Retail Equation

Marketing has been defined as the process by which individuals and groups obtain what they need and want through creating, offering, and freely exchanging products and services of value with others.

The Chartered Institute of Management defines marketing as the management process responsible for identifying, anticipating and satisfying customer requirements profitably.

One can look at the marketing – retail equation from two perspectives – one being that of a manufacturer and the second from the point of view of the retailer. With the growth of industrialization and urbanization, the distance between the manufacturer of a product and the actual consumer has increased. In our world, many products are manufactured in one country and sold to a market in another. Most producers no longer sell their products or services directly to the consumer, but instead, use intermediaries to get their product to the final consumer. The marketing channel design is largely based on the level of service desired by the target consumer. Here, the retailer provides valuable inputs to the manufacturer on the products and the consumers.

Some of the most common marketing channels are illustrated below:

Manufacturer  Wholesaler  Retailer  Consumer

Manufacturer  Retailer  Consumer

Manufacturer  Consumer

Manufacturers or suppliers that offer products for immediate consumptions are known as direct manufacturers or suppliers e.g. Eureka Forbes, whose door-to-door salesman offer its products directly to customers is an example of a company which offers its products directly to the consumers. The Direct Mail order business companies are another example.

More traditional manufacturers or supplies are associated with delayed consumption e.g. shown below. Companies, which deal primarily with immediate consumption are known as service providers, while those that deal with delayed consumption are retailers. An example of a service provider under this definition would be a cinema, while a retailer in the same sector would be a video shop.

The other perspective of looking at the marketing retail relationship is from that of the retail industry itself. Every retailer needs marketing. The marketing efforts of a multi brand retailer like Food World and Shopper’s Stop are different from those of an own brand retailer like Westside. However, the basic principles of marketing are no different for a retailer than for any other supply organization. What different is the immediacy of many retail marketing exchanges, and the range of activities that can be undertaken by the retail marketer in order to achieve a profitable exchange with a customer.

While modern marketing theory may have stemmed from producers of the fast moving consumer goods (FMVG) manufacturers, more recent developments such as relationship marketing and interactive marketing have evolved from the needs of service providers. These ‘new’ marketing activities focus on the dynamic link between a specific supplier and its immediate customer. It is here that the needs of retailing coincide with the domain of marketing.

There are two specific dimensions to retail marketing: first, how to attract customers into the retail environs – shop, restaurant, supermarket or the ‘virtual’ Internet store for instance and second, how to persuade those customers to make a purchase from the store. Both are necessary to achieve success.

The rise of the Retailer:

In the not so distant past, manufacturers created a product, advertised it slickly and sold it through their distribution channel. The manufacturing companies enjoyed economic power, as they were significantly bigger in size compared to the distributors of the retailers. They determined prices of the products that the retailer could stock and also the dealer and distributor margins. They would also independently advertise for their products. In case of a dispute with the distributor or retailer, it would not be rare for the manufacturer to discontinue supplies. However, much has changed. Today, retail has emerged as a separate function by itself. The environment in a large organized retail store is significantly different from that in a traditional or a mom and pop store.