CHAPTER ENDNOTES
CHAPTER 2 CHAPTER 2 | Types of Retailers
LEARNING OBJECTIVES
After reading this chapter, you should be able to:
LO 2-1 List the different characteristics that define retailers.
LO 2-2 Categorize the various types of food retailers.
LO 2-3 Identify the various types of general merchandise retailers.
LO 2-4 Explain the differences between service and merchandise retailers.
LO 2-5 Illustrate the types of ownership for retail firms.
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W
hen it first entered the scene, Sam’s Club had a specific and focused target market: small businesses that wanted to purchase bulk quantities of products to run their operations. But the popularity of the warehouse club has meant that over the years, its customers have increased in number and have grown far more diverse. With these developments, Sam’s Club has also become a more competitive entrant in the retail market, adapting its strategic plan and positioning accordingly.Unfortunately, this competitiveness has had some negative implications for its sibling company, the discount chain Walmart, which still promises the same thing it always has: low prices. Accordingly, it attracts a price-sensitive segment of shoppers who always are seeking the best deal. For a long time, these shoppers also enjoyed the warehouse options of Sam’s Club, which enabled them to purchase large quantities at a lower price. In some cases, though, Sam’s Club stocks smaller packages (e.g., a two-pack of toothpaste) that also would appear on Walmart’s shelves. Furthermore, Walmart and other large discount retailers increasingly feature substantial packages of consumer products when they can get deals on them.
Thus, the two sibling brands frequently cannibalize each other’s sales.
In an effort to avoid that sort of competition, Sam’s Club is looking to revise its image. Rather than a source of cheap, bulk goods, it wants to move up the ladder to become a semi-exclusive (based on the membership fee) environment, where high-end customers come to find reasonable deals on expensive items like televisions or jewelry.
To achieve this shift, Sam’s Club is expanding the assortment of organic goods it carries, adding more brand-name clothing labels, and dedicating a section to sheets with thread counts in the thousands. It also is running tests in a limited number of stores to see how offerings such as expensive furniture, luxury clothing, and prepared meals fare.
These experiments reflect Sam’s Club’s revised segmentation and targeting plan, which involves four main categories of members: large families with young children, “social couples” of various ages who like to entertain, families who live in close proximity to stores and regard
Page 31 the Club as a regular source for their grocery needs, and new moms shopping for their infants who offer strong loyalty potential over time.
With these strategic considerations, Sam’s Club clearly is going well beyond a traditional warehouse club model.
In addition to shifting its assortment and segmentation strategy, Sam’s Club plans to leverage new technologies to
differentiate itself from channel competitors and identify customers in proximity to its stores, then position those
stores accordingly. For example, using zip code data, it learned that approximately 150 Sam’s Club stores were located in high-income areas, yet high-income shoppers were not visiting those nearby stores. Furthermore, the ultimate goal of using digital technology is to make the shopping experience easier for its “exclusive” members, whether they visit stores or shop from home. By claiming leadership in digital uses in the warehouse club market, Sam’s Club believes that
“over time we’ll have the best use of integrated technology in retail.”1
Y
ou want to have a good cup of coffee in the morning, not instant, but you don’t want to bother with grinding coffee beans, boiling water, pouring it through ground coffee in a filter, and waiting. Think of all the different retailers that could help you satisfy this need. You could get your cup of brewed coffee from the drive-through window at the local Starbucks, or you could decide to buy an automatic coffeemaker with a timer so that your coffee will be ready when you wake up. You could purchase the coffeemaker at a discount store like Walmart or Target, a department store such as Macy’s, a drugstore like CVS, or a category specialist such as Best Buy. If you want to buy the coffeemaker without taking the time to visit a store, you could visit Google Shopping (www.google.com/shopping) or Shopzilla (www.shopzilla.com), search for “coffee and espresso maker,” and review the details of thousands of options sold by hundreds of retailers.All these retailers are competing against one another to satisfy your need for a hassle-free, good cup of coffee. Many are selling the same brands, but they offer different services, prices, environments, and convenience. For example, if you want to buy a low-priced, basic coffeemaker, you can go to a discount store. But if you are interested in a coffeemaker with more features
and want to have someone explain the different features, you can visit a department store or a category specialist.
To develop and implement a retail strategy, retailers need to understand the nature of competition in the retail marketplace.2 This chapter describes the different types of retailers and how they compete against one another by offering different benefits to consumers. These benefits are reflected in the nature of the retail mixes used by the retailers to satisfy customer needs: the types of merchandise and services offered, the degree to which their offerings emphasize services versus merchandise, and the prices charged.
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