Principles of Retailing – Module 1: Retailing

1. Retailing: Concept, Definition & Functions

Aspect Explanation
Concept Selling goods/services directly to final consumers for personal use.
Definition Retailing is the set of activities that markets products/services to consumers for personal or
household use.
Functions - Acts as a link between producer and consumer - Creates time, place & possession utility -
Offers customer services - Breaks bulk for easy purchase - Assists in marketing and promotion

2. Evolution of Retailing

 Ancient times: Barter system, weekly markets.

 Medieval times: Local shops and fairs.
 Industrial revolution: Rise of department stores.
 Modern era: Malls, online shopping, global brands.

3. Global Retailing Scenario

 Dominated by large retail chains like Walmart, Carrefour, Tesco.

 Use of technology, supply chain efficiency, and brand loyalty.
 Online retail is booming globally (Amazon, Alibaba, etc.)

4. Growth of Retailing in India

 Fastest growing retail market due to:

o Rising income levels
o Urbanization
o Young population
o Changing lifestyle
 Retail contributes significantly to GDP and employment.

5. Organized Retailing in India

Key Drivers for Growth Future Prospects
- Growing middle class - Expansion in tier-2, tier-3 cities
- Increased disposable income - Use of AI, data analytics for better service
- Foreign investments (FDI in retail) - Growth in online + offline (Omnichannel retail)
- Better infrastructure (malls, roads) - Rise in specialty and experiential retail
6. Retail Formats and Their Characteristics

A. Store Formats

Format Features
Supermarket Self-service, groceries & daily items, low price (e.g., Big Bazaar)
Department Store Multiple product categories under one roof (e.g., Shoppers Stop)
Hypermarket Large, combines supermarket + department store (e.g., Spencer’s, Walmart)
The Mall Collection of different stores + entertainment, food court
Discount Store Offers products at lower prices (e.g., Vishal Mega Mart)
Category Killers Large stores focusing on one category with low price (e.g., Decathlon)
Kiosks Small stalls for quick purchases, located in malls, stations
Convenience Small, near home, open long hours (e.g., 7-Eleven)
Store
 Specialty Store Focus on one type of product/category (e.g., Bata for shoes, Archies)

B. Non-Store Formats

Format Features
E-retailing Online shopping via websites/apps (e.g., Amazon, Flipkart)
Direct Selling Door-to-door or network marketing (e.g., Amway, Tupperware)
TV Home Shopping Buying products seen on TV channels (e.g., Naaptol, Telebrands)
Vending Machine Automated machines selling snacks, drinks, etc. (Common in airports,
Retailing metros)

Module II: Store Location Planning

1. Levels of Location Decisions

Level Decision Involves

Region/Country Which country or region to enter for retail operations
City Selection Choosing the best city based on demand, infrastructure
Local Area Choosing the right neighbourhood/area in the city
Specific Site Exact site or land/building for the store (corner, floor, etc.)

2. City Selection

 Factors considered:
o Population size & demographics
o Income levels and spending habits
o Competition level
o Availability of real estate
o Infrastructure (roads, power, internet)
o Government policies and ease of doing business

3. Location Options
Location Type Explanation
High-Street Location Busy commercial streets, high footfall (e.g., Connaught Place, Linking Road)
Free-Standing Independent building, not connected to other stores (e.g., McDonald's
Location standalone outlets)
Shopping Center/Mall Group of stores under one roof, includes food courts, cinema (e.g., Select
Citywalk, DLF Mall)

4. Site Selection

Factors to consider:
 Accessibility (roads, parking)
 Visibility from main roads
 Rent or cost of space
 Proximity to competitors or complementary stores
 Availability of utilities (electricity, water, etc.)
 Safety and legal clearance

5. Factors Affecting Location Decisions

Decision Key Factors
Level
 City Population, income, retail growth, infrastructure, local laws
Location/Area Customer base, traffic flow, presence of competition, nearby stores
Site Size of space, visibility, cost, convenience, safety
LEVELS OF LOCATION DECISION (3 Levels)
Level What It Means
1. City Selection Choosing the right city to open the store
2. Area/Type of Location in Picking the right area or locality in the selected city
City
3. Specific Site Selection Choosing the exact plot/shop within the chosen area

I. CITY SELECTION – Factors to Consider

Factor Meaning (Easy) Example
1. Trading Area Area from where customers travel to shop Mumbai, Delhi attract shoppers
Size from far
2. Population & More people = more potential buyers; fast- Noida, Bengaluru, Gurgaon
Growth growing = better future business booming in retail
3. Purchasing Higher income = more spending on shopping Gurgaon has high disposable
Power income
4. Specialty Trade City known for specific products Moradabad → Brassware,
Mysore → Silk sarees
5. Competition Less or no competition = better opportunity Globus started in Indore – low
competition
6. Development Lower land/rental cost = cost-effective setup Chennai, Bengaluru cheaper
Cost than Mumbai

II. AREA/TYPE OF LOCATION IN A CITY

Factor Meaning (Easy) Example
1. Customer Attraction How popular the shopping area is for Chandni Chowk (Delhi), Colaba
Power attracting buyers (Mumbai)
2. Competition in Area Are there too many stores selling the same Nai Sarak → good for stationery
product? retailers
3. Accessibility Easy to reach without traffic jams MG Road, Bengaluru – well-
connected
4. Zoning Rules Check municipal plans, construction Ambience Mall Gurgaon suffers
limits, traffic conditions due to traffic
5. City’s Direction of Choose areas where the city is expanding Navi Mumbai, Ghaziabad,
Growth Gurgaon

III. SPECIFIC SITE SELECTION (Exact Shop/Space)

Factor Meaning (Easy) Example
1. Traffic Volume More people/cars passing = more Busy roads or market streets preferred
potential buyers
2. Target Customer Traffic must match the store’s Designer men’s store won’t benefit
Traffic audience from school traffic
3. Complementary Stores Nearby stores should sell related School uniform store near stationery
Nearby items shop
4. Parking Availability Easy and safe vehicle parking is Especially for malls, hypermarkets
necessary
5. Threat of Competition Check if a large competitor might Avoid area near aggressive discount
come nearby stores
Types of Retail Locations
1️. Unplanned Locations – Not part of any planned shopping centre
Type Meaning (Easy) Pros Cons Example
Freestanding Sites Standalone stores, not Easy parking, Less footfall, no Petrol pumps
attached to other visible, low rent shared customer with attached
stores rules base stores
Central Business Main downtown High weekday foot Poor parking, Connaught
District (CBD) business area traffic limited vehicle Place, Delhi
access
Gentrified Areas Old areas becoming Rich customer base, Higher rent over Bandra, Mumbai
modern with wealthy demand for time
residents premium goods

2️. Planned Locations – Part of a designed retail setup (malls, shopping centers)
Type Meaning (Easy) Pros Example
Convenience/Neighborhood Small local shopping Daily needs, anchor Local market
Centers areas near homes stores like supermarkets with grocery +
draw crowds chemist
Enclosed Shopping Malls Big indoor shopping High footfall, mix of DLF Mall of
complexes shopping + food + India, Noida
entertainment
Power Centers Large centers with big High traffic due to big Lifestyle & Home
anchor stores and some brands, visibility Centre in big city
small ones hubs
Lifestyle Centers Open-air malls with Leisure + shopping feel, High Street
shops, cafes, very attractive for youth Phoenix, Mumbai
entertainment
Outlet Centers Discount stores on city Branded goods at low The LaLiT Ashok
outskirts prices = big crowd Outlets,
Bengaluru

3️. Nontraditional Locations – Creative or temporary store setups

Type Meaning (Easy) Pros Example
Pop-Up Stores Temporary shops (few days or Flexible, creates Festive pop-up stores in
months) used to test markets or buzz, low cost malls during Diwali
festivals
Store-Within-a- A mini-store inside a bigger store Shares customers, MAC Cosmetics inside
Store saves rent Shoppers Stop

STORE DESIGN & LAYOUT

1. Exterior Design Components & Significance

Component Importance
Signboards Brand visibility and attraction
Lighting Enhances appeal at night, creates mood
Window Displays Shows best products, attracts foot traffic
Entrance Design First impression, invites people in
Parking Area Convenience for customers, especially in malls or standalone stores
2. Interior Atmospherics

 Creates shopping mood using:

o Lighting
o Music
o Colours
o Fragrance
o Cleanliness
 Aim: Keep customers comfortable and increase time spent in store → more buying

3. Store Layout & Space Planning

Type of Layout Features

Grid Layout Straight rows (used in supermarkets), easy navigation, efficient
Free-Flow Layout No specific pattern (used in fashion stores), relaxed shopping
Loop Layout (Racetrack) Circular path leading customers through the entire store (e.g., IKEA)

 Space Planning: Allocate areas for:

o Entry zone
o Display zones
o Billing counters
o Trial rooms
o Stock/storage areas

Importance of Store Layout

Purpose Simple Meaning
Customer Flow Helps guide how customers walk through the store
Space Utilization Uses store space smartly without feeling crowded
Sales Good layout leads to more browsing, impulse buying, and higher sales
Maximization
Types of Store Layouts
Layout Type Meaning (Easy) Features / Benefits Drawbacks Example
1. Grid Layout Long straight aisles Easy to find products, Feels boring, less Big Bazaar,
with products on both max use of space, fast impulse buying Reliance
sides – like in grocery shopping Smart
stores
2. Loop Loop path that takes Increases browsing, Can feel confusing IKEA,
(Racetrack) you through the entire more product exposure, or crowded Shoppers
Layout store encourages impulse Stop
buying
3. Free-Form No fixed path, open Unique and relaxed Hard to find FabIndia,
Layout and creative layout experience, great for specific items, may Biba
Boutique used in boutiques exploration and create crowding
aesthetic display
4. Spine One main central aisle Easy flow, combines Can feel dull, less Croma,
Layout (like a spine) with benefits of grid + loop, adventurous layout electronics
sections on both sides good for large stores stores
Summary Table
Layout Best For Encourages Navigation
Grid Supermarkets Fast, structured shopping Very easy
Racetrack Department stores, IKEA-style stores Full-store browsing Moderate
Free- Boutiques, Fashion outlets Creative & leisurely shopping Can be confusing
Form
Spine Electronics & Department stores Direct flow through categories Easy & simple

4. Visual Merchandising

 Definition: Displaying products attractively to influence buying decisions.

 Elements include:
o Window displays
o Mannequins
o Product arrangement by colour/theme
o Signage & info tags (visual graphics or signs used to communicate information to customers
inside (and sometimes outside) the store) ( Directional, Promotional, Informational Signage)
o Seasonal decoration

Module III: MERCHANDISING MANAGEMENT

1. Merchandise Mix – Decision Factors

Element Meaning
Variety Number of different product categories (e.g., clothes, accessories)
Assortment Choices within a category (e.g., many types of jeans)
Branding Choosing between private label or national/international brands
Quality High-end or value-for-money products based on target customers
Price Points Range of prices (e.g., budget, mid-range, premium) offered in the store

2. Factors Affecting Merchandise Mix

Factor Explanation
Budget Constraint Limited money for buying stock
Space Limitation Shelf/display space available for products
Product Turnover Rate Speed at which products are sold and replaced
Stock Replenishment How frequently and easily stock is restocked
Economic Order Quantity Best quantity to order to reduce storage + ordering cost
(EOQ)

3. Vendor Identification & Selection

Selection Criteria 4. Negotiating with Vendors

- Product quality
- Price and discounts  Aim: Get best prices, payment terms, delivery time
- Reliability and timely delivery  Should be win-win and based on volume
- After-sales service commitments, returns policy, etc.
- Reputation in market

5. Category Management & Captainship

Term Meaning
Category Managing product categories like separate business units (e.g., dairy, beverages)
Management
Category Captain One leading brand/vendor is allowed to manage/display a category (e.g., Nestle
for dairy)
6. International Sourcing
 Importing products from foreign suppliers to:
o Lower cost
o Better quality
o Get variety
 Needs care due to legal, currency, and delivery issues

Module IV: RETAIL PRICING & COMMUNICATION

1. Factors Affecting Pricing

 Cost of goods
 Competitor pricing
 Customer demand
 Brand image
 Seasonality
 Government taxes

2. Developing a Retail Price Strategy

Step Explanation
Retail Objectives Profit, market share, survival, premium image
Pricing Policy Everyday low pricing, high-low pricing, psychological pricing
Price Adjustments Discounts, markdowns, clearance sales, loyalty rewards

3. Retail Communication

Concept Explanation
Retail Image Customer’s perception about store (based on layout, pricing, ads)

4. Retail Communication Mix – Elements

Tool Purpose
Retail Advertising Print, TV, online ads to attract customers
Sales Promotion Offers like Buy 1 Get 1, coupons, contests
Personal Selling Face-to-face interaction by sales staff
Publicity Free coverage in media (e.g., newspaper article)
Word of Mouth Customer recommendation to others (most trusted form of marketing)

5. Retail Advertising – Types & Media Decisions

 Types: Institutional (brand-focused), Product advertising (specific items)

 Media: Newspapers, radio, social media, hoardings, in-store posters

Module V: RETAIL INFORMATION SYSTEM

1. Key Concepts

Term Explanation
Retail Information System System to collect, manage, and analyse retail data
Data Warehousing Central storage of large customer & product data
Data Mining Finding patterns and trends in data for better decisions
EDI (Electronic Data Interchange) Direct data exchange between retailers and vendors
 Quick Response (QR) Reduces inventory holding time with fast restocking
UPC (Universal Product Code) Barcode for product identification
POS Terminals Point-of-sale system that records sales and updates inventory
RFID Radio tech for tracking inventory
Self Check-out Customer scans and pays without cashier (e.g., at Decathlon)

1. Meaning of Retail Information System (RIS)

 A Retail Information System collects, stores, and analyses data related to retail operations (sales,
stock, customer preferences).
 Helps in decision-making: What to stock? When to reorder? What promotions work?

2. Components of a Retail Information System

Component Purpose
Transaction Processing Records sales, returns, and customer details
Inventory Tracks stock levels, reorder alerts
Management
Customer Database Stores info about customers, buying habits
Vendor Management Tracks purchases, delivery, performance of suppliers
Reporting Tools Provides sales reports, forecasts, trends

3. Key Technologies in RIS

A. Data Warehousing

 A central place to store large volumes of data (sales, inventory, customers).

 Useful for generating reports and doing analytics over time.

B. Data Mining

 Technique to analyze large data sets to identify customer trends, preferences, and patterns.
 Example: Customers who buy baby diapers also buy baby wipes → cross-selling.

C. Electronic Data Interchange (EDI)

 Automated data sharing between retailer and supplier.

 Example: Automatic restock order when inventory goes below set level.
 Saves time, reduces errors.

D. Quick Response (QR) Delivery System

 Ensures products are replenished quickly when sold.

 Helps in reducing stockouts and storage costs.
 Used in fashion retail to adapt to fast-changing trends.

E. Universal Product Code (UPC)

 A barcode printed on products; scanned at billing counters.

 Contains product info: price, size, brand, etc.
 Makes checkout and inventory update faster.
F. Point-of-Sale (POS) Terminals

 System at billing counters to:

o Scan items
o Print bill
o Update inventory
o Record sale
 Also stores customer data for loyalty programs.

G. Radio Frequency Identification (RFID)

 Uses radio waves to track items automatically.
 No need to scan one-by-one like barcodes.
 Helps in:
o Faster inventory counting
o Preventing theft
o Real-time stock monitoring

H. Self-Check-out Systems
 Customers scan and pay for items themselves.
 Seen in large stores (e.g., Decathlon, Walmart).
 Reduces queue time and saves staff cost.

4. Contemporary Issues in Retailing

A. FDI in Retailing (Foreign Direct Investment) - involves foreign companies selling their
products through retail outlets in another country.
Pros Cons
Brings in advanced technology & expertise May hurt small local retailers
Increases competition → better prices for customers Foreign dominance in Indian retail market
Generates employment opportunities Can push out small traders
Improves supply chain Cultural mismatch in product offerings possible
Example: Walmart & Amazon entering India via partnerships.

B. Impact of Organized Retail on Small Grocery Stores (Kirana Shops)

Positive Impact Negative Impact
Encourages modernization of kirana shops Loss of customers due to pricing & variety in malls
Kiranas adopt tech (billing software, UPI, etc.) Organized retailers offer discounts & loyalty offers
Some tie up with big players (e.g., JioMart) Kiranas lack marketing and branding power

What is meant by retailing? According to you, which is the most preferred type of retail store for a
mid-sized clothing and lifestyle business?
Retailing is the process of selling goods and services directly to the final consumers for their personal or
household use. It involves various activities such as selecting merchandise, storing inventory, pricing,
promoting products, and offering customer service. Retailing serves as a bridge between producers and end
users, playing a crucial role in the distribution channel.

For a mid-sized clothing and lifestyle business, the most preferred type of retail store is a Specialty Store.
A Specialty Store focuses on a specific product category — in this case, apparel and lifestyle goods — and
offers a deep assortment of those products. This type of retail store helps the business position itself as an
expert in the category, build brand recognition, and cater to a clearly defined target market.

Reasons why a specialty store is ideal for a mid-sized clothing and lifestyle business:
1. Focused Branding: Helps create a strong and focused brand identity around fashion and lifestyle.
2. Customer Loyalty: Shoppers looking for specific clothing styles or lifestyle products are more
likely to return if they find quality and variety.
 3. Better Inventory Management: With a narrow product line, it's easier to manage inventory, control
quality, and stay on top of trends.
4. Enhanced Customer Service: Staff can be trained specifically in fashion or lifestyle, leading to
better customer support and satisfaction.
5. Cost-Effective Operations: Compared to department stores or large-scale formats, specialty stores
are more cost-effective in terms of space and management for mid-sized businesses.

In summary, retailing connects businesses with consumers, and for a mid-sized clothing and lifestyle
brand, a specialty store offers the best balance of customer engagement, brand building, and operational
efficiency.
How does retail location impact profitability and operations of a business? Also explain loop layout
with diagram.

Retail location is one of the most critical factors in determining the success of a retail business. It directly
affects both profitability and day-to-day operations. A strategically chosen location can attract more
customers, increase visibility, and boost sales. On the other hand, a poorly chosen location can lead to low
footfall, high operational costs, and reduced revenue.

Impact on Profitability:
1. Foot Traffic: Locations with high customer movement (e.g., malls, main markets) generate more
walk-in sales.
2. Accessibility: Easily reachable locations improve customer convenience and retention.
3. Rental and Overhead Costs: Prime locations may have higher rent but usually lead to higher sales,
balancing overall profitability.
4. Competitor Proximity: Being close to or far from competitors can either enhance or hurt profit
depending on positioning.

Impact on Operations:
1. Supply Chain Efficiency: Proximity to suppliers or distribution centers can reduce transportation
costs and delivery time.
2. Employee Availability: Accessible locations attract more job applicants, ensuring smoother
operations.
3. Utilities and Support Services: Urban or commercial zones often have better infrastructure and
services essential for retail operations.

Loop Layout (Racetrack Layout):

A loop layout guides customers along a circular or loop-shaped pathway through the store. It encourages
them to browse through most of the store, increasing product exposure and chances of impulse buying.

Features:
 Clear, defined traffic flow
 Displays placed along the path
 Maximizes customer engagement with merchandise

Advantages of Loop Layout:

 Enhances customer navigation
 Encourages impulse buying
 Helps in organizing product categories clearly

In conclusion, retail location and store layout are vital for maximizing efficiency, customer satisfaction, and
ultimately, the business’s profitability.