IVB02REM Retail

Management Prof. Yogi Agravat

Unit 1 :
• Introduction- Concept and
Evolution of retailing,
• Retailing in India- Issues,
Challenges and opportunities,
• Scope and functions of
retailing,
• Retail institutions
classification, Syllabus
• Retail life cycle,
• Retail locations strategy,
• Retail Merchandising- Concept,
Process, Functions. TRE 2
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Unit 2 :
• Shop Atmospherics- Concept, Elements,
Dimensions.
• Retail Supply Chain- Concept, Elements,
Role of IT.
• Retail Pricing in Retail- concept,
Objectives, Pricing methods.
• Retail Promotion- Concept, Objectives,
Promotional Tools - Media Mix.
• Visual Merchandising- Concept, Store
design elements, Merchandise
presentation techniques.
Syllabus
• Non Store based retailing- Concept,
classification.
• Store Design and Layout Objectives,
Elements, Types
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Unit 3 :
• Retailing and various disciplines Retailing and
HRM- HRM in retailing, Managing employee
turnover in retailing, HR functions in modern
retail.
• Retail outlets and operations management-
Concept, Operational decisions, crisis
management.
• Financial dimensions of retail management-
Profit planning, asset management, retail

Syllabus
budgeting process, Resource allocation.
• Retail outlets and warehouse management-
Managing logistics, Role of a warehouse in
logistics, Functions and types of warehouses,
Recent upgradation.
• Retailing for Agro products- Concept, modern
trends. International Retailing- Concept,
accessing retail markets, Forms of entry.
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Concept of
Retailing
The word retail has its origin in
French word retaillier and means
“to cut a piece’’ or “to break bulk’.
• “Retailing is the sale of goods and services to the
ultimate consumer for personal, family or household
use.”
• According to Kotler: “Retailing includes all the
activities involved in selling goods or services to the
final consumers for personal, non business use”

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• Retailing may be understood as the final step in the distribution of merchandise for
consumption by the end consumers.

• Retailing is responsible for matching final consumer demand with supplies of

different marketers.

• 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.

• 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

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Retail –The
Industry
According to the Retailers Association of India (RAI), the retail industry achieved 93% of pre-
COVID
sales in February 2021
• Indian retail industry is one of the fastest growing in the world which is expected to become 2
Trillion USD industry by 2032.
• According to India Ratings and Research (Ind-Ra), domestic organized food and grocery
retailers are expected to increase by 10% YoY throughout FY23-24.
• Indian retail industry has emerged as one of the most dynamic and fast-paced industries due
to the entry of several new players. It accounts for over 10% of the country’s gross domestic
product (GDP) and around 8% of the employment. India is the world’s 5th largest global
destination in the retail space.

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Retailing Functions in
Distribution

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Evolution of Indian
retail
Modern Formats/
Historic/Rural Traditional/Pervasive Government
International
Reach Reach Supported

Exclusive Brand Outlets

Hyper/Super Markets
Department Stores
Shopping Malls
Public Distribution
System Outlets (PDS)
Khadi Stores
Cooperatives

Convenience Stores
Mom and Pop/Kiranas

Weekly Markets
Village Fairs
Melas

Source of Neighborhood Availability/ Low Shopping

Entertainment Stores/Convenience Costs / Distribution Experience/Efficiency
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The top Retailers in India

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Functions of a
retailer
• 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.
• 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

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.
3. Place: By being available at a convenient location, he creates place utility.

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Functions of a
retailer
4. 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
6. 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
7. 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.
8. Promotional support: small manufacturers can use retailers to provide assistance with transport, storage,
advertising, and pre- payment of merchandise.

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Drivers of Retail Change in
India
Following are the drivers of retail change in India:
• Raising incomes and improvements in infrastructure are enlarging consumer markets an accelerating
the convergence of consumer tastes

• Liberalization of the Indian Economy

• Increase in spending per capita income
• Advent of dual income families also helps in the growth of retailer sector
• Shift in consumer demand to foreign brands like McDonald, Sony, and Panasonic etc.
• Consumer preference for shopping in new environment.
• The Internet revolution is making the Indian consumer more accessible to the growing influence of
domestic and foreign retail chains. Reach of satellite T.V channel is helping in creating awareness about
global products for local markets

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Factors considering for Retail
Format
Deciding on a retail format is the most essential component of a retail strategy.

A retailer format is the type of retail mix that the retailer adopts, which includes the following factors:
• The nature of merchandise and service offered by the retailer
• The pricing policy of the merchandise by the retailer
• The retailer’s approach to advertising and promotional programmes
• The retailer’s approach to the design of the store as well as to visual merchandising
• The choice of location preferred by the retailer for the above, and
• The size of the store
While some of the most popular retailing formats adopted in organized retailing the world over are:
• Convenience stores
• Specialty stores
• Supermarkets
• Hyper markets
• Shopping malls

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CLASSIFICATION OF RETAIL STORES
Classification of Retail
Stores
Classification of Retail Stores

Store Based Retailing Non-Store Retailing

Form of Ownership Merchandise offered Direct selling

Independent retailer Convenience stores Mail order
Chain retailer Supermarkets Tele
Franchise Hypermarkets marketing
Leased departments Specialty stores Automated
Consumer co-operatives Departmental stores Vending
Off price retailers
Factory outlets
Catalogue showrooms

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Major Formats
of Retail Stores

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Departmental
Store

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Departmental  Department stores are large stores which sell different types of products
under one roof in different departments. Each department has an
Store individual specialization of merchandise. Each store is handled
separately in accounting, management, and location.

 Therefore, a department store handles different business units and deals

with a variety of merchandise and are organized in different departments
for the purpose of accounting control, sales promotion, and store
operations.

 The latest trend in department stores is to add departments for sports and
recreational equipment and automotive along with providing services
like travel advice, insurances, and income tax preparations, etc.
Department stores can also be referred to as shopping centers.

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Departmental Types of Department stores on basis of
Store 1. Chain Department Stores – This type of stores is owned and
managed centrally.

2. On the basis of income groups – These stores are designed to

serve people with high- and middle-income groups. These stores
sell high-quality goods and provide first class services to its
customers. there are also stores which are designed to cater to
people with low income such as dollar stores.

3. Leased department stores – The stores whose operations are

given out on lease are called leased department stores.

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Departmental Various features of Department stores:
Store 1. Merchandises are arranged in different departments in the same store.

2. Department stores are integrated stores which perform operations.

3. Department stores are distinguished by the nature of goods sold by

them, not by the variety of goods sold by them like drug and variety
store.

4. Department stores are designed horizontally in order to provide

different merchandises under the same roof.

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Departmental Advantages of Department stores

Store 1. Department stores usually buy products in bulk which gets considerable discounts.
in addition to this, department stores buy directly from the manufacturer therefore, it
eliminates any middleman charges results in high profits.
2. Department stores were a big business are in a position to pay for goods being
purchased. In this way, quality goods can be purchased on much cheaper rates and
also merchandise of the latest style and design can be obtained to be sold in stores.
3. Department stores attract customers because of the convenience offered by them for
people of all classes.
4. Because of its large scale of business expert supervision can be provided for each
department. In addition to this, various services like liberal credits, expert assistance
for shopping, and delivery services can be provided to customers.
5. Department stores can afford to spend on advertising to lure customers to buy more.
For example, within department stores, various discount and offer advertisements
are placed to make customers purchase more than they plan to buy.

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 Limitations of Department Store
Departmental
Store 1. It is very expensive to run a department store as it includes various expenses. For
example, a large number of salespersons are needed to handle different departments
and cash counters.

2. Because of its large size, personal touch and interaction with customers are missed.
Which is not a problem in single line stores.

3. As area required to establish these stores is large, they are usually set up on the
outskirts of a city. Hence, these are not much beneficial for the customers as they
have to buy urgently required goods from the nearby traders.

4. As the whole control is in the hands of employees such as store managers there are
high chances of leak and loss.

5. Many times customers take advantage of “customers are always right” policy.

6. It has been observed that in many stores poor salesperson service is provided
because of the low payments given to them.
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Super Market

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 Supermarkets are self-service stores that sell a wide range of food as well as non-food products.
Super Market
Supermarkets have at least four basic departments such as self-service grocery, dairy produce, meat,
and household department.

These stores can be either entirely operated by owners or they are given on lease to others to operate.

Features of supermarkets
1. Goods are displayed in bulk.

2. Supermarkets are located in nearby housing areas so that people have easy access.

3. These stores offer a wide range of products, low prices, nationally advertised brands, and also
convenient parking.

4. It follows the “cash and carry” policy.

5. Minimum customers service is provided in these stores as these stores work on the basis of
self- service.

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 Advantages of supermarkets
Super Market
1. The supermarket sells a wide variety of merchandises.
2. The supermarket offers convenient shopping to customers as they can
buy everything under one roof.
3. Supermarkets offer low-profit margins, high discounts, and
convenience of buying everything under one roof.
4. Customers don’t have to spend a lot of time.

Disadvantages of supermarkets

5. Fewer customers services.

6. Products which require instruction to use are difficult to purchase
from supermarkets as there is no one to assist you.
7. High administrative expenses required to run a supermarket.

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Chain of Stores

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 In this format of retailing, a chain store consists of four or more stores
Chain of Stores sell the same kind of merchandises and are owned and managed by a
single owner. The supplies are stocked in chain stores are provided by
one or more warehouses owned by the chain store owner.

This retail format is known as “Chain Stores” in America and known as

“Multiple Shops” in Europe. In chain stores, customers are approached
to provide them assistance and not forced to make purchases. More than
one store can be opened in one city to magnet more and more customers.

Features of Chain stores:

1. When one or more shops are run under one name are called chain
stores.
2. There is centralized control over all the shops.
3. Chain stores are integrated stores.

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 Advantages of Chain Stores:
Chain of Stores 1. Chain stores offer low selling prices.
2. Low advertisement cost as the advertisement is done on a central
basis.
3. Chain stores work on a cash basis. Therefore, there are fewer chances
of bad debts and less accounting process required.
4. No need to look for costly and centralized locations.
Disadvantages of Chain Stores:
5. People believe that merchandises are sold at a low price which is
clearly a false claim.
6. Chain stores lack flexibility. As it does not offer wide varieties of
products.
7. There are high chances of a problem because there are several
problems associated with the large scaled business.
8. Chain stores do not provide facilities like Door delivery and credit
facility. Therefore, it has a poor bad image.
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 Convenience
Store
This is located close
to residential
areas so as to make
easy access to the
customers.

It offers a limited
range of products
like groceries, daily
needed FMCG
products, etc. It is
small in size as
compared to other
retail outlets. 30
Franchise Store
This is the best way to
enter into the retail
sector.

In this type of retail

outlet the store
is owned & operated
by individuals on
behalf of & is licensed
by a big supporting
organization.

E.g.  Pizza Hut, Mac

Donald’s.

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Specialty Store

A specialty store is
a shop that caters to
one specific retail
market.

Examples of specialist
stores include
camera stores,
pharmacies, stationers,
and bookstores.

In other words,
a shop that specializes
in one breed of
products.

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Hyper Market

These are very
large in size.
They provide
large parking
than
supermarkets &
departmental
stores.

E.g  Big Bazaar.

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Shopping Mall
It is an arrangement
of retail stores &
provides the right
mix of shopping. 

Here retail space is

shared by other
retailers who operate
these retail outlets
individually. Such
group of a retail
outlets in the same
building or premises
is called a shopping
mall.

e.g S.G mall in Pune,

Pyramid Vishal in
Mumbai
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Discount Store

Discount stores
differentiated
themselves on
the basis of low
prices &
various offers.

For e.g
Subhiksha.

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Factory outlet

Factory stores are

owned & operated
by a manufacturer
who sells the
product directly to
the customer at
a low
price because
there is no
middleman
involved.

e.g Bata, Raymond,

and Nike.

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Characteristics of select retail
formats
Format Description Size (sq.ft) Examples
Varity/assortment Intl. India

Category Killer / Narrow variety, but 50,000+ 15,000+ Toys R Us, Nallis, Best
Specialist deep assortment Buy (electronics), PetsMart
(pet products), Office Depot
(stationary) and Home
Depot

Convenience Mix of products 3,000 – 8,000 500 – 1,000 Big Bazaar, Spencer’s,
stores Hypercity,
Reliance Fresh, D-Mart.
Department Several product lines, 75,000+ 5,000 – 40,000 Marks & Spencer,
stores largely non-food Shopper’s
Stop, Pantaloons,
Central.

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Characteristics of select retail
formats
Format Description Size (Sq.Ft) Examples
Intl. India
Factory Outlets Branded merchandse 5,000 – 10,000 500 – 1000 Levi’s Factory Outlet,
at a discount Reebok Factory Outlet
Pantaloons Factory Outlet

Hypermarket Large self service 80,000 – 220,000 40,000 – 75,000 DMart, Big Bazaar and
stores, mix of food & Star Bazaar
non food.
Essentially low
price
Single Price Stores Offers a mix of 5,000 – 20,000 2,000 – 5,000 9 to 9, 49 to 99
branded & unbranded
stores

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Characteristics of select retail
formats
Format Description Size (sq.ft) Examples
Intl. India
Specialty stores Focus on a Brand 5,000 – 8,000 2,000 – 5,000 Crossword, Music
or Category, World, Haldiram, Sony
Narrow Product World, Toys R Us
Line , but Good
Depth
Supermarket Food, Laundry 8,000 – 20,000 800 – 5,000 DMart, BigBazaar, Star
and Household Bazaar, Reliance Fresh.
Maintenance
Products, Self
Service, Low
Margin, Low Cost

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Non-store
•Retailing
It is another type of retail marketing.
• Different types of non-store retailing are given below:
• Direct selling which started centuries ago with itinerant peddlers has burgeoned into a $9 billion
industry, with over 600 companies selling door to door, office to office, or at home sales parties. A
variant of direct selling is called multilevel marketing, whereby companies such as Amway recruit
independent businesspeople who act as distributors for their products, who in turn recruit and sell to
sub distributors, who eventually recruit others to sell their products, usually in customer homes.
• Direct marketing has its roots in mail-order marketing but today includes reaching people in other
ways than visiting their homes or offices, including telemarketing, television direct response marketing,
and electronic shopping.
• Automatic vending has been applied to a considerable variety of merchandise, including impulse goods
with high convenience value (cigarettes, soft drinks, candy, newspaper, hot beverages) and other
products (hosiery, cosmetics, food snacks, hot soups and food, paperbacks, record albums, film, T-
shirts, insurance policies, and even fishing worms).

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Category Killer Retail

Toys “R” Us, is a toy store chain based in the United States. The chain also has locations in Europe, Asia, Oceania,
Africa, and Canada. The company currently operates 840 stores in the United States and 716stores in 34 other
countries, with some of them under franchises or licenses. The flagship store in New York City’s Times Square is the
largest toy store in the world. It is the largest toy-centered retailer and the second largest overall toy retailer in the
United States. Toys R Us can be termed as a Category killer. Category killer is a term used in marketing and strategic
management to describe a product, service, brand, or company that has such a distinct sustainable competitive
advantage that competing firms find it almost impossible to operate profitably in that industry. The existence of a
category killer eliminates almost all market entities, whether real or virtual. Many existing firms leave the industry,
thereby increasing the industry’s concentration ratio. Toys R Us can be termed as a category killer because it is
focused on one or few categories of merchandise and offers a wide selection of merchandise in these categories at
relatively low prices.

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Variety and
Assortment
• Variety represents the number of merchandise categories a retailer
offers. Variety is often referred to as the breadth of merchandise carried
by a retailer.
• Assortment is the number of different items in a merchandise category. It
referred to as the depth of merchandise.
• Each different item of merchandise is called an SKU (stock keeping unit).
• Warehouse club stores, discount stores, and toy stores all sell toys.
However, warehouse clubs and discount stores sell many other
categories of merchandise in addition to toys. Stores specializing in toys
stock more types of toys.

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THE WHEEL OF RETAILING
The Wheel of Retailing
• The wheel of retailing (Given by McNair) is a well-established framework
for explaining developments in retail institutions. The theory suggests
that retail institutions go through cycles during their development.

• The theory is that as low-end retailers up-grade their strategies to

increase sales and profit margins, new forms of low-price (discount)
retailers take their place in the market.

• The wheel of retailing describes institutional changes that occur when

new competitors enter the market. In its initial form, the wheel of
retailing consists of a three stage cycle.

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TheWheel of
Retailing

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TheWheel of
Retailing

Retail Life Cycle Stages:

Entry / Introduction,
Growth, Maturity,
Decline

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The Wheel of Retailing
• According to the wheel theory, retail innovators often appear as low-
price operators. Thus, the cycle begins with Entry Phase where retail
institutions start off with low prices and low service levels.
• The second phase is trading up. Retailers who wish to expand their
business and attract more customers enhance the quantity and quality of
merchandise they handle, provide more services and open outlets in
more convenient locations. This leads to an increase in operating costs
and prices and thus offers opportunities for new competitors to enter the
market with low-price strategies.
• The third phase sees increased competition for services of all kinds and a
convergence of retailers’ marketing mixes as they mature. They become
vulnerable to new competitors entering the market with low prices.

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The Wheel of Retailing

The wheel of Retail is based on four principles:

(1) Many price-sensitive shoppers will trade customer services, wide

selections, and convenient locations for lower prices.
(2) Price-sensitive shoppers are often not loyal and will switch to
retailers with lower prices. In contrast, prestige-oriented customers
enjoy shopping at retailers with high-end strategies.
(3) New institutions are frequently able to have lower operating costs
than existing formats.
(4) As retailers move up the wheel, they typically do so to increase sales,
broaden the target market, and improve their image.

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The Wheel of Retailing

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The Wheel of Retailing
• When traditional department store prices became too high for many consumers, the growth of the full-
line discount store (led by Walmart) was the result.
• The full-line discount store stressed low prices because of such cost-cutting techniques as having a
small sales force, situating in lower-rent store locations, using inexpensive fixtures, emphasizing high
stock turnover, and accepting only cash or check payments for goods.
• Then, as full-line discount stores prospered, they typically sought to move up a little along the wheel.
This meant enlarging the sales force, improving locations, upgrading fixtures, carrying a greater
selection of merchandise, and accepting credit. These improvements led to higher costs, which led to
somewhat higher prices.
• The wheel of retailing again came into play as newer discounters, such as off-price chains, factory
outlets, and permanent flea markets, expanded to satisfy the needs of the most price-conscious
consumer.

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The Wheel of
Retailing
Example

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The Wheel of Retailing Example
Let us take a fictitious case of ABC and Co., an automobile company. The company was established in the year 2001. Given below is the
wheel of retailing of the company:

Entry Stage: ABC and Co. entered the market in the year 2001 with a single model of cars which was priced extremely low to target the
middle class and the price-sensitive consumer base. It operated from various rental showrooms located in the outskirts of the cities.

Growth Stage: The company was able to gain recognition in the market for affordable cars by the year 2006. The consumers showed
interest, and the booking for cars increased tremendously. The retailer brand now slightly hiked up the price of its initial model and also
launched three more models with new features. Even the stores were shifted to busy market places in various cities for better exposure.
Also, activities like credit purchase, service centers, customer relationship management, etc. were introduced.

Maturity Stage: By the year 2015, the company had almost 211 showrooms in the country selling out multiple models of cars in different
colour variants. By this time, the company is unable to attract new customers and faces a saturation point in business.

Decline Stage: The company’s sale starts to fall by the year 2018, and the debt on it is quite high. Thus, decreasing the return on
investment on the one hand, and increasing the liabilities and operating cost on the other side. Now, in such a situation, ABC and Co. can
either shut down its non-performing showrooms or can come up with an innovative idea which can revive the company’s position.

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Scrambled Merchandising

• Whereas the wheel of retailing focuses on product quality, prices,

and customer service, scrambled merchandising involves a retailer
increasing its width of assortment (the number of different product
lines carried).

• Scrambled merchandising occurs when a retailer adds goods and

services that may be unrelated to each other and to the firm’s
original business.

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Scrambled Merchandising by a shoe store
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Scrambled Merchandising
• Although Starbucks’ in-store coffee sales are still strong, it now faces more competition in the coffee
market from Dunkin’ Donuts, and McDonald’s, and alikes who have upgraded their offerings. Similarly,
Starbucks carries many items outside its original coffee business, including pastries, hot breakfasts,
salads, sandwiches, smoothies, and even wine at some locations.

• Scrambled merchandising is contagious. Drugstores, bookstores, florists, kitchenware stores and gift
shops are all affected by supermarkets’ scrambled merchandising. A significant amount of U.S.
supermarket sales are from general merchandise, health and beauty aids, and other non-grocery items,
such as pharmacy items, magazines, flowers, and kitchen items. In response, drugstores and others are
pushed into scrambled merchandising to fill the sales void caused by supermarkets. Drugstores have
added toys and gift items, greeting cards, batteries, and cameras. This then creates a void for
additional retailers, which are also forced to scramble.

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Scrambled Merchandising

• Scrambled merchandising is popular As…

 Retailers want to increase overall revenues by adding fast-selling,
highly profitable goods and services into their kitty
 It provides atmosphere for impulse purchase for consumers
 Customers like one-stop shopping experience
 It let’s reach different target markets under one roof
 The impact of seasonality and competition is reduced to some
extent
 Sometimes, when the popularity of a retailer’s original product
line(s) declines, It tries to maintain and grow the customer base
with help of scrambled merchandising
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THE RETAIL LIFE CYCLE
 The Retail Life
Cycle
• In the Development stage, the new format is
introduced to the market. It is different from
existing retail institutions’ strategies, as at least
one element of the marketing mix is altered in the
new format.

• In the Introduction phase, sales and profits are

low, but growing. Costs and risks are high because
long-term success is not assured at this stage.

• The Growth phase is characterized by the rapid

growth of both sales and profits. Existing
companies expand their markets and new
competitors employing the same retail format
enter the market. Towards the end of this stage,
growth acceleration begins to decline and cost
pressures may emerge.

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 The Retail Life
Cycle
• The Maturity stage of the retail format is brought
on by market saturation, which in turn is caused by
a high number of firms using this retail format and
competition from new formats. Sales growth
declines and profit margins may have to be
reduced to stimulate sales. Once maturity is
reached, the main goal is to prevent the business
from declining and to sustain profits for as long as
possible.

• In the Decline stage, sales volumes decline and

prices and profitability shrink. Companies can try
to avoid decline by repositioning their retail
format, but many companies abandon the format
altogether and introduce new formats to keep
their customers or attract new ones.

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BUSINESS MODELS IN RETAIL
Business Models in
Retail
Business models in retail is basically how entrepreneurs start retail business and these models of retail business
followed by any entrepreneur
• Independent Retail Model: An independent retailer is one who builds his/her business from the ground up. From
the business planning stage to opening day, the independent retail owner does it all. He/she may hire consultants,
staff and others to assist in the business endeavor. The opportunities are endless.
• Advantages: There are no restrictions on who, how or where an entrepreneur should set up his/ her business.
The freedom to do what one wants to do is the biggest advantage in this form of business. It can be extremely
fulfilling.
• Disadvantages: Because of the ease and flexibility of getting started, there can be a lot of competition in a
particular area for a certain type of customer. Every business decision rests on the owner(s). There is no
branding, no preset guidelines and a great deal of risk in this business model
• Existing Retail Business Model: Someone who inherits or buys an existing business is taking ownership and
responsibility of someone else’s hard work. The foundation has already been laid.
• Advantages: The biggest advantage to buying an existing business or taking ownership of an already-
established retail store is time. The time to build a customer base, the time to establish branding, and the time
it takes to establish credit are generally all past which means most of the hard part is behind the new owner.
• Disadvantages: The existing business may have a negative image or reputation that will take a lot of time to
undo. Loyal customers may not like the change of ownership. Previous owners have caused problems by
opening a competing business
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 Business Models in
Retail
Business models in retail is basically how entrepreneurs start retail business and these models of retail business
followed by any entrepreneur
• Franchise Retail Business Model: Retailers may find the business model of a licensed dealership as a mix of
franchise and independent retailer. The licensee has the right (sometimes this is exclusive) to sell a brand of
products.
• Advantages: There may be some branding or product name recognition by the customer. The dealership
relation is much more flexible than that of a franchise. This may be a good business model for part-time
retailers or those just starting in retail.
• Disadvantages: Because of the ease and flexibility of getting started, there can be a lot of competition in a
particular area for a certain type of customer. Like the independent retailer, every business decision rests on
the owner(s). There is also great deal of risk in this business model
• Network Marketing Retail Business Model: Multi-level Marketing (MLM) or network marketing is a business model
where the selling of products depends on the people in the network . It’s probably not a type of business one
would initially consider when discussing retail businesses, but Amway, Kegen Water used this model quite
successfully for many years.
• Advantages: Generally very little startup funding is needed to operate this type of business. Network
marketing provides freedom from conventional retailing businesses and offers a greater interaction with all
types of people. For those willing to invest the time, huge profits can Notes be made.
• Disadvantages: Too many unscrupulous multi-level marketing schemes exist. Some systems require their
dealers to be more interested in recruiting new members than in selling the products to consumers. It may be
difficult to operate without a storefront.
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Traditional Business Models in Indian
Retail
Business models in retail is basically how entrepreneurs start retail business and these models of retail business
followed by any entrepreneur
• Mom and Pop Stores :These are generally family-owned businesses catering to small sections of society. They are
small, individually run and handled retail outlets.
• Kiosks: A kiosk is a booth with an open window on one side. Broadly, carts and kiosks fall under the branch of
retailing called ‘Specialty Retail’ which refers to businesses targeting a niche audience - on the basis of geography,
gender, tastes and the range of products sold.
• Street Markets: A Street market is an outdoor market such as traditionally held in a market square in a market
town, and are often held only on particular days of the week. Very similar markets, or bazaars can also be found in
large enclosed spaces, instead of on a street.
• Street Shops of India are predominantly unorganized. Indian street shops are varied and scattered. Street Shops of
India generally occurs in small tufts and sells products that are very relevant to economic needs of that particular
area

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CONSUMER BEHAVIOUR IN RETAIL
Factors influencing Consumer Behaviour in
Retailing
 Cultural Factors

 Social Factors

 Personal Factors

 Psychological Factors

 Miscellaneous Factors

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Factors influencing Consumer Behaviour in
Retailing
• Cultural Factors: Cultural factor divided into:
 Culture: The set of basic values perceptions, wants, and behaviors learned by a member of society
from family and other important institutions. Culture is the most basic cause of a person’s wants
and behavior. Every group or society has a culture, and cultural influences on buying behavior may
vary greatly from country to country.
 Sub Culture: A group of people with shared value systems based on common life experiences and
situations. Each culture contains smaller sub cultures a group of people with shared value system
based on common life experiences and situations. Sub culture includes nationalities, religions,
racial group and geographic regions. Many sub culture make up important market segments and
marketers often design products.
 Social Class: Almost every society has some form of social structure, social classes are society’s
relatively permanent and ordered divisions whose members share similar values, interests and
behavior

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Factors influencing Consumer Behaviour in
Retailing
• Social Factors: A consumer’s behavior also is influenced by social factors, such as the:
 Reference Groups: It can be two or more people who interact to accomplish individual or mutual
goals. A person’s behavior is influenced by many small groups. Groups that have a direct influence
and to which a person belongs are called membership groups. Some are primary groups includes
family, friends, neighbors and coworkers. Some are secondary groups, which are more formal and
have less regular interaction. These include organizations like religious groups, professional
association and trade unions.
 Family: Family members can strongly influence buyer behavior. The family is the most important
consumer buying organization society and it has been researched extensively. Marketers are
interested in the roles, and influence of the husband, wife and children on the purchase of
different products and services.
 Roles and Status: A person belongs to many groups, family, clubs, and organizations. The
person’s position in each group can be defined in terms of both role and status

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Factors influencing Consumer Behaviour in
Retailing
• Personal Factors: It includes:
 Age and Life cycle Stage: People change the goods and services they buy over their lifetimes.
Tastes in food, clothes, furniture, and recreation are often age related. Buying is also shaped by
the stage of the family life cycle.
 Occupation: A person’s occupation affects the goods and services bought. Blue collar workers
tend to buy more rugged work clothes, whereas white-collar workers buy more business suits. A
company can even specialize in making products needed by a given occupational group. Thus,
computer software companies will design different products for brand managers, accountants,
engineers, lawyers, and doctors.
 Economic situation: A person’s economic situation will affect product choice. Life Style: Life Style
is a person’s pattern of living, understanding these forces involves measuring consumer’s major
AIO dimensions. i.e. activities (Work, hobbies, shopping, support etc.) interest (Food, fashion,
family recreation) and opinions (about themselves, Business, Products)
 Personality and Self concept: Each person’s distinct personality influences his or her buying
behaviour. Personality refers to the unique psychological characteristics that lead to relatively
consistent and lasting responses to one’s own environment.

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Factors influencing Consumer Behaviour in
Retailing
• Psychological Factors: It includes these Factors:
 Motivation: Motive (drive) a need that is sufficiently pressing to direct the person to seek
satisfaction of the need.
 Perception: The process by which people select, organize, and interpret information to
form a meaningful picture of the world.
 Learning: Changes in an individual’s behaviour arising from experience.
 Beliefs and attitudes: Belief is a descriptive thought that a person holds about something.
Attitude, a person’s consistently favourable or unfavourable evaluations, feelings, and tendencies
towards an object or idea

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Miscellaneous Factors that influence Retail Shoppers
 Low Price

 Mass Distribution

 Self Service

 Prominent Store Display

 Low Marginal Need for an Item

 Small Size and Light – Weight

 Ease of Storage
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Customer Decision-making
Process
There are three fundamental patterns which a consumer can follow and they could be:
(i) Brand first, retail outlet second: When a number of consumers follow this sequence of decision-
making, display of point-of-purchase material and building the image of the outlet becomes
important. Point-of-purchase materials which are to be used at the retail outlet may require primary
research - should visuals be used, should product features be used, should the POP material be in the
regional language. This is especially applicable to durables retailing in India (in cities). Retailers
attempt to increase consumer traffic by providing a number of ‘add-ons’.
(ii)
Retail outlet first, brand second: The brand was probably thought of by the consumers because (i) the
consumers may not have developed a relationship with any retailer which is strong enough to get
into the ‘evoked retail set’ or (ii) the brand has got into the evoked set because of advertising or
positive word of mouth. Local advertising with the mention of brand names which have already got
into the evoked set would enable consumers to be ‘pulled’ to the outlet
(iii) Brand and retail outlet simultaneously: When consumers think of the brand and retail outlet
together, it means that they have a certain preference for the outlet and would like to check the
evoked set of brands there. The marketer would have to carry out primary research to find out
specific markets where consumers have a very positive relationship with retailers. This is important
because of the influence of retailers over the purchase behaviour of consumers in the Indian
context.
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Customer Decision-making
Process on the product type, the duration of this process varies. It may range from few seconds
Depending
(Impulse Buying), to days (Groceries), to months (Car, TV, etc.), or even years (House, Land, etc.). The
process consists of five different stages.
Needs Recognition: Consumers recognize problems in the for of need, or a physical cue or stimulus. A
person looks at the fuel gauge of his/her car, and knows that he/she should refuel. the recognition of
need may be closely associated with the retail outlet that has become strongly connected to particular
items. Example: An empty refrigerator is more likely to prompt the thought ‘I must visit the supermarket’,
than the specific product-related thought ‘I must buy a box of eggs’.

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Customer Decision-making
Process
 Information Search: In this stage, the consumers look for solutions, to their problems or needs. This
can come in the form of past purchase decision, or the consumer may also look for advice from family
or friends. For expensive products, the consumer may research the product online, read reviews,
and may be also induced to go and see the product and feel it (Test Drives for cars, TV
demonstrations, etc.)
 Evaluation of Alternatives Here the consumers evaluate the purchase options based on the technical
specifications, product attributes, and personal factors like brand preference, personal experience,
testing/sampling. Consumer/Company reviews of the products influence the consumer’s evaluation at
this stage.
 Purchase Decision A consumer’s decision to buy also includes whether to buy?, Where to buy?, and
When to buy?. In case of routine goods like groceries, the consumer might go to his/her favourite store
and buy. But in the case of white goods, and brown goods, the consumer may browse multiple stores.
They evaluate the stores based on past experience, ambience, helpfulness of sales staff, visual appeal,
offers, and special discounts
 Post Purchase Evaluation Immediately after purchase, the consumer mentally ranks the whole buying
experience, and satisfaction. This includes decision on whether he/she likes the store, or whether
he/she likes the product and the quality. Such evaluation determines whether a consumer will buy the
product or brand again, or visit the store again. Consumers who are happy with the product that
they purchased, and the buying experience, will become repeat customers, and they are more likely
to tell others about the experience. 73
STRATEGIC RETAIL PLANNING PROCESS
Strategic Retail Planning
Process
1. Deciding the Store’s Mission and Objectives: The mission of a store is identifying the goods and
services that will be offered to customers. It also deals with the issue of how the resources and
capabilities of a store will be used to provide satisfaction to customers and how the store can compete in
the target market vis-à-vis its competitors.
Once the organization mission has been determined, its objectives the desired future positions that it
wishes to reach, should be identified. A store’s objectives are defined as ends that the store seeks to
achieve by its USP and operations
The store’s objectives may be classified into two parts:
(a) External store objectives: are those objectives that define the impact of store on its environment.
Example: To develop high degree of customer confidence by providing quality goods at affordable price.
(b) Internal store objectives: Are those objectives that define how much is expected to be achieved
with
the available resources.
Example: To raise the store turnover by 20% in the coming year.

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Strategic Retail Planning
Process
The strategic planning process, after considering the HR potential and the unique selling proposition
(USP) of a particular store takes proper shape
2. Situational Analysis: The difference between current and future position is known as planning. And the
objective of conducting store’s situation analysis, normally study in the context of external environment
and internal environment.
Under external analysis retailer studies these parameters: Economic environment of retailing,
Political/Legal environment of retailing, Socio-cultural environment of retailing, Technological
environment of retailing, International environment of retailing.
Internal analysis: The objective of studying the internal environment of its own store is to identify the
store’s capabilities and weakness. These resources for the purpose of examining are normally grouped
into human resource, financial resources, physical resources and intangible resources.

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Strategic Retail Planning
Process
3. Retail Strategy: It is a clear and definite plan outlined by the retailer to tap the market.
Mission: The mission is at the core of the existence of the retailer. Other aspects of the strategy may
change over a period of time or vary for different markets
Functions of Retail strategy:
1. Retail strategy define mission or purpose
2. Retail strategy conduct a situation analysis:
3. Retail strategy identify options/strategic alternatives: The alternatives available to a retailer are:
Market Penetration, Market Development, Retail Format Development and Diversification.
4. Retail strategy set objectives
5. Retail strategy obtain and allocate resources needed to compete Resources needed by a retailer
6. Retail strategy develop the strategic plan
7. Retail strategy implement the strategy
8. Evaluate and Control
Formulation of Retail Strategy
Retail mix
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Strategic Retail Planning
Process
4. Strategy Implementation and Control: It is concerned with the designing and
management of retail system to achieve the best possible combination of human,
financial, physical and service resources of a retail store; to achieve the formulated
objectives, without timely and effective implementation also requires scheduling and
coordination of various retail activities.
Strategy control deals in three basic concepts: Inspection Detection Correction

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RETAIL MIX
Retail
Mix
Elements used for classification
Location
Customer • Type of merchandise sold
Services
• Variety & assortment of merchandise sold
Merchandise • Level of customer service
Retail
strategy
• Price of the merchandise
Store
Design &
Display
Communication Mix

Pricing

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re se a rc h
Retail Mix – 4 P’s

The basic components of The PRODUCT MIX are:

(1) Packaging
(2) Brand
(3) Product Item
(4) Product line

The various PRODUCT MIX strategies are:

(1) Launching new products from time to time

(2) Alteration of Existing Products
(3) Eliminate an entire line or reduce assortment within it
(4) Trading Up
(5) Trading Down
(6) Product life cycle management
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Retail Mix – 4 P’s

The components of PRICE MIX are:

1. Organizational objectives
2. Competition
3. Cost and profit
4. Credit terms
5. Discount etc.
6. Fixed and variable costs
7. Pricing options
8. Pricing policies
9. Proposed positioning strategies
10. Target group and willingness to pay

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Retail Mix – 4 P’s

Following are the components of a PLACE MIX:

1. Distribution channels

2. Intermediary

3. Distance Factor

4. Inventory Level

5. Transportation

6. Warehousing and Storage

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Retail Mix – 4 P’s

The following are components of Retail PROMOTION MIX:

1. Cost of the method

2. Reach

3. Degree of flexibility

4. Credibility

5. Control over media

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