retail business

THE RETAIL THE RETAIL BUSINESSBUSINESSWhat Is RetailingWhat Is Retailing

WHAT IS RETAILINGWHAT IS RETAILING

Retailing- Set of Business Activities that adds Retailing- Set of Business Activities that adds value to the products and services sold to value to the products and services sold to customers for their personal and family use.customers for their personal and family use.

Retailing is not only the sale of products in Retailing is not only the sale of products in stores – also involves sale of services e.g. stores – also involves sale of services e.g. selling an insurance policy ; selling hotel selling an insurance policy ; selling hotel accomodation; airline ticket etc.accomodation; airline ticket etc.

What is RetailingWhat is Retailing

All Retailing is not done through stores.All Retailing is not done through stores. Non-Store Retailing is also common e.g.Non-Store Retailing is also common e.g.

- Direct Selling e.g. Aqua Guard - Direct Selling e.g. Aqua Guard

- Internet Retailing or E-Tailing.- Internet Retailing or E-Tailing.

- Catalog selling.- Catalog selling.

- Channel Retailing – Amway.- Channel Retailing – Amway.

Retailers Role in Distribution Retailers Role in Distribution ChannelChannel

A Retailer sells products or services or both A Retailer sells products or services or both for personal and / or family use..for personal and / or family use..

Retailer must have the Right Merchandise, at Retailer must have the Right Merchandise, at the Right Place, at the Right Price, at the Right the Right Place, at the Right Price, at the Right Time, in the Right Quantity, in the Right Time, in the Right Quantity, in the Right Assortment.Assortment.

Retailers provide markets for manufacturers to Retailers provide markets for manufacturers to sell their products.sell their products.

Retailers RoleRetailers Role

Retailer is the final point that links a Retailer is the final point that links a manufacturer to the consumer.manufacturer to the consumer.

A Distribution Channel facilitates movement A Distribution Channel facilitates movement of products from point of production to the of products from point of production to the point of sale to the ultimate consumer.point of sale to the ultimate consumer.

Manufacturer – Wholesaler – Retailer – Manufacturer – Wholesaler – Retailer – Consumer.Consumer.


Manufacturers typically make products and Manufacturers typically make products and sell them to Retailers or Wholesalers.sell them to Retailers or Wholesalers.

When a manufacturer – like Eureka Forbes – When a manufacturer – like Eureka Forbes – sells directly to the consumer, it is performing sells directly to the consumer, it is performing both the production and retailing business both the production and retailing business activities.activities.

Wholesalers satisfy Retailer’s needs whereas Wholesalers satisfy Retailer’s needs whereas Retailers satisfy the needs of the ultimate Retailers satisfy the needs of the ultimate consumer.consumer.


Some Retail Chains like Home Depot and Sam’s Some Retail Chains like Home Depot and Sam’s Wholesale Club are both retailers and wholesalers.Wholesale Club are both retailers and wholesalers.

They perform wholesale activities when they sell to They perform wholesale activities when they sell to other business activities like contractors, restaurant other business activities like contractors, restaurant owners.owners.

Manufacturing, wholesaling and retailing activities Manufacturing, wholesaling and retailing activities are also performed by individual firms but in such are also performed by individual firms but in such channels there must be vertical integration.channels there must be vertical integration.


Vertical Integration means that a firm has to Vertical Integration means that a firm has to perform more than one set of activities such as perform more than one set of activities such as investments by retailers in wholesaling or investments by retailers in wholesaling or manufacturing.manufacturing.

Many Retailers like Walmart, Safeway, Office Many Retailers like Walmart, Safeway, Office Depot – in India – Bata, ITC, Bombay Dyeing Depot – in India – Bata, ITC, Bombay Dyeing etc. do both wholesaling and Retailing etc. do both wholesaling and Retailing activities.activities.


Other Retailers are even more vertically Other Retailers are even more vertically integrated. They design the merchandise they integrated. They design the merchandise they sell and then contract vendors to manufacture sell and then contract vendors to manufacture the same exclusively.the same exclusively.

Example will be : Jini & Jony.Example will be : Jini & Jony.

Explore other retailers who observe this practiceExplore other retailers who observe this practice

Retailers FunctionsRetailers Functions

Providing an assortment of products and Providing an assortment of products and services.services.

Breaking Bulk.Breaking Bulk. Holding Inventory.Holding Inventory. Providing services.Providing services.

Providing Assortments.Providing Assortments.

Supermarkets can carry 15000 to 20000 Supermarkets can carry 15000 to 20000 different items made by , maybe, 300 different different items made by , maybe, 300 different companies.companies.

Offering assortments helps customers to Offering assortments helps customers to choose from large selection of brands, designs, choose from large selection of brands, designs, sizes, colors and prices in one location.sizes, colors and prices in one location.

Providing AssortmentsProviding Assortments

Manufacturers specialise in producing specific Manufacturers specialise in producing specific types of products e.g. Amul makes dairy types of products e.g. Amul makes dairy products, Cadbury makes chocolates, Kellog products, Cadbury makes chocolates, Kellog makes breakfast cereals, Hind.Lever makes makes breakfast cereals, Hind.Lever makes toiletries etc.If each manufacturer has its own toiletries etc.If each manufacturer has its own store and sold its own products only then a store and sold its own products only then a customer would have to go to different stores customer would have to go to different stores to buy different products for domestic use.to buy different products for domestic use.

Providing AssortmentsProviding Assortments

All Retailers specialize in the assortments they All Retailers specialize in the assortments they offer.offer.

Supermarkets offer assortments of food, health Supermarkets offer assortments of food, health and beauty products e.g. Big Apple, Big and beauty products e.g. Big Apple, Big Bazar; Shoppers Stop offers assortments of Bazar; Shoppers Stop offers assortments of clothing and accessories.clothing and accessories.

Consumers are well aware of these different Consumers are well aware of these different assortments on offer. Even small children are assortments on offer. Even small children are now aware of what to find and where.now aware of what to find and where.

Breaking BulkBreaking Bulk

““Retail” is deried from the French word Retail” is deried from the French word ‘Retaillier’ which means to cut a piece off or ‘Retaillier’ which means to cut a piece off or break bulk.break bulk.

Manufacturers or Wholesalers supply in bulk Manufacturers or Wholesalers supply in bulk to Retailers who in turn sell in small quantities to Retailers who in turn sell in small quantities to individual consumers. This is called to individual consumers. This is called ‘breaking bulk’. E.g. A Retailer buys One doz. ‘breaking bulk’. E.g. A Retailer buys One doz. Tubes of Colgate toothpaste from the Tubes of Colgate toothpaste from the wholesaler but sells one tube to the consumer.wholesaler but sells one tube to the consumer.

Holding InventoryHolding Inventory

Major function of Retailers is to keep stock in Major function of Retailers is to keep stock in user friendly packs or sizes for the consumer user friendly packs or sizes for the consumer to buy as per his needs.to buy as per his needs.

Thus, consumer need not keep large inventory Thus, consumer need not keep large inventory at home because he knows that the retailer will at home because he knows that the retailer will have the stock when he needs it. This is have the stock when he needs it. This is particularly important for food stuff and particularly important for food stuff and perishables.perishables.

Providing ServicesProviding Services

Retailers offer credit to customers.Retailers offer credit to customers. Retailers put up attractive display of their Retailers put up attractive display of their

products for the benefit of their customers.products for the benefit of their customers. Sales persons are available to assist customers Sales persons are available to assist customers

with product information etc.with product information etc. Multi channel retailers offer flexibility of Multi channel retailers offer flexibility of

buying anytime- day or night.buying anytime- day or night. Customers have the option of home delivery.Customers have the option of home delivery.

Value AdditionValue Addition

Giving Assortments, breaking bulk, holding Giving Assortments, breaking bulk, holding inventory, providing services, retailers inventory, providing services, retailers increase the value that the consumer receives increase the value that the consumer receives from their products and services.from their products and services.

Assignment:Assignment:

Illustrate the above with an example.Illustrate the above with an example.

Retail SalesRetail Sales

Retailing affects every facet of one’s life. Retailing affects every facet of one’s life. Every action in day to day life involves Every action in day to day life involves retailing.e.g. Eating, dressing, furnishing one’s retailing.e.g. Eating, dressing, furnishing one’s house, repairing one’s car or bike, buying house, repairing one’s car or bike, buying medicines, etc.etc. are all part of retail.medicines, etc.etc. are all part of retail.

Apart from direct retailing, there are other Apart from direct retailing, there are other non-store retailing like E-Tailing, TV non-store retailing like E-Tailing, TV shopping, sale of movie tickets, hotel rooms, shopping, sale of movie tickets, hotel rooms, legal assistance etc.legal assistance etc.

Employment in RetailEmployment in Retail

Retail is one of the largest employers in the Retail is one of the largest employers in the world.world.

In India, employment situation and the future In India, employment situation and the future is as follows:is as follows:

Retail Potential in FutureRetail Potential in Future

By 2011 around 600 malls will be there.By 2011 around 600 malls will be there. Around 1.50 million jobs are from retail industry.Around 1.50 million jobs are from retail industry. In another one and half year there will be around 50% increase In another one and half year there will be around 50% increase

in the job requirements. in the job requirements. Around 2 million direct jobs would be generated from Around 2 million direct jobs would be generated from

the retail industrythe retail industry

Top 25 Global RetailersTop 25 Global Retailers

The top 25 Global Retailers in the world are as The top 25 Global Retailers in the world are as follows: ( List enclosed)follows: ( List enclosed)

Wal-Mart is the biggest retailer in the world Wal-Mart is the biggest retailer in the world and its sales being three times more than and its sales being three times more than Carrefour , the second largest retailer.Carrefour , the second largest retailer.

Many large retailers are diversifying their Many large retailers are diversifying their format offerings to consumers but 50% of the format offerings to consumers but 50% of the 200 largest retailers focus on a single segment 200 largest retailers focus on a single segment only.only.

Global RetailersGlobal Retailers

Majority of Global Retailers are in Food Majority of Global Retailers are in Food Sector.Sector.

More than half of the top 200 Retailers have More than half of the top 200 Retailers have supermarket, warehouse, hypermarket or cash supermarket, warehouse, hypermarket or cash and carry formats.and carry formats.

US companies dominate the largest 200 list. 78 US companies dominate the largest 200 list. 78 American companies in top 200 list represent American companies in top 200 list represent 49% of the sales. Wal-Mart alone contributes 49% of the sales. Wal-Mart alone contributes more than 9% of top 200 sales.more than 9% of top 200 sales.

Global RetailersGlobal Retailers

Japanese companies remain major global Japanese companies remain major global retailers. 30 Japanese companies form the retailers. 30 Japanese companies form the second largest group of the top 200.second largest group of the top 200.

European retailers have larger global coverage European retailers have larger global coverage than US firms- who operate in an average of than US firms- who operate in an average of three countries (except Avon and Mcdonalds)- three countries (except Avon and Mcdonalds)- as against European firms which operate in an as against European firms which operate in an average of seven countries.average of seven countries.

Structure of Retailing and Structure of Retailing and Distribution ChannelsDistribution Channels

Nature of Retailing & Distribution Channels in Nature of Retailing & Distribution Channels in US is quite unique – US distribution system US is quite unique – US distribution system has greater density and large sizes. They has greater density and large sizes. They operate own warehouses eliminating need for operate own warehouses eliminating need for wholesalers. They have sizes of 20,000 + sq.ft. wholesalers. They have sizes of 20,000 + sq.ft.

Large stores and large firms result in very Large stores and large firms result in very efficient distribution systemefficient distribution system

Structure of Retailing and Distribution Structure of Retailing and Distribution ChannelsChannels

Japanese have small stores operated by small Japanese have small stores operated by small firms and a large independent wholesale firms and a large independent wholesale industry.industry.

For efficient daily deliveries to small retailers, For efficient daily deliveries to small retailers, merchandise might often pass through three merchandise might often pass through three distributors between manufacturer and retailer.distributors between manufacturer and retailer.

Thus larger labor force in Japanese system Thus larger labor force in Japanese system engaged in distribution and retailing than in engaged in distribution and retailing than in the U.S.the U.S.


European system falls in between US and Japanese European system falls in between US and Japanese in efficiency and scale.in efficiency and scale.

Northern European retailers are similar to US Northern European retailers are similar to US system – concentration levels are high. In some system – concentration levels are high. In some national markets 80% or more of sales in food or national markets 80% or more of sales in food or home products are accounted for by less than five home products are accounted for by less than five firms.firms.

In Southern Europe, retailing is more fragmented – In Southern Europe, retailing is more fragmented – traditional retail operate alongside big box retailers.traditional retail operate alongside big box retailers.


In Central Europe, privatization of retail trade In Central Europe, privatization of retail trade resulted in change from highly concentrated resulted in change from highly concentrated govt. controlled system to a system which is govt. controlled system to a system which is highly fragmented by many small family highly fragmented by many small family owned retailers.owned retailers.

Factors which have created these differences Factors which have created these differences are social & political objectives; geographical are social & political objectives; geographical and market size.and market size.

Structure of Retailing & Structure of Retailing & Distribution ChannelsDistribution Channels

Top priority of Japanese policy is to reduce Top priority of Japanese policy is to reduce unemployment by protecting small retailers.unemployment by protecting small retailers.

Several European countries have laws Several European countries have laws protecting small retailers. E.g. in 1996 France protecting small retailers. E.g. in 1996 France tightened laws for opening stores over 3000 tightened laws for opening stores over 3000 sq.ft.sq.ft.

Several European govts. Passed strict zoning Several European govts. Passed strict zoning laws to prevent green spaces, inhibit large laws to prevent green spaces, inhibit large scale retailing in suburbs.scale retailing in suburbs.

Second, population density in U.S.is much Second, population density in U.S.is much lower than in Europe and Japan. Thus Europe lower than in Europe and Japan. Thus Europe and Japan have low cost real estate available for and Japan have low cost real estate available for building large stores.building large stores.

Third, US Retail market is larger than Japan or Third, US Retail market is larger than Japan or any single European country. In Europe retail any single European country. In Europe retail chains and distribution centres operate within a chains and distribution centres operate within a single country, hence cannot economies of scale single country, hence cannot economies of scale of US firms serving broader customer base. of US firms serving broader customer base.



Even with efforts to make trade within Even with efforts to make trade within European countries simple and more efficient, European countries simple and more efficient, there are several trade barriers which are not there are several trade barriers which are not existent in the U.S.existent in the U.S.

OPPORTUNITIES IN RETAILINGOPPORTUNITIES IN RETAILINGManagement OpportunitiesManagement Opportunities

Retailers hire people with wide range of skills and Retailers hire people with wide range of skills and interests to cope with the competition.interests to cope with the competition.

Students view Retailing as part of marketing as Students view Retailing as part of marketing as Distribution is part of manufacturer’s marketing Distribution is part of manufacturer’s marketing function.function.

But Retailers undertake most traditional business But Retailers undertake most traditional business activities- raising finance, purchase goods and activities- raising finance, purchase goods and services, develop MIS, design & develop new services, develop MIS, design & develop new products, undertake marketing activities like products, undertake marketing activities like advertising, promotions, sales force management, and advertising, promotions, sales force management, and market research.market research.

OPPORTUNITIES IN RETAILINGOPPORTUNITIES IN RETAILINGManagement OpportunitiesManagement Opportunities

Retail Managers are often given considerable Retail Managers are often given considerable responsibility early in their careers.responsibility early in their careers.

Retail Management is also financially Retail Management is also financially rewarding for those who perform well.rewarding for those who perform well.

Significance of Retail IndustrySignificance of Retail Industry

Consumer money drives the economy and Consumer money drives the economy and retail is where the consumers spend the retail is where the consumers spend the money. Retailers – restaurants, boutiques, money. Retailers – restaurants, boutiques, mail-order companies, e-tailers - these are mail-order companies, e-tailers - these are establishments where retailers spend their hard establishments where retailers spend their hard earned money.earned money.

When a sale takes place, retailers realize When a sale takes place, retailers realize revenue and so do the wholesalers, revenue and so do the wholesalers, distributors, manufacturers etc.distributors, manufacturers etc.


Retail transactions serve as a means for Retail transactions serve as a means for collecting sales taxes which supports public collecting sales taxes which supports public services of all kinds.services of all kinds.

Retail goods are traditionally divided into Retail goods are traditionally divided into durables and non- durables. durables and non- durables.

Durables are furniture, appliances, cars which Durables are furniture, appliances, cars which are expected to last 5 years or more; Non-are expected to last 5 years or more; Non-durables include food, clothing and numerous durables include food, clothing and numerous others which form the bulk.others which form the bulk.


Retail industry offers immense opportunities Retail industry offers immense opportunities to entrepreneurs and workforce for various to entrepreneurs and workforce for various jobs. Retail offers opportunities to buyers, jobs. Retail offers opportunities to buyers, suppliers, and those managing the operations, suppliers, and those managing the operations, finances, and administration of retail finances, and administration of retail companies.companies.

Entrepreneurial OpportunitiesEntrepreneurial Opportunities

Retailing provides opportunities who wish to Retailing provides opportunities who wish to start their own business.start their own business.

Some of the world’s richest people are Some of the world’s richest people are retailing entrepreneurs. E.g. Sam Walton.retailing entrepreneurs. E.g. Sam Walton.

In 1994, Jeffrey Bezos, 30 year old son of a In 1994, Jeffrey Bezos, 30 year old son of a Cuban refugee, quit his highly paying job in Cuban refugee, quit his highly paying job in Wall Street to start an Internet business when Wall Street to start an Internet business when he found that Internet usage was growing at he found that Internet usage was growing at 2300%.2300%.


While his wife was driving the cross country, While his wife was driving the cross country, Jeffrey made his business plan on a laptop and Jeffrey made his business plan on a laptop and rounded up the business plan to launch the first rounded up the business plan to launch the first internet book retailer – Amazon.cominternet book retailer – Amazon.com

It was so named after the river that carries the It was so named after the river that carries the largest volume of water symbolizing Bezos’s largest volume of water symbolizing Bezos’s objective of having the greatest volume of objective of having the greatest volume of internet sales.internet sales.


Today, Amazon. com sells more than just Today, Amazon. com sells more than just books and CDs e.g. its consumer electronics books and CDs e.g. its consumer electronics business sells 25,000 items compared to 5000 business sells 25,000 items compared to 5000 in a big electronics superstore.in a big electronics superstore.

Amazon has also developed partnerships with Amazon has also developed partnerships with Sotheby’s auction house, Toys “R” Us, and Sotheby’s auction house, Toys “R” Us, and others.others.


In 1945, Luciano Benetton lost his father when In 1945, Luciano Benetton lost his father when he was only 10 years old.he was only 10 years old.

In 1960s, he started a sweater company with In 1960s, he started a sweater company with his sister which has now grown to UCB his sister which has now grown to UCB operating in 120 countries with business of operating in 120 countries with business of over $2 billion.over $2 billion.

Most know Georgio Armani as a fashion Most know Georgio Armani as a fashion designer. His worth is $ 1.7 billion and he designer. His worth is $ 1.7 billion and he owns more than 260 stores.owns more than 260 stores.


As many as 10% of the world’s billionaires are As many as 10% of the world’s billionaires are retailers. Retail accounts for over 8% of GDP retailers. Retail accounts for over 8% of GDP in western countries and is one of the largest in western countries and is one of the largest employers. In U.S.A., more than 22 million employers. In U.S.A., more than 22 million Ameriacns are employed in the retailing Ameriacns are employed in the retailing industry in over 2 million retail stores.industry in over 2 million retail stores.


Retailing in the developed world is more Retailing in the developed world is more organized than in India. In USA it is 80%; organized than in India. In USA it is 80%; Western Europe is 70%; it is 40% in Brazil Western Europe is 70%; it is 40% in Brazil and Argentina and 35% in Korea and Taiwan.and Argentina and 35% in Korea and Taiwan.

DEVELOPING A RETAIL DEVELOPING A RETAIL STRATEGYSTRATEGY

Retail Strategy identifies Retail Strategy identifies Target MarketTarget Market Nature of Merchandise and services which Nature of Merchandise and services which

Retailer will offer to cater to the Target Retailer will offer to cater to the Target Market.Market.

How Retailer will develop long-term How Retailer will develop long-term advantage over competition.advantage over competition.


Strategy of Wal-Mart and Toys ”R” Us.Strategy of Wal-Mart and Toys ”R” Us. WAL-MART:WAL-MART: Target Market – Small Towns (under 35,000 popn).Target Market – Small Towns (under 35,000 popn). Merchandise – Branded; Low Price in broad Merchandise – Branded; Low Price in broad

categories ranging from laundry detergents to girl’s categories ranging from laundry detergents to girl’s dresses. Wal-Mart offers different categories of dresses. Wal-Mart offers different categories of merchandise but selection in each category is limited. merchandise but selection in each category is limited. E.g. A store may have only 3 brands of detergents in E.g. A store may have only 3 brands of detergents in two sizes while a supermarket carries 8 brands in five two sizes while a supermarket carries 8 brands in five sizes.sizes.


TOYS “ R “ US:TOYS “ R “ US: Target Market – Suburban areas of large cities.Target Market – Suburban areas of large cities. Merchandise – Specialize in Toys, games, Merchandise – Specialize in Toys, games,

bicycles and furniture for children. Has limited bicycles and furniture for children. Has limited categories of merchandise but has all different categories of merchandise but has all different types and brands of toys and games currently types and brands of toys and games currently available.available.


Both Wal-Mart and Toys “ R “ Us emphasize self Both Wal-Mart and Toys “ R “ Us emphasize self service.service.

Since they emphasize Low-price, both have taken Since they emphasize Low-price, both have taken strategic decisions to develop cost advantage over strategic decisions to develop cost advantage over their competitors.their competitors.

Both have sophisticated distribution and management Both have sophisticated distribution and management information systems to manage inventory.information systems to manage inventory.

They buy at low prices because of their strong They buy at low prices because of their strong relationship with their suppliers.relationship with their suppliers.

STRATEGIC DECISION AREASSTRATEGIC DECISION AREAS

Key Strategic Decision Areas are:Key Strategic Decision Areas are:a)a) Market Strategy.Market Strategy.b)b) Financial Strategy.Financial Strategy.c)c) Organizational Structure and HR Strategy.Organizational Structure and HR Strategy.d)d) Information Systems and Supply Chain Information Systems and Supply Chain

Strategies.Strategies.e)e) Customer Relationship Management Customer Relationship Management

Strategies. Strategies.


Retail Market Strategy based on Environment Retail Market Strategy based on Environment and the firm’s strengths and weaknesses. and the firm’s strengths and weaknesses. When major environmental changes occur, the When major environmental changes occur, the Retailer has to suitably alter current strategy to Retailer has to suitably alter current strategy to take advantage of new opportunities or avoid take advantage of new opportunities or avoid new threats.new threats.

Retailer’s market strategy must be consistent Retailer’s market strategy must be consistent with the financial objectives.with the financial objectives.


Location Strategy important for both consumer Location Strategy important for both consumer and competition.and competition.

First, location is consumer’s prime First, location is consumer’s prime consideration for patronizing a store - e.g. a consideration for patronizing a store - e.g. a customer buys petrol from the service station customer buys petrol from the service station closest to his residence or place of work; closest to his residence or place of work; patronizes a mall also for the same reasons.patronizes a mall also for the same reasons.


Second, Location means long-term advantage Second, Location means long-term advantage over competition. When a Retailer has the best over competition. When a Retailer has the best location, a competing retailer has to settle for location, a competing retailer has to settle for the second best location.the second best location.


Organization Design and HRM Strategy Organization Design and HRM Strategy connected to market strategy. E.g. Retailers connected to market strategy. E.g. Retailers serving national or regional markets must serving national or regional markets must choose between efficiency of centralized choose between efficiency of centralized buying and the need to tailor products and buying and the need to tailor products and services to suit local requirements. Retailers services to suit local requirements. Retailers who require high-end quality of service for who require high-end quality of service for their customers must motivate their sales their customers must motivate their sales associates to fulfill the same.associates to fulfill the same.


Improved Information and SCM systems provide Improved Information and SCM systems provide retailers strategic advantage over competitors. retailers strategic advantage over competitors. Sophisticated computer and distribution system Sophisticated computer and distribution system monitors flow of information and merchandise from monitors flow of information and merchandise from vendors to RDCs to Stores. These technologies are vendors to RDCs to Stores. These technologies are part of an over-all inventory management system that part of an over-all inventory management system that enables retailers to give customers better choice of enables retailers to give customers better choice of merchandise with lesser inventory investment.merchandise with lesser inventory investment.


Basic strategy is understanding and satisfying Basic strategy is understanding and satisfying customer’s needs.customer’s needs.

More important is to understand and cater to the More important is to understand and cater to the wants of the retailer’s valued customers – these are wants of the retailer’s valued customers – these are the ones who contribute the major share of the the ones who contribute the major share of the retailer’s sales and profits.retailer’s sales and profits.

CRM focuses on identifying and building loyalty CRM focuses on identifying and building loyalty with the retailer’s most valued customers.with the retailer’s most valued customers.

Example: J.C.Penney – Case Study.Example: J.C.Penney – Case Study.

Implementing Retail StrategyImplementing Retail Strategy

To implement Retail Strategy, you need to To implement Retail Strategy, you need to develop a Retail Mix which is a combination develop a Retail Mix which is a combination of factors used to satisfy customer needs and of factors used to satisfy customer needs and influence their purchase decisions.influence their purchase decisions.


Elements in Retail Mix are:Elements in Retail Mix are: Types of Merchandise and Services.Types of Merchandise and Services. Merchandise Pricing.Merchandise Pricing. Advertising & Promotional Programmes.Advertising & Promotional Programmes. Store design.Store design. Merchandise display.Merchandise display. Customer service.Customer service. Store Location.Store Location.


Managers responsible for buying have to Managers responsible for buying have to decidedecide

- how much and what to buy.- how much and what to buy.

- select the right vendors and purchase terms.- select the right vendors and purchase terms.

- Fix retail prices.- Fix retail prices.

- How to advertise & promote.- How to advertise & promote.


Store Managers have to decideStore Managers have to decide

- how to recruit, select the right kind of sales - how to recruit, select the right kind of sales people.people.

- how to motivate them.- how to motivate them.

- where and how to display merchandise.- where and how to display merchandise.

- the kind of service to provide customers.- the kind of service to provide customers.

The Retail BusinessThe Retail Business

Key to successful Retailing is offering the Key to successful Retailing is offering the right product, at the right price, in the right right product, at the right price, in the right place, at the right time, in the right quantity, in place, at the right time, in the right quantity, in the right assortments and make a profit.the right assortments and make a profit.

To accomplish this, retailers must understand To accomplish this, retailers must understand the customers needs and wants and what the customers needs and wants and what competitors offer now and in the future.competitors offer now and in the future.

The Retail BusinessThe Retail Business

A Retailer has to take a wide range of A Retailer has to take a wide range of decisions – from deciding the price of a piece decisions – from deciding the price of a piece of apparel or whether a big store should be of apparel or whether a big store should be built in a mall or not.built in a mall or not.

Correct decision making is the key to success Correct decision making is the key to success in a retail venture.in a retail venture.

Retailer’s CharacteristicsRetailer’s Characteristics

Direct end-user interaction in Retailing.Direct end-user interaction in Retailing. Only point in Value Chain to provide a Only point in Value Chain to provide a

platform for promotions.platform for promotions. Sales at Retail level in smaller unit sizes.Sales at Retail level in smaller unit sizes. Location is critical in Retail.Location is critical in Retail. In most Retail business, service is as important In most Retail business, service is as important

as the core products.as the core products.


There are a larger no. of retail units compared There are a larger no. of retail units compared to other members of the value chain. This to other members of the value chain. This happens primarily to meet the requirements of happens primarily to meet the requirements of geographical coverage and population density.geographical coverage and population density.


Direct Interaction with Customers: Retailer Direct Interaction with Customers: Retailer has direct interaction with the end user of has direct interaction with the end user of goods or services – act as intermediaries goods or services – act as intermediaries between end users and wholesalers and between end users and wholesalers and manufacturers. As such they are in a better manufacturers. As such they are in a better position to gauge the consumers response and position to gauge the consumers response and preferences to the manufacturers or suppliers. preferences to the manufacturers or suppliers. This helps manufacturers to redefine products This helps manufacturers to redefine products and marketing strategy.and marketing strategy.


Manufacturers require strong retail network Manufacturers require strong retail network for reach of product and to obtain strong for reach of product and to obtain strong platform for promotions and point – of-platform for promotions and point – of-purchase advertising.purchase advertising.

Because of the importance of retailing in the Because of the importance of retailing in the value chain, many manufacturers have become value chain, many manufacturers have become retailers themselves by setting up exclusive retailers themselves by setting up exclusive stores for their brands.stores for their brands.


This has provided direct contact with This has provided direct contact with customers and also wide publicity.customers and also wide publicity.

Retailing provides extensive support for Retailing provides extensive support for products which are information intensive e.g. products which are information intensive e.g. consumer durables.consumer durables.


Hence, retailers must have proper inventory Hence, retailers must have proper inventory control and enforce effective cost control control and enforce effective cost control measures with each transaction.measures with each transaction.

Credit verification, personnel and value added Credit verification, personnel and value added activities like packaging, gift – wrapping, activities like packaging, gift – wrapping, promotional incentives all add up to costs. To promotional incentives all add up to costs. To offset this, retailers must attract max. no. of offset this, retailers must attract max. no. of shoppers.shoppers.


Many customers in India buy grocery items Many customers in India buy grocery items on a daily basis rather than on weekly or on a daily basis rather than on weekly or monthly basis. Inventory management is tough monthly basis. Inventory management is tough for retailers because of the many minor for retailers because of the many minor transactions and large no. of customers.transactions and large no. of customers.


Point of Purchase Display and Promotions: A Point of Purchase Display and Promotions: A big chunk of retail sales is a result of unplanned big chunk of retail sales is a result of unplanned or impulse purchases. Hence, a retailer must or impulse purchases. Hence, a retailer must take advantage of this and tries to attract he take advantage of this and tries to attract he customer through eye catching display, point-customer through eye catching display, point-of- purchase merchandise, store layout etc. of- purchase merchandise, store layout etc. Impulse goods like chocolates, snack food, Impulse goods like chocolates, snack food, magazines, shaving blades sell faster in high magazines, shaving blades sell faster in high visibility and high traffic locations.visibility and high traffic locations.


Large No. of Retail Outlets: No. of outlets Large No. of Retail Outlets: No. of outlets have to be high to reach out to the max. have to be high to reach out to the max. number of customers. Location of the retail number of customers. Location of the retail store plays an important role and this is done store plays an important role and this is done keeping in mind potential demand, supply of keeping in mind potential demand, supply of merchandise, store image and the geographical merchandise, store image and the geographical location.location.

Role of Services in RetailingRole of Services in Retailing

Store location and facilities are important. Store location and facilities are important. Parking facilities, extended hours of shopping, Parking facilities, extended hours of shopping, children’s play areas, wash rooms, trial rooms children’s play areas, wash rooms, trial rooms are important.are important.

Efficient customer service to make the Efficient customer service to make the customer feel comfortable and important.customer feel comfortable and important.

Role of Services in RetailingRole of Services in Retailing

Though shopping over the phone or through Though shopping over the phone or through internet have become popular, majority of internet have become popular, majority of Indian customers still prefer to visit stores for Indian customers still prefer to visit stores for shopping.shopping.

Stores are popular because consumers need to Stores are popular because consumers need to see and test products, there is social see and test products, there is social interaction, compare different brands and leads interaction, compare different brands and leads to impulse buying.to impulse buying.

Theories of RetailingTheories of Retailing

Retailing is dynamic. New Retail firms bring Retailing is dynamic. New Retail firms bring innovative approaches and change the industry innovative approaches and change the industry as enter, develop and grow.as enter, develop and grow.

New Retailers introduce new ideas e.g. Home New Retailers introduce new ideas e.g. Home shopping clubs through Cable TV. Such shopping clubs through Cable TV. Such retailers are at the entry stage – development retailers are at the entry stage – development and introduction. Over time consumer’s and introduction. Over time consumer’s acceptance of this can be known.acceptance of this can be known.


Retailers who survive the development and Retailers who survive the development and introduction stage enter the ‘growth’ stage.introduction stage enter the ‘growth’ stage.

As business grows, it gradually moves into the As business grows, it gradually moves into the ‘maturity’ stage. Here, competition intensifies and ‘maturity’ stage. Here, competition intensifies and strategies must be developed to maintain existing strategies must be developed to maintain existing market share. Most department stores today are in market share. Most department stores today are in this stage.this stage.

Those who cannot compete effectively move into the Those who cannot compete effectively move into the ‘decline’ stage and ultimately are out of business.‘decline’ stage and ultimately are out of business.


In Retailing, change is not a matter of chance; In Retailing, change is not a matter of chance; it is virtual certainty.it is virtual certainty.

Identify three Retailers who are now in the Identify three Retailers who are now in the ‘decline’ stage and the reasons.‘decline’ stage and the reasons.


Dialectic ProcessDialectic Process: This is an evolutionary : This is an evolutionary theory based on the premise that retail theory based on the premise that retail institutions evolve. New retail formats emerge institutions evolve. New retail formats emerge by adopting characteristics from other forms of by adopting characteristics from other forms of retailers similar to the theory of human retailers similar to the theory of human evolution – a child is the result of pooled evolution – a child is the result of pooled genes of two individuals.genes of two individuals.


Dialectic Process: It is also the blending of two Dialectic Process: It is also the blending of two opposite store types into a superior form. E.g. opposite store types into a superior form. E.g. a specialty store offers specialized a specialty store offers specialized merchandise, wide array of services, attractive merchandise, wide array of services, attractive surroundings. This combined with a discount surroundings. This combined with a discount store will become a speciality discount store store will become a speciality discount store with wide customer services, broad assortment with wide customer services, broad assortment of specialized merchandise, attractive of specialized merchandise, attractive surroundings and at discounted prices.surroundings and at discounted prices.


Gravity Model: Gravity Model: This is a theory about the This is a theory about the structure of market areas. Volume of structure of market areas. Volume of purchases by consumers and the frequency of purchases by consumers and the frequency of trips to the outlets are a function of the size of trips to the outlets are a function of the size of the size of the store and also decides on the the size of the store and also decides on the distance between the store and the origin of distance between the store and the origin of the shopping trip.the shopping trip.


Retail Accordion TheoryRetail Accordion Theory: This theory : This theory suggests that retail institutions go from outlets suggests that retail institutions go from outlets with wide assortments to specialized, narrow with wide assortments to specialized, narrow and compact assortments and then back again and compact assortments and then back again to the more general and wide assortment to the more general and wide assortment situation. This is also called the general – situation. This is also called the general – specific – general theory.specific – general theory.


Retail Lifecycle TheoryRetail Lifecycle Theory: This is a theory of : This is a theory of retail competition that states that retail retail competition that states that retail institutions – like the products they distribute, institutions – like the products they distribute, pass through an identifiable cycle. This cycle pass through an identifiable cycle. This cycle is in four distinct stages – Innovation – is in four distinct stages – Innovation – Accelerated development – maturity – decline.Accelerated development – maturity – decline.


Wheel of Retailing TheoryWheel of Retailing Theory: A theory of retail : A theory of retail institutional changes that explains retail institutional changes that explains retail evolution with an institutional life cycle evolution with an institutional life cycle concept. New retailers enter as low-status, low concept. New retailers enter as low-status, low margin, and low price operations. As they margin, and low price operations. As they achieve success, they increase their customer achieve success, they increase their customer base an sales; products are upgraded, facilities base an sales; products are upgraded, facilities improved, new services added. Prices and improved, new services added. Prices and margins are increased to support higher costs.margins are increased to support higher costs.


New retailers enter market to fill the gap in New retailers enter market to fill the gap in low-status, low margin and low price niche. A low-status, low margin and low price niche. A retail store type emerges, enjoys accelerated retail store type emerges, enjoys accelerated growth, reaches maturity and declines. The growth, reaches maturity and declines. The ‘wheel of retailing’ theory has been criticized ‘wheel of retailing’ theory has been criticized because it does not explain all the changes in because it does not explain all the changes in retailing – e.g. many stores do not begin as retailing – e.g. many stores do not begin as low price, low service outlets.low price, low service outlets.


Natural Selection TheoryNatural Selection Theory: A theory of retail : A theory of retail institutional changes that states retailers that institutional changes that states retailers that can most effectively adapt to environmental can most effectively adapt to environmental changes are the ones that are most likely to changes are the ones that are most likely to prosper and survive. E.g. TV home shopping prosper and survive. E.g. TV home shopping is expanding and growing because they are is expanding and growing because they are responding to changes in the demands of the responding to changes in the demands of the consumers.consumers.


Central Place TheoryCentral Place Theory: This represents a model : This represents a model that ranks communities according to the that ranks communities according to the assortment of goods available in each. At the assortment of goods available in each. At the bottom of the hierarchy ae communities that bottom of the hierarchy ae communities that represent the smallest central places which represent the smallest central places which provide the basic necessities of life. Further up the provide the basic necessities of life. Further up the hierarchy are larger central places which carry all hierarchy are larger central places which carry all goods and services found in lower order central goods and services found in lower order central places plus more specialized ones that are not places plus more specialized ones that are not necessary.necessary.


All the theories suffer from lack of emphasis on All the theories suffer from lack of emphasis on customer taste, wants, desires and expectations. By customer taste, wants, desires and expectations. By patronizing stores that meet their needs and avoiding patronizing stores that meet their needs and avoiding those that do not, consumers exert a powerful force those that do not, consumers exert a powerful force on the evolution of retailing.on the evolution of retailing.

Retailers will succeed by knowing their customers Retailers will succeed by knowing their customers well. Customers expect retailers to provide value not well. Customers expect retailers to provide value not only in the merchandise but in the total shopping only in the merchandise but in the total shopping experience – pleasant atmospherics, courteous service experience – pleasant atmospherics, courteous service and special touches like live entertainment.and special touches like live entertainment.

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