UNIT 1

Retail Management
The waves of globalisation and liberalisation have brought tremendous industrial and
technological growth thereby changing the lives of consumer. Retail trade is an important
component of internal trade of a country. Retailing can also be defined as the timely delivery of
goods demanded by consumers at an affordable and competitive price. One such industry which
has made a phenomenal impact on our daily lives is retail.

The word retailer is derived from the French word ‘Retailer’, meaning ‘to break bulk’. It implies
first hand transaction with the customers. A retailer is a chain between wholesaler and final
customer. Retailing involves a direct interface with the customers. In India organised retailing is
making rapid progress in recent years.

Structure of the retail sector: In India the retail sector is categorised into two sectors, organised
and unorganised.

a. Unorganised Retailing:
The unorganised retailing sector dominates the total retailing activity in India. In India it
constitutes around 95.4 percent. It includes thousands of small retail shops spread over the entire
geographical area of the country. It refers to the traditional format of retail industry. These sectors
is mainly characterized by small retailers and are subject to tax evasion and lack of labour law
system. Example: Local kirana shops, pan bidi shops etc.

b. Organised Retailing:
Organised retailing is a recent development in India. Due to changes in the socio-economic
factors there is a growth of organised retailing. The modern retail structure is characterised by
Malls, Chain shops, departmental stores hyper markets, super market etc.

It refers to trading activities undertaken by the licenced retailers i.e. those who are registered for
sales tax and income tax. In India organised retailing constitutes a very little share of 4.6 percent
of total retail market.

Characteristics of Retailers

(i) A retailer is the link between a wholesaler and the ultimate consumer and he is the last
intermediary in distribution.

(ii) A retailer buys goods from wholesaler in bulk and resells them to consumers in small
quantities.

(iii) A retailer maintains a personal contact with his customers.

iv) A retailer makes sufficient shop display of his wares to attract customers.

(v) Retailers perform all the marketing functions which a wholesaler performs and in addition
emphasises on advertisement.

(vi) Retailers deal in a variety of merchandise and are often known as general merchants.

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(vii) Usually retailers are classified into two major groups, viz., small scale retailers and large
scale retailers.

(vii) Retailers aim at providing maximum satisfaction to their customers in limited area.

Pre-Requisites of Retail Trade

The success of retail trade is based on a proper combination of the following factors:
(i) Locations:
The ultimate success of a retailer depends on the location of his shop. Proper selection of location
is important for a retailer to establish his business.

(ii) Price:
A proper pricing policy can give better results for a retailer if he can combine low prices with
good quality to attract consumers.

(iii) Sales Promotion:

A retailer must arrange for proper sales promotion campaigns in order to familiarise the
customers of that area with his products.

(iv) Prudent Buying Principles:

Every retailer ought to be a shrewd purchaser; only then he can give his best to his customers.
Careful buying earns rich dividends in retail trade.

(v) Knowledge of Merchandise:

Modern business is so complex and the variety and quality of goods being so diverse, a retailer
must have adequate and latest knowledge of the wares he sells. It would not only enable him to
answer customer queries satisfactorily but also to handle the complications of his business. Thus
adequate knowledge of merchandise is another pre-requisite feature of retail trade.

(vi) Services:
A retailer should concentrate on his services. Courteous and prompt service on his part will help
him in attracting more and more customers and thereby flourish in his business. Most retailers go
in for after sale service also, where they cater to the needs of the customers after the latter has
purchased a commodity from them. So efficient service should be the motto of every retailer.

(vii) Efficient Management:
Better planning, organisation and control by a retailer can offer efficient retail operations. A
retailer should have a proper and adequate work-force to assist him in his business. He should
always keep stocks ready for customers and even offer specialised comments on the products he
deals in. If a retailer plans his inventories and works in advance, there is no doubt that he will
achieve his targets and also attract more customers.

(viii) Display of Goods:
Since a retailer deals in a verity of products, he must display his goods in a proper and orderly
manner. This will enable him to get what is required by the customer quickly and also help in
attracting customers. The retailer must go in for tastefully decorated interiors and also have proper
and attractive window-dressing and display.

The goods must be neatly and orderly stocked and the pattern of window display should be
frequently changed for the better, so as to attract the customers’ eye. A retailer must not forget
that a well laid out window display will help him to entice and attract customers from his rivals

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and competitors. Hence, proper care and attention ought to be given for display of goods out as
well as in the retailer’s shop or showroom.

Functions of Retailers
(i) Buying:
A retailer deals in a variety of merchandise and so he buys collects large number of goods his
stocks from a variety of wholesalers. He selects the best from each store them and bears
wholesaler and also pays the most economical price. He brings all the goods marketing risks,
under one roof and then displays them in shop. Thus he performs the twin _ functions of buying
and assembling of goods.

(ii) Storage:
After assembling the goods, the retailer stores them in his godown so that they are held as reserve
stocks for the future. Storage of goods in ready stock is also necessary.

(iii) Selling:
The ultimate aim of every retailer is to sell the goods he buys. So he employs efficient methods of
selling to dispose off his products at a faster rate so that he can increase his turnover in a period of
time.

(iv) Risk-bearing:
The retailer bears the risk of physical damage of goods and also that of price fluctuations.
Moreover, risk of fire, theft, deterioration and spoilage of goods has also to be borne by him.
Changes in fashions, tastes and demand of his customers also have an adverse effect on his sales;
nevertheless a retailer does not lose heart. He bears all these trade risks which come in his way
during the normal course of business.

(v) Packing:
A retailer packs his goods in small packets and containers for his customers. Occasionally he may
be required to grade the goods also.

(vi) Credit:
Often retailers grant credit to customers and also bear the risk of bad debts, which go along with
credit sales.

(vii) Supply Information:
Retailers supply valuable market information to both wholesalers and customers.

(viii) Advertising:
Retailers display goods and spend on advertisement also.

Theories of Retailing
At different times, different retail formats have been popular. Strong retail formats have become
marginal and new retail formats have often emerged to dominate the retailing scene.

1. Environmental Theory (Theory of Natural Selection)

It is based on Darwin’s theory of survival: “The fittest would survive the longest”. The retail
sector comprises consumers, manufacturers, marketers, suppliers, and changing technology.
Those retailers that adapt to changes in demography, technology, consumer preferences, and legal
changes are more likely to survive for long and prosper.
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Retail institutions are monetary body and major environmental factors affecting retailers are
 Changes in customers,
 Changes in competitors
 Changes in technology.
This environment can change the productivity of a single retail state as well as of clusters and
centres. The environment that a retailer competes in is adequately robust to compress any retail
form that does not adjust. Thus, the origin, success or decline of different forms of retail
enterprises is many times attributed to the business environment.
2. The wheel of retailing Theory
McNair represents this theory by Wheel of Retailing that explains the changes taking place in
retailing. The theory suggests that new forms of retailing appear as price cutting, low cost and
narrow profit margin operations. Eventually the retailer trades up by improving displays and
location, providing credit, delivery and by raising advertising expenditure.

Thus, retailers mature as high cost, high price, conservative operators, making themselves
vulnerable to new, lower priced entrants.

A low price retailer should avoid incurring extra costs on the existing format and instead should
open another store with better service levels and premium brands catering to the upmarket
segment. These two stores should be distinct in their brand name, offerings and operations.

3. Conflict Theories (Evolution through Dialectic Process)

Within a broad retail category, there is always a conflict between the retailing of similar formats,
which leads to the development of new formats. Thus, the new retail formats are evolved through
dialectic process of blending two formats.

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Thesis is a single retailer around the corner of the residential area. 
Antithesis is a large departmental store nearby the same residential area, which develops over
some time in opposition to Thesis. Antithesis poses a challenge to Thesis. When there is conflict
between Thesis and Antithesis, a new format of retail is born.
Synthesis- There is a blending of the thesis and antithesis. The result is position between the
"thesis" and "antithesis". Super markets and hypermarkets thrive. This "synthesis" becomes the
"thesis" for the next round of evolution.

4. Retail accordion Theories

This theory focuses on the width of product assortment sold by retail outlets and claims a general-
specific-general cycle. The cycle begins by retailers selling a wide assortment of goods followed
by more focused range and vice-versa. Evolution of retail institutions from general, broad- based
outlets with wide assortments, to narrow- based institutions carrying specialised assortments, and
back to general, broad-based assortments. Synonymous with general-specific-general theory.

5. Retail lifecycle Theories

A new retail format passes through the stages of birth, growth, maturity and decline as industries
and products do. A new retail format that enjoys a competitive advantage over existing formats
grows rapidly.

Attracted by the growth potential of the new format, competitors enter the business during the
growth phase, and there is intense competition among the retailers of the new format.

The players develop ambitious plans of expansion and seek to open their stores in new
geographical areas. There is intense competition during maturity, and a new retail format may
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start replacing it during its decline stage. The three theories explain the evolution of retail formats,
but the decline and demise of a retail format is not inevitable. Retailers have to learn to anticipate
changes in environment and adapt to them.

Retailing in Developing Countries

Retail is exploding in developing markets and those markets have become the driving forces
fueling global growth in retail sales and space. Over the 10-year history of A. T. Kearney's Global
Retail Development Index (GRDI), an annual research project designed to help global retailers
prioritize which countries to enter, the population of developing markets increased 11%, while
retail sales per capita has almost doubled, retail space has more than tripled and Internet access
grew by nearly 500%.

Clearly, developing markets hold significant potential for retail growth, but picking which
markets are prime for development has been a tough learning experience. Initially many global
retailers focused their developing market expansion aspirations on China, which gained
acceptance into the World Trade Organization (WTO) in 2001. As the decade unfolded, retailers
were drawn to the potential of Southeast Asia, the BRIC nations (Brazil, Russia, India and China)
and Eastern European markets like the Czech Republic, Estonia, Hungary, Latvia, Lithuania,
Poland, Rumania, Slovakia and Slovenia following their joining the European Union (EU) in
2004.

But over the 10 years of retail growth tracked by our research, five nations have consistently
ranked in the Top 10: China, India, Russia, Vietnam and Chile. Almost everyone understands
China's size and therefore its market potential. More difficult is establishing its true market value,
particularly when it comes to the emerging middle class and burgeoning urban population. As
many retailers have learned the hard way, the Chinese consumer is unique, and effectively selling
to them demands striking exactly the right balance between assortment, pricing and service
models.

While China slipped a bit to sixth place in the 2011 study, it remains too attractive a market to
ignore. India retailing remains highly fragmented by Western standards but organized retail has
made great strides over the past 10 years. Like China, India's size will always make it attractive to
expansion-minded retailers but much of that attraction can be quickly lost in the morass of
regulatory challenges, the near necessity of taking on a local partner and the increasing power of
local competitors like Reliance and Birla.

While Russia has experienced a decade of historic, double-digit market growth, as in the case of
India, the lack of transparency in government regulation makes it a difficult market to enter. Also
like India, competition -- this time in a more consolidated rather than fragmented form--poses
significant challenges. Vietnam opened its borders to wholly owned foreign trade in 2009,
attracting international retail investment, particularly from Japan and Korea. That said, recent
inflation and the slow pace of development of infrastructure and distribution networks have
hampered large-scale foreign retail investment and frustrated growth plans for retailers doing
business in the country. In honor of its 10th anniversary, this year's report looked at four retailers
that have made developing-market expansion a priority: Carrefour, which pioneered the
globalization of hypermarkets, operates more than 7,500 of its 15,660 stores in 33 nations outside
its French home market. These markets now represent 57% of all Carrefour sales. The German-
based Metro Group, an early entrant in the developing markets game, currently operates in 33
countries. So what does it all mean? Many global retailers struggle to create consistent, profitable
performance. As they venture into new markets, new entrants can face significant challenges. But

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over the last 10 years of studying global retail expansion, we have discovered seven simple
lessons for achieving success in developing economies:

Lesson 1: Market selection is both an art and science. Successful market entry involves more than
just finding available real estate or a local partner. Brands must fit markets, and so the online
channel has become an increasingly popular market-testing vehicle.

Lesson 2: Global expansion is a portfolio game. Since markets are in different stages of growth
and profitability, successful global retailers mix investments in countries with different risk and
performance profiles and resource demands.

Lesson 3: Consumers in developing markets are discerning. Consumers in developing markets

often have access to technologies that are superior to those accessed by their peers in developed
nations. As is the case anywhere, understanding who the target customer is and what he or she
wants and needs are the foundation of all retail success.

Lesson 4: Local competition is often stronger than it appears. Domestic retailers not only know
their customers, culture and regulatory environments better than new market entries, they also are
quick competitive studies. Many of these indigenous retailers have restructured their operations
and are now more formidable than ever.

Lesson 5: The rules are different for global and national organizations. Global retailers must learn
how to strike the right balance when selecting between the advantages of local retail decision-
making in every area, from pricing, assortment and sourcing to format, layout and promotions,
and the demands imposed by virtue of operating a successful global organization.

Lesson 6: Local talent is critical. Hiring, training and retaining local talent is the key to
sustainable a global retail operation.

Lesson 7: Global expansion requires a long-term view. Global retail expansion is not for the
impatient, the intemperate or the faint of heart. It's still a big world out there full of possibilities
for global development. Retailers continue to improve their efforts to crack the cultural code in
markets like China and India. Infrastructure improvement will continue to sustain and increase
sales growth in Eastern Europe and Southeast Asia. Political stability could instantly improve the
market potential of much of Africa and parts of Latin America.

It's too early to pick the final winners in the battle for global retail dominance. Early market
entrants seem to have an advantage, but also often make costly initial mistakes, making life easier
for alert second-wave competitors. But one thing is certain: When it comes to global retailing--
especially in developing markets--you can't win if you don't play.

Retail Scenario of India

The retail companies are found to be rising in India at a remarkable speed with the years and this
has brought a revolutionary change in the shopping attitude of the Indian customers”. In last one
and half decades, many corporate giants have entered into retailing and have successfully
professionalized this business. Many international retailers have entered Indian market and many
are about to enter to explore retailing opportunities.

The Indian retail industry has emerged as one of the most dynamic and fast-paced industries due
to the entry of several new players. Total consumption expenditure is expected to reach nearly
US$ 3,600 billion by 2020 from US$ 1,824 billion in 2017. It accounts for over 10 per cent of the

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country’s Gross Domestic Product (GDP) and around 8 per cent of the employment. India is the
world’s fifth-largest global destination in the retail space.
Market Size
India’s retail market is expected to increase by 60 per cent to reach US$ 1.1 trillion by 2020, on
the back of factors like rising incomes and lifestyle changes by middle class and increased digital
connectivity. While the overall retail market is expected to grow at 12 per cent per annum,
modern trade would expand twice as fast at 20 per cent per annum and traditional trade at 10 per
cent# . In FY17, organised retail market contributed 7 per cent of the total sector and unorganised
retail market contributed the rest 93 per cent of the sector.
Online retail is expected to be at par with the physical stores in the next five years and has grown
23 per cent to $17.8 billion in 2017.
India is expected to become the world’s fastest growing e-commerce market, driven by robust
investment in the sector and rapid increase in the number of internet users. Various agencies have
high expectations about growth of Indian e-commerce markets. Indian e-commerce sales are
expected to reach US$ 200 billion! by 2026 from US$ 39 billion in 2017
Luxury market of India is expected to grow to US$ 30 billion by the end of 2018 from US$ 23.8
billion 2017 supported by growing exposure of international brands amongst Indian youth and
higher purchasing power of the upper class in tier 2 and 3 cities, according to Assocham.
The size of modern retail in India is expected to reach US$ 11.25 billion in 2019 from US$ 13.51
billion in 2016.
Investment Scenario
The Indian retail trading has received Foreign Direct Investment (FDI) equity inflows totalling
US$ 1.42 billion during April 2000–June 2018, according to the Department of Industrial Policies
and Promotion (DIPP).
With the rising need for consumer goods in different sectors including consumer electronics and
home appliances, many companies have invested in the Indian retail space in the past few months.

 Google and Paytm Mall to acquire 7-10 per cent stake in Future Retail with investment of
Rs 3,500-4,000 crore (US$ 522.08-596.66 million).
 Investments by private equity firms and wealth firms in Indian retail sector reached US$
800 million in 2017.
 India’s retail sector attracted Rs 9.5 billion (US$ 147.40 million) investments in FY18, at
a growth rate of 35 per cent year-on-year from Rs 7 billion (US$ 104.34 million) in FY17.

Government Initiatives
The Government of India has taken various initiatives to improve the retail industry in India.
Some of them are listed below:

 The Government of India may change the Foreign Direct Investment (FDI) rules in food
processing, in a bid to permit e-commerce companies and foreign retailers to sell Made in
India consumer products.
 Government of India has allowed 100 per cent Foreign Direct Investment (FDI) in online
retail of goods and services through the automatic route, thereby providing clarity on the
existing businesses of e-commerce companies operating in India.

E-commerce
E-commerce is expanding steadily in the country. Customers have the ever increasing choice of
products at the lowest rates. E-commerce is probably creating the biggest revolution in the retail
industry, and this trend would continue in the years to come. India's e-commerce industry is
forecasted to reach US$ 53 billion by 2018. Retailers should leverage the digital retail channels
(e-commerce), which would enable them to spend less money on real estate while reaching out to
more customers in tier-2 and tier-3 cities.
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Both organised and unorganised retail companies have to work together to ensure better prospects
for the overall retail industry, while generating new benefits for their customers.

Difference between Organised and Unorganised Sector

Sectors are majorly divided into three categories primary, secondary and tertiary. Based on the
employment conditions these are further classified as an organised and unorganised sector.
The organised sector is one that is incorporated with the appropriate authority or government and
follow its rules and regulations. On the contrary, the unorganised sector can be understood as the
sector, which is not incorporated with the government and thus, no rules are required to be
followed.
Organised Sector
The sector, which is registered with the government is called an organised sector. In this sector,
people get assured work, and the employment terms are fixed and regular. A number of acts apply
to the enterprises, schools and hospitals covered under the organised sector. Entry into the
organised sector is very difficult as proper registration of the entity is required. The sector is
regulated and taxed by the government.
There are some benefits provided to the employees working under organised sector like they get
the advantage of job security, add on benefits are provided like various allowances and
perquisites. They get a fixed monthly payment, working hours and hike on salary at regular
intervals.
Unorganised Sector
The sector which is not registered with the government and whose terms of employment are not
fixed and regular is considered as unorganised sector. In this sector, no government rules and
regulations are followed. Entry to such sector is quite easy as it does not require any affiliation or
registration. The government does not regulate the unorganised sector, and hence taxes are not
levied. This sector includes those small size enterprises, workshops where there are low skill and
unproductive employment.
The working hours of workers are not fixed. Moreover, sometimes they have to work on Sundays
and holidays. They get daily wages for their work, which is comparatively less than the pay
prescribed by the government.
BASIS FOR ORGANISED SECTOR UNORGANISED SECTOR
COMPARISON

Meaning The sector in which the The sector that comprises of small
employment terms are fixed and scale emterprises or units and are
employees have assured work is not registered with the government.
Organised sector.

Governed by Various acts like Factories Act, Not governed by any act.
Bonus Act, PF Act, Minimum
Wages Act etc.

Government rules Strictly followed Not followed

Remuneration Regular monthly salary. Daily wages

Job security Yes No

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 BASIS FOR ORGANISED SECTOR UNORGANISED SECTOR
COMPARISON

Working hours Fixed Not fixed

Overtime Workers are paid remuneration No provision for overtime.

for overtime.

Salary of workers As prescribed by the government. Less than the salary prescribed by
the government.

Contribution to Yes No
Provident fund by the
employer

Increment in salary Once in a while Rarely

Benefits and Employees get add-on benefits Not provided.

perquisites like medical facilities, pension,
leave travel compensation, etc.

A.Advantages of Organized Retail in India-

1.Enhanced Welfare Gains for Consumers- 

The emergence of organized retail undoubtedly gives consumers a wider choice of goods, more
convenience, and a better shopping environment, among other benefits. This is feasible because organized
retail can take several formats, from small neighborhood stores in densely populated cities with high real
estate prices to large air-conditioned malls in the periphery where real estate is cheaper. Organized retail
can appear small but spread in all local markets, providing the convenience of a neighborhood kirana store
but with procurement on a mass scale that keeps prices low and provides greater variety.

2.Gains for Farmers- 

Organized retail will result in a complete revamp of the agricultural supply chain in the country. A recent
study by CRISIL has estimated a current annual total loss of about Rs. 1,000 billion in the agricultural
supply chain, 57 per cent of which is due to avoidable wastage and the rest due to avoidable costs of
storage and commissions (CRISIL Research, June 2007). Organized retailers have already started
procuring fruit and vegetables from farmers directly bypassing the various intermediaries who add more
costs than value to the food chain. They are investing heavily on logistics in the form of centralized
warehousing and distribution centers, transport and cold storage, either directly or through engaging third
party logistics companies. They are also employing a large number of unskilled workers for sorting,
grading, packaging and labeling. All these will enhance farmer’s realizations, improve quality of products
at the shop and reduce the ultimate consumer price.

3.Link with Manufacturing-

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The Planning Commission has identified four sectors as the major employment generating sectors for the
Eleventh Plan period, 2007-12. They are: (i) food processing industry; (ii) textiles and clothing; (iii)
tourism; and (iv) construction. Of these sectors, all except tourism are getting a fillip with the growth of
organized retail. Again, the small and medium industry (SMI) sector is getting advantages with the
emergence of organized retailers by becoming their suppliers. Modern retail will catalyze the development
of the SMI sector in the country. 

4.Boost to Exports- 

Organized retail’s link with exports comes through foreign players. International retailers look for sources
around the world and a country in which they operate
becomes a source for their global sales. Some of the international retailers that have plans for India in the
future have already developed suppliers in the country and have started exporting from India. For example,
Wal-Mart exported an equivalent of US$ 600 million, and IKEA about euros from India in 2006-07.

5.Impact on Growth and Productivity-

 Organized retail will enhance the growth and productivity of India by helping the farmers, consumers and
other sectors by providing high quality products.
organized retailing will remove various inefficiencies that characterize the present Indian distribution
system, which in turn will provide better price for the farmers and suppliers on the one hand, and lower
prices for consumers, on the other.

6.Improvement of Government Revenues- 

Another significant advantage of organized retailing is its contribution to government revenues.

Unorganized retailers normally do not pay taxes and most of them are not even registered for sales tax,
VAT, or income tax. Organized retailers, by contrast, are corporate entities and hence file tax returns
regularly. The growth of organized retail business will be associated with a steady rise in tax receipts for
the central, state, and local governments.

7.Impact on Employment and Prices- 

The growth of organized retail will enhance the employment potential of the Indian economy. While
providing direct employment in retail, it will drive the growth of a number of activities in the economy
which in turn will open up employment opportunities to several people. It may adversely affect
employment in unorganized retail and the trade intermediaries associated with the traditional supply
channels but the additional jobs created will be much higher than those that are lost. An important point to
be noted is that while the jobs that organized retail displaces are the low-end, low-quality, underproductive
ones, the new jobs created are the high quality, productive ones. It also generates a number of jobs for
unskilled labour for the tasks of sorting, grading, labeling, etc.

B.Advantages of unorganized retail

1.Employment Impact- 

According to ECR report, unorganized retail outlets employ more family labour than hired labour; on an
average they employ 1.5 persons per shop from the family, and hired employees of 1.1 persons in India. It
is a way of livelihood for Indian people.

2.Location Advantage for the Unorganized Retailers-

 Location is a comparative advantage for unorganized retailers as the mean distance to the residence for
consumers at unorganized outlets is 1.1 km compared to 2.6 km for consumers at organized outlets. A
majority of consumers walk to traditional retailers because it is convenience to reach.

3.Credit Facilities- 
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Consumers get credit facilities in small unorganized retail stores and can make a deferred payment which
is not possible in organized retail stores.

4.Purchase of small quantities- 

It’s a typical attitude of Indians to purchase in small quantities of various goods which they can purchase
from small shops than organized retail stores.

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