Food Retailers

There are many types of food retailers today, although just 60 years ago food was usually purchased in only one kind of store: the neighborhood grocery.

• Conventional supermarket
• Superstores
• Combination stores
• Warehouse grocers
• Convenience stores
• Hypermarkets and Supercenters

Supermarkets have changed considerably through the years. Sixty years ago, a store that held a few thousand items was a big store. By the 1950s, 15,000 items was state of the art. Today, 30,000 or more stockkeeping units (SKUs) is the norm, with about 40% of them actually being non-food items.

Convenience stores are the antithesis of supermarkets. They thrive on carrying much less, but in return they offer 24-hour access and convenient shopping. 7-Eleven celebrated their 77th anniversary in 2004, testimony to the fact the c-stores have actually been around much longer than most people realize (and the Slurpee was introduced in 1966).

Warehouse stores are still around, but in limited number. They became popular in the late-1970s and early-1980s when inflation ravaged the US economy. Offering lower prices, few services, and rather austere shopping environments, they appealed to those who wish to save a few dollars in their grocery bill.

The latest trend is the supercenter, dominated by Wal-Mart, and imitated by Big K and Target. These feature, on average, 200,000 square feet of discount merchandise and groceries all under one roof. Supercenters often offer automotive services, as well as a variety of other conveniences (e.g., fast food, hair care, eyewear, and banking).

Competition in food retailing has intensified greatly. It is also becoming more concentrated at the regional and national levels than ever before. Furthermore, price competition has intensified, with a mix of hi-lo pricing and EDLP. Wal-Mart is now the largest food reailer in the US. Among the supermarket-only companies, Albertson's, Kroger, and Safeway continue to consolidate their power bases by acquiring many regional chains.

General Merchandise Retailing

• Specialty stores, which often focus on very narrow product categories and/or market segments. Also note the emergence of lifestyle retailing. A good example of this is REI.
• Drug Stores, which now carry far more than just pharmaceuticals and health & beauty aid items. Most drug stores are now enormous convenience stores that happen to have a pharmacist in the back of the store.
• Department stores (both large traditional ones and the newer mid-size and small department stores). The trend has been away from downtown flagship stores, and more toward suburban stores that are often a mere shadow of their former downtown predecessors.
• Leased departments. Many departments in both departments stores and mass-merchandising discount stores are in fact leased out to smaller operators. In spite of this, the shopping experience is seamless for shoppers, who never know the difference.
• Discount stores (general merchandise). Started by S.S. Kresge and Ben Franklin stores, improved upon gratly by K-Mart (owned by Kresge), and perfected by Wal-Mart, these stores are now the most popular category of stores in the US.
• Warehouse Clubs. Sam's Club and Costco have figured out the formula for success. Get people to pay $25-$45 per year for a membership that allows them "exclusive" access to about 4000 different SKUs.
• Category Killers. Technically, any of the "big box" stores that focus on one or a few related product categories are category killers. Usually with low prices and an enormous selection, they are represented by the likes of Best Buy, PetSmart, Office Max, and the like.
• DIY stores, like Home Depot and Lowe's. Once called lumber yards, these new behemoths appeal to men and women alike. Home Depot is now the second largest retailer in the US, with annual sales of $40 billion.
• Off-Price Retailers like TJ Maxx and Ross have done a great job appealing to fashion- and budget-conscious shoppers, particularly women. They carry an ever-changing selection of manufacturer overruns, out-of-season merchandise, and other odds and ends that did not sell well the first time around.
• Outlet stores, which are usually owned by the manufacturers themselves, are clustered in large outlet malls that appeal to a surprisingly lucrative segment of the market. Most carry overruns and out-of-season merchandise, but some offer items that are not for sale in any of the "traditional" retailers carrying their lines.
• Close-out stores like Big Lots specialize in very distressed merchandise, meaning out-of-date foods, salvage items, and anything else their buyers can scoop up cheaply. Their inventory changes almost daily.
• One-price Retailers like "Everything's a $1" sell everything at...you guessed it...$1. These stores usually offer a small selection of cheap merchandise that, once again, has not sold well elsewhere.
• Catalog showrooms were the rage in the 1970s and 1980s, as Service Merchandise and Best Products led the way. But customers tired of having to fill out order forms and wait around while someone found their products in the storeroom.
• Hypermarkets and Supercenters (again). This is the natural evolution of the discount store. Wal-Mart, Big K (K-Mart), Target, and Meijer's Thrifty Acres are the biggest players in this arena.

Services Retailers

Service providers are coming to provide ever more services to a population that is hurried and harried, never with enough time to get everything done themselves. Retailers of all types operate on a continuum between tangible products and intangible service, with product-only retailers on one end, and service-only retailers on the other. Most retailers fall somewhere in the middle.

Services have the following traits:

• Intangible, meaning you cannot directly touch a service (although you may be able to touch the results of a service).
• Inseparable production and consumption. They are performed/made and consumed at the same time.
• Perishable, meaning that they cannot be stored.
• Variable in quality, meaing that the human element is a factor. Variability both within and between human service providers guarantees that service managers will have migraines for many years to come.

Types of Ownership

1. Independent. The US Census Bureau defines an independent business actually as anywhere from 1-10 units owned by a private person, family, or group of persons.
2. Retail co-op, such as True Value Hardware. The member stores pool their resources to create and support a central buying and marketing unit that provides economies of scale to all its members.
3. Wholesaler-sponsored voluntary chains. These are similar to retail co-ops above, except that the impetus is from a originating wholesaler who seeks member stores with whom to have an exclusive supplying arrangement. A good example is Affiliated Foods or IGA.
4. Corporate chain, which technically is 11 or more units with common ownership.
5. Franchises, which are individuals or even corporations that pay an up-front fee as well as annual payments to a franchisor for the right to use their business concept and name.