Intro. to Retail (2)

8/6/2019 Intro. to Retail (2)

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RETAIL MANAGEMENT

Rajesh VermaAsia Pacific Institute of Management Studies



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Introduction to Retail

Unit IIntroduction to Retail: what is Retail, Thefunctions of retail, retailing in India. The

evolution of retail in India, retail Change inIndia



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Introduction:

The word retail has its origin in French word retaillier and means “tocut a piece’’ or “to break bulk’.

“Retailing is the sale of goods and services to the ultimate

consumer for personal, family or household use.”

According to Kotler: “Retailing includes all theactivities involved in selling goods or services to

the final consumers for personal, non business use”



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Retailing may be understood as the final step in thedistribution of merchandise for consumption by the endconsumers.

Retailing is responsible for matching final consumerdemand with supplies of different marketers.

Retailing is high intensity competition industry, Thereasons for its popularity lie in its ability to provideeasier access to variety of products, freedom of choiceand many services to consumers.

The Indian retail is dotted by traditionally market placecalled bazaars or haats comprises of numerous smalland large shops, selling different or similarmerchandise



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“ ’ Wheel of Retailing”

A better known theory of retailing “wheel of retailing” proposed by Maclcomb McNair says,

1. New retailers often enter the market place withlow prices, margins, and status. The low prices areusually the result of some innovative cost-cuttingprocedures and soon attract competitors.

2. With the passage of time, these businesses striveto broaden their customer base and increasesales. Their operations and facilities increase andbecome more expensive.



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3. They may move to better up market locations, start

carrying higher quality products or add services andultimately emerge as a high cost price service retailer.

4. By this time newer competitors as low price, lowmargin, low status emerge and these competitors toofollow the same evolutionary process.

5. The wheel keeps on turning and department stories,supermarkets, and mass merchandise went throughthis cycles.



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Functions of a retaillier

From the customer point of view, the retailerserves him by providing the goods that heneeds in the required assortment, at the

required place and time.

From an economic standpoint, the role of aretailer is to provide real added value or utility

to the customer. This comes four differentperspectives



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1. Form: First is utility regarding the form of aproduct that is acceptable to the customer.

The retailer does not supply raw material, butrather offers finished goods and services in aform that the customers want.

The retailer performs the function of sortingthe goods and providing us with an assortmentof product in various categories.

2. Time: He cerates Time utility by keeping thestore open when the consumers prefer to shop.

preferable shopping hours.



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5. Place: By being available at a convenient location, hecreates place utility.

6. Ownership: Finally, when the product is sold,ownership utility is created.

Apart from these functions retailer also performs like:

5. Arranging Assortment: manufacturers usually make one

or a variety of products and would like to sell theirentire inventory to few buyers to reduce costs. Finalconsumers, in contrast prefer a large variety of goodsand services to choose from and usually buy them insmall units.

• Retailers are able to balance the demands of bothsides, by collecting an assortment of goods fromdifferent sources, buying them in sufficiently largequantities and selling them to consumers in small units



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5. Breaking Bulk: to reduce transportation costs,manufacturer and wholesalers typically ship largecartons of the products, which are then tailored by the

retailers into smaller quantities to meet individualconsumption needs

6. Holding stock: Retailers maintain an inventory thatallows for instant availability of the product to theconsumers. It helps to keep prices stable and enablesthe manufacture to regulate production.

7. Promotional support: small manufacturers can use

retailers to provide assistance with transport, storage,advertising, and pre- payment of merchandise.



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Major type of retail stores

There is no universally accepted method of classifying retailer. Various schemes have beenproposed to categories retailers based on

Number of outlets

Margin vs. turnover

Location

Size.

Because of overlap of classification criteria, somestores may qualify as under two differentcategories.



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1. General merchandise retailer: general merchandise retailer

carry a variety of product lines, with considerable depth.Some major types of these stores includesupermarkets and hypermarkets , discount storesand department stores.

o Super market: A supermarket is a large self service retailstore that carries a wide variety of consumer productsunder one roof , such as complete line of food products ,laundry requirement, household maintenance items. InIndia cooperative have managed some supermarkets for

quite sometime like super bazaar in Delhi, apna bazaarshakari bhandar etc.



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o Discount store: these stores are self service, standard

general merchandise retailers regularly offering brandname and private brand items at low price, earn lowermargins and push for high sales turnover. Thecharacteristics of true discount stores include

Selling products at discounted price

Carry standard international , national, or store brand toibuild image

Self service stores to minimize operational costs

Preferred store location are low rent areas.

Like best known discount store is Wal-Mart. In India almostall retail stores offer discounts, subhiksha



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o Department store: a department store is largerretail store organized into several departments,

offering a broad verity and depth of productlines. The product mix may include foodproducts, appliances, clothing, furnishing andother household goods.

Like Pantaloons, shoppers’ stop, department store only for kids is Kids Kemp.

Fashion related department stores in India areEbony, Globus, pantaloons, lifestyles.



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2. Specialty Stores: specialty stores carry a narrow product mix withdepth of assortment within the line.

The emphasis is on a limited number of complimentary productsand high level of customer service

Specialty store often sell shopping goods such as Jewelry, apparel,computers, music systems, sporting goods.

Like; Tanishq, Titan watches, Van Heusen, Raymond's.

3. Shopping Malls: shopping malls typically deal with several bases

and product categories and provide a large variety of merchandiseabs service. There are 96 operational malls in India and expectedto grow 158 by this current year.

Ansal plaza (Delhi), Garuda mall (Bangalore) Sahara plazaGurgaon Spenser Plaza Chennai



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4. Retail chains: a retail chain operates multipleretail outlets under common ownership in

different cities and towns.

To some extent the purchasing function anddecision making are coordinated or

centralized. Like Westside, Globus, Food world, McDonald's

retail petrol outlets. Etc.



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The Marketing – Retail Equation

Manufacturer

Retailer

Consumer

Manufacturer

Consumer

Manufacturer

Wholesaler

Retailer

Consumer

F e e d b a

c k



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Retailing in India.

Retail is the new buzzword in India.

The global Retail development Index has ranked Indiafirst, among the top 30 emerging markets in the world.

It is believed that India has the potential to deliver thefastest growth over the next 50 years.

While barter would be considered to be oldest form of retail trade, since independence , retail in India has

evolved to support the unique needs of country, givenits size and complexity



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Second largest sector after Agriculture. Contributesabout 10 – 11 % of the GDP

The estimated size of the organized retail industry inIndia is Rs. 16,000 crores. This is 2 % of the totalestimated retail trade.

Indian Retail trade increased from Rs. 2200 billion in

2000 to Rs 3300 billion by the year 2005

India's first true shopping mall – complete with foodcourts, recreation facilities and large car parkingspace – was inaugurated as lately as in 1999 in

Mumbai. (this mall is called "Crossroads").



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The Evolution of Retail in India

Retail in India has evolved to support the unique needs of our country, given its size and complexity Haats, Mandis and Melas have always been a part of the Indian landscape. They still continue to be present in most parts of the

country and form an essential part of life and trade inVarious areas.

The PDS (Public Distribution System) would easily as thesingle largest retail chain existing in the country. the

evolution of the PDS of Grains in India has its origin in the“rationing system” introduced by the British during worldwar II



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The system was started in 1939 in Bombay andsubsequently extended to other cities and towns.

the system was abolished post war but howeverattaining independence India was forced toreintroduce it in 1950.

There was rapid increase in the ration shops( being increasingly called the Fair Price Shop orFPSs)

The Canteen Stores Department and the PostOffices in India are also among the largestnetwork of outlets in the country reachingpopulation across the country.



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The Khadi & Village industries (KVIC) was also set up postindependence. The cooperative movement was again championedby the government.

India's Largest retail Chains:

1. PDS: 463,000

2. Post offices: 160,000

3. KVIC: 7,000

4. CSD Stores:3,400

(source business world marketing White book 2005)



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In the past decade, the Indian marketplace hastransformed dramatically. However from the 1950,s tothe 80,s, investment in various industries was limiteddue to low purchasing power in the hands of theconsumer and the government’s policies favoring thesmall scale sector.

The first attempts at organized retailing were noticed inthe textiles sector. One of the pioneers in this field was

Raymond’s which set up stores to retail fabric.



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Raymond’s distribution network today comprises20,000 retailers and over 256 exclusiveshowrooms in over 120 cities of the country

Other textile manufacturing who set up theirown retail chains wee Reliance- which set upVimal showrooms and Garden Silk Mills, whichset up Garden Vareli showrooms.



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Traditional

FormatsItinerant SalesmanHaatsMelas

Mandis etc.

Establishedformats

Kirana shopsConvenience/

department storesPDS/

fair price shops

Pan/ Beedi shops

EmergingFormats

Exclusive retail outletsHypermarketInternal retail

Malls / Specialty MallsMultiplexes

Fast food outletsService galleries

The Evolution of retail in India



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Drivers of Retail change in India

major drivers :1. Changing Income Profiles: Steady economic growth fuelled

the increase in disposable income in India. Theaverage middle class family's disposable income roseby more than 20% between 1999-2003.

2. Diminishing difference between Rural and urban India: Rural Indiaaccounts for over 75% of India population and this initself offers a tremendous opportunity for generatingvolume driven growth. Tax benefit. In year 2002-03 LICsold 50% of its policies in rural India. Same BSNL also

sold its 50% connection in small towns .



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3. Changes in Consumption patterns: Occupational changes andexpansion of media have caused a significant changein the way the consumer lives and spends his money.

o The changes in income brought about changes in the

aspirations and the spending patterns of theconsumers. the buying basket of the consumerchanged

4. The emergence of a young Earning India : Nearly 70% of theIndian population is below the age of 34. takingadvantages of employment opportunity in the

booming service sector these young Indians areredefining service and consumption patterns



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Prominent sector in Indian retail

1. Clothing, textiles and fashion Accessories:

2. Food & food Services:

3. Consumer Durables:

4. Books & Music:

Other emerging sectors

5. Jewellery retail

6. Footwear retail

7. Time Wear Retail

8. Fuel Retail/ petro retail



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Challenges to retail Development in India

Retail not being recognized as an industry inIndia.

The high costs of real estate.

Lack of Adequate infrastructure.

Multiple and complex taxation system.



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Size of the organized retail market (Rs Cr)

2001-02 2007 CAGR (%)(compound Annual

growth rate)

TOTAL 16,000 37,216 18

Food 1,800 7,473 33

Clothing 4,950 10,423 16

Cons.Durables 1,650 3,787 18

Books & Music 450 1,426 26



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Share of organized & unorganized retail with comparison

source: Ernst &Young, The Great Indian Retail Story, 2006

85 15

81 19

55 45

40 60

36 64

30 70

20 80

3 97

1 99

0% 20% 40% 60% 80% 100%

USA

TAIWAN

MALASIA

THAILAND

BRAZIL

INDONESIA

CHINA

INDIA

PAKISTAN

ORGANISED

UNORGANISED



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Retail Trade- India, US and China

Trade($ bn)

Employment(%)

Shops(million)

OrganizedSector

share (%)India 180-394 7 12 2-3

China 360 12 2.7 20

US 3800 12.6-16 15.3 80

Documents

Intro. to Retail (2)