The three major situational influences are Time, Place and Conditions.
Retail outlets are physical (or virtual online) stores that sell product/services. Manufacturing companies make the products that retail outlets sell. Retail outlets can be an independent retailer, a chain store or a franchise. An independent retailer usually only has one location and is a small business owned by a person or group of people. A chain store is a store with many locations throughout a region. A franchise is when a corporation sells partial ownership of their store locations to local businesspeople. The owner then runs the store for the corporation and in turn makes a percentage of the sales as profit. McDonald’s is perhaps the best known franchise in the world. There are several different types of retail outlets, each with its own level of service and product assortment. The amount of gross margin a company makes often depends on their level of product turnover. The less product turnover a company has the more likely they are to need high prices in order to make a profit. Here is a chart with some examples of the different types of retail outlets:
Type of Retailer |
Example |
Service Level |
Product Assortment |
Price |
Gross Margin |
Description |
Department Store |
Macy’s, Bloomingdales, JC Penny |
Medium to High |
Wide |
High |
High |
Due to the high overhead and the exclusivity, product doesn’t turnover quickly so prices are high, and profit must be made off of the price |
Specialty Store |
Harley Davidson Store, Pet Smart, IKEA |
High |
Narrow |
Medium to High |
High |
Sell only special items in one category and therefore don’t have high turnover so profit must be made off of prices |
Supermarket |
Kroger, A&P, Publix, Albertsons |
Low |
Wide |
Low to High |
Low |
Profit is made from turnover of product and the number of customers—if more customers come into the store they will have more sales; and the more time customers are in the store the more money they will spend |
Convenience Store |
7-11, Shell, Exxon, BP |
Low |
Narrow |
High |
Medium to High |
Usually a small store attached to a gas station—prices are high due to the small selection and the lack of options by the customer |
Drugstore |
Walgreens, CVS, Rite Aid |
Low (high at the pharmacy counter) |
Medium |
Medium |
Low |
A store with a limited selection of convenience items with a pharmacy counter inside |
Full-Line Discounter (Big Box Store) |
Wal-Mart, Target, www.amazon.com |
Low to Medium |
Wide |
Low to Medium |
Low |
Profit is made from turnover of product and the number of customers—if more customers come into the store they will have more sales; and the more time customers are in the store the more money they will spend |
Supercenter |
Wal-Mart Supercenter, Super Target |
Low to Medium |
Wide |
Low to Medium |
Low |
A Full-Line Discounter with a grocery store attached |
Specialty Discounter |
Ross, Marshalls, www.overstock.com |
Low |
Medium |
Low to Medium |
Low |
These stores sell product that did not sell at more expensive stores. Products are usually brand names, prices are lower and store usually specializes in one type of product—such as clothes and shoes. |
Warehouse Club |
Costco, Sam’s Club |
Low |
Wide |
Low (but have to buy in bulk) |
low |
Customers have to pay a membership fee to shop; Product is sold in bulk; Wide product assortment including groceries, home goods and electronics at discounted prices |
Off-Price Retailer |
Big Lots, Dollar Tree, Family Dollar |
Low |
Narrow to Medium |
Low |
Low |
These stores sell product that did not sell at other stores. Prices are lower and there is a high rotation of product so the store may not sell the same products all the time. |
Thrift Store |
Salvation Army, Goodwill |
Low |
Medium |
Very Low |
Very Low |
Products are donated and have been used by other people. Prices are extremely low and most of the profit is given to charity. |
Restaurant |
McDonalds, Starbucks, La Bernadin (in New York City) |
Very Low to Very High |
Very Narrow |
Very Low to Very High |
Low to High |
An establishment that serves food prepared by chefs in a kitchen; this can range from fast food to a lavish 10 course sit down meal. Prices vary according to service level. Product is narrow because restaurants specialize in one type of food category. |
Marketers have researched customer behavior enough to know that certain environmental factors will affect their shopping habits—smell, lights, music, colors, crowds, safety and employees. The term for this research is called atmospherics. Atmospherics is the physical manipulation of the store environment (physical or online) to change the mood of the customer. Creating a positive store environment causes people to stay in the store longer and the longer a customer spends in a store the more money they are likely to spend. Creating positive feelings about a store also generates loyal customers and repeat shopping visits.
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