Introduction to the World of

Retailing

Dr. Vinita Sahay

Professor of Marketing
Indian Institute of Management
Raipur

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Manmohan Singh 24 November 2011

passed
India will allow FDI up to 51 per cent in "multi-brand retailers",
single brand retailers, such as Apple and Ikea, can own 100 percent
of their Indian stores, up from the previous cap of 51 percent;
both multi-brand and single brand stores in India will have to
source nearly1/3 of their goods from small and medium-sized Indian
suppliers;
all multi-brand and single brand stores in India must confine their
operations to 53-odd cities with a population over one million, out of
some 7935 towns and cities in India i.e full access to over 200
million urban consumers in India;
multi-brand retailers must have a minimum investment of US$100
million with at least half of the amount invested in back end
infrastructure, including cold chains, refrigeration, transportation,
packing, sorting and processing to considerably reduce the post
harvest losses and bring remunerative prices to farmers;
01/25/16
the opening
of retail competition will be within India's federal 2


3 December 2011, the CMof West Bengal, Mamata Banerjee
reversed it

Anand Sharma, India's Commerce and Industry Minister, after a

meeting of all political parties on 7 December 2011 said, "The decision
to allow foreign direct investment in retail is suspended till consensus is
reached with all stakeholders.

On 19 Feb 2013 Tamil Nadu became the first state in the country
to stoutly resist MNC 'invasion' into the domestic retail sector. In
Chennai, Tamil Nadu CMDA authorities placed a seal on the massive
warehouse spreading across 7 acres that had reportedly been built for one
of the worlds leading multinational retail giants, Wal-mart

February 2014, Vasundhara Raje led newly elected Rajasthan

Government reversed the earlier Government's decision of allowing FDI
in retail in the state.

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Many Drivers
Demographics
Increased global exposure
Increased discretionary incomes
across wider spectrum of
population, across wider
geography
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What is retail?
Retail derived from the French word retaillier,
which means to break bulk.
Retailing is the last stage in the movement of goods
and services to the consumer.
Retail therefore consists of all activities involved in
the marketing of goods and services directly to the
consumers for their personal, family or household
use.
Retailer: a person, agent, agency, company or
organization instrumental in reaching the goods,
merchandise, or services to the ultimate consumer

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Worlds top retailers

Corporation

Country of
Origin

Wal-Mart Stores

U.S.A

Carrefour

France

Tesco

UK

Home Depot

U.S.A

Kroger

U.S.A

Metro

Germany

Sears Holdings

U.S.A

Schwarz
Unternehmens
Treuhand

Germany

Costco

US

Aldi Gmbh

Germany

Target

U.S.A

Albertsons

U.S.A

Kmart

U.S.A

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Functions of a Retailer

Form utility
Time utility
Place utility
Ownership utility

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How Retailers Add Value

Breaking Bulk
-Buy it in quantities customers want
Holding Inventory
-Buy it at a convenient place when you want it
Providing Assortment
-Buy other products at the same time
Offering Services
-See it before you buy, get credit
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The Changing Retail Landscape

Proximity to the customer

The Rise of consumerism
Introduction of the Private Label
Technology

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Nature of Retail Industry is

Changing

To Todays Retailer

Mom and Pop Store

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10

Opportunities in Retail

Management
Sales
Operations
Information technology
Merchandising
Supply Chain and Logistics Management

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Decision Variables for Retailers

Customer Service

Store Design
and Display

Retail

Merchandise
Assortment

Strategy
Pricing

Location
Communication
Mix

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Wal-Marts Retail Mix

Location Strategy

Free-standing Stores

Customer
Service
Store Display
And Design

Communication
Mix
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Merchandise
Assortment

Pricing
13

Wal-Marts Retail Mix

Assortment Strategy

Customer
Service

Location

Large Number
of Categories

Store Design
and Display

Communication
Mix

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Pricing

Few Items
in Each Category

14

Wal-Marts Retail Mix

Location
Customer
Service

Pricing Strategy
Merchandise
Assortment

Store Design
and Display

Communication
Mix

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Low, EDLP

15

Wal-Marts Retail Mix

Customer
Service

Communication Mix

Store Design
and Display

Location

Merchandise
Assortment

Pricing

TV and Newspaper
Insert Ads

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Wal-Marts Retail Mix

Store Design and Display

Customer
Service

Basic, Special
Displays
for Products

Merchandise
Assortments

Communication
Mix

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Location

Pricing

17

Wal-Marts Retail Mix

Customer Service
Limited
Location
Merchandise
Assortment
Store Design
and Display

Pricing

Communication
Mix
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The Marketing Retail Equation

Manufacturer

Manufacturer

Manufacturer

Wholesaler
Retailer

Consumer

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Feedback

Retailer

Consumer

Consumer

19

Growth of retail in India

Public Distribution System

Co-operative movement
Independent retail stores
Textile retail chains
Department store
Specialty stores
Malls
Hypermarkets

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Roadblocks to retail development

in India

Lack of recognition as an industry

High cost of real estate
Lack of adequate infrastructure
Taxation at multiple levels
Restrictions on FDI

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Misconceptions About Careers in

Retailing

Dont need college

Low pay
Long hours
Boring
Dead-end job
No benefits
Everyone is part-time
Unstable environment

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SALES

The Retail Life Cycle

Maturity
Decline

Growth

Profit

Innovation

TIME
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abil
ity p

Mature retailer
Top heavy
Conservative
Declining ROI

Innovative retailer
Low status and price
Minimum service
Poor facilities
Limited product offering

se
pha

Vul
ner

ry
Ent

has
e

The Wheel of Retailing

Traditional retailer
Elaborate facilities
Higher rent
More locations
Higher prices
Extended product offerings

Trading up phase
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Types of Retailers
Retailers Use Different Retail Mixes
-merchandise: variety (breadth) / assortment
(depth)
-services
-store design, visual merchandising
-location
-pricing
Infinite Variations
Survival of the Fitness Some combination of
retail mixes satisfy the needs of significant
segments and persist over time.
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Merchandise Offering

Variety (breadth of merchandise)

- The number of merchandise categories

Assortment (depth of merchandise) -the number of

items in a category (SKUs) : Lotus HerbalsSafe sun SPF 30,3
in 1 matte look daily sunblock120 g

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Variety and Assortment of

Bicycles

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Classification by Type of Merchandise

NAICS : North American Industry Classification System : hierarchical 6 digit code

Classification of Retail Stores

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Classification of Retail Stores

Store Based
Retailing

Form of Ownership

Merchandise offered

Independent retailer
Chain retailer
Franchise
Leased departments
Consumer co-operatives

Convenience stores
Supermarkets
Hypermarkets
Speciality stores
Departmental stores
Off price retailers
Factory outlets
Catalogue showrooms

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Non-Store Retailing

Direct selling
Mail order
Tele marketing
Automated Vending

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Types of Retailers
Food Retailers
Mom and Pop Stores
Convenience Stores
Supermarkets
Supercenters

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General Merchandise
Retailers
Department Stores
Specialty Stores
Discount Stores
Category Specialists
Off-Price Retailers
Warehouse Clubs
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Food Retailers
Mom and Pops/ Kirana Stores
Supermarkets
-is a large,self service food store offering groceries, meat with ltd sale
of non food items like health & beauty aids and general merchandise.
Typical : 30,00 SKUs
Ltd Assortment supermarkets or Extreme Value Food Retailers Eg Aldi
1300 SKUs 6% Labour cost /sales Against average of 12%
Superstore -larger supermarket with extended bakery ,seafood etc
self service
-Practice high low /EDLP. Power Perimeter, Locavore movement
( Carbonfootprint) , Ethnic Merchandise, Private label

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Food Retailers
Big Box Retailers ( Large Ltd
Service)
-Warehouse Clubs( Ltd & irregular
Assortment eg Costco ,Sams Club)
-Supercenters (15% growth in value terms
2014)
-Hypermarkets (16% growth in 2014)

Convenience Stores
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Types of Food Retailers

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Issues in Food Retailing

Competition from Discount Stores
Efficient
Distribution

Lower Prices

Lower Costs

Changing Consumption Patterns

Time Pressure

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Eating Out More

Meal Solutions

34

Types of General Merchandise

Retailers
Discount Stores(Broad
Variety , ltd service, Low
prices :Private + national)
Specialty Stores
Category Specialists( Narrow But deep)
Home Improvement Centers
Department Stores (3 tiers: Special events)
Drugstores
Off-Price retailers (inconsistent Assortment:
Closeouts /irregulars ))
Value Retailers (Dollar General)
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Characteristics of General
Merchandise Retailers

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Issues in Discount Store

Retailing
Only Big Three Left Wal-Mart, Kmart,

Target
Wal-Marts Dominance
Differentiate Strategy
-Wal-Mart = Low Price and Good value
-Target = More Fashionable Apparel
Competition from Category Specialists
-Toys-R-Us, Circuit City, Sports Authority
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Issues in Specialty Store

Retailing

Mall-Based Apparel Retailers:

Decline in Mall Shopping and Apparel Sales
-Lack of New Fashions
-Less Interest in Fashion
-Increase Price ConsciousnessH & M , Zara

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Category Specialists
Deep and Narrow Assortments Destination Stores
Low Price and Service
Wholesaling to Business Customers and Retailing to
Consumers
Incredible Growth
Increased Competition with National Expansion and
Consolidation

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Issues in Department Store

Retailing
Competition
-Discount Stores on Price
-Specialty Stores on Service, Depth of Assortment

Lower Cost by Reducing Services (?)

-Centralized Cash Wraps

More Sales (?)

-Customers Wait for Sale

Focus on Apparel and Soft Home

Develop Private Labels and Exclusive
Brands
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Issues in Drug Store Retailing

Consolidation
Competition from Supermarkets and
Discount Stores Pharmaceuticals
Evolution to a New Format
-Stand Alone Sites with Drive Thru Windows
-Convenient Store Front End

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Issues in Off-Price Retailing

Opportunistic Buying
Hurt By Sales in Department Stores

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Issues in Value Retailing

Target Lower Income Families
Low Cost
Low Prices
-Low Cost Location
-Limited Services

One of the Fastest Growing Retail Segments

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Characteristics of select retail

formats
Format

Description

Size (sq.ft)

Examples

Intl.

India

Category
Killer /
Specialist

Narrow
variety, but
deep
assortment

50,000+

15,000+

Toys R Us,
Nallis, The Loft

Convenience
stores

Mix of
products

3,000
8,000

500 1,000

7-Eleven,
Speedmart

Department
stores

Several
75,000+
product lines,
largely nonfood

5,000
40,000

Marks &
Spencer,
Shoppers Stop,
Pantaloons

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Format

Description

Size (sq.ft)
Intl.

Examples
India

Factory
Outlets

Branded
merchandse at
a discount

5,000 10,000 500 1000

Levis factory
Outlet,
Reebok
Factory Outlet

Hypermarket

Large self
service stores,
mix of food &
non food.
Essentially
low price

80,000
220,000

Wal-mart, Big
Bazaar

Single Price
stores

Offers a mix
of branded &
unbranded
stores

5,000 20,000 2,000 5,000

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40,000
75,000

Family Dollar,
9 to 9, 49 to
99

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Format

Description

Size (sq.ft)
Intl.

Specialty
stores

Focus on a
brand or
category,
narrow
product line ,
but good
depth

Supermarket

Food,laundry 8,000
and
20,000
household
maintainance
products. Self
service, low
margin, low
cost

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Examples
India

5,000 8,000 2,000 5,000 Walgreens,

Crossword,
MusicWorld

800 5,000

Asda,
Kroger,Food
Bazaar, Food
World

46

Amway India
Eureka Forbes
Herbalife
Tupperware
Oriflame
Avon Beauty Products
Forever Living
AMC
Modicare
Hindustan Lever Network

Homeshopping:
HomeShop18
Telebrands
TVC Skyshop
Asian Sky Shop
Shop24Seven

E-Tailing
Flipkart
Amazon.com
Snapdeal.com
Myntra
Dell
Jabong.com
Grofers
HomeShop18
Big Basket
Indiatimes Shopping
India Online
Indiaplaza
Zivame
Junglee.com

Department Stores
Benzer
The Bombay Store
Ebony
Chermas
Meena Bazaar
Westside
Shoppers Stop
D- Mart
Piramyd Store

Specialty store
Mother Care
Wills Lifestyle
Bata
Nalli Sarees
CrossWord
Charagh Din,
Croma
Home Town
All
Nik Nish
Archies
Vijay Sales

Full line discount store

S Mart
Sabka Bazaar
Brand Factory
The Loot

Hypermarkets
Big Bazaar
Star India Bazaar
HyperCity
Giant
Spencers
Total
Jumbo
Reliance Mart

Supermarkets
Food Bazaar
Subhiksha
Nilgiris
Vitan
Foodworld
Reliance Fresh
Spencers
More
6 Ten
Monday to Sunday

DrugstoreReligare
Apollo Pharmacy
MediPlus

FranchiseYellow Chilli
Ferns n Petals
Gini n Johnny
Caf Coffee Day
VLCC
Jumbo King
Sankalp
Mocha
Haldirams
Louis Philippe
Van Heusen
Arrow

Convenience storeSpeedMart
Twenty Four Seven
In & Out
Pratidin

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Direct Selling:

47

Homeshopping:

HomeShop18
Telebrands
TVC Skyshop
Asian Sky Shop
Shop24Seven

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Non-store Retail Formats

Electronic Retailing
Catalog and Direct Mail
Direct Selling
Television Home Shopping
Vending Machines
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Types of Nonstore Retailers

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Issues in Catalog Retailing

Low Start Up Cost
Evolution of Multi-Channel
Offering
-Electronic Channel, Stores

Increasing Mail Costs

Clutter from other Catalogs

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Services vs. Merchandise

Retailers
Intangibility
-Problems in Evaluating Service Quality
-Performance of Service Provider

Simultaneous Production and Delivery

-Importance of Service Provider

Perishability
-No Inventory, Must Fill Capacity

Inconsistency of the Offering

-Importance of HR Management
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Trends in Ownership

Concentration on One Format

Growth in Services Franchising

Reasons for Franchising Growth

Technological advances
Profitable utilization of capital resources
Attainment of the American Dream
Demographic expansion
Product/service consistency

Types of Franchise Systems

Territorial
Operating
Mobile
Distributorship
Co-ownership
Co-management
Leasing/Licensing
Manufacturing
Service

Reasons for Franchising Failure

Inept management
Fraudulent activities
Market
Marketsaturation
saturation

Franchisor Positions in the Marketing

Channel
Manufacturer - retailer
Manufacturer - wholesaler
Wholesaler
Wholesaler--retailer
retailer
Service
Servicesponsor
sponsor--retailer
retailer

Franchisor Benefits
Continuous
Continuousmarket
market
Market
Marketinformation
information
Money
Money
Royalty fees
Sales
Salesof
ofproducts
products
Rental
Rentaland
andlease
leasefees
fees
License
Licensefees
fees
Management
Managementfees
fees

Franchisee Benefits
Initial Services
Market survey and site selection, facility design and
layout, lease negotiation advice, financing advice,
operating manuals, management training programs, and
employee training.
Continuous Services
Field supervision, merchandising and promotional
materials, management and employee retraining, quality
inspection, national advertising, centralized purchasing,
market data and guidance, auditing and record keeping,
management reports, and group insurance plans.

Franchisor
Advantages/Disadvantages
Advantages
Rapid expansion, highly motivated franchisees do a good
job, additional profits by selling franchisees products and
services.
Disadvantages
Company-owned units may be more profitable, less
control then independent retailers over advertising,
pricing, personnel practices, etc.

Franchisee
Advantages/Disadvantages
Advantages
Established/proven product/service, business and
technical assistance, and reduction in risk.
Disadvantages
Loss of control since only semi-independent, franchisee
outlets may compete with corporate-owned outlets,
and high royalties, fees, costs on equipment, supplies,
merchandise, rental/lease rates and mandatory
participation in promotional and support services.

Franchising Trends for the New

Millennium
Sustained growth

Enduring plus un-imagined applications

International expansion

Increasing tensions

Greater emphasis on financial returns

Examples of Service Retailers

Type of Service

Service Retail Firms

Airlines

American, Delta, British Airways, Singapore Airways

Automobile maint/repair

Jiffy Lube, Midas, AAMCO

Automobile rental

Hertz, Avis,

Banks

Citibank, NCNB, Bank of America

Child care centers

Kindercare, Gymboree

Credit cards

American Express, VISA, Mastercard

Education

University of Florida, Babson College

Entertainment parks

Disney, Universal Studios, Six Flags

Express package delivery Federal Express, UPS, US Postal Service

Financial services

Merrill Lynch, Dean Witter

Fitness

Jazzercise, Ballys, Golds Gym

Health Care

Humana, HCA

Home maintenance

Chemlawn, MiniMaid, Roto-Rooter

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