CLASSIFYING RETAIL OUTLETS

Ownership

Level of Service

Classification
of
Retail
Formats

Merchandise

Price

CLASSIFICATION BY OWNERSHIP
Independent
Retailers-one store
ownership

Chain Stores-many stores

but only one owner

Franchises-many owners
of many stores

Cooperatives member
consumers are the owners

Leased

Independent Retailer
Owns and operate only one retail outlet
Managed by owner / proprietor and a few other family
members ( Generation shops)
Local baniya / Kirana store / paanwala
One to one rapport with customer
Limited bargaining power with supplier

Chain Retailer
Two or more outlets under common ownership
Commonality in terms of MERCHANDISE , AMBIENCE
,ADVERTISING , PROMOTIONS

Very high bargaining power with supplier

City and regional preferences ignored
Pantaloons , Shoppers Stop , West side , globus , Wills
Sports, Arrow etc.

Franchising
Contractual agreement between franchiser and franchisee which allows
the franchisee to conduct business under an established name as per a

particular business format in return for a fee or a compensation .

Such type of ownership enriches the Franchiser as the Franchisee are

entrepreneur who bring their business skills to grow the business of

Franchisers.

Ineffective / Bad Franchisee may harm the reputation of the Franchiser

Such a system does not allow Territorial exclusivity .

Franchising
Franchiser: The originator of a trade
name, product, methods of operation, and
so on that grants operating rights to
another party to sell its products.
Franchisee: An individual or business that
is granted the right to sell another partys
product.

Franchise
Established when franchisor licenses franchisee
to use the franchisors trade name, trademarks,
commercial symbols, patents, copyrights, and
other property in the distribution and selling of
goods and services.
Franchisor and the franchisee are usually
established as separate corporations.

BASIC FORMS OF FRANCHISING

Product and
Trade Name
Franchising

Business
Format
Franchising

Dealer agrees to sell certain

products provided by a
manufacturer, but can use any sales
tactics he chooses.
Archie's

Dealer must sell the franchisers

product in the exact way the
franchiser prescribes.
Ex McDonalds

Parties to a Typical Franchise Agreement

Franchisor
(Licensor)
Grant of franchise and
license to use trademarks,
service marks, and trade
secrets

Franchisee
(Licensee)

TYPES OF FRANCHISE AGREMENTS

Direct Franchising Format
Subsidiary Franchising
Regional/Area Franchising or Multiple
Franchising
Unit Franchising
Master Franchising

Direct Franchising Format

It is a simple arrangement where franchiser grants franchise to a
franchisee by execution of a contract.
Franchiser has direct control over the franchisee & the dos & donts
are clearly specified .
Franchiser grants the franchise along with operating guidelines and
the policies of the franchiser .
The consideration payable to the franchiser is usually in the form of
periodic royalty .
Franchiser provides assistance to franchisee by offering all the
standards & process manuals ,shares expertise by transfer of
knowledge & technology

Subsidiary Franchising

Wherever laws & regulations allow foreign organizations to set up their

subsidiaries in India ,franchising is done through a subsidiary .

The subsidiary controls the franchiser directly .

The major advantage of this approach is that the franchiser is present in the
country as a corporate body .

The contract in this case will be a domestic contract and thus subject to
local laws .

Most of the foreign automobile companies work in this way ,franchise rights
for retailing & dealership are given to others by the subsidiary office in India
,which controls all the processes in retail & distribution .

The subsidiary office enters into an agreement with the franchisees.

Regional/Area Franchising or Multiple Franchising

Here the franchiser offers franchise rights to a franchisee only for an

area .

There are separate franchisees for each area or region in the country .

This kind of arrangement is also known as multiple franchising when

more than one franchisee is given the franchise rights for the same
brand .

Example McDonalds in India where franchise rights are given to

different organizations in every region .

Such agreements offer the franchisee the right to open multiple number
of outlets according to a predetermined schedule & within a given area .

Unit Franchising
The franchiser offers the right to a franchisee to open and run just
one store through an exclusive arrangement .

This arrangement involves many franchisees .

The strength of this format is that each franchisee pays full attention
to his store and its performance .
Managing many franchisees across the country may be an uphill
task for franchisers, it is very difficult to monitor compliance to
specified standards & processes.
Ex :Himalaya of Bangalore has adopted the unit franchising method
for its ayurvedic concept stores ,

Master Franchising

In this arrangement ,the franchiser grants the franchise rights to an entire

country or territory .

The franchisee is permitted to open franchise outlets itself & /or grant subfranchise to others .

In this case two agreements are generally involved one that is entered into
between the franchiser & master franchisee and the other between the
master franchisee and sub-franchisees .

Many footwear store brands are franchised in this fashion .

The major advantage of this kind of franchising is the rapid increase in scale
following specified standards & processes .

Local sub-franchisees are familiar with the local market & business viability
can be ensured .

Advantages to Franchising
1.

The franchisor can reach lucrative new markets.

2.

The franchisee has access to the franchisors

knowledge and resources.

3.

Franchisee runs an independent business.

4.

Consumers are assured of uniform product quality.

Leased Department
Also termed as Shop-in Shops
A section of a space is leased to an outside party
Retailer expands its product offering to the customers

Perfumes / cosmetic counters in department stores

The proprietor of leased department is responsible for all
aspects of its business and normally pays a percentage of
sales as rent .
The store sets operating restrictions for the leased
department to ensure overall consistency and coordination
.

Cooperatives
Consumers invest in the enterprise
Profits are distributed among the members as dividends
Stores managed by elected officials

Apna bazar ,Super bazar ,Kendriya bhandar ,Sahakari

bhandar

CLASSIFICATION BY LEVEL OF
SERVICE

Self
Service

Full
Service

CLASSIFICATION BY PRODUCT
OFFERING
Breadth of Product Line
Length of Product Line
Depth of Product Line

PRODUCT MIX
HINDUSTAN UNILEVER LIMITED

PERSONAL
WASH

LUX

LAUNDR
Y

SURX

LIFEBUOY

RIN

LIRIL

WHEEL

HAIR CARE

SUNSILK
CLINIC

DEODORANT
S

SKIN
CARE

ORAL
CA
RE

AXE

FAIR AND
LOVE
LY

PEPSO
DE
NT

PONDS

CLOSE
UP

REXONA

VASELINE

COLOUR
COSME
TICS

FOODS AND
BEVERAG
ES

LAKME

BROOKE
BOND
LIPTON
KISSAN

HAMAM

ANNAPURNA

BREEZE

KNORR

DOVE

KWALITY
WALLS

PEARS
REXONA

MAJOR TYPES OF RETAILERS BY PRODUCT

OFFERING
Kirana Stores
Convenience Stores
Supermarkets
Departmental Stores
Hypermarkets
Specialty Stores

Off Price Retailers

Catalogue Retailing
Category Killers
Warehouse Clubs

Restaurants

Kirana Stores
Neighborhood / residential areas / Independent retailers

Eased / personalized/ emergency purchase

2-3 times a week
Convenience products
Open for long hours
Home delivery and monthly credit

Convenience stores

Neighborhood food oriented store open for long hours

Moderate number of items (more than kirana )

The store size is relatively larger than kirana and provides better customer
service in terms of ambience ,packaging , presentation and quality.

Prices are not as competitive as other formats like supermarket ,department

stores but certainly on the lower side than the kirana stores.

The ease of shopping at convenience store in terms of time and impersonal

nature of supermarket makes these stores more appealing .

According to FMI : A small local store selling mostly grocery , open until late
at night or even 24 hours a day and is abbreviated as c store

The store size is 3000-8000 sq ft

Stores in petrol pumps like HP Speed mart, In and Out.

Supermarkets
Food store offering groceries and limited range of non
food items / general merchandise ie health and beauty
aids , gift items
Large stores ,low cost , low margin , high volume , self
service operations

85% food and grocery items

Impulse buying
8000-20000 sq ft
Nigiris , Foodworld, Subhiksa , Food Bazar , Spencers,
Spinach

Departmental Store

Large stores selling several product lines with each operating as a department under one roof.

Product mix is largely non food like apparel , accessories ,books , music , footwear .

20000- 40000 sq. ft.

Target customers are not price conscious

Ambience / VM plays important role.

National brands as well private labels

Merchandise return policy and loyalty programs

Anchors in a shopping mall

They help in attracting high traffic

30% conversion rates

Atleast 50 employees

50000- 100000 SKUs

Shoppers Stop , Pantaloon , Lifestyle , Westside , Globus , Akbarallys , The Bombay Store , Benzer ,
Ebony , Chermas , Meena Bazzar .

International players like Marks & Spencer , Sears , J.C.Penny .

Hypermarkets
Derived from the French word Hypermarche which is a combination
of a economy supermarket and a discount department store .
Also termed as supercentres
Carrefour started first hypermarket in 1963

A store with 80000-2,20000 sqft. with at least 35% of selling space

devoted to non grocery product like clothes , jewellery , hardware ,
sports equipment , books , CDS /DVDS , Videos , TV , electric
equipments .
One stop shopping
Wal Mart (the Wal-Mart supercentres), Carrefour, Target ( Super
Targets) , Tesco (Tesco Extra Stores), Big Bazaar , Star India
Bazaar , Hypercity

Specialty Store
A retail store specializing in a particular type of merchandise or
single product line with deep assortments in that product line
Such business model is characterized by high level of customer
service or product information
Concentrate on apparel , jewellery ,drugs, fabrics , sporting goods ,
Car / Scooters , furniture etc.
8000 sq.ft.
The Gap , Ikea , Proline fitness centre , Croma , Kings electronics

Off Price Retailers

Merchandise is sold at less than retail prices
Buys manufacturers seconds , off seasons at a deep
discount

The merchandise may be in odd size ,unpopular colors

or with minor defects
Manufacturer owned / Factory outlet (Pantaloon Factory
outlets, Levys factory outlet etc.)
Parental company to expand their business

Discount stores
It conveys the image of a high volume ,
low cost outlet seling at less than
conventional price.
Price conscious ,fashion conscious

Single price stores

Family dollar , My dollar , 49-99

Catalogue Retailers
A retail outlet selling durable products and
other high mark-up merchandise from a
catalogue.

BUYER'S choose items from the

catalogue and complete an order form
which is then processed in store .

Category Killers
A specialty retailer who offers a very large selection in
the chosen product category and economical prices
Focus on one product category, they stock deep ,
dominate the product category
20,000-1,20,000 sq.ft.
Nallis in saris, Trouser Town in Trousers, Toys Kemp in
Toys , The Loft in footwear.

Warehouse Clubs
A limited-service merchant wholesaler that
sells appliances, household items, and
groceries on a cash-and-carry basis to
members, usually small businesses and
groups

Restaurants
Sell tangible products, food and drink, but
also provide valuable service.

NON-STORE RETAILING
Automatic Vending
Direct selling (Door to Door, Party plan,
Multi level networking ) ,Direct Marketing
(TV , mail/ catalogue

Major Forms
of
Nonstore
Retailing

Electronic Retailing

Service

Banks
Hotels
Hospitals
Education
Airlines
Car Rentals
Housekeeping