Retail Formats & Theories: 10/6/2017 Retailing Management - Swapna Pradhan 1

Retail Formats & Theories
Chapter 2
Retailing Management - Swapna

10/6/2017 Pradhan 1
Objectives
The evolution of retail formats
Theories of retail development
The retail life cycle
Classification of retail stores
The role of franchising in retail

10/6/2017 Pradhan 2
The Evolution of Retail Formats
Social developments and their impact
- Bon Marche
- 5 and 10 cent stores
- Montgomery Ward
- Atlantic & Pacific
The Industrial Revolution
Self service
Supermarkets
Speciality stores, malls and other formats
The World Wide Web

10/6/2017 Pradhan 3
Theories of retail development
Environmental theory
Cyclical theory
Conflictual theory
Scrambled merchandising
The Wheel of Retailing

10/6/2017 Pradhan 4
The Retail Life Cycle
SALES
Maturity
Decline
Growth Profit
Innovation
TIME

10/6/2017 Pradhan 5
The Wheel of Retailing
Innovative retailer
Mature retailer
Low status and price
Top heavy
Conservative Minimum service
Poor facilities
Declining ROI
Limited product offering
Traditional retailer
Elaborate facilities
Higher rent
More locations
Higher prices
Extended product offerings
Trading up phase

10/6/2017 Pradhan 6
Growth of Retail Markets MATURITY (5-10 years)
GROWTH (15-25 years) STAGNATION (5-10 years)
Characteristics:
Characteristics:
Characteristics: Characteristics:
INCEPTION (10 years) Characteristics: Increasing specialisation in formats Characteristics:
Increasing specialisation in formats
Established format characteristics National and international presence Consolidation of formats
Established format characteristics National and international presence Consolidation of formats
Characteristics: New store expansion tapers
Characteristics: Development of speciality formats New store expansion tapers National and international presence
Development of speciality formats Oversupply of retail space National and international presence
Movement towards national presence Oversupply of retail space New store expansion stagnates or falls
Evolving, diffused formats Movement towards national presence Significant competition from other New store expansion stagnates or falls
Evolving, diffused formats Rapid expansion phase Significant competition from other Retail space supply tapers, leading to
Rapid expansion phase organised players and overlapping Retail space supply tapers, leading to
Regional presence Availability of retail space at reasonable organised players and overlapping higher acquisition costs/lease rentals
Regional presence Availability of retail space at reasonable formats
formats higher acquisition costs/lease rentals
Conjectural presence in each market costs Significant competition from other
Conjectural presence in each market costs Increasing focus on differentiation organised
Significant competition from other
Lower market share per market Growth in internal and external strategies
Increasing focus on differentiation players and alternative
organised players and alternative
Lower market share per market Growth in internal and external strategies formats
Lack of availability of retail real estate competition Peak penetration into individual formats
Lack of availability of retail real estate competition Peak penetration into individual Over penetration into individual markets
space at reasonable cost Larger penetration into individual markets Over penetration into individual markets
space at reasonable cost markets
Larger penetration into individual markets Growth decelerates
High degree of competition from markets Market share stagnates Growth decelerates
High degree of competition from Market share stagnates
unorganised players Accelerated investments in new Low incremental investments required Market shares of individual players
unorganised players projects
Accelerated investments
with lower in new
incremental Low incremental investments required decline
Market shares of individual players
Investment stage with high incremental projects with lower incremental decline
S investments
Investment stage with high incremental investments Investments funded through internal Dependence on external finance to
investments investments accruals
Investments funded through internal Dependence on external finance to
Mainly promoter and angel investor Private equity, venture capital, debt and accruals fund investments increases
A financing
Mainly promoter and angel investor Private equity, venture capital, debt and
equity market financing accessible Cost of financing declines
Cost of financing declines
fund investments increases
High cost of financing
financing equity market financing accessible Customer acquisition costs increase High cost of financing
L Presence in few merchandise
Presence in few merchandise
High cost of financing
High cost of financing Customer acquisition costs increase Customer retention costs increase
Customer retention costs increase
categories Increase in breadth and depth of Substantially large breadth and depth
E categories Increase in breadth and depth of Substantially large breadth and depth Consolidation of merchandise
Lack of scientific merchandise planning merchandise categories of merchandise categories
of merchandise categories categories
Consolidation of merchandise
Lack of scientific merchandise planning merchandise categories Private labels assume strategic categories
S process
process
Introduction of scientific merchandise
Introduction of scientific merchandise significance
Private labels
for assume strategic
improving profitability
Revamp in private label strategy
Revamp in private label strategy
High bargaining power of vendors planning process significance for improving profitability Low bargaining power of vendors
High bargaining power of vendors planning process Vendors enjoy low bargaining power vendors
Low bargaining power
High logistivs and merchandise Focus on private label development
Focus on private label development Vendors enjoy low bargaining power start losing out of
as vendors
competitive
High logistivs and merchandise Increasing collaboration with vendors to vendors start losing out as competitive
acquisition costs Bargaining power with vendor drive
Increasing pressures lead to squeezing of vendors
acquisition costs Bargaining power with vendor supply collaboration with vendors to
chain efficiencies pressures lead to squeezing of vendors
High degree of resistance from increases drive supply chain efficiencies Consumers demand higher service
High degree of resistance from increases Consumers demand higher service Consumers demand higher service
consumers towards organised formats Consumers start accepting new formats Consumers demand higher service levels as awareness increases
consumers towards organised formats Consumers start accepting new formats levels as awareness increases levels as awareness increases
levels as awareness increases Consumers shift to alternative formats
Consumers shift to alternative formats
Risks:
Risks: Risks: Risks:
Risks: Finance availability Risks:
Availability of finance Finance availability Market risk due to increase in Risks:
Availability of finance Highly geared financial structure Market risk due to increase in Risks:
Low fixed cost coverage leading to Highly geared financial structure competition Business risk increases and payback
Low fixed cost coverage leading to Private label establishment competition Business risk increases and payback
high operating leverage Private label establishment Consumer retention risks periods from new projects increase
high operating leverage IT integration Consumer retention risks periods from new projects increase
High individual property risk IT integration Increasing finance risk
High individual property risk Increasing finance risk
Format risk due to lack of stability New project risks in international
Format risk due to lack of stability New project risks in international
markets
Market risk in terms of acceptability of markets
format
Marketbyrisk in terms of acceptability of
customers Competition from alternative formats
format by customers Competition from alternative formats
Consumer retention risks
Consumer retention risks
African markets Indian markets South Asian markets Developed markets
TIME
10/6/2017 Pradhan 7
I
Classification of Retail Stores
n
d
e Classification of Retail Stores
p
e
n
d
e
n
t
r
e Store Based Non-Store
t
a Retailing Retailing
i
l
e
r
C Form of Ownership Merchandise offered Direct selling

h Independent retailer Convenience stores Mail order
a Tele marketing
i
Chain retailer Supermarkets
n Franchise Hypermarkets Automated Vending
r Leased departments Speciality stores
e
t
Consumer co-operatives Departmental stores
a Off price retailers
i Factory outlets
l
e
Catalogue showrooms
r
F
r
a Retailing Management - Swapna
n 10/6/2017 Pradhan 8
c
h
Characteristics of select retail
formats
Format Description Size (sq.ft) Examples
Intl. India
Category Narrow 50,000+ 15,000+ Toys R Us,
Killer / variety, but Nallis, The Loft
Specialist deep
assortment
Convinience Mix of 3,000 500 1,000 7-Eleven,
stores products 8,000 Speedmart
Department Several 75,000+ 5,000 Marks &
stores product lines, 40,000 Spencer,
largely non- Shoppers Stop,
food Pantaloons
10/6/2017 Pradhan 9
Intl. India
Factory Branded 5,000 10,000 500 1000 Levis factory
Outlets merchandse at Outlet,
a discount Reebok
Factory Outlet
Hypermarket Large self 80,000 40,000 Wal-mart, Big
service stores, 220,000 75,000 Bazaar
mix of food &
non food.
Essentially
low price
Single Price Offers a mix 5,000 20,000 2,000 5,000 Family Dollar,
stores of branded & 9 to 9, 49 to
unbranded 99
stores

10/6/2017 Pradhan 10
Intl. India
Specialty Focus on a 5,000 8,000 2,000 5,000 Walgreens,
stores brand or Crossword,
category, MusicWorld
narrow
product line ,
but good
depth
Supermarket Food,laundry 8,000 800 5,000 Asda,
and 20,000 Kroger,Food
household Bazaar, Food
maintainance World
products. Self
service, low
margin, low
cost
10/6/2017 Pradhan 11
Emerging trends in retailing
1. Constant change new formats.
2. Professional management.
3. Technology.
4. Rise of extremes mass merchandisers /
specialty stores / category killers.
5. Growth of franchising , leading to a global
presence.
6. Retail establishments are gradually turning into
places where people meet & spend more time
10/6/2017 Pradhan 12

Retail Formats & Theories: 10/6/2017 Retailing Management - Swapna Pradhan 1

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Retail Formats & Theories

Retailing Management - Swapna

Retailing Management - Swapna

Retailing Management - Swapna

Retailing Management - Swapna

Retailing Management - Swapna

Retailing Management - Swapna

African markets Indian markets South Asian markets Developed markets

C Form of Ownership Merchandise offered Direct selling

Retailing Management - Swapna

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