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1. RETAIL CONCEPT
The distribution of consumer products begins with the producer and ends at the ultimate consumer. Between the producer and the consumer there is a middleman---the retailer, who links the producers and the ultimate consumers. 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. It is responsible for matching individual demands of the consumer with supplies of all the manufacturers. The word ‘retail’ is derived from the French work retailer, meaning ‘to cut a piece off’ or ‘to break bulk’. A retailer is a person, agent, agency, company, or organization which is instrumental in reaching the goods, merchandise, or services to the ultimate consumer. Retailers perform specific activities such as anticipating customer’s wants, developing assortments of products, acquiring market information, and financing. A common assumption is that retailing involves only the sale of products in stores. However, it also includes the sale of services like those offered at a restaurant, parlour, or by car rental agencies. The selling need not necessarily take place through a store. Retailing encompasses selling through the mail, the Internet, door-to-door visits---any channel that could be used to approach the consumer. When manufacturers like Dell computers sell directly to the consumer, they also perform the retailing function. Retailing has become such an intrinsic part of our everyday lives that it is often taken for granted. The nations that have enjoyed the greatest economic and social progress have been those with a strong retail sector. 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, freedom of choice and higher levels of customer service. As we all know, the ease of entry into retail business results in fierce competition and better value for customer. To enter retailing is easy and to fail is even easier. Therefore, in order to survive in retailing, a firm must do a satisfactory job in its primary
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role i.e., catering to customers. Retailers’ cost and profit vary depending on their type of operation and major product line. Their profit is usually a small fraction of sales and is generally about 9-10%. Retail stores of different sizes face distinct challenges and their sales volume influences business opportunities, merchandise purchase policies, nature or promotion and expense control measures. Over the last decade there have been sweeping changes in the general retailing business. For instance, what was once a strictly made-to-order market for clothing has now changed into a ready-to-wear market. Flipping through a catalogue, picking the right colour, size, 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. By the turn of the century some retailers set up a storefront where people could browse, while new pieces were being sewn or customized in the back rooms. Almost all retail businesses have undergone a similar transition over the years.
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CHARACTERISTICS OF RETAILING
Retailing can be distinguished in various ways from other businesses such as manufacturing. Retailing differs from manufacturing in the following ways: • There is direct end-user interaction in retailing. • In is the only point in the value chain to provide a platform for promotions. • Sales at the retail level are generally in smaller unit sizes. • Location is a critical factor in retail business. • In most retail businesses services are as important as core products. • There are a larger number of retail units compared to other members of the value chain. This occurs primarily to meet the requirements of geographical coverage and population density.
Direct Interaction with Customers Retail businesses have a direct interaction with end-users of goods or services in the value chain. They act as intermediaries between end-users and suppliers such as wholesalers or manufacturers. 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 helps the manufacturers and markets to redefine their product and change the components of its marketing strategy accordingly. 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. Realizing the importance of retailing in the entire value chain, many manufacturers have entered into retail business by setting up exclusive stores for their brands. This has not only provided direct contact with customers, but has also acted as advertisement for the companies and has provided
Downloaded from a2zmba. Credit verification.com the manufacturers with bargaining power with respect to other retailers who stocked their product. Retailing provides extensive sales people support for products which are information intensive. Many consumers buy products in small quantities for household consumption. order levels and the retailer has to keep a tight control on costs associated with each transaction in the selling process. snack foods and magazines can sell much more quickly if they are placed in a high visibility and high traffic location. value-added activities like bagging. Point-of-purchase Display and Promotions A significant relevant chunk of retail sales comes from unplanned or impulse purchases. 4 . store layou8t and catalogues become important. some consumer segments in India even buy grocery items on a daily basis rather than a weekly or a monthly basis. Many do not look at ads before shopping. One way to resolve this is for the retail outlets to be able to attract the maximum possible number of shoppers. display.blogspot. Hence. gift-wrapping and promotional incentives all add up to the costs. Due to lower disposable incomes. such as in the case or consumer durables. Inventory management becomes a challenge for retailers as a result of the many minor transactions with a large number of customers. retailers must take care of determining average levels of stock. employment of personnel. Since a lot of retail products are low involvement in nature. Impulse goods like chocolates. impulse purchases of the shopper is a vital area that every retailer must tap into. Studies have shown that shoppers often do not carry a fixed shopping list and pick up merchandise based on impulsive or situational appeal. 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. Therefore. point-ofpurchase merchandise.
Downloaded from a2zmba. The number of operation units in retail is the highest compared to other constituents of the value chain. Similarly. Manufacturers decide the location on the basis of availability of factors of productions and market.com Larger Number of Retail Business Units Location of retail store plays an important role compared to other business units.blogspot. supply of merchandise and store image-related factors in locating the retail outlet. primarily to meet the needs for geographic reach and customer accessibility. retailers consider factors like potential demand. 5 .
wholesalers. While all retailers offer an assortment. holding stock. by collection an assortment of goods from different sources. while Pantaloons is targeted at the middle class.000 different items from 500 companies. they specialize in types of assortment offered and the market to which the offering is made. Supermarkets in the US offer. Shoppers’ Stop targets the elite urban class. buying them in sufficiently large quantities and selling them to consumers in small units. customers would have to visit several stores to complete their shopping. prefer a large variety of goods and services to choose from and usually buy them in small quantities. If each manufacturer had a separate store for its own products. advertising and certain additional services. The above process is referred to as the sorting process. 6 . Customers are able to choose from a wide range of designs. 15. sizes and brands from just one location.blogspot. 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. as a channel of communication.Downloaded from a2zmba. Retailers are able to balance the demands of both sides. storage. Final consumers. Through this process. retailers undertake activities and perform functions that add to the value of the products and services sold to the consumer. they perform various functions like sorting. Westside provides clothing and accessories. suppliers and consumers.com FUNCTIONS OF RETAILING Retailers play a significant role as a conduit between manufacturers. breaking bulk. while a chain like Nilgiris specializes in food and bakery items. on and average. In this context. in contrast.
It helps to keep prices stable and enables the manufacturer to regulate production.Downloaded from a2zmba. HOLDING STOCK Retailers also offer the service of holding stock for the manufacturers. Retailers fill orders.blogspot. manufacturers and wholesalers typically ship large cartons of the product. meaning ‘to cut a piece off’. Retailers also offer credit and hire-purchase facilities to the customers to enable them to buy a product now and pay for it later. The word retailing is derived from the French word retailer.com BREAKING BULK Breaking bulk is another function performed by retailing. which are then tailored by the retailers into smaller quantities to meet individual consumption needs. Retailers maintain an inventory that allows for instant availability of the product to the consumers. The display itself allows the consumer to see and test products before actual purchase. deliver and install products. 7 . Retail essentially completes transactions with customers. 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. Providing product guarantees. To reduce transportation costs. ADDITIONAL SERVICES Retailers ease the change in ownership of merchandise by providing services that make it convenient to buy and use products. promptly process. after-sales service and dealing with consumer complaints are some of the services that add value to the actual product at the retailers’ end. Salespeople are also employed by retailers to answer queries and provide additional information about the displayed products.
and customer complaints. As a result of these functions. Manufacturers. TRANSPORT AND ADVERTISING FUNCTIONS Small manufacturers can use retailers to provide assistance with transport. salespeople and display. retailers are required to perform the following activities: 8 .blogspot. This also works the other way round in case the number of retailers is small. From advertisements. 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. delivery delays. The manufacturer can then modify defective or unsatisfactory merchandise and services. learn of sales forecasts. storage.com CHANNEL OF COMMUNICATION Retailers also act as the channel of communication and information between the wholesalers or suppliers and the consumers.Downloaded from a2zmba. shoppers learn about the characteristics and features of a product or services offered. in their turn. advertising and pre-payment of merchandise.
It includes both the depth and breadth of products carried. For example. layout and the level of compatibility between the existing merchandise.blogspot. on the other hand retailers from organized retailing depend on a detailed study of past trends and future projections. stock and appropriate mix of merchandise in suitable packages in accordance with the needs of customers.. and physical attributes in order to meet the expectations of their consumers and survive in the 9 . deals in multiple product categories along with all possible variants of brands. colour or flavour. Retailers provide convenient location. 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. Retailers have to select the combination of assortments from various categories. Retailers need to consider certain factors while devising assortment plans for their stores: profitability associated with particular merchandise mix. The assortments must include substitutable items of multiple brands and price points.g. store image. FoodWorld. stock keeping units. The small retailer takes assortment decision on the basis of his experience.com ACTIVITIES PERFORMED BY RETAILERS Retailers undertake various business activities and perform functions that add value to the offerings they make to their target segments. a leading food supermarket positioned as a one-stop shopping centre. They should be distinguished on account of physical dimensions and attributes e.Downloaded from a2zmba.
too much stock will increase the retailer’s cost of operation. Subhiksha.Downloaded from a2zmba. In order to meet their customers’ requirements retailers have to break or arrange the bulk into convenient units. HOLDING STOCK To ensure the regular availability of the offerings retailers maintain appropriate levels of inventory. Some are so small that they have to stock only on the shop floor. retailers. retailers receive large quantities of sacks and cases of merchandise from suppliers to reduce their transportation costs. Therefore. such as FMCG and ready-to-wear apparel. in small towns of India most retailers have arrangements with the nearby warehouses to stock the goods. Their assortment plan is governed by location. a grocery chain in south India has impressive assortments of only the fast moving brands rather than all available variants in the market. Retailers have to face the negative consequences of holding unwanted levels of stock —for instance. on periodic basis. size and store image of their stores.blogspot. too little stock will hamper the sales volume. Consumers normally depend on the retailers directly to replenish their stocks at home. Retailers need to maintain equilibrium between the range or variety carried and the sales which it gives rise to.com business. Normally. 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 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. whereas. BREAKING BULK Breaking bulk means physical repackaging of the products by retailers in small unit sizes according to customer’s convenience and stocking requirements. Whereas. maintain the required levels of stock to meet the regular or seasonal fluctuations in the demand. Retailers in the organized sector. This function receives negligible attention from the retailers now due the introduction of new product categories. Generally. to a 10 .
and information about the concerned target segment to the suppliers. 11 . At the same time. thereby making the shopping experience convenient and enjoyable.Downloaded from a2zmba. At the same time. after-sales services and information regarding new products to their customers. are using effective software packages for maintaining adequate levels of inventory. retailers avail of just-in-time deliveries with the help of efficient consumer response systems. reach to the ultimate customers. the first organized retail chain of wristwatches in India. 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. started by leading watch manufacturers Titan.com certain extent. which reduces the burden of maintaining high levels of stocks. they provide stocking place.blogspot. set up in all its stores. 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. service centres with proper equipment and trained manpower. home delivery. as after-sales service is considered to be an integral ingredient of the watch purchase. EXTENDING SERVICES Retailing provides multiple services to immediate customers and other members of the value chain. Retailers offer credit. Time Zone. For example.
Generally. 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. such as wholesalers.com CATEGORIZING RETAILERS Categorizing retailers helps in understanding the competition and the frequent changes that occur in retailing. The number of outlets operated by a retailer can have a significant impact on the competitiveness of a retail firm. chain stores are often channel captains of the marketing channel—captains can influence other channel partners. chain stores account for nearly 95% of general merchandise stores. to carry out 12 . for example. over a greater number of stores in addition to acquiring economies of purchase.Downloaded from a2zmba. There is no universally accepted method of classifying a retail outlet. such as advertising and managers’ salaries. a greater number of outlets add strength to the firm because it is able to spread fixed costs.blogspot. for practical purposes a chain store refers to a retail firm which has more than 11 units. Because of their size. Big chains operating on a national scale can save costs by a centralized system of buying and accounting. Small chains can use economies of scale while tailoring merchandise to local needs. In the United States. although many categorization schemes have been proposed. While any retailer operating more than one store can be technically classified as a chain owner. Some of these include classifying on the basis of • Number of outlets • Margin Vs Turnover • Location • Size.
Pricing is often a key area of focus for these retailers. large retailers are not perfect. However. They tend to stock a narrow range of inventory that sells well and maintain an extensive inventory of the fast selling products.com activities they might not otherwise engage in. Often. Local managers have little say in inventory selection. from inventory selection to store layout. huge buying power. 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. Big stores have many strengths. including regional or national reputation. Independent retailers can co-exist and flourish in the shadow of the big chains by developing a niche within the diverse market. They have competitive weaknesses that small retailers can exploit. and sophisticated forecasting and inventory systems. The key factor is innovation: stores that do not change will perish. price may be less important. Most offer the same standardized assortments of products nationally. Efficient operations. sales staff has minimal product knowledge. including precise buying practices. superior service and overall quality.blogspot. Their prime locations.Downloaded from a2zmba. Staff turnover is extremely high. are a must. such as extended payment terms and special package sizes. Big stores focus on large markets where their customers live and work. The niche should be developed on the basis of new or unusual product offerings. While value is important. Most large retailers have little connection with the community they serve. Branding is important to them. They usually do not offer special services. vast inventory and hassle-free return and exchange policies. Larger companies are often slow to recognize and react to changes in their local markets. the consistency in their products and services. They use technology to learn more about their customers and target them with point-of-sale machines interactive kiosks. Customer contact within the niche market must be characterized by ‘high-touch’ service. 13 . Perhaps their biggest advantage is their knowledge in every aspect of their business.
• Provide extraordinary service.Downloaded from a2zmba. exemplified by Amazon. • 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.com. Inventory turnover refers to the number of times per year. retailers are classified as low margin low turnover—those that cannot survive the competition—and low margin high turnover.blogspot.com The road to success for the independent retailer lies in doing all the things those big chain stores cannot or will not do. • Invest appropriately in advertising and promotion. • Understand the significance of the Internet. • Maintain essential inventory. • Move to a narrower niche market and stop competing directly with the big retailers. • Charge regular prices and avoid discounting (ensure requisite mark-up). These retailers are in the best position to combat competition because their high turnover allows 14 . • Buy with precision and search out specialty suppliers. Gross margin is net sales minus the cost of goods sold and gross margin percentage is the return on sales. on average. a retailer sells his inventory. Gross margin and inventory turnover is another means of classifying retailers. Jewellery stores and appliance stores are examples of high margin low turnover stores and only a few retailers achieve high margin high turnover. On the basis of this. • Employ the best possible staff. The successful independent retailers embrace the following principles: • Be prepared for change. • Focus on profit instead of volume (be ready to lose an occasional sale).
com them to withstand price wars. The drawback of the classification by this method is that service retailers who have no inventory turnover cannot be encompassed. this area of retailing is likely to undergo tremendous changes in the coming years. with big retailers having lower operational costs per dollar than smaller players.Downloaded from a2zmba. the Internet may make size an obsolete method of comparison. With the advent of the Internet. in this sphere too. Size is often used as a yardstick to classify retailers because costs often differ on the basis of size. Besides renovating old stores. retailers are testing unorthodox locations to expand their clientele. However. 15 . 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. generally within a metropolitan area.blogspot. One of the old means of classification of retailers is by location.
From positioning and operating perspectives.. 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. operated as a franchisee. in an ambience that is conducive for shopping and provides a memorable experience to customers.g. A retail unit could be owned by: • Manufacturer (e..g.Downloaded from a2zmba. owned by manufacturers or wholesalers. Cottage Emporia) • Ownership shared among franchiser and franchisee (e.. Organized retail stores are generally characterized by large. parts of a retail chain. some scholars have started referring to India as a nation of shopkeepers. Retail executives must not lose sight of this in playing up their strengths and working around their weaknesses. leased departments. This epithet has its roots in the huge number of retail enterprises in India. which were over 12 million in 2003.g. Mother Dairy milk booths in Delhi) • Government (e. company owned retail outlets) • Wholesaler (e. Vastra outlet in Rajouri in New Delhi) • Independent retailer (Chanakya Sweet Shop near Hazratganj in Lucknow) • Consumer (consumer owned grocery stores in man y residential societies) • Co-operative society (e..be independently owned. 16 . professionally managed store formats providing goods and services that appeal to customers.. Retail firms may . Recently. Archies Gallery) Although most Indian retailers fall in the category of small-scale units.blogspot. About 78% of these are small family businesses utilizing only household labour.g. consumers owned or co-operative society.g. there are also some very big retailers. each ownership format serves a marketplace niche and presents certain advantages and disadvantages.com 2.
kind of customer interaction level of services provided etc. It acts 17 .A joint venture is not well defined in the law. sometimes at maximum marginal rates. retail units are classified on multiple of ownership. Therefore.Downloaded from a2zmba. geographical locations.blogspot. retail businesses are extremely diverse and there are quite a few types of retail units. Unless incorporated or established as a firm as evidenced by a deed. There are four basic legal forms of ownership for retailers: 1) Sole proprietorship: . usually the individual who has the day-to-day responsibility for running the business.com CLASSIFICATION OF RETAIL UNITS Conceptual classification of a business unit provides the marketers with strategic guidelines. two or more people share ownership of a single business. In a partnership.A partnership is a common format in India for carrying out business activities (particularly trading) on a small or medium scale. so it is important to consult with an accountant and attorney to help one select preferred ownership structure. These firms are owned by one person. 3) Joint venture: . Besides. joint ventures may be taxed like association of persons. This decision is likely to have long-term implications.The vast majority of small businesses start out as sole proprietorships. 2) Partnership: . 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. useful in the design of retailing strategy.
and the duration of the LLC is usually determined when the organization papers are filed. The owners are members.The Limited Liability Company (LLC) is a relatively new type of hybrid business structure that is now permissible in most states. 18 .Downloaded from a2zmba.com like a general partnership.blogspot. 4) Limited liability Company (public and private):. but is clearly for a limited period of time or a single project.
which allows the franchisee to conduct a given form of business under and establishments name and according to a given pattern of business. 19 .A chain retailer operates multiple outlets (store units) under common ownership. Operational structure defines the key strategic decision of retail entity. About 78% of these are small family businesses utilizing only household labour. it usually engages in some level of centralized (or coordinated) purchasing and decision making. Retail firms can be classified into five heads on the basis of their respective operational structures: 1) Independent retail unit: .The total number of retailers in India is estimated to be over 5 million in 2003. or a service sponsor) and a retail franchisee. in discount stores. Usually this is done in case of department and specialty stores and also at times. 3) Franchising: . An independent retailer owns one retail unit. a wholesaler. whether to hire employees and manage the distributed sales function internally or to reach customers though franchised outlets owned and operated by local entrepreneurs.blogspot. 4) Leased Department or Shop-in-shop:.Downloaded from a2zmba. 2) Retail Chain: .It refers to department in a retail store that are rented to an outside party.com Classification of Retailers on the basis of Operational Structure Retail businesses are classified on the basis of their operational and organizational structure.Franchising involves a contractual arrangement between a franchiser (which may be a manufacturer.
com 5) Co-operative Outlets: . 20 . In this context the detailed example of Kendriya Bhandar in India.blogspot.Co-operative outlets are generally owned and managed by co-operative societies.Downloaded from a2zmba.
3) Retailers in Specialized Markets: . T Nagar for ready-made garments. work together to attract customers to their retail area. in Chennai.In this case. Classification of retailers on the basis of location is discussed below: 1) Retailers in a free-standing location: . and also compete against each other for the same customers. better visibility from the road. a retailer locates his store in a place where a group o retail outlets. Godown Street is famous for clothes. Govindappan naicleen street for grocery. This type of location has several advantages including no competition. Poo Kadia for food and vegetables. 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.Besides the above location-based classification. For example. most of the cities have specialized markets famous for a particular product category.com Classification of Retailers on the basis or Retail Location Retailers have also been also been classified according to their store location.blogspot. we also have in India-retailers who prefer specialized markets. 21 . offering a variety of merchandise. which attracts the customers staying close by.Downloaded from a2zmba. For example the Haldiram’s outlet on the Delhi-Jaipur highway and the McDonald’s outlet on Delhi-Ludhiana highway. In India. low rent. 2) Retailers in a Business-associated Location:. Bunder treet for stationery products. Usman street for jewellery. easy parking and lower property costs.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. particularly traditional independent retailers or chain stores.
For quite some time. duty-free shops and newsstands dominated the small amount of commercial space provided at airports. serious efforts are being made to design new airport facilities in order to incorporate substantial amounts of retail space.com 4) Airport Retailing: . 22 .Downloaded from a2zmba. The key features of airport retailing are: • Large groups of prospective shoppers • Captive audience • Strong sales per square foot of retail space • Strong sales of gift and travel items • Difficulty in replenishment • Longer operating hours • Duty-free shopping possible. Lately.blogspot.
manufacturers are identifying. and speciality retailers (Time Zone. Tanishq) have all developed a successful retail models. Consumers are not only looking for the core products or functional benefits from the retailers but also the non-functional benefits. redefining. While multinational retail chains are looking for new markets. At the same time. For example.com TRENDS IN RETAIL FORMATS Retail industry is continuously going through changes on account of liberalization. the small mom-and-pop stores and the traditional department stores. But even in the mass-merchandising segment. is a very common retail formats they 23 . discount clubs (Subhiksha). Mom-and-pop Stores and Traditional Kirana Stores The retail sector is changing as new store categories have started dominating the marketplace. are finding the competition intense. Small independent stores. In 2002. For example. globalization and consumer preferences. Accordingly the retailers too are fast adjusting to the changing consumer preferences. department stores such as Saks and Federated experienced declining revenues (down 3% and 1% respectively). Mass merchandisers (Wal-Mart. most of the traditional eating joints in India such as Haldiram. the competition is fierce.Downloaded from a2zmba. respectively).blogspot. while Wal-Mart and Target saw revenues grow (by 12% and 10%. as is evidenced by Kmart’s bankruptcy announcement in 2002. which need to be compatible with their lifestyles. Vishal chain). 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. so-called category killers (Home Depot. across product categories. The existing retail houses are also gearing up to face the emerging competition from the organized sector and the changing outlook of the consumers. Big Bazaar). or evolving new retail formats. consumer spending is shifting from goods to services.
names like Sears.6%. Indeed. they should be ready to expect more bumps as the strong get stronger and the weak get absorbed. Companies like Amazon.C. and Montgomery Ward dominated malls and downtowns all over America.com and First and second. are now being followed by bricks-and-mortar and catalogue retailers like J. Penney.com are also undertaking large scale renovations to appeal and attract their target consumer segments. However.com. these department stores have suffered badly. however.blogspot. which are expanding retail e-commerce into new markets. which helped pioneer the retail e-commerce concept. In part. J. 24 .Downloaded from a2zmba. Macy’s. Forrester Research Agency projects e-commerce revenue to rise to $123 billion in 2004. It has also come from financial burdens incurred by companies that acquired competing companies and grew too fast. E-commerce The amount of retail business being conducted on the Internet is growing every year. Crew. up from 4. an increase of some 28% over the previous year and for e-tailing to comprise a bigger slice of the overall retail pie (5. Department Stores A few years ago. this is a result of changing shopping patterns and increased competition from discount stores. It is unlikely that these players will disappear from the market. Over the last decade or so. Many major retail organizations and manufacturers have online retail stores.5% in 2003).
along with the category killers. electronic goods or pet food in such huge volumes that they can then sell them at prices even fairly large competitors cannot match. employees). These. these companies offer earn-and-learn experiences with vendors and distributors before they move onward and upward. Category Killers These are the giant retailers that dominate one area of merchandise (e. For most job seekers. but the same employment caveats apply. Where once mom-and-pop and department stores dominated retail. marketing.blogspot. such as Costco. anchored by at least one major department store. Target and Kmart. particularly in home furnishings and home improvement. and Victoria’s Secret. now the discount retailers and category killers are at the top of the heap. with more than a million.. Some are very high-end (Louis Vuitton) while others cater to the price-conscious masses (Old Navy). Industry experts predict growth in this segment. The future of this category is better than that of many of the more general discounters. have changed the landscape of both the retail industry and America. And where once shopping malls. Specialty Stores These include Crate & Barrel. Office Depot.Downloaded from a2zmba.com Discount Stores These are giants such as Wal-Mart (the largest retailer in the world. Many are so successful that department stores have started to emulate their buying. file cabinets. and merchandise display strategies. the Body Shop. Tower Records and The Sports Authority). They are able to buy bathroom tiles. used to be the dominant retail presence lining the nation’s roads. These stores concentrate on one type of merchandise and offer it in a manner that makes it special. as well as membership warehouses. and it seems to 25 .g. now it is the behemoth Wal-Marts and Home Depots.
strictly online purveyors with no bricksand. Major players.com attract many of the best and brightest in retail. and in many of these stores the hand of bureaucracy is not heavy.Downloaded from a2zmba. E-tailers While most retailers have online storefronts. 26 .com.blogspot. have generated enough business to cause top brick-and mortar competitors to come up with their own Internet sites. such as Amazon.mortar counterparts are hoping to snare a percentage of the retail profit. Promotion and responsibility come quickly to those willing to work hard. have also set up online stores so as not to miss out on the revenue opportunities that the Interned offers. Traditional retailers like Wal-Mart and Starbucks. hugely successful in their own right.
Retailers offering a broad variety of merchandise mix. commonly part of a retail chain. There are many different retail stores in India—convenience stores. The leading fashion department stores in India are Ebony. can be classified as follows: Department Stores: .com 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. department stores are located within the planned shopping centres or traditional up market downtown centres.Specialty stores stress on one or a limited number of complementary product categories and extend a high level of service to their customers. Retail units. hypermarkets. Ebony has 7 stores. the 27 . Discount Stores: . LifeStyle has 3 stores and there are 12 Pantaloon Family Stores. The consumer can choose between different stores for different needs.It is a large retail store organized into a number of departments. Globus. limited or no service and low prices are characterized by low margins. LifeStyle.Downloaded from a2zmba.blogspot. medicines) reigned supreme. supermarkets. Shoppers’ Stop and Westside. on account of variety of merchandise mix. All of them are multiproduct stores. In India. Globus has 4 stores. low investments on fixtures. heavy advertising. Pantaloon. Discount stores prefer shopping centres that provide space at lower rents as they attract customers from other adjoining stores in the shopping centre. offering a broad variety and depth of merchandise. Usually. brand stores and discount stores characterized by the variety of merchandise mix offered by a respective retail format. furniture. Specialty Stores: . limited support from sales people etc. department stores.
low prices and comprehensive range of merchandise. at these centres attract large crowds. bargain and image to the particular stores. 28 . Hypermarkets are characterized by large store size.ft.Downloaded from a2zmba.000sq. Such specialized retail operations provide expertise economies of scale.blogspot.com traditionally independent retailers in the specialized market centres operate in a particular product category. low operating costs and margins. Supermarkets and Hypermarkets: .A hypermarket is a very large retail unit offering merchandise at low prices. Superstores have a sales area of over 50.
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.blogspot.com 3.Downloaded from a2zmba. e. Location is a major cost factor because it • Involves large capital investment • Affects transportation costs • Affects human resources cost. Choosing the wrong site can lead to poor results and in some cases insolvency and closure. In India..g. The terms ‘location’ and ‘site’ are often used interchangeably but there is a distinct difference between the two. costs can be quite high. salaries Location is a major revenue factor because it • Affects the amount of customer traffic • 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. Location decisions can be complex. This makes the location decision even more critical. IMPORTANCE OF LOCATION DECISION The importance of the location decision is due to the following factors. It is also one of the most difficult to plan for completely. RETAIL LOCATION STRATEGY Location is the most important ingredient for any business that relies on customers. which denotes the store and 29 . most retailers prefer to own the property rather than avail of the desired property through lease or rental. ‘Location’ is a broader concept.
For example.Downloaded from a2zmba. operations and customer service characteristics. while a site refers to the specific building or part of the building where a store is located.blogspot.com its trading area from where a majority of its customers originate. Location and site characteristics should interact in a positive and synergistic way with a store’s merchandising. housed in an attractive building with adequate parking facilities. a designer men’s store located in an up market shopping centre or a mall near posh residential colonies. 30 .
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. A city’s trading area would comprise its suburbs as well as neighboring cities and towns. Cities like Mumbai and Delhi have a large trading area as they draw customers from far off cities and towns. • Population of population growth in the trading area: The larger the population of the trading area. basing on three aspects: 1) Selection of a city 2) Selection of an area or type of location within a city 3) 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: • Size of the city’s trading area: A city’s trading area is the geographic region from which customers come to the city for shopping. the greater the potential of the city as a shopping location. 31 . • 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.blogspot. 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. A high growth n population in the trading area can also increase the retail potential.com LEVELS OF LOCATION DECISION AND ITS DETERMINING FACTORS A retailer has to take the location decision.Downloaded from a2zmba.
Moradabad has become an important retail location for brassware products while Mysore is famous for silk saris. • Development cost: The cost of land. size and quality of competition: The retailer also considers the number.com • 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. size and quality of competition before selecting a city.Downloaded from a2zmba. rental value and other related cost. 32 .blogspot. • Number.
• Quantitative and qualitative nature of competitive stores: Retailers would like to evaluate the product lines carried by other sores. before selecting the area. Colaba in Mumbai and Commercial Street in Bangalore attract customers from far off.Downloaded from a2zmba.blogspot. number of stores in the area. 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. • Nature of zoning regulations: The retailer should also consider the zoning regulations in the city. while small shopping centres located in colonies attract customers from immediate neighborhood. evaluation of the following factors is required. • Customer attraction power of a shopping district or a particular store: Major shopping centres like Chandni Chowk in Delhi.com 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. etc. • Direction of spread of the city: The retailer should consider the direction in which the city is developing while selection the location. 33 . • Availability of access routes: The area or shopping centre should provide easy access routes.
selecting the trading area is even more important than picking the specific site.Downloaded from a2zmba. The large stores in turn depend on attracting customers from the existing flow of traffic.com Selection of a Specific Site The choice of a specific site is particularly important. In central and secondary shopping centre. 34 . non-anchor sores depend on customers coming to the market and the traffic generated by anchor stores.blogspot. Where sales depend on nearby settlements.
the store depends on its own pulling power and promotion to attract customers. Kemp Fort and LifeStyle stores are free-standing stores in Bangalore away from major market of the city. Or. it may have a choice ranging for. It may locate in an isolated place and pull the customer to the store on its own strength. which pull customers from across the city. They sell convenience products like groceries. Neighborhood Stores Neighborhood stores are located in residential neighborhoods and serve a small locality.com TYPES OF RETAIL LOCATION A retailer has to choose among alternate types of retail locations available.blogspot. This type of location has several advantages including no competition. If it decides to locate its store in a business district. easy parking and lower property costs. Now. the large shopping centres in the heart of the city or smaller shopping complexes in a suburb. low rent. 35 . 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. such as a small grocery store or paan shop in a colony which attracts the customers staying close by. are also coming up in suburbs or away from major markets as free-standing locations. even the large organized sector stores. it may locate in a business district where ther3 are a large number of retail establishments.Downloaded from a2zmba. For example. and often better visibility from the road.
com Highway Stores Highway stores are located along highways or at the intersections of two highways and attract customers passing through these highways. Major regional 36 .Downloaded from a2zmba. three to four medical stores in a cluster but no grocery store. often they are anchored by two or more major department store.blogspot. • Planned Shopping Centres: A planned shopping centre consists of a group of architecturally owned or managed stores. but also compete against each other for the same customers. serve a large trading area. and pedestrian traffic. They attract customers from across the city and suburbs. nearness to commercial and social facilities. and have high rents. 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. based on balanced tenancy and surrounded by parking facilities. • Regional Shopping Centres or Malls: Regional shopping centres or malls are the largest planned shopping centres. we may find four to five shoe stores. An unplanned district generally provides certain advantages like availability of a variety of goods. designed and operated as a unit. Thus. access to public transport. This type of location can be further classified as: • 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. have enclosed malls. services and prices.
is usually a better site than the middle of a block.Downloaded from a2zmba.blogspot. The corner of an intersection. emergence of free-standing department stores. The emergence of several 37 . Spencers Plaza n Chennai and Meropolitan Mall in Gurgaon. Consideration of all the options keeping in view the product mix. Convenience goods are often purchased on impulse from easily accessible stores. etc. A retailer has to consider the following factors while selecting a site: • Kind of products sold • Cost factor • Competitor’s location • Ease of traffic flow and accessibility • Parking and major thoroughfares • Market trends • Visibility Kind of Products Sold For stores dealing in convenience goods. a retailer is presented with a wider choice of locations. the quality of the traffic is more important. customer profile and overall business model presents an enormous challenge. which offers two distinct traffic streams and a large window display area. SITE SELECTION ANALYSIS With the advent of new retail formats in India such as planned shopping centes and malls. and further development of traditional business districts and other unplanned shopping locations. Ansal Plaza in Delhi.com shopping centres or malls in India include Crossroads in Mumbai. hypermarkets.. For stores dealing in shopping goods. the quantity of traffic is most important.
blogspot.Downloaded from a2zmba.com apparel factory outlets within a short stretch on the Delhi-Jaipur highway. is driven by this factor. 38 . at Mahipalpur market in Delhi.
The following factors have to be considered: parking availability. utilities. 39 . An excellent location may be next or close to parallel or complementary businesses that will help to attract customers. Consider the nature of the business you are planning to open and your potential customers. the retail community placed great importance on owning the place since this was considered prestigious in the business community. Studying the flow of traffic. Retailers selling convenience goods must attract business from the existing flow of traffic. This supports their model of selling goods at very low margins. Traditionally. is hence important. one might reconsider that particular location. Ease of Traffic Flow and Accessibility These two factors are more important to some businesses than others. security. industrial parks. Competitor’s Location The type and number of competitors is another important factor. insurance and all related costs having a place to conduct business operations. street widths and parking lots. If one is not able to offer better quality and competitively priced products. The retailers operating in these periodic markets keep shifting from place to place and do not own any property. Space cost is a combination of rent or mortgage payment. noting one-way streets. However. there are many periodic retail markets in Indian which operate on particular days of the week.blogspot. instead they pay a small rental for their set-up in each market. Intense competition in the area shows that new businesses will have to divide the market with existing businesses. franchisee chains and department stores should be noted. The presence of major retail centres.Downloaded from a2zmba. leasehold improvements.com Cost Factor in Location Decision Location decision on cost considerations alone is risky. general decoration.
Market Trends Evaluate the community from a broad. When evaluating the parking that exists at a retail site. landscaping. futuristic perspective. the direction of the travel lanes and spaces.Downloaded from a2zmba. Discussions with business owners and officials in the area can also help. Parking and Major Thoroughfares Parking is another site characteristic that is especially a cause for concern in densely populated areas. 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. which means that some part of a community’s population may be ‘shopping’ in a new store.blogspot. 40 . Visibility Visibility has a varied impact on a store’s sales potential. etc. visibility no longer matters. width of street. There are several ratios that are generally used to determine the adequacy of a parking lot. Once the shopper has become a regular customer. It is important when a shopper is trying to find the sore for the first or second time. Local newspapers are a good source of information. the ideal ratio for food stores is in the magnitude of 7-8 cars per 1. part of the block and neighbors. traffic congestion. and parking configuration (the way the parking lot is laid out. there are two considerations: parking capacity (the number of cars that can be parked). side of street.com distance from residential areas or other business areas. Make use of information available through the Chamber of commerce.000 square feet of food store. While different ratios exist for different types of retailers or service providers. But consider this fact: one in five families’ moves every year.).
com 4. coupled with the stringent provisions of the Rent Control Act. ushered in the entry big international brands opening their exclusive showrooms. There are. 41 .blogspot. The changing socio economic patterns coupled with the consumption increase led to the emergence of the convenience stores. certain bottlenecks as well. toilets and maintenance. This also explains why the Raheja’s forayed into their retail ventureShoppers’ Stop. the sheer size this behemoth will develop into.Downloaded from a2zmba. RETAILING IN INDIA ORIGIN IN INDIA Although retailing does not enjoy the status of an Industry. however. act as a dissuasive factor for many players to initiate operations in the main markets. The inconveniences caused by lack of parking place. which comprised merely shops offering a variety of goods and services clubbed together. The opening up of the economy only fueled this globalization. The origin of retail in India dates back to ancient times when the melas and mandis made their presence felt. the scarcity of space. The next step was the commercial plazas. which became a part of the civic planning. is grabbing attention.
which is quite low in comparison to the developed economies. mt.. The turnover from private labels by major retail chains was estimated at around Rs 1200 million in 2000. The share was 62.blogspot.5billion. ft. snack centres. Food sales constitute a high proportion of the total retail sales. owner-managed shops.Downloaded from a2zmba. which is expected to increase to Rs 800.000 crore retail markets are unorganized. In 2000. in 2001. an overwhelming proportion of the Rs 400. the global management consultancy AT Kearney put retail trade at Rs 400.000 crore by the year 2005—an annual increase of 20%. However. In India.com RETAIL IN INDIA The retail industry in India is largely unorganized and predominantly consists of small. worth approximately Rs 7. barber shops) and pushcarts mobile vendors. The trend to market private labels by a specific retail store is catching on in India as it helps to improve margins. There are also an unaccounted number of low cost Kiosks (tea stalls.000 crore.4 sq. 42 . In fact. while non-food sales were worth Rs4189.2 billion. only a Rs 20. mt.7% in 2001. with an average selling space of 29.000 crore segment of the market is organized. According to a survey by AT Kearney. independent. Total retail sales area in India was estimated at 328 million sq. per outlet. the per capita retailing space is about 2 sq. There is no integrated supply chain management outlook in the Indian traditional retail industry. Retailing is India’s largest industry in terms of contribution to GDP and constitutes 13% of the GDP (Gross Domestic Product). the non-food retailing sector registered faster year-on-year growth than the food sales sector. There are around 5 million retail outlets in India.039.
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7 billion. 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. However. instant. organized retail trade in India was worth Rs 11. Apart from this. At 44 .com EMERGENCE OF ORGANIZED RETAILING Organized retailing in India represents a small fraction of the total retail market. Rural India continues to be serviced by small retail outlets.228. families are experiencing growth in income but dearth of time. The demand for frozen. There is also a strong trend in favour of one-stop shops like supermarkets and department stores. Only 3. ready-to-eat food has been on the rise.Downloaded from a2zmba. Therefore. especially in the metropolitan and large cities in India. 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. provision stores. lead to the closure of many small trading businesses and result in largescale unemployment. In urban India. The McKinsey report predicts that FDI will help the retail businesses to grow to US $ 460-470 billion by 2010. such as haats. 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.6 million outlets cater to more than 700 million inhabitants of rural India. there are periodic or temporary markets. In 2001. paan shops and ration shops are the most popular vehicles of retailing. especially in south India and are spreading all over India at a rapid pace. The modern retail formats are showing robust growth as several retail chains have established a base in metropolitan cities. Here. peeth and melas that come up at the same location at regular time intervals.blogspot. More and more women are taking up corporate jobs. government has discouraged FDI in the retail sector.
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. such as joint ventures where Indian partner is an export house (Total Health Care). Players that entered before the easing of restrictions on FDI in retail had to come through different modes. Global players in the retail segment have been entering the market for a while now. Pizza Hut). The organized retailer should be able to.blogspot.Downloaded from a2zmba. foreign retailers can enter the retailing sector only through restricted modes. 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. 45 .com present. cash and carry operations (Giant) and licensing (Marks & Spencer’s). franchising/local manufacturing/sourcing from small-scale sector (McDonald’s.
India will have 358 shopping malls by 2007. street vendors.com CURRENT SCENARIO The Indian population is whooping 1 billion with 75% of the people living in villages and small towns. The Core and the Lower middle have increased their share in the Growth. and cater to the purchase need of its pole. To cater to this. organized parking lots and other public amenities. Delhi has Connaught Place. It is only natural that the agricultural sector is the biggest employer with its contribution to GDP pegged at 26. 46 . The Indian consumer’s shopping needs are and traditionally have been fulfilled by Kirana sores (corner stores). each city developed its own identity and shopping cluster. Bangalore has Brigade Road and Commercial Street. covering an area of 21. It is interesting to note. And by year end the count will shoot up to 158 malls. 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. for instance in Pune there is MG Road. It will cover 34 million sq ft area. At present (September 23. The 12 million retail outlets in India are the highest in the world. that the Urban Population although just 25% of the total. according to a study by fashion magazine Image.Downloaded from a2zmba. Kiosks. weekly bazaars and high-street shops for consumer durables and luxury goods. with the spending increasing at an average of 11% per annum. Retail is India’s largest industry after Agriculture with around 20% of the economically active population engaged in it and generation 10% of our country’s GDP. Droves of middle-class Indians have broken off their love of traditional stand-alone shops that have no ACs.blogspot. Karol Bagh and South Extension. In India we have 96 malls.6 million sq ft. The chief driver of growth in the retail sector has been the consumer.7%. is an astounding 250 million in size and is growing at a healthy rate of 7% per annum. 2005).
Ahmedabad about 3.4 million sq ft. East region has 10% of India’s retail share. Government and co-operative sector is also making their steps in retailing. Delhi and Mumbai now have maximum number of shopping centres. 47 .blogspot. Ludhiana to account for 2.Downloaded from a2zmba. South region has 18% of India’s retail share.8 million sq ft of mall space by 2007. North region has 39% of India’s retail share. Mother Dairy. Kendriya Bhandar.5 million sq ft.com Currently estimated at $205 billion to grow to $400-500 million. For example. Gurgoan saw the largest development in terms of retail outlet. • • • • • • • • • • Smaller cities will have about 12. Super Bazar etc. over the next 2-3 years. Apna Bazar. West region has 33% of India’s retail share.
This is especially true in the case or new products. Retailers act as gatekeepers who decide on which new products should find their way to the shelves of their stores. ‘Marketers have to sell a new product several times. first within the company. A product manager of household appliances claimed. brand image. and in the value chain in particular.com DRIVERS OF CHANGE IN RETAILING • Changing demographics and industry structure • Expanding computer technology • Emphasis on lower costs and prices • Emphasis on convenience and service • Focus on productivity • Added experimentation • Continuing growth of non-store retailing. and market profile in order to ensure a competitive edge. It is necessary for marketers of consumer products to identify the need and motivations of their partners in the marketing channel. they have a strong say in the success of the product or service launched by a business firm. The increasing numbers of product categories followed by multiple brands in each category complicate decision-making for both manufacturers and market intermediaries.’ It is a well-established fact that manufacturers need to sell their products through retail formats that are compatible with their business strategy. 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. In today’s competitive environment retailers have redefined their role in general. As a result.Downloaded from a2zmba. then to the retailer and finally to the user of the product. 48 .blogspot.
In the backdrop of globalization. negotiating with suppliers. Retailing is a dynamic industry---constantly changing due to shifts in the needs of the consumers and the growth of technology.Downloaded from a2zmba. If such space is occupied by merchandise that is not moving. The retailer may have to resort to substantial price reductions in order to get rid of the unsold stock. Sears. If such space is occupied by merchandise that is not moving. Selecting target markets. a retailer is required to make a conscious effort to position himself 49 . liberalization and highly aware customers. Retailers undertake risk in selecting a portfolio of products or brands to offer to their customers. Retail formats and companies that were unknown three decades ago are now major forces in the economy. 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. such as Wal-Mart. • Selling space available is relatively fixed and must return maximum profits. McDonald’s. The larger retailers have managed to set up huge supply/distribution chains. governed by their individual sales philosophy. it will not result in profit. Retailers have to make optimum selection of goods to be sold given the following major concerns: • Selling space available is relatively fixed and must return maximum profits. it will not result in profit.blogspot. inventory management systems. training salespeople---these are just a few of the many functions that a retail manager has to perform on a perpetual basis. Therefore. determining what merchandise and services to offer. Marks and Spencer.com Retailers want of optimize sales within the limited shelf space. 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. financing pacts and widescale marketing plans. The retailer may have to resort to substantial price reductions in order to get rid of the unsold stock.
Downloaded from a2zmba.blogspot. 50 . This is determined to a great extent by the retail mix strategy followed by acompany to sell its products.com distinctively to face the competition.
Liberty shoes Ltd. Big Bazaar. 51 . Ltd. Tesco. Boots Group.... Trent and the new entrants penetrating the market soon will include Reliance Retail Ltd. Crossword.. Globus Stores Pvt. Pantaloon Retail India Ltd. Food Bazaar.. Titan Industries. Wal-Mart Stores. Carrefour. Ebony Retail Holdings Ltd. etc. Subhiksha. Music World Entertainment Ltd.Downloaded from a2zmba.com MAJOR RETAILER SPACE HOLDERS IN INDIA Bata India Ltd.blogspot. Shoppers Stop.
Problems associated with working Capital funding from lending Institutions. Some of the major factors hindering the growth of this sector are as follows: • • • • • The non-industry structure and status The lack of adequate infrastructure FDI restrictions in this sector The huge investments required in expanding their markets.Downloaded from a2zmba. by 2010 the retail sector is expected to be US $ 300 Billion industry.blogspot. based on a GDP growth rate of 6-7% per annum. 52 .com RETAIL VIABILITY As per the CII McKinsey report.
com 5. SWOT OF THE MARKET 53 .blogspot.Downloaded from a2zmba.
8) Most of the entrants to organized retail come from 3 main categories. retail space available. • • • Real Estate Developers Corporate Houses Manufacturers/Exporters WEAKNESSES 1) Shortage of quality retail spaces at affordable rates. 3) Pattern of consumption changing along with shopping trends. 6) Almost 25 million sq.blogspot. 6) Footfalls not a clear indicator of sales as actual consumers lower in number. 7) Lack of huge investments for expansion 54 .com STRENGTH 1) Organized retailing at US$ 3. 2) Government regulations on development of real estate(Urban Land Ceiling Act) 3) Need to provide Value for Money-squeezing margins 4) Lack of industry status. and have ventured into retail as their business extension. 4) A Growing population will translate to move consumers. 7) Paradigm shift in shopping experience for consumers pulling in more people. ft.31 billion. growing at 8%. 2) 2nd largest contributor to GDP after agriculture at 20%.Downloaded from a2zmba. 5) Retail revolution restricted to 250 million people due to monolithic urban-rural divide. 5) Consumer spending increasing at 11% annually.
4) Archaic labour laws are a hindrance to providing 24/7 shopping experience 5) Personalized service offered by Mom-&-Pop stores.com OPPORTUNITIES 1) Increasing urban population-more participants in retail revolution. 5) Availability of old industrial lands-prime real estate locked in sick industrial units. 6) Average grocery spends at 42% of monthly spends-presents a huge opportunity. 3) Social factors like dual household income has enhanced spending power. 6) Unavailability of qualified personnel to support exponential growth in retail. 7) Increase in use of credit cards.blogspot. THREATS 1) Rising lease/rental costs affecting project viability 2) FDI restrictions in the retail sector 3) Poor monsoons and low GDP Growth could affect consumer spending drastically. 7) Differentiate taxation laws hindering expansion. 55 . 4) Spends moving towards lifestyle products and esteem enhancing products.Downloaded from a2zmba. 2) Increase in consuming middle class population.
The population of India is young. The food & grocery. 56 . specialty stores. People are moving towards luxury and want to experiment with fashion and technology.class population of today needs a feel good experience even if they have to spend a little more for that.Downloaded from a2zmba. consumer durables and books & music sectors are the major retail sectors. There is an increasing need of better apparels. There has been a transition from price consideration to quality and design. cars. unorganized small outlets largely control the sector. supermarkets. category killers and discount chains. as the focus of the customer has changed. However.blogspot.com 6. 50% of the Indian population is under the age of 25. Hence there is tremendous potential for the organized sector in various formats. energetic and full of enthusiasm. mobile phones and consumer durables. clothing. such as hypermarkets. INDIAN CONSUMERISM The lifestyle and profile of the Indian consumer is going through a rapid transformation. The upper and middle.
Downloaded from a2zmba.blogspot.com FACTORS AFFECTING CONSUMER DECISION-MAKING A consumer’s purchase decision tends to be affected by the following four factors: 1) Demographic 2) Psychological 3) Environmental 4) Lifestyle 57 .
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DEMOGRAPHIC FACTORS Demographic factors are unique to a particular person. They are objective, quantifiable and easily identifiable population data such as sex, income, age, marital status etc. It also involves identification of who is responsible for the decision-making or buying and who is the ultimate consumer. PSYCHOLOGICAL FACTORS Psychological factors refer to the intrinsic or inner aspects of the individual. An understanding of consumers’ psychology guides the marketers’ segmentation strategy. ENVIRONMENTAL FACTORS Environmental factors cover all the physical and social characteristics of a consumer’s external world, including physical objects, spatial relationships, the social factors , co customers, reference groups, social class . The environmental factors influence consumers’ wants, learning, motives, which in turn influence effective and cognitive responses and among other things the shopping behavior of the individual. LIFESTYLE Lifestyle refers to an individual’s mode of living as identified by his or her activities, interests and opinions. Lifestyle variables have been measured by identifying a consumer’s day-to-day activities and interests. Lifestyle is considered to be highly correlated with consumer’s values and personality. An individual’s lifestyle is influenced by, among other things, the social group he belongs to and his occupation. For example, 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. At the same time, they are higher spenders than, for e.g., single-income families.
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7. DIVISION OF RETAILERS IN INDIA
The retail sector in India can be divided into two major categories: 1) Organized 2) Unorganized
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UNORGANIZED RETAIL IN INDIA Retailing in India is predominantly unorganized. According to a survey by AT Kearney, an overwhelming proportion of the Rs. 400,000 crore retail market is UNORGANISED. In fact, only a Rs. 20,000 crore segment of the market is organized. We are known as a nation of shopkeepers with over 12 million, the highest outlet density in the world in the world with an estimated turnover of $ 200 billion. However a disturbing point here is that as much as 96 per cent of them are smaller than 500 square feet in area. This means that India per capita retailing space is about 2 square feet (compared to 16 square feet in the United States). India's per capita retailing space is thus the lowest in the world. Another point to note is that only 8 % of our population is engaged in Retail whereas the global average is around 10-12%. Traditional retailing has established in India for some centuries. It is a low cost structure, mostly owner-operated, has negligible real estate and labour costs and little or no taxes to pay. Consumer familiarity that runs from generation to generation is one big advantage for the traditional retailing sector. However this is set to change with the entry of the corporate sector into the retail domain. The question that is being discussed, given the corporate onslaught with big bucks and deep pockets, what will be the impact on the traditional mom and pop store? Will they survive this or will they fold up and leave the field only to the major organized retail players? The answer could be a co-existence. The major advantage for the smaller players is the size, complexity and diversity of our Indian Markets. If we look at the organized retail players, most of them have opened shop in the Metros, Tier 1 and Tier 2 towns. Very rarely do we find organized players in the rural areas and we have more than 70% of the population living in the rural areas.
61 . At this juncture. purchasing power is location-specific. hence vegetable-purchasing power for identical income groups would be different in the two places even though they are the two biggest cities in India with comparable populations. in the long run the majors will come back and cannot be dislodged. For example. In other words.Downloaded from a2zmba. the majors will step and service this need. Consumption habits of households are therefore better determinants of consumer market size than income distribution. Another factor in the favor of the unorganized retail in rural areas is our mindset. This is because of the lack of homogeneity of the consuming class and the varying prices of a single product in different parts of India. it is too early to predict the erosion of the mom and pop stores in India. The superior purchasing power of the majors and the volume of business generated can result in lower prices thus moving the custom away from the traditional store to the organized retail. the Government has banned organized retail major based on the demands of the unorganized sector.com So what could be the scenario? One of the fallouts of the organized retail onslaught would be that the smaller stores in the areas where the majors operate could get squeezed out. vegetables generally cost more in Mumbai than in Chennai. In UP. Another factor that is to be considered is that data on income distribution of households is insufficient in determining market size for different consumer products in India. Tier 1 and Tier 2 towns by the unorganized retail staging strikes against the majors and trying to influence Government policy toward the retail majors and making it difficult for them to operate. who having been exposed to top of line retail outlets in the foreign countries. The rising disposable income of the techies today. Given the above. will sooner or later generate a demand for the same facility.blogspot. the more expensive it will be. While this may happen in the short run. not income specific. This is also proved by countries where Wal-Mart the world’s biggest retailer operates. This fear has manifested itself in Metros. Organized retailing also has to cope with the middle class/rural psychology that the bigger and brighter a Sales outlet is. The customer loyalty today is towards the price.
blogspot. 62 .com The smaller stores have a peaceful coexistence in these countries with the number one company in the fortune 500 list.Downloaded from a2zmba.
These stores are found in both residential as well as commercial markets. Supermarkets and Department stores like Subhiksha. Buying from Malls. the small shopkeepers fear losing their business. The 63 . Marks & Spencers. which is not possible with hypermarkets and supermarkets. Traditional family run convenience stores are too well established in India than to be wiped out and besides there is uniqueness in the traditional items that represent the subcontinent. If the stores are not food based then the type of retail items available are local in nature. The traditional family run convenience stores can take pride in the fact that the Kirana is the most common outlet forms for the consumers.com TRADITIONAL v/s MODERN FORMAT RETAILERS The retail boom will face a strong competition from the 12 million mom-and-pop stores. Reliance Retail Ltd. The tough competition for convenience stores are coming from organized retail stores dealing in food items. Now stores run by families are primarily food based and the set up is as Kirana or the 'corner grocer' stores. These are easily accessible and provide services like free home delivery and goods at credit. Basically they provide high service with low prices.Downloaded from a2zmba. has been inviting such people to join in its Dairy business as franchisees. A good example of such would be Convenio.blogspot. like: • Apna Bazaar • Canteen stores • Food World • Subhiksha • Food Bazaar Convenience Stores are open for long hours and are one of the formats of the Indian retail stores that cater to basic needs of the consumer. The retail stores in India are essentially dominated by the unorganized sector or traditional stores. provide a different environment where one can pick and choose from a variety of products. Owing to the entry of such big players. In fact the traditional stores have taken up 98 percent of the Indian retail market. etc.
blogspot.com food products of traditional family run convenience stores are comprised of branded as well as non-branded items. The convenience factor in terms of items. The future of such stores as they face competition from organized sector would depend on the following particulars: • • • • • • Place and capacity Diligent area coverage Disciplined work schedule Managing turnover Revenue from assets Customer service and satisfaction The traditional family run convenience stores serves the purpose of the housewives who definitely wants to avoid traveling long distances to purchase daily needs. The benefits of family run convenience stores is that they give importance to: • Personal touch • Facilities of credit • Quick home delivery Non-food based stock comprises of multiple and varieties of local brands. among people in general can be highlighted as below: • • • • Groceries Fruits Drug Store Necessary stationery 64 .Downloaded from a2zmba.
Pantaloon has come up with an excellent revenue model. CASE STUDY I. 6 Food Bazaar Stores with over 6.blogspot. it represents the variety of India. BIG BAZAAR: THE INDIAN WAL-MART (ORGANIZED RETAILER) Pantaloon Retail (India) Limited is today recognized as one of the pioneers in the business of organized retailing in the country with a turnover of over RS 400 crores in the financial year ending June 2003. 8. 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. 65 . Pantaloon Retail India Limited is the flagship company of the Pantaloon group promoted by Mr. The company is headquartered in Mumbai with zonal offices at Kolkata. 7 Big Bazaar discount hypermarkets. It has been one of the pioneers in organized retailing in India.01. focusing on ‘value for money’ segment. which is targeted at the growing middle class segment. Pantaloon plans to target the upper middle and the middle class segment. Kanpur. Thane Pune. It began its retailing operations in India way back in 1987. Bangalore. The company plans to diversify into the business of discounting in a big way. Ahmedabad. Bagpur. The company plans to double its retail space in the next couple of years. Hyderabad. Bangalore and Gurgaon (Delhi). Mumbai. Chennai and Gugaon (Delhi).Downloaded from a2zmba. 14 Pantaloon Family Stores. which forms the large chunk of Indian population. It has 4 kinds of stores.300 sq. Currently.5 lakh sq ft retail space across Kolkata. it manufactures and sells ready-made garments through its own retail outlets and two discounting stores. Kishore Biyani.com As such traditional family run convenience stores are here to stay and cannot be oversized by the organized retail sector besides. This segment is very price conscious and always looks out for value for money. ft.
66 . Higher percentage of ‘own brand’ sales improves margins. This has enabled them to enlarge their basket of offerings.com Pantaloon successfully launched its discount store chain.blogspot. thus reducing the breakeven level of sales. which focus on high net-worth of individuals. Big Bazaar has diversified from apparels to household items in its discount stores. This is totally in contrast to the other organized retail players. The brands include Pantaloon.Downloaded from a2zmba. John Miller and Bare. Big Bazaar has strong own brand names in its portfolio across product categories. which targets the large and growing upper-middle and middle class of Indian society.
” said Spencer’s Retail Ltd vicepresident Satyaki Ghosh.com II. 2007 at 0038 hrs IST NEW DELHI. On the contrary. BIG RETAIL WON’T HURT KIRANA SHOPS: Study Smita Aggarwal Indian Express Posted: Sep 14. Kumar added. SEPTEMBER 13: Organised retail does not pose a threat to a large number of neighbourhood ‘mom n pop’ stores. The study also found out that despite the presence of large corporate retailers in southern India for much longer periods. with 40 stores in Chennai alone. wherever large malls or supermarkets have opened. traditional format retailers are not only trying to hold their fort but also expand and upgrade. “In such a scenario.blogspot. He pointed out that there is an adjustment process leading to net gain in employment — the traditional workforce is being absorbed in layers of organised retailing and skilled workforce is being integrated at the front end. Leading south Indian retail chain — RPG group’s Spencer’s Retail limited — has been operating in southern India for over a decade. reveals the preliminary findings of a study by the Indian Council for Research on International Economic Relations (Icrier) to be submitted to the Union Government by September-October 2007.Downloaded from a2zmba. the small convenience stores in the region have not witnessed a decline in their revenues. credit from commercial banks is a constraint for unorganised retailers who want to expand. “Our stores have existed alongside neighbourhood shops and kirana stores. The issue is how credit can be made available at reasonable rates to these retailers so that they can compete more efficiently. said Icrier director and chief executive Rajiv Kumar.” said Kumar. and we have never faced problems with any traders group or association. “Modernisation of retail will not be at the 67 .
Downloaded from a2zmba.blogspot. The committee constituted to frame a comprehensive retail policy by the Government will consider the findings of the Icrier study. Icrier was given the task of studying the impact of the entry of organised retail on small neighbourhood and kirana stores by the Government in the wake of continued traders’ and farmers’ protests. 68 .com expense of labour. The preliminary findings point out that there is no employment loss in unorganised sector.” said Kumar. Kumar said that the study does not recommend any such initiative. Categorically denying the levying of additional cess or any tax on modern retailers.
When shopping in malls.blogspot. CONCLUSION The convenience and personalized service offered by the unorganized sector holds its future in good stead for the future.Downloaded from a2zmba. 69 . 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. The target audience for both the organized and unorganized retail formats remains relatively the same. Besides. Organized retail of late has seen a tremendous boom and is attracting more people to the malls. while enjoying the experience they seem to buy high ticket and items of conspicuous consumption most frequently. people value the experience related to the trip the most and return most frequently for the same.com 9.
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