Low prices offered by them can”kill” a category of merchandise for other retailers, mainly speciality stores. Other features of category killers include low levels of service, location – out of town location, extensive parking, Store architecture and very simple design. Some examples of category killers include – sports (Decathelon), Furniture (IKEA), office (Office Depot), toys & baby products (Toy ‘R’ us or Babies ; ‘R’ us).
iii. Department Stores:
Most of the Department stores operate below one roof of large buildings but due to realty prices, they operate from multi-stored facilities in major cities. These stores are large retail units, with wide variety and deep assortment under one roof. These are structured into different departments Clothes, Accessories, appliances, home furnishing, jewellery, cosmetics, toys, furniture, sports goods, kitchen wares, garments or consumer electronics. Location may be spread across city centres.
They often serve as anchor stores in shopping stores. The Department Stores may be full-line (carry both hard and soft lines of merchandise) and limited-line (usually focus on up market soft lines). These are the general merchandise retailers offering various kinds of quality products and services. These do not offer full service category products and some carry a selective product line. K. Raheja’s Shoppers Stop is a good example of department store. Lifestyle and Westside are the other examples of department store. Another classification of departmental stores can be –
1. Upscale, high fashion stores with exclusive designer merchandise and excellent customer service. Flagship stores of department store chains. Harrods (UK), Paris Haussmann (France), Saks Fifth Avenue (USA),
2. Modestly priced, mid level merchandise with less customer service – Macy’s (USA), and
3. Stores with lower level merchandise and prices (Sears, JC Penny). Most of the department store chains operate in all the three tiers.
Full-line stores provide merchandise for all ages. Other important factors are lifestyle factors, brand preferences, and other demographics such as income and ethnic background. Target markets of limited-line stores are more narrowly defined and price levels typically are higher than in full-line department stores.
Departmental stores enjoy many advantages – first, a new feature has emerged which combines the best aspect of specialty store and branded merchandise by adding store- with-in-store formats; second, they achieve higher gross margins through private- labels; and third, they are also reaching out to new segments.
However, the share of department stores in sales has declined in the last few years due to increased competition from category killers and discount stores and non-store formats, lacklustre merchandise, loss of focus, excessive promotions, industry consolidation, and inconsistent customer care.
These are the largest form of retail formats. They offer an ideal shopping experience by providing a mix of all kinds of products and services, food and entertainment under one roof. Examples are East Delhi Mall, Pacific Mall, Ambience Mall, etc.
“Mall’s day is yet to come.”
Malls are not yet venues for serious shopping but are more a hunt of the window shopper, impulse purchaser and the cinema-goer. Mall footfalls have a different mindset. The reasons are –
(a) Most of the cities are yet to see malls which are well managed.
(b) Except for a handful of malls most do not offer customers the experience and delight they promise.
(c) In some of the reasons, such as NCR, malls have been ‘over built’.
(d) The mall developers’ rental models are never transparent.
(e) Attitude of mall developers – where shops are running after care takers begging them to turn on air conditioning
Some Suggestions: Adequate car parking, ambience, ensuring customer delight, and where the customer is treated as a king.
v. Specialty Store:
The retail chains dealing in specific categories of goods and provide deep assortment in these categories are specialty stores. There are specialty retail stores for all merchandise categories – clothing, shoes, accessories, food, appliances, automotive supplies, home electronics equipment, furniture, toys, home furnishings, jewellery, health and beauty, books and music. Examples in India include Music World of RPG, Crossword (Bookstore), Chroma of Tatas, etc.
In the services sector we have salons (Lever Lakme, Kaya, Shahnaz Husen, etc), spas (Ayush of HUL, Mahindra Resorts, etc), healthcare (Dr Lai’s Lab, Religare, etc). Specialty stores reduce risk if they keep the merchandise according to tastes of targeted customers. Specialty stores are vulnerable to oversaturation; with rapidly turning merchandise, every season has to be on-trend or sales suffer; and these stores are over-dependent on changes in customer preferences or of outgrowing a customer. Reebok has 900 outlets in 325 cities in India.
vi. Discount Stores:
These are the self-service stores, general merchandise or factory outlets that provide discount on MRP items. They focus on mass selling and reaching economies of scale or selling the stock left after the season is over. Discount store may be Full Line Discount Stores. Most stores operate on 50,000 to 80,000 sq feet. These stores accept lower margins for higher volumes. These provide wide assortment from food to toys to automotive services, garden supplies, and sports equipment.
A full line department store offers a broad variety of branded merchandise at low prices, from such categories as electronics, furniture, gardening tools, and so on and so forth. These have origin in the US with Wal-Mart, Kmart, and Target. Store architecture and in-store design are very simple, to keep cost low.
Merchandise less fashion oriented than in department stores. Full line discount stores offer store brands and manufacturer brands and limited customer service. Customers use shopping carts and pay at centralised checkout area. Such stores have strong competition from hypermarkets and from category killers in each specific category. This is why, Wal-Mart had to close some of its full line discount stores or convert them to superstores.
They are considered the poor cousins of retailing. But discount stores that sell apparel and accessories at 30-40 per cent lower than the marked price are giving the primary retail chains a run for their money.
According to India Retail Report prepared by Images, discount stores are expected to grow 30-40 per cent every year. Of the total organised apparel, footwear and accessory retail market of Rs 26,400 crore (Rs 264 billion), discount retailing already accounts for Rs 11,880 crore (Rs 118.80 billion), or 45 per cent. Analysts said this segment will easily become a Rs 26,000-crore (Rs 260 billion) market in the next three years.
No surprise, discount retailers such as Future Group’s Brand Factory, Arvind Brands’ Megamart, Provogue’s Promart and The Loot, are planning to invest huge sums to expand even into tier-II and tier-III towns. The strategy is based on research studies that consumers in these towns aspire for good labels but at a cheaper price. Bipin Gurnani, chief executive of Promart, said his aim is to create a huge “second rung of brand loyalists”.
“It is a win-win situation for the company. While our discount stores clear our unsold inventory, the main stores can launch new merchandise every season,” says KE Venkatachalapathy, business head, Megamart, the discount store of Arvind Brands.
vii. Hard Discounters:
Follow a very aggressive everyday low price strategy with prices up to 20% to 30% below those of conventional super markets. They offer limited assortment. Basic assortment consists of food items with a high turnover and few sizes and brands offered per product category. Internationally successful hard discounters include German Aldi or Lidl chains and Carrefour’s Dia.
No frills setting, store design and atmosphere are very simple and cost oriented. Often products are sold out of boxes (“box stores”) or are presented on pallets. Rely more on store or private labels. Select different non food items which are sold every week at very low rates, promoted heavily by newspaper advertising or distribution of flyers to households.
Non-food items include a variety of product categories, often having no association with the regular merchandise carried by the retailer. Purpose is to increase footfalls and realise a better margin over them. Located in easily accessible traffic oriented and cost oriented locations with adequate parking facilities.
viii. Variety Stores and Value Retailers:
Offer a broad assortment of inexpensive and popularly priced merchandise. Categories covered are clothes, accessories, jewellery, candy, toys, etc. Strong competition from category specialists, discount stores and food retailing formats that carry a range of non food items of similar product lines. To avoid competition they are targeting at low income customers and located in low rent areas.
ix. Off-price Stores:
Sell inconsistent assortment, like clothes, accessories, cosmetics or footwear at low prices. Retailers use aggressive buying strategy. Selling off-season and irregular items. One-price store and factory outlet is a type of off price retailers.
These are generally large self-service outlets, offering a variety of categories (food products and non-food products like cosmetics and non-prescription drugs) with deep assortments and central checkout facilities. Hypermarkets Originated in France. Size ranges from 9000 m2 to 30,000 m2 (e.g., Carrefour). These are located at isolated sites or close to shopping centres.
European formats have a larger share of food items ranging from 60 to 70% , in the USA, the “supercenters” format (like Wal-Mart, Kmart, Target) ranging from 14,000m2 to 21,000m2, carries a broader assortment of general merchandise. Future Group’s hypermarket chain Big Bazaar runs 138 stores across the country.
Conventional Supermarkets were located in neighbourhood locations and share of non-food items included 10% to 25%, which also covered health and beauty aids and products. Usually such stores are located in city or neighbourhood locations.
xi. Convenience Stores:
These are comparatively smaller stores located near residential areas with self-service element. Usually situated at locations that are easy to access, open for long hours (say 24 hours), small and family oriented, and facilities are limited.
Very limited assortment is food-oriented. These remain open for an extended period of the day and have a limited variety of stock and convenience products. Prices are slightly higher due to the convenience given to the customers. A high proportion of sale consists of impulse purchases, with most in areas as snack food, soft drink, beer and wine, milk, eggs, tobacco products, pan masala, eggs or newspapers and magazines. The average transaction in convenience stores is small and the prices are usually above average. Focus is on ease of shopping and mental convenience with limited assortment.
Larger and more diversified than conventional supermarkets. Size varies between 1000 m2 or 1500 m2 and 5000 m2 with expanded service delivery, bakery, seafood, and non-food sections. Share of non-food items ranging from approximately 20 to 40%.
A similar store larger than superstore (up to 9,500 m2) and offering higher share of non-food items (from 25 to 50% of sales) is sometimes referred to as Combination Stores. Combination stores lead to operating efficiencies and cost savings. Non-food items provide higher margins.
Superstores and combination stores can be located in city, or in neighbourhood or even in isolated sites, where customers can come by car. The chain of ‘More’ launched by Kumar Mangalam Birla in 2006 comes under the category of small supermarket stores.
xiii. Warehouse Clubs:
These stores are specific to the USA and not prevalent elsewhere. Business members represent less than 30% of the customer base with 70% sales, made to end users and small-sized firms. Membership is necessary with annual subscription. The largest warehouse clubs in the USA are Costco and SAM’s.
Warehouse Clubs have low prices for limited assortment comprising half food and half general merchandise. Their size ranges 9,000 m2 or larger, store architecture is very simple with concrete floors and wide aisles. Items are usually presented on pallets. Fast moving and high turnover merchandise is offered. In India no such stores are visible available.
Kiosks are box-like shops, which sell small and inexpensive items like cigarettes, toffees, newspapers and magazines, water packets and sometimes, tea and coffee. These are most commonly found on every street in a city, and cater primarily to local residents.