Discount Store

Definition

A discount store is a retail establishment that offers merchandise at prices lower than traditional retail stores. These stores typically achieve lower prices by purchasing in bulk, negotiating with suppliers, and minimizing overhead costs, allowing them to pass the savings on to consumers.

5 Must Know Facts For Your Next Test

1. Discount stores often focus on high-volume, fast-moving consumer goods, such as household items, apparel, and electronics, to maintain their low-price advantage.
2. The business model of discount stores is centered around achieving economies of scale through large-scale purchasing power, efficient supply chain management, and minimal in-store services.
3. Discount stores typically have a no-frills shopping environment, with limited product selection, basic fixtures, and minimal customer service, further contributing to their ability to offer lower prices.
4. The rise of e-commerce has led to the growth of online discount retailers, which can leverage digital platforms to reach a wider customer base and offer even lower prices.
5. Discount stores play a significant role in the distribution channel by providing consumers with affordable access to a wide range of products, often serving as an alternative to traditional department stores or specialty retailers.

Review Questions

• Explain how the business model of discount stores allows them to offer lower prices compared to traditional retail stores.
  • Discount stores are able to offer lower prices by leveraging their large-scale purchasing power to negotiate better terms with suppliers, minimizing overhead costs through a no-frills shopping environment, and focusing on high-volume, fast-moving consumer goods. This business model allows them to achieve economies of scale and pass those savings on to consumers, making them an attractive option for shoppers seeking affordable access to a wide range of products.
• Describe the role of discount stores within the distribution channel and how they differ from traditional retailers.
  • Discount stores play a unique role in the distribution channel by providing consumers with a more affordable alternative to traditional department stores or specialty retailers. By offering a limited product selection, basic in-store services, and everyday low pricing, discount stores are able to disrupt the traditional retail model and offer consumers access to a wide range of products at lower prices. This positioning within the distribution channel allows discount stores to serve as a bridge between manufacturers and consumers, catering to price-conscious shoppers and contributing to the overall accessibility of goods.
• Analyze how the rise of e-commerce has impacted the discount store business model and its place within the distribution channel.
  • The growth of e-commerce has significantly influenced the discount store business model and its role within the distribution channel. Online discount retailers can leverage digital platforms to reach a wider customer base and offer even lower prices by further reducing overhead costs associated with physical retail locations. This has led to the emergence of new discount store models, such as flash sales and subscription-based services, which can capitalize on the convenience and accessibility of e-commerce. As a result, discount stores have had to adapt their strategies to remain competitive, potentially expanding their online presence or exploring hybrid models that combine the benefits of physical and digital retail channels. This evolution within the distribution channel has allowed discount stores to maintain their position as a cost-effective option for consumers while also adapting to the changing retail landscape.

Related terms

Off-Price Retailer: Off-price retailers are a type of discount store that purchase brand-name merchandise at wholesale prices and sell it to consumers at a significant discount compared to the original retail price.

Warehouse Club: Warehouse clubs are a type of discount store that offer members the opportunity to purchase merchandise in bulk at wholesale prices, often requiring a membership fee to access the store.

Everyday Low Pricing (EDLP): Everyday Low Pricing is a pricing strategy used by discount stores where prices are consistently low rather than relying on frequent sales and promotions.