Retail

INTRODUCTION TO RETAILING

Retailing is not like rocket science. It is an industry you all understand because you have interacted with it for so many years.

Why are retailers necessary?

* Consumer perspective:

1. Narrow the choice. Retailers search the market and provide the best selection

2. Breaks bulk

3. Stores goods so consumers do not have to stock up

4. Convenient and pleasant ambiance

5. Services - alterations etc.

* Manufacturers perspective

1. Takes inventory risks

How would we define retail as an industry ?

1. Retailing is a service Industry :

Compare it with a hotel . You can have 1 star hotels and 5 star hotels. A hotel sells rooms and meals , a store sells clothes / FMCG products etc. .Both are required . 1 star hotels will command a room rent of Rs 500/- , 5 start hotels will command a room rent of Rs 5,000/- .

2. Retailing is an entertainment industry : Take the example of PVR .

Peculiarities of the Fashion Industry

Psychological obsolescence - presents both an opportunity and a threat . Opportunity since it gives people more reason to buy, threat because it makes merchandising and buying more difficult and subjective .

RETAIL : STORE FORMATS

By Ownership

 Independents : Single stores , or upto three stores owned by a common promoter .

Presently under threat from Department stores .

Advantages

* Personalized attention

* Quick decision making

Disadvantages

* Limited by capacity of the owner

* Unable to hire the best management

* Lack of economies of scale

* Lower advertising budget

 Chain Stores : If more than three stores owned by the same management and promoted under the same name .

Advantages and disadvantages , inverse of that for independents

 Franchise :

This is an agreement between two parties

Franchisor

* Provides the brand

* Provides the product/ stock

* Dictates the store design

* Advertising

* Gives a minimum guarantee ( in India - internationally brands command minimum guarantee , but in India because of space constraints retailers have had a more powerful negotiating position )

Franchisee

* Provides the space

* Spends on interiors

* Administers the store

* Buys the stock / provides guarantee for goods on consignment

 Concession / shop-in-shop :

Operates like a franchise or an independent store but is located within a store e.g. Royal Sports at Shoppers Stop.

By Product

 Department stores : Multi department / multi product/ multi brand store

 Mass merchandisers : Multi department / multi product / retailers own brand

 Specialty stores: Specialize in a category

 Specialty department store: Specialize in a single line but may have more than one department. Bulk of business comes from the main line .

 Single line specialty store: Specialize in a single line e.g. clothing

 Limited line specialty store: Specialize further e.g. men's wear

 Super specialty store: Super specialization e.g. Big and tall, T-shirt shop

Off Price Retailers

Warehouse stores

Large multi department stores housed in warehouse like buildings located in non-prime areas (cheap real estate). Stack displays to optimize space (sometimes all the way to the ceiling) , minimal service e.g. Wal- mart .

 Category killers

Warehouse stores that specialize in a particular category e.g. Toys R Us.

 Price Clubs

Membership based retailers . You need to buy wholesale packs and you get wholesale prices. Also called Cash n carry e.g. Metro . Giant is a variation of the same . Don't normally carry a wide line of apparel.

 EDLP stores

Where goods are priced low everyday . Sears and JC Penny set this trend . When competition came they discounted and realized sales are maintained but not profits ( the situation Ebony and Big Jo's find themselves in today ) . So they stopped discounting and changed strategy to EDLP.

 Discount stores

Stores ( e.g. Marshall's , USA ) that buy branded merchandise at a discount - end of season , broken stock , slow selling styles . Located off prime real estate. Basic interiors . Stacked by size . Normally one season behind the market in terms of fashion.

 Factory Outlets

Started at factories to sell seconds. Today