Introduction to Retailing

1. Introduction to Retailing Class 2 28November 2009

2. Teaching Methodology • Lecture & Workshop • Saturdays 9:00 to 10:30 • Syllabus coverage • Group case study • Weblog updates • Communications • http://powru.blogspot.com • rampowru@gmail.com • Recommended Textbooks • Levy, M. and Weitz, B., “Retail Management”, Tata McGraw Hill, 2004

3. Recap • Industry Value Chain • Distribution Channel • Definition of Retail • Role and Benefits of Retail • Retail Business Environment • Competition • PEST

4. Retail Environment • Business Environment • SWOT Analysis • Internal • External • Competition Analysis • Porter’s 5 Forces • Strategies • PEST Analysis • Political/Legal • Economic • Social • Technological

5. Exercise for Class break • Select any 2 organized retail stores in India, one being a single-product retailer and other being multi-product retailer. • Evaluate advantages/ disadvantages of the two. • Report the competitive environment of the two.

6. Classification of Retailing • By Ownership • Determined by who owns the retail business • Who manages the retail business • By Strategy • Determined by how retail businesses compete • How the retail business is planned and organized • By Product Line • Determined by what is sold in the retail business • What range of products is available for the consumers

7. Classification by Ownership • Independent Retailer - is one who builds his/her business from the ground up. • Advantages: • There are no restrictions on who, how or where an entrepreneur should set up his/her business. • The freedom to do what one wants to do is the biggest advantage in this form of business. It can be extremely fulfilling. • Disadvantages: • Because of the ease and flexibility of getting started, there can be a lot of competition in a particular area for a certain type of customer. • Every business decision rests on the owner(s). • There is no branding, no preset guidelines and a great deal of risk in this business model.

8. Classification by Ownership • Franchises- purchasing a franchise is buying the right to use a name, product, concept and business plan. The franchisee will receive a proven business model from an established business. • Advantages: • All of the business operation processes have been established. • The franchisee receives help from a network and customers may already familiar with the name. The marketing strategy has already been put in place. • Most all of the risk associated with starting a retail business has been reduced. • Disadvantages: • Franchisees pay a fee, or royalty, based on sales each year. • Start-up costs relating to the franchise may be high. • One of the biggest disadvantages of owning a franchise is the lack of flexibility and freedom.

9. Classification by Ownership • Chain stores – are stores with a common brand and generally operate as franchises • Leased Department – are stores, where the owner leases the business to the manager • Cooperative Stores – owned by an interest group registered as a society, generally for welfare of a community

10. Classification by Strategy • General Merchandise • Is traditionally a retailer located in a small town or in a rural area. • It carries a broad selection of merchandise crammed into a relatively small space where people from the town and surrounding rural areas come to purchase all their general goods. • The store carries routine stock and obtains special orders from warehouses. • Discount Stores • Is a type of department store, which sell products at prices lower than those asked by department stores and other traditional retail outlets.

11. Classification by Strategy • Specialty Stores • Small stores which specialize in a specific range of merchandise and related items. Most stores have an extensive width and depth of stock in the item that they specify in and provide high levels of service and expertise. • The pricing policy is generally in the medium to high range, depending on factors like the type and exclusivity of merchandise and ownership, that is, whether they are owner operated or a chain operation which has the advantage of bulk purchasing and centralized warehousing system. • Off-price Retailers • Most products are name-branded and stores located in malls. • Products may be over-runs, seconds, or last season's stock liquidated from department stores. • Product mix typically emphasizes women's clothing and may include men's clothing, children's clothing, shoes, accessories, perfume, toys or packaged gourmet food.

12. Classification by Product Line • Department stores • Large format multi-product stores which are typically owned by large single corporate owner, where the stores are departmentalized • Supermarkets • The traditional suburban supermarket occupies a large amount of floor space, usually on a single level, and is situated near a residential area in order to be convenient to consumers. • Its basic appeal is the availability of a broad selection of goods under a single roof at relatively low prices. • Other advantages include ease of parking and, frequently, the convenience of shopping hours that extend far into the evening or even 24 hours a day

13. Classification by Product Line • Hypermarkets • Is a superstore which combines a supermarket and a department store. • A very large facility which carries an enormous range of products under one roof, including full lines of groceries and general merchandise. • In theory, hypermarkets allow customers to satisfy all their routine weekly shopping needs in one trip. • Convenience Stores • Small store or shop that sells items such as candy, ice-cream, soft drinks, lottery tickets, cigarettes and other tobacco products, newspapers and magazines, along with a selection of processed food and perhaps some groceries. • Stores that are part of gas stations may also sell motor oil, windshield washer fluid, radiator fluid, and maps. • Often toiletries and other hygiene products are stocked. They are often located alongside busy roads, in densely-populated urban neighbourhoods, at petrol stations or other transportation hubs, some being open 24 hours.

14. Exercise -1 • Identify and classify the following stores by ownership, strategy and product line • Metro Cash & Carry, Big Bazaar, Central, Fabmall, Marks & Spencer, Westside, Reliance Mart, Reliance Fresh, Subhiksha, Shoppers Stop, Pantaloons, Forum, McDonalds, Pizza Hut