EXECUTIVE SUMMARY

Retailing consists of all activities involved in selling goods and services to consumers for their personal, family or household use. It covers sales of goods ranging from automobiles to apparel and food products and services ranging from hair cutting to air travel and computer education. Sales of goods to intermediaries who resell to retailers or sales to manufacturers are not considered a retail activity. Retailing can be examined from many perspectives. A manufacturer of white goods like washing machine and refrigerators has many options to reach out to consumers. It can sell through dealers, the company showrooms (Sony World, Videocon Plaza) or hypermarkets (Big Bazaar). The retail sector in India is highly fragmented with organized retail contributing to only 2% of total retail sales. The retail sector in developed countries was also highly fragmented at the beginning of the last century but the emergence of large chains like Wal Mart, Sears, and Mc Donald’s led to rapid growth of organized retail and growing consolidation of the retail industry in the developed countries. Today, in India we see a rise in the purchasing power and growth of a middle class which follows the western lifestyle. Hence, conditions are conducive for the rapid growth of organized retail in India. Organized retail is growing rapidly and we see the emergence of large organized retail chains like Shoppers’ Stop, LifeStyle and Westside. We also find retail malls mushrooming all over the country. The opportunities in retail industry in India will increase since Indian retailing is on the threshold of a major change. However, with the rapid growth in organized retail and increased emphasis of manufacturers on understanding sales at the retail level, the study of retailing has become increasingly relevant.

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OBJECTIVE OF PROJECT
v To understand the concept of retailing. v To understand the role and relevance of retailing for business and economy. v To identify the activities associated with retailing v To understand the operational structures associated with retail organizations v Understanding consumer behaviour in retailing v Understanding the importance of store location for a retailer v To understand the nature of merchandise budgeting and unit planning v To
understand the concept of relationship marketing and how does it apply to the

retail sector.

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METHODOLOGY
This project is the mixture of theoretical as well as practical knowledge. Also it contains ideas and information imparted by the guide. The secondary data required for the project was collected from various websites and books of reputed authors.

The project started with sorting all the raw data and arranging them in perfect order. To add value to the project and to understand the practicality of retailing business, I have visited various stores who are the best ones in retailing business.

Further, to understand the consumers better, a field survey was also conducted to find out the tastes and preferences, purchasing habits, expectations of the consumers etc. Analysis of this primary data has been done to actually understand the survey in a better way.

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which comprised merely shops offering a variety of goods and services clubbed together. CURRENT SCENARIO The Indian population is whooping 1 billion with 75% of the people living in villages and small towns. It is interesting to note. with the spending increasing at an average of 11% per annum. The opening up of the economy only fueled this globalization. toilets and maintenance. The origin of retail in India dates back to ancient times when the melas and mandis made heir presence felt. that the Urban Population although just 25% of the total. The inconveniences caused by lack of parking place. It is only natural that the agricultural sector is the biggest employer with its contribution to GDP pegged at 26. certain bottlenecks as well. is an astounding 250 million in size and is growing at a healthy rate of 7% per annum. The Core and the Lower middle have increased their share in the Growth. however. The changing socio economic patterns coupled with the consumption increase led to the emergence of the convenience stores. ushered in the entry big international brands opening their exclusive showrooms. the scarcity of space. coupled with the stringent provisions of the Rent Control Act. The 12 million retail outlets in India are the highest in the world. which became a par of the civic planning.ORIGIN OF RETAILING Although retailing does not enjoy the status of an Industry. This also explains why the Raheja’s forayed into their retail venture.7%. There are. The chief driver of growth in the retail sector has been the consumer. act as a dissuasive factor for many players to initiate operations in the main markets. The next step was the commercial plazas. The growth of the efficient small store culture can be attributed to the 6 million villages distributed across the length and breadth of the country. -4- . is grabbing attention. Retail is India’s larges industry after Agriculture with around 20% of the economically active population engaged in it and generation 10% of our country’s GDP.Shoppers’ Stop. the sheer size this behemoth will develop into. and cater to the purchase need of its pole.

-5- . And by year end the count will shoot up to 158 malls. Apna Bazar.The Indian consumer’s shopping needs are and traditionally have been fulfilled by Kirana sores (corner stores). Bangalore has Brigade Road and Commercial Street. organized parking lots and other public amenities. Delhi has Connaught Place.5 million sq ft. Droves of middle-class Indians have broken off their love of traditional stand-alone shops that have no ACs. Currently estimated at $205 billion to grow to $400-500 million. Kendriya Bhandar. It will cover 34 million sq ft area.4 million sq ft. v Smaller cities will have about 12. v Ahmedabad about 3. 2005). v Gurgoan saw the largest development in terms of retail outlet. according to a study by fashion magazine Image. Super Bazar etc. India will have 358 shopping malls by 2007. Mother Dairy. To cater to this. each city developed its own identity and shopping cluster. covering an area of 21. v East region has 10% of India’s retail share.6 million sq ft. v West region has 33% of India’s retail share. v Government and co-operative sector is also making their steps in retailing. Karol Bagh and South Extension. For example. Kiosks. street vendors. v Ludhiana to account for 2. v Delhi and Mumbai now have maximum number of shopping centres. over the next 2-3 years. weekly bazaars and high-street shops for consumer durables and luxury goods.8 million sq ft of mall space by 2007. v North region has 39% of India’s retail share. At present (September 23. v South region has 18% of India’s retail share. for instance in Pune there is MG Road. In India we have 96 malls.

v Retailer of the Year: Leisure: Crossword Bookstore.000 2. v Shopping Centre of the Year: Inorbit Mall v Retail Brand of the Year: Titan v Retail Concept of the Year: Reliance Truck Stop.000 Metro cash-n-carry Spencer LifeStyle Shoppers Stop Trent Globus Piramyd 3.75.00. v Retailer of the Year: Value Retailing: Big Bazar v Retailer of the Year: Catering Service: McDonald’s. -6- . Pantaloon Retail India Ltd. v Retailer of the Year: Health & Beauty: VLCC.000 Pantaloon/Big Bazaar 5.000 The 2nd Annual Images Retail Awards (September 22. v Retailer of the Year: Food & Grocery: Food Bazaar.000 5.000 2.00. v Retailer of the Year: Forecourt Retailing: Bharat Petroleum Corp.50.50.000 2.000 6.000 1. Ltd. ft 10.42.80. MD. v Retailer of the Year: Department Store: Westside. v Retail Destination of the year: Shoppers’ Stop v Retail Launch of the Year: Pantaloon Central.MAJOR RETAILER SPACE HOLDERS IN INDIA ORGANIZATION Bata RPG Raymond Area Sq.00.00. 2005):v Retail Face of the Year: Kishore Biyani.00.000 1. v Retailer of the Year: Entertainment: PVR.00.000 2.

7. Increasing urban population-more participants in retail revolution. Retail revolution restricted to 250 million people due to monolithic urban-rural divide. 3. Most of the entrants to organized retail come from 3 main categories. 5. 2. 3. 4. growing at 8%. Lack of industry status. Spends moving towards lifestyle products and esteem enhancing products. 2nd largest contributor to GDP after agriculture at 20%. 6. v Real Estate Developers v Corporate Houses v Manufacturers/Exporters WEAKNESSES 1. -7- . 2. Shortage of quality retail spaces at affordable rates. Pattern of consumption changing along with shopping trends. Increase in consuming middle class population. 5. Footfalls not a clear indicator of sales as actual consumers lower in number. Paradigm shift in shopping experience for consumers pulling in more people. Organized retailing at US$ 3. 8.SWOT OF THE MARKET STRENGTH 1. retail space available. 6. Government regulations on development of real estate(Urban Land Ceiling Act) 3. Lack of huge investments for expansion. ft. 4. 7. 5. Availability of old industrial lands-prime real estate locked in sick industrial units. OPPORTUNITIES 1. Need to provide Value for Money-squeezing margins 4. A Growing population will translate to move consumers. 2. and have ventured into retail as their business extension. Social factors like dual household income has enhanced spending power.31 billion. Consumer spending increasing at 11% annually. Almost 25 million sq.

Some of the major factors hindering the growth of this sector are as follows: v The non-industry structure and status v The lack of adequate infrastructure v FDI restrictions in this sector v The huge investments required in expanding their markets. Personalized service offered by Mom-&-Pop stores. Average grocery spends at 42% of monthly spends-presents a huge opportunity. Poor monsoons and low GDP Growth could affect consumer spending drastically. FDI restrictions in the retail sector 3.6. RETAIL VIABILITY As per the CII McKinsey report. by 2010 the retail sector is expected to be US $ 300 Billion industry. THREATS 1. based on a GDP growth rate of 6-7% per annum. -8- . Increase in use of credit cards. Archaic labour laws are a hindrance to providing 24/7 shopping experience 5. 7. Differentiate taxation laws hindering expansion. 7. Rising lease/rental costs affecting project viability 2. 4. Unavailability of qualified personnel to support exponential growth in retail. v Problems associated with working Capital funding from lending Institutions. 6.

Hyderabad. John Miller and Bare. focusing on ‘value for money’ segment. Pantaloon successfully launched its discount store chain. It has India’s second largest retail chain with 17 retail outlets and two discounting stores branded as Big Bazaars across the country at an estimated retail space of 4. Pantaloon plans to target the upper middle and the middle class segment. This is totally in contrast to the other organized retail players. Higher percentage of ‘own brand’ sales improves margins.300 sq. 14 Pantaloon Family Stores. which focus on high net-worth of individuals. The company is headquartered in Mumbai with zonal offices at Kolkata. Big Bazaar has diversified from apparels to household items in its discount stores. Bangalore. Pantaloon has come up with an excellent revenue model. Ahmedabad. It began its retailing operations in India way back in 1987. Bagpur.BIG BAZAAR: THE INDIAN WAL-MART Pantaloon Retail (India) Limited is today recognized as one of the poneers in the business of organized retailing in the country with a turnover of over RS 400 crores in the financial year ending June 2003. ft. -9- . Mumbai. Currently. which targets the large and growing upper-middle and middle class of Indian society. It has 4 kinds of stores. Chennai and Gugaon (Delhi). This has enabled them to enlarge their basket of offerings. Big Bazaar has strong own brand names in its portfolio across product categories. The company plans to diversify into the business of discounting in a big way. it manufactures and sells ready-made garments through its own retail outlets and two discounting stores. Bangalore and Gurgaon (Delhi). Thane Pune. It has been one of the pioneers in organized retailing in India. which forms the large chunk of Indian population.01. This segment is very price conscious and always looks out for value for money. thus reducing the breakeven level of sales.5 lakh sq ft retail space across Kolkata. which is targeted at the growing middle class segment. Kanpur. The brands include Pantaloon. The company plans to double its retail space in the next couple of years. 7 Big Bazaar discount hypermarkets. Pantaloon Retail India Limited is the flagship company of the Pantaloon group promoted by Mr Kishore Biyani. 6 Food Bazaar Stores with over 6.

they also perform the retailing function. agent. It is responsible for matching individual demands of the consumer with supplies of all the manufacturers. or by car rental agencies. agency. and financing. company. who links the producers and the ultimate consumers. Therefore. meaning ‘to cut a piece off’ or ‘to break bulk’. the Internet. Retailing has become such an intrinsic part of our everyday lives that it is often taken for granted. or organization which is instrumental in reaching the goods. A common assumption is that retailing involves only the sale of products in stores.RETAIL CONCEPT The distribution of consumer products begins with the producer and ends at the ultimate consumer. A retailer is a person. The nations that have enjoyed the greatest economic and social progress have been those with a strong retail sector.. or services to the ultimate consumer. Why has retailing become such a popular method of conducting business? The answer lies in the benefits a vibrant retailing sector has to offer— an easier access to a variety of products. the ease of entry into retail business results in fierce competition and better value for customer. Their profit is usually a small fraction of sales and is generally about 9-10%. developing assortments of products. Retailers’ cost and profit vary depending on their type of operation and major product line. freedom of choice and higher levels of customer service. Between the producer and the consumer there is a middleman---the retailer. Retail stores of different sizes face distinct challenges and their sales volume influences -10- . Retailers perform specific activities such as anticipating customer’s wants. a firm must do a satisfactory job in its primary role i. However. acquiring market information. parlour. To enter retailing is easy and to fail is even easier. it also includes the sale of services like those offered at a restaurant. catering to customers. Retailing encompasses selling through the mail. As we all know. The word ‘retail’ is derived from the French work retaillier.e. doorto-door visits---any channel that could be used to approach the consumer. Retailing is defined as a conclusive set of activities or steps used to sell a product or a service to consumers for their personal or family use. When manufacturers like Dell computers sell directly to the consumer. merchandise. The selling need not necessarily take place through a store. in order to survive in retailing.

Flipping through a catalogue. then to the retailer and finally to the user of the product. and type of clothing a person wanted to purchase and then waiting to have it sewn and shipped was the standard practice in the earlier days. Over the last decade there have been sweeping changes in the general retailing business. picking the right colour.business opportunities. kA product manager of household appliances claimed. while new pieces were being sewn or customized in the back rooms. merchandise purchase policies. nature or promotion and expense control measures. It is necessary for -11- . As a result. In today’s competitive environment retailers have redefined their role in general. Retailers act as gatekeepers who decide on which new products should find their way to the shelves of their stores. By the turn of the century some retailers set up a storefront where people could browse. The role of retailers in the present competitive environment has gained attention from manufacturers because external parties such as market intermediaries and supplying partners are becoming increasingly powerful.’ It is a well-established fact that manufacturers need to sill their products through retail formats that are compatible with their business strategy. brand image. For instance. DRIVERS OF CHANGE IN RETAILING v Changing demographics and industry structure v Expanding computer technology v Emphasis on lower costs and prices v Emphasis on convenience and service v Focus on productivity v Added experimentation v Continuing growth of non-store retailing. size. and in the value chain in particular. ‘Marketers have to sell a new product several times. Almost all retail businesses have undergone a similar transition over the years. and market profile in order to ensure a competitive edge. they have a strong say in the success of the product or service launched by a business firm. first within the company. what was once a strictly made-to-order market for clothing has now changed into a ready-to-wear market.

Selecting target markets. which in turn harms the image of the retail outlet. Retailers have to make optimum selection of goods to be sold given the following major concerns: v Selling space available is relatively fixed and must return maximum profits. McDonald’s. liberalization and highly aware customers. The retailer may have to resort to substantial price reductions in order to get rid of the unsold stock. financing pacts and wide-scale marketing plans. training salespeople---these are just a few of the many functions that a retail manager has to perform on a perpetual basis. The increasing numbers of product categories followed by multiple brands in each category complicate decision-making for both manufacturers and market intermediaries. determining what merchandise and services to offer. This is especially true in the case or new products. such as Wal-Mart. v There is always the risk of non-performance in terms of quality. it will not result in profit. The world over retail business is dominated by smaller family run chain stores and regionally targeted stores but gradually more and more markets in the western world are being taken over by billion dollar multinational conglomerates.marketers of consumer products to identify the need and motivations of their partners in the marketing channel. Therefore. Retail formats and companies that were unknown three decades ago are now major forces in the economy. In the backdrop of globalization. governed by their individual sales philosophy. The larger retailers have managed to set up huge supply/distribution chains. Retailers want of optimize sales within the limited shelf space. Retailers undertake risk in selecting a portfolio of products or brands to offer to their customers. If such space is occupied by merchandise that is not moving. inventory management systems. supplies etc.. negotiating with suppliers. Marks and Spencer. the challenges for retail managers the world over are increasing---they must take decisions ranging from setting the price of a bag of rice to setting up multimillion dollar stores in malls. Sears. a retailer is required to make a conscious effort to position himself distinctively to face the -12- . Retailing is a dynamic industry---constantly changing due to shifts in the needs of the consumers and the growth of technology.

-13- . v The top 200 largest retailers account for 30% of the worldwide demand.6 trillion out of the US $10 trillion American economy is consumer spending. v The money spent on household consumption worldwide increased by 68% between 1980 and 1998. v Retail sales are generally driven by people’s ability (disposable income) and willingness ( consumer confidence ) to buy. GLOBAL RETAIL-INDUSTRY-RELATED FACTS v Worldwide retail sales are estimated at US $7 trillion. v Retail turnover in the EU was almost 2.competition. This is determined to a great extent by the retail mix strategy followed by a company to sell its products. REGIONAL FACTS v Some two-thirds or US $6. v Retail trade in Europe employs 15% of the European workforce (3 million firms and 13 million workers). About 40% or that ($3 trillion) is spent on discretionary products and services. suggesting that the sector is becoming one of the major players in the development process. v The Asian economies (excluding Japan) are expected to have 6% growth rates in 2005-06. v The 1998 UNDP Human Development Report points to the fact that global expenditures on advertising are ( including in developing countries ) increasing faster than the world economy.000 billion in 2001 and the sector’s better than average growth looks set to continue in the future.

while environmental features were a close second in a survey conducted by the Alliance for Environmental Innovation in conjunction with SC Johnson Wax. Realizing the importance of retailing in the entire value chain. v Product performance was found to be the top purchasing criterion. Therefore. they are in a position to effectively communicate the response and changing preferences of the consumers to the suppliers or sales persons of the company. This occurs primarily to meet the requirements of geographical coverage and population density. 60% of Americans want to lead a simple life. This has not only provided direct contact with customers. CHARACTERISTICS OF RETAILING Retailing can be distinguished in various ways from other businesses such as manufacturing. Manufacturers require a strong retail network both for reach of the product and to obtain a powerful platform for promotions and point-of-purchase advertising. v In most retail businesses services are as important as core products. many manufacturers have entered into retail business by setting up exclusive stores for their brands. v There are a larger number of retail units compared to other members of the value chain. They act as intermediaries between end-users and suppliers such as wholesalers or manufacturers. This helps the manufacturers and markets to redefine their product and change the components of its marketing strategy accordingly. Direct Interaction with Customers Retail businesses have a direct interaction with end-users of goods or services in the value chain. but has also acted as advertisement for the companies and has provided -14- .CONSUMER EXPECTATIONS v Time and quality of life are becoming relatively more important than money. Retailing differs from manufacturing in the following ways: v There is direct end-user interaction in retailing. v Sales at the retail level are generally in smaller unit sizes. v In is the only point in the value chain to provide a platform for promotions. v Location is a critical factor in retail business.

point-of-purchase merchandise. impulse purchases of the shopper is a vital area that every retailer must tap into. such as in the case or consumer durables. gift-wrapping and promotional incentives all add up to the costs. some consumer segments in India even buy grocery items on a daily basis rather than a weekly or a monthly basis. Many consumers buy products in small quantities for household consumption. Retailing provides extensive sales people support for products which are information intensive. One way to resolve this is for the retail outlets to be able to attract the maximum possible number of shoppers. Many do not look at ads before shopping. Impulse goods like chocolates. Point-of-purchase Display and Promotions A significant relevant chunk of retail sales comes from unplanned or impulse purchases. Lower Average Amount of Sales Transaction The average amount of sales transaction at retail point is much less in comparison to the other partners in the value chain. Hence. order levels and the retailer has to keep a tight control on costs associated with each transaction in the selling process. Therefore. Manufacturers decide the location on the basis of availability of factors of productions -15- . display. retailers must take care of determining average levels of stock. Credit verification. employment of personnel.the manufacturers with bargaining power with respect to other retailers who stocked their product. store layou8t and catalogues become important. value-added activities like bagging. Since a lot of retail products are low involvement in nature. Due to lower disposable incomes. Inventory management becomes a challenge for retailers as a result of the many minor transactions with a large number of customers. snack foods and magazines can sell much more quickly if they are placed in a high visibility and high traffic location. Larger Number of Retail Business Units Location of retail store plays an important role compared to other business units. Studies have shown that shoppers often do not carry a fixed shopping list and pick up merchandise based on impulsive or situational appeal.

The theory suggests that new retail formats emerge by adopting characteristics from other forms of retailers in much the same way that a child is the product of the pooled genes of two different individuals. wide-assortment institution. 3. Maturity. ii. 4. Similarly. RETAIL LIFECYCLE THEORY:-A theory of retail competition that states that retailing institutions. It is also referred to as the generalspecific-general theory. primarily to meet the needs for geographic reach and customer accessibility. RETAIL ACCORDION THEORY:.A theory about the structure of market areas.A theory of retail institutional changes that suggests that retail institutions go from outlets with wide assortments to specialized. THEORIES AND MODELS OF RETAILING 1. Decline. 5. like the products they distribute. Innovation. NATURAL SELECTION THEORY: . WHEEL OF RETAILING THEORY: .A theory of retail institutional changes that states that retailing institutions that can most effectively adapt to environmental changes are the ones that are most likely to prosper or survive. narrow. The number of operation units in retail is the highest compared to other constituents ot the value chain. The model states that the volume of purchases by consumers and the frequency of trips to the outlets are a function of the size of the store and the distance between the store and the origin of the shopping trip.An evolutionary theory based on the premise that retail institutions evolve.and market. -16- . This cycle can be partitioned into four distinct stages: i. Accelerated development. DIALECTIC PROCESS: . 2. line store merchants and then back again to the more general. 6.A theory of retail institutional changes that explains retail evolution with an institutional life cycle concept. and iv. GRAVITY MODEL: . pass through and identifiable cycle. supply of merchandise and store image-related factors in locating the retail outlet. iii. retailers consider factors like potential demand.

sizes and brands from just one location. Final consumers. In this context. FUNCTIONS OF RETAILING Retailers play a significant role as a conduit between manufacturers. Supermarkets in the US offer. Further up the hierarchy are the larger central places. they specialize in types of assortment offered and the market to which the offering is made. while Pantaloons is targeted at the middle class. they perform various functions like sorting. Westside provides clothing and accessories. by collection an assortment of goods from different sources. which carry all goods and services. If each manufacturer had a separate store for its own products. -17- . Shoppers’ Stop targets the elite urban class. advertising and certain additional services. At the bottom of the hierarch are communities that represent the smallest central places (centres of commerce). found in lower-order central places plus more specialized ones that are not necessary. SORTIONG Manufacturers usually make one or a variety of products and would like to sell their entire inventory to a few buyers to redu7ce costs. Customers are able to choose from a wide range of designs. Through this process. The above process is referred to as the sorting process. while a chain like Nilgiris specializes in food and bakery items.7. as a channel of communication. They provide the basic necessities of life. prefer a large variety of goods and services to choose from and usually buy them in small quantities.A model that ranks communities according to the assortment of goods available in each. in contrast. customers would have to visit several stores to complete their shopping. CENTRAL PLACE THEORY: . While all retailers offer an assortment. wholesalers.000 different items from 500 companies. holding stock. 15. storage. buying them in sufficiently large quantities and selling them to consumers in small units. retailers undertake activities and perform functions that add to the value of the products and services sold to the consumer. on and average. Retailers are able to balance the demands of both sides. suppliers and consumers. breaking bulk.

BREAKING BULK Breaking bulk is another function performed by retailing. The word retailing is derived from the French word retailler, meaning ‘to cut a piece off’. To reduce transportation costs, manufacturers and wholesalers typically ship large cartons of the product, which are then tailored by the retailers into smaller quantities to meet individual consumption needs.

HOLDING STOCK Retailers also offer the service of holding stock for the manufacturers. Retailers maintain an inventory that allows for instant availability of the product to the consumers. It helps to keep prices stable and enables the manufacturer to regulate production. Consumers can keep a small stock of products at home as they know that this can be replenished by the retailer and can save on inventory carrying costs.

ADDITIONAL SERVICES Retailers ease the change in ownership of merchandise by providing services that make it convenient to buy and use products. Providing product guarantees, after-sales service and dealing with consumer complaints are some of the services that add value to the actual product at the retailers’ end. Retailers also offer credit and hire-purchase facilities to the customers to enable them to buy a product now and pay foe it later. Retailers fill orders, promptly process, deliver and install products. Salespeople are also employed by retailers to answer queries and provide additional information about the displayed products. The display itself allows the consumer to see and test products before actual purchase. Retail essentially completes transactions with customers.

CHANNEL OF COMMUNICATION Retailers also act as the channel of communication and information between the wholesalers or suppliers and the consumers. From advertisements, salespeople

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and display, shoppers learn about the characteristics and features of a product or services offered. Manufacturers, in their turn, learn of sales forecasts, delivery delays, and customer complaints. The manufacturer can then modify defective or unsatisfactory merchandise and services.

TRANSPORT AND ADVERTISING FUNCTIONS Small manufacturers can use retailers to provide assistance with transport, storage, advertising and pre-payment of merchandise. This also works the other way round in case the number of retailers is small. The number of functions performed by a particular retailer has a direct relation to the percentage and volume of sales needed to cover both their costs and profits. As a result of these functions, retailers are required to perform the following activities: ACTIVITIES PERFORMED BY RETAILERS Retailers undertake various business activities and perform functions that add value to the offerings they make to their target segments. Retailers provide convenient location, stock and appropriate mix of merchandise in suitable packages in accordance with the needs of customers. The four major activities carried out by retailers are:

1. Arrange for assortment of offerings 2. Breaking quantity 3. Holding stock 4. Extending services

ARRANGING ASSORTMENT An assortment is a retailer’s selection of merchandise. It includes both the depth and breadth of products carried. Retailers have to select the combination of assortments from various categories. The assortments must include substitutable items of multiple brands and price points. They should be distinguished on account of physical dimensions and attributes e.g., colour or flavour. The small retailer takes assortment decision on the basis of his experience;

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on the other hand retailers from organized retailing depend on a detailed study of past trends and future projections. Retailers need to consider certain factors while devising assortment plans for their stores: profitability associated with particular merchandise mix, store image, layout and the level of compatibility between the existing merchandise. For example, FoodWorld, a leading food supermarket positioned as a one-stop shopping centre, deals in multiple product categories along with all possible variants of brands, stock keeping units, and physical attributes in order to meet the expectations of their consumers and survive in the business. Whereas, Subhiksha, a grocery chain in south India has impressive assortments of only the fast moving brands rather than all available variants in the market. Their assortment plan is governed by location, size and store image of their stores.

BREAKING BULK Breaking bulk means physical repackaging of the products by retailers in small unit sizes according to customer’s convenience and stocking requirements. Normally, retailers receive large quantities of sacks and cases of merchandise from suppliers to reduce their transportation costs. In order to meet their customers’ requirements retailers have to break or arrange the bulk into convenient units. This entire function of the retailers adds value to the offerings not only for the end customers but also for the suppliers in the value chain. Even in the earlier days of generic and commodity-based trading most of the retailers used to perform this important function in the value chain. This function receives negligible attention from the retailers now due the introduction of new product categories, such as FMCG and readyto-wear apparel.

HOLDING STOCK To ensure the regular availability of the offerings retailers maintain appropriate levels of inventory. Consumers normally depend on the retailers directly to replenish their stocks at home. Therefore, retailers, on periodic basis, maintain the required levels of stock to meet the regular or seasonal fluctuations in the demand. Retailers need to maintain equilibrium between the range or variety carried and the sales which it gives rise to. Retailers have to face the negative consequences of holding unwanted levels of stock—for instance, too little stock

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This has not only diluted the relevance of service providers in the unorganized sector but has also enhanced the confidence of the customers in the retai9l services provided by the particular retail chain. Time Zone. although many categorization schemes have been proposed. home delivery. At the same time. Retailers in the organized sector.will hamper the sales volume. as after-sales service is considered to be an integral ingredient of the watch purchase. For example. thereby making the shopping experience convenient and enjoyable. they provide stocking place. service centres with proper equipment and trained manpower. set up in all its stores. Generally. -21- . Retailers offer credit. after-sales services and information regarding new products to their customers. whereas. There is no universally accepted method of classifying a retail outlet. EXTENDING SERVICES Retailing provides multiple services to immediate customers and other members of the value chain. to a certain extent. the first organized retail chain of wristwatches in India. too much stock will increase the retailer’s cost of operation. At the same time. are using effective software packages for maintaining adequate levels of inventory. started by leading watch manufacturers Titan. and information about the concerned target segment to the suppliers. Some of these include classifying on the basis of v Number of outlets v Margin Vs Turnover v Location v Size. reach to the ultimate customers. CATEGORIZING RETAILERS Categorizing retailers helps in understanding the competition and the frequent chandes that occur in retailing. The set of services extended by particular retailers may be part of their core product offerings or it may be ‘add on’ to their product or service. retailers avail of just-in-time deliveries with the help of efficient consumer response systems. which reduces the burden of maintaining high levels of stocks. Some are so small that they have to stock only on the shop floor. in small towns of India most retailers have arrangements with the nearby warehouses to stock the goods.

sales staff has minimal product knowledge. They have competitive weaknesses that small retailers can exploit. such as wholesalers. and sophisticated forecasting and inventory systems. However. to carry out activities they might not otherwise engage in. chain stores account for nearly 95% of general merchandise stores. While any retailer operating more than one store can be technically classified as a chain owner. Big stores focus on large markets where their customers live and work. Most offer the same standardized assortments of products nationally. including regional or national reputation. Branding is important to them. Often. Most large retailers have little connection with -22- . the consistency in their products and services. a greater number of outlets add strength to the firm because it is able to spread fixed costs. They use technology to learn more about their customers and target them with point-of-sale machines interactive kiosks. Big stores have many strengths.The number of outlets operated by a retailer can have a significant impact on the competitiveness of a retail firm. over a greater number of stores in addition to acquiring economies of purchase. the fact that they are open when people can and want to shop and the clear consistent image and identity they develop and maintain challenge the abilities and resources of many small retailers. such as advertising and managers’ salaries. for practical purposes a chain store refers to a retail firm which has more than 11 units. vast inventory and hassle-free return and exchange policies. for example. Because of their size. such as extended payment terms and special package sizes. Pricing is often a key area of focus for these retailers.They tend to stock a narrow range of inventory that sells well and maintain an extensive inventory of the fast selling products. Small chains can use economies of scale while tailoring merchandise to local needs. huge buying power. Their prime locations. chain stores are often channel captains of the marketing channel—captains can influence other channel partners. large retailers are not perfect. Generally. In the United States. Local managers have little say in inventory selection. from inventory selection to store layout. Staff turnover is extremely high. A chain store could have either a standard stock list ensuring that the same merchandise is stocked in every retail outlet or an optional stock list giving the outlets the advantage of changing the merchandise according to customer needs in the area. Perhaps their biggest advantage is their knowledge in every aspect of their business. Big chains operating on a national scale can save costs by a centralized system of buying and accounting.

Independent retailers can co-exist and flourish in the shadow of the big chains by developing a niche within the diverse market.the community they serve. v Focus on profit instead of volume (be ready to lose an occasional sale). The successful independent retailers embrace the following principles: v Be prepared for change. The niche should be developed on the basis of new or unusual product offerings. including precise buying practices. Efficient operations. a retailer sells his inventory. v Learn more about customers and include best customers in a database. A 30% margin implies that a retailer generates Rs 30 for every Rs 100 sales that can be used to pay operating expenses. Gross margin and inventory turnover is another means of classifying retailers.com. While value is important. v Buy with precision and search out speciality suppliers. Larger companies are often slow to recognize and react to changes in their local markets. The road to success for the independent retailer lies in doing all the things those big chain stores can not or will not do. superior service and overall quality. On the basis of this. These -23- . are a must. v Maintain essential inventory. v Employ the best possible staff. v Provide extraordinary service. v Understand the significance of the Internet. on average. v Charge regular prices and avoid discounting (ensure requisite mark-up). Customer contact within the niche market must be characterized by ‘high-touch’ service. v Invest appropriately in advertising and promotion. Jewellery stores and appliance stores are examples of high margin low turnover stores and only a few retailers achieve high margin high turnover. v Move to a narrower niche market and stop competing directly with the big retailers. exemplified by Amazon. price may be less important. They usually do not offer special services. Gross margin is net sales minus the cost of goods sold and gross margin percentage is the return on sales. Inventory turnover refers to the number of times per year. The key factor is innovation: stores that do not change will perish. retailers are classified as low margin low turnover—those that cannot survive the competition—and low margin high turnover.

One of the old means of classification of retailers is by location. While multinational retail chains are looking for new markets. in this sphere too. Accordingly the retailers too are fast adjusting to the changing consumer preferences. Mass merchandisers (Wal-Mart. Besides renovating old stores. consumer spending is shifting from goods to services. Size is often used as a yardstick to classify retailers because costs often differ on the basis of size. manufacturers are identifying. For example. Consumers are not only looking for the core products or functional benefits from the retailers but also the non-functional benefits. With the advent of the Internet.retailers are in the best position to combat competition because their high turnover allows them to withstand price wars. which need to be compatible with their lifestyles. The existing retail houses are also gearing up to face the emerging competition from the organized sector and the changing outlook of the consumers. The drawback of the classification by this method is that service retailers who have no inventory turnover cannot be encompassed. Retailers are no longer satisfied with traditional locations within a city’s business district but are on the constant lookout for alternate locations to reach customers. most of the traditional eating joints in India such as Haldiram. with big retailers having lower operational costs per dollar than smaller players. or evolving new retail formats. discount clubs (Subhiksha). globalization and consumer preferences. the Internet may make size an obsolete method of comparison. TRENDS IN RETAIL FORMATS Retail industry is continuously going through changes on account of liberalization. redefining. For example. retailers are testing unorthodox locations to expand their clientele. However. Mom-and-pop Stores and Traditional Kirana Stores The retail sector is changing as new store categories have started dominating the marketplace. Bikaner and Sagar Ratna have revised their product offerings and atmospherics on the lines of the multinational chains to compete with them and to serve changed expectations of the consumers. this area of retailing is likely to undergo tremendous changes in the coming years. generally within a metropolitan area. -24- . Big Bazaar).

But even in the mass-merchandising segment. In 2002.6%. Forrester Research Agency projects e-commerce revenue to rise to $123 billion in 2004. which are expanding retail e-commerce into new markets. respectively). E-commerce The amount of retail business being conducted on the Internet is growing every year. are finding the competition intense. Companies like Amazon. -25- . Vishal chain). is a very common retail formats they are also undertaking large scale renovations to appeal and attract their target consumer segments. however. Crew. However.5% in 2003).C.com and First and second. up from 4. It has also come from financial burdens incurred by companies that acquired competing companies and grew too fast. an increase of some 28% over the previous year and for e-tailing to comprise a bigger slice of the overall retail pie (5. In part. these department stores have suffered badly. and Montgomery Ward dominated malls and downtowns all over America. Tanishq) have all developed a successful retail models. department stores such as Saks and Federated experienced declining revenues (down 3% and 1% respectively). while Wal-Mart and Target saw revenues grow (by 12% and 10%. Small independent stores. this is a result of changing shopping patterns and increased competition from discount stores. names like Sears. the competition is fierce. Macy’s. across product categories. are now being followed by bricks-and-mortar and catalogue retailers like J. Department Stores A few years ago.so-called category killers (Home Depot. J. as is evidenced by Kmart’s bankruptcy announcement in 2002. Indeed. Penney. and speciality retailers (Time Zone. It is unlikely that these players will disappear from the market. they should be ready to expect more bumps as the strong get stronger and the weak get absorbed.com. which helped pioneer the retail e-commerce concept. Over the last decade or so. At the same time. the small mom-and-pop stores and the traditional department stores. Many major retail organizations and manufacturers have online retail stores.

the Body Shop. And where once shopping malls. particularly in home furnishings and home improvement. anchored by at least one major department store. Some are very high-end (Louis Vuitton) while others cater to the price-conscious masses (Old Navy). now the discount retailers and category killers are at the top of the heap. and in many of these stores the hand of bureaucracy is not heavy.g. employees). such as Costco. now it is the behemoth Wal-Marts and Home Depots. with more than a million. Industry experts predict growth in this segment. file cabinets. The future of this category is better than that of many of the more general discounters. Category Killers These are the giant retailers that dominate one area of merchandise (e. These stores concentrate on one type of merchandise and offer it in a manner that makes it special. Where once mom-and-pop and department stores dominated retail. these companies offer earn-and-learn experiences with vendors and distributors before they move onward and upward.Discount Stores These are giants such as Wal-Mart (the largest retailer in the world. Tower Records and The Sports Authority). -26- . These. Promotion and responsibility come quickly to those willing to work hard. marketing. Many are so successful that department stores have started to emulate their buying. and it seems to attract many of the best and brightest in retail. and Victoria’s Secret. Office Depot. as well as membership warehouses. have changed the landscape of both the retail industry and America.used to be the dominant retail presence lining the nation’s roads. but the same employment caveats apply.. electronic goods or pet food in such huge volumes that they can then sell them at prices even fairly large competitors cannot match. Speciality Stores These include Crate & Barrel. . For most job seekers. Target and Kmart. They are able to buy bathroom tiles. and merchandise display strategies. along with the category killers.

E-tailers While most retailers have online storefronts. -27- . such as Amazon.com. have generated enough business to cause top brick-andmortar competitors to come up with their own Internet sites. Traditional retailers like Wal-Mart and Starbucks. strictly online purveyors with no bricksand-mortar counterparts are hoping to snare a percentage of the retail profit. hugely successful in their own right. Major players. have also set up online stores so as not to miss out on the revenue opportunities that the Interned offers.

The Consumer Protection and Guidance Society currently control Margin Free Markets. which fulfills both their social and intellectual needs. Ravikumar. which is registered charitable institution that started functioning in 1993. named Mr N. The outlets are franchises and are not actually owned by the chain. The music is not too loud and encourages conversation. offering one-stop-shop convenience and self service facility at significant discount to its customers. the prices are high and there is a wide fluctuation in the prices of groceries. which permit them to obtain larger discounts than the non-card holders. Most of these customers. conceived the idea. Due to the large number of intermediaries involved and the transportation costs. If his application is accepted. These shops deal in the enter gamut of foods required by a home for its monthly consumption. fruits and vegetables. Any retailer can upgrade his shop to a Margin Free outlet by sending in an application to the society. The consumers are assured of quality. consumer goods and household articles. food and non-food FMCG items. quantity and fair price of the goods sold through the Margin Free Markets. The idea turned out to be an instant success in Kerala especially because Kerala is more of. and the person behind the counter is non-intrusive and friendly. This is because the other consumer is not listening in. Margin Free outlets are typical discount stores. An enthusiastic entrepreneur. he has to make the necessary investment as required. you will have your share of privacy. -28- . The first outlet of this chain started functioning on 26 January 1994 at Thiruvananthapuram. There are currently more than 275 franchisees of Margin Free Markets spread all over south India. Any consumer knows that even when it is crowded at Barista. fruits and vegetables. The necessity to offer protection against the rising prices gave birth to the idea of Margin Free Markets. a ‘consumer’ state than a ‘producing’ state Kerala depends on her neighbouring states for her consumer needs.BARISTA Barista positioned its outlets as a place where people meet each other in an environment. grocery. MARGIN FREE MARKETS Margin Free Markets is the largest retail chain in the state of Kerala and one of the leading retail chains in India. he is too involved in himself. turn out to be its permanents customers by taking discounts cards. in time.

Vastra outlet in Rajouri in New Delhi) v Independent retailer (Chanakya Sweet Shop near Hazratganj in Lucknow) v Consumer (consumer owned grocery stores in man y residential societies) v Co-operative society (e.g. A retail unit could be owned by: v Manufacturer (e. This epithet has its roots in the huge number of retail enterprises in India. which were over 12 million in 2003.g.g. some scholars have started referring to India as a nation of shopkeepers. each ownership format serves a marketplace niche and presents certain advantages and disadvantages. Organized retail stores are generally characterized by large.g. operated as a franchisee. there are also some very big retailers. in an ambience that is conducive for shopping and provides a memorable experience to customers. From positioning and operating perspectives.. Retail firms may .g. company owned retail outlets) v Wholesaler (e. THE CHANGING STRUCTURE OF RETAILING All dynamic developments in retailing. Cottage Emporia) v Ownership shared among franchiser and franchisee (e... Mother Dairy milk booths in Delhi) v Government (e. professionally managed store formats providing goods and services that appeal to customers. Archies Gallery) Although most Indian retailers fall in the category of small-scale units.. owned by manufacturers or wholesalers.. parts of a retail chain. Retail executives must not lose sight of this in playing up their strengths and working around their weaknesses.RETAIL ORGANIZATION The term retail organization refers to the basic format or structure of a retail business designed to cater to the needs of the end customer. Recently.be independently owned. consumersowned or co-operative society. have been -29- . from the birth of departmental stores in the last century to the recent emergence of warehouse clubs and hypermarkets. About 78% of these are small family businesses utilizing only household labour. leased departments.

The retail business formats have been changing very fast mainly due to technological influences. useful in the design of retailing strategy. the challenge for the retailer now is to keep abreast of these latest formats in order to maintain and grow its share of market and compete within its band of retailers.of greater information to the customer. usually the individual who has the day-to-day responsibility for running the business. a big challenge for the retailer in the information savvy world of today is that the opportunities for price differentiate itself qualitatively by superior customer services or better value for money to the customer. retail units are classified on multiple of ownership. retail businesses are extremely diverse and there are quite a few types of retail units. The Internet and the Web technologies have created a myriad f opportunities for the Web-based business model of retailing. -30- . Changing customer demand. Sole proprietorship: . geographical locations. A key impact of technology has been provision . new technologies.The vast majority of small businesses start out as sole proprietorships. Besides. intense competition. Hence. These firms are owned by one person. Therefore. CLASSIFICATION OF RETAIL UNITS Conceptual classification of a business unit provides the marketers with strategic guidelines. Retailers Classified on the Basis of Ownership One of the first decisions that the retailer has to make as a business owner is how the company should be structured. kind of customer interaction level of services provided etc. This has created a competition for the retailer with its own self. so it is important to consult with an accountant and attorney to help one select preferred ownership structure. Besides. and social changes create new opportunities even as they shake up existing business. This decision is likely to have long-term implications. There are four basic legal forms of ownership for retailers: 1.responses to a changing environment.

In a partnership.A partnership is a common format in India for carrying out business activities (particularly trading) on a small or medium scale.Franchising involves a contractual arrangement between a franchiser (which may be a manufacturer. joint ventures may be taxed like association of persons.A joint venture is not well defined in the law.A chain retailer operates multiple outlets (store units) under common ownership. sometimes at maximum marginal rates.The total number of retailers in India is estimated to be over 5 million in 2003. a wholesaler.2. which allows the franchisee to conduct a -31- . Operational structure defines the key strategic decision of retail entity. The owners are members. Retail Chain: . Independent retail unit: . Joint venture: . but is clearly for a limited period of time or a single project. two or more people share ownership of a single business. An independent retailer owns one retail unit. or a service sponsor) and a retail franchisee. Partnership: . Retail firms can be classified into five heads on the basis of their respective operational structures: 1. and the duration of the LLC is usually determined when the organization papers are filed. 3. It acts like a general partnership. Limited liability Company (public and private):. Classification of Retailers on the basis of Operational Structure Retail businesses are classified on the basis of their operational and organizational structure. it usually engages in some level of centralized (or coordinated) purchasing and decision making. About 78% of these are small family businesses utilizing only household labour. 4.The Limited Liability Company (LLC) is a relatively new type of hybrid business structure that is now permissible in most states. Franchising: . Unless incorporated or established as a firm as evidenced by a deed. 3. 2. whether to hire employees and manage the distributed sales function internally or to reach customers though franchised outlets owned and operated by local entrepreneurs.

given form of business under and establishments name and according to a given pattern of business. which attracts the customers staying close by. offering a variety of merchandise. low rent.Besides the above location-based classification. 2. Usually this is done in case of department and speciality stores and also at times. In this context the detailed example of Kendriya Bhandar in India. a retailer locates his store in a place where a group o retail outlets. 4. we also have in India-retailers who prefer specialized markets.Co-operative outlets are generally owned and managed by co-operative societies. Leased Department or Shop-in-shop:-It refers to department in a retail store that are rented to an outside party.Retailers located at a site which is not connected to other retailers depend entirely on their sore’s drawing power and on the various promotional tools to attract customers. Classification of Retailers on the basis or Retail Location Retailers have also been also been classified according to their store location. Co-operative Outlets: . This type of location has several advantages including no competition. and also compete against each other for the same customers. 3. Retailers in a Business-associated Location:-In this case. Retailers can locate their stores in an isolated place and attract the customers to the store on their own strength—such as a small grocery store or paan shop in a colony. easy parking and lower property costs. Retailers in Specialized Markets: . 5. work together to attract customers to their retail area. particularly traditional independent retailers or chain stores. -32- . Retailers in a free-standing location:. Classification of retailers on the basis of location is discussed below: 1. For example the Haldiram’s outlet on the DelhiJaipur highway and the McDonald’s outlet on Delhi-Ludhiana highway. in discount stores. better visibility from the road.

serious efforts are being made to design new airport facilities in order to incorporate substantial amounts of retail space.For quite some time. in Chennai.In India. duty-free shops and newsstands dominated the small amount of commercial space provided at airports. Airport Retailing: . most of the cities have specialized markets famous for a particular product category. Lately. T Nagar for ready-made garments. For example. Usman street for jewellery.` -33- . The key features of airport retailing are: v Large groups of prospective shoppers v Captive audience v Strong sales per square foot of retail space v Strong sales of gift and travel items v Difficulty in replenishment v Longer operating hours v Duty-free shopping possible. 4. Poo Kadia for food and vegetables. Govindappan naicleen street for grocery. Bunder treet for stationery products. Godown Street is famous for clothes.

Retailers offering a broad variety of merchandise mix. LifeStyle has 3 stores and there are 12 Pantaloon Family Stores. at these centres attract large crowds. LifeStyle. The consumer can choose between different stores for different needs. limited support from sales people etc. bargain and image to the particular stores. Such specialized retail operations provide expertise economies of scale. Speciality Stores: . low operating costs and margins. supermarkets. Supermarkets and Hypermarkets:. There are many different retail stores in India—convenience stores. Shoppers’ Stop and Westside. can be classified as follows: . Hypermarkets are characterized by large store size. brand stores and discount stores characterized by the variety of merchandise mix offered by a respective retail format. the traditionally independent retailers in the specialized market centres operate in a particular product category.ft. Globus has 4 stores. medicines) reigned supreme. on account of variety of merchandise mix. -34- .000sq. hypermarkets.VARIETY OF MERCHANDISE MIX The retail merchandising has come a long way in India since the days when general stores (kirana) that stocked everything from groceries to stationery and small shops that sold limited varieties of products (such as clothes. Usually. limited or no service and low prices are characterized by low margins. Discount stores prefer shopping centres that provide space at lower rents as they attract customers from other adjoining stores in the shopping centre. Discount Stores: . offering a broad variety and depth of merchandise. In India.Department Stores: . Pantaloon.Speciality stores stress on one or a limited number of complementary product categories and extend a high level of service to their customers. low prices and comprehensive range of merchandise. furniture.A hypermarket is a very large retail unit offering merchandise at low prices. Globus. low investments on fixtures. Superstores have a sales area of over 50. department stores are located within the planned shopping centres or traditional up market downtown centres. commonly part of a retail chain. All of them are multiproduct stores. department stores. Retail units. heavy advertising.It is a large retail store organized into a number of departments. The leading fashion department stores in India are Ebony. Ebony has 7 stores.

In fact. ft. There is no integrated supply chain management outlook in the Indian traditional retail industry. The share was 62.4 sq. barber shops) and pushcarts mobile vendors. per outlet.77 3. There are also an unaccounted number of low cost Kiosks (tea stalls. mt.94 1. In 2000. the non-food retailing sector registered faster year-on-year growth than the food sales sector. Growth in retail outlets (millions) Year 1978 1984 1990 1996 Urban 0. independent.039. The turnover from private labels by major retail chains was estimated at around Rs 1200 million in 2000.5billion.02 2.000 crore segment of the market is organized. an overwhelming proportion of the Rs 400.000 crore by the year 2005—an annual increase of 20%. in 2001. In India.80 Rural 1. However. only a Rs 20.58 0. owner-managed shops.33 Total 2. which is expected to increase to Rs 800. Food sales constitute a high proportion of the total retail sales.13 Source: indiainfoline -35- . while non-food sales were worth Rs4189. The trend to market private labels by a specific retail store is catching on in India as it helps to improve margins.2 billion. worth approximately Rs 7. with an average selling space of 29. Retailing is India’s largest industry in terms of contribution to GDP and constitutes 13% of the GDP (Gross Domestic Product)..7% in 2001. There are around 5 million retail outlets in India.36 5.000 crore. According to a survey by AT Kearney.000 crore retail markets is unorganized.35 2. the global management consultancy AT Kearney put retail trade at Rs 400. which is quite low in comparison to the developed economies. mt.76 2.RETAIL IN INDIA The retail industry in India is largely unorganized and predominantly consists of small. snack centres.75 0. Total retail sales area in India was estimated at 328 million sq.42 3. the per capita retailing space is about 2 sq.

In 2001.3% 27.228.Composition of urban outlets Retail Outlet Grocers Cosmetic stores Chemist Food stores General stores Tobacco. The modern retail formats are showing robust growth as several retail chains have established a base in metropolitan cities.6% Source: Indiainfoline EMERGENCE OF ORGANIZED RETAILING Organized retailing in India represents a small fraction of the total retail market. organized retail trade in India was worth Rs 11. -36- . space and rentals are proving to be the biggest constraints to the development of large formats in metropolitan cities since retailers are aiming at prime locations.6% 14.0% 6.4% 17. especially in south India and are spreading all over India at a rapid pace.7 billion.7% 4.0% 17. However.3% 6.0% Composition of rural outlets Retail Outlet Grocers Composition 55.5% Chemists Others 3. pan stores others Source: indiainfoline Composition 34.6% General stores 13.

Players that entered before the easing of restrictions on FDI in retail had to come through different modes. Rural India continues to be serviced by small retail outlets. Only 3. The McKinsey report predicts that FDI will help the retail businesses to grow to US $ 460-470 billion by 2010. Global players in the retail segment have been entering the market for a while now. cash and carry operations (Giant) and licensing (Marks & Spencer’s). Apart from this. There is also a strong trend in favour of one-stop shops like supermarkets and department stores. provision stores.6 million outlets cater to more than 700 million inhabitants of rural India. lead to the closure of many small trading businesses and result in large-scale unemployment.In urban India. -37- . government has discouraged FDI in the retail sector. The organized retailer should be able to. ready-to-eat food has been on the rise. Therefore. Pizza Hut). The demand for frozen. There has been a strong resistance to foreign direct investment (FDI) in retailing from small traders who fears that foreign companies would take away their business. through diversified risks and volume sales command huge concessions on prices from the manufacturers. He should then be in a position to allow a trickle down of this advantage to consumers out of his saved costs. such as joint ventures where Indian partner is an export house (Total Health Care). especially in the metropolitan and large cities in India. such as haats. The main condition for organized retailing is that the retailer should be able to manage and influence the supply chain variables in a commercially viable and sustainable manner. which is adding to the family’s income and leading to better lifestyles rising incomes has led to an increased demand for better quality products while lack of time has led to a demand for better quality products while lack of time has led to a demand for convenience and services. Here. instant. families are experiencing growth in income but dearth of time. peeth and melas that come up at the same location at regular time intervals. At present. foreign retailers can enter the retailing sector only through restricted modes. More and more women are taking up corporate jobs. paan shops and ration shops are the most popular vehicles of retailing. there are periodic or temporary markets. franchising/local manufacturing/sourcing from small-scale sector (McDonald’s.

there are as many ‘middle income and above’ households in the rural areas as there are in the urban areas. stalls. the number of middle and high-income households in rural India is expected to grow from 80 million to 111 million by 2007. In all. Three fourths of India’s population lives in rural areas and brings one-third of the national income.8 shops per village (the term ‘shop’ refers to any type of premises— huts. This rural population is spread all over India in about 0.3 million urban households as against 1.21 million) are connected by puccca roads. According to the NCAER projections. At the highest income level there are 2. currently estimated at around Rs 50. This simply shows the great purchasing potential of rural India.000 crores.RETAILING IN RURAL INDIA An important phenomenon in India’s consumer culture is the emergence of the rural market for several basis consumer goods. and 33% of all villages (0. particularly in the FMCG sector.6 million households in rural areas. There are almost twice as many ‘lower middle income’ households in rural areas as in the urban areas.5% of rural Indians are literate (men 59%. women 31%). shacks that sell goods). thus offering tremendous growth potential to the companies.8 million retail outlets in rural India. Also. Nearly 4. the rural penetration rates are low. with an annual size. As per the National Council for Applied Economic Research (NCAER) study. there are more than 3. It is a definite boon for the companies who have already reached the plateau in their business curve in urban India and are seeking new ways to increase sales. It has also brought the much-needed volume driven growth for companies. But despite the high rural share in these categories. averaging 5. -38- .6 million villages. in value terms. the rural market has been growing steadily over the years and is now bigger than the urban market for FMCGs (53% share of the total market).

30 Coffee Biscuits Toilet soap Toothpaste Penetration % 7 60.09 6.79 6021 793 1441 4955 601 354 6442 1323 Body talcum power 940 Toothpaste Tea Health beverages Electric bulbs Cigarettes Packaged biscuits 2080 6500 908 750 7662 2500 # Figures in Rs crore for 1998-99 * Annual growth rates compounded for last five years (1998-2003) Source: Business Intelligence Unit and NCAER.97 28.54 9. Crore) 7500 13.65 Washing machine Pressure cooker Instant water heater Mixer/grinder Colour television Scooter Motorcycle Source: NCAER.RURAL MARKET PENETRATION LEVELS SELECTED GOODS Durable Refrigerator Rural share % Product 24.1 91.43 28.65 23. 1998-99 -39- .56 47.1 15.87 Talcum powder 16.8 47.6 Black and white television 62.6 35.5 RURAL FMCG MARKET: A SNAPSHOT Category Toilet soap Total size # % Growth* Rural size (Rs.4 23.04 27. 2001 14.77 28.4 13.64 51.51 2.4 Hair oil Shampoo Razor blade Skin cream 16.5 10.0 39.

000 Rs 25. small retailers were dealing in only 30 items. As we know.7 13. pricing and promotion exercise. limited storage and transport facilities.001-50.06.000 8. the significance of retail network increases in the entire rural marketing system. which were quite different from these of the adjoining villages. Therefore.001-77. Product lines displayed and sold by retailers indicated that differences persisted from village to village.3 26.8 22.0 41.6 5. one needs to have good understanding of the role or rural retailers in rural India.4 44.000 2. buyers etc.06. As per a study conducted in the eastern UP belt.000 1994-95 2000-2001 2001-2006* 1. inaccessible markets and high level of demand concentration. More than 70% of retailers from rural areas depended on the nearest feeder centre for their purchases. finding a supplier. -40- . almost 30% of retail outlets were managed by females. transporting.0 61. Each village represented its preferences.7 Rs 50. 20% preferred the haat or mela and the rest preferred the city.6 20.8 4.6 3. While it is necessary for marketers to select a particular distribution channel in rural areas in accordance with the characteristics of the product—consumable or durable—the shelf-life of the product and other factors have to be kept in mind.000 <Rs 25. buying.2 Rs 77. In such circumstances. The challenges for the marketers and retailers are immense in rural India on account of poor logistics. retailers undertake a wide range of activities such as determining consumer needs.4 5. While big-retailers were dealing in 60 to over 100 items. No doubt the retailer is a key source of information for the entire range of entities from manufacturers. wholesalers.PERCENTAGE OF RURAL HOUSEHOLDS Income group >Rs 1.000-1.2% GDP growth Source: NCAER Most manufacturers and marketing companies have a distribution arrangement for villages through village shopkeepers.4 * 2000-2001 and 2001-2007 projections are based on 7.1 37.

retail outlet within villages. the distribution has been left to the initiative of the shopkeepers and dealers in larger villages and to the shopkeepers of smaller villages (within the village retail set-up). The percentage of such villages is merely 10% of the total number of villages in India. retailers also provide credit facilities. 20% visit bi-weekly and rest as per need. As most of the regular customers are neighbors and relatives. The study of retailer’s behaviour. retailers follow a strict schedule.000 persons or above. credit facility becomes an integral part of retail transactions. requirements and network is crucial for strategy in respect of the rural market. Therefore. Most of the corporate have concentrated their efforts on rural areas which have a population of 2. Retail network is an important link between a consumer and a producer. hawkers and feeder centres). namely haats/shandies. This not only saves his time but also is economical. Existing retail formats available in rural India are retail outlets within village. They provide information regarding quantity of pack. It is not compulsory that the retailer himself will go for making purchases. promotional schemes. influence of advertisement. whereas the rest 30% go for cash transaction. (periodic markets). play an exceptional role in reaching to the rural consumers. Rural consumers have sufficient opportunities to make a choice not only in respect of products and brands but also regarding retail formats (haats. At the same time. Retailers are going for diversification in product line. 40% visit market weekly for replenishing the stock..57 lakh villages for distribution appears to be a formidable task. for villages with less than 2. haats and shandies and hawkers. consumer feedback. relatives or even neighbors. etc. he may ask favour of fellow retailers.In order to maintain regular sales. In order to attract customers. etc. feeder centre or market. Covering 5. Thirty per cent visit market (feeder centre) daily. melas. Seventy per cent prefer cash credit transaction.500 populations. -41- . Female-owned shops are coming up. Doubts in respect of credit facility still persist. the age-old mobile department stores.

v Low per capita income and social. Fifty eight per cent visit haats to buy specific products although more than half of them have similar products available in their villages. -42- . economic and cultural differences of the rural masses as compared to the urban segment. The importance of haats in the lives of the rural people is evident from the fact that 81% of the buyers are regular visitors to periodic markets. v Low level of exposure to different product categories and product brands. Villages with less than 500 may not even have one shop. Most of the companies. They deal in limited product and limited brand variety within each product category. railway connectivity) with highly dispersed and thinly populated villages that need huge expenditure to establish distribution channels. are already busy formulating their rural marketing strategy to tap the potential before competition catches up. v Limited or traditional medium of communication and other sales promotion difficulties. periodic markets are normally timed with religious festivals. across product categories. The companies with years of experience in the urban markets are facing serious problems in rural areas in respect of distribution strategy. This limitation age attributed to various factors such as: v Inadequate infrastructure (road. These places attract a large number of itinerant merchants and temporary shops are set up to sell all kinds of goods. Rural areas having a population of more than 1500 enjoy a strong parallel retail format set-up. The number of retail outlets is subject to the population of villages in India. mostly as a secondary business activity. PERIODIC MARKETS (SHANDIES/HAATS/JATHRAS) Periodic markets are traditional places where the rural consumers congregate as a rule. v Inability of the small rural retailers to invest in stocks for multiple products or brands.RETAIL OUTLETS WITHIN VILLAGES These are basically run at low scale. While shandies/haats are held on a particular day every week.

There are around 5 million retail outlets in India. India’s largest MNC. a subsidiary of Unilever. accounting for 13% of the GDP. other than the seven metro cities. it is an even greater challenge to regularly transport products to the far-flung villages.5 area offices and 59 rural/remote area offices to cater directly the needs of the rural consumers. They include formats like kirana and independent stores that are typical of the unorganized retail sector and also the most administratively organized form of Indian retailing—co-operatives and government controlled retail institutions. Any serous marketer must strive to reach at least 13. which helps its brands to reach the interiors of the rural market. has evolved a hub and spoke model to reach the villages. The problems of physical distribution and channel management adversely affect the service as well as the cost aspect. India’s 6. bullock-carts and even boats in the backwaters of Kerala. owner-managed shops. as a rural and semi-urban market. Food sales constitute a high proportion of total retail sales. Retiling is India’s largest industry. Hindustan Lever. which considers rural India as a future growth driver. These distributors appoint and supply once a week smaller distributors in adjoining areas. LG has set up 4. However. To service remote villages.113 villages with a population of more than 5. about 700 million Indians live in rural areas and approaching them is not an easy task with the existing retail infrastructure. Coca-Cola. The traditional retail formats refer to retail formats that have long been part of the retail landscape of India. km. The retail industry in India is highly unorganized and predominantly consists of small. the company depot supplies twice a week to the large distributors who act as hubs. given the poor state of roads.One of the major challenges for companies is to ensure availability of the product or service through the presents distribution channel. To ensure full loads. For solving this problem company can use their delivery vans. independent.27. stockists use auto rickshaws. Marketers must trade-off the distribution cost with incremental market penetration. LG Electronics defines all cities and towns. To tap these unexplored country markets. which can serve two purposes—it can take the products to the customers in every nook and corner of the market and it also enables the firm to establish direct contact with them and thereby facilitate sales promotion. only the bigwigs can adopt this channel. has built a strong distribution system.000. However. -43- .000 villages are spread over 3. Over the years.2 million sq.

using and disposing goods and services. -44- . shopping timing and choice of retail format and store. byt the utility of their buying process itself. Personal Motives v Role playing—shopping activities are learned behaviours and are expected or accepted as part of one’s position or role. psychological. such as mother or housewife. In the retailing context marketers are required to understand customers’ shopping behaviour. brand selection. The behaviour of humans as consumers is complex. v Physical activity—it involves considerable amount of exercise. It is equally important for the retailer to identify the various stages in the consumer decision-making process and the major influences at each stage. v Learning about new trends—shopping provides consumers with information about trends and movements and product symbols reflecting attitudes and lifestyle. among other things. Marketers’ understanding of the drivers of consumers’ buying behaviour will help them to serve their customers effectively and efficiently and attract new customers. Consumers’ motives are important and positively related to their pleasure and satisfaction while shopping in terms of retail choices. v Diversion—shopping may be motivated not by the expected utility of consuming. Consumers’ shopping behaviour can be understood by analyzing the factors that affect behaviour. WHY DO PEOPLE SHOP? It has been suggested that consumer shopping activities are influenced by personal and social motives. listening to the sounds and smelling scents. This would make possible an effective retail marketing strategy. emotional states or moods may explain why or when someone goes shopping.RETAIL CUSTOMER Consumer buying behaviour refers to the buying behaviour of the ultimate consumer. money and effort for buying. Thus. v Sensory stimulation—shopping can provide sensory benefits such as looking at and handling merchandise. environmental or related to the lifestyle of the customer. Consumer behaviour is the study of how consumers make decisions to use their respective resources such as time. which includes decision variables regarding. These factors could be demographic.

v Status and authority—shopping may provide an opportunity to attain status and power by being waited. v Pleasure Bargaining—shopping may offer the enjoyment of gaining a lower price through bargaining comparison shopping or visiting special sales. LifeStyle DEMOGRAPHIC FACTORS Gender Age Occupation Education Family size Income ENVIRONMENTAL FACTORS Physical Environment Social Environment—culture. FACTORS AFFECTING CONSUMER DECISION-MAKING A consumer’s purchase decision tends to be affected by the following four factors: 1.Social Motives v Social experience outside home—shopping can provide opportunities for seeking new acquaintances. social class LIFESTYLE Activities and interests Nature of occupation PSYCHOLOGICAL FACTORS Nituves Perception Learning Attitude Personality -45- . Demographic 2. Having understood why people shop it is important to analyze the factors that affect the consumers’ decision making process regarding what. v Peer group attraction—certain stores provide a meeting place where members of peer group may gather. Environmental 4. when and from where to shop. encounters with friends or just ‘people watching’. v Communication with other similar interests—it provides opportunity for interactions with other customers or sales people. Psychological 3.

motives. they are higher spenders than.com highlights that Indian working women have to balance their wardrobe collection based on requirements of different occasions related to professional workplace or family gathering.DEMOGRAPHIC FACTORS Demographic factors are unique to a particular person. marital status etc. A study by imagesfashion. The environmental factors influence consumers’ wants. among other things. spatial relationships. An individual’s lifestyle is influenced by. An understanding of consumers’ psychology guides the marketers’ segmentation strategy. cocustomers. LIFESTYLE Lifestyle refers to an individual’s mode of living as identified by his or her activities. age. It also involves identification of who is responsible for the decision-making or buying and who is the ultimate consumer. Lifestyle is considered to be highly correlated with consumer’s values and personality. Lifestyle variables have been measured by identifying a consumer’s day-to-day activities and interests. For example. social class . At the same time. including physical objects. interests and opinions. quantifiable and easily identifiable population data such as sex. single-income families. for e. the social group he belongs to and his occupation. They are objective. learning. -46- . which in turn influence effective and cognitive responses and among other things the shopping behaviour of the individual.. the social factors . PSYCHOLOGICAL FACTORS Psychological factors refer to the intrinsic or inner aspects of the individual. reference groups.g. double-income-no-kids (DINKS) families in metros shop very regularly at the super malls because of the limited time at their disposal and they also look for entertainment while shopping on weekends. income. ENVIRONMENTAL FACTORS Environmental factors cover all the physical and social characteristics of a consumer’s external world.

9% 4.6% 25% 7.8% 18.4% 5% 24.7% 7.5% 15.5% 29.1% 6.4% 2.2% 1% 21.2 30.Dress working women prefer for different occasions Occasions In Office At Home To Party While Shopping During Festivals Western wear Ethnic wear Total 66.6% 20.2% 10.7 85.9 80.5% -47- . such as TVs Buying durables such as washing machines Deciding on holiday destinations 20.9% Family Elders Children 14% 11.4% 8.8 10.2% 34% 22.1% 28.5% 5.4% 12. WHO DECIDES? Self Buying a house Child’s marriage Own marriage Child’s education Taking a loan Fixing monthly Budget Buying entertainment Durables.8% 4.2 While Travelling 89.6% 0.6% 19.3 11.9 3.com Men—The Major Decision-Maker In India consumption-related family decision-making in all areas—ranging from which cars to buy to what cloth manufacturers to patronize—is dictated by men when it comes to the most upscale market segment in India.6% 9.1 100 100 100 100 100 100 100 Family Occasions 17.1 31.5% 20.7% Spouse Joint 5.3% 18.4% 4% 0.2% 11.7 77.1% 33.6% 6.8% 30.9 Source: imagesfashion.8% 5.3% 10.7% 33.7% 5.4% 31.7% 6.3 20.1% 21.4% 26.6% 31.2% 0.4% 1.8 69.3% 18.6% 0.1 93.3% 24.2% 33.3% 26.2% 8.

The most comprehensive presentation is Fisk’s ‘conceptual model’ in which he summarizes store qualities as cognitive dimension. there is a strong possibility of positive behaviour towards that particular store or shopping centre. Consumer decision-making is a process of matching self-imaged with the image of relevant retail store to meet their specific needs. Retail marketers have provided considerable importance to consumers’ attitude and images in store selection and rejection. Lot of work on factors influencing consumers’ attitudes towards sores in terms of shopping practices and in terms of store character4istics has been done in the West but it is an emerging field in the developing countries. RETAIL IMAGE DIMENSION To measure the image of a retail store or shopping centre. A retailer must devise a strategy to communicate its individuality or personality across to its target segments to build their confidence in its merchandise and services. The measurement of consumers’ images of the store and measurement of consumers’ self-images aid retailers in segmenting the consumer population into groups by demographic characteristics or patronage practices based on differences in the image of the retail store or shopping centre.CONSUMERS’ IMAGE OF RETAIL STORES A consumer’s image of a store is the summation of his attitudes towards various aspects of that store. These dimensions do not constitute an exhaustive list of retail store characteristics for every tore to measure the store image. -48- . It is argued that where there is some degree of congruity of individual’s self-image and his image of a store or brand. it is essential to identify and aggregate the relevant consumer attitudes. One has to revise the list in respect of the product category they are in . These dimensions can be used to identify relevant attitudes and assist in the development of measurement instruments for a particular retail store. Every retail store possesses an individuality that differentiates it from its competitors. the retail format they have adopted and the competition they are facing along with characteristics of their target segment.

Value for price 1.Dimension 1. Price of a particular item in a particular store. Trading stamps and discounts 4. Store layout 2. Eating facilities 5. Parking availability 2. Merchandise displays 4. Store décor 3. Sales effort and store services 1. Price of same item in a substitute store 4. Traffic barrier 3. Post-transaction satisfaction 1. Congeniality 1. Reliability and usefulness of advertising 4. Billing procedures 5. 2. Store traffic and congestion 6. Price of same item in another store 3. Merchandise suitability 1. Delivery promptness and care 7. Satisfaction with returns and adjustments 3. Class of customers 5. Satisfaction with good in use 2. Depth of assortment 5. Travelling time 4. Satisfaction with accessibility to store Department store image Determinants -49- . Number of brands stocked 2. Helpfulness of sales clerks 3. Breadth of assortment 4. Number of outstanding departments in the store. Access route 2. Adequacy of credit arrangements 6. Locational convenience Determinants 1. Satisfaction with price paid 4. Quality of line 3. 3. Courtesy of sales clerks 2.

v When do customers like to shop? v How do customers like to pay? v What quality of merchandise do customers usually prefer? v What type of store has the maximum appeal for my customers? v How do customers handle servicing of the mechanical products purchased by them? v Who does most of the buying in the homes of my customers? v What is the income level of my average customer? v What is the general attitude of my customer towards his community? v How does my customer react to new and different merchandise or promotional activities? v What major changes has my customer made in the last two years? Based on the above customer profile. These factores could be classified as intrinsic and extrinsic. Advertising in various local publications could then be a good way to reach this segment. the former deals with motives. social class. retailers will have a good idea of how to serve the needs of the target market. culture and economic environment. All the information that will help the retailer to promote and sell his product better should be included in the customer profile study. Consumer behaviour in turn is affected by various factors specific to the consumer and the external environment. Depending on the product or service. -50- . Many companies seek out information on a potential user’s lifestyle. An understanding of consumer behaviour is important in order to formulate and Implement effective retail marketing strategies. perceptions and attitudes of the consumers and the latter deals with influences such as family. loyalty and spending habits. This would also enable the retailer to suitably tailor the advertising to appeal to the target market.SAMPLE OF A CUSTOMER PROFILE AND ANALYSIS Customer research helps a retailer in defining the customer segment he can and should serve and how he can serve them more effectively and profitably. Businesses that advertise heavily want to know the media habits of potential customers as well. the customer profile study should include information relevant to the target market. A useful customer research would like to find answers to the following questions.

income level. marketers in the business of retiling may also seek the benefits of market segmentation depending on his unique market and business context. working women and housewife. those with children and those without children. the retailer may divide the segment of working women into tow sub-segments. targeting and positioning. Segmenting is thus an aggregating process—clustering people with similar needs into a market segment. According to this approach. detailed profiles of customers in each segment should be developed. SEGMENTING. Once the market segments are identified. if it finds that these two groups have different sets of needs. Customer profiles help the retailers in understanding the behaviour of target markets. frequency of purchase. A segment is a relatively homogeneous group and hence responds to a marketing mix in a similar way. TARGETING AND POSITIONING Retail marketers are required to recognize the three stages of market segmentation: segmenting. As in case of marketers in other businesses.RETAIL MARKET SEGMENTATION Market segmentation is the process of dividing the heterogeneous total market into small groups of customers who share a similar set of wants. Different groups or segments require different promotional strategies and marketing mixes because they have different wants and needs.. -51- . A niche is a more narrowly defined group seeking a distinctive mix of benefits. perceptions. which help to understand customers’ lifestyle and behavioural information such as customers’ shopping and consumption habits including product usage. For example. A retailer may divide women customers into two segments. values and beliers. Such pr5ofiles would include demographic information on age. Each of these smaller groups possesses somewhat homogeneous characteristics. the segmentation process begins with the aggregation of customers into groups to maximize homogeneity within and heterogeneity between segments. Marketers usually identify niches by dividing a segment into sub-segments. on psychographic variables such as motives. attitudes. education etc.

Before selecting the target segments it should also ensure that needs of the target segments match with retailer’s business model—its product range. It helps the retailer in merchandising decision— deciding what to stock and in what quantities. an appropriate marketing strategy has to be developed to create positive perceptions in a customer’s mind and achieve the desired market positioning. After the target segments are identified and chosen. After the markets are segmented and profiled. Market segmentation helps the retailer in understanding customer requirements and in developing an appropriate marketing mix. the retailer has to develop it positioning strategy. promotional programme etc. Market research may be carried out to get such an understanding. Choose variable for segmenting market 2. How many segments should be targeted? Positioning 1. Verify prospective segment Targeting 1. Finally. Place offering in the mind of the target segment 3. For effective positioning. Identify which segments will be targeted 3. Decide on targeting 2. State a profile of segment 3. the retailers have to decide which segments to target and focus on and how many segments to target. rate of growth etc. a detailed understanding of the needs of the target segment is necessary. The retailers have to evaluate the attractiveness of each segment by estimating its size. Understanding requirements of target segments also helps in developing an effective promotional programme -52- . Understanding the target segment 2. Evolve marketing mix Stages in marketing segmentation The retailers should also be constantly looking for the emergence of new segments and search new dimensions on which the markets can be segmented.Segmentation 1.

a designer men’s sore located in an upmarket shopping centre or a mall near posh residential colonies. e. The terms ‘location’ and ‘site’ are often used interchangeably but there is a distinct difference between the two.g. salaries Location is a major revenue factor because it v Affects the amount of customer traffic v Affects the volume of business The traditional inclination of Indian retailers to own property further increases capital investment and this along with the penchant of Indian retailers to continue their business at the same location makes the location decision even more important. while a site refers to the specific building or part of the building where a store is located. In India. Location is a major cost factor because it v Involves large capital investment v Affects transportation costs v Affects human resources cost. which denotes the store and its trading area from where a majority of its customers originate. operations and customer service characteristics. This makes the location decision even more critical. IMPORTANCE OF LOCATION DECISION The importance of the location decision is due to the following factors. most retailers prefer to own the property rather than avail of the desired property through lease or rental. Location decisions can be complex.RETAIL LOCATION STRATEGY Location is the most important ingredient for any business that relies on customers. Choosing the wrong site can lead to poor results and in some cases insolvency and closure. there is often little flexibility once a location has been chosen and the attributes of location have a strong impact on a retailer’s overall strategy. costs can be quite high. For example. -53- .. Location and site characteristics should interact in a positive and synergistic way with a store’s merchandising. It is also one of the most difficult to plan for completely. ‘Location’ is a broader concept. housed in an attractive building with adequate parking facilities.

The fast growth in purchasing power and its distribution among a large base of middle class is contribution to a retailing boom around major cities in India. size and quality of competition before selecting a city. A city’s trading area would comprise its suburbs as well as neighbouring cities and towns. Selection of a city 2. v Total purchasing power and its distribution: The retail potential of a city also depends on the purchasing power of the customers and its distribution networks in its trading area. the greater the potential of the city as a shopping location.LEVELS OF LOCATION DECISION AND ITS DETERMINING FACTORS A retailer has to take the location decision. Moradabad has become an important retail location for brassware products while Mysore is famous for silk saris. basing on three aspects: 1. v Development cost: The cost of land. v Population of population growth in the trading area: The larger the population of the trading area. v Total retail trade potential for different lines of trade: A city may b become specialized in certain lines of trade and attract customers from other cities. rental value and other related cost. Selection of an area or type of location within a city 3. v Number. A high growth n population in the trading area can also increase the retail potential. size and quality of competition: The retailer also considers the number. -54- . Cities like Mumbai and Delhi have a large trading area as they draw customers from far off cities and towns. Cities with a large population of affluent and upper middle-class customers can be an attractive location for stores selling high-priced products such as designer men’s wear. Identification of a specific site The factors which influence these decisions are discussed below: Selection of a City The following factors play a significant role in the selection of a particular city for starting or relocating an existing retail business: v Size of the city’s trading area: A city’s trading area is the geographic region fom which customers come to the city for shopping.

Selection of a Specific Site The choice of a specific site is particularly important. v Availability of access routes: The area or shopping centre should provide easy access routes.Selection of an Area or Type of Location within a City In the selection of a particular area or type of location within a city. v Direction of spread of the city: The retailer should considers the direction in which the city is developing while selection the location. while small shopping centres located in colonies attract customers from immediate neighbourhood. before selecting the area. v Nature of zoning regulations: The retailer should also consider the zoning regulations in the city. v Customer attraction power of a shopping district or a particular store: Major shopping centres like Chandni Chowk in Delhi. etc. Colaba in Mumbai and Commercial Street in Bangalore attract customers from far off. number of stores in the area. v Quantitative and qualitative nature of competitive stores: Retailers would like to evaluate the product lines carried by other sores. There should not be traffic jams and congestion MG Road in Bangalore provides easy access from different t parts of the city and hence has become popular. selecting the trading area is even more important than picking the specific site. Where slaes depend on nearby settlements. The large stores in turn depend on attracting customers from the existing flow of traffic. In central and secondary shopping centre. evaluation of the following factors is required. -55- . non-anchor sores depend on customers coming to the market and the traffic generated by anchor stores.

are also coming up in suburbs or away from major markets as free-standing locations. even the large organized sector stores. For example. but also compete against each other for the same customers. Highway Stores Highway sores are located along highways or at the intersections of two highways and attract customers passing through thes highways.TYPES OF RETAIL LOCATION A retailer has to choose among alternate types of retail locations available. it may have a choice ranging for. and often better visibility from the road. It may locate in an isolated place and pull the customer to the store on its own strength. it may locate in a business district where ther3 are a large number of retail establishments. Business-associated Location These are locations where a group of retail outlets offering a variety of merchandise work together to attract customers to their retail area. such as a small grocery store or paan shop in a colony which attracts the customers staying close by. If it decides to locate its store in a business district. Now. This type of location has several advantages including no competition. The various options available to a retailer in India are shown below: Free-standing Location Where there are no other retail outlets in the vicinity of the store and therefore. the store depends on its own pulling power and promotion to attract customers. This type of location can be further classified as: -56- . Kemp Fort and LifeStyle stores are free-standing stores in Bangalore away from major market of the city. the large shopping centres in the heart of the city or smaller shopping complexes in a suburb. which pull customers from across the city. easy parking and lower property costs. Or. Neighbourhood Stores Neighbourhood stores are located in residential neighbourhoods and serve a small locality. They sell convenience products like groceries. low rent.

v Planned Shopping Centres: A planned shopping centre consists of a group of architecturally owned or managed stores. Major regional shopping centres or malls in India include Crossroads in Mumbai. customer profile and overall business model presents an enormous challenge. emergence of free-standing department stores.v Unplanned Business Districts/Centres: An unplanned business district is a type of retail location where two or more retail stores locate together on individual considerations rather than on the basis of any long-range collective planning. often they are anchored by two or more major department store. have enclosed malls. based on balanced tenancy and surrounded by parking facilities. and pedestrian traffic. we may find four to five shoe stores. Thus. services and prices.. Ansal Plaza in Delhi. and further development of traditional business districts and other unplanned shopping locations. a retailer is presented with a wider choice of locations. access to public transport. Spencers Plaza n Chennai and Meropolitan Mall in Gurgaon. SITE SELECTION ANALYSIS With the advent of new retail formats in India such as planned shopping centes and malls. nearness to commercial and social facilities. etc. hypermarkets. A retailer has to consider the following factors while selecting a site: v Kind of products sold v Cost factor v Competitor’s location v Ease of traffic flow and accessibility v Parking and major thoroughfares v Market trends v Visibility -57- . Consideration of all the options keeping in view the product mix. designed and operated as a unit. three to four medical stores in a cluster but no grocery store. and have high rents. serve a large trading area. An unplanned district generally provides certain advantages like availability of a variety of goods. v Regional Shopping Centres or Malls: Regional shopping centres or malls are the largest planned shopping centres. They attract customers from across the city and suburbs.

utilities. is driven by this factor. leasehold improvements. Traditionally. An excellent location may be next or close to parallel or complementary businesses that will help to attract customers. the retail community placed great importance on owning the place since this was considered prestigious in the business community. Convenience goods are often purchased on impulse from easily accessible stores. The retailers operating in these periodic markets keep shifting from place to place and do not own any property. -58- . This supports their model of selling goods at very low margins. which offers two distinct traffic streams and a large window display area is usually a better site than the middle of a block. The corner of an intersection. instead they pay a small rental for their set-up in each market. However. For stores dealing in shopping goods. If one is not able to offer better quality and competitively priced products.Kind of Products Sold For stores dealing in convenience goods. Competitor’s Location The type and number of competitors is another important factor. there are many periodic retail markets in Indian which operate on particular days of the week. franchisee chains and department stores should be noted. Cost Factor in Location Decision Location decision on cost considerations alone is risky. general decoration. The emergence of several apparel factory outlets within a short stretch on the Delhi-Jaipur highway. Space cost is a combination of rent or mortgage payment. the quality of the traffic is more important. Intense competition in the area shows that new businesses will have to divide the market with existing businesses. industrial parks. the quantity of traffic is most important. one might reconsider that particular location. insurance and all related costs having a place to conduct business operations. at Mahipalpur market in Delhi. security. The presence of major retail centres.

side of street.). When evaluating the parking that exists at a retail site. the ideal ratio for food stores is in the magnitude of 7-8 cars per 1. Visibility Visibility has a varied impact on a store’s sales potential. Make use of information available through the Chamber of commerce. and parking configuration (the way the parking lot is laid out. width of street. etc. the direction of the travel lanes and spaces. Discussions with business owners and officials in the area can also help. Once the shopper has become a regular customer. there are two considerations: parking capacity (the number of cars that can be parked). is hence important. visibility no longer matters. -59- . street widths and parking lots. There are several ratios that are generally used to determine the adequacy of a parking lot. distance from residential areas or other business areas. noting one-way streets. which means that some part of a community’s population may be ‘shopping’ in a new store. part of the block and neighbours. landscaping. Retailers selling convenience goods must attract business from the existing flow of traffic. The following factors have to be considered: parking availability. traffic congestion. Parking and Major Thoroughfares Parking is another site characteristic that is especially a cause for concern in densely populated areas. Consider the nature of the business you are planning to open and your potential customers. Studying the flow of traffic. While different ratios exist for different types of retailers or service providers. But consider this fact: one in five families moves every year. Local newspapers are a good source of information. It is important when a shopper is trying to find the sore for the first or second time. futuristic perspective. Evaluate how accessible the site is for walk-in or drive-by traffic as well as the amount of pedestrian traffic and automobile traffic that goes by the proposed location. Market Trends Evaluate the community from a braod.000 square feet of food store.Ease of Traffic Flow and Accessibility These two factors are more important to some businesses than others.

30. Located about 30 km from the central business district of Mumbai. Crocodile. Thane district is ranked third in the list of industrially developed districts in the state. The high rate of development in the district is due to its proximity to Mumbai and its port. More than 50% of the economic and social development of the district is on account of its progress in industrialization.75% were engaged in agriculture and allied activities. Lee Cooper. Women constituted 22. such as McDonald’s. the transportation and subsidy facilities provide by the state government and also the uninterrupted power supply by the atomic energy plant at Tarapur in the Palghar taluka of the district. the population of the district was 52. Arrow and Reebok.59%. on the mainland of the Deccan Plateau. According to the 1991 Population Census. According to the 1991 Census.69% in other activities. Infrastructural facilities are the main source of industrial development in the district. 1. which was 37. including woolen fabrics. Industries in Thane manufacture a wide variety of products.49 lakhs. It is experiencing a large-scale development of shopping malls and multiplex theatres. Major rail lines and a national highway link Thane with Mumbai and other cities and towns. Thane has developed as one of Mumbai’s suburbs.Recently.704 persons. dyestuffs. Lee. cotton textiles and handloomed fabrics. leading brands across product categories established their outlets in Thane. Out of the total workforce. Thane has emerged as one of the major shopping destinations. The nearest airport is in Mumbai. Dominoes. The city is experiencing a growth in many things. this population increased by 56. -60- . Pantaloons. drugs. The advents of national retail chains. The MIDC has developed 10 industrial estates in the district. During 1981 to 1991. pencils.37% of the total population of the district. Planet Fashion. across product categories are driving the changing face of the retail formats of Thane city. It lies on the Thana river in the north Konkan coastal lowland.19% in manufacturing service and cottage industries and remaining 30.961.New Retailing—The Thane Experience Thane is a city in the western Maharashtra state. glassware. This increase in population was the highest in the State for this period.89% of the workforce in the district. the total working population in the district was 1.

Space. storage space and customer space is a major challenge for the owners and managers of the store. is fixed in supply with the retailer and is not easy to expand as it involv4es huge investments. He has to clearly allot the available space to provide the selling space. Retailers acknowledge the importance of space management for the success of business. The best possible allocation of the store space to departments. Effective management of store space requires a sound understanding of the following factors: v The nature of offerings. It has a twoway bearing on retail business—it not only attracts business by ensuring convenience to customers but also places the merchandise in accordance with the salespersons’ work allocation. suppliers and departments within the store v The quantity of merchandise the store wants to carry and display v The location and proportion of space allotted to different types of merchandise Issues related to the nature of offerings. The quantity of merchandise and space allotted to respective merchandise depends on the sales productivity of the particular merchandise and brand positioning of the retailer. The key objectives of retail space management are: v To obtain a high return on investment by increasing the productivity of retail space. merchandise and sales people. personnel space and customer space. product categories. Therefore. suppliers and departments within the store are very important in the retail management. exciting and rational interface between the customer. as a retail input.STORE SPACE MANAGEMENT Space and inventory are the two most important resources of the retail firm. this requires effective utilization of space for merchandise display and customer movement. Retailers’ decision regarding the proportion of space to be allocated to specific merchandise is further guided by the following factors: v Profitability of merchandise v Merchandise display v Placement of merchandise within the store -61- . v To ensure a compatible. the allocation of the internal space among various heads is a challenging task for the retailer. merchandise space.

it could constitute goods. While product management deals with issues related to the kind of products sold by the retailer. ideas. by including the first floor or a basement as part of the retail area to be accessed from the ground floor by an internal staircase. in the context of retailing. There -62- . places. merchandise management concerns itself with the selection of the right quantity of the product and ensuring its availability at the right place and time. retail space can be expanded. Product management is critical to the success o retail business. A related issue is also the management of retail brands and the decision to offer retailer’s private labels along with or instead of national and local brands. events. Identification of the products to be retailed forms the core component of the retailer’s business plan. Products.v Seasonal considerations The space management decision also has an important influence on sub-decisions like: v Location of various departments v Arrangements between departments within the shopfloor v Selection of layout with customer behaviour in mind v Planned traffic flow of customers For better store layout. This involves a careful planning of merchandise mix and its financial implications are reflected in the merchandise budget. services. Hence. PRODUCT MANAGEMENT Products are critical to a retail firm’s existence and profitability. A product could be tangible or intangible. are defined as anything sold and purchased in a retail transaction. may be defined as a se of decisions related to the selection and removal of products from the retailers’ portfolio. keeping in mind other factors. along with the related product and market analysis. Hence. PRODUCT AND BRAND MANAGEMENT Product and merchandise management is a key activity in the management of retail business. It drives the business strategy of the retailer and has immense cost and profit implications. Product management. in a retailing context. it determines business profitability to a large extent. They constitute the basis of exchange transactions between retailers and customers.

Brand management poses several challenges to the retailer. A strong retail brand and a strong private label strategy can be an effective tool to differentiate the stores and the shopping experience. In many cases ‘store’ as a brand is stronger than the ‘brand’ stored within. Retailers may also choose to adopt a multi-pronged strategy. BRAND MANAGEMENT AND RETAILING Of the top ten strongest brands in the world. -63- . The key issues in retail branding are: v Brand management of the retail outlet. the stronger is the retail brand. The ten strongest brands in the world are given below: Coca Cola McDonald’s Sony Nike Microsoft Wal-Mart Ford Levi’s Gap Amazon Strong retail brands have a sharper definition of their brand identity in terms of the following criteria: v Who am I? v What do I do? v How am I different from others? v Why buy me? The sharper this focus. many manufacturing brands are losing their identity to retail brands. there are varied demand patterns and competitive factors for different product categories. A retailer’s brand is valuable since it enhances reach and endurance with the consumer and ensures a more focused strategic plan. five are retail brands. Besides.are different cost implications in sourcing various kinds of products. and v Deciding whether or not to opt for the strategy of self own branding. In the retail boom that India is going through.

Therefore. costs of running business (rent. the price fixed by a retailer is also influenced by a number of external factors. The difference between the cost of the merchandise and the retail price is called the mark-up.. Profitability of retail business is influenced by two factors: one. Profitability is a prime objective of any retail firm. Systematic and informed decisions regarding pricing strategies must be made while considering a wide range of issues. which in turn determines the total revenue and the profit of the retail store. Competitors Suppliers Pricing Strategy Government Customer -64- . These two factors directly influence the pricing of the merchandise sore. the cost involved in the selling of merchandise. Profitability of retail unit is subject to selling of merchandise for more than it has cost a retailer. EXTERNAL INFLUENCES ON RETAIL PRICIN G STRATEGY Apart from internal factors like costs. sound pricing decisions are important to successful retail business. salary. maintenance cost). Profitability covers the cost of buying merchandise. the right price for the product or service is the price that the consume is willing to pay for it.RETAIL PRICING Setting the right price can influence the quantities of various products or services that consumers will buy. the profit margin on the offerings that are sold and second. desired profit margin etc. which in turn influences the profitability of the store. and finally the cost of investment for further expansion of the retail business. IN the end.

Both the retailer and the supplier (manufacturer) like to have control and want to price the product or services according to their own image. Customers A retailer needs to understand the price sensitivity of customers that form his target segment. -65- . various government agencies exercise a strong influence on the price levels through legal and policy directives. competitors are the most influential factor in determining the price. while in others. These four factors or ‘forces’ have to be considered while determining the pricing strategy. The extent of influence may vary from industry to industry. their influence may be inconsequential. the cause of this conflict is the final prices set by the retailer. The competitive environment affects the freedom of a retailer to fix prices to a great extent. A perfectly competitive market is the most competitive market imaginable. as in the case of government regulations. they can be broadly segregated into four ‘force’—customers. Generally. wholesalers and other suppliers). Competition can range from being perfect competition to a monopoly. In some cases. Competitors In most cases. Suppliers It may happen that retailers and manufacturers have different objectives. competitors and government. goals. With the advent of Internet. the retailer may be totally constrained. The price sensitivity of customers is based on various personal.Using Porte’s model to analyze these factors for strategic pricing. and objectives. manufacturers are selling their goods directly to the final customer. Government In the Indian context. suppliers (manufacturers. which leads to conflict between the two. social or geographical factors and presents a major challenge for retailers while setting prices.

MARKET SHARE OBJECTIVE The retailer or marketer may also price his product with the intention of increasing his market share or stabilizing his market share. He can set the price of his product lower than that of his competitors. Within these broad objectives a retailer may also try to fulfill the following specific objectives. and -66- . the marketer may price his products with the objective of obtaining only a target rate of return on his investment. v Expedite the exit of the potential competitors from the market.RETAIL PRICING OBJECTIVE Retail pricing objectives or goals provide direction to the whole pricing process. This particularly so with products in the mature stage of the product life cycle. market skimming. there could be various pricing objectives such as market penetration. marketing and strategic objective of the retail business v The characteristics of product or brand v Consumer price elasticity and price points v The resources available. At other times. The objective of profit maximization must be studied carefully because it may lead to unethical practices such as overcharging or deceiving the customers. When deciding on pricing objectives a retailer need to consider: v The overall financial. v Hasten the exit of the marginal firms. Broadly. PROFIT OBJECTIVE The retail store may price its product with the objective of maximizing profits in the short run or long run or both. COMPETITOR-ORIENTED OBJECTIVE The retailer or marketer may price his product to counter any existing or prospective move by his competitors. Retailers are supposed to determine their objectives as the first step in pricing. A retailer may deliberately price its merchandise low to: v Discourage potential retailers from entering the market. return on investment and early recovery of investments.

v Spoil the market of retail competitors with an eye on getting future benefits. grocery items and vegetables in India are. where people tend to associate high prices with better quality products and a higher status or image. The aim of such pricing is to maintain socially acceptable prices and be fair to customers. to a large extent. The prices of goods at super bazaars such as Margin Free can be considered. GOVERNMENT-ORIENTED OBJECTIVES The pricing of some products may be constrained by the existing laws or may be influenced by government action. Many of the retail stores in India such as Big Bazaar are using these pricing techniques. the marketer can prevent price-cutting by range. which has made many people very price-conscious. BUYER-ORENTED OBJECTIVE Another pricing objective adopted by a retailer may be buyer-oriented. controlled and influenced by government action. PRODUCT-ORIENTED OBJECTIVES The retailers or marketers. -67- . With a low price. at times. increase the sale of weak products or reduce his stock at the end of a season. Customers are usually attracted by the advertisements in newspapers highlighting special offers and discount. With a lower price. Products can also be made visible by means of a high price. the retail store can therefore catch the attention of buyers and this will help him to introduce new offerings. This was practiced in the cosmetics and jewellery trade. make their offerings more ‘visible’ by means of pricing. The prices of petrol. This is especially true in an inflationary economy.

The retailers seek to communicate with customers to achieve a number of objectives. sales promotions. with the owner himself. which offers additional value and incentives to the customer. retailers and manufacturers pool in resources for effective promotional strategy. The key advantage with the retail sector is the opportunity of face-to-face interaction with customers. manufacturer in terms of material. The retailers communicate with customers through many vehicles: advertising. especially in the unorganized sector.RETAIL PROMOTION STRATEGY Retail promotion is broadly defined as all communication that informs. increasing share-of-wallet for all shoppers of specific groups among them. Publicity is an un-paid form of communication that provides information about the retailer through the media. radio. small retail chains and franchisees. and personal selling are example of paid impersonal communications. etc. direct mail. The promotion mix is managed by the retail firm’s marketing and advertising department. -68- . coupons and contests. sales promotion. Some of the popular sales promotion activities are special events in-store demonstration. In some cases. it has the advantage of utilizing various facets of personal selling to personalize the promotion efforts. increasing sale of a given product or category and developing the store image or the retail brand. magazines. Personal selling is the cornerstone of the promotion strategy for the Indian retail industry. ideas and funds. In case of small independent retailers. Advertising. publicity and personal selling. TV. Hence. These objectives include increasing store traffic by encouraging new shoppers to visit the store. Advertising is a form of paid communication and it uses impersonal mass media like newspapers. It not only encourages the customers to visit the stores buy also promotes trial and repeat purchases. persuades and reminds the target market or the prospective segment about marketing mix of the retail firm. Such kind of structure is common in the case of multi-chain department stores or company-owned retail chains. The responsibility of personal selling predominantly lies with the sales personnel and in case of small retail outlets. A sales promotion is another form of paid impersonal communication.

It is effective in case of products or services which are intense on information. Magazines:. basically located in central business districts. targeted letters as part of their communication strategy.With the advent of the local cable TV channels. email and single letters. Leaflets of Flyers:. so they are most useful for marketing specific activities such as opening of a new outlet or off-season sale. such as banking. -69- . For example. use this medium to communicate about their offerings and promotions to their target segment more effectively. real estate practitioners. compatibility with their objective and the rest of the communication strategy.Magazines are considered to be and effective medium to advertise to the target segment. While selecting a particular set of materials for the publicity.Retailers use posters to promote specific activities and events or as free gift to other channel members. most of the small retailers. brochures. catalogues. They have a short shelf life.Retailers from the organized sector can afford this costly mode of communication. Posters/Calendars: . retailers have to consider factors such as cost of the selected material.Retailers to promote specific activities and events use leaflets or flyers. Direct mail advertising includes postcards. a retailer selling baby products could put an ad in Parenting or Health and Nutrition.POPULAR MEDIA VEHICLES USED IN THE INDIAN RETAIL SECTOR There is a whole range of vehicles for promotion available to the retailers to choose from. Booklets:. Direct mail:. especially their loyal customers. fashion designers and insurance services.Retailers can opt to send out regular. This technique is considered to be effective at the time of introducing new product and informing about prospective sales and or special discounts. Local Cable Channels:.

Besides. The target audience for both the organized and unorganized retail formats remains relatively the same. people value the experience related to the trip the most and return most frequently for the same. Organized retail of late has seen a tremendous boom and is attracting more people to the malls.CONCLUSION The convenience and personalized service offered by the unorganized sector holds its future in good stead for the future. -70- . while enjoying the experience they seem to buy high ticket and items of conspicuous consumption most frequently. When shopping in malls. What is to be seen is how organized retail can duplicate the same level of personalized customer service levels offered by the unorganized sector to have a higher conversion ratio.

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