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RetailingAn Overview


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Retail Management 2

Objectives of the Chapter

Retailing : Definition and Scope

Retailers Role in Distribution

ChannelsBenefits of Retailing

Evolution of RetailingRetailing Environment


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Retail Management 3

Introduction

One of the largest industries in India

One of the biggest sources ofEmployment

Present value of retail market is $ 180million. Only 2% in organized sector.

Should employ 250,000 people directlyand 2.5 million people indirectly


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Retail Management 4

Retailing: Definition

Retailing is derived from the French word retailier, which means,"to cut a piece off.

A set of business activities that adds value to the products andservices sold to the final consumers for their personal, family orhousehold use.

From a marketers point of view, retailing can be defined as a setof marketing activities designed to provide satisfaction to theend consumer and profitably maintain the customer base bycontinuous quality improvements across all areas concernedwith selling goods and services.

A retailer is any business establishment that directs itsmarketing efforts towards the end users for the purpose of

selling goods and services. Retailers comprise street vendors,local kirana stores, supermarkets, food joints, saloons, airlines,automobile showrooms, video kiosks, direct marketers, vendingmachine operators, etc.


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Retail Management 5

Retailing: Scope

Retailing involves:

Understanding the needs of consumers

Developing good assortment ofmerchandise

Displaying the merchandise in an

effective manner so that consumers findit easy and attractive to buy.


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Retail Management 6

Retailer role in Channel of

Distribution

An organization qualifies to be a retailer only when it derives amajor chunk of its revenues from its transactions with end users.Thus, a seller is said to have conducted a retail transaction whenhe sells goods to the end customer while a wholesale transactionis conducted when the seller sells goods to a business concern.


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Retail Management 7

Benefits of Retailing

Retailers deliver many benefits to customers,manufacturers, wholesalers, and the economyin the process of transfer of goods and services

from the manufacturer to the end consumer. Benefits to Customers

Benefit to Manufacturers andWholesalers

Benefits to the economy


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Retail Management 8

Benefits of Retailing to Customers

Retailers act as buying agents for consumers.They perform various activities that increasethe value of goods and services they sell to

the end consumer. The various activities are: Breaking Bulk

Providing Assortment

Holding Inventory

Providing after sales service

Providing Information


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Retail Management 9

Activities of Retailer benefiting

ConsumerBreaking Bulk

Retailers buy goods in bulk from manufactures anddivide them into smaller sellable units according toconsumption 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 suittheir consumption patterns.


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Retail Management 10

Retailers evaluate the products of variousmanufactures and offer the best collection ofproducts from which the customer can select

the product of his/her choice. Retailers select the product assortment

depending on the tastes and needs of theirtarget customers.

The variety in assortment offered makes thebuying process easier for customers.


ConsumerProviding Assortment


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Make the products available to consumers ata convenient place and time throughinventory held.

Makes it possible for consumers to makeinstant purchases.

Reduces the cost of storage and enables theconsumer to invest his money profitably.

Spontaneous shopping by customer ispossible only because retailers stock thegoods.


ConsumerHolding Inventory


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Valued added services provided by Retailersare:

free home delivery,

accepting credit cards, accepting payments on installment basis,

arranging loans, etc.

These services make it easierfor customers tobuy and use products.


ConsumerProviding Services


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Retailers play a major role in providingproduct related information to theirconsumers.

Retailers use advertising and in-storesalespersons to provide product information,which helps the consumer to simplify hispurchasing process.


ConsumerProviding Information


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Benefits of Retailing to Manufacturers

and Wholesalers

Manufacturers and wholesalers consider retailing asa channel for delivering their products/services to theend customer.

Retailers provide the manufacturer with greaterrevenues, which could be reinvested in production.

Retailers play a major role in smoothing out thevariation between the production and sales of themanufacturer's products.

Retailers function as the sensory organs ofmanufacturers.

They provide feedback and information on tastes andpreferences of customers for designing new productsor upgrading an existing product.


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Benefits of Retailing to Manufacturers

and Wholesalers (Cont) Retailers also share some of the risks of the manufacturer.

A retailer is exposed to three types of obsolescence risks:

Physical obsolescence

Technological obsolescence

Fashion obsolescence Physical obsolescence riskarises from the damage or wear out

caused to the products while they are stored in the retail outlet.Eg: handicrafts, books, greeting cards, gift items etc.

Technical Obsolescence risk: Risk of technology gettingoutdated resulting in severe losses for the retailer.. Eg:

Computers, Mobile phones, etc. Fashion obsolescence riskis very common for apparel retailers

who deal in merchandise of varying style, design or color.


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Benefits of Retailing to the economy

Employment generated

Contribution to the management of theeconomy

Contribution to the production cycle of theindustries

Ensures the success of the economic

enterprises.


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Evolution of Retailing

Early Eighties 'Retailing' in India was synonymous with peddlers,

vegetable vendors, neighborhood kirana stores (smallgrocery stores) or sole clothing and consumer durablestores in a nearby town.

These retailers operated in a highly unstructured andfragmented market. Very few retailers operated in morethan one city.

Before 1990 Organized retailing in India was led by few manufacturer

owned retail outlets, mainly from the textile industry.,Ex:Bombay Dyeing, Raymonds, S Kumar's, and Grasim.


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Evolution of Retailing

Nineties:

Liberalization of the Indian economy led to the dilutionof stringent restrictions.

Entry of few multi-national players like Nanz into the

Indian market.

Changing profile of the Indian consumers,

Increasing wages of the employees working inGreenfield sectors with higher purchasing power.

Setting up of retail chains by domestic retailers likeCotton World (Mumbai), Nirula's (Delhi) and the Viveksand Nilgiris in the South.


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Factors behind the change of Indian

Retailing Industry

Economic growth

Urbanization

Consumerism Brand Profusion

Availability of Real Estate


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Retailing Environment

Constituents of External Environment

Economic Environment

Legal Environment

Technological Environment

Competitive Environment


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Economic Environment

Nature of the economic system (capitalism,socialism)

Gross domestic product,

Rate of inflation, Purchasing power,

Interest rates,

Tax levels, Employment growth and others


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Legal Environment

Governments use various laws andregulations to ensure that retailers do notindulge in unfair trade practices

Foreign direct investment (FDI) restrictions Lack of industry status

Property regulations

Real estate

Labor Laws

Complex taxation System


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Advantages of permitting FDI in

Retail

Opening up of FDI in the retail sector would:

bring in valuable foreign exchange

bring about organization of the sector

provide employment to thousands of Indians

provide a wider choice of products at reducedprices to the customer

improve the shopping experience.


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Technological Environment

Technology is one of the most importantdrivers of change in the retail industry.

The computerization of various retail store

operations have bought a sea change in theway retailing is conducted in India.

Technology being used to improve theshopping environment and to provide apleasant shopping experience to thecustomer.


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Competitive Environment

Severe competition among the existingplayers

Attractive factors for entry into business.

Stiff Competition from Unorganized sector.

The competition among retailers variesdepending on the way the retail operations

are carried out and which entity of thedistribution channel carries out these retailoperations.


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Summary of the Chapter

Retailing : Definition and Scope

Retailers Role in Distribution Channels

Benefits of Retailing Evolution of Retailing

Retailing Environment

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