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Categorizing Retailers

Categorizing Retailers Assignment / Homework Help

Depending upon certain characteristics retailers can be classified into several categories. Retailers can be categorized on the basis of following six factors:
These groups are not mutually exclusive. In some ways all retailers can be included in each category.

  • Target Market Served
  • Here the classification is based on the type of markets a retailer intends targeting.

    • Mass Market
    • Mass market retailers focus on the largest market possible by selling products of interest to almost all the buyers. As mass market retailers have to attract customers from such huge markets the competition amongst them is very high.

    • Specialty Market
    • Here the category includes retailers focusing on specialty markets. Specialty markets cater to buyers who are looking for products with features that are beyond those in mass market. These customers are looking for special or advanced products. Here a higher level of customer service is also expected. Although not as large as the mass market the specialty retailers also target a sizeable market.

    • Exclusive Market
    • The number of retailers catering to exclusive market in a geographic location is generally small as the target market is small. The buyers interested in exclusive market products are willing to pay a premium for unique features and for highly personalized services. The number of such buyers is usually small.

  • Product Offering
  • Under this category the retailers are classified according to the width and depth of the products they offer. Width refers to the number of different product lines and depth refers to the number of products in each product line.

    • General Merchandisers
    • The general merchandisers are retailers who offer various product lines which mean they have a broad width. However, the number of different items in each product line is few, therefore a shallow depth.

    • Multiple Line Specialty Merchandisers
    • Retailers classified under this category offer a limited number of product lines so they have a narrow width. But they offer an extended selection in each line. They have a greater selection than the general merchandisers. Example is consumer electronics retailer.

    • Single Line Specialty Merchandisers
    • Some retailers have a very limited offering of just one product line that is a very narrow width. And sometimes in this single product line they offer a single product. An example here can be a small website selling a single product like computer gaming software.

  • Pricing Strategy
  • Retailers can also be classified on the basis of their pricing strategy. Some retailers use pricing for competitive advantage while others employ non-pricing strategies for competitive advantage.

    • Discount Pricing
    • Discount retailers usually sell low priced goods. Their profit margin is low that is price minus cost. They usually sell in high volume to make profit. The discount retailers try to keep overhead costs low by controlling expenses on things like real estate, website design, store layout and offer fewer services to customers.

    • Competitive Pricing
    • Some retailers are not interested in competing on price nor are they willing to be seen charging the highest price. Usually such retailers operate in specialty markets. They deeply study the market and ensure that their prices are competitive but do not desire to get engaged in price wars with the discount retailers. They therefore use other elements of the marketing mix like high quality products, beautiful store decoration etc to create higher value for money. The customers are there by lured into paying more.

    • Full Price Pricing
    • Retailers who are catering to exclusive markets realize that such markets are far less price sensitive than mass or specialty markets. Here, additional value added through increased operational expenditure (like expensive store location, more services) justifies higher prices. The retailers targeting exclusive markets sell in volumes less than those of discount or competitive market retailers however the profit margin in each product is far more.

  • Promotional Focus
  • Several promotional techniques are employed by the retailers to catch the customer's interest. Out of the various promotional techniques some retailers use one method as their primary promotional approach.

    • Advertising
    • Advertising is a mass promotional method which is employed by a sizeable number of retailers. The use of newspapers and television are traditional promotional methods still being used. For online retailers internet advertising is the preferred option.

    • Direct Mail
    • Various retailers use direct mail as their promotion technique. A bulk of the customer market can be reached through postal mails and postcards. Catalog retailers primarily use bulk mail to distribute their material. Apart from them small local retailers also use postcards for promotion.

    • Personal Selling
    • Retailers selling expensive high-end products realize that the most effective promotional method in their case is person to person contact with the buyers. The buyers expect such service and though many retailers also employ other promotional techniques like advertising personal selling is the best alternative in building customer relationship in such cases.

  • Distribution Method
  • Retailers are not bound to use only one distribution method they may use more than one method to fulfill their purpose.

    • Store-Based Sellers
    • Almost all buyers physically visit a retail outlet to obtain products of their need. This is the most traditional and predominant method. These store outlets can be further sub-divided into different categories based on features like is the store a stand-alone or physically connected to other stores etc.

      • Stand-Alone
      • These stores do not have other retail outlets connected to it, as the name suggests these stand-alone.

      • Strip-Shopping Center
      • Here the store arrangement is of two or more retail outlets physically connected to each other and sharing physical resources (e.g. a parking lot).

      • Shopping Area
      • A shopping area is like a city shopping district, where many retail outlets operate. These outlets may not be physically connected but are at close proximity. It is a huge retail shopping area with large number of retailers operating independently but with their outlets in close proximity.

      • Regional Shopping Mall
      • It is a huge self-contained shopping area with various connected outlets.

    • Non-Store Sellers
    • For the benefit of the shoppers retailers are fast adopting a new style of marketing their product. The customers do not need to physically visit a retail store to buy a product but can do the same sitting in their home.

      1. Online Seller
      2. The retailer sells his products over the internet. This is a fast growing retail method where the delivery of the product is usually handled by a third party.

      3. Direct Marketers
      4. These marketers are basically retailers selling mainly through direct method. They have one location where they receive orders but it does not receive customers to physically visit and buy. Orders are received through telephone or mail.

      5. Vending
      6. Vending machines are included in this category even though a customer has to be physically present at the machine to buy. This is so because the vending operations are not located at the vending company's place of business.

  • Service Level
  • Apart from providing desirable products at reasonable price the retailer also focuses on providing the customer with services that enhance the purchase experience.

    There are at least three levels of retail service, they are:

    • Self-Service
    • Here the consumer performs almost all the services. Some customers enjoy such shopping experiences and believe it gives them more freedom while others find it bothersome. Self-service provides self-selection services such as online and vending machine purchases. A self-checkout service is also a part of self-service design, here the customer is helped with the selection but the payment and scanning is done at self-checkout stations.

      1. Assorted Service
      2. The retailers provide various kinds of services to their customers. These include assistance at the point-of-purchase, helping the customer while selecting the product, explaining and arranging payment plans, product delivery etc. Some level of service is always provided to the buyer.

      3. Full Service
      4. As the name suggests almost all kinds of services available are provided to the customer. The customer just needs to select the product and the rest is looked after by the retailer. Retailers who provide full service to their customers do this as a value addition to the customer's buying experience.

  • Ownership Structure
  • Retailers can also be categorized on the basis of the structure of their business.

    • Individually Owned and Operated
    • In this kind of ownership structure the retailer or a corporate entity owns and operates a single or very small number of outlets. Mostly all small retail stores are examples of single ownership.

    • Corporate Chain
    • A chain of retail stores owned and operated by a single entity, all performing similar retail activities. There are no fixed numbers as to how many retail outlets make a retail or corporate chain, but the general assumption is more than five retail outlets when owned and operated by a single entity make a corporate chain.

    • Corporate Structure
    • Corporate structure includes large retailers who fall in the non-store category. They include online retailers, catalog and vending.

    • Contractually Licensed and Individually Operated
    • In this form of ownership structure the retail outlet operator is not the outright owner of the business. There is a legal contract between the store owner and the marketer. The retail outlet owner is allowed to borrow the marketer's business concept in return for some percentage of revenue. Example of this form of ownership is seen in retail franchising

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