Meaning of retail The terms retail retailer and retailing are often used

The word retail has been derived from the French word 're- simultaneously and it becomes difficult to differentiate
tiller' which means to cut, trim or divide. This was basically between these terms. Retail, is the process of selling goods
used in the context of tailoring. Thus retailing means to sell and services in the form of packages, suitable for use by the
goods in small quantities. A retailer buys goods in large customers. A Retailer is a person/business that sells the goods
quantities from a wholesaler, divests the goods in the smallest to the customers. Generally a retailer purchases items in bulk
quantities possible and sells it to final customers. Typically, a on the wholesalers and sells them to the final customers in
retailer is a person/link who fulfills small orders of a large small packages. Some retailers such as Wal-Mart are big with
number of people. These people generally are the end users of to purchase goods directly from the manufacturers itself.
the products and therefore buy small quantities of the goods Retailing is the whole process of procuring goods from the
according to their needs. wholesalers/manufacturers as the case may be, packing the
The diagram below shows the simplest distribution goods in small packages and selling them to the customers.
channel: Retailing also includes activities such as pricing discounts,
Manufacturer/ Producer >Wholesalers/ Distributors coupons, vouchers, etc. to the customers in order to attract
>Retailers >Customers them and retain them in future.
Changing Concept of Retailing In view of the above discussion the following are the
The retailers' main motive then was to 'earn profits'. But, with main features/characteristics of retailing:
the passage of time, the number of retailers as well as the ● Retailing is essentially an economic activity.
number of customers increased. With the use of the internet ● It includes sales of goods as well as services.
● It involves earning profits through customer satisfaction
the retailers now have customers all over the world. The retail and retention.
business has become more globalized in nature. People have ● It aims at increasing the number of customers.
● It is very dynamic by nature
become more specific with regard to their demands and the ● It is customer oriented.
utilities of the products. The main motive of retailing now has ● It involves lesser quantity in terms of the goods sold
● It is the last link in the distribution channel.
changed from mere earning of profits to retaining customers'. ● It attracts customers by using various methods such as
The retailers use so many sales promotion measures such as discounts, vouchers, lucky draw schemes, coupons etc.
● It includes the customers who buy articles for non-
discounts, free gifts, vouchers and coupons etc. To attract new business purposes i.e. the customers are the final users of
customers and to retain old ones. the products.
● Goods are purchased either from the wholesalers or
Definitions of Retailing directly from the manufacturers.
● Retailers generally sell large varieties of goods.
A set of business activities carried on to accomplish the
● Retailers usually establish personal contacts with the
exchange of goods and services for purposes of personal, customers.
● The display of goods at the shop plays a major role in
family, or household use, whether performed in a store or by
attracting the customers.
some form of non-store selling. "-American Marketing ● The location of the store as well as the layout is an
important part of retailing.
Association-”
● The average amount of sale per transaction is lower as
Retailing includes all the activities involved in selling goods or compared to other forms. However, the sales volume is
larger.
services to the final consumer for personal, non-business use.
● Retailing provides employment opportunities to people at
"Philip Kotler” all ages. This means there is no restriction as to the age in
which the retail business can be started.
Retail, Retailer and Retailing ● Advertisement is an important part of retailing business.
 Nature of Retailing convenient places, arranging goods according to different
The following diagram shows the major points about the price bands, selling goods in the quantities convenient to the
nature of retailing customers, proper after sale services and a wide range of sales
Part of marketing > Customer centric > Multi-dimensional > promotion measures to attract the customers. Thereafter, there
Varying geographical locations > Transformational >
Complex management process > Assortment of products and should also be proper Customer Relationship Management
services > Studying demand pattern > Creation of utilities > (CRM) programmers to maintain long healthy relationships
Private branding and labeling > Various other services
with the customers.
1. Part of marketing:Retailing is a part of marketing activity. 7. Assortment of Products and Services: Retailing involves
It helps the product to reach the final customer. This is the a combination of goods and services. It is not at all possible
goal of marketing. Thus retailing facilitates marketing for a retailer to survive in today’s world by offering just a
activities by targeting a wide variety of customers. single product. In order to be successful, a retailer needs to
2. Customer centric: The whole concept of retailing revolves offer an assortment of goods and services. For example, a
around the customer. Due to increased competition, all the s baker cannot survive just by selling a few cakes and biscuits.
wants to attract the customers. Retailers use various sales In order to survive in the competitive market, firstly, a baker
promotion methods such as discounts, etc., to lure the needs a proper environment called ambience which is pleasing
customer. to the eyes of the customer. Secondly, he needs a variety of
3. Multi-Dimensional: Retailing has many dimensions. They cakes, biscuits and other products. Along with that he also
vary from local Karana shops and kiosks to super malls selling needs to keep some confectionery items which people are
multiple branded products. These days there is a manifold likely to buy along with the main products such as chocolates,
increase in the use of the internet for buying and selling goods. cookies, chips, cold drinks, patties, burgers, hot dogs, etc.
4. Varying Geographical Locations: The geographical area Apart from these items people may expect him to keep a few
of reach of retailers varies widely. It may vary from a local items such as birthday and anniversary candles, party poppers,
area market selling goods to local customers only to decoration items etc. After these products, people may also
supermalls who have a large variety of customers from expect him to take the orders on phone and home-deliver the
different areas and even different cities. These days due to the items purchased. Thus it can be easily said that retailing is an
increased use of the internet, the retailers have customers from assortment of various goods and services.
all over the country and even from abroad. 8. Studying Demand Pattern: A retailer is required to study
5. Transformational: Since the start of retailing as a full- the current demand pattern of the products being offered by
fledged business, there have been huge transformations in it. him in the market. By studying the demand pattern he can
These transformations generally are in the form of objectives ascertain the quantity of goods he needs to buy in bulk from
of retailing (earlier profit driven, now customer focused), the wholesaler. In case he buys a huge quantity of goods
methods of retailing (from simple retail shops earlier to multi without studying the demand pattern, he may have to face the
brand malls), the areas covered (earlier small areas now whole risk of obsolescence of goods. Moreover, large stocks need
country or even other countries), the customers (from simple large areas for storage. All these have to be arranged by the
local customers to customers from all walks of life) etc. retailer.
6. Complex Management Process: Retailing seems like a 9. Creation of Utilities: A retailer helps in creation of time
simple process. But in reality it is a complex management and place utilities. Time utility is created when goods are
process. Retailing involves retail stores being located in made available at a particular time. The retailer creates time
utility by storing the goods with himself and makes them Thus, retailers specially display and demonstrate their
available to the customers as and when needed. Place utility products according to the customers. Example, decorating
means making the goods available at different places away specially according to various festivals to attract the
from the place of manufacture. Retailers make the goods customers.
available to the customers at various locations away from their Thus it can be said that retailing is a complex, multi-
manufacturing locations. dimensional, transformational activity involving a variety of
10. Private Branding and Labeling: The spurt in the activities such as targeting customers, studying their demand
retailing activity has resulted in creation of private brands. patterns, dividing the product into small segments, attracting
Private branding or labeling means buying products directly customers by providing various discounts, redemption points,
from the manufacturer and giving them their own brand name loyalty bonus, coupons, free gifts, etc.
by the retailer. With the increase in retailing there has been an Apart from these, retailing doesn’t end with the sale of goods.
increase in the exclusive retail stores selling products of It also includes various after sale services like providing
particular brands only. finance to customers, etc. Thus, it is very important to
For example, Big Bazaar, Food Bazaar of Future Group; understand the nature of the retail market.
Reliance Trends, Reliance Footprints, Reliance Fresh, etc., are Scope of Retailing
some of the divisions of Reliance Retail Ltd. which is a Retailing has a very wide scope. It is one of the fastest
subsidiary of Reliance Industries. According to a Neilson growing industries in India and is providing employment
study food continues to dominate the private label market at opportunities to many people. Retailing provides employment
76 per cent of total sales. in two ways. Firstly, it provides entrepreneurship
11. Various Other Services: Retailing also includes various opportunities to the people and secondly, it provides
other services. These services include: employment to so many people who cannot own the retail
(i) Providing Finance to the Customers: Many people stores. With the increase in the purchasing power of the people
cannot afford to buy costly products by paying a lump sum and the rural reach of the retailers, the scope of retailing has
amount. In the absence of finance these people have to keep increased manifold. The scope of retailing can be viewed from
themselves deprived of the use of such things. Retailers solve the two viewpoints. One from the retailer's i.e. the
this problem by providing easy finance terms such as zero entrepreneur's perspective and the other from the employee's
interest payment to their customers. By doing so, they increase perspective.
their customer base. Example, providing finance for 1. Retailer’s Perspective: From the retailer’s perspective,
refrigerators, cars, mobile phones, furniture etc. retailing can include anything that the retailer wishes to sell. It
(ii) Providing after Sale Services: Retailers also provide may be goods or services. These may include goods such as
various after sale services such as free home delivery of the mobiles, computers, electronics, readymade garments, textiles
goods, free gift wrapping, etc. and clothing, jewellery, books, paintings, medicines,
(iii) Installing the Products: Retailers help their customers in stationery, watches, or may include services such as catering,
installing the items they have purchased. For this purpose they hospitality, hospitals etc.
keep technicians and specialists with them. Example, installing 2. Employee’s Perspective: Retailing has provided
electric chimneys at customers’ places. tremendous opportunities of employment. The retailers
(iv)Display and Demonstration: The display and operating at a small level required a small number of
demonstration of the goods also affect the buyers’ decisions.
employees to help them in business. These employees were (C) Number of working women: The number of working
appointed as salesmen, cleaners, cashiers, etc. by the retailers. women also affects the retail business. If the number of
But with the increase in the scope of operations and the growth working women is more, they are likely to spend more than
of retailing, there has been tremendous change in the industry. the housewives and vice-versa.
Now the retailers operate at bigger levels having separate (D) Consumption habits: The consumption habits of the
departments for everything such as finance, marketing, people affect the buying decisions of the people. If people are
advertising and sales, human resource development, etc. in a habit of buying branded goods, then a retail store selling a
Hence, the retailers provide enormous opportunities to the variety of branded products is more likely to succeed.
employees. 6) Add on services: Add on services imply the extra services
Factors affecting retailing provided by the retailer to the customers in addition to the
1)Store location: The location of the retail store has a great normal goods being offered for sale. These extra services may
degree of influence on the success of the business. The retail be in form of financing Facilities on articles being purchased,
store located in a busy market has much more chances of free home delivery services, after sale services, free gift
success than the ones located in related places. Since selection wrapping. loyalty programes etc.
of the store is a kind of permanent and irreversible decision, 7)Behavior with customers: The behavior of the retailer and
great care must be taken while selecting it. his employees with the customers also affect their sales
2)Store ambience: Ambience means the atmosphere of a volume. A person who is very courteous towards his
place. The ambience of the retail store must be such that it customers and is keen to listen to them is more likely to attract
attracts the customers and soothes them. Generally the chain the customers than others.
stores have the same ambience irrespective of their locations. 8)Socio cultural environment: The social cultural
3)Variety: The customer to a large extent is attracted by the environment of any area affects the retail business. The retail
variety of the articles kept in the retail store. Every customer business needs to follow the socio-cultural and the moral
expects a variety of goods of the latest fashion from the values of the people in the area where it operates.
retailer. The retail store having a large variety of articles is Thus all these factors must be considered properly for the
likely to attract a large number of customers. success of the retail business.
4)Store layout: The store layout means the management of 1.Short Answer Type Questions
the articles in the store by the retailer. It includes arranging the A. What do you mean by retailing? What is the
goods properly, keeping the same goods at one place, keeping changing concept of retailing?
the store neat and tidy with clean surroundings, arranging for B. Define retailing and give its important features.
proper display of goods in show windows and shelves, etc. C. Discuss the features of retail business.
5)Demographic factors: There are a number of demographic D. Is retailing transformational in nature. Explain.
factors which affect the retail business. These are E. What are the major factors?
(A)Consumption habits of the people: The consumption F. What Is retailing?
habits of the prospective customers must be studied properly 2 Theories and Models in Retail
before starting the retail business.
Every discipline has a theory on which it is based. A theory
(B) Family structure: The family structure also impacts the
may be defined as a set of principles on which an activity is
retail business. The family structure may be joint or nuclear.
based. It is a set of accepted beliefs and principles which are Business Environment
generalized in real sense. The Internal Environment External Environment
Theory has been derived from Greek word 'theora' which A Internal Environment
means contemplation or speculation. Therefore theory means The internal environment includes the things which are
looking at something for longer periods and generalizing the internal to the business. The internal environment that
facts about the same However, all the theories are based on component of business environment which is a setup of all
certain sets of assumptions. These theories prove to be true those elements that are present in leder A business has full
those assumed facts control over them. These factors include the articles of
Introduction association, vision, objectives, goals, employer-employee
A theory gives tentative insights into the natural world. It is an relations, financial capability, the quality of human resources.
organized system of accepted knowledge that applies in a The environment encompasses all those elements that
variety of circumstances to explain a specific set of influence the behavior and the decisions of the nations,
phenomena. The practice of retailing is also based on some especially the human resources. Although the internal factors
such theories. There are three major theories on which are within the control of the organization, they significantly
retailing is based. These are: influence the business strategies and the business decisions.
Theories of Retailing The following are the internal environment factors:
Environmental Theory > Cyclical Theory > Conflict Articles of Association > Vision > Mission > Core Values >
Strategies > Goals > Objectives > Action Plans > Employer-
Theory Employee Relations > Human Resources > Physical Resources
Environmental Theory and Technological Capabilities > Organizational Structure >
Corporate Culture
The environment is a set of activities that surround us. It is External Environment
everything that we depend upon. The environment is the The external environment of a business comprises all those
surrounding conditions in which every living thing lives. It is elements that are outside the business but have a bearing on
the environment only that determines the survival of anyone the business operations. These are the factors outside the
living. Likewise, business is also surrounded by an business but significantly affects it’s working. To ensure the
environment. The environment of the business means a set of smooth flow of operations, the business act and reacts in
conditions that surround it at all times. It is the environmental response to changes in environmental factors.
conditions of a business that determine its success or failure. External Environment
The survival and sustainability of a business depends upon a Micro Environment : Customers, Competitors ,
variety of factor theories and models of retailing such as the Suppliers/intermediaries , Banks and Financial Institutions
Macro Environment: Economic, Socio-Cultural ,
availability of finance, labor proper market conditions, Technological , Political , Legal , International , Demographic
government policies, taxation policies, natural resource
The following are the micro environment factors:
endowments, fashion trends, purchasing power etc. All these
Customers: They are the kingpin of the market. It is the
factors constitute a business environment. For the successful
customer only whose satisfaction matters the most. For the
running of a business, it is extremely important that one
success of his business, a retailer must have a variety of
studies the environmental factors and act accordingly. The
customers. The retailer challenges the competitors by offering
environment of the business can be divided into internal
some real services such as specific merchandise to the
environments and external environments.
customers. At this stage he takes customers away from the
established competitors by offering real advantages at low Government Policies: Changes in government policies, such
prices. as tax rates, trade tariffs, and minimum wage laws, can impact
Competitors: The competitors are a very important element retail costs and pricing strategies.
of adornment. A retailer must always keep an eye on the Political Stability: Political stability and government policies
activities of the competitions The retailer must try to overcome in a country can influence the business environment, affecting
competitive challenges by always considering the buyers, retail growth and expansion plans.
viewpoint. Demographic Environment
Suppliers/Intermediaries: The suppliers provide the a)Population Trends: Demographic factors such as age
materials that are required by the retailer for the purpose of distribution, population growth rates, and urbanization
selling. To ensure uniformity in operations, a retailer must influence retail demand. For example, an aging population
have multiple suppliers of the commodities. This will increase may increase demand for healthcare products and services.
the bargaining power of the retailer. b)Income Levels: Variations in income levels affect consumer
Banks and Financial Institutions: The banks and the purchasing power and spending patterns. Retailers often
financial institutions provide the necessary finance to the segment markets based on income to tailor their product
retailers. The retailer must keep a close watch on the interest offerings.
rates, banking policies and procedures, etc. c)Cultural Preferences: Demographics also encompass
Public: According to Philip Kotler,"A public is any group that cultural preferences and behaviors, which guide product
has an actual or potential interest in or impact on a company's selection, marketing strategies, and store layouts to meet local
ability to achieve its objectives. "The environmentalists, tastes and preferences.
media, consumer protection groups, locals, etc. constinct International Environment
public and they significantly impact the retailers' decisions. a)Globalization: The increasing interconnectedness of global
The macro environment consists of the following: markets provides opportunities for retailers to expand
Economic Environment: It consists of the economic system, internationally. However, it also introduces challenges related
economic conditions and economic policies. No retailer can to cultural differences, regulatory compliance, and logistical
work in isolation. He/she must consider the economic complexities.
environment before making any decisions. b)Trade Policies: International trade policies, including
Socio-cultural Environment: This component of the macro tariffs, trade agreements, and import/export restrictions, can
environment governs the society's values, preferences, impact the availability and pricing of goods in the retail sector.
behavior and attitudes. All these factors shape an individual's c)Economic Conditions: Economic conditions in different
behavior. When the retailer goes global, studying this factor countries, such as inflation rates, exchange rates, and
becomes more important. economic stability, can affect international retail operations
Technological Environment: The technological environment and profitability.
plays an important role in each one's life. To be successful, a Cyclical Theory
retailer must sell the latest technology products to the This theory was first described by Me Nair in "Significant
customers. He can gain a first mover advantage by selling the Trends and Developments in the Post war Period" This theory
products of latest technology before his competitors. is represented by 'Wheel of Retailing'. It explains in detail the
changes that take place in retail business during its life. The
theory states that change follows a pattern. All the phases have
their own specific attributes. This theory is divided into three The conflict theory focuses on two types of retail formats. The
phases, which describes the changes that take place when a one format is the traditional format which maintains its status
retailer is new to the market and as he establishes himself in quo and the other format is the one which is extremely
the market. The following diagram explains the 'wheel of innovative. This extremely innovative format challenges the
retailing': traditional status quo format. This conflict gives rise to the
Stage 1 The Innovative Retailer (Entry Phase) new innovative forms of retailing Many new forms of retailing
In the innovative phase, the retailer is new to the market as this have emerged as a result of the conflict between the two
is the time when he enters the market. The retailer works as a existing forms. This is a dialectic process and it consists of
low cost operator. The retailer offers smal range of products in action-reaction-synthesis stages. Due to the limitations of
the market. Since the retailer maintains low profit margins, he these forms, new forms emerge. The two already existing
provides minimum services to the customers as well as forms are known as thesis and anti-thesis(opposite to thesis)
minimum facilities, The retailer challenge the competitors by respectively. Due to the conflict between these two forms, a
offering some real services such as specific merchandise to the new form is developed by synthesis iea blend or a fusion or a
customers. At this stage he takes customers away from the mixture of earlier two forms).
established competion by offering real advantages at low 1. Thesis: The earliest forms of retailers. They may be the
prices. individual retailers operating the comer shops across the
Stage 2: The Traditional Retailer (Trading Phase) country. They follow the traditional methods and practices,
This is the stage next to that of the entry phase wherein the can be a discount store.
retailer grows from innovative retailer to a traditional retailer. 2.Anti-thesis: Anti-thesis is a position exactly opposite to the
In this stage, the retailer offers a greater range of products to thesis situation. It develops over a period of time. They are
the customers, charges high profits, tries to acquire greater modern and innovative in their approach. They offer better
market share. The trading locations are improved by paying products, at low prices or even sell discounted products to the
higher rent. The ambience of the store is paid greater attention. customers. The departmental stores are a challenge to the
The facilities extended to the customers are increased. More discount stores.
product assortment and more elaborate services are offered to 3. Synthesis: Synthesis is a situation that comes as a result of
the customers. Therefore, at this stage, the retailer enjoys a the conflict between thesis and anti-thesis situation. It
good status. But the retailer loses his main focus. combines the properties of both thesis and anti-thesis situation.
Stage 3: The Mature Retailer (Vulnerability Phase) The discount departmental store is an example of synthesis. It
As the retailer becomes mature in the field of retailing he combines the features of both discount shops and departmental
becomes less adaptable to the changes in the environment. The stores. At the synthesis stage, the retailers continuously adapt
rate of return on investment declines due to the high cost to the innovations in the market. It is a continuous process of
structure adopted in stage two. To meet these costs he charges action and reaction until a stage of synthesis is reached.
high prices from the customers. This further gives an
opportunity to the new entrants with low cost structure to enter
the market. Thus again the process is repeated and thus the
'wheel of retailing' revolves
Conflict Theory