Retail Institutions


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Retail Institutions

  1. 1. 2
  2. 2. Objectives of the Chapter Introduction Theories of Institutional Change Classification of Retailers 3
  3. 3. RETAIL MANAGEMENT INTRODUCTION – Business activities involve Selling Goods and Services to Consumers for their Personal, Family or Household use. “Every sale of Goods and Services to final consumer” e.g.-Food products, apparel, movie tickets; services from hair cutting to e-ticketing.  Retailing is the Last stage in Distribution Process- Wholesale is an intermediate where Goods and services are sold to Business customers.
  4. 4. RETAIL MANAGEMENT Retailer is customer focused, not Product – focused. Manufacturer may reach customers through: Dealers Company showrooms Super / Hypermarkets Manufacturers will decide on Retail Distribution: Intensive Selective Exclusive
  5. 5. Weekly Markets Village Fairs Melas Convenience Stores Mom and Pop/Kiranas PDS Outlets Khadi Stores Cooperatives Exclusive Brand Outlets Hyper/SuperMarkets Department Stores Shopping Malls Traditional/Pervasive Reach Government Supported Historic/Rural Reach Modern Formats/ International Evolution of Indian retail Source of Entertainment Neighborhood Stores/Convenience Availability/Low Costs /Distribution Shopping Experience/Efficiency
  6. 6. RETAIL MANAGEMENT ORGANISED RETAILING In India organized retailing is 2% Retail sector highly fragmented Retail chains like Wal Mart,McDonalds brought Rapid Growth and consolidation of organized retail Rapid rise of Income levels and accompanying changes in lifestyles greatly contributed to growth of organized retail
  7. 7. RETAIL MANAGEMENT ORGANISED RETAILING In India, increase in Disposable income, Purchasing Power of growing Middle Class conducive conditions for growth of organized Retail Indian Retail environment different from that of western countries: - Cities congested, large population in rural areas - Smaller purchases, limited household space
  8. 8. RETAIL MANAGEMENT RETAILING CONCEPT “Retaillier” French for breaking bulk Retailer links producers to customers Retailer is a person, agent, agency, company or organization reaching the goods or services to ultimate consumer Retailers perform specific activities: Anticipate customer wants Stock product assortments Acquire market information Finance Retail business
  9. 9. RETAIL MANAGEMENT ..1 Retailing may take place through: Retail Store Mail Direct Internet Sales Door-to-door Retail services like Restaurants, Hotels, Parlour, Health Services, car rentals, Travel
  10. 10. RETAIL EVOLUTION THEORIES Four theories of evolution are: 1. Wheel of Retailing Cyclical 2. Accordion theory Theories 3. Dialectic Process Evolutionary 4. Natural selection Theories Cyclical: Begin with one state and return to that state at some time in future Evolutionary: Changes similar to biological evolution
  11. 11. Wheel of Retailing Proposed by Malcomb. P. McNair This theory states that in a retail institution changes take place in a cyclical manner. 12
  12. 12. The Wheel of Retailing
  13. 13. Wheel of Retailing 14
  14. 14. Wheel of Retailing 15 Retailers enter the business at fairly low status, low prices and low cost operations. Helps them compete with existing retailers Then they succeed Hence they acquire more sophisticated and elaborate facilities Finally they mature as high cost high price retailers who become vulnerable to new entrants
  15. 15. Wheel of Retailing Wheel represents phases through which some types of Retailers pass: Retailers attract customers – low price, low service Expand market – More expensive merchandise, More services, open More convenient locations. Trading up process increases costs & price of their merchandise, creating opportunities for new low price retailers to enter e.g. Discount stores & category specialists Some Retailers don’t begin as low price, low service entrants, e.g. Upscale fashion specialty stores.
  16. 16. The Dialectic Process 17 •High margin •Low turnover •High price •Full service •Downtown location •Plush facilities •Low margin •High turnover •Low price •Self service •Low Rent location •Spartan facilities •Average margin •Average turnover •Modest price •Suburban Location •Model facilities
  17. 17. Dialectic Process An evolutionary theory based on premise that retail institutions evolve. The theory suggests that new Retail formats emerge by adopting characteristics from other forms of retailers in much the same way as the child is the product of the pooled genes of the parents. Specialty stores with high margins, low turnover plush operations Discount stores with low margins, high turnover low operations Both the above were synthesized to form category specialist stores.
  18. 18. The Retail Accordion Theory 19
  19. 19. The Retail Accordion Retail development is linked to human habitation. Expands with a geographical expansion of the society. Starting with general stores neighboring localities To specialist stores…things like gifts, restaurants, entertainment at a certain distance Theses specialist retailers when mature start adding variety and become general stores Some become category killers
  20. 20. The Accordion Theory Retailers fluctuate from strategy of offering wide merchandise with shallow assortment to offering limited categories with deep assortment In rural markets, Retailers sell many categories under one roof: shoes, cosmetics, foods, cloth, medicines. However the assortment is shallow and customers have limited choice. Department stores have both width and depth of merchandise Speciality stores carry special categories with deep selection
  21. 21. Natural Selection Based on Darwin's theory of evolution. According to this theory, a firm or retail institution should be flexible enough to adapt to the changing environment and should adapt its behavior. Success depends on the degree of flexibility enjoyed by the firm. 22
  22. 22. Those Retail Institutions Succeed which adapt to changes in customers, Technology, competition and legal environment. Department stores have tried to combat specialty stores by opening specialty counters within the stores. Interest in physical fitness and increased number of women in workforce have made salad bars in grocery stores successful. Natural Selection
  23. 23. Classification of Retail Business 1. Ownership Business:  Proprietorship  Partnership  Limited liability company 2. Operational Structure:  Independent Trader,  Chain Of Stores,  Franchising,  Consumer Cooperative 3. Width & Depth Of Merchandise:  Specific Product Category  Wide Range
  24. 24. Contd.. 4. Type Of Pricing:  Low pricing, minimum Service  Premium Merchandise, High Service  Premium pricing, distinctive Image 5. Consumer Interaction:  Direct interaction  Mail Order  Tele-Selling  Vending machines  Door-to-door  Mobile Vending
  25. 25. GROCERS - Major business is grains, provisions, spices, edible oils. Grocers may be dealing in many other items. GENERAL STORES - Deal in items of daily needs and stocking number of categories, is identified as a general store. CHEMIST- Deal in Ethical Pharmaceutical Products. Require a license and a Qualified Pharmacist. Such outlets also deal in diverse FMCG products.
  26. 26. MODERN FORMAT STORE – a) Part of a chain of stores with self- service facilities b) Part of a chain, but does not have self-service Facilities c) Stand-alone (not part of a chain) with self-service facilities FOOD STORE : Deal mainly in food products - milk, beverages, tea, coffee, squashes, ketchup, jams, chocolates, biscuits, bakeries etc.
  27. 27. TOBACCO KIOSK : Deal in tobacco products like Paan, Cigarettes, etc. are called Pan Bidi shops. Many of them also deal in packaged consumer products like toilet soaps, toothpaste, washing soaps, biscuits, confectionery, batteries etc. COSMETIC STORE : Deal in Ladies Personal care products / Cosmetics, General toiletry products, Men’s toiletry products, Baby Care Products.
  28. 28. Classification of Retailers Store based retailers Ownership Strategy Mix Service Vs Goods retail mix Non – Store based retailer Traditional Non – traditional 29
  29. 29. Types of Retailers Retail Management 30
  30. 30. Based on Ownership Independent Stores Chain Stores Franchise Stores Leased Department Stores Vertical Marketing System Consumer Cooperatives 31
  31. 31. Independent Store A store, which is owned by a single retailer. This retailer does not own any other store. The entry barriers are low Licensing procedures are simple Low initial investment. 32
  32. 32. Chain Stores Chain stores have two or more retail outlets that are commonly owned and controlled. Have a centralized buying and merchandising system and sell similar lines of merchandise. Eg: Musicworld, Titan, Tanishq, etc 33
  33. 33. Franchise Store A store based on a contractual arrangement between a franchiser (manufacturer) and a franchisee, which allows the franchisee to conduct a given form of business under an established name and according to a given pattern of business. Eg: McDonalds Franchising is of two types – Product / Trademark franchising Business format franchising 34
  34. 34. Leased Department A department in a retail store that is rented to an outside party is called a leased department. The volume of sale depends on the existing store's customer base and store's reliability. The lessee is accountable for all the activities of the leased department. 35
  35. 35. Vertical Marketing System A vertical marketing system is a distribution system in which the producers, wholesalers, and retailers act in a unified manner to facilitate the smooth flow of goods and services from producer to end-user. One channel member owns the others or has contracts with them, or has the power to control them. 36
  36. 36. Consumer Cooperatives Consumer cooperatives are retail operations owned and managed by its customer members. In many cases, consumer cooperatives are started by the residents of an area. These residents believe that the existing retailers in that area are not serving them well (either charging too much or providing poor-quality goods/services). 37
  37. 37. Retailers based on Strategic Mix -- 1 Food Oriented Retailers Convenience Stores Conventional Supermarket Food-based supermarket Combination Store Box (limited-line) store Warehouse stores 38
  38. 38. Convenience Store Relatively small stores located near residential areas. Open long hours, seven days a week and carry a variety of products with limited assortment of merchandise. They generally carry high-turnover convenience products. charge relatively high prices and operate in a 3000 to 8000 square foot area. 39
  39. 39. Conventional Supermarket Focus on food and household maintenance products. Earn very limited revenues from the sale of non-food or general merchandise goods. Self-service operation Self-service enhances impulse buying. Every day low price (EDLP) policy may be followed. 40
  40. 40. Food based supermarket Larger and more diversified than a conventional supermarket, but smaller and less diversified than a combination store. The size of the store ranges from 25,000 to 50,000 square feet and the store earns 20 to 25 percent of its revenue from general merchandise goods It provides the full range of grocery items. 41
  41. 41. Combination Store A blend of a super market and a general merchandise store Maintains the identity of both a food store and drug store Size of a combination store ranges from 30,000 to 100,000 square feet Designed to allow customers to have a one-stop shopping experience Prices are less than those in a general merchandise store 42
  42. 42. Box (limited-line) Store A food-based discount store that concentrates on a small selection of goods. Has limited shopping hours, limited services, and limited stocks. Offers a limited number of national brands. Prices are displayed on the shelf or on overhead signs. 43
  43. 43. Warehouse Stores Warehouse stores are discount food retailers with an average size of 100,000 square feet. They cater to customers who look for low price deals. 44
  44. 44. Types of Warehouse Stores Depending on their functioning style Warehouse showroom Catalog showroom Hypermarket Warehouse club 45
  45. 45. Warehouse Showroom Owned by a single-line hard-good retailer. Usually sell well-known brands of furniture and appliances As soon as a customer makes the selection and places an order, the goods are shipped from the nearest warehouse. offers different services like credit, delivery and installation for extra charge. 46
  46. 46. Catalog Showrooms Discount operations that offer merchandise through a catalog or a showroom. Catalog showrooms generally offer hard goods like house ware, jewelry, consumer electronics etc. Customer orders by mentioning the corresponding number of product in the showroom or catalog. 47
  47. 47. Hyper Market A large retail store that offers products at a low price. A combination of a discount store and a food based supermarket. Spread over 300,000 square feet and offers over 50,000 different items for sale. 48
  48. 48. Warehouse Club A general merchandise retailer who offers a limited merchandise assortment with limited service at low prices to consumers as well as small businesses. Store is located in remote locations in an area of 100,000 sft. Interiors are simple and services are limited. Warehouse clubs operating on a membership basis are known as membership clubs. 49
  49. 49. Retailers based on Strategic Mix -- 2 General Merchandise Retailers Classified based on location, merchandise, price, store atmosphere, service and promotion mix: Specialty Stores Variety Stores Department stores Off price retailer Membership Club Flea Market 50
  50. 50. Specialty Stores A type of general merchandise store Sells limited lines of closely related products or services to a select group of customers. Types - Single line specialty stores and Limited line specialty stores. Major variable in a specialty store's strategy is the merchandise assortment. 51
  51. 51. Specialty Store -- 2 The promotional activities emphasize the uniqueness of the store and the deep assortment they provide to customers. Category killer: It offers enormous selection in a product category at relatively low prices. A category killer offers not only low price but also variety within a narrow product line. 52
  52. 52. Variety Stores Variety stores offer a deep assortment of inexpensive and popular goods like stationery, gift items, women's accessories, house wares etc. Also called 5 and 10-cent stores 53
  53. 53. Department Stores Department stores are large retail units that offer wide variety and a deep assortment of goods and services. Organized into separate departments Provide a one-stop shopping experience to customers. 54
  54. 54. Types of Department Stores A traditional department store offers merchandise of average quality priced above average, with minimum customer service. A full-line discount department store offers a broad merchandise assortment at less than prevailing prices. Full-line discount department stores are popular because they offer well-known brands at competitive prices. 55
  55. 55. Features of a Full – Line Department Store High volume, low cost, fast turnover outlet with a wide merchandise assortment. Centralized checkout service Self-service store A low cost model Offers private brands for non-durables and well- known brands for durables. 56
  56. 56. Off-price Retailer Offer an inconsistent assortment of branded fashion- oriented goods at low prices. Purchases from manufacturers who have excess inventory 57
  57. 57. Membership Club Cater to price conscious customers. Customers pay an annual fee to become members Very large and located in isolated areas. Get merchandise directly from manufacturers. Also known as wholesale clubs, warehouse clubs and wholesale centers. 58
  58. 58. Flea Market A flea market is an outdoor or indoor facility that rents out space to vendors Entrepreneurs can start business with low investment. Consists of many retail vendors offering a variety of products at discount prices. 59
  59. 59. Service Vs Goods retail mix As competition increased, service organizations started providing services at a convenient time and location. Service retailing consists of the sale or rental of an intangible activity, which usually cannot be stored or transported, but satisfies the need of the user/ customer. 60
  60. 60. Types of Services Two types: Services along with goods,  Rental Goods Service  Owned Goods Service  Non goods Service Services without any goods (pure service).  Services that are provided without any physical product or good are called pure services. 61
  61. 61. Non – Store Retailer Differ in the retailing methods from store retailers. Reach customers and market merchandise using various methods like "infomercials," direct-response advertising, paper and electronic catalogs, door-to-door selling, in-home demonstrations, portable stalls (street vendors), and vending machines. Non store retailing takes place in two ways: Traditional Non traditional 62
  62. 62. Traditional non store retailers Direct Marketing Direct Selling Vending Machines Catalog marketing Telemarketing TV Home shopping 63
  63. 63. Direct Marketing "Interactive marketing system that uses one or more advertising media to yield a measurable response and/or transaction at any location". -- Direct Marketing Association (DMA) Customer is informed about the product through non personal media and the customer places an order through the mail or phone. In direct marketing, responses can be measured. Company can concentrate its promotional activities on potential customers. 64
  64. 64. Direct Selling "Marketing and retailing consumer goods directly to the consumer that relies neither on direct mail, product advertising nor fixed retail outlets". -- Direct Selling Association Encourages convenience shopping as well as personal touch or feel of a product. Can also be called door- to- door selling 65
  65. 65. Types of Direct Selling Person to Person Multilevel (network) marketing Party plan Direct selling benefits both consumers and sellers. From the consumers' point of view goods are available at their convenience. Direct selling is advantageous for retailers as it is an effective, low cost channel. 66
  66. 66. Vending Machines Involves coin or card-operated dispensing of products. Eliminates the use of sales personnel and facilitates round-the- clock sales. Vending machines help customers avoid the inconvenience of shopping in a store. High Installation costs Also called Automatic Merchandising. 67
  67. 67. Catalog Marketing Catalog marketing refers to sales made through catalogs mailed to a select list of customers or made available in a store. Basic product and pricing information is given along with instructions for placing an order. The kind of delivery (mail, express service, parcel post) that the customer wants can be mentioned in the order 68
  68. 68. Telemarketing Provide more convenience and service satisfaction to customers, Useful for customers who want to avoid traffic congestion and parking problems. Allows retailers to provide customers information on new merchandise and upcoming sales events. Deliver merchandise to the customers' residence or hold it till it is picked up by the customer at a later date. 69
  69. 69. TV Home Shopping TV home shopping works in the following manner: The merchandise items are displayed, described and demonstrated on television. Using the toll-free number provided, customers can place orders. Payments are done through credit cards. The goods are delivered by courier service along with a guarantee. 70
  70. 70. Non-traditional non store based retailers World Wide Web Retailers' websites allow customers to order with a click of the mouse. To attract potential customers, retailers also send details of new products through email to customers. Use of Internet as a medium for promoting their goods and services all over the globe at minimum cost. 71
  71. 71. Video Kiosk The term kiosk is derived from a Turkish word which means open summer house or pavilion. Kiosks are often placed near the entrances of shopping malls. 72
  72. 72. Video Catalog A video catalog is a retail catalog on a CD-ROM disk to be viewed on a computer monitor. After viewing the catalog, the consumer can call up the retailer to order the goods. 73
  73. 73. Summary Theories of Institutional Change Wheel of Retailing Dialectic Process Retail Accordion Natural Selection Classification of Retailers Store-Based Retailer Non Store Retailer 74