TOPIC 1; THE NATURE OF RETAIL BUSINESS

Retailing is an important marketing activity. Not only do producers and consumers meet through
retailing actions, but retailing also creates customer value and has significant impact on the
economy. Before discussing retailing in details, let us see the meaning of some few terms.

Retailing

 Includes all activities in selling goods and services directly to final consumers for
personal, nonbusiness use.
 Retailing is a distribution process, in which all the activities involved in selling the
merchandise directly to the final consumer (i.e. the one who intends to use the product)
are included. It encompasses sale of goods and services from a point of purchase to the
end user, who is going to use that product.

Any business entity which sells goods to the end user and not for business use or for resale,
whether it is a manufacturer, wholesaler or retailer, are said to be engaged in the process of
retailing, irrespective of the manner in which goods are sold.

Retailer implies any organization, whose maximum part of revenue comes from retailing. In the
supply chain, retailers are the final link between the manufacturers and ultimate consumer.

Types of Retailing

 Store Retailing: Department store is the best form of store retailing, to attract a number
of customers. The other types of store retailing includes, speciality store, supermarket,
convenience store, catalogue showroom, drug store, super store, discount store, extreme
value store. Different competitive and pricing strategy is adopted by different store
retailers.
 Non-store Retailing: It is evident from the name itself, that when the selling of
merchandise takes place outside the conventional shops or stores, it is termed as non-
store retailing. It is classified as under:
o Direct marketing: In this process, consumer direct channels are employed by the
company to reach and deliver products to the customers. It includes direct mail
marketing, catalog marketing, telemarketing, online shopping etc.
o Direct selling: Otherwise called as multilevel selling and network selling, that
involves door to door selling or at home sales parties. Here, in this process the
sales person of the company visit the home of the host, who has invited
acquaintances, the sales person demonstrate the products and take orders.
 o Automatic vending: Vending machines are primarily found in offices, factories,
gasoline stations, large retail stores, restaurants etc. which offer a variety of
products including impulse goods such as coffee, candy, newspaper, soft drinks
etc.
o Buying service: The retail organization serves a number of clients collectively,
such as employees of an organization, who are authorized to purchase goods from
specific retailers that have contracted to give discount, in exchange for
membership.
 Corporate Retailing: It includes retail organizations such as corporate chain store,
franchises, retailer and consumer cooperatives and merchandising conglomerates. There
are a number of advantages that these organizations can achieve jointly, such as
economies of scale, better and qualified employees, wider brand recognition, etc.
With the emergence of new forms of retailing, competition is also increasing between them. It is
one of the fast-growing and challenging industry.

Retail Business/Trade

 Is any business enterprise whose sales volume comes primarily from retailing.
 Is the sale of goods in small quantities to consumers.
 Is a business activity involving buying goods and retailing them to ultimate consumers
without changing the physical and chemical form of goods

Retailer

 Is the one who sells goods or commodities directly to consumers. These items are
purchased from the manufacturer or wholesaler and sold to the end user at a marked up
price. Examples: retailer would be the small family-operated pharmacy on the corner etc.
Characteristics of a Retailer

 In the entire distribution chain, a retailer is considered to be the final link, who deals
directly with the customer.
 A retailer purchases in bulk from the wholesalers and sells the products to the customers
in small quantities.
 A retailer essentially maintains a variety of merchandise.
 The aim of a retailer is to achieve maximum satisfaction by exceeding their expectations
and delivering exceptional services.
Key Functions Performed by a Retailer
(1) 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.

(2) Warehousing or Storing:

After assembly of goods from different suppliers, the retailers preserve them in stores 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.

(3) Selling:

The primary function of a retailer is selling the products to the customers for which various
techniques or business practices are being adopted by the retailer to achieve the strategic goals.

(4) 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.

(5) 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 customer’s tastes also adversely affects the sales.

(6) Grading and Packing:

(7) 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
wholesalers and the producers which are very helpful to them.

(8) 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 the consumer. He can explain nicely about the
utility and the characteristics of a new product to the customer.

(9) 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.

SERVICES PERFORMED BY RETAILERS:

Retailers provide important services to both the wholesalers and the consumers.

(I) Services To Wholesalers:

a) Retailer acts as the point of contact between the customer and the wholesaler. Retailers
are responsible for creating and improving the demand for various products by taking
care of the display and merchandising activities.
b) By taking over the function of retailing from the wholesalers and manufacturers,
retailer’s relive them from selling goods in small quantities to the consumers.
 c) Retailers act as a major source of funding for the wholesale trade. Sometimes retailers
make advance payments for the goods to be received from the wholesalers. In this
manner, they help in financing the wholesale trade.
d) Retailers are a valuable source of information and feedback for the wholesalers who in
turn pass on the same information to the producers of the products. Crucial information
related to the changes in the buying preferences of the customers, their experience with
the usage of the products, feedback on the prices and quality of the products is passed on
to the wholesalers. This helps in improving the existing services and in customizing the
product solutions as per the requirements of the customers.

(II) Services to Consumers:

a) A Retailer ensures ready stock availability of goods for the customers in sufficient
quantities and sells the goods to the customers as per their quantity specifications.
b) A retailer ensures availability of a wide variety of choices of products for the customers
by keeping different varieties at various prices and also different brands as well.
c) A retailer can provide credit facilities and heavy cash discounts on the purchase of
different products to the customers.
d) Retailers can provide customized services and pay personalized attention to the
customers for achieving a higher level of satisfaction with the delivery of product or
service.
e) Retailers introduce new products to the customers and also guide them with the usage of
the products.
f) Retailers can provide additional services like free home delivery or after sales services.
g) Retailers purchase and maintain a stock of those products which are mostly demanded by
the customers. They aim at catering to the requirements of all kinds of customers with
varied buying capacities.