TYPES OF RETAILING

HOW RETAILERS ADD VALUE

• Breaking Bulk
-Buy it in quantities customers want
• Holding Inventory
-Buy it at a convenient place when you want it
• Providing Assortment
-Buy other products at the same time
• Offering Services
-See it before you buy, get credit, layaway
 HOW RETAILERS ADD VALUE
The value of the product and service increases
as the retailer performs functions.
Doll can be bought
on credit

Doll is featured on
floor display

Doll is offered in
convenient locations
in quantities of one
Doll is developed in
several styles

Doll is developed at
manufacturer
MANUFACTURER’S PERSPECTIVE
The Four P’s of Marketing
Retailers
Retailers areare
partpart of the
of the
distribution
distribution channel
channel
Product

Distribution Price

Promotion
 RETAILERS ARE A BUSINESS LIKE
MANUFACTURERS
Finance Marketing
Accounting

Operations MIS Human Resources

 QUESTIONS
• What trends are shaping today’s
retailers?
• What are the different type of retailers?
• How do retailers differ in terms and how
they meet the needs of the customers?
• How do service retailers differ from
merchandise retailers?
NATIONAL RETAILERS
– Shoppers Stop
– Life Style
– West Side
– Giant
– Big Bazaar
– Pyramid Mega Store
– Tata – Trent
– Vishal Mega Mart
– Eureka Forbes – Home Stores

FOREIGN MAJORS
o Metro Cash & Carry- German (T.O US $61 Bn.)
o Walmart – US (T.O US $256 Bn.)
o Carrefour – France (T.O US $80 Mn.)
o Tescos – UK ((T.O US $52 Mn.)
o Costco – US (T.O US $42 Mn.)
 RETAIL MANAGEMENT PROCESS
 Retailing is a complex business as it involves the
detailing and precision involved in implementing each
of the decisions
 The Retail Management Process involves several
aspects
 The core of the framework is the Retail Value
Proposition.
 The proposition is derived keeping in mind the market
profile and expectations, opportunities present in the
market, competitive stances and activities and the
retailer’s objectives and resources
 Based on the proposition, retailers decide the formats,
merchandise, location, supply chain, pricing,
promotion and other aspects of retailing mix.
 RETAIL PERFORMANCE & PROFITABILITY
Opportunity Retailer Resources &
Identification & Sizing Competencies
Markets to enter
Drivers of Growth
• Shoppers
• Suppliers Shopper Profile

Shopper Expectations Competition

Value Proposition/ Positioning

Merchandise Format Layout Promotion

• Category • Physical • Customer Flow • Increase Bill Size

• Items Stores • Ease of • Increase Bill Value
• Brands • Online stores Purchase • In-store/ Out-store
• Prime
Supply Chain Location Categories Pricing HRM/ OD

• Suppliers • Trading area • Competition • Motivation

• Logistics • Store Choice • Traffic Building • Recruitment
SU • Turnaround • Traffic • Margin &
 Value Proposition/ Positioning

Merchandise Format Layout Promotion

• Category • Physical • Customer Flow • Increase Bill Size

• Items Stores • Ease of • Increase Bill Value
• Brands • Online stores Purchase • In-store/ Out-store
• Prime
Supply Chain Location Categories Pricing HRM/ OD

• Suppliers • Trading area • Competition • Motivation

• Logistics • Store Choice • Traffic Building • Recruitment
• Turnaround • Traffic • Margin &
s Protector Development

PROFITABILITY

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 ASSESSING RETAIL PERFORMANCE
• Key Performance Criteria:
– Operating Profit Margin (OPM)
– Gross Profit Margin (GPM)
– Net Profit Margin (NPM)

• A retailer would determine these at the

department/category level, store level and
the company level
 STORE BREAK- EVEN
Size 3500 sq ft
Investment Rs. 40 lakh- Fit out
Rs. 10 lakh- Rent deposit
Total Rs. 50 lakhs
Costs: Rent Rs. 90,000
Salaries Rs. 80,000
Power/ Fuel Rs. 50,000
Selling Expense Rs. 15,000
Bank charges Rs. 10,000
Security/ Others Rs. 20,000
Repair/ Maintenance Rs. 20,000
Advertising/ Promotion Rs. 15,000
Total Rs. 3,00,000
Interest on working capital Rs. 5,000
Total Operating expense Rs. 3,55,000
 PERFORMANCE OF MULTIFORMAT
PARTICULARS
RETAILER (PANTALOON
2005- 06 2004- 05
) 2003- 04
Income - Gross sales 2108.76 NA NA
Net sales/ Income from operations 1867.77 1084.00 658.31
Expenditure 1725.73 1381.13 822.78
Cost of goods sold and consumed 1476.89 700.30 438.00
Operating margin 390.88 383.70 220.31
Personnel 112.07 50.65 27.52
Other expenditure 370.23 246.48 136.95
Increase in stock in trade 233.46 NA NA
Gross profit (PBT) 91.89 53.12 24.41
Net profit (PAT) 64.15 38.55 19.77
Equity capital 268.84 NA NA
EPS 25.30 18.89 10.53
Reserves 500.01 NA NA
GPM (%) 4.9% 4.9% 3.7%
NPM (%) 3.4% 3.6% 3.0%
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 COMPARISON OF FINANCIAL
PERFORMANCE (RS. CR)
B.M- Bench Mark Competition, * Department
Particulars Store B.M A* B.M B* B.M C* B.M D* B.M

Net sales 270 300 27 30 25 22 18 24 40 35

% total sales 100% 100% 10% 10% 9.3% 7.3% 6. 7% 8% 14.8% 11.7
%
M. UP % 40 39 39 37 36 338 28 27 33 33
M. Down % 25 23 22 25 21 22 25 23 11 12
G.P % 22 20 40 35 18 17 20 20 23 22
C.D % 2 1.9 2 1.9 2 2 2 1.9 2 1.8
Prom. Exp 5.4 7.5 0.5 0.75 0.3 0.35 0.2 0.3 0.7 0.9
Manpower 17.5 18 17.5 1.8 1.6 1.3 1.2 1.4 2.6 2.1
Inventory T.O 2.5 2.1 3 2.8 1.2 1.6 1.8 1.6 4.2 4.0
Inventory Int. % 11.5 11.5 11.5 11.5 11.5 11.5 11.5 11.5 11.5 11.5
Inventory cost 10.8 13.0 1.1 1.3 1.0 0.9 0.7 1.0 1.6 1.4
Cont. % 18 16 22 21 20 20 14 16 23 19

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 NO. OF RETAIL OUTLETS
in’ 000
AREA 1993 1996 1997 1998 1999 2000 2001
Urban 2693 3074 3200 3400 3500 3700 3800
Rural 5364 6633 7200 7200 8400 9000 9800
Total 8,057 9,707 10,400 11,100 11,900 12,700 13,600

URBAN OUTLETS FOOD/ NON-FOOD 1996

Types of Number Percentage Type of Retail Proportion
Products sold (‘000) (%) Outlets (in %)
Food 824 26.8 Small 64
Other FMCG 1430 46.5 Medium 25
Non- Food 820 26.7 Large 8
Total 3074 100
Very large 3

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 PRODUCT CATEGORY, ASSORTMENT AND
VARIETY
Product Category
The specific generic to which a good or service belongs; eg. while
Fanta is a brand name, the product category is soft drink

Assortment
It is an activity performed by the retail store. It is
defined as the act of getting goods/ services of many
Width of
different product categories from so many different category
sources and offer them under one roof.
Variety
It is a subset of assortment activity. It is defined as the
act of getting many variations of one product category. Width of
It determines the depth of product category option
 FOOD RETAILERS
• Conventional supermarket (Apna Bazaar)
– Self service food store offering groceries, meat, and produce
with limited sales of non food items
• Superstores (Food World)
– Larger conventional supermarkets (20th. to 50th. Sq.ft.)
• Supercentres
– Fastest growing retail category
– 150th. to 220th. Sq. ft. offering wide variety of food (30% to
40%) and non food merchandise (60% to 70%)
– Stock 100th. To 150th. Individual items (SKU’s – Stock keeping
units)
• Hypermarkets
– Large (100th. to 300th. Sq. ft.) combination food (60%-70%) and
general merchandise (30%-40%)
– Stock less SkU’s than super centres
 FOOD RETAILERS
• Convenience stores
– Modern version of neighborhood mom and pop
grocery/ general stores
– Provide limited variety and assortment of
merchandise
– Small size and high sales
– Charge higher prices than supermarkets
– Convenient location (2000 to 3000 sq.ft) with
speedy check out
– Growing in Japan, Asia and Latin America
– 7 –Eleven in Japan
 TYPES OF FOOD RETAILERS
Conventional Supercentre Hypermarket Convenience
Supermarket Stores
% AGE FOOD 70 - 90 30 - 40 60 - 70 90
SIZE ('000 SQ. FT) 20 - 50 150 - 220 100 - 300 2-3
SKU (000)s 20 - 30 100 - 150 40 - 60 2-3
VARIETY Average Broad Average Narrow
ASSORTMENT Average Deep Deep Shallow
PRICES Average Low Low High
 GENERAL MERCHANDISE
RETAILERS
• Discount stores
– Offers broad variety of merchandise both private
labels and national brands
– Limited service
– Offers lowest price basket
– Face competition from ‘specialty stores’
• Specialty stores
– Limited no. of complementary merchandise
– Provides high level of service
– Area < than 8000 sq. ft.
– Slowest growing areas in retailing
 GENERAL MERCHANDISE
RETAILERS
• Category specialist
– Discount store offering narrow variety but deep
assortment of merchandise
– Self service approach
• Department stores
– Provides excellent shopping experience
– Discount store offering narrow variety but deep
assortment of merchandise
– Offer full range of services
– May be leased or operated by independent companies
(shop in shop) where there is a lack of expertise
(beauty saloons, photography studio, jewelry)
 OTHER GENERAL MERCHANDISE
RETAILERS
• Drug stores
– Specialty store concentrates on health & personal grooming
– Provides high level of service
– Area < than 8000 sq. ft.
– Slowest growing areas in retailing
• Value retailers
– General merchandise discount stores in low income urban or
rural markets
– Specialise in gift ware, party, and craft items rather than
consumables
– Smaller than traditional discount stores
– Fastest growing segment
 NONSTORE RETAIL FORMATS
• Electronic retailing
– Sale of products through internet
– Perceived as low cost entry
• Calalogue retailing
– Direct mail retailing
• Television home shopping
− Programme is demonstrated on the TV
− Direct response advertising
• Vending machine retailing
─ Non store format, where merchandise or services are
stored in machine and dispensed to customers when
they deposit cash
 SERVICES RETAILING
• Large and growing part of retail industry
• Types of service
Airlines Financial Income tax Insurance
services preparations
Automobile Fitness Long distance Video rental
repair phones
Automobile Education Real estate Home
rental maintenance
Banks Health care Movie theatres Internet access

Credit cards Hotels Restaurants Entertainment

parks
LARGE FORMAT STORES IN INDIA
• Large Format Stores : multi product, multi brand outlets - large
area with features like customer convenience, ambience and
low pricing…
 Hypermarket –eg. Spencers
 Supermarket –. eg Big Bazaars
 Specialty Stores – eg. NEXT, Woolworths
 Brand Extensions - eg. Sony World, LG Shoppee, Reid
& Taylor, USHA World
 Departmental Stores – eg. Shoppers Stop
 Convenience Stores - eg. Subhiksha, 24 X 7 (modeled
around 7/11 format)
 Discounters – eg. My Dollar Store, The Loot, Discount
Circuit
 Cash & Carry – eg. Metro in Bangalore. Wal-Mart is also
planning to launch its Sams model in India
 Rural Format – eg. Adhaar from Godrej and e Chauppal
from ITC, Hariyali Stores
 LARGE FORMAT STORES
• Large Format Stores are multi product, multi brand
outlets spread over a large area with features like
customer convenience, ambience and low pricing.

• LFS can further be sub divided into:

A. Departmental Stores
B. Super Markets
C. Super Stores
D. Hyper Markets
RELIANCE RETAIL’S ROLL OUT PLAN FOR SPECIALITY
RETAIL FORMATS (INVESTMENT RS. 25,000 CR.)
CATEGORY SIZE NO. OF STORES
(IN SQ. FT.) (OVER 3 YEARS)
HEALTH & WELLNESS 5,500- 15,000 4,000
JEWELLERY 6,500- 14,000 150
APPLE STORES 2,000- 5,500 37
HOME SOLUTIONS 1- 2.5 LAKH 13
BOOKS & MUSIC 5,000- 15,000 23
RELIANCE MINI MART* 11,000- 50,000 200
APPAREL 30,000- 50,000 100

* Amritsar, Gurgaon, Delhi, Mumbai, Nagpur, Pune, Hyderabad, Chennai

Presently Reliance Retail runs > 300 stores across country in four formats:
• Reliance Fresh (Neighborhood small convenience store)
• Reliance Mart (Hypermarket)
• Reliance Digital (Consumer Electronics)
• Reliance Trends ( Fashion Apparel)
 BETTING BIG
• Contribution of small towns to 30% - 35%
total trade
• Average size of a small town 1,000 sq. ft to 25.000 sq. ft
store
• Projected growth for next two 30%
years
• Contribution of Delhi and 40%
Mumbai to organized retail by
2008

• Single largest bill till date of Rs. 1.5 lakh comes from Big Bazaar store of
Sangli in Maharashtra
• Sangli, Alwar, Ambala, Raipur, Ludhiana, Jalandhar, Indore, Panipat, haldia,
Durgapur, Salem, Meerut expected to contribute 30% to 35% of retail revenue
 THE OPPORTUNITIES IN
RETAILING

1. Large Format Stores

2. Shopping Malls
3. Large White Goods Counters
4. Rural Retailers
 FOOD WORLD (RPG) – ORGANIZATION
STRUCTURE

HEAD FOOD WORLD

Operations H.R

Reg. Head
Merchandising I.T
Tamil Nadu

Reg. Head
Projects Mktg. Service Andhra Pradesh

Reg. Head
Finance Security Karnataka

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 FOOD WORLD- REGIONAL ORGANIZATION
HEAD - REGIONAL PROFIT CENTRE

Operations Merchandising W/House Mktg. Commercial H.R

Area Category
Manager Inward Picking Despatch
Manager

Store Each retail shop managed

Staples by a store manager
Managers
•Asst. Manager
Produce •4- 6 customer service
Area
Manager supervisors for managing
Packaged Products
operations
•14- 20 customer service
Store Hardware
representatives (2x8 hrs)
Managers
Liquor
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 RETAIL & ENTERTAINMENT
ORGANIZATION STRUCTURE
RETAIL & ENTERTAINMENT SECTOR

Retail 1 Retail 2 Entertainment Sector: H.R Sector I.T Future

Projects
Travel GSA GCIL (HMV)
Food World
Health & Glow RMIL
Music World
Properties Cash &
Gramco Films
Carry
Spencer’s
Super Stores Gramco Publishing
• Mount Rd.
• Kodaikanal Music World
• Mercara International
• Trivandru & Electronic
m Commerce
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 ELEMENTS OF RETAIL MIX

LOCATION
CUSTOMERSERVICE

STORE DESIGN & RETAIL MERCHANDISE

DISPLAY STRATEGY ASSORTMENTS

PRICING
COMMUNICATION MIX
 IMPLEMENTING THE RETAIL
STRATEGY
• Management develops a retail mix that satisfies
the need of the target market
– Type of merchandise & services
– Merchandise pricing, advertising & promotion
– Convenience of store location, store design and
merchandise display
– Assistance to customers provided by sales people
• How and what type of merchandise to buy
– Vendors and their purchase terms
– Purchase price terms
• How to recruit, select and motivate sales people
 MARGIN TURNOVER FRAME WORK
HIGH TURNOVER
Wall Mart Narrow
Big Bazaar product line
L–H H–H
Low Margin High Turnover High Margin High Turnover
Eg. A discount store Eg. A convenience food store

HIGH MARGIN

L–L H–L
Low Margin Low Turnover High Margin Low Turnover
A store of this type is a Eg. An up-market
‘disaster’ specialty store
Kids Kemp
RETAIL MANAGEMENT DECISION PROCESS
DECISION VARIABLES FOR RETAILERS

Customer Service

Merchandise
Store Design Assortment
and Display Retail
Strategy
Pricing Location

Communication
Mix
 Wal-Mart’s Retail Mix

Customer Location
Service

Store Design Merchandise

And Display Retail Strategy
Assortment

Communication Pricing
Mix
 Wal-Mart’s Retail Mix
Location Strategy

Free-standing Stores

Customer
Service

Store Display Merchandise

And Design Assortment

Communication
Mix Pricing
 Wal-Mart’s Retail Mix
Assortment Strategy

Customer
Service Location

Large Number
Store Design
and Display
of Categories
Few Items
Communication in Each Category
Mix Pricing
 Wal-Mart’s Retail Mix
Location
Pricing Strategy
Customer
Merchandise
Service
Assortment

Store Design
and Display

Communication
Mix Low, EDLP
 Wal-Mart’s Retail Mix
Customer
Service Location

Communication Mix
Store Design Merchandise
and Display Assortment

Pricing

TV and Newspaper
Insert Ads
 Wal-Mart’s Retail Mix

Store Design and Display

Customer
Service Location

Basic, Special
Merchandise
Displays Assortments
for Products
Communication
Mix Pricing
Wal-Mart’s Retail Mix

Customer Service

Limited

Location

Merchandise
Assortment

Store Design
and Display Pricing

Communication
Mix