Consumer Behaviour, Retail GAP

1. Unit-2
Retail Formats

2. Classification of Retail formats
1. Unorganized Retailing - It is defined as
an outlet run locally by the owner .The
supply chain and outsourcing are also
done locally to meet local needs
2. Organized Retailing - It refers to trading
activities undertaken by license retailers,
i.e those who are registered for sales tax,
income tax etc..

3. Unorganized Retail Format

4. Unorganized Retail Formats
• Unorganized retailers is an individual
having small unstructured organization to
carry out retail activities with limited
resources and capabilities that lack
technical and accounting standard.
• Traditional formats of low-cost retailing.
• It is generally family run business, lack of
standardization and the retailers who are
running this store they are lacking of
education ,experience, and exposure

5. Example:
• Hand vendors cart and pavement and
mobile vendors
• General stores, paan/beedi shops,
convenience stores , hard ware shop at the
street corner
• Small –store (kirana) retailing, Mom and
pop Stores, Street vendors, Small road side
stalls are the ways to generate self-
employment

8. Characteristics of Unorganized Retail format
1. Lack of Inventory control and Supply chain
Management
2. Labor Intensity- Low labor cost , failure to
employ part time labor
3. Family Run Stores- Joint Hindu Family firm
4. Lack of Standardization- Goods in the stores
are not arranged properly
5. Crowded Format- any one something to sell
6. Low Productivity
7. Unique Operation

9. Advantages of Unorganized Retail
1. Credit Sales
2. CRM
3. Door delivery
4. Flexible timings
5. Employment impact
6. Location Advantages for the
Unorganized Retailers
7. Purchase of small quantities

10. Disadvantages of Unorganized Retail
1. Price
2. Lack of Hygiene
3. Space and Variety Constraints
4. Generation next, Looking for new Avenue

11. Same Product Category but Organized

12. Type of Organized Format

15. Organized Retail formats
• Owned by corporate entities
• Hypermarket
• Supermarket
• Convenience store
• Exclusive outlet
• Departmental store.
• Organized retail outlet is a place where
the product attributes in terms of quality,
weight, price, service of the providers are
homogeneous.

16. Characteristics of Organized Retail format
1. Direct Interactions with customers
2. Boost to Exports
3. Expose Shoppers
4. Employment Generation
5. Improvement of government revenue
6. Provide ideal shopping
7. Expanded Business Opportunities

17. Importance of Organized Retailing
1. Price advantage
2. Merchandise
3. Dearth of time(Time constraint/
Shop for all needs under single
roof)
4. Employment opportunities
5. Benefit to Tourism
6. Better Realization of Taxes

18. Organized Retailers in India
1. Franchised outlets and Company
showroom:
• Common in food and Garments for
example McDonald’s
• Pizza Hut
• Raymond’s Park Avenue
• World of Titan
• Bata

19. 2. Consumers Co operatives:
• Mother Diary, Khadi Bhandars, Ration shops,
Handlooms Emporiums, etc…

20. 3. Food Retailers: RPG Group’s Food World,
Nilgiri’s
4. Health and Beauty Product Retailer : Apollo
Hospitals Group( it has 70 retail outlets),
Himalaya Drug Stores, Amway.
5. Clothing and Footwear: Raymond’s Madura
Coats, Kala Niketans, The Loft – Biggest
Footwear Store in India at Hyderabad.
6. Departmental Store: Pantaloons, Shopper’s
Stop, Life Style International

21. 7. Petroleum Retailers: Bharat Petroleum
Corporation Ltd, BPCL, Hindustan
Petroleum Corporation Ltd, Reliance
Petroleum.
8. Retail Banking: HDFC Bank, ICICI Bank,
Citibank, State Bank of India

22. Different Organized Retail Format
Classification of Retail format
1. Classification based on types of ownership
2. Classification based on channel used
3. Classification based on pricing strategy
4. Classification based on location
5. Classification based on customer service

23. 1. Classification based on types of ownership
a. Independent Retailer
• An independent retailer operates only one
retail establishment
• The majority of these stores are owner or
family managed
• The ease of entry into this type of retailing
makes the independent retail store
attractive to those with few capital
resources.

24. Characteristics of Independent
1. Think Like an Independent
2. Singular Entrepreneurial Vision
3. Passionate about the business
4. Persistent(Constant/ Continue)

25. b. Franchising
• A Franchise is a contractual agreement
between a franchisor and a franchisee
• This agreement allows the franchise to
operate a retail establishment using the
name and the franchisor’s operating
methods
• A franchisor is the owner of the franchise
and can be a wholesaler, manufacturer, or
service provider

26. Example:
• McDonald ‘s is a franchisor. McDonald’s
creates contracts with individual owners of
restaurants and allows the owners to use
the McDonald name . The franchisee is the
owner of the restaurant who has a contract
with McDonald’s to operates the
establishment under McDonald ‘s name and
follow McDonald’s operating practices

27. Characteristics of Franchising
1. A franchise arrangement is based upon a
contractual relationship
2. The franchisor should have developed a
business system or format, which is
identified wit ha brand name.
3. The franchisee makes a substantial initial
capital investment and normally owns the
business operation
4. The franchisor normally trains the
franchise to ensure that is equipped to
effectively comply with the business system

28. 5. The franchisor continually supports the
franchisee business operation
6. The franchisor also regularly supervises the
franchisee operation
7. Some form of consideration is paid by the
franchisee to the franchisor for the rights
licensed and the services rendered

29. c. Leased Department ( Shop in Shop)
• A leased department consists of space in a
larger retail store that is rented to an outside
vendor
• The retail business that leases the space
runs that area as if it were a small business
within the larger business unit.
• Example: A leased department often
include jewelry and shoe department in the
large departmental stores .

30. Characteristics of Leased Department
1. Leased departments enable store operators
and outside parties to join forces and
enhance shopping experience
2. They should not hurt the image of the store
or place too much pressure on the lessee to
bring in store traffic.
3. The leased department proprietor is
responsible for all aspects of its business.
4. They are most common for in store beauty
saloons , banks, photographic studios, and
shoe, jewellary , cosmetics, watch repair

31. 5. Leased departments are also popular in
shopping centre food courts
6. The store sets operating restrictions for the
leased departments to ensure overall
consistency and co ordination

32. d. Co operatives
• A Cooperatives is a legal entity owned and
democratically controlled by its members
• Members have a close association with the
enterprise as producers or consumers of its
products or services
• It is known as secondary or marketing
cooperative in some countries

33. Characteristics of Co operatives
1. It is common for locally owned grocery
stores, hardware and pharmacies
2. A Cooperatives may also be defined as a
business owned and controlled equally by
the people who use its services or by the
people who work there.
3. Membership is open to all interested
persons
4. The control of ownership is democratic and
each member has only one vote

34. 5. Shares are not transferable
6. Distribution of surplus is made in
proportion to the purchases made at the
cooperatives
7. No credit is extended

35. 2. Classification based on channel used
I. Store Based Retailing
a. General Merchandise Retailers
• Departmental Stores/Variety Stores
• Discount Stores
• Specialty Stores
• Membership club
• Airport retailing
• Drugstores

36. b. Food Merchandise Retailing
• Convenience store
• Conventional supermarkets
• Food based superstores
• Combination stores
• Super centers and hypermarkets
• Limited –line stores

37. II. Non Store Retailing
• Electronic retailing
• Direct marketing
• Direct selling
• Vending machines
• Television home shopping
• Video kiosks

38. 3. Classification based on pricing strategy
a. Category Killer Format: A category killer
format specialist is discount store that offers
a narrow variety but deep assortment of
merchandise.
• These retailers are basically discount
specialty stores. Most category specialist
uses a self service approach.

39. • A category killer is a product, service, brand,
or company that has such a distinct
sustainable competitive advantage that
competing firms find it almost impossible to
operate profitably in that industry (or in the
same local area).

40. b. Ware house Format : The ware house format
is large scale of discounted merchandise by
an individual or an organization in the free
access ambience of a warehouse . This
format has a large width and depth in the
many categories in retails
• This is developed to satisfy customer who
wants low prices every day and are willing
to give up service needs

41. c. Single Price Denomination Format/Dollar
Stores : A single price denomination format
store retails scrambled merchandise lines at
just one price point , generally a low one.
• Such retails outlets are famous in the united
States . The best example of this format is
the Dollar stores , which are spread across
the USA.

42. Dollar Stores: A variety store is a retail store
that sells a wide range of inexpensive
household goods.
• Variety stores often have product lines
including food and drink, personal hygiene
products, small home and garden tools, office
supplies, decorations, electronics, garden
plants, toys, pet supplies, ...

43. d. Off Price Retailers : The key strategy of Off
Price Retailers is to carry the same type of
merchandise as traditional department stores
but offer prices that can be 40% to 50 % lower
• Off Price retailers develop special
relationships with their suppliers for large
quantities of merchandise

44. e. Discount format: The discount format
retails merchandise at 25% or more below
MRP. This is also known as Bazaar format.
Discount store has been described earlier
under the general merchandising retailing.

45. 4. Classification based on location
a. Destination Store: Destination stores are
stores which on their own attract customers
from far and near , on their own , and thus
provide a complete shopping experience
• For Example Large destination stores such
as those in Bangkok or even Dubai which
depend on tourist traffic for most of their
revenue would be adversely affected by the
slow-down of the economy in their of the
two countries

46. b. Parasite Stores: A Parasite Stores is one that
not create its own traffic and whose trade
area is determined by the dominant retailer
in the shopping center or retail area .
• A store that depends on the flow of
customers from events external to those
generated by the store itself.
• A dry cleaner would qualify as a parasite
store to a Wal-Mart store. People end to
atop at this cleaner on the way to or from
Wal-Mart and other stores. It is a business is
derived from Wal-Mart and other
businesses in the area.

47. c. Convenience Stores: As the name suggest,
convenience stores are located in areas that
are easily accessible to customers .
• Convenience stores carry a very limited
assortment(Variety/ limited) of products
and are housed in small facilities
• Owners of convenience stores locate in
neighborhood and try to intercept
consumers between their homes and places
of employment convenience stores

48. 5. Classification based on customer service
a. Retail Banking
b. Personal Care Services Retailers
c. Hospitality Retailers
d. Restaurants
e. Other Utility services
• Telecommunication services
• Water Utility
• Road Infrastructure

49. Emerging Trends in Retail Format
1. Trial and Error
2. Emergence of Wholesale Clubs
3. Customers Still Rely on Traditional
Concepts
4. Category Killer
5. Hypermarkets
6. Dollar Stores
7. E-Retailing

50. 1. Trial and Error
• Now a number of retailers are in a mode of
experimentation trying several formats
which are essentially the representations of
retailing concept fit into consumer mind
space.
• Pantaloon Retail India experimenting with
several formats to cater to a wide
segmentation of consumer market.

51. 2. Emergence of Wholesale Clubs
• This segment is to sell consumers who
purchase on bulk and look out for substantial
discount and offers.
• The new format is going to be a kind of
wholesale club which is likely to be located
close to Food Bazaar.
• Consumers who are interested to purchase on
bulk can take benefit from this format .

52. 3. Customers Still Rely on Traditional
Concepts
• A super market normally sells Grocery,
Fresh Vegetables & Fruits, Frozen foods,
Cosmetics, Small utensils, and Gift Items.
• Subhiksha is one of the leading super market
operators, who largely operates in the
southern part of India is expanding to
western India
• One more retailer Reliance Retail is on the
move and this retailer opened its Reliance
Fresh a super market

53. 4. Category Killer
• A category killer format specialist is
discount store that offers a narrow variety
but deep assortment of merchandise.
• By offering a deep assortment in a category
at comparative low prices, category
specialists can be to “kill” that specific
category of merchandise for other retailers

54. 5. Hypermarkets
• A hypermarket is a superstore combining a
supermarket and a department store. The
result is an expansive retail facility carrying a
wide range of products under one roof,
including full groceries lines and general
merchandise.
• A very large commercial establishment that
is a combination of a department store and a
supermarket.

55. 6. Dollar Stores
• A variety store is a retail store that sells a
wide range of inexpensive household goods.
• Variety stores often have product lines
including food and drink, personal hygiene
products, small home and garden tools,
office supplies, decorations, electronics,
garden plants, toys, pet supplies, ...

56. 7. E-Retailing
• The sale of goods and services through the
Internet.
• Electronic retailing, or e-tailing, can include
business-to-business and business-to-
consumer sales.
• E-tailing revenue can come from the sale of
products and services, through
subscriptions to website content, or through
advertising.

57. Role of MNC’s in Organized Retail format
Multinational Corporations (MNC)
• “ An enterprise which own or control
production or service facilities outside the
country in which they are based”.

58. Features of MNC
1. Biz size
2. Huge intellectual capital
3. Operates in many countries
4. Large number of customers
5. Large number of competitors
6. Structured way of decision making

59. Role of MNC’s in Organized Retail Formats
1. Capital:
• Capital , the means of production, is basic
need of any retailing format . MNC area
able to diffuse the much needed resources
into developing country
• Capital is more durable and is used to
generate wealth through investment.

60. 2. Technology
• The movements of technology to produce
goods as well as for communication
purpose
• The introduction of technology to
developing world can lead to cleaner and
more efficient technologies
• The purposeful application of information
in the design, production, and utilization of
goods and services, and in the organization
of human activity .

61. 3. Skill
• The skill level of the workers within the
host country would also increase because
many MNC’s can and do educate them in
the job skills .
• An ability and capacity acquired through
deliberate, systematic, and sustained effort
to smoothly and adaptively carryout
complex activities or job functions
involving ideas (cognitive skills), things
(technical skills), and/or people
(interpersonal skills )

62. 4. Export
• A function of international trade whereby
goods produced in one country are shipped
to another country for future sale or trade.
• The number of exports of the host country
will grow exceptionally well, their GDP and
Gross national Product(GNP) will also
reflect the growth of industry
• Exports are one of the oldest forms of
economic transfer, and occur on a large scale
between nations that have fewer restrictions
on trade, such as tariffs or subsidies.

63. Reasons for Growth of MNC’s in Retailing
1. Factor mobility
2. Economic reforms
3. Managerial culture
4. Growth urge
5. Market potential
6. Risk minimizing
7. Developing in communication technology