TYPES OF RETAILING INSTITUTIONS

-->

Types of retailing

Retail institution refers to the basic format or structure of business. A specialist store or a small local store may have a very intimate relationship with its customers, with transactions being made on a face-to-face, first name basis. At the other end of the scale, goods may be retailed across the globe, with no physical contact being made at all.

Ownership based (ICFLCV)

Entrepreneurs have many forms of retail business ownership available to them. Each business model has its own list of pros and cons. choosing a type of retail business to start will depend on why you want to own a business, as well as your lifestyle, family, personality, basic skills and much more. Here are a few of the main types of retail ownership and the advantages, disadvantages, and support system of each. In this ownership based retailing we have some subtypes. They are;

1. Independent
2. Chain
3. Franchising
4. Leased departments
5. Consumer cooperatives
6. Vertical marketing system

1. Independent retailers

In independent retailer is one who builds his/her business from the ground up. From the business planning stage to opening day, the independent retail owner does it all. He/she may hire consultants, staff and others to assist in the business endeavor. The opportunities are endless.

Advantages: (T2)

T. There are no restrictions on whom, how or where an entrepreneur should set up his/her business.

T. The freedom to do what one wants to do is the biggest advantage in this form of business. It can be extremely fulfilling.

Disadvantages (LE)

(L). lot of competition in a particular area for a certain type of customer, Because of the ease and flexibility of getting started.

(E). Every business decision rests on the owner(s). There is no branding, no preset guidelines and a great deal of risk in this business model.

Support: Other than small business resources online, in print or sponsored by the various government and trade organizations, there isn't much in the way of support for the independent retailer.

2. Chain retailers (MBCLC)

In this type there will be Multiple outlets under common ownership. The Bargaining power is with the supplier due to large purchasing volume. Through this type of retailing a retailer can achieve Cost efficiencies by doing wholesaling function. There will be shared warehousing facilities. It can also take advantage of a variety of media. In this type flexibility is Limited and investments are very high and also Controlling will be very hard. The personnel have limited independence in their jobs. It defines management philosophies and also can expand time and resources in long run planning.

3. Franchising

Franchising is a contractual agreement between a franchiser and a retail franchisee. It is an organizational firm in which business can benefit by being part of large, multi unit chain-type retail institution. Franchising refers to the method of practicing and using another person's philosophy of business. The "franchisors" authorize the proven methods and trademarks of their businesses to "franchisees" for a fee and a percentage of gross monthly sales. Various tangibles and intangibles such as national or international advertising, training, and other support services are commonly made available by the franchisor. Agreements typically last five to twenty years, with premature cancellations or terminations of most contracts bearing serious consequences for franchisees. There are different types of franchising;

• Product/Trademark
• Business format

Structural arrangement

• Manufacturer – Retailer
• Wholesaler – Retailer – Voluntary (Cooperative)
• Service sponsor – Retailer

There is a low capital investment needed. It helps to acquire well-known names and goods/service lines. It follows cooperative marketing strategy. These types of retailers have exclusive selling rights.

4. Leased Departments

It is a department in retail store that is rented to an outside party. It helps to simplify the works of store. It also helps to reduce store cost and a certain percentage of revenue is received regularly by the store. It may be an element in a shopping centre or a part of a franchisee system.

5. Consumer cooperatives

This type of retailing is owned by its customer members. Cooperatives are member-owned, member-governed businesses that operate for the benefit of their members according to common principles agreed upon by the international cooperative community. In co-ops, members pool resources to bring about economic results that are unobtainable by one person alone. Most simply put, a cooperative is a business 1) voluntarily owned by the people who use it, and 2) operated for the benefit of its members. Regardless of the goods and services provided, co-ops aim to meet their members’ needs.

Most food co-ops are consumer cooperatives, which mean that all our retail co-ops are owned by the people who shop at the stores. Members exercise their ownership by patronizing the store and voting in elections. The members elect a board of directors to hire, guide and evaluate the general manager who runs day to day operations.

All co-ops contain the following elements:

• Co-ops are owned and governed by their primary users (the member-owners).
• Co-ops are democratically governed (one-member, one-vote).
• Co-ops are businesses, not clubs or associations.
• Co-ops adhere to internationally recognized principles.

The specific goals of a cooperative are determined by its members, but all cooperatives adhere to the principles of cooperation that are based on practices of the first successful consumer cooperative in Rochdale, England (founded in 1844). There are consumer, producer co-ops (usually agricultural) and worker-owned cooperatives. There are also housing co-ops, health care co-ops (the original HMOs were co-ops) and financial co-ops (credit unions). The overall goal of the cooperative movement is to create organizations that serve the needs of the people who use them. Cooperative businesses provide goods and services in a way that keeps community resources in the community.

6. Vertical marketing systems

Here all the levels of independently owned business along a channel of distribution are joined together. In this system the producers, wholesalers, and retailers are joined in the production and distribution of products. There are three major types of vertical marketing systems, and each uses different means for setting up leadership and power in the system: (1) corporate, where coordination and conflict management are attained by common ownership; (2) contractual, where coordination and conflict management are attained through contractual agreements among members of the system; (3) administered, where leadership is assumed by one dominant system member. The purpose of a vertical marketing system is to eliminate conflicts arising from each company's pursuit of its own financial objectives. On the other hand a dual vertical marketing system involves more than one type of distribution arrangements.

Another classification of vertical marketing system is;

• Independent system
• Partially integrated system
• Fully integrated system

hi