Retail Management

1. Differences between product and service retailing:

Certainly, here are the key differences between product and service retailing, presented in a
pointwise format:

• Nature:
o Products are tangible, physical items that can be touched and seen.
o Services are intangible and primarily involve actions, experiences, or expertise.
• Quality and Timeliness:
o Product retailing focuses on the quality and cost of the products.
o Service retailing places a strong emphasis on quality, timeliness, and the behavior of
service providers.
• Customization:
o Product retailing involves limited customization, typically based on the available
product variations.
o Service retailing often offers tailor-made solutions to meet individual customer
requirements.
• Technological Support:
o In product retailing, technology can enhance processes but is not as integral to the
consumer experience.
o Service retailing may heavily rely on technology to improve processes and enhance
the customer experience.
• Consumer Relationship:
o Product retailing typically develops a consumer-retailer relationship over time
through repeated visits to the store.
o Service retailing establishes a relationship between the customer and the service
provider from the beginning of the service interaction.
• Storage:
o Products are tangible and can be stored for later use.
o Services are intangible and cannot be stored; they are produced and consumed
instantly.
• Standardization:
o Product retailing allows for standardization of products, ensuring consistency in
quality and features.
o Service retailing faces challenges in standardization due to the human element
involved in service delivery, leading to variations in the customer experience.
• Ownership:
o In product retailing, ownership of the product is transferred to the customer upon
purchase.
o In service retailing, customers use the service but do not own it; ownership remains
with the service provider.
• Perishability:
o Products can be stored and resold, reducing the impact of perishability.
o Services are perishable and cannot be stored or resold, making their immediate
consumption critical.
 • Production and Consumption:
o Products are manufactured, distributed, and then purchased by consumers.
o Services are often produced and consumed instantaneously in the presence of the
customer.
• Examples:
o Product retailing includes items like electronics, clothing, and groceries.
o Service retailing includes healthcare, laundry, travel agencies, counselling, and
personalized services like babysitting.

These distinctions highlight the unique characteristics and considerations associated with retailing
products and services.

Retailing: “Retailing is the process of selling goods or services to end-users through various
distribution channels, with the aim of making a profit. It entails a transaction between a seller or
provider and a consumer, where the act of selling is known as 'retailing.' This includes browsing or
window shopping, followed by making purchases, often through visits to physical stores or websites.
Retailing typically involves handling numerous small orders from a large number of individual
customers. Retailing is the final destination of manufacturing cycle.”

Retail Management: Retail management encompasses the comprehensive processes that attract
customers to retail stores and fulfil their purchasing requirements for personal use.

Functions of Retailer:

1. Delivery to End Consumer:

• Retailers provide hassle-free product delivery, enhancing consumer satisfaction.

2. Part of Distribution Chain:

• Retailers handle distribution, allowing manufacturers to focus on production.

3. Financing Wholesalers:

• Retailers pay in advance, aiding wholesaler operations and ensuring a smooth supply
chain.

4. Bulk Breaking and Storage:

• Retailers invest in inventory based on market demand, balancing supply and

demand.

5. Marketing Support:

• Retailers execute advertising and promotion at their stores, benefiting

manufacturers' products.

6. Storage and Credit Risks:

• Retailers store and assume risks for goods, including loss and damage.

7. Credit Facilities and Risk:

• Retailers offer credit to customers, assuming the risk of non-payment or returns.

 8. Product Variety and Pricing:

• Retailers offer diverse merchandise and competitive pricing for customer

satisfaction.

9. Shopping Convenience:

• Retailers locate stores for customer convenience, improving consumer welfare.

10. After-sale Services and Product Information:

• Retailers provide after-sale services and detailed product information.

11. Market Insight:

• Retailers gather market intelligence from consumer feedback and trends,

contributing to economic adaptability.

12. Employment Generation:

• Retailing creates numerous job opportunities, benefiting the workforce.

These activities enhance the retail transaction, meeting diverse consumer needs.

• Multichannel Retailing Definition:

• Multichannel retailing involves a retail organization serving customers through

multiple channels, such as physical stores, internet sales, and teleshopping.

• Consumer Evolution:

• Consumers, in both developed and developing countries, are exposed to various

retail channels, including online and teleshopping, due to evolving preferences and
convenience factors.

• Evolution of Multichannel Retailers:

• Multichannel retailers have transitioned from traditional brick-and-mortar stores to

include online retailing, ensuring efficient customer outreach.

• Benefits of Multichannel Retailing:

• Multichannel retailing is essential for reaching a broader customer base,

understanding consumer behavior, and promoting the business effectively.

• Data Analytics:

• Retailers can use multichannel retailing to gather data on customer purchasing

habits, channel engagement, and make informed resource allocation decisions.

• 24/7 Accessibility:

• Online platforms offer round-the-clock accessibility, allowing customers to shop from

any location at any time, enhancing convenience and potentially increasing sales.

• Customer Satisfaction:
 • The flexibility to shop at one's convenience, whether online or in person, boosts
customer satisfaction and contributes to higher sales.

• Advantages of E-tailing

• Reduced Transaction Costs:

• E-tailing lowers the cost per transaction, benefiting both customers and retailers.

• Increased Reach:

• E-tailing extends retail reach to remote areas via mobile networks.

• Global Expansion:

• Brick-and-mortar stores can leverage e-tailing to reach a global customer base and
boost sales.

• Low Overhead for Start-ups:

• E-tailers can start from a single room with minimal infrastructure, reducing initial
expenses.

• New Revenue Stream:

• E-tailing creates an additional revenue source for businesses.

• Cross-Border Visibility:

• E-tailing increases product visibility across borders, expanding market potential.

• Consumer Behavior Insights:

• E-tailers can track and analyze consumer shopping behavior to tailor marketing
campaigns effectively.

• Convenience and Time Savings:

• Customers can shop 24/7 from home, saving time compared to physical store visits.

• Product Comparison:

• Customers have access to detailed product information, enabling easy online

product comparisons.

• Improved Logistics and Employment:

• E-tailing growth drives enhancements in logistics and support services, generating

employment opportunities.

• Cost-Efficient Product Testing:

• E-tail websites offer an affordable platform to test and launch new products.

• Disadvantages of E-tailing
 • High Costs:

• Developing and maintaining e-tailing websites can be expensive, including infrastructure,

warehousing, and returns management costs.

• Establishing Trust:

• New e-tailers may struggle to gain consumer trust, requiring time to build a solid
reputation.

• Lacks Emotional Shopping Experience:

• E-tailing doesn't offer the sensory and personal shopping experience of physical
stores, as customers can't touch, smell, or try products.

• Security Concerns:

• Consumers may worry about the safety of their personal and financial information
when making online purchases.

Challenges of Retailing in India:

• Lack of Industry Recognition: Retailing is not officially recognized as an industry, which limits
access to financing and support.

• High Real Estate Costs: Acquiring retail space, especially for large retailers like Walmart, can
be prohibitively expensive.

• Foreign Direct Investment (FDI) Barriers: FDI restrictions make it challenging for foreign
retailers to invest in India.

• Complex Investment Regulations: Real estate and investment regulations are often
cumbersome, slowing down retail expansion.

• Taxation Favors Smaller Businesses: Taxation policies can be more favorable to smaller
enterprises.

• Long Distances and Supply Chain Challenges: India's vast size leads to longer production-to-
consumption times, necessitating improved supply chain and IT integration.

• Infrastructure Gaps: Some regions still lack adequate infrastructure development.

• Skills and Workforce Shortages: A lack of trained workforce and low skill levels in retail
management can hinder operations.

• Retail Complexity: Rapid changes in products, pricing, consumer behavior, and low profit
margins add complexity.

Enablers for Retail Growth in India:

• Globalization: Increasing integration with the global market.

• Rising Incomes and Middle Class: Expanding middle-class population with higher disposable
income.
 • Shifting Consumer Behavior: Less focus on savings, rising consumerism.

• Dual Incomes: More households with both partners working.

• Improved Communication: Enhanced cost-effective communication, better marketing, and

quality awareness.

• Logistics Improvement: Advancements in logistics and supply chain management.

• Wider Market Scope: Expansion from urban to rural, state-wide, national, and international
markets.

• Import Learning: Imports drive the need for improved domestic products.

• Technology Adoption: Better technology adoption and growth with control.

• Internet Accessibility: Widespread internet access and cheaper data, removing operational
boundaries.

• Skilled Workforce: Availability of a more skilled workforce.

Consumer Behavior Defined:

• Consumer behavior is the study of how people make decisions when purchasing, using, and
disposing of goods and services.

Key Aspects of Consumer Behavior:

• It encompasses actions and decisions related to choosing, buying, using, and repurchasing
products or services.

Business Significance:

• Understanding and tracking consumer behavior is vital for businesses as it helps in customer
acquisition and retention.

Specific Actions:

• Consumer behavior involves decisions regarding product choice, purchase, usage, and the
intention to repurchase.

Factors Studied:

• The formal study of consumer behavior examines individual attributes (e.g., demographics,
personality, lifestyle) and behavioral variables (e.g., loyalty, advocacy) to understand
consumer preferences and consumption patterns.

Influence Factors:

• Consumer behavior analysis explores influences from social groups (family, friends, reference
groups) and society at large on consumer choices and decisions.

Factors Affecting Consumer Behavior:

Psychological Factors:

• Motivation: The internal needs and desires that drive consumer decisions.

• Perception: How individuals interpret and make sense of information from their
surroundings.

• Learning: The process by which consumers acquire new information and knowledge.

• Attitudes and Beliefs: The personal values and opinions that influence consumer choices.

Social Factors:

• Family: The impact of family members on individual consumer preferences and decisions.

• Reference Groups: The influence of social groups and associations on consumer behavior.

• Roles and Status: How a person's position and responsibilities in society affect their choices.

Cultural Factors:

• Culture: The overarching values, beliefs, and practices of a society.

• Subculture: Smaller cultural groups within a society that share distinct characteristics.

• Social Class: The stratification of society based on economic and social attributes.

Personal Factors:

• Age: How age influences preferences and needs.

• Income: The financial resources available to consumers.

• Occupation: The individual's job or profession.

• Lifestyle: An individual's way of living, including interests and activities.

Economic Factors:

• The broader economic conditions, such as inflation, recession, and interest rates, that impact
consumer spending and saving patterns.

Consumer Decision-Making Process:

• Problem-Solving Process: It's a series of steps used by consumers to find solutions to their
needs or problems.

• Varied Product Evaluation: Consumers have different criteria for evaluating products, which
can change over time.

• Purchase Journey: A process consumers go through to become aware of, evaluate, and buy
new products or services.

• Business Benefits: Understanding this process helps businesses:

• Target marketing efforts effectively.

• Improve products based on consumer preferences.

 • Increase customer satisfaction.

• Adapt to external factors like pandemics or natural disasters.

Stages of Consumer Decision Process:

1. Need/Problem Recognition:

• Identifying a need or problem that triggers the buying process.

2. Information Search:

• Gathering information, often using tools like Google, to explore solutions.

3. Evaluation of Alternatives:

• Comparing and assessing different product or service options.

4. Purchase Decision:

• Deciding which product or service to buy.

5. Purchase:

• Act of acquiring the chosen product or service.

6. Post-Purchase Evaluation:

• Reflecting on the buying decision and overall satisfaction after purchase.

Applications of Consumer Behavior in Retailing:

1. Retailing Strategy Determination:

• Understanding consumer behavior aids retailers in developing effective retailing

strategies, optimizing product displays to allow consumers to interact with products.

2. Merchandise Mix Decisions:

• Analyzing shopper behavior and basket patterns helps retailers curate the right
merchandise mix, aligning with changing consumer preferences, such as healthy
food options.

3. Product Grouping Based on Shopper Behavior:

• Product placement in groups capitalizes on how one product purchase can trigger
the sale of adjacent items, like toothbrushes next to toothpaste.

4. Retail Communication Strategy:

• Communication within the store, like offers displayed at eye level, leverages insights
from shopper behavior to increase sales, particularly through bulk buying discounts.

5. Influencing Strategy for High-Value Items:

• High-value or high-involvement products, such as laptops or digital cameras, require
tailored sales approaches. Technical staff assistance and interactive displays build
customer confidence in these items.
What is a Market:

• Medium for Exchange: A market facilitates the interaction of buyers and sellers, enabling the
exchange of specific goods or services.

• Physical and Virtual: Markets can be physical (e.g., stores, bazaars) where in-person
exchanges occur, or virtual (e.g., online markets) where interactions are digital.

• Scope: A market represents all buyers and sellers within a defined area, which can range
from the local level to global scales. It encompasses various regions, states, countries, or
cities.

• Exchange Hub: It's a platform where two or more parties engage in the exchange of goods,
services, and information, including transactions involving money.

Market Segments:

• Segment Definition: A segment is a part or portion of a whole.

• Market Segmentation: It involves dividing a market into subsets based on various criteria like
demographics, needs, interests, or behaviors.

• Target Audience Understanding: Market segmentation helps in comprehending the target

audience, enabling more effective product, sales, and marketing strategies.

Why Market Segmentation is Necessary:

• Diversity of Individuals: Individuals in a market vary in preferences, needs, and behaviors,

making segmentation essential.

• Tailored Marketing Strategies: Segmentation allows organizations to create customized

marketing strategies for each segment based on their tastes and preferences.

• Understanding Target Audience: It helps marketers comprehend the specific needs of their
target audience, enabling precise marketing plans.

• Clarity for Customers: Market segmentation provides customers with a clear view of
available products and differences between them.

• Targeted Product Delivery: Organizations can deliver the right product to the right customers
at the right time, improving efficiency and customer satisfaction.

Criteria for Evaluating Market Segments:

1. Geographic Segmentation:

• Regions (North, East, South, West) or population density (Urban, Suburban, Rural).

2. Demographic Segmentation:
 • Characteristics like gender, age, family life cycle, income, occupation, education,
religion, race, and nationality.

3. Psychosocial Segmentation:

• Social class (upper, lower, middle) and personality traits (e.g., aggressive, shy,
emotional).

4. Feelings & Behavior Segmentation:

• Factors like convenience, economy, prestige, informed choices, and usage-related

variables.

Criteria for Viable Segments:

• Actionable: Segments should be actionable, meaning that marketing strategies can be

implemented effectively.

• Identifiable: It should be possible to identify and differentiate the segments clearly.

• Substantial: Segments need to be of sufficient size and significance to justify targeting them.

• Reachable: Marketers should be able to reach and engage with the segments through their
marketing efforts.

What is Market Segmentation:

• Segmenting Diverse Markets: Market segmentation is the process of breaking down a

diverse market into groups with similar attributes or needs.

• STP Decision Process: It's the initial step in the STP decision process, which stands for
Segmentation, Targeting, and Positioning.
 • Competitive Advantage: Market segmentation is a tool to gain stability and compete
effectively in a highly competitive market over the long term.

Example of Market Segmentation:

• Clothing Market: For instance, in the clothing market, segmentation starts with
demographics: Men, Women, Kids, and Infants.

• Further Sub-Divisions: It can be further divided based on psychological variables such as

Traditional Wear, Western Wear, Casual Wear, and Sports Wear.

• Targeted Marketing: Companies can choose specific categories and tailor marketing
strategies to satisfy their target audience effectively.

Criteria for Effective Market Segmentation:

• Means of Identification: Segments should be identifiable with distinct characteristics.

• Responsiveness: Segments should respond to changes in the marketing mix.

• Accessibility: The target group should be accessible for promotion and distribution.

• Significant Size: Segments should be of a significant size to ensure profitability.

• Categorization based on Demand: Segment categorization should align with sector demand.

• Measurability: The market segment's size should be measurable.

• Competitive Analysis: In-depth competitive analysis is essential for long-term survival.

Result of Segmentation:

• The result of segmentation should yield segments that are actionable, identifiable,
substantial, and reachable.

Basic Types/Dimensions of Market Segments:

1. Geographic Segmentation:

• Segmentation based on region (North, East, South, West) and population density
(Urban, Suburban, Rural).

• Common Factors: Climate, Language.

• Retailer Benefit: Offering products suitable for the regional climate and effective
communication in the local language.

2. Demographic Segmentation:

• Separating the market based on demographic variables like gender, age, education
levels, religion, race, and nationality.

• Common Factors: Age, Gender, Housing and Neighborhood.

• Retailer Benefit: Tailoring products and services to specific demographic groups.

 3. Psychographic Segmentation:

• Focusing on customers' habits, interests, lifestyle, activities, personality, and

opinions.

• Retailer Benefit: Creating more targeted marketing campaigns based on

psychographic variables.

4. Behavioral Segmentation:

• Segmenting based on consumer behavior and factors like occasion-based buying,

seeking specific benefits, customer loyalty, and usage rates.

• Retailer Benefit: Developing marketing strategies that align with consumers' buying
behavior and needs.

Benefits of Market Segmentation:

• Customized Marketing: Segmentation enables tailored marketing strategies to meet specific

customer needs and preferences.

• Unexplored Markets: Identifying untapped markets through segmentation provides growth

opportunities and profitability.

• Compelling Marketing Mix: Segmentation helps in creating a marketing mix that suits the
characteristics of each segment.

• New Product Development: It allows for the development of new products that cater to
specific market segments.

• Niche Marketing: Identifying unique needs within segments forms the basis for niche
marketing strategies.

• Cost-Effective: Clarity about target customer requirements through segmentation leads to

cost-effective marketing campaigns.

• Customer Retention: Customer-centric segmentation increases satisfaction and enhances

customer retention.

Importance of Location in Retail:

• Access: The right location ensures customer access to the store.

• Product Availability: It facilitates availability of the right products and services.

• Timing: Location plays a role in providing the right services at the right time.

Store Site Selection Analysis - Factors to Consider:

1. Customers:

• Proximity and number of potential customers who fit the target consumer criteria.
 2. Accessibility:

• Ease of traffic flow and connectivity to the store.

3. Parking:

• Availability of free or paid parking facilities.

4. Macroeconomic Factors:

• Population density, employment rates, consumer spending, and economic indicators.

5. Microeconomic Factors:

• Demographics, subculture, current demand, and growth potential within the trade
area.

6. Competition:

• Nearby competitors and commodity markets.

7. Business Plan:

• Alignment with the local market and business objectives.

8. Store Visibility:

• Visibility as part of the retailer's strategic intent, especially in high streets.

9. Store Location Positioning:

• Being close to the target customer segments based on where they live or visit.

10. Cost:

• Rental cost analysis, including its impact on profitability and gross margins.

• Objective analysis and comparative cost assessment are essential for selecting the right store
location.

Trade Area Analysis (TAA):

• Purpose: Understand demographics and purchasing habits of potential customers in a

specific geographic area.

• Users: Retailers, property developers, and community planners.

• Information Derived:

1. Number of potential customers in the area.

2. Demographics of potential customers.

3. Level of competition from other businesses.

4. Types of businesses present.

5. Customer origins and destinations.

 6. Consumer buying patterns.

Store Design and Purchase Decisions:

• In-Store Purchase Decisions: Studies show that up to 80 percent of purchase decisions are
made within the store.

• Reasons for In-Store Decisions:

1. Vague shopping intentions before entering the store.

2. Uncertainty about brand or style.

3. Impulse buying based on immediate product appeal.

Importance of Store Design:

• Increase Foot Traffic:

• More traffic leads to higher sales opportunities.

• Maximize Sales Efficiency:

• Efficiently utilizing each square foot of the store.

• Positive Customer Influence:

• Happy customers result in higher average sales.

• Space Optimization:

• Avoiding space wastage and allowing for more product displays.

• Brand Reinforcement:

• Stores represent the organization and build brand image.

• Showcasing Products:

• Promoting best sellers and new launches.

• Educating Consumers:

• Providing a space for customer interaction and product information.

• Enhancing Product Desirability:

• Aiding sales through visual and tactile appeal.

• Maintaining Brand Identity:

• Aligning with advertising campaigns.

• Theft Reduction:

• Minimizing stock losses, typically around 2% of sales.

Principles of Store Design:

• Totality:
o The entire store, from entrance to fixtures and displays, should project the retailer's
vision and mission as one cohesive entity.
• Focus:
o While creating an attractive store, the primary focus should always be on the
merchandise. A pleasing ambiance should enhance the product, not distract from it.
• Ease of Shopping:
o Store design should prioritize customer experience, enabling easy movement,
product access, and a layout that's simple to navigate.
• Change and Flexibility:
o Retail stores must anticipate environmental changes and incorporate flexibility into
their design, fixtures, and decor to adapt to short-term and long-term alterations
with minimal expense.

Grid Layout in Retail:

• Traditional Layout:

• Supermarkets, groceries, and pharmacies use the grid layout.

• Merchandise is displayed in long, predictable aisles to encourage impulse buying.

• Cost-Efficiency:

• Minimal wasted space.

• Aisles designed for shoppers and carts.

• Standardized fixtures for lower costs.

 • Drawbacks:

• Can be uninspiring, boring, and lacks excitement.

• Needs additional elements to break monotony and generate interest.

• Store Layout Description:

• A long aisle loops around the store, guiding customer traffic through various
departments.

• Purpose:

• Encourages customers to explore multiple store departments and promotes

unplanned purchases.

• Effect on Shopping Experience:

• Forces customers to view merchandise from different angles, unlike the grid layout,
which focuses on single aisles.

• Utilizes low fixtures to ensure customers can see products beyond the racetrack
displays.

Free Flow / Form / Boutique Layout:

• Store Layout Description:

• Fixtures and aisles are arranged asymmetrically, creating a relaxed and intimate
shopping environment.

• Purpose:

• Provides a pleasing and intimate shopping experience, but at a higher cost.

• Effect on Shopping Experience:

• Lacks a defined traffic pattern, making personal selling more crucial for guiding
customers.

• Reduces the display space for merchandise.

• Flexibility:

• Offers flexibility as fixtures can be rearranged.

• Concerns:

• May result in some space wastage.

Spine Layout:

• Store Layout Description:

 • Features a single aisle running from the front to the back of the store.

• Shelving is located on both sides of the aisle.

• Also known as a straight store layout.

• Purpose:

• Encourages customers to navigate through the store.

• Effective for accessibility between floors, especially in department stores.

• Suitable for stores with large stock, such as supermarkets.

• Department Arrangement:

• Merchandise departments may branch off from the main aisle in either a free-flow
or grid pattern.