Overview Of Indian Retail Industry (July 08


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Overview of Global Retail Industry

2.1 Introduction
Retailing has played a major role in increasing productivity across a wide range of consumer goods and services the world over. In the developed countries, retail industry has transformed into a full-fledged industry where more than three-fourths of the total retail trade is done by the organised sector. Though India boasts of an emerging retail market with top international retailers like Wal-Mart and Carrefour keen to establish their presence, it does not figure on the list of top 10 most preferred global retail markets. Out of the BRIC (Brazil, Russia, India and China) countries, China and Russia are in the top 10 list. But in terms of investment in emerging markets, India tops the list according to a report of AT Kearney. Following are the characteristics of global retail industry: 1. The global rated retail universe is very diverse, covering a large number of segments 2. Global retail industry exhibits very diverse operational and financial dynamics 3. Of the global retail industry, 38% of publicly-rated retailers is investment grade and 62% is speculative trade. The Top 10 global retail players and the information on their sales and growth rates is summarised in the following Table. Serial No. 1. 2. 3. 4. 5. 6. 7. 8. 9. Global Leaders/ Country Wal-Mart Stores Inc. (USA) Carrefour S.A (France) The Home Depot Inc. (USA) Tesco PLC. (UK) Metro AG (Germany) The Kroger Co. (USA) Target Corp. (USA) Costco Wholesale Corp. (USA) Sears Holding Corp. (USA) Sales* (US$m) 348650 97861 90837 79976 75225 66111 59490 60151 53012 Growth (%) (2001-2006) 11.1 2.3 11.1 12.5 4.0 5.7 8.3 11.6 8.0

As with the life cycle of any industry. In addition. Mass Discounters . These retail outlets provide few services. individually owned and operated retail outlet. 2. and product selection can be limited. In the second phase consumers demand modern formats as the markets develop – thereby leading to a strong growth. they often require buyers to make purchases in quantities that are greater than what can be purchased at mass discount stores. In many cases these are family-run businesses catering to the local community. the high rate of growth would lead to a stage of mature market wherein all the players would strengthen their positions.These retailers can be either general or specialty merchandisers but either way.2 Different Retail Formats across the World Across the world retailer is involved in more than one format to operate in different circumstances to cater to its consumers. the growth would be limited and for sustainable growth.10. Schwarz Uternehmens Treuhand KG (Germany) 52422 12. Compared to department stores. . retailers would explore new markets as well as evaluate inorganic opportunities.0 * Sales Value as of 2006 Source: Deloitte & Cygnus Research Organised retailing in most economies typically passes through four distinct phases in its evolution cycle. new entrants create awareness of modern formats and raise consumer expectations. Warehouse Stores – This is a form of mass discounter that often provides even lower prices than traditional mass discounters. This will be followed by the final phase where the market would reach a saturation point. In the first phase. mass discounters offer fewer services and lower quality products. their main focus is on offering discount pricing. Different types of retail formats across the world are: Mom-and-Pop – Represent the small.

Nordstroms focuses its products on clothing and personal care products. These retailers offer shopping convenience including being open for business all day. though in most cases these retailers would not fall into the full-service category. For instance. the retail design and layout is. every day. office supplies (e. they may not need to have the product on-hand the way physical stores do. require customers to purchase memberships in order to gain access to the outlet. There are thousands of online-only retail sellers of which Amazon. Electronic retailers or e-tailers also have the ability to offer a wide selection of product since all they really need in order to attract orders is a picture and description of the product. While department stores are classified as general merchandisers. It is individually managed and specialised retail format.g. small specialty store concepts and have expanded them to create large specialty stores. That is. as the name suggests. called warehouse clubs.g.Possibly the most publicised retail model to evolve in the last 50 years is the retailer that principally sells via the Internet. In many cases a boutique is a full-service retailer following a full-pricing strategy. These so-called “category killers” have been found in such specialty areas as electronics (e. Boutique – This retail format is best represented by a small store carrying specialised and often high-end merchandise. warehouse styled. Some forms of warehouse stores.com is the most famous. Catalogue Retailers – Retailers such as Lands’ End and LL Bean have built their business by having customers place orders after seeing products that appear in a mailed catalogue. E-tailers .Furthermore. Sport Authority). Staples) and sporting goods (e. Orders are then delivered by a third-party shipper. some carry a more selective product line. with consumers often selecting products off the ground from the shipping package. Category Killers – Many major retail chains have taken what were previously very narrowly focused.g. Best Buy). Instead an e-tailer can wait until an order is received from his customers . Department Stores – These retailers are general merchandisers offering mid-to-high quality products and strong level of services. while Sears carries a wide range of products from hardware to cosmetics.

Allowing the franchisee to open a retail outlet that may already be known to local customers. Payment is usually in the form of a one-time. This cuts down significantly on the cost of Franchise – A franchise is a form of contractual channel in which one party. small store size that allows for quick shopping. While the cost to the franchisee may be quite high. an eligible franchisee agrees to pay for the right to use the franchisor’s business methods and other important business aspects. and fast checkout. Convenience – As the name implies these general merchandise retailers cater to offering customers an easy purchase experience. McDonalds is a well-known franchisor that allows individuals to use the McDonalds name and methods to deliver food to consumers. this form of retailing offers several advantages including: 1. The product selection offered by these retailers is very limited and pricing can be high. upfront franchise fee and also on-going percentage of revenue. For instance.Summary Chart Format Target Product Pricing Market Offerings Strategy Promotion Distribution Service Ownership Emphasis Level Structure .1: Retail Formats . such as the franchise name. maintaining products in-stock.before placing the order with the suppliers. and 2. the franchisor. controls the business activities of another party. Convenience is offered in many ways including through easily accessible store locations. the franchisee. Under these arrangements. Table 2. Being trained in operating the business which may allow the franchisee to be successful much faster than if they attempted to start a business on their own.

Chain Vending Mass Specialty Full None Vending Self Corp. Chain Discounter Strip-Centre Warehouse Mass General Discount Advertising Stand-Alone Self Corp. Chain Store Category Mass Specialty Discount Advertising Stand-Alone Assorted Corp. newer devices are entering the market containing more expensive and bulkier products. Structure Source: Knowthis. Specialty Specialty Competitive Marketer Structure E-tailer Mass General Discount Advertising Online Self Corp. These systems require the vending machine have either Internet or telecommunications access to permit purchase using credit cards. such as beverages and snack food. Chain Store Area Shopping Mall Boutique Specialty Specialty Full Selling Stand-Alone Full Individually Exclusive Strip Centre O/O Shopping Chain Area Catalogue Mass General Discount Direct Mail Direct Assorted Corp. Specialty Specialty Competitive Seller Structure Full Franchise Mass Specialty Competitive Advertising StandAssorted Contractual Along Strip Centre Convenience Mass General Full Advertising Stand-Alone Self Individually O/O Corp.Mom-And. While most consumers are well aware of vending machines allowing customers to purchase smaller items.com Vending – This category includes automated methods for allowing consumers to make purchases and quickly acquire products. .Mass General Competitive Advertising Stand-Alone Assorted Individually Pop Specialty Specialty Direct Mail Strip Centre O/O Shopping Area Mass Mass General Discount Advertising Stand-Alone Self Corp. Chain Killer Competitive Strip Centre Department Specialty General Competitive Advertising Shopping Assorted Corp.

income. the composition of households. 2. . Accordingly. the percentage of income used for housing and transportation will continue to limit the amount available for nonautomotive retail. An estimated 80% of all shopping are done by women. time-saving. This suggests that retailers should examine the mix of products and services that will attract women shoppers.2 Changing Income Higher income households will continue to be a primary target for many retailers. and ethnicity must be understood in relation to changes in shopping behaviour and expenditures. When people shop.” Today’s consumer wants “park by the door and see the open sign. These consumers spend 63% more than the average household on food and account for more than half of all spending on products such as men’s apparel and household maintenance supplies and equipment. convenience goods and services present opportunities for retailers.” Given historic trends. As households have fewer children. The pressure to develop retail closer to higher income suburban households will continue to require people to “shop with their wheels.1 Changing Households As households become smaller and number of wage earners increase.3 Consumer Demographic Trends The retailers are facing new challenges. Changes in population.2.3. 2. as the demographic characteristics of customers are changing.3. age. they are less likely to shop at the family department store that was once found downtown. Many households are spending less time shopping. both the lower-income and upper-income segments of the population will provide greater market opportunities than the traditional middleincome segment of the population. they want to know that the store is open and that they have what they want.

America N.65 Source: World Population Prospects . Buying behaviours of different age segments are changing. Asia gives more opportunities owing to its growing economies.3.65 -0.34 -0.76 1.2.71 0. medium variant.91 2. America -0.41 -0.04 0.21 0. Just because a 40-year-old today will be 50 in ten years doesn’t mean that he or she will be buying like today’s 50-year-olds. The major population growth is in developing nations across globe. Average annual rate of change of the total population and the population in broad age groups by major area.42 Total Population 0.48 -0.43 3.41 0.65 2. Thus. relatively affluent and expanding market.03 0.02 3.38 3.38 60+ 2. education and health. Age-wise Rate of World Population Change (%) Particulars 0-14 World Africa Asia Europe L.74 0.04 2. Increasing proportion of infant and child products today are now being purchased by grandparents. .73 80+ 3.59 0.2006 Revision Average change under the age 14 for countries outside Africa and North America is because of family planning and population control measures by respective governments.70 0.3 Aging Population The boomers represent a vast.72 0.93 2.25 15-59 0. the potential of retail growth is very high in these developing countries (Asia and Africa). Retailers should recognise that they have reached an age when they have less to spend on retail goods and more on housing.25 2.92 1.85 -0. 2005-2050 (Expected) in terms of percentage is given in the Table below.88 4.

2. demography. Decision making on buying 5. 2. and the geography of a particular area. it consists of the following steps. a retailer should analyse various factors like population. We have shown the percentage change in retail market of market leaders in respective countries.4 Buying Decisions Precisely speaking about the buying decision process. Need of Recognition 2.3. Merchandising professionals often rely on their instincts and experience to make choices that can define a retailer’s identity and competitive advantage in the marketplace. understanding the retail customers plays an important role in the success of a retail store. Post behaviour after the purchase In the retail industry. After the happening of industrialisation as well as the globalisation. For the development as well as for the growth companies are also concentrating on the global markets. especially in fast-changing segments such as apparel and consumer electronics. Taking into account the global market scenario. Germany etc. we have dealt in this chapter major market leader in retail of some of the developed nations like USA. Alternatives/ Substitutes 4.4 Major Markets The story of globalisation of retail industry is interesting. Retail buyers face daily decisions about which new products and lines to carry. . world has became too small for the business. UK. Information that satisfies the need of the customer 3. To understand the nature of the retail market. The development of technology and globalisation has led to a new era of consumerism where retailers focus completely on meeting the needs. wants and priorities of the consumer. Population analysis helps the retailer to understand potential markets. which is usually followed: 1.

: It is the world's largest public corporation by revenue. The biggest and most influential is mass merchandisers’ category.0 10.49 Wal-Mart Stores Inc. which has led to a movement in sales towards mass merchandisers and discount stores. E-sales is also affecting retail sector. Major Players: Table 2. 2. trailing the British National Health Service.14 Home Depot 90 Kroger Co 60. Competitive threat faced by e-retailers is forcing traditional retailers to respond by competing on both price and service levels.2006) 40. and the Indian . It is the largest private employer in the world and the fourth largest utility or commercial employer. three retailing is divided categories: stores.A decade back. Cygnus Research merchandisers specialty stores.4. many of which have enormous global buying power.0 20. although its percentage is low.55 Target Corporation 59. it was hard to imagine that international retailers would set up shop in your neighbourhood. in the USA The it US accounts for 22% of GDP.0 0.0 Retail Sales Grow th % G row th % in the world GDP is 27%.2: Top Four Players in the US by Revenue in 2006 Company Revenue in US$ billion Wal-Mart Stores Inc 351. and department while the into mass Source:: E&Y Report. But global retail giants are now spreading their wings across the globe to cash in on new opportunities. Consumers in the US have become more valueconscious.0 30. according to the 2008 Fortune Global 500.1 USA The total retail share Sales in U S$ billion 6000 5000 4000 3000 2000 1000 0 2000 2001 2002 2003 2004 2005 2006 Retail Sales in US $ billion Figure2.1: Retail Sales in US (2000 .

Mexico and China. as well as the largest toy seller in the U. Puerto Rico.7% over 2005.0 25. low unemployment and relatively low inflation. and analysts recently estimated that more than one-fifth of them lack a bank account. states. Home Depot Inc : The Home Depot (NYSE: HD) is an American retailer of home improvement and construction products and services.S.0 20. twice the national rate. 400 300 200 100 0 Retail Sales in US $ billion Source:: E&Y Report.4. The world's second largest Home Depot (as of the end of 2007) opened November 14. the retail sector has now entered into a period of low growth. Wal-Mart is the largest grocery retailer in the United States.0 5. Georgia.2: Retail Sales in UK (2000 .56 billion) . the Home Depot employs more than 355.S. about 100m customers. The UK’s GDP reached US$2 trillion in 2006.95 billion (about £255.141 big-box format stores across the United States (including the 50 U. the Virgin Islands and Guam).2 The United Kingdom (UK) The UK’s retail sector is driven by strong housing S a le s in U S $ b illio n 600 500 Figure 2.S. Canada (ten provinces). 2.0 15. Headquartered in Vinings.0 2000 2001 2002 2003 2004 Retail Sales Growth % 2005 2006 G ro w th % prices. population.000 people and operates 2. nearly one-third of the U. the District of Columbia.2006) 30.0 10.0 0. with an estimated 20% of the retail grocery and consumables business. The UK retail sector recorded a sale of over US$513. The retail sector accounts for around 20% of GDP. always". Wal-Mart customers give low prices as the most important reason for shopping there. The average US Wal-Mart customer's income is below the national average. just outside Atlanta in unincorporated Cobb County. 2007 on the island of Guam. stores. reflecting the "Low prices.Railways. visit Wal-Mart's U. registered a growth rate of 2. Cygnus Research After growing for around three years.S. Each week.

commonly known as Sainsbury's. or 11%. encompassing several product categories such as food. home.6 billion (March 2007). which is almost 20 times faster than the retail sector overall at just 1. It estimates that online purchasing rose almost 29% in 2007. the first movement among the top five since 2003.894 billion achieved by department stores – and it is still only 3. better & best" policy for its products. According to Taylor Nelson Sofres rankings published in January 2008. Tesco PLC is a British-based international grocery and general merchandising retail chain. Sainsbury's market share was 16.65 billion sales. the retail industry employed 2. accounting for half the rise in spending in 2007. UK retail sales were approximately $522. In 2008. ASDA's 16. The retail industry in the UK is the top service industry providing employment to nearly 3m people. Tesco operates a "good.5%. beverage.10 In June 2005. .000 new jobs till 2012.6 billion in 2005 (ONS). with 31% of these managerial/professional levels.4% compared to Tesco's 31. The sector is expected to see the creation of 270. according to the Office for National Statistics (ONS). The group also has interests in property and banking. which constitutes around 11% of the UK's total workforce. J Sainsbury plc is the parent company of Sainsbury's Supermarkets Ltd. Online shopping is becoming the fast growth engine of the UK retail sector. Retail is often seen as a stepping-stone for entrepreneurs to start up in other business sectors. according to retail monitoring group Verdict Research.9m people.3: The Top Four Players in the UK by Revenue in 2006 Company US$ billion Tesco PLC 68. clothing.in 2006. a chain of supermarkets in the United Kingdom. of the total UK workforce.1% of the total US$532.482 billion is almost equal to the US$18.7% and Morrison's 11. Online shopping now accounts for most of the sector’s growth and at US$16.70 J Sainsbury 32. Tesco Mobile and financial services.4%. Major Players: Table 2. the company overtook German retail giant Metro AG to become the world's third largest retailer. It is the largest British retailer by both global sales and domestic market share with profits exceeding £2 billion.18 Kingfisher 16.5%. The group has an estate worth about £8. This equates to one in nine.44 Safeway 40.

spur High or rising retail may Retail Sales in US$ billion Source:: E&Y Report. Like in the US. translating into economic growth.0 2. According to a 2008 report by Deloitte Touche Tohmatsu. and possibly a few other European retailers.2.0 0.5 1. and is one of the most globalised retail and wholesale corporations. after Tesco of the UK and Carrefour of France. it also ranks behind Tesco. which are its largest division. the discount stores drive the growth of retail market in Germany. "World market leader in the wholesale business". an increase of 1% against 2005. It has the largest market share in its home market.57 Metro AG: is a diversified retail and wholesale/cash and carry group based in Germany. In English it often refers to itself as Metro Group.4: The Top Four Players in Germany by Revenue in 2006 Company US$ billion Metro AG 84. Cygnus Research % Growth consumption.87 billion in 2006.98 Rewe Handelsgruppe 50. Germany’s retail market is the third largest in the world having total estimated retail sales of US$393.0 2001 2002 2003 2004 2005 2006 Growth % 400 390 380 370 360 350 340 330 Sales in US$ billion Figure 2.3: Retail Sales in Germany (2000 . The cash and carry division's page on the company's official English language website states that the company is the. . Major Players: Table 2.0 1. are not counted as retail.5 0. Metro is Europe's third largest retailer.75 ALDI Einkauf 42.70 Schwarz Group 42.63 trillion in 2006. Germany’s GDP is estimated at US$2.2006) 3.4.3 Germany Consumption makes a significant portion of German GDP 2. If Metro's cash and carry operations.5 and the increasing retail sales could act as an indicator of domestic sales German demand. implicitly excluding the cash and carry division from the retail sector.

600 stores worldwide. Ireland. Major Players: Table 2. The Aldi group operates individual about 7.22 trillion in 2006. Aldi Süd caters to the markets of Austria. the United States.0 -10.4 Japan Japan is the world’s second largest retail industry and it is highly fragmented with a majority of stores run by small businessmen.4: Retail Sales in Japan (2000 . Deregulation in Japan over the last decade has led to its long recessionary climate to restructure the retail and distribution sector by opening up the economy to foreign retailers. 2.4. Spain. the United Kingdom. It was estimated that the Japanese retail industry will reach US$1. The problems faced by foreign retailers in Japan include the reluctance of suppliers to deal with the foreign interlopers and inability to satisfy the expectations of the Japanese consumers.0 Growth % independently from each other in specific market boundaries. which operate Sales in US$ billion Figure 2. by registering a growth rate of 2.0 20. A new store opens every week.operating as ALDI MARKT) and ALDI Süd ("South" operating as ALDI SÜD). registering a growth rate of 8% in 2005. ALDI Nord ("North" . Switzerland and Slovenia. Japan’s GDP reached US$4. Australia. The chain is made up of two separate groups.0 30. Luxembourg.2006) 2000 1500 1000 500 0 2001 2002 2003 2004 2005 2006 Retail Sales in US$ billion % Growth 40.5: Top Four Players in the Germany by Revenue in 2006 . Cygnus Research markets in Belgium. the Netherlands. Portugal and Denmark.0 0.ALDI Einkauf: is a discount supermarket chain based in Germany.43 trillion in 2006.0 10. France. Aldi Nord is responsible for the Source: E&Y Report.1% in 2005 and the consumer demand makes up around 55% of GDP.

(AEON's share is just over 14%). Currently 9 stores exist in Beijing and 3 more in Chengdu with plans to expand elsewhere.msu. joint ventures. For nearly 10 years.Company Ito Yokado Aeon Co Daiei Inc Uny Co Source: www. part of Seven & I Holdings Co.3 Note: For Aeon & Uny FY05 has been taken ITO YOKADO: is a Japanese General Merchandise Store.hed.5 Growth Drivers . AEON controls approximately 4. Its private-brand TOPVALU products are carefully selected with all of these customer needs in mind. The company owns 60% of the women's apparel chain. and restaurants. and more. Ito-Yokado is second only to rival AEON with nearly 12% of Japan's superstore market. where they formed a joint venture with Wangfujing Department Store and China Huafu Trade & Development Group Corp.5 10. 2. In addition to food (more than half of total sales). household goods. and investments.84 37. Customers prefer to shop at AEON because they believe there is no better source for their daily necessities that so thoroughly addresses very real concerns for product reliability and food safety.000 stores worldwide. worry-free and enjoyable lifestyle. 665 supermarket stores. convenience stores.edu US$ billion 12.900 AEON Welcia drug stores. The group has expanded to China. the stores sell apparel. Formerly a holding company for businesses that included banks. AEON Co: Formerly known as JUSCO AEON Co Ltd is the largest retailer in Japan. Under the AEON corporate umbrella are 460 JUSCO superstores. 2.54 14.400 products in the food. recreational. Through ownership. and 1. clothing. AEON has worked to bring the full force of its buying power and cost efficiency to TOPVALU products so as to deliver consistently low prices at an unswervingly high level of quality.600 Mini Stop convenience stores. The brand encompasses 2. house wares and home-furnishing sectors. Ito-Yokado is now a subsidiary and the core operating company of Japan's largest retail conglomerate Seven & I Holdings's domestic superstore business. to support a healthy. to open one of five stores in Beijing.

2 Consumers’ Desire for Something Unique Consumer’s desire for something new drives the retail industry. However. Some factors which have fuelled growth in global retail industry are discussed below. with high GDP growth. fall in unemployment. Table 2.T. The GDP is increasing at a faster pace.1 GDP growth The US economy. Companies are getting more focused on giving consumers something new and unique to survive in this mature industry. thereby leading to change in standard of living towards higher side. Many formats of retail industry are now being accepted. followed by Germany and UK. which in turn is affecting the retail growth.6: GDP Average Annual Growth (2004 – 2008) Country China India Malaysia Thailand Singapore Annual Growth % 8.2 Source: Global Economic Outlook IMF 2. That’s why countries like India and China are also giving boost to the retail industry. Tesco and others. which is more than US$11 trillion.According to the research and analytics firm. This change demands better quality of goods and services.4 5. retail is not the same in emerging markets. Since 2001. Japan’s economy which is at around US$4.2 5. is the largest in the world. Carrefour. Today’s consumer is extremely selective and if the retailer wants his business to grow profitable he must meet the specific needs of the consumer. 2. 17 retailers left markets. Demographics and income levels create a diverse set of requirements that may challenge existing business models and value chain strategies.3 5.4 7. but at the same time in 2005. The departments at the retailing industry are adopting new technologies to help their employers collect better information from the customers to predict consumer demand patterns.5. high disposable income and a huge unorganised retail sector is a potential gold mine for major retailers of the world such as Wal-Mart. .22 trillion is the second largest in the world. 90 new markets have been entered by more than 49 global retailers. Different economic. Kearney.5. In fast growing economies the GDP is mainly driven by consumption. social and political factors create a need to reinvent marketing and operation strategy. A.

For example. the Internet is the only channel that is increasing the number of respondents that shop online. China opened its gates for the foreign retailers when it joined WTO in 2001. The survey found that mid market retailers will spend US$161m on ERP and supply chain management software in 2005 alone.5. traders and wholesalers for operating in special economic zones. Russia and China markets are attracting retailers. whereas. It is not that China is the cheapest place to do the business but it’s because of its vast market size and population.3 Increased Spending on IT by Retailers According to SearchCIO. it led the boom of the retail industry. an annual compound growth rate of 7%. It also offered tax incentives to foreign retailers. But as the technology has evolved into a huge dimension as well as the acceptance of the latest technology by the retailers. a recent survey shows that IT spending by mid market retailers worldwide will grow from US$22 billion in 2004 to US$31 billion in 2009. he first thinks the size of retail outlet. . Central Europe.2.5 Looking East for Growth Southeast Asia. 2.4 Online shopping While retail stores remain the dominant shopping channel. wireless networking and web hosting are expected to reach US$679m by the end of 2005 and grow to US$946m by 2009. Previously.5. any retail outlet is to operate in a small room.5. Investments in customer relationship management (CRM). Online shopping growing as a sales channel reveals that price is declining as a driver of online sales. a 9% compound annual growth rate 2.6 Technology It’s a fact that technology has helped a lot in retail boom.5. if an individual enters into huge retail outlet.com. The 24-hour availability and better selection online increased considerably as a factor in shopper's decision to shop online. 2.

2. which is cheaper and competes with Tesco Finest Line. thereby reducing and controlling the theft in the store. For instance. can put substantial pressure on the manufacturers of branded goods. private labels have overcome this reputation and achieved significant growth in recent years. Almost all the latest retail format is having “bar-scanner”. who have to compete with their own customers. which is directly connected with the computer. say.6 Recent Trends and Developments .now it’s been turned into huge retail complex.7 Growth of Private Labels Private labels are products manufactured for sale under a specific retailer brand. Similarly. The database of the products are saved in the computers. 2. Cadbury’s. margins on private label goods are an average of 10% higher than those on similar branded products. For retailers. CCTV (Close circuit television) is also helping the global retail industry a lot. while beneficial to retailers and consumers. Security mechanism installed at the entrance of the store helps in maintaining the security standard of the retail outlet. Tesco in Europe has a range called the Tesco Finest Line. They are often designed to compete with branded products. Tesco’s Finest Chocolate sells at 50% premium over. which sells only premium products at premium prices. offering customers a cheaper alternative to national brands. which are often significantly less than those of national brands. Bar scanning while use of the UPC (Universal Product Code) in product labelling has almost become a necessity with the advent of optical scanning technology in the retail market industry. its yogurt sells at more than 50% premium over Danone and other yogurts. This combination.5. CCTV is installed in huge retail outlet. Though the public is generally used to see them as low-cost imitations of branded products. It also has Tesco Value Line. which helps in reduction of theft. it have had the information about which product is where. Retail outlet is equipped with RFID technology. how much is the price. Customers benefit from the lower prices. very much helpful in retail outlet in the payment counters. Private labels offer several benefits to both retailers and customers. In every part of the world. what amount of quantity is there in the retail outlet.

requiring developers. optimise supply chain processes and improve productivity and profits. A. animal. relying on storing and remotely retrieving data using devices called RFID tags or transponders. Countries like the US. By the early 1980s the regional shopping mall had Figure 2. RFID technology is going to reduce costs. India came at top with a GRDI score of 92. An RFID tag is an object that can be applied to or incorporated into a product. Market Attractiveness (25%). Some tags can be read from several meters away and beyond the line of sight of the reader. 2. Market Saturation (30%) and Time Pressure (20%). While calculation four factors were considered: Country Risk (25%). or person for the purpose of identification using radio waves.1 Radio Frequency Identification (RFID) technology Radio-frequency identification (RFID) is an automatic identification method. followed by Russia and China with score of 89 and 86 respectively as shown below. Kearney did a study in which Global Retail Development Index (GRDI) was calculated. retailers service providers to and forms.5: Global Retail Development Index (GRDI) 2007 100 GRDI Score 80 60 40 20 0 Ukraine Malaysia Vietnam Mexico India Russia Latvia China Chile Saudi Arabia begun to lose shares to other retail Changes continue today. Source: AT Kearney Report 2007 create new type of stores to stay competitive.6. Developing countries are showing more rapid growth potential. T. UK and Japan are leading the way in deploying . The bracketed figures indicate the weight age given to the factors.The retail market has experienced a significant change in recent years.

Metro.RFID technology. and others like Tesco. But due to some legal issues. most of the retailers re-examined their strategies. 4. As the government has allowed 51% investment in retail markets through FDI.e. If we consider the Indian scenario. Lower inventory levels yet constant product availability. Wal-Mart is providing only back-end support to Bharti for retailing. which lowers a barrier to international trade. 3. In addition to it. 2. JC Penny. The benefits that RFID technology offers are manifold and include – 1. Similarly in apparel retail. almost all the international branded denim companies is . declining population growth rate and low prices. 2. focusing on the core business to survive in a relatively mature industry. For instance. Lower costs. Wal-Mart has entered into joint venture with Indian telecom giant Bharti Group. global leader in retailing i. In 2004. the Mergers and Acquisitions (M&A) activity was on the increase and in the first quarter of 2005. Wal-Mart has entered the Indian market after signing the jointventure agreement with Bharti group. in Indian scenario. The factors that have influenced M&A activity the most are intense competition in the domestic market.6. the global retail giant Wal-Mart Stores Inc entered into a joint venture with Indian conglomerate Bharti Tele-ventures. globalisation of trade is being encouraged by the adoption of certain trade agreements such as NAFTA. Carrefour of Italy is also planning to enter the Indian markets. though China is expected to close the gap by 2009. Better asset utilisation and increased sales through better out-of-stock goods management. Improved efficiency and visibility. Global expansion by major retailers is occurring in emerging markets such as Southeast Asia and China. up by 175%. the technology is well on its way to establishing a stronghold within the retail sector. the retail sector recorded the largest increase.2 Consolidation and Global Expansion In the last few years. Gap and Marks & Spencers joining the RFID bandwagon. With Wal-Mart mandating the use of RFID amongst its top-100 suppliers.

Consumers want the convenience of longer trading hours with a Sunday opening and where possible. each of them have introduced the loyalty card for their customers. People are working longer hours than before. M&A activity in the global retail market has been high.0 billion.3 Consumer trends Retail sector has been a consumer-led industry. With the application of such cards. Total M&A activity in the 17 months from January 2005 through May 2006 was $86. 12% of packaged groceries in Sydney are now bought on Sundays and many stores are open until midnight. Retailers issue these cards for loyalty program. involving restructuring and the sale of assets. totalled $51.for example.4 Augmented use of Smart cards Smart card is a card that is embedded with a microprocessor and memory chip. In the second half of 2007. a 60 month period. Instant discounts are given to the privileged customers. M&A in the retail market can be divided into two segments: financial investments and strategic consolidations. whereas M&A activity from 2000 to 2004. Financial investments in the retail sector are generally short-term investments. retailers have responded .6. . similar to debit card and prepaid phone card. in which customers can enjoy many kinds of benefits. Many retailers have introduced more fast lanes to accommodate the "little but often" shopper. Customers also like to carry one card instead of carrying 10 cards. 2. Strategic consolidations are often mergers whereby companies can gain economies of scale. however. that venture ended up with a huge smoke. better enabling them to compete with superstores. From the beginning of 2005. they can accumulate points and can earn rewards or can purchase goods using the accumulated award points. 2.6. In India. an establishment of Lalbhai group.having tie-ups with Arvind Mills.7 billion. European giant in diary retail “Danone Group” had entered Indian market with Britannia. retail giants like Tata sponsored Westside. and Future group sponsored Big Bazaar. and many married women with children too are working.

2. what aisle it’s in and how much he/she has spent. including Windows CE and Microsoft SQL Server. placing the items they want to buy into the cart and then proceeding to the checkout counter/aisles. Targeted video adverts. Shoppers would manually scan their own items on the display before putting them into the trolley.5 Self Service Bigger retailers are including self service check-out lanes in their stores. usually when purchasing items.6.7 Issues and Challenges . where the customer pumps their own gas rather than have an attendant do it. shoppers can swipe their loyalty card through a scanner on the trolley’s handle at the beginning of their shop. Self service is the practice of serving oneself. without having to pass through the supermarket’s check-out aisles. will then be shown on a 12-inch retractable colour display as they browse the aisles. Common examples include many gas stations.2. 2. while the total cost of their shopping would be calculated before they leave the store. This gives a pleasant shopping experience.6. may also be built into the trolley. Dubbed Media-Cart. based on information about previous shopping habits. An increasing population these days likes these self-serve lanes because they usually take less time than lanes with register clerks.6 Intelligent Shopping Trolleys Supermarket trolleys have always been pretty basic. A “cart-level checkout feature”. rivalling RFID. Microsoft is co-developing a new one featuring an integrated display that tells the customer what to buy. the customer uses a shopping cart in the store. In most of stores around the world. A power unit will sit in the trolley’s base. The screen will be managed by several Microsoft technologies. Automatic Teller Machines (ATMs) in the banking world have also revolutionised how people withdraw and deposit funds.

Supply Chain Management spans all movement and storage of raw materials. retailers face competition from low cost producers. or cooperatively through agreements and contracts. they are giving stiff competition to established retail outlets. retailers should focus on supply chain efficiency to stay competitive. Consumers are also growing more demanding and want more value. Customers are purchasing their respective commodities through Internet. whose ability to deliver high quality products at lower prices has grown very rapidly. More recently.7. through market mechanisms. Supply chain management (SCM) is the process of planning. 2. But smart pricing is the biggest challenge for retailers offering online shopping. the loosely coupled. 2. Because Internet . stylish and innovative products at a low cost. and finished goods from point-of-origin to point-of-consumption. self-organising network of businesses that cooperates to provide product and service offerings has been called the “Extended Enterprise”. for example.In developing countries. however.7.2 Smart Pricing It is the practice of charging different buyers different prices for the same product. it is important for them to reinvest in new technologies and programs. as they lack sufficient time for shopping. Firms in the extended enterprise may operate independently. Retailers have been taking advantage from these low cost producers but at the same time facing competition from established players.1 Supply Chain Efficiency Retailers realise that in order to improve their businesses. This kind of counters are in a nascent stage. SCM integrates supply and demand management within and across companies. future bazaar etc. Another issue of major concern is the emergence of the web based counters like e-bay. Following are some of the issues and challenges facing global retail industry. According to a study done by National Retail Foundation and BearingPoint Inc. Even small and midsize businesses can make price changes per day according to the market conditions. work-in-process inventory. implementing and controlling the operations of the supply chain as efficiently as possible.

and an innovative. and the likes. 2. experimental approach is preferred. consumers will be unhappy if they believe they have paid more for a product. In a theoretical market with perfect information. price discrimination can be a feature only of monopoly markets. Target.allows customers to easily share information with one another. RFID remains an early-adopter technology.4 Shifting Demographic Trends .7. top-name consulting companies that are usually tapped for the job are characteristically conservative with new technology. disconnect of understanding technology and domain space between retailers and technology implementers hinders healthy and rapid adoption of RFID throughout the retail space. Thus. Highly publicized initiatives by Wal-Mart. as they are more likely to offer the out-of-the-box thinking that successful RFID deployments require. But other retailers. the creative consulting firms are a better option. However its deployment has two major deployment problems. At this early stage in the game.” Price discrimination exists when sales of identical goods or services are transacted at different prices from the same provider. this problem is less pronounced. retailers don't fully understand RFID technology. no transaction costs or prohibition on secondary exchange (or re-selling) to prevent arbitrage.6. many such niche RFID outfits would be overwhelmed by the scope of reengineering a retailer's supply chain around RFID.3 Deployment of Technology RFID is important technology in whole of retail business value chain. conversely. It is often referred as “Price Discrimination. It is one of the strategies used by the retail industries to maintain and stand itself in “highly cut throat competitive market”. Their obvious drawback is their small size. Here the problem is that the big. The first is that RFID companies do not fully understand the business and challenges of retailing and. The second problem has to do with retailers' solution to their RFID shortcomings: they outsource the work to technology consulting companies. 2.

2. and usability. They can’t provide all those things which a customer demands. Customers are looking for all kinds of facility while going for shopping. can purchase different goods and services from the same destination. Now purchasing any commodity from a huge retail outlet is a matter of status. Now on the customers are looking the shopping as a leisure activity as compared to necessity a decade ago. This what the main challenge faced by the all retailers.4 trillion in 2006. . However. This is also one of the major reasons behind the evolution of huge retail complex. Now the tastes and the preference of the customer has changed. The trend of globalisation and expansion of big retailers into emerging countries. customers can easily park their vehicles.6% in 2005. from domestic brand of clothing to expensive Versace or Armani. Customers want one stop destination for their shopping. especially on unique kid’s items. in huge multi-outlets. integration.The complex challenge for the retailers today is to understand and serve individuals in a world of more than six billion global customers. particularly into Southeast Asia was seen. Most of the retailers start with demographic segmentation to better understand the profile of the customers. They can purchase anything that ranges from house-hold item to expensive jewelleries. Growth was slow in early 2005 as monetary policy was tightened in the OECD countries.8 Outlook Global retail sales reached an estimated value of US$10. An understanding of shifting demographic trends help retailers plan better for their workforce. by registering a growth rate of 3. Of the three. usability remains the greatest weakness and the greatest vendor opportunity as traditional merchants struggle with the transformation of their legacy applications into insight-driven workbenches. For retail technology vendors the focus for retail enterprise applications must be on three critical priorities: intelligence. The threat of inflation and rising interest rates will pressurize the disposable income in 2006 but the consumer spending will be there. The overall demographic trend is expected to change slowly but the retailers should monitor the shift in demographic trends.

Retailers are also beginning to implement RFID. while food stores’ share of food sales fell from 49% in 2000 to 43% in 2005. Large retailers in mature markets will grow through acquisitions in emerging countries such as Southeast Asia. Central Europe and Russia. In the US.Finally. Cygnus believes that vendors should clearly define their capabilities for supporting retailer global expansion.” a category that includes superstores. Worldwide. while “other general merchandise stores. Economies of scale and technological advancement in inventory management have helped in achieving lower costs. Metro (Germany). . Rising oil prices can drive up the price of consumer goods as the costs of transporting products from manufacturer to market increases. which could impact both retailers and suppliers. allowing the retailer to order new supplies without delay. Retailers have increased their market share by competing in terms of price. Rising oil prices have impacted consumer spending in 2005. The technologies include quick response systems that link retailers’ point of sale scanners to vendors or distribution centres through electronic data interchange. while avoiding costs associated with overstocking. including Wal-Mart (US). The increasing demand for energy may also push back-office costs up. house wares. Conclusion Large superstores. and Tesco (UK). from 2000 to 2005. Large networks enable the retailers to negotiate for high-volume discounts from suppliers. integrating various technologies to further reduce costs. including specific regional or country-specific configurations that exist. Carrefour (France). which offer the best potential as household income rises. grocers’ sales grew at an average annual rate of 2% and department stores’ sales decreased at an average annual rate of 1%. department stores’ share of apparel and shoe sales fell from approximately 59% in 2000 to 48% in 2005. a substitute for bar coding. High volume purchasing also allows retailers to control their own supply chains. have transformed the global retail market by selling merchandise in multiple retail segments (clothing. grew at an annual average of 10%. Deregulation in China and India will open gates for international retailers to expand into new markets. enabling closer tracking of inventory. and groceries) at the expense of more specialised retailers.

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