RETAILING

What is retailing? We all know that Tesco, Carrefour and H&M are retailers, but so are
Avon representatives, Amazon, the local Travelodge and a hair stylist in the beauty salon.
Retailing includes all the activities involved in selling products or services directly to final
consumers for their personal, non-business use. Many institutions – manufacturers, wholesalers and
retailers – do retailing. But most retailing is done by retailers: businesses whose
sales come primarily from retailing

Although most retailing is done in retail stores, in recent years non-store retailing has
been growing much faster than has store retailing. Non-store retailing includes selling to
final consumers through direct mail, catalogues, telephone, the Internet, home-shopping
TV, home and office parties, door-to-door contact, vending machines and other direct selling
approaches. We discuss such direct marketing approaches in detail later (see Chapter 13).
In this chapter, we focus on store retailing

Types of retailers
Retail stores come in all shapes and sizes and new retail types keep emerging. The most
important types of retail stores are described in Exhibit 11.1 and discussed in the following
sections. They can be classified in terms of several characteristics, including the amount of
service they offer, the breadth and depth of their product lines, the relative prices they charge
and how they are organised.

EXHIBIT 11.1 Major store retailer types

Speciality stores
Carry a narrow product line with a deep assortment, such as clothing stores, sporting-goods stores like
JD Sports, furniture stores, florists and bookshops. A clothing store would be a single-line store, a men’s
clothing store would be a limited-line store and a men’s custom-shirt store would be a super-speciality
store. Examples: Zara, Gap, JDSports.
Department stores
Carry several product lines – typically clothing, home furnishings and household goods – with each line
operated as a separate department managed by a specialist buyer or merchandiser. Examples: John
Lewis, Macy’s, Le Printemps and Gostiny Dvor.
Supermarkets
A relatively large, low-cost, low-margin, high-volume, self-service operation designed to serve the
consumer’s total needs for grocery and household products. Examples: Carrefour, Aldi, Tesco.
Convenience stores
Relatively small stores located near residential areas, open long hours seven days a week, and carrying a
limited line of high-turnover convenience products at slightly higher prices. Examples: 7-Eleven, Londis,
Opencor.
Discount stores
Carry standard merchandise sold at lower prices with lower margins and higher volumes. Examples:
Walmart, Target.
Off-price retailers
Sell merchandise bought at less than regular wholesale prices and sold at less than retail, often leftover
goods, overruns and irregulars obtained at reduced prices from manufacturers or other retailers. These
include factory outlets owned. and operated by manufacturers (example: the collection at Serravalle);
independent off-price retailers owned and run by entrepreneurs or by divisions of larger retail
corporations (example: TK Maxx – known as TJ Maxx outside the UK, Ireland and Germany); and
warehouse (or wholesale) clubs selling a limited selection of brand name groceries, appliances, clothing
and other goods at deep discounts to consumers who pay membership fees (example: Costco).
Superstores
Very large stores traditionally aimed at meeting consumers’ total needs for routinely purchased food
and non-food items. Includes category killers, which carry a deep assortment in a particular category
and have a knowledgeable staff
(examples: Tesco, PetSmart); supercentres, combined supermarket and discount stores (example:
Walmart Supercenters); and hypermarkets with up to 220,000 square feet (20,400 square metres) of
space combining supermarket, discount and warehouse retailing (examples: Carrefour, Pyrca).

Amount of service
Different products require different amounts of service and customer service preferences vary. Retailers
may offer one of three levels of service: self-service, limited service and full service.
Self-service retailers serve customers who are willing to perform their own ‘locate–compare–select’
process to save money. Self-service is the basis of all discount operations and is typically used by sellers
of convenience goods (such as supermarkets) and nationally branded, fast-moving shopping goods (such
as Marks & Spencer and Debenhams). Limited-service retailers, such as Carphone Warehouse, provide
more sales assistance because they carry more shopping goods about which customers need
information – expensive electronic items, for example. Their increased operating costs result in higher
prices. In full-service retailers, such as speciality stores and first-class department stores, sales people
assist customers in every phase of the shopping process – think Harrods. Full-service stores usually carry
more speciality goods for which customers like to be ‘waited on’. They provide more services resulting in
much higher operating costs, which are passed along to customers as higher prices.
Product line
Retailers also can be classified by the length and breadth of their product assortments. Some retailers,
such as speciality stores, carry narrow product lines with deep assortments within those lines. Today,
speciality stores are flourishing. The increasing use of market segmentation, market targeting and
product specialisation has resulted in a greater need for stores that focus on specific products and
segments. In contrast, department stores carry a wide variety of product lines. In recent years,
department stores have been squeezed between more focused and flexible speciality stores on the one
hand, and more efficient, lower-priced discounters on the other. In response, many have added
promotional pricing to meet the discount threat. Others have stepped up the use of store brands and
single-brand ‘designer shops’ to compete with speciality stores as Marks & Spencer does with Per Una
clothing for women. Still others are trying mail order, telephone and web selling. Service remains the
key differentiating factor. Retailers such as John Lewis in the UK, El Corte Inglés in Spain and Portugal,
and other high-end department stores are doing well by emphasising high-quality service. Supermarkets
are the most frequently shopped type of retail store. In Europe they are facing slower sales growth
because of slower population growth, saturation of the market and increasing restrictions on new shop
development.

Convenience stores are small stores that carry a limited line of high-turnover convenience goods like
newspapers, snacks and drinks. These specialists are increasingly being joined by small-format versions
of the leading grocers, such as the Tesco Express and Sainsbury Local chains

Superstores are much larger than regular supermarkets and offer a large assortment of routinely
purchased food products, non-food items and services.

Relative prices
Retailers can also be classified according to the prices they charge (see Exhibit 11.1). Most retailers
charge regular prices and offer normal quality goods and customer service. Others offer higher quality
goods and service at higher prices. The retailers that feature low prices are discount stores and ‘off-
price’ retailers.
Discount stores A discount store sells standard merchandise at lower prices by accepting lower margins
and selling higher volume. The early discount stores cut expenses by offering few services and operating
in warehouse-like facilities in low-rent, heavily populated areas.
Off-price retailers
As the major discount stores traded up, a new wave of off-price retailers moved in to fill the ultra-low
price, high-volume gap. Ordinary discounters buy at regular wholesale prices and accept lower margins
to keep prices down. In contrast, off-price retailers buy at less than regular wholesale prices and charge
consumers less than regular retail prices. Off-price retailers can be found in all areas, from food, clothing
and electronics to no-frills banking and discount brokerages.
The three main types of off-price retailers are independents, factory outlets and warehouse clubs
Independent off-price retailers are owned and run either by entrepreneurs or by divisions of larger retail
corporations.
Factory outlets are producer-operated stores sometimes grouped together in factory outlet malls and
value retail centres, where dozens of outlet stores offer prices as low as 50 per cent below retail on a
wide range of items. Factory outlet malls have become one of the hottest growth areas in retailing.