RETAIL MANAGEMENT

Retailing- Introduction.
 The word retail is derived from the French word
“retaillier” which means “to cut a piece off” or “ to
break bulk”.
 Retailing is a distribution channel function where one
organization buys products from supplying firms or
manufactures the product themselves, and then sells
these directly to consumers.
 A retailer is a reseller (i.e., obtains product from one
party in order to sell to another) from which a consumer
purchases products.
 Retailing involves a direct interface with the customer
and the coordination of business activities.
 RETAILING Business activities involve Selling Goods
and Services to Consumers for their Personal, Family or
Household use.
 “Every sale of Goods and Services to the final
consumer” – Food products, apparel, movie tickets;
services from hair cutting to e-ticketing.
 Retailing is the Last stage in Distribution Process-
Wholesale is an intermediate function, where Goods
and services are sold to Business customers.
 Retailing is high intensity competition industry, The
reasons for its popularity lie in its ability to provide
easier access to variety of products, freedom of choice
and many services to consumers.
MANUFACTURER

DISTRIBUTOR

WHOLESALER

RETAILER

END-CONSUMER
Retailing – Definition:-
According to Philip Kotler :-
“All activities involved in selling goods or services
directly to the final consumers for their personal,
non-business use is known as retailing”
According to Cundiff and Still,
“Retailing consist of those activities involved in selling
directly to ultimate consumers. ”
Manufacturer  Wholesaler  RETAILER

You (the consumer)

 It is the sale by seller in small quantities to customer,
not for resale.
 It is the process of bringing the ultimate user to the
main producer, through a series of stages, where
retailing is the last one.
 It is not limited to quantities, but limited to the
exact requirement of the ultimate user.
 It includes various processes which help the
customers to procure the desired merchandise from
retail stores for their end use.
 Who is a Retailer?

Retailer links Producers to Customers-

“Retailer is a person, agent, agency, company or
organization who delivers the Goods or Services to
ultimate consumer”.
Eg: WalMart, Tesco, Spencer, Subhiksha, Nilgiris
Characteristics of Retailing
 Direct end-user interaction.
 Platform for promotions.
 Lower average amount of sales transactions.
 Point of Purchase, Display and promotions.
 Location is a critical factor in retailing.
 Service is more important as products.
 More products at a single point.
 Point of unplanned purchases.
 Provides employment opportunities.
Importance of Retailing
 Services to Wholesalers and Producers.
a) Advertisement of new products.
b) Arrangement to sell the goods.
c) Information about consumer habits, tastes and needs.
d) Sharing of Risks.
 Services to consumers.
a) Selection.
b) Variety of goods.
c) Demand creation.
d) Distribution.
e) Credit Facility.
Benefits of Retailing to the economy
 Employment generated
 Contribution to the management of the economy
 Contribution to the production cycle of the industries
 Ensures the success of the economic enterprises.
Retailing- Scope

 It breaks the bulk that comes from vendor into small

manageable forms for customer.
 It provides an assortment of products to customer.
 Not only products is what customers want, they also want
service that is being provided by customer.
 Sometimes it also manage the inventory and warehouses.
 It also studies customer's needs and wants and provides the
sales pattern to the customer.
 It acts as a link between vendor and the end user.
 It provides information as well as convenience to the customers.
 It provides employment opportunities.
 It provides opportunities for R &D.
Retailing in India

 Retail is the new buzzword in India.

 The global Retail development Index has ranked India

first, among the top 30 emerging markets in the
world.

 It is believed that India has the potential to deliver the

fastest growth in coming years.
 Second largest sector after Agriculture. Contributes about 10 –
11 % of the GDP

 The estimated size of the organized retail industry in India is

Rs. 16,000 crores. This is 2 % of the total estimated retail
trade.
 Indian Retail trade increases year by year.

 India's first true shopping mall – complete with food courts,

recreation facilities and large car parking space – was
inaugurated as lately as in 1999 in Mumbai. (this mall is called
"Crossroads").
Evolution of Retailing in India
 While barter would be considered to be oldest form of retail
trade, since independence , retail in India has evolved to support
the unique needs of country, given its size and complexity

 The emergence of the neighborhood ‘Kirana’ stores catering to

the convenience of the consumers

 Retail in India has evolved to support the unique needs of our

country, given its size and complexity Haats, Mandis and Melas
have always been a part of the Indian landscape. They still
continue to be present in most parts of the country and form an
essential part of life and trade in Various areas.

 The PDS (Public Distribution System) would easily as the

single largest retail chain existing in the country. the evolution of
the PDS of Grains in India has its origin in the “rationing
system” introduced by the British during world war II
 The system was started in 1939 in Bombay and
subsequently extended to other cities and towns. the
system was abolished post war but however attaining
independence India was forced to reintroduce it in 1950.

 There was rapid increase in the ration shops ( being

increasingly called the Fair Price Shop or FPSs)

 The Canteen Stores Department and the Post

Offices in India are also among the largest network of
outlets in the country reaching population across the
country.
 The Khadi & Village industries (KVIC) was also set up post
independence. The cooperative movement was again championed by
the government.

India's Largest retail Chains:

1. PDS: 463,000

2. Post offices: 160,000

3. KVIC: 7,000

4. CSD Stores:3,400
(source “Business World”)
 The latter half of the 1990s saw a fresh wave of
entrants with a shift from Manufactures to Pure
Retailers.

 Post 1995 onwards saw an emergence of

shopping centers,
 mainly in urban areas, with facilities like car
parking
 targeted to provide a complete destination
experience for all segments of society

 Emergence of hyper and super markets trying to

provide customer with 3 V’s - Value, Variety and
Volume
 In the past decade, the Indian marketplace has
transformed dramatically. However from the 1950,s
to the 80,s, investment in various industries was
limited due to low purchasing power in the hands of
the consumer and the government’s policies favoring
the small scale sector.

 The first attempts at organized retailing were noticed

in the textiles sector. One of the pioneers in this field
was Raymond’s which set up stores to retail fabric.
 Raymond’s distribution network today comprises
20,000 retailers and over 256 exclusive showrooms in
over 120 cities of the country

 Other textile manufacturing who set up their own

retail chains wee Reliance- which set up Vimal
showrooms and Garden Silk Mills, which set up
Garden Vareli showrooms.
 Established Emerging
Traditional formats Formats
Formats Kirana shops Exclusive retail outlets
Itinerant Salesman Convenience/ Hypermarket
Haats department stores Internal retail
Melas PDS/ Malls / Specialty Malls
Mandis etc. fair price shops Multiplexes
Pan/ Beedi shops Fast food outlets
Service galleries

The Evolution of Retailing in India

Drivers of Retail change in India

 Socio- Economic Factors

 Large Middle Class People
 Youth Population
 Literacy
 Increase in life expectancy.
 Rate of growth of GDP etc.
 Changing Income Profiles
 Increase in Personal income.
 Rising income of the young middle class.
 Increasing the Middle Class population
 The Age Factor
 More than 70% of population bellow the age of 40.
 More than 47% of population bellow the age of 20.
 Educated Young Generation.
 The changing Role of Women and evolving Family
Structure.
 Educated Women Population.
 Increase in the no. of salaried women.
 Decrease in the no. of average household.
 The Changing Consumption Habits.
 Occupational changes.
 Expansion of Media.
 Increased Credit friendliness.
 Easy Availability of Finance.
 Availability of Credit cards.
 Geographical Dispersion of Market Potential.
 Urbanization.
 Rural Population.
Challenges of Retail Development in India

 Retail not being recognized as an industry in India.

 The high cost of real estate.
 Lack of Adequate infrastructure.
 Multiple and complex taxation system.
 Customer’s unawareness.
 Rise of e-age
 Protests from other sources.
Porter’s Five Forces of Competition
Organised Retailing

 “Organised retailing refers to trading activities

undertaken by licensed retailers, that is, those who
are registered for sales tax, income tax, etc”. These
include the corporate-backed hypermarkets and
retail chains, and also the privately owned large
retail businesses.
 Retail chains like Wal Mart, McDonalds brought Rapid
Growth and consolidation of Organized Retail
 Rapid rise of Income levels and accompanying changes in
lifestyles greatly contributed to growth of Organized Retail
Unorganised Retailing
“Unorganised retailing, on the other hand, refers to
the traditional formats of low-cost retailing, for
example, the local kirana shops, owner manned
general stores, paan/beedi shops, convenience
stores, hand cart and pavement vendors, etc”.
Share of organized & unorganized retail with comparison
source: Ernst &Young, The Great Indian Retail Story.

.
PAKISTAN 1 99

INDIA 3 97

CHINA 20 80

INDONESIA 30 70

BRAZIL 36 64 ORGANISED

40 60 UNORGANISED
THAILAND

MALASIA 55 45

TAIWAN 81 19

USA 85 15

0% 20% 40% 60% 80% 100%

Segments or Sectors of Indian Retail
Industry.
 1. Food Retail
 Food & Grocery (Eg: Food Bazar, Subhiksha,Food
World,Nilgiris…)
 Food Services. (Café CoffeDay, KFC,Piza Hut, Dominos..)
 2. Clothing & Textiles
(Eg: Mudra Garments, Wrangler, Lee, Raymonds, Lifestyle,
Big Bazar..)
 3. Consumer Durables.
(Eg: Next, White Mart, e-planet, Sony, Videocon, Infinity
Retail..)
 4. Footwear
(Egs: Bata, Reliance foot Print, Doc n Mark, Huch Puppies,
Reebok..)
 5. Jewellery Retail
(Eg: Alukkas, Tanishq, Sunny Diamonds, Gitanjali, ..)
 6. Books, Music & Gift Retail.
(Landmark, Crossword, archies..)
 7. Time Wear retail.
(Rado, Swiss World, TITAN, Tomy Hilfiger, Gucci, Rolex..)
 7. Fuel Retail/ Petro Retail
(Essar, Shell, Reliance, BPCl, HPCL..)
10 Trends in Global Retailing
1. Social Responsibility
2. Global consumer growth shifts away from US.
3. Commoditisation
4. The rise of ‘long tail’ retailing
5. The fight to plant the flag in India.
6. Retail investments in service.
7. Emerging market investment in developed retailers.
8. Multi-channel integration.
9. Focus on customer experience.
10. Retailers as world-class marketers.
Difference between wholesaler & Retailer
Criteria 1. Wholesaler Retailer
Buyers Business customers, i.e. Retailers Final Customers, i.e. End users
Buying Motive of For reselling/trading. For consumption.
Buyers
Business Volume High. Low.
Risk Involved High. Less.
Investment High. Moderate.
requirement
Promotional Less Important. Very important.
Activities
Store Less attention. Very Important Hence maximum
Atmosphere, attention.
Layout & Location
Area covered Large area covered many Relatively small- mostly retailers
areas territories can be handle operate in small area.
by single wholesaler.
Upper link Producer Wholesaler or producer in case of
large retailers.
Indian v/s Global Retailing
Scenario
 Reasons for Global Expansion
.

Reasons for
Global
Expansion

Spreading of Growth potential in

communication and developing &
mass media undeveloped markets

Lowering of trade
barriers and tariffs
Factors Used to Analyze
Global Retail Markets
 Market size & Economies
 Infra. & Distribution
 Competition
 Operations
 Financial & Tax Reporting
 Merchandise Acceptability
 Partnering Capability
Advantages of Going Global
 Increase Sales
 Improve profits
 Short-Term Security
 Long-Term Security
 Exclusivity
 Increase Innovation
 Economies of Scale
 Education
 Competitive strike
 Govt. incentives
Basis Indian Retailing Global Retailing
Nature of Retailing India is mostly Unorganized. At Retail World globally is well
Operation present only 2% to 4% accounts for organized and in most developed
organized sectors. countries follow the same.
Scope of Manufacturer control all retail business to a In organized retail industry
Influence large extent. But the scenario is changing, retailer have an upper hand in
even with the limited growth of organized negotiating deals with
retail in India. manufacturers.
Technology Indian retailers lag behind global retailers Global retailers resorts employ
in use of technology. Though, retailers like technology in larger scope than
shopper stop, Pantaloons are employing Indian retailers.
technology in their operations.
Formats Indian retail industry is concentrated A large no. of retail formats are
around few formats. Only 2% of retail available.
industry has adopted modern retail
formats of department stores and
supermarkets.
Retail Real estate space available for organized In west large store formats are
Space retail is getting saturated in Metros and in located in outskirts of cities or the
tier 1 cities in India & is now looking at tier suburbs. The enables them to
2 cities. have large space.
Basis Indian Retailing Global Retailing

Infrastructure Maximum infrastructure problems Minimum infrastructure problems

faced by retailers in Indian market. faced by retailers in International
market.

Manpower A lack of trained manpower slow Trained manpower available aiding

down the development in industry. retail boom.

Products/Bra Indian retail industry usually has Global retailers resort to keep their
nds brands of well known Indian and own brands. This leads to increase
Assortment foreign companies. In some cases competition with better known
private label brands are also company brands. Private label
available. brands are negligent or absent
Functions & Activities of Retailer
 From the customer point of view, the retailer serves
him by providing the goods that he needs in the
required assortment, at the required place and
time.

 From an economic standpoint, the role of a retailer

is to provide real added value or utility to the
customer. This comes from four different
perspectives
 Form Utility
 Place Utility
 Time Utility
 Ownership Utility
1. Form: First is utility regarding the form of a product
that is acceptable to the customer.
 The retailer does not supply raw material, but rather
offers finished goods and services in a form that the
customers want.
 The retailer performs the function of sorting the goods
and providing us with an assortment of product in
various categories.
2. Time: He cerates Time utility by keeping the store
open when the consumers prefer to shop.
 preferable shopping hours

3. Place: By being available at a convenient

location, he creates place utility.

4. Ownership: Finally, when the product is sold,

ownership utility is created.
 Activities of Retailer

1. Sorting
2. Arranging an Assortment of Offerings
3. Breaking Bulk
4. Holding Stock
5. Extending Services
6. Providing Additional Services.
1. Sorting

 Sorting is any process of arranging items according

to a certain sequence or in different sets, and
therefore, it has two common, yet distinct meanings:
 Ordering: arranging items of the same kind, class or
nature, in some ordered sequence,
 Categorising: grouping and labeling items with
similar properties together (by sorts).
2. Arranging Assortment

 Arranging Assortment means, to distribute, arrange or

place according to kind or class.
 An assortment is a retailer’s selection of merchandise.
 An assortment normally include substitutable items of
multiple brands.
 Retailers evaluate the products of various manufactures
and offer the best collection of products from which the
customer can select the product of his/her choice.
 Retailers select the product assortment depending on the
tastes and needs of their target customers.
 The variety in assortment offered makes the buying
process easier for customers
3. Breaking Bulk
o Breaking Bulk means physical repackaging of the
products by retailer in small unit sizes according to
customer’s convenience and stocking requirements.
o Retailers buy goods in bulk from manufactures and
divide them into smaller sellable units according to
consumption patterns of the end consumer.
Benefits:
 1. Quantity discounts from manufactures
 2. Lower freight rates for large shipment of goods.
 3. Availability of products in smaller units enables
customers to buy products in quantities, which suit their
consumption patterns.
4.Holding Stock
 To ensures the regular availability of offerings
retailer maintain appropriate level of inventory.
 Make the products available to consumers at a
convenient place and time through inventory held.
 Makes it possible for consumers to make instant
purchases.
 Reduces the cost of storage and enables the
consumer to invest his money profitably.
 Spontaneous shopping by customer is possible only
because retailers stock the goods.
5.Extending Services
Retailer provides multiple services to immediate customers
and other members of the value chain.
The set of services may be part of the product offering or
“add on” services.
Valued added /“add on” services provided by Retailers
are:
 free home delivery,
 accepting credit cards,
 accepting payments on installment basis,
 arranging loans, etc.
These services make it easier for customers to buy and use
products.
6. Providing Additional Services
 Retailers play a major role in providing
product related information to their
consumers.
 Retailers use advertising, display and in-
store salespersons to provide product
information, which helps the consumer to
simplify his purchasing process.
 Other Services
(Transportation, Storage, Pre-payment of
merchandise, Advertising Functions etc..)
Retailing Environment

 Constituents of External Environment

 Economic Environment
 Legal Environment

 Technological Environment

 Competitive Environment
1.Economic Environment
 Nature of the economic system (capitalism,
socialism)
 Gross domestic product,
 Rate of inflation,
 Purchasing power,
 Interest rates,
 Tax levels,
 Employment growth and others
2. Legal Environment

 Governments use various laws and regulations to

ensure that retailers do not indulge in unfair trade
practices
 Foreign direct investment (FDI) restrictions
 Lack of industry status

 Property regulations
 Real estate
 LaborLaws
 Complex taxation System
3. Technological Environment

 Technology is one of the most important drivers of

change in the retail industry.
 The computerization of various retail store
operations have bought a rapid change in the way
retailing is conducted in India.
 Technology being used to improve the shopping
environment and to provide a pleasant shopping
experience to the customer.
Importance of Technology in Retailing

 Data Collection
 Efficiency in operations
 Communication
 EDI ( Electronic Data Interchange)
 UPC Universal Product Code
 DBM (Database Management)
 e-tailing
4. Competitive Environment

 Severe competition among the existing players

 Attractive factors for entry into business.
 Stiff Competition from Unorganized sector.
 The competition among retailers varies depending
on the way the retail operations are carried out and
which entity of the distribution channel carries out
these retail operations.
Advantages of permitting FDI in Retail

Opening up of FDI in the retail sector would:

 bring in valuable foreign exchange

 bring about organization of the sector

 provide employment to thousands of Indians

 provide a wider choice of products at reduced

prices to the customer
 improve the shopping experience
Significance of Retail Industry

 Customer  Research & info.

Convenience  Mobilizing finance
 Accessibility  Economic
 Convenience of size Development
 Associated services  Employment
 Supply chain  Social Responsibility
 Value Chain
Roles of Retailers
 Be a link between producer and consumer
 Retailer as a channel member
 Retailer as a n image creator
Functions of Retailer
 Buying
 Storing
 Selling
 Grading & Packaging
 Risk bearing
 Transportation
 Financing
 Sales promotion
 Information
Marketing- Retail Equations
Marketing can be defined as the process by which
individuals and groups obtain what they need and
want through creating, offering and freely
exchanging products and services of value with
others.
The Chartered Institute of Management defines
marketing as the management process responsible
for identifying, anticipating and satisfying customer
requirements profitably.
One can look at the marketing – retail equation from two
perspectives
 One being that of a manufacturer

 The second from the point of view of the retailer.

With the growth of industrialization and urbanization, the

distance between the manufacturer of a product and the
actual consumer has increased.
In our world, many products are manufactured in one country
and sold to a market in another.
Most producers no longer sell their products or services directly
to the consumer, but instead, use intermediaries to get their
product to the final consumer.
The marketing channel design is largely based on the level of
service desired by the target consumer. Here, the retailer
provides valuable inputs to the manufacturer on the products
and the consumers.
Some of the most common marketing channels are
illustrated below:
 Manufacturer - Wholesaler - Retailer - Consumer

 Manufacturer - Retailer -Consumer

 Manufacturer - Consumer
The other perspective of looking at the marketing retail
relationship is from that of the retail industry itself.
Every retailer needs marketing. The marketing efforts of a
multi brand retailer like Food World and Shopper’s
Stop are different from those of an own brand retailer
like Titan.
However, the basic principles of marketing are no
different for a retailer than for any other supply
organization.
What different is the immediacy of many retail marketing
exchanges, and the range of activities that can be
undertaken by the retail marketer in order to achieve a
profitable exchange with a customer.
Recent developments such as relationship marketing and
interactive marketing have evolved from the needs of
service providers.
These ‘new’ marketing activities focus on the dynamic link
between a specific supplier and its immediate customer.
It is here that the needs of retailing coincide with the
domain of marketing.
There are two specific dimensions to retail marketing:

 First, how to attract customers into the retail

environments - shop, restaurant, supermarket or the
‘virtual’ Internet store for instance.

 second, how to persuade those customers to make a

purchase from the store. Both are necessary to achieve
success.