Retail Management Solved Question Paper 2021, Dibrugarh University B.Com 5th Sem Non Hons

Dibrugarh University B. Com 5^th Sem Question Papers CBCS Pattern
5^th SEM TDC DSE COM (CBCS) 502 GR-III
Retail Management Solved Question Paper 2021
(Held in January/February, 2022)
Paper: DSE-502 (Group-III)
Full Marks: 80
Pass Marks: 32
Time: 3 hours.
The figures in the margin indicate full marks for the questions.

1. Answer the following as directed:                       1x8=8

a) Write the full form of FMCG.

Ans: FMCG: Fast-Moving Consumer Goods

b) Retailing provides three utilities homely which are: (Choose the correct answer)

1. Time, place, and price.

2. Time, money and price.

3. Time, popularity and possession.

4. Time, place and possession.

Ans: 4. Time, place and possession.

c) In combination store, luxury merchandise sales usually account for 30% - 40% of total store sales. (Write True or False)

Ans: True

d) Price discrimination is a pricing policy where a retailer charges different prices from different customers for the same merchandise. (Write True or False)

Ans: True

e) McDonald’s, NIIT and Koutons are the examples of (Choose the correct answer)

1. Supermarket.

2. Hypermarket.

3. Chain store.

4. Franchising.

Ans: 3. Chain store.

f) India is dominated by _______ retailers. (Independent/organized/grocery/chain store)

Ans: Independent

g) Wal-Mart has tie-up with (Choose the correct answer)

1. Bharti Enterprises.

2. Reliance Retail.

3. Aditya Birla.

4. Tata.

Ans: 1. Bharti Enterprises.

h) What does plastic money mean?

Ans: Plastic money refers to debit card and credit card.

2. Write short notes on any four of the following:            4x4=16

a) Physical Distribution.

Ans: Physical distribution is the process of making the movement of the product to the consumers. It encompasses all the activities involved in the physical flow of products from producers to consumers. Physical distribution makes the product available at the right place and at the right time, thereby maximizing the company’s chance to sell the product and strengthen its competitive position. The products have to be carried to places of consumption; they have to be stored; and they have to be distributed. The product has to be marketed over an extensive marketing territory. It has to be transported through long distances, stored for a considerable length of time before being consumed. Physical distribution largely determines the customer service level. Inefficient physical distribution leads to loss of customers and markets. There are some products which are subject to the seasonality factor - either production is continuous but demand is seasonal, or demand is continuous but production is seasonal. In all such cases, physical distribution acquires additional importance.

b) Inventory Control.

Ans: Inventory control means to monitor the stock of goods used for production, distribution and captive (self) consumption. For a specific time period, stocks of goods are placed at some particular location. Stock of goods includes raw-materials, work in progress, finished goods, packaging, spares, components, consumable items, etc. Inventory Control means maintaining the inventory at a desired level. The desired-level keeps on fluctuating as per the demand and supply of goods.

According to Gordon Carson, "Inventory control is the process whereby the investment in materials and parts carried in stocks is regulated, within pre-determined limits set in accordance with the inventory policy established by the management."

Simply "Inventory control is a method to identify those stocks of goods, which can be used for the production of finished goods. It shall be supported by a schedule which gives details regarding; opening stock, receipt of raw-materials, issue of materials, closing stock, and scrap generated."

Objectives of store control: The following are the important objectives of store control

a)       to make available the right type of raw material at the right time in order to have smooth and continuous flow of production;

b)      to ensure effective utilization of material;

c)       to prevent over stocking of materials and consequent locking up of working capital;

d)      to procure appropriate quality of raw materials at reasonable price.

c) Supermarket.

Ans: 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 centers.

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;

d) Convenience Store.

Ans: 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.

e) Franchising.

Ans: 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.

3. (a) What do you mean by retail business? Explain the functions of a retailer in a competitive business environment. 4+7=11

Ans: Retail Business: Delivering the products is not an end job which a retailer does, today to be the best he needs to deliver services associated with the product. The word Retailing is defined as “The set of business activities that adds value to the products and services sold to consumers for their personal or family use”. Retailing can be referred to all activities involved in marketing and distribution of goods and services. Retailing is defined as a conclusive set of activities or steps used to sell a product or service to consumers for their personal or family use. It is responsible for matching individual demands of the consumer with supplies of all manufacturers. A common assumption is that retailing involves only the sale of products in stores.

However, it also includes the sale of services like those offered at a restaurant, or by car rental agencies. Retailing involves a direct interface with the customer and co-ordination of business activities from end to end right from the concept or design stage of a product or offering, to its delivery, and post delivery services to the customer.

According to Kotler, “Retailing includes all the activities involved in selling goods or services to the final consumers for personal, non-business use.”

According to David Gilbert, “Any business that directs its marketing effort towards satisfying the final consumer based upon the organization of selling goods and services as a means of distribution.”

According to Chetan Bajaj, “Retailing is defined as a conclusive set of activities or steps used to sell a product or a service to consumers for their personal or family use. It is responsible for matching individual demands of the consumers with supplies of all the manufacturers.

Retailing can thus be defined as consisting of all such activities involved in the marketing of goods and services directly to the consumers for their personal, family or household use. Retailing involves a direct interface with the customer and the coordination of business activities from end to end, right from the concept or design stage of a product or offering, to its delivery and post delivery service to the customer.

Functions of retailers:

Retailers are very important part in the distribution channel. They are important not only for producers and wholesalers but also for consumers. Some of the important functions of retailers are listed below:

1. Buying and assembling: Retailer has to assemble products from different manufacturers and wholesalers as he has to keep wide variety of stock of products market the varied and small requirements of large number of customers. This assembling possible through the prices of buying. Buying is a continuous process involving selection and the most economical and dependable sources of supply.

2. Warehousing: Retailer is a safety value releasing the goods in quantities different varieties and price ranges according to the consumer needs. Warehousing has possible holding the stocks to match between the consumer demand and the wholesalers or manufacturer supply conditions. It is possible to have adequate and interrupted supply of goods.

3. Selling: The final aim is to sell products so bought and held by him. Retailer is rightly called as the buying agent of consumers. He is the means to dispose the goods to the consumers for producers and wholesalers and collect the sales revenue for them. Successful retailing needs good deal of salesmanship tactics.

4. Risk-Shouldering: Risk shouldering is the basic responsibility of a retailer arising out of physical deteriorations and changes in prices. These are unavoidable as he holds sufficient and variety of inventories from the time they are bought till they are sold to the consumers. The risk of loss is seen in the number of forms such as natural calamities – fire, food, cyclone, earthquake, spoilage and deterioration due to changes in the weather and fashion and so on.

5. Grading and Packing: Retailers undertake secondary or second round grading and packing activities left by the manufacturers and wholesalers. Classification of goods into different graders and lots is common. As he sells in loose packs and very odd lots, packing assumes a particular importance. Such packing can be highly standardised or can be as per the individual requirements.

6. Financing: In the whole scheme of marketing, the contribution of retailers is really worth emphasizing in so far as consumer financing is concerned. His financing consists of credit granted on liberal terms to the consumers, investment made in large variety of stocks, the expenses of holding stock, salaries and wages of watch and ward staff and other trade expenses.

7. Advertising: Retailers are the best agents to advertise the products, services and ideas. In collaboration with wholesalers and manufacturers retailers do undertake shop display, distribution of sales literature, introduction of new products in a convincing way as he recommends what is ‗right ‘or ‗wrong ‘to a particular customer.

8. Supply of market information: Retailers really enjoy enviable position so far collecting information from the horse‘s mouth. As being in closed and constant touch with consumers, he clearly keenly observes, studies the consumer’s behaviour, changes in the tastes and fashions and therefore, demands. This collected information was passed on to the wholesalers and the manufacturers for their perusal and necessary prediction for future adjustment and success.

Or

(b) What do you understand by the term ‘retailer’? Discuss the various reasons for growth of retail sector in India. 4+7=11

Ans: A retailer is a merchant or occasionally an agent or a business enterprise, whose main business is selling directly to ultimate consumers for non-business use. He performs many marketing activities such as buying, selling, grading, risk-trading, and developing information about customer's wants. A retailer may sell infrequently to industrial users, but these are wholesale transactions, not retail sales. If over one half of the amount of volume of business comes from sales to ultimate consumers, i.e. sales at retail, he is classified as a retailer. Retailing occurs in all marketing channels for consumer products.

Reasons behind the growth of the retail sector

India is not only one of the fastest growing economies in the world but also ranks first in the Global Retail Development Index (GRDI). The GRDI ranks the top 30 developing countries for retail investment worldwide by analysing 25 macroeconomic and retail- specific variables. Moreover, it not only identifies the most attractive markets today but also identifies those that offer potential in the future. Although the sheer market size of China still makes it a strong competitor for foreign investment, the waning of its working population in comparison to the working population of India gives India an edge over China. The main factors responsible for the growth of the retail industry are

1.       Increase in per capita income: Per capita Income means how much an individual earns, of the yearly income that is generated in the country through productive activities. India has marked growth in per capita income by 10.5% which shows tremendous increase in GNP (Gross National Product) of the country. Increase in per capita income reflects hike in income of Households which in turn will consume more, thus leading to growth of retail sector. Household prefer to shop from big giants as compare to their Kirana store.

2.       Demographical changes: India is having huge young age working population which is generating huge income and high savings. For any developing country young age group, income, savings are key factors for its growth. Presence of these key factors has helped in attracting big retail giants to India

3.       High standard of living: Standard of living in India has improved. Earlier Shopping in India always had an emotional tag attached to it, along with that people use to have myth that shopping from shopping complexes or Malls is costlier and it suits only to rich class. But now things have changed. People have changed their misconception and have adopted Mall culture. This shows that standard of living has increased.

4.       Change in consumption pattern: Consumption patterns among various classes have changed over the years. Earlier customers were brand loyal due to which they were allowing new brands to enter the market. But now customers are showing good response to new product entering the market because they have realised that they are paying for quality. This drastic change in customer’s perception has opened ways for many new entrants.

5.       Availability of low-cost consumer credit: It is rightly said that sales generated on credit are more as compare to cash sales. With the change in credit policies, many new customers have entered the market. Purchasing on credit basis with good credit worthiness gives both seller and buyer flexibility to transact. Earlier due to lack of cash many buyers use to postpone their purchases, but now with modernisation they are carrying it on credit basis as it is cheaper to repay.

6.       Improvements in infrastructure: With many infrastructural changes taking place right from metro rails to Bandra-worli sea link in the country, retail is also expanding its wings. With huge infrastructure spending which has entered the country in form of FDI (Foreign Direct investment), more retail giants have proposed to enter Indian market.

7.       Entry of foreign retailers: The main factors responsible for the growth of the retail industry are the foreign retailers and the income structure of the working population. Foreign retailers enter the market and provide good quality products and services which not only expand the market but give local retailers incentives to improve the quality of their own products. Meanwhile, the income structure of the working population determines the demand for products. Other factors include the size of the working population, entry of the retail industry into rural markets or the involvement of a corporate sector to provide quality products at reasonable prices.

8.       Make in India reaping dividends: The Make in India campaign, started with the aim to make India a global manufacturing hub, encouraged multinational and domestic companies to manufacture their products in India. To achieve that aim, the government has been working towards creating a conducive environment for investment, development of modern and efficient infrastructure and opening up new sectors for foreign investments. Under this campaign, the government also took steps to improve India’s rank in the Ease of Doing Business Index, an index that measures how easy it is to do business in a country. Development of the manufacturing sector and an increase in the number of businesses have facilitated job creation leading to higher incomes for an increasing middle-class population. Due to the higher incomes, the population is moving away from the trend of buying only essential commodities, thus leading to a consumption boom in India

9.       Impact of FDI and e-commerce: Recognising the importance of foreign investment in the growth of any industry, the government has initiated lucrative methods to attract foreign investors. These methods include relaxing FDI regulations in certain areas of the retail sectors and are expected to result in a boost to the organised retail sector.

4. (a) Discuss the features of departmental store. How are they different from supermarket?    5+6=11

Ans: 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.

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.

Or

(b) Describe the different types of retailing in India.  11

Ans: 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.

5. (a) What is supply chain management? Discuss the elements of logistics management.          4+7=11

Ans: Supply Chain Management or Logistic Management

The word ‘warehousing’ means the efficient management of the stock (inventory/finished goods) and supplying it at the time of need. ‘Inventory Management’ means handling the inventory at all the stages of the product so that the production and the sales process runs smoothly. ‘Transportation Management’ means the control of the part of travelling of the goods from one place to another. Thus ‘Logistics Management’ can be referred as the linkage between various stages of transferring the goods starting from the manufacturer (owner) to the needy (end customer). The idea of an organization behind this sequence is to make the goods available to the end customer effectively, efficiently and economically.

This process of Logistic Management is explained by the example of the packaged drinks below: This process starts with the sourcing of the raw materials (plastic granules) by the firms/suppliers and then selling it off to the plastic bottle manufacturers. These bottle manufacturers then convert these granules to the plastic bottles (of the desired form, shape, size, colour etc.) as per the need of the customer. The components manufacturers supply the other parts such as printed labels, seals, and corrugated packing boxes/plastic packing sheets. The final product manufacturers (companies which deal in packaged drinking water, soda, soft drinks etc.) source these bottles, pack their produce in them and sell them to the wholesalers/distributors who then sell them to the retailers as and when the orders are received. These retail counters are available for the end customer for purchasing the goods. The feedback about the product from the customer and the faulty goods (if any) are brought back via reverse logistics and are delivered at the appropriate place (final product manufacturer/intermediary product manufacturer etc. as per the nature of the fault).

From the above example it is evident that the sequence of operations and the companies which are engaged in delivering the products and the services to the customer including procurement of raw material components, production of raw materials and procurement of intermediate components, manufacturing of final goods, delivery, and reverse logistics; constitutes the Logistics. When any firm ignores the interests and the complexities of the other channel members while planning its logistics, it leads to increased cost of the Logistics and longer delivery time to the retailer point. This may ultimately reduce the demand of the product due to non-availability of the product.

Elements of Distribution and logistics Management

Supply Chain in itself is not limited to the transportation of the products. It involves the whole process ranging from the ordering of the raw material to the final delivery and then getting the feedback (as discussed above). Various elements of the Supply Chain Management are discussed below:

1)      Customer Analysis: The first and the foremost step is to determine what the need of the customer is. the purchasing company has to get the requirements through various sources before starting to plan the procurement and manufacturing process.

2)      Demand Forecast: The next step is to forecast the demand especially for those goods which are supplied through Push Strategy. This helps the purchasing company to allocate the funds for inventory and also plan for the storage space and other parameters.

3)      Inventory Planning: The next step is to plan for the appropriate level of inventory for the goods so as to keep a proper balance between the Ordering Cost and the Carrying Cost.

4)      Evaluate Suppliers: The next step is to call for the quotations from various suppliers and then decide which one of them is best suitable for procuring the desired quality of raw material at appropriate cost.

5)      Logistics: This step is to evaluate the possibility of having own logistics/having the third party logistics or a mix of both. The types of vehicles with capacity specifications are decided for every route.

6)      Purchase: The order is them placed and the numbers of suppliers are selected keeping in mind the risk of the stock outs. The companies generally avoid to have single supplier because it may lead to monopoly type situation and the supplier may start demanding his own terms and conditions when he feels the whole operations of the purchasing company is dependent on him.

7)      Processing: The next step is to schedule the work with respect to the delivery schedule. The purchasing company has to continuously evaluate the quality of the products, and keep the delivery in line with the promise made to the customers.

8)      Delivery: The processed goods and dispatched in the vehicles as decided above according to their route and the timings.

9)      Inventory Analysis: The inventory is analyzed regularly so as to check the reorder the some to avoid the condition of stock out.

10)   Feedback and Reverse Logistics: The process of the feedback from the front end for the improvements in the product/service is delivered to the decision maker in the purchasing company so that necessary action can be taken. Moreover, the goods which are not acceptable/are returned by the customer are brought back at the manufacturing location/disposed in between as applicable.

Or

(b) What is ideal location? What factors must be considered while analyzing a trading area?      4+7=11

Ans: Selection of specific site: Site analysis is an integral part in determining the sales potential that generates the major traffic flow for a retail store. With the emergence of various retail formats and product categories, presents a wide choice of locations. Further, the mushrooming of planned shopping centers and malls present an enormous challenge before a retailer. Though a retailer tries his level best to select the site to locate a store, these factors must be considered while selecting a particular site.

1)        Types of Goods: While short listing from the various opportunities available for the store location, the retailer needs to consider the types of merchandise he is going to sell as the main deciding factor. Broadly classified, the goods are of the three types are discussed below:

Convenience Goods are the impulse goods bought frequently or which are the basic necessities and are planned once; and they need not to be re planned every time the need arises. This product type is purchased by a wide range of customers. The retailers selling such goods have to ensure that they are present in the area where there is high flow of the traffic (of their target segment). The location and the nearby areas have the possibility of large displays of the products related matter so as to induce the customer to do impulse purchase. Basically these locations have to be very easily accessible.

Shopping Goods are the goods which are purchased infrequently. They are high involvement planned purchases. The customers are willing to travel a particular distance to visit these stores in order to fulfill their needs. The retailers have to ensure that there is sufficient parking facility for the customers and they spend quality time in their stores. They need to position their store in such a location where the target customer base feels comfortable to visit.

Specialty Goods are bought occasionally and have the specific customer base who buys those particular goods/brands only. For these stores, even the standalone locations are suitable wherein there is no other store nearby. The stores selling such goods are very few and hence customers are willing to visit these stores no matter wherever they are located.

But the main factor to consider here is that since these are premium products, the customers would like to compare the physical products and the prices of the complementary products before making the purchase. Therefore in those cases where the complementary goods are available in the same city/area, the retailers will like to locate their store near the competitors so that customers can make the quick decisions and they can convince the customers in the same visit. Because customer once gone for evaluation to the other store in some other location has very rare chances of coming back

Most of these goods are promoted by the retailer using ‘window dressing’. It means displaying the product in the show window of the retail outlet with the face of the product visible from the street. It creates the long lasting first impression. It also attracts the passersby as well as prospects and invites them to enter the store. Mostly the retailers display their premium/newly launched/well known products in the glass at the front of the store and the products are visible from the road outside very clearly. These displays:

Ø  Remind the consumers about their needs.

Ø  Lure them to come inside the store.

Ø  And to explore the products available.

Ø  Which finally attract them to buy the product?

Such types of the retailers choose the busy square of the road to attract the customers.

2)  Population: The population is the main determining factor for selecting the store. As mentioned in the trading area analysis above, the retailer needs to consider whether the majority of his target customers live in the surrounding areas, or pass by that area or regularly shop from that particular area which he is going to locate his store. The local demographics need to be checked and the profile of the population of that area needs to be studied. This also helps to forecast the possible sales and the scope of expansion in future.

3)  Easy Accessibility: Accessibility affects the number of vehicles and pedestrians that pass by the store i.e. the traffic flow. When the traffic is greater, more consumes are likely to stop in and shop at the store. Traffic counts are particularly important for retailers offering merchandise and as most of the services are bought on impulse, than other wise.

The accessibility of the location is the most determining factor in selecting the site. It means connectivity with the site for customers and suppliers. As discussed earlier that the retailers need to ensure that the sufficient number of people pass by that area i.e. the store is located in the area with sufficient traffic. But traffic cannot be confused with the target customers. Only having sufficient traffic does not mean that the store will have sufficient sales, as all of them cannot be the target customers.

4)  Legal and future considerations: The retailer needs to check with the local authorities regarding the restrictions and the future plans of the area where he is purchasing/getting the location on lease. He needs to check the advertisement rules (whether the hoardings/signage boards in and around the location are allowed, whether he can use lighting boards, the height of the displays allowed, etc.) and then he needs to match those specifications with the requirements of his store. Moreover, he needs to check the future plans such as construction of over/under bridge, road leveling etc. which may affect his visibility/traffic flow to the store, and ultimately the sales; and about the various types of licensing requirements for operating the store in that area.

5)  Competition and Saturation: The competition can actually increase the sales or alternately decrease it to the minimum extent on the basis of the merchandise sold and the nature of competition.

Thus stores also facilitate multi-purpose shopping and help customers purchase all their needs at one location i.e. one-ship-shopping. For example: the shopping centers and shopping malls.

6)  Location Cost: Generally, when a retailer decides the location, the basic land cost (in case of purchasing the location) or the basic lease cost (in case of taking the location on rent) is considered. But once the location is finalized, there are various hidden factors which are imposed from time to time and make the overall planning ineffective. These factors need to be considered:

Ø  Charges of the security, maintenance, and use of basic amenities in the building where the store is located.

Ø  Charges for the usage and maintenance of common facilities in the building (Escalator, Centralized cooling units, Stairs, Parking etc.)

Ø  Average cost of power used.

Ø  Compulsory membership in the associations required.

Ø  Various of taxes such as property tax are to be paid by the owner of the retail, etc.

         All these factors help the retailer to determine what is the average cost of the location (including rent) that he has to bear and he is in a position to decide whether the locations are profitable for him or not.

7)  Parking facilities: The retailer needs to ensure that there is sufficient parking facility available for the visitors to his store. It is generally seen that sometimes customer wants to shop at a particular store for buying the merchandise, but he doesn’t find the parking space in front of a shop and he moves ahead. Very good merchandize mix and excellent display will be of no use if the location doesn’t have sufficient parking facility.

8)  Owner’s terms of occupancy: Some owners of the retail mall/market place restrictions on type of retailers those are leased space in the shopping centre and are restricted to compete with other retailers from the same location. In these types of locations such as Malls/markets, the better locations always cost more. For example, in a strip shopping centre, the better locations are closest to the supermarket.

9)  Multiple locations of the same retail chain: Retail chains such as Big Bazar, More, Subhiksha must consider the area being served by one store and the next store should be at such a location that the areas do not overlap. These retail chains with their multiple stores attempt to achieve promotion and equal distribution economies of scale for all the multiple locations. But in doing so, sometimes the locations are chosen so close to each other that they eat away the sales of each other and this is known as cannibalization.

10)     Types of Lease (in case of rented site): In the case of the site on rent, the retailer needs to check whether the type of lease offered by the owner suits his business operations. Various types of lease options available are mentioned below:

Ø  Fixed Percentage Rate: The retailer pays a fixed percentage of the sales as rent per month.

Ø  Fixed Rate Lease: The retailer pays fixed amount per month over the entire duration of the lease.

Ø  Graduated Lease: The rent starts with a particular amount and then it increases at a predefined rate over the time period.

6. (a) What is transportation management? What factors are considered for transport optimization?     4+7=11

Ans: Online for Online Members

Or

(b) What is warehousing? Discuss its benefit in retailing.               11

Ans: A warehouse may be defined as a place used for the storage or accumulation of goods. The function of storage can be carried out successful with the help of warehouses used for storing the goods. Warehousing can also be defined as assumption of responsibility for the storage of goods. By storing the goods throughout the year and releasing them as and when they are needed, warehousing creates time utility.

Benefits of warehousing in Retailing

1. Regular production: Raw materials need to be stored to enable mass production to be carried on continuously. Sometimes, goods are stored in anticipation of a rise in prices. Warehouses enable manufacturers to produce goods in anticipation of demand in future.

2. Time utility: A warehouse creates time utility by bringing the time gap between the production and consumption of goods. It helps in making available the goods whenever required or demanded by the customers.

Some goods are produced throughout the year but demanded only during particular seasons, e.g., wool, raincoat, umbrella, heater, etc. on the other hand, some products are demanded throughout the year but they are produced in certain region, e.g., wheat, rice, potatoes, etc. Goods like rice, tobacco, liquor and jaggery become more valuable with the passage of time.

3. Store of surplus goods: Basically, a warehouse acts as a store of surplus goods which are not needed immediately. Goods are often produced in anticipation of demand and need to be preserved properly until they are demanded by the customers. Goods which are not required immediately can be stored in a warehouse to meet the demand in future.

4. Price stabilization: Warehouses reduce violent fluctuations in prices by storing goods when their supply exceeds demand and by releasing them when the demand is more than immediate productions. Warehouses ensure a regular supply of goods in the market. This matching of supply with demand helps to stabilise prices.

5. Minimisation of risk: Warehouses provide for the safe custody of goods. Perishable products can be preserved in cold storage. By keeping their goods in warehouses, businessmen can minimise the loss from damage, fire, theft etc. The goods kept in the warehouse are generally insured. In case of loss or damage to the goods, the owner of goods can get full compensation from the insurance company.

6. Packing and grading: Certain products have to be conditioned or processed to make them fit for human use, e.g., coffee, tobacco, etc. A modern warehouse provides facilities for processing, packing, blending, grading etc., of the goods for the purpose of sale. The prospective buyers can inspect the goods kept in a warehouse.

7. Financing: Warehouses provide a receipt to the owner of goods for the goods kept in the warehouse. The owner can borrow money against the security of goods by making an endorsement on the warehouse receipt. In some countries, warehouse authorities advance money against the goods deposited in the warehouse. By keeping the imported goods in a bonded warehouse, a businessman can pay customs duty in installments.

7. (a) What are the challenges of Indian retail sector?    12

Ans: Challenges faced by retail sector in India

The retailing sector in India is at the development stage and its faces a number of challenges as highlighted below:

1. Technology: The availability, feasibility and the adoption of the appropriate technology in a cost effective manner is the biggest challenge for the retailers in India. The technology has emerged as one of the most important factor retail not only for billing purpose, but also for control of merchandize, for logistics and supply chain, for placing order, for prevention of theft, etc. It is not economically possible for all the emerging players to adopt the technology in the first stage of their business.

2. Internal Transportation: Most of the big brands have a policy that if any retailer/wholesaler wants to purchase the product directly from the purchasing company, they deliver a particular minimum quantity of the products generally a complete vehicle full of products (as applicable). Now the modern retailers have the policy that they procure the products directly from the purchasing company in order to minimize the procurement cost (avoiding any intermediaries) and ultimately sell to the end customer at comparatively lower cost. But the fact to be noted here is that these companies cannot get the whole vehicle full of one product unloaded at one of their outlet. Due to this, they have to get the delivery at one of their centralized warehouse from where they transport to their individual stores on weekly/fortnightly basis.

3. Skilled Workforce: The next major challenge facing retailers today is the availability of the skilled workforce. With the opening up of the FDI route and the entry of the foreign players in India, they are offering very handsome salaries to the manpower in India to attract them. Most of the retailers are sending the senior management from their home country to manage the operations, and they are taking the middle management and lower level employees from India as they are available at comparatively lower cost in the home country. Due to the offering of handsome salaries by the foreign players, the local retailer’s/retail chains are offering the shortage of manpower. To retain some of their old experienced employees, they have to offer higher salaries which ultimately affect the finances.

4. Stock shrinkage: It is generally said that profitability of the business increases with the size of the business. Bigger is the business, higher are the profits. But with every good thing comes the challenges. Similarly, the challenge which arises here is the theft and fraud. Due to the large scale of operations, the retailers today face the problem of theft (both by the store employees as well as the customer). This theft comes to notice only when at the end of the month/time period, the stock is audited. But nothing can be done by then. Due to large scale operations, if there occurs any administrative error, it multiplies to the higher values.

5. Inventory management: Retail starts with inventory. Inaccurate inventory records alone cost companies, on average, 10% of profits a year. Knowing what to buy, when to buy it and when to mark down or clear underperforming products has always been a key part of remaining competitive in the retail environment. Poor financial performance is the obvious result of carrying too much stock or too many show-moving items.

6. Supplier fraud multiplication effect: The vendor fraud is another challenge for retailer. The vendors generally have the tendency to supply the material with a revised amount of products than what was agreed to. For example, a particular product was agreed at a price of Rs. 10 per unit by the supplier to the retailer. Now when the product order was actually delivered, the bill contained the amount as Rs. 10.20 per unit. If the retailer observes it is just 20 paisa per unit more. And the retailer’s staff is there to check such discrepancies before making payments.

7. Customer retention: Customer retention is also one of the major problems in retail. The customers today have such as wide range of options that each and every retailer is ready with its own set of schemes/offers to lure the customers of the other. Sometimes the retailers even operate at losses to throw a new player out of the market. Customers today have become so informed and evolved that they want each and every product/service with best quality at the most economical price.

8. Consumer Perspective: Consumer response to supermarkets has been moderate because most do not have access to transportation to a supermarket and are still in the habit of buying fresh produce daily from local stores. This is mostly due to the proximity to homes and personal service of local stores.

9. Regular supply of electricity: Continuous supply of electricity is a major challenge in India. But the retailers have employed a large number of convenience management systems for the visitors some of which need continuously supply of electricity round of clock (24 hours). Now if these equipments are not managed and not run round the clock, the shopping experience would become worse than-being pleasant.

10. Competition from unorganized sector: Unorganized retail sector is still predominating over organized sector in India. Supermarkets and similar organized retail accounted for just 4% of the market. Organized retailers face immense competition from the unorganized retailers or kirana stores (mom and pop stores) that generally cater to the customers within their neighbourhood and offer personalized services such as direct credit to customers, free home delivery services, apart from the loyalty benefits.

Or

(b) Discuss the global trends of retail sector and also discuss the recent trend in Indian retail sector.       6+6=12

Ans: Recent emerging trends in Global retail market

1.       Providing convenience: The evolving lifestyle has created people more quality conscious. Due to the busy work schedules, the people get very less time for leisure and shopping. Hence whatever time they get they want to spend it with convenience. Hence globally there is a trend to provide convenience in terms of shopping destinations where almost all the goods are provided under one roof. The consumers are provided convenient delivery timings and convenient payment options.

2.       Technology through Mobile: If the Indian mobile statistics are considered it is projected that India will have over 800 million mobile subscribers by 2016. The case in the other countries is even more advanced. Globally mobile technology is being used for:

Ø  Financial transactions.

Ø  Shopping and digital entertainment.

Ø  Services on demand.

Ø  Social networking for product promotions.

These mobile phones are also used by the retailers to send their promotions and advertisements to the target customer these days.

3.       Changing strategy of Multinational Organizations: With increasing globalization, companies today are redefining their strategies to align it with the external environment of the newer market it wants to enter.

4.       Store design: Biggest challenge for organized retailing is to create a “customer-pull” environment that increases the amount of impulse shopping. For this the retailers throughout the world are creating such formats which enhance the shopping experience of the buyer and he wants to stay in the store for more time. Retail chains like Music World, Baristas are laying major emphasis in store design.

5.       Customization: The retailers throughout the world have started to customize their market models and product offerings to meet the local needs and preferences. The retail store managers are more and more empowered to take on the spot decisions to ensure customer satisfaction. This is because retailers feel that the store staff is more close to the local customer and can understand and customize his needs more effectively.

6.       Multi-channel retailing: Multichannel retailing has become the need of the day. Retailers today are not confined to one single channel of retailing. They are reaching to the customer through multiple channels like store based retailing, online retailing, personal selling, Phone retailing etc. This has made the customer easy to shop by exploring the most convenient option every time he wants to buy a product.

Opportunities for Retail Sector in India

After discussing and carefully analyzing the challenges for the retail industry in India, then next are the opportunities which if carefully tapped, can create a huge positive impact on the retail scenario.

1. Booming Indian Economy: India’s booming economy is a major source of opportunity. The economy of India, when measured in USD exchange rate terms, is the fourth largest in the world, with a GDP of US $1.50 trillion (2008). It is the third largest in terms of purchasing power parity. India is the second fastest growing major economy in the world.

2. Economies of scale: The organized retailers have relatively bigger pockets and they have the ability to purchase in bulk. Due to this, they can get the benefits of economies of scale. The products are procured at the lower prices as compared to the normal retailer due to which they can offer those goods at the price lower than market rates. If the other factors such as storage and transportation are efficiently managed, this low cost procurement can lead to higher footfall and higher revenues.

3. Private Labels: It is generally seen that once established, most of the organized retailers such as Big Bazaar, More etc. have launched their own private labels. That is the packed products such as purses, rice; soft drinks etc. of their own brand are also available. Now the customer who is shopping from these organized stores is ultimately convinced to try those brands once. These private levels are kept 20 – 30% lower in price than the normal goods. The customers who are price sensitive and are getting same/approximately same quality for the reduced price shifts their brand usage

4. Changing Demographics: The major change is seen in the age profile senders. A new group of shoppers are evolving who are in their mid-twenties. Around seven million people such people are entering this category every year. India if compared with developed countries is a very young nation. Nearly two-thirds of India’s population is below the age of 35, and nearly 50% is below 25. The main reason in the increase in the consumption pattern and the style related expenditure is due to this increasing youth population.

5. Store layout leads to impulse buying: The layout of the organized retail stores and the storage of the merchandise is done in such an attractive manner that it leads to impulse buying. Impulse buying means the purchase of the previously unplanned goods by the buyer. The retailers use the strategies such as storing the related products in one section, keeping the related merchandise on one shelf. This leads to buying of even those products by the consumer which are not on the shopping list.

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