RETAIL MANAGEMENT

Prof. Raghavendran.V

Introduction

By Prof. Raghavendran.V

Retail management The various processes which help the customers to procure the desired merchandise from the retail stores for their end use refer to retail management. Retail management includes all the steps required to bring the customers into the store and fulfil their buying needs. Retail management makes shopping a pleasurable experience and ensures the customers leave the store with a smile. In simpler words, retail management helps customers shop without any difficulty.

By Prof. Raghavendran.V

RM
Retail is derived word from Retaillier, which means to cut of a piece or to break bulk. Therefore, a retailer may be defined as a dealer or trader who sells goods in small quantities. Thus retailing is final distribution of merchandise, for consumption by the end consumers.

By Prof. Raghavendran.V

Functions of RM
From the customers point of view, the retailer serves him by providing the goods that he needs, in the required assortment, at the required place and time. From an economic standpoint, the role of a retailer is to provide real added value or utility to the customers. This comes from four different prospective:

By Prof. Raghavendran.V

Functions of RM ( Utility)
1) First utility is form of a product 2) Second in form of time utility 3) Third in form of place utility & 4) Last in form of ownership utility is created.

By Prof. Raghavendran.V

Characteristics of RM
1. Direct End-User Interaction 2. Platform for Promotions & POP displays 3. Lower unit sales 4. Retail location critical 5. Services as important as Core Products 6. Large number of Retailers to meet geographical coverage and population density

By Prof. Raghavendran.V

Retail industry in INDIA

In India Organized Retailing is 2% Retail sector highly fragmented Retail chains like Wal Mart, Sears, McDonalds

brought Rapid Growth and consolidation of

Organized Retail Rapid rise of Income levels and accompanying changes in lifestyles greatly contributed to growth of Organised Retail

Retail Industry in INDIA

By Prof. Raghavendran.V

In

India,

increase Power of

in

Disposable

income, Class

Purchasing Retail

growing

Middle

conducive conditions for growth of Organised

Indian Retail environment different from that of

western countries: - Cities congested, large population in rural - Smaller purchases, limited household space areas

By Prof. Raghavendran.V

Drivers of retail change in INDIA

I. Socio- Economic factors II. Changing Income profiles III. The age factor IV. The changing role of women and evolving family structure V. The changing consumption basket VI. Increased credit friendliness VII.Geographical dispersion of market potential

By Prof. Raghavendran.V

The size of retail in INDIA

In the year 2006 the INDIAN retail market was estimated at Rs 12,00,000 crores and organized sector is about 55,000 crores See chart from the text book, page number 37.

By Prof. Raghavendran.V

Segment wise division

Food and Grocery
Food retail

Food & Grocery

Food Services

Food groceries

Branded Packaged Foods

Catering Service

Fast food centre's

Personal Hygiene Products/ Toiletries

Dry Groceries

restaurants

Others

By Prof. Raghavendran.V

Segment Wise Division

1. 2. 3. 4. 5. 6. Clothing & Textiles Consumer Durable Footwear Jewellery retail Books, music & gift Fuel/ Petro retail

Write sector classification for the above:

By Prof. Raghavendran.V

Foreign Direct Investment in Retail

FDI is a method of allowing external finance into an economy. FDI facilitates international trade and transfer of knowledge, skills and technology. FDI constituted a small per cent of gross fixed capital formation in 1993, which went up to 4%. INDIA is fastest emerging as a key destination of FDI, According FDI confidence index prepared by AT Kearney, India ranks second in FDI attractiveness, first being China.

By Prof. Raghavendran.V

FDI in retail
In India FDI retail is not allowed. An international retailer can enter the Indian retail market through any of the following methods: Hi-Tech Items Social sector items Medical & diagnostic items Manufactured with technology provided by the foreign collaborator. Two- year test marketing (Simultaneously commencement of manufacturing)

By Prof. Raghavendran.V

FDI
Foreign owned companies cannot own and run retail shops to sell other category of goods to consumers in INDIA. Some popular entry options for foreign players are:
Franchising operations Joint venture Manufacturing facility in India Distribution offices

By Prof. Raghavendran.V

Challenges to retail development in INDIA

Organized retail is little over a decade old. It is largely an urban phenomenon and the pace of growth is still slow and reasons are: Retail not being recognized as an industry The high costs of real estate Very high stamp duties Lack of adequate infrastructure Multiple and complex taxation system

By Prof. Raghavendran.V

Analysis of INDIAN Retail

By using porters models, let us analyze the Indian Potential retail segment. Entrants
Bargaining powers of Suppliers
Suppliers Industry Competitors rivalry among existing firms

Threat of new entrants

Buyers

Threat of substitute products/ services

Substitutes

Bargaining powers of buyers

Porters Five Force of Competition

Prof. Raghavendran.V

RETAIL EVOLUTION THEORIES

Four theories of evolution are: 1. Wheel of Retailing Cyclical 2. Accordion theory Theories 3. Dialectic Process Evolutionary 4. Natural selection Theories
Cyclical: Begin with one state and return to that state at some time in future Evolutionary: Changes similar to biological evolution

Prof. Raghavendran.V

Wheel of Retailing/ (Cyclical Theory) Wheel represents phases through which some types of Retailers pass:
Retailers attract customers low price, low service Expand market More expensive merchandise, More services, open More convenient locations. Trading up process increases costs & price of their merchandise, creating opportunities for new low price retailers to enter e.g. Discount stores & category specialists Some Retailers dont begin as low price, low service entrants, e.g. Upscale fashion specialty stores.

Prof. Raghavendran.V

Mature Retailer Top heavy conservative declining ROI

Innovative retailer Low status & price, minimum service, poor facilities, limited product offering

Traditional retailer Elaborate facilities Higher rent More locations higher prices, extended product offerings

Prof. Raghavendran.V

THE ACCORDION THEORY Retailers fluctuate from strategy of offering wide merchandise with shallow assortment to offering limited categories with deep assortment
In rural markets, Retailers sell many categories under one roof: shoes, cosmetics, foods, cloth, medicines. However the assortment is shallow and customers have limited choice. Department stores have both width and depth of merchandise Specialty stores carry special categories with deep selection

Prof. Raghavendran.V

DIALECTIC PROCESS/ CONFLICT THEORY

An evolutionary theory based on premise that retail institutions evolve. The theory suggests that new Retail formats emerge by adopting characteristics from other forms of retailers in much the same way as the child is the product of the pooled genes of the parents. Specialty stores with high margins, low turnover plush operations Discount stores with low margins, high turnover low operations Both the above were synthesized to form category specialist stores.

Prof. Raghavendran.V

DIALECTIC PROCESS/ CONFLICT THEORY

Discount Store Department Store

Discount Department Store

Prof. Raghavendran.V

NATURAL SELECTION/ ENVIRONMENTAL THEORY Those Retail Institutions Succeed which adapt to changes in customers, Technology, competition and legal environment.

Department stores have tried to combat specialty stores by opening specialty counters within the stores. Interest in physical fitness and increased number of women in workforce have made salad bars in grocery stores successful.

Prof. Raghavendran.V

The concept of life cycle in RETAIL

The concept of PLC as Philip Kotler is also applicable to retail organizations. This is because retail organization pass through identifiable stages of innovation, development, maturity and decline. This is what is commonly termed as the RETAIL LIFE CYCLE
Assignment: Explain the concept of Retail Life cycle?

By Prof. Raghavendran.V

Business Models in Retail

Critical factors, which affect the retail model are Trends in the market positioning Competition, & The organizational capabilities

By Prof. Raghavendran.V

Classification of retail formats

Form of ownership Store based retailing Merchandised offered Classification of retail Non store based retailing Direct selling, Mail order, Tele marketing Bank, car rentals, real estate consultant

Service retailing

By Prof. Raghavendran.V

Careers in Retailing
It is people centric industry, which can be exposed to multi-disciplinary and skills. It offers many choices in terms as career.
1. 2. 3. 4. 5. 6. 7. 8. 9. Buying and Merchandising Marketing Store operations Sales Finance Human Resources Technology and E-commerce Visual Merchandising Supply Chain Management & Logistics

By Prof. Raghavendran.V

Assignment time: Sub on 20th Sept

Global Challenges in Retail Industry? Brief out Traditional Business Models in Indian retail. Brief out Classification of retail formats. Classify & Differentiate b/w Super, Hyper markets & Departmental stores.