Chapter

RETAIL MARKETING -
1 AN OVERVIEW

INTRODUCTION

Retailing is one of the oldest business of mankind. As the development of human civilization
took place, the direct business transaction from producer to consumer gave way to direct
marketing. In the modern business world, any business to consumer world, any business to
consumer interaction can be termed as retailing interaction and can be termed as retailing.
Retailing is the final stage of any economic activity.
According to Philip Kotler, "Retailing includes allthe activities involved in selling goods
or services to the final consumers for personal or non-personal use".
Aretailer or retailstore is any business enterprise whose sales volume comes from retailing.
Retailing can be dealt with in different perspectives. Retailer isconsidered as one of the channel
members in distribution. In this case, the retailer is serving as a postman delivering the products/
services of the manufacturer. The role of retailer is simply executing the requirements of the
marketer. Any organization selling to final consumer is doing retailing. Retailing is the final step
in the distribution of merchandise for consumption by the end consumers. Thus, the retailer is
the last link toconsumer in the channel of distribution from manufacturer toconsumer. As the
retailer is working close to consumers, they are able to understand the changing taste and
preferences of consumers. Retailers' feedback about consumers helps the manufacturers to
convert the needs and wants of consumers into a real product in hand. Thus, retailing is the
most dynamicbusiness.
Retailing is any firm selling products in small quantities to final consumers for ultimate
consumption purpose. It consists of all activities involved in the marketing of goods and services
directly to the finalconsumers for their personal, family or household use. Aretailer is a company
or an organisation that purchases products from individuals or companies with the intent to
resell those goods/services to the final consumers.
 Retailing is such a part of our everyday lives that it is often taken for
Retail Marketing
are not aware of the sophisticated business decisions taken by the retail granted.
technologies managers. CUstorner,
adopted tby the retailers are facilitating the consumers to choose The
goods and services among various varieties and brands. Retail managerS are
decisions in selecting target markets, retail locations, merchandise and service too
tmakiheingr reqmouidreernr
with suppliers, motivating sales associates and deciding how to price, offer, COmplex
as the first point of consumer
promote:and
merchandise in the retail outlet. Inthe consumer oriented marketing, retailing may be negotiation
present the
contact.
redefines
FUNCTIONS OF ARETAILER
From customer point of view, retailers supply the
the required time, in the required place. required goods, at affordable
Thus, retailer price, at
Besides that, in modem retailing, it is the retailer who creates time, place and poSsession utilites
the needs of the ultimate performs numerous functions for satishvinn
consumers.
bulk,holding stock, as a channel of Retailer perform various functions like sorting, breakina
services, which are as follows: communication, advertising, storage and certain addition:l
1. Sorting: Manufacturer usualy make one or avariety of
their entire inventory toa few buyers to reduce costs. Final products and would like to sel
variety of goods and services to choose from and consumer, in contrast prefer alarge
are able to balance the usually buy them in smallquantities. Retailers
demands of both sides, by collecting an assortment of goods from
different sources, buy them in sufficiently large
units. This process is referred to as the quantities, sell them to consumers in small
and
sorting process.
activities and perform functions that add to the value Through this process, retailers undertake
of the products and services sold
consumer. Supermarkets offer, on an average, 15,000 to the
Consumers are able to choose from awide range of designs, different items from 500 companies.
location. If each manufacturer had a separate store for sizes, and brands from just one
have to visit several stores to complete their its Own products, consumers would
they specialize in certain types of shopping. While all retailers offer an assortment,
made. For example, VWestside provides assortment offered and the market to which the offering is
clothing and
specializes in food and bakery items.Shoppers' Stop targetsaccessories, while a chain like Nilgrs
istargeted at the middle class. the elite urban class, while Pantalons
2. Breaking Bulk: Breaking bulk is
retailing is derived fromthe French word another function performed by retailing. The bulk.
Aretailer, thus, can be a retaillie, meaning'to cut apiecee off or'to break W
dealer or trader, who sells goods in quantities. To reduce
transportaion
which are then
costs, manufacturers and
wholesalers
small
typicallyship cartons of the produce
tailored bythe retailers into smaller large
needs. quantities to meet individual l consumption
 Retail Marketing - An Overview

3. Holding Stock: Retailers also offer the service of holding stock for the manufacturers.
Retailers maintain an inventory that allows for instant availability of the product to the consumers.
It helps to keep prices stable and enables the manufacturer to regulate production. Consumers
can keep a smallstock of products at home as they know that this can be replenished by the
retailer and can save on inventory carrying cost.
4. Additional Services: Retailers handle the change in ownership of merchandise by
providing services that make it convenient to buy and use products. Providing product guarantees,
after-sales service, and dealing with consumer complaints are some of the services that add
value to the actual product at the retailers' end. Retailers also offer credit and
hire-purchase
facilities to the customers to enable them to buy a product now and pay for it later. Retailers fill
orders, promptlyprocess, deliver and install products.Salespeople are also employed by retailers
to answer queries and provide additional information about the displayed products. The display
itself allows the consumer to see and test products before actual purchase. Retail essentially
completes transactions with customers.
5. Channel of Communication: Retailers also act as the channel of
communication and
information between the suppliers and the consumers. From the advertisements, salespeople,
and display, shoppers learn about the characteristics and features of aproduct or services
offered. Manufacturers, in their turn, learn of sales forecasts, delivery delays, and consumer
complaints. The manufacturer can then modify defective or unsatisfactory merchandise and
services.

6. Transport and Advertising Functions: Small manufacturers can use retailers to provide
assistance with transport, storage, acvertising and prepayment of merchandise. This also works
the other way round incase the number of retailers is small. The number of functions performed
by a particular retailer has a direct relation to the percentage and volume of sales needed to
cover both their costs and profits.

CHARACTERISTIC FEATURES OF RETAILING

Retailing can be distinguished in various ways from other businesses such as manufacturing.
Retailing differs from manufacturing in the following ways:
() Location is acritical factor in retail business.
(i) There are alarger number of retail units compared to other members of the value
chain. This occurs primarily tomeet the requirements of geographical coverage and
population density.
(n) In most retail businesses services are as important as core products.
(iv) Itis the only point in the value chain to provide aplatform for promotions.
() Asale at the retail level is generally in smaller unit sizes.
(vi) There is direct end-user interaction in retailing.
Retail
Marketing from magazines
layou outlet. customerend whe communicaBe
ofoperating the the smallconsumer minordetermining
monthly manufacturer
the increased.
producers
thelrof the to
supply
comesstore
\ocation.
important with suppliersof change
salespersons in urbanization, levelto helps
many get close
merchandise.
and demandand interaction and
productsa
some or Most to the which
ofsales : traffic
the
number effectively the in has on
intermediaries
workiing preferences.
foods an reach weekly of
and product of care hands consumer another. basedmanufacturer
retail high plays
snack consider
potential
The geographic or
consumers buyincomes, resulttake brands.
and
Consumer
direct suppliers a theindustrialization largelyis
and store
point-of-purchase to their consumers than
a must CHANNEL
from in retailerand
chunk
relevant chocolates, a position actual
market
visibility
retaillike have redefine disposable ratheras different use is thetaste
factors
retail between the retailers
retailers effected design
They
factorsfor
Retailers thea to
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feedback
are: in consumers
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title
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Transaction: MARKETING growth
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consumer.
are primarily manufacturers
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manufacturer
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purchases. They of number through manufactured
characteristics consumer. modification
retailer
if ofRetail with Amount
marketing management order THE products target
quickly highest, services. buy consumer
changing household
i
Point-of-Purchase Interaction the even large pathultimate
become
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stock,
IN the theThe Manufacturer
more Number
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Compared wholesalersits witha the final
are their by consumer. product
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Inventory of RETAILER between shortest
catalogues
much
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Lower in transactions hands to
unplanned Company. quantitiessegments longer introduce
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 the consumerwants.
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also
5 between
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Consumer mainly
and at
to needs viz., OrganisationsSale(POS) 6Ps it
grown
areas
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close
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Price, the
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is thetheir
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of feedback
a
as
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satisfy on expected high-income
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Management RETAILING
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setting includes
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is
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mix Design this
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rather Physical
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Retail and OF
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 CHALLENGES TO RETAIL DEVELOPMENT
Organized retail in India is little
the pace of growth is still slow. Some overa decade old. It is largely an urban pheno
of the reasons for this slow
growth are:
 21.
Retail Marketing - An Overview

1. Retail not Recognised as an Industry in India

Lack ot recognition as an industry hampers the availability of finance to the existing and
new players. This affects growth andexpansion plans.
2. The High Costs of Real Estate
Realestate prices in some cities in India are among the highest in the world. The lease or
rent of the property is one of the major areas of expenditure; high lease rentals eat into the
profitability of a project.
3. High Stamp Duties
In addition to the high cost of real estate, the sector also faces very high stamp duties on
transfer of property, which varies from state to state (12.5% in Gujarat and 8% in Delhi). The
presence of strong pro-tenancy laws makes it difficult to evict tenants. The problem is
compounded by problems of clear titles to ownership, while at the same time land use conversion
is time consuming andcomplex as are legal processes for settling of property isputes.
4. Lack of Adequate Infrastructure
Poor roads and the lack of a cold chain infrastructure hampers the development of food
and fresh grocery retail in India. The existing supermarkets and food retailers have to invest a
substantial amount of money and time in building a cold chain netwok.
5. Multiple and Complex Taxation System
The sales tax rates vary from state tostate, while organised players have to face a multiple
point control and tax system, there is considerable sales tax evasion by smallstores. In many
locations,retailers have to face a multipoint octroi. With the introduction of Value Added Tax
VAT) in 2005,certain anomalies in the existing sales tax system causing disruptions in the
supply chain are likely to get corrected over a period of time.
6. Threat of New Entrants

In the case of the Indian retail sector, there exists a high threat of new entrants as the
sector itself is in anascent stage and is growing. Limited barriers to entry exist.
7. Threat of Substitutes
In Indian retail, the threat of substitutes is very high. The unorganized retailing in India is
stillthe largest wherein cheaper versions of products are available. This stillservices most of
the middle and poor income families in the country.
 Retail Marketiny
s. Bargaining Power of Suppliers
product is availableto the retailer for selling to the. end
is veryThe which the
consurne-
price at in retail, as it plays a large role inthe actual profitability. The suppliers to the
important
retailing industry are the companies who provide the finished products to make various retal
products. The bargaining power of suppliers is low because
there are a large number of
suppliers in the market. Therefore the prices become competitive. The emergence ofpotprivate
e ntal
labels in apparel and food has infact played a key role in controlling the bargaining power oi
suppliers.
9. Bargaining Power of Buyers
can be termerd
In Indian retail, the bargaining power of buyers is fast increasing and
powerful in th.
moderate to high, depending on the product or service. The buyers are the most expectations in
retailing industry. In an age of the informed consumer, meeting the buyer's
difficult.
terms of product, price and service is increasingly becoming
10. Intensity of Rivalry
structure of
The intensity of rivalry between competitors in an industry depends on theequally
competition forexample, rivalry is more intense where there are many small or sized
competitors; rivalry is less when an industry has aclear market leader. The competition among
market.
the existing firms in the Indian market is not very high as there are few players in the
High product differentiation is amajor factor that intensifies the competition.
11. Technology
Most of the organised retailers are using available and affordable technology to capture
Consumer information. Modern retailers are using scanned data to figure out the answers to a
lot of questions. Through technology, retailers can capture a whole lot of segmentation variables
and subsequently use them for shopper segmentation. Technology helps to take better decisions
in some critical areas such as new product introduction, suitable product offering, quicker
ordering and assortment planning. Retailers use shopper's loyalty data to design customized
promotional offering for different set of customers.
12. Human Resources

At present talent is inshort supply and employee churn has been high for all player
withretail
very difficult to get experienced stores managers to run stores. The retailer is readyexperienced
w
r
space in differenttmalls and high trafficretail location but availability of qualified and e whichis
personnel is still a big concern for the retailer. Almost all retailers resort to poaching retainins
India,
at best atemporary solution. In view oftherapid expansion ofretail businessincatertotheneeds
and developing workforce is of utmost importancetosupply atalent pool to
of this sunrise sector.
 23
Retail Marketing - An Overview

13. Store Positioning

The success of any retail business depends upon attracting and retaining the customer
base. Therefore, retail stores should position themselves in such a way so that customers would
find it convenient to come to their retail store. If store position is not done in a proper location,
the success ratio does not improve. Big international plavers like Nanz failed to take because of
their improper positioning, they targeted the upper end of the market and they could not survive.
They faded away from the retail scenario in India. In the same line, Indian players like Subiksha
and Big Bazaar are able to attain success through "value proportion" positioning.
14. Foreign Direct Investment
S
Though talk of opening up of the retail sector for FDl has been going on for quite sometime,
n
no major break through has taken place in retail sector so far. FDI would bring a lot of positive
changes both for the operators and the consumers. The infusion of much-needed foreign
investment would result in retail consolidation, increasing supply chain efficiency, flowof
technical know-how and global practices. It will make shoppers feel that they are having an
informative shopping experience.
of
ed To summarise, the retail sector in India is a highly fragmented sector. In India, it is
ng
characterized by low entry barriers, the absence of economies of scale, high transportation
costs and diverse market needs. Retailers need to take these factors into consideration and
et.
work towards creating economies of scale. Retailing is adynamic field which requires cynamic
individuals to implement innovative, dynamic retail programmes that will generate significant
returns to the retailers.