RETAIL MANAGEMENT

Chapter - 2
RETAIL ORGANIZATION
The changing structure of retailing
• All dynamic developments in retailing (department stores,
warehouse clubs, and hypermarkets) are responses to a changing
environment
• Changing customer demand, new technologies, intense competition,
and social change create new opportunities even as they shake up
existing business
• The Internet and web technologies have itself created a myriad of
opportunities for web based business model of retailing
• This has created competition for the retailer in order to maintain
and grow its share of market and compete within its band of
retailers
• For e.g.: Bharat Petroleum - Making A Difference through Innovative
Retailing
Theories of structural change in
retailing
Theories of structural change in
retailing
Retailing has always been a dynamic industry. There are certain
theories of how firms evolve and change the industry in the
process. They are:
• The wheel of retailing
• The dialectic process
• Natural selection
The wheel of retailing
It was proposed by Malcomb McNair at Harvard University.
It is basically a theory of cyclical or circular development.
The wheel of retailing concept describes how retail
institutions transform during their evolutionary life cycles.
The wheel of retailing
1. New retailers often enter the market place with
low prices, margins, and status. The low prices
are usually the result of some innovative cost-
cutting procedures and soon attract competitors.

2. 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.
The wheel of retailing
3. 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.

4. By this time newer competitors as low price, low margin,

low status emerge and these competitors too follow the
same evolutionary process.

5. The wheel keeps on turning and department stories,

supermarkets, and mass merchandise went through this
cycles.
The wheel of retailing
The wheel of retailing
The wheel of retailing
The wheel of retailing

Example?
The dialectic process
Another theory explaining the changes that take place in the
retail institutions is the Dialectic process or ‘melting pot’ theory.
According to this theory, two institutional forms with different
advantages modify their formats till they develop a format that
combines the advantages of both formats
This second theory holds that retailing evolves through a
dialectic process- the blending of two opposite store types
into a superior form. For example- Fabindia and Nalli offer
both a wide array of customer services and a broad
assortment of specialized merchandise.
The dialectic process
Natural selection
According to this theory, retail stores evolve to meet
changes in the micro-environment. The retailers that
successfully adapt to
technological, social, demographic, economic, and political
changes are most likely to grow and prosper.
Classification of retail units

• Bases for classification of retail units

• Nature of ownership
• Operational structure
• Length and depth of merchandise
• Nature of service
• Types of pricing policy
• Types of retail location
• Method of customer interaction
 Merchandise Offering
Variety (breadth of merchandise): wide vs. narrow
- The number of merchandise categories

Assortment (depth of merchandise): deep vs. shallow

-the number of items in a category (SKUs)
Retailers classified on the basis of
ownership
• Sole proprietorship
• Partnership
• Joint venture
• Limited liability company (public and private)
Retailer’s classification on the basis of
operational structure
 Independent retail unit
 Retail Chain
 Franchise
 Size and structural arrangements in franchising:
1. Manufacturer-retailer
2. Wholesaler-retailer franchise
3. Service sponsor-retailer
• Leased departments
 Co-operatives
New areas
• Leased department or Shop-in-shop
• Co-operative outlets
• Largest consumer cooperative society
• Major initiatives
• Benefits To Consumers
• Target market
• Revised positioning
Types of retail location

• Retailers at freestanding locations

• Retailers in business-associated locations
• Retailers in specialized markets
• Retailers at airports
 Variety of merchandise mix
• Departmental stores
For e.g: Chen One

Discount Stores
For e.g.: Best Price, 7th avenue, Walmart, Target, No Frills

• Specialty Stores
For e.g.: Footware - Specialty Store
Khadder- Khadi Specialty

Hypermarkets
For e.g. : Hyperstar, Cosmo, Coscto
Methods of customer interaction
• Retail transactions are carried out through face-to-face
interaction between retailers and customers in the case of
retail stores.
• There are certain methods:
• Non-store retailers
• Electronic retailing like Internet and Mobile Association of
India
Catalogue and direct mail retailing

 Factors for the success of catalogue retailing:

- Convenience: customers can shop when it is convenient for them
in accordance to their schedule
- Time saving: one save resources on account of time and
travelling cost and parking problems
- Information: relevant product information is available in detail
- No time limits: no undue pressure to buy unlike as in
retail store shopping
Direct selling
Person-to-person selling:

- Party-plan or group presentations

- Multilevel network
 Television shopping
 Television shopping is retail format where existing and
prospective customers watch a TV programme demonstrating a
product and then place an order for the same by telephone, e-mail
or Internet
 Three types of television shopping: cable channels meant for
shopping, infomercials, and direct-response advertising shown on
TV
 Vending machine retailing
 A form of non-store retailing where products or services are placed
in a machine and are dispensed to customers when they deposit
cash or use plastic money (credit or debit card)
 Vending machines vending machines offer consumers greater
convenience 24 hours a day, and have replaced many services
formally requiring a human interface