RETAIL

INSTITUTIONS-
BY OWNERSHIP
o An Independent Retailer usually is a small retailer
(always not true) and is found in all lines of trade .

o An independent retailer owns one retail unit.

o The high number of independents is associated with

the ease of entry into the marketplace, due to low
capital requirements and no, or relatively simple,
licensing provisions for many small retail firms.

o IR should not involve itself in price wars.

 1. No restrictions on who, how or where the
business to be set up.
 2. Takes all decisions related to the store
functioning. It drastically saves the time that
usually exist between decision-making and the
implementation process.
 3. Is able to concentrate on a local area to achieve
its business goals.
 4. To serve the local demand, a retailer can decide
the trading hours, merchandise to be sold /
removed and prices as and when desired.
 5.Easy startup due to low investment, modest
fixtures and merchandise (Only if it’s a small setup)
 6. The independent store by providing limited but
deep merchandise can act as a specialized store to
serve a particular consumer segment.
o Lack of bargaining power with suppliers, independents
may not have much power because they often buy in
small quantities.
o Independents generally cannot gain economies of scale
in buying and maintaining inventory. Due to financial
constraints, small assortments are bought several times
per year. Transportation per unit are high.
o Operations are labor intensive, sometimes with little
computerization. Ordering, taking inventory, marking
items, and bookkeeping may be done manually (only
with small setup)
 A chain retailer operates multiple outlets (store
units) under a common ownership

 A chain retailer or a chain store is a group of two

or more outlets carrying the same sort of
merchandise assortment, owned and controlled
jointly and usually supplied from one or more
central warehouses.

 Usually engages in some level of centralized (or

coordinated) purchasing and decision making.
o Chains have bargaining power due to their
purchase volume.

o Chains achieve cost efficiencies when they buy

directly from manufacturers and in large volume.

o Spend considerable time on long-run planning.

o Easy access to media. Cost effectiveness in

advertising and sales promotions.
o Higher investment costs. The establishment cost to set up
such chain of outlets requires huge money and expertise.

o Limited flexibility. Due to centralized decision-making, some

outlets may have difficulty in adapting to local needs.

o Difficult monitoring. Due to huge network of outlets, it is

difficult for management to monitor their day to day activities
resulting in communication gap, inefficiencies, and delay in
decision making.

 Limited independence among personnel

o A contractual agreement between a franchisor and
a retail franchisee, which allows the franchisee to
conduct business under an established name and
according to a given pattern of business

o Franchisee pays an initial fee and a monthly

percentage of gross sales in exchange for the
exclusive rights to sell goods and services in an
area.
o They own a retail enterprise with a relatively
small capital investment.
o They acquire well-known names and
goods/service lines.
o Standard operating procedures and management
skills may be taught to them.
o Cooperative marketing efforts (such as national
advertising) are facilitated.
o Their purchases may be less costly per unit due
to the volume of the overall franchise.
o They may be locked into contracts requiring purchases
from franchisors or certain vendors.

o Royalties are based on sales, not profits.

o Over dependence on Franchisors

o A national or global presence is developed more quickly and
with less franchisor investment.

o Agreements require franchisees to abide by strict operating

rules set by franchisors.

o Because franchisees are owners and not employees, they have

a greater incentive to work hard.

o Even after franchisees have paid for their outlets, franchisors

receive royalties.
o Franchisees harm the overall reputation if they do
not follow company standards.

o A lack of uniformity among outlets adversely

affects customer loyalty.

o Ineffective franchised units directly injure

franchisors’ profitability that results from selling
services, materials, or products to the
franchisees and from royalty fees.

o Franchisees, in greater numbers, are seeking to

limit franchisors’ rules and regulations.
 A consumer cooperative is a retail firm owned
by its customer members.
 A group of consumers invests, elects officers,

manages operations, and shares the profits

or savings that accrue.
A consumer co-op is an autonomous association of consumers united
voluntarily to meet their common needs and aspirations.

The main motive of Consumer Cooperative Stores is to provide

supreme quality goods and services to consumers at reasonable prices
and protect themselves from the exploitation of middlemen.

To eliminate the middlemen, the members of the Consumer

Cooperative Stores buy goods in bulk directly from the wholesalers
and sell them to consumers at prices lower than in a retail market.