Page 668 - Encyclopedia of Business and Finance

eobf_R 7/5/06 3:20 PM Page 645

Retailers

ited with starting Bon Marché as well as inventing the Since about 1970, a number of new types of general-mer-
retail concept of allowing people to come into the store chandise retailers have emerged and are becoming increas-
and browse, with no obligation to buy. He was also the ingly important to consumers. These include category
originator of the money-back guarantee, which at the specialists, home-improvement centers, warehouse clubs,
time was a new concept that built up his trade substan- off-price retailers, and catalog showrooms. A traditional
tially. In addition, he clearly marked all his goods with specialty store concentrates on a limited number of com-
fixed prices and permitted no haggling between customers plementary merchandise categories and provides a high
and clerks. level of service in an area typically smaller than 8,000
Although Bon Marché and native country stores pro- square feet (744 sq m).
vided American merchants with the inspiration for creat-
ing department stores, the great majority of these General-Merchandise Retailers. Department stores are
department stores began as dry-goods stores. Neither Bon retailers that carry a broad variety and deep assortment,
Marché nor any of the world’s early department stores offer considerable customer service, and are organized
would have evolved if economic conditions had not been
into separate departments for displaying merchandise. A
favorable at the time. The American department store is home-improvement center is a category specialist that
largely a product of the years from 1860 to 1910. More
combines the traditional hardware store and lumberyard.
available capital during the Industrial Revolution, low It focuses on providing material and information that
taxes, and cheap labor to build and staff stores contributed
enable do-it-yourselvers to maintain and improve their
to the rise of the department store in America. By the late
homes. A warehouse club is a general-merchandise retailer
1860s or early 1870s, the department store had a firm that offers a limited merchandise assortment with little
foothold in America. Although the term department store
service at low prices to ultimate consumers and small busi-
is not recorded in the language until 1887, the idea of sep-
arate departments in stores can be found in print at least nesses; the stores are large and located in low-rent dis-
tricts, and the goods usually include food and general
forty years earlier.
merchandise. Off-price retailers offer an inconsistent
assortment of brand-name, fashion-oriented soft goods at
Beginning of Mail-Order Retailing. It was also during
low prices, in exchange for not using the manufacturer’s
this time that mail-order retailing began. The earliest
colonists, with no manufacturers of their own, first used promotional allowances, return privileges, and delayed-
payment options.
mail orders to obtain supplies from the mother country.
George Washington ordered goods from England and
France, as did Thomas Jefferson. Benjamin Franklin has Catalog Showrooms. A catalog showroom is a retailer
been called the originator of the mail-order catalog whose showroom is adjacent to its warehouse. These
because in 1744 he issued a list of 600 books he would sell retailers typically specialize in hard goods such as house-
by mail. Ward thought he could eliminate the middleman wares, jewelry, sporting goods, garden equipment, and
by selling direct to country people by mail from offices in consumer electronics. Catalog showrooms can offer low
Chicago. In August 1872, Ward, with capital of $1,600 in prices because they minimize the cost of displaying mer-
savings, founded what was to become Montgomery Ward, chandise, provide minimal service, and are located in
the world’s first great mail-order business, soon to be chal- lower-rent areas rather than regional malls.
lenged by Sears.
Retail Chains. A retail chain is a company operating mul-
TYPES OF RETAILERS tiple retail units under common ownership and usually
Over time, different types of retailers have emerged and has some centralization of decision making in defining
prospered because they have attracted and maintained a and implementing its strategy. Some retail chains are divi-
significant customer base. A retail institution is a group of sions of larger corporations or holding companies.
retailers that provide a similar retail mix designed to sat- Because of scale economies and an efficient distribution
isfy the needs of a specific segment of customers. The system, the corporate chains can sell at lower prices. Since
most basic characteristic of a retailer is its retail mix, about 1990 there has been considerable restructuring of
which include decisions and strategies regarding the type corporate retail chains. These restructuring activities
of merchandise sold, the price of the merchandise, the include consolidation and focus, with consolidation of
assortment of the merchandise, and the level of customer existing retail chains leaving fewer large chains and focus
service. referring to the expertise in managing a specific retail for-
The traditional general-merchandise retail stores are mat rather than operating as a holding company for a
specialty stores, department stores, and discount stores. diverse set of retail formats.

ENCYCLOPEDIA OF BUSINESS AND FINANCE, SECOND EDITION 645