Fairchild Books

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?2007 Fairchild Publications, Inc.
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The Five Rs of Retailing
The Right

• Merchandise
• Price
• Place
• Time
• Quantity

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History

• The first department store is generally agreed
  to be Bon Marché, in Paris in the mid-1800s
• The urban population of New York, Philadelphia
  and Boston modeled themselves after the most
  sophisticated European cities
• Originally three types of retailing existed in
  America, matching the rural population

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Department Stores

• The Bureau of the Census defines a department
  store as a retail store that employs 25 or more
  people and sells
• General lines of apparel
• Home furnishings
• Household linens and dry goods
• Stores, published by the National Retail
  Federation, defines department stores to include
• Multi-department, soft-good store of specialized
  department stores with a fashion orientation and
  full markup policy

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Department Stores

• Many no longer carry hardlines
• Organization of department stores
• Parent, or flagship stores, and branch stores
• Buyers purchase for areas
• Entertainment is a key component of todays
  shopping experience
• Saturation of shopping space per customer in the
  U.S.
• 1960 4 sq. ft. of space per person
• 1990 19 sq. ft. of space per person

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Specialty Stores

• Limited lines of merchandise typify them
• Crate and Barrel, Talbots, Tiffany Co.
• Private label retailer is a variation of the
  specialty store, carrying only product it makes
  itself
• Ann Taylor, Brooks Brothers, Gap

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Organization of Specialty Stores

• Small specialty stores, the buying and
  merchandising are done by owner, store manager,
  and a small staff
• Large multi-department specialty stores are
  organized much like department stores
• Entertainment is a natural activity for specialty
  stores

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Discount Stores

• Discounters sell name-brand merchandise at less
  than full retail prices
• Discounters turn a profit by
• Keeping overhead low and service minimal
• Centralizing checkout counters and relying on
  self-service
• Using volume and size to compensate for low
  markups
• Aiming to do a minimum annual sales volume of
  500,000

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Discount Stores

• Organization of discount stores
• Buyers are responsible for several departments
  instead of a single category
• Entertainment is a big part of the experience
• Greeters are often present
• Blue light specials are eagerly awaited

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Forms of Retail Ownership

• Four common types of ownership (U.S.)
• Sole Proprietors
• Account for over 90 of all retailers
• Small stores, or mom-and-pop stores, are single
  store sole proprietorships
• Chain Organization
• A group of centrally owned stores, 4 or more
• Mass merchandiser known for low prices
• Department store known for high quality
  merchandise
• Specialty merchandiser selling exclusive designs
  at high prices can be chains

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Forms of Retail Ownership
Forms of Retail Ownership

• Leased departments
• Sections of retail stores owned and operated by
  outside organizations
• Specialized knowledge usually portends leased
  departments
• Furs, fine jewelry, beauty salons, and shoes are
  often leased

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Forms of Retail Ownership

• Franchises
• Exclusive use of name, merchandise, and any
  corporate advertising in an exclusive trading
  area are the franchisees benefits. The
  franchisor gets a royalty fee for providing the
  organization, merchandising and training.
• Often confused for chains since the franchises
  and directly owned stores look alike. Benetton is
  a successful franchisor.
• Designer Yves Saint Laurent has long taken
  advantage of franchising to expand the Rive
  Gauche label

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Other Types of Fashion Retailers

• Off-price retailers
• Factory outlet stores
• Category killers
• Boutiques/Showcase stores
• Nonstore retailers
• TV home shopping
• Internet shopping sites

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Off-Price

• Late rise/early peak fashion cycle merchandise as
  opposed to discounters late peak/early decline
• Compete directly with department stores
• Sell brand-name and designer merchandise at lower
  than normal prices, but often late in the season
  and usually in broken sizes and colors

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Off-Price

• In 1920, Loehmanns was the first off-price
  store
• In the 80s, manufacturers turned to off-pricers,
  who paid full price for excess fabric and
  demanded lower cost garments it helped everyone
• T.J. Maxx and Marshalls led the way for the
  resurgence of off-price stores

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Factory Outlet Stores

• Discount operations run by manufacturers, they
  have grown dramatically in recent years
• Less than 100 outlet centers nationwide in 1988
• Almost 360 outlet centers across the U.S. today
• They serve to eliminate overruns and seconds
• Prior to this, manufacturers and designers turned
  to off-pricers
• Todays factory outlet malls are destinations

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Category Killers

• Carry the ultimate narrow and deep selection,
  allowing for deep purchasing discounts which are
  passed on to the customer in the form of low
  prices
• 1970s saw the rise of Toys R Us, Bed Bath
  Beyond and others
• Home Depot and Barnes Noble Booksellers
  continue the trend today
• Most are free standing destinations, big boxes

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Boutiques

• The appeal for individuality is one of the
  driving forces behind the boutique revival
• Showcase stores on Madison Avenue for designers
  are the latest trend
• It allows them to show their goods in a
  controlled environment
• It helps to create the branding necessary to
  compete in todays fashion business

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Nonstore Retailers

• Four categories exist
• Direct selling
• Typified by the Avon, direct selling sales
  totaled 25 billion in the U.S.
• Catalogue retailers
• Lands End, Eddie Bauer, Patagonia,
  Williams-Sonoma and L.L.Bean all run successful
  catalogue businesses
• Total sales in 2000 was 110 billion in the U.S.
• Catalogues also function as early predictors of
  sales for the brick and mortar stores

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Nonstore Retailers

• TV home shopping
• In 2001, HSN had a total sales of almost 2
  billion and a customer base of almost 5 million
• QVC had an estimated 79 million viewers
• Celebrities of some form often appear to promote
  their goods on air

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Nonstore Retailers

• Internet shopping sites
• E-tailing or electronic retailing
• What you need is a PC to access shopping anytime
  from anywhere
• Although the potential is great, it remains
  largely untapped
• E-tail players that have been the most successful
  so far are the online channels of apparel retail
  and catalog giants, like JCPenny.com,
  Landsend.com, and JCrew.com
• Catalogue firms like Lands End, Eddie Bauer, and
  L.L.Bean have had success, in part, due to their
  sophisticated fulfillment capacity

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Mergers

• Until the 30s, most department stores were
  independently owned
• Consolidations, bankruptcy, and foreign
  investments have changed the scene dramatically
• Many retailers closed down
• Efficiency and expansion are the key strategies
  for the retailing future

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Wheel of Retailing

• Retailers must constantly respond to change in
  the environment to succeed and flourish
• Harvard Business School Professor Emeritus
  Malcolm McNairs Wheel of Retailing theory states

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Wheel of Retailing

• Most retailers begin as lower priced distributors
• To grow they trade up and add amenities, varied
  assortments, customer service, higher quality
  goods, etc.
• Capital requirements mean higher prices
• As each retailer moves up, the vacuum is filled
  quickly by the level below