Introduction to retail

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Introduction to retail

  1. 1. Introduction to Retailing Retailing is the set of business activities that adds value to the products and services sold to consumers for their personal or family use Retailing is not just sale of products in stores; it also involves the sale of services Not all retailing is done in stores
  2. 2. Retailer's role in a Distribution Channel A distribution channel is a set of firms that facilitate the movement of products from the point of production to the point of sale and finally to the ulimate consumer / customer Retailers are final business in a distribution channel and link the manufacturers to the consumers Manufacturers------->Wholesaler------->Retailer------->Consumer There are manufacturing retailers (Levis, Polo Ralph Lauren) and then there are manufacturers who sell products to wholesalers, who then sell them to retailers (FMCG). Some retailers also function as wholesalers (Cash 'n' Carry)
  3. 3. Retailer's role in a Distribution Channel A distribution channel is a set of firms that facilitate the movement of products from the point of production to the point of sale and finally to the ulimate consumer / customer Retailers are final business in a distribution channel and link the manufacturers to the consumers Manufacturers------->Wholesaler------->Retailer------->Consumer There are manufacturing retailers (Levis, Polo Ralph Lauren) and then there are manufacturers who sell products to wholesalers, who then sell them to retailers (FMCG). Some retailers also function as wholesalers (Cash 'n' Carry)
  4. 4. Functions performed by Retailers  Providing an assortment of products and services  Breaking bulk  Holding inventory  Providing services
  5. 5. Functions performed by Retailers Providing Assortments       Manufacturers specialise in producing specific types of products (Cadbury makes chocolates, Amul makes dairy products, Kellogg makes breakfast cereals) If each of these manufacturers had its own stores selling only its own products, customers would be required to go to many different stores All retailers offer assortment of products, but they specialise in the assortments they offer Supermarkets (assortments of food, household products, personal care etc. -----> 20,000 to 30,000 different items from over 500 companies) Department stores (assortments of clothing and accessories)
  6. 6. Functions performed by Retailers Breaking Bulk Manufacturers, to reduce transportation costs, ship large quantities of merchandise to retailers, who then offer these products in smaller, manageable quantities to customers Holding Inventory Retailers maintain requisite inventory of broken user friendly sizes so that products will be available when consumers want them thereby facilitating storage of small inventory of products at customers' homes This is particularly beneficial for customers with limited storage space and those who want to purchase perishable merchandise like meat and dairy produce
  7. 7. Functions performed by Retailers Providing Services Retailers provide services that make it easier for customers to buy and use products Customer Service Associates are the most tangible representatives of services provided by retailers Home delivery and product trial are a few other services which retailers provide
  8. 8. Functions performed by Retailers Value to customers / consumers is provided by the execution of the above mentioned functions performed by retailers
  9. 9. Changing Retail Landscape Policy Landscape Operational Landscape
  10. 10. Theories of Retail Development Environmental – where a change in retail is attributed to the change in the environment in which the retailers operate Cyclical – where change follows a pattern and phases can have definite identifiable attributes associated with them Conflictual – the competition or conflict between two opposite type of retailers leads to a new format being developed.
  11. 11. Theories of Retail Development Environmental Theory of Retail Development Charles Darwin's “Survival of the Fittest” - Natural Selection Retail institutions are economic entities and are influenced by a business environment comprising Government policies, competitors, customers and fast changing technology Thus the success or failure of a retail institution will depend upon its capability to manoeuvre to the environmental changes
  12. 12. Theories of Retail Development Cyclical Theory of Retail Development Entry phase Low status & price, minimum services, limited product offers, poor services Trading up phase Expensive facilities, higher rents, more locations, higher prices, more products Vulnerability phase Declining ROI, myopic by nature, scrambled merchandising
  13. 13. Theories of Retail Development Conflictual Theory of Retail Development Thesis Antithesis Synthesis
  14. 14. Evolution of Retail in India Retail in India has evolved to support the unique needs of our country, given its size and complexity Haats, Mandis and Melas have always been a part of the Indian landscape. They still continue to be present in most parts of the country and form an essential part of life and trade in Various areas. The PDS (Public Distribution System) would easily qualify as the single largest retail chain existing in the country. the evolution of the PDS of Grains in India has its origin in the “rationing system” introduced by the British during World War II
  15. 15. Evolution of Retail in India The system was started in 1939 in Bombay and subsequently extended to other cities and towns. The system was abolished post war but after attaining independence, India was forced to reintroduce it in 1950. There was rapid increase in the ration shops ( being increasingly called the Fair Price Shop or FPSs) The Canteen Stores Department (CSD) has also among the largest network of outlets in the country reaching the defence personnel across the country.
  16. 16. Evolution of Retail in India The Khadi & Village industries (KVIC) was also set up post independence. The cooperative movement was again championed by the government.
  17. 17. Types of Retailers Food Retailers Supercentres Hypermarkets Supermarkets Convenience stores General Merchandise Retailers Department Stores Discount stores Speciality stores Home Improvement Centres Drug stores Nonstore Retailers Electronic Retailers Catalog Retailers Direct Selling Vending Machines / Kiosks Television Home Shopping
  18. 18. Variety and Assortment Variety: represents the number of merchandise categories a retailer offers. It is often referred to as the Breadth of Merchandise Assortment: is the number of different items in a merchandise category. It is often referred to as the Depth of Merchandise SKU (Stock Keeping Unit): Each different item of merchandise is called an SKU
  19. 19. Food Retailers – Specifications Type Variety Assortment Size ('000 sq. ft.) SKUs ('000) Supercentre Very Broad Very deep 150 - 350 60 - 100 Hypermarket Very Broad Deep 100 - 300 40 - 60 Supemarket Broad Deep 60 - 100 30 Convenience Store Average Shallow 2-3 1-3
  20. 20. General Merchandise Retailers – Specifications Type Variety Assortment Size ('000 sq. ft.) SKUs ('000) Department Store Broad Deep to Average 100 - 200 100 Discount Store Broad Average to Shallow 60 - 80 30 Specialty Store Narrow Deep 4 - 12 5 Home Improvement Centre Narrow Very Deep 80 - 120 20 - 40 Drugstore Narrow Very Deep 3 - 15 10 - 20
  21. 21. Types of Merchandise* – Retail Verticals Automobile and spares Furniture and home furnishing stores Electronics and appliances stores (CDIT) Building materials and garden equipment and suppliers Food and beverage stores Health and personal care stores Gasoline stations Clothing and clothing accessory stores Sporting goods, hobby, books and music stores General merchandise stores Non-store retailers *(North American Industry Classification System (NAICS))
  22. 22. Differences between Services and Merchandise Retailers Characterstics of a Service  Intangibility  Simultaneous production and consumption  Perishability  Inconsistency of the offering to customers

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