Chapter One

Retailing: Role, Relevance,

and Trends
 Learning Objectives
• Understand the meaning of retail
• Illustrate the functions of a retailer
• Explain the significance of retail as an industry
• Discuss key issues facing retailers
• Analyze the opportunities offered in retail as a
career
 The Meaning of Retail
• Retail is the final stage of any economic activity.
• Retail is derived from French word “retailer” which means ‘to
break bulk’.
• Retailing may be understood as the final step in the
distribution of merchandise for consumption by the end
consumers.
• Any firm that sells products to the final consumer is
performing the function of retailing.
• Retail comprises all activities involved in the marketing of
goods and services directly to the consumers for their
personal, family or household use.
 What is retailing?
 Retailing: a conclusive set of activities or steps used
to sell a product or a service to consumers for their
personal or family use
 Retailer: a person, agent, agency, company or
organization instrumental in reaching the goods,
merchandise, or services to the ultimate consumer
 Countries that have enjoyed the greatest economic
and social progress have been those with a strong
retail sector
 Over the last decade there have been sweeping
changes in the general retailing business
 Few Thoughts on Retailing
• Retailing includes all the activities involved in
selling goods or services to the final consumers
for personal, non-business use.
• A retailer or retail store is any business enterprise
whose sale volume comes primarily from
retailing.
• Any organization selling to final consumers
whether it is 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 the street or in the consumer’s home).
- Kotler
THE MARKETING – RETAIL EQUATION
Marketing Manufacturer Manufacturer

Wholesaler

Retailer
Consumer
Retailer

Consumer
Consumer
 The Role of the Retailer

• In the complex world of trade today, retail

would include not only goods but also
services, which may be provided to the end
consumer.
• In an age where the customer is the king and
marketers are focusing on customer delight,
retail may be redefined as the first point of
customer contact.
 The Retailer as a Link between the
Producer and the Consumer
• Form utility: By offering assortment of finished goods
and services in a form that customer want.
• Time utility: By keeping the store open when the
consumers prefer to shop.
• Place utility: By being available at a convenient
location.
• Ownership utility: By selling the product
• Serves the manufacturer: By distributing the goods to
the end consumer.
 The Retailer as a Channel Member
• The retailer serves the manufacturer by performing
the function of distributing the goods to the end
consumer, and thus forming a channel of information
to the consumer.
• For several product categories where brand loyalty is
not very strong or for unbranded products, the
retailer’s recommendation is vital.
 The Retailer as an Image Creator
• It is important for the retailer and also for the
producer/manufacturer whose products are being
sold in the store to first determine what the store
stands for and accordingly work around the
merchandise and the marketing aspects.
• Two specific dimensions to retail marketing are:
o First, how to attract customers into environs – shop, restaurant,
supermarket or the ‘virtual’ Internet store for instance
o Second, how to persuade those customers to make a purchase
from the store. Both are necessary to achieve success.
 The Rise of the Retailer

Proximity to
the consumer
Growth of
private labels
Rise of
consumerism
The rise
of the
retailer

Technology Globalization
 Rise of the Retailer - Reasons
• Proximity to the Customer
• The Rise of Consumerism
• The Introduction of the Private Label
• Technology
• Globalization
Retailers are no longer dependent on the
manufacturers to sell what is available and have
emerged as the new leaders in the marketing
channel.
 Retailing is closely linked with
4 P’s of Marketing
Four P’s of Marketing Mix Equivalent Four C’s in Retail Mix
Product Customised solution to Customers’ Needs

Price Cost to Customer, Customer Value

Place Convenience of obtaining the Product

Promotion Communication Mix

 Economic significance of retailing
• Sales
• Employment
• Contribution to GDP
• Top 10 retailers in the world
 The top 10 retailers
Fortune Corporation Country of Revenues $ No. of
Rank Origin mn employees
1 Wal-Mart Stores U.S.A 219,812 1,383,000
35 Carrefour France 62,225 382,821
38 Royal Ahold Netherlands 59,634 270,739
46 Home Depot U.S.A 53,553 256,300
56 Kroger U.S.A 50,098 288,000
72 Metro Germany 44,347 186,814
83 Sears Roebuck U.S.A 41,078 310,000
89 Target U.S.A 39,888 223,550
100 Albertsons U.S.A 37,931 220,000
104 Kmart U.S.A 36,151 234,000
Source: Fortune, July 22, 2002
World’s 20 Largest Retailers
Retail industry and economy
 Retail business is the largest private industry
 Retail is ahead of finance and engineering and
contributes over 15 per cent of GDP in the western
countries
 Over 50 of the Fortune 500 and about 25 of the Asian
Top 200 companies are retailers
 Today, in some developed countries, retail businesses
have shares as large as 40 per cent of the market
 The significance of the retail business has increased
with the fast growth in the service sector
 Retail in India
• 14 million retail outlets.
• Second largest sector after agriculture.
• The estimated size of the organized retail industry in
India is Rs. 3.5 lakh crores.
• This is 7 % of the total estimated retail trade.
• The organised retail market is growing at
35 percent annually while growth of
unorganised retail sector is pegged at 6 percent.
• Contributes about 14-20 % of the GDP
 Retail industry in India
• Retail forecasts in India:
• Indian retail market is estimated to US $948
billion by 2019–20 with a CAGR of 12–13 per
cent.
• organized retailing is estimated to increase its
share to 10% by 2019-20
 Retail industry in India
• Emergence of organized retailing:
• The mall space in India is expected to touch
107.8 million sq. ft in 2020
• The shopping mall phenomenon is not likely
to be restricted only to the metropolitan and
big cities.
• Malls have sprung up in the smaller cities and
large towns across the country.
 Retail industry in India
• Delhi and Mumbai lead the rest of the country
in terms of the highest concentration of
shopping malls, accounting for 62 per cent of
pan-India mall stock.
• Chennai and Bangalore together constitute
around 20 per cent of built-up mall space in
the country.
 Contd…

• 65 million square feet of total mall space in

India, expected to sprout in six metros (Delhi
and Mumbai) and seven non-metros in 2022
• 40 per cent of the total mall space to be
concentrated in the National Capital Region
 Growth of retail in India
• Public Distribution System
• Co-operative movement
• Independent retail stores
• Textile retail chains
• Department store
• Specialty stores
• Malls
• Hypermarkets
 Characteristics of retailing
 Direct end-user interaction
 Sole point in the value chain to provide platform for
promotions
 Sales at the retail level is generally in smaller unit sizes
 Location is a critical factor for retail business
 Retail services are as important as core products
 A larger number of retail units as compared to other
members present in the value chain
 Functions of retailing
 Sorting
 Breaking bulk
 Holding stock
 Additional services
 Channel of communication
 Transport and advertising functions
 Activities performed by retailers
• Arrange for assortment of offerings
• Breaking quantity
• Holding stock
• Extending services
Categorizing retailers

 Number of outlets
 Margin vs Turnover
 Location
 Size
Trends in retail formats
 Mom and Pop Stores and traditional kirana stores
 E-commerce
 Department Stores
 Discount Stores
 Category Killers
 Specialty Stores
 E-tailers
Relationships between retailers and
suppliers
 The retail sector is critically dependent on its suppliers
for effective operation and the profitability of its
business
 Several socio-economic and demographic factors are
considered by manufacturers for identifying the ideal
retail format mix for its products
 This is illustrated by the washing soap category in India
and the resultant retail format preferences
 Retail format mix adopted by
manufacturers for soaps

• Soap is targeted towards women as they are the

chief decision-makers in soap purchase. Medicated
positioning like germ killing and anti-bacterial are
marketed to families.
About 75% of the soaps are bought through these
following types of outlets.
Kirana stores
Pan-beedi shops
Department stores
 Retail strategy
 Define the business of the firm in terms of orientation
towards a particular sector
 Set short-term and long-term objectives with regard to
image and profitability
 Identify the target market and direct efforts on the basis
of the customers characteristics and needs
 Decide the broad direction the company must take in
future
 Implement an integrated plan that encompasses all
aspects of retailing like pricing, location, and channel
decisions
 Evaluate and revise the plan depending on the nature of
the internal and external environment
 Retail concepts
An essential part of the retailing strategy, the retailing
concept is essentially a customer-centred, company-
wide approach to developing and implementing a
marketing strategy. The retailing concept covers four
broad areas:
• Customer orientation
• Goal orientation
• Value driven approach
• Coordinated effort
The changing face of retailing
 Role of the Internet
- Does the size of the retail organization play a big part in
adapting easily to the Internet?
- Is the product/service offering also a prime determinant of
cyber retailing?
 Branding through retailers
- How do retailers choose which brands to display?
- Why do many new products fail in the marketplace
- How can manufacturers maximize the brand opportunity in
a given retail outlet?
- What is future of Lifestyle Clustering?
- Vertical retail concepts are increasing in popularity
 Consumption related mega trends
 Shopping Experience

 Now shopping is not just about obtaining products

 Overall satisfactory experience crucial for enhancing customer
value & customer retention
 Shopping experience has following main elements:
- in-store customer services
- merchandise pricing
- promotional activities
- visual merchandising & displays
- availability of merchandise as per customer needs
- adoption of best business practices
 Retailing of Services
Intangible product - built around needs involving deed performance &
can’t be physically possessed. Few examples in retail:
Personal care- Dry cleaning, beauty salons
Entertainment- Movie Theatres, Bowling Alleys
Repair- Automobile Repair Centres

Differentiating features of service retailing:

1. Intangibility - can’t be touch & seen
2. Perishability - simultaneous production & consumption
3. Inconsistency - quality may vary at times depending upon
various factors
4. Inseparability - usually services are performed directly
 Some Important Issues Before a
Retailer
 maximizing customer value - continuous endeavor
 merchandising - offering products as per customer needs
 traffic building - ensuring sales volumes & profitability
 store design & layout - for operational efficiency & better
shopping experience
 finding store location & site - accessibility
 keeping pace with technology- to compete better
 people management - service orientation, minimising
absenteeism, turnover
Drivers of success in the retail sector
 Customers are the driving force in change
 Re-evaluating the marketing plan
 Advanced education for retailers is critical for growth
 Strong visual recognition
 The workplace challenge
 Planning for success
 Roadblocks to retail development in
India
• Lack of recognition as an industry
• High cost of real estate
• Lack of adequate infrastructure
• Restrictions on FDI
 Challenges Faced by Retailers Worldwide

• The Emergence of New Markets

• The Empowered Consumer
• Technology-Enabled Efficiencies
• The Rise of the e-age
 Retail as a Career
• Buying and
• Technology and e-commerce
Merchandising
• Visual Merchandising
• Marketing
• Supply Chain Management
• Store Operations
and Logistics
• Sales
• Finance
• Human Resources