*Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice HallRetail Institutions by Ownership1RETAIL MANAGEMENT: A STRATEGIC APPROACH 11th Edition11th EditionBERMAN EVANS1Chapter ObjectivesTo show the ways in which retail institutions can be classified To study retailers on the basis of ownership type and to examine the characteristics of each To explore the methods used by manufacturers, wholesalers, and retailers to exert influence in the distribution channel2 2Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall*Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice HallI OwnershipII Store-Based Retail Strategy MixIII Nonstore-Based Retail Strategy Mix 3 3Ownership FormsIndependent Chain Franchise Leased department Vertical marketing system Consumer cooperative4 4Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice HallIndependent Retailers2.2 million independent U.S. retailers Account for one-third of total store sales 70% of independents operated by owners and their families Why so many? Ease of entry5 5Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall*Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice HallCompetitive State of IndependentsAdvantages Flexibility in formats, locations, and strategy Control over investment costs, personnel functions, and strategies Personal image Consistency and independence Strong entrepreneurial leadershipDisadvantages Lack of bargaining power Lack of economies of scale Labor intensive operations Over-dependence on owner Limited long-run planning6 6Figure 4-2: Useful Online Publications for Small Retailers7 7Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice HallChain RetailersOperate multiple outlets under common ownership Engage in some level of centralized or coordinated purchasing and decision making In the U.S., there are roughly 110,000 retail chains operating about 900,000 establishments8 8Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall*Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice HallCompetitive State of ChainsAdvantages Bargaining power Cost efficiencies Efficiency maintained by computerization, warehouse sharing, and other functions Defined management philosophy Considerable efforts in long-run planningDisadvantagesLimited flexibilityHigher investment costsComplex managerial controlLimited independence among personnel9 9Figure 4-3: Louis Vuitton A Powerhouse of Upscale Retailing1010Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice HallFranchisingA contractual agreement between a franchisor and a retail franchisee that 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 area11 11Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall*Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice HallFranchise FormatsProduct/ Trademark franchisee acquires the identity of a franchisor by agreeing to sell products and/or operate under the franchisor name franchisee operates autonomously 2/3 of retail franchising salesBusiness Formatfranchisee receives assistance: location, quality control, accounting systems, startup practices, management trainingcommon for restaurants, real- estate1212Figure 4-5: Business Qualifications Sought by McDonalds for Potential FranchiseesFinancial resourcesCustomer and employee focusStrong creditWillingness to complete trainingAbility to manage financesPlanning abilityGrowth capabilityIdeal FranchiseeExperienceFull-time commitment1313Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice HallFigure 4-6: Structural Arrangements in Retail Franchising1414Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice HallWholesaler-Retailer Structural Franchising ArrangementsVoluntary: A wholesaler sets up a franchise system and grants franchises to individual retailers Cooperative: A group of retailers sets up a franchise system and shares the ownership and operations of a wholesaling organization1515Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice HallFigure 4-7: Franchise and Business Opportunities1616Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall*Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice HallCompetitive State of FranchisingAdvantages low capital required acquisition of well- known names operating/ management skills taught cooperative marketing possible exclusive rights less costly per unitDisadvantages over-saturation could occur franchisors may overstate potenti