RETAIL

MARKETING

Module 1

INTRODUCTION

Retail - Any business that directs its marketing efforts

towards satisfying the final consumer based upon the
organization of selling goods and services as a means of
distribution .
Retailer - A dealer or trader who sells goods in small
quantities, or one who repeats or relates .
Retailing -All activities involved in the marketing of goods
and services directly to the consumers for their personal,
family or household use or Retailing includes all the activities
involved in selling goods / services directly to final consumers
for personal , non-business use.
Retailing derived from French word retailler means a piece
of or to cut up.

FUNCTIONS OF A RETAILER

From customers point of view, retailer serves

by providing goods that he needs in the required
assortment and at the right place and time.
From customers point of view, retailer serves by
providing goods that he needs in the required
assortment and at the right place and time.
From an economic standpoint the role of a
retailer is to provide real added value or utility to
the customer.

FUNCTIONS OF A RETAILER

Five different perspectives - By serving the

consumers by way of functioning as a marketing
intermediary and creating time, place and ownership utility.
1.

2.

3.
4.
5.

First utility arises from the need of providing a finished goods

and services in the form that is acceptable to the
customer.
The retailer performs the function of storing the goods, and
providing us with an assortment of products in various
categories
The retailer creates time utility by keeping the store open
when the consumers prefer to shop.
By being available at a convenient location, he creates place
utility.
Finally when the products are sold ownership utility is
created.

FUNCTIONS OF A RETAILER

The Retailer also serves the manufacturers

by Performing the function of distributing the
goods to the end users.
Creating a channel of information from
manufacturer to the consumer.
By serving as a final link in the distribution
chain.
Recommending products where brand loyalty
is not strong or for unbranded products.

INTRODUCTION
CONCEPTS, ROLE & ENVIRONMENT

Retailer is customer focused, not Product

focused.
Manufacturer may reach customers through:
Dealers
Company showrooms
Super / Hypermarkets

Manufacturers will decide on Retail Distribution:

Intensive
Selective
Exclusive

RETAIL EVOLUTION THEORIES

Four theories of evolution/ retailing are:

1. Environmental theory
2. Cyclical Theories
a) Wheel of Retailing
b) Accordion theory
c) Retail lifecycle theory

3. Conflict theory
4. Evolutionary theories
a) Dialectic Process
b) Natural selection

1.ENVIRONMENTAL THEORY

Darwinian approach-Retailers with most appropriate

structure and formats will survive.
If there are different environmental conditions, they
need to adopt in order to succeed.
E.g.: Economy and culture.
They must also respond to the evolution of market
conditions or else they will face extinction.
Major environmental factors
1. Changes related to customers-Demographic, attitude
and preferences, life style and economic influences.
2. Changes in technology.
3. Changes in competition.

2.CYCLICAL THEORY

Cyclical Theories : Begin with one state and

return to that state at some time in future.
Cyclical Theories
a) Wheel of Retailing
b) Accordion theory
c) Retail lifecycle theory

Evolutionary: Changes similar to biological

evolution

a) WHEEL OF RETAILING

Trading-up Phase

-Moderate to high prices

-Elaborate facilities
-Increase in skills

Entry Phase

-Low prices
-Limited facilities
-Limited service

Vulnerability Phase
-High prices
-Excellent facilities
-Excellent service
-Declining ROI

10

a) WHEEL OF RETAILING

Wheel represents phases through which some types of

Retailers pass:
Retailers enter by attracting customers low price, low
service
Expand market More expensive merchandise, More
Trading up services, open more convenient locations.
process increases costs & price of their merchandise,
creating opportunities for new low price retailers to
enter e.g. Discount stores & category specialists
Finally they mature as high cost high price retailers who
become vulnerable to new entrants-inability to adapt.
Some Retailers dont begin as low price, low service
entrants, e.g. Upscale fashion specialty stores.

b) THE ACCORDION THEORY

In rural markets, Retailers sell many categories under one

roof: shoes, cosmetics, foods, cloth, medicines. However the
assortment is shallow and customers have limited choice.
Starting with general stores - neighboring localities
Slowly switching to specialist stores - like gifts,
restaurants, entertainment at a certain distance
These specialist retailers when mature start adding variety
and become general stores.
Some become category killers is a retailer that carries
such a large amount of merchandise in a single category at
such good prices that it makes it impossible for the customers
to walk out without purchasing what they need, thus killing
the competition.
Department stores have both width and depth of merchandise.

c) RETAIL LIFE-CYCLE THEORY

Retail development pass through 4 stages-

Introduction stage slow rate of growth due to

limited resources and experiences.
Growth stage Rapid growth as efficiency and
experience increase.
Maturity stage Level off due to increased
cost and high competition and reduced
efficiency.
Decline stage Decrease in market share and
profitability. May sometimes withdraw from
market.

c) RETAIL LIFE-CYCLE THEORY

Cash
flow

Maturity/Saturatio
n
Growth

Introductio
n

Decline
Level of
sales

Retail
development

Time

3. CONFLICT THEORY

Competition between retailers causes changes

in the nature of retail environment.

It is due to the imbalance caused by
innovations (Brown, 1987) Four stages of
response.
Types of retailer response to innovation.
1.
2.
3.
4.

Shock.
Defensive retreat.
Acknowledgement and assessment.
Adaptation.

4. EVOLUTIONARY THEORY

Evolutionary Theories : Changes similar to

biological evolution
Evolutionary theories
a) Dialectic Process
b) Natural selection

a) DIALECTIC PROCESS

Retail
formats
emerge
by
adopting
characteristics from other forms of retailers in
much the same way as the child is the product
of the pooled genes of the parents.
Specialty stores with high margins, low
turnover plush operations
Discount stores with low margins, high
turnover low operations
Both the above were synthesized to form
category specialist stores.

a) DIALECTIC PROCESS

A new value proposition by one retailer gives

rise to two retailers with same value.
E.g. Tesco always copied Sainsbury
In India too the grocery sector is facing a price
led dialectic processsome of them are sure
to die
Department Store
Thesis
Discount Store
Antithesis

Discount Dept.
Store
Synthesis

b) NATURAL SELECTION

Those Retail Institutions Succeed which adapt

to
changes
in
customers,
Technology,
competition and legal environment.
Department stores have tried to combat
specialty stores by opening specialty counters
within the stores.
Interest in physical fitness and increased
number of women in workforce have made
specialty outlets within grocery stores.

Management of service and quality

in retailing

Two different approaches to quality management.

a) Product-attribute approach

match the product conformance to standardized

requirements.
Controls companies output by using internal standard
setting prospective.
Training -led management style.

b) Consumer-oriented approach

Holistic process of service delivery to be controlled by

considering expectation and attitude of customers.
Marketing-led approach.
E.g. Perceived service quality Gronroos model and
Parasuraman, Zeithaml & Berry model.

PERCEIVED SERVICE QUALITY

GRONROOS MODEL

Gronroos, 1982 focus on IMAGE, a gap

between expected and perceived service.

Aggregation of functional and technical
variables.
Functional quality How technical elements
are transferred to customers.
Technical quality What the customer is
actually receiving.

MANAGING PERCEIVED SERVICE QUALITY

GRONROOS MODEL
Perceived service
quality

Expected
service

Traditional marketing
activities

Technical
quality

Machines

Computerized systems

What?

Image

Internal
relation

Attitudes

Technical
solutions
Knowhow

Perceived
service

Functional
quality
Customer
contacts

How?

PARASURAMAN, ZEITHAML & BERRY

MODEL

Parasuraman et.al., 1985, customer evaluate quality as

difference between expected and perceived service.
Five service-quality gaps are identified.
Realization of these gaps and reducing and closing the
gaps led to improved satisfaction.
Gap 1: ignorance of customer expectations
Gap 2 : requirement for service design stds
Gap 3 : not delivering to service stds
Gap 4 : inconsistency between performances &
promises(service delivery & external commn.)
Gap 5 : the service shortfalls

SERVICE DELIVERY QUALITY

PARASURAMAN, ZEITHAML & BERRY MODEL
Personal
needs

Word of mouth

Past
experience

Expected
service
Gap 5

CONSUMER
MARKETER

Gap 1

Perceived
service

Service
delivery

Gap 4

Gap 3
Translation of
perceptions into
service-quality
specifications
Gap 2
Mgmt perceptions of
consumer
expectations

External com
To consumers

QUALITY CHARACTERISTICS

Merchandise

Performance
Features
Reliability
Conformance to stds
Durability
Serviceability
Aesthetics
Image

Services
Tangibles
Reliability of staff
Responsiveness of
staff
Assurance /
Competence
Empathy

GLOBAL RETAIL INDUSTRY

Retail sales driven by Ability (disposable

income) and willingness (consumer
confidence)
Worldwide retail sales Est.$7 Trillion.
Expenditure on Household Consumption
increased by 68% between 1980 and 1998
Top 200 retailers account for 30% worldwide
demand
Over 50 of the Fortune 500 and 25 of Asian
Top 200 are Retailers

Top 7 Global Retailers

Sales
Grocery Sales
(USD Bn)
(%)

Rank

Name of Retailer

Walmart - USA

235

44%

Tesco- UK

63

75%

Carrefour-France

58

84%

Home Depot -USA

55

51%

Kroger - USA

55

70%

WalGreens -USA

52

75%

Aldi Group- Germany

48

18%

Why retailing so important?

Retailer links Producers to Customers

Retailer is a person, agent, agency, company or organization
reaching the Goods or Services to ultimate consumer
Retailer in close contact with the customers
Sell small quantities of items on a frequent basis
Convenience in terms of location , payment and credit
facilities , range of merchandise , after sales service, etc.
Offer selection merchandise assortment
Retailers perform specific activities:

Anticipate customer wants

Stock product assortments
Acquire market information
Finance Retail business

Retailing is Big Part of Economy

Manufacturing
(18%)

Retail
(17%)
Government
(15%)

Services
(50%)

Employment Projections for 2010 by BLS (Bureau of Labour

Retail in India

FDI in Retail in India; Chinese lesson

A.T. Kearneys Global Retail Development Index
ranks India first
Retailing in India - unorganized sector
Organized retail at 2 % , 85% in US, 20% in China
At 270 million, one of the largest consumer base
GDP growth, increased literacy, increase in media
penetration
60% of India is under the age of 30 - propensity to
shop is higher

Corporate- Indian Retail

Corporate
Reliance Retail

No of
Outle
t
700+

Remarks
Biggest Retail Chain & fast Expanding,
operating in 14 States.

Big Bazaar

164

Fast Expanding, Big Size Stores

Bharti - Walmart

105

Retail Stores in NCR, Punjab, UP &

Rajasthan, Expanding quickly to South
Cash & carry Stores

03

Aditya Birla

500+

Spencers

210

Metro-AGGermany

Concentration in South(acquired
Trinethra and Fab Malls)
Oldest Retailer in India, operates in 27
Cities
Cash and carry stores located at Mumbai,
Hyderabad & Kolkatta, Expanding Slowly

Rapid Transformation Anticipated

28% share

Current Size & Future Projections for Indian Retail Market

1200

282
1011

1000
US$ Billion
800
600
400

336

376

200
0

12
2007

17
2008

421

29
2009

Total Retail

471

51
2010

527
74

2011

590
97

2012

Organized Retail

Reach a share of 28% by 2017

2017

Anticipated Indian Retail

Country

Share of
Years taken to reach the
Organized Retail
level from < 5%

China

20%

10

Poland

20%

Brazil

36%

15

Thailan
d

40%

18

US

85%

50

India

17% (estimated)
27% (estimated)

5
10

India looking at rapid GROWTH compared to other countries

Growth Of Indian Retail

Size of Indian Retail

1200

1011

1000
800
US$600
Bn
400

590
336

200
0

2007

2012*

2017* *Projected

Source: Technopak Analysis, CSO & Other Sources

Indian Retail expected to grow close to 12% p.a. in

the next 10 years

HIGH PRIVATE CONSUMPTION

Private Consumption US $568 Bn (62%)

Rural India consists of 720 Million consumers
across 627,000 villages
17% of these villages account for 50% of the
rural population

Organized Vs Unorganized Retail

Sector
Organized Retail
Sector

Unorganized Retail Sector

Organized Vs Unorganized Retail

Sector

Factor

Organized Retail
Sector

Unorganized Retail
Sector

Definition

Modern form of
retailing

Traditional form of retailing

Examples

Hypermarket,
Retail chain etc.

Mom n Pop stores, hand

cart, pavement vendors etc

Market Share

2%

98%

Market
Growth

35%

6%

Challenges

Poor supply chain

management,
aggressive expansion
etc.

Use of labour intensive

technology, lack of
government support etc.

Comparative Penetration of
Organized Retail

Organized
15%

Traditional

19%
45%
70%

85%

80%

97%

81%
55%
30%

USA

Taiwan

Malaysia Indonesia

20%
China

3%
India

Growth of organized Retail in India

Organized Retail is 2 % of the total Retail

Industry and expected to Grow by 10% by
2012.

Increasing Consumer aspiration

Growing no of Nuclear families
Growing Size of working women segment
Demand from tier II and III cities and rural
markets.
Large young working Population

ORGANISED RETAILING

In India Organized Retailing is 2%

Retail sector highly fragmented
Retail chains like Wal-Mart, Sears, McDonalds
brought Rapid Growth and consolidation of
Organized Retail
Rapid rise of Income levels and accompanying
changes in lifestyles greatly contributed to
growth of Organized Retail

ORGANISED RETAILING

In India, increase in Disposable income,

Purchasing Power of growing Middle Class
conducive conditions for growth of Organized
Retail
Indian Retail environment different from that
of western countries:
Cities congested, large population in rural areas
Smaller purchases, limited household space

Need for Retailers service

Self-service : Self service is the corner-stone of all

discount operations. Customers carry out their own
locate-compare-select process to save money.
Self-selection: customers can find their own goods ,
although they can ask for assistance.
Limited service : retailers in this category carry more
shopping goods , and customers need more information
and assistance. The store also offer services such as
credit and merchandise return privileges
Full service : salespeople are ready to assist in every
phase of locate-compare-select process . High cost of
retailing

Types of Retail Formats

Store retailers : specialty store ,

supermarket , department store , convenience
store , discount store, etc
Non-store retailers : direct selling (multilevel/network marketing) , telemarketing ,
automatic vending , buying service .
Combination

Types of Retail Formats

Store-based Retailers operate from a fixed location

that requires consumers to travel to the store to
view and select merchandise and/or services.
Store-based Retailers

Department stores
Specialty stores
Supermarkets
Supercenters
Category killers
Convenience stores
44

Types of Retail Formats

Non-store based Retailers attempt to reach

the consumer at home, work, or any place
other than a store where they might be
susceptible to purchasing.
Non-store based Retailers

Street peddling
Direct selling
Mail-order
Automatic-merchandising machine
Electronic shopping
45

RETAILING CONCEPT

Retailing may take place through:

Retail Store
Mail Direct
Internet Sales
Door-to-door

Retail services like Restaurants, Hotels, Parlour,

Health Services, Car rentals, Travel
In USA Retail generates $3 trillion through 23 Mn.
Employees. Wal-Mart generates $245 Bn. sales
through 1 Mn. nationally and 0.3 Mn. Foreigners.

RETAIL

Strong economies have a strong Retail sector

Entry in retail sector is easy, hence results in
fierce competition
Retail must perform its primary role of catering
to customer satisfaction
Retail earns modest profits of 9-10%
Retail stores of different sizes face distinct
challenges. Their sales volume influences:
Merchandise purchase
Promotion & - Expenses Control

RETAIL

Last decade has seen tremendous changes in

Retail Business from made to order to ready to
wear, from counter sales to self service, emphasis
on value addition and cost reduction.
Family run retail business giving way to modern
professional retail.
Retail improving inventory management through
systems faster turnover, better profitability, fast
changing customer preferences for assortment of
goods and services. BETTER CUSTOMER CARE

RETAIL CHARACTERISTICS

Direct End-User Interaction

Platform for Promotions & POP displays
Lower unit sales
Retail location critical
Services as important as Core Products
Large number of Retailers to meet
geographical coverage and population density

RETAIL BUSINESS CLASSIFICATION

1. Ownership Business:
Proprietorship,
Partnership,
Limited liability company

2. Operational Structure:

Independent Trader,
Chain Of Stores,
Franchising,
Consumer Cooperative

3. Width & Depth Of Merchandise:

Specific Product Category
Wide Range

RETAIL BUSINESS
CLASSIFICATION

4. Type Of Pricing:
Low pricing, minimum Service
Premium Merchandise, High Service
Premium pricing, distinctive Image

5. Consumer Interaction:

Direct interaction
Mail Order
Tele-Selling
Vending machines
Door-to-door
Mobile Vending

RETAIL MANAGEMENT
..2

GROCERS - Major business is grains,

provisions, spices, edible oils. Grocers may be
dealing in many other items.
GENERAL STORES - Deal in items Daily needs
and stocking number of categories, is
identified as a general store.
CHEMIST- Deal in Ethical Pharmaceutical
Products. Require a license and a Qualified
Pharmacist. Such outlets also deal in diverse
FMCG products.

RETAIL MANAGEMENT
..2

MODERN FORMAT STORE

a) Part of a chain of stores with self-service

facilities

b) Part of a chain, but does not have selfservice Facilities

c) Stand-alone (not part of a chain) with selfservice facilities
FOOD STORE : Deal mainly in food products milk, beverages, tea, coffee, squashes, ketchup,
jams, chocolates, biscuits, bakeries etc.

RETAIL MANAGEMENT
..2

TOBACCO KIOSK : Deal in tobacco products

like Paan, Cigarettes, etc. are called Pan Bidi
shops. Many of them also deal in packaged
consumer products like toilet soaps,
toothpaste, washing soaps, biscuits,
confectionery, batteries etc.
COSMETIC STORE : Deal in Ladies Personal
care products / Cosmetics, General toiletry
products, Mens toiletry products, Baby Care
Products.

RETAIL CONCEPT

Customer Orientation:
Attributes & Needs satisfaction

Coordinated Efforts:

Maximize Business Efficiency

Value driven:
Good Value for Money
Goal Orientation
Achieve Goals

RETAILING CONCEPT

1.
2.
3.
4.
5.

Communication with Customers

Identify Customers Needs
Provide Products and Services to
Satisfy Customers
Elicit Feedback to Improve Services Word Of
Mouth

RETAILING CONCEPT

Customer Service approach:

1.
2.
3.
4.
5.

Create a conducive environment

Listen to your Customers
Direct mail
Relationship Marketing Long Term
Rewards for Regular Customers

ROLE

Consumer spend their money at Retail which drives

the economy. Retailers realize Revenue when
Consumers buy products or Services from them.
The revenue passes up the Consumer Goods
distribution chain viz. to Wholesalers, Distributors
and Manufacturers.
Retail Industry employs 17-20% Workforce that
drives the Economy.
Retail trends often mirror trends in a nations
overall economy.
Retailers add value by Providing the Right Product
at The Right Place at the Right Time.

New Concepts & Trends

Vertical Retail Concept: Traditional stores and

Shop-in-Shop concepts mixture of system and
individuality, e.g. Sale of Non-food items like
newspapers, magazines with snacks, beverages
Consumption Related Trends: Increasing
Consumers with Purchasing Power & More
Migrant Consumers Demand for Broad selection
of Products Demand for Good quality Products
e.g. Honest, Original and Green Products

BOOKS FOR REFERENCE

Retail Management By Chetan Bajaj

Retail Management By Berman & Evans
Retail Management By Levy & Weitz