This document provides an overview of different ways to classify retail units based on factors like ownership structure, operational structure, merchandise variety, location, and customer interaction methods. It discusses classifications such as sole proprietorships, partnerships, limited liability companies, independent traders, chain stores, franchises, cooperatives, department stores, discount stores, specialty stores, supermarkets and hypermarkets. Examples of retailers in India are provided to illustrate each classification.

1. Retail Management, 2/E Bajaj, Tuli & Srivastava
CHAPTER 2
RETAIL ORGANIZATION
Hints to Concept Review Question:
1. What do you understand by classification of retail unit and outline the
importance of classifying retail units?
The strategic intent of each retailer is identified from is classification. A Specific retail
format analysis is important in 3 phases of strategic planning:
• selecting an organizational mission,
• choosing an ownership alternative,
• defining the goods/services category, and
• Setting objectives.
2. List all possible basis of classifying the retail businesses.
The instructor can elaborately explain the bases of classifying retail units, starting with
a) Retail format as per Nature of ownership:
i. Sole proprietorship,
ii. Partnership and
iii. Limited Liability Company (Private L.L.C &Public L.L.C).
b) Retail format as per Operational structure:
i. The independent trader (one retail outlet operation);
ii. The multiple or chain store;
iii. Franchising and the
iv. Consumer co-operative.
c) Length & depth of Merchandise.
i. Offer a wide range of goods
ii. Dealing in specific product category
d) Nature of service:
For eg: Self-service, and providing following services such a delivery, credit, gift
wrapping, repairs, etc.
e) Type of pricing Policy: Some retail businesses choose,
i. Low price emphasis, while some offer
ii. Attractive attribute such as convenient location, premium merchandise mix
or distinctive image.
f) Type of retail location: classified according to their store’s geographic location.
i. Out-of-town locations, whilst others
ii. Locate in ‘cluster’ locations in downtown centers.
g) Method of customer interaction:
i. Retail stores facilitating face-to-face contacts.
ii. Non-store retailing operations (mail order catalogues, telephone selling,
vending machines, door-to-door selling or mobile vendors.)
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2. Retail Management, 2/E Bajaj, Tuli & Srivastava
3. Discuss the types of retail units and their respective characteristics on the basis
of ownership.
Now as answered in the previous question the different basis of classifying retail
formats, but based on the nature of ownership pattern, a retail format can be classified
SOLE PROPRIETORSHIP: The characteristics of this retail format are-
- It’s easy to form, less expensive to organize and the proprietors have full control.
- The income generated reaches the proprietor and he can make the ultimate decision
to keep it or reinvest in business.
- The business is easy to dissolve, if desired, yet other characteristics also do exist like:
- Their business and personal assets are at risk; due to unlimited liability, they are also
legally responsible for all the debts.
- Often limited to using funds from personal savings or consumer loans, and
- May have a hard time attracting high-caliber employees
PARTNERSHIP: The characteristics of this retail format are-
• Partnerships are relatively easy to establish and with more than one owner, the
ability to raise funds may be increased.
• Prospective employees may be attracted to the business if given the incentive to
become a partner and the business usually will benefit from partners who have
complementary skills. Yet,
• Partners are jointly and individually liable for the actions of the other partners.
• Since decisions and profits are shared, disagreements can occur.
LIMITED LIABITLITY (PVT&PUBLIC): LLC’s must not have more than two of the four
characteristics that define corporations i.e.
• Limited liability to the extent of assets; continuity of life; centralization of
management; and free transferability of ownership interests.
• It is designed to provide the limited liability features of a corporation, tax
efficiencies and operational flexibility of a partnership. Yet formation is more
complex and formal than that of a general partnership.
4. What are the differences among retail units operated under following type of
ownership structure namely retail chain, franchising and joint venture.
The main differences among the following retail units are: -
Retail Chain (Barista Coffee Company Ltd – Coffee retail chain; Pizza Hut- Fast Food
retail chain)-
• The retail chain has a higher bargaining power with suppliers due to their volume
of purchases.
• They receive new items as soon as they are introduced, obtain the best prices
and achieve cost efficiencies.
• Large chains may also gain exclusive rights to selling certain items and may have
suppliers make goods under their own brands. (For e.g.: Sears)
• Can take advantage of a variety of media and thereby large revenues are
generated aided by this geographic coverage .Yet,
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3. Retail Management, 2/E Bajaj, Tuli & Srivastava
• The flexibility may be limited and consistent strategies must be maintained.
• Managerial control can be hard for geographically dispersed branches of chain
causing Lack of communication and time delays in decision-making.
Franchising
Individual franchisees can own retail enterprises with relatively small capital
investments.
Franchisees acquire well-known names and goods/service lines.
Standard operating procedures and management skills may be taught to the
franchisees.
A national or global presence can be developed quickly and with less
franchisor investment.
Joint Venture
Understood as technical and financial collaboration either in the form of
green-field projects, take-overs or alliances with existing companies.
Usually comprise two or more individuals/companies, one of whom may be
non-resident, who come together to form an Indian private/public limited
company, holding agreed portions of its share capital.
primarily provides for the manner in which the shareholders of the joint
venture company may transfer or dispose of their shares. It is also
commonly referred to as a shareholders agreement
e.g.: India Satcom Ltd (supplying satellite terminals for data communication) Bangalore,
FIBCOM India Ltd etc.
5. What do you understand by co-operative retail format and enlist its state of
operation in the Indian retail Industry?
Co-operative outlets are generally owned and managed by co-operative societies like
welfare projects of the government for employee and its family’s benefits. Kendriya
Bhandar is the largest operating consumer co-operative society. It operates by following
objectives like:
- Providing essential commodities of daily needs to the customers at reasonable price
- representing assured standards of quality and value for money.
- To play an effective role in the public distribution system and to become a
pacesetter in retail market.
- To assist the Government in holding the price line and ensure distribution of scarce
commodities at controlled prices.
- To create an attractive and congenial shopping environment for customers.
- Other examples of co-operative societies in India are HOPCOM-horticultural co-
operative marketing and Co-optex – Tamil Nadu handloom Weavers co-operative
society (State Government undertaking )
6. What are the types of retail formats on the basis of their location and
merchandise variety they are offerings and discuss each classification with the
help of example (retail store) from your city?
Classification of retailers on the basis of location is discussed below:
Copyright © Oxford University Press, 2010

4. Retail Management, 2/E Bajaj, Tuli & Srivastava
1) Retailers at Freestanding location: Retailers located at site, which is not connected
to other retailers and therefore they depends on its own drawing power and
promotion to attract customers, classified as neighbourhood or highway stores. For
eg : McDonalds outlet in Delhi- Ludhiana highway .
2) Retailers in Business Associated location: who located their store where a group of
retail outlets offering a variety of merchandise, work together to attract customers
to their retail area, but also compete against each other for the same customers,
classified as unplanned business districts and planned shopping centres. For e.g. :
Trichur Round Market Place in Kerala covering garments, grocery, jewelry, shoes,
home products, confectioneries etc can describe a planned business district .
3) Retailers in specialized market: traditional independent retailers or chain stores
particularly prefer specialized markets .For e.g.: the Chowk area in Lucknow famous
for its food and cotton embroidery cloth materials.
4) Retailers at airports: mostly comprising of duty-free shops, newsstands, souvenir
and book stores but now also seen opening food retail chains like café coffee day
etc.
As for retail units on account of variety of merchandise mix can be classified as follows:
• Departmental stores: a large retail store organized into number of
departments offering a broad variety and depth of merchandise; commonly
part of a retail chain Ebony, Globus, Lifestyle, Pantaloon, Shoppers Stop and
Westside
• Discount Stores: Retailers offering a broad variety of merchandise mix,
limited or no service, and low prices. Subhiksha, Margin Free market and
outside India, Wal-Mart is a classic example of the most successful retailer
operating as a discount centre.
• Specialty Stores: complementary product categories and extend a high level
of service to their customers. For e.g.: Vivek’s retailing consumer durables in
Chennai, shopper’s store housing planet m.
• Supermarket and Hypermarkets: Hypermarkets are characterized by large
store size, low operating costs and margins, low prices and comprehensive
range of merchandise. For eg : Big Bazaar ,RPG owned Giant Hypermarket.
Successful international hypermarket chains include Carrefour of France and
Continent of South Africa.
7. What are the different types of retail units on the basis of method of customer
interaction?
Retail units can be classified into two groups on the basis of the nature of
interaction between retailer and customers namely store retailers and non-
store retailers.
Copyright © Oxford University Press, 2010