Retail Management

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Prepared by :
Dr. Pooja Sharma
Presented by :
Education & Information Network

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              Preapred By Dr.Pooja Sharma
Introduction to Retail

Unit I
Introduction to Retail: what is Retail, The
functions of retail, retailing in India. The
evolution of retail in India, retail Change in

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 The word retail has its origin in French word retaillier
  and means “to cut a piece’’ or “to break bulk’.

 “Retailing is the sale of goods and services to the
   ultimate consumer for personal, family or
   household use.”

 According to Kotler: “Retailing includes all
   the activities involved in selling goods or
   services to the final consumers for personal,
   non business use”
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 Retailing may be understood as the final step in the distribution
  of merchandise for consumption by the end consumers.

 Retailing is responsible for matching final consumer demand
  with supplies of different marketers.

 Retailing is high intensity competition industry, The reasons for
  its popularity lie in its ability to provide easier access to variety
  of products, freedom of choice and many services to

 The Indian retail is dotted by traditionally market place called
  bazaars or haats comprises of numerous small and large shops,
  selling different or similar merchandise

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                     “’Wheel of Retailing”

A better known theory of retailing “wheel of retailing” proposed by
     Maclcomb McNair says,

1.   New retailers often enter the market place with low prices,
     margins, and status. The low prices are usually the result of
     some innovative cost-cutting procedures and soon attract

2.   With the passage of time, these businesses strive to broaden
     their customer base and increase sales. Their operations and
     facilities increase and become more expensive.
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3.   They may move to better up market locations, start carrying
     higher quality products or add services and ultimately emerge
     as a high cost price service retailer.

4.    By this time newer competitors as low price, low margin, low
     status emerge and these competitors too follow the same
     evolutionary process.

5.   The wheel keeps on turning and department stories,
     supermarkets, and mass merchandise went through this

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               Functions of a retaillier

 From the customer point of view, the retailer serves him by
  providing the goods that he needs in the required assortment,
  at the required place and time.

 From an economic standpoint, the role of a retailer is to
  provide real added value or utility to the customer. This
  comes four different perspectives

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1. Form: First is utility regarding the form of a product that is
   acceptable to the customer.
  The retailer does not supply raw material, but rather offers
   finished goods and services in a form that the customers
  The retailer performs the function of sorting the goods and
   providing us with an assortment of product in various

2. Time: He cerates Time utility by keeping the store open
   when the consumers prefer to shop.
  preferable shopping hours.

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5.   Place: By being available at a convenient location, he creates
     place utility.

6.  Ownership: Finally, when the product is sold, ownership
    utility is created.
Apart from these functions retailer also performs like:
5. Arranging Assortment: manufacturers usually make one
    or a variety of products and would like to sell their entire
    inventory to few buyers to reduce costs. Final consumers, in
    contrast prefer a large variety of goods and services to choose
    from and usually buy them in small units.
•   Retailers are able to balance the demands of both sides, by
    collecting an assortment of goods from different sources,
    buying them in sufficiently large quantities and selling them to
    consumers in small units
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5.   Breaking Bulk: to reduce transportation costs, manufacturer
     and wholesalers typically ship large cartons of the products,
     which are then tailored by the retailers into smaller quantities to
     meet individual consumption needs

6.   Holding stock: Retailers maintain an inventory that allows
     for instant availability of the product to the consumers. It helps
     to keep prices stable and enables the manufacture to regulate

7.   Promotional support: small manufacturers can use retailers
     to provide assistance with transport, storage, advertising, and
     pre- payment of merchandise.

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                Major type of retail stores

There is no universally accepted method of classifying retailer.
   Various schemes have been proposed to categories retailers
   based on
 Number of outlets
 Margin vs. turnover
 Location
 Size.
Because of overlap of classification criteria, some stores may
   qualify as under two different categories.

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1.   General merchandise retailer: general merchandise
     retailer carry a variety of product lines, with considerable
     depth. Some major types of these stores include
     supermarkets and hypermarkets , discount stores and
     department stores.

o    Super market: A supermarket is a large self service retail
     store that carries a wide variety of consumer products under
     one roof , such as complete line of food products , laundry
     requirement, household maintenance items. In India
     cooperative have managed some supermarkets for quite
     sometime like super bazaar in Delhi, apna bazaar shakari
     bhandar etc.
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o    Discount store: these stores are self service, standard
     general merchandise retailers regularly offering brand name
     and private brand items at low price, earn lower margins and
     push for high sales turnover. The characteristics of true
     discount stores include
 Selling products at discounted price
 Carry standard international , national, or store brand toi
     build image
 Self service stores to minimize operational costs
 Preferred store location are low rent areas.
Like best known discount store is Wal-Mart. In India almost all
     retail stores offer discounts, subhiksha
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o   Department store: a department store is larger retail store
    organized into several departments, offering a broad verity
    and depth of product lines. The product mix may include
    food products, appliances, clothing, furnishing and other
    household goods.
   Like Pantaloons, shoppers’ stop,
   department store only for kids is Kids Kemp.
   Fashion related department stores in India are Ebony,
    Globus, pantaloons, lifestyles.

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2.   Specialty Stores: specialty stores carry a narrow product
     mix with depth of assortment within the line.
    The emphasis is on a limited number of complimentary
     products and high level of customer service
    Specialty store often sell shopping goods such as Jewelry,
     apparel, computers, music systems, sporting goods.
    Like; Tanishq, Titan watches, Van Heusen, Raymond's.

3.   Shopping Malls: shopping malls typically deal with several
     bases and product categories and provide a large variety of
     merchandise abs service. There are 96 operational malls in
     India and expected to grow 158 by this current year.
    Ansal plaza (Delhi), Garuda mall (Bangalore) Sahara plaza
     Gurgaon Spenser Plaza Chennai
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4.   Retail chains: a retail chain operates multiple retail outlets
     under common ownership in different cities and towns.

    To some extent the purchasing function and decision making
     are coordinated or centralized.
    Like Westside, Globus, Food world, McDonald's retail petrol
     outlets. Etc.

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The Marketing – Retail Equation

   Manufacturer                 Manufacturer             Manufacturer




    Consumer                     Consumer                 Consumer

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                Retailing in India.

 Retail is the new buzzword in India.

 The global Retail development Index has ranked India first,
  among the top 30 emerging markets in the world.

 It is believed that India has the potential to deliver the fastest
  growth over the next 50 years.

 While barter would be considered to be oldest form of retail
  trade, since independence , retail in India has evolved to
  support the unique needs of country, given its size and
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 Second largest sector after Agriculture. Contributes about 10
  – 11 % of the GDP

 The estimated size of the organized retail industry in India is
  Rs. 16,000 crores. This is 2 % of the total estimated retail
 Indian Retail trade increased from Rs. 2200 billion in 2000 to
  Rs 3300 billion by the year 2005

 India's first true shopping mall – complete with food courts,
  recreation facilities and large car parking space – was
  inaugurated as lately as in 1999 in Mumbai. (this mall is called

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              The Evolution of Retail in India

 Retail in India has evolved to support the unique needs of our
  country, given its size and complexity Haats, Mandis and Melas
  have always been a part of the Indian landscape. They still
  continue to be present in most parts of the country and form an
  essential part of life and trade in Various areas.

 The PDS (Public Distribution System) would easily as the
  single largest retail chain existing in the country. the evolution of
  the PDS of Grains in India has its origin in the “rationing
  system” introduced by the British during world war II

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 The system was started in 1939 in Bombay and subsequently
  extended to other cities and towns. the system was abolished
  post war but however attaining independence India was
  forced to reintroduce it in 1950.

 There was rapid increase in the ration shops ( being
  increasingly called the Fair Price Shop or FPSs)

 The Canteen Stores Department and the Post
  Offices in India are also among the largest network of
  outlets in the country reaching population across the country.

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    The Khadi & Village industries (KVIC) was also set up post
     independence. The cooperative movement was again championed by the

India's Largest retail Chains:

1.   PDS: 463,000

2.   Post offices: 160,000

3.   KVIC: 7,000

4.   CSD Stores:3,400

(source business world marketing White book 2005)

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 In the past decade, the Indian marketplace has transformed
  dramatically. However from the 1950,s to the 80,s, investment
  in various industries was limited due to low purchasing
  power in the hands of the consumer and the government’s
  policies favoring the small scale sector.

 The first attempts at organized retailing were noticed in the
  textiles sector. One of the pioneers in this field was
  Raymond’s which set up stores to retail fabric.

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 Raymond’s distribution network today comprises 20,000
  retailers and over 256 exclusive showrooms in over 120 cities
  of the country

 Other textile manufacturing who set up their own retail
  chains wee Reliance- which set up Vimal showrooms and
  Garden Silk Mills, which set up Garden Vareli showrooms.

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              The Evolution of retail in India

                       Established                       Emerging
    Traditional           formats                         Formats
     Formats           Kirana shops                Exclusive retail outlets
Itinerant Salesman     Convenience/                    Hypermarket
       Haats         department stores                 Internal retail
       Melas               PDS/                    Malls / Specialty Malls
    Mandis etc.       fair price shops                  Multiplexes
                     Pan/ Beedi shops                Fast food outlets
                                                     Service galleries

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          Drivers of Retail change in India

major drivers :
1.   Changing Income Profiles: Steady economic growth fuelled
     the increase in disposable income in India. The average
     middle class family's disposable income rose by more than
     20% between 1999-2003.
2.   Diminishing difference between Rural and urban India: Rural
     India accounts for over 75% of India population and this in
     itself offers a tremendous opportunity for generating volume
     driven growth. Tax benefit. In year 2002-03 LIC sold 50% of
     its policies in rural India. Same BSNL also sold its 50%
     connection in small towns .

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3.   Changes in Consumption patterns: Occupational changes and
     expansion of media have caused a significant change in the
     way the consumer lives and spends his money.
o    The changes in income brought about changes in the
     aspirations and the spending patterns of the consumers. the
     buying basket of the consumer changed
4.   The emergence of a young Earning India : Nearly 70% of the
     Indian population is below the age of 34. taking advantages
     of employment opportunity in the booming service sector
     these young Indians are redefining service and consumption

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Prominent sector in Indian retail

1. Clothing, textiles and fashion Accessories:
2. Food & food Services:
3. Consumer Durables:
4. Books & Music:
Other emerging sectors
5. Jewellery retail
6. Footwear retail
7. Time Wear Retail
8. Fuel Retail/ petro retail

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Challenges to retail Development in India

 Retail not being recognized as an industry in India.

 The high costs of real estate.

 Lack of Adequate infrastructure.

 Multiple and complex taxation system.

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Size of the organized retail market (Rs Cr)

                 2001-02             2007           CAGR (%)
                                                    (compound Annual growth

 TOTAL           16,000              37,216         18

 Food            1,800               7,473          33

 Clothing        4,950               10,423         16

 Cons.Durables   1,650               3,787          18

 Books & Music   450                 1,426          26
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   Share of organized & unorganized retail with comparison

              source: Ernst &Young, The Great Indian Retail Story, 2006

 PAKISTAN 1                                   99

    INDIA 3                                    97

   CHINA       20                                   80

INDONESIA           30                                    70

   BRAZIL            36                                    64                          ORGANISED

                         40                                    60                      UNORGANISED

  MALASIA                     55                                    45

  TAIWAN                                81                                19

     USA                                 85                                15

        0%           20%               40%          60%             80%         100%

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        Retail Trade- India, US and China

         Trade    Employment             Shops         Sector
         ($ bn)        (%)              (million)     share (%)
India   180-394          7                  12         2-3
China    360             12                 2.7        20
 US      3800        12.6-16               15.3        80

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Description: Retail-Management