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Monday, November 13, 2017

Retailing - Nature and Scope

Unit – 1: Retailing – Nature and Scope
Meaning of Retailing

What is Retail?
In today’s competitive environment, retaining customer is a difficult task. Customer should get the product at their doorstep, due to which many intermediaries went on adding to the distribution channel. Distribution becomes narrower with the innovation of the word “Retail”. Retail is defined as any business that directs its marketing efforts towards satisfying the final consumers, based up on the organization of selling goods and services as a means of distribution. The word ‘retail’ is dried from the French word retailer, meaning ‘to cu a piece off’ or ‘to break bulk’.

Who is a Retailer?
A retailer is a merchant or occasionally an agent or a business enterprise, whose main business is selling directly to ultimate consumers for non-business use. He performs many marketing activities such as buying, selling, grading, risk-trading, and developing information about cusotmer's wants. A retailer may sell infrequently to industrial users, but these are wholesale transactions, not retail sales. If over one half of the amount of volume of business comes from sales to ultimate consumers, i.e. sales at retail, he is classified as a retailer. Retailing occurs in all marketing channels for consumer products.

Meaning of Retailing

Delivering the products is not an end job which a retailer does, today to be the best he needs to deliver services associated with the product. The word Retailing is defined as “The set of business activities that adds value to the products and services sold to consumers for their personal or family use”. Retailing can be referred to all activities involved in marketing and distribution of goods and services. Retailing is defined as a conclusive set of activities or steps used to sell a product or service to consumers for their personal or family use. It is responsible for matching individual demands of the consumer with supplies of all manufacturers. A common assumption is that retailing involves only the sale of products in stores.

However, it also includes the sale of services like those offered at a restaurant, or by car rental agencies. Retailing involves a direct interface with the customer and co-ordination of business activities from end to end right from the concept or design stage of a product or offering, to its delivery, and post delivery services to the customer.

According to Kotler, “Retailing includes all the activities involved in selling goods or services to the final consumers for personal, non business use.”
According to David Gilbert, “Any business that directs its marketing effort towards satisfying the final consumer based upon the organization of selling goods and services as a means of distribution.”
According to Chetan Bajaj, “Retailing is defined as a conclusive set of activities or steps used to sell a product or a service to consumers for their personal or family use. It is responsible for matching individual demands of the consumers with supplies of all the manufacturers.

Retailing can thus be defined as consisting of all such activities involved in the marketing of goods and services directly to the consumers for their personal, family or household use. Retailing involves a direct interface with the customer and the coordination of business activities from end to end, right from the concept or design stage of a product or offering, to its delivery and post delivery service to the customer.

Retail Management
Management refers to the process of bringing people together on a common platform and make them work as a single unit to achieve the goals and objectives of an organization. Management is required in all aspects of life and forms an integral part of all businesses.
The various processes which help the customers to procure the desired merchandise from the retail stores for their end use refer to retail management. Retail management includes all the steps required to bring the customers into the store and fulfill their buying needs. Retail management makes shopping a pleasurable experience and ensures the customers leave the store with a smile. In simpler words, retail management helps customers shop without any difficulty.
Functions of Retailers:
Retailers as the last link in the chain of distribution, performs good many functions of marketing. Of all these following are the most significant ones.
1. Buying and assembling: Retailer has to assemble products from different manufacturers and wholesalers as he has to keep wide variety of stock of products market the varied and small requirements of large number of customers. This assembling possible through the prices of buying. Buying is a continuous process involving selection and the most economical and dependable sources of supply.
2. Warehousing: Retailer is a safety value releasing the goods in quantities different varieties and price ranges according to the consumer needs. Warehousing has possible holding the stocks to match between the consumer demand and the wholesalers or manufacturer supply conditions. It is possible to have adequate and interrupted supply of goods.
3. Selling: The final aim is to sell products so bought and held by him. Retailer is rightly called as the buying agent of consumers. He is the means to dispose the goods to the consumers for producers and wholesalers and collect the sales revenue for them. Successful retailing needs good deal of salesmanship tactics.
4. Risk-Shouldering: Risk shouldering is the basic responsibility of a retailer arising out of physical deteriorations and changes in prices. These are unavoidable as he holds sufficient and variety of inventories from the time they are bought till they are sold to the consumers. The risk of loss is seen in the number of forms such as natural calamities – fire, food, cyclone, earthquake, spoilage and deterioration due to changes in the weather and fashion and so on.
5. Grading and Packing: Retailers undertake secondary or second round grading and packing activities left by the manufacturers and wholesalers. Classification of goods into different graders and lots is common. As he sells in loose packs and very odd lots, packing assumes a particular importance. Such packing can be highly standardised or can be as per the individual requirements.
6. Financing: In the whole scheme of marketing, the contribution of retailers is really worth emphasizing in so far as consumer financing is concerned. His financing consists of credit granted on liberal terms to the consumers, investment made in large variety of stocks, the expenses of holding stock, salaries and wages of watch and ward staff and other trade expenses.
7. Advertising: Retailers are the best agents to advertise the products, services and ideas. In collaboration with wholesalers and manufacturers retailers do undertake shop display, distribution of sales literature, introduction of new products in a convincing way as he recommends what is ‗right‘ or ‗wrong‘ to a particular customer.
8. Supply of market information: Retailers really enjoy enviable position so far collecting information from the horse‘s mouth. As being in closed and constant touch with consumers, he clearly keenly observes, studies the consumer’s behaviour, changes in the tastes and fashions and therefore, demand. This collected information was passed on to the wholesalers and the manufacturers for their perusal and necessary prediction for future adjustment and success.
Role and Importance of Retailers

Retailers have an important place in the distribution channel. As they sell goods to final consumers, they play useful as well as an important role in distribution channel as the last link. In the absence of retailers, the consumers cannot find necessary goods at only one place or at a single shop. They need to walk to many shops to find one after another goods. The producers and wholesalers also need to face various problems. Retailers are important in distribution channel because of it’s services to producers, wholesalers and consumers.

Services to Manufacturers and Wholesalers: The invaluable services that the retailers render to the wholesalers and producers are given as here under:
(i)     Help in distribution of goods: A retailer’s most important service to the wholesalers and manufacturers is to provide help in the distribution of their products by making these available to the final consumers, who may be scattered over a large geographic area.
(ii)   Personal selling: In the process of sale of most consumer goods, some amount of personal selling effort is necessary. By undertaking personal selling efforts, the retailers relieve the producers of this activity and greatly help them in the process of actualizing the sale of the products.
(iii) Enabling large-scale operations: On account of retailer’s services, the manufacturers and wholesalers are freed from the botheration of making individual sales to consumers in small quantities. This enables them to operate at relatively large scale, and thereby fully concentrate on their other activities.
(iv)  Collecting market information: As retailers remain in direct and constant touch with the buyers, they serve as an important source of collecting market information about the tastes, preferences and attitudes of customers. Such information is considered very useful in taking important marketing decisions in an organisation.
(v)    Help in promotion: From time-to-time, manufacturers and distributors have to carry on various promotional activities in order to increase the sale of their products. For example, they have to advertise their products and offer short-term incentives in the form of coupons, free gifts, sales contests, and so on. Retailers participate in these activities in various ways and, thereby, help in promoting the sale of the products.

Services to Consumers: Some of the important services of retailers from the point of view of consumers are as follows :
(i)     Regular availability of products: The most important service of a retailer to consumers is to maintain regular availability of various products produced by different manufacturers. This enables the buyers to choose products according to their tastes from a wide variety and buy them when needed.
(ii)    New products information: By arranging for effective display of products and through their personal selling efforts, retailers provide important information about the arrival, special features, etc., of new products to the customers. This serves as an important factor in the decision making process for the purchase of those goods.
(iii)   Convenience in buying: Retailers generally buy goods in large quantities and sell these in small quantities, according to the requirements of their customers. Also, they are normally situated very near to the residential areas and remain open for long hours. This offers great convenience to the customers in buying products of their requirements.
(iv)  Wide selection: Retailers generally keep 0stock of a variety of products of different manufacturers. This enables the consumers to make their choice out of a wide selection of goods.
(v)    After-sales services: Retailers provide important after-sales services in the form of home delivery, supply of spare parts and attending to customers. This becomes an important factor in the buyers’ decision for repeat purchase of the products.
(vi)  Provide credit facilities: The retailers sometimes provide credit facilities to their regular buyers. This enables the latter to increase their level of consumption and, thereby, their standard of living.

Scope of Retailing
The scope of the Indian retail market is immense for this sector is poised for the highest growth in the next 5 years. The India retail industry contributes 10% of the countries GDP and its current growth rate is 8.5%. In the Indian retail market the scope for growth can be seen from the fact that it is expected to rise to US$ 608.9 billion in 2009 from US$ 394 billion in 2005. 
The organized retailing sector in India is only 3% and is expected to rise to 25- 30% by the year 2010. There are under construction at present around 325 departmental stores, 300 new malls, and 1500 supermarkets. This proves that there is a tremendous scope for growth in the Indian retail market. 
The growth of scope in the Indian retail market is mainly due to the change in the consumers behavior. For the new generation have preference towards luxury commodities which have been due to the strong increase in income, changing lifestyle, and demographic patterns which are favorable. 
The scope of the Indian retail market have been seen by many retail giants and thats the reason that many new players are entering the India retail industry. The major Indian retailers are:
Ø  Pantaloons Retail India Ltd
Ø  Shoppers Stop
Ø  Bata India Ltd
Ø  Music World Entertainment Ltd
Judging the scope for growth in the India retail industry many global retail giants are also entering the Indian retail market. They are :
Ø  Tesco
Ø  Metro AG
Ø  Wal- Mart

The scope for growth in the Indian retail market is seen mainly in the following cities:
Ø  Mumbai
Ø  Delhi
Ø  Pune
Ø  Ahmedabad
Ø  Bangalore
Ø  Hyderabad
Ø  Kolkata
Ø  Chennai
The scope of the Indian retail market is very vast. And for it to reach its full potential the government and the Indian retailers will have to make a determined effort. 

Reasons behind the growth of the retail sector
India is not only one of the fastest growing economies in the world but also ranks first in the Global Retail Development Index (GRDI). The GRDI ranks the top 30 developing countries for retail investment worldwide by analysing 25 macroeconomic and retail- specific variables. Moreover, it not only identifies the most attractive markets today but also identifies those that offer potential in the future. Although the sheer market size of China still makes it a strong competitor for foreign investment, the waning of its working population in comparison to the working population of India gives India an edge over China. The main factors responsible for the growth of the retail industry are
1.       Increase in per capita income: Per capita Income means how much an individual earns, of the yearly income that is generated in the country through productive activities. India has marked growth in per capita income by 10.5% which shows tremendous increase in GNP (Gross National Product) of the country. Increase in per capita income reflects hike in income of Households which in turn will consume more, thus leading to growth of retail sector. Household prefer to shop from big giants as compare to their Kirana store.
2.       Demographical changes: India is having huge young age working population which is generating huge income and high savings. For any developing country young age group, income, savings are key factors for its growth. Presence of these key factors has helped in attracting big retail giants to India
3.       High standard of living: Standard of living in India has improved. Earlier Shopping in India always had an emotional tag attached to it, along with that people use to have myth that shopping from shopping complexes or Malls is costlier and it suits only to rich class. But now things have .changed, people have changed their misconception and have adopted Mall culture. This shows that standard of living has increased.
4.       Change in consumption pattern: Consumption patterns among various classes have changed over the years. Earlier customers were brand loyal due to which they were allowing new brands to enter the market. But now customers are showing good response to new product entering the market because they have realised that they are paying for quality. This drastic change in customers perception has opened ways for many new entrants.
5.       Availability of low-cost consumer credit: It is rightly said that sales generated on credit are more as compare to cash sales. With the change in credit policies, many new customers have entered the market. Purchasing on credit basis with good credit worthiness gives both seller and buyer flexibility to transact. Earlier due to lack of cash many buyers use to postpone their purchases, but now with modernisation they are carrying it on credit basis as it is cheaper to repay.
6.       Improvements in infrastructure: With many infrastructural changes taking place right from metro rails to Bandra-worli sea link in the country, retail is also expanding its wings. With huge infrastructure spending which has entered the country in form of FDI (Foreign Direct investment), more retail giants have proposed to enter Indian market.
7.       Entry of foreign retailers: The main factors responsible for the growth of the retail industry are the foreign retailers and the income structure of the working population. Foreign retailers enter the market and provide good quality products and services which not only expand the market but give local retailers incentives to improve the quality of their own products. Meanwhile, the income structure of the working population determines the demand for products. Other factors include the size of the working population, entry of the retail industry into rural markets or the involvement of a corporate sector to provide quality products at reasonable prices.

8.       Make in India reaping dividends: The Make In India campaign, started with the aim to make India a global manufacturing hub, encouraged multinational and domestic companies to manufacture their products in India. To achieve that aim, the government has been working towards creating a conducive environment for investment, development of modern and efficient infrastructure and opening up new sectors for foreign investments. Under this campaign, the government also took steps to improve India’s rank in the Ease of Doing Business Index, an index that measures how easy it is to do business in a country. Development of the manufacturing sector and an increase in the number of businesses have facilitated job creation leading to higher incomes for an increasing middle-class population. Due to the higher incomes, the population is moving away from the trend of buying only essential commodities, thus leading to a consumption boom in India
9.       Impact of FDI and e-commerce: Recognising the importance of foreign investment in the growth of any industry, the government has initiated lucrative methods to attract foreign investors. These methods include relaxing FDI regulations in certain areas of the retail sectors and are expected to result in a boost to the organised retail sector.

Retailing in India has traditionally been fragmented, while in the western countries, big retailers usually dominate the landscape. In recent times, India has seen the emergence of several organized retailing formats, from departmental stores like Shopper's Stop to discount stores like Big Bazaar. We also have niche (exclusive) stores like Music World, Coffee Day and Planet M and Grocery Stores like Spencer's, subiksha etc.,  
Indian retailing is undergoing a process of evolution and is poised to undergo dramatic transformation. The traditional formats like hawkers, grocers and paan shops co-exit with modern formats like Super- markets and Non-store retailing channels such as multi level marketing and teleshopping. Modern stores trend to be large, carry more stock keeping units, have a self-service format and an experiential ambience. The modernization in retail formats is likely to happen quicker in categories like dry groceries, electronics, mens' apparel and books. Some reshaping and adaptation may also happen in fresh groceries, fast food and personal care products.  In recent years there has been a slow spread of retail chains in some formats like super markets, malls and discount stores. Factors facilitating the spread of chains are the availability of quality products at lower prices, improved shopping standards, convenient shopping and display and blending of shopping with entertainment and the entry of Tatas into retailing.
Foreign direct investment in the retail sector in India, although not yet permitted by the Government is desirable, as it would improve productivity and increase competitiveness. New stores will introduce efficiency. The customers would also gain as prices in the new stores tend to be lover. The consequences of recent modernization in India may be some what different due to lower purchasing power and the new stores may cater to only branded products aimed at upper income segments.
The Indian retail environment has been witnessing several changes on the demand side due to increased per capital income, changing lifestyle and increased product availability. In developed markets, there has been a power shift with power moving from manufactures towards the retailers. The strategies used by retailers to wrest power include the development of retailers own brands and the introduction of slotting allowances which necessitate payments by manufactures to retailers for providing shelf space for new products. The recent increased power of retailers has led to the introduction of new tactics by manufactures such as every day low pricing, partnership with retailers and increased use of direct marketing methods.
The earlier part of this lesson has provided some information that enables the construction and analysis of recent trends in the Indian Retail Industry. The driving forces towards that trend can be broadly classified into the following categories.
i)        Economic development
ii)       Improvements in civic situation
iii)     Changes in government polices
iv)     Changes in consumer needs, attitudes and behavior
v)      Increased investment in retailing
vi)     Rise in power of organized retail.
The development of the Indian economy is a necessary condition for the development of the Indian retail sector. The growth of the economy can provide gainful employment to those who would otherwise enter retailing in areas like roadside vending and other similar low cost entries into the retail sector. The growth of modern retail is linked to consumer needs, attitudes and behavior. Marketing channels including retailing emerge because they receive impetus from both the supply side and the demand side. On the demand side, the marketing channel provides service outputs that consumer's value.
In Indian retailing, convenience and merchandise appear to be the most important factors influencing store choice, although ambience and service are also becoming important in some contexts. Store ambiance includes such as lighting, cleanliness, store layout and space for movement.
The government of India has clarified on a number of occasions that foreign dried investment will not be permitted in India in the retailing sector. Major international retailer organizations are waiting for signals of policy change especially in the wake of Chinese permission for foreign investment in its retail. In opening up the retail sector, the government may consider various approaches such as insisting an joint ventures, limiting the foreign stake, or specifying the cities where investment is permitted.
Although FDI is not yet permitted in retailing, a number of global retailers are testing the waters by signing technical agreements and franchises with Indian firms. Fast food chains like McDonald's and Pizza Hut are already operating in the metres. A Marks and Spencer Store is already operational in Mumbai. Recent trends show that industrial groups such as Reliance and Raymonds have been active in encouraging development of well appointed exclusive showrooms for their textile brands. Industrial houses like Rahejas, Tatas have entered retailing. Several Indian and foreign brands have used franchising to establish exclusive outlet for their brands.
The Indian retail sector is largely traditional but stores in modern format are emerging. Though the contribution of organized retailing in the retail sales in India though small in the last decade, but currently it is picking up very fast spreading their activates not only in metros but in other cities. Modern management techniques are used in managing the affairs of retail sector. Firms will need to proactively review their sales structures, brand activates, logistics policy and price structure to cope with pressures from powerful retailers.
Failure of Retail Business: A retail trade may fail owing to the following reasons:
(i) Limited financial resources.
(ii) Lack of experience in the line.
(iii) Faulty credit policy of retailer
(iv) Change of customer’s outlook.
(v) Natural calamities, viz., earthquakes, floods, etc.
(vi) Personal factors, viz., death or illness of retailer himself.
(vii) Poor location of shop.
(viii) Poor advertising and window display.
(ix) Impolite and discourteous behaviour of retailer.
(x) Poor service of retailer.
(xi) Stiff competition from rivals in the same trade.
(xii) Poor or lack of foresight of the retailer which leads to faulty planning, organisation and control of the business.
(xiii) Financial crunch viz., limited capital resource of the retailer.

(xiv) Unplanned spending by the retailer for personal needs.

Why Retailing is superior than other forms?
1)      A retailer performs the dual functions of buying and assembling of goods. The responsibility of a retailer is to identify the most economical source for obtaining the goods from the suppliers and passing on the advantages to the consumer.
2)      The retailers perform the functions of warehousing and storing. They store the goods in bulk and make them available as per the requirement of the consumer. Warehousing and store keeping helps in ensuring uninterrupted availability of the goods to the consumers.
3)      The primary function of a retailer is selling the products to the customers for which various techniques or business practices are being adopted by the retailer to achieve the strategic goals.
4)      The prime focus of a retailer is on maximizing customer satisfaction by delivering quality products and services both on cash as well as credit basis. As a result of which, retailer always runs the risk of accumulating bad debts on account of non-payment of the amount from the consumer.
5)      A retailer needs to have robust risk management capabilities. Various kinds of risks can be involved in a retail business which a retailer should be well prepared with like loss or damage of the products due to deterioration in quality, perishability or spoilage. A change in customer’s buying preferences or tastes can also affect the retail business to a great extent, or even the products may be damaged due to the natural calamities or vagaries of nature.
6)      A retailer performs the crucial function of grading for all those goods which at times are either left ungraded by the wholesalers or manufacturers so that the customers readily accept the goods. The retailer is responsible for the packing of goods in small packages or small containers for the customer’s convenience.
7)      The retailers are the direct point of contact or communication with the customers; hence they gather information regarding the changing tastes and preferences of the consumers, pass on the customer feedback to the manufacturers for continuous improvement in service delivery.
8)      Retailers act as a vital channel for the launch of new products in the market as they are the direct interface with the consumers and can communicate directly with the targets consumers about the new product features and advantages.

9)      The retailers are responsible for the product promotion and advertisement by planning the product displays and visual merchandising for attracting the customers.