Retail Management

Part : 01
Introduction Chapter-01
to RM
An Introducing to
Retailing

Retail Management 1
 Marketing
 Definition

“A process to identify needs and wants of customers

and then to develop/produce products to meet their
needs/wants at profit.”

Retail Management 2
 The Marketing Process
The process of
1. Analyzing Marketing Opportunities
2. Selecting Target Markets
3. Developing the Marketing Mix (4 Ps : Product, Price,
Place, Promotion)
4. Managing the Marketing Effort

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 Place

 Place : Making a good or service available to the customers.

 It involves decisions regarding Marketing (Distribution)

Channels and Market Logistics.

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 Marketing Channels
 “Marketing Channels” are also called “Trade Channels” or
“Distribution Channels”.

 “These are set of independent organizations involved in the

process of making a good or service available for use or
consumption to the customers.”

 Producers and the final customers are part of every channel;

the resellers or middlemen like wholesalers, retailers come in
between them. Those middlemen are also called
“Intermediaries”.

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 Market Logistics

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 Market Logistics
 Physical Distribution : Physical Distribution starts at the
factory, in which managers choose a set of warehouses and
transportation carriers that will deliver the goods to final
destinations in the desired time or at the lowest total cost.
 Supply Chain Management (SCM) : Physical Distribution has
now been expanded into the broader concept of Supply Chain
Management (SCM). SCW starts before Physical Distribution,
it includes procuring right inputs from suppliers (inbound
logistics), production processes (operations), then dispatching
to the final destination to end consumers (outbound logistics).
(See Next Slide)
 The supply chain perspective can help a company identify
superior suppliers and distributors and help them improve
productivity, which ultimately brings down the company’s
cost.

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 Inbound and Outbound Logistics
 Inbound Logistics referred to as physical supply, deals
with the logistical relationship between the firm and its
suppliers. It addresses the flow of materials from suppliers to
the plant.

 Outbound Logistics referred to as physical distribution, is

the logistical relationship between the firm and its
customers. It is the movement of finished goods out of the
plant to the final customer.

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 Market Logistics Decisions

Order
Processing

Market
Transportation Logistics Warehousing
Decisions

Inventory

Retail Management 9
 Market Logistics Decisions
 Four major decisions must be made with regard to market
logistics.

1. Order Processing
2. Warehousing
3. Inventory Control
4. Transportation

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 Channel Levels
Consumer Goods
The consumer goods marketing channels are as follows.
1. Zero-Level Channel or Direct Marketing Channel (consists of a
manufacturer selling directly to the final customer)
2. One-Level Channel (contains only one intermediary, like
Retailer)
3. Two-Level Channel (contains two intermediaries, like
Wholesaler and Retailer)
4. Three-Level Channel (contains three intermediaries, like
Wholesaler, Jobber and Retailer)
 From the producer’s point of view, the control becomes
difficult as the number of channel levels increase.

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 Consumer Goods Marketing Channel Levels
Manufacturer
Manufacturer
Manufacturer

Manufacturer

Wholesaler

Wholesaler

Retailer
Jobber

Retailer

Retailer
Consumer

Consumer

Consumer
Consumer

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 Retailing

Wal Mart-USA Carrefour-France

World’s Largest Retailer Hypermarkets

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 Retailing-Definition
 Retailing includes all the activities involved in selling goods
or services directly to final consumers for personal, non-
business use.

 A Retailer or Retail Store is any business enterprise whose

sales volume comes primarily from retailing.

 Retailing is the last stage of distribution process.

 Note : Any organization selling to final customers-whether it

is a manufacturer, wholesaler, or retailer-is doing retailing.

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 Retailing Management

 Retailing Management is the sale by seller in small

quantities to customer not for sale and includes marketing or
financial support aimed at improving the performance of retail
outlets.

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 The Framework (Scope) of Retailing
 There is tendency to think of retailing as primarily involving the
sale of tangible (physical) goods. However, retailing also
includes the sale of services
 Retailing does not have to involve a store

 Retailing does not have to include a ‘Retailer’ Manufacturers,

importers, and wholesalers act as retailers when they sell to
final consumers.

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 Non-store Retailing

Direct
Selling

Non-store
Retailing

Automatic Direct
Vending Marketing

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 Non-store Retailing
 Although 97 percent of goods and services are sold through
stores, however Non-store Retailing has been growing much
faster than store retailing.
 Non-store retailing falls into three major categories.
1. Direct Selling (It is the personal contact between a sales person and
a consumer away from a retail store; like door-to-door selling)
2. Direct Marketing (Direct-Mail, Catalogue Marketing, Telemarketing,
Television Direct-Response Marketing, E-Shopping)
3. Automatic Vending (It is the sale of products through a machine with
no personal contact between buyer and seller. It is used for variety
of merchandise, like for soft-drinks, dandy, newspapers etc.)

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 Non-store Retailing

Vending Machines
A Non-store Retailing
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 Retail Functions in Distribution
 Retailing is the last stage in a distribution channel. A typical
distribution channel comprises the followings.
Manufacturer Wholesaler Retailer Consumer
 Retailers often act as the point of contact and communication
between manufacturers, wholesalers, and the consumers.
 Retailers smooth the flow of goods and services. The
discrepancy results from the fact that manufacturers produce
large quantity of limited variety of goods, while consumers
desire only a limited quantity of a wide variety of goods.
Retailers collect an assortment from various sources, buy in
large quantity, and sell in small amounts. This is called the
Sorting Process.

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 Retail Functions in Distribution
 For small suppliers, retailers can provide assistance by
transporting , storing, marking, advertising, and pre-paying
for products.
 Retailers also complete transactions with customers. This
means having convenient locations, filling orders promptly
and accurately, and processing credit purchases.
 Some retailers also provide customer services such as gift-
wrapping, delivery, and installation.
 Many firms now engage in Multi-Channel Retailing, whereby a
retailer sells to consumers through multiple retail formats (like
through stores as well as through non-store retailing).

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 The Relationships Among Retailers and
Their Suppliers
 The relationships among retailers and suppliers can be
complex; however it depends on suppliers’ strategy whether
they are following Exclusive Distribution, Intensive
Distribution, or Selective Distribution.
a. Exclusive Distribution : It means severely limiting the number
of retailers. Channel relations tend to be smoothest with
Exclusive Distribution. In this case suppliers make agreements
with one or a few retailers that designate the latter as the
only ones in specified geographical areas to carry certain
brands or products. It is used when the manufacturer wants
to maintain control over the service level and outputs offered
by the retailers, however it may limit their long-run total
sales. Exclusive Distribution is frequently used for consumer
specialty goods like expensive cars, suits etc.

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 The Relationships Among Retailers and
Their Suppliers
b. Intensive Distribution : When suppliers sell through as many
retailers as possible. Channel relations tend to be most volatile with
Intensive Distribution. This strategy is generally used for FMCG
products, like soap, snack foods, candies, gums etc. for which the
consumer requires a great deal of location convenience. However
the competition among retailers selling the same items is high and
they would be more concerned about their own results. Retailers
may assign little shelf-space to specific brands, set high price on
them, and do not advertise them.

c. Selective Distribution : In this case, the suppliers sell through

moderate number of retailers. This combines aspects of exclusive
and intensive distribution. Selective Distribution is frequently used
for consumer shopping goods like clothing, appliances etc.

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 The Special Characteristics of Retailing

Small
Average
Sale

Retailer’s
Strategy

Popularity
Impulse
of
Purchases
Stores

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 The Special Characteristics of Retailing
 Three factors that distinguish retailing from other types of
businesses are as follows.
i. Small Average Sale : The average amount of a sales
transaction for retailers is much less than for manufacturers.
This low amount creates a need to tightly control the costs
associated with each transaction (transaction cost), such as
sales personnel
ii. Impulse Purchases : Final consumers make many unplanned
or impulse purchases. As per research 70% of all consumer
buying decisions are made in the store. This behaviour
indicates the value of in-store displays, attractive store lay-
outs, well-organized stores, catalogues, and websites. The
products like candy, cosmetics, snack foods, magazines, and
other items are sold as impulse goods when placed in visible,
high traffic areas in a store, catalogue, or website.

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 The Special Characteristics of Retailing

iii. Popularity of Stores : Retail customers usually visit a store,

even though non-store retailing (by mail, phone, and web
sales etc.) has increased. Many people like to shop in person;
want to touch, smell, and like to try on products.

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 Trends in Retailing
i. New Retail Forms and Combinations (Some supermarkets now
include bank branches, bookstores, coffee shops, gas stations, and
fitness clubs to their stores)

ii. Growth of Intertype Competition (Different types of stores-discount

stores, catalogue showrooms, department stores-all compete for the
same consumers by carrying the same type of merchandise)

iii. Competition Between Store-based and Nonstore-based Retailing

iv. Growth of Giant Retailers
v. Growing Investment in Technology (Like check-out scanning
systems, in-store television
vi. Global Presence of Major Retailers

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 Private Labels vs National Brands

 Private Label Brand : It is the one developed by the middle-

men, like wholesaler or retailer etc. (e.g. Gourmet Milk)

 National Brand or Manufacturer Brand : It is the one

developed by the manufacturer of a product (e.g. Pepsi, Coke
etc.)

 Generics : These are unbranded, plainly packaged, less

expensive versions of common household products.

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 The Private Label Threat
 In the confrontation between manufacturers’ and private label
brands, the retailers have many advantages.

 Because shelf-space is scarce, many supermarkets now

charge a ‘Slotting Fee’ for accepting a new national brand.

 Retailers also charge for special display space and in-store

advertising space.

 Retailers typically give more prominent display to their own

brands and make sure they are well-stocked.

 The consumers have become more price sensitive, therefore

they are attracted towards relatively cheaper private labels.

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 The Private Label Threat

The retailers ask for slotting fee for

allocating their scarce shelf-space to
National Brand manufacturers

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 The Retail Strategy
 A Retail Strategy is the overall plan guiding a retail firm. It
influences the firm’s business activities and its response to market
forces, such as competition and the economy.

 Any retailer, regardless of size or type, should utilize these six steps
in strategic planning.

1. Define the business in terms of the goods or service category and

the company’s specific orientation

2. Set long-run and short-run objectives for sales and profit, market
share, image, and so on.

3. Determine the customer market to target on the basis of its

characteristics (such as gender and income level) and needs (such
as product and brand preferences).

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 The Retail Strategy
4. Devise an overall, long-run plan that gives direction to the
firm and its employees.

5. Implement an integrated strategy that combines such factors

as store location, product assortment, pricing, and
advertising/displays to achieve objectives.

6. Regularly evaluate performance and correct weaknesses or

problems when observed.

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 The Retailing Concept
 Four principles form the Retailing Concept.

a. Customer Orientation : The retailer determines the attributes

and needs of its customers to satisfy these needs to the
fullest.

b. Coordinated Effort : The retailer integrates all plans and

activities to maximize efficiency.

c. Value-Driven : The retailer offers good value to customers

d. Goal Orientation : The retailer sets goals and then uses its
strategy to attain them.

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 The Retailing Concept

Customer Orientation

Retailing Retail
Coordinated Effort
Concept Strategy

Value-Driven

Goal Orientation

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 The Retailing Concept
 Unfortunately, the Retailing Concept is not grasped by every
retailer. Some are indifferent to customer needs, some are
not receptive to change, some do not get feedback from
customers.

 Three issues that relate to a retailer’s performance in terms of

the retailing concept are

a. The Total Retail Experience

b. Customer Service
c. Relationship Retailing

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 a) The Total Retail Experience

Build-A-Bear Workshop-USA
Eliminating Shopper Boredom

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 E-Tailers

 An E-Tailer is a retailer that primarily uses the internet as a

medium for customers to shop for the goods or services
provided.

 Two distinct categories of E-Tailers are Pure Plays and Bricks

and Clicks.

a. A Pure Play E-Tailer uses the internet as its primary means of

retailing. Examples of pure play e-tailers are Dell and
Amazon.com.

b. A Brick and Click E-Tailer uses the internet to push its good or
service but also has the traditional physical storefront
available to customers.

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 E-Tailers

Amazon.com Dell
An E-Tailer-Pure Play An E-Tailer-Pure Play

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