1.
RETAIL FORMATS AND
THEORIES

2.
EVOLUTION OF RETAIL FORMATS
SOME FACTS
 The first department stores “Bon
Marche” was set up in 1852 in Paris
 Bon Marche revolutionized retail at time
by relying on volume rather than on high
mark up.
 Success of Bon Marche led to other
department stores coming up
in Europe and America

3.
EVOLUTION OF RETAIL FORMATS
Some Facts…..
 The first chain store was
 A&P (Atlantic & Pacific)-a grocery
store founded in 1859 by George F
Gilman
 The world witnessed the new form of
retail when Montgomery Ward
launched the first mail order
catalogue in 1870
 Another important chain store was F
W Woolworth, set up in 1879

4.
EVOLUTION OF RETAIL FORMATS
Emergence of Self service
 Retail evolved in many ways over the twentieth
century
 Self service as a concept started in 1916 when
Clarence Saunders started their first self-service store
“Piggly Wiggly” in Memphis, Tennessee
 The concept of self-service helped the retailer reduce
costs, as fewer workers were required to service the
customers

5.
EVOLUTION OF RETAIL FORMATS
Supermarkets
 1930’s saw the emergence of supermarkets
 The first hypermarket that as developed was Carrefour in France, in
1963
 New formats gave an opportunity to pick up products, compare with
others and then taking a decision of buying
 Providing all information regarding price, weight, date of manufacture
and expiry on the product itself became necessary to aid decision
making

6.
EVOLUTION OF RETAIL FORMATS
Supermarkets and Hypermarkets…
 The mass merchandisers worked on three
principles, which have now become the fundamental
principles of modern selling
1. They fixed product prices before sale, and
customers bought at the set prices
2. Prices were determined on the basis of stock turns
and the amount of profit that would be generated
from the product
3. They departmentalized the products. Accounting
systems were devised to determine the contribution
of various departments. This enabled them to drop
unprofitable goods

7.
EVOLUTION OF RETAIL FORMATS
Specialty Stores, Malls and Other Formats
 The needs of the customers grew and changed
 This ensured the emergence of commodity
specialized mass merchandisers in 1970s
 Seventies also saw the use of technology by way
of introduction of the “barcode”
 Specialty chains developed I the 1980s as did the
large shopping malls
 Shopping malls were created o provide for all of
he consumer’s needs in a single self contained
shopping area

8.
EVOLUTION OF RETAIL FORMATS
Rise of the Web
 The world of retail changed yet again when in 1995, Amazon. Com
opened its doors to a world wide market on the web
 Evolution of retail formats worldwide has been largely influenced by a
constantly changing social and economic landscape
 One of the main reasons for new formats emerging is the consumer
himself
 Today's consumer is more demanding and is focused on what he wants
 Retailer on the other hand has been influenced by availability of real
estate and its increasing prices
 He is faced with the challenge of adding on new services and the need
for differentiation
 This has led to specialization and the emergence of specialists
 Supply chain complexities and increasing pressure on margins has also
forced the retailers to look at new formats

9.
THEORIES OF RETAIL
DEVELOPMENT
These theories revolve around:
• Importance of competitive pressures
• The investments in organizational capabilities and
• Creation of a sustainable competitive advantage.
These are developed to explain the process of retail development:
1. Environmental Theory
2. Cyclical Theory
3. Conflictual Theory

10.
ENVIORNMENTAL THEORY
Retail Environment:
a. Customers
b. Competitors
c. Changing Technology
Based on Darwin theory of survival of the fittest.

11.
CYCLICAL THEORY
Mature retailer
Top Heavy
Conservative
Declining ROI
Innovative retailer
Low status and price
Minimum service
Poor facilities
Limited product offering
Traditional retailer
Elaborate facilities
Higher rent
More locations
Higher prices
Extended product offerings
VulnerabilityPhase
EntryPhase
Trading up Phase
A. Wheel of Retailing- described by McNair

12.
CYCLICAL THEORY…..
B. ACCORDIAN THEORY: Hollander used analogy of an
orchestra.
Open accordions
Closed Accordions.

13.
CONFLICTUAL THEORY
Department Stores Individual retailers
Hypermarkets and
Supermarkets
Anti-thesis Thesis
Synthesis
Retailing evolves through blending of two opposites to create
a new format.

14.
CLASSIFICATION OF RETAIL
STORES

15.
Classification of retail stores
Store-Based Retailing Non-Store Retailing
Form of Ownership
• Independent retailer
• Chain Retailer
• Franchise
• Leased Departments
• Vertical Marketing System
• Consumer Cooperatives
Merchandise Offered
• Convenience Store
• Supermarkets
• Hypermarkets
• Specialty Stores
• Department Stores
• Off Price Retailers
• Full line discount store
• Warehouse store
• Variety Store
• Factory Outlets
• Catalogue Showrooms
• Membership Club
• Flea Market
• Direct Selling
• Direct Marketing
• Automated Vending
• World Wide Web
• Other Emerging Retail
• formats
Based on Location
•High Street
•Destination
•Convenience

16.
STORE FORMAT BY LOCATION
1. High Street Format
 It is Located in busy shopping area.
 Area is less than 2000 square feet.
 No parking facility
 Focused Merchandised Category
 Example: M. G. Road in Bangalore

17.
2.DESTINATION FORMAT
 Huge Parking space
 Wide merchandise category
 They are Independent retail store with
alluring proposition for the customer to
visit the store with the primary intention
of shopping there

18.
3. CONVENIENCE STORE
 Located in the catchment area of target
customers
 Extended hours of operation
 Less than 5000 square feet
 24X7 convenience stores situated close to
homes to generate high footprints
 snacks, grocery type items & confectionary
Merchandise include: beverages, ready to eat
 These store carry a limited stock of daily use
goods with a special focus on food products
eg. In & Out petrol pump outlets.

19.
CLASSIFICATION BASED ON
OWNERSHIP
INDEPENDENT RETAILER
ADVANTAGES:
• Flexibility in choosing retail formats and locations
• Decision making is centralized
• Low investment cost
• Independents have independence
• Easily sustain consistency
DISADVANTAGES:
• Less bargain power with suppliers
• Cannot gain economies of scale
• Very little computerization
• Relatively high cost of advertising
• Over dependence on owner
• Limited amount of time and resources allotted to long-run planning

20.
CHAIN RETAILER
ADVANTAGES:
• Bargaining power with suppliers
• Achieve cost efficiencies by being wholesales themselves
• Computerized
• Can take advantage of variety of media options
• Defined management philosophies
• Long term planning, opportunities and threats are carefully monitored
DISADVANTAGES
• Lesser flexibility
• Investments may be high
• Managerial control can be hard
• Limited independence in jobs

21.
FRANCHISING
Franchising is a retail organization form in which small businesses
can benefit by being a part of a large, multiunit chain-type retail
institution .
Two types of franchising:
•Product/Trademark and Business format franchising.
Archie's/Gasoline stations McDonalds
Three structural arrangements dominate franchising:
•Manufacturer-retailer Gasoline stations/Exxon, Mobil, Ford
•Wholesaler-retailer
1.Voluntary Auto accessory store
2.Cooperatives
•Service sponsor retailer KFC, McDonalds, Holiday Inn

22.
LEASED DEPARTMENT
From the stores perspective
ADVANTAGES:
•Skilled manpower to handle merchandise
•Market can be enlarged by providing one stop customer shopping
•% of revenues is received regularly
•Stock servicing, display etc is the responsibility of the licensee
DISADVANTAGES:
•Operating procedures may be conflicting
•Store’s image may get adversely affected
•Customers tend to blame the store for any pitfall

23.
LEASED DEPARTMENT..CONT
For leased operator’s
ADVANTAGES:
•Immediate sales because of store’s established image
•Some costs are reduced through shared facility.
•Volume saving in print/ media ads
DISADVANTAGES:
•Inflexibility since working style may differ
•Goods/services line are restricted
•Store may raise the rent or may not renew lease
•In-store location may not generate expected sales.

24.
VERTICAL MARKETING
SYSTEM
CHANNEL TYPE CANNEL FUNCTIONS OWNERSHIPS
1. Independent Manufacturing Independent
Systems Partners
2. Partially
Integrated Two channel members
Systems Wholesaling own all facilities and
perform all functions
3. Fully All functions are
Integrated performed by a single
Systems Retailing channel member

25.
CONSUMER CO-OPERATIVES
Consumer co-operatives exist for three basic reasons:
•They feel that they can operate a store as well or may be better than
any other retailer
•They believe that existing retailers are inadequately fulfilling
customers need for healthful, environmentally safe products
•They assume that existing retailers make excessive profits and they
can sell merchandise for lower prices

26.
CLASSIFIACATION BASED ON
MERCHANDISE OFFERED
FOOD ORIENTED RETAILERS
CONVENIENCE STORES:
It is usually a food-oriented retailer that is well located, is open for
long hours and carries a moderate number of items. This type of
retailer is small, has average to above average prices and average
services and average atmosphere.
Milk, eggs, bread, newspaper, tobacco products, soft drinks,
magazines, video rentals, etc are the major category occupants.
Store size ranges from 3000 to 8000 sq. ft.
Ex. Mom n Pop stores.

27.
CONVENTIONAL SUPERMARKET
These are large, low cost, low margin, high volume, self service
retailers designed to meet the needs for food, groceries and other non-
food items.
They rely on high inventory turnover. Their profit margins are low.
The size of the store ranges from 8000 to 20000 sq. ft.
Ex. Kroger, Safeway, Foodworld, Adani supermarket, Subhiska,
Nilgiri’s, Reliance Fresh.

28.
FOOD BASED SUPERSTORE
A food based superstore is a larger and more diversified
than a conventional supermarket but usually less diversified
and smaller than a combination store.
Some supermarkets merged with general merchandise store
or drug store.
They are typically 25000 to 50000 sq feet of total space.
20-25 % revenues comes from garden supplies, small
household appliances, flowers, etc.
They stimulate impulse purchases.

29.
COMBINATON STORE
A combination store combines supermarket and general
merchandise sales in one facility.
25-40% revenues from general merchandise.
They are from 30000 to 100000 sq feet.
the combination of economy supermarket with discount
department store is called super center.
Examples: Wal-mart, K-mart.

30.
HYPERMARKET
Also called as supercentre, this format is a blend of economy
supermarket with discount department store.
They offer both food and non-food items like grocery, clothes,
jewellery, cycles, sports items, books, CDs, furniture, etc.
This format was pioneered by Carrefour in France.
This ranges from 80,000 to 2,20,000 sq. ft.
The cheapest price will normally be found in these stores.
Across the world hypermarkets are a part of retail park with other
shops, cafeteria and restaurants.
Other facilities include photo processing shop, pharmacy shops.
They are usually located in the outskirts of major towns and cities.
Ex. SIB, Big Bazaar, Adani Hypermarket.

31.
BOX STORE
This is a food based discounter that focuses on a a small
section of items, moderate working hours, few services and
limited manufacturer’s brands.
They have less than 1500 SKUs.
Items are displayed in cut cases.
Customers do their own bagging.
They aim to price at 20-30% below supermarkets.
Example: Aldi.

32.
WAREHOUSE STORE
A warehouse store is a food-based discounter offering a moderate number
of food items in a no frill setting.
They appeal to one stop shoppers.
These stores concentrate on special discount purchases from manufacturer
brands. They use cut-case displays, provide little service, post prices on
shelves and are located in industrial districts.
Potential problem is lack of brand continuity.
They temporarily or permanently run out of brands.
Here customers pack their own goods.
They work on volumes and their gross margins are far lower than
supermarkets or hypermarkets.
Largest stores are called super warehouse.
Their sizes can be 15000 to 50000 square feet.
Ex. Cub Foods

33.
GENERAL MERCHANDISE
RETAILERS
SPECIALITY STORE
A specialty store concentrates on selling one product/ service line
such as apparel and accessories, toys, furniture. They have a deep
assortment in their chosen category and tailor their strategy to
selective market segment.
Personal attention, store ambience and customer service are the
prime importance to the retailer.
They operate in an area which is under 8000 sq. ft.
Ex. The Gap, Mango, Levis, Wills Lifestyle, Big & Tall, Adidas,
Nike, Style Spa, Proline fitness station.

34.
CATEGORY KILLERS
Also called as Power Retailer.
This is a new type of specialty retailer which offers a very large
selection of chosen category .
They stock deep and dominate the chosen category.
Ex. Planet Sports, Crossword, Nalli Sarees, Sales India, Croma, E-
planet.

35.
DEPARTMENT STORE
TRADITIONAL DEPARTMENT STORE:
A traditional department store is a large retail unit with an
extensive assortment of goods and services that is organized into
separate departments for buying, promotion, customer service and
control.
They generally serve as anchor stores in malls and is usually part of
a chain.
Apparel and home furnishing are the two most common product
categories.
Size varies from 20,000 to 40,000 sq. ft.

36.
DEPARTMENT STORE…
Merchandise quality is moderate to quite good. Pricing is moderate
to above average. Customer service is medium to high level.
Ex. Marks & Spencer, Sears, J.C. Penny, Westside, Globus,
Pyramid, Pantaloons, Shopper’s Stop, Lifestyle.

37.
FULL-LINE DISCOUNT STORE
It conveys the image of high volume, low cost, fast turnover outlet
selling a broad merchandise for less than conventional prices.
Products are sold via self service.
Non durable goods feature from private brands and durable goods
are from well known national brands.
Less fashion sensitive merchandise are carried.
Ex. Wal-Mart.

38.
DOLLAR STORE/ VARIETY
STORE
 US based My Dollar Store started operation in
Mumbai through franchise arrangement with
Sankalp Retail Value.
 Floor Space: 4000 Sq. Feet
 Merchandise: Cleaning, Health & Beauty,
Hardware,
 Plastic ware, Kitchen ware & confectionary etc.

39.
OFF-PRICE CHAIN
An off-price chain features brand name, sometime designer labels
of women wear, cosmetics, accessories, footwear,etc and sell them
at every day low prices in an efficient, limited service environment.
They have centralized check-outs, no gift wrapping and charge
separately for alterations.
Ex. T.J. Maxx

40.
FACTORY OUTLET
A factory outlet is a manufacturer-owned store selling manufacturer
closeouts, discontinued merchandise, irregulars, cancelled orders
and sometime in season fresh merchandise at at lower rate.
They sell merchandise at up to 60% less than MRP due to low
operating cost, low rent, limited display and cheap fixtures.
Also sell in cartons.
Ex. Levis factory outlet, Pantaloon factory outlet, etc.

41.
MEMBERSHIP CLUB
A membership club is a retail format where consumers have to be
members to be able to buy merchandise at a wholesale price.
Here the members pay a certain amount of annual fee.
Their operating strategy includes inexpensive isolated locations,
opportunistic buying, little or no advertising, plain fixtures, wide
aisles, very low prices.
Ex. Sam’s and Costco

42.
FLEA MARKET
A flea market has many retail vendors offering a range of products
at discount prices in plain surroundings.
They are located in non-traditional sites like stadiums,
racetracks,etc.
Here, individual retailers rent space on a daily or weekly basis.
At any flea market, price haggling are encouraged.
Ex. Rose Bowl

43.
CATALOGUE SHOWROOMS
A catalogue retailer specializes in hard goods such as houseware,
jewellery, consumer electronics.
The customer walks into this retail showroom and goes through the
catalogue of the product that would like to purchase.
The product is then arranged to be bought from the warehouse for
inspection and purchase.
Ex. Argos, Service Merchandise and Best Products.

44.
NON-STORE RETAILING
DIRECT MARKETING:
Is a form of retailing in which a customer is first exposed to goods
or service through a non personal medium such as direct mail,
newspaper, broadcast or television and then orders are placed by
mail, phone or computer.
There are three forms:
1. Mail order retailing/ catalogue retailing.
2. Television retailing.
3. E- tailing

45.
DIRECT SELLING
Direct selling includes both personal contact with consumers in their
homes and offices and phone solicitations initiated by a retailer.
1500 crore market in India growing @ 28% p.a.
Profile of products purchased from Direct Selling: (IN %)
HOUSEHOLD GOODS 68.9
PERSONAL CARE PRODUCTS 12.4
FAMILY PRODUCTS 14.4
BUSINESS AIDS 3.59
FOOD PRODUCTS 0.71
Ex. Oriflame, Amway, Avon, Herbalife, Tupperware, Eureka Forbes
Controlled by IDSA.

46.
AUTOMATED VENDING
Ex. Tata Coffee, Jiffy, ATMs.
AIRPORT RETAILING
Ex. Travel Requisition Shop

47.
E-Retailers

48.
VIDEO KIOSKS
The video kiosk is a free standing, interactive, electronic computer
That displays products and related information on a video screen.
It often uses a touch screen for consumers to make selection.
Example: McDonald, Wills Lifestyle.