Chapter 4
Retail
Institutions by
Ownership RETAIL
MANAGEMENT:
A STRATEGIC
APPROACH,
10th Edition
BERMAN EVANS
Figure 4-1: A Classification Method
I for Retail Institutions
Ownership
II
Store-Based
Retail Strategy Mix
( food category,general category ,etc)
III
Nonstore-Based
Retail Strategy Mix
(Wb,direct etc)
4-2
Ownership Forms
Independent
Chain
Franchise
Leased department
Vertical marketing system
Consumer cooperative
4-3
Independent Retailers
Owner of single unit
Why so many? Ease of entry
- low capital requirement
- no licensing
4-4
Competitive State of Independents
Advantages Disadvantages
Flexibility in formats, Lack of bargaining
locations, and strategy power
Control over investment Lack of economies of
costs and personnel scale
functions, strategies
Labor intensive
Personal image- operations
Relationship marketing
Over-dependence on
Consistency as only one
store and independence
owner
Strong entrepreneurial Limited long-run
leadership planning
4-5
Chain Retailers
Operate multiple outlets under common
ownership
Engage in some level of centralized or
coordinated purchasing and decision making
E.g- McDonald,
Lilliput,Archies,pantaloons,pizza hut,big
bazaar
4-6
Competitive State of Chains
Advantages Disadvantages
Bargaining power Limited flexibility
Cost efficiencies Higher investment
Efficiency from costs
computerization,
Complex managerial
sharing warehouse
and other functions control
Defined management Limited
philosophy independence among
Considerable efforts personnel
in long-run planning
4-7
Franchising
A contractual agreement between a franchisor and
a retail franchisee, which allows the franchisee to
conduct business under an established name and
according to a given pattern of business
Franchisee pays an initial fee and a monthly
percentage of gross sales in exchange for the
exclusive rights to sell goods and services in an
area
Key franchisers- Aptech, chabbra 555, koutons,
NIIT,Mcdonald,priknit,vishal,
4-8
Franchise Formats
Product/Trademark Business Format
Franchisee acquires Franchisee receives
the identity of a assistance: location,
franchisor by quality control,
agreeing to sell accounting systems,
products and/or startup practices,
operate under the management training
franchisor name Common for
Franchisee operates restaurants, real-estate
autonomously McDonald, Café Mocha
Auto dealers,
4-9
Competitive State of Franchising
Advantages Disadvantages
Low capital required Oversaturation could
Acquire well-known occur
names Franchisors may
Operating/ overstate potential
management skills taught Locked into contracts
Cooperative marketing Agreements may be
possible cancelled or voided
Exclusive rights Royalties are based on
Less costly per unit sales, not profits
4-10
From the Franchisor’s Perspective
Benefits Potential Problems
National or global Potential for harm to
presence possible reputation
Qualifications for Lack of uniformity may
franchisee/operations are affect customer loyalty
set and enforced Ineffective franchised
Money obtained at units may damage resale
delivery value, profitability
Royalties represent Potential limits to
revenue stream franchisor rules
4-11
Leased Departments
• A leased department is a department in a retail
store that is rented to an outside party
– The proprietor is responsible for all aspects of its
business and pays a percentage of sales as rent
– The department store sets operating restrictions
to ensure consistency and coordination
– PVR multiplexes
4-12
Competitive State of
Leased Departments
Benefits Potential Pitfalls
Provides one-stop Lessees may negate
shopping to store image
customers Procedures may
Lessees handle conflict with
management department store
Reduces store Problems may be
costs blamed on
Provides a stream department store
of revenue rather than lessee
4-13
Vertical marketing System
• It consists of all the levels of independently
owned businesses
manufacturer,wholesaler,retailer along a
channel of distribution.
• All work together to satisfy customer i.e no
individual approach or profit maximisation.
4-14
Figure 4-8a: Vertical Marketing
Systems
Independent Channel System
Functions:
Manufacturing
Wholesaling
Retailing
Ownership:
Independent Manufacturer
Independent Wholesaler
Independent Retailer
Used- when manufacturer or retailer are small .all three try to reach customer
In case of intensive distribution is required
E.g- food stores,drug stores,coke,toys R us,
4-15
Figure 4-8b: Vertical Marketing
Systems
Partially Integrated Channel System
Functions:
Manufacturing
Wholesaling
Retailing
Ownership:
Two channel members own all facilities and
perform all functions
Used when manufacturer ,retailer are large and exclusive distribution is sought
Wholesale activity is expensive
e.g- furniture stores
4-16
Figure 4.8c: Vertical Marketing
Systems
Fully Integrated Channel System
Functions:
Manufacturing
Wholesaling
Retailing
Ownership:
All production and distribution functions
are performed by one channel member
Used when manufacturer is resourseful and need direct interaction with cutomer
e.g-kroger( food retailer),Avon,Hallmark, Sear,Reliance fresh,vishal mart
4-17
Consumer cooperatives
• Retail outlets owned and managed by its
customer members
• Started coz local retailer is not able to
satisfy
• Kendriya bhandar managed by govt
• Super bazaar in delhi
• Apna bazaar in mumbai
4-18
