RETAIL

Growing Importance of Retail

Sector
• Large and increasing contribution to GDP
• Economic importance more visible
• Major employer
• Retailers diversifying their activities
• Organisations growing on an international scale
• Blurring of areas of retail to include wider areas of
business activity
• Size of operation allowing for supply chain control.
 Characteristics of Retailing
• There is direct end-user interaction in
retailing.
• Sales at the retail level is generally in smaller
unit sizes.
• Location is a critical factor in retail business.
• In most retail businesses services are as
important as core product.
• It is the only point in the value chain to
provide a platform for promotions.
 Modern Retail In Expansion
Phase…
Initiation Conceptualization Expansion and Entry Consolidation
of Global Retailers

I II Entry of large
III
Large Scale
Consolidation

Stiff
IV Movement to
Pure play Retailers, Smaller Cities
global retailers Competitio
Size of Industry

realizing the and Rural

n
potential start to Areas
test waters,
More Aggression from
International Players

Manufacturers Large Investment More than 5-6 Players

opening their Commitments by large with Revenues in
own outlets Indian corporates excess of US $ 700
Expansion by leading mn
Product Brands Specialty Formats based
on finer segmentation of
the market
Private brands getting
established

Pre 1995 1995 to 2005 to 2010 Onwards

2005 2010
Types of Retail Formats
 Mom and Pop Stores (e.g. kiryana stores)
 Department stores ( Shopper’s stop)
 Specialty store ( Pizza Hut)
 Supermarkets (Wal-Mart,Big Bazaar)
 Convenience stores (In & Out)
 E-tailors (e-bay,amazon.com)
 Discount stores (Koutons)
Full-line discounters or mass merchandisers
Specialty discount stores or category killers
FUNCTIONS OF RETAILERS
PROVIDING
UNDERSTANDING
ASSORTMENT
CUSTOMER NEEDS
OF GOODS
& WANTS
SERVICES

PROVIDING FUNCTIONS OF
SERVICES TO BREAKING
CUSTOMERS RETAILERS BULK

PROVIDING
HOLDING INFORMATION TO
INVENTORY SUPPLIERS
Retail Market Break-Up in
2008

Source: Technopak Analysis

 India Retail Scenario
• The Indian retail market is expected to be about US $ 535 Billion by 2013. With
an anticipated US$ 30 Billion in fresh investments over next 5 years, modern
retail will show impressive CAGR >40%

Modern Retail Retail GDP

2,135

1,487
1,161
783 755
410 535
280 170
8 18 73

2003 2008 2013 (P) 2018 (P)

All Figs in US$
billion
8
 Currently, Modern Retail Comprises a
Small Percentage of Total Retail in India

Breakup of Modern and Traditional Breakup of categories within modern

Retail retail
Spending Shifting From Basic To
Discretionary
Food & Grocery
Rent, Utilities &
Education
Fuel, Transport & 201
Communication 3

Savings &
Investment
Discretionary
Expenditure 200
8

• The share of food and grocery in the

consumer’s wallet continues to drop –
200 releasing money for discretionary
expenditure
3

• F&G share expected to decline from 36%

in 2008 to 32% in 2013
Source: India Consumer Trends ’07, Technopak analysis
Despite Current Slowdown, Growth
Opportunity For Retail & Consumer
Products Is Still Intact
• Medium and long term prospects for the Indian economy
continue to be enthusing with strong domestic consumption
and reduction in commodity prices, inflation, and lowering
interest rates.
• Sectors such as Consumer Products, Food & Grocery,
Consumer Appliances & Durables, QSRs, Healthcare,
Education, etc. are still showing high growth prospects as
reflected in their recent financial numbers.
• Modern Indian retail is currently experiencing a steep
learning curve and the current turbulence is not entirely
unexpected or undesirable.
• Retail will witness expansion, consolidation, acquisition and
further entry of international chains between 2009-2013
giving further fillip to the overall growth of modern retail.
• Investment options will further increase as the Government
will finally open up international investment in the retail
sector during 2009-2013 period.
DEFINITION OF RETAILING

The term ‘retailing’ is derived from the old French

word “retailler ” meaning ‘a piece of’ or ‘to cut
up’.

Retail is:
“Any business that directs its marketing efforts
towards satisfying the final consumer based upon
the organisation of selling goods and services as
a means of distribution”.
 Classification of Retail
Units
Retail stores can be classified as per the following
• Nature of ownership:
- Sole proprietorship, Partnership, Joint Venture
Limited Liability company.
• On the basis of Operational Structure :
- Independent Unit, Retail Chain, Franchise, Leased (s-in-s)
departments, Co-operatives (Fair price)
• On the basis of retail Location :
- Free Standing Retailers, In Business-associated location,
planned shopping centers
• On the basis of Merchandise Mix.
 Method of Customer Interaction

Type of Retailers

Store Retailers Non-Stores Retailers

- Electronic Retailing
- Catalogue & Direct Mail Retailing
- Direct Selling
Person to Person
Party Plan or Person Selling
Multilevel Network
- Vending Machines
 Retail Marketing
The Nature of Retail Marketing:
 The key aspects of retail
marketing is an attitude of mind.

 In making retail marketing

decisions, retailers must consider
the needs of the customers.

 Retail marketing decisions are

driven by what the shoppers need
and want
Cont…
 Retail marketing is therefore a philosophy and is
all about satisfying the customers
 What the customers regard as value and what
they buy is decisive.
 What the customers buy determines the nature of
the retailer’s business
 The essence of retail marketing is developing
merchandise and services that satisfy specific
needs of customers, and supplying them at prices
that will yield profits.
 Retailers must take the customers’ needs into
consideration in retail operation.
 The concept of Retail
Marketing
• The retail marketing concept is the acceptance by
the retailer that it is the “customer” and not
“demand” that lie at the core of the retail
organisation.
• The retail marketing concept is a philosophy, not
a system of retailing or retail structure.
• It is founded on the belief that profitable retailing
and satisfactory returns on investment can only
be achieved by identifying, anticipating and
satisfying customer needs and desires.
• It is an attitude of mind that places the customer
at the very centre of retailing activities.
Retail marketing is stimulating, quick-
paced, and influential.

It encompasses a wide range of

activities including:
– Environmental analysis
– Market research
– Consumer analysis
– Product planning etc.
 Importance Of Marketing In
Retailing
• Marketing is a vital tool for every retailer, as it identifies
current, unfulfilled needs and wants, which it defines and
quantifies.
• Marketing determines which target groups the retailer should
serve.
• Marketing could be seen as delivering an acceptable standard
of living.
• Marketing can ensure complete satisfaction and sustained
customer loyalty.
• Marketing depends on the efficient co-ordination of consumer
prediction, product development, packaging design and
influencing demand through appropriate communication
medium.
• From these, a suitable mix is achieved.
Retail marketing objectives

The retail marketing objective is a performance

parameter which has been explicitly stated.
It can be stated in quantifiable terms and time terms so
that results can be measured against it.

Three types of retail objectives include:

1. Basic objective – those which defines retailer’s long-

term purposes.
2. Goals – those which the retailer must achieve to be
successful
3. Targets – short-term goals that require immediate
achievement.
 Retail marketing mix
• Retail marketing mix is the term used to describe the
various elements and methods required to formulate and
execute retail marketing strategy.

• Retail managers must determine the optimum mix of

retailing activities and co-ordinate the elements of the mix.

• The aim of such coordination is for each store to have a

distinct retail image in consumers’ mind.

• The mix may vary greatly according to the type of market

the retailer is in, and the type of product/services.
The 3 P’s of Marketing (Extended
Marketing mix)
 Composition of key
elements
• Place
• Product
• Price
• Promotion
• People
• Process
• Physical Environment
 Retail Marketing Mix
While many elements may make up a firm’s retail
marketing mix, the essential elements may include:
• Store location,
• merchandise assortments
• Store ambience,
• customer service,
• price,
• Communication with customers
Mix …

• Personal selling
• Store image
• Store design
• Sales incentives
• People
• Process
• Physical evidence
 Theories of Retail Development
Retail Development from the theoretical perspective:

• No single theory can be universally applicable or acceptable.

The application of each theory varies from market to market ,
depending on the level of maturity and the socio-economic
conditions in that market.

• The retail scenario keeps changing continuously. These changes

are brought by ever changing customer requirement, economic
development of the nation , falling borders, new technologies
and by entrepreneurs.
• Growth in retail is a result of understanding market signals and
responding to opportunities that arise in a dynamic manner.
• Theories of retail development can broadly be classified as:

1. Environmental: where a change in retail is attributed to the

change in the environment in which the retailers operate.

2. Cyclical : where change follows a pattern and phase can have

definite identifiable attributes associated with them.

3. Conflictual: where the competition or conflict between two

opposite types of retailers, leads to a new format being
developed.
• The Wheel Keeps On Turning And Department Stores,
Supermarkets, And Mass Merchandise Went Through
This Cycles

e
has

Ent
p

ry p
ility

Innovative retailer
Mature retailer

has
rab

Low status and price

Top heavy

e
ne

Minimum service
Vul

Poor facilities
Declining ROI
Limited product offering

Traditional retailer
Elaborate facilities
Higher rent
More locations
Higher prices
Extended product offerings

T
Trading up phase
3. Conflict theory (dialectic Process)

• Conflict always exit between operators of similar formats or

within broad retail categories.

• Retail innovation does not necessarily reduce the number of

formats available to the consumer, instead , it leads to the
development of more formats.

• Retailing involves through a dialectic process, i.e. blending of

two opposite to creates a new format. This can be applied to
development in retailing like;
A. Thesis: Individual retailers as corner shops all across the
country.

B. Antithesis: A position opposed to the thesis develops over a

period of time . (department store, discount store). The
antithesis is a challenge to the Thesis.

C. Synthesis: There is a blending of the Thesis and antithesis.

The result position between the thesis and antithesis.
Supermarkets and hypermarkets flourish. This “synthesis”
for the next round of evolution.
Illustration

Antithesis Thesis

Discount Store Department Store

Discount
Department Store