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Introduction to Retailing

Suresh Chandra.Ch, Junior Research Fellow

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Nature of Retail Industry is Changing

To Today s Retailer

Mom and Pop Store

‡ From a personal perspective, how does retailing provides a potential career opportunities ?

Opportunities in Retailing ‡ Management Opportunities ‡ Entrepreneurial Opportunities .

non business use. A retailer or retail store is any business enterprise whose sale volume comes primarily from retailing. as a dealer or trader who sells goods in small quantities. . which means to cut of a piece or to break bulk. Retails includes all the activities involved in selling goods or services to the final consumers for personal.The word retail is derived from the French word retaillier . Therefore a retailer may be defined.

. telephone. wholesaler or retailer is doing retailing.Any organization selling to final consumers whether it is a manufacturer. It does not matter how the goods or services are sold (by person. mail. vending machine or internet or whether they are selling in store or on the street or at the consumer s house) Retail may be redefined as the first point of customer contact.

Time utility by keeping the store open when the customers prefer to shop.. form of a product that is acceptable to the customer.e. Provides a place utility.Functions of a Retailers : Providing Assortment i. Providing service to the customer. being available at a convenient location. Holding inventory & providing information to suppliers. .

Retailing in the Channel of Distribution and Marketing ‡ Retailer is the last step in the Manufacturer to Consumer distribution link ‡ Retailer has the important product/consumer link ‡ Product Marketing by manufacturer can be enhanced by coordination with retailer .

convenient hours. and customers want everything: a wide assortment of good quality merchandise.SAM WALTON FOUNDER OF WALMART . knowledgeable service. I have stuck to one guiding principle give your customers what they want. guaranteed satisfaction with what you buy. the lowest possible prices. free parking. For my whole retail career. a pleasant shopping experience. friendly. .

‡ From your perspective. what are the benefits and limitations of purchasing a pair of jeans directly from a manufacturer rather than from a retailer? .

Importance of retailing ‡ It is the final link in the chain of production ‡ It is the 2nd largest employer after agriculture in India. among the top 30 emerging markets in the world . ‡ The global Retail development Index has ranked India first. ‡ It accounts for an impressive part of GDP by contributing more than 10% to GDP.

Mcnair s) Dialectic process Retail accordion Natural selection .Theories of structural changes in retailing ‡ ‡ ‡ ‡ Wheel of retailing (Malcolm. P.

1. Wheel of Retailing Entry Phase (New entrant) ‡ Low prices & limited products ‡ Limited facilities and services ‡ Price-sensitive consumers Trading up phase (Traditional retailer) ‡ Moderate prices ‡ Improved facilities ‡ Broader base of valueMature Retailer and service-conscious (vulnerability phase) consumers ‡ High prices ‡ Excellent facilities and services ‡ Upscale consumers ‡ Declining ROI .

Walker) Discount Store ‡Low margin ‡High turnover ‡Low price ‡Self service ‡Low rent location ‡Spartan facilities Department Store ‡High margin ‡Low turnover ‡High price ‡Full service ‡Downtown location ‡Plush facilities Discount Department Store ‡Average margin ‡Average turnover ‡Modest price ‡Suburban location ‡Model facilities . Dialectic Process (Thomas.2. Maronick and Bruce J.J.

LO 3 .The Retail Accordion ‡ It describes how retail institutions evolve from outlets that offer wide assortments to specialized stores and continue repeatedly through the pattern and these stores begin to offer a wide variety of merchandise. ‡ The accordion theory is vague about the competitive importance of providing wide assortments for various target customer groups.

Natural Selection ‡ This theory based on Darwin s theory of evolution ‡ A retail institution should be flexible enough to adapt to the changing environment and should adapt its behaviour to survive in the market. . would stagnate and may even be forced to exit the market. ‡ The retail institution that is flexible enough to adapt to changes in the economy will be the most successful and those which are not willing to change.

. Retailers Chain Retailers Franchise Consumer cooperative Merchandise Offered : Convenience store Supermarkets Hypermarkets Specialty stores Departmental stores Factory outlets Electronic retailing Direct selling Catalog retailing Tele marketing TV Home shopping Automated Vending Banks Car rentals Tours & Travel Services Hotels etc. .Classification of retail formats Store Based Retailing Non-store Retailing Service Retailing Form of ownership : Indepen.

apparel 20. traditional stores Departmental stores A large self service outlet offering a variety of merchandise Apparel. footwear.000 FoodWorld. furnishings 10.Format Definition Formats Description A large superstore.000-100. Westside Category killers Large speciality stores focussed on one or a few categories of merchandise. furniture. groceries.000-15. Staples . groceries. Trinethra. fashion accessories.ft. medicines 3. Spencer. Vishal Megamart.000 In&Out. medicines 500-2. Jewellery. 15. Pantaloon. Subhiksha.000 Best Buy Circuit City. watches.000 Example Hyper markets Food. Trinethra. furnishings. offering a wide selection at low prices Electronics. combining a supermarket and departmental store. Food baazar Convenience stores Small size. Hypercity. office supplies.000 Shopper s Stop. Reliance Retail Super markets A large self service outlet offering food and household goods Food. Lifestyle. offering full lines of grocery and general merchandise all under one roof Key categories retailed Typical size Sq. easily accessible stores offering a quick shopping. Star India Bazaar.000-100. apparel. groceries. Subshiksha. fast check out experience and extended working hours Food. consumer durables Big Bazaar.000-50.

tyres. Gucci. electronics. TBZ Retail outlet offering multiple branded products belonging to a single category class Footwear. Colourplus. Crosswords .Format Definition (Contd. Adidas. 100.ft. offering goods in bulk at discount prices to members Key categories retailed Typical size Sq.000-5. furniture 1. groceries Warehouse clubs Single brand outlets Multibrand speciality stores Retail outlet offering products of a single brand Apparel.000 + Example Metro cash and carry.) Formats Description Warehouse style large stores. books 1. Sam s Club Food. McDonalds.000 Nike. apparel. Planet Fashion. Gautier. footwear.000-20.000 Planet Sports. Costco. food services.

Organized retail sector 2.Sectors in Retail Industry The retail industry is divided into: 1. . that is. income tax. Unorganized retail sector Organized retail sector: It refers to trading activities undertaken by licensed retailers. and also the privately owned large retail businesses. those who are registered for sales tax. These include the corporate-backed hypermarkets and retail chains. etc.

convenience stores. the local kirana shops. or income tax. hand cart and pavement vendors. etc The unorganized retailers normally do not pay taxes and most of them are not even registered for sales tax. . paan /beedi shops.Sectors in Retail Industry Unorganized retail sector: It refers to performing trading activities by traditional formats of low-cost retailing. VAT. for example. owner manned general stores.

Modern Retail Organized Channels ‡ The share of organized retail is less than 7% of the total retail market in India. .

. but Rapid Transformation is Anticipated Current Size & Future Projections for Indian Retail Market 900 800 700 600 500 400 300 200 100 0 800 US$ Billion 342 373 408 445 486 530 200 12 2007 18 2008 26 2009 Total Retail 39 2010 59 2011 Organized Retail 87 2012 2017 And may reach a share of 25% by 2017 ..

unorganized sector) . FDI restrictions. property regulations. real estate) ‡ Legal environment (labour laws) ‡ Technological environment (use of IT& online system) ‡ Competitive environment (Entry of MNCs.Retail Environment External environment factors include: ‡ Economic environment (Nature of economic system.

Retailing in India .

Established formats Kirana shops Convenience/ department stores PDS/ fair price shops Pan/ Beedi shops Emerging Formats Exclusive retail outlets Hypermarket Internal retail Malls / Specialty Malls Multiplexes Fast food outlets Service galleries .The Evolution of retail in India Traditional Formats Itinerant Salesman Haats Melas Mandis etc.

Evolution of Indian retail Historic/Rural Reach Traditional/Pervasive Reach Government Supported Modern Formats/ International Exclusive Brand Outlets Hyper/Super Markets Department Stores Shopping Malls PDS Outlets Khadi Stores Cooperatives Convenience Stores Mom and Pop/Kiranas Weekly Markets Village Fairs Melas Source of Entertainment Neighborhood Stores/Convenience Availability/ Low Costs / Distribution Shopping Experience/Efficiency .

stood at US$197.37 billion by 2014. retail sales will grow from US%392. ‡ Indian retail industry is the 5th largest in the world.In a joint study recently conducted by Associated Chambers of Commerce and Industry of India (ASSOCHAM)and KPMG. the following findings were revealed: * Over the coming 4-5 years is expected to be around US$ 25-30 billion. ‡ It is contributing 13% to INDIA s GDP. ‡ According to BMI India retail report. in single brand retail trading.04 million. ‡ FDI inflows between April 2000 and October 2010.63 billion in 2011 to US $674. .

High Income Opportunities Changing role of women in family Drivers of Indian Retail International Exposure Changing Consumption Attitude Market & Government .

. growth in income ‡ Increasing penetration into the lower income strata ‡ Arrival of Transnational companies (TNCs) ‡ Better inventory and ordering through electronic sources.Trends in Retailing ‡ Rapid development of infrastructure in retailing (mushrooming hypermarkets in metros in coming season) ‡ Increasing GDP and changing lifestyles of people.

Problems &Challenges for Indian retailing ‡ The tax structure in India favors small retail business (Kerala) ‡ Lack of adequate infrastructure facilities ‡ High cost of real estate ‡ Dissimilarity in consumer groups ‡ Restrictions in Foreign Direct Investment ‡ Shortage of retail study options ‡ Shortage of trained manpower ‡ Low retail management skill (Subhiksha) ‡ Intrinsic complexity of retailing rapid price changes .

Growth drives for Indian retailing ‡ ‡ ‡ ‡ ‡ Demography dynamics Double incomes Plastic revolution Urbanization Covering distances has become easier .

Why Consumers Buy Fashions???? .

Why Consumers Buy Fashions ‡ ‡ ‡ ‡ Communicate with Others Manage Appearance Express Self-Image Impress Others .

‡ b) FDI up to 51 % with prior Government approval (i. FIPB) for retail trade of Single Brand products. ‡ a) FDI up to 100% for cash and carry wholesale trading and export trading allowed under the automatic route.FDI Policy with Regard to Retailing in India ‡ It will be prudent to look into Press Note 4 of 2006 issued by DIPP and consolidated FDI Policy issued in October 2010 which provide the sector specific guidelines for FDI with regard to the conduct of trading activities. subject to Press Note 3 (2006 Series).e. . ‡ c) FDI is not permitted in Multi Brand Retailing in India.