A format is defined as a type of retail mix that is followed or used by a set of retailers that offers some unique benefit that helps in attracting shoppers.
It is the mix of variables that retailers use to develop their business strategies and constitute the mix as merchandise assortment, pricing, transactional convenience, preferential approach, channel, experience, and the overall business model.
In the business of retailing, organizations adopt several varieties of channels, shapes, and sizes. The diversity of the retail industry in terms of the variety of store formats that are followed in the business of retailing.
Formats have been found to be influencing the choice of store as well as orientation of the shoppers. Also, retailers are experimenting with alternate format with differing success rates. With availability of more and more choices, customers try to optimize the value derived and hence split their shopping across different formats.
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However, it is also true that some shoppers patronize one of the formats and prefer to do most of their shopping from that format. It is, therefore, essential that a retailer should select the value and then choose the “format or formats” that deliver the value to the fullest.
Some of the types of retail formats are: 1. Departmental Store 2. Multiple Shops 3. Mail Order House 4. Consumers’ Cooperative Store 5. Super Market 6. Hyper Market.
Additionally learn about some other retail formats: 1. Mom-and-Pop Stores 2. Kirana Stores 3. Discount Stores 4. Category Killers and 5. Speciality Stores.
Types of Retail Formats – Departmental, Multiple Shops, Mail Order, Super Market and Etc.
Types of Retail Formats – Large Stores: Departmental Store, Multiple Shops, Mail Order House, Consumers’ Cooperative Store, Super Market and Hyper Market
In the business of retailing, organizations adopt several varieties of channels, shapes, and sizes. The diversity of the retail industry in terms of the variety of store formats that are followed in the business of retailing. In Indian scenario, formats have been found to be influencing the choice of store as well as orientation of the shoppers. Also, retailers are experimenting with alternate format with differing success rates.
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Retail outlets essentially differ in terms of the:
i. Ownership of the retail business itself, the characteristics of the premises.
ii. Infrastructure, ambience, and so on (the format).
iii. The orientation of the merchandise portfolio and range.
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iv. Service-level and pricing considerations.
While some types and formats of retailing are centuries old; the new kinds of retail outlets have emerged and are developing with technological advancement, proliferation of globalization, changing consumer behavior, and their increased expectations. These new formats are constantly evolving to offer a better shopping experience to the consumers.
Hence, retail format is basically the store “package” that the retailer offers to the target audience. Retail players are categorized on the basis of different retail formats that are essentially based on the retail operation. These formats are mainly defined on the basis of the size of the store, the type of merchandise sold, the pricing strategy followed, and also the location.
Thus, a format is defined as a type of retail mix that is followed or used by a set of retailers that offers some unique benefit that helps in attracting shoppers. It is the mix of variables that retailers use to develop their business strategies and constitute the mix as merchandise assortment, pricing, transactional convenience, preferential approach, channel, experience, and the overall business model.
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Hence, a format is essentially the retailing model for delivering the value promised to the customers so as to create an SCA. It is generally observed that customers prefer different formats for their different needs, but sometimes they also do the cross-buying. While books are increasingly being bought through online portals, grocery and food items are purchased at store-based formats.
Many times, shoppers buy similar kind of merchandise through separate formats. For instance, for buying apparels and fashion merchandise, consumers not only prefer brick-and-mortar department stores but also online fashion retailers. This happens because while off-line department stores allow them to feel, touch, and try the merchandise, online fashion retailers higher selection and convenience of shopping.
Hence, it can be observed that, with availability of more and more choices, customers try to optimize the value derived and hence split their shopping across different formats. However, it is also true that some shoppers patronize one of the formats and prefer to do most of their shopping from that format. It is, therefore, essential that a retailer should select the value and then choose the “format or formats” that deliver the value to the fullest.
Thus, before finalizing on the format selection, retailers evaluate the enablers and deterrents in the retail marketplace. Deterrents consist of variables that would hamper the smooth operation and growth of the format in a specific marketplace. This primarily involves identifying the key drivers of growth, the shoppers’ profile, and shoppers’ expectations and preferences.
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It also means evaluating the nature of competition and challenges in the marketplace. Here the retailer decides the elements of the retail mix to satisfy the target markets’ needs more effectively and efficiently than its competitors.
The choice of retail mix elements enables the retailer to:
i. Decide the type, design, and structure of selected format or combination of formats.
ii. Select the retail value proposition that the store would like to offer to shoppers (unique value the format is offering).
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Retailers develop a mix by using the following elements, essentially based on the value identified and the environmental factors.
Variety and Assortment of Merchandise:
i. Variety is the number of different merchandise categories a retailer offers.
ii. Assortment is the number of different items a retailer offers in a specific merchandise category.
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iii. SKU is nothing but a single unit of each different kind of merchandise.
For example, department stores, a category killer, and online stores all sell apparels. However, department stores sell many other categories of merchandise in addition to apparels, so here they have a greater variety. The category killer (or say specialty store) sells only one or very few category (say denim jeans), necessarily stocks more assortments of this category, and hence more SKUs.
They carry more designs, almost all brands, sizes, colors, patterns, and so on, and hence deeper assortments than general retailers such as department or discount stores, while online retailers can offer a huge selection across the categories at various price points.
Other elements are store ambience—atmosphere and amenities provided, pricing considerations, customer service level, and location preferences. Besides all these factors, the major transformation the retail industry has witnessed is growing tendency of off-line retailers embracing the online retailing channels, and vice versa is also true.
The reason for going the hybrid or Omni-channel way is the huge growth of e-commerce and changing consumer behavior and shopping preference. Brick-and-mortar retailers have taken cognizance of the online model’s ability to reach wider customer base across the geographies with comparatively very less investment. This would never have been achievable in a pure off-line retailing model.
On the other hand, online retailing model also want to offer coherent shopping experience to their targeted audience by adding certain feature to the shopping experience that are otherwise not possible with pure-play online model. The major macroeconomic driver of this phenomenon is a young demographic supported by Internet penetration, rising income levels, growing adoption of smartphones/mobile devices, and growing aspirations.
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In addition, at an individual level, greater access to a wide range of merchandise (especially beyond the major cities) and convenience (access at the click of a button), which is supported by the options like COD payment model, have been the key online (both through desktop and mobile) shopping adoption trigger.
This synergy has prompted many brick-and-mortar retailers to tie up with online players to widen their reach. The off-line retailers can leverage their “physical” assets to develop and build strong “clicks and bricks” retailing models that are able to deliver flawless shopping experience across multiple channels (Omni-channel strategy) that eventually build and strengthen the customer loyalty.
For example, department store chain Shoppers Stop entered into an exclusive strategic partnership with e-retailer Snapdeal to expedite its Omni-channel strategy. Though Shoppers Stop already has its own e-commerce shopping portal, they would have reached out to a small segment.
However, this strategic association with well-established marketplace model of Snapdeal helps Shoppers Stop to reach a wider audience by adding newer markets across geographies. This tie-up gives not only a pan-Indian reach to Shoppers Stop but also an opportunity to design and develop Omni-channel shopping experience.
Customers can buy the merchandise on Shoppers Stop’s online store on Snapdeal and pick up the merchandise at Shoppers Stop’s off-line store or can get it delivered at their home from the nearest Shoppers Stop brick-and-mortar outlet. This synergistic partnership brings Snapdeal’s market reach and technology together with the power of Shoppers Stop as a brand on its marketplace.
Snapdeal also hosts online retailing model of Tata-owned Croma. Similarly, Future Group as part of their Omni-channel strategy has an exclusive partnership with Amazon, intended to leverage multiple channels such as web, mobile, or brick-and-mortar stores.
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However, this kind of off-line and online retail collaboration requires meticulous consideration for pricing and merchandising management for prevention of any kind of cannibalization. This may happen because the company is now operating through multiple retailing formats such as off-line stores, own online portal, and presence on the marketplace model of other retailer.
So the brands that the retailer sells through its online and off-line model generally have separate listing on the marketplace model also. Here, there is a possibility of duplication of brands, perhaps with different price tags. These kinds of situations may confuse the customer or the customer may end up shopping at the lowest price, which may eventually lead to loss of business in the form of cannibalization (gain of one model of the retailer at the cost of its other model).
Large scale retailing has assumed great importance these days. Large scale retail stores buy directly from the manufacturers and sell directly to the consumers.
Almost in every big city, we come across large scale retail organisations of the following types:
1. Departmental Store
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2. Multiple Shops
3. Mail Order House
4. Consumers’ Cooperative Store
5. Super Market or Bazar and
6. Hyper Market
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The origin of departmental store took place in France. The first departmental store ‘Bon Murche’ was started in Paris in 1852. These days, departmental stores have become very popular in almost all the countries.
A departmental store may be defined as a retail organisation that handles a wide variety of merchandise grouped into well defined departments for the purposes of promotion, service, accounting and control. A departmental store is a large scale retail organisation having a number of departments under the same roof.
Every department confines its activities to a particular line of business. These departments are centrally organised and controlled to form a single established or firm. The management of all the departments is centralised, but the stocks of each department is handled separately.
2. Chain Stores or Multiple Shops:
A multiple shop system is a system of branch shops operating under a centralised management and dealing in similar lines of products. The multiple shops or chain stores receive supply from the central office and remit the sale proceeds regularly to the central office. Each shop is allowed to retain a small amount of cash on interest basis to meet its day-to-day expenses.
Purchasing, pricing and advertising are done centrally. There is only decentralisation of selling. The chain stores display goods in an identical manner and sell the same standardised merchandise. Bata, Mafatlal, and Raymonds shops are some of the examples of chain stores in India. Unlike departmental stores, chain stores deal only in a limited variety of products. For instance, Bata retail stores deal in footwear’s and allied accessories only.
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3. Mail Order House (Catalogue Retailing):
Mail order houses are retail organisations which carry on business through mail. Mail order business is also known as ‘selling through post’ for the retailer and ‘shopping by post’ for the consumer. Under this, the retailers contact the prospective customers through some sort of advertising. Advertising is carried through press, T.V., or by sending leaflets and catalogues giving the necessary details about the product.
Mail order houses maintain mailing lists of potential customers. They send the literature about their products through mail. They also mail reply paid cards to the prospective customers. When they receive orders, they will procure the goods and dispatch them to the customers usually by VPP (Value Payable Post). Sometimes, the goods are sent by railway parcel and the railway receipt is forwarded to the customer by VPP. Many mail order houses also send the goods ordered through couriers.
Mail Order Retailing is a Type of Non-Store Based Retailing:
It is suitable under the following conditions:
(i) Goods are identified by brand name and are of standardised quality;
(ii) Goods enjoy popular demand by the customers scattered over wide areas;
(iii) Goods do not require demonstration or special skills in handling and use; and
(iv) Goods are durable and do not get spoiled in the course of transit.
Books, drugs and medicines, sport articles, cosmetics and beauty aids, electronic gadgets of small value and cameras are some of the goods which are sold through mail.
The following factors have contributed to the growth of mail order business:
(i) Growth of postal facilities and development of railways and other means of transportation.
(ii) Increased circulation of newspaper and journals; and
(iii) Growing desire of people to have wider varieties and better qualities of goods.
4. Consumers Cooperative Store:
Consumers’ cooperative store is organised under the Cooperative Societies Act and is owned and operated by the consumers themselves. The capital of the store is provided by the share-holders. The membership of the store is voluntary. The aim of the store is to provide service to the members and not the maximisation of profit.
The establishment of consumers’ cooperative store is an attempt to eliminate middlemen who increase the cost of product to the consumers. They buy in large quantities directly from the manufacturers and sell them to the consumers at reasonable prices. Since there are no middlemen, the consumers get products of good quality at cheaper rate.
The profits earned by the consumers’ cooperative store during a year are utilised for strengthening its reserve fund, for declaring moderate rate of dividend and for declaring a bonus to the members according to the value of purchases made by them. A part of the profit may also be utilised for social purposes.
5. Super Market (Self-Service Store):
A super market or bazar is a large retailing business unit selling mainly food and grocery items on the basis of low-margin appeal, wide variety and assortments, self- service and heavy emphasis on merchandising appeal.
A super market deals mostly in food and grocery items and convenience goods like household goods, hosiery items, cosmetics, medicines and drugs, etc. It is generally situated at the main shopping centre. Goods are kept in open racks, and the price and quality are clearly labelled on the goods. A consumer can make selection of goods moving from counter to counter and pick up the selected goods and place them in a trolly.
After he has completed his selection, the trolly will be carried to the exit where a person computes the total charge and the buyer makes payment to the cashier and then takes delivery of goods. Thus, super market follows the policy of ‘self-help’ by the customers. The customers are not pressurised by the salesmen. That is why, many people are attracted towards the super market.
Super market is organised on departmental basis and a customer can buy various types of goods under one roof. Super market can be differentiated from departmental store on the main ground that there are no salesmen at the super bazar to deal with the customers.
The customers are free to choose the commodities of their choice. Moreover, a super market does not offer certain services which are usually provided by a departmental store. For instance, a super market does not allow credit sales and does not provide free home delivery service.
The concept of hyper market originated in France and then spread to U.S. and England. Hyper markets like Big Bazar have also come up in India.
Hyper markets are big self-service retail stores offering a wide variety of merchandise consisting of both food products and non-food products. They have central payment mechanism and central checkout facilities.
Future Group’s hyper market chain Big Bazar runs more than 140 stores across the country. It offers a wide variety of merchandise at prices lower than charged by other retail stores. That is why, it attracts a wide stream of customers from all walks of life.
Challenges before Unorganised Kirana Stores:
Organised retailers have created certain challenges before the kiranas (or mom and pop stores) in India.
The kirana stores find difficulty in competing with the big organised retailers because of the following reasons:
(i) Inadequate financial resources.
(ii) Lack of sufficient space for expansion. Purchase of new space (real estate) is not affordable.
(iii) Lack of trained workers because of low wages.
(iv) Poor window display at the retail store.
(v) Lack of facilities for consumers which are available at organised retail stores.
(vi) Poor management of the retail store.
Despite the above constraints, kirana or mom and pop stores will continue to operate in India.
Kirana stores are very popular with the Indian masses because of the following factors:
1. The kirana stores are located in the neighbourhood of customers. Thus, location is a big advantage for the kirana stores.
2. Being in the neighbourhood, kirana stores can meet the immediate needs of the people. For items of small value or for just one or two items, one need not go to a Mall or Hyper market.
3. Kirana stores ensure convenience in shopping. They are also known as convenience stores. One need not travel to the market place for shopping. Further, shopping from kirana stores is time saving also.
4. The owners of kirana stores offer advice to customers and help them in making the right choice.
5. Kirana stores offer goods on credit and also deliver goods at the residence of the buyer.
6. The kirana shop-keepers accept orders over the phone and ensure home delivery of even low-value items to customers.
7. The owners of kirana stores follow relationship marketing because of which many people patronise the kirana stores.
Departmental Stores:
A departmental store suffers from the following drawbacks:
(i) Huge Investment:
The establishment of a departmental store involves heavy capital investment. The cost of running the business is too heavy. This burden is to be borne by the customers.
(ii) Higher Prices:
Departmental stores provide recreation and other facilities. The cost of the services and facilities is ultimately borne by the customers by paying higher prices of the goods purchased.
(iii) Overhead Expenses:
Window-dressing and interior decoration increase overhead expenses which ultimately reduce the earnings of the store.
(iv) Lack of Personal Touch:
Many people do not like to come to departmental stores because of lack of personalised attention and services.
(v) Difficulty in Supervision:
A departmental store runs many departments and each department has multiple workers. There may arise the problem of effective supervision and control of salarised employees.
Demerits of Multiple Shops:
The system of multiple shops also suffers from a number of drawbacks which are as follows:
(i) Limited Variety of Goods:
It cannot offer a wide variety of products to customers because the range is limited and each store keeps stocks of good manufactured and distributed by its owners only.
(ii) Lack of Services:
There is non-availability of free home delivery service and credit facility to customers. This discourages certain types of people to visit multiple shops.
(iii) Unsuitable Products:
The products offered by multiple shops are of standardised nature. These might not suit the requirements of certain types of customers.
(iv) Lack of Personal Touch:
The chain stores are managed by the branch managers who are paid employees and not owners. They do not take personal interest in each and every customer. They do not try to convince and persuade the customers to buy.
(v) Divided Attention:
A manufacturer entering the business of retail trading through multiple shops may not find time to attend to both production and distribution. Under the circumstance, he may suffer on both counts.
(vi) Inflexibility:
The shop or branch manager is given the minimum discretion and he must sell only what is made available by the head office. Further, he has no control over the terms and conditions of sale which are laid down by the head office. Thus, there is inflexibility in operations.
Demerits of Mail Order Business:
The demerits of mail order business are as under:
(i) Lack of Personal Touch:
There is no personal contact between the seller and the buyer. The buyer does not get any opportunity to inspect the goods before purchasing them. If goods are sold on sale or return basis, this will result in wastage of cost incurred on postage if the goods are returned by the buyer.
(ii) Additional Expenses:
Goods mailed by post are costlier because the customers have to pay for the postal expenses also.
(iii) Lack of Services:
The customers are deprived of certain services like credit facility and after-sale service from the seller.
(iv) Not Suitable for Non-standard Products:
Mail order business is not suitable for certain agricultural products and for other products which are not of standardised quality and cannot be sent through post.
(v) Delay:
There may be delay in getting the goods by the customers because of postal delays or other difficulties.
(vi) Limited Variety:
Mail order retailing is suitable for the sale of a limited variety of goods. Perishable items and the items requiring demonstration cannot be sold through mail order business.
(vii) Suitable for Educated Customers Only:
Mail order houses can approach only those customers who can read and write. In developing countries, where large number of people are uneducated, there is limited scope for mail order retailing.
Demerits of Cooperative Stores:
The consumers’ cooperative stores have not been very successful because of the following limitations:
(i) Limited Capital:
Consumer cooperative stores are generally formed by people of low income. Their capacity to contribute to share capital is limited. Thus, the store has to manage with the limited amount of capital.
(ii) Lack of Initiative:
There is generally lack of initiative among the consumers to form cooperative societies.
(iii) Inefficient Management:
Inefficient management of the stores is another problem because consumers do not possess the qualities to run business.
(iv) Lack of Motivation:
Since there is a ceiling on the rate of return, incentive for motivation is missing.
Demerits of Super Market:
A super market suffers from the following drawbacks:
(i) Lack of Personal Touch:
There are certain people who give greater weightage to personal attention. Such people do not like shopping through the super market as there are no sales persons.
(ii) Limited Scope:
Super markets cannot handle commodities that require personal explanation by the salesmen.
(iii) Mishandling of Goods:
Some customers handle the goods carelessly and misuse the opportunity of self-service and selection. This may cause loss to the super market.
(iv) Higher Overhead:
In practice, super markets have not been able to create low price appeal among the customers because of higher overhead expenses.
(v) Unsuitable for Small Towns:
Establishment and running of a super market requires huge investment and its turnover should be higher to keep the overhead expenses under reasonable limits. Thus, a super market cannot be established if the necessary capital is not available and a large turnover is not expected. In other words, super markets are not suitable for smaller towns.
Malls:
A mall is shopping complex which has a large number of shops offering various goods and services in one and the same building. In other words, a shopping mall is huge multi-storey building that contains a number of stores or shops offering a huge variety of goods and services. These shops could be approached through interconnecting walkways and lifts. That means people can do their shopping within the same building.
In India shopping malls are very popular in the big cities of Delhi, Mumbai, Gurgaon, Noida, Bengaluru, etc. They are gaining popularity in other cities like Ludhiana, Amritsar, Jaipur, Hyderabad, etc.
The salient features of shopping malls are as follows:
(i) Mini Market:
A shopping mall is a mini market containing several stores within the same building. A large variety of goods are available here.
(ii) Wide Range:
A shopping mall makes available wide range of goods of daily use like, garments, packed foods, cosmetics, electronics goods and even luxury goods.
(iii) Central Location:
Shopping malls are often located at central places in the city and are well connected with different parts of the city.
(iv) Services:
In shopping malls, a large variety of services such as beauty salons, restaurants, telephone booths, cinema halls, etc. are also available.
(v) Ownership:
The shops in the malls are owned by different business firms which can run their stores or give their shops on rent to other business firms.
(vi) Advertising:
Being big retailers, the shopping malls can afford to spend huge funds on advertising to attract the customers.
Merits:
The shopping malls have been gaining popularity because of the following advantages:
(i) Convenient Shopping:
Shopping has become very convenient and comfortable in shopping malls. These malls operate in air- conditioned buildings with convenient walkways and lifts for the convenience of the customers.
(ii) Wide Choice:
In a shopping mall, customers get wide range of goods and services offered by different businessmen. By visiting one place, the customers can buy all types of goods required by them.
(iii) Services:
A shopping mall provides several services like restaurants, beauty parlours and saloons, entertainment, etc.
(iv) Cash Sales:
Various shops in the mall sell their goods on cash basis. Thus, there are no chances of bad debts.
(v) Large Turnover:
Because of the variety of goods and services provided by a shopping mall under the same roof, a large number of customers get attracted to the mall. As a result, the stores have large turnover leading to greater revenues.
Demerits:
The disadvantages of shopping malls are as follows:
(i) Huge Capital Investment:
To set-up a shopping mall, huge capital investments is needed. Only a few large business houses can afford to build shopping malls.
(ii) High Operating Costs:
The operating costs of malls are very high. They have to spend huge amount of funds in decorating and maintaining the shopping complex. They are also required to maintain common facilities like drinking water, toilet facilities, clean environment, etc. for the benefit of the customers.
(iii) High Price:
Due to high operating cost, prices charged by shops in malls are higher as compared to small retail shops. Only rich persons can afford to buy goods from shopping malls.
(iv) Away from Residential Areas:
Shopping malls are built on big plots available in big shopping centres only. Because they are far away from the residential area, the customers have to spare time and use some mode of transport to reach the shopping mall.
Types of Retail Formats – With Features
(i) Departmental Stores:
Features of Departmental Stores: (retailers)
1. Large Size- A departmental store is a large retail establishment with huge capital investment.
2. Central Location- A departmental store is located in the centre of the city, so that people from different parts of the city may easily reach it.
3. Wide Variety- A departmental store deals in a wide range of goods, practically from “pin to plane”. It is a complete shopping centre.
4. Services and Amenities- A departmental store provides several facilities such as post office, restaurant, public telephone, reading room, free home delivery, credit, parking, etc.
5. Attractive Appearance- A departmental store is housed in a big and impressive building which is elegantly furnished and tastefully decorated.
6. Unified Control- All purchases are made centrally while selling is decentralised.
7. Extensive Advertising- A departmental store undertakes advertising and publicity on a large scale to attract customers from far and wide.
(ii) Multiple Shops or Chain Stores:
Multiple shops or chain stores are the groups of shops in the same branch of retail trade. They are under the control of the same management and are widely dispersed all over the country. They may be found in variety of branches of retail trade, e.g., footwear, furniture, grocery, clothes, etc.
Multiple shop system is of a recent origin, but is steadily gaining popularity. While departmental stores are situated at central places in a city or town waiting for the customers to come to it, multiple shops reach out to the customers wherever they can be found. For example, the Bata retail shops are a good model of multiple shop system in India.
Suitability:
The multiple shop system can only be successful with regard to those commodities which are in large demand. The commodities should be of such a type that a rapid turnover may be expected. Thus, this system is most suited to those commodities which are necessities or semi-necessities and have a constant demand, which are standardized and branded and require only little selling effort on the part of salesmen and the items are portable type.
Main Features of Chain Stores:
1. Large-Scale Trading- It is an example of large-scale retail organization.
2. Organisation as a Company- Like departmental stores, they are also organised as a joint-stock company.
3. Specialization- They specialize in one or a few types of commodities. All Bata shops, for example, sell footwears, plus related items like socks, boot polish, etc., though recently they have also taken to selling men’s garments.
4. Elimination of Middlemen- When organised by manufacturers, multiple shops aim at eliminating both wholesalers and retailers. When operated by wholesalers, they seek to eliminate retailers.
5. Uniform Price- There is the same price for the same goods sold in multiple shops all over the country.
6. Uniform Layout and Decoration- Multiple shops under the same management are distinguished by the same layout, decoration, etc.
7. Centralized Purchases- Purchases for all the multiple shops are made by the central office. But sales are completely decentralized.
8. Cash Sales- Multiple shops sell goods on cash and carry basis and there is generally no provision for the sale on credit.
9. Suppliers of Necessities- The articles sold are mainly necessities or semi-necessities of standardized qualities and require little selling effort.
(iii) Mail Order Business:
Mail order business houses are those retail institutions which receive orders through post and despatch goods by post parcel or railway parcel. The sales are made entirely by mail and there is no personal contact between the seller and the customers.
A mail order house prepares a mailing list containing names and addresses of the prospective customers to whom catalogues and letters are sent. Advertisements are published in newspapers. Customers send order by post.
The mail order house packs goods and sends them by V.P.P. (Value Payable Post). The postman delivers goods to the customer on receipt of payment. The payment is sent through the mail. Thus, mail order business is ‘shopping by post’ from the customer’s point of view and ‘selling by post’ from the seller’s side. A mail order house may be established by a manufacturer, a departmental store or by any other merchant.
Features of Mail Order Business:
Main features of mail order houses are:
(i) The whole business is conducted by post. There is no face-to-face contact between the seller and the buyer.
(ii) Extensive advertising is done at the national level.
(iii) Orders are received through mail.
(iv) Goods are delivered through post.
(v) No middlemen are involved.
(iv) Consumers’ Co-Operative Stores:
Of late, the co-operative form of retailing has become very popular in certain parts of our country. Under this system, the consumers themselves come together to form a cooperative society in order to protect their common interests. The society enrolls members either from the general public or particular groups like the employees of an organisation. The objective is to save the members from exploitation by middlemen as regards to price, quality, weight etc.
Retail stores run by co-operative societies formed by consumers are known as consumer’s co-operative stores. Such stores are owned and operated by consumers, so as to make goods available at a reasonable price. They may deal in all types of consumer goods of daily use including grocery, stationery, utensils, dress materials, medicines, etc. The articles are procured from wholesalers or manufacturers.
Features of Co-Operative Stores:
1. Open Membership- Membership is open to all those who have a common interest. There is no discrimination on the basis of caste, creed, religion or sex.
2. One Member-One Vote- Each member has one vote irrespective of the capital contributed by him. The organisation operates on democratic principles.
3. Capital- The capital of the store is divided into shares purchased by members.
4. Cash Sales- The stores sell goods to the members on cash.
5. Distribution of Surplus- The profits of the store are distributed among the members in proportion to the purchases made by each member during the year. A limited (upto 10 per cent) dividend is paid on the capital.
6. Management- An executive committee consisting of president, secretary, etc., manages the store. The members of the executive committee are elected by the members of the co-operative.
(v) Super Market:
Super market is a large-scale retail organisation. It originated in the U.S.A. during the Inter-war period. It is also known as self-service store. It is housed in a very large-sized premises and is like a departmental store. Super market deals mostly in several varieties of food products, like vegetables, fruits, eggs, bakery and dairy products, etc., along with other articles of daily requirements.
The most distinctive characteristic of super market is the absence of salesmen and shop assistants to help the consumers. The products are kept in open shelves and are neatly packed. Slips are pasted to indicate the weight, price, quality, etc., of the products. The main principle is self-service, i.e., buy and pay. The customers are free to collect the goods according to their own liking.
Super markets provide trolleys to customers to bring the goods to the gate of the super market where they have to pay for all their purchases at one counter and take delivery of the goods purchased. Goods are strictly sold on cash basis.
Main Features of Super Market:
1. Large-scale Retail Organisation- A super market is a large-scale retail organisation. It is generally run by a limited company and is very popular in developing countries.
2. Central Location and Attractive Appearance- A super market must be centrally located in busy places. It is generally housed in big premises. It must be attractive. Its window display must draw the attention of the customers.
3. Easy availability of Daily Need Goods- Super markets generally deal in complete line of food and groceries and non-food convenience goods like cosmetics, drugs and other reasonably priced household goods.
4. Reasonable Price- The prices of articles sold are reasonable because of-
(i) Large scale buying
(ii) Low profit margin
(iii) No bad debts due to cash sales, and
(iv) No expenses on employing salesmen (staff overhead costs).
5. Absence of Salesmen and Sales Assistants- One of the major features of super markets is the absence of the salesmen to effect sales. There are also no sales assistants to help customers.
6. Role of Packaging- There is no salesmen at the counter. Hence, packages must have all such details printed thereon as would provide satisfactory, full and necessary information to the customers. Since packaging plays such an important role, the goods must be placed in neat and decent packing.
(vi) Hire-Purchase System:
Hire-purchase system is good for both the buyers and the sellers. Under this system, the buyer has to make payment of the goods within a fixed period and in pre-determined installments. The purchaser cannot become the owner of the goods unless he makes payments for all the installments. The delivery of goods is given to the purchaser on payment of first installment.
But if the purchaser is unable to make payment of any installment, the seller has a right to take back the goods and forfeit the amount paid so far by the purchaser.
Features of Goods under Hire-Purchase System:
1. Reasonable Durability- The goods sold under the hire-purchase system may not be very long lasting, but they should be durable enough to last until the final installment of the price has been paid.
2. Stable Demand- The demand for such goods should not be easily influenced by changes in fashion, tastes etc.
3. Standardization- The goods should confirm to certain standards so that they can be resold without much difficulty.
4. High Price- Only high-priced goods can sell under the hire-purchase system. The cheap ones are obviously unsuitable for the purpose.
5. Easy to Identify- The goods should be such that they can be easily identified among the other belongings of the buyer. Difficulty in identifying such goods will create problems for the seller, if he has to take them back due to non-payment of any installment.
Types of Retail Formats – Mom-and-Pop Stores, Traditional Kirana Stores, Department Stores, Discount Stores, Category Killers and Speciality Stores
Mom-and-Pop Stores and Traditional Kirana Stores:
The retail sector is changing as new store categories have started dominating the marketplace. Mass merchandisers such as Wal-Mart and Big Bazaar; discount stores such as Future Group’s Brand Factory, Arvind Brands’ Megamart, and The Loot; category killers (Home Depot, Vishal chain); and speciality retailers (Time Zone, Tanishq) have all developed successful retail models.
At the same time, the small mom- and-pop stores or the traditional kirana stores, are feeling the heat. In 2002, while Wal-Mart and Target saw revenues grow (by 12 per cent and 10 per cent, respectively), department stores such as Saks and Federated experienced declining revenues (down 3 per cent and 1 per cent, respectively).
However, even in the mass-merchandising segment, the competition is fierce, as was evident from Kmart’s bankruptcy announcement in 2002. Small independent stores, across product categories, is a very common retail format in India, particularly in small townships, but with the emergence of new retail formats they are also undertaking large scale renovations to attract their target consumer segments.
In a survey by Indian Council for Research on International Economic Relations (ICRIER) in 2008 which covered 2010 small businesses in four metros and 10 cities, it was seen that growth in organized retailing had only a marginal impact on turnover and profitability. None of the small shops surveyed wanted to quit the business. Instead they wanted better access to bank credit to meet the changing market environment.
Department Stores:
A department store is a retail establishment, which specializes in satisfying a wide range of the consumer’s personal and residential durable goods needs; and at the same time offering the consumer a choice of multiple merchandise lines, at variable price points, in all product categories.
Department stores usually sell products including apparel, furniture, home appliances, electronics, and additionally select other lines of products such as paint, hardware, toiletries, cosmetics, photographic equipment, jewellery, toys, and sports goods. Certain department stores are further classified as discount department stores.
These stores commonly have central customer checkout areas, generally in the front area of the store. Department stores are usually part of a retail chain of many stores situated around a country or several countries. Some examples of department stores in India are Lifestyle, Shoppers Stop, Westside, and Globus.
Discount Stores:
These are giants such as Wal-Mart (the largest retailer in the world, with more than a million employees), Target, and Kmart, as well as membership warehouses like Costco. These, along with the category killers, have changed the landscape of both the retail industry and America.
Where once mom-and-pop and department stores dominated retail, now the discount retailers and category killers are at the top of the heap. Further where once shopping malls, anchored by at least one major department store, used to be the dominant retail presence lining the nation’s roads, now it is the behemoth Wal-Marts and Home Depot. Discount stores normally price their merchandise at 30-40 per cent lower than the market price and use huge volumes to compensate for lower margins.
Category Killers:
These are the giant retailers that dominate one area of merchandise (e.g., Office Depot, Tower Records, and The Sports Authority). They are able to buy bathroom tiles, file cabinets, electronic goods, or pet food in such huge volumes that they can then sell them at prices which even fairly large competitors cannot match.
The future of this category is better than that of many of the more general discounters, but the same employment caveats apply. For most job seekers, these companies offer earn-and-learn experiences with vendors and distributors before they move onward and upward.
Financial data drawn from Marks and Spencer’s archives and annual reports can be used to identify five phases in the company’s sales growth. Early, rather erratic growth, often through acquisition, gave way to a second phase of store development funded by the company’s floatation in the 1920s.
Sales growth in the third phase came substantively through an increase in store size. A fourth phase involved improvements in labour and space productivity. The final and current phase of evolution emphasises diversification.
Speciality Stores:
These include Crate &C Barrel, The Body Shop, and Victoria’s Secret. Some of the popular Indian speciality stores are Adidas, Bata, Sony World, Nokia World, Music World, Bausch, and Lomb, etc. These stores concentrate on one type of merchandise and offer it in a manner that makes it special.
Some are very high-end (Louis Vuitton, Adidas) whereas others cater to the price-conscious masses (Old Navy, Bata). Many are so successful that department stores have started emulating their buying, marketing, and merchandise display strategies.
Industry experts predict growth in this segment, particularly in home furnishings and home improvement, and it seems to attract many of the best and the brightest in retail. Promotion and responsibility come quickly to those willing to work hard, and in many of these stores, the hand] of bureaucracy is not heavy.
Types of Retail Formats – Departmental Stores, Multiple Shops and Super Bazar (With Characteristics, Advantages and Disadvantages)
Departmental Stores:
Departmental store is meant by that retail shop of large scale in which there are a number of divisions. Each division sells the distinct products and all these departments are controlled at a single place. Its objective is to cater all necessities of the customers at a single place. The departmental stores can provide the product from needle to the motor-car at their premise.
Several scholars have defined departmental stores as under:
James Stephenson – “A big store engaged in the retail trade of wide variety of articles under same roof.”
According to Clark and Clark – “The departmental store is a retail institution that handles a wide variety of merchandise group into well-defined departments for purposes of promotion, service, accounting and control.”
In the words of S.E. Tomas – “A departmental store is a large retail establishment having in the same building. A number of departments of this store confine its activities to one particular branch of trade and forms complete unit in itself.”
Thus, the departmental store is such an arrangement of shops in which all required commodities of society are made available by the different departments. Dealing room, toilet, restaurant, bath-room, rest house, post-office and parks too are available there.
Characteristics of Departmental Stores:
i. Availability of All Kinds of Goods – It is the main objective and effort of a departmental store to cater all requirements of human beings at a single place. The commodities from a needle to motor-car is available here.
ii. Many Departments – There are a number of departments in a single shop. These departments are independent and a single type of product is sold in each department. For example, garment department, medicine department, department of leather goods, and department of eatable etc.
iii. Centralised Management – A seller of an each department runs independently its own department but a single institution manages, controls and has ownership on all departments.
iv. Free Control – Each department runs itself. It has a manager who exercises the control on his department.
v. Services Towards Customers – Special attention is given on the buyer’s convenience. For example, credit facility, means of recreation, delivery of goods at home and other facilities like telephone, postal facility etc.
vi. Large Scale Business – The departmental stores are established on large scale because it is divided in several departments and each department is a perfect unit in itself.
Advantages of Departmental Stores:
i. Economy in Buying – Purchase is also made in large scale for the bulk sale of products. Owing to bulk purchase, the goods are available with concessions, competitive prices and on suitable condition for the payment thereby enough saving is made.
ii. Overhead Expenses – The departmental stores are run economically. The expert executives are paid their salaries on the bulk sale of goods and this amount is adjusted from the prices of the goods. Similarly, being sold all commodities at a place, the expenditure on electricity, water, advertisement etc., are also reduced per unit of the goods.
iii. Facility to Select the Goods – Several varieties of goods are available in these stores and the customer is facilitated to select the commodity of his choice.
iv. Availability of All Products at a Place – The buyer has no more visit to take at several shops for several goods required because he can get everything from a needle to motor-car at a single place in departmental stores.
v. Increase in the Sale of Stores – A customer with purchase of one thing wants to bus simultaneously some other products too because there are a number of products available with the departmental store. Thus, the sale is increased to a large extent.
vi. Advertisement of Another Department by a Department – As a customer enters in the concerned department through a number of other departments, the commodities available with those departments attract him and thus, an automatic advertisement is made for other departments too.
vii. Function by the Experts – Often, all activities in these stores are performed by expert persons owing to which, every function is performed with profitability and with the best manner.
viii. Symbol of Modernity – The departmental stores make an effort to keep commodities of new designs and these are therefore, called a symbol of modernity.
ix. Convenience in Shopping – The public feels all convenience while buying all required goods available in the same building. The structure and size of store also have a major impact in the mind of buyers and they become confident of the prices and policies of stores.
x. Receipt of Additional Services – Services to customers is the basic principle of these departmental stores. These not only endeavour to make available superior goods to the customers but also provide some other services. Sale on approval, adjustment for disliked goods, credit account and the facility to deliver the goods at home etc., are incorporated with these services. No separate price is charged for these services.
Disadvantages of Departmental Stores:
i. No Warm reception to the Customers – These stores do not receive their customers so humbly as it is done by the retail traders. Such reluctant behaviour affects the marketing and a customer once neglected seldom re-visit there.
ii. Losses to Some Departments – There are certain departments which run on losses in order to maintain the diversity. This tendency reduces the profit share of the stores.
iii. Increase in Expenses Due to Free Service – Several free services are provided with these departments which increase the expenses and the quantity of profit is reduced.
iv. More Attention to Rich Customers – Only rich customers are given special care and the customers of unsound financial status are neglected.
v. Reduction in Efficiency – Apart from a large capital, more efficiency is required for these stores. Since, there is lack of efficient employees in India, such stores are not so much prevalent here.
vi. Difficulty in Construction of Appropriate Premise – An attractive and a grand building is required for carrying the functions of a departmental store. In dense areas of a city, space for such building is difficult to find.
vii. Inconvenient to the Distant Customers – These stores are often opened in the centre of city where the distant customers cannot take frequent visits.
viii. Need for Considerable Capital – attractive grand buildings, the goods in bulk quantum and a number of employees are required to run a departmental store. A considerable capital is required to invest for acquiring these things. It is difficult for an ordinary person to manage for so much huge capital.
ix. More Price of the Products – As a considerable amount is spent to manage such business, the price of commodity is increased thereby rapid reduction in the number of customers.
x. Lack of Expert Persons – Most skilled and expert persons are required to run these stores but it is difficult to find such experts.
xi. Lack of Credit Facilities – As there is no direct contact of buyers with the departmental stores, they cannot get the credit facility on their purchase. On account of this, the customer barely buys any goods from departmental store.
xii. Other Disadvantages –
a. Limited area,
b. Improper during recession and –
c. More expenses on advertisement.
Multiple Shops:
Multiple shops are called chain stores or chain shops too. It is such a system of retail trade in which a number of shops under control of a single institution and trading on the same commodity; are opened in the different parts of the city or the different cities of the country. Their objective is to achieve a specialization in a particular commodity and to reach with the customers.
These shops have same decoration, same product and its same price everywhere. There are no middlemen in such pattern of business and the manufacturers sell the products directly to the consumers. For example, DCM shops, shops of Bata shoe company, shops of Usha sewing machine and Usha fans.
Its main definitions are as under:
According to S. E. Tomas – “This is a system under which there is a large number of retail shops owned by the same proprietor which are scattered over a large area of a particular country and are engaged in the same line of activity.”
According to James Stephenson – “A multiple shop consists of a number of shops owned by a single business firm.”
According to P.D. Converse – “A number of retail stores operating under a common ownership and management, constitute a multiple shop or a chain store.”
According to J.Z. Fri – “A group of stores handling similar lines of merchandise with single ownership and centralize.”
According to F.H. Nystorn – “Chain store is a retail organisation comprising two or more retail stores owned by and operated under one management.”
Characteristics:
i. Business in one Type of Commodity – These carry on business on similar type of commodity.
ii. Uniform Sale Price – The commodity being sold in various shops has uniform sale price.
iii. Central Workshop – The commodity sold in these shops is manufactured at one factory or place.
iv. Similarity – The decoration, furniture, colour and shape of each shop is kept uniform so that the customer can identify it easily.
v. Cash Sales – Only cash sale is made in these shops.
vi. Nearness to Customers – The main objective of these shops is to get nearness to the customers so that they can sell more and more goods to them.
vii. Central Management – These shops are managed, conducted and controlled by the head office.
viii. Commodities Useful for Common Public are sold on these shops.
ix. Only authentic commodities are sold from these shops.
x. These shops are opened in a spacious premise.
i. Large scale advantages are obtained from this pattern.
ii. Often, an efficient management is made on all levels.
iii. Minimum stock is kept with the shops. The cost and the maintenance expenses are reduced.
iv. Research work is possible.
v. The mediators cannot intervene.
vi. The customers obtain the products on competitive price.
vii. Equal price are obtained at ail shops.
viii. The shops are recognized easily.
ix. Other advantages –
(a) Cash sale,
(b) Improvement of product and its advertisement is possible,
(c) Public confidence is won,
(d) The risks are shattered.
Disadvantages of Multiple Shops:
i. A considerable capital is required.
ii. Lack of credit facilities.
iii. The buyers of different choice feel difficulty in selection of the commodity.
iv. The employees appointed at these shops behave rudely with the customers.
v. Control is loosen.
vi. Personal attention on customers is finished.
vii. The employees prefer the bureaucracy.
viii. Since, these shops are located at distant places, their inspection and control is difficult.
ix. These shops establish monopoly in long term.
x. Owing to change in the demand of commodity, huge loss is anticipated.
Super Bazar:
Super Bazar is purported to such a retail commercial institution that sells several types of eatables and other commodities. For example, it sells the fruits, vegetable, dry fruits, meat, bakery, dairy goods etc.
The customers receive perfect opportunity to select their favourite commodities in Super Bazar. Generally, a basket is stood in which dishes are placed. The customer puts the commodities of his choice and finally brings them at the counter.
A clerk working there, raises a bill for all the commodities bought. The customer pays the bill and receives the goods.
There are a number of Super Bazars opened in .several cities like Connaught Place in Delhi, Mumbai, Lucknow, Dehradun, Allahabad, Jodhpur etc. As much as 100 Super Bazars are functioning in metro cities.
Characteristics of Super Bazar:
1. These are organized like departmental stores.
2. There are no salesmen and the customer selects the commodities of his choice, puts them on dishes and brings at the counter himself.
3. Only eatables are sold through Super Bazar.
4. Cash sale of commodity is made.
5. The commodities are sold on fix price.
Advantages:
1. Bumper Sale – Owing to availability of all necessary commodities at a single place, bumper sale is made by Super Bazar.
2. Less Price – As salesmen are not appointed, expenses is decreased and it maintains the price of commodity at lower level.
3. More Profit – On account of reduction in overhead sales expenses, Super Bazars earn profit to a large degree.
4. Convenience of Selection to the Customer – The customers obtain an opportunity to select their favourable commodities.
5. Profits of Large Scale Production – The businessman acquires the profit of large scale production.
1. Requirement of Considerable Capital – A considerable capital is required for such pattern of sale and to arrange capital to such extent is beyond the capacity of common people.
2. Necessity of a Proper Place – For opening a Super Bazar, a particular building and its location at a middle of population is required.
3. Inconvenience in the Sale of Complex Items – Only common commodities can be sold through Super Bazar and complex items cannot be sold through this system.
On account of the disadvantages, the Super Bazar has so far not proved useful in India. However, with the pace of rising living standard, more Super Bazars will be opened here.