Chapter 2

Retail Formats

Faiza Nasir
Retail formats?
Merchandise’s Division

 ProductWidth
 Product Length

 Product Depth
 SKUs?
 A common term for a unique numeric identifier, used to refer to a
specific product in inventory or in a catalog.

 Inventory control count that represents one or more items that

will be sold together. For example, a retail bed store would
consider one bed frame with four wheels equal to one SKU (even
though the frame and the wheels come from different suppliers),
because a frame is never sold without wheels, and wheels are
never sold alone. Conversely, a frame, a box spring, and a
mattress would be considered three SKUs, because any of the
three items might be sold separately.

 Warehousing item that is unique because of some characteristic

(such as brand, size, color, model) and must be stored and
accounted for separate from other items. Every SKU is assigned a
unique identification number (inventory or stock number) which is
often the same as (or is tied to) the item’s UPC.
 Store vs.
Non-Store formats
 Store Formats by Location
a) Chain store
 Multi-locational
 Operates multiple outlets under common ownership
 Engages in some level of centralized or coordinated purchasing
and decision making
b) High street format:
 A retail chain that seeks to locate itself in busy shopping areas
(generally less than 2,000 sft, with no parking facilities and
focused merchandise categories)
c) Destination format:
 Independent retail stores located specifically in an area with
alluring propositions (usually large in size, with ample
concessions, huge parking space, wide merchandise categories)
d) Convenience store format:
 Accessible carrying wide array of consumable goods (less than
5,000 sft, extended hours, parking for few vehicles, convenience
merchandise)
Competitive State of Chains
Advantages Disadvantages
 Bargaining power  Limited flexibility
 Cost efficiencies
 Higher investment
 Efficiency from
costs
computerization,  Complex managerial
sharing warehouse
and other functions control
 Defined management  Limited

philosophy independence among

 Considerable efforts personnel
in long-run planning
Convenience Store Strategy Mix

Prices:
Location:
Average to
Neighborhood
Above average

Atmosphere &
Merchandise: Services:
Medium width Average
and low depth
of assortment; Promotion:
average quality Moderate
 Store Formats by Ownership
a) Independent
 Generally higher level of independent retailers exists
 50% of these are run by owners and their families
 Why so many? Ease of entry

b) Franchise:
 A contractual agreement between a franchisor and a retail
franchisee, which allows the franchisee to conduct business
under an established name and according to a given
pattern of business
 Franchisee pays an initial fee and a monthly percentage of
gross sales in exchange for the exclusive rights to sell
goods and services in an area
 Competitive State of Independents

Advantages Disadvantages
 Flexibility in formats,  Lack of bargaining
locations, and strategy power
 Control over investment  Lack of economies of
costs and personnel scale
functions, strategies  Labor intensive
 Personal image operations
 Consistency and  Over-dependence on
independence owner
 Strong entrepreneurial  Limited long-run
leadership planning
 Competitive State of Franchising

Advantages Disadvantages
 small capital required  oversaturation could
 acquire well-known occur
names  franchisors may
 operating/management overstate potential
skills taught  locked into contracts
 cooperative marketing  agreements may be
possible cancelled or voided
 exclusive selling rights  royalties are based
 less costly per unit on sales, not profits
From the Franchisor’s Perspective

Benefits Potential Problems

 national or global  potential for harm to

presence possible reputation

 lack of uniformity
 qualifications for
may affect customer
franchisee/ loyalty
operations are set  ineffective franchised
and enforced units may damage
 money obtained at resale value,
delivery profitability
 royalties represent  potential limits to

revenue stream franchisor rules

 Store Formats by
Merchandise Category
a) Family store
 Store dealing in all categories of related item (For e.g. apparel
store offering merchandise to suit the wardrobe of a family)
b) Specialty format:
 Narrow product lines with good depth. Specializing in a given type
of merchandise, offering attentive customer services.
c) Department store format:
 Large in size having several departments working as SBUs
d) Super market format:
 Departmentalized, specializing in foodstuff, grocery and limited
non-food categories, free access displays so that customers can
pick from shelves.
e) Emporium:
 Selling a variety of a particular group of merchandise (sari
emporium).
 Specialty Store Strategy Mix

Prices:
Competitive to
Above average
Merchandise:
Very narrow width and Atmosphere and
extensive depth of Services:
assortment; average to Average to excellent
good quality
Promotion:
Heavy use of displays
Extensive sales force
Department Store Strategy Mix

Location: Prices:
Business district, shopping Average to
center or isolated store Above average

Atmosphere and
Merchandise: Services:
Extensive width and Good to excellent
depth of Promotion:
assortment; average to Heavy ad and catalog
good quality use; direct mail;
personal selling
 Conventional Supermarket
Strategy Mix
Location: Prices:
Neighborhood Competitive

Merchandise: Atmosphere and

Extensive width Services:
and depth Average
of assortment; Promotion:
average quality; Heavy use of
manufacturer, newspapers, flyers,
private, & generic brands and coupons
 Store Formats by Size
a) Superstore format
 Single-level large store, twice the size of a supermarket, offers
non-traditional goods and services like pharmacy, flower shop,
bookstore, salad bar, bakery etc.
b) Shopping Mall:
 Spread over a large area, arrangement of retail stores and places
for leisure activities.
c) Shopping Center:
 Plaza combining five or more tenant spaces developed under one
building.
d) Hypermarket:
 Wide variety, offering in large quantities in each category selling
huge volumes at low margins.
 Store Formats by Price
a) Discount format
 Bazaar format, believing in discounts more often.
b) EDLP format:
 Specialize in a particular merchandise line, assuring consistently
low prices.
c) Category killer format:
 Large specialty store having enormous selection of its product
category at relatively low prices.
d) Factory-outlet format:
 Owned and operated by the manufacturer
e) Warehouse format:
 Large sale of discontinued merchandise, has large width and
depth in many categories it retails.
f) Single-price denomination format:
 Scrambled merchandise at just one price point, generally at a low
one.
Discount Store Strategy Mix

Prices:
25% or more below
MRP
Merchandise:
Extensive width and Atmosphere/ Services:
depth of Slightly below
assortment; average to average to average
good quality (overruns,
irregulars, cut-sizes) Promotion:
Heavy on newspapers;
price-oriented; selling
 Factory Outlet Strategy Mix

Prices:
Very Low
Merchandise:
Moderate width and Atmosphere/ Services:
poor depth of Very low
assortment;
low continuity (cancelled
orders, discontinued Promotion:
merchandise) Little
Warehouse Store Strategy Mix

Location:
Prices:
Secondary site, often in
Very low
industrial area

Atmosphere and
Merchandise: Services:
Moderate width and Low
low depth of
assortment; emphasis on
manufacturer brands Promotion:
bought at discount Little or none
 Store Formats by Concessions
a) Stopover store format
 Like petrol pump, offers instant use or ready-to-eat categories of
merchandise.
b) Kiosk:
 Small freestanding pavilion
c) Alliances:
 With brands that customers trusts
 Bazaars?
 Seasonal
 Structured
 Un-structured
 Thematic
Scalability and
its importance