Pretend that every single person you

meet has a sign around his or her neck

that says, ‘Make me feel important.’
Not only will you succeed in sales, you
will succeed in life.

-Mary Kay Ash

Introduction p

to Retailing
A detailed report about the
Retailing Industry

The secret of successful retailing is to give your

customers what they want.
-sam walton
Content:

1. Introduction
2. Meaning and Definition
3. Characteristics of Retailing
4. Functions of Retailing
5. Types of Retailing
6. Forms of Retailing based on ownership
7. Retail Theories
8. Wheel of Retailing
9. Retail Life Cycle
10.Retail Business in India
11.Influencing Factors
12.Present Indian retail scenario
13.International Perspective in Retail Business
 Module -1

Introduction to Retailing

Retail management:

Retail management refers to the process that retail owner or manager strives to run, maintain,
and grow a retail business from the basic to complicated retail operations including employee,
order, sales, inventory, fulfilment, warehouse, supplier, customer information, payment and
accounting, etc.

Retailing:

• Retailing is a distribution process, in which all the activities involved in selling the
merchandise directly to the final consumer (i.e. the one who intends to use the product)
are included. It encompasses sale of goods and services from a point of purchase to the
end user, who is going to use that product.

• Any business entity which sells goods to the end user and not for business use or for
resale, whether it is a manufacturer, wholesaler or retailer, are said to be engaged in the
process of retailing, irrespective of the manner in which goods are sold.

• Retailer implies any organization, whose maximum part of revenue comes from
retailing. In the supply chain, retailers are the final link between the manufacturers and
ultimate consumer.

Meaning and Definition:

Retailing is the selling of goods and services to consumer end users. Retailing is seen as a
contrast to wholesaling, which typically involves selling in mass quantities at lower prices.
Retailers frequently buy in bulk from wholesalers, then repackage merchandise for individual
sale.

Definition:

Retailing is a distribution process, in which all the activities involved in selling the merchandise
directly to the final consumer (i.e. the one who intends to use the product) are included. It
encompasses sale of goods and services from a point of purchase to the end user, who is going
to use that product.

Characteristics of Retailing:

Retail units compared in terms of their characteristics can be grouped into three main
types: department stores, specialty retail stores, and convenience stores.

Some of the retailing characteristics you need to pay heed to are

1. Direct contact with the customer:

• Retailing involves direct contact with the customer, so retailers need to understand
customer needs and preferences to provide them with an effective shopping experience.
• Retailers must be able to build relationships with customers, offer helpful advice and
provide a positive shopping experience. It helps to create an atmosphere in the store
that encourages customers to shop, thus increasing sales.

2. Marketing orientation:

• Retailing is mainly concerned with marketing products to customers, so retailers must

be able to identify customer needs and develop effective strategies for meeting those
needs. Retailers must also be able to develop effective promotions so that customers
are aware of product offers and can decide which products best meet their needs.
• Retailers must be marketing-oriented and strive to identify customer needs and
preferences and respond to them accordingly. This requires having a comprehensive
understanding of the target market, creating effective promotional campaigns, and
using data-driven decision making.

3. Point-of-purchase Display and Promotions:

• Retailers also need to develop effective point-of-purchase displays so that customers

can easily find the products they are looking for. They should also create attractive
promotional materials, such as promotional signs, brochures, and other forms
of advertising so that customers are aware of the products and services offered.
 • With the help of effective point-of-purchase displays and promotions, retailers can
attract more customers to their stores and increase sales.

4. Relationship with the customers:

• Retailers need to be able to develop relationships with customers to create loyal, long-
term customers. Retailers should offer excellent customer service and strive to provide
a positive shopping experience.
• They should also be knowledgeable about their products and services so that customers
have access to reliable information. Retailers must also be able to respond quickly
to customer complaints and feedback.

5. Multi-channel retailing:

• In today’s world, multi-channel retailing is very important. Retailers should be able to

offer their customers the ability to purchase products online and from physical stores.
• Retailers must be able to provide a seamless experience across different channels and
make sure that their customers are satisfied with the overall shopping experience.

6. Lower Average Amount of Sales Transaction:

• Retailers typically have lower average amounts of sales transactions than other types of
businesses, so they need to focus on building relationships with customers so that they
can build loyalty and increase sales.
• It’s also important for retailers to understand the needs of their customers and offer
products and services that meet those needs.

7. Larger Number of Retail Business Units:

• Retailers typically have a larger number of business units than other types of
businesses, as there are many different types of retail outlets. This means that retailers
must be able to manage multiple locations and ensure that each location meets customer
needs.
• Retailers must also be able to coordinate promotions and displays across different
locations, to maximize the effectiveness of their marketing efforts.
8. Stock small quantities of goods:

• Retailers typically stock smaller quantities of items than other types of businesses. This
requires retailers to be able to keep up with the latest trends in products and services so
that they can quickly restock popular items.
• Retailers must also be able to monitor inventory levels and ensure that items are
available when customers need them.

9. Starting with a unique proposition:

• Retailers must also be able to develop unique propositions that differentiate them from
other retailers. This can include offering exclusive products or services, providing a
wide selection of items at competitive prices, or developing innovative ways to connect
with customers.
• Retailers must also stay on top of industry trends and be able to adjust quickly to remain
competitive.

Functions of Retailing:

Retail trade performs many valuable functions for the trade and commerce as a whole. Some
of them are as follows:

1) Delivery of the goods to the end consumer:

This makes shopping for all requirements quite hassle-free for the consumers. This also
facilitates consumption and maximizes consumer satisfaction. Because the company cannot
take responsibility of delivery to every single customer, it appoints retailers. One of the
functions of retailing is immediate delivery.

2) Is an essential part of the distribution chain:

Because the retailer takes over the cumbersome task of distribution of goods manufactured to
the target market, the manufacturer is relieved of this responsibility and can divert his resources
to manufacturing activities.
3) Finances the wholesaler:

While booking his order of goods with the wholesaler, the retailer pays some percentage or the
whole of the order price in advance. This helps the wholesaler to carry on with his operations
seamlessly. In some industries, it is the retailer who pays cash to maintain stock and in others
the wholesaler has to carry the stock as paid capital. Nonetheless, financing is one of the major
functions of retailing. A retailer who does not contribute to financing will bring down the
effectiveness of the supply chain.

4) Stores the goods according to market requirement:

The retailer invests his working capital in building a gamut of inventory reflecting market
requirements. He also sells the requisite quantity, however small or big, to the final consumers
satisfying their needs. The retailers know the complete demand and supply potential due to
their years of experience. Hence it is one of the functions of retailing to balance the demand
and supply as per external market conditions.

5) Lends a hand in manufacturer’s marketing initiative:

Retailer plans and executes many advertising and promotion activities at the point of purchase
i.e. right in his store. This leads to gain in popularity of and favourable market conditions for
the product of the manufacturer.

6) Assumes storage and credit risks:

When the retailer orders and stores a large quantity of goods from the manufacturer, he makes
sufficient provisions to store it safely for some days. This involves costs. Also, there is also a
risk of loss of these goods on account of destruction, theft, spoilage etc. The retailer assumes
these risks while storing goods.

7) Extends credit facilities to the consumers and assumes credit risk:

The retailer does so to encourage shopping. This adds to the vigor of commercial activities in
the economy. But there is also a risk that the customers won’t pay for the goods bought or may
return damaged goods to the retailer. This inherent risk in trade is assumed by the retailer.

8) Offers wide variety of customers and enticing price range in a product line:

In order to attract more customers, a retailer offers a wide range of merchandise at attractive
prices. This results in higher consumer satisfaction and higher standards of living in any
economy.

9) Provides convenience in shopping:

Retailers try to set up their shops nearby housing areas or near parks, schools – the areas where
the customer finds it very convenient to shop. This enhances the consumer welfare.

Retailing Types:

Retailing can be divided into five types. Here are the types of retailing that exists today –

1. Store retailing: This includes different types of retail stores like department stores,
speciality stores, supermarkets, convenience stores, catalogue showrooms, drug stores,
superstores, discount stores, extreme value stores etc.

2. Non-store retailing: Non-store retailing is a type of retailing where the transaction

happens outside conventional shops or stores. It is further divided into two types – direct
selling (where the company uses direct methods like door-to-door selling)
and automated vending (installing automated vending machines which sell offer a
variety of products without the need of a human retailer).

3. Corporate retailing: It involves retailing through corporate channels like chain

stores, franchises, and merchandising conglomerates. Corporate retailing focuses on
retailing goods of only the parent or partner brand.
 4. Internet retailing: Internet retailing or online retailing works on a similar concept of
selling small quantities of goods to the final consumer, but they serve a larger market
and don’t have a physical retail outlet where the customer can go and touch or try the
product.
5. Service retailing: Retailers not always sell tangible goods; retail offerings also consist
of services. When a retailer deals with services, the process is called service retailing.
Restaurants, hotels, bars, etc. are examples of service

Types of Retail Ownership:

There are five types of retail ownership:

1. Independent Retailer
2. Existing Retail Business
3. Franchise
4. Dealership
5. Network Marketing

1 Independent Retailer:
In independent retailer is one who builds his/her business from the ground up. From the
business planning stage to opening day, the independent retail owner does it all. He/ she may
hire consultants, staff and others to assist in the business endevor. The opportunities are
endless.

Advantages: There are no restrictions on who, how or where an entrepreneur should set up
his/her business. The freedom to do what one wants to do is the biggest advantage in this form
of business. It can be extremely fulfilling.

Disadvantages: Because of the ease and flexibility of getting started, there can be a lot of
competition in a particular area for a certain type of customer. Every business decision rests on
the owner(s). There is no branding, no preset guidelines and a great deal of risk in this business
model.
 2 Existing Retail Business:
Someone who inherits or buys an existing business is taking ownership and responsibility of
someone else’s hard work. The foundation has already been laid.

Advantages: The biggest advantage to buying an existing business or taking ownership of an

already established retail store is time. The time to build a customer base, the time to establish
branding, and the time it takes to establish credit are generally all past which means most of
the hard part is behind the new owner
.
Disadvantages: The existing business may have a negative image or reputation that will take
a lot of time to undo. Loyal customers may not like the change of ownership. Previous owners
have caused problems by opening a competing business.

3 Franchise:
Purchasing a franchise is buying the right to use a name, product, concept and business plan.
The franchisee will receive a proven business model from an established business.

4 Dealership
Retailers may find the business model of a licensed dealership as a mix of franchise and
independent retailer. The licensee has the right (sometimes this is exclusive) to sell a brand of
products. Unlike a franchise, the dealer can sell a variety of brands and there generally no fees
to the licensor. Dealerships may or may not be identified as an authorized seller or by the
company’s trademark.

Advantages: All of the business operation processes have been established. The franchisee
receives help from a network and customers may already familiar with the name. The
marketing strategy has already been put in place. Most all of the risk associated with starting a
retail business has been reduced.

Disadvantages: Franchisees pay a fee, or royalty, based on sales each year. Startup costs
relating to the franchise may be high. One of the biggest disadvantages of owning affranchise
is the lack of flexibility and freedom.

5 Network Marketing:
Multilevel marketing (MLM) or network marketing is a business model where the selling of
products depends on the people in the network. Not only is a product being sold, but other
salespeople are being recruited to sell that same product or product line. It’s probably not a
type of business one would initially consider when discussing retail businesses, but Amway
used this model quite successfully for many years.

Advantages: Generally very little startup funding is needed to operate this type of business.
Network marketing provides freedom from conventional retailing businesses and offers a
greater interaction with all types of people. For those willing to invest the time, huge profits
can be made.

Disadvantages: Too many unscrupulous multilevel marketing schemes exist. Some systems
require their dealers to be more interested in recruiting new members than in selling the
products to consumers. It may be difficult to operate without a storefront. Most network
marketing systems offer motivational materials, training and support.

Theories of Retailing – Cyclic and Non-Cyclic Theories:

Retailing may be defined as the selling of goods to the general public, rather than sales to
businesses. The process usually involves sales of relatively small amounts of finished goods,
with purchasers mainly motivated by their own consumption needs and not for resale.

Numerous theories have bene developed to explain the patterns and trends that manifest in the
retailing and selling. These can be divided into two main categories; cyclic and non-cyclic
theories.

Cyclic Theories:

Cyclic theories hypothesize the retail environment and competitive practices of retailers will
follow a slightly, repeating pattern, with clear identifiable stages.

1. Wheel of Retailing Theory:

The wheel of retailing theory is one of the most common cyclic retailing theory. This was first
proposed by McNair (1958) is one of the oldest retailing theories, and is frequently cited. The
idea is that retailers will enter the market and progress through a cycle of strategies. Initially,
McNair believed that retailers would enter the market using a low-cost strategy, and accepting
low profit margins, as a method of acquiring customers. Costs are kept to a minimum during
this phase, with the retailer offering only limited service and product range. This was referred
to as the entry phase.

As the retailer acquires customers and profits, they move onto the trading up phase of the cycle.
At this stage the retailer has gained customers and is able to invest in the business in order to
improve profits. Strategies that this stage may include obtaining better facilities, for example
moving to higher locations, increasing the service level, expanding the product range, and
investing more in displays and advertising. Notably, when one retailer moves into this phase,
they may leave a gap in the retail sector for new discounters to enter.

The third stage is the vulnerability phase, where the retailer has become a mature business and
may now have high overhead costs. At this stage the organization may be facing a declining
return on investment, may need to renew their strategies in order to retain existing customer,
who may be tempted to competing organizations where there are lower prices, high level of
differentiation. Therefore, the mature retailer may move back to the entry phase, with a need
to attract new customers, often achieved through increased discounting, and cutting costs to
alleviate the heavy overheads.

This theory does explain many retailing trends in many countries. For example, Marks and
Spencer in the UK started out as a market stall before the High Street, and then facing
challenges and losses with high overhead in the 1990s. The weakness of this model is its focus
on costs, and inability to explain the continuing presence of profitable premium market
specialist firms.

2. Retail Lifecycle Theory:

This concept was developed in repose to weaknesses in the wheel of retail model; the focus on
costs and overcome the weakness of the accordion theory which focuses on
merchandise/goods. This theory reflects the general product lifecycle theory, hypothesizing
that retail stores will traverse a lifecycle, starting with development introduction, and then
growth which may be divided into early and later growth, with the potential for an accelerated
growth category. Following this, the firm reaches maturity, which may be followed by decline,
or the lifecycle may be restarted with a renewal. These may be applied not only to retail stores,
but also retail formats and selling channels. Retailers may be attracted by new formats and
trends which offer potential, but they may face intense competition as many firms may be
attracted to new opportunities. Importantly, new opportunities may result from disruptive
innovations. When initially introduced in the 19th century department stores were a disruptive
innovation, just as catalogues were in the nineteenth century and ecommerce has been in the
twentieth century.

Examining the current retail environment on the UK in 2016, the early growth stage may be
typified with the new single brand stores, such as Apple and Samsung. Single price stores, such
as £1 stores, and warehouse clubs, may be classified as accelerate growth stores. Retail stores
in the mature category make up a large proportion of retailers, these include supermarkets, fast
food chains, and department stores. The current retailers in decline include independent grocery
stores and catalogue retailers.

RETAIL BUSINESS IN INDIA:

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. India ranked 73 in the United Nations Conference on Trade and
Development's Business-to-Consumer (B2C) E-commerce Index 2019. India is the world’s
fifth-largest global destination in the retail space and ranked 63 in the World Bank’s Doing
Business 2020. The retail sector in India accounts for over 10% of the country’s GDP and
around 8% of the workforce (35+ million). It is expected to create 25 million new jobs by 2030.

The sizeable middle class and nearly unexplored retail market in India are the main enticing
factors for international retail behemoths seeking to move into newer markets, which will help
the Indian retail business grow more quickly. The urban Indian consumer's purchasing power
is increasing, and branded goods in categories like apparel, cosmetics, footwear, watches,
beverages, food, and even jewellery are gradually evolving into business and leisure that are
well-liked by the urban Indian consumer. The retail sector in India is expected to reach a
whopping US$ 2 trillion in value by 2032, according to a recent analysis by the Boston
Consulting Group (BCG).

India is the world’s fifth-largest global destination in the retail space. In the FDI Confidence
Index, India ranked 17 (after US, Canada, Germany, United Kingdom, China, Japan, France,
Australia, Switzerland, and Italy).

As of 2021, there were 1.2 million daily e-commerce transactions. Online shoppers in India are
expected to reach ~500 million in 2030 from +150 million in 2020. The E-Commerce market
is expected to touch US$ 350 billion in GMV by 2030.

India’s retail sector was experiencing exponential growth with retail development taking place
not just in major cities and metros, but also in small cities. Healthy economic growth, changing
demographic profile, increasing disposable income, urbanisation, and changing consumer
tastes and preferences have been some of the factors driving growth in the organised retail
market in India.

To improve the business climate and make it simpler for foreign companies to register fully
owned subsidiaries in India, the Indian government has implemented a number of rules,
regulations, and policies.

Some other main factors responsible for the growth in Retail Industry are as
follows:

Growth of Consumers: – Nowadays there is tremendous growth in number of consumers in

India, especially the middle class. Consumer demand & income structure has also increased
further raising their expectations for quality products at reasonable prices. Retail outlets offer
a wide variety of products & services to the customers to meet their demands thus resulting
into the growth of Retail Sector.

Working Population: – In recent times the graph of working population has seen a steep
increase in urban as well as rural areas thus changing their spending habits & income structure.
It becomes very difficult for the working people to spend enough time in shopping at different
locations. This enables a retailer to provide them various products at one place, creating a
platform for development.

Value for Money: – Big & organised retail outlets basically deal in volumes & can offer a
good range of products at reasonable price thus attracting customers at a very large scale. This
in return also creates a good opportunity for retailers to get more profits & enables new business
groups to enter into this sector.

Rural Market: – Today’s Indian Retail market has entered in rural areas creating a big
competition, as the rural population has become more literate & quality conscious. These high
potential rural populations have thus enabled the retailers to enter rural market & develop new
products & strategies to meet their demands. Also it has created employment opportunities for
the rural people thus heading towards growth & development.

Corporate Sector: –Corporate sectors have also entered into the retail business to cater the
customers demand & provide them better quality products at reasonable price. This is one of
the reasons that have brought revolution to the retail sector thus driving it towards the growth.

Foreign Retailers: – Rapid expansion & the race to cater the demand of every customer is
catching the interest of foreign retailers to enter the market &provide good quality products &
services through joint ventures or franchising. This will further boost the retail sector & will
help in developing economy of the country.

Technological Impact: – Advance technology has made it easier for the retailers to handle
large scale business & cater the needs of consumers. With the introduction of computerized
billing system, electronic media & marketing techniques, barcode system has changed the face
of retailing in providing products & services to customers. Also the use of online market has
driven the retail sector towards advanced growth structure.

Income Structure: –Increase in the number of working population has resulted in increase in
the income structure in cities as well as remote areas. This has further led to increase in the
demand for quality products & services. People nowadays tend to try new things & improve
their look thus increasing the spending habits & giving an opportunity to grow & expand their
business.
Retail business in India:

The market after 2021 has been an eye-opening time for the Indian retail sector. The industry saw
a decline of 8.5% in FY 2021, but it recovered in 2022 to reach $836 billion with 81.5%
contribution from traditional retail. However, the COVID-19 disruptions led to a rapid increase in
e-commerce and digital adoption. Now, brands across segments are concentrating on increased
online presence and direct sales as customers continue to shop online.

Quite interestingly, shoppers from Tier II and Tier III cities make up over 61 percent of the total
market share in FY 2022 in comparison to 53.8 percent in FY 2021. While Tier I cities have a
lesser growth rate for e-commerce at 47.2 percent, tier II and III cities showcased growth of 92.2
percent and 85.2 percent, respectively. In 2023, tier II and III cities dominance is likely to continue.
Looking at the way Indian retail industry is moving, 2023 will be the year to watch.

Encouragingly, India has had a boom in attracting international companies over the past few years;
it is now the fifth-largest global destination for retail. The industry growth is riding on several
factors, including rising disposable incomes, exposure of Gen Z to international brands, and ease
of doing business.

Opportunities-led growth:

Over the past two years, the COVID-19 pandemic has led to changes in consumer preferences and
attitudes; this has changed how consumers buy and use products and services. Consumers are no
longer differentiated between offline and online consumption channels making large corporations
experiment with various strategies to create seamless retail experiences integrated across all
channels.

Retailers will use digital channels to increase customer reach in tier II and tier III cities while
spending less on physical estate. Small-sized retailers will benefit from the continued popularity
of third-party e-commerce platforms or marketplaces as they continue to rule the D2C market in
2023 and beyond. The most prosperous D2C companies and online merchants will have a few
characteristics in common, such as being modest, highly skilled at using SEO and SEM tools and
having great brand-building and digital marketing abilities.
However, the industry’s long-term prospects are promising, supported by rising affluence,
favourable demographics, the entry of foreign competitors, and increased urbanization.

Digital-led challenges:

However, the digital transformation is also leading up to consumer behavior which may emerge
as a major challenge for the retail industry in 2023. Maintaining brand loyalty will be a tough job
in the coming year; the Indian consumer, who has an ingrained attitude of trying multiple things
before settling for one, has more ammunition in his kitty with smartphones or access to the digital
world. Though traditional customer loyalty programs will still be effective, brands have to look
for solutions to address the growing personalization trend.

Secondly, the retailers have to sail through the labyrinth of tech solutions in the market to find the
perfect one for themselves. Most retailers strive for software to streamline their operations, but
frequently make poor decisions. Business owners need to understand what the software offers and
whether it fits the needs of their business model. A company that manages just fine without a
complicated software platform may experience cost increases and internal discord. The solution
is to look for software created exclusively for retail enterprises for the best outcomes.

Thirdly, many retail businesses struggle with efficiency, effectiveness, and quantifying the results
of their marketing strategies, including paid media, local SEO, enterprise SEO, content strategy,
and social media. The sector or company must crack the codes about leveraging digital channels
to generate leads, sales, and MRR.

International perspective in retail business:

International trade and commerce has existed for centuries and played a very important part in
the World History. However International Retailing has been in existence and has gained
ground in the past two to three decades. The economic boom in several countries, coupled with
globalization have given way to Organisations looking at setting up retailing across borders.
The advent of internet and multimedia has further changed the dimensions as far as
International Retailing is concerned.

Who are the International Retailers?

When you think of International Retailers the names that come to one’s mind would be the
Wal-Mart, Gucci, Ralph Lauren, Mango, GAP etc. All of these are International Retailers.
However we can broadly classify the International Retailers under two categories. The first
category would be the global grocery retailers and the second category belongs to the
International fashion Brands.

Ever since International Retailing started getting recognition in the industry, several
academicians as well as Industry experts have tried to come up with exact definition.

The attempt to define International Retailing raised a legitimate question as to what exactly the
retailers were internationalizing. Unless the correct fact was established, there could be no right
definition. Some asked if the Companies internationalised their management systems,
management expertise or the brands.

The famous International Business researchers Johanson and Wiedersheim-Paul who had
studied the growth of Swedish Companies suggested that the term ‘International’ can be
attributed to the Business orientation, the management style and orientation. They further
elaborated that in the first instance the Companies began exporting products to other countries
and further growth of business entailed setting up manufacturing facilities in the foreign
countries. Though this might have been the trend seen in manufacturing organisations, the same
has not been totally accepted in the retail sector.

Conclusion:. Retail is a critical industry that provides products and services to consumers.
Retail businesses perform different functions, including merchandising, marketing, and
customer service.

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