Business Models
Content
Business Models in
Retail
Singh
- Jayati
Classification of retail stores
Store-Based Retailing
Based on Location
Non-Store Retailing
•High Street
•Destination
•Convenience
Merchandise Offered
Form of Ownership
• Independent retailer
• Chain Retailer
• Franchise
• Leased Departments
• Vertical Marketing System
• Consumer Cooperatives
• Convenience Store
• Supermarkets
• Hypermarkets
• Specialty Stores
• Department Stores
• Off Price Retailers
• Full line discount store
• Warehouse store
• Variety Store
• Factory Outlets
• Catalogue Showrooms
• Membership Club
• Flea Market
• Direct Selling
• Direct Marketing
• Automated Vending
• World Wide Web
• Other Emerging Retail
• formats
STORE FORMAT BY LOCATION
1. High Street Format
• It is Located in busy shopping area.
• Area is less than 2000 square feet.
• No parking facility
• Focused Merchandised Category
• Example: M. G. Road in Bangalore
2.DESTINATION FORMAT
• Huge Parking space
• Wide merchandise category
• They are Independent retail store
with alluring proposition for the
customer to visit the store with
the primary intention of shopping
there
3. CONVENIENCE STORE
• Located in the catchment area of target customers
• Extended hours of operation
• Less than 5000 square feet
• 24X7 convenience stores situated close to homes to generate
high footprints
• snacks, grocery type items & confectionary Merchandise include:
beverages, ready to eat
• These store carry a limited stock of daily use goods with a
special focus on food products eg. In & Out petrol pump outlets.
CLASSIFICATION BASED ON
OWNERSHIP
INDEPENDENT RETAILER
ADVANTAGES:
• Flexibility in choosing retail formats and locations
• Decision making is centralized
• Low investment cost
• Independents have independence
• Easily sustain consistency
DISADVANTAGES:
• Less bargain power with suppliers
• Cannot gain economies of scale
• Very little computerization
• Relatively high cost of advertising
• Over dependence on owner
• Limited amount of time and resources allotted to long-run planning
CHAIN RETAILER
ADVANTAGES:
• Bargaining power with suppliers
• Achieve cost efficiencies by being wholesales themselves
• Computerized
• Can take advantage of variety of media options
• Defined management philosophies
• Long term planning, opportunities and threats are carefully monitored
DISADVANTAGES
• Lesser flexibility
• Investments may be high
• Managerial control can be hard
• Limited independence in jobs
FRANCHISING
Franchising is a retail organization form in which small businesses
can benefit by being a part of a large, multiunit chain-type retail
institution .
Two types of franchising:
•Product/Trademark and Business format franchising.
Archie's/Gasoline stations
McDonalds
Three structural arrangements dominate franchising:
•Manufacturer-retailer
Gasoline stations/Exxon, Mobil, Ford
•Wholesaler-retailer
1.Voluntary
Auto accessory store
2.Cooperatives
•Service sponsor retailer KFC, McDonalds, Holiday Inn
LEASED DEPARTMENT
From the stores perspective
ADVANTAGES:
•Skilled manpower to handle merchandise
•Market can be enlarged by providing one stop customer shopping
•% of revenues is received regularly
•Stock servicing, display etc is the responsibility of the licensee
DISADVANTAGES:
•Operating procedures may be conflicting
•Store’s image may get adversely affected
•Customers tend to blame the store for any pitfall
LEASED DEPARTMENT..CONT
For leased operator’s
ADVANTAGES:
•Immediate sales because of store’s established image
•Some costs are reduced through shared facility.
•Volume saving in print/ media ads
DISADVANTAGES:
•Inflexibility since working style may differ
•Goods/services line are restricted
•Store may raise the rent or may not renew lease
•In-store location may not generate expected sales.
VERTICAL MARKETING
SYSTEM
CHANNEL TYPE
1. Independent
Systems
2.
3.
Partially
Integrated
Systems
Fully
Integrated
Systems
CANNEL FUNCTIONS OWNERSHIPS
Manufacturing
Independent
Partners
Wholesaling
Retailing
Two channel members
own all facilities and
perform all functions
All functions are
performed by a single
channel member
CONSUMER
CO-OPERATIVES
Consumer co-operatives exist for three basic reasons:
•They feel that they can operate a store as well or may be better than
any other retailer
•They believe that existing retailers are inadequately fulfilling
customers need for healthful, environmentally safe products
•They assume that existing retailers make excessive profits and they
can sell merchandise for lower prices
CLASSIFIACATION BASED ON
MERCHANDISE OFFERED
FOOD ORIENTED RETAILERS
CONVENIENCE STORES:
It is usually a food-oriented retailer that is well located, is open for
long hours and carries a moderate number of items. This type of
retailer is small, has average to above average prices and average
services and average atmosphere.
Milk, eggs, bread, newspaper, tobacco products, soft drinks,
magazines, video rentals, etc are the major category occupants.
Store size ranges from 3000 to 8000 sq. ft.
Ex. Mom n Pop stores.
CONVENTIONAL
SUPERMARKET
These are large, low cost, low margin, high volume, self service
retailers designed to meet the needs for food, groceries and other nonfood items.
They rely on high inventory turnover. Their profit margins are low.
The size of the store ranges from 8000 to 20000 sq. ft.
Ex. Kroger, Safeway, Foodworld, Adani supermarket, Subhiska,
Nilgiri’s, Reliance Fresh.
FOOD BASED SUPERSTORE
A food based superstore is a larger and more diversified
than a conventional supermarket but usually less diversified
and smaller than a combination store.
Some supermarkets merged with general merchandise store
or drug store.
They are typically 25000 to 50000 sq feet of total space.
20-25 % revenues comes from garden supplies, small
household appliances, flowers, etc.
They stimulate impulse purchases.
COMBINATON STORE
A combination store combines supermarket and general
merchandise sales in one facility.
25-40% revenues from general merchandise.
They are from 30000 to 100000 sq feet.
the combination of economy supermarket with discount
department store is called super center.
Examples: Wal-mart, K-mart.
HYPERMARKET
Also called as supercentre, this format is a blend of economy
supermarket with discount department store.
They offer both food and non-food items like grocery, clothes,
jewellery, cycles, sports items, books, CDs, furniture, etc.
This format was pioneered by Carrefour in France.
This ranges from 80,000 to 2,20,000 sq. ft.
The cheapest price will normally be found in these stores.
Across the world hypermarkets are a part of retail park with other
shops, cafeteria and restaurants.
Other facilities include photo processing shop, pharmacy shops.
They are usually located in the outskirts of major towns and cities.
Ex. SIB, Big Bazaar, Adani Hypermarket.
BOX STORE
This is a food based discounter that focuses on a a small
section of items, moderate working hours, few services and
limited manufacturer’s brands.
They have less than 1500 SKUs.
Items are displayed in cut cases.
Customers do their own bagging.
They aim to price at 20-30% below supermarkets.
Example: Aldi.
WAREHOUSE STORE
A warehouse store is a food-based discounter offering a moderate number
of food items in a no frill setting.
They appeal to one stop shoppers.
These stores concentrate on special discount purchases from manufacturer
brands. They use cut-case displays, provide little service, post prices on
shelves and are located in industrial districts.
Potential problem is lack of brand continuity.
They temporarily or permanently run out of brands.
Here customers pack their own goods.
They work on volumes and their gross margins are far lower than
supermarkets or hypermarkets.
Largest stores are called super warehouse.
Their sizes can be 15000 to 50000 square feet.
Ex. Cub Foods
GENERAL MERCHANDISE
RETAILERS
SPECIALITY
A specialty
store concentratesSTORE
on selling one product/ service line
such as apparel and accessories, toys, furniture. They have a deep
assortment in their chosen category and tailor their strategy to
selective market segment.
Personal attention, store ambience and customer service are the
prime importance to the retailer.
They operate in an area which is under 8000 sq. ft.
Ex. The Gap, Mango, Levis, Wills Lifestyle, Big & Tall, Adidas,
Nike, Style Spa, Proline fitness station.
CATEGORY KILLERS
Also called as Power Retailer.
This is a new type of specialty retailer which offers a very large
selection of chosen category .
They stock deep and dominate the chosen category.
Ex. Planet Sports, Crossword, Nalli Sarees, Sales India, Croma, Eplanet.
DEPARTMENT STORE
TRADITIONAL DEPARTMENT STORE:
A traditional department store is a large retail unit with an
extensive assortment of goods and services that is organized into
separate departments for buying, promotion, customer service and
control.
They generally serve as anchor stores in malls and is usually part of
a chain.
Apparel and home furnishing are the two most common product
categories.
Size varies from 20,000 to 40,000 sq. ft.
DEPARTMENT STORE…
Merchandise quality is moderate to quite good. Pricing is moderate
to above average. Customer service is medium to high level.
Ex. Marks & Spencer, Sears, J.C. Penny, Westside, Globus,
Pyramid, Pantaloons, Shopper’s Stop, Lifestyle.
FULL-LINE DISCOUNT STORE
It conveys the image of high volume, low cost, fast turnover outlet
selling a broad merchandise for less than conventional prices.
Products are sold via self service.
Non durable goods feature from private brands and durable goods
are from well known national brands.
Less fashion sensitive merchandise are carried.
Ex. Wal-Mart.
DOLLAR STORE/ VARIETY
STORE
•
•
•
•
US based My Dollar Store started operation in
Mumbai through franchise arrangement with Sankalp
Retail Value.
Floor Space: 4000 Sq. Feet
Merchandise: Cleaning, Health & Beauty,
Hardware,
Plastic ware, Kitchen ware & confectionary etc.
OFF-PRICE CHAIN
An off-price chain features brand name, sometime designer labels
of women wear, cosmetics, accessories, footwear,etc and sell them
at every day low prices in an efficient, limited service environment.
They have centralized check-outs, no gift wrapping and charge
separately for alterations.
Ex. T.J. Maxx
FACTORY OUTLET
A factory outlet is a manufacturer-owned store selling manufacturer
closeouts, discontinued merchandise, irregulars, cancelled orders
and sometime in season fresh merchandise at at lower rate.
They sell merchandise at up to 60% less than MRP due to low
operating cost, low rent, limited display and cheap fixtures.
Also sell in cartons.
Ex. Levis factory outlet, Pantaloon factory outlet, etc.
MEMBERSHIP CLUB
A membership club is a retail format where consumers have to be
members to be able to buy merchandise at a wholesale price.
Here the members pay a certain amount of annual fee.
Their operating strategy includes inexpensive isolated locations,
opportunistic buying, little or no advertising, plain fixtures, wide
aisles, very low prices.
Ex. Sam’s and Costco
FLEA MARKET
A flea market has many retail vendors offering a range of products
at discount prices in plain surroundings.
They are located in non-traditional sites like stadiums,
racetracks,etc.
Here, individual retailers rent space on a daily or weekly basis.
At any flea market, price haggling are encouraged.
Ex. Rose Bowl
CATALOGUE SHOWROOMS
A catalogue retailer specializes in hard goods such as houseware,
jewellery, consumer electronics.
The customer walks into this retail showroom and goes through the
catalogue of the product that would like to purchase.
The product is then arranged to be bought from the warehouse for
inspection and purchase.
Ex. Argos, Service Merchandise and Best Products.
NON-STORE RETAILING
DIRECT MARKETING:
Is a form of retailing in which a customer is first exposed to goods
or service through a non personal medium such as direct mail,
newspaper, broadcast or television and then orders are placed by
mail, phone or computer.
There are three forms:
1. Mail order retailing/ catalogue retailing.
2. Television retailing.
3. E- tailing
DIRECT SELLING
Direct selling includes both personal contact with consumers in their
homes and offices and phone solicitations initiated by a retailer.
1500 crore market in India growing @ 28% p.a.
Profile of products purchased from Direct Selling: (IN %)
HOUSEHOLD GOODS
68.9
PERSONAL CARE PRODUCTS
12.4
FAMILY PRODUCTS
14.4
BUSINESS AIDS
3.59
FOOD PRODUCTS
0.71
Ex. Oriflame, Amway, Avon, Herbalife, Tupperware, Eureka Forbes
Controlled by IDSA.
AUTOMATED VENDING
Ex. Tata Coffee, Jiffy, ATMs.
AIRPORT RETAILING
Ex. Travel Requisition Shop
E-Retailers
VIDEO KIOSKS
The video kiosk is a free standing, interactive, electronic computer
That displays products and related information on a video screen.
It often uses a touch screen for consumers to make selection.
Example: McDonald, Wills Lifestyle.
Retail
Singh
- Jayati
Classification of retail stores
Store-Based Retailing
Based on Location
Non-Store Retailing
•High Street
•Destination
•Convenience
Merchandise Offered
Form of Ownership
• Independent retailer
• Chain Retailer
• Franchise
• Leased Departments
• Vertical Marketing System
• Consumer Cooperatives
• Convenience Store
• Supermarkets
• Hypermarkets
• Specialty Stores
• Department Stores
• Off Price Retailers
• Full line discount store
• Warehouse store
• Variety Store
• Factory Outlets
• Catalogue Showrooms
• Membership Club
• Flea Market
• Direct Selling
• Direct Marketing
• Automated Vending
• World Wide Web
• Other Emerging Retail
• formats
STORE FORMAT BY LOCATION
1. High Street Format
• It is Located in busy shopping area.
• Area is less than 2000 square feet.
• No parking facility
• Focused Merchandised Category
• Example: M. G. Road in Bangalore
2.DESTINATION FORMAT
• Huge Parking space
• Wide merchandise category
• They are Independent retail store
with alluring proposition for the
customer to visit the store with
the primary intention of shopping
there
3. CONVENIENCE STORE
• Located in the catchment area of target customers
• Extended hours of operation
• Less than 5000 square feet
• 24X7 convenience stores situated close to homes to generate
high footprints
• snacks, grocery type items & confectionary Merchandise include:
beverages, ready to eat
• These store carry a limited stock of daily use goods with a
special focus on food products eg. In & Out petrol pump outlets.
CLASSIFICATION BASED ON
OWNERSHIP
INDEPENDENT RETAILER
ADVANTAGES:
• Flexibility in choosing retail formats and locations
• Decision making is centralized
• Low investment cost
• Independents have independence
• Easily sustain consistency
DISADVANTAGES:
• Less bargain power with suppliers
• Cannot gain economies of scale
• Very little computerization
• Relatively high cost of advertising
• Over dependence on owner
• Limited amount of time and resources allotted to long-run planning
CHAIN RETAILER
ADVANTAGES:
• Bargaining power with suppliers
• Achieve cost efficiencies by being wholesales themselves
• Computerized
• Can take advantage of variety of media options
• Defined management philosophies
• Long term planning, opportunities and threats are carefully monitored
DISADVANTAGES
• Lesser flexibility
• Investments may be high
• Managerial control can be hard
• Limited independence in jobs
FRANCHISING
Franchising is a retail organization form in which small businesses
can benefit by being a part of a large, multiunit chain-type retail
institution .
Two types of franchising:
•Product/Trademark and Business format franchising.
Archie's/Gasoline stations
McDonalds
Three structural arrangements dominate franchising:
•Manufacturer-retailer
Gasoline stations/Exxon, Mobil, Ford
•Wholesaler-retailer
1.Voluntary
Auto accessory store
2.Cooperatives
•Service sponsor retailer KFC, McDonalds, Holiday Inn
LEASED DEPARTMENT
From the stores perspective
ADVANTAGES:
•Skilled manpower to handle merchandise
•Market can be enlarged by providing one stop customer shopping
•% of revenues is received regularly
•Stock servicing, display etc is the responsibility of the licensee
DISADVANTAGES:
•Operating procedures may be conflicting
•Store’s image may get adversely affected
•Customers tend to blame the store for any pitfall
LEASED DEPARTMENT..CONT
For leased operator’s
ADVANTAGES:
•Immediate sales because of store’s established image
•Some costs are reduced through shared facility.
•Volume saving in print/ media ads
DISADVANTAGES:
•Inflexibility since working style may differ
•Goods/services line are restricted
•Store may raise the rent or may not renew lease
•In-store location may not generate expected sales.
VERTICAL MARKETING
SYSTEM
CHANNEL TYPE
1. Independent
Systems
2.
3.
Partially
Integrated
Systems
Fully
Integrated
Systems
CANNEL FUNCTIONS OWNERSHIPS
Manufacturing
Independent
Partners
Wholesaling
Retailing
Two channel members
own all facilities and
perform all functions
All functions are
performed by a single
channel member
CONSUMER
CO-OPERATIVES
Consumer co-operatives exist for three basic reasons:
•They feel that they can operate a store as well or may be better than
any other retailer
•They believe that existing retailers are inadequately fulfilling
customers need for healthful, environmentally safe products
•They assume that existing retailers make excessive profits and they
can sell merchandise for lower prices
CLASSIFIACATION BASED ON
MERCHANDISE OFFERED
FOOD ORIENTED RETAILERS
CONVENIENCE STORES:
It is usually a food-oriented retailer that is well located, is open for
long hours and carries a moderate number of items. This type of
retailer is small, has average to above average prices and average
services and average atmosphere.
Milk, eggs, bread, newspaper, tobacco products, soft drinks,
magazines, video rentals, etc are the major category occupants.
Store size ranges from 3000 to 8000 sq. ft.
Ex. Mom n Pop stores.
CONVENTIONAL
SUPERMARKET
These are large, low cost, low margin, high volume, self service
retailers designed to meet the needs for food, groceries and other nonfood items.
They rely on high inventory turnover. Their profit margins are low.
The size of the store ranges from 8000 to 20000 sq. ft.
Ex. Kroger, Safeway, Foodworld, Adani supermarket, Subhiska,
Nilgiri’s, Reliance Fresh.
FOOD BASED SUPERSTORE
A food based superstore is a larger and more diversified
than a conventional supermarket but usually less diversified
and smaller than a combination store.
Some supermarkets merged with general merchandise store
or drug store.
They are typically 25000 to 50000 sq feet of total space.
20-25 % revenues comes from garden supplies, small
household appliances, flowers, etc.
They stimulate impulse purchases.
COMBINATON STORE
A combination store combines supermarket and general
merchandise sales in one facility.
25-40% revenues from general merchandise.
They are from 30000 to 100000 sq feet.
the combination of economy supermarket with discount
department store is called super center.
Examples: Wal-mart, K-mart.
HYPERMARKET
Also called as supercentre, this format is a blend of economy
supermarket with discount department store.
They offer both food and non-food items like grocery, clothes,
jewellery, cycles, sports items, books, CDs, furniture, etc.
This format was pioneered by Carrefour in France.
This ranges from 80,000 to 2,20,000 sq. ft.
The cheapest price will normally be found in these stores.
Across the world hypermarkets are a part of retail park with other
shops, cafeteria and restaurants.
Other facilities include photo processing shop, pharmacy shops.
They are usually located in the outskirts of major towns and cities.
Ex. SIB, Big Bazaar, Adani Hypermarket.
BOX STORE
This is a food based discounter that focuses on a a small
section of items, moderate working hours, few services and
limited manufacturer’s brands.
They have less than 1500 SKUs.
Items are displayed in cut cases.
Customers do their own bagging.
They aim to price at 20-30% below supermarkets.
Example: Aldi.
WAREHOUSE STORE
A warehouse store is a food-based discounter offering a moderate number
of food items in a no frill setting.
They appeal to one stop shoppers.
These stores concentrate on special discount purchases from manufacturer
brands. They use cut-case displays, provide little service, post prices on
shelves and are located in industrial districts.
Potential problem is lack of brand continuity.
They temporarily or permanently run out of brands.
Here customers pack their own goods.
They work on volumes and their gross margins are far lower than
supermarkets or hypermarkets.
Largest stores are called super warehouse.
Their sizes can be 15000 to 50000 square feet.
Ex. Cub Foods
GENERAL MERCHANDISE
RETAILERS
SPECIALITY
A specialty
store concentratesSTORE
on selling one product/ service line
such as apparel and accessories, toys, furniture. They have a deep
assortment in their chosen category and tailor their strategy to
selective market segment.
Personal attention, store ambience and customer service are the
prime importance to the retailer.
They operate in an area which is under 8000 sq. ft.
Ex. The Gap, Mango, Levis, Wills Lifestyle, Big & Tall, Adidas,
Nike, Style Spa, Proline fitness station.
CATEGORY KILLERS
Also called as Power Retailer.
This is a new type of specialty retailer which offers a very large
selection of chosen category .
They stock deep and dominate the chosen category.
Ex. Planet Sports, Crossword, Nalli Sarees, Sales India, Croma, Eplanet.
DEPARTMENT STORE
TRADITIONAL DEPARTMENT STORE:
A traditional department store is a large retail unit with an
extensive assortment of goods and services that is organized into
separate departments for buying, promotion, customer service and
control.
They generally serve as anchor stores in malls and is usually part of
a chain.
Apparel and home furnishing are the two most common product
categories.
Size varies from 20,000 to 40,000 sq. ft.
DEPARTMENT STORE…
Merchandise quality is moderate to quite good. Pricing is moderate
to above average. Customer service is medium to high level.
Ex. Marks & Spencer, Sears, J.C. Penny, Westside, Globus,
Pyramid, Pantaloons, Shopper’s Stop, Lifestyle.
FULL-LINE DISCOUNT STORE
It conveys the image of high volume, low cost, fast turnover outlet
selling a broad merchandise for less than conventional prices.
Products are sold via self service.
Non durable goods feature from private brands and durable goods
are from well known national brands.
Less fashion sensitive merchandise are carried.
Ex. Wal-Mart.
DOLLAR STORE/ VARIETY
STORE
•
•
•
•
US based My Dollar Store started operation in
Mumbai through franchise arrangement with Sankalp
Retail Value.
Floor Space: 4000 Sq. Feet
Merchandise: Cleaning, Health & Beauty,
Hardware,
Plastic ware, Kitchen ware & confectionary etc.
OFF-PRICE CHAIN
An off-price chain features brand name, sometime designer labels
of women wear, cosmetics, accessories, footwear,etc and sell them
at every day low prices in an efficient, limited service environment.
They have centralized check-outs, no gift wrapping and charge
separately for alterations.
Ex. T.J. Maxx
FACTORY OUTLET
A factory outlet is a manufacturer-owned store selling manufacturer
closeouts, discontinued merchandise, irregulars, cancelled orders
and sometime in season fresh merchandise at at lower rate.
They sell merchandise at up to 60% less than MRP due to low
operating cost, low rent, limited display and cheap fixtures.
Also sell in cartons.
Ex. Levis factory outlet, Pantaloon factory outlet, etc.
MEMBERSHIP CLUB
A membership club is a retail format where consumers have to be
members to be able to buy merchandise at a wholesale price.
Here the members pay a certain amount of annual fee.
Their operating strategy includes inexpensive isolated locations,
opportunistic buying, little or no advertising, plain fixtures, wide
aisles, very low prices.
Ex. Sam’s and Costco
FLEA MARKET
A flea market has many retail vendors offering a range of products
at discount prices in plain surroundings.
They are located in non-traditional sites like stadiums,
racetracks,etc.
Here, individual retailers rent space on a daily or weekly basis.
At any flea market, price haggling are encouraged.
Ex. Rose Bowl
CATALOGUE SHOWROOMS
A catalogue retailer specializes in hard goods such as houseware,
jewellery, consumer electronics.
The customer walks into this retail showroom and goes through the
catalogue of the product that would like to purchase.
The product is then arranged to be bought from the warehouse for
inspection and purchase.
Ex. Argos, Service Merchandise and Best Products.
NON-STORE RETAILING
DIRECT MARKETING:
Is a form of retailing in which a customer is first exposed to goods
or service through a non personal medium such as direct mail,
newspaper, broadcast or television and then orders are placed by
mail, phone or computer.
There are three forms:
1. Mail order retailing/ catalogue retailing.
2. Television retailing.
3. E- tailing
DIRECT SELLING
Direct selling includes both personal contact with consumers in their
homes and offices and phone solicitations initiated by a retailer.
1500 crore market in India growing @ 28% p.a.
Profile of products purchased from Direct Selling: (IN %)
HOUSEHOLD GOODS
68.9
PERSONAL CARE PRODUCTS
12.4
FAMILY PRODUCTS
14.4
BUSINESS AIDS
3.59
FOOD PRODUCTS
0.71
Ex. Oriflame, Amway, Avon, Herbalife, Tupperware, Eureka Forbes
Controlled by IDSA.
AUTOMATED VENDING
Ex. Tata Coffee, Jiffy, ATMs.
AIRPORT RETAILING
Ex. Travel Requisition Shop
E-Retailers
VIDEO KIOSKS
The video kiosk is a free standing, interactive, electronic computer
That displays products and related information on a video screen.
It often uses a touch screen for consumers to make selection.
Example: McDonald, Wills Lifestyle.
