The World of Retailing: An Overview of Retailing & Indian Retail
©2015
Textbook
41 Pages
Summary
Retailing has been practiced from the early years of mankind in the form of barter to the current technologically sophisticated e-tailing in the 21st century. In any format, retailing involves the sale of goods and services to the final consumer. The forms of retailing are bricks-and-mortar stores, non-store bases, or a combination of a store and a non-store base. The assortment of goods in these businesses is planned, purchased, and presented by the retailer for the convenience of the consumer.
The objective was to gain a deeper understanding into the world of retailing, its formats, store image and current trends occurring in the retailing sector and we visualized that this exercise would provide credible insights into business metrics and processes that run the industry today. We looked further to rediscover Indian retail, an industry that has burgeoned at high velocity. It will help in identify improvement opportunities for tomorrow and lead us towards future excellence in the growing retailing sector.
The objective was to gain a deeper understanding into the world of retailing, its formats, store image and current trends occurring in the retailing sector and we visualized that this exercise would provide credible insights into business metrics and processes that run the industry today. We looked further to rediscover Indian retail, an industry that has burgeoned at high velocity. It will help in identify improvement opportunities for tomorrow and lead us towards future excellence in the growing retailing sector.
Excerpt
Table Of Contents
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Chapter1. Introduction
Retailing encompasses the business activities involved in selling goods and services to
consumers for their personal, family, or household use. It includes every sale to the final
consumer.
Retailing is one of the rapidly advancing divisions of the economy showing the fastest
growth. As one of the nation's largest and ever growing employers, the retail industry furnish
worthy business opportunities to the country. Retailing has affects on every facet of our life.
It has become such an essential part of our regular lives. Lately, retail has been one of the
growth areas in the global economy and has witnessed a high growth rate in the developed
countries and is poised for an exponential growth, in the emerging economies. Along with the
rapid growth, retailing scenario has also been characterized by increasing competition and
emergence of increasingly new retailing formats (Popkowski Leszczyc, Sinha, and
Timmermans, 2000). With an overlap of merchandise being offered across different formats,
the competition has become intense and unpredictable in terms of the direction where it is
coming from. The countries that boast of the substantial economic and social advancement
have been those with a strong retail sector. Globally, retail business is controlled by small
family run stores and regionally targeted outlets. More and more markets in the Western
society are taken over by billion-dollar multinational groups, such as Wal-Mart, etc. The
gigantic retail organizations have huge supply & distribution chains, inventory management
systems, financing, and wide scale marketing plans which have empowered them to impart
advance services at competitive prices by attaining economies of scale.
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Retailing broadly involves:
1. Understanding the consumers' needs
2. Developing good merchandise assortment and
3. Display the merchandise in an effective manner so that shoppers find it easy and attractive
to buy.
A retail store is a place or business of selling products and/or services to its consumers for
their personal and family use. Today, there are different forms of retail stores present around
us like convenience stores, departmental stores, branded stores, mom & pop stores, etc. We
can even classify retail stores by the type of products these stores sell, such as, food products,
luxury goods, durable goods, consumable goods. A common notion among people is that
retailing involves the selling and buying of goods in stores, but retailing also involves the
services rendered like hair salon or staying in hotel or home delivery of pizza. Retailing is not
only done in stores. Online selling or the direct sales of cosmetics by Amway is an example
of non-store retailing.
A successful senior executive in the grocery trade said: "The retail game is not complicated,
all you have to do is know what your customer wants to purchase, offer it at a price they are
prepared to pay and make sure it is available when they want to purchase it".
A store operation is running, supervising and inspecting all the functions of the store. From
deciding the location, setting up the shop to finalizing the types of products to be sold at the
shop, deciding the type of customers who would be visiting the store or deciding our target
audience, hiring the staff, ordering the products, pricing the goods, taking the inventory,
planning the advertising campaign, placing the goods in the store, etc. So which ever format
retail store enters for buying & selling of goods, the retailer has to follow a standard
operation procedure (SOP) which involves all functions of store operation related to
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maintenance, distribution, health, safety, protection and customer service. So it can be said, at
the very least, the retailer really has to get this formula right and everything else will follow.
In the current scenario, Retail Operations became apparent as a significant and important area
of research. There are several reasons for this emergence. Retailing is a vast and budding
sector of the economy in most of the countries in the world. Globally, both developing and
developed economies has seen its growth. It is a dynamic & progressive sector seeing
constant changes in markets, technologies, and products occurring rapidly. With
advancement in technology and increased usage of the Internet, retailers face an extensive set
of operational challenges & competition. New research in retailing has discovered new
applications, data sets, and theory, which assures a productive ground for operations
management. Further, retail operations consist of merchandising, assortment planning, shelf-
space allocation, store execution, promotions, pricing, staffing, etc.
A retail store is a place where the customers take decisions on the purchase of the products
offered by the retailer. The store also impacts the perception that customers frame in their
minds about the store, the products available, the services offered and the staff. In the
management's opinion, operations of the store add a major element to the cost. As a result,
the store itself becomes a critical asset for the retail business and it is crucial that the store
operations are controlled & managed well to achieve and assist customer satisfaction and be
cost effective business. Managing store operations for a retail firm of any size- from mom &
pop store to national & international retail chain is a challenging task. It needs amalgamation
among different functions within the store. When all the tasks are executed in an integration
manner, the store operations run effectively.
The importance and significance of retail operations for consumers relates to as far back as
1826 when Samuel Lord and George Washington Taylor started their first departmental store
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(Frings, 1991). Since then, retail operations have become as assorted as the consumer groups
they are serving. (Jarnow&Guerreiro, 1991).
Store image is the way in which the store is defined in the shopper's mind, partly by its
functional qualities and partly by an aura of psychological attributes.
Studies indicate that a
retailer has roughly seven seconds to capture the attention of a passing customer.
Sheth,
Mittal and Newman (2001) define store image as the total sum of customers' perceptions
about a store. This perception is determined by factors such as: merchandise, service, price,
atmosphere, promotions and people. For these authors, store image determines the type of
customer to be attracted to the store and, by turn, this customer feeds back this image.
Oxenfeld (1974) argues that store image is a concept which is "more than the sum of its
parts... , it represents interaction among characteristics and includes extraneous elements...,
it has some emotional content... a combination of factual and emotional material". The
process of monitoring the store image is, therefore, a tool that can either dictate immediate
actions or direct longer-term marketing programs. For McGoldrick (1990), the accumulated
image is also an indicator of the asset value of the "retail brand", which represents the long-
term results of the marketing activities.
According to Schiffman & Kanuk, (2000) Customer perception has a great impact on a
customer`s retail fondness. It is important for retailers to know what their customers' tastes,
preferences & choices are so as to understand the future demands of their customers and
accordingly plan their marketing strategies. Monroe and Guiltinan (1975); Bellenger,
Robertson and Hirschman (1976); and Winn and Childers (1976) have studied demographic,
socio-economic, or psychological variables, as the crucial predictors of store choice. In the
studies done by Mitchel and McGoldrick, (1996); Mitchell and Harris (2005) store choice
was seen as a risk reduction strategy for the shoppers.
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Chapter2: Theories of Retailing
The growth of retail formats worldwide is largely influenced by constantly changing social
and economic scenario. One of the main reasons for emergence of new formats in retail
sector is the consumer himself. Today's consumer is more demanding and is focused on what
he wants. Consumer demand is the key reason for the emergence of various formats.
Retailers are influenced by factors like availability of real estate and increase in its prices.
They are faced with the challenge of adding new services and need for differentiation which
has led to specialization and the emergence of specialists. Supply chain complexities and the
increasing pressure on margins have also forced retailers to look for new formats.
There are different theoretical perspectives to look into retail development. No single theory
can be universally applicable or acceptable. The application of each theory varies from
market to market, depending on the level of maturity and the socio-economic conditions in
that market.
The theories that explain the process of retail development revolve around the importance of
the investments in organizational capabilities, competitive pressure and the creation of a
sustainable competitive advantage. It requires the application of strategic planning by retail
organizations. Growth in retail sector is a result of understanding market trends and
responding to the opportunities that arise in a dynamic manner.
Three retailing theories explain how different retail formats emerge, mature and are then
replaced by another format.
1)
Cyclical where change follows a pattern and phases can have definite identifiable
attributes associated with them.
2)
Conflictual the competition or conflict between two opposite type of retailers leads
to a new format being developed.
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3)
Environmental where a change in retail is attributed to the change in the
environment in which the retailers operate.
1. Cyclical Theory
The common view of all Cyclical theories is that retail sectors progress in a rhythmical
pattern (e.g., low-high-low cycle or general-specific-general cycle) by altering their retail
attributes, such as price reduction or assortment. Two of the well-known cyclical theories are
the Wheel of Retailing theory and the Retail Accordion theory. The Wheel of Retailing
theory is an example of retail evolution determined through the price aspect, and the Retail
Accordion theory is an example of retail sector evolution in terms of product assortment.
The Wheel of Retailing:
McNair (1958) introduced the Wheel of Retailing theory to explain a retail evolution pattern,
which he observed in the retail operations in Europe and U.S. He was a pioneer in retail
evolution theory, and was one of the first authors who outlined the retail evolution concept
with a model.
The theory suggests that new forms of retailing appear as price cutting, low cost and narrow
profit margin operations. Eventually the retailer trades up by improving displays and location,
providing credit, delivery and by raising advertising expenditure. Thus, retailers mature as
high cost, high price, conservative operators, making themselves vulnerable to new, lower
priced entrants.
A low price retailer should avoid incurring extra costs on the existing format and instead
should open another store with better service levels and premium brands catering to the
upmarket segment. These two stores should be distinct in their brand name, offerings and
operations.
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Figure 1 Wheel of Retailing
Retail Accordion:
Hollander (1966) proposed the Retail Accordion theory, which explained retail evolution as a
cyclical trend in terms of the number of merchandise categories (i.e., product assortment).
This theory focuses on the width of product assortment sold by retail outlets and claims a
general- specific-general cycle. A theory of retail institutional changes that suggests that
retail sector go from outlets with wide assortments to specialized, narrow line store merchants
and then back again to the more general, wide-assortment institution. The country moves
from generalized merchandise to specialized stores like shoe, clothing, drug, and food stores.
2. Conflict Theory
Many researchers have proposed some form of a Conflict theory to explain retail evolution
(e.g., Gist, 1968; Oxenfeldt, 1960; Schumpeter, 1947 Thomas, 1970). Research with the
cyclical theories, has been done primarily in Europe and the United States based on
observations of retail operations. Among these researchers, Gist (1968) proposed the
Dialectic theory, a well-known Conflict theory that has been the basis for the common
concepts of many conflict theories. The Dialectic theory is based on Karl Marx's Theory of
Evolution.
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This theory implies that new retail institutions result from stores borrowing characteristics
from the other very different competitors. The established retail institution, known for
relatively high margins, low turnover and plush facilities, is the specialty store-the thesis.
Discount stores in their early form were the antithesis of service-oriented specialty stores i.e.
they were characteristically low margin, high turnover, with broad variety.
Conflict always exists between operators of similar formats or within broad retail categories.
It is believed that retail innovation does not necessarily reduce the number of formats
available to the consumer; instead, it leads to the development of more formats. Retailing
thus evolves through a dialectic process, i.e., the blending of two opposites to create a new
format.
This can be applied to Developments in retailing as follows: --
A. Thesis- Individual retailers as corner shops all across the country
B. Antithesis- A position opposed to the thesis develops over a period of time. These are the
department stores. The antithesis is a "challenge" to the thesis.
C. Synthesis- There is a blending of the thesis and antithesis. The result is position between
the "thesis" and "antithesis". Super markets and hypermarkets thrive. This "synthesis"
becomes the "thesis" for the next round of evolution.
Figure 2 Conflict Theory
Details
- Pages
- Type of Edition
- Erstausgabe
- Publication Year
- 2015
- ISBN (PDF)
- 9783954899692
- ISBN (Softcover)
- 9783954894697
- File size
- 1 MB
- Language
- English
- Publication date
- 2015 (August)
- Grade
- 74
- Keywords
- Retail Busines Store Choice Retail Format Indian Retailing India
