RETAIL MANAGEMENT PART-1

Introduction to Retail
Unit I
Introduction to Retail: what is Retail, The
functions of retail, retailing in India. The
evolution of retail in India, retail Change in
India
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Retail comes from the Old

French word tailler, which
means to cut off, divide in
terms of tailoring (1365) and
prefix with re and the verb
tailor meaning to cut again.

 It was first recorded as a noun with

the meaning of a sale in small
quantities in 1433 (from the Middle
French retail, piece cut off, shred,
scrap, paring).[ Like in French, the
word retail in both Dutch and German
also refers to the sale of small
quantities of items..
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Retailing is the sale of

goods and services to
the ultimate consumer
for personal, family or
household use.
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 Retail is the sale of goods and

services from individuals or
businesses to the end-user called the
customer.
Retailers are the integral part of a
system called the supply chain which
carries goods from the producer to
the target market.
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 Shops may be in residential streets or in

a shopping mall.. Sometimes a shopping
street has a partial or full roof to protect
customers from precipitation.
Online retailing, a type of electronic
commerce used for business-toconsumer (B2C) transactions and mail
order, are forms of non-shop retailing.
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 According to Kotler: Retailing

includes all the activities
involved in selling goods or
services to the final consumers
for personal, non business use

 Retailing may be understood as the

final step in the distribution of
merchandise for consumption by the
end consumers.
Retailing is responsible for matching
final consumer demand with supplies
of different marketers.
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Retailing is high intensity

competition industry, The

reasons for its popularity lie

in its ability to provide easier
access to variety of products,
freedom of choice and many
services to consumers
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Economic Justification for

Retailing
All middlemen basically serve as
purchasing agents for their customers and
as sales specialists for their suppliers.
To carry out those roles, retailers perform
many activities, including anticipating
customers wants, developing assortments
of products, acquiring market information
and financing.
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 It is relatively easy to become a

retailer. No large investment in
production equipment is required,
merchandise can often be purchased
th
Last
class
on
19
Sep 2016
on credit and store space
can be
leased with no down payment or a
simple website can be set up at
relatively little cost.
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To enter retailing is easy; to

fail is even easier! To
survive in retailing, a firm
must do a satisfactory job in
its primary role - catering to
consumers.
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The Indian retail is dotted by

traditionally market place
called bazaars or haats
comprises of numerous small
and large shops, selling
different or similar
merchandise
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Wheel of Retailing

A better known theory of retailing

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.
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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
expensive.
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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.
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5. The wheel keeps on turning

and department stores,
supermarkets, and mass
merchandise went through this
cycles.
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Exposure

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Functions of a retaillier

From the customer 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 customer. This
comes four different perspectives
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1. Form: First is utility regarding the form of a

product that is acceptable to the customer.
The retailer does not supply raw material,
but rather offers finished goods and services
in a form that the customers want.
The retailer performs the function of sorting
the goods and providing us with an
assortment of product in various categories.

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2. Time: He cerates Time utility

by keeping the store open
when the consumers prefer to
shop.
preferable shopping hours.

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3. Place: By being available at a convenient

location, he/she creates place utility.
4. Ownership: Finally, when the product is
sold, ownership utility is created.
Apart from these functions retailer also
performs like:
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5. Arranging Assortment: manufacturers

usually make one or a variety of
products and would like to sell their
entire inventory to few buyers to
reduce costs. Final consumers, in
contrast prefer a large variety of
goods and services to choose from
and usually buy them in small units.
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 Retailers are able to balance

the demands of both sides, by
collecting an assortment of
goods from different sources,
buying them in sufficiently
large quantities and selling
them to consumers in small
units
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6. Breaking Bulk: to reduce

transportation costs,
manufacturer and wholesalers
typically ship large cartons of the
products, which are then tailored
by the retailers into smaller
quantities to meet individual
consumption needs
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7. Holding stock: Retailers maintain

an inventory that allows for
instant availability of the
product to the consumers. It
helps to keep prices stable and
enables the manufacture to
regulate production.
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8. Promotional support: small

manufacturers can use
retailers to provide
assistance with transport,
storage, advertising, and
pre- payment of
merchandise.
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Major type of retail stores

There is no universally accepted method of

classifying retailer. Various schemes have
been proposed to categories retailers based
on
Number of outlets
Margin vs. turnover
Location
Size.
Because of overlap of classification criteria,
some stores may qualify as under two
different categories.
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1. General merchandise retailer: general

merchandise retailer carry a variety
of product lines, with considerable
depth. Some major types of these
stores include supermarkets and
hypermarkets , discount stores
and department stores.
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 Super market: A supermarket is a large

self service retail store that carries a
wide variety of consumer products under
one roof , such as complete line of food
products , laundry requirement,
household maintenance items. In India
cooperative have managed some
supermarkets for quite sometime like
super bazaar in Delhi, apna bazaar
shakari bhandar etc.
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o Discount store: these stores are self

service, standard general
merchandise retailers regularly
offering brand name and private
brand items at low price, earn
lower margins and push for high
sales turnover. The characteristics
of true discount stores include
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 Selling products at discounted price

Carry standard international , national, or
store brand toi build image
Self service stores to minimize operational
costs
Preferred store location are low rent areas.
Like best known discount store is Wal-Mart.
In India almost all retail stores offer
discounts
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o Department store: a department store is larger

retail store organized into several
departments, offering a broad verity and
depth of product lines. The product mix may
include food products, appliances, clothing,
furnishing and other household goods.
Like Pantaloons, shoppers stop,
department store only for kids is Kids Kemp.
Fashion related department stores in India are
Ebony, Globus, pantaloons, lifestyles
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2. Specialty Stores: specialty stores carry a narrow

product mix with depth of assortment within the line.
The emphasis is on a limited number of
complimentary products and high level of customer
service
Specialty store often sell shopping goods such as
Jewelry, apparel, computers, music systems, sporting
goods.
Like; Tanishq, Titan watches, Van Heusen, Raymond's.

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3. Shopping Malls: shopping malls typically

deal with several bases and product
categories and provide a large variety of
merchandise abs service. There are 96
operational malls in India and expected
to grow 158 by this current year.
Ansal plaza (Delhi), Garuda mall
(Bangalore) Sahara plaza Gurgaon
Spenser Plaza Chennai
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4. Retail chains: a retail chain operates multiple

retail outlets under common ownership in
different cities and towns.
To some extent the purchasing function and
decision making are coordinated or
centralized.
Like Westside, Globus, Food world,
McDonald's retail petrol outlets. Etc.
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The Marketing Retail Equation

Manufacturer

Manufacturer

Manufacturer

Wholesaler
Retailer

Consumer

Feedback

Retailer

Consumer

Consumer

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Retailing in India.
Retail is the new buzzword in India.
The global Retail development Index has ranked
India first, among the top 30 emerging markets in
the world.
It is believed that India has the potential to deliver
the fastest growth over the next 50 years.
While barter would be considered to be oldest form
of retail trade, since independence , retail in India
has evolved to support the unique needs of country,
given its size and complexity
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 Second largest sector after

Agriculture. Contributes about 10
11 % of the GDP
The estimated size of the organized
retail industry in India is Rs. 16,000
crores. This is 2 % of the total
estimated retail trade.
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 Indian Retail trade increased from Rs.

2200 billion in 2000 to Rs 3300 billion
by the year 2015
India's first true shopping mall
complete with food courts, recreation
facilities and large car parking space
was inaugurated as lately as in 1999
in Mumbai. (this mall is called
"Crossroads").
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The Evolution of Retail in India

Retail in India has evolved to support the unique

needs of our country, given its size and complexity
Haats, Mandis and Melas have always been a part of
the Indian landscape. They still continue to be
present in most parts of the country and form an
essential part of life and trade in Various areas.
The PDS (Public Distribution System) would easily as
the single largest retail chain existing in the country.
the evolution of the PDS of Grains in India has its
origin in the rationing system introduced by the
British during world war II
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 The system was started in 1939 in Bombay and

subsequently extended to other cities and towns.
the system was abolished post war but however
attaining independence India was forced to
reintroduce it in 1950.
There was rapid increase in the ration shops
( being increasingly called the Fair Price Shop or
FPSs)
The Canteen Stores Department and the Post
Offices in India are also among the largest
network of outlets in the country reaching
population across the country.
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The Khadi & Village industries (KVIC) was also set up post
independence. The cooperative movement was again
championed by the government.

India's Largest retail Chains:

1.

PDS: 463,000

2.

Post offices: 160,000

3.

KVIC: 7,000

4.

CSD Stores:3,400

(source business world marketing White book 2015)

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 In the past decade, the Indian marketplace has

transformed dramatically. However from the
1950,s to the 80,s, investment in various
industries was limited due to low purchasing
power in the hands of the consumer and the
governments policies favoring the small scale
sector.
The first attempts at organized retailing were
noticed in the textiles sector. One of the pioneers
in this field was Raymonds which set up stores to
retail fabric.
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 Raymonds distribution network today

comprises 20,000 retailers and over 256
exclusive showrooms in over 120 cities of the
country
Other textile manufacturing who set up their
own retail chains wee Reliance- which set up
Vimal showrooms and Garden Silk Mills, which
set up Garden Vareli showrooms.

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The Evolution of retail in India

Emerging
Established
Formats
Traditional
formats
Exclusive retail outlets
Formats
Kirana shops
Hypermarket
Itinerant Salesman
Convenience/
Internal retail
Haats
department stores
Malls / Specialty Malls
Melas
PDS/
Multiplexes
Mandis etc.
fair price shops
Fast food outlets
Pan/ Beedi shops
Service galleries

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Drivers of Retail change in India

major drivers :
1.

2.

Changing Income Profiles:

Steady economic growth

fuelled the increase in disposable income in India.
The average middle class family's disposable
income rose by more than 20% between 20142015.
Diminishing difference between Rural and urban India: Rural
India accounts for over 75% of India population
and this in itself offers a tremendous opportunity
for generating volume driven growth. Tax benefit.
In year 2014-15 LIC sold 50% of its policies in
rural India. Same BSNL also sold its 50%
connection in small towns .
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3.

4.

Changes in Consumption patterns: Occupational changes

and expansion of media have caused a significant

change in the way the consumer lives and spends
his money.
The changes in income brought about changes in
the aspirations and the spending patterns of the
consumers. the buying basket of the consumer
changed
The emergence of a young Earning India : Nearly 70% of
the Indian population is below the age of 34.
taking advantages of employment opportunity in
the booming service sector these young Indians
are redefining service and consumption patterns
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Prominent sector in Indian retail

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
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Challenges to retail Development in India

Retail not being recognized as an industry in
India.
The high costs of real estate.
Lack of Adequate infrastructure.
Multiple and complex taxation system.

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Size of the organized retail market (Rs Cr)

2009

2015

CAGR (%)
(compound Annual
growth rate)

TOTAL

16,000

37,216

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Food

1,800

7,473

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Clothing

4,950

10,423

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Cons.Durables

1,650

3,787

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Books & Music

450

1,426

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Share of organized & unorganized retail with comparison

source: Ernst &Young, The Great Indian Retail Story, 2006

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