Retail Marketing

A biscuit factory in Pune can make a lakh packets a day, yet families buy them one packet at a time, at a shop near home. The business that makes that last sale is the retailer.

The retailer is the final link in the distribution channel. It connects manufacturers with consumers, creates satisfaction at the point of sale, and passes customer feedback back up the chain.

A retailer is any business whose sales come mainly from retailing. But any organisation that sells to final consumers is doing retailing, whether it is a manufacturer, a wholesaler or a retailer. The method does not matter (in person, by mail, phone, vending machine or online), nor the place (a store, the street or the buyer's home). A shoe maker's factory outlet is retailing, though the firm is a manufacturer.

Kotler and Armstrong classify store retailers on four bases: the amount of service, the product line sold, relative prices, and how they are organised. Supermarkets are classified by product line.

The more service a store gives, the more it costs to run, so prices usually rise from self-service to full service.

Why low margins can pay. Take two grocery stores in one town (illustrative numbers). A full-service store sells ₹1 lakh a day at a 20% gross margin, which leaves ₹20,000. A supermarket sells ₹4 lakh a day at an 8% margin, which leaves ₹32,000. The lower margin earns more rupees because volume is four times higher. The supermarket also carries higher rent and wage bills, so volume must stay high.

Don't confuse an off-price retailer with a discount store. A discount store sells regular, standard goods cheaply by accepting a lower margin. An off-price retailer sells leftover, surplus or irregular branded goods, bought below regular prices. In the same way, a category killer is not a specialty store: both go deep in one line, but the category killer is a superstore.

Where it breaks. Real stores mix types. A neighbourhood kirana is a convenience store by size and hours, but it gives limited service: credit to regular customers and home delivery. Most Indian retail still happens in small independent shops like this, which a Western list of formats fits only loosely.

For exams. Expect a description to match with a store type, and the four bases of classification. Remember the service ladder in order: self-service, self-selection, limited service, full service.

By service, by product line, by price, by organisation.

A kirana owner pays more for a carton of soap than the chain supermarket down the road, because the chain buys for many stores at once. Corporate retailing is about getting that kind of buying power.

Selling without a store. Four forms are named in the exam texts.

How retailers organise. The forms differ in who owns the outlets and who organises the joint buying.

Corporate retail organisations gain economies of scale, greater buying power, wider brand recognition and better-trained staff than independent stores usually can.

Private labels (also called reseller, store, house or distributor brands) are a retailer's own brands, as Marks & Spencer, Benetton and The Body Shop sell. They give the retailer more control over price and quality, higher margins and stronger customer loyalty. An illustration: a store buys a branded pack of biscuits for ₹80 and sells it for ₹100, a margin of ₹20 (20% of price). It has its own label made for ₹60 and sells it for ₹90, a margin of ₹30 (33% of price). The shopper pays less and the store earns more per pack.

Don't confuse a voluntary chain with a retailer cooperative. Both give independent shops group buying. A wholesaler organises a voluntary chain; in a retailer cooperative the retailers set up the buying body themselves. Study notes sometimes give Lijjat Papad as a consumer cooperative. In fact it is a cooperative of the women who make its products, not one owned by its customers. Direct selling also differs from direct marketing: direct selling uses a salesperson in person, direct marketing reaches buyers through media.

Where it breaks. Multi-level marketing can slide into a pyramid scheme, where income comes from recruiting people rather than selling to consumers; Indian law prohibits such schemes. Franchisees give up much of their freedom, and one badly run outlet harms the whole brand. With a private label, the retailer, not a manufacturer, answers for quality.

For exams. Match each form to who owns or organises it. The consumer cooperative is the only one owned by its customers.

Go deeper for practitioners

A decision. A bakery in Pune runs three successful shops and wants thirty. Opening its own outlets keeps full control of recipes and service, but needs capital it does not have. Franchising lets franchisees put in the money and grows faster, but the bakery must write down its system, train others, and inspect them. The question to settle first is whether the bakery's quality can be written into a manual. If it lives in one head baker's hands, franchising will dilute it.

Links. Chains, voluntary chains, cooperatives and franchises are vertical marketing systems, covered in Distribution (this unit). Franchising abroad is a form of licensing, one of the modes of entry in International marketing. Private labels raise the brand decisions covered in Brand management.

Chain, voluntary chain, cooperative, franchise, conglomerate.

A kirana owner in Nagpur now takes UPI payments, delivers phone orders and stocks brands his father never sold. The retail trends below explain why his shop, and the mall across town, keep changing.

Trends in India. Most of these push retail toward organised, digital formats, while the kirana adapts rather than disappears.

Wider trends. These apply to retailing worldwide, India included.

Intertype competition means competition between different kinds of store. A supermarket, a kirana and an online seller all compete for the same family's monthly grocery list.

Don't confuse single-brand with multi-brand retail FDI. Single-brand retail is a firm selling only its own brand in its stores; foreign firms may own all of it through the automatic route, with no prior government approval. Multi-brand retail is a store selling many brands, like a supermarket; foreign ownership is capped at 51 per cent and needs government approval.

Where it breaks. In India, buying behaviour is far from uniform across income groups. Organised retail has made less impact on lower-income shoppers, and small independent retailers survive by offering personal service, credit and nearness. Organised retail needs trained staff, and technology gives it cost and service advantages over unorganised players. FDI rules are policy, and policy changes, so check the current position before relying on it.

For exams. The FDI limits, routes and years are the most-asked facts. Also expect a trend to match with its description, such as kirana modernisation or expansion into smaller cities.

Organised, online, digital and reaching smaller towns.