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Chapter - I

Introduction to Retail Industry

1.1 Meaning of Retail

Retail comes from the French word retailler, which refers to "cutting off, clip and divide"

in terms of tailoring (1365). First, it is recorded as a noun with the meaning of a "sale in

small quantities" in 1433 (French). Its literal meaning for retail was to "cut off, shred,

paring”.1 Retail is the final stage of any economic activity. By virtue of this fact, retail

occupies an important place in the world economy. According to Philip Kotler, Retailing

includes all the activities involved in selling goods or services to the final consumers for

personal, non-business use. A retailer or retail store is any business enterprise whose sale

volume comes primarily from retailing. These are the final business entities in a

distribution channel that links manufacturers to customers. Manufacturers typically make

products and sell them to retailers or wholesalers. Wholesalers resell these products to the

retailers and finally, retailers resell these products to the ultimate consumers.2

Any organization selling to final consumers whether it is a manufacturer, wholesaler or

retailer-is doing retailing. It does not matter how person, mail, telephone, vending

machine, or internet or where they are sold-in a store, on the street, or in the consumer’s

home) sells the goods or services. A Retailer thus, provides value-creating functions like

assortment of products and services to the consumers, breaking bulk, holding inventory

and provides services to consumers, manufacturers and wholesalers.

1.1.1. Retailing Broadly Involves

1. Understanding the consumers’ needs

2. Developing good merchandise assortment and

_________________________________

1Harper, Douglas (2001), “Retailing”, online Etymology Dictionary.

2Kotler Philip, Kelvin Lane Keller (2006), Marketing management 12

th edition by prentice hall inc.p.504.

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3. Display the merchandise in an effective manner so that shoppers find it easy and

attractive to buy.

Retailing encompasses the business activities involved in selling goods and services to

customers for their personal, family, or household use. It includes every sale to final

consumer- ranging from cars to apparel to meals at restaurants to movie tickets. Retailing

is the last stage in the distribution process.

It thus consists of all activities involved in the marketing of goods and services directly to

the consumers, for their personal, family or household use. In an age where customer is

the king and marketers are focusing on customer delight, retail may be redefined as the

first point of customer contact.

The distribution of finished products begins with the producer and ends at the ultimate

consumer. Between two of them there is an intermediary the retailer. Retailing is the set

of business activities that adds value to the product and services sold to the consumers for

their personal or family use. Retailing encompasses selling through the mail, the internet,

and door-to-door visits – any channel that could be approach the consumer. Retailing is

responsible for matching individual demands of 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 sector3.

1.1.2. Retailing Concept

There are mainly four principles forms the retailing concept they are:

1. Customer orientation: The retailer determines the attributes and needs of its customers

and endeavours to satisfy these needs to be fullest.

_______________________________

3Barry Berman& Joel R. Evans (2006), Retail Management A Strategic approach ninth edition Pearson

education.inc, New delhi.p.25-27.

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2. Coordinated effort: The retailers integrate all plans and activities to maximize

efficiency.

3. Value driven: The retailer offers good value to customers, whether it is upscale or

discount. This means having prices appropriate for the levels of products and

customer service.

4. Goal orientation: The retailer sets goals and then uses its strategy to attain them.4

1.2. The Evolution of Retailing in India5

While barter would considered the oldest form of retail trade, since independence, retail

in India has evolved to support the unique needs of our country, given its size and

complexity. Haats, Mandis, and Melas are always been a part of the Indian landscape.

They continue to be present in most parts of the country and form an essential part of life

and trade in various areas.

The PDS (Public Distribution System) would easily emerge as the single largest retail

chain existing in the country. The evolution of the public distribution of grains in India

has its origin in the ‘rationing’ system introduced by the British during World War II. The

system was started in 1939 in Bombay and subsequently extended to other cities and

towns. By the year 1946, as many as 771 cities/towns were covered. The system was

abolished post war; however, on attaining independence, India was forced to reintroduce

it in 1950 in the face of renewed inflationary pressure in the economy. The system,

however, continued to remain an essentially urban oriented activity. In fact, towards the

end of the first five-year plan (1956), the system was losing its relevance due to

comfortable food grains availability. Now, PDS was reintroduced and other essential

commodities like sugar, cooking coal and kerosene oil were added to the commodity

basket of PDS.

The Canteen Store Department and Post Office in India are also among the largest

network of outlets in the country, reaching populations across state boundaries.

____________________________________

4Ibid.p.36-37

5William D. Perreault, JR, E Jerome MC Carthy, (2006), Basic marketing a global- Managerial approach.

15th

edition, Tata MC Hill Graw Publisher.p.360-363.

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Today, there are more than 7000 KVIC stores across the country. The co-operative

movements are championed by the government, which set up the Kendriya Bhandars in

1963. Today, they operate a network of 112 stores and 42 fair price shops across the

country. Mother Dairy, another early starter, controls as many as 250 stores, selling foods

at attractive prices. In Maharashtra, Bombay Bazaar, which runs under the label Sahakari

Bhandar and Apna Bazaars, runs a large chain of co-operative stores.

An initial step towards liberalization was taken in the period from 1985-90. It was at this

time that many restrictions on private companies was lifted, and in the 1990’s, the Indian

economy solely progressed from being state-led to becoming “market friendly”.

While independent retail stores like akbarally’s, Vivek’s and Nalli’s have existed in India

for a long time, the first attempt at organized retailing were noticed in the textiles sector.

One of the pioneers in this field was Raymond’s, which set up stores to retail fabric. It

also developed a dealer network to retail fabric. Other textile manufacturers who set up

their own retail chains were Reliance-, which set up Vimal showrooms, and Garden Silk

Mills, which set up Garden Vareli showrooms. It was but natural that with the growth of

textile retail, readymade branded apparel could not be far behind and the next wave of

organized retail in India saw the likes of Madura Garments, Arvind Mills, etc. set up

showrooms for branded menswear. With the success of the branded menswear stores, the

new age Departmental store arrived in India in the early nineties.

1.2.1 Global Retailing Industry

The latter half of the 20th Century, in both Europe and North America, has seen the

emergence of the supermarket as the dominant grocery retail form. The reasons why

supermarkets have come to dominate food retailing are not hard to find. The search for

convenience in food shopping and consumption, coupled to car ownership, led to the

birth of the supermarket. As incomes rose and shoppers sought both convenience and new

tastes and stimulation, supermarkets were able to expand the products offered. The

invention of the bar code allowed a store to manage thousands of items and their prices

and led to 'just-in-time' store replenishment and the ability to carry tens of thousands of

individual items.

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Computer-operated depots and logistical systems integrated store replenishment with

consumer demand in a single electronic system. On the Global Retail Stage, little has

remained the same over the last decade. One of the few similarities with today is that

Wal-Mart was ranked the top retailer in the world then and it still holds that distinction.

Other than Wal-Mart’s dominance, there is little about today’s environment that looks

like the mid-1990s. The global economy has changed, consumer demand has shifted, and

retailers’ operating systems today fused with far more technology than was the case six

years ago. Saturated home markets, fierce competition and restrictive legislation have

relentlessly pushed major food retailers into the globalization mode.

Since the mid-1990s, numerous governments have opened up their economies as well, to

the free markets and foreign investment that has been a plus for many a retailer.

Technology has become the real enabler for retailers over the last six years. Supply chain

innovations for retailers were particularly strong in the second half of the 1990s and have

continued into today. With all the emphasis on technology and cost cutting, a major thrust

of retailers continues to be demand-based. Four years ago, more than half (53per cent) of

the top 200 retailers operated in only one country. Today, only 44 per centre main single-

country merchants. This globalization trend can only intensify in the years ahead. The

benefits of increased sales and greater economies of scale are too large to be ignored.

The global retail industry has traveled a long way from a small beginning to an industry

where the worldwide retail sale alone is valued at $ 15 trillion. The top 200 retailers alone

account for 30% of worldwide demand. Retail sales driven by people’s ability (disposable

income) and willingness (consumer confidence) to buy, compliments the fact that the

money spent on household consumption worldwide increased 68% between 1980 and

2010. The leader has in-disputably been the USA where some two-thirds or $ 10 trillion

out of the $ 15 trillion American economy is consumer spending. About 40% of that ($

4trillions) is spending on discretionary products and services. Positive forces at work in

retail consumer markets today include high rates of personal expenditures, low interest

rates, low unemployment and very low inflation. Negative factors that hold retail sales

back involve weakening consumer confidence.

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Table No.1.1.Top Ten Global Retailers

Source: Top Ten Global Retailers for 2012, Deloitte LLP Report Jan 13 2014 Deloitte

The world’s top 250 retailers earned 24 percent of their retail revenue from foreign

operations, up slightly from the past two years. European retailers remained the most

dependent on foreign revenue, generating nearly 40 percent of total revenue from

overseas operations. Japanese retailers were the least globalized, earning just 7.7 percent

of revenue from foreign markets, less than half that of North American retailers (16.1

percent).

____________________________

6Top Ten Global Retailers for 2012, Deloitte LLP Report Jan 13 2014 Deloitte

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1.3. Organized v/s Unorganized Retailing

1.3.1 Unorganized Retailing or Traditional Retailing

According to the National Accounts statistics of India, ‘the unorganized sector includes

units whose activity is not regulated by any statue or legal provision, and/or those, which

do not maintain regular accounts. In the context of retail sector, it could therefore, be said

to cover those forms of trade, which sell an assortment of products and services ranging

from fruits and vegetables to shoe repair. These products or services may be, sold or

offered out of a fixed or mobile location and the number of people employed could range

between 10-20 people. The traditional formats is of low-cost retailing for example the

neighborhood baniya (vaishya), the local kirana (general) shop, owner manned general

stores, provision stores, flea (Thadi) markets, hand cart and pavement vendors, the

vegetable, fruit vendor, Mom and Pop Stores, local sabji mandi (vegetable market),

weekly haats, general readymade garment shop or a footwear shop, general electronic

shop etc. the, the paan wala, the cobbler, etc. would be termed as the unorganized sector.

1.3.2 Organized or Modern Retailing

Organized retailing refers to trading activities undertaken by licensed retailers, that is,

those who registered for sales tax, income tax, etc. These include the corporate-backed

hypermarkets and retail chains, departmental store, discount stores, drug stores, factory

outlets, and the privately owned large retail businesses. Professionally managed stores or

large chain of stores, providing goods and services that appeal to customers, in an

ambience that is encouraging for shopping and agreeable to customers, characterizes the

organized retail stores. For example: Vishal Mega Mart, Big Bazaar, Wills Lifestyle,

Shoppers Stop, Reliance Trends, Spencers, Reebok, Nike, Catmos, Lilliput, McDonald’s,

Pizza Hut, Barista, Cafe Coffee Day, Koutons, Cotton County, Peter England, Titan,

Raymond’s, Sony, Samsung, Next, LG, Apollo Pharmacy, etc.7

_______________________________

7Prakash .Study on consumer perception on coca-cola soft drinks in Chennai city School of Management

SRM University project report titled (reg. no: 35080399).

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1.3.3 The FMCG (Fast Moving Consumer Goods) Industry in India

Fast Moving Consumer Goods (FMCG), also known as Consumer Packaged Goods

(CPG) is products that have a quick turnover and relatively low cost. Consumers

generally put less thought into the purchase of FMCG than they do for other products.

The Indian FMCG industry witnessed significant changes through the 1990s. Many

players had been facing severe problems because of increased competition from small

and regional players and from slow growth across its various product categories. As a

result, most of the companies are forced to revamp their product, marketing, distribution

and customer service strategies to strengthen their position in the market.

By the turn of the 20th century, the face of the Indian FMCG industry had changed

significantly. With the liberalization and growth of the Indian economy, the Indian

customer witnessed an increasing exposure to new domestic and foreign products through

different media, such as television and the Internet. Apart from this, social changes such

as increase in the number of nuclear families and the growing number of working couples

resulting in increased spending power also contributed to the increase in the Indian

consumers' personal consumption. The realization of the customer's growing awareness

and the need to meet changing requirements and preferences because of changing

lifestyles required the FMCG producing companies to formulate customer-centric

strategies. These changes had a positive impact, leading to the rapid growth in the FMCG

industry. Increased availability of retail space, rapid urbanization, and qualified work

force also boosted the growth of the organized retailing sector.

The FMCG sector also received a boost by government led initiatives in the 2003 budget

such as the setting up of excise free zones in various parts of the country that witnessed

firms moving away from outsourcing to manufacturing by investing in the zones.

Unlike other economy sectors, FMCG share float in a steady manner irrespective of

global market dip, because they generally satisfy rather fundamental, as opposed to

luxurious needs. The FMCG sector, which is growing at the rate of 9% is the fourth

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largest sector in the Indian Economy and is worth Rs.93000 cores. The main contributor,

making up 32% of the sector, is the South Indian region. It is predicted that in the year

2010, the FMCG sector will be worth Rs.143000 cores. The sector being one of the

biggest sectors of the Indian Economy provides up to 4 million jobs. (Source: HCCBPL,

Monthly Circular, March)

The FMCG sector consists of the following categories:

Personal Care- Oral care, Hair care, Wash (Soaps), Cosmetics and Toiletries, Deodorants

and Perfumes, Paper products (Tissues, Diapers, Sanitary products) and Shoe care; the

major players being; Hindustan Lever Limited, Godrej Soaps, Colgate, Marico, Dabur

and Procter & Gamble.

Household Care- Fabric wash (Laundry soaps and synthetic detergents), Household

cleaners (Dish/Utensil/Floor/Toilet cleaners), Air fresheners, Insecticides and Mosquito

repellants, Metal polish and Furniture polish; the major players being; Hindustan Lever

Limited, Nirma and Rickets Colman.

Branded, Packaged foods and beverages- Health beverages, Soft drinks, Staples/Cereals,

Bakery products (Biscuits, Breads, Cakes), Snack foods, Chocolates, Ice-creams, Tea,

Coffee, Processed fruits, Processed vegetables, Processed meat, Branded flour, Bottled

water, Branded rice, Branded sugar, Juices; the major players being; Hindustan Lever

Limited, Nestle, Coca-Cola, Cadbury, Pepsi and Dabur Spirits and Tobacco; the major

players being; ITC, Godfrey, Philips and UB.8

______________________________

8www.indiaretaling.com, retrieved.2014-04-12

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1.4 Retail Organization

Through a retail organization, firm structures, assigns tasks, policies, resources, authority,

responsibility, and rewards to efficiently, and effectively satisfy the needs of its target

market, employees and management. A firm cannot survive unless its organization

structure satisfies the target market, regardless of how well employee and management

needs met.

1.4.1 Principles for Organizing a Retail Firm

An organization should show interest in its employees. Job rotation, promotion from

within, participatory management, job enrichment and so forth improve worker morale.

Employee turnover, lateness and absenteeism should monitor, as they may

indicate personal problem.

Line of authority should be traceable from the highest to the lowest positions.

There is a limit to the number of employees a manager can directly supervise

them.

An organization has informal structure aside from the formal organization chart.9

1.4.2. Different Types of Organisational Arrangement

a. Organizational Arrangement Used by Small Independent Retailers

Small independents use uncomplicated arrangement with only two or three levels of

personnel (owner-manager and employees), and the owner manager personally runs the

firm and oversees workers. There are few employees, little specialization, and no branch

units.

b. Organizational Arrangement Used by Departmental Stores

Departmental stores continue to use organizational arrangement that is a modification of

the Mazur plan, which divides all retail activities into four functional areas

merchandising, publicity, store management, and accounting and control:

____________________________________

9Barry Berman& Joel R. Evans (2006), Retail Management A Strategic approach ninth edition Pearson

education.inc, New delhi.p.293-295.

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Merchandising-buying, selling, stock planning and control, promotion planning.

Publicity-window and interior displays, advertising, planning and executing

promotional events, advertising research, public relations.

Store management-merchandise care, customer services, buying store supplies

and equipments, maintenance, operating activities, store and merchandise

protection, employee training and compensation, workroom operations.

Accounting and control-credit and collections, expense budgeting and control,

record keeping.

c. Organizational Arrangement Used by Chain Stores

Most of the chain stores use a version of the equal store organization, which has mainly

following attributes:

There are many functional divisions, such as sales promotions, merchandise

management, distribution, operations, real estate, personnel and information

systems.

Overall authority is centralized. Store managers have selling responsibility.

Many operations are standardized (fixtures, store layout, building design,

merchandise lines, credit policy, and store service).

An elaborate control system keeps management informed.

Some decentralization lets branches adapt to localities and increase store manager

responsibilities. Though large chains standardize most of the items their outlets

carry, store managers often fine-tune the rest of the strategy mix for the local

market.

d. Organizational Arrangement Used by Diversified Retail Stores

A diversified retailer is a multi-line firm operating under central ownership. Like other

chains, diversified retailer operates multiple stores; unlike typical chains, a diversified

firm is involved with different types of retail operations. Due to their multiple strategy

mixes, diversified retailers face complex organizational considerations. Interdivision

control needed with operating procedures and goals clearly communicated.10

_________________________________________

10Ibid.p.293-295.

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1.4.3. Types of Locations

There are three different location types: isolated store, unplanned business district, and

planned shopping center. Each has its own attributes as to the composition of

competitors, parking, nearness to nonretail institutions and other factors.

a. The Isolated Store

An isolated store is a freestanding retail outlet located on either a highway or a street.

There is no adjacent retailer with which, this type of stores shares traffic. The advantage

of this type of retail location is many.

Rental costs are relatively low.

Better road and traffic visibility is possible.

Facilities can be adapted to individual specifications.

Cost reductions are possible, leading to lower price.

There is no competition in close proximity.

Isolation is good for stores involved in one-stop or convenience shopping.

b. The Unplanned Business District

An unplanned business district is a type of retail location where two or more stores situate

together in such a way that the total arrangement or mix of stores is not due to prior long

range planning. Store locate based on what is best for them, not the district. .Four shoe

stores may exist in area with no pharmacy. There are four kinds of unplanned business

district: central business district, secondary business district, neighbourhood business

district, and string.

c. The Planned Shopping Center

A planned shopping center consists of a group of architecturally unified commercial

establishment on a site that is centrally owned or managed, designed and operated as a

unit, based on balanced tenancy, and accompanied by parking facilities. Its location, size,

and mix of stores related to the trading area served. The planned shopping center has

several positive attributes:

Well rounded assortments of goods and services based on long range planning.

Strong suburban population.

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Cooperative planning and sharing of common costs.

Maximization of pedestrian traffic for individual stores.

Access to highway and availability of parking for consumers.

Generally lower rent and taxes than CBDs.11

1.5. Functions Perform by the Retailer12

a. Providing an assortment of product and services

b. Breaking bulk

c. Holding Inventory

d. Providing Services

a. Providing Assortment

Offering an assortment enables customers to choose from a wide selection of brands,

designs, sizes, colours and prices at one location. All retailers offer assortment of

products, but they specialize in the assortment they offer Supermarkets provide

assortment of food health and beauty care, and household products.

b. Breaking Bulk

To reduce transportation costs, manufactures and wholesalers typically ship cases of

frozen dinners or cartoons of blouses to retailers. Retailers than offer the product tin

smaller quantities tailored to individual consumers and household conception patterns.

This is called breaking bulk.

c. Holding Inventory

A major function of retailers is to keep inventory that is already broken into user friendly

sizes so that products will be available than when consumers want them.

_________________________________

11Ibid.p.265-270.

12Tapan.k.panda (2007), marketing management text and cases second addition excel book

publication.p.482.

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d. Providing Services

Retailers provide services that make it easier for customers to buy and use products. They

offer credit so consumers can have a product now and pay for it later.

1.6. Business Models in Retail

India is a country dominated by local and traditional retailers and business models

specific to Indian context are bound to emerge. This section discusses some of the retail

business models that have emerged and which are peculiar to the Indian landscape. These

are as:

1.6.1. Store Based Retailers

These operate at fixed point of sale locations. Their stores are located and designed to

attract a high volume of walk-in customers. In general, store based retailers offer a wide

variety of merchandise and use mass media advertising to attract customers. This

classification divided on various parameters like:

I. Ownership

II. Strategy-mix

III. Service vs. Goods retail mix.

I. Ownership Based Retailers

Depending on the ownership pattern, stores can be divided into six categories as:

1. Independent Stores

i. Owned by a single retailer-

ii. Low entry barriers

iii. Low initial investments

iv. Simple licensing procedures

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v. Owner holds the right to decisions

vi. Can act as specialized stores

2. Chain Stores

i. Have two or more retail outlets

ii. Common ownership & control

iii. Centralized purchase & merchandising.

iv. Sell similar lines of merchandise

v. Bulk purchaser, high bargaining power

vi. E.g.: Bata, Liberty, Kodak, Archie’s, Titan, Raymond’s, LG, McDonald’s, Barista etc

3. Franchise Stores

i. Store based on contractual agreement between a Franchiser (manufacturer) & a

Franchisee, which allows the franchisee to conduct a given form of business under an

established name & according to a given pattern of business.

ii. Franchisee gets well known brands.

iii. Exclusive rights to sell.

iv. Benefit of the nationwide promotional activities.

v. Exposure to standard operating procedures.

vi. E.g.- Aptech, McDonald’s, Monte Carlo, Koutons, Pizza-Hut,etc.

4. Leased Departmental Store

i. A department in a retail store that is rented to an outside party.

ii. The lessee is accountable for all activities of the leased department.

iii. Adds variety to the merchandise offered by the store.

iv. No cannibalizing of sales of existing product lines of the stores.

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v. Reduced cost of establishment.

vi. Increased customer traffic.

5. Vertical Marketing System

i. A distribution system in which the producers, wholesalers, & retailers act in a unified

manner to facilitate the smooth flow of goods & services to the end-user.

ii. One channel member owns the other or has contracts with them.

6. Consumer Cooperatives

i. Retail operations owned & managed by its customer members.

ii. A group of customers invests in the retail operations in return of stock certificates,

which entitle them to a share in the profits of the retail store.13

II. Retail Institutions Categorized by Store Based Strategy-Mix

A. Food-Oriented Retailers

1. Convenience Store

A convenience store is typically a well-located food oriented retailer that is open long

hours and carries a moderate numbers of items .The store facility is small and has average

to above average prices, and average atmosphere, customer services. There are fourteen

thousands U.S convenience stores and there total annual sales are $130 billion.

2. Convational Super Market

A conventional supermarket is a departmentalized food store with a wide range of food

and related products; sales of general merchandise are rather limited. This institution

started 75 years ago when it is recognized that large-scale operations would let a retailer

combine- volume sales, self-services, and low prices.

____________________________________

13

Barry Berman& Joel R. Evans (2006), Retail Management A Strategic approach ninth edition Pearson

education.inc, New delhi.p.109-120.

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3. Food –Based Superstore

A Food-based superstore is larger and more diversified than a conventional supermarket

but usually smaller and less diversified than a combination store. This format originated

in the 1970s as supermarket sought to stem sales declines by expending store size and the

number of non-food items carried.

4. Combination Store

A combination store unites supermarket and general merchandise in one facility. With

general merchandise, accounting for 25 to 40 percent of sales .The format began in the

late 1960s and early 1970s, as common checked areas were set up for separately owned

supermarkets and drugstore or supermarkets and general merchandise stores. Common

stores are large form 30,000 up to 100,000 or more square feet. This leads to operating

efficiencies and cost savings.

5. Box (Limited-Line) Store

The box (limited- line) store is a food-based discounter that focuses on a small selection

of items, moderate hours of operation (compared to other supermarkets), few services,

and limited manufacture brands. It carries fewer than 2,000 items, few refrigerated

perishables, and few sizes and few sizes and brands per item.

6. Warehouse Store

A warehouse store is a food –based discounter offering a moderate number of food items

in a no-frills setting. It appeals to one -stop food shoppers ,concentrates on special

purchases of popular brands, uses cut-case displays, offers little service, posts prices on

shelves, and locate in secondary sites .the largest warehouse store is known as super

warehouse.

B. General Merchandise Retailers

1. Speciality Store

A specialty store concentrates on selling one goods or service line, such as young

women’s apparel. It usually carries a narrow but deep assortment in the chosen category

and tailors the strategy to a given market segment .this enables the store to maintain a

better selection and sales expertise than competitors, which Are often department stores.

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2. Traditional Department Store

A department store is a large retail unit with an extensive assortment (width and depth) of

goods and services that is Organised into separate detriments for purpose of buying,

promotion, customer services, and control. At a traditional department store, merchandise

quality ranges from average to quite good. Pricing is moderate to above average.

Customer service ranges from medium levels of sales help, credit, delivery, and so forth

to high levels of each.

3. Full –Line Discount Store

A full –line discount store is a type of department store with these features:

It conveys the image of a high- volume, low-cost outline selling a broad product

assortment for less than conventional prices.

It is more apt to carry the range of product lines once expected at department

stores , including electronics ,furniture ,and appliances-as well as auto accessories

, gardening tools ,and house wares.

Shopping carts and centralized checkout service are provided.

4. Variety Store

A variety store handles an assortment of inexpensive and popularly priced goods and

services, such as apparel and accessories, costume jewellery, notions and small wares,

candy toys, and other items in the price range. These stores do not carry full product

range, may not be departmentalized, and do not deliver products.

5. Off Price Chain

An off price chain features brand name apparel and accessories, footwear, linens, fabrics,

cosmetics, and/or house wares and sell them at everyday low prices in an efficient,

limited service environment. It frequently has community dressing rooms, centralized

checkout counters, no gift-wrapping, and extra charges for alterations.

6. Off-Price Retailer

i. Offer an inconsistent assortment of branded fashion-oriented soft goods at low prices.

ii. Purchase goods from manufacturers who have excess inventory.

iii. Purchase in bulk & sell at off-prices.

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7. Membership Club

i. Customer has to pay annual fee to become the members of the club.

ii. Membership allows them to purchase goods at low price.

iii. Purchases, directly from manufacturers.

8. Flea Market (Outdoor Bazaar)

i. An outdoor or indoor facility that rent out space to vendors who offer merchandise,

services & other goods.

ii. Many retail vendors offering a variety of products at discount prices at places where

there is high concentration of people.

III. Services vs. Goods Retail Mix Based

Service Retailing

The retail entities primarily selling services rather than products are in retailing of

services. Services also play a significance role in the retail merchandise mix of the retail

organization selling merchandise as a core product. The main differences between

retailing of products and retailing of services are because of the intangibility,

simultaneous production and consumption, perishability and inconsistency.

i. Sale or rental of an intangible activity, which usually cannot be stored or

transported, but satisfies the needs of the user.

ii. Service can be along with goods or pure service.

iii. E.g. - Hospitals, banks, beauty salons, entertainment firms etc.14

1.6.2. Non-Store Retailers

A. Traditional

1. Direct Marketing-

i. Customer is informed about the product through non-personal Medias like

TV, radio, magazine, newspaper, internet etc.

_________________________________________

14Ibid.p.136-147

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ii. The customer places an order through mail or phone.

iii. Less investment as compared to store based retailing.

iv. Wide geographic area is covered.

2. Direct Selling

i. Door-to-door selling.

ii. Person-to-person selling (Eureka Forbes).

iii. Multilevel (network) marketing (Amway, Japan Life).

3. Vending Machines

i. Involves coin or card operated dispensing of goods & services.

ii. Round the clock sales.

iii. Machines are placed at the most convenient places for the customers.

iv. Soft drinks vending machines, ATMs, coffee, vending machines etc.

4. Catalog Marketing-

i. Sales made through catalogs mailed to a select list of customers or made available

in a store.

ii. Delivery or order can be through mail, express service, and parcel post.

5. Tele-Marketing-

i. Telephone as a media for sales.

ii. Informing customers about new merchandise & upcoming sales events.

6. TV Home Shopping-

i. Shop – by- TV, demonstration of the product, its features, benefits etc (Asian

sky shop, tele-shopping etc.).15

_________________________________________

15M’Michael j,Etzel,Bruce j .walker, William J Stanton,Ajay pandit, marketing concept and cases 13

edition tata mc graw hill publishing company.p.436-440.

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B. Nontraditional

1. E-tailing or World Wide Web

i. Internet as a medium for promoting their products.

ii. People access information about products using the web address of the

retailer’s homepage.

iii. Retailers’ website allows customers to order with a click of mouse.

2. Video Kiosk-

Freestanding interactive computer terminal that displays product & related information on

a video screen, are often touch screen.

3. Video Catalog-

A retail catalog on a CD-ROM disk, to be viewed on a computer monitor.16

1.6.3. Some Other Types of Retail Business Models

Mom-and-Pop Stores: These are generally family-owned businesses catering to small

sections of society. They are small, individually run and handled retail outlets.

Category Specialists / Killers: These retailers are discount specialty stores. By offering

a complete assortment at low prices, category specialists can “kill” a category of

merchandise for other retailers and thus they are called category killers. For example,

Office Depot, electronics (Best Buy) and sporting goods (Sport Authority), The Home

Store, Landmark, and Music World etc. are some of the category specialists.

_______________________

16Barry Berman& Joel R. Evans (2006), Retail Management A Strategic approach ninth edition Pearson

education.inc, New delhi.p.162-173.

22 | P a g e

Malls: These are the largest form of retail formats. They provide an ideal shopping

experience by providing a mix of all kinds of products and services, food and

entertainment under one roof. Examples are Sahara Mall, TDI Mall, MGF Metropolitan.

Specialty Stores: The retail chains, which deal in specific categories and provide deep

assortment in them are specialty stores. Examples are RPG's Music World, Mumbai's

bookstore Crossword, etc.

Discount Stores: These are the stores or factory outlets that provide discount on the MRP

items. They focus on mass selling and reaching economies of scale or selling the stock

left after the season is over.

Supermarkets: A predominantly self-service format offering a full line of groceries,

meat, and produce with limited sales of non-food items, such as health and beauty aids

and general merchandise. It operates between 5,000 to 30,000 square feet of total selling

area. These stores typically carry approximately 30,000 SKUs. The largest supermarket

chains of US are Kroger, Albertson’s, Safeway, A hold USA, and Publix. Nilgiri’s, Food

world, Subhiksha, Food Bazaar and Vitan are some of the Supermarkets in India.

Supercenters: The fastest growing retail category, are large stores (150,000-220,000 Sq.

ft.) that combine a supermarket with a full-line discount store. By offering broad

assortments of grocery and general merchandise products under one roof, supercenters

provide a one-stop shopping experience. Supercenters offer larger percentage of non-food

items and focus more on dry groceries such as breakfast cereal and canned goods, instead

of fresh items. Wal-Mart, Meijer, Kmart, Fred Meyer (a division of Kroger) etc. are some

of the major supercenters of the world.

Hypermarkets: It is a combination of a general merchandise store and the supermarket.

These are characterized by large store size, low operating costs and margins, low prices

and comprehensive range of merchandise. Hypermarket operates in over 50,000 sq. ft.

area and offers over 50,000 different items for sale. Hypermarkets carry a larger

proportion of food items than supercenters with a greater emphasis on perishables-

produce, meat, fish and bakery. They offer an expanded selection of non-food items,

including health and beauty products and general merchandise at low prices.

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Full-Line Discount Stores: These retailers offer a broad variety of merchandise, limited

service and low prices. Discount stores offer both private labels and national brands, but

these brands are typically less fashion oriented than the brands in the department stores.

The big three full-line discount store chains are Wal-Mart, Kmart, and Target, which

account for 84 percent of the sales in this retail format.

Drugstores: These specialty stores concentrate on health and personal grooming

merchandise. Pharmaceuticals often represent over 50 percent of drugstore sales and even

greater percentage of their profits. The largest drugstore chains in the United States are

Walgreen, CVS, Rite Aid and Albertson’s.

Extreme Value Retailers: These small, full-line discount stores offer a limited

merchandise assortment at very low prices. The largest extreme value retailers are Dollar

General and Family Dollar Stores.

Franchising: It is a contractual agreement between a franchisor and a franchisee that

allows the franchisee to operate a retail outlet using a name and format developed and

supported by the franchisor. In a franchise contract, the franchisee pays a lump sum plus

a royalty on all sales for the right to operate a store in a specific location. The franchisee

also agrees to operate the outlet in accordance with procedures prescribed by the

franchisor. The franchisor provides assistance in locating and building the store,

developing the products or services sold, training managers, and advertising.

Cash and Carry: The term cash and Carry means that customers do their own order

picking, pay in cash and carry the merchandise away. The cash and carry is a wholesale

format that aids small retailers and businesspersons. Metro AG, Germany and Shoprite of

South Africa, Bharti–Wal-Mart etc are some of the major players in Cash and Carry

format.

Airport Retailing: In the present era, airports are focusing on retail to convert airports

into exciting, energized business and retail/entertainment centers-as well as transportation

hubs. Airports in many cities of the western world, the Far East and Middle East serve as

mini shopping Plazas for the traveler, the trend is catching up in India. Across the globe,

24 | P a g e

major airports that are upgrading or adding terminals are equipping them with copious

amounts of retail and restaurant space.

The Public Distribution System: PDS in India is more than half a century old as

rationing introduced in 1939 in Bombay, by the British Government, as a measure to

ensure equitable distribution of food grains to urban consumers in the face of rising

prices. The PDS, as understood today, is a means for the distribution of essential

commodities to a large number of people, through a network of Fair Price Shops (FPS),

on a recurring basis. The commodities include Wheat, Rice, Sugar, Kerosene etc.

1.7. Retailer’s Relationships

In a relationship retailing, there are four factors to keep in mind: the customer base,

customer service, customer satisfaction and loyalty programs.

a. The Customer Base

Retailers must regularly analyze their customer base in terms of population and lifestyle

trends, attitude towards and reason for shopping, the level of loyalty, and the mix of new

versus loyal customer.

b. Customer Service

Customer service refers to the identifiable, but sometimes intangible, activities

undertaken by a retailer in conjunction with the goods and service it sells. Consistent with

a value chain philosophy, retailers must apply two elements of customer service:

Expected customer service is the service level that customers want to receive from any

retailer, such as basic employee courtesy. Augmented customer services include that

activity that enhance the shopping experience and give retailers a competitive advantage.

c. Customer Satisfaction

Customer satisfaction occurs when the value and customer service provided through

retailing experience meet or exceed customer expectations. If the expectation of

customer not met, the consumer will be dissatisfied. “Retail satisfaction consists of three

categories: shopping system satisfaction which includes availability and types of outlets;

buying system satisfaction which includes selection and actual purchasing of products;

25 | P a g e

and consumer satisfaction derived from the use of product. Dissatisfaction with any of the

three aspects could lead to customer disloyalty, decrease in sales, and erosion of the

market share.

d. Loyalty Programs

Consumer loyalty programs reward a retailer’s best customer, those with whom it wants

long lasting relationships. These programs honour the shopping behaviour of the

customer.17

1.8. Retail Promotion

Retail promotion includes any communication by retailer that informs, persuades, and /or

reminds the target market about any aspect of that firm. Elements of the retail

promotional mix are Advertising, public relations, personal selling, and sells promotion.

a. Advertising

Advertising is a paid, non-personal communication transmitted through out -of-store

mass media by an identified sponsor. Wal-Mart spends just 0.4 percent of sales on ads,

relying more on word of mouth, in-store events, and everyday low prices.18

b. Public Relations

Public relations entail any communication that fosters a favourable image for the retailer

among its publics (consumers, investors, government, channel members, employees, and

the public). It may be nonperson or personal, paid or non- paid, and sponsor controlled or

not controlled. Publicity is any non-personal form of public relations whereby message

are transmitted through mass media, the time or space provided By the media is not paid

for , and there is no identified commercial Sponsor.

______________________________________

17Ibid.p.46-53.

18Tapan. k. Panda (2007), marketing management text and cases second addition excel book

publication.pp.548.

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c. Personal Selling

Personal selling involves oral communication with one or more prospective customers for

making sale. the level of personal selling used by a retailer depends on the image it

wants to convey , the products sold ,the amount of self service, and the interest in long

term customer relationships as well as customer expectation .

d. Sales Promotion

Sales promotion encompasses the paid communication activities other than advertising,

public relations, and personal selling that stimulates consumer purchases and dealer

effectiveness .it includes displays, contests, sweepstakes, coupons, prices, and sample.19

1.9. Retail Strategy

The word strategy comes from the Greek word meaning the “art of the general”. The term

strategy was used in retailing for example; promotion strategy, location strategy, and

private brand strategy. A Retail strategy is the overall plan guiding a retail firm. It

influences the firm’s business activities and its response to market forces, such as

competition and the economy. Any retailer, regardless of size or type, should utilize these

six steps in strategic planning:

1. Define the type of business in terms of the goods or services category and the

company’s specific orientation (such as full service or “no frills”).

2. Set long run and short-run objectives for sales and profit, market share, image, and so

on.

3. Determine the customer market to target based on its characteristics (such as gender

and income level) and needs (such as product and brand preferences).

4. Devise an overall, long run plan that gives general direction to the firm and its

employees.

______________________________________

19Barry Berman& Joel R. Evans (2006), Retail Management A Strategic approach ninth edition Pearson

education.inc, New delhi.p.499-509.

27 | P a g e

5. Implement an integrated strategy that combines such factors as store location, product

assortment, pricing, and advertising and displays to achieve objectives.

6. Regularly evaluate performance and correct weakness or problems when observed.

To illustrate these points, the background and strategy of Target Stores- one of the

world’s foremost retailers are presented.20

1.10. Issues in Multichannel Retailing

Customers to be recognized by a retailer whether they interact with a sales associated or

kiosk in a store, log on to the retailer’s website or contact the retailers call centre by

telephone. To provide a consistent face to customers across multiple channel retailers

need to integrate their customer databases and system used to support each channel.

The major issues faced by the multichannel retailer are:

1. Integrated Shopping Experience

When retailers initially went online, they simply displayed products for sale on their

website. Now to get ahead of the competition, multichannel retailers need to provide

features and services that enhance the customers experience across channel. One of the

earliest integration success stories has been giving customers the ability to visit stores to

return item purchased online. Once customers are in the store, they also are more likely to

buy something than they would we if they only show an item on the web.

2. Brand Image

Multichannel retailers need to project the sales image to their customers across all

channels.

________________________________________________

20Tapan. k. Panda (2007), marketing management text and cases second addition excel book

publication.p.484.

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3. Merchandise Assortment

Customer aspect they everything they see in a retailers store will also are available on its

website. A significant product overlap across channel reinforces the brand image in the

customer’s mind.

4. Pricing

Retailers with stores in multiple markets often set different prices for the same

merchandise to deal with differences in local competition. Multichannel retailers are

beginning to offer new types of pricing, like auction that take advantage of the unique

properties of the internet.21

1.11. Strategy Retail Planning Process22

The strategic retail planning process entails the set of steps retailers goes through to

develop a strategic retail plan it describe how retailers select target market segments,

determine the appropriate retail format and build sustainable competitive advantages. The

planning processes can be used to formulate strategic plans at different levels within a

retail corporation. There are seven steps in the strategic retail planning processes, which

are given in figure 1.1.

_______________________________________

21Integrating Multiple Channels, Chain Store age Executive, August 2001, p.A24.

22Michael Levy, Barton A Weitz, Ajay Pandit (2008), Retailing Management Sixth Edition Tata McGraw

Hill publishing company limited.p.65.

29 | P a g e

Figure No.1.1. Strategy Retail Planning Process

Step – I: Define the Business Mission

The first step in the strategic retail planning process is to define the business mission. The

mission statement is a broad description of a retailers objectives and the scope of

activities it plans to undertake. Whereas the objectives of a publically held farm to

maximise its stockholder’ wealth by increasing the value of its stock and paying

dividends.

1. Define the Business Mission

2. Conduct a situation audit: Market attractiveness

analysis Competitors analysis Self-analysis

3. Identify Strategic Opportunities

4. Evaluate strategic alternatives

5. Establish specific objectives and allocates resources

6. Develop a retail mix to implement strategy

7. Evaluate performance and make adjustment

30 | P a g e

Step – II: Conduct a Situation Audit

After developing a mission statement and setting objectives, the next step in the strategic

planning process is to conduct a situation audit, an analysis of the opportunities and treats

in the retail environment and the strength and weakness of retail business relative to its

competitors. The elements in the situation analysis are shown in given table

Table No.1.2. Situation Analysis

Market

Factors

Competitive

Factors

Environmental

Factors

Analysis of Strength

and Weakness

Size Barriers to entry Technology Management capabilities

Growth Bargaining power

of vendors

Economic Financial resources

Seasonality Competitive rivalry Regulatory Locations

Business cycles Social Operations

Merchandise

Store management

Customer loyalty

Step – III: Identifying Strategic Opportunities

After completing the situation audit, the next step is to identify opportunities for

increasing retail sales. Kelly Bradford presently competes in gift retailing using a

speciality store format. Some of growth strategies identified by him is market penetration,

market expansion, format development and diversification.

Step – IV: Evaluate Strategic Opportunities

The evaluation determines the retailer is potential to establish a sustainable competitive

advantage and reap long-term profits from the opportunities being evaluated. Thus, a

retailer must focus on opportunities that utilized its strength and its competitive

advantage.

Step – V: Establish Specific Objectives and Allocate Resources

The next step in the strategic planning process is to establish a specific objective for each

opportunity. The retailer’s overall objectives are including in the mission statement; the

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specific objectives specific objectives are goals against which progress towards the

overall objectives can be measured. Thus, these objectives have three components.

1) The performance sought, including a numerical index against which progress may

be measured.

2) A period within which the goal is to achieved.

3) The level of investment needed to achieve the objective.

Step – VI: Develop a Retail Mix to Implement Strategy

The sixth step in the planning process is to develop a retail mix for each opportunity in

which an investment will be made and control and evaluate performance.

Step – VII: Evaluate Performance and Make Adjustments

The final step in the planning process is to evaluate the result of the strategy and

implementation program. If the retailer is meeting or exceeding its objectives, changes

aren’t needed. But if the retailer fails to meet its objective, reanalysis is required.

Typically, this reanalysis starts with reviewing the implementation programs, but it may

indicate that the strategy (or even the mission statement) needs to be reconsidered.

1.12. Major Organized Retailers in Indian Market

1. Pantaloon Retail

The flagship company of Future Group, Pantaloons Retail operates over 16 million

square feet of retail space, has over 1000 stores across 73 cities in India and employs over

30,000 people. It can boast of launching the first hypermarket Big Bazaar in India in

2001. The companies also operates in other retail segments such as - Food & grocery (Big

bazaar, Food bazaar), Home solutions (Hometown, furniture bazaar, collection-i),

consumer electronics (e-zone), shoes (shoe factory), Books: music & gifts (Depot),

Health & Beauty care services (Star, Sitara and Health village in the pipeline), e-tailing

(Futurbazaar.com), entertainment (Bowling co.).

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2. K. Raheja Group

They forayed into retail with Shopper’s Stop, India’s first departmental store in 2001. It is

the only retailer from India to become a member of the prestigious Intercontinental Group

of Departmental Stores (IGDS). Shoppers Stop has a national presence, with over 2.05

million square feet area across 39 stores in 17 cities. It has also introduced new formats in

the market viz Home Stop – the exclusive home furnishings, décor as well as furniture

store and Hyper City– a premium shopping destination for Foods, Home ware, Home

Entertainment, Hi-Tech Appliances, Furniture, Sports, Toys & Fashion. Other format of

the company includes -- Crossword Book Store, Mother Care & Early Learning Centre

(ELC), Estee Lauder group, Airport Retailing, Time Zone Entertainment.

3. Tata Group

Established in 1998, Trent - one of the subsidiaries of Tata Group - operates Westside, a

lifestyle retail chain and Star India Bazaar - a hypermarket with a large assortment of

products at the lowest prices. In 2005, it acquired Landmark, India's largest book and

music retailer. Tata’s has also formed a subsidiary named Infiniti retail which consists of

Croma, a consumer electronics chain. Another subsidiary, Titan Industries, owns brands

like “Titan”, the watch of India and Tanishq, the jewelry brand.

4. RPG Group

One of the first entrants into organized food & grocery retail with Food world stores in

1996 and then formed an alliance with Dairy farm International and launched health &

glow (pharmacy & beauty care) outlets. Now the alliance has dissolved and RPG has

Spencer’s Hyper, Super, Daily and Express formats and Music World stores across the

country.

5. Landmark Group

Landmark Group launched in 1998 in India; currently owning 100 stores across various

retail formats. The retail ventures of Landmark Group includes - Home Centre, Centre

33 | P a g e

point, Baby shop, Splash, Shoe Mart, Lifestyle, Max, Lifestyle Department Stores, SPAR

hypermarkets, Food mark, Fun City, Fitness First, Citymax India etc.

6. Bharti-Wal-Mart

Bharti have signed a 50:50 percent joint venture agreement with Wal-Mart’ in which

Wal-Mart will be taking care of cash & carry and Bharti will do the front-end. Further,

they plan to invest US$ 7 billion in creating retail network in the country including 100

hypermarkets and several 100 small stores.

7. Reliance

Reliance Retail is the retail business wing of the Reliance business. It has many brands

into retailing business like Reliance Fresh, Reliance Footprint, Reliance Time Out,

Reliance Digital Store, Reliance Wellness, Reliance Trends, Reliance AutoZone,

Reliance Super, Reliance Mart, Reliance iStore, Reliance Home Kitchens, Reliance

Market (Cash n Carry) and Reliance Jewel The company owns more than 560 Reliance

Fresh stores and recently it has also launched Reliance Mart Hyper mart. The company

further plans to launch its mart in Delhi / NCR, Hyderabad, Vijayawada, Pune and

Ludhiana region.

8. AV- Birla Group's

Madura garments are a subsidiary of Aditya Birla Nuvo Ltd. and own brands such as

Louis Philippe, Van Heusen, Allen Solly, Peter England, Trouser town. The recently

acquired food and grocery chain of south, Trineth, has further increased their number of

store to 400 stores in the country. The company also own ‘More’ supermarkets and

hypermarkets. Currently it runs 600 supermarket and nine hypermarkets across India. The

turnover this year was 1700 crores.

9. Metro

Metro Cash & Carry, the first company to introduce cash and carry business, started its

operations in India in 2003 with two Distribution Centers in Bangalore. Metro offers

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assortment of over 18000 articles across food and non-food at the best wholesale prices.

Currently Metro operates six cash and carry centers in Bangalore, Hyderabad, Kolkata

and Mumbai.

10. Vivek’s Ltd

Vivek’s Limited is the largest consumer electronics and home appliances retail chain in

India, with 44 stores in south, covering a retail space area of over 1, 75, 000 sq. ft and a

turnover of over Rs. 400 crore. Its brand, Vivek’s, is now a household name. The

company plans to set up 50 more showrooms in South India.23

1.12.1. Major Factor Responsible for the Growth of Organized Retailing in India

Organised retailing is a recent development. It is the outcome of socioeconomic factors.

India is standing on the threshold of retail revolution. Retail Industry, one of the fastest

changing and vibrant industries that, has contributed to the economic growth of our

country. Within a very sport span of time, Indian retail industry has become the most

attractive, emerging retail market in the world.

Some of the factors responsible for the growth of organised retailing are as under:

1. Growth of Middle Class Consumers

In India, the number of middle class consumer is growing rapidly. With rising consumer

demand and greater disposable income has given opportunity of retail industry to grow

and prosper. They expect quality products at decent prices. Modern retailers offer a wide

range of products and value added services to the customers. Hence, this has resulted into

growth of organised retailing in India. Growing consumerism would be a key driver for

organized retail in India.

_________________________________________

23Kavaldeep Dixit, “Retailing Marketing in India” Key issues and Challenges, op.cit; p.12-23.

35 | P a g e

2. Increase in the Number of Workingwomen

Today the urban women are literate and qualified. They have to maintain a balance

between home and work. The purchasing habit of the workingwomen is different from

the homemaker. They do not have sufficient time for leisure and they expect everything

under one roof. They prefer one-stop shopping Modern retail outlets therefore offers one

store retailing.

3. Value for Money

Organised retailers offer quality products at reasonable prices. Example: Big Bazaar and

Subhiksha. Opportunity for profit attracts more and more new business groups for

entering in to this sector.

4. Emerging Rural Market

Today the rural market in India is facing stiff competition in retail sector also. The rural

market in India is fast emerging, as the rural consumers are becoming quality conscious.

Thus due to huge potential in rural retailing organised retailers are developing new

products and strategies to satisfy and serve rural customers. In India, Retail industry is

proving the country’s largest source of employment after agriculture, which has the

deepest penetration into rural India.

5. Entry of Corporate Sector

As the corporate – the Piramals, the Tatas, the Rahejas, ITC, S.Kumar’s, RPG

Enterprises, and mega retailers- Crosswords, Shopper’s Stop, and Pantaloons race to

revolutionize the retailing sector.

6. Entry of Foreign Retailers

Indian retail sector is catching the interest of foreign retailers. Due to liberalisation,

multinationals have entered out country through joint ventures and franchising. This

further is responsible for boosting organised retailing.

7. Technological Impact

Technology is one of the dynamic factors responsible for the growth of organised

retailing. Introduction of computerization, electronic media and marketing information

system have changed the face of retailing. Organized retailing in India has a huge scope

36 | P a g e

because of the vast market and the growing consciousness of the consumer about product

quality and services. One of the major technological innovations in organised retailing

has been the introduction of Bar Codes. With the increasing use of technology and

innovation, retailers are selling their products online with the help of Internet.

8. Rise in Income

Increase in the literacy level has resulted into growth of income among the population.

Such growth has taken place not only in the cities but also in towns and remote areas. As

a result, the increase in income has led to increase in demand for better quality consumer

goods. Rising income levels and education have contributed to the evolution of new retail

structure. Today, people are willing to try new things and look different, which has

increased spending habits among consumer.

9. Media Explosion

There has been an explosion in media due to satellite television and internet. Indian

consumers exposed to the lifestyle of countries. Their expectations for quality products

have risen and they are demanding more choice and money value services and

conveniences.

10. Rise of Consumerism

With the emergence of consumerism, the retailer faces a more knowledgeable and

demanding consumer. As the business exist to satisfy consumer needs, the growing

consumer expectation has forced the retail organizations to change their format of retail

trade. Consumer demand, convenience, comfort, time, location etc. are the important

factors for the growth of organised retailing in India.24

1.12.2. Challenges and Opportunities

The challenges faced by the Indian organized retail industry are various and these are

stopping the Indian retail industry from reaching its full potential. The behavior pattern of

the Indian consumer has undergone a major change.

_______________________________________

24www.Indiaretailing.com. retrieved. 2014-05-10.

37 | P a g e

This has happened for the Indian consumer is earning more now, western influences,

women working force is increasing, desire for luxury items and better quality. He now

wants to eat shop and get entertained under the same roof. All these have lead the Indian

organized retail sector to give more in order to satisfy the Indian customer.

The biggest challenge facing by the Indian organized retail industry is the lack of retail

space. With real estate prices escalating due to increase in demand from the Indian

organized retail industry, it is posing a challenge to its growth. With Indian retailers,

having to shell out more retail space it is effecting their overall profitability in retail.

Trained labor shortage is a challenge facing by the organized retail industry in India. The

Indian retailers have difficulty in finding trained person and have to pay more in order to

retain them. This again brings down the Indian retailers profit levels.

The Indian government has allowed 51% foreign direct investment (FDI) in the Indian

retail sector to one-brand shops only. This has made the entry of global retail giant to

organized retail industry in Indian difficult. However, the global retail giants like Tesco,

Wal-Mart and Metro AG are entering the organized retail industry in India indirectly

through franchisee agreement and cash and carry wholesale trading. This is a challenge

being faced by Indian organized retail industry. Many Indian companies entering the

Indian organized retailing like Reliance Industries Limited, Pantaloons, and Bharti

Telecoms are facing stiff competition from these global retail giants. As a result

discounting is becoming an accepted practice among this Indian companies.25

________________________________

25Indiaretailing.com. retrieved. 2014-04-14.

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1.13. Perception

1.13.1. Meaning of Perception

Perception is the process of attaining awareness or understanding of sensory information.

It is a psychological process by which consumers derives certain meanings to what has

been sensed by different sensory organs It explains how a person recognizes, selects,

organizes and interprets each stimulus based on his/her needs, values and expectations. It

describes, “How we see the world around us”.

Theories of perception mainly suggest that people make their own picture of the world.

Similarly, shoppers/customers perceive brands or products in their own ways and take

decision based on their perception about them rather than objective reality. Perception in

marketing influences our acquisition and consumption of goods and services through our

tendency to assign meaning to such things as color, symbols, tastes and packaging.

Culture, tradition, and our overall upbringing determine our perception of the world.

Thus, perception is precisely the reason behind the differences in like and dislikes,

preferences and non-preferences about a product, a brand, a place, and people.

Thus, the perceptual process includes; Exposure occurs when a stimulus comes within

range of our sensory receptor nerves. Attention occurs when the stimulus activates one or

more sensory receptor nerves, and the resulting sensation go to the brain for processing

and Interpretation is the assignment of meaning to sensations.26

1.13.2 Elements of Perception

Sensation- it is the immediate and direct response of the sensory organs to stimuli.

Sensitivity of a stimulus depends on the quality of sensory receptors, the amount of

stimulus to which the individual is exposed, and the environment within which the

perception takes place.

________________________________________

26Leon G. Schiffman, Leslie Lazur. Kanuk, (1994), Consumer behaviour 5th edition 1994 prentice hall of

India pvt.Ltd.p.162-167.

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The Absolute Threshold – this is the lowest level at which an individual can experience

a sensation. The point at which one can detect a difference between “something” and

“nothing” is that person’s absolute threshold for that stimulus.

Just Noticeable Difference (JND) - It is the minimal apparent difference between two

similar stimuli as observed by the consumer. It is also known as differential threshold.

Weber’s Law states that the stronger the stimulus, the greater the change required the

stimulus to be seen as different.

Subliminal Perception- Subliminal perception occurs whenever the stimuli presented

below the threshold for awareness are found to influence thoughts, feelings or actions. A

subliminal message is a signal or message embedded in another medium designed to pass

below the normal limits of the human mind’s perception. These messages are

unrecognizable by the conscious mind, but, in certain situations can affect the

subconscious mind and can influence subsequent thoughts, behaviors, attitudes, beliefs

and value systems. Subliminal messages are often found to be very effective to influence

consumption behaviour.27

1.13.3 Dynamics of Perception

Perception is a result of two types of inputs: physical stimuli and experiences. The

combined effect of these two factors produces different pictures for each individual. This

is because people are very selective as to which stimuli they recognize and which they

neglect. Secondly, for stimuli they recognized, their interpretation would depend on their

personal needs, expectations and experiences. Perception has three aspects selection,

organization and Interpretation of stimuli. As consumers are invariably subject to a lot of

information exposure and influences, they tend to form their perceptions depending on

their mindsets.28

_______________________________

27Ibid.p.186

28Ibid.p.190

40 | P a g e

1.13.4. The Aspects of Perception

There are three aspects of perception

i. Selection

ii. Organisation

iii. Interpretation of stimuli

a. Perceptual Selection

Consumers subconsciously exercise a great deal of selectivity about which aspects of

environment that is, the stimuli – they will perceives. An individual may look at

something, ignore others and turn away from still others. In total, people actually receive

– or perceive – only a small fraction of the stimuli to which they are exposed. This called

selective perception.

b. Perceptual Organisation

The specific principal underline perceptual organisations are often referred to by the

name given to the school of psychology that was first developed it, Gestalt psychology.

We do not experience the numerous stimuli we select from the environment as separate

and discrete sensations; rather, we tend to organise them into groups and perceive them as

unified whole. There are the three most basic principal of perceptual organisation that are

figure and ground, grouping and closure.

c. Perceptual Interpretation

Interpretation of stimuli is also uniquely individual, since it is based on what we expect to

see in light of our previous experience on the number of plausible explanation we can,

and on our motives and interest at the time of perception. Consumers attribute the sensory

input they receive to sources they consider most likely to have caused the specific pattern

of stimuli. Experiences and social interaction may help to form certain expectation that

provide categories or alternatives that we use in interpreting stimuli.29

_____________________________

29Ibid.p.171-183

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1.13.5 Exposure

Exposure simply reflects the process by which the consumer comes in physical contact

with a stimulus. Consumers exposed too many types of marketing stimuli, including ads,

packages, brand names, signs, logos, and brand attributes. Exposure to services and

products can come from many sources, including the mass media, friends, opinion leaders

and marketers; and information can be communicated via word-of-mouth or through

nonperson sources.

Figure No.1.2.The Psychological Core

Attitude Formation and Change

Memory and Retrieval

Motivation

Ability

And

Opportunity

EXPOSURE, ATTENTION AND PERCEPTION

PERCEPTION

Sensory processing

-Vision

-Hearing

-Taste

-Smell

-Touch

Perceptual

Thresholds

-Absolute thresholds

-Differential threshold

-Subliminal perception

Perceptual

organization

-Figure/ground

-Closure

-Grouping

ATTENTION

Characteristics

Preattentive processing

Increasing attention via:

-Self-relevance

-Pleasant stimuli

-Surprise

-Easy-to-process stimuli

Habituation

Physiological and emotional

responses

EXPOSURE

Gaining exposure

Selective exposure

Categorized and comprehensive

42 | P a g e

a. Marketing Stimuli

1. It is the information about brand names, brand symbols, product attributes, signs, and

packages and so on.

2. Communicated through marketer or non-marketer sources and through the mass media

or personal sources.

3. That occurs at the buying, using, or disposing stages of consumption.

Exposure is important because it is a critical step in consumers processing of marketing

stimuli. Advertising in media like airlines in flight entertainment programs, luggage

carousels, home video rentals, shopping carts, school news programs, and instant coupon

machines in supermarket are other ways of increasing exposure. The internet is also

becoming an increasingly popular spot for exposure to marketing communications.

Consumers are most likely to be exposed to products when they are featured in an end-of-

aisle display or when they take up a lot of space on the shelf. Exposure increases if

products are placed at points in the store where all consumers must go and spend time.

For example hardware stores, supermarkets, automotive stores, and restaurants find that

sale of some products can be enhanced by the use of point-of-purchase displays at the

checkout counter.

b. Consumers Attention:

Attention refers to the process by which an individual allocates part of his or her

cognitive resources (mental activity) to a stimulus. Attention is also a critical information

processing activity. A certain amount of attention is necessary for information to be

perceived to activate our sensory receptors.

c. Characteristics of Attention:

One key aspect of attention is that it is selective because we cannot possibly process all

the things to which we are exposed. A second aspect of attention is that it is capable of

divided. This means that we can divide our attentional resources into units and allocate

some attention to one task and some attention to another task. When we parcel our

attention and flexibility from one task to other, it means we have the potential to become

distracted. If a consumer is distracted from marketing stimulus the amount of attention

devoted to it will be greatly reduced. A third and critical aspect of attention is that it is

limited. That is, attending to something takes up a limited supply of processing resources.

43 | P a g e

This means that we can pay attention to several things at once only if the processing of

these things is relatively automatic, well practiced and effortless.30

1.13.6. Perceiving a Stimulus:

Perception occurs when stimuli are registered by one of our five senses: vision, hearing,

taste, smell, and touch.

a. Perceiving Through Vision:

Vision is one of the key senses in the processing of marketing stimuli. There are two

major properties of visual stimuli affect whether they are pick up by sensory receptors:

colour and brightness.

Colour: Colour is an important factor in the perception of visual stimuli, colours can be

classified into two broad categories: warm colours, such as red, orange, and yellow, and

cool colours, such as green, blue, and violet. Warm colours generally encourage activity

and excitement, where as cool colours are more soothing and relaxing.

Brightness: A basic principle of visual processing is that the more intense the stimulus,

the more likely it is to be perceived. Intensity is determined by brightness. Stimuli that

are brighter are more likely to activate sensory receptors. That is why many packages and

advertisements are relatively in design.

b. Perceiving Through Hearing:

The perception of sound represents another form of sensory input. A major principle

determining whether a stimulus will pick up by sensory receptors is its auditory intensity.

Thus, loud music or voices, or stark noises can increase the probability that the stimulus

will be perceive.

_____________________________

30wayne D. Hoyer, Deborah j McInnis, (1999), consumer behaviour all India publisher and distributers

regd.p.57-62.

44 | P a g e

c. Perceiving Through Taste:

Organic products, herbal teas, low-fat beef and whole cereal grain products once

associated with “health food junkies” are now finding broader appeal because they taste

better than they used to. Today consumers want to have healthy foods, but ease of

preparation end up being the most important factor that drive their choices.

d. Perceiving Through Smell:

Smell is an interesting perceptual modality. There are also individual differences in

consumer’s ability to label odours. The elderly have a harder time identifying smells

compared with younger consumers, and men are worse at the task than women are. Like

other senses, smell also produces physiological and emotional outcomes. For example,

the smell of peppermint makes us more aroused, and the smell of lily of the valley makes

us feel relaxed. Providing consumers with a pleasant smelling environment can have a

positive effect on shopping behaviour.

e. Perceiving Through Touch:

The sense of touch is a very important element for many products and services. Like

other sensory modalities, touch has important physiological and emotional effects.

Depending upon how we are touched, we can feel stimulated or relaxed. Consumers who

are touched by a sales person are more likely to evaluate both the store and salesperson

positively.31

1.14. Gwalior Division: Introduction and Demographic Profile32

Gwalior Division is an administrative subdivision of Madhya Pradesh state in central

India. It includes the districts of Ashoknagar, Datia, Guna, Gwalior, and Shivpuri. The

historic city of Gwalior is the administrative headquarters of the division. Gwalior and

Chambal divisions correspond to the Gird region of Madhya Pradesh, which is mostly a

level agricultural plain, dotted with ranges of low hills.

__________________________________

31Ibid.p.72-76

32www. Census2011.co.in. Retrieved 2014-03-15

45 | P a g e

The divisions include the northern, contiguous portion of the former princely state of

Gwalior together with the former princely state of Datia; the non-contiguous southern

portions of the former state of Gwalior are currently part of Bhopal, Indore and Ujjain

divisions.

Ashoknagar District is a district of Madhya Pradesh state in central India. The city of

Ashoknagar is the administrative headquarters of the district. Ashoknagar district was

formed in 2003. The district has an area of 4673.94 km². The district has a population of

688,920 (2001 census). It divided into five tehsils: Ashoknagar, Chanderi, Issagarh,

Mungaoli and Shadora. The district was created on August 15, 2003 when it was split

from Guna District.

Average literacy rate of Ashoknagar in 2011 were 67.90 compared to 62.26 of 2001. If

things are looked at gender wise, male and female literacy were 80.22 and 54.18

respectively. For 2001 census, same figures stood at 77.01 and 45.24 in Ashoknagar

District. Total literate in Ashoknagar District were 480,957 of which male and female

were 299,409 and 181,548 respectively.

Table No.1.3. Ashoknagar Demographic Profile

Area

Total 4,673.94 km2 (1,804.62 sq mi)

Population (2011)

• Total 844,979

• Density 180/km2 (470/sq mi)

Demographics

• Literacy 67.90

• Sex ratio 900

Datia District is in Gwalior Division in the Indian state of Madhya Pradesh. The town of

Datia is the district headquarters. Datia is bounded by the Madhya Pradesh districts of

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Bhind to the north, Gwalior to the west, and Shivpuri to the south, and by Jhansi District

of Uttar Pradesh state to the east. The district is part of Gwalior Division.

TableNo.1.4. Datia Demographic Profile

According to the 2011, Census Datia District has a population of 786,375, roughly equal

to the nation of Comoros or the US state of South Dakota. This gives it a ranking of 487th

in India (out of a total of 640). The district has a population density of 292 inhabitants per

square kilometre (760 /sq mi). Its population growth rate over the decade 2001-2011 was

18.4%. Datia has a sex ratio of 875 females for every 1000 males, and a literacy rate of

73.5%.

Guna District is one of the 50 districts of Madhya Pradesh in central India. Its

administrative headquarters is Guna. The district has a population of 12,40,938 (2011

census). It has an area of 6485 km², and is bounded on the northeast by Shivpuri District,

on the east by Ashoknagar District, on the southeast by Vidisha District, on the southwest

by Rajgarh District, on the west and northwest by Jhalawar and Baran districts of

Rajasthan state.

According to the 2011 census Guna District has a population of 1,240,938, roughly equal

to the nation of Trinidad and Tobagoor the US state of New Hampshire. This gives it a

ranking of 388th in India (out of a total of 640). The district has a population density of

194 inhabitants per square kilometre (500 /sq mi). Its population growth rate over the

Area

• Total 2,038 km2 (787 sq mi)

Population (2011)

• Total 786,375

• Density 390/km2 (1,000/sq mi)

Demographics

• Literacy 73.5 per cent

• Sex ratio 875

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decade 2001-2011 was 26.91%. Guna has a sex ratio of 910 females for every 1000

males,[2]

and a literacy rate of 65.1%.

Table No.1.5. Guna Demographic Profile

Area

• Total 6,485 km2 (2,504 sq mi)

Population (2011)

• Total 12,40,938

• Density 190/km2 (500/sq mi)

• Urban 24.46%

Demographics

• Literacy 65.1 per cent

• Sex ratio 910

Shivpuri District is a district of Madhya Pradesh state of India. The town of Shivpuri is

the district headquarters. Important towns in the district are: Badarwas, Karera,

Khaniyadhana, Kolaras, Narwar and Pichhore.

Shivpuri is famous for Madhav National Park. This national park has a varied terrain of

forested hills and flat grasslands around the lake. It is very rich in biodiversity. Sakhya

Sagar and Madhav Sagar lakes, created on Manier River in 1918, are two important

biodiversity support systems in the national park. The Sailing Club situated on Sakhya

Sagar at the entrance of the National park is a place of scenic beauty.

According to the 2011, census Shivpuri district has a population of 1,725,818, roughly

equal to the nation of The Gambia or the US state of Nebraska. This gives it a ranking of

280th in India. The district has a population density of 168 inhabitants per square

kilometre (440 /sq mi) Its population growth rate over the decade 2001-2011 was

22.74%. Shivpuri has a sex ratio of 877 females for every 1000 males, and a literacy rate

of 63.73%.

48 | P a g e

Table No.1.6. Shivpuri Demographic Profile

Area

• Total 10,298 km2 (3,976 sq mi)

Population (2011)

• Total 1,725,818

• Density 170/km2 (430/sq mi)

Demographics

• Literacy 63.73 per cent

• Sex ratio 877 females over 1000 males

Gwalior District is one of the 50 districts of Madhya Pradesh state in central India. The

historic city of Gwalior is its administrative headquarters. Other cities and towns in this

district are Antari, Bhitarwar, Bilaua, Dabra, Morar Cantonment, Pichhore, and

Tekanpur.

The district has an area of 5,214 km², and a population 1,629,881 (2001 census), a 26%

increase from 1991. Gwalior District is bounded by the districts of Bhind to the northeast,

Datia to the east, Shivpuri to the south, Sheopur to the east, and Morena to the northwest.

According to the 2011 census Gwalior district has a population of 2,030,543, roughly

equal to the nation of Slovenia or the US state of New Mexico.

Table No.1.7. Gwalior Demographic Profile

Area

• Total 5,214 km2 (2,013 sq mi)

Population (2011)

• Total 2,030,543

• Density 390/km2 (1,000/sq mi)

Demographics

• Literacy 77.93 per cent

• Sex ratio 862

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1.15. Conclusion

Overall, this chapter provide a theoretical knowledge about the retailing and is whole

process, concept, different types of retail organization, and business models in retail and

perception process. This chapter come with the fact that there are various factors, which

affect consumer perception level.

Retailing includes all the activities involved in selling goods or services to the final

consumers for personal, non-business use. A retailer or retail store is any business

enterprise whose sale volume comes primarily from retailing. These are the final business

entities in a distribution channel that links manufacturers to customers. Manufacturers

typically make products and sell them to retailers or wholesalers. Wholesalers resell these

products to the retailers and finally, retailers resell these products to the ultimate

consumers. There are mainly four principles forms the retailing concept they are

customer orientation, coordinated effort, value driven and goal orientation

Perception is the process of attaining awareness or understanding of sensory information.

It is a psychological process by which consumers derives certain meanings to what has

been sensed by different sensory organs It explains how a person recognizes, selects,

organizes and interprets each stimulus based on his/her needs, values and expectations. It

describes, “How we see the world around us”. There are three elements of Perception that

is Sensation, the absolute threshold, just noticeable difference (JND) and subliminal

perception.

Perception is a result of two types of inputs: physical stimuli and experiences. The

combined effect of these two factors produces different pictures for each individual. This

is because people are very selective as to which stimuli they recognize and which they

neglect. Secondly, for stimuli they recognized, their interpretation would depend on their

personal needs, expectations and experiences. Perception has three aspects selection,

organization and Interpretation of stimuli. As consumers are invariably subject to a lot of

information exposure and influences, they tend to form their perceptions depending on

their mindsets.