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Presentation Transcript

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OBJECTIVES To understand, Types of retailers Franchising Strategic issues in retailing Market decisions Global trend in retailing Trends in retailing in India

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Retailing - meaning Retailing includes all activities involved in Selling and providing goods and services to ultimate consumers for personal, or household use.

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French word –‘retailer’ Retailing involves Understanding customer needs Assortment of merchandise Display merchandise Manufacturer----- wholesaler------Retailer----Customer

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TYPES OF RETAILERS Generally retailers are classified into four categories: Retailing based on ownership Retailing based on the extent of product lines handled Retailing based on the services vs. goods retail strategy mix Non-store based retailing

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A. Ownership Independent Chain Franchise Leased Vertical market system Independent Partially integrated Fully integrated Consumer cooperative

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B. The Extent of Product Lines Handled Specialty stores ex: Health&Glow stores that have been set up in recent times by the Goenka Group and offer solutions for better health in the form of Ayurvedic products.  Department stores ex: Westside, Pantaloons, Shoppers’ Stop and Lifestyle are examples of department stores in India.

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Discount Stores ex: Big Bazaar and Giant Hypermarket are examples of discount stores. Supermarkets ex: Food World and Trinetra are examples of supermarkets in India. Hypermarkets ex: Giant Hypermarket set up by the RPG Group in Hyderabad was the first of its kind in India with two more to come up in Mumbai and Kolkata in the future.

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C. Retailing Based on the Service vs. Goods Retail Strategy Mix Goods - goods retailing, physical products are sold such as groceries. Services - services retailing, the consumer does not get ownership of a product. Rented goods services ex: Car rental Owned goods services ex: Annual maintenance contracts for PCs and printers Non-goods services, No physical goods are involved; only the time and expertise of the person who is going to provide the service is bought for a fee. ex: Stockbrokers, tutors, personal trainers, real-estate brokers

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D. Non-Store based Retailing Traditional non store retailer Direct marketing Direct selling Person to person Multilevel marketing Party plan Vending machine Catalog marketing Telemarketing TV home shopping Non traditional non store retailer WWW Video kiosks Video catalog

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FRANCHISING Franchising is a contractual and legally binding agreement between a franchiser and a franchisee. This agreement is also known as a franchise or license agreement. FRANCHISER Owner of a trademark or a trade name, a producer of goods or a service gives the franchisee the right to do business using his trademark, trade name, product, or service

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FRANCHISEE Abides by the specifications laid down by the franchiser Obtains the license to do business by paying the franchiser an initial amount and setting aside a definite portion of his monthly sales for the franchiser. Factors considers before franchising are, Establish their brands in the market before venturing into franchising Companies that have high brand value are likely to be more successful as it is difficult for others to imitate the company’s product or service offerings

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Franchisees should be chosen on the basis of Their prior experience and local knowledge, so that they can serve the market efficiently. Securing the confidence of the franchisees is very important for the franchiser

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Major Types of Franchising Product distribution franchise Business format franchise and Trade name franchise.

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1.Product distribution franchise The franchisee is allowed to distribute, the manufacturer’s product in a wholesale or retail form. The terms of the franchising agreement do not allow the franchisee to make any changes in the product format and the product has to be sold in a specified geographical area. The franchisee utilizes the franchiser’s product, service and trademark for selling. Ex : Automobile dealers and dealers of petrol, gas and diesel are examples of product distribution franchises.

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2.Business format franchise The franchisee has the freedom to modify or make changes to the franchiser’s product or produce a new product under the license of the franchiser. The franchisee uses the trademark of the franchiser along with his methods of production, quality control mechanisms, marketing plans, operational standards and so on. In this type of franchising too, the franchisees operate in a designated market area. Ex: Fast food outlets such as McDonald’s, and ice cream parlors such as Baskin Robbin’s are examples of business format franchises.

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3.Trade name franchise The franchiser allows the franchisee to use his trade name or license for the products manufactured at the franchisee’s plant. The franchisee after producing the products has considerable freedom to sell them in a predetermined market area. Ex: Soft drink bottlers are examples of this type of franchises.

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Advantages to the franchiser Low capital and low risk Speedier Expansion Extended Market Penetration Motivation of the Franchisee Controlling the quality Disadvantages to a franchiser Business Control Expenses Involved Lower Profit Potential

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Advantages to the franchisee Reduced Business Risk Operational Advantages Easy Financing of the Business Entrepreneurial Benefits Resale of the Business Disadvantages to a franchisee Limited Freedom Fee Payment Nonperformance of the Franchiser

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Retail Franchising within India Grew initially in the apparel & footwear sectors Has gradually grown to cover a wide variety of sectors including food, consumer durables, jewelry, books, home décor etc Two varieties of Retailers: The manufacturer-retailers – typically Product Distribution Franchises – have been around for a while The aggregators – typically Business Format Franchises – only now beginning to show up

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Existent & likely to be successful only in smaller formats Substantial action also happening in non metro locations Thereby spreading organized retailing over a larger footprint Has had to contend with the peculiarities of the Indian real estate markets Result – MG (Minimum Guarantee) has become the key driver

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STRATEGIC ISSUES IN RETAILING Situation analysis Setting objectives Identification of target markets and consumers Developing an overall strategy considering the controllable and uncontrollable variables Developing specific activities on the basis of the day-to-day operations and also the business environment. Finally, suitable control strategies for control have to be devised by evaluating the deviations and correcting them to attain the retail organization’s objectives.

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Location Store Image Decisions

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MARKET DECISIONS Product Assortment and Procurement Service Mix and Retailing Environment Price Place promotion

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GLOBAL TREND IN RETAILING Significant global changes over the past two decades Present global state that involves e-tailing (e-tailing is a term for retailing on the Internet) Disruption (unexpected break in activity) in retailing, Departmental stores Origin of catalogue retailing, discount department stores, and Internet retailing Discounted departmental stores Online retailing

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TRENDS IN RETAILING IN INDIA Indian retail industry remained a largely unorganized sector till the eighties Corporate houses like Raymond’s, Bombay Dyeing, and Titan stepped into retailing after recognizing the vast potential of this sector The growth of the retailing industry in India are, Increased urbanization, Growth in the demand for newer and varied products by consumers, Branded goods penetrating the market on a large scale and A fall in the cost of real estate.

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Retailing provides the highest employment after agriculture in India. These retail outlets contribute over Rs.14,000 crore to the GDP (Gross  Domestic Product) of the country. The major segments of retailing are, consumer durables, followed by furniture, healthcare, garments, food and services. Retailing of personal care products, apparel, music, and books is on the rise too.

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Clothing and Textiles Jewelry and Watches Footwear Food and Grocery

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Home Décor and Furnishings Electronics Beauty Care Books and Music

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Major Retailers India’s top retailers are largely lifestyle, clothing and apparel stores This is followed by grocery stores Following the past trends and business models in the west retail giants such as Pantaloon, Shoppers’ Stop and Lifestyle are likely to target metros and small cities almost doubling their current number of stores These Walmart wannabes have the economy of scale to be low –medium cost retailers pocketing narrow margin Leading Retailers

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SUMMARY Types of retailers Franchising Strategic issues in retailing Market decisions Global trend in retailing Trends in retailing in India

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