14EMBF38

RETAIL MANAGEMENT
• UNIT – I:
Introduction to retail marketing and retail
Environment-The wheel of Retailing-Retail
Formats-store and non- store Retailing, Factors
affecting retailing in India. Prospects of retailing
in India. Trends in retailing. Retail environment.
FDI in retail in India.
• UNIT – II:

• Consumer behaviour in the retail context-

Retail strategy- Region wise analysis of Indian
Retailing. The buying function- buying
methods and control.
• UNIT – III:
• Retail site selection and issues of location,
Retail store planning, design and layout,
Merchandising, Category management, Role
of private label- supply chain management in
retailing
• UNIT – IV:

• Pricing, Promotion and advertising in retail

marketing- Retail Operations- Customer
service management in Retail. Role of
personal selling in retailing
• UNIT – V:

• Store image and display, purchasing,

negotiating purchases, consumerism and
moral values in retailing. Patronage and
generating loyalty. Malls in india- emergence
and customer pereeption
•
• Reference:
• Retail Management-suja Nair
• Retail Marketing Management- David gilberth
• Retailing Management-Michael Levy ,Barton,A
Weitz.
• Franchise in India -C.Y.Pal
 What is Retailing?

• Retailing – a set of business activities that

adds value to the products and services sold
to consumers for their personal or family use.

• A retailer is a business that sells products

and/or services to consumers for personal or
family use.
 Examples of Retailers
• Retailers:
-Sears, Holiday Inn, McDonalds, Amazon.com, Jiffy Lube,
AMC Theaters, American Eagle Outfitter, FAO Schwartz,
Kroger

• Firms that are retailers and wholesalers that

sell to other business as well as consumers:
-Office Depot, The Home Depot, United Airlines, Bank of
America, Sams Clubs
 Retail comes from…..

• A French word

• To cut off, clip off, divide.

 How Retailers Add Value
• Breaking Bulk
-Buy it in quantities customers want
• Holding Inventory
-Buy it at a convenient place when you want it
• Providing Assortment
-Buy other products at the same time
• Offering Services
-See it before you buy, get credit, layaway
 Manufacturer’s Perspective
The Four P’s of Marketing

Retailers arepart
Retailers are partofofthe
the
distribution
distribution channel
channel
Product

Distribution Price

Promotion
 Distribution Channel
PPT 1-4
Distribution Channel
Retailers are a Business Like Manufacturers

Accounting Finance Marketing

Operations MIS Human Resources

Manufacturer of RETAILER
A OF A, B, C,
WHOLESALER OF D
A&B
Manufacturer
of B
RETAILER
OF A, B, C,
D
Manufacturer
of C
WHOLESALER OF
C&D

Manufacturer RETAILER
of D OF A, B, C,
D
 CUSTOMER OF
PRODUCT
A

CUSTOMER OF
PRODUCT
B

CUSTOMER OF
RETAILER PRODUCT
C
OF
A, B, C, D CUSTOMER OF
PRODUCT
D
examples
 BREAKING THE BULK
• PRODUCERS SELL IN LARGE
QUANTITIES AND CONSUMERS BUY
IN SMALL QUANTITIES.
 PROVIDING SERVICES
• Credit to consumers

• Display of products , consumers can see and test them

• Sales people to answer questions and additional

information.

• Home delivery.
Retailing is a part of our life
In recent past buying and selling
has become more formal and
brand dominated

Traditional forms co exist with

organized retailers.
 RETAILING IS…….
• It encompasses the business activities
involved in selling goods and services to
consumers for their personal , family, or
household use.
• It includes every sale to final consumer
ranging from cars to apparel to meals at
restaurants to movie tickets. Retailing is
the last stage in the distribution channel
 Retail management is…..
 The process of bringing the ultimate user to the main
producer through a series of stages where retailing is the
last one.
 It is not limited to quantities but to the exact requirement of
last user.
 Bringing about operational efficiency at this last stage and
making an environment so compelling that the consumer
looks no where else.
 Retail management is an art.
 It requires a number of
management tool for a
complete end user
satisfaction.
 Retail management is getting
to know the final user on
behalf of a manufacturer.
Effective retail
management
 Effective Retail Management
• The retailer must keep a record of all the products coming into the store.

• The products must be well arranged on the assigned shelves according to size, color, gender, patterns
etc.

• Plan the store layout well.

• The range of products available at the store must be divided into small groups comprising of similar
products. Such groups are called categories. A customer can simply walk up to a particular category
and look for products.

• A unique SKU code must be assigned to each and every product for easy tracking.

• Necessary labels must be put on the shelves for the customers to locate the merchandise on their own
without much assistance.

• Don’t keep the customers waiting.

• Make sure the sales representatives attend the customers well. Assist them in their shopping. Greet
them with a smile the retailer must ensure enough stock is available at the store.
 Effective Retail Management
• Make sure the store is kept clean. Don’t stock unnecessary furniture as it gives a cluttered
look to the store. The customers must be able to move freely.

• The store manager, department managers, cashier and all other employees should be trained
from time to time to extract the best out of them. They should be well aware of their roles and
responsibilities and customer oriented. They should be experts in their respective areas

• The store manager must make daily sales reports to keep a track of the cash flow. Use
software's or maintain registers for the same.

• Remove the unsold merchandise from the shelves. Keep them somewhere else.

• Create an attractive display.

• Plan things well in advance to avoid confusions later on.

Decision Variables for Retailers

Customer Service

Store Design Merchandise

and Display Assortment
Retail
Strategy
Pricing Location

Communication
Mix
Economic Significance of Retailing

• Over $2.5 trillion in annual U.S. sales

-greater than medical care, housing, recreation combine
• Employs 17% of population
-about the same as manufacturing and growing
• Management training opportunities
• Entrepreneurial opportunities
Nature of Retail Industry is Changing

To Today’s Retailer

Mom and Pop Store

 Wal-Mart’s Retail Mix

Customer Location
Service

Store Design Merchandise

And Display Retail Strategy Assortment

Communication Pricing
Mix
 Wal-Mart’s Retail Mix
Location Strategy

Free-standing Stores

Customer
Service

Store Display Merchandise

And Design Assortment

Communication
Mix Pricing
 Wal-Mart’s Retail Mix
Assortment Strategy

Customer
Service Location

Large Number
Store Design
and Display
of Categories
Few Items
Communication
Mix Pricing
in Each Category
 Wal-Mart’s Retail Mix
Location
Pricing Strategy
Customer
Merchandise
Service
Assortment

Store Design
and Display

Communication
Mix Low, EDLP
 Wal-Mart’s Retail Mix
Customer
Service Location

Communication Mix
Store Design Merchandise
and Display Assortment

Pricing

TV and Newspaper
Insert Ads
 Wal-Mart’s Retail Mix

Store Design and Display

Customer
Service Location

Basic, Special
Merchandise
Displays Assortments
for Products
Communication
Mix Pricing
Wal-Mart’s Retail Mix

Customer Service

Limited

Location

Merchandise
Assortment

Store Design
and Display Pricing

Communication
Mix
Misconceptions About Careers in Retailing

• Don’t need college

• Low pay
• Long hours
• Boring
• Dead-end job
• No benefits
• Everyone is part-time
• Unstable environment
 Why You Should Consider Retailing
Entry level management positions
-Department manager or assistant buyer/planner
-Manage and have P&L responsibility on your first job
Starting pay average with great benefits
- Some retailers pay graduate school
No two days are alike
Buying for financially oriented people
Management for people people
 Types of Jobs in Retailing
Most entry level jobs are in
store management or buying, but…

retailers also have staff specialists:

--accounting and finance
--real estate
--human resource management
--supply chain management
--advertising
--public affairs
 The Evolution of retail in India

Established Emerging
Traditional formats Formats
Formats Kirana shops Exclusive retail outlets
Itinerant Salesman Convenience/ Hypermarket
Haats department stores Internal retail
Melas PDS/ Malls / Specialty Malls
Mandis etc. fair price shops Multiplexes
Pan/ Beedi shops Fast food outlets
Service galleries

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 The Marketing – Retail Equation

Manufacturer Manufacturer Manufacturer

Wholesaler

Retailer
Feedback

Retailer

Consumer Consumer Consumer

42
WHEEL OF RETAILING
 “’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.
44
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.

45
46
 PHASES OF WHEEL OF RETAILING

The cycle can be broadly classified into three

phases :
Entry Phase
Trading up phase
Vulnerability Phase
 ENTRY PHASE
• The new , innovative retailer enters the market with a
low status and low price store format.
• Starts with a small store that offers goods at low prices
or goods of high demand.
• This would attract the customers from more established
competitors.
• Tries to keep the costs at minimum by offering only
minimal service to customers, maintaining a modest
shopping atmosphere ,locating the store in a low rent
area and offering a limited product mix.
• Success and market acceptance of the new retailer will
force the established to imitate the changes in retailing
made by the new entrant.
• This would force the new entrant to differentiate its
products through the process of trading up.
 TRADING UP PHASE
• New retailer tries to make elaborate changes
in the external structure of the store through
up gradation.
• Retailer will now reposition itself by offering
maximum customer service ,a posh shopping
atmosphere , and relocating to high cost area(
as per the convenience of the customers ).
• Thus in this process the new entrant will
mature to a higher status and higher price
operation . This will increase the cost of the
retailer.
• The innovative institution will metamorphose
into a traditional retail institution . This will
lead to vulnerability phase.
 Vulnerability phase
• The innovative store will have to deal with
high costs , conservatism and a fall on ROI.
• Thus, the innovative store matures into an
established firm and becomes vulnerable to
the new innovator who enters the market .
• Entry of the new innovator marks the end of
the cycle and beginning of the new cycle into
the industry.
• Example Of this theory – kirana stores were
replaced by the chain stores like NILIGIRS
and FoodWorld etc which in turn faced
severe competition from supermarkets and
hypermarkets like Big Bazar and Giant.
The wheel of retailing
• Step 1 of the Wheel of retailing – Establishing and
penetrating in the market
• The theory pays attention to the new retailers which
often enter the market place with low prices as well as
low profit margins and sometimes low status.
• The low prices are usually the result of some
innovative cost-cutting procedures. Sooner than later,
these innovative cost-cutting procedures will most
probably attract competitors if the entry barriers are
not high enough.
• .
• Step 2 of the Wheel of retailing – Expanding in
the market
– During the time and while they gain more experience
of the market, these retailer businesses strive to
enlarge their CUSTOMER BASE with the purpose of
increasing sales, gaining a higher profit margin as well
as acquiring a significant market share.
– They can attempt to increase their customer base
through different mechanisms, most of the times by
attempting to TARGET a different segment of
customers. Since these retailers initially enter the
market with low prices, their main target is
represented by low income population.
• Step 3 of the Wheel of retailing – Stabilized business model
attracting margins.
• In this stage of the Wheel of retailing, the company is already in an
established position and hence the rates are enough to get a decent
margin. Because of the margin it is getting, the company keeps
expanding moderately and increases its reach to attract as well as
retain more customers.
• This is the most profitable stage for any retailing organization.
• However, when there is more DEMAND than SUPPLY, it always
opens up a niche.
• And generally, at this stage itself, other competitors start preparing
or analyzing the market and think on how to penetrate this market.
• Stage 4 of Wheel of retailing – The entry by another retail competitor
who challenges, and then brings down the original.
• By adding higher qualitative PRODUCTS to the market or by providing
additional services, or by simply moving to a better market location the
retail businesses then target another segment. Therefore, their
OPERATIONS and facilities increase and become more expensive, as they
might require extra labor, extra expertise, extra warehouse,
etc. Ultimately, these retail businesses might emerge as a high cost price
service retailer.
• This is done in order to recover its fixed costs quickly and have an early
breakeven so that it can start generating some profit. Overall, in this stage,
the cost is high for the original retailer. And hence its prices are higher.
Therefore, this presents an OPPORTUNITY for another retailer who can
then enter in the market again in stage 1, with an objective to penetrate
the market. New retail businesses then enter in the market and attempt to
follow the same steps as the previous one before.
 FUNCTIONS OF RETAILER
• Provides personal services to all
• Provides two-way information
• Facilitate standardization and grading
• Undertake physical movement and storage of goods
• Assembles goods from various sources
• Stock goods for ready supply to buyers
• Extend credit facility
• Create demand by window display
• Providing an Assortment of products & service :
Breaking bulk Holding inventory providing service
RETAIL FORMAT/ TYPES
OF RETAIL
In store-Retailing Non-Store Retailing
• Department Stores • Direct Selling
• Supermarkets • Telemarketing
• Discount Houses • Online Retailing
• Chain Stores • Automatic vending
• Multiple Shops • Direct Marketing
 CLASSIFICATION OF
DEPARTMENTAL STORES
• On the basis of ownership these are:
• (i) The independent;
• (ii) The ownership group; and
• (iii) Chain department Stores.
• Independent stores are owned by a financial interest which does not own
other similar stores.
• Ownership group stores are those stores which were formerly dependent
but now have been combined.
• Chain department stores are those stores which are centrally owned and
operated.
• On the basis of income groups:
– These stores cater to the middle and high income groups. They usually handle
good quality merchandise and offer maximum service to the customers. Other
stores cater to the needs of the lower income group people.
• Leased department stores.
CLASSIFICATION BY OWNERSHIP

Independent
Retailers-one store
ownership

Chain Stores-many
stores but only one
owner

Franchises-many
owners of many
stores
 BASIC FORMS OF FRANCHISING

Dealer agrees to sell certain products provided

Product and
by a manufacturer, but can use any sales tactics
Trade Name
he chooses.
Franchising
Ex-Michelin Tires, Avon

Business Dealer must sell the franchiser’s product in the

Format exact way the franchiser prescribes.
Franchising Ex – McDonalds, Wendy's
 CLASSIFICATION BY LEVEL OF
SERVICE

Self Service Full Service

Discount stores
Factory outlets
Warehouse clubs Exclusive stores
CLASSIFICATION BY PRODUCT
OFFERING

The mix of products offered to the

consumer by the retailer; also called
the product assortment

Deep & narrow-like Starbucks

Or
Shallow & broad like Walmart
 CLASSIFICATION BY PRODUCT
OFFERING

 Depth of Product Line

• Specialty Outlets

• Category Killers

 Breadth of Product Line

• General Merchandise Stores

• Scrambled Merchandising

Why do this?
 MAJOR TYPES OF RETAILERS BY
PRODUCT OFFERING/ STORE RETAIL
FORMATS
Department Stores

Specialty Stores Hyper Kiosks

markets

Supermarkets
Mass
Malls Discounters

Street Vendors
Category Convenience
killers Stores

Convenience Stores

Discount Stores

Restaurants
 DIRECT MARKETING

Direct Mail
Direct
Marketing needs
no personal Catalogs & Mail Order
interaction
Telemarketing
 CHOOSING THE RETAIL MIX

Product Place

Choosing the Price Personnel

Retailing Mix

Promotion Presentation
 CHOOSING THE RETAIL MIX

Product

Personnel Promotion

Target
Market

Presentation Place

Price
PRESENTATION (COMMUNICATION) OF
THE RETAIL STORE

Employee Type & Density

Merchandise Type & Density

Fixture Type & Density

Factors Sound
in
Creating Odors
Store’s
Atmosphere Visual Factors
PERSONNEL OF THE RETAIL STORE

How many

How knowledgeable

How helpful / invasive

Factors
in Fit the image of the product
Personnel
decisions Good personal sellers
RETAILING STRATEGY - LOCATION

 Central Business District

• Parasites
Freestanding
 Regional Shopping Centers Store
• Anchor Stores
Shopping
 Strip Location Center Tenant
• Destination stores

• Power centers Mall Tenant

 Multichannel Retailers
 Retailing Mix

• The retailing mix includes the activities

related to managing the store and the
merchandise in the store, which includes retail
pricing, store location, retail communication,
and merchandise
 Multichannel Retailers

• Multichannel retailers utilize and integrate a

combination of traditional store formats and
nonstore formats such as catalogs, television,
and online retailing.
 Retail Life Cycle

• The retail life cycle is the process of growth

and decline that retail outlets, like products,
experience, which consists of the early growth,
accelerated development, maturity, and decline
stages.
The retail life cycle
Factors affecting retail in INDIA
 Factors Influencing Trends in Retailing

• Environmental Awareness
• Increase in Senior Population
• Social Media
• Online Shopping
 Reasons of Growth
• The changing Indian consumers psyche.
• Greater per capita income
• Increase in disposable income of middle class households
• Growing high and middle income population.
• Affordability growth, falling interest rates, easier consumer credit .
• Greater variety and quality at all price points
• Urban consumers getting exposed to international lifestyles,
inclined to acquiring asset.
• No longer need-based shopping, shopping is more a family
experience.
• Changing mindset of consumers- Increasing tendency to spend.
• Greater levels of education
 CHALLENGES FACING THE INDIAN
ORGANIZED RETAIL SECTOR
• The biggest challenge facing the Indian
organized sector is the lack of space.
• With real estate prices escalating due to
increase in demand from the Indian organized
retail sector, it is posing a challenge to its
growth.
• With Indian retailers having to shell out more
for retail space it is affecting their overall
profitability in retail.
• Trained manpower shortage is a challenge facing the organized retail
sector in India.
• The Indian retailers have difficulty in finding trained person and also have
to pay more in order to retain them.
• This again brings down the Indian retailers profit levels.
• The foreign direct investment (FDI) in the Indian retail sector to one
brand shops has made the entry of global retail giants to organized retail
sector in India difficult.
• But the global giants like TESCO, WAL-MART, and METRO AG are entering
the organized retail sector in India indirectly through franchisee
agreement and cash and carry wholesale trading.
• Many Indian companies are also entering the Indian organized retail sector
like Reliance Industries Limited, Pantaloons, and Bharti Telecoms. But they
are facing stiff competition from these global retail giants.
• As a result the discounting practice too brings down the profit of the
Indian retailers.
 Division of Retail Industry –
Organised and Unorganised Retailing
The retail industry is mainly divided into:-
Unorganised Retailing
Organised Retailing
• Unorganised retailing, on the other
• Organised retailing refers to
hand, refers to the traditional
trading activities undertaken by
formats of low-cost retailing, for
licensed retailers, that is, those
example, the local kirana shops,
who are registered for sales tax,
owner manned general
income tax, etc.
stores, paan/beedi shops,
• These include the corporate- convenience stores, hand cart and
backed hypermarkets and retail pavement vendors, etc.
chains, and also the privately
owned large retail businesses.
FDI RETAIL IN INDIA
 FDI
• FDI can be defined as a cross border
investment, where foreign assets are invested
into the organizations of the domestic market
excluding the investment in stock.
•
FDI..
Until 2011, foreign direct investment (FDI) was not allowed in multi-brand retail, forbidding
foreign companies from any ownership in supermarkets, convenience stores or any retail
outlets.
• Even single-brand retail was limited to 51 per cent ownership. In January 2012, India allowed
100 per cent FDI investment in single-brand stores, but imposed the requirement that the
single brand retailer would have to source 30 percent of its goods from India.
• On 7 December 2012, India allowed 51 per cent FDI in multi-brand retail.
 Reasons for promotion of FDI in Retail
•
The major benefit of FDI is that it is both supplementary and complimentary with
regards to local investment.
• FDI lets a company gain better access to top class technology and supplementary
funds.
• They are also exposed to management practices in vogue around the world and also
get the chance to become a part of the global market system.

• The Indian government had commissioned Indian Council for Research on

International Economic Relations (ICRIER) to perform a study on the effect of
organised retailing practices on its unorganised counterpart.

ICRIER submitted the report during 2008. The study hinted at the advantages that
the growth of organised retail will have for various participants like the consumers,
manufacturers, and farmers.

.
 Reasons for promotion of FDI in
Retail
• The government decided on the basis of the results in other countries and the ICRIER
study that this decision would result in a greater influx of FDI in both back and front end
infrastructure. It was expected that the agricultural sector would become more efficient
and be in a better position to use technology.

It was also expected that this decision would result in more and better jobs being created
and the best practices around the world will be introduced in India. Both farmers and
consumers will see more convenient prices and higher quality in future and this will help
both the classes.

The government also put in an obligatory condition before foreign companies for
procuring 30 percent supplies from local producers in order to provide a fillip to the
manufacturing sector in India. Jobs are expected to be available in both rural and urban
areas thanks to greater back and frontal operations resulting from more FDI.

Domestic retail entities and traders are expected to pull up their socks and increase their
efficiency ever since this decision. Consequently, the consumers are expected to receive
better services and the producers who provide the source products also get better
payment
 Process of FDI in Retail

There is no such procedure for short listing the

companies. International companies who are willing to
invest in either single or multi-brand retail can put in their
applications with the Department of Industrial Policy and
Promotion.
Here the applications are reviewed in an effort to
determine their suitability as per the stated guidelines.
Subsequently, the Foreign Investment Promotion Board,
Ministry of Finance will consider the applications before
providing the final approval.
.
 Advantages of FDI in retail
• India's retail industry is one of the biggest around the world when it comes to the
privately owned ones.
• The benefits of FDI in retail, as per experts, carry greater weightage than the cost
related implications.
The cost of production facilities will come down as well. This will mean a greater
choice of products at lesser and justifiable prices for the customers.
As a result of FDI, companies will be able to bring in technology and skills from
other countries and this will help in infrastructural development of India. This will
also help in creating more value for money for the buyers.
After FDI in retail, it is possible to set up a properly organised chain of retail stores
as the capital to do is readily available. The investment can be regarded as a long
term one as the physical capital put into a domestic company is not liquidated
easily. This is its main difference from equity capital.
ICRIER had also predicted that if FDI in retail was introduced in India during 2011-
12, the Indian economy could have grown by 13 per cent, the unoganised sector
could have seen a 10 per cent growth and the organised sector could have increased
by 45 per cent
 Disadvantages of FDI in retail
•

As per the Committee's report almost 8 percent of India's

workforce is employed in the unorganised retail sector.
• This comes up to roughly 40 million people.
• It has been stated that FDI in retail will generate 2 million
jobs. However, the Committee had stated that it is not a
proper indication as it does not take into account the number
of people who already work in the retail sector.
Labour practices of organisations such as Wal-Mart.

It is being said that the lobby favouring FDI in retail in India

has invested at least Rs 52 crore and experts opine this could
have had a major say in the way things turned out.
 Why countries seek FDI?
 Increase investment level and thereby income &
employment
 Increase tax revenue of government
 Facilitates transfer of technology
 Encourage managerial revolution through professional management
 Increase exports and reduce import requirements
 Increase competition and break domestic monopolies
 Improves quality and reduces cost of inputs