MAR3231 Ex2 Ch5

independent retailers definition:

the owner (who is also often the manager) is solely responsible for the management and operations of the retail establishment.

• usually small, privately-owned businesses that operate independently and are not affiliated with any larger chain

why do indepedent retailers account for one-third of total store sales?

ease of entry

independent retailers advantages:

• Flexibility in formats, locations, strategy, etc

• Control over investment costs, personnel costs, personnel functions

• Easier to manage personal image

• Consistency and independence

• Strong entrepreneurial leadership

  • (Usually) Strong connection to their local community

independent retailers disadvantages:

• Lack of bargaining power

  • I.e. an independent company doesn’t have the same influence/control as Best Buy, for example, because they are held in a higher regard and will get better deals. 

• Labor intensive operations

• Over-dependence on owner

chain retailers definition:

a group of retailers that possess the same name, store policies, sell the same products, and are almost always owned by the same parent company.

chain retailers operate under common ownership, which means:

profits and losses made by each store are factored into the parent company’s financial reporting.

• Given this interwoven nature, they engage in some level of centralized or coordinated purchasing and decision-making.

_ retailers have a parent company that owns each location, while _ retailers have different stores/branches owned by separate individuals who are solely responsible for daily operations.

chain ; franchise

chain retailers advantages:

• Bargaining power

  • EX: Walmart is such a large retailer, that the benefit to sell to a company like them is huge. So companies will give them good deals to get in their stores.

• Efficiency maintained by computerization, warehouse sharing, and other functions

• Defined management philosophy (I.e. standardization on rules and operations)

chain retailers disadvantages:

• Limited flexibility

• Higher/expensive investment costs

• Complex managerial control 

  • Bureaucratic 

• Limited independence among personnel

• Excessive standardization due to extreme concern for bargaining power

retail franchising definition:

A contractual agreement between a franchisor and a retail franchisee.

• The 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

franchisee vs franchisor

• Franchisee: individual or group interested in purchasing usage rights of the brand

• Franchisor: the brand

retail franchising advantages:

• Low capital required

• acquisition of well-known names

• operating/ management skills taught

• cooperative marketing possible

• exclusive rights

retail franchising disadvantages:

• over-saturation could occur

• franchisors may overstate potential

• contractual confinement

• royalties are based on sales, not profits

  • So, if you’re mismanaging the business/losing money, you are still expected to pay the royalties on top of the revenue

Carefully designed leased departments offer a win/win scenario for:

both the retailer and the brand

leased departments definition:

 a department/space in a retail store that is rented to an outside party

leased departments contractual agreement:

• The outside party (lessee) is responsible for all aspects of its business and pays a percentage of sales as rent. 

• The retail store sets operating restrictions to ensure consistency and coordination 

As an independent retailer in Tallahassee, Loli & the Bean has additional challenges when competing with national chains because _____.

Loli & the Bean lacks the inventory management systems found in retailers like Wal Mart

independent retailers example:

• Loli and the Bean in Tallassee: impressive product display and popular with town locals

• Kevin’s: outdoor gear/apparel that sells name brand clothing

• Hearth and Soul in Tallahassee: Susie (the owner) has set up the store to look like a home. 

• Bramble & Wild: sells flower bouquets created with blooms from handpicked suppliers

A disadvantage for independent retailers is a lack of _____.

Management Succession Options

When considering the large number of retailer stores associated with this type of ownership, the need to develop and monitor a common image is most important for which retail institutions?

chains and franchises

It is advantageous for Governor’s Square Mall to have Mac Cosmetics as a leased department because  _____, but Governor’s Square should be concerned about _____.

Mac Cosmetics manages their employees : the effect Mac Cosmetics might have on the mall’s image