Amity Business School

Amity Business School

MBA(M&S), Semester 4 Retail & Mall Management Sunetra Saha

Module I

Amity Business School

Basics of Retailing Global scenario, Indian context Organized Retailing in India, Retail Formats and their Characteristics viz. Location, space / layout, merchandise, Customer profile etc. Formats: Super market, Specialty Store, Departmental Store, The Plaza, The Mall, The emporium, The Bazaar, Stop-Over, Single Size Denomination, Kiosk AT Kearney Report No. of sessions: 3

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Retailing

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Retailing consists of the sale of goods or merchandise from a fixed/variable location, such as a department store in small or individual lots for direct consumption by the purchaser. The sale of goods or commodities in small quantities directly to consumers. Retailing is defined as a conclusive set of activities or steps used to sell a product or a service to consumers for their personal or family use

Characteristics of retailing

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Direct interaction with customers. Lower & average amount of sales transaction. Point-of-purchase, Display and Promotions. Direct end user interaction. Only point of supply chain to provide a platform for promotions. Sales in smaller unit sizes

Functions of retailing
Sorting Breaking bulk Holding Stock Creating time & place utility Additional services o Channel of Communication o Transport o Advertising

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Drivers of Retail Change

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Changing industry structure Expanding technology Change in Art of living. Emphasis on lower costs and prices Emphasis of convenience and service

Industry Evolution

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Traditionally retailing in India can be traced to:The emergence of the neighborhood Kirana stores catering to the convenience of the consumers.

Era of government support for rural retail: Indigenous franchise model of store chains run by Khadi & Village Industries Commission. Retail in India is brought up by SHOPPERS STOP when it established its first customer care associates in the year 1993 and was providing a salary of Rs. 900/- to an employee.

Industry Evolution

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1980s experienced slow change as India began to open up economy. Textiles sector with companies like Bombay Dyeing, Raymond's, S Kumar's and Grasim first saw the emergence of retail chains Later Titan successfully created an organized retailing concept and established a series of showrooms for its premium watches The latter half of the 1990s saw a fresh wave of entrants with a shift from Manufactures to Pure Retailers

Industry Evolution

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For e.g. Food World, Subhiksha and Nilgiris in food and FMCG; Planet M and Music World in music; Crossword and Fountainhead in books. Post 1995 onwards saw an emergence of shopping centers, mainly in urban areas, with facilities like car parking targeted to provide a complete destination experience for all segments of society

Industry Evolution

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Emergence of hyper and super markets trying to provide customer with 3 Vs Value, Variety and Volume Expanding target consumer segment: The Sachet revolution - example of reaching to the bottom of the pyramid.

Retail in India

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In India, the retail is the second largest employer after agriculture. New attractive retail formats in India like supermarkets, discount stores, department stores etc. Indian retail size of population with a contribution of 14% to natural GDP & 7% of total workforce in the country. There are some 12 million retail outlets. Local Kirana store, the Paanwala, Vegetable venders, street food are the big part of retail industry. Total retail size in India is estimated Rs 9,30,000 crores and expected to grow @5%p.a

Features of Modern Retail

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Adoption of modern management practices Growth of multi-store retail chain Large format retailing Integrated & dedicated distribution systems Growth of private labels CRM & loyalty programmes

Retail scenario in India

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Faster growth rate of organized retail as compared to unorganized retail (annual growth rate of 35%, overall industry growth rate of 8 10%) Smaller cities are participating in Retail growth Entry of global giants Proliferation of local players Consolidation of Indian retail market Rise of Online Shopping

Growth factors of Indias retail

Rising incomesstrong economy

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Collaboration among retailers, Vendors & mall developers Retail growth Rise of pure retail companies

Growing young working population

Urbanization of Indian society

Technological advancement Store operations, logistics

Changing consumer preferences Demand

Supply

Issues before a retailer

Maximizing customer value Merchandising Traffic building Store design & layout Store location & Site Keeping pace with technology People management

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Retail Format

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Classification of Retail Units

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Nature of ownership Operational structure Length & depth of Merchandise Nature of service Type of pricing policy Type of retail location Method of consumer interaction

Merchandises Division

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Product Width Product Length Product Depth

SKUs?

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A common term for a unique numeric identifier, used to refer to a specific product in inventory or in a catalog. Inventory control count that represents one or more items that will be sold together. For example, a retail bed store would consider one bed frame with four wheels equal to one SKU (even though the frame and the wheels come from different suppliers), because a frame is never sold without wheels, and wheels are never sold alone. Conversely, a frame, a box spring, and a mattress would be considered three SKUs, because any of the three items might be sold separately. Warehousing item that is unique because of some characteristic (such as brand, size, color, model) and must be stored and accounted for separate from other items. Every SKU is assigned a unique identification number (inventory or stock number) which is often the same as (or is tied to) the items UPC.

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Store vs. Non-Store formats

a) Chain store Multi-locational Operates multiple outlets under common ownership Engages in some level of centralized or coordinated purchasing and decision making b) High street format: A retail chain that seeks to locate itself in busy shopping areas (generally less than 2,000 sft, with no parking facilities and focused merchandise categories) c) Destination format: Independent retail stores located specifically in an area with alluring propositions (usually large in size, with ample concessions, huge parking space, wide merchandise categories) d) Convenience store format: Accessible carrying wide array of consumable goods (less than 5,000 sft, extended hours, parking for few vehicles, convenience merchandise)

Store Formats by Location

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Competitive State of Chains

Advantages Bargaining power Cost efficiencies Efficiency from computerization, sharing warehouse and other functions Defined management philosophy Considerable efforts in long-run planning

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Disadvantages Limited flexibility Higher investment costs Complex managerial control Limited independence among personnel

Convenience Store Strategy Mix

Location: Neighborhood

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Prices: Average to Above average

Atmosphere & Services: Average

Merchandise: Medium width and low depth of assortment; average quality

Promotion: Moderate

Store Formats by Ownership

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a) Independent Generally higher level of independent retailers exists 50% of these are run by owners and their families Why so many? Ease of entry b) Franchise: A contractual agreement between a franchisor and a retail franchisee, which allows the franchisee to conduct business under an established name and according to a given pattern of business Franchisee pays an initial fee and a monthly percentage of gross sales in exchange for the exclusive rights to sell goods and services in an area

Competitive State Amity Business School of Independents

Advantages Flexibility in formats, locations, and strategy Control over investment costs and personnel functions, strategies Personal image Consistency and independence Strong entrepreneurial leadership Disadvantages Lack of bargaining power Lack of economies of scale Labor intensive operations Over-dependence on owner Limited long-run planning

Franchising
Franchising

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An arrangement in which a supplier (franchiser) grants a dealer (franchisee) the right to sell products in exchange for some type of consideration
Franchiser furnishes equipment, buildings, management know-how, and marketing assistance. Franchisee supplies labor and capital, and operates the business by the provisions of the franchise agreement.

Major Types of Retail Franchises

Manufacturer Authorization

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Product producer licenses retailers to sell its brand name product(s)

Distributor Authorization
Product producer licenses distributors to sell its brand name product to retailers

Producer Authorization
Franchiser supplies brand names, production techniques, or other services to franchisee while maintaining development and control of marketing strategies

Competitive State of Franchising

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Advantages Disadvantages small capital required oversaturation could occur acquire well-known names franchisors may overstate potential operating/management skills taught locked into contracts cooperative marketing agreements may be possible cancelled or voided exclusive selling rights royalties are based on sales, not profits less costly per unit

From the Amity Business School Franchisors Perspective

Benefits national or global presence possible qualifications for franchisee/ operations are set and enforced money obtained at delivery royalties represent revenue stream Potential Problems potential for harm to reputation lack of uniformity may affect customer loyalty ineffective franchised units may damage resale value, profitability potential limits to franchisor rules

Store Formats by Merchandise Category

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a) Family store Store dealing in all categories of related item (For e.g. apparel store offering merchandise to suit the wardrobe of a family) b) Specialty format: Narrow product lines with good depth. Specializing in a given type of merchandise, offering attentive customer services. c) Department store format: Large in size having several departments working as SBUs d) Super market format: Departmentalized, specializing in foodstuff, grocery and limited non-food categories, free access displays so that customers can pick from shelves. e) Emporium: Selling a variety of a particular group of merchandise (sari emporium).

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Specialty Store Strategy Mix

Prices: Competitive to Above average
Merchandise: Very narrow width and extensive depth of assortment; average to good quality Atmosphere and Services: Average to excellent Promotion: Heavy use of displays Extensive sales force

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Department Store Strategy Mix

Location: Business district, shopping center or isolated store Prices: Average to Above average
Atmosphere and Services: Good to excellent Promotion: Heavy ad and catalog use; direct mail; personal selling

Merchandise: Extensive width and depth of assortment; average to good quality

Conventional Supermarket Strategy Mix

Location: Neighborhood Merchandise: Extensive width and depth of assortment; average quality; manufacturer, private, & generic brands Prices: Competitive

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Atmosphere and Services: Average Promotion: Heavy use of newspapers, flyers, and coupons

Store Formats by Size

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a) Superstore format Single-level large store, twice the size of a supermarket, offers non-traditional goods and services like pharmacy, flower shop, bookstore, salad bar, bakery etc. b) Shopping Mall: Spread over a large area, arrangement of retail stores and places for leisure activities. c) Shopping Center: Plaza combining five or more tenant spaces developed under one building. d) Hypermarket: Wide variety, offering in large quantities in each category selling huge volumes at low margins.

Store Formats by Price

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a) Discount format Bazaar format, believing in discounts more often. b) EDLP format: Specialize in a particular merchandise line, assuring consistently low prices. c) Category killer format: Large specialty store having enormous selection of its product category at relatively low prices. d) Factory-outlet format: Owned and operated by the manufacturer e) Warehouse format: Large sale of discontinued merchandise, has large width and depth in many categories it retails. f) Single-price denomination format: Scrambled merchandise at just one price point, generally at a low one.

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Discount Store Strategy Mix

Prices: 25% or more below MRP
Merchandise: Extensive width and depth of assortment; average to good quality (overruns, irregulars, cut-sizes) Atmosphere/ Services: Slightly below average to average Promotion: Heavy on newspapers; price-oriented; selling

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Factory Outlet Strategy Mix

Prices: Very Low
Merchandise: Moderate width and poor depth of assortment; low continuity (cancelled orders, discontinued merchandise)

Atmosphere/ Services: Very low

Promotion: Little

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Warehouse Store Strategy Mix

Location: Secondary site, often in industrial area
Merchandise: Moderate width and low depth of assortment; emphasis on manufacturer brands bought at discount

Prices: Very low

Atmosphere and Services: Low

Promotion: Little or none

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Store Formats by Concessions

a) Stopover store format Like petrol pump, offers instant use or ready-to-eat categories of merchandise. b) Kiosk: Small freestanding pavilion c) Alliances: With brands that customers trusts

Bazaars?
Seasonal Structured Un-structured Thematic

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Non-Store Retailing
Non-store Retailing

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The selling of products outside the confines of a retail facility Growth sector of retailing due to
Consumers are less willing to devote personal time to shopping in retail stores. Poorly trained and informed retail personnel cant offer needed sales assistance. Growing population of older shoppers who tend to shop less in large stores.

Non-Store Retailing (contd)

Direct Selling

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The marketing of products to ultimate consumers through faceto-face sales presentations at home or in the workplace
Party plans: hosting groups to view a product demonstration and encouraging participants to purchase the products

Benefits
Personal attention to customer Convenience of time and place of presentation

Limitations
High costs make it the most expensive form of selling Negative consumer view of direct selling

Direct Marketing
The use of telephone and nonpersonal media to introduce products to consumers, who then can purchase them via mail, telephone, or the Internet

Direct Marketing
Catalog Marketing

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A type of marketing in which an organization provides a catalog from which customers can make selections and place orders by mail, telephone, or the Internet
Consumer advantages are efficiency and convenience Marketer advantages are lower location, facility, selling, and operating costs. Disadvantages are inflexibility and limited selection and local service availability.

Direct Marketing (contd)

Direct-Response Marketing

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A type of marketing that occurs when a retailer advertises a product and makes it available through mail or telephone orders

Telemarketing
The performance of marketing-related activities by telephone

Direct Marketing (contd)

Television Home Shopping

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A form of selling in which products are presented to television viewers, who can buy them by calling a toll-free number and paying with a credit card

Online Retailing
Retailing that makes products available to buyers through computer connections

Automatic Vending
The use of machines to dispense products

Single Outlet Retailer A single outlet retailer is one which has only one outlet present in the market place. Normally new players enter in this mode and later graduate up to multi Outlet retailer. Eg. Spar (Food Retail) Multi-Outlet Retailer With Centralized Distribution These are the retailers who have got more than one outlet in the market place but have centralized distribution. This model is mainly adopted by regional players with a presence in one or more cities in close vicinity.

Business Models in India

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Multi-Outlet Retailer With Local Suppliers These are the retailers who have got multiple numbers of outlets in the market place and source their material from local suppliers. Normally this model is adopted in case of national players to stream line the logistics activity and wastage during transportation, cheap availability of Raw materials in the local area from local suppliers etc. They also can make adjustments to their product according to the regional preferences with the help of local suppliers.

Business Models in India

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Business Models in India

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Multi-Outlet Retailer With Mixed Distribution These are retailers who have got multiple numbers of outlets in the market place and source their material from local suppliers as well as from their centralized warehouse. This decision can be based on cheap availability of raw materials in the local area, the high cost of transportation, issues related to the standardization of the product etc.

Strategic Issues in Retailing

Retail Store Location
Factors affecting location
Intended target market Kinds of products Suitability site for customer access Characteristics of existing retail operations

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Types of Locations
Free-standing structures
Position relative to competition Customer access and parking

Traditional business districts

Redevelopment of decaying downtown infrastructure

Strategic Issues in Retailing (contd)

Traditional Shopping Centers
Neighborhood shopping centers

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Usually consist of several small convenience and specialty stores.

Community shopping centers

Include one or more department stores (anchors), some specialty stores, and convenience stores.

Regional shopping centers

Have the largest department stores, the widest product mix, and the deepest product lines of all shopping centers.

Strategic Issues in Retailing (contd)

Nontraditional Shopping Centers
Factory outlet malls

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Shopping centers that feature discount and factory outlet stores carrying traditional brand name products

Mini warehouse mall

Loosely planned centers that lease space to retailers running retail stores out of warehouse bays

Nonanchored malls
Do not have traditional department store anchors; instead combine off-price and category killer stores in a power center format

Strategic Issues in Retailing (contd)

Retail Positioning

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Identifying an unserved or underserved market segment and serving it through a strategy that distinguishes the retailer from others in the minds of consumers in that segment

Store Image
Atmospherics
The physical elements in a stores design that appeal to consumers emotions and encourage buying Interior layout, colors, furnishings, and lighting Exterior storefront and entrance design, display windows, and traffic congestion

Strategic Issues in Retailing (contd)

Scrambled Merchandising

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The addition of unrelated products and product lines to an existing product mix, particularly fast-moving items that can be sold in volume Intent of scrambled merchandising
Convert stores into one-stop shopping centers Generate more customer traffic Realize higher profit margins Increase impulse purchases

The Wheel of Retailing

A hypothesis holding that new retailers usually enter the market as low-status, low-margin, low-price operators but eventually evolve into high-cost, high price merchants.

Theories of retail development

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Cyclical theories Wheel of retailing- Entry phase - Trade up phase - Vulnerability phase Retail Accordion merchandise mix expands or contracts during different time periods

Theories of retail development

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Development theories Dialectic process new retail formats emerge by adopting characteristics from other retailers Theory of Natural Selection adaptation to changes in environment