Retail Management

Module 1: Introduction to Retailing and Retail Environment

Abhay Sir Notes

1. Definition of Retailing
A retail marketing include set of activities where a retailer buys products
from a wholesaler or manufacturer to sells them to ends users
(consumers). In simple words, a retailer is an intermediary which makes
products available to consumers using different channels, for example,
brick-and-mortar retail store, shopping malls, shopping website,
automatic vending machines, kiosks etc.

According to Philip Kotler, “all activities in selling goods or service

directly to final consumer for personal or non-business use is
retailing or retail marketing.”

People know about big-name retail companies such as Walmart or Target.

These big names sell various products, but they don’t create those products
themselves. This is possible through a retail marketing business model, which
follows three steps:

 The retailer purchases and sells products from businesses.

 The retailers advertise those products to customers.

 Customers come into the store and buy those products.

Many stores follow this model to make money and to get products to
customers. While people think of physical stores as retailers, they forget that
online websites can be retail stores as well. One of the most popular retailers,
Amazon, makes sales through their website.

2. Importance of retailing
Retailing has mirrored the increasing prominence of the
retail industry. Retailing provides necessary service and a
positive contribution to the economy. The importance of
retailing is given below:

1. Retailing shapes the lifestyle of the people: Retailing is an integral part of the modern society.
It shapes the way of life. In the past, trading of goods was a part of a traditional society. But in
recent times, buying and selling of goods have become a brand dominated activity.

2. Retailing contributes to the economy: The importance of retail sector is reflected in its
contribution to the growth of an economy. Its contribution is much more visible in the modern
era than it was in the past. As the retail sector is linked to the significant portion of the
economy, its contribution to GDP is substantial. Retailing is the driving force of the economy. It
aims at promoting its sustained growth.

3. Retailing dominates the supply chain: Goods and service flow from manufacturers or service
providers to consumers. Where consumers are large in number and are widely distributed, the
role of retailers becomes crucial. Retailers serve as a connecting link between the wholesalers
and consumers. Due to its dominant position in the supply chain, the retail structure has steadily
developed over the years.

Now-a-days, retailing is characterized by large multiple chains rather than small scale
independent retailers. The formalization and growing importance of retailing has made it
powerful in the distribution channel. Now, retailers are compared with manufacturers which
indicates the growing dominance of retailers within the supply chain.

Besides, the annual turnovers achieved by the retailers can be compared with the largest
companies in other service industries.

4. Retailing is interdisciplinary: The pace of growth within retailing is accelerating. Retailing has
emerged from a number of interrelated disciplines such as geography, economics, management
and marketing.
 5. Retailing is acknowledged as a subject area in its own right: Potter has described the academic
study of retailing as the “Cinderella of the social sciences“. Retailing is an accepted area of
academic debate, such as marketing and management, developed fully as an area of study.
University research centres focus on retailing and professional appointments in retailing have
been made. Academic journals focusing on retailing are being published worldwide.

6. Retailers enjoy status as major employers: In today’s society, retailers are the major
employers. It is estimated in developed countries that retail industry employs one in nine of the
workforce. Retailers employ a significant proportion of the overall workforce.

More than two thirds of the retail force are women. Also, more than half of retailing employees
are employed on a part-time basis. This, highly flexible workforce is capable of adapting to the
differing labor demands In the past, retailing employees got lower pay and had longer working
hours. But now, the retail sector is becoming more organized with better pay scale.

7. Retailers are gatekeepers within the channel of distribution: Retailers are becoming
increasingly important in their role as gatekeepers within the channel of distribution. In the past,
suppliers were dominant. Retailers supplied the merchandise that was on offer and consumers
selected from them. As retailers have become significantly powerful, they are able to influence
suppliers and stock only the brands they wish to sell. So, consumers are able to buy only what is
stocked and offered to them by the retailers. Retailers are thus considered as shaping consumer
demand.

8. Retailing has scope for expanding internationally: Retailing offers scope for shifting retail
operations outside the home market. Retailers who focus on luxury goods markets are
expanding their business internationally. Retailers are moving into more geographically and
culturally distant markets.

3. Scope of Retailing
Retailing has a very wide scope. It is one of the fastest growing
industries in India and is providing employment opportunities to
many people. Retailing provides employment in two ways.
Firstly, it provides entrepreneurship opportunities to the people
and secondly, it provides employment to so many people who
cannot own the retail stores.

1. Retailer’s Perspective:
From the retailer’s perspective, retailing can include anything that the retailer wishes to sell. It
may be goods or services. These may include goods such as mobiles, computers, electronics,
readymade garments, textiles and clothing, jewellery, books, paintings, medicines, stationery,
watches, or may include services such as catering, hospitality, hospitals etc.

However, in certain cases permission in form of license is required to be obtained from the
government. In such cases the retailer will have to comply with all the legal formalities before
starting a business. For example, a license is required to operate a chemist’s shop. Hence, the
retailer must possess the required qualifications and hence may apply for the license.

2. Employee’s Perspective:
Retailing has provided tremendous opportunities of employment. The retailers operating at a
small level required small number of employees to help them in business. These employees
were appointed as salesmen, cleaners, cashiers, etc. by the retailers. But with the increase in the
scope of operations and the growth of retailing, there has been tremendous change in the
industry.

Now the retailers operate at bigger levels having separate departments for everything such as
finance, marketing, advertising and sales, human resource development, etc. Hence, the
retailers provide enormous opportunities to the employees.

ADVERTISEMENTS:

The following are the areas where the scope of retailing can be seen from the point of view of
the employee:

i. Purchase Department:

The purchase department is responsible for making all the purchases for the business. It
includes the selection of the merchandise to be sold to the customers, their price range, the
selection of the vendor from whom the purchases are to be made, etc.

This department requires vast amount of efforts and includes a lot of paper work, telephonic
conversation and travelling. The employees working with this department should be well
conversed having good amount of knowledge about the industry as well as the vendors. They
must be able to take quick decisions.

ii. Finance Department:

The finance is the life blood of any organization. The finance department performs the functions
such as making and compiling the financial records, allocation of finance to various
departments, management of finance, arrangement of finance, controlling the cash flow,
managing the banking as well as investments, deciding the credit allocation, etc. Sometimes a
retail audit may also be conducted by the finance department.

iii. Marketing and Sales:

The marketing department includes various activities such as sales promotion, advertising,
public relations, etc. These activities are extremely important from the view point of reaching
the customers. The marketing department is responsible for conducting extensive market
research and understanding customer requirements.

The people required in marketing department should be well conversant, having proper
knowledge about the product, any they must be able to convince the customer to buy the
products. They should also be capable of understanding the customer’s requirements and act
accordingly.

iv. Stores:

The stores department is responsible for storing the goods. The store’s manager should ensure
that at every time the inventory is maintained at proper levels so that there is no shortage of
goods. At the same time the department should ensure that too much inventory may cause
problems of storage, obsolescence, wear and tear, etc. So the store’s manager must always
keep an up to date record of the inventory and ensure uninterrupted supply of materials.

v. Human Resource:

The human resource department is responsible for the recruitment, selection, training,
induction etc. of the employees. Human resource is a human centric industry. The people
required in this department must be able enough to understand the requirements of the people
in the organization and must be able to stop the efficient employees from leaving the
organization.

vi. Technology in Retailing:

Retail industry in India is in a mature stage and is a very confident user or information
technology. The industry is using technologies such as Electronic Data Interchange (EDI) which is
used to electronically transfer the information through computers. Database Management, Data
Warehousing and Data Mining are the techniques that are used to gather information about the
customers and store them for future use.
 Data Mining helps in customer relationship management. Radio Frequency Identification System
(RFID) is used for supply chain management. The concept of e-tailing is continuously gaining
ground in retailing. It includes the use of internet for selling the goods.

vii. Supply Chain Management:

Supply Chain Management means managing the supply of materials, services and information
along the supply chain. Managing the resources efficiently and effectively increases profitability
of the business. Supply chain is managed by using information systems.

Thus there are many areas where retailing can provide employment to the people. Therefore it
can be concluded that the scope of retailing is very wide. One can engage himself as an
entrepreneur or can join the sector as an employee depending upon his skills and finance, etc.

4. Special Characteristics of Retailing

Important Characteristics of Retailing are given below:

1. It offers direct interaction with the customers:

None else in the channel comes across the customers as the retailer is the last point. It is he who
gets the feedback from the customers.

2. Small quantity makes large quantity:

ADVERTISEMENTS:

A retailer is selling in small quantities through break bulk function. However, the small quantities
become large when aggregated.

3. Customer service:
A retailer provides different services to the customers, like home delivery and credit facility.

4. Point of sales promotion:

A manufacturer going in for sales promotion has to provide it to the final point from where the
customer buy. Sale, Point of Purchase display, discounts, etc. have to be offered at this point
only.

5. Different forms:
Retailers have undergone a sea-change. Traditionally retailers were in the form of Hats, Melas,
and Mandies; then the forms changed to mom-and-Pop stores or Kirana stores, super bazars
etc; and now the organised retail is before us. From brick-and-mortar-stores now there are
many forms of non-store based retailers.
 6. Location and Layout being Important:

Location is very important for the retailers, otherwise customer footfalls may be a problem.
Customers are time-poor and hence location is very important. Apart from location, layout is
equally important especially in the new retailing environment. Ambience, the part of extended
marketing mix is the necessity rather than a luxury. It is because of this reason that most of the
mom-and-pop stores are undergoing interiors.

7. Big Employment Provider:

Retail sector is the second largest employer in India.

Retail firms may be independently owned, chain-owned, franchisee-operated, leased departments,

owned by manufacturers or wholesalers, or consumer-owned. Although retailers are primarily small
(three-quarters of all stores are operated by firms with one outlet and more than one-half of all firms
have two or fewer paid employees), there are also very large retailers.

Each ownership format serves a marketplace niche, if the strategy is executed well:
▶▶ Independent retailers capitalize on a highly targeted customer base and please shoppers in
a
friendly, informal way. Word-of-mouth communication is important. These retailers should
not try to serve too many customers or enter into price wars.
▶▶ Chain retailers benefit from their widely known image and from economies of scale and
mass
promotion possibilities. They should maintain their image chainwide and not be inflexible in
adapting to changes in the marketplace.
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112 PART 2 • SITUATION ANALYSIS
▶▶ Franchisors have strong geographic coverage—due to franchisee investments—and the
motivation of franchisees as owner-operators. They should not get bogged down in policy
disputes
with franchisees or charge excessive royalty fees.
▶▶ Leased departments enable store operators and outside parties to join forces and enhance
the
shopping experience, while sharing expertise and expenses. They should not hurt the image
of the store or place too much pressure on the lessee to generate store traffic.
▶▶ A vertically integrated channel gives a firm greater control over sources of supply, but it
should not provide consumers with too little choice of products or too few outlets.
 ▶▶ Cooperatives provide members with cost savings due to pooled purchasing and joint
ownership of a warehouse. They should not expect too much involvement by members or add
facilities that raise costs too much.
Independent
5. Future Prospects of Retailing in India
6. Organised Vs Unorganised Retailing
7. An Introduction to Retail Environment in India
8. Introduction to Global Retail Market
9. Economic Significance of Retailing in India
10. Foreign Direct Investment in Indian Retail market