Page 436 - Foundations of Marketing

Retailing, Direct Marketing, and Wholesaling | Chapter 14 403

Because they are usually small, specialty stores may have high costs in proportion to sales, and
satisfying customers may require carrying some products with low turnover rates. However, these
stores sometimes obtain lower prices from suppliers by purchasing limited lines of merchandise in
large quantities. Successful specialty stores understand their customers and know what products
to carry, which reduces the risk of unsold merchandise. Specialty stores usually offer better selec-
tions and more sales expertise than department stores, their main competitors. By capitalizing
on fashion, service, personnel, atmosphere, and location, specialty retailers position themselves
strategically to attract customers in specifi c market segments. However, traditional specialty
stores have struggled to adapt to increased competition from online retailing. For example, Gap
has battled to maintain sales and market share. Thanks to a revamped image, streamlined opera-
tions, more fashion-forward designs, and campaigns featuring all-American celebrities such as
10
the musicians The Avett Brothers, Gap has been making a sales comeback.
Category Killers

A more recent kind of specialty retailer is called the category killer , which is a very large
specialty store that concentrates on a major product category and competes on the basis
of low prices and broad product availability. These stores are referred to as category kill-
ers because they expand rapidly and gain sizable market shares, taking business away from
smaller, higher-cost retail outlets. Examples of category killers include Home Depot and
Lowe’s (home improvement chains), Staples and Office Depot (office-supply chains), Barnes
& Noble (bookseller), Petco and PetSmart (pet-supply chains), and Best Buy (consumer elec-
category killer A very
tronics). Online retailing has also placed pressure on category killers and taken away market
large specialty store that
share in recent years.
concentrates on a major
product category and competes
Off-Price Retailers on the basis of low prices and
product availability
Off-price retailers are stores that buy manufacturers’ seconds, overruns, returns, and off-
off-price retailers Stores
season production runs at below-wholesale prices for resale to consumers at deep discounts.
that buy manufacturers’
Unlike true discount stores, which pay regular wholesale prices for goods and usually carry seconds, overruns, returns,
second-line brand names, off-price retailers offer limited lines of national-brand and designer and offseason merchandise for
merchandise, usually clothing, shoes, or housewares. Consumers appreciate the ability to resale to consumers at deep
purchase name-brand goods at discounted prices, and sales at off-price retailers, such as discounts

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Traditional Specialty Stores and Off-Price Specialty Stores Foot Locker is a traditional specialty store, while Marshalls is an example of an
off-price specialty retailer.

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