Unit I (12 hours)

Retailing - Meaning - Definition - Characteristics - evolution of retailing in India - retailing

principles - retail sales objectives - retailing in India - across the globe - reasons for retail growth
- emerging trends in retailing - retail formats - store based; non-store based - traditional and
non-traditional retailing - internet retailing - cyber retailing.

What is Retail Management?

Retail Management is the process which helps the customers to procure the
desired merchandise form the retail stores for their personal use. ... It gives an overview
of the concept of visual merchandising and lays emphasis on customer relationship
management, brand management and sales management.

Retaining – Meaning

Retailing is a distribution process, in which all the activities involved in selling

the merchandise directly to the final consumer (i.e. the one who intends to use the
product) are included. It encompasses sale of goods and services from a point of
purchase to the end user, who is going to use that product.

Types of Retailing

 Store Retailing: Department store is the best form of store retailing, to attract a
number of customers. The other types of store retailing includes, speciality store,
supermarket, convenience store, catalogue showroom, drug store, super store,
discount store, extreme value store. Different competitive and pricing strategy is
adopted by different store retailers.

 Non-store Retailing: It is evident from the name itself, that when the selling of
merchandise takes place outside the conventional shops or stores, it is termed as
non-store retailing. It is classified as under:

 Direct marketing: In this process, consumer direct channels are employed

by the company to reach and deliver products to the customers. It
includes direct mail marketing, catalog marketing, telemarketing, online
shopping etc.

 Direct selling:Otherwise called as multilevel selling and network selling,

that involves door to door selling or at home sales parties. Here, in this
process the sales person of the company visit the home of the host, who

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 has invited acquaintances, the sales person demonstrate the products and
take orders.

 Automatic vending: Vending machines are primarily found in offices,

factories, gasoline stations, large retail stores, restaurants etc. which offer a
variety of products including impulse goods such as coffee, candy,
newspaper, soft drinks etc.

 Buying service: The retail organization serves a number of clients

collectively, such as employees of an organization, who are authorized to
purchase goods from specific retailers that have contracted to give
discount, in exchange for membership.

 Corporate Retailing: It includes retail organizations such as corporate chain

store, franchises, retailer and consumer cooperatives and merchandising
conglomerates. There are a number of advantages that these organizations can
achieve jointly, such as economies of scale, better and qualified employees, wider
brand recognition, etc.

Retailing: Top 9 Major Principles of Retailing

1. Clear definition of objectives and policies:

According to this principle of retail organization, each employee must understand the
objectives and policies of the store. If the objectives are not clearly defined, the
employees in the retail organization shall not be in a position to understand what is
expected from them and in what type of activities the organization engage itself.

2. Duties and Responsibilities:

According to this principle, the duties and responsibilities of each and every employee,
working at various levels in the retail store should be clearly defined. The line of
authority must be clear from the highest to the lowest positions. All employees must be
well informed of their respective position, responsibilities in the retail organization and
the persons to whom they are answerable and who reports to them.

3. Unity of Command:

According to this principle, one employee working at junior level should be responsible
to one direct supervisor. The purpose is to avoid any conflict regarding responsibilities
of employees receiving orders from more than one supervisor.

4. Supervision and Control:

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According to this principle, even after delegating the authority, the supervisor still will
be responsible for a manager’s or employees’ mistakes. He cannot get rid of the mistake
done by his juniors or those who are to achieve the goal.

5. Interest in employees:

According to this principle, the retail organization should show continuous interest in
its employees, job promotion, employees’ participation in management, internal
promotion, efforts/job recommendation, job enrichment, induction and so on; improve
employee’s morale and efficiency.

6. Monitoring of Human Resource:

According to this principle, issues related to employees like attendance, employee

turnover, punctuality and absenteeism should be regularly monitored otherwise they
can create problems for the whole organization.

7. Rule of Simplicity:

According to this principle, simplicity in all sorts of operations is must for running a
retail organization properly. There should be a limit to the number of employees a
manager could directly supervise.

8. Responsibility and Authority:

According to this principle, assigning duties without any authority will not work in a
retail organization. Therefore, responsibilities should be associated with proper
authority. An employee who is responsible to achieve some retail organization’s
objectives needs the power to achieve it.

9. Division of Labour:

According to this principle, in order to achieve organizational objectives, the work

should be divided among subordinates properly. It means dividing the retail
organization’s work in various departments into various components and then
assigning the same to each employee of the organization. It enables the management to
fix up the responsibilities on each employee concerned.

Indian Retail Industry: Growth, Trends, Challenges, and Opportunity

Retail industry in India is un doubtingly one of the fastest growing sector in the world.
It is the largest among all industries accounting to 10 per cent of the country GDP and
employs around 8 per cent of the workforce. India has seen a drastic shopping

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revolution in terms of format and consumer buying behaviour. From shopping centers
to multi-storied malls to huge complexes offering shopping, entertainment and food all
under one roof and it is because of this trend that the retail industry is witnessing a
revolution as many new format markets like hypermarkets, supermarkets,
departmental stores have made their way in the market.

Growth:

Due to the large scope of business and high growth potential, India is attracting
investors across the globe. In FDI Confidence Index, India ranks 8th (after U.S.,
Germany, China, UK, Canada, Japan, and France).

India is all set to gain from the latest FDI policy in retail.

There has been an increase in purchasing power of the consumer due to easy
availability of credit which has given a push to higher value items and encouraged
repeated purchases. There has been a clear shift in consumer mindset in buying. They
are more educated and well informed. They have become more experimenting and are
willing to try and buy products which they haven’t been used as yet. The expansion of
middle class has led to higher purchases of luxury products and brand consciousness.
Significant growth in discretionary income and changing lifestyles are among the major
growth drivers of Indian retail industry.

With GST taking its shape, it has helped the retailers simplify its tax structure. This will
lead to better supply chain structure, better cash flows, pricing, and profitability.

Opportunities:

Rural markets show high growth potential if tapped with the right set of products and
pricing. With increasing investments in infrastructure, connectivity to such towns is
now becoming easier. This helps the retailer to increase reach in such high potential
markets.

The private label space in the organized Indian retail industry has begun experiencing
an increased level of activity. The share of private label strategy in the US and the UK
markets is 19 per cent and 39 per cent, respectively, while its share in India is just 6
percent. Thus this gives a tremendous opportunity for the homegrown label to expand
its base.

India‘s price competitiveness attracts large retail players to use it as a sourcing base.

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Many international retailers are increasing their sourcing from India and are moving
from third-party buying offices to establishing their own wholly-owned/wholly-
managed sourcing and buying offices

Challenges:

Although retail industry in India is on a growing track not everyone has tasted success.
Due to various diversities in the state policies and local influences, it becomes a larger
hindrance for the retail to expand rapidly.

The high cost of real estate, deep discounting from e-tailers, non-availability of skilled
labor in rural market are a few challenges that may hinder the growth of retail industry.
Innovative concepts and model shall survive the test of time and investment.

Conclusion:

Indian retail industry is no doubt one of the largest and fastest growing industries. Like
most developed countries, India’s growth also relies on growth of its retail industry.
India is becoming a dynamic market with many international brands entering India to
capitalize on the growing consumption pattern shown by the country. With right
reforms and government initiatives, India retail industry is surely inching its way
towards becoming the next boom industry. The future of the retail industry looks
promising, as more and more Government policies have come into play, making it
favourable to do business.

Types of Retail Formats in India

Mom-and-pop Stores

These are small family-owned businesses, which sell a small collection of goods to the
customers. They are individually run and cater to small sections of the society. These
stores are known for their high standards of customer service.

Department stores

Department stores are general merchandisers. They offer to the customers mid- to high-
quality products. Though they sell general goods, some department stores sell only a
select line of products. Examples in India would include stores like "Westside" and
"Lifestyle"--popular department stores.

Category Killers

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Specialty stores are called category killers. Category killers are specialized in their fields
and offer one category of products. Most popular examples of category killers include
electronic stores like Best Buy and sports accessories stores like Sports Authority.

Malls

One of the most popular and most visited retail formats in India is the mall. These are
the largest retail format in India. Malls provide everything that a person wants to buy,
all under one roof. From clothes and accessories to food or cinemas, malls provide all of
this, and more. Examples include Spencers Plaza in Chennai, India, or the Forum Mall
in Bangalore.

Discount Stores

Discount stores are those that offer their products at a discount, that is, at a lesser rate
than the maximum retail price. This is mainly done when there is additional stock left
over towards the end of any season. Discount stores sell their goods at a reduced rate
with an aim of drawing bargain shoppers.

Supermarkets

One of the other popular retail formats in India is the supermarkets. A supermarket is a
grocery store that sells food and household goods. They are large, most often self-
service and offer a huge variety of products. People head to supermarkets when they
need to stock up on groceries and other items. They provide products for reasonable
prices, and of mid to high quality.

Street vendors

Street vendors, or hawkers who sell goods on the streets, are quite popular in India.
Through shouting out their wares, they draw the attention of customers. Street vendors
are found in almost every city in India, and the business capital of Mumbai has a
number of shopping areas comprised solely of street vendors. These hawkers sell not
just clothes and accessories, but also local food.

Hypermarkets

Similar to supermarkets, hypermarkets in India are a combination of supermarket and

department store. These are large retailers that provide all kinds of groceries and
general goods. Saravana Stores in Chennai, Big Bazaar and Reliance Fresh are
hypermarkets that draw enormous crowds.

Kiosks

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Kiosks are box-like shops, which sell small and inexpensive items like cigarettes, toffees,
newspapers and magazines, water packets and sometimes, tea and coffee. These are
most commonly found on every street in a city, and cater primarily to local residents.

Traditional Channel comprises of the regular trade partners like

1. Direct Dealers: Companies sell directly to them and in turn they directly sell to the
end consumer or user. Number of outlets owned by them may vary anywhere between
1 to 10 in any specific location/ city. Their presence is limited to specific geography –
within a city or a region

2. Distributors: Companies sell directly to them and they in turn service the smaller
retail shops (known as sub-dealers) in the area designated to them by the company. The
sub-dealers then sell to the end consumers

3. Wholesalers: This one is a disorganized channel. Either companies or a bigger direct

dealer will sell them the products in bulk and they in turn sell to the smaller retailers
comparatively at a lower cost than the distributor. They run like a parallel channel to
distribution and at times may lead to market imbalances.

4. Brand Shops: These are company owned or franchised retail outlets selling products
of only one company. They act as usually the place to showcase the entire range of the
products sold by the company.

Non-Traditional or Modern Retail Channel refers to all other formats of retail stores like
Hyper markets, Department Stores, Discount Stores, Electric Multiple stores, Cash and
Carry Stores, Specialty Stores, Online, Direct selling

Now let us make an attempt to differenciate between the two on certain parameters as
mentioned below:

1. Presence: Usually Traditional channel has limited geographical presence say within a

city or a specific region while Non-Tradtional or Modern Channel has national
presence.

2. Service: Traditional channel (Example: say a neighbourhood Kirana store) has high

involvement with the consumer during the sale is made. It can be even to the level of
free home delivery of small value goods bought. However the expectation of the
consumer is low in terms of service standards at the time of sale. On the other hand in
Modern Retail usually there is low involvement with the consumers on the shopfloor.
Usually consumers are free to roam around and choose on their own what they wish to

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buy. Not much personal attention given. At the same time consumer expectations are
high.

3. Delivery: There are no strict norms for the delivery of goods from the company to the
retailer where as in Modern Retail there are defined delivery norms such as specific
time schedule for deliver, barcodes, delivery to happen before expiry of PO etc

4. Volumes: Traditional trade usually sells/ buys consistent volumes with increase

during the season/ festivals while on the other hand modern trade sells/ buys higher
volumes throughout the year due to promotions and regular expansions.

5. Margins: Traditional trade demands higher margins while retention is low. Modern

Trade however demands high margin and also there is fixed percentage of retention.

6. Merchandise: High visibility is ensured in traditional trade with a slight cluttered

display. Whereas modern trade has innovative merchandising.

7. Promotions: Promotions in traditional channel are usually seasonal while modern

retail channel believes in monthly and daily promotions on products.

8. Training of staff: There is a moderate focus on training of staff in traditional trade

while modern trade ensures high level of training of their staff.

9. Credit terms: Companies usually give lower credit periods to traditional trade while
modern trade enjoys higher credit limits and periods.

10. Relationships: Traditional trade is managed usually on personal relationship of the

sales personnel with the owner while the relationship of modern trade with companies
is professional and legal

OBJECTIVES OF RETAIL:

1.      Customer Satisfaction: Retailers know that satisfied customers are loyal

customers. Consequently, retailers must develop strategies intended to build
relationships that result in customers returning to make more purchases.

2.      Acquiring the Right Products: A customer will only be satisfied if they can
purchase the right products to satisfy their needs. Since a large Percentage of retailers
do not manufacture their own products, they must seek suppliers who will supply
products demanded by customers. Thus, an important objective for retailers is to
identify the products customers will demand, and negotiate with suppliers to obtain
these products.

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3.      Product Presentation: Once obtained, products must be presented or
merchandised to customers in a way that generates interest. Retail merchandising often
requires hiring creative people who understand and can relate to the market.

4.      Traffic Building: Like any marketer, retailers must- use promotional methods to
build customer interest. For retailers a key measure of interest is the number of people
visiting a retail location or website. Building “traffic” is accomplished with a variety of
promotional techniques such as advertising, including local newspapers or Internet,
specialized promotional activities, such as coupons.

5.      Layout: For store-based retailers, a store’s physical layout is an important

component in creating a retail experience that will attract customers. The physical
layout is more than just deciding in what part of store to locate products. For many
retailers designing the right shopping atmosphere (e.g., objects, light, and sound) can
add to the appeal of a store. Layout is also important in the online world where site
navigation and usability may be deciding factors in whether a retail website is
successful.

6.      Location: Where to physically locate a retail store may help or hinder tore traffic.
Well placed stores with high visibility and easy access, while possibly commanding
higher land usage fees, may hold significantly more value than lower cost sites that
yield less traffic. Understanding the trade-off between costs and benefits of locations is
an important retail decision.

7.      Keeping Pace With Technology: Technology has invaded all areas of retailing
including customer knowledge (e.g., customer relationship management software),
product movement (e.g., use of RFID tags for tacking), point-of-purchase (e.g., scanners,
kiosks, self-serve checkout), web technologies (e.g., online shopping       carts,   purchase
recommendations) and many more.

Electronic Retailing / Cyber Retailing

What is 'Electronic Retailing?

Electronic retailing is the sale of goods and services through the internet. Electronic
retailing, or e-tailing, can include business-to-business (B2B) and business-to-consumer
(B2C) sales of products and services, through subscriptions to website content, or
through advertising. E-tailing requires businesses to tailor traditional business models
to the internet and its users.

Advantages of E-retailers

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E-tailing helps traditional brick-and-mortar stores reach more consumers worldwide
and increase sales. While Individual and start-up e-tailers may be launched from a
single room with one computer and expand rapidly rather than pay for an entire
building with expensive overhead. Here are some of the listed benefits with every e-
tailer:

1. Customers comfort and tracing

E-tailers may trace consumers’ shopping behavior while gaining valuable insights into
their spending habits, which may lead to increased revenue. In addition, customers
shop from the comfort of their homes at any time rather than being physically present
in the store during specific hours.

2. Efficiency

E-Commerce is an efficient retail method for business transactions. Start-up costs for
establishing an e-commerce business is far less than expanding your business with
more brick and mortar locations. Fewer licenses and permits are required to start an
online business than that of a physical store location. You will also save money by using
fewer employees to perform operations such as managing inventory and billing
customers. You won’t have to search for an appropriate geographic location or worry
about paying high utility costs for the facility.

3. Privacy

Some consumers are reluctant to embrace e-commerce because of privacy 7 issues.

Making an online purchase often requires disclosing personal information such as an
address, telephone number, and banking or credit card account information. While
many people feel making an online purchase does not compromise their personal
information, some still prefer not to take a chance of having their account information
accessed by a third party, and will only make their purchases at a storefront operation.

 4. Unfamiliarity

There are always going to be people who prefer to do their shopping at a brick and
mortar location. Some people are resistant to change and may not want to embrace e-
commerce due to a lack of knowledge about the process or a general reluctance to
purchase an item they cannot physically examine. If the product does not meet the
customer’s expectations in some way, such as being the wrong size or defective, he
must then spend time sending it back and waiting for the replacement product to
arrive.

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OTHER ADVANTAGES

Easy access to market - in many ways the access to market for entrepreneurs has never
been easier. Online marketplaces such as eBay and Amazon allow anyone to set up a
simple online shop and sell products within minutes. See selling through online
marketplaces.

Reduced overheads - selling online can remove the need for expensive retail premises
and customer-facing staff, allowing you to invest in better marketing and customer
experience on your e-commerce site.

Potential for rapid growth - selling on the internet means traditional constraints to
retail growth - eg finding and paying for larger - are not major factors. With a good
digital marketing strategy and a plan a scale up order fulfilment systems, you can
respond and boost growing sales. See planning for e-commerce.

Widen your market / export - one major advantage over premises-based retailers is the
ability expand your market beyond local customers very quickly. You may discover a
strong demand for your products in other countries which you can respond to by
targeted marketing, offering your website in a different language, or perhaps partnering
with an overseas company. See exporting - an overview.

Problems Faced By E-retailers

Creating and maintaining an e-tailing website is expensive. Infrastructure costs for

order fulfillment, warehousing goods, dealing with returns and other issues add up
quickly. Also, consumers may not trust a company that is not well-established and may
not buy from it as frequently as brick-and-mortar stores. Here is a list of some of the
basic problems:

1. Can’t Feel Products

Just looking at a photograph and reading a description of a product may give enough
information for a consumer to make a purchase online. Some products, however, need
to be held, smelled, touched and listened to in person, making them poor candidates for
detailing. Musicians, for example, will typically want to play an acoustic guitar before
making a purchase, since every guitar has its own unique feel and sound. A person
interested in buying speakers for his home stereo may want to listen to them, which can
be demonstrated in a retail store but not through an online e-tailer. Deciding on the
purchase of a new car is another instance where people are apt to want to smell, sit in
and test drives the car.

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 2. Hard to Build Customer Relations

The friendly smile of an employee greeting you as you walk into a retail store can go a
long way in building customer relations, helping ensure repeat business. Helpful and
knowledgeable interaction with store employees creates confidence with customers.
Etailing lacks the opportunity for face-to-face contact and must try other means to
establish long-term relationships with customers.

 3. Additional Costs

E-tailing involves additional costs for purchased items compared to purchases made at
brick and mortar stores. Items must be mailed or shipped, incurring not only the
additional cost of postage but also for packing materials, which can be significant if
items are large or fragile. When items have to be returned, even more postage may be
required by the e-tailer for return shipping costs.

4. Finding Your E-tail Store

Just creating a website does not ensure potential customers will visit your store. A retail
store in a shopping mall is almost guaranteed it will get a lot of interest generated by
foot traffic. While there are strategic promotional steps an e-tailer can take to try to
increase the odds of his site appearing in the results list from a Google search, driving
Internet traffic to a site requires a lot of work, with no sure results.

5. Lack of Consumer Trust and Security

People may have more trust and confidence in dealing with a physical retail store than
with an online e-tailer. They know that the store is there, and if they have a problem
they know where to go. In contrast, a website might look very impressive, yet the
business might simply be a person working part-time with a laptop computer on a
kitchen table, which could close the business at any time or simply decide to ignore
customers who have complaints.

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