Retail Organization and Classification of Retail Units

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The term retail organization refers to the basic format or structure of a retail business designed to
cater to the needs of the end customer. Recently, some scholars have started referring to India
as a nation of shopkeepers. This epithet has its roots in the huge number of retail enterprises in
India, which were over 12 million in 2003. About 78% of these are small family businesses
utilizing only household labour.
Retail firms may be independently owned, parts of a retail chain, operated as a franchisee, leased
departments, owned by manufacturers or wholesalers, consumers owned or co-operative society.
A retail unit could be owned by:
• Manufacturer (e.g., company owned retail outlets)
• Wholesaler (e.g., Vastra outlet in Rajouri in New Delhi)
• Independent retailer (Chanakya Sweet Shop near Hazratganj in Lucknow)
• Consumer (consumer owned grocery stores in man y residential societies)
• Co-operative society (e.g., Mother Dairy milk booths in Delhi)
• Government (e.g., Cottage Emporia)
• Ownership shared among franchiser and franchisee (e.g., Archies Gallery)
Although most Indian retailers fall in the category of small-scale units, there are also some very
big retailers. Organized retail stores are generally characterized by large, professionally managed
store formats providing goods and services that appeal to customers, in an ambience that is
conducive for shopping and provides a memorable experience to customers.
From positioning and operating perspectives, each ownership format serves a marketplace niche
and presents certain advantages and disadvantages. Retail executives must not lose sight of this
in playing up their strengths and working around their weaknesses.
Classification of Retail Units
Conceptual classification of a business unit provides the marketers with strategic guidelines,
useful in the design of retailing strategy. Besides, retail businesses are extremely diverse and
there are quite a few types of retail units. Therefore, retail units are classified on multiple of
ownership, geographical locations, kind of customer interaction level of services provided etc.
1. Retailers Classified on the Basis of Ownership
One of the first decisions that the retailer has to make as a business owner is how the company
should be structured. This decision is likely to have long-term implications, so it is important to
consult with an accountant and attorney to help one select preferred ownership structure.
There are four basic legal forms of ownership for retailers:
 • Sole proprietorship: – The vast majority of small businesses start out as sole
proprietorships. These firms are owned by one person, usually the individual who has the day-
to-day responsibility for running the business.
• Partnership: - A partnership is a common format in India for carrying out business
activities (particularly trading) on a small or medium scale. In a partnership, two or more people
share ownership of a single business.
• Joint venture: – A joint venture is not well defined in the law. Unless incorporated or
established as a firm as evidenced by a deed, joint ventures may be taxed like association of
persons, sometimes at maximum marginal rates. It acts like a general partnership, but is clearly
for a limited period of time or a single project.
• Limited liability Company (public and private):- The Limited Liability Company (LLC)
is a relatively new type of hybrid business structure that is now permissible in most states. The
owners are members, and the duration of the LLC is usually determined when the organization
papers are filed.
2. Classification of Retailers on the basis of Operational Structure
Retail businesses are classified on the basis of their operational and organizational structure.
Operational structure defines the key strategic decision of retail entity, whether to hire employees
and manage the distributed sales function internally or to reach customers though franchised
outlets owned and operated by local entrepreneurs.
Retail firms can be classified into five heads on the basis of their respective operational
structures:
• Independent retail unit: – The total number of retailers in India is estimated to be over 5
million in 2003. About 78% of these are small family businesses utilizing only household labour.
An independent retailer owns one retail unit.
• Retail Chain: – A chain retailer operates multiple outlets (store units) under common
ownership; it usually engages in some level of centralized (or coordinated) purchasing and
decision making.
• Franchising: – Franchising involves a contractual arrangement between a franchiser
(which may be a manufacturer, a wholesaler, or a service sponsor) and a retail franchisee,
which allows the franchisee to conduct a given form of business under and establishments
name and according to a given pattern of business.
• Leased Department or Shop-in-shop:- It refers to department in a retail store that are
rented to an outside party. Usually this is done in case of department and specialty stores and
also at times, in discount stores.
 • Co-operative Outlets: – Co-operative outlets are generally owned and managed by co-
operative societies. In this context the detailed example of Kendriya Bhandar in India.
3. Classification of Retailers on the basis or Retail Location
Retailers have also been also been classified according to their store location. Retailers can
locate their stores in an isolated place and attract the customers to the store on their own strength
—such as a small grocery store or paan shop in a colony, which attracts the customers staying
close by.
Classification of retailers on the basis of location is discussed below:
• Retailers in a free-standing location: – Retailers located at a site which is not
connected to other retailers depend entirely on their sore’s drawing power and on the various
promotional tools to attract customers. This type of location has several advantages including
no competition, low rent, better visibility from the road, easy parking and lower property costs.
For example the Haldiram’s outlet on the Delhi-Jaipur highway and the McDonald’s outlet on
Delhi-Ludhiana highway.
• Retailers in a Business-associated Location:- In this case, a retailer locates his store
in a place where a group o retail outlets, offering a variety of merchandise, work together to
attract customers to their retail area, and also compete against each other for the same
customers.
• Retailers in Specialized Markets: - Besides the above location-based classification, we
also have in India-retailers who prefer specialized markets, particularly traditional independent
retailers or chain stores. In India, most of the cities have specialized markets famous for a
particular product category. For example, in Chennai, Godown Street is famous for clothes,
Bunder treet for stationery products, Usman street for jewellery, T Nagar for ready-made
garments, Govindappan naicleen street for grocery, Poo Kadia for food and vegetables.
• Airport Retailing: – For quite some time, duty-free shops and newsstands dominated
the small amount of commercial space provided at airports. Lately, serious efforts are being
made to design new airport facilities in order to incorporate substantial amounts of retail space.
The key features of airport retailing are:
• Large groups of prospective shoppers
• Captive audience
• Strong sales per square foot of retail space
• Strong sales of gift and travel items
• Difficulty in replenishment
• Longer operating hours
• Duty-free shopping possible.
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