Retail ManagementRetail Management

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Retailing from three different perspectives:

Suppose we manage a manufacturing firm that makes vacuum cleaners. How should we sell these items?

We could distribute via big chains such as Best Buy or small neighborhood appliance stores,

Have our own sales force visit people in their homes, or

Set up our own stores (if we have the ability & resources to do so).

We could sponsor TV infomercials or magazine ads, complete with a toll-free phone number.

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Suppose we have an idea for a new way to teach school going students how to use computer software for spelling

and vocabulary. How should we implement this idea?

We could lease a store in a strip shopping center and run ads in a local paper,

Do mailings to parents and visit children in their homes.

In each case, the service is offered “Live”. But there is another option: we could use an animated Web site to teach children online.

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Suppose that we, as consumers, want to buy apparel. What choices do we have?

We could go to a department store, discounter store or an apparel store.

We could go to a shopping center or order from a catalog.

We could look to retailers that carry a wide range of clothing or look to firms that specialize in one clothing category (such as leather coats).

We could surf around the Web and visit retailers around the globe.

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Retailing Overview

Every sale of goods & services to the final consumer—ranging from automobiles to apparel to meals at restaurants to movie theater tickets.

The word ‘retail’ has been derived from the French word ‘retaillier’ means‘to cut a piece off’ or ‘to break bulk’. Simply, it implies a first-hand deal with the customers.

A retailer is a ‘dealer or trader who sells goods in small quantities’.

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Retailing Overview

An organization selling to final consumers—whether it is a:-

Manufacturer’sWholesalerRetailer

is doing retailing.

Retailing does not have to include a “retailer”. Manufacturers, importers,non-profit firms and wholesaler act as retailers if they sell goods/services to final consumer.

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Goods may reach to consumer :-(In Person) (Through Stores, Streets)Through Mail,Telephone, (At Consumer’s home)Vending Machine,Internet

Retailing encompasses the sale of services also.

Example: Haircut , airlines travel, restaurant etc.

Retailing is the last stage in the distribution process.

Retailing does not have to involve a store.

Retail sales driven by:

People’s ability (Disposable income)

Willingness (Consumer confidence) to buy.

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Retailing involves selling products and services to consumers for their personal or family use. Department stores, like Shopper stop, Pantaloon, discount stores like Wal-Mart and K-Mart, and specialty stores like Music Word for audio, Tanishq for jewellery, Mc Donald etc are all examples of retail stores.

Service providers, like dentists, hotels and hair salons, and on-line stores, like Amazon.com, are also retailers.

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Many businesses, like Home Depot, are both wholesalers and retailers because they sell to consumers and building contractors.

Other businesses, like The Limited, are both manufactures and retailers. Regardless of other functions these businesses perform, they are still retailers when they interact with the final user of the product or service .

Manufacturer

Distributors/Wholesalers

Retailers

Consumers

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Characteristics

1. Personal Interaction with Customer.

2. Lower Average amount of sales transaction.

Reasons: Purchase in small quantities.

Lower disposable income

Precautions: Average levels of stock.

Order levels.

Popularity of different brands.

3. Point-of-Purchase display & promotions

Impulse purchase: Ex: Chocolates, snack foods, candy, cosmetics, magazines etc.

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4. Larger number of retail business units

Factors to be considered:

• Availability of factors of productions & market (manufacturers)

• Potential demand

• Supply of merchandise

• Store imageRetailers

The number of operating units in retail is the highest compared to other constituents of the value chain, primarily to meet the needs for geographic reach and customer accessibility.

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Activities performed by Retailers

Arranging assortments

Breaking bulk

Holding Inventory

Providing services

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1. Arranging Assortment

• Is a selection of merchandise

• Substitutable items of multiple brands, SKUs & Price points.

Factors while devising assortment plans for the store:-

• Profitability with merchandise mix

• Store layout

• Level of compatibility between the existing products.

• Example: Food World, Subhiksha

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2. Breaking BulkMeans physical repackaging of the products in small lot

2. Holding Inventory“too little stock will hamper the sales volume, whereas, too much stock will increase the retailer’s cost of operation.

4. Extending Services

• “Add-on-Services”

• Offer credit

• Home delivery

• After sales services

• Information on new products

• Example: Time Zone

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Organized Retail Trade• Organized retail stores are characterized by large professionally

managed format stores. They provide goods and services that appeal to customers, in an excellent ambience that is conducive for shopping, created based on consumer preference analysis, and offer good value as some of the benefits of large-scale purchases are passed on to consumers.

• Organized retailing refers to trading activities undertaken by licensed retailers who are registered for sales tax and income tax.

• These include corporate backed hypermarket and retail chains and so on.

• Organized retail sector in India is targeted at high-income urban customers.

• The organized retail trade has shown a tremendous growth in our Indian industry

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Share of Organized Retail in India

1999 2002 2005

Total Retail (in billion INR)

7000 8250 10000

Organized Retail

(in billion INR) 50 150 350

% Share of Organized Retail

0.70% 1.80% 3.5%

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Table 1.2 Organized Retail Format

Specialty stores Hyper market

Convenience stores Franchise stores

Department stores

Discount stores

Supermarkets

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Advantages of organized retail

• Convenience of browsing and choosing through products—no barriers.

• Choice of ‘everything under one roof’.

• Heavy discounts on certain items like snack foods, electronic goods, and groceries.

• Loyalty cards/schemes.• Better and specialized service at certain store.• Specialized stores.

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Table 1.3A glance on Unorganized and organized retail

trade

Organized retail trade

• skilled manpower• leveraging technology• effective inventory

management• high investment• sales forecast

Unorganized retail trade

• Unskilled manpower • less focus on

technology usage• Un- managed

inventories• low cost of operations• individually

owned/managed

Types of RetailingTypes of Retailing

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Store Retailing• Store retailers operate from fixed point-

of-sale locations to attract a high volume of walk-in-customers.

• Use mass-media advertising to attract customers.

• They sell products and services to the customers for personal or household consumption.

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Non-Store Retailing

Internet Retailing (E-tailing)

Catalog Retailing (Direct Mail Retailing)

Direct Selling (tele-selling)

TV Home Shopping .

Vending Machine (Automatic Retailing)

Customer

As per study, 12% of global retail sales will be through Non-Store formats by year 2010.

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Internet Retailing

Retailers communicate with customers and offer products and services for sale over the internet.

Electronic retailers range in size from Amazon. COM with over $ 3.0 billion annual sales to niche players such as www.dilmatea.com which sells tea from Sri Lanka.

2005 – 250 million users connected to the internet.

Success of Internet will depend on whether the Indian consumer has access and how they use or perceive Internet Shopping.

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Catalog Retailing (Mail-order retailing)

A non-store format where the product or service is communicated to a prospective customer through a Catalog.

Direct Mail (letters, brochures etc) is a form of Catalog retailing.

It is convenient. ( during festive)

Operation costs is less as—No sales people to be hired, trained or paid.

Drawback: involve considerable expenditure in preparation & mailing of catalog.

Example: Indiatimes Shopping, Oriflame

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Factors witnessing the success of Catalog retailing:

• Convenience

• Time-saving

• Information

• No time limits : there is no undue pressure to buy unlike the retail store shopping.

Guidelines for Catalog Retailing• Must reflect brand identity

• Avoid clutter

• Use of text along with pictures

• Catalog has to sell as a whole not pieces

• An order form should be included

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Direct Selling (door-to-door retailing)

• It is a retail format which involves personal contact between salesperson/retailer and customers in a convenient location, either at the customer’s home or at work, and demonstrate the product’s benefits, takes an order and delivers the merchandise to the customer.

• More than 1000 companies world wide selling through this manner.

• Example: Avon, Oriflame, Eureka Forbes, Amway, Modicare.

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• Range of Product & Services sold are:Cosmetics, personal care product, kitchen ware, carpets, insurance, travel etc.

• India reports total sales of Rs. 13.74 billion through direct selling. Amway the market leader registered the annual sales of over Rs 5 billion.

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Trends that have increased the use of Direct Selling are:

• High costs of driving, including traffic congestion & parking problems.

• Shortage of retail help (sales force) at retail stores.

• Long check-out lines (Big Bazar)

• Increasing number of working women's.

• Availability of credit cards

• Time pressure on consumer

• Growth of computer power and communication technology.

Direct selling has minimal support of advertising and large dependence on Word-of-Mouth publicity.

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Tele Selling

• It is a telephone based retail format for -----making appointment.--information exchange for sale over the phone.

• Expensive as compare to direct mail because labour cost involved.

• A study shows tele-selling generate 5 times the results produced by direct mail.

• It involves a set of activities:

1) set targets2) compilation of data base3) script writing4) call opening

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TV Home Shopping

• Retail format in which customers watch a TV programme demonstrating merchandise & then place orders for the products over the telephone.

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• Different ways to communicate the target audience:

• Through Infomercial (informative commercial), where, between scheduled TV programs, advertisements for products are aired and orders solicited from viewers.

• Through 30 or 60 minute capsule, covering various products, with in depth demonstrations.

• Example: Asian sky shop, HSN (home Shopping Network), TSN, Tele-brands (India) and Star Wamaco (International player).

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Vending Machines (Automatic Retailing)

• A retail format in which the merchandising is stored in a machine and dispensed directly to the customers when they deposit cash or use a credit card.

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• 24 hours service.

• Location : near railway stations, airports, shopping malls commercial and office complexes.

• Range of products:snacks, candy, soft drinks,vegetables, ice-cream, condom, post-cards, monetary transactions etc…

Retail FormatsRetail Formats

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On the basis of Merchandise Offered/ Store strategy mix

On the basis of Ownership

Department Store

Specialty Store

Discount Store

Super Market

Hyper Market

Convenience Store

Shopping Mall

Independent Retailer

Retail Chain

Franchising

Leased Department

Co-operative Outlets

On the basis of On the basis of Merchandise Offered or Merchandise Offered or

Store Strategy MixStore Strategy Mix

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Department Store• Carry a broad variety & deep assortment of product, offer

some customer services, & are organized into separate department for displaying merchandise

• Deals in clothing, personal care & cosmetic, books & stationeries, home furnishings, electronics, paint, hardware, toys etc.

• Provide a distinctive shopping experience to customers on account of services (home delivery, use of credit card, restaurants, cloakroom & changing room etc.

• Prices relatively high due to:-Trained sales staffHigh capital investments

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Department Store

• Usually, located within planned shopping centers

• Large format apparel department stores are Ebony, Globus, Lifestyle, pantaloon, shoppers stop, Westside. Akbarally’s, the Bombay store & Benza in Mumbai, Chermas & Meena Bazaar in Hyderabad

• Upcoming as a department stores such as, Appeal—fashion store in west Delhi, Baniya store in Jammu (offering gifts, dry fruits, sports material, apparel, home fashion, curtains, bed sheet etc)

• International players: Marks & Spencer, Sears, J.C. Penny, Harrods, Selfridges.

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Specialty Store• Store specializing in a particular type of merchandise or

single product of durable goods such as home furniture & household goods, consumer electronics & or domestic electrical appliance, beauty & health care. For example, a store that exclusively sells cell phones or video games would be considered specialized

• Characterized by a high level of services or product information being made available to customers

• Selling area ranges around 8000 sq.ft.

• International Players: The Gap, IKEA, High & Mighty, Big & Tall, Pep Boys, Autozone (Auto parts)

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Specialty Store• Indian Players: Gautier (furniture), Titan (watches), Tanishq

(jewellery), Music World, McDonald, Pizza Hut & Nirula’s for food services, Paroline fitness station, Carbon from peakok Jewellery, Park avenue from Raymonds men’s specialty store, Khadder—Khadi specialty (Kolkata based company)

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Discount Stores• Offers wide assortment of goods, limited or no

services & low prices

• Offers both Private brand and National brand

• Less fashion merchandise is carried

• Subhiksha, Wal-Mart, K-mart, Target

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Super Market• Self-service food store offering groceries, meat & fresh

produce, dairy products

• Deals in non-food items also such as house-hold appliances, some apparel items, pharmacy products, health & beauty product

• Other services– banks, cafes, child care centers, photo processing etc

• Selling area 25000 to 50000 sq. ft.

• Food World outlets, Nilgiris, Food Bazaar & vitan, Kroger, Safeway

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Hyper Market

• It is a super store which combines a supermarket and a department store. Basically taken from a French word hypermarche

• Large retail facility which carries an enormous range of products under roof, including full lines of groceries and general merchandise

• Selling area 100000 sq. ft. to 300000 sq. ft.

• Food articles (60-70%) & Non-Food articles (30-40%)

• Product ranges: clothes, jewellery, hardware's, sports equipment, cycles, motor accessories, books, CD’s, DVD’s, videos, TV’s, electrical equipment, computers. Also deals in petrol station, banks, photo processing shops & pharmacies

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Hyper Market• Hypermarkets are designed to attract customers from a

significantly large area with their unique ranges and low prices.

• Key retailers—Carrefour, Wal-Mart, Meijer, Target (Super Targets), Tesco (Tesco Extra Stores), Giant, Big Bazaar & Star India Bazaar

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Convenience Store • Is a small store or shop located near residential areas that

sells items such as candy, ice-cream, soft drinks, lottery tickets, newspapers and magazines, along with a selection of processed food and perhaps some groceries

• Often located alongside busy roads, in densely-populated urban neighborhoods, near railway stations or other transportation hubs. In some countries most convenience stores have longer shopping hours, some being open 24 hours.

• Selling area ranges from 2000 to 3000 sq. ft.

• International players: 7-Eleven, Circle K, Albert Heijn & SPAR

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Shopping Mall • Shopping Mall is an arrangement of retail stores & providing

the right mix of shopping food courts & entertainment and parking facilities.

• Retail space is shared by retailers (tenants), who will pay the developers of the Mall—rent or lease payment for putting up the shop within the Mall premises.

• Example: In Banglore—The forum, Central, Sigma Mall etc, In Mumbai—Inorbit

Form of OwnershipForm of Ownership

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Independent Retailer• Generally operates one outlet and offers personalized

services, a convenient location & close customer contact. In India, stores like local baniya / kirana store & the panwala are some examples of independent retailers

• About, 96% of all the retail businesses in India, are managed and run by independents, including barber shops, drycleaners, furniture stores, bookshops, neighborhood stores

• Easy entry, require low investment and little technical knowledge

• On other hand, most independent retailers fail because of poor management skills and inadequate resources etc.

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Retail Chain• When two or more outlets are under a common ownership, it

is called a retail chain.

• Characterized by similarity in the merchandise offered to the consumer, the ambience, advertising and promotions.

• Example: Wills Sports (ITC), Louis Philippe, Van Heusen (Madura Garments), Arrow (Arvind Mills) & department stores like Globus, Westside & Shopper's Stop, Food World, Planet M etc.

• Biggest advantages: bargaining power with the suppliers

• Attention to each of the stores becomes fairly restricted

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Franchising• It is a contractual agreement between the franchiser and

the franchisee, which allows the franchisee to conduct business under an established name as per a particular business format, in return for a fees, and a share of the profits

• Example: Archie’s Stores, McDonalds, Pizza Hut, Nirula’s, Dominoes, Baskin Robbins, Aptech, NIIT and Subway

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Leased Department• Popularly know by Shop-in-Shops. When a section of a

department in a retail store is leased/ rented to an outside party, it is termed as a leased department.

• It is the best method for retailers to expand their product offering to the customers

• In India, many large department stores operate their perfumes and cosmetics counters in this manner. Example: Timex Watches

• In China, most department stores are 100% leased departments or Shop-in-shops

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Co-operative Outlets• It is generally owned and managed by co-operative societies

• Examples: Sahakari Bhandar’s and Apna Bazaar shops in Mumbai and Super Bazaar in Delhi and Kendriya bhandar

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