Retail Marketing

Chapter-1:
Introduction to Retailing

Prepared by Dr. Shreya Sangal

Learning Objectives
• To understand the concept of retailing
• To understand the characteristics, and functions of retailing.
• To study the relevance of retailing.
• To understand the framework of retailing.
• To identify the activities associated with retailing.
• To understand the role of IT in retailing.
What is Retailing?
Retailing
• The last link in the chain of production, begins with extraction, moves onto
manufacturing, and ends with the distribution of finished goods and services to
the final consumer.
• When goods are put in consumers' hands or shopping bags, retailers obtain
revenue—and so do the wholesalers, distributors, and manufacturers who make
up the consumer-goods distribution chain.
• Consumer money drives the economy, and retail is where consumers spend that
money.
Retailing
• Retailing is defined as a set of activities or steps used to sell a product
or a service to consumers for their personal or family use. It is
responsible for matching individual demands of the consumer with
supplies of all the manufacturers.

• The word 'retail' is derived from the French word retaillier, meaning 'to
cut a piece of' or 'to break bulk.
Who is a retailer?
• A retailer is a person, agent, agency, company, or organization, that plays a crucial role in
delivering the goods, merchandise, or services to the ultimate consumer.
• Retailers perform specific activities, such as anticipating customers' wants, developing
assortments of products, acquiring market information, and financing.
• A common perception is that retailing involves only the sale of products in stores.
However, it also includes the sale of services like those offered at a restaurant, parlour,
or by car rental agencies.
• The selling need not necessarily take place through a store. Retailing encompasses selling
through the mail, the Internet, door-to-door visits--any channel that could be used to
approach the customer.
Retail Goods
Retail goods are traditionally divided into:

• Durable goods, such as furniture, cars, and large appliances, which are expected
to last at least five years.

• Non-durable goods, which include food, clothing, and other innumerable

categories that are too numerous to mention but which eventually form the
bulk of the stuff one sees across the sales counters of glossy stores or makeshift
tables at weekly markets.

• Services: Restaurants, entertainment, salon, etc.

Example: Small
Family Run
Chains/ Local
Stores
Kirana Shops, Local Shops
 Example:
Regionally
Targeted
Stores
Dmart, Star Bazar, Suvidha Store More supermarkets
 Billion Dollar
Multinational
Conglomerates
WalMart, McDonalds, Marks and Spencer, etc.
 Framework of Retailing
• There is a tendency to think of retailing as primarily involving the sale of tangible (physical) goods.

• However, retailing also includes the sale of services. And this is a big part of retailing!

• A service may be the shopper's primary purchase (such as a haircut) or it may be part of the
shopper's purchase of a good (such as furniture delivery).Retailing does not have to involve a
store.

• Mail and phone orders, direct selling to consumers in their homes and offices, Web transactions,
and vending machine sales all fall within the scope of retailing. Retailing does not even have to
include a "retailer."

• Manufacturers, importers, nonprofit firms, and wholesalers act as retailers when they sell to final
consumers.
Characteristics of Retailing
Retailing can be distinguished in various ways from other business activities. It
differs from manufacturing in the following ways:

• There is a direct end-user interaction in retailing.

• It is the only point in the value chain to provide a platform for promotions.
• Sales at the retail level are generally in small unit sizes.
• Location is a critical factor in retail business.
• In most retail businesses, services are as important as core products.
• There are a larger number of retail units than other value chain members.
• This occurs primarily to meet the requirements of geographical coverage
and population density.
Characteristics of Retailing
1. Direct Interaction with Customers
• Retailing entails a direct interaction with end-users of goods or services in
the value chain. Retailers act as intermediaries between end-users and
suppliers such as wholesalers or manufacturers.
• Therefore, they are in a position to effectively communicate the response
and changing preferences of the consumers to the suppliers or sales
persons of the company.
• Manufacturers require a strong retail network for expanding the reach of
their products and to obtain a powerful platform for promotions and point-
of-purchase advertising.
Characteristics of Retailing
Point-of-purchase Display and Promotions
• A significant chunk of retail sales comes from unplanned or impulse
purchases.
• Studies have shown that shoppers often do not carry a fixed shopping list
and pick up merchandise based on impulsive or situational appeal.
• Since a lot of retail products are low involvement in nature, impulse
purchases of the shopper is a crucial to consider.
• Therefore, display, point-of-purchase merchandise, store layout, and
catalogues become important.
• Impulse goods like chocolates, snack foods, and magazines can sell much
more quickly if they are placed in a high visibility and high traffic location
Characteristics of Retailing
3. Lower average amount of Sales Transactions
• The average amount of sales transaction at a retail point is much less in
comparison to the other partners in the value chain.
• Many consumers buy products in small quantities for household
consumption. Due to lower disposable incomes some consumer segments
in India buy even grocery items on a daily basis rather than a weekly or a
monthly basis.
• Inventory management, thus, becomes a challenge for retailers as a result
of innumerable minor transactions with a large number of customers.
• The retailer has to keep a tight control on costs associated with each
transaction in the selling process.
Characteristics of Retailing
4. Location/ Large no. of retail units
• Location of retail store plays an important role compared to other business
units.
• Manufacturers decide the location based on availability of factors of
production and market.
• Similarly, retailers consider factors like potential demand, supply of
merchandise, and store image-related factors in locating the retail outlet.
Retail Industry and Economy
• Retail business is the largest private industry in the world ahead even of finance and
engineering, contributing over 8 percent to the GDP in developed western countries by the
beginning of this century.

• Over fifty of the Fortune 500, and about twenty-five of the Asian Top 200 companies are
retailers.

• Today, in some developed countries, retail business houses have shares as large as 40 percent
of the market. In Thailand and Brazil, organized retail business has been growing rapidly.

• India is one of the biggest markets in the world. Retail business contributes around 10-11 per
cent to the country's GDP.
Retail Industry and Economy
• India also has the largest number of retailers, about 15 million, though they are mostly small
neighborhood ones.

• The significance of the retail business has increased with the rapid growth in the service
sector. There has been a dramatic change in the structure of the economy post-
liberalization.

• In the early 2000s, while agriculture continued to be the mainstay of the Indian economy,
the manufacturing sector slumped due to demand recession and liberalized imports.

• Much of the rapid growth in organized retail business in developing countries was due to the
entry of global retailers.
Retail Industry in India
• In India, the retail sector is the second largest employer after agriculture.
• It is highly fragmented and consists predominantly of small, independent, and owner-managed
shops.
• Besides, the country is also dotted with low-cost kiosks and pushcarts.
• There are some 12 million retail outlets of which nearly 5 million sell food and related products.
• The retail industry in India ranks 4th in the world in terms of size and accounts for 10% of the
country’s overall GDP. The industry’s market size in 2020 was approximately INR 65.50 trillion.
• A boom in the retail trade in India owing to a gradual increase in the disposable income of middle-
class households.
• More and more players are venturing into the retail business with new and attractive formats, such
as e-retail, quick commerce, malls, supermarkets, discount stores, and department stores,
transforming the traditional bookstores, chemist shops, and furnishing stores altogether.
• Food, clothing, and footwear are the most sold product categories in retail.
The Emergence of Organized Retail in India

Organized retail refers to trading activities undertaken by licensed retailers who are registered under the

tax and legal system, such as GST, labor laws, and corporate regulations. This includes: Supermarkets

(e.g., Big Bazaar, Walmart) Department Stores (e.g., Shoppers Stop) Chain Stores (e.g., Reliance Fresh) E-

commerce Platforms (e.g., Amazon, Flipkart).

Unorganized retail consists of informal, small-scale businesses that are not registered under legal or tax

systems. This includes: Kirana Shops (small neighborhood stores), Street Vendors, Weekly Markets, Local

Convenience Stores.
The emergence of Organized Retail in India
• The Indian retail market is expanding at a rapid pace.
• The shopping mall phenomenon, is not likely to be restricted only to the metropolitan and big cities as
malls have sprung up in the smaller cities and large towns across the country.
• In 2022, there were 271 shopping malls in India. The number of malls in India has steadily grown since
2012. The number of shopping malls indicates a growth of the middle class.
• They hold a total area of 92.9 million sq. ft. in the top eight markets; Ahmedabad, Bengaluru,
Chennai, Hyderabad, Kolkata, Mumbai, National Capital Region (NCR), and Pune.
• Out of the total number of shopping malls in India, NCR has the largest share of the total malls
amongst the top 8 cities at 34 %, followed by Mumbai at 18%, and Bengaluru at 17%.
The emergence of Organized Retail in India

• The contribution of Tier-II cities to total organized retailing sales is expected to grow
to 20-25%.
• Organized retail in small towns is growing by 50 - 60% a year compared to 35-40% in large
cities.
• A study identified five types of cities and grouped them under categories such as
maturing, transitional, high growth, emerging, and nascent representing the different
stages of retail market evolution.
• Each type offered different types of opportunities to the retailers and the property sector.
The emergence of Organized Retail in India
• The 'maturing cities were Delhi/NCR and Mumbai and emerged above the other cities in terms of the
number of shopping malls and organized retailers.

• The 'transitional' cities are firmly making their mark on the retail sector. They are catching up as both
retailers and developers tap into the large middle class of those cities. In this category are included
the cities of Bengaluru, Kolkata, Hyderabad, Pune, and Ahmedabad and Chennai.

• The 'high growth' cities are a small group that have entered a high growth phase. They include cities
with substantial consumer spending power like Ludhiana, the tourism-driven city of Jaipur, rapidly-
growing IT hubs like Chandigarh and Kochi, as well as some medium-sized cities like Lucknow, Surat,
and Vadodara. These are perceived by retailers as the next retail destinations.

• The 'emerging' cities have been branded thus on the basis of plans drawn up by major hypermarkets
and department store retailers for the future. Factors such as growing income, rising aspirations,
scarcity of branded stores, and growing corporate activity are leading to a rise in demand for organized
retailing in these cities. These include Nagpur, Indore Nashik Bhubaneshwar, Vizag, Coimbatore,
Mangalore, Mysore, and Trivandrum.
Retail market size across India from 2011 to 2023 (in billion U.S. dollars)

Source: Statista
Functions of Retailing
1. Contact between manufacturers, wholesalers, and the consumer.
2. Sorting: Retailers collect an assortment from various sources, buy in large
quantities, and sell in small amounts.
3. Information to Shoppers: Shoppers learn about the availability and
characteristics of goods and services, store hours, sales, and so on from
retailer ads, salespeople, and displays.
4. Information to Manufacturers and Wholesalers: Manufacturers and
wholesalers are informed by their retailers with regard to sales forecasts,
delivery delays, customer complaints, defective items, inventory turnover,
etc.
Functions of Retailing
Additional Services
•

•
Importance of Retailing

•
•
A typical Channel of Distribution:

Wholesaler Retailer Final Customer

Manufacturer
Role of
Retailers in
Supply Chain
Scope of Retailing
• Retailing has a very wide scope. It provides employment opportunities to many people.
With the increase in the purchasing power of the people and the rural reach of the
retailers, the scope of retailing has increased manifold.

• Retailing offers jobs in two different ways. First of all, it gives people the chance to start
their entrepreneurial ventures, and secondly, it gives many people employment, who
are unable to own retail establishments.

• Variety of Products, Sales channels, Market segments (Demographics, preferences),

Reach (Local, global), technology integration (Complex, basic, none), Supply chains (long,
short). Retailing businesses can be big or small (size), can deal in essential goods/services
or hedonic goods/services.
Categorizing Retailers
1. Number of Outlets

2. Margin vs turnover

3. Location

4. Size
Categorizing Retailers
1. Number of Outlets:

The number of outlets operated by a retailer can have a significant impact on the
competitiveness of a retail firm.

Generally, a greater number of outlets adds strength to the firm because it can spread fixed
costs, such as advertising and managers' salaries, over a greater number of stores in
addition to acquiring economies of purchase.

A chain store refers to a retail firm that has more than eleven units. In the US, chain stores
account for 95% of general merchandise stores.
Categorizing Retailers
2. Margin vs turnover:

Gross margin and inventory turnover is another means of classifying retailers.

Gross margin is net sales minus the cost of goods sold. A 30 per cent margin implies that a
retailer generates Rs 30 for every Rs 100 sales that can be used to pay operating expenses.
Inventory turnover refers to the number of times per year, on average, a retailer sells his
inventory.

On the basis of this, retailers are classified as low margin low turnover--those that cannot
survive the competition--and low margin high turnover, exemplified by Amazon.com.
Jewellery stores and appliance stores are examples of high margin low turnover stores and
only a few retailers achieve high margin high turnover. These retailers are in the best
position to combat competition because their high turnover allows them to withstand price
wars (Ex: Bata, Titan).
Categorizing Retailers
3. Location:

Retailers are no longer satisfied with traditional locations within the business district of a city
and are on the constant lookout for alternate locations to reach customers.

Besides renovating old stores, retailers are testing unorthodox locations to expand their
clientele.

With the advent of the Internet, this area of retailing is likely to undergo tremendous changes
in the forthcoming years.
Categorizing Retailers
4. Size:
Small chains can use economies of scale while tailoring merchandise to local needs.
Big chains operating on a national scale can save costs by a centralized system of buying and
accounting.

A chain store could have either a standard stock list ensuring that the same merchandise is
stocked in every retail outlet or an optional stock list giving the outlets the advantage of
changing the merchandise according to customer needs in the area.

Big stores focus on large markets where their customers live and work. They use technology
to learn more about their customers and target them with point-of-sale machines, interactive
kiosks, and sophisticated forecasting and inventory systems.

What are the challenges faced by retailers based on their store size?
Trends in Retail Formats
1. Mom-and-Pop Stores and Traditional Kirana Stores
2. E-commerce
3. Department Stores
4. Discount Stores
5. Category Killers
6. Specialty Stores
 Mom-and-Pop Stores and Traditional Kirana Store

• Mom-and-pop stores, commonly known as traditional Kirana stores in India are

Small independent stores, available particularly in small townships, but with
the emergence of new retail formats, they are also undertaking large-scale
renovations to attract their target consumer segments.
• These small, family-owned businesses typically offer a range of everyday
essentials, including groceries, snacks, and household items. Their evolution
can be traced back to the early 20th century when local merchants catered to
the needs of their communities.
• Kirana stores are characterized by their personalized service, credit facilities,
and deep understanding of local customer preferences. They often thrive in
urban and rural areas, providing convenience and accessibility to consumers
• In recent years, some Kirana stores have embraced technology by integrating
digital payment systems and online ordering.
 E-commerce
• The journey began in the late 1990s with the launch of platforms
like Indiatimes and Rediff Shopping, which introduced online shopping to Indian
consumers.
• However, it was the emergence of Flipkart in 2007, offering a wide range of
products and a user-friendly interface.
• The entry of Amazon in 2013 further intensified competition, with innovations in
logistics and customer service.
• The rise of mobile internet access and digital payment solutions, such
as Paytm and PhonePe, fueled the growth of e-commerce.
• Niche players like Myntra (fashion) and BigBasket (groceries) have carved out their
markets, while Jabong and Snapdeal have also contributed to the sector's diversity.
• Today, India's e-commerce market is one of the fastest-growing globally, with
projections to reach $200 billion by 2026.
Top 15 E-commerce Companies in India

Amazon India Myntra

Flipkart Purplle
Nykaa Pepperfry
IndiaMART Lenskart
Meesho Tatacliq
FirstCry ShopClues
AJIO Jiomart
Snapdeal
 Department Stores

• A significant role in the evolution of retail shopping, offering a wide variety of

products under one roof.
• The concept gained traction in the early 20th century, with the establishment
of iconic stores like Westside and Shoppers Stop in the 1990s, which
introduced a modern shopping experience to Indian consumers.
• These stores typically feature distinct sections for clothing, electronics, home
goods, and groceries, allowing customers to browse and purchase multiple
items conveniently.
• In the 2000s, international brands like Lifestyle and Marks & Spencer offered a
blend of global and local products. The advent of e-commerce has prompted
omnichannel strategies to enhance customer engagement.
• Today, departmental stores continue to thrive by focusing on customer
experience, loyalty programs, and exclusive product lines.
 Discount Stores
• Discount stores cater to price-sensitive consumers seeking value for
money. The concept gained momentum in the early 2000s, with the
establishment of chains like Big Bazaar, which offered a wide range
of products at discounted prices, including groceries, apparel, and
household items.
• These stores typically operate on a high-volume, low-margin model,
allowing them to pass savings on to customers.
• The success of discount stores can be attributed to the growing
middle class, increasing disposable incomes, and a shift in
consumer behavior toward budget-friendly shopping options.
• In recent years, other players like D-Mart and Reliance Fresh have
entered the market, feature promotional sales.
 Category Killers
• Category killers are specialized retail stores that dominate a specific
product category, offering a vast selection and competitive pricing
that often outshines general retailers.
• One of the earliest examples of a category killer in India is Croma,
which launched in 2006 and quickly became a go-to destination for
consumer electronics, providing a wide range of products from
laptops to home appliances.
• Home Centre has established itself as a leader in home furnishings
and decor, offering an extensive selection of furniture and home
accessories.
• These stores often provide knowledgeable staff, competitive
pricing, and exclusive brands, making them attractive to consumers.
• Provide in-store experience and offer personalized service.
Specialty Stores

Specialty stores are retail outlets that focus on a specific product

category or niche, offering a curated selection of items and expert
knowledge to cater to particular consumer needs.
Consumers are increasingly seeking unique products and personalized
shopping experiences.
Typically emphasize quality, variety, and specialized service. Examples
include FabIndia, which specializes in ethnic clothing and handcrafted
products, and Nike or Adidas stores, which focus on sportswear and
athletic gear.
Specialty stores often create a strong brand identity and foster
customer loyalty.
In recent years, niche markets such as organic foods, artisanal products,
and eco-friendly goods have seen a surge in specialty stores.
Difference between Category Killers & Specialty Stores
The Retailing Concept
Four principles form the retailing concept:
1. Customer orientation. The retailer determines the attributes and needs of its customers
and endeavors to satisfy these needs to the fullest.
2. Coordinated effort. The retailer integrates all plans and activities to maximize efficiency.
3. Value-driven. The retailer offers good value to customers, whether it be upscale or
discount. This means having prices appropriate for the level of products and customer
service.
4. Goal orientation. The retailer sets goals and then uses its strategy to attain them.
The Retailing Concept
• The retailing concept is straightforward.
• It means communicating with shoppers and viewing their desires as critical to the
firm's success, having a consistent strategy (such as offering designer brands, plentiful
sales personnel, attractive displays, and above-average prices in an upscale store).
• Offering prices perceived as "fair" (a good value for the money) by customers; and
working to achieve meaningful, specific, and reachable goals.
Retail Strategy
A retail strategy is the overall plan guiding a retail firm. It influences the firm's
business activities and response to market forces, such as competition and the
economy. Retailers should utilize these six steps in strategic planning:

1. Define the type of business in terms of the goods or service category and the
company's specific orientation (such as full service or "no frills").

2. Set long-run and short-run objectives for sales and profit, market share,
image, and so on.
Retail Strategy
3. Determine the customer market to target based on its characteristics (such as gender
and income level) and needs (such as product and brand preferences).

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

5. Implement an integrated strategy that combines such factors as store location, product
assortment, pricing, and advertising and displays to achieve objectives.

6. Regularly evaluate performance and correct weaknesses or problems when observed.

Case: Target Corporation, The winning Approach of Upscale Discounter
 Case: Target Corporation, The winning Approach of Upscale Discounter
Retail Strategy:
• Growth-oriented objectives: Outstanding value,
exceptional guest experience. Pay Less, Brand Promise.

• Appeal to a Prime Market: Middle-income well-

educated adults, 42 median age.

• Distinctive Company Image: Discount department

store with everyday low pricing, upscale discounter.
Great design, more choices.

• Focus: Discount store niche

• Strong Customer Service: Exceeding expectations of

customers, excellent customer service.
 Case: Target Corporation, The winning Approach of Upscale Discounter
Retail Strategy:
• Multiple points of contact: toll-free telephone nos, 48
stores, extensive advertising

• Employee Relations: Employees members, company

paid benefits: pension plans, paid trips, medical plans,
tuition reimbursement, insurance plans, merchandise
discounts.

• Innovation: unique innovations, gift cards with

camera.

• Commitment to Technology: Tech and infra

investments, perishable food and merchandise
distribution centers.

• Community Involvement: 5% of its income to

communities
Total Retail Experience
• One consumer may shop at a discount retailer, another at a neighborhood store, and a third at a full-
service firm; these diverse customers all have something crucial in common: They each encounter a total
retail experience (including everything from parking to checkout counter) in making a purchase.
• The way to stand out in a crowded marketplace is to operate in a distinctive way that invites notice, and
people notice things that reduce clutter and enhance value. Many companies are choosing remodels over
ground-up stores to increase shopping basket size.
• Opportunities for competitive differentiation are everywhere new brands and formats, services,
presentations, and interactivity. Even small touches can encourage shoppers to buy often and stay loyal.
• The total retail experience includes all the elements in a retail offering that encourage consumers during
their contact with a retailer.
• Many elements, such as the number of salespeople, displays, prices, the brands carried, and inventory
on hand, are controllable by a retailer; others, such as the adequacy of on-street parking, the speed of a
consumer's Internet connection, and sales taxes, are not.
• If some part of the total retail experience is unsatisfactory, consumers may not make a purchase from a
retailer again.
 Total Retail Experience
Various retailers have not learned this lesson, which is why
some theme restaurants are in trouble. In a Niche format from
Future Group, "Ethnicity," was launched in the city of
Ahmedabad in the state of Gujarat, to provide an organized
retail platform for Indian ethnic wear products at par with
Western brands in the country. The new concept retailed a
wide range of products across ethnic and fusion wear,
including handicrafts, home decor, accessories, and gifts. It
also offers jewelry, home decor, beauty products, and
accessories. However, its USP lies in localized packaging; for
example, Gujarat has Gujarati packaging.

Rani Market (queens' market for women), Raja Market (kings'

market for men), Chota India (little India for kids)- a collection
of kids' ethnic wear, party wear, and accessories, Sona Chandi
(gold and silver), Ghar Aangan (home needs), incense,
ayurveda, and natural products, are the six departments in the
store. Ethnicity is aimed at providing a platform for smaller
Indian brands and ethnic products.
 Customer Service
Customer service refers to the identifiable, but sometimes intangible, activities undertaken by a retailer in
conjunction with the basic goods and services it sells.

Factors comprising a customer service strategy are store hours, parking, shopper friendliness of the store
layout, credit acceptance, salespeople, amenities such as gift wrapping, restrooms, employee politeness,
delivery policies, the time shoppers spend in checkout lines, and customer follow-up.

Satisfaction with customer service is affected by expectations (based on the type of retailer) and past
experience.

Ex: Westside cares. Customer complaints are resolved within 24 hours, and the stores have a no-questions-
asked exchange policy. For quality defects, one can return a product within one year of purchase. However,
such instances are very few as Westside quality standards are stringent to ensure that consumers do not face
problems with merchandise bought at the store.
Relationship Retailing
• It refers to establishing and maintaining long-term bonds with customers. This means
concentrating on the total retail experience, monitoring satisfaction with customer service, and
staying in touch with customers.

To be effective in relationship retailing, a firm should keep two points in mind:

• Because it is harder to lure new customers than to make existing ones happy, a "win-win"
approach is critical.

• For a retailer to "win" in the long run (attract shoppers, make sales, earn profits), the customer
must also "win" in the long run (receive good value, be treated with respect, feel welcome by the
firm).
• Due to the advances in computer technology, it is now much easier to develop a customer data
base with information on people's attributes and past shopping behavior.
Case:
• Retailing in India- Hypermarkets
• Build-a-bear workshop
End of Presentation
Customer Respect Checklist
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