RETAIL MANAGEMENT

Course Code 20MBAMM306 Teaching Hours/Week (L:T:P) 3:0:2 CIE Marks 40

SEE Marks 60 Credits 04 Exam Hours 03

Module -3 . 10 hours
Introduction and Perspectives on Retailing World of Retailing, Retail management, introduction,
meaning, characteristics, emergence of organizations of retailing - Types of Retailers (Retail
Formats) - Multichannel Retailing -Customer Buying Behavior, role of retailing, trends in
retailing, FDI in Retail - Problems of Indian Retailing - Current Scenario. Assignment: History
and current trends including Indian retail FDI Policy.

DEFINITION AND INTRODUCTION

1.Retailing, derived from French word Retaillier cut a piece off or break the bulk
2.Retailing consists of activities involved in selling goods and services to ultimate consumers for
personal consumption. coughan, Aderson, Louis

Meaning
3. Retailing is a set of business activities that add value to the products and services sold for their
family consumption
4.Sale of services
5.Set of activities by a retailer and the channels used to approach costumers
6.Retailing is major part of world economy and the fastest changing industry in the world like
departmental stores, Specialty stores, discount or mass merchandising, warehouse or wholesale
clubs, Factory outlets small and mid-size retailers.
7. Boom is confined to urban, emerging along the lines of the economic evolution of society.
8.Is the process of understanding the environment especially consumer and competition
developing and implementing effective strategies, .mainly involves merchandise management
and stores management.

Characteristics of Retailing
1.Average sale is much less than
the manufacturer,
need to control costs,
maximizing number of customers,
emphasizing more on special promotions
2.Value of in store buying due to customers impulse buying and is difficult to make forecasting.
3.Retailer offer specialized assortment of products
4.Bulk item shipped are customized and are offered at smaller quantities
5.Holding Inventory.
6.Direct end user interaction, retailing increases the value of products and Services.
7.Location is critical factor in retailing.

Retail industry in India

 Generate sales and earn revenue

  Providing Profitability
 Improving Market Share
 Improving Corporate Image
Trends in Retailing
1. Spatial convenience: Number of working women have fueled an intense demand for
convenience. The quest for convenience on the part of consumers is shown by
 Frantic growth of convenience store fueled by the entry of Petroleum marketers
AM/PM store
 Exploding Popularity of online shopping operators
 Diversification of vending machine into food /clothing and videotapes.
2. Increased power of retailer: At one time, colgate dominated retailers. Now the retailers tend
to dominate them.
 The reasons for this reversal are many. Retailers have many new products from
which to choose when deciding what to stock on their sheleves.
 Further the IT has diffused throughout retailing to such an extent that virtually all
major retailer can capture item-by-item data via scanning devices at that
electronic point of sale terminal.
 This knowledge of information has permitted retailers to calculate the (DPP)
Direct Portfolio of Individual Items, track what moves and what does not move
well in their stores.
 So the Manufacturers struggled to get space in the shelves of retailers. They offer
Pricing concession, slotting allowance etc., to promote products.
3. Growing Diversity of Retail formats:
● Consumers can now purchase same merchandise from wide variety of retailers. they are
Dept. store, specialty store, convenience store, category killer, Mass merchandiser,
Hypermarket.
● Mom and Pop Stores and Traditional Kirana stores: small independent stores across
product categories is very common retail format in India. Particularly in small
townships .
● E- commerce: The amount of retail business conducted on the Internet is growing every
year. Companies like Amazon. com and First and second.com which helped pioneer the
retail e-commerce. Fabmart.com.
● Department store with varied merchandising operations.
● Franchise : Territory rights are also sold to franchisees. Various distribution and other
services are provided by contract to franchisees for fee. Ex. McDonalds, Blockbuster
Video
● Warehouse club- wholesale club: Appeal is to price conscious shopper. size is 60000 sq.
ft. or more. Product selection is limited and products are usually sold in bulk size.
● Mail order catalog: Non-store selling through the use of literature sent to potential
customer. Usually has a central distribution centre for receving and shipping direct to the
customer.
● Specality Discounter –Category killer:
4. Emergence of region specific formats: In departmental store format, while most A
class cites and metros have larger stores of 50000 sq ft sizes, stores in B Class towns have
stabilized in the 25000- 35,000 sq. feet range. Most players have started operating these 2
 formats across various cities, which has helped them to standardize the merchandise
offering across the chain.
● Entry of International Players: A large no. of international players have evinced interest
in India despite the absence of favorable government policies.
● Mall Devlopment: Modern malls made their entry into India in the late 1990s with the
establishment of cross roads in Mumbai and Ansal Plaza in Delhi. According to a market
estimates,close to 10mn sq. feet of mall space is being developed across several cities in
the country.
Digital in-store experience
 Self-service kiosks improve customer experience and increase sales for retailers by 20%.
 Beacon-triggered offers increase the likelihood of a purchase by 73%.
 85% of customers have used self-checkout kiosks, often citing convenience and
Simplicity.
Emergence of organized retailing:
 Organized retailing in India represents fraction of total retail market.
 In 2011, organized retail trade in India was worth Rs. 11,228.7 billion
 64 million sq ft is expected to grow by 84 million sq feet in 2023
 The modern retail formats are showing robust growth as several retail chains have
established a base in metropolitan cities, especially in south India, and are spreading all
over India at a rapid pace.
 However, space and rentals are providing to be the biggest constraints to the development
of large formats in metropolitan cities since retailers are aiming at prime locations.
 In urban India, families are experiencing growth in income but dearth of time. More and
more women are taking up corporate jobs, which is adding to the family’s income and
leading to better lifestyles.
 Rising incomes has led to an increased demand for better quality products while lack of
time has led to a demand for convenience and services.
 The demand for frozen, instant, ready to cook , ready-to-eat food has been on the rise,
especially in the metropolitan and large cities in India.
 There is also a strong trend in favour of one stop shops like supermarkets and department
stores.
 Rural India continues to be serviced by small retail outlets. Only 3. 6 million outlets cater
to more than 700 million inhabitants of rural inida. Here, provision stores, paan shops and
ration shops are the most popular vehicles of retailing.
 Apart from this, there are periodic or temporary markets, such as that come up at the
same location at regular time intervals.
Types of Retailers
Store Retailing by Store based Strategy Food Retailers
1. Departmental stores.
2. Convenience Store.
3. Full Line Discount.
4. Conventional Supermarket.
5. Specialty Stores.
6. Food Based Superstore
7. Off Price Retailer.
8. Combination Store.
Store Retailing by Store based Strategy
Food Retailers
9. Variety Store.
10. Super Centers.
11. Flea Market.
12. Hypermarket.
13. Factory Outlet.
14. Limited Line Stores.
15. Membership Club.

Non Store Retailing.

1. Direct Marketing.
2. Electronic/Internet/E- Direct Selling.
3. Vending Machines
4. Catalog Marketing
5. Franchising

Multichannel Retailing
a) Store channel:
b) Catalog channel:
c) Internet channel:

Customer buying behaviour:

1. Need recognition / Problem recognition:
2. Information search
3. Alternative evaluation
4. Purchase decision
5. Post-purchase behaviour
Types of buying decisions:
1. Extended problem solving:
2. Limited problem solving:
3. Habitual decision making:

Factors influencing the buying process

1. Cultural factors:
- Culture and societal environment
2. Social factors:
- Reference groups and membership groups
3. Family:

Historical perspective
● The retail industry emerged in the US in the eighteenth century, restricted to general
stores.
● Specialty stores were developed only in those areas that had a population of above 5,000.
● Supermarkets flourished in the US and Canada with the growth of suburbs after World
War II.
 ● The modern retail industry is booming across the world.
● Revenues from retail sales in the US alone stood at $4.48 trillion in 2007, according to a
report by the US Census Bureau

Role of Retailing:
1. Destination
2. Routine
3. Preferred routine
4. Seasonal/occasional
5. Convenience

FDI in Retail:
● FDI IN SINGLE-BRAND RETAIL
● FDI IN ―MULTI-BRAND‖ RETAIL

Problems of Indian retailing:

1. Global economic slowdown impacting consumer demand
2. Consumption declines in the advanced economies
3. Competition from the unorganized sector
4. Retail sector yet to be recognized as an industry
5. High real-estate costs
6. Lack of basic infrastructure
7. Supply-chain inefficiencies
8. Challenges with respect to human resources
9. Shrinkage

Introduction and Perspectives on Retailing World of Retailing:

Retailing is a global, high-tech industry that plays a major role in the global economy. About one
in five U.S. workers is employed by retailers. Increasingly, retailers are selling their products and
services through more than one channel—such as stores, Internet, and catalogs. Firms selling
services to consumers, such as dry cleaning and automobile repairs, are also retailers.

Retail management: The various processes which help the customers to procure the desired
merchandise from the retail stores for their end use refer to retail management. .includes all the
steps required to bring the customers into the store and fulfil their buying needs.

.makes shopping a pleasurable experience and ensures the customers leave the store with a smile.
In simpler words, .helps customers shop without any difficulty.

What is Retailing?
 Most common form of doing business.
  It consists of selling merchandise from a permanent location (a retail store) in small
quantities directly to the consumers.
 These consumers may be individual buyers or corporate.
 Retailer purchases goods or merchandise in bulk from manufacturers directly and then
sells in small quantities
 Shops may be located in residential areas, colony streets, community centers or in
modern shopping arcades/ malls.

Meaning of Retailing:
According to Kotler: ´Retailing includes all the activities involved in selling goods or services to
the final consumers for personal, non-business uses.
A process of promoting greater sales and customer satisfaction by gaining a better understanding
of the consumers of goods and services produced by a company.

Characteristics of Retailing:
1. Direct interaction with customers/end customers.
2. Sale volume large in quantities but less in monetary value
3. Customer service plays a vital role
4. Sales promotions are offered at this point only
5. Retail outlets are more than any other form of business
6. Location and layout are critical factors in retail business.
7. It offers employment opportunity to all age
Types of Retailers:

Store Retailing by Store based Strategy

Food Retailers
1. Departmental stores.
2. Convenience Store.
3. Full Line Discount.
4. Conventional Supermarket.
5. Specialty Stores
6. Food Based Superstore
7. Off Price Retailer.
8. Combination Store.
9. Variety Store.
10. Super Centres
11. Flea Market.
12. Hypermarket.
13. Factory Outlet.
14. Limited Line Stores.
15. Membership Club.
1. Department Store Department stores are large retailers that carry wide breadth and depth of
products. They offer more customer service than their general merchandise competitors.
Department stores are named because they are organized by departments such as juniors, men ‘s
wear, female wear etc. Each department is act as ―mini store. Means each department is
allocated the sales space, manager and sales personnel that they pay an attention to the
department. IMC programe for each department is different and particular. Department store
utilizes various sources for marketing communication. Due to overstoring most of the budget are
spending on advertising, couponing and discounts. Unfortunately, the use of coupons diminishes
profits and creates a situation where consumer does not buy unless they receive some type of
discount.

2) Convenience stores: Convenience stores are located in areas that are easily accessible to
customers. Convenience store carry limited assortment of products and are housed in small
facilities. The major seller in convenience stores is convenience goods and nonalcoholic
beverages. The strategy of convenience stores employ is fast shopping, consumer can go into
convenience stores pick out what they want, and check out relatively short time. Due to the high
sales, convenience store receives products almost daily. Because convenience store don‘t have
the luxury of high volume purchase.

3) Full line Discount Stores It conveys the image of a high volume, low cost, fast turnover outlet
selling a broad merchandise assortment for less than conventional prices. It is more to carry the
range of products line expected at department stores, including consumer electronics, furniture
and appliances. There is also greater emphasis on such items as auto accessories, gardening
equipment, and house wares. Customer services are not provided within stores but at centralized
area. Products are sold via self-service. Less fashion sensitive merchandise is carried.

4) Specialty Store: Specialty store carry a limited number of products within one or few lines of
goods and services. They are named because they specialize in one type of product. Such as
apparel and complementary merchandise. Specialty store utilizes a market segmentation strategy
rather than typical mass marketing strategy when trying to attract customers. Specialty retailers
tend to specialize in apparel, shoes, toys, books, auto supplies, jeweler and sporting goods. In
recent years, specialty stores have seen the emergence of the category killer. Category killers
(sometimes called power retailer or category specialty) are generally discount specialty stores
that offer a deep assortment of merchandise in a particular category.

5) Off-price Retailers Off price retailers resemble discount retailers in that they sell brand name
merchandise at everyday low prices. Off price retailers rarely offer many services to customers.
The key strategy of off-price retailers is to carry the same type of merchandise as traditional
department stores but offer prices that can be 40 to 60 percent lower. To able to offer the low
prices, off price retailers develop special relationship with their suppliers for large quantity of 8
merchandise. Inventory turnover is the key factor of successful off price retailing business. In
addition to purchasing close outs and cancel orders, off price retailers negotiate with
manufacturer to discount order off merchandise that is out of seasons or to prepay for items to be
manufactured thus reducing the price of buying items. E.g., there are many types of off-price
retailers, including outlet store, Manufacturers department store or even specialty store chains
can be an off-price retailer.

6) Variety Store Variety store offer deep assortment of inexpensive and popular goods like
stationary, gift items, women ‘s accessories, house wares etc. They are also called 5 to 10 percent
store because the merchandise in such stores, used to cost much.

7) Flea Market Flea market is a literal transaction of the French aux puces, in outdoor bazaars in
Paris. A flea market is the outdoor or indoor facility that rent out space to vendors who offer
merchandise, services and other goods that satisfy the legitimate needs of customers. Flea market
provides opportunity for entrepreneur to start business at low price. A flea market consists of
many retail vendors offering a variety of products at discount price at places where there is high
concentration of people. On specific market days they assemble for exchange of goods and
services.

8. Factory Outlets Factory outlets are manufacturer owned stores selling manufacturers
closeouts, discontinued merchandise, irregulars, cancelled orders, and sometimes in seasons, first
quality merchandise.

9) Membership Clubs A membership club appeals to price conscious consumers, who must be a
member of shop there. It breaks the line between wholesale ling and retailing. Some members of
typical club are small business owners and employee who pay a nominal annual fee and buy
merchandise at wholesale prices; these customers make purchase for use in operating their firm
or for personal use. They yield 60% of total club sale. The bulk members are final consumers
who buy exclusively for their own use; they represent 40 %of overall sales.

10. Conventional supermarket. Conventional supermarket is essentially large departmental stores

that specialize in food. According to the food marketing institute, a conventional supermarket is
a self-service food store that generates an annual sales volume of $2 million or more. These
stores generally carry groceries, meat and produce products. A conventional food store carries
very little general merchandise.

11. Food Based Superstore One of the biggest trends over the past twenty years in food retailing
has been the development of superstore. Superstores are food based retaliates that are larger than
the traditional supermarket and carry expanded service daily, bakery, seafood and nonfood
sections. Supermarket varies in size but can be as large as 150000 sq ft. Like combination stores
food-based superstore are efficient, offer people a degree of one stop shopping stimulates
impulse purchase and feature high profit general merchandise.

12. Combination Store Because shoppers have been demanding more convenience in their
shopping experience, a new type of food retailers has been emerging. This type of retailer
combines food items and nonfood items to create one stop experience for the customer.
Combination stores are popular for the following reasons. They are very large from the 30000 to
100000 or more sq ft. this leads to operating efficiencies and cost savings. Consumer like one
stop shopping and will travel further to get to the store. Impulse sales are high.

13. Super Centers and Hypermarkets Super center is a combination of a superstore and discount
store. Supercenter developed based on the European Hypermarkets, an extremely large retailing
facility that offers many types of products in addition to foods. In supercenter more than 40
percent of sales come from nonfood items. Super Centre is fastest growing retail category and
encompasses as much as sales. Wal-Mart is category leader with 74 percent share of super center
retail share.

14. Warehouse Clubs and Stores. Warehouse clubs and stores were developed to satisfy
customers who want to low prices every day and are willing to give up service’s needs. These
retailers offer a limited assortment of goods and services, both food and general merchandise, to
both end users and midsize businesses. The stores are very large and are located in the lower rent
areas of cities to keep their overhead low-cost low. Generally, warehouse clubs offer varying
types of merchandise because they purchase product that manufactures have discounted for
variety of reasons. Warehouse clubs rely on fast moving, high turnover merchandise. One
benefits of this arrangement is that the stores purchase the merchandise from the manufacture
and sell it prior to actually having to pay the manufacturer.

15. Limited Line Stores Limited line store also known as box stores or limited assortment stores,
represent a relatively small number of food retail stores in the United States. Limited line store
are food discounters that offer a small selection of products at lows prices. They are no frills
stores that sell products out of boxes or shippers. Limited line stores rarely carry any refrigerated
items and are often cash and carry, accepting no checks or purchase bags from the retailers. In
limited line store, the strategy is to price products at least 20 percent below similar products at
conventional supermarkets.

Non-Store Retailing.
1. Direct Marketing.
2. Electronic/Internet/E- Direct Selling.
3. Vending Machines
4. Catalog Marketing
5. Franchising
Direct Marketing
Direct marketing is defined as an interactive system of marketing, which uses non personal
media of communication to make a sale at any location or to secure measurable response. Direct
marketing is a method wherein the manufacturer or producer sells directly to retailer, user or
ultimate consumers without intervening intermediaries. This offers flexibility with maximum
controls of sales efforts and marketing information feedback. Various forms of Direct
Marketing-telemarketing, Direct mail marketing, television, marketing,

Direct Selling. In contrast to direct marketing, which involves no personal contact with
consumers, direct selling entails some type of personal contact. This contact can be at the
consumer home or at an out of home location such as the consumer office.

Vending Machines.
Vending machines represents an additional class of retail institutions. Essentially, vending is non
store retailing in which the consumer purchases a product through a machine. The machine itself
takes care of the entire transaction, from taking the money to providing the product. Vending
machine offerings range from typical products such as soft drinks and candy to insurance,
cameras, phone calls, phone cards, books, paper and pens.

Catalog Marketing. Mail Orders marketing/Catalog Marketing, also called as mail order
business, is one of the established methods of direct marketing. Since mail orders marketers use
catalogues for communication with the consumer, this form of marketing is often referred to as
catalogue marketing. In these methods the consumer become aware of product through
information furnished to them by the marketer through catalogues dispatched by mail.

Franchising

Franchise in French means privilege or freedom. Franchising refers to the methods of practicing
and using another person philosophy of business. The franchisor grants the independent
operators the right to distribute its products, techniques and trademarks for a percentage of gross
monthly sales and royalty fee. Various tangibles and intangibles such as national or international
advertising, training and other support services are commonly made available by the franchisor.
Agreements typically last five to twenty years, with premature cancelation or termination of most
contracts bearing serious consequences for franchisees.
Advantage of Franchising.
Advantage to the Franchiser.
Low Capital & Low Risk.
Speeder Expansion.
Extended Market Penetration.
Disadvantages of Franchising
Business Control.
Expenses Involved
Lower profit Potential.
Multichannel Retailing:
Multi-channel retailers are defined as those who browse or purchase through more than one
channel (retail store, catalog, Internet)
The emergence of multiple channels, especially the internet as a strong channel for shopping, has
been a real empowerment for the customer today. The customer is option rich, time and attention
poor and fully aware of the choices that he or she has access to in the market. Multichannel
retailing helps deliver a superior shopping experience by synchronizing customer touch points
and leveraging channel capabilities.

The broad trends that we have been seeing in the industry that will have a positive impact on
Multi channel retail are:
• Customers that use the online channel in addition to traditional store-based retailing has grown
by 20-30% year over year
• Internet influenced offline spending has grown significantly over the past few years
• Cross-channel customers are younger and wealthier
• Customers spend more at the store (about $150) when buying a product after performing their
research online; increasing the retailer ‘s share of the customer wallet

a) Store channel:
Store-Based Sellers – By far the predominant method consumers use to obtain products is to
acquire these by physically visiting retail outlets (a.k.a. brick-and-mortar). Store outlets can. be
further divided into several categories. One key characteristic that distinguishes categories is
whether retail outlets are physically connected to one or more others stores:
 Stand-Alone – These are retail outlets that do not have other retail outlets connected.
 Strip-Shopping Centre – A retail arrangement with two or more outlets physically
connected or that share physical resources (e.g., share parking lot)
 Shopping Area – A local centre of retail operations containing many retail outlets that
may or may not be physically connected but are in close proximity to each other such as a
city shopping district.
 Regional Shopping Mall – Consists of a large self-contained shopping area With many
connected outlets
b) Catalog channel:
The consumer selects the goods he/she wants to purchase from an online catalog. This
catalog may be hosted either on the SAP Marketplace or on the retailer's Web site. Once
the order is complete, the customer confirms it and notes the order number. The order is
then transferred to the retailer's SAP System, the necessary materials are reserved, the
internal order is triggered, and the goods are sent off and delivered by a service partner.
 Using the confirmed order number, the customer can check the status of the shipment at
any time on the Internet. Once the goods have been shipped and the customer has
received them, the goods receipt is confirmed and based on this, billing then takes place
c) Internet channel: When a firm uses its website to offer products for sale and then
individuals or organizations use their computers to make purchases from this company,
the parties have engaged in electronic transactions (also called on line selling or internet
marketing). Many electronic transactions involve two businesses which focus on sales by
firms to ultimate consumers. Thus, online retailing is one which consists of electronic
transactions in which the purchasers ‘an ultimate consumer.

Customer buying behaviour:

The buying Process:
1. Need recognition / Problem recognition: The need recognition is the first and most
important step in the buying process. If there is no need, there is no purchase. This
recognition happens when there is a lag between the consumer‘s actual situation and the
ideal and desired one. .
However, not all the needs end up as a buying behaviour. It requires that the lag between
the two situations is quite important. But the ―way‖ (product price, ease of acquisition,
etc.) to obtain this ideal situation has to be perceived as ―acceptable‖ by the consumer
based on the level of importance he attributes to the need.
2. Information search Once the need is identified, it‘s time for the consumer to seek
information about possible solutions to the problem. He will search more or less
information depending on the complexity of the choices to be made but also his level of
involvement. (Buying pasta requires little information and involves fewer consumers than
buying a car.)
Then the consumer will seek to make his opinion to guide his choice and his decision-
making process with:

Internal information: this information is already present in the consumer‘s memory. It

comes from previous experiences he had with a product or brand and the opinion he may
have of the brand.

Internal information is sufficient for the purchasing of everyday products that the
consumer knows – including Fast-Moving Consumer Goods (FMCG) or Consumer
Packaged Goods (CPG). But when it comes to a major purchase with a level of
uncertainty or stronger involvement and the consumer does not have enough information,
he must turns to another source:
External information: This is information on a product or brand received from and
obtained by friends or family, by reviews from other consumers or from the press. Not to
mention, of course, official business sources such as an advertising or a seller‘s speech.
3. Alternative evaluation Once the information collected, the consumer will be able to
evaluate the different alternatives that offer to him, evaluate the most suitable to his needs
and choose the one he think it‘s best for him.

In order to do so, he will evaluate their attributes on two aspects. The objective
characteristics (such as the features and functionality of the product) but also subjective
(perception and perceived value of the brand by the consumer or its reputation).

Each consumer does not attribute the same importance to each attribute for his decision
and his Consumer Buying Decision Process. And it varies from one shopper to another.
Mr. Smith may prefer a product for the reputation of the brand X rather than a little more
powerful but less known product. While Mrs. Johnson has a very bad perception of that
same brand. The consumer will then use the information previously collected and his
perception or image of a brand to establish a set of evaluation criteria, desirable or
wanted features, classify the different products available and evaluate which alternative
has the most chance to satisfy him.
4. Purchase decision Now that the consumer has evaluated the different solutions and
products available for respond to his need, he will be able to choose the product or brand
that seems most appropriate to his needs. Then proceed to the actual purchase itself.

His decision will depend on the information and the selection made in the previous step
based on the perceived value, product‘s features and capabilities that are important to
him.
5. Post-purchase behaviour Once the product is purchased and used, the consumer will
evaluate the adequacy with his original needs (those who caused the buying behaviour).
And whether he has made the right choice in buying this product or not. He will feel
either a sense of satisfaction for the product (and the choice). Or, on the contrary, a
disappointment if the product has fallen far short of expectations.

An opinion that will influence his future decisions and buying behaviour. If the product
has brought satisfaction to the consumer, he will then minimize stages of information
search and alternative evaluation for his next purchases in order to buy the same brand.
This will produce customer loyalty.

Types of buying decisions:

1. Extended problem solving:

Is a purchase decision process in which customers devote considerable time and

efforts to analyse the alternatives. Customers typically engage in extended problem
solving when purchase decision involves a lot of risk and uncertainty. Financial risk
 arises when a customer purchases an expensive product or service. Physical risks are
important when customers feel that a product or service may affect their health or
safety. Social risks arise when customers believe a product will affect how others
view them. Consumers engage in extended problem solving when they are making
buying decision to satisfy an important need or when they have little knowledge
about the product or service.
2. Limited problem solving:

Is a purchase decision process involving a moderate amount of time and effort.

Customers engage in this type of buying process when they have had some prior
experience with the product or service and their risk is moderate. In these situations,
customers tend to rely more on personal knowledge than on external information.
They usually choose a retailer they have shopped at before and select merchandise
they bought in the past. The majority of decisions involve limited problem solving.
One common type of limited problem solving is impulse buying, which is a buying
decision made by customers on the spot after seeing the merchandise.
3. Habitual decision making:

Is a purchase decision process involving little or no conscious effort. Today‘s

customers have many demands on their time. One way they cope with these time
pressures is by simplifying their decision-making process. When a need arises,
customers may automatically respond with, ―I‘ll buy the same thing i bought last
time from the same store.‖ typically, this habitual decision –making process is used
when decisions aren‘t very important to customers and involve familiar merchandise
they have bought in the past. When customers are loyal to a brand or a store, they are
involved in habitual decision making.

Factors influencing the buying process:

1. Cultural factors:
Cultural factors are coming from the different components related to culture or
cultural environment from which the consumer belongs.
Culture and societal environment:
Culture is crucial when it comes to understanding the needs and behaviours of an
individual.
Throughout his existence, an individual will be influenced by his family, his
friends, his cultural environment or society that will ―teach‖ him values,
preferences as well as common behaviours to their own culture.
For a brand, it is important to understand and take into account the cultural factors
inherent to each market or to each situation in order to adapt its product and its
marketing strategy. As these will play a role in the perception, habits, behavior or
expectations of consumers.
2. Social factors
Social factors are among the factors influencing consumer behavior significantly.
They fall into three categories: reference groups, family and social roles and
status.
Reference groups and membership groups:
The membership groups of an individual are social groups to which he belongs
and which will influence him. The membership groups are usually related to its
social origin, age, place of residence, work, hobbies, leisure, etc..

The influence level may vary depending on individuals and groups. But is
generally observed common consumption trends among the members of a same
group.

The understanding of the specific features (mindset, values, lifestyle, etc..) of each
group allows brands to better target their advertising message.

More generally, reference groups are defined as those that provide to the
individual some points of comparison more or less direct about his behavior,
lifestyle, desires or consumer habits. They influence the image that the individual
has of himself as well as his behavior. Whether it is a membership group or a non-
membership group.

Because the individual can also be influenced by a group to which he doesn‘t

belong yet but wishes to be part of. This is called an aspirational group. This
group will have a direct influence on the consumer who, wishing to belong to this
group and look like its members, will try to buy the same products.

Family:

The family is maybe the most influencing factor for an individual. It forms an
environment of socialization in which an individual will evolve, shape his
personality, and acquire values. But also develop attitudes and opinions on
various subjects such as politics, society, social relations or himself and his
desires.

But also on his consumer habits, his perception of brands and the products he
buys.

We all kept, for many of us and for some products and brands, the same buying
habits and consumption patterns that the ones we had known in our family.
Perceptions and family habits generally have a strong influence on the consumer
buying behavior. People will tend to keep the same as those acquired with their
families.

Historical perspective

The retail industry emerged in the US in the eighteenth century, restricted to

general stores. Specialty stores were developed only in those areas that had a
population of above 5,000 Supermarkets flourished in the US and Canada with
the growth of suburbs after World War II. The modern retail industry is booming
across the world. Revenues from retail sales in the US alone stood at $4.48 trillion
in 2007, according to a report by the US Census Bureau.

Role of retailing:

1. Destination: The retailer uses the destination category to take a leadership role
in the market. The destination category communicates the retailer‘s commitment
to meet the specific needs of consumers. It delivers consistent superior value to
target shoppers and is used to define the target consumer image of the retailer for
the market. For example, a store might want to be known as the preferred
destination for ready-to-eat meal solutions. Their deli would then be well stocked
with a wide variety of prepared meals and side dishes. The destination category
draws shoppers to the store where they can do the rest of their shopping when
they come in for dinner.

2. Routine: The routine category is designed to assist in building the target

consumers' image of the retailer. A routine category serves as a link between the
retailer and the consumer. This would include most of the "routine" items
consumers typically put on their shopping list.

3. Preferred routine: The preferred routine role for a category is used to help
define the retailer as the preferred choice by delivering consistent superior
value to the target consumer. This is the trusted retailer that consumers go to
when they try to fill specific needs—for instance, one that's committed to
having best-quality produce in the market. Produce is a routine purchase for
consumers, but produce selection can vary greatly by retailer. Natural stores
can differentiate themselves by offering the best local and regional produce in
the market.
 4. Seasonal/occasional: A seasonal/occasional role for a category is focused on
specific events—the floral department for Mother‘s Day. Retailers typically
place a great deal of emphasis on the floral department on Mother's Day by
increasing their selection, inventory and gift ideas.

5. Convenience: The convenience role is geared toward filling impulse needs.

This category strategy typically plays an important role delivering profit and
margin enhancement through items like the ready-to-eat meals in the deli and
the chilled single serve beverages at the checkout lines.

Trends in Retailing:
The Retail Industry is changing rapidly due to various reasons
1. Spatial convenience: Number of working women has fuelled an intense demand for
convenience. The quest for convenience on the part of consumers is shown by
o frantic growth of convenience store fuelled by the entry of Petroleum marketers
AM/PM store
o Exploding Popularity of online shopping operators
o Diversification of vending machine into food /clothing and videotapes.
2. Increased power of retailer: At one time, Colgate dominated retailers. Now the retailers tend
to dominate them. The reasons for this reversal are many. Retailers have many new products
from which to choose when deciding what to stock on their shelves. Further the IT has diffused
throughout retailing to such an extent that virtually all major retailer can capture item-by-item
data via scanning devices at that electronic point of sale terminal. This knowledge of information
has permitted retailers to calculate the (DPP) Direct Portfolio of Individual Items, track what
moves and what does not move well in their stores. So the Manufacturers struggled to get space
in the shelves of retailers. They offer Pricing concession, slotting allowance etc., to promote
products.
3. Growing Diversity of Retail formats: Consumers can now purchase same merchandise from
wide variety of retailers. They are Dept. store, specialty store, convenience store, category killer,
Mass merchandiser, Hypermarket.
o Mom and Pop Stores and Traditional Kirana stores: A small independent store across product
categories is very common retail format in India. Particularly in small townships
o E- commerce: The amount of retail business conducted on the Internet is growing every year.
Companies like Amazon. Com and First and second.com which helped pioneer the retail e-
commerce. Fabmart.com
o Department store with varied merchandising operations
o Franchise: Territory rights are also sold to franchisees. Various distribution and other services
are provided by contract to franchisees for fee. Ex. McDonalds, Blockbuster Video
o Warehouse club- wholesale club: Appeal is to price conscious shopper. Size is 60000 sq. ft. or
more. Product selection is limited and products are usually sold in bulk size.
o Mail order catalog: Non-store selling through the use of literature sent to potential customer.
Usually has a central distribution centre for receiving and shipping direct to the customer.
o Speciality Discounter –Categorykiller:
Offers merchandise in one line (e.g. sporting goods, office supplies; children merchandise) with
great depth of product selection at discounted prices. Stores usually range in size from 50,000 to
75000 square feet.
4.Emergence of region-specific formats: In deptl store format, while most A class cites and
metros have larger stores of 50000 sq ft sizes, stores in B Class towns have stabilized in the
25000- 35,000 sq. feet range. Most players have started operating these 2 formats across various
cities, which has helped them to standardize the merchandise offering across the chain.

5.Entry of International Players: A large no. of international players has evinced interest in
India despite the absence of favorable government policies.

6.Mall Development: Modern malls made their entry into India in the late 1990s with the
establishment of cross roads in Mumbai and Ansal Plaza in Delhi. According to a market
estimate, close to 10mn sq. feet of mall space is being developed across several cities in the
country.

FDI in Retail: FDI in retail industry means that foreign companies in certain categories can sell
products through their own retail shop in the country. At present, foreign direct investment (FDI)
in pure retailing is not permitted under Indian law
Government of India has allowed FDI in retail of specific brand of products. Following this,
foreign companies in certain categories can sell products through their own retail shops in the
country. India‘s retail industry is estimated to be worth approximately US$411.28 billion and is
still growing, expected to reach US$804.06 billion in 2015.

As part of the economic liberalization process set in place by the Industrial Policy of 1991, the
Indian government has opened the retail sector to FDI slowly through a series of steps: 1995:
World Trade Organization‘s General Agreement on Trade in Services, which includes both
wholesale and retailing services, came into effect.

1997: FDI in cash and carry (wholesale) with 100% rights allowed under the government
approval route. 2006: FDI in cash and carry (wholesale) brought under the automatic route. Up
to 51 percent investment in a single-brand retail outlet permitted.

2011: 100% FDI in single brand retail permitted. The Indian government removed the 51 percent
cap on FDI into single-brand retail outlets in December 2011 and opened the market fully to
foreign investors by permitting 100 percent foreign investment in this area. Government has also
made some, albeit limited, progress in allowing multi-brand retailing, which has so far been
prohibited in India. At present, this is restricted to 49 percent foreign equity participation. The
spectre of large supermarket brands displacing traditional Indian mom-and-pop stores is a hot
political issue in India, and the progress and development of the newly liberalized single-brand
retail industry will be watched with some keen eyes as concerns further possible liberalization in
the multi-brand sector.

FDI IN SINGLE-BRAND RETAIL While the precise meaning of single-brand retail has not
been clearly defined in any Indian government circular or notification, single-brand retail
generally refers to the selling of goods under a single brand name.

Up to 100 percent FDI is permissible in single-brand retail, subject to the Foreign Investment
Promotion Board (FIPB) sanctions and conditions mentioned in press Note. These conditions
stipulate that: Only single-brand products are sold (i.e. sale of multi-brand goods is not allowed,
even if produced by the same manufacturer). Products are sold under the same brand
internationally.

Single-brand products include only those identified during manufacturing. Any additional
product categories to be sold under single-brand retail must first receive additional government
approval FDI in single-brand retail implies that a retail store with foreign investment can only
sell one brand.

For example, if Adidas were to obtain permission to retail its flagship brand in India, those retail
outlets could only sell products under the Adidas brand. For Adidas to sell products under the
Reebok brand, which it owns, separate government permission is required and (if permission is
granted) Reebok products must then be sold in separate retail outlet.

FDI IN ―MULTI-BRAND RETAIL While the government of India has also not clearly
defined the term ―multi-brand retail,‖ FDI in multi-brand retail generally refers to selling
multiple brands under one roof. Currently, this sector is limited to a maximum of 49 percent
foreign equity participation. These are positive steps and it will encourage international brands to
set up shop in India. On the other hand, this will also lead to competition among Indian players.
It will be the consumers who stand to gain,'' This would not change the market dynamics
immediately as it will take some time for these plans to fructify.

Problems of Indian retailing:

1. Global economic slowdown impacting consumer demand: The current contraction in

overall growth has not been so severe ever since the one witnessed during World War II. The sub
prime-triggered crisis in the US during end of 2007 gradually spread across other parts of the
world; as a the fallout of this crisis, credit availability dropped sharply in advanced economies
and their GDP growth contracted incessantly during the last quarter of 2008. the financial crisis
continued to trouble advanced and developing economies in spite of policymakers‘ attempts to
replenish liquidity in these markets. Many financial institutions collapsed and filed for
bankruptcy, as the situation got from bad to worse. Many banks/institutions made massive write-
downs following this turn of events. During 2007-10, the write-downs on global exposures are
expected to be worth US$ 4 trillion while the write downs on the US-originated assets alone are
likely to be worth US$ 2.7 trillion11. Such massive write-down will affect the financial system
to a grave extent, as it is likely to further strain banks ‘funding capabilities. Already these write-
downs are turning into a major challenge for banks/financial institutions because of solvency
issues, and deepening risk of failure of banks/ financial institutions. Failure of the US investment
bank Lehman Brothers, for instance, has had an enormous impact on the overall global financial
system, and has consequently shaken the confidence of banks, investors, households etc.

2. Consumption declines in the advanced economies: Private consumption expenditure is an

important indicator of overall economic growth. In the last couple of quarters, the decline in
consumption has further affected the global economic downturn. Moreover, widespread financial
crisis severely hit credit availability and household disposable income. For instance, US
households lost 20% (US$ 13 trillion)14 of their net worth as a percentage of disposable income
from the second quarter of 2007 to the fourth quarter of 2008. The stock prices across the world
started falling during the second quarter of 2007 and continued its losses throughout 2008; the
global stock market lost between 40-60% in dollar terms that translated to a huge loss of global
wealth in 2008. The personal disposable income (at current prices) in the US registered negative
growth (3.9% and 2.1%) during the last two quarters of 2008, respectively. The consumer
demand situation was aggravated further by reduced capital availability and consequent fall in
investments.

3. Competition from the unorganized sector Organized retailers face immense competition
from the unorganised retailers or kirana stores (mom-and-pop stores) that generally cater to the
customers within their neighbourhood. The unorganised retail sector constitutes over 94% of
India‘s total retail sector and thus, poses a serious hurdle for organised retailers. If put
numerically, the organised retailers are facing stiff competition from over 13 million kirana
stores that offer personalised services such as direct credit to customers, free home delivery
services, APART from the loyalty benefits. During the current economic slowdown, the
traditional kirana stores adopted various measures to retain their customers, which directly
affected organised retailers. Generally, it has been observed that customers shop impulsively and
end up spending more than what they need at organised retail outlets; however, in kirana stores,
they stick to their needs because of the limited variety. During a downturn, many customers may
not like to spend . 22 .. more as is evident from the past few months‘ trend that shoppers are
increasingly switching from organised retail stores to kiranas.

4. Retail sector yet to be recognised as an industry The retail sector is not recognised as an
industry by the government even though it is the second-largest employer after agriculture. Lack
of recognition as an industry affects the retail sector in the following ways:  Due to the lack of
established lending norms and consequent delay in financing activity, the existing and new
players have lesser access to credit, which affects their growth and expansion plans  The
absence of a single nodal agency leads to chaos, as retailers have to oblige to multiple authorities
to get clearances and for regular operations

5.High real-estate costs Even though the real estate prices have subsided recently due to the
slowdown in economies and the financial crises, these prices are expected to go up again in the
near future. Presently the sector faces high stamp duties, pro-tenancy acts, the rigid Urban Land
Ceiling Act and the Rent Control Act and time-consuming legal processes, which causes delays
in opening stores.

Earlier on the lease or rents on properties were very high (among the highest in the world) at
some prominent locations in major cities. The profitability of retail companies were affected
severely because real costs constituted a major part of their operating expenses. Now companies
are moving out from prominent malls of tier I cities and are re-negotiating the rental agreements
with landlords to reduce costs. Some are even focussing on setting up shops in tier II and tier III
cities.
6. Lack of basic infrastructure Poor roads and lack of cold chain infrastructure hampers the
development of food retail in India. The existing players have to invest substantial amounts of
money and time in building a cold-chain network.
7. Supply-chain inefficiencies Supply chain needs to be efficiently-managed because it has a
direct impact on the company‘s bottom lines. Presently the Indian organised retail has an
efficient supply chain but it appears efficient only when compared with the unorganised sector.
On an international level the Indian organised retailers fall short of international retailers like
Wal-Mart and Carrefour in terms of efficiencies in supply chain. In the following paragraphs
some key challenges that the retailers face during procuring goods from suppliers to delivering
the same to end-customers are discussed.

8. Challenges with respect to human resources The Indian organised retail players shell out
more than 7% of sales towards personnel costs. The high HR costs are essentially the costs
incurred on training employees as there is a severe scarcity for skilled labour in India. The retail
industry faces attrition rates as high as 50%, which is high when compared to other sectors also.
Changes in career path, employee benefits offered by competitors of similar industries, flexible
and better working hours and conditions contribute to the high attrition.

9. Shrinkage Retail shrinkage is the difference between the book value of stock and the actual
stock or the unaccounted loss of retail goods. These losses include theft by employees,
administrative errors, shoplifting by customers or vendor fraud. According to industry estimates,
nearly 3- 4% of the Indian chain‘s turnover is lost on account of shrinkage. The organised
industry players have invested IT, CCTV and antennas to overcome the problem of shrinkage.