FUNCTIONS OF RETAILING

OVERVIEW OF RETAILING
 RETAILING

TO DEFINE RETAILING , CONSIDER IT

FROM VARIOUS PERSPECTIVES,
DEMONSTRATE ITS IMPACT, & NOTE
ITS SPECIAL CHARACTERISTICS
 RETAILERS MUST BE “CUSTOMER-
FOCUSED, NOT PRODUCT-FOCUSED,”
------- CARL STEIDTMANN,
DIRECTOR & CHIEF ECONOMIST OF
PRICEWATERHOUSECOOPERS
 6-step process for customer-focus

1. Create a great environment

2. Listen to your customer

3. Consider the “Lifetime Value” of your customer

4. Use direct mail

5. Employ relationship marketing principles

6. Provide rewards to your best customers

 Retailing consists of…
• Business activities involved in selling goods &
services to consumers for their personal,
family, or household use

• In contrast, wholesaling is an intermediate

stage in the distribution process
 Impact on economy
• Retailing is a major part of world commerce
• Retail sales & employment are key economic
contributors
• Retail trends often mirror trends in a nation’s
overall economy
• Out of global retail sales of $6.6 trillion U.S.
retail accounts for over $3 trillion
 Retail in modern format
Country Modern format(%) Total($)
India 3 200 bn
China 15 325 bn
Indonesia 30 75 bn
Thailand 40 32 bn
Malaysia 45 20 bn
Taiwan 81 40 bn
-------------------------------------------------------
Source: Operations Research Group
 Top 10 retailers worldwide
Rank Retailers No. of stores Sales 2000
owned (US $ Mill.)
1 Wal-Mart (USA) 4178 100,000
2 Carrefour (France) 8130 61,047
3 The Kroger Co. (USA) 3445 49,000
4 Home Depot (USA) 1134 45,738
5 Royal Ahold (USA) 7150 45,729
6 Metro AG (Germany) 2169 44,189
7 Kmart Corporation (USA) 2105 37,028
8 Sears Roebuck (USA) 2231 36,823
9 Albertson’s Inc. (USA) 2512 36,362
10 Target Corporation (USA) 1307 36,362

Source: Price Waterhouse Coopers

 Sector-wise sales – world
estimates
Sector Sales
(US $ Trillion)
Retail 6.6
Financial services 5.1
Construction engineering 3.2
Packaged goods 2.0
Chemicals 1.4
Energy 1.2
Electronics 1.1
Automotive 1.0
Telecom 0.8
Pharmaceuticals, diagnostics 0.3

Source: ICRIER, working Paper No.80

 Share of retailing in total
employment in select countries
Country Share of retail in
total employment (%)
USA 17
Brazil 15
Poland 12
China 6
India 6-7

Source: CSO India: M.G.Study, 2000

 Retail function in distribution

Manufacturer Wholesaler Retailer Final

consumer
 Relationships among retailers & their suppliers
• Complex relationships among retailers & their
suppliers must be understood:
1. Retailers are part of the distribution channel;

2. Retailers are also major customers of goods &

services for resale, store fixtures, computer
equipment, management consulting & insurance

• Retailers & their suppliers may have divergent

viewpoints that need to be reconciled
 Comparing exclusive, intensive, &
selective distribution
Exclusive Intensive Selective
No. of retailers L H M
Potential for conflict L H M
Support from supplier (retailer) H L M
Supplier’s sales L H M
Retailer’s assortment L H M
Product (retailer) image H L M
Competition among retailers L H M
Exclusive distribution:
• Generally smoothest
• Stimulates both parties to work together

• Yet, also requires retailers to limit its

assortment in product categories

• From manufacturers’ perspective, may limit

their long-run total sales potential
Intensive distribution:
• Sell through as many retailers as possible
• Often maximizes suppliers’ sales & lets
retailers offer many brands & product versions
• Consequently competition among retailers
selling same items is high
Selective distribution:
• Sell thru’ moderate no. of retailers, combines
aspects of both exclusive & intensive distribution
• Allows suppliers’ to have higher sales than in
exclusive distribution & lets retailers carry some
competing brands
• Encourages suppliers to provide marketing support &
retailers to give adequate shelf space
• Yet, this approach does not have the channel
cooperation of exclusive distribution or the sales
potential of intensive distribution
 Special characteristics of retailing

Small average salesImpulse purchases

Retailer’s
strategy

Popularity of stores
 2. Importance of developing &
applying a retail strategy
Any retailer should apply these 6 steps:
1. Define the type of business in terms of the goods or service
category & the company’s specific orientation
2. Set long-run & short-run objectives for sales & profit, market
share, image,…
3. Determine the customer market to which to appeal on the
basis of its characteristics & needs
4. Devise an overall, long-run plan that gives general direction to
a firm & its employees
5. Implement an integrated strategy that combines such factors
as store location, product assortment, pricing, & advertising &
displays to achieve objectives
6. Regularly evaluate performance & correct weaknesses or
problems as they are observed
 3. Marketing concepts applied to retailing
customer orientation

Retailing Retail
Coordinated effort concept strategy

Value-driven

Goal orientation
1. Customer orientation: retailer determines
the attributes & needs of its customers &
endeavours to satisfy these needs to the
fullest
2. Coordinated effort: retailer integrates all
plans & activities to maximize efficiency
3. Value driven: retailer offers good value to
customers, whether it be a discounter or
upscale; i.e. prices appropriate for level of
products & customer service
4. Goal orientation: retailer sets goals & then
uses its strategy to attain them
Unfortunately, this concept is not grasped by all
retailers:
• Some indifferent to customer needs, plan
haphazardly, , have prices that do not offer value,
& have unclear goals
• Retailing concept is easy to adopt
• 3 issues that relate to a retailer’s performance in
terms of retailing concept:
1.Total retail experience
2.Customer service
3.Relationship retailing
 Total retail experience
• Irrespective of the type of outlet, shoppers encounter a total
retail experience in making a purchase

– No. of sales people

– Displays, Prices
– Brands carried, Inventory on hand

• If some part of the total experience is unsatisfactory,

consumers may not buy a given good or service

• One of the biggest challenges for today’s retailers is

generating customer “excitement”
 Customer service
• Customer service has a strong impact on total retail
experience
• Among customer service strategy are:
– Store hours
– Parking access
– Shopper- friendliness of store layout
– Credit acceptance
– Level & caliber of salespeople
– Amenities such as gift wrapping
– Rest room availability
– Employee politeness
– Handling special orders
– Delivery policies
– Time spent at check-out lines
– Customer follow-up
• Leading retailer in customer service is Nordstrom
 Relationship retailing
• Seek to establish & maintain long-term bonds
with customers

• Retailers must thus concentrate on total retail

experience:
– monitor satisfaction with customer service
– stay in touch with the customers
• To ‘win’ in the long run customer must also
‘win’ in the long run
• Due to advances in computer technology, it is
now much easier to build database