Module 1

Retail Management
Deepika Soni
 Retailing: Introduction
• Liberalized financial and political environment in India has prompted a wave of large number of entrants into the
country’s rapidly growing retail industry during the past few years, without doubt, the retail industry in India is in
the phase of radical restructuring. The fundamental drivers of change are increasing per capita income, growing
GDP, availability of consumer finance, and therefore irreversible. Retailing in general sense consists of business
activities that are involved in buying and selling of goods and services to ultimate consumers for their own use –
ranging from Bread butter to automobiles to apparels to airline tickets.
• In India, after agriculture, the retail is the second largest sector that provides enough employment to Indian
workforce. But retailing in India is at cross roads on the one side, retail sales are making new heights year after
year and on the other side, traditional Indian retailers (Kirana stores) face numerous challenges.
• Experts believe that retail expansion in the coming five to seven years is expected to be stronger than our Indian
GDP growth, driven by changing lifestyles and by strong income growth, which in turn will be supported by
favorable demographic patterns and the extent to which organized retailers succeed in reaching lower down the
income scale to reach potential consumers towards the bottom of the consumer pyramid. Use of plastic money,
easy availability of consumer credit will also assist in boosting consumer demand.
• Today, a vast majority of India’s young population favors branded goods. With the spread of satellite televisions
and visual media, urban life style trends have spread across the rural areas also. The shopping extravaganza of the
Indian middle class especially the young population for clothing, eating outside and lust for modern living styles
has unleashed new possibilities for retail growth even in the rural areas.
• Thus, 85% of the retail boom which was focused only in the metros has started to infiltrate towards smaller cities
and towns. Tier-II cities are already receiving focused attention of retailers and the other smaller towns and even
villages are likely to join in the coming years. This is a positive trend, and the contribution of these tier-II cities to
total organized retailing sales is expected to grow to 20-25%. One of the principal reasons behind the explosion of
retail and its fragmented nature in the country is the fact that retailing is probably the primary form of disguised
unemployment/underemployment in the country.
• Given the already over-crowded agriculture sector, and the stagnating manufacturing sector, and the hard nature
and relatively low wages of jobs in both, many million Indians are virtually forced into the services sector.
Retailing: Meaning and Definition:
• Retailing consists of selling merchandise from a permanent location (a retail store)
in small quantities directly to the consumers, for personal, family or household use..
These consumers may be individual buyers or corporate. In the world of Trade and
Commerce, a retailer purchases goods or merchandise in bulk from manufacturers
directly and then sells in small quantities are known as Retail stores or shops.
• Shops may be located in residential areas, colony streets, community centers or in
modern shopping arcades/ malls. In fact, any organization selling merchandise to
final consumers -whether a producer, wholesaler or a retailer -is doing retail
business.
• It does not take into account how the merchandise is being sold. While on the other
hand, retail format is a blend of product range, pricing, marketing and the way the
items are displayed. A retail-format will be suitable for a retailer does not depend
upon market practice but upon retailer’s budget, merchandise and the need of the
locality. A good format draws more footfalls and helps retailer a platform to succeed
and earn name and fame.
• Retailing is defined as a set of activities or steps used to sell a product or a service
to consumers for their personal or family use. It is responsible for matching
individual demands of the consumer with supplies of all the manufacturers.
• Retailing has become such an intrinsic part of our everyday lives that it is often
taken for granted. The nations that have enjoyed the greatest economic and social
progress have been those with a strong retail sector.
Retailing: Meaning and Definition: Contd

• The distribution of finished products begins with the producer and ends at the ultimate consumer.
Between the two of them, there is a middle person—the retailer. Retailing is defined as a set of
activities or steps used to sell a product or a service to consumers for their personal or family
use. It is responsible for matching individual demands of the consumer with supplies of all the
manufacturers. The word ‘retail’ is derived from the French word retaillier, meaning ‘to cut a
piece of’ or ‘to break bulk’.
• Eg Reliance Fresh, Croma, Pantaloon, Shoppers Stop Dmart etc.
• A retailer is a person, agent, agency, company, or organization, which is instrumental in reaching
the goods, merchandise, or services to the ultimate consumer. Retailers perform specific
activities, such as anticipating customers’ wants, developing assortments of products, acquiring
market information, and financing.
• The nations that have enjoyed the greatest economic and social progress have been those with a
strong retail sector. Why has retailing become such a popular method of conducting business?
The answer lies in the benefits that a vibrant retailing sector offers—an easy access to a variety of
products, freedom of choice, and high levels of customer service.
• A common perception is that retailing involves only the sale of products in stores. However, it
also includes the sale of services such as those offered at a restaurant, parlour, or by car rental
agencies. The selling need not necessarily take place through a store. Retailing encompasses
selling through the mail, the Internet, door- to-door visits—any channel that could be used to
approach the consumer
• Retailing encompasses selling through the mail, the Internet, door- to-door visits—any channel
that could be used to approach the consumer. When manufacturers like Dell Computers sell
directly to the consumer, they too become retailers.
Retailing: Meaning and Definition: Contd
• The world over retail business is dominated by small family-run chains and regionally targeted
stores. Gradually more and more markets in the Western world are being taken over by billion-
dollar multinational conglomerates, such as Wal-Mart, Sears, McDonald’s, and Marks and
Spencer.
• The larger retailers have set up huge supply or distribution chains, inventory management
systems, financing pacts, and wide- scale marketing plans, which have allowed them to provide
better services at competitive prices by achieving economies of scale.
• Over the last decade, there have been sweeping changes in the general retailing business. For
instance, what was once a strictly ‘made-to-order’ market for clothing is now a predominantly
‘ready-to-wear’ market? Flipping through a catalogue, picking the right colour, size, and type of
cloth a person wanted to purchase, and then waiting to have it sewn and shipped used to be the
standard practice in the earlier days.
• In an era of globalization, liberalization, and a highly aware customer, a retailer is required to
make a conscious effort to position himself distinctively to face the competition. This is
determined to a great extent by the retail mix strategy followed by a company to sell its products.
• A major development in the recent times has been the emergence of varied retail formats that
have started operating in most product categories. For instance, there are large department
stores that offer a huge assortment of goods and services. There are discounters who offer a wide
array of products, and compete mainly on price. For example, Big Bazaar and Reliance Mart.
• In today’s competitive environment, retailers have redefined their role in general, and in the
value chain in particular. They act as gatekeepers who decide which new products should find
their way to the shelves of their stores. As a result, they have a strong say in the success of a
product or service being launched into the market. It is a well-established fact that
manufacturers need to sell their products through retail formats that are compatible with their
business strategy, brand image, and market profile to ensure a competitive edge.
Retailing: Meaning and Definition: Contd
• Consumer companies might improve their new product success rate if they put in more
effort at creating retailer value as well as consumer differential advantage. If the
objectives of a manufacturer are incompatible with those of a market intermediary like
the retailer, the success of a product stands jeopardized.
• Consumer durables major LG electronics and Paras Pharmaceuticals, the makers of Moov,
Borosoft, Krack cream, etc., for instance, are deriving extensive advantage due to wide
retail network developed over years.
• The wide and increasing range of product categories accompanied by multiple brands in
each category complicate decision-making for both the manufacturers and market
intermediaries. Retailers want to optimize sales within the limited shelf space, governed
by their individual sales philosophy. They undertake risk in selecting a portfolio of
products or brands to offer to their customers.
Characteristics of Retailing:

(i )
Direct contact with the customer – Retailing involves direct contact with the end customer and
are a mediator between the wholesaler and the customer or the manufacturer and the customer
depending upon the distribution channels used.
(ii) Sale volume is comparatively large in quantities but less in monetary value as compared to
exporting/manufacturing.
(iii) Customer service plays a vital role in the success of retail business.
(iv) Sales promotions are offered at this point only.
(v) In almost all countries, retail outlets are more than any other form of business.
(vi) Location and layout are critical factors in retail business.
(vii) It offers employment opportunity to all age groups irrespective of age and gender, qualification or
religion etc.
(viii) Relationship with the customers – Retailers form a bond with the customers and help them
decide which products and services they should choose for themselves.
(ix) Stock goods of different brands – Retailers usually stock different goods of different brands
according to the demand in the market.
Characteristics of Retailing:

(x) Customers’ contact with the company – Retailers act as the representatives of the company to
the end customers who give their feedback and suggestions to them.
(xi) Have a limited shelf space – Retail stores usually have very limited shelf space and only stock
goods which have good demand.
(xii) Sells the goods at maximum prices – Since retailing involves selling the products directly to the
customers, it also witnesses the maximum price of the product.
(xii) Retailer emphasizes more on advertisements and promotion to maximize sales.
(xiii)Increases impulse sales by aggressive marketing. Many consumers do not look at ads before
shopping and don’t make a shopping list.
(xiv) Indicate the value of in store displays, attractive store layouts, well organized products,
catalogues, website etc
(xv)Irrespective of online retail boom, many people still want to touch, feel and smell the product before
making a purchase.
(xvi) Most urgent purchases are done at retail stores as online delivery takes time
 Social Significance of Retailing

• The retailer acts as a link between the customer and the marketer, who is
responsible for selling the ultimate products and services to the customers.
• Make products available at remote location.
• Remove the hinderances of time, place and money.
• In the entire complicated process of marketing, retailer acts an intermediary in
the complex marketing & distribution channel. Though manufacturers can directly
sell their products and services to the end customers ultimately, it may result in
high expenses, inconvenience and time-consuming process.
• Retailers collect an assortment of products from variety of sources, buy in bulk &
sell in small amounts, doing the sorting function.
• Shoppers learn about availability and features of goods and services, various
brands, anf get to feel the product hands on make a better purchase decision.
• Act as an intermediatory to provide customer feedback and enable goods and
services to improvise.
• Manufacturers and wholesalers also get knowledge and forecasting about
consumers’ tastes, changing preferences, delivery delays, complaints, etc through
retailers.
 Economic Significance of Retailing
• The retailers play the role of sales specialists and also as agents of purchase for their customers and suppliers
respectively. Retailers handle the entire gamut of roles and functions aiming at understanding customer
requirements and anticipating the demand, gathering information about the market trends through strong
market intelligence and making product related assortments and discovering financing opportunities.
• It is relatively easier to become a retailer, as large investment is not required, procurement of production
equipment is not required, and a retailer can procure merchandise on the basis of credit.
• The retail sector in the present scenario is witnessing a fierce competition as a large number of retail players
have entered in the same market segment with similar product offerings. The only differentiating factor which
may provide a winning edge in the competitive race is by providing better value to the consumers and
satisfying the consumers with their offerings. Besides this, a retailer should also be providing justice to the
producers and also to the wholesalers by ensuring that their products are sold to the ultimate consumers.
• For expansion of business opportunities globally and tapping larger business prospects, large retailers have
been diversifying their business formats by way of mergers or acquisitions to cater to the growing needs of a
diverse and a larger customer segment. Moreover, the retail industry has been impressive regarding
generating large-scale employment opportunities worldwide which is expected to grow at a much faster rate
in comparison with the other sectors performance in future as well.
• The retail sector has opened newer job avenues for people having different areas of specialization
with diverse skills and qualification backgrounds. These opportunities could be in the areas of Finance &
Accounting, Retail Operations, Commercial Operations, Inventory & Warehousing, SCM & Logistics, HRM,
Distribution Systems, Marketing & Brand Management, IT, New Products Development & Market
Research/Business Analysis.
• Retailing career can be quite rewarding right from the start of the career for a person as it may require
bearing a handling a lot of challenges and responsibilities right from the beginning. Moreover, retailing has
given rise to entrepreneurial opportunities, and few of the wealthiest entrepreneurs are involved in the retail
business.
 Importance of Retailing to the Economy of India?
The Indian retail industry is the fifth largest industry in the world. It comprises organised and unorganised sectors, Indian retail industry is one of the fastest growing
industries in India, especially over the last few years. Retail is India’s largest industry, accounting for over 10 percent of the country’s GDP and around eight percent of
employment.
Though initially, the retail industry in India was mostly unorganised, however with the change of tastes and preferences of the consumers, the industry is getting more
popular these days and getting organised as well. With growing market demand, the industry is expected to have grown at a pace of 25-30% annually. The India retail
industry is expected to grow from Rs 35,000 crore in 2004-05 to newer heights.
In the Indian retailing industry, food is the most dominating sector and is growing at a rate of 9% annually. The branded food industry is trying to enter the India retail industry
and to convert Indian consumers to branded food users. At present 60% of the Indian grocery basket consists of non- branded items.

Also, more and more companies are willing to invest in India due to significant growth forecasts based on:

1. The fact that two-thirds of the country’s population is below 35 years of age and more than 50% of the country comprises middle class consumer which adds to the
willingness to consume. According to Business Monitor International middle and upper class consumer base has set vast opportunities in India’s tier-II and tier-Ill cities.
2. The growth of well-travelled Indians coupled with huge media exposure is creating new needs in the minds of consumers. Improved mobility and better tourism has made
Indian consumers to demand more.
3. Indians natural tendency to experiment with modern concepts without losing out on traditional behaviour.
4. The greater availability of personal credit has significantly contributed to growing demand for cars, houses, and white goods.
5. India is showing good growth rate in terms of gross domestic product (GDP). An agency predicts average annual GDP growth of 7.6 per cent through 2015. Growth
means more income and greater availability of things which retailers distribute and make available.
6. Entry of large diversified business houses into retail has created a plethora of new and modern retail offering to the consumers.
7. Possibility of FDI in multiband retail and the recent opening up of single brand retail is surely leading to diversified brand offerings to consumers and high competition for
retailers. More and more of foreign companies want to establish their stores in India.
8. The creation of malls across the country and new high streets has suddenly urged traditional retailers to modernise themselves or take risk, otherwise they will be
outdated. Development of retail is happening across tier 1, tier 2 and tier 3 towns and this makes chain store retail interesting.
9. Technology including technology for more sophisticated logistics, retail systems, new payment mechanisms including mobile payments, sophisticated Customer
Relationship capabilities and social media allows for consumers to experiment with multichannel shopping.
The government’s aim to introduce GST (Goods and Services Tax) will also bring in entirely new logistics system in the country which would structure stocking points based
on transportation and not based on tax impact on goods. This would create a new level of optimised stock availability across the supply chain.
Small and regional brands are tying up with retail giants to push their merchandise, as middle class Indians shift from mom-and pop stores to the comfort and variety of