Chapter 4 ChatGPT Flashcards
Retail Institution
What is a retail institution?
A business’s format or structure, which determines how it operates in the market.
Example: Walmart operates as a chain retailer, while a family-owned bookstore is an independent retailer.
Types of Retail Ownership
What are the main types of retail ownership?
Independent Retailers
Chain Retailers
Franchises
Leased Departments
Consumer Cooperatives
Independent Retailers
What is an independent retailer?
A retail business owned and operated by a single person or family.
Advantages:
✅ Flexibility in decision-making
✅ Lower investment costs
✅ Direct customer relationships
Disadvantages:
❌ Limited bargaining power with suppliers
❌ High competition and failure rate
❌ Limited advertising reach
Example: A local bakery run by a single owner.
Chain Retailers
What defines a chain retailer?
A business with multiple store locations under common ownership.
Advantages:
✅ Brand recognition
✅ Bulk purchasing power
✅ Centralized decision-making
Disadvantages:
❌ Higher operational costs
❌ Less flexibility in local markets
❌ Complex management structure
Example: Target and Starbucks operate thousands of stores globally.
Franchising
What is franchising?
A business model where a company (franchisor) grants a retailer (franchisee) the right to operate under its brand.
Types of Franchises:
Product/Trademark Franchise: The franchisee sells products under the franchisor’s brand (e.g., car dealerships).
Business Format Franchise: The franchisee follows a complete business system (e.g., McDonald’s).
Advantages:
✅ Established brand and customer base
✅ Business support from franchisor
✅ Group marketing efforts
Disadvantages:
❌ High franchise fees
❌ Limited operational independence
❌ Revenue sharing with franchisor
Example: Subway and McDonald’s operate using the franchise model.
Leased Departments
What is a leased department?
A section of a store operated by an outside retailer.
Advantages for the Store:
✅ Increases product variety
✅ Generates rental income
✅ Reduces operational costs
Advantages for the Leased Retailer:
✅ Access to an established customer base
✅ Lower setup costs
Disadvantages:
❌ Risk of conflicting store policies
❌ Host retailer may increase rent or not renew leases
Example: Sephora inside J.C. Penney, Finish Line inside Macy’s.
Consumer Cooperatives
What is a consumer cooperative?
A retail business owned by its customers, who share in profits.
Advantages:
✅ Lower prices for members
✅ Focus on customer needs
Disadvantages:
❌ Requires active participation
❌ May lack professional management
Example: Recreational Equipment Inc. (REI) operates as a consumer cooperative.
Vertical Marketing Systems
What is a vertical marketing system (VMS)?
A structure where all supply chain levels (manufacturers, wholesalers, and retailers) coordinate to maximize efficiency.
Types of VMS:
Independent – Each business operates separately (e.g., local grocery store buying from various suppliers).
Partially Integrated – Some supply chain levels are combined (e.g., furniture stores handling their own distribution).
Fully Integrated – One company controls all levels (e.g., Kroger producing its own store-brand products).
Dual Marketing Strategy
What is a dual marketing strategy?
When a retailer uses multiple distribution methods to reach consumers.
Example: Sherwin-Williams sells its own paint in company stores and sells Dutch Boy paint in hardware stores.
Retail Influence in the Distribution Channel
How do retailers exert control in a distribution channel?
Manufacturers: Use strong branding and exclusive distribution deals.
Wholesalers: Provide bulk purchasing and franchise support.
Retailers: Create private-label products to gain control.
Example: Walmart influences suppliers by demanding lower prices for bulk purchases.
