Service and Merchandise Retailers

What you’ll learn to do: Compare and contrast service and merchandise retailers

For many retailers, it is difficult to differentiate themselves because the items they carry are also available at their competition. Therefore retailers are left to compete in other ways, either through unique products or on exceptional customer service. Retailers who are unable to be excel at those areas over their competition are left to compete on price alone. This is a dangerous game, given the small margins within food retailing.

Assortment Levels and Types of Retailers

Imagine the difference between shopping at a Macy’s, a Staples, a shoe store, and a Wal-Mart. These retailers all differ in their assortments and you likely wouldn’t buy everything you need from just one of them. Obviously a shoe store would not be the place to go for groceries, but it would be a good place to find a new pair of sandals. We will examine the differences in assortment and variety between different types of merchandise retailers below.

Department Stores

Department stores offer a broad assortments of products with multiple departments separating product categories. Their assortments have depth within each category and they have some variety, but usually focus mainly on soft goods such as apparel and bedding, but some hard goods, like appliances, are usually included as well.

Category Specialist

As the name suggests, category specialists are retailers that specialize in one category of products. These categories are fairly broad, such as clothing or hardware. Think of stores like Office Depot or Toys R Us that clearly have a specific type of product they’re selling, but still have a very broad assortment with lots of depth within that category.

Specialty Stores

Specialty stores, like category specialists, have a specific type of product that they sell, but specialty stores are even more particular than category specialists. While category specialists sell products of a certain category, specialty stores are much more product-specific. They don’t have much in the way of variety, but their assortment is very deep. Specialty stores would include florists, locksmiths, and hardware stores, among others.

Full Line Discount Stores

Full line discount stores are retailers that provide name-brand products at a lower cost than other stores. They make money by keeping sales high in order to be able to sell name-brand products at a lower cost than elsewhere. This system also necessitates lots of variety and a wide assortment so that sales can be driven up more easily.

Drug Stores

Drug stores don’t stock a wide variety of products, but have depth in their assortment of health products. It’s important for them to have this depth because they have to compete with other larger super center stores that have pharmacy departments.

Off-Price Stores

Off-price retailers offer high quality products at cheap prices. They buy from other retailers that overbought, manufacturers that overproduced, retailers selling their remaining inventory that is going out-of-season, and in other similar ways. Their assortments are primarily soft goods and because of the nature of their purchasing system, their inventory is inconsistent. T.J. Maxx and Marshalls are examples of off-price retailers.