Organized retail is a sector which consists of the companies which are associated with production or sales of goods and services that operates as private limited organizations which are governed by companies act. The organized retail sector can be characterized as follows
- The retail setups are owned by companies.
- Few of the employees on the payroll of the organization with others are on contract.
- The employees are governed under the act of minimum wages.
Organized retail is associated with customers walking into the stores for the showrooms and buying their necessary products. Huge quantities of goods are stocked up in the retail store and huge discounts which are gained by the company are passed down to the customers.
Many retailers like Walmart, IKEA, Costco, and Target have been an attraction for customers for a long time because of their discounted pricing structure. There has been an increasing retail store establishment in North American countries Canada with stores like Target and Nordstrom which have been establishing their bases from some time.
Many categorize 7-eleven under the retail formats thus widening the definition of the organized retail sector.
Advantages of the organized retail sector
1) An economic win for customers
The prominent advantage of having organized retail for customers is that they get a wider selection of goods along with more convenience and an enhanced shopping environment. The organized retailer has several formats and presence write from a small neighborhood in small towns or cities to a high air conditioned Mall where the real estate is cheaper.
Therefore it caters many customers going to its wide presence. For example, Walmart is present even in the tier two cities as well as the major areas of tier one cities thereby reaching all the kinds of customers.
Apart from these advantages, a major advantage for customers is that these retail formats have huge discounts which unorganized retail formats may not be able to provide. Since organized retailers buy goods in huge quantities they also able to reap the benefits of huge discounts.
This discount is passed on to the customer on all the goods that are purchased over there and thus the customer is at the gain and it is a Win-Win situation for both retailer as well as a customer. Presence of 7-eleven in small cities and big cities has benefited the customers in both retailers and customers equally.
2) Big gains for farmers
Another advantage of the organized retail sector is that it provides a big gain for farmers. Since these retail formats buy in bulk from the farmers themselves it is beneficial for farmers to deal with one customer rather than hundred customers and also it provides greater convenience and ease of trade along with better profits for both the customer as well as the farmer. The retail sector has given a huge push to the farming sector.
This also leads to an increase in the use of modern equipment and tools in farming along with more employment opportunities for unskilled laborers to work on a farm thereby providing employment opportunities.
3) Growth of Mid-level customers
Because of the organized retail number of middle-class people or middle-income group, people are increasing and having a better lifestyle. These mid-level customers indirectly help the industry and the economy to grow and prosper which is why it turns out to be a cycle which benefits each other.
The retail sector benefits the customers who intern benefits the retail sector.
The middle-income level group expects the products to be at a decent and affordable price and the number of such people is increasing every day which is the reason why the retail sector has to focus on such customers. As their bank capacity increases the organized retail sector will benefit from them.
4) Economies of scale for Organized Retailers
All of the organized retail players preferred to buy the products in bulk at having a discounted price. The purchases are frequent and masking is done in order to fulfill the needs of the customers. This helps the players to achieve economies of scale and a part of the discount is passed on to the customers as well. Apart from that they also enjoy cost advantage on many factors such as advertising expenditures purchases and a few other recurring costs.
Organized retailers tend to have multiple branches of their stores in different locations which is why one purchase. Is preferred it to conduct business. The processing is done at one point why the distribution is done at every store so that the product reaches every customer.
In terms of customer, it is advantages to have one store with which they can conduct business and make their purchases.
5) Minimization of risks
Another advantage of organized retailing is that there are multiple stores present and this reduces the distribution cost. This also minimizes the risks associated and the possibility of losses is reduced.
This is advantages to the retailer’s sunset also avoids unnecessary costs which are levied. Even in case of taxation, it is easier for the retailers to files for a tax from one point rather than having multiple stores.
6) Employment Opportunities
The need for organized retail chains is increasing all over the market in every country. More and more people are preferring to work for a discounted organized retail store other than purchasing it is a local vendor who might have different and increase price consumer products.
This has resulted in retail stores opening branches in multiple locations. This, in turn, has affected and generated employment for many local people. Retail stores have constant job opportunities for people from different backgrounds.
Right from Cashier to store manager people from various backgrounds can apply in a retail store without age restriction and get employed and start earning daily wages have the employment opportunities increase more and more people get employed and this results in the betterment of the economy overall.
As more and more retail store is open more and more job opportunities are surfaced. Thus organized retail has opened and expanded opportunities of the job for many people.
Disadvantages of organized retail
1) Monopolistic Approach
A major downfall of having a chain of retail stores is that they may have a monopoly for a particular product. This monopolistic approach can affect the customers severely and can compel them to buy the products at a higher price.
The monopolistic approach can affect the competition and can impact the customers economically in a negative way.
2) Lower prices may be a Myth
Not every retail store can afford to give all the products at a low price. Also, it is true that the products are purchased by the retailers to having a discounted price but there is no surety that the discount is passed on to the customers.
Discounted price may or may not justify the actual price and sometimes the products are charged higher than the price of discount and inertia case the customers are the ones who have to pay the additional price thereby causing negativity to customers.
There may be certain products which are discounted are sold at a lower price but the reason behind them may not be justified. It might be that the retail stores intend to finish the existing stock which is why they might price those few products at a discounted price or the product might be nearing the expiry which may cause them to give it on offers.
3) Quality compromise
Owing to the advantage of having economies of scale there may be a compromise on quality terms. The storage of the products may present a big problem and storage of department stores which is why that may be a compromise on quality.
Owing to the fact of getting more and more business the stocks are piled up and not taken care of which may cause the damage in the product internally and the customer may realize this after the purchase and this may affect the brand image of the store.
4) Stock Maintenance and Stock losses
From the point of view of the retailer, maintaining such a huge stock is costly. Of course, the retailer gets an enormous discounted price but stock maintenance and storing and warehousing charges reduced the discount and add up to the cost of the retailer.
There may be times when the product is kept in stock but it is not required by the customer and in such cases, there is also expiry of the product. In such cases, the stock loss has to be Borne by the retailer. This also reduces profitability and increases the cost.
Sometimes this cost is passed on the reducing the discount of the product to the customer and thus the idea of bargain price is nullified in such cases.
How to Manage Organized retail?
Due to increasing competition and the retail industry, it is very crucial that you manage your business properly and effectively in order to get more and more customers and their experience and convert them to reduce our customers.
There are plenty of retail stores in every neighborhood nowadays and to bring the customer back to your retail store these are some following tips that you can follow:
1) Customer Experience
A couple of years back many of the industries used to say that customer service was a crucial part of the business but it is not only about service today but also about the experience of the customer. Customer experience is the memorability of the store in the mind of the customer so that the customer remembers your store for those certain traits.
Right from having organized goods for customers to the alphabetical arrangement of goods, to people to policies and cleanliness and attractive or efficient merchandising, all of the things matter to customers and address to the customer experience.
The purchase of the customer may be more or less but it is very crucial that he walks out with the positive customer experience which is passed on along by him to his circle of acquaintances. Positive customer experience also adds up to the brand value and the image of the retail and plays a very important part and customer retention.
In the organized retail industry it is very easy ensures that the customer has a positive experience from the retailer.
2) Inventory Management
A major challenge for organized retail services is the management of inventory. Displaying the items without any particular categorization or stacking up in piles haphazardly is no way to manage inventory.
A constant display of ‘Out of stock’ board of the daily necessities items for making the shopping experience more difficult for the customers by not categorizing the goods can make the customer never come back to your retail store. One time organization is not part of the organized retail, rather constant maintenance of that organization throughout the day and the next day is inventory management.
Organized retail shops should get acquainted with technology for this purpose. Use of technology and upgraded software which are essential for retail stores like checkout software or stock management software can make the work that is easy and increase efficiency amongst the workers ultimately benefiting the customers.
3) Visual Merchandising
A well-organized display of products in your store can be a very attractive and persuasive salesman rather than an actual person. Products come in different colors and forms and it is essential to strike and appeal those products efficiently source to attract the customers.
The sales people can wear color complimenting outfits and stand besides products so that the customers can easily identify and ask for help when needed. Display of signs which has categories of products written on them along with the directions makes it easier for the customers to navigate through the store.
Visual merchandising tips to attract more and more new customers and retain the existing ones.
4) People management and management of people
These how to separate things altogether which are related to the only one aspect of the business which is people. People are the first things that customer interact with one then tell the store right from the security guard up till the cashier.
It is very essential that people are well trained and able to answer all the queries of customers like directing to the right spot asking for a particular variant of a product or any other such inquiry related to the retail store. Having well trained and courteous people or staff will be beneficial and helpful to the customers and build a good reputation amongst the customers.
Most of the companies today focus on internal customers which are nothing but staff because if the internal customers are happy they will work hard to ensure that the external customers are happy. It is also essential that in terms of business the employees have good relations with their supervisors so that information flows freely without any hindrance from bottom to top and vice versa.
5) Time management and Teamwork
Time is very important in the case of organized retail where there could be times when there is information over is old or it could be very difficult for eating managers because of the huge inflow of customers. That would be numerous problems arising which needs to be addressed simultaneously and this is where the time management skills of the retail manager come in handy.
The problems which need to be solved and priority are to be addressed immediately without delay and for the rest of the problems the retail manager can send a supervisor by delegating his authority. Interruptions should be avoided as much as possible and straight No without delay of time should be given to unreasonable demands.
Teamwork is a part of time management which means that the work should be done together with the team so that the time for the work is minimized and the goals are reached faster and effectively. Having good teamwork also ensure that the store and smoothly and efficiently and the customers are handled well and within time limits.
Customer Management starts with time management and time management initiates with teamwork.
Examples of Organized Retailers across the World
IKEA is a Swedish organized retail share which is the world’s largest retailer in furniture since 2008. It has multiple outlets all over the world. The headquarter of IKEA is in the Netherlands.
It is an American retail corporation which has multiple hypermarkets and departmental stores which are discounted along with grocery products.
Compared to other supermarkets was marked as heavily discounted. It is headquartered in Arkansas and was founded by Sam Walton in the year 1962.
3) Costco, Target, The Home Depot, are a few other major players in Organized retail
The organized retail industry is growing very rapidly and in coming years the growth will be exponential in order to meet the increased demand from the customers all over the world.
Especially in countries like India and China which have a huge base of customers has a tremendous scope of organized retail.
Alternatively, check out the Marketing91 Academy, which provides you access to 10+ marketing courses and 100s of Case studies.