RETAIL BUSINESS MANAGEMENT

(COM3MN208)
MODULE I — THE RETAIL FUNCTION (Short Notes)

1.1 Introduction to Retailing – Role of Retailing

Meaning
Retailing is the final link in the distribution/supply chain — selling goods and services directly to the ultimate consumer for
personal, family, or household use (not for resale).

The Retailer as a Middleman

The retailer stands between the manufacturer/wholesaler and the final consumer, forming the last link of the marketing
channel.

Functions/Role of Retailing
1. Breaking Bulk — converting large manufacturer quantities into small consumer-usable units.
2. Creating Utility — place, time, and possession utility for consumers.
3. Providing Assortment — bringing together products from multiple manufacturers under one roof.
4. Holding Inventory/Warehousing — storing stock so manufacturers don't have to.
5. Providing Information — two-way communication between manufacturers and consumers.
6. Providing Services — installation, after-sales service, credit, home delivery, etc.
7. Risk-Bearing — bearing risk of price fluctuation, theft, spoilage, unsold stock.
8. Promotion and Demand Generation — using displays, discounts, and advertising.

Economic and Social Importance

1. Employment Generation
2. Contribution to GDP and Economic Growth
3. Link Between Producers and Consumers
4. Standard of Living and Consumer Choice
5. Support to Small-Scale and Rural Producers

1.2 Organised vs Un-organised Retailing

Meaning
Organised Retailing: retail trade by licensed, tax-registered retailers with standardized practices and large-format/chain
operations.
Unorganised Retailing: traditional, small-scale, low-investment trade by local shopkeepers, usually family-owned, with
informal accounting.

Characteristics of Organised Retail

• Corporate/chain structure
• Legal compliance (GST-registered)
• Bulk purchasing, centralized supply chain
 • Use of technology (POS, ERP)
• Standardized/fixed pricing
• Trained/salaried workforce
• Modern ambience and infrastructure

Characteristics of Unorganised Retail

• Small scale, single outlet
• Low investment and overheads
• Informal/minimal record-keeping
• Personalized customer relationships
• Flexible pricing/bargaining
• Credit facility (udhaar system)
• Location convenience

Comparative Table
Basis Organised Retail Unorganised Retail
Scale Large, multi-outlet chains Small, single outlet
Investment High Low
Legal/Tax Status Registered, GST-compliant Often informal
Technology POS, ERP Manual records
Pricing Fixed, MRP-based Negotiable
Staffing Trained, salaried Family labour
Credit to Customers Rare Common (udhaar)
Market Share in India ~15–20% ~80–85%

Why Unorganised Retail Dominates

• Proximity and convenience
• Credit facility
• Personal trust and relationship
• Flexibility on small quantities
• Cultural/social factors

Why Organised Retail is Growing

1. Rising urbanization and disposable income
2. Changing consumer preferences
3. FDI in retail
4. Growth of e-commerce/omnichannel retail
5. Better supply chain efficiency

Challenges for Unorganised Retail

1. Price competition
2. Loss of customers to modern formats
3. Limited access to capital/technology

Coexistence and Convergence

Both formats coexist; many unorganised retailers now adopt technology (UPI, WhatsApp ordering) to stay competitive.

1.3 Classification of Retail Stores

On the Basis of Ownership
1. Independent/Sole Proprietor Stores
2. Chain Stores
3. Franchise Stores
4. Cooperative Stores
5. Departmental/Government-run Stores

On the Basis of Merchandise/Product Line

1. Specialty Stores — narrow line, deep assortment
2. Departmental Stores — multiple departments under one roof
3. Supermarkets — self-service, food/grocery focus
4. Hypermarkets — supermarket + department store combined
5. Convenience Stores — small, long hours, limited range
6. Discount Stores — lower prices, lower service
7. Category Killers — one category, huge variety/depth
8. General/Variety Stores — wide range, single/limited price point

On the Basis of Size/Scale

1. Small/Unorganised Retailers
2. Large-format/Organised Retailers

On the Basis of Level of Service

1. Self-Service Stores
2. Full-Service Stores
3. Limited-Service Stores

Non-Store-Based Retail Formats

Emerging classification covering e-commerce and other non-store retail (see 1.4/Non-Store Retailing).

1.4 Growth of Retail Formats – Mall Management – Retail Life Cycle

Stages in Growth of Retail Formats
1. Traditional/Unorganised Format
2. Organised Single-Brand/Specialty Stores
3. Supermarkets and Departmental Stores
4. Hypermarkets
5. Shopping Malls
6. E-commerce/Online Retail
7. Omnichannel Retailing
Drivers of Growth of Modern Retail Formats
• Rising disposable income and urbanization
• Increase in nuclear families and working women
• FDI in retail sector
• Growth of organised supply chains and cold storage
• Rising smartphone/internet penetration
• Changing consumer aspirations

Observation Study on Mall Management — Key Aspects to Observe

• Store layout and zoning (anchor vs non-anchor placement)
• Tenant mix
• Visual merchandising and store fronts
• Traffic flow and common area design
• Parking and accessibility
• Promotional activities and events
• Facility management
• Anchor vs non-anchor store relationship

Retail Life Cycle (RLC) — Stages

1. Innovation/Introduction Stage
2. Accelerated Development/Growth Stage
3. Maturity Stage
4. Decline Stage

Significance of Retail Life Cycle

• Helps retailers anticipate need for innovation/repositioning
• Assists strategic decisions on entering new markets/formats
• Explains why some formats disappear while others grow

1.5 Overview of Retail Industry in India – Problems & Prospects

Key Features of Indian Retail Industry
1. Dominance of Unorganised Retail
2. Rapid Growth of Organised Retail
3. Second-Largest Employer in India
4. Growing Contribution to GDP
5. Rise of E-commerce and Digital Retail
6. Regional and Cultural Diversity in Retail
7. Government Policy Influence

Problems Facing Retailing in India

1. Fragmented Supply Chain
2. Lack of Adequate Infrastructure
3. High Real Estate Costs
4. Competition from E-commerce
5. Skilled Manpower Shortage
6. Taxation and Regulatory Complexity
7. Counterfeit Products and Piracy
8. Seasonal and Regional Demand Fluctuations
9. Resistance from Unorganised Sector

Prospects of Retailing in India

1. Expanding Middle Class and Rising Income
2. Growth of Tier-2 and Tier-3 Cities
3. Digital Transformation and Omnichannel Retail
4. Government Support and FDI Reforms
5. Rise of Home-Grown and Regional Retail Brands
6. Growth of Organic, Ethnic, and Cooperative Retail
7. Technology-Enabled Small Retailers
8. Youth Employment and Entrepreneurship Opportunities

Predominance of Unorganised Retailing in India

1. Sheer Number of Outlets
2. Share of Daily Essential Purchases
3. Rural Retail Dominance
4. Employment Concentration

Factors Responsible for Growth of Unorganised Retailing

1. Proximity and Convenience
2. Credit Facility (Udhaar System)
3. Personalized Relationship and Trust
4. Flexibility in Purchase Quantity
5. Bargaining and Flexible Pricing
6. Low Investment and Entry Barriers
7. Cultural and Social Preferences
8. Limited Penetration of Organised Retail in Rural Areas
9. Employment and Livelihood Dependency
10. Adaptation Through Basic Technology

Multi-Channel Retailing — Meaning

A retail strategy where a retailer sells and interacts with customers through multiple, often independently operating channels
— physical stores, websites, apps, telemarketing, social media.
Note: Differs from omnichannel retailing, where channels are fully integrated into one seamless experience.

Advantages of Multi-Channel Retailing

1. Wider Customer Reach
2. Increased Sales Opportunities
3. Convenience for Customers
4. Brand Visibility and Reinforcement
5. Data Collection Across Channels
6. Risk Diversification
7. Ability to Test New Markets
8. Cost-Effective Expansion

Franchising
Meaning
A business arrangement where a franchisor grants a franchisee the right to operate a business using its brand name, systems,
and support, for a fee/royalty.

Types of Franchising
1. Product Distribution Franchising
2. Business Format Franchising
3. Manufacturing Franchising
4. Conversion Franchising

Advantages of Franchising
For the Franchisor:
1. Rapid expansion with lower capital investment
2. Local market knowledge
3. Reduced operational risk
For the Franchisee:
1. Established brand recognition
2. Proven business model and training
3. Marketing and advertising support

Disadvantages of Franchising
For the Franchisor:
1. Loss of direct control
2. Risk to brand reputation
For the Franchisee:
1. High initial fees and ongoing royalty
2. Limited independence
3. Dependency on franchisor's reputation

Non-Store Retailing
Meaning
Selling goods/services to consumers without using a traditional physical store format — includes direct selling, direct
marketing, vending, and online retailing.
Types of Non-Store Retailing
1. E-commerce/Online Retailing
2. Direct Selling
3. Direct Marketing (Catalogue/Telemarketing)
4. Television Home Shopping
5. Vending Machine Retailing
6. Social Media Retailing

Advantages/Importance of Non-Store Retailing

1. Convenience for customers
2. Wider market reach
3. Lower operating costs for sellers
4. Personalized selling (direct selling)
5. 24/7 availability
6. Growth opportunity for small/rural entrepreneurs

Disadvantages of Non-Store Retailing

1. Lack of physical product examination
2. Trust and security concerns
3. Delivery delays and logistics issues
4. Limited personal interaction
5. High dependency on technology and internet access

Functions of Retailing
1. Breaking Bulk
2. Creating Assortment
3. Holding/Storing Inventory
4. Creating Utility (Place, Time, Possession)
5. Providing Information
6. Providing Services
7. Risk-Bearing
8. Promotion and Demand Generation
9. Financing
10. Standardization and Grading