Retail Management

Introduction to Retailing
Retail
The word ‘retail’ is derived from the French
word ‘retaillier’, meaning ‘to cut a piece off’ or
‘to break bulk’. In simple terms, it implies a
first-hand transaction with the customers.
 Retailing involves a direct interface with the

customer and the coordination of business

activities from end to end.
 The industry has contributed to the
economic growth of many countries and is
one of the fastest changing and dynamic
industries in the world today.
Definitions
 According to W.J. Stanton, “Retailing includes
all activities directly related to sales of goods
or services to the ultimate consumer for
personal a non-business use”.
 According to Cundiff and Still, “Retailing

consist of those activities involved in selling

directly to ultimate consumer.”
 Retailing in Marketing Mix
Retailing forms an integral part of the
marketing mix and includes elements like
product, place, price, people, presentation
and promotion.
Retail stores serve as communication hub
for customers. Commonly known as the Point
of Sales (POS) or the Point of Purchase (POP),
retail stores transmit information to the
customers through advertisements and
displays.
Functions of a Retailer
Retailor provides the goods that customer needs, in a
desired form, at a required time and place.
  A retailor does not sell raw material. He sells

finished goods or services in the form that customer

wants.
  A retailer buys a wide range of products from

different wholesalers and offers the best products

under one roof. Thus, the retailor performs the
function of both buying and selling.
  A retailor keeps the products or services within

easy reach of the customer by making them available

at appropriate location.
Retailing Scenario-Global
 Retailing is big business in more developed
countries and it is better organised than what
it is in India.
 Over 50 of the Global Fortune 500 Companies

and 25 of the Asia’s top 200 companies are

retailers.
 Retail is a significant contributor to the

overall economic activity: the total retail share

in the World GDP is 27% while in USA it
accounts for 22% of the GDP.
Percentage of Organised and Traditional
Retailing Globally
Country Organised Traditional
Retailing (%) Retailing (%)
USA 80 20
W.Europe 70 30
Malaysia & Thailand 50 50
Brazil & Argentina 40 60
Philippines 35 65
Indonesia 25 75
China 20 80
South Korea 15 85
Retailing Scenario - India
 India has over 12 million retail outlets of various sizes and
formats of which most of them are unorganised.
 Retailing in India is becoming increasingly important, and
organised retailing is poised to grow at an exponential rate.
These growth opportunities have even attracted global
majors who are setting up shop in India.
 The growth in Indian retailing provides jobs to roughly 15%
of employable Indian adults, and is the biggest contributor
to India’s GDP after agriculture.
 Retailing in India accounts for over 10% of the country’s
Gross Domestic Product (GDP) and around 8% of the
employment (Source: Indian Brand Equity Foundation-IBEF).
 The Indian retail market is expected to grow to US$1.1
trillion by 2020, while the modern retail market in India
is expected to double in size over the next three years.
(Source: IBEF)
 Transition from traditional retail to organised retail is
taking place.
 The online retail is growing at rapid pace. Online retail
in India is expected to be at par with the physical stores
in the upcoming few years, driven by robust investment
and rapid increase in the number of internet users.
 The overall retail market in India is expected to grow at
12% growth rate per annum, driven by growing
urbanization, rising income, younger demographics
and rising aspirations of the middle class.
 Economic Significance of Retailing
 Retailers handle the entire gamut of roles and functions aiming
at understanding customer requirements and anticipating the
demand, gathering information about the market trends
through strong market intelligence and making product related
assortments and discovering financing opportunities.
 It is relatively easier to become a retailer, as large investment
is not required, procurement of production equipment is not
required, and a retailer can procure merchandise on the basis
of credit.
 The retail industry has been impressive regarding generating
large-scale employment opportunities worldwide which is
expected to grow at a much faster rate in comparison with the
other sectors performance in future.
Contribution of Retailing to the
Indian Economic Scenario
 Real Estate
 Tourism/Outbound Shopping
 Higher GDP
 Outsourcing opportunities
 Career Opportunities in retailing
 Retailing career can be quite rewarding right from the start of
the career for a person as it may require bearing a handling a
lot of challenges and responsibilities right from the
beginning. Moreover, retailing has given rise to
entrepreneurial opportunities, and few of the wealthiest
entrepreneurs are involved in the retail business.
 The retail sector has opened newer job avenues for people
having different areas of specialization with diverse skills and
qualification backgrounds.
 These opportunities could be in the areas of Finance &
Accounting, Retail Operations, Commercial Operations,
Inventory & Warehousing, SCM & Logistics, HRM, Distribution
Systems, Marketing & Brand Management, IT, New Products
Development & Market Research/Business Analysis.
Types of Jobs in Retail
 Store Operations
 Human Resources / Training
 Finance and Administration
 Buying
 Customer Contact Centres
 Marketing
 Logistics
 Information Technology (IT)
 Automotive Skills
Characteristics of Retailing
 Direct contact with the customer
 Relationship with the customers
 Stock small quantities of goods
 Stock goods of different brands
 Customers’ contact with the company
 Have a limited shelf space
 Sells the goods at maximum prices
 Functions Of Retailing
 Sorting: Retailers balance the demands of both sides (manafacturer
who wants to sell and customers who has different choices) by
collecting and assorting the goods from different sources and
placing them according to the customers’ needs.
 Breaking Bulk: Retailers buy the goods from manufacturers and
wholesalers in sufficiently large quantities but sell to the customers
in small quantities.
 Channel Of Communication: Since retail involves direct contact with
the end consumers, it forms a very important channel of
communication for the companies and manufacturers.
 Retail also acts as a mediator between the company and the
customer and communicates the feedback given by the customers
back to the manufacturer or wholesaler.
 Marketing: Retail stores are the final channels where the actual
decisions are made. Hence, they act as important marketing
channels for the brands. Smart placements, banners,
advertisements, offers, and other strategies are executed by the
manufacturers to increase their sales in retail stores.
Some more functions for retailing:

 Buying and assembling of goods

 Warehousing and storing
 Maximizing customer satisfaction
 Risk management
 Grading of goods and services to the

customers
 Vital channel for the launch of new products
 Product promotion and advertisement
Types of Retailing
1. Store Retailing
2. Non-Store Retailing
3. Corporate Retailing
4. Internet Retailing and
5. Service Retailing
1. Store Retailing
◦ Departmental Stores
◦ Specialty Stores
◦ Supermarkets
◦ Discount Stores
◦ Convenience Stores
◦ Malls
◦ Hyper-Marts
◦ Kirana Stores
2. Non-Store Retailing
◦ Direct Selling
◦ Automated Vending
3. Corporate Retailing
4. Online Retailing/E-Tailing

5. Service Retailing
Theories of Retailing Evolution
 Environmental Theory (Natural Selection)
 Cyclical Theory
 Conflict Theory (Evolution through Dialectic

Process)
1) Environmental Theory (Natural
Selection)
 It is based on Darwin’s theory of survival: “The
fittest would survive the longest”.
 Retailers deal with an environment which is made up
of customers, competitors and changing technology.
This environment can change the productivity of a
single retail state as well as of clusters and centres.
 Need ceases to exist → the institution will tend to
disappear.
 Retailing institutions that can most effectively adapt
to environmental changes are the ones most likely
to prosper or survive.
2) Cyclical Theory
 Cyclical theory fundamentally describes the
different phases in a company. This theory
states that change follows a pattern and all
phases have specific attributes linked with them.
 Three main components of Cyclical theory

1) Wheel of retailing
2) Retail life cycle
3) Retail accordion.
a) Wheel of Retailing
 It was described by McNair II. It helps us

understand retail changes.

 It refers to a company entering the market with

low prices and reasonable service in order to

challenge competitors.
b) Retail Life Cycle
c) Retail Accordion
Retail Accordion theory is evolved by Hollander
(1966) which explained retail evolution as a cyclical
trend in terms of the number of merchandise
categories such as product assortment.
 Evolution of retail institutions from general,
broadbased outlets with wide assortments, to
narrowbased institutions carrying specialised
assortments, and back to general, broad-based
assortments.
 Synonymous with general-specific-general theory.
 Stern and El-Ansary (1977) suggested a graphic

model of Retail Accordion theory with breadth of

merchandise line assortment changing across
time.
3) Conflict Theory (Evolution through
Dialectic Process)
 Gist (1968) suggested the Dialectic theory,
influential Conflict theory that has been the basis
for the common concepts of many conflict theories.
 The Dialectic theory is based on Karl Marx's Theory
of Evolution.
 Blake (1939) summarized the Theory of Evolution
as the " the progress of change means that
everything must decline to make way for new
things, that nothing in nature or society is "fixed"
or "sacred" since it must share the process of
transformation.
 Dialectics means, specifically, that the phases of
each development repeat former phases, but on
a different plane.
 Gist proposed that an existing retail institution

is challenged by its competitor because it has

competitive advantages over the existing retail
institution (i.e., thesis1). As time passes, the
first retail institution imitates the characteristics
of competitor to upgrade its existing
characteristics and finally creates a new retail
institution.
Dialectic Process