Unit 1: Introduction to retailing

Retailing is the set of business activities that add value to products and services sold to consumers for their personal or family use (Levy and Weitz). The word comes from the French retaillier — "to cut a piece off", i.e. break bulk.

Functions of a retailer

Economic significance

• Retail contributes over 10% of India's GDP and is one of the largest employers after agriculture.
• Links producers to consumers; creates place, time and possession utility.
• Generates demand information that feeds back to manufacturers.
• Supports allied industries — real estate, logistics, packaging, advertising, IT.
• Source of tax revenue (GST) and FDI inflows.

• Management careers: store manager, category manager, buyer, merchandiser, visual merchandiser, supply chain manager.
• Entrepreneurship: franchise outlets, D2C brands, online stores on marketplaces.
• Growth opportunities: tier-2 and tier-3 cities, rural retail, e-commerce and quick commerce.

• Retail strategy (Levy and Weitz): target market + retail format + bases of sustainable competitive advantage (customer loyalty, location, HR, distribution and IT, unique merchandise, vendor relations, customer service).

• The unorganised sector still accounts for the majority of Indian retail sales; organised and online retail are growing fastest.
• FDI policy: 100% FDI allowed in single-brand retail (automatic route), up to 51% in multi-brand retail with conditions; FDI in e-commerce only in the marketplace model.

• Demographics: young population, rising middle class, nuclear families, working women.
• Rising incomes and aspirations: shift to brands and quality.
• Urbanisation: growth of cities and malls.
• Technology: smartphones, cheap data, UPI, digital payments.
• Availability of credit: credit cards, EMI, buy-now-pay-later.
• Policy changes: GST created a single national market; FDI liberalisation.
• Media exposure: global brands and lifestyles on TV and social media.

• High real-estate costs in prime locations.
• Poor infrastructure and supply chain — cold chains, warehousing, roads.
• Shortage of trained manpower and high attrition.
• Competition from the unorganised sector — low overheads, credit to customers, home delivery.
• Complex regulations — multiple licences, labour laws, FDI restrictions in multi-brand retail.
• Price-sensitive consumers and heavy discounting by e-commerce players.
• Shrinkage — theft, damage and administrative errors.