Purchasing

Situations

Chapter 23 Purchasing
1
SECTION 23.2 The Purchasing Function

Why It's Important

Knowing the details of the purchasing

function will give you a better idea of what is
involved in the overall job description. It is
especially important to recognize the impact
of the Internet on the purchasing function.
You can expect changes in job descriptions
for buyers in the near future due to the
significant increase in online purchasing.

Chapter 23 Purchasing
2
SECTION 23.2 The Purchasing Function

The Buying Process

Planning purchases is the preliminary step

in the buying process. The buying process
involves several types of purchasing
situations, selecting suppliers, negotiating
terms, and sometimes using the Internet.

Chapter 23 Purchasing
3
SECTION 23.2 The Purchasing Function

Types of Purchase Situations

There are three types of purchase situations:

 new-task purchase
 modified rebuy
 straight rebuy

Chapter 23 Purchasing
4
SECTION 23.2 The Purchasing Function

New Task Purchase

A new-task purchase is a purchase that is

made for the first time. This can be the most
complicated purchase. It could be anything
from a special item that a customer has
requested and a store doesn’t carry to
complex manufacturing equipment to be
used to automate production.

Chapter 23 Purchasing
5
SECTION 23.2 The Purchasing Function

Modified Rebuy

In a modified-rebuy situation, the buyer

has had experience buying the good or
service, but some aspect of the purchase
changes, such as purchasing from a new
vendor. A buyer usually gets proposals
from several vendors before making a
buying decision.

Chapter 23 Purchasing
6
SECTION 23.2 The Purchasing Function

Straight Rebuy

In a straight-rebuy situation, the buyer

routinely orders the goods and services
purchased from the same vendor(s) as in
the past. Staple goods such as office
supplies fall into the straight-rebuy category
for wholesale and retail buyers.

Chapter 23 Purchasing
7
RETAILING
 Definations
 According to William J Stantons,
“ A Retailer or Retail store is a business enterprise which
sells primarily to the ultimate consumers for non business
use.”
 According to Cundiff and Still,
“Retailing consist of those activities involved in the selling
directly to ultimate consumers. ”
 According to Mc. Carthy.
“ Retailing is selling to final consumer products to
households.”
 Retailing may be understood as the final step in the
distribution of merchandise for consumption by the end
consumers.

 Retailing is responsible for matching final consumer demand

with supplies of different marketers.

 Retailing is high intensity competition industry, The reasons

for its popularity lie in its ability to provide easier access to
variety of products, freedom of choice and many services to
consumers.

 The Indian retail is dotted by traditionally market place called

bazaars or haats comprises of numerous small and large shops,
selling different or similar merchandise
 Characteristics of Retailing
 Direct Interaction with Customers.

 Lower Average Amount of Sale

Transaction.
 Point of Purchase and Display and

Promotion.
 Importance of Retailing
 Services to Wholesalers and Producers.
b) Advertisement of new products.
c) Arrangement to sell the goods.
d) Information about consumer habits, tastes and needs.
e) Sharing of Risks.
 Services to consumers.
g) Selection.
h) Variety of goods.
i) Demand creation.
j) Distribution.
k) Credit Facility.
 Functions of Retailing.
 Sorting.

 Breaking Bulk.

 Holding Stock.

 Additional Services.

 Channel of Communication.

 Transport and Advertising Functions

 Main Activities involved in retailing
 Choosing the Store Location.
 Sourcing/buying or partnership/supply chain management.
 Merchandising and category Management.
 Visual Merchandising (Display)
 Sales Promotion.
 Store Positioning and Building the store as a Brand.
 Store Operations.
 IT Task.
 Inventory Management.
 Shrinkage Loss Prevention.
 Real estate development.
 Achieving efficiencies in Retail Operations.
Retail Industry

2
 Evolution of Indian Retail Industry

 Barter system was known as the first form of Retail

 Followed by Kirana Stores and Mom & Pop Stores
 Finally Manufacturing era necessitated the small stores and specialty stores
 It was a seller’s market till this point of time with limited number of brands
available
 1980s experienced slow change as India began to open up economy.
 The latter half of the 1990s saw a fresh wave of entrants with a shift from
Manufactures to Pure Retailers.
 Post 1995 onwards saw an emergence of shopping centers
 Emergence of hyper and super markets trying to provide customer with 3 Vs
- Value, Variety and Volume
 Expanding target consumer segment
Overview

4
 Industry Description
 Indian retail Industry is Fifth
largest in the world.

 The current penetration

pegged at 5-7 per cent.

 Accounts for 24% of

country’s GDP and 8% of
the total employment.

 Food is the largest

segment in terms of its.

5
 Structure & Phase of The Industry

Retail formats in India:

 Hyper marts/supermarkets
 Mom-and-pop stores
 Departmental stores
 Convenience stores
 Shopping malls
 E-trailers
 Discount stores
 Vending
 Specialty stores
 Key Success Factors for the industry

 Effective forecasting 
 Strong balance sheet 
 Stock control 
 Market position 
 Proximity to market 
 Creating Systems In Retail
 Hiring the Right Employees
 Marketing
 Buying The Right Merchandise
 Customer Service
 Risks for Retail Sector
 Low-growth consumer markets
 Regulation and compliance
 Inability to control costs/rising input prices
 Inability to benefit from e-commerce
 Wrong price image
 Supply chain disruptions
 Inability to penetrate emerging markets
 Failure to respond to shifting consumer behavior
 Sourcing
 Volatility in commercial real estate markets
 Opportunities for Retail Sector

 Rising emerging market demand and rise of global middle class

 New marketing channels and social media
 Competitive differentiation via CSR and green branding
 Multichannel approach
 Demographic change
 Private label
 Launching new products and services
 Global urbanization
 Competitive differentiation via local branding
 Enhancing efficiency in the supply chain
Types of Retailers
Specialty Stores
 These stores are characterized by narrow product
lines but with deep assortments such as Apparel
Stores , Sporting goods store, Furniture store ,Florist
and Book store. Under this also there could be
specializations like limited line store ( eg. Men’s
clothing store) and Super specialty store (eg. Men’s
custom shirt store ).
Department Stores
 Several Product Lines –typically clothing ,home
furnishing and household goods with each line
operated as a separate department managed by
specialist buyers and merchandisers
Supermarket/Hypermarket
 Relatively large ,low cost ,low margin high volume
,self service operation which is designed to cater
total needs for food, laundry, household
maintenance products .
Convenience Stores
 These are the stores which are relatively small in
size and they are located near residential area ,
normally remains open seven days a week and
carrying a limited line of high turnover convenience
products at slightly high prices. Many have added
take away sandwiches , coffee and pastries.
Discount Stores
 Standard merchandise sold at lower prices with
lower margin but higher volumes. Actual discount
stores regularly sell merchandise at lower prices
and offer mostly national brands. In Discount
retailing , Discount specialty retailing is also
present eg. discount electronic store or discount
book store
Off Price Retailers
 Merchandise bought at less than regular wholesale
prices and sold at less than retail prices. Often left
over goods , irregulars obtained at reduced prices
from manufacturers and other retailers.
 Factory outlets are owned and operated by
manufacturers and they normally carry
manufacturer’s surplus ,discontinued and irregular
goods
Mom & Pop Stores
 Local neighborhood stores managed by an
independent, which provides limited range of daily
use articles.
 Many such outlets are still thriving by knowing their
customers better and providing them with more
personalized service.
Current Characteristics of Retail
Industry
 Decline in Mom & Pop Stores
 Internet & E Commerce
 Repositioning of Departmental Stores
 Rise in Discount stores
 Category Killers
 Direct/Non Store Retailing
 Retailing in India.

 Retail is the new buzzword in India.

 The global Retail development Index has ranked India first,

among the top 30 emerging markets in the world.

 It is believed that India has the potential to deliver the fastest

growth over the next 50 years.

 While barter would be considered to be oldest form of retail

trade, since independence , retail in India has evolved to
support the unique needs of country, given its size and
complexity
 Second largest sector after Agriculture. Contributes about 10 –
11 % of the GDP

 The estimated size of the organized retail industry in India is

Rs. 16,000 crores. This is 2 % of the total estimated retail
trade.
 Indian Retail trade increased from Rs. 2200 billion in 2000 to
Rs 3300 billion by the year 2005

 India's first true shopping mall – complete with food courts,

recreation facilities and large car parking space – was
inaugurated as lately as in 1999 in Mumbai. (this mall is called
"Crossroads").
 The Evolution of Retail in India

 Retail in India has evolved to support the unique needs of our

country, given its size and complexity Haats, Mandis and Melas have
always been a part of the Indian landscape. They still continue to be
present in most parts of the country and form an essential part of
life and trade in Various areas.

 The PDS (Public Distribution System) would easily as the

single largest retail chain existing in the country. the evolution of the
PDS of Grains in India has its origin in the “rationing system”
introduced by the British during world war II
 The system was started in 1939 in Bombay and subsequently
extended to other cities and towns. the system was abolished
post war but however attaining independence India was forced
to reintroduce it in 1950.

 There was rapid increase in the ration shops ( being increasingly

called the Fair Price Shop or FPSs)

 The Canteen Stores Department and the Post Offices

in India are also among the largest network of outlets in the
country reaching population across the country.
 The Khadi & Village industries (KVIC) was also set up post
independence. The cooperative movement was again championed by the
government.

India's Largest retail Chains:

 PDS: 463,000

 Post offices: 160,000

 KVIC: 7,000

 CSD Stores:3,400

(source business world marketing White book 2005)

 In the past decade, the Indian marketplace has transformed
dramatically. However from the 1950,s to the 80,s, investment
in various industries was limited due to low purchasing power
in the hands of the consumer and the government’s policies
favoring the small scale sector.

 The first attempts at organized retailing were noticed in the

textiles sector. One of the pioneers in this field was Raymond’s
which set up stores to retail fabric.
 Raymond’s distribution network today comprises 20,000
retailers and over 256 exclusive showrooms in over 120 cities
of the country

 Other textile manufacturing who set up their own retail chains

wee Reliance- which set up Vimal showrooms and Garden Silk
Mills, which set up Garden Vareli showrooms.
 The Evolution of retail in India

Established Emerging
Traditional formats Formats
Formats Kirana shops Exclusive retail outlets
Itinerant Salesman Convenience/ Hypermarket
Haats department stores Internal retail
Melas PDS/ Malls / Specialty Malls
Mandis etc. fair price shops Multiplexes
Pan/ Beedi shops Fast food outlets
Service galleries
 Drivers of Retail change in India

major drivers :
 Changing Income Profiles: Steady economic growth fuelled
the increase in disposable income in India. The average
middle class family's disposable income rose by more than
20% between 1999-2003.
 Diminishing difference between Rural and urban India: Rural
India accounts for over 75% of India population and this in
itself offers a tremendous opportunity for generating volume
driven growth. Tax benefit. In year 2002-03 LIC sold 50% of
its policies in rural India. Same BSNL also sold its 50%
connection in small towns .
 Changes in Consumption patterns: Occupational changes
and expansion of media have caused a significant change in
the way the consumer lives and spends his money.
o The changes in income brought about changes in the
aspirations and the spending patterns of the consumers.
the buying basket of the consumer changed

t The emergence of a young Earning India : Nearly 70% of

the Indian population is below the age of 34. taking
advantages of employment opportunity in the booming
service sector these young Indians are redefining service
and consumption patterns
Prominent sector in Indian retail

1. Clothing, textiles and fashion Accessories:

2. Food & food Services:
3. Consumer Durables:
4. Books & Music:
Other emerging sectors
 Jewellery retail
 Footwear retail
 Time Wear Retail
 Fuel Retail/ petro retail
Indian versus Global Retailing
Scenario.
Basis Indian Retailing Global Retailing
Nature of Retailing India is mostly Unorganized. At Retail World globally is well
Operation present only 2% to 4% accounts for organized organized and in most developed
sectors. countries is control by major.
Scope of Package good manufacturer control all retail In organized retail industry retailer
Influence business to a large extent. But the scenario is have an upper hand in negotiating
changing, even with the limited growth of deals with manufacturers.
organized retail in India.
Technology Indians retailers lag behind global retailers in Global retailers resorts employ
use of technology. Though, retailers like technology in larger scope than
shopper stop, Pantaloons are employing Indian retailers.
technology in their operations.
Formats Indian retail industry is concentrated around A large no. of retail formats are
few formats. Only 2% of retail industry has available.
adopted modern retail formats of department
stores and supermarkets.
Retail Space Real estate space available for organized retail In west large store formats are
is getting saturated in Metros and in tier 1 located in outskirts of cities or the
cities in India & is now looking at tier 2 cities. suburbs. The enables them to have
large space.
Basis Indian Retailing Global Retailing

Infrastructure Maximum infrastructure problems faced Minimum infrastructure problems faced

by retailers in International market. by retailers in International market.

Manpower A lack of trained manpower hampers Trained manpower available aiding retail
development in industry. boom.

Products/Bran Indian retail industry usually has brands of Global retailers resort to keep their own
ds Assortment well known Indian and foreign brands. This leads to increase
companies. Private label brands are competition with better known
negligent or absent. company brands.
 Retail Location Strategies &
Decisions

ISB&M Retail Management

Why Location is Important?
There are three most important aspects in Retailing – location, location
& location.
Locating the retail store in the right place was considered to be
adequate for success.
It is a important part of the retail strategy as it conveys a fair amount
of image.
It influences the merchandise mix & interior layout of the store.
It is difficult to change the location once the store comes into
existence.
Change of location may result in loss of customer & employees.

ISB&M Retail Management

Types of Retail Location
The choice of the location of the store depends on the target audience & kind
of merchandise to be sold.
Types:
Freestanding/Isolated store
Store located along major traffic artery
No competitive retailers around
Rents are usually low
Advertising cost are high
Customers may not prefer to travel long distance to visit only one store
Part of a business district
A business district (primary, secondary or neighborhood) is a place of commerce in
the city
Rent is high; parking is cumbersome
It has good accessibility in terms of transport
Customers are more

ISB&M Retail Management

Types of Retail Location contd..
Types:
Part of a shopping centre
Shopping centre - A group of retail & other commercial establishments that is
planned, developed, owned & managed as single property
Parking is available
Basic configuration – mall or strip centre with walkway
Ideally enclosed & climate control

ISB&M Retail Management

Steps involved in choosing a retail
location
1. Identify the market in which to locate the store
2. Evaluate the demand & supply within that market i.e., determine the market potential
1. Demographic features of the population
2. The characteristics of the households in the area
3. Competition & compatibility
4. Laws & regulations
5. Trade area analysis
3. Identify the most attractive sites
1. Traffic
2. Accessibility of the market
3. The no. & types of stores in the area
4. Amenities available
5. To buy or to lease
6. The product mix offered
4. Select the best site available
ISB&M Retail Management
The Spread of Organized Retail in
India

Jaipur
Pune
Bhopal
Mumbai Chandigarh
Bhubaneshwar
Bangalore Hyderabad
Delhi
Chennai
Indore Nagpur
Kolkata
Gurgaon Udaipur
Noida

ISB&M Retail Management

The Retail Value Chain

Support Functions

Third Party Retail Customer Customers

Suppliers
Logistics Operations Mgmt.

Systems

ISB&M Retail Management

Retail Marketing Mix

The Retail
Marketing
Mix

ISB&M Retail Management

The Retail Image Factors

People

Pricing

Associations
Presentation The Adidas Retail Store
CA, USA

Brand
Retail
Customer

Promotion
Service

Store
Image

Product / Place /
Merchandise Location
features

Shopping
Experience

ISB&M Retail Management

The Retail Communication Mix

Sales
Promotion

Public
Advertising
Relations
Retail
Communication
Mix

Personal Direct
Selling Marketing

ISB&M Retail Management

Retail Selling Process

Acquiring Product/Merchandise Knowledge

Studying the Customer

Approaching the Customer

Presenting the Merchandise

Overcoming Resistance

Suggestive Selling

Closing the Sale

ISB&M Retail Management

 Servicing the Retail Customer

ISB&M Retail Management

Measuring Gaps in Service

ISB&M Retail Management

 Retail Store Design & Visual
Merchandising

ISB&M Retail Management

Retail Store Design
Retail stores needs to be designed to be more competitive, the retailer first needs to
catch the customer‘s eye & then, to draw his attention away from other stores.
The basic principles of store design require that the image being created in tune with
the merchandise, the advertising & the service offered by the store.
Retail design is primarily a specialized practice of architecture and interior design,
however it also incorporates elements of interior decoration, graphic design,
ergonomics, and advertising.

Store
Image

Store
Store Theme
Atmosphere

Elements of the Store Environment

ISB&M Retail Management

Why Retail Store Design is Important?

The store design & layout tells a customer what the store is all about.

The creates the image of the retail store in the minds of the customer.

This image is the starting point of all marketing efforts.

It make the store simple to navigate.

It creates the sense to belongingness, responsibility, security, & pleasure in

shopping.

ISB&M Retail Management

Elements of Retail Design

Frontage & Parking

Entrance Location

Building Location
Arch.

Access
Safety Store Design

Store
Theme

Target Merchandise
Customer Mix

ISB&M Retail Management