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Delivering Value Through Retail Formats

1Module 2This module will cover the following topics:Classification of retail byOwnershipMerchandise offeredNon-store RetailingService RetailingEmerging retail formats

2Classifying on the Basis of OwnershipIndependent RetailersA Chain RetailerFranchisingLeased DepartmentCooperatives3Form of Ownership A retail business like any other type of business, can be owned by A sole proprietor, partners or a corporation. A majority of retail business in India are sole proprietorships and partnerships. Independent Retailer Generally operates one outlet and offers personalized service, a convenient location and close customer contact. Roughly 90% of all the retail businesses in India, are managed and run by independents, including barber shops, drycleaners, furniture stores, bookshops and neighborhood stores.Entry into retailing is easy and it requires low investment and little technical knowledge.

Most independent retailers fail because of the poor management skills and inadequate resources. 5Retail Chain When two or more outlets are under common ownership is called a retail chain.A chain retailer operates multiple outlets (store units) under a common ownership and name.Chains achieve efficiency due to the centralization of purchasing and warehousing and computerization.Serve a large dispersed target marketTake advantage of "economies of scale" in buying and selling goods.Have bargaining powers with suppliers Take advantage of tools like computers and information technology. 6Retail Franchising It is a contractual arrangement between a "franchiser" and a "franchisee" It is one of the most common modes of expansion in retailingMore than one-third of all retail sales are made by franchisees.They may be a manufacturer, wholesaler, or a service sponsorThey allow to conduct a business under an established name and according to a specific set of rules.In exchange for fees, royalties and a share of the profits, the franchiser offers assistance and very often supplies as well. 7Leased DepartmentsThese are also termed as shop in shopWhen a section of a department in a retail store is leased/ rented to an outside party it is termed as leased departmentIt helps to extend product offering to the customersMany companies operate their perfumes and cosmetics counters, salon, photo studio, food court in this manners These outlets are offered in malls, department stores, multiplexes, airports, railways stationsLeased departments help the stores in generating greater traffic and providing one-stop shopping.

8Consumer CooperativesConsumers cooperatives aim to provide essential commodities at reasonable priceThese stores are owned , managed and controlled by it membersA retail cooperative is a group of independent retailers.They combine their financial resources and their expertise in order to effectively control their wholesaling needs. They share purchases, storage, shopping facilities, advertising, planning and other functions. The individual retailers retain their independence, but agree on broad common policies. Protect the interest of consumersStabilize prices

9Classification on the basis of Merchandise offeredFood based StoresConvenience storeSupermarketBox (Limited line) storeWare house storeNon food based StoresSpecialty store Departmental storeFull line discount storeVariety storeOff price chainFactory outletMembership club Flea market

Food Based StoresConvenience StoresThey are usually well located, food-oriented retailer Open long hours and carries a moderate number of itemsThis retailer is small. It has average to above-average prices, and average atmosphere and customer services.Provide quick purchase to customersThe store size range from 3000 to 8000 sq. ft.7-Eleven, Circle K, and Caseys General Store, Speedway11Conventional SupermarketA conventional supermarket is a departmentalized food store with a wide range of food and everyday commoditiesThese stores are efficient, offer a degree of one-stop shopping, stimulate impulse purchases.Offers limited range of non-food items such as health and beauty and general merchandiseThey are chosen for varieties, self-service (increase volume), promotions and low prices.Carry 5000 to 10000 SKUsArea 30000 square feet to 50000 square feetThe leading chains are Kroger, Safeway, and Ahold, USA12A box (limited-line) StoreIt is a food-based discounter that focuses on a small selection of items, moderate hours of operation, few services and limited manufacturer brands.They around 2,000 items, few refrigerated perishables, and limited assortments.Items are displayed in cut cases, Customers carry items in their own bagsPrivate-label brands are stressed. Prices are 20 to 30 percent below supermarkets.

13A Warehouse StoreWarehouse stores are membership retail outletsIt is a food-based discounter offering a moderate number of food items and general merchandise in a no-frills setting.These stores appeal to one-stop food shoppers, use cut-case displays, offer low price, little service.Attracts price conscious consumers , sale more private labelsThey are large in size , located in low rent areasIt also sells products to retailers The largest store is known as a super warehouse. Cub Foods is the leading chain.

14Non-Food Based StoresA Specialty StoreThese are upscale stores for affluent customers A specialty store deal in a specific product or high level servicesCarry a narrow but deep assortment in their chosen category Concentrates on , medicines, books, toys, , home improvement products, apparel, jewellery, sporting goods, furniture etc.Operate in under 8000 square feet areaExamples: Home Depot (home improvement), Best Buy (consumer electronics), T.J. Maxx (apparel), Toys R Us (toys), GameStop (video games), and Barnes & Noble (books). Ikea furniture15Category killerA category killer is a specialist discount storeIt offers the lowest price and the largest assortmentsCategory killers are known to kill brands by making price the most important buying consideration.These retailers concentrate on reducing cost by increasing operational efficiencyExpand into less competitive international market

16Department StoreA department store is a large retail unit with an extensive assortment of goods and services that is organized into separate departments for purposes of buying, promotion, customer service, and control.Apparel, furniture, and appliances and home furnishing, paint, hardware, toiletries, cosmetics, etc.Merchandise quality ranges from average to quite good, pricing is moderate to above average, and customer service ranges from medium to high levels.Average area 20000 to 40000 square feet50K to 100K sku, Self service facility

17A full-line Discount StoreA full-line discount store has a broad merchandise assortment Low pricesFocus on items as auto accessories, gardening equipment, and house waresCentralized checkout service and good customer serviceSelf-service emphasisLess fashion-sensitive merchandise and inexpensive facilities and low operating costs.18Variety StoreA variety store handles an assortment of inexpensive and popular goods and services,Such as stationary, gift items, women accessories, health and beauty products, toys, artificial jewelery, greeting cardsThey do not carry full product linesTransaction are often on cash basisThere are open displays, few salespeopleDollar discount stores offer the same merchandise as traditional variety stores, but at lower prices. Example: Dollar General and Family Dollar are the two leading chains.

Off-price ChainMerchandise sold at less than retail priceOffers a range of out of season designs, seconds and order rejectedAn off-price chain features apparel and accessories, footwear (primarily womens and family) fabrics, cosmetics, and house wares and sells them at everyday low prices in an efficient, limited-service environment.The four leading off-price chains are T.J. Maxx, Marshalls, Ross Stores, and Burlington Coat Factory.Factory outlet and single price outlets are the examples

20A Factory OutletA factory outlet is a manufacturer-owned store selling closeouts, discontinued merchandise, canceled orders, and, sometimes, in-season, first-quality merchandise.Manufacturers interest in factory outlets has increased for four basic reasons:They can control where their discounted merchandise is sold.They are able to achieve supplemental profits.They can decide upon store visibility, set promotion policies etc.They may need revenue from outlet stores to sustain their growth.

A Membership ClubA membership (warehouse) club appeals to price-conscious consumers, who must be members to shop there.Offer variety of goods in bulk at whole sale priceProvide limited number of products , 5000 or lessUse of large store facilities (up to 100,000 or more square feet)Select isolated locations, little advertising, wide aisles, concrete floors, limited credit options, and very low prices.General merchandise and apparel, food, pharmacy, photo developing, a car-buying service, a gasoline service station etc.

Flea MarketRetail vendors sell a range of products at discount pricesSites normally associated with retailing (such as racetracks, stadiums, and sites abandoned by other retailers.Individual retailers rent space on a daily, weekly, or seasonal basis.The consumer interest in bargaining, the broader product mix, the availability of some brand-name merchandise, and low prices.The Rose Bowl Flea Market has 2,500 vendors and attracts 20,000 shoppers daily.23HypermarketIt is combination of supermarket and department storeA retail store with a sales area of over 5000 sqmOffer a variety of food and non foods productsProvide one stop shopping experienceProvide cheapest priceIt has cafeteria, petrol pumps, banks, pharmacyCarrefour, Wal-Mart, Meijer, Target, Tesco, Asda

Non Store Retailing Customers do not go to a store to buyThis type of retailing is growing very fastConsumers buy merchandise not available in local stores Ideal for working people Convenience of buying 24/7 and delivery at a location and time of their choiceNon- store retailing growing at the higher rate than sales in the retail store25Non Store retailing In Home Retailing: door-door selling.Opportunity to demonstrate products in personal mannerGet prospect's attention and there are fewer distractionsExamples: Eureka Forbes vacuum cleaners and water filters. Telesales/Telephone Retailing: Contact prospect over the phone, for the purpose of making a sale or purchase. Example: mobile phone service providers, private insurance companies, and credit companies etc. Network Marketing26Non Store Retailing Catalog Retailing: The retailers offers the merchandise in a catalogue,It includes ordering instructions and customer orders by mail. The basic attraction for shoppers is convenience. The advantages to the retailers include lower operating costs, lower rents, smaller sales staff and absence of shop lifting. Argos offers over 4000 quality productsBurlington's catalogue shopping was quite popular

Non Store retailing Direct Response Retailing: Use magazines, newspapers, radio and television Offering an address or telephone number so that consumers can write or call to place an order. It is also called as "Direct response advertising. The availability of credit cards and toll free numbers stimulate direct response by telephone. The goal is to induce the customer to make an immediate purchase.

Examples: infomercials and direct response advertising

28Non Store Retailing Automatic Vending:It is the ultimate non personal, non store retailing Products are sold directly to customers/buyers from machinesThese machines dispense products which enable customers to buy after closing hours.

Electronic Retailing/E-Tailing: Retailers offer products and services for sale, over the internet. No queues, geographic barriers, low price, unlimited selection Touch and feel factors are hindrance for growth

29Full Service Self ServiceDiscount storesExclusive storesFactory outlets Warehouse clubsCLASSIFICATION BY LEVEL OF SERVICE Service RetailingRetail BankingCar rentalsUtility services like gas, electricityMaintenance services for water filters, computer systemsChallenges to Retail Development in IndiaLacks International StandardsInefficient supply chain managementReal estate issues, lack of retail space, high priceShortage of skilled human resource Vendor frauds, thefts, shopliftingLack of industry statusLack of adequate infrastructureMultiple and complex taxation systemCurrency fluctuation Red tape, various governments approval Cultural diversity and different purchasing pattern Political risk

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