Introduction to the World of
Retailing
Dr. Vinita Sahay
Professor of Marketing
Indian Institute of Management
Raipur
01/25/16
Manmohan Singh 24 November 2011
passed
India will allow FDI up to 51 per cent in "multi-brand retailers",
single brand retailers, such as Apple and Ikea, can own 100 percent
of their Indian stores, up from the previous cap of 51 percent;
both multi-brand and single brand stores in India will have to
source nearly1/3 of their goods from small and medium-sized Indian
suppliers;
all multi-brand and single brand stores in India must confine their
operations to 53-odd cities with a population over one million, out of
some 7935 towns and cities in India i.e full access to over 200
million urban consumers in India;
multi-brand retailers must have a minimum investment of US$100
million with at least half of the amount invested in back end
infrastructure, including cold chains, refrigeration, transportation,
packing, sorting and processing to considerably reduce the post
harvest losses and bring remunerative prices to farmers;
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the opening
of retail competition will be within India's federal 2
3 December 2011, the CMof West Bengal, Mamata Banerjee
reversed it
Anand Sharma, India's Commerce and Industry Minister, after a
meeting of all political parties on 7 December 2011 said, "The decision
to allow foreign direct investment in retail is suspended till consensus is
reached with all stakeholders.
On 19 Feb 2013 Tamil Nadu became the first state in the country
to stoutly resist MNC 'invasion' into the domestic retail sector. In
Chennai, Tamil Nadu CMDA authorities placed a seal on the massive
warehouse spreading across 7 acres that had reportedly been built for one
of the worlds leading multinational retail giants, Wal-mart
February 2014, Vasundhara Raje led newly elected Rajasthan
Government reversed the earlier Government's decision of allowing FDI
in retail in the state.
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Many Drivers
Demographics
Increased global exposure
Increased discretionary incomes
across wider spectrum of
population, across wider
geography
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What is retail?
Retail derived from the French word retaillier,
which means to break bulk.
Retailing is the last stage in the movement of goods
and services to the consumer.
Retail therefore consists of all activities involved in
the marketing of goods and services directly to the
consumers for their personal, family or household
use.
Retailer: a person, agent, agency, company or
organization instrumental in reaching the goods,
merchandise, or services to the ultimate consumer
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Worlds top retailers
Corporation
Country of
Origin
Wal-Mart Stores
U.S.A
Carrefour
France
Tesco
UK
Home Depot
U.S.A
Kroger
U.S.A
Metro
Germany
Sears Holdings
U.S.A
Schwarz
Unternehmens
Treuhand
Germany
Costco
US
Aldi Gmbh
Germany
Target
U.S.A
Albertsons
U.S.A
Kmart
U.S.A
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Functions of a Retailer
Form utility
Time utility
Place utility
Ownership utility
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How Retailers Add Value
Breaking Bulk
-Buy it in quantities customers want
Holding Inventory
-Buy it at a convenient place when you want it
Providing Assortment
-Buy other products at the same time
Offering Services
-See it before you buy, get credit
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The Changing Retail Landscape
Proximity to the customer
The Rise of consumerism
Introduction of the Private Label
Technology
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Nature of Retail Industry is
Changing
To Todays Retailer
Mom and Pop Store
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Opportunities in Retail
Management
Sales
Operations
Information technology
Merchandising
Supply Chain and Logistics Management
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Decision Variables for Retailers
Customer Service
Store Design
and Display
Retail
Merchandise
Assortment
Strategy
Pricing
Location
Communication
Mix
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Wal-Marts Retail Mix
Location Strategy
Free-standing Stores
Customer
Service
Store Display
And Design
Communication
Mix
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Merchandise
Assortment
Pricing
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Wal-Marts Retail Mix
Assortment Strategy
Customer
Service
Location
Large Number
of Categories
Store Design
and Display
Communication
Mix
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Pricing
Few Items
in Each Category
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Wal-Marts Retail Mix
Location
Customer
Service
Pricing Strategy
Merchandise
Assortment
Store Design
and Display
Communication
Mix
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Low, EDLP
15
Wal-Marts Retail Mix
Customer
Service
Communication Mix
Store Design
and Display
Location
Merchandise
Assortment
Pricing
TV and Newspaper
Insert Ads
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Wal-Marts Retail Mix
Store Design and Display
Customer
Service
Basic, Special
Displays
for Products
Merchandise
Assortments
Communication
Mix
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Location
Pricing
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Wal-Marts Retail Mix
Customer Service
Limited
Location
Merchandise
Assortment
Store Design
and Display
Pricing
Communication
Mix
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The Marketing Retail Equation
Manufacturer
Manufacturer
Manufacturer
Wholesaler
Retailer
Consumer
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Feedback
Retailer
Consumer
Consumer
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Growth of retail in India
Public Distribution System
Co-operative movement
Independent retail stores
Textile retail chains
Department store
Specialty stores
Malls
Hypermarkets
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Roadblocks to retail development
in India
Lack of recognition as an industry
High cost of real estate
Lack of adequate infrastructure
Taxation at multiple levels
Restrictions on FDI
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Misconceptions About Careers in
Retailing
Dont need college
Low pay
Long hours
Boring
Dead-end job
No benefits
Everyone is part-time
Unstable environment
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SALES
The Retail Life Cycle
Maturity
Decline
Growth
Profit
Innovation
TIME
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abil
ity p
Mature retailer
Top heavy
Conservative
Declining ROI
Innovative retailer
Low status and price
Minimum service
Poor facilities
Limited product offering
se
pha
Vul
ner
ry
Ent
has
e
The Wheel of Retailing
Traditional retailer
Elaborate facilities
Higher rent
More locations
Higher prices
Extended product offerings
Trading up phase
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Types of Retailers
Retailers Use Different Retail Mixes
-merchandise: variety (breadth) / assortment
(depth)
-services
-store design, visual merchandising
-location
-pricing
Infinite Variations
Survival of the Fitness Some combination of
retail mixes satisfy the needs of significant
segments and persist over time.
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Merchandise Offering
Variety (breadth of merchandise)
- The number of merchandise categories
Assortment (depth of merchandise) -the number of
items in a category (SKUs) : Lotus HerbalsSafe sun SPF 30,3
in 1 matte look daily sunblock120 g
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Variety and Assortment of
Bicycles
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Classification by Type of Merchandise
NAICS : North American Industry Classification System : hierarchical 6 digit code
Classification of Retail Stores
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Classification of Retail Stores
Store Based
Retailing
Form of Ownership
Merchandise offered
Independent retailer
Chain retailer
Franchise
Leased departments
Consumer co-operatives
Convenience stores
Supermarkets
Hypermarkets
Speciality stores
Departmental stores
Off price retailers
Factory outlets
Catalogue showrooms
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Non-Store Retailing
Direct selling
Mail order
Tele marketing
Automated Vending
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Types of Retailers
Food Retailers
Mom and Pop Stores
Convenience Stores
Supermarkets
Supercenters
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General Merchandise
Retailers
Department Stores
Specialty Stores
Discount Stores
Category Specialists
Off-Price Retailers
Warehouse Clubs
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Food Retailers
Mom and Pops/ Kirana Stores
Supermarkets
-is a large,self service food store offering groceries, meat with ltd sale
of non food items like health & beauty aids and general merchandise.
Typical : 30,00 SKUs
Ltd Assortment supermarkets or Extreme Value Food Retailers Eg Aldi
1300 SKUs 6% Labour cost /sales Against average of 12%
Superstore -larger supermarket with extended bakery ,seafood etc
self service
-Practice high low /EDLP. Power Perimeter, Locavore movement
( Carbonfootprint) , Ethnic Merchandise, Private label
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Food Retailers
Big Box Retailers ( Large Ltd
Service)
-Warehouse Clubs( Ltd & irregular
Assortment eg Costco ,Sams Club)
-Supercenters (15% growth in value terms
2014)
-Hypermarkets (16% growth in 2014)
Convenience Stores
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Types of Food Retailers
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Issues in Food Retailing
Competition from Discount Stores
Efficient
Distribution
Lower Prices
Lower Costs
Changing Consumption Patterns
Time Pressure
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Eating Out More
Meal Solutions
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Types of General Merchandise
Retailers
Discount Stores(Broad
Variety , ltd service, Low
prices :Private + national)
Specialty Stores
Category Specialists( Narrow But deep)
Home Improvement Centers
Department Stores (3 tiers: Special events)
Drugstores
Off-Price retailers (inconsistent Assortment:
Closeouts /irregulars ))
Value Retailers (Dollar General)
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Characteristics of General
Merchandise Retailers
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Issues in Discount Store
Retailing
Only Big Three Left Wal-Mart, Kmart,
Target
Wal-Marts Dominance
Differentiate Strategy
-Wal-Mart = Low Price and Good value
-Target = More Fashionable Apparel
Competition from Category Specialists
-Toys-R-Us, Circuit City, Sports Authority
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Issues in Specialty Store
Retailing
Mall-Based Apparel Retailers:
Decline in Mall Shopping and Apparel Sales
-Lack of New Fashions
-Less Interest in Fashion
-Increase Price ConsciousnessH & M , Zara
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Category Specialists
Deep and Narrow Assortments Destination Stores
Low Price and Service
Wholesaling to Business Customers and Retailing to
Consumers
Incredible Growth
Increased Competition with National Expansion and
Consolidation
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Issues in Department Store
Retailing
Competition
-Discount Stores on Price
-Specialty Stores on Service, Depth of Assortment
Lower Cost by Reducing Services (?)
-Centralized Cash Wraps
More Sales (?)
-Customers Wait for Sale
Focus on Apparel and Soft Home
Develop Private Labels and Exclusive
Brands
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Issues in Drug Store Retailing
Consolidation
Competition from Supermarkets and
Discount Stores Pharmaceuticals
Evolution to a New Format
-Stand Alone Sites with Drive Thru Windows
-Convenient Store Front End
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Issues in Off-Price Retailing
Opportunistic Buying
Hurt By Sales in Department Stores
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Issues in Value Retailing
Target Lower Income Families
Low Cost
Low Prices
-Low Cost Location
-Limited Services
One of the Fastest Growing Retail Segments
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Characteristics of select retail
formats
Format
Description
Size ([Link])
Examples
Intl.
India
Category
Killer /
Specialist
Narrow
variety, but
deep
assortment
50,000+
15,000+
Toys R Us,
Nallis, The Loft
Convenience
stores
Mix of
products
3,000
8,000
500 1,000
7-Eleven,
Speedmart
Department
stores
Several
75,000+
product lines,
largely nonfood
5,000
40,000
Marks &
Spencer,
Shoppers Stop,
Pantaloons
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Format
Description
Size ([Link])
Intl.
Examples
India
Factory
Outlets
Branded
merchandse at
a discount
5,000 10,000 500 1000
Levis factory
Outlet,
Reebok
Factory Outlet
Hypermarket
Large self
service stores,
mix of food &
non food.
Essentially
low price
80,000
220,000
Wal-mart, Big
Bazaar
Single Price
stores
Offers a mix
of branded &
unbranded
stores
5,000 20,000 2,000 5,000
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40,000
75,000
Family Dollar,
9 to 9, 49 to
99
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Format
Description
Size ([Link])
Intl.
Specialty
stores
Focus on a
brand or
category,
narrow
product line ,
but good
depth
Supermarket
Food,laundry 8,000
and
20,000
household
maintainance
products. Self
service, low
margin, low
cost
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Examples
India
5,000 8,000 2,000 5,000 Walgreens,
Crossword,
MusicWorld
800 5,000
Asda,
Kroger,Food
Bazaar, Food
World
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Amway India
Eureka Forbes
Herbalife
Tupperware
Oriflame
Avon Beauty Products
Forever Living
AMC
Modicare
Hindustan Lever Network
Homeshopping:
HomeShop18
Telebrands
TVC Skyshop
Asian Sky Shop
Shop24Seven
E-Tailing
Flipkart
[Link]
[Link]
Myntra
Dell
[Link]
Grofers
HomeShop18
Big Basket
Indiatimes Shopping
India Online
Indiaplaza
Zivame
[Link]
Department Stores
Benzer
The Bombay Store
Ebony
Chermas
Meena Bazaar
Westside
Shoppers Stop
D- Mart
Piramyd Store
Specialty store
Mother Care
Wills Lifestyle
Bata
Nalli Sarees
CrossWord
Charagh Din,
Croma
Home Town
All
Nik Nish
Archies
Vijay Sales
Full line discount store
S Mart
Sabka Bazaar
Brand Factory
The Loot
Hypermarkets
Big Bazaar
Star India Bazaar
HyperCity
Giant
Spencers
Total
Jumbo
Reliance Mart
Supermarkets
Food Bazaar
Subhiksha
Nilgiris
Vitan
Foodworld
Reliance Fresh
Spencers
More
6 Ten
Monday to Sunday
DrugstoreReligare
Apollo Pharmacy
MediPlus
FranchiseYellow Chilli
Ferns n Petals
Gini n Johnny
Caf Coffee Day
VLCC
Jumbo King
Sankalp
Mocha
Haldirams
Louis Philippe
Van Heusen
Arrow
Convenience storeSpeedMart
Twenty Four Seven
In & Out
Pratidin
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Direct Selling:
47
Homeshopping:
HomeShop18
Telebrands
TVC Skyshop
Asian Sky Shop
Shop24Seven
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Non-store Retail Formats
Electronic Retailing
Catalog and Direct Mail
Direct Selling
Television Home Shopping
Vending Machines
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Types of Nonstore Retailers
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Issues in Catalog Retailing
Low Start Up Cost
Evolution of Multi-Channel
Offering
-Electronic Channel, Stores
Increasing Mail Costs
Clutter from other Catalogs
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Services vs. Merchandise
Retailers
Intangibility
-Problems in Evaluating Service Quality
-Performance of Service Provider
Simultaneous Production and Delivery
-Importance of Service Provider
Perishability
-No Inventory, Must Fill Capacity
Inconsistency of the Offering
-Importance of HR Management
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Trends in Ownership
Concentration on One Format
Growth in Services Franchising
Reasons for Franchising Growth
Technological advances
Profitable utilization of capital resources
Attainment of the American Dream
Demographic expansion
Product/service consistency
Types of Franchise Systems
Territorial
Operating
Mobile
Distributorship
Co-ownership
Co-management
Leasing/Licensing
Manufacturing
Service
Reasons for Franchising Failure
Inept management
Fraudulent activities
Market
Marketsaturation
saturation
Franchisor Positions in the Marketing
Channel
Manufacturer - retailer
Manufacturer - wholesaler
Wholesaler
Wholesaler--retailer
retailer
Service
Servicesponsor
sponsor--retailer
retailer
Franchisor Benefits
Continuous
Continuousmarket
market
Market
Marketinformation
information
Money
Money
Royalty fees
Sales
Salesof
ofproducts
products
Rental
Rentaland
andlease
leasefees
fees
License
Licensefees
fees
Management
Managementfees
fees
Franchisee Benefits
Initial Services
Market survey and site selection, facility design and
layout, lease negotiation advice, financing advice,
operating manuals, management training programs, and
employee training.
Continuous Services
Field supervision, merchandising and promotional
materials, management and employee retraining, quality
inspection, national advertising, centralized purchasing,
market data and guidance, auditing and record keeping,
management reports, and group insurance plans.
Franchisor
Advantages/Disadvantages
Advantages
Rapid expansion, highly motivated franchisees do a good
job, additional profits by selling franchisees products and
services.
Disadvantages
Company-owned units may be more profitable, less
control then independent retailers over advertising,
pricing, personnel practices, etc.
Franchisee
Advantages/Disadvantages
Advantages
Established/proven product/service, business and
technical assistance, and reduction in risk.
Disadvantages
Loss of control since only semi-independent, franchisee
outlets may compete with corporate-owned outlets,
and high royalties, fees, costs on equipment, supplies,
merchandise, rental/lease rates and mandatory
participation in promotional and support services.
Franchising Trends for the New
Millennium
Sustained growth
Enduring plus un-imagined applications
International expansion
Increasing tensions
Greater emphasis on financial returns
Examples of Service Retailers
Type of Service
Service Retail Firms
Airlines
American, Delta, British Airways, Singapore Airways
Automobile maint/repair
Jiffy Lube, Midas, AAMCO
Automobile rental
Hertz, Avis,
Banks
Citibank, NCNB, Bank of America
Child care centers
Kindercare, Gymboree
Credit cards
American Express, VISA, Mastercard
Education
University of Florida, Babson College
Entertainment parks
Disney, Universal Studios, Six Flags
Express package delivery Federal Express, UPS, US Postal Service
Financial services
Merrill Lynch, Dean Witter
Fitness
Jazzercise, Ballys, Golds Gym
Health Care
Humana, HCA
Home maintenance
Chemlawn, MiniMaid, Roto-Rooter
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