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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.
CHARACTERISTICS OF RETAILING
Retailing can be distinguished in various ways from other businesses such as manufacturing. Retailing differs from manufacturing in the following ways: • There is direct end-user interaction in retailing. • In is the only point in the value chain to provide a platform for promotions. • Sales at the retail level are generally in smaller unit sizes. • Location is a critical factor in retail business. • In most retail businesses services are as important as core products. • There are a larger number of retail units compared to other members of the value chain. This occurs primarily to meet the requirements of geographical coverage and population density.
Direct Interaction with Customers Retail businesses have a direct interaction with end-users of goods or services in the value chain. They act as intermediaries between end-users and suppliers such as wholesalers or manufacturers. Therefore, they are in a position to effectively communicate the response and changing preferences of the consumers to the suppliers or sales persons of the company. This helps the manufacturers and markets to redefine their product and change the components of its marketing strategy accordingly. Manufacturers require a strong retail network both for reach of the product and to obtain a powerful platform for promotions and point-of-purchase advertising. Realizing the importance of retailing in the entire value chain, many manufacturers have entered into retail business by setting up exclusive stores for their brands. This has not only provided direct contact with customers, but has also acted as advertisement for the companies and has provided
Retailing provides extensive sales people support for products which are information intensive. Due to lower disposable incomes. Impulse goods like chocolates. retailers must take care of determining average levels of stock. Therefore.the manufacturers with bargaining power with respect to other retailers who stocked their product. some consumer segments in India even buy grocery items on a daily basis rather than a weekly or a monthly basis. Hence. display. Many do not look at ads before shopping. Credit verification. store layou8t and catalogues become important. impulse purchases of the shopper is a vital area that every retailer must tap into. order levels and the retailer has to keep a tight control on costs associated with each transaction in the selling process. One way to resolve this is for the retail outlets to be able to attract the maximum possible number of shoppers. Many consumers buy products in small quantities for household consumption. Point-of-purchase Display and Promotions A significant relevant chunk of retail sales comes from unplanned or impulse purchases. gift-wrapping and promotional incentives all add up to the costs. value-added activities like bagging. point-ofpurchase merchandise. such as in the case or consumer durables. snack foods and magazines can sell much more quickly if they are placed in a high visibility and high traffic location. Studies have shown that shoppers often do not carry a fixed shopping list and pick up merchandise based on impulsive or situational appeal. Since a lot of retail products are low involvement in nature. 4 . Inventory management becomes a challenge for retailers as a result of the many minor transactions with a large number of customers. employment of personnel. 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.
Larger Number of Retail Business Units Location of retail store plays an important role compared to other business units. 5 . Similarly. supply of merchandise and store image-related factors in locating the retail outlet. retailers consider factors like potential demand. primarily to meet the needs for geographic reach and customer accessibility. Manufacturers decide the location on the basis of availability of factors of productions and market. The number of operation units in retail is the highest compared to other constituents of the value chain.
Shoppers’ Stop targets the elite urban class. sizes and brands from just one location. on and average. 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. The above process is referred to as the sorting process. Westside provides clothing and accessories. Final consumers. If each manufacturer had a separate store for its own products. buying them in sufficiently large quantities and selling them to consumers in small units. in contrast. breaking bulk. prefer a large variety of goods and services to choose from and usually buy them in small quantities. advertising and certain additional services. In this context. Retailers are able to balance the demands of both sides. storage. 6 . 15. Through this process. while Pantaloons is targeted at the middle class. while a chain like Nilgiris specializes in food and bakery items. as a channel of communication. Customers are able to choose from a wide range of designs.FUNCTIONS OF RETAILING Retailers play a significant role as a conduit between manufacturers. wholesalers. Supermarkets in the US offer.000 different items from 500 companies. retailers undertake activities and perform functions that add to the value of the products and services sold to the consumer. suppliers and consumers. holding stock. by collection an assortment of goods from different sources. they specialize in types of assortment offered and the market to which the offering is made. customers would have to visit several stores to complete their shopping. While all retailers offer an assortment. they perform various functions like sorting.
ADDITIONAL SERVICES Retailers ease the change in ownership of merchandise by providing services that make it convenient to buy and use products. 7 . Retailers maintain an inventory that allows for instant availability of the product to the consumers. Salespeople are also employed by retailers to answer queries and provide additional information about the displayed products. promptly process. meaning ‘to cut a piece off’. 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. manufacturers and wholesalers typically ship large cartons of the product. deliver and install products. HOLDING STOCK Retailers also offer the service of holding stock for the manufacturers. Retailers also offer credit and hire-purchase facilities to the customers to enable them to buy a product now and pay for it later. which are then tailored by the retailers into smaller quantities to meet individual consumption needs. To reduce transportation costs. Retail essentially completes transactions with customers.BREAKING BULK Breaking bulk is another function performed by retailing. The display itself allows the consumer to see and test products before actual purchase. Providing product guarantees. It helps to keep prices stable and enables the manufacturer to regulate production. after-sales service and dealing with consumer complaints are some of the services that add value to the actual product at the retailers’ end. The word retailing is derived from the French word retailer. Retailers fill orders.
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. and customer complaints. TRANSPORT AND ADVERTISING FUNCTIONS Small manufacturers can use retailers to provide assistance with transport. storage. shoppers learn about the characteristics and features of a product or services offered. From advertisements. delivery delays. retailers are required to perform the following activities: 8 . Manufacturers. learn of sales forecasts. As a result of these functions. 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. advertising and pre-payment of merchandise. This also works the other way round in case the number of retailers is small. salespeople and display. in their turn.
FoodWorld.. 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. The small retailer takes assortment decision on the basis of his experience. store image. Retailers provide convenient location. For example. It includes both the depth and breadth of products carried. deals in multiple product categories along with all possible variants of brands. stock keeping units. colour or flavour.ACTIVITIES PERFORMED BY RETAILERS Retailers undertake various business activities and perform functions that add value to the offerings they make to their target segments. Retailers need to consider certain factors while devising assortment plans for their stores: profitability associated with particular merchandise mix.g. on the other hand retailers from organized retailing depend on a detailed study of past trends and future projections. layout and the level of compatibility between the existing merchandise. Retailers have to select the combination of assortments from various categories. and physical attributes in order to meet the expectations of their consumers and survive in the 9 . stock and appropriate mix of merchandise in suitable packages in accordance with the needs of customers. The assortments must include substitutable items of multiple brands and price points. They should be distinguished on account of physical dimensions and attributes e. a leading food supermarket positioned as a one-stop shopping centre.
too much stock will increase the retailer’s cost of operation.business. Generally. 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. Subhiksha. too little stock will hamper the sales volume. retailers receive large quantities of sacks and cases of merchandise from suppliers to reduce their transportation costs. Retailers in the organized sector. a grocery chain in south India has impressive assortments of only the fast moving brands rather than all available variants in the market. Some are so small that they have to stock only on the shop floor. BREAKING BULK Breaking bulk means physical repackaging of the products by retailers in small unit sizes according to customer’s convenience and stocking requirements. Normally. on periodic basis. in small towns of India most retailers have arrangements with the nearby warehouses to stock the goods. This function receives negligible attention from the retailers now due the introduction of new product categories. Consumers normally depend on the retailers directly to replenish their stocks at home. HOLDING STOCK To ensure the regular availability of the offerings retailers maintain appropriate levels of inventory. Retailers need to maintain equilibrium between the range or variety carried and the sales which it gives rise to. whereas. such as FMCG and ready-to-wear apparel. Retailers have to face the negative consequences of holding unwanted levels of stock —for instance. retailers. In order to meet their customers’ requirements retailers have to break or arrange the bulk into convenient units. Their assortment plan is governed by location. Therefore. 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. to a 10 . size and store image of their stores. Whereas. maintain the required levels of stock to meet the regular or seasonal fluctuations in the demand.
Retailers offer credit. started by leading watch manufacturers Titan. they provide stocking place. 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. are using effective software packages for maintaining adequate levels of inventory. reach to the ultimate customers. set up in all its stores. At the same time. after-sales services and information regarding new products to their customers. For example. 11 . retailers avail of just-in-time deliveries with the help of efficient consumer response systems. as after-sales service is considered to be an integral ingredient of the watch purchase. At the same time.certain extent. home delivery. Time Zone. 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. and information about the concerned target segment to the suppliers. service centres with proper equipment and trained manpower. the first organized retail chain of wristwatches in India. EXTENDING SERVICES Retailing provides multiple services to immediate customers and other members of the value chain. thereby making the shopping experience convenient and enjoyable. which reduces the burden of maintaining high levels of stocks.
Some of these include classifying on the basis of • Number of outlets • Margin Vs Turnover • Location • Size. 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. Small chains can use economies of scale while tailoring merchandise to local needs. The number of outlets operated by a retailer can have a significant impact on the competitiveness of a retail firm. chain stores are often channel captains of the marketing channel—captains can influence other channel partners. In the United States. Because of their size. chain stores account for nearly 95% of general merchandise stores. Generally. There is no universally accepted method of classifying a retail outlet. although many categorization schemes have been proposed. to carry out 12 . While any retailer operating more than one store can be technically classified as a chain owner. such as advertising and managers’ salaries. such as wholesalers.CATEGORIZING RETAILERS Categorizing retailers helps in understanding the competition and the frequent changes that occur in retailing. 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. for example. Big chains operating on a national scale can save costs by a centralized system of buying and accounting. for practical purposes a chain store refers to a retail firm which has more than 11 units.
Customer contact within the niche market must be characterized by ‘high-touch’ service. Pricing is often a key area of focus for these retailers. However. Their prime locations. Big stores have many strengths. They tend to stock a narrow range of inventory that sells well and maintain an extensive inventory of the fast selling products. huge buying power. such as extended payment terms and special package sizes. large retailers are not perfect. Often. are a must. including precise buying practices. They usually do not offer special services. Most offer the same standardized assortments of products nationally. Local managers have little say in inventory selection. Perhaps their biggest advantage is their knowledge in every aspect of their business. Independent retailers can co-exist and flourish in the shadow of the big chains by developing a niche within the diverse market. Big stores focus on large markets where their customers live and work. The key factor is innovation: stores that do not change will perish. The niche should be developed on the basis of new or unusual product offerings. Larger companies are often slow to recognize and react to changes in their local markets.activities they might not otherwise engage in. Most large retailers have little connection with the community they serve. They use technology to learn more about their customers and target them with point-of-sale machines interactive kiosks. price may be less important. from inventory selection to store layout. Branding is important to them. While value is important. They have competitive weaknesses that small retailers can exploit. superior service and overall quality. Efficient operations. 13 . and sophisticated forecasting and inventory systems. vast inventory and hassle-free return and exchange policies. Staff turnover is extremely high. sales staff has minimal product knowledge. including regional or national reputation. the consistency in their products and services. 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.
• Focus on profit instead of volume (be ready to lose an occasional sale). • Charge regular prices and avoid discounting (ensure requisite mark-up). • Maintain essential inventory. • Understand the significance of the Internet. • Buy with precision and search out specialty suppliers. a retailer sells his inventory. on average. • Learn more about customers and include best customers in a database. Jewellery stores and appliance stores are examples of high margin low turnover stores and only a few retailers achieve high margin high turnover. exemplified by Amazon. Gross margin is net sales minus the cost of goods sold and gross margin percentage is the return on sales. • Provide extraordinary service. • Employ the best possible staff.com. retailers are classified as low margin low turnover—those that cannot survive the competition—and low margin high turnover.The road to success for the independent retailer lies in doing all the things those big chain stores cannot or will not do. Inventory turnover refers to the number of times per year. On the basis of this. These retailers are in the best position to combat competition because their high turnover allows 14 . • Invest appropriately in advertising and promotion. The successful independent retailers embrace the following principles: • Be prepared for change. • Move to a narrower niche market and stop competing directly with the big retailers. A 30% margin implies that a retailer generates Rs 30 for every Rs 100 sales that can be used to pay operating expenses. Gross margin and inventory turnover is another means of classifying retailers.
the Internet may make size an obsolete method of comparison.them to withstand price wars. Besides renovating old stores. generally within a metropolitan area. in this sphere too. 15 . this area of retailing is likely to undergo tremendous changes in the coming years. with big retailers having lower operational costs per dollar than smaller players. Size is often used as a yardstick to classify retailers because costs often differ on the basis of size. However. With the advent of the Internet. One of the old means of classification of retailers is by location. The drawback of the classification by this method is that service retailers who have no inventory turnover cannot be encompassed. Retailers are no longer satisfied with traditional locations within a city’s business district but are on the constant lookout for alternate locations to reach customers. retailers are testing unorthodox locations to expand their clientele.
. owned by manufacturers or wholesalers. each ownership format serves a marketplace niche and presents certain advantages and disadvantages. Cottage Emporia) • Ownership shared among franchiser and franchisee (e.g.g. Mother Dairy milk booths in Delhi) • Government (e. Vastra outlet in Rajouri in New Delhi) • Independent retailer (Chanakya Sweet Shop near Hazratganj in Lucknow) • Consumer (consumer owned grocery stores in man y residential societies) • Co-operative society (e. From positioning and operating perspectives. leased departments.. parts of a retail chain. professionally managed store formats providing goods and services that appeal to customers. A retail unit could be owned by: • Manufacturer (e. 16 . About 78% of these are small family businesses utilizing only household labour. Retail firms may . 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. Archies Gallery) Although most Indian retailers fall in the category of small-scale units. Recently. which were over 12 million in 2003. in an ambience that is conducive for shopping and provides a memorable experience to customers.be independently owned. company owned retail outlets) • Wholesaler (e.. This epithet has its roots in the huge number of retail enterprises in India. operated as a franchisee. there are also some very big retailers.g. consumers owned or co-operative society. some scholars have started referring to India as a nation of shopkeepers.g. Retail executives must not lose sight of this in playing up their strengths and working around their weaknesses. Organized retail stores are generally characterized by large..g..2.
2) Partnership: . Therefore. 3) Joint venture: . These firms are owned by one person. There are four basic legal forms of ownership for retailers: 1) Sole proprietorship: . useful in the design of retailing strategy. usually the individual who has the day-to-day responsibility for running the business. retail businesses are extremely diverse and there are quite a few types of retail units. Unless incorporated or established as a firm as evidenced by a deed. 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. retail units are classified on multiple of ownership.A joint venture is not well defined in the law.CLASSIFICATION OF RETAIL UNITS Conceptual classification of a business unit provides the marketers with strategic guidelines. It acts 17 .The vast majority of small businesses start out as sole proprietorships. kind of customer interaction level of services provided etc.A partnership is a common format in India for carrying out business activities (particularly trading) on a small or medium scale. Besides. sometimes at maximum marginal rates. two or more people share ownership of a single business. This decision is likely to have long-term implications. so it is important to consult with an accountant and attorney to help one select preferred ownership structure. geographical locations. In a partnership. joint ventures may be taxed like association of persons.
4) Limited liability Company (public and private):.The Limited Liability Company (LLC) is a relatively new type of hybrid business structure that is now permissible in most states. The owners are members. 18 . and the duration of the LLC is usually determined when the organization papers are filed. but is clearly for a limited period of time or a single project.like a general partnership.
or a service sponsor) and a retail franchisee. Retail firms can be classified into five heads on the basis of their respective operational structures: 1) Independent retail unit: .It refers to department in a retail store that are rented to an outside party.Classification of Retailers on the basis of Operational Structure Retail businesses are classified on the basis of their operational and organizational structure. About 78% of these are small family businesses utilizing only household labour. whether to hire employees and manage the distributed sales function internally or to reach customers though franchised outlets owned and operated by local entrepreneurs. Operational structure defines the key strategic decision of retail entity. 4) Leased Department or Shop-in-shop:. it usually engages in some level of centralized (or coordinated) purchasing and decision making. 2) Retail Chain: . 19 .Franchising involves a contractual arrangement between a franchiser (which may be a manufacturer. in discount stores. which allows the franchisee to conduct a given form of business under and establishments name and according to a given pattern of business. An independent retailer owns one retail unit. Usually this is done in case of department and specialty stores and also at times. 3) Franchising: .A chain retailer operates multiple outlets (store units) under common ownership.The total number of retailers in India is estimated to be over 5 million in 2003. a wholesaler.
In this context the detailed example of Kendriya Bhandar in India. 20 .5) Co-operative Outlets: .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. Poo Kadia for food and vegetables. better visibility from the road. work together to attract customers to their retail area. and also compete against each other for the same customers. This type of location has several advantages including no competition. For example.Classification of Retailers on the basis or Retail Location Retailers have also been also been classified according to their store location.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.Besides the above location-based classification. 3) Retailers in Specialized Markets: . easy parking and lower property costs. In India. For example the Haldiram’s outlet on the Delhi-Jaipur highway and the McDonald’s outlet on Delhi-Ludhiana highway. 2) Retailers in a Business-associated Location:. which attracts the customers staying close by. offering a variety of merchandise. Godown Street is famous for clothes. we also have in India-retailers who prefer specialized markets. particularly traditional independent retailers or chain stores. low rent. most of the cities have specialized markets famous for a particular product category. Bunder treet for stationery products.In this case. Govindappan naicleen street for grocery. Classification of retailers on the basis of location is discussed below: 1) Retailers in a free-standing location: . T Nagar for ready-made garments. 21 . 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. in Chennai. Usman street for jewellery.
serious efforts are being made to design new airport facilities in order to incorporate substantial amounts of retail space. Lately. duty-free shops and newsstands dominated the small amount of commercial space provided at airports. 22 .4) Airport Retailing: . 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.For quite some time.
are finding the competition intense. Consumers are not only looking for the core products or functional benefits from the retailers but also the non-functional benefits. For example. But even in the mass-merchandising segment. globalization and consumer preferences. The existing retail houses are also gearing up to face the emerging competition from the organized sector and the changing outlook of the consumers. most of the traditional eating joints in India such as Haldiram.TRENDS IN RETAIL FORMATS Retail industry is continuously going through changes on account of liberalization. respectively). discount clubs (Subhiksha). manufacturers are identifying. Small independent stores. so-called category killers (Home Depot. In 2002. as is evidenced by Kmart’s bankruptcy announcement in 2002. 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. For example. While multinational retail chains are looking for new markets. Vishal chain). At the same time. Big Bazaar). which need to be compatible with their lifestyles. Mass merchandisers (Wal-Mart. Tanishq) have all developed a successful retail models. and speciality retailers (Time Zone. Accordingly the retailers too are fast adjusting to the changing consumer preferences. or evolving new retail formats. consumer spending is shifting from goods to services. across product categories. is a very common retail formats they 23 . redefining. department stores such as Saks and Federated experienced declining revenues (down 3% and 1% respectively). Mom-and-pop Stores and Traditional Kirana Stores The retail sector is changing as new store categories have started dominating the marketplace. the small mom-and-pop stores and the traditional department stores. while Wal-Mart and Target saw revenues grow (by 12% and 10%. the competition is fierce.
they should be ready to expect more bumps as the strong get stronger and the weak get absorbed. In part. names like Sears.are also undertaking large scale renovations to appeal and attract their target consumer segments. are now being followed by bricks-and-mortar and catalogue retailers like J. Indeed. 24 . Many major retail organizations and manufacturers have online retail stores. however. It is unlikely that these players will disappear from the market. Penney. J. up from 4. and Montgomery Ward dominated malls and downtowns all over America. which helped pioneer the retail e-commerce concept. Over the last decade or so. Department Stores A few years ago.5% in 2003). which are expanding retail e-commerce into new markets.6%. However. these department stores have suffered badly. Forrester Research Agency projects e-commerce revenue to rise to $123 billion in 2004. It has also come from financial burdens incurred by companies that acquired competing companies and grew too fast. an increase of some 28% over the previous year and for e-tailing to comprise a bigger slice of the overall retail pie (5. this is a result of changing shopping patterns and increased competition from discount stores.com. Crew. E-commerce The amount of retail business being conducted on the Internet is growing every year.C. Companies like Amazon. Macy’s.com and First and second.
anchored by at least one major department store. have changed the landscape of both the retail industry and America. but the same employment caveats apply. Many are so successful that department stores have started to emulate their buying. with more than a million. and it seems to 25 . Target and Kmart. marketing. these companies offer earn-and-learn experiences with vendors and distributors before they move onward and upward. as well as membership warehouses. 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. used to be the dominant retail presence lining the nation’s roads. They are able to buy bathroom tiles. Some are very high-end (Louis Vuitton) while others cater to the price-conscious masses (Old Navy). Tower Records and The Sports Authority). and merchandise display strategies. These. employees). Industry experts predict growth in this segment. the Body Shop. Office Depot. now the discount retailers and category killers are at the top of the heap. along with the category killers. and Victoria’s Secret. such as Costco. file cabinets. These stores concentrate on one type of merchandise and offer it in a manner that makes it special.Discount Stores These are giants such as Wal-Mart (the largest retailer in the world. The future of this category is better than that of many of the more general discounters. Where once mom-and-pop and department stores dominated retail. Category Killers These are the giant retailers that dominate one area of merchandise (e.. And where once shopping malls. now it is the behemoth Wal-Marts and Home Depots.g. Specialty Stores These include Crate & Barrel. particularly in home furnishings and home improvement.
such as Amazon. have also set up online stores so as not to miss out on the revenue opportunities that the Interned offers. strictly online purveyors with no bricksand. have generated enough business to cause top brick-and mortar competitors to come up with their own Internet sites. hugely successful in their own right. Promotion and responsibility come quickly to those willing to work hard. Traditional retailers like Wal-Mart and Starbucks. 26 . and in many of these stores the hand of bureaucracy is not heavy.attract many of the best and brightest in retail. E-tailers While most retailers have online storefronts.mortar counterparts are hoping to snare a percentage of the retail profit. Major players.com.
Usually. LifeStyle. furniture. commonly part of a retail chain. Discount stores prefer shopping centres that provide space at lower rents as they attract customers from other adjoining stores in the shopping centre. the 27 . hypermarkets. heavy advertising. Retail units. The leading fashion department stores in India are Ebony. department stores.Specialty stores stress on one or a limited number of complementary product categories and extend a high level of service to their customers. department stores are located within the planned shopping centres or traditional up market downtown centres.It is a large retail store organized into a number of departments. Specialty Stores: . All of them are multiproduct stores. Ebony has 7 stores. medicines) reigned supreme. In India.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. LifeStyle has 3 stores and there are 12 Pantaloon Family Stores. Pantaloon.Retailers offering a broad variety of merchandise mix. supermarkets. Shoppers’ Stop and Westside. low investments on fixtures. limited or no service and low prices are characterized by low margins. brand stores and discount stores characterized by the variety of merchandise mix offered by a respective retail format. The consumer can choose between different stores for different needs. offering a broad variety and depth of merchandise. Discount Stores: . limited support from sales people etc. Globus has 4 stores. There are many different retail stores in India—convenience stores. Globus. can be classified as follows: Department Stores: . on account of variety of merchandise mix.
000sq. Such specialized retail operations provide expertise economies of scale. 28 . Supermarkets and Hypermarkets: . low prices and comprehensive range of merchandise.ft. bargain and image to the particular stores. Hypermarkets are characterized by large store size. at these centres attract large crowds.traditionally independent retailers in the specialized market centres operate in a particular product category. low operating costs and margins. Superstores have a sales area of over 50.A hypermarket is a very large retail unit offering merchandise at low prices.
This makes the location decision even more critical.3. Choosing the wrong site can lead to poor results and in some cases insolvency and closure. most retailers prefer to own the property rather than avail of the desired property through lease or rental. which denotes the store and 29 . The terms ‘location’ and ‘site’ are often used interchangeably but there is a distinct difference between the two. e.g. RETAIL LOCATION STRATEGY Location is the most important ingredient for any business that relies on customers. ‘Location’ is a broader concept. Location is a major cost factor because it • Involves large capital investment • Affects transportation costs • Affects human resources cost. It is also one of the most difficult to plan for completely. Location decisions can be complex. costs can be quite high. 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.. In India. IMPORTANCE OF LOCATION DECISION The importance of the location decision is due to the following factors. 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.
its trading area from where a majority of its customers originate. a designer men’s store located in an up market shopping centre or a mall near posh residential colonies. For example. housed in an attractive building with adequate parking facilities. Location and site characteristics should interact in a positive and synergistic way with a store’s merchandising. 30 . operations and customer service characteristics. while a site refers to the specific building or part of the building where a store is located.
LEVELS OF LOCATION DECISION AND ITS DETERMINING FACTORS A retailer has to take the location decision. 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. • 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 . A city’s trading area would comprise its suburbs as well as neighboring cities and towns. the greater the potential of the city as a shopping location. A high growth n population in the trading area can also increase the retail potential. 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. 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. Cities like Mumbai and Delhi have a large trading area as they draw customers from far off cities and towns. • Population of population growth in the trading area: The larger the population of the trading area.
Moradabad has become an important retail location for brassware products while Mysore is famous for silk saris. 32 . size and quality of competition before selecting a city. • Development cost: The cost of land.• Total retail trade potential for different lines of trade: A city may b become specialized in certain lines of trade and attract customers from other cities. size and quality of competition: The retailer also considers the number. • Number. rental value and other related cost.
• Quantitative and qualitative nature of competitive stores: Retailers would like to evaluate the product lines carried by other sores. number of stores in the area. while small shopping centres located in colonies attract customers from immediate neighborhood. • Availability of access routes: The area or shopping centre should provide easy access routes. etc. before selecting the area. Colaba in Mumbai and Commercial Street in Bangalore attract customers from far off. • Direction of spread of the city: The retailer should consider the direction in which the city is developing while selection the location. 33 .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. 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. 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.
Where sales depend on nearby settlements.Selection of a Specific Site The choice of a specific site is particularly important. selecting the trading area is even more important than picking the specific site. 34 . The large stores in turn depend on attracting customers from the existing flow of traffic. non-anchor sores depend on customers coming to the market and the traffic generated by anchor stores. In central and secondary shopping centre.
it may have a choice ranging for. 35 . and often better visibility from the road. Neighborhood Stores Neighborhood stores are located in residential neighborhoods and serve a small locality. the store depends on its own pulling power and promotion to attract customers. For example. 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. it may locate in a business district where ther3 are a large number of retail establishments. This type of location has several advantages including no competition. such as a small grocery store or paan shop in a colony which attracts the customers staying close by. which pull customers from across the city. It may locate in an isolated place and pull the customer to the store on its own strength. If it decides to locate its store in a business district. Kemp Fort and LifeStyle stores are free-standing stores in Bangalore away from major market of the city. Now. the large shopping centres in the heart of the city or smaller shopping complexes in a suburb. Or. They sell convenience products like groceries. are also coming up in suburbs or away from major markets as free-standing locations. even the large organized sector stores. easy parking and lower property costs. low rent.TYPES OF RETAIL LOCATION A retailer has to choose among alternate types of retail locations available.
three to four medical stores in a cluster but no grocery store. Major regional 36 . we may find four to five shoe stores. designed and operated as a unit.Highway Stores Highway stores are located along highways or at the intersections of two highways and attract customers passing through these highways. services and prices. 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. They attract customers from across the city and suburbs. An unplanned district generally provides certain advantages like availability of a variety of goods. and pedestrian traffic. often they are anchored by two or more major department store. but also compete against each other for the same customers. • Planned Shopping Centres: A planned shopping centre consists of a group of architecturally owned or managed stores. • Regional Shopping Centres or Malls: Regional shopping centres or malls are the largest planned shopping centres. access to public transport. based on balanced tenancy and surrounded by parking facilities. and have high rents. have enclosed malls. Thus. 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. serve a large trading area. nearness to commercial and social facilities.
is usually a better site than the middle of a block.shopping centres or malls in India include Crossroads in Mumbai. Spencers Plaza n Chennai and Meropolitan Mall in Gurgaon. 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. hypermarkets. a retailer is presented with a wider choice of locations. customer profile and overall business model presents an enormous challenge. which offers two distinct traffic streams and a large window display area. and further development of traditional business districts and other unplanned shopping locations. The emergence of several 37 . the quality of the traffic is more important. emergence of free-standing department stores. Ansal Plaza in Delhi. The corner of an intersection. For stores dealing in shopping goods. etc. the quantity of traffic is most important.. Convenience goods are often purchased on impulse from easily accessible stores. SITE SELECTION ANALYSIS With the advent of new retail formats in India such as planned shopping centes and malls. Consideration of all the options keeping in view the product mix.
38 .apparel factory outlets within a short stretch on the Delhi-Jaipur highway. at Mahipalpur market in Delhi. is driven by this factor.
This supports their model of selling goods at very low margins. leasehold improvements. 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. The following factors have to be considered: parking availability.Cost Factor in Location Decision Location decision on cost considerations alone is risky. industrial parks. Competitor’s Location The type and number of competitors is another important factor. The presence of major retail centres. An excellent location may be next or close to parallel or complementary businesses that will help to attract customers. there are many periodic retail markets in Indian which operate on particular days of the week. instead they pay a small rental for their set-up in each market. 39 . one might reconsider that particular location. However. noting one-way streets. Space cost is a combination of rent or mortgage payment. insurance and all related costs having a place to conduct business operations. utilities. Ease of Traffic Flow and Accessibility These two factors are more important to some businesses than others. Traditionally. Studying the flow of traffic. street widths and parking lots. franchisee chains and department stores should be noted. Retailers selling convenience goods must attract business from the existing flow of traffic. general decoration. is hence important. security. Consider the nature of the business you are planning to open and your potential customers. Intense competition in the area shows that new businesses will have to divide the market with existing businesses. If one is not able to offer better quality and competitively priced products.
side of street. the ideal ratio for food stores is in the magnitude of 7-8 cars per 1. 40 . there are two considerations: parking capacity (the number of cars that can be parked).). width of street. It is important when a shopper is trying to find the sore for the first or second time. Visibility Visibility has a varied impact on a store’s sales potential. part of the block and neighbors. Discussions with business owners and officials in the area can also help.distance from residential areas or other business areas. Make use of information available through the Chamber of commerce. But consider this fact: one in five families’ moves every year. When evaluating the parking that exists at a retail site. Once the shopper has become a regular customer. visibility no longer matters. Local newspapers are a good source of information. and parking configuration (the way the parking lot is laid out. futuristic perspective. Parking and Major Thoroughfares Parking is another site characteristic that is especially a cause for concern in densely populated areas. etc. traffic congestion.000 square feet of food store. landscaping. the direction of the travel lanes and spaces. 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. There are several ratios that are generally used to determine the adequacy of a parking lot. Market Trends Evaluate the community from a broad. which means that some part of a community’s population may be ‘shopping’ in a new store.
coupled with the stringent provisions of the Rent Control Act. This also explains why the Raheja’s forayed into their retail ventureShoppers’ Stop.4. act as a dissuasive factor for many players to initiate operations in the main markets. The inconveniences caused by lack of parking place. There are. however. The opening up of the economy only fueled this globalization. certain bottlenecks as well. RETAILING IN INDIA ORIGIN IN INDIA Although retailing does not enjoy the status of an Industry. The next step was the commercial plazas. which became a part of the civic planning. toilets and maintenance. is grabbing attention. 41 . which comprised merely shops offering a variety of goods and services clubbed together. ushered in the entry big international brands opening their exclusive showrooms. the scarcity of space. The changing socio economic patterns coupled with the consumption increase led to the emergence of the convenience stores. the sheer size this behemoth will develop into. The origin of retail in India dates back to ancient times when the melas and mandis made their presence felt.
In 2000.000 crore by the year 2005—an annual increase of 20%. There are around 5 million retail outlets in India. an overwhelming proportion of the Rs 400. the global management consultancy AT Kearney put retail trade at Rs 400. There are also an unaccounted number of low cost Kiosks (tea stalls. ft.000 crore segment of the market is organized. However. worth approximately Rs 7.7% in 2001. 42 . In India. Retailing is India’s largest industry in terms of contribution to GDP and constitutes 13% of the GDP (Gross Domestic Product). The turnover from private labels by major retail chains was estimated at around Rs 1200 million in 2000. with an average selling space of 29. in 2001.5billion. per outlet. The trend to market private labels by a specific retail store is catching on in India as it helps to improve margins.. There is no integrated supply chain management outlook in the Indian traditional retail industry. In fact. According to a survey by AT Kearney. The share was 62. Food sales constitute a high proportion of the total retail sales. mt. the non-food retailing sector registered faster year-on-year growth than the food sales sector. which is expected to increase to Rs 800.000 crore.039.000 crore retail markets are unorganized. only a Rs 20.RETAIL IN INDIA The retail industry in India is largely unorganized and predominantly consists of small.4 sq. snack centres. while non-food sales were worth Rs4189. barber shops) and pushcarts mobile vendors. the per capita retailing space is about 2 sq. independent. which is quite low in comparison to the developed economies. Total retail sales area in India was estimated at 328 million sq. mt. owner-managed shops.2 billion.
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. peeth and melas that come up at the same location at regular time intervals. At 44 . there are periodic or temporary markets. More and more women are taking up corporate jobs.7 billion. provision stores. Apart from this. especially in the metropolitan and large cities in India. Therefore. paan shops and ration shops are the most popular vehicles of retailing. The McKinsey report predicts that FDI will help the retail businesses to grow to US $ 460-470 billion by 2010. In urban India. organized retail trade in India was worth Rs 11. families are experiencing growth in income but dearth of time.EMERGENCE OF ORGANIZED RETAILING Organized retailing in India represents a small fraction of the total retail market. There is also a strong trend in favour of one-stop shops like supermarkets and department stores. Here. However. In 2001. The modern retail formats are showing robust growth as several retail chains have established a base in metropolitan cities.6 million outlets cater to more than 700 million inhabitants of rural India. Rural India continues to be serviced by small retail outlets. Only 3. government has discouraged FDI in the retail sector. such as haats. 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. lead to the closure of many small trading businesses and result in largescale unemployment. especially in south India and are spreading all over India at a rapid pace.228. instant. ready-to-eat food has been on the rise. 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.
Global players in the retail segment have been entering the market for a while now. cash and carry operations (Giant) and licensing (Marks & Spencer’s). Pizza Hut). The organized retailer should be able to. such as joint ventures where Indian partner is an export house (Total Health Care). franchising/local manufacturing/sourcing from small-scale sector (McDonald’s. 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.present. through diversified risks and volume sales command huge concessions on prices from the manufacturers. He should then be in a position to allow a trickle down of this advantage to consumers out of his saved costs. foreign retailers can enter the retailing sector only through restricted modes. Players that entered before the easing of restrictions on FDI in retail had to come through different modes. 45 .
At present (September 23. and cater to the purchase need of its pole. The 12 million retail outlets in India are the highest in the world. Delhi has Connaught Place. each city developed its own identity and shopping cluster. for instance in Pune there is MG Road.CURRENT SCENARIO The Indian population is whooping 1 billion with 75% of the people living in villages and small towns. It is interesting to note. organized parking lots and other public amenities.7%. To cater to this. The Core and the Lower middle have increased their share in the Growth. In India we have 96 malls. Droves of middle-class Indians have broken off their love of traditional stand-alone shops that have no ACs. And by year end the count will shoot up to 158 malls.6 million sq ft. 2005). covering an area of 21. The Indian consumer’s shopping needs are and traditionally have been fulfilled by Kirana sores (corner stores). Kiosks. Bangalore has Brigade Road and Commercial Street. Karol Bagh and South Extension. weekly bazaars and high-street shops for consumer durables and luxury goods. 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. with the spending increasing at an average of 11% per annum. that the Urban Population although just 25% of the total. according to a study by fashion magazine Image. India will have 358 shopping malls by 2007. The chief driver of growth in the retail sector has been the consumer. street vendors. is an astounding 250 million in size and is growing at a healthy rate of 7% per annum. It will cover 34 million sq ft area. 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. It is only natural that the agricultural sector is the biggest employer with its contribution to GDP pegged at 26. 46 .
West region has 33% of India’s retail share.4 million sq ft.8 million sq ft of mall space by 2007.5 million sq ft. East region has 10% of India’s retail share. Gurgoan saw the largest development in terms of retail outlet. Ahmedabad about 3. Apna Bazar. North region has 39% of India’s retail share. For example. Ludhiana to account for 2. Government and co-operative sector is also making their steps in retailing. • • • • • • • • • • Smaller cities will have about 12. over the next 2-3 years. 47 .Currently estimated at $205 billion to grow to $400-500 million. Kendriya Bhandar. Super Bazar etc. South region has 18% of India’s retail share. Delhi and Mumbai now have maximum number of shopping centres. Mother Dairy.
‘Marketers have to sell a new product several times. and in the value chain in particular.DRIVERS OF CHANGE IN RETAILING • Changing demographics and industry structure • Expanding computer technology • Emphasis on lower costs and prices • Emphasis on convenience and service • Focus on productivity • Added experimentation • Continuing growth of non-store retailing. and market profile in order to ensure a competitive edge. 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. 48 . The role of retailers in the present competitive environment has gained attention from manufacturers because external parties such as market intermediaries and supplying partners are becoming increasingly powerful. In today’s competitive environment retailers have redefined their role in general. first within the company. then to the retailer and finally to the user of the product. Retailers act as gatekeepers who decide on which new products should find their way to the shelves of their stores. they have a strong say in the success of the product or service launched by a business firm. It is necessary for marketers of consumer products to identify the need and motivations of their partners in the marketing channel. This is especially true in the case or new products. As a result. The increasing numbers of product categories followed by multiple brands in each category complicate decision-making for both manufacturers and market intermediaries. A product manager of household appliances claimed.
Retailing is a dynamic industry---constantly changing due to shifts in the needs of the consumers and the growth of technology. 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. The retailer may have to resort to substantial price reductions in order to get rid of the unsold stock. The retailer may have to resort to substantial price reductions in order to get rid of the unsold stock. financing pacts and widescale marketing plans. The larger retailers have managed to set up huge supply/distribution chains. McDonald’s. it will not result in profit. governed by their individual sales philosophy. If such space is occupied by merchandise that is not moving. such as Wal-Mart. negotiating with suppliers. a retailer is required to make a conscious effort to position himself 49 . Selecting target markets. Therefore. • Selling space available is relatively fixed and must return maximum profits. Sears. liberalization and highly aware customers. Marks and Spencer. training salespeople---these are just a few of the many functions that a retail manager has to perform on a perpetual basis. Retail formats and companies that were unknown three decades ago are now major forces in the economy. Retailers undertake risk in selecting a portfolio of products or brands to offer to their customers. 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. determining what merchandise and services to offer. 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. it will not result in profit. inventory management systems.Retailers want of optimize sales within the limited shelf space. In the backdrop of globalization. If such space is occupied by merchandise that is not moving.
This is determined to a great extent by the retail mix strategy followed by acompany to sell its products.distinctively to face the competition. 50 .
Trent and the new entrants penetrating the market soon will include Reliance Retail Ltd.. Subhiksha. Music World Entertainment Ltd. etc. Wal-Mart Stores. Big Bazaar. Liberty shoes Ltd. Carrefour. Tesco...MAJOR RETAILER SPACE HOLDERS IN INDIA Bata India Ltd. Boots Group.. Ltd. Pantaloon Retail India Ltd.. Crossword. Titan Industries. 51 . Ebony Retail Holdings Ltd. Food Bazaar. Globus Stores Pvt. Shoppers Stop.
Problems associated with working Capital funding from lending Institutions. Some of the major factors hindering the growth of this sector are as follows: • • • • • The non-industry structure and status The lack of adequate infrastructure FDI restrictions in this sector The huge investments required in expanding their markets.RETAIL VIABILITY As per the CII McKinsey report. by 2010 the retail sector is expected to be US $ 300 Billion industry. 52 . based on a GDP growth rate of 6-7% per annum.
SWOT OF THE MARKET 53 .5.
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. ft. • • • Real Estate Developers Corporate Houses Manufacturers/Exporters WEAKNESSES 1) Shortage of quality retail spaces at affordable rates.31 billion. 8) Most of the entrants to organized retail come from 3 main categories. 2) 2nd largest contributor to GDP after agriculture at 20%.STRENGTH 1) Organized retailing at US$ 3. and have ventured into retail as their business extension. 6) Footfalls not a clear indicator of sales as actual consumers lower in number. retail space available. growing at 8%. 7) Paradigm shift in shopping experience for consumers pulling in more people. 3) Pattern of consumption changing along with shopping trends. 5) Consumer spending increasing at 11% annually. 4) A Growing population will translate to move consumers. 5) Retail revolution restricted to 250 million people due to monolithic urban-rural divide. 7) Lack of huge investments for expansion 54 . 6) Almost 25 million sq.
4) Spends moving towards lifestyle products and esteem enhancing products. 6) Unavailability of qualified personnel to support exponential growth in retail. 3) Social factors like dual household income has enhanced spending power. 55 . 4) Archaic labour laws are a hindrance to providing 24/7 shopping experience 5) Personalized service offered by Mom-&-Pop stores.OPPORTUNITIES 1) Increasing urban population-more participants in retail revolution. 5) Availability of old industrial lands-prime real estate locked in sick industrial units. 7) Differentiate taxation laws hindering expansion. 7) Increase in use of credit cards. 6) Average grocery spends at 42% of monthly spends-presents a huge opportunity. 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. 2) Increase in consuming middle class population.
such as hypermarkets. category killers and discount chains. unorganized small outlets largely control the sector. 50% of the Indian population is under the age of 25. There is an increasing need of better apparels. However.6. 56 . The population of India is young. Hence there is tremendous potential for the organized sector in various formats. consumer durables and books & music sectors are the major retail sectors. specialty stores. as the focus of the customer has changed. The upper and middle. mobile phones and consumer durables. supermarkets. clothing. cars. People are moving towards luxury and want to experiment with fashion and technology.class population of today needs a feel good experience even if they have to spend a little more for that. There has been a transition from price consideration to quality and design. INDIAN CONSUMERISM The lifestyle and profile of the Indian consumer is going through a rapid transformation. energetic and full of enthusiasm. The food & grocery.
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.
7. DIVISION OF RETAILERS IN INDIA
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.
Given the above. the more expensive it will be. Another factor in the favor of the unorganized retail in rural areas is our mindset. While this may happen in the short run. 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. Organized retailing also has to cope with the middle class/rural psychology that the bigger and brighter a Sales outlet is. Tier 1 and Tier 2 towns by the unorganized retail staging strikes against the majors and trying to influence Government policy toward the retail majors and making it difficult for them to operate. who having been exposed to top of line retail outlets in the foreign countries.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. the majors will step and service this need. will sooner or later generate a demand for the same facility. At this juncture. In UP. it is too early to predict the erosion of the mom and pop stores in India. purchasing power is location-specific. vegetables generally cost more in Mumbai than in Chennai. In other words. The rising disposable income of the techies today. 61 . 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 fear has manifested itself in Metros. in the long run the majors will come back and cannot be dislodged. This is also proved by countries where Wal-Mart the world’s biggest retailer operates. the Government has banned organized retail major based on the demands of the unorganized sector. Consumption habits of households are therefore better determinants of consumer market size than income distribution. The customer loyalty today is towards the price. 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. For example. 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.
62 .The smaller stores have a peaceful coexistence in these countries with the number one company in the fortune 500 list.
These are easily accessible and provide services like free home delivery and goods at credit. which is not possible with hypermarkets and supermarkets. The tough competition for convenience stores are coming from organized retail stores dealing in food items. A good example of such would be Convenio. Basically they provide high service with low prices. The retail stores in India are essentially dominated by the unorganized sector or traditional stores. In fact the traditional stores have taken up 98 percent of the Indian retail market. etc. Buying from Malls. The traditional family run convenience stores can take pride in the fact that the Kirana is the most common outlet forms for the consumers. These stores are found in both residential as well as commercial markets. provide a different environment where one can pick and choose from a variety of products.TRADITIONAL v/s MODERN FORMAT RETAILERS The retail boom will face a strong competition from the 12 million mom-and-pop stores. has been inviting such people to join in its Dairy business as franchisees. Supermarkets and Department stores like Subhiksha. Reliance Retail Ltd. The 63 . the small shopkeepers fear losing their business. 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. Owing to the entry of such big players. Now stores run by families are primarily food based and the set up is as Kirana or the 'corner grocer' stores. Traditional family run convenience stores are too well established in India than to be wiped out and besides there is uniqueness in the traditional items that represent the subcontinent. If the stores are not food based then the type of retail items available are local in nature. Marks & Spencers.
food products of traditional family run convenience stores are comprised of branded as well as non-branded items. 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. The convenience factor in terms of items. The future of such stores as they face competition from organized sector would depend on the following particulars: • • • • • • Place and capacity Diligent area coverage Disciplined work schedule Managing turnover Revenue from assets Customer service and satisfaction The traditional family run convenience stores serves the purpose of the housewives who definitely wants to avoid traveling long distances to purchase daily needs.
The company plans to diversify into the business of discounting in a big way. 7 Big Bazaar discount hypermarkets. ft. It began its retailing operations in India way back in 1987. 8.As such traditional family run convenience stores are here to stay and cannot be oversized by the organized retail sector besides. which is targeted at the growing middle class segment. Pantaloon Retail India Limited is the flagship company of the Pantaloon group promoted by Mr. 14 Pantaloon Family Stores. Bangalore.300 sq. This segment is very price conscious and always looks out for value for money. 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 manufactures and sells ready-made garments through its own retail outlets and two discounting stores.01. 65 . The company is headquartered in Mumbai with zonal offices at Kolkata. Ahmedabad. 6 Food Bazaar Stores with over 6. The company plans to double its retail space in the next couple of years. Mumbai. focusing on ‘value for money’ segment. Pantaloon plans to target the upper middle and the middle class segment. Kishore Biyani. It has been one of the pioneers in organized retailing in India. Kanpur. It has 4 kinds of stores. 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. which forms the large chunk of Indian population. Thane Pune. it represents the variety of India. Pantaloon has come up with an excellent revenue model. Bangalore and Gurgaon (Delhi). Currently. Bagpur. Chennai and Gugaon (Delhi). Hyderabad.5 lakh sq ft retail space across Kolkata. CASE STUDY I.
which focus on high net-worth of individuals. This is totally in contrast to the other organized retail players. John Miller and Bare. which targets the large and growing upper-middle and middle class of Indian society. thus reducing the breakeven level of sales. Higher percentage of ‘own brand’ sales improves margins. The brands include Pantaloon. Big Bazaar has diversified from apparels to household items in its discount stores. 66 . Big Bazaar has strong own brand names in its portfolio across product categories.Pantaloon successfully launched its discount store chain. This has enabled them to enlarge their basket of offerings.
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. “Our stores have existed alongside neighbourhood shops and kirana stores. the small convenience stores in the region have not witnessed a decline in their revenues.” said Kumar. The study also found out that despite the presence of large corporate retailers in southern India for much longer periods. Kumar added. credit from commercial banks is a constraint for unorganised retailers who want to expand. Leading south Indian retail chain — RPG group’s Spencer’s Retail limited — has been operating in southern India for over a decade. and we have never faced problems with any traders group or association. with 40 stores in Chennai alone. “In such a scenario. 2007 at 0038 hrs IST NEW DELHI. 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.II. On the contrary. traditional format retailers are not only trying to hold their fort but also expand and upgrade. SEPTEMBER 13: Organised retail does not pose a threat to a large number of neighbourhood ‘mom n pop’ stores. “Modernisation of retail will not be at the 67 . said Icrier director and chief executive Rajiv Kumar.” said Spencer’s Retail Ltd vicepresident Satyaki Ghosh. wherever large malls or supermarkets have opened. The issue is how credit can be made available at reasonable rates to these retailers so that they can compete more efficiently. BIG RETAIL WON’T HURT KIRANA SHOPS: Study Smita Aggarwal Indian Express Posted: Sep 14.
Icrier was given the task of studying the impact of the entry of organised retail on small neighbourhood and kirana stores by the Government in the wake of continued traders’ and farmers’ protests. 68 . Categorically denying the levying of additional cess or any tax on modern retailers.expense of labour. Kumar said that the study does not recommend any such initiative. The preliminary findings point out that there is no employment loss in unorganised sector.” said Kumar. The committee constituted to frame a comprehensive retail policy by the Government will consider the findings of the Icrier study.
while enjoying the experience they seem to buy high ticket and items of conspicuous consumption most frequently. When shopping in malls. people value the experience related to the trip the most and return most frequently for the same. 69 . CONCLUSION The convenience and personalized service offered by the unorganized sector holds its future in good stead for the future. 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. Besides. The target audience for both the organized and unorganized retail formats remains relatively the same. Organized retail of late has seen a tremendous boom and is attracting more people to the malls.9.
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