Sales & Retail Management 5

RETAIL MANAGEMENTProf. Raghavendran.V

By Prof. Raghavendran.V

IntroductionRetail managementThe various processes which help the customers to

procure the desired merchandise from the retail stores for their end use refer to retail management. Retail management includes all the steps required to bring the customers into the store and fulfil their buying needs.

Retail management makes shopping a pleasurable experience and ensures the customers leave the store with a smile. In simpler words, retail management helps customers shop without any difficulty.


RM

Retail is derived word from “Retaillier”, which means to cut of a piece or to break bulk. Therefore, a retailer may be defined as a dealer or trader who sells goods in small quantities.

Thus retailing is final distribution of merchandise, for consumption by the end consumers.


Functions of RM

From the customer’s point of view, the retailer serves him by providing the goods that he needs, in the required assortment, at the required place and time. From an economic standpoint, the role of a retailer is to provide real added value or utility to the customers. This comes from four different prospective:


Functions of RM ( Utility)

1)First utility is form of a product2)Second in form of time utility3)Third in form of place utility &4)Last in form of ownership

utility is created.


Characteristics of RM1. Direct End-User Interaction2. Platform for Promotions & POP

displays3. Lower unit sales4. Retail location critical5. Services as important as Core

Products6. Large number of Retailers to meet

geographical coverage and population density


Retail industry in INDIAIn India Organized Retailing is 2%Retail sector highly fragmentedRetail chains like Wal Mart, Sears, McDonalds brought Rapid Growth and consolidation of Organized Retail

Rapid rise of Income levels and accompanying changes in lifestyles greatly contributed to growth of Organised Retail


Retail Industry in INDIAIn India, increase in Disposable income,

Purchasing Power of growing Middle Class conducive conditions for growth of Organised Retail

Indian Retail environment different from that of western countries:

- Cities congested, large population in rural areas

- Smaller purchases, limited household space


Drivers of retail change in INDIAI. Socio- Economic factorsII. Changing Income profilesIII.The age factorIV. The changing role of women and

evolving family structureV. The changing consumption basketVI. Increased credit friendlinessVII.Geographical dispersion of market

potential


The size of retail in INDIA

In the year 2006 the INDIAN retail market was estimated at Rs 12,00,000 crores and organized sector is about 55,000 crores

See chart from the text book, page number 37.


Segment wise division

Food and Grocery

Food retail

Food & Grocery

Food groceries Branded Packaged Foods

Personal Hygiene Products/ Toiletries

Dry Groceries

Food Services

Catering Service

Fast food centre's

restaurants Others


Segment Wise Division

1. Clothing & Textiles2. Consumer Durable3. Footwear4. Jewellery retail5. Books, music & gift6. Fuel/ Petro retail

Write sector classification for the above:


Foreign Direct Investment in RetailFDI is a method of allowing external finance

into an economy. FDI facilitates international trade and transfer of knowledge, skills and technology. FDI constituted a small per cent of gross fixed capital formation in 1993, which went up to 4%.

INDIA is fastest emerging as a key destination of FDI, According FDI confidence index prepared by AT Kearney, India ranks second in FDI attractiveness, first being China.


FDI in retailIn India FDI retail is not allowed. An

international retailer can enter the Indian retail market through any of the following methods:

Hi-Tech ItemsSocial sector itemsMedical & diagnostic itemsManufactured with technology provided by the

foreign collaborator.Two- year test marketing (Simultaneously

commencement of manufacturing)


FDI

Foreign owned companies cannot own and run retail shops to sell other category of goods to consumers in INDIA.

Some popular entry options for foreign players are:Franchising operationsJoint ventureManufacturing facility in IndiaDistribution offices


Challenges to retail development in INDIAOrganized retail is little over a decade old.

It is largely an urban phenomenon and the pace of growth is still slow and reasons are:

Retail not being recognized as an industry

The high costs of real estateVery high stamp dutiesLack of adequate infrastructureMultiple and complex taxation system


Analysis of INDIAN RetailBy using porter’s models, let us analyze the

Indian retail segment.

Industry Competitors

rivalry among existing firms

Suppliers

Potential Entrants

Buyers

Substitutes

Bargaining powers of Suppliers

Threat of new entrants

Bargaining powers of buyersThreat of substitute

products/ services

Porter’s Five Force of Competition

RETAIL EVOLUTION THEORIES

Four theories of evolution are:1. Wheel of Retailing Cyclical2. Accordion theory Theories3. Dialectic Process Evolutionary4. Natural selection Theories

Cyclical: Begin with one state and return to that state at some time in future

Evolutionary: Changes similar to biological evolution

Prof. Raghavendran.V

Wheel of Retailing/ (Cyclical Theory)Wheel represents phases through which

some types of Retailers pass:Retailers attract customers – low price, low

serviceExpand market – More expensive

merchandise, More services, open More convenient locations. Trading up process increases costs & price of their merchandise, creating opportunities for new low price retailers to enter e.g. Discount stores & category specialists

Some Retailers don’t begin as low price, low service entrants, e.g. Upscale fashion specialty stores.


Innovative retailerLow status & price, minimum service,

poor facilities, limited product

offering

Traditional retailerElaborate facilities

Higher rentMore locations

higher prices, extended product offerings

Mature RetailerTop heavy

conservative declining ROI


THE ACCORDION THEORYRetailers fluctuate from strategy of

offering wide merchandise with shallow assortment to offering limited categories with deep assortment

In rural markets, Retailers sell many categories under one roof: shoes, cosmetics, foods, cloth, medicines. However the assortment is shallow and customers have limited choice.

Department stores have both width and depth of merchandise

Specialty stores carry special categories with deep selection


DIALECTIC PROCESS/ CONFLICT THEORY

An evolutionary theory based on premise that retail institutions evolve.

The theory suggests that new Retail formats emerge by adopting characteristics from other forms of retailers in much the same way as the child is the product of the pooled genes of the parents.

Specialty stores with high margins, low turnover plush operations

Discount stores with low margins, high turnover low operations

Both the above were synthesized to form category specialist stores.


DIALECTIC PROCESS/ CONFLICT THEORY


Discount Store Department Store

Discount Department Store

NATURAL SELECTION/ ENVIRONMENTAL THEORY

Those Retail Institutions Succeed which adapt to changes in customers, Technology, competition and legal environment.

Department stores have tried to combat

specialty stores by opening specialty counters within the stores.

Interest in physical fitness and increased number of women in workforce have made salad bars in grocery stores successful.


The concept of life cycle in RETAILThe concept of PLC as Philip Kotler is also applicable to retail organizations. This is because retail organization pass through identifiable stages of innovation, development, maturity and decline. This is what is commonly termed as the “RETAIL LIFE CYCLE”


Assignment: Explain the concept of Retail Life cycle?


Business Models in Retail

Critical factors, which affect the retail model are

Trends in the market positioningCompetition, &The organizational capabilities


Classification of retail formats

Classification of retail

Store based retailing

Form of ownership

Merchandised offered

Non store based retailing

Direct selling, Mail order,

Tele marketing

Service retailing

Bank, car rentals, real

estate consultant


Careers in RetailingIt is people centric industry, which can be exposed

to multi-disciplinary and skills. It offers many choices in terms as career.1. Buying and Merchandising2. Marketing3. Store operations4. Sales5. Finance6. Human Resources7. Technology and E-commerce8. Visual Merchandising9. Supply Chain Management & Logistics


Assignment time: Sub on 20th SeptGlobal Challenges in Retail Industry?Brief out Traditional Business Models in

Indian retail.Brief out Classification of retail formats.Classify & Differentiate b/w Super, Hyper

markets & Departmental stores.

Education

Sales & Retail Management 5