RETAIL

MANAGEMENT
Dr. Sunil Kumar M N
Assistant Professor
MODULE NO. 1
INTRODUCTION TO RETAILING
Introduction – Meaning and Definition – Characteristics of Retailing- Forms of
Retailing based on ownership. Retail Theories- Wheel of Retailing- Retail Life
cycle- Retail Business in India. Influencing factor- Present Indian retail
scenario. International Perspective in Retail Business.
 INTRODUCTION TO
RETAILING
 The retail industry secures the fifth position as an industry and is the second largest employer after

agriculture, providing bright and exciting job opportunities in India.

 Retail business is undergoing rapid transformation in its marketing practices. Till a few years ago,

we bought most of the daily use products from small shops in our neighborhood or a nearby market.
Generally, the shopkeepers sell goods—either individually as a sole proprietor or with the help of a
few assistants. In the last few years, however, the concept of large departmental stores and malls has
come up, which also provide the same products.
MEANING & DEFINITION OF
RETAILING
 Retailing consists of all business activities involved in selling goods & services to

consumers for their personal, family, or household use.

 In contrast, wholesaling is an intermediate stage in the distribution process Impact on

economy. •Retailing is a major part of world commerce. Retail sales & employment are
key economic contributors.

 According to Philip Kotler:

“ Retailing includes all the activities involved in selling goods or services to the final
customers for personal, non-business use”
 CHARACTERISTICS OF
1. RETAILING
Direct contact with the customer
2. Marketing orientation
3. Point-of-purchase Display and Promotions
4. Relationship with the customers
5. Multi-channel retailing
6. Larger Number of Retail Business Units
7. Right environment
8. Sells the goods at maximum prices
9. Unique characteristics of a retailer
10. Delivering emotional and self-expressive benefits
11. Innovative methods of thinking and planning
12. Right environment
 FORMS OF RETAILING BASED ON
OWNERSHIP
Independent Retailer

Franchise

Chain Retailer

Leased

Consumer cooperative
INDEPENDENT RETAILER
 In independent retailer is one who builds his/her business from the ground up.

From the business planning stage to opening day, the independent retail owner
does it all.

 An independent retailer is someone who has started their own retail business

independently, and not as part of a franchise chain.

ADVANTAGES & DISADVANTAGES OF
INDEPENDENT RETAILER
Advantages: Disadvantages:

 Lot of competition
 Ease and flexibility

 There is no branding
 There are no restrictions

 No preset guidelines
 Entrepreneurship

 A great deal of risk in this business model

 Having Power Over Their Profitability

 Low Bargaining Power

 Personalized Experiences
 FRANCHISE
 Franchising is based on a marketing concept which can be adopted by an organization as a strategy for

business expansion. Where implemented, a franchisor licenses its know-how, procedures, intellectual
property, use of its business model, brand, and rights to sell its products.

 Purchasing a franchise is buying the right to use a name, product, concept and business plan. The

franchisee will receive a proven business model from an established business.

 Retail franchising is a business model in which an individual or business, referred to as a franchisor,

grants a license to another individual or business, referred to as a franchisee, to use its trademarked
products, services, and brand.
 THE TYPES OF RETAIL FRANCHISING
 Single-Unit Franchising: This type of franchising involves granting a single franchisee the exclusive right to

operate one unit of a business in a specific geographical area.

 Multi-Unit Franchising: This type of franchising grants a single franchisee the exclusive right to operate

multiple units of a business in a specific geographical area.

 Area Development Franchising: This type of franchising grants a single franchisee the exclusive right to develop

and operate a specified number of units of a business in a specified geographic area over a period of time.

 Master Franchising: This type of franchising grants a single franchisee the exclusive right to develop and

operate a specified number of units of a business in multiple geographic areas.

 Conversion Franchising: This type of franchising grants a single franchisee the right to convert existing

businesses into franchise operations.

EXAMPLES OF FRANCHISING
IN INDIA
 McDonald’s
 Dominos
 KFC
 Pizza Hut
 Subway
 Baskin Robbins
 Burger King
 Star bucks
 CHAIN STORES
 Chain stores are defined as a type of retail organisation that is composed of more than

one retail store, and it is owned and operated by a single management company.

 It is an outlet that is characterised by several locations that share a brand with centralised

management along with standard business practices. Chain Stores have completely
revolutionised the retail market.

 They have managed to dominate the sector for a long time and continue to do so with

their method of making shopping more convenient for the customers.

CHARACTERISTICS OF CHAIN
STORES
 Large Scale Retailing
 Approaching a Customer
 Same Line of Products
 Specialisation
 Uniformity
 Single Ownership
 Centralised Buying and Decentralised Selling
 Uniform Pricing
 Dealing with Cash
 Central Management
 Minimum Size
 ADVANTAGES OF CHAIN STORES
1. Chain stores specialize in a particular product.

2. Such stores can cater to the needs of people in different localities.

3. Central location and luxurious premises are not required for chain stores.

4. There is economy in advertising.

5. Chain stores work only on cash basis. Bad debts, therefore, are totally eliminated.

6. The floor space required for a chain store is much less when compared with a departmental store.

7. Such a store does not require many sales personnel.

8. If any branch has shortage of stock, it can draw from the nearest branch.

9. The overall cost of operation of a chain store is much less when compared with a departmental store.

10. As wholesalers are eliminated, the cost of distribution is bound to be less.

 DISADVANTAGES OF CHAIN
STORES
1. As chain stores deal only in a particular item, they may not attract many customers.

2. The head office may find it difficult to exercise control over a number of retail outlets/branches established throughout
the city/country.

3. The central office also has to maintain the relevant accounts in respect of every shop and this again is a tedious process.

4. The product quality, price etc., are decided by the controlling office. The retail shops have to sell what is supplied to
them.

5. The retail outlets also have to be in touch with central office to get the stocks replenished. There is also scope for delay.

6. Absence of credit sales in such a business again is a barrier.

7. Indiscriminate opening of branches without taking into account the buying potentials of each place may result in loss.
LEASED DEPARTMENTS
 In India, leased departments are an emerging trend in the field of retail

business. Most of the renowned retail chain stores set up their outlets or
extension counters in commercial complexes of residential areas, malls, PVR
multiplexes, public places like bus terminals, railway stations, metro stations,
airports and on national highways. The reason behind their popularity is the
business and marketing philosophy of the retail chains that insures the
availability of their brands to the consumers near their place of work or home.
 ADVANTAGES AND DISADVANTAGES
OF LEASED DEPARTMENTS
Advantages
i. It provides one-stop shopping experience.
ii. Leased stores pay for property, personnel and other expenses resulting in fewer burdens on lessor.
iii. Lessor gets regular monthly income in the form of rent.
iv. Employees’ management, merchandise displays and arrangement, reordering of items, complaint handling and
so on are handled by individual lessees.
Disadvantages
i. Operating hours may vary from store to store on the basis of goods and /or services sold.
ii. Items sold /business lines are restricted.
iii. If lessees are performing well, the store owner may increase the rent or lessees themselves can create problems
by changing /not obeying agreements’ rules and regulations.
iv. The bad image of one lessee can spoil the image of entire store
 CONSUMER COOPERATIVES

Consumer Cooperatives are retail outlets owned and managed by its customer
members. A group of interested customers (members) start retail operations
by investing money, receive stock certificates, elect members to run day to
day activities and share the profits on the basis of investment made or
certificates held.
The reason to setup consumer cooperative is that local retailers are not able to
satisfy consumers’ needs (whatever the reason may be). Therefore, consumers
are left with no option but to open their own store. Examples of cooperatives
in India are the ‘Kendriya Bhandaars’, owned and managed by government,
‘Apna Bazaar’ shops in Mumbai and ‘Super Bazaar’ stores in Delhi. In some
cases, these stores are run by the local residents of society/colony/apartment
residents.
CHARACTERISTICS
1. Limited expansion
2. Profit is shared by its members
3. They sell usually essential commodities at reasonable price
4. Main purpose is social service not to earn profit, and
5. Average customer service
 RETAIL THEORIES
 Like every other industry new retail firms have brought innovative approaches in retailing. Retail development

can be looked at from different theoretical perspectives, as no one theory is universally acceptable. The reason
for this unacceptability is mainly because of different market conditions and different socio-economic
conditions in the market.

The theories are:

1. Wheel of Retailing

2. Retail Accordion Theory

3. Theory of Natural Selection

4. Retail life cycle

 WHEEL OF RETAILING
 This theory talks about the structural changes in retailing. The theory was proposed by Professor Malcolm P.

McNair. This theory describes how retail institutions change during their life cycle. In the first stage when
new retail institutions start business they enter as low status, low price and low margin operations.

 Wheel of retailing is a concept which observes that a retail business will go through 4 phases of

transformation starting from being a small player based on discount to a big well-known store. These 4 phases
- Entry, Growth, Stabilization, Compete happen in a circular fashion for a retail player. Most of the retail
businesses start on low cost, low price and low margins but as their sales start increasing they quickly shift to
a high cost, high revenue model.
 4 STAGES OR PHASES OF WHEEL OF RETAILING

 Phase 1 Entry

 This is mainly the start phases of a retail business in which a new player enters a market. Unless a retail

store has a strong backing and finance, normally it would start at a lower scale with products at a lower
costs and high discounts to attract customers. The business earns less margin so that it can make sure that
the customers revisit the store for better prices. This is the stage where a new store enters the market and
tries to ensure that the business is started.

 Phase 2 Expansion and Growth

 Once the business is established and customers know about it, ideally the store would have some standing

in the market. At this stage in phase 2, the businesses start expanding and try to earn better margins and
profit. In this stage, more products and/or customers are added to fuel the growth. This is a very important
stage and leads to establishment of a player in the market.
 Phase 3 Stabilization

 One a retail business enters Phase 3, the focus is mainly on the stabilization of the business with constant

improvement and focus on service quality and profits. Here the business tries to focus on brand, partnerships,
alliances, innovations to keep the business running at good margins. Parallel focus is kept on new
opportunities and growth as well. This is a critical phases where the retail business needs to keep the focus
intact.

 Phase 4 Competition

 In this stage as per the wheel of retailing concept, a competitor or a new challenge would come up for the

retailer. In this stage, the retailer would mostly move to high price and high margin product and services to
keep the business running.
 WHEEL OF RETAILING
EXAMPLE
 A restaurant started in a temporary location would be offering a limited number of items at low price. It looks

to develop its client base but as soon as the construction is completed or final, it starts providing a lot more
variety and introduces a number of new services (free home deliver y, boarding , and lodging ) it also starts
increasing its prices on its earlier items. This is done to recover its fixed cost quickly and have an early
breakeven so that it can start generating some profit since it is operating in a virgin market it will look to
increase its market share.

 However, with passage of time when a new restaurant comes up in its vicinity and starts offering the same

items at a lower price in order to retain its customers it will bring down its prices back to where its earlier
ones.
RETAIL ACCORDION THEORY
 Retail Accordion states that the retail institutions evolve with wide variety of products and

services but then evolve to build specialized stores with unique services needed for particular
segment of customers. Now when big investors come, they try to land up with many facilities
but with the course of time, they try to understand customers and emerge with a facility which
is very essential for customers. They try to look after a segment of customers with
specialized facility to attract that customer. They develop all kind of services required to keep
that base.
 RETAIL ACCORDION THEORY
 In 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 localities .Slowly switching to specialist stores - like gifts, restaurants,

entertainment at a certain distance.

 These 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.

 It is also referred to as the general-specific-general theory. Retail accordion theory is a theory of retail institutional change

that suggests that retail institutions go from outlets with wide assortments to specialized narrow line store merchants and
then back again to the more general wide assortment institution
 THEORY OF NATURAL
SELECTION
 Retailing institutions that can most effectively adapt to environmental
changes are the ones most likely to prosper or survive.
 Environmental need for a certain kind of retailing institution → it will evolve
 Need ceases to exist the institution → will tend to disappear.
 Institutions that most effectively adapt to environmental changes are most
likely to survive
 RETAIL LIFE CYCLE
The concept of product life cycle as explained by Philip Kotler, is also applicable to retail organizations as they pass
through identifiable stages of:

1. Innovation

2. Development

3. Maturity

4. Decline.

This is commonly termed as the Retail Life Cycle.

The Retail Life cycle is a theory about the change through time of the retailing outlets.

It is claimed that the retail institutions show ‘s-shaped' development through their economic life, that has been classified
into four main phases.
 1. INNOVATION
 A new organization is born — it improves the convenience or creates other advantages to
the final customers that differ from those offered by other retailers.

 Stage of innovation, where there are fewer competitors

 Rate of growth is fairly rapid

 Management fine-tunes its strategy through experimentation.

 Levels of profitability are moderate.

 This stage can last up to five years depending on the organization.

 2. ACCELERATED GROWTH

 Rapid increases in sales.

 Few competitors emerge.

 Since the company has been in the market for a while, it is now in a position to anticipate the conditions

in the market by establishing a position of leadership.

 Since growth is imperative, the investment level is also high, as is the profitability. Investment is largely

in systems and processes.

 This stage can last from five to eight years.

 3. MATURITY
 Retail organization still grows, but competitive pressures are felt from newer forms of

retailing that tend to arise. Thus, the growth rate tends to decrease.

 Gradually, as markets become more competitive, the rate of growth slows down and profits

also start declining.

 Retail organization needs to rethink its strategy and reposition itself in the market.

 Change may occur not only in the format but also in the merchandise mix offered.
4. DECLINE
 Retail organization looses its competitive edge and there is a decline in sales. Thus it needs

to decide if it is still going to continue in the market.

 The rate of growth is negative, profitability declines further and overheads are high.

 The retail business in India has only recently seen the emergence of organized, corporate

activity. Traditionally, most of the retail business in India has been small owner-managed
business.

 It is hence, difficult to put down a retail organization, which has passed through all the four

stages of the retail life cycle.

 RETAIL INDUSTRY IN INDIA
 Indian retail market is expected to reach US$ 1.1 trillion by 2027 and US$ 2 trillion by
2032.
 Indian retail industry is one of the fastest growing in the world. India ranked 63 in the
World Bank’s Doing Business 2020 publication and ranked 73 in the United Nations
Conference on Trade and Development's Business-to-Consumer (B2C) E-commerce Index
2019. India’s direct selling industry is expected be valued at US$ 2.30 billion (Rs. 19,000
crore) by the end of 2022.
 India is the fifth-largest and preferred retail destination globally. The country is among the
highest in the world in terms of per capita retail store availability. India’s retail sector is
experiencing exponential growth with retail development taking place not just in major
cities and metros, but also in tier II and III cities. Online penetration of retail is expected to
reach 10.7% by 2024 versus 4.7% in 2019.
 According to India Ratings and Research (Ind-Ra), domestic organised food and grocery
retailers are expected to increase by 10% YoY in FY22. By 2024, India's e-commerce
industry is expected to increase by 84% to US$ 111 billion, driven by mobile shopping,
which is projected to grow at 21% annually over the next four years.
INFLUENCING FACTOR- PRESENT INDIAN RETAIL SCENARIO

 Growth of Consumers.

 Working Population

 Value for Money

 Rural Market

 Corporate Sector

 Foreign Retailers

 Technological Impact

 Income Structure
INTERNATIONAL PERSPECTIVE IN
RETAIL BUSINESS
FACTORS INVOLVED IN INTERNATIONAL
RETAILING
REASONS FOR INTERNATIONALISATION
RETAILING