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Retail

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Retail is defined as “Any business that directs its marketing efforts towards satisfying the final consumer based upon, the organisation of selling goods and services as a means of distribution.”

The word retail has been derived from the French word ‘re-tailler’ which means ‘to cut, trim or divide’. Thus retailing means, to sell goods in small quantities.  Retailing not only covers the sale of goods which are tangible but also includes the sale of services to individual customers.

The term retailing has a much wider scope than it seems. Retailing not only covers the sale of goods which are tangible but also includes the sale of services to individual customers.

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The examples of service retailers can be dry cleaners, beauty salons, health centres, spas, tailor’s shop, etc. In the absence of retailers, there would be absolute confusion and it would be very difficult for the manufacturer to make the products available to a large number of customers. Thus retailers facilitate smooth running of goods and services to the ultimate customers.

Learn about:

1. Meaning of Retail 2. Concept of Retail 3. Classification 4. Types of Retail Channels 5. Elements 6. Structure 7. Factors Influencing

8. Theories 9. Customer Relationship Management in Retail Sector 10. Customer Service in Retail 11. Innovation in Retail 12. Careers in Retail 13. Issues and Challenges 14. Future.

Retail: Concept, Classification, Types, Structure, Factors, Theories, Customer Service, Issues and Challenges in Retail


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Contents:

  1. Meaning of Retail
  2. Concept of Retail
  3. Classification of Retail
  4. Types of Retail Channels
  5. Elements in Retail Strategy
  6. Structure of Retail [In Various Countries]
  7. Factors Influencing Retail
  8. Theories in Retail
  9. Customer Relationship Management in Retail Sector
  10. Customer Service in Retail
  11. Innovation in Retail
  12. Careers in Retail
  13. Issues and Challenges in the Retail Business
  14. Future of Retail Industry

Retail – Meaning

The word retail has been derived from the French word ‘re-tailler’ which means ‘to cut, trim or divide’. This was basically used in the context of tailoring. Thus retailing means, to sell goods in small quantities. A retailer buys goods in large quantities from a wholesaler, divides the goods in the smallest quantities possible and sells it to final customers.

The term retailing has a much wider scope than it seems. Retailing not only covers the sale of goods which are tangible but also includes the sale of services to individual customers. The examples of service retailers can be dry cleaners, beauty salons, health centres, spas, tailor’s shop, etc.

In the absence of retailers, there would be absolute confusion and it would be very difficult for the manufacturer to make the products available to a large number of customers. Thus retailers facilitate smooth running of goods and services to the ultimate customers.

It is essentially the marketing concept of a customer-centred, company-wide approach to developing and implementing a strategy. It provides the guidelines, which must be followed by all retailers irrespective of their size, channel design, and medium of selling.

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The retail concept covers four broad areas and is an essential part of the retailing strategy:

(i) Customer Orientation – The retailer makes a careful study of the needs of the customer and attempts to satisfy those needs.

(ii) Goal Orientation – The retailer has clear cut goals and devises strategies to achieve those goals.

(iii) Value Driven Approach – The retailer offers good value to the consumer with merchandise having the price and quality appropriate for the target market.

(iv) Coordinated Effort – Every activity of the firm is aligned to the goal and is designed to maximize its efficiency and deliver value to the consumer.

The retailing concept, though simple to adopt is not followed by many retailers who neglect one or more of the points enumerated above. There must be a proper balance of all the aspects of this concept for the retailer to achieve success. The retailing concept, while important is limited by its nature as it does not cover the firm’s internal capabilities or the competitiveness of the external environment.

It however remains an important strategic guide. The retailing concept can be used to measure the retailers’ performance through three parameters – the total retail experience, customer service, and relationship retailing. The total retail experience refers to all the ingredients of a customer’s interaction with the retailer. This includes all activities from parking to billing.

If some parts of the retail experience are unsatisfactory, the shopper may decide not to patronize that particular outlet. Therefore, it is necessary for a retailer to ensure that every element in the experience must aim at fulfilling customer expectations. This experience means different aspects for different types of retailers — for an upper-end clothing retailer this might imply the presence of plush interiors and air conditioning while a discount store needs to have adequate stock.

One of the biggest challenges for the retailer today is to devise new ways of attracting customer attention to be able to position themselves differently from competitors. Many novelties in retailing, for example, the theme restaurants, have emerged and there is a battle to snare the customer’s attention. Sometimes though, elements of the retail experience can be beyond the control of the retailer, like the levying of sales tax or the speed of online shopping.

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Customer service refers to the tangible and intangible activities undertaken by a retailer in combination with the basic goods and services it provides. It is part of the value- driven approach adopted by retailers in a bid to differentiate themselves and occupy a strategic position.

Among the factors that drive a firm’s customer-centric approach are store hours, parking access, sales personnel, amenities like a recreation area for children, and coffee shops. Different people evaluate the same service in various ways. Even an individual may do so at different times due to intangibility. People’s assessment of a particular service is based not necessarily on reality but on perception.

Keywords such as customer orientation, innovation, and flexibility have become ‘must-haves’.

These words have been repeated like mantras for decades now but rarely have they been put into practice. The service mentality frequently encountered in the Indian retail sector can still be unpleasant even to those customers willing to make purchases. The realisation that the services provided do not suit the prices demanded impels rationally acting customers to switch to the discounters.

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Stand-alone businesses and the owner-managed specialist stores are suffering in particular and, at least in urban India, appear to have passed their zenith. Many retail companies have now realised that the competition for the purchasing power of the customers has long crossed the boundaries of their own narrow sectors. New competitors have been courting the attention of customers and trespassing on the traditional territory of the retail companies.

Some of the major criteria for the fight customer approach are as follows:

1. Creating the right environment;

2. Listening to customers;

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3. Providing rewards to the best customers; and

4. Realising the lifetime value of consumers.

The concept of lifetime value of consumers is employed in relationship marketing. Retailers need to establish relationships with existing customers to motivate them to return regularly. The ongoing process of identifying and creating new value with individual customers over the lifetime of a relationship is relationship marketing.

It is mutually beneficial in nature creating a win-win solution for both the retailer and the consumer by allowing the retailer to be profitable and giving the consumer value. This is especially important because it is much harder to attract new customers than it is to retain old ones. It is a blend of product, quality, and services.

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Relationship marketing uses the event-driven tactics of customer retention marketing, but treats marketing as a process over time rather than single unconnected events. By moulding the marketing message and tactics according to the lifecycle of the customer, the relationship marketing approach achieves very high customer and is highly profitable.

Using the relationship marketing approach, the retailer must customise programmes for individual consumer groups and the stage of the process they are going through as opposed to some forms of database marketing where everybody would get virtually the same promotions, with perhaps a change in offer. The stage in the customer lifecycle determines the marketing approach used with the customer. A simple example of this would be sending new customers a ‘welcome kit,’ as an incentive to make a second purchase.


Retail – Concept

There are many approaches to understanding and defining retailing; most emphasize retailing as the business activity of selling goods or services to the final consumer.

“Any business that directs its marketing efforts towards satisfying the final consumer based upon, the organisation of selling goods and services as a means of distribution.”

The concepts assumed within this definition are quite important. The final consumer within the distribution chain is a key concept here as retailers are at the end of the chain and are involved in a direct interface with the customer. However, the emphasis on final consumer is intentionally different from that on customer – a consumer is the final user of a purchase whereas a customer may have bought for his or her own use, as a present or as part of an own business activity. Purchases for business or industrial use are normally not retail transactions. Additionally, retailing includes more than the sale of tangible products, as it involves services such as financial services, hair cutting or dry cleaning.

Retailers are often referred to as ‘middlemen’ or ‘intermediaries’. This suggests they occupy a middle position, receiving and passing on products from producers and wholesalers to customers. This is accomplished by the addition of service and the provision of the store in a convenient location to provide a successful channel of distribution.

The key objective for any successful channel is to ensure availability of the right product, in the right quantity, at the right time via the right channel. All marketing channel decisions need to be related to ensuring the customer is a focal point for the selection and display of stock so as to make the sales operation as effective as possible.

In demand-led Western economies we usually consider retailing as providing a necessary service and a positive contribution to the economy. This is due to the effectiveness of the retailer in supporting manufacturing by buying in bulk (either directly from the manufacturer or through a wholesaler) on the basis of knowing what the consumer requires.

However, in supply-led economies such as the former Centrally Planned Economics (CPES) of Eastern and Central Europe, retailing has traditionally been viewed as an unnecessary and unproductive link in the channel of distribution, jack (2001) highlights this as –

The norm throughout most of the developed world is modern shop design, products you can pick up to examine, and reasonably helpful shop assistants. Such things are a rarity in Russia, where you are more likely to be screamed at, ordered to produce the exact change and charged for a plastic bag to carry away what you have bought.

During the Soviet era, which was plagued by shortages, the shop assistant was king. In pharmacies, the inferiority of the customer was institutionalised by health regulations. Clients were meant to bend down to speak through a tiny window — supposedly for the sake of hygiene — through which they received orders on which drugs to buy.

Thus, a retailer carries out a specific service and this should not be confused with the wholesaler.

Retailing involves a direct interface with the customer and the coordination of business activities from end to end — right from the concept or design stage of a product or offering, to its delivery and post-delivery service to the customer. The industry has contributed to the economic growth of many countries and is undoubtedly one of the fastest changing and dynamic industries in the world today.

(1) Retailing and the Marketing Mix:

Retailing forms an integral part of the marketing mix and includes elements like product, place, price, people, presentation and promotion. Place relates to the distribution and availability of products in various locations. Customers are first introduced to the product at the retail store. Organisations sell their products and services through these retail outlets and get feedback on the performance of their products and customers’ expectations about them.

Retail stores serve as communication hubs for customers. Commonly known as the Point of Sale (POS) or the Point of Purchase (POP), retail stores transmit information to the customers through advertisements, and displays. Hence, the role of retailing in the marketing mix is very significant.

(2) Channel Power:

Channel power refers to the extent to which retailers influence marketers’ decisions like pricing, promotion and product strategy. This emanates from the point of customer contact (the retailers), which is the one-point source of information feedback from customers to the marketer/manufacturer. Because of its communication capabilities, the channel is in a position to influence customers’ decisions.


Retail – Classification

To understand the retailing function, we must first understand the types of retail stores. When we buy vegetables from a vendor, grocery from a small store, or apparel from a branded store, our experience in all these cases is different even though all these are retail outlets.

It is at the retail level that companies must figure out how they can best serve their customers while earning a profit, or stand out in a competitive environment where consumers have too many choices; while retaining a core of loyal customers. Retailers—whether small shops or big supermarkets—are in a position to understand and meet customer needs.

If we look closely, we find that retail can be classified on five attributes:

1. Sector,

2. Ownership,

3. Level of service,

4. Product assortment, and

5. Price.

These are des­cribed as follows:

1. Sector:

India’s retail industry can be classified into organized and unorganized sectors. Organized retail refers to trading done by licensed retailers, or those who are registered for sales tax, income tax, service tax, and also give employee benefits. This includes the corporate-backed hypermarkets and retail chains, and the privately owned large retail businesses.

Unorganized retail, on the other hand, refers to the traditional retail, such as individually owned shops, local kirana shops, general stores, paan/beedi shops, kiosks, convenience stores, hawkers and sellers using hand carts, and street vendors. They are not usually registered for payment of tax and have no social security benefits.

2. Ownership:

Retail outlets thus vary from small roadside shacks to stores to franchise operations and supermarkets. Many such outlets are started by people to make a living for themselves on making a small investment and, indeed, the retail sector remains the largest employer in many countries, including India. An individual decides on what type of retail outlet he/she wants to have depending on financial resources, lifestyle, family background, personality, and skills.

To start a retail business, a person may think of either going at it independently or with family members to start a store of any size. One may choose to join a direct marketing company, or take up a franchise to operate the store under a recognized trade name.

Companies establishing their marketing channels must learn to deal with individual entrepreneurs to large chains. The needs and motivations of each type of retailer will be different.

The different types of ownership are given below:

i. Individual Entrepreneurs or Family-Owned Stores:

These stores serve a group of loyal customers, usually living close by. In the US such stores are called ‘mom-and-pop stores’, implying that a retired couple runs the store. However, in the Indian context, this would be wrong, since stores are family owned and the more appropriate description may well be a ‘pop-and-sons store’. The independent retail owner makes all the decisions, from which type of goods to stock to the level of services to be provided. Many such stores in India are handed down from generations and have remained in the same family, sometimes for almost a century.

ii. Company Owned Stores:

Owned and operated by large companies, these retail outlets have central buying departments that place large orders with the manufacturers. Retail chains fall under this category.

iii. Franchise:

Rather than go at it alone, an entrepreneur may decide to open a store with a famous company by obtaining its license. In this case, the store is operated using the franchisor’s trade name and business model. The franchisee gets the right to use the name, product, concept, and business plan of the franchisor who also decides about store layout and design.

The franchisee pays a royalty and commission on sales to the franchisor. In the case of a strong brand name, like McDonald’s, the franchisee gets an assured business and goodwill which otherwise would take years to build. In this way, the franchisee reduces most of the risks associated with starting a retail business. Franchisees get marketing, training, and operational support needed to run a successful business.

iv. Dealership:

A third form of retail is the model of a licensed dealership. In this, the licensee gets the right, which is sometimes exclusive, to sell a company’s products. But the arrangement is more flexible than a franchise, since the dealer can sell a variety of goods in his store. There is no royalty or fees to be paid to the licensor, and the system works as a mix of franchise and independent retailer.

The advantage is that the retailer gets an assured supply of goods from a company, the company provides some branding or product name recognition, and, thus, a regular stream of customers can be expected. Existing retailers may find the dealership model lucrative, as it adds to their business. The dealer maintains his independence. But companies may pressurize dealers to achieve a certain level of sales. Dealers do not receive help from companies in setting up their business.

v. Network Marketing:

This is a retail model where a person sells the companies’ products to friends, family members, and others for a commission. The agent also recruits other people to sell products, on which he or she earns commission. It is a business for individuals to do on part- or full-time basis. The main advantage of network marketing is that individuals can start the business with relatively less investment.

Network marketing provides freedom for people to sell in their spare time. However, one may find oneself stuck with unsold stock, and unscrupulous multi-level companies simply shut down after recruiting a lot of representatives. Network marketing relies more on personal selling rather than store selling.

3. Level of Service:

Level of service varies from full service to self-service. When we go to a shop and ask for goods, the shopkeeper gets them for us, packs them, and hands over the packet. This is called full service. In a supermarket, however, we must pick goods ourselves and carry them to the cash counter. This is an example of self-service. Some other stores operate somewhere in between these two, providing partial service, as in apparel stores, where a sales person will assist in selecting products and the customer carries his/her shopping to the cash counter.

4. Product Assortment:

Stores may have a single line of products as in a specialty store, or stock many items as in shops and supermarkets. Convenience stores will stock only some items that are required by their customers on a daily basis.

5. Price:

Retail stores are also classified on the basis of full price or discounted price. Customers visit these stores depending on their needs. An upmarket fashion store, for instance, will not offer discounts, but a store selling mass-produced goods may offer goods at discounts. Some such stores offer discounts all the year round.


Retail – 2 Main Types of Retail Channels

A multichannel retailer is a retailer that sells merchandise or services through more than one channel. Single-channel retailers are evolving into multichannel retailers to attract and satisfy more customers. By using a combination of channels, retailers can exploit the unique benefits provided by each channel.

Type # 1. Store Channel:

Stores offer a number of benefits to customers that they cannot get when shopping through catalogues and the Internet.

(i) Browsing:

Shoppers will often only have a general sense of what they want (such as a sweater, something for dinner, or a gift) but don’t know the specific item they want. They go to a store to see what is available before they decide what to buy. While many consumers surf the Internet and look through catalogues for ideas, most consumers still prefer browsing in stores.

(ii) Touching and Feeling Products:

Perhaps the greatest benefit offered by stores is the opportunity for customers to use all of their senses when examining products — touching, smelling, tasting, seeing, and hearing. While new technologies can provide 3-D representations on a CRT screen, these visual improvements will not provide the same level of information you get when actually trying on that swimsuit.

(iii) Personal Service:

Although shoppers can be critical of the personal service they get in stores, sales associates still have the capability of providing meaningful, personalised information. They can tell you if a suit looks good on you, suggest a tie to go with a dress shirt, or answer questions you might have about what is appropriate to wear at a business casual event. Customers for durable goods such as appliances report that salespeople are the most useful information source, more useful than Consumer Reports, advertising, and friends.

(iv) Cash Payment:

Stores are the only channel that accepts cash payments. Many customers prefer to pay cash because it is easy, resolves the transaction immediately, and does not result in potential interest payments.

(v) Immediate Gratification:

Stores have the advantage of allowing customers to get the merchandise immediately after they buy it. If your child has a fever, you are not going to wait a day or two for the delivery of a prescription from Drugstore(dot)com.

(vi) Entertainment and Social Experience:

Stores provide more benefits to consumers than simply having merchandise readily available and helping them buy it. For example, in-store shopping can be a stimulating experience for some people, providing a break in their daily routine and enabling them to interact with friends. Paco Underhill, author of How We Shop, points out, “Stores are a social experience. I don’t care how many chat rooms there are on a site, they will never provide what the experience of brick-and-mortar shopping provides for all five senses, if not six or seven.”

All nonstore retail formats are limited in the degree to which they can satisfy these entertainment and social needs. Even the most attractive and inventive web pages and video clips will not be as exciting as the displays and activities in a Bass Pro Shop or Niketown store. However, some store formats are more exciting than others. For example, most people view grocery shopping as a chore to be accomplished as quickly as possible.

Type # 2. Catalogue Channel:

Convenience Catalogues, like all nonstore formats, offer the convenience of looking at merchandise and placing an order any day at any time from almost anywhere. With a catalogue, consumers have the added convenience of not being restricted to a place with an Internet connection and a computer.

They can look through a catalogue on the beach or propped up in bed. Finally, the information in a catalogue is easily accessible for a long period of time. Consumers can refer to the information in a catalogue anytime by simply picking it up from the coffee table. The development of “maga-logs,” catalogues with magazine-type editorial content, enhances the desire to keep catalogues readily available.

(i) Safety – Security in malls and shopping areas is becoming an important concern for many shoppers. Nonstore retail formats have an advantage over store-based retailers by enabling customers to review merchandise and place orders from a safe environment — their homes.

(ii) Quality of Visual Presentation – The photographs of merchandise in catalogues, while not as useful as in-store presentations, are superior to the visual information that can be displayed on a CRT screen.


Retail – 3 Major Elements in Retail Strategy

Retail Strategy outlines the mission and vision of a retail organization. It sets the tone for creating sustainable competitive advantage for a retailer through the optimization of available resources. Due to the emergence of new competitors, new store formats coupled with new technologies and change in customer needs and behaviors forces the retailers to give more attention to the long term strategic planning.

Element # 1. Target Market:

Retailers first identify the target market they are going to cater to. These are the set of customers whom the retailer plans to focus its resources and retail mix. There are few important factors which retailers consider while selecting the target market. First, retailer checks whether the target market is lucrative enough or not.

If the target market is large and expected to grow in the future, coupled with fewer competitors in the segment it will lead to higher profits, then It Is the deemed attractive target market for retailers. One more important factor to be considered while selecting a target market is that it needs to be consistent with retailer’s competitive advantages.

Element # 2. Retail Format:

Deciding on retail format is important aspect of retail strategy as it defines the nature of the retailer’s operation or its retail mix. Retail form is the store format which retailer uses to showcase the merchandise to customer. They use location, price and merchandise mix to define the retail format. Retail formats are also used to differentiate themselves from competitors.

Element # 3. Sustainable Competitive Advantage:

Sustainable competitive advantage is what prompts the customers to choose a retailer store over its competitors. It is an advantage which competitors cannot copy and more importantly li translates in to more sales, and subsequently profits, for the retailers.

Retailers use various sources to obtain competitive advantage; they can be customer loyalty, store locations, distribution channels, Information Systems, differentiated merchandise, supply chain management, employees, supplier relations, customer service and human resource management.


Retail – Structure of Retail (In Various Countries)

A number of structural changes in the retail environment have become evident during the post-war era. These developments have occurred throughout Europe, although they are apparent to differing extents in different markets. Three fundamental and inter-related transitions have occurred in the European retail environment – first, the balance of power has shifted along the distribution channel from the manufacturers to the retailers; secondly, traditional independent retailers and co-operatives have lost market share to multiple chain organisations; and thirdly, markets have become increasingly consolidated and concentrated.

The second point above is reinforced by Hollinger (1998), who identified that the Co-op had fifty mutual retail societies, of which the fifteen largest accounted for more than 90 per cent of the movement’s trade. In fact in 1985 the Co- operative movement as a whole could boast that it was the UK’s leading grocery retailer, as well as a banker, insurance provider, funeral services group and agricultural operator. The Co-op business allowed its competitors such as Tesco, J. Sainsbury, ASDA and Safeway to invest heavily in store development, delivering a consistent product range to customers while the Co-op’s individual societies were left to languish.

Retailers have been able to use their power against suppliers, in part, due to the growth of multiple organisations. Multiples have grown dominant by being more competitive and achieving economics and efficiencies of scale, in turn owing to their enhanced negotiating position because of their power over suppliers.

The extent of the domination of the market by multiples varies throughout Europe. The highest levels of concentration and multiple dominance are in the structurally advanced markets of the UK and Germany, where the top three to five players account for almost half the market share in the grocery sector.

This trend decreases slightly in the structured markets of France and the Netherlands, while in intermediary and traditional markets such as Spain, Italy, Portugal and Greece small-scale independent retailers still maintain a strong market presence. However, even in these markets the trend is towards market dominance by multiples, just as we can follow these structural trends since the 1960s and 1970s, so we can trace geographical trends.

Independent and co-operative retailers have fought to maintain their market share. To varying degrees throughout Europe public policy has favoured them, for example by restricting the development of new stores or controlling acquisitions of large companies. They have also attempted to fight back strategically by joining together in voluntary groups and alliances and by providing a complementary retail offer to the multiples.

For example, small grocery stores may be unable to compete with the range of merchandise of a superstore but they can increase their competitiveness by locating in neighbourhoods rather than out-of-town sites and offering longer opening hours for local consumer convenience. Retailers are constantly having to assess the changing environment in which they operate and adapt accordingly.

One outcome of this has been the way in which retailers have altered their store format, size and location. Outcomes of environmental changes are the dichotomous trends in store size, the development of dominant formats in national markets, and Vocational issues such as the move of stores to out-of-town sites.


Retail – Top 3 Factors Influencing Retail

Factor # 1. Customers:

Customers are the most important element for the retailers. To be successful retailer must know its customers. Why customers shop, how they select a shop and how they select among that stores merchandise.

These can be:

Convenience- of hours, of location, of shopping ease-

(i) Assortment of merchandise- whether a wide variety or limited

(ii) Quality and fashion level of goods

(iii) Price- Generally important at the lower end

(iv) Services- such as credit, delivery, courteous sales staff, assistance in selection, after sales services, return-goods privileges.

(v) Excitement- Such as promotional efforts.

If retailer really understands their customers, they can position themselves and plan their merchandise and services accordingly. To a large extent the various combinations of merchandise and services are controllable by the retailer.

Stores can stay open in the evenings and on Sundays; retailer can decide to stock low-priced or expensive goods, to offer many services or bare minimum; to have frequent sales, style, shows and other excitement-creating events or none.

Factor # 2. Competition:

A retailer’s competition does not only come from those competitors who are using the same retail format but also from new competitors who are coming up from new formats.

The competition between retailers using the same type of retail format is known as intra-type competition. Examples of this type of competition are- A department store competing with other department stores; a discount store competing with other discount stores; a supermarket competing with other supermarkets; etc.

Competition between retailers that have similar merchandise but are using different formats is known as inter-type competition. For example- competition between department and discount stores.

To provide one stop shopping and to attract a broader group of consumers, retailers offer a broader variety of merchandise, some of it typically not associated with the store type. This is called scrambled merchandising. For example- grocery shops keeping clothes, sports goods in a drug store, etc.

Increased inter-type competition and scrambled merchandising has made it harder to identify and monitor competition for retailers. In a way all retailers are competing against each other for the money spent by the consumer on goods and services. However, the intensity of competition is greatest among retailers when customer view them having the similar retail mix.

The competition to the retailers may come from same retailer located within the vicinity of the target market or a similar kind of business in that locality. For example- a retailer located in a suburb selling video and music cassettes would have competition with the cable TV and the movie theatre located in that suburban area.

The retailer may also face tough competition from the scrambled stores, which in addition to their merchandising products also provide videocassettes on rent. Therefore the retailer has to identify, assess the strengths and weaknesses of his /her competitor while designing the strategy for marketing its products.

Factor # 3. Environmental Trends:

This is the third core element of retailing. The environmental factors surrounding the customers and the competition is a major factor confronting retailers.

These environmental factors are:

a. Changing customer’s needs,

b. Changes in demographic composition of customers,

c. Changes in technology,

d. Changes in business environment,

e. Legal framework.

i. Economic Factors:

The rate of growth in India has gradually picked up in last two decades. In the eighties it breached the so called ‘Hindu rate of growth’ and reached 5 percent levels. Throughout the nineties the growth has remained above this level even crossing 7 percent levels. This has resulted in increased buying power and disposable income in the hands of Indian consumers.

Apart from growth, India’s large middle class has led to introduction of organized retail formats. You can see many types of retail formats in India now, for example, department stores, specialty stores, manufacturer-owned retail chains etc.

As Indian economy gets integrated in the world economy, global trends start affecting Indian economy such as global recession. This gets reflected in consumers buying patterns. Last year (2001) saw drop in sales of leading retailers in India due to the economic slowdown.

ii. Demographic Factors:

There has been significant growth in number of towns and significant increase in population of urban India due to migration from rural areas. Rising prosperity and population has driven the population of many cities over 10 lakhs. This has created interest in large retailers. Many retailers have opened their stores in number of cities now. Prominent among them are Shoppers Stop, Food World, Westside, Ebony Piramyd, Pantaloon, Lifestyle, Globus etc.

iii. Social Factors:

Nuclear small family is becoming a norm in India with increasing number of women working outside the four walls of home. Thus, there is increase in disposable income of families, however there is paucity of time as in many families both (husband and wife) work.

iv. Psychological Factors:

Consumerism is on increase in India. Media and cable TV proliferation has given exposure to Indian consumers to new ideas, new life style and new desires. This has fuelled consumer demand. Even in last four years when the economy was not doing as well, consumer durables sales was growing at about 20%.

Similarly, there is increased emphasis on health, personal hygiene, etc. Therefore, many retailers carry low sodium salt, cholesterol free oil, diet coke etc.

v. Brand Profusion:

Compared to early eighties, India has seen brand explosion in almost all goods. Earlier there was only one brand of salt, namely, Tata Salt, now there are number of brands available. Many goods were sold in loose earlier, now there exists number of established brands, Numerous brands in consumer durables, automobiles, household items, garments etc, have appeared in the Indian retail horizon.

vi. Psychographic Change:

There has been a perceptible change in the mental attitude of the people at large. People specially in cities have become health conscious. Hygiene is a prerequisite for any investment related to consumption and food items. Due to change in earning, the concept of marketing has also changed.

vii. Demographic Change:

The people at large live in big apartments and isolated suburban areas. There is a growth of clusters of population in identified geographical locations. A particular geographic location is populated by people with distinct characteristics of demand and consumption. This indicate that the requirement of different clusters may be different depending upon the type of families living together.

viii. Political Change:

Since last two decades, India is facing severe political instability. This is causing frequent policy changes and creation of pressure groups.

ix. Technological Changes:

Last decade saw tremendous change in technology specially information technology. Information Technology has provided ways to network and increase market share with profitability. There is a possibility of mutual growth and business with collaborations.


Retail – 4 Main Theories

Like every other industry new retail firms have brought innovative approaches in retailing. Retail development can be looked at from different theoretical perspectives, as no one theory is universally acceptable. The reason for this unacceptability is mainly because of different market conditions and different socio-economic conditions in the market.

The theories are:

1. Wheel of Retailing

2. Retail Accordion Theory

3. Theory of Natural Selection

4. Retail life cycle

1. 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. New retailers enter in 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.

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. Theory of Natural Selection:

According to this theory retail stores evolve to meet change in the microenvironment. The retailers that successfully adapt to the technological, economic, demographic, political and legal changes are the ones who are more likely to grow and prosper.

This theory is considered as a better one in comparison of Wheel of retailing because it talks about the macro environmental variables as well, but the drawback of this theory is that if fails to address the issues of customer taste, expectations and desires.

4. Retail Life Cycle:

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.

This level may go up to eight years. Hypermarkets, Dollar stores are in this stage. 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 recrafting 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 loose 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.


Retail – Customer Relationship Management in Retail Sector

The famous words of “the father of the nation” have now come to life in every retail outlet,

“The consumer is the most important person on our premises.

He is not dependent on us, we are dependent on him.

He is not an interruption of our work, he is the purpose of it.

He is not an outsider on our business, he is a part of it.

We are not doing a favor on him by serving him.

He is doing us a favor by giving us the opportunity to do so.”

“Customer is the king” and modern day businesses fully endorse that view. Customer Relationship Management (CRM) is a concept that combines management thought technology and business practices. It is a “big picture” approach that integrates the sales, order fulfillment, customer service as well as co-ordinates and unifies all points of interaction with the customer, throughout the Customer Life Cycle (CLC).

CRM helps nurture individual customers, enchant them with quick, efficient and responsive service, and build abiding relationships with each one of them. CRM leverages the enabling information technologies to help organizations gain customer fidelity, provide personalized service to customers, acquire better knowledge of customers and differentiate from competition. CRM is about giving specialized attention to individual customers.


Retail – Customer Service in Retail

Customer service in retail focuses on customer expectations. The ability of the retail organisation to identify these expectations and fulfill them will determine whether consumers enter the shop again and again. Service management thus aims to first measure customer expectations and then find ways of meeting them.

Customer service has two dimensions – the services and the service. While ‘services’ are the facilities, concessions or infrastructure offerings extended to customers; ‘service’ is how well they are offered by the store. For instance, in a garment store an alteration facility is part of the basket of services.

If it is done well and the garment is delivered within the promised time frame, then the service is said to be good. A retailer then needs to spell his service vision and create a service culture within the organisation. He has to set service standards with the right strategy, systems and people and manage processes and people to deliver them.

Defining the Service Objective:

The first step to improving the quality of service is defining the objective for service performance in the organisation. A retailer needs to clearly decide upon service goals, and come up with the relevant strategies and systems. He has to understand the importance of service management to attain differentiated leadership in the industry, and thus firm up his organisation’s service objective. He also needs to give due importance to determining the profile of the store’s customers, their expectations and the means to fulfill them.

Defining the Customer Profile and Expectations:

Customer expectations often depend on the profile of the buyers catered to by the retail organisation. Good service means offering customers a little more than what they expect. For example, after eating in the restaurant of a five-star hotel, the customer expects the bill given to him to be placed in a leather folder. But in a non-graded restaurant, the bill can just be placed on the table. Hence, studying the profile of the customer and his expectations will enable retailers to design a complete service process.

Customer expectations can be broken up into:

(i) Basic – Absolutely essential attributes of the experience.

(ii) Expected – Associated attributes of the experience that the customer takes for granted.

(iii) Desired – Attributes the customer doesn’t expect, but knows about them and appreciates it if the experience includes them.

(iv) Unanticipated – ‘Surprise’ attributes that add value for the customer beyond his or her desires or expectations.

Developing the Service Vision:

The organisation’s service vision emanates from its intent to serve its customers. The vision statement reflects what the management wants the store to become and be known for in terms of customer service. It can be called the ‘defined future state of the business’ in relation to the customer and the value he receives or would receive. The vision needs to be shared and communicated for uniform understanding and to enable the right delivery so that maximum customer satisfaction can be achieved.

Mapping All the Processes:

The customer service process starts with the customer expressing his need, and ends when it is fulfilled. To begin, the retailer has to decide on all the elements of the process to be implemented. He then has to compare them with the current processes and map them according to the desired status. The process ends with an operational plan after a careful review.

The following are the goals of the process:

(i) Dependability – Does the service provider do what is promised? Responsiveness: Is the service being provided in a timely manner? Authority: Does the service provider create a feeling of confidence in the customer during the service delivery process?

(ii) Empathy – Is the service provider taking into account the customer’s point of View?

(iii) Tangible Evidence – Is there evidence of the service being performed?

Setting Standards and Developing a Service Strategy:

After identifying areas of improvement and redesigning processes, it is necessary to now set new standards and design methods, to make each department or function progressive, resulting in total customer focus. Take the example of a garment store that, after process mapping, has found that it can increase customer satisfaction by reducing the delivery time of the altered garment from the current 24 hours to half-an-hour.

It has to design its methods of functioning in such a way that each garment being altered is attended to on time, concentrating its resources on it and setting up the required infrastructure. The strategy is to use customer service to differentiate the retail organisation in the minds of the customers.

Managing and Developing Human Resources:

Efficient customer service is all about putting people behind products and services. Human resources need to be trained at all levels to deliver the most efficient customer service as it is they who make the moments ‘magical’ for the customers. Further it is the store personnel who are the ‘face’ of the organisation to the customers.

Communicating the organisation’s vision, values, plans and strategies to the employees work wonders. They can then deliver excellent customer service to achieve the organisation’s service vision. Developing an effective training and development plan for the whole organisation also helps people to operate a lot more efficiently.

Monitoring, Measuring and Filling Gaps in Service Quality:

The retailer needs to monitor quality of service to ensure that service goals are being met, that service strategies are successful, and to find out how well the systems are supporting the process. Monitoring service quality also means the continuous measurement of service quality parameters and evaluating them.

Why measure? The reason for measuring something is to understand it so that it can be done better or differently. From the angle of service quality, this means either identifying an opportunity for improvement, establishing a baseline for improvement, or verifying that the task has been accomplished.

Retailers who really believe that service quality is an important ingredient in their success recipe appreciate the need for continuous measurement of all service parameters.

Monitoring and measurement can be considered a way to close the loop around the service quality improvement effort, to lead and guide rather than drive it. The measurements help everybody know how well they are accomplishing what they have to do.

Service quality measurement being a continuous process, the retailer needs to clearly state the value he would like to deliver to his customers; all the aspects of service quality need to be understood by every employee. They should be well-trained on how to deliver value to the customer. Every employee must be made to understand the organisation’s service vision and objectives.

Some retailers use ‘mystery shoppers’ to evaluate the service quality performance. Since quality of service is a subjective assessment, each person values it based on his own expectations and perceptions. If not clearly briefed on the parameters on which they need to evaluate service, the findings of the mystery shoppers may not be too accurate.

Service Qualities to be Measured:

The objective of every service quality monitoring and measuring exercise is to primarily evaluate customer satisfaction levels.

But before a retailer actually starts measuring it based on customer feedback he needs to do an organisational assessment of the service and culture of the organisation by considering the following:

(i) Value delivered to the customer.

(ii) The internal effectiveness of the organisation, and areas in need of improvement.

(iii) Quality of work life, as it has a bearing on how efficiently they work.

(iv) The need for a service quality initiative to achieve the desired quality standards.

(v) The chances of the service quality initiative succeeding in the organisation.

(vi) Top management’s commitment to the effort and its capability to ensure that it does succeed.

These should help determine the following:

(i) Adequacy of the service strategy.

(ii) Customer-friendliness of the systems and policies.

(iii) Competence and customer focus of the service people.

(iv) Commitment and support provided by managers across the organization.

(v) Degree to which the culture is customer-centred.

(vi) Extent of staff empowerment.

Most retailers measure service quality performance only at the store level. To be a truly service-oriented organisation, the retailer needs to monitor and measure service quality of all departments/functions, both at the front and back ends.

The entire organisation should be one big customer service department, where everybody is responsible for service quality. Every department and employee should be accountable to the other and all departments/functions need to be given the same level of importance.

Once service quality performance has been monitored and measured internally, the results need to be carefully studied and analysed. Based on this analysis, appropriate feedback has to be given to the employees and corrective actions taken in right earnest. After measuring the culture and service quality performance internally, the retailer can consider soliciting customer feedback.

Implementation after Monitoring and Measuring Service Quality:

The key factor in closing the loop is not measurement but the information itself, in the hands of those who best respond and act on it. The right dissemination of the information and results of the measurement is critical to enhance service quality performance.

The management of a retail organisation needs to ask the following questions while implementing a customer service action plan:

(i) What information do employees need to find out how well they are succeeding in delivering quality service?

(ii) What information do supervisors need to enable them to support frontline employees who interact directly with customers?

(iii) What information do middle-level managers need to help them support both supervisors and workers?

(iv) What information does the senior management team need to help it guide the organisation towards service quality?

The entire process of monitoring and measuring service quality has to be regarded as a feedback mechanism rather than as a controlling tool. The retailer needs to create a feedback mechanism that communicates to the employees as to how the organisation in general and they in particular are faring on service quality and reengineer processes to fill the gaps.

Service quality is a continuous process and involves every employee in the organisation. Monitoring and measuring service quality performance provides the organisation and its employees a live scoreboard to know how they are faring. A retailer’s commitment to this process — and the resulting action that goes into creating and using this process wisely — will help to make service quality a differentiator for the organisation and ensure that it emerges a winner.


Retail – Innovation in Retail

Retailers are making every attempt to lure Gen-Y customers with sci-fi offerings. Young consumers are a key target for retailers across the world. The retailers are adopting cutting-edge technologies and reshaping everyday shopping experiences.

There is a flurry of activity surrounding online retail initiatives right now, with particular emphasis on mobile. At the same time retailers can’t ignore the need to drive that consumer to a physical store. Retailers are inventing ways to tackle these two-pronged challenges.

Let’s discuss some of the innovation happening in the retail:

1. Tesco Virtual Supermarket in Korean Subway Station:

The British supermarket chain and advertising agency Cheil came up with a unique shopping experience in a South Korean subway station. Instead of just standing around waiting for the next train, consumers could shop for groceries. Here’s how it works – a wall-sized billboard shows pictures of common grocery items, and you can scan the QR codes of each item using your smartphone. Then these groceries are delivered to your home within the same day.

2. The Apple Store – On the Spot Payment:

Every sales associate at Apple store can check you out right on the floor, using an iPhone as a cash register and swiping your credit card on the spot, using Square’s point-of-sale technology.

3. Materialise (dot) com:

Materialise’s prototyping machines claim to have the largest rapid prototyping and manufacturing facility in the world — so they can make anything and send it to you right away. There’s also Shapeways, which can create whatever you want, from jewelry to gadgets.

4. Magic Mirrors:

UK-based Marks & Spencer recently installed 10 virtual mirrors in their retail stores to coincide with their virtual mirror application available on their website, the San Diego Business Journal reports. Customers can see, in-store, what a particular shade of eye-shadow looks like or how a punchy shade of lipstick looks against their skin, without the makeup ever touching them.

5. Automated Processes:

In Seattle, Washington, a tiny store called Hointer sells designer jeans for men Customers use a Smartphone to scan tags on the products they want. Then the items are robotically delivered to dressing rooms. Shoppers can go online to request more sizes and colors.

The purchase is completed via a slide-through credit card machine—and the shoppers exit the store without interacting with a live salesperson. Many stores are offering 3D images of the products to the shoppers at the stores before they make purchases.

These are just a few of the examples that demonstrate the way in which retailers are reinventing their stores, mostly with the help of technology, and often with the integration of e-commerce.


Retail – Careers in Retail (With Steps and Career Options)

In the United States and around the world, retailers make up a significant portion of all employers. According to the U.S. Bureau of the Census, Census of Retail Trade, traditional retailers in the United States provide around 25 million jobs. If you add in all retailers, including e-tailers and service retailers (such as banks), the number comes closer to 50 million jobs. Any way you look at the numbers, more people are employed in retailing than in any other industry.

If you want to work with customers, there is not a better field of study. Retail graduates work for large companies such as Sears, Target, Disney, or The Gap. They also work for smaller retailers such as regional airlines (Southwest, Southeast, Mesaba) or small mom-and-pop retailers. Some even prefer to take a chance and open their own businesses. Because retailing is labour intensive, there will always be open positions within the industry.

With thousands of retailers opening every year and with many retailers becoming international, the number of employment opportunities is growing rapidly. Depending on the areas you wish to work in, salaries in retailing are competitive. Entry-level management trainee positions can pay in the upper $30,000 range, with liberal benefits. It is not uncommon for managers of large stores to make more than $100,000 a year, with generous benefits.

Retail careers offer all individuals the chance to succeed. Great opportunities abound for women and men of all races. Retailing also offers a good deal of geographic mobility: retail outlets exist in every city of every state in United States and worldwide. A retailing career also poses many challenges. Workweeks can be long, particularly during holiday seasons.

Retail professionals may have to manage temporary employees as well as perform many different activities in a day. Therefore, a strong work ethic is essential for success in retail management in addition, retail employees must be flexible and creative in their positions, and they must have analytical skills. The universal functions of management — planning, organizing, leading, and controlling — are imperative for success in a retail career.

In summary, retailing is a very dynamic field and needs dynamic individuals to implement programs that will generate a significant return to store owners. Individuals who desire success, both personal and financial, are in high demand. If you have the enthusiasm necessary for success, retail management will offer you a satisfying career and quality of life.

Steps to Build a Successful Career in Retail Sector:

According to industry experts, career prospects in the retail sector show potential in the near future. The growth in the industry is mostly led by multinational corporations adding retail outlets in India by observing the fluctuating demands and preferences of the Indian customers. Owing to soaring consumer demands, retail companies are expected to continue their hiring spree in 2014, especially at the customer representative level.

For a successful career in business especially in retail, the following features need to be taken care of:

i. Education:

Retail business does not demand any education which is specialised, but if anyone has it then he or she can move upward with the backing of his or her education. The practical learning that is required can be achieved by doing the actual retail job.

ii. Expertise vs. Experience:

The one thing that cannot be compromised in retailing is expertise in the field, i.e., retail field. Retail is a vicious cycle. Through experience, expertise can be enhanced.

iii. Consumer Delight and the Focus on it:

Consumer delight is highly focused in a business called retail. The employees must have a good approach and ripeness for serving existing as well as prospective consumers efficiently. For business development, the retail business company should train its manpower in correct form and do it continuously.

And it should have proper strategies for polishing them so that they can not only attract new customers but also retain the existing one. If the company ensures this, then there will be a network of loyal consumers which would be the basis on which retail business can progress and develop. There must be some common norms and values which organisations of retail can sustain.

iv. Brand Name vs. Job Profile:

For each and every personnel it is very much important to have crystal clear profile of job responsibilities. Company’s financial strength, culture, vision, plans, etc. should be clear to a candidate who wants to work with the organisation. The profiles of people who are governing the company like directors, chief executive officer, etc., must be clear for the candidate who wants to work with the institution.

Career Options in Retail Sectors:

1. Executive—Customer Sales:

Executive customer sales are regarded as the first or entry level job. Executive customer sales are one of the most reliant jobs because retail business is based on sales. Executive customer sales have detailed knowledge of products, sales, etc.

2. Executive—Department/Executive—Floor/Executive—Category:

These executives are responsible for managing a single department, floor, category, etc.

3. Executive—Outlet:

Outlet executive, also known as General Manager of the outlet, is responsible for taking care of an individual outlet and its daily functioning. The manager is wholly responsible for the outlet personnel.

4. Manager—Retail Operation:

Retail manager plans and co-ordinates the operations of the shop. The duty is to manage, arrange and systematise the retail shop.

The job involves arranging of products, stockpile and analysing operations. People with a master’s degree can start off at this position.

5. Merchandisers:

Merchandisers are the retail people engaged in buying and selecting the products for outlets of retail business. For a successful merchandiser, knowing the consumer demands as well as the needs is very important, and they must be attentive to drifts and hold vigour.

6. Visual Merchandisers:

They provide a look at the brand, as they embrace very important positions in the retail industry. Enjoying the position and responsibility as technological design makers, they merchandise producers as well as outlet planners.

i. Executive of Retail Communication – The executive designs the communication materials for the promotion of the retail store.

ii. Executives of Retail Marketing – Here the executive is responsible for the marketing of retail store among the prospective customers.

iii. Back-end Operations Manager – Back-end Operation manager looks into the logistic part of the retail store and maintains the inventory properly.

iv. Private-label Brands Manager – Here the manager is responsible for the design and promotion of private level brands to position themselves in the mind of the prospects.

v. Manager of Logistics and Warehouse – Logistic and warehouse manager is responsible for the logistic and warehousing part to avoid mismanagement.

The professionals for retailing industry are at all-time high in demand globally. For job openings, multinational companies have opened large chains of retail outlets in all the cities and towns as well as rural areas. For recruiting employees in retail outlets as product officers, public relation executives, managers, etc., a retail organisation makes a selection from among people who have a good ability for communication and demonstrated capability for convincing consumers of the retailing industry.


Retail – Issues and Challenges in the Retail Business

These are following issues and challenges in the retail business:

a. Legal and security,

b. Ethical issues,

c. Technological and

d. Non-store retailing etc.

As this is just beginning of retail business, more issues may arise during the full phased operations.

a. Legal and Security Issues:

Organised retailing has started over the past few years as an adventure in almost all the large cities in India by the developing and growing business organisations. The population of retail shops and stores in the unorganized sectors as existing today is very big.

The main areas, which may attach legal and security issues, can be enumerated as under:

1. Land acquisition,

2. Construction of building and creating other facilities, requiring statutory permission and clearances,

3. Elimination of middlemen and agents working in the retail business since inception will create threats for their existence including loss of earnings for their livelihood,

4. Employment of members of families of whose land acquisition is involved,

5. Payment of compensations for the land acquired from the landowners.

Of these, acquisition of land is a big issue affecting the legal as well as political environments at the national level.

b. Ethical Issues:

The coming up of retail business in a big way is likely to create difficulties and losses to a large population of the society engaged in the retail business since time immemorial to earn their livelihood.

A few of the likely issues may be indicated as under:

1. Closure of old stores and shops and making them poor within no time,

2. Snatching the jobs of lakhs of people engaged in these old shops and stores,

3. Elimination of middlemen will also be unethical, if the men and women employed by them are not suitably re-employed in the new retail company,

4. Land acquisition is always complained of inadequate compensations to the landowners.

Therefore, these issues have to be well taken by the organisations and persons concerned so as to avoid any adverse situation in the retail management process.

c. Technological Issues:

Retail management is a new venture in the supply distribution chain from original supplier to the consumers. There are many agencies and channels associated in the total system. This is a new venture, hence lacks in the latest facilities demanded by the consumers. There will be difficulties at all the centers in the operations of retail business. Hence, this will require a massive drive for the technological developments in all the service centers from original suppliers/farmers, retail shops staff and executives to the end consumers.

d. Non-Store Retailing:

The newly formed retail management companies like, Reliance, Guardian Lifecare Private Limited etc. have started bringing the goods straight from the manufacturers or farmers to the retail centers, from where the same are supplied to the consumers directly, instead of keeping the same in an interim store room for further work of cleaning, washing and packing etc.

Thus, these are the various jobs to be done at the retail centers subsequent to the bringing of the goods from the original suppliers. This will increase the workload and may create a mess in the supply distribution chain.


Retail – Future of Retail Industry

Retail industry is continuously going through changes on account of liberalisation, globalisation, and consumer preferences. While multinational retail chains are looking for new markets, manufacturers are identifying, redefining, or evolving new retail formats.

The existing retail houses are also gearing up to face the emerging competition from the organised sector and the changing outlook of the consumers. For example, consumer spending is shifting from goods to services. Accordingly the retailers too are fast adjusting to the changing consumer preferences.

Consumers are not only looking for the core products or functional benefits from the retailers but also the non-functional benefits, which need to be compatible with their lifestyles. For example, most of the traditional eating joints in India such as Haldiram, Bikanerwala, and Sagar Ratna have revised their product offerings and atmospherics on the lines of the multinational chains to compete with them and to serve changed expectations of the consumers.

1. Mom-and-Pop Stores and Traditional Kirana Stores:

The retail sector is changing as new store categories have started dominating the marketplace. Mass merchandisers (Wal-Mart, Big Bazaar), discount clubs (Subhiksha), so-called category killers (Home Depot, Vishal chain), and speciality retailers (Time Zone, Tanishq) have all developed successful retail models. At the same time, the small mom-and-pop stores and the traditional department stores, are finding the competition intense.

In 2002, while Wal-Mart and Target saw revenues grow (by 12% and 10%, respectively), department stores such as Saks and Federated experienced declining revenues (down 3% and 1%, respectively). But even in the mass-merchandising segment, the competition is fierce, as is evidenced by Kmart’s bankruptcy announcement in 2002. Small independent stores, across product categories, is a very common retail format in India, particularly in small townships, but with the emergence of new retail formats they also undertaking large scale renovations to appeal and attract their target consumer segments.

2. E-Commerce:

The amount of retail business being conducted on the Internet is growing every year. Indeed, Forrester Research Agency projects e-commerce revenue to rise to $123 billion in 2004, an increase of some 28% over the previous year and for e-tailing to comprise a bigger slice of the overall retail pie (5.6%, up from 4.5% in 2003).

Many major retail organisations and manufacturers have online retail stores. Companies like Amazon(dot)com and First and second(dot)com, which helped pioneer the retail e-commerce concept are now being followed by bricks- and-mortar and catalogue retailers like J. Crew, which are expanding retail e- commerce into new markets.

3. Department Stores:

A few years ago, names like Sears, J.C. Penney, Macy’s, and Montgomery Ward dominated malls and downtowns all over America. Over the last decade or so/ however, these department stores have suffered badly. In part, this is a result of changing shopping patterns and increased competition from discount stores.

It has also come from financial burdens incurred by companies that acquired competing companies and grew too fast. It is unlikely that these players will disappear from the market. However, they should be ready to expect more bumps as the strong get stronger and the weak get absorbed.

4. Discount Stores:

These are giants such as Wal-Mart (the largest retailer in the world, with more than a million employees), Target, and Kmart as well as membership warehouses, such as Costco. These, along with the category killers, have changed the landscape of both the retail industry and America.

Where once mom-and- pop and department stores dominated retail, now the discount retailers and category killers are at the top of the heap. And where once shopping malls, anchored by at least one major department store, used to be the dominant retail presence lining the nation’s roads, now it is the behemoth Wal-Marts and Home Depots.

5. Category Killers:

These are the giant retailers that dominate one area of merchandise (e.g., Office Depot Tower Records, and The Sports Authority). They are able to buy bathroom tiles, file cabinets, electronic goods, or pet food in such huge volumes that they can then sell them at prices even fairly large competitors cannot match.

The future of this category is better than that of many of the more general discounters, but the same employment caveats apply. For most job seekers, these companies offer earn-and-learn experiences with vendors and distributors before they move onward and upward.

6. Speciality Stores:

These include Crate & Barrel, the Body Shop, and Victoria’s Secret. These stores concentrate on one type of merchandise and offer it in a manner that makes it special. Some are very high-end (Louis Vuitton) while others cater to the price- conscious masses (Old Navy). Many are so successful that department stores have started to emulate their buying, marketing, and merchandise display strategies.

Industry experts predict growth in this segment, particularly in home furnishings and home improvement, and it seems to attract many of the best and the brightest in retail. Promotion and responsibility come quickly to those willing to work hard, and in many of these stores the hand of bureaucracy is not heavy.

7. E-Tailers:

While most retailers have online storefronts, strictly online purveyors with no bricks-and-mortar counterparts are hoping to snare a percentage of the retail profit Major players, such as Amazon(dot)com, have generate enough business to cause top brick-and-mortar competitors to come up with their own Internet sites. Traditional retailers like Wal-Mart and Starbucks, hugely successful in their own right have also set up online stores so as not to miss out on the revenue opportunities that the Internet offers.


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