Full file at https://testbanku.

eu/

SOLUTION MANUAL AND CASE SOLUTIONS FOR

RETAILING MANAGEMENT 7TH EDITION BY LEVY
Complete downloadable file at:
https://testbanku.eu/Solution-Manual-and- Chapter 1 & Appendix A
Case-Solutions-for-Retailing-Management-
7th-Edition-by-Levy

Berman & Evans, 10th edition

CASES AND ANCILLARY CASES

CASE 1: Tractor Supply Company: Targeting the Hobby Farmer

Synopsis: The Tractor Supply Company case introduces students to a unique retailing story. By
recognizing a target market with unique needs, TSC repositioned its traditional tractor-
parts business into a specialty retailer serving a variety of needs for consumers
entertaining their interests in part-time farming and ranching. This growing consumer
segment has been TSC’s focus for the past 15 years as it developed a merchandise
variety and assortment well beyond its early focus on tractor parts. This case provides a
comprehensive illustration of TSC’s retail mix. It describes TSC’s growth strategies with
a specific emphasis on the firm’s current merchandise variety, target market relationships
and technology practices.

CASE 2: Rainforest Café: A Wild Place to Shop and Eat

Synopsis: Video Segment 5, Rainforest Café, complements this case. The Rainforest Cafe is a
theme restaurant similar in concept to Planet Hollywood and Hard Rock Cafe. The case
describes the concept of a theme restaurant that develops and sells branded merchandise
associated with the restaurant's theme. This case provides a good illustration of
Rainforest Café’s retail strategy with a specific emphasis on the firm’s retail offering and
its relationship to competitors.

CASE 3: Providing a Retail Experience: Build-A-Bear Workshop

Synopsis: Video Segment 6, Build-A-Bear, complements this case. Build-A-Bear Workshop is a
unique chain of over 170 stores where customers can build their own teddy bears and, in
general, obtain a novel and fun experience. The case highlights the strategy and
operations of a typical store and types of experiences enjoyed by customers. This case
highlights the steps Build-A-Bear takes to implement the firm’s retail mix, including
merchandise and services, pricing and store design.

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CASE 4: Wal-Mart and Corporate Social Responsibility

Synopsis: This case begins with a description of the prominent position Wal-Mart has achieved
within the retail industry. It reviews the foundation of Wal-Mart’s position as the world’s
largest retailer, as well as the reasons behind Wal-Mart’s tremendous success in the
marketplace. The case goes on to describe several of the criticisms that have been leveled
against Wal-Mart, including criticisms of its impacts on small businesses and
communities, its compensation of employees, and its sourcing practices. The case
provides a foundation for discussion of Corporate Social Responsibility issues using the
example of the world’s largest retailer.

CASE 6: Mall Anchors Away! The Franklins Discover Online Shopping

Synopsis: Case 6 describes a comparison of one family’s experiences in brick-and-mortar versus

online shopping. Searching for a model to build with his 6-year old son at several types
of store-based retailers, Drew Franklin has the opportunity to review the strengths and
weaknesses of several types of brick-and-mortar formats from category killers to
discounters to specialty stores. The Franklins continue their shopping experience into
nonstore retailing territory, again experiencing all the pros and cons of the online
retailing format. The case provides opportunities to review and compare various bricks-
and-mortar and online retail formats and strategies with students.

CASE 8: Retailing in India: The Impact of Hypermarkets

Synopsis: Video Segment 2, Retail Revolution in India, complements this case. The Retailing in
India case describes the efforts of retailers like Wal-Mart, Tesco and Carrefour to explore
opportunities to move into retailing in India through development of hypermarkets. The
case describes economic growth and developments in the Indian retail marketplace, as
well as changes in the behaviors of Indian consumers that have combined to create a very
attractive potential opportunity for global retailers. The case describes both the
opportunities presented for development of the hypermarket format, as well as the
competitive challenges which these hypermarkets will likely create in the traditional
retail markets in India.

CASE 12: The Competitive Environment in the 18- to 22-Year-Old Apparel Market

Synopsis: American Eagle and Abercrombie & Fitch are rival retailers vying for a competitive
leadership position among the same segment of the teenage/college student market.
Each, however, pursues a slightly different strategy, even though some similarities have
raised legal questions. The case details the strategies, merchandising, operations, and
competitive positions of the two retailers. This case provides an opportunity to examine
and compare the strategies of two competing retailers.

CASE 26 – Discount Dining Draws a Crowd: Restaurant Weeks in Major Cities

Synopsis: This case describes the growing popularity of Restaurant Weeks in major cities. During
these weeks, anywhere from 60 to 200 restaurants take part in the promotions by offering

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special deals to consumers during certain days and times during the event. The case
illustrates this unique trend in food retailing, as well as the promotional strategies
participating retailers and cities use to get the word out about these special events.

CASE 38: Interviewing for a Management Trainee Position

Synopsis: Students are asked to participate in a variety of professional development steps in the
context of a retail management trainee position, including evaluating resumes, preparing
his or her own resume and role-playing an interview. The case illustrates important
elements of the interview process for retail management trainees. Use with Appendix 1A.

Ancillary Case A2: Value Retailers: Dollar General and Family Dollar Cater to an
Underserved Market Segment

Synopsis: Dollar General and Family Dollar are exemplars of the retail category known as extreme
value retailers. The case describes the target market, location, merchandising, buying
and operations strategies of extreme value retailers and also identifies some trends.
Ancillary Case A8: The Gap and Old Navy

Synopsis: The Gap is a multinational apparel manufacturing and retailing conglomerate. In an

effort to expand and diversify its appeal, the company has in recent years opened up Old
Navy, and Banana Republic. All of the company’s stores have customers of their own,
but they all compete with one another to some extent. This case provides a general
overview of retail strategy and includes discussion of strategy concepts including
merchandise and service offering, target market and store design.

Ancillary Case A9: Blue Sky Surf Shop – Twenty-One Years of Surfing and Still Going
Strong
Synopsis: Blue Sky Surf Shop is a highly successful specialty store that caters to surfing
enthusiasts. The store, which has been in business for over two decades, draws most of
its business from its loyal customers and word of mouth referrals. This case provides a
general overview of retail strategy and includes a discussion of strategy concepts
including merchandise and service offering, target market and store design.

Ancillary Case A10: Cleveland Clinic

Synopsis: The Cleveland Clinic is a well-respected health care provider facing a changing
competitive environment. In response to this changing environment, Cleveland Clinic is
opening facilities in South Florida. It illustrates the parallels between health care
(services) retailing and the more traditional in-store retailing formats. This case provides
an overview of the retail strategy used by a service retailer.

Ancillary Case A11: Niketown

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Synopsis: Nike, the manufacturer of the leading brand of athletic shoes, has opened retail outlets to
showcase their products. These outlets have a unique and highly entertaining store
environment. It illustrates an innovative retailing approach that emphasizes store design
and layout to entertain customer while they buy merchandise. The Niketown case
illustrates an innovative retailing approach that emphasizes store design and layout to
entertain customer while they buy merchandise.

Ancillary Case A13: Marquette Army/Navy Surplus Store

Synopsis: Army/Navy Surplus store is considering various new strategic directions. The store was
originally a typical military surplus store with a large assortment of military clothing.
Items included used uniforms, canteens, and helmets as well as new merchandise. As
the store grew, it added a department carrying trendy clothing for female teenagers. The
store is facing several problems with its current retail strategy including
promotions and pricing. This case should generate discussion based on retail strategy
evaluation and implementation.

VIDEO SEGMENTS

Video Segment 1: The History of Wal-Mart

Teaching Use: Entrepreneurship in retailing – How Sam Walton started the business

Summary:

This video follows the remarkable growth of Wal-Mart, from the grand opening of Walton's 5 & 10 in
the early 1950s to today. Wal-Mart is the largest retail merchant in the world. This segment discusses the
history of the firm up to the present. Sam Walton started his retailing career by opening a Ben Franklin
franchised variety store in a small town in Arkansas. Then he attempted to convince Ben Franklin to
allow him to sell his merchandise at lower prices so he could open discount stores in small rural
communities. When Ben Franklin decided not to support his concept, Walton proceeded on his own to
open his first discount store in 1960 in Rodgers, Arkansas. This store, store #1, is still open.

The video then traces the evolution of Wal-Mart – national expansion of general merchandise discount
stores, the launching of Sam’s Club warehouse clubs, and international expansion. The video stresses the
importance Wal-Mart places on people, both customers and employees.

Video Segment 2: Retail Revolution in India

Teaching Use: Introduction to the World of Retailing

This video can be used alone or in conjunction with Case 8: “Retailing in India: The Impact of
Hypermarkets,” located in Section V of the textbook.

Summary:
The economy in India is growing by 8% a year, its stock market rose by nearly 40% in 2005 and foreign
investors are flooding in. It is estimated that 70 million Indians in a population of about 1 billion now

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earn a salary of $18,000 a year, a figure that is set to rise to 140 million by 2011. Many of these people
are looking for more choices in where to spend their new-found wealth.

Indian retail is heavily underdeveloped and over 95% of the market is made up of small, family-run
stores. There are signs that the Indian government is dropping its traditionally protectionist stance
toward these nine million small grocery shops and opening up its retail market to greater overseas
investment. This policy change means that, chains like McDonalds, Marks & Spencer, Body Shop and
Ikea can, if they want to, open and control their own operations in India.

The Indian government has been conducting an impact analysis of how the introduction of supermarket
chains like Tesco and Carrefour would affect its retail sector. The government is trying to find a model
that doesn't displace existing retailers. Politicians still feel they have a duty to protect the small
shopkeepers they represent. Leaders realize that foreign investment is badly needed to provide the
infrastructure to upgrade India's retail industry. An estimated 50% of the country's fruit and vegetables
rot by the roadside before they reach market.

Source: Poston, Toby. Countdown to India's retail revolution. BBC News - Online, February 8, 2006,
http://news.bbc.co.uk/2/hi/business/4662642.stm.

Video Segment 3: Staples’ Retail Mix

Teaching Use: Introduction to the World of Retailing

Summary:
Staples is a category specialist in for office supply merchandise. Its retail mix I includes merchandise
(80% national brands and 20% of its own brand); locations (high traffic areas) and store design (popular
products in the front of the store to make it easy to shop for products). It offers its customers the
opportunity to shop for merchandise through multiple channels – store, Internet, and catalogs.

Video Segment 5: Rainforest Café; A Themed Restaurant Chain

Teaching Use: Innovative, new retail concepts. Illustration of use of entertainment in retailing.

This video can be used alone or in conjunction with Case 1: “Rain Forest Cafe,” located in Section
V of the textbook.

Summary:

Rainforest Cafe is a theme restaurant in which the customers are seated in a tropical rainforest
environment. The video shows the unique design of the restaurant, the types of food served, and the
merchandise sold in the restaurant. The use of proprietary animal figures on the merchandise and in the
restaurant design is discussed.

In December 2000, Rainforest Café was purchased from the founders by Landry’s Seafood Restaurants.
At the time, Rainforest Café was experiencing some financial problems due to over expansion. The
growth strategy of Rainforest Café focused the development of Rainforest Café restaurants in both high-
profile concentrated tourist areas, and in enclosed shopping mall locations. Most of the mall locations
had high initial revenues that was followed by prolonged revenue declines. (The repeat business was not

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high.) While these mall locations generate revenues significantly greater than typical casual dining
restaurants, they also had higher operating costs. This video complements Case 1 in the textbook.

Video Segment 6: Build-A-Bear: Experiential Retailing

Teaching Use: Innovative, new retail concepts. Illustration of use of entertainment in retailing

This video can be used alone or in conjunction with Case 2: “Build a Bear Workshop,” located in
Section V of the textbook.

Summary:

Build-A-Bear Workshop is a national mall-based specialty store retailer with over 100 locations in the
U.S. The stores target children and sell store stuffed animals. The unique aspect of the firm’s retail
offering is that children can create their own unique animals and clothes them. The video discusses the
critical issues such as employee training and human resource management for a retailer that provide a
high level of customer service.

Video Segment 30: Starbucks – Fair Trade Relationships with Coffee Farmers
Teaching Use: Ethics and Corporate Social Responsibility

This video can be used alone or in conjunction with Case 35 - Starbucks in Section V of the
textbook.

Summary:

The video documents Starbucks’ approach to working with their coffee growers to guarantee the
future availability of coffee beans at prices that are economically viable for the growers.
Starbucks’ need for specialty Arabica beans in The Coffee Belt, between the Tropic of Cancer
and the Tropic of Capricorn, at high elevations represents a very narrow product market. At the
time the video was made, Starbucks 6500+ outlets represented 16% of the specialty coffee
market but specialty coffee represented only 10% of world coffee bean production.

Their long-term commitment to their growers extends far beyond the price paid per pound. They
are negotiating longer-term contracts to guarantee both the availability of product and future
revenue for the growers to enable them to make secure capital investments into their farms. In
addition, Starbucks is partnering with 3rd party financing agencies to extend credit to growers to
enable them to pay their pickers in advance, prior to receiving payment for their coffee crop.

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ANNOTATED OUTLINE INSTRUCTOR’S NOTES

I. The World of Retailing

Ask students about where they bought their
 Retailing is evolving into a global, high-
textbook for the course. One will likely get a mix
tech business.
of responses, including the college bookstore or
the downtown store, in addition to the Internet or
 When today’s consumer makes a purchase
even from another student. Question students on
in their local store, that purchase is often
the pros and cons of each type of transaction.
made possible through the use of
sophisticated communications and
information systems. The use of new
technologies helps retailers reduce their
operations costs, while better serving their
customers.

 Retail managers today must make complex

decisions on selecting target markets and
retail locations, determining what
merchandise and services to offer,
negotiating with suppliers and distributing
merchandise to stores, training and
motivating sales associates, and deciding
how to price, promote and present
merchandise.
See PPT 1-5, 1-6
II. What Is Retailing?

 Retailing is the set of business activities

Ask students to give examples of retailers. One ice-
that adds value to the products and services
breaking activity is to ask each student to list as
sold to consumers for their personal or
many retailers as they can think of in a specified
family use.
period of time. Ask the student with the most listed
retailers to read his or her list to the class.
Generally, the student will think of traditional
retailers that sell through stores. By the definition
we propose here, many retailers do not sell
through stores and/or sell services rather than
merchandise. Be sure to discuss the many other
examples such as Quizno’s, QVC, Avon, Jiffy Lube,
Pizza Hut, and airlines.
Certainly students should be encouraged to
consider Internet retailers and multi-channel
retailers like Amazon.com or Barnes and Noble
and BN.com.

As part of your discussion you may also wish to

include universities and colleges. These
organizations sell some services to end users and

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thus are retailers, but they also sell some services

to businesses and thus are channel members, but
not retailers.

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See PPT 1-7, 1-8, 1-10

A. A Retailer's Role in a Supply Chain

 Retailers are the final business in a supply

chain that links manufacturers with A typical supply chain network is illustrated in
consumers. A supply chain is a set of PPT 1-9
firms that make and deliver a given set of
goods and services to the ultimate
consumer.
Discuss how, in some channels, consumers can
perform some of the functions performed by
 Manufacturers make products and sell
retailers, wholesalers, and manufacturers in other
them to retailers or wholesalers.
channels.
Wholesalers engage in buying, taking title
to, often storing, and physically handling For example, assembling furniture or toys is a
goods in large quantities, then reselling the function frequently performed by manufacturers
goods (usually in smaller quantities) to (providing services). Consumers who buy through
retailers or industrial or business users. discount stores have to discover information about
products on their own. When buying at warehouse
 Some retail chains are both retailers and stores, consumers might buy in large quantities
wholesalers. They’re performing retailing and repackage the food into smaller packages
activities when they sell to consumers and (breaking bulk and holding inventory.)
wholesaling activities when they sell to
other businesses like building contractors
or restaurant owners.

 In some supply chains, manufacturing,

wholesaling, and retailing activities are
performed by independent firms.

 But most supply chains have some vertical Discuss the advantages and disadvantages of
integration. Vertical integration means vertical integration. See PPT 1-11 for examples of
that a firm performs more than one level of types of vertical integration.
activity in the channel. For example, most
large retailers--such as Safeway, Wal-Mart,
and Office Depot --do both wholesaling Why is Victoria’s Secret vertically integrated while
and retailing activities the local department store is not?
Advantages:
 Backward integration occurs when a
Develop unique merchandise only sold in your
retailer performs some distribution and
manufacturing activities, such as operating stores.
warehouses and/or designing private label Better coordination between manufacturing and
merchandise. Forward integration occurs retailing.
when a manufacturer undertakes its own
Disadvantages:
retailing activities, such as Ralph Lauren
opening its own retail stores. Higher costs because retailer might not be an
efficient manufacturer.
PPT 1-12, 1-13, 1-14 illustrate the value question
B. Retailers Create Value
for retailers. See PPT 1-15, 1-16 for an example of
the value added by retailers in the music industry.
 Retailers undertake business activities and
perform functions that increase the value of

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the products and services they sell to

consumers. Note that retailers and distributors account for a
lot of the cost of a product. A retailer's markup of
 These functions are: 50% adds half of the cost in making and getting
the product to the consumer.
Students could be given a hypothetical issue to
debate: Suppose the local grocery store markups
all its products by about 50%? Is the grocery store
profitable?

Some students may confuse the markup of 50%

with profits. The various functions performed by
retailers as noted below would help students
understand the costs borne by retailers.

As an aside, standard industry average profits for

grocery retailing are only in 1-3% range.

See PPT 1-17, 1-18

1. Providing Assortments
Ask students to describe the difference in the
 Offering an assortment enables customers assortments of bicycles provided by Wal-Mart and
to choose from a wide selection of brands, the local bike shop. What is the difference in
designs, sizes, colors, and prices in one assortment of body lotions and creams provided by
location. Bath and Body Works and Kmart?

 All retailers offer assortments of products,

but they specialize in the assortments they
offer. Supermarkets provide assortments of
food, health and beauty care (HBC), and
household products; while Abercrombie
and Fitch provides assortments of clothing
and accessories.
How many students have made purchases at Sam’s
2. Breaking Bulk
Club/BJ’s/Costco? What items have the students or
family members purchased in bulk? Discuss the
 To reduce transportation costs,
advantages of buying in bulk. For what purchases
manufacturers and wholesalers typically
and what types of consumers does buying in bulk
ship cases/cartons of products to retailers.
make sense?
 Retailers then offer the products in smaller
quantities tailored to individual consumers’
and households’ consumption patterns.
Discuss product categories for which holding
3. Holding Inventory
inventory is particularly appealing (e.g., holiday
decorations, seasonal gear).
 A major function of retailers is to keep
inventory so that products will be available

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when consumers want them, reducing the

consumer’s cost of storing products.
See PPT 1-19 for an example here

Ask the students what kind of services retailers

4. Providing Services
provide. Some services are: acceptance of credit
cards, alteration of merchandise, assembly of
 Retailers provide services such as credit,
merchandise, bridal registry, check cashing, child-
product displays, and sales staff to make it
care facilities, credit, delivery to home,
easier for customers to compare, buy and
demonstrations of merchandise, displaying
use products.
merchandise, dressing rooms, gift wrapping, lay-
away plans, parking, personal assistance in
selecting merchandise, personal shoppers, play
areas for children, presentations on how to use
merchandise, provisions for customers with special
needs (wheelchairs, translators), repair services,
rest rooms, special orders and warranties.

Which of these services do students believe offer

the greatest value to the consumer? Do their
opinions differ for different retailers?

Ask students how a computer retail store can

5. Increasing the value of products and
increase the value of a computer for a consumer.
services.
Compare the service of a computer store with an
on-line store like Dell.
 By providing assortments, breaking bulk,
holding inventory, and providing services,
retailers increase the value consumers
receive from their products and services.
See PPT 1-20
III. Social and Economic Significance Of
Retailing
Ask students which retailers are actively engaged
A. Social Responsibility
in CSR.
 Retailers are socially responsible
businesses. Corporate social
responsibility describes the voluntary See PPT 1-21 for examples of retailers engaging in
actions taken by a company to address the CSR
ethical, social and environmental impacts
of its business operations and the concerns
of its stakeholders.

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Discuss what type of changes in the retail industry

B. Retail Sales
may take place in the 21st century. How is
technology affecting the changes in this industry?
 U.S. retail sales in 2005 were $4.1 trillion.
Will consumers still go to stores or will they buy
However, official statistics include only
everything from a computer in their houses? What
store and catalog sales; they don't include
will stores look like? How will they adjust to the
the retail sales of automobiles and repairs.
Internet? Who will be the big winners/losers?
 Although the majority of retail sales take

place in large retail chains, most retailers

are small businesses. In fact, 95% of the
1.9 million retail firms in the U.S. operate
only one store.

C. Employment How many students in the class have worked in

retail? Talk about the variety of retail jobs
 Retailing is one of the nation's largest available to college students.
industries in terms of employment. In
2005, over 24 million people were
employed in retailing, approximately 18%
of the nonagricultural U.S. workforce.

D. Top 20 Global Retailers

See PPT 1-22
 Retailing is becoming a global industry as
more retailers pursue growth by expanding
their operations to other countries. Are students surprised by any companies on the
list? Why or why not?
 Large retailers in particular are becoming
increasingly international in geographic
scope.
Ask what companies will be in the top 5 in 5 years.
 Exhibit 1-3 lists the 20 largest global Why?
retailers.
Discuss how some companies are doing a good
job of dealing with changing customer needs and
 The exhibit includes companies that
others are not.
compete on the basis of price (such as
Wal-Mart), firms that are known for
specific categories (such as Safeway for
What global retailers have students experienced
groceries and CVS for drugs), and firms
while traveling abroad? How do these experiences
that sell a wide variety of merchandise
compare to the students’ experiences in the local
through different retail formats (such as
marketplace?
Target).

 The 20 largest retailers account for about

35% of the world market. Of the top global
retailers, 36% are headquartered in the
U.S., 36% in Europe and 14% in Japan.

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PPT 1-23, 1-24, 1-25 illustrate these different

E. Structure of Retailing and Distribution
distribution channels
Channels Around the World
Ask students to consider several reasons for
 Compared with distribution channels in the differences in distribution systems in various
European Union, China and India, the US nations.
distribution system has the greatest retail
density with the greatest concentration of
large retail firms. The combination of
large stores and large firms results in a How do differences in distribution systems lead to
very efficient distribution system. differences in retail experiences for consumers?

 The Chinese and Indian distribution

systems are characterized by small stores
operated by relatively small firms and a
large, independent wholesale industry. As
a result, a larger percentage of labor is
employed in distribution and retailing than
in the US.

 Northern European retailing is most similar

to the US system. Southern European
retailing is more fragmented across all
sectors. Central European retailing has
changed from a highly concentrated
structure to one of extreme fragmentation
(involving small family owned stores).

 Factors that have created differences in

distribution systems include: (1) social and
political objectives, (2) geography, and (3)
market size.

IV. Opportunities in Retailing

A. Management Opportunities See PPT 1-26, 1-27, 1-28, 1-29 for more
information and examples of opportunities in the
 Retailers employ people with expertise and retailing field
interest in finance, accounting, human
resource management, logistics, computer
systems, and marketing. Ask students what they think of retailing as a
career. If there are many opportunities and they
 A typical buyer in a department store earns seem to pay well, why do most students think that
$50,000 to $60,000 per year. Store retailing is not a good job to get after graduation?
managers often make over $100,000.

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Examples of entrepreneurs in retail are shown in

B. Entrepreneurial Opportunities
PPT 1-30, 1-31
 Retailing provides opportunities for people
wishing to start their own business. Many
retail entrepreneurs are among the
wealthiest people in the United States. What are some ideas that a retail entrepreneur
might consider now near the campus or in the
 The successes of Jeff Bezos students’ hometowns?
(Amazon.com), Anita Roddick (The Body
Shop), Ingvar Kamprad (IKEA) and (Sam
Walton (Wal-Mart) show how each
capitalized on entrepreneurial
opportunities.

V. The Retail Management Decision

Process Use this to discuss the organization of the course
and the book
 The book is organized around the
management decisions retailers make to
provide value to their customers and
develop an advantage over their
competitors.
See PPT 1-32 for the Retail Management Decision
A. Understanding the World of Retailing
Process
(Section I)
Ask students about some changes occurring in the
 Retail managers need a good environment now that will affect retailing in
understanding of their environment, general and specific retailers. Corporate Social
especially their customers and Responsibility may come up as an answer and the
competition, before they can develop and impacts of CSR on the practice of retailing could
implement effective strategies. be discussed in detail.

 The critical environmental factors in the

world of retailing are: (1) the
macroenvironment, and (2) the
microenvironment. The impact of the
macroenvironment includes technological,
social and ethical/legal/political factors on
retailing. The retailer’s microenvironment
includes the retailer’s competitors and
customers.

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1. Competitors
In going through this section, you might pick a
 A retailer’s primary competitors are those specific local retailer. Ask students to identify the
with the same format. Thus, department retailer’s customers, intratype competitors,
stores compete against other department intertype competitors, and environmental trends
stores and supermarkets compete with affecting the retailer.
other supermarkets. This competition
between retailers with the same format is
called intratype competition. See PPT 1-34 for examples

 To appeal to a broader group of consumers

and provide one-stop shopping, many Ask students to give an example of intratype
retailers are increasing their variety of competition – local department store competing
merchandise. Variety is the number of against another department store in the same mall
different merchandise categories within a
store or department. The offering of
merchandise not typically associated with
the store type, such as clothing in a drug
store, is called scrambled merchandising. Ask students to compare the different types of
merchandise offered at Wal-Mart to those offered
 Competition between retailers that sell at, say, Bath and Body Works or McDonald's.
similar merchandise using different
formats, such as discount and department
stores, is called intertype competition.

 Increasing intertype competition has made

it harder for retailers to identify and Ask students to give an example of intertype
monitor their competition. In one sense, competition – drug store and discount store that
all retailers compete against each other for sell the same brand of cosmetics.
the dollars consumers spend buying goods
and services.

 Since convenience of location is important

in store choice, a store’s proximity to
competitors is a critical factor in
identifying competition.

 Management’s view of competition also

can differ, depending on the manager’s
position within the retail firm.

 The CEO of a retail chain may view

competition from a much broader
geographic perspective as compared to a
specific store's manager or a departmental
sales manager within the store.

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2. Customers
Query students on the specific impacts of an aging
 Retailers are responding to broad population or dual-income households on retailing,
demographic and life-style trends in our including retail location, store layout, etc. What
society, such as the growth in the elderly needs for specific types of merchandise and
and minority segments of the U.S. services do these markets create?
population and the importance of shopping
convenience to the rising number of two-
income families.

 To develop and implement an effective

strategy, retailers need to know why
customers shop, how they select a store,
and how they select among that store’s
merchandise.

B. Developing a Retail Strategy (Section II)

See PPT 1-35
 Understanding of the macro- and
microenvironments is needed to formulate
and implement a retail strategy. How can one retailer gain long-term competitive
advantage over competitors in the marketplace?
 The retail strategy indicates how the firm (Potential areas for discussion may include:
plans to focus its resources to accomplish location, customer relationships, technology,
its objectives. The retail strategy merchandising, etc.)
identifies: (1) the target market, (2) the
nature of merchandise and services to be
offered, and (3) how the retailer will build
a long-term advantage over competitors.

Strategic Decision Areas

 Key strategic decision areas include the

determination of market strategy, financial
strategy, location strategy, organizational
structure and human resource strategy,
information systems and supply chain
strategies, and customer relationship
management (CRM) strategies.

 When major environmental changes occur,

the current strategy and the reasoning
behind it are reexamined. The retailer then
decides what, if any, strategy changes are
needed to take advantage of new
opportunities or avoid new threats in the
environment.

 The retailer’s market strategy must be

consistent with the firm’s financial

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objectives. Location decisions are

important for both consumer and
competitive reasons. A retailer’s
organizational design and human resource
management strategies are intimately
related to its market strategy. Retail
information and supply chain management
systems will be significant opportunities
for retailers to gain strategic advantage in
the coming decade.

 Basic to any strategy is understanding the

customer so as to provide them with the
goods and services they want. Customer
Relationship Management (CRM) is a
business philosophy and set of strategies,
programs, and systems that focus on
identifying and building loyalty with the
firm's most valued customers.

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2. JCPenney Moves from Main Street

to the Mall. See PPT 1-36, 1-37 to review the strategic
evolution of JCPenney.
 In the late 1950s, Penney was one of the
most profitable national retailers. Its target
market was small towns. In its Main Street
locations, Penney sold staple soft goods at Also see PPT 1-38 and 1-39 for similar evolutions
low prices with minimal service. All sales of Wal-Mart and Sears, respectively.
were cash; the company didn't offer credit
to its customers.

 Organization structure was decentralized.

 In spite of its success, there was a growing

awareness among company executives that
macroenvironmental trends would have a
negative impact on the firm.

 In the early 1960s, Penney undertook a

new strategic direction that was consistent
with changes it saw in the environment.

 All new Penney stores were located in

regional malls across the United States.
Penney opened several mall locations in
each metropolitan area to create significant
presence in each market.

 To effectively control its 1,500 stores,

Penney installed a sophisticated
communication network.

 Penney launched its catalog operations and

has recently moved aggressively into
selling merchandise over the Internet
(www.jcpenney.com). The firm's multi-
channel strategy has been very successful,
with the average customer that shops
across all its channels – stores, catalogs,
and the Internet – spending four times
more than the firm's average single
channel customer.

 To compete effectively with the retailers

targeting Penney’s middle-income
customers, the company has made some
radical changes in how it operates, its
organizational structure, and where it
locates its stores.

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See PPT 1-41 for Key Decision Variables for

C. Implementing the Retail Strategy
Retailers
(Sections III and IV)

 To implement the retail strategy,

Ask students what McDonald’s needs to do to
management develops a retail mix that
implement its strategy effectively. Have them
satisfies the needs of its target market
discuss each of the elements of the retail mix used
better than its competitors.
by McDonalds. Compare the retail mix elements
used by McDonalds to the retail mix elements used
 Elements in the retail mix include the
by an upscale restaurant in town. Why the retail
types of merchandise and services offered,
are mixes of these two types of restaurants
merchandise pricing, advertising and
different? – [They have different target markets
promotional programs, store design,
with different needs.]
merchandise display, assistance to
customers provided by salespeople, and
convenience of the store’s location.

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1. Whole Foods Market: An

Organic and Natural Food Supermarket See PPT 1-40
Chain

 When John Mackey, founder and CEO of

Whole Foods Market, found that textbooks Ask students what Whole Foods needs to do to
weren’t going to provide the answers he implement its strategy effectively. Have them
was looking for, he dropped out of college, discuss each of the elements of the retail mix used
lived in a vegetarian housing co-op, and by Whole Foods. Compare the retail mix elements
worked in an Austin natural food store. used by Whole Foods to the retail mix elements
used by a traditional supermarket in town. Why
 After he opened his own health-food store are the retail mixes of these two types of food
and restaurant, he teamed up with a local retailers different? – [They have different target
organic grocer to open the first Whole markets with different needs.]
Foods, which was an instant success. Additional Chapter 1 PPTs illustrate the retail
mixes of several well known retailers. Use these
 Whole Foods stores, at 25,000 to 60,000 illustrations to guide discussion on various
square feet, are much larger and carry a strategic choices for different types of retailers.
much broader assortment than the typical
natural and organic grocery store. See:
 The stores offer vegetarians as well as PPT 1-42 through 1-48 Wal-Mart’s Retail Mix
health-conscious nonvegetarians a one-
stop shopping experience. PPT 1-49 through 1-55 Claire’s Retail Mix

 The flower power of the 60’s is reflected PPT 1-56 through 1-62 Macy’s Retail Mix
in Mackey’s guiding management
principles – love, trust, and employee PPT 1-63 through 1-69 Target’s Retail Mix
empowerment.

 Mackey also has an old fashioned

competitive drive to dominate Whole
Foods’ segment of the supermarket
industry.

 Whole Foods’ latest venture is the opening

of new, exciting 50,000 square foot
versions of its stores pioneering a new
lifestyle concept that synthesizes health
and pleasure.
Ask students who have worked for retailers
VI. Ethical and Legal Considerations
whether the firm had a code of ethics. What were
some common elements of those codes?
 Retail managers need to consider the
ethical and legal implications of their
decisions in addition to the effects those
decisions have on the profitability of their See PPT 1-70, 1-71, 1-72 for a review of ethical
firms and the satisfaction of their decision making situations and ethical decision
customers. strategies.

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 Ethics are the principles governing the

behavior of individuals and companies to Discuss recent news articles relating to retailers
establish appropriate behavior and indicate and legal/ethical issues.
what is right and wrong.

 Determining appropriate ethical principles

is a difficult task. Ethical principles can
vary from country to country and can also
change over time.

 Many companies have developed codes of

ethics to provide guidelines for their
employees.

VII. Summary

 Retailing provides considerable value to

consumers while giving people
opportunities for rewarding and
challenging careers.

 The key to successful retailing is offering

the right product, at the right price, in the
right place, at the right time, and making a
profit. To accomplish this, retailers must
understand what customers want and what
competitors are offering.

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VIII. Appendix 1A: Careers in Retailing

See PPT 1-74, 1-75,and 1-76
 Retailing offers exciting and challenging
career opportunities. Few other industries
grant as many responsibilities to young
managers.

 Retailing offers a variety of career paths

such as buying, store management, sales
promotion and advertising, personnel,
operations/distribution, loss prevention,
and finance in several different corporate
forms such as department stores, specialty
stores, food stores, and discount stores.

 In addition, retailing offers almost

immediate accountability for talented
people to reach key management positions
within a decade. Starting salaries are
competitive, and the compensation of top
management ranks among the highest in
any industry.

A. Career Opportunities
 Career opportunities in retail firms occur
in merchandising/buying, store
management, and corporate staff functions.

 Primary entry-level opportunities for a

retailing career are in the areas of buying
and store management. Buying positions
are more numbers oriented, whereas store
management positions are more people
oriented.

1. Store Management

 Successful store managers must have the

ability to lead and motivate employees.
Store management involves all the
disciplines necessary to run a successful
business: sales planning and goal setting,
overall store image and merchandise
presentation, budgets and expense control,
customer service and sales supervision,
personnel administration and development,
and community relations.

2. Merchandise Management

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 Merchandise management attracts people

with strong analytical capabilities, an
ability to predict what merchandise will
appeal to their target markets, and a skill to
negotiate with vendors as well as store
management to get things done. Many
retailers break the merchandise/buying
function into two career paths: buying and
merchandise planning.

3. Corporate Staff

 Corporate staff opportunities include

positions in MIS, operations/distribution,
promotions/advertising, loss prevention,
finance/control, real estate, store design,
and human resource management.

 Career opportunities for corporate staff

positions are more difficult to break into.

B. Myths About Retailing

1. Sales Clerk Is the Entry-Level Job in
Retailing

2. College and University Degrees Are Not

Needed to Succeed in Retailing

3. Retail Jobs Are Low Paying

4. Retailing Is a Low Growth Industry

with Little Opportunity for Advancement

5. Working in Retailing Requires Long

Hours and Frequent Relocation

6. Retailing Doesn’t Provide Opportunities

for Women and Minorities

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ANSWERS TO SELECTED “GET OUT AND DO ITS”

INTERNET EXERCISE Data on U.S. retail sales are available at the U.S. Bureau of the
Census Internet site at http://www.census.gov/mrts/www/mrts.html. Look at the unadjusted
monthly sales by type of retailer. In which quarter are sales the highest? Which types of
retailers have their greatest sales in the fourth quarter?

(in $ millions) US unadjusted retail sales for 2007, for all retail and food service businesses
were 4,482,668. For these businesses overall, sales were highest in the 4th quarter. Sales for
the October-December 2007 quarter were 1,183,792.

(in $ millions) Many types of US retailers posted their highest sales in the 4 th quarter of 2007
including Home Furnishings Retailers (15,869), Electronics and Appliances Retailers
(34,764), and Jewelry Stores (11,443). In fact, Jewelry Stores posted sales for the month of
December alone at 37% of their total sales for all 2007!

INTERNET EXERCISE Go to the Macy’s (http://www.macysjobs.com/college), Sears

Holdings (http://www.searsholdings.com/careers/college/aboutus/people.htm), and
National Retail Federation (http://www.nrf.com/RetailCareers/) web sites to find
information about retail careers with these companies. Review the information about the
different positions in these companies. In which positions would you be interested? Which
positions are not of interest to you? Which company would interest you? Why?

Students’ answers will vary considerably here. Some students may take a more long-term view
looking to Buyer or Planner positions which call for a variety of skills including strong
organizational and analytical skills, excellent verbal and written communication skills and extensive
PC experience. These positions also require several years of prior experience in lower-level buying
positions. Other students may find these positions to be more quantitative or analytical than their
interests lie.

Students looking at entry-level positions, as well as those seeking more creative positions or those
with a broader focus may be attracted to the entry-level Fashion Assistant or Product Assistant
positions. These positions request a less comprehensive skill set as well as less emphasis on prior job
experience.

ANSWERS TO DISCUSSION QUESTIONS AND PROBLEMS

1. What is your favorite retailer? Why do you like this retailer? What would a competitive
retailer have to do to get your patronage?

Students may choose an example from a wide variety of retailers. Answers will likely range from
national chains including but not limited to K-Mart, The Gap, Bloomingdale's, McDonald's, The
Sports Authority, Starbucks, JC Penney, to online retailers like Amazon.com and eBay to
favorite local shops and hangouts.

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Whatever selection is made, ask students to concentrate on the specific aspects of retail strategy,
such as: (1) intended target market of the retailer; (2) nature of merchandise and services and the
specific consumer needs sought to be satisfied; (3) product variety and assortments carried; (4)
store location strategy; (5) pricing strategies; (6) specific service strategies; (7) strategies
designed to attract and retain customers; and, (8) strategies specifically designed at gaining a
long-term advantage over competitors.

2. From your perspective, what are the benefits and limitations of purchasing a pair of jeans
directly from a manufacturer rather than a retailer?

Students may indicate benefits typically associated with “removing the middleman” such as
reduced price and effort in completing the transaction.

While these benefits will occur in specific cases, such as a one-time purchase of jeans from a
specific designer, it must be noted that the average consumer engages in buying dozens of items
on a regular basis. Even if all manufacturers were to offer their products directly to consumers, it
can be readily noted that the consumer would now have to spend an extraordinary amount of time
each day ordering directly from each manufacturer. This should lead to discussion of the
limitations of purchasing directly from the manufacturer rather than a retailer.

Here, the various functions performed by retailers, such as bulk-breaking, holding inventories,
and providing information, service and assortments can be brought to bear on overcoming the
limitations discussed above for the consumer. Bulk-breaking enables consumers to buy only the
specific amount they would need. Retail inventory helps eliminate the need for consumers to
hold their own inventory, since they could simply satisfy their needs for a specific and immediate
time-period, such as buying one unit of dish washing detergent that would last the next 2 months.
Retailers provide valuable information and services that save consumers time and effort as
compared to when consumers attempt to obtain such information by themselves or serve
themselves. By providing an assortment of products and brands in one location – in some cases
of scrambled merchandising, a very wide assortment of products and brands – retailers help
consumers engage in one-stop shopping, thereby saving them the time and effort for other
productive and leisure activities.

Further, it would be uneconomical for most manufacturers, especially those selling low-priced
items, such as toothpaste directly to each consumer or household. In general, even if retailers are
eliminated from the supply chain, their functions remain. Often these functions would be
distributed between the manufacturer and consumers. For example, manufacturers would now
have to produce a wider variety of products (in order to offer an assortment) and consumers
would have to carry greater amounts of inventory (to buy a case-load of toothpastes!). The
distribution of retail functions would increase manufacturer costs as well as consumer costs and
efforts. One may argue that "buying cheaper from the manufacturer" is, in a vast majority of
cases, a myth.

3. What retailers would be considered intratype competitors for a convenience store chain
such as 7-Eleven? What firms would be intertype competitors?

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Discussion should lead to those convenience stores in the local market offering the traditional
convenience store retail mix including gasoline, snacks, newspapers, coffee, and a limited variety
of grocery items.

Ask students to discover intertype competitors for 7-Eleven by focusing on a particular

merchandise offering such as a gallon of milk, a fountain soda or a candy bar. This discussion
will illustrate that intertype competition for 7-Eleven may come from a number of retailers
offering similar merchandise through different formats, such as supermarkets, fast food
restaurants or discount stores.

4. Does Wal-Mart contribute to or detract from the communities in which it operates its
stores?

Students may argue either in favor of or against the large discount stores, such as Wal-Mart. The
arguments against may include:
(1) smaller family-owned firms may not be able to compete on the basis of price with Wal-Mart
and hence would have to close down, resulting in loss of entrepreneurial opportunities within the
community;
(2) the personal service of a Mom-and-Pop store is now replaced by an impersonal cash register
clerk and very few employees offering information and service within the store; and,
(3) over a period of time, there may be no competition for the larger store, which may begin to
charge higher prices, from a monopoly position.

On the other hand, the arguments in favor include:

(1) greater product assortment and choice for the consumer at lower prices;
(2) one-stop shopping convenience for the consumer, freeing up the consumer's time for other
productive and leisure activities;
(3) immediate increase in employment at various levels of the local, large store organization; and,
(4) greater opportunities at the supply level, since the large store would have to rely on local
supply sources for a variety of products, especially perishables.

In general, students would see both the arguments for and against the large store. However, one
could also add that smaller firms providing superior service or other forms of consumer value
apart from price would prevail despite the presence of a large store competing on the basis of
price. Examples include electronics stores that provide greater consumer information and
expertise, or customized services such as portrait framing, etc. Given that modern retailing has
seen several different types of retailers emerge and compete successfully, it is debatable if the
large store would ever actually become a monopoly. As long as some consumers continue to
seek a wide variety of retail offerings beyond price, other retailers or retail formats will emerge to
challenge the growing monopolization by the larger store.

5. Choose a U.S.-based retailer that wants to open a new store outside the United States for
the first time. Which country should it pursue? Why?

Students may point out global retail expansions they are aware of here. This could include Wal-
Mart or Home Depot’s expansions to other countries. They should consider differences in
retailing practices and distribution channels in various countries in selecting the most appropriate
match for their retail store of choice, such as supply chains, availability of land and restrictions to
be considered for new stores, as well as consumer buying and shopping habits.

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6. Why do retail managers need to consider ethical issues in making decisions?

As do all managers in today’s business world, retail managers must consider the ethical
implications of the decisions that they make. These considerations go steps beyond the legal
aspects of a situation to determine appropriate behaviors and the choice between right and wrong
courses of action. Special consideration must be given to the effects of these decisions on the
profitability of the manager’s firm and the welfare of the firm’s customers, employees and
communities. Fortunately, many retail firms have developed codes of ethics to provide guidelines
for employees in making the ethical decisions they face. These policies provide a clear sense of
what the individual firm considers to be right or wrong.

7. Choose one of the top 20 retailers (Exhibit 1-3). Go to the company’s Web site and find out
how the company started and how it has changed over time?

From the Exhibit of the Top 20 retailers, students can see that in general, European retailers have
been more successful in expanding to more countries as compared to U.S. retailers. In general,
given smaller sizes of the countries in which these retailers originated, they had to expand to
other country markets to sustain their growth strategies. By contrast, the U.S. retailers have
enjoyed a larger market size within the U.S. alone, thereby rendering global expansion less of a
priority for them. Students will also note that food retailing dominates among the largest
retailers, as 8 of the top 10 sell food products.

8. From a personal perspective how does retailing rate as a potential career compared to
others you are considering?

After reading the chapter, some students may already be attracted to retailing as a career, since
they would now have realized the wide variety of opportunities provided in the retail sector. At
the same time, some may compare retailing less favorably to other potential career paths, such as
advertising, or more immediately lucrative endeavors, such as the stock market. Ultimately, all
students should have recognized that retailing is not simply being a store associate, greeting the
customer and making a sale. Those students interested in the technology field should see a
variety of opportunities to make a career in retailing, as should those with interests in finance,
accounting or human resource management.

9. How might managers at different levels of a retail organization define their competition?

Perceptions of competition may vary across different levels of a retail organization since retail
managers are concerned mainly with their specific scope of activities and responsibilities.
Departmental sales managers may be viewing competition primarily at the product level. For
example, the men’s clothing department manager at Bloomingdales would try to monitor,
analyze and react to the strategies of Lord and Taylor's or a smaller specialized men's clothing
store located in the same mall. The store manager's view of competition would be slightly
broader, encompassing all product categories within a specific location. For example, the
manager of a local McDonald's would view other fast food stores in the neighborhood as
competitors, while the store manager at K-Mart would view Wal-Mart and other discount stores
in the area as competitors. At the broader chain store headquarter level, the CEO may view as
competition as the struggle for dominance of specific regional or national markets. For example,

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in certain areas, Blockbuster may view competition from other video rental chains as intense but
in others, may view their competition to be supermarkets renting out videos, movie theaters,
regular and cable TV and other forms of entertainment, including ballet and opera.

10. Retailing View 1.1 describes how some retailers are acting socially responsible. Take the
perspective of a stockholder in the company. What effect will these activities have on the
value of its stock? Why might they have a positive or negative effect?

Stockholders may see both positive and negative effects on stock value resulting from the firm
and its employees undertaking socially responsible activities. Positive impacts on value are likely
to come from increased loyalty from both customers and employees. Customers in local
communities directly aided by the firms’ employees as well as those customers learning about
the retailers’ activities through local and national media channels are likely to form favorable
impressions of the retailer through learning of its socially responsible actions. These positive
impressions may contribute to greater patronage and loyalty to the retailer in return for its
generosity and community support.

These retailers may realize positive value through creating employee loyalty as well. In a high
turnover industry like retailing, creating a pool of loyal and dedicated employees by investing in
their own socially responsible actions appears to be a winning strategy. Awareness of these
practices may also give these retailers an edge in recruiting high quality potential employees to
the organization.

On the other hand, the stockholder may have concerns about negative impacts on company value.
From his or her perspective, the company is in business to make a profit. If the stockholder views
the contributions of supplies, employee time, and limitations placed on suppliers as taking away
from the bottom-line profitability of the firm, that stockholder may view the retailer’s social
responsibility programs to be a negative impact on the value of the firm.
Chapter 02 - Types of Retailers https://manual-solution.com/downloads/management/solution-manual-
for-retail-management-8th-edition-bymichael-levy-barton-a-weitz/ 2-1 CHAPTER 2 TYPES OF
RETAILERS ANNOTATED OUTLINE INSTRUCTOR NOTES I. Retailer Characteristics  The 1.9
million U.S. store-based retailers range from street vendors selling hot dogs to Internet retailers like
Amazon.com to multichannel retailers like Best Buy that have both an extensive physical store presence
and an active Internet site.  The retail industry is always evolving. As consumer needs and competition
within the industry change, new retail formats are created to respond to those changes.  The most basic
characteristic of a retailer is its retail mix – the elements used to satisfy its customers’ needs.  Four
elements of the retail mix that are particularly useful for classifying retailers are: (1) the type of
merchandise sold, (2) the variety and assortment of merchandise and/or services sold, (3) the level of
customer service, and (4) the price of the merchandise. Ask students to compare the four elements of the
retail mix -- the type of merchandise sold, the variety and assortment of merchandise and/or services
sold, the level of service provided to customers, and price -- of two women's specialty stores in a local
mall. Now compare the retail mixes of one of the specialty stores and the local discount store (e.g.,
WalMart). Use this comparison to illustrate how the competition between the two specialty stores is
stronger than the competition between the specialty store and the discount store. PPT 2-5 illustrate
classification of retailers by merchandise offering and by variety and assortment. A. Variety and
Assortment.  Variety is the number of merchandise categories a retailer offers. Assortment is the number
of different items in a merchandise category. Each different item of merchandise is called a SKU (stock
keeping unit).  Variety is often referred to as the breadth of merchandise and assortment is referred to as
the depth of merchandise. See PPT 2-8 Ask students to give examples of local retailers with low variety
and high assortment, with high variety and low assortment. What benefits does high variety offer to

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customers? What is the benefit of high assortment? Ask student to give an example of an SKU. B.
Services Offered  Retailers also differ in the services they offer customers. Customers expect retailers to
provide some services-- See PPT 2-10 Discuss the different customer service policies of a national
specialty store like Victoria’s Chapter 02 - Types of Retailers
https://manual-solution.com/downloads/management/solution-manual-for-retail-management-8th-edition-
bymichael-levy-barton-a-weitz/ 2-2 accepting personal checks, displaying merchandise, providing
parking, and being open long and convenient hours.  Some retailers charge customers for other services,
such as home delivery and gift wrapping, although upscale retailers offer customers these services at no
charge. Secret and a local department store or an Internet retailer. Discuss the type of customer that
would shop in each store. How do these customers differ and what types of services would these
customers expect? C. Prices and the Cost of Offering Breadth and Depth of Merchandise and Services 
Stocking a deep and broad assortment is appealing to customers but costly for retailers. When a retailer
offers many SKUs, inventory investment increases because the retailer must have back-up stock for each
SKU.  Similarly, services attract customers to the retailer, but they are also costly.  To make a profit,
retailers that offer broader and deeper assortments and services need to charge higher prices.  A critical
retail decision involves the tradeoff between costs and benefits of maintaining additional inventory or
providing additional services. See example in PPT 2-12 for illustration Customers like wide variety, deep
assortments, and a lot of service, though some customers appreciate having the retailer edit the
assortment for them. Ask students why all retailers don’t have this type of offering? (Can’t be everything,
have constraints of money and size of store.) Why don't discount stores offer more services? (They appeal
to a target segment that does not want to pay the cost for more service options.) PPT 2-14 shows a
comparison of sales and growth rates in various retail sectors II. Food Retailers  Twenty years ago,
consumers purchased food primarily at conventional supermarkets. Now conventional supermarkets
account for only 56 percent of food sales.  Supercenters, warehouse clubs, convenience stores and
extreme value food retailers are significantly changing consumers' food purchasing patterns because they
too sell food. At the same time, traditional food retailers carry many nonfood items.  The world's largest
food retailer is WalMart with supermarket-type sales of more See PPT 2-15, 2-16 Where do students
make the majority of their off-campus food purchases? What are the pros and cons of these different food
retailer formats? Chapter 02 - Types of Retailers
https://manual-solution.com/downloads/management/solution-manual-for-retail-management-8th-edition-
bymichael-levy-barton-a-weitz/ 2-3 than $134 billion. A. Supermarkets  A conventional supermarket is
a selfservice food store offering groceries, meat, produce, and limited non-food items.  A limited
assortment supermarket (also called an extreme value food retailer) only stocks about 2,000 SKUs. The
two largest US examples of these stores are Save-A-Lot and ALDI.  Limited assortment supermarkets
are designed to maximize efficiency and reduce costs through limited assortment and service offerings.
These cost savings and efficiencies allow the stores to charge significantly lower (40-60% lower) prices
than conventional supermarkets. See PPT 2-17 Ask students to consider the retail mixes of the major
supermarkets in the area surrounding campus. Which compete on price? On merchandise? On service? A
combination? 1. Trends in Supermarket Retailing  Today, conventional supermarkets are under
substantial competitive pressure. Supercenters are attracting customers with their broader assortments and
general merchandise at attractive prices. Full-line discount chains and extreme value retailers are
increasing the amount of shelf space they devote to consumables.  Competitive pressure also comes
from convenience stores who are selling more fresh merchandise.  Low cost competitors are especially
challenging for conventional supermarkets because of their superior operating efficiencies.  To compete
successfully with intrusions by other types of retailers, conventional supermarkets have taken steps to
differentiate their offerings, such as emphasizing their “power perimeters” (areas around the outside walls
with fresh perishables such as dairy, produce, florist, deli and bakery departments), targeting Ask
students about why they would continue to shop at conventional supermarkets. Alternatively, why would
they shop for food at supercenters, warehouse clubs or convenience stores? What types of needs are
fulfilled by conventional supermarkets that can’t be filled through other food retailing formats? Based on

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these discussions, will conventional supermarkets be driven out of business by competing formats? See
PPT 2-20 for coverage of Trends. Chapter 02 - Types of Retailers
https://manual-solution.com/downloads/management/solution-manual-for-retail-management-8th-edition-
bymichael-levy-barton-a-weitz/ 2-4 health conscious and ethnic consumers, providing a better in-store
experience, and offering more private-label brands.  Conventional supermarkets are also offering more
natural, organic, and fair trade foods for their increasingly health and environmentally conscious
consumers. Fair trade means purchasing from factories that pay workers a living wage, well more than
the prevailing minimum wage, and offer other benefits like onsite medical treatment.  Through
adjustments to the traditional merchandise mix, conventional supermarkets are also targeting more ethnic
shoppers.  Conventional supermarkets chains are leveraging their quality reputations to offer more
private-label merchandise. Privatelabel brands benefit both customers and retailers. (Branding strategies
are covered in depth in Chapter 14.)  The online grocery market also represents a growing category. 
Creating an enjoyable shopping experience through wider variety, better store ambiance, and customer
service is another approach supermarket chains may use to differentiate themselves from low-cost, low-
service competitors. Some have begun to integrate “food as theater” concepts, such as cooking and
nutrition classes and food tastings. B. Supercenters  Supercenters are the fastest growing retail category.
At 150,000 to 220,000 square foot these stores offer a wide variety of food and non-food merchandise.
The largest supercenters are Wal-Mart supercenters, Meijer, Kmart, Fred Meyer (a division of Kroger),
and Target.  By offering broad assortments of grocery See PPT 2-22 for an illustration of the
characteristics of supercenters and warehouse clubs. The supercenter is one of the fastest growing retail
formats. Why is the supercenter more attractive than a hypermarket in the U.S., but not in Europe? What
are benefits to consumers shopping in supercenters versus conventional Chapter 02 - Types of Retailers
https://manual-solution.com/downloads/management/solution-manual-for-retail-management-8th-edition-
bymichael-levy-barton-a-weitz/ 2-5 and general merchandise under one roof, supercenters provide a one-
stop shopping experience.  However, since supercenters are very large, some customers find them
inconvenient because it can take a long time to find the items they want.  Hypermarkets are also large
(100,000 to 300,000 square feet) combination food and general merchandise retailers. They typically
stock fewer SKUs than supercenters.  Popular in both Europe and South America, hypermarkets are not
common in the United States. Located in large, warehouse-type structures with large parking facilities,
hypermarkets typically carry a larger selection of food items than supercenters with a focus on
perishables.  Supercenters place greater emphasis on general merchandise and dry grocery items such as
breakfast cereals and canned goods.  Although supercenters and hypermarkets are the fastest growing
categories in global retailing today, these retailers do face challenges in finding and acquiring appropriate
land for building (particularly in Europe and Japan), along with backlash against these supersize stores,
particularly in the U.S. supermarkets? What are the disadvantages? Where do students fall on the debate
over the proliferation of supersize stores? Have any of their hometowns faced a battle over the building of
a Wal-Mart or other supercenter? Ask students why they believe feelings run so deep on this particular
retailing issue. C. Warehouse Club  A warehouse club is a retailer that offers a limited and irregular
assortment of food and general merchandise with little service at low prices to ultimate consumers and
small businesses.  Stores are large (at least 100,000 to 150,000 square feet) and located in low rent
districts.  Warehouse clubs reduce prices by using See PPT 2-22 for an illustration of the characteristics
of supercenters and warehouse clubs. Ask students to give local examples of warehouse clubs. What is
the target market for warehouse clubs? (Consumers with larger families and small businesses.) Chapter
02 - Types of Retailers https://manual-solution.com/downloads/management/solution-manual-for-retail-
management-8th-edition-bymichael-levy-barton-a-weitz/ 2-6 low-cost locations and inexpensive store
designs, and offering little customer service. They reduce inventory holding costs by carrying a limited
assortment of fast-selling items and buying merchandise opportunistically.  Most warehouse clubs have
two types of members: wholesale members who own small-businesses and individual members who
purchase for their own use. Typically members must pay an annual fee of approximately $50. Are
warehouse clubs wholesalers or retailers? (When they sell to small businesses they are wholesalers. When

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they sell to individual members for personal or household use, they are retailers. D. Convenience Stores 
Convenience stores provide a limited variety and assortment of merchandise at a convenient location in a
2,000-to-3,000- square-foot store with a speedy checkout, with higher prices than supermarkets. They are
a modern version of the neighborhood mom-and-pop grocery/general store.  Convenience stores enable
consumers to make purchases quickly without having to search through a large store and wait in long
checkout lines.  Convenience stores are facing increasing competition from other retail formats,
especially from supercenters and supermarket chains who have added gasoline to their merchandise
offerings, offering tying gasoline sales to their frequent shopper programs.  In response to these
competitive threats, convenience stores are taking steps to decrease their dependency on gasoline sales by
tailoring their merchandise assortments to local markets, making their stores even more convenient to
shop, and adding new services.  To increase convenience, some convenience stores are opening smaller
stores close to where consumers shop and work. Others are exploring the use of technology to increase
shopping See PPT 2-23 for an overview of the characteristics of convenience stores Ask students to give
examples of local convenience stores. Which products do they tend to buy most often at convenience
stores? What do they like/dislike about them? In general, what is so "convenient" about convenience
stores? What services do students believe would make a convenience store more “convenient”? Chapter
02 - Types of Retailers https://manual-solution.com/downloads/management/solution-manual-for-retail-
management-8th-edition-bymichael-levy-barton-a-weitz/ 2-7 convenience such as self-service kiosks. III.
General Merchandise Retailers  The major types of general merchandise retailers are department stores,
full-line discount stores, specialty stores, category specialists, home improvement centers, offprice
retailers, and extreme value retailers. See PPT 2-24 PPT 2-24 compares the various types of general
merchandise retailers along several characteristics. A. Department Stores  Department stores are retailers
that carry a broad variety and deep assortment, offer some customer services, and are organized into
separate departments for displaying merchandise.  The largest department store chains in the U.S. are
Macy’s, Sears, JCPenney, and Kohl’s, Nordstrom, Dillard’s and Saks Fifth Avenue.  Today, most
department stores focus almost exclusively on soft goods. The major departments are women’s, men’s,
and children’s clothing and accessories; home furnishings; cosmetics; and kitchenware and small
appliances.  Each department within the store has a specific selling space allocated to it as well as
salespeople to assist customers, often resembling a collection of specialty shops.  Department store
chains can be categorized into three tiers: (1) upscale, high fashion chains with exclusive designer
merchandise and excellent customer service (Neiman Marcus, Nordstrom); (2) traditional chains with
more moderately priced merchandise and less customer service (Macy’s and Dillard’s); and (2) value-
oriented chains catering to priceconscious consumers (Kohl’s and JCPenney).  Today many customers
question the benefits of shopping at department stores due to: (1) lack of convenient locations, (2) See
PPT 2-25, 2-26, 2-27 Ask students to give examples of local department stores. Why do customers go to
department stores? What do they like/dislike about them? Ask students to give local examples of
specialty stores. What are the differences between specialty stores, department stores, and discount
stores? Where do students buy business suits, dresses, jeans, computers, electronics? Why do they go to
that type of store? Which department store tier do students prefer? Which tier do they shop most often?
Discuss differences in these responses. Chapter 02 - Types of Retailers
https://manual-solution.com/downloads/management/solution-manual-for-retail-management-8th-edition-
bymichael-levy-barton-a-weitz/ 2-8 decreases in customer service and (3) relatively high prices. B. Full-
Line Discount Stores  A full-line discount store is a retailer that offers a broad variety of merchandise,
limited service, and low prices. They offer both private and national brands.  The big three full-line
discount store chains are Wal-Mart, Target and Kmart.  A significant trend in this sector is WalMart’s
conversion of discount stores to supercenters as a result of increased competition faced by the full-line
discount stores, as well as the significant operating efficiencies realized by supercenters.  As Wal-Mart
closes its full-line stores, Target is becoming one of the most successful retailers in terms of sales growth
and profitability, succeeding because its stores offer fashionable merchandise at low prices in a pleasant

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shopping environment. Discuss the target markets of the three largest fullline discount store chains (Wal-
Mart, Target and Kmart). How will the category specialists (Toys R Us) affect the retail strategy of full-
line discount store chains? What about Internet only retailers? Are discount stores going to succeed in the
“clicks” environment? In general, what are the factors that contribute to the success of discount stores
despite increasing competition from other formats? C. Specialty Stores  A specialty store concentrates
on a limited number of complementary merchandise categories and provides a high level of service in a
relatively small store.  Specialty stores tailor their retail strategy toward very specific market segments
by offering deep but narrow assortments and sales associate expertise.  Today, competitors from other
countries also are making some of the most successful specialty stores in the U.S. rethink how they
satisfy their customers’ needs. For instance, Zara and H&M have introduced “fast fashion” to the U.S.
market. Fast fashion is cheap and chic offering new, fresh merchandise 2-3 times per week. See PPT 2-
29, 2-30 Why do customers go to specialty stores? What do they like/dislike about them? Specialty stores
tailor their retail strategy toward a very specific market segment. One specialty retailer, Hot Topics,
focuses on selling licensed, music- inspired apparel to teenagers in mall-based stores. Ask students what
retail strategy elements must be in place for a retailer like Hot Topics to remain successful. Discuss the
“fast fashion” specialty store model with students. Which of these stores have they visited? What do they
like/dislike about the concept? Ask which target market(s) this concept is best suited for. D. Drugstores
See PPT 2-31 Chapter 02 - Types of Retailers
https://manual-solution.com/downloads/management/solution-manual-for-retail-management-8th-edition-
bymichael-levy-barton-a-weitz/ 2-9  Drugstores are specialty stores that concentrate on health and
personal grooming merchandise. Pharmaceuticals often represent 50 percent of drugstore sales and an
even greater percentage of their profits.  Drug stores, particularly the national chains, are experiencing
sustained sales growth because the aging population requires more prescription drugs. Prescription
pharmaceutical margins are shrinking due to governmental health care policies and HMOs.  Drugstores
are also being squeezed by competition from pharmacies in discount stores and supermarkets, as well as
prescription mail-order retailers.  In response, drug store chains are building larger stand-alone stores
offering a wider assortment of merchandise, more frequently purchased food items, and drivethrough
windows for picking up prescriptions. Also, drugstore retailers are encouraging pharmacists to take the
time to provide personalized service. Ask students if they have shopped online for drugstore products.
What has been their experience? Do they think the Internet is a viable channel for drugstore merchandise?
E. Category Specialist  A category specialist is a big box discount store that offers a narrow variety but
deep assortment of merchandise. These retailers predominantly use a self-service approach, but they offer
assistance to customers in some areas of the store.  By offering a complete assortment in a category at
low prices, category specialists can "kill" a category of merchandise for other retailers and thus are
frequently called category killers.  Because category specialists dominate a category of merchandise,
they can use their buying power to negotiate low prices, and assured supply when items are scarce. See
PPT 2-32, 2-33 Ask students to give local examples of category specialists. How are they similar to
specialty stores? Discuss the differences and similarities with discount stores. Ask students to describe an
experience at a home Chapter 02 - Types of Retailers
https://manual-solution.com/downloads/management/solution-manual-for-retail-management-8th-edition-
bymichael-levy-barton-a-weitz/ 2-10  One of the largest and most successful types of category specialist
is the home improvement center. A home improvement center is a category specialist offering equipment
and material used by do-it-yourselfers and contractors to make home improvements.  While
merchandise in home-improvement centers is displayed in a warehouse atmosphere, salespeople are
available to assist customers in selecting merchandise and to tell them how to use it.  Competition
between specialists in each category is very intense (Staples vs. Office Depot; Home Depot vs. Lowe’s)
as firms expand into the regions originally dominated by another firm. Direct competition focuses on
price, resulting in reduced profits because the competitors have difficulty differentiating themselves on
other elements of the retail mix.  In response to this increasing competitive intensity, the category killers
continue to concentrate on reducing costs by increasing operating efficiency and acquiring smaller chains

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to gain scale economies, although some category killers, like Home Depot and Lowe’s are attempting to
differentiate themselves with service through licensed contractors. improvement center such as Home
Depot in terms of merchandise, atmosphere and salesperson service. F. Extreme Value Retailers 
Extreme value retailers, such as Family Dollar Stores and Dollar General, are small, full-line discount
stores that offer a limited merchandise assortment at very low prices.  By offering limited assortments
and operating in low-rent locations, extreme value retailers are able to reduce costs and maintain very low
prices.  Despite some of these chains’ names, few just sell merchandise for $1. Rather, the See PPT 2-34
for a summary of issues facing extreme value retailers. Ask students to name the extreme value retailers
in the local marketplace. How many have shopped at one of them? For what types of merchandise? What
is the primary appeal of these retailers? Chapter 02 - Types of Retailers
https://manual-solution.com/downloads/management/solution-manual-for-retail-management-8th-edition-
bymichael-levy-barton-a-weitz/ 2-11 names imply a good value but do not limit prices to the arbitrary
dollar price point.  The growing popularity of extreme value retailers has led some vendors to agree to
create special, smaller packages just for them.  Once considered low-status retailers catering to low-
income consumers, extreme value retailers have broadened their appeal to higher-income consumers by
offering exciting bargains and unique merchandise. G. Off-Price Retailers  Off-price retailers, also
known as closeout retailers, offer an inconsistent assortment of brand name merchandise at low prices. 
Off price retailers can sell brand name and even designer-label merchandise at low prices due to their
unique buying and merchandising practices. Most merchandise is bought opportunistically from
manufacturers or other retailers with excess inventory at the end of the season.  End of season
merchandise that will not be used in following seasons is called closeouts. The merchandise may be in
odd sizes or unpopular colors or styles, or it may be irregulars, merchandise that has minor mistakes in
construction.  Typically, merchandise is purchased at one-fifth to one-fourth of the original wholesale
price. Off-price retailers can buy at low prices because they don't ask suppliers for advertising
allowances, return privileges, markdown adjustments, or delayed payments.  Due to this pattern of
opportunistic buying, customers can't be confident that the same type of merchandise will be in stock
each time they visit the store. Ask students to give examples of local off-price retailers. What do
consumers like about offprice retailers? What don't they like? See PPT 2-35 for a summary of the issues
facing off-price retailers Ask students which type of off-price retailer offers consumers truly the best
value? Why? Chapter 02 - Types of Retailers
https://manual-solution.com/downloads/management/solution-manual-for-retail-management-8th-edition-
bymichael-levy-barton-a-weitz/ 2-12  Outlet stores are off-price retailers owned by manufacturers, or by
department or specialty store chains.  Outlet stores owned by manufacturers are frequently referred to as
factory outlets.  Manufacturers view outlet stores as an opportunity to improve their revenues from
irregulars, production overruns, and merchandise returned by retailers. Outlet stores also allow
manufacturers some control over where their branded merchandise is sold at discount prices. H.
Differences between Services and Merchandise Retailers  Four important differences in the nature of the
offering provided by services and merchandise retailers are: (1) intangibility, (2) simultaneous production
and consumption, (3) perishability, and (4) inconsistency of the offering to customers. PPT 2-36 1.
Intangibility  Services are generally intangible -- customers cannot see, touch, or feel them. Services are
performances or actions rather than objects.  Intangibility introduces a number of challenges for services
retailers. It is difficult for customers to evaluate services before they buy them, or even after they buy and
consume them. Services retailers often use tangible symbols to inform customers about the quality of
their services.  Services retailers also have difficulty in evaluating the quality of services they are
providing. To evaluate the quality of their offering, services retailers place emphasis on soliciting
customer evaluations and complaints. Ask students how customers can evaluate the quality of an
intangible service offering. What problems does intangibility cause for the services retailer? 2.
Simultaneous Production and Chapter 02 - Types of Retailers
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bymichael-levy-barton-a-weitz/ 2-13 Consumption  Service providers create and deliver the service as
the customer is consuming it. The simultaneity of production and consumption creates some special
problems for services retailers.  First, the customers are present when the service is produced, may have
an opportunity to see it produced, and in some cases, may be part of the production process.  Other
customers consuming the service at the same time can affect the quality of the service provided. 
Finally, the services retailer often does not get a second chance to satisfy the needs of their customers.
While customers can return damaged merchandise to a store, customers that are dissatisfied with services
have limited recourse. Thus it is critical for services retailers to get it right the first time.  Because
services are produced and consumed at the same time, it is difficult to reduce costs through mass
production. What problems does simultaneous production cause for the services retailer? 3. Perishability
 Because the creation and consumption of services is inseparable, services are perishable. They can't be
saved, stored, or resold. This is in contrast to merchandise, which can be held in inventory until a
customer is ready to buy it.  In addition, the demand for a service varies considerably over time. Thus,
services retailers often have times when their services are underutilized and other times when they have
to turn customers away because they cannot accommodate them.  Services retailers use a variety of
programs to match demand and supply. They also attempt to make customer waiting time Give examples
of retailers for which perishability is a real problem? [movie theaters, airlines, cruise lines, public golf
courses] What do these retailers do to minimize the problem? What actions have students seen services
retailer take to make waiting time more enjoyable for customers? Chapter 02 - Types of Retailers
https://manual-solution.com/downloads/management/solution-manual-for-retail-management-8th-edition-
bymichael-levy-barton-a-weitz/ 2-14 more enjoyable. 4. Inconsistency  Merchandise is often produced
by machines with very tight quality control. Because services are performed by people, no two services
will be identical.  Thus, an important challenge for service retailers is providing consistently highquality
services. What problems does inconsistency cause for the services retailer? Are there services retailers
whose inconsistency is acceptable? (Custom designers, hair “artists”) VII. Types of Ownership  Another
way to classify retailers is by their ownership. The major classifications of retail ownership are: (1)
independent, single-store establishments, (2) corporate chains, and (3) franchises. See PPT 2-39 . A.
Independent, Single-Store Establishments  Retailing is one of the few sectors in our economy in which
entrepreneurial activity is extensive. Many of these retail start-ups are owner managed which means
management has direct contact with their customers and can respond quickly to those customers’ needs. 
While single-store retailers can tailor their offering to their customers' needs, corporate chains can more
effectively negotiate lower prices for merchandise and advertising due to their larger size.  To better
compete against corporate chains, some independent retailers join a wholesale-sponsored voluntary chain.
A wholesale-sponsored voluntary cooperative group is an organization operated by a wholesaler offering
a merchandising program to small, independent retailers on a voluntary basis. Ask students to give
examples of local independent, single-store retailers. Do they shop at independents? Why or why not? Do
students believe national chains will drive all independents out of business? B. Corporate Retail Chains 
A retail chain is a company operating multiple retail units under common Wal-Mart has pursued a
strategy of opening stores on the outskirts of small rural towns with populations between 25,000 and
50,000. These stores offer broader selection of Chapter 02 - Types of Retailers https://manual-
solution.com/downloads/management/solution-manual-for-retail-management-8th-edition-bymichael-
levy-barton-a-weitz/ 2-15 ownership and usually having some centralization of decision making in
defining and implementing its strategy. merchandise at much lower prices than previously available from
local retailers. Discuss the pros and cons of this strategy in class. What ramifications may result?
(Monopolizing market, demise of small stores, potential to become major employer in rural area). C.
Franchising  Franchising is 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. Approximately 40% of all US retail sales are made by franchisees.  In a franchise contract,
the franchisee pays a lump sum plus a royalty on all sales for the right to operate a store in a specific

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location. The franchisee also agrees to operate the outlet as per the procedures prescribed by the
franchisor. The franchisor provides assistance in locating and building the store, developing the products
and/or services sold, management training, and advertising.  The franchise ownership format attempts to
combine the advantages of owner-managed businesses with efficiencies of centralized decision-making in
chain store operations. Ask students to give examples of local franchises. If they wanted to own a retail
business, would they want a franchise or their own store? Why? What are the advantages of being a
franchisee? PPT 2-39 provides a brief introduction to the Franchising form of retail ownership. VIII.
Summary  Over the past 30 years, U.S. retail markets have been characterized by the emergence of
many new retail institutions. Traditional institutions have been joined by category specialists,
hypermarkets and superstores, extreme value retailers, and nonstore retailers among others. IX. Appendix
2A: Comparison Shopping  All retailers learn about their competitors through comparison shopping. It
might be as informal as walking through a competitor's store and looking around. For an exercise on
comparison shopping see Ancillary Exercise 2-2. Breaking the class into groups and having each group
do a comparison shopping exercise is a good way to get students to understand the difference Chapter 02
- Types of Retailers https://manual-solution.com/downloads/management/solution-manual-for-retail-
management-8th-edition-bymichael-levy-barton-a-weitz/ 2-16 However, a structured analysis is more
helpful in developing a retail offering that will attract consumers from a competitor's store.  The first
step is to define the scope of the comparison; the comparison might be between two retail chains, two
specific stores, two departments, or two categories of merchandise, depending on responsibilities of the
person undertaking the comparison.  Comparisons might also focus on chains' financial resources,
inventory levels, number of stores and employees, store locations, merchandise sold, employee
compensation programs, and return policies. between retailers and the types of decisions retail manager
make. Have each group compare different institutions selling the same merchandise category. For
example, men's suits in a department store and men's specialty store, athletic shoes in a discount store
and specialty shoe store, CD's in a discount store and a specialty music store. ANSWERS TO
SELECTED “GET OUT AND DO ITS” 2 GO SHOPPING Go to an athletic footwear specialty store
such as Foot Locker, a sporting goods category specialist, a department store, and a discount store.
Analyze their variety and assortment of athletic footwear by creating a table similar to that in Exhibit 2–
2. Students should be able to fill in this type of table and explain their findings. Variety of Athletic
Footwear Breath of Merchandise Assortment of Athletic Footwear Depth of Merchandise Footlocker
Specialty Store Sporting Goods Category Specialist Department store Discount Store 3 GO SHOPPING
Keep a diary of where you shop, what you buy, and how much you spend for two weeks. How did each
retailer meet your shopping needs? Get your parents to do the same thing. Tabulate your results by type
of retailer. Are your shopping habits significantly different Chapter 02 - Types of Retailers
https://manual-solution.com/downloads/management/solution-manual-for-retail-management-8th-edition-
bymichael-levy-barton-a-weitz/ 2-17 or are they similar to those of your parents? Do you and your
parents’ shopping habits coincide with the trends discussed in this chapter? Why or why not? Students
should keep a list of places shopped. Results can be compared to a parent or another classmate. Thais
assignment should give student insight to their own consumer buying behavior and how they select
merchandise and retail formats. 4 GO SHOPPING Describe how the supermarket where you shop is
implementing organic, locally grown, ethnic and private label merchandise. If any of these categories of
merchandise are missing, explain how this could be a potential opportunity for growth for this
supermarket. Responses here will vary. Some stores have big commitment to organic, locally grown,
ethnic and private label merchandise. Students should consider the demographics of the store’s customers
to evaluate the potential demand for these categories. 5 INTERNET EXERCISE Data on U.S. retail sales
are available at the U.S. Bureau of the Census Internet site at www.census.gov/mrts/www/mrts.html.
Look at the unadjusted monthly sales by NAICS. Which categories of retailers have the largest
percentage of sales in the fourth quarter (the holiday season)? Students will notice that many retail
categories generate their largest percentage of sales in the fourth quarter. Some 2007 examples (in
$millions) are: (443) Electronics and Appliance Stores: 34,764 (44312) Computer and Software Stores:

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6,698 (4453) Beer, Wine and Liquor Stores: 11,289 (44812) Women’s Clothing Stores: 11, 913 (45111)
Sporting Goods Stores: 10,355 (454) Nonstore Retailers: 87,696 7 INTERNET EXERCISE Go to
Entrepreneur Magazine’s Franchise Zone web page at http://www.entrepreneur.com/franchise500 and list
the top 500 franchises for the past year. How many of these retailers in the Top Ten have you patronized
as a customer? Did you know that they were operated as a franchise? Look at the list for previous years to
see changes in the rankings. Click on the link, About the Franchise 500, and describe what factors were
used to develop the list. Finally, what is the nature of the business that seems to lend itself to
franchising? Chapter 02 - Types of Retailers
https://manual-solution.com/downloads/management/solution-manual-for-retail-management-8th-edition-
bymichael-levy-barton-a-weitz/ 2-18 The Top 10 Franchises for 2008 include many familiar names.
Students will likely report having visited a Subway, McDonald’s, Sonic, or 7-Eleven. Students should
uncover some notable changes in the Top 10. Perhaps most significant, Subway has been moved into the
number 2 spot after many years at number 1. An interesting point for discussion of competitive strategy
is the reintroduction of fast food retailers like McDonald’s and KFC to the top 10, as well as the new
entrance of Sonic. What do students believe are behind the reinvigoration of these fast food franchise
retailers? Will they be able to maintain these positions in the face of changing trends in consumer
lifestyles and food retailing? The web site notes that the list of the Top 500 franchises is based on
quantifiable measures such as financial strength and stability, growth rate, size of the system, and number
of years in business. Students will likely notice that service-based retailers tend to lend themselves best to
the franchise system, particularly those services that allow for standardization of business practices and
retail operating formats. 8 Bed Bath & Beyond is the number one superstore domestics retailer in the US
with about 930 stores throughout the US and Ontario, Canada. This retailer sells domestics (bed linens,
bathroom and kitchen items) and home furnishings (cookware and cutlery, small household appliances,
picture frames, and organizing supplies). What are the SIC and NAICS codes used by this retailer? What
other retailers compete against Bed Bath & Beyond and which store format is implemented by each
competitor? Primary SIC Code 5023: Home furnishings Primary NAICS Code 442299: All Other Home
Furnishings Stores Other SIC Codes 2273 Carpets and rugs 2391 Curtains and draperies 2392 House
furnishings, nec 2519 Household furniture, nec 2844 Toilet preparations 3631 Household cooking
equipment 3633 Household laundry equipment 3634 Electric housewares and fans 3635 Household
vacuum cleaners 3639 Household appliances, nec 3661 Telephone and telegraph apparatus 5021
Furniture 5641 Children's and infants' wear stores 5719 Misc. home furnishings stores 5722 Household
appliance stores 5947 Gift, novelty, and souvenir shops Key Competitors Macy's Department store
Target Discount Store Wal-Mart Discount store Chapter 02 - Types of Retailers https://manual-
solution.com/downloads/management/solution-manual-for-retail-management-8th-edition-bymichael-
levy-barton-a-weitz/ 2-19 Other Competitors Anna's Linens Art.com Babies "R" Us Burlington Coat
Factory The Children's Place Container Store Cost Plus Dillard's Euromarket Designs Garden Ridge
Gymboree IKEA J. C. Penney Kmart Macy's Pier 1 Imports Ross Stores Saks Sears Sensational
Beginnings Target TJX Companies Tuesday Morning Corporation Wal-Mart Williams-Sonoma
ANSWERS TO DISCUSSION QUESTIONS AND PROBLEMS 1. Distinguish between variety and
assortment. Why are these important elements of retail market structure? The main difference between
variety and assortment is that variety refers to the number of different merchandise categories a retailer
sells, whereas assortment is the number of different items or SKUs in a merchandise category. In
addition, variety is often referred to as the breadth of merchandise carried by the retailer, and assortment
is referred to as the depth of merchandise. These elements form an integral part of the retail market
structure, since it is the retail offering that ultimately distinguishes one retailer from another. 2. Choose a
small, independent retailer and explain how it can compete against a large national chain. It is very
difficult for independents to compete against chains on price. Corporate chains can buy merchandise at
lower cost because they buy in large quantities. Thus, they can offer the same merchandise at lower
prices than independents. However, chains also tend to have the same merchandise in all stores. Thus
independents can compete effectively against chains by offering merchandise that is tailored to the needs

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of the local community. In addition, chains are often very bureaucratic. They have a lot of rules, which
constrain the nature of the service that can be provided to customers. In addition, store managers in
chains often move from store to store or they are promoted to higher-level management positions.
Therefore, they have less opportunity to develop long-term relationships with customers. Chapter 02 -
Types of Retailers https://manual-solution.com/downloads/management/solution-manual-for-retail-
management-8th-edition-bymichael-levy-barton-a-weitz/ 2-20 Independents can compete by offering
better service—by developing personal relationships with local customers. 3. What do off-price retailers
need to do to compete against other formats in the future? The main competitive weapon for the off-price
retailers is their low price. While they may not directly compete with higher service formats, such as
department and specialty stores, they do face increasing competition from discount stores. Here, the off-
price stores may be at a relative disadvantage since their merchandise is based upon opportunistic buying,
while discount stores offer a relatively stable mix of merchandise at stable prices (everyday low pricing).
Since the option of improving service may increase costs and weaken their only source of competitive
advantage, low price, off-price retailers should focus on strategies to keep their costs and prices low and
explore low cost methods of attracting and retaining customers. In terms of keeping operational costs
low, they can locate in lower cost urban and rural areas (note that outlet stores are more clustered within
outlet malls located farther from the city but near major highways). They can also implement more
efficient inventory and merchandise management systems (note that for a discount store, such as Wal-
Mart, operational efficiency and costs reductions are crucial to offering lower prices to customers). Also,
they can expand their sourcing to include imports from low cost international markets. Another threat for
off-price retailers may be from Internet stores. Often several stores publicize their low prices and also
attempt to match consumer price preferences through reverse bidding and auctions (sites such as Priceline
and eBay). Off-price retailers can explore the possibility of using the Internet for relatively low cost
advertising about current merchandises (since their merchandise stocks fluctuate more rapidly due to
opportunistic buying). Factory outlet stores, on the other hand, can compete more directly over the
Internet. 4. Compare and contrast the retail mixes of convenience stores, traditional supermarkets,
superstores, and warehouse stores. Can all of these food retail institutions survive over the long run?
How? Why? Chapter 02 - Types of Retailers
https://manual-solution.com/downloads/management/solution-manual-for-retail-management-8th-edition-
bymichael-levy-barton-a-weitz/ 2-21 Element of Retail Mix Convenience Store Traditional Supermarket
Superstore Warehouse Store Location Typically freestanding, easily accessible sites Typically in strip
shopping centers Typically in strip shopping centers Typically in strip shopping centers Merchandise
Assortment Limited variety and assortment Average variety and assortment Greater variety with deeper
assortment than supermarket Greater variety with about the same assortment as supermarket. Primary
difference is that merchandise assortment varies because of opportunistic buying. Pricing Higher pricing
than supermarkets Average pricing. Some chains have constant (every day) pricing and others have
special sale (high-low) pricing. Lower pricing than supermarkets. Typical every day pricing. Lower
pricing than supermarkets. Pricing depends on cost of merchandise bought on special buys. Advertising
and Promotion Personal selling Limited advertising, frequent shopper programs tied to gasoline sales.
Minimal High-low pricing chains advertise weekly specials. Minimal Limited advertising since most
have everyday pricing. Minimal Minimal promotion since all merchandise is basically on sale. Minimal
Store design and display Designed for quick and easy merchandise selection and checkout Typically use
a gridiron with cross-hatch aisles, extensive signs. Same as supermarket. Same as supermarket. A bit
more disorganized to give the customers the feel of searching for a bargain. Service Minimal Some
services for produce, bakery, meat and fish categories. Some services for produce, bakery, meat and fish
areas. Minimal All four types will persist because they appeal to different customer needs. The
warehouse stores typically have larger pack sizes that are very attractive to customers with large families
and to small business owners like local restaurants. In addition, due to the varying assortments,
customers who are brand loyal might not want to shop in these stores. Convenience stores are located and
designed to offer customers a snack, quick meal or minimal grocery/general merchandise purchase along

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with their gasoline. These retailers offer easy in and out access and speedy transactions. In response to
competitive pressures from other food retailers, as well as dependency on gasoline sales, many
convenience stores are now offering consumers fresh food and healthy fast food choices to reduce
dependency on fuel sales while maintaining on-the-go ease and convenience. Chapter 02 - Types of
Retailers https://manual-solution.com/downloads/management/solution-manual-for-retail-management-
8th-edition-bymichael-levy-barton-a-weitz/ 2-22 The superstores are low in price but more inconvenient
to shop in because of the large size. Thus they appeal to customers who are very price conscious and are
willing to drive a longer distance and spend more time shopping in a larger store. Conventional
supermarkets are the most convenient. In major metro areas, there is a conventional supermarket two to
three miles from everyone’s home. They also provide more services for customers such as cutting meat to
order. Conventional supermarkets appeal to customers who value service and convenience and are not as
price conscious. Note that the same consumer may shop at all four types of food retailers depending on
the nature of the shopping trip. For example, a consumer might stock up on basic such as toilet paper,
soft drinks, and can goods at a warehouse or superstore and then go to a supermarket to buy meat,
produce, and gourmet food. 5. Could a large discounter, such as Target or Walmart, enter another retail
format such as convenience stores or department stores in the future? Would they be successful with
either strategy? Explain why or why not. Both Target and Walmart have had success entering other store
formats. Target is offering more supermarket items and Walmart has food stores and warehouse stores.
Based on these experiences it could be possible for theses discounters to enter other formats. Department
stores may be more problematic because there has been considerable industry consolidation in this
category. There are already three tiers in the department store category, therefore there is already high
competition. 6. Why are retailers in the limited assortment supermarket and extreme value discount store
sectors growing so rapidly? Both limited assortment supermarkets and extreme value discount stores
focus on relatively limited merchandise offerings at highly appealing (low!) prices. The retail formats are
able to offer their extremely low prices through maximizing efficiency. By reducing extras and service
offerings, as well as managing a relatively low merchandise assortment, these retailers are able to provide
consumers with the “thrill of the hunt” for amazing deals. 7. The same brand and model of a personal
computer is sold by specialty computer stores, discount stores, category specialists, online retailers and
warehouse stores. Why would a customer choose one retail format over the others? Each type of retail
store provides a unique combination of price and services tailored to the needs of different types of
customers. The specialty store typically will have higher prices, but will offer more services. It will have
salespeople with technical expertise available to provide information to customers and answer questions.
This service is particularly valuable to customers who do not know much about computers. Chapter 02 -
Types of Retailers https://manual-solution.com/downloads/management/solution-manual-for-retail-
management-8th-edition-bymichael-levy-barton-a-weitz/ 2-23 On the other hand, discount stores,
category specialists, and warehouse stores have lower prices and do not offer much personalized service.
These stores are more attractive to customers who have more expertise and do not need personalized
service. Due to the greater assortment in category specialists, customers are able to compare the prices
and features of different brands in one store visit. Warehouse and discount stores have limited
assortments and thus customers can only see a limited set of brands and models. But they can also buy
merchandise in different product categories at the same time they are buying a computer. Some
customers will prefer the convenience and selection offered online. The Internet may also be used to
collect information and compare features and prices prior to shopping in a store location. 8. Choose a
product category that both you and your parents purchase (e.g., business clothing, casual clothing, music,
electronic equipment, shampoo). In which type of store do you typically purchase this merchandise?
What about your parents? Explain why there is (and is not) a difference in your store choices. Students
may emphasize specialty stores such as The Gap, Old Navy, Circuit City, Best Buy etc. for their
purchases for clothing, CDs, or electronic equipment, while mentioning that their parents favor
traditional department stores such as Macy's or Sears for the purchase of such product categories. If price
is a major factor, there may be some similarities between the students and their parents; both may shop at

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discount stores. The merchandise, service and prices for the various retail formats stocking different
product categories are different. In general, stores deliberately targeting a younger population will be
favored by students since these stores would better match their expectations of merchandise (such as
fashion clothing), prices and services (students may consider themselves savvy customers for certain
products, such as music and electronic equipment, and may not need the type of service demanded by
their parents for instance in purchasing business clothing). 9. At many optical stores you can get your
eyes checked and purchase glasses or contact lenses. How is the shopping experience different for the
service as compared to the product? Design a strategy designed to get customers to purchase both the
service and the product. In so doing, delineate specific actions that should be taken to acquire and retain
optical customers. Optical stores present an interesting mix of service and related merchandise. On one
hand, the eye examination is usually done by a trained and licensed eye doctor and here the service
experience is often very professional and similar to a visit to any physician or hospital. On the other
hand, the glasses or contact lenses are displayed in a retail store setting with the service being mostly
oriented towards helping the customer try out various options. The contrasts between the service and
retail environments may be unnerving for some customers. Chapter 02 - Types of Retailers
https://manual-solution.com/downloads/management/solution-manual-for-retail-management-8th-edition-
bymichael-levy-barton-a-weitz/ 2-24 One strategy to reduce the gap is to ensure that the retail setting is
very professional and courteous. Since the problem has been detected and identified by the eye doctor,
the sales staff in the retail setting could engage and interact more directly with the customer with more of
a problem-solving approach. This would involve educating consumers on various issues, including the
merits/demerits of using glasses or contact lenses, the types of lenses and coatings, proper care of glasses
and contact lenses, etc. It must also be recognized that most customers who are prescribed glasses for the
first time are likely to continue wearing glasses or contact lenses for the rest of their lives. Thus, it is
important to start building consumer trust and confidence through professional service and expertise. One
strategy would be to encourage customers to return for an eye examination every year and also have their
current prescription for the glasses or lenses checked. Another is to provide free repair service for the
frames. 10. Many experts believe that customer service is one of retailers' most important issues in the
new millennium. How can retailers that emphasize low price (such as discount stores, category
specialists, and off-price retailers) improve customer service without increasing costs and thus, prices? It
is very difficult to offer high-quality, personalized customer service at a low cost, because personalized
service is provided by people who have to be paid more. Price-oriented retailers provide service by using
signage to make it easy for customers to locate products, having many checkout counters so customers
can pay for merchandise quickly, and using displays to demonstrate the use of merchandise and
information about the merchandise. These store layout and display activities do not require people, but
they make it easier for customers to buy merchandise. Personalized service from employees can be
provided economically by having a centralized place in the store where experts are available to answer
questions. Rather than have a lot of employees circulating throughout the store, a smaller number of
employees can be in one central location. However, customers will have to come to the service providers
rather than the service providers going to the customers. Chapter 02 - Types of Retailers https://manual-
solution.com/downloads/management/solution-manual-for-retail-management-8th-edition-bymichael-
levy-barton-a-weitz/ 2-25 ANCILLARY LECTURES LECTURE # 2-1: FRANCHISING
-------------------------------------------------- Instructor’s Note: Franchising is one of the most popular and
successful ways for individuals to start their own business. The growth in franchising as a retail format
will probably continue in the near future. Many students who take a retailing course have intentions of
someday starting their own business and this lecture may provide them with an interesting possibility to
consider. Instructors might want to use this lecture as a stimulus to a class discussion on the topic.
PowerPoint slides 2-59 to 2-67 can be used with this lecture. --------------------------------------------------
Introduction Franchising is the licensing of an ENTIRE business format by a parent company
(FRANCHISOR) to a number of outlets (FRANCHISEES) to market a product or service and engage in
a business developed by the FRANCHISOR using the FRANCHISOR’S trade names, trademarks, know-

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how, and methods of doing business. In 1985, sales of goods and services by all franchising companies
exceeded $529 billion, approximately 33 percent of all U.S. retail sales flow. There are roughly half a
million establishments in franchise-related businesses. The growth of franchising Franchising has had a
steady stream of growth. Some of the reasons include 1. Technological advances, 2. Profitable utilization
of capital resources, 3. Attainment of the American dream, 4. Demographic expansion, and 5.
Product/service consistency. Technological advances Equipment and systems--reduce product variability
and more efficient marketing and distribution systems. For example: Electronic Data interchange.
Profitable utilization of capital resources Can tap savings and credit capacity of individuals to realize
national product/service saturation Attainment of the American dream Owning your own business.
Demographic expansion40 Chapter 02 - Types of Retailers
https://manual-solution.com/downloads/management/solution-manual-for-retail-management-8th-edition-
bymichael-levy-barton-a-weitz/ 2-26 Urban “sprawl” creates need for more small retail establishments.
No-longer just downtown locations. Product/service consistency Due to geographic mobility, franchises
have provided a level of homogeneous (boring) quality in its product or service. For example: A Big Mac
tastes the same everywhere. Types of franchise systems There are various types of franchise systems
including 1. Territorial, 2. Operating, 3. Mobile, 4. Distributorship, 5. Co-ownership, 6. Co-management,
7. Leasing/Licensing, 8. Manufacturing, and 9. Service. Territorial franchise The franchise granted
encompasses several counties or states. The holder of the franchise assumes the responsibility for setting
up and training individual franchisees within his territory and obtains an ‘override” on all sales in his
territory. For example: McDonalds and Burger King Regional franchises. Operating franchise The
individual independent franchisee that runs his own franchise. He deals either directly with the parent
organization or with the territorial franchise holder. For example: McDonalds and Burger King individual
locations. Mobile franchise A franchise that dispenses its product from a moving vehicle, which is either
owned by the franchisee or leased from the franchisor. For example: Country Store on Wheels and Snap-
On Tools. Distributorship The franchisee takes title to various goods and further distributes them to sub-
franchisees. Chapter 02 - Types of Retailers
https://manual-solution.com/downloads/management/solution-manual-for-retail-management-8th-edition-
bymichael-levy-barton-a-weitz/ 2-27 The distributor has exclusive coverage of a wide geographical area
and acts as a supply house for the franchisee that carries the product. For example: Texaco gasoline
supply centers. Co-ownership The franchisor and franchisee share the investment and profits. For
Example: Denny’s Restaurant. Co-management The franchisor controls the major part of the investment.
The partner-manager shares profits proportionately. For example: Travelodge and Holiday Inn.
Leasing/Licensing The franchisor leases/licenses the franchisee to use his trademarks and business
techniques. The franchisor either supplies the product or provides franchisees with a list of approved
suppliers. For example: Sheraton Hotels. Manufacturing The franchisor grants a franchise to manufacture
its product through the use of specified materials and techniques. The franchisee distributes the product,
utilizing the franchisor’s techniques. This method enables a national manufacturer to distribute regionally
when distribution costs from central manufacturing facilities are prohibitive. For example: Sealy. Service
The franchisor describes patterns by which a franchisee supplies a professional service, as exemplified by
employment agencies. For example: Personnel One. Why franchises fail Individuals who are interested in
franchising need to recognize that there is risk despite the high potential for success. Franchises can fail
for several reasons including 1. Inept management, 2. Fraudulent activities, and 3. Market saturation.
Chapter 02 - Types of Retailers https://manual-solution.com/downloads/management/solution-manual-
for-retail-management-8th-edition-bymichael-levy-barton-a-weitz/ 2-28 Inept management Poor finances,
product/service mix rejected, grew too quickly. Fraudulent activities The selling of unsound or unproven
franchises to ignorant buyers, unfair contracts, etc. Market saturation Too many franchises of same type,
e.g., chicken fast-food. Franchisors and the marketing channel A franchisor may occupy any position in
the marketing channel. Manufacturer-retailer franchise Automobile dealers and service stations.
Manufacturer-wholesaler franchise Coca-Cola, Pepsi, Seven-Up, etc. sell syrup they manufacture to
franchised wholesalers who bottle and distribute to retailers. Wholesalers-retailer franchise Rexall Drugs

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and Sentry Drugs. Service Sponsor--Retailer franchise Avis, Hertz, and National, McDonald’s, Chicken
Delight, KFC, Howard Johnson’s and Holiday Inn, Midas and AMCO, Kelly Girl and Manpower
Franchisor benefits Franchisees (the store) provide benefits for the franchisor (the parent company).
Continuous market Insured through consistent quantity and quality and strong promotion. Market
information Information such as sales, local advertising, employee turnover, profits, etc. is usually
provided. Money Principal sources of franchise company revenue. Royalty fees Royalties provide
continuous income although often the rate may decrease as sales volume increase. Sometimes a flat rate
is established regardless of level of sales. Chapter 02 - Types of Retailers
https://manual-solution.com/downloads/management/solution-manual-for-retail-management-8th-edition-
bymichael-levy-barton-a-weitz/ 2-29 Sales of products Often the franchisor supplies raw materials and
finished products to the franchisee at a profit. For example, Coke supplies syrup, Holiday Inn supplies
furniture and carpeting. Rental and lease fees The franchisor may lease buildings, equipment, and
fixtures. License fees There may be special fees that allow the franchisee to use and display the
franchisor’s trademark. Management fees Franchisor can charge for consultant fees, management reports,
training, etc. Franchisee benefits Franchisors provide benefits for the franchisee through initial and
continuous services. . Initial services There are a number of initial services that franchisors provide for
franchisees including 1. Market survey and site selection, 2. Facility design and layout, 3. Lease
negotiation advice, 4. Financing advice, 5. Operating manuals, 6. Management training programs, and 7.
Employee training. Continuous Services There are also a number of continuous services that franchisors
offer to franchisees including 1. Field supervision, 2. Merchandising and promotional materials, 3.
Management and employee retraining, 4. Quality inspection, 5. National advertising, 6. Centralized
purchasing, 7. Market data and guidance, 8. Auditing and record keeping, 9. Management reports, and
Chapter 02 - Types of Retailers https://manual-solution.com/downloads/management/solution-manual-
for-retail-management-8th-edition-bymichael-levy-barton-a-weitz/ 2-30 10. Group insurance plans.
Franchisor advantages/disadvantages Depending upon which viewpoint one takes (the franchisor or
franchisee) there are many advantages and disadvantages of franchising. From the perspective of the
franchisor, the advantages include 1. Rapid expansion, 2. Highly motivated franchisees do a good job,
and 3. Additional profits by selling franchisees products and services. The disadvantages include 1.
Company-owned units may be more profitable, 2. Less control than independent retailers over
advertising, pricing, personnel practices, etc. (e.g., can’t fire franchisee). Franchisee
advantages/disadvantages From the viewpoint of the franchisee the advantages include 1.
Established/proven product/service, 2. Business and technical assistance, and 3. Reduction in risk. The
disadvantages include 1. Loss of control -- are really only semi-independent business people, 2. Many
franchisors own a number of their outlets which may compete with those owned by franchisees, and 3.
High royalties, fees, costs of equipment, supplies, merchandise, rental or lease rates and mandatory
participation in promo and support services. Franchising trends for the New Millennium Most of the
growth of franchising occurred in the 1980s in the retailing of goods and services. However, there two
basic types of franchising that merit consideration. The first, product and trade franchising, a common
form of retailing in the automobile and petroleum industry, focuses on what is sold. Examples include
brands like Ford, Honda, and Texaco. The second, business format franchising, sells the right to operate
the same business in different geographic locations. The emphasis here is on how the business is run.
Examples include Kentucky Fried Chicken, McDonald’s and Burger King. The major franchising trends
perceived for New Millennium are Chapter 02 - Types of Retailers
https://manual-solution.com/downloads/management/solution-manual-for-retail-management-8th-edition-
bymichael-levy-barton-a-weitz/ 2-31 1. Sustained growth, 2. Enduring plus unimagined applications, 3.
International expansion, 4. Increased tensions, and 5. Greater emphasis on financial returns. Sustained
Growth It is perceived that franchising will continue to grow steadily, a trend begun in the 1980s. One of
the possible explanations for this growth is that franchising offers franchisors rapid expansion as well as
highly motivated owner-managers. Also, annual growth in franchised sales volume will exceed the
inflation rate by several percentage points. Enduring plus unimagined applications Today, such things

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like video yearbooks, house-sitting services, and house calls by doctors may be owned by franchises.
With the applications such as these, the possibilities are certainly diverse. For example, in the future,
franchisees will come from three main sources, which include middle managers, women, and
independent small-business owners. International expansion Franchisors are currently exploring foreign
markets. In fact, in 1988 one-sixth of all business-format franchisors had businesses outside the United
States. In addition, this trend has also been reciprocated by foreign franchisors as well. However, non-
U.S. franchisors have had a more difficult time in the U. S. due to stiff competition. Increasing tensions
Despite the overwhelming of franchisors on the whole, there is still a major source of contention. That is,
franchisor-franchisee relations have witnessed a rise in class-action suits and arbitration hearings. In
1989, over 400 franchisee-related hearings were held. Dissatisfaction among franchisees could originate
from various sources. First, perceived inequity among this group regarding mandated or proposed
changes may be a major source of conflict. Also unsatisfactory financial performance may be another
cause of discord. Chapter 02 - Types of Retailers
https://manual-solution.com/downloads/management/solution-manual-for-retail-management-8th-edition-
bymichael-levy-barton-a-weitz/ 2-32 Greater emphasis on financial returns The main sources of financial
returns include: dual operations in which a franchisee may be permitted to run two or more franchises
from a common or adjacent area; reduced costs due to downsizing; and incentives for ownership.
[Source: This lecture was adapted from Gerald Pintel and Jay Diamond, Retailing, 4th ed. (Englewood
Cliffs, NJ.: Prentice-Hall, 1987), pp. 73-76. in El-Ansary and Stern’s book, Marketing Channels,
Prentice-Hall, 3rd. ed. , 1988, p. 333); Bruce J. Walker, “Retail Franchising in the 1990s,” Retailing
Issues Letter, Published by Arthur Andersen & co, in conjunction with the Center for Retailing Studies,
Texas A&M University, Vol.; 3, No.1, January 1991, pp. 1-.]

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