Lecture 1 Intro Retail.ppt

Agri-Food & Retail Management
Instructor : Dr. Anshu Mehta
Disclaimer : Company names and logos in the presentation are properties of respective companies. Mention of
any company name or display of brand logo should not be treated as any promotion or endorsement of the
brand. Names and logos are being used only to drive emphasize points in the presentation.

 Retail has its origin from a French word “Retailer”, meaning to break
bulk or to cut into smaller pieces.
 Retailing comprises activities encompassing selling goods and
services straight way to final customers for their individual, non-
business consumption (Kotler, 2012).
 A firsthand-transaction between the vendor and the customer (Pandya,
2012).
Introduction 2

 Organized retail infiltration is 12 per cent in 2021-22, up from 9 percent
in 2017.
 The retail market size in India was expected to amount to 1.5 trillion
U.S. dollars by 2030, up from 0.88 trillion dollars in
2020.(https://www.ibef.org/industry/retail-india)
 By the year 2025, India is projected to be the third largest consumer
economy in the world.(IBEF, January,2020)
Introduction 3

• It accounts for over 10% of the country’s gross domestic product
(GDP) and around 8% of the employment.
• India is the world’s fifth-largest global destination in the retail space.
4

Importance of Retailing
Why Retail is Important?
5

• Sales to Ultimate consumers of the products
• In a retail transaction, the goods and services are sold to ultimate or
final consumers.
• Goods and services sold at this point can be used for various
purposes such as for personal use, household use.
• Retail stores play an important role in high-level exposure of
businesses and widespread distribution of products and an
opportunities to interact with customers and know about their
views.
6

• A convenient form of selling quantity-wise
• The meaning of word retail is to break down the goods in small
pieces and reselling them.
• The goods are bought by the retailer in large quantities from the
middleman or manufacturer and bulk is divided into small quantities
and sold to consumers as per their requirements.
• Retailer can repack goods in various quantities and shapes so that it
is convenient for consumers to choose and carry them to their homes.
7

• Convenient Place and Location
• Retailer stores are generally set up at locations which are convenient
for consumers to reach.
• A retail store can be of various forms such as it could be a small shop,
small store, or a multiplex. Goods can be sold through internet and
mobile apps as per the convenience of consumers.
• Shopping online is becoming a new trend because of the advancement
in technology and courier services. More and more companies are
taking their business online where customers can view products at the
comfort of their home and buy them.
8

• Shaping lifestyle of the people
• It is an integral part of modern society. People highly depend on retail
stores to lead a comfortable life.
• Rural customers
• Retail businesses contribute to the economy
• In many countries, the retail business is one of the biggest
contributors to the Gross Domestic Product. Retailing is a driving
force of the economy, and its ambition is to encourage sustained
growth.
9

• Retailers provide maximum employment
• Retail world employs maximum people. As per an estimation, one in
nine of the workforces is employed in the retail industry.
• Moreover, two third of the total workforce in the retail world is women
and more than half employees in retailing are part-time employees,
which provides flexibility to workers to adapt to the particular needs.
• In the past, the salaries paid to employees were very low. But as the
work conditions and salaries paid in the retail sector are improving
more and more people are considering retail jobs.
10

• Retail dominates the supply chain
• Goods and services flow from the manufacturer or a service provider to
final consumers and when there is a huge number of consumers,
spread worldwide, then the role of retail stores become much more
important.
• Retailers play the role of a connecting link between a manufacturer and
final consumers.
• In modern times, retailing is categorized by large multiple chains. The
increasing importance and formalization of retailing have made it a
powerful part of the supply chain.
11

• Creates utilities and value
• Retailer increases the value of the product by creating a place, time,
and utility in the distribution of goods.
• Retailers buy products in bulk and break them in small quantities and
sell them in small packs. In this way, he creates form utilities.
• Goods manufactured in one corner of the world are consumed in
other parts of the world. He buys products from manufacturers and
sells them in the local market thereby creating place utility.
12

• The retailer buys products in advance and place them in his store and
sell them to the consumers whenever the need arises. By creating
these three-utility value of goods is increased. The retailer makes sure
the regular production and consumption of goods.
• Provision of warehousing and storage
• It is a big problem for a manufacturer. A retailer buys goods in advance
from the manufacturer and reduces the problems of warehousing and
storage for the manufacturer.
• Retailer also helps in increasing the sales of goods by displaying them
nicely in the retail store.
13

Futuristic Retailing
What are the trends in Retailing?
14

Trends of the retail industry
• Personalization is the key to success
• More and more people are seeking personalized retail experience to
suit their personal shopping preferences.
• According to a study conducted by Accenture, 75% of consumers
prefer to shop from the store where retailers recognize them, know
their first names, and recommend their products based on their past
history.
• The more personalized experience consumer gets from the retailer, the
more he prefers to shops from it.
15

• By installing this technology in smartphones, they get details of
customers purchase history and offer them makeover based on that
history records. Keeping a purchase record of customers is quite easy
for digital stores.
• Online retailers can use algorithms to remember the history of
customers’ purchase history and can offer similar products to them.
16

• Recommender system?
• It is a type of information filtering system.
• By drawing from huge data sets, the system’s algorithm can pinpoint
accurate user preferences.
• Once you know what your users like, you can recommend them new,
relevant content.
• Eg., Netflix, YouTube, Tinder, and Amazon
17

• Brick and Mortar to co-exist
• At the end of 2017, thousands of brick-and-mortar stores closed down
because of the increase in the trend of online shopping.
• However, now changing customers’ behavior is being observed and if
stores offer excellent shopping experience and provide personalization,
then given a choice, people have started going out for shopping in
brick-and-mortar stores.
• Online leading e-commerce business such as Amazon are opening
physical stores.
20

• Even in the digital time, people prefer to buy products such as
clothes and accessories from the physical store because they can
see products and try them before making an investment in them.
• Phygital Retailing
21

• Automated Delivery strategies
• Companies are investing in Automation is the technology.
• Eg., many stores offer “Click and Collect” which means that
customers can place an order online and pick their order from the
desired location.
• Target has introduced the concept of “Drive-Up,” in which customers
can place orders using the target app. The store will prepare their
order and send them a notification when their order is ready then
customers can drive to the store and park it at parking spot where
employees of the store will load their car with their stuff.
22

• Similarly, the concept of a vending machine is also rising.
Customers can punch on the screen for whatever they want to buy
and make payments using a credit card.
• People like the concept of the vending machine and vending
machines can be the future of automated retail.
• Fun Fact: In Japan, you can buy anything from food to pet from
vending machines.
23

• Modifying the Retail environment
• In past stores were considered for exchange of goods and physical
handling.
• But at present people don’t go to the store merely to buy things but
they go to stores for the experience.
• To stay ahead in the business, the brick-and-mortar stores are required
to think about the innovative methods to entertain and please shoppers
and make them come to your store again and again.
• Eg., Starbucks
24

• Line and cashiers are things of the past
• New technology is being introduced options such as kiosks and self-
check-out machines.
• Take the example of Amazon stores; they let their customers simply
pick up the goods they want to purchase and walk out of the store.
• The overhead cameras, deep learning technology, and weight sensors
at the door detect the items bought, and the amount is deducted from
the Amazon accounts of buyers. This concept has been successful.
• https://www.youtube.com/watch?v=zdbumR6Bhd8
25

• DIY
• AR & VR
• Chatbots
26

Organized Retail
What is Organized Retail sector?
27

Organized Retail
• The retail sector can be classified in organized and unorganized
retailing
• Business is merged with the appropriate government and authority and
follow the rules and regulations.
• It requires proper registration of the business. The organized sector is
regularized by the government, and proper taxes are applied to it.
• Organized retailing is the process of selling goods or merchandise
all under one roof in a fixed location such as a departmental store,
hypermarket, supermarket or even a convenience store.
28

Key Difference between organized and unorganized retailing 29
Organized Retailing Unorganized Retailing
The Organized retail sector is
regulated by the government and
the employment terms and working
hours per day in this sector are
fixed.
The Unorganized retail sector is not
regulated by the government and
employment terms and working
hours per day are not fixed in this
sector.
The Organized retail sector is
governed by various acts like Bonus
act, factories act, minimum wages
act, and PF act, etc.
There is no government act to
govern the unorganized retail sector.
Government rules are strictly
followed in the Organized retail
sector.
No government rules are followed in
the unorganized retail sector.
Regular monthly salary is given to
employees on the monthly basis.
Daily wages are given to employees.

30
There is job security for employees
in the Organized retail sector.
The working hours are not fixed in
Workers in the organized retail
sector are paid additionally for the
extra number of working hours.
Workers in the unorganized retail
sector do not get paid additionally
for the extra number of working
hours.
Employers make a contribution to
the provident fund of an employee.
Employers do not make any
contribution to the provident fund of
an employee.
Salary given to employees is equal
to the salary prescribed by the
government.
Less salary is paid to employees
than the salary prescribed by the
government.

31
The increment is given to
employees n regular basis (mostly
annually).
Very rarely increment is given to
employees.
Employees working in the
organized retail sector get add on
benefits such as a pension,
medical facilities, leave,travel
compensation, etc.
No benefits or perquisites are
provided to employees working in

What are the advantages of the
organized retail sector?
32

Advantages of the organized retail sector
• An economic win for customers
• customers get a wider selection of goods along with more convenience
and an enhanced shopping environment.
• The organized retailer has several formats and presence. It caters
many customers going to its wide presence.
• Eg., Walmart is present even in the tier two cities as well as the major
areas of tier one cities thereby reaching all the kinds of customers.
• These retail formats have huge discounts which unorganized retail
formats may not be able to provide.
33

• They buy goods in huge quantities, they are also able to reap the
benefits of huge discounts.
• This discount is passed on to the customer on all the goods that are
purchased over there and thus the customer is at the gain and it is a
Win-Win situation for both retailer as well as a customer.
34

• Big gains for farmers
• These retail formats buy in bulk from the farmers themselves. It is
beneficial for farmers to deal with one customer rather than hundred
customers and also it provides greater convenience and ease of trade
along with better profits for both the customer as well as the farmer.
The retail sector has given a huge push to the farming sector.
• This also leads to an increase in the use of modern equipment and
tools in farming along with more employment opportunities for unskilled
laborers to work on a farm thereby providing employment
opportunities.
35

• Growth of Mid-level customers
• Middle-class people or middle-income group people are increasing and
they are having a better lifestyle.
• They expects the products to be at a decent and affordable price,
which is the reason why the retail sector has to focus on such
customers.
• These mid-level customers indirectly help the industry and the
economy to grow and prosper which is why it turns out to be a cycle
which benefits each other.
36

• Economies of scale for Organized Retailers
• Organized retailers may have multiple branches in different locations.
They preferred to buy the products in bulk which is why one purchase
and have a discounted price.
• The purchases are frequent, and masking is done in order to fulfill the
needs of the customers. This helps the players to achieve economies
of scale and a part of the discount is passed on to the customers as
well.
• Enjoy cost advantage on many factors such as advertisement
expenditures purchases and a few other recurring costs.
37

• The processing is done at one point and distributed to every store so
that the product reaches every customer.
• In terms of customer, it is advantages to have one store with which
they can conduct business and make their purchases.
• Minimization of risks
• retailers avoids unnecessary costs which are levied. Even in case of
taxation, it is easier for the retailers to files for a tax from one point
rather than having multiple stores.
38

• Employment Opportunities
• The need for organized retail chains is increasing all over the market
in every country. More and more people are preferring to work for a
discounted organized retail store.
• This has resulted in retail stores opening branches in multiple
locations. This, in turn, has affected and generated employment for
many local people. Retail stores have constant job opportunities for
people from different backgrounds.
39

• Right from Cashier to store manager people from various
backgrounds can apply in a retail store and get employed and start
earning daily wages have the employment opportunities increase
more and more people get employed and this results in the
betterment of the economy overall.
• As more and more retail store is open more and more job
opportunities are surfaced. Thus, organized retail has opened and
expanded opportunities of the job for many people.
40

Ownership
Based
• Independent
Stores
• Chain Stores
• Franchising
• Leased
Department
Stores
Merchandi
se-Based
• Department
Stores
• Supermarkets
• Specialty Stores
• Convenient
Stores
• Super Stores
• Service Retailers
Price-
Based
• Discount Stores
• Factory Outlets
• Category Killers
• Off-Price
Retailing
• Warehouse
Clubs
• Hypermarkets
• Shopping Malls
Non-Store Retailing
Direct
Selling
• Companies
selling
merchandise
door-to-door
• Companies
selling
merchandise at
home sales
parties
Direct
Marketing
• Telemarketing
• Direct Mail
Marketing
• Catalog
Marketing
• Online Buying
Automatic
Vending
• Merchandise
Sale via Vending
Machines
Retailing
Store Retailing
Introduction 41

 The Internet is today the epicenter of all disruptions around the world.
 The worldwide internet penetration has gone up drastically and more
than 60 percent of the world population is using internet. This figure is
projected to raise.
 Another technological breakthrough that has led to an increased online
activity is the growth in the use of smartphones.
42
Online Retailing

 The worldwide smart phones users were 3.2 billion in the year 2019
and will reach a 3.8 billion by 2021 (O'Dea, February 28, 2020 ). The
worldwide smartphone users have exceeded 5.27 billion and are
predicted to grow by several hundred millions in the next few years.
 Internet or online activities and Smartphones are the main reason
behind this growth in the Service sector and especially retail sector
(Bressolles, 2014) (Burt, 2003) (Faqih, 2015) (Nilashi, 2015) (Towers,
2016).
43
Online Retailing

Active Users by Social Platforms-World 48

Active Users by Social Platforms- India 49

Reasons for using Social Media – Global View 50

 Online retailing, also known as e-tailing is the new and contemporary
mode of shopping.
 It is the mechanism of selling the goods and services through
electronic media, mainly the internet. Thus, as the term suggests it is
the online sale of retail goods and services.
 These formats can be Pure Play e-tailers like Amazon, Bigbasket,
Flipkart or Brick and Click e-tailers like Walmart, who sell products
online as well as through the brick and mortar.
51
Online Retailing

 It allows the customers to search, select and purchase the products,
services and information remotely over the Internet (Celik, 2016).
 Worldwide upsurge projected on goods purchased online by
consumers from 2382 billion dollars in 2017 to 6542 billion dollars in
2023.
 An upsurge in the retail e-commerce sale out of the total retail sales. It
was 14.1 percent of the total retail sales in the year 2019 and it
projected to reach 22 percent of worlds total retail sales (eMarketer,
May 2019).
52
Online Retailing

 In India the number of e-shoppers are estimated to reach 220 million
by 2025. As projected in 2019, one in every three Indian customers
shop through smartphones (IBEF, Indian Ecommerce Industry
Analysis, January 2020)
 India has the third-highest number of e-retail shoppers (only behind
China, the US).
53
Online Retailing

Online Retailing
• There is a wide range of products available online
• Comparison can be made easily before the purchase.
• The online formats help customer to shop at any hour and from any
place, thus facilitating 24X7 availability to the customers.
• The customer is also provided with detailed product information, its
availability enabling them to make the purchase decision.
• This information is available for each online retailer, thus helping them
to compare and make the best choice for themselves.
54

Online Retailing
• It also provides easy return options and easy payment options such as
payment through cash on delivery, which inclines the customer more
towards online shopping.
• But the touch and feel factor is missing, which is a point of concern for
the customers and also there is omissions of the humanitarian clues in
online shopping between the customers and the vendor which is
present while shopping offline.
• According to studies this may be a cause leading to generation of less
faith on the offerings of the online retailers (Jargons, Electronic
Retailing ).
55

• Grocery comprise of food items that are essential and bought
repeatedly, frequently and usually in large quantities.
• grocery buying is a low involvement, low value, repetitive but
indispensable activity.
 Only 0.15 % Indians purchase groceries online. The online grocery
market in India is expected to raise from 569 million dollars in 2018 to
3.6 billion dollars in 2024 (Netscribes (India) Pvt, 2019).
56
Online Grocery Retailing

 Online grocery shopping is a distinctive and upcoming vertical of
online retailing. It is an unexplored category.
 Most online grocery retailers sell the same item, brand, quality, at
similar price.
 Sector is less attractive, low opportunity due to high competition, high
threat of substitutes, high bargaining power of customers and low
switching costs.
 Online retailers can differentiate themselves and attract the customers
is through providing unparalleled customer experience.
57
Online Grocery Retailing

 Bargaining Power of Suppliers
• Number of suppliers
• Size of suppliers
• Ability to substitute
• Switching Costs
• Differentiated Product
60
Porter 5 Forces

 Bargaining Power of Buyers
• Number of customers
• Size of Order
• Difference between competitors
• Price sensitivity
• Differentiated Product
• Switching Costs
61
Porter 5 Forces

 Competitive Rivalry
• Number of Competitors
• Growth of Industry
• Committed Rivals
• Exit Barriers – It depends on the business model.
• The business may follow any of the three models- Hyper-Local
Model, Inventory Model, Hybrid Model (inventory + hyper-local).
62
Porter 5 Forces

• Hyper-local model- Online grocery retailer procures the merchandise
from the local retailers as and when the customer places an order with
them. They deliver the merchandise to the customer with start-up
delivery service providers. The online grocery retailer does not
maintain any inventory of the goods with themselves. For example,
Swiggy, PepperTap, Zip.in, ZopNow, etc. This model has many
advantages, but it may lead to inventory mismatch between store and
application, low fulfillment rates, inability to process heavy orders.
63

• Inventory model- Online grocery retailer procures the products from the
farmers, mandis, and companies and maintain their inventory at their
warehouse. They receive the orders, process them, and make
deliveries accordingly. Thus, they incur huge financial investment and
delayed deliveries but at the same time have high fill rate and in-house
brands. Examples Big Basket, Local Banya.
64

• Hybrid model- Online grocery retailer operates through inventory as
well as hyper-local model. Example Grofers.
• They procure in bulk and maintain inventories of dry products and
procure fresh produce directly from stores.
• Yet, there are issues of inventory mismatch and wastage in this
model.
• Exit barriers are not very high if the model is of hyper-local in nature.
65

 Threat of New Entry
• Economies of Scale
• Capital Requirements
• Distribution Channel – This aspect is nearly alike for all the players
and does not make any difference for established players or new
entrant.
• Tenure advantage- irrespective of business size seasoned players
have few gains as compared to new players in terms of established
brand, customer base, etc.
66
Porter 5 Forces

 Threat of Substitutes
• Substitutes for OGR may be any offline format like mom n pop store,
kirana stores, hyper local markets etc.
• Value of the substitute – Customers can easily check the prices of the
grocery items and compare them. There is not much difference in the
prices and offers given on the products. But, in the brick and mortar
stores the customer can touch, feel and judge the products quality but
has long billing time. ORG provides the convenience of ordering any
time and easy payment gateways to the customers.
• Cost of switching – The cost of switching for shoppers to substitute is
very low. Therefore, threat of substitutes is quite high in OGR.
67
Porter 5 Forces

Summary
• OGR does not have very attractive opportunity due to
• high competition (both from online as well as offline players),
• high threat of substitutes,
• high bargaining power of customers
• low switching costs.
• Thus, the area where the online retailers can differentiate themselves
and attract the customers is through providing unparalleled customer
experience.
• Services rendered to customers in a category may get generic over
time and providing experiential value is the way for the retailers to set
themselves apart.
68

Retailer-Supplier Relationship 69

Retailer-Supplier Relationship 70
L-Low, M-Medium, H-High

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