Monday, November 13, 2017

Types of Retailing

Unit – 2: Types of Retailing

Various Types of Retailing
Regardless of the particular type of retailer (such as a supermarket or a department store), retailers can be categorized by (a) Ownership, (b) Store strategy mix, and (c) Non store operations.
1. Form 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.

a. Independent Retailer: Such retailers generally operates one outlet and offers personalized service, a convenient location and close customer contact. Roughly 98% of all the retail businesses in India, are managed and run by independents, including barber shops, drycleaners, furniture stores, bookshops, LPG Gas Agencies and neighborhood stores. This is due to the fact that entry into retailing is easy and it requires low investment and little technical knowledge. This obviously results in a high degree of competition. Most independent retailers fail because of the ease of entry, poor management skills and inadequate resources.

b. Retail Chain: It involves common ownership of multiple units. In such units, the purchasing and decision making are centralized. Chains often rely on, specialization, standardization and elaborate control- systems. Consequently chains are able to serve a large dispersed target market and maintain a well known company name. Chain stores have been successful, mainly because they have the opportunity to take advantage of "economies of scale" in buying and selling goods. They can maintain their prices, thus increasing their margins, or they can cut prices and attract greater sales volume. Unlike smaller, independent retailers with lesser financial means, they can also take advantage of such tools as computers and information technology.

c. Retail Franchising: It ss a contractual arrangement between a "franchiser" (which may be a manufacturer, wholesaler, or a service sponsor) and a "franchisee" or franchisees, which allows the latter to conduct a certain form of business under an established name and according to a specific set of rules. The franchise agreement gives the franchiser much discretion in controlling the operations of small retailers. In exchange for fees, royalties and a share of the profits, the franchiser offers assistance and very often supplies as well. Classic examples of franchising KR Bakery, Famous bakery and opus bakery.

d. Cooperatives: A retail cooperative is a group of independent retailers, that have combined 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. Amul and milma are typical example of a cooperative in India.

2. Store Strategy Mix: Retailers can be classified by retail store strategy mix, which is an integrated combination of hours, location, assortment, service, advertising, and prices etc. The various categories are:
a. Convenience Store: It is generally a well situated, food oriented store with long operating house and a limited number of items. Consumers use a convenience store; for fill in items such as bread, milk, eggs, chocolates and candy etc.
b. Super markets: It is a diversified store which sells a broad range of food and non food items. A supermarket typically carries small house hold appliances, some apparel items, bakery, film developing, jams, pickles, books, audio/video CD's etc.
c. Department Stores: A department store usually sells a general line of apparel for the family, household linens, home furnishings and appliances. Large format apparel department stores include Pantaloon, Ebony and Pyramid. Others in this category are: Shoppers Stop and Westside.
d. Speciality Store: Such stores mainly concentrates on the sale of a single line of products or services, such as Audio equipment, Jewellery, Beauty and Health Care, etc. Consumers are not confronted with racks of unrelated merchandise. Successful speciality stores in India include, Music World for audio needs, Tanishq for jewellery and McDonalds, Pizza Hut and Nirula's for food services.
5. Hyper Markets: Is a special kind of combination store which integrates an economy super market with a discount department store. A hyper market generally has an ambience which attracts the family as whole. LULU hypermarket is good example of hypermarket.

3. Non Store Retailing: In non store retailing, customers do not go to a store to buy. This type of retailing is growing very fast. Among the reasons are; the ability to buy merchandise not available in local stores, the increasing number of women workers, and the presence of unskilled retail sales persons who cannot provide information to help shoppers make buying decisions
The major types of non store retailing are:

a. In Home Retailing: Where, a sales transaction takes place in a home setting - including door-door selling. It gives the sales person an opportunity to demonstrate products in a very personal manner. He/ She has the prospect's attention and there are fewer distractions as compared to a store setting. Examples of in home retailing include, Eureka Forbes vacuum cleaners and water filters.
b. Telesales/Telephone Retailing: This involves contact between the prospect and the retailer over the phone, for the purpose of making a sale or purchase. A large number of mobile phone service providers use this method. Other examples are private insurance companies, and credit companies etc.
c. Catalog Retailing: This is a type of non store retailing in which the retailers offers the merchandise in a catalogue, which includes ordering instructions and customer orders by mail. The basic attraction for shoppers is convenience. The advantages to the retailers include lover operating costs, lower rents, smaller sales staff and absence of shop lifting. This trend is catching up fast in India.
d. Direct Response Retailing: Here the marketers advertise these products/ services in magazines, newspapers, radio and/or television offering an address or telephone number so that consumers can write or call to place an order. It is also sometimes referred to 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 and direct response to the advertisement to "order now." Telebrands is a classic example of direct response retailing. Times shopping India is another example.
e. Automatic Vending: Although in a very nascent stage in India, is the ultimate in non personal, non store retailing. Products are sold directly to customers/buyers from machines. These machines dispense products which enable customers to buy after closing hours. ATM's dispensing cash at odd hours represent this form of non store retailing. Apart from all the multinational banks, a large number of Indian banks also provide ATM services, countrywide.
f. Electronic Retailing/E-Tailing: Is a retail format in which retailers communicate with customers and offer products and services for sale, over the internet. The rapid diffusion of internet access and usage, and the perceived low cost of entry has stimulated the creation of thousands of entrepreneurial electronic retailing ventures during the last 10 years or so. Flipkart,, E-bay and are some of the many e-tailors operating today.

Department Stores
These are large scale retail stores selling under one roof and one control a variety of goods divided into different departments, each of which specializes in an individual merchandise. Converse is of the opinion that a department store is a retail shop handling several classes of goods including fast moving consumer goods, each class being separated from others in management, accounting and location. It is viewed by Clarke as that type of retail institution which handle a wide verity of merchandise under one roof which the merchandise grouped into well-defined  departments which is centrally controlled and which caters primarily to women shoppers.
Thus a department store is a retailing business unit that handles a wide variety of shopping and specialty goods and is organized into separate departments for purposes of sales promotion, accounting control and store operation.
Recent trends are to add departments for automotive, recreational and sports equipment, as well a services such as insurance, travel advice and income-tax preparation. Department stores are distinctive in that they usually are oriented towards service. They are usually shopping centers.

Classification of Department Stores
These stores may be classified either according to ownership or income groups to which they appeal.
a) On the basis of ownership these are:
(i) The independent; (ii) The ownership group; and (iii) Chain department Stores.
Independent stores are owned by a financial interest which does not own other similar stores.
Ownership group stores are those stores which were formerly dependent but now have been combined.
Chain department stores are those stores which are centrally owned and operated.
b) On the basis of income groups, These stores cater to the middle and high income  groups. They usually handle good quality merchandise and offer maximum  service to the customers. Other stores cater to the needs of the lower income group people.
c) Sometimes there is also to be found what are called leased department stores. Although it appears to most customers that all departments in a department store are owned and operated by the store, that is not always the case. The operations of certain departments are sometimes turned over to leases and such departments are called leased departments.

Some of the important features of a departmental store are as follows:
1. Large retail establishment: Departmental store is a large size retail institution under a roof where different goods are sold out. Adequate capital needs to be invested to establish, operate and expand it. Generally, departmental stores are operated as joint stock company.
2. Centralised Location: These stores are generally located at a central place in the heart of a city, which caters to a large number of customers.
3. Wide varieties of goods: To provide all kinds and varieties of goods to satisfy customers' needs in the same place is an important feature of departmental store. It is said 'from needle to plane, i.e A to Z goods can be found in a departmental store'. All the consumers goods from ready-made garments, household goods, furniture, electrical goods, medicines, motor cars to many others are sold by departmental store.
4. Centralised Management: As the size of these stores is very large, they are generally formed as a joint stock company managed by a board of directors. There is a managing director assisted by a general manager and several department managers. All the departments of departmental store are operated under the management and control of central level management. But each department is let free to purchase, sell and advertise their goods.
5. Elimination of Middlemen: A departmental store combines both the functions of retailing as well as warehousing. They purchase directly from manufacturers and operate separate warehouses. That way they help in eliminating undesirable middlemen between the producers and the customers; and
6. Centralised Purchased: They have centralised purchasing arrangements. All the purchases in a department store are made centrally by the purchase department of the store, whereas sales are decentralised in different departments.
7. Special facilities: Departmental stores make all the necessary goods available to customers. They also provide different facilities to the customers to attract them. Departmental stores provide goods on credit, help customers to carry goods to their home, they also provide cafeteria, telephone, mail, and other services to customers. 
Advantages of Departmental Stores

The major advantages of retailing through departmental stores may be listed as follows:
1.       Attract large number of customers: As these stores are usually located at central places they attract a large number of customers during the best part of the day.
2.       Bulk Buying: Departmental stores buy goods in large quantity from producers. As a result, they get quality goods at low price. They can also take help of specialist in buying goods. Those having strong financial position can buy goods in large quantity due to which per unit price and transport cost also falls low.
3.       Convenience in buying: By offering large variety of goods under one roof the departmental stores provide great convenience to customers in buying almost all goods of their requirements at one place. As a result, they do not have to run from one place to the another to complete their shopping.
4.       Attractive services: A departmental store aims at providing maximum services to the customers. Some of the services offered by it include home delivery of goods, execution of telephone orders, grant of credit facilities and provision for restrooms, telephone booths, restaurants, saloons etc.
5.       Economy of large-scale operations: As these stores are organised at a very large-scale, the benefits of large-scale operations, particularly, in respect of purchase of goods are available to them.
6.       Promotion of sales: The departmental stores are in a position to spend considerable amount of money on advertising and other promotional activities, which help in boosting their sales.
7.       Research: Departmental stores can carry out study and researches of different sectors. As a result, effectiveness comes in its operation with minimum cost and the profit increases. 
8.       Ability to bear loss: In comparison to other retailing institutions, departmental stores can have more ability to bear loss. In case any one or two departments got loss in business, the profits earned by other departments can easily compensate the loss. The financial position of departmental store becomes stronger than of other retailing institutions.
9.       Economy in advertisement: Departmental stores make effective a well as attractive advertisements taking help of specialists. Each department also advertises goods by attractively displaying and decorating shop. The departments do not need to spend on advertising goods, as a result cost for advertisement becomes automatically low.
Limitations of Departmental Stores
However, there are certain limitations of this type of retailing. These are described as follows:
1.       Large investment of capital: Large amount of capital is required to operate departmental store. The business entrepreneurs having limited capital cannot operate departmental stores.
2.       Limited number of customers: Departmental store attracts mainly rich class customers. poor customers hesitate to enter departmental stores. It becomes difficult for some customers to buy goods from departmental stores, they feel uneasy to buy goods, takes longer time and prices of goods is higher in departmental stores.
3.       Lack of personal attention: Because of the large-scale operations, it is very difficult to provide adequate personal attention to the customers in these stores.
4.       High operating cost: As these stores give more emphasis on providing services, their operating costs tend to be on the higher side. These costs, in turn, make the prices of the goods high. They are, therefore, not attractive to the lower income group of people.
5.       High possibility of loss: As a result of high operating costs and largescale operations, the chances of incurring losses in a departmental store are high. For example, if there is any change in the tastes of customers or latest fashions, it necessitates selling of such out-of-fashion articles in clearance sale, to reduce the huge inventory of goods built up.
6.       Inconvenient location: As a departmental store is generally situated at a central location, it is not convenient for the purchase of goods that are needed at short notice.
7.       Difficulty in management: Departmental stores are difficult to efficiently manage and run smoothly. Very efficient, skilled and able manager is needed. Otherwise, it becomes impossible to operate departmental stores.
Super Markets
A super market is a large retailing business unit selling wide variety of consumer goods on the basis of low margin appeal, wide variety and assortment, self-service and heavy emphasis on merchandising appeal. The goods traded are generally food products and other low priced, branded and widely used consumer products such as grocery, utensils, clothes, electronic appliances, household goods, and medicines. Super markets are generally situated at the main shopping centres.

Goods are kept on racks with clearly labelled price and quality tags in such stores. The customers move into the store to pick up goods of their requirements, bring them to the cash counter, make payment and take home the delivery. Super markets are organised on departmental basis where customers can buy various types of goods under one roof. However, as compared to departmental stores, these markets don’t offer certain services such as free home delivery, credit facilities, etc., and also don’t appoint sales persons to convince customers about the quality of products.
Some of the important characteristics of a super market are as follows:
1.       A super market generally carries a complete line of food items and groceries, in addition to non-food convenience goods;
2.       The buyers can purchase different products as per their requirements under one roof in such markets;
3.       There are no selling counters or selling assistants to help the customers. A super market operates on the principle of self-service. The distribution cost is, therefore, lower;
4.       The prices of the products are generally lower than other types of retail stores because of bulk purchasing, lower operational cost, and low profit margins;
5.       The goods are sold on cash basis only.
6.       The super markets are generally located at central locations to secure high turnover.
7.       They function on cash-and-carry lines and offer no credit.
8.       The products stored in a super market are properly packed and placed on separate racks in order to facilitate purchasing by the buyer.
9.       The buyer is completely at ease while buying as there is no undue sales pressure by counter salesmen.
10.   They are large retail organisations and are a useful channel of distribution.
Advantages of Super Market
Super markets are becoming more and more in our country because of its following advantages:
1.       All Products under one roof: Super markets offer a wide variety of products at low cost, under one roof. These outlets are, therefore, not only convenient but also economical to the buyers for making their purchases.
2.       Low Price: Goods are found at relatively at low price in supermarkets because they purchase larger quantity of goods, sales volume rises high. It takes less operating cost. They take less profit from customers.
3.       Central location: The super markets are generally located in the heart of the city. As a result, these are easily accessible to large number of people staying in the surrounding localities.
4.       Freedom of selection and self-service: The customers should select goods themselves in supermarket. More freedom is given to select goods, due to which the customers can get more satisfaction. Such freedom is more appropriate for those customers who do not like interference of sellers.
5.       Wide selection: Super markets keep a wide variety of goods of different designs, colour, etc., which enables the buyers to make better selection.
6.       No bad debts: As generally the sales are made on cash basis, there are no bad debts in super markets.
7.       Benefits of being large scale: A super market is a large scale retailing store. It enjoys all the benefits of large scale buying and selling because of which its operating costs are lower.
8.       Prospect for large profit: Supermarkets can have prospect of earning more profit, because they purchase in large quantity and sell out small quantity. Moreover, they bear only little operation expenses and do not provide free services to customers. This automatically results in more profit.
Limitations of Super Market
The major limitations of super markets are as follows:
1.       No credit: Super markets sell their products on cash basis only. No credit facilities are made available to the buyers. This restricts the purchasing power of buyers from such markets.
2.       No personal attention: Super markets work on the principle of selfservice. The customers, therefore, don’t get any personal attention. As a result, such commodities that require personal attention by sales people cannot be handled effectively in super markets.
3.       Mishandling of goods: Some customers handle the goods kept in the shelf carelessly. This may raise costs in super markets.
4.       High overhead expenses: Super market incur high overhead expenses. As a result these have not been able to create low price appeal among the customers.
5.       Huge capital requirement: Establishing and running a super market requires huge investment. The turnover of a store should be high so that the overheads are kept under reasonable level. This can be possible in bigger towns but not in small towns.

6.       Need of central place: Central as well as proper places are needed to establish supermarkets. Supermarkets cannot be operated everywhere. It becomes difficult to find proper location to establish supermarkets, even if found they become costly.
7.       Unsuitable for all products: Only some products, which are known by customers, can be sold in supermarkets. Some goods need to be explained by sellers to the customers for their knowledge. So, the products unknown to customers cannot be sold out from supermarkets.
8.       Need of efficient manager: Compared to other retailing institutions, efficient manager is necessary for the operation of supermarkets. Otherwise, it cannot be operated successfully.
Difference Between Departmental Store and Super Market
Departmental Store
Super Market
A department store is a large retail store offering a variety of merchandise and services and organized in separate departments.
Supermarket is a large self-service retail market that sells food and household goods.
Departmental stores are larger than supermarkets.
Although supermarkets are large stores, they are typically smaller than departmental stores.
Departmental stores have many floors.
Supermarkets usually have only one floor.
Departmental stores stock a variety of products.
Supermarkets do not usually stock clothing, jewelry, and hardware.
Fresh Products
Departmental stores do not usually stock fresh produce or meat.
Supermarket: Supermarkets stock fresh produce, dairy, and meat.
Departmental stores are not typically owned by corporate chains.
Supermarkets are owned by corporate chains.

Super Market is superior than other markets


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