Introduction to Retailing

LECTURE I

What Is Retail?
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l Retail derived from the French word

retaillier, which means to break bulk
l Retailing- last stage in the movement
of goods and services to the consumer
l Retail consists of- all activities
involved in the marketing of goods and
services directly to the consumers for
their personal, family or household use
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Functions Of A Retailer
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l Break Bulk or Form Utility

Buy it in quantities customers want
l Hold Inventory or Place utility
Buy it at a convenient place when you want it
l Provide Assortment
Buy other products at the same time
l Offer Services
See it before you buy, get credit, layaway
l Serves the manufacturer
by distributing the goods to the end consumer
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The Concept Of Organized Retail

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l Unorganized sector- units whose activity

is not regulated by any statute or legal
provision, and/or those which do not
maintain regular accounts
l Unorganized form of retail - those forms
of trade which sell an assortment of
products and services ranging from fruits
and vegetables to shoe repair
l Organized form of retail- typically a multioutlet chain of stores or distribution
centres run by professional management

Nature of Retail Industry is

Changing

To Todays Retailer

Mom and Pop Store

Share of Organized Retail in Selected Countries,

2006

Country

Total Retail Sales

(US$ bn)

Share of Organized
Retail (%)

USA

2983

85

Japan

1,182

66

China

785

20

UK

475

80

France

436

80

Germany

421

80

India

322

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The total number of traditional retailers is estimated to be 13 million by Technopak

Advisers Pvt. Ltd. The classification of the unorganized retail universe by category is
shown below.
Chemists
3%

Furniture
1%

Cosmetics
2%
Hawkers
8%

Food stores
1%
Non veg stores
1%
Kirana I
20%

Fruit and vegetables

4%

Furnishing
1%

Jewellery
0%

Hardware
2%
General Merchnadise
2%

Paan n Bidi Stores

14%

CDIT
2%
Footwear
2%
Apparel
6%
Modern Independent stores
0%

Kirana II
31%

Categories of traditional retailers

l Fruit and Vegetable Sellers - Sells fruit and

vegetables.
l Food Store - Reseller of bakery products. Also
sells dairy and processed food and beverages.
l Non -Vegetable Store - Sells chicken and mutton
(supplemented by fish), or predominantly fish.
l Kirana I - Sells bakery products, dairy and
processed food, home and personal care, and
beverages.
l Kirana II - Sells categories available at a Kirana I
store plus cereals, pulses, spices, and edible oils.
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Categories of traditional retailers

l Modern Independent Stores - Sells categories available
at a Kirana II store and has self- service. Operates single
or several stores (but not an organized chain of stores).
l Apparel Sells mens wear, womens wear, innerwear,
kids and infant wear.
l Footwear Sells mens wear, womens wear, and kids
wear.
l CDIT (Consumer Durables & IT) Sells electronics, small
appliances, durables, telecom, and IT products.
l Furnishing Sells home linen and upholstery.
l Hardware - Sells sanitary-ware, taps and faucets, door
fittings, and tiles.
l General Merchandize Includes lightning, stationery,
toys, gifts, utensils, and crockery stores.
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Modern Retail Formats in India

Type of Format

Examples

Area (Sq. Ft.)

Hypermarket

Spencers, and Pantaloon Retail's Big Bazaars.

50,000 - 1,00,000

Cash-and-carry

Metro, the Germany-based C&C

More than 75,000

Shoppers' Stop, Pantaloons, Westside,

Department Store

Ebony, Lifestyle, Globus

10,000 - 60,000

Apna Bazaar, Sabka Bazaar, Haiko, Nilgiri's,

Supermarket

Spencers, Food Bazaar

Shop-in-Shop

Infinity

1,000

footwear stores, music stores, electronic and

Speciality Store

household stores, gift stores,

Category Killers

Sreeleathers, The Loft

800

(Large Speciality
Retailers)

20,000
Subhiksha, factory outlets of apparel and
footwear brands, namely, Levis factory outlet,

Discount Store

Nikes factory outlet, Koutons, etc.

1,000

Convenience Store

In & Out, Safal

800

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Non-store Retail Formats

Electronic Retailing
Catalog and Direct Mail
Direct Selling
Television Home Shopping
Vending Machines

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Ryan McVay/Getty Images

Royalty-Free/CORBIS

Business Models In Retail

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Types of Nonstore Retailers

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Merchandise/Service Continuum

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Services vs. Merchandise Retailers

Intangibility
-Problems in Evaluating Service Quality
-Performance of Service Provider
Simultaneous Production and Delivery
-Importance of Service Provider
Perishability
-No Inventory, Must Fill Capacity
Inconsistency of the Offering
-Importance of HR Management
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GROWTH MILESTONES
l SUPER MARKETS - Apna Bazaar, Nine to Nine,
Food World & margin free shops.
l APPAREL RETAIL - Westside, Wills Lifestyle,
Shoppers Stop, Pantaloons, Ebony & Globus.
l HOME IMPROVEMENT RETAIL STORES Gautier, Wonder Living, Bombay Bazaar.
l REGIONAL RETAILERS - Vishal Megamart,
Adani, Crossword, Nilgiris, Kemps Chain, &
Landmark.

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Food Retailers
l
l
l
l
l
l
l

Haldirams
Baskin Robins
Dominos Pizza
Subway India
Vadilal
KFC
Ruby Tuesday
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Service Retailers
l
l
l
l
l
l
l
l

VLCC Healthcare
ADLABS
GATI
Air Hostess Academy
Lakme Beauty Saloon
Aptech Computer Education
Rent a Car
Blue Dart
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GROWTH MILESTONES
l BUSINESS HOUSES - Wadia, Godrej,
Tata, Hero.
l SHOPPING MALLS - food & apparel
chains, consumer durables & multiplex
operators.
l SHOPPING MALL DEVELOPMENT TDI,
Parsavnath etc.
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Organized Retail Models

Retailer

Segment

Business Strategy

Subhiksha

Value

Low-price high-volume strategy: by keeping

no fancy frills front-end and by becoming
an intermediary at the back end, Subhiksha
leverages on discounted prices on bulk
purchases and cash payments.

Trent Limited

Lifestyle &
Value

Single- brand strategy: leverages on

high margins in private labels, and
targets consumers in socio-economic
class B and C.

Future Group:
PRIL

Lifestyle &
Value

Strategic JVs and subsidiaries around

retail has enabled PRIL to develop
retailing across age groups, all product
categories, the entire customer
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segments under multiple retail formats.

Organized Retail Models

Retailer

Segment

Business Strategy

ITC Choupal
Sagar & Choupal
Fresh

Value

Backward integration through IT-based

business model: leverages by building
direct relationship with the supply source,
the farmers, to sell as well as purchase
products and services.

Spencers Retail

Value

NDDB: Mother
Dairy

Value

The duck and the duckling model: by

having two- or three- value segment
stores, backed by a cluster of small-sized
Fresh, Daily, and Express stores, to
leverage on economies of scale at backend value chain.
Operates on a co-operative model with
the objective of increasing farmers
welfare. Has a strong presence in Delhis
NCR region. Strategically located in
residential areas and follows a low-price
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strategy for fruit and Vegetables

Key Growth Drivers of Retail in India

l

Changing Demographics:
Working Population:
Younger workforce
Rising Income
Changing Role of Women:
Usage of plastic money

l
l
l
l
l

Outsourcing
Consumer Expectations
Consumer Lifestyle
Changing Attitudes
Increasing spending of Rural
Consumers

l
l
l
l
l
l
l

Explosion of Media
Establishment of Supply
Chain
Entry of foreign brands in
India
Entry of India big business
houses
Change in Scale of
Operations
New Entrepreneurs
Technological Impact

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Regulatory Framework
l There had been no specific restrictions on the entry of
foreign retailers into the Indian market till 1996. A
few foreign players were granted permission for
retailing under this earlier regime.
l In January 2006, however, a partial liberalization took
place in policy in which foreign companies are
allowed to own up to 51 per cent in single-brand
retail JVs as approved by the Foreign Investment
Promotion Board (FIPB).
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Regulatory Framework
l Besides this, foreign companies are allowed in
wholesale cash-and-carry business and export
trading with 100 per cent equity through the
automatic route. Foreign companies with 100
per cent equity can also carry out trading of
items sourced from the small-scale sector and
do test marketing of products for which the
company has a manufacturing approval under
the FIPB route.
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Regulatory Framework
l With regard to domestic regulation, the organized
retailer has to secure a number of licenses and
clearances from various central, state, and local
authorities before it starts its operations.
The number of licenses varies from state to state and it also
depends on the type of store format.
First, a retailer has to obtain a trade license from the local
authority (municipal corporation, municipality, or panchayat)
which grants permission to carry on the retail business.
It has also to obtain licenses from the Agricultural Produce
Marketing Committees (APMCs) of each state for
procurement and sale of fruit, vegetables, and staples within
the respective market areas (mandis) of each APMC.
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Regulatory Framework
In addition, in case a new building or mall is to be
constructed for use in retailing, the organized retailer
has to obtain no objection certificates (NOCs)
from the different state authorities in charge of
traffic, electricity, water, fire and pollution control.
Zoning restrictions are also applicable to the
organized retail outlets which can be set up only on
land earmarked for the local authority for
commercial establishments.

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Entrepreneurial Opportunities
l
l
l
l
l

Sam Walton Kishore Biyani Jeff Bezos

Donald Fisher Dave Thomas -

Founder of Walmart
CEO, Future Group
Founder, Amazon.com
The Gap
Wendys

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