Retail. Management. 3rd. Edition CHETAN BAJAJ. Director International onal School of Business & Media Bengaluru RAJNISH TULI

Transcription

1 Retail Management 3rd Edition CHETAN BAJAJ Director International onal School of Buine & Media Bengaluru RAJNISH TULI Head Marketing Science Millward Brown, Singapore NIDHI VARMA SRIVASTAVA Oxford d Univerity Pre Marketing Science Director Millward Brown, India

2 3 Oxford Univerity Pre i a department of the Univerity of Oxford. It further the Univerity objective of excellence in reearch, cholarhip, and education by publihing worldwide. Oxford i a regitered trade mark of Oxford Univerity Pre in the UK and in certain other countrie. Publihed in India by Oxford Univerity Pre YMCA Library Building, 1 Jai Singh Road, New Delhi , India Oxford Univerity Pre 2005, 2010, 2016 The moral right of the author/ have been aerted. Firt Edition publihed in 2005 Third Edition publihed in 2016 All right reerved. No part of thi publication may be reproduced, d, tored in a retrieval ytem, or tranmitted, in any form or by any mean, without the prior permiion in writing of Oxford Univerity Pre, or a exprely permitted by law, by licence, or under term agreed with the appropriate riate reprographic right organization. Enquirie concerning reproduction outide the cope of the above hould be ent to the Right Department, Oxford Univerity Pre, at the addre above. You mut not circulate thi work in any other form and you mut impoe thi ame condition on any acquirer. ISBN-13: ISBN-10: Typeet in Garamond by E-Edit Infotech Private Limited (Santype), Chennai Printed in India by Magic International (P) Ltd., Greater Noida Cover image: Bikeriderlondon / Shuttertock Third-party webite addree mentioned in thi book are provided by Oxford Univerity Pre in good faith and for information only. Oxford Univerity Pre diclaim any reponibility for the material contained therein. Oxford Univerity U ity Pre P

3 Preface to the Third Edition The prevailing retail cene in India i proving to be more promiing than it wa ever forecat to be. According to a report publihed by the Boton Conulting Group and the Retailer Aociation of India, the Indian retail market i expected to double to $1 trillion by 2020 from $600 billion in Conequently, India i not only emerging a one of the mot favoured invetment detination in the world, but i alo witneing a remarkable change in it retail landcape. The report highlight ome other intereting number a well. While the overall retail market in India i expected to grow at 12 per cent per annum, modern trade would grow almot twice a fat at 20 per cent per annum, and traditional trade at 10 per cent. Retail pending in the top even Indian citie amounted to $53.7 billion a of 2014, with organized retail penetration at 19 per cent. Online retail i expected to be at par with the phyical tore in the next five year. While thee number ignal happy tiding, traditional retailer face numerou challenge. E-commerce i flourihing in the country and ha forced many firm to join the digital wave. Interetingly, many online retailer are alo looking at opening phyical tore to bring in ynergie of operation in both format of retail. Conidering uch overwhelming change in the retail cenario over the lat five year, it ha become neceary to revie thi book and update it with the latet data and development. While updating the book, we alo felt the need to expand the coverage of the book to make it a complete and exhautive textbook for retail tudent and practitioner in India. Accordingly, one new chapter ha been added to enure coverage of all the relevant factor affecting retail and make the book more ueful. e to the hird Edi on Include new chapter on e-commerce Provide extended coverage on the ue of technology in retail, role of private label, and coverage of legal and ethical apect of retail buine Contain revied and updated content throughout ut Preent new cae tudie, exhibit, and photograph rgani a on and tr ct re The text ha been divided into 18 chapter. Chapter 1, Retailing: Role, Relevance, and Trend,, provide an introduction to retailing. It focue on the function of retailer and provide an overview of the functioning of the entire ditribution chain a well a the role of retailer and wholealer within it. Chapter 2, Retail Organization, cover the variou retail format that have emerged in developed countrie and in India. It alo dicue manufacturer retailer O, relationhip and non-tore retailing operation, uch a elling through the Internet and catalogue. Chapter 3, Retail in India, explore the Indian retailing cenario in depth, examine the tructure of the Indian retail indutry, and tudie the retailing and wholealing organization. It examine rural market and the way manufacturer and retailer are reaching out to thee market. Thi chapter alo dicue the legal iue related to retailing. Chapter 4, Retail Cutomer, dicue the buying behaviour of retail cutomer in different buying ituation, tudie the different tage of the buying proce, and examine the proce of conumer deciion-making. Chapter 5, Retail Market Segmentation, examine the different way in which a retailer can egment the target market and poition the retail tore. It dicue the demographical and pychographical factor that affect conumer behaviour and may erve a the bae for egmenting market. Chapter 6, Financial Planning for Retail, dicue preparing financial trategy, raiing capital for growth, budgeting and planning cah flow, conducting analyi of balance heet, and evaluating retail performance. Planning and managing rapid growth while maintaining profitability target i critical for major retailer in India at thi tage izationox Oxfo xford Univerity n Pre

4 vi Preface to the Third dition of their evolution. Thi chapter focue on trategie being adopted by Indian retailer to achieve their financial objective. Chapter 7, Retail Location Strategy, dicue the factor that have to be conidered while taking a deciion on a tore location. A retailer analyi of the viability of a ite and etimate of the likely traffic are explored. It alo cover different theorie on election of retail location. Chapter 8, Organizational Structure and Human Reource Management in Retail, dicue how with the increaing cutomer awarene, the growth and ucce of a retailer depend largely on competent cutomer ervice. Good cutomer ervice i poible only if employee are motivated, have a clear undertanding of their role, and work in an empowered environment. In addition, detailed and clear organizational tructure, ytem, procee, and job decription help in creating uch a motivating environment. Thi chapter elaborate on thee iue in the context of Indian retailer. Chapter 9, Supply Chain Management and Information Sytem, highlight how Indian retailer will have to develop efficient upply chain management and effective information ytem procee comparable with global bet practice to reach the next tage in retail evolution. The upply chain, particularly for food product in India, i very inefficient, entailing a lot of watage and loe in tranit. Today, major retailer in India are alo introducing complex IT ytem that have helped revolutionize the retail indutry in developed countrie. Thi chapter dicue the latet development in thee field. Chapter 10, Retail Product and Brand Management, explain the role of product management in the retail buine. It analye the ignificance of retail branding and highlight the difference e between retail and tore brand. Chapter 11, Merchandie Management, dicue the analyi, planning, acquiition, control, and handling of merchandie in the context of the retail buine. It alo decribe the model tock plan, category management, vendor relation, and meaurement of merchandie performance. Chapter 12, Retail Pricing, explore the variou pricing trategie deployed by retailer and the condition in which each of them i appropriate. Chapter 13, Retail Promotion Strategy, examine and compare the promotion and communication proce of retailer and manufacturer. It dicue how retailer decide on promotion objective and budget. The promotional media being ued by Indian retailer to communicate effectively with their cutomer and their uitability are alo examined. Chapter 14, Store Operation, deal with that area which i at the heart of retailing, and account for the bulk of employment in the retail ector. A tore manager perform a wide range of function that can be broadly divided into ix major categorie, namely managing employee, controlling cot, tore maintenance and upkeep, managing merchandie preentation, providing cutomer ervice, and complying with legilation. Mot management graduate in retail will find employment in the area of tore operation, and hence the added importance of undertanding thi function. Thi chapter explain all the aforementioned function of management at the tore level. Chapter 15, Atmopheric and Retail Space Management, dicue how Indian retailer plan their layout and diplay tore interior, diplay, and merchandie preentation. The chapter explain how the tore layout depend on the product mix and merchandiing trategy. Chapter 16, Cutomer Relationhip Management in Retailing, explore how Indian retailer are developing relation with their cutomer. It examine the importance of ervice quality and dicue variou method to improve ervice. Thi chapter alo cover the development and management of cutomer loyalty programme. Chapter 17, Managing Retail Chain and Franchiing, explain how major organized-ector retailer operate a large number of tore acro the country. Many of the ervice ector retailer operate through the franchiing mode, which i one of the mot ucceful marketing concept, accounting for the majority of ervice ector retail in mot developed countrie. Thi chapter addree thi critical iue and i baed on extenive tudie of Indian retail chain and will contribute to education and practice in thi important area of retail. Chapter 18, E-commerce, examine feature and type of online retailing and relation between growth of Internet and changing pattern of trading; tudie the enabling technologie, ecurity, challenge, and planning for growth of e-commerce. Oxfo xford d Univerity U ity Pre P

5 Preface to the Third dition vii nline Reo rce The following reource are available to upport the faculty and tudent uing thi text: For Faculty PowerPoint preentation Intructor manual For Student Flahcard gloary Appendix A: Socio-economic claification Appendix B: Career in retailing The author and publiher wih to thank the copyright holder, organization, and individual for their aitance and permiion to refer their material while preparing the manucript. Every effort ha been made to trace the ownerhip of the copyrighted material and appropriately acknowledging them. Information that will enable the publiher to rectify any error or omiion in ubequent edition will be welcome. Oxford Univerity Pre Chetan Bajaj Rajnih Tuli Nidhi Varma Srivatava

6 raie or the Earlier Edi on Thi i mot comprehenive text book on Retail management written for Indian management tudent which include relevant example from Indian retail etting. The third edition include new chapter on e-commerce and private label brand, which are very contemporary iue faced by retail indutry. Thi i a mut read for all MBA (a well a BBA) marketing tudent! Prof. Dineh Sharma Shaileh J. Mehta School of Management, IIT Bombay Retail Management by Bajaj, Tuli, Srivatava i a landmark book in the area of retailing in India. Their firt edition wa probably one of the very the firt book for the Indian market on thi topic which had hit the market way back in I compliment the author for now coming up with a thoroughly updated verion with relevant evant example and extenive treatment of all function of retail buine.. For any tudent of retail management at the graduate and pot-graduate te level, I would recommend thi book a a Mut Read Dr Anirban Sengupta Executive Director, International School of Buine and Media, Pune rdint The book ok i quite comprehenive and well-articulated. Dr Abhinav P. Tripathi ITS Intitute of Management, Ghaziabad Oxford O Univerity Pre P The book ha good Indian-context example, and there i implicity in explaining the concept. Prof. Jamine Simi Chrit Univerity, Bengaluru I liked the cae at the end of each chapter. Dr Shubhendra Singh Parihar Jaipuria Intitute of Management, Lucknow

7 Preface to the Firt Edition Retailing conit of all activitie involved in elling good and ervice to conumer for their peronal, family, or houehold ue. It cover ale of good ranging from automobile to apparel and food product, and ervice ranging from hair cutting to air travel and computer education. Sale of good to intermediarie who reell to retailer or ale to manufacturer are not conidered a retail activity. Retailing can be examined from many perpective. A manufacturer of white good like wahing machine and refrigerator ha many option to reach out to conumer. It can ell through dealer, the company howroom (Sony World, Videocon Plaza), home improvement tore (Arcu), or hypermarket (Big Bazaar). The manufacturer will have to decide which retail format to adopt and whether to go for intenive ditribution (ell through many outlet), elective ditribution (ell through limited outlet), or excluive ditribution (ell through very few outlet). Next, the manufacturer will have to decide which model to offer through different type of outlet. Having decided on retail ditribution, the promotion trategy to attract retailer will have to be finalized. The retail ector in India i highly fragmented with organized retail contributing to only 2 per cent of total retail ale. The retail ector in developed countrie wa alo highly fragmented at the beginning of the lat century but the emergence of large chain like Wal Mart, Sear, and McDonald led to rapid growth of organized retail and growing conolidation of the retail indutry in the developed countrie. The rapidly riing income level and accompanying change in lifetyle greatly contributed to the growth of organized retail in the Wet. Today, in India we ee a rie in the purchaing power, and growth of a middle cla which follow the wetern lifetyle. Hence, condition are conducive for the rapid growth of organized retail in India. However, the Indian environment i different from that of wetern countrie in many way. Indian citie are congeted and a large part of the population i till concentrated in rural area. The Indian houe are maller and the Indian conumer i till not ued to buying in bulk on weekend. The Indian retail cene i hence very different from that prevailing in the developed countrie. A organized retail grow, retail format, which evolved in the Wet, need to be modified and new format uitable to Indian condition have to evolve. Even a organized retail grow, a large part of Indian retail i till likely to be unorganized. Hence, it i neceary for tudent and practitioner to undertand the difference in the retailing environment and retailing intitution in India. Organized retail i growing rapidly and we ee the emergence of large organized retail chain like Shopper Stop, LifeStyle and Wetide. We alo find retail mall muhrooming all over the country. The opportunitie in retail indutry in India will increae ince Indian retailing i on the threhold of a major change. Retailing i fat emerging a an important area of tudy in B-chool all over the world. In India alo we ee a growing interet in retailing among MBA tudent in the lat few year ince the retailing ector i creating many employment opportunitie. Till a few year back, retailing wa covered a a component of the coure on ale and ditribution in mot Indian B-chool. However, with the rapid growth in organized retail and increaed emphai of manufacturer on undertanding ale at the retail level, the tudy of retailing ha become increaingly relevant. Thi ha led many B-chool to introduce a eparate elective on retailing. Today, retailing ha become one of the mot popular elective coure in many B-chool. Some B-chool are now even offering a diploma and pecialization in retail management. The tudy of retailing i very important to MBA tudent intereted in employment opportunitie with large retail chain. An undertanding of retail operation, tore location, conumer behaviour, information ytem, upply chain, marketing trategie, etc. i very ueful in managing tore operation. A tudy of retailing i alo ueful to tudent who wih to take up career in ale, ditribution, and related function in conumer good and ervice indutrie. Sale manager of conumer product firm need to undertand the perpective of retailer and deign appropriate marketing programme to attract retailer, particularly when large organized chain become more dominant. Product and brand manager need to undertand the factor behind the growth of retail brand to plan effective product and branding trategie. o t the oo Oxford O d Univerity U y Pre P While teaching a retailing coure in India, we found that there wa no uitable textbook which explored the retailing cene in India. There were a number of foreign textbook but thoe were not applicable to the Indian context. There wa a real need to have a text which explored the Indian retail cene. Thi text eek to fill that void. Thi book i baed on an extenive reearch on the Indian retailing environment and would be very ueful to tudent puruing coure on retailing and ale and ditribution, a well a executive in retail tore. The book cover cae, illutration, and example from the Indian retail cene and help the tudent to undertand the Indian conumer and how retail intitution have developed in India. We viited a large number of retail outlet and inter-

8 Preface to the irt dition xi viewed retailer and retail executive during our reearch. We have alo drawn material from econdary ource, including article in magazine and newpaper. A large number of exercie and project aignment have been included at the end of each chapter to help tudent aimilate and internalize their learning. Content and tr ct re Chapter 1 3 focu on retailing concept and retail format. Chapter 1 provide an introduction to retailing. Thi chapter focue on the function of retailer and provide an overview of the functioning of the entire ditribution chain a alo the role of retailer and wholealer within it. Chapter 2 cover the variou retail format which have emerged in developed countrie and in India. Thi chapter alo dicue how the retail franchiing ytem operate, and preent manufacturer retailer relationhip and non-tore retailing operation, uch a elling through Internet and elling through catalogue. Chapter 3 explore the Indian retailing cenario in depth, examine the tructure of the Indian retail indutry, and tudie the retailing and wholeelling organization. It examine the rural market and how manufacturer actu and retailer are reaching out to thee market. Thi chapter alo dicue legal iue related to retailing. Chapter 4 and 5 of the book focu on retail cutomer in India and their buying behaviour. Chapter 4 dicue the buying behaviour of retail cutomer in different buying ituation, tudie the different tage of the buying proce, and how the cutomer goe about deciion-making. Chapter 5 examine the different way in which a retailer can egment hi market and poition the retail tore. It dicue demographical and pychographical factor which affect cutomer behaviour and which can erve a the bai for egmenting market. Chapter 6, 7, 8, 9, and 10 of the book focu on the retail mix trategie. Location deciion i poibly the mot critical deciion for a retailer and a key to retail ucce. Chapter 6 cover the factor which have to be conidered d while taking a deciion on tore location. The variou type of hopping centre available in India and location option for retailer are preented. A retailer analyi of the viability of a ite and etimate of the likely traffic are explored. Different theorie on election of retail location are covered. Merchandiing i at the heart of retailing. Chapter 7 dicue how merchandiing deciion are made. Thi chapter cover the iue of vendor management and development, ent, management of retail inventory, and the development of a buying plan. Chapter 8 dicue how Indian retailer plan their layout and diplay tore interior, diplay, and merchandie preentation. Store layout depend on the product mix and merchandiing trategy. Chapter 9 explore the variou pricing trategie adopted by retailer and the condition in which each of them i appropriate. Chapter 10 examine and compare the promotion and communication proce of retailer and manufacturer. It examine how retailer decide on the promotion objective and budget. The promotional media being ued by Indian retailer to communicate effectively with their cutomer and their uitability are alo examined. Chapter 11, the lat chapter of the book, dicue how Indian retailer are developing relation with their cutomer. The importance of ervice quality i examined and variou method to improve ervice are dicued. Thi chapter alo cover how cutomer loyalty programme are developed and managed. edagogical Feat re areo Oxford O d Univerity U y Pre A unique apect of the book i the large number of illutration and example from Indian ituation. The book contain cae of major Indian retailer including Subhikha, Big Bazaar, Margin Free Market, Shopper Stop and Wetide. There i alo a cae on franchiing, which will help tudent undertand franchiing operation and plan of major franchiing chain in India. Thee cae will help tudent undertand the Indian retailing environment and how large organized retailer are evolving their format and buine model. Thee cae will alo help tudent know about the plan of ome major retail chain in India and the contraint and opportunitie before them. At the end of each chapter there are concept review quetion on major iue covered in the chapter to help tudent tet their undertanding of main concept covered in the chapter. Each chapter alo ha project aignment on which the tudent are expected to do a mall field tudy to help them to undertand the practical apect or iue. An intructor manual accompanie the book. Chetan Bajaj Rajnih Tuli Nidhi Varma Srivatava

9 3 e Each chapter begin with learning objective that focu on learning and the knowledge you hould acquire after tudying the chapter. After tudying thi chapter, the reader will be able to undertand the retailing cenario in India evaluate variou retailing format in the Indian context examine the growth and development of organized and traditional retail format in India analye the nature of retailing in rural India become aware of the development in the retail ector with repect to variou product categorie dicu the key challenge faced by the retail indutry in India E hi it INTRODUCTION Un iv er it yp The retail indutry in India i largely unorganized and predominantly conit of mall, independent, and ownermanaged hop. Retailing i India larget indutry in term of contribution to GDP and contitute over per cent of the GDP (gro dometic product) and around eight per cent of the workforce in the country. There are around million retail outlet in India apart from an unaccounted number of low-cot kiok (tea tall, nack centre, barber hop, etc.) and puhcart/mobile vendor. In 1996, there were 1.8 million urban outlet and 3.33 million rural outlet. In the year 2014, there were an etimated million outlet with a total retail pace of about 2 billion q. ft acro the country. India alo ha the highet number of outlet per peron 7 per thouand. However, retail pace per capita at 2 q. ft (0.19 m2) per peron i among the lowet in the world compared to that of the developed countrie 19 q. ft per peron in the US. According to Jone Lang LaSalle (JLL) India report on Retail Real Etate, the total hopping mall tock i likely to reach 95.7 million q. ft by 2015, repreenting an addition of 24.9 million q. ft of new upply from the year By the end of 2017, it i expected to reach million q. ft. However, even now more than 95 per cent of retailer The chapter contain exhibit function in le than 500 q. ft of hopping pace. thatwa help Organized retail, which jut in fiveundertanding per cent of retail buine in the countrythe in 2006, regitered of a phenomenal application the theory growth rate in the lat decade and acquired 10 per cent hare the chapter. of overall retail in India.dicued According toin Retailer Aociation of India report Retail 2020: Retropect, Reinvent, Rewrite, India retail market i expected to double to US $1 trillion by 2020 from US $600 billion in 2015 driven by income growth, urbanization, and attitudinal hift. While the overall retail market will grow at 12 per cent per annum, modern trade will grow twice a fat at 20 per cent per annum, and traditional trade at 10 per cent. The retail pending in the top even Indian citie of India currently amount to D3.58 trillion (US $57.56 billion), with organized retail penetration at 19 per cent in However, it i expected that the online retail will be at par with the phyical tore in five year, and India i expected to become the world fatet growing e-commerce market on back of the robut invetment ec re earning LEARNING OBJECTIVES India Feature ofretail theinbook d Organized Retail Space O xf or The real etate ector in India ha reponded well to the growth of the organized retail ector and thi ha led to a phenomenal rie in the availability of pace for organized retail operation year after year. Mall pace, from a meager one million q. ft in 2002 ha touched 76 million q. ft in 2013 and wa etimated to reach 87.7 million q. ft by the year According to Jone Lang LaSalle (JLL) India report, Delhi-NCR and Mumbai have Fig re and a le All chapter contain figure and table to illutrate the topic dicued in the chapter. Chapter_03.indd 56 been leading in term of having the highet concentration of hopping mall, accounting for 62 per cent of the total tock. Chennai led with 1.95 million q. ft of upply in 2013, followed by Mumbai and Pune. In 2014, Delhi-NCR wa expected to hold the dominant poition in term of expected net addition of hopping mall. Source: and economictime.indiatime.com Type of loca on Free-tanding loca on Neighbourhood tore Highway tore 5/13/2016 3:38:57 PM Buineaociated loca on Unplanned buine ditrict/centre Downtown or central buine ditrict (CBD) Secondary buine ditrict Neighbourhood buine ditrict Suburban buine ditrict Planned hopping centre Regional hopping centre or mall Neighbourhood/Community Specialit market Periodic eriodic market/weekly TABLE 11.1 Product life cycle tage Strategy variable FIG. 7.3 Target market High-income innovator Variety Limited or extenive Price kimming trial Growth Maturity Decline Middle-income Ma market Low-income Limited variety product feature Greater variety Le variety More retailer More retailer Fewer or no retailer More price level Lower price Lower price Peruaive Limited Prelim.indd 12 6/15/2016 3:39:50 PM

10 mmar The ummary at the end of each chapter draw together the main concept dicued within the chapter to help you reflect and evaluate important concept. erm All technical term have been explained at the end of each chapter a key term to help you retain all the new term that learnt in the chapter. it yp re e iv Un d or xf O A erie of conceptreview quetion a well a project work aignment highlight the major topic covered in the chapter to enhance learning and can be ued for review and claroom dicuion. er E ercie End-o -cha ter cae Each chapter end with a cae tudy that i deigned to conolidate your undertanding of the chapter ubject and broaden your deciion-making kill. Prelim.indd 13 6/15/2016 3:39:56 PM

11 Brief Content Preface to the Third Edition v Acknowledgement viii Preface to the Firt Edition x Feature of the Book xii Companion Online Reource xiv Detailed Content xvii Lit of Exhibit and Cae Studie xxiii 1. Retailing: Role, Relevance, and Trend 1 2. Retail Organization Retail in India Retail Cutomer Retail Market Segmentation Financial Planning for Retail Retail Location Strategy Organizational Structure and Human Reource Management in Retail Supply Chain Management and Information Sytem Retail Product and Brand Management Merchandie Management Retail Pricing Retail Promotion Strategy Store Operation Atmopheric and Retail Space Management Cutomer Relationhip Management in Retailing 352 Oxford O Univerity Pre 17. Managing Retail Chain and Franchiing E-commerce 393 Subject Index 415 Company and Brand Name Index 423 About the Author 429

12 Detailed Content Preface to the Third Edition v Acknowledgement viii Preface to the Firt Edition x Feature of the Book xii Companion Online Reource xiv Brief Content xv Lit of Exhibit and Cae Studie xxiii 1. Retailing Role Rele ance and rend 1 Changing Face of Retailing 16 Role of IT in Retailing 17 Introduction 1 Vertical Retail Concept1 18 What i Retailing? 1 Branding ng Through Retailer 19 Retail Indutry and Economy 3 Conumption-related Mega Trend 20 Retail Indutry in India 3 Driver of Succe in the Retail Sector 20 Characteritic of Retailing 7 Cutomer The Driving Force in Change 20 Direct Interaction with Cutomer 7 Re-evaluating the Marketing Plan 21 Point-of-purchae Diplay and Promotion 7 Strong Viual Appeal 21 Lower Average Amount of Sale Tranaction 7 Workplace Challenge 21 Location or Larger Number of Retail Buine Planning for Succe 21 Unit 8 Function and Activitie of Retailing 8 v. Retail rgani a on Sorting 8 Arranging Aortment 8 Introduction 26 Breaking Bulk 8 Changing Structure of Retailing 27 Holding Stock 9 Theorie of Structural Change in Extending Service 9 Retailing 28 Providing Additional Service 9 Claification of Retail Unit 29 Categorizing Retailer 9 Bae for Claification of Retail Unit 29 Number of Outlet 9 Claification on the Bai of Ownerhip 30 Size 10 Claification on the Bai of Operational Margin v Turnover 11O11 Structure 31 Location 11 Claification on the Bai of Retail Location 37 Structure and Nature of Retailing Channel 11 Variety of Merchandie Mix 40 Trend in Retail Format 12 Department Store 40 Mom-and-pop Store and Traditional kirana Store 12 E-commerce 12 Department Store 13 Dicount Store 41 Speciality Store 43 Supermarket and Hypermarket 43 Service Retailer 44 Dicount Store 13 Method of Cutomer Interaction 45 Category Killer 13 Store Retailer 45 Speciality Store 13 Non-tore Retailer 45 Relationhip Between Retailer and Supplier 14 Electronic Retailing 46 Retail Format Mix Adopted by Manufacturer for Soap 14 Retail Strategy 15 Catalogue and Direct Mail Retailing 48 Direct Selling 49 Televiion Shopping 50 Retail Concept 15 Vending Machine Retailing 51 Oxford Univerity Pre P

13 xviii Detailed Content 3. Retail in ndia Introduction 56 Emergence of Organized Retailing 57 Traditional Retail Format 60 Kirana and Independent Store 60 Cooperative and Government Bodie 61 Mother Dairy and Safal 62 Public Ditribution Sytem in New Delhi 62 Central Cottage Indutrie Emporium 63 Modern Retail Format in India 63 Franchied Outlet and Company-owned Store 63 Retailing in Rural India 64 Retail Format in Rural India 66 Challenge to Organized Retail in Rural India 67 Emerging Organized Rural Retail Format 67 Geographical Spread of Indian Market 69 Retail Strategy with Repect to Specific Product Categorie 69 Food 70 Retaurant 72 Health and Beauty Product 73 Clothing and Footwear 75 Home Furniture and Houehold Good Retailer 79 Durable Good 80 Petro-retailing in India 83 Retail Banking 85 Leiure Indutry 88 Vertical Marketing Sytem in Indian Retailing 89 Challenge in Retail Buine in India 90 Real Etate 90 Workforce 90 Conumer Good Supplier Require Retructuring 91 Legal and Political Apect of Retailing in India 92 FDI Norm in Retailing Legal Iue in E-tailing lingo92 O92 Labour Regulation in the Retail Sector 93. Retail C tomer 99 Introduction 99 Conumer Behaviour 100 Why Do People Shop? 100 Factor Affecting Conumer Deciion-making 100 Demographic Factor 100 Pychological Factor 101 Environmental Factor 104 Lifetyle 107 Stage of the Conumer Deciion-making Proce 107 Need Recognition 108 Information Search 108 Evaluation of Alternative 109 Purchae Deciion 111 Pot-purchae Dionance 112 Type of Conumer Deciion-making 112 Conumer Deciion Rule 113 Compenatory Deciion Rule 113 Non-compenatory Deciion Rule 113 Influence of Situational Variable on Shopping Behaviour 114 Conumer Image of Retail Store 115 Retail Image Dimenion 116 Indian Shopper 117 Conumer Behaviour in Online Retail in India 119 Abandonment of Cart 119 Firt Time Uer of Online Purchaing 119 Hurdle During Online Trading 119 Inpiration for Online Purchaing 119 Deirable Place for E-trading 119 Product Dicover Method 120 Mot Frequently Purchaed Category 120 Mot Expenive Product Purchaed 121 Reearch and Analyi of Cutomer Profile 121. Retail Mar et egmenta on 1 Introduction 125 em Market Segmentation 125 Benefit of Market Segmentation 126 Segmenting, Targeting, and Poitioning 126 Criteria for Effective Market Segmentation 127 Type of Market 127 Dimenion for Segmentation 128 Geographic Segmentation 128 Demographic Segmentation 129 Pychographic Segmentation 130 Value and Lifetyle Segmentation 130 Behavioural Segmentation 132 Market Targeting Chooing the Segment to Focu 132 Cutomer Profile 134 Cutomer Demographic 134 Pychcographic 134 Survey of Buyer Intention 135 Market Segmentation in India 136 Oxford Univerity ity Pre. Financial lanning or Retail 1 Introduction 144 Financial Strategy 144 Funding Retail Venture and Raiing Capital 145 Approaching Finance Companie or Bank 145 Private Equity Funding 145 Franchiing 145

14 Supplier Credit 145 Payback Period 146 Profit Planning 146 Improving Profit 147 Budgeting 148 Advantage and Diadvantage of Budgeting 148 Type of Budget 149 Financial Statement 149 Balance Sheet 149 Income Statement 150 Financial Analyi 150 Break-even Analyi 150 Ratio Analyi 151 Comparative Financial Statement Analyi 152 Merchandie Turnover 152 Importance of Turnover Etimate 153 Method of Averaging Stock 154 Evaluating Retail Performance 155 Comparion with Other Retailer 156 Comparion within a Store 156 Comparion within a Retail Chain 157 Other Retail Performance Meaure Retail oca on trateg 1 Introduction 162 Importance of Location Deciion Level of Location Deciion and it Determining Un162 Factor 163 Selection of a City 163 Selection of an Area or Type of Location Within a City 164 Selection of a Specific Site 165 Type of Retail Location 165 Free-tanding Location O165 Buine-aociated Location 166 Type of Conumer Good and Location Deciion 168 Convenience Good 168 Shopping Good 168 Speciality Good 169 Trading Area 170 Trade Area Analyi 170 Site Selection Analyi 171 Kind of Product Sold 171 Cot Factor in Location Deciion 171 Competitor Location 171 Eae of Traffic Flow and Acceibility 172 Parking and Major Thoroughfare 172 Market Trend 172 Viibility 172 iono Detailed Content xix Selection of a Particular Shopping Centre or Market Area 173 Merchant Aociation 173 Reponivene of the Landlord 173 Zoning and Planning 173 Leae Term 173 Building Layout 174 Etimate of Store Sale 174 How to Make a Traffic Count 174 Pedetrian Traffic Count 174 Automobile Traffic Count 175 Retail Location Theorie 175 Central Place Theory 175 Spatial Interaction Theory 175 Land Value Theory 176 Principle of Minimum Differentiation 177 Location Aement ment Procedure 177 Checklit Analyi 177 Analogue Analyi e1 177 Financial Analyi 177 Regreion Modelling 177 Retail Area Development rgani a onal tr ct re and man Reo rce Management in Retail 183 Introduction 183 Structure of Retail Organization 183 Coordinating Merchandie and Store Management 184 Organization of a Small Retail Shop and a Single Store Retailer 184 Organization Arrangement Ued by Department Store 185 Organization of a National Chain Store 185 Organizational Culture 185 Human Reource Management 186 Human Reource Planning 186 Recruitment and Selection 187 Selection Proce 187 Orientation and Training 187 Compenation for Retail Peronnel 188 Superviion of Retail Peronnel 188 Performance Appraial 188 Oxford Univerity Pre 9. l Chain Management and n orma on tem 191 Introduction 191 Supply Chain and Competitive Advantage 191 Improved Product Availability 192 Reduced Stock-out 192

15 xx Detailed Content Puh and Pull Supply Chain 193 Puh Supply Chain 194 Pull Supply Chain 194 Information Flow in a Supply Chain 195 Data Warehoue 195 Electronic Data Interchange 196 Intranet and Extranet 196 Ditribution Centre and Their Activitie 197 Operation at a Ditribution Centre 197 Ditribution Centre v Direct Store Delivery 197 Challenge in Developing Effective Supply Chain in India 198 Indutry Structure 198 Limited Ditribution Channel at Pan-India Level 199 Compromied Phyical Infratructure 199 Poor Warehouing Facility 199 Unorganized Tranportation Sector 199 Partnerhip Among Retailer and Vendor in Supply Chain Management 200 Electronic Data Interchange and Information Sharing 200 Vendor-managed Inventory 200 Supply Chain Management acro Categorie 201 Collaborative Planning, Forecating, and Replenihment 201 Emerging Retail Technologie 201 Radio Frequency Identification Device 202 Global Poitioning Sytem and Geographic Information Sytem Retail rod ct and rand Management 11 Introduction 211 Product Management nt 211 Role of Product Management in Retail Buine 211 Product Range and Aortment 212 Product Aortment Strategy 214 Conumer Perception of Aortment 214 Product Selection 216 Retailer Criteria for Selection 216 Phyical Propertie 217 Packaging 217 Product Quality 217 Brand Management and Retailing 218 Retail Store a a Brand 218 Driver of Retail Brand 219 Advantage of a Retail Brand 219 Retail Brand Equity 220 Retail Branding Strategy 220 Retail Co-branding 221 Store Brand 223 Significance of Own Branding 223 Succe of Private Label 224 Optimizing the Store Brand Marketing Mix 226 Type of Store Brand 226 Premium-lite Store Brand 227 Premium-price Store Brand Merchandie Management 3 Introduction 234 Merchandie Management 234 Merchandie Mix Management 235 Target Market Analyi 236 Merchandie Planning 237 Model Stock Plan 243 Factor that t Contrain Development of an Optimum Merchandie Plan 244 Merchandie Acquiition 246 Type of Supplier 248 Criteria for the Selection of Supplier 249 Merchandie Control 250 Inventory Turnover 250 Open-to-buy 250 Ev Evaluating Merchandie Performance 252 Merchandie Handling 253 Receiving and Checking the Merchandie 253 Marking and Stocking the Merchandie 253 Category Management 254 Advantage of Category Management 255 Merchandie Management in Variou Retail Segment 255 Speciality Retailer 255 Grocery and Food Retailing 255 Merchandie Management Sytem 256 Oxford Univerity U y Pre P 1. Retail ricing 1 Introduction 261 External Influence on Retail Pricing Strategy 263 Cutomer 263 Supplier 265 Competitor 266 Government 267 Price Dicrimination 267 Retail Pricing Objective 269 Retail Pricing Approache and Strategie 270 Pricing Approache 270 Pricing Approache and Other Element of the Retail Marketing Mix 272 Pricing Strategie 272 Pricing Practice 274

16 Detailed Content xxi Tactic for Fine-tuning the Bae Price 278 Pricing Strategy and Private Label Brand 279 Setting Retail Price 279 Concept and Calculation for Setting Retail Price 279 Method for Setting Retail Price 282 Conumer Repone to Price 283 Cutomer Service and Shopping Experience 322 Retailer Service 322 Marketing Sytem and Reporting 323 Community Relation, Public Relation, and Publicity 324 Legilation on Retail and Compliance 324 International Retail Operation Retail romo on trateg 88 Introduction 288 Selection of Promotion Mix 288 Advertiing 290 Objective of Advertiing 290 Significance of Advertiing in the Retail Sector 291 Type of Advertiing 291 Step Involved in Retail Advertiement Campaign 294 Media Selection 296 Selecting Specific Media Vehicle 297 Popular Media Vehicle Ued in the Indian Retail Sector 298 Deciding on Media Timing 300 Deciding on Geographical Allocation 300 Sale Promotion Objective of Sale Promotion 301 Supplier-originated Sale Promotion 302 Point-of-purchae (PoP) Diplay Material 304 Advantage of Sale Promotion 304 Step in Deigning Retail Sale Promotion otion 304 Peronal Selling 307 Objective of Peronal Selling 307 Type of Peronal Selling 308 Identifying and Overcoming Objection during the Selling Proce 309 Publicity 310 Type of Publicity tore era on 311Ox 31 Introduction 316 Role of a Store Manager 317 Staff Management Superviion, Motivation, and Retention 317 Credit Management 317 Inventory Management 318 Store Maintenance 318 Energy Management 319 Houekeeping 319 Safety and Security 319 Merchandie Shrinkage 320 Inurance 321 Crii Management 321 Outourcing Store Function tmo heric and Retail ace Management 33 Introduction 330 Atmopheric 330 Importance of Atmopheric Planning 330 Role of Atmopheric in Retail Strategy 330 Key Component of Retail Atmopheric 331 Store Space Management 342 Retail Performance Meaure 343 Bai of Space Allocation 344 Wall a Retail Selling Tool 345 Merchandie Diplay and Wall Planning 346 Colour Planning 347 Colour Scheme 347 Role of Colour in Retail Atmopheric 347 Phyical Material in Store Deigning 347 Atmopheric in the Context of Internet Retailing 348 v1. C tomer Rela onhi Management in Retailing 3 Introduction 352 Evolution of Cutomer Relationhip Management 353 Cutomer Relationhip Management in the Organized and Unorganized Retail Sector 353 Organized Retail Sector 354 Unorganized Retail Sector 354 Cutomer Relationhip Management Strategie in Retailing 354 Peronalization Benefit 355 Special Treatment Benefit 355 Communication Benefit 356 Reward 356 Cutomer Service in Retailing 356 Managing Gap Between Expectation and Performance 357 Loyalty Programme 359 Bae of Loyalty Programme 360 Identifying Loyal Cutomer 360 Requirement for a Loyalty Programme 362 Claification 362 Ue of Loyalty Card Data 364 Relationhip Reward 365 Sector-pecific Loyalty Programme 367 Oxfo xford Univerity v ity Pre P

17 xxii Detailed Content Managing Loyalty Programme 370 Role of Employee in Store Loyalty 372 Cot to Franchiee 388 Selection of Franchier Managing Retail Chain and Franchiing 378 Introduction 378 Challenge for a Retail Chain 378 Franchiing Model 379 Deciion on Franchiing 379 Need for Rapid Expanion 380 Maintaining Uniformity and Quality acro the Chain 381 Market Reponivene and Operational Deciion 383 Sytem-wide Adaptation 385 Franchiing a a Buine Option 387 Type of Franchiing 388 Subject Index 415 Company and Brand Index 423 About the Author E-commerce 393 Introduction 393 Definition 394 Feature 394 Advantage 395 E-commerce Buine Model 395 Growth of Internet and Online Retailing 400 Framework 401 Enabling Technologie 402 Factor for Growth 404 Security 406 National Cyber Security Policy Challenge 406 Planning for Growth 407 Oxford Univerity Pre

18 1 Retailing: Role, Relevance, and Trend LEARNING OBJECTIVES INTRODUCTION After tudying thi chapter, the reader will be able to comprehend the concept of retailing undertand the role and relevance of retailing for buine and economy identify the activitie aociated with retailing dicu the key trend that impact the retail ector evaluate the retail ector in the context of the value chain analye the impact of Internet on the retail ector Which buine conider every individual a cutomer? Which buine account for le than 10 per cent of the worldwide labour force and i till the ingle larget indutry in mot nation? What i common between Wal- Mart, Amazon.com, and the mall kirana (grocer) tore that dot your neighbourhood? The anwer i retailing, the lat link in the chain of production, which begin from the extraction tage, move on to manufacturing, and end in the ditribution of finihed good and ervice to the final conumer. When good are put in the hand, or in the hopping bag of conumer, retailer obtain revenue and o do the wholealer, ditributor, and manufacturer who make up the conumer-good ditribution chain. In addition, retail tranaction action erve a a mean for collecting ale taxe, which upport public ervice of all kind. Thu, conumer money drive the economy, and retail i where conumer pend that money. Boutique, retaurant, dicount upertore, mail-order companie, and e-tailer thee etablihment are where conumer pend their hardearned money. Retail good are traditionally divided into durable good, uch a furniture, car, and large appliance, which are expected to lat at leat five year and non-durable good, which include food, clothing, and other innumerable categorie that are too numerou to mention but which eventually form the bulk of the tuff one ee acro the ale counter of gloy tore or makehift table at weekly market. Retail indutry provide immene opportunitie to entrepreneur and workforce uch a alepeople and clerk. The indutry alo ha opportunitie for people intereted in determining what good will be old, getting thee good to the right place at the right time, and managing the operation, finance, and adminitration of retail companie. WHAT IS RETAILING? The ditribution of finihed product begin with the producer and end at the ultimate conumer. Between the two of them, there i a middle peron the retailer. Retailing i defined a a et vof activitie or tep ued to ell a product or a ervice to conumer for their peronal or family ue. It i reponible for matching individual demand of the conumer with upplie of all the manufacturer. The word retail i derived from the French word retaillier, meaning to cut a piece of or to break bulk. Retailing ha become uch an intrinic part of our everyday live that it i often taken for granted. The nation that have enjoyed the greatet economic and ocial progre have been thoe with a trong retail ector. Why ha retailing become uch a popular method of conducting buine? The anwer lie in the benefit that a vibrant retailing ector offer an eay acce to a variety of product, freedom of choice, and high level of cutomer ervice. A retailer i a peron, agent, agency, company, or organization, which i intrumental in reaching the good, merchandie, or ervice to the ultimate conumer. Retailer perform pecific activitie, uch a anticipating cutomer want, developing aortment of product, acquiring market information, and financing. A common perception i that retailing involve only the ale of product in tore. However, it alo include the ale of ervice uch a thoe offered at a retaurant, parlour, or by car rental agencie. The elling need not necearily take place through a tore. Retailing encompae elling through the mail, the Internet, doorto-door viit any channel that could be ued to approach the conumer. When manufacturer like Dell Computer ell directly to the conumer, they too become retailer. Oxford O d Univerity ity Pre

19 2 Retail Management Retail Indutry North America Retail i the econd larget indutry in the S in term of both the number of etablihment and the number of employee. It i alo one of the larget indutrie worldwide. According to Plunke Reearch, thi ector employ over 15.4 million American and generated around 5.3 trillion in retail ale in the year There are about per cent employee in the retail indutry of the total national employment of S. al-mart i the world larget retailer and the larget company with annual ale groing nearly S billion. It employ more than 1.4 million employee in the S and more than 800,000 abroad. The econd larget retailer in the world i Teco. Single-tore buinee account for over 95 per cent of all S retailer, but generate le than 50 per cent of all retail tore ale. The world over retail buine i dominated by mall family-run chain and regionally targeted tore. Gradually more and more market in the Wetern world are being taken over by billion-dollar multinational conglomerate, uch a Wal-Mart, Sear, McDonald, and Mark and Spencer. The larger retailer have et up huge upply or ditribution chain, inventory management ytem, financing pact, and widecale marketing plan, which have allowed them to provide better ervice at competitive price by achieving economie of cale. A retailer cot and profit varie depending on their type of operation and major product line. They uually manage a profit of 9 10 per cent on their ale. Retail tore of different ize face ditinct challenge and their ale volume influence buine opportunitie, merchandie purchae policie, nature of promotion, and expene control meaure. A we all know, the eae of entry into retail buine reult in fierce competition and better ter value for cutomer. To enter retailing i eay, and to fail i even eaier. Therefore, to urvive in the retailing buine, any enterprie mut perform it primary role of catering to cutomer atifactorily. Over the lat decade, there have been weeping change in the general retailing buine. For intance, what wa once a trictly made-to-order market for clothing i now a pre dominantly ready-to-wear market. Flipping through a catalogue, picking the right colour, ize, and type of cloth a peron wanted to purchae, and then waiting to have it ewn and hipped ued to be the tandard practice in the earlier day. By the turn of the century, ome retailer et up a torefront wherein people could browe wherea new piece were being ewn or cutomized in the back room. Almot all retail buinee have undergone a imilar tranition over the year. In an era of globalization, liberalization, and a highly aware cutomer, a retailer i required to make a conciou effort to poition himelf ditinctively to face the competition. Thi i determined to a great extent by the retail mix trategy followed owed by a company to ell it product. A major development in the recent time ha been the emergence of varied retail format that have tarted operating in mot product categorie. For intance, there are large department tore that offer a huge aortment of good and ervice. There are dicounter who offer a wide array vof product, and compete mainly on price. For example, Big Bazaar and Reliance Mart. There are alo the high-end retailer who target extremely niche egment with top-ofthe-line brand uch a Loui Philippe and Dior. Each of thee retailer have their ditinct advantage, and it i intereting to ee how thee advantage play out. For example, during tough economic time, the dicount retailer tend to outperform their rival wherea the oppoite i true when the economy i doing well. The more ucceful retailer attempt to combine the characteritic of more than one type of retailing to differentiate themelve from the exiting competition. Oxford O d Univerity U ity Pre Driver of Change in Retailing Changing demographic and indutry tructure xpanding computer technology mphai on lower cot and price mphai on convenience and ervice ocu on productivity Added experimentation Continuing growth of non-tore retailing In today competitive environment, retailer have redefined their role in general, and in the value chain in particular. They act a gatekeeper who decide which new product hould find their way to the helve of their tore. A a reult, they have a trong ay in the ucce of a product or ervice being launched into the market. A product manager of houehold appliance claimed, Marketer have to ell a new product everal time, firt within the company, then to the retailer, and finally to the uer of the product. It i a well-etablihed fact that manufacturer need to ell their product through retail format that are compatible with their buine trategy, brand image, and market profile to enure a competitive edge. The role

20 Retailing: Role, Relevance, and Trend 3 of retailer in the preent competitive environment ha gained the attention of manufacturer becaue external partie, uch a market intermediarie and upplying partner are becoming increaingly powerful. It i thu, neceary for the marketer of conumer product to identify the need and motivation of their partner in the marketing channel. Conumer companie might improve their new product ucce rate if they put in more effort at creating retailer value a well a conumer differential advantage. If the objective of a manufacturer are incompatible with thoe of a market intermediary like the retailer, the ucce of a product tand jeopardized. Conumer durable major LG electronic and Para Pharmaceutical, the maker of Moov, Borooft, Krack cream, etc., for intance, are deriving extenive advantage due to wide retail network developed over year. The wide and increaing range of product categorie accompanied by multiple brand in each category complicate deciion-making for both the manufacturer and market intermediarie. Retailer want to optimize ale within the limited helf pace, governed by their individual ale philoophy. They undertake rik in electing a portfolio of product or brand to offer to their cutomer. They have to make an optimum election of good to be old given the following major concern: Selling pace available i relatively fixed and mut return maximum profit. If uch pace i occupied by merchandie that i not moving, it will not reult in profit. The retailer may have to reort to ubtantial price reduction to get rid of the unold tock. There i alway the rik of non-performance in term of quality, upplie, etc., which in turn harm the image of the retail outlet. Retailing i a dynamic indutry contantly changing due to hift in the need of the conumer and the growth of technology. Retail format and companie that were unknown three decade ago are now major force in the economy. Therefore, the challenge for retail manager the world over are increaing they mut take deciion ranging from etting the price of a bag of rice to etting up multimilliondollar tore in mall. Selecting target market, determining what merchandie and ervice to offer, negotiating with upplier, training alepeople thee are jut a few of the many function that a retail manager ha to perform on a perpetual bai. RETAIL INDUSTRY AND ECONOMY Retail buine i the larget private indutry in the world ahead even of finance and engineering, contributing over eight per cent to the GDP in the developed wetern countrie by the beginning of thi century. Over 50 of the Fortune 500, and about 25 of the Aian Top 200 companie are retailer. Thailand and Indoneia, which were affected by the currency turmoil, pepped up the deregulatory meaure to attract more FDI in retail buine. Japan, under a prolonged receion and protracted downfall in dometic invetment, abolihed it law on large cale retail tore in the 1990 in three phae in order to attract foreign direct invetment (FDI). Today, in ome developed countrie, retail buine houe have hare a large a 40 per cent of the market. In India, organized retail buine ha been growing rapidly. Retail buine contribute around per cent to the country GDP. According to Nationencyclopedia. com and Tradingeconomic.com, thi ector i generating ale of about US $500 billion a year and i nine time bigger than that of Thailand and three to four time bigger than that of South Korea and Taiwan. India alo ha the larget number of retailer, about million, though they are motly in the mall neighbourhood. The ignificance of the retail buine ha increaed with the rapid growth in the ervice ector. There ha been a dramatic change in the tructure of the economy potliberalization. ation. While agriculture continue to be the maintay of Indian economy, the manufacturing ector ha lumped due to demand receion and liberalized import. Much of the rapid growth in organized retail buine in the developing countrie i due to the entry of global retailer. In Thailand, even of the world top 10 retailer have made ignificant invetment Carrefour, Caino, Makro, Royal Ahold, and Juco have et up hop in Thailand According to Thomawhite.com, in China, more than half of World top 50 retailer uch a Wal-Mart, Carrefour, Teco, and Metro are conducting buine and five Chinee dometic retailer are among top 250 global retailer. According to AT Kearney report, Brazil wa at top poition of Global Retail Development Index 2011 and ha emerged a the world third bigget grocery market, next only to America and China. In Brazil, it top three global retailer, that i, Pao de Acucar, Carrefour S.A., and Wal-Mart Brazil, together hold about 45 per cent of the retail market. Oxford O d Univerity U ity Pre P Retail Indutry in India In India, the retail ector i the econd larget employer after agriculture. It i highly fragmented and conit predominantly of mall, independent, and owner-managed hop. Beide, the country i alo dotted with low-cot kiok and puhcart. There are ome 12 million retail outlet of which nearly five million ell food and related product. According to the 2012 A.T. Kearney Global Retail Development Index, the Indian retail market i the fifth larget retail detination globally. There ha been a boom in the retail trade in India owing to a gradual increae in the dipoable income of the middlecla houehold. More and more player are venturing into the retail buine with new and attractive format, uch

21 4 Retail Management Indian retail (H billion) Organized retail (H billion) ood and grocery everage Clothing and footwear urniture and furnihing Non-intitutional healthcare Sport and entertainment Peronal care Jewellery and watche Total 14,574 25, Share of organized format in total retail ( ) Source: P C, CRISIL Reearch 2013 a mall, upermarket, dicount tore, department tore, tranforming altogether the traditional booktore, chemit hop, and furnihing tore. Food ale contitute a high proportion of the total retail ale: it wa around 64 per cent in , worth approximately H16,342 billion. Clothing and footwear ale were worth H3332 billion (refer Table 1.1). Retail Forecat in India India wa ranked fourteenth in 2013 on the Global Retail Development Index (GRDI), by A.T. Kearney, highlighting it a one of the key foreign invetment detination worldwide. However in 2014, the rank fell to twenty poibly due to low pending ng and general economic lowdown, along with policy concern over approval of multi-brand retail acro everal tate of India. The trend i expected to revere oon upported by factor uch a improving demographic, riing dipoable income level, expanion of organized retail ector into Tier 2 and 3 citie, and changing cutomer habit. According to indutry etimate, the Indian retail market i etimated to grow from US $496 billion in 2014 to US $948 billion by with a CAGR of per cent. Simultaneouly, organized retail which wa generating revenue of US $41.4 in 2012, i expected to continue growing at an impreive rate to a projected US $94.8 by Preently, organized retail ector account for 7 8 per cent of the total market, i likely to increae it hare to 10 per cent by Table 1.2 preent a brief overview of the hare of the retail ector in variou countrie. A trong trend in favour of organized retail format ha been witneed in the food a well a non-food ector a people are increaingly howing their preference for onetop hop. Cutomer are alo looking for ambience and co TABLE 1.1 rowth in Indian retail market Total v organized TABLE 1.2 Share of the organized retail ector in elected countrie, 2013 Total retail Share of organized Countrie ale (US$ bn) retail (%) S ec China nited ingdom rance ermany India Malayia Ruia razil Oxford O d Univerity U v Pre P Source: Criil Reearch timate-2014, Tradingeconomic, and f uropian Retail-2014 uromonitor International convenience in hopping. Thi i likely to continue more trongly in the next couple of year. In future, with more dual income familie, the conumer ability to pend will increae, but at the ame time it i predicted that the time available for hopping will go down. In uch a cenario, retailer will have to take tep to develop hopping a an experience, though the more ucceful retailer will be thoe who would provide quicker ervice. Emergence of Organized Retail Format in India Indian retail market i expanding at a rapid pace (refer Table 1.3). The mall pace in India increaed from 30 million q. ft in 2006 to 77.6 million q. ft in year 2013,

22 Retailing: Role, Relevance, and Trend 5 TABLE 1.3 rganized retail expanion by format Format Average ize. No. of tore Area ( 000. Share in total pace (%) No. of tore Area ( 000. Share in total pace (%) Supermarket ypermarket 40, , Dicount tore Specialty tore ,612 16, ,541 27, Department tore 30, , Cah and carry Store 80, Total 27,076 30, ,933 68, Source: Technopak, Deloi e,, and Aranca Analyi development in the pipeline. Activity i alo expected to accelerate in Chennai. nai. The high growth citie are a mall group that have entered a high growth phae. They include citie with ubtantial conumer pending power like Ludhiana, the tourim-driven city of Jaipur, rapidly-growing IT hub uch a Chandigarh and Kochi, a well a ome medium-ized citie uch a Lucknow, Surat, and Vadodara. Thee high growth citie, mainly located in northern India, are perceived by retailer a the next retail detination. Chandigarh, Ludhiana, Jaipur, Lucknow, and Kochi lead the pack, characterized by high level of hopping mall development and ignificant retailer vi interet. The emerging citie have been branded thu on the bai of plan drawn up by major hypermarket and department tore retailer for the future. Factor uch a growing income, riing apiration, carcity of branded tore, and growing corporate activity are leading to a rie in demand for organized retailing in thee citie. The urban centre in thi category include Nagpur, Indore, Nahik, Bhubanehwar, Vizag, Coimbatore, Mangalore, Myore, and Thiruvananthapuram. At thee centre, IT/ITES (Information Technology Enabled Service) companie are rapidly expanding their workforce, which in turn i timulating retailer activity. Thi group alo include ome major tourit detination uch a Amritar, Agra, and Goa and a number of outhern Indian citie, which have o far been le impacted by organized retail. and thi i expected to touch million q. ft in The hopping mall phenomenon, however, i not likely to be retricted only to the metropolitan and big citie a mall have prung up in the maller citie and large town acro the country. Among the citie, Delhi and Mumbai lead the ret of the country in term of the highet concentration of hopping mall, accounting for 62 per cent of pan-india mall tock. They are followed by Chennai and Bangalore, which together contitute around 20 per cent of builtup mall pace in the country. In 2013, net addition of approximately 5.2 million q. ft of mall pace wa regitered, tranlating into a 22 per cent increae in comparion to the previou year. Chennai led with creation of nearly two million q. ft of freh upply, followed by Mumbai and Pune. The average ize of mall i likely to increae in the coming year a developer are focuing on project ize that allow for a critical ma in term of variou format and categorie under one roof. In 2014, the average ize of mall i etimated at around 3.8 lakh q. ft, which i expected to increae to 6.6 lakh q. ft in The tranitional citie are firmly making their mark on the retail ector. Whilt organized retailing among them i a more recent phenomenon than in the NCR and Mumbai, they are oon catching up a both retailer and developer tap into the large middle cla of thoe citie. In thi category are included the citie of Bengaluru, Kolkata, Hyderabad, Pune, and Ahmedabad, all of which have ignificant mall Oxford O d Univerity ity Pre Small Town Retail Boom RP group plan to open mall in all citie with a population of over eight lakh. LuLu roup International, an Abu Dhabi-baed company having diveri ed buine interet with focu on retail ector, ha announced it plan to invet H2500 crore in Telangana in Reliance retail ha planned to cover 1500 citie and town on the line of al-mart. Titan plan to add 100 more orld of Titan, atrack, and elio tore in Source: economictime.indiatime.com and new.franchieindia. com

23 6 Retail Management Leading Corporate Retail Plan The Indian retail indutry in the ingle brand egment ha received foreign direct invetment ( DI) equity in ow to the tune of S million during the period April 2000 January 2015, according to the Department of Indutrial Policie and Promotion (DIPP). ith the riing need for conumer good in di erent ector, including conumer electronic and home appliance, many companie have inveted in the Indian retail pace in the pat few month. Some of them are a follow: Paytm plan to et up 30,000 50,000 retail outlet where it cutomer can load cah in their digital wallet. The company i alo looking to enroll retailer, motly kirana tore, a merchant for accepting digital payment. Mobile wallet company Mobi wik ha partnered with Jabong.com to provide mobile payment ervice to Jabong cutomer. Impact of Receion on the Indian Retail Sector An economic lowdown i prompting India retailer to reviit their expanion plan wherea foreign rm are reviewing their plan to enter a market named the mot a ractive retail detination three year running. A economic growth picked up to more than nine per cent in recent year, a promiing middle dle cla a racted multiple corporate uch a Reliance, Tata roup, Aditya irla group, and harti nterprie to the retail ector. lobal retailer al-mart, Teco and ermany Metro A alo felt the pull. owever, the a raction ha dimmed a economic growth ha lowed to below even per cent and pending ha tightened. Retailer are cloing tore, curbing pending, and repoitioning themelve to ride out the tough time. Many leading indigenou player are making change at operational and trategic level. Subhikha Trading Service, which operated about 1600 dicount tore acro India, ran out of cah lat ctober. The unlited company operation are nearly at a tandtill and it i undergoing a debt retructuring exercie. xpert are viewing thi etback for retailer in India a a neceary one after companie opened outlet at a furiou pace in unviable location at exorbitant rent, charting out ambitiou expanion plan. Subhikha Trading Service ha initiated renegotiation of account of rental with real etate player and i alo conidering relocation of ome of it tore from the odd acro the country due to low ale volume and high rental. India larget lited retailer, Pantaloon Retail, faced with falling ale in variou product and high inventory cot, i reworking it trategy. It i focuing on cot and upply chain e ciencie, high-margin private label, be er credit term and price from vendor, and re-negotiating leae rental agreement. Cah-trapped ihal Retail i cloing tore and ha no plan to open more in 2010, but will expand through the franchiee route. ritih retailer Mark and Spencer, facing falling ale at home, i repoitioning itelf in India and i looking at larger format tore to a ract more people. Analyt feel the economic lowdown i likely to lead to more focu on value-retailing in clothing and food in coming Data ind ha partnered with omeshop18 to expand it retail footprint in the country. nder the partnerhip, both the companie will ointly launch pecial ale program acro broadcat, mobile, and Internet media to create greater acce of the la er tablet range. Amazon Inc. and lipkart India will invet nearly H2300 crore ( S million) in the near term a they plan to acquire more cutomer in the country fat-growing online retail market. ahionand ou ha opened three ditribution hub in Surat, Mumbai, and engaluru to haten deliverie. Abu Dhabi-baed Lulu roup plan to invet H2500 crore ( S million) in a fruit and vegetable proceing unit, an integrated meat proceing unit and a modern hopping mall in yderabad, Telangana. Source: indianbuine.nic.in nic.in and ndia.indiatime.com month and a hift away from lifetyle retailing, a trategy that hould bene t local retailer. verea retailer are till keen on India but prefer to wait for a year or more. Reliance Retail i alo trying hard to beat the receion. That explain it deciion to cloe 30 of it unpro table tore and reducing the manpower by at leat Alo on card are vr renegotiating rental for it 900 propertie to cut down uch cot by a third. The company ha alo uni ed it ourcing function for value format after achieving a critical ma. The value format include neighbourhood format Reliance reh, upermarket chain Reliance Super, hypermarket format Reliance Mart, and Reliance ellne, a beauty and wellne format. The ve tep taken by Reliance Retail have been a follow: he e te 30 unpro table tore cloed Manpower lahed by at leat 1000 Rental for 900 propertie to be cut by a third Sourcing function being uni ed In peciality format, the ratio of private label to other product increaed to 50:50 The environment i tough indeed for retailer. According to Nikhil ora, Managing Director of ID C SS I Securitie, every quare foot of retail pace call for H2000 H2500 of capital, while the mot pro table retailer generate H1000 H1200 of cah pro t at the tore level and 300 at the net level. So, at bet, internal accrual can upport ut 15 per cent of pace addition. iven thi and the fact that the book of rapidlygrowing retailer are highly leveraged and that the current environment i making acce to external capital di cult, retail growth ha hit a roadblock. Though there are capitalized player uch a Reliance, Tata, and harti operating in the pace, retailing cannot exit in the abence of a retail environment the competition alo ha to be funded. Source: amath and John (2009), Buine Standard, 26 ebruary Oxford O d Univerity U ity Pre re

24 Retailing: Role, Relevance, and Trend 7 CHARACTERISTICS OF RETAILING Retailing can be ditinguihed in variou way from other buine activitie like manufacturing. It differ from manufacturing in the following way: There i a direct end-uer interaction in retailing. It i the only point in the value chain to provide a platform for promotion. Sale at the retail level are generally in mall unit ize. Location i a critical factor in retail buine. In mot retail buinee, ervice are a important a core product. There are a larger number of retail unit compared to other member of the value chain. Thi occur primarily to meet the requirement of geographical coverage and population denity. irect nterac on ith C tomer Retailing entail a direct interaction with end-uer of good or ervice in the value chain. Retailer act a intermediarie between end-uer and upplier uch a wholealer or manufacturer. Therefore, they are in a poition to effectively communicate the repone and changing preference of the conumer to the upplier or aleperon of the company. Thi help the manufacturer and marketer to redefine their product and change the component of it marketing trategy tegy Theorie and Model of Retailing ialec c roce An evolutionary theory baed on the premie that retail intitution evolve. The theory ugget that new retail format emerge by adopting characteritic from other form of retailer in much the ame way that a child i the product of pooled gene of two di erent individual. Gravity model A theory about the tructure of market area. The model tate that the volume of purchae by conumer and the frequency of trip to the outlet are a function of the ize of the tore and the ditance between the tore and the origin of the hopping trip. Retail accordion theory A theory of retail intitutional change that ugget that retail intitution go from outlet with wide aortment to pecialized, narrow, line tore merchant and then back again to the more general, wideaortment intitution. It i alo referred to a the generalpeci c-general theory. Retail life cycle theory A theory of retail competition that tate that retailing intitution, like the product they accordingly. Manufacturer require a trong retail network for expanding the reach of their product and to obtain a powerful platform for promotion and point-of-purchae advertiing. Realizing the importance of retailing in the entire value chain, many manufacturer have entered into retail buine by etting up excluive tore for their brand. Thi ha not only provided direct contact with the buyer, but ha alo acted a an advertiement for the companie and provided the manufacturer with a bargaining power with repect to other retailer (dealer) who tock their product. Retailing alo provide extenive ale executive upport for product, which are information-intenive a in the cae of conumer durable. oint-o - rchae i la and romo on A ignificant chunk of retail ale come from unplanned or impule purchae. Studie have hown that hopper often do not carry a fixed hopping lit and pick up merchandie baed on impulive or ituational appeal. Many do not look at ad before hopping. Since retail product are low involvement in nature, impule purchae of the hopper i a vital area that every retailer mut tap into. Therefore, diplay, point-of-purchae merchandie, tore layout, and catalogue become important. Impule good uch a chocolate, nack food, and magazine can ell much more quickly if they are placed in a high viibility and high traffic location. ditribute, pa through an identi able cycle. Thi cycle can be partitioned into four ditinct tage: (1) innovation, (2) accelerated development, (3) maturity, and (4) decline. Wheel of retailing theory A theory of retail intitutional change that explain retail evolution with an intitutional life cycle concept. at ral elec on theor A theory of retail intitutional change that tate that retailing intitution that can mot e ectively adapt to environmental change are the one that are mot likely to proper or urvive. Central place theory A model that rank communitie according to the aortment of good available in each. At the bo om of the hierarchy are communitie that repreent the mallet central place (centre of commerce). They provide the baic neceitie of life. urther up the hierarchy are the larger central place, which carry all good and ervice found in lower-order central place plu more pecialized one that are not neceary. placed i Oxford O d U Univerity Pre o er erage mo nt o ale ranac on The average amount of ale tranaction at a retail point i much le in comparion to the other partner in the value chain. Many conumer buy product in mall quantitie for houehold conumption. Due to lower dipoable income ome conumer egment in India buy even grocery item on a daily bai rather than a weekly or a monthly bai. Inventory management, thu, become a challenge for retailer a a reult of innumerable minor tranaction with a large number of cutomer. Hence, retailer have to take care of the average

25 8 Retail Management level of tock, order level, and the popularity of different brand. The mall amount alo mean that the retailer ha to keep a tight control on cot aociated with each tranaction in the elling proce. Credit verification, employment of peronnel, value-added activitie uch a bagging, giftwrapping, and promotional incentive all add up to the cot. One way to reolve thi i for the retail outlet to be able to attract the maximum poible number of hopper. oca on or arger m er o Retail ine Unit Location of retail tore play an important role compared to other buine unit. Manufacturer decide the location on the bai of availability of factor of production and market. Similarly, retailer conider factor uch a potential demand, upply of merchandie, and tore image related factor in locating the retail outlet. The number of operating unit in retail i the highet compared to other contituent of the value chain, primarily to meet the need for geographic reach and cutomer acceibility. FUNCTIONS AND ACTIVITIES OF RETAILING Retailer play a ignificant role a a link between manufacturer, wholealer, upplier, and conumer. In thi context, they perform variou function that add value to the offering they make to their target egment. They provide convenient location, tock, and appropriate riate mix of merchandie in uitable package in accordance with the need of cutomer. The major activitie, a hown in Fig. 1.1, carried out by retailer are a follow: ow: Sorting Arranging aortment Breaking bulk Holding tock Extending ervice Providing additional ervice or ng Manufacturer uually make one or a variety of product and would like to ell their entire inventory to a few buyer Providing addi onal ervice Sor ng Extending ervice Ac vi e of retailer Arranging aortment Holding tock FIG. 1.1 Activitie of retailer Breaking bulk to reduce cot. Final conumer, in contrat, prefer a large variety of good and ervice to chooe from but buy them in mall quantitie. Retailer are able to balance the demand at both end of the value chain pectrum by picking up an aortment of good from different ource, buying them in ufficiently large quantitie, and elling them to conumer in mall unit. The aforegiven proce i referred to a orting. Through thi proce, retailer undertake activitie and perform function that add to the value of the product and ervice old to the conumer. Supermarket in the US offer, on an average, 15,000 different item from 500 companie. Cutomer are able to chooe from a wide range of deign, ize, and brand from jut one location. If each manufacturer had a eparate tore for their product, cutomer would have to viit everal tore to complete their hopping. While all retailer offer an aortment, they pecialize in type of aortment offered and the market to which the offering i made. For intance, while Wetide provide clothing and acceorie, a chain like Nilgiri pecialize in food and bakery item. Shopper Stop target the elite urban cla wherea Pantaloon target the middle cla. Arranging Aortment An aortment i a retailer election of merchandie. It include both the depth and breadth of product carried. Retailer have to elect the combination of aortment from variou categorie. The aortment mut include ubtitutable item of multiple brand, tock-keeping unit (SKU), and price. They hould be ditinguihed on account of phyical dimenion and attribute, for example, colour or flavour. Small retailer take aortment deciion on the bai of their experience. On the other hand, retailer from organized retailing depend on a detailed tudy of pat trend and future projection. Retailer need to conider certain factor while deviing aortment plan for their tore: profitability aociated with particular merchandie mix, tore image, layout, and the level of compatibility between the exiting merchandie. For example, Spencer, a leading food upermarket poitioned a a one-top hopping centre, deal in multiple product categorie along with all poible variant of brand, SKU, and phyical attribute to meet the expectation of their conumer and urvive in the buine. On the other hand, Big Bazaar ha an impreive aortment of only the fatmoving brand and SKU intead of all available variant in the market. Their aortment plan i governed by location, ize, and tore image (value for money) of their tore. Oxford d Univerity y Pre Breaking Bulk Breaking bulk mean phyical repackaging of the product by retailer in mall unit ize according to cutomer convenience and tocking requirement. Normally, retailer receive large quantitie of ack and cae of merchandie

26 Retailing: Role, Relevance, and Trend 9 from upplier to reduce their tranportation cot. In order ervice i conidered to be an integral ingredient of the watch to meet cutomer requirement, retailer have to break or purchae. arrange the bulk into convenient unit. Thi entire function Although hopping over the phone and through the add value to the offering not only for the end cutomer Internet have increaed vatly in the pat few year, yet the but alo for the upplier in the value chain. Even in the majority of Indian conumer till viit tore to hop. Store earlier day of generic and commodity-baed trading, mot remain popular becaue of the need of conumer to be able of the retailer ued to perform thi important function in to ee and feel the product themelve before buying. It i the value chain. Thi function receive little attention from a mean of ocial interaction, the opportunity to compare retailer nowaday due to the introduction of new product different brand, and impule buying. The location of a tore categorie uch a fat moving conumer good (FMCG) and i alo of great importance in the retail proce. In their bid ready-to-wear apparel. to attract more footfall, retailer alo keep track of amenitie uch a parking, extended hour of operation, pecial play area for children, wahroom, and trial room. Beide, Holding Stock efficient cutomer ervice i required to make the cutomer To enure the regular availability of their offering, retailer feel comfortable and important. maintain appropriate level of inventory. Conumer normally depend on the retailer directly to replenih their tock at home. Therefore, retailer, on periodic bai, ro iding ddi onal onal er ice maintain the required level of tock to meet the regular or Here are ome additional function of retailing. eaonal fluctuation in the demand. They need to maintain equilibrium between the range, or variety carried and the Channel nel of Communication ale which it give rie to. They have to face the negative Beide the aforementioned main activitie of retailer, they conequence of holding unwanted level of tock for erve a ignificant communication channel acro the value intance, too little tock will hamper the ale volume, chain. wherea too much tock will increae the retailer cot of From advertiement, alepeople, and diplay, hopper operation. The majority of Indian retailer being mall, they learn about the characteritic and feature of a product or do not have the pace to tock huge inventorie. Some are o ervice offered. Manufacturer, on their part, get information regarding ale forecat, delivery delay, and cu- mall that they can tock only on the hop floor. In general, vm in mall town mot retailer have arrangement with nearby tomer complaint. A a reult, they can modify defect or warehoue to tock the good. Retailer in the organized addre anomalie in unatifactory merchandie and ervice. ector, to a certain extent, have intalled effective oftware package for maintaining adequate level l of inventory. At the ame time, retailer avail of jut-in-time -time deliverie with the help of efficient conumer repone ytem, which reduce the burden of maintaining high level of tock. Extending Service Retailer provide multiple ervice to immediate cutomer and other member of the value chain. The et of ervice extended by particular retailer may be part of their core product offering or it may be an add on to their product or ervice. Often they offer credit, home delivery, after-ale ervice, and information regarding new product to their cutomer, thereby making hopping a convenient and enjoyable experience. At the ame time, they provide tocking place, reach to the ultimate cutomer, and information about the concerned target egment to the upplier. For example, Time Zone, the firt organized retail chain of writwatche in India, tarted by leading watch manufacturer Titan, et up in all it tore, ervice centre with proper equipment and trained manpower. Thi ha not only diluted the relevance of ervice provider in the unorganized ector but ha alo enhanced the confidence of the cutomer in the retail ervice provided by the particular retail chain a after-ale Tranport and Advertiing Function Small manufacturer can ue retailer to provide aitance with tranport, torage, advertiing, and pre-payment of merchandie. Thi alo work the other way round in cae the number of retailer i mall. The number of function performed by a particular retailer ha a direct relation to the percentage and volume of ale needed to cover both their cot and profit. Oxford O d Univerit U rity Pre P CATEGORIZING RETAILERS Categorizing retailer help in undertanding the competition and the frequent change that occur in retailing. There i no univerally accepted method of claifying a retail outlet, although many categorization cheme have been propoed. Some of thee include claifying on the bai of (a) number of outlet, (b) margin v turnover, (c) location, and (d) ize. Number of Outlet The number of outlet operated by a retailer can have a ignificant impact on the competitivene of a retail firm. In general, a greater number of outlet add trength to the firm

27 10 Retail Management becaue it i able to pread fixed cot, uch a advertiing and manager alarie, over a greater number of tore in addition to acquiring economie of purchae. While any retailer operating more than one tore can be technically claified a a chain owner, for practical purpoe a chain tore refer to a retail firm which ha more than eleven unit. In the United State, for example, chain tore account for nearly 95 per cent of general merchandie tore. Challenge for Retail Banking Mot Indian bank both in the private and public ector have huge retail operation ome example being State ank of India, Pun ab National ank, D C ank, ICICI ank, etc. Retail bank and market are at di erent tage in their evolution. or ome, the challenge i to achieve baic operating e ciencie in nancial product deigning and baic elling kill in the front-line. or ome other, the challenge i to nd new way to create income growth, through innovative propoition, di erential pricing, or uperior delivery. ther are beginning to ee the unbundling of retail value-chain, with pecialit retail bank, ervice and nancial product buinee coming into exitence, and raiing fundamental quetion about where and how to compete. Regardle of their market context, all retail bank face a ditinct et of management challenge. irt, retail bank are typically larger and more complex to manage than mot other nancial buinee. A typical retail bank comprie maive production, ervicing, and retailing operation which need to come together to provide conitent delivery at the pointof-ale or point-of-ervice. or example, ICICI ank witneed huge purt in it retail banking operation and cutomer bae in early owever over time, it cutomer ervice could not keep pace with thi rapid growth and there were numerou complaint that cutomer communicated in thi repect. A retail bank may employ everal thouand of people, each of them needing to be motivated and managed to hare in the value of the whole. Second, the economic of retail banking are complex. The value of product and cutomer can take a lifetime to be realized, and can eaily lead to poor reource allocation on deciion and cro-ubidie. In the ame way, the economic of delivery are obcure, with no clear diviion between where money i made along the manufacturing and the retailing value-chain. Third, retail income i under a ack. There are few bank left that can feel comfortable that they have a ecure, table home bae to rely on. The a ack ack ha come not from the Internet retailer, or other entrant, but from other incumbent whether bank ght to take cutomer or inurer ght to take their hare of the cutomer market. Size vh hop, and the clear conitent image and identity which they develop and maintain challenge the abilitie and reource Small chain can ue economie of cale while tailoring of many mall retailer. However, their bigget advantage, merchandie to local need. Big chain operating on a perhap, i the knowledge of their cutomer. They not only national cale can ave cot by a centralized ytem of know their cutomer, but alo apply that knowledge in buying and accounting. A chain tore could have either a every apect of their buine, from inventory election to tandard tock lit enuring that the ame merchandie i tore layout. tocked in every retail outlet or an optional tock lit giving However, large retailer are not perfect. They have the outlet the advantage of changing the merchandie competitive weaknee that mall retailer can exploit. Mot according to cutomer need in the area. Becaue of their offer the ame kind of aortment of product nationally. ize, chain tore are often captain of the marketing Local manager have little ay in inventory election. Often, channel who can influence other channel partner, like ale taff ha minimal product knowledge. Staff turnover i wholealer, to carry out activitie they might not otherwie extremely high. Mot large retailer have little connection engage in uch a extended payment term and pecial with the community they erve. They uually do not offer package ize. pecial ervice. Larger companie are often low to recognize Big tore focu on large market where their cutomer and react to change in their local market. live and work. They ue technology to learn more about their Independent retailer can co-exit and flourih in the cutomer and target them with point-of-ale machine, hadow of the big chain by developing a niche within the interactive kiok, and ophiticated forecating and divere market. The niche hould be developed on the bai inventory ytem. They tend to tock a narrow range of of new or unuual product offering, uperior ervice, and inventory that ell well and maintain an extenive inventory overall quality. While value i important, price may be le of the fat elling product. Branding i important to them. important. Efficient operation, including precie buying Pricing i often a key area of focu for thee retailer. Big practice, i a mut. Cutomer contact within the niche tore have many trength uch a regional or national market mut be characterized by high-touch ervice. The reputation, huge buying power, vat inventory, and halefree return and exchange policie. Their prime location, key factor i innovation; tore that do not change will perih. The road to ucce for the independent retailer lie in doing the conitency in the quality of their product and ervice, all the thing which the big chain tore cannot or will not the fact that they are open when people can and want to otho Oxfo xford Unive U iverit rity Pre P

28 Retailing: Role, Relevance, and Trend 11 oca on One of the oldet mean of claification of retailer i by location, generally within a metropolitan area. Location will be dealt with more extenively in the ucceeding chapter but uffice it to ay at thi tage that retailer are no longer atified with traditional location within the buine ditrict of a city, and are on the contant lookout for alternate location to reach cutomer. Beide renovating old tore, retailer are teting unorthodox location to expand their clientele. With the advent of the Internet, thi area of retailing i likely to undergo tremendou change in the forthcoming year. forum of ale. Thi combination of large retailer and large tore make the US one of the mot efficient uer of the ditribution channel. In Japan, on the other hand, mall firm and tore govern the retail ector. The wholeale channel i relatively much larger and independent. To reach all the tore, almot daily, often require the merchandie to pa through a many a three channel of ditribution. Therefore, thi reduced efficiency mean that in contrat to the 10 per cent of the total labour force employed in thi ector in the US, the Japanee ue 20 per cent of their workforce. The European ytem fall in between that of the US and Japan. Northern Europe i the cloet to the US in term of concentration level in ome national market, 80 per cent of the retail ale in food i in the hand of fewer than five firm. In outhern Europe, the market i more fragmented with the traditional farmer market retailing till predominant in ome ector along with big-box format. Central Europe ha een an increae in retail floor pace after the privatization of the retail trade. Privatization ha alo reulted in a tranition from an extremely tructured ytem to one that i highly fragmented, with kiok rapidly gaining popularity. In the Indian context, traditionally the mall retailer have played a major role in variou ector with the unorganized player outnumbering the organized one. However, the pat do. The ucceful independent retailer hould embrace the STRUCTURE AND NATURE OF RETAILING following principle: CHANNELS Be prepared for change. Move to a narrower niche market and top competing Retailing i the lat tage in the ditribution proce, directly with the big retailer. which comprie all the buine operation and the people Learn more about cutomer and include bet cutomer involved in the phyical movement and tranfer of ownerhip in a databae. of good and ervice from the producer to the conumer. Invet appropriately in advertiing and promotion. A typical ditribution channel conit of a manufacturer, a Charge regular price and avoid dicounting (enure wholealer, a retailer, and the final conumer. Wholealing i requiite mark up). an intermediate tage during which good are old not to Buy with preciion and earch out peciality upplier. the final conumer but to the buine cutomer for reale. Maintain eential inventory. In ome ditribution channel, different activitie are Focu on profit intead of volume (be ready to loe an performed by independent firm. However, mot ditribution occaional ale). channel have a certain degree of vertical integration Provide extraordinary ervice. performing more than one activity. For example, Spencer Employ the bet poible taff. carrie out both wholealing and retailing activitie. It buy Undertand the ignificance of the Internet. directly from the manufacturer, ha merchandie hipped Size i often ued a a yardtick to claify retailer becaue to it warehoue, and then ditribute it acro it tore. cot often differ on the bai of ize, with big retailer having Some retailer, epecially in the clothing buine, even lower operational cot per rupee than maller player. deign the merchandie they ell and contract it production However, in thi phere too, the Internet may make ize an to manufacturer. acturer. obolete method of comparion. The nature of retailing channel differ in variou part of the world. The US ha a retail denity that i greater than that of all other countrie. A feature of the US ytem i the Margin v Turnover concentration of large retail firm 10 per cent of it food Gro margin and inventory turnover i another mean of and general merchandie retail firm account for over 40 per claifying retailer. Gro margin i net ale minu the cot cent of all retail ale. Some firm are even able to eliminate of good old and gro margin percentage i the return on wholealer a they are large enough to operate their own ale. A 30 per cent margin implie that a retailer er generate vw warehoue. Large tore of over 20,000 q. ft are popular H30 for every H100 ale that can be ued to pay operating expene. Inventory turnover refer to the number of time per year, on average, a retailer ell hi inventory. On the bai of thi, retailer are claified a low-margin low-turnover thoe that cannot urvive the competition and low-margin high-turnover, r, exemplified by Amazon.com. Jewellery tore and appliance ance tore are example of highmargin low-turnover tore and only a few retailer achieve high-margin high-turnover. r. Thee retailer are in the bet poition to combat competition on becaue their high turnover allow them to withtand price war. The drawback of the claification by thi method i that ervice retailer who have no inventory turnover cannot be encompaed. Oxford O d Univerity U ity Pre P

29 12 Retail Management decade ha witneed the rie of upermarket chain at the regional a well a national level. Some of thee tore alo have their own line of merchandie, be it clothe, food item, or houehold article. Price concioune among the large middle cla alo mean that large tore that are able to offer dicount on bulk purchae have become more important. Why doe the nature of retailing channel in thee countrie differ? The variance i primarily due to three factor: (a) ocial and political objective, (b) geography, and (c) market ize. The primary objective of Japanee or Indian economy i to reduce unemployment the large labour force that i available i employed by mall labour-intenive buinee. Second, the population denity in Japan and India i much higher than in the United State. Thu, thee countrie have le low-cot real etate available for development of large tore. Third, the US market i the larget in the world and i able to leverage on economie of cale. India i till a growing market and ha yet to develop a ytem a efficient a that of the US. TRENDS IN RETAIL FORMATS Retail indutry i continuouly going through change on account of liberalization, globalization, and conumer preference. While multinational retail chain are looking for new market, manufacturer are identifying, redefining, ing, or evolving new retail format. The exiting retail houe are alo gearing up to face the emerging competition from the organized ector and the changing outlook of the conumer. For example, conumer pending i hifting from good to ervice. Accordingly, the retailer too are rapidly reponding to the changing conumer preference. Conumer are not only looking for core product or functional benefit from the retailer but alo non-functional benefit, which need to be compatible with their lifetyle. For example, mot of the traditional eating joint in India uch a Haldiram, Bikanerwala, and Sagar Ratna have revied their product offering and atmopheric along the line of the multinational chain to compete with them and to cater to the changed expectation of the conumer. O Mom-and- o tore and radi onal kirana Store The retail ector i changing a new tore categorie have tarted dominating the marketplace. Ma merchandier uch a Wal-Mart and Big Bazaar; dicount tore uch a Future Group Brand Factory, Arvind Brand Megamart, and The Loot; category killer (Home Depot, Vihal chain); and peciality retailer (Time Zone, Tanihq) have all developed ucceful retail model. At the ame time, the mall momand-pop tore or the traditional kirana tore, are feeling the heat. In 2002, while Wal-Mart and Target aw revenue grow (by 12 per cent and 10 per cent, repectively), department tore uch a Sak and Federated experienced declining revenue (down 3 per cent and 1 per cent, repectively). However, even in the ma-merchandiing egment, the competition i fierce, a wa evident from Kmart bankruptcy announcement in Small independent tore, acro product categorie, i a very common retail format in India, particularly in mall townhip, but with the emergence of new retail format they are alo undertaking large cale renovation to attract their target conumer egment. In a urvey by Indian Council for Reearch on International Economic Relation (ICRIER) in 2008 which covered 2010 mall buinee in four metro and 10 citie, it wa een that growth in organized retailing had only a marginal impact on turnover and profitability. None of the mall hop urveyed wanted to quit the buine. Intead they wanted better acce to bank credit to meet the changing market environment. E-commerce Many major retail organization and manufacturer have online retail tore. Companie uch a Amazon.com and Firtandecond.com, which helped pioneer the retail e-commerce concept, are now being followed by brick- and-mortar and catalogue retailer like J. Crew, which are expanding retail e-commerce into new market. India retail market i etimated at $470 billion in 2011 and i expected to grow to $850 billion by 2020 with etimated CAGR of even per cent. Overall, e-commerce vm market i expected to reach US $24 billion by the year 2015 with both online travel and e-tailing contributing equally. Another big egment in e-commerce i mobile/ DTH recharge with nearly one million tranaction daily by operator webite. India e-commerce market wa worth about $3.8 billion in 2009, and roe to $12.6 billion in In 2013, the e-retail egment wa worth US $2.3 billion. About 70% of India e-commerce market i travel related. According to Google India, there were 35 million online hopper in India in 2014 and i expected to cro 100 million mark by end of With global growth rate of 8 10%, electronic and apparel are the bigget categorie in term of ale. A of Q1 2015, ix Indian tartup companie, that i, Flipkart, Snapdeal, InMobi, Quikr, OlaCab, and Paytm have managed to enter the billion dollar club. The key driver in Indian e-commerce are a follow: Ecalating broadband Internet ubcriber, 3G penetration, and recent introduction of 4G in few citie, India ha an Internet uer bae of about million a of January It i growing at a much fater rate, adding around ix million new entrant every month. Exploive growth of martphone uer, oon to be world econd larget martphone uer bae. Availability of much wider product range (including long tail and direct import) compared to what i available at brick and mortar retailer. Competitive price compared Oxford O o d Univerity U ity Pre P

30 Retailing: Role, Relevance, and Trend 13 to brick and mortar retail, driven by diintermediation and reduced inventory and real etate cot. Increaed uage of online claified ite, with more conumer buying and elling econd-hand good In India, cah on delivery i the mot preferred payment method, accumulating 75% of the e-retail activitie, which need to make a hift toward online payment mechanim. India ha got it own verion of Cyber Monday known a Great Online Shopping Fetival (GOSF), which tarted in December 2012, when Google India partnered with e-commerce companie including Flipkart, HomeShop18, Snapdeal, Indiatime hopping, and Makemytrip. Cyber Monday i a term coined in the USA for the Monday coming after Black Friday. In June 2013, Amazon.com launched their Amazon India marketplace without any marketing campaign and inveted $2 billion in India to expand buine, Amazon ha alo entered grocery egment with it Kirana now in Bangalore and i alo planning to enter variou other citie uch a Delhi, Mumbai, and Chennai. After thi, it larget Indian rival Flipkart ha raied about US $2.3 billion till November Snapdeal raied US $50 million in April 13, and in Feb 2014, online fahion retailer Myntra raied US $50 million from a group of invetor led by Premji Invet. Traditional retailer uch a Wal-Mart and Starbuck, hugely ucceful in their own right, have alo et up online tore o a not to mi the revenue opportunitie that the Internet offer. Department Store A department tore i a retail etablihment, which pecialize in atifying a wide range of the conumer peronal and reidential durable good need; and at the ame time offering the conumer a choice of multiple merchandie line, at variable price point, in all product categorie. Department tore uually ell product including apparel, furniture, home appliance, electronic, c, and additionally elect other line of product uch a paint, hardware, toiletrie, cometic, photographic equipment, jewellery, toy, and port good. Certain department tore are further claified a dicount department tore. Thee tore commonly have central cutomer checkout area, generally in the front area of the tore. Department tore are uually part of a retail chain of many tore ituated around a country or everal countrie. Some example of department tore in India are Lifetyle, Shopper Stop, Wetide, and Globu. c,o Dicount Store Thee are giant uch a Wal-Mart (the larget retailer in the world, with more than a million employee), Target, and Kmart, a well a memberhip warehoue like Cotco. Thee, along with the category killer, have changed the landcape of both the retail indutry and America. Where once mom-and-pop and department tore dominated retail, now the dicount retailer and category killer are at the top of the heap. Further where once hopping mall, anchored by at leat one major department tore, ued to be the dominant retail preence lining the nation road, now it i the behemoth Wal-Mart and Home Depot. Dicount tore normally price their merchandie at per cent lower than the market price and ue huge volume to compenate for lower margin. Category Killer Thee are the giant retailer that dominate one area of merchandie (e.g., Office Depot, Tower Record, and The Sport Authority). They are able to buy bathroom tile, file cabinet, electronic good, or pet food in uch huge volume that they can then ell them at price which even fairly large competitor cannot match. The future of thi category i better than that of many of the more general dicounter, but the ame employment caveat apply. For mot job eeker, thee companie offer earn-and-learn experience with vendor and ditributor before they move onward and upward. Oxford Univerity ity Pre P The volution of Mark and Spencer Source: Mark and Spencer Financial data drawn from Mark and Spencer archive and annual report can be ued to identify five phae in the company ale growth. Early, rather erratic growth, often through acquiition, gave way to a econd phae of tore development funded by the company floatation in the Sale growth in the third phae came ubtantively through an increae in tore ize. A fourth phae involved improvement in labour and pace productivity. The final and current phae of evolution emphazie diverification. Speciality Store Thee include Crate & Barrel, The Body Shop, and Victoria Secret. Some of the popular Indian peciality tore are Adida, Bata, Sony World, Nokia World, Muic World,