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Theories have been developed to explain the process

of retail development

Theories developed : Revolve around importance of


Competitive pressures
Investments in organizational capabilities
Creation of sustainable competitive advantage

Growth in retail is a result of


Understanding market signals
Responding to the opportunities that arise
1. Environmental Theory
 Where a change in retail is attributed to the change
in the environment in which the retailers operate

5. Cyclical Theory
 Where change follows a pattern and phases can be
can have definite identifiable attributes associated
with them

9. Conflictual Theory
 The competition or conflict between two opposite
types of retailers, result in a new format being
developed
Environmental Theory
 Retail institutions are economic entities

 Retailers confront an environment (customers,


competitors, changing technology etc.)

 Environment can alter profitability of a single retail


store as well as of clusters and centres

 Environment in which retailer competes is robust to


squash any retail form that is unable to adjust

 The birth, success or decline of different retail


enterprises is attributed to business environment

 The ability to adapt to these environmental changes,


successfully, is the core of this theory
 Eg. Department stores I Western markets
Cyclical Theory
 Also known as the “Wheel of Retailing” theory. One of
the most well known theories
 Described by McNair, helps us in understanding retail
changes
 Theory suggests that retail innovators often appear as
8. low price operators,
9. with low cost structure
10. and low profit margin requirements offering some real
advantages that enable them to take away customers
 While prospecting they develop their business
 Offer wide range and acquire expensive facilities
 Such trading up occurs as the retailer becomes
established in his own right
 This in turn leaves room for others to enter and repeat
he process
Cyclical Theory
Theory of the wheel of retailing can be better understood
by taking the
example of a department store

 Starts as a low cost competitor to small retailers


 They develop and prosper
 Then they are severely undercut by supermarkets and
discount warehouses

This theory does not explain the development of retail in all


markets

In less developed markets, introduction may not


necessarily occur at a low
Price

There introduction may occur at a high price


Conflict Theory
 Conflicts will always exist between
operators of similar formats or within
broad retail categories

 Belief : Retail innovation does not


necessarily reduce the number of formats
available to customers

 But it leads to the development of more


formats

Retailing thus evolves through a dialectic


process ie. the
Conflict Theory
This can be applied to developments in retailing as follows

a. “Thesis” : Individual retailers exist as corner shops all


across the country

b. “Antithesis” : A position opposed to the thesis develops


over a period of time. These are the department stores.
Antithesis is a challenge to the thesis
c. “Synthesis” : There is a blending of thesis and
antithesis

The result is a position between the thesis and the


antithesis

Supermarkets and hypermarkets thrive

This synthesis becomes the thesis for the next round of


evolution
Classification of Retail Stores : On the basis of
ownership
Independent Retailer

 One who owns and operates only one retail


outlet
 Such an outlet features the owner &
proprietor and few local hands or family
members
 Many independent stores are passed from
generation to generation
 In India large number of retailers are
independent retailers
 Example : local baniyas, kirana stores,
paanwalla etc.
 Ease of entry into the retail market is one of
Chain Retailer
 Also known as a “Corporate Retailer”
 When two or more outlets are under a
common ownership
 Characteristics: Similarity in merchandise,
ambience, advertising and promotion
 Examples : Park Avenue, Parx (Raymond),Wills
Sport (ITC), Louis Phillipe, Van Heusen
(Madura Coats), Arrow (Arvind Mills)
 Department stores like West Side, Pantaloons,
Globus, Shopper’s Stop, Music World, Planet M
, etc.
 The biggest advantage for the chain stores is
the bargaining power over their suppliers
 Cost effectiveness is also possible in
advertising and promotion
Franchising

 Franchise is a contractual agreement


between franchiser and franchisee
 Allows the franchisee to conduct
business under an established name
 The business format is specified
 The franchisee in return pays a fee or
compensation
Franchising can be for the following
 A product or a trade mark franchise, eg.
Archie’s
 A business format franchise – Mc
Leased Departments
 These are also termed as shop-in-shops
 When a section of a department in a retail
store is leased / rented to an outside party
 A good method available to a retailer for
expanding his product offering to the
customers
 In India many large department stores
operate their perfumes and cosmetics
counters in this manner
 This is a new trend emerging in Indian
retail
 Large retail chains are setting up smaller
retail outlets
 Outlets or counters in high traffic areas
like malls, department stores, multiplexes
Consumer Cooperatives

 Consumer cooperative is a retail institution


owned by its member customers
 Consumer cooperative may arise due to
dissatisfied consumers, whose needs are
not met by existing retailers
 The members of the cooperative largely
run these cooperatives
 Thus there is limited growth opportunities
 Examples of cooperatives: Sahakari
Bhandars & Apna Bazaar in Mumbai and
the Super Bazaar in Delhi
 Kendriya Bhandars are probably the oldest
examples operated by the government
Classification on the basis of merchandise
offered
1. As food oriented
2. General merchandise retailers

Within this classification they may further be


classified on
the basis of target markets they cater to
 Speciality stores, department stores and
convenience stores cater to a very specific
target market
 They are many a times referred to as
products/ service retailers
 Supermarkets, hypermarkets and
Convenience Stores
 Small stores located near residential areas
 Open for long hours, seven days a week
and offer limited line of convenience
products
 Eggs, milk, bread, toiletries etc.
 Store size ranges from 3,000 to 8,000
sq.ft.
 Targeted at customers who wish to make
purchases quickly
 Convenience stores as such do not exist in
India formally
 However retail stores have come up at
petrol pumps like HP, IOC, BPC, Speed
Mart etc.
Supermarkets
 These are large, low cost, low margin, high
volume, self service operations
 Designed to meet he needs for food,
groceries & other non-food items
 This format was at the forefront of grocery
revolution, and today, controls more than
30% of he grocery market in many
countries
 Internationally the size of these stores
varies from 8,000 to 20,000 sq.ft.
 ASDA, Safeway, Kroger and Tesco are
some of the large international players
 The concept of everyday low pricing (EDLP)
is followed by some retailers
 Under this the price charged by retailers
Hypermarkets
 These are huge retail stores occupying an area
which ranges anywhere between 80,000 to
2,20,000 sq.ft.
 Offer both food and non food items like
clothes, jewellery, hardware, sports
equipment, cycles, motor accessories, books,
CD’s DVD’s, videos, TV’s, electrical equipment
and computers
 They combine the supermarket, discount &
warehousing retailing principles
 Hypermarket concept was pioneered by
Carrefour in France
 Cheapest prices will normally be found in
these stores
 Across the world, hypermarkets are usually
part of a retail park with other shops,
cafeterias and restaurants
Department Stores
 These as retail format, originated in the mid
nineteenth century
 They are large-scale retail outlets, often multi
leveled, whose merchandise offer spans a
number of different product categories
 The merchandise of various departments is
displayed separately in the store
 Apparel and furnishing are two of the most
common product categories
 Some of the well known international players
in this format are Marks & Spencer, Sears, J C
Penny, Harrods, Selfridges etc
 This format of retailing has seen a lot of action
over the last few years
 Some of the national players are Shopper’s
Stop, Westside etc
Speciality Stores

 These are characterized by narrow product


line, with a deep assortments in that product
line
 Speciality stores usually concentrate on
apparel, jewellery, fabrics, sporting goods,
furniture etc.
 They have a very clear defined target market
and their success lies in serving their needs.
 Personal attention, store ambience and
customer service are of prime importance to
these retailers
 Internationally most speciality retailers
operate in an area that is under 8,000 sq.ft.
 Examples of speciality stores in India are
proline fitness station, Gautier furniture, etc
Speciality Stores

 These are characterized by narrow product


line, with a deep assortments in that product
line
 Speciality stores usually concentrate on
apparel, jewellery, fabrics, sporting goods,
furniture etc.
 They have a very clear defined target market
and their success lies in serving their needs.
 Personal attention, store ambience and
customer service are of prime importance to
these retailers
 Internationally most speciality retailers
operate in an area that is under 8,000 sq.ft.
 Examples of speciality stores in India are
proline fitness station, Gautier furniture, etc
Off Price Retailers

 Here the merchandise sold is less than the


retail price
 They buy manufacturer’s seconds, overruns
and off seasons at deep discount
 The merchandise may be in odd sizes,
unpopular colours or with minor defects
 Off price retailer may be manufacturer owned
or may be owned by a speciality or
departmental store
 These outlets are usually seen by the parent
company as a means of increasing the
business
 Factory outlets, if owned by the manufacturer,
may only stock company’s merchandise
Catalogue Showrooms

 Catalogue retailers usually specialize in hard


goods
 House ware, jewellery, consumer electronics
etc
 Customers walk into these showrooms and go
through the catalogue of products they would
like to purchase
 Sometimes customers are asked to write the
code number and hand it over to the clerk,
who hen arranges for the product to be
brought out from the warehouse for inspection
and purchase
 Examples : Electronics & Electrical Equipment,
Building Accessories, Sanitary Fittings, Paints
etc
Non Store Retailing
 Ultimate form of retailing directly to the
consumers
 Direct relationship with the consumer
 Can be classified into direct selling and direct
response marketing

Direct Selling
 Involves making of personal contact with end
consumers at his home or his place of work
 Cosmetics, jewellery, food and nutritional
products, home appliances and educational
materials are some of he products sold in this
manner
 Direct selling industry started in India in mid-
1990s, went through a bad phase and today
Direct Response marketing
 Involves various non personal methods of
communication with the consumers and these
include
- Catalogue retailing
- Television retailing
- E- retailing

Mail Order Retailing/Catalogue Retailing


 It eliminates personal selling and store
operations
 Appropriate for speciality products
 Key is using customer database to develop
targeted catalogues that appeal to narrow
target markets
 The basic characteristic of this form of
Television Shopping
 Asian Sky Shop was among the first
retailers who introduced television
shopping in India
 The product is advertised on the
television, details about the product
features, price and other things like
guarantee and warranty are
explained
 Phone numbers are provided for
each city, where the buyer can call
in and place the order for the
product
Electronic Shopping

 This format allows customers to


evaluate and purchase products from
the comfort of their homes
 Success depends on the products that
are offered and the ability of the retail
organization to deliver the product on
time
 Strong supply chains and delivery
mechanisms need to be in place for it to
be a success
 Many retailers are opting to sell the
products on the internet