Retailing: meaning and Concept

Retailing is defined as a 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
consumer with supplies of all the manufacturers. Retailing has
become such an intrinsic part of our everyday lives that it is
often taken for granted. The nations that have enjoyed the
greatest economic and social progress have been those with a
strong retail sector. The word ‘retail’ is derived from the
French word retaillier, meaning ‘to cut a piece of’ or ‘to break
bulk’. Retailing has become such an intrinsic part of our
everyday lives that it is often taken for granted. The nations
that have enjoyed the greatest economic and social progress
have been those with a strong retail sector.
A retailer is a person, agent, agency,
company, or organization, which is instrumental in reaching
the goods, merchandise, or services to the ultimate consumer.
Retailers perform specific activities, such as anticipating
customers’ wants, developing assortments of products,
acquiring market information, and financing. A common
perception is that retailing involves only the sale of products
in stores.
However, it also includes the sale of services
such as those offered at a restaurant, parlour, or by car rental
agencies. The selling need not necessarily take place through
a store. Retailing encompasses selling through the mail, the
Internet, door- to-door visits—any channel that could be used
to approach the consumer. When manufacturers like Dell
Computers sell directly to the consumer, they too become
retailers.
The world over retail business is dominated by small family-
run chains and regionally targeted stores. Gradually more and
more markets in the Western world are being taken over by
billion-dollar multinational conglomerates, such as Wal-Mart,
Sears, McDonald’s, and Marks and Spencer.
The larger retailers have set up huge supply or distribution
chains, inventory management systems, financing pacts, and
wide- scale marketing plans, which have allowed them to
provide better services at competitive prices by achieving
economies of scale.
A retailer’s cost and profit varies depending on their type of
operation and major product line. They usually manage a
profit of 9-10 per cent on their sales. Retail stores of different
sizes face distinct challenges and their sales volume
influences business opportunities, merchandise purchase
policies, nature of promotion, and expense control measures.

Components of Retailing
The retailing concept covers four broad areas and is an
essential part of the retailing strategy:
• Customer Orientation – The retailer makes a careful
study of the needs of the customer and attempts to satisfy
those needs.

• Goal Orientation – The retailer has clear cut goals and

devises strategies to achieve those goals.

• Value Driven Approach – The retailer offers good

value to the consumer with merchandise having the price
and quality appropriate for the target market.

• Coordinated Effort – Every activity of the firm is

aligned to the goal and is designed to maximize its
efficiency and deliver value to the consumer.
 Features of Retailing
The retailing concept, though simple to adopt is not followed
by many retailers who neglect one or more of the points
enumerated above. There must be a proper balance of all the
aspects of this concept for the retailer to achieve success. The
retailing concept, while important is limited by its nature as it
does not cover the firm’s internal capabilities or the
competitiveness of the external environment. The followings
important features of retailing come into light:

• Retailing is essentially an economic activity.

• It includes sales of goods as well as services.
• It involves earning profits through customer satisfaction
and retention.
• It aims at increasing the number of customers.
• It is very dynamic by nature.
• It is customer oriented.
• It involves lesser quantity in terms of the goods sold.
• It involves personal touch with the customer.
• It is the last link in the distribution channel.
• It attracts customers by using various methods such as
discounts, vouchers, lucky draw schemes, coupons, etc.
• It includes the customers who buy the articles for non-
business purposes.

Retailing:Characteristics of Retailing and

Retailers
• There is direct end-user interaction in retailing.
• It is the only point in the value chain to provide a
platform for promotions.
• Sales at the retail level are generally in smaller unit sizes.
• Location is a critical factor in retail business.
• In most retail businesses services are as important as core
products.
• There are a larger number of retail units compared to
other members of the value chain. This occurs primarily
to meet the requirements of geographical coverage and
population density.

Characteristics of Retailing and Retailers

• Retailing brings goods and services closer to the

consumers
• A Retailer is the last link in the distribution channel
• Retailers buy in large quantities but sell in individual
units
• There are large number of retailers as compared to
manufacturers and wholesalers
• Retailing can be organised (branded chain stores) or un-
organised (that is normal stores that we find in our
neighbourhood)
• Retailing provides a direct contact with the customers
• Retailing is the function that keeps an eye on the pulse of
the customers
• Retailing can also be done through online stores, and
• Provides a variety of products at a single place.

Retailing :6 Main Features

• Sale to the final consumer – The most important

characteristic of retailing is that it involves the sale of the
product or service to the final consumer.
 • Various channels – In retailing the goods and services
can be sold either in person, through mail, through
telephone, through vending machines or the internet.
• Small order size – The order size handled by a retailer is
much smaller as compared to the wholesaler.
• Large number of orders – The retailer handles a large
number of orders.
• Wide variety of customers – The retailer handles a wide
variety of customers.
• Keeps a large assortment of goods – The retailer keeps
a wide variety of goods.

Evolution of Retailing
Retailing has been a very old phenomenon. It can be traced
back to the time when trade began. Goods were sold either in
some marketplaces or they were sold in small quantities by
some peddlers. In the medieval times trade was dependent on
local sources since there was hardly any mode of
transportation and thus, they used to be limited to close by
places. For the products that are regarded as specialty,
customers travelled quite a distance.
Even in prehistoric times, people travelled much space in
order to arrange the merchandise in the areas where goods or
products are less or short in supply. Products of basic and
outmost necessary were provided by peddlers. Centuries after
centuries, there was flourishment of retail market in top towns
and cities globally, providing huge variety of merchandise
worldwide? It is believed that in the seventeenth century the
flea market (original) started in the suburbs of Paris as
Marche’ aux paces.
The area or place in which sellers sold their merchandise in
earlier days as global flea market developed into congregation
of retail. There is evidence that retailing existed in ancient
Greece, and in its cities like Troy. At that time also retailing
catered to the need of those societies. People of that time were
called entrepreneur, since they converted the need and want of
societies into opportunities to earn sufficient profits.
We can find the evolution of retail business in the Indian
subcontinent with the formation of a store of kirana type as
well as a store of mom and pop type. Traditional outlets are
used by local people for daily use items. KVIC with
government’s help, have many rural retailing and indigenous
franchise stores. There were few companies which started
their chains of retail business. As time passes, new entrants
entered into market from manufacturing to pure retailing unit.
After 1990, different retail outlets such as Foodworld, Planet
M and Music World and Crossword had made their presence
in the market.
After that, the concept of hypermarket and supermarket
evolved. Customers had global experience in the shopping
malls in the towns and urban centres. The evolution of
retailing sector resulted into continuous improvement in the
supply chain management (SCM), distribution channels,
technological advancement as well as backend operations
which resulted into more and more mergers and acquisitions
and huge investments.

Major environmental factors affecting retailing

• Changes in the consumer character-Demographic, e.g.
population age changes, social, e.g. product and service
preferences, economic, e.g. changes in real incomes.

• Changes in technology, e.g. greater ownership, use of

motorcars, food freezers, and microwave ovens.

• Changes in competition, i.e. changes in the levels of

competitive strength within the areas of influence.
 Major Functions of Retailing
Retailing constitutes the final link in the distributive chain.
Therefore, it is responsible for the performance of several
important marketing functions. Some of these functions are:
• Assembling of goods from various wholesalers.
• The physical movement and storage of goods for the
supply to the final consumers to meet their needs and
requirements.
• The providing information concerning the nature and use
of goods to the wholesalers and producers. It also inform
as about the market trend.
• The standardisation, grading and final processing of
goods which have been left in graded or unstandardised
by wholesalers.
• The provision of ready availability of goods of various
qualities and of various manufacturers.
• The assumption of risk concerning the price, nature and
extent of demand of goods as long as they remain unsold.
• The financing of inventory and the extension of credit to
consumers for a short period.

Importance of Retailing in India

• A big part of our personal income is spent on retail
goods.
• It is a major source of employment.
• In the distribution system, retail is the link to the ultimate
consumers.
• The level of retail sales indicates the consumer’s
purchasing power; thus, it becomes the basis for
determining the economic status of the people of a
country.
 • It adds value to the product because it creates time, place
and possession utility.
• It accounts for a major portion of marketing costs.
• Taxes from retail store add income to our national
treasury.
Retailing – Importance of Retailing in Indian
Economy
The retail sector is particularly important because retailing is
the final link in the chain of production which begins at the
extractive stages, moves through the manufacturing processes
and ends by the distribution of goods (and services) to the
final consumer.
Retailing accounts for about 15-20% of the organized
workforce in any developed economy. It is the second largest
employer in the India after agriculture. There are about 6
million retail establishment in India. Of which, 4.1 million
(70%) sell food products, and related items. An interesting
research in this area has shown that grocery stores (56% of all
retail outlets) and general stores (13%) dominate rural India.
There are 1.8 million retail outlets in urban India. Of which
more than 50% earn between Rs. 7,500.00 to Rs. 25,000.00
daily. Approximately 6.6% of urban adults in India are shop
owners. There are about 21% outlets in urban area engaged in
service retailing. Though no official data is available, the
given above figure indicate that this sector may be employing
about 15-20% of the organized work force, which is in line
with global averages.
Retailing accounts for an impressive part of Gross Domestic
Product (GDP). The year 1997 – 1999 has been a slowdown
in economic growth with the GDP growth rate pegged at 4 to
5 %. Total retail sales in India reached Rs. 5793 billion in
1996 representing around 53% of GDP and 69% of consumer
expenditure. Retail sales per capita was Rs. 6297 in 1996.
In India, if private final expenditure is taken as an indicator,
the total retail trade in India could be about Rs. 700,000- Rs.
800,000 crores or USS 160-180 billion (excluding fuels).
In India, organised retailing is a relatively new concept, still
organised retailing accounts for approximately Rs. 13,300
Crores. It is expected to grow at 28% rate becoming Rs.
45000 Crores by 2005. The turnover of India’s biggest retailer
Shoppers’ Stop is about Rs. 210 crores annually.
Retailing is also important, as it is an important tax collection
point for the government.
There are number of small shops and stores in a suburban
location. The area is dominated by middle class and upper
middle class service employees. A super market chain opened
a store in that area with the supply of fast-moving consumer
goods (FMGCs). The resident of the area was used to shop at
the local stores and were hesitant to enter the posh looking
supermarket. Later on, when they realized that the same
products are available in the supermarket at cheaper rate, they
started visiting the supermarket. Within a year, the
supermarket got good hold of the market and the sales
increased by almost 200% from the initial months.
Trends of Retailing in India
• Shift from Unorganized to Organized Retailing:
Retailing in India is thoroughly unorganized. There is no
supply chain management perspective. The key factors
that drive the growth of organized retailing in India are
higher disposable incomes, rising urbanization, growing
consumerism, nuclear family structure, growing number
of educated and employed women population.
• Store Design: Irrespective of the format, the biggest
challenge for organized retailing is to create an
environment that pulls in people and makes them spend
 more time in shopping and also increases the amount of
impulse shopping.
• Competition -Competition is increasing between
different types of retailers. Discount stores, departmental
stores, supermarkets, etc. all compete for the same
customers. The small independent retailers survive by
providing personal services to the customers.

• New Form of Retailing: Modem malls made their entry

into India in the late 1990s, with the establishment of
Crossroads in Mumbai and Ansal Plaza in Delhi. India’s
first true shopping mall, ‘Crossroads’—complete with
food courts, recreation facilities and large car parking
space—was inaugurated as late as 1999 in Mumbai.
Malls have given a new dimension to shopping
experience.

• Technology: Technology today has become a

competitive tool. It is the technology that helps the
organized retailer to score over the unorganized players,
giving both cost and service advantages. Technology has
also made possible the growth of non-store retailing.
• Consumer Buying Behaviour: In India, there are no
uniform trends with respect to consumer buying
behaviour. There are visible differences in the shopping
pattern of consumers across income segments. Organized
retailing has definitely made headway in the upper class.
• Entertainment: Modem retail formats provide a place
for people to assemble, and a means of entertainment, by
providing facilities such as food courts, mini theatre,
children’s play spaces and coffee shops. These facilities
help the customers enjoy shopping.
Factors behind the change of Indian Retail Industry
• Raising incomes and improvements in infrastructure are
enlarging consumer markets an accelerating the
convergence of consumer tastes
• Liberalisation of the Indian Economy
• Increase in spending per capita income
• Advent of dual income familiar also helps in the growth
of retailer sector
• Shift in consumer demand to foreign brands like
McDonald, Sony, Panasonic, etc.
• Consumer preference for shopping in new environs
• The Internet revolution is making the Indian consumer
more accessible to the growing influence of domestic and
foreign retail chains. Reach of satellite T.V. channel is
helping in creating awareness about global products for
local markets
• About 47% of India’s young population, which is
technology savvy, watch more than 50 TV satellite
channels and display the highest propensity to spend,
will immensely contribute to the growth of the retail
sector in the country by 2015
• Availability of quality real estate and mall management
practices foreign companies’ attraction to India is the
billion-plus population

Retail Formats
• Store Based: Store based formats can be further
classified into two formats based on the basis of
Ownership or Merchandise offered.
• Non Store Based Classification: Non Store retail
organizations focus on establishing direct contact with
the consumer. This may be both personal (direct personal
 selling) and nonpersonal TV, the Internet, mail, catalog
or phone).
• Service Based Classification: Such retailers specialize
in providing different kinds of services to the end
consumer. The services can be classified as Banking
Services, Rentals, Electricity, cooking gas, etc. Various
factors like quality of service, how much customization
can be provided for meeting the client specific
requirements, the uniqueness of the service and delivery
within the timelines, usage of innovative technology, etc,
are given importance for determining the success of
service.

Classification of Retailers on the Basis of Ownership

• Sole Proprietorship: This constitutes the majority as
many small business ventures start on a sole
proprietorship basis only. In the case of sole
proprietorship, the ownership of the business exists with
a single person, usually the one who is responsible for
the day to day affairs of running the business.
• Partnership: This is also one of the most common
business formats in India. In Partnership form of
business, the ownership is shared between two or more
people for running the business.
• Joint Venture: A Joint venture involves the creation of a
third or a new entity due to collaboration between two or
more than two parties, with an agreement to manage the
business operations in a particular area by combining
their resources and sharing their profits as per the well-
defined terms and conditions of the contract.
Difference between Product and Service Retailing
Products are tangible in nature, whereas services are
intangible in nature. Hence, various aspects such as quality,
timeliness, behaviour, and knowledge of the service delivery
professional, service customizations as per the requirement of
the customer and use of technological support for improving
key processes and enhancing the consumer experience, etc
play a crucial role in determining the success of an
organization involved in services.
• In the case of Product Retailing, the governing
factors are the cost as well as the quality of the
products. On the other hand, in the case of service
retailing the factors which determine the success of
services are timeliness and the overall attitude and
conduct of the service providers.
• In Product Retailing the relationship between the
consumer and the retailer is developed only when the
consumer pays frequent visits to the outlets. On the
other hand, in the case of relationship, the
relationship between the customer and the service
provider is established from the start itself.
• Products are tangible and can be very well stored,
whereas, services cannot be stored due to its
intangibility.
• Another factor which distinguishes product retailing
from service retailing is standardization.
Standardization is possible in case of product
retailing but not possible in case of service retailing
due to the human element involved in the delivery of
services.
• Transfer of ownership is possible in case of product
retailing but not for service retailing. Once the
 product is purchased by the consumer, the ownership
of the product gets transferred from the retailer to the
consumer. But, in the case of service retailing the
consumers are only the end users of the services but
the ownership remains with the service providers.
Store based retailer:
A. On the basis of ownership:
1. Independent retailer: An independent retailer is one who
owns and operates only one retail outlet. Such stores can be
seen under proprietorship. The individual retailer can easily
enter into a retail market. The owner is assisted by local staff
or his family members. These kinds of shops are passed from
one generation to other generation. The independent retailer
maintains a good relationship with the customers. Small scale
retail business: Single owners can easily start and manage
small business units profitably with the help of one or two
assistants. It can be a grocery store, stationery shop, or a cloth
store, etc.
2. A chain retailer: When two or more retail outlets are under
a common ownership it is called a retail chain. For example:
One of a number of retail stores under the same ownership
and dealing in the same merchandise. It is called chain
retailing.
Chain Stores are groups of retail stores engaged in the same
general field of business that operate under the same
ownership or management, chain stores are retail outlets
owned by one firm and spread nationwide. For example, Van
Heusen, Food world, Shopper’s stop etc.
3. Franchise: A franchise is a contractual agreement between
franchisor and a franchisee in which the franchisor allows the
franchisee to conduct a business under an established name as
per the business format. In return the franchisee has to pay a
fee to the franchiser. For example: Pizza hut, McDonalds, etc.
4. Leased Department: These are also known as Shop in
Shops. When a section or a department in a retail store is
rented to the outside party it is called leased department. The
licensor permits the licensee to use the property and in turn
the licensee pays a fee to the licensor for using his property.
5. Consumer Co-operatives: A consumer co-operative is a
retail organisation owned by its member customers. The
objective is to provide commodities at a reasonable price. For
example: Sahakari Bhandar, Apna Bazaar etc.

On the Basis of Merchandise offered

1. Departmental Stores: A departmental store is a large scale
retail institution that offers several products from a pin to
plane such as clothing, grocery etc. Retail establishment that
sells a wide variety of goods. Departmental stores are the
largest form of organized retailing today, located mainly in
metro cities, in proximity to urban outskirts. They lend an
ideal shopping experience with an amalgamation of product,
service and entertainment, all under a common roof.
Examples include Shoppers Stop, Piramyd, Pantaloon.
2. Convenience stores: These are relatively small stores
located near the residential area. They offer limited line of
convenient products such A ` store is a small store or shop
that sells items such as candy, ice-cream, soft drinks, lottery
tickets, cigarettes and other tobacco products, newspapers and
magazines, along with a selection of processed food and
perhaps some groceries, etc. Such stores enable the customers
to make quick purchase and offer them few services. They
stock a limited range of high-turnover convenience products
and are usually open for extended periods during the day;
Prices are slightly higher due to the convenience premium.
3. Super Market: These are retail organisations that provide
low-cost high-volume self-service operation to meet consumer
requirements. Most of the super market charge lower price.
Example: Subhiksha. They are the large self-service outlets,
catering to varied shopper needs. These are located in or near
residential high streets. A supermarket, also called a grocery
store, is a self-service store offering a wide variety of food
and household merchandise, organized into department.
It is larger in size and has a wider selection than a traditional
grocery store and it is smaller than a hypermarket or
superstore. Supermarkets usually offer products at low prices
by reducing their economic margins.

4. Hyper Market: A hypermarket is a superstore which

combines a supermarket and a department store. Hyper
markets are huge retail stores that offer various products such
as clothes, jeweller, stationery, electronic goods at cheaper
price. Example: Big Bazaar, Star Bazaar, Giant Stores etc.
They focus on high volume.
5. Specialty stores: A specialty store is a store, usually retail,
that offers specific and specialized types of items. They offer
a narrow product line that concentrates on specialised
products such as jeweler, fabrics, furniture etc. Customer
service and satisfaction are given due importance.
For example, a store that exclusively sells cell phones or
video games would be considered specialized. A specialty
store specializes in one area.
B-Non-Store Retailing:
A direct relationship of the retailer with his customer is on the
basis of non-store Retailing. In India around twenty percent of
retail sale is from non-store. The proportion of non store is
growing steadily.

It is classified as under:
o Direct Selling: Direct selling is a retail channel for
the distribution of goods and services. There is no
fixed retail location. In direct selling there is a direct
contact of the retailer with his ultimate customers. It
is highly an interactive form of retailing. Products
like cosmetics, jewellery, food items are sold in
such manner. The retailers visit home place or work
place of the customers to sell the products. It is also
known as network marketing where the products
and services are sold face to face.
o Mail order: It is a retail format in which offerings
are communicated to the customers through a
catalogue, letters or broachers. Such retailing is
suitable for specialty products. The buyer places an
order for the desired products with the merchant
through a telephone call or website. Internet and
online payment options, has made shop from home
easier.
o Tele Marketing: It is a form of retailing in which
the products are advertised on television. Details
about the product in regard to its features, price,
warranty, direction to use etc. are mentioned and
explained. Phone numbers are provided due to
which customers can make a call and place an order
for the product.
o Automatic Vending: This is a form of non store
retailing in which the products are stored in a
machine and dispensed to the customers when they
deposit cash. Vending machines are placed at
convenient and busy locations like air ports,
shopping malls, working place etc. This machine
 primarily contains products like chocolates, snacks
and drinks etc.
o Electronic retailing: It is also called as e-tailing or
internet retailing. It is a retail format in which
products are offered to the customers through
internet. The customers can evaluate and purchase
the products from their homes or office place. This
kind of retail is gaining importance in recent years.
Key Terminologies used in Retail Business
• Consumption: Consumption involves the usage of
product/services at a given point of time, but cannot be
used for the purpose of resale.
• Customer Satisfaction: Customer satisfaction means the
extent to which a customer is satisfied with the decision
of availing the product/service and getting back to the
same retailer/business owner for buying the same
product.
• Consumerism: Integrated initiative on the part of the
individuals, governments and various groups to
safeguard the consumer rights and to protect them from
the policies and regulations which result in infringement
of the rights of the consumers.
• Retail: Selling the products/services to the ultimate
customers. The retailers keep different products in small
quantities and sell them directly to the customers. The
Retail business buys the products from the wholesalers at
discounted prices, add their margins and sell to the
customers.
• Wholesale: Wholesale involves selling large quantities
of products at a lesser price to the retailers/customers.
• Logistics: Logistics deals with the commercial side of
retail with focus effective planning, execution and
control on procurement and movement of the products
for achieving cost advantages and gaining a business
edge through effective distribution and resource
optimization.
• Distribution: It is concerned with the product movement
from the manufacturers to the ultimate consumer by
following organized channel/intermediaries. The
objective of maintaining a robust and a strong
distribution channel is to ensure product reach to the
maximum number of customers within shortest possible
time along with cost advantages.
• Inventory Shrinkage: This is a drastic reduction in the
existing inventory position due to the occurrence of anti-
social events like theft on the part of employees or
customers. This may even occur due to certain errors in
the process of merchandise management during the stage
of receipt of the merchandise. The key focus of any
retailer would be on controlling the inventory shrinkage
for improving the overall business performance and
controlling the costs.
• Markdown: This means a reduction in the prices of the
product.
• Procurement: This involves sourcing the
products/services from the vendors/suppliers by
managing the end to end procurement cycle. The process
includes preparing purchase orders, bargaining for the
best deals from the suppliers/vendors, identifying new
vendors, making follow-ups, preparing various kinds of
documentation/coordination activities and releasing the
payment to the suppliers.
• Costs of Switching: This essentially implies the total
cost which a customer may have to incur for switching
from suppliers to suppliers or trying out new
marketplaces.
• Consumer Empowerment: In the present scenario, the
consumers are more aware of their personal rights and
can voice out their grievances before the concerned
authorities regarding the non-performance of products.
The main source of easy access to information for the
consumers is the internet and digital technologies.