Modi Institute of Management & Technology

Approved by AICTE, New Delhi & Affiliated to Rajasthan Technical University,

Kota

Assignment on

RETAIL MANAGEMENT

Submitted in partial fulfillment of the requirements for the award of the degree of
Master of Business Administration
(Batch 2022-24)

Submitted By: Janvi Bajaj Submitted To: Mrs. Ramneet Kaur Ma’am
(MBA 3rd Semester)

ACKNOWLEDGEMENT
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“It is not possible to prepare a project report without the assistance &encouragement of other
people. This one is certainly no exception.”

On the very outset of this report, I would like to extend my sincere & heartfelt obligation towards
all the personages who have helped me in this endeavor. Without their active guidance, help,
cooperation & encouragement, I would not have made headway in the project. I am ineffably
indebted to Miss SURBHI JAIN Ma’am for conscientious guidance and encouragement to
accomplish this assignment. I am extremely thankful and pay my gratitude to my faculty of MBA
3rd SEMESTER for their valuable guidance and support on completion of this project in
its presently.
I extend my gratitude to MIMT, KOTA for giving me this opportunity. I also acknowledge with a
deep sense of reverence, my gratitude towards my parents and member of my
family, who has always supported me morally as well as economically. Any omission in this brief
acknowledgement does not mean lack of gratitude.

Thanking You
Janvi Bajaj

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 TABLE OF CONTENTS
S.No. Particulars Page No.
1. INTRODUCTION 3-12
a. WHAT IS RETAIL?
b. RETAILING IN MARKETING CHANNELS
c. CLASSIFICATION OF RETAILING FORMAT
d. PRODUCT RETAILING VS SERVICE RETAILING
e. RETAIL VS WHOLESALE
f. EVOLUTION OF RETAIL
2. RETAIL CHALLENGES AND THEORIES 13-17
a. CHALLENGES
b. THEORIES
3. UNDERSTANDING RETAIL CUSTOMER 18-24

a. CUSTOMER VS CONSUMER
➢ IDENTIFY A CUSTOMER
➢ CUSTOMER BUYING BEHVIOR PATTERN
➢ FACTOR INFLUENCING RETAIL CUSTOMER
➢ CONSUMER DECISION MAKING PROCESS

4. RETAIL MARKET AND STRATEGIES 25-28

a. MARKET TYPES
b. RETAIL STRATEGY
5. RETAIL BUSINESS LOCATION 29-31
a. IMPORTANCE
b. TYPES
c. FACTORS DETERMINING RETAIL LOCATION
d. STEPS TO CHOOSE RIGHT LOCATION
6. RETAIL STORE LAYOUT AND DESIGN 32-35
a. RETAIL FLOOR SPACE
b. STORE LAYOUT AND DESIGN
7. RETAIL BUSINESS OPERATIONS 36-41
a. STORE MANAGEMENT
b. PREMISES MANAGEMENT
c. INVENTORY MANAGEMENT
d. RECEIPT MANAGEMENT
e. SUPPLYCHAIN MANAGEMENT AND LOGISTICS
f. CUSTOMER SERVICE
g. ELEMENTS OF RETAIL MARKETING MIX

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INTRODUCTION

RETAIL

"In my whole retailing 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, lowest
possible prices, guaranteed satisfaction with what they buy, friendly knowledgeable service,
convenient hours, free parking, and a pleasant shopping experience.

You love it when you visit a store that somehow exceeds your expectations and you hate it when a
store inconveniences you, or gives you hard time, or just pretends you are invisible…"

– Sam Walton (Founder, Walmart)

In the complex world of today, the consumer is king and retailers are keener on consumer
satisfaction. Considering the busy lifestyles of today’s consumers, the retailers also provide
services apart from products.

Retailing occupies a very important place in the economics of any country. It is the final stage of
distribution of product or service. It not only contributes to country’s GDP but also empowers a
large number of people by providing employment.

Retail Management starts with understanding the term 'Retail'.

WHAT IS RETAIL?

“Retailing includes all activities involved in selling goods or services to the final consumers

for personal, non-business use.”

- Phillip Kotler

Any organization that sells the products for consumption to the customers for their personal,
family, or household use is in the occupation of retailing.

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RETAILING IN MARKETING CHANNELS

With industrialization and globalization, the distance between the manufacturer and the consumer
has increased. Many a times product is manufactured in one country and sold in another. The levels
of intermediaries involved in the marketing channel depends upon the level of service the
consumer desires.

PRODUCER WHOLESALER RETAILER CONSUMER

PRODUCER RETAILER CONSUMER

PRODUCER CONSUMER

Type A & B: Retailers, for example – Walmart, Pantaloons.

Type C: Service Provider, for example- Eureka Forbes.

CLASSIFICATION OF RETAILING FORMATS

The retailing formats can be classified into following types as shown in the diagram:

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 1. Ownership Based Retailing

Let us see these retailers in detail:

➢ Independent Retailers: They own and run a single shop, and determine their policies
independently. Their family members can help in business and the ownership of the unit
can be passed from one generation to next. The biggest advantage is they can build
personal rapport with consumers very easily. For example, stand-alone grocery shops,
florists, stationery shops, book shops, etc.
➢ Chain Stores: When multiple outlets are under common ownership it is called a chain of
stores. Chain stores offer and keep similar merchandise. They are spread over cities and
regions. The advantage is, the stores can keep selected merchandise according to the
consumers’ preferences in a particular area. For example, Westside Stores, Shopper’s
Stop, etc.
➢ Franchises: These are stores that run business under an established brand name or a
particular format by an agreement between franchiser and a franchisee. They can be of
two types:
• Business format. For example, Pizza Hut.
• Product format. For example, Ice cream parlors of Amul.
➢ Consumers Co-Operative Stores: These are businesses owned and run by consumers
with the aim of providing essentials at reasonable cost as compared to market rates. They
have to be contemporary with the current business and political policies to keep the
business healthy. For example, Sahakari Bhandar from India, Puget Consumers Food Co-
Operative from north US, Dublin Food Co-Operative from Ireland.

2. Merchandise Based Retailing

Let us see these in detail:

➢ Convenience Stores: They are small stores generally located near residential premises,
and are kept open till late night or 24x7. These stores offer basic essentials such as food,
eggs, milk, toiletries, and groceries. They target consumers who want to make quick and

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 easy purchases. For example, mom-and-pop stores, stores located near petrol pumps, 7-
Eleven from US, etc.
➢ Supermarkets: These are large stores with high volume and low profit margin. They
target mass consumer and their selling area ranges from 8000 sq.ft. to 10,000 sq.ft. They
offer fresh as well as preserved food items, toiletries, groceries and basic household
items. Here, at least 70% selling space is reserved for food and grocery products. For
example, Food Bazar and Tesco.
➢ Hypermarkets: These are one-stop shopping retail stores with at least 3000 sq.ft. selling
space, out of which 35% space is dedicated towards non-grocery products. They target
consumers over large area, and often share space with restaurants and coffee shops. The
hypermarket can spread over the space of 80,000 sq.ft. to 250,000 sq.ft. They offer
exercise equipment, cycles, CD/DVDs, Books, Electronics equipment, etc. For example,
Big Bazar from India, Walmart from US.
➢ Specialty Stores: These retail stores offer a particular kind of merchandise such as home
furnishing, domestic electronic appliances, computers and related products, etc. They also
offer high level service and product information to consumers. They occupy at least 8000
sq.ft. selling space. For example, Gautier Furniture and Croma from India, High &
Mighty from UK.
➢ Departmental Stores: It is a multi-level, multi-product retail store spread across average
size of 20,000 sq.ft. to 50,000 sq.ft. It offers selling space in the range of 10% to 70% for
food, clothing, and household items. For example, The Bombay Store, Ebony, Meena
Bazar from India, Marks & Spencer from UK.
➢ Factory Outlets: These are retail stores which sell items that are produced in excess
quantity at discounted price. These outlets are located in the close proximity of
manufacturing units or in association with other factory outlets. For example, Nike,
Bombay Dyeing factory outlets.
➢ Catalogue Showrooms: These retail outlets keep catalogues of the products for the
consumers to refer. The consumer needs to select the product, write its product code and
handover it to the clerk who then manages to provide the selected product from the
company’s warehouse. For example, Argos from UK. India’s retail Hyper City has joined

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 hands with Argos to provide a catalogue of over 4000 best quality products in the
categories of computers, home furnishing, electronics, cookware, fitness, etc.

3. Non-Store Based (Direct) Retailing

It is the form of retailing where the retailer is in direct contact with the consumer at the
workplace or at home. The consumer becomes aware of the product via email or phone call from
the retailer, or through an ad on the television, or Internet. The seller hosts a party for interacting
with people. Then introduces and demonstrates the products, their utility, and benefits. Buying
and selling happens at the same place. The consumer itself is a distributor.

For example, Amway and Herbalife multi-level marketing.

Non-Store based retailing includes non-personal contact based retailing such as:

➢ Mail Orders/Postal Orders/E-Shopping: The consumer can refer a product catalogue

on internet and place order for purchasing the product via email/post.
➢ Telemarketing: The products are advertised on the television. The price, warranty, return
policies, buying schemes, contact number etc. are described at the end of the Ad. The
consumers can place order by calling the retailer’s number. The retailer then delivers the
product at the consumer’s doorstep. For example, Asian Sky shop.
➢ Automated Vending/Kiosks: It is most convenient to the consumers and offers
frequently purchased items round the clock, such as drinks, candies, chips, newspapers,
etc.

The success of non-store based retailing hugely lies in timely delivery of appropriate product.

4. Service Based Retailing

These retailers provide various services to the end consumer. The services include banking, car
rentals, electricity, and cooking gas container delivery.

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The success of service based retailer lies in service quality, customization, differentiation and
timeliness of service, technological upgradation, and consumer-oriented pricing.

PRODUCT RETAILING VS SERVICE RETAILING

PRODUCT RETAILING SERVICE RETAILING
Quality and cost are prime factors in the Timeliness and nature of people involved in
success of product retailing. service retailing are crucial factors in the
success.

Product retailer and consumer relationship is Service provider and customer relationship is
established only if the consumer frequently established right from start.
visits the outlet.

Products can be stored in outlet while Services are intangible hence cannot be stored
retailing. while retailing.

Product retailing can be standardized. Service retailing cannot be standardized as it

highly depends upon the human entities
involved.

In product retailing, the ownership of the In service retailing, there is no transfer of

purchased product can be transferred from ownership. The consumer can only access the
owner to consumer after transaction. service.

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RETAIL VS WHOLESALE

RETAIL WHOLESALE

The products are sold to the customers The products are sold either to retailer for
directly further selling or to the customer directly

Retailer sells the products by adding his own The cost of product sold at wholesale is
profit margin hence the cost of product always lesser than retail cost
increases

Retail business generally does not have direct Wholesale business has a direct contact with
contact with the manufacturer the manufacturer

Retail business buys products from Wholesale businesses have to buy from the
wholesaler in small quantities. Hence, there is manufacturer in bulk. Hence if there is some
always an upper hand to question the quality issue with the quality of the product, they can
and discard the damaged products hardly complain

Retail has to work on attracting customers, Wholesale business is not much engaged into
managing selling space, employee’s salaries, such activities
etc.

Retail business earns lesser profit Wholesale business earns more profit

EVOLUTION OF RETAIL

Though the barter system is considered as the oldest form of retailing, the traditional forms of
retailing such as neighborhood stores, main-street stores and fairs still exist in the laid-back towns
around the world. During post-war years in the US and Europe, small retailers reformed their shops
into large organized stores, markets, and malls.

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Retail evolution mainly took place in three stages:

➢ Conventional
➢ Established
➢ Emerging

With revolutionary changes taking place in the worldwide economy and the growing importance
of 24/7 operation of the business, the retail sector has been undergoing a paradigm shift across the
world.

The world of today has turned into a global village; consumerism is having a huge impact on the
contemporary retail business, and technological advancements have created opportunities as well
as several challenges for the retail industry.

With the advent of the internet, the growth in the retail industry has been impressive due to the
benefits of the economies of scale and also the expansion of business across the geographical
boundaries at B2B (Business to Business) and B2C (Business to Consumer) levels.

Indian Retail industry is expected to have a bright future and offers numerous opportunities for
progress and growth. According to GRDI reports, some favorable factors which support the
growth of retail business are: rise in fashion loving and brand conscious young population,
extensive urbanization, and expansion of opportunities for new investment in retail sector.

The retail sector in Indian context can be subdivided into Organized and Unorganized retail
sectors. Organized retailing constitutes licensed retailers registered under sales and income tax,
involved in carrying out their day-to-day trading functions. This may include large hypermarkets,
large-scale owned retail ventures owned privately or the retail chains as well. On the other hand,
unorganized retailing comprises of a sizeable proportion of small retailers operating their own
Kirana, paan, beedi shops, general stores, chemists, hawkers, etc.

In developed economies, organized retail enjoys a predominant share of around nearly 75-80%
as against traditional retailing, while in developing economies; unorganized sector enjoys a
predominant share in the retail market.

The retail sector in India is highly fragmented or distributed. Unorganized retail constitutes a
significant share of over 90%, while the organized retail segment is just in a start up stage and

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has witnessed an impressive growth over last few years. Retail in India originated with the Mom
and Pop Stores and Kirana Stores, which used to cater to the requirements of the local
population. Over a period, the government encouraged rural retail and provided support for
establishing Khadi & Village industries.

During 1980’s, the retail scene in India changed further with the opening up of the economy, as a
result of which leading retail chains in textile sector were established like Raymond’s, S Kumar’s
and Bombay Dyeing. Subsequently, Titan launched its retail showroom, and the organized
retailing started strengthening its grip in the Indian market.

By 1995, major retail outlets such as Food World, Music World, and Planet M, Crossword
entered the Indian retail market. Large retail formats and stores like shopping malls,
hypermarkets and supermarkets came into operation for providing best of the class experience to
the customers.

The retail sector evolution witnessed improvements in the distribution set up, supply chain
management, technological innovations, back end operational support and excellence and
increase in business alliances in the form of collaborative ventures, mergers, acquisitions, joint
ventures, etc.

Major players in the retail industry like Tata Group, Future Group, Bharti, and Reliance, etc.
have stepped forward with aggressive and ambitious investment plans in the retail sector as a
part of their business expansion strategy across various verticals. Moreover, with the introduction
of retail reforms by the Government of India which allows FDI of 51% in multi brand stores in
India, organized retail sector is expected to capture a major share of the market in the upcoming
future.

According to Assocham study, factors such as globalization and liberalization of economies,

increase in the purchasing power of the consumers, changing lifestyle and infrastructural
developments, have revolutionized the Indian retail market.

Though, the share of Food & Grocery segment in organized retailing has shown an impressive
growth since last few years. E Commerce and E Tailing in recent years have redefined the retail
landscape and offer a lot of opportunities to various stakeholders.

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Challenges Faced by the Indian Retail Sector:

Even though the retail sector in India has a lot to offer regarding opportunities and prospects of
business growth, still it is susceptible to various impediments/bottlenecks which may slow down
the pace of growth. Several challenges such as infrastructural limitations, rigid or stringent
regulations, political uncertainties, etc, may restrict the growth prospects and pose a lot of
hurdles. Some of the major challenges which Indian retail industry is faced with are:

• Competing with the international standards

• Indian retail industry is exposed to several systemic inefficiencies and problems with the
supply chain framework.
• Indian retail outlets operate in a constrained space of below 500 sq. ft., which is too small
as per the international retail outlet space standards.
• Growth in the retail industry has given rise to real estate related problems with increasing
requirements for setting up hypermarkets and supermarkets across various locations in
large scale.
• Problems related to the shortage or lack of availability of trained or skilled manpower.
• Frauds in the form of thefts, vendor frauds or administrative loopholes in the retail
industry, are a major cause of worry and this has posed several challenges before the
management.
• Infrastructural and logistics related issues.

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RETAIL CHALLENGES AND THEORIES

CHALLENGES

Michael Porter, a professor from Harvard Business School, designed a framework named Five
Forces Analysis for structured analysis of industries. This framework helps to understand the
degree of competition in the industry. Let us see according to his framework, what are the five
fundamental forces of competition in the retail industry:

THREAT OF NEW
COMPETITORS

INTENSITY OF
RIVALRY AMONG THREAT OF
EXISTING SUBSTITUTES
COMPETITORS

BARGAINING
BARGAINING
POWER OF
POWER OF BUYER
SUPPLIER

➢ THREAT OF NEW COMPETITORS

The easier it is for a new company to enter the industry, fiercer is the competition. Any new
entrant poses a threat to the existing players as it can decrease the profit share of existing players.
The factors that limit new entrants are:

• How loyal are end consumers in the industry?

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 • How difficult it is for the consumer to switch to the new product?
• How large is the amount of capital required to enter into the industry?
• How difficult it is to access distribution channel?
• How hard it is to acquire new skills for the staff?

For example, Pizza Hut, an old player in food services retail, was founded in 1958 at Kansas,
US. The entry of Dominos in 1960 at Michigan posed a threat of competition to it. But following
their different marketing policies, they both have acquired prominent places in the market.

Threat is high when Threat is low when

Products of the retail company are not Products of the retail company are
differentiated. differentiated.

Consumer perception is not good for existing Consumer perception is healthy for existing
product and switching cost is low. product and switching cost is high.

Retail brand is not well-known. Retail brand is well-known.

Accessing distribution channels is easy. Accessing distribution channels is remote.

Proprietary technology and material,

Proprietary technology and material, government
government policies, and location are
policies, and location are not troublesome issues.
troublesome issues.

The number of buyers of existing product are The number of buyers for existing product
low. are high.

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 ➢ THREAT OF SUBSTITUTES

Substitutes are the products or services that provide the same functionality. A successful product
leads to creating other similar products. While entering into retail, one should think of:

• How many near substitutes are available in the market?

• What is the price of the substitute?
• What is the consumer perception about those substitutes?

By advertising, marketing, and investing in R&D for the product or service, a retail business can
elevate its position in the industry.

For example, Google+ and Facebook both are social platforms the consumers use for socializing.
They provide similar features such as posts, chat, share text, graphics and media content,
forming groups, etc.

Substitute threat is high when Substitute threat is low when

Products of the retail company are not Products of the retail company are
differentiated. differentiated.

Products are costly. Products are inexpensive.

Consumer’s brand loyalty is low. Consumer’s loyalty is high.

Cheaper parallel products of the same category

No cheaper parallel products are available.
are available.

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 ➢ BARGAINING POWER OF BUYERS

It is the position of buyers and likelihood of their ability to gain benefit while buying. If there are
many suppliers and few buyers, the buyers are at advantageous position while pricing and they
generally have the last word. The retail managers need to think of the following:

• How large market share the retail company has?

• What size of consumers is the company depending upon for its sales?
• Are buyers buying in large volumes?
• How many other retail competitors are in the same product line?

➢ BARGAINING POWER OF SUPPLIER

It is the ability of the supplier to control the cost and supply of the products in the market. If the
suppliers are at a dominating position over the company while product pricing, threatening to
raise price or reduce supply, then that retail industry is said to be less attractive. The retail
managers need to find out answers for the following:

• What are the substitute products other than what the supplier provides?
• Is the supplier providing goods to multiple industries?
• Is the supplier-switching cost high?
• If the supplier and the company are capable of entering into one another’s business?

➢ INTENSITY OF RIVALRY AMONG EXISTING COMPETITORS

Intensity of Rivalry is high when Intensity of Rivalry is low when

There is no or very less product or service

differentiation. The product or service is in differentiation.

There are less competitors. There are more competitors.

Availability of product in a particular area is The product is widely available in a

less. particular area.

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THEORIES

In retail management, theories can be broadly classified as follows:

➢ Environmental Theory (Natural Selection)

It is based on Darwin’s theory of survival: “The fittest would survive the longest”. The retail
sector comprises consumers, manufacturers, marketers, suppliers, and changing technology.
Those retailers that adapt to changes in demography, technology, consumer preferences, and
legal changes are more likely to survive for long and prosper.

➢ Cyclical Theory

McNair represents this theory by “Wheel of Retailing” that explains the changes taking place in
retailing.

According to him, the new entrant retailers are often into low cost, low profit margin, low
structure retail business, which offers some unique, real benefit to the consumers. Over some
time they establish themselves well, prosper, and expand their products with more expensive
facilities, without losing focus on their core values.

This creates a place for yet new entrants in the market thereby creating threat of competition,
substitution, and rivalry.

➢ Conflict Theories (Evolution through Dialectic Process)

Within a broad retail category, there is always a conflict between the retailing of similar formats,
which leads to the development of new formats. Thus, the new retail formats are evolved through
dialectic process of blending two formats.

Say, Thesis is a single retailer around the corner of the residential area. Antithesis is a large
departmental store nearby the same residential area, which develops over some time in
opposition to Thesis. Antithesis poses a challenge to Thesis. When there is conflict between
Thesis and Antithesis, a new format of retail is born which is known as Synthesis.

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UNDERSTANDING RETAIL CONSUMER

“Whether it is stocks or socks, I like buying quality merchandise when it is marked down.”

- Warren Buffet

Understanding retail consumer deals with understanding their buying behavior in retail stores.
Understanding the consumer is important to know who buys what, when, and how. It is also
important to know how to evaluate consumer’s response to sales promotion. It is very vital to
understand the consumer in the retail sector for the survival and prosperity of the business.

CONSUMER VS CUSTOMER

A consumer is a user of a product or a service whereas a customer is a buyer of the product or

service. The customer decides what to buy and executes the deal of purchasing by paying and
availing the product or service. The consumer uses the product or service for oneself.

For example, the customer of a pet food is not the consumer of the same. Also, if a mother in a
supermarket is buying NESTLE chocolate for her toddler son then she is a customer and her son
is a consumer.

➢ IDENTIFYING A CUSTOMER

It is sometimes difficult to understand who is actually a decision maker while purchasing when a
customer enters the shop accompanying someone else. Thus everyone who enters the shop is
considered as a customer. Still, it is necessary to identify composition and origin of the
customers.

• Composition of Customers: It includes customers of various gender, age, economic and

educational status, religion, nationality, and occupation.
• Origin of Customer: From where the customer comes to shop, how much the customer
travels to reach the shop, and which type of area the customer lives in.
• Objective of Customer: Shopping or Buying? What does the customer’s body language
depict?

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 ➢ CUSTOMER’S BUYING BEHAVIOR PATTERN

The needs, tastes, and preferences of the consumer for whom the products are purchased drives
the buying behavior of the customer. The pattern of customer’s buying behavior can be
categorized as:

• Place of Purchase

Customers divide their place of purchase. Even if all the products they want are available at a
shop, they prefer to visit various shops and compare them in terms of prices. When the
customers have a choice of which shop to buy from, their loyalty does not remain permanent to a
single shop. Study of customer’s place of purchase is important for selection of location, keeping
appropriate merchandise, and selecting a distributor in close proximity.

• Product Purchased

It pertains to what items and how many units of items the customer purchases. The customer
purchases a product depending upon the following:

i. Availability/Shortage of product
ii. Requirement/Choice of product
iii. Perishability of product
iv. Storage requirements
v. Purchasing power of oneself

This category is important for producers, distributors, and retailers. Say, soaps, toothbrushes,
potatoes, and apples are purchased by a large group of customers irrespective of their
demographics but live lobsters, French grapes, avocadoes, baked beans, or beef are purchased by
only a small number of customers with strong regional demarcation.

Similarly, the customers rarely purchase a single potato or a banana, like more than two
watermelons at a time.

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 • Time and Frequency of Purchase

Retailers need to keep their working time tuned with customer’s availability. The time of
purchase is influenced by:

i. Weather
ii. Season
iii. Location of customer

The frequency of purchase mainly depends on the following factors:

i. Type of commodity
ii. Degree of necessity involved
iii. Lifestyle of customers
iv. Festivals and customs
v. Influence of the person accompanying the customer.

For example, Indian family man from intermediate income group would purchase a car not more
than two times in his lifetime whereas a same-class customer from US may buy it more
frequently. A tennis player would buy required stuff more frequently than a student learning
tennis at a school.

• Method of Purchase

It is the way a customer purchases. It involves factors such as:

i. Is the customer purchasing alone or is accompanied by someone?

ii. How does the customer pay: by cash or by credit?
iii. What is the mode of travel for the customer?

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 • Response to Sales Promotion Methods

The more the customer visits a retail shop, the more (s)he is exposed to the sales promotion
methods. The use of sales promotional devices increases the number of shop visitors-turned-
impulsive buyers.

The promotional methods include:

i. Displays: Consumer products are packaged and displayed with aesthetics while on
display. Shape, size, color, and decoration create appeal.
ii. Demonstrations: Consumers are influenced by giving away sample product or by
showing how to use the product and its benefits.
iii. Special pricing: Unit’s special price under some scheme or during festive season,
coupons, contests, prizes, etc.
iv. Sales talks: It is verbal or printed advertisement conducted by the salesperson in the
shop.

An urban customer, due to fast paced life would select easy-to-cook or ready-to-eat food over
raw food material as compared to rural counterpart who comes from laid-back lifestyle and self-
sufficiency in food items grown on farm.

It is found that the couples buy more items in a single transaction than a man or a woman
shopping alone. Customers devote time for analyzing alternative products or services. Customers
purchase required and perishable products quickly but when it comes to investing in consumer
durables, (s)he tries to gather more information about the product.

➢ FACTOR INFLUENCING RETAIL CONSUMER

Understanding consumer behavior is critical for a retail business in order to create and develop
effective marketing strategies and employ four Ps of marketing mix (Product, Price, Place, and
Promotion) to generate high revenue in the long run.

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Here are some factors which directly influence consumer buying behavior:

• Market Conditions/Recession

In a well-performing market, customers don’t mind spending on comfort and luxuries. In

contrast, during an economic crisis they tend to prioritize their requirements from basic needs to
luxuries, in that order and focus only on what is absolutely essential to survive.

• Cultural Background

Every child (a would-be-customer) acquires a personality, thought process, and attitude while
growing up by learning, observing, and forming opinions, likes, and dislikes from its
surrounding. Buying behavior differs in people depending on the various cultures they are
brought up in and different demographics they come from.

• Social Status

Social status is nothing but a position of the customer in the society. Generally, people form
groups while interacting with each other for the satisfaction of their social needs.

These groups have prominent effects on the buying behavior. When customers buy with family
members or friends, the chances are more that their choice is altered or biased under peer
pressure for the purpose of trying something new. Dominating people in the family can alter the
choice or decision making of a submissive customer.

• Income Levels

Consumers with high income has high self-respect and expects everything best when it comes to
buying products or availing services. Consumers of this class don’t generally think twice on cost
if he is buying a good quality product.

On the other hand, low-income group consumers would prefer a low-cost substitute of the same
product. For example, a professional earning handsome pay package would not hesitate to buy
an iPhone6 but a taxi driver in India would buy a low-cost mobile.

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 • Psychological Elements

Psychological factors are a major influence in customer’s buying behavior. Some of them are:

i. Motivation: Customers often make purchase decisions by particular motives such as

natural force of hunger, thirst, need of safety, to name a few.
ii. Perception: Customers form different perceptions about various products or services of
the same category after using it. Hence perceptions of customer lead to biased buying
decisions.
iii. Learning: Customers learn about new products or services in the market from various
resources such as peers, advertisements, and Internet. Hence, learning largely affects their
buying decisions. For example, today’s IT-age customer finds out the difference between
two products’ specifications, costs, durability, expected life, looks, etc., and then decides
which one to buy.
iv. Beliefs and Attitudes: Beliefs and attitudes are important drivers of customer’s buying
decision.

➢ CONSUMER’S DECISION-MAKING PROCESS

A customer goes through a number of stages as shown in the following figure before actually
deciding to buy the product.

However, customers get to know about a product from each other. Smart retail managers
therefore insist on recording customers’ feedback upon using the product. They can use this
information while interacting with the manufacturer on how to upgrade the product.

• Identifying one’s need is the stimulating factor in buying decision. Here, the customer
recognizes his need of buying a product. As far as satisfying a basic need such as hunger,
thirst goes, the customer tends to decide quickly. But this step is important when the
customer is buying consumer durables.
• In the next step, the customer tries to find out as much information as he can about the
product.

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• Further, the customer tries to seek the alternative products.
• Then, the customer selects the best product available as per choice and budget, and
decides to buy the same.

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RETAIL MARKETS AND STRATEGIES

MARKET TYPES

There are two types of retails: Organized Retail and Unorganized Retail.

• Organized Retail

Organized Retailing is a large retail chain of shops run with up-to-date technology, accounting
transparency, supply chain management, and distribution systems.

• Unorganized Retail

Unorganized Retailing is nothing but a small retail business conducted by an owner or a

caretaker of the shop with no technological and accounting aids.

The following table highlights the points that differentiate organized retail from unorganized
retail:

Parameter Organized Retail Unorganized Retail

Scale of Operations Large Small

Employees Professional, skilled, and trained Unprofessional

Number of Stores Chain of multiple stores Maximum 2-3 outlets of the

same owner within a city or
across nearby cities

Ambience of Store Pleasant, attractive Lack of good ambience

Range of Products Wide range of products across the Only a range of local
nations products

Shopping experience Excellent, memorable, engaging Average

Source of Mostly from wholesaler

merchandise Directly from manufacturer/producer

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 Convenience of Very less
Very high. Customer can walk around
choosing products and choose the product

Examples Walmart, Hyper City, Big Bazar Standalone shops

RETAIL STRATEGY

It is a plan designed by a retail organization on how the business intends to offer its products and
services to the customers. There can be various strategies such as merchandise strategy, own-
brand strategy, promotion strategy, to name a few.

A retail strategy includes identification of the following:

• The retailer’s target market.

• Retail format the retailer works out to satisfy the target market’s needs.
• Sustainable competitive advantage.

➢ Strategy for Effective Market Segmentation:

For effective market segmentation, the following two strategies are used by the marketing force
of the organization:

i. Concentration (Niche) Strategy

Under this strategy, an organization focuses going after large share of only one or very few
segment(s). This strategy provides a differential advantage over competing organizations which
are not solely concentrating on one segment.

For example, Toyota employs this strategy by offering various models under hybrid vehicles
market.

ii. Multi-segment Strategy

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Under this strategy, an organization focuses its marketing efforts on two or more distinct market
segments. For example, Johnson and Johnson offers healthcare products in the range of baby
care, skin care, nutritionals, and vision care products segmented for the customers of all ages.

➢ Strategy for Effective Market Penetration:

Market penetration strategies include the following:

• Price Penetration

It is setting the price of the product or service lesser than that of the competitor’s product or
service. Due to decreased cost, volume may increase which can help to maintain a decent level
of profit.

• Aggressive Promotion

Increasing product or service promotion on TV, print media, radio channels, e-mails, pulls the
customers and drives them to view and avail the product or service. By offering discounts,
various buying schemes along with the added benefits can be useful in high market penetration.

• High Product Distribution

By distributing the product or service up to the level of saturation helps penetration of market in
a better way. For example, Coca Cola has a very high distribution and is available everywhere
from small shops to hypermarkets.

➢ Growth Strategy:

If a retail organization conducts SWOT Analysis (Strength, Weakness, Opportunity, Threat)

before considering growth strategies, it is helpful for analyzing the organization’s current
strategy and planning the growth strategy.

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Ansoff’s Matrix

An American planning expert named Igor Ansoff developed a strategic planning tool that
presents four alternative growth strategies. On one dimension there are products and on the other
is markets.

This matrix provides strategies for market growth. Here is the sequence of these strategies:

• Market Penetration: Company focuses on selling the existing products or services in the
existing market for higher market share.
• Market Development: Company focuses on selling existing products or services to new
markets or market segments.
• Product Development: Company works on innovations in existing products or
developing new products for the existing market.
• Diversification: Company works on developing new products or services for new
markets.

“Silicon valley is a mindset; not a location.”

- Reid Hoffman (Co-Founder, LinkedIn)

Before visiting a mall or a shop, the first question that arises in consumers’ mind is, “How far do
I have to walk/drive?”

In populous cities such as Mumbai, Delhi, Tokyo, and Shanghai to name a few, consumers face
rush-hour traffic jams or jams because of road structure. In such cases, to access a retail outlet to
procure day-to-day needs becomes very difficult. It is very important for the consumers to have
retail stores near where they stay.

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RETAIL BUSINESS LOCATION

IMPORTANCE OF LOCATION

Retail store location is also an important factor for the marketing team to consider while setting
retail marketing strategy. Here are some reasons:

• Business location is a unique factor which the competitors cannot imitate. Hence, it can
give a strong competitive advantage.
• Selection of retail location is a long-term decision.
• It requires long-term capital investment.
• Good location is the key element for attracting customers to the outlet.
• A well-located store makes supply and distribution easier.
• Locations can help to change customers’ buying habits.

TYPES OF BUSINESS LOCATIONS (TRADE AREA)

A trade area is an area where the retailer attracts customers. It is also called catchment area.
There are three basic types of trade areas:

➢ SOLITARY SITES These are single, free-standing shops/outlets, which are isolated
from other retailers. They are positioned on roads or near other retailers or shopping
centers. They are mainly used for food and non-food retailing, or as convenience shops.
For example, kiosks, mom-and pop stores (similar to kirana stores in India).
➢ UNPLANNED SHOPPING AREA These are retail locations that have evolved over
time and have multiple outlets in close proximity. They are further divided as:
• Central business districts such as traditional “downtown” areas in cities/towns.
• Secondary business districts in larger cities and main street or high street locations.
• Neighborhood districts.
• Locations along a street or motorway (Strip locations).

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 ➢ PLANNED SHOPPING AREA These are retail locations that are architecturally well-
planned to provide a number of outlets preferably under a theme. These sites have large,
key retail brand stores (also called “anchor stores”) and a few small stores to add
diversity and elevate customers’ interest. There are various types of planned shopping
centers such as neighborhood or strip/community centers, malls, lifestyle centers,
specialty centers, outlet centers.

FACTORS DETERMINING RETAIL LOCATION

The marketing team must analyze retail location with respect to the following issues:

➢ Size of Catchment Area: Primary (with 60 to 80% customers), Secondary (15 to 25%
customers), and Tertiary (with remaining customers who shop occasionally).
➢ Occupancy Costs: Costs of lease/owning are different in different areas, property taxes,
location maintenance costs.
➢ Customer Traffic: Number of customers visiting the location, number of private vehicles
passing through the location, number of pedestrians visiting the location.
➢ Restrictions Placed on Store Operations: Restrictions on working hours, noise
intensity during media promotion events.
➢ Location Convenience: Proximity to residential areas, proximity to public transport
facility.

SIZE OF
CATCHMENT
AREA

LOCATION OCCUPANCY
CONVENIENCE COSTS

RESTRICTION
S PLACED ON CUSTOMER
STORE TRAFFIC
OPERATIONS

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STEPS TO CHOOSE RIGHT LOCATION

A retail company needs to follow the given steps for choosing the right location:

Step 1 - Analyze the market in terms of industry, product, and competitors - How old is the
company in this business? How many similar businesses are there in this location? What the new
location is supposed to provide: new products or new market? How far is the competitor’s
location from the company’s perspective location?

Step 2 – Understand the Demographics – Literacy of customers in the prospective location,

age groups, profession, income groups, lifestyles, religion.

Step 3 – Evaluate the Market Potential – Density of population in the prospective location,
anticipation of competition impact, estimation of product demand, knowledge of laws and
regulations in operations.

Step 4 - Identify Alternative Locations – Is there any other potential location? What is its cost
of occupancy? Which factors can be compromised if there is a better location around?

Step 5 – Finalize the best and most suitable Location for the retail outlet.

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RETAIL STORE LAYOUT AND DESIGN

RETAIL FLOOR SPACE

Here are the steps to take into consideration for using floor space effectively:

• Measure the total area of space available.

• Divide this area into selling and non-selling areas such as aisle, storage, promotional
displays, customer support cell, (trial rooms in case of clothing retail) and billing
counters.
• Create a Planogram, a pictorial diagram that depicts how and where to place specific
retail products on shelves or displays in order to increase customer purchases.
• Allocate the selling space to each product category. Determine the amount of space for a
particular category by considering historical and forecasted sales data. Determine the
space for billing counter by referring historical customer volume data. In case of clothing
retail, allocate a separate space for trial rooms that is near the product display but away
from the billing area.
• Determine the location of the product categories within the space. This helps the
customers to locate the required product easily.
• Decide product adjacencies logically. This facilitates multiple product purchase. For
example, pasta sauces and spices are kept near raw pasta packets.
• Make use of irregular shaped corner space wisely. Some products such as domestic
cleaning devices or garden furniture can stand in a corner.
• Allocate space for promotional displays and schemes facing towards road to notify and
attract the customers. Use glass walls or doors wisely for promotion.

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STORE LAYOUT AND DESIGN

Customer buying behavior is an important point of consideration while designing store layout.
The objectives of store layout and design are:

• It should attract customers.

• It should help the customers to locate the products effortlessly.
• It should help the customers spend longer time in the store.
• It should motivate customers to make unplanned, impulsive purchases.
• It should influence the customers’ buying behavior.

FORMAT:

The retail store layouts are designed in way to use the space efficiently. There are broadly three
popular layouts for retail stores:

➢ Grid Layout: Mainly used in grocery stores.

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➢ Loop Layout: Used in malls and departmental stores.

➢ Free Layout: Followed mainly in luxury retail or fashion stores.

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DESIGN:

Both internal and external factors matter when it comes to store design.

Interior Design

The store interior is the area where customers actually look for products and make purchases. It
directly contributes to influence customer decision making. In includes the following:

➢ Clear and adequate walking space, separate from product display area.
➢ Free standing displays: Fixtures, rotary displays, or mannequins installed to attract
customers’ attention and bring them to the store.
➢ End caps: These displays at the end of the aisles can be used to display promotional
offers.
➢ Windows and doors can provide visual messages about merchandise on sale.
➢ Proper lighting at the product display. For example, jewelry retail needs more acute
lighting.
➢ Relevant signage with readable typefaces and limited text for product categories, for
promotional schemes, and at Point of Sale (POS) that guides customers’ decision-
making process. It can also include hanging signage for enhancing visibility.
➢ Sitting area for a few differently abled people or senior citizens.

Exterior Design

This area outside the store is as much important as the interior of the store. It communicates with
the customer on who the retailer is and what it stands for. The exterior includes:

➢ Name of the store, which tells the world that it exists. It can be a plain painted board or as
fancy as an aesthetically designed digital board of the outlet.
➢ The store entrance: Standard or automatic, glass, wood, or metal? Width of the entrance.
➢ The cleanliness of the area around the store.
➢ The aesthetics used to draw the customers inside the store.

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RETAIL BUSINESS OPERATIONS

Multi-Attribute Method

This method is based on the concept that the customers consider a retailer or a product as a set of
features and attributes. It is used to analyze various alternatives available with regard to vendors
and select the best one, which satisfies the store requirements. “Customers remember the
service a lot longer than they remember the price.”

- Lauren Freedman (President, E-tailing Group)

The retail business operations include all the activities that the employers perform to keep the
store functioning smoothly. The shopping experience of a customer is planned before the
customer enters, shops, and leaves the store with a smile or with agony by carrying a perception
about the store. This experience drives the customer’s decision of visiting the store in future.

Let us see, what efforts retail business operations executives put in to make the shopping
experience memorable for the customer.

STORE MANAGEMENT
The retail store being the fundamental source of revenue and the place of customer interaction, is
vital to the retailer.

The store manager may not himself perform, but is responsible for the following duties:

• Ensuring adequate stock of merchandise in the store.

• Appropriate planning, scheduling, and organization of staff, inventory and expenses, for
short and long-term success.
• Monitoring the loss and taking preventive measures to protect the company’s assets and
products in the store.
• Upgrading store to reflect high profitable image.
• Communicating with head office/regional office when required.

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 • Conducting constructive meetings with staff to boost their morale and motivate the staff
to achieve sales goals.
• Communicating with customers to identify their needs, grievances, and complaints.
• Ensuring that the store is in compliance with employment laws regarding salary, work
hours, and equal employment opportunities.
• Writing performance appraisals for assisting staff.

The store manager ensures that these duties are performed according to the guidelines set by the
company.

PREMISES MANAGEMENT
The store premises are as important as the retail store itself. Managing premises includes the
following tasks:

Determining Working Hours of Store. It majorly depends upon the target audience, retailed
products, and store location. For example, a grocery store near residential area should open
earlier than a fashion store. Also, a solitary store can be open as long as the owner wants to but a
store in a mall has to adhere to working hours set by the mall management.

Managing Store Security. It helps avoiding inventory shrinkage. It depends upon the size of
store, the product, and the location of store. Some retailers attach electronic tags on products,
which are sensed at store entrance and exits by sensors for theft detection. Some stores install
video cameras to monitor movement and some provide separate entry and exit for personnel so
that they can be checked. For example, a large departmental store needs high security than the
grocery store located near residential area.

Here are some basic formulae used while managing premises:

a) Transaction per Hour = No. of Transactions/Number of Hours

The retailer keeps track of the number of transactions per hour, which helps in determining store
hours and staff scheduling.

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 b) Sales per Transaction = Net Sales/Number of Transactions

The result gives the value of the average sales and net return, which is used to study sales trends
over time.

c) Hourly Customer Traffic = Customer Traffic In/Number of Hours

This measure is used to track total number of customer traffic per unit time. It is then applied to
schedule hours and determine staff strength.

INVENTORY MANAGEMENT

Merchandise manager, category manager, and other staff handle the inventory. It includes the
following tasks:

• Receiving products from the vendor.

• Recording inward entry of the products.
• Checking the products against quality norms laid by the retail company and for details
such as colors, sizes, and styles. In case of large stores, this task is automated to a large
extent.
• Separating and documenting the faulty or damaged products for returning.
• Displaying the products appropriately to gain customers’ attention. Heavy products are
kept at the lower level. Most accessed products are kept at the eye-level and the less
accessed products are kept at high level of shelves. On-the-fly-purchased products such
as chocolates, candies, etc. are placed near payment counters.

Here are some formulae used for inventory control:

➢ Inventory Turnover Rate = Net Sales/Average Retail Value of Inventory

It is expressed in number of times and indicates how often the inventory is sold and replaced
during a given period of time.

➢ Cost of Goods Sold/Average Value of Inventory at Cost

When either of these ratio declines, there is a possibility that inventory is excessive.

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 ➢ % Inventory Carrying Cost = (Inventory Carrying Cost/Net Sales) * 100

This measure has gained importance due to rise in inventory carrying cost because of high
interest rates. This prevents blockage of working capital.

➢ Gross Margin Return on Inventory (GMROI) = Gross Margin/Average Value of Inventory

The GMROI compares the margin on sales on the original cost value of merchandise to yield a
return on merchandise investment.

RECEIPT MANAGEMENT
Managing receipt is nothing but determining the manner in which the retailer is going to get the
payment for the sold products. The basic modes of receipt are:

➢ Cash
➢ Credit card
➢ Debit card
➢ Gift card

Large stores have the facility of paying by the modes listed above but small retailers generally
prefer accepting cash. The retailer pays card fees depending upon the volume of transactions
with the suppliers, manufacturers, or producers.

The staff responsible for accepting payment needs to clearly understand the procedure for
accepting payment by cards and collecting the amount from the bank

SUPPLYCHAIN MANAGEMENT AND LOGISTICS

Supply Chain Management (SCM) is the management of materials, information, and finances
while they move from manufacturer to wholesaler to retailer to consumer. It involves the
activities of coordinating and integrating these flows within and out of a retail business.

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Most supply chains operate in collaboration if the suppliers and retail businesses are dealing with
each other for a long time. Retailers depend upon supply chain members to a great extent. If the
retailers develop a strong partnership with supply chain members, it can be beneficial for
suppliers to create seamless procedures, which are difficult to imitate.

CUSTOMER SERVICE

The top management of a retail business decides the customer service policy. The entire retail
store staff is trained for customer service. Each employer in the retail store ensures that the
service starts with smile and the interacting customer is comfortable and has a pleasant shopping
experience.

The promptness and politeness of the retail store staff, their knowledge about the product and
language, ability to overcome challenges, and rapidness at the billing counter; everything is
noted by the customer. These aspects build a great deal of customer’s perception about the store.

Many retail stores train staff members to handle the cash counter. They have also introduced a
concept of express billing where customers buying less than 10 products can bill faster without
having to stand in the regular payment queue.

During festivals and markdown periods, the trend of shopping increases.

➢ Customer Conversion Ratio = (Number of Transactions/Customer Traffic) * 100

The result is the retailer’s ability to turn a potential customer into a buyer. It is also called “walk
to buy ratio”. Low results mean that promotional activities are not being converted into sales and
the overall sales efforts need to be assessed afresh.

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ELEMENTS OF RETAIL MARKETING MIX

The retail marketing mix is the combination of marketing activities that the retailers carry out to
meet the target market’s requirements in the best possible way. Retail marketing mix is a
combination of 7 Ps:

Product – The quality and range of variants of the product or service.

Place – It is the location where the product or service is sold: online, type of store, location of
store, time taken and the mode of transport to reach the retail place.

Price – Cost of product or service for different customer segments by considering various price
affecting factors.

Promotion – It is raising customers’ awareness about the product or service and driving
customers to buy the products by offering tempting deals.

People – This includes internal stakeholders such as customers, sales staff, management staff,
and external stakeholders such as suppliers and supply chain management force.

Process – It is the range of activities involved in manufacturing and delivering the product or
service to the customer.

Physical Environment – Presenting the products or offering services in a well-organized and

attractive manner, keeping an aesthetic sense in presentation to elevate customers’ shopping
experience.

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