Chapter1.ppt

**Introduction to the World of RetailingDr. Vinita SahayProfessor of MarketingIndian Institute of Management Raipur

Retailing Management - Swapna Pradhan

**Manmohan Singh 24 November 2011 passed India will allow FDI up to 51 per cent in "multi-brand retailers", single brand retailers, such as Apple and Ikea, can own 100 percent of their Indian stores, up from the previous cap of 51 percent;both multi-brand and single brand stores in India will have to source nearly1/3 of their goods from small and medium-sized Indian suppliers;all multi-brand and single brand stores in India must confine their operations to 53-odd cities with a population over one million, out of some 7935 towns and cities in India i.e full access to over 200 million urban consumers in India;multi-brand retailers must have a minimum investment of US$100 million with at least half of the amount invested in back end infrastructure, including cold chains, refrigeration, transportation, packing, sorting and processing to considerably reduce the post harvest losses and bring remunerative prices to farmers;the opening of retail competition will be within India's federal structure of government. The states of India have the prerogative to accept it and implement it.

**3 December 2011, the CMof West Bengal, Mamata Banerjee reversed itAnand Sharma, India's Commerce and Industry Minister, after a meeting of all political parties on 7 December 2011 said, "The decision to allow foreign direct investment in retail is suspended till consensus is reached with all stakeholders.On 19 Feb 2013 Tamil Nadu became the first state in the country to stoutly resist MNC 'invasion' into the domestic retail sector. In Chennai, Tamil Nadu CMDA authorities placed a seal on the massive warehouse spreading across 7 acres that had reportedly been built for one of the worlds leading multinational retail giants, Wal-martFebruary 2014, Vasundhara Raje led newly elected Rajasthan Government reversed the earlier Government's decision of allowing FDI in retail in the state.

**Many Drivers DemographicsIncreased global exposureIncreased discretionary incomes across wider spectrum of population, across wider geography

**What is retail?Retail derived from the French word retaillier, which means to break bulk.Retailing is the last stage in the movement of goods and services to the consumer.Retail therefore consists of all activities involved in the marketing of goods and services directly to the consumers for their personal, family or household use.Retailer: a person, agent, agency, company or organization instrumental in reaching the goods, merchandise, or services to the ultimate consumer

**Worlds top retailers

CorporationCountry of OriginWal-Mart StoresU.S.ACarrefourFranceTescoUKHome DepotU.S.AKrogerU.S.AMetroGermanySears HoldingsU.S.ASchwarz Unternehmens Treuhand GermanyCostcoUSAldi Gmbh GermanyTargetU.S.AAlbertsonsU.S.AKmartU.S.A

**Functions of a RetailerForm utilityTime utilityPlace utilityOwnership utility

**How Retailers Add ValueBreaking Bulk-Buy it in quantities customers wantHolding Inventory-Buy it at a convenient place when you want itProviding Assortment-Buy other products at the same timeOffering Services-See it before you buy, get credit

**The Changing Retail LandscapeProximity to the customerThe Rise of consumerismIntroduction of the Private LabelTechnology

**Nature of Retail Industry is ChangingMom and Pop StoreTo Todays Retailer

**Opportunities in RetailManagementSalesOperationsInformation technologyMerchandisingSupply Chain and Logistics Management

**Decision Variables for RetailersCustomer Service Store Design and Display Merchandise AssortmentCommunication Mix LocationPricingRetail Strategy

**Wal-Marts Retail MixFree-standing StoresLocation Strategy

**Wal-Marts Retail MixLocationPricingCommunication MixStore Design and DisplayCustomer ServiceLarge Number of Categories Few Items in Each CategoryAssortment Strategy

**Wal-Marts Retail MixLow, EDLPPricing Strategy

**Wal-Marts Retail MixCommunication MixTV and Newspaper Insert Ads

**Wal-Marts Retail MixStore Design and DisplayBasic, Special Displays for Products

**Wal-Marts Retail MixCustomer ServiceLimited

**The Marketing Retail Equation

**Growth of retail in IndiaPublic Distribution SystemCo-operative movementIndependent retail storesTextile retail chainsDepartment storeSpecialty storesMallsHypermarkets

**Roadblocks to retail development in IndiaLack of recognition as an industryHigh cost of real estateLack of adequate infrastructureTaxation at multiple levelsRestrictions on FDI

**Misconceptions About Careers in RetailingDont need collegeLow payLong hoursBoringDead-end jobNo benefitsEveryone is part-timeUnstable environment

**The Retail Life Cycle

**The Wheel of Retailing

**Types of RetailersRetailers Use Different Retail Mixes-merchandise: variety (breadth) / assortment (depth)-services-store design, visual merchandising-location-pricingInfinite VariationsSurvival of the Fitness Some combination of retail mixes satisfy the needs of significant segments and persist over time.

**Merchandise OfferingVariety (breadth of merchandise)- The number of merchandise categories

Assortment (depth of merchandise)-the number of items in a category (SKUs) : Lotus HerbalsSafe sun SPF 30,3 in 1 matte look daily sunblock120 g

**Variety and Assortment of Bicycles

Classification by Type of MerchandiseNAICS : North American Industry Classification System : hierarchical 6 digit code

**Classification of Retail StoresIndependent retailerChain retailerFranchiseLeased departments

**Types of RetailersFood RetailersMom and Pop StoresConvenience StoresSupermarketsSupercentersGeneral Merchandise RetailersDepartment StoresSpecialty StoresDiscount StoresCategory SpecialistsOff-Price RetailersWarehouse Clubs

**Food Retailers Mom and Pops/ Kirana Stores Supermarkets -is a large,self service food store offering groceries, meat with ltd sale of non food items like health & beauty aids and general merchandise. Typical : 30,00 SKUs Ltd Assortment supermarkets or Extreme Value Food Retailers Eg Aldi 1300 SKUs 6% Labour cost /sales Against average of 12% Superstore -larger supermarket with extended bakery ,seafood etc self service -Practice high low /EDLP. Power Perimeter, Locavore movement ( Carbonfootprint) , Ethnic Merchandise, Private label

**Food RetailersBig Box Retailers ( Large Ltd Service) -Warehouse Clubs( Ltd & irregular Assortment eg Costco ,Sams Club) -Supercenters (15% growth in value terms 2014) -Hypermarkets (16% growth in 2014)Convenience Stores

**Types of Food Retailers

**Issues in Food Retailing Competition from Discount Stores

Changing Consumption Patterns

Efficient Distribution Lower CostsLower PricesTime PressureEating Out MoreMeal Solutions

**Types of General Merchandise RetailersDiscount Stores(Broad Variety , ltd service, Low prices :Private + national)Specialty StoresCategory Specialists( Narrow But deep)Home Improvement CentersDepartment Stores (3 tiers: Special events)DrugstoresOff-Price retailers (inconsistent Assortment: Closeouts /irregulars ))Value Retailers (Dollar General)

**Characteristics of General Merchandise Retailers

**Issues in Discount Store RetailingOnly Big Three Left Wal-Mart, Kmart, TargetWal-Marts DominanceDifferentiate Strategy-Wal-Mart = Low Price and Good value-Target = More Fashionable ApparelCompetition from Category Specialists-Toys-R-Us, Circuit City, Sports Authority

**Issues in Specialty Store RetailingMall-Based Apparel Retailers:Decline in Mall Shopping and Apparel Sales-Lack of New Fashions-Less Interest in Fashion-Increase Price ConsciousnessH & M , Zara

**Category SpecialistsDeep and Narrow Assortments Destination StoresLow Price and ServiceWholesaling to Business Customers and Retailing to ConsumersIncredible GrowthIncreased Competition with National Expansion and Consolidation

**Issues in Department Store RetailingCompetition -Discount Stores on Price -Specialty Stores on Service, Depth of AssortmentLower Cost by Reducing Services (?) -Centralized Cash WrapsMore Sales (?) -Customers Wait for SaleFocus on Apparel and Soft HomeDevelop Private Labels and Exclusive Brands

**Issues in Drug Store Retailing Consolidation Competition from Supermarkets and Discount Stores Pharmaceuticals Evolution to a New Format -Stand Alone Sites with Drive Thru Windows -Convenient Store Front End

**Issues in Off-Price RetailingOpportunistic BuyingHurt By Sales in Department Stores

**Issues in Value RetailingTarget Lower Income FamiliesLow Cost Low Prices -Low Cost Location -Limited ServicesOne of the Fastest Growing Retail Segments

**Characteristics of select retail formats

FormatDescriptionSize (sq.ft)ExamplesIntl.IndiaCategory Killer / SpecialistNarrow variety, but deep assortment50,000+15,000+Toys R Us, Nallis, The LoftConvenience storesMix of products3,000 8,000500 1,0007-Eleven, SpeedmartDepartment storesSeveral product lines, largely non-food75,000+5,000 40,000Marks & Spencer, Shoppers Stop, Pantaloons

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FormatDescriptionSize (sq.ft)ExamplesIntl.IndiaFactory OutletsBranded merchandse at a discount5,000 10,000500 1000Levis factory Outlet, Reebok Factory OutletHypermarketLarge self service stores, mix of food & non food. Essentially low price80,000 220,00040,000 75,000Wal-mart, Big BazaarSingle Price storesOffers a mix of branded & unbranded stores5,000 20,0002,000 5,000Family Dollar, 9 to 9, 49 to 99

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FormatDescriptionSize (sq.ft)ExamplesIntl.IndiaSpecialty storesFocus on a brand or category, narrow product line , but good depth5,000 8,0002,000 5,000Walgreens, Crossword, MusicWorldSupermarketFood,laundry and household maintainance products. Self service, low margin, low cost 8,000 20,000800 5,000Asda, Kroger,FoodBazaar, Food World

Direct Selling:

Amway India Eureka Forbes Herbalife Tupperware Oriflame Avon Beauty Products Forever Living AMC Modicare Hindustan Lever Network

Homeshopping:HomeShop18 Telebrands TVC Skyshop Asian Sky Shop Shop24Seven

E-TailingFlipkart Amazon.com Snapdeal.com Myntra Dell Jabong.com Grofers HomeShop18 Big Basket Indiatimes Shopping India Online Indiaplaza Zivame Junglee.com

Department StoresBenzerThe Bombay StoreEbonyChermasMeena BazaarWestsideShoppers StopD- MartPiramyd Store

Specialty storeMother CareWills LifestyleBataNalli SareesCrossWordCharagh Din,CromaHome TownAllNik NishArchiesVijay Sales

Full line discount storeS MartSabka BazaarBrand FactoryThe Loot

HypermarketsBig BazaarStar India BazaarHyperCityGiantSpencersTotalJumboReliance Mart

SupermarketsFood BazaarSubhikshaNilgirisVitanFoodworldReliance FreshSpencersMore6 TenMonday to Sunday

Drugstore- ReligareApollo Pharmacy MediPlus

Franchise- Yellow ChilliFerns n PetalsGini n JohnnyCaf Coffee DayVLCCJumbo KingSankalpMochaHaldiramsLouis PhilippeVan Heusen Arrow

Convenience store- SpeedMartTwenty Four Seven In & OutPratidin**

Homeshopping:HomeShop18 Telebrands TVC Skyshop Asian Sky Shop Shop24Seven

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**Non-store Retail Formats

Electronic Retailing

Catalog and Direct Mail

Direct Selling

Television Home Shopping

Vending Machines

**Types of Nonstore Retailers

**Issues in Catalog RetailingLow Start Up CostEvolution of Multi-Channel Offering -Electronic Channel, StoresIncreasing Mail CostsClutter from other Catalogs

**Services vs. Merchandise RetailersIntangibility -Problems in Evaluating Service Quality -Performance of Service ProviderSimultaneous Production and Delivery -Importance of Service ProviderPerishability -No Inventory, Must Fill CapacityInconsistency of the Offering -Importance of HR Management

Trends in OwnershipConcentration on One FormatGrowth in Services Franchising

Reasons for Franchising Growth

Types of Franchise Systems

Reasons for Franchising Failure

Franchisor Positions in the Marketing Channel

Franchisor Benefits

Franchisee Benefits

Franchisor Advantages/Disadvantages

Franchisee Advantages/Disadvantages

Franchising Trends for the New Millennium

**Examples of Service Retailers

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