Meaning of Retailing :

INTRODUCTION TO RETAILING
Retailing encompasses those business activities involved with the sale of goods and services to the final
consumer for personal, family, or household use.
Retailing is the final stage in a channel of distribution. Retailing functions are performed by any firm selling
merchandise or providing services to the final consumer.
According to Philip Kotler :
“Retailing includes al the activities involved in selling goods or services to the final customers for personal,
non – business use.”
Functions of Retailing - :
1. Understanding the Needs of Consumers –
Knowing and understanding customer needs is at the centre of every successful business. Therefore, a
retailer should clearly understand needs of his target customers. Every retailer should know the reason for their
customers to buy from them and not from their competitors. This is called Unique Selling Proposition {USP}. USP
can change as the business or market changes. A retailer can have different USPs for different types of customer.
2. Buying and Assembling –
A retailer deals in different variety of goods which he purchases from different wholesalers for selling to the
consumers. He tries to locate best and economical source of the supply of goods.
3. Breaking the Bulk –
Manufacturers normally send their products in bulk (whole cases or cartons) to retailers to minimize
transportation cost. As the retailers sell goods in smaller quantities, they should break large quantities into
convenient smaller quantities. This process is called breaking the bulk.
4. Warehousing or Storing –
After assembly of goods from different suppliers, the retailers preserve them in store and supply these goods to
the consumers as and when required by them. The goods are kept as reserve stocks in order to ensure
uninterrupted supply to the consumers.
5. Selling –
The end objective of the retailer is to sell the goods to consumers. He undertakes various methods to sell
goods to the ultimate consumers.
6. Credit Facilities –
He caters to the needs of the customers even by supplying them goods on credit. He bears the risk of bad
debts on account of non – payment of amount by the customers.
7. Risk Bearing –
A retailer has to bear different type of risks in relation to goods. While in stores, goods are exposed to
various risks like deterioration in quality, spoilage and perishability etc.
The products are confronted to natural risks viz., fire, flood, earthquake and other natural calamities. Other
type of risks like change in customers tastes also adversely affects the sales.
8. Grading and Packing –
The retailer grades the goods which are left ungraded by the manufacturers and the wholesalers. He packs the
goods in small packages and containers for the convenience of the customers.
9. Collection and Supply of Market Information –
 The retailers are in direct touch with the consumers. They gather invaluable information with regard to likes
dislikes tastes and demands of the consumers and pass on this information to the wholesales and the producers which
are very helpful to them.
10. Helps in Introducing New Products –
Without the services of retailers, new products cannot be introduced properly in the market. This is so
because a retailer has a direct link with consumer. He can explain nicely about the utility and the characteristics of a
new product to the customer.
11. Window Display and Advertising –
The retailer displays the products in show windows in order to attract the customers. This leads to immense
publicity for the product.

The Importance of Retailing

1. Sales to Ultimate consumers of the products
The products and services are sold to ultimate or final buyers in a retail sale. During this sale, the goods are not
resold. The goods and services sold here can be used for various uses, including residential, household, and
industrial use.

As a result, the producer will now engage with his customers through the store and learn about their opinions.

2. A convenient form of selling quantity-wise

The term "retail" refers to breaking down items into small parts and reselling them. The products are purchased
in bulk from the middleman or producer by the merchant, and the majority is separated into small amounts and
sold to customers according to their needs.

To do so, the retailer will repackage items in different quantities and types, making it easier for customers to
pick and take them along.

3. Convenient Place and Location

Retailer shops are often located in areas that are easier for customers to access. A retail store can take several
different types, such as a coffee shop, a small store, or a multiplex. Consumers can buy and sell goods via the
internet and smartphone apps at their leisure.

Furthermore, due to advancements in technology and delivery systems, shopping online is becoming a modern
trend. As a result, a growing number of businesses are moving their operations online, allowing consumers to
access and purchase goods from the convenience of their own homes.

4. The lifestyle of the people are shaped by retailing

Retail is an essential aspect of today's culture. People rely heavily on retail stores to live comfortably.
Previously, products and services were made available by the trade mechanism.

However, nowadays, commerce has been replaced by the purchase and sale of commodities, making retail
shops an integral part of society.

5. Retail businesses contribute to the economy

The retail industry is a noteworthy contributor to the Gross Domestic Product (GDP) in many countries. Its
contribution has increased significantly in recent years and continues to grow at a rapid pace. Retailing is a
significant economic power to promote long-term development.

6. Retail dominates the supply chain

Goods and services flow from a retailer or a distribution supplier to final customers in a supply chain. Where
there are many consumers spread globally, the position of retail stores becomes even more critical. Retailers
serve as a conduit between a producer and the end customer.

The organization of retail stores has steadily changed over time due to their critical importance in the supply
chain. Vast numerous chains, not small scale local retail outlets, define retailing in today's world. Retailing has
become a dominant part of the supply chain as its value and formalization have grown.

Furthermore, retailers are being compared to distributors, demonstrating retailers' domination in the distribution
chain. Again, the annual turnover of a few supermarkets, such as Wal-Mart, is far higher than the annual
turnover of businesses.

All of these factors indicate that retail is the essential component of the whole supply chain.

7. Retail is interdisciplinary
Economics, geography, management, economics, and marketing have also played a role in the development of
retailing. Economics helps manage a store's finances. A strong understanding of geography is essential for
selecting the best location for a shop.

Management is crucial in handling your employees and inventory, and proper promotion is equally vital in
helping you get into the market.

8. Retailers provide maximum employment

The supermarket industry now hires the most workers. According to estimates, the retail sector employs one out
of every nine people. Furthermore, women make up two-thirds of the overall retail population, and more than
half of all retail staff work part-time, giving jobs the freedom to respond to the demands of any employer.

In the past, employers were paying pitiful wages. As a result, workers in the supermarket industry worked on a
contract basis. However, as working conditions and delivery in the retail industry improve, many people
consider retail employment a long-term occupation.

9. Retailing is a vital subject area of study

Because of the popularity of retailing, it is receiving an increasing amount of attention. Retail is a distinct field
of study from management and marketing. To help this industry thrive, studies have been done, and experts
have been recruited.

Furthermore, scholarly journals focusing on retailing are distributed all over the globe.

10. Retailing offers scope for development in other countries

Retail offers a fantastic chance to reach into new markets around the world. A merchant who wishes to expand
their market by distributing their items in other countries opens shops in other countries to maximize the
number of people who buy their merchandise.

However, expanding the company is problematic because it necessitates many documentation and formalities to
obtain permission to operate in other nations.

11. Retailers rule the channel of distribution

Retailers are taking control of a delivery system. Since the industry had a small range of vendors in the past,
suppliers held much power. Retailers have no choice but to buy products from the retailer and sell them in their
shops. In today's world, though, there are many vendors for a single category of commodity.

As a result, a retailer can choose the brands to carry in their stores, and customers can purchase items from the
retailers' stock. As a result, retailers play an essential part in influencing market demands.

12. Provides Comfort and facilities for shopping

Shopping has been a pleasurable activity thanks to the many amenities and conveniences offered by department
stores, shopping centres, multiplexes, and other establishments. People no longer see shopping as a chore but
rather as a stress-relieving and family game.

The significant supermarkets provide a variety of amenities such as air conditioning, parking, attractions, a
children's play area, lifts, shopping trolleys, and grocery services, among others, and mobile retailing means that
all orders made via the platform or mobile applications are delivered to the customer's doorstep.

13. Provide services to the manufacturer

The merchant is the last link in the supply chain and the person who deals with consumers. As a result, he can
learn about clients' opinions and their likes and dislikes. This knowledge is gathered by the retailer and shared
with the producer.

This enables the manufacturer to make the necessary adjustments to the product's quality and expand its
offerings to please its clients. As a result, a supplier is critical in assisting the producer in increasing sales
production.

14. Provision of warehousing and storage

For a retailer, warehousing is a significant issue. A supplier purchases products in bulk from the producer,
alleviating the manufacturer's warehousing and storage issues.

Furthermore, by showcasing products attractively in the department store, the retailer aids in increasing product
purchases.

15. Advantage of an expert and specialist

Retailers are veterans who have sold goods to consumers before. Because of his frequent contact with clients,
he has a great understanding of their preferences and dislikes. He keeps merchandise on hand to meet the needs
of consumers and sells them in various sizes and shapes.

Furthermore, with their sales skills and product awareness, they support consumers in selecting the best product
for them.

16. Creates utilities and value

By providing a place, time, and utility in the delivery of products, the retailer raises the value of the commodity.
Retailers purchase goods in large amounts and split them down into limited quantities to sell in small packets.
He generates type utilities in this manner.

Products made in one part of the globe are consumed in other parts of the world. He purchases goods from
suppliers and resells them in the local market, thus generating utility for the place.

The merchant purchases goods in advance, place them in his store and sell them to customers as required. The
utility value of commodities is improved by producing these three items. The retailer ensures that things are
produced and consumed daily.

Scope

Retailing has a very wide scope. It is one of the fastest growing industries in India and is providing employment
opportunities to many people. Retailing provides employment in two ways. Firstly, it provides entrepreneurship
 opportunities to the people and secondly, it provides employment to so many people who cannot own the retail
stores.

With the increase in the purchasing power of the people and the rural reach of the retailers, the scope of
retailing has increased manifold. The scope of retailing can be viewed from the two viewpoints. One from the
retailer’s, i.e., the entrepreneur’s perspective and the other from the employee’s perspective.
1. Retailer’s Perspective:

From the retailer’s perspective, retailing can include anything that the retailer wishes to sell. It may be goods or
services. These may include goods such as mobiles, computers, electronics, readymade garments, textiles and
clothing, jewellery, books, paintings, medicines, stationery, watches, or may include services such as catering,
hospitality, hospitals etc.

However, in certain cases permission in form of license is required to be obtained from the government. In such
cases the retailer will have to comply with all the legal formalities before starting a business. For example, a
license is required to operate a chemist’s shop. Hence, the retailer must possess the required qualifications and
hence may apply for the license.

2. Employee’s Perspective:

Retailing has provided tremendous opportunities of employment. The retailers operating at a small level
required small number of employees to help them in business. These employees were appointed as salesmen,
cleaners, cashiers, etc. by the retailers. But with the increase in the scope of operations and the growth of
retailing, there has been tremendous change in the industry.

Now the retailers operate at bigger levels having separate departments for everything such as finance,
marketing, advertising and sales, human resource development, etc. Hence, the retailers provide enormous
opportunities to the employees.

The following are the areas where the scope of retailing can be seen from the point of view of the
employee:
i. Purchase Department:
The purchase department is responsible for making all the purchases for the business. It includes the selection of
the merchandise to be sold to the customers, their price range, the selection of the vendor from whom the
purchases are to be made, etc.

This department requires vast amount of efforts and includes a lot of paper work, telephonic conversation and
travelling. The employees working with this department should be well conversed having good amount of
knowledge about the industry as well as the vendors. They must be able to take quick decisions.

ii. Finance Department:

The finance is the life blood of any organization. The finance department performs the functions such as making
and compiling the financial records, allocation of finance to various departments, management of finance,
arrangement of finance, controlling the cash flow, managing the banking as well as investments, deciding the
credit allocation, etc. Sometimes a retail audit may also be conducted by the finance department.
iii. Marketing and Sales:
The marketing department includes various activities such as sales promotion, advertising, public relations, etc.
These activities are extremely important from the view point of reaching the customers. The marketing
department is responsible for conducting extensive market research and understanding customer requirements.
 The people required in marketing department should be well conversant, having proper knowledge about the
product, any they must be able to convince the customer to buy the products. They should also be capable of
understanding the customer’s requirements and act accordingly.

iv. Stores:

The stores department is responsible for storing the goods. The store’s manager should ensure that at every time
the inventory is maintained at proper levels so that there is no shortage of goods. At the same time the
department should ensure that too much inventory may cause problems of storage, obsolescence, wear and tear,
etc. So the store’s manager must always keep an up to date record of the inventory and ensure uninterrupted
supply of materials.

v. Human Resource:

The human resource department is responsible for the recruitment, selection, training, induction etc. of the
employees. Human resource is a human centric industry. The people required in this department must be able
enough to understand the requirements of the people in the organization and must be able to stop the efficient
employees from leaving the organization.

vi. Technology in Retailing

Retail industry in India is in a mature stage and is a very confident user or information technology. The industry
is using technologies such as Electronic Data Interchange (EDI) which is used to electronically transfer the
information through computers. Database Management, Data Warehousing and Data Mining are the techniques
that are used to gather information about the customers and store them for future use.

Data Mining helps in customer relationship management. Radio Frequency Identification System (RFID) is
used for supply chain management. The concept of e-tailing is continuously gaining ground in retailing. It
includes the use of internet for selling the goods.

vii. Supply Chain Management:

Supply Chain Management means managing the supply of materials, services and information along the supply
chain. Managing the resources efficiently and effectively increases profitability of the business. Supply chain is
managed by using information systems.
Thus there are many areas where retailing can provide employment to the people. Therefore it can be concluded
that the scope of retailing is very wide. One can engage himself as an entrepreneur or can join the sector as an
employee depending upon his skills and finance, etc.

NATURE

1. Part of Marketing:

Retailing is a part of marketing activity. It helps the product to reach the final customer. This is also the goal of
marketing. Thus retailing facilitates marketing activities by targeting a wide variety of customers.
2. Customer Centric:

The whole concept of retailing revolves around the customer. Due to increased competition, all the retailers
want to attract the customers. Retailers use various sales promotion methods such as discounts, etc., to lure the
customers.
3. Multi-Dimensional:

Retailing has many dimensions. They vary from local kirana shops and kiosks to super malls selling multiple
branded products. These days there is a manifold increase in the use of internet for buying and selling the
goods.
4. Varying Geographical Locations:

The geographical area of reach of retailers varies widely. It may vary from a local area market selling goods to
local customers only to super malls who have a large variety of customers from different areas and even
different cities. These days due to the increased use of internet, the retailers have customers from all over the
country and even from abroad.
5. Transformational:

Since the start of retailing as a full-fledged business, there have been huge transformations in it. These
transformations generally are in the form of objectives of retailing (earlier profit driven, now customer focused),
methods of retailing (from simple retail shops earlier to multi brand malls), the areas covered (earlier small
areas now whole country or even other countries), the customers (from simple local customers to customers
from all walks of life) etc.
6. Complex Management Process:

Retailing seems like a simple process. But in reality it is a complex management process. Retailing involves
retail stores being located in convenient places, arranging goods according to different price bands, selling
goods in the quantities convenient to the customers, proper after sale services and a wide range of sales
promotion measures to attract the customers. Thereafter,there should also be proper Customer Relationship
Management (CRM) programmes to maintain long healthy relationships with the customers.
7. Assortment of Products and Services:

Retailing involves a combination of goods and services. It is not at all possible for a retailer to survive in
today’s world by offering just a single product. In order to be successful, a retailer needs to offer an assortment
of goods and services. For example, a baker cannot survive just by selling a few cakes and biscuits. In order to
survive in the competitive market, firstly, a baker needs a proper environment called ambience which is
pleasing to the eyes of the customer.
Secondly, he needs a variety of cakes and biscuits and other products. Along with that he also needs to keep
some confectionery items which people are likely to buy along with the main products such as chocolates,
cookies, chips, cold drinks, patties, burgers, hot dogs, etc.
Apart from these items people may expect him to keep a few items such as birthday and anniversary candles,
party poppers, decoration items etc. After these products, people may also expect him to take the orders on
phone and home-deliver the items purchased. Thus it can be easily said that retailing is an assortment of various
goods and services.
8. Studying Demand Pattern:

A retailer is required to study the current demand pattern of the products being offered by him in the market. By
studying the demand pattern he can ascertain the quantity of goods he needs to buy in bulk from the wholesaler.
In case he buys a huge quantity of goods without studying the demand pattern, he may have to face the risk of
obsolescence of goods. Moreover, large stocks need large areas for storage. All these have to be arranged by the
retailer.
 9. Creation of Utilities:

A retailer helps in creation of time and place utilities. Time utility is created when goods are made available at a
particular time. The retailer creates time utility by storing the goods with himself and makes them available to
the customers as and when needed. Place utility means making the goods available at different places away
from the place of manufacture. Retailers make the goods available to the customers at various locations away
from their manufacturing locations.
10. Private Branding and Labeling:

The spurt in the retailing activity as resulted in creation of private brands. Private branding or labeling means
buying products directly from the manufacturer and giving them own brand name by the retailer. With the
increase in retailing there has been an increase in the exclusive retail stores selling products of particular brands
only.
For example, Big Bazaar, Food Bazaar of Future Group; Reliance Trends, Reliance Footprints, Reliance Fresh,
etc., are some of the divisions of Reliance Retail Ltd. which is a subsidiary of Reliance Industries. According to
a Neilson study food continues to dominate the private label market at 76 per cent of total sales. Packaged
grocery dominates this market with about 53 per cent share of total sales.
Types of Retailing - :
I. Store Based Retailing
II. Non – Store based Retailing
I. Store Based Retailing
1. Form of ownership
2. Merchandise Offered
1. Form of ownership –
i. (Mom-and-pop stores) Stores –
There are generally family – owned businesses catering to small sections of society. They are small,
individually run and handled retail outlets. The “shop” could be any type of business, such as an auto repair garage,
bookstore or restaurant. These stores operate in the local locality. Therefore, there are in the near vicinity of a
particular locality.
ii. Chain Stores
A chain store or retail chain is a retail outlet in which several locations share a brand, central management,
and standardized business practices. They have come to dominate the retail and dining markets, and many service
categories, in many parts of the world.
iii. Franchise stores
A franchise store is a deal in which an entrepreneur buys a license to use another business' products, brand,
proprietary knowledge, and trade secrets.
iv. Leased Departments
Leased departments are broadly defined as operations of one company conducted within the establishment of
another company. Typical examples may include jewelry counters or optical centers within department stores.
v. Consumer Co-operative
A consumer cooperative is a cooperative business owned by its customers for their mutual benefit. It is a form
of free enterprise that is oriented toward service rather than pecuniary profit.
 2. Merchandise Offered - :
i} Convenience Stores -
Convenience store is a small store that stocks a range of everydate items such as groceries, snack foods,
candy, milk, eggs, toiletries, soft drinks, tobacco products and newspapers.
They are comparatively smaller stores located near residential areas. They are opened for long hours for the
convenience of customers, and have a limited variety of stock and convenience products.
Prices are slightly higher due to the convenience given to the customers. These shops are open seven days a
week and offer a limited line of convenience products.
ii} Super Market –
The super market is a large – scale retail institution specializing in necessaries and convenience goods.
They have huge premises and generally deal in food and non – food articles.
Super markets are large, low cost, low margin, high volume, self service operations designed to meet the
needs for food groceries and other non food items like health and beauty care products.
Thus, the super markets are also known as self – service stores since the customers are to do all the
purchasing by themselves without the aid of salesmen or selling assistants.
Advantages –
 Large turnover because of the large variety of merchandise which is offered to the customers.
 Low prices and high profits because of quick turnover.
 Situated at convenient places and within reach of buyers.
 The buyer is perfectly free as to what he should buy.
iii} Hypermarket –
Hypermarket is very large store that carries products found in a supermarket as well as merchandise
commonly found in departmental stores.
Hypermarket is a superstore combining a supermarket and a department store. The result is an expensive
retail facility carrying a wide range of products under one roof, including full groceries lines and general
merchandise. In theory, hypermarkets allow customers to satisfy all their routine shopping needs in one trip.
Advantages –
 Customers can get everything at one place. Hence saving time, energy and money in searching.
 Cost reductions from bulk buying in hypermarket are transferred to customers.
iv} Speciality Stores –
Specialty store is a small retail outlet that focuses on selling a particular product range and associated items. Most
specialty store business operators will maintain considerable depth in the type of product that they specialize in
selling, usually at premium prices, in addition to providing higher service quality and expert guidance to
shoppers.
The specialty stores specialize in a particular category or sub – category of goods such as footwear, sarees,
dress material and jewellery. These are smaller size compared to bigger formats and focus on quality and variety of
the chose category.
v} Category Killers –
A category killer is a product, service, brand, or company that has such a distinct sustainable competitive
advantage that competing firms find it almost impossible to operate profitably in that industry (or in the same local
area).
The existence of a category killer eliminates almost all market entities. Example, as one of the most famous
 search engine, Google does not have real competitors.
vi} Departmental Stores –
A departmental store is a large retail trading organization. It has several departments, which are classified and
organized accordingly. Departments are made as per different types of goods to be sold.
For example, individual departments are established for selling packed food goods, groceries, garments,
stationery, cutlery, cosmetics, medicines, computers, sports, furniture etc., so that consumers can purchase all basic
household requirements under one roof. It provides them maximum shopping convenience and therefore, also
called as “Universal Providers” or “One Spot Shopping”.
Characteristics –
 Departmental stores are large – scale retail establishments.
 They have a number of departments organized under one roof.
 Each department specializes in a particular kind of trade.
 They are located in the important central places of the big cities.
 A huge amount of capital is required to establish a departmental store.
 Their control and management are centralized.
vii} Off Price Retailer –
Off – price retailers are retailers who provide high quality goods at cheap prices. They usually sell second
– hand goods, off – the – season items etc., these retailers offer inconsistent assortment of brand name and fashion
– oriented soft goods at low prices. They buy manufacturer irregulars, seconds, closeouts, canceled orders,
overruns, goods returned by other retailers and end – of – season closeout merchandise.
viii} Factory Outlet –
A factory outlet is a manufacturer – owned store selling that firm’s stock directly to the public. The stock
can either be first – quality merchandise or discontinued, irregulars, canceled orders at a very low price.
ix} Catalogue Showrooms –
Catalogue retailers usually specialize in hard goods such as house ware, jewellery, and consumer
electronics. There are retailers whose showrooms are adjacent to the warehouse. These showrooms have a low
price, as they minimize the cost of displaying merchandise, focus on a narrow range of goods and are located in
low cost areas.
x} Full Line Discount Stores –
A discount store is a retail store which sells products at prices lower than the typical market value. A “full
– line discount store” or “mass merchandiser” may offer a wide assortment of goods with a focus on price rather
than service, display, or wide choice. Discount store may specialize in specific merchandise such as jewelry,
electronic equipment, or electrical appliances, relying on bulk purchase and efficient distribution to keep down cost.
xi} Warehouse Store –
It is a mass retailing of merchandise such as groceries, hardware, home furnishing, over the counter drugs,
toiletries, etc., through a super store that offers very low prices and little or not customer service.
xii} Variety Store –
A variety store is a retail store that sells a wide range of inexpensive household goods. Variety stores often
have product lines including food and drink, personal hygiene products, small home and garden tools, office
supplies, decorations, electronics, garden plants, toys, pet supplies, remaindered books, recorded media and motor
and bike consumables.
xiii} Membership Club –
This format is also known as cash and carry and is open to members only and not the general public. The
 current definition of a warehouse club is that it is a no frill, no – thrill, large – format store selling only to its members at
wholesale rate.
Xiv} Flea Market-
A flea market is a type of street market that provides space for vendors to sell previously-owned
merchandise. This type of market is often seasonal.
II. Non – Store based Retailing i} Direct Selling –
Direct selling is the marketing & selling of products directly to consumers away from a fixed retail location.
Peddling is the oldest form of direct selling.
Modern direct selling includes sales made through the party plan, one-on-one demonstrations, and other
personal contract arrangements as well internet sales. Directing selling is a dynamic, vibrant, rapidly expanding
channel of distribution for the marketing of products and services directly to consumers.
ii} Mail Order –
Mail order is the buying of goods or services by mail delivery. The buyer places an order for the desired
products with the merchant through some remote method such as telephone call or web site.
Then, the products are delivered to the customers. The goods are supplied on the system of P.O.D (i.e.,
payment on delivery) or V.P.P. (i.e., value payable through the post).
iii} Telemarketing
Telemarketing is a form of direct marketing. Here, marketer goes direct to the customer using telecom / IT
facilities.
How does Telemarketing work?
Telemarketing is usually done through specific campaigns. Contract is established with hundreds of
prospects in a campaign that normally runs through a few days. Several tele-callers are hired for the tele-call
operation.
Advantages of Telemarketing –
 Telemarketing facilitates personalized contact though not fact-to-face contact with prospective customers.
 Compared to mass marketing programmes, it gives the marker a better change to influence the prospects.
 It enhances marketing productivity by providing a screening and selection facility through preparatory
conversations with prospects.
 Telemarketing is less expensive compared to most other forms of selling.
 It can be used in respect of different types of products. It is suitable for both industrial goods and consumer durables.
iv} The Call Centre –
The call centre is the real operation theatre in telemarketing. The call centre usually has a manager in
overall charge, a few supervisors and the required number of tele-callers.
The tele-caller opens the call by greeting the prospect appropriately. Then she politely seeks the customer’s
permission to have brief conversation. She generates adequate interest in the product on the part of the consumer and
tries to clinch an order.
v} Automated Vending –
A vending machine is a machine that dispenses product when a customer deposits a sufficient amount of
money into a money slot. The money is accepted by a current validator. It is a machine that provides various
snacks, drinks and other products to customers. The idea of having vending machine is to vend product without a
cashier.
vi} World Wide Web –
Internet marketing, or online marketing, refers to advertising and marketing efforts that use the Web and e-
 mail to drive direct sales via electronic commerce, in addition to sales leads from web sites or e-mails.
Forms of Retail Business Ownership
On the basis of ownership pattern, retail format can be classified as –
1. Sole Proprietary Concern –
A sole proprietorship, also known as the sole trader or simply a proprietorship, is a type of business entity that
is owned and run by one individual or one legal person and in which there is no legal distinction between the owner
and the business. The owner is in direct control of all elements and is legally accountable for the finances of such
business and this may include debts, loans, loss etc.
They sell only limited variety of goods. Sole traders will be unable to take advantage of economies of scale in
the same way as limited companies and larger corporations, who can afford to buy in bulk. This might mean
that they have to charge higher prices for their products or services in order to cover the costs.
At the same time, all decision must be made by the sole trader. Therefore, the success or failure of the
business rests on one person.
2. Partnership Firm –
Partnership is a combination of two or more persons, some having capital, other having skill and
experience to conduct any lawful business, forming a business firm and sharing the profits of such a business. Hence
the persons who form the partnership are called ‘partners’ individually and a “Firm” collectively.
These types of retail organizations can little more varieties compared to sole proprietary format of retail
organizations. This is mainly because of the availability of decent amount of capital and improved managerial
abilities.
3. Company –
A limited company is a company in which the liability of members or subscribers of the company is limited to
what they have invested or guaranteed to the company. Limited companies may be limited by shares or
guarantee. Examples for limited company format of retailing are Aditya Birla Retail Limited, Pantaloon Retail
India Ltd., Future Group etc.,
These form retail organizations can offer vide range of quality products to large group of consumers at an
affordable price. They can afford to operate in large buildings, keeping in mind the consumer convenience.
Theories of Retailing - :
The theories developed to explain the process of retail development. It revolves around the importance of
competitive pressures. It is the investments in organizational capabilities.
I. Environmental Theory –
According to environmental theory there is a change in retail. It is attributed to the change in the
environment in which the retailers operate. The environmental theory explains how retail business evolved from the
specialized stores into department, discount, chain, mail order and online stores.
Retail environment is made up of customers, competitors and changing technology. The changes in the
external environment can alter the profitability of retail organizations. If an organization is not able to cope with its
external environment, it will soon vanish from the market. Thus, the birth, success or decline of different forms of
retail enterprises many a times is attributed to the business environment.
Therefore, Darwin’s statement of “Survival is the Fittest” is very well applicable in this context. For this
reason, it is important for retailers to be aware of and adjust to changing environments.
II. Cyclical Theory –
Cyclical theory basically explains the different phases in a company. According to this theory, change
follows a pattern and all phases have identifiable attributes associated with them. There are three primary
 components associated with the theory : Wheel of retailing, retail cycle and retail accordion.
 Wheel of retailing refers to a company entering the market with low prices and affordable service in order to
challenge competitors.
 Retail life cycle addresses the four stages that a company goes through when entering the buyer’s market.
 The retail accordion aspect of cyclical theory suggests that some businesses go from outlets that offer an array of
products to establishments providing a narrow selection of goods and services.
III. Conflict Theory –
According to this theory the competition or conflict between two opposite types of retailers, leads to a new
format being developed. It says that retailers change in response to competition. It explains how some department
stores transitioned into discount stores. The conflict always exists conflict always exists between operators of similar
formats or within broad retail categories.
This theory proposes that new forms of retail institutions emerge due to “inter – institutional conflict.”
When an innovative retailer (antithesis), challenges an established retailer (thesis), a new form of retailer (synthesis) results.
The synthesis later becomes a thesis, triggering a new turn for a new turn for assimilation.
For example, when a thesis and antithesis are taken as department stores and discount stores respectively, the
synthesis may emerge as discount department stores.
 Thesis – Individual retails as corner shops all across the country.
 Antithesis – It is a position opposed to the thesis develops over a period of time. These are the department
stores. The antithesis is a “challenge” to the thesis.
 Synthesis – There is a blending of the thesis and antithesis. The result is position between the “thesis” and
“antithesis”. This “synthesis” becomes the “thesis” for the next round of evolution.
Wheel of Retailing - :
The Wheel of Retailing is a theory to explain the institutional changes that take place when innovators,
including large business houses, enter the retail arena.
The Wheel of Retailing is a hypothesis that describes how retailers approach to capture market share and
create brand value. It explains how retailers usually begin at the bottom of the wheel with low prices, profits and
prestige and then gradually work their way up to increased prices, profits and prestige.
 This theory states that in a retail institution changes takes place in cyclical manner. As it cycles through the wheel
of retailing, a discount retail business might develop into a higher end department store, leaving its former niche to
be filled by newer discount businesses.
 The theory suggests that new forms of retailing appear as price cutting, low cost and narrow profit margin operations.
Eventually the retailer trades up by improving displays and location, providing credit, delivery and by raising
advertising expenditure.
 Thus, retailers mature as high cost, high price, conservative operators, making themselves vulnerable to new, lower
priced entrants.
 A low price retailer should avoid incurring extra costs on the existing format and instead should open another
store with better service levels and premium brands catering to the upmarket segment. These two stores should be
distinct in their brand name, offerings and operations.
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Wheel of Retailing an example –

Most of the retail businesses start on low cost, low price and low margins but as their sales start
increasing, they quickly shift to a high cost, high revenue model.
Example –
A restaurant started in a temporary location would be offering a limited number of items at low price. It
looks to develop its client base but as soon as the construction is completed or final, it starts providing a lot more
variety and introduces a number of new services (free home delivery, boarding, and lodging) it also starts
increasing its prices on its earlier items. This is done to recover its fixed cost quickly and have an early
breakeven so that it can start generating some profit since it is operating in a virgin market it will look to increase
its market share.
However with passage of time when a new restaurant comes up in its vicinity and starts offering the same
items at a lower price in order to retain its customers it will bring down its prices back to where its earlier ones.
The cycle can be broadly classified into three phases –
I. Entry Phase
II. Trading up Phase
III. Vulnerability Phase
I. Entry Phase –
 The new, innovative retailer enter the market with a low status and low price store format.
 Starts with a small store that offers goods at low prices or goods of high demand.
 This would attract the customers from more established competitors.
 Tries to keep the costs at minimum by offering only minimal service to customers, maintaining a modes shopping
atmosphere, locating the store in a low rent area and offering a limited product mix.
 Success and market acceptance of the new retailer will force the established to imitate the changes in
retailing made by the new entrant.
 This would force the new entrant to differentiate its products through the process of trading up.
II. Trading Up Phase –
 New retailer tries to make elaborate changes in the external structure of the store through up gradation.
 Retailer will now reposition itself by offering maximum customer service, a posh shopping atmosphere, and
relocating to high cost area (as per the convenience of the customers)
 Thus in this process the new entrant will mature to a higher status and higher price operation. This will increase
the cost of the retailer.
 The innovative institution will metamorphose into a traditional retail institution. This will lead to
vulnerability phase.
III. Vulnerability Phase –
 The innovative store will have to deal with high costs, conservatism and a fall on ROI.
 Thus, the innovative store matures into an established firm and becomes vulnerable to the new innovator who
enters the market.
 Entry of the new innovator marks the end of the cycle and beginning of the new cycle into the industry.
 Example of this theory – kirana stores were replaced by the chain stores like Apna Bazar and FoodWorld (new
entrant) which in turn faced severe competition from supermarkets and hypermarkets like Big Bazar and Giant.

Retail Accordion Theory

A theory of retail institutional change that suggests that retail institutions go from outlets with wide assortments to
specialized narrow line store merchants and then back again to the more general wide assortment institution. It is
also referred to as the general-specific-general theory.
 RETAIL MANAGEMENT BBA SEM 5

Factors Affecting / Influencing Indian Retail Industry - :

1. Increase in per capita Income –
Per Capita Income means how much an individual earns, of the yearly income that is generated in the
country through productive activities. India has marked growth in per capita income by 10.5% which shows
tremendous increase in GNP (Gross National Product) of the country.
Increase in per capita income reflects hike in income of Households which in turn will consume
more, thus leading to growth of retail sector. Household prefer to shop from big giants as compare to their Kirana
Store.
2. Demographical Changes –
India is having huge young age working population which is generating huge income and high
savings. For any developing country young age group, income, savings are key factors for its growth. Presence of
these key factors has helped in attracting big retail giants to India.
3. High Standard of Living –
Standard of living in India has improved. Earlier Shopping in India always had an emotional tag attached
to it, along with that people use to have myth that shopping from shopping complexes or Malls is costlier
and it suits only to rich class. But now things have changed people have changed their misconception and have
adopted Mall culture. This shows that standard of living has increased.
4. Change in Consumption Pattern –
Consumption patterns among various classes have changed over the years. Earlier customers were brand
loyal due to which they were allowing new brands to enter the market. But now customers are showing
good
response to new product entering the market because they have realized that they are paying for quality. This drastic
change in customer’s perception has opened ways for many new entrants.
5. Availability of Low – Cost Consumer Credit –
It is rightly said that sales generated on credit are more as compare to cash sales. With the change in credit
policies, many new customers have entered the market. Purchasing on credit basis with good credit
worthiness gives both seller and buyer flexibility to transact. Earlier due to lack of cash many buyers use to
postpone their purchases, but now with modernization they are carrying it on credit basis as it is cheaper to
repay.
6. Improvements in Infrastructure –
With many infrastructural changes taking place right from metro rails to road connectivity in the country,
retail is also expanding its wings. With huge infrastructure spending which has entered the country in form of FDI
(Foreign Direct Investment), more retail giants have proposed to enter Indian Market.
7. Corporate Sector Entry –
Large business tycoon such as Tata’s, Birla’s, & Reliance etc., have entered the retail sector. They are in a
position to provide quality products and entertainment.
8. Entry to various sources of Financing –
An economy gets finance from two routes either in form of FDI or as FII (Foreign Institutional
Investment). Now both the ways are opened up for retail sector. Now both the ways are opened up for retail
sector. Previously so as to protect small kirana stores route for FDI in retail was difficult but later on when it
was found that retailing is generating employment of around 8% in economy FDI route was also simplified.
Present Indian Retail Scenario - :
01. Rapid Growth –
The retail movement in India has acquired the critical mass that is required for rapid acceleration in terms
 RETAIL MANAGEMENT BBA SEM 5
of industry growth as well as geographical spread. The Indian retail industry can no longer be called nascent. The
spread of super stores to the northern cities such as Delhi, Chandigarh, Jaipur and Kolkata is evidence of the fact
that organized retailing in India has emerged from its southern bastion.
The retailing boom is being driven by increased expectations as well as changing shopping behavior of the
urban Indian consumer. With the increasing number of nuclear families, working women, greater work pressure
and increased commuting time, consumers are looking for convenience.
02. Emergence of Region – Specific Formats –
For the first time in 10 years, the industry is witnessing the development of region – specific formats.
With organized retail penetrating in B class towns, retailers have started differentiating in the sizes and formats of
stores.
For example, in departmental store format, while most A class cities and metros have larger stores of
50,000 plus sq. ft. sizes, stores in B class town have stabilized in the 25,000 – 35,000 sq. ft. range. Most
players have started operating these two formats across various cities, which has helped them to standardize
the merchandise offering across the chain.
03. Emergence of Discount Formats –
Larger discount formats, popularly known as hypermarkets, are now emerging as major competitors to
both unorganized and organized retailers. Penetration of organized retail into the lower strata of income groups
and consumer demand for increased value–for–money has improved the prospects of these formats. These formats
span across the entire range of merchandise categories for example – Big Bazaar.
04. Unorganized Retail –
Indian retail is dominated by a larger number of small retailers consisting of the local kirana shops, owner
– manned general stores, chemists, footwear shops, apparel shops, paan and beedi shops, hand – cart hawkers,
pavement vendors, etc., which together make up the so called unorganized retail or traditional retail. The last 4 –5
years have witnessed the entry of a number of organized retailers opening stores in various modern formats in
metros and other important cities. Still, the overall share of organized retailing in total retail business has
remained low.
The major factors responsible for the growth of organized retailing in India are as follows –
1. Enhanced Working Women –
Today the urban women are literate and qualified. They have to maintain a balance between home
and work. The purchasing habit of the working women is different from the home maker. They do not have
sufficient time for leisure and they expect everything under one roof. They prefer one – stop shopping. Modern
retail outlets therefore offer one store retailing.
2. Value for Money –
Organized retail deals in high volume and are able to enjoy economies of large scale production and
distribution. They eliminate intermediaries in distribution channel. Organised retailers offer quality products at
reasonable prices. Example : big bazaar and Subhiksha. Opportunity for profit attracts more and more new
business groups for entering into this sector.
3. Rural Market –
Today the rural market in India is facing stiff competition in retail sector also. The rural market in India is
fast emerging as the rural consumers are becoming quality conscious. Huge potential in rural retailing organized
retailers are developing new products and strategies to satisfy and serve rural customers. In India, Retail industry
is proving the country’s largest source of employment after agriculture, which has the deepest penetration into
rural India.
4. Enhanced Middle Class Consumers –
In India the number of middle class consumer is growing rapidly. With rising consumer demand and
greater disposable income has given opportunity of retail industry to grow and prosper. They expect quality
 RETAIL MANAGEMENT BBA SEM 5
products at decent prices. Modern retailers offer a wide range of products and value added services to the customers.
5. Growth of Consumerism –
With the emergence of consumerism, the retailer faces a more knowledgeable and demanding consumer.
As the business exist to satisfy consumer needs, the growing consumer expectation has forced the retail
organizations to change their format of retail trade.
6. Technological Impact –
Technology is one of the dynamic factors responsible for the growth of organized retailing. Introduction
of computerization, electronic media and marketing information system have changed the face of retailing.
Organized retailing in India has a huge scope because of the vast market and the growing consciousness of
the consumer about product quality and services.
One of the major technological innovations in organized retailing has been the introduction of Bar Codes.
With the increasing use of technology and innovation retailers are selling their products online with the help
of Internet.
7. Enhanced Income –
Increase in the literacy level has resulted into growth of income among the population. Such growth has
taken place not only in the cities but also in towns and remote areas. As a result the increase in income has led to
increase in demand for better quality consumer goods. Rising income levels and education have contributed to the
evolution of new retail structure.
Today people are willing to try new things and look different, which has increased spending habits among
consumer.
8. Media Explosion –
There has been an explosion in media due to satellite television and internet. Indian consumers are
exposed to the lifestyle of countries. Their expectations for quality products have risen and they are demanding
more choice and money value services and conveniences.
Current Indian Retail Statistics
 Retailing in India is one of the pillars of its economy and accounts for about 10 percent of its GDP.
 The Indian retail market is estimated to be US$ 600 billion and one of the top five retail markets in the world by
economic value. India is one of the fastest growing retail markets in the world, with 1.2 billion people.
 India's retailing industry was essentially owner manned small shops.
 In 2010, larger format convenience stores and supermarkets accounted for about 4 percent of the
industry, and these were present only in large urban centers.
 India's retail and logistics industry employs about 40 million Indians (3.3% of Indian population).
 India has highest number of outlets per person (7 per thousand) which is mostly unorganized.
 India has topped the A.T. Kearney’s annual Global Retail Development Index (GRDI) for the third
consecutive year, maintaining its position as the most attractive market for retail investment.
 On 7 December 2012, the Federal Until 2011, Indian central government denied foreign direct investment
(FDI) in multi-brand retail, forbidding foreign groups from any ownership in supermarkets, convenience
stores or any retail outlets. Even single-brand retail was limited to 51% ownership and a bureaucratic process.
 In January 2012, India approved reforms for single-brand stores welcoming anyone in the world to innovate in
Indian retail market with 100% ownership, but imposed the requirement that the single brand retailer source 30
percent of its goods from India.
 Government of India allowed 51% FDI in multi-brand retail in India. All multi-brand and single brand stores
in India must confine their operations to 53-odd cities with a population over one million, out of some 7935
towns and cities in India. It is expected that these stores will now have full access to over 200 million urban
consumers in India.