Retail Management

DEFINITION OF RETAILING
Retailing includes . . . .
all activities involved in selling, renting, and providing goods and services to ultimate customers for personal, family or household use. In the channel of distribution, retailing is where the customer meets the product. It is through retailing that exchange occurs.

What is Retailing
All the activities directly related to the sale of goods and services to the ultimate consumer for personal, non-business use.

A retailer is a business that sells products and/or services to consumers for personal or family use.

EVOLUTION OF INDIAN RETAIL

Rural Approach Traditional Approach Govt. Approach Modern Approach
Shopping malls, Super bazaar ,etc.
Khadi outlets, Co-operative stores Mom and pop kirana stores Weekly bazaars Melas

The nature of retail marketing

The key aspects of retail marketing is an attitude of mind. In making retail marketing decisions, retailers must consider the needs of the customers. Retail marketing decisions are driven by what the shoppers need and want.

The nature of retail marketing

Retail marketing is therefore a philosophy and is all about satisfying the customers What the customers regard as value and what they buy is decisive. What the customers buy determines the nature of the retailers business.

GLOBAL RETAILING TRENDS

Going internationalization Value driven retailer to values driven retailer Enhancing service offerings Expanding Private brands Migration of retail format Consolidation

Global Economic Impact of Retailing

Four of the 30 largest businesses in the U.S. are retailers. In 1997, Wal-Marts $119 billion in sales surpassed the gross domestic product of Finland for the same year. Sears, Wal-Mart, Kmart, and JC Penny together employ more than 1.6 million people. Wal-Mart has 603 stores outside the U.S., including joint ventures in China and Korea.

REASONS FOR RETAIL GROWTH

Organized retail versus unorganized retail Emergence of nuclear family concept and changing age profile Increased disposable income New business Opportunities Fast changing Indian consumer Availability of skilled labour Low cost of operations

EMERGING TRENDS IN RETAILING

New retail formats and combinations Internet age and computer awareness ie.online retailing etc. Emergence of Specialty Stores Newer and newer promotional techniques are emerging. Industrial boom and emergence of new residential societies Use of plastic money Distance no bar

Characteristics of Retailing
Direct interaction with customers It offers employment Opportunities Customer service plays a vital role Location and layout are critical factors in retail business.

FUNCTIONS OF RETAILERS

Identify Consumer demands Management of merchandise Convenience of timing Convenience of place. Serves as the final link. Providing an assortment of products and services Breaking Bulk Holding Inventory Providing services

Retailers Position within a Distribution Channel

PPT 1-4

Distribution Channel

Classification of Retail Operations

Ownership

Level of Service

Product Assortment

Classification of Retail Establishments

Price

Ownership
Classification of Ownership Independent Retailers Chain Stores Franchises

Independent Retailer
Owns, operates only one outlet, Owner / Proprietor / Family members working as assistants. Neighborhood Baniya / Paanwalla / Advantages Ease of entry and rapport with customers. Disadvantages Economies of scale and Total Offer

Chain Retailer
When two or more outlets under common ownership, it is called retail chain. Corporate retail chain Similarity in merchandise, the ambience, advertising, promotions. Wills Sport / Louis Phillipe / Arrow / Shoppers Stop / Food World / Music World / Planet M / .. Cost effectiveness is possible in advertising and promotions.

Franchising
A franchise is a contractual agreement between the franchiser and the franchisee that allows the franchisee the right to supply its brands exclusively within a defined area, as per a particular format for a specified period of time. For Ex. Mc Donalds,Pizza Hut, Relince Fresh,etc. Contractual agreement to conduct business fee and compensation are determined. Franchising is essentially a method of expanding the retail business.

Basic Forms of Franchising

Product and Trade Name Franchising Business Format Franchising Dealer agrees to sell certain products provided by a manufacturer or wholesaler. An ongoing business relationship between a franchiser and a franchisee.

Reasons for Franchising Growth

Technological advances
Profitable utilization of capital resources Demographic expansion Product/service consistency Levels of Control

Major Types of Retail Operations

Department Stores

Specialty Stores
Supermarkets Drugstores Convenience Stores Discount Stores Restaurants

Retail Formats
Department Stores (20000 to 40000 Sq Ft) Large scale retail format / Often multi-levelled / Variety of merchandise specially furnishing and apparel. Shoppers Stop / Westside / Harrods / JC Penny Speciality Stores (Normally under 8000 Sq Ft) Narrow Product Line / Deep Assortment / Toy Kemp in Banglore, Nalli Saree in Chennai Super Markets (8000 to 20000 Sq Ft) Large / Low Cost / Low Margin / High Volume / Self Service grocery revolution. Convenience Stores (3000 to 8000 Sq Ft) Small / Near Residences / Petrol Pumps

Retail Formats
Discount Stores (Varying Sizes) Off-price retailers, Seconds showrooms, Factory outlets offering odd sizes and unpopular colours. Hyper Markets (80000 to 220000 Sq Ft) Huge Size, Both food and non-food (Clothes/Jewellery/Hardware/Whitegoods/Cycles/Computer s. Carrefour , Retail Parks with cafeteria, restaurants, pubs, banks, petrol stations. May be located on the outskirts of the town.

Forms of Non-store Retailing

High Active customer involvement
Direct selling
Telemarketing On-line retailing

Automatic vending

Television home Direct mail shopping and catalogs

Low Low Active retailer involvement High

Automatic Vending
Non-store retailing that makes it possible to serve customers where stores cannot. Maintenance and operating costs are high. Small convenience products are available in vending machines. Of the 3 million vending machines now in use, 1.8 million are soft drink machines.

Direct Mail & Catalogs

Marketing efficiency is improved through segmentation and targeting. Customer value is enhance by providing a fast and convenient means of making a purchase. In 1998 Americans increased their catalog spending to $87 billion. A typical household receives 50 catalogs each year.

Television Home Shopping

TV home shopping is possible when consumers watch a shopping channel on which products are displayed; orders are placed over the telephone. Two popular home shopping programs reach 60 million homes and have combined sales of $2 billion. TV home shopping programs traditionally attract 40-50 year old females. Limitations of TV shopping have been the lack of buyer-seller interaction and the inability of consumers to control the items they see.

Online Retailing
Online retailing allows consumers to search for, evaluate, and order products through the Internet. The advantages of online retailing are: ability to comparison shop privacy variety
Forecasts suggest that current annual sales of $10 billion could reach $100 billion in just a few years.

Telemarketing
Telemarketing involves using the telephone to interact with and sell directly to consumers.

Direct Selling
Direct selling involves direct sales of goods and services to consumers through personal interactions and demonstrations in their home or office. Industry sales are more than $16 billion, but are declining in the U.S. as retail chains begin to carry similar products at discount prices, and the increasing number of dual-career households reduces the number of potential buyers at home. Many direct selling retailers are expanding into international markets to offset the decline in domestic sales.

RETAIL ECONOMICS
It includes the various sectors of the economy in which retailing has yielded a share The retail Environment Retail Consolidation Contribution of Retailing to Indian economic scenario a.Real estate bTourism/Outbound shopping c.Higher GDP d.Outsourcing Opportunities FDI in retail

WHEEL OF RETAILING
Retailers must constantly respond to change in the environment to succeed and flourish Harvard Business School Professor Emeritus Malcolm McNairs Wheel of Retailing theory states:

Most

retailers begin as lower priced distributors To grow they trade up and add amenities, varied assortments, customer service, higher quality goods, etc. Capital requirements mean higher prices As each retailer moves up, the vacuum is filled

 The wheel keeps on turning and department stores, supermarkets, and mass merchandise went through this cycles

Mature retailer Top heavy Declining ROI

Innovative retailer Low status and price Minimum service Poor facilities Limited product offering

Traditional retailer Elaborate facilities Higher rent More locations Higher prices Extended product offerings

T Trading up phase

Choosing the Retailing Mix

Product
Choose the Retail Marketing Mix
Place or Location

Price
Promotion

Presentation Customer Service

People

Key element
Product (merchandise) Product development Product management Product features and benefits Branding Packaging After-sales services

Key Element
Place (store location) Target market Channel structure Channel management Retailer image Retail logistics Retail distribution

Key element
Price
The price is the amount a customer pays for the product. The business may increase or decrease the price of product if other stores have the same product.

PRESENTATION
The manner in which the merchandise is presented at the store level is very important. This aspect not only deals with the store layout and the ambience created, but also with visual merchandising .Visual merchandising is the orderly , systematic and intelligent way of putting stock on display in the retail store.

Key element
Promotion Developing promotional mixes Advertising management Sales promotion Sales management Public relations Direct marketing

CUSTOMER SERVICE The support services that a retailer has have become very important today. The credit policies, product return policies, etc. need to be clear not only to the sales staff but also to the end customer. Relationship marketing, data warehousing and customer relations management are the new buzzwords in the industry today and all these are aimed at enhancing customer service.

Key element
People element Staff capability Efficiency Availability Effectiveness Customer interaction Internal marketing

INTERESTING FACTS ON

Every 10th billionaire is a retailer. 25 of the top 50 Fortune 500 companies are in Retail. In India the Retailing Industry provides employment to over 18 m people, second largest after agriculture. 1 out of every 25 families in India are engaged in the business of retailing 72% of Indian population staying in rural market. In India Per Capita square feet area under retail is just 2 sq.

RETAIL

Manufacture rs

Whole seller

Organized Sector
Distributor

Retailer

 Overall Plan or Framework of Action At Least One Year Outlines

Mission Goals Consumer Market Overall and Specific Activities Control Mechanisms

RETAIL STRATEGIES
A clear and definite plan that the

retailer outlines to tap the market and build a long- term relationship with the consumers.

Establish Mission Analyse Situation Identify Options Set Objectives Obtain & Allocate resources
Develop Implementation Plan

Monitor Progress &

I. DEFINE THE MISSION OR THE PURPOSE OF THE ORGANIZATION

The mission statement is a statement of the longterm purpose of the organisation.Mission statement need to provide a clear sense of direction for the organization. A retailers mission statement normally highlights the following elements: The products services that will be offered The customers who will be served the geographic areas that the organisation chooses to operate in The manner in which the firm intends to compete in its chosen markets.

II. CONDUCT A SITUATION ANALYSIS

Once the mission has been defined , the retail organization needs to look inwards and understand what its strengths and weaknesses are and look outwards and analyze the opportunities and threats that may arise in the environment. Experts have developed various models for conducting a situation analysis, these include PEST analysis, SWOT analysis, etc.

III. IDENTIFYING OPTIONS /STRATEGIC ALTERNATIVES

After determining the strengths and weaknesses of the organization and the environment, the retailer needs to consider the various alternatives available to him for tapping a particular market.Ignor Ansoff presented a matrix , which looked at growth opportunities by focusing on the firms present and potential products in the existing and new markets.Ansoffs Matrix helps to understand the options available to a retailer. These alternatives available to the retailer are: Market Penetration Market development Retail format Development Diversification

RETAIL STRATEGY
EXISTING NEW

MARKET PENETRATION Increase in the basket size Increase the customers Increase the purchase frequency

MARKET DVELOPMENT / EXPANSION New market Segments with existing markets New customer base

EXISTING

RETAIL FORMAT DEVELOPMENT NEW New format for existing customers

DIVERSIFICATION New retail formats directed at new market segments

Market penetration this is a strategy

adopted by the firm when it seeks to achieve growth with the existing products in the market segments that it operates in . Strategy may focus either on: - Increasing the number of customers - Increasing the quantity purchased by customers(basket size) - Increasing the frequency of purchase Increasing the number of customers can be achieved by adding new stores and by modifying the product mix

 Another approach is to encourage salespeople to cross sell Market penetration strategy is the least risky one, since it leverages many of the firms resources and capabilities However, market penetration has limits Once the market approaches saturation, a new strategy needs to be pursued if the firm is to continue growth For Ex- Pizza parlors offering discount on the purchase of second pizza within a specific period of time

MARKET EXPANSION /DEVELOPMENT

1.

2.

A retailer is said to follow a strategy of market development if he reaches a new market segments or completely changes the customer base, thus this strategy involves Tapping new geographical markets Introducing products to the existing range Expansion by adding new retail stores to existing network is an example of geographical expansion

 Introducing a pharmacy in a supermarket (eg. The medicine Shoppe at the Haiko Supermarket in Mumbai) is an example of a retailer introducing new products, appealing to a different audience Another example is McDonalds who introduced ice creams for Rs.7 This not only created add on sales, but also brought in customers who had the perception that McDonalds is an expensive fast food restaurant

Retail Format Development- Developing a retail

format is introducing a new format to customers. Examples are fast food retailers like McDonalds, and subway who offer limited menus in smaller locations, this strategy may be appropriate if the retailer strengths are related to specific customers rather than to specific products itself. Another example is bookstore chain Crosswords, opening smaller format stores by the name Crossword Corner at Shoppers Stop Strategy may be appropriate if the retailers strengths are related to specific customers, rather than to specific products In this situation retailer can leverage its strengths by developing a new product targeted to his existing customers

Diversification- the retailer grows by diversifying into new businesses by developing new products for new markets. For e.g.. Tobacco giant ITC entered the business of apparel retail through Wills Lifestyle stores and even entering into the greeting card business.

IV. SET OBJECTIVES

The objectives are a translation of the mission statement into operational terms. They indicate the results to be achieved. The purpose of setting objectives is to give direction and set standards for the measurement of performance. Objectives may be set keeping these two areas in mind; examples include Sales volume targets Market share targets Retail expansion targets Profitability to be achieved Liquidity Returns on investment

V. OBTAIN AND ALLOCATE THE RESOURCES NEEDED TO COMPETE

The resources that a retailer needs are human as well as financial .Financial resources take care of the monetary aspects of the business like shop rent, salaries, and payment etc. Human resources are just as vital to the success of a retail operation as are financial resources and physical facilities.

OBTAIN AND ALLOCATE RESOURCES NEEDED TO COMPETE

Resources needed by a retailer - Human Resources - Financial Resources 1. Human Resource HR plan must be consistent with overall strategy of the organization HR management focuses on issues such as recruiting, selecting, training, compensating, and motivating personnel These activities must be managed effectively and efficiently 2.Financial Resources Takes care of the monetary aspects of business Shop rent, salaries and payments for merchandise

VI. DEVELOP THE STRATEGIC PLAN

At this stage , the retailer determines the strategy by which he will achieve the objectives set forth. The target market is defined and the retail mix that will serve this audience finalized. This enables the retailer to arrive at the best alternative that is most compatible with the organizations resources and skills This process involves the determination of the merchandise mix the pricing policy types of location the retail stores would be located at services to be offered , communication platform that would be adopted by the retailer

VII. IMPLEMENT THE STRATEGY, EVALUATE AND CONTROL

The key to the success of any strategy lies in its implementation. To implement a firms desired positioning effectively, every aspect of the store must be focused on the target market. Once a strategy is implemented , managers need the feedback on the performance of the new strategy. Such an evaluation covers all elements of the plan. And accordingly the control strategies are planned.

Figure 1-10: Applying the Retailing Concept

Customer Orientation

Coordinated Effort
Value Driven Goal Orientation

Retailing Concept

Retail Strategy

Modern Indian Retail Lifecycle

CREATE AWARENESS New retailers Driving growth STRENGTHEN INCREASE CLIENT BACK END EXPECTATION MANAGEMENT Consumer Retailers demands strengthening Organized Backend forms CONSOLIDATION Retailers going global / M&A

1993

2004

2010

2012

FIRST GEAR

SECOND GEAR
2008

THIRD GEAR

FOURTH GEAR