The distribution of products begins with the producer and ends at the ultimate
consumer. Between the producer and consumer there is a middle man – who is retailer.
Who links the producer and ultimate consumers. The word ‘retail’ is derived from the
French word retailer which means ‘ to cut a piece off’ or to break bulk.
India has often been called a nation of shopkeepers. Presumably the reason for this is;
that, a large number of retail enterprises exist in India. In 2004, there were 12 million
such units of which 98% are small family businesses, utilizing only household labour.
Even among retail enterprises, which employ hired workers, a majority of them use less
than three workers.
The followings are some of the essential characteristics of a retailer:
He is regarded as the last link in the chain of distribution.
He purchases goods in large quantities from the wholesaler and sell in small
quantity to the consumer.
He deals in general products or a variety of merchandise.
He develops personal contact with the consumer.
He aims at providing maximum satisfaction to the consumer.
He has a limited sphere in the market.
Retailers perform a number of functions. These are:
The retailer buys a variety of products from the wholesaler or a number of wholesalers.
He thus performs two functions like buying of goods and assembling of goods.
The retailer performs storing function by stocking the goods for a consumer.
He develops personal contact with the consumers and gives them goods on credit.
He bears the risks in connection with Physical Spoilage of goods and fall in price. Besides
he bears risks on account of fire, theft, deterioration in the quality and spoilage of goods.
He resorts to standardization and grading of goods in such a way that these are
accepted by the customers.
He makes arrangement for delivery of goods and supply valuable market information to
both wholesaler and the consumer.
Home furnishing retailers
Direct Sales Catalog and mail order companies
Some e-commerce businesses
Retailing in India
Retailing in India is one of the pillars of its economy and accounts for 14 to 15
percent of its GDP. The Indian retail market is estimated to be US$ 500 billion and one
of the top five retail markets in the world by economic value. India is one of the fastest
growing retail markets in the world, with 1.2 billion people.
As of 2013, India's retailing industry was essentially owner manned small shops.
In 2010, larger format convenience stores and supermarkets accounted for about 4
percent of the industry, and these were present only in large urban centers. India's retail
and logistics industry employs about 40 million Indians (3.3% of Indian population). As a
major source of employment retailing offers a wide range of career opportunities
including; store management, merchandising and owning a retail business. Until 2011,
Indian central government denied foreign direct investment (FDI) in multi-brand retail,
forbidding foreign groups from any ownership in supermarkets, convenience stores or
any retail outlets.
As the Indian retailing is getting more and more organized various retail formats
are emerging to capture the potential of the market.
Large and small supermarkets
Departmental stores are a few formats which flourishing in the both big and small
As the major cities have made the present retail scenario pleasant, the future of the
Indian Retailing industry lies in the rural regions. Catering to these consumers will bring
tremendous business to brands from every sector. However as the market expands
companies entering India will have to be more cautious with their strategic plans. To tap
into the psyche of consumers with different likes and dislikes and differing budgets a
company has to be well prepared and highly flexible with their product and services.
Regardless of the particular type of retailer (such as a supermarket or a department
store), retailers can be categorized by (a) Ownership, (b) Store strategy mix, and (c)
Non store operations.
1 Form of Ownership
A retail business like any other type of business, can be owned by a sole proprietor,
partners or a corporation. A majority of retail business in India are sole proprietorships
a. Independent Retailer.
Generally operates one outlet and offers personalized service, a convenient location and
close customer contact. Roughly 98% of all the retail businesses in India, are managed
and run by independents, including barber shops, drycleaners, furniture stores,
bookshops, LPG Gas Agencies and neighborhood stores. This is due to the fact that
entry into retailing is easy and it requires low investment and little technical knowledge.
This obviously results in a high degree of competition. Most independent retailers fail
because of the ease of entry, poor management skills and inadequate resources.
b. Retail Chain
It involves common ownership of multiple units. In such units, the purchasing and
decision making are centralized. Chains often rely on, specialization, standardization and
elaborate control- systems. Consequently chains are able to serve a large dispersed
target market and maintain a well known company name. Chain stores have been
successful, mainly because they have the opportunity to take advantage of "economies
of scale" in buying and selling goods. They can maintain their prices, thus increasing
their margins, or they can cut prices and attract greater sales volume. Unlike smaller,
independent retailers with lesser financial means, they can also take advantage of such
tools as computers and information technology.
c. Retail Franchising
Is a contractual arrangement between a "franchiser" (which may be a
manufacturer, wholesaler, or a service sponsor) and a "franchisee" or franchisees, which
allows the latter to conduct a certain form of business under an established name and
according to a specific set of rules. The franchise agreement gives the franchiser much
discretion in controlling the operations of small retailers. In exchange for fees, royalties
and a share of the profits, the franchiser offers assistance and very often supplies as
well. Classic examples of franchising KR Bakery, Famous bakery and opus bakery.
A retail cooperative is a group of independent retailers, that have combined their
financial resources and their expertise in order to effectively control their wholesaling
needs. They share purchases, storage, shopping facilities, advertising planning and other
functions. The individual retailers retain their independence, but agree on broad common
policies. Amul and milma are typical example of a cooperative in India.
Store Strategy Mix
Retailers can be classified by retail store strategy mix, which is an integrated
combination of hours, location, assortment, service, advertising, and prices etc. The
various categories are:
a. Convenience Store: Is generally a well situated, food oriented store with long
operating house and a limited number of items. Consumers use a convenience store; for
fill in items such as bread, milk, eggs, chocolates and candy etc.
b. Super markets: Is a diversified store which sells a broad range of food and non food
items. A supermarket typically carries small house hold appliances, some apparel items,
bakery, film developing, jams, pickles, books, audio/video CD's etc.
c. Department Stores: A department store usually sells a general line of apparel for the
family, household linens, home furnishings and appliances. Large format apparel
department stores include Pantaloon, Ebony and Pyramid. Others in this category are:
Shoppers Stop and Westside.
d. Speciality Store: Concentrates on the sale of a single line of products or
services, such as Audio equipment, Jewellery, Beauty and Health Care, etc. Consumers
are not confronted with racks of unrelated merchandise. Successful speciality stores in
India include, Music World for audio needs, Tanishq for jewellery and McDonalds, Pizza
Hut and Nirula's for food services.
Hyper Markets: Is a special kind of combination store which integrates an economy
super market with a discount department store. A hyper market generally has an
ambience which attracts the family as whole. LULU hypermarket is good example of
3 Non Store Retailing
In non store retailing, customers do not go to a store to buy. This type of retailing is
growing very fast. Among the reasons are; the ability to buy merchandise not available
in local stores, the increasing number of women workers, and the presence of unskilled
retail sales persons who cannot provide information to help shoppers make buying
The major types of non store retailing are:
a. In Home Retailing: Where, a sales transaction takes place in a home setting -
including door-door selling. It gives the sales person an opportunity to demonstrate
products in a very personal manner. He/ She has the prospect's attention and there are
fewer distractions as compared to a store setting. Examples of in home retailing include,
Eureka Forbes vacuum cleaners and water filters.
b. Telesales/Telephone Retailing: This involves contact between the prospect and the
retailer over the phone, for the purpose of making a sale or purchase. A large number of
mobile phone service providers use this method. Other examples are private insurance
companies, and credit companies etc.
c. Catalog Retailing: This is a type of non store retailing in which the retailers offers the
merchandise in a catalogue, which includes ordering instructions and customer orders by
mail. The basic attraction for shoppers is convenience. The advantages to the retailers
include lover operating costs, lower rents, smaller sales staff and absence of shop lifting.
This trend is catching up fast in India.
d. Direct Response Retailing: Here the marketers advertise these products/ services in
magazines, newspapers, radio and/or television offering an address or telephone number
so that consumers can write or call to place an order. It is also sometimes referred to as
"Direct response advertising." The availability of credit cards and toll free numbers
stimulate direct response by telephone. The goal is to induce the customer to make an
immediate and direct response to the advertisement to "order now." Telebrands is a
classic example of direct response retailing. Times shopping India is another example.
e. Automatic Vending: Although in a very nascent stage in India, is the ultimate in non
personal, non store retailing. Products are sold directly to customers/buyers from
machines. These machines dispense products which enable customers to buy after
closing hours. ATM's dispensing cash at odd hours represent this form of non store
retailing. Apart from all the multinational banks, a large number of Indian banks also
provide ATM services, countrywide.
f. Electronic Retailing/E-Tailing: Is a retail format in which retailers communicate with
customers and offer products and services for sale, over the internet. The rapid diffusion
of internet access and usage, and the perceived low cost of entry has stimulated the
creation of thousands of entrepreneurial electronic retailing ventures during the last 10
years or so. Flipcart, Amazon.com, E-bay and Bazee.com HDFCSec.com are some of the
many e-tailors operating today.
Wheel of retailing
According to this theory new retailers enter the market as, low margin, low price,
low status institutions. The cycle begins with retailers attracting customers by offering
low price and low service. Over a period of time these retailers want to expand their
markets and begin to stock more merchandise, provide more services, and open more
convenient locations. This trading up process. increases the retailers costs and prices,
creating opportunities for new low price retailers to enter the market. The evolution of
the department store illustrates the "wheel of retailing" theory. In its entry phase, the
department store was a low cost-low service venture. With time it moved up into the
trading-up phase. It upgraded its facilities, stock selection, advertising and service. The
same department store then moves into the vulnerability phase, because it becomes
vulnerable to low cost/low service formats, such as full line discount stores and category
specialists Wheel of retailing
There are many factors for retailers to consider while developing and implementing their
marketing plans. Among the major retailing decisions are these related to
(a) Target markets
(b) Merchandise management
(c) Store location
(d) Store image
(e) Store personnel
(f) Store design
(g) Promotion, and
(h) Credit and collections.
Target Markets: Although retailers normally aim at the mass market, a growing number
are engaging in marketing research and market segmentation, because they are finding
it increasingly difficult to satisfy everyone. Through a careful definition of target markets,
retailers can use their resources and capabilities to position themselves more effectively
and achieve differential advantage. The tremendous growth in number of speciality
stores in recent years is largely due to their ability to define precisely the type of
customers, they want to serve.
Merchandise Management: The objective here is to identify the merchandise that
customers want, and make it available at the right price, in the right place at the right
time. Merchandise Management includes (i) merchandise planning (ii) merchandise
purchase, and (iii) merchandise control. Merchandise planning deals with decisions
relating to the breadth and depth of the mix, needed to satisfy target customers to
achieve the retailers return on investment. This involves sales forecasting, inventory
requirements, decisions regarding gross margins and mark ups etc. Merchandise buying
involves decisions relating to centralized or decentralized buying, merchandise resources
and negotiation with suppliers. Merchandise Control: deals with maintaining the proper
level of inventory and protecting it against shrinkage (theft, pilferage etc.).
Store Location: Location is critical to the success of a retail store. A store's trading-area
is the area surrounding the store from which the outlet draws a majority of its
customers. The extent of this area depends upon the merchandise sold. For example
some people might be willing to travel a longer distance to shop at a speciality store
because of the unique and prestigious merchandise offered. Having decided on the
trading area a specific site must then be selected. Factors affecting the site include,
traffic patterns, accessibility, competitors' location, availability and cost and population
shifts within the area.
Store Image: A store image is the mental picture, or personality of the store, a retailer
likes to project to customers. Image is affected by advertising, services; store layout,
personnel, as well as the quality, depth and breadth of merchandise. Customers tend to
shop in stores that fit their images of themselves. Store Personnel: Sales personnel at a
retail store can help build customer
loyalty and store image. A major complaint in many lanes of retailing, is the
poor attitude of a salesperson. There is a growing trend now, to provide training to,
these sales clerks to convert them from order takers to effective sales associates.
Store Design: A store's exterior and interior design affect its image and profit potential.
The exterior should be attractive and inviting and should blend with the store's general
surroundings. The term "Atmospherics" is used to refer to the retailer's effort at creating
the right ambience. Merchandise display is equally important. An effective layout guides
the customer though the various sections in the store and facilitates purchase.
Promotion: retail promotion includes all communication from retailers to consumers and
between sales people and customers. The objective is to build the stores image, promote
customer traffic, and sell specific products. It includes, both, personal and non personal
promotion. Personal communication is personal selling - the face to face interaction
between the buyer and the seller. Department stores and speciality stores, emphasize
this form of promotion. Non personal promotion is advertising. The media used are TV,
Radio, Newspapers, Outdoor displays and direct mail, other forms of promotion include,
displays, special sales etc.
Credits & Collections: Retailers are generally wary of providing credit, because of
additional costs-financing accounts receivables, processing forms and bad debts etc. But
many customers prefer some form of credit while purchasing. This explains the
popularity of different types of credit cards and debit cards.
Vertical marketing system
A vertical marketing system (VMS) is one in which the main members of a
distribution channel—producer, wholesaler, and retailer—work together as a unified group in order to meet consumer needs. In conventional marketing systems, producers,
wholesalers, and retailers are separate businesses that are all trying to maximize their
profits. When the effort of one channel member to maximize profits comes at the expense of other members, conflicts can arise that reduce profits for the entire channel. To address this problem, more and more companies are forming vertical marketing systems.
Vertical marketing systems can take several forms. In a corporate VMS, one member of
the distribution channel owns the other members. Although they are owned jointly, each
company in the chain continues to perform a separate task. In an administered VMS, one member of the channel is large and powerful enough to coordinate the activities of the other members without an ownership stake. Finally, a contractual VMS consists of
independent firms joined together by contract for their mutual benefit. One type of
contractual VMS is a retailer cooperative, in which a group of retailers buy from a jointly
owned wholesaler. Another type of contractual VMS is a franchise organization, in which a producer licenses a wholesaler to distribute its products.
The concept behind vertical marketing systems is similar to vertical integration. In vertical integration, a company expands its operations by assuming the activities of the next link in the chain of distribution. For example, an auto parts supplier might practice forward integration by purchasing a retail outlet to sell its products. Similarly, the auto parts supplier might practice backward integration by purchasing a steel plant to obtain the raw materials needed to manufacture its products. Vertical marketing should not be confused with horizontal marketing, in which members at the same level in a channel of distribution band together in strategic alliances or joint ventures to exploit a new marketing opportunity.