RETAILING NOTE

UNIT 1(INTRODUCTION)
CONCEPT OF RETAILING
• Retailing is a convenient, convincing and comfortable method of selling goods
and services. Retailing, though as old as business, trade and commerce has now
taken new forms and shapes. This is because of new management techniques,
marketing techniques and also due to ever changing and dynamic consumer
psychology.
• Retail marketing is not just buying and selling but also rendering all other
personalized consumer services. With the RM picking up it has given a new look
for various fast moving capital goods (FMCG) goods. This not only increased the
demand for various goods in the market but also made retail marketing the second
largest employment area, the first being agriculture.
“Retailing includes all the activities involved in selling goods or services to the
final consumer for personal, non-business use.” – Philip Kotler
• 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.
• Difference between consumer and customer:
Consumer: final user of a purchase
Customer: purchase for different purpose
CHARACTERISTICS OF RETAILING
1. Sale to the final consumer – The most important characteristic of retailing is that it
involves the sale of the product or service to the final consumer.
2. Various channels – In retailing the goods and services can be sold either in person,
through mail, through telephone, through vending machines or the internet.
3. Small order size – The order size handled by a retailer is much smaller as compared to
the wholesaler.
4. Large number of orders – The retailer handles a large number of orders.
5. Wide variety of customers – The retailer handles a wide variety of customers.
6. Keeps a large assortment of goods – The retailer keeps a wide variety of goods.

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Other characteristics:

 The retailer’s interface with the customer, often with social interaction and
interpersonal sales technique

 Considered as last link of chain of distribution.

 Selling of small quantities frequently

 Attempt to provide convenience in terms of location, payment and credit

facilities, after-sale services, etc.

 Offering selection, provide choice to target market

 Trade with general public

 Charge higher prices

 Simpler pricing policy with less discounting structure

 Bears a different kind of risk to producer and wholesaler

TYPES OF RETAILERS IN CONTEXT OF NEPAL:

 Department stores:
It is a large retail outlet having different departments or sections for different
types of products. It offers a wide variety of general products. Representative
merchandises/ samples are displayed in the separate areas, which give idea about
the merchandise sold in that particular section.
 Discount Stores:
These retailers are different from the shops offering occasional discounts and
schemes for a limited period. They regularly sell the products at the lower prices.
They buy at regular prices from the wholesalers. But they work on lower margins
and they sell in bulk quantities.
Hence they can sell standard product at lower prices. Many people have wrong
impression about the discount stores that the quality of products sold is inferior
hence the price is less. Today discount retailing has entered into specialized goods
such as bookstores, consumer durable goods. For example, Wal-Mart and K Mart
are the largest and popular discount stores in USA.
 Specialty Store:
Such type of retail shop offers only specific category of the product. Specialty
retailer deals with limited or even a single product line and focuses more on the
depth of the product line carried out by him. For example, Retailers selling
Furniture, Paints, Gift Articles, Greeting Cards, Dairy Products, Shoes, Paint,
Petrol Pump, Flowers, etc. pure vegetarian restaurants, Chinese Restaurants, Tea
Stalls, Bakery.

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  Vending Machine:
An automatic vending machine sells merchandise when a customer deposits
sufficient money into its slot or vent to purchase the desired items. It contains
products like beverages, snacks, candies, chocolates, platform tickets etc.
 Mom and pop stores (kirana pasal):
They are family owned business catering to small sections. They are individually
handled retail outlets and have a personal touch.
 Shopping Malls:
The biggest form of retail in Nepal, It offers customers a mix of all types of
products and services including entertainment and food under a single roof.
 E-traders:
These are providing online buying and selling of products and services.

GROWING IMPORTANCE OF RETAIL INDUSTRY

 Large and increasing contribution to GDP
 Economic importance more visible
 Major Employer
 Retailers as Gatekeepers
 Retailers diversifying their activities
 Organization growing on an international scale
 Size of Operations allowing for supply chain control
 Blurring of areas of retail to include wider area of business activit

The Importance of Retailing

1) Sales to Ultimate consumers of the products

In a retail transaction, the goods and services are sold to ultimate or final consumers. The
products don’t get resold after this transaction. Goods and services sold at this point can
be used for various purposes such as for domestic use, household use or for industrial
use.

Hence, at this point manufacturer can interact with his consumers through retailer and
know about their views.

2) A convenient form of selling quantity-wise

The meaning of word retail is to break down the goods in small pieces and reselling
them. the goods are bought by the retailer in large quantities from the middleman or
manufacturer and bulk is divided into small quantities and sold to consumers as per their
requirements.

To do this, the retailer can repack goods in various quantities and shapes so that it is
convenient for consumers to choose and carry them to their homes.

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3) Convenient Place and Location

Retailer stores are generally set up at locations which are convenient for consumers to
reach. A retail store can be of various forms such as it could be a small shop, small store,
or a multiplex. Goods can be sold through internet and mobile apps as per the
convenience of consumers.

Moreover, shopping online is becoming a new trend because of the advancement

in technology and courier services. Therefore, more and more companies are taking their
business online where customers can view products at the comfort of their home and buy
them.

4) The lifestyle of the people are shaped by retailing

Retailing is an integral part of modern society. People highly depend on retail stores to

lead a comfortable life. in the past time, goods and service were made available through
the process of trading.

But in present times trading is replaced by buying and selling goods which makes retail
stores an important part of the society.

5) Retail businesses contribute to the economy

In many countries, the retail business is one of the biggest contributors to the Gross
Domestic Product (GDP) and its contribution has increased as compared to past and is
also increasing by leap and bounds. Retailing is a driving force of the economy and its
ambition is to encourage sustained growth.

6) Retail dominates the supply chain

In a supply chain, goods and services flow from the manufacturer or a service provider to
final consumers and when there is a huge number of consumers and they are distributed
worldwide then the role of retail stores become much more important. Retailers play the
role of a connecting link between a manufacturer and final consumers.

Because of their crucial importance in the supply chain the structure of retail stores has
improved gradually over the years. In modern times, retailing is categorized by large
multiple chains and not by small scale independent retail stores. The increasing
importance and formalization of retailing have made it a powerful part of the supply
chain.

Moreover, the comparison of retailers is being made with manufacturers which shows the
increasing dominance of retailers in the distribution channel. In addition to this, the
annual turnover of a few retailers such as Wal-Mart is much more than the annual
turnover of companies.

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All these points show that retail is the most dominating part of the whole supply chain.

7) Retail is interdisciplinary

Retailing has developed from a number of interrelated disciplines such as economics,

geography, management, economics, and marketing. Economics is useful to manage the
finances of a store. the good knowledge of geography is important to make the right
choice of location to open a store.

Management plays an important role in managing your staff and inventory and similarly,
right marketing helps you to penetrate in the market.

8) Retailers provide maximum employment

At the present time, the retail world employs maximum people. As per an estimation, one
in nine of the workforces is employed in the retail industry. Moreover, two third of the
total workforce in the retail world is women and more than half employees in retailing
are part-time employees, which provides flexibility to workers to adapt to the
particular needs of any employer

In the past, the salaries paid to employees were very low. Therefore, people worked on a
temporary basis in the retail sector. But as the work conditions and salaries paid in the
retail sector are improving more and more people are considering retail jobs as a
permanent career.

9) Retailing is an important subject area of study

Because of the importance of retailing more and more emphasis is being paid to the area
of retailing. Retailing is a separate subject of studies like management and marketing.
researches have been conducted and professionals being hired to make this sector
flourish.

In addition to this, academic journals concentrating on retailing are being published

worldwide.

10) Retailing offers scope for expansion in other countries

Retail provides a great opportunity to expand in international markets. A retailer who

wants to extend their business by selling their goods in other countries opens stores in
different countries to increase the number of consumers of their products.

However, it is not easy to expand your business as it requires a lot of paperwork and
formalities to be done to be able to get clearance to take your business to other countries.

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11) Retailers rule the channel of distribution

Retailers are becoming the rulers of a channel of distribution. In past times, the power
was in the hand of suppliers because of a limited number of suppliers in the market.
Retailers had no other option than getting goods from the supplier to sell in their stores.
But in present times there are many suppliers for a single type of product.

Therefore, a retailer can make a decision for which brand to stock in their stores and
consumers buys products stock provided by the retailers. Therefore, retailers play an
important role in shaping the demands of consumers.

12) Provides Comfort and facilities for shopping

Shopping has become a pleasant experience because of all the facilities and comfort
provided by chain stores, shopping malls, multiplexes, etc. people now don’t think
shopping as work but they look forward to it and consider it as a stress releasing and
family activity.

The giant retailers provide various facilities such as air conditioning, parking,
entertainment, kids play section, lifts, trolleys to carry goods, and food facilities, etc. and
retailing through mobile phones ensures doorstep delivery on all orders placed through
the website or mobile apps.

13) Provide services to the manufacturer

The retailer is the end part of the supply chain and he is the one who interacts with the
customers. therefore, he has the opportunity to know about the views of customers and
their likings and disliking. Retailer gathers this information from his customers and
shares it with the manufacturer.

This helps the manufacturer to make the required changes in the quality of the product
and improve its services to satisfy their customers. Therefore, a retailer plays an
important role in helping the manufacturer to increase his revenue generation.

14) Provision of warehousing and storage

Warehousing is a big problem for a manufacturer. A retailer buys goods in advance from
the manufacturer and reduces the problems of warehousing and storage for the
manufacturer.

In addition to this, the retailer helps in increasing the sales of goods by displaying them
nicely in the retail store.

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15) Advantage of an expert and specialist

Retailers are experts and have experience in selling products to customers. They have a
better understanding of customers and their likes and dislikes because of this regular
contact with them. They stores products as per the need of customers and sells them to
customers in different sizes and shapes.

In addition to this, with their experience of selling and knowledge about the product they
assist customers to choose the right product for them.

16) Creates utilities and value

Retailer increases the value of the product by creating a place, time, and utility in the
distribution of goods. Retailers buy products in bulk and break them in small quantities
and sell them in small packs. In this way, he creates form utilities.

Goods manufactured in one corner of the world are consumed in other parts of the world.
he buys products from manufacturers and sells them in the local market thereby creating
place utility.

The retailer buys products in advance and places them in his store and sells them to the
consumers whenever the need arises. By creating these three utility values of goods is
increased. The retailer makes sure the regular production and consumption of goods.

Dynamism in retailing:

Retailing, however judged, is dynamic. One of the areas of retailing that has been
addressed by authors is the way in which the retail environment changes. Brown (1987)
has reviewed the research in this area and suggest that theories of retail institutional
change may be classified into three groups: environmental, cyclical and conflict theories.

1. Environmental theory: explains developments in retail industry as a result of changes

in environment with variations in lifestyle patterns

2. Cyclical theory: prediction of changes in retail industry as cycle

3. Conflict theory: retail change with relationships between and competitive behavior of
retailers

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 • Environmental Theory

It is based on Darwin’s theory of survival: “The fittest would survive the longest”.
The retail sector comprises consumers, manufacturers, marketers, suppliers, and
changing technology. Those retailers that adapt to changes in demography,
technology, consumer preferences, and legal changes are more likely to survive for
long and prosper.

operation of retailers on major environmental forces which shape the nature of retail
environments such as economic, social, political, regulatory, cultural and
demographic Direct links between condition and retail change i.e. acceptance of
female sales persons, consumer purchasing patterns. Similarly, import of self service
format, moving from small local store to superstores for purchasing grocery products.

The major environmental factors:

a. Changes related to consumer:

 Demographic changes- increases or decreases in population, age groups, racial

groups, , socio-economic group
 Attitudes, and preferences in purchasing, brands and products
 Changes in lifestyle i.e. food habit, banking services for bill payment
 Economic influences i.e. income level of family, working female etc

b. Changes in technology:

 Using of technology at home

 Computer application to business
 Just in time deliver system, online shopping

c. Change in competition:

 Competitive situation in market

 Involvement in innovation for new and unique products
 Using of different channel to serve and satisfy the customers
 Providing different services to occupy the market

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  Cyclical Theory

1. The wheel of retailing:

This theory talks about the structural changes in retailing. The theory was proposed by
Professor Malcolm P. McNair. This theory describes how retail institutions change
during their life cycle. In the first stage when new retail institutions start business they
enter as low status, low price and low margin operations.
As the retail firms achieve success they look in for increasing their customer base. They
begin to upgrade their stores, add merchandise and new services are introduced. Prices
are increased and margins are raised to support the higher costs. A new retailer enters the
market place to fill the vacuum created by these retailers who move on to second stage of
life cycle and continues to move ahead as a result of the success.
A new format emerges when the store reaches the final stage of the life cycle. When the
retail store started it started serving low and price sensitive customers but when market
grew their margins and price changed to higher side they moved on to serve upscale
customers.
The theory has been criticized because they do not advocate all the changes that happen
in the retail sector and in the present scenario not all firms start low to enter the market.

Entry stage:

 Offering of product with lower price to attract customers

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  Increase the level of service and quality with high price with experience and
capital

Trading up:

 Improvement of facilities and offer enhanced services with improved product

 Moving up market position

Vulnerable:

 Becomes vulnerable due to high cost, declining efficiency

 May forced to withdraw the market

 Opportunity for the new entrants\

2. Retail accordion theory:

This theory describes how general stores move to specialized stores and then
again become more of a general store. Hollander borrowed the analogy
‘accordion’ from the orchestra. He suggested that players either have open
accordion representing the general stores or closed accordions representing
narrow range of products focusing on specialized products. This theory was also
known as the general-specific-general theory. The wheel of retailing and the
accordion theory are known as the cyclical theories of retail revolution.

3. The retail life-cycle theory:

Like products, and brands retail organizations also pass through identifiable
stages of innovation, accelerated development, maturity and decline. This is
commonly known as the retail life cycle. Any organization when in the innovation
stage is nascent and has few competitors.

They try to create a distinctive advantage to the final customers. Since the
concepts are new at this stage organizations try to grow rapidly and the
management tries to experiment. Profits will be moderate and the stage may last
for a couple of years. When we talk about our country’s e-buying or online
shopping it is in the innovation stage.

In the accelerated growth phase the organizations face rapid increase in sales,
competitors begin to emerge and the organizations begin to use leadership and
their presence as a tool for stabilizing their position. The investment level will be
high as there are others who will be creating a lot of competition.

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 In the maturity stage as competition intensifies newer forms of retailing begin to
emerge, the growth rate starts to decline.
At this stage firms should start recreating strategies and reposition themselves to
survive in the market place. Supermarkets, cooperative stores are in this stage.
The final stage of the retail life cycle is the declining phase where firms begin to
lose their competitive advantage. Profitability starts to decline further and the
overheads starts to rise.

Thus we see that organizations need to adopt different strategies at each stage of
life cycle in order to sustain in the marketplace.

Conflicts Theory:
• Competition between retailers causes changes in the nature of the retail
environment.

• The causes are driven by innovations.

• Brown (1987) states that a response to innovation follows a process of four

stages:

 Retailers are in shock at the innovation.

 Retailers deny the threat by means of defensive retreat.

 Retailers then move into a stage of acknowledgement and assessment.

 Finally they (Retailers) develop a strategy of adaptation.

RETAILING AND MAREKETING

What is Retail Marketing?

Retail marketing involves every element from the interior to exterior promotions and
offers, product placements in-store advertisement, strategic placement as well as the
behavior of store representatives.

Definition of Retail Marketing

Retail marketing includes set of activities where a retailer buys products from a
wholesaler or manufacturer to sells them to ends users (consumers). In simple words, a
retailer is an intermediary which makes products available to consumers using different
channels, for example, brick-and-mortar retail store, shopping malls, shopping website,
automatic vending machines, kiosks etc.

Definitions of Marketing

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Philip Kotler, 1999: “a social and managerial process by which individuals and groups
obtain what they need and want through creating and exchanging products and value with
others.”

British chartered Institute of Marketing 1984: “ the management process responsible for
identifying anticipating and satisfying customers requirements profitably”.

Development of Marketing

. Three distinct stages of marketing:

a. The production era:

 Buying of cheap products by the customers

 Emphasis on reducing costs of products

 Increasing the efficiency of production

 Reduction of unit cost

2. The Sales era:

 Attempt to sales the products

 Need of use of effective means for selling

 Increment of competition

 Need to know about markets, need of improving techniques

3. The marketing era:

 Focus on need of customer than what they have

 Focus on satisfaction of customers, improvement in marketing mix

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