Ownership Forms
-Independent
-Chain
-Franchise
- Leased Department
Independent Retailers (Ownership Forms)
Retailer owns one retail unit. Capitalize on a very targeted customer base and please shoppers in a friendly, informal way. Word-of-mouth very important
- 2.2 million independent US retailers
- Account for 1/3 of total store sales
- 70% of independents op
Independent Retailers Advantages
- Flexibility in formats, locations, and strategy
- Control over investment costs, personnel functions, and strategies
- Personal image
- Consistency and independence
- Strong entrepreneurial leadership
Disadvantages Independent Retailers
- Lack of bargaining power
- Labor intensive operations
- Over dependence on owner
Chain Retailers Definition (Ownership Form)
- Operate multiple outlets under common ownership
- Engage in some level of centralized or coordinated purchasing and decision making
- Approx. 110,000 operating in the US
Examples:
- Walmart
- Best Buy
- Walgreens
Chain Retailers Advantages
- Bargaining power
- Efficiency maintained by computerization warehouse sharing, and other functions
- Defined management philosophy
Chain Retailers Disadvantages
- Limited flexibility
- Higher investment costs
- Complex managerial control
- Limited independence among personnel
- Excessive standardizations due to extreme concern for bargaining power
Franchising
- A contractual agreement between a franchisor and a retail franchisee
- 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 area
Examples:
McDonald's
Subway
Jimmy Jo
Franchising Advantages
- Low capital required
- Acquisition of well known names
- Operating/management skills taught
- Cooperative marketing possible
- Exclusive rights
- Less costly per unit
Franchising Disadvantages
Over saturation could occur
- Franchisors may overstate potential
- Contractual confinement
- Agreements may be cancelled or voided
- Royalties are based on sales, not profits
Leased Departments (Ownership Form)
- A department in a retail store that is rented out by an outside party
- The proprietor is responsible for all aspects of its business and pays a percentage of sales as rent
- The department stores sets operating restrictions to ensure consistency and co
Common Leased Departments
- Cosmetics/fragrance
- Salon/spa
- Fine Jewelry
- Photo Studio (CPI)
- Optical
Leased Departments Benefits
- Provides one stop shopping to customers
- Lessees handle management
- Reduces store costs
- Provides a stream of revenue
Leased Departments Potential Pitfalls
- Lessees may negate store image
- Procedures may conflict with department store
- Problems may be blamed on department store rater than lessee