RETAIL MANAGEMENT2

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RETAIL MANAGEMENT-2

• Prepared by
• Dr. Pooja Sharma
• Presented by
• Education Information Network
• http//www.InfoFanz.com
• Info_at_InfoFanz.com

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Unit 2 Retail Theories Strategy

• Theories of Retail Development,
• The concept of Life cycle in Retail Strategy

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The Evolution of Retail Format

• The origin of retail are as old as trade itself,
  for centuries most of merchandise was sold in
  marketplace or by peddlers.
• Earlier markets were dependent on local sources
  for supplies of perishable foods because journeys
  were far too. And long distance transportation.
• The peddlers who provided people with the basic
  goods and necessities could not be self
  sufficient. In prehistoric times the peddler
  travelled long distance to bring products to
  locations which were in short supply.

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• Evolution of retail formats in different times
• Social Developments and their impact
• The development of trading has been intimately
  associated with social developments over the
  ages.
• Two important developments of the 18th century
• The development of rail roads and telegraphs
  which largely affected the growth of retail
  trade.
• In 1852 Bon Marche, the first departmental store
  , was set up in Paris.
• Bon Marche revolutionized retail at time by
  relying on volume rather than high mark up, to
  make money.
• By the year 1897,the store sold more than 30
  million worth of goods per year.

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• The first department store which opened in US ,
  was Stewarts in New York, which was followed by
  Macys post civil war.
• The late 1800s saw the rise of the so called 5
  and 10 cent stores , which emerged to serve the
  needs of the poorer classes.
• The Industrial revolution
• The industrial revolution call for dramatic
  changes on the retail front.
• The increase in urbanization lead to the
  emergence of shops, to serve the needs of the
  locals.
• The middle income consumers increased and mass
  transportation become a way of life
• Mass manufacturing made it possible to
  manufacturing goods in large quantities.

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• The emergence of self service
• Retail evolve in many ways over the 20th century.
• Self service as a concept started in 1916 when
  Clarence Saunders started the first self service
  store.
• The development of supermarkets and convenience
  stores
• The emergence of the supermarkets first saw in
  1930s. first hypermarket that was developed by
  Carrefour in France in 1963.
• The new formats gave the customer the choice of
  picking up a product, comparing it with others
  and then taking a decision on buying.

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• Speciality stores, malls formats
• As the needs of the consumers grew and changed it
  was visible the emergence of commodity
  specialized mass merchandisers in the 1970s.
• The 70s were witness to the use of technology in
  the retail sector with the introduction of the
  Barcode.
• The Rise of the Web
• The world of retail changed again in 1995, when
  Amazon. Com opened its doors to Worldwide market
  on the Web.
• With the growth of the world wide web , both
  retailers and consumers can find suppliers and
  products from anywhere in the world.

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Theories of Retail Development

• Retail Development from the theoretical
  perspective
• No single theory can be universally applicable or
  acceptable. The application of each theory varies
  from market to market , depending on the level of
  maturity and the socio-economic conditions in
  that market.
• The retail scenario keeps changing continuously.
  These changes are brought by ever changing
  customer requirement, economic development of the
  nation , falling borders, new technologies and by
  entrepreneurs.

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• Growth in retail is a result of understanding
  market signals and responding to opportunities
  that arise in a dynamic manner.
• Theories of retail development can broadly be
  classified as
• Environmental where a change in retail is
  attributed to the change in the environment in
  which the retailers operate.
• Cyclical- where change follows a pattern and
  phase can have definite identifiable attributes
  associated with them.
• Conflictual where the competition or conflict
  between two opposite types of retailers, leads to
  a new format being developed.

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Environmental theory

• Darwin's theory of natural selection has been
  popularized by the phrase survival of the
  fittest.
• Retail institution are economic entities and
  retailers confront an environment which is made
  up of customers, competitors and changing
  technology.
• So the birth, success or decline of different
  forms of retail enterprises is many a times
  attributed to the business environment.

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• Those retail institutes that are keenly aware of
  their operating environment and which react
  without delay, gain from the changes.
• Thus Following the Darwinian approach of
  survival of fittest, those retailers that
  successfully adapt technological, economic,
  demographic and legal changes are the ones that
  are most likely to grow and proper.
• The Ability to adapt to change, successfully
  is at the core of this theory

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Cyclical Theory

• The most well know theory of retail evolution is
  the retail wheel of retailing theory.
• This theory suggests that retail innovators often
  first appear as low price cost operators with a
  low cost structure and low profit margin
  requirements, offering some real advantages.
• As they prosper , they develop their business,
  offering a greater range or acquiring more
  expensive facilities they lose the focus. (on
  which they entered in the market). This phase is
  known as trading phase. This in turn leave room
  for others to enter and repeat the process.
• They then become vulnerable to new discounters
  and lower cost structure as they are now Mature
  retailers.

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• The wheel keeps on turning and department stores,
  supermarkets, and mass merchandise went through
  this cycles

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3. Conflict theory (dialectic Process)

• Conflict always exit between operators of similar
  formats or within broad retail categories.
• Retail innovation does not necessarily reduce the
  number of formats available to the consumer,
  instead , it leads to the development of more
  formats.
• Retailing involves through a dialectic process,
  i.e. blending of two opposite to creates a new
  format. This can be applied to development in
  retailing like

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• Thesis Individual retailers as corner shops all
  across the country.
• Antithesis A position opposed to the thesis
  develops over a period of time . (department
  store, discount store). The antithesis is a
  challenge to the Thesis.
• Synthesis There is a blending of the Thesis and
  antithesis. The result position between the
  thesis and antithesis. Supermarkets and
  hypermarkets flourish. This synthesis for the
  next round of evolution.

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• Illustration

Antithesis
Thesis
Discount Store
Department Store
Discount Department Store
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The Concept of Life Cycle in Retail

• The concept of product life cycle as explained by
  Philip Kotler is applicable to retail
  organization.
• This is because retail organization pass through
  identifiable stages of innovation, development,
  maturity and decline. This is commonly termed as
  the Retail Life Cycle
• Attributes and strategies changes as institutions
  mature.
• The retail life cycle is a theory about the
  changes through time of the retailing outlets

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• Innovation
• A new organization is born it improves the
  convenience or create other advantages for the
  final customers, which differ sharply from those
  offered by other retailers. This is the stage of
  Innovation.
• In Innovation organization have very few
  competitors.
• Because it is new concept , the rate of growth
  is fairly rapid and the management fine-tunes its
  strategy through experimentation.
• At this stage the level of profitability re
  moderate and this stage can last up to five
  years, depends on the organization.

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• Accelerated Growth
• The retail organization faces rapid increase in
  sales.
• As organization moves to stage two of growth
  ,which is the stage of development, a few
  competitors emerge.
• As company has been in the market for a while it
  is now in a position to pre-empt the market by
  establishing a position of leadership.
• At this stage since growth is imperative, the
  investment levelis also high as is the
  profitability.
• This stage last from 5-8 years.

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• Maturity
• The organizational this stages still grows, but
  competitive pressures are felt acutely from newer
  forms of retailing that tend to arise.
• Thus growth rate tends to decreases.
• Gradually as marketers become more competitive
  and direct competition increases, the rate of
  growth slows down and profits also start
  declining.
• This is the time when the retail organization
  needs to rethink its strategy and reposition
  itself in the market.
• A change may occur not only in the format but
  also in the merchandise mix offered.

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• Decline
• The retail organization looses its competitive
  edge and there is a decline.
• At this stage organization needs to decide is it
  is still going to continue in the market.
• The rate of growth is negative, profitability
  declines further and overheads are high.

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The Concept of Life Cycle in Retail
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• The retail business in India has only recently
  seen the emergence of organized, corporate
  activity.. And traditionally most of the retail
  business in India was constituted of small owner-
  managed businesses.
• Hence it is difficult to identify a retail
  organization which has passed through all the
  four stages of the retail life cycle.
• Initially when shoppers stop opened its first
  outlet in Mumbai in 1991 they offers apparel,
  imitation, cosmetics and perfumes and home
  fashion. That time they also offer loyalty
  programmes in place, which did not offers by
  others.

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• The store enjoyed an enviable position for
  sometime and later the change in customer
  expectations and increases competition in the
  form of other department stores like, Globus,
  Westside, Lifestyle etc.
• Later competition gives lots of other angles also
  , like Speciality store, book store, Music store
  etc.

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Classification of Retail Formats

• Form of Ownership
• Independent retailer Example only one retail
  outlet Premsons, Benzer etc.
• Chain retailer examples, Wills Sports, Louis
  Philippe, Van Heusen
• Franchise examples Mc Donald, pizza hut,
  Dominoes etc.
• Leased departments airport, malls Multiplexes.
  etc. Leased one
• Consumer co-operatives kendriya bhandar,apna
  bazar

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• Basis of the Merchandise offered
• Convenience stores
• Supermarkets
• Hypermarket

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Classification of Retail Formats