Retail Institutions by Ownership

CERVANTES DIO DOMINGO PERLADA SALAC

Independent
Small stores with a single location or up to three locations often owned by an individual, a family or a two person partnership.

Advantages
Flexibility to choose format, location and device a strategy Independents can easily sustain consistency in their efforts because only one store is operated Acts as specialists in a niche of goods/services Independence

Disadvantages
In bargaining with suppliers, independents may not have much power Operations are labor intensive Cannot spend much money on high-cost promotional tools

Chain
Chain retailer operates multiple outlets under common ownership.

Advantages
Chains have bargaining power due to their purchase volume Cost efficient Efficiency is gained by sharing warehouse facilities. Computer- reduce increase efficiency and reduces overall cost

Disadvantages
Flexibility is limited Consistent strategies must be maintained Difficult to adapt to local markets Investments are higher due to multiple lease and fixtures Managerial control is complex

FRANCHISING
Involves a contractual agreement between a franchisor and a retail franchisee which allows a franchisee to conduct a business under an established name and according to a given pattern of business.

 Small businesses benefit by being part of a large, chain-type retail institution.

Product/Trademark Franchising
Franchisee acquires the identity of the franchisor by agreeing to sell the latters products and/or operate under the latters name.

The franchisee operates autonomously.

There are certain operating rules, but the franchisee sets the: Store Hours Chooses Location Determines Facilities and Display

Business Format Franchising

More interactive relationship between the franchisor and franchisee. Receives assistance on site location, quality accounting systems, startup practices, management training, and responding to problems besides the right to sell goods and services.

 Business Format Franchising Arrangement are common to restaurants and other food outlets, real estate and service retailing

Ideal Potential Franchisee:

Financial Resources High Personal Integrity The Ability to Manage Finances A Proven Ability to Train and Motivate People An Entrepreneurial Spirit and Strong Desire to Succeed

 A Willingness to Complete a Detailed Training Program A Willingness to Devote Full Time to Day-to-Day Operations

Competitive Advantages and Disadvantages of Franchising

ADVANTAGES:
They own a retail enterprise with a relatively small capital investment. They acquire well known names and goods/service lines. Standard operating procedures and management skills may be taught to them.

 Cooperative marketing efforts (such as national advertising) are facilitated They obtain exclusive selling rights for specified geographical territories Their purchases may be less costly per unit due to the volume of the overall franchise.

DISADVANTAGES:
Oversaturation could occur if too many franchisees are in one geographic area. Due to overzealous selling by some franchisors, franchisees income potential, required managerial ability, and investment may be incorrectly stated.

 They may be locked into contracts requiring purchases from franchisors on certain vendors. Cancellation clauses may give franchisors the right to void agreements if provisions are not satisfied.

 In some industries, franchise agreements are of short duration. Royalties are often a percentage of gross sales, regardless of franchisee profits

Leased Department
Leased department are in-store locations rented to outside parties. A retail department that is leased to, and operated by, a separate company. Also known as a franchised department

Advantages
Market is enlarged by providing one stop customer shopping Personnel management, merchandise displays and reordering items are undertaken by lessees. Regular store personnel do not have to be involved Leased department operation procedures may conflict with store procedures

Disadvantages
Inflexibility Restrictions on items sold Lease nonrenewal Poorer results than expected

Vertical Marketing System

Consists of all the levels of independently owned businesses along a channel distribution.

Independent System
Manufacturing Wholesaling Retailing Independent Manufacturer Independent Wholesaler Independent Retailer

Partially Integrated System

Manufacturing Wholesaling Retailing Two channel members own all facilities and perform all functions.

Integrated System
Manufacturing Wholesaling Retailing All production and distribution functions are performed by one channel member.

Consumer Cooperative

A retail firm owned by its customer members.

Consumer Cooperative

Manages operations

Elects officers

Group of consumers who invest

Shares profits or savings

Consumer Cooperative
Consumer Cooperatives exist because:
Consumers think they can operates stores better than traditional retailers. Retailers inadequately fulfill customer needs for healthful and environmentally safe products. Assumes existing retailers make excessive profits and sell it as a merchandise for lower prices.