Introduction to Retailing

LECTURE I

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 What Is Retail?
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Retail – derived from the French word

“retaillier”, which means to break bulk
Retailing- last stage in the movement of
goods and services to the consumer
Retail consists of- all activities involved in
the marketing of goods and services directly
to the consumers for their personal, family or
household use

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 Functions Of A Retailer
3  Break Bulk or Form Utility
 Buy it in quantities customers want

 Hold Inventory or Place utility

 Buy it at a convenient place when you want it

 Provide Assortment
 Buy other products at the same time

 Offer Services
 See it before you buy, get credit, layaway

 Serves the manufacturer

 by distributing the goods to the end consumer
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The Distribution Channel

PPT 1-4

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 The Concept Of Organized Retail
5 Unorganized sector- units whose activity is
not regulated by any statute or legal
provision, and/or those which do not
maintain regular accounts
Unorganized form of retail - those forms of
trade which sell an assortment of products
and services ranging from fruits and
vegetables to shoe repair
Organized form of retail- typically a multi-
outlet chain of stores or distribution centres
run by professional management 5
 Nature of Retail Industry is
Changing

To Today’s Retailer

Mom and Pop Store

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Share of Organized Retail in Selected Countries,
2006

Country Total Retail Sales Share of Organized

(US$ bn) Retail (%)

USA 2983 85
Japan 1,182 66
China 785 20
UK 475 80
France 436 80

Germany 421 80

India 322 4

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The total number of traditional retailers is estimated to be 13 million by Technopak
Advisers Pvt. Ltd. The classification of the unorganized retail universe by category is
shown below.

Furniture Food stores

Chemists 1% 1%
3% Non veg stores
1%
Cosmetics
2% Kirana I
20%
Hawkers
8%

Fruit and vegetables

Furnishing
4%
1%
Jewellery
Hardware
0%
2%
General Merchnadise
2%

Paan n Bidi Stores

14%

CDIT
2%
Footwear
2% Kirana II
Apparel 31%
6%
Modern Independent stores 8
0%
Categories of traditional retailers

 Fruit and Vegetable Sellers - Sells fruit and

vegetables.
 Food Store - Reseller of bakery products. Also
sells dairy and processed food and beverages.
 Non -Vegetable Store - Sells chicken and mutton
(supplemented by fish), or predominantly fish.
 Kirana I - Sells bakery products, dairy and
processed food, home and personal care, and
beverages.
 Kirana II - Sells categories available at a Kirana I
store plus cereals, pulses, spices, and edible oils.

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Categories of traditional retailers

 Modern Independent Stores - Sells categories available at a

Kirana II store and has self- service. Operates single or several
stores (but not an organized chain of stores).
 Apparel – Sells men’s wear, women’s wear, innerwear, kids’
and infant wear.
 Footwear – Sells men’s wear, women’s wear, and kid’s wear.
 CDIT (Consumer Durables & IT) – Sells electronics, small
appliances, durables, telecom, and IT products.
 Furnishing – Sells home linen and upholstery.
 Hardware - Sells sanitary-ware, taps and faucets, door fittings,
and tiles.
 General Merchandize – Includes lightning, stationery, toys, gifts,
utensils, and crockery stores.

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Modern Retail Formats in India
Type of Format Examples Area (Sq. Ft.)

Hypermarket Spencer’s, and Pantaloon Retail's Big Bazaars. 50,000 - 1,00,000

Cash-and-carry Metro, the Germany-based C&C More than 75,000
Shoppers' Stop, Pantaloons, Westside,
Department Store Ebony, Lifestyle, Globus 10,000 - 60,000
Apna Bazaar, Sabka Bazaar, Haiko, Nilgiri's,
Supermarket Spencer’s, Food Bazaar 1,000
Shop-in-Shop Infinity
footwear stores, music stores, electronic and
Speciality Store household stores, gift stores, 800
Category Killers Sreeleathers, The Loft
(Large Speciality
Retailers) 20,000
Subhiksha, factory outlets of apparel and
footwear brands, namely, Levi’s factory outlet,
Discount Store Nike’s factory outlet, Koutons, etc. 1,000
Convenience Store In & Out, Safal 800 11
 Non-store Retail Formats

Electronic Retailing
Catalog and Direct Mail
Direct Selling
Television Home Shopping
Vending Machines

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Royalty-Free/CORBIS
Ryan McVay/Getty Images
Business Models In Retail
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Types of Nonstore Retailers

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Merchandise/Service Continuum

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Services vs. Merchandise Retailers
Intangibility
-Problems in Evaluating Service Quality
-Performance of Service Provider
Simultaneous Production and Delivery
-Importance of Service Provider

Perishability
-No Inventory, Must Fill Capacity

Inconsistency of the Offering

-Importance of HR Management
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GROWTH MILESTONES
 SUPERMARKETS - Apna Bazaar, Nine to Nine,
Food World & margin free shops.

 APPAREL RETAIL - Westside, Wills Lifestyle,

Shopper’s Stop, Pantaloons, Ebony & Globus.

 HOMEIMPROVEMENT RETAIL STORES -Gautier,

Wonder Living, Bombay Bazaar.

 REGIONAL RETAILERS - Vishal Megamart, Adani,

Crossword, Nilgiris, Kemps Chain, & Landmark.
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Food Retailers
 Haldirams
 Baskin Robins
 Domino’s Pizza
 Subway India
 Vadilal
 KFC
 Ruby Tuesday

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Service Retailers
 VLCC Healthcare
 ADLABS
 GATI
 Air Hostess Academy
 Lakme Beauty Saloon
 Aptech Computer Education
 Rent a Car
 Blue Dart

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GROWTH MILESTONES
 BUSINESS HOUSES - Wadia, Godrej, Tata,
Hero.

 SHOPPING MALLS - food & apparel chains,

consumer durables & multiplex operators.

 SHOPPING MALL DEVELOPMENT – TDI,

Parsavnath etc.

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 Organized Retail Models
Retailer Segment Business Strategy
Subhiksha Value Low-price high-volume strategy: by keeping
no fancy frills front-end and by becoming
an intermediary at the back end,
Subhiksha leverages on discounted
prices on bulk purchases and cash
payments.

Trent Limited Lifestyle & Single- brand strategy: leverages on

Value high margins in private labels, and
targets consumers in socio-economic
class B and C.

Future Group: Lifestyle & Strategic JVs and subsidiaries around

PRIL Value retail has enabled PRIL to develop
retailing across age groups, all
product categories, the entire
customer segments under multiple
retail formats.
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 Organized Retail Models
Retailer Segment Business Strategy

ITC Choupal Value Backward integration through IT-based

Sagar & Choupal business model: leverages by building
Fresh direct relationship with the supply
source, the farmers, to sell as well as
purchase products and services.
Spencer’s Retail Value The “duck and the duckling” model: by
having two- or three- value segment
stores, backed by a cluster of small-
sized Fresh, Daily, and Express stores,
to leverage on economies of scale at
back-end value chain.

NDDB: Mother Value Operates on a co-operative model with the

Dairy objective of increasing farmers’ welfare.
Has a strong presence in Delhi’s NCR
region. Strategically located in
residential areas and follows a low-price
strategy for fruit and Vegetables
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Key Growth Drivers of Retail in India
 Changing Demographics:
 Working Population:
 Younger workforce
 Rising Income
 Changing Role of Women:
 Usage of plastic money
 Outsourcing
 Consumer Expectations
 Consumer Lifestyle
 Changing Attitudes
 Increasing spending of Rural
Consumers
 Explosion of Media
 Establishment of Supply
Chain
 Entry of foreign brands in
India
 Entry of India big business
houses
 Change in Scale of
Operations
 New Entrepreneurs
 Technological Impact
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 Regulatory Framework
 There had been no specific restrictions on the entry of
foreign retailers into the Indian market till 1996. A
few foreign players were granted permission for
retailing under this earlier regime.
 In January 2006, however, a partial liberalization
took place in policy in which foreign companies are
allowed to own up to 51 per cent in single-brand
retail JVs as approved by the Foreign Investment
Promotion Board (FIPB).

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 Regulatory Framework
 Besides this, foreign companies are allowed in
wholesale cash-and-carry business and export trading
with 100 per cent equity through the automatic route.
Foreign companies with 100 per cent equity can also
carry out trading of items sourced from the small-
scale sector and do test marketing of products for
which the company has a manufacturing approval
under the FIPB route.

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 Regulatory Framework
 With regard to domestic regulation, the organized retailer
has to secure a number of licenses and clearances from
various central, state, and local authorities before it starts its
operations.
 The number of licenses varies from state to state and it also depends on
the type of store format.
 First, a retailer has to obtain a trade license from the local authority
(municipal corporation, municipality, or panchayat) which grants
permission to carry on the retail business.
 It has also to obtain licenses from the Agricultural Produce Marketing
Committees (APMCs) of each state for procurement and sale of fruit,
vegetables, and staples within the respective market areas (mandis) of
each APMC.

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 Regulatory Framework
 In addition, in case a new building or mall is to be
constructed for use in retailing, the organized retailer
has to obtain “no objection certificates” (NOCs)
from the different state authorities in charge of
traffic, electricity, water, fire and pollution control.
 Zoning restrictions are also applicable to the
organized retail outlets which can be set up only on
land earmarked for the local authority for
commercial establishments.

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 Entrepreneurial Opportunities

 Sam Walton - Founder of Walmart

 Kishore Biyani - CEO, Future Group
 Jeff Bezos - Founder, Amazon.com
 Donald Fisher - The Gap
 Dave Thomas - Wendy’s

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