RETAIL

MANAGEMENT
UNIT 1
 INTRODUCTION
Retailing comes at the end of the marketing distributive
channel. The word ‘retail has been derived from the French
word “retaillier” and means ‘to cut a piece’ or ‘to break bulk’.
It covers all the activities involved in the sale of product and
services.

Retailing is a high-intensity competition industry and second

largest globally. The reason for its popularity lies in its ability to
provide easier access to a variety of products, freedom of
choice, and many services to consumers. The size of an
average retail store varies across countries depending largely
on the level of a particular country’s economic development.
The largest retail store in the world is Wal-Mart of USA.
 INDIAN RETAIL INDUSTRY
• 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
country’s gross domestic product (GDP) and around eight per cent of the
employment. India is the world’s fifth-largest global destination in the retail
space.
• India ranked 73 in the United Nations Conference on Trade and
Development's Business-to-Consumer (B2C) E-commerce Index 2019. India
is the world’s fifth largest global destination in the retail space and ranked
63 in World Bank’s Doing Business 2019.
• India is the world’s fifth largest global destination in the retail space. In FDI
Confidence Index, India ranked 16 (after US, Canada, Germany, United
Kingdom, China, Japan, France, Australia, Switzerland, and Italy).
 MARKET SIZE
• Retail industry reached US$ 950 billion in 2018 at
CAGR(compound annual growth rate) of 13 per cent and is
expected to reach US$ 1.1 trillion by 2020. Online retail sales
were forecast to grow 31 per cent y-o-y to reach US$ 32.70
billion in 2018. Revenue generated from online retail is
projected to reach US$ 60 billion by 2020.
• Revenue of India’s offline retailers, also known as brick and
mortar (B&M) retailers, is expected to increase by Rs 10,000-
12,000 crore (US$ 1.39-2.77 billion) in FY20.
• 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 India’s E-
commerce market.
 Brick-and-mortar
 Brick and mortar (also bricks and mortar or B&M) refers to a physical
presence of an organization or business in a building or other structure.
The term brick-and-mortar business is often used to refer to a company
that possesses or leases retail shops, factory production facilities, or
warehouses for its operations
 The term "brick-and-mortar" refers to a traditional street-side
business that offers products and services to its customers face-to-face in
an office or store that the business owns or rents. The local
grocery store and the corner bank are examples of brick-and-
mortar companies
 The largest example of a traditional brick-and-mortar business is Walmart.
This multinational retailer controls roughly 11,500 physical stores in 27
countries. ... Walmart has increased its online business, but it's still best
known as a store where people can go and buy things.
 Government Initiatives
The Government of India has taken various initiatives to
improve the retail industry in India. Some of them are listed
below:
• Government may change 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 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.
 RETAIL MANAGEMENT
• The various processes which help the customers to
procure the desired merchandise from the retail
stores for their end use refer to retail management.
Retail management includes all the steps required to
bring the customers into the store and fulfill their
buying needs.
• Retail management makes shopping a pleasurable
experience and ensures the customers leave the store
with a smile. In simpler words, retail management
helps customers shop without any difficulty.
 What is Retailing?
• Most common form of doing business

• It consists of selling merchandise from a permanent location (a

retail store) in small quantities directly to the consumers.
• These consumers may be individual buyers or corporate.

• Retailer purchases goods or merchandise in bulk from

manufacturers directly and then sells in small quantities

• Shops may be located in residential areas, colony streets,

community centers or in modern shopping arcades/ malls.
 Meaning of Retailing
According to Kotler: ´Retailing includes all the
activities involved in selling goods or services
to the final consumers for personal, non
business uses.
A process of promoting greater sales and
customer satisfaction by gaining a better
understanding of the consumers of goods and
services produced by a company.
 Characteristics of Retailing
1. Direct interaction with customers/end customers.

2. Sale volume large in quantities but less in monetary value

3. Customer service plays a vital role

4. Sales promotions are offered at this point only

5. Retail outlets are more than any other form of business

6. Location and layout are critical factors in retail business.

7. It offers employment opportunity to all age

 Functions of Retailing
 Retailers are crucial players in the emerging market
scenario. Large brands are running first to get into the
desired retail formats to cater to the growing middle class
of India.
 Retailers perform various functions like providing
assortments, sorting, breaking the bulk, rendering
services, bearing risk, serve as a channel of
communication, transportation, advertising and holding
inventory.
 They significantly contribute towards increasing the
product value and satisfying the consumers. Following are
the functions of a retailer/retailing:
1.Providing assortments: Offering an assortment enables
customers to choose from a wide selection of brands,
designs, sizes, colors, and prices in one location.
Manufacturers specialize in producing specific types of
products.
Example: Kellogg’s makes breakfast cereals, Knorr makes
soups. If each manufacturer had its own stores that only
sold its own products, consumers would have to go to
many different stores to buy groceries to prepare a single
meal. Retailers offer assortment of multiple products and
brands for consumer convenience.
 2. Sorting: Manufacturers make one single line or multiple product
lines and will always prefer to sell their entire output to few
buyers to reduce their costs. Final consumers will prefer to choose
from a large variety of goods and services and then usually buy in
smaller quantities. Retailers have to strike a balance between
demands of both the sides, by collecting a combination of goods
from different producers, buying them in large quantities and
selling them to individual consumers in smaller quantities. The
above process is called sorting and under this process, the retailer
undertakes activities and performs functions that add value to the
products and services while selling them to consumers.
Example: A shopping supermarket of Pantaloon Retail in the name
of ‘Big Bazaar’ sells more than 20,000 assortments from 900
companies. Customers can choose from such a basket in just one
location. There are specialized retailers like Nilgiris or Barista,
which offers specialized assortments of a single product line .
3. Breaking Bulk: Retailers offer the products in
smaller quantities tailored to individual
consumers and household consumption
patterns. This reduces transportation costs,
warehouse costs and inventory costs. This is
called breaking bulk.
4. Rendering Services: Retailers render services that make it easier
for customers to buy and use products. They provide credit
facilities to the customers. They display products, which attract
the customers. Retailers keep ready information on hand to
answer queries of the customers. They provide services by
which the ownership can be transferred from manufacturer to
the end consumers with convenience. They also provide product
guarantee from owner’s side, after sales service and also deal
with consumer complaints. Retailers also offer credit to
consumers and develop hire purchase facilities to enable them
to buy a product immediately and pay the price at their ease.
Retailers also fill orders, promptly process, deliver and install the
product at customer point. Retail sales people answer the
customer complaints and demonstrate the product for the
customer to evaluate before making a choice. They also help in
completing a transaction and realizing the sale.
5. Risk Bearing: Retailers bear a different kind
of risk to the manufacturers and wholesalers.
Even the customers can come back to the
retail point and return the product. In that
case, the risk of product ownership many
times rests with the retailers. Many companies
have buy back schemes and return schemes
whereby the retailers can always return the
unsold items to the manufacturer.
6. Holding Inventory: A major function of
retailers is to keep inventory so that products
will be available for consumers. Thus,
consumers can keep a much smaller inventory
of products at home because they can easily
access more from the nearby retailers.
Retailer’s inventory allows customers instant
availability of the products and services.
7. Channel of Communication: Retailers are the bridge between
the manufacturer or his representative and the end customers.
They serve as a two-way channel of communication. The
manufacturer collects customer choice and preference data
and provides information about existing and new products
through the retailers. The point of purchase displays provide
serve as advertisements that provide information about new
products and many times retailers inform the consumers
about likely date of availability of a product or entry of
variants into the market. The shoppers get a chance to learn
about products and services from the stores and even acquire
trial habits by seeing others buying a product or service in the
store. The manufacturer too collects customer data, data on
gaps in demand and supply cycles and customer satisfaction
from retail points.
8.Transportation: Retailers also help in transport
and advertising function. The larger
assortments are transported from
wholesaler’s point to retailers point by
retailer’s own arrangements and many times,
the retailer delivers the goods at final
consumer’s point. So, retailers provide
assistance in storage, transportation and pre-
payment merchandise.
 Consumer versus Customer
• A consumer is a user of a product or a service
whereas a customer is a buyer of the product or
service. The customer decides what to buy and
executes the deal of purchasing by paying and availing
the product or service. The consumer uses the
product or service for oneself.
• For example, the customer of a pet food is not the
consumer of the same. Also, if a mother in a
supermarket is buying Nestlé Milo for her toddler son
then she is a customer and her son is a consumer.
 Types of Retail Markets
There are two types of retails − Organized Retail and
Unorganized Retail.
1.Organized Retail
• Organized Retailing is a large retail chain of shops run
with up-to-date technology, accounting transparency,
supply chain management, and distribution systems.
2.Unorganized Retail
• Unorganized Retailing is nothing but a small retail
business conducted by an owner or a caretaker of the
shop with no technological and accounting aids.
Classification of Retailing Formats
 Ownership Based Retailing
• Independent Retailers − They own and run a single shop, and
determine their policies independently. Their family members can
help in business and the ownership of the unit can be passed from
one generation to next. The biggest advantage is they can build
personal rapport with consumers very easily. For example, stand-
alone grocery shops, florists, stationery shops, book shops, etc.
• Chain Stores − When multiple outlets are under common ownership
it is called a chain of stores. Chain stores offer and keep similar
merchandise. They are spread over cities and regions. The
advantage is, the stores can keep selected merchandise according to
the consumers’ preferences in a particular area. For example,
Westside Stores, Shopper’s Stop, etc.
• Franchises − These are stores that run business under an
established brand name or a particular format by an agreement
between franchiser and a franchisee. They can be of two types −
– Business format. For example, Pizza Hut.
– Product format. For example, Ice cream parlors of Amul.
• Consumers Co-Operative Stores − These are businesses owned
and run by consumers with the aim of providing essentials at
reasonable cost as compared to market rates. They have to be
contemporary with the current business and political policies to
keep the business healthy. For example, Sahakar Bhandar from
India, Puget Consumers Food Co-Operative from north US, Dublin
Food Co-Operative from Ireland.
 Merchandise Based Retailing
• Convenience Stores − They are small stores generally located near
residential premises, and are kept open till late night or 24x7. These
stores offer basic essentials such as food, eggs, milk, toiletries, and
groceries. They target consumers who want to make quick and easy
purchases.
For example, mom-and-pop stores, stores located near petrol pumps,
7-Eleven from US, etc.

• Supermarkets − These are large stores with high volume and low profit
margin. They target mass consumer and their selling area ranges from
8000 sq.ft. to 10,000 sq.ft. They offer fresh as well as preserved food
items, toiletries, groceries and basic household items. Here, at least 70%
selling space is reserved for food and grocery products.
For example, Food Bazar and Tesco.
• Hypermarkets − These are one-stop shopping retail stores with at least
3000 sq.ft. selling space, out of which 35% space is dedicated towards non-
grocery products. They target consumers over large area, and often share
space with restaurants and coffee shops. The hypermarket can spread over
the space of 80,000 sq.ft. to 250,000 sq.ft. They offer exercise equipment,
cycles, CD/DVDs, Books, Electronics equipment, etc.
For example, Big Bazar from India, Walmart from US.
• Specialty Stores − These retail stores offer a particular kind of merchandise
such as home furnishing, domestic electronic appliances, computers and
related products, etc. They also offer high level service and product
information to consumers. They occupy at least 8000 sq.ft. selling space.
For example, Gautier Furniture and Croma from India, High & Mighty from
UK.
•Departmental Stores − It is a multi-level, multi-product retail store spread
across average size of 20,000 sq.ft. to 50,000 sq.ft. It offers selling space in
the range of 10% to 70% for food, clothing, and household items.
For example, The Bombay Store, Ebony, Meena Bazar from India,
Marks & Spencer from UK.
•Factory Outlets − These are retail stores which sell items that are
produced in excess quantity at discounted price. These outlets are located
in the close proximity of manufacturing units or in association with other
factory outlets.
For example, Nike, Bombay Dyeing factory outlets.
•Catalogue Showrooms − These retail outlets keep catalogues of the
products for the consumers to refer. The consumer needs to select the
product, write its product code and handover it to the clerk who then
manages to provide the selected product from the company’s warehouse.
For example, Argos from UK. India’s retail HyperCity has joined hands
with Argos to provide a catalogue of over 4000 best quality products in
the categories of computers, home furnishing, electronics, cookware,
fitness, etc.
Non-Store Based (Direct) Retailing
It is the form of retailing where the retailer is in
direct contact with the consumer at the workplace or
at home. The consumer becomes aware of the
product via email or phone call from the retailer, or
through an ad on the television, or Internet. The
seller hosts a party for interacting with people. Then
introduces and demonstrates the products, their
utility, and benefits. Buying and selling happens at
the same place. The consumer itself is a distributor.
For example, Amway
• Mail Orders/Postal Orders/E-Shopping − The consumer can refer a
product catalogue on internet and place order for purchasing the
product via email/post.

• Telemarketing − The products are advertised on the television. The

price, warranty, return policies, buying schemes, contact number etc.
are described at the end of the Ad. The consumers can place order by
calling the retailer’s number. The retailer then delivers the product at
the consumer’s doorstep. For example, Asian Skyshop.

• Automated Vending/Kiosks − It is most convenient to the consumers

and offers frequently purchased items round the clock, such as drinks,
candies, chips, newspapers, etc.
 Service Based Retailing
• These retailers provide various services to the
end consumer. The services include banking,
car rentals, electricity, and cooking gas
container delivery.
• The success of service based retailer lies in
service quality, customization, differentiation
and timeliness of service, technological
upgradation, and consumer-oriented pricing.
 Evolution of Retail

Though the barter system is considered as the oldest form of retailing,

the traditional forms of retailing such as neighborhood stores, main-
street stores and fairs still exist in the laid-back towns around the
world. During post-war years in the US and Europe, small retailers
reformed their shops into large organized stores, markets, and malls.

Retail evolution mainly took place in three stages −

• Conventional
• Established
• Emerging
 Retail Management - Sectors
• Today’s retail market is satisfying diverse needs of its
consumers. The consumer’s needs range from as
basic as food & food services to as luxurious as
jewelry items. In this chapter, we analyze prominent
retail sectors around the world, their structure, and
the key players in that sector.
• The retail sectors are prominently divided into Food,
Clothing & Textiles, Consumer Durables, Footwear,
Jewelry, Books-Music-Gift Articles, and Fuel.
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 Multichannel Retailing
• Multi channel retailers are defined as those who browse or
purchase through more than one channel (retail store, catalog,
Internet)
• The emergence of multiple channels, especially the internet as a
strong channel for shopping, has been a real empowerment for the
customer today. The customer is option rich, time and attention
poor and fully aware of the choices that he or she has access to in
the market.
• Multichannel retailing helps deliver a superior shopping experience
by synchronizing customer touch points and leveraging channel
capabilities. The broad trends that we have been seeing in the
industry that will have a positive impact on Multi channel retail are:
• Customers that use the online channel in addition to
traditional store based retailing has grown by 20-30%
year over year
• Internet influenced offline spending has grown
significantly over the past few years
• Cross-channel customers are younger and wealthier
• Customers spend more at the store (about $150) when
buying a product after performing their research
online; increasing the retailer‘s share of the customer
wallet
a) Store channel:
• Store-Based Sellers – By far the predominant
method consumers use to obtain products is to
acquire these by physically visiting retail
outlets (brick-and-mortar). Store outlets can
be further divided into several categories. One
key characteristic that distinguishes categories
is whether retail outlets are physically
connected to one or more others stores:
• Stand-Alone – These are retail outlets that do not have
other retail outlets connected.
• Strip-Shopping Centre – A retail arrangement with two or
more outlets physically connected or that share physical
resources (e.g., share parking lot)
• Shopping Area – A local centre of retail operations
containing many retail outlets that may or may not be
physically connected but are in close proximity to each
other such as a city shopping district.
• Regional Shopping Mall – Consists of a large self-contained
shopping area With many connected outlets
b) Catalog channel:
The consumer selects the goods he/she wants to purchase
from an online catalog. This catalog may be hosted either on
the SAP Marketplace or on the retailer's Web site. Once the
order is complete, the customer confirms it and notes the
order number. The order is then transferred to the retailer's
SAP System, the necessary materials are reserved, the
internal order is triggered, and the goods are sent off and
delivered by a service partner. Using the confirmed order
number, the customer can check the status of the shipment at
any time on the Internet. Once the goods have been shipped
and the customer has received them, the goods receipt is
confirmed and based on this, billing then takes place
c) Internet channel
When a firm uses its website to offer products for sale
and then individuals or organisations use their computers
to make purchases from this company, the parties have
engaged in electronic transactions (also called on line
selling or internet marketing). Many electronic
transactions involve two businesses which focus on sales
by firms to ultimate consumers. Thus online retailing is
one which consists of electronic transactions in which the
purchasers‘ an ultimate consumer.
Customer Buying Behaviour
 Types of Buying Decisions
1. Extended problem solving
2. Limited problem solving
3. Habitual decision making
Factors influencing the buying process

1. Cultural Factors
2. Social Factors
3. Personal Factors
4. Psychological Factors
 Role of Retailing
1. Destination
2. Routine
3. Preferred routine
4. Seasonal/occasional
5. Convenience
 Problems of Indian retailing
1. Global economic slowdown impacting consumer
demand
2. Consumption declines in the advanced economies
3. Competition from the unorganised sector
4. Retail sector yet to be recognised as an industry
5. High real-estate costs
6. Lack of basic infrastructure
7. Supply-chain inefficiencies
8. Challenges with respect to human resources
9. Shrinkage
 ASSIGNMENT 1
1. Elaborate the trends in Retailing
2. Discuss briefly the FDI in Retail Industry