Unit 4: Introduction to retailing & Retail Consumer behavior
Introduction to Retailing
Retailing refers to all activities involved in selling goods and services directly to the final consumer for personal or household use.
Retailers are the last link in the distribution channel and play a crucial role in connecting manufacturers with consumers.
Nature of Retailing
| Feature | Explanation |
|---|---|
| Final Step in Distribution | Retailing brings goods from producers to final customers. |
| Direct Interaction with Consumers | Retailers understand customer needs better due to face-to-face contact. |
| Small Quantity Sales | Goods are sold in small units suitable for personal consumption. |
| Wide Range of Products | Retailers stock multiple brands and varieties. |
| Customer Service-Oriented | Retailing focuses on convenience, ambience, and satisfaction. |
| Use of Technology | Modern retailing involves POS systems, CRM, e-billing, and digital payments. |
Scope of Retailing
Retailing covers a wide range of activities:
- Procurement of goods
- Assortment and storage
- Pricing and promotion
- Customer service
- Store management and display
- Logistics & inventory management
- Online selling
- After-sales service
The scope has expanded due to e-commerce, globalization, and digital transformation.
Importance of Retailing
For Consumers
- Provides product variety and convenience
- Offers competitive prices
- Ensures availability of products near home
- Provides credit, home delivery, returns, and after-sales services
For Manufacturers
- Acts as a major selling channel
- Helps in brand building
- Provides market feedback
- Helps introduce new products
For Economy
- Generates employment
- Contributes to GDP
- Encourages entrepreneurship
- Supports agricultural and industrial growth
Factors Influencing Retailing
| Factor | Explanation |
|---|---|
| Economic Factors | Income levels, employment rate, inflation, and purchasing power. |
| Social & Cultural Factors | Lifestyle changes, family structure, urbanization. |
| Technological Factors | Online shopping, digital payments, automation, AI. |
| Legal & Regulatory Factors | GST, consumer protection laws, retail FDI rules. |
| Competition | Price wars, promotional strategies, new retail entrants. |
| Demographics | Age, gender, population size, location. |
| Globalization | Entry of global brands like Walmart, IKEA, Amazon. |
Retail Business Models
| Model | Description | Example |
|---|---|---|
| Low-Cost Model | Focus on low prices, high volume | Big Bazaar, D-Mart |
| Premium Model | High quality, premium pricing | Shoppers Stop |
| Franchise Model | Independent owner uses brand name | Domino’s, McDonald's |
| Online / E-commerce | Digital marketplace selling online | Amazon, Flipkart |
| Hybrid / Omnichannel | Combination of offline & online | Reliance Trends, Tata Croma |
| Direct Selling Model | Selling without intermediaries | Amway, Tupperware |
Retail Formats
Retail formats refer to the types of stores or selling channels used for retailing.
They can be store-based and non-store-based.
A. Store-Based Retail Formats
1. Department Stores
- Large stores offering wide product categories under one roof.
- Includes clothing, cosmetics, home goods, electronics. Example: Lifestyle, Central
2. Supermarkets
- Large, self-service stores focusing on food and household products.
- Offer competitive pricing and convenience. Example: Reliance Smart, Big Bazaar
3. Discount Stores
- Sell goods at lower prices by reducing service and overhead costs.
- Focus on bulk buying and lower margins. Example: D-Mart, Walmart
4. Specialty Stores
-
Focus on specific product categories such as electronics, clothing, toys.
Example: Croma, Decathlon
5. Convenience Stores
-
Small stores near residential areas offering daily-need products.
Example: Local kirana stores, 24/7 stores
B. Non-Store Retail Formats
1. E-Retailing / Online Retailing
- Selling products through websites or apps.
- Offers home delivery, discounts, and wide product choices. Examples: Amazon, Flipkart, Myntra
2. Direct Selling
-
Sellers visit customers directly to demonstrate and sell products.
Examples: Amway, Avon, Oriflame
3. Vending Machines
-
Automated machines that dispense products when payment is made.
Examples: Beverage vending machines in airports, stations
4. Telemarketing
-
Selling through phone calls and promotions.
5. Catalog Retailing
-
Selling through printed or digital catalogs sent to consumers.
Retail Consumer Behavior
Retail consumer behavior refers to the buying behavior of customers in a retail environment.
Factors influencing retail consumer behavior
- Psychological: motivation, learning, perception
- Personal: age, income, occupation
- Social: family, friends, social class
- Cultural: values, traditions
- Situational: store layout, ambience, discounts
Consumers now prefer:
- Convenience
- Online shopping
- Fast delivery
- Personalization
Conclusion
This topic helps MBA students understand:
- How retailing works
- Why retail formats are evolving
- How consumer behavior shapes retail strategies
- How technology and competition influence retail decisions
Organized vs Unorganized Retail in India
A. Organized Retail
Organized retail refers to licensed, professionally managed retail stores.
These stores follow government regulations, maintain standard procedures, use technology, and pay taxes.
Examples
- Reliance Retail
- D-Mart
- Big Bazaar
- Croma
- Shoppers Stop
- Online retailers (Amazon, Flipkart)
Features
- Standard billing system
- POS machines
- Proper supply chain
- Branded products
- Fixed prices
- Trained employees
- Large store formats
B. Unorganized Retail
Unorganized retail includes small, traditional retail formats that are not registered under formal business rules.
Examples
- Local kirana shops
- Street vendors
- Push-cart vendors
- Small convenience stores
Features
- No fixed pricing
- Cash-based transactions
- Personal relationships with customers
- Low overhead cost
- Flexible timing
Difference: Organized vs Unorganized Retail
| Basis | Organized Retail | Unorganized Retail |
|---|---|---|
| Structure | Formal, registered | Informal, unregistered |
| Billing | Proper billing, GST | Mostly cash, no bills |
| Technology | High use (POS, CRM) | Very low use |
| Pricing | Standard pricing | Negotiable |
| Store Size | Large | Small |
| Customer Service | Professional | Personal, informal |
| Examples | D-Mart, Reliance | Kirana stores |
FDI in Retail & Current Policy Framework in India
FDI = Foreign Direct Investment
India allows FDI in two major retail segments:
A. Single-Brand Retail
Selling only one brand (e.g., Nike, Apple, Adidas).
FDI Allowed
- 100% FDI allowed, but
- Beyond 49%, government approval may be required.
- 30% local sourcing norm is applicable in many cases.
B. Multi-Brand Retail
Selling multiple brands under one roof (e.g., Walmart, Tesco).
FDI Allowed
- 51% FDI allowed
- Requires state government approval
- Minimum investment of USD 100 million
- 30% procurement from small & medium Indian enterprises
C. E-commerce Retail
FDI allowed only under Marketplace Model, where platform acts as an intermediary.
FDI Allowed
- 100% FDI in Marketplace model
- 0% FDI in Inventory-based model (retailer controlling inventory)
Marketplace Restrictions
- Cannot sell products from a vendor in which platform has >25% stake
- Cannot influence prices directly
Understanding Retail Consumer Behavior
Retail consumer behavior involves the process of need recognition, buying, evaluating, and using retail products.
Factors Influencing In-Store Consumer Decisions
| Factor | Explanation |
|---|---|
| Store Layout | Easy navigation increases purchase probability |
| Ambience | Lighting, scent, music affect mood |
| Price & Discounts | Promotions and sale offers |
| Merchandise Display | Attractive shelves encourage impulse buying |
| Sales Staff Behavior | Helpful staff improves satisfaction |
| Location | Accessibility and parking availability |
| Product Variety | More options attract customers |
| Store Reputation | Trust increases loyalty |
Factors Influencing Online Consumer Decisions
| Factor | Explanation |
|---|---|
| Website/App Design | Simple, fast navigation boosts sales |
| Reviews & Ratings | Builds trust |
| Price Comparison | Easy comparison increases purchase chances |
| Delivery Speed | Same-day/next-day delivery |
| Return Policy | Hassle-free returns encourage online buying |
| Secure Payment Options | UPI, COD, cards, wallets |
| Personalized Recommendations | AI-based suggestion improves engagement |
Retail Marketing Mix (6Ps)
Retail uses an extended marketing mix to meet customer needs.
1. Product
- Product variety
- Quality
- Assortment
- Private labels
- Packaging
- After-sales service
2. Price
- EDLP (Everyday Low Pricing)
- Discounts and promotions
- Prestige pricing
- Psychological pricing
- Price matching
3. Place
- Store location
- Distribution channels
- Supply chain efficiency
- Omnichannel presence (online + offline)
4. Promotion
- Advertising (TV, radio, print, digital)
- Sales promotions (BOGO, discounts)
- Loyalty programs (reward points)
- Digital marketing
- Personal selling
5. People
- Trained staff
- Customer service
- Store employees’ behavior
- Appearance and knowledge
6. Presentation (Physical Evidence)
- Store layout
- Visual merchandising
- Ambience
- Lighting, music, cleanliness
- Digital displays
- Website design for online retail
Retail Branding and Private Labels
A. Retail Branding
Retailers build their own brand identity to create differentiation.
Examples
- Reliance Trends
- Shoppers Stop
- D-Mart (Everyday Low Price image)
Benefits
- Increased customer loyalty
- Strong store image
- Competitive advantage
B. Private Labels (Store Brands)
Private labels are products developed and sold under the retailer’s own brand name.
Examples
- D-Mart: D-Mart Minimax
- Big Bazaar: Tasty Treat, CleanMate
- Reliance: Good Life
- Amazon: Amazon Basics
Advantages of Private Labels
- Higher profit margins for retailers
- Lower prices for customers
- Better control over quality
- Loyalty due to unique products
Conclusion
This topic helps MBA students understand:
- How Indian retailing is structured
- How government policies impact FDI
- How consumers make retail decisions online and in-store
- How retailing uses the 6Ps for competitive advantage
- Why private labels are strategically important