What are the different types of Retail Operations?

Those who are familiar with retailing, either as practitioners or as students learning about the industry, understand that each organization requires a specific structure to carry out its goals. There are many different types of retail operation—those that are more traditionally oriented such as department stores, chains, and single-unit independents; operations that exclusively feature their own merchandise under private labels; franchises and licensed stores; and the off-site variety, from which continued growth is expected. The latter classification is a typical in retailing in that the operations do not have store locations. It is these retailers—specifically catalog operations, home shopping networks, and Internet Web sites—that are expected to make great gains in sales.

1. Chain Organizations

In the early days of retailing, the general store was often the place in which consumers could make their purchases. General stores offered a variety of unrelated products. When merchandise became more plentiful, merchants began to specialize in just one type of goods in new ventures called limited line stores. These ventures, ultimately to become known as specialty stores, were greeted with success, and their owners began opening other units. Thus, the chain organization, a name given to two or more units (often as many as a couple of thousand) under common ownership, enjoyed extreme financial rewards.

Today, the majority of the chains are centrally organized. They are managed from corporate headquarters, where all of the decision making is made. The buyer operates from this centralized facility and has very little in-store contact with the various units. The major responsibility is purchasing, with communication coming by way of the telephone, faxes, and e-mail.

Some of the typical chains are Target and Walmart, each of which operates as discount value-oriented merchants; Petite Sophisticate, a traditional operation that specializes in apparel for the smaller-female figure; The Limited, a company that deals exclusively with their private-label brands; and SteinMart, an off-price operation.

2. Department Stores

Department stores are either of the full-line designation, in that they carry a wide assortment of hard goods and soft goods, and occasionally prepared and gourmet foods, or the specialized entries that restrict their offerings to one or two merchandise types, such as apparel and accessories. The former group includes companies like Macy’s, Dillard’s, and Belk, and the latter, Neiman Marcus and Nordstrom.

3. Flagship

In the vast majority of these companies, the buyer operates from the store’s main retail facility, known as the flagship, and is responsible for purchases for that unit as well as the branches. Others, however, operate from centralized locations, similar to those utilized by chains. At one time, the sales staff was the buyer’s responsibility, but as organizations expanded, this management function was generally removed as a day-to- day activity. Today, with catalogs and Internet Web sites becoming important to these retailers, some buyers are called on to make purchases for these outlets as well as for the stores.

4. Single-unit Independents

Although the trend has been and continues to be big business in retailing, there are still entrepreneurs who wish to operate their own stores. Many of them are extremely successful since they are able to offer their clientele both specialized merchandise and personalized services. Most important in this classification are specialty stores that feature just one item such as shoes, jewelry, or apparel, and boutiques that generally sell limited quantities of higher-priced ladies apparel and accessories, and sometimes custom-made items. The owner usually has the buying responsibility, although in these independent ventures, as they grow in size, other professional buyers may be used.

5. Franchised Operations and Licensed Stores

Before you can actually understand the role of the buyer in a franchised operation, it is necessary to become familiar with the franchising concept. As defined by the Small Business Administration, “A franchise contract is a legal agreement to conduct a given business in accordance with prescribed operating methods, financing systems, territorial domains, and commission fees.

There are two major parties in a franchising arrangement, the franchiser and the franchisee. The former is the party who has come up with the concept. He or she has developed a product, idea, or formula that is generally retail-oriented. After a few units have become successful retail operations, expansion could take place, as in the case of traditional chain organizations in which all of the stores are centrally owned and managed. In franchising, the franchiser chooses to go the expansion route by allowing individuals to open stores in specific locations. For a startup fee, and other monetary requirements, the franchisees, or owners of theses individual units, are given the right to operate their own businesses. Of course, as the earlier definition indicates, the franchisees must follow specific rules and regulations that have been set forth by the franchisers. The vast majority of franchises are food-oriented and bear such famous names as McDonald’s, Wendy’s, and Burger King. There are, however, many others that retail wearing apparel, accessories, and home furnishings.

6. Licensing

Similar to franchising is licensing. The significant difference is that in franchising there is a startup fee for the privilege of becoming a member of a franchise family. In licensing, there typically isn’t a startup fee. One of the most well-known licensed arrangements is Benetton—the largest retail licenser in the world, with more than 500 units in the United States alone. Another is Ralph Lauren. As with the franchise arrangement, licensees are required to follow the merchandising philosophies established by the licensers. The buyer’s role in both franchising and licensing is quite different from that in any of the other retailing formats. The merchandise sold in the stores is either produced by the franchiser or licenser or purchased by buyers for distribution to the individual units. Generally, the individual stores have no buying responsibility. In some situations, however, the individual merchants have some say about the merchandise assortments they will carry in their stores.

7. Catalogs

The catalog phenomenon continues to grow. What was once a method to bring some extra sales revenue to retailers, catalog selling is now a retailing mainstay? The major department stores such as Macy’s, Marshall Field, Bloomingdale’s, Belk, and Dillard’s, as well as the chains like Victoria’s Secret, Crate & Barrel, and Pottery Barn use catalogs throughout the year to reach their markets. Some of the stores feature catalogs in which the merchandise is available only through this means.

Other retail organizations use the catalog as their only means to reach the target markets. They have neither stores in which customers may shop nor any other means to sell their goods.

8. Home Shopping Networks

With more and more people having less time to shop in stores, cable television has given them the opportunity to make purchases right from their easy chairs. The two major entries are QVC and HSN. They sell a variety of merchandise with the specialties of both being jewelry and women’s apparel. With reported sales by these major outlets at more than 25,000 transactions per hour, the buyers are constantly scouring the globe for merchandise.

9. Internet

In terms of overall retail sales, the Internet has yet to generate significant revenues for the majority of the companies using it, in order to make them profitable. Each year, however, they regularly beat the previous year’s sales. This channel is being used by retailers all over the world with established stores and catalogue operations. Some businesses are based exclusively on the Net, with this their only means of selling to consumers.

One enormously successful Web site is amazon.com, which sells books and CDs at discounted prices. As with the other retail concepts such as the in-store ventures and off-site outlets, the buyer plays a significant role.

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