1UNIT-1UNIT-1UNIT-1UNIT-1

Definition:Definition:Definition:Definition:

Retailing All activities involved in selling goods or services directly to final consumers for theirpersonal, non-business use. RetailRetailRetailRetail is the sale of goods and services from individuals or businesses tothe end-user. Retailers are part of an integrated system called the supply chain. A retailer purchasesgoods or products in large quantities from manufacturers directly or through a wholesale, and thensells smaller quantities to the consumer for a profit. Retailing can be done in either fixed locations likestores or markets, door-to-door or by delivery. Retailing includes subordinated services, such asdelivery. The term "retailer" is also applied where a service provider services the needs of a largenumber of individuals, such as a public. Shops may be on residential streets, streets with few or nohouses or in a shopping mall. Shopping streets may be for pedestrians only. Sometimes a shoppingstreet has a partial or full roof to protect customers from precipitation. Online retailing, a type ofelectronic commerce used for business-to-consumer (B2C) transactions and mail order, are forms ofnon-shop retailing.Shopping generally refers to the act of buying products. Sometimes this is done to obtain necessitiessuch as food and clothing; sometimes it is done as a recreational activity. Recreational shopping ofteninvolves window shopping (just looking, not buying) and browsing and does not always result in apurchase.

EvolutionEvolutionEvolutionEvolution

The International Retailers in Europe as well as US began the trend of reviewing their manufacturingand procurement processes two decades ago and found the need to overhaul the entire system to beable to create increased efficiencies. At the same time several developments in the externalenvironment were found to be conducive for adapting new supply chain strategies and moving awayfrom the traditional mode of operations. One of the significant factors was the emergence of Supplierbases and networks in South Asian countries and in China. Malaysia, Thailand, China, India and HongKong which emerged as strong supplier bases equipped with modern technology, skilled and cheaperlabor and sufficient capacity. Secondly, the availability of IT Solutions in terms of EDI, Scanning anddata transfer capabilities made it possible for the Companies to co-ordinate and work with the offshoresuppliers on real time basis. Data sharing, multi-media communication capability coupled with CADdesign software etc changed the way the Fashion Retailing manufacturing and procurement processesworked and reduced the elaborate lead times that were hereto required.The International Retailers realised that the only way to remain competitive in future was toconcentrate on offshore procurement and regularly review supply chain solutions. The development ofstable supply chains involved identifying competent and reliable as well as professional suppliers,working with them to setup and improve their processes as well as Quality Management and otheraspects of production. Besides they also realised the importance of getting involved in building themulti level supplier chains and creating two tier supplier networks. The outlook of the Companies andthe relationship between the Buyer and Seller changed to that of being partners and working toachieve common objectives. The International Retailers realised the importance of being closelyinvolved with and controlling the entire process of production including raw material supplies andquality. Collaborative working styles began to emerge with the Companies that made foray in theoffshore buying.TheTheTheThe emergenceemergenceemergenceemergence ofofofof newnewnewnew strategystrategystrategystrategy andandandand outlookoutlookoutlookoutlook towardstowardstowardstowards suppliersuppliersuppliersupplier networksnetworksnetworksnetworks leadleadleadlead totototo rationalisationrationalisationrationalisationrationalisation ofofofofSuppliersSuppliersSuppliersSuppliers. Companies began to evaluate their supplier and sourcing models that lead to rationalisation

2of supplier base where the Companies began to shrink the number of suppliers that they were workingwith and chose to concentrate on and work with fewer suppliers in a collaborative manner. Investing inSupplier relationship, identifying key suppliers and growing fruitful partnership as well as takinginterest in augmenting supplier capabilities were the important lessons learnt by the InternationalRetailers that shapes their procurement strategy even in the current times.On the logistics front, the Companies began to work with different models and third party logisticsplayers to consolidate the ware at local areas and at a country level before shipping the products inbulk. Hong Kong emerged as the consolidation centre for South Asia and more over the Companiesbegan to airlift the ready garments without waiting to ship the same. The higher cost of air freight wasset off against the lead time in reaching the market and inventory holding costs.Now we see that the differentiation between the International Retailers is through the Supply chainNetworks. Whichever company has a better and stronger Supply chain network gets to win the seasonin the market. Essentially the competition is between SCM networks.

RoleRoleRoleRole ofofofof RetailerRetailerRetailerRetailer inininin channelchannelchannelchannel ofofofof distributiondistributiondistributiondistribution

To sell the product to the ultimate consumer; to handle financial arrangement of the transactionincluding giving credit or offering credit cards or taking risks the cash will be stolen or spoil or go outof style or lose some utility. Also, educating the consumer particularly in "pioneer"products....teaching people how to use a Palm Pilot or whatever. Handling warranty returns. Protectingmerchandise from theft perhaps. Adding location utility to the product. A beer delivered to you in rowsix of a Celtics game that is cold is worth more than a warm can at Walmart. So eretailers add time,place and condition (whatever that is called in the book) utility

BenefitsBenefitsBenefitsBenefits

1.1.1.1. AwarenessAwarenessAwarenessAwarenessThe primary benefit of retail marketing is to bring awareness to the consumer that the product exists tofill a need or a want that the consumer has. For example, if a retail marketing campaign is promoting aproduct that gets rid of nail fungus, someone with nail fungus now knows that an over-the-counterproduct is available to help resolve their nail fungus problem. In return, this marketing helps to boostsales for the nail fungus remover manufacturer and the retailer selling the product on its store shelves.In essence, potential customers of a product have to know that the product exists for the sales of theproduct to be successful. Retail marketing is the bridge between a product and its potential customertarget market.

2. BoostsBoostsBoostsBoosts ProfitsProfitsProfitsProfitsRetail marketing also has the advantage of boosting business profits. Whether it's announcing thelaunch of a new product or offering a special sale or coupon on an existing product, this type of retailmarketing can attract larger crowds to the retail location. The more potential customers who walkthrough the door provides a potential for higher sales, and a larger sales volume brings increasedprofitability to the retail establishment.

3. CreatesCreatesCreatesCreates aaaa CompetitiveCompetitiveCompetitiveCompetitive EnvironmentEnvironmentEnvironmentEnvironment

Retail marketing creates a healthy competitive environment between retailers. This benefits consumersbecause it helps to keep their costs down when purchasing products. Retail marketing also helps keepcompetitors aware of what the other is charging for the same product, so it allows retailers to adjustprices as necessary to stay competitive in the market.

34. CreatesCreatesCreatesCreates JobsJobsJobsJobs

A direct positive effect of retail marketing is that it draws more customers to the retail stores. Anindirect effect of retail marketing, however, is it creates jobs. When a retail store has more business, italso tends to need more employees to help with the volume of business. For potential employees thathave experience in the retail industry or who are looking to break into retail work, retail marketing canopen up many new job opportunities.

5. The first point under retailing benefits for customers, bulkbulkbulkbulk breakingbreakingbreakingbreaking refers to the act of retailers ofbuying goods in large quantities and then breaking them into smaller sizes for their individualcustomers. As a result purchases become convenient for customers - in terms of quantity bought aswell as expenditures made.

6.The assortingassortingassortingassorting functionfunctionfunctionfunction is nothing but evaluating all the different products available and offering tothe target the optimum array of products from which to choose. The storing function performed by theretailers relieves customers of the task of anticipating their desires too far in advance of their needs asthe retailers keep goods in inventory until customers are willing to buy and use them.

7. Further, retailers help manufacturers smoothensmoothensmoothensmoothen thethethethe productionproductionproductionproduction cyclecyclecyclecycle by placing orders for peakdemands well in advance and by managing inventory even on behalf of the manufacturer.

FunctionsFunctionsFunctionsFunctions ofofofof retailers:retailers:retailers:retailers:

1.1.1.1. Buying:Buying:Buying:Buying:A retailer buys a wide variety of goods from different wholesalers after estimat-ing customer demand.He selects the best merchandise from each wholesaler and brings all the goods under one roof. In thisway, he performs the twin functions of buying and assembling of goods.2.2.2.2. Storage:Storage:Storage:Storage:A retailer maintains a ready stock of goods and displays them in his shop.3.3.3.3. Selling:Selling:Selling:Selling:The retailer sells goods in small quantities according to the demand and choice of consumers. Heemploys efficient methods of selling to increase his sales turnover.4.4.4.4. GradingGradingGradingGrading andandandand Packing:Packing:Packing:Packing:The retailer grades the goods which are not graded by manufac-turers and wholesalers. He packsgoods in small lots for the convenience of consumers.5.5.5.5. Risk-bearing:Risk-bearing:Risk-bearing:Risk-bearing:A retailer always keeps stock of goods in anticipation of demand. He bears the risk of loss due to fire,theft, spoilage, price fluctuations, etc.6.6.6.6. Transportation:Transportation:Transportation:Transportation:Retailers often carry goods from wholesalers and manufacturers to their shops.7.7.7.7. Financing:Financing:Financing:Financing:Some retailers grant credit to customers and provide the facility of return or exchange of goods. Insome cases, home delivery and after sale service are provided by retailers.8.8.8.8. SalesSalesSalesSales promotion:promotion:promotion:promotion:A retailer displays goods. He carries out publicity through shop decoration, window display, etc. Hemaintains direct and personal contacts with consumers. He persuades consumers to buy goods throughpersonal selling.

49.9.9.9. Information:Information:Information:Information:Retailers provide knowledge to consumers about new products and uses of old products. They adviseand guide consumers in better choice of goods. They also provide market information to wholesalersand manufacturers.

RetailRetailRetailRetail industryindustryindustryindustry inininin IndiaIndiaIndiaIndia

The retail industry in India gathered a new momentum with the establishment of different internationalbrand outlets, hyper or super markets, shopping malls and departmental stores.The organised retail segment in India is projected to be 9 per cent of total retail market by 2015 and 20per cent by 2020. Hypermarkets would be the largest retail segment, accounting for 21 per cent of thetotal retail space by 201314.India has one of the largest number of retail outlets in the world. The retail sector is experiencingexponential growth, with retail development taking place not just in major cities, but also in Tier-IIand Tier-III cities. Indias growing population and urbanization provides a huge market for organisedretail.Growing economic prosperity and transformation in consumption pattern drives retail demand.India ranks fourth among the 30 countries that were surveyed in Global Retail Development Index andranked sixth in the 2011 Global Apparel Index.

MarketMarketMarketMarket SizeSizeSizeSize

The BMI India Retail Report for the fourth quarter of 2011 forecasts that total retail sales will growfrom US$ 411.28 billion in 2011 to US$ 804.06 billion by 2015. Robust economic growth, populationgrowth, the increasing wealth of individuals and the speedy construction of organized retailinfrastructure are key factors behind the forecast growth.As well as an expanding middle and upper class consumer base, there will also be opportunities inIndias Tier-2 and Tier-3 cities. The greater availability of personal credit and a growing vehiclepopulation providing improved mobility also contribute to a trend of 11.9 per cent annual retail salesgrowth. Tourism is also a major contributor to the Indian retail sector.The countrys franchise market is growing at a healthy pace of over 30 per cent per annum with Tier-2and Tier-3 cities gradually getting attracted to the network of retailers and franchisers.Franchising in India has witnessed impressive growth of around 30-35 per cent year-after-year overthe last 4-5 years with an estimated turnover of $4 billion. It is helping transform good ideas intobusinesses. The FRO serves as a platform to identify, foster and commercialize innovative businessstart-up ideas and to meet the demands of todays dynamic entrepreneurial arena. according toGaurav Marya, President, Franchise India.

E-tailingE-tailingE-tailingE-tailing

As online retailing surges on the back of customer incentives and product discounts, brick and mortarchain stores like Shoppers Stop Ltd, Lifestyle International (P) Ltd and The Bombay Store arereworking their internet strategies to compete with e-tailers such as flipkart.com. Moreover companieslike watchmaker Titan Industries Ltd and Lifestyle, which had no presence in the e-tailing space, arealso in the process of creating a niche in the e-tailing space.Similarly, futurebazaar.comthe e-commerce venture of the Kishore Biyani-led Future Grouphasstarted selling the full range of merchandise available in its retail stores. A year-and-a-half ago theyrelaunched their website as a deal site and further tweaked its online strategy to include multiple

5categories as it plans to establish itself as a serious online destination for shoppers.

RetailRetailRetailRetail inininin RuralRuralRuralRural IndiaIndiaIndiaIndia

Rural chains in India are focussing on hinterlands in a big way. For many companies, a large portionof their revenues comes from rural sales. This fact is further making marketers focus their strategiesaccording to customers in rural areas.The footwear industry in India is growing at a compound annual growth rate (CAGR) of about 15 percent and is anticipated to reach approximately US$ 7.87 billion by 2015 from the current level ofaround US$ 4.48 billion, according to a study by a leading industrial body. The anticipated growth isbased on larger penetration into tier II and III cities and growing rural market which is making variouspremium footwear ranges, about 55 per cent of the overall footwear industry.

GovernmentGovernmentGovernmentGovernment InitiativeInitiativeInitiativeInitiative

Foreign direct investment (FDI) up to 100 per cent is allowed under the automatic route incash & carry (wholesale). Government is planning to remove the old tax systems to simplify thetax calculation and avoid double taxation in Indian retail. New Goods and Service Tax (GST) willsimplify the tax structure The Cabinet finally paved way for the entry of global retail giants such as Wal-Mart, Tescoand Carrefour to open independent multi-brand retail outlets in India. The Cabinet has allowedforeign direct investment (FDI) of up to 51 per cent in multi-brand retail. Simultaneously, theCabinet also gave the nod for raising the FDI limit in single-brand retail ventures to 100 per cent

InvestmentsInvestmentsInvestmentsInvestments

Foreign direct investment (FDI) inflows in single-brand retail trading during April 2000 toDecember 2011 stood at US$ 44.45 million, according to the Department of Industrial Policy andPromotion (DIPP) Illinois-based firm, Kitchen Holding Company LLC, which markets and distributes high-endkitchenware brands like Corelle, Corningware and Pyrex cutlery, has recently announced thesetting up a wholly-owned subsidiary in India to be called World Kitchen (India). World Kitchenwill sell kitchenware to consumers through retail outlets and channel partners Italian luxury major Canali has entered into a 51:49 joint venture (JV) with Genesis LuxuryFashion, which currently has distribution rights of Canali-branded products in India. The companyalso plans to invest Rs 7.65 crore (US$ 1.53 million) in India. The JVcompany will now sellCanali branded products in India exclusively Germany-based Metro AG will invest an additional Rs 560 crore (US$ 112.12 million) in2012 to set up eight wholesale stores in India to take advantage of the growth in consumption inAsias third-largest economy Mukesh Ambani-controlled Reliance Brands will bring British shirt brand Thomas Pink toIndia, as it looks to rapidly increase its presence in the fast-growing domestic premium-to-luxuryfashion retail market Australian bakery cafe chain Muffin Break is planning to enter into India in next two or threemonths and plans to open up to 40 outlets in the next two years

6GlobalGlobalGlobalGlobal RetailRetailRetailRetail ScenarioScenarioScenarioScenario

1.1.1.1. MoreMoreMoreMore retailersretailersretailersretailers havehavehavehave returnedreturnedreturnedreturned totototo profitability.profitability.profitability.profitability.

The past few years have forced retailers to make difficult decisions, improve efficiencies,restructure and, in some cases, move away from certain non-core business lines. This disciplinedapproach has help strengthen companies in terms of business processes, product offerings, andmost importantly on their balance sheets. As a result of their restructuring and businessimprovements efforts they have emerged more profitable, leaner and more agile. The industry isregaining much of the momentum that the economic downturn might have sapped, and withstronger balance sheets companies are now in a position to reinvest in growth.

2.2.2.2. StrategyStrategyStrategyStrategy shiftedshiftedshiftedshifted fromfromfromfrom costcostcostcost containmentcontainmentcontainmentcontainment totototo growthgrowthgrowthgrowth acceleration.acceleration.acceleration.acceleration.

Compared to the past few years, participants in the survey indicated a focus on growth, buildingon the efficiency gains made in the prior years. In fact, executives in every function, with theexception of supply chain, downshifted their emphasis on cost reduction this year, as efficiencygains and other operating improvements helped cushion margins and stem losses. Retailers spentthe year focused on generating top-line growth by expanding their product lines and footprint. Insupport of that, marketing and advertising spend rose for the first time in a few years, with mostretailers employing funds to increase awareness, improve the quality of customer outreach, anddeepen their multichannel presence. Headcount also stabilized, even growing in some cases asback-office functions like IT added staff in an effort to keep pace with the increased demandsplaced upon it. Given there is a shift in strategy from containment to growth acceleration, thereare immense opportunities for retailers over the next two to three years to improve sellingplatforms, customer engagement, business performance and processes and much more.

3.3.3.3. RetailersRetailersRetailersRetailers demonstratedemonstratedemonstratedemonstrate ititititssss allallallall aboutaboutaboutabout thethethethe customer.customer.customer.customer.

Retailers see customer satisfaction as the key conduit to accelerating sales growth, particularlyamid declining retention rates and increased fragmentation. Consumer-focused businesses areawash in information on their markets, merchandise, prices, and customers. Retailers have moreinformation available to them than ever before, but in our experience at KPMG, companies havedifficulty taking full advantage of their large pools of data, typically millions of transaction leveldata points, in a systematic way. As we found in this years survey, companies showed anincreased reliance on data mining and analytics, improving the one-to-one marketing experience,and segmenting the customer base by profitability, long-term value, and other parameters. As aresult, expanding wallet share now rivals, or exceeds, market share in importance. Stores havestepped up efforts to build customer engagement and loyalty in response, with investmentstargeted at personalized, one-to-one marketing and customer-specific promotions.Retailers demonstrated that improved customer service is more than talk this year. Far moreorganizations linked compensation to customer satisfaction. This was true from the leadershiplevel on down: 36% said it influenced compensation at the corporate level; 73% at the fieldmanagement level; 77% at the store management level; 50% at the store associate level, and 59%at the call center level.

74.4.4.4. ShoppingShoppingShoppingShopping isisisis increasinglyincreasinglyincreasinglyincreasingly mobilemobilemobilemobile andandandand online.online.online.online.

It comes as no surprise that shopping is increasingly mobile and online. Survey data suggests thathaving a digital presence (i.e. web, social media, mobile) is now considered a business necessity:100 percent of those polled have a web presence, and the majority make close to their full in-storeassortment available online. In 2011, retailers continued to work hard to plan and integrate theirweb assets and offer a consistent look and feel across all sales channels. They also focused on theeffective use of social networking sites (40%), integrating their online presence with otherchannels (40%), and creating a more interactive online offering (38%).This years survey respondents also indicate that mobile payment platforms for consumers tomake purchases either in store or online will continue to gain momentum in 2012. Four in 10 saybuilding out their mobile shopping and payments capabilities will be a key strategic priority overthe next 12 months, a 15% increase over this year. As mentioned above, it is all about thecustomer, so retailers need to actively enhance and evolve their methods for consumer interactionin an effort to near that perfect one-ton-one experience. Shopping habits and expectations arevery personal and vary greatly from consumer to consumer, but one thing is cleara largepopulation of consumers have completely adopted the mobile shopping experience, and this trendwill continue as demographics move younger. Retailers who develop the right strategies andapproaches to this relatively new platform will be in much stronger position that those who donot.

5.5.5.5. AAAA businessbusinessbusinessbusiness isisisis onlyonlyonlyonly asasasas goodgoodgoodgood asasasas thethethethe peoplepeoplepeoplepeople whowhowhowho runrunrunrun it.it.it.it.

At KPMG, our people are absolutely critical to the success of our business. This is true in retail aswell. Retailers recognize the need to groom leaders with the skills and acumen to manage acrossdisciplines, assess new growth markets, and work through solving business complexities. Morethan 80% of human resources executives responding to this years Retail Horizons study saidleadership development and succession planning was their top strategic priority and 91% intendto make it their lead initiative heading into 2012.Challenges with talent management resonated beyond the top echelons of leadership. As retailbusiness models transition from their physical, brick-and-mortar roots to an increasingly digitalmarketplace, stores must balance the need for newer, non-traditional skill sets, while deepeningtheir core management experience set. With hiring back on the agenda, those issues have becomemore pressing. Talent management came in second only to leadership development as the keypriority for 2012. Given the importance of human capital to a retail business and renewed focuson leadership development, talent management, and retention, it is critical for retail companies tohave strong people management strategies in place including succession plans, employeetraining programs and career path projections.

IndianIndianIndianIndian RetailRetailRetailRetail ScenarioScenarioScenarioScenario

Retail market in India was valued at INR 16.94 tr in 2010 and is expected to grow at aCAGR of 11%. It accounts for 22% of the country's GDP and is the second largestemployer with 35.06 mn people. Traditional retail formats are fast getting replaced bymodern organised retail formats. Due to growing retail space and changing consumer

8behaviour, retail market in India is poised for strong growth in the near future.

The report begins with the market overview section that gives an insight into the retailmarket in India, its market size and growth, along with the share of major retail segments.Low organized retail penetration indicates huge growth potential of this market. This isfollowed by the major segments in the retail market, where food and grocery occupies thelargest share. The various market entry strategies available for foreign retailers,franchising, cash and carry wholesale trading, strategic license agreements, joint ventures,manufacturing, distribution, have also been highlighted. A comparison of the traditionalretail supply chain with the modern retail supply chain has also been given. The sectionalso includes an overview of the various organized retail formats, hypermarkets,cash-and-carry, department stores, supermarkets, shop-in-shop, specialty stores, categorykillers, discount stores and convenience stores. Additionally, an analysis of Porters FiveForces provides an insight into the competitive intensity and attractiveness of the market.

An analysis of the drivers and challenges explains the factors leading to the growth of themarket including low organized retail penetration, rising income levels and consumerism,growing retail space and mall boom, increasing availability of credit and changingdemographics and consumer behavior. Strong opportunity exists in the market due to loworganized retail penetration in India. This coupled with the fact that income level andconsumerism are rising, will drive the retail market. The key challenges identified areinsufficiencies in supply chain, shortage of skilled manpower and real estate issues.

Key trends in the market have also been analyzed which includes emergence ofinnovative retail formats, online and rural retailing and integration of various businessstrategies. This is followed by a section on the FDI scenario of the retail market in Indiawhich includes evolution of retail FDI policy, current FDI scenario in retail, single brandretailing and multi brand retailing in India. A section on the investment scenario of thismarket is also highlighted, including investment and expansion plans, mergers andacquisitions, and partnership agreements in the retail sector.

The competition section provides an overview of the competitive landscape in the marketand includes a detailed profile of the major players. It begins with a matrix showing thevarious retail formats under which the players operate in India. A bubble chart for thepublic companies, depicting their relative positions in the market with respect to totalincome, net profit/loss and market capitalization is included. Similarly, a bubble chart forthe private players is also included with respect to their total income, net profit/loss andtotal assets. This section also includes list of products and services, key people, financialsnapshot, key ratios and key recent developments for all companies, along with keybusiness segments and key geographic segments for public companies. The reportconcludes with a section on strategic recommendations which comprises of an analysis ofthe growth strategies of the retail market in India.

9EmergingEmergingEmergingEmerging TrendsTrendsTrendsTrends andandandand OpportunitiesOpportunitiesOpportunitiesOpportunities inininin IndiaIndiaIndiaIndia RetailingRetailingRetailingRetailing IndustryIndustryIndustryIndustry

Retail industry, being the fifth largest in the world, is one of the sunrise sectors with hugegrowth potential and accounts for 14-15% of the countrys GDP. Comprising oforganized and unorganized sectors, Indian retail industry is one of the fastest growingindustries in India, especially over the last few years.

According to the Global Retail Development Index 2012, India ranks fifth among the top30 emerging markets for retail. The recent announcement by the Indian government withForeign Direct Investment (FDI) in retail, especially allowing 100% FDI in single brandsand multi-brand FDI has created positive sentiments in the retail sector.

EmergingEmergingEmergingEmerging AreasAreasAreasAreas

Some sectors that occupy a prominent position with the retail industry are:

ApparelApparelApparelApparel Retail:Retail:Retail:Retail: Everybody understands the impact of fashion and textiles on theenvironment. Almost $19.5 billion were spent on online apparel shopping in the year2009 and increasing since then.

FashionFashionFashionFashion &&&&LifestyleLifestyleLifestyleLifestyle Retail:Retail:Retail:Retail: In India the vast middle class and its almost untapped retailindustry are the key attractive forces for global retail giants wanting to enter into newermarkets, which in turn will help the retail to grow faster.

FoodFoodFoodFood &&&& BeverageBeverageBeverageBeverage Retail:Retail:Retail:Retail: Backed by huge potential and changing lifestyles, the food andbeverage retail market is growing at a robust 30-35 per cent per year.

PharmaceuticalPharmaceuticalPharmaceuticalPharmaceutical Retail:Retail:Retail:Retail: Driven by therapies like anti-diabetic, vitamin, anti-infectiveand dermatology, it accounted for a robust 15% growth in 2011.

E-commerceE-commerceE-commerceE-commerce orororor E-tailingE-tailingE-tailingE-tailing thethethethe nextnextnextnext bigbigbigbig revolution:revolution:revolution:revolution: With the advent of e-commerce inthe retail industry, retail stores are facing stiff competition from e-stores. The risingdemand for e-shopping has lead to a new debate cropping up in the world.

FactorsFactorsFactorsFactors drivingdrivingdrivingdriving growthgrowthgrowthgrowth are:are:are:are:

Emergence of nuclear families

10

Falling real estate prices Growing trend of double-income households Increase in disposable income and customer aspiration Increase in expenditure for luxury items Large working population Low share of organized retailing Growing liberalization of the FDI policy in the past decade

SkillSkillSkillSkill setssetssetssets requiredrequiredrequiredrequired are:are:are:are:

The industry employs a staggering number of people, and given its rapid proliferation,this number is always on the rise. The backbone of the sector are the operations andsupply chain management jobs but there are various other options as well, from salesexecutives and store managers to merchandise planners and buyers.

Conceptual understanding Analytical skills Detail-orientation Fair understanding of customers psychology Observations skills Project Management Operational Skills In-depth product knowledge

BottlenecksBottlenecksBottlenecksBottlenecks

A long way to meet international standards Lack of efficient supply-chain management Lack of required retail space No fixed consumption pattern Shortage of trained manpower Lack of proper infrastructure and distribution channels

Ratings agency Fitch has assigned a stable outlook to the retail sector for 2012 as factorslike expected sales, growth-driven expansion and efficient working capital managementare likely to benefit retail companies.

11

Unit-2Unit-2Unit-2Unit-2

TheTheTheThe RoleRoleRoleRole ofofofof MacroMacroMacroMacro EnvironmentEnvironmentEnvironmentEnvironment inininin thethethethe RetailRetailRetailRetail IndustryIndustryIndustryIndustry

All retail companies operate within a macro environment, or the sphere of influenceoutside the company that shapes how companies do business. Unlike the microenvironment of a retail store, companies in the retail industry usually cannot influence orchange the macro environment and must adapt to changes as they arise. The macroenvironment includes economic, technological, societal and governmental influences. Aretailer must understand the role of each to compete within the retail industry.

DemographicDemographicDemographicDemographic EnvironmentEnvironmentEnvironmentEnvironment

The first environmental fact of interest to retailers is population because people make upmarkets. Retailers are keenly interested in the size of the population, its geographicaldistribution, density, mobility trends, age distribution and social ethnic and religiousstructure. Demographic structure is seldom static for long and changes in its compositionoften test the residency of a marketing firm. Further, these changes influence thebehaviour of consumers which, in turn, will have a direct impact in the retailers business.The ripples of these changes will reach the organization forcing it to alter or amend theexisting marketing practices in vogue. In short, Retail firms, will have to continuouslymeasure the changes qualitative as well as quantitative that are taking place in thepopulation structure. To avoid negative consequences brought on by active consumergroups, a retailer must communicate with consumers, anticipate problems, respond tocomplaints and make sure that the firm operates properly.

Political/LegalPolitical/LegalPolitical/LegalPolitical/Legal EnvironmentEnvironmentEnvironmentEnvironment

Retail marketing decisions are substantially impacted by developments in the political /legal environment. This environment is composed of laws, government agencies andpressure groups that influence and constrain various organisations and individuals insociety. Legislation affecting retail business has steadily increased over the years. Thelegislation has a number of purposes. The first is to protect from each others. So laws arepassed to prevent unfair competition. The second purpose of Government regulation is toprotect consumers from unfair retail practices. Some firms, if left alone would adulterate

12

their products, tell lies in their advertising, deceive through their packages and baitthrough their prices. Unfair consumer practices have been defined and are enforced byvarious agencies. The third purpose of Government Regulation is to protect the largerinterest of society against unbridled business behavior. The retail marketing executiveneeds a good working knowledge of the major laws protecting competition consumersand the larger interests of society.

Social/CulturalSocial/CulturalSocial/CulturalSocial/Cultural EnvironmentEnvironmentEnvironmentEnvironment

In recent years, the concept of social responsibility has entered into the marketingliterature as an alternative to the marketing concept. The implication of sociallyresponsible marketing is that retail firms should take the lead in eliminating sociallyharmful products such as cigarettes and other harmful drugs etc. There are innumerablepressure groups such as consumer activists, social workers, mass media, professionalgroups and others who impose restrictions on marketing process and its impact may befelt by retailers in doing their business. The society that people grow up in shapes theirbasic beliefs, values and norms. People live in different parts of the country may havedifferent cultural values which has to be analyzed by retail business people/firm. Thiswill help them to reorient their strategy to fulfill the demands of their consumers. Retailmarketers have a keen interest in anticipating cultural shifts in order to spot newmarketing opportunities and threats. Several firms such as ORG, MARG etc. offer social /cultural forecasts in this connection. For example, marketers of foods, exercise equipmentand so on will want to cater to this trend with appropriate products and communicationappeals.

EconomicEconomicEconomicEconomic EnvironmentEnvironmentEnvironmentEnvironment

Retail markets consist of purchasing power as well as people. Total purchasing power is afunction of current income, prices, savings and credit availability. Marketers should becognizant of major trends in the economic environment. The changes in economicconditions can have destructive impacts on business plans of a firm. Economicforecasters looking ahead through the next decade are likely to find their predictionsclouded by the recurrent themes of shortages, rising costs and up and down businesscycles. These changes in economic conditions provide marketers with new challenges andthreats. How effectively these challenges could be converted into opportunities depend onwell-thought-out marketing programmes and strategies. Further, no economy is free fromthe tendency of variation between boom and depression, whether it is a free economy orcontrolled economy. In any event, economic swings affect marketing activity, becausethey affect purchasing power. Retail marketing firms are susceptible to economicconditions, both directly and through the medium of market place. For example, the costsof all inputs positively respond to upward swing of economic condition which willaffect the output price and consequently affect the sales. The effect on consumers alsoinfluences the marketing through changes in consumer habits. This is an indirect

13

influence. For example, in the event of increase in prices, consumers often curtail orpostpone their expenditures. Conversely, during time of fall in prices, consumers aremuch less conscious of small price differences and would buy luxury and shoppingproducts.

TechnologicalTechnologicalTechnologicalTechnological EnvironmentEnvironmentEnvironmentEnvironment

The most dramatic force shaping peoples lives is technology. Advances in technologyare important factors which affect detail marketers in two ways. First, they are totallyunpredictable and secondly, adoption of new technology often is prevented by constraintsimposed by internal and external resources. At the same time, it should be rememberedthat technological progress creates new avenues of opportunity and also poses threat forindividual firms. Technology has helped retailers to measure the products with modernweighing machines. Earlier, they have used balances which could not measure themerchandise correctly. With the help of weighing machine, products can be measuredwith the result customer satisfaction can be enhanced. In the following areas wheretechnology have been extensively used.

Packing of the products Printing the name of the shop on the product visibly Modern refrigerators where merchandise can be used for a long time and Billing.

Technological change faces opposition from one group of people-telling that it may leadto retrenchment of employees. But in the long run, this argument may not sustain, retailmarketers need to understand the changing technological environment and how newtechnologies can serve human needs. They need to work closely with research anddevelopment people to encourage more consumer oriented research. The retail marketersmust be alert to the negative aspects of any innovation that might harm the users andcreate consumer distrust and opposition.

ForeignForeignForeignForeign DirectDirectDirectDirect InvestmentInvestmentInvestmentInvestment inininin RetailRetailRetailRetail

FDI can be defined as a cross border investment, where foreign assets are invested intothe organizations of the domestic market excluding the investment in stock. It bringsprivate funds from overseas into products or services. The domestic company in whichforeign currency is invested is usually being controlled by the investing foreign company.Eg. An American company taking major stake in a company in India. Their ROI is basedon the performance of the project.

In the past decades, FDI was concerned only with highly industrialized countries. US wasthe worlds largest recipient of FDI during 2006 with an investment of 184 million fromOECD (Organization for Economic Co-operation and Development) countries. France,

14

Greece, Iceland, Poland, Slovak Republic, Switzerland and Turkey also have a positiverecord in FDI investments. Now, during the course of time, FDI has become a vital partin every country more particularly with the developing countries. This is because of thefollowing reasons:

Availability of cheap labor.Uninterrupted availability of raw material.Less production cost compared with other developed countries.Quick and easy market penetration.

FDI

FDI

FDI

FDI in

in

in

in the

the

the

the Retail

Retail

Retail

Retail sector:

sector:

sector:

sector:

Retailing is one of the worlds largest private industry. Liberalizations in FDI have causeda massive restructuring in retail industry. The benefit of FDI in retail industrysuperimposes its cost factors. Opening the retail industry to FDI will bring forth benefitsin terms of advance employment, organized retail stores, availability of quality productsat a better and cheaper price. It enables a countries product or service to enter into theglobal market.

Cheaper

Cheaper

Cheaper

Cheaper production

production

production

production facilities:

facilities:

facilities:

facilities:

15

FDI will ensure better operations in production cycle and distribution. Due to economiesof operation, production facilities will be available at a cheaper rate thereby resulting inavailability of variety products to the ultimate consumers at a reasonable and lesser price.

Availability

Availability

Availability

Availability of

of

of

of new

new

new

new technology:

technology:

technology:

technology:

FDI enables transfer of skills and technology from overseas and develops theinfrastructure of the domestic country. Greater managerial talent inflow from othercountries is made possible. Domestic consumers will benefit getting great variety andquality products at all price points.

Long

Long

Long

Long term

term

term

term cash

cash

cash

cash liquidity:

liquidity:

liquidity:

liquidity:

FDI will provide necessary capital for setting up organized retail chain stores. It is a longterm investment because unlike equity capital, the physical capital invested in thedomestic company is not easily liquidated.

Lead

Lead

Lead

Lead driver

driver

driver

driver for

for

for

for the

the

the

the countrys

countrys

countrys

countrys economic

economic

economic

economic growth:

growth:

growth:

growth:

FDI would create a competition among the global investors, which would ultimatelyensure better and lower prices thus benefiting people in all sections of the society. Therewould be an increase in the market growth and expansion. It will increase retailemployment and suppress untrained manpower and lack of experience. It will ensurebetter managerial techniques and success. Higher wages will be paid by the internationalcompanies. Urban consumers will be exposed to international lifestyles.

FDI

FDI

FDI

FDI opens

opens

opens

opens new

new

new

new doors

doors

doors

doors for

for

for

for Franchising:

Franchising:

Franchising:

Franchising:

Restrictions on FDI are considered as trade barriers as they deny direct market access toforeign firms. Retail giants who are at their wings, seeking entry into foreign market lookfor other available alternatives. These restrictions on the global retailers regarding theinflow of Foreign Direct Investment, leads them towards acquiring the market entrythrough franchises. Thus, countries which offer promising market potentialities for retailgrowth offers substantial growth in the franchising sector as well.

FDI

FDI

FDI

FDI Success

Success

Success

Success story

story

story

story China:

China:

China:

China:

China is the worlds largest FDI recipient, and has used it deftly to increase its exports. Itstarted off with an FDI investment of $19 billion in 1990, and reached $300 billion in1999. 40 retailers now have a secured approval in the Chinese market. FDI has created anencouraging effect in both traditional as well as modern formats of retail business inChina.

16

Carrefour from France, Tesco from England, Metro from Germany, and Wal-Mart fromUS have entered the Chinese retail sector and has uplifted the countrys economy.Initially during 1992, China allowed FDI only in a few selected cities and also restrictedthe ownership by 26 percent. Later on as the exports of the country progressivelyincreased, by 2002, the Government increased the FDI cap to 49 percent. China continuesto hit new records. More than 28 million people and approximately 10 percent of Chinastotal population are working in companies funded with FDI. With the advent of FDI,retail sector is likely to make massive strides, and catalyze the growth of the countryseconomy.

Unit-3Unit-3Unit-3Unit-3

TypesTypesTypesTypes ofofofof Retailer:Retailer:Retailer:Retailer:

Food Retailers:

Supermarkets:Supermarkets:Supermarkets:Supermarkets: A Conventional supermarket is a self-serviced food store offering groceries, meat, and

produce with limited sales of non food items, such as health and beauty aids and generalmerchandise.

Whereas conventional supermarkets carry about 30,000 SKUs, Limited assortmentsupermarkets, also called extreme value food retailers, only stock 1,250 SKUs. Ratherthan carrying twenty brands of laundry detergent, limited assortment stores offer one ortwo brands and sizes, one of which is a store brand. Stores are designed to maximizeefficiency and reduce costs.

TrendsTrendsTrendsTrends inininin FoodFoodFoodFood Retailing:Retailing:Retailing:Retailing:

The set of programs supermarket chains have undertaken to achieve this inventoryreduction is called efficient customer response (ECR) and includes just-in-time inventorymanagement and better assortment planning.

17

To complete successfully against intrusions by other food retailing formatsconventional supermarkets are differentiating their offering by

Emphasizing fresh perishables, Targeting health-conscious and ethnic consumers, Providing a better in-store experience, and Offering more private label brands. Fresh merchandise categories, the areas around the outside walls known as the power

perimeter, have long been the mainstays of conventional supermarkets.

These include the dairy, bakery meats, florist, produce, deli, and coffee bar departments - hightraffic; profitable departments that help pull shoppers through the store.

SupercentersSupercentersSupercentersSupercenters::::

The fastest growing retail category, are large stores that combine a supermarket with afull-line discount store. By offering board assortments of grocery and generalmerchandise products under one roof, super centers provide a one-stop shoppingexperience.

Hypermarkets: are also large combination food and general merchandise stores.Hypermarkets typically stock fewer Kus than supercenters - between 40,000 and 60,000items ranging from groceries, hardware, and sports equipment to furniture and applianceto computers and electronics.

Hypermarkets are not common in the United States, though hypermarkets andsupercenters are similar. Both hypermarkets and supercenters are large, carry grocery andgeneral merchandise categories, offer self-service, and are located in warehouse-typestructures with large parking facilities.

However, hypermarkets carry a larger proportion of food items than supercenters with agreater emphasis placed on perishables produce, meat, fish, and bakery.

Supercenters, on the other hand, have a larger percentage of nonfood items and focusmore on dry groceries, such as breakfast cereal and canned goods, instead of fresh items

WarehouseWarehouseWarehouseWarehouse ClubsClubsClubsClubs

Warehouse clubs are retailers that offer a limited and irregular assortment of food andgeneral merchandise with little service at low prices for ultimate consumers and smallbusinesses.

Warehouse clubs are large (at least 100,000-150,000 square feet) and typically located inlow-rent districts. They have simple interiors and concrete floors. Aisles are wide soforklifts can pick up pallets of merchandise and arrange them on the selling floor. Littleservice is offered. Customers pick merchandise off shipping pallets, take it to checkoutlines in the front of the store, and usually pay with cash.

Warehouse clubs can offer low prices because they use low-cost locations, inexpensivestore designs, and little customer service and keep inventory holding costs low bycarrying a limited assortment of fast selling items.

Most warehouse clubs have two types of members: wholesale members who own smallbusinesses and individual members who purchase for their own use.

18

Typically, members must pay an annual fee of $25-45.

ConvenienceConvenienceConvenienceConvenience StoresStoresStoresStores

Convenience stores provide a limited variety and assortment of merchandise at aconvenient location in 2,000- 3,000 square foot stores with speedy checkout. They are themodern version of the neighborhood mom-and pop grocery/general store. Customers canshop very quickly.

Due to their small size and high sales, convenience stores typically receive deliveriesevery day. Convenience stores only offer limited assortments and variety, and they chargehigher prices than supermarkets.

In response to competitive pressures, convenience stores are taking steps to decrease theirdependency on gasoline sales, tailoring assortments to local markets, and making theirstores even more convenient to shop.

To increase convenience, convenience stores are opening smaller stores close to whereconsumers shop and work.

General Merchandise Retailers

The major types of general merchandise retailers are department stores, full-line discount stores,specialty stores, category specialists, home improvement centers, off-price retailers, and extremevalue retailers.

DepartmentDepartmentDepartmentDepartment StoresStoresStoresStores

Department stores are retailers that carry a broad variety and deep assortment, offercustomer services, and organize their stores into distinctly separate departments fordisplaying merchandise.

Traditionally, department stores attracted customers by offering a pleasing ambience,attentive service, and a wide variety of merchandise under one roof.

They sold both soft goods (apparel and bedding) and hard goods (appliances, furniture,and consumer electronics).

But now most department stores focus almost exclusively on soft goods. Department store chains can be categorized into three tiers. The first tier includes upscale,

high fashion chains with exclusive designer merchandise and excellent customer service.The second tier of upscale traditional department stores, in which retailers sell moremodestly priced merchandise with less customer service.The value oriented tier caters to more price-conscious consumers.Retail chains in the first tier have established a clearly differentiated position and areproducing strong financial results, while the value oriented tier is facing significantcompetitive challenges from discount stores.

19

Department stores still account for some of retailings traditions multistoried downtownstores, special events, parades, Santa Claus lands, and holiday decorations and offerdesigner brands that are not available from other retailers.Department stores have not been as successful as discount stores and food retailers inreducing costs by working with their vendors to establish just-in-time inventory systems,so prices are relatively high.The performance of department stores is linked to the strengths of the brands they sell.In light of the decline in department store patronage, many of these brands, previouslysold exclusively through department stores, are pursuing other growth opportunities.To deal with their eroding market share, department stores areAttempting to increase the amount of exclusive merchandise they sell,Undertaking marketing campaigns to develop strong images for their stores and brands,andBuilding better relationships with their key customers.In recent years, department stores discount sales events have increased dramatically tothe point that consumers have been trained to wait for items to be placed on sale ratherthan buy them at full price.Finally, department stores are using technology and information systems to improvecustomer service in a cost-effective manner.

Full-LineFull-LineFull-LineFull-Line DiscountDiscountDiscountDiscount StoresStoresStoresStores

Full-line discount stores are retailers that offer a broad variety of merchandise, limitedservice, and low prices. Discount stores offer both private and national label, but thesebrands are typically less fashion oriented than the brands in department stores.Target is becoming one of the most successful retailers in terms of sales growth andprofitability. Target succeeds because its stores offer fashionable merchandise at lowprices in a pleasant shopping environment.

SpecialtySpecialtySpecialtySpecialty StoresStoresStoresStores

Specialty stores concentrate on a limited number of complementary merchandisecategories and provide a high level of service in relatively small stores.Specialty stores tailor their retail strategy toward a very specific market segment byoffering deep but narrow assortments and sales associate expertise.Because specialty retailers focus on specific market segments, they are vulnerable toshifts in consumer tastes and preferences.

DrugstoresDrugstoresDrugstoresDrugstoresDrugstores are specialty stores that concentrate on health and personal groomingmerchandise.Pharmaceuticals often represent over 50 percent of drugstore sales and an even greaterpercentage of their profits.Drugstores, particularly the national chains, are experiencing sustained sales growthbecause the aging population requires more prescription drugs.Drugstores are also being squeezed by considerable competition from pharmacies indiscount stores and supermarkets, as well as from prescription mail-order retailers.

20

Drugstore retailers are using systems to allow pharmacists time to provide personalizedservice.

CategoryCategoryCategoryCategory Specialists:Specialists:Specialists:Specialists:

Are big box discount stores that offer a narrow but deep assortment of merchandise? Theseretailers are basically discount specialty stores. Most category specialists use a self-serviceapproach, but some specialists in consumer durables offer assistance to customers. For, example,office depot stores have a warehouse atmosphere, with cartons of copying paper stacked onpallets plus equipment in boxes on shelves.

By offering a complete assortment in a category at low prices, category specialists cankill a category of merchandise for other retailers and thus are frequently called categorykillers. Due their category dominance, they use their buying power to negotiate lowprices and are assured of supply when items are scarce.One of the largest and most successful types of category specialist is the homeimprovement center. A home improvement center is a category specialist offeringequipment and material used by do-it-yourselfers and contractors to make homeimprovements.

ExtremeExtremeExtremeExtreme ValueValueValueValue Retailers:Retailers:Retailers:Retailers:

Are small, full-line discount stores that offer a limited merchandise assortment at very low prices?The largest extreme value retailers are dollar general and Family dollar stores. Extreme valueretailers are one of the fastest growing segments in retailing. Like limited assortment foodretailers, extreme value full-line retailers reduce costs and maintainlow prices by offering a limited assortment and operating in low-rent, urban, or rural locations.

Off-PriceOff-PriceOff-PriceOff-Price RetailersRetailersRetailersRetailers

Offer an inconsistent assortment of brand name merchandise at low prices. Americas largestoff-price retail chains are TJX companies, Ross Stores, and Burlington Coat Factory. Off-priceretailers sell brand name and even designer label merchandise at low prices through their uniquebuying and merchandising practices. Most merchandise is bought opportunistically frommanufacturers or other retailers with excess inventory at the end of the season. Due to this patternof opportunistic buying, customers cant be confident that the same type of merchandise will be instock each time they visit the store.

Closeout Retailers: are off-price retailers that sell a broad but inconsistent assortment ofgeneral merchandise as well as apparel and soft home goods. The largest closeout chainsare Big Lots Inc. and Tuesday Morning.Outlet stores are off-price retailers owned by manufacturers or department or specialtystore chains. Those owned by manufacturers are frequently referred to as Factory Outlets.Out stores are typically found in one of the fastest growing types of malls the outletmall.

21

NonNonNonNon StoreStoreStoreStore RetailersRetailersRetailersRetailers

In the preceding sections, we examined retailers whose primary channel is their stores. In thissection, we will discuss types of retailers that operate primarily through non-store channels.

ElectronicElectronicElectronicElectronic RetailersRetailersRetailersRetailers

Electronic Retailing (also called e-tailing, online retailing, and Internet retailing) is aretail format in which the retailers communicate with customers and offer products andservice for sale over the Internet.Even though online retail sales continue to grow much faster than retail sales throughstores and catalogs, we now realize the internet is not a revolutionary new retail formatthat will replace stores and catalogs. While the Internet continues to provide opportunitiesfor entrepreneurs in the retail industry, it is now primarily used by traditional retailers as atool to complement their store and catalog offerings, grow their revenues, and providemore value for their customers.Most of the retailers that sell merchandise exclusively over the Internet target nichemarkets markets that are so small and dispersed that they cannot be economicallyserviced by stores.

CatalogCatalogCatalogCatalog andandandand Direct-MailDirect-MailDirect-MailDirect-Mail RetailersRetailersRetailersRetailers

Catalog retailing is a non-store retail format in which the retail offerings arecommunicated through a catalog, whereas direct-mail retailers communicate with theircustomers using letters and brochures.Historically, catalog and direct-mail retailing were most successful with rural consumerswho lacked ready access to retail stores.In 2003, $125 billion of merchandise and services were sold through catalogs, and over17 billion catalogs were distributed in the United States. The Merchandise categories withthe greatest catalog sales are apparel, gifts, books, and home dcor.

TypesTypesTypesTypes ofofofof CatalogCatalogCatalogCatalog andandandand DirectDirectDirectDirect MailMailMailMail RetailersRetailersRetailersRetailers

General merchandise catalog retailers offer a broad variety of merchandise in catalogsthat are periodically mailed to their customers.Specialty catalog retailers focus on specific categories of merchandise, such as fruit,gardening tools, and seeds and plants. Direct mail retailers typically mail brochures andpamphlets to sell a specific product or service to customers at one point in time.

22

Catalog retailing is very challenging.First, it is difficult for smaller catalog and direct-mail retailers to compete with large,well-established firms with sophisticated CRM and fulfillment systems.Second, the mailing and printing costs are high and increasing.Third, it is difficult to get customers attention as they are mailed so many catalogs anddirect mail promotions.Forth, the length of time required to design, develop, and distribute catalogs makes itdifficult for catalog and direct mail retailers to respond quickly to new trends andfashions.

DirectDirectDirectDirect SellingSellingSellingSelling

Direct selling is a retail format in which salespeople, frequently independentbusinesspeople, contact customers directly in a convenient location, either at thecustomers home or at work; demonstrate merchandise benefits and/or explain a service;take an order; and deliver the merchandise or perform the service. Direct selling is ahighly interactive form of retailing in which considerable information is conveyed tocustomers through face-to face discussions with salespeople However, providing thishigh level of information, including extensive demonstrations, is costly.Two special types of direct selling are the party plan and multilevel selling.About 30 percent of all direct sales are made using a party plan system, in whichsalespeople encourage customers to act as hosts and invite friends or coworkers to aparty at which the merchandise is demonstrated. Sales made at the party are influencedby the social relationship of the people attending with the host or hostess, who receives agift or commission for arranging the meeting.

TelevisionTelevisionTelevisionTelevision HomeHomeHomeHome ShoppingShoppingShoppingShopping

Television home shopping is a retail format in which customers watch a TV program thatdemonstrates merchandise and then place orders for the merchandise by telephone.The three forms of electronic home shopping retailing areCable channels dedicated to television shoppingInfomercialsDirect-response advertisingDirect-response advertising includes advertisements on TV and radio that describeproducts and provide an opportunity for consumers to order them.Infomercials are TV programs, typically 30 minutes long that mix entertainment withproduct demonstrations and then solicit orders placed by telephone.The major advantage of TV home shopping compared with catalog retailing is thatconsumers can see the merchandise demonstrated on their TV screen.

VendingVendingVendingVending MachineMachineMachineMachine RetailingRetailingRetailingRetailing

Vending machine retailing is a non-store format in which merchandise or services are stored in amachine and dispensed to customers when they deposit cash or use a credit card. Vending

23

machines are placed at convenience, high-traffic locations, such as in the workplace or onuniversity campuses, and primarily contain snacks and drinks.

Due to increasing labor and gasoline costs, vending machine operators are increasingtheir prices and retrofitting machines to accept higher denomination bills.Technological developments in vending machine design may result in long-term salesgrowth.Some retailers are experimenting with vending machines as another channel to servicetheir customers.

ServiceServiceServiceService RetailingRetailingRetailingRetailing

Service retailers firms selling primarily services rather than merchandise are a large andgrowing part of the retail industry.There are several trends that suggest considerable future growth in services retailing.Many organizations such as banks, hospitals, health spas, legal clinics, entertainmentfirms, and universities that offer services to consumers traditionally havent consideredthemselves retailers. Due to increased competition, these organizations are adoptingretailing principles to attract customers and satisfy their needs.All retailers provide goods and services for their customers.

DifferencesDifferencesDifferencesDifferences betweenbetweenbetweenbetween ServicesServicesServicesServices andandandand MerchandiseMerchandiseMerchandiseMerchandise RetailersRetailersRetailersRetailers

IntangibilityIntangibilityIntangibilityIntangibility

Services are generally intangible customers cannot see, touch, or feel them. They areperformances or actions rather than objects.Due to the intangibility of their offering, service retailers often use tangible symbols toinform customers about the quality of their services.Services retailers also have difficulty evaluating the quality of services they areproviding.To evaluate the quality of their offering, services retailers often solicit customerevaluations and complaints.

SimultaneousSimultaneousSimultaneousSimultaneous ProductionProductionProductionProduction andandandand ConsumptionConsumptionConsumptionConsumption

Products are typically made in a factory, stored and sold by a retailer, and then sued byconsumers in their homes. Services providers, however, create and deliver the service asthe customer is consuming it.The simultaneity of production and consumption also creates some special problems forservice retailers.First, the customers are present when the service is produced, may even have anopportunity to see it produced, and in some cases may be part of the production process,as in making their own salad at a salad bar.

24

Second, other customers consuming the service at the same time can affect the quality ofthe service provided.Third, the service retailer often does not get a second chance to satisfy the needs of itscustomers.Because services are produced and consumed at the same time, it is difficult to reducecosts through mass production. Most service retailers are small, local firms.

PerishabilityPerishabilityPerishabilityPerishability

Because the creation and consumption of services are inseparable, services are perishable.They cant be saved, stored, or resold.Due to the perish ability of services, an important aspect of services retailing is matchingsupply and demand.Thus, services retailers often have times when their services are underutilized and othertimes when they have to turn customers away because they cant accommodate them.Services retailers use a variety of programs to match demand and supply.

InconsistencyInconsistencyInconsistencyInconsistency

Products can be produced by machines with very tight quality control so customers arereasonably assured that all boxes of cheerios will be identical. Because services areperformances produced by people (employees and customers), no two services will beidentical.Thus, an important challenge for services retailers is providing consistently high-qualityservices. Many factors that determine service quality are beyond the control of theretailers; however, services retailers expend considerable time and effort selecting,training, managing, and motivating their service providers.

TypesTypesTypesTypes ofofofof OwnershipOwnershipOwnershipOwnership

Independent,Independent,Independent,Independent, Single-StoreSingle-StoreSingle-StoreSingle-Store EstablishmentsEstablishmentsEstablishmentsEstablishments

Retailing is one of the few sectors in our economy in which entrepreneurial activity isextensive. Many of these retail start-ups are owner managed, which means managementhas direct contact with customers and can respond quickly to their needs. Small retailersare also very flexible and can therefore react quickly to market changes and customerneeds.Whereas single-store retailers can tailor their offerings to their customers needs,corporate chains can more effectively negotiate lower prices for merchandise andadvertising due to their larger size.To better compete against corporate chains, some independent retailers join awholesale-sponsored voluntary cooperative group, which is an organization operated by awholesaler offering a merchandising program to small, independent retailers on avoluntary basis.

25

In addition to buying, warehousing, and distribution, these groups offer members servicessuch as advice on store design, and layout, site selection, bookkeeping and inventorymanagement systems, and employee training programs.

CorporateCorporateCorporateCorporate RetailRetailRetailRetail ChainsChainsChainsChains

A retail chain is a company that operates multiple retail units under common ownershipand usually has centralized decision making for defining and implementing its strategy.

FranchisingFranchisingFranchisingFranchising

Franchising is a contractual agreement between a franchisor and a franchisee that allowsthe franchisee to operate a retail outlet using a name and format developed and supportedby the franchisor.In a franchise contract, the franchisee pays a lump sum plus a royalty on all sales for theright to operate a store in a specific location. The franchisee also agrees to operate theoutlet in accordance with procedures prescribed by the franchisor. The franchisorprovides assistance in locating and building the store, developing the products or servicessold, training managers, and advertising. To maintain each franchisees reputation, thefranchisor also makes sure that all outlets provide the same quality of services andproducts.

The franchise ownership attempts to combine the advantage of owner-managedbusinesses with efficiencies of centralized decision making of chain store operations.Franchisees are motivated to make their store successful because they receive the profits(after royalty is paid). The franchisor is motivated to develop new products and systemsand to promote the franchise because it receives a royalty on all sales. Advertising,product development, and system development are efficiently done by the franchisor,with costs shared by all franchisees.

Types

Types

Types

Types of

of

of

of Retail

Retail

Retail

Retail outlets

outlets

outlets

outlets

DepartmentDepartmentDepartmentDepartment StoresStoresStoresStores

A department store is a set-up which offers wide range of products to theend-users under one roof. In a department store, the consumers can get almost allthe products they aspire to shop at one place only. Department stores provide awide range of options to the consumers and thus fulfill all their shopping needs.

Merchandise:Merchandise:Merchandise:Merchandise:Electronic AppliancesApparelsJewelleryToiletriesCosmetics

26

FootwearSportswearToysBooksCDs, DVDs

Examples - Shoppers Stop, Pantaloon

DiscountDiscountDiscountDiscount StoresStoresStoresStores

Discount stores also offer a huge range of products to the end-users but at adiscounted rate. The discount stores generally offer a limited range and the qualityin certain cases might be a little inferior as compared to the department stores.

Wal-Mart currently operates more than 1300 discount stores in United States. InIndia Vishal Mega Mart comes under discount store.

Merchandise:Merchandise:Merchandise:Merchandise:Almost same as department store but at a cheaper price.

SupermarketSupermarketSupermarketSupermarket

A retail store which generally sells food products and household items, properlyplaced and arranged in specific departments is called a supermarket. Asupermarket is an advanced form of the small grocery stores and caters to thehousehold needs of the consumer. The various food products (meat, vegetables,dairy products, juices etc) are all properly displayed at their respectivedepartments to catch the attention of the customers and for them to pick anymerchandise depending on their choice and need.

Merchandise:Merchandise:Merchandise:Merchandise:Bakery productsCerealsMeat Products, Fish productsBreadsMedicinesVegetablesFruitsSoft drinksFrozen FoodCanned Juices

WarehouseWarehouseWarehouseWarehouse StoresStoresStoresStores

27

A retail format which sells limited stock in bulk at a discounted rate is called aswarehouse store. Warehouse stores do not bother much about the interiors of thestore and the products are not properly displayed.

MomMomMomMom andandandand PopPopPopPop StoreStoreStoreStore (also(also(also(also calledcalledcalledcalled KiranaKiranaKiranaKirana StoreStoreStoreStore inininin India)India)India)India)

Mom and Pop stores are the small stores run by individuals in the nearby localityto cater to daily needs of the consumers staying in the vicinity. They offer selecteditems and are not at all organized. The size of the store would not be very big anddepends on the land available to the owner. They wouldnt offer high-endproducts.

Merchandise:Merchandise:Merchandise:Merchandise:EggsBreadStationeryToysCigarettesCerealsPulsesMedicines

SpecialitySpecialitySpecialitySpeciality StoresStoresStoresStores

As the name suggests, Speciality store would specialize in a particular productand would not sell anything else apart from the specific range.Speciality storessell only selective items of one particular brand to the consumers and primarilyfocus on high customer satisfaction.

Example -You will find only Reebok merchandise at Reebok store and nothingelse, thus making it a speciality store. You can never find Adidas shoes at aReebok outlet.

MallsMallsMallsMalls

Many retail stores operating at one place form a mall. A mall would consist ofseveral retail outlets each selling their own merchandise but at a commonplatform.

EEEETailersTailersTailersTailers

Now a days the customers have the option of shopping while sitting at their homes.They can place their order through internet, pay with the help of debit or credit

28

cards and the products are delivered at their homes only. However, there arechances that the products ordered might not reach in the same condition as theywere ordered. This kind of shopping is convenient for those who have a hecticschedule and are reluctant to go to retail outlets. In this kind of shopping; thetransportation charges are borne by the consumer itself.

Example - EBAY, Rediff Shopping, Amazon

DollarDollarDollarDollar StoresStoresStoresStores

Dollar stores offer selected products at extremely low rates but here the prices arefixed.

Example - 99 Store would offer all its merchandise at Rs 99 only. No furtherbargaining is entertained. However the quality of the product is always in doubt atthe discount stores.

UNIT-UNIT-UNIT-UNIT- IVIVIVIV

NonNonNonNon TraditionalTraditionalTraditionalTraditional RetailRetailRetailRetail Classification:Classification:Classification:Classification:

Nontraditional based or non store based retail market strategy is a kind of platform wherein nontraditional means are used to sell the goods. It is classified into 5 types:

1.DirectDirectDirectDirect MarketingMarketingMarketingMarketing: It is a form of retailing where in the customer is first introduced tothe product through a non personnel medium like cable, TV, e mail, magazine, newspaper,etc and then orders are booked via e mail, phone(particularly by using a toll free number),fax, etc. These are of 2 types:

Firms providing general marketing goodsFirms providing narrowed specialty product lines

This system has several advantages including:

Reduced costs: startup cost, inventory cost, location cost, sales force cost.Possibility of offering lower prices.Shopping convenience for the customers.

29

Specific consumer segments can be pin pointed using mailers.A store based retailer can supplement its regular business and expand itsgeographic area.

Various disadvantages including:

Products cannot be examined prior to purchase.Prospective entrants may underestimate the costs. Catalog preparation, printingand mailing can be an expensive job.The most popular catalogues draw purchases from less than 10% of recipients.Clutter existsSome firms have given a bad name to the industry due to late deliveries andproviding damaged goods.

2. DirectDirectDirectDirect sellingsellingsellingselling: It includes both personal contact with consumers in their homes (andother non-store locations such as offices) and phone solicitations initiated by a retailer.Examples: Carpet selling, vacuum cleaner, other household products, cosmetics, books,encyclopedia etc. It emphasizes convenience in shopping and a personal touch.

3.VendingVendingVendingVending machine:machine:machine:machine: It is a retailing format involving the coin or card operateddispensing of hot and cold beverages and food or snacks items. It eliminates the use ofsales personnel.

It allows round the clock sales. Location of the machines can be done accordingcustomers convenience.

4.WorldWorldWorldWorldWideWideWideWideWebWebWebWeb: WWW in the field of retailing relates to online retailing. It enablesretailers worldwide presence. Enhances the retailers brand. Provides information to theconsumers. Promotes new products. Furnish customer service. Cost efficient. Canannounce special offers and also employment opportunities.

Other Emerging Retail Formats: includes -

Video kiosks freestanding, interactive computer terminals that display productsand related information on a video screen.Airport retailing duty-free shopping centers

5.5.5.5. e-Tailing:e-Tailing:e-Tailing:e-Tailing: The customer can shop and order through internet and the merchandise aredropped at the customer's doorstep. Here the retailers use drop shipping technique. Theyaccept the payment for the product but the customer receives the product directly fromthe manufacturer or a wholesaler. This format is ideal for customers who do not want totravel to retail stores and are interested in home shopping. However it is important for the

30

customer to be wary about defective products and non secure credit card transaction.Example: Amazon, Pennyful and eBay.

6. VendingVendingVendingVendingMachine:Machine:Machine:Machine: This is an automated piece of equipment wherein customers candrop the money in the machine and acquire the products.

TheRoleofMacroEnvironmentintheRetailIndustAllretailcompaniesoperatewithinamacroenvirForeignDirectInvestmentinRetailTypesofRetailoutletsAdepartmentstoreisaset-upwhichofferswiderMerchandise:ElectronicAppliancesApparelsJewellExamples-ShoppersStop,PantaloonDiscountstoresalsoofferahugerangeofproductWal-Martcurrentlyoperatesmorethan1300discounMerchandise:AlmostsameasdepartmentstorebutaAretailstorewhichgenerallysellsfoodproductsMerchandise:BakeryproductsCerealsMeatProductsAretailformatwhichsellslimitedstockinbulkMomandPopstoresarethesmallstoresrunbyindMerchandise:EggsBreadStationeryToysCigarettesAsthenamesuggests,SpecialitystorewouldspeciExample-YouwillfindonlyReebokmerchandiseatManyretailstoresoperatingatoneplaceformamNowadaysthecustomershavetheoptionofshoppiExample-EBAY,RediffShopping,AmazonDollarstoresofferselectedproductsatextremelyExample-99StorewouldofferallitsmerchandiseNonTraditionalRetailClassification:Nontraditionalbasedornonstorebasedretailmar1.DirectMarketing:ItisaformofretailingwherFirmsprovidinggeneralmarketinggoodsFirmsprovidingnarrowedspecialtyproductlinesThissystemhasseveraladvantagesincluding:Reducedcosts:startupcost,inventorycost,locatPossibilityofofferinglowerprices.Shoppingconvenienceforthecustomers.SpecificconsumersegmentscanbepinpointedusinAstorebasedretailercansupplementitsregularVariousdisadvantagesincluding:Productscannotbeexaminedpriortopurchase.Prospectiveentrantsmayunderestimatethecosts.ThemostpopularcataloguesdrawpurchasesfromleClutterexistsSomefirmshavegivenabadnametotheindustryd2.Directselling:Itincludesbothpersonalconta3.Vendingmachine:ItisaretailingformatinvolvItallowsroundtheclocksales.Locationofthem4.WorldWideWeb:WWWinthefieldofretailingreOtherEmergingRetailFormats:includes-Videokiosksfreestanding,interactivecomputerAirportretailingduty-freeshoppingcenters