USN 1 P E
PESIT Bangalore South Campus
Hosur road, 1km before Electronic City, Bengaluru -100
Department of Master of Business Management
Date 17/8/2015 Max Marks: 50
Subject & Code : Retail Management – 14MBAMM302 Section : A
Name of faculty: Ravi Urs Time : 11.30 AM – 1.00 PM
1. a Explain the terms retailing and retailer.
Retailing includes all the activities involved in selling goods or service to final consumers for personal, non-business use. A retailer or retail store is any business enterprise whose sales volume comes primarily from retailing. The word retail is derived from the French word retaillier, meaning 'to cut a piece of' or ' to break bulk'.
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A retailer may be defined as a “dealer or trader who sells goods in small quantities” or
“one who repeats or relates” b Explain dialectic process or melting pot theory.
Dialectic process or melting theory suggests that retail firms adapt mutually to the emerging competition and tend to adopt the plans and strategies of the opposition. This gives rise to a process where a successful retail ‘formula’ is adopted by many retailers without really finding out the key success factors.
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2. a What are the retail channels available for interacting with customers? Explain the skills needed by firms to effectively operate the channels of retailing.
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Retail units can be classified into two groups on the basis of the nature of interaction between retailers and customers:
Store retailers
Non-store retailers a) Store retailers
Retail transactions are carried out through face-to-face interaction between retailers and customers
They operate from fixed point-of-sale locations to attract a high volume of
MBA III

USN 1 P E
PESIT Bangalore South Campus
Hosur road, 1km before Electronic City, Bengaluru -100
Department of Master of Business Management walk-in customers
They have extensive displays of merchandise and use mass-media advertising to attract customers
Some retailers also provide after-sale services, such as installations, repair and alterations
Skills needed:
Good merchandising ability
Building good relationship with customers b) Non-store retailers
These retailers sell to the customers in the absence of a retail store.
They can be: i.
Electronic retailing ii.
Catalogue and Direct mail retailing iii.
Direct selling iv.
Television shopping v.
Vending machine retailing i.
Electronic retailing
Here the retailer will build a website where the customers can search for the products they are interested in buying, compare the brands, and make the purchase online. It provides an opportunity for customers to select from a wider range of products and without moving out of their homes. It widens the market to be served and provides national and
MBA III

USN 1 P E
PESIT Bangalore South Campus
Hosur road, 1km before Electronic City, Bengaluru -100
Department of Master of Business Management international presence.
Skills needed:
A distinctive brand
An integrated channel strategy (supply chain)
Optimal merchandise mix
An efficient distribution system
A provision for understanding and using consumer insights ii.
Catalogue and Direct mail retailing
Here the retailers communicate about their merchandise or service through a catalogue
They directly mail advertising material to their existing or potential customers with the objective of selling goods or services
Skills needed:
Convenience – customers can shop when it is convenient for them
Time saving – there is time saving and no travelling cost and no parking problems
Information – relevant product information is available in detail
No time limits – the ordering can be done at any time of the day iii.
Direct selling
It involves personal contact between retailer and customer
It also includes phone interactions between retailer and customer
It is highly interactive in nature and is suitable for selling products high on
MBA III

USN 1 P E
PESIT Bangalore South Campus
Hosur road, 1km before Electronic City, Bengaluru -100
Department of Master of Business Management information and search attributes
Skills needed:
Ability of the sales person to convince the customers to buy the product
On time delivery of product and proper service
Controlling the cost of selling iv.
Television shopping
In this format existing and prospective customers watch a TV program demonstrating products and then place order by telephone or e-mail
Skills needed:
Proper demonstration of the product
Giving proper contact details for customers to call
Selling products at a lesser cost v.
Vending machine retailing
Here the products are placed in a machine and dispensed to customers when they deposit cash or use credit card or debit card
Skills needed:
Ensuring the vending machine is always in proper working condition
Ensure availability of product in the machine
Selecting a suitable place to place the machine b Explain the emerging trends in retail management. a) Adoption of modern management practices
Latest management practices like Just-in-time, lean management, flat
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MBA III

USN 1 P E
PESIT Bangalore South Campus
Hosur road, 1km before Electronic City, Bengaluru -100
Department of Master of Business Management organizational structures, employee empowerment, and large scale business are all being adopted by retail management
This helps in improving the overall efficiency and profitability of the retailer
It helps the retailer to raise money for their business
It attracts best talent towards retail business b) Growth of multi-chain retail stores
With the entry of big business houses like Reliance and Aditya Birla
Group into retail business, the multi-chain retail stores have started
This is a very important step in the growth of the retail industry as it has brought visibility to the sector
It has enabled the retailers to gain economies of scale and efficiency
It has provided job opportunity to large number of people c) Large format retailing
The modern retailer is interested in offering many products and services under one roof to the customer and this has led to creation of large format retailing
This also helps the retailers to get footfalls and reach economies of scale
Shopping, entertainment, games, promotions, are all offered under a single roof
This also helps in cross-selling of products d) Integrated and Dedicated Distribution System
The success of modern retail store will depend on its ability to create a dependable, cost effective, and high quality supply chain
Retailers are developing dedicated vendors when they have the ability to
MBA III

USN 1 P E
PESIT Bangalore South Campus
Hosur road, 1km before Electronic City, Bengaluru -100
Department of Master of Business Management place larger orders e)
This dedicated supply chain will ensure uninterrupted supply of products and also customized products with the preferred quality
The vendors are also well integrated with the retailers with inputs given to them about how to manage their productivity
Growth of private labels
The ability of the big retailers to attract the customers have given them an opportunity to create their own brands
Such brands created in-house by the retailers are called as ‘private brands’ or ‘private labels’
These brands are sold in the respective retails shops only
E.g. ‘Select’ brand from Reliance, ‘More’ brand from More
These private labels are being offered at a much lower price to the customers as compared to branded products
The retailers ensure that maximum in-house promotion of the private labels are done to attract the customers
The quality of the private labels also matches the branded products f) Customer relationship management and loyalty programs
The retail business is becoming very competitive
Customer retention and loyalty is becoming very important
Retailers are doing their best to create loyalty among their customers by offering them special benefits
Privileged information like special promotions and new offerings are communicated to loyal customers
Bonus points are given in purchase of items to promote revisits by the customers
MBA III

USN 1 P E
PESIT Bangalore South Campus
Hosur road, 1km before Electronic City, Bengaluru -100
Department of Master of Business Management
Customer’s birthdays and wedding anniversaries are stored and messages are sent during these days to develop customer loyalty g) Focus on layout and visual merchandising
Retailers are giving importance to layout to enable the customer to walk through the store and view all the products
This will improve business as it may lead to window shopping
3. a
The layout is also designed keeping in mind need of the customer like lighting and ambience
Visual merchandising is becoming important as a tool to increase income
Proper display of the products to the customers helps the customers to make informed decision and thus enhance his shopping experience
The clubbing of the products into various categories helps in visual merchandising and helps the customers to buy related products
Explain the various types of retail formats. What are their unique features? 10 a) Independent retail unit
An independent retailer owns one retail unit. Their growth can be attributed to long history of non-industry based economic growth, need to have low capital and licensing requirements.
Unique features:
Investment costs for leases, fixtures, workers and merchandise can be brought down
Decision-making is centralized and the levels of management are minimized
They have strong control over their strategies and usually the owneroperator is present on the premises b) Retail chain
MBA III

USN 1 P E
PESIT Bangalore South Campus
Hosur road, 1km before Electronic City, Bengaluru -100
Department of Master of Business Management
A chain retailer operates multiple outlets under common ownership
It usually engages in some level of centralized purchasing and decision making
Unique features:
They have bargaining power with suppliers due to their volume of purchase
They may have suppliers that make goods under the retailer’s brand
They can use computers for ordering, merchandise, taking inventory, forecasting and bookkeeping, thus increasing efficiency and reducing costs c) Franchising
It involves a contractual arrangement between a franchiser (which may be a manufacturer, a wholesaler, or a service sponsor) and a retail franchise, which allows the franchisee to conduct a given form of business under an establishment’s name and according to a given pattern of business
Unique features:
The franchisee pays an initial fees and a monthly percentage of gross sales in exchange for the exclusive rights to sell goods and services in a specified area
It helps small businesses to benefit by being part of large, multi-unit, chaintype retail institution
A national or global presence can be developed quickly and with less franchiser investment d) Shop-in-Shop
It refers to department in a retail store that is rented to an outside party
MBA III

USN 1 P E
PESIT Bangalore South Campus
Hosur road, 1km before Electronic City, Bengaluru -100
Department of Master of Business Management
Unique features:
The proprietor of a leased department is usually responsible for all aspects of its business and normally pays the store a percentage of sales as rent
In most cases these shop-in-shop are by the existing stores-based retailers to broaden the services they are offering, which require specialized skills e) Co-operative Outlets
They are generally owned and managed by co-operative societies
Unique features:
It is operated on a neither profit nor loss basis
Decisions are taken by a committee
Members of the co-operative are usually the largest customers f) Department stores
It is a large retail store organized into a number of departments, offering a broad variety and depth of merchandise, commonly part of a retail chain
Unique features:
Customers are free to move around the store
Various departments within the store have a designated selling space allocated to them
Salespeople to assist customers g) Discount stores
These retailers offer a broad variety of merchandise mix. There is limited or
MBA III

USN 1 P E
PESIT Bangalore South Campus
Hosur road, 1km before Electronic City, Bengaluru -100
Department of Master of Business Management no service. Merchandise are offered at low price.
Unique features:
There operate in low margins, have heavy advertising, low investment on fixtures and limited support from sales people
Operations and inventory management in stores have to be very efficient h) Speciality Stores
These types of stores stress on one or limited number of complementary product categories and extend a high level of service to their customers
Unique features:
These specialized retail operations provide expertise, economics of scale, bargain, and image to a particular store
This kind of retail format appeals to lifestyle product categories such as apparels, watches, home fashions, jewellery, etc. i) Supermarkets and Hypermarkets
A hypermarket is a very large unit characterized by large store size, low operating costs and margins, low prices and a comprehensive range of merchandise
Unique features:
Hypermarkets own spacious parking facility exclusively for their customers and employees j) Convenience stores
They provide a limited variety and assortment of merchandise at a
MBA III

USN 1 P E
PESIT Bangalore South Campus
Hosur road, 1km before Electronic City, Bengaluru -100
Department of Master of Business Management convenient location
Unique features: b
They enable consumers to make purchase quickly, without having to search through a large store or wait in long check-out line
Since they offer limited assortment and variety, they charge a higher price than supermarkets
What is FDI? What are its advantages and disadvantages?
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FDI is the process whereby the residents of one country (the source country) acquires ownership of assets for the purpose of controlling the production, distribution and other activities of a firm in another country (the host country)
Advantages of FDI

It contributes to the overall GDP growth of India
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It allows for a higher growth rate of organized retail
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It can lead to employment generation as many jobs would be created in the organized retail sector
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It would bring technology and other infrastructure to the retail sector and improve its productivity
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It would bring in competition to the retail sector
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The banks would be more willing to lend to this sector
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Since direct sourcing would be preferred by big retailers, it will directly benefit the farmers and other small scale manufacturers
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It helps to control inflation to an extent
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This will increase the quality of the items being sold
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It will improve the quality of life of employees who are employed in retail sector due to competition
MBA III

USN 1 P E
PESIT Bangalore South Campus
Hosur road, 1km before Electronic City, Bengaluru -100
Department of Master of Business Management
4.
Disadvantages of FDI
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There may be some small time retails who may be forced to close their operations
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If the farmers are not able to have a well defined contract, they may be taken advantage of
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The higher use of technology may make some jobs redundant thus creating unemployment
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There may be dominance by some big retailers leading to creation of a monopoly, thus providing an opportunity for exploitation
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It may lead to the Indian money leaving the shores as profits to the foreign companies
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Some people believe that it will lead to situations where majority of the work will be done by Indians, whereas the profit will accrue to the foreign companies
When Disney Corporation decided to create a retail outlet in Europe, the company spent a lot of time and money on its new project, Euro Disney, located in Paris. Disney was inspired by the success if it’s Tokyo Disneyland, which had generated, for Disney, 10 percent of the gate receipts and rides and 5 percent of all sales of food, drink and souvenirs without investing any money.
Disney created essentially the same agreement with Euro Disney regarding percentages. It had also invested $4.4 billion to retail 49 percent share.
During the first year of opening Euro Disney, a recession hit Europe. Profits from all properties
(especially the hotels) were nonexistent and, because of falling property values, the equity that was invested in the physical real estate fell in value. In addition, Disney failed to realize that
European customers were price conscious. It also didn’t count on the great demand for breakfast at its park restaurants and on European’s desire for wine with meals. To compound these problems, Disney had a harder time training some of its French employees in efficiency and customer satisfaction.
Disney had created an empire based on the needs and wants of its U.S. and Japanese consumers, and ignored the wants and needs of the European market. The result was disappointing sales at
MBA III

USN 1 P E
PESIT Bangalore South Campus
Hosur road, 1km before Electronic City, Bengaluru -100
Department of Master of Business Management
Euro Disney. Although tourists loved to frequent Euro Disney, they failed to spend as much money as did customers at other Disney parks. In 1998, Euro Disney was the most popular tourist attraction in France, with around 12.5 million visitors. a b
Questions:
What are the mistakes done by Disney in opening and running Euro Disney?

Taking the inspiration from Tokyo Disneyland, without considering the differences between the customer profile of Japanese and European customers
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Creating the same agreement with Euro Disney as it had done with Tokyo Disneyland
 Investing in the venture without understanding the market completely
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 Not understanding the price sensitiveness of European customers
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Not realizing the food habits of the Europeans like their need for breakfast and their preference for wine with meals
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Not understanding the culture of French people in terms of their efficiency and customer satisfaction
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It ignored the wants and needs of the European market
What suggestions would you give Disney to make Euro Disney as profitable as its other parks?
5

Introduce breakfast at the park
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Serve wine with meals
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Reduce the price of some of the not-so-popular items in the park

Rework on the agreement to be more suitable for Euro Disney
 Spend time to conduct research to understand the European customers better in terms of their needs and what is their spending pattern
* * * * * * * *
MBA III

USN 1 P E
PESIT Bangalore South Campus
Hosur road, 1km before Electronic City, Bengaluru -100
Department of Master of Business Management
MBA III