MODULE -1

INTRODUCTION TO THE WORLD OF RETAILING

Coverage.

What is Retailing The importance of retailing Opportunities in retailing Trends in Retail Industry Retail Management Decision Process Types of Retailers

Definition

A conclusive set of activities or steps used to sell a product or a service to consumers for their personal or family use. It is responsible for matching individual demands of the consumer with the supplies of all the manufacturers. French word retaillier meaning to cut a piece off or to break the bulk. A retailer is a person, agent, agency, company, or organization which is instrumental in reaching the goods, merchandise, or services to the ultimate consumer.

What is retailing to you?

Retailing a set of business activities that adds value to the products and services sold to consumers for their personal or family use

The Four Ps of Marketing

Product Distribution Price Promotion

Retail Industry and Economy

It is the largest private industry, ahead of finance and engineering. Retail is the largest industry in the world with sales of $ 7.3 trillion. 25 of the top 50 Fortune 500 companies are in retail. Every 10th billionaire in the world is a retailer. Retail is the second largest industry in US in terms of establishments and employees. Generates $3.8 trillion in sales in US. Generates 11.7% of US employment. Well known retailers - Wal Mart, Harrods, Sears, McDonalds

Worlds 20 Largest Retailers in 2005

1-6

Home Depot

Huge product assortment Prices are 20% 30% below hardware stores Obsessed with offering high quality customer service Lifetime value of customers: $25,000 Well-trained, highly motivated salespeople earn above average salaries Customer problem solving is encouraged Internet site offers many home improvement tips One of todays most successful retailers

Retail Industry in India

The Indian retail industry is the fifth largest in the world. Comprising of organized and unorganized sectors, India retail industry is one of the fastest growing industries in India

With growing market demand, the industry is expected to grow at a pace of 25-30% annually, contributing 8-10 to GDP.
2nd largest employer. About 12 million retail outlets in India.

They are predominantly small, independent, and owner managed shops. Boom in retail industry is due to increase in the disposable income of the middleclass households. The retail business in India is expected to reach US$ 833 billion by the year 2013. It is further expected to reach US$ 1.3 trillion by the year 2018. Today organized retailing in India is estimated to increase from 4% in 2008, to 16% in the next five years.

Growth Of Indian Retail

Size of Indian Retail

1200 1011 1000

US$ Bn

800 590 600 400 200 0 2007 2012* 2017*

*Projected

336

Source: Technopak Analysis, CSO & Other Sources

Indian Retail expected to grow close to 12% p.a. in the next 10 years

Major Retailers in India

Pantaloons Tata Group RPG Group Reliance AV Birla Group

Characteristics of Retailing

There is direct end user interaction in retailing. It is only the point in the value chain to provide a platform for promotions. Sales at the retail level is generally in smaller unit sizes. Location is a critical factor in retail business. In most retail businesses services are as important as core products. There are a larger number of retail units compared to other members of the value chain.

Drivers of Change in Retailing

Changing demographics and industry structure Expanding computer technology Emphasis on lower costs and prices Emphasis on convenience and service Focus on productivity Added experimentation Counting growth of non-store retailing

Functions of Retailing

Sorting Breaking bulk Holding stock Additional services

Channel of communication
Transport and Advertising functions

Trends in Retailing

Mom-and-pop stores E-commerce Department Stores Discount Stores Category Killers Speciality Stores E-tailers

How do Retailers add value?

Provide Assortment Buy other products at the same time Break Bulk Buy it in quantities customers want Hold Inventory Buy it at a convenient place when you want it Offer Services See it before you buy; get credit; layaway

Opportunities in Retail Industry

From a traditional setup to a professional setup Fastest growing service industry in India Marketing oriented industry like FMCG, consumer durables etc. Being customer focused and being innovative is the key. Includes dynamics of supply chain management, merchandising more than any other industry. Large requirements of professionally trained manpower like MBAs to manage businesses.

Retail has changed! So has the career opportunities!

To Today s Retail er
Human Resources Loss Prevention Real Estate Store Design

Mom and Pop Store

Operations MIS Finance

Promotion/Advertising

The Retail Management Decision Process

Level-1

Understanding the world of retailing

Level-2

Developing a retail strategy

Level-3

Implementing the retail strategy

Understanding the world of retailing

Environmental Factors
Macro

technology, social, ethical, political Micro competition and customers

Competition

Intratype competition - between same type retailer Intertype competition - Greater Variety of products makes for scrambled merchandising.

Customers

Consumer Behavior

Developing a Retailing Strategy

Indicates how the firm plans to focus its resources to accomplish objectives. It identifies

Target markets Nature of Merchandise and services Building a long term advantage over competitors

Wal-Mart

V/S

Toys R Us
big towns Toys, games, bicycles and children Low price

Small towns ----Wide Varity shallow selection ----furniture for Low price ------

Retailing Strategy Cont.

Strategic Decision Area

Marketing

strategy Financial strategy Location strategy Organizational structure Human Resource Information systems Supply Chain Strategies CRM

Implementing the Retail Strategy

Retail Mix combination of factors used to satisfy customer needs and influence their purchase decision.

Elements in retail mix includes:

Types

of merchandise and service Pricing Advertising and promotion Store design and merchandise display Level of customer service Store location

Wal-Marts Retail Mix

1-24

Customer Service

Location

Store Design And Display

Retail Strategy

Merchandise Assortment

Communication Mix

Pricing

Wal-Marts Retail Mix

1-25

Location Strategy

Free-standing Stores

Customer Service Store Display And Design

Merchandise Assortment

Communication Mix

Pricing

Wal-Marts Retail Mix

1-26

Assortment Strategy

Customer Service

Location

Store Design and Display

Large Number of Categories Few Items in Each Category

Communication Mix

Pricing

Wal-Marts Retail Mix

1-27

Location

Pricing Strategy
Merchandise Assortment

Customer Service

Store Design and Display

Communication Mix

Low, EDLP

Wal-Marts Retail Mix

1-28

Customer Service

Location

Communication Mix
Store Design and Display Merchandise Assortment

Pricing

TV and Newspaper Insert Ads

Wal-Marts Retail Mix

1-29

Store Design and Display

Customer Service

Location

Basic, Special Displays for Products

Communication Mix

Merchandise Assortments

Pricing

Wal-Marts Retail Mix

1-30

Customer Service
Limited
Location Merchandise Assortment Store Design and Display Communication Mix

Pricing

Types of Retailers

Basis for classification of Retail Units

1.

2.
3. 4. 5. 6.

Nature of ownership Operational structure Type of retail location Length and depth of merchandise Method of customer interaction Based on goods and services

1. Nature of ownership

Sole proprietorship Partnership Joint venture

2. Operational Structure

Independent retail unit Retail chain Franchise Leased departments Co-operatives

3. Retail location

Retailers in a Free-standing location Retailers in a business-associated location Retailers in specialized markets Retailers at airports

4. Variety of Merchandise Mix

Department stores
Discount stores Speciality stores

Category killers

1. Discount store discount store retailer that offers a broad variety of merchandise, limited service, and low prices. Eg. Wal-Mart, Subiksha

2. Specialty stores A specialty store concentrates on a limited number of complementary merchandise and provides a high level of service. Eg. Park Avenue from Raymonds

3. Category specialist is discount store that offers a narrow variety but deep assortment of merchandise. They are basically discount speciality stores. By offering a complete assortment in a category specialists can kill a category of merchandise for other retailers and thus are called category killers Eg. Home Depot, Sangeetha, Univercell 4. Department stores are retailers that carry a broad variety and deep assortment, offer some customer services, and are organized into separate departments for displaying merchandise. Eg. Shoppers Stop, Pantaloons.

5. Method of customer interaction

Store based retailing Non-store based retailing

Non-traditional retailing

Store-based Retailing
Food Retailers
Convenience store Supermarkets Food-based superstores Combination stores Limited-line stores Warehouse stores

General merchandise retailers

Specialty stores Department stores Full-line discount stores Variety stores Off-price chain Membership clubs Thrift stores Flea markets

40

Non-Store based Retailing

Direct Marketing
Catalog

retailing Direct mail

Direct Selling
Person-to-person

selling Multi-level marketing

Automatic Vending Machines

41

Non-Traditional Retailing

The Internet
Online

shopping E-tailing

Video-kiosks

Video-catalogs

42

6. Based on goods and services

Product retailer
Service retailer
Rented-goods

service retailers Owned-goods services retailing Non-goods services

43