Retail management

Prof. Harisankar Muralidharan

Some of the questions we will aim to cover
during the course of this semester..
 What is the value added by retailers?
 What is happening in Global and Indian retail scenario?
 Which are the various retail formats?
 Retail Strategy : what are the various decision areas for
a retailer?
◦ Selection of location
◦ Merchandise planning
◦ Store design
◦ Pricing
◦ Selection of manpower
◦ Promotion
 What are the latest trends in retailing?
 How can retailers use technology?
What is the role of retailers?
What value do they add?
Retailing : A critical link in
distribution channel
Retail is the sale of goods to end users, not for
resale, but for use and consumption by the
purchaser. The retail transaction is at the end of
distribution channel..

The word retail is derived from the French word

“retaillier” which means “to cut a piece off” or “to
break bulk”
 Manufacturer’s Perspective

Retailers
Retailersare
arepart
partofofthe
the
distributionchannel
distribution channel
Product

Price
Place

Promotion
Retailers play a role in facilitating
flows in distribution channel
 Retailers facilitate channel flows

FORWARD
Physical Flow of Goods,
Title and Promotions

BACKWARD
Company Payment for goods Customers
Returns/Expiries

BOTH WAYS
Information
 Apart from facilitating channel
flows, do retailers add any other
value to the overall distribution
effort of any business?
Functions of a Retailer
(Value added as a part of the distribution channel)

❖Breaking bulk
❖Aggregation
❖ Holding stock
❖Advertising & Communication
❖Transportation
❖Additional services
 IMPORTANCE OF RETAILERS TO
OVERALL ECONOMY

 Facilitates cash flows

 Key contributor for GDP
 Generates employment opportunities
 Provides consumers a basic platform to interact
with goods
 INDIAN RETAIL MARKET
❖ The total retail market in India estimated to be
around $750-800 billion, likely to grow at CAGR of
13%
❖ Retail industry accounts for about 10-12% of
country’s GDP
❖ Contributes to 8% of total employment
❖ Food & Grocery is the largest sub sector in retail
industry (nearly 2/3rd), followed by apparel (9-10%)
❖ Online retail estimated to be around $24 billion
(2018-19), projected to touch $100 billion by FY 24

https://www.indiaretailing.com/
https://www.equitymaster.com/
 EVOLUTION OF RETAIL IN INDIA
Pre 1990s 1990-2005 2005-2010 2010 onwards

▪ Emergence of modern ▪ Substantial investment ▪ FDI inflow in the retail

▪ Manufacturers opened
trade commitments by large sector crossed $ 1billion
their own outlets
Indian corporates in 2017
(Raymond, Bombay ▪ Most of organised
players in apparel ▪ Entry in food and ▪ Expanding to smaller
Dyeing)
general merchandise cities and rural areas
segment
category
▪ Major players such ▪ Large-scale
▪ Pan-India expansion to entry of
as Shoppers Stop, top 100 cities
Pantaloons, international
▪ Repositioning by brands
Crosswords,
existing players
PlanetM ▪ FDI in single-brand retail
▪ Major Indian business
up to 100 per cent from
houses started
51 per cent
aggressive
investments (Reliance, ▪ Approval of FDI limit in
Birla, Tata Group) multi- brand retail up to
51 per cent
▪ Rise in private label
brands by retail players
▪ E commerce has
emerged as one of the
major segments

Source: Technopak Advisors Pvt Ltd, BCG

In India..

13
CATEGORY SPLIT
ORGANISED RETAIL ACROSS
CATEGORIES
Organised retail penetration and key trends across categories
Category share as
Approx. gross
Retail category a % of total market ORP (%) Key trends
margin (%)
2014-15
Large market and low ORP presents
Food & beverage 69-70 2-3 3-14
robust opportunities
High margins, increased preference for
Clothing & textile 11-13 17-20 35-50
branded apparel
Wide range of price points and good-after
Consumer durables 4-5 15-20 10-20
sales service are key differentiators
Housing boom and increasing aspiration
Home décor & furnishing 3 5-6 40-50
levels are driving demand

Growth driven by new product launches,

Beauty, personal care 8-11 6-10 20-40 consumers’ aspirations and expansion
plans of organised players

Lifestyle brands are increasing their

Footwear 2 16-17 25-35
product offerings and formats

Others 3-4 9-30 10-15 Pharmacy retail, stationery retailers, etc

 Types of Retailing

There are basically three types of retailing:

➢ Store based retailing

➢ Non-store based retailing

➢ Service retailing
 Retail Formats

Store Based Non-Store Based

Based on Form Based on • Online retailers

of Ownership Merchandise • Mobile apps
Independent • Direct selling/door
• Offered
Retailers to door
• Hyper Markets
• Chain Retailers • Tele-shopping
• Super Markets
• Franchisees • Email/catalogue
• Department Store
• Cooperatives based selling
• Speciality Stores
• Manufacturer’s • Automated Vending
• Convenience
own stores Stores
• Factory Outlets
• Small/Large
Grocers
• Kiosks/Street
Vendors
Theories of Retail Development
THEORIES OF RETAIL DEVELOPMENT

• Theories of Retail are results of attempts to explain

the process of retail development/evolution
• Three Broad Theories
• Cyclical Theories
• Wheel of Retiling
• Retail Accordion Theory
• Retail Life Cycle Theory

• Environmental Theory
• Conflict Theory
 Wheel of Retailing

• Founded on the concept that retailers evolve

through a cyclical trend
• Credited to work by McNair (as early as 1950-
60s)
Mature retailer Innovative retailer
Top Heavy Low status and price
Conservative Minimum service
Declining ROI Poor facilities
Limited product offering

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

Trading up Phase

Wheel of Retailing
 Accordion Theory
• Credited to Hollander, who used analogy of an
accordion to explain the cyclical nature of retail
development
• Focuses on the width of assortment that retailers
tend to carry
• Describes a ‘Generalist-Specialist-Generalist’
cycle
 Retail Life Cycle

• Similar to the concept of PLC

• Describes that a new format of retail
passes through life cycle stages
• Disruptive Innovations from time to time
alters retailing landscape and impacts life
cycle of various formats
 ENVIORNMENTAL THEORY
• Based on Darwin theory of survival of the fittest
• Ability to adapt quickly to change is key to success
• Retailers constantly are exposed to an environment
that consists of Customers, Competitors,
Manufacturers, Intermediaries, Changing
Technology
• Changes to any element of environment changes
profitability of individual retailers/clusters of
retailers
• Ability to adapt quickly to changes is key to
success and long term survival
 CONFLICT THEORY

• Founded on the concept that main driving force for

change is competition between rivals
• Change is led by innovative outsider, forcing
existing retailer to respond
• Retailers mutually adapt in the face of competition
from ‘’opposites’’
• New retail formats evolve through the blending of
two conflicting formats
 Department Stores Individual retailers

Hypermarkets and
Supermarkets

Retailing evolves through blending of two opposites to create a new format.

Developing a Retail Strategy
RETAIL STRATEGY

 Two fundamental steps:

◦ Pick the target market
◦ Developing a retailing mix to satisfy the chosen
target market
The mix planning
 The retail marketing mix is the vehicle
through which a retailer’s marketing strategy
is implemented
 In planning the mix, retailers should be guided
by three basic principles:
◦ The mix must be consistent with the expectation of
target customers
◦ Elements must be consistent with each other to
create synergy
◦ The mix must be responsive to competitive
strategy
Retail Mix
(Decision variables for a retailer)
 Location
 Merchandise
◦ Variety & Assortment
 Presentation
◦ Ambience
◦ Store Layout
◦ Visual Merchandising
 Pricing
 People
◦ Quality, Number of personnel
◦ Service Levels
 Promotion
 Retailing Mix
Merchandise
Product Variety
& Assortment

Personnel
& Store Location
Service Levels

Target
Market
Presentation
Ambience Promotions/
Store design Communication
Visual Merchandising

Pricing
EDLP
High-Low
Economy/Premium
Retail Mix – Framework of 7Ps

 Place
 Product
 Price
 Promotion
 People
 Physical Environment
 Process
 Decathlon : Marketing Mix

Product Price Place Promotion

• Equipment & • Prices • Large stand • Sponsorships of
accessories for maintained alone stores Events
all types of lower than top • Located along • No/little mass
sports/fitness brands like highways/main media
• Own brands Nike/Reebok streets • Social media
• Odd pricing used
• Very few
promotions

Physical
Process People
Evidence
• Self selection by • Young sports • Unique store
shoppers enthusiasts layout
• Shoppers get to • Well trained, • Merchandise
try equipment knows a lot about organized
• Limited home the sport according to sport
delivery (with • Large signages
charges) • ‘Active’ shoppers
and staff
Understanding Buying
Behavior
 Why should retailers understand
shoppers’ behavior?

• Understanding shopping behaviour is crucial in

developing retail strategy
• Decisions related to store design, placement of products,
pricing strategy, promotions etc. should ideally be taken
with shopper’s behaviour in view.
 Shopper Marketing

• Shopper marketing is the process of understanding

shoppers and using that understanding to develop a
marketing mix which influences shopper behavior in
such a way as to positively impact consumption of the
brand and or category
• Many companies see shopper marketing as not just
influencing shoppers inside stores. There are touch
points from the time someone starts planning to buy a
product till the actual purchase (path to purchase)
 Shopper Research/Study
• Shopper’s behavior studies includes attempts to
find answers to many questions
– What’s the buying process?
– Which are the touch points to influence a shopper?
– Are all shopping trips same? How do they differ?
– Are there any barriers to purchase in a retail
environment?
– What are the needs that a shopper has?
– Are there different kinds of shoppers?
Different Shopping Modes

Blinkered Browser
Different Shopping Modes

Magpie Bargain Activated

Moment(s) Of Truth (MOTs)

Stimulus First Second

Moment Moment
of Truth of Truth
At shelf Experience of
In-store using
 New MOTs

Stimulus First Second

Moment Moment
of Truth of Truth

Pre-shopping | At shelf Experience

In-store | In-home In-store
 Path to Purchase
Shopper’s Journey from recognising the need to buy
something to actual purchase
It may be as simple as going straight to a shop shelf
and buying. Or as complex as…
18-47
‘Involvement’ and variety of choices
available (or differences between
brands available) may impact
buying behavior
 Types of Buying Decisions :
Assael Model
High Low
Involvement Involvement
Complex Variety-
Significant Buying Seeking
Differences
between brands Behavior Behavior

Dissonance- Habitual
Few differences Reducing Buying Buying
Between brands
Behavior Behavior
 Complex Buying Behaviour
• Customers with this buying behavior are highly
involved in the purchase.
• Differences between brands are also very high.
This leads to more complexity as substantial
gathering of information to make purchase
decision
• Brand/Retailer should make information easy to
access and understand. Type of information
provided should differentiate one brand from
others.
 Dissonance Reducing Buying
Behaviour
• This is the behavior of customers when there is high involvement in
product purchase but there are very few differences between
brands.
• Anxiety of purchase is more as it is difficult to find differences.
Consumer may buy one brand without considering any of the
negative aspects.
• The disadvantage of this behavior is that customer will likely develop
dissonance after buying when they notice that other brands may
have been just as good. It will be difficult to control this post
purchase dissonance.
• In this case, retailer should consider giving guarantees, assurances
to reduce possible dissonance
 Variety Seeking Buying Behaviour
• Behavior of consumers when there are major differences between
the brands but the involvement in purchasing is low.
• Loyalty is low and lot of brand switching occurs
• Switches happen not due to any negative opinion about what they
have already used. Other brands offer something different,
consumers try them just for sake of variety
• In this situation the retailer should consider:
– Ensure plenty of variety
– Ensure easy availability and good visibility
– Brands that are not market leaders should follow sales
promotion techniques to encourage customers to switch
 Habitual Buying Behaviour

• It is the behavior of customers when there is low involvement in

purchase and no major differences between the brands.
• Typically everyday products like salt or sugar
• Consumer go for same brand due to familiarity and not so much due
to loyalty.
• In this situation the retailer should follow these strategies:
– Ensure availability of leading brands
– Switching is likely to be low, so use price and sales promotion to
encourage trial of other brands
– Do not vary displays/location (it might break the habit)
 Impulse Buying

Impulse buying is an unplanned buying behavior

resulting from a powerful urge to buy something
immediately
• Example1: Someone buying chocolate at a super market cashier
– out of impulse
• Example2: A buyer in an apparel section buying a dress even
though it was not planned – triggered by a promotional offer
Urge to buy is usually triggered by stimuli at point of
purchase
 Encouraging Impulse Buying

• Have Salespeople Suggest Add-

ons
• Have Complementary
Merchandise Displayed Near
Product of Interest
• Use Signage in Aisle or Special
Displays
• Put Merchandise Where
Customers Are Waiting
Consumer behaviour patterns that
are of relevance to retailers

• Showrooming

• Webrooming