RETAIL MANAGEMENT PART-1

Prepared & Presented by :

Mr. Siva Rama Krishna. Vuppala
Asst. Professor, Dept of MBA
SBIT, Khammam

Introduction to Retail
Unit I
Introduction to Retail: what is Retail, The
functions of retail, retailing in India. The
evolution of retail in India, retail Change in
India
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Introduction:
The word retail has its origin in French word
retaillier and means to cut a piece or to
break bulk.
Retailing is the sale of goods and services
to the ultimate consumer for personal,
family or household use.

According to Kotler: Retailing

includes all the activities involved in
selling goods or services to the final
consumers for personal, non business
use

 Retailing may be understood as the final step in the

distribution of merchandise for consumption by the
end consumers.
Retailing is responsible for matching final consumer
demand with supplies of different marketers.
Retailing is high intensity competition industry, The
reasons for its popularity lie in its ability to provide
easier access to variety of products, freedom of
choice and many services to consumers.
The Indian retail is dotted by traditionally market
place called bazaars or haats comprises of
numerous small and large shops, selling different or
similar merchandise
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Wheel of Retailing

A better known theory of retailing wheel of

retailing proposed by Maclcomb McNair says,
1.

New retailers often enter the market place with

low prices, margins, and status. The low prices
are usually the result of some innovative costcutting procedures and soon attract competitors.

2.

With the passage of time, these businesses strive

to broaden their customer base and increase
sales. Their operations and facilities increase
and become more expensive.
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3.

They may move to better up market locations,

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

4.

By this time newer competitors as low price, low

margin, low status emerge and these competitors
too follow the same evolutionary process.

5.

The wheel keeps on turning and department

stories, supermarkets, and mass merchandise
went through this cycles.
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Functions of a retaillier
From the customer point of view, the retailer
serves him by providing the goods that he
needs in the required assortment, at the
required place and time.
From an economic standpoint, the role of a
retailer is to provide real added value or utility
to the customer. This comes four different
perspectives

1. Form: First is utility regarding the form of a

product that is acceptable to the customer.

The retailer does not supply raw material, but

rather offers finished goods and services in a
form that the customers want.

The retailer performs the function of sorting

the goods and providing us with an
assortment of product in various categories.
2. Time: He cerates Time utility by keeping the
store open when the consumers prefer to
shop.

preferable shopping hours.

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5.

Place: By being available at a convenient location, he

creates place utility.

6.

Ownership: Finally, when the product is sold,

ownership utility is created.
Apart from these functions retailer also performs like:
5. Arranging Assortment: manufacturers usually make
one or a variety of products and would like to sell
their entire inventory to 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 units.
Retailers are able to balance the demands of both
sides, by collecting an assortment of goods from
different sources, buying them in sufficiently large
quantities and selling them to consumers in small
units
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5.

Breaking Bulk: to reduce transportation costs,

manufacturer and wholesalers typically ship large
cartons of the products, which are then tailored by
the retailers into smaller quantities to meet
individual consumption needs

6.

Holding stock: Retailers maintain an inventory that

allows for instant availability of the product to the
consumers. It helps to keep prices stable and
enables the manufacture to regulate production.

7.

Promotional support: small manufacturers can use

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

There is no universally accepted method of
classifying retailer. Various schemes have been
proposed to categories retailers based on
Number of outlets
Margin vs. turnover
Location
Size.
Because of overlap of classification criteria, some
stores may qualify as under two different
categories.
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1.

General merchandise retailer: general merchandise

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

Super market: A supermarket is a large self service

retail store that carries a wide variety of consumer
products under one roof , such as complete line of
food products , laundry requirement, household
maintenance items. In India cooperative have
managed some supermarkets for quite sometime
like super bazaar in Delhi, apna bazaar shakari
bhandar etc.
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Discount store: these stores are self service,

standard general merchandise retailers regularly
offering brand name and private brand items at
low price, earn lower margins and push for high
sales turnover. The characteristics of true
discount stores include
Selling products at discounted price
Carry standard international , national, or store
brand toi build image
Self service stores to minimize operational costs
Preferred store location are low rent areas.
Like best known discount store is Wal-Mart. In India
almost all retail stores offer discounts, subhiksha
o

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Department store: a department store is larger

retail store organized into several
departments, offering a broad verity and depth
of product lines. The product mix may include
food products, appliances, clothing, furnishing
and other household goods.
Like Pantaloons, shoppers stop,
department store only for kids is Kids Kemp.
Fashion related department stores in India are
Ebony, Globus, pantaloons, lifestyles.

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2.

3.

Specialty Stores: specialty stores carry a narrow

product mix with depth of assortment within the line.
The emphasis is on a limited number of complimentary
products and high level of customer service
Specialty store often sell shopping goods such as
Jewelry, apparel, computers, music systems, sporting
goods.
Like; Tanishq, Titan watches, Van Heusen, Raymond's.
Shopping Malls: shopping malls typically deal with
several bases and product categories and provide a
large variety of merchandise abs service. There are 96
operational malls in India and expected to grow 158 by
this current year.
Ansal plaza (Delhi), Garuda mall (Bangalore) Sahara
plaza Gurgaon Spenser Plaza Chennai
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4.

Retail chains: a retail chain operates multiple

retail outlets under common ownership in
different cities and towns.

To some extent the purchasing function and

decision making are coordinated or
centralized.
Like Westside, Globus, Food world,
McDonald's retail petrol outlets. Etc.

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The Marketing Retail Equation

Manufacturer

Manufacturer

Manufacturer

Wholesaler
Retailer

Consumer

Feedback

Retailer

Consumer

Consumer

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Retailing in India.
Retail is the new buzzword in India.
The global Retail development Index has ranked
India first, among the top 30 emerging markets in
the world.
It is believed that India has the potential to deliver
the fastest growth over the next 50 years.
While barter would be considered to be oldest form
of retail trade, since independence , retail in India
has evolved to support the unique needs of country,
given its size and complexity
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 Second largest sector after Agriculture.

Contributes about 10 11 % of the GDP
The estimated size of the organized retail
industry in India is Rs. 16,000 crores. This is 2 %
of the total estimated retail trade.
Indian Retail trade increased from Rs. 2200
billion in 2000 to Rs 3300 billion by the year
2005
India's first true shopping mall complete with
food courts, recreation facilities and large car
parking space was inaugurated as lately as in
1999 in Mumbai. (this mall is called
"Crossroads").
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The Evolution of Retail in India

Retail in India has evolved to support the unique

needs of our country, given its size and complexity
Haats, Mandis and Melas have always been a part of
the Indian landscape. They still continue to be
present in most parts of the country and form an
essential part of life and trade in Various areas.
The PDS (Public Distribution System) would easily as
the single largest retail chain existing in the country.
the evolution of the PDS of Grains in India has its
origin in the rationing system introduced by the
British during world war II
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 The system was started in 1939 in Bombay and

subsequently extended to other cities and towns.
the system was abolished post war but however
attaining independence India was forced to
reintroduce it in 1950.
There was rapid increase in the ration shops
( being increasingly called the Fair Price Shop or
FPSs)
The Canteen Stores Department and the Post
Offices in India are also among the largest
network of outlets in the country reaching
population across the country.
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The Khadi & Village industries (KVIC) was also set up post
independence. The cooperative movement was again
championed by the government.

India's Largest retail Chains:

1.

PDS: 463,000

2.

Post offices: 160,000

3.

KVIC: 7,000

4.

CSD Stores:3,400

(source business world marketing White book 2005)

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 In the past decade, the Indian marketplace has

transformed dramatically. However from the
1950,s to the 80,s, investment in various
industries was limited due to low purchasing
power in the hands of the consumer and the
governments policies favoring the small scale
sector.
The first attempts at organized retailing were
noticed in the textiles sector. One of the pioneers
in this field was Raymonds which set up stores to
retail fabric.
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 Raymonds distribution network today

comprises 20,000 retailers and over 256
exclusive showrooms in over 120 cities of the
country
Other textile manufacturing who set up their
own retail chains wee Reliance- which set up
Vimal showrooms and Garden Silk Mills, which
set up Garden Vareli showrooms.

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The Evolution of retail in India

Emerging
Established
Formats
Traditional
formats
Exclusive retail outlets
Formats
Kirana shops
Hypermarket
Itinerant Salesman
Convenience/
Internal retail
Haats
department stores
Malls / Specialty Malls
Melas
PDS/
Multiplexes
Mandis etc.
fair price shops
Fast food outlets
Pan/ Beedi shops
Service galleries

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Drivers of Retail change in India

major drivers :
1.

2.

Changing Income Profiles:

Steady economic growth

fuelled the increase in disposable income in India.
The average middle class family's disposable
income rose by more than 20% between 19992003.
Diminishing difference between Rural and urban India: Rural
India accounts for over 75% of India population
and this in itself offers a tremendous opportunity
for generating volume driven growth. Tax benefit.
In year 2002-03 LIC sold 50% of its policies in
rural India. Same BSNL also sold its 50%
connection in small towns .
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3.

4.

Changes in Consumption patterns: Occupational changes

and expansion of media have caused a significant

change in the way the consumer lives and spends
his money.
The changes in income brought about changes in
the aspirations and the spending patterns of the
consumers. the buying basket of the consumer
changed
The emergence of a young Earning India : Nearly 70% of
the Indian population is below the age of 34.
taking advantages of employment opportunity in
the booming service sector these young Indians
are redefining service and consumption patterns
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Prominent sector in Indian retail

1. Clothing, textiles and fashion Accessories:

2. Food & food Services:
3. Consumer Durables:
4. Books & Music:
Other emerging sectors
5. Jewellery retail
6. Footwear retail
7. Time Wear Retail
8. Fuel Retail/ petro retail
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Challenges to retail Development in India

Retail not being recognized as an industry in
India.
The high costs of real estate.
Lack of Adequate infrastructure.
Multiple and complex taxation system.

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Size of the organized retail market (Rs Cr)

2001-02

2007

CAGR (%)
(compound Annual
growth rate)

TOTAL

16,000

37,216

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Food

1,800

7,473

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Clothing

4,950

10,423

16

Cons.Durables

1,650

3,787

18

Books & Music

450

1,426

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Share of organized & unorganized retail with comparison

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

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