RETAIL MANAGEMENT

OBJECTIVE : The objective is to enable students to acquire skills in Retail Management.

Unit 1: INTRODUCTION TO RETAIL BUSINESS 10 Hrs.
Definition functions of retailing - types of retailing forms of retail business ownership. Retail theories
Wheel of Retailing Retail life cycle. Retail business in India: Influencing factors present Indian retail
scenario. International perspective in retail business.
Unit 2: CONSUMER BEHAVIOUR IN RETAIL BUSINESS 12 Hrs.
Buying decision process and its implication on retailing Influence of group and individual factors, Customer
shopping behavior, Customer service and customer satisfaction. Retail planning process: Factors to consider in
preparing a business plan implementation risk analysis.
Unit 3: RETAIL OPERATIONS 10 Hrs.
Factors influencing location of Store - Market area analysis Trade area analysis Rating Plan
Method - Site evaluation. Retail Operations: Stores Layout and visual merchandising, Stores designing, Space
planning, Inventory management, Merchandise Management, Category Management.
Unit 4: RETAIL MARKETING MIX 16 Hrs.
Introduction -Product : Decisions related to selection of goods (Merchandise Management revisited)
Decisions related to delivery of service. Pricing : Influencing factors approaches to pricing price sensitivity Value pricing Markdown pricing. Place : Supply channel SCM principles Retail logistics computerized
replenishment system corporate replenishment policies. Promotion : Setting objectives communication
effects - promotional mix. Human Resource Management in Retailing Manpower planning recruitment and
training compensation performance appraisal Methods.
Unit 5: IMPACT OF INFORMATION TECHNOLOGYIN RETAILING 08 Hrs.
Non store retailing (e-retailing) - The impact of Information Technology in retailing - Integrated
Systems and networking EDI Bar coding Electronic article surveillance Electronic shelf labels
customer database management system. Legal aspects in retailing, Social issues in retailing, Ethical issues in
retailing.
SKILL DEVELOPMENT

ore operations

-retailing

Module - 1
1. Retail is the sale of goods and services from individuals or businesses to the end-user. Retailers are a part of an
integrated system called the supply chain. A retailer purchases goods or products in large quantities
from manufacturers directly or through a wholesale, and then sells smaller quantities to the consumer for
a profit. Retailing can be done in either fixed locations like stores or markets, door-to-door or by delivery. In the
2000s, an increasing amount of retailing is done online using electronic payment and delivery via
a courier or postal mail. Retailing includes subordinated services, such as delivery. The term "retailer" is also
applied where a service provider services the needs of a large number of individuals, such as for the public.
Shops may be on residential streets, streets with few or no houses, or in a shopping mall. Shopping streets may
be for pedestrians only. Sometimes a shopping street has a partial or full roof to protect customers
from precipitation. Online retailing, a type of electronic commerce used for business-to-consumer (B2C)
transactions and mail order, are forms of non-shop retailing.
2.

Shopping generally refers to the act of buying products. Sometimes this is done to obtain necessities such as
food and clothing; sometimes it is done as a recreational activity. Recreational shopping often involves
window shopping (just looking, not buying) and browsing and does not always result in a purchase.

3. Retailers are a part of an integrated system called the supply chain. A retailer purchases goods or products in
large quantities from manufacturers directly or through a wholesale, and then sells smaller quantities to the
consumer for a profit.
A business or person that sells goods to the consumer, as opposed to a wholesaler or supplier, who normally sell
their goods to another business.
Definition: One who sells goods or commodities directly to consumers. These items are purchased from the
manufacturer or wholesaler and sold to the end user at a marked up price.
Also Known As: Merchant
Examples: Wal-Mart is a well-known large chain retailer. Another example of a retailer would be the small
family-operated pharmacy on the corner.
Meaning and Definition of Retailer.
The word retailer has been derived from the French word "Retail" which means to sell in small quantities, rather
than in gross. A retailer is a person who purchases a variety of goods in small quantities from different
wholesalers and sell them to the ultimate consumer. He is the last link in the chain of distribution from the
producer to the consumer.

Definition and Scope of Retailing:

Retail Industry, one of the fastest changing and vibrant industries in the world, has contributed to the economic
growth of many countries. The term 'retail' is derived from the French word retailer which means 'to cut a piece
off or to break bulk'. In simple terms, it implies a first-hand transaction with the customer.
Retailing can be defined as the buying and selling of goods and services. It can also be defined as the timely
delivery of goods and services demanded by consumers at prices that are competitive and affordable.
Retailing involves a direct interface with the customer and the coordination of business activities from end to
end- right from the concept or design stage of a product or offering, to its delivery and post-delivery service to
the customer. The industry has contributed to the economic growth of many countries and is undoubtedly one of
the fastest changing and dynamic industries in the world today.
Characteristics
The followings are some of the essential characteristics of a retailer:

He is regarded as the last link in the chain of distribution.

He purchases goods in large quantities from the wholesaler and sell in small quantity to the consumer.

He deals in general products or a variety of merchandise.

He develops personal contact with the consumer.

He aims at providing maximum satisfaction to the consumer.

He has a limited sphere in the market.

What are the functions of retailing?

The functions of retailing include :
a.Sorting :The items are arranged in order by the retailers so that the customers are able to locate and pick up
their needed goods easily.
b.Storage: The retailer holds stocks of goods and thereby meets the day-to-day needs of the consumer.
c.Channels of communication: The retailer spreads by word-of-mouth communication, valuable information to
the customers about the product.
d.Transportation: Nowadays, small grocery stores are undertaking the work of door deliver orders in case of
durable goods.

FUNCTIONS OF RETAILING
1. Buying:
A retailer buys a wide variety of goods from different wholesalers after estimating customer demand. He selects
the best merchandise from each wholesaler and brings all the goods under one roof. In this way, he performs the
twin functions of buying and assembling of goods.
2. Storage:
A retailer maintains a ready stock of goods and displays them in his shop.
3. Selling:
The retailer sells goods in small quantities according to the demand and choice of consumers. He employs
efficient methods of selling to increase his sales turnover.
4. Grading and Packing:
The retailer grades the goods which are not graded by manufacturers and wholesalers. He packs goods in small
lots for the convenience of consumers.
5. Risk-bearing:
A retailer always keeps stock of goods in anticipation of demand. He bears the risk of loss due to fire, theft,
spoilage, price fluctuations, etc.
6. Transportation:
Retailers often carry goods from wholesalers and manufacturers to their shops.
7. Financing:
Some retailers grant credit to customers and provide the facility of return or exchange of goods. In some cases,
home delivery and after sale service are provided by retailers.
8. Sales promotion:
A retailer displays goods. He carries out publicity through shop decoration, window display, etc. He maintains
direct and personal contacts with consumers. He persuades consumers to buy goods through personal selling.
9. Information:
Retailers provide knowledge to consumers about new products and uses of old products. They advise and guide
consumers in better choice of goods. They also provide market information to wholesalers and manufacturers.

Services Performed By Retailers:

Retailers provide important services to both the wholesalers and the consumers.
These can be explained as under:
(I) Services To Wholesalers:

They supply invaluable information with regard to tastes, preferences, fashions and demands of the
customers to the wholesalers who in turn transmit the same to the producers which is of immense utility
to them.

By taking over the function of retailing from the wholesalers and manufacturers, retailers relive them
from selling goods in small quantities to the consumers.

Many retailers usually place orders in advance with the wholesalers which is very helpful in planning
the purchases of the wholesalers.

Sometimes retailers make advance payments for the goods to be received from the wholesalers. In this
manner, they help in financing the wholesale trade.

Without the services of the retailers a new product cannot be introduced in the market supplied to him
by the wholesalers.

(II) Services to Consumers:

The retailers assemble variety to produces from the wholesaler and place them at the doorstep of the
consumers and provide them a convenience of choice.

They provide credit facilities to the consumers thereby helping them in times of difficulty.

They extend personalized service to the consumers and try to give them maximum satisfaction.

They introduce new products to the consumers and also guide them as to their uses.

They extend free home delivery and after sales service to the consumers.

They allow cash discount to the consumers on the products sold.

They buy and stock products best suited to the consumers.

They give valuable advice regarding the use and maintenance of the products delivered by them.

They cater to the needs of every type of consumer by keeping in view their paying capacity.

They supply fresh products to the consumers.

They usually take back the goods which do not suit to the consumers and replace them.

Types of Retailers
There are 7 main types of retailers which can be defined by the size of their business and the way they in which
they sell their products.
1. Department Store This type of retailer is often the most complex offering a wide range of products
and can appear as a collection of smaller retail stores managed by one company. The department store
retailers offer products at various pricing levels. This type of retailer adds high levels of customer
service by adding convenience enabling a large variety of products to be purchased from one retailer.
2. Supermarkets Generally this type of retailer concentrates in supplying a range of food and beverage
products. However many have now diversified and supply products from the home, fashion and
electrical products markets too. Supermarkets have significant buying power and therefore often retail
goods at low prices.
3. Warehouse retailers This type of retailer is usually situated in retail or Business Park and where
premises rents are lower. This enables this type of retailer to stock, display and retail a large variety of
good at very competitive prices.
4. Speciality Retailers Specialising in specific industries or products, this type of retailer is able to offer
the customer expert knowledge and a high level of service. They also add value by offering accessories
and additional related products at the same outlet.
5. E-tailer This type of retailer enables customers to shop on-line via the internet and buy products
which are then delivered. This type of retailer is highly convenient and is able to supply a wider
geographic customer base. E-tailers often have lower rent and overheads so offer very competitive
pricing.
6. Convenience Retailer Usually located in residential areas this type of retailer offers a limited range of
products at premium prices due to the added value of convenience.
7. Discount Retailer This type of retailer offers a variety of discounted products. They offer low prices
on less fashionable branded products from a range of suppliers by reselling end of line and returned
goods at discounted prices.

Types of Retail Operations:

Retail operations enable a store to function smoothly without any hindrances. The significant types of retail
operations consist of:

Department store
Specialty store
Discount/Mass Merchandisers
Warehouse/Wholesale clubs
Factory outlet

Retail Management System targets small and midsize retailers seeking to automate their stores. The package
runs on personal computers to manage a range of store operations and customer marketing tasks, including
point of sale; operations; inventory control and tracking; pricing; sales and promotions; customer management
and marketing; employee management; customized reports; and information security.
The Emerging Sectors in Retailing:
Retailing, one of the largest sectors in the global economy, is going through a transition phase not only in India
but the world over. For a long time, the corner grocery store was the only choice available to the consumer,
especially in the urban areas. This is slowly giving way to international formats of retailing. The traditional food
and grocery segment has seen the emergence of supermarkets/grocery chains (Food World, Nilgiris, Apna
Bazaar), convenience stores and fast-food chains.
It is the non-food segment, however that foray has been made into a variety of new sectors. These include
lifestyle/fashion segments (Shoppers' Stop, Globus, LifeStyle, Westside), apparel/accessories (Pantaloon, Levis,
Reebok), books/music/gifts (Archies, MusicWorld, Crosswords, Landmark), appliances and consumer durables
(Viveks, Jainsons, Vasant & Co.), drugs and pharmacy (Health and Glow, Apollo).
The emergence of new sectors has been accompanied by changes in existing formats as well as the beginning of
new formats:

Hypermarts
Large supermarkets, typically 3,500-5,000 sq. ft.
Mini supermarkets, typically 1,000-2,000 sq. ft.
Convenience stores, typically 750-1,000sq. ft.
Discount/shopping list grocer

The traditional grocers, by introducing self-service formats as well as value-added services such as credit and
home delivery, have tried to redefine themselves. However, the boom in retailing has been confined primarily to
the urban markets in the country. Even there, large chunks are yet to feel the impact of organised retailing.
There are two primary reasons for this. First, the modern retailer is yet to feel the saturation' effect in the urban

market and has, therefore, probably not looked at the other markets as seriously. Second, the modern retailing
trend, despite its cost-effectiveness, has come to be identified with lifestyles.
In order to appeal to all classes of the society, retail stores would have to identify with different lifestyles. In a
sense, this trend is already visible with the emergence of stores with an essentially `value for money' image. The
attractiveness of the other stores actually appeals to the existing affluent class as well as those who aspire for to
be part of this class. Hence, one can assume that the retailing revolution is emerging along the lines of the
economic evolution of society
Theories of structural changes of retailing:
The evolution of RM has taken a fantastic transition from traditional methods to modern thinking. Starting as
primary or traditional retailing with melas, fairs, jataras, weekly bazaars, rural fairs to mom and pop shop kirana
stores the journey further reached to public distribution systems ( PDS) Khadi outlets, co- operative stores and
finally reached the level of shopping malls , bazaars, super bazaars and special bazaars.
Traditional- melas, Fairs, weekly Bazaars, Rural fairs.
Indegenous- mom and pop, kirana stores Neighbor stores.
Contemporary- PDS, Khadi outlets, co-operative stores
Modern Retailing- shopping malls, Bazaars, Super Bazaars, Special bazaars.
Retail store operations:
When retail-marketing space is a best shopping zone for the consumers, it is quite challenging to the
businessman. It has to ensure not only product availability but also make the shopping more creative and
pleasurable. RM has to take care of various areas like,

Store administration and management

Inventory and stock management
Managing of receipts
Theft management
Customer service
Sales promotion
Employee morale

RM is once again a wonderful economic activity that creates a win win situation. It brings not only the success
of the businessman but also the success of both consumer and the employees. This is possible only if there is
product and price satisfaction.
. Store administration and management- this involves cleanliness, discipline, proper documentation, no
objection certification for various products and skilful management of products and personnel.

Inventory management- it becomes the duty of the retail manager to check day to day and time to time the stock
so as to ensure the product is made available at the counters. Not only the expected product availability has to
be maintained but also the quality and shelf life has to be guaranteed. Inventory has to be evaluated correctly
and receipts have to be properly maintained. With retail marketing shopping has taken a trendy and pleasurable
affair. With all these changes customer service has become the most important service to be rendered in the
marketing field. The customer has to be given maximum possible choice with a blend of perfect sales promotion
from the side of the retailer. So the overall picture of retail stores promotion has become a exclusive area of
management.
All other 5 points to be detailed
Characteristics and trends in retailing

Interaction with the end consumers

It enhances the volume of sales but the monetary value is less

Customer service plays a vital role

There is a tendency for automatic sales promotion

With more outlets retail marketing creates visibility

Location and layout plays a vital role.

Creates employment opportunities to all age groups, gender , irrespective of qualification and religion.

Generates job opportunities in flexi timings.

Retail marketing creates a place, time and possession utility for a product.

History of Retail Management:

Retail marketing started from Mediterranean regions and spread to Egypt and Babylonia. For over 2000 years
Retail marketing flourished in Rome. After the destruction of Roman Empire retailing spread across the globe
and Romans are the first ones to conduct sophisticated retailing. As sophistication and human relations go hand
in hand Retail marketing has got lot to do with the psychology of human behaviour. So retail marketing can be
conveniently called has psychology of marketing.
Trends in retailing: Retail Marketing is largely based on three Vs- Value, Volume and Variety. Though the
Retail marketing had the quantitative development across the globe, the quality is no doubt being compromised
with the Globalization.International quality products are competing with indiginised products. This variation in
size, quality and competition has made Indian market face ridiculous growth. As the competition is between
international and indiginised products, its taking a great toll on both the sectors.

With the big giants entering the market, there is a grave competition in the Indian Economy. After 1995 the
great companies like Food world, Reliance, Planet M, Music World and many others also entered the retail
market. The visibility and the craze to remain in the forefront of business has made many of the giant
companies to move from manufacturing to front line retailing. With this Retailing has become prominent giving
world class shopping experience to the customers under one roof.
Conclusion
Indian retailing, thus enjoys many unique features, is still done in a primitive way. Barring a few exceptions,
Indian retailers, particularly FMCG retailers, are not in a position to implement world-class practices of supply
chain management. The concepts of Quick Response or Efficient Consumer Response are unheard of in Indian
retailing. The two bases of modern retailing management, the Electronic Data Interface and a mutually
respectable partnership among retailers and suppliers (the manufacturers) are missing to a great extent in Indian
context. Also, Indian marketing channel members are performing some unnecessary tasks, which makes the
channel structure heavy and inefficient. Though these inefficiencies are observed in all retailing irrespective of
industry, the symptoms are more evident in Indian FMCG retailing. Inefficiency in retailing leads to lower
profitability of the retailers and lower service outputs for the consumers.
Ways and means to strengthen the position of the retailing industry, doing away with the causes for the
inefficiencies, therefore, are to be taken up in an urgent manner. Such measures may include establishment of
retailers co-operatives, merger and buy-out, use of technology to the greatest possible extent, setting up of non
store retailing centers and increase in franchisee network.
Top 5 Types of Retail Ownership
Entrepreneurs have many forms of retail business ownership available to them. Each business model has its
own list of pros and cons. Choosing a type of retail business to start will depend on why you want to own a
business, as well as your lifestyle, family, personality, basic skills and much more. Here are a few of the main
types of retail ownership and the advantages, disadvantages, and support system of each.
1. Independent Retailer
In independent retailer is one who builds his/her business from the ground up. From the business planning stage
to opening day, the independent retail owner does it all. He/she may hire consultants, staff and others to assist in
the business endeavor. The opportunities are endless.
2. Existing Retail Business
Someone who inherits or buys an existing business is taking ownership and responsibility of someone else's
hard work. The foundation has already been laid.
3. Franchise
Purchasing a franchise is buying the right to use a name, product, concept and business plan. The franchisee
will receive a proven business model from an established business

4. Dealership
Retailers may find the business model of a licensed dealership as a mix of franchise and independent retailer.
The licensee has the right (sometimes this is exclusive) to sell a brand of products. Unlike a franchise, the dealer
can sell a variety of brands and there generally no fees to the licensor. Dealerships may or may not be identified
as an authorized seller or by the company's trademark.
5. Network Marketing
Multi-level marketing (MLM) or network marketing is a business model where the selling of products depends
on the people in the network. Not only is a product being sold, but other salespeople are being recruited to sell
that same product or product line. It's probably not a type of business one would initially consider when
discussing retail businesses, but Amway used this model quite successfully for many years.
Retail Stores: Store Based Retailer and Non-Store Retailing
Important categories under which the retail stores can be broadly classified are as follows:
Retail stores can be broadly classified into two categories, i.e. store based retailers and non-store based retailers.
The classification is t explained as follows:
A. Store based retailer:
Store based retailer is again classified,
I. On the basis of ownership:
1. Independent retailer:
An independent retailer is one who owns and operates only one retail outlet. Such stores can be seen under
proprietorship. The individual retailer can easily enter into a retail market. The owner is assisted by local staff
or his family members. These kinds of shops are passed from one generation to other generation.
The independent retailer maintains a good relationship with the customers. Small scale retail business: Single
owners can easily start and manage small business units profitably with the help of one or two assistants. It can
be a grocery store, stationery shop, or a cloth store, etc.
2. A chain retailer:
When two or more retail outlets are under a common ownership it is called a retail chain. For example: One of a
number of retail stores under the same ownership and dealing in the same merchandise. It is called chain
retailing.
Chain Stores are groups of retail stores engaged in the same general field of business that operate under the
same ownership or management, chain stores are retail outlets owned by one firm and spread nationwide. For
example, Van Heusen, Food world, Shoppers stop etc.
3. Franchise:
A franchise is a contractual agreement between franchisor and a franchisee in which the franchisor allows the
franchisee to conduct a business under an established name as per the business format. In return the franchisee
has to pay a fee to the franchiser. For example: Pizza hut, McDonalds, etc.

4. Leased Department:
These are also known as Shop in Shops. When a section or a department in a retail store is rented to the outside
party it is called leased department. The licensor permits the licensee to use the property and in turn the licensee
pays a fee to the licensor for using his property.
5. Consumer Co-operatives:
A consumer co-operative is a retail organisation owned by its member customers. The objective is to provide
commodities at a reasonable price. For example: Sahakari Bhandar, Apna Bazaar etc.
II. On the Basis of Merchandise offered
1. Departmental Stores:
A departmental store is a large scale retail institution that offers several products from a pin to plane such as
clothing, grocery etc. Retail establishment that sells a wide variety of goods.
Departmental stores are the largest form of organized retailing today, located mainly in metro cities, in
proximity to urban outskirts. They lend an ideal shopping experience with an amalgamation of product, service
and entertainment, all under a common roof. Examples include Shoppers Stop, Piramyd, Pantaloon.
2. Convenience stores:
These are relatively small stores located near the residential area. They offer limited line of convenient products
such A ` store is a small store or shop that sells items such as candy, ice-cream, soft drinks, lottery tickets,
cigarettes and other tobacco products, newspapers and magazines, along with a selection of processed food and
perhaps some groceries, etc.
Such stores enable the customers to make quick purchase and offer them few services. They stock a limited
range of high-turnover convenience products and are usually open for extended periods during the day; Prices
are slightly higher due to the convenience premium.
3. Super Market:
These are retail organisations that provide low cost high volume self-service operation to meet consumer
requirements. Most of the super market charge lower price. Example: Subhiksha.
They are the large self-service outlets, catering to varied shopper needs. These are located in or near residential
high streets. A supermarket, also called a grocery store, is a self-service store offering a wide variety of food
and household merchandise, organized into department.
It is larger in size and has a wider selection than a traditional grocery store and it is smaller than a hypermarket
or superstore. Supermarkets usually offer products at low prices by reducing their economic margins.
3. Hyper Market:
A hypermarket is a superstore which combines a supermarket and a department store. Hyper markets are huge
retail stores that offer various products such as clothes, jeweler, stationery, electronic goods at cheaper price.
Example: Big Bazaar, Star Bazaar, Giant Stores etc. They focus on high volume.
4. Specialty stores:
A specialty store is a store, usually retail, that offers specific and specialized types of items. They offer a narrow
product line that concentrates on specialised products such as jeweler, fabrics, furniture etc. Customer service
and satisfaction are given due importance.

For example, a store that exclusively sells cell phones or video games would be considered specialized. A
specialty store specializes in one area.

B. Non-Store Retailing:
A direct relationship of the retailer with his customer is on the basis of non-store Retailing. In India around
twenty percent of retail sale is from non-store. The proportion of non store is growing steadily.
It is classified as under:
1. Direct Selling:
Direct selling is a retail channel for the distribution of goods and services. There is no fixed retail location. In
direct selling there is a direct contact of the retailer with his ultimate customers.
It is highly an interactive form of retailing. Products like cosmetics, jewellery, food items are sold in such
manner. The retailers visit home place or work place of the customers to sell the products. It is also known as
network marketing where the products and services are sold face to face.
2. Mail order:
It is a retail format in which offerings are communicated to the customers through a catalogue, letters or
brouchers. Such retailing is suitable for specialty products. The buyer places an order for the desired products
with the merchant through a telephone call or website. Internet and online payment options, has made shop
from home easier.
3. Tele Marketing:
It is a form of retailing in which the products are advertised on television. Details about the product in regard to
its features, price, warranty, direction to use etc. are mentioned and explained. Phone numbers are provided due
to which customers can make a call and place an order for the product.
4. Automatic Vending:
This is a form of non store retailing in which the products are stored in a machine and dispensed to the
customers when they deposit cash. Vending machines are placed at convenient and busy locations like air ports,
shopping malls, working place etc. This machine primarily contains products like chocolates, snacks and drinks
etc.
5. Electronic retailing:
It is also called as e-tailing or internet retailing. It is a retail format in which products are offered to the
customers through internet. The customers can evaluate and purchase the products from their homes or office
place. This kind of retail is gaining importance in recent years.
Theories of Retailing: Explaining How different retail formats Emerge and Mature
At different times, different retail formats have been popular. Strong retail formats have become marginal and
new retail formats have often emerged to dominate the retailing scene.
Three retailing theories explain how different retail formats emerge, mature and are then replaced by another
format.

Definition of 'Wheel Of Retailing'

The Wheel of Retailing is a theory to explain the institutional changes that take place when innovators,
including large business houses, enter the retail arena.
Definition: The Wheel of Retailing is a theory to explain the institutional changes that take place when
innovators, including large business houses, enter the retail arena.
Description: The Wheel of Retailing is a hypothesis that describes how retailers approach to capture market
share and create brand value. It explains how retailers usually begin at the bottom of the wheel with low prices,
profits and prestige and then gradually work their way up to increased prices, profits and prestige.
As mentioned, the Wheel of Retailing is just a hypothesis and may not be applicable to all retailing situations.
It, however, seems to explain many retailing trends in many countries.

The wheel of retailing:

The theory suggests that new forms of retailing appear as price cutting, low cost and narrow profit margin
operations. Eventually the retailer trades up by improving displays and location, providing credit, delivery and
by raising advertising expenditure.
Thus, retailers mature as high cost, high price, conservative operators, making themselves vulnerable to new,
lower priced entrants.
A low price retailer should avoid incurring extra costs on the existing format and instead should open another
store with better service levels and premium brands catering to the upmarket segment. These two stores should
be distinct in their brand name, offerings and operations.

Retail accordion:
This theory focuses on the width of product assortment sold by retail outlets and claims a general- specificgeneral cycle. The cycle begins by retailers selling a wide assortment of goods followed by more focused range
and vice-versa.
Retail lifecycle:
A new retail format passes through the stages of birth, growth, maturity and decline as industries and products
do. A new retail format that enjoys a competitive advantage over existing formats grows rapidly.
Attracted by the growth potential of the new format, competitors enter the business during the growth phase,
and there is intense competition among the retailers of the new format.
The players develop ambitious plans of expansion and seek to open their stores in new geographical areas.
There is intense competition during maturity, and a new retail format may start replacing it during its decline
stage. The three theories explain the evolution of retail formats, but the decline and demise of a retail format is
not inevitable. Retailers have to learn to anticipate changes in environment and adapt to them.
Disruptive innovations in retailing:
A disruptive technology enables innovative companies to create new business models that alter the economics
of their industry. In retailing,

 The first disruption came in the form of department stores.

The second was the mail-order catalogue.
The third was the rise of discount department stores.
Internet retailing is the fourth disruption.
It is important to keep in mind that while a disruptive technology changes the factors-of-success and economics
of an industry, it does not change the profitability of individual companies. In retailing, the profits that a retailer
earns are almost directly proportional to the margins that it earns on its products, and the number of times its
turns over its inventory in a year.
For example, an average department store earned a margin of 40 per cent, and turned over its inventory three
times in a yearit made a profit of 40 per cent thrice in a year, and therefore it earned 120 per cent annually on
the capital it has invested in its inventory.
In contrast, an average discount store earned a margin of 23 per cent, and turned over its inventory five times in
a yearit made a profit of 23 per cent 5 times in a year, and therefore it earned 115 per cent on the capital it has
invested in its inventory. Therefore, two store formats can have similar return on capital invested in inventory,
but they may have different margins and inventory turnover rate.
i. Department storesRetailing was originally dominated by local merchants who kept large inventories,
extended credit and offered personalized advice. They could turn their inventory over only twice a year and
therefore had to charge a high price.
Department stores which appeared later did not offer some of the personalized services of the local merchants,
but they brought together an enormous number of different goods in one location, making it easier for shoppers
to find what they needed.
The aggregation of customers and products enabled departmental stores to charge lower prices. They also
accelerated their inventory turnover rates. Site location was an important competitive advantage and was
managed scientifically. The stores were located at the busiest part of the city.
ii. Another disruption also took place at around the same time. Catalogue retailing was started to cater to
customers in the rural areas who could not visit cities. For instance, Sears compensated for the lack of personal
service with money-back guarantees. Sears continued with catalogue retailing, but it also opened large number
of stores, where customers could come, buy and take the purchased products with them

iii. The business model of malls and discounters was the same as that of department stores, but they prospered
because they implemented the discounting model more faithfully. Focused retailers, i.e., retailers who kept a
limited number of product lines, were able to achieve margins and inventory turns similar to those of
department stores because they had deeper product lines in each product category.
Malls did not have a distinct business model of its ownit simply aggregated category focused retailers in one
premise. Catalogue retailing also went through similar transformationlarge number of specialty catalogue
retailers set up their operations when more and more customers became comfortable making purchases from
catalogues. And they ate into the sale of generalist catalogue retailers like Sears.
The increased mobility of shoppers due to the advent of automobiles, enabled discounters like Kmart to set up
shop in less expensive real estate at the edge of town, effectively avoiding departmental stores competitive
advantage of prime locations in city centres.
Discounters followed a business model of low-cost, high turnover that enabled them to achieve five inventory
turns at around 20 per cent. They priced their goods 20 per cent below the prices of the department stores. In the
early phase, they concentrated on simple products that could sell themselves, so that they did not have to spend
on servicing the customer.
About 80 per cent of its product portfolio consisted of branded hard goods like hardware and kitchen
appliances. The department store stopped selling hard goods, and started concentrating on soft goods like
clothing, cosmetics and home furnishingsthey moved upmarket.
But, white goods have varied and complex attributes, and salespeople have to take care to explain their features
and benefits to the customers.
Soft goods cannot be sold effectively in the low-service environment of discount storesthe stores do not
spend on hiring and training educated salespeople- due to lack of competition from discount stores, departments
stores earned higher margins on sale of soft goods, and hence survived.
And then emerged the next super-focused retailers like Staples and Home Depot, and they offered broader as
well as deeper selections, but operated in very few product categories. Replicating the pattern of department
stores, most of the discounters had to leave the hard-goods market and are now concentrating on soft goods.
Competing against full-price department stores is easier than competing against the category specialists.

iv. Internet retailing the fourth retailing disruption is internet retailing. Internet retailing offers immense price
flexibility. Anyone, at any time, can become a global retailer by setting up a web page. The pattern of evolution
of internet retailing can be gauged from the past patterns in retailing disruptions.
A disruption started when generalist stores and catalogues were successful, and then specialized retailers took
over the generalist stores and catalogues. The specialized retailers grew, and they were able to make enough
sales from a narrow, but deep product mix. In each retailing revolution, the disruptive retailers initially offered
products that could be sold easilywithout a salesperson explaining the benefits and features of the product to
the customers.
Such self-selling products were simple, branded products whose benefits and features customers could
understand easily. Later they started offering more complex, but high margin products to maintain their profit
margins, because they faced severe competition at the low end of their businesses.
The fourth retailing disruption of internet retailing faces technological and economic factors that are different
from those that were present in earlier retailing disruptions. Focused or specialist retailers might be in an
advantageous position in internet retailing, because customers will find it easy to travel across the websites of
focused internet retailers.
Focused retailers will become stronger if cybermalls emerge that rent space to focused retailers whose category
brands are strong, in the same way that malls rent space to focused retailers in the physical space.
The movement towards soft goods is more precarious. Internet per se is not a good medium to sell soft goods.
But if internet retailers also operate physical stores to work in conjunction with the internet ones, it would work.

Concept of Life Cycle in Retail

The concept of product life cycle is also applicable to retail organizations. This is because retail organizations
pass through identifiable stages of innovation, development, maturity and decline. This is what is commonly
termed as the retail life cycle.
Attributes and strategies change as institutions mature. The Retail Life Cycle is a theory about the change
through time of the retailing outlets. It is claimed that the retail institutions show an s-shaped development
through their economic life. The s-shaped development curve has been classified into four main phases:
Innovation:
A new organization is born, it improves the convenience or creates other advantages to the final customers that
differ sharply from those offered by other retailers. This is the stage of innovation, where the organization has a
few competitors. Since it is a new concept, the rate of growth is fairly rapid and the management fine tunes its

strategy through experimentation. Levels of profitability are moderate and this stage can last up to five years
depending on the organization.
Accelerated Growth:
The retail organization faces rapid increases in sales. As the organization moves to stage two of growth, which
is the stage of development, a few competitors emerge. Since the company has been in the market for a while, it
is now in a position to pre-empt the market by establishing a position of leadership. Since growth is imperative,
the investment level is also high, as is the profitability. Investment is largely in systems and processes. This
stage can last from five to eight years. However, towards the end of this phase, cost pressures tend to appear.
Maturity:
The organization still grows but competitive pressures are felt acutely from newer forms of retailing that tend to
arise. Thus, the growth rate tends to decrease. Gradually as markets, become more competitive and direct
competition increases, the rate of growth slows down and profits also start declining. This is the time when the
retail organization needs to rethink its strategy and reposition itself in the market. A change may occur not only
in the format but also in the merchandise mix offered.
Decline:
The retail organization looses its competitive edge and there is a decline. In this stage, the organization needs to
decide if it is still going to continue in the market. The rate of growth is negative, profitability declines further
and overheads are high.
The retail business in India has only recently seen the emergence of organized, corporate activity. Traditionally,
most of the retail business in India has been small owner managed business. It is difficult to put down a retail
organization, which has passed through all the four stages of the retail life cycle.
In the private sector, till a few years ago, most cities in India had a few independent retailers. For example,
Mumbai had stores like Akbarallys., Premsons, Amarsons and Benzer. Then Shoppers Stop opened its first
outlet in Mumbai in 1991.The store initially offered apparel, imitation jewelry cosmetics and perfumes and
home fashions. It also had a customer loyalty program in place, which many stores at that time did not offer.
The store enjoyed an enviable position for a while. However, with the change in customer expectations and
increased competition in the form of other department stores like Globus, Eastside, Lifestyle, etc and the rise of
specialty stores, the company has been forced to rethink its product offering. It now not only stocks apparel,
jewelry, cosmetics etc that it earlier stocked but has also acquired the book store chain Crosswords.
Cross words counters have been added to many of the existing stores. The store in Andheri (Mumbai) also
houses Planet M, music retail chain and a small coffee shop. In May 2008, the company embarked upon a major
exercise in terms of repositioning of the store, which involved among other things, a change in the logo. It is
necessary to keep in mind that a retailer need not always move from maturity to decline. By reworking the
marketing strategy or by changing the product or service offering, a retailer may succeed in moving back to the
growth phase after reaching a stage of maturity with a certain format and a certain mix of products.