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DEFINITION OF RETAILING
Retailing includes . . . .
all activities involved in selling, renting, and providing goods and services to ultimate customers for personal, family or household use. In the channel of distribution, retailing is where the customer meets the product. It is through retailing that exchange occurs.
What is Retailing
All the activities directly related to the sale of goods and services to the ultimate consumer for personal, non-business use.
A retailer is a business that sells products and/or services to consumers for personal or family use.
Four of the 30 largest businesses in the U.S. are retailers. In 1997, Wal-Marts $119 billion in sales surpassed the gross domestic product of Finland for the same year. Sears, Wal-Mart, Kmart, and JC Penny together employ more than 1.6 million people. Wal-Mart has 603 stores outside the U.S., including joint ventures in China and Korea.
Characteristics of Retailing
Direct interaction with customers It offers employment Opportunities Customer service plays a vital role Location and layout are critical factors in retail business.
FUNCTIONS OF RETAILERS
Identify Consumer demands Management of merchandise Convenience of timing Convenience of place. Serves as the final link. Providing an assortment of products and services Breaking Bulk Holding Inventory Providing services
Distribution Channel
Level of Service
Product Assortment
Price
Ownership
Classification of Ownership Independent Retailers Chain Stores Franchises
Independent Retailer
Owns, operates only one outlet, Owner / Proprietor / Family members working as assistants. Neighborhood Baniya / Paanwalla / Advantages Ease of entry and rapport with customers. Disadvantages Economies of scale and Total Offer
Chain Retailer
When two or more outlets under common ownership, it is called retail chain. Corporate retail chain Similarity in merchandise, the ambience, advertising, promotions. Wills Sport / Louis Phillipe / Arrow / Shoppers Stop / Food World / Music World / Planet M / .. Cost effectiveness is possible in advertising and promotions.
Franchising
A franchise is a contractual agreement between the franchiser and the franchisee that allows the franchisee the right to supply its brands exclusively within a defined area, as per a particular format for a specified period of time. For Ex. Mc Donalds,Pizza Hut, Relince Fresh,etc. Contractual agreement to conduct business fee and compensation are determined. Franchising is essentially a method of expanding the retail business.
Specialty Stores
Supermarkets Drugstores Convenience Stores Discount Stores Restaurants
Retail Formats
Department Stores (20000 to 40000 Sq Ft) Large scale retail format / Often multi-levelled / Variety of merchandise specially furnishing and apparel. Shoppers Stop / Westside / Harrods / JC Penny Speciality Stores (Normally under 8000 Sq Ft) Narrow Product Line / Deep Assortment / Toy Kemp in Banglore, Nalli Saree in Chennai Super Markets (8000 to 20000 Sq Ft) Large / Low Cost / Low Margin / High Volume / Self Service grocery revolution. Convenience Stores (3000 to 8000 Sq Ft) Small / Near Residences / Petrol Pumps
Retail Formats
Discount Stores (Varying Sizes) Off-price retailers, Seconds showrooms, Factory outlets offering odd sizes and unpopular colours. Hyper Markets (80000 to 220000 Sq Ft) Huge Size, Both food and non-food (Clothes/Jewellery/Hardware/Whitegoods/Cycles/Computer s. Carrefour , Retail Parks with cafeteria, restaurants, pubs, banks, petrol stations. May be located on the outskirts of the town.
Automatic vending
Automatic Vending
Non-store retailing that makes it possible to serve customers where stores cannot. Maintenance and operating costs are high. Small convenience products are available in vending machines. Of the 3 million vending machines now in use, 1.8 million are soft drink machines.
Marketing efficiency is improved through segmentation and targeting. Customer value is enhance by providing a fast and convenient means of making a purchase. In 1998 Americans increased their catalog spending to $87 billion. A typical household receives 50 catalogs each year.
Online Retailing
Online retailing allows consumers to search for, evaluate, and order products through the Internet. The advantages of online retailing are: ability to comparison shop privacy variety
Forecasts suggest that current annual sales of $10 billion could reach $100 billion in just a few years.
Telemarketing
Telemarketing involves using the telephone to interact with and sell directly to consumers.
Direct Selling
Direct selling involves direct sales of goods and services to consumers through personal interactions and demonstrations in their home or office. Industry sales are more than $16 billion, but are declining in the U.S. as retail chains begin to carry similar products at discount prices, and the increasing number of dual-career households reduces the number of potential buyers at home. Many direct selling retailers are expanding into international markets to offset the decline in domestic sales.
RETAIL ECONOMICS
It includes the various sectors of the economy in which retailing has yielded a share The retail Environment Retail Consolidation Contribution of Retailing to Indian economic scenario a.Real estate bTourism/Outbound shopping c.Higher GDP d.Outsourcing Opportunities FDI in retail
WHEEL OF RETAILING
Retailers must constantly respond to change in the environment to succeed and flourish Harvard Business School Professor Emeritus Malcolm McNairs Wheel of Retailing theory states:
Most
retailers begin as lower priced distributors To grow they trade up and add amenities, varied assortments, customer service, higher quality goods, etc. Capital requirements mean higher prices As each retailer moves up, the vacuum is filled
The wheel keeps on turning and department stores, supermarkets, and mass merchandise went through this cycles
Innovative retailer Low status and price Minimum service Poor facilities Limited product offering
Traditional retailer Elaborate facilities Higher rent More locations Higher prices Extended product offerings
T Trading up phase
Price
Promotion
People
Key element
Product (merchandise) Product development Product management Product features and benefits Branding Packaging After-sales services
Key Element
Place (store location) Target market Channel structure Channel management Retailer image Retail logistics Retail distribution
Key element
Price
The price is the amount a customer pays for the product. The business may increase or decrease the price of product if other stores have the same product.
PRESENTATION
The manner in which the merchandise is presented at the store level is very important. This aspect not only deals with the store layout and the ambience created, but also with visual merchandising .Visual merchandising is the orderly , systematic and intelligent way of putting stock on display in the retail store.
Key element
Promotion Developing promotional mixes Advertising management Sales promotion Sales management Public relations Direct marketing
CUSTOMER SERVICE The support services that a retailer has have become very important today. The credit policies, product return policies, etc. need to be clear not only to the sales staff but also to the end customer. Relationship marketing, data warehousing and customer relations management are the new buzzwords in the industry today and all these are aimed at enhancing customer service.
Key element
People element Staff capability Efficiency Availability Effectiveness Customer interaction Internal marketing
INTERESTING FACTS ON
Every 10th billionaire is a retailer. 25 of the top 50 Fortune 500 companies are in Retail. In India the Retailing Industry provides employment to over 18 m people, second largest after agriculture. 1 out of every 25 families in India are engaged in the business of retailing 72% of Indian population staying in rural market. In India Per Capita square feet area under retail is just 2 sq.
RETAIL
Manufacture rs
Whole seller
Organized Sector
Distributor
Retailer
RETAIL STRATEGIES
A clear and definite plan that the
retailer outlines to tap the market and build a long- term relationship with the consumers.
Establish Mission Analyse Situation Identify Options Set Objectives Obtain & Allocate resources
Develop Implementation Plan
RETAIL STRATEGY
EXISTING NEW
MARKET PENETRATION Increase in the basket size Increase the customers Increase the purchase frequency
MARKET DVELOPMENT / EXPANSION New market Segments with existing markets New customer base
EXISTING
Another approach is to encourage salespeople to cross sell Market penetration strategy is the least risky one, since it leverages many of the firms resources and capabilities However, market penetration has limits Once the market approaches saturation, a new strategy needs to be pursued if the firm is to continue growth For Ex- Pizza parlors offering discount on the purchase of second pizza within a specific period of time
1.
2.
A retailer is said to follow a strategy of market development if he reaches a new market segments or completely changes the customer base, thus this strategy involves Tapping new geographical markets Introducing products to the existing range Expansion by adding new retail stores to existing network is an example of geographical expansion
Introducing a pharmacy in a supermarket (eg. The medicine Shoppe at the Haiko Supermarket in Mumbai) is an example of a retailer introducing new products, appealing to a different audience Another example is McDonalds who introduced ice creams for Rs.7 This not only created add on sales, but also brought in customers who had the perception that McDonalds is an expensive fast food restaurant
Diversification- the retailer grows by diversifying into new businesses by developing new products for new markets. For e.g.. Tobacco giant ITC entered the business of apparel retail through Wills Lifestyle stores and even entering into the greeting card business.
Resources needed by a retailer - Human Resources - Financial Resources 1. Human Resource HR plan must be consistent with overall strategy of the organization HR management focuses on issues such as recruiting, selecting, training, compensating, and motivating personnel These activities must be managed effectively and efficiently 2.Financial Resources Takes care of the monetary aspects of business Shop rent, salaries and payments for merchandise
Coordinated Effort
Value Driven Goal Orientation
Retailing Concept
Retail Strategy
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