Module 2

Important decisions in
retail management
Contents

• Retail locations selection

• Importance of retail locations
• Types of retail locations
• Factors determining the location decision
• Steps involved in choosing a retail locations
• Measurement of success of location
• Brief Idea about the Types of Retail formats
• Organized Retailing Vs. Unorganized Retailing
 Importance of Retail
Locations
• Retail store location is also an important factor for the marketing team
to consider while setting retail marketing strategy. Here are some
reasons −
• Business location is a unique factor which the competitors cannot imitate.
Hence, it can give a strong competitive advantage.
• Selection of retail location is a long-term decision.
• It requires long-term capital investment.
• Good location is the key element for attracting customers to the outlet.
• A well-located store makes supply and distribution easier.
• Locations can help to change customers’ buying habits.
Retail Locations [Page 168]

• Types of Retail Locations: Various options are available to the retailer

for choosing the locations of his store. The choice of the location of
the store again depends on the target audience and the kind of
merchandise to be sold.
Retail Locations

• Typically, a store location may be classified as:

• Freestanding / isolated store
• Part of a business district
• Part of a shopping center
1. Freestanding Locations

• Freestanding locations is a store located along a major traffic artery,

without any other competitive retailers around.
• The biggest advantage of such a location is that there is no
competition around.
• Due to this, rents are usually low and facilities like ample parking are
available when taking a decision to locate a store as an isolated store,
a retailer needs to bear in mind that the advertising costs for such a
location are usually high, as the retailer need to draw out customers
to visit the locations.
1. Freestanding Locations

• The distance that the target consumer is willing to travel to buy a

particular product is a key factor that the retailer needs to take into
consideration, to ensure that the eventual location that he chooses
for the store is successful.
2. Part of a Business District

• A retail store can also be located as a part of a business district.

• A business district is a place of commerce in the city, which
developed historically as the Centre of trade and commerce in the
city or town and most probably, would have no pre set format or
structure.
2. Part of a Business District

• A business district can be classified as a Central, Secondary or a

Neighborhood Business District.
• A Central Business District (CBD) is the main center of commerce and
trade in the city.
• It is characterized by peak land rates and intense developments.
• E.g. CBD in Mumbai would be Colaba or Nariman Point.
2. Part of a Business District

• The Secondary Business District (SBD) is one, which has evolved over
a period of time, with the spread of population within the city.
• A city may have more than one SBD.
• An SBD is characterized by a good mix of retailers, the store are
generally smaller than those in the CBD and public transportation is
adequate.
3. Part of a Shopping Center

• A Shopping center has been defined by the International Council of

Shopping Centre's as ‘a group of retail and other commercial
establishments that is planned, developed, owned and managed as a
single property.’
• The availability of parking is an important feature of a shopping
centre.
3. Part of a Shopping Center

• The international Council of Shopping Centers has defined eight basic

types of shopping centres. They are
• Neighborhood Shopping Center
• Community Shopping Center
• Regional Shopping Center
• Super Regional Center
• Fashion/Speciality Center
• Power Center
• Theme Center
• Outlet Center
Sr No Type Concept Sq. Ft. Primary Trade Area

1 Neighborhood Convenience, supermarket 30K-1.5L 3 Miles

2 Community General merchandise 1L-3.5L 3-7 Miles

3 Regional General merchandise, fashion 4L-8L 5-15 Miles

4 Super Regional Similar to regional but has 8L+ 5-25 Miles

more variety

5 Fashion/Speciality Fashion oriented 80K-2.5L 5-15 Miles

6 Power Discount department store, 2.5L-6L 5-10 Miles

off price

7 Theme/Festival Leisure, tourist oriented, 80K-2.5L N/A

restaurants, entertainment

8 Outlet Manufacturers outlet store 50K-2.5L 25-75 Miles

Steps involved in
Choosing Retail Location [Page
173]
• This may be a region in a city, a state or an international market that
he wishes to tap.
• After identifying the region, the following steps have to be
followed:
• Identify the market in which to locate the store
• Determine the market potential
• Identify the most attractive sites
• Select the best site available
Steps involved in
Choosing Retail Location
• Step 1: Market Identification
• Step 2: Determining the Market Potential
• Demographic features of population
• The characteristics of household in the area
• Competition and compatibility
• Laws and regulations
• Trade area analysis
 Steps involved in
Choosing Retail Location
• Step 3: Identify Most Attractive Sites
• Step 4: Select the Best Site available
• Traffic
• Accessibility of the market is also a key factor
• The total no of store and type of the stores that exist in the area
• Amenities available
• To buy or to lease
• The product mix offered
Factors determining the
Retail Location
• Selection of the area
• Choice of the site
• Scale of operation
• Amount of capital
• Decoration of shop
• Selection of goods
• Source of supply
• Sales policy
Classifying Retail Formats

Price range Ownership

Product Amount of
assortment Classification
service
of Retail
Formats

Chapter 4 : Types of Retail Formats 18

Classifying Retail Formats
BASED ON PRODUCT ASSORTMENT - Classifying
formats using their product assortment or
merchandise range.

Chapter 4 : Types of Retail Formats 19

Retail Formats based on Product
Range
Specialty
stores

Category Super
Specialists markets

Product
range

Convenience
Hyper market
stores

Department
store

Chapter 4 : Types of Retail Formats 20

 Specialty stores

• Specialty stores deal in a single category of

merchandise (jewelry, shoes).
• They deal in complementary
merchandise categories and related
products (clothing
/accessories or sporting equipment /active sports
apparel).
• Specialty store offers a narrow product line but
with deep assortments in that product line.
• This is more efficient to manufacture in bulk.
• Lacoste, Adidas
Chapter 4 : Types of Retail Formats 21
 Department store

• Department store specializes in selling a

wide range of products without a single
predominant product line.
• It carries a broad and deep assortment along
with customer service.
• It caters to multiple needs of several groups of
customer under one roof.
• They earn profit by the huge sales volumes.
• They concentrate on mass market.
• Lifestyle, Westside.

Chapter 4 : Types of Retail Formats 22

 Department store

• Department stores may further be classified

into three tiers :
Upscale, high fashion chains that house exclusive
designer products and offer a high level of
customer service.
Traditional stores that sell moderately priced
products with less customer service.
This tier consists of stores that offer value for
money by catering to price sensitive
consumers.
Chapter 4 : Types of Retail Formats 23
 Super markets

• Super markets are large, low cost, low margin,

high volume, self service operations designed to
meet the need for food groceries and other non- food
items like health and beauty merchandise.
• Perishable food items like baked stuff, meats and dairy
products form the majority of their merchandise.
• Have a large number of frequent customers
• Sell low cost products at a low margin.
• Follow the self service format.
• The profit margins are low.

Chapter 4 : Types of Retail Formats 24

 Convenience stores

• Convenience stores cater to people at odd

hours from easily accessible locations. Eg; at
petrol pumps, airports, train stations.
• They enable the consumer to purchase quickly
without having to browse through a huge array of
products.
• They stock basic things but charge high price for
the convenience offered.
• They keep limited assortment of high
turnover, convenience goods.
Chapter 4 : Types of Retail Formats 25
 Hyper market

• Hyper market / multi department store is a superstore

which combines a super market and a department
store. It is a large retail facility which carries an enormous
range of products under one roof.
• They carry a larger proportion of food items with emphasis
on perishables.
• At least 35% of selling space devoted to non grocery
products. They also sell hardware, garments, sports
equipment, furniture, appliances and electronics.
• It is the largest version of retail.
• Hypermarkets focus on high-volume but low –
margin sales.
• Spencers or Hypermart

Chapter 4 : Types of Retail Formats 26

 Category Specialists

• Category Specialists/ Killers/Power retailers

offer a narrow but deep assortment of
merchandise.
• They have a self-service approach but may offer
some assistance to customers in some product
categories like electronics.
• They are able to buy merchandise at lower prices
due to their buying power based on volumes.
• The Home Store, Croma.
Chapter 4 : Types of Retail Formats 27
Classifying Retail Formats
BASED ON RELATIVE PRICE – Stores sell at lower
prices because of lower operational costs due
to Self service, No free home delivery, No
mail/telephone orders and use of Low rent
locations

Chapter 4 : Types of Retail Formats 28

Retail formats based on Relative Price
Full line
discount
store

Extreme
Factory
Price outlet
value
retailers

Off
price
retailer

Chapter 4 : Types of Retail Formats 29

 Full line discount store

• A full line discount store keeps a wide

assortment of garments, furnishings, health
and beauty products and gives huge
discounts on all merchandise.
• They offer goods at lower price as compared
to all departmental stores.
• There may be minimal or even no customer
service and no product returns policy.
• Eg; Walmart.

Chapter 4 : Types of Retail Formats 30

 Extreme value retailers

• Extreme value retailers are primarily discount

stores that have a limited product range at
very low prices. Thus their merchandise is
wide but shallow.
• The target customer is the low income group.
• Manufacturers create smaller size packaging
for extreme value retailers.
• Eg; Dollar Store .

Chapter 4 : Types of Retail Formats 31

 Off price retailer

• Off price retailer or close out stores deal in

an inconsistent merchandise at very low
prices. They buy irregulars, off-
ratios, cancelled orders and seconds
goods at a low cost directly from the
manufacturer and sell at a low
price.

Chapter 4 : Types of Retail Formats 32

 Manufacturers or factory outlet

• Manufacturers or factory outlet is a

special category of off price retailers.
• Manufacturer gets into retailing to sell off
production overruns, leftovers, incomplete
assortments, returns from retailers, irregulars,
cancelled shipments, odd sizes to improve
their revenues.
• Manufacturers use space within their building,
thus lower overheads rather than renting a
store.
• Need to sell seconds/rejects.
• Thus prices are lower than the MRP .
Chapter 4 : Types of Retail Formats 33
Classification By Retail
Organization
Voluntary
Chains

Merchandising
Franchises
Conglomerates

Retailer
Organisati
on
Independent Retailer
Store Cooperatives

Corporate Consumer
Chains Cooperatives

Chapter 4 : Types of Retail Formats 34

 Independent retailer

• Independent retailer /mom and pop store especially if

it is a small one.
• Is usually family owned and operates only one
retail outlet.
• Owner is in direct contact with customer and understands
them.
• Decision making vests with the owner who can react
quickly to changes in demands and needs of customer. This
results in a very flexible and quick responding marketing
mix.
• The flip side is that the business relies on one person’s
skills alone. This can be dangerous for the retailers survival.

Chapter 4 : Types of Retail Formats 35

 Chain store

• Chain store has two or more stores that are

commonly owned and controlled. They have
centralized operations, employ central buying
and merchandising, sell similar merchandise in store
units that are standardized.
• They buy at a lower price and the promotion
cost is spread all over the retail chains.
• They can negotiate lower prices due to large
volumes.
• Have a broader management base with
specialists handling different aspects of the
business.
• Fabindia, Westside, Spencers
Chapter 4 : Types of Retail Formats 36
 Franchise

• Franchise is a contractual agreement between 2

parties - a franchiser and a franchisee. It gives
the franchisee the right to sell franchisers product
line or service.
• The franchise is purchased by the franchisee for a
price based on the franchise’s success records
and growth potential.
• The franchiser provides a set of operating
procedures and a national advertising
program.
• KFC, McDonalds.
Chapter 4 : Types of Retail Formats 37
 Leased department

• Leased department is a department in a retail

store that is rented to an outside party.
• The proprietor of the leased department is
responsible for all aspects of the business
and pays a percent to the retail store as rent.
• This format is used to widen the product
offerings.
• Allows win-win strategy for both the leased
department operator and retail store.
• W, Biba

Chapter 4 : Types of Retail Formats 38

 Merchandise conglomerate

• Merchandise conglomerate is a cooperation

which combines different retail formats
under a central ownership.
• It consists of 2 or more different type of retail
stores owned by 1 owner.
• Eg; Future Group which owns Food Bazaar and
Big Bazaar and many more retail formats.

Chapter 4 : Types of Retail Formats 39

 Consumer Cooperative

• Consumer Cooperative is owned by its

customer members who invest, manage
the firm and share the profits.
• Cooperatives form only a small part of the
retail sector as they involve consumer
initiative and drive.
• SEWA (Self -Employed Women’s Association)
and KVIC (Khadi and Village Industries
Commission) are cooperatives.

Chapter 4 : Types of Retail Formats 40

Classifying Retail Formats
BASED ON AMOUNT OF SERVICE
Services that a retailer offers can range from
sales personnel, home delivery, returns policy,
packing, schemes, membership, loyalty
programs, valet parking, gift wrapping.
 Self-service
 Limited services
 Full services

Chapter 4 : Types of Retail Formats 41

 Non store retailing

• Non store retailing is retailing through any

mode other than a physical store.
• It offers increased possibilities for those who
lack time or enthusiasm for conventional
shopping.
• Main problems of non store retail :
– Security issues in use of credit cards
– Consumer cannot touch and feel the product
especially fabric and colors

Chapter 4 : Types of Retail Formats 42

 Non store retailing

• Non store formats

– Catalog /mail order retailers - sells
through a catalog. Eg; Tupperware.
– Electronic retail – electronic shopping thru a TV or
telephone
– Internet Retailing
– Kiosks are stalls put in any location that is
likely to have heavy footfall.
– Direct selling - Personal selling , Party plan and
Network marketing eg; Tupperware, Avon, Amway
– Vending machines or automated selling

Chapter 4 : Types of Retail Formats 43