functions of retailing and franchising system in india

7/29/2019 Functions of Retailing and Franchising System in India

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FOR THE SUBJECT OF: PRESENTED BY:

Retail Marketing Harshul Nagpal

mba-904 9th Semester

Roll No.

50


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Retail is the sale of goods and services fromindividuals or businesses to the end-user.

Retailers are part of an integrated system called

the supply chain. A retailer purchases goods or products in large

quantities, and then sells smaller quantities tothe consumer for a profit.

Retailing can be done in either fixed locations oronline.

Retailing includes subordinated services, such asdelivery.


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Manufacturers usually make one or a small variety ofproducts and would like to sell their entire inventory toa few buyers to reduce costs.

Final Consumers, in contrast, prefer a large variety of

goods and services to choose from and usually buy themin small quantities.

Retailers are able to balance the demands of bothsides, by collection and assortment of goods from

different sources, buying them in sufficiently largequantities and selling them in small units.


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To help reducetransportation costs,manufacturers and

wholesalers typicallyship large cartons ofthe product, which arethen retailers tailor

them into smallerquantities to meetindividual consumption

needs.


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Retailers also offer the service of holding stockfor the manufacturers.

Retailers maintain an inventory that allows for

instant availability of the product to theconsumers. It helps to keep prices stable and enables the

manufacturer to regulate production.

Consumers can keep a small stock of products athome as they know that this can be replenishedby the retailer and can save on inventorycarrying costs.


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Retailers ease the change in ownership of merchandise by

providing services that make it convenient to buy and use

products.

Providing product guarantees, after-sales service and dealing with

consumer complaints are some of the services that add value tothe actual product at the retailers end.

Retailers also offer credit and hire-purchase facilities to the

customers to enable them to buy a product now and pay for it

later. Retailers fill orders, promptly process, deliver and install products.

Salespeople are also employed by retailers to answer queries and

provide additional information about the displayed products.

The display itself allows the consumer to see and test products

before actual purchase.


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Retailers also act as the channel of communicationand information between suppliers and consumers.

From advertisements, salespeople and display:

Shoppers learn about the characteristics and features of aproduct or services offered.

Manufacturers, in their turn, learn of sales forecasts,

delivery delays, and customer complaints.

Supplier Retailer Consumer


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Small manufacturers can use retailers to provide

assistance with transport, storage, advertising and pre-

payment of merchandise.

This also works the other way round in case the numberof retailers is small.

The number of functions

performed by a retailer has

a direct relation to thepercentage and volume of

sales needed to cover both

their costs and profits.


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By providing all the abovementioned services of sorting,breaking bulk, holdinginventory and many more,

retailers increase the value ofproducts and services for theconsumers.

Here, the value of the product

or service is related to theadditional benefits provided bythe retailer through which acustomer feels more connected,satisfied and value the product

or service being received.


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Franchising is a contractual agreement

between a franchisor and a franchisee that

allows the franchisee to operate a retail outletusing a name and format developed and

supported by the franchisor.


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In a franchise contract, the franchisee pays a lumpsum plus a royalty on all sales for the right to operatea store in a specific location.

The franchisee also agrees to operate the outlet in

accordance with procedures prescribed by thefranchisor.

The franchisor provides assistance in locating andbuilding the store, developing the products or services

sold, training managers, and advertising. To maintain each franchisees reputation, the

franchisor also makes sure that all outlets provide thesame quality of services and products.


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Food Retailers Merchandise Retailers Services RetailersHaldiram

Baskin Robbins

Dominos Pizza

Subway India

Vadilal

KFC

Good Things

Maspar

Ddmas

The Ceat Shoppe

Koutons

Reynolds

Ebony

Lilliput

Air Hostess Academy

Lakme Beauty Salon

Shahnaz Herbal

Wind Shield Experts

Aptech Computer Education

VLCC Healthcare

Reliance World

Sharekhan

Ferns N PetalsBig Flix

Reliance AutoZone

ADLABS

Blue DartGATI

Retailers Using Franchise Business Model


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Franchising is one of the fastest growing and everchanging industry in India.

Though at a nascent stage, the industry has

witnessed 30 to 35 % growth in the last 4-5 years. India is a multi ethnic country with the second largest

populationin the world.

There are approximately 1150 national and

international business format franchise systems inIndia in 2007.

Around 8-10 % Indian franchise systems have

entered international markets.


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There are an estimated 70, 000 units operating inbusiness format franchises.

The growth rate in franchised units from 2005-06 to2006-07 was 30 to 35 per cent.

Some 5,00,000 persons are employed in businessformat franchise organizations. Franchising contributed less than 4% to Indias

Gross Domestic Product (GDP) in 2007. Annual turnover is approximately US$ 4 billion. In a franchised business in India, over 90 per cent

succeed. This success rate usually luresentrepreneurs with no experience but with a surpluscapital and a will to succeed towards franchising.


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Franchise India Holding Ltd, a counselling and

partnering firm for the franchise industry, estimates a

rise in the adoption of franchise model by small-

format retail players in the country since theslowdown last year.

As per its estimates, 85% of all small-format retail

business in India now operates on the franchise

model.

Brands such as Koutons, Levis, Reebok and Adidas,

which were traditionally not franchising, have lately

started looking at the model.


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Videocon India, which runs two retail formats (Next

and Planet M), is now starting to franchise Planet M,

which was earlier being expanded through company-

run stores. So much so, the retail format ratio for most brands

now stands at 80% dedicated to franchising and 20%

for company run at strategic locations.

Bata India, the largest retailer and manufacturer of

footwear in the country with 1,200 stores, is starting

its own franchise network to expand its retail

presence.


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Cookie Man, the retail chain store owned by

Australian Foods Ltd, which runs over 50 stores

across India, is looking at reaching a total of 250

stores through franchising. Not only does the franchisee bring in the capital, but

also, the retailers save 4-8% on the point of sales.

Currently, 45% of organised retail sales in India are

through franchised outlets.

This is in line with the developed world countries like

US and Europe, where these models are well incepted

in the business world.


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As per Franchise India estimates, the fashion retail

industry in the country is pegged at $29 billion

and growing at 12% per annum. India is now

opening up as a competitive apparel retail market. The market potential for footwear is 1.1 billion

pairs and it is estimated to be a $2 billion sector.

Thejewellery market is estimated at $9.7 billion,with gold contributing 98% to retailing.


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functions of retailing and franchising system in india

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