Retailing -An Overview & Retail Institutions(1)

7/29/2019 Retailing -An Overview & Retail Institutions(1)

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Session 3 Chap 1 - Retailing &Chap 2 - Retail Institutions


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Derived from French word, Retailier, meaning To cut a piece

off

A set of business activities that add value to the products &services sold to final consumer for their personal, family &household uses.

Benefits to the Economy 10% of GDP

Retailing involves:1) Understanding the needs of a consumer

2) Developing a good assortment of merchandise

3) Displaying the merchandise in an effective manner to make it

attractive & easy to buy.


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Benefits of Consumers through Retailing1) Breaking bulk

2) Providing Assortments

3) Holding of Inventory

4) Providing services like Free Delivery, Card facility, loans, hirepurchase etc

5) Providing Information through Ads, Kiosks and Salesmen.

Benefits to Manufacturers & Wholesalers1) Channel for delivering products/services to end customers.

2) Provides manufacturers with revenue that can be used later.

3) Acts as the sensory organs for manufacturer.

4) Providing feedback on goods and services.

5) Shares physical, technological & fashion obsolescence riskswith manufacturer.


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Theories of Institutional Change in Retailing1) Wheel of Retailing TheoryMalcolm P McNair

2) Dialectic Process or Melting Pot Theory Thomas Maronick& Bruce Walker

3) Retail Accordion Theory Hollander

4) Natural Selection Theory


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1) Wheel of Retailing (Malcolm P McNair) Change takes place cyclically

Three Phases Entry Trading Up Vulnerability

ENTRY PHASE Low status, low price, minimal service, minimal facility &

limited product offerings.

TRADING UP PHASE Elaborate facilities, essential & Exotic services, Higher rent

locations, Fashion oriented, Higher prices, Extended offerings.

VULNERABILITY PHASE Top Heaviness, Conservatism and Declining ROI, Competition

from innovative new retailer who goes through same cycle.


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2) Dialectic Process or Melting Pot Theory(Thomas Maronick & Bruce Walker)

When challenged by a competitor with a differential strategicadvantage, an established player will adopt strategies andtactics in the direction of that advantage to negate theinnovators attraction.

Two institutional forms modify their formats and mutuallyadapt & move together in terms of offerings, facilities,supplementary services, prices and become quite similar.

The new format now becomes vulnerable to negation by newcompetitors.


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3) Retail Accordion Theory (Hollander) Institutions evolve over time from outlets offering a wide

variety of merchandise to stores offering specialized products

and then eventually these stores begin to offer a wide variety ofmerchandise or the other way around.


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4) Natural Selection Based on Darwins theory of Evolution.

A firm or retail institution should be flexible enough to adaptto the changing environment and should adapt its behaviour tothose changes, to survive in the market.

The one that is flexible enough to adapt to changes will be mostsuccessful.


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CLASSIFICATION OF RETAILERSBased on their selling process

Store Based Retailers 2) Non Store Based Retailers

STORE BASED RETAILERS Fixed point of sale locations

High volume of walk in Wide variety of merchandise

Sell for personal, household, business & institutional clients & customers.

NON STORE BASED RETAILERSReach customers and market their merchandise using various methods like

Broadcasting of Infomercials 5) In House demonstrations

Direct response advertising 6) Selling from portable stalls

Paper & Electronic catalogs 7) Vending machines

Door to door soliciting and other innovative methods


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CLASSIFICATION OF STORE BASEDRETAILERSA) Based on Ownership

1) Independent Stores2) Chain Stores3) Franchise Stores4) Leased Department Stores5) Vertical Marketing System (VMS)6) Consumer Cooperatives


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STORE BASED RETAILERSA) BASED ON OWNERSHIP1) Independent Retail store Store owned by a single retailer. Retailer does not own any other store.

Advantagesa) Free to select a convenient location & store format.

b) Can concentrate on small target market.c) Can decide on timing, assortments & price.

d) Entry barriers are low, cost of setting up lower.

e) No duplication of store functions.

f) Owner takes all decisions & can respond quickly to changes.

Disadvantagesa) Bargaining power is less than that of other retail formats.

b) Labour intensive methods are used for ordering, stocktaking, merchandising &accounting. Total operational costs increases.

c) Lack exposure to modern retailing techniques.

d) Fail to attract customers from distant locations.


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A) BASED ON OWNERSHIP2) Chain Stores Two or more retail outlets that are commonly owned and controlled

Centralized buying and merchandising system with similar merchandise.

Advantages1) Can purchase at a low price, can keep shipping costs low due to bulk purchase.

2) Can bargain with suppliers over price, quantity, discounts & re-order.

3) Centralized decision making system & Use of latest technology.

4) Can afford promotion of their products as stores are spread over large area.

5) Full time experts employed for long term planning.

Disadvantages1) Need to maintain consistency across all stores.

2) Initial cost of establishment is high for chain stores.

3) Difficult for top management to control activities of every store.

4) Location of stores is geographically dispersed.

5) Sole owners take personal interest in managing chain stores effectively.

Retailing -An Overview & Retail Institutions(1)

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