RETAIL MANAGEMENT PART1 Prepared Presented by Mr Siva

RETAIL MANAGEMENT PART-1 Prepared & Presented by : Mr. Siva Rama Krishna. Vuppala Asst. Professor, Dept of MBA SBIT, Khammam 1

Introduction to Retail Unit I Introduction to Retail: what is Retail, The functions of retail, retailing in India. The evolution of retail in India, retail Change in India 2

Introduction: v The word retail has its origin in French word retaillier and means “to cut a piece’’ or “to break bulk’. v “Retailing is the sale of goods and services to the ultimate consumer for personal, family or household use. ” v According to Kotler: “Retailing includes all the activities involved in selling goods or services to the final consumers for personal, non business use” 3

v Retailing may be understood as the final step in the distribution of merchandise for consumption by the end consumers. v Retailing is responsible for matching final consumer demand with supplies of different marketers. v Retailing is high intensity competition industry, The reasons for its popularity lie in its ability to provide easier access to variety of products, freedom of choice and many services to consumers. v The Indian retail is dotted by traditionally market place called bazaars or haats comprises of numerous small and large shops, selling different or similar merchandise 4

“’Wheel of Retailing” A better known theory of retailing “wheel of retailing” proposed by Maclcomb Mc. Nair says, 1. New retailers often enter the market place with low prices, margins, and status. The low prices are usually the result of some innovative cost-cutting procedures and soon attract competitors. 2. With the passage of time, these businesses strive to broaden their customer base and increase sales. Their operations and facilities increase and become more expensive. 5

3. They may move to better up market locations, start carrying higher quality products or add services and ultimately emerge as a high cost price service retailer. 4. By this time newer competitors as low price, low margin, low status emerge and these competitors too follow the same evolutionary process. 5. The wheel keeps on turning and department stories, supermarkets, and mass merchandise went through this cycles. 6

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Functions of a retaillier v From the customer point of view, the retailer serves him by providing the goods that he needs in the required assortment, at the required place and time. v From an economic standpoint, the role of a retailer is to provide real added value or utility to the customer. This comes four different perspectives 8

1. Form: First is utility regarding the form of a product that is acceptable to the customer. § The retailer does not supply raw material, but rather offers finished goods and services in a form that the customers want. § The retailer performs the function of sorting the goods and providing us with an assortment of product in various categories. 2. Time: He cerates Time utility by keeping the store open when the consumers prefer to shop. § preferable shopping hours. 9

5. Place: By being available at a convenient location, he creates place utility. 6. Ownership: Finally, when the product is sold, ownership utility is created. Apart from these functions retailer also performs like: 5. Arranging Assortment: manufacturers usually make one or a variety of products and would like to sell their entire inventory to few buyers to reduce costs. Final consumers, in contrast prefer a large variety of goods and services to choose from and usually buy them in small units. • Retailers are able to balance the demands of both sides, by collecting an assortment of goods from different sources, buying them in sufficiently large quantities and selling them to consumers in small units 10

5. Breaking Bulk: to reduce transportation costs, manufacturer and wholesalers typically ship large cartons of the products, which are then tailored by the retailers into smaller quantities to meet individual consumption needs 6. Holding stock: Retailers maintain an inventory that allows for instant availability of the product to the consumers. It helps to keep prices stable and enables the manufacture to regulate production. 7. Promotional support: small manufacturers can use retailers to provide assistance with transport, storage, advertising, and pre- payment of merchandise. 11

Major type of retail stores There is no universally accepted method of classifying retailer. Various schemes have been proposed to categories retailers based on § Number of outlets § Margin vs. turnover § Location § Size. Because of overlap of classification criteria, some stores may qualify as under two different categories. 12

1. General merchandise retailer: general merchandise retailer carry a variety of product lines, with considerable depth. Some major types of these stores include supermarkets and hypermarkets , discount stores and department stores. o Super market: A supermarket is a large self service retail store that carries a wide variety of consumer products under one roof , such as complete line of food products , laundry requirement, household maintenance items. In India cooperative have managed some supermarkets for quite sometime like super bazaar in Delhi, apna bazaar shakari bhandar etc. 13

o Discount store: these stores are self service, standard general merchandise retailers regularly offering brand name and private brand items at low price, earn lower margins and push for high sales turnover. The characteristics of true discount stores include § Selling products at discounted price § Carry standard international , national, or store brand toi build image § Self service stores to minimize operational costs § Preferred store location are low rent areas. Like best known discount store is Wal-Mart. In India almost all retail stores offer discounts, subhiksha 14

o Department store: a department store is larger retail store organized into several departments, offering a broad verity and depth of product lines. The product mix may include food products, appliances, clothing, furnishing and other household goods. § Like Pantaloons, shoppers’ stop, § department store only for kids is Kids Kemp. § Fashion related department stores in India are Ebony, Globus, pantaloons, lifestyles. 15

2. Specialty Stores: specialty stores carry a narrow product mix with depth of assortment within the line. § The emphasis is on a limited number of complimentary products and high level of customer service § Specialty store often sell shopping goods such as Jewelry, apparel, computers, music systems, sporting goods. § Like; Tanishq, Titan watches, Van Heusen, Raymond's. 3. Shopping Malls: shopping malls typically deal with several bases and product categories and provide a large variety of merchandise abs service. There are 96 operational malls in India and expected to grow 158 by this current year. § Ansal plaza (Delhi), Garuda mall (Bangalore) Sahara plaza Gurgaon Spenser Plaza Chennai 16

4. Retail chains: a retail chain operates multiple retail outlets under common ownership in different cities and towns. § § To some extent the purchasing function and decision making are coordinated or centralized. Like Westside, Globus, Food world, Mc. Donald's retail petrol outlets. Etc. 17

The Marketing – Retail Equation Manufacturer Wholesaler Retailer Consumer Feedback Retailer Consumer 18

Retailing in India. v Retail is the new buzzword in India. v The global Retail development Index has ranked India first, among the top 30 emerging markets in the world. v It is believed that India has the potential to deliver the fastest growth over the next 50 years. v While barter would be considered to be oldest form of retail trade, since independence , retail in India has evolved to support the unique needs of country, given its size and complexity 19

v Second largest sector after Agriculture. Contributes about 10 – 11 % of the GDP v The estimated size of the organized retail industry in India is Rs. 16, 000 crores. This is 2 % of the total estimated retail trade. v Indian Retail trade increased from Rs. 2200 billion in 2000 to Rs 3300 billion by the year 2005 v India's first true shopping mall – complete with food courts, recreation facilities and large car parking space – was inaugurated as lately as in 1999 in Mumbai. (this mall is called "Crossroads"). 20

The Evolution of Retail in India v Retail in India has evolved to support the unique needs of our country, given its size and complexity Haats, Mandis and Melas have always been a part of the Indian landscape. They still continue to be present in most parts of the country and form an essential part of life and trade in Various areas. v The PDS (Public Distribution System) would easily as the single largest retail chain existing in the country. the evolution of the PDS of Grains in India has its origin in the “rationing system” introduced by the British during world war II 21

v The system was started in 1939 in Bombay and subsequently extended to other cities and towns. the system was abolished post war but however attaining independence India was forced to reintroduce it in 1950. v There was rapid increase in the ration shops ( being increasingly called the Fair Price Shop or FPSs) v The Canteen Stores Department and the Post Offices in India are also among the largest network of outlets in the country reaching population across the country. 22

v The Khadi & Village industries (KVIC) was also set up post independence. The cooperative movement was again championed by the government. India's Largest retail Chains: 1. PDS: 463, 000 2. Post offices: 160, 000 3. KVIC: 7, 000 4. CSD Stores: 3, 400 (source business world marketing White book 2005) 23

v In the past decade, the Indian marketplace has transformed dramatically. However from the 1950, s to the 80, s, investment in various industries was limited due to low purchasing power in the hands of the consumer and the government’s policies favoring the small scale sector. v The first attempts at organized retailing were noticed in the textiles sector. One of the pioneers in this field was Raymond’s which set up stores to retail fabric. 24

v Raymond’s distribution network today comprises 20, 000 retailers and over 256 exclusive showrooms in over 120 cities of the country v Other textile manufacturing who set up their own retail chains wee Reliance- which set up Vimal showrooms and Garden Silk Mills, which set up Garden Vareli showrooms. 25

The Evolution of retail in India Traditional Formats Itinerant Salesman Haats Melas Mandis etc. Established formats Kirana shops Convenience/ department stores PDS/ fair price shops Pan/ Beedi shops Emerging Formats Exclusive retail outlets Hypermarket Internal retail Malls / Specialty Malls Multiplexes Fast food outlets Service galleries 26

Drivers of Retail change in India major drivers : 1. 2. Changing Income Profiles: Steady economic growth fuelled the increase in disposable income in India. The average middle class family's disposable income rose by more than 20% between 1999 -2003. Diminishing difference between Rural and urban India: Rural India accounts for over 75% of India population and this in itself offers a tremendous opportunity for generating volume driven growth. Tax benefit. In year 2002 -03 LIC sold 50% of its policies in rural India. Same BSNL also sold its 50% connection in small towns. 27

3. o 4. Changes in Consumption patterns: Occupational changes and expansion of media have caused a significant change in the way the consumer lives and spends his money. The changes in income brought about changes in the aspirations and the spending patterns of the consumers. the buying basket of the consumer changed The emergence of a young Earning India : Nearly 70% of the Indian population is below the age of 34. taking advantages of employment opportunity in the booming service sector these young Indians are redefining service and consumption patterns 28

Prominent sector in Indian retail 1. Clothing, textiles and fashion Accessories: 2. Food & food Services: 3. Consumer Durables: 4. Books & Music: Other emerging sectors 5. Jewellery retail 6. Footwear retail 7. Time Wear Retail 8. Fuel Retail/ petro retail 29

Challenges to retail Development in India o Retail not being recognized as an industry in India. o The high costs of real estate. o Lack of Adequate infrastructure. o Multiple and complex taxation system. 30

Size of the organized retail market (Rs Cr) 2001 -02 2007 CAGR (%) (compound Annual growth rate) TOTAL 16, 000 37, 216 18 Food 1, 800 7, 473 33 Clothing 4, 950 10, 423 16 Cons. Durables 1, 650 3, 787 18 Books & Music 450 1, 426 26 31

Share of organized & unorganized retail with comparison source: Ernst &Young, The Great Indian Retail Story, 2006 32