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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.
Activities of Retailer benefiting
ConsumerProviding Assortment
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Retail Management 11
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.
Activities of Retailer benefiting
ConsumerHolding Inventory
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Retail Management 12
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.
Activities of Retailer benefiting
ConsumerProviding Services
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Retail Management 13
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.
Activities of Retailer benefiting
ConsumerProviding Information
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Retail Management 14
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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Retail Management 15
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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Retail Management 16
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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Retail Management 17
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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Retail Management 18
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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Retail Management 20
Retailing Environment
Constituents of External Environment
Economic Environment
Legal Environment
Technological Environment
Competitive Environment
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Retail Management 21
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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Retail Management 22
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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Retail Management 23
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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Retail Management 24
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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Retail Management 25
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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Retail Management 26
Summary of the Chapter
Retailing : Definition and Scope
Retailers Role in Distribution Channels
Benefits of Retailing Evolution of Retailing
Retailing Environment