Retailing

The word ‘retail’ has its origin in French word retailer and means ‘to cut a piece’ or ‘to break bulk’. Retailing covers all the activities involved in the sales of products to final consumers for personal, family, household use and not for business. These activities include anticipating what consumers’ want, developing assortments of products, acquiring market information, and financing. A retailer is a business and can be an individual, chain store, departmental store, supermarket, specialty store, small locality shop, paan-bidi kiosk, or a service retailer etc., who links the producers and the final consumer. Retailing is responsible for matching final consumer demand with supplies of different marketers. Manufacturers who sell directly to ultimate consumers are performing the retailing activity. In a case of service retailing, the retailer is also the producer of services, such as dry cleaner, beauty parlor, or a fast food joint.
Retailers primarily get their sales volume from retailing. The value added by retailers is important both for final consumers and marketers. Retailers add value, provide service and help consumers in making product selections. The image of a retailer can enhance product value, though, contributing to consumers’ experience, availability, or convenience. Retailers provide technical advice, demonstrate, deliver, extend credit, and provide after-sales repair services etc. Retailing is not confined to stores only but it also takes place door-to-door, through mail, Internet etc.
Retailing is a high-intensity competition industry and second largest globally. The reason for its popularity lies in its ability to provide easier access to a variety of products, freedom of choice, and many services to consumers. The size of an average retail store varies across countries depending largely on the level of a particular country’s economic development. The largest retail store in the world is Wall-Mart of the USA and the second largest is Carrefour of France. The Indian market is dotted with traditional marketplaces called bazaars or has to comprise of numerous small and large shops, selling different or similar merchandise. A bazaar in India is a long street in a city or town and a central place of commercial activities. In Indian rural areas, these bazaars also occur on fixed weekdays where buyers and sellers converge from other nearby villages and often seem like festive events. Traditionally, the small retailers in India have played a major role in all sectors and unorganized retailers outnumber organized ones.
Within the last 10–12 years there have been major changes in the general retailing scenario. For example, now ready-to-wear garments market has seriously affected what used to be strictly a made-to-order market for clothing. Almost all other retail businesses are undergoing changes with the passage of time.
According to a better-known theory of retailing — wheel of retailing proposed by Malcomb McNair (Figure 9.5), new retailers often enter the marketplace with low prices, margins, and status. The low prices are usually the result of some innovative cost-cutting procedures and soon attract competitors. 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. 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. By this time newer competitors as low-priced, low-margin, low-status emerge and these competitors to follow the same evolutionary process. The wheel keeps on turning and department stores, supermarkets, and mass merchandisers went through this cycle.

retailing

Functions of Retailers

Retailers are crucial players in the emerging market scenario. Large brands are running first to get into the desired retail formats to cater to the growing middle class of India. The retailers perform various functions like providing assortments, sorting, breaking the bulk, rendering services, bearing risk, channel of communication, transport, and advertising and holding inventory. They significantly contribute towards increasing the product value and satisfying the consumers.
Providing Assortments: Offering an assortment enables customers to choose from a wide selection of brand design, sizes, colors, and prices in one location. Manufacturers specialize in producing specific types of products, for example, Kellogg’s
makes breakfast cereals, Campbell makes soups. If each of these manufacturers had its own stores that only sold its own products, consumers would have to go to many different stores to buy groceries to prepare a single meal. Retailers offer an assortment of multiple products and brands for consumer convenience.
Sorting: Manufactures make one single line or multiple product lines and will always prefer to sell their entire output to few buyers to reduce their costs. Final consumers will prefer to buy from a large variety of goods and services to choose from and usually buy in smaller quantities. Retailers have to balance between demands of both the sides, by collecting a combination of goods from different producers, buying them in large quantities and selling them to individual consumers in smaller quantities. The above process is called sorting and under this process, the retailer undertakes activities and performs functions that add value to the products and services while selling them to consumers. A shopping supermarket of Pantaloon in the name of ‘Big Bazaar’ sells 20,000 assortments from 900 companies. Customers can choose from such a basket in just one location. There are specialized retailers like Nilgiris or Barista, which offers specialized assortments of a single product line.
Breaking Bulk: Retailers offer the products in smaller quantities tailored to individual consumers and household consumption patterns. This reduces transportation costs, warehouse costs, and inventory cost. This is called breaking bulk. The word ‘retailing’ is drawn from French, which means ‘cutting a piece off’, which shows the true function of a retailer.
Rendering Services: Retailers render services that make it easier for customers to buy and use products. They provide credit facilities to the customers. They display products, which attract the customers. Retailers keep ready information on hand to answer queries of the customers. They provide services by which the ownership can be transferred from the manufacturer to the end consumers with convenience. They also provide product guarantee from owner’s side, after sales service and dealing with consumer complaints. Retailers also offer credit to consumers and develop hire purchase facilities to enable them to buy a product immediately and pay the price at their ease. Retailers also fill orders, promptly process, deliver and install the product at customer point. Retail salespeople answer the customer complaints and demonstrate the product for the customer to evaluate before making a choice. They also help in completing a transaction and realizing a sale.
Risk Bearing: The retailers bear a different kind of risk to the manufacturers and wholesalers. Even the customers can come back to the retail point and return the product. In that case, the risk of product ownership many times rests with the retailers. Many companies have bought back schemes and return schemes whereby the retailers can always return the unsold items.
Holding Inventory: A major function of retailers is to keep inventory so that products will be available for consumers. Thus, consumers can keep a much smaller inventory of products at home because they can easily access from the nearby retailers. Retailer’s inventory allows customers the instant availability of the products and services.
Channel of Communication: Retailers are the bridge between the manufacturer or his representative and the end customers. They serve as a two-way channel of communication. The manufacturer collects customer choice and preference data and provides information about existing and new products through the retailers. The point of purchase displays provides information about new products and many times the retailers inform the consumers about likely date of availability of a product or entry of variants into the market. The shoppers get a chance to learn about products and services from the stores and even acquire trial habits by seeing others buying a product or service in the store. The manufacturer collects customer data, data on gaps in demand and supply cycles and customer satisfaction from retail points.
Transport and Advertising Function: Retailers also help in transport and advertising function. The larger assortments are transported from wholesaler’s point to retailers point by retailer’s own arrangements and many times, the retailer delivers the goods at final consumer’s point. So, retailers provide assistance in storage, transportation and advertising and pre-payment merchandise. The percentage that a retailer gets from the sale price depends on the number of function that the retailer does for the manufacturer

Strategic Issues in Retailing

To enter retailing is easy and still easier to fail. To survive and be successful in retailing needs catering to customers. Their costs and profits depend on their type of operation, product lines, and level of service. Personal consumers make purchases for a variety of reasons. Sometimes the reasons seem to be obvious, and at times seem to be non-rational, vague and may be just social or psychological in nature, such as to escape boredom, to socialize, to kill time, or to learn if there is anything interesting or new. Retailers particularly consider target market and retail store location; merchandise variety and assortment; store image and atmospherics; services, price level, and promotion.

OUR COURSES

Online Professional Certification