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Introduction to Retail Management

Chapter -1 (Introduction to retail management)


The term ‘retailing’ is derived from the old French word “retailer” 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”.

Retailing: A set of business activities that adds value to the products and services sold to consumers for
their personal or family use.

• It is not only sale of products in stores but also sale of services

• Not all retailing done in store, retailing can be done by direct sales of cosmetics, catalog sales,
home shopping n/w on cable TV ,haircut

Retail industry in India is largely unorganized & predominantly consists small independent and over
managed shops organized retail in India represents a small fraction of the total retail market.

According to Philip Kotter, “Retailing includes all the activities involved in selling goods
or services to the final consumer for personal, non-business use. A retailer or retail store
is any business enterprise whose sales volume comes primarily from retailing.”

Retailing can be defined as conclusive set of activities or steps used to sell a product or a service used to
sell a product or a service to ultimate consumers to ultimate consumers.

Retailer: A retailer is a business that sells products and/or services to consumers for personal or family
use.

Retail management: The process of bringing the ultimate user to the main producer, through a series
of stages, where retailing is the last one. It is not limited to quantities, but limited to the exact requirement
of the ultimate user. Therefore, bringing about operational efficiency at this last stage, and creating an
environment so compelling that he looks nowhere else, is "Retail Management". RM- is an art, and
necessitates employing several tools of logistics management for a complete end user satisfaction. RM -
is getting to know the final user on behalf of the producer. RM - is a process of facilitation.

Retail marketing: Retail marketing is comprised of the activities related to selling products directly to
consumers through channels such as stores, malls, kiosks, vending machines or other fixed locations. In
contrast, direct marketing to consumers attempts to complete a sale through phone, mail or website sales.
The successful implementations of the components of the traditional marketing mix (product, place, price
and promotion) are essential for success in retail marketing. The savvy marketer must have a thorough
understanding of his or her customers to answer the questions that are implied by each of the 4 P's.

Manufacturer wholesaler Retailer Final customer

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• Retailers are at the end of the distribution chain & involve in direct interface with the customer

• Referred as intermediaries – pass on products from producers & wholesalers to customers

• Provision of channel in a convenient location to provide a successful channel of distribution

• Key objective: availability of right product, in right qty, at right time – successful channel

Characteristics of retailing:

1. There is direct end-user interaction in retailing.

2. Sales at the retail level is generally in smaller unit sizes.

3. Location is a critical factor in retail business.

4. In most retail business service are as important as core product.

5. It is the only point in the value chain to provide a platform for promotions.

Function of the retailing:

Retailing is supposed to provide:

 Product or Form Utility (End Product)

 Place utility (Retail Store- Opened according to convenience and demand)

 Time Utility (Shopping time convenient to consumers)

 Ownership Utility (Transfer of Ownership to consumer)

 Providing an assortment of products

 Breaking Bulk

 Holding inventory

 Channel of Communication(providing information to the supplier and customer)

 Transport and Advertising Functions

 Additional Services (Customer care, Credits and After sales)

Providing an assortment of products:

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• Supermarkets carry 15000 different items made by over 500 companies


• This assortment enables customers to buy wide selection of brands, designs, sizes, colors & prices
in one location
• Not the case in individual manufacture’s retail outlets
Breaking Bulk:

• To reduce transportation costs, mfrs ship whole cases of their products to


retailers
• Retailers then offer the products in smaller quantities tailored to individual
consumers usage pattern
• Breaking the large shipments into smaller consumer quantities – Breaking
Bulk
Holding inventory:

• Function of retailers – to make the availability of products when consumers want them
• Consumers can have small inventory of products at home as retailers will have the availability
• By maintaining inventory, retailers reduce customer’s cost of storing products
Providing services:

• Provide services that make it easier for customers to buy & use products
• Offer products on credit
• Display products for ease of use by customers for purchase
• Assistance provided by sales people on purchase

Reasons for the growth of retailing:

1. Higher disposable income


2. Dual-income families (means more than one earning hand in the family)
3. Changing life-styles
4. Lack of time
5. Seeking of convenience
6. Shopping experience
7. Wide range of products (retailer diversifying their activities)
8. Quality products
9. A growing urban youth population
10. Good infrastructure

Barrier to the growth of retailing:

1. Lack of sufficient and appropriate


2. Small market size
3. High tax and custom duty
4. Shortage of high quality malls and human resources capital
5. Lack of proper judicial system to counter piracy
6. Due to red tapism
7. Huge geographical and regional differences

Opportunities or career in Retail Sector:

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 Manager Trainee:
Works within a rotation among the various departments & functions in a firm becoming familiar
with all operations, and works with computer printouts
 Department Manager:
Supervises sales staff within the department, assigns duties, trains staff, evaluates employees'
performances, supervises merchandise presentations, submits reports & analyzes inventory &
stock control within a department, assists in sales when necessary, & initiates store
communication
 Assistant Store Manager:
Supervises & schedules the sales staff, supervises merchandise presentations, opens and closes
the store, submits reports, analyzes inventory and stock control within a department, assists in
sales when necessary, and initiates store communication.
 Assistant Buyer:
Works with the merchandiser developing the line, assists in determining the merchandise to be
included and the price points of merchandise, keeps clerical records for the buyer, follows up on
merchandise shipments, initiates store communication, and works with computer printouts.
 Market Research Assistant:
Researches market conditions to determine potential sales, examines and assists in analyzing data
to forecast future trends, prepares reports, and works with computer printouts.
 Merchandiser:
Determines the merchandise selection in cooperation with a buyer or corporate management,
responsible for the "presentation" of the merchandise in the department or store, tracks the "flow"
of merchandise
 Human Resource Specialist:
Analyzes retail functions and job descriptions; recruits, trains, assesses, and motivates employees

Retailing in India

The Indian retail market, which is the fifth largest retail destination globally, has been ranked as the most
attractive emerging market for investment in the retail sector by AT Kearney's eighth annual Global
Retail Development Index (GRDI), in 2009. The share of retail trade in the country's gross domestic
product (GDP) was between 8–10 per cent in 2007. It is currently around 12 per cent, and is likely to
reach 22 per cent by 2010.
A McKinsey report 'The rise of Indian Consumer Market', estimates that the Indian consumer market is
likely to grow four times by 2025. Commercial real estate services company, CB Richard Ellis' findings
state that India's retail market is currently valued at US$ 511 billion. Further, CB Richard Ellis states that
India has moved up to the 39th most preferred retail destination in the world in 2009, up from 44 last
year.
Banks, capital goods, engineering, fast moving consumer goods (FMCG), software services, oil
marketing, power, two-wheelers and telecom companies are leading the sales and profit growth of India
Inc in the fourth quarter of 2008-09. India continues to be among the most attractive countries for global
retailers. At US$ 511 billion in 2008, its retail market is larger than ever and drawing both global and

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local retailers. Foreign direct investment (FDI) inflows as on July 2009, in single-brand retail trading,
stood at approx. US$ 46.60 million, according to the Department of Industrial Policy and Promotion
(DIPP).
India's overall retail sector is expected to rise to US$ 833 billion by 2013 and to US$ 1.3 trillion by 2018,
at a compound annual growth rate (CAGR) of 10 per cent. As a democratic country with high growth
rates, consumer spending has risen sharply as the youth population (more than 33 percent of the country
is below the age of 15) has seen a significant increase in its disposable income. Consumer spending rose
an impressive 75 per cent in the past four years alone. Also, organised retail, which is pegged at around
US$ 8.14 billion, is expected to grow at a CAGR of 40 per cent to touch US$ 107 billion by 2013.
The organised retail sector, which currently accounts for around 5 per cent of the Indian retail market, is
all set to witness maximum number of large format malls and branded retail stores in South India,
followed by North, West and the East in the next two years.
According to the report ‘Mall Realities India 2010’ by leading property consultants, Jones Lang LaSalle
Meghraj and Cushman & Wakefield India in association with Shopping Centres Association of India,
over 100 malls of over 30 million sq feet of new shopping centre space are projected to open in India
between 2009 and end-2010.
Further, this sector is expected to invest around US$ 503.2 million in retail technology service solutions
in the current financial year. This could go further up to US$ 1.26 billion in the next four to five years, at
a CAGR of 40 per cent.
India has emerged the third most attractive market destination for apparel retailers, according to a study
by global management consulting firm AT Kearney. It further says that in India, apparel is the second
largest retail category and is expected to grow by 12-15 per cent per year. Apparel, along with food and
grocery, will lead the organised retailing in India.
India has one of the largest numbers of retail outlets in the world. The sector is witnessing exponential
growth with retail developments taking place not only in major cities and metros but even in tier-II and
tier-III cities in India.
Marks & Spencer Reliance India is planning to open 35 more stores over the next five years, according to
Mark Ashman, CEO of the company. The 51:49 joint venture between UK’s Marks and Spencer and
Reliance Retail Ltd already has 15 stores in India.
Carrefour SA, Europe’s largest retailer, may start wholesale operations in India by 2010 and plans to set
up its first cash-and-carry outlet in the National Capital Region. Currently, Carrefour exports goods worth
US$ 170 million from India to Europe, UAE, Indonesia, Europe, Thailand, Singapore and Malaysia.
Jewellery manufacturer and retailer, Gitanjali Group and MMTC are jointly setting up a chain of
exclusive retail outlets called Shuddi–Sampurna Vishwas. The joint venture, which plans to open around
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60 stores across India by end of this year, will retail hallmarked gold and diamond jewellery.
Mahindra Retail, a part of the US$ 6.7-billion Mahindra Group, plans to invest US$ 19.8 million by 2010
to step up its specialty retail concept 'Mom and Me'.
Pantaloon Retail India (PRIL) plans to invest more than US$ 103.3 million to expand its seamless mall
Central and the value fashion format Brand Factory over the next two years.
Bharti Retail has introduced eight Wal-Mart private labels—including two of its largest, ‘Great Value’
and ‘George’—in its supermarket chain Easyday, hoping to attract more consumers with their
international design and packaging.
Italian sportswear brand Lotto will launch two new footwear brands Sabots and Calcetto in the country in
the next few weeks. The plan is to have at least 50 exclusive outlets by March 2010.
Steel players such as JSW Steel and Essar Steel are increasing their focus on opening up more retail
outlets pan India. JSW Steel currently has 50 such steel retail outlets called JSW Shoppe and is targeting
to increase it to 200 by March 2010. Similarly, Essar Steel also has such retail outlets called Essar
hypermarts. With a total 150 such outlets currently, this segment contributes to about 20-25 per cent to
the Essar’s total revenue.
EBONY Homes, the home furniture retail arm of the US$ 3 billion DS Constructions, has plans to invest
US$ 25.1 billion to set up a chain of 20-25 furniture stores styled Ebony Gautier across the country by
March 2012.
Gujarat Co-operative Milk Marketing Federation (GCMMF), which owns and markets Asia's largest dairy
brand, Amul, plans to add 6,000 Amul retail parlours across the country in FY 2009.
With rentals dropping sharply, large retailers such as Aditya Birla Retail, Reliance Retail and Shoppers
Stop, and food chains such as McDonald’s are also looking at metros and mini-metros for expansion.
Many major international brands are also looking for a foothold in India. The brands planning an India
entry include The Pizza Company and Spicchio Pizza (both pizza chains from Thailand), Coffee Club
from Australia, Japanese brand Lolita Fashion, Revive Juice Bars from the UK, Mrs Fields Cookies and
Jamba Juice from the US, and French fashion brand Jules.
Retail brands such as United Colors of Benetton, Tommy Hilfiger and Puma are opening factory outlets
to sell excess stock and woo the price-conscious buyers.
Policy Initiatives
100 per cent FDI is allowed in cash-and-carry wholesale formats. Franchisee arrangements are also
permitted in retail trade.
51 per cent FDI is allowed in single-brand retailing.
Road Ahead
According to industry experts, the next phase of growth is expected to come from rural markets, with
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rural India accounting for almost half of the domestic retail market, valued over US$ 300 billion. Rural
India is set to witness an economic boom, with per capita income having grown by 50 per cent over the
last 10 years, mainly on account of rising commodity prices and improved productivity.
According to retail and consumer products division, E&Y India, basic infrastructure, generation of
employment guarantee schemes, better information services and access to funding are also bringing
prosperity to rural households. The rural market, product design will need to go beyond ideas like smaller
sizes (such as single use sachets) to create genuinely new products, according to Ramesh Srinivas,
national industry director (consumer markets), KPMG India.
According to a new market research report by RNCOS titled, 'Booming Retail Sector in India', organised
retail market in India is expected to reach US$ 50 billion by 2011.
Number of shopping malls is expected to increase at a CAGR of more than 18.9 per cent from 2007 to
2015.
Rural market is projected to dominate the retail industry landscape in India by 2012 with total market
share of above 50 per cent.
Organized retailing of mobile handset and accessories is expected to reach close to US$ 990 million by
2010. Driven by the expanding retail market, third party logistic market is forecasted to reach US$ 20
billion by 2011.
Exchange rate used:
1 USD = 47.9 INR (as on June 2009)
1 USD = 48.41 INR (as on September 2009)

Drivers of retail change in India:

Socio Economic Factors: Steady GDP, Literacy, Birth-death rate, Basic Amenities
Changing Income Profiles: Increased personal income, size of Middle Class
Age Factor: Young Nation (70% below 40), more workers, early earners
Changing Role of Women: Increasing, double income, lesser time
Evolving Family Structure: Nuclear families
Changing Consumption Pattern: Occupational changes, expansion of media affected living and
spending pattern. Telecom, FMCG, Automobile
Increased Credit Friendliness: Changing mindset, easy loans, credit card
Geographical Dispersion of Market Potential: Urbanization of underdeveloped areas

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Major Sectors in Indian Retail:

Segment I(a)- Food & Grocery:

Includes:
fresh groceries,
branded packaged foods,
personal hygiene products and toiletries
Dry unprocessed groceries
Size: 62% of Indian retail market. Some Examples:
Food Bazaar (Pantaloon Retail India Ltd)
Subhiksha
Spencer’s (RPG)
Nilgiri’s (Nilgiris Group)
Spinach, Home store, Sabka Bazaar (Wadhawan Food Retail Ltd)
More (AV Birla)
Reliance Fresh (Reliance Retail)

Segment I(b)- Food Catering Services:

Includes:
Café’s and Restaurants
Fast food centers:
Café’s /Restaurants/Pub/Bar/Hotels
Club/ hospitals/Sales on trains, airplanes/ workplaces/ edu. Instt.
Street vendors/ takeaway/ QSR
Size: Rs 57,000 Cr.
Some Examples:
Barista
McDonald’s, Pizza Hut, KFC

Segment II- Clothing & Textile:

Includes:
Manufacturers, Ready Made Garments (Apparel)
Apparel: (largest share among organized retail:38%)
Men, women, children (infants, toddler, G&B, Teens, accessories)
Formal, casual
Western, Indian
Accessories: sleepwear, innerwear
Size: Rs 113,500 Cr.
Some Examples:
Van Heusen, Louis Philippe (Madura Garments)
Lee, Wrangler (Arvind Brands Ltd)
Park Avenue, Parx (JK Group)
Wills Life Style (ITC)

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Segment III- Consumer Durables:

Includes:
Televisions, Audio, DVD/VCD, Home Theatres, Mobile
Refrigerators, AC, Vacuum Cleaner, W/M, M/W
Size: Rs 41,500 Cr.
Some Examples:
Next (Videocon)
Croma (Tata Group)
LG, Sony

Segment IV- Footwear:

Includes:
Shoes: Sandal, pump, step in, high top, oxford
Boots: high low, soft stiff, plain ornamented, crushed smooth
Slippers and rubbers: lined, unlined
Size: Rs 13,750 Cr.
Some Examples:
Bata shoe organization
Metro shoes ltd
Lakhani India ltd

Segment V- Jewellery:

Size: Rs 52, 000 Cr.


Some Examples:
Tanishq
Gili

Some Retailers in India:


REI AGRO LTD Retail-Formats:6TEN Hyper & 6TEN Super
RPG Retail-Formats: Music World, Books & Beyond, Spencer’s Hyper, Spencer’s Super, Daily & Fresh
Pantaloon Retail-Formats: Big Bazaar, Food Bazaar, Pantaloons, Central, Fashion Station, Brand Factory,
Depot, aLL, E-Zone etc.
The Tata Group-Formats: Westside, Star India Bazaar, Steeljunction, Landmark, Titan Industries with
World of Titans showrooms, Tanishq outlets, Chroma.
K Raheja Corp Group-Formats: Shoppers Stop, Crossword, Hyper City, Inorbit
Lifestyle International-Lifestyle, Home Centre, Max, Fun City and International Franchise brand stores.
Pyramid Retail-Formats: Pyramid Megastore, TruMart
Nilgiri’s-Formats: Nilgiris’ supermarket chain
Subhiksha-Formats: Subhiksha supermarket pharmacy and telecom discount chain.
Trinethra- Formats: Fabmall supermarket chain and Fabcity hypermarket chain
Vishal Retail Group-Formats: Vishal Mega Mart
BPCL-Formats: In & Out
Reliance Retail-Formats: Reliance Fresh
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Reliance ADAG Retail-Format: Reliance World


German Metro Cash & Carry
Aditya Birla Group - More

Top ten global retailers…


1. Wal-Mart
United States
Sales: $374.5 billion
Earnings: $12.9 billion
Stores: 6,800 worldwide
2. Carrefour
France
Sales: $130 billion (€82.1 billion)
Earnings: $5.2 billion (€2.3 billion)
Stores: 87,422 worldwide (including cash and carry, convenience stores, hypermarkets, etc.)
3. Tesco
United Kingdom
Sales: $102.6 billion (£51.8 billion)
Earnings: $5.5 billion (£2.8 billion)
Stores: 3,729 worldwide
4. Metro AG
Germany
Sales: $101 billion (€64.3 billion)
Earnings: $1.5 billion (€983 million)
Stores: 2,221
5. Home Depot
United States
Sales: $77.3 billion
Earnings: $4.2 billion
Stores: 2,258
6. CVS Caremark
United States
Sales: $76.3 billion (includes acquisition of Caremark)
Earnings: $2.6 billion
Stores: 6,245
7. Kroger
United States
Sales: $70.2 billion
Earnings: $1.2 billion
Stores: 2,486
8. Costco
United States

Sales: $64.9 billion


Earnings: $1.8 billion
Stores: 520 9. Target
United States
Sales: $63.4 billion

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Earnings: $2.8 billion


Stores: 1,591
10. Groupe Auchan SA
France
Sales: $57.7 billion (€36.7 billion)
Earnings: $1.2 billion (€762 million)
Stores: 1,140 (plus 1,448 franchised or associated supermarkets and mini markets in Italy, France,
and Spain)

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