1. CRITICAL ELEMENTS OF RETAILING

2. Definition of Retailing Retailing consists of the activities involved in selling goods and services directly to ultimate consumers for personal, non business use

3. Basis of Positioning Breaking bulk Spatial convenience Waiting and delivery time Product variety Most retail outlets Sam’s Clubs Convenience Shopping Specialty Large stocks Minimum queuing time Breadth of product range Depth of assortment

4. Major Retailer Types Specialty store Department store Supermarket Convenience store Discount store Off-price retailer Superstore Catalog showroom

5. Elements of Retailing (Customer related) Variety and Assortment breadth of product lines and depth of product brands or models Location and Convenience Customer Service

6. Contrast of Traditional and Modern Retailing TRADITIONAL High margin Low Turnover Numerous personal services MODERN Low margin High turnover Minimum Services In the 21 st Century, some retailers are able to combine LOW MARGINS, HIGH MARGINS WITH EXCELLENT PERSONAL SERVICES by using sophisticated information systems for improved asset management

7. Strategic Profit Model Net Profit Net Worth Net Profit Net SalesTotal Assets Net SalesTotal Assets Net Worth X X Margin Management Asset Turnover Financial Leverage

8. Measures of Performance critical to Retailers 1.Gross margin return on inventory (GMROI) 2.Gross margin per full time equivalent employee (GMROL) 3.Gross margin per square foot (GMROS)

9. Indicators of Sales Effectiveness Number of people passing by location Percentage who enter store Percentage of those who enter who also buy Average amount spent per sale

10. Trends in Retailing New retail forms and combinations Growth of intertype competition Competition between store-based and non-store-based retailing Growth of giant retailers Growing investment in technology Global presence of major retailers

11. Strategic Issues in Modern Retailing

12. Increased Power of Retailers Retailers tend to dominate because : 1.Growth for a manufacturer now translates to market share game 2.In the competitive environment retailers cannot increase prices. Margins can increase only by lowering procurement prices 3.Retailers have many new products to choose when deciding what to stock 4.With information technology the retailer can capture item by item data of sales

13. Power Retailing Characterized by : 1.Ability to take risks by forecasting trends 2.Ordering early 3.Selling in large volumes 4.Heavy investments in information technology 5.Commitment to deliver value 6.Emphasis on customer service

14. Emergence of Global Retailers Driven by : 1.Slowing of growth in the home markets 2.Overwhelming attractiveness of new emerging markets 3.Liberalization of several closed economies

15. What spells success for a Retail operation Merchandise Planning and Control Merchandise Budgeting : Planned sales Planned stock levels Planned reductions (markdowns) Planned Gross margins and Operating Profits

16. Non Store Retailing 1.Catalogue retailing 2.Direct Selling Organizations 3.Electronic Channels

17. Catalogue Retailing Suitable for Service Outputs Trade off Dispersed customers Time starved customers Break Bulk Assortment Spatial convenience Delayed deliveries

18. Catalogue Retailing Challenges Procurement of the product Preparation of the catalogue Organizing the mailing lists Order fulfillment and shipping Out – of – stock situations Merchandise returns

19. Direct Selling Organizations (Multilevel selling – Network selling) ‘Distributors’/Consultant primarily perform the promotion flow vigorously Drawbacks : 1.Low entry barriers, hence the danger of non-serious distributors being inducted 2.Segmenting/targeting/positioning absent

20. Electronic Channels Potential constrained by Service Outputs Trade off Penetration of PCs Inefficiencies of the ISP Fear of fraud Break Bulk Assortment Spatial convenience Delayed deliveries Channels involving use of Internet to reach the end-user. The customer can buy on-line

21. Electronic Channels Challenges Integration of electronic channel with the existing channels Reduction of conflict Order fulfillment and shipping Out – of – stock situations Merchandise returns

22. February 29 IKEA calls Indian retail opportunity a myth In a scathing attack on misplaced optimism for Indian Retailing, an official of Swedish retail major, IKEA has dismissed the Indian retail market as over-hyped. “India is not ready for big retailers yet. Maybe we can talk about it in 2015-16…I am not impressed by the big investments happening in this market today. I want to see return on investment, which is not happening,” IKEA India Property and Establishment Manager Staf Lenders said at the Technopak Retail Summit. easing of FDI norms was a pre-condition for their entry. Mr. Lenders further lambasted Indian retailers and those who had already made investment, “I can’t understand how an Indian company can open 200 stores in one year. May be you (India) are just copying the mistakes of others…Also, local companies, including Reliance, do not know how to respect customers.”

23. Franchising Is the licensing of an entire business format. Is a package of industrial or intellectual property rights. Franchising is characterized by : 1.Use of common name or sign, with a uniform presentation of the premises 2.Communication of know how from franchisor to franchisee 3.Continuing provision of commercial or technical assistance by the franchisor to the franchises.

24. Franchising from a franchisee point of view 1.A good way for the uninitiated to get into business 2.A good system to run a business 3.Renting of brand equity

25. Franchising from a franchisor point of view 1.A good way to tide over scarcity of capital and managerial talent 2.A justification for national advertising 3.Preempt competition in a fragmented market and build a strong brand 4.Harnessing the motivation of a capable person 5.Cutting down on the monitoring costs by making people into residual elements

26. The Franchise Contract Three important sections of the contract : 1.The payment system 2.The real estate 3.Termination

27. The Franchise Contract Three important sections of the contract : 1.The payment system 2.The real estate 3.Termination For notes only

28. Company owned v/s Franchise owned Outlets When to have company outlets ??? 1.Initially the franchisor needs to start out with some outlets of his/her own to formulate the business format and develop the brand name. 2.To hold a location in a new market 3.In markets requiring monitoring from the franchisor a company outlet is preferable …..2

29. Company owned v/s Franchise owned Outlets 1.Each form benchmarks for the other 2.Company stores are good laboratories to test a new product concept. However, company store managers don’t generate ideas, they follow rules. Ideas come from the franchisees. …..2

30. That’s all for Today!!!