3IndexSr.No.Topics Pg. No.1. INTRODUCTION 42. WHAT IS RETAIL MANAGEMENT 4-53. RETAIL FUNCTION AND DISTRIBUTION 54. BENEFITS OF RETAIL 85. CLASIFICATION OF RETAILINSTITUTION8-156. RETAIL LOCATION STRATEGY ANDDECICIONS16-187. SERVICING THE RETAIN CUSTOMER 19
4INTRODUCTIONRetailing : - According to Kotler: “Retailing includes all the activitiesinvolved in selling goods or services to the final consumers for personal,non business use”It is responsible for matching individual demands of the consumer withsupplies of all the manufacturers.WHAT IS RETAIL MANAGEMENTDefinition :- A process of promoting greater sales and customersatisfaction by gaining a better understanding of the consumers of goodsand services produced by a company. A typical retail managementstrategy for a manufacturing business might research the retail processthat distributes the finished products created by the business toconsumers to determine and satisfy what buyers want and require. The various processes which help the customers to procure thedesired merchandise from the retail stores for their end use refer toretail management. Retail management includes all the steps required to bring thecustomers into the store and fulfill their buying needs.Let us understand the concept with the help of an example:Tim wanted to purchase a mobile handset. He went to the nearbystore and purchased one for himself.In the above case, Tim is the buyer who went to a fixed location (inthis case the nearby store). He purchased a mobile handset(Quantity - One) to be used by him. An example of retail.The store from where Tim purchased the handset must haveshown him several options for him to select one according to hisbudget and need.
5From where do you think the store owner (also called the retailer)purchased all the handsets?Here the manufacturers and the wholesalers come into the picture.The retailers purchase goods in bulk quantities (huge numbers) tobe sold to the end-users either directly from the manufacturers orthrough a wholesaler.RETAIL FUNCTION AND DISTRIBUTIONRetailers play a significant role as a conduit between manufacturers, wholesalers,suppliers and consumers. In this context, they perform various functions like sorting,breaking bulk, holding stock, as a channel of communication, storage, advertisingand certain additional services.1: SortingManufacturers usually make one or a variety of products and would like to sell theirentire inventory to a few buyers to redu7ce costs. Final consumers, in contrast,prefer a large variety of goods and services to choose from and usually buy them insmall quantities. Retailers are able to balance the demands of both sides, bycollection an assortment of goods from different sources, buying them in sufficientlylarge quantities and selling them to consumers in small units.The above process is referred to as the sorting process. Through this process,retailers undertake activities and perform functions that add to the value of theproducts and services sold to the consumer. Supermarkets in the US offer, on andaverage, 15,000 different items from 500 companies. Customers are able to choosefrom a wide range of designs, sizes and brands from just one location. If eachmanufacturer had a separate store for its own products, customers would have tovisit several stores to complete their shopping. While all retailers offer an assortment,they specialize in types of assortment offered and the market to which the offering ismade. Westside provides clothing and accessories, while a chain like Nilgirisspecializes in food and bakery items. Shoppers‟ Stop targets the elite urban class,while Pantaloons is targeted at the middle class.2: Breaking BulkBreaking bulk is another function performed by retailing. The word retailing is derivedfrom the French word retailer, meaning „to cut a piece off‟. To reduce transportation
6costs, manufacturers and wholesalers typically ship large cartons of the product,which are then tailored by the retailers into smaller quantities to meet individualconsumption needs.3: Holding StockRetailers also offer the service of holding stock for the manufacturers. Retailersmaintain an inventory that allows for instant availability of the product to theconsumers. It helps to keep prices stable and enables the manufacturer to regulateproduction. Consumers can keep a small stock of products at home as they knowthat this can be replenished by the retailer and can save on inventory carrying costs.4: Additional ServicesRetailers ease the change in ownership of merchandise by providing services thatmake it convenient to buy and use products. Providing product guarantees, after-sales service and dealing with consumer complaints are some of the services thatadd value to the actual product at the retailers‟ end. Retailers also offer credit andhire-purchase facilities to the customers to enable them to buy a product now andpay for it later. Retailers fill orders, promptly process, deliver and install products.Salespeople are also employed by retailers to answer queries and provide additionalinformation about the displayed products. The display itself allows the consumer tosee and test products before actual purchase. Retail essentially completestransactions with customers.5: Channel of CommunicationRetailers also act as the channel of communication and information between thewholesalers or suppliers and the consumers. From advertisements, salespeople anddisplay, shoppers learn about the characteristics and features of a product orservices offered. Manufacturers, in their turn, learn of sales forecasts, deliverydelays, and customer complaints. The manufacturer can then modify defective orunsatisfactory merchandise and services.6: Transport and Advertising FunctionsSmall manufacturers can use retailers to provide assistance with transport, storage,advertising and pre-payment of merchandise. This also works the other way round incase the number of retailers is small. The number of functions performed by aparticular retailer has a direct relation to the percentage and volume of sales neededto cover both their costs and profits.7: Arranging AssortmentManufacturers usually make one or a variety of products and would like to sell theirentire inventory to few buyers to reduce costs. Final consumers in contrast prefer alarge variety of goods and services to choose from and usually buy them in small
7units.8: Promotional support:Small manufacturers can use retailers to provide assistance with transport, storage,advertising, and pre- payment of merchandise.BenefitsThe implementation of such a retail marketing strategy yields benefits for consumers,manufacturers and wholesalers and creates economic utility.The first point under retailing benefits for customers, bulk breaking refers to the actof retailers of buying goods in large quantities and then breaking them into smallersizes for their individual customers.As a result purchases become convenient for customers - in terms of quantitybought as well as expenditures made.The assorting function is nothing but evaluating all the different products availableand offering to the target the optimum array of products from which to choose.The storing function performed by the retailers relieves customers of the task ofanticipating their desires too far in advance of their needs as the retailers keepgoods in inventory until customers are willing to buy and use them.Further, retailers help manufacturers smoothen the production cycle by placingorders for peak demands well in advance and by managing inventory even on behalfof the manufacturer.They create economic utility for consumers by providing the products in the form andat the place and time desired by the consumer. Reach more customers Reduce costs Improve cash flow Increase sales more rapidly Focus on area of expertise
8CLASIFICATION OF RETAIL INSTITUTIONOwnership format serves a marketplace niche. Independent retailers capitalize on a very small targeted customer base &please shoppers in a friendly, folksy (simple) way. Word-of mouthcommunication is important. These retailers should not try to serve toomany customer & enter into price wars. Chain retailers benefit from widely known image, economies of scales (i.e.cost advantages that a business obtains due to expansion), & masspromotion possibilities. They should maintain their image chain wide & notbe inflexible in adapting changes in the marketplace. Franchisors have strong geographic coverage & motivation of thefranchisees as owner-operators. They should not get bogged down inpolicy disputes with franchisees or charge excessive royalty fees. Leased departments enable store operators & outside parties to join forces& enhance the shopping experience, while sharing expertise & expenses.They should not hurt the image of the store or place too much pressure onthe lessee to bring in store traffic. A vertically integrated channel gives a firm greater control over sources ofsupply, but it should not provide consumers with too little choice ofproducts or too few outlets. Cooperatives provide members with price savings. They should not expecttoo much involvement by members or add facilities that raise costs toomuch.a) Independent Retailer : - An independent retailer owns one retailunit.AdvantagesThere is flexibility in choosing retail formats, location, assortment (variety),prices, hours etc., & devising strategy based on the target customers.Investment costs for leases, fixtures, workers, & merchandise can be broughtdown. There is no duplication of stock or personnel function. Responsibilitiesare clearly delineated (defined) within the store.
9Independents frequently act as specialist in a niche of the particulargoods/services category. They are then more efficient & can lure (attract)shoppers interested in specialized retailers.Independents exert strong control over their strategies, & the owner-operatoris typically on the premises. Decision making is centralized & layers ofmanagement personnel are minimized.There are certain image attached to independents, particularly small ones,that chains cannot readily capture.Independents can easily sustain consistency in their efforts because only onestore is operated.Independents have “Independence”. No meetings, union, stockholders & laborunrest etc.DisadvantagesLess bargaining power with the suppliers as they buy less quantity.Cannot gain economies of scale (i.e. cost advantages that a business obtainsdue to expansion) in buying & maintaining inventory. Transportation, ordering,& handling costs are high.Operations are labor intensive.They are limited to certain media for advt. because of financial constraints.Family-run independents is overdependence on the owner. It is difficult tokeep it up & running.Limited time allotted to long-run planning, since owner is intimately involved inday-to day operations.Chain Retailer :- Chain retailer operates multiple outlets (store units) undercommon ownership. It usually involves in some level of centralized purchasing &decision making.Advantages Many chains have bargaining power due to their purchase volume. Theyreceive new items when introduced, have orders promptly filled, get salessupport, & obtain volume discounts. Chains achieve cost efficiencies when they buy directly from themanufacturers & in large volumes, ship and store goods, & attend tradeshows sponsored by the suppliers to learn about new offerings. They cansometimes bypass wholesalers.
10 Efficiency is gained by sharing warehouse facilities; purchasing standardizedstore fixtures; centralized buying & decision making etc. Headquarters havebroad authority for personnel policies & for buying, pricing, & advt. decisions. Computerized ordering merchandise, inventory, forecasting, sales, &bookkeeping. This reduces overall costs. Take advantage of variety of media from print to electronic. Detailed & clear responsibility for employees with available substitute incaseany employee is retiring or quitting.Disadvantages Flexibility may be limited. Consistent strategies on pricing, promotions, &product variety must be followed throughout all units which may be difficult toadapt to local diverse market. Investment is high due to infrastructure & store as multiple store has to bestocked. Managerial control is complex due to geographically dispersed branches. Limited independence to the personnel.Franchising :- Franchising involves a contractual arrangement between afranchisor (a manufacturer, wholesaler, or service sponsor) & a retail franchisee,which allows the franchisee to conduct business under a established name &according to a given pattern of business.The franchisee pays an initial fees & a monthly %age of the gross sales inexchange for the rights to sell goods & services in an area.A franchisee operates autonomously in setting store hours, chooses a location,& determines facilities & displays.Advantages of Franchisees They own a retail enterprise with a relatively small capital. They acquire well-known names & goods/services lines. Standard operating procedures & management skills may be taught to them. Cooperative marketing efforts (like national advt.) are facilitated. They obtain exclusive selling rights for specified geographical territories.
11 Their purchases may be less costly per unit due to the volume of the overallfranchise.Disadvantages of Franchisees Oversaturation could occur if too many franchisees are there in onegeographical area. Due to overzealous selling by some franchisors, franchisees‟ incomepotential, required managerial ability, & investment may be incorrectly stated. They may be locked into contracts requiring purchases from franchisors orcertain vendors. Cancellation clauses may give franchisors the right to void agreement ifprovisions are not satisfied. In some industries, franchise agreements are of short duration. Royalties are often a %age of gross sales, regardless of franchisee profits.Advantages of Franchisors A national & global presence is developed more quickly & with less franchisorinvestment. Franchisee qualification for ownership are set & enforced. Agreement require franchisees to abide by stringent operating rules set byfranchisors. Money is obtained when goods are delivered rather than when goods aresold. Because franchisees are owners & not employees, they have greater initiativeto work hard. Even after franchisees have paid for their outlets, franchisors receive royalties& may sell products to the individual proprietors.Disadvantages of Franchisors Franchisees harm the overall reputation if they do not adhere to companystandards. Lack of uniformity among outlets adversely affects customer loyalty. Intra-franchise competition is not desirable.
12 The resale value of individual units is injured if franchisees perform poorly. Ineffective franchised units directly injure franchisors‟ profitability.Franchisees, in greater number, are seeking to limit franchisors‟ rules ®ulationsLeased Department :- A leased department is a department in a retail store –usually a department, discount, or specialty store – that is rented to outside party.The leased department proprietor is responsible for all aspects of its business &normally pays a %age of sales as rent.The store sets operating restrictions for the leased department to ensure overallconsistency & coordination.Advantages (from the stores‟ prespective) The market is enlarged by providing one-stop customer shopping. Personnel management, merchandise displays, & reordering items areundertaken by lessees. Regular store personnel do not have to be involved. Leased department operators pay for some expenses, thus reducing storecosts. A %age of revenue is received regularly.Disadvantages (from the stores‟ prespective) Leased department operating procedures may conflict with store procedures. Lessees may adversely affect the stores‟ image. Customers may blame problems on the store rather than on the lessees.Advantages for Leased department operators Stores are known, have steady customers, & generate immediate sales forleased departments. Some costs are reduced through shared facilities like security equipment &display windows. Their image is enhanced by the relationships with popular storesDisadvantages for Leased department operators
13 There may be inflexibility as to the store hours they must be open & theoperating style. The goods / services lines are usually restricted. If they are successful, the store may raise rent or not renew leases when theyexpire. In-store locations may not generate the sales expected.CONVENIENCE STOREA convenience store is usually a retailer that is well located, open long hours, andcarries a moderate number of items. It‟s a small store with average prices, goodsand services.DEPARTMENT STOREA Department store is a large retail unit with an extensive assortment of goodsand services that is organized into separate departments for purposes of buying,promotion, customer service and control.CONVENTIONAL SUPERMARKETA conventional supermarket is a departmentalized food store with a wide range offood and related products; sales of general merchandise are rather limited.SPECIALTY STOREA specialty store concentrates on selling goods or service line, such as appareland accessories, toys, furniture. In contrast to a mass marketing approach,specialty stores usually carry a narrow assortment in their chosen categorytailoring to selective market segments.DISCOUNT STOREIt is a type of department store with following features:High-volume, low-cost, fast-turnover outlet.Centralized checkout service.Lower operating costs.Clear customer focus: shoppers looking for good value.FACTORY OUTLETA factory outlet is a manufacturer-owned store selling manufacturer closeouts,discontinued merchandise, irregulars, cancelled orders, and, sometimes, in-season, first quality merchandise. Factory outlets can be profitable despite pricesup to 60 percent less than customary retail prices due to low operating costs. Atfactory outlets, manufacturers can decide on store visibility, set promotion
14policies, etc. E.g. .Levi‟s Factory Outlet Store at Marine Lines, Mumbai. Reebok,Nike & Adidas Stores on the Delhi-Haryana border.DIRECT MARKETINGIt is a form of retailing in which a customer is exposed to a good or servicethrough a non-personal medium (e.g. Direct mail, T.V., radio, magazines, orinternet.). It has the following features:Low costs and inventoriesMore geographical coverage.Convenience for customers.No prior to purchase examination of goods.DIRECT SELLINGDirect selling includes both personal contacts with consumers in their homes asalso phone solicitations. The strategy mix for direct selling emphasizesconvenience in shopping and a personal touch. Besides, for the retailer, directselling has lower overhead costs.VENDING MACHINESA vending machine is a retailing format involving the coin-or card-operateddispensing of goods and services. It eliminates the use of sales personnel andallows for 24-hour sales.WORLD WIDE WEBIs another aspect of modern retailing. I shall touch upon this in our part on role ofI.T. in retailing.
15RETAIL LOCATION STRATEGY AND DECICIONSLocation is the most important ingredient for any business that relies oncustomers. It is also one of the most difficult to plan for completely.Location decisions can be complex, costs can be quite high, there isoften little flexibility once a location has been chosen and the attributesof location have a strong impact on a retailer‟s overall strategy. In India,most retailers prefer to own the property rather than avail of the desiredproperty through lease or rental. This makes the location decision evenmore critical. Choosing the wrong site can lead to poor results and insome cases insolvency and closure.Importance of Location DecisionThe importance of the location decision is due to the following factors.Location is a major cost factor because itInvolves large capital investmentAffects transportation costsAffects human resources cost, e.g., salariesLocation is a major revenue factor because itAffects the amount of customer trafficAffects the volume of businessThe terms „location‟ and „site‟ are often used interchangeably but there isa distinct difference between the two. „Location‟ is a broader concept,which denotes the store and its trading area from where a majority of itscustomers originate, while a site refers to the specific building or part ofthe building where a store is located. Location and site characteristicsshould interact in a positive and synergistic way with a store‟smerchandising, operations and customer service characteristics. Forexample, a designer men‟s store located in an up market shoppingcentre or a mall near posh residential colonies, housed in an attractivebuilding with adequate parking facilities.
16Levels of Location Decisions and its Determining FactorsA retailer has to take the location decision, basing on three aspects:1. Selection of a city2. Selection of an area or type of location within a city3. Identification of a specific siteThe factors which influence these decisions are discussed below:1. Selection of a CityThe following factors play a significant role in the selection of a particularcity for starting or relocating an existing retail business:Size of the city’s trading area: A city‟s trading area is thegeographic region from which customers come to the city forshopping. A city‟s trading area would comprise its suburbs as wellas neighboring cities and towns. Cities like Mumbai and Delhi havea large trading area as they draw customers from far off cities andtowns.Population of population growth in the trading area: The largerthe population of the trading area, the greater the potential of thecity as a shopping location. A high growth n population in thetrading area can also increase the retail potential.Total purchasing power and its distribution: The retail potentialof a city also depends on the purchasing power of the customersand its distribution networks in its trading area. Cities with a largepopulation of affluent and upper middle-class customers can be anattractive location for stores selling high-priced products such asdesigner men‟s wear. The fast growth in purchasing power and itsdistribution among a large base of middle class is contribution to aretailing boom around major cities in India.
17Total retail trade potential for different lines of trade: A citymay b become specialized in certain lines of trade and attractcustomers from other cities. Moradabad has become an importantretail location for brassware products while Mysore is famous forsilk saris.Number, size and quality of competition: The retailer alsoconsiders the number, size and quality of competition beforeselecting a city.Development cost: The cost of land, rental value and otherrelated cost.2. Selection of an Area or Type of Location within a CityIn the selection of a particular area or type of location within a city,evaluation of the following factors is required.Customer attraction power of a shopping district or aparticular store: Major shopping centres like Chandni Chowk inDelhi, Colaba in Mumbai and Commercial Street in Bangaloreattract customers from far off, while small shopping centres locatedin colonies attract customers from immediate neighborhood.Quantitative and qualitative nature of competitive stores:Retailers would like to evaluate the product lines carried by othersores, number of stores in the area, etc. before selecting the area.Availability of access routes: The area or shopping centreshould provide easy access routes.Nature of zoning regulations: The retailer should also considerthe zoning regulations in the city.Direction of spread of the city: The retailer should consider thedirection in which the city is developing while selection thelocation.3. Selection of a Specific SiteThe choice of a specific site is particularly important. In central andsecondary shopping centre, non-anchor sores depend on customerscoming to the market and the traffic generated by anchor stores. Thelarge stores in turn depend on attracting customers from the existingflow of traffic. Where sales depend on nearby settlements, selecting thetrading area is even more important than picking the specific site.
18Servicing the retail customerTo start with let us understand what is meant by the term customer service. Is it areturns policy? Is it a loyalty program? In India customer service is largely associatedwith loyalty programs however by itself customer service is a subject of aphenomenal amount of research world over. Customer service continues to remainan enigma to most retailers. Defining customer service is difficult as the conceptitself is multi faced. The definition given by Lovelock focuses on various aspects:Customer service is a task, other than proactive selling that involves interactions withcustomers in person or by telecommunications, mail or automated processes. It isdesigned performed and communicated with two goals in mind: operationalproductivity and customer satisfaction.Thus, customer service may be termed as all the functions and activities performedby a retailer in order to satisfy the customer thereby building customers for life. Incase of most customers, what is uppermost in the mind is their last experience withthe retailer. They may have had a positive experience on the past ten occasions, butif the eleventh experience with the brand has been negative, it will subsume all thegood ones that came before. Hence, customer service has in fact, become anecessity.Very often, the terms customer service and customer satisfaction are usedinterchangeably however, the basic difference between them needs to beunderstood. Customer service focuses on measurement of how well a firm meets theestablished performance standards that re viewed as important to meetingcustomers‟ needs Customers satisfaction on the other hand is how the customermeasure externally the service performance of a firm. An important key to customersatisfaction is obtaining customer feedback. The aim of customer satisfaction is toidentify the gap between customer perception of service and the actual service.It is believed that every encounter that a customer has with a service provider in anyform – personal on the phone, complaint handling bills etc – is a moment of truth.What customers know of the organization comes from various encounters that theyhad with the organization. How they feel about the organization is a result of thequality of these encounters. A moment of truth occurs any time a customer comes incontact with some aspect of the organization and uses the opportunity to judge thequality of service the organization provides. This when applied to the retailer, helpsus understand why customers choose to patronize some retailers over others.