Retailing An Overview

Objectives of the Chapter

Retailing : Definition and Scope Retailers Role in Distribution

Channels Benefits of Retailing Evolution of Retailing Retailing Environment

Retail Management 2

Introduction
One of the largest industries in India

One

of the biggest sources of Employment Present value of retail market is $ 180 million. Only 2% in organized sector. Should employ 250,000 people directly and 2.5 million people indirectly
Retail Management 3

Retailing: Definition
Retailing is derived from the French word retailier, which means,

"to cut a piece off. A set of business activities that adds value to the products and services sold to the final consumers for their personal, family or household use. From a marketers point of view, retailing can be defined as a set of marketing activities designed to provide satisfaction to the end consumer and profitably maintain the customer base by continuous quality improvements across all areas concerned with selling goods and services. A retailer is any business establishment that directs its marketing efforts towards the end users for the purpose of selling goods and services. Retailers comprise street vendors, local kirana stores, supermarkets, food joints, saloons, airlines, automobile showrooms, video kiosks, direct marketers, vending machine operators, etc.
Retail Management

Retailing: Scope
Retailing involves: Understanding the needs of consumers Developing good assortment of merchandise Displaying the merchandise in an effective manner so that consumers find it easy and attractive to buy.
Retail Management 5

Retailer role in Channel of Distribution

An organization qualifies to be a retailer only when it derives a major chunk of its revenues from its transactions with end users. Thus, a seller is said to have conducted a retail transaction when he sells goods to the end customer while a wholesale transaction is conducted when the seller sells goods to a business concern.
Retail Management 6

Benefits of Retailing
Retailers deliver many benefits to customers, manufacturers, wholesalers, and the economy in the process of transfer of goods and services from the manufacturer to the end consumer.

Benefits to Customers Benefit to Manufacturers and Wholesalers Benefits to the economy

Retail Management

Benefits of Retailing to Customers

Retailers act as buying agents for consumers. They perform various activities that increase the value of goods and services they sell to the end consumer. The various activities are:

Breaking Bulk Providing Assortment Holding Inventory Providing after sales service Providing Information
Retail Management 8

Activities of Retailer benefiting Consumer Breaking Bulk

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.

Retail Management

Activities of Retailer benefiting Consumer Providing Assortment

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.
Retail Management 10

Activities of Retailer benefiting Consumer Holding 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.
Retail Management 11

Activities of Retailer benefiting Consumer Providing Services

Valued added 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.

Retail Management

12

Activities of Retailer benefiting Consumer Providing Information

Retailers play a major role in providing

product related information to their consumers. Retailers use advertising and in-store salespersons to provide product information, which helps the consumer to simplify his purchasing process.

Retail Management

13

Benefits of Retailing to Manufacturers and Wholesalers

Manufacturers and wholesalers consider retailing as

a channel for delivering their products/services to the end customer. Retailers provide the manufacturer with greater revenues, which could be reinvested in production. Retailers play a major role in smoothing out the variation between the production and sales of the manufacturer's products. Retailers function as the sensory organs of manufacturers. They provide feedback and information on tastes and preferences of customers for designing new products or upgrading an existing product.
Retail Management 14

Benefits of Retailing to Manufacturers and Wholesalers (Cont)

Retailers also share some of the risks of the manufacturer. A retailer is exposed to three types of obsolescence risks:

Physical obsolescence Technological obsolescence Fashion obsolescence Physical obsolescence risk arises from the damage or wear out caused to the products while they are stored in the retail outlet. Eg: handicrafts, books, greeting cards, gift items etc. Technical Obsolescence risk: Risk of technology getting outdated resulting in severe losses for the retailer.. Eg: Computers, Mobile phones, etc. Fashion obsolescence risk is very common for apparel retailers who deal in merchandise of varying style, design or color.

Retail Management

15

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.

Retail Management

16

Evolution of Retailing
Early Eighties 'Retailing' in India was synonymous with peddlers, vegetable vendors, neighborhood kirana stores (small grocery stores) or sole clothing and consumer durable stores in a nearby town. These retailers operated in a highly unstructured and fragmented market. Very few retailers operated in more than one city. Before 1990 Organized retailing in India was led by few manufacturer owned retail outlets, mainly from the textile industry.,Ex: Bombay Dyeing, Raymonds, S Kumar's, and Grasim.

Retail Management

17

Evolution of Retailing
Nineties: Liberalization of the Indian economy led to the dilution of stringent restrictions. Entry of few multi-national players like Nanz into the Indian market. Changing profile of the Indian consumers, Increasing wages of the employees working in Greenfield sectors with higher purchasing power. Setting up of retail chains by domestic retailers like Cotton World (Mumbai), Nirula's (Delhi) and the Viveks and Nilgiris in the South.
Retail Management 18

Factors behind the change of Indian Retailing Industry

Economic growth Urbanization Consumerism

Brand Profusion
Availability of Real Estate

Retail Management

19

Retailing Environment
Constituents of External Environment
Economic

Environment Legal Environment Technological Environment Competitive Environment

Retail Management

20

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
Retail Management 21

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

Labor Laws Complex taxation System

Retail Management 22

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.

Retail Management

23

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 sea 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.
Retail Management 24

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.
Retail Management 25

Summary of the Chapter

Retailing : Definition and Scope
Retailers Role in Distribution Channels Benefits of Retailing

Evolution of Retailing
Retailing Environment

Retail Management

26