Retail Marketing Management

Unit: 1 Introduction

By

Mr. Navin Raj Saroj M.B.A. (Marketing)

Concept of Retailing The distribution of products begins with the producer and ends at the ultimate consumer. Between the producer and consumer there is a middle man – who is retailer.

Retail is the medium who sales goods and services from Individuals or business to the end-user. Retailers are the part of an integrated system called the supply chain.

The term 'retail' is derived from the French word retailer which means 'to cut a piece off or to break bulk'. In simple terms, it implies a first-hand transaction with the customer. It can also be defined as the timely delivery of goods and services demanded by consumers at prices that are competitive and affordable.

Retail Definition

Any Business that directs its marketing efforts towards satisfying the final consumer based upon the organization of selling goods and services as a means of distribution

Distribution Channels

• MANUFACTURER

• DISTRIBUTOR

• WHOLESALER

• RETAILER

• END USER CONSUMER)

Retail Industry

The Retail Industry is the sector of economy which is consisted of individuals, stores, commercial complexes, agencies, companies, and organizations, etc., involved in the business of selling or merchandizing diverse finished products or goods to the end-user consumers directly and indirectly. Goods and products of the retail industry or sector are the finished final objects/products of all sectors of commerce and economy of a country.

Characteristics of Retail

• Considered as last link in the chain of distribution,

• Purchases goods in large quantities from wholesaler and sell in small quantity to the consumer,

• Retailer offer – selection and provide the choice,

• Set up business trade with general public,

• Retailer normally charge higher unit price (MRP).

• Develops personal contact with consumer,

Retail Industry The Retail Industry is the sector of economy which is consisted of individuals, stores, commercial complexes, agencies, companies, and organizations, etc., involved in the business of selling or merchandizing diverse finished products or goods to the end-user consumers directly and indirectly. Goods and products of the retail industry or sector are the finished final objects/products of all sectors of commerce and economy of a country.

Factors Involve for Growing Importance of Retail Sector

Large and increasing contribution to GDP

Economic importance more visible

Major Employer

Retailers as Gatekeepers

Retailers diversifying their activities

Organization growing on an international scale

Size of Operations allowing for supply chain control

Blurring of areas of retail to include wider area of business activity

Division of Retail Industry – Organised and Unorganised Retailing

Organised Retailing

• Organised retailing refers to trading activities undertaken by licensed retailers, that is, those who are registered for sales tax, income tax, etc. These include the corporate-backed hypermarkets and retail chains, and also the privately owned large retail businesses.

Unorganised Retailing

• Unorganised retailing, on the other hand, refers to the traditional formats of low-cost retailing, for example, the local kirana shops, owner manned general stores, paan/beedi shops, convenience stores, Nanglo, hand cart and pavement vendors, etc.

Organized Retail

Organized Retail Cont.

Unorganized Retail

Unorganized Retail

Retail management saves time and ensures the customers easily locate their desired merchandise and return home satisfied.

An effective management avoids unnecessary chaos at the store.

Big Retailers in Nepal

Major Retailers in India

International Retailers

IKEA Swedish Furniture

Types of Retailers

• Over time, different

types of retailers

have emerged and

prospered because

they have attracted

and maintained a

significant customer

base.

Retailers In Nepal

• Mom-and-pop stores (Kirana Pasal/General store):

They are family owned business catering to small sections; they are individually handled retail outlets and have a personal touch.

Retailers In Nepal

• Departmental stores:

These are general retail merchandisers offering quality products and services.

Retailers in Nepal

• Shopping malls:

• The biggest form of retail in Nepal, malls offers customers a mix of all types of products and services including entertainment and food under a single roof.

Retailers in Nepal

• E-traders/ Retailers: • Are retailers

providing online buying and selling of products and services.

Retailers in Nepal

• Discount stores:

• These are factory outlets that give discount on the MRP.

Retailers in Nepal

• Vending:

• It is a relatively new entry, in the retail sector. Here beverages, snacks and other small items can be bought via vending machine.

Retailers in Nepal

• Category killers:

• Small specialty stores that offer a variety of categories. They are known as category killers as they focus on specific categories, such as electronics and sporting goods. E.g. Selection Centre Sports, Book Store

Retailers in Nepal • Specialty stores:

• These are retail

chains dealing in specific categories and provide deep assortment. Nepal Book Depot and Ekta Books are a couple of examples.

The Importance of Retail Industry

Retailing is not only an integral part of our economic structure but also shapes and is shaped by our way of life. The power of individual retail organization is growing; they are now comparable with and even bigger than, many manufacturers, which is an indication of the growing dominance of retailers with in the supply chain.

Retailers are often referred to as middleman or intermediaries. The key objective for any successful channels is to ensure availability of the right product in the right quantity, at the right time via the right channel.

EMERGING TRENDS IN RETAIL

Retail improving through Management Systems – faster turnover, better profitability, fast changing customer preferences for goods and services.

“BETTER CUSTOMER CARE”

Driven by changing lifestyles, strong income growth and favorable demographic patterns, Nepalese retail is expanding at a rapid pace.

Led by the rising purchasing power, changing consumption patterns, increased access to information and communication technology and improving infrastructure, rural retail market is also growing up.

Global Retail scenario

• In the other parts of the world, retailing is better organized than what it is in Nepal.

• The US retail Industry is the world largest retail industry and its still growing.

• In USA most part of retailing is accounted by organized sectors.

Global Retail scenario

• The USA dominates the world retail market and accounts for Higher % of the global retailing group.

• The organized retailing has gained a great deal of momentum in China in the past few years.

• The developing countries are also making an effort in the industry but organized retailing is mainly dominated by the developed countries like USA.

Nepal’s Retail Scenario

• Most of the retailing in Nepal is unorganized. Most of the organized retailing in the country has just started recently, and has been concentrated mainly in the cities.

• Today convenience has become a priority for the Nepali consumers and they want everything under one roof so that they have an easy accessibility.

Nepal’s Retail Scenario

• So the organized retailing has a very big opportunity to set itself in the Nepali markets.

• The two main factors which drives organized retailing in Nepal are low prices and the benefits that are offered by them.

THE DYNAMIC NATURE OF RETAIL CHANGE

• Retailing, however judged, is dynamic. Retail Environment is changing, changing means breaking with past:

Rewriting the Rules (Factors of Change):

Schumpeter’s theory: how to dethroning the industry leader

1. Be Aggressive,

2. Use a Complex repertoire of actions,

3. Be Unpredictable, and

4. Delay the leader’s reaction time

THE DYNAMIC NATURE OF RETAIL CHANGE

• Theories of Retail Institutional Change classified into three groups:-

1. Environmental Theory

2. Cyclical Theory and

3. Conflict Theory

Environmental Theory A whole array of factors shape the nature of retail environments:

Factors of Economic, Social, Political, Regulatory, cultural and demographic nature all imping upon the environment in which retailers operate.

Environmental Theories have taken a “Darwinian” approach and suggest that only retailers with the most appropriate organizational structure and formats will survive (Gist, 1968; Davidson et al. 1983; Brown 1987)

The major Environmental Factors

1. Changes related to the consumer,

2. Changes in technology,

3. Changes in Competition

Cyclical Theory Cont. The Wheel of Retailing Wheel represents three phases through which some types of

Retailers pass : 1. Entry: trading up and vulnerability; Retailers attract customers –

low price, low service, low rent location, limited product mix 2. Expand market – More expensive merchandise, More services,

open More convenient locations. Trading up process increases costs & price of their merchandise, creating opportunities for new low price retailers to enter e.g. Discount stores & category specialists

3. Some Retailers don’t begin as low price, low service entrants, e.g. Upscale fashion specialty stores.

Cyclical Theory Cont. The retail Accordion Theory

Retailer initially enter a market as a general retailer; with experience they focus down on particular product sectors and/or consumer groups. Over time they begin to diversify their offer in order to grow, but again will revert to specialization.

The Retail Life Cycle Theory

The theory suggests that retail developments pass through stages. At birth (termed the embryonic stages in the context of industry life cycles), This is followed by a time of rapid growth as efficiency and experience increase. Eventually growth will level off into the mature stage due to increased costs and competition and reduced efficiencies. In a mature market the competition remains intense, growth slows and profits begin to fall. A continued decreased in market share and profitability will eventually cause the development to decline.

Cyclical Theory Cont.

Conflict Theory

Competition between retailers causes changes in the nature of the retail environment. The causes are driven by innovations. Brown (1987) states that a response to innovation follows a process of four stages:

• Retailers are in shock at the innovation,

• Retailers deny the threat by means of defensive retreat;

• Retailers then move into a stage of acknowledgement and assessment;

• Finally they (Retailers) develop a strategy of adaptation

The structure of retailing in the UK and Europe

• The balance of power has shifted from Manufacturers to the retailers,

• Traditional independent retailers and co-operatives has lost market share to multiple chain organizations,

• Markets have become increasingly consolidated and concentrated.

The strategic approach to retail marketing

Strategy to enter in retail business:

Cost Oriented :-

Demand Oriented :-

Nepal’s Retail Future Cont.

• Nepalese retail business is getting more and more organized to capture the potential of the markets.

• Mega Malls

• Multiplexes

• Large and Small super markets

• Hypermarkets

• Departmental stores are a few formats which flourishing in the both big and small regional markets

As the major cities have made the present retail scenario pleasant, the future of the Nepalese Retailing Industry lies in the rural regions. Catering to these consumers will bring tremendous business to brands from every sector. However as the market expands many organization entering Nepal will have to be more cautious with their strategic plans. To tap into the psyche of consumers with different like and dislikes and differing budgets a company has to be well prepared and highly flexible with their product and services.

Nepal’s Retail Future