Retailing: Introduction

Unit #1

Introduction to Retailing- Key Topics 
      

Nature & scope of Retailing Retailing- Definition Functions of a Retailer Rise of a Retailer The Retailing Concept The Retail Strategy Retailing Concept- Key Issues Consumerism 

  

Rise of Indian Consumerism Retail Formats Major Retail Players in India Retail in IndiaEvolution & drivers of retail change

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Unit #1: Introduction to Retailing

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Retailing- Definition
Retailing encompasses the business activities involved in selling goods and services to consumers for their personal, family or household use.  It includes every sale to the final consumer  It is the last stage in distribution process 

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Unit #1: Introduction to Retailing

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Retail Functions in Distribution

Manufacturer

Wholesaler

Retailer

Final Consumer

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Unit #1: Introduction to Retailing

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buy in large quantity & sell in small quantitythe Sorting Process Communicate both with customers & manufacturers and wholesalers  Manufacturers and wholesalers get information from retailers on sale forecasts. customer complaints.Retailers.Key Functions   Collect an assortment from various sources. inventory turnover etc 5 10/21/2010 Unit #1: Introduction to Retailing . delivery delays. defective items.

Retailer·s role in Sorting Process Customers MBrand A MBrand B MBrand C MBrand D MBrand E Wholesaler Brand A Brand B Brand C Brand D Wholesaler Retailer Brand E Brand F Wholesaler MBrand F 10/21/2010 Unit #1: Introduction to Retailing 6 .

advertising & prepaying for products 10/21/2010 Unit #1: Introduction to Retailing 7 . marking. sales etc from retailer ads and displays Retailers complete transactions with customers  Retailers provide assistance to small suppliers by transporting. store hours. storing.Some other Functions   Shoppers (customers ) are provided information on availability and Characteristics of goods & services.Retailers.

Special Characteristics of Retailing Small Average Sale Impulse Purchases Retailer·s Strategy Popularity of Stores 10/21/2010 Unit #1: Introduction to Retailing 8 .

2. even though mail.Retailing: Special Characteristics 1. phone and web-sales have increased Unit #1: Introduction to Retailing 9 10/21/2010 . The average amount of a sales transaction for retailers is much less than for manufacturers Final consumers make many unplanned or impulse purchases Retail Consumers usually visit a store. 3.

such as competition & economy  10/21/2010 Unit #1: Introduction to Retailing 10 .Retail Strategy The overall plan guiding a retail firm  It influences the firm s business activities and its response to market forces.

product assortment. pricing & advertising and displays to achieve objectives Regularly evaluate performance and correct weakness/when observed 11 2) 5) 3) 6) 10/21/2010 Unit #1: Introduction to Retailing . market share image and so on Determine the customer market to target on the basis of its characteristics and needs 4) Devise an overall long run plan that gives general direction to the firm & its employees Implement an integrated strategy that combines such factors as store location.Developing & Applying Retail Strategy: Six Steps 1) Define the type of business in terms of the goods /service category and company s specific orientation (full service or no frills) Set long run & short run objectives for sales and profit.

Driven Goal Orientation 10/21/2010 Unit #1: Introduction to Retailing 12 .Underlying Principles Customer Orientation Retail Strategy Coordinated Effort Retailing Concept Value.The Retailing Concept.

Retailing Concept: Three Issues The Total Retail Experience  Customer Service  Relationship Retailing  10/21/2010 Unit #1: Introduction to Retailing 13 .

The Total Retail Experience Includes all the elements in a retail offering that encourage or inhibit customers during their contact with a retailer  Number of salespeople. displays. brands carried. sales tax etc: Uncontrollable  10/21/2010 Unit #1: Introduction to Retailing 14 . prices. inventory on hand: Controllable  Adequacy of on street parking.

sales people. shopper friendliness of the store layout Credit acceptance. employee politeness Delivery policies.Customer Service   Refers to the identifiable yet sometimes intangible activities undertaken by a retailer in conjunction with the basic goods and services it sells Has a strong impact on the total retail experience     Key Elements Store hours. amenities such as gift wrapping. time shoppers spend on checking out lines and customer follow up 15 10/21/2010 Unit #1: Introduction to Retailing . rest rooms. parking.

monitoring satisfaction with customer service and staying in touch with customers  10/21/2010 Unit #1: Introduction to Retailing 16 .Relationship Retailing Seeking to establish & maintain long term bonds with customers rather than act as if each sale transaction is a new sales encounter  Concentrating on total retail experience.

Key Guidelines 1. 2.Win approach critical Building & maintaining customer database 10/21/2010 Unit #1: Introduction to Retailing 17 .Relationship Retailing. Win.

The Rise of the Retailer Proximity to the Customer  The Rise of Consumerism  The Introduction of the Private label  Technology  10/21/2010 Unit #1: Introduction to Retailing 18 .

especially with regard to price.Consumerism: what it means   protection of consumers' rights: the protection of the rights and interests of consumers. and safety materialistic attitude: an attitude that values the acquisition of material goods ( disapproving )  belief in benefits of consumption: the belief that the buying and selling of large quantities of consumer goods is beneficial to an economy or a sign of economic strength 10/21/2010 Unit #1: Introduction to Retailing 19 . quality.

so in this respect the country is closer to developed economies such as Japan and the United States than are China and other fast-growing emerging markets in Asia. accounting for more than 60 percent of India s GDP. In 2005 private spending reached about 17 trillion Indian rupees($372 billion). Today only 29 percent of Indians live in cities Source: Mckinsey Consumer Research report 2008   10/21/2010 Unit #1: Introduction to Retailing 20 . India remains the least urbanized of the emerging Asian economies.The Rise of the Indian Consumerism/Consumer   Indian income will triple over the next two decades. Over the next two decades. the country s middle class will grow from about 5 percent of the population to more than 40 percent and create the world s fifth-largest consumer market.

If India can achieve 7. to 54 percent.000 rupees a year.India. The growth that has pulled millions of people out of poverty is also building a huge middle class that will be concentrated in India s urban areas.Shining   Extreme rural poverty has declined from 94 percent in 1985 to 61 percent in 2005 In 1985 93 percent of the population lived on a household income of less than 90.by 2005 that proportion had been cut nearly in half.3 percent annual growth over the next 20 years. 465 million more people will be spared a life of extreme deprivation Unit #1: Introduction to Retailing 21   10/21/2010 .

y By 2025 India s wealthiest citizens will total 24 million. more than the current population of Australia. projected at about 19 million people 10/21/2010 Unit #1: Introduction to Retailing 22 . By that year too. India s affluent class will be larger than China s comparable segment.Consumer Spending ProjectionsMckinsey Global Report  Discretionary spending in India will rise from 52 percent of total private spending today to 70 percent in 2025.

transport. recreational products and services will take a smaller slice of household spending there than in other countries Unit #1: Introduction to Retailing 23 . 10/21/2010  Despite India s fondness for cricket and Bollywood movies. and communications will soar and eventually command a greater share of consumption than they do elsewhere. education.Some Other Projections  Spending on purchases that improve the economic prospects and quality of life of a person or family health.

y The highest growth will come from car purchases. Categories such as clothing and household goods are expected to post slower annual growth relative to overall consumption 10/21/2010 Unit #1: Introduction to Retailing 24 . already the largest category of expense after food.Projections y Transportation. will take a bigger portion of household budgets in coming years. exceeding its share in all of our benchmark countries.

000 rupees a year. That class now comprises about 50 million people.000 to 1. but by 2025 cities will command 62 percent of the country s spending power. roughly 5 percent of the population y Today 57 percent of private spending is spread across rural areas.Implications for Marketers India will witness the rapid growth of its middle class households with disposable incomes from 200.000.  10/21/2010 Unit #1: Introduction to Retailing 25 .

Implications In absolute terms the country s urban population will expand significantly. from 318 million today to 523 million in 2025.  The shift in spending power from the countryside to the cities will place the bulk of India s private consumption within easier reach of major companies  10/21/2010 Unit #1: Introduction to Retailing 26 .

Technology in Retail  Customer Interfacing Systems Bar Coding and Scanners Payment Internet Operation Support Systems ERP System CRM Systems Advanced Planning and Scheduling Systems 10/21/2010 Unit #1: Introduction to Retailing 27 .

HSBC Unit #1: Introduction to Retailing 28 . is still in its nascent stages in India 8 #1 Global Retail industry is of size USD 8 Trillion Fortune #1 Wal-Mart is a Retailer 50 Over 50 of the Fortune 500 companies are retailers 25 25 of the Asian Top 200 companies.Retailing in India Retail the largest private industry globally. are retailers 10/21/2010 Source: CII Mckinsey.

com 10/21/2010 Unit #1: Introduction to Retailing 29 .Indian Retail.Some Statistics    Market size (total) 2006: US$ 300 bn/annum Market size (total) 2010: US$ 427 bn/annum Market size (total) 2015: US$ 637 bn/annum       Market size (modern retail) 2006: US$ 9-12 bn/annum Market size (modern retail) 2011: US$ 60 bn/annum Annual rate of growth (modern retail): 35% Penetration (modern retail) 2006: 3 to 4% Penetration (modern retail) 2010: 10% Number of retail outlets (total): 12 million Source: www.indiaretailbiz.

ft.ft. 35% (tier II & III cities) New space distribution (among top 7 cities): NCR 34%.) New space distribution: 65% (top 7 cities).  Retail Space       Typical space per outlet: 100 to 500 sq. of persons employed (total): 21 mn  No. Mumbai 23%. Space occupied (modern retail): 35 mn sq.Indian Retail Statistics o New Investment by 2011: US$ 30 bn  No.ft.) New Malls under construction: 361 (117 mn sq.ft. of new jobs in next two years: 2 mn.indiaretailbiz. Operating Malls 2007: 114 (35 mn sq. Rest 43% 30 Source: www.com 10/21/2010 Unit #1: Introduction to Retailing .

Major Retail Formats in India      Malls Specialty Stores Discount Stores Department Stores Hypermarts/Supermar kets   Convenience Stores MBOs (Multi.Brand Outlets) 10/21/2010 Unit #1: Introduction to Retailing 31 .

FoodWorld. eg. ‡ Hypermarket (from the French term hypermarche) : A store that combines a supermarket and a department store. The chains are often supplied from the distribution centres of a larger business eg. A gigantic retail facility that carries a big range of products under one roof. ‡ Specialty malls: Consortium of retailers that carry a certain category of products. In & Out petrol pump outlets. Big Bazaar. They are usually situated some distance from the city centre. ‡ Category killers: Large format stores that specialise in a narrow line of merchandise eg. thus going for economies of scale. Vivek. medicine and household products. Consumers have to make a special visit to pick up the goods. When planned. Convenios carry a limited stock of daily use goods with a special focus on food products eg. hypermart caters to all routine weekly shopping needs in one trip eg. organised in separate departments. constructed and executed correctly. Wedding Souk. Often part of a chain that owns or controls other supermarkets in the same or other towns.Various Retail Formats ‡ Department store: Large retail store offering a variety of services and merchandise. Vijay Sales. Occupy prominent positions in the heart of town or as anchor stores in out-of-town malls eg. ‡ Convenios: 24X7 convenience stores situated close to homes to generate high footprints. 10/21/2010 Unit #1: Introduction to Retailing 32 . including fresh groceries and apparel. ‡ Supermarket: A store that sells a wide variety of goods including food. Shopper¶s Stop. Gold.

of which organized retailing (i.Recent Trends  Retailing in India is witnessing a huge revamping exercise as can be seen in the graph India is rated the fifth most attractive emerging retail market: a potential goldmine. Retail Sales in India     10/21/2010 Unit #1: Introduction to Retailing 33 .e. modern trade) makes up 3 percent or US$ 6.4 billion As per a report by KPMG the annual growth of department stores is estimated at 24% Ranked second in a Global Retail Development Index of 30 developing countries drawn up by AT Kearney. Estimated to be US$ 200 billion.

q. 2. average size of outlet equals 50 s.q. the retail space per capita at 2 s. Rural retail industry has typically two forms: "Haats" and Melas".Recent Trends contd. 3. Haats are the weekly markets : serve groups of 10-50 villages and sell day-to-day necessities. Though India has the highest number of retail outlets per capita in the world. Traditionally three factors have plagued the retail industry: 1. Rural bias: Nearly two thirds of the stores are located in rural areas. Unorganized : Vast majority of the twelve million stores are small "father and son" outlets Fragmented : Mostly small individually owned businesses. Melas are larger in size and more sophisticated in terms of the goods sold (like TVs) 10/21/2010 Unit #1: Introduction to Retailing 34 . ft per person is amongst the lowest. ft.

Recent changes: Experimentation with formats: Retailing in India is still evolving and the sector is witnessing a series of experiments across the country with new formats being tested out. Emergence of discount stores: They are expected to spearhead the organised retailing revolution. Piramyd and Globus are laying major emphasis & investing heavily in store design. Cash and carry etc. RPGs. Bombay Bazaar and Efoodmart formed which are aggregations of Kiranas. sub-urban discount stores. Big Bazaar. Ex. Unorganized retailing is getting organized: To meet the challenges of organized retailing such as large cineplexes. 25 stores in Delhi under the banner of Provision mart are joining hands to combine monthly buying. Quasi-mall. Bombay Bazaar. Research shows that the chances of senses dictating sales are upto 10-15%. 10/21/2010 Unit #1: Introduction to Retailing 35 . Ex. Baristas. and malls. Retail chains like MusicWorld. Store design : Biggest challenge for organised retailing to create a customerpull environment that increases the amount of impulse shopping. Stores trying to emulate the model of Wal-Mart. which are backed by the corporate house such as 'Ansals' and 'PVR the unorganized sector is getting organized.

India     10/21/2010 India s top retailers are largely lifestyle. Shoppers Stop and Lifestyle are likely to target metros and small cities almost doubling their current number of stores These Walmart wannabes have the economy of scale to be low medium cost retailers pocketing narrow margin Leading Retailers Unit #1: Introduction to Retailing 36 . clothing and apparel stores This is followed by grocery stores Following the past trends and business models in the west retail giants such as Pantaloon.Major Retailers.

Margin Free. Specialty Electronics .Major Retailers ² Formats Adopted Retailer RPG Retail Piramal's Original formats Supermarket (Foodworld) Later Formats Hypermarket (Spencer's)Specialty (Health and Glow) Store Department Store (Piramyd Discount Store (TruMart) Megastore) Small format outlets (Shoppe) Supermarket (Food Bazaar) Department Store Hypermarket (Big Bazaar) Mall (Central) (Pantaloon) (TBA) Pantaloon Retail K Raheja Group Department Store (shopper's stop) Supermarket Specialty Store Hypermarket (TBA) (Crossword) Department Store (Westside) Hypermarket (Star India Bazaar) Department Store (Lifestyle) Hypermarket (TBA) Tata/ Trent Landmark Group Others 10/21/2010 Unit #1: Introduction to Retailing 37 Discount Store (Subhiksha. Apna Bazaar). Supermarket (Nilgiri's).

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Indian Organized Retail is set to explode with Food & Lifestyle retail as major segments Entertainment 1% Home 3% Clothing and Textile 36% Food & Grocery 14% Pharma 2% Durable 10% Health & Beauty 1% Books. Music & Gifts 3% Watch & Jewellery 17% Footwear 13% 10/21/2010 3 SBU s covering 88% of market segment!! Unit #1: Introduction to Retailing 41 .

Double Incomes: Increasing instances of Double Incomes in most families coupled with the rise in spending power.    Urbanization: increased urbanization has led to higher customer density areas thus enabling retailers to use lesser number of stores to target the same number of customers. Covering distances has become easier: with increased automobile penetration and an overall improvement in the transportation infrastructure. Food and Grocery etc. 42 10/21/2010 Unit #1: Introduction to Retailing . Now a customer can travel miles to reach a particular shop. covering distances has become easier than before. if he or she sees value in shopping from a particular location. Plastic Revolution: Increasing use of credit cards for categories relating to Apparel.Drivers of Retail Change in India    Demography Dynamics: Approximately 60 per cent of Indian population below 30 years of age. Consumer Durable Goods.

Thank You 10/21/2010 Unit #1: Introduction to Retailing 43 .

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