Retail Management
Anindo
“There are two kinds of companies, those that work to try to charge
more and those that work to charge less. We will be the second.”
Jeff Bezos
What is Retailing?
• Retailing encompasses the business activities involved in selling goods and services
to consumers for their personal, family, or household use. It includes every sale to
the final consumer—ranging from cars to apparel to meals at restaurants to movie
tickets. Retailing is the last stage in the distribution process from supplier to
consumer. (Berman & Evans)
• Retailing is the set of business activities that adds value to the products and services
sold to consumers for their personal or family use. (Levy & Weitz)
Retailer and its Role in Supply Chain
• A retailer is a business that sells products and/or services to
consumers for their personal or family use. Retailers are a key
component in a supply chain that links manufacturers to consumers.
Key issues for Retailers to Adapt
• Better Service: How can we better serve our customers while earning a
fair profit?
• Differentiate: How can we stand out in a highly competitive
environment where consumers have so many choices?
• Coordination: How can we better coordinate our merchandising,
pricing, and service strategy across all our channels when costs, profit
margins, and target segments differ across the channels?
• Customer-centricity: How can we grow our business while retaining a
core of loyal customers?
Indian Retail Industry
• 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 eight% of the employment. India is the world’s fifth-largest global
destination in the retail space.
• As per Kearney Research, India’s retail industry is projected to grow at a slower pace of 9% over 2019-2030, from US$ 779 billion in 2019 to
US$ 1,407 billion by 2026 and more than US$ 1.8 trillion by 2030.
• Organised retail penetration is expected to increase to 18 per cent in 2021 from an estimated 9 per cent in 2017.
• According to the Retailers Association of India (RAI), the retail industry achieved 93% of pre-COVID sales in February 2021; consumer durables
and quick service restaurants (QSR) increased by 15% and 18% respectively.
• According to India Ratings and Research (Ind-Ra), domestic organised food and grocery retailers are expected to increase by 10% YoY in FY22,
with organised retailers and e-commerce likely to benefit from the ongoing demand for essentials.
• India is expected to become the world's third-largest consumer economy, reaching Rs. 27.95 lakh crore (US$ 400 billion) in consumption by 2025.
^Increasing participation from foreign and private players has given a boost to Indian retail industry. India’s price competitiveness attracts large
retail players to use it as a sourcing base. Global retailers such as Walmart, GAP, Tesco and JC Penney are increasing their sourcing from India and
are moving from third-party buying offices to establishing their own wholly owned/wholly managed sourcing and buying offices in India.
• E-Retail has been a boon during the pandemic and according to a report by Bain & Company in association with Flipkart ‘How India Shops
Online 2021’ the e-retail market is expected to grow to US$ 120-140 billion by FY26, increasing at approximately 25-30% p.a. over the next 5
years. India has the third-highest number of e-retail shoppers (only behind China, the US).
• Healthy economic growth, changing demographic profile, increasing disposable income, urbanisation, changing consumer tastes and preferences
are some of the factors driving growth in the organised retail market in India.
(Source: IBEF Report 2022)
Source: McKinsey India Ascent Report 2016
Source: Cushman & Wakefield 2020 Report
Retail Management Decision Process
Manufacturing, Wholesaling
and Retailing
• Vertical Integration – firm performs more than one set of activities in
the channel
• Ex: retailer invests in wholesaling or manufacturing
• Types:
• Backward Integration
• Forward Integration
Manufacturing, Wholesaling, Manufacturing, Wholesaling and
Retailing
• Backward Integration
• Ex: JCPenney sells Arizona jeans
• Big Bazaar having its apparel
brand FBB
Private Label
Manufacturing, Wholesaling,
Manufacturing, Wholesaling and Retailing
• Forward Integration – manufacturers undertake retailing activities
• Ex: Ralph Lauren (New York Jones, Liz Claiborne)
• Titan (India) – World of Titan
• Large retailers engage in both wholesaling and retailing
• Ex: Wal-Mart, Lowe’s, Safeway,
Dr. Anupamaa S. Brown
Chavan Shoe Company
anupamaa.chavan@nmims.ac.in
How Retailers Add Value - Functions
• Provide Assortment
Buy other products at the same time
• Break Bulk
Buy it in quantities customers want
• Hold Inventory
Buy it at a convenient place when you want it
• Offer Services
See it before you buy; get credit; layaway
• Increasing the Value of Products and Services
By providing assortments, breaking bulk, holding inventory, and providing services, retailers
increase the value that consumers receive from their products and services.
Dr. Anupamaa S. Chavan
anupamaa.chavan@nmims.ac.in
Growth Drivers for Retail
• Top 20 Global Retailers:
Retail Scenario – (Global) FY- 2016
Source- Deloitte
Source- Deloitte
Emerging Retail Markets
New Entrants
Indian Retail Scenario : Source- Indian Brand Equity Foundation
videoplayback (1).
Indian Retail Scenario Source IBEF
Dr. Anupamaa S. Chavan
anupamaa.chavan@nmims.ac.in
Indian Retail Scenario---Source IBEF
Indian Retail Scenario : Source IBEF
Dr. Anupamaa S. Chavan
anupamaa.chavan@nmims.ac.in
Key Players in Organised Market in India
MAJOR RETAIL PLAYERS IN INDIAN MARKET:
• Future Group: Big Bazaar, Food Bazaar, Ezone, Future Bazaar, Central;
Hypercity
• K Raheja Group: Shopper’s Stop, Inorbit, Crossword
• Tata Group: Tanishq, Titan, West Side, Titan Eye, West Land
• RPG Group: Spencer’s Retail
• Landmark Group: Lifestyle (Headquaters in Dubai, tapping tier2 cities)
• Reliance: Reliance fresh, Reliance Digital, Reliance Jewels, Reliance Retail
• AV Birla Group: R Mall Thane, More Store
• Subhiksha – Shut down
Dr. Anupamaa S. Chavan
anupamaa.chavan@nmims.ac.in
CHALLENGES TO RETAIL DEVELOPMENT IN INDIA
• Retail not being recognized
• The high costs of real estate
• Faces very high stamp duties on transfer of property
• Lack of adequate infrastructure
• Multiple and complex regulations/licenses/certifications/taxation system
Foreign Direct Investment (FDI) in Retail
• FDI up to 100% for cash and carry wholesale trading and export trading
• 51 % foreign direct investment in multi-brand retail and 100% foreign
direct investment in single-brand retail
• FDI for E-Commerce Entity:
• Inventory based model of e-commerce
• Marketplace based model of e-commerce
INDIAN RETAIL SET TO BENEFIT FROM
FDI POLICY
TYPES OF RETAILERS
Food Retailers, General Merchandise, Stores, Non-stores
Classification of
Retail Institutions
Characteristics of Food Retailers
Characteristics of General Merchandise Retailers
Food Retailers
Supermarkets
• A conventional supermarket is a large, self-service retail food store offering
groceries, meat, and produce, as well as some non-food items, such as health and
beauty aids and general merchandise. Perishables including meat, produce, baked
goods, and dairy products account for 44 percent of supermarket sales and
typically have higher margins than packaged goods.
• Rather than carrying twenty brands of laundry detergent, limited-assortment
supermarkets offer one or two brands and sizes, one of which is a store brand.
Stores are designed to maximize efficiency and reduce costs.
• Fresh-merchandise categories are the areas around the outer walls of a
supermarket, known as the “power perimeter,” that include the dairy, bakery,
meat, florist, produce, deli, and coffee bar. These departments attract consumers
and are very profitable.
Food Retailers
Supercenters and HyperMarkets
• Supercenters are large stores (185,000 square feet) that combine a supermarket with a
full-line discount store.
• General merchandise (nonfood) items are often purchased on impulse when customers’
primary reason for coming to the supercenter is to buy groceries.
• General merchandise has higher margins, enabling the supercenters to price food items
more aggressively.
• However, supercenters are very large, so some customers find them inconvenient
because it can take a long time to find the items they want.
• Hypermarkets carry a larger proportion of food items than do supercenters and have a
greater emphasis on perishables—produce, meat, fish, and bakery items.
• Supercenters, in contrast, have a larger percentage of nonfood items and focus more on
dry groceries, such as breakfast cereal and canned goods, instead of fresh items.
Food Retailers
Convenience Stores
• Convenience stores provide a limited variety and assortment of merchandise at a
convenient location in 3,000- to 5,000-square-foot stores with speedy checkout.
• Convenience stores enable consumers to make purchases quickly, without having to
search through a large store and wait in a long checkout line. Over half the items
bought are consumed within 30 minutes of purchase.
• To get gasoline customers to spend more on other merchandise and services,
convenience stores are offering more fresh food and healthy fast food that appeal to
today’s on-the-go consumers, especially women and young adults.
• To increase convenience, convenience stores are opening smaller stores close to
where consumers shop and work. For example, 7-Eleven has stores in airports,
office buildings, and schools. Easy access, storefront parking, and quick in-and-out
access are key benefits offered by convenience stores
General Merchandise Retailers
Department Stores
• Department stores are retailers that carry a broad variety and deep assortment, offer customer
services, and organize their stores into distinct departments for displaying merchandise.
• Traditionally, department stores attracted customers by offering a pleasing ambience, attentive
service, and a wide variety of merchandise under one roof. They sold both soft goods (apparel and
bedding) and hard goods (appliances, furniture, and consumer electronics). But now most
department stores focus almost exclusively on soft goods.
• The major departments are women’s, men’s, and children’s apparel, home furnishings, cosmetics,
kitchenware, and small appliances. Each department within the store has a specific selling space
allocated to it, as well as salespeople to assist customers.
• To deal with their eroding market share, department stores are (1) attempting to increase the
amount of exclusive merchandise they sell, (2) undertaking marketing campaigns to develop
strong images for their stores and brands, and (3) expanding their online presence.
Full-line Discount Stores
• Full-line discount stores are retailers that offer a broad variety of merchandise,
limited service, and low prices. Discount stores offer both private labels and
national brands. The largest full-line discount store chains are Walmart, Target,
and Kmart (Sears Holding).
• Full-line discount stores confront intense competition from category specialists
that focus on a single category of merchandise
Specialty Stores
• Specialty stores concentrate on a limited number of complementary merchandise categories and
provide a high level of service.
• Specialty stores tailor their retail strategy toward very specific market segments by offering deep
but narrow assortments and sales associate expertise.
• Some of the fastest-growing specialty store concepts were developed by European retailers. The
Spain-based Zara chain and Sweden’s H&M have introduced cheap and chic “fast fashion”
• Fast-fashion companies introduce new products two to three times a week, compared with 10 to
12 times a year at traditional specialty stores, to ensure that they offer the most trendy and up-to-
date fashions.
• Because of the constantly fresh atmosphere, customers develop a “buy it now” shopping
behavior; next week, the store will have different merchandise. As a result, fast-fashion retailers
actually sell 85 percent of their merchandise at full price compared with only 60 percent at
traditional stores.
Specialty Store Retailers
Category Specialists / Category Killers
• Category specialists are big-box stores that offer a narrow but deep assortment of
merchandise.
• Most category specialists predominantly use a self-service approach, but they
offer assistance to customers in some areas of the stores.
• By offering a complete assortment in a category, category specialists can “kill” a
category of merchandise for other retailers.
• Using their category dominance and buying power, they buy products at low
prices and are ensured of supply when items are scarce.
• Department stores and full-line discount stores located near category specialists
often have to reduce their offerings in the category because consumers are drawn
to the deep assortment and relatively low prices at the category killer.
Examples of Category Specialists
Off-Price Retailers
• Off-price retailers, also known as closeout retailers, offer an inconsistent assortment of brand-
name merchandise at a significant discount off the manufacturers’ suggested retail price (MSRP).
• Off-price retailers are able to sell brand-name and even designer-label merchandise at 20 to 60
percent lower than the MSRP because of their unique buying and merchandising practices.
• Most merchandise is bought opportunistically from manufacturers that have overruns, cancelled
orders, forecasting mistakes, causing excess inventory, close-outs, and irregulars. They also buy
excess inventory from other retailers.
• Due to this opportunistic buying, customers cannot be confident that the same type of merchandise
will be in stock each time they visit the store. Different bargains will be available on each visit.
• A special type of off-price retailer is the outlet store. Outlet stores are off-price retailers owned by
manufacturers or retailers. Those owned by manufacturers are also referred to as factory outlets.
Manufacturers view outlet stores as an opportunity to improve their revenues from irregulars,
production overruns, and merchandise returned by retailers.
Service Retailers
Services retailers are firms that primarily sell services rather than
merchandise and are a large and growing part of the retail industry.
