Industrial Unrest, History, Reasons, Solutions

Industrial Unrest refers to the collective dissatisfaction and actions taken by employees in response to perceived injustices, grievances, or unfavorable conditions within the workplace. This unrest can manifest in various forms, including strikes, work-to-rule actions, go-slows, protests, and other forms of collective employee resistance. Common causes of industrial unrest include disputes over wages, working conditions, job security, management practices, and employment terms. Industrial unrest disrupts normal business operations, potentially leading to financial losses, decreased productivity, and strained labor-management relations. Effective resolution of industrial unrest typically involves negotiation, mediation, and sometimes intervention by labor courts or government agencies to address the underlying issues and restore workplace harmony.

History of Industrial Unrest:

Early Industrial Revolution (Late 18th – Early 19th Century)

  • Luddite Movement (1811-1816): Workers in England, known as Luddites, protested against the mechanization of the textile industry, which they feared would lead to job losses and lower wages. They destroyed machinery as a form of protest.
  • Combination Acts (1799-1824): These British laws prohibited trade unions and collective bargaining. Their repeal in 1824 marked a significant victory for labor rights.

Mid-19th Century

  • Chartist Movement (1838-1857): In Britain, the Chartists demanded political reforms, including universal male suffrage and better working conditions, leading to several strikes and demonstrations.
  • Great Railroad Strike (1877): The first major strike in the United States, this nationwide protest was sparked by wage cuts and poor working conditions in the railroad industry, leading to violent clashes and federal intervention.

Late 19th – Early 20th Century

  • Haymarket Affair (1886): A labor protest in Chicago advocating for an eight-hour workday turned violent when a bomb was thrown at police, leading to a backlash against labor movements.
  • Pullman Strike (1894): A nationwide railroad strike in the U.S. resulting from wage cuts and high rents in company-owned housing. The strike led to federal intervention and highlighted the need for labor reform.

Early 20th Century

  • Russian Revolution (1917): Industrial unrest and poor working conditions were among the factors leading to the Bolshevik Revolution, which resulted in the establishment of a communist state.
  • General Strike (1926): In the United Kingdom, this major strike involved workers from various industries protesting wage reductions and poor conditions in the coal industry.

Mid-20th Century

  • Post-War Labor Strikes (1940s-1950s): Following World War II, many countries, including the U.S. and the U.K., experienced significant labor strikes as workers demanded better wages and working conditions.
  • Taft-Hartley Act (1947): In the U.S., this act restricted the activities and power of labor unions, leading to significant changes in labor relations.

Late 20th Century

  • Solidarity Movement (1980s): In Poland, the Solidarity trade union led strikes and protests against communist rule, playing a crucial role in the eventual fall of communism in Eastern Europe.
  • Miners’ Strike (1984-1985): In the U.K., the National Union of Mineworkers (NUM) led a major strike against coal mine closures and job losses, resulting in a protracted and bitter conflict with the government.

21st Century

  • Globalization and Labor Movements: As globalization has spread, industrial unrest has also become a global phenomenon, with workers in various countries protesting against outsourcing, poor working conditions, and labor rights violations.
  • Gig Economy and Labor Rights: The rise of the gig economy has led to new forms of industrial unrest, with gig workers demanding fair wages, benefits, and better working conditions.

Reasons of Industrial Unrest:

  • Wage Disputes:

Discontent over inadequate wages, pay cuts, or disparities in salary can lead to industrial unrest.

  • Poor Working Conditions:

Unsafe or unhealthy working environments, lack of proper facilities, and insufficient safety measures can trigger unrest.

  • Job Security:

Fear of layoffs, retrenchment, and lack of job stability can cause anxiety and lead to collective actions by employees.

  • Unfair Labor Practices:

Perceived unfair treatment, discrimination, or favoritism by management can provoke employee dissatisfaction.

  • Workload and Working Hours:

Excessive workloads, unrealistic targets, and long or irregular working hours can contribute to employee stress and unrest.

  • Lack of Benefits:

Insufficient or inadequate benefits, such as health insurance, retirement plans, and leave policies, can cause discontent among employees.

  • Poor Communication:

Lack of transparent communication between management and employees about company policies, changes, or decisions can lead to misunderstandings and mistrust.

  • Management Style:

Authoritarian or unsupportive management practices that do not consider employee input or welfare can lead to resentment and industrial action.

  • Organizational Changes:

Restructuring, mergers, acquisitions, and other significant changes without adequate employee consultation can create uncertainty and resistance.

  • Grievance Handling:

Inefficient or unfair handling of employee grievances can exacerbate discontent and lead to collective actions.

Solutions of Industrial Unrest:

  • Open Communication:

Establishing transparent and regular communication channels between management and employees helps build trust and address concerns before they escalate.

  • Fair Wage Practices:

Implementing fair and competitive wage structures and regularly reviewing compensation to reflect market conditions and employee contributions can alleviate wage-related grievances.

  • Improving Working Conditions:

Ensuring a safe, healthy, and supportive work environment by adhering to safety standards, providing necessary facilities, and promoting well-being can reduce dissatisfaction.

  • Job Security Measures:

Offering job security through clear contracts, fair employment practices, and policies that minimize layoffs can provide employees with a sense of stability and trust.

  • Employee Benefits:

Providing comprehensive benefits such as health insurance, retirement plans, and sufficient leave policies can enhance employee satisfaction and loyalty.

  • Effective Grievance Handling:

Establishing and maintaining efficient grievance redressal mechanisms allows employees to voice their concerns and have them addressed promptly and fairly.

  • Inclusive Management Style:

Adopting a participative management style that involves employees in decision-making processes and values their input fosters a collaborative and respectful workplace culture.

  • WorkLife Balance:

Promoting work-life balance through flexible working hours, manageable workloads, and policies that support personal time can help reduce stress and improve morale.

  • Employee Training and Development:

Investing in training and professional development opportunities helps employees grow within the company, boosting their engagement and satisfaction.

  • Union and Management Collaboration:

Encouraging cooperative relationships between unions and management can help address issues collectively and prevent conflicts from escalating.

  • Conflict Resolution Mechanisms:

Implementing effective conflict resolution strategies such as mediation, arbitration, and negotiation can help resolve disputes amicably and maintain industrial harmony.

  • Recognition and Rewards:

Recognizing and rewarding employee achievements and contributions can motivate employees and create a positive work environment.

  • Regular Employee Feedback:

Conducting regular employee surveys and feedback sessions to understand and address their concerns can help preempt potential unrest.

Strikes, Lockout, Prevention of Strikes

Section 2 (q) of the Industrial Disputes Act defines:

Strike means a cessation of work by a body of persons employed in any industry acting in combination, or a concerted refusal, or a refusal under a common understanding, of any number of persons who are or have been so employed to continue to work or to accept employment.

The following essential requirements for the existence of a strike:

  • There must be cessation of work.
  • The cessation of work must be by a body of persons employed in any industry;
  • The strikers must have been acting in combination;
  • The strikers must be working in any establishment which can be called industry within the meaning of Section 2(j); or
  • There must be a concerted refusal; or
  • Refusal under a common understanding of any number of persons who are or have been so employed to continue to work or to accept employment;

They must stop work for some demands relating to employment, non-employment or the terms of employment or the conditions of labour of the workmen.

Types:

  • Recognition Strike:

Typical strike often resulted to pressurize the employer to recognize the value of workers and deal with them.

  • Economic Strike:

When the strike is due to an economic issue, like better pay, bonus, benefits, working hours, and working conditions, it is called an economic strike.

  • Sympathy Strike:

When more employee union join the strike initiated by another union, to support them, it is a sympathy strike.

  • Sit down Strike:

Strike in which the employees strike while remaining at their job in the factory.

  • Wildcat Strike:

When the strike is unauthorized and not supported by the labour union, it is called a wild cat strike.

  • Go-slow Strike:

In this form of strike, workers do not work at normal speed, which is usually regarded as misconduct, rather than strike.

  • Hunger Strike:

A strike in which all or some of the workers fast, is called a hunger strike.

Lockout

Lock-Out means the employer temporarily closes down the factory or any unit of the enterprise, where numerous workers are employed, to handle the uncontrollable situation, till the issues are resolved. It is used to compel the workers to agree and resume the work as per the terms and conditions of the employers.

It may result in a huge loss to both the parties, i.e. management and workers. In fact, frequent lock-outs may lead to the permanent shut down of the factory which leads to the loss of jobs on a large scale.

Lock-Out involves partial or full temporary locking down of the workplace or halting operations or denial by the employer to continue employment, of a certain number of employees with an aim of enforcing demands or showing grievance or to support other employers. It encompasses:

  • Temporary shut down of the factory or unit.
  • The industry is locked out to enforce demand or terms and conditions.
  • Intended to reopen the factory or unit when workers agree to work, as per the demand of the management and also to scale down the worker’s demand.

Strike

Lock-Out

Meaning Strike refers to the suspension of work by the workers or employees, so as to compel the employer, to agree to their demands. Lock-out is when the employer compels the workers to accept his terms and conditions, by shutting down the factory.
What is it? Organized and collective withdrawal of labor supply. Withholding the demand for labor.
Tactic Union power tactic Employer power tactic
Objective To gain redressal of the grievance, or to cause change through it. To gain an advantage by inflicting proprietary rights over the workers.
Used to Initiate or resist change in their working conditions. Force employees to return to work.
Tool of Workers Management

Prevention of Strikes

  • Open Communication Channels:

Foster open and transparent communication between management and employees. Regularly engage in dialogue to address concerns, discuss grievances, and solicit feedback to identify and resolve issues before they escalate.

  • Fair Labor Practices:

Implement fair labor practices, including competitive wages, benefits, and working conditions. Ensure that employees feel valued and respected, and that their contributions are fairly rewarded.

  • Employee Engagement and Participation:

Encourage employee engagement and participation in decision-making processes that affect their work and livelihoods. Involve employees in discussions about workplace policies, practices, and changes.

  • Conflict Resolution Mechanisms:

Establish effective conflict resolution mechanisms, such as grievance procedures, mediation, or arbitration, to address disputes and grievances in a timely and fair manner.

  • Negotiation and Collective Bargaining:

Engage in meaningful negotiation and collective bargaining with labor unions or employee representatives to address issues and reach mutually acceptable agreements on terms and conditions of employment.

  • Invest in Employee Well-Being:

Invest in programs and initiatives that support employee well-being, such as health and wellness programs, work-life balance initiatives, and professional development opportunities.

  • Promote a Positive Work Culture:

Foster a positive work culture built on trust, respect, and collaboration. Recognize and reward employee contributions, promote teamwork, and celebrate achievements to boost morale and job satisfaction.

  • Address Root Causes:

Identify and address the root causes of potential grievances or dissatisfaction among employees. Conduct regular assessments of workplace conditions, policies, and practices to identify areas for improvement.

  • Training and Development:

Provide training and development opportunities to managers, supervisors, and employees on effective communication, conflict resolution, and negotiation skills to equip them with the tools to prevent and manage disputes.

  • Compliance with Labor Laws:

Ensure compliance with labor laws and regulations governing employment practices, wages, hours, and working conditions. Stay informed about legal requirements and uphold ethical standards in all aspects of employment.

Dismissal and Discharge

Dismissal

Dismissal refers to the termination of an employee’s employment contract by the employer, resulting in the employee’s immediate separation from the organization. It is typically initiated due to reasons such as poor performance, misconduct, violation of company policies, or redundancy. Dismissal can also occur as a result of disciplinary actions, such as repeated violations of workplace rules or serious breaches of conduct. When an employee is dismissed, they may be required to leave the workplace immediately or after serving a notice period, depending on the terms of their employment contract and applicable labor laws. Dismissal can have significant implications for the employee’s career, financial stability, and reputation, as well as legal and financial consequences for the employer.

Reasons of Dismissal:

  • Poor Performance:

Employees may be dismissed due to consistently failing to meet job performance standards or objectives despite warnings or opportunities for improvement.

  • Misconduct:

Dismissal may occur as a result of serious misconduct, such as theft, fraud, dishonesty, harassment, violence, or gross insubordination in the workplace.

  • Violation of Company Policies:

Employees may face dismissal for repeatedly violating company policies, procedures, or codes of conduct, such as attendance policies, safety regulations, or ethical guidelines.

  • Breach of Trust:

Dismissal may be warranted when an employee breaches the employer’s trust or engages in actions that undermine the employer-employee relationship, such as confidentiality breaches or conflicts of interest.

  • Redundancy:

Employees may be dismissed due to redundancy when their role or position becomes redundant or unnecessary due to organizational restructuring, technological advancements, or changes in business needs.

  • Incapability:

Dismissal may occur if an employee is unable to perform their job duties adequately due to physical or mental incapacity, illness, injury, or disability, even after reasonable accommodations have been made.

  • Serious Breach of Contract:

Dismissal may result from a serious breach of the employment contract by the employee, such as breach of non-compete agreements, conflict of interest, or engaging in activities that harm the employer’s interests or reputation.

Types of Dismissal:

  • Summary Dismissal:

Also known as immediate dismissal, summary dismissal occurs when an employee’s contract is terminated without notice due to serious misconduct or gross misconduct. This type of dismissal typically occurs when an employee’s actions significantly breach company policies or employment laws.

  • Constructive Dismissal:

Constructive dismissal occurs when an employee resigns from their position due to a fundamental breach of contract by the employer. This could include changes to terms and conditions of employment, harassment, or a hostile work environment.

  • Wrongful Dismissal:

Wrongful dismissal occurs when an employee is dismissed in breach of their employment contract or without proper notice. This could happen if the employer fails to follow the correct dismissal procedures or terminates the employee for reasons not permitted by law.

  • Redundancy Dismissal:

Redundancy dismissal occurs when an employee’s position is no longer required due to organizational restructuring, technological changes, or economic reasons. This type of dismissal is typically based on business needs rather than individual performance.

  • Retirement Dismissal:

Retirement dismissal occurs when an employee’s employment is terminated upon reaching the retirement age specified in their employment contract or under applicable labor laws.

  • Layoff Dismissal:

Layoff dismissal occurs when employees are temporarily laid off from work due to a lack of available work or other economic reasons. This type of dismissal is usually intended to be temporary, with the expectation of rehiring once conditions improve.

  • Medical Dismissal:

Medical dismissal occurs when an employee’s employment is terminated due to prolonged illness, injury, or incapacity, preventing them from fulfilling their job duties even with reasonable accommodations.

Discharge

Discharge in the context of employment refers to the termination of an employee’s contract by the employer, leading to the end of the employment relationship. Unlike dismissal, which typically involves the termination of employment due to misconduct or poor performance, discharge can occur for various reasons, including redundancy, organizational restructuring, or the completion of a fixed-term contract. Discharge may also occur when an employee is unable to fulfill their job duties due to factors such as illness, injury, or disability. Depending on the circumstances and applicable labor laws, discharged employees may be entitled to severance pay, notice period, or other benefits outlined in their employment contract or statutory regulations. Discharge can have significant consequences for both the employer and the employee, impacting financial stability, career prospects, and legal rights.

Reasons of Discharge:

  • Redundancy:

When an employee’s role becomes redundant due to organizational restructuring, technological advancements, or changes in business needs, leading to termination of their employment.

  • Poor Performance:

Discharge may occur if an employee consistently fails to meet performance standards despite warnings or opportunities for improvement.

  • Misconduct:

Serious misconduct, such as theft, fraud, harassment, violence, or gross insubordination, may result in discharge from employment.

  • Violation of Policies:

Discharge can happen when an employee repeatedly violates company policies, procedures, or codes of conduct, such as attendance policies or safety regulations.

  • Incapability:

When an employee is unable to perform their job duties adequately due to physical or mental incapacity, illness, injury, or disability, discharge may be necessary.

  • Breach of Trust:

Discharge may occur if an employee breaches trust by engaging in actions that undermine the employer-employee relationship, such as confidentiality breaches or conflicts of interest.

  • End of Contract:

Discharge can happen when a fixed-term contract expires, and the employer chooses not to renew it.

Types of Discharge:

  • Honorable Discharge:

An honorable discharge occurs when an employee’s employment contract is terminated under favorable circumstances, such as resignation, completion of contract terms, or retirement.

  • General Discharge:

General discharge refers to the termination of an employee’s contract without any negative connotations. It typically occurs when an employee’s performance or conduct does not meet the required standards but does not warrant more severe action.

  • Dishonorable Discharge:

Dishonorable discharge is a severe form of termination that occurs when an employee is dismissed for serious misconduct or gross negligence. It carries significant negative consequences and may impact the employee’s future employment prospects.

  • Other Than Honorable Discharge (OTH):

An other than honorable discharge is given when an employee’s conduct or performance falls below the expected standards but does not warrant a dishonorable discharge. It may still have negative implications for the employee’s benefits and eligibility for reemployment.

  • Bad Conduct Discharge:

Bad conduct discharge is a punitive form of termination that is less severe than a dishonorable discharge but more serious than a general discharge. It is typically given for serious misconduct but does not carry the same stigma as a dishonorable discharge.

  • Administrative Discharge:

An administrative discharge is a termination that occurs for reasons unrelated to misconduct or performance, such as organizational restructuring, position elimination, or the expiration of a fixed-term contract.

  • Involuntary Discharge:

An involuntary discharge occurs when an employee’s contract is terminated against their will, often due to factors such as poor performance, misconduct, or organizational needs.

Key differences between Dismissal and Discharge

Aspect Dismissal Discharge
Definition Termination by employer Termination of employment
Connotation Negative Neutral or variable
Reason Misconduct, poor performance Various, including redundancy
Legal Implications Subject to scrutiny May vary by type
Employee’s Status Negative impact on reputation May vary by type
Employee’s Rights May be challenged legally Subject to contractual terms
Stigma May carry stigma Depends on type
Termination Process May involve disciplinary actions May be administrative
Employment Status Often involuntary May be voluntary or involuntary
Impact on Benefits May affect entitlements Varies depending on circumstances
Legal Recourse Potential for legal action Dependent on circumstances
Public Perception Negative perception possible Neutral or variable

Retail Information system

The advent of information technology has significantly impacted the way retailers do their business. POS informs retailers of the details of sales transactions: what item was sold, where the transaction occurred, at what price, what employee performed the sale, and information about the customer making the purchase. Supply chain management systems (SCM) track the origin of the product even before it arrives at store or warehouse (and will be discussed in more detail in the next section). Financial data systems provide management with data concerning the organizations profit and loss factors. Human resource systems (HRS) keep track of employees: status, title, employment type, salary, address, etc. Customer relation management systems (CRM) track customer information and will be discussed in a later section.

Retail information systems:

For any retail strategy, gathering and reviewing information is valuable. For this, retailers use the RIS (Retail information systems) which anticipates the information needs of retail managers; collects, organizes, and stores relevant data on a continuous basis; and directs flow of information to the proper decision makers.

As computer technology has become more sophisticated and less expensive, more retailers are developing comprehensive information systems. 2 very popular systems are:

  • UPC- Universal product code, and
  • EDI-Electronic Data Interchange.

Also, to improve inventory planning and forecasting, a new program is now in place. It is called CPFR- collaborative planning, forecasting and replenishment. Also gaining importance is the concept of Database Management, which is used to gather, integrate and apply information related to specific areas.

Database Management consists of:

Data warehousing: Here, the copies of all databases in the company are stored in 1 location and are accessible to any employee anywhere.

Data Mining & Micromarketing: Data Mining involves the in-depth analysis of information to gain specific insights about customers, products, vendors etc. Micromarketing is an emerging application of data mining whereby the retailer uses differentiated marketing and develops focused retail strategy mixes for specific customer segments.

Non-traditional retailing: The various new forms of non-traditional retailing are as follows:

The World Wide Web:

The Web is a useful tool for retailers as it projects a retail presence, helps to generate sales, and most importantly, provides information to customers.

Following are examples of e-tailing:

  • Shopping robots, called ‘bots’ are computerized comparison programs that enable online shoppers to search 100s of sites and obtain the best price. They have resulted in a shift of power to the consumer.
  • Electronic banking is the hottest thing in service retailing. It helps customers to transact 24 hours a day, 7 days a week at a variety of locations. It includes modern facilities like ATMs, electronic debit payments and smart cards.
  • Besides, things like electronic gift certificates and interactive electronic kiosks are modernizing the shopping experience of customers.
  • Retailers like Amazon.com, Wal-mart & Fabmart.com are leaders in web-based retailing.

Other emerging, fast-growing nontraditional retail institutions are:

Video Kiosks:

The video kiosk is a freestanding, interactive, electronic terminal that displays product related information on a video screen. Although some video kiosks are located in stores to enhance customer service, others enable customers to place orders, complete transactions and arrange for products to be shipped.

Airport Retailing:

One of the fastest growing sectors in retailing. Today, at virtually every airport, there are full blown shopping areas. Some of its features are as follows:

  • The group of prospective shoppers is rather large.
  • Air travellers are a temporarily captive audience, looking for a way to fill their time.
  • Sales per square foot of retail space at airports are usually 3-4 times higher than at regional malls.

Objective of Retail Information System

  • An information system should provide relevant information to retail manager regularly.
  • An information system should anticipate needs and requirement of the retail manager.
  • An information system should be flexible enough to incorporate constant evolving needs of the consumer market.
  • An information system should be able to capture, store and organize all the relevant data on a regular and continuous basis.
  • The retail Information systems should be aligned with strategic and business plans of the organization. Therefore, it should be able to provide information, which supports and drives this objective.

Characteristics of Retail Information System

  • Retail Information systems Information systems. Retail Information systems should connect all the stores under the company’s
  • Retail information system should allow instant information exchange between stores and management.
  • Retail information system should handle the various aspect of product management.
  • Retail information system should handle customer analysis.
  • Retail information system should allow the store manager flexible pricing over a financial year.

Principles of Retailing

Retailing is a major business format in which you sell goods and services directly to end consumers. While the types of retail providers are virtually limitless, several common principles of retailing contribute to successful development of a profitable retail business. The approach a retailer takes in applying these core principles impacts the nature of the operation.

Duties and Responsibilities:

According to this principle, the duties and responsibilities of each and every employee, working at various levels in the retail store should be clearly defined. The line of authority must be clear from the highest to the lowest positions. All employees must be well informed of their respective position, responsibilities in the retail organization and the persons to whom they are answerable and who reports to them.

Clear definition of objectives and policies:

According to this principle of retail organization, each employee must understand the objectives and policies of the store. If the objectives are not clearly defined, the employees in the retail organization shall not be in a position to understand what is expected from them and in what type of activities the organization engage itself.

Unity of Command:

According to this principle, one employee working at junior level should be responsible to one direct supervisor. The purpose is to avoid any conflict regarding responsibilities of employees receiving orders from more than one supervisor.

Supervision and Control:

According to this principle, even after delegating the authority, the supervisor still will be responsible for a manager’s or employees’ mistakes. He cannot get rid of the mistake done by his juniors or those who are to achieve the goal.

Monitoring of Human Resource:

According to this principle, issues related to employees like attendance, employee turnover, punctuality and absenteeism should be regularly monitored otherwise they can create problems for the whole organization.

Rule of Simplicity:

According to this principle, simplicity in all sorts of operations is must for running a retail organization properly. There should be a limit to the number of employees a manager could directly supervise.

Responsibility and Authority:

According to this principle, assigning duties without any authority will not work in a retail organization. Therefore, responsibilities should be associated with proper authority. An employee who is responsible to achieve some retail organization’s objectives needs the power to achieve it.

Interest in employees:

According to this principle, the retail organization should show continuous interest in its employees, job promotion, employees’ participation in management, internal promotion, efforts/job recommendation, job enrichment, induction and so on; improve employee’s morale and efficiency.

Division of Labour:

According to this principle, in order to achieve organizational objectives, the work should be divided among subordinates properly. It means dividing the retail organization’s work in various departments into various components and then assigning the same to each employee of the organization. It enables the management to fix up the responsibilities on each employee concerned.

Retailer Meaning Characteristics and Functions

The word ‘Retailer’ had been derived from the French word ‘Re-tailer’ which means ‘to-cut again’. Obviously then, retailing means to cut in small portions from large lumps of goods. A retailer is last middlemen in the chain of distribution of goods to consumers. He is a link between the wholesalers and the consumer.

The American Marketing Association defines retailing as “the activities involved in selling directly to the ultimate consumer for personal and non-business use. It embraces direct-to-customer sales activities of the producer, whether through his own stores or by house-to-house canvassing or by mail-order business. The retailer is an intermediary in the marketing channels and is a specialist who maintains contact with the consumer and the producer and is an important connecting link in the mechanism of marketing.

Characteristics of a Retailer

  • In the entire distribution chain, a retailer is considered to be the final link, who deals directly with the customer.
  • A retailer essentially maintains a variety of merchandise.
  • A retailer purchases in bulk from the wholesalers and sells the products to the customers in small quantities.
  • The aim of a retailer is to achieve maximum satisfaction by exceeding their expectations and delivering exceptional services.

Functions of Retailing:

  • Assembling of goods from various wholesalers.
  • The providing information concerning the nature and use of goods to the wholesalers and producers. It also informs as about the market trend.
  • The physical movement and storage of goods for the supply to the final consumers to meet their needs and requirements.
  • The standardisation, grading and final processing of goods which have been left in graded or unstandardised by wholesalers.
  • The assumption of risk concerning the price, nature and extent of demand of goods as long as they remain unsold.
  • The provision of ready availability of goods of various qualities and of various manufacturers.
  • The financing of inventory and the extension of credit to consumers for a short period.

Pre-Requisites of Retail Trade:

The success of retail trade is based on a proper combination of the following factors:

(i) Locations:

The ultimate success of a retailer depends on the location of his shop. Proper selection of location is important for a retailer to establish his business.

(ii) Price:

A proper pricing policy can give better results for a retailer if he can combine low prices with good quality to attract consumers.

(iii) Sales Promotion:

A retailer must arrange for proper sales promotion campaigns in order to familiarise the customers of that area with his products.

(iv) Prudent Buying Principles:

Every retailer ought to be a shrewd purchaser; only then he can give his best to his customers. Careful buying earns rich dividends in retail trade.

(v) Knowledge of Merchandise:

Modern business is so complex and the variety and quality of goods being so diverse, a retailer must have adequate and latest knowledge of the wares he sells. It would not only enable him to answer customer queries satisfactorily but also to handle the complications of his business. Thus adequate knowledge of merchandise is another pre-requisite feature of retail trade.

(vi) Services:

A retailer should concentrate on his services. Courteous and prompt service on his part will help him in attracting more and more customers and thereby flourish in his business. Most retailers go in for after sale service also, where they cater to the needs of the customers after the latter has purchased a commodity from them. So efficient service should be the motto of every retailer.

(vii) Efficient Management:

Better planning, organisation and control by a retailer can offer efficient retail operations. A retailer should have a proper and adequate work-force to assist him in his business. He should always keep stocks ready for customers and even offer specialised comments on the products he deals in. If a retailer plans his inventories and works in advance, there is no doubt that he will achieve his targets and also attract more customers.

(viii) Display of Goods:

Since a retailer deals in a verity of products, he must display his goods in a proper and orderly manner. This will enable him to get what is required by the customer quickly and also help in attracting customers. The retailer must go in for tastefully decorated interiors and also have proper and attractive window-dressing and display.

The goods must be neatly and orderly stocked and the pattern of window display should be frequently changed for the better, so as to attract the customers’ eye. A retailer must not forget that a well laid out window display will help him to entice and attract customers from his rivals and competitors. Hence, proper care and attention ought to be given for display of goods out as well as in the retailer’s shop or showroom.

Functions of Retailers:

(i) Buying:

A retailer deals in a variety of merchandise and so he buys collects large number of goods his stocks from a variety of wholesalers. He selects the best from each store them and bears wholesaler and also pays the most economical price. He brings all the goods marketing risks, under one roof and then displays them in shop. Thus, he performs the twin functions of buying and assembling of goods.

(ii) Storage:

After assembling the goods, the retailer stores them in his godown so that they are held as reserve stocks for the future. Storage of goods in ready stock is also necessary.

(iii) Selling:

The ultimate aim of every retailer is to sell the goods he buys. So he employs efficient methods of selling to dispose off his products at a faster rate so that he can increase his turnover in a period of time.

(iv) Risk-bearing:

The retailer bears the risk of physical damage of goods and also that of price fluctuations. Moreover, risk of fire, theft, deterioration and spoilage of goods has also to be borne by him. Changes in fashions, tastes and demand of his customers also have an adverse effect on his sales; nevertheless a retailer does not lose heart. He bears all these trade risks which come in his way during the normal course of business.

(v) Packing:

A retailer packs his goods in small packets and containers for his customers. Occasionally he may be required to grade the goods also.

(vi) Credit:

Often retailers grant credit to customers and also bear the risk of bad debts, which go along with credit sales.

(vii) Supply Information:

Retailers supply valuable market information to both wholesalers and customers.

(viii) Advertising:

Retailers display goods and spend on advertisement also.

Retail Accounting

Retail accounting isn’t a special kind of accounting process or system, but rather an inventory valuation technique often used by retailers. It differs from “cost accounting” for inventory in that it values inventory based on the selling price rather than the acquisition price.

The retail method is an accounting method used to provide a comprehensive account inventory at the item’s retail price in order to detect losses, damages and theft of stock allowing small business owners to track costs, keep account of the goods you’re buying or selling, know how much is left over, and maintain the right amount of inventory at all times.

The retail method uses the cost to retail price ratio to estimate the value of the inventory. To calculate the value of ending inventory, you need to follow these steps:

  • Maintain a comprehensive record of purchases and on-hand goods at cost price and retail price
  • Calculate a cost-to-retail ratio

Formula = Cost price x 100 / Retail price

  • Estimate the ending inventory at retail prices by subtracting the retail price of goods sold from the retail price of goods in inventory
  • Convert the estimated inventory at retail price to cost price by applying the cost-to-retail percentage.

Advantages

  • This accounting method involves easy calculations, as all units of one item have the same price and experience the same changes in the price.
  • It is convenient for retailers operating multiple stores, as it can save time in conducting physical inventories.
  • In retail accounting, preparing financial statements gets easier due to simple calculations.
  • This method is independent of labour-intensive physical inventory counts.

Disadvantages

  • This method can be inaccurate in the event of pricing changes.
  • This type of accounting can be ineffective or more complex with the introduction of discounts.
  • Retail accounting often involves assuming unrealistic pricing conditions and it may be unable to provide the exact price values.

Applications:

Retail accounting for discount in sales

Sometimes, retailers may offer a reduction in the cost of the product in exchange for early payment by the customer. In many cases, retailers offer a discount when they are short of cash. When a customer takes advantage of this sale and pays less than the full amount of the invoice, the retailer records the discount as a credit to a receivable account and a debit to a sales discount account.

Retail accounting for returns

If an order gets processed, delivered and then returned within the same accounting period, retailers can make the necessary adjustments to the balance sheets. When the return happens in the sales time period, it may show an extra profit in the sales. Usually, the return process involves a credit to the receivable account and a debit to the sales return account.

Uses:

  1. Calculate cost-to-retail percentage

The first step involves finding the cost-to-retail percentage of a retail inventory. You require the total purchase price of the inventory and the selling or retail price. Here is a formula to calculate the cost-to-retail percentage:

Cost-to-retail percentage = (Cost of inventory / Retail price of the inventory) x 100

For example, if a store buys an inventory for ₹500 and sells it for ₹1000, they can calculate the cost-to-retail percentage by using this formula:

Cost-to-retail percentage = (₹500 / ₹1000) x 100 = 50%

  1. Find the cost of inventory available for sale

After determining the cost-to-retail percentage, calculate the specific time period of reporting. Then, find the cost of inventory at the start of that time and the cost of additional purchases during this time. Here is the formula that you can use to find the cost of inventory available for sale:

Cost of inventory available for sale = Cost of beginning inventory + Cost of additional purchases

  1. Determine the cost of sales

Next, you can calculate the total cost of sales for a particular time period. You can use the total amount of sales and the cost-to-retail percentage for the calculation. The result represents the total amount gained when selling the inventory. Here is a formula that you can use to determine the cost of sales:

Cost of sales = Total amount of sales x Cost-to-retail percentage

  1. Determine the ending inventory

After calculating the cost of sales and the cost of inventory available for sale, you can calculate the ending inventory. Ending inventory is the value of stock that a retail business has at the end of a particular reporting period. After determining the ending inventory, retailers can include this information on the balance sheet. Here is a formula to find the ending inventory value:

Ending inventory = Cost of inventory available for sale – Cost of sales during the reporting period

Retail Cash Management

Retailers are required to accept, process, and store cash payments as well as the required amount for change. Keeping cash increases the need for working capital; and cash handling processes waste human resources. Consequently, an effective cash management system is one of the key tasks for the retail sector.

Cash circulation expenses for retail businesses:

  • Cash insurance during storage and transportation
  • Interest on deposit and withdrawal
  • Cash collection services
  • Internal personnel costs
  • Maintenance and equipment of security systems for the cash counting room
  • Delay cost in depositing the collected cash to a bank account (risk of a cash gap)
  • Repeated collection costs, recount, and dispute resolution in the event of a discrepancy between the declared and actual collection amounts
  • Expenses in case of internal fraud or theft
  • Purchase and maintenance of special equipment for validation, counting and packing of cash

Optimization of Retail cash circulation

  • Order automation for the cash collection and exchange delivery
  • Cash distribution within the organization (between points of sale/service)
  • Cash Flow visualization from cashier systems and electronic cashiers
  • Instant deposit using automated deposit machines (ADM)

Benefits:

Improved customer service

Nothing is more frustrating than being a customer trying to get help and finding that no store assistant is available. Employees are often in the back of the store, busy with tasks such as counting the till at change of shift, instead of providing customer service out in the store. These days, when customer service is crucial to staying ahead of the competition, you have to free up staff for more customer-orientated work. With cash management in place, counting money is done automatically.

The role description for a cashier has changed significantly in recent years, you can read more about it in our blog post “Take a look at the cashier’s new role”.

Efficiency and time-savings

The time needed for reconciling and balancing the cash register is an ineffective process that takes time away from more productive activities. Since neither the manager nor the staff will spend time handling the cash, they can focus on running the business and on revenue-generating activities instead. The specific time savings depend, of course, on how big the store is, but the time spent on cash handling can be cut by, as much as 50% by using cash management.

No human mistakes

With cash management, the customers always get the right amount of change back. Also, the staff does not have to stay after closing to count today’s cash. The solution automatically counts the money and always does it correctly. No more need for double counting and recounting, and no risk that there will be counting errors.

Increased revenue

Every cash purchase will take less time, and with reduced queues, there will be time to serve more customers. Also, all the time saved every day by reducing the counting of money frees up time for sales promotions and customer service. Moreover, of course, a well-run store with excellent customer service attracts more customers.

Lowered costs

Cash Management decreases cash costs by 30%. First of all, you reduce your costs by simplifying your operation in the business. Then, you will get both lower CIT costs and insurance costs since cash is securely closed and sealed.

Enhanced security

Cash is still the most commonly used form of payment in retail, particularly for smaller transactions of €20 or less. Still, many retailers handle their cash manually, which makes their businesses vulnerable both to robberies and internal theft. When the cashier has no access to the money, the risk significantly lowers. One simple robbery can cost up to € 13.000 in revenue losses and staff counselling. With a cash management solution, the staff feels safer, and long opening hours are less risky.

Uses in Various Sectors:

Convenience and Grocery Stores

Cash Management provides stores with the tools to increase efficiency by changing the way managers and employees handle, reconcile and report cash within the convenience store setting. Reconciling tills takes less time. Reporting is in real-time, and credit can be applied to an existing bank account immediately. Decreasing the risk of loss and saving time by bringing all cash handling functions in-house, CM reduces the amount of trips to the bank, keeps managers and employees in the store, and makes banking relationships more efficient.

Restaurants, Fast Food Dining and Retail

With employees managing your money throughout the day by managing cash drawers or self-banking, Cash Management (CM) can reduce 1-2 hours per day of reconciling and managing daily cash sales for your staff. CM eliminates the need for multiple touches and puts control back into your manager’s hands by eliminating the need for mangers to leave the establishment to make deposits and the ability to stay in the stores and focus on daily tasks. CM also reduces errors and saves time for staff. This all contributes to the cost savings improvements. CM provides the processes, reporting, and accountability to help make cash handling worry-free and efficient.

Cash Checking Stores

Cash Management offers a device that keeps cash safe until courier pick up, a reporting system that offers real-time reporting, and the ability to reconcile drawers easily and swiftly. Decreasing the risk of loss and giving your staff peace of mind and confidence.

Entertainment Venues including Casinos

50 different stations, hundreds of employees all handling their own tills can be nerve-racking. That’s the world of sports and entertainment venues, and Casinos. Cash Management offers a controlled environment for cash counting, saving each employee time daily anywhere from 30 to 60 minutes equaling potentially hundreds of hours per week for the business. Managers spend on average 2 or more hours less time closing the books at the end of a shift or event with CM solutions in place. Increase employee efficiency and cut down on time and save on your bottom line.

Product Assortment and Display

Product Assortment

An assortment strategy in retailing involves the number and type of products that stores display for purchase by consumers. Also called a “product assortment strategy,” it is a strategic tool that retailers use to manage and increase sales. The strategy is made up of two major components:

  • The depth of products offered, or how many variations of a particular product a store carries (e.g. how many sizes or flavors of the same product).
  • The width (breadth) of the product variety, or how many different types of products a store carries.

Components of Assortment Strategies

Assortment strategies are defined according to two main factors:

  1. Product Width

Product width refers to the range of product lines that a retailer offers. For example, a supermarket may offer product lines ranging from food items to cosmetics and over-the-counter medical supplies. They are all the product lines that are available to customers and combine to make up the product width offered by the retailer.

  1. Product Depth

Product depth is the variety of products offered under each product line. For example, if the retailer in question is a specialized cereal store, they are likely to offer hundreds of options for cereal. The variety determines the product depth.

Assortments strategies are determined by the product width and depth that a retailer chooses to offer and ideally result in optimal product mixes that drive sales and increase the likelihood of customers making positive purchase decisions. The strategies employed may be dependent on the physical capacity of stores smaller stores generally lack the space for high product width and depth and tend to focus on one or the other.

For example, a specialty retailer, such as a cereal store, is likely to show narrower product width (few product lines), but high product depth (numerous options for each product line). That is, they are likely to offer only cereal but will also provide many options of cereals to choose from.

On the other hand, a wholesaler, such as Costco, is likely to demonstrate high product width (lots of product lines ranging from fresh fruit to clothing, household furniture, and accessories) but lower depth (only a few options in each product line, e.g., offering).

Types of Assortment Strategies

  1. Wide assortment

A wide assortment strategy is used when retailers aim to offer a lot of different product lines or categories, but with lesser depth in each category. It aims to provide more variety in the types of product lines offered but does not provide a high number of products in each product line.

For example, a grocery store that provides a lot of different products, but only stocks one or two brands for each type of product, is employing a wide assortment strategy.

  1. Deep assortment

A deep assortment strategy aims to provide a large number of options within a particular product category. It is common for specialty stores that focus on one or a few products to utilize a deep assortment strategy.

For example, a supplement store is likely to offer many options for buyers of protein powders, it is using a deep assortment strategy by focusing on fewer product lines but with high depth and variety within each product line.

  1. Scrambled assortment

Retailers using scrambled assortment strategies aim to offer products that are outside of their core business operations in order to attract more clients from different markets.

For example, a store that is famous for its smoothies starts selling fresh fruit and packaged food, which allows it to target a wider audience, including people who wish to make smoothies at home.

  1. Localized assortment

A localized assortment strategy allocates the product mix based on the preferences of the local population and the characteristics of the geographical region. This allows the retailer to cater to different demands according to geography and thereby increase sales.

For example, a clothing retailer like Zara does not sell the same clothing inventory in a store in Mumbai, India, as it does in Vancouver, Canada. This is because the population in Vancouver requires warmer clothing for snow and the winter season, whereas the population in India exhibit different clothing preferences and requirements.

  1. Mass-market assortment

Mass-market assortment strategies are used by stores with large physical storage capabilities, such as Walmart and Amazon. They aim to appeal to the mass-market and offer as many products and varieties as possible, catering to a much bigger customer base.

Importance of Assortment Strategies

If used effectively, assortment strategies can boost sales and help the retailer grow its customer base. They are important because they determine the goods that a customer interacts with, which leads to a purchase decision. Assortment can vary according to seasons an ice cream store may offer different flavors in the summer and different flavors in a monsoon season.

Similarly, a clothing retailer is likely to stock different clothes in spring and in summer (probably more beachwear) than it does in winter (more jackets). This caters to the public demand and increases sales. Similarly, in supermarkets, complementary goods, such as toothbrushes and toothpaste, are assorted strategically so that customers are persuaded to buy more than they intended to.

However, assortment strategies can be disadvantageous if the product mix and allocation doesn’t appeal to the population visiting the store (or the website, for e-commerce retailers). For example, offering too much variety within a product line can frustrate customers because it makes it harder to make a decision. At the same time, providing too little variety can be disappointing to some customers and can negatively impact sales revenue.

Product Display

Retail product displays are the fixtures in your store that hold or promote your products.

The look of retail product displays relies heavily on your visual merchandising strategy. Generally, the first interaction customers have with your products in-store is via your displays.

If you have a brick-and-mortar store, retail product displays are a must. You or your visual merchandiser can arrange displays to showcase your products and increase sales.

It’s also a visual merchandiser’s responsibility to manage and maintain your retail product displays over time. Fixtures may break or become worn down.

After testing certain display types, you may decide to iterate on your strategy and implement new display designs to help boost sales.

Ways to Displays:

  1. Display related products together in a themed way. When building a product display look for products that are natural add-ons to the main product featured.
  2. Use lighting to feature products. Accent lighting creates visual interest for shoppers, and helps to make featured products “pop.”
  3. Change displays in high traffic areas on a weekly basis. Customers want a reason to return to your store, so get them excited by displaying new and different products.
  4.  Use blocks of colour to attract attention. Bright colors can focus your customer’s attention on key products and services. Combined with good lighting it helps you to create focal points for your customers.
  5. Keep messaging simple. Use the “blink test” to ensure that your customer can understand your offer. You only have a few seconds to garner their attention, so do not distract them with too much verbiage.
  6. Don’t forget the pricing. If a customer fails to see a price on an otherwise well-dressed display, they could very well assume that the item is out of their price range, and forcing them to ask for assistance on the item takes the “impulse” out of impulse buying!
  7.  Pay attention to the store exterior. This includes the sign, the windows, and the sidewalk. If your business looks dirty or closed from the outside, then customer perception would be exactly that, and they will walk right by.
  8.  Maintain your fixtures and store. You may have the best merchandise that is competitively priced, but if the gondola fixtures, sales counters, or sign holders are broken, damaged, or dirty it reflects negatively on your business…and the sales report.
  9.  Make merchandise easy to see and buy. Learn from the grocery retailers…keep your key products at between wait and eye-level so that customers do not have to work to see them or pick them up.
  10.  Clean, spaced, and organized. Have you ever been in a store that had dirty merchandise? Unorganized and dirty stores tell your customer that you don’t care and as a result…neither will they!

Product Life cycle in Retailing

The retail life cycle theory holds that retail institutions experience the cycle of innovation, growth, maturity and decline, like goods and services that they sell, similar to that of the product life cycle. The market traits and strategies which are taken by retail institutions should differ in variable stages of retail life cycle. The theory of retail life cycle is first introduced by William Davidson W. R, Betas A. D and Bass S. J in 1976.

Different stages of retail life cycle

Innovation stage

In the innovation stage, in which the reformation and development of business methods promote the emergence of new retail formats, the operating characteristics of new formats have not been understood by both consumers and the industry, lowering market share. Moreover, because of the development cost of new formats, it is hard for retail companies, which apply the new methods, to make profit at this stage.

This theory holds that the innovation in retail institutions is realized through the reformation of business methods. The reformation of business methods is mainly realized by decreasing the cost of operation and the price of products or services. However, it may also be innovated through improvement of product mix, customer service, sales, store selection, store design or sales promotion, business hours, logistics system and other ways, some of which are usually combined and innovated. Sometimes the company which leads the new retail format may become the target of hit (Roth, V. J., & Klein, S. 1993). During the period, the emergence of new forms can also lead to the blow of competitors and retaliation. In this stage, it has little impact on the existing competitive structure for its low market share.

Growth stage

In the growth stage, Langlois, R., & Robertson, P. (1995) points out that the new business formats start to be accepted by consumers and traits of new formats are widely understood in the industry. As a result, the market share begins to ascend and copycats are also on the rise. The competition between companies that apply traditional methods and new methods gets more intense. At that time, companies who have reformed their operating activities firstly can increase the marker sales and the profitability.

At the meanwhile, the competition between companies of new and original retail formats begin to turn out white-hot. With the rapid growth of reformed companies, customers of companies without innovation intend to choose products and services of innovative companies. Therefore, the unreformed retail institutions begin to take various actions to reduce the loss of customers. In fact, many companies which use original retail formats meet challenges of new formats with the positive attitude and apply some new methods in the existing formats. The competition of different retail formats is unique and increase the vitality in the market.

Later in the stage, with the wide application of new formats, the competition of companies which accept new formats will emerge and augment. The competition of different retail formats does not take the main role in the market. In the competition of new formats, some companies lacking competence start considering to leave the market. The remaining companies are inclined to take actions like improvement of service standard, expanding the commodity portfolio and improvement of shop facilities. Despite the continuing growth of sales, the cost will surge as well. Apart from the direct cost, indirect cost will increase sharply including promotion cost and the expense incurred by the increasing size of the organization. The cost may be higher than the sales and companies will face the non-profit situation.

Maturity stage

In this stage, companies of new retail formats are incapable of taking more market share and expand the customers’ base. In this period, companies which won out in the growth stage are trying to maintain the market share. However, the profit margin begins to decline because the new retail formats could not make any company have edge on the others and companies have to decrease the price in order to defeat competitors. Therefore, how to decrease the cost is the main problem that each enterprise faces. In order to pursue the differential advantage in the period of competition, the enterprises compete to make the market more mature and stable. Characteristics of new formats have been gradually lost and new formats change to traditional formats. Thus it becomes an important opportunity for the emergency of another new format.

For chain businesses, in this stage, they need to consider to close inefficient shops and open new shops in good addresses as well as develop to diversified and compound retail organization (Turner, S. 2002). It should be pointed out that the retail format even in the maturity stage can be improved to make the company come back to the growth stage. According to the research of Sun, L., Kay, R., & Chew, M. (2009), department stores in the United States has been in the maturity stage after World War II. After that, the development of shopping centers gave department stores an opportunity to grow again because department stores were different at that time form before and they were reformed based on the model of shopping centers.

Decline stage

In decline stage, the new formats have become the traditional ones and with the change of consumers’ buying behavior and the appearance of newer formats, the market begins to shrink and traditional formats (original new formats) could not make any profit but may suffer great loss due to the decreasing sales. During this period, some companies decide to leave the market. As a result, the competition among the same retail formats is not serious but the competition of different formats will get increasingly intense.

Companies of the traditional format compete through the price, which makes their profit get less and less. Companies of the new format have edge on the others due to their advantages in other aspects like service, product quality and operation style. The situation of decline stage is similar to the innovation stage but in the term of traditional formats.

After this stage, the market will enter the next life cycle.

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