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Chapter - 1
Introduction :
Retailing is one of the oldest business of mankind. As the development of human civilisation took place, the direct business transaction from producer to consumer gave way to direct marketing. In the modern business world, any business to consumer world, any business to consumer interaction can be termed as retailing interaction and can be termed as retailing. A retailer or retail store is any business enterprise who's sales volume comes from retailing. Retailing can be dealt with in different perspectives. Retailer is considered as one of the channel members in distribution. In this case, the retailer is serving as a postman delivering the products/ services of the manufacturer. The role of retailer is simply executing the requirements of the marketer. Any organisation selling to final consumer is doing retailing. Retailing is the final step in the distribution of merchandise for consumption by the end users. Thus, the retailer is the last link to consumer in the channel of distribution from manufacture to consumer. As the retailer. is working close to consumer, they are able to understand the changing taste and preferences of consumers. Retailer’s feedback about consumers helps the manufactures to convert the needs and wants of consumers into a real product in hand. Thus, retailing is the most dynamic business. Retailing is any firm selling products in small quantities to final consumers for ultimate consumption purpose. It consists of all activities involved in the marketing of goods and services directly to the final consumers for their personal, family or household use. A retailer is a company or an organisation that purchase products from individuals or companies with the intent to resell those goods/services to the final consumers. Retailing is such a part of our everyday lives that it is often taken for granted. Customers are not aware of the sophisticated business decisions taken by the retail managers. The modern technologies adopted by the retailers are facilitating the consumers to choose their required goods and services among various varieties and brands. Retail managers are making complex decisions in selecting target markets, retail locations, merchandise and service to offer, negotiation with suppliers, motivating sales associates and deciding how to price, promote and present the merchandise in the retail outlet. In the consumer oriented marketing, retailing may be redefined as the first point of consumer contact.
Definitions:
The actual term ‘retailing’ means ‘a piece of’ or ‘to cut up’. This implies that retailers acquire large quantities of products and divide them up into smaller units to be sold to individual consumers. The definitions of retailing therefore emphasis it as the business activity of selling products or services to the final consumer.
- Philip Kotler defines retailing as follows: “ all the activities involved in selling goods or services directly to final consumers for personal, non business use”.
- Mc. Carthy. - “Retailing is selling final consumer products to households”.
- Cundiff and Still - “Retailing consists of those activities involved is selling directly to ultimate consumers”. The above definition of retailing assumes certain concepts:
- Sales of goods and service is a mean of distribution.^ The Final consumer within the distribution chain is a key concept. The retailers are involved in a direct interface with the customer. The emphasis on final consumer is different from that on a customer. A consumer is the final user of a purchase while a customer may have brought for his or her own use of a part of own business activity. Purchase for business or individual use are not retail truncations. Retailing includes more than the sale of tangible products. It involves services such as financial services, hair cutting or dry cleaning.
- Retailers are the middlemen or intermediaries in the chain of distribution. They occupy a middle person position, receiving and passing on the products from producers and wholesalers to customers. This is made possible by opening the store in a convenient location to provide a successful channel of distribution. The successful channel ensures availability of the right product in the right quantity, at the right time and through the right channel. All marketing channel decisions are made with reference to customers. Customer satisfaction is the focal point for the selection and display of a wide range of stocks in any retail outlet.
Significance of Retailing:
Retailing has mirrored the increasing prominence of the retail industry. Retailing provides necessary service and a positive contribution to the economy. The importance of retailing is given below: Retailing shapes the lifestyles of people: Retailing is an integral part of the modern society. It shapes the way of life. In the past, trading of goods was a part of a traditional society. But in recent times, buying and selling of goods have become a brand dominated activity. Retailing contributes to the economy: The importance of retail sector is reflected in its contribution to the growth of an economy. Its contribution is much more visible in the modern era than it was in the past. As the retail sector is linked to the significant portion of the economy. Its contribution to GDP is substantial. Retailing is the driving force of the economy. It aims at promoting its sustained growth. Retailing dominates the supply chain: Goods and Services flow from manufactures or service providers to consumers. Where consumers are large in number and are widely distributed, the role of retailers becomes crucial. Retailers serve as a connecting link between the wholesalers and consumers. Due to its dominated position in the supply chain, the retail structure has steadily developed over the years.
Larger Number of Retail Business Units: Location of retail store plays an important role compared to other business units. Retailers consider factors like potential demand, supply of merchandise and store image-teated factors in locating the retail outlet. Direct Interaction with Customers: Retail businesses have a direct interaction with end-users of goods and services. They act as intermediator between consumers and suppliers who may be wholesalers or manufactures. Therefore, they are in a position to effectively communicate the response and charging preferences of the consumers to the suppliers or salesperson of the company. Lower Average Amount of Sales Transaction: Many consumers buy products in small quantities for household consumption. Due to lower disposable incomes, some consumer segments in India even buy grocery items on a daily basis rather than a weekly or a monthly basis. Inventory management becomes a challenge for retailers as a result of the many minor transactions with a large number of customers.
Traditional Retail Versus Non-Traditional/Modern Retail:
Traditional Channel comprises of the regular trade partners like Direct Dealers: Companies sell directly to them and in turn they directly sell to the end consumer or user. Number of outlets owned by them may vary anywhere between 1 to 10 in any specific location/city. Their presence is limited to specific geography–within a city or a region. Distributors: Companies sell directly to them and they in turn service the smaller retail shops (known as sub-dealers) in the area designated to them by the company. The sub-dealers then sell to the end consumers. Wholesalers: This one is a disorganised channel. Either companies or a bigger direct dealer will sell them the products in bulk and they in turn sell to the smaller retailers comparatively at a lower cost than the distributor. They run like a parallel channel to distribution and at times may lead to market imbalances. Brand Shops: These are company owned or franchised retail outlets selling products of only one company. They act as usually the place to showcase the entire range of the products sold by the company. Non-Traditional or Modern Retail Channel refers to all other formats of retail stores like Speciality store, Department store, Super store, Convenience store, Discount store, Off-Price retailer, Superstore and Catalogue showroom. Speciality Store: Speciality stores carry very limited product lines with deep assortment. They offer a wide choice of models, size, style, colour and other important attributes in the assortment carried. They offer a wide choice in terms of models, size, style, colour and other important attributes in the assortment carried. Department Store: A departmental store is a large retail outlet that handles a wide range of lines of product. It has a wide assortment in each line and is organised into separate departments for
purposes of buying, promotion, services and control. It is sometimes called mass merchandising departmental store like military canteens. Super Markets: A supermarket is designed to serve the total needs for food, laundry and household maintenance products. It is relatively large in size. Its operation is low cost, low margin, high volume and self service in nature. Convenience Store: A convenience store is located near residential area. It is relatively large in size. Its operation is low cost, low margin, high volume and self service in nature. Discount Store: Discount store sells standard merchandise at lower prices. Higher volumes of sales compensate lower margin and increase the overall profitability. Discount retailing has moved into specially merchandise stores such as sports goods stores, electronics stores and book shops. Off-Price retailer: An off-price retailer sells left over goods, over runs, and irregular obtained at reduced price from manufactures or other retailers. Off-Price retailers may be of three types. Factory Outlets: These are owned and operated by manufactures. They carry the manufacture’s surplus, discontinued or irregular goods. Example: dinner ware, shoes, upscale apparel, etc. Independent off price retailer: Independent off-price retailers are owned and run by entrepreneurs or by divisions of larger retail corporations. Warehouse clubs: These are otherwise know as wholesale clubs. They sell a limited selection of brand-name grocery items, appliances, clothing, etc. Super Store: Super stores meet consumer’s tool needs for routinely purchased food and nonfood items. Hyper Markets: Hyper markets originated in France. Hyper markets combine speciality stores, limited line stores in a single level store. Product assortment goes beyond routinely purchased goods. It includes furniture, large and small appliances, clothing items, etc. Catalogue Showroom: Customers order goods from a catalogue in the showroom. Then, they pick these goods up at merchandise pickup area in the store. Now let us make an attempt to differentiate between the two on certain parameters as mentioned below: Parameters Traditional channel Non- traditional channel
- Presence Limited geographical presence say within a city or a specific region. National presence
Global Retailing Trends:
Retailers throughout the globe now have understood that sustainable competitive advantage can be achieved only by those retailing firms that integrate consumer demand directly into their merchandising and supply chain planning workflows. Global retailers know that if they have to stay ahead of changing consumer shopping habits and increasing merchandise choices, committed ethical behaviour, community involvement, innovative promotions and pace with new technology is essential. Following trends in global retailing have been observed:
1. Going Internationalisation: As the domestic markets are becoming saturated, retailers have started looking to overseas markets for business growth, economies of scale, especially in Asia. Further, geopolitical developments, including Tie-ups, joint ventures, trade pacts within the regions is facilitating movements of goods and services across frontiers. Similarly for example, staples and Nike are entering the Indian and Chinese markets. Target and Dollar stores (US based) also continue to grow their geographic presence aggressively in Asian countries. 2. Value driven retailer to values driven retailer: Value retailers like Wal-Mart, Costco and Target which previously were recognised as the destination for the monthly stock-up trip now continue to improve “shop-ability,” by providing more convenient store layouts and shopping experiences that make the customers buying quicker and easier. This trend focuses on programs designed to meet consumer lifestyles and needs based on money, time, family size and type, and personal and social obligations. 3. Enhancing service offerings: Walgreen’s, for instance, has built a superior brand proposition around pharmacy authority and convenience. Walgreen’s capital spending, organisational energy, and marketing dollars all focus on delivering convenience at every level, through real estate strategy, quick in-and-out convenience, layout, assortment and micro-merchandising. 4. Expanding Private Brands: To increase margins and draw increase awareness to store developed private brands as compared to well established or third party brands, retailers now are introducing their own store brands. Retail firms believe that these own or private labels have evolved from ‘cheap and nasty substitutes’ to the real thing though ‘copycat’ private labels still remain a strong strategy for retailers. 5. Migration of retail format: Due to competition and entry of world’s largest companies in this sector, retail formats have been changing radically. The co-operatives and basic department stores of the early 20th century have given entry to mass merchandisers (Wal- Mart), warehouse clubs (Marko, Sam’s Club), hypermarkets (Carrefour), discounters (Aidi), convenience stores (7-Eleven), and category killers (Toys ‘R’ Us, Sports Authority). UK’s Tesco Group operates supermarkets, hypermarkets, departmental stores, convenience stores, neighbourhood stores, mail order, and like most others recently cyber retailing (online retailing/e-stores). The most important business philosophy for
various old, emerging and new retailing formats is convenience in terms of ‘under-one roof, ‘one- stop location’, ‘time saving or ease of shopping, making consumers ‘king’ in real sense.
Retailing in Indian Scenario:
India is the second largest consumer market in world. If offers enough opportunities for the growth of retail business. Present size of business is estimated at $450bn with approximate of 5% being in organised retail. Retail in India is overcrowded by small shops which account for around 14mn, which have a per capita flour size of around 260 sq.ft. There is brighter side to India organised retail. It is expected to touch around $800 bn by
- Right now organised retail is growing at 35% pa. Global retail development Index has
identified India as top 5th among 30 emerging economies Empirical studies have revealed that,
whenever per capita Income of a nation exceeds $1200, organised retail starts growing. This is experienced in case of China, South Korea, Japan etc., But in India, with present per capita Income of $400 is indicating the signs of progress in organised retail. Retail boom is already being experienced in big cities, where 82% of organised retail business is coming from six big cities like Delhi, Mumbai, Bangalore, Chennai, Hyderabad, Kolkata and 12% coming from next four cities. These cities have seen big Shopping Malls, Super Bazars Multiplex etc. There is need of penetration or entry of this organised retail business into ‘C’ class cities and rural area. Growth: Due to the large scope of business and high growth potential, India is attracting investors across the globe. In FDI Confidence Index, India ranks 8th (after U.S., Germany, China, UK, Canada, Japan, and France). India is all set to gain from the latest FDI policy in retail. There has been an increase in purchasing power of the consumer due to easy availability of credit which has given a push to higher value items and encouraged repeated purchases. There has been a clear shift in consumer mindset in buying. They are more educated and well informed. They have become more experimenting and are willing to try and buy products which they haven’t been used as yet. The expansion of middle class has led to higher purchases of luxury products and brand consciousness. Significant growth in discretionary income and changing lifestyles are among the major growth drivers of Indian retail industry. With GST taking its shape, it has helped the retailers simplify its tax structure. This will lead to better supply chain structure, better cash flows, pricing, and profitability. Opportunities: Retail rating agency called Fitch has predicted stable growth for retail in India. Areas like Apparels, electronics, fashion and Lifestyle, E-commerce along with food and grocery are constantly expected to expand their organised market shares. ‘E-tailing’ i.e., retail through internet is expected to become popular in India. We are already experiencing web based shopping experience through e-agencies like ‘Quickr(dot)com, Myntra(dot)com’, etc.,
Indian customer is described as Tight fisted. He does not spend lavishly. There is stress on saving. With growing education, life style is changing particularly young population believes in enjoying comforts and luxuries People are aspiring for a higher living standard. The exposure to TV, Internet has made people to know life style of western people. Consumerism i.e., consumption and satisfaction is catching up in Indian society that is creating new opportunities for organised retail growth.
7. Urbanisation: Growing urbanisation is creating opportunity for retail marketing. Prospects of gelling c job in city and attraction of city life is making rural people to migrate to urban centres. Further town areas are upgrading into cities, with better urban look and infrastructure. People are becoming urban i.e., sophisticated in their consumption habits that is creating opportunity for retail marketing. Challenges: Although retail industry in India is on a growing track not everyone has tasted success. Due to various diversities in the state policies and local influences, it becomes a larger hindrance for the retail to expand rapidly. The high cost of real estate, deep discounting from e-tailers, non- availability of skilled labor in rural market are a few challenges that may hinder the growth of retail industry. Innovative concepts and model shall survive the test of time and investment.
New trends in Indian Retailing:
Following are the recent trends that have stood out in recent years and continue to grow further:
1. Emergence of New retail formats and combinations: Due to huge amounts of new investments and decreasing charm for ‘kirana’ stores, the retail sector is expected to grow. Bank branches, bill counters, saloons, internet cafe have opened in the malls. The ‘cash and carry’ activities are expected to grab majority of attention. 2. Internet age: Increased computer awareness and shrinking usage charges have made people enabled buy things online resulting in growth of non-store retailing. Retailers are informing about new arrivals/ fresh stock through e-mails, television, SMS and telephones to which anyone can respond to through toll-free 16 digit numbers. 3. Raise of Departmental stores: Specialty stores like ‘Reliance Digital’, ‘Music World’ ‘Metal Junctions’, ‘Nokia World’ and ‘Pantaloons’ have their presence in most of the malls in the country. Departmental stores have given way to malls, having a mixture of large and small retailers offering varied brands for each and every section of the society.
4. Sales Promotion channels: They are increasingly becoming professional and targeting differently to different lifestyle groups. Newer and newer promotional techniques are emerging. Event managers are hired and visual merchandising professionals are consulted. Today retailers are not sticking to traditional methods of promoting a sale but personal selling door-to-door selling, free home delivery and payment through plastic money have emerged and is being widely used. 5. Emergence of new residential societies: Today retail organisations are not only targeting big cities but are considering tier II and tier III cities like Jaipur, Pune, Shimla, Karnal, Panipat, Coimbatore, Baroda, Chandigarh etc also. The South Indian states are one step ahead when it comes to shopping in the supermarkets for day-to- day needs and also have been influencing other states where supermarkets are being established. 6. Use of Plastic Money: Use of credit and debit cards for buying merchandise is relatively a new phenomenon but is gaining popularity immensely. Credit and debit cards are commonly known as ‘plastic money’. Today, especially in metros, retail spending is mainly done by plastic cards, accounting for over 45 percent and is likely to touch 65 percent over the next five years. 7. Distance – No bar: Thanks to increased public transportation, better roads, highways and an overall improvement in the transportation infrastructure that has enabled customers to visit from one place to another smoothly than ever before. Now for want of quality goods, a customer can travel several kilometres to reach a particular store. 8. Collaboration among retailers: Partnerships and tie-ups among retailers, real estate developers, brands, franchisees, and financiers have become the fashion of the day to spread risk related to huge investments and uncertainty. 9. Government support: The government infrastructure support, relaxation on foreign direct investments further has accelerated the growth of Indian organised retail sector. Consequently, the shopping malls are coming up throughout the country in a big way. 10. Sophisticated customers: Due to Internet revolution, customers are becoming conversant about the products they are interested in buying. For example, over thirty percent of Indian consumers collect information from the Internet about prices, features, guarantee/warranty options before visiting any store for the actual purchase. This suggested the retailers that they need to respond to varying consumer needs and growing assortment.
