RETAIL MANAGEMENTChapter - 2RETAIL ORGANIZATION

The changing structure of retailing• All dynamic developments in retailing (department stores,

warehouse clubs, and hypermarkets) are responses to a changing environment

• Changing customer demand, new technologies, intense competition, and social change create new opportunities even as they shake up existing business

• The Internet and web technologies have itself created a myriad of opportunities for web based business model of retailing

• This has created competition for the retailer in order to maintain and grow its share of market and compete within its band of retailers

• For e.g.: Bharat Petroleum - Making A Difference through Innovative Retailing

Theories of structural change in retailing

Theories of structural change in retailing

Retailing has always been a dynamic industry. There are certain theories of how firms evolve and change the industry in the process. They are:

• The wheel of retailing• The dialectic process• Natural selection

The wheel of retailingIt was proposed by Malcomb McNair at Harvard University. It is basically a theory of cyclical or circular development. The wheel of retailing concept describes how retail institutions transform during their evolutionary life cycles.

The wheel of retailing1. New retailers often enter the

market place with low prices, margins, and status. The low prices are usually the result of some innovative cost-cutting procedures and soon attract competitors.

2. With the passage of time, these businesses strive to broaden their customer base and increase sales. Their operations and facilities increase and become more expensive.

The wheel of retailing3. They may move to better up market locations, start

carrying higher quality products or add services and ultimately emerge as a high cost price service retailer.

4. By this time newer competitors as low price, low margin, low status emerge and these competitors too follow the same evolutionary process.

5. The wheel keeps on turning and department stories, supermarkets, and mass merchandise went through this cycles.

The wheel of retailing

The wheel of retailing

The wheel of retailing

The wheel of retailing

Example?

The dialectic processAnother theory explaining the changes that take place in the retail institutions is the Dialectic process or ‘melting pot’ theory. According to this theory, two institutional forms with different advantages modify their formats till they develop a format that combines the advantages of both formats

This second theory holds that retailing evolves through a dialectic process- the blending of two opposite store types into a superior form. For example- Fabindia and Nalli offer both a wide array of customer services and a broad assortment of specialized merchandise.

The dialectic process

Natural selectionAccording to this theory, retail stores evolve to meet changes in the micro-environment. The retailers that successfully adapt to technological, social, demographic, economic, and political changes are most likely to grow and prosper.

Classification of retail units

• Bases for classification of retail units• Nature of ownership• Operational structure• Length and depth of merchandise• Nature of service• Types of pricing policy• Types of retail location• Method of customer interaction

Merchandise Offering

Variety (breadth of merchandise): wide vs. narrow- The number of merchandise categories

Assortment (depth of merchandise): deep vs. shallow-the number of items in a category (SKUs)

Retailers classified on the basis of ownership

• Sole proprietorship• Partnership• Joint venture• Limited liability company (public and private)

Retailer’s classification on the basis of operational structure

Independent retail unitRetail ChainFranchiseSize and structural arrangements in franchising:

1. Manufacturer-retailer2. Wholesaler-retailer franchise3. Service sponsor-retailer

• Leased departmentsCo-operatives

New areas

• Leased department or Shop-in-shop• Co-operative outlets• Largest consumer cooperative society• Major initiatives • Benefits To Consumers• Target market • Revised positioning

Types of retail location

• Retailers at freestanding locations• Retailers in business-associated locations• Retailers in specialized markets• Retailers at airports

Variety of merchandise mix• Departmental stores

For e.g: Chen One

Discount StoresFor e.g.: Best Price, 7th avenue, Walmart, Target, No Frills

• Specialty StoresFor e.g.: Footware - Specialty Store

Khadder- Khadi Specialty

HypermarketsFor e.g. : Hyperstar, Cosmo, Coscto

Methods of customer interaction

• Retail transactions are carried out through face-to-face interaction between retailers and customers in the case of retail stores.

• There are certain methods:• Non-store retailers• Electronic retailing like Internet and Mobile Association of

India

Catalogue and direct mail retailing

Factors for the success of catalogue retailing:- Convenience: customers can shop when it is convenient for them in accordance to their schedule - Time saving: one save resources on account of time and travelling cost and parking problems - Information: relevant product information is available in detail- No time limits: no undue pressure to buy unlike as in

retail store shopping

Direct sellingPerson-to-person selling:

- Party-plan or group presentations

- Multilevel network

Television shopping

Television shopping is retail format where existing and prospective customers watch a TV programme demonstrating a product and then place an order for the same by telephone, e-mail or Internet

Three types of television shopping: cable channels meant for shopping, infomercials, and direct-response advertising shown on TV

Vending machine retailing A form of non-store retailing where products or services are placed

in a machine and are dispensed to customers when they deposit cash or use plastic money (credit or debit card)

Vending machines vending machines offer consumers greater convenience 24 hours a day, and have replaced many services formally requiring a human interface