RETAIL INSTITUTION BY OWNERSHIP
*Retail institutions can be classified by ownership: independent, chain, franchising, leased department, vertical marketing system, and consumer cooperative.
*An independent owns only one retail unit. Since only one store location is involved, a detailed list of specifications can be derived for the best location and a thorough search can be undertaken. The one store location also lowers investment costs for leases, fixtures, employees, and merchandise. An independent often has the image of a friendly, personalized retailer.
*Chains are multiple retail units under common ownership, which utilize centralized purchasing and decision making. Competitive advantages for chain stores include bargaining power, wholesale function efficiencies, multiple-store efficiencies, computerization, access to media, well-defined management, and long-run planning. Chains have a number of disadvantages: inflexibility, high investments, reduced control, and limited independence.
*Franchising is defined as a contractual arrangement between a franchisor and a retail franchisee, which allows the franchisee to conduct a given form of business under an established name and according to a given pattern of business. A franchisor benefits because control is acquired and growth is increased. A franchisee benefits because a well-known name and shared costs are achieved at a reasonable price.
*A leased department is a department in a retail store that is rented to an outside party. The proprietor of a leased department is usually responsible for all aspects of its operations (including fixtures) and normally pays the store a percent of sales as rent. The store imposes various requirements on the leased department to ensure overall consistency and coordination.
*Vertical marketing systems occur when successive stages of production and distribution are owned by a manufacturer, wholesaler, or retailer or two of these categories. A vertically integrated firm can achieve many objectives such as self-sufficiency, lower costs through elimination of middlemen, direct contact with the consumer, greater bargaining power when dealing with outside suppliers or retailers, a sense of achievement, and time efficiencies in orders and deliveries.
*A consumer cooperative is a retail firm that is owned by its customers. A group of consumers invest, receive stock certificates, elect officers, manage the operations, and share the profits or savings that accrue.
*Do you believe that independent retailers will soon disappear from the retail landscape? Explain your answer.
No. While the relative number of independents is diminishing in favor of chains, independents will still continue to be strong in such areas as restaurants, dry cleaners, specialty clothing stores, appliance repair, etc. Independents also have some major competitive advantages as compared to chains: flexibility in strategy, lower investment costs, specialist strategy, control over strategy, independence, consistency, and a strong entrepreneurial drive.
*Why does the concept of ease of entry usually have less impact on chain retailers than on independent retailers?
Independents can emerge due to low capital requirements, no licensing requirements, and no zoning concerns. Large chain retailers are generally much better capitalized, and often compete with multiple formats in multiple markets.
*How can an independent retailer overcome the problem of little computerization?
The independent retailer can outsource common computerization areas such as accounting, taxes, inventory management, and sales analysis to specialists. Increasingly, software firms have also targeted independent retailers and smaller chains with software appropriate for these retailers. Many of these firms offer training sessions for store owners and managers.
*What difficulties might an independent encounter if it tries to expand into a chain?...
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