

• Franchising = “global brand + local owner”

• The brand provides: name, system, training,
marketing
• The franchisee provides: investment, daily
operations 2-29
Franchisor Benefits CHAPTER 2
1

Continuous market

Market information

Money

Royalty fees

Sales of products

Rental and lease fees

License fees

Management fees

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Franchisee Benefits CHAPTER 1
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Initial Services
• Market survey and site selection, facility design and layout,
lease negotiation advice, financing advice, operating manuals,
management training programs, and employee training.

Continuous Services
• Field supervision, merchandising and promotional materials,
management and employee retraining, quality inspection,
national advertising, centralized purchasing, market data and
guidance, auditing and record keeping, management reports,
and group insurance plans.
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Franchisor Advantages/Disadvantages CHAPTER 2
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Advantages
• Rapid expansion, highly motivated franchisees do a good
job, additional profits by selling franchisees products and
services.
Disadvantages
• Company-owned units may be more profitable, less
control then independent retailers over advertising,
pricing, personnel practices, etc.

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Franchisee Advantages/Disadvantages CHAPTER 2
1

Advantages
• Established/proven product/service, business and
technical assistance, and reduction in risk.

Disadvantages
• Loss of control since only semi-independent, franchisee
outlets may compete with corporate-owned outlets, and
high royalties, fees, costs on equipment, supplies,
merchandise, rental/lease rates and mandatory
participation in promotional and support services.
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Keywords C H A P T E R 12

• assortment The number of SKUs within a merchandise category. Also called depth of merchandise.
• breadth of merchandise The number of different merchandise categories within a store or
department.
• category killer A discount retailer that offers a narrow but deep assortment of merchandise in a
category and thus dominates the category from the customers’ perspective. Also called a category
specialist.
• category specialist A discount retailer that offers a narrow but deep assortment of merchandise in
a category and thus dominates the category from the customers’ perspective. Also called a
category killer.
• convenience store A store that provides a limited variety and assortment of merchandise at a
convenient location in a 2,000- to 3,000-square-foot store with speedy checkout.
• conventional supermarket A self-service food store that offers groceries, meat, and produce with
limited sales of nonfood items, such as health and beauty aids and general merchandise.
• department store A retailer that carries a wide variety and deep assortment, offers considerable
customer services, and is organized into separate departments for displaying merchandise.

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Keywords CHAPTER 1
2

• depth of merchandise The number of SKUs within a merchandise category. Also called depth of
merchandise.
• discount store A general merchandise retailer that offers a wide variety of merchandise, limited
service, and low prices.
• franchising A contractual agreement between a franchisor and a franchisee that allows the
franchisee to operate a retail outlet using a name and format developed and supported by the
franchisor.
• off-price retailer A retailer that offers an inconsistent assortment of brand-name, fashion-oriented
soft goods at low prices.
• specialty store A type of store concentrating on a limited number of complementary merchandise
categories and providing a high level of service.

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Keywords CHAPTER 2
1

• stock-keeping unit (SKU) The smallest unit available for keeping inventory control. In soft goods
merchandise, an SKU usually means a size, color, and style.
• supercenter Large store (150,000 to 220,000 square feet) combining a discount store with a
supermarket.
• supermarket A conventional supermarket is a large, self-service retail food store offering groceries,
meat, and produce, as well as some nonfood items, such as health and beauty aids and general
merchandise.
• value retailers Small, full-line discount stores that offer a limited merchandise assortment at very
low prices.
• variety The number of different merchandise categories within a store or department.
• warehouse club A retailer that offers a limited assortment of food and general merchandise with
little service and low prices to ultimate consumers and small businesses.

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