Retail Management

Retail management focuses on all the activities involved in selling the goods or services to
the final consumer.

Retail comes from the Old French word tailler, which means “to cut off, clip, pare, divide” in
terms of tailoring (1365). It was first recorded as a noun with the meaning of a “sale in small
quantities” in 1433 (from the Middle French retail, “piece cut off, shred, scrap, paring”). Like
in French, the word retail in both Dutch and German also refers to the sale of small quantities
of items.
According to Philip Kotler, “Retailing includes all the activities involved in selling goods or
services directly to the final consumer for personal or non-business use.”
According to David Gilbert “any business that directs its marketing efforts towards satisfying
the final consumer based upon the organization of selling goods and services as a means of
distribution.”

The Special Characteristics of Retailing

The three (3) factors that distinguish retailing from other types of business:
1. Small average sale
2. Impulse purchases - Final consumers make many unplanned or impulse purchases. Surveys
show that a large percentage of consumers do not look at ads before shopping, do not prepare
shopping lists (or they deviate from the lists once in stores), and make fully unplanned
purchases.
3. Popularity of stores

The Retailing Concept

The four (4) principles from retailing concept which should be understood and applied by all
retailers:
1. Customer orientation. The retailer determines the attributes and needs of its customers and
endeavours to satisfy these needs to the fullest.
2. Coordinated effort. The retailer integrates all plans and activities to maximize efficiency.
3. Value-driven. The retailer offers good value to customers, whether it be upscale or
discount. This means having prices appropriate for the level of products and customer
service.
4. Goal orientation. The retailer sets goals and then uses its strategy to attain them
Social and Economic Significance of Retailing
The retailer acts as a link between the customer and the marketer, who is responsible for
selling the ultimate products and services to the customers.
In the entire complicated process of marketing, retailer acts an intermediary in the complex
marketing & distribution channel. Though manufacturers can directly sell their products and
services to the end customers ultimately, it may result in high expenses, inconvenience and
time-consuming process.

Social Significance
In the present business scenario, social responsibility and increasing importance are being
given to driving the functions of marketing functions with a sense of social responsibility.
This has resulted in retail organizations paying a great deal of attention towards the social
responsibilities which they have towards their customers.
Economic Significance
The retailers play the role of sales specialists and also as agents of purchase for their
customers and suppliers respectively. Retailers handle the entire gamut of roles and functions
aiming at understanding customer requirements and anticipating the demand, gathering
information about the market trends through strong market intelligence and making product
related assortments and discovering financing opportunities.

Importance of Retail Industry

While meeting the needs of customers, the following are some of the functions performed by
a retailer:
1. Customer Convenience - Consumers benefit from retailing as retailers perform
marketing functions that make it possible for customers to have access to a broad
variety of products and services.
2. Accessibility to Products & Services - Retailers acquire products and services from
different places and assort them at a single point as per the needs of the consumers
and thus facilitate customers' access.
3. The convenience of Size - Retailers breakbulk and serve the products in quantities and
sizes as desired by the customer. For example, shampoo is available in small sachets.
The retailer helps consumers by providing appropriate products, services, and advice
in the packing and quantities desired by them.
4. Providing Associated Services - A vibrant retail sector benefits the consumers by
providing a range of products and services efficiently.
5. Supply Chain - Retailers are part of an integrated system called the supply chain. A
retailer purchases goods or products in large quantities from manufacturers or directly
through a wholesaler, and then sells smaller quantities to the consumer for a profit.
6. Value Chain - When consumers purchase goods, retailers must order more goods to
replenish their stock. In turn, factories must manufacture the goods for retailers. The
factories then purchase more raw materials to use to manufacture more goods
 7. Research & Information - The retailer provides useful information across the supply
chain. He informs and educates customers about product features and benefits. They
provide information to consumers through advertising, displays, and signs and sales
personnel.
8. Mobilizing Finance - The retailing industry mobilizes the investment and savings of
people, as a small shop can be set up with minimal investment. They store
merchandise, mark prices on it, place items on the selling floor, and otherwise handle
products; usually they pay suppliers for items before selling them to final customers.
9. Economic Development- Retailing is one of the most important industries in the
world and plays a predominant role in the economic development of the country.
Healthy retail sector growth and speeds up economic development.
10. Generating Employment - Globally, retailing is the largest revenue generator and
employment provider next only to agriculture. It provides opportunities to the poorest
and unskilled along with the educated and skilled.
11. Social Responsibility - Successful retailers also recognize that people want to see the
improvements in the general level of consumption and social cohesion over time.
Retailers have to enhance their perceived value to the community by acting as a focal
point and through effective public relations and promotional campaigns including
sponsorships.

Types of Retailers

1) Department Stores - a department store handles different business units and deals with
a variety of merchandise and are organized in different departments for the purpose of
accounting control, sales promotion, and store operations.
Department stores can be classified on the basis of income groups or ownership.
1. On the basis of ownership – There are three types of a department store on
the basis of ownership
2. The ownership Group – Ownership group stores are dependent formally but
are combined.
3. The independent – This type of department stores is owned by the financial
interest which does not own any other similar stores.
Types of Department stores
1. Chain Department Stores – This type of stores is owned and managed
centrally.
2. On the basis of income groups – These stores are designed to serve people
with highand middle-income groups. These stores sell high-quality goods and
provide first class services to its customers. there are also stores which are
designed to cater to people with low income such as dollar stores.
3. Leased department stores – The stores whose operations are given out on
lease are called leased department stores
Various features of Department stores:
 1. Merchandises are arranged in different departments in the same store.
2. Department stores are integrated stores which perform operations.
3. department stores are distinguished by the nature of goods sold by them, not
by the variety of goods sold by them like drug and variety store.
4. Department stores are designed horizontally in order to provide different
merchandises under the same roof.

2) Super Markets - Supermarkets are self-service stores that sell a wide range of food as
well as non-food products. supermarkets have at least four basic departments such as
self-service grocery, dairy produce, meat, and household department.
Features of supermarkets
1. Goods are displayed in bulk.
2. Supermarkets are located in nearby housing areas so that people have easy
access.
3. These stores offer a wide range of products, low prices, nationally
advertised brands, and also convenient parking.
4. It follows the “cash and carry” policy.
5. Minimum customers service is provided in these stores as these stores work
on the basis of self- service.

3) Chain Stores or Multiple Shops - In this format of retailing, a chain store consists of
four or more stores sell the same kind of merchandises and are owned and managed
by a single owner. The supplies are stocked in chain stores are provided by one or
more warehouses owned by the chain store owner.
The appropriate examples of chain stores are Wal-Mart, subway, Bed Bath and
Beyond, and Body Shop, etc. Chain stores work on the basis of “Centralized buying
with decentralized selling”.
Features of Chain stores
1. When one or more shops are run under one name are called chain stores.
2. There is centralized control over all the shops.
3. Chain stores are integrated stores.

4) Discount Houses - Discount house is a type of retail format which operates at low cost
and almost no customer’s service. These stores are large in size, open for public and
advertised heavily. They sell a wide range of products of well-known brands,
housewares, appliances, sporting goods, house furnishing, toy and automotive
services, and clothing, etc.
5) Direct Selling - Direct selling is when customer and seller have direct contact with
each other away from the store. direct selling is also referred to as home selling. The
total volume of direct selling has been growing in India since the beginning of the
21st century.
Features of direct selling:
1. The whole business is controlled centrally.
2. There is no building to display products.
3. The seller needs to establish a relationship with the customers to gain their
trust.
4. Direct selling does not require heavy initial investments.

6) Telemarketing - Telemarketing is also known as telephone selling. In telemarketing, a

salesperson initiates a sale over the phone to a prospect and close it over the phone
only. It consists of cold canvassing from a phone directory. There are various
products such as magazine subscriptions, pest control devices, club memberships, and
credit cards which can be sold without seeing are usually sold over the phone.

7) Online Retailing - Online retailing is when a firm offers products on their website and
people and organizations from this company. In this way, both entities engage in the
online transaction also known as internet marketing or electronic transactions.

8) Automatic Vending - A sale is made without the slightest contact between a seller
and a buyer through automatic vending. The idea behind selling through automatic
vending is to provide convenient purchase. Products from well-known brands and
those have great turn-over are usually sold through automatic vending machines.

9) Direct Marketing - Direct marketing consists of all Non-store retail formats except
telemarketing, direct selling, online retailing, and automatic vending. Direct
marketing is a way of contacting customers through broadcasting or print media.

10) Franchising - In this retail format, a businessman who owns the business (known as a
franchise) and a company who offers business (known as franchiser). A businessman
can use the name of already well-established business’s name to run their business
under a certain condition set up franchiser.
Different benefits of franchising:
1. Conserve capital.
2. Low marketing costs.
3. Easy to establish a distribution system to a short period of time.
4. Cost of fixed expenses cut down substantially.

11) Mom and Pop stores - Mom and Pop stores are types of retail format which is a small,
independent, family-owned business. This type of stores usually faces tough
 competition from big well-established businesses who can lure customers to buy more
with their heavy advertising and marketing methods

12) Specialty Stores - Specialty stores are small in size and they generally offer limited
products categories but provides a high level of service. The specialty stores can be a
drug store, DIY stores, Category Killers, etc

E-retailing involves online and other electronic transactions involving goods and services for
personal, non-business use.
e-commerce includes consumer and business sectors, encompassing all goods and services
sold on the Internet and through other electronic means including business-to-business (B2B)
as well as business-to-consumer (B2C) transactions.
Mobile commerce (m-commerce) refers to selling through cell phones and personal digital
assistants (PDAs) that are Internet equipped.
Multichannel retailing is a B2C model that integrates store, direct marketing, direct selling,
online, and other electronic methods to transact business with customers globally
Catalogs, direct mail, e-mail, and outbound telemarketing are popular direct marketing
vehicles.

Omnichannel retail – focuses on customer

Multichannel retail – focuses on product

Channels are conduits through which sales are transacted. For example, going online, calling
a catalog company, faxing a deli, or visiting a store to make a purchase involves using a
channel.
Vehicles are promotions or other techniques used to reach and inform customers.

Organizational Structures
1) Pure-Play Retailers - Companies that do business through one predominant channel.
The term pure play is usually attributed to online retailers that have never operated
brick-and-mortar stores nor engaged in other types of non-store distribution, but it is
appropriate to use the term to describe any business using a single channel to trade.
Brick-and mortar retailers conduct business from traditional physically constructed
facilities. Examples of pure-play online retailers include Amazon.com; Blue Nile,
Inc., the jewelry retailer; and Newegg.com, the computer retailer.
2) Dual-Channel Retailers - Companies that operate through two distinct channels are
dual channel retailers. Typically, those that run brick-and-mortar stores and also
 maintain transactional Web sites or catalog divisions are in this category. Target and
Walmart are brickand- mortar retailers that also operate online stores
3) Multichannel Retailers - Companies that sell through two or more channels are
considered multichannel retailers. Frequently these businesses use traditional stores,
catalogs, and online stores to reach their customers although many other options are
possible.
4) Triple-plays - are retailers that trade through three channels such as stores, catalogs,
and online.
5) Electronic Spin-Offs - Companies that originally traded through other electronic
means before opening online stores are considered electronic spin-offs.
6) Non-Transactional Retail Sites - Web sites used purely for information and promotion
that do not sell online are called non-transactional sites.

Reasons for the Multichannel Approach

1. Reach More Customers
2. Provide Customer Convenience
3. Compete More Effectively
4. Grow the Business
5. Balance Risk
6. Achieve Profitability
7. Expand Globally

Advanced Research Projects Agency (ARPA) - used by the U.S. government as a

military research network.

FACTORS SHAPING THE RETAIL INDUSTRY

1. Technological Advances
2. Customer Dynamics
3. Industry Consolidation and Ownership Change
4. Merchandising Policy
5. Supply Chain Initiatives:
6. Emergency of China
7. Multichannel Emphasis
8. Organized Retail Crime
9. Customer Privacy and Security
10. Sustainability
Traditionally the day after Thanksgiving is called “Black Friday” because it is one of the
busiest shopping days in the holiday season, signifying the shift to profitability for many
retailers

According to Philip Kotler, the typical buying process involves five stages the consumer
passes through described as:
1. Problem Recognition – recognizing of unmet need
2. Information Search - seek information.

 Personal Sources
 Commercial sources
 Public sources
 Experimental sources
3. Evaluation of Alternatives - selects the best one
4. Purchase Decision - the most promising band
5. Post Purchase Behavior -

TYPES OF BUYING DECISIONS

1. Nominal Decision Making - habitual decision making
divided into two different categories: brand loyal purchase and repeat
purchase
2. Limited Decision Making - involves internal and limited external search
3. Extended Decision Making - extensive internal and external information search
followed by a complex evaluation of multiple alternatives and significant post
purchase evaluation

High Involvement Buying - high-involvement products carry a high risk to consumers if

they fail, or have high-value tags
Purchasing a product with no planning or forethought is called impulse buying.

FACTORS INFLUENCING CUSTOMER BUYING BEHAVIOR

 Situational Factors - are temporary conditions that affect how buyers behave
 The Consumers’ Physical Situation
 The Consumers’ Social Factors
 The Consumers’ Time Factors
 The Reasons for Consumers’ Purchase
 The Consumers’ Mood
  Personal Factors
 The Consumers’ Personality
 The Consumers’ Self-Concept
 The Consumers’ Gender
 The Consumers’ Age and Stage of Life
 The Consumers’ Lifestyle
 Psychological Factors
 Motivation
 The Consumer Perception
 Consumers’ Attitude
 Societal Factors
 The Consumers’ Culture
 The Consumers’ Subculture
 The Consumers’ Social Class
 Reference Groups and Opinion Leaders
 The Consumers’ Family

atmospherics - the ones over which firms have control

Learning refers to the process by which consumers change their behavior after they
gain information or experience a product

MARKET SEGMENTATION
 Demographic Segmentation - e simplest and widest type of market segmentation
used.
 Behavioral Segmentation - divides the population on the basis of their behavior,
usage and decision-making pattern
 Psychographic Segmentation - uses lifestyle of people, their activities, interests as
well as opinions to define a market segment.
 Geographic Segmentation