Transcript Retail Formats & Theories

RETAIL MANAGEMENT PART-1
Prepared & Presented by :
Mr. Siva Rama Krishna. Vuppala
Asst. Professor, Dept of MBA
SBIT, Khammam
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Introduction to Retail
Unit I
Introduction to Retail: what is Retail, The
functions of retail, retailing in India. The
evolution of retail in India, retail Change in
India
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Introduction:
 The word retail has its origin in French word retaillier
and means “to cut a piece’’ or “to break bulk’.
 “Retailing is the sale of goods and services to the
ultimate consumer for personal, family or
household use.”
 According to Kotler: “Retailing includes all
the activities involved in selling goods or
services to the final consumers for personal,
non business use”
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 Retailing may be understood as the final step in the distribution
of merchandise for consumption by the end consumers.
 Retailing is responsible for matching final consumer demand
with supplies of different marketers.
 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.
 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
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“’Wheel of Retailing”
A better known theory of retailing “wheel of retailing” proposed by
Maclcomb McNair says,
1.
New retailers often enter the market place with low prices,
margins, and status. The low prices are usually the result of
some innovative cost-cutting procedures and soon attract
competitors.
2.
With the passage of time, these businesses strive to broaden
their customer base and increase sales. Their operations and
facilities increase and become more expensive.
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3.
They may move to better up market locations, start carrying
higher quality products or add services and ultimately emerge
as a high cost price service retailer.
4.
By this time newer competitors as low price, low margin, low
status emerge and these competitors too follow the same
evolutionary process.
5.
The wheel keeps on turning and department stories,
supermarkets, and mass merchandise went through this
cycles.
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Functions of a retaillier
 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 four different perspectives
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1. Form: 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.
2. Time: He cerates Time utility by keeping the store open
when the consumers prefer to shop.

preferable shopping hours.
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5.
Place: By being available at a convenient location, he creates
place utility.
6.
Ownership: Finally, when the product is sold, ownership
utility is created.
Apart from these functions retailer also performs like:
5. Arranging Assortment: manufacturers usually make one
or a variety of products and would like to sell their entire
inventory to few buyers to reduce costs. Final consumers, in
contrast prefer a large variety of goods and services to choose
from and usually buy them in small units.
•
Retailers are able to balance the demands of both sides, by
collecting an assortment of goods from different sources,
buying them in sufficiently large quantities and selling them to
consumers in small units
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5.
Breaking Bulk: to reduce transportation costs, manufacturer
and wholesalers typically ship large cartons of the products,
which are then tailored by the retailers into smaller quantities to
meet individual consumption needs
6.
Holding stock: Retailers maintain an inventory that allows
for instant availability of the product to the consumers. It helps
to keep prices stable and enables the manufacture to regulate
production.
7.
Promotional support: small manufacturers can use retailers
to provide assistance with transport, storage, advertising, and
pre- payment of merchandise.
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Major type of retail stores
There is no universally accepted method of classifying retailer.
Various schemes have been proposed to categories retailers
based on
 Number of outlets
 Margin vs. turnover
 Location
 Size.
Because of overlap of classification criteria, some stores may
qualify as under two different categories.
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1.
General merchandise retailer: general merchandise
retailer carry a variety of product lines, with considerable
depth. Some major types of these stores include
supermarkets and hypermarkets , discount stores and
department stores.
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Super market: A supermarket is a large self service retail
store that carries a wide variety of consumer products under
one roof , such as complete line of food products , laundry
requirement, household maintenance items. In India
cooperative have managed some supermarkets for quite
sometime like super bazaar in Delhi, apna bazaar shakari
bhandar etc.
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o
Discount store: these stores are self service, standard
general merchandise retailers regularly offering brand name
and private brand items at low price, earn lower margins and
push for high sales turnover. The characteristics of true
discount stores include
 Selling products at discounted price
 Carry standard international , national, or store brand toi
build image
 Self service stores to minimize operational costs
 Preferred store location are low rent areas.
Like best known discount store is Wal-Mart. In India almost all
retail stores offer discounts, subhiksha
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o



Department store: a department store is larger retail store
organized into several departments, offering a broad verity
and depth of product lines. The product mix may include
food products, appliances, clothing, furnishing and other
household goods.
Like Pantaloons, shoppers’ stop,
department store only for kids is Kids Kemp.
Fashion related department stores in India are Ebony,
Globus, pantaloons, lifestyles.
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2.



3.

Specialty Stores: specialty stores carry a narrow product
mix with depth of assortment within the line.
The emphasis is on a limited number of complimentary
products and high level of customer service
Specialty store often sell shopping goods such as Jewelry,
apparel, computers, music systems, sporting goods.
Like; Tanishq, Titan watches, Van Heusen, Raymond's.
Shopping Malls: shopping malls typically deal with several
bases and product categories and provide a large variety of
merchandise abs service. There are 96 operational malls in
India and expected to grow 158 by this current year.
Ansal plaza (Delhi), Garuda mall (Bangalore) Sahara plaza
Gurgaon Spenser Plaza Chennai
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4.
Retail chains: a retail chain operates multiple retail outlets
under common ownership in different cities and towns.

To some extent the purchasing function and decision making
are coordinated or centralized.
Like Westside, Globus, Food world, McDonald's retail petrol
outlets. Etc.

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The Marketing – Retail Equation
Manufacturer
Manufacturer
Manufacturer
Wholesaler
Retailer
Consumer
Feedback
Retailer
Consumer
Consumer
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Retailing in India.
 Retail is the new buzzword in India.
 The global Retail development Index has ranked India first,
among the top 30 emerging markets in the world.
 It is believed that India has the potential to deliver the fastest
growth over the next 50 years.
 While barter would be considered to be oldest form of retail
trade, since independence , retail in India has evolved to
support the unique needs of country, given its size and
complexity
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 Second largest sector after Agriculture. Contributes about 10
– 11 % of the GDP
 The estimated size of the organized retail industry in India is
Rs. 16,000 crores. This is 2 % of the total estimated retail
trade.
 Indian Retail trade increased from Rs. 2200 billion in 2000 to
Rs 3300 billion by the year 2005
 India's first true shopping mall – complete with food courts,
recreation facilities and large car parking space – was
inaugurated as lately as in 1999 in Mumbai. (this mall is called
"Crossroads").
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The Evolution of Retail in India
 Retail in India has evolved to support the unique needs of our
country, given its size and complexity Haats, Mandis and Melas
have always been a part of the Indian landscape. They still
continue to be present in most parts of the country and form an
essential part of life and trade in Various areas.
 The PDS (Public Distribution System) would easily as the
single largest retail chain existing in the country. the evolution of
the PDS of Grains in India has its origin in the “rationing
system” introduced by the British during world war II
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 The system was started in 1939 in Bombay and subsequently
extended to other cities and towns. the system was abolished
post war but however attaining independence India was
forced to reintroduce it in 1950.
 There was rapid increase in the ration shops ( being
increasingly called the Fair Price Shop or FPSs)
 The Canteen Stores Department and the Post
Offices in India are also among the largest network of
outlets in the country reaching population across the country.
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
The Khadi & Village industries (KVIC) was also set up post
independence. The cooperative movement was again championed by the
government.
India's Largest retail Chains:
1.
PDS: 463,000
2.
Post offices: 160,000
3.
KVIC: 7,000
4.
CSD Stores:3,400
(source business world marketing White book 2005)
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 In the past decade, the Indian marketplace has transformed
dramatically. However from the 1950,s to the 80,s, investment
in various industries was limited due to low purchasing
power in the hands of the consumer and the government’s
policies favoring the small scale sector.
 The first attempts at organized retailing were noticed in the
textiles sector. One of the pioneers in this field was
Raymond’s which set up stores to retail fabric.
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 Raymond’s distribution network today comprises 20,000
retailers and over 256 exclusive showrooms in over 120 cities
of the country
 Other textile manufacturing who set up their own retail
chains wee Reliance- which set up Vimal showrooms and
Garden Silk Mills, which set up Garden Vareli showrooms.
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The Evolution of retail in India
Traditional
Formats
Itinerant Salesman
Haats
Melas
Mandis etc.
Established
formats
Kirana shops
Convenience/
department stores
PDS/
fair price shops
Pan/ Beedi shops
Emerging
Formats
Exclusive retail outlets
Hypermarket
Internal retail
Malls / Specialty Malls
Multiplexes
Fast food outlets
Service galleries
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Drivers of Retail change in India
major drivers :
1.
2.
Changing Income Profiles: Steady economic growth fuelled
the increase in disposable income in India. The average
middle class family's disposable income rose by more than
20% between 1999-2003.
Diminishing difference between Rural and urban India: Rural
India accounts for over 75% of India population and this in
itself offers a tremendous opportunity for generating volume
driven growth. Tax benefit. In year 2002-03 LIC sold 50% of
its policies in rural India. Same BSNL also sold its 50%
connection in small towns .
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3.
o
4.
Changes in Consumption patterns: Occupational changes and
expansion of media have caused a significant change in the
way the consumer lives and spends his money.
The changes in income brought about changes in the
aspirations and the spending patterns of the consumers. the
buying basket of the consumer changed
The emergence of a young Earning India : Nearly 70% of the
Indian population is below the age of 34. taking advantages
of employment opportunity in the booming service sector
these young Indians are redefining service and consumption
patterns
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Prominent sector in Indian retail
1. Clothing, textiles and fashion Accessories:
2. Food & food Services:
3. Consumer Durables:
4. Books & Music:
Other emerging sectors
5. Jewellery retail
6. Footwear retail
7. Time Wear Retail
8. Fuel Retail/ petro retail
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Challenges to retail Development in India
 Retail not being recognized as an industry in India.
 The high costs of real estate.
 Lack of Adequate infrastructure.
 Multiple and complex taxation system.
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Size of the organized retail market (Rs Cr)
2001-02
2007
CAGR (%)
(compound Annual growth
rate)
TOTAL
16,000
37,216
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Food
1,800
7,473
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Clothing
4,950
10,423
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Cons.Durables
1,650
3,787
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Books & Music
450
1,426
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Share of organized & unorganized retail with comparison
source: Ernst &Young, The Great Indian Retail Story, 2006
PAKISTAN 1
99
INDIA 3
CHINA
INDONESIA
BRAZIL
THAILAND
97
20
80
30
70
36
40
ORGANISED
UNORGANISED
60
55
MALASIA
45
81
TAIWAN
19
85
USA
0%
64
20%
40%
15
60%
80%
100%
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