The document discusses various channel systems used in marketing, including vertical, horizontal, and multi-channel systems. It also discusses retailers and the retail trade, defining a retailer as the last link in the distribution channel. The document notes that retailers break bulk into suitable lots for consumers and are best positioned to understand customer expectations. It also outlines factors that influence customer choice of retailer, including price, location, product selection, services, and salesperson helpfulness. Global and Indian retail trends are also summarized.

1. Jatin Gadhiya
SDM Questions and Answers
Q1. Explain the various Channel Systems.
Ans : Companies use various channel partners to market their products. The type of channel
partners used by the companies depends upon the type of product and the level of service which
the companies want to provide. The channel partners can be grouped into the following types of
channel systems ;
- Verticle marketing systems
- Horizontal marketing systems
- Multi-channel marketing systems
Verticle Marketing Systems
In this type of channel system, the product passes from the producer through the distributor to
the retailer. But these channel members do not act as if trying to run an independent business.
Rather, they work as a team and co-operate with each other. The idea is to reduce conflict and
work in the common interest. When they act as a unified system, the resulting size gives them
immense bargaining power and reduces duplication of efforts. Vertical Marketing Systems are of
three types –
- Corporate : In this type, the different stages from production to distribution are all
handled by one entity. This type of system is now found in chain stores like More mega
store, where production, distribution and retailing is controlled by one company.
- Administered : Unlike in the corporate type, here the different stages are not owned by a
single company. But the manufacturer is such a big entity that it is able to control the
other channel members. For eg HUL, P&G, ITC. The entire marketing efforts of the
system are coordinated by the company.
- Contractual : Here the members arrive at an arrangement between themselves to gain
economies of scale and bargaining power. Most consumer cooperative stores like Apna
Bazar are examples of this type.
Horizontal Marketing Systems :
This is an arrangement between two totally unrelated organizations for mutual benefit. For
example, the tie up between Domonos and Coke allows only Coke to be sold at all the Dominos
Pizza Outlets. Similarly, a tie up between Inox and McDonalds may allow only McDonalds to
be located at Inox theatres.

2. Jatin Gadhiya
Multi-Channel Marketing System :
This system is used by companies which use two or more marketing channels to reach their
customers. For example HUL has a different channel to service the retail trade and a different
channel to service the institutional trade.
This system enjoys many benefits like :
- Better coverage of the market
- Having a separate channel to service large A category customers .
Multi channel systems are used where
- The same product is sold to different market segments . Example moisturing lotion being
sold through provision stores and chemists.
- Unrelated products are sold to the same market. Example ITC selling Cigarettes and
Chocolates to the same retailer
- Size of the buyers varies . Example selling milk to retailers and canteens or hotels.
- Geographic concentration of the customers varies . For example HUL having one
distributor to service Baroda City and another to service the rural markets of Baroda
district.
- The reach is difficult for certain segments – like North Eastern States, ladakh.
Q2. Who is a retailer and what is retailing? What are the general characteristics of retail
trade?
Ans: A retailer is the last link in the distribution channel by which a company reaches its end
customer. He is the one who breaks the bulk into suitable lots for the consumers. Being the one
in direct contact with the consumers, he has the best knowledge of the consumers’ expectations
and is in a position to influence the consumer decision making.
Retailing includes all the activities involved in selling consumer products and services directly to
the consumers for their personal or domestic consumption.
The general characteristics of retail trade are:
- The order size tends to be small
- The retailer caters to a large variety of customers and hence stocks a large assortment of
goods.
- The retail store service personnel and the goods displayed play an important role in the
selling process.
- A lot of retail buying is on impulse therefore managing inventory is important.
- The retailer must ensure availability and visibility of the products he sells.
Q3. What are the factors which influence the choice of retailer from which the customers
buy?

3. Jatin Gadhiya
Ans: The retailer plays an important role in the success of a product because he is the last link in
the distribution channel and therefore knows what the customer’s expectations are. Moreover, it
has been found that only 35% of consumer purchases are planned. The rest are either impulse
purchases, substitutions of one brand for other. These decisions can be greatly influenced by the
quality of retailers’ merchandising efforts. A consumer selects a retailer on the basis of the
following factors:
1. Price – whether products are reasonably priced or not. Also the terms and amount of
credit extended and concessions and discounts offered.
2. Location: customers generally prefer a retailer who is conveniently located – from ehere
they can easily buy their requirements. The location may be near the residence or work
place.
3. Product selection: Consumers generally prefer the retailer who offers a wide choice of
brands and quality of a product.
4. Special Services: customers prefer the retailer who offers special services like free home
delivery, gifts wraps etc.
5. Helpful Salespeople: Customers prefer that retailer where the sales staff is helpful and
courteous.
6. Fairness in dealings: the retailer who is fair in his dealings with the customers is
preferred more.
Q4. Write a note on the Global Retailing Scene?
Ans: Retailing today is the fastest growing industry in the world. Globally, the retail trade is
worth US $ 6.6 trillion. In developed countries, most of the retailing trade is organized whereas
in developing countries it is unorganized. In US the share of organized retail is 85% whereas in
India it is only 5%. The Indian retail trade is worth US $ 180 bn.
The retail trade is considered a part of the service sector. It contributes highly to the GDP of a
country and also has immense employment potential. Therefore it plays an important role in the
economic growth of a country.
Globally, retail is gaining an upper hand over its suppliers. At one time the packaged goods
manufacturers were calling the shots in the retail sector. But the things have changed today and
organized retail has gained a lot of bargaining power over its suppliers.
Traditionally, the corner grocery store worked on high margins. But today, the modern retail
trade works on low margin – high volumes basis. Since today the customer is better informed, it
becomes impossible to work on high margins. The modern retailer therefore, tries to maintain his
profitability by saving on his purchases. He also tries to save on inventory carrying costs by
keeping the optimum level of inventory. He is well aided in this by the developments in
information technology.
Organized retailing has also resorted to private labeling. Where the retailers cannot integrate
backwards on their own, they resort to private labeling. This gives them a chance to achieve their
profitability.

4. Jatin Gadhiya
Q5. Write a note on the trends in Retailing in India
Ans : The organized retail trade in India constitutes only 5% if the total estimated business of
US $ 180 bn. But keeping with the trends the world over and with the growing consumerism and
swelling middle class, this is set to change. There are a number of factors which are boosting the
organized retail trade in India. Some of them are:
1. With growing awareness, the Indian consumer has come of age. He is no longer content
with what is available, but demands what he needs.
2. The requirement for variety is rising with rising income levels and willingness to pay for
it.
3. The proliferation of communication channels has influenced the product choices
expected.
4. With increased literacy rates, the consumer, both in rural as well a urban centres ha
become more aware of his bargaining power.
5. Just as urban centers are demanding what is available in foreign developed countries, the
rural Indian is also demanding what is available in the urban centers.
6. Supply chains of the suppliers as well as the retailers have improved tremendously.
7. Improvement in the infrastructure like roads, transport etc. has given a further boost to
this industry.
8. People have understood the advantage of bargaining with large volumes.
9. Corporate sector has entered the retailing sector.
10. Branding of stores has emerged.
11. The use of IT has given added advantage to retailing.
Q6. Explain the role played by a retailer in the retail trade?
Ans: The retailer is the last link in the distribution channel of the company. He plays a vital
role in serving the customers. He is able to provide service to the customer by the following;
Merchandising : It may be defined as – ‘ a set of activities involved in acquiring goods and
services and making them available at the place, time, and prices and the quantity that enable
a retailer to reach his goals. This definition includes almost all the aspects of retailing.
Merchandising provides time, place and convenience utility to the consumer.
Customer Service: The basic service provided by any retailer is that he makes the goods
required by the customers at the time and place of his choice. Every customer has some
expectations of the store in terms of basic needs to be fulfilled. These basic needs ensure that
the customer at least visits the store. There are certain add on services like home delivery
which make the customer stick to the store. By providing these services, the retailer ensures
that the customer visits the store regularly and helps in the sale of product.

5. Jatin Gadhiya
Customer communication: The retailer plays an important role in communicating with the
consumers. Through this communication the retailer may inform or educate the consumers
about the products etc. The retailer also needs to communicate with the customers to make
them aware about the ongoing promotion schemes etc.
Q7. Explain the various strategies in retail?
Ans: The retail business thrives on certain basic things which drive the retail trade. They are
- No of customers visiting the store each day ( footfall ). In a corner grocery store, all the
visitors are there necessarily to purchase something. This may not be the case in modern
retail trade. A substantial number of visitors visit the store for window shopping.
- The number of footfalls converted into purchases: The idea is to see that maximum
number of visitors to the store buy something. If the customer has come with an intention
to buy, then he must be persuaded to buy more.
- Increase the depth of purchases of each customer: That is, the store must get the
maximum share of the spending of the customer.
- Retention of the customer: Once a customer has shopped in the store, he must not only
come back again for all his needs but also recommend the store to his friends and
relatives.
Given that these are the drivers of retail trade, the strategy must be so designed so as to
achieve these objectives. It can be done by the following ways:
- Having a wide range of products with some differentiation that are characteristic of the
store.
- Having an efficient operation which gives the customers what they want in the least time
and with the least effort.
- Building long term relationship with the customers with the help of loyalty programs etc.
The differentiation can be in terms of product or store related benefits.
Positioning Strategy: In this strategy, the store develops an identity for itself in terms of
what it has to offer to the customers. The identity developed must be different from other
stores. For example Subhiksha had positioned itself as a no frills store with a wide range of
offerings.
Product Differentiation Strategy: In this strategy, the store may offer products that are not
on offer at any other store.
Operational Superiority: In this strategy, the store must have highly efficient operations
which help the customers. For example, having many billing counters so that the customer
does not waste time in making payments. Another way is to have a very efficient and
systematic display of products so that the customer can access very easily the product he
wants to buy.
Store location: The location of the store must be such that it is easily accessible to a large
number of customers.

6. Jatin Gadhiya
Q8. What is electronic retailing or e-Tailing? What are its advantages and
disadvantages?
Ans : E- tailing is shopping on the internet without the customer having to visit a store.
Advantages:
1. Assortment can be unlimited
2. Comparison of products is easier to make on the internet.
3. There are no geographical boundaries. A customer in Baroda can buy a product from
Guwahati.
4. There are no time restrictions. Shopping can be done at any time of day.
5. Payment is online. There is no need to handle cash.
Disadvantages:
1. The joy of shopping cannot be had in e-tailing.
2. Modern retail formats make shopping experience also entertaining. This cannot be had in
e-tailing.
3. Customers cannot touch and feel the product before buying.
4. In e-tailing, there is nobody to help or make recommendations to the customer in the
shopping.
5. Most customers in India are still averse to using credit cards for shopping because of
security reasons. These customers will not shop through e-tailing.