Introduction

Good morning everyone. Today we are going to see some definition of retailing, types and
functions of retailing. Retailing means the act of selling goods directly to the customers or the
end users. It also the tasks of buying a large amount of goods or products from manufacturer and
selling them to the customers in small unit.

Generally, retailing is the process of promoting greater sales and customer satisfaction by
gaining understanding of the consumers of goods and services produced by a company.

We will also discuss how economic, legal and social factors affects the retailing environment,
and the competitive strategies that retailers used to overcome his/her competitors, the significant
trend in selecting retail locations, and the last one that will be defined in this assignment is BSG
matrix and how retailer can use it in practice.

1. Explain the term retailing, its function and types1

Retailing is the process of selling goods or services to the final consumer for personal, non-
business use. The function of retailing is to provide a platform for the transfer of goods and
services from the manufacturer or producer to the end consumer. Retailing can be classified into
three different types:

1.1 Function of retailing

Retailers play a significant role as a conduit between manufacturers, wholesalers, suppliers and
consumers. In this context, they perform various functions like sorting, breaking bulk, holding
stock, as a channel of communication, storage, advertising and certain additional services.

Sorting

Manufacturers usually make one or a variety of products and would like to sell their entire
inventory to a few buyers to reduce costs. Final consumers, in contrast, prefer a large variety of
goods and services to choose from and usually buy them in small quantities. Retailers are able to
balance the demands of both sides, by collection an assortment of goods from different sources,
buying them in sufficiently large quantities and selling them to consumers in small units.

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The above process is referred to as the sorting process. Through this process, retailers undertake
activities and perform functions that add to the value of the products and services sold to the
consumer.

Breaking Bulk

Breaking bulk is another function performed by retailing. The word retailing is derived from the
French word retailer, meaning ‘to cut a piece off’. To reduce transportation costs, manufacturers
and wholesalers typically ship large cartons of the product, which are then tailored by the
retailers into smaller quantities to meet individual consumption needs.

Holding Stock

Retailers also offer the service of holding stock for the manufacturers. Retailers maintain an
inventory that allows for instant availability of the product to the consumers. It helps to keep
prices stable and enables the manufacturer to regulate production. Consumers can keep a small
stock of products at home as they know that this can be replenished by the retailer and can save
on inventory carrying costs.

Additional Services

Retailers ease the change in ownership of merchandise by providing services that make it
convenient to buy and use products. Providing product guarantees, after-sales service and dealing
with consumer complaints are some of the services that add value to the actual product at the
retailers’ end. Retailers also offer credit and hire-purchase facilities to the customers to enable
them to buy a product now and pay for it later.

Retailers fill orders, promptly process, deliver and install products. Salespeople are also
employed by retailers to answer queries and provide additional information about the displayed
products. The display itself allows the consumer to see and test products before actual purchase.
Retail essentially completes transactions with customers.

Channel of Communication

Retailers also act as the channel of communication and information between the wholesalers or
suppliers and the consumers. From advertisements, salespeople and display, shoppers learn about

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the characteristics and features of a product or services offered. Manufacturers, in their turn,
learn of sales forecasts, delivery delays, and customer complaints. The manufacturer can then
modify defective or unsatisfactory merchandise and services.

Transport and Advertising Functions

Small manufacturers can use retailers to provide assistance with transport, storage, advertising
and pre-payment of merchandise. This also works the other way round in case the number of
retailers is small. The number of functions performed by a particular retailer has a direct relation
to the percentage and volume of sales needed to cover both their costs and profits.

1.2 Retailing Types

Retailing can be divided into five types. Here are the types of retailing that exists today:

Store retailing: This includes different types of retail stores like department stores, speciality
stores, supermarkets, convenience stores, catalogue showrooms, drug stores, superstores,
discount stores, extreme value stores etc.

Non-store retailing: Non-store retailing is a type of retailing where the transaction happens
outside conventional shops or stores. It is further divided into two types – direct selling (where
the company uses direct methods like door-to-door selling) and automated vending (installing
automated vending machines which sell offer a variety of products without the need of a human
retailer).

Corporate retailing: It involves retailing through corporate channels like chain stores,
franchises, and merchandising conglomerates. Corporate retailing focuses on retailing goods of
only the parent or partner brand.

Internet retailing: Internet retailing or online retailing works on a similar concept of selling
small quantities of goods to the final consumer, but they serve a larger market and don’t have a
physical retail outlet where the customer can go and touch or try the product.

Service retailing: Retailers not always sell tangible goods; retail offerings also consist of
services. When a retailer deals with services, the process is called service retailing. Restaurants,
hotels, bars, etc. are examples of service retailing.

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2. Discuss in detail how economic, legal and social factors affecting retail environment4

2.1 Economic factors

Economic factors can have a significant impact on the retail environment. Here are a few ways in
which economic factors can affect retail:

1. Consumer spending: The overall state of the economy, including factors like GDP growth,
employment rates, and inflation, can influence consumer spending patterns. During economic
downturns, consumers may cut back on discretionary spending, leading to decreased sales for
retailers. Conversely, during periods of economic growth, consumers may have more disposable
income, resulting in increased retail sales.

2. Income levels: The income levels of consumers can directly impact their purchasing power
and, in turn, the retail environment. Higher incomes can lead to increased spending on non-
essential items, while lower incomes may result in more budget-conscious shopping habits.

3. Consumer confidence: Economic factors such as market stability, job security, and future
economic prospects can impact consumer confidence. When consumers are optimistic about the
economy, they are more likely to spend on retail goods and services. Conversely, during times of
economic uncertainty, consumer confidence may decline, leading to reduced retail sales.

4. Interest rates and credit availability: Interest rates set by central banks can affect the cost of
borrowing for both consumers and businesses. Higher interest rates can discourage consumer
spending and lead to reduced sales for retailers. Additionally, the availability of credit can impact
retail sales, as consumers may be more inclined to make large purchases when credit is readily
available.

5. Exchange rates: For retailers engaged in international trade, exchange rates can significantly
impact their competitiveness and profitability. Fluctuations in exchange rates can affect the cost
of imported goods, which can directly impact pricing strategies and profit margins.

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Overall, economic factors play a crucial role in shaping the retail environment. Retailers must
closely monitor economic trends and adapt their strategies accordingly to navigate the ever-
changing economic landscape.

2.3 Legal factors

Legal factors can have a considerable impact on the retail environment. Here are some ways in
which legal factors can influence the retail industry:

1. Employment laws: Legislation related to labor and employment, such as minimum wage
laws, overtime regulations, and workplace safety standards, can directly affect retailers' operating
costs and human resource management practices.

2. Consumer protection laws: Legal regulations aimed at protecting consumers, such as product
safety standards, truth in advertising laws, and consumer privacy regulations, can impact how
retailers market and sell their products and services.

3. Taxation laws: Tax laws, including sales taxes, corporate taxes, and import/export duties, can
have a significant effect on retailers' financial performance and pricing strategies. Changes in tax
laws can impact retail profitability and influence consumer purchasing behavior.

4. Health and safety regulations: Retailers must comply with health and safety regulations to
ensure the well-being of employees and customers. Regulations related to food safety, building
codes, and occupational health can impact retail operations and infrastructure.

5. Environmental regulations: Legislation related to environmental protection, waste

management, and sustainability initiatives can influence retailers' supply chain practices, product
sourcing, and packaging strategies.

6. Competition laws: Antitrust and competition regulations aim to promote fair competition and
prevent monopolistic practices. Retailers must adhere to these laws to ensure fair business
practices and avoid legal implications related to anticompetitive behavior.

7. Data protection and privacy laws: With the increasing use of consumer data for marketing
and personalization, retailers must comply with data protection and privacy regulations to

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safeguard consumer information and avoid potential legal consequences related to data breaches
or misuse of personal data.

Overall, legal factors play a crucial role in shaping the retail environment. Retailers must stay
informed about relevant legal requirements and ensure compliance to mitigate legal risks and
maintain ethical business practices.

2.3 Social factors

Social factors can have a profound impact on the retail environment. Here are a few ways in
which social factors can influence retail:

1. Changing demographics: Shifts in population demographics, such as age, gender, ethnicity,

and household composition, can affect consumer preferences and purchasing behavior. For
example, an aging population may lead to increased demand for healthcare products and
services, while a growing millennial population may drive demand for tech-savvy, socially
conscious products.

2. Lifestyle trends: Evolving lifestyle trends and cultural shifts can drive changes in consumer
behavior and shopping habits. For instance, the rise of health and wellness trends has led to
increased demand for organic, sustainable, and health-focused products in the retail market.

3. Technological advancements: The rapid advancement of technology has transformed the

way consumers shop, interact with brands, and make purchasing decisions. Social media, e-
commerce, and mobile technology have significantly altered consumer behavior and
expectations, leading retailers to adapt their strategies to meet the demands of digitally connected
consumers.

4. Social values and attitudes: Changing social values and attitudes can influence consumer
preferences and purchasing decisions. Consumers are increasingly seeking out brands that align
with their values, such as sustainability, ethical sourcing, and corporate social responsibility.
Retailers that can demonstrate a commitment to these values may gain a competitive advantage
in the marketplace.

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5. Cultural influences: Cultural factors, including traditions, customs, and regional preferences,
can impact consumer behavior and product demand. Retailers often need to tailor their product
offerings and marketing strategies to resonate with diverse cultural groups and regional
preferences.

Overall, social factors play a significant role in shaping the retail environment. Retailers must
stay attuned to evolving social trends and consumer preferences to effectively engage with their
target audience and remain competitive in the market.

3. What strategies being used in to overcome competition in the retail sector7

Retailers use several strategies to overcome competition in the retail sector. Some of the most
commonly used strategies are:

1. Differentiation: Retailers differentiate themselves by offering unique products, services, or

experiences that set them apart from competitors. This could include exclusive product lines,
personalized customer service, or innovative store designs. Differentiation helps retailers attract
customers who value the distinctive aspects of their offerings.

2. Pricing strategies: Retailers can use pricing strategies to gain a competitive edge. This can
involve offering lower prices than competitors (discount pricing), providing value for money
through competitive pricing, or employing premium pricing strategies to position themselves as
high-end brands. Dynamic pricing, where prices are adjusted based on demand and market
conditions, can also be used to optimize sales and profits.

3. Marketing and branding: Effective marketing and branding strategies help retailers build
brand awareness, create a strong brand image, and connect with target customers. Retailers often
invest in advertising, social media campaigns, influencer partnerships, and other marketing
initiatives to differentiate themselves and attract customers.

4. Customer experience: Providing an exceptional customer experience can be a powerful

competitive advantage. Retailers focus on creating a welcoming and engaging environment,
offering personalized recommendations, providing convenient and efficient services (such as

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easy checkout processes or hassle-free returns), and investing in customer loyalty programs to
retain and attract customers.

5. Omnichannel presence: Retailers are increasingly adopting omnichannel strategies to

provide a seamless shopping experience across various channels, including physical stores, e-
commerce websites, mobile apps, and social media platforms. This allows customers to interact
with the brand in multiple ways and enhances convenience and accessibility.

6. Supply chain optimization: Streamlining and optimizing the supply chain can help retailers
reduce costs, improve efficiency, and ensure product availability. This includes efficient
inventory management, implementing just-in-time delivery systems, and leveraging technology
to improve logistics and distribution.

7. Continuous innovation: Retailers must stay ahead of the competition by continuously

innovating and adapting to changing customer needs and preferences. This could involve
introducing new product lines, embracing new technologies (such as augmented reality or virtual
reality), or adopting new business models (such as subscription-based services or direct-to-
consumer models).

It's important to note that the specific strategies employed may vary depending on the retail
sector, target market, and competitive landscape. Successful retailers often combine multiple
strategies to gain a competitive advantage and achieve long-term success.

4. Describe what you believe to be significant trend in selecting retail locations.

One significant trend in selecting retail locations is the shift towards data-driven decision-
making. The availability of real-time data and sophisticated analytics tools has enabled retailers
to make more informed decisions about where to locate their stores.

Here are some key factors that are considered when selecting retail locations:

1. Demographics: Retailers analyze demographic data to identify areas with the highest
concentration of their target customers. This includes information on age, income, education
level, and household size.

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2. Foot traffic: Retailers seek locations with high foot traffic, such as near public transportation
hubs, tourist attractions, or popular shopping areas.

3. Competitors: Retailers analyze the competitive landscape in a particular area to identify

opportunities and potential threats. This includes information on the number and type of
competitors in the area, their pricing strategies, and their market share.

4. Accessibility: Retailers consider the accessibility of a location, including parking availability

and proximity to major roads and highways.

5. Cost: Retailers consider the cost of renting or purchasing a retail space in a particular area,
balancing the potential sales revenue against the cost of operating the store.

6. Local regulations: Retailers must comply with local zoning laws, building codes, and other
regulations that may impact the location and operation of their store.

7. Online presence: Retailers consider their online presence and how it can complement their
physical store locations. For example, retailers may choose to locate their stores in areas where
they have a high concentration of online customers to drive foot traffic and enhance their
omnichannel capabilities.

Overall, the trend towards data-driven decision-making has enabled retailers to make more
informed decisions about where to locate their stores. By leveraging data and analytics tools,
retailers can identify opportunities, mitigate risks, and optimize their retail footprint to drive
growth and profitability.

5. What is BSG matrix and how can retailers can use it in practice?9

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The BSG matrix, also known as the Boston Consulting Group matrix or the growth-share matrix,
is a strategic planning tool used to analyze a company's portfolio of products or business units. It
classifies products or business units into four categories based on their market growth rate and
relative market share. These categories are gaphically described as the following:

1. Stars: High-growth products or business units with a high market share. Stars have the

potential to generate substantial profits and are considered to be in a strong competitive position.
Retailers can focus on investing in stars to further capitalize on their growth and market
dominance.

2. Cash Cows: Low-growth products or business units with a high market share. Cash cows
generate significant cash flow and profit due to their established market presence. Retailers can

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leverage cash cows to fund investments in other areas of their business or to support the growth
of other products or business units.

3. Question Marks (or Problem Children): High-growth products or business units with a low
market share. Question marks have the potential to become stars if they gain market share, but
they require significant investments and careful strategic decisions. Retailers need to carefully
evaluate question marks and decide whether to invest in their growth or divest them if they are
not viable.

4. Dogs: Low-growth products or business units with a low market share. Dogs have limited
growth potential and often generate little to no profit. Retailers may opt to divest or phase out
dogs to allocate resources to more promising areas of their business.

How can retailers use the BSG Matrix in practice?

Retailers can use the BSG Matrix to make informed decisions about their product offerings,
marketing strategies, and resource allocation. Here are some practical applications of the BSG
Matrix in retail:

Product Portfolio Analysis: Retailers can use the BSG Matrix to analyze their product offerings
and identify opportunities for growth. By understanding the current position of each product,
they can make informed decisions about which products to invest in, which to discontinue, or
which to promote more aggressively.

Marketing Strategy: Retailers can use the BSG Matrix to develop targeted marketing strategies
for each product category. For example, Brand Leaders may require a strong advertising
campaign to maintain their market share and profitability, while Brand Followers may benefit
from targeted promotional activities.

Resource Allocation: By understanding the different product categories, retailers can allocate
resources more effectively. For example, they can invest more in marketing and advertising for
Brand Leaders and Private Labels, while focusing on lower costs and operational efficiencies for
Commodities.

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Supplier Relationship Management: Retailers can use the BSG Matrix to evaluate and manage
their relationships with suppliers. By understanding the position of each product within the
matrix, they can negotiate better deals with suppliers, aligning their strategies and objectives
more effectively.

Category Management: Retailers can use the BSG Matrix as a framework for category
management, ensuring that each product category is effectively managed and optimized for
profitability.

By using the BSG matrix, retailers can gain insights into their product or business unit portfolio
and make strategic decisions regarding investment, resource allocation, and growth
opportunities. It helps retailers prioritize their efforts and optimize their business performance by
focusing on products or business units that have the most potential for success.

Conclusion

Retailing is the process of selling goods or services to the end-users or customers.

Retailing perform various functions such as sorting, breaking bulk, channels of communication,
additional services and etc.

The strategies that retailers use to overcome their competitors are differentiation strategy,
marketing and branding strategy, pricing strategy, focus strategy, and etc.

Retailers can identify opportunities, mitigate risks, and optimize their retail footprint to derive
growth and profitability by leveraging data and analytical tools.

References

 Guy, C. and Bennison, D. (2001). Retail Planning Policy in the UK: The Implications for

Superstore Development and Retail Competition. British Council for Out of Town Retail,

London. 12

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 Competition Commission (2008). The Supply of Groceries in the UK: Market

Investigation. Competition Commission, London. 13

 “ET in The Classroom”, Times Multimedia ,2003(CD-ROM)

 www.indiatimes .com Sept21, 2003

 “Mall Management strategies” www.pearlacademy.com

 http://www.indianmba.com/Faculty_Column/FC689/fc689.html

 www.blonnet.com

 www.iimcal.ac.in/intaglio/downloads/Retails.doc.

 www.imagesfasionsforum.com/fashion_vision4.htm 13

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