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BY-

Saurabh Gadkari
Dhundiraj Gawade DUAL -D
Unmesh Rajhans
Ketan Deshmukh

BALAJI INSTITUTE OF TELECOM AND MANAGEMENT


 Retailing consists of the sale of
goods or merchandise from a fixed
location, such as a department
store or kiosk, or by post, in small or
individual lots for direct
consumption by the purchaser
 Retail management can refer to the
way business is conducted in the
retail sector : the very stage in
which goods and services are
delivered to their end users.
 A retail management is about
departmental store retailing and
shopping mall retailing business.
 Traditionally retailing in India can be traced to
-The emergence of the neighborhood ‘Kirana’ stores catering to the
convenience of the consumers

 Textiles sector with companies like Bombay Dyeing, Raymond's, S


Kumar's and Grasim first saw the emergence of retail chains
 Later Titan successfully created an organized retailing concept and
established a series of showrooms for its premium watches
 The latter half of the 1990s saw a fresh wave of entrants with a shift
from Manufactures to Pure Retailers.
 For e.g. Food World, Subhiksha in food and FMCG; Planet M and
Music World in music; Crossword and Fountainhead in books.
 Post 1995 onwards saw an emergence of shopping centers,
 mainly in urban areas, with facilities like car parking
 targeted to provide a complete destination experience for all segments
of society
 Emergence of hyper and super markets trying to provide customer with 3
V’s - Value, Variety and Volume
 Expanding target consumer segment: The Sachet revolution - example of
reaching to the bottom of the pyramid.
 At year end of 2000 the size of the Indian organized retail industry is
estimated at Rs. 13,000 crore
Traditionally three factors have plagued Recent changes:
the retail industry:

Experimentation with formats: Retailing in


India is evolving and a series of experiments
Unorganized : Vast majority of the across the country with new formats being
twelve million stores are small "father tested out.
and son" outlets
Store design : Biggest challenge for
organized retailing to create a “customer-
Fragmented : Mostly small individually pull” environment that increases the amount
owned businesses, average size of of impulse shopping. Research shows that
outlet equals 50 s.q. ft. the chances of senses dictating sales are
upto 10-15%. Retail chains like Music World,
Baristas, Pyramid and Globus are laying
major emphasis & investing heavily in store
Rural bias: Nearly two thirds of the design.
stores are located in rural areas. Rural
retail industry has typically two forms: Emergence of discount stores: Stores trying
"Haats" and “Melas". to emulate the model of Wal-Mart. Ex. Big
Bazaar, Bombay Bazaar, RPGs.
Haats are the weekly markets : serve
groups of 10-50 villages and sell day-to-
day necessities. Unorganized retailing is getting organized:
To meet the challenges of organized retailing
Melas are larger in size and more such as large cineplexes, and malls, which
sophisticated in terms of the goods are backed by the corporate house such as
sold (like TVs) 'PVR‘ the unorganized sector is getting
organized. Bombay Bazaar and Efoodmart
formed which are aggregations of Kiranas.
 Multiple drivers leading to a consumption boom:
 Favorable demographics
 Growth in income
 Increasing population of women
 Raising aspirations : Value added goods sales

 Food and apparel retailing key drivers of growth


 Organized retailing in India has been largely an urban phenomenon with
affluent classes and growing number of double-income households.
 More successful in cities in the south and west of India. Reasons range
from differences in consumer buying behavior to cost of real estate and
taxation laws.
 Rural markets emerging as a huge opportunity for retailers reflected in
the share of the rural market across most categories of consumption
 ITC is experimenting with retailing through its e-Choupal and Choupal
Sagar – rural hypermarkets.
 HUL is using its Project Shakti initiative – leveraging women self-help
groups – to explore the rural market.
 Mahamaza is leveraging technology and network marketing concepts
to act as an aggregator and serve the rural markets.
 IT is a tool that has been used by retailers ranging from Amazon.com to
eBay to radically change buying behavior across the globe.
 ‘e-tailing’ slowly making its presence felt.
 Companies using their own web portal or tie-sups with horizontal players
like Rediff.com and Indiatimes.com to offer products on the web.
 India is rated the fifth most Retail Sales in India
attractive emerging retail
market: a potential goldmine.
 Estimated to be US$ 200 billion,
of which organized retailing (i.e.
modern trade) makes up 3
percent or US$ 6.4 billion
 As per a report by KPMG the
annual growth of department
stores is estimated at 24%
 Ranked second in a Global Retail
Development Index of 30
developing countries drawn up
by AT Kearney.
How to increase the brands share of usage within a household….

SINKS
JOINT FAMILY NUCLEAR FAMILY
DINKS

SINGLES

Their would be Customers of this Customers of the


a decline. Decade Next decade

We are strengthening our positioning of the “Complete Department Store” to


serve the whole household.
For this Store brand needs to be developed like a FMCG brand which could be
used by almost every family member, more and more times.
The teenagers would be the next big customers.
Entertainment

Trends in Convenience
Retailing and Efficiency

Customer Management
 Indian retail is fragmented with over 12 million outlets operating in
the country. This is in comparison to 0.9 million outlets in USA,
catering to more than 13 times of the total retail market size as
compared to India
 India has the highest number of outlets per capita in the world -
widely spread retail network but with the lowest per capita retail
space (@ 2 sq. ft. per person)
 Annual turnover of Wal-Mart (Sales in 2001 were $219 billion) is
higher than the size of Indian retail industry. Almost 100 times more
than the turnover of HUL (India's largest FMCG company).
 Wal-Mart - over 4,800 stores (over 47 million square meters) where
as none of India's large format store (Shoppers' Stop, Westside,
Lifestyle) can compare.
 The sales per hour of $22 million are incomparable to any retailer in the
world. Number of employees in Wal-Mart are about 1.3 million where as
the entire Indian retail industry employs about three million people.
 Developed economies like the U.S. employ between 10 and 11 percent of
their workforce in retailing (against 7 percent employed in India today).
 60% of retailers in India feel that the multiple format approach will be
successful here whereas in US 34 of the fastest-growing 50 retailers have
just one format
 Inventory turns ratio: measures efficiency of operations. The U.S. retail
sector has an average inventory turns ratio of about 18. Many Indian
retailers KPMG surveyed have inventory turns levels between 4 and 10.
 Global best-practice retailers can achieve more than 95 percent
availability of all SKUs on the retail shelves (translating into a stock-out
level of less than 5 %).The stock-out levels among Indian retailers
surveyed ranged from 5 to 15 percent.
 Greater per capita income
 Increase in disposable income of middle class households

 20.9%* growth in real disposable income in ’99-’03.

 Growing high and middle income population


 Growing at a pace of over 10%* per annum over last decade

 Affordability growth
 Falling interest rates

 Easier consumer credit

 Greater variety and quality at all price points


 Growth determining factors
 Government Policy

 Infrastructure development

 GDP growth

 Employment generation and job creation

 In several new sunrise industries

 Implies greater purchasing power


 The urban consumer
 Getting exposed to international lifestyles

 Inclined to acquiring asset

 More discerning and demanding than ever

 No longer need-based shopping


 Shopping is a family experience

 Changing Mindset
 Increasing tendency to spend

 Post Liberalization children coming of age

 100 mn 17-21 year olds*. Tend to spend freely.

 Greater levels of education


 Investment in technology
 Cold storage chains solve the perennial problem of
wastage
 Greater investment in the food processing sector
technology
Benefits of  Better operations in production cycle and distribution
FDI
 Better lifestyle
 Greater level of wages paid by international players
usually
 More product variety
 Newer product categories
 Economies of scale to help lower consumer price
 Increased purchasing capacity of consumerszz
Convenience
Cash and carry
store

Department
Discount store
store

Super market Hyper market


Exclusive brand
Specialty store
outlet

Multi-brand
Category killers
outlet

kiosks
India’s number of Domestic grocery chains and Early Foreign Entrants:
Price
Place (store location) Product (merchandise)
Costs
Target market Product development
Profitability
Channel structure Product management
Value for money
Channel management Product features and benefits
Competitiveness
Retailer image Branding
Incentives
Retail logistics Packaging
Quality
Retail distribution After-sales services
Status

Promotion People element


Process element
Developing promotional mixes Staff capability
Order processing
Advertising management Efficiency
Database management
Sales promotion Availability
Service delivery
Sales management Effectiveness
Queuing system
Public relations Customer interaction
Standardisation
Direct marketing Internal marketing
Service Assort- Gross
Type of Retailer Price
Level ment Margin
Department Store Mod Hi-High Broad Mod-High Mod High
Specialty Store High Narrow Mod-High High
Supermarket Low Broad Moderate Low
Convenience Store Low Med-Narrow Mod High Mod High
Drugstore Low-Mod Medium Moderate Low
Full-line Discounter Mod-Low Med-Broad Mod Low Mod Low
Specialty Discounter Mod-Low Med-Broad Mod Lo-low Mod Low
Warehouse Clubs Low Broad Low-lower Low
Off-price Retailer Low Med-Narrow Low Low
Restaurant Low-High Med-Narrow Low-High Low-High
Controllable Uncontrollable
Variables: Variables:

•Store location •Consumers


•Managing business •Competition
•Merchandise Retail •Technology
management Strategy •Economic
and pricing conditions
•Communicating •Seasonality
with customer •Legal restrictions
Identify the most attractive
markets in which to operate

Identify the most attractive


sites that are available within
each market

Select the best site(s)


available
 Retail Gravity Theory
 Saturation Theory
 Buying Power Index
 Suggests that there are underlying consistencies in shopping behavior that yield to
mathematical analysis and prediction based on the notion or concept of gravity.

 Reilly’s Law of Retail Gravitation based on Newtonian gravitational principles,


explains how large urbanized areas attract customers from smaller rural
communities.

 where Dab is the breaking point from city A, d


measured in miles along the road to city B;
Dab =
 d is the distance between city A and city B
Pb
along the major highway;
1+
 Pa is the population of city A; and Pa
 Pb is the population of city B.
 Examines how the demand for goods and services of a potential trading
area is being served by current retail establishments in comparison with
other potential markets.

 Retail Store Saturation is a condition where there is just enough store


facilities for a given type of store to efficiently and satisfactorily serve the
population and yield a fair profit to the owners.

 Under stored is a condition in a community where the number of stores in


relation to households is relatively low so that engaging in retailing is an
attractive economic endeavor.

 Overstored is a condition in a community where the number of stores in


relation to households is so large that engaging in retailing is usually
unprofitable or marginally profitable.
 Index of Retail Saturation (IRS) is the ratio of demand for a product
(households in the geographic area multiplied by annual retail
expenditures for a particular line of trade per household) divided by
available supply (the square footage of retail facilities of a particular line
of trade in a geographic area).

IRS = (H X RE)/RF

 Where IRS is the index of retail saturation for and area;


 H is the number of households in the area;
 RE is the annual retail expenditures for a particular line of trade per
household in the area;
 RF is the square footage of retail facilities of a particular line of trade in
the area (including square footage of the proposed store).
 Buying Power Index (BPI) is an indicator of a market’s overall retail
potential and is composed of the weighted measures of effective buying
income (personal income, including all nontax payments such as social
security, minus all taxes), retail sales, and population size.

BPI = 0.5(the area’s percentage of effective buying income)


+ 0.3(the area’s percentage of retail sales)
+ 0.2(the area’s percentage of population)
It is not possible for Indian Manufacturers to price their products separately for different
states which have different tax rates. Consequently, they have to manufacture the product
with one single rate which is applicable all over the country. The manufacturers usually
prints the price prevailing in the state with the highest tax rate. The problem with this is that
it means consumers in states with lower tax rates will potentially have to pay a price which
they are not intended to pay.
Sales Conversion
Density Rate How do you monitor
your retail business
performance?..
Inventory following are the
number of metrics
Turnover Wastage which measure the
ratio financial and
operational aspects of
a Retail Business.

Shrinkage
There are three scenarios
of power play between the key
players in any Retail Economy. In
all scenarios the unorganized retail
sector looks like the one with the
least power.
The green box has the future Wal-
Mart of India..

The light green box - players who


grow large without being efficient and
will be prime targets for takeovers by
the leaders in the next five years.

The bright yellow box - Laggers who


are playing a wait and watch policy…
the niche players who want to play
only in specialized formats or
categories and the regional players.
Those that are efficient may remain in
this category while others who are
not will fall into the exiters box .

The light yellow box contains exiters


who will potentially exit the retail race
over the next five years.
Some Retail Promotional Tactics:

1. Investment buying
2. False Prices
3. New Product Charges
4. Shelf Space charges

. Almost all Retail promotions


are Supplier funded. The fact
is if the promotions are not
supplier funded , the retailer
would end up incurring loses
Broad objective being
 Bring traffic into the store
 Move the traffic to various selling areas of the store
 Entice customers into purchasing.

Advertising; sales
promotion; store
Personal selling
Paid atmosphere; visual
merchandising

Publicity W.O.M
Unpaid

Impersonal Personal
Shelf space is a scarce
resource for a retailer. Shelf
space allocation involves the
distribution of appropriate
amount of shelf space
among different products,
together with their locations,
in a supermarket in such a
way that the total profits
and/or customer satisfaction
are maximized.
 estimated India’s total retail market at US$ 202.6 billion which is
expected to grow at a compounded 30 per cent over the next five
years.
 With the organized retail segment growing at the rate of 25-30 per
cent per annum, revenues from the sector are expected to triple
from the current US$ 7.7 billion to US$ 24 billion by 2010.
 The share of modern retail is likely to grow from its current 2 per
cent to 15-20 percent over the next decade
 Over next two years India will see several Indian retail businesses
attaining a critical mass as growth in the industry picks up
momentum driven by two key factors:
 Availability of quality real estate and mall management
practices
 Consumer preference for shopping in new environments
 Wal-Mart : huge plans for India.
 New York-based high-end fashion retailer Saks Fifth Avenue has tied up
with realty major DLF Properties to set up shop in a mall in New Delhi.
 Tommy Hilfiger, retailer of apparels, expects to open one store each in
Delhi, Ahmadabad, Lucknow and Bangalore in the next four months.
 Lack of differentiation among the malls that are coming up. One
option may be to look at specialization.
 Poor inventory turns and stock availability measures - retailers
clearly need to augment their operations.
 Operations of retailers and suppliers are not integrated. Efficient
replenishment practices practiced in the Indian auto and auto-
component industry can be leveraged to implement efficient supply
chain management techniques.
 Supplier maturity, in terms of adherence to delivery schedules and
delivering the quantity ordered, is an issue
 Sales tax laws - lead to retailers having state-level procurement and
storage leads to Indian retailers having higher inventories. VAT has helped
alleviate this a bit.
 Increased adoption of IT and shrinkage management will be a critical
area.
 Supply chain and customer relations followed by merchandising, facilities
management and vendor development are areas which have significant
gaps and proactive training is a key imperative for overcoming these.
Thank you