Introduction to Retailing …..

Suresh Chandra.Ch,
Junior Research Fellow
 Nature of Retail Industry is Changing

To Today’s Retailer

Mom and Pop Store

• From a personal perspective, how does
retailing provides a potential career
opportunities ?
 Opportunities in Retailing

• Management • Entrepreneurial
Opportunities Opportunities
The word retail is derived from the French word
‘retaillier’, which means to cut of a piece or to
break bulk. Therefore a retailer may be defined,
as a dealer or trader who sells goods in small
quantities.

Retails includes all the activities involved in selling

goods or services to the final consumers for
personal, non business use. A retailer or retail
store is any business enterprise whose sale
volume comes primarily from retailing.
Any organization selling to final consumers whether
it is a manufacturer, wholesaler or retailer is
doing retailing. It does not matter how the goods
or services are sold (by person, mail, telephone,
vending machine or internet or whether they are
selling in store or on the street or at the
consumer’s house)

Retail may be redefined as the first point of

customer contact.
Functions of a Retailers :

Providing Assortment i.e., form of a product that is

acceptable to the customer.

Time utility by keeping the store open when the

customers prefer to shop.

Provides a place utility, being available at a convenient

location.

Holding inventory & providing information to suppliers.

Providing service to the customer.

 Retailing in the Channel
of Distribution and Marketing
• Retailer is the last step in
the Manufacturer to
Consumer distribution link
• Retailer has the important
product/consumer link
• Product Marketing by
manufacturer can be
enhanced by coordination
with retailer
 SAM WALTON FOUNDER OF WALMART……….

“For my whole retail career, I have stuck to one

guiding principle…give your customers what
they want, and customers want everything: a
wide assortment of good quality merchandise;
the lowest possible prices; guaranteed
satisfaction with what you buy; friendly,
knowledgeable service; convenient hours; free
parking; a pleasant shopping experience.
• From your perspective, what are the benefits
and limitations of purchasing a pair of jeans
directly from a manufacturer rather than from
a retailer?
 Importance of retailing
• It is the final link in the chain of production
• It is the 2nd largest employer after agriculture
in India.
• It accounts for an impressive part of GDP by
contributing more than 10% to GDP.
• The global Retail development Index has ranked
India first, among the top 30 emerging markets in
the world
 Theories of structural changes in
retailing
• Wheel of retailing (Malcolm. P. Mcnair’s)
• Dialectic process
• Retail accordion
• Natural selection
1. Wheel of Retailing

Entry Phase (New

entrant)
• Low prices & limited
products
• Limited facilities and
services Trading up phase
• Price-sensitive (Traditional retailer)
consumers • Moderate prices
• Improved facilities
• Broader base of value-
Mature Retailer and service-conscious
(vulnerability phase) consumers
• High prices
• Excellent facilities and
services
• Upscale consumers
• Declining ROI
2. Dialectic Process (Thomas.J. Maronick and Bruce J. Walker)

Discount Store Department Store

•Low margin •High margin
•High turnover •Low turnover
•Low price •High price
•Self service •Full service
•Low rent location •Downtown location
•Spartan facilities •Plush facilities

Discount
Department Store
•Average margin
•Average turnover
•Modest price
•Suburban location
•Model facilities
 The Retail Accordion
• It describes how retail institutions evolve from
outlets that offer wide assortments to
specialized stores and continue repeatedly
through the pattern and these stores begin to
offer a wide variety of merchandise.
• The accordion theory is vague about the
competitive importance of providing wide
assortments for various target customer
groups.

LO 3
 Natural Selection
• This theory based on Darwin’s theory of evolution
• A retail institution should be flexible enough to adapt
to the changing environment and should adapt its
behaviour to survive in the market.
• The retail institution that is flexible enough to adapt
to changes in the economy will be the most
successful and those which are not willing to change,
would stagnate and may even be forced to exit the
market.
 Format Definition
Key categories retailed Typical size Example
Formats Description
Sq.ft.
A large superstore, combining a
supermarket and departmental Food, groceries, apparel, 15,000-100,000 Big Bazaar, Hypercity, Spencer, Star
store, offering full lines of furnishings, consumer durables India Bazaar, Vishal Megamart,
Hyper grocery and general Reliance Retail
markets merchandise all under one roof

A large self service outlet Food, groceries, medicines 3,000-15,000 FoodWorld, Trinethra, Subshiksha,
offering food and household Food baazar
Super markets goods

Small size, easily accessible Food, groceries, medicines 500-2,000 In&Out, Trinethra, Subhiksha,
stores offering a quick traditional stores
Convenience shopping, fast check out
experience and extended
stores working hours

A large self service outlet Apparel, Jewellery, watches, fashion 10,000-50,000 Shopper’s Stop, Lifestyle, Pantaloon,
offering a variety of accessories, footwear, furniture, Westside
Departmental merchandise furnishings
stores
Large speciality stores focussed
Electronics, office supplies, apparel
on one or a few categories of 20,000-100,000 Best Buy – Circuit City, Staples
merchandise, offering a wide
Category selection at low prices
killers
 Format Definition (Contd.)
Key categories retailed Typical size
Formats Description Example
Sq.ft.
Warehouse style large stores, Food, groceries •100,000 + Metro cash and carry, Costco, Sam’s
offering goods in bulk at Club
Warehouse discount prices to members
clubs

Retail outlet offering products of a Apparel, footwear, tyres, food •1,000-5,000 Nike, Adidas, Colourplus, McDonalds,
Single brand single brand services, furniture Gautier, Gucci, TBZ
outlets

Multibrand Retail outlet offering multiple Footwear, apparel, electronics, •1,000-20,000 Planet Sports, Planet Fashion,
branded products belonging to books Crosswords
speciality a single category class
stores
 Sectors in Retail Industry
The retail industry is divided into:
1. Organized retail sector
2. Unorganized retail sector

Organized retail sector: It refers to trading activities

undertaken by licensed retailers, that is, those who
are registered for sales tax, income tax, etc. These
include the corporate-backed hypermarkets and
retail chains, and also the privately owned large
retail businesses.
 Sectors in Retail Industry
Unorganized retail sector: It refers to
performing trading activities by traditional
formats of low-cost retailing, for example, the
local kirana shops, owner manned general
stores, paan /beedi shops, convenience
stores, hand cart and pavement vendors, etc
The unorganized retailers normally do not pay
taxes and most of them are not even
registered for sales tax, VAT, or income tax.
 Modern Retail – Organized Channels
• The share of organized retail is less than 7% of the
total retail market in India.
 .. but Rapid Transformation is Anticipated
Current Size & Future Projections for Indian Retail Market
900 800
800
700
600 530
486
US$ Billion

500 445
373 408
400 342
300
200 200
100 87
26 39 59
0 12 18
2007 2008 2009 2010 2011 2012 2017

Total Retail Organized Retail

And may reach a share of 25% by 2017

 Retail Environment
External environment factors include:
• Economic environment (Nature of economic
system, FDI restrictions, property regulations,
real estate)
• Legal environment (labour laws)
• Technological environment (use of IT& online
system)
• Competitive environment (Entry of MNCs,
unorganized sector)
Retailing in India
 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
Evolution of Indian retail
Historic/Rural Reach Traditional/Pervasive Government Modern Formats/
Reach Supported International

Exclusive Brand Outlets

Hyper/Super Markets
Department Stores
Shopping Malls
PDS Outlets
Khadi Stores
Cooperatives
Convenience Stores
Mom and
Pop/Kiranas
Weekly Markets
Village Fairs
Melas

Source of Neighborhood Shopping

Entertainment Stores/Convenience Availability/ Low Experience/Efficiency
Costs / Distribution
In a joint study recently conducted by Associated Chambers of Commerce
and Industry of India (ASSOCHAM)and KPMG, the following findings
were revealed:
 
* Over the coming 4-5 years is expected to be around US$ 25-30 billion.
• Indian retail industry is the 5th largest in the world.
• According to BMI India retail report, retail sales will grow from US
%392.63 billion in 2011 to US $674.37 billion by 2014.
• FDI inflows between April 2000 and October 2010, in single brand retail
trading, stood at US$197.04 million.
• It is contributing 13% to INDIA’s GDP.
 Trends in Retailing
• Rapid development of infrastructure in retailing
(mushrooming hypermarkets in metros in coming
season)
• Increasing GDP and changing lifestyles of people,
growth in income
• Increasing penetration into the lower income strata
• Arrival of Transnational companies (TNCs)

• Better inventory and ordering through electronic

sources.
 Problems &Challenges for Indian
retailing
• The tax structure in India favors small retail business
(Kerala)
• Lack of adequate infrastructure facilities
• High cost of real estate
• Dissimilarity in consumer groups
• Restrictions in Foreign Direct Investment
• Shortage of retail study options
• Shortage of trained manpower
• Low retail management skill (Subhiksha)
• Intrinsic complexity of retailing – rapid price changes
 Growth drives for Indian retailing
• Demography dynamics
• Double incomes
• Plastic revolution
• Urbanization
• Covering distances has become easier
Why Consumers Buy Fashions????
 Why Consumers Buy Fashions
• Communicate with Others
• Manage Appearance
• Express Self-Image
• Impress Others
FDI Policy with Regard to Retailing in India

• It will be prudent to look into Press Note 4 of 2006 issued by

DIPP and consolidated FDI Policy issued in October 2010
which provide the sector specific guidelines for FDI with
regard to the conduct of trading activities.
• a)      FDI up to 100% for cash and carry wholesale trading and
export trading allowed under the automatic route.
• b)      FDI up to 51 % with prior Government approval (i.e.
FIPB) for retail trade of ‘Single Brand’ products, subject to
Press Note 3 (2006 Series).
• c)      FDI is not permitted in Multi Brand Retailing in India.