NEW HORIZON COLLEGE

RETAIL MANAGEMENT
VI B.B.A.

Prepared by
RAJESHRI PARMAR

UNIT-I
Introduction To Retailing
 UNIT 1

INTRODUCTION TO RETAILING

Concept of Retailing

Customers need to buy products to satisfy their needs. This means that they eat
food, wear clothes and use transport to move from one point to another on a daily basis.
When customers buy these everyday necessities they deal with retailers. Retailers are found
everywhere in the society and people use them to be able to satisfy their needs in a
convenient manner.

Retailing is an important part of any economy and ultimately links consumers with
manufacturers. Retailing is changing swiftly because of the fast changing environment in
which retailers operate. Consumer needs are changing, competitors are entering the market
arena, and technology is introducing new retailing methods to the industry. Retailers need
to know how to keep abreast of these changes to attract new customers and retain them.

Meaning of Retailing

The word “Retail” is derived from the French word ‘ Retaillier’ meaning ‘to cut a piece off’ or
to ‘break bulk’. The distribution of consumer products begin with the producer and ends at
the ultimate consumer. Between the producer and the consumer there is a middleman- the
retailer, “who links the producer and the ultimate consumers”.

Definition of Retailing

According to Cundiff and Still, “Retailing consist of those activities involved in selling directly
to ultimate consumers.”

According to Mc.Carthy, “Retailing is selling to final consumer products to households”.

Any organization selling to final consumer – whether a manufacturer, wholesaler, or

retailer-is doing retailing. It does not matter how the goods or services are sold (by person,
mail, telephone, vending machine, or internet) or where they are sold (in a store, on street,
or in the consumer’s home).
Characteristics of Retailing

1. Direct Interaction with customers: Retail businesses have a direct interaction with end-
users of goods or services in the value chain. They act as intermediaries between end-users
and suppliers such as wholesalers or manufacturers.

2. Lower average amount of sales transaction: The average amount of sales transaction at
retail point is much less in comparison to the other partners i the value chain. Many
consumers buy the products in small quantities for household consumption.

3. Point-of-Purchase display and promotions: A significant relevant chunk of retail sales

comes from unplanned or impulse purchases. Studies have shown that shoppers often don’t
carry a fixed shopping list and pick up merchandise based on impulsive or situational appeal.

4. Larger Number of Retail Business: Location of retail store plays an important role
compared to other business units. Manufacturers decide the location on the basis of
availability of factors of productions and market.

Scope of Retailing

Retailing includes the activities in selling consumer’s goods to the ultimate consumer. It
focuses on ultimate, rather than industrial consumers.

SCOPE OF RETAILING

SUPPLY CHAIN
STORE MANAGEMENT
MANAGEMENT

CATEGORY INVENTORY
MANAGEMENT MANAGEMENT

VENDOR MANAGEMENT CUSTOMER

RELATIONSHIP
MANAGEMENT
1. Store Management: Retailers acknowledge the importance of store management for the
importance of store management for the success of business. It has two-way bearing on
retail business- it not only attracts business by ensuring convenience to customers but also
places the merchandise in accordance with the salespersons’ work allocation.

2. Supply Chain Management: It is a system approach to managing the entire flow of

information, materials and services from raw materials suppliers through factories and
warehouses to the end customer.

3. Category Management: It is the process of managing a retail business with the objective
of maximizing the sales and profits of a category rather than the performance of individual
brands or models.Retailing processes in which first of all, all likeminded products in a
retailer’s total portfolio are lumped together into product groups are called ‘Categories’.
Example: Toothpastes, Washing liquids, Cosmetics etc.

4. Inventory Management: It is maintaining the requisite inventory stocks to meet customer

requirements while simultaneously ensuring that its carrying cost is low as possible.

5. Vendor Management: It is the management and control, by an entity, of those third

parties that supply goods and/or services to that entity.

6. Customer Relationship Management (CRM): CRM processes are extremely helpful in

identifying and targeting the best customers of the business firm and generating quality
sales leads as well as in the planning and implementation of marketing campaigns with
definite goals and objectives. The processes involved in CRM can help the firm maintain a
customized relationship with the customers for creating higher level customer satisfaction
and offering the finest customer service.

Functions of Retailing

Functions of Retailing

Sorting Breaking Bulk

Holding Stocks Additional Services

Channel of Communication Transport and Advertising

Functions
1. Sorting: Manufacturers usually make one or a variety of products and would like to sell
their name inventory to a few buyers to reduce costs. Final consumers, in contrast, prefer a
large variety of goods and services to choose from and usually buy them in small quantities.
Buying them in sufficiently large quantities and selling them to consumers in small units.

2. Breaking Bulk: To reduce transportation cost, manufacturers and wholesalers typically

ship large cartons of the product, which are then tailored by the retailers into smaller
quantities to meet individual consumption.

3. Holding Stock: Retailers also offer the service of holding stock for manufacturers.
Retailers maintain an inventory that allows for instant availability of the product to the
consumers. Consumers can keep a small stock of products at home as they know that this
can be replenished by the retailer and can save on inventory carrying cost.

4. Additional Services: Retailers ease the change in ownership of merchandise by providing

services that make it convenient to buy and use products. Retailers fill orders, promptly
process, deliver and install products. Salespeople are also employed by retailers to answer
queries and provide additional about displayed products.

5. Channel of Communication: Retailers also act as the channel of communication and

information between the wholesaler or suppliers and the consumers.

6. Transport and Advertising Functions: Small manufacturers can use retailers to provide
assistance with transport, storage, advertising and prepayment of merchandise.

Importance of Retailing

1. Importance to Consumer:

- Selection: The retailers keep stock of different varieties of goods. An average

consumer cannot afford to stock goods that he requires for everyday use. In other words by
holding stocks of these goods retailers relieves the consumer of performing this function for
himself.

- Variety of goods: The retailer keeps a good assortment of various varieties of a

product manufactured by different firms. In this way, he provides a variety of choice to his
customers.

- Demand Creation: Most of the demand creations methods are undertaken by

retailers for the manufacturers and wholesalers. They arrange for the display of goods,
supply necessary information to the customers and provide various similar services.

- Distribution: The retailer is an expert in the distribution of consumer goods. Out of

their experience, training and intimate knowledge of the goods, they are in a position to
keep the customers in the proper selection of goods.
 - Credit Facility: The retailer often extends credit facilities to the consumers. These
alone account for larger sales volume.

- Personal Services: The retailer provides many personal services to the consumer,
they sell the goods on approval basis that is to say that the consumer is given the facility
that if goods are not of their choice or are not approved by the family members, they can
return the same within a specified time limit.

2. Importance to wholesalers and producers:

- Advertisement of New Products: As the retailers are in direct touch with the
consumers and they know the needs and wants of consumer, they are in a position to
influence the decision of the consumer to buy a new product.

- Arrangement to sell the goods: Retailers and only retailers sell the product to
innumerable small consumers and thus relieve the wholesaler from selling the goods to
ultimate consumers in small quantities.

- Information about consumers’ Habits, Tastes and Needs: As the retailers are in
close touch with the consumers and have full knowledge of their habits, tastes, needs and
preferences.

Factors Influencing Retailing

Other factors

Other Factors Influencing Retailing

Computerization Communication

Fashion

1. Computerization: In this age of information technology, retailing is one business which is

highly dependent on the delivery of accurate and timely information, which can have a
tremendous influence on the success of a retailer. Since retailer by its nature, has to deal
with very large volumes of data, it is imperative for a retailer to be properly equipped with
latest in Informational technology. Computers are essential in all departments of a retail
operation and it is extremely important for retailers to obtain fast and accurate information
to be able to react in a timely manner.

2. Communication: By bringing cities and countries closer to each other, communication has
made the world much smaller. It has also facilitated the easy exchange of information
between people through various means including the telephone, modems, satellites,
television and the latest revolution- the INTERNET.

3. Fashion: The term ‘fashion’ refers to the way people live, dress, work or play all over the
world. It usually varies from country-to-country and even region-to-region and never
constant. Fashion is usually categorized into two distinct types:

- Classic Fashion: A fashion that remains in place for a fairly long period of time. For
example Blazers, Shirt waist dresses etc.

- Fad Fashion: On other hand, a fashion that changes within a very short period of
time is known as fad. Examples of fad for teenagers are neon colours, wearing bracelets etc.

Challenges in Retailing

Challenges in Retailing

High Costs for Organized Sector Specialization

Strong IT Support Poor Infrastructure

Lack of Trained Workforce

1. High Costs for organized sector: Traditional retailing has been established in India for
some countries. It has a low cost structure, is mostly owned operated and has negligible real
estate and labour costs and little or no taxes to pay. In contrast, players in the organized
sector have high expenses to meet and yet have to keep prices low enough to be able to
compete with traditional sector.

2. Specialization: According to experts, the real boom in organized retailing will come one
the supermarkets start selling daily need goods at 90% of the regular price. The key will be
to plan a national scale presence, build strong sourcing networks that connect the business
directly with farms, and sell fresh food at attractive prices. Ex: Subhiksa, a Chennai based
grocer-cum-chemist, started out with low prices, but with best quality and variety range of
products.

3. Strong IT support: The backbone of retailing is IT. It would require large investments that
connect every aspect of the operations seamlessly, from suppliers to the cash counters. For
example, a store like Food World generates about a million bills every month. Similarly,
other stores like Pantaloon, Shoppers’ Stop can track sales and place orders based on
scientific demand projections.

4. Poor Infrastructure: In India, infrastructure such as cold-chain infrastructure is primitive,

affecting the modernization of the food sector. In order to succeed, supermarkets would
require volumes to be cost competitive, which would require with hubs all over India.

5. Lack of Trained Workforce: Workforce employed for the retail industry is not well trained
when compared with the western countries. A skilled person can add on to the productivity.
Training the individual lies in the hands of the retailers.

6. Other challenges

 International Standards
 Inefficient Supply Chain Management
 Lack of retail space
 Cultural Disparity
 Escalating Real Estate Prices
 Human Resource Problem
 Frauds in Retail
 Infrastructure and Logistics
 Complexity in Tax structure
 Currency Fluctuation
 Red-Tapism
 Political Risk
Opportunities in Retailing

Organized retailing is believed to be the sunrise industry of India. It is quite obvious that the
tremendous growth in the organized retail sector would undoubtedly bring with it a lot of
opportunities as well. The major areas of opportunities are:
Opportunities in Retailing

Retail Management Positions Staff at all levels of retail operations

Market Research Retail Design Consultants

Franchising Retail Advertising

Retailing Software and Consultancy Retailing Equipment Supplier

services

Retail Banking

1. Retail Management Positions: Unlike many other major industries or sectors, the retail
industry is an extremely customer service-intensive industry and is heavily dependent on
the quality of manpower. While many functions in a retail operation may be automated
with the help of high end computerization, customer service is one area in which men can
never be substituted by machines.

2. Staff at all Levels of Retail Operations: the retailing business, by its very nature, is
primarily a customer-oriented business and is thus fairly manpower-intensive. Thus staff
members both for the front-end sales as well as for the back-end support functions are
required in large numbers at all level of operations, billing, financial control, internal audit,
HRD and administration would be in great demand in the near future.

3. Market Research: No retail operation can commence without the conduction of proper
and in-depth market research into the respective target market. In fact it is due to the lack
of specialized knowledge of retail research among Indian companies that some global retail
chains have given international market research companies assignment to conduct a
nationwide survey for setting up a retail chain.

4. Retail Design Consultants: The latest trends for designing retail stores indicate the
building of models especially for the twenty-first century.

5. Franchising: It is method that companies adopt to branch-out into additional stores in a

rapid manner. For the franchisees too, this is considered to be easier route for starting a
retail store since the expertise is gained from the founders who also help to minimize risks.

6. Retail Advertising: Retailing in India can never establish firm roots unless it is backed by
well-thought-out advertising. Retailing concerns not just about a new store or a new retail
company in the business, but signifies a kind of revolution.

7. Retailing software and consultancy services: Retailing is an extremely complex business

where the number of transactions in particular is believed to be more than in any other
business.

8. Retailing Equipment Suppliers: The tremendous growth recently witnessed in the

organized retail sector is also bound to foster a proportionate growth in equipment
suppliers for such stores. Most retail equipment is highly specialized in nature and is likely to
generate tremendous opportunities for those who are able to commit themselves to this
industry at least in the medium-term.

9. Retail Banking: Retail banking refers to banking in which banking institutions execute
transactions directly with consumers, rather than corporations or other banks. Services
offered include- saving and checking accounts, mortgages, personal loans, debit cards,
credit cards etc. Retail banking aims to be the one-stop shop for as many financial services
as possible on behalf of retail clients.

Retail Formats

Every business has distinct way of organizing the very minute activities that are involved in
delivering its products or services to end consumer. In retail parlance, one would term it as
the format adopted by the retailer to reach his end consumer.

Business Model in Retail

A business model is the manner in which a business chooses to serve its customers and
stakeholders. In retail, a business model would dictate the product and/or services offered
by the retailer, the pricing policy that he adopts.

Retail Structure is mainly used to describe retail format stated under Unorganized and
organized Retail sector. The retail formats in India can be categorized into the traditional
and the modern forms. The traditional format includes Kiranas, Street markets, Kiosk. The
unorganized retail sector basically includes local Kiranas, hand cart, the vendors on the
pavement etc. This constitutes about 98% of the total retail trade.

Retail Business Model

Retailers buy products and services from

wholesaler

Puts the profit margin to that

products/services

Sells it to end the customer at the retail

outlet

Provide after sales services for customer

satisfaction and retention

Basic Classification of Retail Format

The Indian retail industry is divided into two sectors which are as follows:

1. Unorganized Retailing: Unorganized retailing is defined as an outlet run locally by the

owner or care taker of a shop that lacks technical and accounting standardization. The
supply chain and sourcing are also done locally to meet local needs. Its organized
counterpart may not obtain its supplies from local sources.

2. Organized Retailing: Organized retailing refers to trading activities undertaken by

licensed retailers, i.e those who are registered for sales tax, income tax etc. These include
the corporate-backed hypermarkets and retail chains and also the privately owned large
retail businesses.
Unorganized Retail Formats

It refers to the traditional formats of low-cost retailing. Eg, Hand Vendors cart and
pavement and mobile vendors, the local kirana shops, owner manned general stores,
Paan/beedi shops, convenience stores, hardware shop at the streetcorner, selling
everything from bathroom fittings to paints and small construction tools; or the slightly
more organised medical store and a host of other small retail businesses in apparels,
electronics, food etc.

Small-store (Kirana) retailing, Mom and Pop stores, street-Vendors, Small-road side
stalls are the ways to generate self-employment, as it requires limited investment in land,
capital and labour. It is generally family-run business, lack of standardization and the
retailers who are running this store they are lacking of education, experience and exposure.

Unorganized retailer is an individual having a small unstructured organization to

carry-out retail activities with limited resources and capabilities that lack technical and
accounting methods. Examples of unorganized retailing Hawker, Kirana stores

Characteristics of Unorganized Retail Formats

Characteristics of Unorganized Retail Formats

Lack of Inventory Control and Labour Intensity

Supply chain management

Family Run Stores Lack of Standardization

Crowded Format Absence of Real Competition

Low Productivity Unique Operation

Importance of Unorganised Retail

 It provide credit sales

 It fulfils the needs of the customer
 Provides number of options for one product
 Flexible utilization
 Door Delivery
 Flexible timings
 Location advantage for unorganized retailers
 Customers can purchase in small quantities

Organised Retail Formats

Formats in Indian organised retailer sector and its subsequent successful operation are
credited to India Economic System Reform earnest in July 1991. A format in Indian
organized retail sector is at its nascent stage.

The term organised retailing means to have a formal organization to coordinate and carry
out activities. The organized retail formats are generally owned by corporate entities. They
may include: Hyper Market, Super Market, Convenience store, exclusive outlet,
departmental stores, and cash-n-carry.
Characteristics Organized Retail Format

Characteristics of Organized Retail Formats

Direct Interaction with Customer Employment Generation

Boost to Experts Improvement of Government

Revenues

Dominant in Food, Grocery and Provide Ideal Shopping

Apparel

Expose Shoppers Expanded Business

Opportunities

Importance of Organized Retailing

1. Price Advantage: Price is a major factor in purchase decisions all over the world, more so
in India. Given a choice Indian consumers will go to the place which offers more discounts,
instead of buying the same stuff from their neighbourhood store that sells at MRP.

2. Merchandise: Organized players provide a greater variety of merchandise to the

customers.

3. Dearth of Time: Due to hectic lives and changing lifestyle, today’s consumer faces a
constraint of time.

4. It provides employment opportunities

5. Better Social Infrastructure

6. Benefit to tourism

7. Better Realization of Taxes

Comparison between Unorganized and Organized Retail.

SL NO. Characteristics Unorganized Retail Organised Retail

1 Span of Control There is direct control of
strategy, and centralized
decision making
2 Flexibility in Operations Has flexibility in location and Limited flexibility as
strategy
3 Economies of Scale Lack the economies of scale
4 Competition Faced High because of factors such as Lower than
ease of entry and low capital
requirement
5 Some Important Searching for the successors
Concerns
6 Average Size (sq ft) 300
There is centralized
or coordinated
purchasing and
decision-making
well established
norms have to be
followed
Efficiency of using
warehousing
facilities, large
volume purchases,
also centralized
decision making
unorganized retailers
because investment
cost are high.
Individual outlets
face competition
from players offering
similar assortment o
In addition to
maintaining
consistent retail
marketing strategies
in all branches
adapting to local
needs of the target
market
4000
 Types of Retailing/ Classification of Retail Format

CLASSIFICATION OF RETAIL FORMAT

STORE BASED RETAILING NON-STORE BASED

RETAILING

-Direct Selling
FORMS OF OWNER SHIP MERCHANDISE
OFFERED -Mail Order

-Telemarketing

-Automated Vending
-Independent/ Mom -Convenience Stores
and Pop Stores -Super Market -World Wide Web
-Hyper Market
- Chain Stores -Speciality Stores
-Category Killers
- Franchise stores -Departmental Stores
-Off Price Retailer
-Leased Departments -Factory Outlet
-Catalogue Showrooms
- Consumer Cooperative -Full Line Discount
Stores
-Warehouse Store
-Variety Store
-Membership
Club

.
Independent (Mom-&-Pop) Stores

These are generally family-owned businesses catering to small sections of society. They are
small, individually run and handled retail outlets.

Advantages

 Flexibility in choosing retail formats and locations

 Decision making is centralized
 Low investment cost

Disadvantages

 Less Bargain Power with suppliers

 Cannot gain economies of scale
 Very little computerization

Chain Stores

Chain stores are a group of stores handling similar lines of merchandise with single
ownership and centralized locations. Examples Bata Shoe

Advantages

 Such shops eliminate the middlemen in between manufacturers and ultimate

consumers.
 They can avail the advantages of bulk purchasing
 They usually have a low operating costs

Disadvantages

 A multiple store provides buyers with limited choice as it deals in one particular line
of goods
 There are lack of personal contact with customers
 Branch Managers have limited power
Franchise Stores

A franchise is a contractual agreement between the franchiser and franchisee which allow
the franchise to conduct business under an established name as per a particular business
format in return for a fee or compensation.

Advantages

 The franchisee’s lack of basic or specialised knowledge is overcome by the training

programme of the franchisor.
 The franchisee will usually need less capital than for setting up a business
independently.
 In most cases, the franchisee’s business benefits from operating under a name and
reputation (Brand Image) which is already well established in the minds and eyes of
the public.

Disadvantages

 The franchisee will have to pay the franchisor for the services provided and for the
use of the system, i.e the initial franchise fee and continuing franchise fees.
 The prospective franchisee may find it difficult to assess the quality of the franchisor.
 The franchisor’s policies may affect the franchisee’s profitability.

Leased Departments

They are also termed a shop in shops. When a section of a department in a retail store is
rented to an outside party, it is termed as a leased department.

Consumer Cooperative

A consumer co-operative is a retail institution owned by its member customer. The societies
started to help lower and middle class people and protect these sections from the clutches
of profit hungry businessman are called consumer co-operative stores.

Advantages

 It facilitates its members in getting pure and unadulterated goods at competitive

price.
 It develops a state of moral booster to the poor people who develop greater
confidence among themselves
 The control and management of society is democratic
 These societies lead to the elimination of middlemen
Disadvantages

 The societies usually suffer from inadequacy of finance as majority of the members
of the society are from the middle or low income group of people.
 Most of the members do not have proper managerial ability and training, so they
cannot manage the affairs of the societies properly.
 There is lack of advertising and salesmanship which results in lesser sales.

Convenience Stores

Convenience store is a small store that stocks a range of everyday items such as groceries,
snack food, candy, milk etc. They are comparatively smaller stores located near residential
areas. Prices are slightly higher due to the convenience given to the customer.

Super Market

Super markets are large, low cost, low margin, high volume, self service operations designed
to meet the needs for food, groceries and other non-food items like health and beauty care
products.

Advantages

 Large turnover because of the large variety of merchandise which is offered to the
customer
 Low prices and high profits because of quick turnover
 The buyer is perfectly free as to what he should buy

Disadvantages

 Huge capital required

 Need of central place
 Unsuitable for all products
 Need of efficient manager.

Hyper Market

Hypermarket is a superstore combining a supermarket and a department store. The result is

an expansive retail facility carrying a wide range of products under one roof, including full
groceries lines and general merchandise.

Advantages

 Customers can get everything at one place. Hence saving time, energy and money in
searching.
  Cost reduction from bulk buying in hypermarket is transferred to customers.

Disadvantages

 It causes major traffic problems for public due to vehicles frequently going in and out
of the hyper market.
 It forces smaller shops in the surrounding of the hypermarket to stop their business.

Speciality Stores

Speciality store is a small retail outlet that focuses on selling a particular product range and
associated items. The speciality stores specialize in a particular category or sub-category of
goods such as footwear, sarees, dress materials and jewellery.

Category Killers

A category killer is a product, service, brand or company that has such a distinct sustainable
competitive advantage that competing firms find it almost impossible to operate
profitability in that industry. Example: One of the most famous search engines “GOOGLE”
does not have real competitors.

Departmental Stores

A departmental store is a large retail trading organization. It has several departments which
are classified and organised accordingly. Departments are made as per different types of
goods to be sold. Ex: Packed food, cosmetics, cutlery, stationery etc.

Advantages

 Shopping Convenience
 Wide Choice
 Large volume of sales
 Central Location

Disadvantage

 Distance
 High cost of operation
 Higher prices

Off Price Retailers

Off price retailers are the retailers who provide high quality goods at cheap prices. The
usually sell second-hand goods, off-the-season goods etc.
Factory Outlet

Factory outlet is a retail store that sells discounted price items that are irregular, outdated
or have been produced in excess quantities.

Catalogue Showrooms

Catalogue retailers usually specialize in hard goods such as house ware, jewellery and
consumer electronics. These are retailers whose showrooms are adjacent to the warehouse.
These retailers usually specialize in hard goods. In such outlets, the customer places an
order for merchandise using the number on the display item or in a catalogue, which is then
fetched from the warehouse and sold to the customer.

Full Line Discount Stores

A discount store is a retail store which sells products at prices lower that the typical market
value. A “full-line discount store” or “mass merchandiser” may offer a wide assortment of
goods with a focus on price rather than service, display or wide choice.

Warehouse Store

It is a mass retailing of merchandise such as groceries, hardware, home furnishing etc.

through a super store that offers a very low prices and little or no customer service.

Variety Store

A variety store is a retail store that sells a wide range of inexpensive household goods.
Variety stores often have product lines including food and drink, personal hygiene products,
small home and garden tools, office supplies etc. Larger stores may sell frozen foods and
fresh produce.

Membership Club

This format is also known as cash and carry and is open to members only and not the
general public. The current definition of warehouse club is that it is a no-frill, no thrill large
format store selling only to its members at wholesale rate.

Direct Selling

Direct selling is the marketing and selling of products directly to consumers away from a
fixed retail location. Direct selling is dynamic, vibrant, rapidly expanding channel of
distribution for the marketing of products and services directly to consumers.
Mail orders

Mail order is the buying of goods or services by mail delivery. The buyer places an order for
the desired products with the merchant through some remote methods such as telephone
call. Then, the products are delivered to the customer. The products are typically delivered
directly to an address supplied by the customer. The goods are supplied on the system of
C.O.D (Cash On Delivery) or V.P.P (Value payable through Post)

Telemarketing

Telemarketing is a form of direct marketing. Here marketer goes direct to the customer
using telecom/IT facilities. Telemarketing is usually done through specific campaigns.
Contact is established with hundreds of prospects in a campaign that normally runs through
few days. Several tele-callers are hiredfor the tele-call operation.

Automated Vending

A vending machine is a machine that dispenses product when a customer deposits a

sufficient amount of money into a money slot. The money is accepted by a currency
validator. It is a machine that provides various snacks, drinks and other products to
customers. The ideas of having vending machine are to vend product without cashier.

World Wide Web

Internet marketing or online marketing refers to advertising and marketing efforts that use
the web and email to drive direct sales via electronic commerce, in addition to sales leads
from Web sites or emails.

Forms of Retail Business Ownership

1. Sole Proprietary Concern

2. Partnership Firm

3. Limited Company

4. Co-operatives

5.Franchises
 Theories of Retailing

THEORIES OF RETAILING

Environmental Theory Cyclical Theory (Wheel of Conflict Theory

Environmental Theory
Retailing; Retail Life Cycle;
Retail Accordion)

Environmental Theory

Where a change in retail is attributed to the change in the environment in which the
retailers operate. The changes in the external environment can alter the profitability of the
environment.

Cyclical Theory

Where change follows a pattern and phases can have definite identifiable attributes
associated with them. There are three components associated with cyclical theory: Wheel of
Retailing; Retail Life Cycle

Conflict Theory

Where the competition or conflict between two opposite types of retailers, leads to new
format being developed.This theory proposes that new forms of retail institution
(antithesis), challenges an established retailer (thesis), a new form of retailer (synthesis)
results. For example, when a thesis and antithesis are taken as department stores and
discount stores respectively, the synthesis may emerge as discount department stores.

Wheel of Retailing

The Wheel of Retailing

The Wheel of Retailing is theory to explain the institutional changes that take place when
innovators, including large business houses, enter the retail arena. It explains how retailers
usually begin at the bottom of the wheel with low prices, profit and prestige and then
gradually work their way up to increased prices, profits and prestige. The theory suggests
that new forms of retailing appear as price cutting, low cost and narrow profit margin
operation.

Thus retailers mature as high cost, high price, conservative operators, making themselves
vulnerable to new, lower price entrants.
A low price retailer should avoid incurring extra costs on the existing format and instead
should open another store with better service levels and premium brands catering to the
upmarket segment.

Price cutting, low

cost, narrow profit

Trade Up
Vulnerable to lower
priceentrants

WHEEL OF RETAILING

High Cost, High Improve Display,

Price Increasing Ad Cost

Increase in Cost
This theory states that in a retail institution changes takes place in a cyclical manner. The
cycle can be broadly classified into three phases.

 Entry Phase
 Trading Up Phase
 Vulnerability Phase

Entry Phase

 The new, innovative retailer enters the market with low status and low price store
format.
 Starts with a small store that offers goods at low prices or goods of high demand.
 This would attract the customer from more established competitors.

Trading Up Phase

 New retailer tries to make elaborate changes in the external structure of the store
through upgradation.
 Retailer will now reposition itself by offering maximum customer service , a posh
shopping atmosphere and relocating to high cost area

Vulnerability Phase

 The innovative store will have to deal with high cost, conservatism and fall o ROI.
 Thus the innovative store matures into an established firm and becomes vulnerable
to the new innovator who enters the market.

Retail Life Cycle Theory

The Retail Life Cycle theory is a theory about the change through time of the retailing
outlets. It is claimed that the retail institutions show as s-shaped development through their
economic life. The s-shaped development curve has been classified into four main phases:

 Innovation/Early growth
 Accelerated Growth/ Accelerated Development
 Maturity
 Decline
Innovation/ Early Growth

A new organization is born, it improves the convenience or creates other advantages to the
final customer that differ sharply from those offered by other retailers.

Accelerated Growth

The retailer organization faces rapid increase in sales. As the organization moves to stage
two of growth, which is the stage of development, few competitors emerge. Since growth is
imperative, the investment level is also high, as in the profitability.

Maturity

The organization still grows but competitive pressures are felt acutely from newer forms of
retailing that tend to arise. This is the time when the retail organisation needs to rethink its
strategy and reposition itself in the market.

Decline:

The retail organization loses its competitive edge and there is a decline. In this stage the
organization needs to decide if it is still going to continue in the market.
Indian Perspective in Retail Business

1. The Indian Retail Industry is the largest among all the industries, accounting for 10% of
the country’s GDP and around 8% of the employment.

2. The retail Industry in India has come forth as one of the most dynamic and fast paced
industries with several players entering the market.

3. The Indian Retail Industry is gradually inching its way toward becoming the next boom
industry

4. A large young working population with median age of 24 years, nuclear families in urban
areas, along with increasing working women population and emerging opportunities in the
service sector are going to be the key factors in the growth of organised retail sector in
India.

5. In India the vast middle class and its almost untapped retail industry are the key attractive
forces for global retail giants wanting to enter into newer markets, which in turn will help
the Indian Retail Industry to grow faster. Indian retail is expected to grow 25% annually.
Modern retail in India could be worth US Dollars 175-200 Billion by 2016.

Growth trends in Indian Retail Industry

 Retail industry is expected to grow at a rate of 12% per annum for the next 5 years
 Higher incomes motivating the purchase of essential and non-essential products
which contributing in the growth of retail sector.
 Consumption patterns of Indian customers are changing.
 Increase in easy access to credit and consumer awareness
 New technology and lifestyle trends creating replacement demand
 Increase in rural income as well as urbanization of the population
 Important Questions

Section A

1. Define Retailing.

2. Mention any four functions of a retailer.

3. What do understand by

- Independent Stores

- Chain Store

- Franchise Store

- Speciality Store

Section B

1. Explain any five functions of a retailer

2. Explain the advantages and disadvantages of the following (Any One)

- Independent Stores

- Chain Store

- Franchise Store

- Speciality Store

- Departmental Store

3. Explain Cyclical Theory of Retailing

4. Explain Conflict Theory of Retailing

Section C

1. Explain in detail functions of a Retailer

2. Explain RLC (Retail Life Cycle)

3. Explain Wheel of Retailing.

 UNIT -2 CONSUMER BEHAVIOUR IN RETAIL BUSINESS

Consumer behaviour is the study of how individual customers, groups or organizations select, buy,
use, and dispose ideas, goods, and services to satisfy their needs and wants. It refers to the actions of
the consumers in the market place and the underlying motives for those actions

CONSUMER BEHAVIOUR-MEANING

In other words; The term consumer behaviour is understood as the behaviour that consumer display in
searching for purchasing, using, evaluating and disposing of products and services that they expect
will satisfy their needs.

CONSUMER BEHAVIOUR-DEFINITION

“Consumer behaviour is the study of how people buy, what they buy, when they buy and why they
buy” BY:- KOTLER

BLACKBOXMODEL

The black box model shows the interaction of stimuli, consumer characteristics, decision process and
consumer response. It can be distinguished between interpersonal stimuli or intrapersonal stimuli. The
black box model is related to the black box theory of behaviourism, where the focus is not sent on the
processes of consumer but the relation between the stimuli and the response of the consumer. The
marketing stimuli are planned and processed by the companies, whereas the environmental stimuli are
given by the social factors, based on the economical, political and cultural circumstances of a society.
The buyers black box contains the buyer characteristics and the decision process, which determines
the buyers response. The black box model considers the buyers response as a result of conscious
rational decision process. This is which it is assumed as the buyer has recognised and determined the
problem, however in reality many decisions are not made in awareness of a determinedproblem by the
consumer

Factors affecting consumer behaviour

1. Marketing factors:Each element of marketing mix/ product,price,place and promotion has

the potential affect the buying process at various stages.
 Product: The uniqueness of the product, the physical appearance, and packaging can
influence buying decision of a consumer.
 Pricing: Pricing strategy affects buying behaviour of consumer to a greater extent. Marketers
must consider the price sensitivity of the target customers while fixing price.
 Promotion: The various elements of promotion such as advertising, publicity, public
relations, personal selling, and sales promotion affect buying behaviour of customers.
Marketers should select the promotion mix after considering the nature of his customer.
 Place: The channels of distribution and the place of distribution affect buying behaviour of
customer. Marketers make an attempt to select the right channel and distribute the products at
the right place.
 .
2 Personal factors:The personal factors of a consumer may affect the buying decisions.
The personal factors includes:

*Age: The age factor greatly influences the buying behaviour. For instance teenagers may
prefer trendy clothes, whereas office executives may prefer sober and formal clothes.
*Gender: The consumer behaviour varies across gender. For instance girls may prefer certain
feminine colours such as pink, purple, whereas boys may prefer blue, black etc….
*Education: Highly educated persons may spend on books, personal care products, etc…But a
person with low or no education may spend less on personal grooming products, general
reading books and so on….
*Income level: Normally, higher income level, higher is the level of spending and vice-versa.
But this may not be always the case in developing countries, especially in the rural areas.
*Status in society: Persons enjoying higher status in the society do spend a good amount of
money on luxury items such as luxury cars, luxury watches, premium brand of clothing etc…
*Other personal factors: The other personal factors such as personality, lifestyle, family size,
etc influence consumer behaviour.

3. Psychological factors:A persons buying behaviour is influenced by psychological factors.

*Learning:It refers to changes in individual behaviour that are caused by information and experience.
For eg: when a customer buys a new brand of perfume, and is satisfied by its use, then he/she is more
likely to buy the same brand next time. Through learning, people acquire beliefs and attitudes, which
in turn influence the buying behaviour.

*Attitude: It is tendency to respond in a given manner to a particular situation or object or idea.

Consumers may develop a positive, or negative, or neutral attitude towards certain products or certain
brands, which in turn would affect his/her buying behaviour.

*Motives: A motive is the inner drive that motivates a person to act or to behave in a certain manner.
The marketer must identify the buying motives of the target customers and influence them to act
positively towards the product that are marketed by him. Some of the buying motives include;

- Pride and possession

- Love and affection

- Comfort and convenience

*Perception:It is the impression which one forms about a certain situation or object. A
motivated person is ready to act, but the way or the manner in which he/she acts is influenced
by his/her perception of the situation.

*Beliefs: A beliefs is a descriptive thought, which a person holds about certain things.it may be
based on knowledge, opinion, faith, trust and confidence. People may hold certain beliefs of certain
brands, products. Beliefs develop brand images, which in turn can affect buying behaviour.
4. Situational influences: Major situational influences include the physical surroundings, social
surroundings, time, the nature of the task, and monetary moods and conditions.

*Physical surroundings: The physical surroundings at the place of purchase affect buying
behaviour. When a customer is shopping in a store, the features that affect buying behaviour would
include the location of the store, the decor, the layout etc..

*Social surroundings: The social surroundings of a situation involve the other people with
the customer that can influence buying decision at the point of purchase.

*Time factor: Customers may make different decisions based on when they purchase- the
hour of the day, the day of the week or the season of the year. For instance, a consumer who
has recived his salary on a particular day may shop more items, than at the end of the month
when he is short of fund

*Task: A customer may make a different buying decision depending upon the task to be
performed by the product. For instance, if the product is meant as a gift rather than for
personal use, then the customer may buy a different brand/product depending upon to whom
the gift is purchased.

*Momentary conditions: The moods and condition of the customer at the time of purchase may
also affect the buying decision. A customer who is very happy would make a different buying
decision, as compared to when he is not in a happy mood.

:
5. Social factors The social factors such as reference groups, family, and social and status affect
the buying behaviour:

*Reference groups: A reference groups is a small of people such as colleagues at work place, club
members, friends circle, neighbours, family members, and so on. Reference groups influence its
members as follows:

-They influence members values and attitudes.

-They expose members to new behaviours and lifestyle.

-They create pressure to choose certain products or brand.

*Family: The family is the main reference group that may influence the consumer behaviour.
Nowadays, children are well informed about goods and services through media or friend circles, and
other sources. Therefore, they influence considerably in buying decisions of both FMCG products and
durables.

*Roles and status: A person performs certain roles in a particular group such as family, club,
organisations and so on. For instance, a person may perform the role of senior executive in a firm and
another person may perform the role of a junior executive, the senior executive may enjoy higher
status in the organisation, as compared to junior executive.
6.Cultural factors:Culture includes race and religion, tradition, caste, moral values etc. culture also
include sub-cultures such as sub-caste, religious sects, language.

*Culture: It influences consumer behaviour to a great extent. Cultural values and elements are passed
from 1 generation to another through family, educational institutions, religious bodies etc. cultural
diversity influences food habits, clothing, customs and traditions etc. for instance, consuming alcohol
and meat in certain religious communities is not restricted, but in certain communities, consumption
of alcohol and meat is prohibited.

*Sub-culture: Each culture consists of smaller sub culture that provides specific identity to its
members. Sub cultures include sub- caste, religious sects, Geographic regions. Therefore, marketers
may adopt multicultural marketing approach, i.e., designing and marketing goods and services that
cater to the tastes and preferences of consumers belonging to different sub-cultures.

Family Influences

Family is the most important consumer buying organisation in any society, and family, members
constitute the most influential primary reference group.

The family orientation consists of parents and sibling. Form parents, a person acquires an
orientation toward religion, politics, and economies, and a sense of personal ambition, self –worth,
and love. Even if the buyer no longer interacts very much with his or her parents, their influence on
behaviour can be significant. In countries where parents live with grown children, their influence can
be substantial.

Family influences on consumer behaviour result from three sources:

(a) Consumer socialisation,

(b) Passage through the family life cycle, and
(c) Decision making within the family or household.

Consumer Socialisation

Consumer socialisation is the process whereby one acquires the skills to consume, as well as
the values associated with being a consumer .The socialisation process is not necessarily limited to
learning how to buy ,but can also include how not to buy, The most common socialisation agents are
family ( mostly parents ), peers, the mass media , and the school.

Family: This is the primary and chief agent of socialisation for most people, especially in the first
five years of their life. The family provides the child with his/her first social contact with the social
world, and it is through it that the correct patterns of behaviour are internalised and learnt. However,
learning is done in an informal manner and the right (or wrong behaviour) is approved (or rejected)
through rewards and punishment. Family has a very significant role to play during socialisation, since
it is the only one that allows that adjustments are made when necessary. This is because there are
strong emotional ties and motivations are fused during such informal learning.
Parents teach price-quality relations to their children, including experiences with the use of money
and ways to shop for quality products. Parents also teach their children how to be effective shoppers,
and how to buy products on sale. Parents influence children’s brand preferences. They also influence
children’s ability to distinguish fact from exaggeration in advertising.

School: When a child reaches school age, he/she starts to widen his /her socialising cycle via school
setting. Here, learning is more of formal type, since there is an obvious transition from an
environment of personal and intimate relationship to one which is more impersonal. At school, talents
are evaluated on the basis of sets of standards and requirements. The school helps the child to adapt to
social order through the hidden curriculum and functions in order to prepare the latter for a stable
adult life. Moreover, the school is specialised to impart certain technical, intellectual skills and
cultural heritage of the society, so that the individual is able to integrate himself with the society. In
many cases, socialisation provided by the school erodes values learnt at home and which are contrary
to the dominant culture.

The peer group: this is the second important influence that a child encounters during his/her
lifetime. Play patterns with his playmates is highly influential on the way he/she thinks, and the way
he/she will act later. Peer group are usually people who are of the same age and have similar status,
and association is usually people who are of the same age and have similar status, and association is
usually accidental. For instance, a child who enters the standard one same age group. He/she might
become friends with only some of them. Yet, the whole class constitutes his/her peer group. However,
as a child grows up, he/she starts to choose his/her peer group on a couple of criteria. Usually it is
based on common interests, activities, similar income level and status. As we can easily note, the peer
group is the only socialising agent that is not controlled by adults. They affect the individual in such
issues like appearance, lifestyles, fashion, social activities, drugs, technology and so on.

The mass media:It is recognised by many sociologists that the mass media brings a powerful
socialising influence. But the extent of its effects is difficult to measure. Mass media transmits
information in an impersonal manner. It is conducted in a one-way flow, since the audience is passive
receivers. Although the mass media is perceived as empowering us with wider information,
knowledge about the wider world, it becomes clear that it also harms its audience and receivers. By
concentrating and stressing on certain topics, the media can create manage and control our
impressions of what should be seen as real, and important. It is known that there is a strong
correlation between violent television shows and aggressive anti-social behaviour among children,
since the latter like to copy their favourite heroes. Another threat is the internet. Although, it can be
used as a pool/reservoir of knowledge, the internet constitutes a danger for children since they can be
easily exposed to certain damaging material.

FAMILY LIFE CYCLE

Family life cycle has a profound influence on consumer buying decision. Family life cycle is the
emotional and intellectual stages, one passes through from childhood to his/her retirement years as a
member of a family. In each stage, one faces challenges in his/her family life that allow him/her to
build or gain new skills. Life cycle stages try to depict the consumption behaviour of consumers, from
bachelor to retired solitary survivor. The basic assumption underlying the family life cycle approach is
that most housseholds pass through an orderly progression of stages. Each stage is characterised by
financial situation and purchasing patterns. This is a historically important and intuitive approach to
segmentation, because customers do buy different products at different stages of their life.
 Family life cycle is an important tool in marketing. Marketers and their companies can direct
their marketing effort to subsets of the family life cycle. Family life cycle includes the key variable
like age, marital status, career, disposable income, family size on so on. Various stages of family life
cycle is explained in the following paragraphs.

BACHELOR STAGE

The bachelor stage of the life cycle comprises those who are not yet married but who
no longer live at their parents’ home. This stage of their life cycle is characterised by a low income.
But they enjoy high discretionary power in spending their income. Their decisions are influenced by
peer reference group. Their financial burden is few. People at this stage of the life cycle are more
likely to participate in recreational activities. They would like to enjoy their holidays. They buy basic
kitchen equipments, basic furniture, cars, clothes and so on

Newly married couples

This stage represents people who are newly married. At this stage, they will not have burden of a
children. At this stage, they are likely to be in better financial condition than later, when they get
children. They are more likely to spend money on vacations. Their focus of purchase is on consumer
durables like refrigerators, TV sets, life insurance, car, furniture and so on.

Full nest:Families with children is known as full nest. Full nest is divided further into three
categories

Full nest I: (couples with youngest child below 6 years). This stage is characterised by:

(a) Home purchasing at peak,

(b) Liquid assets/saving low,
(c) Dissatisfied with financial position and amount of money saved,
(d) Reliance on credit finance, credit cards, overdrafts etc.,
(e) Child dominated household,
(f) Their purchases is based on child’s need,
(g) They buy necessities like washers, dryers, baby food and clothes, vitamins, toys, books
etc.

Full nest II:(couples with youngest child 6 or more years). This

Stage is characterised by:

(a) Better financial position,

(b) Some wives return to work,
(c) Mortgagee burden reduces due to increased income
(d) Still, child dominated household
(e) Their purchase is based on child’s need
(f) Buy necessities-foods, cleaning material, clothes, bicycles, music lessons, pianos,
holidays etc.
Full nest III: (old married couples with dependent children).

This stage is characterised by:

(a) financial position still improves,
(b) wife continues to work,
(c) school and examination dominated household,
(d) some children get first jobs; other in further/higher education,
(e) expenditure to support children’s further/higher education
(f) They buy more tasteful furniture, non-necessary appliances, holidays, etc.
Empty nest
Empty nest is a situation in which children have grown and moved away from their
parents. Empty nest can be divided into two categories:
Empty nest I:
(a) Older married couple with no children at home
(b) Head of the family continues to work
(c) Income at highest level
(d) Expenses are relatively low
(e) Almost they have cleared dues and enjoy home ownership
(f) They are satisfied with the financial position and money saved
(g) Interested in travel, recreation and self education
(h) They buy luxuries and involve in home improvement.

Empty nest II:

(a) Older married couple with no children at home

(b) Head of the family is retired
(c) Significant reduction in th income
(d) They are concerned with the level of pension and savings
(e) They buy medical appliances and medical care
(f) They buy products to aid health, sleep and digestion
(g) They assist children and grand children
Solitary survivor
People in the final stage of the family life cycle are the solitary survivors. Solitary
survivors is divided into two categories
Solitary survivor I:
(a) Consists of widow or widower but still working
(b) Income still adequate but likely to sell family home and purchase smaller
accommodation
(c) Concerned with level of savings and pension
(d) Worried about security and dependence

Solitary survivor II:

(a) Consists of window and windows and retired

(b) Significant reduction in income
(c) Additional medical requirements
(d) Special need for attention, affection and security
(e) Possible dependence on others for personal financial movement and control
Uses of the model in marketing

Family life cycle has tremendous uses in marketing. Following

Movement and family life cycle;

(a) Can be used as a method for market segmentation

(b) Provides an understanding of changes in consumer buying behaviour
(c) Can be used in targeting strategies

Roles in family decision making processes

Different members of a family will play different role, and influence decision
making process. The different roles in a family is explained in the following
paragraph

Influencers:

Influencers are those family members who provide information and advice,
and thus influence the purchase. The housewife tells her family about the new hotel
opened in the locality. Her favourite description and opinion about the hotel influences
her husband and children to go to that hotel.

INFLUENCERS GATE KEEPERS

ROLES OF THE DECIDERS

BUYERS
FAMALIES

PREPARER

DISPOSERS
USERS

MAINTAINERS

Gatekeepers:Gatekeepers are those family members who control the flow of information about a
product or service, thus influencing

the decisions of other family members. For example the son who studies in 10th standard would like to
get a racing bicycle from his father. He may not reveal relevant information on all other brands except
his favourate brand to his father. By doing so, the son influenced his father to buy the bicycle of his
preferred brand.
Deciders:Deciders are those family members who have the power to influence or jointly decide
whether or not to buy a product or service. The husband and wife may jointly decide about the
purchase of a new TV.

Buyers:Buyers are those family members who actually buy a particular product. A housewife
actually buys all the food articles, and other daily needs required by other family members.

Preparers:Preparers are those family members who transform or prepare the product into to the
form in which it is actually consumed. For example housewife may prepare meal to her family
members using raw vegetables, spices, oil and other ingredients.

Users:Users are those family members who use or consume a particular product or service. All
family members may use television, and listen to a music system. But the bike purchased by father
may be father may be used by his college-going son.

Maintainer:Maintainers are those family members who take care of the maintenance or repair work
to ensure the better and continued performance of the product. For example, husband may service
bike and car every weekend housewife may maintain reregister and TV every weekend.

Disposers:Disposers are those family members who initiate the disposal of a product. For example,
housewife may decide to sell old newspaper at the end of every month.

Household decision making process

Marketers target their communication towards children and parents in different ways. The message is
developed carefully to deal with these two categories and attract them to buy their product. Looking at
the advertisement, the receiver of the information (parent) gathers the relevant information, before the
decision is made. Children influences their parents to buy the product though emotional appeal. After
influence by the information of emotional attack, parents will take decision regarding the purchase of
a product. Once the product is purchased, the usage is done based on to whom the product is
purchased. If the product is purchased for the entire family, all of them will be the users of the
product.

Functions of family:

Family, as a social group, has a significant role on consumer behaviour. An individual’s immediate
family members play an essential role in influencing his/her buying behaviour. Family consists of
parent, siblings, spouse, grandparents, relatives, etc. Family by far is the most important reference
group. What an individual imbibes from his parents becomes his/her culture. What he sees from his
childhood becomes his habit or in other words lifestyle. Following are the functions played by family

Economic well-being:

Family provides financial supports to its dependents. It takes care of the needs of children. In a
traditional family, head of the family used to work and others used to take care of the internal affairof
the family. In a traditional family, housewife used to take care of children and husband used to work
outside. The outlook of a modern family is changed a lot. Both husband and wife earn to support
family. Not only that,even teenage children go to work to earn their money and spend lavishly. There
are few teenagers who engage in earning activities to support their parents.

Emotional support:Family is a group from which one will learn love, affection and intimacy.
Family helps its members to develop such feelings, and shows them how to exercise these feelings.
Today’s family structure and nature are different. Both the parents go to work and will have limited
time to express such feelings. Therefore, marketers, like greeting card manufacturing company, have
capitalised such opportunities to their advantage. Most of the families encourage their children to
develop their communication skills, interpersonal skills by getting them admitted to personality
development centers. This helps children to adjust to adjust to their environment.

Suitable lifestyle:Another important function of family is to provide a suitable lifestyle to its family
members. Family commitments, including the allocation of time, generally influence consumption
pattern. In most of the modern families, both the parents are working. This has led to the shortage of
quality time with the rest of the family members. Therefore, marketers have realised the importance of
quality time and concentrated on hotels and weekend trips.

Social relationship:Family teaches their members interpersonal skills, dress, grooming standard,
appropriate manner, selection of speech, suitable educational, occupational and career goals.

Moral and ethical values:Family teacher their members moral and ethical values. Family teaches
their members to draw a distinction between good and the bad in the society.

Interpersonal skills: Family teaches their members how to deal with other family members. Family
teaches their member how to respect others, follow their discipline and principles.

Religious values:Each family follows some religion. Each religion has a set of values. Family
teaches their members these values.Each element of marketing mix/ product, price, place and
promotion has the potential affect the buying process at various stages.

Current trends in consumer behaviour

1.The concept of the Presumers: In todays expectation economy, consumers want the best.
Presumers are more active and more powerful. Presumers not only would like to buy the right
product, but also the right brand.

2.Emerging middle class: purchasing power of middle income group has considerably increased.
Their pattern of thinking has undergone a positive change. Marketers are competing to reap benefit
out of the emerging big middle class consumer market.

3.Mobile moments: Mobile devises have become part and parcel of life cycle. Due to technological
revolution, todays customer can get any information on his mobile phone. Consumers can search
information, place order and make payment using their mobile phones. This has completely changed
the buying habit of modern consumers. This saves time and money to the consumers.

4.New mindset: Modern consumers are becoming environmental conscious. They demand eco-
friendly products like battery driven cars, e-billing etc. this offered a real challenge to the marketer to
develop exiting products that are eco-friendly. Companies are spending considerable amount of
money on research and development to produce eco-friendly sustainable products.
5.Increased demand in the filed of health care and wellness: consumers are not just confined
to thepurchase of durable goods. They would want to spend quality timeduring holidays and leisure
hours. Atthe sametime, they are becoming health conscious. This has created a huge potential market
for health care and wellness. Wellness include *social wellness *occupational wellness *physical
wellness *emotional wellness *spiritual wellness.

6.Globel Experience: Purchasing power of modern consumers has increased considerably. They
would like to experience new things. Their purchase is no longer restricted to local market. They
would like to enjoy the best of the best product available in the world.

7.Demand for “Desi” products(domestic products): Though there are consumer wanting to
buy imported goods, there are many consumer buying products manufactured locally. Example for
such products are kadhi cloths, Raymond, Haldiram etc.

8.Transparent and clear:Consumer expect companies to provide information about the products
which is real, unambiguous, and clear. Companies cannot simply promise which they cannot deliver.

9.Brand consciousness: Consumer would want to buy benefit, not just a product .while buying a
product, always for value formoney. Modern consumer prefer to buy branded product. For them,
brand is a confidence. Therefor, marketers are competing to position their brand in the minds of
customers.

10.Working women: In the last decade, the working women segment has grown
significantly. This segment has opened the floodgates for the indian manufactures and
retailers.

11.Value sensitive: consumer are becoming value sensitive and not price sensitive. They are
ready to pay higher price, if the product offers them more value than other brands.

12.Features, and just not a brand:consumers give preferences to product features rather than its
brand name. they look for a brand that offers a product with more features.

13.Use of credit cards: Traditional consumers were buying goods with the money available with
them. They used to buy products within their limited earnings. The modern consumers are not
confined only to their limited earnings. They are taking advantage of credit cards and bank loans to
full fill their needs and wants.

14.Better experience while buying products: consumers just do not want availability of
products. They want better ambiance, services and experience. This has led to the growth of shopping
malls where shopping, entertainment, and better facility are available under 1 roof.

15.Change in the behaviour of rural consumers: In recent years, the purchasing power of rural
consumers has increased considerably. Standard of living of rural consumers has gone up. Even they
want modern amenities at their homes.

16.Trendy life: Modern consumers are influenced by western culture. Foreign brands have gained
wide consumer acceptance in India. The products include beverages, packed food, personal care
products, garment and apparel.
17.Online buying: consumers prefer buying products online. This is mainly because of busy life
and suffocating traffic. People can examine most of the products online before placing an order. Also
they can go through the feedback given by others regarding this product online. Online buying saves
time and money for consumers. Today, almost all the products are sold online.

18.Youth segment: Youth segment is exposed to enormous information unlike their parents. They
are in the fore front of creating new, modern, west embracing consumer society.

Buying Decision Process.

Consumer buying process describes the process a customer goes through when buying a product.

Need Recognition and Problem

awareness

Information Search

Evaluation of Alternatives

Purchase

Post-Purchase Evaluation

Introduction to buying process

The purchase is only the visible part of a more complex decision process created by the consumer for
each buying decision he makes. Therefore, it is necessary for the marketer to consider the whole
buying process rather than just the purchase decision. The consumer decision making process
involves the following 5 steps: 1. Problem reorganization 2. Information search 3. Evaluation of
alternatives. 4. Purchase decision 5. Post-purchase evaluation.

1.problem reorganization: the 1st stage in the buying decision is the problem
reorganization.problem reorganization occurs when a consumer is faced with an unsatisfied need and
desires a fulfilled outcome that satisfies their need. Problem reorganization is triggered by either
external or internal stimuli. The core of a marketers goal is to make consumers aware of possible
unsatisfied needs, and to show the consumer how the product or service will fulfil that need.
2.Information search: the 2nd stage in the buying process is the search for the information. The
information search involves expose to different sources, such as promotional material and displays of
the product, actively researching the product, or relying on historic information in the consumers
mind, such as preconceived ideas about a product or a previous experience with the product. The
external to which a consumer conduct an information search depends largly on the perceived risk of
the purchase. Eg buying a new car, might involve an extended search effort on the consumer, because
the trouble and time that is spend in finding the information are minimal compared to the risk of
buying the wrong car.

3.Evaluation of alternatives: The 3re stage of the decision making process, is the evaluation of
outcome. The consumer is now ready to make decision based on all the information gathered and
those discarded. The goal of the marketing manager is to determine which attributes of a product will
convince a consumer to buy it. This stage of the decision making process is critical, because many
consumers are not to make a rational decision by weighing alternatives. Consumers evaluate
alternatives based on price, design, quality, features, performance, popularity.

4.Purchase decision: The next step in the decision making process is to purchase the product. The
consumer has decided which product to buy, or not to buy anything at all. If he decides to make a
purchase, he makes all necessary arrangements to acquire the product. He chooses the brand shop and
time of purchase.

5.Post-purchase behaviour: the next step in the process is an evaluation of the product after the
purchase. Now that the consumer has made he purchase. He expects certainoutcomes from his
decision. The level of satisfaction that the consumer will experience will depend largely on how many
of his expectations were met. Based on the level of satisfaction or dissatisfaction, he will decide
whether to buy or not to buy the same product next time. Greater amount of satisfaction brings
repeated purchase, and dissatisfaction may lead to brand switching.Diffusion(Adopiton) of
innovations

RETAIL PLANNING PROCESS

Retail planning process is a process that defines objectives and assesses both the internal and external
situation to formulate strategy,implement the strategy,evaluate the progess,and make adjustments as
necessary to stay on track.

A simplified view of the strategic planning process is shown in the following diagram:

MISSION AND
OBJECTIVES

ENVIRONMENTAL
SCANNING
 STRATEGY
FORMULATION

STRATEGY
IMPLEMENTATION

EVALUATION AND
CONTROL

(a).mission and objectives:

The mission statement describes the company’s business vision,including the unchanging values and
purpose of the firm and forward-looking visionary goals that guide the pursuit of future opportunities.

Guided by the business vision,the firm’s leaders can define measurable financial and strategic
objectives.Financial objectives involve measures such as sales targets and earnings growth.Strategic
objectives are related to the firm’s business position,and may include measures such as market share
and reputation.

(b) Environmental scan:

The environmental scan includes the following components:

 Internal analysis of the firm.

 Analysis of the firm’s industry.
 External macro-environment(PEST analysis)
The internal analysis can identify the firm’s strength and weaknesses and the external analysis
reveals opportunities and threats.a profile of the strengths,weaknesses,opportunities and
threats is generated by means of SWOT analysis.
An industry analysis can be performed using a framework developed by Michael Porter
known as Porter’s five forces.this framework evaluates entry barriers, suppliers, customers,
substitute products,and industry rivalry.

(1)Threat of substitute products:

It means how easily the customers of the company can switch to its competitors product.Threat of
substitute is high when:
 There are many substitute products available.
 Quality of the competitor’s product is better.
 Customer can easily find the product that the company is offering at the same or less price.

In the above mentioned conditions,customer can easily switch to other products.therefore,substitutes

are a threat to the company’s product.profits and prices are affected by substitute products.

(2) Threat of new entrants:

A new entry of a competitor into the market weakens company’s power.threat of new entry depends
upon entry and exit barriers.threat of new entrant is high when:

 Customers can easily switch.

 The key technology adopted by the company is not hard to acquire or is not protected well.
 The product of the company is not differentiated.

(3)Industry rivalry:

It means the intensity of competition among the existing competitors in the market.intensity of the
rivalry depends on the number of competitors and their capabilities.industry rivalry is high:
 There are number of small or equal competitors.
 Customers have low switching costs.
 Exit barriers are high and rivals stay and compete.

These situations make the reasons for advertising wars,price wars,modifications,ultimately costs
increase and it ia difficult to compete.

(4)Bargaining power of suppliers:

It means how strong is the position of the seller.bargaining power of the suppliers is determined by
the intensity of the power of the suppliers in increasing the price of products offered by them.suppliers
are more powerful when:

 A few substitutes available to supplies.

 Their product is most effective or unique.
 Switching cost from one supplier to another is high.

When suppliers have control on supplies and its prices,that segment is less attractive.it is best way to
make win-win relation with suppliers.it’s good idea to have multi-sources of supply.

(5)Bargaining power of buyers:

It means how much control the buyers have to drive down the prices of the product offered by the
firm.buyers have more bargaining power when:

 Buyer purchases in bulk quantities.

 Product is not differentiated.
 Buyers are price sensitive.

Buyers bargaining power may be lowered down by offering differentiated product.if the company is
serving a few but huge quantity ordering buyers,then they have the power to dictate the company.

(c)Strategic formulation:
 Given the information from the environmental scan,the firm should match its strengths to the
opportunities that it has identified,while addressing its weaknesses and external threats.

To attain superior profitability,the firm seeks to develop a competitive advantage over its rivals.a

Competitive advantage can be based on cost or differentiation.Michael Porter identified three

industry-independent generic strategies from which the firm can choose.

Porter’s generic strategies:

It describes how a company gains competitive advantage across its chosen market scope.there are
three generic strategies,namely cost leadership,differentiation and focus.

 A cost leadership strategy is a strategy focused on producing the products at a lowest cost in the
industry.
 A cost focus strategy focuses on a narrow market segment and involves developing lower cost
products for that target segment.
 A differentiation strategy is strategy that involves making the products or services,different from and
more attractive than the competitors.
 A differentiation focus strategy is a strategy of developing unique products for a smaller market
segment.

(d)Strategy implementation:
The selected strategy is implemented by means of programs,budgets,and procedures.implementation
involves organization of the firm’s resources and motivation of the staff to achieve objectives.
The way in which the strategy is implemented can have a significant impact on whether it will be
successful.in a large company,those who implement the strategy likely will be different people from
those who formulated it.for this reason,care must be taken to communicate the strategy and the
reasoning behind it.otherwise,the implementation might not succeed if the strategy is misunderstood
or if lower-level managers resist its implementation because they do not understand why the particular
strategy was selected.

(e)Evaluation and control:

The implementation of the strategy must be monitored and adjustments made as needed.
Evaluation and control consists of the following steps:
1.define parameters to be measured.
2.define target values for those parameters.
3.perform measurements.
4.compare measured results to the pre-defined standards.
5.make necessary changes.

Diffusion(Adoption) Of Innovations.

In a sense the diffusion process as developed by E.M. Rogers is the same as the products life cycle.
However,the diffusion process looks at what is happening in the market,whereas the products life
cycle merely depicts the flows of revenues and profits to the business units on accounts of the
diffusion process. The diffusion process is desciribed in the form of the normal distribution curve.

1.Innovators:They are the first two and a half per cent of the market. They are risk takers and act as
forerunners. They are willing to take the risk in many respects. They show different life style and
personality. They are young, educated, well-informed and richer consumers. They are very important
to the success of the new product.

2.Early Adopters:The next thirteen and a half per cent using the products are early adopters. They
are the opinion leaders and taste makers in their circle of connections and friends. They are also
opinion leaders in the community . They are educated, rich and more successful than average.

3.Early Majority:The next 34% are early majority to adopt new product,bringing the total adopters
to 50 per cent. They are average people with regard to income , occupation , age, education. They
make the innovation legitimate and its no longer a luxury or a novelty. They do not hold leadership
position. They from a bridge between the new and the old values of society. They are shrewd buyers
and give more thought to themselves and their behaviours.

4.Late Majority:The next 34% are the late majority buyers to adopt the innovation. They are older
and less educated buyers. They have limited purchasing power. Hence, they are skeptical in their
adoption of the new product. It is an indication that it is now a clear necessity. They buy the product
only when public opinion clearly is in favour of the product. They depend more on the word of
mouth and personal guidance by their reference groups. They are less exposed to mass media

5. Laggards:It is the last category of buyers(16 %). They tend to be older,with less educational,
poorer and traditional in their outlook on life. Caution , conservation and price-consciousness
characterise the laggards. They have little contact with mass media particularly newspapers. They rely
only on radio, Tv and reference groups. Rural buyers tend to exhibit the laggards.

Group Dynamics and Consumer Reference Groups

A group consists of two or more people who interact to accomplish either individual or
mutual goals. In marketing, it is defined as two or more individuals who share a set of norms, values,
or beliefs and have certain implicitly or explicitly defined relationships to one another, such that their
behaviours are interdependent.Reference group is a person or group that serves as a point of
comparison (or reference) for an individual in the formation of either general or specific values,
attitudes, or behaviour.

Types of Reference Groups

Normative Reference Group: Normative reference group is that group in which the
consumer had direct relation or face to face relation and influence on the consumer buying decision
and behaviour. Example for normative reference group are family and friends. The members of the
family are always in interaction with the consumer and they give difference ideas and suggestions or
advice to the consumer to buy a specific product or brand. And thus they influence the consumer.
 Comparative Reference Groups: Comparative reference group is that group in which the
consumer has indirect relation and less face to face interaction. Such type of groups attract the
consumer and the consumer gradually start to adopt the life style of the personalities lying in the
comparative reference group.

For example, in this group we have television stars, cinema stars, sportsmen, and other
popular personalities. The consumers are attracted by the marketer through difference types of
promotional campaigns and start to purchase difference types of products used by the personalities of
the comparative reference group.

Indirect Reference Groups consists of those individuals or groups with whom an individual
does not have any direct face-to-face contact, such as film stars, TV stars, sportsman, and
politicians.Indirect Reference groups are used in advertising to appeal to difference market segments,
group situation with which potential customers can identify are used to promote products and
services. The three types of indirect reference groups appeals most commonly used are:

*Celebrities.

*Experts, and

*The ‘common man’

Celebrities are well-known people (In their specific field of activity) who are admired and their fans
aspire to emulate their behaviour. Film stars and sports heroes are the most popular celebrities. Soft
drinks (Thums up), shaving cream (Palmolive), toilet soaps (Lux), textiles (Dinesh, Graviera) are
advertised using celebrities from the sports and film fields.
Experts such as doctors, lawyer, accountants and authors are used for establishing the benefits of the
product. Colgate and Forhans toothpastes are examples of products, which use the expert reference
groups appeal for promotion.

Common man: Another Indirect reference group appeal is that which uses the testimonials of a
satisfied customer, “the common man”. Dove has recently tried something of the same. Pantene on
the other hand tried to counter attack by using both, satisfied customers as well as celebrities.

Contractual Reference Group

A contractual reference group is one in which a person holds membership or has a regular face to face
contact and of whose values, attitude, and standards he or she approves. Thus, a contractual group is
likely to have a congruent influence on an individual’s attitudes or behaviour.

Aspirational Reference Group

These are groups to which a person would like to join as member. These groups can be very powerful
in influencing behaviour, because the individual will often adopt the behaviour of the aspirational
group in the hopes of being accepted as a member. Sometimes the aspirational groups are better off
financially, or will be more powerful. The desire join such. For example, a humble office worker may
dream of one day having the designation to be present in the company boardroom. Advertising
commonly uses images of aspirational groups, implying that the use of a particular produce will move
the individual a little closer to being a member of an aspirational group. Just consider Nokia 6230 ad
campaign where a young man with Nokia mobile is shown to be capable to go the top position in the
company, thus instigating you to use the same model in order to join the same aspirational group.

A Disclaimant Reference Group: In this group, a person holds membership or has face-to-face
contact but disapprove the group’s values, attitudes or behaviour. Thus, the person tends to adopt
attitudes and behaviour that are in opposition to the norms of the group. For example, neighborhood
friends who have been dropped out of school.

An Avoidance Group: In this group, a person does not hold membership and does not have face-to-
face contact and of whose values, attitudes, and behaviours he or she disapproves. Thus, the person
tends to adopt attitudes and behaviour that are in opposition to those of the group. For example, one
may vocally reject the actions of those peers who do not demonstrate adequate respect for their
parents and religion.

Reference Group Power

*Referent Power (When consumers imitate qualities by copying behaviours of a prominent person
they admire). This is the result of a person’s perceived attractiveness, worthiness, and right to respect
from others. Example: religions or fraternities.
*Information Power (Able to influence consumer opinion by virtue of their (assumed) access to the
“truth”). This comes from access to the latest, best and most information has a high degree of power.
For example, younger son in the family will have information power as he is exposed to the latest
technology.
*LegitimatePower (Granted to people by virtue of social agreements). This comes from the belief
that a person has the formal right to make demands, and to expect compliance and obedience from
others. For example, mother demands her children to behave in a certain manner at home. She
believes that she has the power to command certain behaviour from her family members. Children
oblige her request because they believe that respecting parents is their bonded duty.
*ExpertPower (Derived from possessing specific knowledge about a content area). This is the ability
of a group or individual to influence a consumer due to the group’s or individual’s knowledge of, or
experience with, a specific subject matter. Example: Indian Dental Association.
*RewardPower (When a person or group has the means to provide positive reinforcement). This
power gives power to a person to award somebody for accomplishing certain desired result. For
example, father rewards his son with a sophisticated mobile for securing first rank in 10 th standard.
*Coercive Power (Influencing a person by social or physical intimidation). This comes from the
belief that a person can punish others for noncompliance. For example, mother may coerce her kids to
follow desired decorum in a social function. Sometimes, children also coerce their parents to change
behaviour. For example child is aware that throwing tantrum in the kitchen will cause mom to give
him his favourate ice-cream.
Shopping Personality Type

All people engage in some form of shopping every now and then. Motivation for shopping may differ
from one person to another, but one thing is certain: each person has their own unique shopping habits
that are closely linked to their personality and spending power. Shopping personalities can be
classified as:

1) The Touchy-Feely Shopper:He is a type of shopper who would like to touch, pick and feel
the product before he buys it. Research shows that if a customer touches or picks up
merchandise he is more likely to buy it. That is why retailers purposely put items like coats,
sweaters, and other fancy and necessary items in easy-to-touch locations.
2) The Mall Lingerer:These shoppers take their time going through a store before purchasing
goods. Some of the studies conducted have shown that shoppers who spend 30 to 60 minutes
in a mall spend an average of $72.70. If they linger three or more hours, the figure jumps to
$200.40. Therefore, floor plans are designed. Accordingly when we notice, to get an escalator
for the next floor, we have to walk halfway through the store. That is intentional.
3) Guerrilla shoppers:The guerrilla shopper is the opposite of the mall lingerer. This person
waits until the last minute, especially around the holiday season, and then runs around
frantically, trying to get all the shopping done in one shot. This person also shops
infrequently. They are more likely to overspend if they do shop once, rather than making
several small trips.
4) The Sale Junkie: Thesepeople are subjected to a spillover effect. If they see one bargain,
they think everything in the store is a bargain, making them to spend more money.
5) The Social Shopper: This type enjoys shopping with friends and almost never shops alone,
they tend to make a lot of impulsive purchases.

Customer Service and Customer Satisfaction: Customer satisfaction is a marketing term that
measures how the products or services supplied by a company meet or exceeds a customer’s
expectation.

Importance of Customer Satisfaction

1. It is a leading indicator of customer re-purchase intention and loyalty:Customer

satisfaction is the best indicator of how likely a customer will make a purchase in the future.
Asking customer to rate their satisfaction on a scale of 1-10 is a good way to see is they will
become repeat customer or even advocates. Any customers that give a rating of 7 and above,
 can be considered satisfied, and can safely except them to come back and make repeat
purchases. Customers who give a rating of 9 or 10 are potential customer advocates to convert
potential customers to customers.
2. It is a point of differentiation:In a competitive marketplace where the businesses
compete for customers; customer satisfaction is seen as a key differentiator. Businesses who
succeed in these cut-throat environments are the ones that makes customer satisfaction a key
element of their business strategy.
3. It reduces customer churn:In most if the cases it is found that price is not the main reason
for customer churn; it is actually due to the overall poor quality of the customer service.
Customer satisfaction helps company to reduce customer churn. By measuringand tracking
customers satisfaction companies can put new processes in place to increase the overall
quality of customer service.
4. It increases customer lifetime valve:It is found that a ‘totally satisfied customer’
contributes 2.6 times more revenue than a ‘somewhat satisfied customer’. Furthermore, a
‘totally satisfied customer’ contributes 14 times more than a ‘somewhat dissatisfied
customer’. Therefore, satisfaction plays a significant role in how much revenue a customer
generates for a company’s business.
5. It reduces negative word of mouth :It is found that an unhappy customer tells between
9-15 people about their experience.
This will affect company’s business and its reputation badly. Customer satisfaction is
closely linked to revenue and repeat purchases. To eliminate bad word of mouth, companies need
to measure customers satisfaction on an ongoing basis. Tracking changes in satisfaction will help
company to identify if customers are actually happy with your products or services.
6. It is cheaper to retain customers than acquire new ones: It is said that it costs six to
seven times more to acquire new customers than it does to retain existing customers.
Customer cost a lot of money to acquire. Company’s marketing team spends a thousand of
rupees to get the attention of prospects, nurturing them into leads and closing them into sales.
Therefore, it is necessary to retain existing customers. No doubt, it requires companies to
spend little amount of money. You stay connected with the customers, following techniques
can be used
 Use blogs to educate customers
 Use email to spend special promotion
 Use customers satisfaction surveys to listen
 Delight customers by offering personalized experiences.
Sources of Consumer Dissatisfaction: Customer dissatisfaction is caused for many
reasons. Following are the reasons behind customer dissatisfaction
 If the specified standard is not achieved by the producer
1. If the products are defective
2. Products not supplied at a required or specified time
3. Improper customer service or approach
4. Inadequate after sales service
Tools for Measuring Customer Satisfaction
1. Complaint and Suggestion Systems:
A customer-centered organization makes it easy for customers to register suggestion and
complaints. Some customer companies – P&G, General Electric, Whirlpool – establish
hot lines with tool numbers. Companies are also using Websites and Email for quick two-
way communication.
2. Customer Satisfaction Surveys:Studies show that although customers dissatisfied,
with one out of every four purchases, less than 5% will complain. Most customers will
buy less or switch suppliers. Responsive companies measure customer satisfaction
directly by conducting periodic surveys. While collecting customer satisfaction data, it is
also useful to ask additional questions to measure re-purchase intention, and to measure
likelihood or willingness to recommend the company and the brand to others.
3. Ghost Shopping:Companies can hire people to pose as potential buyers to report on
strong and weak points experienced in buying the companies and competitors products.
These mystery shoppers can even test how the company’s sales personnel handle various
situations. Managers themselves should leave their office from time to time, enter
company competitor sales situations where there are unknown, and experience the
firsthand treatment they receive. A variant of this Is that the managers to make phone
calls to their own company with questions and complaints, to see how the calls are
handled.
4. Last Customer Analysis:Companies should contact customers who have stopped
buying or who have switched to another supplier to learn why this happened. Not only is
it important to conduct exit interviews when customer first stops buying, it is also
necessary to monitor the customer loss rate.
Working Towards Enhancing Consumer Satisfaction
1. Segmentation:

Divide the market into suitable segments on which organization will focus. It is necessary to
develop different strategy for each market segment. Companies should use different marketing
approach, advertising and promotion for each customer segment.
2. Treat every customer as valuable asset:Every customer is important for a company.
Whether a customer buys goods worth Rs.100 or Rs.10,000, he is still a customer to a
organization. Never the less, company should provide benefits, bonuses and extra service for
the most valuable customers.
3. Locate distribution centers near customers:Company should ensure that the
distribution centers are easily approachable by good numbercustomers. Location should have
the facilities like parking of vehicles, nearness to public transport facility etc.
4. Combine produce quality with service quality to enhance customer
satisfaction:Product quality alone will not help the organization to satisfy its customers.
Companies should also pay attention to service quality also. This helps customer in enjoying
total purchase experience.
5. Product Design:Companies should strive for a greater diversity of the products or services
offering due to increased level of customer expectations. Companies should design the
product with multiple functions. Provide user related information like user guide, warranty,
complaint card, satisfaction feedback, etc.
6. Constant market Research:

Company should conduct preliminary market research, before the product or service is designed.
This will help the company to understand exact customer requirements.

7. Build entry barriers:

Companies should build entrance barriers for competitors by enhancement of product or
services advantages. In this direction, company should be watching the market continuously to
know the changing need of the customer.
8. Avoid unnecessary promises:Companies should not overstate the performance of the
product. This creates dissatisfaction in the minds of customers.
9. Apply Integrated approach:Company should be aware that satisfaction of customer
wants, needs and expectations is a never ending challenge. They should strive to establish
long-term business alliances with customers. Company should also create organization
trademark and preserve brand image.
10. Encourage customer feedback:

Company should encourage customers to offer feedback about the product and services quality.
Each feedback should be viewed as an opportunity for improvement.

11. Customer Relationship Management:

Companies should treat each customer as a valuable asset. Companies should maintain constant
tough with these customers. Companies should develop a habit of sending communications
frequently to these customers, so that customer will remember the company.

Dealing with Customer Complaint

Dealing with customer complaints effectively can improve customer retention and help
the company gain the reputation for providing good services. Customer complaints should not be
taken as an insult. They should be treated as opportunities for improvement.
Following are the ways to deal with consumers complaints.

1. Acknowledge and Apologize:

Thank customer for bringing the deficiency of the product to the notice of the
company and apologize for the inconvenience caused to them. Make note of point of
grievances properly.
2. Respond to them honestly:
Go through the content of the complaint. Understand the reason behind his
dissatisfaction. Respond to the customer stating how the problem is going to be solved and
within what time duration.
3. Act:
Finally, once the explanation is given how the problem will be resolved, the
necessary action should be taken to complete the task. Follow it through and ensure that
promise is delivered on time.
4. Treating Complaint As a Learning Experience:
Every complaint, big or small, should be considered equally. No point in time any
complaint should be ignored. From each complaint companies should learn how not to serve
customers.
5. Empathize With the customer:
Allow the customer to vent their feelings and then remind them that the company will
help them and will do everything in resolving the issue.
6. Encourage Feedback:
Customer should be enabled to send their feedback about the product, service quality
or any other relevant issues to the company immediately after they encounter any
inconvenience with the product. Companies can make use of internet technology for this
purpose.
7. Take proactive steps:
 Company should take all the possible measures to avoid the customer complaints to
the extent possible. Tell every customer to feel free to offer their valuable suggestions to
further improve the quality.
8. Proper direction:
Company should make it very clear to the customers regarding the point of contact in
case of any malfunctioning of the product. Contact person, Contact number, his designation
etc should be made know to the customer. Written literature in this direction should be made
available to every customer.
9. Employee Training:
Every employee of an organization should have training on how to deal with the
customer complaint. Employee should remember that they should not take complaints
personally.
10. Access to social media:
Company should be in tough with social media to know what customer feel about the
company and its product. This will help the company to understand the mood of the market
and take necessary steps, if necessary, to improve its offerings.

BUSINESS PLAN

A business plan is a formal statement of a set of business goals,the reasons they are believed
attainable,and the plan for reaching those goals.a business plan represents all aspects of business
planningprocess declaring vision and strategy alongside sub-plans to cover
marketing,finance,operations,human resources as well as a legal plan,when required.a business plan is
summary of those disciplinary plans.it is blueprint to the future of an organization.

BENEFITS OF PREPARING BUSINESS PLAN:

 Apply for finance from a financial institution;

 Secure investors,sponsors,suppliers and staff;
 Clearly outline goals and long term vision;
 Determine the commercial viability of business idea;
 Examine business idea from many different angles;
 Test commitment and motivation of the organization;
 Identify business’s strengths,weaknesses,opportunities and threats;
 Develop strategies to successfully operate and market the products;and
 establish measuresto evaluate business success,

FORMAT OF BUSINESS PLAN

(1)Executive summary:
This section is a brief overview of the whole business plan.
  Description of business: provide some information about the product or service the
company wishes to offer.
 The market: what markets the company is intending to target?
 Growth potential: what is the potential for company’s business?(what company
expects to achieve in one to three year’s time?)
 Utilisation of finances: what will the loan/overdraft/investment be used
for?,profits,sales
 Source of funding and its repayment: loan,bank overdraft,personal funds?
 Assistance required: what assistance would be required to help launch company’s
project?
(2) Enterprise Description:
It is important that the company demonstrates clear understanding of the business it
would like to be in.the company should also explain the business concept and the
reasons why it thinks it will be successful.
 Provide an overview of business idea and its innovativeness.
 What inspired the company to choose this line of business.
 Why company believes that there is a real need for its product or service?
 Where the company sees its businessin the medium and long term?
(3)Product or service description:
 Provide a detailed description of the product or service.
 What innovative features the company’s product or service offers?
 List three unique selling points offered by its product or service.
 How will its product or service satisfy client needs and expectations?

(4)Industry analysis:

This section helps company to understand the industrial environment it intends to work in.by this
company can identify important changes that are likely to take place in the intended market.

 How many companies already operate in this sector?

 Can the company perceive any important changes in this sector?
 Is the company aware of Political, Economical, Social, Technological ,Legislative or
Environmental changes that could seriously affect its business in the medium or long
term?this is known as the PESTLE analysis.
(5)competition analysis:
 Who are the most important competitors?
 What are their main strengths and weaknesses?
 What are the competitors’pricing policies?
 Can the company list main competitors and their estimated market share?

(6)SWOT Analysis:

This section enables the company to look closely at the internal strengths and weaknesses
of its business,and to identify external threats and potential opportunities.SWOT stands
for:

S = Strengths

W =Weaknesses
 O =Opportunities

T =Threats.

Strengths:

Characteristics of the business,or project team that give it an advantage over others.

Eg:(high quality,competitive pricing,customer care etc)

Weaknesses:

Are characteristics that place the team at a disadvantage relative to others.

Eg:(lack of funds,lack of management skills,unskilled workforce)

Opportunities:

External chances to improve performance in the environment

Eg:(new markets,export potential,joint venture proposal)

Threats:

External elements in the environment that could cause trouble for the business or project

Eg:(imported products,new entrants,political and economic changes)

(7) Marketing sub-plan:

The product:

 List three important features that make company’s product or service worth
having . Eg:design, functionality, reliability.
 In what aspects can the product or service offered be described as innovative?
 Does the company has any plans to add more product or service to its current
portfolio?

The customer:

 Is the business dependent on one main customer or will it sell to a wide variety of customers?
 What measures will it employ to identify consumer requirements with regard to its product or
service?
 Has the companyplans to have a uniform approach to all customer groups or will it vary its
strategies accordingly?

The place:

 Where do the plan to sell its product or service?

 Directly from the factory
 From a showroom
 E-commerce
 Other
  If the company feels that the customers will find it difficult to access its products,can
it suggest ways of improving the situation?
 Mention three ways in which the competitors facilitate access to their product or
service fot their customers.

The method:

 What methods of advertising the company intends to use its product or

service?(newspapers,television,radio,sponsorship)
 How the company prices its product?explain the resons behind yhe pricing
strategies.
 Is the company intending to offer credit to its customers?explain the reasons
behind its decisions

(8) Operations sub-plan:

 Is the company already has business premises or is the company planning to

buy/lease/rent them in the near future?
 Give details of equipments/machinery/vehicles the company requires to operate
its business.
 Prepare a list of main suppliers and their credit terms.
 Is the company intends to operate a quality management system of any sort?is
the company planning to apply for quality certification?
 Ensure that the company has comfortedwith health and safety and/or
environmental regulations relavant to the business.

(9) human resources sub-plan:

 Describe company’s management structure.

 What type of skills and/or experience is the company looking for?
 What measures the company plans to adopt to ensure employee loyalty?
 What plans the company has to develop management team as business
continues to expand.

(10) The budget:

The budget provides the financial planning detail for every aspect of the business.Eg:employee
costs,rent,IT investments,machinery costs,sales value,direct material costs,shipping and freight
charges,etc.the ultimate target that should result from the budget is the budgeted net profit.it is a key
tool for operating the business, and by facilitating comparision of actual performance versus budgeted
performance,its highlights the operating variances to management.

The budgeted net profit, after taxation, when expressed as a percentage of the net investment in the
business, gives the Return Of Investment(ROI)

It should give the projection of revenue expected by the company for certain number of future years,
say 3 to 5 years.

(11) Liquidity:

Liquidity is fundamental to every business in relation to being able to trade and meet obligations.
Management monitors the risks in liquidity by tracking cash movements with a Cash Flow Forecast
ensuring adequate cash or facilities to raise money to carry out the business.it should state:

 How will the company keeps control of its cash flow?

 How will the company finance the changes it may need to make in its business?

(12) Financial sub-plan:

 Calculate the break-even points of its business and how soon the company can reach it.it
should take into consideration all the costs involved
Direct costs(eg:labour,material,shipping costs)
Indirect costs(eg:rent and service charges)
 Over what period will loan/overdraft be repaid and are these repayments included in the
Cash flow forecast?
 Has the company taken account of tax consideration in its calculations?

(13) Selected options and critical measures:

 Invest for training for management

 Employ new staff
 Invest in Informatio Technology Systems
 Seek foreign partners
 Look for new market segments

(14) Milestone schedule:

This is a list of all the critical measures that are mentioned in the business plan.when implemented,the
measures in the milestone schedule will help the company to become more efficient.

At this stage, after having gone through the business planning process, the company should be in a
better position to identify and prioritize the needs in line with the realities of the business venture.by
now the company should be confident enough to draw milestone for its business.the milestone
schedule should include:

 The type of assistance required

 The date of implementation of these measures
 The cost of implementing such measures
 Other information specific to the business that needs to be monitored at a glance.
 Unit-3

RETAIL OPERATION

FACTORS INFLUENCING LOCATION OF A STORE

Proper establishment of a shop is very important for the success in a retail trade. Therefore a retail
location becomes the most crucial factor in retail operations. The factors are as follows:

1. Selection of the site: before commencing the business, a retailer should decide about the
area which the retailer would like to serve. While deciding the area he should examine the
population of the area, income level of the people, nearness to the market, transport and
communication facilities etc.
2. Choice of the site: once the area is decided, a retailer may open his shop in special markets or
in residential areas. The place of location should be easily accessible to the customers.
3. Scale of operations: a retailer should decide the size of his business. Size will depend on his
financial and managerial resources, capacity to bear the risks and demand potential of the
area.
4. Amount of capital: adequate finance is necessary for the success of any business. The
amount of capital required depends on the size of business, terms of trade, availability of
credit, cost of decoration of shop and display of goods.
5. Decoration of shop: the layout and the decoration of the shop are decided so that customer
finds the place attractive and comfortable for shopping. The retailer should display the goods
in an attractive manner to attract more and more customers.
6. Selection of goods: the goods to be sold are selected on the basis of the nature, status and the
needs of the customers. Changes in income, habits and fashions of customers must be
considered in the choice of goods.
7. Source of supply: the wholesalers and manufacturers from whom goods are to be purchased
must be selected carefully. The price range, and distance from the shop, means of transport,
etc be should considered.
8. Sales policy: the retailer should adopt a suitable sales policy to increase the sales and profits.
Sales policy and prices should be decided keeping in mind the competition and the
customers.

STEPS INVOLVED IN CHOOSING RETAIL LOCATION:

Retailers desire to set up their outlets in the best possible locations. Retail stores are
located where the opportunities offered by the market are at a maximum. Retailers
usually go through three step process to select a store location:

1. Market identification: The first step in arriving at a decision on retail location is to

identify the markets attractive to a retailer. A market place is a location where goods and
services are exchanged .The traditional market square is a city where traders set up stalls
and buyers browse the stores. This kind of market is very old, and countless such markets
are still in operation around the whole world .In some parts of the world, the retail
business is still dominated by small family-run stores, but his market is increasingly being
taken over by large chains. Most of these stores are called high street stores. Gradually
high street stores are being re-grouped at one location called malls.
2. Determining the market potential: In order to determine the market potential, the retailer needs to
take into consideration various elements .The chief among them are:

a) Demographic features of the population: understanding the features of the population is integral to
developing a retail marketing strategy. EG : population of India, size of the population, rural and
urban population, growth of urbanization, level of literacy, level of education in the population.

b) The characteristics of the households in the area: The retailer needs to have a clear understanding
of the average household income and distribution of this income in the area.

c) Competition and compatibility: while determining the market potential, it is necessary to check the
compatibility of the retail store with the other retail outlets in an area.

d) Law and regulation : Various permissions which are needed ,the hours which the stores can operate
, the minimum wages to be offered to the persons working , the holidays required ,etc.

e) Trade area analysis: A trade area refers to the geographical area from which retailers attract
customers. When two or more shopping centers are situated close to each other, then their trade areas
would overlap. The size and shape of the trade area depends on the size of the store, the type of the
store, competitor’s placement, and the time taken to travel to the store.

Benefits:

 Identify gaps or overlaps in the market coverage of your existing store network, and
make corrections by opening, closing or moving stores.
 Make better site selection decisions by using characteristics of existing trade areas to
predict trade areas around potential location.
 Define a geographic area to analyze for market potential, market penetration, and
competitive threats.
 Become more efficient and effective at target marketing by reaching out only to those
customers and prospectus in a store’s trade area.
 Use as a key input into customer profiling.

Factors to be considered for Trade Area Analysis:

 Total size & density (demand &supply) of the population

 Standard of living
 Age group distribution
 Number of residents owning homes
 Size of competition
 Traffic Parking facilities
 Ease of deliveries
 Demand density
 Procurement
 Transportation

Types of Trade Area:

a) Deterministic Trade Area: Trade areas created by relating customers address to the store
where customers purchased. The trade area boundary is formed by measuring the travel
time or distance that most customers travel to reach the store.
 b) Proximal Trade Areas: These are the trade areas that assign all geography closest to a
store, to that store. Proximal trade area ensures that market potential of a trade area is
double counted, as might be the case in overlapping trade areas.
c) Probabilistic Trade Areas: Trade area defined by multiple inputs, including distance and travel
time, but also factors such as:

 Attractiveness – product mix, parking, prices and more

 Alternatives – competitors, other stores in your own network
 Environment – urban or rural, population density
 Traffic – volume and patterns

Zones

a) Primary trade zones: Usually 3-5mile radius. It generates 60-65% of customers

b) Secondary trade zones: usually 3-7mile radius. It generates 20% of customers
c) Tertiary trade zone: usually 15-50mile radius. It covers remaining customers

f) Market area Analysis:

A market analysis studies the attractiveness and the dynamic of a market within an industry. It is part
of the industry analysis. It is a part of environmental analysis. Through this analysis the strengths,
weaknesses, opportunities and threats (SWOT) of a company can be identified. The market analysis is
also known as a documented investigation of a market that is used to inform a firm’s planning
activities.

Dimensions of Market Area Analysis

a) Market size: the market size is defined through the market volume and the market potential.
The market volume exhibits the sales volume of special market. It means that the market price
and the quantity are taken into account. The relation of the market volume to market potential
gives the information about the chances of market growth. The examples of information
sources for determining market size:
 Government data
 Customer surveys
 Financial data
 Trade association data

b) Market Trends: market trends are the upward or downward movement of a market, during a
period of time. Here the key factor is potential customers or customers segments. It also needs
the information about competitors, products, consumers, etc. The example includes the
changes in economic, social, legal, political conditions and in available technology, price,
demand for variety and level of emphasis on service and support.

c) Market growth rate: a simple means of forecasting the market growth rate is to extrapolate the
historical data into the future. A better method is to study market trends and sales growth is
through complementary products. The important point in the market growth rate can be
predicted by constructing the product diffusion curve, it can be estimated by studying the
characteristics of the adoption rate of similar product in past.
 d) Market opportunity: a market opportunity for a product or a service is based on either one
technology or several, fulfilling the need(s) of market better than the competition, and better
than substitution –technologies within the given environmental frame. Example: society,
politics, legislation.

e) Market profitability: while different organisation in a market will have different levels of
profitability. Michael Porter devised a useful framework for evaluating the attractiveness of an
industry or market. The five factors that influences the market profitability are:

 Buyer power
 Supplier power
 Barriers to entry
 Threat of substitute products
 Rivalry Among firms in the industry

f) Industry cost structure: the cost structure is an important for identifying key factors for success. The
cost structure also is helpful for formulating strategies to develop a competitive advantage.

g) Distribution channels: the distribution system may help the market analysis in the following ways
are:

 Existing distribution channels

 Trends and emerging channels
 Channel power structure
h) Success Factors: the factors are those elements that are necessary in order for the firm to achieve its
marketing objectives. The examples are:

 Access to essential unique resources

 Ability to achieve economies of scale
 Access to distribution channels
 Technological progress

3. Identify alternate sites and select the site: After having determined the market potential and
taking a decision on the location of the store, a retailer has to select the site to locate the store.
Though each retailer strives to find the 100% best location, there are various factors which affect his
decision. The chief among them are:
a) Traffic: This refers to both pedestrian and vehicular traffic. The traffic that passed the site is
an important determinant of the potential sales that can be generated from that store.
However, it is essential that the traffic is suitable to the kind of products to be retailed in the
store.
b) Accessibility of the market is also a key factor: It is defined in terms of availability of public
transport and road or local train connections to reach market. EG: Majestic and MG road in
Bangalore.
c) Amenities available: Depending on the type of product to be retailed, facilities like free and
ample parking become important.
d) To buy or to lease: An important factor to be considered before taking the decision on the
site is the decision to buy or lease the store. If the store is to be leased then terms of lease will
have to be suited carefully. The length of the lease period should not be too short or too long.
Second consideration is that of the lease rent, which should be justified for the location.
 e) The product mix offered: The kind of product mix offered by the retailer also affects his
choice of location.

Rating plan method

Location often plays a significant role in a company’s profit and overall success. A
location strategy is a plan for obtaining the optimal location for a company by
identifying company needs and objectives, and searching for locations with offerings
that are compatible with these needs and objectives.

A company’s location strategy should conform with, and be part of, its overall
corporate strategy.

Formulating a location strategy typically involves the following factors:

1. Facilities : facilities planning involves determining what kind of space a company

will need given its short-term and long-term goals.

2.Feasibility : Feasibility analysis is an assessment of the different operating costs and

others factors associated with different locations.

3.Logistics: Logistics evaluation is the appraisal of the transportation options and cost
for the prospective manufacturing and warehouse facilities.

4.Labour: Labour analysis determines whether prospective locations can meet a

company’s labour needs given its short-term and long-term goals.

5.Community and site: Community and site evaluation involves examining whether a
company and a prospective community and site will be compatible in the long-term.

6.Trade zones: Companies may want to consider the benefits offered by free-trade
zones, which are closed facilities monitored by customer services where goods can be
brought without the usual customer requirements. The united states has about 170 free-
trade zones and others countries have them as well.

7.Political risk: Companies considering expanding into others countries must take
political risk into considering when developing a location strategy .since some
countries have unstable political environments, companies must be prepared for
upheaval and turmoil if they plan long-term operations in such countries.

8.Governmental regulation : Companies also may face government barriers and heavy
restrictions if they intend to expand into others countries .Therefore, companies must
examine government –as well as cultural – obstacles in others countries when
developing location strategies.

9.Environmental regulation : Companies should consider the various environmental

regulations that might affect their operations in different locations. Environmental
regulation also may have an impact on the relationship between a company and the
community around a prospective location.

10.Incentives: Incentives negotiation is the process by which a company and a

community negotiate property and any benefits the company will receive, such as tax
breaks. Incentives may place a significant role in a company’s selection of a site.

Site Evaluation
Retail site selection is not simply a question of what real estate is available. It is
an analytic challenge that requires an understanding of the customer and the market
potential for retailer at a location.

Choosing a location in retail is a strategic decision which is difficult to return.

Enterprise have to be sensitive while choosing location, especially features like
population, economic and competition difficulties must be considered.

While evaluation the site, following are the prime considerations

Size and characteristics of population.

Level of competition.

Access to transportation.

Availability of parking.

Attributes of nearby stores.

Property costs.

Length of agreement (if lease).

Population trends.

Legal restrictions.

While evaluating a retail site, following factors should be considered:

Accessibility.

Locational advantages.

Terms of occupancy.

Legal considerations (e.g. environmental considerations, zoning restrictions, building

codes, signs, licensing requirements).

Retail operations
The field of retail operations concerns the work that individuals do to keep a retail
store functioning. This includes both retail salespeople and managers in all types of
retail stores, including small stores with only a handful of workers and large chain
stores with hundreds of employees. Retail operations include the following activities.

Types of retail operations:

1. Space planning: It helps to avoid stock outs and reduce loss on sales. It is the most precious asset
for a retailer. The success in retailing is getting decided by how wella retailer is using his space and
more and more retail performance measures are getting aligned with the space. Therefore it is
important that proper allocation of space should be done to department product categories, storage
space, customer space, movement of goods, vehicles parking, customer waiting and space between
storage racks.

Stages of space planning

 Space planning{macro}
 Space planning{category}
 Space planning{micro}

Planogram:It is a retailers drawing or a blue print which communicate how the merchandise is
physically fit on to a store to allow proper visibility and price point options.

Benefits\importance:

 Avoids stock out

 Reduces loss in sales
 Increased performance
 Increased sales revenue
 Helps in controlling space locally or centrally
 Introducing higher profit items
 Better store space location
 Removal of non-performing products
 Improves stock position

Limitations:

 Knowing the space inventor: the obvious 1st point of space management is knowing how
much merchandise space you have, down to the last fixture and this space inventory needs to
be kept up to date, whenever there is a change in a fixture configuration or location, or new
racks are added then the record must be updated.
 Controlling space plan locally or centrally:this is always an issue for retail chains. Both of
these approaches have advantages and disadvantages.
Advantages:
1. The planograms can be created centrally and all downstream processes can be managed
centrally.
2. Another obvious advantage of this is that this gives better control to the head quarter, who
sometimes wants to stay up to date on what is going on at the store level.

Disadvantages:
 1.The store assortment cannot take care of local tastes, that is macro merchandising or 1-1
marketing is not possible in the approach.

2. More importantly, the planogram designed centrally may not fit into the actual space
available in a store as a central planogram design is generally based on an average store rack
size to actual availability of space in a store may be different from that.

 Integrating floor database to replenishment systems: inventory turnover is an

important element when retailers plan space for a particular SKU. The less space a
high inventory turn item has, the more times it must be replenished from the store
backroom. Some retailers have linked their space database to their store
replenishment systems. The replenishment system is then aware of the facings or
space the item has been allocated and can adjust replenishment policies
correspondingly.

2.Merchandisemanagement: the activity of promoting the sale of goods at a retail organisation is

called as merchandising. It includes display techniques, free samples demonstration, special offers.
Merchandise management can be termed as analysis, planning, handling and controlling of the
merchandise investment of a retail operation.

Benefits\importance:

 understanding the target market

 building a merchandise plan
 buying what customers want
 building the right assortment
 being consistent
 offering value
 understanding the needs of the vendor
 sharing information
 surprising customers
 accepting mistakes

Visualmerchandising: it is an art of increasing the sale of product by effectively and sensibly

displaying them at the retail outlet. It refers to the display of the merchandise to attract customers.

Benefits :

 it helps the customers to easily find out what they are looking for.
 it helps them to know the latest trends in fashion.
 The customer without any help can make the purchase.
 It helps them in quick purchase and make shopping a better experience
 It gives the store a unique image.
 It increases customers satisfaction

Tools :

 Colour and texture

 Props and fixture
 Store windows
  Lighting
 Manniquins

3.Inventorymanagement: Inventory or stock refers to goods or materials that a business holds for the
purpose of resale. It is the process of efficiently overseeing the constant flow of units into, and out of
existing inventory.

Benefits :

 Maintaining proper merchandise assortment

 Inventory forecasting
 Asset management
 Maintaining buffer stock
 Avoiding under or over stocking
 Avoiding double order
 Quality management
 Inventory rotation
 Replenishment
 Tracking, monitoring, controlling the management of material

4.Store designing: store designing is a well thought strategy to set up a store in a certain way to
optinise space and sales. It is a branch of marketing and is considered as a part of overall brand of the
store

Benefits :

 Implementing retailers strategy

 Influencing customers buying behaviour
 Providing flexibility
 Controlling design and maintaining cost
 Meeting legal requirements
 Having a powerful store image

Store design includes;

*store image

*exterior store design-parking location etc.

*interior store design-flooring, fixtures, colour, graphics etc.

5.Category management: it is a retailing and purchasing concept in which the range of products
purchased by a business organisation or sold by retailer is broken into discrete groups of similar
products. It is done with the objective to alter the relationship between retailer and supplier by sharing
of data, exchange of information and joint business building.

Importance :

 Understanding customer needs

 Increase customer satisfaction
  Facing competitive pressures
 Better efficiency and effectiveness
 Development of advances in information technology

6.Store layout: A store layout is the design in which a stores interior is set up. Store layouts are well
thought out to provide the best exposure possible. They are designed to create an attractive image for
consumers. A stores layout displays the overall image of the store not only attracts customers, but also
causes them to purchase goods while shopping there.

Factors of store layout:

 Total space available

 Types of products or merchandise offered by the store
 Number of departments in store
 Mode of operation i.e, whether the store is self-service, sales staff assisted etc
 Target audience or customers and average number of customers visiting the store
 Service requirements, size and location of service departments, facilities for the store
employees.

Objectives of store layout:

 Optimum utilisation of space available both vertical and horizontal

 Minimum movement and product handling
 Minimum distance travelled. In case of self-service stores, distance travelled by the customers
to get the required products orminimum physical efforts
 Maximum visibility of the products to the customers.
 Maximum accessibility to the customers in case of self-service outlets, where customers pick
up the products of their choice from the racks
 Maximum encouragement to the customers to visit as many departments or product areas as
possible
 Maximum flexibility in changing the layout or entire set up if required, in minimum cost and
time.
 Ease in maintenance of the store. The fixtures, racks, counters, etc. should be arranged in such
a manner that it is easier to move, repair and clean the floor.
 Maximum safety for the employees working in the store and the customers visiting the store.
Types of store layout: store layout can be designed in many different ways. The factors that
affect the design are discussed above. Retailer can select most appropriate type of layout for
his store considering these factors.
 Grid layout: the grid layout the most commonly used in supermarkets and food retailers.
While 1 area of display is along the walls of the store, the other merchandise is displayed in a
parallel manner. It allows for movement within the area and users space effectively.
 Race track layout: The race track layout is also called as loop layout. As the name suggests,
the display is in the form of o race track or a loop with major aisle running through the stores.
The aisle provides access to various shop-in shops or multiple departments within the store.
This layout is popularly found in department stores. Secondary aisles within each section may
link individual merchandise sections within the departments. This flow pattern is also suitable
when rectangular space is available.
  Free flow or form layout: In a free flow layout, merchandise is arranged in an asymmetrical
manner. It allows for free movement and is often used in department stores to encourage
people to brows and shop. This type of a layout may not allow for maximum utilisation of
retail space available.

 Spine layout: This layout combines merits of free-flow, grid, and loop layouts. Traffic flow
is in straight line running from the front to the back of the stores. Merchandises can be
displayed on both the side of the spin

Store design: retail store design is a branch of marketing and considered as a part of the
overall brand of the store. Retail store design factors into window displays, furnishing,
lighting, flooring, music, store layout to create a brand or specific appael.

7.Store atmosphere:

1.The store must offer a positive ambience to the customers for them to enjoy their
shopping and leave with a smile.

2. The store should not give a cluttered look.

3. There products should be no foul smell in the store as it irritates the customers.

4. The floor, ceiling, carpet, wall and even the mannequins should not have unwanted
spots.

5. Never dump unnecessary packing boxes, hangers or cloths in the dressing room.
Keep it clean.

6. Make sure the customers are well attended.

7. One of the most important aspects of retailing is cash handling.Its essential for the
retailer to track the daily cash flow to calculate the profit and loss of the store.Cash
Registers, electronic cash management system or an elaborate computerized point of
sale (pos) system help the retailer to manage the daily sales and the revenue generated.

8. Prevent shoplifting/Safety and security :

1. Do not allow customers to carry more than three dresses at one time to the
trail room.

2. Install CCTV’s and cameras to keep a close watch on the customers.

3. Ask the individuals to submit carry bags at the security.

4. Install a generator for power back and to avoid unnecessary black outs.

5. Keep expensive products in closed cabinets.

6. Instruct the children not to touch fragile products.

7. The customers should feel safe inside the store.

9. Customers Service:
 1. Clothes should to have unwanted stains or dust marks as they appeal and fail
to impress the customers.

2. Greet customers with a smile and assist them in their shopping.

3.The retailer must not oversell his products to the customers. Let them decide
on their own.

4. Give the individual an honest and correct feedback. If any particular outfit
is not looking good on anyone, tell him the truth and suggest him some better options.

5. Never compromise on quality of products. Remember one satisfied customers

bring five more individuals to the stor. Word of plays an important role in brand
promotion.

10.Refunds and returns:

1. Formulate a concrete refund policy for your store.

2, The store should have fixed timings for exchange of merchandise.

3. Never exchange products in lieu of cash.

4. Never be rude to the customer, instead help him to find something else.

5. Visual merchandising:

6. The position of dummies should be change frequently.

7. There should be adequate light in the store.

8. Don’t stock unnecessary at the store.

9. Make sure the signage display all the necessary information about the store
and is installed at the right place visible o all.

10. The customer should be able to move and shop freely in the store.

11.The retail store should be well ventilated.

11. Training program :

1. The store manager must conduct frequent training programs for the sales
representative, cashier and others team members to motivate them from time to
time.

2. Is is the store manager’s responsibility to update his subordinates with the

latest software in retail or any other developments in the industry.

3. It is the store manager’s responsibility to collate necessary reports (sales as

well as inventory) and send to the head office on a daily basis.
4. Inventory and stock management:

5. The retailer must ensure to manage inventory to avoid being “out of stock”.

6. Every retail chain should have its own warehouse to stock the merchandise.

7.Take adequate steps to prevent loss of inventory and stock.

 UNIT 4

RETAIL MARKETING MIX

INTRODUCTION

Marketing is business function that indentifies consumer needs, determines

target markets & applies products & services to serve these markets. It also
involves promoting such products & services within the market place. A
strategy commonly utilized is the ‘ Marketing Mix’. This tool is made up of
four variables known as four P’s namely:- Product, Price, Place, Promotion.

Product

Products are also termed as Merchandise. Product refers to the bundle of

tangible & intangible attributes that a seller offers to a buyer in return of a
particular predefined amount of payment in a particular mode. The different
products that the store offers are termed as the Merchandise Mix. Therefore the
Product Mix is the total variety of products a firm sells.

Product mix

It is a combination of product lines within a company. A company like HUL has

a numerous products like shampoos, detergents, soaps etc. the combination of
all these products lines is the product mix.

Product lines

It generally refers to a type of product within an organisation. As the

organisation can have a number of different types products, it will have similar
number of product lines. Thus, in Nestle, there are milk based products like
milkmaid, food products like Maggi, chocolate products like kitkat & other such
products lines.

Length of the product mix

If a company has 4 product lines & 10 products within product lines than the
length of the product mix is 40. Thus, the total number of products against the
total number of product lines forms the length of the product mix. This equation
is also known as product line length.

Width of the product mix

Where product line length refers to the total number of product lines & the
products within the product lines, the width of the products mix is equal to
number of products lines within a company. Thus, taking the above example if
there are four product lines within the company & ten products within each
product line then the product line is four only.

Depth of the product mix

It is fairly easy to understand what depth of the product mix will mean where
length & width were a function of the number of product lines, the depth of the
product mix is the total number of products within a number line.

Product line consistency

The lesser the variations between the products, the more is the product line
consistency.

DECISION RELATED TO SELECTION OF GOODS

(MERCHANDISE MANAGEMENT)

Inventory & Merchandise manager is required to train, coach & direct customer
service associates in customers service, receiving processes, product
merchandising & labelling compliances, housekeeping & other tasks for
efficient store operations.

Merchandise plan should:

 Develop better merchandise assortment plans at Store.

 Increase store promotion profitability & increase turns.
 Make better pricing decisions for improved margins.
 Determining cost & profitability of each category of product.
 Setting merchandise budgets & plans considerations & methods.
 Definition & assessment of control techniques break even analysis,
EOQ, re-order levels JIT, cyclical provision, stock control procedures,
rate of stock –turn, DPP.
  Appraisal of stock-holdings methods & stock taking methods-analysis
& control of stock loss.
 Principles of stock presentations- product positioning, management.
 Application of information technology to merchandise management.
 Control & evaluation of branches, departments-profitability.
Assessment & Selection of suppliers merchandise & location.
 Evaluation & selection of distribution channels; supply chain
management; negotiations and considerations.
 Selection of suppliers-methods & consideration.
 Selection of merchandise, determination of order quantity-influences
& considerations.
 Applications of information technology to the selection & ordering
process.
 Own brand merchandise-strategies & considerations.

PRICE

The price charged for a product or service is one of the most important business
decisions an organisation will make. Setting a price that is too high or too low
will limit business growth. It could cause serious problems in terms of sales &
cash flow.

Prices in retail depend upon many factors. Product pricing strategy changes
from time to time according to market design. It is important for any retailer to
keep the price of his item competitive to attract buyers.

Factors Affecting Retail Pricing Strategy

1. Retail Business Model

2. Uniqueness of the Product

3. Market Demand for the product

4. Competition Level

5. Economic Conditions

6. Credit/Instalment Facilities
Pricing Strategies/ Approaches

1. Penetration Pricing: It is a pricing strategy where the price of a product is

initially set at a price lower than the eventual market price.

2.Price Skimming: The practice of initially charging a high price for a new
product, in an effort to maximize profits before substitutes or imitation products
become available.

3. Leader Pricing (Loss leader): Loss leader pricing is an aggressive pricing

strategy in which a store sells selected goods below cost in order to attract
customers.

4. Price Bundling: A marketing ploy in which several products are offered for
sale in one combined unit that is often marked at a reduced price compared to
the sum of their separate purchase prices.

5. Odd Pricing (Psychological Pricing): It is based on the theory that certain

prices have psychological impact. The retail prices are often expressed as “odd
prices”: a little less than a round number. Ex: Rs.19.99 or Rs.2.98

6. Multi-unit pricing: It is a strategy of offering a lower price per unit for the
purchase of two or more products of the same type, when bought together than
when units are bought single. For Example company may charge Rs.200 for T-
Shirt. If two T-Shirt are purchased, shop may charge him only Rs.370.

7. Every Day Low Pricing (EDLP): It is a pricing strategy of a retailer to

charge lower price (than other retailers in the market), continuously for the
goods sold by them.

8. One-Price Policy: It is a pricing strategy in which the same price is offered

to every customer who purchases the product under the same conditions.

9. Variable Pricing: It is a pricing strategy where a business offers varying

price points at different locations or Point-of-Sale.

10. Mark-up pricing: It refers to the amount of profit that a seller adds to the
cost price of a product to arrive his selling price. For Example, a seller buys a
product at Rs.5 and sells it at Rs.10, the mark is Rs.5.

11. Product line pricing: This strategy can be used when a retailer has more
than one product in a line.
12. The Manufacturer’s Suggested Retail Price (MSRP) –or-
Recommended Retail Price (RRP): MSRP of a product is the price
recommended by the manufacturer.

13. Geographic Pricing: It involves setting different price for different

territories because of different transportation costs.

14. Value Based Pricing: It is the practice of setting the price of a product or
service at its perceived value to the customer.

15. Markdown pricing: Reduction in the original selling price of a product is

called markdown pricing.

Pricing Sensitivity

1. Different consumers have different preferences, priorities and budget

constraints.
2. Some consumers are price sensitive and some are not.
3. Price sensitivity reflects how purchase behaviour of a consumer changes
with change in price.
4. The degree of price sensitivity varies from product to product and from
consumer to consumer.
5. Two important points that should be noted in connection to price
sensitivity are:
a. Price sensitivity consumers can’t be defined by income, age,
ethnicity, gender or interests
b. Very Price Sensitive (VPS) shoppers are cost conscious but they
are not disloyal or low spenders.

Factors affecting Price Sensitivity

1. Unique Value Effect: How unique is the product? ( Buyers have less
price sensitivity if the product is unique)
2. Substitute Awareness Effect: What is the availability of the substitute
products? (Buyers have less price sensitivity if they are not aware of or if
there are few substitutes.)
3. Difficult Comparison Effect: How easy is it for customers to compare
products? (Buyers have less price sensitivity if they cannot easily
compare products.)
4. Total Expenditure Effect: What is the total expenditure necessary to
purchase the product relative to their total income? (Buyers have less
 price sensitivity when the total expenditure is low relative to total
income.)
5. End Benefit Effect: What is the total expenditure necessary to purchase
the product relative to the total cost of the end product? ( Buyers have
less price sensitivity when the total expenditure is low relative to the
total cost of the end product)

Place

Retail Location is considered to be one of the most important elements in retail

decision. The right location is often critical to the success of a business.

Factors to be considered while selecting a Place

 Density of Target Market

 Uniqueness of retail offering
 Legal Considerations
 Environmental Issues
 Local Competitions
 Traffic Density
 Cost of location
 Proximity to other business
 Adequate space for parking

Retail Supply Chain

A supply chain is a system of organizations, people, activities, information, and

resources involved in moving a product or service from supplier to customer.
Supply chain activities transform natural resources, raw materials and
components into a finished product that is delivered to the end customer.

Supply Chain Management

 Supply Chain Management is concerned with the management of the

flow of goods, flow of cash, and flow of information internally and
externally of a company or a group of companies that share the same
value chain.
 It includes the movement and storage of raw materials, wok-in-process
inventory and finished goods from origin to point of consumption.
  Supply chain management has been defined as the “ design, planning,
execution, control and monitoring of supply chain activities with the
objective of creating value to customers, building a competitive
infrastructure, leveraging logistics, synchronizing supply with demand
and measuring performance.

Components of Supply Chain Management

1. Planning: A plan or strategy must be developed to address how a given good

or service will meet the needs of the customers.

2. Sourcing: This component involves building a strong relationship with

suppliers of the raw materials needed to make the product the company delivers.

3. Making: This is the manufacturing section of Supply Chain Management.

The product is manufactured, tested, packaged and scheduled for delivery.

4. Delivering: This component in Supply Chain Management is logistical and

involves the company creating warehouse networks, coordinating the receipt of
orders from customers, deciding on the transportation and shipment methods,
and setting up invoices to receive payment.

5. Returning: This is the final, service oriented part of the supply chain. In this
component, the company tries to create a network that is responsible for
receiving defective products or excessive amounts of them, as well as
maintaining the original products sent to the customer.

Retail Logistics

Logistics management is the function of managing the total flow of materials

which includes movement of raw materials from suppliers, in process within the
firm and movement of finished goods to the customer.

Functions of Logistics

1. Order Processing

2. Transport Management

3. Inventory Management

4. Ware Housing

5. Materials Handling
6. Packaging

7. Production Scheduling

8. Information System

Retail Promotional Strategies

Sales promotion strategies are powerful tools to give marketing campaigns an

extra edge in attracting new customers. Sales promotions rely on consumers’
price sensitivity to encourage them to try new products. Retail promotion is
simply the way the retailers communicate with their publics. They exchange
meanings with them through the messages they create and the media they use.

Setting Promotional Strategies

 Building Awareness
 Create Interest
 Provide Information
 Stimulate Demand
 Reinforce the brand

Promotional Mix

The communication or promotion mix includes the following four ingredients

 Advertising: It is defined as any paid form of non-personal presentation

and promotion of ideas, goods and services by an identified sponsor. It is
impersonal salesmanship of mass selling, a means of mass
communication.
 Publicity: It is non-personal stimulation of demand for a product, service
or a business unit by placing commercial significant news about it in a
publication or obtaining favourable presentation of it upon radio,
television, or stage that is not paid for the sponsor.
 Personal Selling: It is the best means of oral and face-to-face
communication and presentation with the prospects for the purpose of
making sales. There may be one prospect or a number of prospects in the
personal conversation.
  Sales Promotion: It covers those marketing activities other than
advertising, publicity and personal selling that stimulate consumer
purchasing and dealer effectiveness. Such activities are displays, shows,
exhibitions, demonstrations and many other non-routine selling efforts at
the point of purchase.

Nature of Promotion

 It is Informative process
 It is persuasive process
 It is motivating process
 Brand Switching
 Promotion is an investment
 Promotion is directed towards a target group
 Promotion calls for economics
 It is an intelligence process

Importance of Promotion

1. It attracts more customer to the product

2. It encourages the middlemen to buy and store more
3. It encourages the sales force by offering incentives to salesmen
4. It boosts sales in the short and long term
5. It reinforces the brand image with the customer.
HUMAN RESOURCE MANAGEMENT IN RETAILING

Define Human Resource Management

Human Resources Management is defined as managing (planning,

organizing, directing & controlling) the functions of employing, developing,
and compensating human resources resulting in the creation & development of
human relations with a view to contribute proportionately to the organizational,
individual & social goals.

DIFFERENCE BETWEEN PERSONNEL MANAGEMENT & HRM

PERSONNEL MANAGEMENT:

Means persons employed. PM views man as economic man who works for
salary.

HRM treats people as human beings having economic, social & psychological
needs

OBJECTIVES OF HRM

1. Societal Objectives: To be ethically & socially responsible to the needs

& challenges of the society

2. Organizational Objectives : To recognize the role of HRM in bringing

the organizational objectives

3. Functional Objectives: To maintain the dept’s contribution at a level

appropriate to the organization’s needs. Resources are wasted if HRM is
less sophisticated to suit the organizational demands.
4.
5. Personal Objectives: to assist the employees in achieving their personal
goals to enhance the individual contribution.
 1. To create & utilize an able and motivated workforce to accomplish
organizational objectives
2. To establish strong working relationships and grou groups
ps within the
organization by co-ordination
ordination of individual and group goals with those of
the organization
3. To create facilities and opportunities for individual or group development
so as to match the growth of the organization.
4. To attain effective utilizati
utilization
on of human resources in achievement of
organizational objectives.
5. To identify and satisfy the need by providing adequate and equitable
wages and incentives benefits and social security and measures for
challenging work, recognition and status

IMPORTANCE OF HUMAN RESOURCE MA

MANAGEMENT

1. Human Resource Management in the Nation’s Well-Being

Well
A nation with abundant physical resources will not benefit unless HR
makes use of them. HR with the right attitude is responsible for making
use of national resources

2. Man vis-à-vis
vis Machine
Most of problems in the organization are human, social, psychological
rather than physical, technical or economic.

3. HRM is a central subsystem

 HRM operates upon and controls all other subsystem. Social significance,
proper management of the personnel enhances their dignity by satisfying
their personal needs.

4. Professional Significance
By providing healthy working environment it promotes team work in
employees

5. Significance for individual Enterprises

is achieved, by creating the right attitude among employees through
effective communication.
HRM FUNCTIONS

Functions of HRM

Managerial Functions Operative Functions

1. Planning 1. Employment

2. Organizing 2. Human Resources

3. Directing Development

4. Controlling 3. Compensation

4. Human Relations

5. Industrial Relations

A. Managerial Functions
1. Planning
Planning is pre-determined course of action. It involves planning of HR
requirements, recruitment, selection, training. Involves forecasting of
personnel needs, changing values, attitude & behavior of employees &
their impact on their organization
2. Organizing
 Organizing explains to carry out determined course of action.
Organization is a structure by which co-operative group of human beings
allocates its task among its members, identifies relationships & integrates
its activities towards a common objective.
3. Directing
Directing defines execution of plan. At any level the function is
motivating, commanding, leading & activating people.
4. Controlling
The performance has to be verified to check if the personnel functions are
performed in conformity with the plans & directions of organization.
B. Operative Functions

1. Employment
is concerned with securing & employing the people to achieve
organizational objectives. It covers functions such as job analysis, human
resource planning, recruitment, selection and internal mobility.

2. Human Resource Development

HRD is process of improving, molding & changing skills, aptitude and
attitude, values based on present & future job requirements.

3. Compensation
Is process of providing adequate & fair remuneration to the employees.

4. Human Relations
Is concerned with practicing policies & programs like employment,
development, compensation & interaction among employees & create a
sense of relationship between individual workers, management & trade
unions.

5. Industrial Relations
IR is relation study among employees, employer, government & trade
unions.

6. Recent Trends in HRM

Includes Quality of work life, total quality in human resources, HR
Accounting, Audit & Research
 “Human Resource Planning (HRP) is a process by which an
organization should move from current manpower position to its desired
manpower position striving to have right number, right kind of people at right
place & at right time resulting in both organizational and individual receiving
maximum benefit”

- E.W.Vetter

Human Resources Planning means deciding the number and type of

human resources required for each job, unit and total company for a particular
future date in order to carry out organizational objectives.

OBJECTIVES OF HRP

1. To recruit and retain the HR of required quality & quantity

2. To foresee the employee turnover and make arrangements for minimizing
turnover and filling up vacancies
3. To meet the needs of expansion and diversification
4. To improve the standard, skill, knowledge, discipline
5. To access the surplus and shortage of HR
6. To estimate the cost of HR
BENEFITS OF HUMAN RESOURCE PLANNING

1. It checks the corporate plan of the organization.

2. It offsets uncertainty & change. This enables the organization to have right
men at right time and in right place.

3. It helps to anticipate the cost of salary enhancement, better benefits.

4. To foresee the need for redundancy and plan to check it or provide

alternative employment in consultation with trade unions and government
through remodeling and economic plans.

5. To foresee the changes in values, aptitudes and attitude of human resources.

Define Recruitment
 “Thee process of searching for prospective employees and stimulating
them to apply for jobs in the organization”
-
Edwin B. Flippo
OBJECTIVES OF RECRUITMENT

 To attract people with multi

multi-dimensional
dimensional skills & experiences that suit
present & future organizational strategies.
 To induct outsiders with a new perspective to lead the company.
 To infuse fresh blood at all levels of the organization.
 To develop
lop organizational culture that attracts competent people to the
company.
 To search/ head hunt people whose skills fit in the company.

METHODS OF RECRUITMENT
METHODS OF RECRUITMENT

1. Traditional Methods

The methods of recruitment is broadly classified as Internal & External

Internal
a. Present Permanent Employees
Organizations consider the present employees for high level jobs due to
availability of most suitable candidates for jobs or equally to the
external source, to meet the trade union demands and to motivate the
existing employees.

b. Present Temporary/ Casual Employees

Organizations consider temporary or casual employees for low level
jobs or trade union pressures or in order to motivate them on the present
job.

c. Retrenched/ Retired Employees

The organization retrenches the employees due to lack of work. The
organization takes the candidates back due to lack of obligation and
trade union pressure. The organizations prefer to re-employ their retired
employees as token of loyalty to the organization.

d. Dependents of Deceased, Disabled, Retired /employees

Organizations provide employment to the dependents/ family members
of deceased, disabled to build brand image & develop commitment.

External

a. Campus
Organizations get inexperienced candidates of different types from various
educational institutions like colleges and train candidates in different
disciplines

b. Private Employment Exchanges

 Consultants perform recruitment functions on behalf of the client company
by charging fees. The client company is relieved from recruitment
functions.

c. Public Employment Exchanges

The Government setup Employment exchanges to provide information
about vacancies to candidates.

d. Professional Organizations
Associations maintain complete bio-data of their members and provide the
same to various organizations on requisition.

e. Data Banks
The management can collect the bio-data of the candidates from different
sources like Employment Exchange and feed them in computer and
provide the details of candidates on requisition.
f. Casual Applicants
Candidates apply casually through mail or hand over applications in HR
Dept. This is suitable for temporary or low level jobs.
g. Trade Unions
Employees seeking change in employment put a word to the trade union
leaders with a view to getting suitable candidate.

i. Modern Methods
a. Internal
Employee Referral
Present employees are aware of qualifications, attitude, experience and
emotions of their friends and relatives. They are aware of job
requirements and organizational culture of their company. Hence the HR
Managers of the company depend on present employees for reference of
the candidates for various jobs. This reduces time and cost required for
recruitment.

External

1. Walk-in
 The busy organization and rapid changing companies do not find time
to perform various functions of recruitment, therefore they advise the
potential candidates to attend interview directly and without prior
application on a specified date, time and place.

2. Consult-In
The busy and dynamic companies encourage potential job seekers to
approach them personally and consult those regarding jobs.

3. Head Hunting
The company’s request the professional organizations to search for
jobs for the best candidate particularly for senior executive positions.
Head Hunters are also called as ‘Search Consultants’

4. Body Shopping
Professional organizations and hi-tech training institutes develop the
pool of human resource for possible employment. The prospective
employers contact these organizations to recruit the candidates or the
organizations themselves approach the prospective employers to place
their human resources. These professional and training institutions are
called ‘Body Shoppers’ and these activities are known as Body
Shopping.

5. Mergers & Acquisitions

Strategic Business Alliances like acquisitions, mergers and take-overs
helps in gathering human resources. In addition the companies also
have alliances in sharing their human resources on adhoc basis.

6. Outsourcing
Some organizations recently started developing human resource pool
employing the candidate for their own organization. These
organizations do not utilize the human resource instead they supply
HRs to various companies based on their temporary needs.

RECRUITMENT PROCESS
 RECRUITMENT TECHNIQUES

1. Traditional
a. Promotions
The internal candidates are stimulated to take up higher level jobs and
express their willingness to be engaged in next higher level jobs if the
management gives them assurance that they will be promoted to the next
higher level.

b. Transfers
 Employees will be stimulated to work in new sections or p[laces if the
management wishes to transfer them to places of their choice.

c. Advertisement
Advertisements provides one way communication providing candidates
in different sources, the information about the job and company
stimulates them to apply for jobs. It includes advertising through different
media like newspaper, magazines, radio and television.

2. Modern
a. Scouting
Scouting means sending the representation of the organizations to various
sources of recruitment with a view to persuading or stimulating the
candidates to apply for jobs. The representatives provide the information
about the company and exchange information and ideas and clarify the
doubts of the candidates.

b. Salary and Perks

Companies stimulate the prospective candidates by offering higher level
salary, more perks and quick promotions.

c. ESOPs
Companies stimulate the employees by offering stock ownership to the
employees through their Employee Stock Ownership Programs (ESOPs)

SELECTION PROCEDURE
Selection defines selecting the right candidate at right time and at right place.
Recruitment

1. Development of Bases for selection

The company selects the appropriate candidate from applicants’ pool. The
company develops appropriate techniques for screening the candidates and
selecting the right candidate.
2. Application Form/ Application Blank
The Resume contains data such as personal background, educational
attainments, work experiences, salary, personal details and references.
3. Written Examination
The organizations conduct written examination for qualified candidates to
measure the candidates’ ability in arithmetical calculations, aptitude, and
attitude, knowledge in various disciplines, general knowledge and English
knowledge.
4. Preliminary interview
The preliminary interview is to solicit necessary information for prospective
applicants and assess the applicant’s suitability to the job. The information
provided by the candidate is related regarding education, experience, salary
expected and communication skills.
5. Business games
Business games help to evaluate applicants in area of decision-making,
identifying the potentialities, handling situations, problem solving and
human relations. Participants are placed in hypothetical work situation and
are required to play role situations in game. These games are conducted for
mid level and high level jobs.
6. Test
Tests are objective and standardized measure of sample of behavior from
which inferences about future behavior and performance can be drawn.
Uses of Tests
 Tests help managers in evaluating candidate’s suitability to the job.
 Tests help in ranking the candidates applied for job.
 Tests help in determine weaknesses of candidates.
 Tests determine candidate’s intelligence, mechanical aptitude, interest
in job, clerical aptitude and personality.
7. Interview
The interviewer matches the information obtained about the candidate
through various means and through his own observation during the
interview.
8. Medical Examination
Certain jobs require certain physical qualities like perfect hearing,
stamina, vision, tolerance of working conditions and clear tone. Medical
examinations reveal the physical fitness of the candidate.
9. Reference checks
 Candidates are required to give names of references in their application
forms. The references could be individuals who are familiar with the
candidate‘s academic achievement or from applicant’s previous employer or
coworkers. The information regarding candidate’s regularity of work, character,
progress, salary package and job details would be enquired.

10. Final Decision by Line Manager

The Line Manager makes the final decision whether to select or reject the
candidate considering economic and technical and social implications.

11. Job Offer

The organization has to intimate the decision of employment to the
successful and unsuccessful students. The company accepts those
candidates who accept the offer with or without the modifications of
terms and conditions of employment and place them on the job.

12. Employment
The company may modify the terms and conditions of employment as
requested by the candidate and will place them on job.

Training:-

Meaning & Definition:-

Training is the act of increasing the knowledge & skill of an employee for
doing a particulars job.

Dale.S.Beach defines the training as “… the organized procedure by

which people learn knowledge &/or skill for a definite purpose”.

Training & Development need = Standard performance – Actual

performance.

DIFFERENCE BETWEEN TRAINING DEVELOPMENT &

EDUCATION:-

Training refers to the process of imparting specific skills. Development

refers to the learning opportunities designed to help employees grow.
Education is theoretical learning in classrooms.

Differences b/w Training & Development.

Area Training Development

Content Technical Skills & Managerial &
Knowledge Behavioural skills &
Knowledge
Purpose Specific job related Conceptual & general
knowledge
Duration Short term Long term
For Whom Mostly Technical & Managerial
Non Managerial

Need & Importance of Training

Training is necessary for the following reasons:-

i) Increased Productivity:-

Training improves the performance of employees. Increased skill &

efficiency results in better quantity & quality of production. A trained
workforce will handle machine carefully & will handle machine carefully &
will use the materials is an economical way.

ii) Higher Employee Morale: - A trained worker derives happiness & job
satisfaction from his work. It also gives him job security & ego satisfaction.

iii) Less Supervision:- The degree of supervision required for a trained

worker will be less. Trained workers may contribute significantly in
reducing managerial problems of supervision.

iv) Less Wastages:- Untrained workers may waste more materials, damage
machines & equipments & may cause accidents. A trained worker will know
the art of operating the machine properly. The control of various wastes will
substantially reduce the manufacturing cost.

i) Easy Adaptability:- The technological advancement will require new

approach to work. The methods of work are constantly undergoing a change.
This will necessitate the adoptability of workers to changing work
environment. A trained worker can be more adaptable to change. The trained
persons will adapt to new situation more easily because they have basic
technical knowledge.

ii) Reduced Turnover & Absenteeism:- Labour turnover & absenteeism

are mainly due to job dissatisfaction when a worker is properly trained he
will take keen interest in his job & can derive satisfaction from it Training
helps in reducing labour absenteeism by increasing job satisfaction among
them.
iii) Employee Development:- Training also helps in the development of
employees. It first helps in locating talent in them & then developing it to
the maximum. Training provides employee an opportunity to showcase his
talent also.

Benefits of Training

How Training Benefits the Organisation

i) Leads to improved profitability &/or more positives attitudes toward

profits orientation.

ii) Improves the job knowledge & skills at all levels of the organization.

iii) Improves the morale of the workforce.

iv) Helps people identify with organizational goals.

v) Helps create a better corporate image.

vi) Fosters authenticity, openness & trust

vii) Improves the relationship between boss & subordinate.

viii) Aids organizational development.

ix) Helps prepare guidelines for work.

x) Provides information for future new in all areas of the organization.

xi) Organisation gets more effective decision making & problem solving.

xii) Aids in developing leadership skill, motivation, loyalty, better

attitude & other aspect that successful workers & managers usually
display.
xiii) Aids in increasing productivity &/or quality of work.

xiv) Improve labour – management relations.

xv) Helps in handling conflict, thereby helping to prevent stress &

tension.

Benefits to Individual:-

a) Helps the individual in making better decision & effective problem

solving.

b) Through training & development, motivational variables of recognition,

achievement, growth, responsibility & advancement are internalized &
operationalised.

c) Aids in encouraging & achieving self development & self confident.

d) Increase job satisfaction & recognition.

e) Moves a person towards personal goals while improving interactive in

learning.

g) Helps eliminate fears in attempting new tasks.

Identification of Training Needs

Training needs are identified on the basis of organizational analysis, job

analysis & manpower analysis. Training programme, Training methods &
course content are to be planned on the basis of training needs.

Training needs = Job & organizational requirements – Employees

specifications.

TRAINING METHODS:-

Training methods are broadly divided into two. They are

i) On – the – job method

ii) Off – the – job method

Training Methods
 On the – job method Off the job

* Job Rotation * Vestibule Training

* Coaching * Role Playing

* Job Instruction * Lecture methods

* Committee Assignment * Conference

& discussion

* Internship training * Programmed

instruction

On – the – Job Training Methods:-

On the Job methods refers to methods that are applied in the

workplace, while the

Employee is actually working.

i) Job Rotation:- This type of training involves the movement of the trainee
from one job to another. The trainee receives job knowledge. & gains
experience from his supervisor or trainer in each of the different job
assignments. This method gives an opportunity to the trainee to
understand the problems of employees on other jobs & respect them.

ii) Coaching:- The trainee is placed under a particular supervisor whose

functions as a coach in training the individual. The supervisor
provides feedback to the trainee on his performance &offers him some
suggestions for improvement. A limitation of this method of training
is that the trainee may not have the freedom or opportunity to express
his own ideas.
iii) Job Instruction:- This method is also known as training through step by
step. Under this method the trainer explains to the trainee.

iv) Apprenticeship training:- It is meant to give the trainee sufficient

knowledge & skill in those shades & crafts in which a long period of
training required for gaining complete proficiency. The way of doing
the jobs, job knowledge & skills & allows him to do the job. The
trainer Appraises the performance of the trainee, provides feedback
information & corrects the trainer.

v) Internship:- In internship training, educational institutions & business

firms have a joint programme of training. Selected candidates carry on
regular. Studies for the prescribed period. They also work in some
factory or office to acquire practical knowledge & skills. This method
helps to provide a good balance between theory & practice.

Off – the – Job Training Methods:- off the job training refers to training
imported away from the Employee’s immediate work area. The
employee is separated from the job situation & his attention Is focused
exclusively on learning which can later lead to improved job
performance.

Off the job training methods are a follows:-

i) Vestibule Training: - This is a training method where the actual work

conditions are simulated & the equipment used by the trainees is
similar to what is used on the job. In this way, the trainees gain
experience of using the equipment without any pressures of work or
cost involved.

ii) Role Playing:- It is described as a method of human interaction involving

realistic behaviour is imaginary situations. The trainees as sum the
roles of different characters is the organizational context. It basically
helps in improving the communication, people-management &
relationship management skills of the trainees.

iii) Case Exercises:- A real life problem encountered in the organization is

presented to the trainees in the form of case study. They are then asked
to analyse the case & present their views & recommendations for
solving the problem.
 iv) Sensitivity Training:- This method aims to influence an individual
behaviour through group Decision. The trainees are enabled to see
themselves others see them & develop an understanding of others
views & behaviour

v) Conference or Discussion:- It is a method in training the clerical,

professional & supervisory Personnel. This method involves a group of
people who pose ideas, examine & share facts, ideas &Data, test
assumptions & drew conclusions all of which contribute to the
improvement of job performance.
vi) Programmed Instructions:- The trainee is given a series of questions
after he studies the relevant material required for the accomplishment of
the job. After the trainee answers a question,, he himself gives a
immediate feedback whether it is right or wrong. If the answer is
correct, he is asked to proceed to the next question but if it is wrong, he
is asked to refer back to the material.
vii) Classroom Lecturers:- This approach is widely used for helping the
employees understand the rules procedures & policies of the
organization. A two way communication makes a session lively
interesting.

Objectives of Training

Training is an essential part of the orientation program for new recruits in an

organization.

The main objectives of training are:-

i) Improving Employee Performance:

When an employee is recruited by an organization, he might not have

all the skills required to carry out his job. Training the employee at this stage
helps him learn his job faster & excuses better performance. Training also helps
in bridging the gap between the actual & the expected performance of the
employees by enhancing their knowledge & skills.

ii) Updating Employee Skills:-

Technological changes may result in job changes in terms of the

tasks & activities involved. Training enables employees to update their skills &
helps integrate the technological changes successfully into organizational
systems & processes.
iii) Avoiding Managerial Obsolescence:-

Managerial obsolescence is the failure to adopt new methods &

processes that can improve employee & organizational performance. Rapid
changes in technical, legal & social environments have an impact on the way
managers perform their jobs, & those who do not adopt to these change become
absolute & ineffective.

iv) Preparing for Promotion & Managerial Succession:-

Training helps an employee acquire the skills required to assume

greater responsibilities. It makes the transition from an employee’s present job
to the next one, easier & smoother.

v) Retaining & Motivating Employees:-

One way to motivate & retain employee is through a systematic

program of career planning & development.

vi). Creating an Efficient & Effective Organisation:-

A manager who has well trained & well equipped employees need
to spend less time supervising them. Accidents at the workplace can also be
reduced by effective training of the employees.

PERFORMANCE APPRAISAL & COMPENSATION

Performance appraisal can be defined as the process of evaluating the

performance of an employee & communicating the results of the evaluation
to him for the purpose or rewarding or developing the employee.

According to Edward Flippo “Performance appraisal is the systematic,

periodic & an impartial rating of an employee’s excellence in matters
pertaining to his present job & his potential for a better job.”

Objectives of Performance Appraisal

1) Work – Related Objectives:-

a) To access the work of employees in relation to job requirements
b) To improve efficiency
c) To help management is fixing employees according to their
capacity, interest, aptitude & qualifications.
d) To carry out job evaluation.
 2) Career Development objectives:-
a) To access the strong & weak points in the working of the
employees & finding remedies for weak points through training.
b) To plan career goal
c) To guide the job change with the help of continuous ranking.
3) Communication:-
a) To provide feedback to employee’s so that they come to know
where they stand & can improve their job performance.
b) To clearly establish goals i.e what is expected of the employee in
terms of performance & future work assignment.
c) To develop positive superior – subordinated relations & thereby
reduce grievances.
4) Organizational Objectives:-
a) To serve as a basis for promote or demotion
b) To serve as a basis for wage & salary administration &
considering pay increases & increments.
c) To serve as a basis for planning suitable training & development
programme
d) To serve as a basis for transfers of termination in case of
reduction in staff strength.

METHODS OF PERFORMANCE APPRAISAL

Performance appraisal methods can be classified into two. They are:-

1) Traditional methods
2) Modern methods

Traditional methods:- It is also known as Traits approach. It is based on the

evaluation of traits in a person.
 A) Graphic Rating Scale:- This method of appraisal requires the rater to
rate the employee on factors like quantity & quality of work, job
knowledge, dependability, punctuality, attendance, etc.
Rating Scales are of two types viz
a) Continuous rating scale
b) Discontinuous rating scale.

In continuous order like 0,1,2,3,4 & 5 & in discontinuous order, the appraises
assigns the points to each degree.

QUANTITY OF Unsatisfactory poor Fair Average Good

Excellent
Work
0 1 2 3 4
5

CONTINUOUS RATING SCALE

ATTITUDE

No Interest Indifferent Interested Enthusiastic

Very Enthusiastic

DISCONTINUOUS RATING SCALE

Advantages:-

i) It is easy to understand, easy to use & permits a statistical tabulation

of scores of employees.
ii) Ratings are objective in nature.

Disadvantage:-

i) A supervisor may tend to rate his men high to avoid criticism from
them.
ii) The choice of employee behavior categories – the important might
ones get missed out & irrelevant ones may get included.

B) Ranking Method:- It is otherwise called as Straight ranking method. It is

the simplest & old method of merit rating. Every employee is judges as a whole
without distinguishing the rates from his performance. A list is then prepared
for ranking the workers in order of their performance on the job so that an
excellent employee is at the top & the poor at bottom.
Advantages:-
 It permits comparison of all employees in any single rating group
regardless of the types of work.
 It is suitable only when there are limited persons organization.
Disadvantages:-
 This method only tells us about & not the actual difference among them.
C) Paired Comparison method:-

Under this method, the appraiser compares each employee with every
other employee, one at a time. For example, there are five employees named A,
B, C, D & E. The performance of A is first compared with the performance of B
& a decision is made about whose performance is better. Then A is compared
with C, D & E in that order. The same procedure is repeated for other
employees. After the completion of comparison, the results can be tabulated, &
a rank is created from the number of times each person is considered to be
superior.

D) Forced Distribution method:-

It is developed to prevent the raters from too high or too low. Under
this method, the rate after assigning the points to the performance of each
employee has to distribute his ratings in a pattern to conform to normal
frequency distribution.

E) Checklist Methods:-

The checklist is a simple rating technique in which the supervisor is

given a list of statements or words & asked to check statements representing the
characteristics & performance of each employee.

There are 3 types of checklist method. They are:-

i) Simple checklist method:- under this method, a checklist of statements on

the traits of the employee & his or her job is prepared is two columns –
viz as ‘Yes’ & ‘No’ columns. All that the rater (immediate superior)
should do is tick the ‘Yes’ column if the answer to the statement is
positive & in column ‘No’ if the answer is negative. The HR department
assigns certain points to each ‘Yes’ ticked. Depending on the number of
‘Yes’ the total score is arrived at
Table :- Checklist for Operators

Ye No
s
Is the employee really interested in the job

Is his or her attendance satisfactory

ii) Weighted Checklist Method:- It involves weighting different items in the

checklist, having a series of statements about an individual, to indicate
that some are important than others. Weighted performance score is
compared with the overall assessment standards in order to find out the
overall performance of the employee.

iii) Forced Choice Method:- In this, the rater is given a series of statements
about an employee. These statements are arranged in blocks of two or
more, & the rater indicates which statement is most or least descriptive of
the employee. Typical Statements are:
*) Learns fast ----------Works hard
*) Work is reliable ---------- performance is a good example for
*) Absents after ---------- others usually tardy

As in the checklist method, the rater is simply expected to select the statements
that describe the rate. Actual assessment is done by the HR department.

F) Critical Incident Method:-

The appraiser makes a note of all the critical incidents that reflect the
performance or behaviour of the employee during the appraisal period. These
are recorded as & when they occur & can demonstrate either positive or
negative traits or performance. At the end of the appraisal period this records
forms the basis for evaluation of the performance of the employee.

G) Essay or Free Form Appraisal:-

 This method requires the manager to write a short essay describing
each employee’s performance during the rating period. Questions or Guidelines
are provided to the appraiser, based on which he analysis & describes the
employee’s performance.

H) Group Appraisal:-

Al employee is appraised by a group of appraisers. This group consists

of the immediate supervisors of the employee to other supervisor’s who have
close contact with the employee’s work, manager or head of department &
consultants. This method widely used for purposes of promotion, demotion &
retrenchment appraisal. Eq:- Blue Star

I) Confidential Report:-

Assessing the employee’s performance confidentially is a traditional

method. The superior appraiser the performance of his subordinate based on his
observations, judgment & intuitions.

II Modern Methods:-

Modern concerns use the following methods for the performance

appraisal:-

A) BARS (Behaviorally Anchored Rating Scales):-

BARS concentrates on the behavioral traits demonstrated by the employees
instead of his actual performance.
These are three steps in implementing a BARS system. They are:-
i) Determination of relevant job dimensions by the manager & the
employee for each job dimension.
ii) Identification of behavioral anchors by the manager & the employee
for each job dimension.
iii) Determination of the scale values to be used & grouping of anchors for
each scale value, based on consensus.

Example:-

Dimension: Planning & Organising Anchors

Scale Value
5[ ] Excellent Develops a comprehensive plan, documents well, obtain
approval & distributes to all concerned.
4[ ] Good Lays out all plane.
3[ ] Average Revises due dates as project progresses & investigate customer
complaints
2[ ] Below Average Poor plans & unrealistic time schedules are common
1[ ] Unacceptable Fails due to lack of planning & is not interested in
improving.
B) Assessment Centre:-
An assessment centre is a central location where the managers may
come together to participate in job related exercises evaluated by trained
observers. The principle idea is to evaluate managers over a period of time, by
observing & later evaluating their behaviour across a series of select exercises
such as role-playing in basket exercises, etc.
C) Human Resources Accounting:-
It deals with cost of & contribution of human resources to the
organization. Cost & Contribution of human resources to the organization. Cost
of the employee includes cost of manpower planning, recruitment, selection,
placement, induction, training, development wages & benefits, etc. Employee
contribution is the money value of employee service which can be measured by
labour productivity or value added by human resource.
Cost of human resources may be taken as standard. Employee
performance can be measured in terms of employee contribution to the
organization.
D) Management by Objective:-
Management by objective is a process whereby the superior &
subordinate managers of an organization jointly identify its common goals,
define each individuals major areas of responsibility in terms of results expected
of him & use these measures of guides for operating the unit & assessing the
contribution of its members.
Four Steps in MBO process
1) It is to establish the goals each subordinate is to attain.
2) Setting the performance standards for the subordinates.
3) Actual level of goal attainment is compared with the goals.
4) Establishing new goals & possibly new strategies for goals not previously
attained.
E) Psychological Appraisal:-
 It focuses on future potential & not actual performance. Industrial
psychologist are employed for conducting the appraisal.
The appraisal normally consists of in depth interviews, psychological
tests, discussions with supervisors & a review other evaluations.
The psychological appraisal results are useful for decision making
about
i) Employee Placement
ii) Career Planning & development
iii) Training & Development
F) Results Method:-
Organisation of the contemporary periods evaluates employee
performance based on accomplishments they achieve rather than based on the
behavioural factor/traits. Employee accomplishments include sales turnover,
number of units produced, & number of customers served, number of complaint
settled & the like.
G) Balance Scorecard:-
It was developed by Robert Kaplan & David Norton. It brings the
linkages among financial, customer, processes & learning.
H) Managerial Appraisal:-
Harold Koontz has developed a concept of managerial appraisal i.e appraising
managers as managers. According to this concept, the managers attain
organizational objectives by performing the basic managerial functions Viz.
planning, organizing, leading, motivating, staffing & controlling.
The checklist containing the questions in these areas is prepared
with a five degree rating scale i.e extremely poor performance, neither poor or
not fair performance, fair performance. The appraisers rate performance of
managers by assessing weights to the scale & appraise only those areas which
are clear & are supported by adequate knowledge.

i) 360 Degree Performance Appraisal:-

The employee’s performance is evaluated by his supervisor, his peers,
his internal/external customers, his internal/external suppliers & his
subordinates.
 Limitation / Pitfalls of Performance Appraisal
1) Halo Effect:- The appraiser allow a single characteristic of the appraise to
dominate his judgment of the employee performance. This can result in
either a positive or negative report.
2) Leniency Effect:- This refers to the situation where the appraiser tends to
give high ratings & only positive feedback to the appraise, irrespective of
his actual performance.
3) Stringency Effect:- An appraiser which feels that the rules & standards of
the organization are not strict enough, tries to be very strict in rating his
appraises. This might lead to dissatisfaction among his appraises as they
would feel that the evaluation is biased & unfair.
4) Recency Effect:- This occurs when the recent performance of the appraise
dominates the appraisal. The appraiser tends to get influenced by the
performance of the employee over the last 2-3 months of the appraisal
period as it is still fresh in his memory. An employee who has perform well
for the preceding nine months but fail to maintain the same level of
performance in the last 3 months preceding the appraisal might get the
same rating as or an interior one than someone who performed well only in
the last 2-3 months of the appraisal period.
5) Primacy Effect:- The performance of the appraiser at the beginning of the
appraisal period dominate the evaluation.
6) Central Tendency Effect:- It is the tendency of the appraiser to rate most
of the appraiser in the middle of the performance scale. The appraiser gives
neither high nor low ratings & tends to give ratings in the middle of the
scale to all the appraisers.
7) Stereotyping:- It involves judging someone based on the group he belongs
to & the appraisers perception of the group.

Uses of Performance Appraisal

Apart from evaluating the performance of the employee for rewards/punishment
& development, a good performance appraisal system has many other users.
Some of these are listed below.

i) Training & development needs of the employees can be determines.

ii) Organisational effectiveness can be improved by improving the
individual performances of the employees.
 iii) The performance appraisal system forms the basis for compensation
management in the organization.
iv) Can be used as basic for transfers, promotions & other career
planning activities& individual employees.
v) It also helps in succession planning in the organization.

Compensation is the remuneration paid by the management to the

employee for his/her contribution to the organization.
Compensation includes Wages/Salary, incentives, bonus & social security
measures or fringe benefits.

Definitions & Concepts

Wage & Salary administration:- is essentially the application of

systematic approach to the problem of ensuring that the employee are paid in a
logical, equitable & fair manner.
Wage:- Indian Labour Organisation defines the term Wage as the “the
remuneration paid by the employer for the services of hourly, daily, weekly &
fortnightly employees.
Salary: - The term salary is defined as the remuneration paid to the
clerical & managerial personnel employed on monthly or annual basis. It is also
known as Basic Pay.
Earnings:- Earnings are the total amount of remuneration received by an
employee during a given period. These include salary, dearness allowance,
House rent allowance, city compensatory allowance, other allowances, over
time payments, etc.
Nominal/Money Wage:- It is the Wage paid or received in monetary
terms.
Real Wage:- It is the amount of Wage arrived after discounting nominal
wage by the living cost. It represents the purchasing power of money wage.

Objectives of compensation

1) To acquire qualified competent personnel:- Candidates decide upon their

career in a particular organization mostly on the basis of the amount of
remuneration the organization offers qualified & competent people join the best
– paid organization.
2) To retain the Present Employees:- If the salary level does not compare
favourably with that of other similar organizations, employees quit the present
one & join other organizations.
3) To secure Internal & External Equity:- Internal equity does mean payment
of similar wages for similar jobs within the organization External equity implies
payment of similar wages to similar jobs in comparable organizations.
4) To Ensure Desired Behaviour:- Good rewards performance loyalty,
accepting new responsibilities & changes.
5) To Keep Labour & Administrative Costs:- In line with the ability of the
organization to pay.
6) To facilitate pay roll administration of budgeting & wage & salary control.
7) To promote organization feasibility.

QUESTIONS

SECTION A

1. What do you understand by retail marketing mix?

2. What do you mean by Supply Chain Management?
3. What do you mean by Retail Logistics and Warehousing?
4. What do you understand by Man Power Planning In retailing?

SECTION B

1. Explain the factors affecting retail pricing decisions.

2. Explain the factors affecting consumer price sensitivity.
3. Write explanatory note on retail promotions strategies.
4. Write a note on Manpower planning in retailing.
5. What are the objectives of Performance Appraisal in retailing?

SECTION C
1. Explain Retail Marketing Mix in detail.
2. Explain Retail Pricing Strategies in detail.
3. Explain the factors to be considered while selecting a retail price.
4. Write a note on Recruitment and selection in retailing.
5. Explain various training methods available to retail employees.