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Sales and Retail Management Retail Management

Setting the Stage

Being close to the customers, retailers have a critical influence over the choice of the end customers.

Retail companies are those components of the distribution channel that interact directly with the end customers. Retail enterprises, therefore, tend to possess greater knowledge about the customers needs and aspirations

What is Retailing?
Retailing includes all the activities involved in selling products or services directly to final consumers for their personal, non-business use. Any Organization selling to final consumerswhether it is manufacture, wholesaler or retailer- is doing retailing.

What is Retailing?
Any business entity selling to consumers directly is retailing in a shop, in person, by mail, on the internet, telephone or a vending machine Retail also has a life cycle newer forms of retail come to replace the older ones the corner grocer may change to a supermarket Includes all activities involved in selling or renting products or services to consumers for their home or personal consumption

Characteristics of retailing
Order sizes tend to be small but many Caters to a wide variety of customers. Keeps a large assortment of goods Lot of buying in the outlet is impulse- inventory management is critical Selling personnel and displays are important elements of the selling process Strengths in availability and visibility Targeted customer mix decides the marketing mix of the retailer

Functions of Retailers
Marketing functions to provide consumers a wide variety Helps create time, place and possession utilities May add form utility (alteration of a trouser bought by a customer) Helps create an image for the products he sells

Functions of Retailers
Add value through:
Additional services extended store timings, credit, home delivery Personnel to identify and solve customer problems Location in a bazaar to facilitate comparison shopping

Types of Retailers-Retail Formats

Retailers are classified based on:

Amount of Service They Offer Breadth & Depth of Product Lines Relative Prices Charged How They Are Organized

Amount of Service
Self-Service Retailers:
Serve customers who are willing to perform their own locate-compare-select process to save money.

Limited-Service Retailers:
Provide more sales assistance because they carry more shopping goods about which customers need information.

Full-Service Retailers:
Usually carry more specialty goods for which customers like to be waited on.

Product Line Classification

Specialty Stores: Carry narrow product lines with deep assortments within those lines.

Department Stores: Carry a wide variety of product linestypically clothing, home furnishings, and household goods. Each line is operated as a separate department managed by specialist buyers or merchandisers.

Product Line Classification


Large, low-cost, low-margin, high-volume, self-service store that carries a wide variety of food, laundry, and household products. Convenience Stores: Small stores located near residential areas that are open long hours 7 days a week and carry a limited line of high-turnover convenience goods.

Product Line Classification

Superstores: Much larger than regular supermarkets and offer a large assortment of routinely purchased food products, nonfood items, and services.

Category Retailers: Giant specialty stores that carry a very deep assortment of a particular line and is staffed by knowledgeable employees.

Relative Prices Classification

Discount Store:

A retail institution that sells standard merchandise at lower prices by accepting lower margins and selling at higher volume.

Off-Price Retailer:

Retailer that buys at less-than-regular wholesale prices and sells at less than retail. Examples are factory outlets, independents, and warehouse clubs.

Relative Prices Classification

Factory Outlet: Off-price retailing operation that is owned and operated by a manufacturer and that normally carries the manufacturers surplus, discontinued, or irregular goods.

Independent Off-Price Retailer: Off-price retailer that is either owned and run by entrepreneurs or is a division of a larger retail operation.

Relative Prices Classification

Warehouse Club: Off-price retailer that sells a limited selection of brand-name grocery items, appliances, clothing, and other goods at deep discounts to members who pay annual membership fees.

Organizational/Operational Classification

Chain Stores: Two or more outlets that are owned and controlled, have central buying and merchandising, and sell similar lines of merchandise.

Voluntary Chain: A wholesaler-sponsored group of independent retailers that engages in bulk buying and common merchandising.

Organizational/Operational Classification

Retailer Cooperative: A group of independent retailers that bands together to set up a jointly owned, central wholesale operation and conducts joint merchandising and promotion efforts.

Franchise: A contractual association between a manufacturer, wholesaler, or service organization (a franchiser) and independent businesspeople (franchisees) who buy the right to own and operate one or more units in the franchise system.

Organizational/Operational Classification

Merchandising Conglomerates: A free-form corporation that combines several diversified retailing lines and forms under central ownership, along with some integration of their distribution and management functions.

Global Retail Industry

The retail world globally is well organized and in most developed countries is controlled by major companies. It is estimated that the global business is retail worth US$6.6 trillion, most of which in the developed world is organized retail. In the developing countries, the retail trade is mostly unorganized. The size of the retail market varies from $2325 billion in the US, to $180 billion in India. Of this, the share of organized retail is 85% in the US and about 5% in India.

Global Retail Industry

China has 20% and Taiwan is big at 80%. The retail sector is considered as part of the service sector and in countries where organized retail is strong, the contribution of the service sector to the GDP is very high. It is estimated that the 2 million retail outlets in the US employ about 22 million people.

Global Retail Industry

Global Retail Industry

The Global Retail Market: issues and Challenges The significance of retail not only from its contribution to various economies but also by the level of employment generated by the industry. The world retail is a fast changing one and calls for constant evolution on the part of the retailers. A retailer not only needs to keep track of the competition, the changes in technology and the socio economic climate of the nation that he is operating in.

The Global Retail Market: issues and Challenges Emergence of new market Empowered consumer Technology enabled efficiencies The rise of e-age Emerging market investment in developed countries The fight to plant the flag in India Global consumers growth shifts away from the US The rise of long tail retailing

The Global Retail Market: issues and Challenges-how to overcome Agility in response and integration within the organization. Focus on customer experience Social Responsibility Retail investment in services Investment in developed countries Retailers as world class markerts

Indian Retail Industry

Traditionally retailing in India can be traced to The emergence of the neighborhood Kirana stores catering to the convenience of the consumers Era of government support for rural retail: Indigenous franchise model of store chains run by Khadi & Village Industries Commission 1980s experienced slow change as India began to open up economy. Textiles sector with companies like Bombay Dyeing, Raymond's, S Kumar's and Grasim first saw the emergence of retail chains Later Titan successfully created an organized retailing concept and established a series of showrooms for its premium watches

Indian Retail Industry

Indian Retail Industry

The latter half of the 1990s saw a fresh wave of entrants with a shift from Manufactures to Pure Retailers. For e.g. Food World, Subhiksha and Nilgiris in food and FMCG; Planet M and Music World in music; Crossword and Fountainhead in books. Post 1995 onwards saw an emergence of shopping centers, mainly in urban areas, with facilities like car parking targeted to provide a complete destination experience for all segments of society

Indian Retail Industry

Emergence of hyper and super markets trying to provide customer with 3 Vs - Value, Variety and Volume Expanding target consumer segment: The Sachet revolution - example of reaching to the bottom of the pyramid. At year end of 2000 the size of the Indian organized retail industry is estimated at Rs. 13,000 crore. It is estimated that there are over 12 million retail outlets in India of various sizes and varieties, most of them being in the unorganized sector. Unorganized sector contributes to about 95% of the retail business.

Indian Retail Industry The organized players

Indian companies
Future Group Reliance Retail Bharti Shoppers'Stop Pyramid Aditya Birla Group Subhiksha Spencer Group Tata Westside, Tata Chroma

Foreign Players

Nike (Single brand) Levis (Single brand) Wal-mart (JV) Metro (Cash&Carry)

Indian Retail Industry

Estimated over 12 mln retail outlets with most of them in the unorganized sector 10 outlets per 1000 population Average per capita space 2 sq ft compared to 15 sq ft in the US Organized retail is estimated between 4 to 7% but growing fast

Copyright Houghton Mifflin Company. All rights reserved.

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Retailing Trends - India

Consumer wants more benefits without additional costs Rising income levels cheap no longer works, but value for money Explosion of communication channels influences choices of products Increased literacy has made consumer more conscious of his bargaining power Growing number of urban nuclear families

Retailing Trends - India

Influence of retailer increasing assortment plus other facilities offered Rural consumers want the same things and as their urban counterparts and are willing to pay for it Better organized supply chains to cater to a large number of outlets in different locations Improved infrastructure helping the consumers Bigger volumes help in economies of scale

Retailing Trends - India

Retailing in India is witnessing a huge revamping exercise as can be seen in the graph India is rated the fifth most attractive emerging retail market: a potential goldmine. Estimated to be US$ 200 billion, of which organized retailing (i.e. modern trade) makes up 3 percent or US$ 6.4 billion As per a report by KPMG the annual growth of department stores is estimated at 24% Ranked second in a Global Retail Development Index of 30 developing countries drawn up by AT Kearney.

Retailing Trends - India

Traditionally three factors have plagued the retail industry:

Recent changes:

Unorganized : Vast majority of the twelve million stores are small "father and son" outlets Fragmented : Mostly small individually owned businesses, average size of outlet equals 50 s.q. ft. Though India has the highest number of retail outlets per capita in the world, the retail space per capita at 2 s.q. ft per person is amongst the lowest.

Experimentation with formats: Retailing in India is still evolving and the sector is witnessing a series of experiments across the country with new formats being tested out. Ex. Quasi-mall, sub-urban discount stores, Cash and carry etc. Store design : Biggest challenge for organised retailing to create a customer-pull environment that increases the amount of impulse shopping. Research shows that the chances of senses dictating sales are upto 10-15%. Retail chains like MusicWorld, Baristas, Piramyd and Globus are laying major emphasis & investing heavily in store design.

Retailing Trends - India

Traditionally three factors have plagued the retail industry: Recent changes:

Rural bias: Nearly two thirds of the stores are located in rural areas. Rural retail industry has typically two forms: "Haats" and Melas". Haats are the weekly markets : serve groups of 10-50 villages and sell day-to-day necessities. Melas are larger in size and more sophisticated in terms of the goods sold (like TVs)

Experimentation with formats: Emergence of discount stores: They are expected to spearhead the organised retailing revolution. Stores trying to emulate the model of WalMart. Ex. Big Bazaar, Bombay Bazaar, RPGs. Unorganized retailing is getting organized: To meet the challenges of organized retailing such as large cineplexes, and malls, which are backed by the corporate house such as 'Ansals' and 'PVR the unorganized sector is getting organized. 25 stores in Delhi under the banner of Provision mart are joining hands to combine monthly buying. Bombay Bazaar and Efoodmart formed which are aggregations of Kiranas.

Retailing Trends - India

Multiple drivers leading to a consumption boom: Favorable demographics Growth in income Increasing population of women Raising aspirations : Value added goods sales Food and apparel retailing key drivers of growth Organized retailing in India has been largely an urban phenomenon with affluent classes and growing number of double-income households.

Retailing Trends - India

More successful in cities in the south and west of India. Reasons range from differences in consumer buying behavior to cost of real estate and taxation laws. Rural markets emerging as a huge opportunity for retailers reflected in the share of the rural market across most categories of consumption ITC is experimenting with retailing through its e-Choupal and Choupal Sagar rural hypermarkets. HLL is using its Project Shakti initiative leveraging women self-help groups to explore the rural market. Mahamaza is leveraging technology and network marketing concepts to act as an aggregator and serve the rural markets.

Retailing Trends India Major Retailers 1. Clothing, textiles and fashion Accessories: 2. Food & food Services: 3. Consumer Durables: 4. Books & Music: Other emerging sectors 5. Jewellery retail 6. Footwear retail 7. Time Wear Retail 8. Fuel Retail/ petro retail

Retailing Trends India Major Retailers

Pantaloon Retail K Raheja Group Tata group RPG group Landmark group Bharti-Walmart Reliance AV Birla Group's Metro Viveks Ltd

Retailing Trends India Retailing formats in India

Malls Specialty Stores Discount Stores Department Stores Hyper marts/Supermarkets Convenience Stores Department Stores: Shopper Stop, Lifestyle, Pantaloons Hypermarkets: Big Bazaar, Spencer Supermarkets and Conv. Stores: Subhiksha, Trinethra

Retailing Trends-FDI
MNC players showing interest to operate in India Resistance from the existing players So far only cash-and-carry permitted Franchisees also allowed KFC, Tag Heuer, Swatch, McDonalds Jan 2006, 51% FDI permitted in single brand businesses:
All products should be under the same brand name Same brands should be sold internationally Branding at the time of manufacturing itself

Now 100% Now 51% in multi brand retail

Career in retailing
Buying and merchandising Marketing Store operations Sales Finance Human resources Technology and e-commerce Visual merchandising Supply chain management and logistics

Retail Locations

Why is Store Location Important for a Retailer? Location is typically prime consideration in customers store choice. Location decisions have strategic importance because they can help to develop sustainable competitive advantage. Location decisions are risky: invest or lease?

Types of Locations
Free Standing Sites City or Town Locations
Inner City Main Street

Shopping Centers Other Location Opportunities

Selecting a particular location type

Involves evaluating a series of trade-offs between
The size of the trade area (geographic area encompassing most of the customers who would patronize a specific retail site) the occupancy cost of the location The pedestrian and vehicle customer traffic The restrictions placed on store operations by the property manager The convenience of the location for customers

Freestanding Sites
location for individual store unconnected to other retailer Advantages:
Convenience High traffic and visibility Modest occupancy cost Separation from competition Few restrictions

No foot traffic No drawing power

City or Town Locations

Gentrification is bringing population back to the cities. Advantage to Retailers:
Young professionals Incentives to move provided by cities Jobs! Low occupancy costs High pedestrian traffic

Central Business District (CBD)

Draws people into areas during business hours Hub for public transportation Pedestrian traffic Residents

High security required Parking is poor Evenings and weekends are slow

Main Streets vs. CBDs

Occupancy costs lower than CBDs They dont attract as many people There are not as many stores Smaller selections offered Not as much entertainment Some planners restrict store operations

Shopping Centers
Shopping Center Management Controls:
Parking Security Parking lot lighting Outdoor signage Advertising Special events for customers

Other Location Opportunities

Airports Resorts Store within a Store Temporary or pop-up stores

Matching Location to Retail Strategy

The selection of a location type must reinforce the retailers strategy be consistent with
the shopping behavior size of the target market The retailers position in its target market

Department Stores Regional Mall Specialty Apparel Central Business District, Regional malls Category Specialists Power Centers, Free Standing Grocery Stores Shopping Centers Drug Stores Stand Alone

Store Layout

Store Design Objectives

Implement retailers strategy Build Loyalty Increase Sales on Visits Control Cost Legal Considerations Design Trade-Offs

Store Design and Retail Strategy

Meets needs of target market Builds a sustainable competitive advantage Displays the stores image

Store Design Elements

Layouts Signage and Graphics Feature Area

Store Layouts
To encourage customer exploration and help customers move through the stores
Use a layout that facilitates a specific traffic pattern Provide interesting design element

Types of Store Layouts

Grid Racetrack Free Form

Grid Layout
Easy to locate merchandise Does not encourage customers to explore store
Limited site merchandise lines to

Allows more merchandise to be displayed Cost efficient Used in grocery, discount, and drug stores: Why?

Racetrack Layout
Loop with a major aisle that has access to departments Draws customers around the store Provide different viewing angles and encourage exploration, impulse buying Used in department stores

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Racetrack Layout

Free-Form (Boutique) Layout

Fixtures and aisles arranged asymmetrically Provides an intimate, relaxing environment that facilitates shopping and browsing Pleasant relaxing ambiance doesnt come cheap small store experience Inefficient use of space More susceptible to shoplifting salespeople can not view adjacent spaces. Used in specialty stores and upscale department stores

Usage of Signage and Graphics

Location identifies the location of merchandise and guides customers Category Signage identifies types of products and located near the goods Promotional Signage relates to specific offers sometimes in windows Point of sale near merchandise with prices and product information Lifestyle images creates moods that encourage customers to shop
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Space Management
The space within stores and on the stores shelves are fixtures is a scare resource The allocation of store space to merchandise categories and brands The location of departments or merchandise categories in the store

Space Planning
Productivity of allocated space (sales/squire foot, sales/linear foot) Merchandise inventory turnover Impact on store sales Display needs for the merchandise

Visual Merchandising: Fixtures

A. Straight rack B. Rounder (bulk fixture, capacity fixture) C. Four-way fixture (feature fixture) D. Gondolas

Creating an Appealing Store Atmosphere

The design of an environment through visual communications, lighting, colors, music, and scent to stimulate customers perceptual and emotional responses and ultimately to affect their purchase behavior

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