RETAIL MANAGEMENT ..1

RETAIL MARKETINGModule 1Retail - Any business that directs its marketing efforts towards satisfying the final consumer based upon the organization of selling goods and services as a means of distribution .Retailer - A dealer or trader who sells goods in small quantities, or one who repeats or relates . Retailing -All activities involved in the marketing of goods and services directly to the consumers for their personal, family or household use or Retailing includes all the activities involved in selling goods / services directly to final consumers for personal , non-business use.Retailing derived from French word retailler means a piece of or to cut up.INTRODUCTIONFrom customers point of view, retailer serves by providing goods that he needs in the required assortment and at the right place and time.From customers point of view, retailer serves by providing goods that he needs in the required assortment and at the right place and time.From an economic standpoint the role of a retailer is to provide real added value or utility to the customer.FUNCTIONS OF A RETAILER3Five different perspectives - By serving the consumers by way of functioning as a marketing intermediary and creating time, place and ownership utility.First utility arises from the need of providing a finished goods and services in the form that is acceptable to the customer.The retailer performs the function of storing the goods, and providing us with an assortment of products in various categoriesThe retailer creates time utility by keeping the store open when the consumers prefer to shop.By being available at a convenient location, he creates place utility.Finally when the products are sold ownership utility is created.FUNCTIONS OF A RETAILER4The Retailer also serves the manufacturers by Performing the function of distributing the goods to the end users.Creating a channel of information from manufacturer to the consumer.By serving as a final link in the distribution chain.Recommending products where brand loyalty is not strong or for unbranded products.

FUNCTIONS OF A RETAILER5Retailer is customer focused, not Product focused. Manufacturer may reach customers through:DealersCompany showroomsSuper / HypermarketsManufacturers will decide on Retail Distribution:IntensiveSelective ExclusiveINTRODUCTION CONCEPTS, ROLE & ENVIRONMENTFour theories of evolution/ retailing are:Environmental theoryCyclical TheoriesWheel of RetailingAccordion theory Retail lifecycle theoryConflict theoryEvolutionary theoriesDialectic ProcessNatural selectionRETAIL EVOLUTION THEORIESDarwinian approach-Retailers with most appropriate structure and formats will survive.If there are different environmental conditions, they need to adopt in order to succeed.E.g.: Economy and culture.They must also respond to the evolution of market conditions or else they will face extinction.Major environmental factorsChanges related to customers-Demographic, attitude and preferences, life style and economic influences.Changes in technology.Changes in competition.1.ENVIRONMENTAL THEORYCyclical Theories : Begin with one state and return to that state at some time in future.Cyclical TheoriesWheel of RetailingAccordion theory Retail lifecycle theoryEvolutionary: Changes similar to biological evolution

2.CYCLICAL THEORY10a) WHEEL OF RETAILINGEntry Phase-Low prices-Limited facilities-Limited serviceVulnerability Phase-High prices-Excellent facilities-Excellent service-Declining ROITrading-up Phase-Moderate to high prices-Elaborate facilities-Increase in skillsWheel represents phases through which some types of Retailers pass:Retailers enter by attracting customers low price, low serviceExpand market More expensive merchandise, More Trading up services, open more convenient locations. process increases costs & price of their merchandise, creating opportunities for new low price retailers to enter e.g. Discount stores & category specialistsFinally they mature as high cost high price retailers who become vulnerable to new entrants-inability to adapt.Some Retailers dont begin as low price, low service entrants, e.g. Upscale fashion specialty stores.

a) WHEEL OF RETAILINGIn rural markets, Retailers sell many categories under one roof: shoes, cosmetics, foods, cloth, medicines. However the assortment is shallow and customers have limited choice.Starting with general stores - neighboring localitiesSlowly switching to specialist stores - like gifts, restaurants, entertainment at a certain distanceThese specialist retailers when mature start adding variety and become general stores.Some become category killers is a retailer that carries such a large amount of merchandise in a single category at such good prices that it makes it impossible for the customers to walk out without purchasing what they need, thus killing the competition.Department stores have both width and depth of merchandise.

b) THE ACCORDION THEORYRetail development pass through 4 stages-Introduction stage slow rate of growth due to limited resources and experiences.Growth stage Rapid growth as efficiency and experience increase.Maturity stage Level off due to increased cost and high competition and reduced efficiency.Decline stage Decrease in market share and profitability. May sometimes withdraw from market.c) RETAIL LIFE-CYCLE THEORYc) RETAIL LIFE-CYCLE THEORYTimeRetail developmentIntroductionGrowthMaturity/SaturationDeclineLevel of salesCash flow0Competition between retailers causes changes in the nature of retail environment.It is due to the imbalance caused by innovations (Brown, 1987) Four stages of response.Types of retailer response to innovation.Shock.Defensive retreat.Acknowledgement and assessment.Adaptation.3. CONFLICT THEORYEvolutionary Theories : Changes similar to biological evolutionEvolutionary theoriesDialectic ProcessNatural selection4. EVOLUTIONARY THEORYRetail formats emerge by adopting characteristics from other forms of retailers in much the same way as the child is the product of the pooled genes of the parents.Specialty stores with high margins, low turnover plush operations Discount stores with low margins, high turnover low operationsBoth the above were synthesized to form category specialist stores.a) DIALECTIC PROCESSA new value proposition by one retailer gives rise to two retailers with same value.E.g. Tesco always copied SainsburyIn India too the grocery sector is facing a price led dialectic processsome of them are sure to die

a) DIALECTIC PROCESSThesisAntithesisDepartment StoreDiscount StoreDiscount Dept. Store

SynthesisThose Retail Institutions Succeed which adapt to changes in customers, Technology, competition and legal environment. Department stores have tried to combat specialty stores by opening specialty counters within the stores. Interest in physical fitness and increased number of women in workforce have made specialty outlets within grocery stores.b) NATURAL SELECTIONTwo different approaches to quality management.Product-attribute approach match the product conformance to standardized requirements.Controls companies output by using internal standard setting prospective.Training -led management style.Consumer-oriented approach Holistic process of service delivery to be controlled by considering expectation and attitude of customers.Marketing-led approach.E.g. Perceived service quality Gronroos model and Parasuraman, Zeithaml & Berry model.

Management of service and quality in retailingGronroos, 1982 focus on IMAGE, a gap between expected and perceived service.Aggregation of functional and technical variables.Functional quality How technical elements are transferred to customers.Technical quality What the customer is actually receiving.PERCEIVED SERVICE QUALITY GRONROOS MODELTraditional marketing activitiesExpected servicePerceived service Perceived service qualityImage Technical qualityFunctional qualityTechnical solutionsKnowhowComputerized systemsMachinesAttitudesInternalrelationBehaviorService MindedCustomer contactsAccessibilityAppearanceMANAGING PERCEIVED SERVICE QUALITY GRONROOS MODELWhat?How?Parasuraman et.al., 1985, customer evaluate quality as difference between expected and perceived service.Five service-quality gaps are identified.Realization of these gaps and reducing and closing the gaps led to improved satisfaction.Gap 1: ignorance of customer expectationsGap 2 : requirement for service design stdsGap 3 : not delivering to service stdsGap 4 : inconsistency between performances & promises(service delivery & external commn.)Gap 5 : the service shortfalls

PARASURAMAN, ZEITHAML & BERRY MODELWord of mouthPersonalneedsPastexperienceExpected servicePerceived service Service deliveryTranslation of perceptions into service-quality specifications Mgmt perceptions of consumer expectationsExternal comTo consumersCONSUMERMARKETERGap 1Gap 2Gap 3Gap 4Gap 5SERVICE DELIVERY QUALITYPARASURAMAN, ZEITHAML & BERRY MODELQUALITY CHARACTERISTICSMerchandisePerformanceFeaturesReliabilityConformance to stdsDurabilityServiceabilityAestheticsImage ServicesTangiblesReliability of staffResponsiveness of staffAssurance / CompetenceEmpathyRetail sales driven by Ability (disposable income) and willingness (consumer confidence)Worldwide retail sales Est.$7 Trillion.Expenditure on Household Consumption increased by 68% between 1980 and 1998Top 200 retailers account for 30% worldwide demandOver 50 of the Fortune 500 and 25 of Asian Top 200 are RetailersGLOBAL RETAIL INDUSTRYTop 7 Global RetailersRankName of RetailerSales(USD Bn)Grocery Sales (%)1Walmart - USA23544%2Tesco- UK6375%3Carrefour-France5884%4Home Depot -USA5551%5Kroger - USA5570%6WalGreens -USA5275%7Aldi Group- Germany4818%27Retailer links Producers to CustomersRetailer is a person, agent, agency, company or organization reaching the Goods or Services to ultimate consumer Retailer in close contact with the customers Sell small quantities of items on a frequent basisConvenience in terms of location , payment and credit facilities , range of merchandise , after sales service, etc.Offer selection merchandise assortmentRetailers perform specific activities:Anticipate customer wantsStock product assortmentsAcquire market informationFinance Retail business

Why retailing so important?Retailing is Big Part of EconomyServices (50%)Government (15%)Manufacturing(18%)Retail(17%)Employment Projections for 2010 by BLS (Bureau of Labour Statistics, US)29FDI in Retail in India; Chinese lessonA.T. Kearneys Global Retail Development Index ranks India firstRetailing in India - unorganized sectorOrganized retail at 2 % , 85% in US, 20% in China At 270 million, one of the largest consumer baseGDP growth, increased literacy, increase in media penetration60% of India is under the age of 30 - propensity to shop is higher

Retail in IndiaCorporateNo of OutletRemarksReliance Retail700+Biggest Retail Chain & fast Expanding, operating in 14 States. Big Bazaar164Fast Expanding, Big Size StoresBharti - Walmart105

03Retail Stores in NCR, Punjab, UP & Rajasthan, Expanding quickly to SouthCash & carry StoresAditya Birla500+Concentration in South(acquired Trinethra and Fab Malls)Spencers210Oldest Retailer in India, operates in 27 CitiesMetro-AG- Germany4Cash and carry stores located at Mumbai, Hyderabad & Kolkatta, Expanding SlowlyCorporate- Indian RetailRapid Transformation Anticipated28% shareReach a share of 28% by 201732Anticipated Indian RetailCountryShare of Organized RetailYears taken to reach the level from < 5%China20%10Poland20%8Brazil36%15Thailand40%18US85%50India17% (estimated)27% (estimated)510India looking at rapid GROWTH compared to other countries33Growth Of Indian RetailIndian Retail expected to grow close to 12% p.a. in the next 10 years*ProjectedSource: Technopak Analysis, CSO & Other Sources3434Private Consumption US $568 Bn (62%) Rural India consists of 720 Million consumers across 627,000 villages17% of these villages account for 50% of the rural populationHIGH PRIVATE CONSUMPTIONOrganized Vs Unorganized Retail SectorOrganized Retail Sector

Unorganized Retail Sector

36FactorOrganized Retail SectorUnorganized Retail SectorDefinitionModern form of retailingTraditional form of retailingExamplesHypermarket, Retail chain etc.Mom n Pop stores, hand cart, pavement vendors etcMarket Share2%98%Market Growth35%6%ChallengesPoor supply chain management, aggressive expansion etc.Use of labour intensive technology, lack of government support etc.Organized Vs Unorganized Retail Sector37Comparative Penetration of Organized Retail38Organized Retail is 2 % of the total Retail Industry and expected to Grow by 10% by 2012.Increasing Consumer aspirationGrowing no of Nuclear familiesGrowing Size of working women segmentDemand from tier II and III cities and rural markets.Large young working PopulationGrowth of organized Retail in IndiaIn India Organized Retailing is 2%Retail sector highly fragmentedRetail chains like Wal-Mart, Sears, McDonalds brought Rapid Growth and consolidation of Organized Retail Rapid rise of Income levels and accompanying changes in lifestyles greatly contributed to growth of Organized Retail

ORGANISED RETAILINGIn India, increase in Disposable income, Purchasing Power of growing Middle Class conducive conditions for growth of Organized RetailIndian Retail environment different from that of western countries:Cities congested, large population in rural areasSmaller purchases, limited household spaceORGANISED RETAILINGSelf-service : Self service is the corner-stone of all discount operations. Customers carry out their own locate-compare-select process to save money.Self-selection: customers can find their own goods , although they can ask for assistance.Limited service : retailers in this category carry more shopping goods , and customers need more information and assistance. The store also offer services such as credit and merchandise return privilegesFull service : salespeople are ready to assist in every phase of locate-compare-select process . High cost of retailingNeed for Retailers serviceStore retailers : specialty store , supermarket , department store , convenience store , discount store, etcNon-store retailers : direct selling (multi-level/network marketing) , telemarketing , automatic vending , buying service .Combination Types of Retail FormatsBuying service : a storeless retailer serving a specific clientele- usually employees of large orgns who are entitled to buy from a list of retailers who have agreed to give discounts in return for membership.43Store-based Retailers operate from a fixed location that requires consumers to travel to the store to view and select merchandise and/or services.Store-based Retailers Department storesSpecialty storesSupermarketsSupercentersCategory killersConvenience stores44Types of Retail Formats44Department stores: Represent manufacturers with non-competing product lines. Work under contract within protected sales territories. Prices, delivery, service, warranties, and other handling are spelled out within the contractSpecialty store: Feature a deep assortment of productsExamples: Lady Footlocker, Naturalizer Shoes, Hallmark Card Shops, Tiffanys, and collectible sports card shopSupermarket: Self-service, centralized customer service, large-scale and low-cost, price emphasis, broad assortment of merchandise 1. Self-service and self-selection displays2. Centralization of customer services at the checkout counter/desk3. Large-scale, low-cost physical facilities4.A strong price emphasis A broad assortment of merchandise to facilitate multiple-item purchases

Supercenters:Combination supermarket and department storeOne stop shopping with up to a 30-50 mile radius in rural areasDominant new form of growth for major retailers

Category killersThe ultimate in specialty stores - carries tremendous specialized itemsExamples:Toys R Us, Carmax, AutoNation, etc.

Convenience stores:Serve a neighborhood with a radius of about 1.5 milesGreater time, place, and possession utilityLower turnover with higher prices

Non-store based Retailers attempt to reach the consumer at home, work, or any place other than a store where they might be susceptible to purchasing.Non-store based RetailersStreet peddlingDirect sellingMail-orderAutomatic-merchandising machineElectronic shopping 45Types of Retail Formats

45Several facts to consider about e-tailing:

The Internet will not increase overall consumer demand.Clicks-and-bricks strategies that integrate a single message will be more powerful than a pure e-tailing strategy.E-tailers must pay better attention to customer service.Internet shoppers would probably buy more online if they could return items more easily.

Retailing may take place through:Retail StoreMailDirectInternetSalesDoor-to-door

Retail services like Restaurants, Hotels, Parlour, Health Services, Car rentals, TravelIn USA Retail generates $3 trillion through 23 Mn. Employees. Wal-Mart generates $245 Bn. sales through 1 Mn. nationally and 0.3 Mn. Foreigners.RETAILING CONCEPTStrong economies have a strong Retail sectorEntry in retail sector is easy, hence results in fierce competitionRetail must perform its primary role of catering to customer satisfactionRetail earns modest profits of 9-10%Retail stores of different sizes face distinct challenges. Their sales volume influences:Merchandise purchasePromotion & - Expenses ControlRETAILLast decade has seen tremendous changes in Retail Business from made to order to ready to wear, from counter sales to self service, emphasis on value addition and cost reduction.Family run retail business giving way to modern professional retail. Retail improving inventory management through systems faster turnover, better profitability, fast changing customer preferences for assortment of goods and services. BETTER CUSTOMER CARERETAILDirect End-User InteractionPlatform for Promotions & POP displaysLower unit salesRetail location criticalServices as important as Core ProductsLarge number of Retailers to meet geographical coverage and population densityRETAIL CHARACTERISTICSOwnership Business:Proprietorship, Partnership, Limited liability companyOperational Structure: Independent Trader, Chain Of Stores, Franchising, Consumer CooperativeWidth & Depth Of Merchandise:Specific Product CategoryWide Range RETAIL BUSINESS CLASSIFICATION4. Type Of Pricing:Low pricing, minimum ServicePremium Merchandise, High ServicePremium pricing, distinctive Image5. Consumer Interaction:Direct interactionMail OrderTele-SellingVending machinesDoor-to-doorMobile VendingRETAIL BUSINESS CLASSIFICATIONGROCERS - Major business is grains, provisions, spices, edible oils. Grocers may be dealing in many other items. GENERAL STORES - Deal in items Daily needs and stocking number of categories, is identified as a general store.CHEMIST- Deal in Ethical Pharmaceutical Products. Require a license and a Qualified Pharmacist. Such outlets also deal in diverse FMCG products. RETAIL MANAGEMENT ..2MODERN FORMAT STORE a) Part of a chain of stores with self-service facilitiesb) Part of a chain, but does not have self-service Facilitiesc) Stand-alone (not part of a chain) with self-service facilities FOOD STORE : Deal mainly in food products - milk, beverages, tea, coffee, squashes, ketchup, jams, chocolates, biscuits, bakeries etc. RETAIL MANAGEMENT ..2TOBACCO KIOSK : Deal in tobacco products like Paan, Cigarettes, etc. are called Pan Bidi shops. Many of them also deal in packaged consumer products like toilet soaps, toothpaste, washing soaps, biscuits, confectionery, batteries etc.COSMETIC STORE : Deal in Ladies Personal care products / Cosmetics, General toiletry products, Mens toiletry products, Baby Care Products.RETAIL MANAGEMENT ..2Customer Orientation:Attributes & Needs satisfactionCoordinated Efforts:Maximize Business EfficiencyValue driven:Good Value for MoneyGoal OrientationAchieve GoalsRETAIL CONCEPTCommunication with CustomersIdentify Customers NeedsProvide Products and Services toSatisfy CustomersElicit Feedback to Improve Services Word Of MouthRETAILING CONCEPTCustomer Service approach: Create a conducive environmentListen to your CustomersDirect mailRelationship Marketing Long TermRewards for Regular CustomersRETAILING CONCEPTConsumer spend their money at Retail which drives the economy. Retailers realize Revenue when Consumers buy products or Services from them. The revenue passes up the Consumer Goods distribution chain viz. to Wholesalers, Distributors and Manufacturers.Retail Industry employs 17-20% Workforce that drives the Economy.Retail trends often mirror trends in a nations overall economy.Retailers add value by Providing the Right Product at The Right Place at the Right Time.ROLEVertical Retail Concept: Traditional stores and Shop-in-Shop concepts mixture of system and individuality, e.g. Sale of Non-food items like newspapers, magazines with snacks, beveragesConsumption Related Trends: Increasing Consumers with Purchasing Power & More Migrant Consumers Demand for Broad selection of Products Demand for Good quality Products e.g. Honest, Original and Green Products

New Concepts & TrendsRetail Management By Chetan BajajRetail Management By Berman & EvansRetail Management By Levy & Weitz

BOOKS FOR REFERENCE