RETAIL

MANAGEMENT

RETAIL MANAGEMENT INTRODUCTION –

CONCEPTS, ROLE & ENVIRONMENT RETAILING Business activities involve Selling

Goods and Services to Consumers for their Personal, Family or Household use.

“Every sale of Goods and Services to final consumer” – Food products, apparel, movie tickets; services from hair cutting to e-ticketing.

Retailing is the Last stage in Distribution Process- Wholesale is an intermediate where Goods and services are sold to Business customers.

RETAIL FUNCTIONS IN DISTRIBUTION

A Typical Channel of Distribution

Retailers role in sorting process

Retailers often act as the contact between manufacturers, wholesalers, & customers.

Retailers collect an assortment (variety) from various sources, buy in large quantity, &

sell in small amount. This is sorting process.

Retailers communicate with customers, wholesalers & manufacturers.

Shoppers learn about the availability & characteristics of goods & services, store hours,

sales etc., from retailers advt., sales people & displays.

Manufacturers & wholesalers are informed by their retailers with regard to sales forecast,

delivery delays, customer complaints, defective items, inventory turnover and so on..

Many goods & services have been modified due to retailer feedback.

For small suppliers, retailers provide assistance by transporting, sorting, marketing,

advertising, & pre-paying for the products.

Retailers also complete transactions with customers i.e., having convenient locations,

filling order promptly & accurately, & processing credit purchase.

Some retailers also provide customer services such as gifts wrapping, delivery, &

installation.

To be more appealing, many firms engage in multi-channel retailing i.e., multiple point

of contact like physical stores, websites, mail-order catalogs etc.

RETAIL FUNCTIONS IN DISTRIBUTION

CONTD..

Benefits

Reach more customers

Reduce costs

Improve cash flow

Increase sales more rapidly

Focus on area of expertise

RETAIL FUNCTIONS IN DISTRIBUTION

CONTD..

Retailers are part of distribution channel, so manufacturers (wholesalers) are concerned about:

Caliber of displays

Customer service

Store hours

Retailer’s reliability as business partners

Retailers are also major customers of goods & services for resale, store fixtures,

computers, management consulting ,& insurance.

RETAILER-SUPPLIER RELATIONSHIP

Retailers and supplier have different priorities on:

Control over distribution channel

Profit allocation

No. of competing retailers handling supplier’s products

Product display

Promotion support

Payment terms

Operating flexibility

Channel Relations

Exclusive Distribution

Suppliers make agreements with one or a few retailers that designates them the only one

to carry certain brands/products in a specific geographic region.

Both parties work together to maintain an image, assign self space, allot profits & costs,

& advertise.

This is the smoothest channel relationship.

RETAILER-SUPPLIER RELATIONSHIP

CONTD..

Intensive Distribution

Suppliers sell through as many retailers as possible.

This maximizes suppliers’ sales & lets retailers offer many brands & product versions.

Retailers may assign little self space to specific brands, set high price on them, & not

advertise them.

This is most volatile channel relationship.

Selective Distribution

Suppliers sell through a moderate no. of retailers carrying some competing brands.

This combines aspects of Exclusive & Intensive Distribution

The average amount of a sales transaction for retailers is much less than manufacturers.

This low amount creates the need to tightly control the cost associated with each

transaction like sales personnel, credit verification, & bagging.

To maximize the no. of customer the retailer has to emphasize more on ads & special

promotions.

Increase impulse sales by more aggressive selling.

THE SPECIAL CHARACTERISTICS OF

RETAILING

Final consumers make many unplanned or impulse purchases.

Large %age of consumers do not look at ads before shopping.

They do not prepare shopping list.

Make fully unplanned purchases.

This indicates the value of in-store displays, attractive store layouts, & well organized

stores, catalogs, & website.

Retailer’s ability to forecast, budget, order merchandise, & sufficient personnel on the selling floor becomes difficult.

Retail customers usually visit a store, even though mail, phone, & web sales has increased.

Most retail transactions happen in stores & will continue in future.

Many people like to shop in person, want to touch, smell, and/or try on products.

Many people to browse for unplanned purchases.

They feel more comfortable talking a purchase home with them than waiting for a

delivery.

Desire privacy while at home.

Retailers must work to attract shoppers to stores & consider such factors such as store

location, transportation, store hours, proximity (nearness) of competitors, product

selection, parking & ads.

THE SPECIAL CHARACTERISTICS OF

RETAILING

Retail strategy is the overall plan guiding a retail firm. It influences the firm’s business activities & its response to market forces, such as competition & economy.

Six steps in strategic planning

Define the type of business in terms of the goods or services & company’s specific orientation.

Set long-run & short-run objectives for sales & profit, market share, image etc.

Determine the customer market to target on the basis of its characteristics (like gender

& income level) & needs (like product & brand preferences).

Devise an overall, long-run plan that gives general direction to the firms & its employees.

Implement an integrated strategy that combines factors like store location,

transportation, product variety, pricing, and advertising & display to achieve objectives.

Regularly evaluate performance & correct weaknesses or problems when observed.

IMPORTANCE OF RETAIL STRATEGY

Growth-oriented objectives

Appeal to prime market

Distinctive company image

Focus

Strong customer service for its retail category

Multiple points of contact

Employee relations

Innovation

Commitment to technology

Community involvement

Constantly monitoring performance

KEY TO SUCCESS

Customer orientation - The retailer determines the attributes & needs of its customers

& endeavors (take action) to satisfy these needs.

Coordinated effort - The retailers integrates all plans & activities to maximize

efficiency.

Value-driven - The retailer offers good value to the customers, whether it be upscale

(expensive) or discount i.e., “appropriate pricing” for goods & customer service.

Goal oriented - The retailer sets goal & uses its strategy to attain them.

THE RETAILING CONCEPT

CLASSIFICATION OF RETAIL STORES

Classification of retail stores

Store-Based Retailing Non-Store Retailing

Form of Ownership • Independent retailer

• Chain Retailer

• Franchise

• Leased Departments

• Vertical Marketing System

• Consumer Cooperatives

Merchandise Offered • Convenience Store

• Supermarkets

• Hypermarkets

• Specialty Stores

• Department Stores

• Off Price Retailers

• Full line discount store

• Warehouse store

• Variety Store

• Factory Outlets

• Catalogue Showrooms

• Membership Club

• Flea Market

• Direct Selling

• Direct Marketing

• Automated Vending

• World Wide Web

• Other Emerging Retail

• formats

Based on Location

•High Street

•Destination

•Convenience

STORE FORMAT BY LOCATION

1. High Street Format

It is Located in busy shopping area.

Area is less than 2000 square feet.

No parking facility

Focused Merchandised Category

Example: M. G. Road in Bangalore

2.DESTINATION FORMAT

Huge Parking space

Wide merchandise category

They are Independent retail store with

alluring proposition for the customer to

visit the store with the primary intention

of shopping there

3. CONVENIENCE STORE

Located in the catchment area of target customers

Extended hours of operation Less than 5000 square feet 24X7 convenience stores situated close to homes

to generate high footprints snacks, grocery type items & confectionary

Merchandise include: beverages, ready to eat These store carry a limited stock of daily use

goods with a special focus on food products eg. In & Out petrol pump outlets.

CLASSIFICATION BASED ON OWNERSHIP

INDEPENDENT RETAILER

ADVANTAGES:

• Flexibility in choosing retail formats and locations

• Decision making is centralized

• Low investment cost

• Independents have independence

• Easily sustain consistency

DISADVANTAGES:

• Less bargain power with suppliers

• Cannot gain economies of scale

• Very little computerization

• Relatively high cost of advertising

• Over dependence on owner

• Limited amount of time and resources allotted to long-run planning

CHAIN RETAILER

ADVANTAGES:

• Bargaining power with suppliers

• Achieve cost efficiencies by being wholesales themselves

• Computerized

• Can take advantage of variety of media options

• Defined management philosophies

• Long term planning, opportunities and threats are carefully monitored

DISADVANTAGES

• Lesser flexibility

• Investments may be high

• Managerial control can be hard

• Limited independence in jobs

FRANCHISING

Franchising is a retail organization form in which small businesses

can benefit by being a part of a large, multiunit chain-type retail

institution .

Two types of franchising:

•Product/Trademark and Business format franchising.

Archie's/Gasoline stations McDonalds

Three structural arrangements dominate franchising:

•Manufacturer-retailer Gasoline stations/Exxon, Mobil, Ford

•Wholesaler-retailer

1.Voluntary Auto accessory store

2.Cooperatives

•Service sponsor retailer KFC, McDonalds, Holiday Inn

LEASED DEPARTMENT

From the stores perspective

ADVANTAGES:

•Skilled manpower to handle merchandise

•Market can be enlarged by providing one stop customer shopping

•% of revenues is received regularly

•Stock servicing, display etc is the responsibility of the licensee

DISADVANTAGES:

•Operating procedures may be conflicting

•Store’s image may get adversely affected

•Customers tend to blame the store for any pitfall

LEASED DEPARTMENT..CONT

For leased operator’s ADVANTAGES:

•Immediate sales because of store’s established image

•Some costs are reduced through shared facility.

•Volume saving in print/ media ads

DISADVANTAGES:

•Inflexibility since working style may differ

•Goods/services line are restricted

•Store may raise the rent or may not renew lease

•In-store location may not generate expected sales.

VERTICAL MARKETING SYSTEM

CHANNEL TYPE CANNEL FUNCTIONS OWNERSHIPS

1. Independent Manufacturing Independent

Systems Partners

2. Partially

Integrated Two channel members

Systems Wholesaling own all facilities and

perform all functions

3. Fully All functions are

Integrated performed by a single

Systems Retailing channel member

CONSUMER CO-OPERATIVES Consumer co-operatives exist for three basic reasons:

•They feel that they can operate a store as well or may be better than

any other retailer

•They believe that existing retailers are inadequately fulfilling

customers need for healthful, environmentally safe products

•They assume that existing retailers make excessive profits and they

can sell merchandise for lower prices

CLASSIFIACATION BASED ON MERCHANDISE

OFFERED

FOOD ORIENTED RETAILERS

CONVENIENCE STORES:

It is usually a food-oriented retailer that is well located, is open for

long hours and carries a moderate number of items. This type of

retailer is small, has average to above average prices and average

services and average atmosphere.

Milk, eggs, bread, newspaper, tobacco products, soft drinks,

magazines, video rentals, etc are the major category occupants.

Store size ranges from 3000 to 8000 sq. ft.

Ex. Mom n Pop stores.

CONVENTIONAL SUPERMARKET These are large, low cost, low margin, high volume, self service

retailers designed to meet the needs for food, groceries and other non-

food items.

They rely on high inventory turnover. Their profit margins are low.

The size of the store ranges from 8000 to 20000 sq. ft.

Ex. Kroger, Safeway, Foodworld, Adani supermarket, Subhiska,

Nilgiri’s, Reliance Fresh.

FOOD BASED SUPERSTORE

A food based superstore is a larger and more diversified

than a conventional supermarket but usually less diversified

and smaller than a combination store.

Some supermarkets merged with general merchandise store

or drug store.

They are typically 25000 to 50000 sq feet of total space.

20-25 % revenues comes from garden supplies, small

household appliances, flowers, etc.

They stimulate impulse purchases.

COMBINATON STORE

A combination store combines supermarket and general

merchandise sales in one facility.

25-40% revenues from general merchandise.

They are from 30000 to 100000 sq feet.

the combination of economy supermarket with discount

department store is called super center.

Examples: Wal-mart, K-mart.

HYPERMARKET

Also called as supercentre, this format is a blend of economy

supermarket with discount department store.

They offer both food and non-food items like grocery, clothes,

jewellery, cycles, sports items, books, CDs, furniture, etc.

This format was pioneered by Carrefour in France.

This ranges from 80,000 to 2,20,000 sq. ft.

The cheapest price will normally be found in these stores.

Across the world hypermarkets are a part of retail park with other

shops, cafeteria and restaurants.

Other facilities include photo processing shop, pharmacy shops.

They are usually located in the outskirts of major towns and cities.

Ex. SIB, Big Bazaar, Adani Hypermarket.

BOX STORE

This is a food based discounter that focuses on a a small

section of items, moderate working hours, few services and

limited manufacturer’s brands. They have less than 1500 SKUs.

Items are displayed in cut cases.

Customers do their own bagging.

They aim to price at 20-30% below supermarkets.

Example: Aldi.

WAREHOUSE STORE

A warehouse store is a food-based discounter offering a moderate number

of food items in a no frill setting.

They appeal to one stop shoppers.

These stores concentrate on special discount purchases from manufacturer

brands. They use cut-case displays, provide little service, post prices on

shelves and are located in industrial districts.

Potential problem is lack of brand continuity.

They temporarily or permanently run out of brands.

Here customers pack their own goods.

They work on volumes and their gross margins are far lower than

supermarkets or hypermarkets.

Largest stores are called super warehouse.

Their sizes can be 15000 to 50000 square feet.

Ex. Cub Foods

GENERAL MERCHANDISE RETAILERS

SPECIALITY STORE

A specialty store concentrates on selling one product/ service line

such as apparel and accessories, toys, furniture. They have a deep

assortment in their chosen category and tailor their strategy to

selective market segment.

Personal attention, store ambience and customer service are the

prime importance to the retailer.

They operate in an area which is under 8000 sq. ft.

Ex. The Gap, Mango, Levis, Wills Lifestyle, Big & Tall, Adidas,

Nike, Style Spa, Proline fitness station.

CATEGORY KILLERS

Also called as Power Retailer.

This is a new type of specialty retailer which offers a very large

selection of chosen category .

They stock deep and dominate the chosen category.

Ex. Planet Sports, Crossword, Nalli Sarees, Sales India, Croma, E-

planet.

DEPARTMENT STORE

TRADITIONAL DEPARTMENT STORE:

A traditional department store is a large retail unit with an extensive

assortment of goods and services that is organized into separate

departments for buying, promotion, customer service and control.

They generally serve as anchor stores in malls and is usually part of

a chain.

Apparel and home furnishing are the two most common product

categories.

Size varies from 20,000 to 40,000 sq. ft.

DEPARTMENT STORE…

Merchandise quality is moderate to quite good. Pricing is moderate to

above average. Customer service is medium to high level.

Ex. Marks & Spencer, Sears, J.C. Penny, Westside, Globus, Pyramid,

Pantaloons, Shopper’s Stop, Lifestyle.

FULL-LINE DISCOUNT STORE

It conveys the image of high volume, low cost, fast turnover outlet

selling a broad merchandise for less than conventional prices.

Products are sold via self service.

Non durable goods feature from private brands and durable goods

are from well known national brands.

Less fashion sensitive merchandise are carried.

Ex. Wal-Mart.

DOLLAR STORE/ VARIETY STORE

US based My Dollar Store started operation in Mumbai

through franchise arrangement with Sankalp Retail Value.

Floor Space: 4000 Sq. Feet

Merchandise: Cleaning, Health & Beauty, Hardware,

Plastic ware, Kitchen ware & confectionary etc.

OFF-PRICE CHAIN

An off-price chain features brand name, sometime designer labels

of women wear, cosmetics, accessories, footwear,etc and sell them

at every day low prices in an efficient, limited service environment.

They have centralized check-outs, no gift wrapping and charge

separately for alterations.

Ex. T.J. Maxx

FACTORY OUTLET

A factory outlet is a manufacturer-owned store selling manufacturer

closeouts, discontinued merchandise, irregulars, cancelled orders and

sometime in season fresh merchandise at at lower rate.

They sell merchandise at up to 60% less than MRP due to low

operating cost, low rent, limited display and cheap fixtures.

Also sell in cartons.

Ex. Levis factory outlet, Pantaloon factory outlet, etc.

MEMBERSHIP CLUB

A membership club is a retail format where consumers have to be

members to be able to buy merchandise at a wholesale price.

Here the members pay a certain amount of annual fee.

Their operating strategy includes inexpensive isolated locations,

opportunistic buying, little or no advertising, plain fixtures, wide

aisles, very low prices.

Ex. Sam’s and Costco

FLEA MARKET

A flea market has many retail vendors offering a range of products

at discount prices in plain surroundings.

They are located in non-traditional sites like stadiums,

racetracks,etc.

Here, individual retailers rent space on a daily or weekly basis.

At any flea market, price haggling are encouraged.

Ex. Rose Bowl

CATALOGUE SHOWROOMS

A catalogue retailer specializes in hard goods such as houseware,

jewellery, consumer electronics.

The customer walks into this retail showroom and goes through the

catalogue of the product that would like to purchase.

The product is then arranged to be bought from the warehouse for

inspection and purchase.

Ex. Argos, Service Merchandise and Best Products.

NON-STORE RETAILING

DIRECT MARKETING:

Is a form of retailing in which a customer is first exposed to goods

or service through a non personal medium such as direct mail,

newspaper, broadcast or television and then orders are placed by

mail, phone or computer.

There are three forms:

1. Mail order retailing/ catalogue retailing.

2. Television retailing.

3. E- tailing

DIRECT SELLING

Direct selling includes both personal contact with consumers in their

homes and offices and phone solicitations initiated by a retailer.

1500 crore market in India growing @ 28% p.a.

Profile of products purchased from Direct Selling: (IN %)

HOUSEHOLD GOODS 68.9

PERSONAL CARE PRODUCTS 12.4

FAMILY PRODUCTS 14.4

BUSINESS AIDS 3.59

FOOD PRODUCTS 0.71

Ex. Oriflame, Amway, Avon, Herbalife, Tupperware, Eureka Forbes

Controlled by IDSA.

AUTOMATED VENDING

Ex. Tata Coffee, Jiffy, ATMs.

AIRPORT RETAILING Ex. Travel Requisition Shop

E-RETAILERS

VIDEO KIOSKS

The video kiosk is a free standing, interactive, electronic computer

That displays products and related information on a video screen.

It often uses a touch screen for consumers to make selection.

Example: McDonald, Wills Lifestyle.