Retail Marketing

Unit 1

Unit 1

Introduction to Retailing

Structure:
1.1 Introduction
Objectives
1.2 Retail scenario in India: Organised vs. Unorganised
1.3 Definition of Retailing
1.4 Functions of the Retailer
1.5 Factors Leading to the Growth of the Retail Sector
1.6 Challenges faced by a retailer
1.7 Classification of Retail units
Based on ownership
Based on operational structure
Based on retail location
1.8 Summary
1.9 Glossary
1.10 Terminal Questions
1.11 Answers
1.12 Case study

1.1 Introduction
Take a moment to think of how many different products you have used since
this morning; you woke up and brushed your teeth, drank a cup of tea and
ate some cookies to go with it, your shirt and trousers were perhaps made
by different manufacturers, and so on. What is the common link between
each of these? The answer is that you bought all of them at a retail store.
Imagine how hard it would be if we had to run to individual manufacturers to
buy everything we needed.
Retailers act as the interface between manufacturers and the end customer.
They buy stock in large quantities and sell them to customers in smaller
quantities. Retailers are the last leg of the supply chain through which a
product travels before finally reaching the end customer. This unit will help
you to understand the functions of a retailer and factors responsible for retail
growth in India. Also, this unit explains to you the classification of retailing
and challenges faced by retailers.

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Objectives:
After studying this unit, you should be able to:
explains the difference between organised and Unorganised retailing in
India.
define retailing
describe the functions of retailers
identify factors leading to the growth in retailing
identify the major challenges faced by the retail industry.

1.2 Retail Scenario in India: Organised vs. Unorganised

Retail industry in India can be classified into two broad categories
organised retail and unorganised retail.
Organised retail includes retailers who operate their business as a
professionally managed commercial entity. They have professionally
managers running the business, and maintain proper account books as per
standards. Examples of organised retailers include Big Bazaar, Star Bazaar.
Organized retail in India is small, currently estimated to be around 7% of the
total retail, however, it is growing much faster compared to unorganised
retail. Figure 1.1 shows the projected growth of the share of organized
retailing to the total retail business in India till 2020-21.

Fig. 1.1: Projected share of organised retail versus unorganised retail during
the decade between 2010-11 to 2020-21.
(Source: India Brand Equity Foundation Retail Report (November 2011),
Deloitte, Aranca Research)
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Unorganised retail Unorganised retailing refers to the traditional formats

of low-cost retailing. Unorganised retailing refers to retail businesses that
are typically run by the owner (or his family) or a caretaker. The
management of such retail stores is not a professional function and they
lack technical and accounting standardisation.
Conventional Kirana shops, general stores, corner shops among various
other small retail outlets are examples of unorganised retailers. They remain
the driving force behind Indias retail industry.
The following are some salient points about the retail sector in India:
Retail industry, being the fifth largest in the world, is one of the sunrise
sectors with huge growth potential and accounts for 14-15% of the
countrys GDP. Comprising of organised and unorganised sectors,
Indian retail industry is one of the fastest growing industries in India,
especially over the last few years.
According to the Global Retail Development Index 2012, India ranks fifth
among the top 30 emerging markets for retail. The recent
announcement by the Indian government with Foreign Direct Investment
(FDI) in retail, especially allowing 100% FDI in single brands and multibrand FDI has created positive sentiments in the retail sector.
Indian retail industry is the largest industry in India, with an employment
of around 8% and contributing to over 15% of the country's GDP.
McKinsey report 'The rise of Indian Consumer Market', estimates that
the Indian consumer market is likely to grow four times by 2025.
Retail industry in India is expected to rise 25% yearly being driven by
strong income growth, changing lifestyles, and favourable demographic
patterns.
Indian retail industry is one of the fastest growing industries with
revenue is increasing at a rate of 5% yearly.
India's overall retail sector is expected to rise to US$ 833 billion by 2013
and to US$ 1.3 trillion by 2018, at a compound annual growth rate
(CAGR) of 10 per cent
A further increase of 78% is expected in the industry of retail in India by
growth in consumerism in urban areas, rising incomes, and a steep rise
in rural consumption.

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CB Richard Ellis' findings state that India's retail market is currently

valued at US$ 450 billion.
In India, the retail industry is broadly divided into the organised and
unorganised sectors.
The organised sector accounted for Rs. 350 billion of the total revenues.
Traditionally, the retail industry in India comprised of large, medium and
small grocery stores which could be categorised as unorganised
retailing.
Most of the organised retailing in India had recently started and was
mainly concentrated in metropolitan cities.

Self Assessment Questions:

1. In India, the retail industry is broadly divided into _____________and
________________ sectors.
2. Conventional Kirana shops, general stores, corner shops among
various other small retail outlets are examples of ________________.
a) Unorganised retailing.
b) Organised retailing.

1.3 Definition of Retailing

Retailing is a set of activities that enables selling of goods and commodities
to the customers or end consumer in small quantities.
A retailer is a person or an outlet through which products or services are
sold to customers or the end user.
Retailing is one of the key elements of a marketing and distribution strategy;
it ensures that a product reaches the consumers. The word retailing
originated from the French word retailier which means to cut or break into
pieces. In other words, retailing is the process of buying goods or products
in bulk, breaking down the bulk and selling them in smaller quantities to
customers or end users. However, it is the type of customer and not the
activity that distinguishes a retailer from other traders; the distinction being
that, a retailer sells to the final consumers. Retailers attempt to satisfy
consumers by ensuring that the right merchandise is available at the right
price at the right place and at right time.

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Self Assessment Questions:

3. ______________ is one of the key elements of a marketing and
distribution strategy.
4. The word retailing originated from the French word retailier which
means ______________.

1.4 Functions of the Retailer

Retailers play a significant role between manufacturers, wholesalers,
suppliers and consumers. Retailers perform three major functions: Sourcing
and buying, storing and selling. They also perform other supporting
functions such as grading and packing, risk bearing, transportation, value
added services, sales promotion, provision of information and store
operations.
Major functions
1. Sourcing and buying: One of the primary functions of the retailer is to
source and buy a range of products or goods from different wholesalers or
manufacturers based on the estimation of demand and sales forecast.
Retailers choose the best suitable merchandise from different wholesalers
or manufacturers and place them under one roof for sale. Therefore, a
retailer performs the twin functions of buying and assembling a range of
goods.
2. Storing: Every retailer breaks down bulk goods into smaller quantities
and maintains a stock of goods and displays them in the store for the
purpose of sale. Most large scale retailers prefer to maintain stocks in their
back store; this helps in reducing cost by reducing the frequency of
transportation of goods to and from wholesalers.
3. Selling: The primary objective of any retailer is to sell goods to the
customers and earn profits. The retailer thus sells the goods in smaller
quantities to meet the demand and choice of customers. Retailer employs
suitable methods and sales strategies to sell goods to increase the sales
turnover.
Supporting functions:
Grading and packing: Grading is a process of dividing goods and products
based on its shape, size, quality, colour, weight and so on. Grading also
helps in determining the price of goods. Grading is widely followed in the
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marketing of agricultural products. Grading helps in determining the value of

the product too. The best grade commands the highest price. The retailer
grades those product or goods which are not graded by the manufacturers
or wholesalers.
Based on factors such as pricing strategy, grades, seasons, sales
promotions and consumer demands, the retailers also package goods in
smaller quantities for the convenience of customers. Grading and packaging
are always carried out as per the standards prescribed by the relevant
government authorities.
Risk bearing: Retailers, both large and small, maintain a certain amount of
stock to ensure availability of stocks to meet customer demands. This leads
them to bear the risk of loss due to fire, spoilage, price fluctuations, theft and
so on.
Logistics and transportation: Retailers are required to maintain their own
transportation facilities to carry goods from wholesalers or manufacturers to
their stores or distribution centres. Large scale retailers such as Walmart
and Reliance Retail maintain organised logistics facilities such as fleets,
cold chain, distribution centres and various other resources to ensure an
efficient supply chain whereas small retailers depend on logistics and
transportation service providers.
Value added services: Most organised and modern retailers provide value
added services to customers such as exchange or return of goods, home
delivery of products and after sales services.
Sales promotion: Retailers carry out sales promotion activities to promote
sale of goods and increase their sales turn over. Such sales promotion
activities include festive decorations, decorative window displays, discount
offers, road shows and so on. It is a modern trend amongst most
contemporary retailers to maintain direct personal contacts with customers
to woo them to buy their products.
Provision of information: Retailers provide information to customers about
new products along with their features and benefits. This acts as guidance
to customers to help them make the best suitable choice of products.
Retailers also provide information on market trends and forecasts to
wholesalers and manufacturers.
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Store operations: Store operation is the most prominent function of any

retail store. Apart from storing and displaying of goods, store operations in a
modern large scale store involves activities such as housekeeping, loss
prevention, health and safety of consumers and staff, human resource
management and commercial activities such as accounting and billing.
Activity 1:
Study the major functions and support functions of any one of the
organised retailer.
Hint: Go to any hypermarket (Mega-mart, Big Bazaar, Brand Factory,
Star Bazaar, West side or Home Town) and refer the functions in
Section 1.3.
Self Assessment Questions
5. Retailers perform three major functions called as _________________.
6. A retailer performs twin functions of ___________________________
the range of goods.

1.5 Factors Leading to the Growth of the Retail Sector

Young working population: India has a large young working population
with an average age of 24, A large proportion of the working-age population
implies a lucrative consumer base vis--vis that of other economies of the
world, placing India on the radar as one of the most promising retail
destinations of the world. Nuclear families in urban areas, along with
increasing working women population and emerging opportunities of
employment are going to be the key growth drivers of the organised retail
sector in India.
Economic growth: The speedy growth of the economy in India is one of
the forces that has driven consumerism amongst Indians, leading them to
spend a large portion of their disposable income. Analysts have projected
that India is the fastest growing economy and is set to outpace developed
economies by the year 2050. Predictions by analysts also say that India will
sustain a GDP growth rate of 5 percent during this period.
Untapped potential market: India is a leading emerging market today and
is a priority market for international retailers to invest. Today, organised
retail scenario in India offers a very attractive proposition for the entry of
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new players in the sector as well as those already existing. There exists a
spectrum of opportunities from rural retailing to luxury retailing due to the
rising percentage of disposable income amongst all the classes and
geographies. Adding to all the above, there is massive retail space
availability in the tier II and tier III cities and towns across the country.
Low cost of operations: With a lot of untapped potential in tier II and tier III
towns and cities in India, most companies are intending to venture into
smaller towns and cities to leverage the opportunities such as availability of
retiling space and skilled manpower at a lower cost. Graduates from small
towns who look for opportunities in larger cities are the ideal resources for
the role of executives in customer service, sales and marketing as well as in
finance.
Share of wallet: The maximum share of a familys earnings is devoted to
food and grocery at 36% followed by rent and utilities which accounts to a
significant proportion. The share of other expenditures in the daily routine of
an individual is shifting drastically. Double income in a single family by both
husband and wife has also increased the share of wallet resulting in the
increase in the buying power of a family.
Increase in sizable and disposable income: Business communities
believe that a sizable disposable income in India exists in urban areas
where well-off and affluent classes reside. However, it is a fact that a similar
number of middle class families exists in rural India who have the same
purchasing power as that of families in urban areas. Despite a lot of promise
from the rural markets, modern organised retailers are pondering over
strategies to cater to such rural market profitably.
Diversified culture and festivals: India is a secular country which has a
variety of cultures, languages and festivals which are celebrated throughout
the year. Each festival is celebrated all over India with different names and
rituals with great enthusiasm. On auspicious occasions like 'Akshaya
Tritiya', the sale of gold is expected to cross 40 tonnes in the country, with
Tamil Nadu alone accounting for more than 20 tonnes. Each festival brings
fresh opportunities for retailers. There are huge opportunities in India for
retailers to convert shoppers into buyers.

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Growing number of HNI: The growth of HNI was primarily led by market
capitalisation and real GDP growth. India with its huge population has the
most number of HNIs with a huge potential to spend. The richest farmers in
the villages of Punjab own Mercedes cars. According to a McKinsey report,
Indias HNI population will equal the size of the Australian population in
2025.
Brand conscious: Indias major population consists of the youth and they
are the ones who are most concerned about brands and new trends in the
market. People have become more brand savvy, whether it is the clothes or
the commodity they use. In India, branded products have a huge market.
For example, Gitanjali jewellers in India have branded diamonds like
Nakshatra, Gili, etc. These brands attract the consumer because the brand
is perceived as an authenticated product.
Media exposure: We have more than 100 TV channels with different
languages and therefore mass media is the best method to help consumer
remember what the retail market has to offer them. There will be a shift from
traditional media to increased communication at the point of purchase and
this initiative will help promote the whole sector.
Self Assessment Questions
7. The large proportion of the implies a
lucrative consumer base in India.

1.6 Challenges faced by a retailer

Lack of infrastructure: A large amount of investment goes into provision of
power backups due to insufficient and inefficient supply of power. The cost
of power for the retailing sector when compared to the manufacturing sector
is higher and this leads to escalation of costs of maintenance and
development.
High rentals: India is one of the major countries in Asia with an improving
market. There are concerns about an asset-price bubble raising questions.
Property prices are sky high and are increasing very fast. The buzzword
Shop till you drop! that was often heard a few years age is no more heard
now. The drastic increase in rental charges for retail space, almost 300
percent in 2008, has made retailers go completely dull since they are unable

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to afford such high rentals. This has brought about speculators in the
market.
Supply chain & logistics issues: Rs. 50,000 crores worth of food
produced is wasted in India each year due to the lack of a robust supply
chain infrastructure and this leads to unproductive costs of logistics With the
absence of efficient logistics systems, retailers are forced to incur huge
costs to set up individual supply chain management (SCM) and logistics
infrastructure. Stock-out levels among Indian retailers range from 5 to 15%
whereas the global average is less than 5%.
What to sell: Another challenge is the category of items to be offered.
According to researches, 41 percent of the total consumption expenditure
goes towards the food and groceries segment which accounts for
77 percent of total retail sales. Obviously, this is the most preferred section
of retailers. Supply chain management, storage of fresh perishable foods
and persuading the customers that the food is inexpensive despite being
fresh are genuine challenges to the newcomers. Diversifying the product
base to consumer products such as readymade garments, furniture mobiles
and computers can mitigate losses, if any, from food marketing and also
broaden the reach to consumers.
Nostalgia: Indian shoppers expect honesty, good behaviour, discounted
prices, etc., from the local shopkeepers with whom they have been
interacting for long. This demand from customers is difficult to handle as it
needs a change in the mind-set which has been long formed. However,
organised retailers can tackle this by employing local human resource to
deal with customers in the vernacular and handle their expectations better.
Information technology: This is a major problem and India must act fast if
it wishes to create a smooth field for organised retailing. Digitisation of
services will make transfer of goods easy and an improvement in supply
chain management will definitely play a significant role in attracting more
consumers and less consumer grievances. Besides, it will generate easier
payments option for customers and easier money movement for the CEOs
of these highly diversified retail organisations.
Human resource crunch: The concern about insufficient manpower in the
industry has been in the news lately. This fear is somehow unfounded. The
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retail industry, according to recent reports, is growing at a rate of 100

percent. According to an article in the Economic Times dated 25th June, it is
estimated that the organised retailing sector will require manpower of almost
18 million by the year 2022. If we add to this the foray of mega international
players due to 100 percent FDI in retailing sector, the demand for manpower
is definitely going to escalate. Retailing mainly deals with hard selling of
space, trade of stocks and building of relationships. Since most job
openings are for front line roles, a graduation will suffice.
Inconsiderable regulatory framework: Retailers require around 12 to 15
clearances at the central, state and local levels to set up operations
because there is no single window clearance process. The provisions of the
The Shops and Establishments Act also vary. There are various restrictions
on interstate movement of goods, especially for food grains. There is no
government regulatory authority like (TRAI, DGCA, IRDA) to monitor the
Indian retail business.
Limited FDI: Allowing 100 percent FDI in single brand retailing from
January 2012 will attract a lot of international players to invest in Indian retail
sector, giving rise to an add to the existing boom in the sector in all
respects. However, despite central government allowing 100% FDI in single
brand retailing, there is a choice for state governments to accept or decline
the same. This aspect might challenge international players as they may
have to restrict themselves only to certain geographies and bear a risk of
losing out to the local players as they may not be able to expand.
Government interference: Some political parties want the government to
amend laws and increase curbs so that the mega players cannot openly
decimate the unorganised retail sector. This is a conclusion based on a
myopic outlook and must be changed for a long-term strategy.
Self Assessment Questions
8. The cost of power for retailing sector when compared to that in
manufacturing sector is higher. (True/False)

1.7 Classification of Retail Units

The major classification of retail units are store based retailing, operational
structure based, location based. Further to this, store based retiling is
classified on the basis of ownership and on the basis of variety of
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merchandise mix. Figure 1.1 shows the detailed classification of retail units
which is discussed below in detail.

Figure 1.1: Classification of retail units

Store based retailing: In store based retailing, you can see and touch the
products since it deals with tangible products. Accordingly, it is classified on
the basis of ownership and on the basis of merchandise mix.
1.7.1 Based on ownership:
One of the first decisions that the retailer has to make as a business owner
is how the company should be structured. This decision is likely to have
long-term implications.
There are four basic legal forms of ownership for retailers:
1. Sole proprietorship: In this type, the business is owned and run by an
individual. He enjoys the whole profit and assets and also is responsible
for liability & losses.
For example, if you start a small business with an investment of 5 lakhs
and you open a grocery store, your ownership form is called sole
proprietorship.

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2. Partnership: In India, this is a general form of doing a business. When a

single business carried out by two or more people, the form of
ownership is called partnership.
For example, if your friend is investing 3 lakhs in the grocery business
along with your 5 lakh investment, the ownership form is called
partnership.
3. Joint venture: When two or more firms come together to accomplish a
same goal or project for a limited period, it is termed as Joint Venture.
Both companies are mutually benefitted and dependent on each other to
achieve a common goal. One of the best examples of joint venture is
Hero Honda. It was a joint venture between the Hero Group and the
Honda Motor Company which was established in 1984 as Hero Honda
Motors Limited to produce two-wheelers in India. In 2011, Honda had
withdrawn its dependence of its sourcing from the Hero Group.
4. Limited Liability Company (LLC): The Limited Liability Company
(LLC), a hybrid of the partnership and the corporation, has become a
popular legal alternative for business owners. The LLC provides
protection to owners from being personally responsible for the debt
liabilities of the company. Members are only liable to the extent of their
investments in the company.
For example, if you slip and get injured on company property, you can
file a law suit which may bankrupt the business, but it cannot touch the
personal assets of the LLC's members.
1.7.2 Based on the variety of merchandise mix: On the basis of the
merchandise offerings and its variety, retailers are classified into the
following types:
1. Convenience stores: Stores which sells convenient goods in a limited
variety, i.e. frequently purchased goods with minimum effort & easily
accessible to customers is called convenience stores. For example,
convenience goods like paste, milk, bread can be purchased from a
kirana shop (convenience stores) near your house.
2. Supermarkets: A supermarket is a self-service store which deals with a
wide range of food and non-food items. It offers fixed prices, clean
products and faster check-out. Example, Food World offers food items
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like vegetables, fruits, frozen foods and also non-food items like
cosmetics, stationary and gift items.
3. Discount stores: Discount store offers an extensive range of products
with heavy discount in price than any format of retailer. For example,
Future groups Brand Factory. Also The Loot, a multibrand discount
store is famous for its low price. It has brands such as Nike, Reebok,
Adidas, Levis, Pepe Jeans, Provogue, Benetton, Wrangler, Lee, Arrow
as well as Mercedes, Old Navy, Gap and Banana Republic.
4. Specialty stores: Stores which specialises in a particular range of
products and provides the depth and width of a specific product category
is referred to as a specialty store. Example, Titans World of Titan offers
a range of Titan watches.
5. Department stores: These are large stores which classifies products
under specified departments. It has a wide range of products compared
to any other formats. Department stores sell products such as furniture,
apparel, appliances, electronic goods and also includes products like
hardware, toiletries, cosmetics, photographic equipment, jewellery, toys,
and sporting goods.
6. Hypermarkets: A hypermarket is a very large retail unit offering
merchandise at low prices. Hypermarkets are characterised by large
store size, low operating costs and margins, low prices and
comprehensive range of merchandise. They are a combination stores
that unite supermarket and general merchandise sales in one store with
the latter generally accounting for 25-50 % of the total sales. Consumers
choose them for one-stop-shopping and do not mind travelling a
distance to visit these stores. They achieve operational efficiencies and
cost saving through their large scale operations. Impulse sales are high
in such stores. For example, Shoprite Hyper, Hypercity, Star Bazaar,
Pantaloons Big Bazaar, and Vishal Megamart.
Note: Indias first hypermarket was started by Vishal Megamart.
1.7.3 Based on operational structure:
Operational structure refers to the arrangement or organisation of day-today activities as well as strategic retail activities like hiring employees
according to customer walk-ins, co-ordinating with dealers and deciding on
outlets, etc.
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1. Independent retail unit: An independent retailer owns a single retail

unit with a targeted customer base. For example, shops like Ishwarya
beauty parlour, Whiterose Laundry Service, etc., in your street or near
your living place where you would have experienced customised
service.
2. Retail chain: As the name indicates, chain indicates the number of retail
units. Retail chain operates under a common ownership with several
outlets. It ranges from two to thousands of stores across various
locations and it maintains the uniqueness in ambience and in the variety
of merchandise sold. Example, Reliance Fresh, Shoppers Stop, Big
Bazar, etc., If you visit a Big Bazaar in Bangalore and Mumbai, you will
see the same kind of ambience inside both the stores and you will find
the similar goods and services as well .
3. Franchising: Franchising is a business model in which a firm follows
and runs its business by adapting the same strategies of a successful
company under its brand name. It is a replica of a successful business
model with a contractual agreement of conducting business in a given
pattern. The person or firm which follows the pattern of a successful
company is termed as Franchisee and the successful company is called
Franchiser.
This model is popular with fast food restaurants and in the hotel industry.
For example, McDonald's (MCD) operates the world's largest fast food
chain and earns 37% of its revenue from franchising across its
approximate 31,400 restaurant locations. Franchisees operate 65% of
McDonald's restaurants worldwide.
4. Leased department or shop-in-shop: When a brand owner occupies
shelf space in another retailers store, which deals with multiple-brand,
to increase their sales is called leased department ownership. For
example, when you visit Big Bazaar or Star Bazaar, you can see brand
owners like Adidas, Nike, Reebok, etc., who have leased a particular
space in these shops to sell their products.
5. Co-operative outlets: In this concept of ownership, the retail outlets are
owned by co-operative societies. For example, Amul Parlour by Amul
India ltd, Mother Dairy milk booths in New Delhi, etc.
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1.7.4 Based on retail location:

Retail location is an important factor which plays a crucial role in
accessibility and popularity. On the basis of retail location, retail units are
classified as listed below.
1. Free-standing location: Free standing location represents an isolated
location of the retailer where the business depends entirely on their
pulling power. Here promotional tools are used to attract customers. For
example, the Haldiram outlet on the Delhi-Jaipur highway and
McDonalds outlet on Delhi-Ludhiana highway.
2. Business-associated location: One or more retailers work together
and operate in a particular location to bring customers to their location
where they compete with each other for the same kind of customers. For
example, Chikpet in Bangalore, Chandni Chowk in Delhi.
3. Retailers in specialised markets: Apart from business associated
location, there are other locations in India which are specialised in
specific types of products. For example, Surat in Gujarat specialises in
sarees, silk saree is the speciality of Tamil Nadu, Hyderabad is famous
for pearls, etc.
Activity 2:
Interpret the form of ownership, operational structure, merchandise mix,
location of a retailer.
Hint: Select any retailer to observe the activities and the classification
criteria of that retail store.
Self Assessment Questions
9. When a single business carried out by two or more people, the form of
ownership is called Partnership. (True or False)
10. When a brand owner occupies a shelf-space in other retailers store
which deals with multiple-brand to increase their selling, it is called
___________________.
.
11. ____________________ is a business model in which a firm follows
and runs its business by adapting the same strategies of a successful
company under a same brand name

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1.8 Summary
Let us recapitulate the important concepts discussed in this unit:

Indian retail industry is broadly divided into the organised and

unorganised sectors.

Retailing is a set of activities that enables selling of goods and

commodities to the customers or end consumer in small quantities.

Retailers perform three major functions called as sourcing and buying,

storing and selling and many more functions such as grading and
packing, risk bearing, transportation, value added services, sales
promotion, provision of Information and store operations

The factors leading to growth of the retail sector young working

population, economic growth, low cost of operations, Increase in sizable
and disposable income, diversified culture and festivals, Growing
number of HNI, brand conscious, Media exposure.

Challenges faced by a retailer are Lack of Infrastructure are high rentals,

supply chain & logistics issues, amalgamation or confusion, limited FDI,
human resource crunch, inconsiderable regulatory framework,
information technology.

The retail units are broadly classified on the basis of operational structure,
retail location & store based retailing.

1.9 Glossary
Retailing: The word retailing originated from the French word retailier
which means to cut or break into pieces.
HNI: High Net worth Individuals.
Sole proprietorship: In this type, the business is owned and run by an
individual.
Hypermarket: It is a very large retail unit offering merchandise at low
prices. Hypermarkets are characterised by large store size, low operating
costs and margins, low prices and comprehensive range of merchandise.
Independent retail unit: An independent retailer owns a single retail unit
with targeted customer base.
Retail chain: It is signified in the name itself, i.e a chain that indicates the
number of retail units.
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Leased department or shop-in-shop: When a brand owner occupies a

shelf-space in other retailers store which deals with multiple-brand to
increase their selling, it is called leased department ownership.
Free-standing location: Free standing location represents an isolated
location of the retailer where the business depends entirely on their pulling
power.
Co-operative outlets: In this concept of ownership, the retail outlets will be
owned by co-operative societies.
Specialty stores: The store which is specialised in a particular range of
products.

1.10 Terminal Questions

1.
2.
3.
4.

Define retailing and List the functions of a retailer.

Discuss the factors which influence the growth of retail sector.
What are the challenges being faced by retailers in India?
Explain the classification of retail formats in detail with Indian examples.

1.11 Answers
Self Assessment Questions
1. Organised & Unorganised.
2. Unorganised retailing
3. Retailing
4. To cut or breaking into pieces.
5. Sourcing and buying, storing and selling.
6. Buying and assembling.
7. Working-age population.
8. True.
9. True.
10. Leased department ownership.
11. Franchising.
Terminal Questions
1. Refer Section 1.3
2. Refer Section 1.5
3. Refer Section 1.6
4. Refer Section 1.7
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1.12 Case Study

Lawrence & Mayo
Lawrence & Mayo is a 135 year old organisation and one of the largest
growing chains of Optical stores in India. L&M, today, attracts more than
thousands of customers everyday in 84 stores (Company-OwnedCompany-Operated) across nearly 30 cities in India and is well equipped
to meet the increasing demands of the rapidly growing market for eye
care and precision instruments.
Lawrence & Mayo has been truly a trend setter in the Indian optical
industry. It has introduced several international brands in India. Example,
Ray Ban was introduced in India in the late 1930s. Also, contact lenses
were introduced in 1975, computerised eye testing (Auto Refractometer)
in 1988 & so on. Eventually L & M is the first optical retailer to be certified
for ISO 9001:2008. Thus, L & M is the most trusted optical retail chain in
India. L&M obviously cannot ignore the R10,000 crore growing watch
market at average rate of 8% annually driven by the youth and premium
segment of consumers which has not been tapped by major Indian
brand.
Watches are typically segmented into specialist watches and fashion
watches. All International watch brands have a clear position as to where
they belong. In India, most sales are in the fashion segment and this fine
distinction has not yet been used by marketers. 50 million wrist watches
are sold in India every year. Some of the major players include domestic
firms such as Titan, Timex, Maxima and HMT and a host of international
brands and companies such as LVMH, Seiko, the Swatch Group, Chanel
and others. Notwithstanding the presence of global players, the Indian
market has always been dominated by a single player. In the past till the
late 80s, in the mechanical era, HMT dominated the market. And after
that it has again seen the domination of another single company, Titan.
Today, Titan has almost 65% market share of the organised watch
market in the country.
The highest share of watches retailed is around the price range from
R500/- to r3000/-. The category of watches retailed in the price bracket of
R4000 to R15000 is growing at an exponential rate of over 20%. The size
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of the organised luxury watch segment is around 3 % and growing at

around 20% annually. L&M also has a huge plan to launch their own
brand into this segment with international design and quality in the major
cities of Mumbai, Delhi, Chennai, Kolkata, Pune and Bangalore.
High import duty and tax burden at various stages has pushed the price
of luxury watches in India much higher than their international
counterparts. To cater to the price sensitive Indian market, L&M has a
clear focused strategy on product and plan to overcome price barriers by
introducing various cuts in their margins to maintain competitiveness in
retail market. With the economy springing positive vibes, increased
international travel, steadily progressing retail landscape, larger
disposable income and a large number of high net worth individuals
would favour the growth of the market. The expansion of modern retail in
India will further fuel the growth of this sector as the watch is increasingly
transforming into a lifestyle product from a mere time-keeping device.
Questions:
1. What is the best way for the L& M to continue to grow?
2. What are L&Ms competitive advantages? How can L&M gain its
position as the market leader in this new segment?
References/e-references:
Dr Vikram; Rushing into Retail, Business World, 31 May, 1999
McKinnon, AC (1986) Physical Distribution Strategy of Multiple Retailers,
International Journal of Retailing,
Brand Equity, Economic Times, Dec.26-Jan 2, 1997
Shridharan, R (1998), The Future of Retailing, Business Today, 7-21
December, 1998
Shridharan, R (1998), The Future of Retailing, Business Today, 7-21
December, 1998
Kumar, N (1996) The Power of Trust in Manufacturer-Retailer
Relationships, Harvard Business Review, 74, November/December.
12 Stern L.W. and El-Ansary A. I. (1993), Marketing Channels, Prantice
Hall India, New Delhi, 4th Edition,

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