RETAILING MANAGEMENT – I

Dr . Padmaja Rachapudi
PhD,MMM,MBA,MA

Retail
•According to Philip Kotler “ Retailing includes all the activities involved in selling goods or services to the final consumers for personal, non – business use. A retailer or retail store is any business enterprise whose sale volume comes primarily from retailing”. • retaillier (french word), which means to cut off a piece or to break bulk. •A retailer may be defined, as a „ dealer or trader who sells goods in small quantities‟.

at the right place. at the right price. • Retailing may be understood as the final step in the distribution of merchandise. • Retailers attempt to satisfy consumer needs by having the right merchandise. for consumption by the end consumers. . • Retailers are the final business in a distribution channel that links manufacturers to consumers • Indian retail industry is the second largest employer in the country with almost 12million retail stores in India. when the consumer wants it.conti….

Characteristics of retailing • • • • • • • It offers direct interaction Sale volume is comparatively large in quantities Customer service Sales promotions are offered at this point only Different forms Location and layout are critical factors More employment opportunities .

retail sales is expected to cross USD 400 billion by 2010. With the sustained and strong rates of economic growth. turning India into the biggest retail market in the world! • Retailing is the second largest industry in the US in terms of number of people employed. .Retail Industry • The next phase of economic development in India will be consumption led.

medium and small grocery stores and drug stores which could be categorized as unorganized retailing. estimates that the Indian consumer market is likely to grow four times by 2025. • • • • • . and favorable demographic patterns. India retail industry is the largest industry in India.. Retail industry in India is expected to rise 25% yearly being driven by strong income growth.5 % of the total) of the total revenues. changing lifestyles. Most of the organized retailing in India had recently started and was mainly concentrated in metropolitan cities. with an employment of around 8% and contributing to over 10% . the retail industry is broadly divided into the organized and unorganized sectors. organized retail market in India is expected to reach US$ 50 billion by 2011. • In India. 350 billion (about 3. Traditionally. the retail industry in India comprised of large.Conti. the organized sector accounted for Rs.11% of the country's GDP. Of this total market. McKinsey report 'The rise of Indian Consumer Market'.

India retail industry is one of the fastest growing industries with revenue is increasing at a rate of 5% yearly.. • • • • • CB Richard Ellis' findings state that India's retail market is currently valued at US$ 511 billion. India's overall retail sector is expected to rise to US$ 833 billion by 2013 and to US$ 1.Conti.3 trillion by 2018. rising incomes. is expected to grow at a CAGR of 40 per cent from US$ 20 billion in 2007 to US$ 107 billion by 2013. and a steep rise in rural consumption. . at a compound annual growth rate (CAGR) of 10 per cent organized retail. which accounts for almost 5 per cent of the market. A further increase of 7-8% is expected in the industry of retail in India by growth in consumerism in urban areas.

and they can range from commodity fairs to religious fairs. It is estimated that the average outlets in every mela would be more than 800. Melas – Melas are fairs. c) d) . It is estimated that more than 25. This is a location which witnesses a public gathering of buyers and sellers at fixed times at fixed locations.Retail Evolution a) b) Barter system Haats – periodic markets that form a major part of the rural market system in India.000 melas are held annually in the country. Mandis – Mandis are markets set up by the state government for the sale of agricultural produce directly from the farmers.

• Public Distribution system was introduced in India in the year 1950.. investments in various industries was limited due to low purchasing power and the govt‟s policies favouring the small – scale sctor.Conti. • From 1990‟s the Indian economy slowly progressed from being state – led to becoming “market friendly” . Bombay bazar) • From the 1950‟s to the 1980‟s. ( the evolution of the public distribution of grains in India) • Kendriya bandars (1963) • Mother dairy ( foods and provisions) • Co-operative stores( In Mumbai.

This was the beginning of new era in retail in India • The vast middle class market demanded value for money products (Post liberalisation). to 25 in 2003. 220 malls in 2006. • The concept of retail as entertainment came to India with the advent of malls. with a cumulative estimated space of 40 million sq.ft.Conti… • The first time organised retailing was noticed in the textile sector. Vimal. Garden etc. • From 3 malls in the year 2000. Nalli‟s.ft and over 600 malls by 2010. Vivek‟s. . Raymond‟s. giving cumulative estimated retail space of as much as 100 million sq.

The Evolution of Retail in India • [ Traditional formats Itinerant salesman Haats Melas Mandis Established formats Kirana shops Convenience / departmental stores Company / multi brand showrooms PDS / fair price shops Co-operative stores Pan / Beedi shops Emerging formats Exclusive retail outlets Hypermarkets Malls / specialty malls Multiplexes Rural oriented formats Fast food outlets etc. .

.Functions of a Retailer • Retailers provide important functions that increase the value of the products and services they sell to consumers and facilitate the distribution of those products and services for those who produce them. manufacturers and wholesalers ship cases / cartons to retailers. This is called breaking bulk. 1) Providing an assortment of products and services – Most consumers are well aware of the product assortments retailers offer.. 2) Breaking Bulk – To reduce transportation costs. These functions are. It is cost effective for both manufacturers and consumers.

d) Some retailers have salespeople on hand to answer questions and provide additional information about products. c) They display products so consumers can see and test them before buying. b) They offer credit so consumers can have a product now and pay for it later.A major function of retailers is to keep inventory that is already broken into user – friendly sizes so that products will be available when consumers want them.Conti… 3) Holding inventory . . 4) Providing services – a) Retailers provide services that make it easier for customers to buy and use products.

breaking bulk. retailers increase the value consumers receive from their products and services.Conti… 5) Increasing the value of products and services – By providing assortments. and providing services. holding inventory. .

Study & Practice of Retailing • A successful retail manager requires analytical and creative skills. . success formulas and guidelines. 1) Analytical method • Retail manager is a finder and investigator • Systematic decisions • Standardized set of procedures. There are two methods for the study and practice of retailing.

. 2) Creative Method • The creative retail manager is an idea person. • The manager must respond the unforeseen events in the environment • Imaginative and creative mind. • Retailers in the 21st century cannot do without creativity or analytical skills. 3) A Two – Pronged Approach • Both methods are mainly implemented by the retail manager.Conti. .

Key Drivers 1) Consumer Pull a) high income segment b) Middle and lower income group 2) Rising Incomes 3) Explosion of Media 4) Change in Consumer Behavior .

there are 18.0007. .000 stock keeping units (SKU). 6) The rural Market waking up 7)Establishment of the Supply Chain • Entry restrictions for multinationals have been removed in nearly all sectors • This has enabled chain retailers to enjoy better range depth and sourcing options as well as improved margins. at this stage the distributor becomes an important link between manufacturer and customer.000 units. • Because of this real estate companies and other corporates into investing in malls and other retail formats. while most retailers have the space for at most 5. • According to a study.Conti… 5) Consumerism Cycle • Over the time the distributor gains control over the market.

Conti… 8) Emergence of Hubs of Retail Activity 9) Change in Scale of Operations • Subhiksha and Food World has many stores spread over many cities. . • This growing scale enables the supermarkets to eliminate links in the purchasing chain and to make deals with food processors directly. • Because of huge purchases. HLL has dedicated a team to deal with these emerging power retailers.

. Carrefour and Ahold are exploring entry options.Conti… 10) Entry to the Corporate Sector 11) Expansion of family owned businesses 12) New Entrepreneurs 13) Building chains around brands 14) Foreign retailers looking for entry options • Should have a tie up with some of the indian retailers because of FDI restrictions. Metro. Kingfisher. • Tesco.

Indian retail industry .

a large number of customers are not willing to pay a premium for the shopping experience promised by large format retailers. .Key Challenges 1) • • • • • • The Kirana CRM practice Known about the customer‟s families Credit and home delivery Consumer familiarity runs from generation to generation Open longer hours and stock most of the goods Consequently.

• The lease cost up to 6-10 percent of sales • Manpower cost is lower at 5-6 percent of sales • Capital costs are more in retail business due to major renovations needed every 57 years. .Conti… 2) High costs for the organized sector • High expenses to organized sector .

• Ex. as Carrefour is doing in China.Conti. • Build strong sourcing networks that connect the business directly with farms.. Subhiksha ( 7-8 percent markdown on the MRP) • Indian consumers are buying mainly from store – based retailers. and sell fresh food at attractive prices. . 3) Specialization • The real boom in organized retailing will come once the supermarket start selling daily need goods at 90 percent of the regular price. Grocery still remains the main purchase from these stores.

high margin. which shows the amount of sales per sq ft of shop space.Conti… 4) Correct Merchandise Mix (inventory planning and Management) • Getting the right product mix is critical to retailing • Every retailer wants to have high-value. • The retailers use to check volumes is „sales density‟. and fast moving products. .

6) Poor Infrastructure • Cold chains • Roads and rail infrastructure • Efficiency of Supply Chain • A strict quality control increases the prices of the merchandise . from suppliers to the cash counters.Conti. 5) Strong IT support • The backbone of retailing is IT • It would require large investments that connect every aspect of the operations seamlessly..

.Conti…. The change can be in terms of modification and creation of new formats or new products for the same targeted customers. • Unified tax laws • The existing labour laws are difficult for shops to have flexible timings • The industry is expected to see further growth of organized retailing in both food and non-food segments in the coming years. • Indian retailing needs to adapt to change. 7) Industry Status • The Indian Retail Council was formed in 2000. .

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