Finally, we can categorize retailers based on the ownership structure of the business.
Individually Owned and Operated
Under this ownership structure, an individual or corporate entity owns and operates one or a very small number of outlets or single online store. Single ownership of retail outlets most frequently occurs with small retail stores, though there are some cases, for instance in the furniture industry, where single ownership involves very large outlets.
A retail chain consists of multiple retail outlets owned and operated by a single entity all performing similar retail activities. While the number of retail outlets required to be classified as a chain has never been specified, we will assume that any business owning more than five retail locations would be considered a chain.
This classification covers large retailers operating less than five locations, such as automotive dealers, beauty salons or furniture stores, and those operating in the non-store retail arena, such as online, catalog, and vending companies.
Contractually Licensed and Individually Operated
The contractual channel arrangement discussed in the Distribution Decisions Tutorial has lead to a retail ownership structure in which operators of the retail outlet are not the out-right owners of the business. Instead, the arrangement often involves a legal agreement in which the owner of the retail concept allows the operator to run the owner’s business concept in exchange for financial considerations, such as a percentage of revenue. This structure is most often seen in retail franchising.