Retailing

1. Chapter 10
Definition of Retailing
Retail is the
process of selling consumer
goods and/or services to
customers through multiple
channels of distribution to
earn a profit.
Demand is
created through diverse
target markets and
promotional tactics,
satisfying consumers' wants
and needs through a lean
supply chain

2. How do consumers decide which
retailer to buy from?
A consumer selects a retailer based on
the following factors:
•Price (value offered, credit and special discounts)
•Location (convenience, parking, safety, stores
nearby)
•Product Selection ( width and depth of assortment,
brands quality)
•Special service ( home delivery, special orders,
gifts wrap, valet parking
•Helpful Salespeople ( courteous, knowledgeable,
fast check out)
•Fairness in Dealing ( honesty, return privileges)

3. Function of Retailing
Functions of retailing include:
•Performing marketing functions that enables
them to make available a wide variety of products
to the consumers.
•Helping create time, place and possession
utilities.
•Adding form utility such as when a clothing
retailer alters a trousers to fit a customer
•A retailer’s services also help to create an image
for the products he sells.

4. A retail firm can be classified according to
•Form of ownership-sole ownership, partnership,
corporation, consumer co-operatives,
•Operational Structure-independent, chain, franchise
•Service and price orientation-full service, limited
service, self-service, normal margin, discounter off-
price
•Merchandising offering-general, mass or specialty.
Merchandise width refers to the number of non-
competing product line offered for sale. Merchandise
depth refers to the number of brands, models, or style
carried for each product category.
•Where the sales takes placed- in the store or non
store

5. Some of the kinds of retailers are:
Type of Retailer Characteristic
Specialty Store Narrow product line with deep assortment-apparel, furniture,
books
Department store Several product lines in different department
Supermarket Large, low cost, low margin, high volume, self-service operation
with a wide
Convenience Store Small stores located in residential areas, open long hours all day
long of the week
Discount store Standard merchandise sold at lower prices for low margins
Corporate Chains More outlets commonly owned and controlled by one firm like
Reliance Retail
Voluntary Chain Wholesaler sponsored group of independent retailers
Retailer co-ops Independent retailers with central buying operations and common
promotions
Consumer co-ops Co-operative societies of groups of consumer operating their own
stores-farmers industrial workers and so on
Franchise organization Contractual arrangement between the producer and retailers-
selling the producers product exclusively

6. The Retailer as a Salesman
Most consumers, who may get
confused by the wide choice of products
available, will finally buy one product based
on the retailer’s recommendation.
Even when a product of the
consumer’s choice is not available, the
retailer will not let the consumer go empty
handed but would recommend an
alternative product, which most of the times
the consumer will accept as he trusts the
retailer.

7. Theories in Retail
Wheel of retailing
•this theory was proposed by Malcomb Mcnair and
enumerates the way in which retail organizations
changes during their lifetime. This describe in brief below:
•A retail outlets starts with low price margins and
simplicity and a better image. In order to improve the
footfalls and stickiness, the outlet would add additional
services for its customer. This would add cost to the
business.
•In the second stage, the outlet has higher prices,
margins and a better image. In order to keep customers
happy, more services need to be added.
•There is an escalation of the second stage into the third
stage where the retailer has built a ‘premium’ image
•This creates a gap in the market which gets filled by
entirely new outlets which starts at stage 1 of low price,
margins and simplicity.

8. Retail Accordion Theory
This theory is proposed by Hollander and
has been described a general-specific-general
theory. It explains that an outlet which starts as a
general retailer grows into specialized retailer and in
course of time becomes even bigger general retailer.
Theory of Natural Selection:
the evolution of retail stores is influenced
by the environmental factors like economic,
demographic, legal, politics, and technological.
Retailers who successfully adapt to these factors
are more successful.

9. Retail Life Cycle
This theory looks at retail similar to
the products life cycle. The stages explained
by the retail life cycle include four stages
which experts says can be clearly identified.
These four stages are: innovation, quick
growth, maturity and decline.
The Global Retailing Scene

10. The retail sector is considered as
part of the service sector an in countries
where organized retail is strong the
contribution of the sector to the GDP is very
high. At the same time, the employment
potential of the retail sector is high.
One can deduce from this that the
retail sector plays a major role on the
growth of the economy of any country.
Globally, organized retail is becoming
powerful over its supplier and the
producers of goods are taking action to
protects their turf
The Global Retailing Scene

11. Retailers Dictate Terms
Some of the reasons for the growth of the power
of the retailer over the manufacturer particularly in
the Western countries are
•Consumer product margins for the retailers are low and in order to
get higher volumes they need shares from the others and hence
the situation has become very competitive.
•Merchandisers in retail are also in charge of buying. The
profitability of the retailer id decided to a great extent at the stage
of buying itself. Buyers influence the service levels, revenue,
profitability, quality and competitiveness. Naturally, they have to put
pressure on their vendors to achieve these.
•New developments in information technology are helping retailers
to:
Analyze what are their fast moving and most profitable
products/brands/packs
Identify which are their profitable store location and
Recognize who are their most loyal and good customers.
Manage inventory

12. Retailer’s Own Brands/Private Label
Retailer’s own brands have some inherent advantages:
•They are so good as the major brands but are priced less
as they have cost advantages.
•They provide higher margins to the retailer.
•If successful, they give better bargaining power to the
retailers. They can demand better terms from the national
company brands.
•The task of merchandising becomes simpler

13. Manufacturers’ Response to Growing
Retail Strength
Most of these responses are what has happened
in the US where the retail power is evident. Some of these
responses may be relevant in the Indian context some
years down the line when the Indian organized retail grows
big and influential.
•Manufacturers are taking the help of new technologies
to manage organized retail better. Two such
technologies are EDI (Electronic Data Interchange) and
VMI (Vendor Managed Inventory) to manage the
physical possession and ordering flows.
•In the apparel industry, manufacturers use their own
outlets to counter the pressure from the major retailers.
These outlets which are in India are also meant to sell
seconds and exports surplus items. In due course they
may even stock and sell regular goods

14. Retail Relationship
In order to consistently deliver a value proposition
to consumers, a retailers tries to make sure of the
following:
•Customer delivered value should be what the customer
thinks is right
•The value delivery has to be consistent.
•The retailers should have a system in place to measure
customer satisfaction
•Customers should be clear on the value proposition the
retailer has planned for them-retailer communication
should take care of this
•The positioning of the retailer with the value delivery focus
should be in line with the intended target market.