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

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.



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

retailers must take care of determining average levels of stock. One way to resolve this is for the retail outlets to be able to attract the maximum possible number of shoppers. point-ofpurchase merchandise. gift-wrapping and promotional incentives all add up to the costs. Since a lot of retail products are low involvement in nature. Many consumers buy products in small quantities for household consumption. Studies have shown that shoppers often do not carry a fixed shopping list and pick up merchandise based on impulsive or situational appeal. Hence. 4 . Therefore. snack foods and magazines can sell much more quickly if they are placed in a high visibility and high traffic location. 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. Inventory management becomes a challenge for retailers as a result of the many minor transactions with a large number of customers. Point-of-purchase Display and Promotions A significant relevant chunk of retail sales comes from unplanned or impulse purchases. order levels and the retailer has to keep a tight control on costs associated with each transaction in the selling process. Due to lower disposable incomes. Retailing provides extensive sales people support for products which are information intensive. impulse purchases of the shopper is a vital area that every retailer must tap into. Credit verification. Impulse goods like chocolates. 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. Many do not look at ads before shopping. display.the manufacturers with bargaining power with respect to other retailers who stocked their product. such as in the case or consumer durables. value-added activities like bagging. employment of personnel.

The number of operation units in retail is the highest compared to other constituents of the value chain. retailers consider factors like potential demand.Larger Number of Retail Business Units Location of retail store plays an important role compared to other business units. primarily to meet the needs for geographic reach and customer accessibility. 5 . supply of merchandise and store image-related factors in locating the retail outlet. Similarly. Manufacturers decide the location on the basis of availability of factors of productions and market.

000 different items from 500 companies. sizes and brands from just one location. Final consumers.FUNCTIONS OF RETAILING Retailers play a significant role as a conduit between manufacturers. 6 . retailers undertake activities and perform functions that add to the value of the products and services sold to the consumer. while a chain like Nilgiris specializes in food and bakery items. advertising and certain additional services. breaking bulk. by collection an assortment of goods from different sources. storage. prefer a large variety of goods and services to choose from and usually buy them in small quantities. in contrast. suppliers and consumers. holding stock. Retailers are able to balance the demands of both sides. they specialize in types of assortment offered and the market to which the offering is made. wholesalers. Through this process. 15. The above process is referred to as the sorting process. In this context. While all retailers offer an assortment. on and average. as a channel of communication. they perform various functions like sorting. while Pantaloons is targeted at the middle class. Supermarkets in the US offer. Customers are able to choose from a wide range of designs. 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. buying them in sufficiently large quantities and selling them to consumers in small units. Shoppers’ Stop targets the elite urban class. Westside provides clothing and accessories. If each manufacturer had a separate store for its own products. customers would have to visit several stores to complete their shopping.

Retailers fill orders. Retailers also offer credit and hire-purchase facilities to the customers to enable them to buy a product now and pay for it later. HOLDING STOCK Retailers also offer the service of holding stock for the manufacturers. promptly process. 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. ADDITIONAL SERVICES Retailers ease the change in ownership of merchandise by providing services that make it convenient to buy and use products. Providing product guarantees. deliver and install products.BREAKING BULK Breaking bulk is another function performed by retailing. It helps to keep prices stable and enables the manufacturer to regulate production. The display itself allows the consumer to see and test products before actual purchase. To reduce transportation costs. 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. 7 . Retail essentially completes transactions with customers. after-sales service and dealing with consumer complaints are some of the services that add value to the actual product at the retailers’ end. manufacturers and wholesalers typically ship large cartons of the product. meaning ‘to cut a piece off’. Salespeople are also employed by retailers to answer queries and provide additional information about the displayed products. The word retailing is derived from the French word retailer.

salespeople and display. learn of sales forecasts. in their turn. From advertisements. retailers are required to perform the following activities: 8 . Manufacturers. delivery delays. As a result of these functions. This also works the other way round in case the number of retailers is small. The number of functions performed by a particular retailer has a direct relation to the percentage and volume of sales needed to cover both their costs and profits. shoppers learn about the characteristics and features of a product or services offered. advertising and pre-payment of merchandise. The manufacturer can then modify defective or unsatisfactory merchandise and services.CHANNEL OF COMMUNICATION Retailers also act as the channel of communication and information between the wholesalers or suppliers and the consumers. TRANSPORT AND ADVERTISING FUNCTIONS Small manufacturers can use retailers to provide assistance with transport. storage. and customer complaints.

The assortments must include substitutable items of multiple brands and price points. They should be distinguished on account of physical dimensions and attributes e. 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 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. stock keeping units. layout and the level of compatibility between the existing merchandise.. The small retailer takes assortment decision on the basis of his experience. FoodWorld. It includes both the depth and breadth of products carried. and physical attributes in order to meet the expectations of their consumers and survive in the 9 . on the other hand retailers from organized retailing depend on a detailed study of past trends and future projections.ACTIVITIES PERFORMED BY RETAILERS Retailers undertake various business activities and perform functions that add value to the offerings they make to their target segments. colour or flavour.g. a leading food supermarket positioned as a one-stop shopping centre. deals in multiple product categories along with all possible variants of brands. store image. For example. stock and appropriate mix of merchandise in suitable packages in accordance with the needs of customers. Retailers provide convenient location.

Retailers in the organized sector. too much stock will increase the retailer’s cost of operation. This function receives negligible attention from the retailers now due the introduction of new product categories. Subhiksha. whereas. size and store image of their stores. In order to meet their customers’ requirements retailers have to break or arrange the bulk into convenient units. Normally. to a 10 . BREAKING BULK Breaking bulk means physical repackaging of the products by retailers in small unit sizes according to customer’s convenience and stocking requirements. 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. too little stock will hamper the sales volume. Some are so small that they have to stock only on the shop floor. Whereas. on periodic basis. maintain the required levels of stock to meet the regular or seasonal fluctuations in the demand. retailers. 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. HOLDING STOCK To ensure the regular availability of the offerings retailers maintain appropriate levels of inventory. retailers receive large quantities of sacks and cases of merchandise from suppliers to reduce their transportation costs. Retailers have to face the negative consequences of holding unwanted levels of stock —for instance. Their assortment plan is governed by location. Therefore. such as FMCG and ready-to-wear apparel.business. a grocery chain in south India has impressive assortments of only the fast moving brands rather than all available variants in the market. in small towns of India most retailers have arrangements with the nearby warehouses to stock the goods. Generally.

certain extent. Retailers offer credit. after-sales services and information regarding new products to their customers. For example. 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. thereby making the shopping experience convenient and enjoyable. are using effective software packages for maintaining adequate levels of inventory. as after-sales service is considered to be an integral ingredient of the watch purchase. service centres with proper equipment and trained manpower. Time Zone. which reduces the burden of maintaining high levels of stocks. and information about the concerned target segment to the suppliers. set up in all its stores. EXTENDING SERVICES Retailing provides multiple services to immediate customers and other members of the value chain. 11 . At the same time. reach to the ultimate customers. they provide stocking place. home delivery. 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. At the same time. retailers avail of just-in-time deliveries with the help of efficient consumer response systems. the first organized retail chain of wristwatches in India.

Small chains can use economies of scale while tailoring merchandise to local needs. although many categorization schemes have been proposed. to carry out 12 . The number of outlets operated by a retailer can have a significant impact on the competitiveness of a retail firm. There is no universally accepted method of classifying a retail outlet. Generally. chain stores account for nearly 95% of general merchandise stores. Some of these include classifying on the basis of • Number of outlets • Margin Vs Turnover • Location • Size. In the United States. for practical purposes a chain store refers to a retail firm which has more than 11 units. such as wholesalers. for example. chain stores are often channel captains of the marketing channel—captains can influence other channel partners.CATEGORIZING RETAILERS Categorizing retailers helps in understanding the competition and the frequent changes that occur in retailing. Because of their size. Big chains operating on a national scale can save costs by a centralized system of buying and accounting. 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. over a greater number of stores in addition to acquiring economies of purchase. a greater number of outlets add strength to the firm because it is able to spread fixed costs. While any retailer operating more than one store can be technically classified as a chain owner. such as advertising and managers’ salaries.

Staff turnover is extremely high. While value is important. Branding is important to them.activities they might not otherwise engage in. 13 . Independent retailers can co-exist and flourish in the shadow of the big chains by developing a niche within the diverse market. sales staff has minimal product knowledge. Most large retailers have little connection with the community they serve. However. Big stores focus on large markets where their customers live and work. Perhaps their biggest advantage is their knowledge in every aspect of their business. They usually do not offer special services. They tend to stock a narrow range of inventory that sells well and maintain an extensive inventory of the fast selling products. including precise buying practices. Local managers have little say in inventory selection. are a must. The niche should be developed on the basis of new or unusual product offerings. such as extended payment terms and special package sizes. Larger companies are often slow to recognize and react to changes in their local markets. Often. and sophisticated forecasting and inventory systems. vast inventory and hassle-free return and exchange policies. from inventory selection to store layout. 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. Their prime locations. Big stores have many strengths. They use technology to learn more about their customers and target them with point-of-sale machines interactive kiosks. the consistency in their products and services. They have competitive weaknesses that small retailers can exploit. Efficient operations. including regional or national reputation. Customer contact within the niche market must be characterized by ‘high-touch’ service. Most offer the same standardized assortments of products nationally. superior service and overall quality. large retailers are not perfect. The key factor is innovation: stores that do not change will perish. huge buying power. price may be less important. Pricing is often a key area of focus for these retailers.

On the basis of this. exemplified by Amazon.com. • Buy with precision and search out specialty suppliers. • Charge regular prices and avoid discounting (ensure requisite mark-up). • Understand the significance of the Internet. These retailers are in the best position to combat competition because their high turnover allows 14 . Jewellery stores and appliance stores are examples of high margin low turnover stores and only a few retailers achieve high margin high turnover. • Invest appropriately in advertising and promotion. • Focus on profit instead of volume (be ready to lose an occasional sale). A 30% margin implies that a retailer generates Rs 30 for every Rs 100 sales that can be used to pay operating expenses. Inventory turnover refers to the number of times per year. on average. • Maintain essential inventory. • Move to a narrower niche market and stop competing directly with the big retailers.The road to success for the independent retailer lies in doing all the things those big chain stores cannot or will not do. a retailer sells his inventory. • Provide extraordinary service. Gross margin is net sales minus the cost of goods sold and gross margin percentage is the return on sales. • Learn more about customers and include best customers in a database. Gross margin and inventory turnover is another means of classifying retailers. The successful independent retailers embrace the following principles: • Be prepared for change. • Employ the best possible staff. retailers are classified as low margin low turnover—those that cannot survive the competition—and low margin high turnover.

the Internet may make size an obsolete method of comparison. 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. with big retailers having lower operational costs per dollar than smaller players.them to withstand price wars. generally within a metropolitan area. in this sphere too. Besides renovating old stores. One of the old means of classification of retailers is by location. retailers are testing unorthodox locations to expand their clientele. With the advent of the Internet. However. Size is often used as a yardstick to classify retailers because costs often differ on the basis of size. this area of retailing is likely to undergo tremendous changes in the coming years. The drawback of the classification by this method is that service retailers who have no inventory turnover cannot be encompassed. 15 .

16 . Mother Dairy milk booths in Delhi) • Government (e.g. company owned retail outlets) • Wholesaler (e.be independently owned. operated as a franchisee.g. there are also some very big retailers. A retail unit could be owned by: • Manufacturer (e. leased departments. Recently. 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. owned by manufacturers or wholesalers. Organized retail stores are generally characterized by large. About 78% of these are small family businesses utilizing only household labour.g. 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. which were over 12 million in 2003.g. in an ambience that is conducive for shopping and provides a memorable experience to customers.g. consumers owned or co-operative society. Archies Gallery) Although most Indian retailers fall in the category of small-scale units. Retail firms may .2. professionally managed store formats providing goods and services that appeal to customers... This epithet has its roots in the huge number of retail enterprises in India.. parts of a retail chain.. From positioning and operating perspectives. Cottage Emporia) • Ownership shared among franchiser and franchisee (e. 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. each ownership format serves a marketplace niche and presents certain advantages and disadvantages.

Therefore. two or more people share ownership of a single business.A partnership is a common format in India for carrying out business activities (particularly trading) on a small or medium scale. This decision is likely to have long-term implications. 2) Partnership: . kind of customer interaction level of services provided etc.A joint venture is not well defined in the law.The vast majority of small businesses start out as sole proprietorships. 3) Joint venture: . retail units are classified on multiple of ownership. retail businesses are extremely diverse and there are quite a few types of retail units. In a partnership. geographical locations. These firms are owned by one person. 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. It acts 17 . joint ventures may be taxed like association of persons. 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: . useful in the design of retailing strategy. sometimes at maximum marginal rates. so it is important to consult with an accountant and attorney to help one select preferred ownership structure. usually the individual who has the day-to-day responsibility for running the business. Besides.CLASSIFICATION OF RETAIL UNITS Conceptual classification of a business unit provides the marketers with strategic guidelines.

like a general partnership.The Limited Liability Company (LLC) is a relatively new type of hybrid business structure that is now permissible in most states. and the duration of the LLC is usually determined when the organization papers are filed. The owners are members. but is clearly for a limited period of time or a single project. 18 . 4) Limited liability Company (public and private):.

About 78% of these are small family businesses utilizing only household labour.The total number of retailers in India is estimated to be over 5 million in 2003. or a service sponsor) and a retail franchisee.A chain retailer operates multiple outlets (store units) under common ownership. Operational structure defines the key strategic decision of retail entity. whether to hire employees and manage the distributed sales function internally or to reach customers though franchised outlets owned and operated by local entrepreneurs. 4) Leased Department or Shop-in-shop:. Retail firms can be classified into five heads on the basis of their respective operational structures: 1) Independent retail unit: . 19 . 2) Retail Chain: .Classification of Retailers on the basis of Operational Structure Retail businesses are classified on the basis of their operational and organizational structure. it usually engages in some level of centralized (or coordinated) purchasing and decision making. An independent retailer owns one retail unit. in discount stores.It refers to department in a retail store that are rented to an outside party. which allows the franchisee to conduct a given form of business under and establishments name and according to a given pattern of business.Franchising involves a contractual arrangement between a franchiser (which may be a manufacturer. 3) Franchising: . Usually this is done in case of department and specialty stores and also at times. a wholesaler.

20 .5) Co-operative Outlets: . In this context the detailed example of Kendriya Bhandar in India.Co-operative outlets are generally owned and managed by co-operative societies.

a retailer locates his store in a place where a group o retail outlets. most of the cities have specialized markets famous for a particular product category. Classification of retailers on the basis of location is discussed below: 1) Retailers in a free-standing location: . in Chennai. we also have in India-retailers who prefer specialized markets. 3) Retailers in Specialized Markets: . particularly traditional independent retailers or chain stores. 21 . offering a variety of merchandise.Besides the above location-based classification. Retailers can locate their stores in an isolated place and attract the customers to the store on their own strength—such as a small grocery store or paan shop in a colony. easy parking and lower property costs. In India. which attracts the customers staying close by. Usman street for jewellery. For example the Haldiram’s outlet on the Delhi-Jaipur highway and the McDonald’s outlet on Delhi-Ludhiana highway.In this case.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. T Nagar for ready-made garments. low rent.Classification of Retailers on the basis or Retail Location Retailers have also been also been classified according to their store location. Bunder treet for stationery products. Poo Kadia for food and vegetables. 2) Retailers in a Business-associated Location:. Godown Street is famous for clothes. better visibility from the road. work together to attract customers to their retail area. Govindappan naicleen street for grocery. For example. and also compete against each other for the same customers. This type of location has several advantages including no competition.

22 . 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.4) Airport Retailing: . serious efforts are being made to design new airport facilities in order to incorporate substantial amounts of retail space.For quite some time. Lately. duty-free shops and newsstands dominated the small amount of commercial space provided at airports.

Vishal chain). Small independent stores. Consumers are not only looking for the core products or functional benefits from the retailers but also the non-functional benefits. discount clubs (Subhiksha). Accordingly the retailers too are fast adjusting to the changing consumer preferences. the small mom-and-pop stores and the traditional department stores. Big Bazaar). are finding the competition intense. respectively). manufacturers are identifying. Tanishq) have all developed a successful retail models. and speciality retailers (Time Zone. or evolving new retail formats. For example. But even in the mass-merchandising segment. In 2002. At the same time. is a very common retail formats they 23 . redefining. 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. most of the traditional eating joints in India such as Haldiram. Mass merchandisers (Wal-Mart. While multinational retail chains are looking for new markets. For example. which need to be compatible with their lifestyles. the competition is fierce. 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. department stores such as Saks and Federated experienced declining revenues (down 3% and 1% respectively). while Wal-Mart and Target saw revenues grow (by 12% and 10%. consumer spending is shifting from goods to services. Mom-and-pop Stores and Traditional Kirana Stores The retail sector is changing as new store categories have started dominating the marketplace. so-called category killers (Home Depot.TRENDS IN RETAIL FORMATS Retail industry is continuously going through changes on account of liberalization. as is evidenced by Kmart’s bankruptcy announcement in 2002. globalization and consumer preferences.

Crew. 24 . However. E-commerce The amount of retail business being conducted on the Internet is growing every year.are also undertaking large scale renovations to appeal and attract their target consumer segments. Penney. Companies like Amazon. are now being followed by bricks-and-mortar and catalogue retailers like J.com. In part. Macy’s.com and First and second. It has also come from financial burdens incurred by companies that acquired competing companies and grew too fast. Many major retail organizations and manufacturers have online retail stores. J. Indeed. which are expanding retail e-commerce into new markets. 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. however. these department stores have suffered badly. which helped pioneer the retail e-commerce concept. Department Stores A few years ago.6%. names like Sears. Forrester Research Agency projects e-commerce revenue to rise to $123 billion in 2004. It is unlikely that these players will disappear from the market. Over the last decade or so.C. this is a result of changing shopping patterns and increased competition from discount stores. they should be ready to expect more bumps as the strong get stronger and the weak get absorbed.5% in 2003). and Montgomery Ward dominated malls and downtowns all over America.

used to be the dominant retail presence lining the nation’s roads. Specialty Stores These include Crate & Barrel.g. For most job seekers. electronic goods or pet food in such huge volumes that they can then sell them at prices even fairly large competitors cannot match. now the discount retailers and category killers are at the top of the heap. Target and Kmart. and merchandise display strategies. file cabinets. particularly in home furnishings and home improvement. Office Depot. along with the category killers. The future of this category is better than that of many of the more general discounters. the Body Shop. Many are so successful that department stores have started to emulate their buying.. with more than a million. but the same employment caveats apply. These. marketing.Discount Stores These are giants such as Wal-Mart (the largest retailer in the world. as well as membership warehouses. and Victoria’s Secret. and it seems to 25 . They are able to buy bathroom tiles. employees). 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. Where once mom-and-pop and department stores dominated retail. And where once shopping malls. now it is the behemoth Wal-Marts and Home Depots. Tower Records and The Sports Authority). such as Costco. Some are very high-end (Louis Vuitton) while others cater to the price-conscious masses (Old Navy). These stores concentrate on one type of merchandise and offer it in a manner that makes it special. have changed the landscape of both the retail industry and America. anchored by at least one major department store. Industry experts predict growth in this segment.

have generated enough business to cause top brick-and mortar competitors to come up with their own Internet sites. such as Amazon. E-tailers While most retailers have online storefronts. and in many of these stores the hand of bureaucracy is not heavy.attract many of the best and brightest in retail. strictly online purveyors with no bricksand.mortar counterparts are hoping to snare a percentage of the retail profit. have also set up online stores so as not to miss out on the revenue opportunities that the Interned offers. Major players. hugely successful in their own right.com. Traditional retailers like Wal-Mart and Starbucks. Promotion and responsibility come quickly to those willing to work hard. 26 .

Globus has 4 stores. offering a broad variety and depth of merchandise. can be classified as follows: Department Stores: . LifeStyle has 3 stores and there are 12 Pantaloon Family Stores. department stores. Specialty Stores: . Discount stores prefer shopping centres that provide space at lower rents as they attract customers from other adjoining stores in the shopping centre. hypermarkets. Ebony has 7 stores. medicines) reigned supreme. limited support from sales people etc. low investments on fixtures.Retailers offering a broad variety of merchandise mix. LifeStyle. Globus. Pantaloon. supermarkets. commonly part of a retail chain. furniture. All of them are multiproduct stores. Retail units. The consumer can choose between different stores for different needs. Discount Stores: . The leading fashion department stores in India are Ebony. heavy advertising. on account of variety of merchandise mix.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. brand stores and discount stores characterized by the variety of merchandise mix offered by a respective retail format.Specialty stores stress on one or a limited number of complementary product categories and extend a high level of service to their customers. Shoppers’ Stop and Westside.It is a large retail store organized into a number of departments. limited or no service and low prices are characterized by low margins. In India. There are many different retail stores in India—convenience stores. the 27 . Usually. department stores are located within the planned shopping centres or traditional up market downtown centres.

Supermarkets and Hypermarkets: . low operating costs and margins. at these centres attract large crowds. Hypermarkets are characterized by large store size. Such specialized retail operations provide expertise economies of scale.000sq. 28 . bargain and image to the particular stores. Superstores have a sales area of over 50.ft.A hypermarket is a very large retail unit offering merchandise at low prices. low prices and comprehensive range of merchandise.traditionally independent retailers in the specialized market centres operate in a particular product category.

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. In India. ‘Location’ is a broader concept.. 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. It is also one of the most difficult to plan for completely. This makes the location decision even more critical. costs can be quite high.3. The terms ‘location’ and ‘site’ are often used interchangeably but there is a distinct difference between the two. IMPORTANCE OF LOCATION DECISION The importance of the location decision is due to the following factors. which denotes the store and 29 . most retailers prefer to own the property rather than avail of the desired property through lease or rental. e. RETAIL LOCATION STRATEGY Location is the most important ingredient for any business that relies on customers. 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. Location decisions can be complex.g.

a designer men’s store located in an up market shopping centre or a mall near posh residential colonies. Location and site characteristics should interact in a positive and synergistic way with a store’s merchandising. while a site refers to the specific building or part of the building where a store is located. 30 . For example. operations and customer service characteristics.its trading area from where a majority of its customers originate. housed in an attractive building with adequate parking facilities.

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. A city’s trading area would comprise its suburbs as well as neighboring cities and towns. • Population of population growth in the trading area: The larger the population of the trading area. A high growth n population in the trading area can also increase the retail potential. • 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. 31 . 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.LEVELS OF LOCATION DECISION AND ITS DETERMINING FACTORS A retailer has to take the location decision. Cities like Mumbai and Delhi have a large trading area as they draw customers from far off cities and towns. the greater the potential of the city as a shopping location. 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.

• 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. Moradabad has become an important retail location for brassware products while Mysore is famous for silk saris. size and quality of competition before selecting a city. rental value and other related cost. • Development cost: The cost of land. 32 . • Number. size and quality of competition: The retailer also considers the number.

Colaba in Mumbai and Commercial Street in Bangalore attract customers from far off. before selecting the area. • Quantitative and qualitative nature of competitive stores: Retailers would like to evaluate the product lines carried by other sores.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. while small shopping centres located in colonies attract customers from immediate neighborhood. 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. 33 . • Direction of spread of the city: The retailer should consider the direction in which the city is developing while selection the location. etc. 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. • Nature of zoning regulations: The retailer should also consider the zoning regulations in the city. • Availability of access routes: The area or shopping centre should provide easy access routes. number of stores in the area.

Selection of a Specific Site The choice of a specific site is particularly important. In central and secondary shopping centre. non-anchor sores depend on customers coming to the market and the traffic generated by anchor stores. 34 . selecting the trading area is even more important than picking the specific site. Where sales depend on nearby settlements. The large stores in turn depend on attracting customers from the existing flow of traffic.

the large shopping centres in the heart of the city or smaller shopping complexes in a suburb. are also coming up in suburbs or away from major markets as free-standing locations. low rent. such as a small grocery store or paan shop in a colony which attracts the customers staying close by.TYPES OF RETAIL LOCATION A retailer has to choose among alternate types of retail locations available. This type of location has several advantages including no competition. For example. the store depends on its own pulling power and promotion to attract customers. Or. Neighborhood Stores Neighborhood stores are located in residential neighborhoods and serve a small locality. It may locate in an isolated place and pull the customer to the store on its own strength. and often better visibility from the road. 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. even the large organized sector stores. If it decides to locate its store in a business district. which pull customers from across the city. Kemp Fort and LifeStyle stores are free-standing stores in Bangalore away from major market of the city. Now. They sell convenience products like groceries. 35 . it may locate in a business district where ther3 are a large number of retail establishments. it may have a choice ranging for. easy parking and lower property costs.

serve a large trading area. access to public transport. designed and operated as a unit. • Planned Shopping Centres: A planned shopping centre consists of a group of architecturally owned or managed stores. An unplanned district generally provides certain advantages like availability of a variety of goods. 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. They attract customers from across the city and suburbs. often they are anchored by two or more major department store. and pedestrian traffic. • Regional Shopping Centres or Malls: Regional shopping centres or malls are the largest planned shopping centres. nearness to commercial and social facilities. but also compete against each other for the same customers.Highway Stores Highway stores are located along highways or at the intersections of two highways and attract customers passing through these highways. 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. services and prices. three to four medical stores in a cluster but no grocery store. Major regional 36 . have enclosed malls. Thus. and have high rents. we may find four to five shoe stores.

hypermarkets.. the quality of the traffic is more important. a retailer is presented with a wider choice of locations. For stores dealing in shopping goods. SITE SELECTION ANALYSIS With the advent of new retail formats in India such as planned shopping centes and malls. Convenience goods are often purchased on impulse from easily accessible stores. customer profile and overall business model presents an enormous challenge. Spencers Plaza n Chennai and Meropolitan Mall in Gurgaon. Ansal Plaza in Delhi. The corner of an intersection. The emergence of several 37 . emergence of free-standing department stores.shopping centres or malls in India include Crossroads in Mumbai. Consideration of all the options keeping in view the product mix. is usually a better site than the middle of a block. etc. the quantity of traffic is most important. which offers two distinct traffic streams and a large window display area. and further development of traditional business districts and other unplanned shopping locations. 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.

38 . is driven by this factor. at Mahipalpur market in Delhi.apparel factory outlets within a short stretch on the Delhi-Jaipur highway.

Traditionally. Intense competition in the area shows that new businesses will have to divide the market with existing businesses. Ease of Traffic Flow and Accessibility These two factors are more important to some businesses than others. there are many periodic retail markets in Indian which operate on particular days of the week. is hence important. industrial parks. noting one-way streets. However. If one is not able to offer better quality and competitively priced products. An excellent location may be next or close to parallel or complementary businesses that will help to attract customers. street widths and parking lots. instead they pay a small rental for their set-up in each market. Retailers selling convenience goods must attract business from the existing flow of traffic. insurance and all related costs having a place to conduct business operations. Consider the nature of the business you are planning to open and your potential customers. franchisee chains and department stores should be noted. The retailers operating in these periodic markets keep shifting from place to place and do not own any property. the retail community placed great importance on owning the place since this was considered prestigious in the business community. security. leasehold improvements. general decoration. utilities. 39 . Space cost is a combination of rent or mortgage payment. This supports their model of selling goods at very low margins. Competitor’s Location The type and number of competitors is another important factor. one might reconsider that particular location. The following factors have to be considered: parking availability. Studying the flow of traffic.Cost Factor in Location Decision Location decision on cost considerations alone is risky. The presence of major retail centres.

). traffic congestion. Visibility Visibility has a varied impact on a store’s sales potential. Parking and Major Thoroughfares Parking is another site characteristic that is especially a cause for concern in densely populated areas. When evaluating the parking that exists at a retail site. Once the shopper has become a regular customer. Make use of information available through the Chamber of commerce. width of street. side of street. Local newspapers are a good source of information. 40 . visibility no longer matters. etc. futuristic perspective. there are two considerations: parking capacity (the number of cars that can be parked). Discussions with business owners and officials in the area can also help.000 square feet of food store. But consider this fact: one in five families’ moves every year. landscaping. While different ratios exist for different types of retailers or service providers. 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.distance from residential areas or other business areas. There are several ratios that are generally used to determine the adequacy of a parking lot. and parking configuration (the way the parking lot is laid out. the ideal ratio for food stores is in the magnitude of 7-8 cars per 1. which means that some part of a community’s population may be ‘shopping’ in a new store. Market Trends Evaluate the community from a broad. It is important when a shopper is trying to find the sore for the first or second time. part of the block and neighbors. the direction of the travel lanes and spaces.

is grabbing attention. The inconveniences caused by lack of parking place. The origin of retail in India dates back to ancient times when the melas and mandis made their presence felt. The next step was the commercial plazas. There are. This also explains why the Raheja’s forayed into their retail ventureShoppers’ Stop. however. toilets and maintenance.4. which became a part of the civic planning. The changing socio economic patterns coupled with the consumption increase led to the emergence of the convenience stores. ushered in the entry big international brands opening their exclusive showrooms. coupled with the stringent provisions of the Rent Control Act. RETAILING IN INDIA ORIGIN IN INDIA Although retailing does not enjoy the status of an Industry. 41 . the sheer size this behemoth will develop into. the scarcity of space. which comprised merely shops offering a variety of goods and services clubbed together. act as a dissuasive factor for many players to initiate operations in the main markets. certain bottlenecks as well. The opening up of the economy only fueled this globalization.

ft. Total retail sales area in India was estimated at 328 million sq. independent. mt.000 crore segment of the market is organized. In fact. The trend to market private labels by a specific retail store is catching on in India as it helps to improve margins. The share was 62. which is quite low in comparison to the developed economies.000 crore. In India.7% in 2001.RETAIL IN INDIA The retail industry in India is largely unorganized and predominantly consists of small. According to a survey by AT Kearney.039.000 crore retail markets are unorganized. In 2000. Food sales constitute a high proportion of the total retail sales.. The turnover from private labels by major retail chains was estimated at around Rs 1200 million in 2000. the per capita retailing space is about 2 sq. There are around 5 million retail outlets in India.000 crore by the year 2005—an annual increase of 20%. only a Rs 20. owner-managed shops. the non-food retailing sector registered faster year-on-year growth than the food sales sector. There is no integrated supply chain management outlook in the Indian traditional retail industry. which is expected to increase to Rs 800. per outlet. while non-food sales were worth Rs4189. the global management consultancy AT Kearney put retail trade at Rs 400. with an average selling space of 29. barber shops) and pushcarts mobile vendors. However.4 sq. mt.2 billion.5billion. an overwhelming proportion of the Rs 400. in 2001. worth approximately Rs 7. snack centres. 42 . There are also an unaccounted number of low cost Kiosks (tea stalls. Retailing is India’s largest industry in terms of contribution to GDP and constitutes 13% of the GDP (Gross Domestic Product).

43 .

ready-to-eat food has been on the rise. In urban India.6 million outlets cater to more than 700 million inhabitants of rural India. More and more women are taking up corporate jobs. Only 3. However. The McKinsey report predicts that FDI will help the retail businesses to grow to US $ 460-470 billion by 2010. Rural India continues to be serviced by small retail outlets. paan shops and ration shops are the most popular vehicles of retailing. provision stores.228.7 billion. Apart from this. There is also a strong trend in favour of one-stop shops like supermarkets and department stores. government has discouraged FDI in the retail sector. Here.EMERGENCE OF ORGANIZED RETAILING Organized retailing in India represents a small fraction of the total retail market. In 2001. At 44 . peeth and melas that come up at the same location at regular time intervals. instant. especially in south India and are spreading all over India at a rapid pace. organized retail trade in India was worth Rs 11. 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. such as haats. especially in the metropolitan and large cities in India. lead to the closure of many small trading businesses and result in largescale unemployment. families are experiencing growth in income but dearth of time. The modern retail formats are showing robust growth as several retail chains have established a base in metropolitan cities. there are periodic or temporary markets. 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. Therefore. The demand for frozen. 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.

cash and carry operations (Giant) and licensing (Marks & Spencer’s). Global players in the retail segment have been entering the market for a while now. 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. Players that entered before the easing of restrictions on FDI in retail had to come through different modes. Pizza Hut). He should then be in a position to allow a trickle down of this advantage to consumers out of his saved costs. such as joint ventures where Indian partner is an export house (Total Health Care). franchising/local manufacturing/sourcing from small-scale sector (McDonald’s. foreign retailers can enter the retailing sector only through restricted modes. The organized retailer should be able to. 45 . through diversified risks and volume sales command huge concessions on prices from the manufacturers.present.

and cater to the purchase need of its pole. covering an area of 21.CURRENT SCENARIO The Indian population is whooping 1 billion with 75% of the people living in villages and small towns. The chief driver of growth in the retail sector has been the consumer. Kiosks.6 million sq ft. with the spending increasing at an average of 11% per annum. street vendors. Bangalore has Brigade Road and Commercial Street. It will cover 34 million sq ft area. At present (September 23. And by year end the count will shoot up to 158 malls. In India we have 96 malls. Karol Bagh and South Extension. organized parking lots and other public amenities. for instance in Pune there is MG Road. The 12 million retail outlets in India are the highest in the world. 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. To cater to this. each city developed its own identity and shopping cluster. according to a study by fashion magazine Image. Delhi has Connaught Place. that the Urban Population although just 25% of the total. is an astounding 250 million in size and is growing at a healthy rate of 7% per annum. Droves of middle-class Indians have broken off their love of traditional stand-alone shops that have no ACs. 2005). 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. It is interesting to note. The Indian consumer’s shopping needs are and traditionally have been fulfilled by Kirana sores (corner stores). It is only natural that the agricultural sector is the biggest employer with its contribution to GDP pegged at 26. weekly bazaars and high-street shops for consumer durables and luxury goods. 46 . The Core and the Lower middle have increased their share in the Growth. India will have 358 shopping malls by 2007.7%.

Ludhiana to account for 2. Gurgoan saw the largest development in terms of retail outlet.Currently estimated at $205 billion to grow to $400-500 million. over the next 2-3 years.4 million sq ft. Super Bazar etc. Mother Dairy. 47 . Delhi and Mumbai now have maximum number of shopping centres.5 million sq ft. North region has 39% of India’s retail share. Ahmedabad about 3. • • • • • • • • • • Smaller cities will have about 12. West region has 33% of India’s retail share. Apna Bazar. East region has 10% of India’s retail share. Government and co-operative sector is also making their steps in retailing. Kendriya Bhandar.8 million sq ft of mall space by 2007. For example. South region has 18% of India’s retail share.

The increasing numbers of product categories followed by multiple brands in each category complicate decision-making for both manufacturers and market intermediaries. then to the retailer and finally to the user of the product.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. Retailers act as gatekeepers who decide on which new products should find their way to the shelves of their stores. It is necessary for marketers of consumer products to identify the need and motivations of their partners in the marketing channel. 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. they have a strong say in the success of the product or service launched by a business firm. A product manager of household appliances claimed. In today’s competitive environment retailers have redefined their role in general. first within the company. and market profile in order to ensure a competitive edge. This is especially true in the case or new products. brand image.’ It is a well-established fact that manufacturers need to sell their products through retail formats that are compatible with their business strategy. and in the value chain in particular. ‘Marketers have to sell a new product several times. 48 . As a result.

it will not result in profit. inventory management systems. it will not result in profit. Selecting target markets. Retailers undertake risk in selecting a portfolio of products or brands to offer to their customers. Therefore. If such space is occupied by merchandise that is not moving. If such space is occupied by merchandise that is not moving. negotiating with suppliers. a retailer is required to make a conscious effort to position himself 49 . Retail formats and companies that were unknown three decades ago are now major forces in the economy. governed by their individual sales philosophy. Marks and Spencer. The retailer may have to resort to substantial price reductions in order to get rid of the unsold stock. Sears. 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.Retailers want of optimize sales within the limited shelf space. Retailing is a dynamic industry---constantly changing due to shifts in the needs of the consumers and the growth of technology. • Selling space available is relatively fixed and must return maximum profits. determining what merchandise and services to offer. McDonald’s. In the backdrop of globalization. liberalization and highly aware customers. The larger retailers have managed to set up huge supply/distribution chains. 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. financing pacts and widescale marketing plans. training salespeople---these are just a few of the many functions that a retail manager has to perform on a perpetual basis. The retailer may have to resort to substantial price reductions in order to get rid of the unsold stock. such as Wal-Mart. 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.

This is determined to a great extent by the retail mix strategy followed by acompany to sell its products. 50 .distinctively to face the competition.

51 .. Music World Entertainment Ltd. Subhiksha. Carrefour. Liberty shoes Ltd. Trent and the new entrants penetrating the market soon will include Reliance Retail Ltd... Ebony Retail Holdings Ltd. Wal-Mart Stores. Shoppers Stop. Big Bazaar. Boots Group. Food Bazaar. Crossword. etc. Globus Stores Pvt.. Tesco. Ltd. Pantaloon Retail India Ltd.MAJOR RETAILER SPACE HOLDERS IN INDIA Bata India Ltd.. Titan Industries.

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. by 2010 the retail sector is expected to be US $ 300 Billion industry. 52 .RETAIL VIABILITY As per the CII McKinsey report. Problems associated with working Capital funding from lending Institutions. based on a GDP growth rate of 6-7% per annum.


3) Pattern of consumption changing along with shopping trends. growing at 8%. 5) Retail revolution restricted to 250 million people due to monolithic urban-rural divide.31 billion. retail space available. 6) Almost 25 million sq. 7) Lack of huge investments for expansion 54 . 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. 6) Footfalls not a clear indicator of sales as actual consumers lower in number. 4) A Growing population will translate to move consumers. 5) Consumer spending increasing at 11% annually. • • • Real Estate Developers Corporate Houses Manufacturers/Exporters WEAKNESSES 1) Shortage of quality retail spaces at affordable rates. 2) 2nd largest contributor to GDP after agriculture at 20%. 8) Most of the entrants to organized retail come from 3 main categories. ft.STRENGTH 1) Organized retailing at US$ 3. and have ventured into retail as their business extension. 7) Paradigm shift in shopping experience for consumers pulling in more people.

6) Average grocery spends at 42% of monthly spends-presents a huge opportunity. 5) Availability of old industrial lands-prime real estate locked in sick industrial units. 3) Social factors like dual household income has enhanced spending power. 7) Increase in use of credit cards. 55 .OPPORTUNITIES 1) Increasing urban population-more participants in retail revolution. 2) Increase in consuming middle class population. 4) Spends moving towards lifestyle products and esteem enhancing products. 6) Unavailability of qualified personnel to support exponential growth in retail. 7) Differentiate taxation laws hindering expansion. 4) Archaic labour laws are a hindrance to providing 24/7 shopping experience 5) Personalized service offered by Mom-&-Pop stores. 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.

The upper and middle. category killers and discount chains.class population of today needs a feel good experience even if they have to spend a little more for that. There has been a transition from price consideration to quality and design. supermarkets. clothing. There is an increasing need of better apparels. 56 . unorganized small outlets largely control the sector. mobile phones and consumer durables. as the focus of the customer has changed. consumer durables and books & music sectors are the major retail sectors. INDIAN CONSUMERISM The lifestyle and profile of the Indian consumer is going through a rapid transformation.6. The population of India is young. specialty stores. cars. People are moving towards luxury and want to experiment with fashion and technology. energetic and full of enthusiasm. such as hypermarkets. The food & grocery. 50% of the Indian population is under the age of 25. Hence there is tremendous potential for the organized sector in various formats. However.

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 .

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.



The retail sector in India can be divided into two major categories: 1) Organized 2) Unorganized


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.

the more expensive it will be. This is also proved by countries where Wal-Mart the world’s biggest retailer operates. 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. 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. 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. For example. the majors will step and service this need. Another factor in the favor of the unorganized retail in rural areas is our mindset. who having been exposed to top of line retail outlets in the foreign countries. vegetables generally cost more in Mumbai than in Chennai. purchasing power is location-specific. The rising disposable income of the techies today. will sooner or later generate a demand for the same facility. it is too early to predict the erosion of the mom and pop stores in India. 61 . Consumption habits of households are therefore better determinants of consumer market size than income distribution. The customer loyalty today is towards the price. 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. not income specific. in the long run the majors will come back and cannot be dislodged. 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.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. While this may happen in the short run. Organized retailing also has to cope with the middle class/rural psychology that the bigger and brighter a Sales outlet is. the Government has banned organized retail major based on the demands of the unorganized sector. In other words. In UP. At this juncture. Given the above. This fear has manifested itself in Metros.

62 .The smaller stores have a peaceful coexistence in these countries with the number one company in the fortune 500 list.

The traditional family run convenience stores can take pride in the fact that the Kirana is the most common outlet forms for the consumers. A good example of such would be Convenio. Owing to the entry of such big players. These stores are found in both residential as well as commercial markets. The tough competition for convenience stores are coming from organized retail stores dealing in food items. In fact the traditional stores have taken up 98 percent of the Indian retail market. etc. 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.TRADITIONAL v/s MODERN FORMAT RETAILERS The retail boom will face a strong competition from the 12 million mom-and-pop stores. the small shopkeepers fear losing their business. Marks & Spencers. If the stores are not food based then the type of retail items available are local in nature. Now stores run by families are primarily food based and the set up is as Kirana or the 'corner grocer' stores. 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. Buying from Malls. Supermarkets and Department stores like Subhiksha. The retail stores in India are essentially dominated by the unorganized sector or traditional stores. These are easily accessible and provide services like free home delivery and goods at credit. has been inviting such people to join in its Dairy business as franchisees. The 63 . Reliance Retail Ltd. provide a different environment where one can pick and choose from a variety of products. Basically they provide high service with low prices.

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. among people in general can be highlighted as below: • • • • Groceries Fruits Drug Store Necessary stationery 64 . 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.food products of traditional family run convenience stores are comprised of branded as well as non-branded items.

300 sq. Pantaloon has come up with an excellent revenue model.5 lakh sq ft retail space across Kolkata. 14 Pantaloon Family Stores. 6 Food Bazaar Stores with over 6. 7 Big Bazaar discount hypermarkets.As such traditional family run convenience stores are here to stay and cannot be oversized by the organized retail sector besides. It has 4 kinds of stores. The company is headquartered in Mumbai with zonal offices at Kolkata. The company plans to diversify into the business of discounting in a big way. Mumbai. Bangalore and Gurgaon (Delhi). 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. Bagpur. Pantaloon Retail India Limited is the flagship company of the Pantaloon group promoted by Mr. Hyderabad. Currently. 8.01. Bangalore. Kishore Biyani. ft. Ahmedabad. CASE STUDY I. it manufactures and sells ready-made garments through its own retail outlets and two discounting stores. Pantaloon plans to target the upper middle and the middle class segment. which is targeted at the growing middle class segment. 65 . 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. It began its retailing operations in India way back in 1987. It has been one of the pioneers in organized retailing in India. focusing on ‘value for money’ segment. Thane Pune. it represents the variety of India. Kanpur. The company plans to double its retail space in the next couple of years. Chennai and Gugaon (Delhi). which forms the large chunk of Indian population. This segment is very price conscious and always looks out for value for money.

thus reducing the breakeven level of sales.Pantaloon successfully launched its discount store chain. This has enabled them to enlarge their basket of offerings. Big Bazaar has diversified from apparels to household items in its discount stores. Higher percentage of ‘own brand’ sales improves margins. This is totally in contrast to the other organized retail players. The brands include Pantaloon. 66 . which targets the large and growing upper-middle and middle class of Indian society. John Miller and Bare. which focus on high net-worth of individuals. Big Bazaar has strong own brand names in its portfolio across product categories.

the small convenience stores in the region have not witnessed a decline in their revenues. 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. with 40 stores in Chennai alone. 2007 at 0038 hrs IST NEW DELHI. “Our stores have existed alongside neighbourhood shops and kirana stores. “Modernisation of retail will not be at the 67 . On the contrary. Kumar added. BIG RETAIL WON’T HURT KIRANA SHOPS: Study Smita Aggarwal Indian Express Posted: Sep 14. said Icrier director and chief executive Rajiv Kumar. credit from commercial banks is a constraint for unorganised retailers who want to expand. and we have never faced problems with any traders group or association. SEPTEMBER 13: Organised retail does not pose a threat to a large number of neighbourhood ‘mom n pop’ stores. traditional format retailers are not only trying to hold their fort but also expand and upgrade. Leading south Indian retail chain — RPG group’s Spencer’s Retail limited — has been operating in southern India for over a decade.II. The study also found out that despite the presence of large corporate retailers in southern India for much longer periods. 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.” said Kumar. “In such a scenario. The issue is how credit can be made available at reasonable rates to these retailers so that they can compete more efficiently. wherever large malls or supermarkets have opened.” said Spencer’s Retail Ltd vicepresident Satyaki Ghosh.

Kumar said that the study does not recommend any such initiative. Categorically denying the levying of additional cess or any tax on modern retailers. 68 .expense of labour. 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. The preliminary findings point out that there is no employment loss in unorganised sector.” said Kumar.

The target audience for both the organized and unorganized retail formats remains relatively the same. 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. When shopping in malls.9. CONCLUSION The convenience and personalized service offered by the unorganized sector holds its future in good stead for the future. Organized retail of late has seen a tremendous boom and is attracting more people to the malls. people value the experience related to the trip the most and return most frequently for the same. Besides. 69 . while enjoying the experience they seem to buy high ticket and items of conspicuous consumption most frequently.

Sign up to vote on this title
UsefulNot useful

Master Your Semester with Scribd & The New York Times

Special offer for students: Only $4.99/month.

Master Your Semester with a Special Offer from Scribd & The New York Times

Cancel anytime.