DISTRIBUTION DECISION

RETAILERS

In simple words retailing refers to all transactions which involve sale of goods to the ultimate consumers for personal consumption. If the buyer uses the goods for reselling purposes it will not be treated as a retailing transaction. Any individual or business unit or shop primarily engaged in retail selling is known as a retailer or retail store.

Dealers:

Dealers are also a type of retailers. They work for a specific type of products or sell the products of one or few manufacturers. Dealers are at the bottom of the distribution hierarchy, working under stockists/distributors or semi-wholesalers, as the case may be. In cases where a company operates a single tier distribution system, dealers operate directly under the company. Retailers are also referred to as dealers. They operate in a relatively small territory or at a specific location, but they do not normally perform stock-holding and sub-distribution functions. The stocks they maintain are operational stocks necessary for immediate sale at the retail outlet. They buy assorted products in suitable lots and resale them to household consumers located in a limited geographical area, competing with other retailers.

Functions

Like the wholesalers, retailers also perform a variety of functions connected with the buying and selling of goods. They, in brief, perform the following functions.

I ) Estimating the demand: All retailers - big or small- have to make an estimate of the demand for different products and have to determine the nature of products that consumers need to be supplied. '

2) Procurement of goods: Most retailers deal in a variety of products. So they may have to procure goods from different wholesalers. Besides, they must decide to buy from those wholesalers who supply goods suited to the requirements of consumers as to quality and price.

3) Transportation: Usually the retailers are to arrange the transportation of goods procured from the wholesalers' place. Sometimes delivery is also arranged by the wholesalers on the basis of orders placed with their salesmen.

4) Storing goods: Small-scale retailers have limited space for the goods to be kept in stock. Large retail stores often have godowns to store different varieties of goods in adequate quantities. But in all cases, goods have to be held in stock so as to meet the customers, needs. For this purpose storage of goods must be so arranged that customers may be served without delay. They must be given an opportunity to select goods of their choice. This is often done by display of goods on shelves and high show cases.

Services

As middlemen engaged in the distribution of goods, retailers deal with wholesalers and consumers.

The services of retailers to the consumers are significant in several ways:

1) By holding ready stocks of various commodities required by the consumers, retailers relieve the customers of the need for stocking a wide variety of goods which could be extremely inconvenient and cumbersome.

2) By keeping a good assortment of the various varieties of a particular product, say soap, toothpaRes, etc. retailers provide a wide variety of choice to their customers.

3) By proper display of new products, the retailers keep the consumer- informed about the changing trends in production of different varieties of goods, besides helping manufacturers to promote their products.

 4) Retailers very often guide their customers about the relative merits of the various brands of a particular product and thus help them in the selection of

5) Retailers may provide special facilities to their customers, for example, free horn delivery, extension of credit, after-sales service, etc.

Classification

Broadly speaking, we may divide the retailers into two categories as:

 1) itinerant retailers, and

2) fixed shop retailers.

Fixed shop retailers can be further classifed as:

1) small scale retailers, and

2) large scale retailers.

Retailers also may be further classified on the basis of

(a) form of ownership, and

(b) non-store retailing.

 All these categories are explained below.

Itinerant Retailers

 Retail traders who carry on business moving about from place to place to sell their goods are known as itinerant retailer. They do not have any fixed place of business. They either move from house to house with their goods, or change their place of business frequently according to convenience .and sales prospects.

1) Hawkers or Peddlers: These retailers move from door to door in (residential localities and sell their wares which may consist of vegetables, fruits, utensils, toys, ice cream, snacks, etc. They carry their articles in bags or trays hanging from shoulders, on bicycles or push carts, small motor vans or horse-drawn .

2) Pavement Traders: Pavement traders are found in busy market areas, street crossings, in front of railway stations and bus terminals. The goods traded by them include items like hand bags, cut-pieces of cloth, readymade garments, footwear, household utensils, toys, books and journals, pens and pencils, fruits, vegetables, etc. These traders sometimes put up temporary sheds or make-shift platforms for display of goods. More often they spread their wares on pavements at different places depending on the prospects of sale.

3) Market Traders: This type of itinerant retailers generally sell their goods in weekly markets held in small towns or villages. They move from one market to another in the neighbouring places on specific days fixed for the market.

Services of Itinerant Retailers: These retailers serve consumers at the nearest and the most convenient places: They serve either at the consumers' door-step or on busy places which consumers normally visit. Thus, housewives and working people find it very convenient to buy goods from itinerant traders like hawkers and pavement traders.

Small-scale Retail Shops

 Small-scale retail shops include those small shops dealing with miscellaneous products of regular use, and shops selling particular products of different varieties. They hold small stocks and do their business in fixed shops located in residential areas or market places. According to the nature of goods sold, the small retail shops may be divided into three categories as follows:

 I) Stalls on Streets: Small shops on the road side are very common in cities and towns. These are set up as stalls in front of large stores or in residential areas selling a limited variety of products of regular use like stationery, grocery, toilet products, biscuits, etc. The shops are located within easy reach of consumers' residence or nearby roads or street-crossings, or bus stops. These retailers meet the needs of customers at convenient locations. They supply goods of regular use for which customers are not prepared to go to central markets.

2) General Merchandise Shops: These are small retail stores which deal in all types of general consumer goods of regular use including provisions, bread, butter, stationery and toiletry. paper and pencils, cigarettes, matches, etc. These shops are located in thickly inhabited residential areas and busy markets. Consumers find it convenient to buy all their requirements in one shop. Regular buyers are also offered home delivery services and credit facility.

3) Specialty Shops: Small retail shops which deal in only one or two special types of goods are known as specialty shops. The goods dealt with may be only electrical fittings of different kinds, or medicines, or motor parts, or books and stationery, or bread and confectionary items, or ready-made garments, or toys, etc. People often find it convenient to buy their requirements from these shops due to the availability of different grades and sizes in the small product line.

Large-scale Retail Shops

Large-scale retail shops are so called because they deal in a large variety of goods, and have large volume of business. The types of fixed shops in this category include the following:

 1) Departmental stores

Departmental stores grew up in developed countries mainly to cater to the requirements of well-to-do people who required articles of high quality and looked forward for comfortable shopping.

2) Super-market

The customers are to pick-up the items they need and then pay for the articles at the cash counter. It works on a self-service basis though one or two salesmen are there to help the customers. The super-market, like the departmental store, deals in a large variety of goods. But there are certain differences between the two types of stores:

 i) In a super-market the products sold are generally low priced, fast-moving items of daily need. Durable goods like refrigerators, electric fans, radio, television, etc. are not available in super-markets. A departmental store mostly concentrates on consumer durables and fashion goods.

 ii) In a departmental store there are separate counters served by salesmen, whereas super-market operates on a self-service basis.

 iii) Customers are not provided with services and facilities like hair-dressing recreation, etc., in a super-market. These may be available in large departmental stores, although not in every such store.

3) Multiple shops or chain stores

 4) Mail order house

5) Consumer co-operative stores

Consumers sometimes join together to form co-operative societies to sell goods on retail basis. The basic purpose is to eliminate middlemen and obtain their requirements at a lower price. The capital is subscribed by the members through the purchase of shares of small denominations. Co-operative stores purchase their requirements in bulk, from manufacturers or wholesalers.

Co-operative stores have the following advantages:

Consumers can be sure of the quality of goods in the sense that there is no possibility of an adulteration practiced by some retailers in the private sector.

These stores are able to offer various products at more reasonable prices than most other retailers.

Consumers are assured of availability of certain products even when there is an overall shortage in the market and that too at reasonable prices. Retailers usually take advantage of such situations by either increasing prices or earmarking supplies to their favoured customers.

Co-operative stores suffer from the following limitations:

Consumers do not patronise these stores regularly, coming to these stores only in times of shortages.

In practice, they have not been able to reap the benefit of bulk purchases from manufacturers.

Large co-operative stores may tend to suffer from all the drawbacks of q bureaucratic management.

 6) Hire purchase traders

Hire-purchase trading consists of supplying durable goods for use by customers who agree to pay the price by installment at regular intervals. The buyer acquires ownership of the goods only after the total price has been paid. In other words, in hire-purchase trading, the buyer takes possession of the goods, but does not get the ownership until the last installment has been paid. The installments are regarded as hire charges. If there is default in paying an installment, the seller has the right to recover the goods or sue the buyer for the balance amount due. Durable goods like refrigerators, television Sets, radio, sewing ' machines, electric fans, automobiles, industrial machinery, air-conditioners, etc., can be sold by hire-purchase trading houses.

7) Discount houses

Large scale retail establishments which offer discounts on the prices are known as 'Discount Houses'. Durable goods like household appliances (cooking ovens, electrical gadgets, etc.) camera, binoculars, etc., are generally available through discount houses at a relatively lower price as compared with the price charged by other retail stores. This is possible as the discount houses directly purchase from manufacturers and operate the business on a low margin of profits.  They expect to cover expenses and make substantial profits through large volume of sales.

8) Super bazars

These are large retail stores organised by co-operative societies 1 i which sell a variety of products under a single roof. The goods traded by superbazars include consumer goods which are procured at wholesale rates from manufacturers or wholesalers. The stores are operated either on the principle of selfservice or with separate counters served by salesmen. The difference between a super-bazar and super-market is that the former is organised by co-operative society whereas the latter is generally established as a private sector organisation. Similarly, the difference between a consumer co-operative store and super-bazar is that a consumer co-operative store is usually run on small scale, while the super-bazar may be a large-scale establishment.

9) Automatic vending machines

Retail sale of articles with the help of coinoperated automatic machines is known as automatic vending. Retailing on a large scale is possible in this way by placing machines at convenient locations like bus terminals, railway stations, airports, shopping centres, etc. This method of retail selling is very popular in western cbuntries. Cigarettes, razor blades, postage stamps, milk, ice-cfeam, soft drinks, soup, paper-back books, newspapers, etc., are sold in cities through vending machines.

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.

1. Independent Retailer: Generally operates one outlet and offers personalized services, 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.

2. 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.

2. 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.

4. Cooperatives: A retail cooperative is a group of independent retailers, that 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 is a typical example of a cooperative in India.

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 salespersons who cannot provide information to help shoppers make buying decisions. The major types of non store retailing are:

1. In Home Retailing: Where, a sales transaction takes place in a home setting - including door-door selling. It gives tbe salesperson an opportunity to demonstrate products in a very personal manner. HelShe has the prospect's attention and there are fewer distractions as compared to a store setting. Examples of in home retailing include, Eureka Forbes vaccum cleaners and water filters.

2. 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 provider use this method. Other examples are private insurance companies, and credit companies etc.

3. Catalog Retailing: This is a type of non store retailing in which the retailers offer 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 lower operating costs, lower rents, smaller sales staff and absence of shop lifting. This trend is catching up fast in India. Burlington's catalogue shopping was quite popular in recent times. Some multi level marketing companies like Oriflame also resort to catalogue retailing.

4. Direct Response Retailing: Here the marketers advertise these products1 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.

5. 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. ATMs 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.

6. 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. Amazon.com, E-bay etc are some of the many e-tailers operating today.

Trends in Retailing

Retailers are adapting to the shopping needs and time constraints of working women, dual earner households and the increased customer interest in quality and customer service.

Shopping Malls:

A growing number of shopping malls are coming up all over the country. In north India, there seems to be a proliferation of such malls surrounding Delhi, in places like Gurgaon and Noida. In general they target higher income customers, with their prestigious speciality shops, restaurants and department stores.

Factory Outlets:

Manufacturers are opening factory outlets to sell off surplus inventories and outdated merchandise. This forward vertical integration gives manufacturers greater control over distribution, than selling the merchandise to off price retailers. Mohini knitwear of Ludhiana (Punjab) and number and woollen and hosiery manufacturers set up their outlets in Delhi during winters.

Non Store Retailing:

Non store retailing is accelerating at a faster rate than in store retailing. This includes direct marketing. In Home shopping, TV shopping and e-tailing etc.

 Diversification of Offerings:

Scrambled (unrelated products or services) merchandising is taking on a broader meaning and inter type competition among retailers is growing. For instance Citibank is organizing tourist trips and sending mail order catalogues to its credit card customers.

 Impact of Technology on Shopping Behaviour:

The way retailers present their merchandise and conduct their transactions are changing. Cable TV Channnels are used to present merchandise, Videos have replaced catalogues and computer linkages to acquire information and make purchases are on the increase. Virtual shopping ' through PDAs is another possibility.

Multi Channel Retailing:

Traditional store based and catalogue retailers are placing more emphasis on their electronic channels and evolving into multichannel retailers, because they can reach new markets and overcome limitations posed by traditional formats.

Expansion Globally:

Due to globalisation and liberalisation under the WTO regime, retailers are also finding opportunities to expand globally. Retailers with unique ' formats and strong brand positioning are increasingly moving into other countries. Many are expanding internationally to escape mature and saturated home markets.