RETAIL MANAGEMENT

Chapter - 2
RETAIL ORGANIZATION

The changing structure of retailing

All dynamic developments in retailing (department stores,

warehouse clubs, and hypermarkets) are responses to a

changing environment
Changing customer demand, new technologies, intense
competition, and social change create new opportunities
even as they shake up existing business
The Internet and web technologies have itself created a
myriad of opportunities for web based business model of
retailing
This has created competition for the retailer in order to
maintain and grow its share of market and compete
within its band of retailers
For e.g.: Bharat Petroleum - Making A Difference through
Innovative Retailing

Theories of structural change

in retailing

Theories of structural change

in retailing
Retailing has always been a dynamic industry. There
are certain theories of how firms evolve and change
the industry in the process. They are:
The wheel of retailing
The dialectic process
Natural selection

The wheel of retailing

It was proposed by Malcomb McNair at Harvard
University. It is basically a theory of cyclical or
circular development. The wheel of retailing
concept
describes
how
retail
institutions
transform during their evolutionary life cycles.

The wheel of retailing

1.

New retailers often enter the

market place with low prices,
margins, and status. The low prices
are usually the result of some
innovative cost-cutting procedures
and soon attract competitors.

2. With the passage of time, these

businesses strive to broaden their
customer base and increase sales.
Their operations and facilities
increase and become more

The wheel of retailing

3. They may move to better up market locations, start
carrying higher quality products or add services and
ultimately emerge as a high cost price service
retailer.
4.

By this time newer competitors as low price, low

margin, low status emerge and these competitors
too follow the same evolutionary process.

5. The wheel keeps on turning and department stories,

supermarkets, and mass merchandise went through
this cycles.

The wheel of retailing

The wheel of retailing

The wheel of retailing

The wheel of retailing

Example?

The dialectic process

Another theory explaining the changesthat take place
in the retailinstitutions is the Dialectic process or
melting pot theory. According to this theory,
twoinstitutional forms with different advantages modify
their formats till they develop a format that combines
the advantages of both formats

This second theory holds that retailing evolves

through a dialectic process- the blending of two
opposite store types into a superior form. For
example- Fabindia and Nalli offer both a wide
array of customer services and a broad
assortment of specialized merchandise.

The dialectic process

Natural selection
According to this theory, retail stores evolve to
meet changes in the micro-environment. The
retailers that successfully adapt to technological,
social, demographic, economic, and political
changes are most likely to grow and prosper.

Classification of retail units

Bases for classification of retail units
Nature of ownership
Operational structure
Length and depth of merchandise
Nature of service
Types of pricing policy
Types of retail location
Method of customer interaction

Merchandise Offering
Variety (breadth of merchandise): wide vs.
narrow
- The number of merchandise categories

Assortment (depth of merchandise): deep vs.

shallow
-the number of items in a category (SKUs)

Retailers classified on the

basis of ownership

Sole proprietorship
Partnership
Joint venture
Limited liability company (public and private)

Retailers classification on the

basis of operational structure
Independent retail unit
Retail Chain
Franchise
Size and structural arrangements in franchising:
1. Manufacturer-retailer
2. Wholesaler-retailer franchise
3. Service sponsor-retailer
Leased departments
Co-operatives

New areas

Leased department or Shop-in-shop

Co-operative outlets
Largest consumer cooperative society
Major initiatives
Benefits To Consumers
Target market
Revised positioning

Types of retail location

Retailers
Retailers
Retailers
Retailers

at freestanding locations
in business-associated locations
in specialized markets
at airports

Variety of merchandise mix

Departmental stores
For e.g: Chen One
Discount Stores
For e.g.: Best Price, 7th avenue, Walmart, Target, No
Frills
Specialty Stores
For e.g.: Footware - Specialty Store
Khadder- Khadi Specialty
Hypermarkets
For e.g. : Hyperstar, Cosmo, Coscto

Methods of customer
interaction
Retail transactions are carried out through face-toface interaction between retailers and customers in
the case of retail stores.
There are certain methods:
Non-store retailers
Electronic retailing like Internet and Mobile
Association of India

Catalogue and direct mail

retailing
Factors for the success of catalogue retailing:
- Convenience: customers can shop when it is
convenient for them in accordance to their schedule
- Time saving: one save resources on account of time
and travelling cost and parking problems
- Information: relevant product information is available
in detail
- No time limits: no undue pressure to buy unlike as in
retail store shopping

Direct selling
Person-to-person selling:
- Party-plan or group presentations
- Multilevel network

Television shopping
Television shopping is retail format where existing and
prospective customers watch a TV programme
demonstrating a product and then place an order for
the same by telephone, e-mail or Internet
Three types of television shopping: cable channels
meant for shopping, infomercials, and direct-response
advertising shown on TV

Vending machine retailing

A form of non-store retailing where products or services
are placed in a machine and are dispensed to customers
when they deposit cash or use plastic money (credit or
debit card)
Vending machines vending machines offer consumers
greater convenience 24 hours a day, and have replaced
many services formally requiring a human interface