Strategic Planning in Retailing Contd amp Retail Institutions by Ownership Ownership and Management Alternatives Sole proprietorship is an unincorporated retail firm owned by one person ID: 144739
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Slide1
BA 336 Retail Operations
Strategic Planning in Retailing (Cont’d)
&
Retail Institutions by OwnershipSlide2
Ownership and Management Alternatives
Sole proprietorship
is an unincorporated retail firm owned by one person
A
partnership
is an unincorporated retail firm owned by two or more persons, each with a financial interest
A
corporation
is a retail firm that is formally incorporated under state law; it is a legal entity apart from its officersSlide3
Checklist
to Consider When Starting a New BusinessSlide4
Checklist
for Purchasing an Existing Retail BusinessSlide5
Selected
Kinds of Retail Goods and Service Establishments
Durable Goods Stores:
Automotive group
Furniture and appliances group
Lumber, building, and hardware group
Jewelry stores
Nondurable Goods Stores:
Apparel group
Food group
General merchandise group
Gasoline service stationsSlide6
Retail Mgt. 12e (c) 2013 Pearson Education, Inc. publishing as Prentice Hall
Selected
Kinds of Retail Goods and Service Establishments
Service Establishments (Personal):
Laundry and dry cleaning
Beauty/barber shops
Funeral services
Health-care services
Service Establishments (Amusement):
Movie theaters
Bowling alleys
Dance halls
Golf coursesSlide7
Selected Kinds of Retail Goods and Service Establishments
Service Establishments (Repair):
Automobile repair
Car washes
Consumer electronics repair
Appliance repairs
Service Establishments (Hotel):
Hotels
Motels
Trailer parks
CampsSlide8
Image and Positioning
An
image
represents
how a given retailer is
perceived
by consumers and others.
Slide9
Positioning Approaches
Mass merchandising
is a positioning approach whereby retailers offer a discount or value-oriented image, a wide or deep merchandise selection, and large store facilities.
Niche retailing
occurs when retailers identify specific customer segments and deploy unique strategies to address the desires of those segments rather than the mass market.Slide10
Niche
Retailing by
Babies “R” UsSlide11
Selected Retail
Positioning StrategiesSlide12
Target Market Selection
Three techniques
Mass marketing
Concentrated marketing
Differentiated marketingSlide13
La BoqueriaSlide14
Strategic Implications of
Target Market Techniques
Retailer’s location
Goods and service mix
Promotion efforts
Price orientation
StrategySlide15
Developing
an Overall Retail Strategy
Retail
Strategy
Uncontrollable
Variables:
Consumers
Competition
Technology
Economic
conditions
Seasonality Legal restrictions
Controllable
Variables:
Store location
Managing business
Merchandise
management
and pricing
Communicating
with customerSlide16
Retail Strategy– Low Costs
Removal of bad costs
Use of private label products to reduce costs of national/manufacturer brands
Reduce product proliferation
Obtain best net price instead of focus on promotional monies, trade incentives and forward buyingSlide17
Retail Strategy– Low Costs
(cont.)
Supply chain initiatives
Low promotional expense (everyday low pricing)
Proper employee utilizationSlide18
Retail Strategy--Differentiation
Well-thought out private
labels
Hiring right employees (value-profit chain)
Empowering employees
Use of a fun atmosphere
“Little things that mean a lot”
Money-back guaranteesSlide19
Legal Environment
and Retailing
Store Location
zoning laws
blue laws
environmental laws
direct selling laws
local ordinances
leases and mortgages
Managing the Business
licensing provisions
personnel laws
antitrust laws
franchise agreements
business taxes
recycling lawsSlide20
20
Sample Strategic Plan
Sally’s is a small, independently owned, high-fashion ladies clothing shop located in a suburban strip mall. It is a full-price, full-service store for fashion-forward shoppers. Sally’s carries sportswear from popular designers, has a personal shopper for busy executives, and has an on-premises tailor. The store is updating its strategic plan as a means of getting additional financing for an anticipated expansion.Slide21
Additional Concerns for
Global Retailing
In addition to the strategic planning process:
assess your international potential
get expert advice and counseling
select your countries
develop, implement, and review an international retailing strategySlide22
Factors Affecting the Success of a Global Retailing Strategy
Timing
A balanced international program
A growing middle class
Matching concept to market
Solo or partnering
Store location and facilities
Product selectionSlide23
Factors to Consider When Engaging in Global RetailingSlide24
A
Classification Method for Retail Institutions
I
Ownership
II
Store-Based
Retail Strategy Mix
III
Nonstore-Based
Retail Strategy Mix
Slide25
Ownership Forms
Independent
Chain
Franchise
Leased department
Vertical marketing system
Consumer cooperativeSlide26
Independent Retailers
2.2 million independent U.S. retailers
Account for one-third of total store sales
70% of independents operated by owners and their families
Why so many?
Ease of entrySlide27
Competitive State of Independents
Advantages
Flexibility in formats, locations, and strategy
Control over investment costs, personnel functions, and strategies
Personal image
Consistency and independence
Strong entrepreneurial leadership
Disadvantages
Lack of bargaining power
Lack of economies of scale
Labor intensive operations
Over-dependence on owner
Limited long-run planningSlide28
Useful
Online
Publications for Small RetailersSlide29
Chain Retailers
Operate multiple outlets under common ownership
Engage in some level of centralized or coordinated purchasing and decision making
In the U.S., there are roughly 110,000 retail chains operating about 900,000 establishmentsSlide30
Competitive State of Chains
Advantages
Bargaining power
Cost efficiencies
Efficiency maintained by computerization, warehouse sharing, and other functions
Defined management philosophy
Considerable efforts in long-run planning
Disadvantages
Limited flexibility
Higher investment costs
Complex managerial control
Limited independence among personnel
Excessive standardization due to extreme concern for bargaining powerSlide31
Louis
Vuitton
– A Powerhouse of Upscale RetailingSlide32
Franchising
A contractual agreement between a franchisor and a retail franchisee that 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 areaSlide33
Franchise Formats
Product/ Trademark
Franchisee acquires the identity of a franchisor by agreeing to sell products and/or operate under the franchisor name
Franchisee operates autonomously
2/3 of retail franchising sales
Business Format
Franchisee receives assistance: location, quality control, accounting systems, startup practices, management training
Common for restaurants, real-estateSlide34
Business
Qualifications Sought by McDonald’s for Potential Franchisees
Financial resources
Customer and
employee focus
Strong credit
Willingness to
complete training
Ability to manage
finances
Planning ability
Growth capability
Ideal
Franchisee
Experience
Full-time
commitmentSlide35
Franchise Disclosure
Document Contents
The Franchisor and Any Predecessors
Litigation History
Bankruptcy (i.e., any franchisees who may have filed)
Listing of the Initial Franchise Fee and Other Initial Payments
Other Fees and Expenses
Statement of Franchisee's Initial Investment
Obligations of Franchisee to Purchase or Lease from Designated Sources
Obligations of Franchisee to Purchase or Lease in Accordance with Specifications or from Authorized SuppliersSlide36
Franchise Disclosure
Document Contents
(cont)
Financing Arrangements
Obligations of the Franchisor; Other Supervision, Assistance or Services
Exclusive/Designated Area of Territory
Trademarks, Service Marks, Trade Names, Logotypes and Commercial Symbols
Patents and Copyrights
Obligations of the Franchisee to Participate in the Actual Operation of the Franchise Business
Restrictions on Goods and Services Offered by Franchisee
Slide37
Franchise Disclosure
Document Contents
(cont)
Renewal, Termination, Repurchase, Modification and Assignment of the Franchise Agreement and Related Information
Arrangements with Public Figures
Actual, Average, Projected or Forecasted Franchise Sales, Profits or Earnings
Information Regarding Franchises of the Franchisor
Financial Statements
Contracts
Acknowledgment of Receipt by Respective FranchiseeSlide38
Dunkin’ Donuts Franchise Disclosure DocumentSlide39
Pros and Cons of
Dunkin’ Donuts Franchise
Pros:
No company owned stores
Outside suppliers can be approved
No markup on approved signs
Of 4,543 franchises 16 terminated, none reacquired by franchisor and 80 ceased operations– A failure rate of 2.1 percent
Average sales in Metro NY $914,992– 41.4 percent at or above average
19 day initial training programSlide40
Pros and Cons of
Dunkin’ Donuts Franchise
Cons
No exclusive territory, can license other retailers to sell donuts, seek to convert other donut shops to Dunkin’ Donuts, can sell donuts in supermarkets, convenience stores, airports, universities
Referral incentives to existing franchises, franchise brokers
Pages 12-34 litigation history. In one case DD settled with payment of $780,000 to plaintiff; in another repurchased franchise for $1.1 million
Continuing franchise fees 5.9 percent of sales, continuing advertising fee 5.0 percent of sales, loan guarantee fee 1 percent of loan amount + net, net, net leaseSlide41
41
Pros and Cons of
Dunkin’ Donuts Franchise
Cons
Board member sells eggs
DD has right to approve advertising
DD can appoint additional members to Brand Advisory Council, can dissolve council, council is only advisorySlide42
Structural
Arrangements in Retail FranchisingSlide43
Wholesaler-Retailer
Structural Franchising Arrangements
Voluntary:
A wholesaler sets up a franchise system and grants franchises to individual retailers
Cooperative:
A group of retailers sets up a franchise system and shares the ownership and operations of a wholesaling organizationSlide44
Franchise
and Business OpportunitiesSlide45
Competitive State of Franchising
Advantages
low capital required
acquisition of well-known names
operating/ management skills taught
cooperative marketing possible
exclusive rights
less costly per unit
Disadvantages
over-saturation could occur
franchisors may overstate potential
contractual confinement
agreements may be cancelled or voided
royalties are based on sales, not profitsSlide46
From the Franchisor’s Perspective
Benefits
national or global presence possible
qualifications for franchisee/operations are set and enforced
money obtained at delivery
royalties represent revenue stream
Potential Problems
potential for harm to reputation
lack of uniformity may affect customer loyalty
ineffective franchised units may damage resale value, profitability
potential limits to franchisor rulesSlide47
Potential Conflicts Between Franchisor and Franchisee
High power of franchisor relative to franchisee. Franchisee needs franchisor approval to sell business, and to extend franchise. Lease is generally in name of franchisor
Franchisor obtains profit based on gross sales, not on franchisee’s profitability
Franchisor requires goods and services to be purchased from itself or approved vendor
Franchisor can break up territory of existing franchisee, reducing its sales and profitabilitySlide48
Leased Departments
A leased department is a department in a retail store that is rented to an outside party
The proprietor is responsible for all aspects of its business and pays a percentage of sales as rent
The department store sets operating restrictions to ensure consistency and coordinationSlide49
Competitive State of Leased Departments
Benefits
provides one-stop shopping to customers
lessees handle management
reduces store costs
provides a stream of revenue
Potential Pitfalls
lessees may negate store image
procedures may conflict with department store
problems may be blamed on department store rather than lesseeSlide50
Common Leased Departments
for Department Stores
Cosmetics/Fragrances
Beauty Salon/Spa
Fine Jewelry
Furs
Photography studio (CPI)
OpticalSlide51
Vertical
Marketing Systems
Independent Channel System
Functions:
Manufacturing
Wholesaling
Retailing
Ownership:
Independent Manufacturer
Independent Wholesaler
Independent RetailerSlide52
Partially Integrated Channel System
Functions:
Manufacturing
Wholesaling
Retailing
Ownership:
Two channel members own all
facilities and perform all functions.
Vertical
Marketing SystemsSlide53
Vertical
Marketing Systems
Fully Integrated Channel System
Functions:
Manufacturing
Wholesaling
Retailing
Ownership:
All production and distribution functions
are performed by one channel member
.