INTRODUCTION

TO
THE WORLD
OF
RETAILING

By- SACHIN VERMA

MBA(FC)
 Definition of Retailing

Retailing includes .. .. .. ..
Retailing includes
all
allactivities
activitiesinvolved
involvedin
inselling,
selling,renting,
renting,and
andproviding
providing
goods
goodsand
andservices
servicesto
toultimate
ultimatecustomers
customersfor
forpersonal,
personal,
family
familyor
orhousehold
householduse.
use.

In
Inthe
thechannel
channelof
ofdistribution,
distribution,retailing
retailingisiswhere
wherethethe
customer
customermeets
meetsthe
theproduct.
product. ItItisisthrough
throughretailing
retailingthat
that
exchange
exchangeoccurs.
occurs.
 RETAILERS

-Sears, Holiday Inn, McDonalds,

[Link], Jiffy Lube, AMC

Theaters,

American Eagle Outfitter, Big Bazaar

 Retailing Creates Value
 Retailing’s economic value is represented
by:
[Link] employed in retailing, and
[Link] total amount of money exchanged in
retail sales.

 Utilities provided by retailers create value

for customers. Time, place, possession, and
form utilities are offered by most retailers.
Retail Sales By Type of Business

.9
3.8
9.6
4.9 24.5
5.7
5.9
6.2 16.7
9.2 12.9

0 325 650
Sales ($billions)
Retailers are a Business Like Manufacturers
Classifying Retail
Outlets
Retail outlets can be classified in several
ways:
-- Form of ownership. Who owns the
outlet.
-- Level of service. The degree of service
provided to the customer.
-- Merchandise line. How many different
types of products a store carries and in
what assortment.
Classifying retail outlets
METHOD OF CLASSIFICATION DESCRIPTION OF RETAIL OUTLET
Form of ownership Independent retailer
Corporate chain
Contractual system
• Retailer-sponsored cooperative
• Wholesaler-sponsored voluntary chain
Franchise
Level of service Self-service
Limited service
Full-service
Merchandise line Depth
• Single line
• Limited line
Breadth
• General merchandise
• Scrambled merchandise
 The possibilities and costs of franchising
TOTAL
TYPE OF NUMBER OF
FRANCHISE START-UP
BUSINESS FRANCHISES
COSTS

McDonald’s Fast-food restaurant $385,000-$520,000 19,500

Merry Maids Cleaning Service $27,500-$40,500
700
Jiffy Lube Automobile fluid service $208,000-$229,000 667
Mail Boxes Etc. Postal Services $55,000-$75,000 2,953
Duds ’N Suds Laundry and snack bar $60,000 80

Radio Shack Electronic accessories $67,500 1,934

Barbizon School of Modeling $69,500-$124,000 65
 Depth and Breadth of Product

Line
Depth of product line means that the store carries a large
assortment of each item, such as shoe stores that offer running
shoes, dress shoes, and children’s shoes.

 Breadth of product line refers to the variety of different items a

store carries.
-- scrambled merchandising refers to retailers that offer
several unrelated product lines in a single store.
-- hypermarkets are very large retail outlets that have the
goal of offering customers everything at one outlet.
-- Supercenters are retailers that combine a typical
merchandise store with a grocery store.
 Breadth vs. Depth of Merchandise
Lines
Breadth: Number of different product lines

Shoes Appliances CDs Men’s Clothing

Depth:
Number of
items within
each product
line
Differences in Store
Concepts
DISCOUNT STORE SUPERCENTER HYPERMARKET

70,000 150,000 230,000

200-300 300-350 400-600

$10-$20 $20-$50 $75-$100

18%-19% 15%-16% 7%-8%

60,000-80,000 100,000 60,000-70,000

 Forms of Non-store Retailing
High

Direct
selling
Tele-
marketing
On-line
retailing
Television
home
shopping
Direct mail
and
catalogs
Automatic
t s uc e vi t c A

vending
Low
Low Active retailer involvement High
 Automatic Vending
 Non-store retailing that makes it
possible to serve customers where
stores cannot.
 Maintenance and operating costs
are high.
 Small convenience products are
available in vending machines.
 Of the 3 million vending machines
now in use, 1.8 million are soft
drink machines.
 Direct Mail & Catalogs
 Marketing efficiency is improved
through segmentation and
targeting.
 Customer value is enhance by
providing a fast and convenient
means of making a purchase.
 In 1998 Americans increased their
catalog spending to $87 billion.
 A typical household receives 50
catalogs each year.
 Television Home Shopping
 TV home shopping is possible when consumers watch
a shopping channel on which products are displayed;
orders are placed over the telephone.
 Two popular home shopping programs reach 60
million homes and have combined sales of $2 billion.
 TV home shopping programs traditionally attract 40-
50 year old females.
 Limitations of TV shopping have been the lack of
buyer-seller interaction and the inability of
consumers to control the items they see.
 Online Retailing
 Online retailing allows consumers to
search for, evaluate, and order
products through the Internet.
 The advantages of online retailing
are:
ability to comparison shop
privacy
• Forecasts suggest that current annual sales of $10
variety
billion could reach $100 billion in just a few years.
 Telemarketing
 Telemarketing involves using the telephone
to interact with and sell directly to
consumers.

 According to the American Telemarketing

Association, telemarketing sales exceed
$500 billion.

 As the use of telemarketing grows,

consumer privacy has become a topic of
discussion among consumers, Congress, the
Federal Trade Commission, and businesses.
 Direct Selling
 Direct selling involves direct sales of goods
and services to consumers through personal
interactions and demonstrations in their
home or office.
 Industry sales are more than $16 billion, but
are declining in the U.S. as retail chains begin
to carry similar products at discount prices,
and the increasing number of dual-career
households reduces the number of potential
buyers at home.
 Many direct selling retailers are expanding
into international markets to offset the
decline in domestic sales.
 THE 7 P’s

 Product
 Prices
 Promotio
n
 Place
 THE ADDITIONAL P’s

 Physical Evidence
 Process
 People
 IMPORTANCE

 The 7 P’s allows a retailer to analyze and

strategize his business keeping in mind
the most critical part of marketing in
operating his business.
 Many retailers do not do this and this is
the difference from those who become
successful and those who do not.
 As products, markets, customers and
needs change rapidly, a retailer must
continually revisit these seven Ps to
make sure he is on track and achieving
the maximum results possible in today's
marketplace.
 PRODUCT

 To find out what customers want & need &

then develop a product to meet the need of
the potential customers.
 To keep analysing if the current mix of
products and services are appropriate and
suitable for the market and the customers of
today .
PRICE

 A product is only worth what a

customer is prepared to pay for it.
 The price needs to be competitive,
but not necessarily the cheapest.
 PLACE

 This can be Direct selling, mail order, telemarketing or in retail stores.

 This is where the customers can buy the product, and is the means to
get the product to the customer.
PROMOTION

 This is the way in which you communicate

to your potential customers about your
product.
 This can be done in a number of ways,
which includes your brand image,
advertising, special offers.
PHYSICAL EVIDENCE

 This is the intangible part of the business mostly

concerned with services as they cannot be seen.
 Intangible is often used to describe services as they
cannot be touched like a product can be.
 This important because, fundamentally you are selling
a product, but in order for you to be able to price your
goods at the right the level, you will also be selling the
service the buyer will receive.
 PEOPLE

 The reputation of the brand rests in the people’s

hands. You must therefore ensure that all your
people are appropriately trained, well motivated
and have the right attitude.
 People does not only include the people in your
business , but also the people that you use for your
business.
PROCESS

 The process that you go through and the

behavior of those who deliver the products
are crucial to customer satisfaction.
 Issues such as waiting times , the information
passed onto customers are vital factors when
trying to maintain 100% satisfaction.
A comparative Analysis
of

WAL MART
AND
BIG BAZAAR
 CULTURE,VALUES as key forces in shaping STRATEGY and
developing
COMPETENCIES …
Paras Deshpande
WALMART
 Sam Walton started as a
specialty store owner of
Ben Franklin franchise
stores.
 He was forty‐four when
we opened first Wal‐
Mart in 1962.
 EarlyTimes
 In the early days of Wal‐Mart the emphasis
on item promotion helped us to make up
for a lot of shortcomings we had—an
unsophisticated buying program, a less
than ideal merchandise assortment, and
practically no back‐office support.
 Early periods were marked by extensive
benchmarking to such a level that
managers lived half of the time in
competitors stores.
CreatingCulture

• Wal‐Mart is not a big success merely because

we grew up out here in the country, where
people are just naturally friendly and
therefore make great retail employees. It's
true that we have many fine associates from
the country, but they have had to enter our
culture and learn retailing just like anybody
else, and we have spent a good deal of time
teaching many of them to overcome their
natural shyness and learn to speak up and
help our customers.
NEXT THE INDIAN CONTEXT
Raja of Indian Retail
• Born in a middle class trading
family, Kishore Biyani started
his career selling stone wash
fabric as trader.
• His objective is to capture every
rupee in the wallet of Indian
consumer.
• He is concentrating not just on
retail but his ambitions span
over full consumer space.
• With the launch of Pantaloons,
Big Bazaar, Food Bazaar,
Central he has redefined the
retailing business in India
 Kishore Biyani KB
Views, Value and Vision.
• There are three kinds of entrepreneurs - Creators,
preservers and destroyers.
• He considers himself as both creator and destroyer at
the same time. Preserving the status-quo has never
been the cup of his tea.
• He strongly believes none of his business will ever
cater to the elitist class.
• In the current era of knowledge economy Ideas will be
the greatest assets of a company. Organizations that
allow insights and information to flow freely will be
the ones to come out as winners.
 Kishore Biyani KB
Views, Value and Vision.
• There are three kinds of entrepreneurs - Creators,
preservers and destroyers.
• He considers himself as both creator and destroyer at
the same time. Preserving the status-quo has never
been the cup of his tea.
• He strongly believes none of his business will ever
cater to the elitist class.
• In the current era of knowledge economy Ideas will be
the greatest assets of a company. Organizations that
allow insights and information to flow freely will be
the ones to come out as winners.
Allied ventures
 Retail Pricing
Terminology
 Markup refers to how much should be
added to the cost the retailer paid for
the product to reach a final selling price.
 Original markup is the difference
between the retailer’s original cost and
initial selling price.
 The maintained markup is the difference
between the final selling price and
retailer cost and is also the gross
margin.
 Retail Pricing
Terminology
 Markdown occurs when the product
does not sell at the original price and
an adjustment is necessary.
 Shrinkage is theft of merchandise by
customers and employees.
 Off-price retailing involves selling
brand name merchandise at lower than
regular prices. The difference between
the off-price retailer and a discount
store is that off-price merchandise is
bought by the retailer from
manufacturers excess inventory at
prices below wholesale prices.
 Store Location
Types of Store Locations
 Central business district
 regional shopping centers
 community shopping centers
 strip location
 power center
The Wheel of Retailing
As more time passes, outlet
adds still more services
[Link]
Outletnow
nowhas:
has:
Higher prices
Higher prices [Link]
Outletnow
nowhas:
has:
Higher
Highermargins
margins Still higher prices
Still higher prices
Higher status
Higher status Still
Stillhigher
highermargins
margins
Still
Stillhigher
higherstatus
status
Passage
of time
As time passes,
outlet adds services

[Link]
Newform
formofofoutlet
outlet
enters retailing
enters retailing
[Link]
Outletstarts
startswith: environment
Low prices
with: environmentwithwith
Low prices characteristics
characteristicsofof
Low
Lowmargins outlet
Low
margins
status outletininBox
Box11
Low status
 Market share or profit
Value-retail stores

Early
growth
On-line retailers
Single-brand stores

Single-price stores

Factory outlet stores

Accelerated
development
Warehouse clubs

Fast food outlets

The Retail Life Cycle

Convenience stores
Profit
Supermarkets

Maturity
Department stores
Market share

Malls (?)

Catalog Retailers
Decline

General store
 Future Changes in Retailing

Impact of Technology

Changing Shopping Behavior

Importance of Brands
egift Advertisement

Courtesy CyberShop International, Inc.

[Link] Web Page

Courtesy [Link]
 Recent Trends in
witnessing a huge Retailing
 Retailing in India is
revamping exercise as can
be seen in the graph Retail Sales in India
 India is rated the fifth
most attractive emerging
retail market: a potential
goldmine.
 Estimated to be US$ 200
billion, of which organized
retailing (i.e. modern
trade) makes up 3 percent
or US$ 6.4 billion
 As per a report by KPMG
the annual growth of
department stores is
estimated at 24%
 Ranked second in a Global
Retail Development Index
of 30 developing countries
drawn up by AT Kearney.

Recent Trends contd.
Multiple drivers leading to a consumption boom:
 Favorable demographics
 Growth in income
 Increasing population of women
 Raising aspirations : Value added goods sales
 Food and apparel retailing key drivers of growth
 Organized retailing in India has been largely an urban phenomenon with affluent classes and growing number
of double-income households.
 More successful in cities in the south and west of India. Reasons range from differences in consumer buying
behavior to cost of real estate and taxation laws.
 Rural markets emerging as a huge opportunity for retailers reflected in the share of the rural market across
most categories of consumption
 ITC is experimenting with retailing through its e-Choupal and Choupal Sagar – rural hypermarkets.
 HLL is using its Project Shakti initiative – leveraging women self-help groups – to explore the rural market.
 Mahamaza is leveraging technology and network marketing concepts to act as an aggregator and serve
the rural markets.
 IT is a tool that has been used by retailers ranging from [Link] to eBay to radically change buying
behavior across the globe.
 ‘e-tailing’ slowly making its presence felt.
 Companies using their own web portal or tie-sups with horizontal players like [Link] and [Link]
to offer products on the web.
 Conclusion
 The India Retail Report 2009 compiled by research
group Images Research is again optimistic about
Indian Retail Industry. As per the report, spiralling
income and rising economic growth will fuel the
growth of industry and it will touch Rs. 18,10,000
crore by 2010. Organized Retail is expected to
constitute 13% of it i.e. Rs. 2,30,000 crore. The
report says that though people are perceiving that
organized retail will hit mom & pop format hard,
but modernizing retail will generate employment
for 15 million people in different activities.
 .
 Conclusion
 The report is based on rising economic
growth rate of 8-9 per cent and a hike in
average salaries by about 15 per cent which
may trigger the rate of consumption. But
with subprime crisis in US, Indian
companies are also affected in big way, and
even stock market is suffering. We hear
news of cost cutting and layoffs daily. So, I
don’t know how far it is right to believe
growth rate of 8-9% and hike of 15%.
 Conclusion

Food and grocery dominated the retail

segment with 59.5 per cent share valued at Rs
7,92,000 crore, followed by clothing and
accessories with a 9.9 per cent share at Rs
1,31,300 crore