Retail Management

Unit 8

Unit 8

Trends in Retailing

Structure:
8.1 Introduction
Objectives
8.2 Growing importance of the Retail Industry
Factors illustrating the growing importance of the retail sector
Recent trends in retailing
Social responsibility of business in the growth of rural markets
8.3 Changing Nature of Retailing
Decisions on the area of possible change
Uniqueness in Indian shopping habits
8.4 Organised Retailing
Growth of organised retailing in India
Indian retail giants
Key indicators to the growth of organised retail in India
8.5 Modern Retail Formats
Store format and retail parlance
8.6 E-Tailing
Use of Information Technology for retail development
Importance of e-tailing
8.7 Summary
8.8 Glossary
8.9 Terminal questions
8.10 Answers

8.1 Introduction
The pace of development within the retailing industry is found to be everaccelerating. It is said that the only thing constant in the world of retailing is
change. Consumers are becoming more sophisticated and demanding each
day and the world is witnessing the emergence of different types of retailing.
Formation of new consumer groups has led to the segmentation of retail
markets, resulting in a more complex retail environment.
The increased growth of markets has led to an increase in the number of
retailers and intensified competition. The rates of competition in the existing
retail market necessitated the retailers to look for new ways to expand their
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businesses. New areas that emerged as a result of this were entry of

retailers into financial services. All this suggest that retailing is a dynamic
industry.
Objectives:
After studying this unit, you should be able to:
explain the growth of the retail sector
explain the changing nature of retailing
describe organised retailing
explain modern retail formats
discuss e-tailing.

8.2 Growing importance of the Retail Industry

Retailing activity is not only an integral part of our economic structure but
also shapes our way of life. Over the recent years, buying and selling of
products has been much more of an organised and brand-driven activity. In
the 1960s, retailing was pre-dominantly seen as having a relatively smaller
role than other industries such as manufacturing. However, retailing is now
seen as an important activity and its contribution to the growth of the society
is well accepted. The contribution of retailing can be measured in terms of
its proportion to the GDP and the total workforce its employs across the
globe. Retailers are among the largest and the most sophisticated
organisations. For instance, the retail sector boom has been clearly
reflecting in the performance and business excellence model of the Future
group in India.
The Indian retail scape
The Indian retail industry has over 12 million outlets, which is the largest
number of retail outlets in the world. It contributes to over 10% to the Gross
Domestic Product of the country. Retail sector is also the largest
employment provider in the country after the agriculture sector. Of the 12
million outlets present in the country, 5 million retail outlets sell food or food
related products. Though, food or food related products account for such a
large number, the organised market only accounts for 15% of the total retail
market size. A T Kearneys annual Global Retail Development Index (GRDI)
rated India as the number two retail destination.

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8.2.1 Factors illustrating the growing importance of the retail sector

The growing importance of the retail sector can be attributed to the following
factors:
Significant contribution to the countrys Gross Domestic product.
Retail sectors visible contribution to the economic structure.
Employment opportunities provided to millions of people.
Retailers acting as gate keepers.
Support of retailers in Assortment and Distribution activities to other
sectors..
Growth in the size of the overall business activity, enabling many
organisations to scale up internationally.
8.2.2 Recent trends in retailing
India is considered to be a potential goldmine and the fifth most
attractive market for retailing. The size of its demography, supported by
the growing purchasing power of consumers is believed to be the
reasons for such a huge potential in consumption.
As per the report published by the rating company KPMG, the annual
growth rate of departmental stores is 24%. As convenience is one of the
unique buying habits of Indian shoppers, departmental stores provide
the necessary convenience in providing all the products at a single place
thereby making products affordable and shopping less time consuming.
Key drivers in increased consumption pattern are:
a. Demographical advantage.
b. Growth in income led by economic growth.
c. Increased purchase and consumption by women led by the theme of
women empowerment.
d. Changing aspirations and changes in lifestyle led by globalisation
and also consumption patterns impacted from the West.
Growth in food and apparel would lead to an overall growth in the retail
sector.
Growing number of affluent classes and double-income households.
The growth of rural markets spurred by initiated effort in rural
development by the government of India through various development
schemes has benefitted retailers to tap opportunities available in rural
markets.
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8.2.3 Social responsibility of business in the growth of rural markets

Several projects funded by the government of India have made rural
development possible. Rural development has opened doors for growth in
the retail sector. The major focus in the area of rural development for the
Government of India has been the small scale sector and this has resulted
in the mushroom growth of small businesses. Small businesses generally
serve the retail sector. The development of small businesses has also been
one of the main agendas of the government. As a part of their contribution to
community development, companies are also focusing on rural development
through its corporate social responsibility initiative. The direct and indirect
contribution of corporate businesses has led to the growth of the retail
sector.
For example, Infosys commenced its new facility in the city of Mangalore
and this gave rise to the opening of new Kirana stores. Here, the social
responsibility of Infosys is measured by employment opportunities that it has
provided to the local population. This in turn has given rise to Kirana stores
that as creative entrepreneurs always convert little opportunities that come
their way. Some of the notable contributions of corporates that have
indirectly led to the growth of retail sector can be noted as under:
The ITC experiment of tapping retail sector through its highly popular
program called e-choupal and choupal sugar by setting rural
hypermarkets.
Project Shakti by HUL leveraging women empowerment by the creation
of self-help groups in rural markets.

8.3 Changing Nature of Retailing

Retailing is a dynamic sector. Brown (1987) has made extensive research in
this area and has suggested that institutional changes may be classified into
three groups: environmental, cyclical and conflict theories. Change in the
lifestyle; resulting from the growing economy brings more purchasing power
in the hands of the consumers. Environmental theory seeks to explain the
development in the retail industry as a resultant of increased purchasing
power which drives life style pattern changes. Cyclical theories, allied to the
business cycle, suggest there are patterns of development which may
predict changes in the retail industry, just as cycles can be seen in general
economic conditions. Conflict theory proposes that change in institutional
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retail is an outcome of relationships between retailers and their competitive

behaviour.
The major environmental factors:
Demographic changes: Increase or decrease in the population numbers,
age groups, racial groups, socio-economic groups, etc.
Tastes and preferences towards brands and products and attitude of the
consumer.
Considering the time value of money, where credit card payments, fast
food, telephone banking, internet banking, electronic remittance of funds
are becoming more important.
Changes in technology: Automatic Teller Machines, Online reservations
and ticket bookings, Branchless banking, just in time delivery systems,
and so on.
Changes in competition: The extent of competition decides price and
supply. Competition influences the functioning of the retail industry.
The wheel of retailing: The cyclic theory
When a new retailer enters the market, he offers his products at the lowest
possible price. The idea behind such a decision is to capture maximum
share in the market by increased sales. But gradually the retailers
confidence being in the market and the capital he has gained gives him an
edge over his competitors to increase the service and quality and therefore
an increase in price. In this stage, some retailers who have matured reach
an upstaged market. This is the position of being complacent and venerable
due to high costs, inefficiency and perhaps redundant management
strategies which results in decreased sales. The retailer plunges into decline
and may also be forced to withdraw from the market. New retailers see an
opening at the bottom end of the market and this stage gives an opportunity
for emerging players to enter the market.
8.3.1 Decision on the areas of possible change
Focus on accessibility and variety through innovative marketing
strategies with vendor machines, kiosks, venue marketing, internet sites
and virtual stores.
Customisation of products or services to serve and suit niche markets.

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Use of mobile retail outlets through portable stores. The benefit of such
retailing is that it enhances the reach which otherwise could not be
possible by expecting customers to walk into the stores.
Extensive coverage of the market through tele-shopping and cable
networks.
Advancement of technology to reduce costs like anti-shoplifting devices
computerised sales information and increased security.
Customer relationship management through customer loyalty programs
and relationship marketing with a view to retain long term relationship
with the customer.

8.3.2 Uniqueness in Indian shopping habits

The tastes and preferences of Indian shoppers are different when compared
to the shoppers of other parts of the world. The main reason for such a
variance in the shopping approach is the culture prevalent in different
countries.
Following are the observations of a survey on customers published by a
global management consultancy firm Mckinsey & Co on Indian retail
markets:
Indian customers by virtue are not loyal to brands.
Shoppers in India associate packaging of fruits and vegetables to lack of
freshness.
The preference of Indian Women is towards ethnic apparel and
jewellery.
Indian shoppers give more importance to convenience in purchase.
Clothes are most often bought on occasions.
In case of electronic goods, customers have the tendency to buy
branded goods.
Self Assessment Questions
1. The increased growth of markets have led to an increased size of
retailers and intensified competition. (True/False)
2. The contribution of retailing can be measured in terms of its proportion
to the GDP, the total workforce its employs across the globe.
(True/False)

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3. The Indian Retail industry has over 12 million outlets, which is the
largest number of retail outlets in the world. (True/False)
4. The boom in retailing in India has been mainly observed in the urban
markets. (True/False)

8.4 Organised Retailing

There is an immense potential for growth in India in the organised retailing
sector. Out of the fortune 500 companies, 50 companies are from the retail
sector. Out of the top 200 Asian firms, 25 firms are retailers. 10% of worlds
billionaires are retailers. In India, the retail sector saw a major surge in
business in the last decade. Retail shops like Big Bazar, Reliance Fresh,
More for You, Spencers retail have grown substantially in revenues and
margins over the last few years. These firms have also provided
employment opportunities and thereby supported community development.
Retailing methods in India are primarily in the form of Supermarkets,
hypermarkets and departmental stores.
8.4.1 Growth of organised retailing in India
Before liberalisation, the markets were driven by manufacturers as they had
control over the supply of the products. But, post liberalisation; markets are
basically driven by demand where the consumer calls the shots. Over the
last few years, the consumer has evolved into being extremely demanding.
In terms of quality, it is termed as Customer defined quality both in product
and service specifications.
Organised retailing in India initially began in South India. In comparison with
metro cities like Mumbai and Delhi, land prices in cities like Chennai,
Hyderabad and Bangalore were available at cheap prices when retailing
was in its early stages. This supports the concept called store
rationalisation, where, cheap prices ultimately reflect in the availability of
products at lesser costs which places both the retailer and the consumer in
an ideal footing. In major cities in India, nearly 30% of the food sales are
accounted by supermarkets. In the consumer durables space, firms such as
Viveks and E-Zone have contributed significantly through specialty chains. It
took two years of recession in the early part of 2000 to bring down the
property prices in cities like Mumbai and Delhi, and this is when retailing
made an entry into these regions.
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The boom in retailing in India has been mainly observed in the urban
markets. There are two main reasons for this. Firstly, the retailers present in
the urban markets feel that the opportunities available in urban markets are
yet to exhaust and therefore it makes sense to be tapping opportunities that
are not fully explored. Secondly, identification on the basis of lifestyle needs
that appeal to different classes of the society also leaves a gap that most
retailers think to fill. Retail chains like Crossroads, Shoppers stop are
concentrating on the upper segment of the consumer population and are
selling products at higher prices. On the other hand, Retail outlets like Food
World, Big Bazar, target the middle class population. Retailing is all about
meeting customer expectations by making better customer segmentation
and thereby targeting the lifestyle needs of these classified consumer
segments.
8.4.2 Indian retail giants
Let us now look at some of the retail giants present in India.
Pantaloons
Pantaloons operate with a 30000 million square feet space utilisation
arrangement with a total investment of US$ 1 billion. Besides, India is also a
favourable destination for many Joint ventures with foreign multinationals.
Bharti telecom is in talks with Tesco for an investment worth 750 million.
Foreign giants like Wal-Mart, KFC have invested huge capital and have
entered Indian markets through their franchising agreement.
Pantaloons is present across all retail segments. It is the largest retail chain
in India with a turnover of R20 billion. Food and grocery (Big Bazar, Food
Bazar) home solutions (Furniture Bazar, Hometown) apparels (Brand
factory) shoes (Shoe bazar) books, music and gift (Depot) electronic
retailing (futurebazar.com) and entertainment (Bowling.co) are some of the
retail segments that Pantaloons has been operating.
Shoppers Stop
Shoppers Stop is the only retail chain to be a member of the prestigious
Inter-continental group of departmental stores (IGDS). With a turnover of R7
billion, they occupy 8 lakh square feet of retail space. Mother Care, an
exclusive outlet for stocking merchandise for children, Cross word brand of
book stores are owned and operated under the K Raheja Group which also
owns Shoppers Stop.
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Tata Group
The Tata Retail group is a large retail chain in India. Tatas Star bazar is an
established retail store in food and grocery segment. This is the
hypermarket, which is mainly located in the urban markets and is well
known for large assortments at affordable prices. The Tatas acquired
Landmark the largest book and music store in 2005. One of the
subsidiaries of the Tata Group Trent operates Westside a lifestyle retail
chain. Chroma the electronic retail chain is also owned and operated by the
Tata group through its subsidiary, Infiniti Retail.
A V Birla Group
Strong apparel brands like Louis Philippe, Peter England, Van Heusen,
Allen Solly, Trouser Town operate under Aditya Birla Nuyo Limited which is
a subsidiary of the A..V Birla Group. The group is well known and a pioneer
in the apparel segment. Their More for you range of supermarkets has a
wide presence in the whole of India.
Reliance
Reliance retail started its stores in November 2006 and at the end of 2007, it
operated over 418 stores in over 17 cities spanning 1.5 million square feet.
The formats that Reliance retail operates in are Reliance Fresh, Reliance
Digital, Reliance Mart, Reliance Footprint, Reliance Wellness, Reliance
Trendz and Reliance Jewels.
8.4.3 Key indicators to the growth of organised retail in India

The rate of growth of consumerism which will pave a path for consumer
orientation and consumer enlightenment.

Supply chain management that is cost-effective and backed by superior

and fast paced technology.

Encouraging global retail partnerships by setting up liberalised economic

zones through various methods such as joint ventures, licensing,
franchising etc.

Focus on the ever demanding consumer to match consumer

expectations. Consumers expect products at a cheaper price which add
more value.

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8.5 Modern Retail Formats

The retailing format in India can be termed as a revolution with more and
more formats being defined each day. The determinants that affect the
format of retailing are retail mediation with the customer, physical storage
characteristics and merchandise characteristics. At the same time a strong
co-existence between the newly defined retail formats and the primitive
ones has been found. This is because customer behaviour in the purchase
of goods varies depending upon the format in which merchandise is made
available.
8.5.1 Store formats and retail parlance
Store formats; their positioning and differentiation characteristics create a
different image in the minds of the customer. The categorisation of the retail
formats can be on the basis of location, design, size, merchandise, service
experience offering etc. The existence of a number of retail formats makes it
customary to understand the clear meaning of various key store format
definitions.
1) Store formats by location
Chain store format is owned and operated by a single organisation with
cohesive promotion and service strategy and a synergistic merchandising
plan. Chain stores are multi locational with a store presentation having a
signature store design.
If a retail store locates itself in busy shopping areas it is known as highstreet format retail store. The store space is generally less than 2000
square feet with no focused merchandise categories and parking facilities.
Independent retail stores which are large in size and provide good offers
and ample concessions and also huge parking facilities are known as
destination format. The customers usually visit these stores with an
intention of shopping only in these stores as products are based on high
standards of quality and affordable prices.
A retail store with quick accessibility and choice of wide range of
consumable products and services for its target customers located in a
catchment area is known as a convenience store format.

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2) Store formats by ownership

When a retail store is not operated as a part of a large retail chain but is
owned and operated by a single person or in partnership, it takes the form of
an independent store format classification.
A retail store forming a part of a larger retail chain owned and operated by
individuals under a licensing agreement on behalf of the larger retail
organisation is known as a franchise format.
3) Store formats by merchandise categories
In a particular product category, if a store deals with all merchandise
categories that suit the wardrobe of a family, such format is known as a
family store. Retail stores can be classified according to the merchandise
categories they deal with.
Specialty stores offer attentive customer service. For example, Park Avenue
by Raymonds is a mens specialty store. Specialty store specialise in a
given type of merchandise. Such stores offer good depth in the product
category but limit their attention to a specific special product category.
In a departmental store, each store functions as a separate strategic
business unit. Each section in the store deals with different type of product
categories under one roof. Thus, apparels, cosmetics, fragrances,
accessories, home-ware, electronics etc. are sold under one roof with
several department or sections selling them. Departmental stores are large
in size. They generally occupy a store space of more than 10000 square
feet and deal with more than 100000 stock keeping units (SKUs). A
departmental store offers good concessions and hence does large volume
of sales. Shoppers Stop is a departmental store.
Supermarkets provide free access displays to customers and give the
liberty of picking products from shelves based on the array of products
displayed on these shelves. A store that is departmentalised and specialises
in specific product category such as grocery and limited non-food category
is called as a supermarket. A supermarket operates with a store space of
3,000 square feet and stores more than 30000 stock keeping units.
A retail store selling a variety of a particular group of merchandise is known
as an emporium. for example Garden Vareli sari emporium, art emporium,
etc.
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4) Store formats by size

A single-level large store which usually occupies a floor space of more than
5000 square feet selling food and non-food goods is known as a super
store. Usually twice the size of a super market, a super store offers nontraditional goods and services like pharmacy, flower shop, book store, salad
bar, bakery etc. under one roof (for example: Nilgiris, Bangalore)
Arrangement of retail stores for leisure activities such as dining,
entertainment and shopping selected according to their contribution to an
overall merchandising plan is a shopping mall arrangement. A mall is
spread over a large area which occupies floor space of more than 2,00,000
square feet and is run as an integrated business by an individual or an
organisation, to which independent retailers pay for opportunities to
participate.

8.6 E-Tailing
A visit to a large mall or store will show that information technology plays a
major role in the retail sector today. The mounting of detecting devices to
capture the pictures of shop lifters would show the advancement retail
sector has seen due to the progress in information technology. Most of the
products today are sold online. Consumers today feel that buying products
today by visiting the retail store is a waste of time and also an additional
expense on transport. Consumers buy products online by making payments
through internet banking, mobile banking or through debit or credit cards.
From the retailers point of view, the emergence of electronic selling has
added value to the retailers business. The success of majority of the
businesses may be attributed to the way in which investment in information
and technology have improved retailers business.
Significant contributors to efficiency may be the application of management
information systems, database management systems, Electronic stock
management, control systems etc. The use of modern technology has also
helped businesses to expand their operations and increase their scale of
business.

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8.6.1 Use of Information Technology for retail development

Let us now look at some of the use of Information Technology (IT) for retail
development. IT in retail helps in:
Improving operating logistics.
Reducing delivery time.
Enabling better inventory control. A well-defined inventory control
system is critical to the survival of any business.
In addition, better information about consumers supported by an advanced
information system always keeps the business updated on consumers
changing tastes and preferences, the pricing policy and also the quality
expected by the consumer. The quality expected by the consumer is also
termed as Customer defined quality.
The ever-increasing access of internet and the use of personal computers
have given a new dimension for on-line retailing. The report by the Indian
Market research Bureau (IMRB), about 43 lakh households in India have
had the first-hand experience of using internet and personal computer
facilities. The personal computer market is growing by about 70% year on
year.
8.6.2 Importance and growth of e-tailing
E-tailing from a business perspective, provides opportunities to operate
beyond boundaries. With minimum use of infrastructure, e-tailing provides
unlimited shelf space, with no limitations on operational timings. For
consumption driven industry like India, e-tailing is a good form of business
model as it provides better reach electronically, which otherwise throws a
challenge to reach markets physically.
With over 2.5 billion internet users, access to internet has also played an
important role in expanding markets. Expanded markets to a great extent in
the last decade have been served by electronic media. Youthful India,
changing lifestyles and exposure to growing international markets have
given a fillip to retailing across the globe. In the Indian context, the best
example is the online reservation system introduced by the Indian
Railways, through their website www.irctc.co.in. Besides, the Railways also
promote their tour packages through the online portal by luring customers
through various innovative promotional methods.
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Self Assessment Questions

5. Retailing methods in India are primarily in the form of ______________.
6. Reliance, Tata group, Pantaloons and Shoppers stop are some of the
retail giants present in India. (True/False)
7. A single-level large store which usually occupies a floor space of more
than 5000 square feet selling food and non-food goods is known as a
______________.

8.7 Summary

Retailing is seen as an important activity and its contribution to the

growth of the society is well accepted.

The Indian Retail industry has over 12 million outlets, which is the
largest number of retail outlets in the world. It contributes to over 10% to
the Gross Domestic product of the country.

The opportunities for growth in rural markets coupled with gaps available
for penetration in urban markets makes retailing an attractive sector for
growth.

Retailing methods in India are primarily in the form of Supermarkets,

hypermarkets and departmental stores.

Store formats; their positioning and differentiation characteristics create

a different image in the minds of the customer.

The determinants that affect the format of retailing are retail mediation
with the customer, physical storage characteristics and merchandise
characteristics.

With minimum use of infrastructure, e-tailing provides unlimited shelf

space, with no limitations on operational timings

8.8 Glossary
Accessibility: 1) The degree to which customer can easily get into and out
of the shopping centre. 2) Ability of the retailer to deliver the appropriate
retail mix to customer in this segment
Advertising: Paid communications delivered to customers through non
personal mass media such as newspapers, television, radio, direct mail, and
the internet.
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Ancillary services: Services such as layaway, gift wrap, and credit that are
not directly related to the actual sale of a specific product within the store.
Assortment: The number of SKUs within a merchandise category. It is also
called depth of merchandise.
Brand: A distinguishing name or symbol (such as a logo, design, symbol, or
trademark) that identifies the product or services offered by a seller and
differentiates those products and services from the offerings of the
competitors.
Joint Venture: In case of global expansion, an entity formed when the
entering retailer pools its resources with a local retailer to form a new
company in which ownership, control and profits are shared. More generally,
any business venture in which two or more firms pool resources to form a
new entity.
Lifestyle: Refers to how people live, how they spend their time and money,
what activity they pursue, and their attitudes and opinions about world they
live in.
Merchandise management: Refers to the process by which a retailer
attempts to offer the right quantity of the right merchandise in the right place
at the right time and meet the companys financial goals
Speciality product: A product for which the customer will expend
considerable effort to buy
Word of mouth: Communications among people about a retailer
Supply chain management: The integration of business processes from
end users through original suppliers that provide products, services and
information that add value for customers.
Inventory management: The process of acquiring and maintaining a
proper assortment of merchandise while keeping ordering, shipping,
handling and other related costs in check.

8.9 Terminal Questions

1. Explain the contribution of the retail industry in shaping the economic
structure of India.
2. Explain about the changing nature of retailing.
3. Describe organised retailing.
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4. List some of the modern retail formats.

5. What is E-tailing? Explain.

8.10 Answers
Self Assessment Questions
1. True.
2. True.
3. True.
4. True.
5. Supermarkets, hypermarkets and departmental stores.
6. True
7. Super store.
Terminal Questions
1. Refer section 8.2
2. Refer section 8.3
3. Refer section 8.4
4. Refer section 8.5
5. Refer section 8.6
References:

Berman, B., & Evans, J. R. (n.d.). Retailing Management. Pearson

Education.

Levy, M., & Weitz, B. A. (n.d.). Retailing Management. Tata McGraw Hill.

Pradhan, S. (n.d.). Retailing Management - Text and Cases. Tata

McGraw Hill.

_________________

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