unit 1 understand retail

8/9/2019 Unit 1 Understand Retail

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Unit- I

Understanding Retailing

Dr.Yogananthan.


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Objectives ..

What is retailing? Types & Functions Key drivers, challenges. Retail in India


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Food for thought

Interface between producer & end consumer. Firsthand information producer & end consumer.

High sensitivity towards profit (win win). Order lead time. Identify Retail Brand Identity . Shift trend in Merchandise mix. Facilitator / Coordinator for VAS.


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Contents

Introduction to Retail Management Types & classification of Retailing Functions of retailer Retailers creating value for customers Functions of retailing Key drivers and challenges in Retailing Retail industry in India.

Future of retailing. Summary


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The Marketing Retail Equation

Manufacturer

Retailer

Consumer

Manufacturer

Consumer

Manufacturer

Wholesaler

Retailer

Consumer

F e e d b a c k


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BASIC CONCEPT: The Retailer

The entity at the penultimate position in adistribution/marketing channel, that sells to thefinal consumer

Functions: breaks bulk (distributor of small quantities) editor of product range provides goods in convenient location finances stock

The term retail sector has been used to refer to atype of retailer, based principally on the productoffer.


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Retailing may be understood as the final step in thedistribution of merchandise for consumption by the endconsumers.

Retailing is responsible for matching final consumerdemand with supplies of different marketers.

Retailing is high intensity competition industry, Thereasons for its popularity lie in its ability to provideeasier access to variety of products, freedom of choiceand many services to consumers.

The Indian retail is dotted by traditionally market placecalled bazaars or haats comprises of numerous smalland large shops, selling different or similar merchandise


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Types and Classification of Retailing.


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Types of Retailers

Specialty Stores Department Stores

Supermarkets

Discount Stores Convenience

Stores Off-Price Retailers

Superstores

Goal 2: Know the major types of retailers


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1. General merchandise retailer : general merchandiseretailer carry a variety of product lines, withconsiderable depth. Some major types of thesestores include supermarkets andhypermarkets , discount stores anddepartment stores.

o Super market : A supermarket is a large self serviceretail store that carries a wide variety of consumerproducts under one roof , such as complete line of

food products , laundry requirement, householdmaintenance items. In India cooperative havemanaged some supermarkets for quite sometimelike super bazaar in Delhi, apna bazaar shakaribhandar etc.


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o Discount store : these stores are self service, standardgeneral merchandise retailers regularly offering brandname and private brand items at low price, earn lowermargins and push for high sales turnover. Thecharacteristics of true discount stores includeSelling products at discounted price

Carry standard international , national, or store brandto build imageSelf service stores to minimize operational costsPreferred 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 islarger retail store organized into severaldepartments, offering a broad verity anddepth of product lines. The product mix mayinclude 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. Specialty Stores: specialty stores carry a narrow productmix with depth of assortment within the line.

The emphasis is on a limited number of complimentaryproducts 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.

3. Shopping Malls:shopping malls typically deal with severalbases and product categories and provide a large varietyof merchandise abs service. There are 96 operational mallsin India and expected to grow 158 by this current year.Ansal plaza (Delhi), Garuda mall (Bangalore) Sahara plazaGurgaon Spenser Plaza Chennai


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4. Retail chains: a retail chain operatesmultiple retail outlets under commonownership in different cities and towns.

To some extent the purchasing function

and decision making are coordinated orcentralized.Like Westside, Globus, Food world,McDonald's retail petrol outlets. Etc.


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Classification of Retailing

Amount of service Product lines

Relative prices Organizational approach

Self-service retailers Customers are willing to self-serve

to save money

Convenience stores and fast movingshopping goods Limited-service retailers

Most department stores Full-service retailers

Salespeople assist customers in

every aspect of shopping experience High-end department stores and

specialty stores

Retailers Are

ClassifiedBy:



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Retailing



Specialty stores Narrow product lines with deep

assortments

Department stores Wide variety of product lines

Supermarkets Convenience stores

Limited line Superstores

Food, nonfood, and services Category killers

Giant specialty stores

Retailers Are

ClassifiedBy:



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Retailing



Discount stores Low margins are offset by high

volume Off-price retailers Independent off-price retailers

TJ Maxx, Marshalls

Factory outlets

Levi Strauss, Reebok Warehouse clubs

Sams Club, Costco

Retailers Are

ClassifiedBy:



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Retailing Corporate chain stores

Commonly owned / controlled Voluntary chains

Wholesaler-sponsored groups of

independent retailers Retailer cooperatives

Groups of independent retailers who buy in bulk

Franchise organizations Based on something unique

Merchandising conglomerates Diversified retailing lines and forms

under central ownership

Amount of service

Product lines


Retailers Are

ClassifiedBy:



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Functions of a Retailer.


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Functions of a retaillier

From the customer point of view, the retailerserves him by providing the goods that he needsin the required assortment, at the required place

and time.

From an economic standpoint, the role of aretailer is to provide real added value or utility to

the customer. This comes four differentperspectives


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1. Form : First is utility regarding the form of aproduct that is acceptable to the customer.

The retailer does not supply raw material, butrather offers finished goods and services in aform that the customers want.

The retailer performs the function of sorting thegoods and providing us with an assortment of product in various categories.

2. Time: He cerates Time utility by keeping thestore 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 reducecosts. Final consumers, in contrast prefer a largevariety of goods and services to choose from andusually buy them in small units.

Retailers are able to balance the demands of bothsides, by collecting an assortment of goods fromdifferent sources, buying them in sufficiently largequantities and selling them to consumers in smallunits


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5. Breaking Bulk:to reduce transportation costs,manufacturer and wholesalers typically ship largecartons of the products, which are then tailored by

the retailers into smaller quantities to meetindividual consumption needs

6. Holding stock: Retailers maintain an inventory thatallows for instant availability of the product to theconsumers. It helps to keep prices stable andenables the manufacture to regulate production.

7. Promotional support: small manufacturers can useretailers to provide assistance with transport,storage, advertising, and pre- payment of merchandise.


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Study & Practice of Retailing A successful retail manager requires analyticaland creative skills. There are two methods for

the study and practice of retailing.

1) Analytical method Retail manager is a finder and investigator Systematic decisions

Standardized set of procedures, successformulas and guidelines.


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Conti..2) Creative Method The creative retail manager is an idea person. The manager must respond the unforeseen events in

the environment Imaginative and creative mind.3) A Two Pronged Approach Both methods are mainly implemented by the retail

manager. Retailers in the 21 st century cannot do without

creativity or analytical skills.


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Retailers & Consumers Retailers are close to consumers so they are in the best

position to understand their changing needs product and shopping needs and preferences

short term and long term changes Retailers add value to the product (e.g. display,information, after sales service)

Retailers form close relationships with customers (generateloyalty)

analysis of information (gathered electronically) provides insight into customer purchasing habits

retailers develop a retail brand identity


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MoneyShopping timeTravel timePhysical effortStressRisk to personal safetyRisk of wrong purchase

BENEFITS COSTS

High quality productsFavourite brandsWide range of productsGood shoppingenvironmentEase of usePleasant service

BALANCING BENEFITS AND COSTS TO CREATEVALUE


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FUNCTIONS OF RETAILING


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FUNCTIONS OF RETAILING

Retailing a customer focus Relationship among retailer & supplier Retail strategy - Marketing concepts for retailing

Key drivers Retailers performance


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6-step process for customer-focus

1. Create a great environment

2. Listen to your customer

3. Consider the Lifetime Value of your customer

4. Use direct mail

5. Employ relationship marketing principles

6. Provide rewards to your best customers


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Relationships among retailers & their suppliers

Complex relationships among retailers & their suppliers must beunderstood:1. Retailers are part of the distribution channel;2. Retailers are also major customers of goods & services for resale, store

fixtures, computer equipment, management consulting & insurance3. Retailers & their suppliers may have divergent viewpoints that need to

be reconciledExamples: Suguna chicken, Chocolate & Display, DVD packet unit sales,

shoes & show case stands, etc.


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Special characteristics of retailing

Small average sales Impulse purchases

Retailersstrategy

Popularity of stores

I t f d l i g &


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Importance of developing &applying a retail strategy

Any retailer should apply these 6 steps:1. Define the type of business in terms of the goods or service

category & the companys specific orientation2. Set long-run & short-run objectives for sales & profit, market

share, image,3. Determine the customer market to which to appeal on the basis of

its characteristics & needs4. Devise an overall, long-run plan that gives general direction to a

firm & its employees5. Implement an integrated strategy that combines such factors as

store location, product assortment, pricing, & advertising &displays to achieve objectives

6. Regularly evaluate performance & correct weaknesses or problems as they are observed


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Marketing concepts applied to retailing

customer orientation

Retailing RetailCoordinated effort concept strategy

Value-driven ( expec vs projected values)

Goal orientation


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1. Customer orientation: retailer determines theattributes & needs of its customers & endeavours tosatisfy these needs to the fullest

2. Coordinated effort: retailer integrates all plans &activities to maximize efficiency

3. Value driven: retailer offers good value to customers,whether it be a discounter or upscale; i.e. pricesappropriate for level of products & customer service

4. Goal orientation: retailer sets goals & then uses itsstrategy to attain them


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Key drivers of

Retailers performanceUnfortunately, this concept is not grasped by allretailers:

Some indifferent to customer needs, plan

haphazardly, , have prices that do not offer value,& have unclear goals Retailing concept is easy to adopt 3 issues that relate to a retailers performance in

terms of retailing concept:1. Total retail experience2. Customer service3. Relationship retailing

T t l t il i


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Total retail experience

Irrespective of the type of outlet, shoppers encounter atotal retail experience in making a purchase No. of sales people Displays, Prices Brands carried, Inventory on hand

If some part of the total experience is unsatisfactory,consumers may not buy a given good or service

One of the biggest challenges for todays retailers is

generating customer excitement


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Customer service Customer service has a strong impact on total retail experience

Among customer service strategy are: Store hours Parking access Shopper- friendliness of store layout Credit acceptance

Level & caliber of salespeople Amenities such as gift wrapping Rest room availability Employee politeness Handling special orders

Delivery policies Time spent at check-out lines Customer follow-up


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Relationship retailing

Seek to establish & maintain long-term bonds withcustomers

Retailers must thus concentrate on total retailexperience: monitor satisfaction with customer service stay in touch with the customers

To win in the long run customer must also win inthe long run

Due to advances in computer technology, it is nowmuch easier to build database


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Key Drivers and Challengesin Retailing.


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Key Drivers

1) Consumer Pulla) high income segment

b) Middle and lower income group2) Rising Incomes3) Explosion of Media

4) Change in Consumer Behavior


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Conti5) Consumerism Cycle

Over the time the distributor gains control over the market, at thisstage the distributor becomes an important link betweenmanufacturer and customer.

6) The rural Market waking up7)Establishment of the Supply Chain Entry restrictions for multinationals have been removed in nearly all

sectors This has enabled chain retailers to enjoy better range depth and

sourcing options as well as improved margins. According to a study, there are 18,000 stock keeping units (SKU),

while most retailers have the space for at most 5,000-7,000 units. Because of this real estate companies and other corporates into

investing in malls and other retail formats.


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Conti8) Emergence of Hubs of Retail Activity9) Change in Scale of Operations Subhiksha and Food World has many stores spread

over many cities.

This growing scale enables the supermarkets toeliminate links in the purchasing chain and to makedeals with food processors directly.

Because of huge purchases, HLL has dedicated ateam to deal with these emerging power retailers.


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Conti10) Entry to the Corporate Sector 11) Expansion of family owned businesses12) New Entrepreneurs13) Building chains around brands14) Foreign retailers looking for entry options Should have a tie up with some of the indian

retailers because of FDI restrictions.

Tesco, Kingfisher, Metro, Carrefour and Aholdare exploring entry options.


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Key Challenges1) The Kirana CRM practice Known about the customers families Credit and home delivery

Consumer familiarity runs from generation togeneration Open longer hours and stock most of the goods Consequently, a large number of customers are not

willing to pay a premium for the shoppingexperience promised by large format retailers.


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Conti2) High costs for the organized sector High expenses to organized sector . The lease cost up to 6-10 percent of sales

Manpower cost is lower at 5-6 percent of sales Capital costs are more in retail business due to

major renovations needed every 5-7 years.


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Conti..3) Specialization The real boom in organized retailing will come once

the supermarket start selling daily need goods at 90 percent of the regular price, as Carrefour is doing inChina.

Build strong sourcing networks that connect the business directly with farms, and sell fresh food atattractive prices.

Ex. Subhiksha ( 7-8 percent markdown on the MRP)

Indian consumers are buying mainly from store based retailers. Grocery still remains the main purchase from these stores.


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Conti4) Correct Merchandise Mix (inventory planning

and Management) Getting the right product mix is critical to

retailing Every retailer wants to have high-value, high

margin, and fast moving products.

The retailers use to check volumes is salesdensity, which shows the amount of sales per sq ft of shop space.


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Conti..

5) Strong IT support The backbone of retailing is IT It would require large investments that connect every aspect of the

operations seamlessly, from suppliers to the cash counters.6) Poor Infrastructure Cold chains Roads and rail infrastructure Efficiency of Supply Chain A strict quality control increases the prices of the merchandise


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Conti..

7) Industry Status The Indian Retail Council was formed in 2000. Unified tax laws The existing labour laws are difficult for shops to have flexible

timings The industry is expected to see further growth of organized

retailing in both food and non-food segments in the comingyears.

Indian retailing needs to adapt to change. The change can be in

terms of modification and creation of new formats or new products for the same targeted customers.


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Retail in India..


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Retail Evolutiona) Barter system

b) Haats periodic markets that form a major part of the ruralmarket system in India. This is a location which witnesses a

public gathering of buyers and sellers at fixed times at fixedlocations.

c) Melas Melas are fairs, and they can range fromcommodity fairs to religious fairs. It is estimated that morethan 25,000 melas are held annually in the country. It isestimated that the average outlets in every mela would bemore than 800.

d) Mandis Mandis are markets set up by the state governmentfor the sale of agricultural produce directly from thefarmers.


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Conti..

Public Distribution system was introduced in India in the year 1950. ( the evolution of the public distribution of grains in India)

Kendriya bandars (1963)

Mother dairy ( foods and provisions) Co-operative stores( In Mumbai, Bombay bazar) From the 1950s to the 1980s, investments in various industries

was limited due to low purchasing power and the govts policiesfavouring the small scale sctor.

From 1990s the Indian economy slowly progressed from beingstate led to becoming market friendly


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Conti

The first time organised retailing was noticed in the textilesector. Viveks, Nallis, Raymonds, Vimal, Garden etc. Thiswas the beginning of new era in retail in India

The vast middle class market demanded value for money products (Post liberalisation).

The concept of retail as entertainment came to India with theadvent of malls.

From 3 malls in the year 2000, to 25 in 2003, 220 malls in 2006,with a cumulative estimated space of 40 million sq.ft and over

600 malls by 2010, giving cumulative estimated retail space of as much as 100 million sq.ft.


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The Evolution of Retail in India [

Traditional formatsItinerant salesman

HaatsMelas

Mandis

Established formatsKirana shops

Convenience / departmental storesCompany / multi brand showrooms

PDS / fair price shopsCo-operative storesPan / Beedi shops

Emerging formatsExclusive retail outlets

HypermarketsMalls / specialty mallsMultiplexes

Rural oriented formatsFast food outlets etc.


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TraditionalFormats

Itinerant SalesmanHaatsMelas

Mandis etc .

Establishedformats

Kirana shopsConvenience/department stores

PDS/fair price shops

Pan/ Beedi shops

EmergingFormats

Exclusive retail outletsHypermarketInternal retail

Malls / Specialty MallsMultiplexes

Fast food outletsService galleries

The Evolution of retail in India


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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 top30 emerging markets in the world.

It is believed that India has the potential to deliver the fastest growth overthe next 50 years.

While barter would be considered to be oldest form of retail trade, sinceindependence , 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 about10 11 % of the GDP

The estimated size of the organized retail industry in Indiais Rs. 16,000 crores. This is 2 % of the total estimatedretail trade.Indian Retail trade increased from Rs. 2200 billion in 2000to Rs 3300 billion by the year 2005

India's first true shopping mall complete with foodcourts, recreation facilities and large car parking space was inaugurated as lately as in 1999 in Mumbai. (thismall 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 andMelas 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 thesingle largest retail chain existing in the country. theevolution of the PDS of Grains in India has its origin in therationing system introduced by the British during worldwar II


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The system was started in 1939 in Bombay andsubsequently extended to other cities and towns.

the system was abolished post war but howeverattaining independence India was forced toreintroduce it in 1950.

There was rapid increase in the ration shops( being increasingly called the Fair Price Shop orFPSs)

TheCanteen Stores Department

and thePost Offices

in India are also among the largest network of outlets in the country reaching population acrossthe country.

h di & ill i d i ( C)


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The Khadi & Village industries (KVIC)was also set up postindependence. The cooperative movement was againchampioned by the government.

India's Largest retail Chains:1. PDS(PUBLIC DISTRIBUTION SYSTEM):463,000

2. Post offices: 160,000

3. KVIC: 7,000

4. CSD (CANTEEN STORES DEPARTMENTS)Stores:3,400

(source business world marketing White book 2005)


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In the past decade, the Indian marketplace hastransformed dramatically. However from the 1950,s tothe 80,s, investment in various industries was limiteddue to low purchasing power in the hands of theconsumer and the governments policies favoring thesmall scale sector.

The first attempts at organized retailing were noticed inthe textiles sector. One of the pioneers in this field was

Raymonds which set up stores to retail fabric.


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Raymonds distribution network today comprises20,000 retailers and over 256 exclusiveshowrooms in over 120 cities of the country

Other textile manufacturing who set up their ownretail chains wee Reliance- which set up Vimalshowrooms and Garden Silk Mills, which set upGarden Vareli showrooms.


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Drivers of Retail change in India major drivers :1. Changing Income Profiles: Steady economic growth

fuelled the increase in disposable income in India. The average middle class family's disposableincome rose by more than 20% between 1999-

2003.2. Diminishing difference between Rural and urban India: RuralIndia accounts for over 75% of India populationand this in itself offers a tremendous opportunityfor generating volume driven growth. Tax benefit.

In year 2002-03 LIC sold 50% of its policies inrural India. Same BSNL also sold its 50%connection in small towns .


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3. Changes in Consumption patterns: Occupational changesand expansion of media have caused a significantchange in the way the consumer lives and spends hismoney.

o The changes in income brought about changes in theaspirations and the spending patterns of theconsumers. the buying basket of the consumerchanged

4. The emergence of a young Earning India : Nearly 70% of the Indian population is below the age of 34. takingadvantages of employment opportunity in thebooming service sector these young Indians areredefining 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 sectors5. Jewellery retail6. Footwear retail7. Time Wear Retail8. Fuel Retail/ petro retail


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Challenges to retail Development inIndia

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 (RsCr)

2001-02 2007 CAGR (%)(compound Annual

growth rate)

TOTAL 16,000 37,216 18Food 1,800 7,473 33

Clothing 4,950 10,423 16

Cons.Durables 1,650 3,787 18

Books & Music 450 1,426 26

Share of organized & unorganized retail with comparison


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source: Ernst &Young, The Great Indian Retail Story, 2006

85 15

81 19

55 45

40 60

36 64

30 70

20 80

3 97

1 99

0% 20% 40% 60% 80% 100%

USA

TAIWAN

MALASIA

THAILAND

BRAZIL

INDONESIA

CHINA

INDIA

PAKISTAN

ORGANISED

UNORGANISED


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Retail Trade- India, US and China

Trade($ bn) Employment(%) Shops(million) OrganizedSector

share (%)India 180-394 7 12 2-3China

360 12 2.7 20US 3800 12.6-16 15.3 80


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Future of Retailing.


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The Future of Retailing New retail forms and shortening retail life cycles

Wheel-of-retailing concept

Growth of nonstore retailing Mail-order, television, phone, online shopping

Retail convergence

The merging of consumers, products, prices, andretailers



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The Future of Retailing Rise of mega retailers

Growing importance of retail technology Global expansion of major retailers Retail stores as Communities or Hangouts



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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 lowprices, margins, and status. The low prices areusually the result of some innovative cost-cuttingprocedures and soon attract competitors.

2. With the passage of time, these businesses strive tobroaden their customer base and increase sales.

Their operations and facilities increase and becomemore expensive.


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3. They may move to better up market locations, startcarrying higher quality products or add services andultimately emerge as a high cost price serviceretailer.

4. By this time newer competitors as low price, lowmargin, low status emerge and these competitorstoo follow the same evolutionary process.

5. The wheel keeps on turning and department stories,supermarkets, and mass merchandise went throughthis cycles.


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Top 10 retailers worldwideRank Retailers No. of stores Sales 2000

owned (US $ Mill.)1 Wal-Mart (USA) 4178 100,0002 Carrefour (France) 8130 61,0473 The Kroger Co. (USA) 3445 49,0004 Home Depot (USA) 1134 45,7385 Royal Ahold (USA) 7150 45,729

6 Metro AG (Germany) 2169 44,1897 Kmart Corporation (USA) 2105 37,0288 Sears Roebuck (USA) 2231 36,8239 Albertsons Inc. (USA) 2512 36,36210 Target Corporation (USA) 1307 36,362

Source: Price Waterhouse Coopers


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Retailing and wholesaling, Philip Kotler, web based article. Introduction to retail product management-

www.routledge.com/textbooks/0415327156/ppt/slides1.ppt Retail management by Dr. Pooja Sharma,

www.infofanz.com/Download/MBA_MPA.../Retail-Management-1. ppt RETAILING MANAGEMENT I, Dr . Padmaja Rachapudi, web based article.

Retailing management, Levy & Weitz, Tata McGraw Hill company, Page 5-24.
http://www.infofanz.com/Download/MBA_MPA.../Retail-Management-1.ppthttp://www.infofanz.com/Download/MBA_MPA.../Retail-Management-1.ppthttp://www.infofanz.com/Download/MBA_MPA.../Retail-Management-1.ppthttp://www.infofanz.com/Download/MBA_MPA.../Retail-Management-1.ppt

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