Chapter One

The Nature of
Retailing

Learning Objectives
After the end of this chapter you will be able to
Define

retailing and marketing

Explain

the meaning and concept of marketing and its

practices in retail organisations

Review

the Functions of Retailing

Identify

Operating characteristics distinguishing retailers from

other members of the channel team

1.1. Concepts and definition

Definition of Retailing
The

term retailing is derived

from the old French word
retailer,
meaning

a piece of or
To cut off,
clip off,
divide

 Activities

involved in selling merchandise to

ultimateconsumers.

Retailersactasbothcustomersandmarketersin

theirchannels.

any

business that directs its marketing efforts

towards satisfying the final consumer based

upon the organisation of selling goods and
services as a means of distribution
4

 According

to Kotler:

Retailing includes all the activities

involved in selling goods or services
to the final consumers for personal,
non business use
It

is

responsible

for

matching

individual

demands of the consumer with supplies of all

the manufacturers.
5

DAVID GILBERT DEFINED RETAIL AS-

Any

business that directs its marketing

efforts

towards

satisfying

the

final

consumer based upon the organization

of selling goods and services as means
of distribution
6

Contd.
Retailing

a set of business activities that adds

value to the products and services sold to
consumers for their personal or family use.
A retailer is a business that sells products and/or
services to consumers for personal or family use.

Contd.
Retailing:

encompasses

the business activities involved in selling

goods and services to consumers for their personal,
family, or household use.
includes every sale to the final consumer
is the final stage in a channel of distribution.
functions
are performed by any firm selling
merchandise or providing services to the final consumer.
8

Retail management 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 to the exact requirement of

last user.
Bringing

about operational efficiency at this last stage and

making an environment so compelling that the consumer looks

no where else.

Retail Management
The

various processes which help the customers to

procure the desired merchandise from the retail
stores for their end use refer to retail management.
Retail management includes all the steps required
to bring the customers into the store and fulfill their
buying needs.
Retailing Management : the procedure of
Planning , Organizing , Staffing , Directing
and Controlling in retail business to approach
10 the objectives firm.

Retail management
is

an art.
requires a number of management tool
for a complete end user satisfaction.
Retail management is getting to know
the final user on behalf of a
manufacturer.
11

Effective retail management

The

retailer must keep a record of all the

products coming into the store.

The

products must be well arranged

on the assigned shelves according to size,

color, gender, patterns etc.
12

Cont..
Plan
The

the store layout well.

range of products available at the store

must be divided into small groups comprising

of similar products.
Such

13

groups are called categories.

Cont..
A

customer can simply walk up to a

particular category and look for products
without much assistance.
A unique code must be assigned to each
and every product for easy tracking.
Necessary labels must be put on the
shelves for the customers to locate the
merchandise on their own.
14

Cont..
Dont

keep the customers waiting.

Ascertain

sales representatives attend the customers

well.
Assist
The

retailer must ensure enough stock is available at the

store.

15

them in their shopping. Greet them with a smile

Cont..

Make sure the store is kept clean.

Dont stock unnecessary furniture as it gives a

chaotic look to the store.

The customers must be able to move freely.

The store manager, department managers, cashier

and all other employees should be trained from time
to time to extract the best out of them.

16

Cont..
They should be well aware of their roles
and responsibilities and customer
oriented.
They should be experts in their
respective areas.
The store manager must make daily sales

17

Cont..
Remove
Keep

them somewhere else.

Create
Plan

on.

18

the unsold merchandise from the shelves.

an attractive display.

things well in advance to avoid confusions later

Why retail management ?

Retail

mgt
saves time and
ensures the customers easily locate
their desired merchandise and
return home satisfied.
An effective management
avoids unnecessary chaos at the
store.
19

How Retailers Add Value

Breaking

20

Bulk
-Buy it in quantities customers want
Holding Inventory
-Buy it at a convenient place when you want it
Providing Assortment
-Buy other products at the same time
Offering Services
-See it before you buy, get credit, lay away

How Retailers Add Value

The

value of the product and service

increases as the retailer performs
functions
Availability
Promotion
Assortment

21

and etc.

Factors Influencing Retail

Management

22

Social
how

consumers, households and communities

behave and their beliefs.
E.g. changes in attitude towards health, or a
greater number of pensioners in a population.

Legal
the

way in which legislation in society affects the

business.
E.g. changes in employment laws on working hours.

23

Economic
how the economy affects a business in terms
of :

24

taxation,
government spending,
general demand,
interest rates,
exchange rates and
global economic factors.

Political
how

changes in government policy might affect

the business
e.g. a decision to subsidies' building new houses
in an area could be good for a local brickworks.

Technological
how

the rapid pace of change in production

process and product innovation affect an
organization.
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Issues in Retailing
How

can we best serve our customers

while earning a fair profit?
How can we stand out in a highly
competitive environment where
consumers have too many choices?
How can we grow our business, while
retaining a core of loyal customers?
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1.2. Functions of Retailing

1.

Providing an
assortment of
products

2.

Breaking the bulk

3.

Holding stock

1. Providing an assortment
of products
Provide

a large variety of products.

The same as well as different brands
Consumers thus have a wide range to
choose from.
Retailers balance the demand from both
sides.
They may specialize in one kind of
assortment.

Manufact
urer

Wholes
aler

Final
consu
mer

A Typical Channel of Distribution

29

Reta
iler

Manufac
turer
Brand A
Manufac
turer
Brand B
Manufac
turer
Brand C
Manufac
turer
Brand D
30

Wholes
aler
Retaile
r
Wholes
aler

Retailers role in sorting process

Brand
A
custom
ers
Brand
B
custom
ers
Brand
C
custom
ers
Brand
D
custom
ers

Manufactur
er of A
Manufactur
er of B
Manufactur
er of C
Manufactur
er of D
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WHOLESA
LER
OF
A&B
WHOLESA
LER
OF
C&D

RETAIL
ER OF
A, B, C,
D
RETAIL
ER OF
A, B, C,
D
RETAIL
ER OF
A, B, C,
D

CUSTOMER OF
PRODUCT
A
CUSTOMER OF
PRODUCT
B

RETAILER
OF
A, B, C, D

CUSTOMER OF
PRODUCT
C
CUSTOMER OF
PRODUCT
D

32

2. BREAKING THE BULK

producers

sell in large
quantities and
consumers buy in small
quantities.

33

3. HOLDING STOCK

Holds stock for the manufacturers

Maintain an inventory for instant

availability of products for consumer.

34

This helps to keep prices stable.

Enabling

manufacturer to regulate
production.
Helps consumers to keep products
in small quantities

35

4. PROVIDING SERVICES
Credit

to consumers
Display of products , consumers
can see and test them
Sales people to answer questions
and additional information.
Home delivery.
36

1.3. Operating distinguishing

Characteristics retailers from
other members of the channel
team
Direct
Sales

end user interaction

are in smaller unit size but on frequent

bases
Location
Services

37

is a critical factor

are as important as core products

 They

offer an assortment/ varirty of products.

Large

number of retail outlet in comparison to

other members of the chain.

The

average amount of sales transaction for

retailers is much small .

Final

consumer makes many unplanned or

impulse purchase.
Retail

38

customer usually visit a store even if website

sales exists.

Type of Retailer

39

By form of
ownership

Independent Store ,
Consumer Cooperatives
Chain Store ,
Franchising ,

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By Type of
Business

Mail and Telephone order ,

Automatic vending ,
Door-to-door Selling ,
Catalog selling ,
Internet marketing or
E-Commerce.

Type of Retailer
(by product line)
General or Variety Store :
miscellaneous

and variety of merchandising ,

and low price with house hold use.
Managing by the entrepreneur and the most
number of retailing business types in the worl
d.

Single-line-Store :
merchandising

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in the same of product line

like woman-dressing line , Children style.

Type of

Retailer

Specialty Store :
Concentrates on a limited number of
complementary merchandise categories
and provides a high level of service
such
as consumer electronics ,
appliances , sport goods , cards , jewelry
etc
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Type of

Retailer

Department Store :
are

retailers that carry a broad variety and

deep assortment,
offer
are

considerable customer services , and

organized into separate department for

displaying merchandise.
43

Type of
Retailer

Supermarket
Self-service

food store offering:

groceries,
meat

and

produce

44

with limited sales of

nonfood items , such as
health and beauty aids and

Cont..
general

merchandise with promotional one day a

week or advertise sale items in local papers.

Some

supermarket use Every Day Low

Price(EDLP)policy Typically,
everyday

price in these supermarkets are lower

than regular prices in promotional supermarkets

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Type of
Convenience
provide

Retailer

Stores :

a limited variety and assortment of

merchandise at a convenient location in a
2000-3000 sqr.ft.
store with speedy checkout.
They are the modern version of the neighborhood
mom-and-pop grocery store.

46

Type of
Discount

Retailer

Stores :

full line discount store is a retailer that

offers a board variety of merchandise ,
limited service , and low prices.
They offer national brands , but these
brands are typically less fashion-oriented
than brands in department stores.
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Type of

Retailer

Super Center or Super Stores :

are in 150,000 - 200,000 sqr.ft. stores those
are the fastest growing retail category.
The Supper centers are full-line discount stores
sell groceries at low prices to build store traffic.
Offering broad assortment of grocery and
general merchandise under one roof , provide a
one stop shopping experience.
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Type of

Retailer

Warehouse Club :
is a retailer that offers a limited assortment
of food and general merchandise
with little service at low prices to ultimate
consumers and small business.
Stores are large to 100,000 sqr.ft.
And located in low-rent districts.
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Cont.
They

have simple interiors and concrete

floors.
Aisles are wide so forklifts can pick up
pallets of merchandise and arrange them on
the selling floor.
Pay with cash and carry by themselves.

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Type of

Retailer

Hypermarkets :
is a very large retail store offering low prices.
It combines a discount store and superstore food retailer
in one warehouse like building.
Hypermarkets can be up to 300,000 sqr.ft.
Larger than 6 football field- and stock over 50,000
different items.
Low operating margins , low prices and the size of the
general merchandise assortment.
Such as Carrefour , Tesco , Auchan , Casino , Makro

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Type of Retailer (Form of

Ownership)

Independent Store :

General

store that manage by freedom

entrepreneur and independent in decision makin
g.
Owner -managed and direct contact with
customers and can respond quickly to their needs.
They

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are very flexible and arent bound by

bureaucratic rules that restrict store location or ty
pes of merchandise sold.

Type of Retailer (Form of

Ownership)
Chain Store :
a firm that consists of multiple retail units
under common ownership and
usually has some centralization of decision
making in defining and implementing its
strategy.

53

Type of Retailer (Form of

Ownership)
Consumer Cooperatives
one type of retail outlets that owned by their
customers ; others are owned by government agen
cies.
In consumer cooperatives ,
customers

54

own and operate the retail establishment.

Customers have ownership shares , hire full-time managers,
and share in store profits through price reduction or
dividends.
The best-known consumer cooperatives are credit union
that provide financial services.

Type of Retailer (Form of

Ownership)
Franchise Store :
is

55

a contractual agreement between a franchisor

and a franchisee
allows the franchisee to operate a retail outlet
using name and format developed and supported by
the franchisor.
the franchisee pays a lump sum plus a royalty on
all sales for the right to operate a store in a specific l
ocation

 and

operate the outlet in accordance with procedures

prescribe by the franchisor

beginning with assistance in locating and building ,

developing

products and service sold , training ,

advertising and
system

that run by franchisor with costs shared by

franchisees.

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Type of Retailer (Form of

Ownership)

Franchise Store : Entrance Criteria

Initial Fee or Franchise Fee :

Royalty Fee :
operate the outlet in accordance with procedures
prescribe by the franchisor

Advantage of Franchise Store

Utility and Value of Master Brand or Franchisor
All supported by Master Company or Franchisor
Monetary and Source of fund supported
Training and development human resource
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efficiency