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7/29/2019 Functions of Retailing and Franchising System in India
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FOR THE SUBJECT OF: PRESENTED BY:
Retail Marketing Harshul Nagpal
mba-904 9th Semester
Roll No.
50
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Retail is the sale of goods and services fromindividuals or businesses to the end-user.
Retailers are part of an integrated system called
the supply chain. A retailer purchases goods or products in large
quantities, and then sells smaller quantities tothe consumer for a profit.
Retailing can be done in either fixed locations oronline.
Retailing includes subordinated services, such asdelivery.
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Manufacturers usually make one or a small variety ofproducts and would like to sell their entire inventory toa few buyers to reduce costs.
Final Consumers, in contrast, prefer a large variety of
goods and services to choose from and usually buy themin small quantities.
Retailers are able to balance the demands of bothsides, by collection and assortment of goods from
different sources, buying them in sufficiently largequantities and selling them in small units.
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To help reducetransportation costs,manufacturers and
wholesalers typicallyship large cartons ofthe product, which arethen retailers tailor
them into smallerquantities to meetindividual consumption
needs.
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Retailers also offer the service of holding stockfor the manufacturers.
Retailers maintain an inventory that allows for
instant availability of the product to theconsumers. It helps to keep prices stable and enables the
manufacturer to regulate production.
Consumers can keep a small stock of products athome as they know that this can be replenishedby the retailer and can save on inventorycarrying costs.
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Retailers ease the change in ownership of merchandise by
providing services that make it convenient to buy and use
products.
Providing product guarantees, after-sales service and dealing with
consumer complaints are some of the services that add value tothe actual product at the retailers end.
Retailers also offer credit and hire-purchase facilities to the
customers to enable them to buy a product now and pay for it
later. Retailers fill orders, promptly process, deliver and install products.
Salespeople are also employed by retailers to answer queries and
provide additional information about the displayed products.
The display itself allows the consumer to see and test products
before actual purchase.
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Retailers also act as the channel of communicationand information between suppliers and consumers.
From advertisements, salespeople and display:
Shoppers learn about the characteristics and features of aproduct or services offered.
Manufacturers, in their turn, learn of sales forecasts,
delivery delays, and customer complaints.
Supplier Retailer Consumer
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Small manufacturers can use retailers to provide
assistance with transport, storage, advertising and pre-
payment of merchandise.
This also works the other way round in case the numberof retailers is small.
The number of functions
performed by a retailer has
a direct relation to thepercentage and volume of
sales needed to cover both
their costs and profits.
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By providing all the abovementioned services of sorting,breaking bulk, holdinginventory and many more,
retailers increase the value ofproducts and services for theconsumers.
Here, the value of the product
or service is related to theadditional benefits provided bythe retailer through which acustomer feels more connected,satisfied and value the product
or service being received.
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Franchising is a contractual agreement
between a franchisor and a franchisee that
allows the franchisee to operate a retail outletusing a name and format developed and
supported by the franchisor.
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In a franchise contract, the franchisee pays a lumpsum plus a royalty on all sales for the right to operatea store in a specific location.
The franchisee also agrees to operate the outlet in
accordance with procedures prescribed by thefranchisor.
The franchisor provides assistance in locating andbuilding the store, developing the products or services
sold, training managers, and advertising. To maintain each franchisees reputation, the
franchisor also makes sure that all outlets provide thesame quality of services and products.
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Food Retailers Merchandise Retailers Services RetailersHaldiram
Baskin Robbins
Dominos Pizza
Subway India
Vadilal
KFC
Good Things
Maspar
Ddmas
The Ceat Shoppe
Koutons
Reynolds
Ebony
Lilliput
Air Hostess Academy
Lakme Beauty Salon
Shahnaz Herbal
Wind Shield Experts
Aptech Computer Education
VLCC Healthcare
Reliance World
Sharekhan
Ferns N PetalsBig Flix
Reliance AutoZone
ADLABS
Blue DartGATI
Retailers Using Franchise Business Model
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Franchising is one of the fastest growing and everchanging industry in India.
Though at a nascent stage, the industry has
witnessed 30 to 35 % growth in the last 4-5 years. India is a multi ethnic country with the second largest
populationin the world.
There are approximately 1150 national and
international business format franchise systems inIndia in 2007.
Around 8-10 % Indian franchise systems have
entered international markets.
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There are an estimated 70, 000 units operating inbusiness format franchises.
The growth rate in franchised units from 2005-06 to2006-07 was 30 to 35 per cent.
Some 5,00,000 persons are employed in businessformat franchise organizations. Franchising contributed less than 4% to Indias
Gross Domestic Product (GDP) in 2007. Annual turnover is approximately US$ 4 billion. In a franchised business in India, over 90 per cent
succeed. This success rate usually luresentrepreneurs with no experience but with a surpluscapital and a will to succeed towards franchising.
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Franchise India Holding Ltd, a counselling and
partnering firm for the franchise industry, estimates a
rise in the adoption of franchise model by small-
format retail players in the country since theslowdown last year.
As per its estimates, 85% of all small-format retail
business in India now operates on the franchise
model.
Brands such as Koutons, Levis, Reebok and Adidas,
which were traditionally not franchising, have lately
started looking at the model.
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Videocon India, which runs two retail formats (Next
and Planet M), is now starting to franchise Planet M,
which was earlier being expanded through company-
run stores. So much so, the retail format ratio for most brands
now stands at 80% dedicated to franchising and 20%
for company run at strategic locations.
Bata India, the largest retailer and manufacturer of
footwear in the country with 1,200 stores, is starting
its own franchise network to expand its retail
presence.
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Cookie Man, the retail chain store owned by
Australian Foods Ltd, which runs over 50 stores
across India, is looking at reaching a total of 250
stores through franchising. Not only does the franchisee bring in the capital, but
also, the retailers save 4-8% on the point of sales.
Currently, 45% of organised retail sales in India are
through franchised outlets.
This is in line with the developed world countries like
US and Europe, where these models are well incepted
in the business world.
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As per Franchise India estimates, the fashion retail
industry in the country is pegged at $29 billion
and growing at 12% per annum. India is now
opening up as a competitive apparel retail market. The market potential for footwear is 1.1 billion
pairs and it is estimated to be a $2 billion sector.
Thejewellery market is estimated at $9.7 billion,with gold contributing 98% to retailing.
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