RETAIL RETAIL MANAGEMENTMANAGEMENT

Growing Importance of Retail Sector

• Large and increasing contribution to GDP• Economic importance more visible• Major employer• Retailers diversifying their activities• Organisations growing on an international

scale• Blurring of areas of retail to include wider

areas of business activity• Size of operation allowing for supply chain

control.

Characteristics of RetailingCharacteristics of Retailing• There is direct end-user interaction in

retailing.• Sales at the retail level is generally in smaller

unit sizes. • Location is a critical factor in retail business.• In most retail businesses services are as

important as core product.• It is the only point in the value chain to

provide a platform for promotions.

Modern Retail In Expansion Modern Retail In Expansion Phase…Phase…

IVIIIIIInitiation

Manufacturers opening their own outlets

Pure play Retailers, realizing the potential start to test waters,

Conceptualization Expansion and Entry of Global Retailers

Large Investment Commitments by large Indian corporates

Expansion by leading Product Brands

Stiff Competition

Large Scale Consolidation

More than 5-6 Players with Revenues in excess of US $ 700 mn

More Aggression from International Players

Specialty Formats based on finer segmentation of the market

Private brands getting established

Movement to Smaller Cities and Rural Areas

I

Size

of I

ndus

try

Pre 1995 1995 to 2005 2005 to 2010 2010 Onwards

Consolidation

Entry of large global retailers

Types of Retail Formats Mom and Pop Stores (e.g. kiryana stores) Department stores ( Shopper’s stop)

Specialty store ( Pizza Hut)

Supermarkets (Wal-Mart,Big Bazaar)

Convenience stores (In & Out)

E-tailors (e-bay,amazon.com)

Discount stores (Koutons)

Full-line discounters or mass merchandisers

Specialty discount stores or category killers

FUNCTIONS OF RETAILERS

FUNCTIONS OFRETAILERS

UNDERSTANDINGCUSTOMER NEEDS

& WANTS

PROVIDING ASSORTMENT

OF GOODS SERVICES

PROVIDINGSERVICES TO CUSTOMERS

BREAKING BULK

HOLDINGINVENTORY

PROVIDINGINFORMATION TO

SUPPLIERS

Retail Market Break-Up in Retail Market Break-Up in 20082008

Source: Technopak Analysis

India Retail ScenarioIndia Retail Scenario

8

All Figs in US$ billion

• The Indian retail market is expected to be about US $ 535 Billion by 2013. With an anticipated US$ 30 Billion in fresh investments over next 5 years, modern retail will show impressive CAGR >40%

8 18 73 170280 410 535755783

1,1611,487

2,135

2003 2008 2013 (P ) 2018 (P )

Modern R etail R etail G DP

Currently, Modern Retail Comprises a Currently, Modern Retail Comprises a Small Percentage of Total Retail in IndiaSmall Percentage of Total Retail in India

Breakup of Modern and Traditional Retail

Breakup of categories within modern retail

Spending Shifting From Basic To Spending Shifting From Basic To DiscretionaryDiscretionary

• The share of food and grocery in the consumer’s wallet continues to drop – releasing money for discretionary expenditure

• F&G share expected to decline from 36% in 2008 to 32% in 2013

Source: India Consumer Trends ’07, Technopak analysis

2003

2008

2013

Food & Grocery

Rent, Utilities & Education

Fuel, Transport & Communication

Savings & Investment

Discretionary Expenditure

Despite Current Slowdown, Growth Despite Current Slowdown, Growth Opportunity For Retail & Consumer Opportunity For Retail & Consumer

Products Is Still IntactProducts Is Still Intact• Medium and long term prospects for the Indian economy

continue to be enthusing with strong domestic consumption and reduction in commodity prices, inflation, and lowering interest rates.

• Sectors such as Consumer Products, Food & Grocery, Consumer Appliances & Durables, QSRs, Healthcare, Education, etc. are still showing high growth prospects as reflected in their recent financial numbers.

• Modern Indian retail is currently experiencing a steep learning curve and the current turbulence is not entirely unexpected or undesirable.

• Retail will witness expansion, consolidation, acquisition and further entry of international chains between 2009-2013 giving further fillip to the overall growth of modern retail.

• Investment options will further increase as the Government will finally open up international investment in the retail sector during 2009-2013 period.

DEFINITION OF RETAILINGDEFINITION OF RETAILING

The term ‘retailing’ is derived from the old The term ‘retailing’ is derived from the old French word “French word “retaillerretailler ” meaning ‘a piece of’ or ” meaning ‘a piece of’ or

‘to cut up’.‘to cut up’.

Retail isRetail is::

““Any business that directs its marketing efforts Any business that directs its marketing efforts towards satisfying the final consumer based towards satisfying the final consumer based upon the organisation of selling goods and upon the organisation of selling goods and services as a means of distribution”.services as a means of distribution”.

Classification of Retail Classification of Retail UnitsUnits

Retail stores can be classified as per the following• Nature of ownership: - Sole proprietorship, Partnership, Joint Venture

Limited Liability company.• On the basis of Operational Structure : - Independent Unit, Retail Chain, Franchise, Leased (s-in-s)

departments, Co-operatives (Fair price)• On the basis of retail Location : - Free Standing Retailers, In Business-associated location,

planned shopping centers• On the basis of Merchandise Mix.

- Electronic Retailing- Catalogue & Direct Mail Retailing- Direct Selling

Person to PersonParty Plan or Person SellingMultilevel Network

- Vending Machines

Type of Retailers

Store Retailers Non-Stores Retailers

Method of Customer InteractionMethod of Customer Interaction

Retail MarketingRetail MarketingThe Nature of Retail Marketing:

The key aspects of retail marketing is an attitude of mind.

In making retail marketing decisions, retailers must consider the needs of the customers.

Retail marketing decisions are driven by what the shoppers need and want

Cont…Retail marketing is therefore a philosophy

and is all about satisfying the customersWhat the customers regard as value and what

they buy is decisive.What the customers buy determines the

nature of the retailer’s businessThe essence of retail marketing is developing

merchandise and services that satisfy specific needs of customers, and supplying them at prices that will yield profits.

Retailers must take the customers’ needs into consideration in retail operation.

The concept of Retail The concept of Retail MarketingMarketing

• The retail marketing concept is the acceptance by the retailer that it is the “customer” and not “demand” that lie at the core of the retail organisation.

• The retail marketing concept is a philosophy, not a system of retailing or retail structure.

• It is founded on the belief that profitable retailing and satisfactory returns on investment can only be achieved by identifying, anticipating and satisfying customer needs and desires.

• It is an attitude of mind that places the customer at the very centre of retailing activities.

Retail marketing is stimulating, quick-paced, and influential.

It encompasses a wide range of activities including:– Environmental analysis– Market research– Consumer analysis– Product planning etc.

Importance Of Marketing In Importance Of Marketing In RetailingRetailing

• Marketing is a vital tool for every retailer, as it identifies current, unfulfilled needs and wants, which it defines and quantifies.

• Marketing determines which target groups the retailer should serve.

• Marketing could be seen as delivering an acceptable standard of living.

• Marketing can ensure complete satisfaction and sustained customer loyalty.

• Marketing depends on the efficient co-ordination of consumer prediction, product development, packaging design and influencing demand through appropriate communication medium.

• From these, a suitable mix is achieved.

Retail marketing objectives

The retail marketing objective is a performance parameter which has been explicitly stated.

It can be stated in quantifiable terms and time terms so that results can be measured against it.

Three types of retail objectives include:

1. Basic objective – those which defines retailer’s long-term purposes.

2. Goals – those which the retailer must achieve to be successful

3. Targets – short-term goals that require immediate achievement.

Retail marketing mix• Retail marketing mix is the term used to describe the

various elements and methods required to formulate and execute retail marketing strategy.

• Retail managers must determine the optimum mix of retailing activities and co-ordinate the elements of the mix.

• The aim of such coordination is for each store to have a distinct retail image in consumers’ mind.

• The mix may vary greatly according to the type of market the retailer is in, and the type of product/services.

The 3 P’s of Marketing (Extended Marketing mix)

Composition of key Composition of key elementselements

• Place• Product• Price• Promotion• People• Process• Physical Environment

Retail Marketing MixRetail Marketing Mix

While many elements may make up a firm’s retail marketing mix, the essential elements may include:

• Store location,

• merchandise assortments

• Store ambience,

• customer service,

• price,

• Communication with customers

Mix …

• Personal selling• Store image• Store design• Sales incentives• People• Process• Physical evidence

Theories of Retail DevelopmentTheories of Retail DevelopmentRetail Development from the theoretical perspective:

• No single theory can be universally applicable or acceptable. The application of each theory varies from market to market , depending on the level of maturity and the socio-economic conditions in that market.

• The retail scenario keeps changing continuously. These changes are brought by ever changing customer requirement, economic development of the nation , falling borders, new technologies and by entrepreneurs.

• Growth in retail is a result of understanding market signals and responding to opportunities that arise in a dynamic manner.

• Theories of retail development can broadly be classified as:

1. Environmental: where a change in retail is attributed to the change in the environment in which the retailers operate.

2. Cyclical : where change follows a pattern and phase can have definite identifiable attributes associated with them.

3. Conflictual: where the competition or conflict between two opposite types of retailers, leads to a new format being developed.

• The Wheel Keeps On Turning And Department Stores, Supermarkets, And Mass Merchandise Went Through This Cycles

Entry phase

Trading up phase

Vul

nera

bilit

y ph

ase

Mature retailerTop heavy

Declining ROI

Innovative retailerLow status and priceMinimum servicePoor facilitiesLimited product offering

Traditional retailerElaborate facilitiesHigher rentMore locationsHigher pricesExtended product offerings

Entry phase

T

Vul

nera

bilit

y ph

ase

Mature retailerTop heavy

Declining ROI

Innovative retailerLow status and priceMinimum servicePoor facilitiesLimited product offering

Traditional retailerElaborate facilitiesHigher rentMore locationsHigher pricesExtended product offerings

3. Conflict theory (dialectic Process)3. Conflict theory (dialectic Process) • Conflict always exit between operators of similar formats or

within broad retail categories.

• Retail innovation does not necessarily reduce the number of formats available to the consumer, instead , it leads to the development of more formats.

• Retailing involves through a dialectic process, i.e. blending of two opposite to creates a new format. This can be applied to development in retailing like;

A. Thesis: Individual retailers as corner shops all across the country.

B. Antithesis: A position opposed to the thesis develops over a period of time . (department store, discount store). The antithesis is a challenge to the Thesis.

C. Synthesis: There is a blending of the Thesis and antithesis. The result position between the thesis and antithesis. Supermarkets and hypermarkets flourish. This “synthesis” for the next round of evolution.

Discount Store

Discount Department Store

Department Store

Antithesis

Illustration

Thesis