[MUSIC] >> To develop and implement a retail strategy, retailers need to understand the nature of the competition in the retail marketplace. Retailers compete against one another by offering different benefits to consumers. These benefits are reflected in the nature of the retail mixes used by retailers to satisfy customer needs. The type of merchandise and offered services. The degree to which they're offering emphasized services versus merchandise. And the charged prices. The most basic characteristic used to describe the different type of retailers is the retail mix, or the elements retailers use to satisfy the customer needs. Four elements of the retail mix are particularly useful for classifying retailers. The type of merchandise or service offer. The variety and assortment of merchandise offer. The level of customer service. And the price of the merchandise or service. I will start with the type of merchandise or service offer. We can talk about the women's clothing stores, shoe stores. No? It is quite clear to understand this type of classification. Another one is regarding the variety and assortment of merchandise offer. Retailers can offer the same merchandise, but differ in the variety and assortment of the offered merchandise. For you to understand, the variety or breadth is the number of merchandise categories a retailer offers. For example, in the department stores, they have different departments or product categories. And assortment or depth is the number of different items offered in a merchandise category. For example, Office Depot. Depth in office supply is deeper than the one in a department store. A third classification is by the level of customer service, retailers may also differ in the services they offer to customers. Although customers expect almost all retailers to provide certain services, no, such as displaying the merchandise, accepting credit cards, providing parking and being open convenient hours. And, finally, we can also classify them by the price of their merchandise. Stocking a deep and broad assortment is appealing to customers, but costly for retailers. When a retailer offers many SKUs, or items, its inventory increases because the retailer must have backup stock for each of these items. Similarly, services attract customers to their retailer, but they are also costly. To make a profit, retailers that offer broader variety, deeper assortment and additional services, need to charge higher prices. I am now going to refer to some of the main types of retailers, the full retailers. 20 years ago, consumers bought food primarily at conventional supermarkets. Now, they account for slightly more than half of food sales. The food landscape is changing dramatically. And the fastest growing sector of the food market are the supercenters, warehouse clubs, convenience stores and extreme value food retailers. Do you know the difference between each of these formats? I will answer you. Whereas conventional supermarkets carry about 30,000 different references, limited assortment supermarkets, or the so-called extreme value food retailers, only stock about 2,000. We have the example of Aldi or DÃa. Supercenters are large stores, they may have more than 185 square feet to combine supermarket with a full line discount store. Walmart is the fantastic example. And the difference with European hypermarkets like Carrefour is that the hypermarkets sell a larger proportion of food ,up to 70%, and a bigger percentage of fresh food. What is a warehouse club? A retailer offering a limited and irregular assortment of food and general merchandise with little service at low prices to consumers and small businesses. We have the example of Costco it's the second biggest retailer in the world or Macro. And the convenience stores. They do provide a limited variety and assortment of merchandise at a very conveniet location in more or less three to five thousand square feet with a speedy check out. 7-Eleven is an example. If we now talk about the general merchandise retailers, we can mention some of them, because there are many. The department stores. They offer a broad variety and deeper assortment. The example in Spain would be El Corte Ingles or Isetan in Japan. The full line discount stores. They have broad variety with limited services and low prices. Very well known, Target in the U.S. Specialty stores offer a limited number of complimentary merchandise category with a high level of service. Zara, Gap. The drugstores. They concentrate on health and personal grooming merchandise. We have Boots in the U.K., or CVS and Walgreens in the U.S. The category specialists are bigbox stores offering a narrow but deep assortment. Decathlon in sportswear, or Office Depot in office supply. And the off-price retailers, that include the outlet stores that you may know. They offer inconsistent assortment of brand name merchandise at a significant discount. We have groups like Value Retail or McArthurGlen Designer Outlet. And there are more types, but I'm not going to mention them. You will find out about them. However, in addition, there are other types of retailers called the service retailers. They sell services rather than merchandise. We can consider here, for example, the airlines, car dealers, banks, fast food, hotels. What would you say are the main differences between service and merchandise retailers? For service retailers, it's intangibility because consumers cannot see or touch them. The simultaneous production and consumption because they create and deliver the service as the consumer is consuming it, imagine in a fast food restaurant. The perishability. They cannot be stored or resold. When the plane takes off, it's done. And inconsistency. Services are provided by people and no two services are identical. So far, we have seen that retailers may be classified in terms of their retail mix and the merchandise and services that they sell. Another way to classify retailers is by the ownership. They can be independent, single store establishment. In the U.S., there are more than 1.9 million retailers from which 90% own a single store. The second one would be corporate stores. They are companies that operate multiple retail units. We have the example of Tesco, Uniqlo. And, finally, the franchises. It's 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. More than 40% of the U.S. retail sales are made by franchisees. Think about McDonald's or Burger King. Now that we have learned about the different types of retailers, in the next class we will discover why it's so important to understand the consumer. [MUSIC]
