Retail
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INTRODUCTION TO RETAILING
Retailing is not like rocket science. It is an industry you all understand because you have interacted with it for so many years.
Why are retailers necessary?
Consumer perspective:
Narrow the choice. Retailers search the market and provide the best selection
Breaks bulk
Stores goods so consumers do not have to stock up
Convenient and pleasant ambiance
Services – alterations etc.
Manufacturers perspective
Takes inventory risks
How would we define retail as an industry ?
Retailing is a service Industry :
Compare it with a hotel . You can have 1 star hotels and 5 star hotels. A hotel sells rooms and meals , a store sells clothes / FMCG products etc. .Both are required . 1 star hotels will command a room rent of Rs 500/- , 5 start hotels will command a room rent of Rs 5,000/- .
Retailing is an entertainment industry : Take the example of PVR .
Peculiarities of the Fashion Industry
Psychological obsolescence – presents both an opportunity and a threat . Opportunity since it gives people more reason to buy, threat because it makes merchandising and buying more difficult and subjective .
RETAIL : STORE FORMATS
By Ownership
Independents : Single stores , or upto three stores owned by a common promoter .
Presently under threat from Department stores .
Advantages
Personalized attention
Quick decision making
Disadvantages
Limited by capacity of the owner
Unable to hire the best management
Lack of economies of scale
Lower advertising budget
Chain Stores : If more than three stores owned by the same management and promoted under the same name .
Advantages and disadvantages , inverse of that for independents
Franchise :
This is an agreement between two parties
Franchisor
Provides the brand
Provides the product/ stock
Dictates the store design
Advertising
Gives a minimum guarantee ( in India – internationally brands command minimum guarantee , but in India because of space constraints retailers have had a more powerful negotiating position )
Franchisee
Provides the space
Spends on interiors
Administers the store
Buys the stock / provides guarantee for goods on consignment
Concession / shop-in-shop :
Operates like a franchise or an independent store but is located within a store e.g. Royal Sports at Shoppers Stop.
By Product
Department stores : Multi department / multi product/ multi brand store
Mass merchandisers : Multi department / multi product / retailers own brand
Specialty stores: Specialize in a category
Specialty department store: Specialize in a single line but may have more than one department. Bulk of business comes from the main line .
Single line specialty store: Specialize in a single line e.g. clothing
Limited line specialty store: Specialize further e.g. mens wear
Super specialty store: Super specialization e.g. Big and tall, T-shirt shop
Off Price Retailers
Warehouse stores
Large multi department stores housed in warehouse like buildings located in non-prime areas (cheap real estate). Stack displays to optimize space (sometimes all the way to the ceiling) , minimal service e.g. Wal- mart .
Category killers
Warehouse stores that specialize in a particular category e.g. Toys R Us.
Price Clubs
Membership based retailers . You need to buy wholesale packs and you get wholesale prices. Also called Cash n carry e.g. Metro . Giant is a variation of the same . Dont normally carry a wide line of apparel.
EDLP stores
Where goods are priced low everyday . Sears and JC Penny set this trend . When competition came they discounted and realized sales are maintained but not profits ( the situation Ebony and Big Jos find themselves in today ) . So they stopped discounting and changed strategy to EDLP.
Discount stores
Stores ( e.g. Marshalls , USA ) that buy branded merchandise at a discount – end of season , broken stock , slow selling styles . Located off prime real estate. Basic interiors . Stacked by size . Normally one season behind the market in terms of fashion.
Factory Outlets
Started at factories to sell seconds. Today