Retail Management

Dr. Yamini Vyas Pandey

 Retailing
• Retailing is defined as a set of activities or
steps used to sell a product or service to
consumers for their personal or family use.
• Every sale of goods & services to final
consumer .
• Retailing is the last stage of distribution
process.
• “Retailing consists of activities involved in
selling directly to ultimate consumer for
personal or non-business use. It embraces the
direct to customers sales activities of the
producer, whether through his own store, by
house to house counseling or mail order
business”.
• Any one i.e., manufacturer or middlemen or
retailer selling directly to the final customer
through any kind of sales outlet is doing the
business of retailing.
• It does not matter how goods or services are
sold i.e., by person, mail vending machine,
internet, mobile etc., or where they are sold,
in store, on street or in the consumer home.
 Retail marketing primarily undertakes
following activities:
• 1. Identify the customer and understand his
needs
• 2. Store the needed merchandise or goods.
• 3. Attractive presentation of goods for easy
identification and convenience.
• 4. Provide necessary comfort in purchase i.e.,
location, price, service etc.
 Characteristics or Features of Retail
Marketing:
1. Sale to Ultimate Customer:
2. Convenient Form (Quantity):
3. Convenient Place and Location:
4. Last Link in Chain of Distribution: Manufacturer-
>Distributor / wholeseller-> Retailer-> Customer
5. Organized Sale:
6. Marketing not Just Sale:
7. Goods and also Service:
8. Creation of Utility:
9. Customer Delight:
 Importance of Retail Marketing:
1. Link and Communication between Manufacturer
and Consumer:
2. Benefits of a Specialist or Expert in Distribution
Network
3. Creates Utility and Value
4. Comfort and Facility of Shopping
5. Service to Manufactures and Middlemen
6. Provision of Storage and Warehousing
7. Service to Customer
8. Increase in Productivity
9. Increase in Standard of Living
10. Increase in Employment Opportunities
11. Increase in GDP
12. Retail as a Separate Branch of Study
 Function / Activities
• Sorting
• Arranging assortment
• Breaking bulk
• Holding Stock
• Collect Market Information:
• Extending services
• Marketing Functions:
• Promotion of Product:
• Offers Variety of Services to his Customers:
• Risk Bearing:
• Providing additional services
– Channel of communication
– Transport and advertising function
 `
• Retailing is customer oriented not product oriented.
• Manufacturer reach customers through
– Dealers
– Company showrooms
– supermarkets
• Kind of retail distribution
– Intensive
– Selective
– Exclusive
 Organized Retailing
• In India Organized retailing is 2%.
• Rapid rise of income levels and changes in
lifestyles, growth can be seen
• Disposable income increases, Increasing
purchasing power
• India retail environment different from
western due to congested cities, small
purchases, limited household spaces.
• Retailer is a person , agent, agency, company
or organization reaching the goods or services
to ultimate consumer.
• Activities:
– Anticipate customer wants
– Stock product assortment
– Acquire market information
– Finance retail business
 Retailing
• May take place through:
– Retail stores
– Mails
– Internet
– Door to door (Direct sales)
 Characteristics of retailing
• Direct interaction with customers
• Point of purchase display and promotion
• Lower average amount of sale transaction (lower
unit sale)
• Location important or large number of retail
business units
• Services are important
• as per the geographical coverage and population
density.
 Retail evolution Theories
• Four theories
– Wheel of retailing (Cyclical theory – Begin with
one state and return to that state at some time in
future)
– Accordion Theory (Cyclical)
– Dialectic Process (Evolutionary- Changes similar
to biological evolution)
– Natural Selection (evolutionary)
 Wheel of Retailing
• Wheel represents phases through which some
type of retailers pass
• Retailers attract customers – low price , low
service
• Expand market : More expensive merchandise,
more services, more convenient location.
• Some Retailers don’t begin as low price, low
service entrants, e.g. Upscale fashion specialty
stores
• Retail innovators often first appear as a low
price operators with low cost and low profit
margin requirements.
• Over the time they upgrade the product and
improve their facilities and customer service
and price rise.
• As innovators mature they, become vulnerable
to new discounters with lower costs.
 Wheel is based on 4 principles
• Many price sensitive buyers will trade
customer service, wide selection and
convenient location for lower price.
• Price sensitive shoppers are not loyal and will
switch to others for low price. Presetige
oriented shopper enjoy shopping at retailers
with high end strategies.
3. New institutions are frequently able to have
lower operating costs than existing formats.
4. As retailers move up the wheel, they typically
do so to increase the sale, broaden target
market and improve their image.
 Three basic strategic positions
• Low end:
– Low price, limited facilities and services, price
sensitive consumer
• Medium end:
– Moderate price, improved facilities, Boarder base
of service and value oriented customers.
• High end: High prices, Excellent facilities and
services, upscale consumers.
 Example
• Traditional department stores – High prices
• Results in discount store – low price , cost
cutting , small sales force, low rented store
location, inexpensive fixtures, emphasize on
high stock turnover.
• After that , increase sales force, improving
location, upgrading fixtures, greater selection of
merchandise led to higher cost and result in
higher prices.
• Chain will come back to fist level and
introduce new discount stores, factory outlets,
permanent flea market to satisfy the needs of
price conscious customers.
 Criticism of Wheel of retailing
• Many high margin retailers , decreasing the
prices to enter in the market.
• Gaps are identified as retailing is changing
frequently.
• Wheel of retailing focuses on product quality,
price and customer service, Scrambled
merchandising involves a retailers increasing its
width of assortment. ( number of different
product lines)
 Scrambled merchandising
• It occurs when retailer adds goods and
services which are unrelated to each other
and to the firm’s original business.
• It helps in increasing the revenue, fast selling,
highly profitable goods and services.
• Motivate for Impulse purchase and one stop
shopping.
 The Retail Life Cycle
• It states that retail institutions like the goods and
services they sell- pass through identifiable life
stages –
– Stage 1: Introduction ( early growth) -
– Stage 2 : Growth (accelerated development)
– Stage 3: Maturity : Competitor’s customer, Maximum
Profits & Sales, competition, USP
– Stage 4:Decline
– First stage can be development - new retail concept
developed
• Development
• Introduction : Retail concept tried by consumers
• Growth- retail concept becomes more popular,
added competition
• Maturity- Retail concept at peak of popularity,
highly competitive.
• Decline – Retail Concept losses popularity due
to firms in other stages, less competition
 Accordion Theory
Retailers fluctuate from strategy of offering wide
merchandise with shallow assortment to
offering limited categories with deep assortment
In rural markets, Retailers sell many categories under
one roof: shoes, cosmetics, foods, cloth, medicines.
However the assortment is shallow and customers
have limited choice.
Department stores have both width and depth of
merchandise
Speciality stores carry special categories with deep
selection
 Dialectic Theory
An evolutionary theory based on
premise that retail institutions
evolve.
The theory suggests that new Retail
formats emerge by adopting
characteristics from other forms of
retailers.
Specialty stores with high margins, low
turnover plush operations
Discount stores with low margins, high
turnover low operations
 Natural Selection Theory
Those Retail Institutions Succeed
which
adapt to changes in customers,
Technology, competition and legal
environment.
Department stores have tried to
combat specialty stores by opening
specialty counters within the stores.
 Categorization of retailers
• On the basis of Number of outlets
• Size
• Margin V/S Turnover
• Location
 Trends in retail formats
• MOM & POP stores
• Traditional Kirana stores
• Departmental Stores
• Discount stores
• Category Killers
• Speciality stores
 Bases for classification of Retail Units

• Nature of Ownership
• Operational structure
• Length and depth of merchandise
• Nature of service
• Type of pricing policy
• Type of retail location
• Method of customer interaction
Classification on the basis of Ownership

• Sole proprietorship :
– Owned by one person
– Owns all the business & profits
– Complete responsibility
– Easy and least expensive
– Easy to dissolve
• Partnership
– Two or more people
– Legal agreement (decisions, profits, disputes,
dissolution)
– Easy to establish
– Ability to raise fund
– Prospective employees may be attracted
– Profits shared
– May have a limited life
– Entity for tax
• Joint venture:
– Limited liability to the extent of assets
– Continuity of life
– Free transferability of ownership interest
– Centralization of management
Eg. tata
• Limited liability company (hybrid business
structure & provide operational flexibility of
partnership)
 On the basis of operational structure
• Independent Retail unit :India has highest
number of outlets
– Flexibility in choosing the retail format and
location
– Small customer segment
– Act as specialist or for niche goods or services
– Certain image attached
– Sustain consistency
– Enjoy independence
– Less power to bargain from supplier
• Retail Chain :operates multiple store units
under common ownership.
– Eg. Haldiram & Mc D
– Centralized purchasing and decision making
– Good bargaining power
– Efficiency in multiple store operations can be
gained through shared warehousing facilities.
– Everything is systematic
– Less flexibility as everything is same
– Investment may be high
– Managerial control can be tough
• Franchising : A contractual arrangement
between a franchiser and a franchisee.
– Gives opportunity to use established name
– Franchisee pay a initial fee and after , a monthly
percentage of gross sale.
– Franchisees receive assistance on site location,
quality control, accounting system, training etc.
– Exclusive selling rights
– Agreements are of short duration
• Leased department or Shop-in-shop : It refers
to department in a retail store that rented an
outside party.
– Used by the existing store based retailers to
broaden their merchandise or service offering
– Market can be enlarged
– A percentage of revenues is received regularly by
the lessor.
• Cooperative outlets : owned and managed by
cooperative societies. Benficial for customers
as provide the products on less prices.
 On the basis of Location
• Retailers in free standing location : Located at a
site which is not connected to other retailers
depend entirely on their store’s drawing power
and various promotional tools to attract
customers.
• Retailers in business associated location : a
retailer locates his store in a place where a
group of retail outlets offering a variety of
merchandise work together to attract customer.
• Unplanned business districts : a type of retail
location where two or more retailers locate
their stores together.
– Availability of variety of goods, services and prices
– Access to public transport
– Congestion, outdated facilities, lack of space for
large outlets, parking problem and high rentals.
– Eg. Sadar
• Planned shopping centers:
– Cannaught place was developed as planned
– Sector market in Chandigarh
• Retailers in specialized markets:
– For particular product category
– Famous areas
• Retailers at Airports :
– Large group of prospective buyers
– Captive audience
– Strong sales per square foot of retail space
– Strong sale of gifts and travel items
– Difficulty in replenishment
 On the basis of merchandise mix
• Department stores: large stores organized in different
departments offering a broad variety of merchandise.
– Selling space
– Point of sale terminal
– Sales person to assist customer
• Discount stores: mix merchandise, low price, no
service, low investment on fixtures
– Category wise discount, item wise or brand wise discount
– Eg. Vishal, margin free market
• Speciality stores : stress on one or a limited
number of complementary product categories
– High level of services to customers
– Furniture retailers, watches, apparels etc.
– Largest penetration
• Supermarkets & hypermarkets:
– Large retail unit with low prices
– Large store sizes, operating costs, low prices
– Spacious parking
– Big bazar, spencer
 Service Retailers
• Selling services
• Simultaneous production and consumption
• Barber, tailoring, financial services, beauty
services
• National coverage, some have local like
doctors, lawyers etc.
• Branch level works
 Method of Customer Interaction
• Store retailers
• Non-store retailers
• Electronic retailing
 Topics to be discussed
• The Wheel of Retailing, the Retail Life Cycle,
Emerging Trends in Retailing; The Retail
Scenario in India
• Retail Life cycle Theory
– Theory of retail competition
– Retailing institutions pass through a cycle
– 4 Stages
• Innovation
• Accelarated development
• Maturity
• decline
• Wheel of Retailing Theory:
– Institutional life cycle concept
• Natural selection theory
– Those who adapt to environmental changes are more likely to prosper
or survive.
• Central Place Theory
– Ranks communities as per the assortment of goods available in each.
– At the bottom of hierarchy are communities that represent the
smallest central places (centre of commerce). Provide the basic
necessities of life.
– up the hierarchy – large central places, which carry all goods & services