Introduction to

retailing
Retailing consists of the sale of goods or
merchandise from a fixed location, such as a
department store or kiosk, or by post, in small
or individual lots for direct consumption by
the purchaser. Retailing may include
subordinated services, such as delivery.
Purchasers may be individuals or businesses.
In commerce, a retailer buys goods or
products in large quantities from
manufacturers or importers, either directly or
through a wholesaler, and then sells smaller
quantities to the end-user. Retail
establishments are often called shops or
stores. Retailers are at the end of the supply
chain. Manufacturing marketers see the
process of retailing as a necessary part of
their overall distribution strategy.
It means all the activities involved in selling

goods & services directly to final consumer for

personal, non-business use.

Shops may be on residential streets, shopping
streets with few or no houses, or in a
shopping center or mall. Shopping streets
may be for pedestrians only. Sometimes a
shopping street has a partial or full roof to
protect customers from precipitation. Online
retailing, also referred to as B2C type of e-
commerce, and mail order are forms of non-
shop retailing.
Shopping generally refers to the act of buying
products. Sometimes this is done to obtain
necessities such as food and clothing;
sometimes it is done as a recreational activity.
Recreational shopping often involves window
shopping (just looking, not buying) and
browsing and does not always result in a
purchase.
Nature of Retailing
Retailing includes all transactions in which the
buyer intends to consume.
A Retailer:
Must derive more than 1/2 of their sales from
the ultimate consumer of the product to be
classified a retailer (less than 1/2, then they
are a wholesaler).
Classification of Retail Stores
According to 5 Criteria:

• Form of Ownership
Sole Proprietor (majority #s)
Corporate Chains
Contractual Chains
Franchising

• Types of Merchandise Offering

Merchandise mix, breadth (variety); depth
(selection in product)

o Limited-line stores-----> Sporting

Goods Stores etc.
o Single-line stores------> Specialty
Retailers Foot Locker, Radio
Shack...Category Killers...Borders
Books, Toys R Us etc.
o General merchandise stores
Department stores
Macy's, Strawbridge & Clothier etc.
Competition from discount stores and
specialty have put pressure on
department stores.
Some department stores are cutting
services, offering basement discounts
(competing with discount stores),
others are remodelling and opening
designer departments and boutiques
(competing with specialty stores).
Others increased services, IE
restaurants. Leased departments,
leased to entrepreneurs.
o Supermarkets... Superfresh etc.
Supermarkets are adding high turnover
non-food items to offset low margins of
food items.
Added delis and hot pizza etc, in
response to societal pressure (fast
food). Also competition from
convenience stores, 7-11 etc.
o Hypermarkets...success in europe, not
in US 40% food, 60% general
merchandise WalMart (222,000 Square
 feet, $2.5m per week) moving more
toward supercenters.
o Supercenters...merchandise/groceries
Wal Mart's projected high growth area
of 1990s. Getting away from
Hypermarkets. 80% of shoppers shop
both sides of store. Use groceries to
attract customers (traffice generaters),
hoping they purchase high margin
items.
o Discount Stores...Wal-Mart, KMart
Developed in the 1950s when the post
war supply for goods caught up with
the demand for goods.
Departmentalized, volume retailers.
o Off-price retailers... Buy manufacturers
seconds, overruns, off seasons at a
deep discount. TJ Maxx, Marshalls (317
stores, largest in the US).
Discounted prices, fewer customer
services. Inventory turned over 9- 12*
per year (specialty retailer *3).
Outlet malls-Reading VF outlet.
Manufacturers that use Off-price
retailing may alienate specialty
retailers.
Cannot advertise specific brands, but
 are advertising existence.
Factory Outlets Dollar Discounts
Offering more and more first run items,
it is difficult for manufacturers to make
enough "seconds" to fill these stores.
Also starting to offer services, i.e.
taking credit cards etc. It is not always
the case anymore that you are
guaranteed to get a better deal here
than at a Department Store that has
items on sale...especially if you
consider the costs of accessing remote
locations etc.
o Warehouse/Wholesale Club... Members
only selling operations combine cash &
carry wholesaling with discount
retailing.
Pioneered by Price Club, now bought
out by Cost Co. Wholesale Club.
Largest, WalMart's Sam's Club, $6.6
bn. KMart's PACE
o Variety Stores... Woolworths are
transforming to specialty merchants,
Champs Sporting Goods, Kids Mart,
Lady Footlocker, Woolworth Express.
Variety stores are becoming less
popular.
 Service Price Orientation (Level of
Service)
1 Service oriented retailer strategy.
2 Slim Profit margins, discount retailers, off-
price retailers, deep discounters.

High | Price
Department Stores
|
Specialty Stores
|
|
|
|
 Min
-------------------------------------------------------
-----Max.
Service |
|
|
Superstores |
Discount Stores |
Factory Outlets |
|
Low |

Where retailing takes place

In store vs. non store.

• In Home Retailing, selling via personal

contacts with customers in their own
home. Avon, Electrolux, Amway,
Encyclopedias.
Either cold calling, or calling on a lead.
Can demonstrate the product.
Becoming less popular, moving more
toward office party plan etc, since more
dual earning families.
Party plan-Tupperware
• Telemarketing, direct selling of goods and
services by phone, generate sales leads,
increase customer service, raise funds for
non-profit organizations, gather marketing
data.
Long distance telephone companies.
• Mail Order Retailing, sell by description.
Compact discs. LL Bean. Eliminate
personal selling and store operations.
Appropriate for specialty products.
Key is using customer databases to
develop targeted catalogs that appeal to
narrow target markets.
Offers convenience (Place utility), no
parking or long lines etc.
Buy from anywhere, retailer has low rent,
small sales staff and no shop lifting.
Automated Vending, less than 2% of retail
sales. Most impersonal way of retailing.
Convenience Products. High repair costs,
restocking cost. Pizza.
ATMs, Purnell's basement, Restrooms, gas
stations.
Price higher than in stores, consumers pay
for convenience.
Personal products, no human contact.
Television shopping, QVC and Home
Shopping Network. Use has plateaued due
to:
o Limited Cable Channel capacity

o Waiting for improvements in

technology, i.e. interactivity.

 • Electronic Shopping Using computer on-
line services
Problems:
Security of monetary transactions
Who is the vendor?
Prodigy
Compuserve
Types of Retailers
Specialty Store: Narrow Product line with a
deep assortment, such as apparel stores,
furniture stores, bookstores etc.
Department Store: Several Product lines-
typical clothing, home furnishings and
household goods
Super market: Relatively large, low cost low
margin, high volume, self service operation
designed to serve total needs for food,
laundry and household maintenance products
Convenience Store: Relatively small store
located near residential area, open long hours
seven days a week and carrying a limited line
of high turnover convenience products at
slightly higher prices
Discount store: Standard merchandise sold at
lower prices with lower margins and higher
volumes
Off-Price Retailer: Merchandise bought at less
than regular wholesale price and sold at less
than retail; often left over goods, overruns
and irregulars obtained at lower prices.
Retailers can position themselves as offering
one of four levels of service:
Self-service: It is corner stone of all discount
operations.
Self selection: Customers find their own
goods, although they can ask for assistance
Limited service: These retailers carry more
shopping goods and customers need more
information and assistance
Full Service: Sales people are ready to assist
in every phase of the locate compare-select
process.
Bloomingdale’s Wal-Mart
Tiffany Kinney shoe
Breadth of Product line
4. By combining these different service levels
with different assortment breadths, we can
distinguish the four broad positioning
strategies available to retailers
a. Bloomingdale’s: Stores that feature a broad
product assortment and high value added Pay
high attention to store design, product quality,
service and image. Profit margin is high.
b. Tiffany: Narrow product assortment but
high value added. Cultivate an exclusive
image and tend to operate on high margin
and low volume.
c. Sun glass hut: narrow prod assortment and
low value added, such stores keep their costs
and prices low by designing similar stores and
centralizing buying, merchandising and
distribution
d. Wall Mart: Broad product line but low value
added. Focus on keeping prices low. High
volume
5. Non store Retailing falls into 4 major
categories:
a. Direct selling
b. Direct marketing
c. Automatic vending
d. Buying services is a store less retailer
serving a specific clientele usually employees
of large organizations, who are entitled to buy
from a list of retailers who have agreed to
give them discounts in return for
memberships.
6. Major types of corporate retailing
a. Corporate chain stores: Two or more outlets
commonly owned and controlled, employing
central buying and merchandising and selling
similar lines of merchandise.
b. Voluntary chains: A wholesaler sponsored
group of independent retailers engaged in
bulk buying and common merchandising
c. Retailer cooperatives: Independent retailers
who set up a central buying organization and
conduct joint promotion effort
d. Franchises
e. Merchandising conglomerates: A free form
corporation that combines several diversified
retailing lines and forms under central
ownership along with some integration of
distribution and management.

COMPANY PROFILE

RELIANCE RETAIL LIMITED

Reliance Retail is the retail chain division of
Reliance Industries of India which is headed
by
Mukesh Ambani. Reliance Industries Chairman
Mukesh Ambani has unveiled a Rs. 25,000-
crore
($5.60 billion) retail plan for the company on
June 26, 2006. Mukesh Ambani has called this
Starting of reliance retail as an idea which has
the potential to revolutionize the Indian
socioeconomic framework. He said
"Conceptually, Reliance is creating a virtuous
circle of prosperity by bringing farmers, small
shopkeepers and consumers in a win- win
partnership.” "A new company, Reliance Retail
Ltd. (RRL) will spearhead this revolution.
Reliance Industries will have a 100 percent
stake in RRL, save for employee stock
options".

THE RELIANCE EMPIRE

Reliance being the all encompassing
company has entered into all the
sectors, retail being their latest.

Reliance Industries Limited

Chairman and Managing Director :
Mukesh Ambani
Market Capitalization :
INR 39,609,150,020 (Sept, 2006)
Total Shares Outstanding :
22,405,900 (Sept, 2006)
Closely Held Shares :
11,365,943
Sales :
INR 10,512,963,000
According to the company website "1 out
of every 4 investors in India is a Reliance
shareholder. RIL is ranked at 342 in the
2006 Fortune Global 500 list among the
world’s largest corporations.

The Product End uses

Reliance
Industries
Business
Brand

Petroleum Crude oil Refining,power,pet

(Exploration and Natural rochemicals and
gas other industries.
&
production)

Refining LPG, Domestic and

Propylene, industrial fuel Feed
Gasoline, stock for
Jet/Aviation petrochemicals,Tra
turbine fuel, snsport fuel,
High Speed Aviation fuel,
Diesel, Domestic Fuel,
Superior Transport Fuel,
kerosene oil Feedstock for
fertilizers, feed
stock for power
plants
and cement plants
Polymers Polypropyle
ne
Repol
High
Relene
Density
Polyethylen
e

Linear low
density
Reclair
polyethylen
Reon e
Poly Vinyl
Chloride
Relpipe Poly-Olefin
pipes

Chemicals Linear Alkyl Detergents

Benzene
Relab
Acrylic Wet spun
Acrylic fibre
Recrylon
Dry spun
Recrylic
Acrylic fibre

Fibre Paraxylene
Intermediat Mono
es Ethylene

Texltiles Suitings, Fabrics

shirtings,
Vimal
Dress
material,
Sarees Furnishing, home
textiles
Harmony

Furnishing
Fabrics, Day
curtains,
 Automotive
RueRel upholstery Fabrics

V2 Suitings Fabrics

Reance Ready to Suits, shirts and

stitch take trousers.
away fabric

Polyester
Readymade
Recron garments

Staple fibre,
filament
yarn
Recron Cotton
cotluk luk,cotton
feel yarn

Recron
Dyefast Easy
dyeable
yarn
Recron
superblack
Dope dyed
staple fibre
Recron
superdye
Cationic
Dyeable
staple fibre
  eliance recorded a profit of 8.9% on assets -
R
first among the 38 chemical companies in
Asia.

I n terms of market cap, Reliance Industries

ranks third among chemical companies in
Asia, with a market cap of $6087.2 million as
on October 19, 2001.

 eliance's total sales, at $6232 million,

R
ranked eighth among the 38 Asian chemical
companies. Reliance's total sales have gone
up substantially from 1996 when the company
recorded $2485 million.

 ompany with the highest refining capacity

C
in India-60mpta
Reliance SEZ
At Jhajjar, Haryana (Area covered 25, 000
acres) (Nature of SEZ-Multi product)
Reliance SEZ in Raigad (Area covered- 10,000
hectares)

Reliance Fresh is the convenience store

format which forms part of the retail business
of of Reliance Industries of India which is
headed by Mukesh Ambani. Reliance plans to
invest in excess of Rs 25000 crores in the next
4 years in their retail division. The company
already has in excess of 560 reliance fresh
outlets across the country. These stores sell
fresh fruits and vegetables, staples, groceries,
fresh juice bars and dairy products.
A typical Reliance Fresh store is approximately
3000-4000 square. feet and caters to a
catchment area of 1-2 km.
History
Post launch, in a dramatic shift in its
positioning and mainly due to the
circumstances prevaling in UP, West Bengal
and Orissa, it was mentioned recently in news
Dailies that, Reliance Retail is moving out of
stocking fruits and vegetables. Reliance Retail
has decided to minimise its exposure in the
fruit and vegetable business and position
Reliance Fresh as a pure play super market
focusing on categories like food, FMCG, home,
consumer durables, IT and wellness , with
food accounting for the bulk of the business.
The company may not stock fruit and
vegetables in some states, Orissa being one
of them. Though Reliance Fresh is not exiting
the fruit and vegetable business altogether, it
has decided not to compete with local
vendors partly due to political reasons, and
partly due to its inability to create a robust
supply chain. This is quite different from what
the firm had originally planned.
When the first Reliance Fresh store opened in
Hyderabad last October, not only did the
company said the store’s main focus would be
fresh produce like fruits and vegetables at a
much lower price, but also spoke at length
about its “farm-to-fork’’ theory. The idea the
company spoke about was to source from
farmers and sell directly to the consumer
removing middlemen out of the way.
Reliance Fresh, Reliance Mart, Reliance Digital,
Reliance Trendz, Reliance Footprint, Reliance
Wellness, Reliance Jewels, Reliance Timeout
and Reliance Super are various formats that
Reliance has rolled out.
In addition, Reliance Retail has entered into an
alliance with Apple for setting up a chain of
Apple Specialty Stores branded as iStore,
starting with Bangalore.

BACKGROUND
We can see many examples of businesses
where ,first we grow and then think of
expanding but
Reliance is quite different. Reliance has
developed such huge amount of resources
and capital over the years that whenever it
steps into any segment it is not required to
wait for growing signal, that’s why it always
thinks of expanding without any bounderies.
Reliance retail is next
Step by RIL which will be a pan India project.
Reliance Fresh is the retail chain division of
Reliance Industries of India which is headed
by Mukesh Ambani. Reliance has entered into
this segment by opening new retail stores into
almost every metropolitan and regional area
of India. Reliance plans to invest Rs 25000
crores in the next 4 years in their retail
division and plans to begin retail stores in 784
cities across the country. The Reliance Fresh
supermarket chain is RIL’s Rs 25,000 crore
venture and it plans to add more stores across
different g, and eventually have a pan-India
footprint by year 2011.
The super marts will sell fresh fruits and
vegetables, staples, groceries, fresh juice bars
and dairy products and also will sport a
separate enclosure and supply-chain for non-
vegetarian products. Besides, the stores
would provide direct employment to 5 lakh
young Indians and indirect job opportunities
to a million people, according to the company.
The company also has plans to train students
and housewives in customer care and quality
services for part-time jobs.
The company is planning on opening new
stores with store-size varying from 1,500 sq ft
to 3,000 sq ft, which will stock fresh fruits and
vegetables, staples, FMCG products and dairy
products. Each store is said to be within a
radius of 1-2 km of each other, in relation to
the concept of a neighbour store. However,
this is only the entry roll-out that the company
has planned. Bangalore is said to have 40
stores in all by the end of the year.
In a dramatic change due circumstances
prevaling in UP, West Bengal and Orissa, It
was mentioned recently in News Dailies that,
Reliance Retail is moving out stocking.
Reliance Retail has decided to minimise its
exposure in the fruit and vegetable business
and position Reliance Fresh as a pure play
super market focusing on categories like food,
FMCG, home, consumer durables, IT, wellness
and auto accessories, with food accounting for
the bulk of the business.

The company may not stock fruit and

vegetables in some states, Orissa being one
of them. Though Reliance Fresh is not exiting
the fruit and vegetable business altogether, it
has decided not to compete with local
vendors partly due to political reasons, and
partly due to its inability to create a robust
supply chain. This is quite different from what
the firm had originally planned. When the first
Reliance Fresh store opened in Hyderabad last
October, not only did the company said the
store’s main focus would be fresh produce like
fruits and vegetables at a much lower price,
but also spoke at length about its “farm-to-
fork’’ theory. The idea the company spoke
about was to source from farmers and sell
directly to the consumer removing middlemen
out of the way. Reliance may exit some
businesses if the business does not increases
by March 2008.

A GLANCE AT EXISTING RELIANCE

FACILITIES : MORE THAN 200 STORES IN 12 CITIES.

PROCESSING CENTERS IN PUNJAB,

DELHI, RAJASTHAN,

M.P, GUJARAT, JHARKHAND, ORISSA,

KERALA,

TAMILNADU, BENGAL, ANDHRA

PRADESH, KARNATAKA.
 INVENTORY : FRESH FRUITS AND VEGETABLES,
STAPLES, GROCERIES,

FMCG’s, MILK ETC.

TRANSPORTATION : “RELOGISTICS “ , 2000 CRORE RELIANCE

COMPANY..

. TATA 407, TATA 409, TATA 909 AND

COLD TRUCKS.

USE THIRD PARTY LOGISTICS ALSO

INFORMATION : ADVANCED STORES WITH UPGRADED

SOFTWARES.

SOURCING : NEARBY VILLAGES OF ABOVE

MENTIONED

PROCESSING CENTERS + FEW INHOUSE

LABELS + KNOWN SUPPLIERS.

PRICING : PROCUREMENT FROM FARMER’S HAS

GIVEN

RELIANCE COMPETITIVE EDGE OVER THE

OTHER RETAILERS.

Reliance plans to invest in excess of Rs 25000

crores in the next 4 years in their retail
division. The company already has in excess
of 560 reliance fresh outlets across the
country. These stores sell fresh fruits and
vegetables, staples, groceries, fresh juice bars
and dairy products.
A typical Reliance Fresh store is approximately
3000-4000 square. feet and caters to a
catchment area of 1-2 km.

Post launch, in a dramatic shift in its

positioning and mainly due to the
circumstances prevaling in UP, West Bengal
and Orissa, it was mentioned recently in news
Dailies that, Reliance Retail is moving out of
stocking fruits and vegetables. Reliance Retail
has decided to minimise its exposure in the
fruit and vegetable business and position
Reliance Fresh as a pure play super market
focusing on categories like food, FMCG, home,
consumer durables, IT and wellness , with
food accounting for the bulk of the business.
The company may not stock fruit and
vegetables in some states, Orissa being one
of them. Though Reliance Fresh is not exiting
the fruit and vegetable business altogether, it
has decided not to compete with local
vendors partly due to political reasons, and
partly due to its inability to create a robust
supply chain. This is quite different from what
the firm had originally planned.
When the first Reliance Fresh store opened in
Hyderabad last October, not only did the
company said the store’s main focus would be
fresh produce like fruits and vegetables at a
much lower price, but also spoke at length
about its “farm-to-fork’’ theory. The idea the
company spoke about was to source from
farmers and sell directly to the consumer
removing middlemen out of the way.
Reliance Fresh, Reliance Mart, Reliance Digital,
Reliance Trendz, Reliance Footprint, Reliance
Wellness, Reliance Jewels, Reliance Timeout
and Reliance Super are various formats that
Reliance has rolled out.
In addition, Reliance Retail has entered into an
alliance with Apple for setting up a chain of
Apple Specialty Stores branded as iStore,
starting with Bangalore.
Indian Retail Industry
Introduction
India’s GDP growth of 9.4 per cent in 2006-07
is the highest posted for over 18 years,
reflecting the booming economy of the
country. Growing in tandem with the economy
is the Indian retail sector. The sector is on a
high growth trajectory and is expected to
grow by more than 27 per cent over the next
5 to 6 years. Retail is one of India’s largest
industries, contributing to about 10 per cent
of the GDP and providing employment to 8
per cent of the nation’s workforce. Indian
retail business promises to be one of the core
sectors of the
Indian economy, with organized retail sector
estimated to grow by 400 per cent of its
current size by 2007-08.
The growth and potential of the sector is
being widely acknowledged both in the
domestic as well as international forums. India
topped AT Kearney’s Global Retail
Development Index 2007 for the third
consecutive year, retaining its position in the
global market as the most preferred retail
destination amongst emerging markets.
For the fifth time, India also topped the Global
Consumer
Confidence Index June – 2007 conducted twice
a year by The Nielsen Company. Indians were
judged the world’s most optimistic
consumers, with large sections of the
population considering “now” a good time to
spend. Indian consumers were also found to
be bullish about their personal finances over
the next 12 months.
The economics of Indian consumerism is
buoyant, with India ranking as the fourth
largest economy in terms of Purchasing Power
Parity (PPP), next only to United States, Japan
and China. India is expected to outpace Japan
by the year 2010 to become world’s third
largest economy. With 54 per cent of the
Indians aged below 25, the young Indian
consumer is buying big to look good and feel
good.
The India Retail Industry is the largest among
all the industries, accounting for over 10 per
cent of the country’s GDP and around 8 per
cent of the employment. The Retail Industry in
India has come forth as one of the most
dynamic and fast paced industries with
several players entering the market. But all of
them have not yet tasted success because of
the heavy initial investments that are required
to break even with other companies and
compete with them. The India Retail Industry
is gradually inching its way towards becoming
the next boom industry.
The total concept and idea of shopping has
undergone an attention drawing change in
terms of format and consumer buying
behaviour, ushering in a revolution in
shopping in India. Modern retailing has
entered into the Retail market in India as is
observed in the form of bustling shopping
centres, multi-storied malls and the huge
complexes that offer shopping, entertainment
and food all under one roof.

A large young working population with median

age of 24 years, nuclear families in urban
areas, along with increasing workingwomen
population and emerging opportunities in the
services sector are going to be the key factors
in the growth of the organized Retail sector in
India. The growth pattern in organized
retailing and in the consumption made by the
Indian population will follow a rising graph
helping the newer businessmen to enter the
India Retail Industry.

In India the vast middle class and its almost

untapped retail industry are the key attractive
forces for global retail giants wanting to enter
into newer markets, which in turn will help the
India Retail Industry to grow faster. Indian
retail is expected to grow 25 per cent
annually. Modern retail in India could be worth
US$ 175-200 billion by 2016. The Food Retail
Industry in India dominates the shopping
basket. The Mobile phone Retail Industry in
India is already a US$ 16.7 billion business,
growing at over 20 per cent per year. The
future of the India Retail Industry looks
promising with the growing of the market,
with the government policies becoming more
favourable and the emerging technologies
facilitating operations.
Indian Retail Scene
India is the country having the most
unorganized retail market. Traditionally it is a
familys livelihood, with their shop in the front
and house at the back, while they run the
retail business. More than 99% retailers’
function in less than 500 square feet of
shopping space. Global retail consultants KSA
Technopak have estimated that organized
retailing in India is expected to touch Rs
35,000 crore in the year 2005-06. The Indian
retail sector is estimated at around Rs
900,000 crore, of which the organized sector
accounts for a mere 2 per cent indicating a
huge potential market opportunity that is
lying in the waiting for the consumer-savvy
organized retailer.

Purchasing power of Indian urban consumer is

growing and branded merchandise in
categories like Apparels, Cosmetics, Shoes,
Watches, Beverages, Food and even Jewellery,
are slowly becoming lifestyle products that
are widely accepted by the urban Indian
consumer. Indian retailers need to advantage
of this growth and aiming to grow, diversify
and introduce new formats have to pay more
attention to the brand building process. The
emphasis here is on retail as a brand rather
than retailers selling brands. The focus should
be on branding the retail business itself. In
their preparation to face fierce competitive
pressure, Indian retailers must come to
recognize the value of building their own
stores as brands to reinforce their marketing
positioning, to communicate quality as well as
value for money. Sustainable competitive
advantage will be dependent on translating
core values combining products, image and
reputation into a coherent retail brand
strategy.
There is no doubt that the Indian retail scene
is booming. A number of large corporate
houses Tatas’, Rahejas’, Piramals’, Goenkas’
have already made their foray into this arena,
with beauty and health stores, supermarkets,
self-service music stores, newage book stores,
every-day-low-price stores, computers and
peripherals stores, office equipment stores
and home/building construction stores. Today
the organized players have attacked every
retail category. The Indian retail scene has
witnessed too many players in too short a
time, crowding several categories without
looking at their core competencies, or having
a well thought out branding strategy.
STRATEGIES, TRENDS AND
OPPORTUNITIES
Retailing in India is gradually inching its way
toward becoming the next boom industry. The
whole concept of shopping has altered in
terms of format and consumer buying
behaviour, ushering in a revolution in
shopping in India. Modern retail has entered
India as seen in sprawling shopping centres,
multi-storied malls and huge complexes offer
shopping, entertainment and food all under
one roof. The Indian retailing sector is at an
inflexion point where the growth of organized
retailing and growth in the consumption by
the Indian population is going to take a higher
growth trajectory. The Indian population is
witnessing a significant change in its
demographics. A large young working
population with median age of 24 years,
nuclear families in urban areas, along with
increasing workingwomen population and
emerging opportunities in the services sector
are going to be the key growth drivers of the
organized retail sector in India.
GROWTH OF RETAIL SECTOR IN INDIA

Retail and real estate are the two booming

sectors of India in the present times. And if
industry experts are to be believed, the
prospects of both the sectors are mutually
dependent on each other. Retail, one of
India’s largest industries, has presently
emerged as one of the most dynamic and fast
paced industries of our times with several
players entering the market. Accounting for
over 10 per cent of the country’s GDP and
around eight per cent of the employment
retailing in India is gradually inching its way
toward becoming the next boom industry.
As the contemporary retail sector in India is
reflected in sprawling shopping centers,
multiplex- malls and huge complexes offer
shopping, entertainment and food all under
one roof, the concept of shopping has altered
in terms of format and consumer buying
behavior, ushering in a revolution in shopping
in India. This has also contributed to large-
scale investments in the real estate sector
with major national and global players
investing in developing the infrastructure and
construction of the retailing business. The
trends that are driving the growth of the retail
sector in India are
Low share of organized retailing
Falling real estate prices
Increase in disposable income and customer
aspiration
Increase in expenditure for luxury items
(CHART)
Another credible factor in the prospects of the
retail sector in India is the increase in the
young working population. In India, hefty pay
packets, nuclear families in urban areas, along
with increasing working-women population
and emerging opportunities in the services
sector. These key factors have been the
growth drivers of the organized retail sector in
India which now boast of retailing almost all
the preferences of life - Apparel &
Accessories, Appliances, Electronics,
Cosmetics and Toiletries, Home & Office
Products, Travel and Leisure and many more.
With this the retail sector in India is witnessing
rejuvenation as traditional markets make way
for new formats such as departmental stores,
hypermarkets, supermarkets and specialty
stores.

The retailing configuration in India is fast

developing as shopping malls are increasingly
becoming familiar in large cities. When it
comes to development of retail space
specially the malls, the Tier II cities are no
longer behind in the race. If development
plans till 2007 is studied it shows the
projection of 220 shopping malls, with 139
malls in metros and the remaining 81 in the
Tier II cities. The government of states like
Delhi and National Capital Region (NCR) are
very upbeat about permitting the use of land
for commercial development thus increasing
the availability of land for retail space; thus
making NCR render to 50% of the malls in
India.

India is being seen as a potential goldmine for

retail investors from over the world and latest
research has rated India as the top
destination for retailers for an attractive
emerging retail market. India’s vast middle
class and its almost untapped retail industry
are key attractions for global retail giants
wanting to enter newer markets. Even though
India has well over 5 million retail outlets, the
country sorely lacks anything that can
resemble a retailing industry in the modern
sense of the term. This presents international
retailing specialists with a great opportunity.
The organized retail sector is expected to
grow stronger than GDP growth in the next
five years driven by changing lifestyles,
burgeoning income and favourable
demographic outline.
INDUSTRY EVOLUTION
Traditionally retailing in India can be traced to
the emergence of the neighborhood Kirana
stores catering to the convenience of the
consumers
Era of government support for rural retail:
Indigenous franchise model of store chains
run by Khadi & Village Industries Commission
1980s experienced slow change as India
began to open up economy.
Textiles sector with companies like Bombay
Dyeing, Raymond's, S Kumar's and Grasim
first saw the emergence of retail chains
Later Titan successfully created an organized
retailing concept and established a series of
showrooms for its premium watches
The latter half of the 1990s saw a fresh wave
of entrants with a shift from Manufactures to
Pure Retailers.
For e.g. Food World, Subhiksha and Nilgiris in
food and FMCG; Planet M and Music World in
music; Crossword and Fountainhead in books.
Post 1995 onwards saw an emergence of
shopping centers
Mainly in urban areas, with facilities like car
parking
Targeted to provide a complete destination
experience for all segments of society
Emergence of hyper and super markets trying
to provide customer with 3 V’s - Value, Variety
and Volume
Expanding target consumer segment: The
Sachet revolution - example of reaching to the
bottom of the pyramid.
At year end of 2000 the size of the Indian
organized retail industry is estimated at Rs.
13,000 crore

RETAILING FORMAT IN INDIA

Malls:
The largest form of organized retailing today.
Located mainly in metro cities, in proximity to
urban outskirts, they range from 60,000 sq ft
to 7, 00,000 sq ft and above. They lend an
ideal shopping experience with an
amalgamation of product, service and
entertainment, all under a common roof.
Examples include Shoppers Stop, Pyramid,
and Pantaloon.
Specialty Stores:

Chains such as the Bangalore based Kids

Kemp, the Mumbai books retailer Crossword,
RPG's Music World and the Times Group's
music chain Planet M, are focusing on specific
market segments and have established
themselves strongly in their sectors.
Discount Stores:
As the name suggests, discount stores or
factory outlets, offer discounts on the MRP
through selling in bulk reaching economies of
scale or excess stock left over at the season.
The product category can range from a
variety of perishable/ non-perishable goods.
Department Stores:

Large stores ranging from 20000-50000 sq. ft,

catering to a variety of consumer needs.
Further classified into localized departments
such as clothing, toys, home, groceries etc.

Departmental Stores are expected to take

over the apparel business from exclusive
brand showrooms. Among these, the biggest
success is K Raheja's Shoppers Stop, which
started in Mumbai and now has more than
seven large stores (over 30,000 sq. ft) across
India and even has its own in store brand for
clothes called Stop.

Hyper marts/Supermarkets:

Large self-service outlets, catering to varied

shopper needs are termed as Supermarkets.
These are located in or near residential high
streets. These stores today contribute to 30%
of all food & grocery organized retail sales.
Super Markets can further be classified in to
mini supermarkets typically 1,000 sq ft to
2,000 sq ft and large supermarkets ranging
from of 3,500 sq ft to 5,000 sq ft. having a
strong focus on food & grocery and personal
sales.

Convenience Stores:

These are relatively small stores 400-2,000

sq. feet located near residential areas. They
stock a limited range of high-turnover
convenience products and are usually open
for extended periods during the day, seven
days a week. Prices are slightly higher due to
the convenience premium

MBO’s:

Multi Brand outlets, also known as Category

Killers, offer several brands across a single
product category. These usually do well in
busy market places and Metros.

INDIA’S NUMBER OF DOMESTIC GROCERY

CHAINS AND EARLY FOREIGN ENTRANTS

Retailing in India is evolving rapidly, with

consumer spending growing by
unprecedented rates and with increasing
number of global players investing in this
sector. Organised retail in India is undergoing
a metamorphosis and is expected to scale up
to meet global standards over the next five
years.
India’s retail market has experienced
enormous growth over the past decade, more
than doubling in size to US$ 311.7 billion in
2005-06. The market was estimated at US$
1.1 trillion (in PPP terms) in 2005-06. The
most significant period of growth for the
sector was between years 2000 and 2006,
when the sector revenues increased by about
93.5 per cent translating to an average
annual growth of 13.3 per cent. The sector’s
growth was partly a reflection of the
impressive Indian economic growth and
overall rise in income levels of consumers.
Even the introduction of Value Added Tax
(“VAT”) in April 2005 has not severely
impacted consumer demand for retail goods.
Greater exposure to western products and
lifestyles has helped drive consumerism. The
sector also benefited considerably by the
rising popularity of satellite television since
the early 1990s, which provided a highly
effective mass marketing route, reaching out
to the large Indian consumer base.
Traditional and modern Retailing
Traditional retailing continues to be the
backbone of the
Indian retail industry, with
traditional/unorganized retailing contributing
to over 95 per cent of total retail revenues.
The quintessential mom-and-pop retailing
outlets or the cornerstore formats constitute a
major part of Indian retail store formats. Over
12 million small and medium retail outlets
exist in India, the highest in any country. More
than 80 per cent of these are run as small
family businesses. Prevalence of traditional
retailing is highly pronounced in small towns
and cities with primary presence of
neighborhood “kirana” stores, push-cart
vendors, “melas” and “mandis”. Organized
formats are only in the initial stages of
adoption in these regions. Leading retail
players in the industry are beginning to
explore these markets and the rural
consumers are slowly beginning to embrace
the newer organized retail formats.
Modern/Organized retailing is growing at an
aggressive pace in urban India, fuelled by
bourgeoning economic activity. Organized
retail revenues are expected to increase from
an estimated US$ 12.9 billion per annum in
2005-06 to more than US$ 43 billion by 2009-
10. The sector is predicted to grow by 400 per
cent, in value terms, by 2007-08. A large
number of domestic and international players
are setting up base and expanding their
business with newer organized retail formats
and intense competition driving innovation in
formats.

Growth across segments

Retail sector in India is primarily categorized
by the type of products retailed, as opposed
to the different retail formats in operation.
The Food and Beverages vertical accounts for
the largest share of revenues at 74 per cent of
the total retail market. This category has the
highest consumer demand across all income
levels and various retail formats.
The Indian consumer behavior of preferring
proximity to retail formats is highly
pronounced in this sector, with food, grocery
and allied products largely sourced from the
local stores or push-cart vendors.
Apparels and consumer durables are the
fastest growing verticals in the retail sector.
Mobile phone as a product category has
witnessed the highest growth in consumer
demand amongst all retail product offerings,
with increasing penetration of
telecommunications in towns and villages.
The Telecommunications sector has been
adding on an average 5 million new users
every month.
The other product categories are gaining
traction predominantly in the urban areas and
emerging cities, with increasing average
income and spending power of young urban
India.

Organized retail in India

Organized retail clocked revenues of US$

12,927 million, compared to total retail sales
estimated at US$ 311,731 million in 2005-06.
The apparel industry contributed to the
largest share of the organized retail pie, with
revenues of US$ 4,756 million, owing to the
rapidly rising number of malls and
introduction of several domestic and
international apparel brands in the country.
The Food and Beverages segment recorded
the highest growth over 2004-05, with the
proliferation of Organized retail clocked
revenues of US$ 12,927 million, compared to
total retail sales estimated at US$ 311,731
million in 2005-06. The apparel industry
contributed to the largest share of the
organized retail pie, with revenues of US$
4,756 million, owing to the rapidly rising
number of malls and introduction of several
domestic and international apparel brands in
the country. The Food and Beverages segment
recorded the highest growth over 2004-05,
with the proliferation of supermarkets,
hypermarkets and the entry of major players
like Reliance Fresh (promoted by Reliance
Retail Ltd). This segment is poised to gain
traction, with several new players planning
their entry and the existing players expanding
their business in this segment at a rapid pace.
The Home Décor segment followed suit
growing at 18 per cent, with a boom in the
real estate and housing sector. Penetration of
organized retail was at 4.15 per cent in 2005-
06, an increase from the 3 per cent estimated
for 2004-05, and is projected to increase to
9.52 per cent in
2009-10, with revenues from organized retail
expected to touch US$ 43,829 million in 2009-
10.
Footwear segment recorded the highest
penetration of 32.84 per cent, primarily due to
the presence of well established players like
Bata, Liberty and Paragon. These players have
been in the market for over three decades,
have good brand recall and a well established
distribution network penetrating both rural
and urban areas.

Consumer durables segment and the books

and music segment also witnessed continued
growth. Entry of players like Crossword and
Music world has given the segment strong
impetus.
Apparel is one of the fastest growing verticals,
with the highest number of domestic and
foreign brands mushrooming in the market,
and increasing consumer willingness to pay
for brand and quality of products.

RECENT TRENDS
Retailing in India is witnessing a huge
revamping exercise as can be seen in the
graph
India is rated the fifth most attractive
emerging retail market: a potential goldmine.
Estimated to be US$ 200 billion, of which
organized retailing (i.e. modern trade) makes
up 3 percent or US$ 6.4 billion
As per a report by KPMG the annual growth of
department stores is estimated at 24%
Ranked second in a Global Retail
Development Index of 30 developing
countries drawn up by AT Kearney.
Multiple drivers leading to a consumption
boom:
Favorable demographics
Growth in income
Increasing population of women
Raising aspirations: Value added goods sales
Food and apparel retailing key drivers of
growth
Organized retailing in India has been largely
an urban
Phenomenon with affluent classes and
growing number of double-income
households.
More successful in cities in the south and west
of India. Reasons range from differences in
consumer buying behavior to cost of real
estate and taxation laws.
Rural markets emerging as a huge opportunity
for retailers reflected in the share of the rural
market across most categories of
consumption
ITC is experimenting with retailing through its
e-Choupal and Choupal Sagar rural
hypermarkets.
HLL is using its Project Shakti initiative
leveraging women self-help groups to explore
the rural market.
Mahamaza is leveraging technology and
network marketing concepts to act as an
aggregator and serve the rural markets.
IT is a tool that has been used by retailers
ranging from Amazon.com to eBay to radically
change buying behavior across the globe.
E-tailing slowly making its presence felt.
Retail sales India
CHALLENGES & OPPORTUNITIES

Retailing has seen such a transformation over

the past decade that its very definition has
undergone a sea change. No longer can a
manufacturer rely on sales to take place by
ensuring mere availability of his product.
Today, retailing is about so much more than
mere merchandising. It’s about casting
customers in a story, reflecting their desires
and aspirations, and forging long-lasting
relationships. As the Indian consumer evolves
they expect more and more at each and every
time when they steps into a store. Retail
today has changed from selling a product or a
service to selling a hope, an aspiration and
above all an experience that a consumer
would like to repeat.

For manufacturers and service providers the

emerging opportunities in urban markets
seem to lie in capturing and delivering better
value to the customers through retail. For
instance, in Chennai CavinKare’s LimeLite,
Marico’s Kaya Skin Clinic and Apollo Hospital’s
Apollo Pharmacies are examples, to name a
few, where manufacturers/service providers
combine their own manufactured products
and services with those of others to generate
value hitherto unknown. The last mile connect
seems to be increasingly lively and
experiential. Also, manufacturers and service
providers face an exploding rural market yet
only marginally tapped due to difficulties in
rural retailing. Only innovative concepts and
models may survive the test of time and
investments.
However, manufacturers and service
providers will also increasingly face a host of
specialist retailers, who are characterized by
use of modern management techniques,
backed with seemingly unlimited financial
resources. Organized retail appears inevitable.
Retailing in India is currently estimated to be
a US$ 200 billion industry, of which organized
retailing makes up a paltry 3 percent or US$
6.4 billion. By 2010, organized retail is
projected to reach US$ 23 billion. For retail
industry in India, things have never looked
better and brighter. Challenges to the
manufacturers and service providers would
abound when market power shifts to
organized retail.
The retail sector has played a phenomenal
role throughout the world in increasing
productivity of consumer goods and services.
It is also the second largest industry in US in
terms of numbers of employees and
establishments. There is no denying the fact
that most of the developed economies are
very much relying on their retail sector as a
locomotive of growth. The India Retail Industry
is the largest among all the industries,
accounting for over 10 per cent of the
country’s GDP and around 8 per cent of the
employment. The Retail Industry in India has
come forth as one of the most dynamic and
fast paced industries with several players
entering the market. But all of them have not
yet tasted success because of the heavy
initial investments that are required to break
even with other companies and compete with
them. The India Retail Industry is gradually
inching its way towards becoming the next
boom industry.
Key Players in the Indian Retail Sector:
The untapped scope of retailing has attracted
superstores like Wal-Mart into India, leaving
behind the kiranas that served us for years.
Such companies are basically IT based. The
other important participants in the Indian
Retail sector are Bata, Big Bazaar, Pantaloons,
Archies, Cafe Coffee Day, landmark, Khadims,
Crossword, to name a few.

Retailing in India: a forecast:

Future of organized retail in India looks bright.

According to recent researches it is projected
to grow at a rate of about 37% in 2007 and at
a rate of 42% in 2008. It will capture a share
of 10% of the total retailing by the end of
2010.

According to the Union Minister of Commerce

& Industry, Shri Kamal Nath, the organized
retail sector is expected to grow to a value of
Rs. 2,00,000 crore (US$45 billion) and may
generate 10 to15 million jobs in next 5 years.
This can happen in two forms- 2.5 million of
these people may be associated directly with
retailing and the rest 10 million people may
be gainfully employed in related sectors that
will be pulled up through the strong forward
and backward linkage effects.

However to compete in this sector one needs

to have up-to-date market information for
planning and decision making. The second
most important requirement is to manage
costs widely in order to earn at least normal
profits in face of stiff competition.
Policy and regulatory environment
The Government is progressively undertaking
reforms and liberalising the retail sector;
thereby attracting significant foreign
investments. The regulatory and supervisory
policies are being reshaped and reoriented to
meet the new challenges and opportunities in
this sector.
To facilitate easier flow of Foreign Direct
Investments (“FDI”) inflow, instead of having
to seek Foreign Investment Promotion Board
(“FIPB”) approval, FDI up to 100 per cent is
allowed under the automatic route for cash
and carry wholesale trading and export
trading. FDI up to 51 per cent is allowed, with
prior Government approval for retail trade in
‘Single Brand’ products with the objective of
attracting investment, technology and global
best practices and catering to the demand for
such branded goods in India. This implies that
foreign companies can now sell goods sold
globally under a single brand, such as in the
case of Reebok, Nokia and Adidas. However,
retailing of multiple brands, even if the goods
are produced by the same manufacturer, is
presently not allowed. Relaxation of FDI
restrictions are being vigorously pursued by
the business and trade coalitions and are
expected to fall in place over the next 3-5
years.
The most common channels for entry of
foreign retailers are the strategic licence
agreements, franchising, distribution,
manufacturing, joint ventures and cash and
carry wholesale trading.

Strategic licence agreements

This route involves the foreign company
entering into a licensing agreement with a
domestic retailer or partnering with Indian
promoter owned companies in the Middle East
(UAE) or South East Asian countries
(Singapore, Malaysia, Thailand, Indonesia).
Franchising
This is a widely taken entry route, with many
international brands setting up shop via this
provision. The franchising routes operable in
India are:
• Unit franchisee: Franchisee is granted
rights to operate a
single business unit
• Multiple franchisee: Individual unit
franchises are given
to multiple outlets, a route primarily used by
domestic brands
• Master franchisee: Rights are granted for an
entire territory to the master franchisee and
the master franchisee can in turn grant unit
and multiple franchisees in that territory

• Regional franchisee: This route is similar to

that of the master franchisee, but applicable
on a larger scale The master and regional
franchisee routes are the most preferred and
the oft-adopted routes of entry into India by
the international retailers.
Cash-and-carry wholesale trading
100 per cent FDI is allowed in wholesale
trading which involves building a large
distribution infrastructure to assist local
retailers and manufacturers.
Joint ventures
International firms can enter into agreements
with domestic players, and set up base in
India. The share of the multinational is
restricted to 49 per cent in this route.

Manufacturing
International retailers can set-up
manufacturing units for their products in
India. Entry through this route entails the
company the rights to retail the products in
India through individual retailing outlets.
Distribution
An international company can set up
distribution offices in India and supply
products to the local retailers. Franchisee
outlets can also be set up in this route. The
labour laws in India are under the scanner for
higher liberalisation, with the Government
permitting flexibilities in the rules in emerging
retail hubs like Bangalore and Hyderabad.
Instituted laws like restriction on working
hours, mandatory closure of the store once a
week are being modified to suit the modern
retailing demands and necessities, without
adversely impacting the labour benefits.
Efforts are also being undertaken by the
Government to remove impediments being
posed by licensing and clearance mechanisms
in India; with the aim of introducing a single-
window clearance mechanism. This would
reduce the entry and establishment timelines
for new players in the market and facilitate
easy procedures in issuance of necessary
approvals.
The Government is expected to take a
calibrated approach in land and rent reforms
to improve the real estate regulatory
environment and facilitate easy access to
retail space for international investors. The
Government is releasing large tracts of
unused land for retail development in the
Mumbai and NCR regions. This is soon to be
followed by other state governments, with the
Governments benefiting from the access to
impressive revenues from land.
Key Trends and drivers

Maturing Metros
National Capital Region (NCR)
NCR comprises of National Capital Territory
(NCT), Faridabad and Gurgaon of Haryana and
Noida and Ghaziabad of Uttar Pradesh. NCR
contributed to US$ 16,342 million of retail
revenues in 2005-06, and is projected to open
doors to markets worth US$ 19,522 million by
2010-11. Delhi, the fashion capital of India
and home to the highest number of rich and
super-rich households, contributes US$
12,683 million to the retail revenues. The total
number of households in Delhi stood at 2.8
million in 2005-06, with more than 7,000
households belonging to the rich and super-
rich category, with incomes higher than US$
243,902 per annum. This is the highest for
any city across the country.

Mumbai
A potpourri of consumers, this city contributes
to US$ 10,195 million of total retail revenue.
The hub of Indian cinema and home to diverse
income categories; the middle class and the
rich account for 47 per cent and 30 per cent
of retail revenues of the city.
Each category of population has a significant
share in the retail pie, with the city offering
opportunities for a spectrum of retail formats,
from value segment to the lifestyle segment.
Mumbai is home to a large percentage of the
rich and super-rich households, with
businessmen, politicians and bollywood
personalities, having their base in the city.
This city is projected to offer a retail potential
of US$ 14,927 million by 2010-11.
The regions of NCR and Mumbai dominate the
organised retail scenario in India. The
combined contribution of these metros is
estimated to reach 40 per cent by 2007-08.
These cities which are also referred to as the
“Maturing Metros”, have been projected to
achieve world’s 2nd and 3rd largest city
status by 2015 and have the highest number
of malls and modern retail format stores in
operation and many more in the pipeline.
Most pan-India retailers have multiple retail
outlets present in these cities. These cities
also act as launch pads for the new entrants.
Lastly, these maturing metros are the hub of
the ‘luxury-retailing’ in India.
Metros on the Growth Path
Metros of Bangalore, Hyderabad, Chennai and
Kolkatta are growing at an exceptional rate,
with the retail buzz in these cities becoming
more pronounced by the day.
These cities contributed to US$ 15,511 million
worth retail revenues in 2005-06, projected to
touch US$ 25,610 million by 2010-11.
With the growth in the IT/ITeS sector and other
sunrise sectors like biotechnology, hospitality
etc. concentrated in these cities, the metros
have experienced exponential growth over
the past few years, and are expected to
demonstrate robust economic performance in
the coming years.
Bangalore and Hyderabad have low
penetration of underprivileged households,
with the consuming middle class forming the
largest share of population. Luxury retailing
has found entry and tremendous response in
these markets, with increasing number of rich
and super rich households in these cities.
The middle class households contribute to
almost half the retail activity in these metros,
with lifestyle formats beginning to mushroom.
These cities are expected to witness a radical
transition in the migration of households
belonging to the lower income strata to the
higher income category, owing to the success
of the technology sector and other sunrise
sectors such as biotechnology and hospitality
industries. These cities have considerable
latent demand for branded products and offer
suitable opportunities for a variety of retail
offerings.
Most of the retail sector giants have a
footprint in these cities, with aggressive future
plans for expansion.

Metros-in-the-making
The emerging cities of Ahmedabad, Pune,
Kanpur, Nagpur, Surat, Ludhiana, Coimbatore,
Chandigarh, Lucknow, Kochi, Jaipur, Vadodara,
Vizag, Indore, Vijayawada, Trivandrum,
Bhopal, Nashik and Madurai contribute to US$
15,619 million worth total retail activity.
Organised retail penetration is lower than in
any of the metros, with traditional retail ruling
the market across these geographies.
These cities are less saturated than the
metros, but have greater spending power.
Middle class and lower middle class form
majority of the households, with more than
half the population falling in this category. The
combined retail potential of these cities is
expected to increase to US$ 23,563 million.
Underprivileged population is expected to
decrease by more than 30 per cent in cities of
Pune and Ahmedabad by 2010-11, with the
other smaller cities also following a similar
trend. Pune and Ahmedabad are the fastest
growing cities with thriving industry activity.
Investors from the IT/ITeS sector and the other
emerging sectors are eyeing these cities for
expansion. These two cities contributed to
US$ 3,854 million worth retail revenues in
2005-06, projected to increase to US$ 5,976
million by 2010-11. Pune has witnessed an
explosive increase in the mall space
availability in the recent years, with the
organised retail penetration substantially
increasing.
The cities, along with the other potential cities
as listed below, are set to take centre stage as
the future retailing hotspots, with significant
improvement in their infrastructure and
purchasing power.

The mall phenomenon

From the setting up of India’s first mall in
1999, there has been a steady proliferation of
malls, a trend specially pronounced in the
urban cities. Total number of malls was
estimated at 200 for 2005-06, projected to
increase to 600 by 2010-11.
With increasing number of malls, there is
increasing retailing space availability for
players, with malls further providing
incentives like lower rentals for anchor
tenants and greater consumer exposure. The
activity in the retail sector is further being
supported by the allowance of FDI in real
estate by the Government.
With impressive ratio of transactions to
customer footfalls ratio (conversion ratio)
across malls, the market trend promises a
positive outlook for the future. Mall
development activity is being pursued
aggressively across all the metros and the
high-growth cities, with significant
investments in the pipeline. The evolving
cosmopolitan population with rising
aspirations and growing incomes across the
country is the driving force increasing
domestic and international investments.
Changing face of Indian consumerism
Favourable demographics, combined with
increasing disposable incomes, are
progressively changing the face of Indian
consumerism. With the economy opening new
vistas of employment and with employers
offering attractive compensation packages
and perks, the pool of Indian skilled
professionals are boasting of higher
disposable incomes.
From frugal spending to frenzied shopping,
India’s swelling middle class is redefining
lifestyle patterns with adoption of western
values and growing brand consciousness. The
average household disposable income has
doubled since 1985, with analysts predicting a
similar trend for the next two decades.
The thriving services sector growth has
handed young India a bulging wallet and a
penchant for luxury products.
The new found freedom to shop at plush malls
and stores for expensive gadgets like mobile
phones and laptops has fuelled the growth of
organised retail in India.
The Indian consumer is gradually moving from
the local “kirana” shopping to “Mall Hopping”.
With a number of domestic and international
brands available in stores in metros and
smaller cities and with a wide range of
product offerings from food and grocery to
furniture and fixtures, the Indian consumer is
fast embracing modern retail.
With the country’s income pyramid changing
dramatically, there has been a definite shift
from the “saving” tendency to the “spending”
attitude. Increased consumer exposure to the
latest trends and brands driven by the mass
media is contributing to the soaring retail
revenues. There has been a marked increase
in the number of new entrants in the retail
sector with player revenues increasing across
all the retail segments.
Higher disposable incomes
Disposable incomes are on the rise with the
economy providing new avenues of
employment in IT/ITeS and other sunrise
sectors like biotechnology. The increase of per
capita income has been more pronounced in
the metros and the emerging cities, with a
progressive growth in the standard of living
with employers offering attractive
compensation packages and perquisites to
the pool of skilled Indian professionals.
National per capita income (NNP at factor
cost) stood at US$ 717 in 2006-07, an
increase of 11 per cent over 2005-06. Delhi,
the seat of Indian Government and the centre
of thriving economic activity has the highest
per capita income, mirroring the higher
standard of living.
Urban India’s disposable incomes are
ricocheting with favourable and conducive
economy and employment trends.
Increasing urbanization
India’s urban population is estimated at 286
million, constituting 27.8 per cent of the total
population of 1,029 million as on 2001. The
urban population is projected to increase to
468 million, constituting 33.4 per cent of the
total projected population of 1,400 million by
2010. With over 34 cities having a population
of over 1 million, this number is projected to
grow rapidly. Urban population has grown over
five times over the past five decades, with
India’s urban population being second largest
in the world, in numerical terms, next only to
China.
Increased subscription of credit cards in the
last 3-4 years indicates a definitive change in
the consumer habits of the Indian population.
The number of credit cards issued was at 16.6
million in 2005-06, growing at a compound
annual growth rate of 28 per cent in the last 6
years. The number of debit cards have
increased manifold and touched 53.7 million
by 2005-06. The growing acceptance of
plastic money across small and medium sized
stores and retail outlets has stimulated the
rapid growth in issuance of credit cards.
International retail giants are increasingly
choosing India as the target market, with
most of the global retail power-houses
exploring entry options into the country’s
retail market.
Wal-Mart has entered into a 50:50 Joint
Venture and Franchisee agreement with Bharti
Retail Ltd. and plans to set up its first cash-n-
carry outlet by 2007-08. It is anticipated that
the Starbucks – Pepsi Co. joint venture would
provide Indian market access to the world’s
largest coffee chain.
Carrefour, France’s retail major is set to
finalize its entry route to Indian retail sector.
Increasing technology adoption
With modern retail store formats growing
players are increasingly deploying advanced
Information Technology tools for managing
their supply chain, warehousing and logistics
requirements.
Retail sector constituted 8 per cent of the IT
export revenues in 2005-06. Apart from the
industry giants, the small scale retailers are
also embracing IT solutions to optimise their
operational efficiencies. Big league IT firms
like IBM India, Oracle and SAP are developing
solutions for smaller retailers’ requirements.
Metros on the growth lane
The growing disposable incomes, the
consuming class and the increasing standard
of living across these cities translate to
opportunities across all the retailing formats
and verticals. The mushrooming lifestyle
formats in these cities is stimulated by the
increasing exposure of consumer base to
international brands and willingness to spend
for quality. These cities most often also serve
as the test beds for any innovative store
formats.

Metros-in-the-making
Many metro retailers are expected to open
outlets in these cities to benefit from the
“First-Mover” advantage, and gain a foothold
in these cities. These cities provide ample
opportunities, especially for the food and
grocery formats, with lower lease rentals and
high availability of retail space, access to
farms and agricultural produce. Consuming
class accounts for over 60 per cent of the
total households, offering potential in the food
and grocery, consumer goods and apparel
verticals.
The ‘First -Mover’ advantage
More than 72 per cent of India’s population
resides in small towns and rural areas with
agri-produce retailing forming the largest
share of total retail pie in these regions,
offering immense potential for the food and
grocery vertical with customer preference
tuned towards value retailing. Players like
Reliance Retail, Aditya Birla Nuvo Group’s
Trinethra Supermarket etc. have aggressive
plans to tap opportunities in these emerging
cities in suitable formats.
Players who have already established their
presence in the top metros of the nation are
already planning their establishments in these
emerging cities and regions to gain the first-
mover advantage over other entrants.
Innovative formats
Formats like “Wedding Malls”, which are
unheard of in the far west are found to be
very successful in the Indian market. The
Wedding Malls for instance, stock the
complete range of wedding product offerings
from apparel to jewellery. The retail industry
players are successfully blending knowledge
from the experiences of the global retail
industry with the unique requirements and
preferences of the Indian consumer. Such
customisation to the latent needs of the
Indian consumer has brought about a great
deal of innovation in the product offerings as
well the retail formats in which they are being
sold. Khadi & Village Industries Commission is
set to roll out a string of swanky “Khadi
Plazas”, which would showcase the traditional
handloom textiles in a completely new form.
Over 7,000 existing outlets are to be beefed
up to cater to the changing tastes of the
young Indian consumer and thereby provide a
boost to the presently stagnant sales of the
khadi textiles. The latest addition to the list of
diverse retail formats are the “Village Malls”,
with the fair price shops being revamped to
cater to larger needs of local populations. The
Government of Gujarat has spearheaded one
such initiative with 512 “Village malls”
launched in the state with further plans for
508 such malls.
Emergence of India as the retail sourcing
hub
Riding on the back of a strong manufacturing
industry, India is fast emerging as an
important global sourcing hub for top
international brands India has had a continued
presence in the global scenario as one of the
leading exporters of apparels and textiles. The
expiry of the Multi Fiber Arrangement has
further widened the global markets for
apparel. Many international brands have
identified India as one of the important supply
centres for procurement of textiles and
apparels.
Wal-Mart’s sourcing operations was estimated
at US$ 1 billion, Tesco’s around US$ 100
million and Marks & Spencer around US$ 145
million from India for the year 2005-
06. Unilever sources major portion of their
fast moving consumer goods from its wholly
owned Indian subsidiary, Hindustan Unilever
Limited. Adidas, Next and Calvin Klein are
expected to follow suit, with Adidas opening
its first office in Bangalore.
Online retailing
The ‘Click-to-buy’ phenomenon is fast
catching up in India, with increase in number
of broadband and dial-up internet
connections, limited personal time for
shopping, increased use of plastic money and
large base of young population that spends a
considerable time online.
The stated factors are facilitating rapid growth
of online shopping with the industry players
scaling up to meet the consumer
requirements. Most retailers are developing
and maintaining their own online sale portals
for easy consumer access, facilitating online
purchase of merchandise. Tata
Indicom’s i-choose.in and G&B’s
godrejlifespace.com are good examples of this
trend. Players like Rediff.com, eBay.in,
Indiatimes.com were some of the early
entrants in the Indian online retail space,
clocking impressive revenues through online
transactions.
Some of the more recent players to enter this
niche market include Pantaloons Retail India
Ltd., through its Futurebazaar.com venture.
Many smaller retail portals are also thriving on
the internet, meeting the niche Indian
consumer requirements such as ethnic
apparel, handicrafts and jewellery. Demand
for these portals, which has been primarily
driven by the non-resident Indians, is gaining
popularity on the Indian soil as well, with the
young urban Indian consumer’s increasing
exposure to the virtual world of internet. With
value-added services like cash-on-delivery to
facilitate online transactions by consumers
without credit/ debit card, unique bidding
schemes etc, e-commerce is fast gaining
acceptance in India.
Rural retailing
Rural retailing constitutes more than 95 per
cent of total retail revenues, with more than
70 per cent of India’s population concentrated
in the rural areas. Rural hypermarkets are
growing at a blistering pace meeting the
unique requirements of the rural consumer.
The range of services provided by the rural
retailers extends from creating a platform to
buy and sell farm produce, to banking
services, to restaurants etc.
One of the key players in the rural retail
segment is ITC with its Choupal Saagar
initiative. ITC has 14 outlets in operation
presently and plans to increase the number to
700 over the next 7-10 years. ITC’s Choupal
Saagar retails products and also acts as a
procurement hub for ITC’s e-choupals where
farmers are offered better rates for their
agriculture produce, compared with the
prevalent market rates for the same.
Other examples of players and their services
in the rural retail segment are DSCL’s Hariyali
Kisan Bazaar and Indian Oil Corporation’s
Kisan Seva Kendra. DSCL’s Hariyali Kisan
Bazaar has over 70 outlets presently and the
company proposes to operate a total of 200
outlets over the next 12 months. The outlets
provide a spectrum of offerings including
agronomist-consultations, agri-inputs, and
financial services, apart from the conventional
retailing services.
Indian Oil Corporation’s Kisan Seva Kendra
offerings extend over fuel, agri-produce, fast
moving consumer goods and other value
added services. The company has a network
of over 1400 outlets presently. Reliance Retail
andPantaloon Retail India Ltd. are expected to
undertake more ventures to capture the vast
untapped potential in the rural investors are
actively pursuing an entry route into India for
opportunities in the luxury segment.
Delhi and Mumbai are the prime contributors
to the luxury retail revenues and have the
highest density of luxury brand outlets in the
country. However, currently the location of
these outlets is primarily limited to five-star
hotel mall spaces, with limited footfalls and
consumer exposure.
Industry players have aggressive expansion
plans in the pipeline, with investor confidence
reinforced by the booming sales in the luxury
segment. The two Louis Vuitton stores in
Mumbai and Delhi averaged monthly sales of
US$ 13 million in 2005-06. Hugo Boss is
expanding to other metros in the country,
encouraged by 30 per cent increase in its
India sales in the past year.
Cashing in on the transit Channels
Infrastructue sector in India is booming with
several capacity building measures being
undertaken aggressively by the central and
state governments. Construction of new
airports and development of metro rail
systems equalling premium global standards
is opening a new realm of retailing
opportunities in these transit points. Airports
Authority of India has commenced the up
gradation of 9 metro airports and 15 non-
metro airports, with emphasis also on
development of retail space in the airports.
The joint venture between Shopper’s Stop and
The Nuance Group AG has won the contract
for setting up duty-free and duty-paid retailing
outlets at the upcoming Bangalore and
Hyderabad International Airports. The Mass
Rapid Transit System, currently in operation in
Delhi, and under construction at other metro
cities like Bangalore and Hyderabad is also
expected to offer immense retail potential.
With the Delhi Metro Rail Corporation (DMRC)
inviting tenders for retail development in the
53 metro stations in operation and 79 stations
proposed to come up by 2010 in Delhi,
retailers are in the fray to exploit the
commercial potential of the retail space.
SEZ synergies
Special Economic Zones are government
driven initiatives attracting higher investment
into India, with about 154 Special Economic
Zones notified as on Oct 3, 2007 spread over
states and union territories of India . SEZs
offer ample retail opportunities, with a
percentage of the SEZ area earmarked for
retailing in the non-processing zone. The size
of the area in the retailing space is calculated
considering various parameters like the type
of SEZ, projected size of the residential
population in SEZ, and population in the
catchment area. IT/ITeS based SEZs offer
impressive retailing opportunities; the target
segment for such SEZs would be the urban
population with high-disposable incomes.

Tourism related opportunities

With tourists’ inflow increasing impressively
with each passing year, tourism holds the key
to a large retailing opportunity. In 2005-06,
approximately 4.45 million foreign tourists
arrived in India, registering a growth of 13.5
per cent over 2004-05.
Retailing of regional handicrafts and artifacts
holds an opportunity to capture the interest of
foreign tourists, given the rich and diverse
cultural heritage of India. The Indian Tourism
Board’s initiatives like Dilli Haat (a crafts
bazaar located in Delhi) retails the regional
crafts of various states, attracting a large
number of tourist footfalls. The concept is fast
gaining traction in other destinations in India
such as Jaipur, Mumbai and Hyderabad.

Reliance fresh retail stores

Reliance is gearing to be a major player in the
Indian Retail Revolution. They are
aggressively working on a pan-India network
of retail outlets in various formats. State-of-
the-art technology, a seamless supply chain
infrastructure and unmatched customer
experience, is what the initiative is all about.
Reliance Retail, the 100% subsidiary of
Reliance Industries, entered the retail foray
involving a minimum investment of Rs 25,000
crore. They plan to achieve a target of Rs 10-
billion revenue by 2010 employing 5,00,000
people. Hinting at an impending IPO, Reliance
retail, has renamed “Ranger Farm” to Reliance
Fresh Ltd, having hived the name of their
most popular format. The company’s name
will sound familiar to the investors once the
company plans to tap the capital markets by
facilitating brand recall.
The first of their format is Reliance Fresh, a
convenience store. These stores, range from
2,000 to 5,000 sq feet, provide customers
with a variety of fresh fruits, vegetables,
staple foods and other products in a world-
class ambience. They aggressively partnered
farmers by following a farm-to-folk strategy to
ensure fresh fruits and vegetables at
affordable prices. They chose Hyderabad to
test waters, as the city offers real estate at a
price that does not quite pinch. They selected
the cream crowd from pioneers in organized
retailers to head the organization. With such a
strong foothold, they ventured and their cash
counters clicked Rs 3.5 to Rs 6.5 lakh per day
and some outlets at prime locations are
averaging Rs 5 lakh per day.
Vegetable vendors and small retail shop-
owners are accusing Reliance of directly
hitting their business. Reliance Fresh will not
compete with local vendors due to political
reasons, and their inability to create a robust
supply chain. This is different from their
original plans. In states like Kerala, West
Bengal and Orissa, where they face
opposition, they have changed their retail
strategy by introducing large supermarkets,
where they will not trade in fruits and
vegetables. This is a critical factor in
assessing the impact of retail giants on the
unorganized segment. These Reliance Super
stores are large supermarkets with an area of
4,000-10,000 sq ft and will stock grocery,
stationary, pharmaceutical products and
apparel only.
In the foods business, they have consciously
segregated its vegetarian and non-vegetarian
items by having a separate brand - Delight for
the latter, with a separate distribution centre.
This may be a smart move as vegetarians are
sensitive to these issues. Seeing huge
opportunities, they have introduced own
brands like ‘Dairy Pure’ for milk, ghee, (the
only other major player being Amul) and
‘Reliance Select’ for other categories like
staples. This will optimize margins and
streamline supply chain because of bulk
procurement.
Reliance Fresh will also retail FMCG, home,
consumer durables, IT, pharmaceuticals, and
auto accessories, in different formats like
hypermarkets, supermarkets and discount
stores; however, food will be a major account.
Reliance Fresh, Reliance Mart, Reliance Digital,
Reliance Trendz (apparel), Reliance Footprint
(footwear, handbags, accessories), Reliance
Wellness (health), Reliance Jewels, Reliance
Timeout (books and gifts) and Reliance Super
(mini mart) are various formats that Reliance
has introduced.
There are 491 Reliance Fresh stores and this
figure is likely to touch 1,400 by the end of
next fiscal, currently spanning 2.2-million sq.
ft. In addition, Reliance Retail has entered into
an alliance with Apple for a chain of Apple
Specialty Stores branded as iStore, Bangalore.
With Marks and Spencer they are exploring
apparel, gourmet food and cafes. Diversifying
into various categories gives them an
opportunity to tap the growing segments with
immediate effect and further minimize
potential losses.
After the successful launch of consumer-good
super market Reliance Fresh and Consumer
Electronic and Digital, Reliance Mart
(1,50,000-3,00,00 sq. ft.) is the company's
hypermarket format. Around 23 percent of the
hypermarket floor space will be allocated to
garment brands, while the rest will stock
footwear, home goods and other products.
Luxury products will cover a floor space of 11
percent. Reliance Retail Limited (RRL)
announced a Joint Venture with Pearle Europe
for the launch of a chain of optical stores. This
will bring a world-class range of private label
frames, lenses and sunglasses. The optical
industry is on the brink of major growth and
has few organized players. Even the Tatas
have ventured in this segment.
Reliance has bought properties ranging from
Rs 1,000 per sq ft to as high as Rs 22,000 per
sq ft or more for their expansion. Reliance
now plans the franchisee route for further
expansion. Faced with expensive real estate
costs and delays in retail space acquisition,
the company is co-opting existing small
retailers in all formats other than Reliance
Fresh and Reliance Hypermarket. This is yet
another success formula for giant retailers.
Given their economies of scale and huge
resources, excellent business acumen, and
governmental support, the ever-strategic
Reliance Fresh has become an ambitious and
strong force to reckon with. They are able to
provide their merchandise at cheaper rates
than any other retailer, and have signed real
estate deals at breakneck speed for mega
projects across India. Reliance and Future
Group are the early birds at making a dent in
the large profit from the retail sector in India,
at excellent real estate rates for properties in
prime locations.
The retail sector employs around 40 million
people in India. Trade/retailing contributes to
14 percent of the service sector. The fact that
about 4 percent of the population is employed
in the unorganized retail trade makes it vital
to the socio- economic equilibrium in India.
Organized retailing and supply chain
integration displace labour in a labour-surplus
society. These chains negate a large and
growing proportion of added value away from
producers to companies. Bulk procurement
decreases producer’s margins. By controlling
both ends of the chain, the company can buy
cheap and sell dear, thus severely
undercutting the small retailers and creating a
monopolistic situation.
In addition, retail trade also has a sky
rocketing effect on the real estate prices.
Markets, wholesale sales and retail form one
axis of the economy, while productive sectors
like agriculture, textile, and industries form
the other. Ambitious MNCs are trying to
control both the axes of the economy on the
pretext of privatization, liberalization, and
globalization.
Therefore, Reliance Fresh along with other
domestic corporations have a moral standing.
Along with the support of the government,
they must pave a path for an efficient retail
market (no monopoly) in India and help
maintain a socio-economic equilibrium. This
will remain the biggest challenge for Reliance
who leads the way as a corporate citizen. The
growth must be through value creation. This
will help the Indian retail sector to remain
fresh in a hygienic and ethical market.

Strategic Issues in Retailing

Consumer purchases are often the results of

social influences and psychological factors.
Need to create marketing strategies to
increase store patronage.
Location:
Least flexible of strategic retailing issues and
one of the most important. Need to consider:
cost
location of the target market
kinds of products being sold
availability of public transportation
customer characteristics
competitors location
relative ease of traffic flow, incl. pedestrian
parking and major thorough fares
complementary stores
Handout...All Decked Out, Stores...
Discusses the recent developments in retail
location, stores moving back to urban areas. It
talks about why stores are doing this, which
stores are doing this and the implications of
(re) locating down-town.

Product Assortment:
Wide and shallow, deep and narrow?
Look at merchandising policies.
Handout...Target `Micromarkets' its way to
success...
Retail Positioning:
Competition is intense. Need to identify an
undeserved market segment and service the
segment distinguishing yourself from others in
the minds of consumers, IE position as high
price, high quality with many services, or
reasonable quality at "everyday low prices".
Atmospherics:
Describes the physical elements in a store's
design that appeals to consumers and
encourages consumers to buy. Warm, fresh,
functional exciting.
Exterior Atmospherics-store front, display
windows, important to attract new customers.
Surrounding businesses, look of the mall etc.
Interior Atmospherics-lighting, color, dressing
room facilities etc
Displays enhance and provide customers with
information.
Need to determine the atmosphere that your
target market seeks.

Store Image:
Mental picture that a retailer tries to project to
the consumer. To a consumer, it is a persons
attitude towards a store. Need to project an
image, a functional and psychological image
in consumer's minds that is acceptable to the
target market. Depends on the atmospherics,
reputation, number of services offered,
product mix, pricing etc.
FAO Schwartz "It is important to leave people
with a memorable image of your store. At
Disneyland, its Cinderellas castle. For us, its
the clock."

Relationship Marketing:
Handout...Department Stores target...
Importance of relationship marketing in order
to target your loyal customers.
Importance of Logistics
Handout...How Wal-Mart Outdid A Once Touted
Kmart in Discount Store Race.

10 Insider Tips for Retail Success

Location
Where you at? Choosing your location is the
most important step in making your dream of
owning a retail store come true. What good is
it if you have a great staff and awesome
merchandise but no customers? You should
choose a location that has a high traffic count.
A new retail store isn't going to have a
following unless it's a franchise with a well-
known name, [so if you're independent,] you'll
need all the help you can get. Ideally, you'll
want to be next to non-competitive retail
businesses that have steady clients; the
overflow from these businesses will drive your
walk-in traffic and bring in new business for
you immediately. If you're looking into a new
shopping plaza, you'll need to ask for the
demographics of the area. This will ensure
that you're not opening a high-end store in a
low-end part of town. Be aware of your
surroundings, and take your time choosing the
perfect location. Don't choose a location just
because it' close to your house.
Big brother. Mall management has a job to
do, and it's to make sure stores coming into
the mall or those already in the mall are
following all the guidelines and policies that
pertain to each individual lease. But
management should help new tenants
become more familiar with the mall because
malls are run by a strict set of rules, and
breaking one of the rules can break your
pocketbook. Opening late, for example, is
prohibited and requires a monetary fine to be
paid to the mall. Mall management teams are
very professional, and it's best to have done
your research before attempting a meeting or
negotiating with leasing managers.
Merchandise
Stocking your shelves. Selecting
merchandise for your store can be the most
time-consuming and expensive part of
opening a business. This duty shouldn't be
taken lightly! Before opening your store, you
should visit wholesale marts to get an idea of
the merchandise you'd like to carry. Decide
what your mark-up will be and what's
appropriate for your area. Choosing the
merchandise can be fun, but remember to
maintain a general theme and purpose for
your products. Discuss ideas with other
retailers at the mart, and ask the sales reps
for their ideas and suggestions. You'll find
most people are willing to help and discuss
their experiences with certain products. This
will help you decide and narrow down [your
choices to] products that will do well in your
store.
Keeping a theme. I maintain a theme in my
store by staying true to our name: Glamdora--
It's a Girl Thing. Customers know what to
expect when they come into our store: They
expect to see merchandise for girls--not many
stop in to see what we have for boys. Keeping
with our tagline, we include merchandise for
girls of all ages: nail files, gifts, room decor,
shoes, accessories. They're all chosen for their
colors and merchandised by theme. Our
stores are hot pink and lime green with zebra
and leopard accents. With that theme, I
choose merchandise that appropriately fits my
store. I choose the nail files in hot pink, gifts in
bright colors, room decor in zebra or leopard,
and so on. [Sticking] to your theme will help
you build loyal customers and create a unique
store in the process.
Stay current and stay true. Don't think you
know it all when it comes to trends. Keep up
with local as well as national trends. You
might see a particular look plastered all over
the TV or in fashion magazines, but know your
market. Will it sell in your store? Does it fit
your theme? And don't attempt to sell
anything that's way out of your normal buying
budget just because it's trendy. The best thing
to do is listen to your customers. Customers
will always let you know what they're looking
for, but only if you ask. Visit your nearest
wholesale mart to preview upcoming trends
and new products.
Hiring and Management
Good kids. It's inevitable--you're going to
have young people work for you. Hire a young
person who has a desire to know more about
your type of business. A person who's really
interested in cars but wants to work in your
clothing store might not be as suitable as
someone who's attending classes in fashion
design. When interviewing a young person,
ask them about their interests and hobbies,
and what they feel they can offer you as an
employee. I like to ask what they feel is their
best attribute.
Second in command Check all management
applicants' references, and require a resume.
Advertise for a manager if your budget allows
and only if you're prepared to offer
competitive pay. A management candidate
should have at least one year of management
experience and two years of retail experience.
Ask them numerous questions about software,
cash handling and, most important,
management skills pertaining to customer
service and employees.
Loss prevention. You can always expect
theft--count on it and set your prices because
of it. The only way to find out how much
you're losing is to do inventory. I have a POS
[point-of-service] system that's run from my
PC and has real-time inventory. It doesn't
have to be refreshed and can tell me right
then what I have on hand. Keep your
employees honest with cameras. If you're
selling any small items that people are going
to walk off with, keep them in secure cases.
Make sure employees bring clear purses to
work--or no purses at all. You always have to
take precautions.
Drawing In--and Keeping--Customers
Everything must go! Have a specific place
for your sale items. Customers should be able
to easily distinguish sale items from regular
merchandise in the store. Placing your sales
items towards the back of the store will force
customers to walk by the regularly priced
merchandise before coming across the sale
items, thus increasing the probability for sales
of regular merchandise. Clearly mark your
sales prices on all your merchandise and on
signs that will grab your customers' attention.
Storefront signs will also increase traffic flow
and let customers know there's a reason to
stop in your store, and you might grab new
customers who [want to] give you a try and
see what you have on sale.
Good as gold.Customer service is key to any
successful business. Any smart business
owner will tell you that customers are gold
and should be treated as such. I always
remind my employees that customers pay
their checks and deserve their undivided
attention at all times. Customer service isn't
just telling a customer "hello"; it's also about
helping them to their car with their packages
and making sure they had a great experience
while shopping in your store. Each customer
should be treated the same and given equal
attention whether they buy something or not.
Treat your customers with respect, and always
go the extra mile for them. Word of mouth is
priceless--your best advertising can come
from a happy customer. All it costs is your
time.

hat you use to measure your success often

defines your vision and your strategy. If your
goal is more customers, you can get them,
but they may not be profitable. Fleet Bank
discovered that half of their existing
customers are not profitable to the bank. If
your goal is higher sales, you can boost them
– but a what cost? Many retailers have the
idea that sales and discounts are the road to
success. They may actually be the road to
ruin.
Fredrich Reichheld, author of The Loyalty
Effect, said that the "net present value of the
customer base should be at the top of the
measurement hierarchy." Lifetime value is the
net present value of the profit to be realized
on the average new customer during a given
number of years. It is a wonderful concept,
and can be an excellent guide to profitable
strategy. The steps you have to go through
are these:
Get your customers to give you data, and
build it into a database complete with
purchase history. For a retailer, that means
that you have to get your customers to use a
plastic member card, or to record their credit
cards with you so you can keep track of their
spending.
Use the data to segment your customers by
profitability. You will get a picture that looks
something like this:
When you do this, you may discover that your
top 20% of your customers gives you 80% of
your profits. Everyone else has discovered the
same thing. But you may also find, as the
Fleet Bank did, that you cannot market
profitably to these Gold customers. They are
already giving you all their business in your
category. They are "maxed out." What should
you do for them? Give them special services
and attention so as to retain them. The people
you should market to are those just below
Gold. They have the ability to move up to
Gold, if you will only encourage them.
Building a relationship with customers only
works if the customer benefits from the
relationship. The trick in retailing, therefore, is
to find things that you can do for customers
that will modify their behavior in profitable
ways. What you provide to customers has to
be something that they will appreciate and
value, but which do not cost you too much. In
retailing, the margins are often thin. Safeway,
for example, estimated how much they could
afford to spend on customer relationship
management. It came to about $2 per
customer per month. $2 per month isn’t going
to change anyone’s behavior. So what do you
do? You concentrate your resources on those
customers whose behavior you can most
easily change, and whose changed behavior
will be most profitable.
If you segment retail customers by frequency
of visit, and incremental sales potential, you
will notice that your biggest opportunities lie
in the second and third quintiles:
These customers probably do a good deal of
their buying somewhere else. If you make it
worth their while, they could shift to doing
more business with you.
The other thing you will discover if you
analyze customers by years as a customer, is
that long term loyal customers are different
from new customers. They tend to:
buy more often
buy higher priced items
are less costly to serve
have higher retention rates.
This being the case, retailers have discovered
that the goal of their marketing programs
should be to build a relationship with
customers whose behavior can be modified,
to convert them over time into long run loyal
and profitable customers. The process can be
measured and tracked by using a lifetime
value chart. It looks like this:
Lifetime Value Before New Programs
Year 1 Year 2 Year 3
Customers 5,000 3,500 2,590
Retention Rate 70.0% 74.0% 80.0%
Visits/Week 0.64 0.69 0.78
Average Basket $33 $45 $55
$5,280, $5,433, $5,555,5
Total Sales
000 750 50
Cost Percent 83.0% 80.0% 79.0%
$4,382, $4,347, $4,388,8
Direct Costs
400 000 85
Labor + $580,80 $597,71 $611,11
Benefits 11% 0 3 1
Card Program
$80,000 $28,000 $20,720
$16, $8
$105,60 $108,67 $111,11
Advertising 2%
0 5 1
$5,148, $5,081, $5,131,8
Total Costs
800 388 26

$131,20 $352,36 $423,72

Gross Profit
0 3 4
Discount Rate 1.00 1.20 1.44
 $131,20 $293,63 $294,
NPV Profit
0 5 253
$131,20 $424,83 $719,08
Cum. NPV Profit
0 5 8
Lifetime Value $26.24 $84.97 $143.82
In this chart, we are tracking the performance
of 5,000 newly acquired customers over three
years. Their initial retention rate is 70%,
which means that during the first year, 30%
stop shopping with us. The retention rate goes
up over time, as loyal customers are sorted
out from disloyal ones. Their visits per week
also go up with loyalty, as does the contents
of their average shopping basket. This retailer
spends 2% of his revenue on advertising and
about $16 per customer per year on a plastic
frequent shopper card system so that he can
keep track of what customers are buying.
The lifetime value of these customers is $143
in the third year. We should note that this is
based on the net present value of their profits,
adjusted by a discount rate. The discount rate
is needed because money that you will
receive in the future is not worth as much as
money that you have in hand right now. The
rate discounts future money so it can be
legitimately added to current profits to get a
valid lifetime value. The formula for the
discount rate is:
D = (1 + i)n
Where i = the current interest rate plus a risk
factor, and n = the number of years that you
have to wait to get your hands on the future
money.
The lifetime value numbers are really very
powerful measures. They include in a single
set of numbers the retention rate, the
spending rate, the costs of marketing, and the
discount rate. By themselves, however, they
are not as powerful as they will be when we
use them to evaluate marketing strategies. To
illustrate this, look at what Safeway is doing
with their frequent shopper program.
By analyzing customer spending patterns,
Safeway discovered shoppers who never
visited the meat or produce departments. For
those shoppers alone, Safeway gave them a
coupon for $1 off of anything bought in those
departments. Result: meat and produce sales
went through the roof. And, more important,
these same people returned to shop in these
departments two weeks later after the coupon
campaign had terminated.
This strategy is targeting certain customers
whose behavior you want to change, and
giving something only to them that you can
afford which helps to modify their behavior.
Safeway also experimented with a host of
other programs designed to build a
relationship with certain targeted customer
segments. They offered free ice cream on
their birthday, and measured increased sales
elsewhere in the store that resulted from this
gift. Besides birthday programs, retailers have
experimented with:
Customer specific pricing, where members get
cheaper prices on certain items
Rewards for large baskets
Rewards for frequency
Slow day shopping rewards
Personal recognition and relationship
programs
Reducing advertising to pay for relationship
building programs
Suppose that the retailer listed above were to
adopt all or many of these programs. What
could happen to lifetime value as a result?
Lifetime Value Using Customer
Management Program
Year 1 Year 2 Year 3
Customers 5,000 3,750 2,963
Retention Rate 75.0% 79.0% 85.0%
Visits/Week 0,68 0,73 0.82
Average Basket $38 $50 $61
$6,120, $6,843, $7,409,
Total Sales
000 750 213
Cost Percent 83.0% 80.0% 79.0%
$5,079, $5,475, $5,853,2
Direct Costs
600 000 78
Labor + Benefits $673,20 $752,81 $815,01
11% 0 3 3
Card
$80,000 $30,000 $23,700
Program$16, $8
Customer
Specific $61,200 $66,438 $74,092
Marketing
Advertising 1% $61,200 $68,438 $74,092
$5,955, $6,394, $6,840,
Total Costs
200 688 176
$164,80 $449,06 $569,03
Gross Profits
0 3 7
Discount Rate 1.00 1.20 1.44
$164,80 $374,21 $395,16
NPV Profit
0 9 5
 $164,80 $539,01 $934,18
Cum. NPV Profit
0 9 3
Lifetime Value $32.96 $107.80 $186.84
In this example the retailer has cut his
advertising budget in half. With the resulting
savings, he has boosted programs for his
valued customers. What has he gained by
this?
The retention rate has gone up from 70% to
75%
The visits per week have risen from 0.64 to
0.68
The average basket has risen from $33 to $36
The lifetime value in the third year has risen
from $143 to $186.
What does this really mean for a chain store?
Effect of Adoption of New Programs
New LTV $32.96 $107.80 $186.84
Previous LTV $26.24 $84.97 $143.82
Gain $6.72 $22.83 $43.02
With 200,000 $1,344, $4,566, $8.604,0
Customers 000 000 00
Assuming that the chain has 200,000
customers who are using the frequent
shopper card, and getting the relationship
building programs described, the profits to the
chain in the third year will be more than $8
million. This is real profit, since the costs of
the new programs have already been factored
in.
These charts don’t tell you that the programs
will be a success. Poor execution can ruin any
well laid plan. But lifetime value analysis tells
you that your programs can be successful.
Many programs fail because this type of
analysis has not been done in advance.
Increasingly marketers are realizing that the
techniques used to measure success guide
their strategy. Lifetime value, as a
measurement, is preferable to basing your
strategy on numbers of customers, market
share, or total sales.
How to Impress Customers:
Focus on Areas Where You are Better
than Competition
Focus on at least one key benefit that
you know compels customers to buy from
you, sometimes refer Treat your staff with
extreme care and attention. Be aware that
your treatment of staff usually translates into
their treatment of the customers. Make sure
there is a team in the store and everyone
knows what is expected and what the
objective is.
Listen to your customers. Always look for
a feedback and suggestions for improvement;
teach this skill to your staff as well.
Gaining new customers is about 5 times
more difficult (or expensive) than maintaining
your existing customers. Treat them like gold
and reward the people who have higher
percentage of return customers.
Test everything you do for effectiveness
and take corrective action or change the
process altogether. Never be satisfied with the
status quo.
Last but not least, make sure everyone
at the store understands that their
paycheck is ultimately paid by the
purchasing customers. Sounds straight
forward but easy to forget
red to as differentiation, emphasize the point
and clearly communicate it.

Top Retail Salespeople...

1. Are able to relate to
people easily. They can
build rapport very quickly;
understanding people are different and each
type requires appropriate approach and
conversation.
2. Let the customer talk most of the time
(preferably 80% of the time) by asking open
ended questions to discover the needs and
requirements of the customer.
3. Can recognize and relate to the
objections and do not get defensive when
handling objections.
4. Are able to identify and prioritize the
requirements of the customer; and not just
the apparent ones but possible hidden needs
like status and prestige.
5. Know their products or services inside
out and are able to find a good match
between customer requirements and what the
product and/or service can deliver.
6. Talk about benefits rather than
features. They are able to express benefits in
a simple yet effective and relevant fashion.
7. Always look for ways to improve their
skills and knowledge. They attend
seminars, read books and listen to tapes and
CD’s to discover new ways of increasing their
effectiveness and productivity.
8. Are determined to win. They clearly
understand the definition of success in their
environment and the rewards that are
attached to attaining it. They like to talk about
their major achievements and look forward to
doing even better.
9. Are self confident and generally happy
people. They don’t necessarily show their
burning desire to win to the outside world.
10. Like to help others when they can
afford the time, however they also clearly
understand that time is the most important
resource they have and the only one that can
not be recovered.
More Retail Sales Tips
Ø In the world of retail sales, actions
count, not words. Results count, not
promises.

Ø Make sure you as a salesperson and your

product and/or service promise a lot and
deliver even more. Make big commitments,
fulfill them all, and then give a little extra.
Ø Don’t compete, create! Find out what
everyone else is doing, and then don't do it.
Be unique. Approach your retail sales in a
way that sets you apart from other stores in a
way that makes a positive and long lasting
impression.
Ø Remember a picture is worth a
thousand words! Create positive pictures
with the words you use.

Ø Use the following magic words: free,

new, you, discover, save, guaranteed,
introducing, results, benefits, easy, proven,
love, alternative, now, win, gain, happy,
trustworthy, beautiful, comfortable, proud,
healthy, safe, right, security, fun, value,
advice, wanted, people and why.

Ø Avoid the following words: buy,

purchase, obligation, failure, bad, sell, loss,
liability, difficult, wrong, decision, deal, hard,
death, order, fail, cost, worry and contract.

Ø Selling is a combination of science and

art. Certain things must happen before a sale
is made. Every customer/prospect must
answer six questions: Do I want the product?
Do I want this particular one? Do I want it
now? Do I want to pay the price? Do I want to
get it from you? Do I want to get it from your
company?
Ø Sell benefits not products. Show your
passion when you describe a feature of your
product, explain its function, explain the
benefit of that function, prove the benefit by
providing evidence, and ask a nail-down
question to get your prospect's verbal
acceptance of the benefit's value.

Ø Benefits help you tune-in to your

customer's mental radio station, WIIFM,
"what's in it for me?".

Ø It is your obligation to close, and

provide your customer with an opportunity
to make a decision.

Ø You will know where you are with your

customer's "will-invest-line" by closing
throughout the presentation and gauging the
responses. As customer gets closer to the
"will-invest-line", you will receive more
positive responses.

Ø Think of a balance scale as representing

the way your customer's mind operates -
weighing need, use and value against the
required investment.
Ø Remember to close early (not before
the need is established and benefits of a
product/service are known) and often, so you
won't buy your product back.

Ø Effective closing questions should be

natural, sincere, yet assumptive (assume the
sale). Include physical action. Offer a choice
between alternatives. Be sure your question
requires a response. After asking a closing
question, be quiet. Usually, the one who
breaks the silence gives in.

Ø Objections do not mean "no". They

mean your customer is interested in seeing
more benefit, use, and value.

Ø For objections that do not deserve a

response, just cushion, bypass the objection
and continue your presentation.

Ø The READY formula suggests five ways

to respond to an objection: reverse it, explain
it, admit it, deny it, or ask "why?”
Ø Develop a sense of belief / conviction
about your service or product. Conviction
alone is sometimes enough to handle even a
major objection.

Ø Always maintain a positive attitude by

visualizing the gainful end result of your work
for your customer, company and yourself.
Even in the face of resistance, remember that
your effort will be appreciated once your
customer realizes you are there to help.

Ø Develop a follow-up schedule for

customers who bought from you. Remind
them that you are there to help them with
their future purchases. Remember it is five
times easier to maintain an existing customer
than to acquire a new one.

Ø You don’t have to work as hard to

achieve your numbers if you leave such an
impression with your customers that they
always ask for you when they come back.
Customer Service Overhaul

We all seem to know how

important customer service is-if we are going
to be successful in retail. Then why do we
keep getting lousy service wherever we go?

Assuming most customers are reasonable

people, the answer to the above question is 1.
Store staff don't know or don't understand
what the expected behavior in terms of
customer care is or 2. Management gives this
issue only a lip service and do not place firm
criteria to maintain high customer service
levels.

It always boils down to quality of

management doesn't it? In both of the above
cases, it's management that is squarely
responsible. So, before things get even worse,
here are the commandments you need to put
in place and make sure they are ingrained into
everyone's mind:

1. A Vision of Customer Service

Excellence That is Clearly Developed and
Communicated: If you do not set the
expectations right from the beginning, you
can't blame anyone but yourself.

2. Recruit, Hire, Train and Promote

People with People Skills: When you are
interviewing for new people, look for
indications of friendliness, helpful nature and
ask questions probing for the level of people
skills . When evaluating staff performance,
make sure there is enough indication and
consideration to their performance in
customer service.

3. Measure Individual Service

Performance, Report Results and
Celebrate Victories: What is not measured
can not be managed. End of story. Develop a
performance chart for each staff member and
rate them from 1 to 10 for their Customer
Service performance. You'll see a marked
improvement almost immediately.

4. Solve Problems When and Where They

Occur immediately: Customer studies show
that as long as a problem is resolved fast and
to the customer's benefit, most become very
loyal customers for life. Study your policies
and procedures and eliminate the fluff and
unnecessary steps that take time. To speed up
the resolution process, empower your staff to
make certain decisions without having to look
for management.

5. Stay Close to Your Customer: When was

the last time you took one of your customers
to lunch or even a coffee? I know a lot of you
are thinking we don't do that in retail, that's
the domain of B2B sales; but unless you know
your customer's honest opinion, how are you
going to improve your operation? Think about
it.
Prepare for Sales Success
We start our selling process with preparation.
All professionals prepare properly and our
routine is no exception. Preparation is an in
depth endeavor. One has to be mentally
prepared, physically prepared, be well
groomed, have the surroundings aesthetically
prepared and have a general game plan.
Always know your business inside and out.
Make it your business to know stock status,
available delivery times and advertising
schedules and promotions.
Create an atmosphere that your store is
having the biggest sale of the year. Make
sure that your store reflects the event. Look
busy and successful. Make sure to display
any awards, mementos of achievement and
testimonial letters that allow customers to see
the true professional they are dealing with.
Remain upbeat and be in a positive state of
mind. Let your customers know that you have
made many sales already today. The
confident aura with which you carry yourself
will go a long way towards creating the right
atmosphere. “This is the place to buy your
product” should be written all over your face.
Know your competition and all of their
strengths and weaknesses. Know your
industry and all of the corresponding product
information. When you know more than
anyone else, there is really no need for a
customer to shop anywhere else.
While it is very important for you to know
the specifications of your product, it is more
important that you fully embrace your product
and what it can do to make life better for your
customer. Having confidence in your product
line and the place that you work will allow you
to make many more and higher end sales.
You should know your customer and be able
to relate to them. This may vary in different
neighborhoods. Get in touch with your
community and know the type of customers
that live there.
 Always be prepared with the proper sales
ads, price sheets, costs and product
information at hand. Looking and acting
organized makes a difference to the customer.
Learn and be careful to use urgency words
such as “now” and “today” in your
presentation.
Always use proper and friendly body
language. How you look, stand and act are
windows to the soul. Make sure you let your
customers know that you are not hiding
anything or lying to them.
Keep all of these points in mind when
preparing to take a customer. A customer
picks up on everything. It is a known fact that
a customer makes their decision on whether
they are at the place they are going to buy in
the first two minutes. This is possible
because the brain processes millions of
thoughts a minute subconsciously. When your
shoes are not shined, your tie is not properly
tied or your store does not look clean and
organized, you are starting the sales process
with two strikes.
Take the time to be prepared and your sales
figures will reflect it. Practice and preparation
make it perfect.
Suggestions for better retailing

o Innovation in the organization,

financing and delivery of community
service.
o A successful retailing business requires

that a distinct and consistent image be

created in the customer’s mind that
permeates all product and service
offerings.
o A store should have an inviting
appearance that makes the customer
feel comfortable and yet eager to buy.
o Greater effort must be spent on
merchandise displays that make it
easier for the customer to find and
purchase the items they want or need.
o The exterior presentation can offer a

conservative, progressive, lavish or

discount image to the customer.
o Good prices and positive word of
mouth advertising is important.
o A cluttered entryway causes shoppers
to indefinitely postpone entering a
store, while an attractive, well
designed entrance is inviting to the
customer.
o Special emphasis should be placed on

the store’s window displays because

they are the information link to the
potential customer.
o Selling space is the most important
part of a store and therefore, efforts to
utilize each square foot will help to
maximize sales.
o Motivate the customer to spend
money.
o Project the image of the store.
o Keep expenses to a minimum.
o The main principles of design used in
display are balance, emphasis,
proportion, rhythm, colour, lighting and
harmony.
o An effective way of attracting
customers to a store is by having good
displays, both exterior and interior.
o Each piece of merchandise must be
considered in relation to others.
 o Create a buying mood by using various
amounts of light or manipulating light
and shadow.
o Related merchandise should be
grouped together on the end-cap and
gondola sides.
o Appeal to as many customers as
possible. Do not limit the audience.
o Feature national name brand items
that have wide customer acceptance.
o Stimulate buying by asking for the
sale.
o Logical and sequential ordering of
things is needed.

Conclusion

Retailing is thus considered to be one of the

best ways of merchandising.
Small scale as well as large scale retailing
scores over many other forms of business
owing to the fact that it is more customer
oriented.
Gone are those days where people had time
to move from store to store to get all that
they want.

The trend is now for retail stores where one

can get all the basic needs under one roof.
Customer is now treated as King in the market
and therefore, his needs are well looked after
by various retail markets.

Customer satisfaction has now become one of

the major key factor for every entrepreneur to
carry out his business. Retailing is one such
form of business where they target on
customer satisfaction by making all possible
arrangements for them to come and shop in
comfort.

Retailing has now become one of the leading

industries that is adding a lot to the GDP of
our country. This is thereby helping the nation
to develop and has given employment
opportunities many skilled as well as unskilled
people.

Therefore the government has to provide

enough support to all those retail chain stores
so that the country would develop further.