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SHWETA GAJBHIYE (09927868) Batch 200-11 SJMSOM, IIT Bombay
chemists. pavement vendors. the overall share of organized retailing in total retail business has remained low. owner-manned general stores. there are four drivers of modern retail¶s ³one-stop shopping model´: price. Indian retail is dominated by a large number of small retailers consisting of the local kirana shops. which together make up the so-called ³unorganized retail´ or traditional retail. Through a balanced regulatory framework and competition policy. Leveraging on the perception of high-quality imported goods that was attached to the old Spencer¶s & Co. Spencer¶s business strategy focuses on an array of food-related products and activities spanning across intercontinental and domestic culinary. Still.5 The last 3-4 years have witnessed the entry of a number of organized retailers6 opening stores in various modern formats in metros and other important cities. Modern retail business focuses on maximizing customer footfalls and capturing rising volume and share of the customer wallet. footwear shops. Rather we can see the democratic scenario in Indian Retail (because of low level of centralization. and shopping experience. eventually closing the gap between the organized and unorganized sectors. brand name. (ii) improve business process practices. Nevertheless. (iii) spur investments in support industries. the macroeconomic landscape indicates that the domestic retail industry has immense scope for the modern as well as traditional retailers to co-exist. both the traditional format and the modern format can continue to grow. etc. Spencer s Retailer Spencer¶s differentiates itself on product quality. product. apparel shops. paan and beedi shops. and (iv) enhancing the store ambience. (ii) expanding product assortment. Thus. Organized retailing will: (i) promote quality employment. service. Spencer¶s follows the ³duck and duckling´ (pyramidal) . hand-cart hawkers. and ambience. low capital input and due to a good number of self organized retail).Indian Retail Market India is the only one country having the highest shop density in the world. with 11 outlets per 1000 people (12 million retail shops for about 209 million households). the model works by: (i) improving sourcing efficiencies. (iii) differentiating service. assortment of imported food products. and chef demonstrations. and (iv) enable the modernization of the fragmented traditional retail industry. While the competition strategy is largely price focused.
The company incorporates the cluster approach in its ³hub-and-spoke´ business model to gain economies of scale in sourcing. followed by the supermarket format (Spencer¶s Daily).strategy for its retail expansion and cost benefits in back-end procurement. and a larger set of express stores. The rest 55 per cent consist of FMCG. Kirana Stores A typical outlet of Spencer¶s is about 5600 sq ft providing employment to average 23 people per retail outlet. Spencer¶s differentiates on high-quality food assortment. .7700. Each hub also functions as a central point to a number of repackaging centres. fruit and vegetables. Overall. and other white goods. and ambience. 500 sq ft. staples. service. and a larger set of convenient store format (Spencer¶s Express and Fresh) located close to the local neighbourhood. The two retail outlet can be compared on four parameters: price. and collection centres in the cluster region. the Spencer¶s Express product mix differentiates from the regular kirana stores because it is a mixture of imported. The spread of stores serves as spokes to a single distribution centre. In the hypermarket segment. and domestic food products. run by 2-4 people and annual sale per square is not more than Rs. However. Spencer s Retailer vs. intercontinental. and fruit and vegetables. An Express store consists of fruit and vegetables. If this numbers are compared with the Kirana stores (unorganized retail outlet) the shop is of size appr. 1000. Product Spencer¶s & Co brand name. and some general merchandize. On the other hand. in between supermarket format stores. bakery and chilled and dairy products. other 30 per cent is imported food products. an average Spencer¶s Daily store contains a higher share of FMCG products. across all formats. Each state is more or less regarded as a cluster consisting of a small set of hyper. 30 per cent of the food is speciality food. The annual sale per square ft is around Rs. staples. 45 per cent of the merchandize is equally distributed across garments. product. and promotional activities around its multiple retail formats. logistics. it has a small set of destination stores (Spencer¶s hyper). the hub. electronic goods. and the rest is regular domestic food.
the hypermarket format contains around 5 per cent mobile phones. the company is also building its positioning to maximize its margin on differentiated general merchandize products in the electronics. and clothing in its hypermarket. In the case of private label clothing. however. private labels are priced between 5 per cent and 10 per cent cheaper than the branded labels. This relation is more at personal level than at professional level. Spencer¶s pricing across multiple food products is similar to the price available in the market. where margins are low. In staples. but private labels are priced around 20-30 per cent lower than the branded labels which have an overall 30 per cent margin. Kirana stores generally don¶t offer any discount on the product. branded FMCG products are sold at 15-18 per cent margin because FMCG products are discounted nearly 2-3 per cent lower than the MRP price. But. plastic goods. In FMCG products. Additionally. staples. . the maximum gain is around 50-60 per cent. In the hypermarket format. Spencer¶s keeps a mix of private and branded labels in the FMCG. pricing is standardized daily based on the APMC market pricing. the Spencer¶s strategy includes concessionaire contracts with food chains known in their respective region. On the other hand local Kirana stores generally don¶t enter into a legal contract though they also get the product from the nearby region. Price Considering its focus on food products. the gain is generally between 18 per cent and 20 per cent.In order to expand on the assortment of food products under the Spencer¶s banner in hyper and superstore formats. and ceramic product categories. Spencer¶s attempts to capitalize on the purchase of the balance 10 per cent of differentiated imported and speciality food products of its customer basket. Spencer¶s gains around 10-15 per cent margin on fruit and vegetables. Spencer¶s has also tied up with ³Life Skill´ to roll out pharmaceutical products across Spencer¶s hyper stores in the south. they sell it at MRP. In the case of fresh food and vegetables. Although Spencer¶s has a separate subsidiary Cellucom for mobile phone retailing.
Particularly for Spencer¶s. Apart from that generally the Kirana Store retailer has the bonding with the near by customer. the reason being that most people are right handed and the eye movement goes from right to left. at the end of the day when they get their wage. separate spaces are sold to external brands and products are placed on shelves by keeping their popularity and publicity in mind. while it is a very common practice for Kirana Stores. Reasons that Kirana Store Survive 1. Fruit and vegetables are kept in the first part of the store because of its volume and to attract customers. Generally these kirana shops are the family business of these small retailers which they are running for more than one generation. he understand their needs much better that the organized retailer understand their customer. A large number of working class in India is working as daily wage basis. SKUs that are bought on a regular basis are kept on the right hand side. there are many families who are traditionally using these kirana stores offering a wide range of merchandise mix. they come to this small retail shop to purchase wheat flour. These kiran shops are having their own efficient management system (like better understanding of customer need) and with this they are efficiently fulfilling the needs of the customer. . unorganized can do it better because of long term relationship with customer. Ambience Organized retailers have comparatively much better ambience than unorganized. Though organized retailer has all the system in place to provide best service and solve customer grievances. Competing brands are kept side by side. In smaller towns and urban areas. This is one of the good reasons why the customer doesn¶t want to change their old loyal kirana shop.Services The main different between the two is Spencer¶s never give credit to it customer. 2. 3.
Many times customers prefer to shop from the nearby kirana shop rather than to drive a long distance organized retail stores. In every corner the street an unorganized retail shop can be found that is hardly a walking distance from the customer¶s house. Also they use cheap child labour at very low rates. Now this type of credit facility is not available in corporate retail store. It is the convenience store for the customer. Similarly there is another consumer class who are the seasonal worker. . 5. They incur little to no real-estate costs because they generally operate from their residences. As they are operating from their home so they can pay for their utilities at residential rates. Their labour cost is also low because the family members work in the store. so this kirana stores are the only place for them to fulfill their needs. During their unemployment period they use to purchase from this kirana store in credit and when they get their salary they clear their dues. This unorganized stores are having number of opportunities to cut their costs. Another reason might be the proximity of the store. 6.rice etc for their supper. For them this the only place to have those food items because purchase quantity is so small that no big retail store would entertain this. 4.
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