Meaning and Definition of Retail Meaning Retail is the business of selling goods. The goods can be anything from food to clothes to books © toys but it is done from a fixed location - usually a shop.eS. INTRODUCTION TO RETAIL BUSINESS Definition of Retail Retail is the sale of goods toend users, not for resale, but for use and consumption by the purchaser. Retail trade sector comprises of establishment primarily engaged in retailing, merchandise generally without transformation and renclering services incidental tothe sale of merchandise. ‘The North American Industry Classification System (NAICS)” retail may be defined as the first point of customer contact”, Definition of Retailing Hecorng $0 iip Kotler, Retaing includes af the actives involved in sling goods or services tothe final | ams, for personal no Busines ue. A retro resi store 18 ay Busine enterprie whole vofeme comes pra fom retain’ Becoing to 5 ave,” Rts owes are ss fom whom he conser uinstely 6 Hecrbng 0 Wom J-Staton “Retr or area tres a busines enters wc ls rman to elite consumer for Nobis rbing 0 Cond and Si ang consi of cities ile in sling Sto mat consume ecg to McCarthy” Rtaling sling ia consumer praia uct “According to report of definition committee USA “Retailing includes ol activites incidental to welling tothe wbinate | conser Retailing is defined to include all the business activities relating to selling of goods and services to the final consumers. IMPORTANCE OF RETAILING: (Organised retailing in India was estimated at £18, 000crores in 2002-2003 and has grown at about 40% over the last 3 years (Source KSA Retail Outlook) > Retailing has a tremendous impact on the economy. It involves high annual sales and employment. As a major source of employment retailing offers a wide range of career ‘opportunities including; store management, merchandising and owning a retail business. ppossible for customers to have access to a broad variety of products and services. Retailing ‘also helps to create place, time and possession utilities. A retailers service also helps to ‘enhance a product's image. > Retailers participate in the sorting process by collecting an assortment of goods and services from a wide variety of suppliers and offering them for sale. The width and depth of assortment depend upon the individual retailer's strategy. > They provide information to consumers through advertising, displays and signs and sales ‘personnel. Marketing research suppor is given to other channels, members. | > Consumers benefit from retailing in that, retailers perform marketing functions that makes it ;————_—_o > They store merchandise, mark prices on it, plac handle products; usually they pay suppliers for items befo They complete transactions by using appropriate locations, other services eg. delivery Retailing in a way, is the final stage in marketing channels for consumer provide the vital link between producers and ultimate consumers. fe items on the selling floor and otherwise re selling, them to final customers, and timings, credit policies, and products. Retailers Characteristics of retaile ‘The followings are some ofthe essential characteristics ofa retailer: ‘© Hes regarded asthe las linkin the chain of distribution. 4+ He purchases goods in large quantities from the wholesaler and sellin small quantity tothe consumer. ‘+ He deals in general products ora variety of merchandise ‘+ He develops personal contact with the consumer. ‘+ He aims at providing maximum satisfaction to the consumer. ‘© Hehas a limited scope in the market. \ctions of retailer: Retailers perform a number of functions. These are: "© The retailer buys a variety of products from the wholesaler or a number of wholesalers. He thus performs two functions like buying of goods and assembling of goods. ‘The retailer performs storing function by stocking the goods for a consumer. He develops personal contact with the consumers and gives them goods on credit "He bears the risks in connection with Physical Spoilage of goods and fallin price. Besides he risks on account of fire, theft, ceterioration in the quality and spoilage of goods. ‘resorts to standardization and grading of goods in such a way that these are accepted by he customers. arrangement for delivery of goods and supply valuable market information to er and the consumer. or of maintaining Inge quantity of goods for future period becauseINTRODUCTION TO RETAIL BUSINESS 1 1.5 | 4, He develops personal relationship with the customers by giving them credit. 5. He provides free-home delivery service to the customers. 6. He informs the new product to the customers. 7. He makes arrangement for replacement of goods when he receive complaints. To Wholesaler: 1. He gives valuable market information with regard to taste, fashion and demand for the goods to the wholesaler. The retailer maintains direct contact with the customers and so he relieves the wholesaler with regard to maintenance of direct contact. 3. He helps the wholesaler in getting their goods distributed to the consumer. 4. Hes regarded as an important link between the wholesaler and the consumer. 5. He creates demand for the products by displaying the goods to the consumers.Functions of Retailer in the Distribution Channel 1. Providing Assortments: Manufacturers generally specialize in producing specific types of products: For example, Cadbury's makes chocolates, Kellogg, makes breakfast cereals, and Everest makes spices. If such manufacturers decided to have their own stores g, only their own products, consumers would have to go to many different stores to make purchases for their requirements. Retailers collect a variety of products and services from & ‘number of sources and then offer these as an assortment to their customers, offering assortment enables their customers to choose from a wide selection of brands, desig sizes, colours, and prices in one location. 2. Breaking Bulk: Breaking bulk is beneficial to both manufacturers and consumers Manufacturers prefer to ship products in bulk quantity cartons in order to reduce transportation costs as it is more cost effective for manufacturers to package and ship merchandise in larger, rather than smaller quantities. Consumers, in turn, preter ©isa: INTRODUCTION To RETAIL BUSINESS Purchase merchandise in smaller, more mans products ailers purchase the able quantities. Re Jarger quantities from manufacturers and then offer the products in smaller king bulk quantities to the consumers as per theie requirements. This is called bres 3. Holding Inventory: Holding inventory is a major function of retailers in order to keep inventory that has been broken down from their bulk packaging into user-friendly sizes so that products can be made available in smaller quantities whenever consumers want them. This will enable consumers to conveniently maintain a small inventory products at home since they are aware that the retailers will always maintain an inventory of the products they need! at the store and make the products available when they need more. This reduces, fhe consumer's cost of storing products. Consumers find this beneficial since they have limited storage space especially for perishable merchandise like dairy and frozen products. 4, Providing Convenient Locations and Timings: Retailers select the locations of their stores and Keep them open for longer timings so that they are conveniently located and available to their customers for fulfilling their requirements of goods and services as soon as they require them. 5. Providing Services: Retallers provide services in order to make it easier for consumers to . buy and use products, this could be in the form of providing credit to consumers so that they can use a product now and pay for it later. This could also involve services like Droviding the space required fr displaying products so that consumers can see the varity and feel and test them before buying. Retailers may also provide additional information about the characteristics and availablity of products to customers through salespeople who are available to ansiver questions. With multichannel retailing, retailers offer the flexibility of multiple retail formats like retail store, web sites, mailorder catalogues, and a toll-free number. This provides convenience and enables customers to buy anytime during the day CF night. Customers can also choose to pick merchandise up ata store at their convenience orhave ithome-delivered 6 Recording and Providing Feedback: Retailers record transactions and feedback from customers which they inform back to wholesalers and manufacturers inthe form of sales forecasts, delivery delays, defective items, customer complaints, inventory turnover, and other information. This retailer feedback enables the wholesalers and manufacturers to modify goods and services in order to better satisfy customers and in the process increase their sales 7, Increasing the Value of Products and Services: Retailers provide assortments, break bulk, Hold inventory, offer convenient locations and timings, provide services, and record and provide feedback, thus increasing the value provided to consumers from products and services. In general, retailers serve the following functions: > Anticipate and fulfil consumer neecs and wants at competitive prices. > Provide assortments by stocking large quantities of different items manufactured by various companies.Cyclical Retail Development The Wheel of Retailing theory is one of most common cyclical development theory. The wheel theory includes three cycles: The entry, Trade-up and Vulnerable phase. In the entry phase, retailers enter the market with low prices and affordable service in order to increase market penetration. As the marketing mix improves and market share increases, retailers provide more variety, better facilities and better service, while typically increasing prices. In the vulnerable phase, competition from new, more innovative businesses cause retailers to lose both market share and profitability, Conflict theory (Competition Drives Change) Conflict theory, also known as the Competition says that retailers change in response to competition. Phases include problem recognition, implementation of solutions and the emergence of a new retail business. In the first phase, retailers may ignore new competitors and fight to maintain } the status quo. When this fails, the business attempts to imitate or differentiate itself by improving products or services. Those moving into the third phase create an entirely new business, This explains, for example, how some department stores transitioned into discount stores Theories of Retail Development Specialty Stores, malls & Other Formats: As the needs the consumers grew and changed, one saw the emergence of commodity specialized mass merchandisers in the 1970s. The seventies were also witness to the use of technology entering retail sector with the introduction of the barcode. Specialty chains developed in the 80s as did the large shopping malls. Shopping malls, a late 20th century development were created to provide for the consumer's d in single, self-contained shopping area. Although they were first created for the convenience of populations, they are now found in many main city thoroughfares. A large branch of a retail chain usually serves as a mall's retail flagship, which is the primary attraction for In Asian countries, many malls house swimming pools, arcades and amusement parks. City Plaza shopping malll includes one of the territory’s two ice rinks. Web: The world of retail changed yet again, when in 1995, [Link] opened its vide market on the web. With the growth of the worldwide web, both retailers and ‘suppliers and products from anywhere in the world. of retail formats worldwide has been largely influenced by a constantly landscape. One of the main reasons for new formats emerging is the er when compared to the consumer of the earliest generation isINTRODUCTION TO RETAIL BUSINESS cS definitely more demanding and is focused on what he wants. Consumer demand is the prime reason for the emergence of various formats. The retailer on the other hand, has been influenced by factors like the availability of real estate and the increase in its prices. He is faced with the challenge of adding on new services and the need for differentiation. This has led to specialization and the emergence of specialists. Supply chain complexities and the increasing pressure on margins have also forced retailers to look at new formats. Retail development can be looked at from the theoretical perspective. No single theory can be ‘universally applicable or acceptable. The application of each theory varies from market to market, depending on the level of maturity and the socio-economic conditions in that market. Wheel of retailing Js a hypothesis that attempts to explain the emergence of new retailing institutions and their ‘eventual decline and replacement by newer retailing institutions. Like products retailing institutions also have a life cycle, Jt means in retail marketing process whereby original low-price discounters upgrade their services and gradually increase prices. As they evolve into full-line department stores, a competitive ‘opportunity develops for new low-price discounters to develop, and the process continues with the ext generation, ‘As more tine passes, ‘let aa mora services 3. ute now has Sul igher pees Sil ghor margins Sul gher sats ‘alt in Box Definition: The Wheel of Retailing is a theory to explain the institutional changes that take place ‘when innovators, including large business houses, enter the retail arena Description: The Wheel of Retailing is a assumption that describes how retailers approach to capture market share and ereate brand value It explains how retailers usually begin atthe bottom of the wheel with low prices, profits and prestige and then gradually work their way up to increased prices, profits and prestige ‘As mentioned, the Wheel of Retailing is just a hypothesis and may not be applicable to all ‘tailing situations. It, however, seems to explain many retailing trends in many countries.aoe ne US ey From this theory we can conclude that, “New rea market a low status institutions. The cycle begins with retailers attract Service. Over a period of time these retailers want to expand Provide more services, and open more co And prices, creating opportunites for new low price retailers to enter mers by offering lon markets and begin to stock mo nent locations. ss in It consists of three phases like entry phase, rade up phase and vulnerable phase, Fae a ete cen cde aes with he cpeaog of ey Inattatong,wil nally oes ltd proach lw pies ant minimuny so institution at this phase stategialyacept low margins duc to lack of services and face eS eaten ancien crc protic prem na en increase penetration of the, market. When these retail institutions are successful other ta} institutions rapidly imitate and adapt those characteristics. At the end ofthe entry phase ts Of the same type of retail institutions has increased. As time passes the innovative retail instr become tradional retail institutions that offer more services and better store features a higher prac Ve reg For instance the maturing or more rational retail institutions provides facilities, such 45 yp rooms, carts food courts and resting areas and promise services, such as more variety in protec advertisements, delivery, and provision of credit . The retail institutions are simulans increasing their margins and prices and appeal to more middle and upper income consumers my than bargain hunting and lower income consumers. ‘These upgrading practices continue to be practised by the aging retail institution type int th trade up or second phase, information from other theories resulting in combination theories 5 needed changes at the peak of the trade up phase, retail institutions achieve increases in alg volume, profitability and market share due to improvement oftheir store retail mix ‘As time passes and the wheel turns, retail institution types mature additionally and move ito the third /final phase, the vulnerable phase. ‘These firms are mature retail institutions that should have a strong cash flow ancl high pros however as retailers add higher levels of operational practices, operation costs increase, product pt rises and profit margins tend to erode asa result some mature retailers focus only on product qi and services rather than on prices. On the other hand some mature retailers abandon high qual and high services in order to reduce operation costs and product prices to survive price competion. ‘These changing operational practices make the third phase vulnerable to easy replacement other retailers in this vulnerable phase, retail institutions lose marketshare and profitability All these conditions allow for the emergence of a new innovative retailer in the next cxce of wheel of retailing, Retail Store Life Cycle Introduction Stage AAs the name implies, the introduction is the beginning stage of any business, characte ‘innovation and industry expansion. Entrepreneurs in this phase of development either inti! new retail store model, for example a particular product mix combined with a new service, 0° direction for an existing store. Introductory stage stores should be prepared for low profits -INTRODUCTION TO RETAIL BUSINESS a igh development costs. Retail expert Bob Phibbs notes that business owners can often reenerEZé faling business by returning the introductory stage with a new approach Growth Phase {Once your store catches on it enters the growth phase. As you grow, your profits increase (qutomers rave about your brand. While this phase may fee like Christmas, business professor Da (Gerth warns that competitors begin to copy you at this point, diluting your brand Some of your edge. The challenge in this sage is to keep innovating enough so you pew and exciting for your customers each time they visit. Maturity Phase {Once you are fully established, you have a chythm and you've gotten pretty good at kee (gore stocked so customers can count on you. In this stage, you also have a lot of competi SJourstoredeGines your industry instead of fecing new and diferent. Competition even may Sree ‘othe point where your industry over expands, leading to declining profits and reduced customer Toyaly Asis happens, prices besin to drop 2s you and your competitors try to lure back customers with great deals. To counter this, Phibb advises innovation instead of discounting. Decline Ifyou are unable fo innovate sulfciently to keep your business new and fresh, it enters the last [hase ofthe ret life cyele decline, At this point, your business may seem out of date and boring 19 P tomers, Other retailers have caught their attention, and it's dificult to lure those customers back Succosful businesses Watch the trends in their industry and neighbourhood to anticipate the decline and change before customers abandon them. Retall business in India Retail Business in india is influenced by many factors. They are as follows 1. Range of merchandise 2. Convenience of Shopping at «Particular Outlet Travel me and distance Socioeconomic Background and Culture be Segoe Fecalgase Cycle ST ALOYSIUS COLL : LO¥S EGE LIBRARY Society affects retain complex ways MANGALURU- 575 008 Technology Social Responsibility ‘Range of Merchandise : The range of merchandise is perhaps the most important reason forcastomers to patronize a particular outlet. The initial curiosity about the store may draw consumer toa fell tore, but to convert him into a buyer and to retain him over a pericd Of time is largely dependent on the quality and the range of merchandise offered by the Sore. If the merchandise is similar to that of another store or what is commonly availabe, -_thecustomer may not se any reason why he should not sith stores i, “The range of merchandise offered plays an important role in the case of categories like ere durables, books and music, apparel and other lifestyle product. eke ie pexseheINTRODUCTION TO RETAIL BUSIWegg . Location convenience /Convenience of Shopping at a Particular Outlet The element oy convenience is fast gaining prominence in the world of organised etl. This is especity true incase of items like grocery /fruts and chemists . Travel time and distance : The time required to reach a particular retail location is again fast becoming critical. This is especially true in the case of metros like Mumbai, whery travel ime i high, This as resulted in many local areas developing in terms of shopping to facilitate buying. We see the appearance of multiple outlets for a brand, department stores and malls making their appearance across most Indian cities, . Socio-economic Background and Culture : The socio-economic background of the consumer largely determines his lifestyle, Ths influences the kind of store that he may be comfortable shopping in. Consumer buying behaviour varies from market to market and is Jargely influenced by the culture ofthe region, for example, Asian culture is very different from Wester culture. The need hierarchy is different for each market. The need that the retailer can fulfil needs to be clearly understood by him, This will not only help him in determining the right merchandise mix, but it will also help him in evolving an effective communication strategy. The Stage of the Family Life Cycle : The stage of the family life cycle that the customer belongs to, also largely influences his needs. For example, the needs of a young bachelor will be different from the needs of a family with children in their teens, which will again be different from the requirements of an elderly retired couple. The retailer needs to be clear about the target market that he is catering to, as he cannot be everything to everybody. Society affects retail in complex ways : Many social factors influence markets that retail businesses serve. Economic and political changes, for instance, can overlap and fundamentally change how a society thinks. While retail business owners can’t hope to Predict every possible change, paying attention to the major social factors that drive change can help prepare them to adapt. + Technology : Technological changes have an enormous impact on how retail businesses ‘operate, in good ways and in bad. Take the advent of smartphones, for example. Retail stores now can use location-based advertising to reach nearby consumers with targeted Sales messages, but they also must deal with shoppers comparing prices across the world to find the best deal. The effect technology has on a society can boost a retail store's Performance while also undermining traditional ways of doing business, forcing retailers to adapt or give way to more progressive competitors. Social Responsibility : Consumers increasingly consider the social impact of the money they spend. Some will pay more to support retailers who assert sustainable practices, for Instance, by buying products made with recycled material. Others avoid companies notorious for irresponsible or unethical practices, such as outsourcing manufacturing to exploitative sweatshops in under-developed countries. More than ever, retail store owners ‘must consider the ethical and social ramifications of their actions, as well as the actions of their suppliers. A manufacturer's negative publicity for example, could hurt sales in every retail store it supplies.\wTRODUCTION TO RETAIL BUSINESS = Retail in India - Present At present the Retail industry in india is accelerating. Though India i still not at an equal pace with other Asian counterparts, Indian is geared to become a major player inthe Retail Market. The fact that most of the developed nations are saturated and the developing ones still not prepared, India secures & great position in the international market. Also with a highly diverse demography, India provides immense scope for companies brining in diferent products targeting different consumers According t0 the Global Retail Development Index, India is positioned as the foremost destination for Retail investment and business development. The factor that is presently playing a sigifcant role here isthe fact that a large section of Indian popiilation is in the age group of 20° witha considerably high purchasing power this has caused the increase in the demand in the urban market resulting inconsistent growth inthe Retail business. Though the metros and other tier 1 cities continue to sustain Retail growth, the buzz has now shite from these great cites to lesser known ones. As the spending power is no longer limited to tmeros, every tier 2 city inthe country has good market for almost every product oF service. Duc &9 this, ier 2 cities like Chandigarh, Coimbatore, Pune, Ahmedabad, Baroda, Hyderabad, Cochin, Nagpur, Indore, Trivandrum et. provide a good platform fr a brand to enter Indian market However there ae a few precautions for every brand that explores Indian market. As Indian consumers are very curious and have a broad perspective, they respond well to a new product or concept and there are very far chances of a brand surviving wel, but every Indian consumer be it an ‘ubanite ora small fown dweller needs a feeling of value for money. Although labelled as tight fisted, Indian consumers are great spenders once they realize that they are getting value for their money. ‘Alo new product /service concepts from the western world are better adopted fist by the urban Indians, the smaller markets respond well othe need based retailing rather than luxury concepts. ‘As the Indian retailing is getting more and more organized various retail formats are emerging to capture the potential of the market + Mega Malls + Multiplexes + Largeand small supermarkets + Hypermarkets ‘+ Departmental stores are afew formats which flourishing in the both big and small regional markets [As the major cities have made the present retail scenario pleasant, the future of the Indian Retailing industry lies in the rural regions. Catering to these consumers will bring tremendous ‘business to brands from every sector. However as the market expands companies entering India will have to be more cautious with their strategic plans. To tap into the psyche of consumers with different likes and dislikes and differing budgets a company has to be well prepared and highly flexible with their product and service. In ths regard focusing on developing each market separately can savea brand from many troubles.Types of Retailing 1, Specialty stores: Speciality stores are retail businesses that focus on specific product categories, such as office supplies, men’s or women’s clothing, and carpet. It isn’t the product they sell that determines if a company is a specialty store but rather the breadth of their product offering. If a company could be considered an expert in a certain type of good, itis a specialty store.L112 | INTRODUCTION TO RETAIL BUSINESS Examples of Specialty Stores To identify some examples of specialty stores, open the yellow pages to a category that interests you. Perhaps you'll look up medical supplies, home décor, electronics, floor coverings, crafts, toys, or video games - any of the stores listed in those sections will be specialty stores. Specialty stores don’t have to be single locations or local businesses. 2. Department Stores: A department store is a set-up which offers wide range of products to the end-users under one roof. In a department store, the consumers can get almost all the Products they aspire to shop at one place only. Department stores provide a wide range of options to the consumers and thus fulfil all their shopping needs. 3. Supermarket: A large form of the traditional grocery store, is a self-service shop offering a wide variety of food and household products, organized into aisles. It is larger in size and has a wider selection than a traditional grocery store, but is smaller and more limited in the range of merchandise than a hypermarket or big-box market. The supermarket typically comprises meat, fresh produce, dairy, and baked goods aisles, along with shelf space reserved for canned and packaged goods as well as for various non-food items such as kitchenware, household cleaners, pharmacy products and pet supplies. Some supermarkets also sell a variety of other household products that are consumed regularly, such as medicine, clothes, and some stores sell a much wider range of non-food products: DVDs, sporting quipment, board games, and seasonal items (e.g., Christmas wrapping paper in December). itional supermarket occupies a large amount of floor space, usually on a single ‘is usually situated near a residential area in order to be convenient to consumers, is the availability of a broad selection of goods under a single roof, at prices. Other advantages include ease of parking and frequently the shopping hours that extend into the evening or even 24 hours a day. tally allocate large budgets to advertising, typically through newspapers. borate in-shop displays of products. The shops are usually part of or control (sometimes by franchise) other supermarkets located s increasing opportunities for economies of scale.