RETAIL MANAGEMENT

RETAIL MANAGEMENT
UNIT – 1
• Introduction to Retailing
• Significance of Retail Industry
• Marketing Retail Equations
• New Role of Retailers
• Indian Retail Scenario and its future prospects
WHAT IS MANAGEMENT?
Management refers to the process of bringing people together
on a common platform and make them work as a single unit to
achieve the goals and objectives of an organization.
Management is required in all aspects of life and forms an
integral part of all businesses.
Retail, by definition, is the sale of goods or service from a
business to a consumer for their own use. A retail transaction
handles small quantities of goods whereas wholesale deals with
the purchasing of goods on a large scale.
 Who is a Retailer?

Retailer links Producers to Customers-

“Retailer is a person, agent, agency, company or organization
who delivers the Goods or Services to ultimate consumer”.
Eg: WalMart, Tesco, Spencer, TESCO, Nilgiris
A retailer is a person or business that you purchase goods
from. Retailers typically don’t manufacture their own items.
They purchase goods from a manufacturer or a wholesaler and
sell these goods to consumers in small quantities.
Retailing is the distribution of a retailer obtaining goods and
services from manufactures and selling them to customers for
use, not for resale, but for use and consumption by the
purchaser.
The word retail is derived from the French word “taillier”
which means “to cut a piece off” or “ to break bulk”.
Retailing is a distribution channel function where one
organization buys products from supplying firms or
manufactures the product themselves, and then sells these
directly to consumers. 
 Retail involves the sale of merchandise from a
single point of purchase directly to a customer
who intends to use that product.
 The single point of purchase could be a brick-
and-mortar retail store, an Internet shopping
website, a catalog, or even a mobile phone. 
 The retail transaction is at the end of the chain.
 Retailing Business activities involve Selling
Goods and Services to Consumers for their
Personal, Family or Household use.
 “Every sale of Goods and Services to the
final consumer” – Food products, apparel,
movie tickets; services from hair cutting to e-
ticketing.
 Retailing is the Last stage in Distribution
Process- Wholesale is an intermediate
function, where Goods and services are sold
to Business customers.
 Retailing is high intensity competition
industry, The reasons for its popularity lie in
its ability to provide easier access to variety
of products, freedom of choice and many
services to consumers.
 STAGES OF RETAIL IN INDIA
• Historic / Rural Reach – Barter System / Weekly Markets /
Melas / Street Vendors – Entertainment
• Traditional – Convenience Store / Mom and Pop / Kirana –
Neighborhood Stores
• Government Supported – PDS Outlets / Khadi Stores /
Cooperatives – Availability / Low cost
• Modern Formats / International – EBOs / Super stores /
Department stores / Shopping Malls – Shopping Experience
 How does the Retail Supply Chain work?

The retail supply chain consists of manufacturers, wholesalers,

retailers, and the consumer (end user). 
The wholesaler is directly connected to the manufacturer, while
the retailer is connected to the wholesaler, and not to the
manufacturer.
 Different Types of Retail Stores

• Department Stores
• Grocery Stores and Supermarkets
• Warehouse Retailers
• Specialty Retailers
• Convenience Retailer
• Mobile Retailer
• Internet Retailer
Department stores

A department store is a
large store, divided into
departments which sell
such products as
furnishings, electronics,
clothing, footwear, toys,
cosmetics, etc.
Grocery stores & Super markets

These retailers sell all

types of food and
beverage products, and
sometimes also home
products and consumer
electronics as well. 
Warehouse Retailers
Retail warehouses are
large, single-
level stores, typically
with a minimum of 1000
square metres
gross retail floorspace,
normally selling goods
for home improvement
or gardening, furniture,
electrical goods, carpets
and so on
Specialty Retailers
These specialize in a
specific category and
brand-name products.
McDonalds and Nike
are examples of
specialty retailers,
generally selling only
merchandise that carries
their brand name or is
associated with it.
Convenience Retailer
A convenience store, or
corner store is a small
retail business that
stocks a range of
everyday items such as
coffee, groceries, snack
foods, confectionery,
soft drinks, tobacco
products, over-the-
counter drugs, toiletries,
newspapers, and
magazines etc.
Internet / Mobile Retailer
Internet shopping websites ship the
purchases directly to customers at
their homes or workplaces, without
the expenses of traditional brick-and-
mortar retailers.
They usually sell merchandise for a
lower-than-retail price, using
warehouses for storage and
developing relationships with
warehouses, vendors, and sometimes
manufacturers to provide goods at
reduced prices.
 Characteristics of Retailing
1. Direct end-user interaction
2. Platform for promotions
3. Lower average amount of sales transactions
4. Point of purchase, display and promotion
5. Location is a critical a factor
6. Service is more important as products
7. More products at a single point
8. Point of unplanned purchase
 Importance of Retailing

Services to Producers and Wholesalers:

a) Advertisement of new products.
b) Arrangement to sell the goods.
c) Information about consumer habits, tastes and needs.
d) Sharing of Risks.
 Importance of Retailing

Services to Consumers:
a) Selection.
b) Variety of goods.
c) Demand creation.
d) Distribution.
e) Credit Facility.
 Retailing - Scope
❑ It breaks the bulk that comes from vendor into small manageable forms
for customer.
❑ It provides an assortment of products to customer.
❑ Not only products is what customers want, they also want service that is
being provided by retailer.
❑ Sometimes it also manage the inventory and warehouses.
❑ It also studies customer's needs and wants and provides the sales pattern
of the customer.
❑ It acts as a link between vendor and the end user.
❑ It provides information as well as convenience to the customers.
❑ It provides employment opportunities.
❑ It provides opportunities for R &D.
Drivers of Retail change in India
 Drivers of Retail change in India
1. Socio-economic factors – Large middle class, Youth
population, Literacy, Increased in life expectancy, Rate of
growth of GDP
2. Changing income profiles – Increase in personal income,
rising income of young middle class (demand for niche and
branded products),  increasing disposable incomes etc.
3. Increase in the number of working women
4. Value for money
5. Emerging rural market
 Drivers of Retail change in India
6. Entry of Corporate sector
7. Entry of foreign retailers
8. Technological impact
9. Media explosion
10.Rise of consumerism - As the business exist to satisfy consumer
needs, the growing consumer expectation has forced the retail
organizations to change their format of retail trade. Consumer
demand, convenience, comfort, time, location etc. are the
important factors for the growth of organised retailing in India.
 Organized and unorganized Retailing
“Organised retailing refers to trading activities undertaken by
licensed retailers, that is, those who are registered for sales tax,
income tax, etc”. These include the corporate-backed hypermarkets
and retail chains, and also the privately owned large retail
businesses.

Unorganised retailing, on the other hand, refers to the traditional

formats of low-cost retailing, for example, the local kirana shops,
paan/beedi shops, convenience stores, hand cart and pavement
vendors, etc
 Functions and Activities of Retailer

• From the customer point of view, the retailer serves him by

providing the goods that he needs in the required assortment,
at the required place and time.

• From an economic standpoint, the role of a retailer is to

provide real added value or utility to the customer. This
comes from four different perspectives;
 Utilities provided by the Retailer
1. Form Utility

First is utility regarding the form of a product that is acceptable to

the customer.
The retailer does not supply raw material, but rather offers
finished goods and services in a form that the customers want.
The retailer performs the function of sorting the goods and
providing us with an assortment of product in various categories.
 Functions and Activities of Retailer
2. Time Utility
Retailer creates time utility by keeping the store open when the
consumers prefer to shop – Preferable shopping hours.
3. Place Utility
By being available at a convenient location, he creates place
utility.
4. Ownership
Finally, when the product is sold, ownership utility is created.
 Activities of Retailer

1. Sorting
2. Arranging an assortment of offering
3. Breaking bulk
4. Holding stock
5. Extending services
6. Providing additional services
 1. Sorting

Sorting is any process of arranging items according to a certain

sequence or in different sets, and therefore, it has two common,
yet distinct meanings:
Ordering: arranging items of the same kind, class or nature, in
some ordered sequence,
Categorising: grouping and labeling items with similar
properties together (by sorts).
 2. Arranging Assortment

Arranging Assortment means, to distribute, arrange or place according

to kind or class.
An assortment is a retailer’s selection of merchandise.
An assortment normally include substitutable items of multiple brands.
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.
2. Arranging Assortment
 3. Breaking Bulk
Breaking Bulk means physical repackaging of the products by retailer in
small unit sizes according to customer’s convenience and stocking
requirements.
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.
 4. Holding Stock
• To ensure the regular availability of offerings retailer maintain
appropriate level of 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.
 5. Extending services
The set of services may be part of the product offering or “add
on” services.

•Valued added /“add on” services provided by Retailers are:

• free home delivery,
• accepting credit cards,
• accepting payments on installment basis,
• arranging loans, etc.
 6. Providing additional services

• Retailers play a major role in providing product related

information to their consumers.
• Retailers use advertising, display and in-store salespersons to
provide product information, which helps the consumer to
simplify his purchasing process.
• Other Services
(Transportation, Storage, Pre-payment of merchandise,
Advertising Functions etc..)
 RETAILING ENVIRONMENT

Constituents of External environment:

1. Economic Environment
2. Legal Environment
3. Technological Environment
4. Competitive Environment
5. Global Environment
 1. Economic Environment

❖ The Market size

❖ Gross Domestic product
❖ Rate of inflation / recession / depression
❖ Purchasing Power
❖ Interest rates
❖ Tax levels
❖ Employment growth and others
 2. Legal Environment

• Laws and regulation and their effect on Retailing -

Governments use various laws and regulations to ensure that
retailers do not indulge in unfair trade practices
• Labour Laws
• Consumer Protection act
 3. Technological Environment

• Technological conditions determine the development of an

organization by increasing the efficiency, production and
competitiveness.
• The adaptation to new technology will have impact in the
organization in multiple areas
 4. Competitive Environment

• Severe competition among the existing players

• Attractive factors for entry into business.
• Stiff Competition from Unorganized sector.

There are five basic competitive forces, which influence the state
of competition in an industry.
 Porter’s 5 force Model of Competitiveness

Porter's Five Forces is a framework for

analyzing a company's competitive
environment – Michael E Porter -
"Competitive Strategy: Techniques for
Analyzing Industries and Competitors" in
1980.
Five Forces analysis can be used to guide
business strategy to increase competitive
advantage.
Porter’s 5 force Model of Competitiveness
 5. Global Environment

• GATT – to promote internal trade

• Global Retail Expansion
Global retailing is the concept of selling products across the
geographical boundaries of a country to the consumers available
in the different parts of the world to attain global presence and
recognition and to capture the opportunities prevailing in the
potential overseas markets.
FDI in Retail in India
FDI in Retail in India – A boon or Bane?
FDI in Retail in India
Advantages:
• Growth in Economy
• Job Opportunities
• Benefits to Farmers
• Benefits to consumers
• Bring in valuable foreign exchange
• provide a wider choice of products at reduced prices to the
customer
• improve the shopping experience
FDI in Retail in India
Disadvantages:
• Impact on Local Markets ( Kirana Shops)
• Limited Employment Generation
• Fear of Lowering Prices
• Negative Impact on Indian Economy
• Negative Impact on Indian Domestic Market
• Predatory prices
• India becomes dumping ground
Basis Indian Retailing Global Retailing
Retailing India is mostly Unorganized. Retail World globally is well organized
At present only 2% to 4% accounts for and in most developed countries follow
Nature of Operation organized sectors. the same.

Manufacturer control all retail business In organized retail industry retailer have
to a large extent. But the scenario is an upper hand in negotiating deals with
Scope of Influence changing, even with the limited growth manufacturers.
of organized retail in India.

Indian retailers lag behind global Global retailers resorts employ

retailers in use of technology. Though, technology in larger scope than Indian
retailers like shopper stop, Pantaloons retailers.
Technology are employing technology in their
operations.

Indian retail industry is concentrated A large no. of retail formats are

around few formats. Only 2% of retail available.
industry has adopted modern retail
Formats formats of department stores and
supermarkets.
 Maximum infrastructure problems faced Minimum infrastructure problems faced
Infrastructure by retailers in Indian market. by retailers in International market.

A lack of trained manpower slow down Trained manpower available aiding

Manpower the development in industry. retail boom.

Indian retail industry usually has brands
of well known Indian and foreign
Products/Brands Assortment companies. In some cases private label
brands are also available.
Global retailers resort to keep their own
brands. This leads to increase
competition with better known
company brands. Private label brands
are negligent or absent

Real estate space available for organized In west large store formats are located
retail is getting saturated in Metros and in outskirts of cities or the suburbs. The
Retail Space in tier 1 cities in India & is now looking enables them to have large space.
at tier 2 cities.
 UNIT – 2 RETAIL FORMATS & THEORIES
Retailing may be understood as the final step in the distribution of
merchandise for consumption by the end consumers.

The Indian Retail is dotted by traditionally market place called

bazaars or haats comprises of numerous small and large shops,
selling different or similar merchandise
 EVOLUTION OF RETAIL FORMATS
❖ The first department stores “Bon Marche” was set up in 1852 in Paris
❖ Success of “Bon Marche” led to other department stores coming up in
Europe and America
The First chain store was A&P (Atlantic & Pacific) – a grocery store founded in 1859
by George F Gilman
• The world witnessed a new form of retail when Montgomery Ward
launched the first mail ordetr catalogue in 1870
• Another important chain store was F W Woolworth, set up 1879
 Emergence of Self-Service

❖Retail evolved in many ways over the

twentieth Century
❖Self Service as a concept started in 1916 When
Clarence Saunders started their first self-service
store “Piggly Wiggly” in Memphis, Tennessee.
(reduce cost)
 Super Markets

❖ Emergence of super markets in 1930s

❖The first hypermarket that was developed by Carrefour
in France in 1963
❖Opportunity to pick up products, compare, then buying
❖Providing information about price, weight, date of
manufacture, and expiry on the product itself
 ❖Specialty Stores, Malls and Other

oThe needs of the customers grew and changed

oThis ensured the emergence of commodity specialized
mass merchandisers in 1970s
oSeventies also saw the use of technology by way of
introduction of the “barcode”
oSpecialty chains developed I the 1980s as did the
large shopping malls
oShopping malls were created to provide for all of
the consumer’s needs
 Rise of the Web
•The world of retail changed yet again when in 1995,
Amazon.com opened its doors to a world wide market
on the web
•Evolution of retail formats worldwide has been largely
influenced by a constantly changing social and
economic landscape
 THEORIES OF RETAIL DEVELOPMENT

• ENVIROMENTAL THEORY
• CYCLICAL THEORY
• CONFICTUAL THEORY
 ENVIROMENTAL THEORY

Retail environment –
a) Customers
b) Manufactures
c) Suppliers
d) Competitors
e) Changing technology
 ENVIROMENTAL THEORY

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.
 CYCLICAL THEORY

•Two Cyclical theories of retail change: the Wheel of Retailing

and the Retail Accordion

Wheel of Retailing
First proposed by Professor Malcolm P. McNair in 1958, the
purpose of the Wheel of Retailing was to suggest a cyclical
pattern for retail business development.
 The Wheel of Retailing
•The essence of McNair’s hypothesis is that new types of
retailers begin life at the lowest end of the retail price, status and
margin spectrum.

•Eventually the retailer trades up by improving displays and

location, providing credit, delivery and by raising advertising
expenditure.

•As a result of these significant investments, these retailers

become high operating cost businesses.
 The Wheel of Retailing

•The final stage of their evolvement (as predicted by the theory)

is that these retailers mature to become high-cost, high-price,
inefficient businesses.

•At this stage, these once flexible and efficient businesses

become vulnerable to the innovations and cost-efficiencies of
newer, more agile low-price entrants.
 Retail Accordion Theory

Retail Accordion theory is evolved

by Hollander (1966) which explained
retail evolution as a cyclical trend in
terms of the number of merchandise
categories such as product assortment.

Analogy of an orchestra
•Open accordions
•Closed accordions
 Retail Accordion Theory

Evolution of retail institutions from general, broad-based outlets

with wide assortments, to narrow based institutions carrying
specialized assortments, and back to general, broad-based
assortments.
At initial stage, the retail institution is a general store. With time,
the retail institution becomes specialized by carrying a limited
line of merchandise with a deep assortment.
These establishments later return to a generalized outlet
store.
Retail Accordion Theory
Retail Accordion Theory
Retail Accordion Theory
 Conflictual Theory

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.
 Conflictual Theory

Say, 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.
Conflictual Theory
 Retail Life Cycle

Retail organizations pass through identifiable stages of

•Innovation
•Accelerated Growth
•Maturity
•Decline
 Retail Life Cycle

Innovation

•Differentiated services, product and format

•Few competitors
•Rapid Growth
•Moderate Profit
 Retail Life Cycle

Accelerated Growth

•Increase in Sales
•Emergence of Competitors
•Organization try to attain leadership
•Higher investment
•Cost pressure
 Retail Life Cycle

Maturity

•Increased competition
•Decrease in growth rate
•Repositioning: Strategy, format and merchandize mix
 Retail Life Cycle

Decline

•Loses Competitive edge

•Negative Rate of growth
•Profitability decline
•Cost run higher