Retailing
Defining Retailing
Any business entity selling products and
services to consumers is retailing
 The goods may be sold in a shop, in
person, by mail, on the internet, telephone
or a vending machine
 Retailing includes all activities involved in
selling or renting consumer products and
services directly to ultimate consumers
for their personal or home consumption

Terminologies
Variety : Different kinds of goods to be
carried / services offered (men’s garments,
ladies garments)
 Assortment : Decisions related to the
range
of
choice
(like
brands,styles,models,sizes and colors)
 Example : Colourplus v/s Allensolly

Why does a consumer buy from a
specific retailer ?
Price
 Location
 Product selection
 Special services
 Helpful salespersons
 Fairness in dealings

Functions of retailing
Helping create time, place and possession
utility
 Adding form utility like cloth alterations
 Adding value and aiding sales by offering
credit, delivery and extended store hours

Types of Retail Operations
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Corporate chains : More outlets owned by one
firm e.g. : Reliance Retail
Voluntary chain : Wholesaler sponsored group
of independent retailer
Retailer co-ops : Independent retailer with
central buying operations and common
promotions
Consumer co-ops : Co-operative societies of
groups of consumers operating their own stores
Franchise
Organization
: Contractual
agreement between the producer and retailers –
selling the producers products exclusively
The Information Flow
The information flow at the retailer point
is 2 way. While the retailer is the source
of all information about the company
products to the consumers , he is also an
important touch point of feedback from
the consumers to the company
 The retailer is also an important source
of feedback for competitor’s strategies

Theories in Retail
Wheel of retailing : This theory focuses
on the way a retail chain changes during life
time.
- At the onset a retailer starts with low prices,
margins. With time he adds services which
up the operational cost
- In the second stage , the outlet can
command higher prices and maintain a
better image through better services
- Then the retailer pushes to a premium
image , creating a gap for low margin and
price shop
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Theories in Retail
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Retail accordion theory : This theory
posits that an outlet which starts as a
general retailer “grows” into a specialized
retailer and in course of time becomes an
even bigger retailer
Theory of natural selection : The
evolution of retail stores is influenced by
environmental factors like economic,
demographic,
legal,
political
and
technological. A retailer has to adapt to
these factors to be successful
Types of retailers
Store retail
 Non store retail

Store retail
Specialty Store :
Narrow Product Line like the Body Shop ,
Raymond Shop, Wills Lifestyle, Allen solly
store , Woodlands, Fitness One, Organic
India Sony World, LG Electronics store ,
Mobile World
- Specialty stores concentrate on a limited
number of complementary merchandise
categories and provide high level of service
- Domino’s , sub way, Vadilal, KFC etc are food
retailers / category specialists

Store retail

Department Store :
Department stores are retailers that carry
a broad variety and deep assortment , offer
customer services and organize their stores
in to distinct departments for displaying
merchandise
A department store is generally going to
emphasize clothing and household
items
Pantaloons, Shoppers Stop, Marks and
Spensers, Lifestyle, Reliance Trends are
example of departmental store
Store retail
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Supermarket :
Large, Low cost, low margin, high volume
self service store designed to meet total
needs for food and house hold products
A super market emphasizes food
but may sell other items (think of your
local grocery store)
Examples are Food Bazzar , Nilgiri’s ,
subhiksha, spenser’s
Store retail

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Convenience Store :
Small Store in residential area, often open
24*7, limited number of high turn over
convenience products
Convenience stores enable consumers to
make quick purchases without long
queues
The near by kirana store is also a
convenience store
Store retail
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Drug Store :
Prescription, pharmacies and OTC
medicines , health and beauty aids,
personal care products
Planet Health, Apollo Pharmacy, Walgreen
in USA , near by pharmacy store etc
Store retail
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Discount store :
Standard or specialty merchandise , low
price, low margin, high volume stores like
Vmart ,Brand Factory etc
Extreme Value Retailers :
Small Discount stores are stores offering
a limited merchandise at very low prices
Patloons, Megamart etc
STORE RETAIL

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Off Price Retail :Eg: Factory Outlets
Leftover Goods , irregular ( minor
mistakes in making) merchandise sold at
less than retail
Mainly owned by manufacturers these
stores are aimed at improving earnings
from left overs and production over runs
Store retail
Superstore (Hypermarket)
- The superstore may carry items such as
clothes, shoes, stationary, or seasonal
merchandise with less focus on grocery
and food.
 Warehouse Clubs :
- Are retailers that offer a limited service at
lower price for ultimate consumers and
small businesses (Metro, Best Price)

Service retailing
Airlines, Movies, Automobile service ,
Education, Fitness centers, banks etc are
the service retail examples
 Examples :

Differences between services and
merchandising
Intangibility
 Simultaneous production and
consumption
 Perishability
 Inconsistency

New trends in retailing
New Retail forms and Combinations
 Growing Intertype competition
 Increasing strength of non store based
selling
 Growth of Giant retailers
 Growth of shopper marketing
 Growing investment in technology

How does a consumer select a
retailer
Price
 Location
 Product selection
 Special services
 Helpful sales person
 Fairness in dealings

Functions of Retailing
Performing marketing functions that
enable them to make available a wide
variety of products to the consumers
 Helping create time, place and possession
utilities
 Adding form utility ( garment altering)
 A retailers service also helps create an
image for the product he sells

Retailers add value to product
By the services they offer such as credit,
delivery, extended store hours
 The personnel they hire to solve
consumer problems
 The store’s location

Retail Firm Classification
Form of ownership : sole ownership,
partnership, corporation, consumer cooperative
 Operational structure : Independent,
chain, franchise
 Service and price orientation : full service,
limited service, normal margin, off-price,
self-service
 Merchandise : general or specialty

Private Labels
Retailers develop their own brands to
compete with other national brands
 Private labels offer consumers good
quality at affordable price, higher margins
to retailers, better bargaining powers to
retailers and the task of merchandising
becomes simpler

Categories
Retail focus on categories
Understanding the term category
 Category management focuses on
three parameters :
- Efficient introduction of new products in
the stores
- Running product promotions effectively
- Optimum store assortment

Category Lifecycles
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Fad and Trend
Category Types :
Routine categories : Customers use the
retailer as the preferred vendor for these
items – milk, bread, soft drinks etc
Destination Category : This is customers
first choice for specific products
Season categories : The retailer is well
known for selling seasonal merchandise
Convenience categories : Nearby panshop
Category Management
In major retail organizations, individual
category managers are responsible for
their business and its profitability
 The survey of the trading area is a crucial
determinant of offer categories
 The classification should reflect consumer
preference
 The categories in store have to be made
available and visible to ensure multiple
purchases and impulse buying

Category Management
The decisions on category management
needs to be dynamic and change as per
customer needs
 The major goal of category management
is to create a unique customer value and
ensure stickiness
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Merchandising
Merchandising
The definition of merchandising is a set of
activities in acquiring goods and
services and making them available
at the places, times, prices, quantity
and quality that enables retailers to
reach his goals
 The focus is on acquiring the goods and
storing them so that nay customer can
access them at a time, place and quantity
convenient to her

Merchandising
Merchandising directly effects the revenue
and profitability of the store
 Merchandising also takes into account the
assortment of the goods and quality
 There are multiple factors which influence
the merchandising policy viz. the objectives
of the retailer, demographic of the trading
area, the level of the customer service,
competitive pressures, service proposition
(home delivery of bottled water)
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Merchandise Buying Roles
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Selection of Vendor : Price, quality, reliability,
time for processing orders, time for delivery
from time of order placement, terms and
conditions, advertising and promotion
support, ethics in doing business and any
other exclusive rights provided to the buyer
Selection of merchandise : Quality inspection
by sampling, negotiated terms, order and
delivery times, inventory holding rules, reordering costs
Merchandising Strategy
Wide Strategy : This strategy is
appropriate for mass based consumer
products. This strategy requires more
space.
 It
also provides for cross sales
opportunities. It induces more impulse
purchase. Building a loyal customer base is
easier. It depends on volume sales.
 The retailer has to focus on increasing the
number of products a customer buys.

Merchandising Strategy
Deep Strategy : This strategy works for
niche products. This type of strategy
takes a longer time to build a base but
lasts longer. It depends more on planned
buying.
 The retailer tries to sell more upgraded
versions of the product for higher
margins
 This strategy requires less space

Key Decisions by Merchandising
Managers
Products to be sold
 Variety of each category
 Pack sizes of each SKU’s
 Price points of each products
 Quantity of each product, SKU to be
carried at any point of time
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Customer Service
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Some of the factors affecting the
customer service are :
The location of store and its working
hours
The assortment of goods and services
The prices at which the goods are made
available
Help and assistance within the store to
support the selection of the goods by the
customer
Augmented Customer Service
Free demo and installation assistance
 Additional facilities like coffee shop, ATM
machine or even a salon
 Additional services like easy payments,
home delivery, loyalty scheme or credit
cards
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Type of Shopper and Trade Format
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Task focused shopper : Task focused
shopper looks for convenient location,
proximity to similar stores, correct
merchandise selection, high availability,
competitive price and good product
visibility
Type of Shopper and Trade Format
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Leisure Shopper : Leisure shopper
focuses on wide choice, good ambience,
additional facilities, theme displays,
customer service and some exclusive
goods
Retail Performance Metrics
Gross margin return on inventory
investment (GMROI)
Formula = gross margin % * sales to
inventory ratio
 GMV (online retail) : The total value of all
goods sold without accounting for
discounts offered on the goods
 Of late , retailers are questioning the use
of this method
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Franchising
The franchisor is the firm which wants to
sell its products or service and the
franchisee is the firm or group of
individuals who are willing to sell the
products or services on behalf of the
franchisor
 The franchisor helps the franchisee find a
good location, blueprints for the shop or
store
, financial, marketing
and
management assistance

Benefits to franchisee
Quick recognition among potential
customers
 Management training provided by the
franchisor
 Franchisor may buy ingredients, supplies
and parts and sell to the franchisee at
lower prices than the market
 Financial assistance where required
 Promotional aids, in store details and the
like

Benefits to the franchisor
Faster expansion
 Local franchisee pays lower rates for
advertising than a national firm
 Owners of the franchisee are motivated
to work more than just employees
 All
local taxes and licenses are
responsibility of the franchisees

STORE LAYOUT,DESIGN,AND
VISUAL MERCHANDISING
IMPORTANCE OF PRESENTATION
The environment in the store , the design
of the store, and the presentation and
location of merchandise in the store have
a significant impact on shopping behaviour
 These factors lead to increased time
spent by customers and also increase the
money they spend
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IMPORTANCE OF PRESENTATION
Store design also enhances retailers image
and improves his ROA
 A “good design” concept also includes a
retail website
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STORE DESIGN OBJECTIVES
Some store objectives are to
1) Implement the retailer’s strategy
2) Build loyalty by providing a rewarding
shopping experience
3) Increase sales per visit
4) Control costs
5) Meet legal requirements

Store – Retailer’s Brand Strategy
Implement retail strategy
The store design must be consistent with
the retailer's strategy.
 Example : Mc Donald’s strategy around
kids ensure a lot of fun for kids in a McD
store
 Examples from class
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Build loyalty
When customer’s have a good experience visiting
a store , they develop a loyalty for that store
 Shopping experience has been divided into 2
parts viz. utilitarian shopping and hedonic
shopping
 Customers engaged in utilitarian shopping also
appreciate a good store design as they have less
time to find out merchandise. At the same time
customers engaged in hedonic shopping also
appreciate a store design full of entertainment
 Example :Visit Hamleys store
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Increase sales on visit
Store design has a substantial effect on
which products customers buy, how much
time they spend and on how much they
spend per visit
 The retailer’s attempt to design their
stores in a manner which induces
expensive and unplanned purchases
 Example: baby diaper and beer case
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Control cost
The store design also affect labour and
inventory shrinkage
 The design can significantly reduce costs as
observed in the starbucks video
 In case of starbucks select water fixtures
saves water bills, glass made store exteriors
ensure more natural light across the day ,
reharvested wood ensures the environment
friendly image of the retailer.
 Flexibility is also an important aspect of
store fixtures. Example : College Bookstore
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Legal requirements

Laws for firesafety, disabled people,
building strength, consumer privacy , etc
STORE DESIGN ELEMENTS
Three design elements are
1) Layout
2) Signage
3) Feature areas

Layout
Retailers have three general types of store layouts
viz. grid, racetrack and free form
 Grid Layout : Has parallel aisles with merchandise
on shelves on both sides of the aisles. Cash
registers are located at entrance/ exit of the
store
 Grid layout provide ease of merchandise locating
which ensures that customers spend less time
searching. Hence this layout is suitable for stores
selling groceries and day to day needs
 The grid layout is also cost efficient as it wastes
less space
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Racetrack layout
The racetrack layout , also known as loop, is a
store layout that provides a major aisle that
loops around the store to guide customer
traffic around different departments within the
stores.
 The racetrack layout facilitates the goal of
getting customers to see the merchandise
available in multiple departments encouraging
unplanned purchases. The layout also allows
customers to see the product from the
different angles
 Race track layout video
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Free-Form layout
A free form layout also known as a
boutique layout , arranges fixtures and
aisles in an asymmetric pattern. It
facilitates a lot of browsing and relaxing
environment
 This layout is costly as very few
merchandise are placed in the store and
personal selling becomes very important
as customers cannot drawn across all
areas of the store
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Signage and Graphics
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Signage and graphics help customers locate
specific products and departments , provide
product information, and suggest items or
special purchases
Graphics such as photo panels can reinforce
a store’s image
Signage is used to identify the location of
merchandise categories within a store and
the types of products offered in a category.
The signs are hung typically from the ceiling
to enhance their visibility
Signage
Signage and Graphics
Icons are also used to facilitate
communication with customers speaking
different language
 Some different signs are :
- Category signage
- Promotional signage
- Point of sale signage
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Category and Promotional Signage
Feature Areas
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Windows : Window displays draws in the
customers and provide a visual message
about the type of the merchandise offered at
the store
Entrances : Decompression zone
Freestanding displays : Freestanding displays
are fixtures or mannequins that are located
on aisles and attract customers and bring
them into a department in stores using
racetrack or freeform Layout
Window Display
Feature areas
End Caps : Displays at the end of the aisle
SPACE MANAGEMENT
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Space mgmt involves 2 decisions :
The allocation of store space to
merchandise categories and brands
The location of departments or
merchandise categories in the store
Space allocated to merchandise
categories
Space Productivity : A simple thumb rule
is for allocating space on the basis of the
merchandise sales
 Inventory turnover : More space is
allocated to fast selling merchandise to
minimize the need to restock
 Display considerations : The importance
of display cannot be undermined in
modern retail
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Location
category
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of
merchandise
in
a
Examples :
Private labels are placed right adjacent to
national brands as western customers read
from left to right and see the national brands
but buy the less priced high margin private
labels
In
supermarkets
most
profitable
merchandise is placed on the third shelf
from floor as it is eye contact level for most
customers
The merchandise influenced by kids are
placed on lower shelves
Tools used by retailers to position
items in a category
Plano grams : A planogram is a diagram
that shows how and where specific SKU’s
should be placed on retail shelves or
displays to increase customer purchases
 By developing planograms retailers make
a category visually appealing and induce
customers to buy

VISUAL MERCHANDISING
Visual Merchandising
VM is the presentation of a store and its
merchandise in a way that will attract
customer eyeballs
 FIXTURES :
 The primary purpose of fixture is to
efficiently hold and display merchandise

Straight Rack fixture
Rounder Fixture
Four way Fixture
Gondola Fixtures
Presentation Techniques
Idea Presentation : Some retailers use an
idea oriented presentation – a method of
presenting merchandise based on specific
ideas or the image of the store. Individual
items are grouped to show customers
how the items could be used or
combined.
 Mostly used in furniture stores
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Idea Presentation
Presentation Techniques
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Item and Size Presentation : Presentation based
on items like cereals with cereals and pack of 250
gms with other 250 gms
Colour presentation : Presentation based on
grouping basis colour
Price Lining : Organizing basis price points
Vertical merchandising : Same pic as in gondola pic
t shirts
Tonnage Merchandising : large quantity of
merchandise displayed together as in D Mart
Tonnage Merchandising
Atmospherics
Atmospherics refers to the design of an
environment by stimulation of the five senses.
 Atmospherics include the store's layout, noise
level, temperature, lighting and decorations.
Lighting, Colour, music , scent, temperature all
contribute towards creating an excellent
stimulating atmospherics
 They are designed to set the store apart from its
competitors in a positive way. It is part of an
overall companies branding and image.

Tips for designing a good website
Make it simple
 Good Visual of Products – 3d view
 Easy Checkout
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