FUNCTIONS OF RETAILERS

RETAILERS HAVE MANY IMPORTANT FUNCTIONS

TO PERFORM TO FACILITATE THE SALE OF THE
PRODUCTS. THESE FUNCTIONS INCLUDE –
Sorting
 Manufacturers produce large quantities of similar
goods and like to sell their inventories to few buyers
who buy in lots.
 While customers desire many varieties of goods from
different manufacturers to choose from.
 Retailers balance the demands of both sides by
collecting and assorting the goods from different
sources and placing them according to the customers’
needs.
Breaking Bulk
 Retailers buy the goods from manufacturers and
wholesalers in sufficiently large quantities but sell to
the customers in small quantities.
Channel Of Communication
 Since retail involves direct contact with the end
consumers, it forms a very important channel of
communication for the companies and manufacturers.
 The manufacturer tries to communicate the
advantages of their products as well as the offers and
discounts through retailers.
 Retail also acts as a mediator between the company
and the customer and communicates the feedback
given by the customers back to the manufacturer or
wholesaler.
Marketing
 Retail stores are the final channels where the actual
decisions are made. Hence, they act as important marketing
channels for the brands.
 Smart placements, banners, advertisements, offers, and
other strategies are executed by the manufacturers to
increase their sales in retail stores.

Risk Bearing:
 Retailers bear a different kind of risk to the manufacturers
and wholesalers. Even the customers can come back to the
retail point and return the product. In that case, the risk of
product ownership many times rests with the retailers.
Many companies have buy back schemes and return
schemes whereby the retailers can always return the unsold
items to the manufacturer
Rendering Services:
 Retailers render services that make it easier for
customers to buy and use products. They display
products, which attract the customers. Retailers keep
ready information on hand to answer queries of the
customers.
 They provide services by which the ownership can be
transferred from manufacturer to the end consumers
with convenience.
 They also provide product guarantee from owner’s
side, after sales service and also deal with consumer
complaints.
 Retailers also offer credit to consumers and develop
hire purchase facilities to enable them to buy a
product immediately and pay the price at their ease.
 Retailers also fill orders, promptly process, deliver
and install the product at customer point. Retail
sales people answer the customer complaints and
demonstrate the product for the customer to evaluate
before making a choice. They also help in completing
a transaction and realizing the sale.
Holding Inventory:
 A major function of retailers is to keep inventory so
that products will be available for consumers.
 Thus, consumers can keep a much smaller inventory
of products at home because they can easily access
more from the nearby retailers.
 Retailer’s inventory allows customers instant
availability of the products and services.
Transportation:
 Retailers also help in transport and advertising
function.
 The larger assortments are transported from
wholesaler’s point to retailers point by retailer’s own
arrangements and many times, the retailer delivers
the goods at final consumer’s point.
 So, retailers provide assistance in storage,
transportation and pre-payment merchandise
NON STORE BASED CHANNEL
NON-STORE BASED RETAIL FORMATS
 Non-store retailing is a form of retailing in which
a firm sells its products without a physical retail
store/space. The firm sells its products via online
platforms and delivers the product to customer’s
doorstep.
 With the changes in customer’s preferences, the
non-store retailing business has grown
immensely during the 21st century. A lot of non-
store retailing brands have established
themselves as trustable sellers. Therefore, more
and more people now prefer to shop without
physically visiting the brick-and-mortar stores.
 Moreover, non-store retailing has now taken a
significant share of the retailing business. In fact,
one of the world’s largest retailers, Amazon, is a
perfect example of non-store retailing. The company
has massive warehouses but no physical store.
Customers buy the products online, and Amazon
delivers the products at the customer’s mentioned
designation anywhere in the world.
 But, that does not mean non-store retailing means
selling products over the internet, there are many
other forms of non-store retailing, and we are going
to have a detailed look at all of them.
Types of Non-Store Retailing with Examples
Generally, non-store retailing is classified into six
further types:
 Direct selling

 Telemarketing

 Online retailing

 Automatic vending

 Direct marketing

 Electronics retailing
DIRECT SELLING
 Direct selling is the oldest form of non-store retailing.
Door-to-door selling is one of the most common
practices in direct selling.
 Salesmen usually do cold calls to homes or offices to
sell the products.
 Some salesmen prefer making an appointment with a
potential client and then visit later.
 However, a firm needs highly trained sales people for
direct selling. It is not easy to persuade a customer
unless you have the right skills. Therefore, companies
spend heavy budgets on training such a workforce.
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.
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 et
DIRECT MARKETING
 Direct marketing is a blend of different non-store
retailing practices. Companies used to do direct
marketing through coupons, newspapers,
magazines, and mails (letters).
 However, with the advent of the internet,
companies now use emails, e-newspaper,
websites, e-magazines, etc.
 As of now, email marketing has become one of the
most effective sources of direct marketing.
Companies offer regular email subscriptions
mostly free of cost. Potential customers are
regularly updated about the latest offerings from
the companies.
INTERNET CHANNEL RETAILING

 As a sophisticated and interactive medium, the

internet accessed by personal computer is
showing every sign of being accepted as a
mainstream shopping mode by an
increasingly computer literate society.
 Using the internet to access information has been
accepted as part of everyday life for many sectors
of society, and in the process of shopping it has
become very useful to customers as a way of
accumulating information about retailers’
product and service offerings in a relatively fast
and convenient manner
 As a way of accessing specialist retailers that might be
geographically remote from consumers, the internet
provides a channel of discovery for the consumer, and
a way of providing home shopping services for a wider
target market for the retailer.
 The internet is also an efficient home-shopping device,
enabling time-poor or less mobile consumers to order
and take delivery of routinely purchased items such as
basic groceries and household items.
 Irrespective of the way we access the e-retailer,
whether it is via the PC, the mobile phone or the Notes
hand-held personal organizer, consumers increasingly
expect retail organizations to be able to offer flexibility
in terms of information gathering (to supplement pre-
sale shopping), purchase transaction, and taking
delivery of the product or service (post-sale activity).
ADVANTAGES
 Easy access to market - in many ways the access
to market for entrepreneurs has never been easier.
Online marketplaces such as eBay and Amazon
allow anyone to set up a simple online shop and sell
products within minutes.
 Reduced overheads - selling online can remove
the need for expensive retail premises and customer-
facing staff, allowing you to invest in better
marketing and customer experience on your e-
commerce site.
 Potential for rapid growth - selling on the
internet means traditional constraints to retail
growth - eg finding and paying for larger - are not
major factors. With a good digital marketing
strategy and a plan a scale up order fulfilment
systems, you can respond and boost growing sales.
 Widen your market / export - one major
advantage over premises-based retailers is the
ability expand your market beyond local customers
very quickly. You may discover a strong demand for
your products in other countries which you can
respond to by targeted marketing, offering your
website in a different language, or perhaps
partnering with an overseas company.
 Customer intelligence - ability to use online
marketing tools to target new customers and website
analysis tools to gain insight into your customers'
needs.
DISADVANTAGES
 Website costs - planning, designing, creating,
hosting, securing and maintaining a professional e-
commerce website isn't cheap, especially if you expect
large and growing sales volumes.
 Infrastructure costs - even if you aren't paying the
cost of customer-facing premises, you'll need to think
about the costs of physical space for order fulfilment,
warehousing goods, dealing with returns and staffing
for these tasks.
 Security and fraud - the growth of online retail
market has attracted the attention of sophisticated
criminal elements. The reputation of your business
could be fatally damaged if you don't invest in the
latest security systems to protect your website and
transaction processes.
 Legal issues - getting to grips with e-commerce and
the law can be a challenge and you'll need to be
aware of, and plan to cope with, the additional
customer rights which are attached to online sales.
 Advertising costs - while online marketing can be
a very efficient way of getting the right customers to
your products, it demands a generous budget. This is
especially true if you are competing in a crowded
sector or for popular keywords.
 Customer trust - it can be difficult to establish a
trusted brand name, especially without a physical
business with a track record and face-to-face
interaction between customers and sales staff. You
need to consider the costs or setting up a good
customer service system as part of your online
offering.
CATALOG CHANNEL
 Catalogue marketing helps companies reduce their
cost per customer and increase their reach
significantly.
 Catalogue retailing is a convenient way for customer
to purchase products.
 Retailers too have an advantage in catalog
marketing as they can operate from remote locations
with minimum store operating expenses and need
not spend heavy amounts on store décor.
 However, catalog marketing is suitable only for a
limited range of products.
ADVANTAGES

 The main advantage of selling through catalogs

is the ability to reach hundreds of thousands of
readers with just one mailing.
 This dramatically increases a retailers exposure
to potential shoppers.
 With mail order sales, the catalog is essentially
your "store" and the copy is the
salesperson.
 Instead of waiting for the customer to come to
you, your catalog is written, designed and mailed
purposefully to a particular target demographic.
 This requires that you write powerful copy to
attract your customers.
 To reduce the amount of risk and expense, a catalog
business can grow slowly.
 This allows retailers to focus on marketing a small
amount of merchandise in the beginning and then
let the catalog evolve as more customers are
acquired.
 Because payment is received in advance, retailers
may not need to stock the merchandise and tie up
their cash flow.
DISADVANTAGES
 Like selling online, mail order retailers must work harder
than brick and mortar shops to build trust and customer
loyalty.
 Selling via catalogs does have a lot of initial expense.
 Besides the production of the catalog, retailers must
purchase lists of prospective customers in order to
generate new sales.
 Low response rates and high postal costs may also
discourage a retailer from sending follow-up mailings.
 Mail order retailers cannot easily change prices in
response to market conditions.
 The product copy must be extremely well written as it
serves as the only enticement for the customer to
purchase the product.
 Finally, every day more and more online-only
retailers are learning the power of having a place for
customers to try the products before they buy.
 When you are competing with stores who have a
brick and mortar presence, then you are at a
disadvantage.
 The customers can try there before they buy.

 Often times, this means your only competitive

advantage is price - which we all know is not an
advantage just a fast way to the poor house.
MULTI CHANNEL
RETAILING
MULTI CHANNEL RETAILING
 By using a number of different retail formats, retail
businesses are better able to allow consumers this
flexibility.
 Most large retailers in the UK now fall into the category
of the ‘multi-channel’ retailer, which is a term used to
describe the strategy of using more than one ‘route’ to
consumer markets.
 Typically, the multi-channel retailer runs stores and has
a transactional website (the so called ‘clicks-and-mortar’,
or ‘clicks-and-bricks’ approach), but other combinations
might be stores/ catalogue, stores/catalogue/website,
stores/website/direct mail.
 Offering alternative ways to shop may encourage
customers to remain loyal to a favored retail brand as
lifestyles change, but it can also present retailers with
new operational and competitive challenges.
Benefits of a multichannel retailing
 Improved customer perception: Brands that
create a seamless buying experience can gain
significant customer loyalty. They’re perceived as
attentive to consumers’ needs, purchasing habits and
digital-savviness. With multichannel distribution,
brands can also differentiate themselves not by lower
price but through convenience.
 Increased customer base: When brands place their
merchandise in the path of customers who need them,
whether in-store or online, sales, exposure, and
customer reach will increase.
 Diversify risk: It can protect merchants from
relying on a single sales channel. In the event of a
supply chain breakdown or suspension of a major
account, merchants who diversify their channels can
avoid such a hit against your revenue.
 Growing into untapped markets: Going
multichannel also allows merchants to expose their
products to new customers and first-time buyers,
leading to more product sales. How? By selling on
online marketplaces, opening a new online or
physical store, trying a pop-up experience, or
expanding to different geographies.
 Greater control over your brand’s future:
Wouldn’t it be nice not to fear Amazon’s changing
algorithm or pay-out structure? With a multichannel
strategy, you’re not reliant on a single platform.
You’re free to optimize your supply chain on your
terms, get creative with your marketing, and have
complete access to your customer base. How to build
a good pre-order strategy
 An increased market potential – A major
advantage of marketing to multiple channels is that
there is an immediate increase in market potential. If
you only have one shop, but you suddenly created an
online store which is accessible across the country,
then your market potential has suddenly increased.
Thus, this is the number 1 and most profound
advantage of marketing to multiple channels.
Disadvantages of a multichannel
Higher costs in labor and materials:
 More products in more places mean more suppliers,
geographically dispersed warehouses, staff to fulfill
orders, and additional shipping costs.
 This strategy requires more money. But just because
you build it, doesn’t mean they will come. You’ll need
to set aside a budget for marketing and advertising.
 You could be spreading yourself and resources too
thin. Employees could get overwhelmed and start
making costly mistakes.
Cannibalization of sales:
 Opening an online store could eat into your in-store
experience. Visits to your physical store could go
down significantly once this more convenient option
is made available. CNBC’s Jim Cramer even
made this comment: “The better Nordstrom’s website
becomes, the less incentive you have to actually go to
their stores. In other words, they are cannibalizing
themselves.”
 Cannibalization is a term used to refer to sales loss
caused by a company’s introduction of a new product
or sales channel that displaces its own older products
(or pre-existing channels) rather than increasing the
company’s overall market share. It’s a challenge
faced by retailers when crafting omnichannel
shopping experiences.
 Potential for channel conflict: In multichannel
distribution, conflict can take many forms: direct
sales competing with an independent distributor, two
similar distributors competing for the purchase,
retailer vs. distributor (Gillette vs Smartly, Target’s
private label), small merchants vs. retail goliaths, or
your channels competing for the same customer.
 Increased complexity: You have to manage
thousands of inventory and SKUs, fulfill orders, work
with suppliers, provide excellent customer service,
and guarantee delivery times. Multiply these efforts
by the number of extra channels you’re selling on.
Management among systems, tools, and your
employees can prove to be time-consuming
STORE CHANNEL
RETAILING
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, Shopper’s 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.
On the Basis of Merchandise offered
 Specialty store

 Department store

 Super market

 Convenience store

 Discount store

 Extreme discount stores

 Off price store/ used good stores

 Superstore

 Malls

 Factory outlets

(explain each of them)

CHALLENGES OF RETAILING IN INDIA
 Retailing as an industry in India has still a long
way to go. To become a truly flourishing industry,
retailing needs to cross the following hurdles:
 Automatic approval is not allowed for foreign
investment in retail
 Regulations restricting real estate purchases,
and cumbersome local laws
 Taxation, which favours small retail
businesses.
 Absence of developed supply chain and
integrated IT management
 Lack of trained work force
 Low skill level for retailing management
 Intrinsic complexity of retailing – rapid price
changes, constant threat of product obsolescence and
low margins.
 Organised retailing to create a “customer-pull”
environment that increases the amount of impulse
shopping
 Retail chains like MusicWorld, Baristas, Piramyd
and Globus are laying major emphasis & investing
heavily in store design
 Large cineplexes, and malls, which are backed by
the corporate house such as 'Ansals' and ‘PVR‘the
unorganized sector is getting organized Lack of
necessary infrastructure
 Low coverage of modern infrastructure services