Page 9 - DMGT551_RETAIL_BUSINESS_ENVIRONMENT

Retail Business Environment

Notes Sorting: Manufacturers make one single line or multiple product lines and will always
prefer to sell their entire output to few buyers to reduce their costs. Final consumers will
prefer to choose from a large variety of goods and services and then usually buy in
smaller quantities. Retailers have to strike a balance between demands of both the sides,
by collecting a combination of goods from different producers, buying them in large
quantities and selling them to individual consumers in smaller quantities. The above
process is called sorting and under this process, the retailer undertakes activities and
performs functions that add value to the products and services while selling them to
consumers.

Example: A shopping supermarket of Pantaloon Retail in the name of ‘Big Bazaar’ sells
more than 20,000 assortments from 900 companies. Customers can choose from such a basket in
just one location. There are specialized retailers like Nilgiris or Barista, which offers specialized
assortments of a single product line.
Breaking Bulk: Retailers offer the products in smaller quantities tailored to individual
consumers and household consumption patterns. This reduces transportation costs,
warehouse costs and inventory costs. This is called breaking bulk.
Rendering Services: Retailers render services that make it easier for customers to buy and
use products. They provide credit facilities to the customers. They display products, which
attract the customers. Retailers keep ready information on hand to answer queries of the
customers. They provide services by which the ownership can be transferred from
manufacturer to the end consumers with convenience. They also provide product guarantee
from owner’s side, after sales service and also deal with consumer complaints. Retailers
also offer credit to consumers and develop hire purchase facilities to enable them to buy
a product immediately and pay the price at their ease. Retailers also fill orders, promptly
process, deliver and install the product at customer point. Retail sales people answer the
customer complaints and demonstrate the product for the customer to evaluate before
making a choice. They also help in completing a transaction and realizing the sale.

Risk Bearing: Retailers bear a different kind of risk to the manufacturers and wholesalers.
Even the customers can come back to the retail point and return the product. In that case,
the risk of product ownership many times rests with the retailers. Many companies have
buy back schemes and return schemes whereby the retailers can always return the unsold
items to the manufacturer.

Holding Inventory: A major function of retailers is to keep inventory so that products will
be available for consumers. Thus, consumers can keep a much smaller inventory of products
at home because they can easily access more from the nearby retailers. Retailer’s inventory
allows customers instant availability of the products and services.
Channel of Communication: Retailers are the bridge between the manufacturer or his
representative and the end customers. They serve as a two-way channel of communication.
The manufacturer collects customer choice and preference data and provides information
about existing and new products through the retailers. The point of purchase displays
provide serve as advertisements that provide information about new products and many
times retailers inform the consumers about likely date of availability of a product or entry
of variants into the market. The shoppers get a chance to learn about products and services
from the stores and even acquire trial habits by seeing others buying a product or service
in the store. The manufacturer too collects customer data, data on gaps in demand and
supply cycles and customer satisfaction from retail points.

Transportation: Retailers also help in transport and advertising function. The larger
assortments are transported from wholesaler’s point to retailers point by retailer’s own
arrangements and many times, the retailer delivers the goods at final consumer’s point.
So, retailers provide assistance in storage, transportation and pre-payment merchandise.

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