Retail Management

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Course Objectives
• Explain What is Retail Management
• Describe the Benefits of Retailing
• Explain the Retail Selling Process
• Explain the Classification of Retailers
• Explain the Components of Retailing Concept
• Explain the Steps of Retail Strategy Planning
• Explain What is Franchising
• Explain What is Merchandising
• Explain What is Visual Merchandising
• Describe the Importance of Location in Retailing
• Explain the Types of Retail Location
• Explain What is a Private Label
• Explain the Process of Creation of Private Label
• List the Myths about Careers in Retailing
• List the Tips for Success in Retailing

Introduction
Look at the logos of
some of the leading
organizations across
the world.
What do you think is
common among the
companies shown?
All the companies
whose logos have been
shown are ‘retailers’.

Introduction
All these retailers are establishments that
are engaged in selling merchandise for
personal or household consumption.
They also render services that are incidental to
the sale of such goods.
Thus, each one of the companies shown sells directly to the
final consumers.

Introduction
Hence, a retailer is any business
establishment that directs its marketing
efforts towards the end users for the purpose
of selling goods and services.
Thus, retailers comprise street vendors, local grocery
stores, supermarkets, food joints, saloons, airlines,
automobile showrooms, internet kiosks, home appliance
showrooms, direct marketers, vending machine
operators, etc.

Introduction
In fact, the retail industry is one of the
fastest growing and biggest sources of
employment across the globe.
Therefore, like any business, it is very important
to manage a retail business and its various
components.
Let us look at the various aspects of retail
management in detail.

Definition
Now, let us look at a few definitions that will be useful while you study retail
management.
Retailing
Retailer
Wholesaling
Wholesaler
Let us look at each in detail.

Definition
management.
Retailing
Retailer
Wholesaling
Wholesaler
The word ‘Retailing’ is derived from the
French verb ‘retailer’, which means, "to
cut a piece off.” Retailing is defined as all
business activities that are involved in
selling goods or services directly to the
final consumers for their personal, family
or household and non-business use.
Whereas, from a marketers point of view,
retailing is defined as a set of marketing
activities that are designed to provide
satisfaction to the end consumer and
profitably maintain the customer base by
continuous quality improvements across
all areas concerned with selling goods
and services.

Definition
management.
Retailing
Retailer
Wholesaling
Wholesaler
A retailer is any business establishment
that directs its marketing efforts in selling
merchandise for personal or household
consumption towards the end users for
the purpose of selling goods and services.
Hence, an organization qualifies to be a
retailer only when it derives a major
chunk of its revenues from its
transactions with end users. Thus, a seller
is said to have conducted a retail
transaction when he sells goods to the
end customer.

Definition
management.
Retailing
Retailer
Wholesaling
Wholesaler
Wholesaling includes all activities that
involve selling goods and services to
those buying for resale or business use.
Thus, a wholesale transaction is
conducted when the seller sells goods to
a business concern.

Definition
management.
Retailing
Retailer
Wholesaling
Wholesaler Wholesaler is a firm that is engaged
primarily in wholesaling activity of selling
goods and services to those buying for
resale or business use.

Objective
• Explain What is Retail Management
• Describe the Benefits of Retailing
• Explain the Retail Selling Process
• Explain the Classification of Retailers
• Explain the Components of Retailing Concept
• Explain the Steps of Retail Strategy Planning
• Explain What is Franchising
• Explain What is Merchandising
• Explain What is Visual Merchandising
• Describe the Importance of Location in Retailing
• Explain the Types of Retail Location
• Explain What is a Private Label
• Explain the Process of Creation of Private Label
• List the Myths about Careers in Retailing
• List the Tips for Success in Retailing

What is Retail Management?

Scope of Retailing
So, what exactly does ‘retailing’ involve?
Considering and understanding the needs of consumers
Keeping a good assortment of merchandise
Displaying the merchandise in an effective and attractive
manner so that consumers find
it easy and attractive to buy
Retailing involves:

Role of Retailer in Channel of Distribution
Manufacturer
Wholesaler
Retailer
Final Consumer

MCQ
Q. A retailer sells to _____________.
Click on the
radio button
to select the
correct
answer!

MCQ
Q. A retailer sells to _____________.

Benefits of Retailing
• Benefit to Manufacturers and Wholesalers
• Benefits to Customers
• Benefits to the Economy
Now, let us look at a few key benefits of retailing. There are various ways in
which retailers in the process of transfer of goods and services from the
manufacturer to the end consumer benefit customers, manufacturers,
wholesalers and the economy. The benefits of retailing can be studied
considering the following aspects:

Benefits of Retailing to Customers:
For consumers or customers, the retailers act as buying agents. Retailers perform
various activities that increase the value of goods and services that are then
ultimately sold to the end consumer. The various activities performed by the
retailers that ultimately benefit the customers are as follows:
• Breaking Bulk
• Providing Assortment
• Holding Inventory
• Providing Services
• Providing Information
Let us look at each activity in detail.

Benefits of Retailing to Customers:
• Breaking Bulk
Breaking Bulk :
One of the major benefits that retailers
pass on to their customers is through their
activity of ‘breaking bulk’. This is because
retailers buy goods in bulk from
manufactures. They then divide the bulk
goods into smaller saleable units as per the
consumption patterns of the end
consumer.

• Breaking Bulk
Breaking Bulk :
One of the major benefits that retailers pass
on to their customers is through their
activity of ‘breaking bulk’. This is because
retailers buy goods in bulk from
manufactures. They then divide the bulk
goods into smaller saleable units as per the
consumption patterns of the end consumer.

Providing Assortment:
Another major benefit passed on to the end
consumer by retailers is the activity of
‘providing assortment’. This is due to the
fact that retailers always evaluate the
products of various manufacturers. They
then choose and offer the best assorted
collection of products depending on the
tastes and needs of their target customers.
Hence, consumers get a wide range of
products and prices to choose from as per
his/her choice. Therefore, the offered
variety in assortment makes the buying
process easier for customers.

Holding Inventory:
Retailers also benefit the customers because
they make the products available to
consumers at a convenient place and time
due to the inventory held by the retailer.
This makes it possible for consumers to
make instant purchases without waiting to
order and then receive the product at a later
date or time. This greatly benefits the
customer because it reduces the cost of
storage and enables the consumer to invest
his money profitably. Due to the fact that
retailers hold an inventory of stock of goods,
it becomes possible that customers can
engage in spontaneous shopping.

Providing Services:
Retailing and retailers also benefit the
customer through the wide array of services
that they offer to the end customer such as
follows:
• Free home delivery
• Acceptance of Credit Cards/Debit Cards
• Acceptance of payments on EMI
(Equated Monthly Instalment) Basis
• Providing and arranging of various
consumer loans, etc.
The various services offered by retailers
make it easier for customers to buy and use
products.

Providing Information:
Another major benefit of retailing to
customers is that the retailers provide vital
product related information to their
consumers. Retailers provide product
information through in-store advertising and
in-store salespersons which helps the
consumer to make a wise, simple and quick
purchasing decision.

• Benefit to Manufacturers and Wholesalers
Benefits of Retailing to Manufacturers and Wholesalers:
Retailing is primarily considered by manufacturers and wholesalers as a channel
for delivering their products/services to the end customer. However, the role of
retailing for manufacturers and wholesalers goes far beyond just making the
product available to the end customer.

• Benefits to the Economy
Benefits of Retailing to the Economy:
Retailing is a major contributor to the GDP of any country. It is also a major source
of employment and hence a major influence on the economy of any country. Some
of the benefits of retailing to the economy are as follows:
• It generates a large number of employment opportunities
• It contributes to the management of the economy
• It contributes to the production cycle of the industries
• It ensures the success of the economic enterprises

Let us now look at a
real life example to
understand the benefits
that retailing offers to
customers.
Real Life Example

Real Life Example
Look at the various images given below. Each represents one of the benefits
that retailing offers to its customers. Look at each image carefully.

Real Life Example
Breaking Bulk:
The retailer divides the bulk
goods into smaller saleable
units as per the consumption
patterns of the end consumer.
Thus, customers can buy
products in quantities which
suit their consumption patterns
due to the availability of
products in smaller units.

Real Life Example
Providing Assortment:
Retailers evaluate the products of
various manufacturers; they then
choose and offer the best assorted
collection of products depending
on the tastes and needs of their
target customers. Hence,
consumers get a wide range of
products and prices to choose
from as per his/her choice.
Therefore, the offered variety in
assortment makes the buying
process easier for customers.

Real Life Example
Holding Inventory:
Retailers make the products available
to consumers at a convenient place
and time due to the inventory held by
the retailer. This makes it possible for
consumers to make instant purchases
without waiting to order and then
receive the product at a later date or
time. Due to the fact that retailers
hold an inventory of stock of goods, it
becomes possible that customers can
engage in spontaneous shopping.

Real Life Example
Providing Services:
Retailers also benefit the customer through
the wide array of services that they offer to
the end customer such as follows:
• Free home delivery
• Acceptance of Credit/Debit Cards
• Acceptance of payments on EMI
(Equated Monthly Instalment) Basis
• Providing and arranging of various
consumer loans, etc.
The various services offered by retailers
make it easier for customers to buy and use
products.

Real Life Example
Providing Information:
Retailers provide vital product
related information to their
consumers. Retailers provide
product information through in-
store advertising and in-store
salespersons which helps the
consumer to make a wise,
simple and quick purchasing
decision.

MCQ
Q. What is meant by ‘breaking bulk’?
Click on the
radio button
to select the
correct
answer!

MCQ
Q. What is meant by ‘breaking bulk’?

External Environment Affecting Retailing
The several components of the external environment that affect retailing are as
follows:
1
2
3
4

1
Economic Environment:
The economic environment greatly affects
the success and working of the retail
industry. Several components of the
economic environment affect retailing such
as:
• Nature of the Economic System
(Capitalist/Socialist/Mixed Economy)
• Gross Domestic Product (GDP)
• Interest Rates
• Inflation Rate
• Tax Levels
• Purchasing Power of People
• Employment Growth and Others

Legal Environment:
Retailing is also affected by the various laws
and regulations passed by the Government.
The Government uses various laws and
regulations to ensure that retailers do not
indulge in unfair trade practices. Some of
the laws and regulations that affect retailing
are as follows:
• Restrictions on Foreign Direct
Investment (FDI)
• Property Regulations
• Lack of Industry Status
• Labor Laws
• Real Estate
• Complex Taxation System
2

Technological Environment:
One of the major factors that drive change in
the retail industry is ‘Technology’. Across the
globe, the manner in which retailing is
carried out has changed drastically due to
the computerization of various retail store
operations through the advent of
computers, MIS etc. Technology is now being
used in the retail industry as a means to
improve the shopping environment and to
provide a pleasant shopping experience to
the customer.
3

Competitive Environment:
Each and every retailer faces tough
competition from several others who co-
exist alongside him in the retailing industry.
The key factors that affect the competition
among retailers are the way the retail
operations are carried out and which entity
of the distribution channel carries out these
retail operations.
4

Risks Faced by Retailer
There are three types of obsolescence risks that a retailer is exposed to:

Physical Obsolescence:
The risk of physical
obsolescence arises from the
damage or wear and tear of
the products while they are
stored in the retail outlet.
Some of the most common
products that face the risk of
physical damage are
handicrafts, books, greeting
cards, gift items etc.

Technological Obsolescence:
The risk of technical
obsolescence arises due to
technology getting outdated
which may result in severe
losses for the retailer. Some of
the most common products
that face the risk of outdated
technology are computers,
mobile phones, etc.

Fashion Obsolescence:
The risk of fashion
obsolescence arises mainly
for apparel retailers who deal
in merchandise of varying
style, design or color.

MCQ
Q. United Colors of Benetton is an
apparel retailer. Which of the
following risks is United Colors of
Benetton most likely to face?
Click on the
radio button
to select the
correct
answer!

MCQ
Q. United Colors of Benetton is an
apparel retailer. Which of the
following risks is United Colors of
Benetton most likely to face?

Various Functions of a Retail Business
There are various functions included in a retail business just like any other
business. The following are a few of the vital functions included in any retail
business:
Operations MIS
Human
Resource
Accounting Finance Marketing
Roll your
mouse over
the icon, to
learn more.

Did You Know?
An important fact to know about the retail
industry is that it is not the typical ‘9 to 5
job’. This is mainly due to the fact that stores
are meant to serve the public. Therefore,
retail stores have to be open when the
general public has the time to shop. So,
retail shops remain open in the evenings or
weekends. So, employees in a retail store
have to work non-traditional hours to
maximize their effectiveness.

Decision Variables in Retailing
There are various variables that
retailers have to take into account
while making decisions regarding the
operation of their retail business.

Decision Variables in Retailing
Some of the variables that all retailers have to consider for decision
making are:
Store Design
and Display
Decision
Variables in
Retailing

Retail Marketing Mix
The following are the components that make up the ‘Retail Marketing Mix’:
People
Product
Price
Place
Promotion
Presentation
Customer
Service
Retail
Marketing
Mix

Retail Communication Mix
The following are the components that make up the ‘Retail Communication
Mix’:
Sales
Promotion
Advertising
Personal
Selling
Direct
Marketing
Public
Relations
Retail
Communication
Mix

Retail Selling Process
The following are the steps involved in the ‘Retail Selling Process’:
Acquiring Product/Merchandise Knowledge
Studying the Customer
Approaching the Customer
Understanding the Need of Customer
Presenting the Merchandise
Overcoming Resistance
Suggestive Selling
Closing the Sale
Roll your mouse over the
icon, to learn more.

Tip
A key to always satisfy your customer and keep him happy is to under-
promise and over-deliver. By doing this, you put yourself in a position
where you stretch yourself beyond the practice of "don't promise what you
can't deliver". Hence, when you under-promise and over-deliver, you
always deliver more than you promise to your customers. This is a great
way to keep your current customers happy and to attract more customers.

Types of Retailers
The following are some of the types of retailers:
Specialty Stores
Department Stores
Supermarkets
Discount Stores
Convenience Stores
Off-Price Retailers
Superstores

Classification of Retailers
• Relative Prices
• Amount of Service
• Product Lines
• Organizational Approach
Retailers are classified by:

Retailers can be classified based on the ‘amount
of service’ they offer to their customers. Hence,
based on the amount of service offered to
customers, retailers can be such as follows:
Limited-service
Retailers
Self-service
Retailers
Full-service
Retailers

Limited-service
Retailers
Self-service
Retailers
Full-service
Retailers
Self-service
Retailers
Self-service Retailers:
In such retail stores, the customers have to
self-serve themselves. In such stores, the
customers are willing to self-serve to save
money.

Limited-service
Retailers
Self-service
Retailers
Full-service
Retailers
Limited-service
Retailers
Limited-service Retailers:
In such retail stores, the customers are
offered limited service rather than a
completely self-serving mode. Such retail
stores are such as discount stores, most
department stores etc.

Limited-service
Retailers
Self-service
Retailers
Full-service
Retailers
Full-service
Retailers
Full-service Retailers:
In such retail stores, there are many
salespeople available to assist and guide the
customers in every aspect of shopping
experience. Such retail stores are such as
high-end department stores, specialty stores
etc.

• Product Lines
Retailers can be classified based on the ‘product
lines’ they offer to their customers. Hence,
based on the type of product lines offered to
Department Stores
Specialty Stores
Limited Line Stores
Superstores
Category Killers

• Product Lines
Department Stores
Specialty Stores
Limited Line Stores
Superstores
Category Killers
Specialty Stores
Specialty Stores:
Such retail stores offer specialized product
lines that include narrow product lines with
deep assortments.

• Product Lines
Department Stores
Specialty Stores
Limited Line Stores
Superstores
Category Killers
Department Stores
Department Stores:
Such retail stores offer a wide variety of
product lines across product categories. Such
stores include supermarkets, convenience
stores etc.

• Product Lines
Department Stores
Specialty Stores
Limited Line Stores
Superstores
Category Killers
Limited Line Stores Limited Line Stores:
These offer a limited line of products and
categories.

• Product Lines
Department Stores
Specialty Stores
Limited Line Stores
Superstores
Category Killers
Superstores
Superstores:
These are retail stores that offer product lines
across a wide range of categories such as
food, non-food, and services.

• Product Lines
Department Stores
Specialty Stores
Limited Line Stores
Superstores
Category Killers
Category Killers
Category Killers:
These stores include the giant specialty stores
which do not have a demarcated category of
product lines but offer a range of products
across several categories ranging from
electronics, food, electrical items, home
appliances, stationary, etc.

• Relative Prices
Retailers can be classified based on the ‘relative
prices’ they offer to their customers. Hence,
based on the relative prices offered to
Off-price Retailers
Discount Stores
Factory Outlets

• Relative Prices
Off-price Retailers
Discount Stores
Factory Outlets
Discount Stores
Discount Stores:
Such retail stores offer very low prices to
customers and themselves operate on low
margins which are offset by high volume of
sales.

• Relative Prices
Off-price Retailers
Discount Stores
Factory Outlets
Off-price Retailers:
These retailers offer independent off-price to
customers apart from the manufacturer’s
price.
Off-price Retailers

• Relative Prices
Off-price Retailers
Discount Stores
Factory Outlets
Factory Outlets:
Many manufacturers operate company
owned retail outlets or factory outlets that
offer discounts as well as factory rejects on
sale to customers.
Factory Outlets

Retailers can be classified based on the
‘organizational approach’ they choose for their
business. Hence, based on the organizational
approach, retailers can be such as follows:
Voluntary Chains
Corporate Chain Stores
Retailer Cooperatives
Franchise Organizations
Merchandising
Conglomerates

Voluntary Chains
Merchandising
Conglomerates
Corporate Chain Stores:
These stores are commonly owned/controlled
by the corporate or manufacturer.

Voluntary Chains
Merchandising
Conglomerates
Voluntary Chains:
These stores are wholesaler-sponsored
groups of independent retailers.
Voluntary Chains

Voluntary Chains
Merchandising
Conglomerates
Retailer Cooperatives:
These stores are operated by groups of
independent retailers who buy in bulk.

Voluntary Chains
Merchandising
Conglomerates
Franchise Organizations:
These stores are based on selling something
unique with a good brand name.

Voluntary Chains
Merchandising
Conglomerates
Merchandising Conglomerates:
These are diversified retailing lines and are
formed under central ownership.
Merchandising
Conglomerates

Components of Retailing Concept
The following are the key concepts involved in retailing:
Customer
Orientation
Coordinated
Effort
Value-driven
Goal
Oriented
Retailing
Concept
Retail
Strategy

Components of Retailing Concept
Customer
Orientation
Coordinated
Effort
Value-driven
Goal
Oriented
Retailing
Concept
One of the key components of the retailing concept is
‘customer orientation’. A retailer always determines the
attributes and needs of its customers. He then endeavors
to take action in order to satisfy these needs of his
customers.
A retailer must always make a coordinated effort
to succeed. Hence, a retailer integrates all his
plans and activities to maximize efficiency.
One of the primary things that a retailer should
aim to offer to his customers is a ‘good value
proposition. Hence, a retailer must offer good
value to the customers, through ‘appropriate
pricing’ for goods and customer service.
A retailer should always set goals and then use strategy
to attain them.

Steps of Retail Strategy Planning
The overall plan that guides the
functioning and operation of a
retail firm is known as the ‘Retail
Strategy’. Hence, retail strategy
influences the retail firm’s
business activities and its
response to market forces, such
as competition and economy.

2
1
3
The following are the steps of retail strategy planning:
• Define the type of business in terms of the goods or services as well as
the company’s specific orientation.
• Determine and set long-term and short-term objectives for
sales and profit, market share, image etc.
• Identify and determine the specific target customer group or market
on the basis of customer characteristics such as gender, income level,
age group etc. as well as based on their needs such as specific
product and brand preferences.

5
4
6
The following are the steps of retail strategy planning:
• Form an overall, long-run plan that gives general direction to the
retail firm and its employees.
• Form and implement an integrated strategy to achieve
objectives defining and including all factors such as store
location, transportation, product variety, advertising, display
and pricing.
• Evaluate performance continuously and regularly. Also, make sure
to rectify and correct any weaknesses or problems when observed.

Retail Value Chain
The following are the components that make up the ‘Retail Value Chain’:
Third Party
Logistics
Retail
Operations
Customer
Management
Suppliers Customers
Support Functions
Systems

Basic Supply Chain in Retailing
Supplier
Raw Material Packaging Warehouse
Manufacturer
Manufacturer Warehouse
Retailer Warehouse
Retailer
End Customer
Physical
Flow
of
Goods
Financial
Flow
of
Goods

Classification of Retail Institutions
Ownership
Store-based Retail
Strategy Mix
Non-store Based
Retail Strategy Mix
The given flowchart shows the classification of retail institutions:
Ownership:
• Independent
• Chain
• Franchise
• Leased Department
• Vertical Marketing System
• Consumer Cooperative
Store-based Retail Strategy
Mix:
• Convenience Store
• Conventional & Food-
based Supermarket
• Box (limited line) Store
• Warehouse Store
• Specialty Store
• Variety Store
• Traditional & Full-line
Department Store
• Off-price Chain
• Factory Outlet
• Flea(louse) Market
Non-store Based Retail
Strategy Mix & Non-
traditional Retailing:
• Direct Marketing
• Direct Selling
• Vending Machine
• World Wide Web (WWW)

Vertical Marketing System
Vertical
Marketing
System
Corporate
Vertical
Marketing
System
Wholesaler-
sponsored
Voluntary
Chains
Contractual
Vertical
Marketing
System
Franchise
Program
Manufacturer-
sponsored Retail
Franchise System
Manufacturer-
sponsored
Wholesale
Franchise System
Service-
sponsored Retail
Franchise System
Service-
sponsored
Franchise System
Administered
Vertical
Marketing
System
Retailer-
sponsored
Cooperative

In most of the cases, the traditional
distribution channels are used to get the
products to consumers. However, a large number
of marketing approaches do not fit properly into
this model. Many businesses use a large network
of their own shops or outlets to sell their own
merchandise. Thus, the concept of a vertical
marketing system has emerged to reflect this type
of a situation.

In developed economies, a more realistic and practical view of the retail industry
is shown and can be understood through the vertical marketing system. In such a
vertical marketing system, many large retailers such as Wal-Mart, IKEA, and
Metro-AG are actively involved in marketing functions such as product
development, branding and advertising that were at one time the sole
responsibility of the manufacturers. On the other hand, many manufacturers such
as Levi Strauss, Nike, and Arrow are involved in retailing activities. Such
manufacturers either run their own retail outlets dedicated to selling their own
merchandise or by perform functions that were at one time solely performed by
the retailer, such as allocating shelf space.

What is Franchising?
Franchising involves a contractual arrangement between a franchisor and
a retail franchisee. The franchisor may be a manufacturer, wholesaler, or
service sponsor. A franchise or the contractual agreement allows the
franchisee to conduct business under a established name and according to
a given pattern of business.

What is Franchising?
To get a franchise, a
franchisee has to pay an
initial fee to the
franchisor. Thereafter,
the franchisee pays a
monthly percentage of
the gross sales in
exchange for the rights
to sell goods and
services of the franchisor
in a particular area and
location.

understand the
concept of
franchising.
Real Life Example

Real Life Example
Let us now understand how the concept of franchising works through
SUBWAY® Restaurants.
SUBWAY® Restaurants were started way back in 1965 by a seventeen-year-
old Fred DeLuca.
Fred DeLuca had just completed his high school and he aspired to become a
medical doctor.

Real Life Example
However, he did not have the necessary financial arrangements to pay for
his education.
He decided to ask Dr. Peter Buck, a family friend for advice and help.
Dr. Peter Buck suggested Fred should open a submarine sandwich shop.

Real Life Example
Dr. Peter Buck also offered a loan of $1,000 to start Fred’s business venture
and offered to become Fred’s business partner.
Thus, the first store was opened in Bridgeport, Connecticut in August, 1965.
Fred proved to be a great business man and made it his company’s mission
to serve well-made, high quality product and provide excellent customer
service.

Real Life Example
Fred and Dr. Buck aimed to have 32 stores opened in 10 years.
Thus, very soon several SUBWAY® restaurants were successfully opened
around the world.
By 1974, the duo owned and operated 16 submarine sandwich shops
throughout Connecticut.

Real Life Example
However, they both soon realized that they would not be able to reach their
goal of ’32 stores’ in time on their own.
Hence, they turned to ‘franchising’.
Granting a ‘franchise’ to other people meant that a franchise business was
established or operated under an authorization from SUBWAY® Restaurants to
sell or distribute SUBWAY® Restaurants’ goods or services in a particular area.

Real Life Example
Franchising and authorizing other business owners to become their
franchisees allowed the SUBWAY® brand to experience remarkable growth
which continues to this day.
Thus, any person who has the necessary entrepreneurial skills and capital
can join the SUBWAY® team as a franchisee.
The person gets a great opportunity to own their own business which is a
proven successful venture with a low investment and simple operations.

Real Life Example
The following lists some of the support given by the SUBWAY® team to a
franchisee:
• Allowing flexible floor plans
• National and local support
• National and regional advertising
• Two week training program
• Ongoing learning for franchisee owners and their staff
• Store development assistance
• Design support
• Store lease negotiations
• Store construction guidance and much more

Real Life Example
Therefore, you can see that organizations can use the concept of
‘franchising’ for spreading their presence globally.
At the same time, ‘franchising’ allows an organization to maintain its brand
image.
Franchising also allows an organization to maintain consistent quality of
products and services to be offered all across the globe through its
franchisees.

What is Category Management?
• A category is an assortment of items that is seen by a customer as reasonable
substitutes of each other.
• Category Management is defined as:
o “The distributor/supplier process of managing categories as Strategic Business
Units (SBUs), producing enhanced business results by focusing on delivering
customer value”
• Thus, the main aim of the concept of category management is to better understand
the needs of consumers which serve as the basis for retailers’ and suppliers’
strategies, goal, and work processes.

Importance of Category Management
Category Management is crucial for the success of any retailing business as:
It provides a systematic process to be followed for the management of a
retail business.
It helps to tackle competitive pressures and be competitive in a tough
market.
It ensures that decision-making is based on complex analysis of consumer
data and market level syndicate data.
It allows to take an objective view of brands available based solely on
consumers’ desires and avoid brand bias based on suppliers’ interest.
It helps to cater to the changes in consumer preferences, tastes and
choice.
It provides economical and efficient considerations for managing a retail
outlet.
It helps to take advantage of the latest advances in IT to ensure the
success of the retail venture.

What is Merchandising?
• Merchandising is defined by ‘The American Marketing Association’ as follows:
o “The planning involved in marketing the right merchandise at the right place
at the right time in the right quantity at the right price”.
• Merchandising is analysis, planning, buying, handling & control and selling of
merchandise or a product.

Factors affecting the Merchandising Function
The following are the various factors that affect the merchandising function:
Merchandising
Function
Size of
Organization
Organizational
Structure
Types of Stores
Inventory of
Merchandising to
be Carried

What is Merchandise Planning?
Merchandise Planning is defined as the planning and control of the
merchandise inventory of the retail firm. The merchandise inventory
should be planned in such a manner that it balances the expectations
of the target customers and the strategy of the firm.

Elements of Retail Design
There are several elements that have to be taken into consideration for the
design of a retail outlet such as follows:
Store Design
Store Theme
Building
Architecture
Location
Access
Parking
Target
Customer
Merchandise
Mix
Frontage &
Entrance
Safety
Location
Roll your mouse over the
icon, to learn more.

Tip
In the retail industry, it’s all about ‘Appearance’. Hence, appearance
matters in almost everything in the retail industry, whether it's packaging,
merchandising or the retail employee’s dress. Maintaining a good
appearance in everything helps a retailer to create a big impression on his
customers and give a uniform and organized outlook to his business.

What is SKU?
• SKU is an acronym for
Stock Keeping Unit.
• SKU is a unique numerical
identifying number.
• This unique number
refers to a specific stock
item in a retailer's
inventory or product
catalog.

What is SKU?
Hence, the primary purpose of SKU is to help identify the product,
product size or type, and the manufacturer. SKU is a part of the
backend inventory control system in the retail industry. It is a unique
number that allows a retailer to track a product in their inventory that
may be in warehouses or in retail outlets.

What is Visual Merchandising?
The term ‘Visual
Merchandising’ means an
orderly, systematic, logical and
intelligent way of arranging and
putting stock on the shop floor.
Visual merchandising is crucial
for the success of any retail
business as it helps create the
right atmosphere in the store
and present the merchandise in
the right manner. Visual
merchandising should make
sure that a selling space is neat,
easy-to-see, follow and shop.

What is Visual Merchandising?
SKU (Stock Keeping Unit) Planning
Store Windows
Floor Displays
Signs
Space Design
Fixtures & Hardware
Props & Mannequins
There are several aspects to be taken into consideration for visual
merchandising such as:

Retail Life Cycle
The given image shows the ‘Retail Life Cycle’ of any retail establishment.

Importance of Location in Retailing
• One of the most important aspects in
Retailing is ‘location’.
• It is one of the major factors that
decides the success or failure of a retail
business venture.
• Location is crucial to the success of a
retail store as it conveys a fair the
image of a retail store.
• Location is one of the important
aspects to be considered in developing
the retail strategy.

Importance of Location in Retailing
• Location decides and influences the
merchandise mix and interior layout of
the store based on the locality and
neighbors surrounding the store.
• Hence, vice versa, the choice of the
location of the store also depends on
the target audience and kind of
merchandise to be sold.
• It is important to keep in mind that
once the store comes into existence, it
is very difficult to change the location
as changing the location of a store may
result in loss of customer and
employees.

Types of Retail Location
Part of a Shopping Centre
Part of a Business District
Freestanding/Isolated Store
The following are the major types of retail locations chosen for retail stores:

• A freestanding or isolated store is usually located along major
traffic arteries.
• Such stores are located isolated from others such that they do not
have any major competitive retailers around them.

Part of a Business District
• Retail stores may also be located in a business district which is a
place of commerce in the city.
• The major advantage is that such locations have several means of
transport and good accessibility in terms of public transport as
well.
• The number of customers is very high.

Part of a Shopping Centre
• Stores may be located inside a shopping centre.
• A shopping centre is a group of retail and other commercial
establishments that is planned, developed, owned and managed
as single property.

Private Label
A retailer is said to be
selling a ‘Private Label’ or
‘Selling Own Label/Brand’
when he decides to sell
products or a line of
merchandise which is
owned, controlled,
merchandised and sold by
the retailer in his own
store/chain of stores.
Therefore, a Private Label
is a brand name or label
which can simply be the
store’s name or a name
created exclusively by
that store.

Private Label
In certain
cases, a store
may belong to
a wholesale
buying group.
This wholesale
buying group
may own labels,
which are made
available to the
members of the
group.
Hence, this
whole-sale
owned labels
are referred to
as controlled
labels.
Controlled
labels can be
used by the
retailer
belonging to
that wholesale
group.

Classification of Private Labels
Let’s look at each in detail.
A private label can be classified as:

Store Brand
• Such a private label carries
the retailer’s name.
• Examples are: Westside,
Food World, Big Bazaar
etc.

Umbrella Brand
• Such a private label is a
common brand name that
is used across multiple
categories.
• Examples are: ‘Splash’
which is an Umbrella brand
for Lifestyle Stores and
‘Bare’ which is an Umbrella
brand for Pantaloons.

Individual Brands
• Such a private label
includes specific brand
names that are created for
specific market segments
and/or categories.
• Examples are: ‘Absolut’
brand that stand for a
specific range of cosmetic
products of Lakme.

MCQ
Q. Which of the following is a private
label that includes specific brand
names that are created for specific
market segments and/or
categories?
Click on the
radio button
to select the
correct
answer!

MCQ
Q. Which of the following is a private
label that includes specific brand
names that are created for specific
market segments and/or
categories?

Need for Private Labels
Initially, to start with ‘private labels’ were offered as generic product
offerings as the lower priced alternative to the national brands.
Hence, their main marketing strategy included driving it on the base
of value proposition.
However, private labels carried the stigma of inferior quality and
hence were less preferred by customers against the national brands.

Need for Private Labels
Soon, private labels were offered in
apparel, food and grocery sector due to
the increase in retail stores, the need to
earn higher profit and the desire to
service the gaps in consumer
requirements.
In today’s modern world, private labels
are offered by almost every large retail
store which cater to a specific audience.
Private labels rely on in-store
advertisements.
A private label allows a retailer to earn a
higher margin than other brands he retails
because the designing, merchandising, in-
store advertisement, sourcing and
distribution of the private label products
is done by the retailer himself.

Identification
of the Need
for a Private
Label
Decision to
Make or
Buy the
Product
Placing the
Order and
Allocating the
Goods
Marketing
Performance
Measurement
The following are the key steps in the process of creation of a private label:
Process of Creation of Private Label

Decision to
Make or
Buy the
Product
Placing the
Order and
Allocating the
Goods
Marketing
Performance
Measurement
Identification
of the Need
for a Private
Label
Identification of the Need for a
Private Label:
The first step in the creation of a
‘private label’ is to identify the
need for the ‘private label’. For
this purpose, the retailer has to
identify any gaps in the customer
needs and their fulfilment. The
retailer has to find if there are any
products or services that his
customers desire but do not get
or get at a very high price. The
retailer can then decide to
identify this gap and fulfil it by
offering a private label of his own.

Identification
of the Need
for a Private
Label
Placing the
Order and
Allocating the
Goods
Marketing
Performance
Measurement
Decision to
Make or
Buy the
Product
Decision to Make or Buy the
Product:
Once a retailer decides that he
wants to offer a private label to
his customers, the next step is to
decide whether he has to make
the product or buy the product
from another wholesaler or
supplier. He should take a
decision, after he should
contemplates all the pros and
cons of making the product
himself or buying and then selling
the product.

Identification
of the Need
for a Private
Label
Decision to
Make or
Buy the
Product
Marketing
Performance
Measurement
Placing the
Order and
Allocating the
Goods
Placing the Order and Allocating
the Goods:
After he decides to either make
the product or buy the product,
the next step is to put that decision
into action. If he has to make the
product, he should get the
necessary infrastructure, raw
materials and labor to make the
product. On the other hand, if he
has to buy the product, he should
place the required amount of
order. Then after the products are
acquired, he should carefully
allocate and pack the goods in
requisite quantities and make it
available at his stores.

Identification
of the Need
for a Private
Label
Decision to
Make or
Buy the
Product
Placing the
Order and
Allocating the
Goods
Performance
Measurement
Marketing
Marketing:
This is an important step in the
creation of the private label. Once
the products are ready to be sold,
it is very important to market
them in the right way. One of the
key requirements for the success
of a private label is its strong and
effective marketing strategy. A
retailer can use in-store
advertisement as well as offer
discounts and various attractive
offers on his private labels to
attract customers.

Identification
of the Need
for a Private
Label
Decision to
Make or
Buy the
Product
Placing the
Order and
Allocating the
Goods
Marketing
Performance
Measurement
Performance Measurement:
The last step in the process of
creation of a private label is the
measuring of performance of the
private label. Every retailer should
continuously monitor and
measure the performance of his
private labels to find if it is doing
well and is successful. A retailer
should find out the opinions of his
customers about the range,
quality, pricing etc. of the
products offered under private
labels.

understand the
concept of private
label.
Real Life Example

Real Life Example
Pantaloons has created its own
private label named ‘Bare’. Under
this private label ‘Bare’,
Pantaloons sells products or a
line of merchandise which is
owned, controlled, merchandised
and sold by the Pantaloons as a
retailer in his own store/chain of
stores. Hence, Pantaloons is said
to be Selling Own Label/ Brand or
Private Label merchandise.
Let us now understand how the concept of private label is used by ‘Pantaloons’
in its retail stores.

Real Life Example
The private label ‘Bare’ in this case
is an ‘Umbrella Brand’ where a
common brand name is used across
multiple categories. Pantaloons
decided to use a private label of its
own when it recognized the need to
service the gaps in consumer
requirements as well as to earn
higher profit.

Real Life Example
Pantaloons relies on its in-store
advertisements for promoting its
private label ‘Bare’. Pantaloons
needs to focus on ‘quality’ to
keep its private label ahead of all
other national brands.

Real Life Example
Pantaloons uses its private label ‘Bare’:
To gain an advantage of
offering the customer another
option.

Electronic
Data
Interchange
(EDI)
Radio
Frequency
Identification
(RFID)
Enterprise
Resource
Planning
(ERP)
Transaction
Processing
System (TPS)
Customer
Relationship
Management
(CRM)
The following are some of the
applications of IT in retailing:
Application of IT in Retailing

Decision
Support
System
(DSS)
Database
Management
Data
Warehousing
and
Mining
Intranet
and
Internet
E-Commerce
or
E-Trailing
The following are some of the
applications of IT in retailing:
Application of IT in Retailing

Advantages of FDI in Retail
The following are some of the advantages of opening up of Foreign
Direct Investment (FDI) in the retail sector:
It would help to bring in valuable foreign exchange.
It would help to bring about better organization of the
retail sector.
It would help provide large numbers of employment
opportunities to several people.
It would help to provide a greater range of products at
reduced prices to the customer.
It would help to improve the shopping experience.

Myths about Careers in Retailing
There are several myths that have been passed on for several decades about
the careers in the retail industry. Some of the following are the myths about
careers in retailing, which are not true:
To get into the retail industry, an individual does not need any kind of
college education
All jobs in the retail industry are usually low paying jobs.
The work in the retail industry entails long working
hours in every job profile.
All the people working in a retail business are
part-time workers.

Myths about Careers in Retailing
There are several myths that have been passed on for several decades about
the careers in the retail industry. Some of the following are the myths about
careers in retailing, which are not true:
The jobs in a retail industry are all dead-end jobs with no scope of
promotions or career growth.
Retail industry offers an unstable environment that is
unsuitable for developing a steady and sound career.
Jobs in the retail industry do not entail any benefits
for the individual.
The job profiles in the retail industry are all
boring and mundane.

Tips for Success in Retailing
Always aim for growth-
oriented objectives
Your strategy should
aim to appeal to prime
market
Always develop and
maintain distinctive
company image
Always work with great
focus and effort targeted
towards success
Maintain a strong and
excellent customer
service
Keep multiple points of
contact in a retail store
whom customer can reach
easily
The following are a few tips for success in retailing:

Tips for Success in Retailing
Develop and maintain
good inter-employee
relations
Maintain a strict
commitment to
technology
Continuously monitor
performance and improve
on your own set standards
Always have
community
involvement and
contribute to society
Aim at innovating new
products, ideas and
concepts to please
customers
Roll your mouse
over the icon,
to learn more.

Did You Know?
Careers in retailing are not just limited to
‘sales’ and ‘customer service’. There are
many specializations available in the retail
industry from which you can choose as you
move up in your career. Hence, you can
choose to specialize in areas like:
• Buying
• Pricing
• Merchandising
• Marketing
• Customer Service
• Personnel
• Training
• Operations and so on

Video
Look at the video given below to understand the 5Ps of Retailing.
Click on the video link
to play it!
http://www.youtube.com/watch?v=MIeQFHnZSHU

Practice
Let us now practice
all that you have
learned about Retail
Management.

Practice
Visit any of your favorite retailers. Observe
and make a note of the following things:
• What are various product categories
offered by retailer?
• What are various sizes in which
packaging has been done?
• How is the merchandise visually
displayed?
• Does the retailer offer any private
labels?
• What is the difference in price
between same product of a national
brand and of a private label offered
by retailer?
• What is one thing that stands out or
makes this retailer special for you?

Case Study
Howard Thompson has
applied for a position of a
manager in one of the retail
stores of Globus Stores, a
reputed chain of retail
stores.
1. What are the
qualities that Howard
needs to portray to
the interviewer to get
the job?
2. What are the main
elements of the
functioning of a
retail business that
Howard should be
aware of to succeed
in the retail
industry?

Summary
Introduction to Retail
Management
Retail Communication
Mix
Process of Creation of
Private Label

Summary
Management
Product Lines
Amount of Service Relative Prices
Organizational
Approach

Summary
Product
People
Management
Promotion
Presentation
Price
Place
Customer Service

Summary
Retail Communication Mix
Management
Sales Promotion
Advertising Direct
Marketing
Public Relations
Personal Selling

Summary
Process of Creation of
Private Label
Management
Identification of the
Need for a Private
Label
Decision to Make
or Buy the Product
Resources/ staff
required
Placing the Order and
Allocating the Goods
Marketing
Performance
Measurement

Summary
Management
Acquiring
Merchandise
Knowledge
Studying the
Customer
Approaching the
Customer
Overcoming
Resistance
Suggestive Selling
Closing the Sale
Understanding the Need
of Customer
Presenting the
Merchandise

Glossary
C
G
M
O
W
Click each alphabet to learn more.

C
G
M
O
W
Glossary
• Customer - Customer is
someone who pays for goods or
services
• Credit Card - Credit Card is a
card (usually plastic) that
assures a seller that the person
using it has a satisfactory credit
rating and that the issuer will
see to it that the seller receives
payment for the merchandise
delivered

C
G
M
O
W
Glossary
• Gross Domestic Product (GDP) -
Gross Domestic Product (GDP) is
the total market values of goods
and services produced by
workers and capital within a
nation's borders during a given
period (usually 1 year)
• Goods - Goods is a raw material
or product that is bought and
sold commercially in large
quantities

C
G
M
O
W
Glossary
• Merchandise - Merchandise is a
commodity offered for sale
• Management - Management is
the act of managing something

C
G
M
O
W
Glossary
• Obsolescence - Obsolescence is
the process of becoming
obsolete; falling into disuse or
becoming out of date
• Operations - Operations include
all the activities involved in the
running of a business

C
G
M
O
W
Glossary
• Wholesaler - Wholesaler is
someone who buys large
quantities of goods and resells
to merchants rather than to the
ultimate customers
• Warehouse - Warehouse is a
storehouse for goods and
merchandise

Retail Management

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