UNIT - I

INTRODUCTION TO RETAIL BUSINESS

Retail Concept
Word retail implies to sell or to vend to ultimate users. Retail is a final step in
distribution system that involves selling goods and service in original form in small
quantity directly to the consumers for their personal use. It is the only stage where
consumers come in direct contact with sellers.
Meaning of Retailing
Retailing is an important economic activity. Retailing means selling goods and
services to the final consumers. There are two components involved in it. They are
sellers and consumers. The word retail is derived from the French word 'retaillier’
which means to cut off a piece or to break the bulk. Retailer may be defined as a
dealer or trader who sells goods in small quantities or one who repeats or relates.
Thus, retailing may be understood as the final step in the distribution of merchandise
for the consumption by the end consumers.
Definitions of Retailing
According to Philip Kotler, "Retailing includes all activities involved in selling goods
and services to the final consumers for personal or non personal use. A retailer or
retail store is any business enterprise whose sales volume comes primarily from
retailing. "
According to Berman and Evans, "Retailing is said to encompass the business
activities involved selling goods and services to consumers for their personal, family
or house hold use."

FEATURES OR CHARACTERISTICS OF RETAILING

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.
2. Delivery of the goods to the end consumer: This makes shopping for all
requirements quite stress-free for the consumers. This function 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.
3. 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.
4. 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.
5. 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.
6. 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.
7. 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.
8. Stores the goods as per market requirement: The retailer invests his working
capital in building a range 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.
9. 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 favorable market
conditions for the product of the manufacturer.
10. 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 a risk of loss of these
goods on account of destruction, theft, spoilage etc. The retailer assumes these
risks while storing goods.
11. Extends credit facilities to the consumers and assumes credit risk: The retailer
does so to encourage shopping. This adds to the strength 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.
12. 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.
13. 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.
14. Offers after sale services: Retailers offer after sale services, differentiated
packaging, giving more information about the use of the product. All these
activities add value to the retail transaction and cater to various requirements of the
consumers suitably.
15. Hears the voice of the market: The retailer measures the beat of the market by
listening to the consumer feedback, expectations, complaints, and by observing a
shift in the tastes and preferences of the consumers. This arms him with very
critical market intelligence enabling the entire commercial fraternity to gear up for
the changing economic scenario.
16. Generating employment for masses: Retail trade, especially the brick-and-
mortar models, are human resource-centric establishments. They require many
employees for numerous functions such as stock taking, over the counter selling,
packaging, after sales services, floor management etc. Thus, retail sector provides
lots of employment opportunities for all the talented job aspirants.
17. 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.
18. 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.

IMPORTANCE OF RETAILING
Importance of retail marketing cannot be ignored for today’s manufacturers. Retail
stores play an important role in high-level exposure of businesses and
widespread distribution of products. In retail stores, retailers get opportunities to
interact with customers (the ultimate consumers of your products).
In addition to this, you can promote products to them and also provide chances to
them view and test products before making a purchase decision.
1. Sales to Ultimate consumers of the products: In a retail transaction, the goods
and services are sold to ultimate or final consumers. The products don’t get resold
after this transaction. Goods and services sold at this point can be used for various
purposes such as for domestic use, household use or for industrial use. Hence, at
this point manufacturer can interact with his consumers through retailer and know
about their views.
2. A convenient form of selling quantity-wise: The meaning of word retail is to
break down the goods in small pieces and reselling them. The goods are bought by
the retailer in large quantities from the middleman or manufacturer and bulk is
divided into small quantities and sold to consumers as per their requirements. To
do this, the retailer can repack goods in various quantities and shapes so that it is
convenient for consumers to choose and carry them to their homes.
3. Convenient Place and Location: Retailer stores are generally set up at locations
which are convenient for consumers to reach. A retail store can be of various
forms such as it could be a small shop, small store, or a multiplex. Goods can be
sold through internet and mobile apps as per the convenience of consumers.
 Moreover, shopping online is becoming a new trend because of the advancement
in technology and courier services. Therefore, more and more companies are
taking their business online where customers can view products at the comfort of
their home and buy them.
4. The lifestyle of the people is shaped by retailing: Retailing is an integral part of
modern society. People highly depend on retail stores to lead a comfortable life. In
the past time, goods and service were made available through the process of
trading. But in present times trading is replaced by buying and selling goods which
makes retail stores an important part of the society.
5. Retail businesses contribute to the economy: In many countries, the retail
business is one of the biggest contributors to the Gross Domestic Product (GDP)
and its contribution has increased as compared to past and is also increasing day by
day. Retailing is a driving force of the economy and its ambition is to encourage
sustained growth.
6. Retail dominates the supply chain: In a supply chain, goods and services flow
from the manufacturer or a service provider to final consumers and when there is a
huge number of consumers and they are distributed worldwide then the role of
retail stores become much more important. Retailers play the role of a connecting
link between a manufacturer and final consumers.
7. Retail is interdisciplinary: Retailing has developed from a number of interrelated
disciplines such as economics, geography, management, economics, and
marketing. Economics is useful to manage the finances of a store. The good
knowledge of geography is important to make the right choice of location to open
a store. Management plays an important role in managing your staff and inventory
and similarly, right marketing helps you to penetrate in the market.
8. Retailers provide maximum employment: At the present time, the retail world
employs maximum people. As per estimation, one in nine of the workforces is
employed in the retail industry. Moreover, two third of the total workforce in the
retail world is women and more than half employees in retailing are part-time
employees, which provides flexibility to workers to adapt to the particular needs of
any employer.
9. Retailing is an important subject area of study: Because of the importance of
retailing more and more importance is being paid to the area of retailing. Retailing
is a separate subject of studies like management and marketing. Researchers have
been conducted and professionals being hired to make this sector grow. In addition
to this, academic journals concentrating on retailing are being published
worldwide.
10. Retailing offers scope for expansion in other countries: Retail provides a great
opportunity to expand in international markets. A retailer who wants to extend
their business by selling their goods in other countries opens stores in different
countries to increase the number of consumers of their products. However, it is not
easy to expand your business as it requires a lot of paperwork and formalities to be
done to be able to get clearance to take your business to other countries.
11. Retailers rule the channel of distribution: Retailers are becoming the rulers of a
channel of distribution. In past times, the power was in the hand of suppliers
because of a limited number of suppliers in the market. Retailers had no other
option than getting goods from the supplier to sell in their stores. But in present
times there are many suppliers for a single type of product.
Therefore, a retailer can make a decision for which brand to stock in their stores
and consumers buys products stock provided by the retailers. Therefore, retailers
play an important role in shaping the demands of consumers.
12. Provides Comfort and facilities for shopping: Shopping has become a satisfying
experience because of all the facilities and comfort provided by chain stores,
shopping malls, multiplexes, etc. People now don’t think shopping as work but
they look forward to it and consider it as a stress releasing and family activity.
The giant retailers provide various facilities such as air conditioning, parking,
entertainment, kids play section, lifts, trolleys to carry goods, food facilities, etc.
and retailing through mobile phones ensures doorstep delivery on all orders placed
through the website or mobile apps.
13. Provide services to the manufacturer: The retailer is the end part of the supply
chain and he is the one who interacts with the customers. Therefore, he has the
opportunity to know about the views of customers and their likes and dislikes.
Retailer gathers this information from his customers and shares it with the
manufacturer. This helps the manufacturer to make the required changes in the
quality of the product and improve its services to satisfy their customers.
Therefore, a retailer plays an important role in helping the manufacturer to
increase his revenue generation.
14. Provision of warehousing and storage: Warehousing is a big problem for a
manufacturer. A retailer buys goods in advance from the manufacturer and reduces
the problems of warehousing and storage for the manufacturer. In addition to this,
the retailer helps in increasing the sales of goods by displaying them nicely in the
retail store.
15. Advantage of an expert and specialist: Retailers are experts and have experience
in selling products to customers. He has a better understanding of customers and
their likes and dislikes because of this regular contact with them. He stores
products as per the need of customers and sells them to customers in different sizes
and shapes. In addition to this, with their experience of selling and knowledge
about the product they assist customers to choose the right product for them.
16. Creates utilities and value: Retailer increases the value of the product by creating
a place, time, and utility in the distribution of goods. Retailers buy products in bulk
and break them in small quantities and sell them in small packs. In this way, he
creates form utilities.

FUNCTIONS OF RETAILING
1. Buying: Buying means purchase of goods and services. Retailer purchases the
goods in bulk from the manufacturers or the wholesalers for the purpose of resale.
Thus, buying is an important function of retailing.
2. Selling: Selling is an act of transferring title of goods to the buyer for an agreed
price. Retailer sells the goods purchased by him, for the final consumers in small
quantities.
3. Transportation: transportation means carrying the goods and services from
manufacturer place to the retailer’s place. Thus, a retailer carries the goods and
services from the manufacturer or wholesaler to his place with the help of
transportation.
4. Storage and Warehousing: Storage is the protection and prevention of goods
until they are sold to the consumers. Thus, a retailer purchases the goods from the
manufacturers or wholesalers in bulk and stores them in his shop to sell to the final
consumers as per their requirements in small quantities.
5. Financing: financing is also an important function of retailing. Financing means
providing loans and advances to carry on marketing activities. Some time retailers
pay amount in advance to the wholesalers or manufacturers. At the same time,
retailer can sell the goods to consumers on credit. Thus, retailing performs the
function of financing.
6. Promotion: To maximize this profit, a retailer needs to promote the goods and
services which are in his custody. He has to undertake some promotional activities
like advertising, window display, brouchers, etc.
7. Risk-bearing: risks are natural and basic in every business. It means that, every
business is concerned with some kind of risks. Risks are unwanted and can lead to
loss to the retailer.
8. Packing: Another important function of a retailing is packing. Retailer purchases
the goods in bulk from the manufacturer or wholesaler. After purchasing, retailers
have to pack the goods in smaller quantities to sell it to the final consumers as per
their requirements.
9. Supply of Market Information: One of the major functions of retailing is supply
of market information. This function helps to the manufacturers. As retailers are in
close touch with consumers, they are well versed with the consumer’s like and
dislikes. This information helps to the manufacturer to produce the products
according to the consumer’s requirement.

RETAILER
A retailer is a person or merchant who deals in selling goods and services for the final
consumers for their personal and non-business purpose and whose sales volume
comes primarily from retailing.

Characteristics of Retailer
The followings are some of the essential characteristics of a retailer:
1. Last link in the distribution channel: Retailer is considered as the last link in the
chain of distribution as he sells the goods and services to the ultimate consumers.
2. Purchases in larger quantity and sells in small units: Retailer purchases goods
and services in large quantities from the wholesaler and sells the same in small
quantity to the consumer as per their requirements.
3. Deals in general products: Retailers deal in general products or a variety of
merchandise.
4. Personal contact with the consumer: Retailer develops personal contact with the
consumer as he is the only person in the distribution channel who directly connects
with the customers.
5. Provides maximum satisfaction: Retailer aims at providing maximum
satisfaction to the consumer by providing variety of products as per their
requirements.
6. Limited scope: Retailer has a limited scope in the market as he has to depend on
the manufacturers or wholesalers or suppliers.
7. Supplies necessary information to the manufacturer: Retailer gives valuable
market information with regard to taste, fashion and demand for the goods to the
manufacturers.

SERVICE OF A RETAILER
A retailer provides a number of services to the customer and to the wholesaler.
To Customers:
1. He provides ready stock of goods and as such he sells and quantity of goods
desired by the customers.
2. He keeps a large variety of goods produced by different producers and thereby
ensures a wide variety of choice to the customers.
3. He relives the consumers of maintaining large quantity of goods for future period
because he himself holds large stock of goods.
4. He develops personal relationship with the customers by giving them credit.
5. He provides free-home delivery service to the customers.
6. He informs the new product to the customers.
7. He makes arrangement for replacement of goods when he receives complaints.

To Wholesaler:
1. He gives valuable market information with regard to taste, fashion and demand for
the goods to the wholesaler.
2. The retailer maintains direct contact with the customers and so he relieves the
wholesaler with regard to maintenance of direct contact.
3. He helps the wholesaler in getting their goods distributed to the consumer.
4. He is regarded as an important link between the wholesaler and the consumer.
5. He creates demand for the products by displaying the goods to the consumers.
 THE FIVE PRINCIPLES OF RETAIL
One: The customer is the most important person in your business
The customer holds the key to every successful retail operation. The main retail
principle to master is the customer; the customer should be the centre of your business
and everything you do must rotate around that customer. Knowing them and focusing
on them in everything you do, will help you grow your business and your team the
customer is king.
Two: Retail is detail
One of the most famous principles in retailing is "retail is detail"– this is where the
challenge lies: how do you become more detailed and what detail should you focus
on? You need to address and improve your understanding of your customer. To do
this, every retailer must focus on the detail and get the detail right the majority of the
time. Mistakes are OK, but you must learn from them and do not repeat your mistakes.
Customers will allow you some mistakes, but too many will turn them away,
understanding the detail is a key skill to master in retail.
Three: Understand the four Ps
This is a very old principle but still has validity. This retail principle will help you
understand the overall foundations of a retail business; the 4 Ps: Product, Price, Place,
and Promotion. These are the basic foundations of a successful retail business.
a. Product: You need products that your customers want to buy and a product range
that will satisfy your customers' needs and desires. The products must also deliver
a profit for you to have a successful business;
b. Price: Price must be consistent across the marketing mix and meet all
requirements for your business. You need to price your product range at the correct
level for the customers to be able to buy your products, and for them to gain value
from your products. This could mean pricing high or low this very much depends
upon your customer offering;
c. Place: You must provide somewhere for your customers to purchase your product,
be that a physical store or an e-commerce website.
d. Promotion: Once you have a product - at the right price, in a place where the
customer can access it - you need to tell them about this and products, make sure
your customers know that you and your products exist and are available for them
to enjoy.
Four: Go the extra mile for your customer
Providing great customer service starts with understanding and knowing your
customer; however, knowing them is the start of the journey and you will need to
deliver more than just customer service. To be successful you must deliver world-
class customer service; you must "go the extra mile for the customer". You and your
team must continually go the extra mile for the customer, each time delivering just a
little more than they expect. Doing this each time you and your team interact with
your customers will win them over and make them loyal over a long period of time.
Five: Location
The final retail principle is location. History has dictated that this is one of the most
important factors in the success of a physical store and still to this day it will have a
major impact on your success. The best location of your store will be dictated by your
brand and product strategies. For example, a supermarket operation needs a car park
and a high fashion store needs to be in a high fashion area that attracts the right
customers for the store. However, that location has less effect now than previously,
due to two main factors: the first being the flexibility of the customers, now we often
travel more, and the second being the internet.

FUNCTIONS OF RETAILER IN THE DISTRIBUTION CHANNEL

1. Providing Assortments: Manufacturers generally specialize in producing specific
types of products: For example, Cadbury's makes chocolates, Kellogg makes
breakfast cereals and Everest makes spices. If such manufacturers decided to have
their own stores selling only their own products, consumers would have to go to
many different stores to make purchases for their requirements. Retailers collect a
variety of products and services from a number of sources and then offer these as
an assortment to their customers, offering an assortment enables their customers to
choose from a wide selection of brands, designs, sizes, colours, and prices in one
location.
2. Breaking Bulk: Breaking bulk is beneficial to both manufacturers and consumers.
Manufacturers prefer to ship products in bulk quantity carton in order to reduce
transportation costs as it is more cost effective for manufacturers to package and
ship merchandise in larger, rather than smaller quantities. Consumers, in turn,
prefer to purchase merchandise in smaller, more manageable quantities. Retailers
purchase the products in larger quantities from manufacturers and then offer the
products in smaller quantities to the consumers as per their requirements. This is
called breaking bulk.
3. Holding Inventory: Holding inventory is a major function of retailers in order to
keep inventory that has been broken down from their bulk packaging into user-
friendly sizes so that products can be made available in smaller quantities
whenever consumers want them. Consumers find this beneficial since they have
limited storage space especially for perishable merchandise like dairy and frozen
products.
4. Providing Convenient Locations and Timings: Retailers select the locations of
their stores and keep them open for longer timings so that they are conveniently
located and available to their customers for fulfilling their requirements of goods
and services as soon as they require them.
5. Providing Services: Retailers provide services in order to make it easier for
consumers to buy and use products, this could be in the form of providing credit to
consumers so that they can use a product now and pay for it later. This could also
involve services like providing the space required for displaying products so that
consumers can see the variety and feel and test them before buying. Retailers may
 also provide additional information about the characteristics and availability of
products to customers through salespeople who are available to answer questions.
6. Recording and Providing Feedback: Retailers record transactions and feedback
from customers which they inform back to wholesalers and manufacturers in the
form of sales forecasts, delivery delays, defective items, customer complaints,
inventory turnover, and other information. This retailer feedback enables the
wholesalers and manufacturers to modify goods and services in order to better
satisfy customers and in the process increase their sales.
7. Increasing the Value of Products and Services: Retailers provide assortments,
break bulk, hold inventory, offer convenient locations and timings, provide
services, and record and provide feedback, thus increasing the value provided to
consumers from products and services.

ADVANTAGES AND LIMITATIONS OF THE RETAIL BUSINESS

Advantages
1. Options for Own, Franchisee or Employee: Retailing is one of the few
businesses in the world that provides the prospective retailer many diverse options
for starting the business. One can either start one's own retail store or take the
franchise of a well-established retail chain where most of the technology and
expertise would be given by the franchiser. Apart from this, most small retailers
with adequate experience in their own relatively smaller stores, can also take up
rewarding careers as employees in much larger chain stores, a incident especially
seen in the west.
2. Broad Selection of Retail Formats to choose from: While the concept and
principles of retailing are quite similar across the world, every entrepreneur or
employee has innumerable choices of retail formats with which he would be
associated. If one has an extensive knowledge of food items, one can open a food
supermarket, while someone with a wide knowledge of cooking, can start a fast
food store. A fashion- oriented individual, on the other hand, could well decide to
start a garment-focused department store. There are thus hundreds of retailing
options to choose from.
3. Easy Mobility: As mentioned earlier, the principles and concepts of retailing are
quite similar across the world, with the result that retail experience and knowledge
are easily transferable. As retail stores exist in all communities, people who wish
to relocate can usually find suitable opportunities in their new surroundings more
easily than would be possible in another type of business.
4. People-oriented Industry: Retailing affords one the opportunity to work with and
meet interesting people. In fact practically no other business in the world offers an
opportunity to meet such a wide cross-section of people, which could possibly
include a star or a famous personality or even a powerful politician in the list of
customers at ones retail outlet.
5. Reasonably Secure Business: Despite periods of slowdown in the economy,
retailing is a fairly stable business. Many retailing formats deal with essential
 products which are the least affected by a recession in the economy. It is
interesting to note that the history of supermarkets around the world has, in fact,
registered an increasing popularity during periods of recession. Since most large
retailers are known for buying items in bulk and selling them at much lower rates
than their smaller competitors, most people frequent these larger stores even more
during such times.
6. Non-dependence on Few Vendors or Few Customers: The very nature of the
retail business ensures that one is never dependent on a handful of vendors or even
a handful of customers. It is apparent from the preceding chapters that irrespective
of whichever store format one chooses, the numbers of individual items as well as
the variety in each product line have to be fairly large. This means that the number
of vendors that one has to deal with is also very large. The company is never
dependent on an individual vendor or even a handful of vendors, as it has several
options.
7. Tried and Tested Formula: The organized retail business is not an invention of
India or of any one country or individual. It has developed over the decades all
over the world and has witnessed a series of successes in every country where it
has been undertaken.
8. Minimum Taxation: With retailing being an extremely high volume business,
complete integrity of data is of prime importance, with the result that there is
practically no possibility of manipulating sales figures or sales tax in organized
retailing unlike retailing in the unorganized sector. The former also enjoys a
distinct advantage in terms of income tax.
9. Fixed Price Business: Organized retailing is basically a self-service business
involving the art of displaying a large variety of items in logical sequence. The
hundreds of customers who visit such self-service stores are able to pick and
choose items with ease and without having to enquire about the prices or spoil in
bargaining.
10. Opportunity for Constant Growth and Innovation: As explained earlier, a
profitable retailer always stands to benefit by dividing his successful format across
other newer locations. A creative or ambitious individual can never get bored with
retailing as there is always scope for continuous growth, unlike many other
industries. In retailing even companies that have been in existence since the
nineteenth century is expanding till today using new formats.
11. Negative Working Capital Requirement: Since most organized retailers survive
on high volumes and hold a significant portion of the market share of their
products that they deal in, it is natural for vendors to try and attract them with all
sorts of facilities. One of the vital advantages for retailers is that they are able to
avail of substantial interest-free credit offered by their vendors.

Limitations
1. Low Initial Returns: While any new business has a development period,
organized retailing in India may have a slightly higher and more tiring
development period than others since it is not only a new business but also a new
 concept. Even the starting salaries offered to professionals may be relatively low
initially. Once an individual gains a foothold and fully understands the science of
retailing, he can climb over the rank.
2. Easy Negative Publicity: A retail operation typically touches the lives of almost
every family in any region and often becomes quite popular with its respective
target customers. Under such circumstances any minor mistake made by the
company or its staff carries with it the risk of being blown out of proportion by the
press and soon becomes gossip news for the entire region with extremely severe
impact for the retailer.
3. Non-standard Working Hours: This is commonly cited as a negative factor in
retailing as most stores include evenings, Saturdays, Sundays and even holidays as
working time. Retailing involves a lot of hard work, commitment and dedication,
and holidays are usually peak days in the life of a retail outlet. This is likely to
change one's entire lifestyle and one's family members must also be prepared to
make initial sacrifices.
4. Lack of Expertise in India: Since organized retailing has never before been as
popular as it is today, the expertise for running such an operation is not adequately
available.

Guidelines for an Effective Retailing

An effective retailer should follow these guidelines or principles:
1. Provide highly personalised and extraordinary service.
2. Maintain high variety and required inventory.
3. Learn how to win and maintain the customers.
4. Keep the details of your regular and privileged customers in your data base and be
in constant touch with them.
5. Buy with precision and search out speciality suppliers.
6. Employ most efficient and qualified staff.
7. Always be pro-active and dynamic in change and innovation.
8. Stop unnecessary competing directly with big competitors.
9. Go for computerisation and frequent use of internet.
10. Charge regular and fixed pieces do not go for false discount.

TYPES OF RETAILING / FORMS OF RETAIL BUSINESS OWNERSHIP

A. Speciality Stores:
Speciality stores are retail businesses that focus on specific product categories,
such as office supplies, men's or women's clothing and carpet. It isn't the product
they sell that determines if a company is a specialty store but rather the breadth of
their product offering. If a company could be considered an expert in a certain type
of good, it is a specialty store. They also add value by offering accessories and
additional related products at the same outlet.
Examples of Speciality Stores: medical stores, electronics, toys, etc.
 Advantages
a. Usually quite small, you can find what you want very quickly.
b. You can find what you need, no unnecessary stuff.
c. It is in your neighbourhood, so don't need to drive always
Limitations
a. If it deals in only one type of goods. More customers may not visit such stores.
b. Difficulty to attract customers
c. Difficult to sell.

B. Department Stores:
A department store is a set-up which offers wide range of products to the end-users
under one roof. In a department store, the consumers can get almost all the
products they desire to shop at one place only. Department stores provide a wide
range of options to the consumers and thus fulfil all their shopping needs. This
type of retailer is often the most complex, offering a wide range of products and
can appear as a collection of smaller retail stores managed by one company.
For example: Shoppers’ Stop, Pantaloons, Westside, etc.
Features of Departmental Store
1. Departmental store gives shopping convenience: A departmental store
enables a customer to purchase all his requirements under one roof. Time is
saved as there is no need to visit several shops.
2. Departmental store has wide range of products: In a departmental store, a
customer makes his best choice depending upon his requirement. This best
choice is possible because there are wide range of products and brands
available.
3. Departmental store buys bulk goods for cheap: Goods purchased in bulk are
cheaper, because of the large discount allowed by the manufacturers and
savings in freight, loading and unloading charges. The goods are bought in bulk
from various sources at lower costs.
4. Departmental store provide various facilities: Departmental stores not only
sell goods but also provide various facilities like reading room, telephone,
drinking water, parking recreation hall, etc.
5. Departmental store does huge publicity: A departmental store has large
funds at its disposal. It can carry on advertisement and publicity on a large
scale. It can avail of the benefits of services of the experts.
6. Departmental store has a large turnover: Due to the central location,
shopping convenience, extensive advertisement, provision of services, etc, a
large number of customers are attracted. So, the turnover is usually very high.
7. Departmental store results in a higher efficiency: A departmental store
appoints experts for buying, advertising, accounting, etc. Similarly, skilled and
 qualified salesmen and other members of staff are appointed, which results in a
higher efficiency.
8. Departmental store can raise finance easily: Departmental stores have
generally business organization in the form of a limited company. Hence, they
can easily raise the necessary finance for running the company.
9. Departmental store gives facility to inspect goods: Departmental store
enables the customers to touch, feel and check the finishing quality goods
before any purchase.
10. Departmental store earns goodwill and reputation: Departmental stores
enjoy a lot of reputation and goodwill because of their efficient services to the
customers.
Advantages of Departmental Store
1. Departmental Store is located in the centre of a city: The departmental store
is usually located in the central area of a large city. Location and premises are
the two most important aspects for it. The departmental store is generally
situated at that place where a maximum number of people comes for shopping
2. Departmental Store offers a wide variety of goods: A departmental store not
only offers a wide variety of goods and but also provides a huge range of
designs, colours and styles that suit individual demands of consumers.
3. Departmental Store means shopping under one roof: The main idea behind
a departmental store is to supply all basic requirements under one roof. It acts
as a supplier of a large variety of quality goods and services. Thus,
departmental store provides maximum shopping convenience to its customers
4. Departmental Store offers quality goods and services: The motto of every
departmental store is to provide high quality goods and render professional
services to their customers. It always keeps a huge stock of fresh goods which
highlight latest fashions and trends followed by different manufacturers.
5. Departmental Store has a single management: Various sections of the
departmental store operate independently. However, they all are under direct
control of a single management buying, supervision, accounting, advertising
and external communications are handled directly by the central management
of a departmental store.
6. Departmental Store always attracts customers: Departmental stores have
attractive interior decoration and window display. They spend heavily on sales
promotion. This is done through the advertising, discounts, special seasonal
offers, gift schemes, festival offer, etc.
7. Departmental Store fulfils needs of most families: Departmental store
mainly satisfies needs of the rich and higher middle class group of the society.
More attention is given to quality, choice, convenience and service rendered to
the customer.
8. Departmental Store renders good customer service: Departmental stores
offer efficient customer services such as inspection of goods, actual
demonstration of goods, convenient packages, provision for refreshment,
reading rooms, home delivery, parking facility, etc.
9. Departmental Store operates by appointing experts: The departmental store
conducts its business on a very large scale and generates good profit revenues.
It can easily afford to appoint experts for purchasing, advertising, recruitment,
supervision, etc., and keeps operating smoothly.
10. Departmental Store sells goods only on cash basis: A departmental store
sells goods only on a cash basis. Generally, credit facilities are not offered to
customers to avoid the risk of bad debts.
11. Departmental S tore has a high operational cost: Departmental stores have
to incur high expenses by way of rent, advertising, provisions of conveniences
and facilities to its customers. Thus, costs of operation are high.
12. Departmental Store diffuses the risk of loss: The losses made by one
department of a departmental store can be compensated by profits earned by
other departments. Thus, the risk of loss is diffused and hence reduced.
Disadvantages of Departmental Store
1. Departmental store needs higher operating costs: The cost of running a
departmental store is very high. Since a departmental store is centrally located
the rent for the building is very high. It also offers personal services and
facilities, spends more on advertising and gives a high salary to skilled
employees. All these expenses increase the overhead expenses of a
departmental store.
2. Departmental store is difficult to supervise: A departmental store has many
departments with a large number of selling units. Effective co-ordination,
supervision and control of all the departments may not be always possible. This
may due to a shortage of qualified staff. Without a team of professional staff, it
creates problems of effective supervision and control over the work of
employees.
3. Departmental store always needs huge capital: A departmental store has
many departments dealing in different lines of products, since it aims at selling
everything under one roof. Such a large retail organization always requires a
large amount of capital to keep business running.
4. Departmental store maintains high prices: Generally, the prices of goods
sold in a departmental store are higher than those in the other small retail
shops.
5. Departmental store don't supply all goods: Departmental stores are not
capable of conducting all types of retail business. They supply certain varieties
of goods. It is physically impossible for them to supply all varieties or kinds of
goods.
6. Departmental store has to deal with thefts: In large stores, there are chances
of shoplifting, robberies, misuse, etc. The thefts can be committed by
customers as well as by staff members.
7. Departmental store gets low customer feedback: Departmental stores offer
services to a large number of customers. The salesmen in the stores, being
salaried staff can hardly give personal attention to all customers. Due to lack of
 contact with the customers, their feedback may be very low or sometimes may
not be possible.
8. Departmental store needs services of specialists: Departmental store requires
services of specialists to plan and to manage the store. However, it is difficult
to appoint and maintain specialists.

C. Supermarket:
A large form of the traditional grocery store is a self-service shop offering a wide
variety of food and household products. It is larger in size and has a wider
selection than a traditional grocery store, but is smaller and more limited in the
range of merchandise than a hypermarket. Generally this type of retailer
concentrates in supplying a range of food and beverage products. However many
have now diversified and supply products from the home, fashion and electrical
products too. Supermarkets have significant buying power and therefore often
retail goods at low prices.
For example: Food world, Nilgiris.
Features of Supermarket
a. Everything you need is available under one roof.
b. Availability of fresh and frozen items.
c. Easy to navigate around.
d. Car parking facility.
e. Self-service system.
f. Saving in labour cost due to self-service system.
g. Reasonable or low prices of goods.
h. Freedom of selection.
i. Advantages of large scale operations.
j. Shopping is very easy and quick.
k. Supermarket requires huge financial resources.
l. There is lack of personal attention.
m. Supermarket does not provide various services such as free home delivery,
personal guidance and credit facility and after sale service.
n. It requires large and extensive premises.
o. Goods which require explanation by salesmen cannot be sold in such markets.
Advantages of supermarkets:
a. All products under one roof: A supermarket is a building in which you can
buy all kinds of alimentary products like bread, meat, fish, and vegetables.
b. Comfortable for customers: Nowadays these are becoming very popular
because the people who buy there think that it is more comfortable to buy in
these big stores than in little ones.
c. Convenient parking locations: One advantage of this type of shops is that it's
easier to buy in them because they are very big and spacious. Buying in
 supermarkets takes less time than doing it in little shops, because there are
more parking places in big ones.
d. Products are comparatively cheap: The most important advantage is that
supermarkets are very cheap because most of them have their own brands.
They can sell their own products cheaper than others that are made by another
business or factory.
e. Self-service system: Supermarkets help to save lot money in labour cost due to
self-service system.
f. Large turnover: With the help of low operating cost and self- service system,
supermarkets able to enjoy the benefit of large turnover.
g. Shopping becomes a pleasing activity: In supermarkets, due to adequate
parking space and other facilities, shopping becomes easy and pleasing activity
rather than boredom.
Disadvantages of supermarkets:
a. Threat for small ones: Another disadvantage could be that these king of shops
make the little ones disappear, giving less workplaces to people.
b. Shortage of work: Another disadvantage is that this lack of work can't be
compensated by the workplaces that a supermarket gives, and, because of that,
lots of people are against these big stores.
c. People buy unnecessarily: Because people who usually go to these big stores
buy more than they need because of the amount of cheap products that these
kinds of shops offer for sale.
d. Requires huge financial resources: As they operate in large scale,
supermarket requires huge financial resources.
e. Lack of personal attention: As there is a practice of self-service system, there
is lack of personal attention.
f. Lacks to provide additional facilities: Supermarket does not provide various
services such as free home delivery, personal guidance and credit facility and
after sale service.
g. Lack of co-ordination: Supermarkets, sometimes faces the problem of co-
ordinating activities of various sections of the market.
h. Requires large and extensive premises: As the supermarkets deal in different
product lines and variety of products, they require large and extensive
premises.

D. Convenient Store:
Usually quite small, you can find what you want very quickly, you can find what
you need, no unnecessary stuff, in your neighbourhood, so don't need to drive,
always could have a chat with staff because you're local. Usually located in
residential areas this type of retailer offers a limited range of products at premium
prices due to the added value of convenience.
 Characteristics:
a. While building size may vary significantly, typically the size will be less than
5,000 square feet.
b. Off-street parking and/or convenient pedestrian access.
c. Extended hours of operation.
d. Product mix includes grocery type items, and also includes items from the
following groups: beverages, snacks (including confectionery) and tobacco.

E. Discount Stores:
Discount stores also offer a huge range of products to the end-users but at a
discounted rate. The discount stores generally offer a limited range and the quality
in certain cases might be a little inferior as compared to the department stores.
Wal-Mart currently operates more than 1300 discount stores in United States.
Advantages of Discount Store
a. Custom to bargain: Whatever their income, most people always have their eye
out for a bargain. Changing your business to a discount model is likely to
greatly increase your customers. This is a good thing, as you’ll need to increase
your sales volumes to compensate for your reduced profit margins. Discount
stores do particularly well at times when the economy is in trouble, because all
demographics are looking to save money.
b. Brand Identity/Perceptions: Changing your business to a discount model has
the potential to confuse your potential customer base about your brand and
what you sell. Your previous customers may stay away due to the down market
connotations connected to discount stores, while new customers who are
looking to save money may associate your business with the more expensive
products you sold before rebranding. Long-held assumptions can be very
difficult to shift, even with an aggressive marketing campaign.
c. Broader Stock: If you previously sold high-end premium items, you'll be able
to spend less time worrying about your buying strategy and sourcing stock once
you switch to a discount business model.
d. Price Fluctuations: If you plan to establish and maintain your store's
reputation for value, you'll need to keep your prices down. This can be difficult
if inflation is high and your suppliers are raising their prices.
Disadvantages of Discount Store
a. Defective products: usually defective products will be sold in discount stores.
b. Old stock: usually when the products are rejected by the customers and
returned back by the sellers the companies sell them at a discounted rate

F. Off-price Retailers:
Off-price retailers are retailers who provide high quality goods at cheap prices.
They usually sell second-hand goods, off-the-season items etc.
Description: These retailers offer inconsistent assortment of brand name and
fashion-oriented soft goods at low prices. They buy manufacturer irregulars,
 seconds, closeouts, cancelled orders, overruns, goods returned by other retailers
and end-of-season closeout merchandise.

G. Catalogue Showrooms:
Definition: These are retailers whose showrooms are adjacent to the warehouse.
These retailers usually specialize in hard goods such as house ware, jewellery, and
consumer electronics.
Description: In such outlets, the customer places an order for merchandise using
the number on the display item or in a catalogue, which is then fetched from the
warehouse and sold to the customer. These showrooms have low prices, as they
minimize the cost of displaying merchandise, focus on a narrow range of goods
and are located in low cost areas.

H. Mail Order Retailing:

In this the retailing institutions find out the address of the prospective buyers from
telephone directories, voters lists, etc. and send the illustrative catalogues to their
addresses.
The catalogues invariably contain an order form together with a stamped self-
addressed envelope. The buyer has to simply put his signature in the order form
mentioning the quantity required .As soon as the orders are received, the goods are
packed and sent by Value Payable Posts (V P P) and the post man collects the
required amount before the goods are delivered to the buyer. The collected money
is sent back to the seller through post office.
Merits
a. Even goods not readily available in the market could be purchased through this
method.
b. This business could be operated from any place where the postal facility is
available.
c. No bad debts are suffered as money is collected before, the goods are
delivered.
d. It widens markets and helps the traders to discover untapped markets.
e. The system could be operated easily even when the demand is low.
f. Only a small amount of capital is required to undertake this business.
g. As the goods are delivered at their doors, customers are benefitted.
h. No central place is required for business.
Demerits
a. The buyers are unable to inspect and select the goods before they are bought.
b. Even the most illustrated catalogue is incapable of giving exact idea about the
product.
c. Articles which require demonstration cannot be sold.
d. After sales service is out of question.
 e. No credit facility is provided.
f. There could be delays in getting the goods.
g. Catalogues becomes obsolete very quickly as prices are subject to fluctuations.
h. The demand creating activities are being costlier.
i. Higher prices are charged.
j. Sometimes the goods are damaged in transit.

I. Hire Purchase Retailing:

In this type of selling, the seller agrees to sell the goods on the condition that the
buyer shall pay the purchase price in fixed number of instalments. The article is
legally not sold out but is only hired by the buyer. He cannot become the owner
until the final instalment is paid. Till then he will only be a mere possessor of the
article and in default, the product will be seized by the seller as the amount paid so
far will be treated as hire charges, hence the name is hire purchase.
Advantages of Hire purchase retailing:
a. Articles beyond capacity: The consumers could get articles of such nature as
are normally beyond their capacities.
b. High standard of living: It increases the standard of living.
c. Useful to small investors: Small manufacturers could use the opportunity to
get plants and machinery. They could be put to use. And payments arranged
from the income arising out of their productive use.
d. Double advantage: Persons of surplus means could also use this system while
they could get the article, the money retained could be profitably invested
elsewhere.
Disadvantages of Hire purchase retailing:
a. High prices: The prices are high due to the inclusion of interest for the
deferred period.
b. Loss in default: The default not only makes one lose the product but also the
payments made.
c. More default: It attracts more customers who cannot possess such article
normally so the chances of default are great.
d. Legal problems: It involves legal problems. This creates delay in effecting
sales.
e. Difficult contact: The manufacturers often find it difficult to call on customers
frequently.

J. E-tailing
This type of retailer enables customers to shop on-line via the internet and buy
products which are then delivered. This type of retailer is highly convenient and is
able to supply a wider geographic customer base. E-tailers often have lower rent
and overheads so offer very competitive pricing.
 Advantages of E-tailing
a. Customers have a much wider choice at their fingertips (many e-tail sites etc.)
Thus the web creates a global bazaar style marketplace that brings together
many consumers and many retailers.
b. With web search capabilities (which need further development) it is easier to
find the types of goods a customer is searching for, catalogues are received
passively, at the request of the retailer.
c. Customers can execute transactions via the same medium the information is
provided, so there is no disconnect between the desire to purchase and the
ability to purchase. (Payment schemes are still evolving and therefore this
advantage is likely to become more apparent in the future.)
d. E-tailers can use price discrimination more efficiently than catalogue retailers
(which may use coupons to lower certain "fixed" prices). E-tailers can use
previous transactions to identify the likelihood of products being purchased at
certain price points.
e. E-tailers can change the product placement (user display) based on previous
transactions, to increase the visibility of goods that the user is more likely to
purchase based on their close relationship with previous purchases. Thus
placement can be designed based on the context of the previous purchases.
Disadvantages of E-tailing
a. Not all customers have access to the web, as they do to the postal system. This
is a temporary issue as the evolution of the web continues.
b. Ease of use is a problem, as the web design is still complex, or at least
somewhat chaotic. E-tail stores are not standardized in design in the way
catalogues and retail stores have become. Therefore different user behaviours
(navigation schemes) need to be learned for each e-tail store. This is a
temporary issue as the evolution of the web continues.
c. Trust, security and privacy concerns prevail. Consumers are concerned with the
use of the data they provide during transactions.
d. Graphic presentation is not as compelling for the web as it can be for
catalogues. This is a temporary issue as the evolution of the web continues.

K. Services retailing
These retailing firms are selling different services rather than products. It is very
large and growing part of the retail industry. There is large varieties of service
retailers.
There are large number of professional service providers like lawyers, doctors,
Chartered accountants, architect beside this many organisations such as banks,
hospitals, health spas, entertainment firms and university, schools and colleges are
offering various services to the clients/customers and meeting their day to day
requirements and even specific requirements. These stores are bright and clear and
try to provide best service to make customers as their permanent customers.
 LATEST TRENDS IN RETAILING
In recent years the nature of retailing has changed dramatically, as firms try to protect
their positions in the market place. Many customers are no longer willing to spend as
much time on shopping as they once did. Retailers are adapting to the shopping needs
and time constraints of working women, dual earner households and the increased
customer interest in quality and customer service:
In recent years latest trends have been observed by marketer in retailing.
1. Retailing is going global: In these days all big retailers have started looking for
international; markets for further business. Due to geo-political development joint
ventures, acquisition and trade agreements is facilitating movement of goods and
services across the boundaries of the countries.

2. Retailers are becoming value driven: In these days shop ability of retailers has
increased throughout the world the concept of convenient store, with latest layout,
like "malls", "hyper store" and "'speciality store" have made the shopping a good
experience .buying has become quick and easy. Value retailers like "Wal-Mart"
have been providing value addition and comfortable shopping.

3. Designing of their private brand: There is another latest trend where retailers are
developing their own or private brands for increasing their margins and sales
instead of only selling well established brands which cost very high as compared
to their own private brands. Retail firms believe that these private brands are cheap
for other costly national brands .Copycat private brands is a strong strategy for
retailers.
For example: Reliance sells its own brand of items like reliance noodles, sugar,
electronic items, etc.
4. Change of retail formats: Retail formats are changing due to high competition
and entry of world's largest companies. Emerging and latest new retailing format is
concentrating only shopping under one roof and one shop location shopping.

5. Factory Outlets: Manufacturers are opening factory outlets to sell off surplus
inventories and outdated merchandise. This forward vertical integration gives
manufacturers greater control over distribution, than selling the merchandise to off
price retailers. Mohini knit wear of Ludhiana (Punjab) and number of woollen and
hosiery manufacturers set up their outlets in Delhi during winters.

6. Shopping Malls: A growing number of shopping malls are coming up all over the
country. In north India; there seems to be an increase in number of such malls
surrounding Delhi, in places like Gurgaon and Noida. In general they target higher
income customers, with their prestigious speciality shops, restaurants and
department stores.
7. Diversification of Offerings: Scrambled (unrelated products or services)
merchandising is taking on a broader meaning and inter type competition among
retailers is growing. For instance Citibank is organizing tourist trips and sending
mail order catalogues to its credit card customers.

8. Impact of Technology on Shopping Behaviour: The way retailers present their

merchandise and conduct their transactions are changing. Cable TV Channels are
used to present merchandise, Videos have replaced catalogues and computer
linkages to acquire information and make purchases are on the increase. Virtual
shopping through PDA's is another possibility.

9. Multi-Channel Retailing: Traditional store based and catalogue retailers are

placing more emphasis on their electronic channels and growing into multi-
channel retailers, because they can reach new markets and overcome limitations
posed by traditional formats.

Reasons for growth of retail sector in India:

Today if one turns around he will find big shopping malls and multiplexes all the way
which is indication of retail revolution and it is survey and concluded that growth in
Indian organised sector is mainly due to revolutionary change in consumer behaviour
for that these are some of the factors which can be held responsible.
1. Emerging nuclear family concept.
2. Changes in consumer life style where luxuries have become necessities.
3. High pay packages being paid by MNC's and private sectors.
4. Expecting convenience shopping under one roof, air conditioned malls and
multiplexes.
5. High purchasing power of Indian middle class.
6. Effects of liberalisation, privatisation, and globalisation.
7. High and regular flow of Foreign Direct Investment (FDI) into retail sector.
8. Building large chain stores of popularI ndian brand.
9. Presence of foreign retail players directly or through consolidation with Indian
retail players.
10. Expansion of third generation family business like Tata, Birla, Reliance, etc.
11. Providing wide range of choices to Indian consumers through MNC brands.

FACTORS CONTRIBUTING TO GROWTH OF RETAIL SECTOR IN INDIA

Following are the factors that are contributing for the growth of retail sector in India.
1. Increase in per capita income: Per capita Income means how much an individual
earns, of the yearly income that is generated in the country through productive
activities. India has marked growth in per capita income by 10.5% which shows
tremendous increase in GNP (Gross National Product) of the country. Increase in
per capita income reflects hike in income of Households which in turn will
 consume more, thus leading to growth of retail sector. Household prefer to shop
from big giants as compare to their Kirana store.

2. Demographical changes: India is having huge young age working population

which generating huge income and high savings. For any developing country
young age group, income, savings are key factors for its growth. Presence of these
key factors has helped in attracting big retail giants to India.

3. High standard of living: Standard of living in India has improved. Earlier

Shopping in India always had an emotional tag attached to it, along with that
people use to have belief that shopping from shopping complexes or Malls is
costlier and it suits only to rich class. But now things have changed, people have
changed their misconception and have adopted Mall culture. This shows that
standard of living has increased.

4. Change in consumption pattern: Consumption patterns among various classes

have changed over the years. Earlier customers were brand loyal due to which they
were not allowing new brands to enter the market. But now customers are showing
good response to new product entering the market because they have realised that
they are paying for quality. This drastic change in customers' perception has
opened ways for many new entrants.

5. Availability of low-cost consumer credit: It is rightly said that sales generated on

credit are more as compare to cash sales. With the change in credit policies, many
new customers have entered the market. Purchasing on credit basis with good
credit worthiness gives both seller and buyer flexibility to transact. Earlier due to
lack of cash many buyers use to postpone their purchases, but now with
modernisation they are carrying it on credit basis as it is cheaper to repay.

6. Improvements in infrastructure: With many infrastructural changes taking place

like metro rails, retail is also expanding its wings. With huge infrastructure
spending which has entered the country in form of FDI (Foreign Direct
investment), more retail giants have proposed to enter Indian market.

7. Entry to various sources of financing: An economy gets finance from two routes
either in form of FDI (Foreign direct investment) or as FI (Foreign institutional
investment). Now both the ways are opened up for retail sector. Previously so as to
protect small Kirana stores route for FDI in retail was difficult but later on when it
was found that retailing is generating employment of around 8% in economy FDI
route was also simplified.

8. Technology: 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.

9. 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.

10. Location Convenience: The element of convenience is fast gaining importance in

the world of organised retail. This is especially true in case of items like grocery/
fruits and chemists. This facility can help the consumers to buy the product in
quick time as per their requirement.

11. 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.

FACTORS AFFECTING RETAILING IN INDIA ( CHALLENGES)

Various factors affect retailing in India are as follows.
1. High cost of retail space: One of the important factors affecting retail business in
India is cost of retail space. To carry a retail business one must need a sufficient
space. Whether they purchase it or took on lease basis, the cost of the retail space
is very high while considering the viability of a retail store.
2. Lack of skilled labour: Since organised retailing in India is still in its infancy,
very few trained professionals are available to skilfully manage the various
departments of a retail operation.
3. Rural consumers cannot be attracted: Generally, people in rural areas are loyal
to some brands. And retailers are not able to attract the rural consumers for their
new products, hence it is affecting the retail sector of India.
4. Lack of finance: Another major factor affecting retail business is lack of finance.
There are many people with innovative ideas but the only thing they are not having
is money. Even there is less number of loans provided to such retailers. Hence
retail business is weakened by shortage of finance.
5. High interest cost: As said above, there are only few facilities or limited number
of institutions providing loans to the retail business. And those institutions which
are providing loans to retailers are charging very high interest rate. Hence the
 retailers are not in a position to borrow sufficient funds to invest in the retail
business.
6. Excessive electricity cost: It has been found that electricity costs throughout India
are among the highest in the world. Since organized retail stores usually occupy a
fairly large space and are also generally required to be centrally air conditioned,
require refrigerator facility, good lighting facility, etc. Hence, the cost of the
electricity has a tremendous impact on a retail business.
7. No credit facility: Another factor affecting retail sector is availability of credit
facility. There is lack of credit facilities in the retail sector in India. Retail are not
getting proper credit facilities from the wholesalers and manufacturers and even
consumers are not getting credit facilities from the retailers.
8. No convenient transport facility: availability of inconvenient and irregular
transport facilities especially in rural areas is also one of the factor influencing
retail business in India.
9. Lack of government support: lack of government support is also affecting the
retail business in India. Government is not framing any policies specifically for
retail sector and not encouraging the retailers in India.
10. Corruption: This is mostly true that India’s taxation system wherein only a very
small percentage of India’s population actually pays any income tax. The situation
with regard to sales tax is even bad and for reasons best known to the authorities,
the system continues to function as such. As a result most retailers in the
unorganised retail sector continue to flourish as they have, over the years, mastered
the art of evading taxes which itself forms a major portion of their earnings.
11. Weak consumer laws: Last but not the least, it is strongly felt that weak consumer
laws have also obstructed the growth of retailing in India. The legal redressal
system in India is perceived to be a time-consuming and frustrating affair that
often prevents the delivery of timely justice.

THEORIES OF RETAILING
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 been developed to explain the patterns and trends that visible
in the retailing and selling. These can be divided into two main categories; cyclic and
non-cyclic theories.
A. Cyclic Theories
Cyclic theories assume 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.
Entry Phase: 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.
Trading-up 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.
Vulnerability Phase: 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.

2. Retail Accordion Theory

Retail accordion theory was developed to explain the way retailers choose the number
and type of product categories they would retail, with the hypothesis that firms would
go through a cycle of from general goods, towards more specific products, and then
back to general goods again.
In the initial stages of setting up, and the early stages of retail, the retail stores would
carry a wide range of products to satisfy different consumer category needs. As the
retail environment grows there is an increased number of specialists attracting
consumer attention. However, this trend of specialization may be shifted again to
generalization as consumers may be attracted to convenience of different goods on
one store, meaning specialist stores need to become more generalized to compete.
3. 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,
assuming that retail stores will pass through 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.
Introduction Stage: The initial stage of the retail organization life cycle is the
introduction stage which resembles the infancy stage of human development. This is
the stage when the retail organization is developing new products or services and is
just entering the market. The retail organization is starting its journey in the retail
world with the goal of optimizing growth and profit.
As the retail organization builds brand awareness and customer trust, sales are
typically lower in this stage of the retail life cycle. Higher expenses occur during the
introduction stage due to start-up costs and a higher level of advertising; thus,
impacting the initial profitability of the company. Nearly 1 in 5 retail organizations
fail within the first year of entering into the market. Market research is one key factor
in helping a company succeed during this stage.
Growth Stage: This is when the retail organization is gaining recognition among
potential customers. Customers are learning about the company and are now shopping
at the retail establishment or using the service. This stage will result in growth and
profitability as advertising and operating expenses are reduced and more products are
sold.
At this point, other retail organizations witness the need for the products and services,
so competition begins to enter the market. Due to competition, the company must
continue to be innovative and offer new and different products or services. How the
retail organization reacts to competition entering the market determines the length of
time it remains in the growth stage. The reaction also determines how the retail
organization will set itself apart from the competition and attract customers to the
business.
Maturity Stage: Now the retail business is fully established and has reached the
maturity stage. This is the stage when the retail business has reached peak sales and
has established a loyal customer base. The goal of continuing profitability is offering
more products or services and positioning the retail business to target a new market.
Also, the focus is on minimizing operating costs to maximize profitability. If a
business does not stay on top of trends or identify the needs of customers, the business
will quickly begin to decline.
Decline Stage: When a business loses view of innovation and opportunities to provide
new and improved products, the business will begin to see a decline in sales.
Customers are no longer interested in your product and may start looking to your
competitors to meet their needs. The business’s profits will not be able to support the
expenses of the business. At this point, the business may have to decide to either
rebrand the business or close the business.

4. Non Cyclic Theories

Non-cyclic patterns present the retail environment at one in which there are different
forces, that constant adaptation without the presence of repeating pattern.
5. Conflict Theory
Conflict theory has its foundation in Dialectic theory, which is a recognized conflict
theory based on Marx’s Theory of Evolution. The basic idea is that for progress to be
made in any environment there must be conflict, with new ideas taking the place of
the older ideas and practices, which may then be followed creating a hybrid or new
format, which itself will eventually be replaced.
In a retail environment, this means that one firm, or format, will be challenged by new
or competing firms and formats. As the new form or format become more effective,
the older firms or formats will emulate the new ideas in a form of mixture. For
example, the supermarkets have emulated the online shipping environment by offering
online grocery shopping. Recently, online firms have sought to compete with the
supermarkets, as seen with Amazon offering a ‘save and subscribe’ service, to deliver
regular items on a predetermined schedule, including some grocery items, and the
recent launch of the grocery store offering same day delivery in trial areas.
It is imagined the best features of the preceding models are likely to be retained and
combined with new competing ideas to create new retail models.
This model may explain how and why some trends appear to develop and are then
adopted and spread creating hybrid models. However, there are weaknesses with the
model; it does not explain why many traditional retail stores do not change and
evolve, and the argument that the blending of ideas is not always easily visible, and as
such means this model may be seen as ambiguous.
6. Environmental Evolution Theory
The main idea behind environmental evolution theory is that retail firms will evolve
and change in response to changes in the microenvironment. This theory states that the
firms which are best able to adapt and take advantage of changes in the environment
are those most likely to survive and thrive.
According to this theory, a firm or retail institution should be flexible enough to adapt
to the changing environment and should adapt its behaviour to survive in the market.
The retail institution that is flexible enough to adapt to changes in the economy will be
the most successful. If the store or the retail institution is not willing to change, it
would decline and may even be forced to exit the market.

PRESENT INDIAN RETAIL SCENARIO

Indian retail sector has been growing rapidly with various factors effecting to its
rise. The few very important factors would be the increase in digitization, purchasing
power of consumers, urbanization and rapidly changing lifestyle of the consumers.

A sharp rise and improvement in the consumption pattern of Indians has been noted
that has resulted in the retail sector grow. There is a positive impact seen in the
section of organized retail. At present the organized retail penetration is 7 percent
and it’s expected to reach 10 percent. Also the organized retail market is also going
to grow and reach the level of 19 percent which is currently at the level of 9 percent,
according to reports published.

When closely observed, it’s seen that there has been a great penetration of the bigger
brands in smaller cities and people of India are able to enjoy the top MNC brands
that previously were not in their reach. This can be directly linked to the increase in
purchasing power of consumers. Superior customers experience has noted elevated
intensity and the consumers are looking up to goods that a decade ago was not a part
of their lifestyle.

In years there have been many foreign brands which have understood the Indian
market and have established firmly in the Indian market. They continue to flourish
as the consumers are buying their products. This is a very good & positive sign
which shows the changes occurring in retail industry. Foreign Direct Investment is
another vital reason for increasing consumerism. With the liberalization of FDI,
there will be a hike in investments pumped in by major companies. With this we can
also see a positive change in the lifestyle of consumers. The taste and preferences of
consumers in India has been changing. And this is bringing India, at par with the
consumption pattern of the developed nations. Changes in Government policy have
attracted many international giants to look for a avourable chance of prosperity in
Indian retail market.

The ease in government norms regarding FDI has made India relish & enjoy the
consumption pattern that is being followed across developed nations. Goods and
Services Tax (GST) is another major step that has been taken in terms of retailing.
This has impacted & given a boost to the foreign brands and they are keen in
investing into Indian market. When there is one single framework applicable to a
huge variety of investment procedure then the foreign brands are highly keen in
making a penetration. Present scenario of Indian retail industry is the replica of the
same.

From unorganized retail there has been a transition to the organized retail that has
streamlined the process. With this we can predict that the Indian retail industry is
heading steadily towards a new era.

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