Chapter One
The Nature of Retailing
Outline
1.1. Concepts and definition of Retailing
1.2. Functions of Retailing
1.3. Operating characteristics distinguishing
retailers from other members of the channel
team
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1.1. Concepts and Definition of Retailing
• Retailing is defined as a set of activities involved in
selling goods or services directly to final consumers for
their personal or family use, none business use.
• It is responsible for matching individual demands of the
consumer with supplies of all the manufacturers.
• Retail Management or retailing involves those
companies engaged primarily in buying goods from
manufacturers or wholesalers in order to resell these
products to the consumer on their Retail stores or shops.
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 Retail is the sale of goods or services directly to the enduser for consumption.
• Retail comprises the final step in the supply chain.
• In retail, the goods that are sold are not meant for further
sales or business purposes.
• Retailers are usually not involved in the manufacture of
goods and services.
• They procure the goods from a supplier and are
responsible for selling the same to the end-user.
• Retailing encompasses selling through the mail, the
Internet, door- to-door visits—any channel that could be
used to approach the consumer.
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Why has retailing become such a popular method of
conducting business?
i.e., a vibrant retailing sector offers:
 an easy access to a variety of products
 freedom of choice and
 high levels of customer service
Retailers perform specific activities, such as:
• anticipating customers’ wants,
• developing assortments of products,
• acquiring market information, and financing.
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 Retailer is any business entity who is responsible for the
final sale of goods to the consumer.
 Retailers sell small or even single quantities to the
general public.
 Any organization selling to final consumers whether it is
a manufacturer, wholesaler or retailer is doing retailing.
 When manufacturers like Dell Computers sell directly to
the consumer, they too become retailers.
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The ease of entry into retail business results in
fierce competition. The arena of competition
includes:
 Price
 convenience of location,
 selection and display of merchandise,
 attractiveness of the establishment, and
reputation.
• To survive in the retailing business, any enterprise
must perform its primary role of catering to
customers.
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1.1.1Trends in Retailing
1. New retail forms and combinations.
2. Growth of intertype competition.
3. Growth of giant retailers.
4. Growing investment in technology.
5. Global presence of major retailers.
6. Selling an experience, not just goods.
7. Competition between store based and non-store
based retailing.
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1.1.2 Reasons for Studying Retailing
Retailing is an important field to study because of the
following importance
1. Sales to Ultimate consumers of the products
• Manufacturer can interact with his consumers through
retailer and know about their views.
2. A convenient form of selling quantity
• The goods are bought by the retailer in large quantities
divided into small quantities and sold to consumers as
per their requirements.
3. Convenient Place and Location
• Retailer stores are generally set up at locations which
are convenient for consumers to reach.
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4. Retail businesses contribute to the economy
• In many countries, the retail business is one of the
biggest contributors to the Gross
Domestic Product (GDP).
5. Retail dominates the supply chain
 Retailers play the role of a connecting link between a
manufacturer and final consumers.
 Retailers collect an assortment from various sources,
buy in large quantity, and sell in small amounts.
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Retailer’s Role in the Sorting Process
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• 6. Retail is interdisciplinary
• Retailing has developed from a number of interrelated
disciplines such as economics, geography,
management, and marketing.
7. Retailers provide maximum employment
• At the present time, the retail world employs
maximum people.
8. Retailers rule the channel of distribution
 A retailer can make a decision for which brand to
stock in their stores and consumers buys products
stock provided by the retailers.
 Therefore, retailers play an important role in shaping
the demands of consumers.
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1.1.3. The Retailing Concept
• RM uses a customer-centered, chain wide approach to
strategy development and implementation, is valued
driven, and has clear goals.
• For improved retail strategy, four principles of retailing
concept should be applied by retailers
1. Customer orientation: the retailer determines the
needs of its customers and endeavors to satisfy needs
2. Coordinated effort: the retailer integrates all plans
and activities to maximize efficiency.
3. Value driven: the retailer offers good value to
customers
4. Goal orientation: the retailer sets goals and then uses
its strategy to attain them
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1.1.4 Retailing Formats:
There are different types of retailing formats
1. Malls: The largest form of organized retailing today
located mainly in metro cities.
2. Specialty Stores: these are focusing on specific
market segments and have established themselves
strongly in their sectors.
3. Discount Stores: offer discounts on the Material
Requirements Planning (MRP) through selling in bulk
reaching economies of scale or excess stock left over
at the season
4. Department Stores: large stores which are catering to
a variety of consumer needs further classified into
localized departments such as clothing, toys, home,
groceries
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5. .Hyper marts/ Supermarkets:
• Large self-service outlets, catering to varied shopper
needs are termed as Supermarkets.
6. Convenience Stores:
• These are relatively small stores located near
residential areas.
• They stock a limited range of high-turnover
convenience products
7. Multi Brand outlets (MBO’s):
• Offer several brands across a single product
category.
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Types of Retailing
1. Store Retailing
2. Non-store Retailing
3. Corporate Retailing
1. Types of store retailing:
the items are sold at physical stores in this case. It includes
• Department store,
• Specialty store,
• Supermarket,
• Convenience store,
• Catalogue showroom,
• Drug store, super store,
• Discount store, and extreme value store.
Department store is the best form of store retailing, to attract a
number of customers.
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2. Non-store Retailing:
• when the selling of merchandise takes place outside the conventional
shops or stores, it is termed as non-store retailing.
• It is classified as under:
 Direct marketing: consumer direct channels are employed by the
company to reach and deliver products to the customers.
• It includes direct mail marketing, telemarketing, online shopping.
 Direct selling:
• involves door to door selling or at home sales parties.
• The sales person of the company visit the home of the host.
 Automatic vending:
• Vending machines are primarily found in offices, factories, gasoline
stations, large retail stores, restaurants etc.
• offer a variety of products including impulse goods such as coffee,
candy, newspaper, soft drinks etc.
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3. Corporate Retailing
• CR is done through retail structures which are more
efficient and have a larger reach.
• It includes retail organizations such as
 Corporate chain store,
 Franchises,
 Consumer cooperatives and
 Merchandising conglomerates.
Corporate retailing focuses on retailing goods of only
the parent or partner brand
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Types of retailers
Retailers are classified by:
1. Amount of service
2. Product lines
3. Relative prices
4. Organizational approach
1. Amount of service
 Retailers can position themselves as offering one of the
three levels of following services.
 Self-service retailers: customers are willing to self- serve to
save money. E.g., Discount Stores
 Limited service retailers: most Department Stores
 Full service retailers: sales person assist customers in
every aspect of shopping experience.
E.g., Specialty Stores.
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2. Retailers are classified by product line
Specialty store: narrow product lines with deep
assortments
Department Stores: wide variety of product
lines
Convenience Stores: limited line
Superstores: food, nonfood, and services
Category killers: giant specialty stores
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3. Retailers are classified by Relative prices
 Discount Stores: low margins are offset by high volume
 Off-price retailers: independent Off-price retailers
4. Retailers are classified by Organizational approach
 Corporate chain stores: commonly owned/ controlled
 Voluntary chains: wholesaler- sponsored groups of
independent retailers
 Retailer cooperatives: groups of independent retailers
who buy in bulk
 Franchise organizations: licensed retailers
 Merchandising conglomerates: diversified retailing lines
and forms under central ownership
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1.2. Functions of Retailing
What are the Functions of a Retailers?
Retailers perform the following functions
1. Buying: A retailer buys a wide variety of goods from
different wholesalers after estimating customer demand.
2. Storage: A retailer maintains a ready stock of goods
and displays them in his shop.
3. Selling:
• The retailer sells goods in small quantities according to
the demand and choice of consumers.
4. Grading and Packing: The retailer grades and packs
goods in small lots for the convenience of consumers.
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5. Risk-bearing:
• He bears the risk of loss due to fire, theft, spoilage, price
fluctuations for stock of goods.
6. Transportation: Retailers often carry goods from
wholesalers and manufacturers to their shops.
7. Financing:
• Some retailers grant credit to customers and provide the
facility of return or exchange of goods.
8. Sales promotion:
• A retailer carries out publicity through shop decoration,
window display, persuades consumers to buy goods through
personal selling.
9. Information:
• Providing Information to the customers about the products on
sale.
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1.3. Operating Characteristics Of Retailing
• Retailing can be differentiated from wholesaling or
manufacturing because of its certain distinct
characteristics which include:
Direct contact with the customer –
• Retailing involves direct contact with the end
customer.
Relationship with the customers –
• Retailers form a bond with the customers
Stock small quantities of goods –
Retailers usually stock small quantities of goods
compared to manufacturers and wholesalers.
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Stock goods of different brands –
 Retailers usually stock different goods of different
brands according to the demand in the market.
• Customers’ contact with the company –
• Retailers act as the representatives of the company to
the end customers.
Have a limited shelf space –
 Retail stores usually have very limited shelf space and
only stock goods which have good demand.
Sells the goods at maximum prices –
 witnesses the maximum price of the product because
they sale the products directly to the end customers.
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Retail Management Skills
• The need for specialized skills is increasingly felt in
the areas of:
 Strategic management - strategizing, targeting and
positioning, marketing and site selection, among
others
 Merchandise management - Vendor selection,
inventory management, pricing and so on
 Store management - Layout, display, customer
relationship, inventory management, etc.
 Administrative Management - Human resources,
finance, marketing.
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The End
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