Various Types of Retailing
Departmental Store and Super Market
Retail Management Notes
Various Types of Retailing
Regardless of the particular type of
retailer (such as a supermarket or a department store), retailers can be
categorized by (a) Ownership, (b) Store strategy mix, and (c) Non store
operations.
1. Form of Ownership: A
retail business like any other type of business can be owned by a sole
proprietor, partners or a corporation. A majority of retail business in
India are sole proprietorships and partnerships.
a. Independent Retailer: Such retailer
generally operates one outlet and offers personalized service, a convenient
location and close customer contact. Roughly 98% of all the retail businesses
in India are managed and run by independents, including barber shops,
drycleaners, furniture stores, bookshops, LPG Gas Agencies and neighborhood
stores. This is due to the fact that entry into retailing is easy and it
requires low investment and little technical knowledge. This obviously results
in a high degree of competition. Most independent retailers fail because of the
ease of entry, poor management skills and inadequate resources.
b. Retail Chain: It involves common
ownership of multiple units. In such units, the purchasing and decision making
are centralized. Chains often rely on, specialization, standardization and
elaborate control- systems. Consequently chains are able to serve a large
dispersed target market and maintain a well-known company name. Chain stores
have been successful, mainly because they have the opportunity to take
advantage of "economies of scale" in buying and selling goods. They
can maintain their prices, thus increasing their margins, or they can cut
prices and attract greater sales volume. Unlike smaller, independent retailers
with lesser financial means, they can also take advantage of such tools as
computers and information technology.
c. Retail Franchising: It is a
contractual arrangement between a "franchiser" (which may be a
manufacturer, wholesaler, or a service sponsor) and a "franchisee" or
franchisees, which allows the latter to conduct a certain form of business
under an established name and according to a specific set of rules. The
franchise agreement gives the franchiser much discretion in controlling the
operations of small retailers. In exchange for fees, royalties and a share of
the profits, the franchiser offers assistance and very often supplies as well.
Classic examples of franchising KR Bakery, Famous bakery and opus bakery.
d. Cooperatives: A retail cooperative
is a group of independent retailers, which have combined their financial
resources and their expertise in order to effectively control their wholesaling
needs. They share purchases, storage, shopping facilities, advertising planning
and other functions. The individual retailers retain their independence, but
agree on broad common policies. Amul and milma are typical example of a
cooperative in India.
2. Store Strategy Mix: Retailers
can be classified by retail store strategy mix, which is an integrated combination
of hours, location, assortment, service, advertising, and prices etc. The various
categories are:
a. Convenience Store: It is generally
a well situated, food oriented store with long operating house and a
limited number of items. Consumers use a convenience store; for fill in
items such as bread, milk, eggs, chocolates and candy etc.
b. Super markets: It is a diversified
store which sells a broad range of food and nonfood items. A supermarket
typically carries small house hold appliances, some apparel items, bakery,
film developing, jams, pickles, books, audio/video CD's etc.
c. Department Stores: A department
store usually sells a general line of apparel for the family, household
linens, home furnishings and appliances. Large format apparel department
stores include Pantaloon, Ebony and Pyramid. Others in this category are: Shoppers
Stop and Westside.
d. Speciality Store: Such store mainly
concentrates on the sale of a single line of products or services, such
as Audio equipment, Jewellery, Beauty and Health Care, etc. Consumers are
not confronted with racks of unrelated merchandise. Successful Speciality
stores in India include, Music World for audio needs, Tanishq for
jewellery and McDonalds, Pizza Hut and Nirula's for food services.
5. Hyper Markets: Is a special kind of
combination store which integrates an economy super market with a
discount department store. A hyper market generally has an ambience
which attracts the family as whole. LULU hypermarket is good example of hypermarket.
3. Non Store Retailing: In
non-store retailing, customers do not go to a store to buy. This type of
retailing is growing very fast. Among the reasons are; the ability to
buy merchandise not available in local stores, the increasing number of
women workers, and the presence of unskilled retail sales persons who
cannot provide information to help shoppers make buying decisions
The major types of non-store retailing
are:
a. In Home Retailing: Where, a sales
transaction takes place in a home setting - including door-door selling.
It gives the sales person an opportunity to demonstrate products in a
very personal manner. He/ She has the prospect's attention and there are fewer
distractions as compared to a store setting. Examples of in home retailing include,
Eureka Forbes vacuum cleaners and water filters.
b. Telesales/Telephone Retailing: This
involves contact between the prospect and the retailer over the phone,
for the purpose of making a sale or purchase. A large number of mobile
phone service providers use this method. Other examples are private insurance
companies, and credit companies etc.
c. Catalog Retailing: This is a type
of non-store retailing in which the retailers offers the merchandise in
a catalogue, which includes ordering instructions and customer orders by mail.
The basic attraction for shoppers is convenience. The advantages to the
retailers include lover operating costs, lower rents, smaller sales
staff and absence of shop lifting. This trend is catching up fast in
India.
d. Direct Response Retailing: Here the
marketers advertise these products/ services in magazines, newspapers,
radio and/or television offering an address or telephone number so that
consumers can write or call to place an order. It is also sometimes referred to
as "Direct response advertising." The availability of credit
cards and toll free numbers stimulate direct response by telephone. The
goal is to induce the customer to make an immediate and direct response
to the advertisement to "order now." Telebrands is a classic
example of direct response retailing. Times shopping India is another example.
e. Automatic Vending: Although in a
very nascent stage in India, is the ultimate in non-personal, non-store
retailing. Products are sold directly to customers/buyers from machines.
These machines dispense products which enable customers to buy after closing
hours. ATM's dispensing cash at odd hours represent this form of non-store retailing.
Apart from all the multinational banks, a large number of Indian banks also provide
ATM services, countrywide.
f. Electronic Retailing/E-Tailing: Is
a retail format in which retailers communicate with customers and offer
products and services for sale, over the internet. The rapid diffusion of
internet access and usage, and the perceived low cost of entry has stimulated
the creation of thousands of entrepreneurial electronic retailing
ventures during the last 10 years or so. Flipkart, Amazon.com, E-bay and
Bazee.com HDFCSec.com are some of the many e-tailors operating today.
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👉👉Retail Management Notes
Department Stores
These are large
scale retail stores selling under one roof and one control a variety of goods
divided into different departments, each of which specializes in an individual
merchandise. Converse is of the opinion that a department store is a retail
shop handling several classes of goods including fast moving consumer goods,
each class being separated from others in management, accounting and location.
It is viewed by Clarke as that type of retail institution which handle a wide
verity of merchandise under one roof which the merchandise grouped into
well-defined departments which is
centrally controlled and which caters primarily to women shoppers.
Thus a
department store is a retailing business unit that handles a wide variety of
shopping and specialty goods and is organized into separate departments for
purposes of sales promotion, accounting control and store operation.
Recent trends
are to add departments for automotive, recreational and sports equipment, as
well a services such as insurance, travel advice and income-tax preparation.
Department stores are distinctive in that they usually are oriented towards
service. They are usually shopping centers.
Classification
of Department Stores
These stores
may be classified either according to ownership or income groups to which they
appeal.
a) On the
basis of ownership these are:
(i) The
independent; (ii) The ownership group; and (iii) Chain department Stores.
Independent
stores are owned by a financial interest which does not own other similar
stores.
Ownership
group stores are those stores which were formerly dependent but now have been
combined.
Chain
department stores are those stores which are centrally owned and operated.
b) On the
basis of income groups, These stores cater to the middle and high income groups. They usually handle good quality
merchandise and offer maximum service to
the customers. Other stores cater to the needs of the lower income group
people.
c) Sometimes
there is also to be found what are called leased department stores. Although it
appears to most customers that all departments in a department store are owned
and operated by the store, that is not always the case. The operations of
certain departments are sometimes turned over to leases and such departments
are called leased departments.
Some of the important features
of a departmental store are as follows:
1.
Large retail establishment: Departmental store is a large size retail
institution under a roof where different goods are sold out. Adequate capital
needs to be invested to establish, operate and expand it. Generally,
departmental stores are operated as joint stock company.
2. Centralised Location: These stores are generally located at a
central place in the heart of a city, which caters to a large number of
customers.
3. Wide
varieties of goods: To provide all kinds and varieties of goods to satisfy
customers' needs in the same place is an important feature of departmental
store. It is said 'from needle to plane, i.e A to Z goods can be found in a departmental
store'. All the consumers goods from ready-made garments, household goods,
furniture, electrical goods, medicines, motor cars to many others are sold by
departmental store.
4. Centralised
Management: As the size of these stores is very large, they are generally
formed as a joint stock company managed by a board of directors. There is a
managing director assisted by a general manager and several department
managers. All
the departments of departmental store are operated under the management and control of central
level management. But each department is let free to purchase, sell and
advertise their goods.
5. Elimination
of Middlemen: A departmental store combines both the functions of retailing as
well as warehousing. They purchase directly from manufacturers and operate
separate warehouses. That way they help in eliminating undesirable middlemen
between the producers and the customers; and
6. Centralised
Purchased: They have centralised purchasing arrangements. All the purchases in
a department store are made centrally by the purchase department of the store,
whereas sales are decentralised in different departments.
7. Special
facilities: Departmental stores make all the necessary goods available to
customers. They also provide different facilities to the customers to attract
them. Departmental stores provide goods on credit, help customers to carry
goods to their home, they also provide cafeteria, telephone, mail, and other
services to customers.
Advantages of Departmental
Stores
The major advantages of retailing through departmental stores may
be listed as follows:
1.
Attract large number of customers: As these
stores are usually located at central places they attract a large number of
customers during the best part of the day.
2.
Bulk
Buying: Departmental stores buy goods in large quantity from producers. As a
result, they get quality goods at low price. They can also take help of
specialist in buying goods. Those having strong financial position can buy
goods in large quantity due to which per unit price and transport cost
also falls low.
3.
Convenience in buying: By offering large variety
of goods under one roof the departmental stores provide great convenience to
customers in buying almost all goods of their requirements at one place. As a
result, they do not have to run from one place to the another to complete their
shopping.
4.
Attractive services: A departmental store aims
at providing maximum services to the customers. Some of the services offered by
it include home delivery of goods, execution of telephone orders, grant of
credit facilities and provision for restrooms, telephone booths, restaurants,
saloons etc.
5.
Economy of large-scale operations: As these
stores are organised at a very large-scale, the benefits of large-scale
operations, particularly, in respect of purchase of goods are available to
them.
6.
Promotion of sales: The departmental stores are
in a position to spend considerable amount of money on advertising and other
promotional activities, which help in boosting their sales.
7.
Research:
Departmental stores can carry out study and researches of different sectors. As
a result, effectiveness comes in its operation with minimum cost and the profit
increases.
8.
Ability
to bear loss: In comparison to other retailing institutions, departmental
stores can have more ability to bear loss. In case any one or two departments
got loss in business, the profits earned by other departments can easily
compensate the loss. The financial position of departmental store becomes
stronger than of other retailing
institutions.
9.
Economy
in advertisement: Departmental stores make effective a well as attractive
advertisements taking
help of specialists. Each department also advertises goods by attractively
displaying and decorating shop. The departments do not need to spend on
advertising goods, as a result cost for advertisement becomes automatically
low.
Limitations
of Departmental Stores
However, there are certain limitations of this type of retailing.
These are described as follows:
1. Large investment of capital:
Large amount of capital is required to operate departmental store. The business entrepreneurs having limited
capital cannot operate departmental stores.
2. Limited number of customers:
Departmental store attracts mainly rich class customers. poor customers
hesitate to enter departmental stores. It becomes difficult for some customers
to buy goods from departmental stores, they feel uneasy to buy goods, takes
longer time and prices of goods is higher in departmental stores.
3. Lack of personal
attention: Because of the large-scale operations, it is very difficult to
provide adequate personal attention to the customers in these stores.
4. High
operating cost: As these stores give more emphasis on providing services, their
operating costs tend to be on the higher side. These costs, in turn, make the
prices of the goods high. They are, therefore, not attractive to the lower
income group of people.
5. High
possibility of loss: As a result of high operating costs and largescale operations,
the chances of incurring losses in a departmental store are high. For example,
if there is any change in the tastes of customers or latest fashions, it
necessitates selling of such out-of-fashion articles in clearance sale, to
reduce the huge inventory of goods built up.
6. Inconvenient
location: As a departmental store is generally situated at a central location,
it is not convenient for the purchase of goods that are needed at short notice.
7. Difficulty in management: Departmental stores are
difficult to efficiently manage and run smoothly. Very efficient, skilled and
able manager is needed. Otherwise, it becomes impossible to operate
departmental stores.
Super Markets
A super market is a large retailing business unit selling wide
variety of consumer goods on the basis of low margin appeal, wide variety and assortment,
self-service and heavy emphasis on merchandising appeal. The goods traded are
generally food products and other low priced, branded and widely used consumer
products such as grocery, utensils, clothes, electronic appliances, household
goods, and medicines. Super markets are generally situated at the main shopping
centres.
Goods are kept on racks with clearly labelled price and quality
tags in such stores. The customers move into the store to pick up goods of
their requirements, bring them to the cash counter, make payment and take home
the delivery. Super markets are organised on
departmental basis where customers can buy various types of goods under one roof. However, as compared to departmental stores, these markets don’t offer certain services such as free home delivery, credit facilities, etc., and also don’t appoint sales persons to convince customers about the quality of products.
Some of the important characteristics
of a super market are as follows:
1. A super
market generally carries a complete line of food items and groceries, in
addition to non-food convenience goods;
2. The buyers
can purchase different products as per their requirements under one roof in
such markets;
3. There are
no selling counters or selling assistants to help the customers. A super market
operates on the principle of self-service. The distribution cost is, therefore,
lower;
4. The prices
of the products are generally lower than other types of retail stores because
of bulk purchasing, lower operational cost, and low profit margins;
5. The goods
are sold on cash basis only.
6. The super
markets are generally located at central locations to secure high turnover.
7. They
function on cash-and-carry lines and offer no credit.
8. The
products stored in a super market are properly packed and placed on separate
racks in order to facilitate purchasing by the buyer.
9. The buyer
is completely at ease while buying as there is no undue sales pressure by
counter salesmen.
10. They are
large retail organisations and are a useful channel of distribution.
Advantages of Super Market
Super markets are becoming more and more in our
country because of its following advantages:
1. All
Products under one roof: Super markets offer a wide variety of products at low
cost, under one roof. These outlets are, therefore, not only convenient but
also economical to the buyers for making their purchases.
2. Low
Price: Goods are
found at relatively at low price in supermarkets because they purchase larger
quantity of goods, sales volume rises high. It takes less operating cost. They
take less profit from customers.
3. Central
location: The super markets are generally located in the heart of the city. As
a result, these are easily accessible to large number of people staying in the
surrounding localities.
4. Freedom
of selection and self-service:
The customers should select goods themselves in supermarket. More freedom is
given to select goods, due to which the customers can get more satisfaction.
Such freedom is more appropriate for those customers who do not like
interference of sellers.
5. Wide
selection: Super markets keep a wide variety of goods of different designs,
colour, etc., which enables the buyers to make better selection.
6. No
bad debts: As generally the sales are made on cash basis, there are no bad
debts in super markets.
7. Benefits
of being large scale: A super market is a large scale retailing store. It
enjoys all the benefits of large scale buying and selling because of which its
operating costs are lower.
8. Prospect
for large profit:
Supermarkets can have prospect of earning more profit, because they purchase in
large quantity and sell out small quantity. Moreover, they bear only little
operation expenses and do not provide free services to customers. This
automatically results in more profit.
Limitations of Super Market
The major limitations of super
markets are as follows:
1. No
credit: Super markets sell their products on cash basis only. No credit
facilities are made available to the buyers. This restricts the purchasing
power of buyers from such markets.
2. No
personal attention: Super markets work on the principle of selfservice. The
customers, therefore, don’t get any personal attention. As a result, such
commodities that require personal attention by sales people cannot be handled
effectively in super markets.
3. Mishandling
of goods: Some customers handle the goods kept in the shelf carelessly. This
may raise costs in super markets.
4. High
overhead expenses: Super market incur high overhead expenses. As a result these
have not been able to create low price appeal among the customers.
5. Huge
capital requirement: Establishing and running a super market requires huge
investment. The turnover of a store should be high so that the overheads are
kept under reasonable level. This can be possible in bigger towns but not in
small towns.
6. Need
of central place:
Central as well as proper places are needed to establish supermarkets.
Supermarkets cannot be operated everywhere. It becomes difficult to find proper
location to establish supermarkets, even if found they become costly.
7. Unsuitable
for all products:
Only some products, which are known by customers, can be sold in supermarkets.
Some goods need to be explained by sellers to the customers for their
knowledge. So, the products unknown to customers cannot be sold out from
supermarkets.
8. Need
of efficient manager:
Compared to other retailing institutions, efficient manager is necessary for
the operation of supermarkets. Otherwise, it cannot be operated successfully.
Difference Between
Departmental Store and Super Market
Basis
|
Departmental
Store
|
Super
Market
|
Meaning
|
A department store is a
large retail store offering a variety of merchandise and services and
organized in separate departments.
|
Supermarket is a large
self-service retail market that sells food and household goods.
|
Size
|
Departmental stores are
larger than supermarkets.
|
Although supermarkets are
large stores, they are typically smaller than departmental stores.
|
Floors
|
Departmental stores have
many floors.
|
Supermarkets usually have
only one floor.
|
Products
|
Departmental stores stock a
variety of products.
|
Supermarkets do not usually
stock clothing, jewelry, and hardware.
|
Fresh
Products
|
Departmental stores do not
usually stock fresh produce or meat.
|
Supermarket: Supermarkets
stock fresh produce, dairy, and meat.
|
Ownership
|
Departmental stores are not
typically owned by corporate chains.
|
Supermarkets are owned by
corporate chains.
|
Super Market is
superior than other markets
Supermarkets enjoy some of the most stable
revenue streams of all business types because, while various consumer tastes
and trends fluctuate, the demand for groceries and basic household items is
fairly constant. For this reason, starting a supermarket chain can prove to
become a strong and lucrative investment for some time to come. Whether you
plan to start with one store or multiple stores, location is key to success in
such a venture.
1. Identify your supermarket facility locations. To do this,
conduct an analysis of the market in your prospective areas. You want your
business to be located in a populous and accessible area with high levels of
traffic. Conduct a feasibility study or hire a business analyst to do so.
2. Research your state's general business licensing and permit
requirements. If you are opening multiple locations at once, you may need to
meet a number of requirements, especially if you are opening locations in
multiple states. Go to SBA.gov, click the "Starting and Managing a Business"
pull-down menu, click the "Search for Business Licenses and Permits"
link and click the appropriate state or states.
3. Obtain the required licenses to operate in each state where you
will have a store. For example, if your supermarket chain is in Connecticut,
the state may require Milk, Retail Store, Frozen Dessert Retailer, Bakery,
Non-Legendary Drug and Liquor licenses. If you plan on selling gasoline in the
parking lot as many grocery stores do, you need a Retail Gasoline Dealer Permit
and a Weight & Measures Device Registration from the Department of Consumer
Protection. If your supermarket chain is in various states, follow the
licensing and permit requirements of your various supermarket locations.
4. Write a supermarket business plan. All businesses require
business plans, especially ones that need financing. Your business plan should
contain a market analysis that deals with the demographics in and surrounding
your supermarket locations, the regular traffic around the stores, the
prospects for profitability in your chosen locations and your financing
requirements.
5. Hire the personnel necessary for running a supermarket. These
may include cashiers, baggers, stock clerks, order fillers, meat, poultry and
fish-processing workers, bakers, cooks and food preparation workers, food
servers, hand laborers, freight, stock and material movers, hand packers and
packagers, demonstrators and product promoters, first-line managers, general
office clerks, bookkeeping, accounting and auditing clerks, category managers,
such as snack food managers, marketing and sales managers, human resources,
training and labor relations specialists and cleaning workers.
6. Choose suppliers. You may contact local food growers and
producers in your area. You may also contact the manufacturers of the items you
sell. For example, if you want to sell Procter and Gamble Products, you may go
to order.pg.com, where you can register and order the company's products
through the Internet. Wholesalers are another option. For supermarket wholesalers,
check WholesaleCentral.com and B2BSupermarkets.com. To ensure that you are
responding to the varying tastes and preferences of your prospective customers,
offer variety and don't limit yourself to a single brand of items.
