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Amita Charan* Asst. Prof. Commerce, University of Delhi Abstract : Indian retail industry is generating above 10% of the Gross Domestic Production ($800 Billion) at present, Indian retail industry is the largest source of employment, after agriculture, in the country. Enormous opportunities exist in this sector. Driven by the changing lifestyles and strong income growth, retail industry in India is expected to record an impressive growth in the next five years. Growth in this sector will be further supported by the favorable demographic patterns, cultural diversities, and income disparity. Growing consumer credit, ease in financing and spending habit will also help boost consumer demand. As shopping malls are becoming increasingly common in metropolitan cities, and the announced development plans project at least 150 new shopping malls by 2008. Number of departmental stores is growing at an annual 24%. Supermarkets have been taking a growing share of general food and grocery trade during the past two decades. RNCOS has recently published a market research report named "India Retail Sector Analysis (2006-2007)". According to report, RETAIL SECTOR is broadly divided in to organized and unorganized retail sectors, total market for the Indian retail industry was worth Rs. 10 Trillion in 2005 Nation witnessing economic acceleration since 2004, Real GDP growth estimated at 8.5% for the year 2007 – 2008 as Indian economy flourishing with rapid industrialization and encouraging development of the service sector. The faster growth of the service sector has generated considerable employment opportunities. Entry of MNCs and private players in most industries except few areas Indian economy is generating several employment opportunities. Some signs of overheating stock market, skyrocketing oil prices, changing repo rates, IT slowdown, higher inflation and liquidity tightening led hardening of interest rates. Comfortable foreign exchange Reserves following the integration of world economies and influx of foreign capital. The Monetary, fiscal, and trade policies designed and structured to propel economic expansion, with periodic government interventions to arrest volatility and speculation. In a recent study it was estimated Indian are second largest internet users after china. Customer is technology driven and want to buy quality product, proper demo, value for money, after sale service in a shorter time therefore ecommerce is expanding. Shopping in metro is not as easy as in small town. Marketing, CRM, Feedback, Innovations and Customization are also become easier because of ecommerce. Thanks to e-commerce shopping hassles are eliminated and on line shopping has emerged. Though internet has brought the convenience of shopping to the doorstep, marketers should innovate ideas by which they can sell their products online and devise strategies for customer satisfaction. There is no secret about selling online. It’s a simple 3 step formula : lure more users to your website, took them on to your site and see profits soar. This was one of the few online experiments that future bazaar the online arm of future group tied. They set up tiny kiosks in key areas in various towns like Mumbai, Delhi, Hyderabad. These kiosks had catalogues of merchandise that sell on their websites. One had to simply walk into the kiosk, look at these catalogues and approach sales people to place an order. These sales people in turn would log on to the future
bazaar site and place an order for the items which would be delivered to the customers at home.
TO retail or to e-tail? That sounds like a Shakespearean dilemma. You ask any retailer, chances are that he will say both. It all began a couple of years ago. Retailing as an attractive business was slowly emerging out of the shadows. Retailing, today is one of the largest sectors in the global economy. It is going through a transition phase not only in India but the world over. Gone are the days when retailing was considered only as a selling point for grocery and personal care products. Retailing - no marks for guessing this is the most active and attractive sector of the last decade in India. While the retailing industry itself has been present through history in our country, it is only the recent past that has witnessed so much dynamism. It's the latest bandwagon that has witnessed hordes of players leaping onto it. While international retail store chains have caught the fancy of many travelers abroad, the action was missing from the Indian business scene, at least till recently. The emergence of retailing in India has more to do with the increasing purchasing power of buyers, especially post- liberalization, increase in product variety, and the increasing economies of scale, with the aid of modern supply and distribution management solutions. A definition of retailing is essential in order to be in a position to assess the impact of retailing and its future potential. The current retailing revolution has been provided an impetus from multiple sources. These 'revolutionaries' include many conventional stores upgrading themselves to modern retailing, companies in competitive environments entering the market directly to ensure exclusive visibility for their products and professional chain stores coming up to meet the need of the manufacturers who do not fall into either of the above categories. Attractiveness, accessibility and affordability seem to be the key offerings of the retailing chain The emerging sectors: But the international formats of retailing have now found its ways the corner grocery store was the only choice available to the consumer, especially in the urban areas. This is slowly giving way to international formats of retailing. The traditional fcr1 and grocery segment has seen the emergence of supermarkets/grocery chains (Food World, Nilgiris, Bombay Bazaar, Apna Bazaar), convenience stores (ConveniO, HP Speedmart) and fast-food chains (McDonalds, Dominos). The emergence of new sectors has been accompanied by changes in existing formats as well as the beginning of new formats: • Hypermarket: • Large supermarkets, typically 3,500-5,000 sq. ft. • Mini supermarkets, typically 1,000-2,000 sq. ft. • Convenience stores, typically 750-1 ,000sq. ft. • Discount/shopping list grocer The traditional grocers, by introducing self-service formats as well as value-added services such as credit and home delivery, have tried to redefine themselves. However, the boom in retailing has been confined primarily to the urban markets in the country. Even there, large chunks are yet to feel the impact of organized retailing. There are two primary reasons for this. First, the modern retailer is yet to feel the saturation' effect in
the urban market and has, therefore, probably not looked at the other markets as seriously. Second, the modern retailing trend, despite its cost-effectiveness, has come to be identified with lifestyles. In order to appeal to all classes of the society, retail stores would have to identify with different lifestyles. In a sense, this trend is already visible with the emergence of stores with an essentially 'value for money' image. The attractiveness of the other stores actually appeals to the existing affluent class as well as those who aspire for to be part of this class. Hence, one can assume that the retailing revolution is emerging along the lines of the economic evolution of society.
INDIA HOLDS SIGNIFICANT PROMISE
• • • • • • • • • • • • • • • • India has nearly one billion residents, and a retail market that is forecast to grow at a 30% compounded annual growth rate (CAGR) over the next five years. To date, few organized retailers have entered India, and there is relatively little modern retail space available-a combination that represents and attractive opportunity for those willing to navigate the challenges. The retail business (both unorganized and organized) constitutes a sizeable portion of the country’s GDP The unorganized & unsystematic segment and the fragmented Kirana Shops has provided employment to sizeable portion of the population Although, the Kirana shops continue to have a significant market presence, the dominance is getting slightly diluted owing to gradual entry of private players and MNCs in the field of organized retailing The domestic Firms offer a portfolio of services through organized retailing outlets which benefits suppliers of inputs and end product consumers. Apart from conventional organized retailing outlets and shopping malls, a series of food retail outfits have mushroomed in the country About $10 billion investments planned by big corporates/ international retail chains for setting up a variety of shopping malls, branded retail chains, etc. Companies like RPG Group, Pantaloon, Benzer, Shoppers Stop, Crossword, etc are planning to expand and diversify their retail operations. The current size of the retail business in India is estimated at $ 300 Billion and is expected to reach $ 640 billion by the year 2015 The retail trade constitutes about 10-11% of India’s GDP, with about four crore workers being employed in this segment. The size of the organized retailing segment is estimated to touch $ 45 billion by 2010, with scope for providing employment opportunities to 2.5 million people. The unorganized segment of retailing constitutes 96% of total market size, and the organized sector accounts for the remaining 4% of market size. This is meager compared to 20% in China and 85% in the case of USA The retail business is witnessing a 9% growth rate, with the organized segment registering 35% growth. The organized segment is projected to expand by 40% in the forthcoming future.
Retail Business in India: Changing Landscape
Spread of organized retailing: Organized retailing is spreading and making its presence felt in different parts of the country. The trend in grocery retailing, however, has been slightly different with a growth concentration in the South. However, the Mecca of retailing is undoubtedly Chennai. What was considered a 'traditional', conservative' and 'cost-conscious' market, proved to be the home ground for most of the successful retail names - Food World, Music World, Health and Glow, Vitan, Subhiksha and Viveks -to name a few. The choice of Chennai as the 'retail capital' has surprised many, but a variety of factors acted in its favour. Chennai, in spite of being a rapidly growing metropolis offers reasonable real estate prices, one of the most critical elements for the industry. Chennai has been witnessing a high industrial growth and increasing presence of the MNCs, both in the IT sector as well as outside it. The industrial boom' has led to the emergence of new residential areas with aggregation of professionals as well as a rapid increase in the number of 'double-income' households and growth of the nouveau riche/upper middle class with increased purchasing power. This has been combined with the increasing need for touch and feel shopping (especially for the large migrant population). All the factors have acted favourably in nurturing the industry. Consumer- the prime mover A variety of factors seem to influence the growth in the retailing industry. 'Consumer Pull', however, seems to be the most important driving factor behind the sustenance of the industry. In this context, a brief survey among consumers across income segments to understand their spending pattern. An analysis of the 'monthly purchase basket of the consumers surveyed indicated that the average monthly household spend on food and grocery related items varied across income segments. For instance, in the case of upper income households, the average spend was around Rs 4,200 per month. As against this, the average spend in the case of a middle income household was around Rs. 2,850 and lower income households Rs. 1,250 per month. (This is computed from a sample of 100 customers having an average family size of four). Based on the distribution of the more than 15 lakh households in Chennai across income segments and the average spend, a conservative estimate of the grocery retailing potential at Chennai will be around Rs. 300 crores. Besides increasing purchasing power, a variety of other factors also seem to fuel the retailing boom. With increase in double-income households and workingwomen, there is an increasing pressure on time with very little time being available for leisure. In this scenario, consumers are seeking the convenience of one-stop shopping, whereby they could have better utility of time. They are also seeking speed and efficiency in processing, as a result. Being more aware, consumers are on the lookout for more
information, better quality and hygiene as well as increased customer service. These changes in consumer behaviour also augur well for the retailing industry. However, in India there are no uniform trends with respect to consumer buying behaviour. There are visible differences in the shopping pattern of consumers across income segments as shown in the table. Organized retailing has definitely made headway in the upper class. However, even in this segment, items such as milk, fruits, vegetables and a significant portion of 'throughthe-month' purchases seem to be done at traditional outlets. The middle-income class prefer shopping for processed food and personal care in supermarkets and fall back on traditional outlets for bulk shopping. Organized retail outlets seem to be associated with branded items/special purchases. Organized retailing does not seem to have made an impact on the lower class, except for 'curiosity' shopping. The biggest question before organized retailers therefore, is whether this really means a huge untapped potential for the organized retailers and whether the conversion in mindset going to be easy. Emerging Trends Thanks to e-commerce shopping has changed. Though internet has brought the convenience of shopping to the doorstep, marketers should innovate ideas by which they can sell their products online and devise strategies for customer satisfaction. There is no secret about selling online. It’s a simple 3 step formula : lure more users to your website, took them on to your site and see profits soar. This was one of the few online experiments that future bazaar the online arm of future group tied. They set up tiny kiosks in key areas in various towns like Mumbai, Delhi, Hyderabad. These kiosks had catalogues of merchandise that sell on their websites. One had to simply walk into the kiosk, look at these catalogues and approach sales people to place an order. These sales people in turn would log on to the future bazaar site and place an order for the items which would be delivered to the customers at home. What worked with the kiosks is the fact that although the sale was happening online the consumer never had to log on to the web. This made them more comfortable while placing an online order. Although this was a temporary initiative the kiosk did 20 times more sales per unit compared to a normal retail outlet says Sanskarson Banerjee CEO Future Bazaar. Future group is planning to make kiosks a permanent future to target the people who are not technology savvy or don’t have easy access to the internet. Players like e-Bay have a slightly different twist to the kiosk strategy. They have partnered with Reliance Webworld in 100 Webworlds in 16 cities. In this case the consumer goes to an internet café instead of kiosk where the café owner hand hold web through the entire process of buying online. According to IAMAI (Internet and Mobile Association of India) 24% of Indias’ 50 million internet users still access the net via pay and surf cyber café. No wonder this strategy has worked for e-Bay as well.
However the concept of Net shopping is yet to be proven. And the poor financial performance of most of the companies offering virtual shopping has resulted in storebased retailing regaining the upper hand. Other forms of non-store shopping including various formats such as catalogue/mail order shopping, direct selling, and so on are growing rapidly. However, the size of the direct market industry is too limited to deter the retailers. For all the convenience that it offers, electronic retailing does not suit products where 'look and see' attributes are of importance, as in apparel, or where the value is very high, such as jewellery, or where the performance has to be tested, as of consumer durables. The most critical issue in electronic retailing, especially in a country such as ours, relates to payments and the various security issues involved.. Etail management skills It is a fact that the retailing industry is in its starting phase in our country. The benefits of organized retailing will only be felt once an equitable scale is achieved. This to a large extent depends on the store size, the walkthroughs, bills per customer per year, average bill size and the revenue earned per sq. ft. But besides resources and bottom line, a variety of other aspects need to be in place for tasting success. The need for qualified and trained manpower is of utmost importance. The need for specialized skills is increasingly felt in the areas of: 1. Strategic management - strategizing, targeting and positioning, marketing and site selection, among others 2. Merchandise management - Vendor selection, inventory management, pricing and so on. 3. Store management - Layout, display, customer relationship, inventory management, etc. 4. Administrative Management - Human resources, finance, marketing and so on. With the need for specialized skill set, retailing has become a specialized area of knowledge and training. The RPG School of Retailing and the introduction of specialized retailing courses at various business schools, including the IIMs, stand testimony to this. Technology impact The other important aspect of retailing relates to technology. It is widely felt that the key differentiator between the successful and not so successful retailers is primarily in the area of technology. Simultaneously, it will be technology that will help the organized retailer score over the unorganized players, giving both cost and service advantages. Retailing is a 'technology-intensive' industry. It is quoted that everyday at least 500 gigabytes of data are transmitted via satellite from the 1,200 point-of-sales counters of JC Penney to its corporate headquarters. Wal-Mart pioneered the concept of building a competitive advantage through distribution and information systems in the retailing industry. They introduced two innovative logistics techniques - cross-docking and electronic data interchange. Data Warehousing' is an established concept in the advanced nations. Wit the help of 'database retailing', information on existing and potential
customers is tracked. Besides knowing what was purchased and by whom, information on softer issues such as demographics and psychographics is captured) Most grocery retailers such as Food World have started tracking consumer purchases through CRM. The lifestyle retailers through their 'affinity clubs' and 'reward clubs' are establishing their processes. The traditional retailers will always continue to exist but organized retailers are working towards revamping their business to obtain strategic advantages at various levels - market, cost, knowledge and customer. With differentiating strategies - value for money, shopping experience, variety, quality, discounts and advanced systems and technology in the back-end, change in the equilibrium with manufacturers and a thorough understanding of the consumer behaviour, the ground is all set for the organized retailer.Given the current trend in liberalization, it will not be long before the retailing sector is also thrown open to international competition • It was only in the year 2000 that the global management consultancy AT Kearney put a figure to it: Rs. 400,000 crore (1 crore = 10 million) which will increase to Rs. 800,000 crore by the year 2005 - an annual increase of 20 per cent. • Retailing in India is thoroughly unorganized. There is no supply chain management perspective. According to a survey b y 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.
• From a size of only Rs.20,000 crore, the ORGANISED retail industry will grow to Rs.
160,000 crore by 2005. The TOTAL retail market, however, as indicated above will grow 20 per cent annually from Rs. 400,000 crore in 2000 to Rs. 800,000 crore by 2005 (source: survey by A T Kearney) • The first challenge facing the organized retail industry in India is: competition from the unorganized sector. 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. • In contrast, players in the organized sector have big expenses to meet, and yet have to keep prices low enough to be able to compete with the traditional sector. High costs for the organized sector arises from: higher costs, social security to employees, high quality real estate, much bigger premises, comfort facilities such as air-conditioning, back-up power supply, taxes etc. Organized retailing also has to cope with the middle class psychology that the bigger and brighter a sales outlet is, the more expensive it will be. • India's first true shopping mall - complete with food courts, recreation facilities and large car parking space - was inaugurated as lately as in 1999 in Mumbai. (this mall is called "Crossroads").
An FDI Confidence Index survey done by AT Kearney, retail industry is one of the most attractive sectors for FDI (foreign direct investment) in India and foreign retail chains would make an impact circa 2003. Quite a few corporate houses began looking at retailing as one way to corporate salvation. Notable among them are: the R P Goenka group, the Tatas, the S Kumars, the Rajan Raheja group and the Ajay Piramal group. And many more are still in the process of finalising their forays into retailing.Even as loose ends of retailing plans are being tied up, e-tailing has begun catching the attention of many entrepreneurs. Suddenly, you started hearing e-tailing names such as Rediff.com, Jaldi.com, Fabmart.com, Tsnshop.com and Satyamonline.com. This could well be the beginning of an e-tail revolution. As the new sensation unfolds, it should be understood that retailing is serious business. Thanks to the popularity of the Internet, e-tailing is assuming greater significance. A number of products and services are on e-tail offer and novel plans are being worked out by many e-tailers. How large is the retailing industry? Is e-tailing large enough to take on so many players? True, both retailing and e-tailing are still nascent and growing. One estimate by consultants KSA Technopak is that the organised retailing sector should be as large as Rs 5,000 crore and e-tailing in India should be just about Rs 12 crore. What is the rationale behind such an assertion? Basically anything which involves a direct sale to a consumer at any point of time could be termed as retailing, be it selling of books, apparels, footwears, music or even grocery among other things. Such a retail trade could take place in a shopping mall, in a department store or in a basic momand-pop store or in a friendly neighborhood grocer's shop. Most of such retail trades that can be done through the brick-and-mortar retailing route can be successfully replicated on the Internet as well.
E-RETAILING APPROACH: Internet Retailing or ‘e-retailing’ as is usually referred to as covers retailing using a variety of different technologies or media. It may be broadly be a combination of two elements. » Combining new technologies with elements of traditional stores and direct mail models » Using new technologies to replace elements of store or direct mail retail. Internet retail also has some elements in common with direct mail retailing. For eg, email messages can replace mail messages and the telephone, that are used in the direct mail model as means of providing information, communication and transactions while on-line catalogues can replace printed catalogues. As with direct mail businesses, critical success factors include: • Use of customer databases • Easy ordering • Quick Delivery Operational elements that the Internet retail model shares with both the retail store and
direct mail models include: » Billing of customers » Relationships with suppliers There are, therefore, many elements that Internet retail and more traditional retail models have in common. Indeed many of the most successful Internet retailers have been those that have been able to successfully transfer critical elements from traditional retailing to the Internet, such as customer service and product displays. The four challenges of E – Retailing Every on-line fulfillment operation, large or small, faces four main challenges: Controlling customer data As outsourcing arrangements proliferate and delivery services become more expert in using information technology, retailers risk losing their lock on consumer data. This knowledge, ranging from the socioeconomic status of customers to their buying patterns and preferences, helps intermediaries and shippers reduce costs, but they can also use it to compete with retailers.
Integrating on- and off-line orders
From an operations perspective, the easiest route for companies with a foot in both the real and the virtual worlds might be to enter electronic orders manually into the off-line order management system. This option makes most sense when the volume of on-line orders is higher; companies must decide how much integration they need. In a totally integrated system, Internet orders would be automatically transmitted through a processing center and transferred to the shipper’s manifest. Savings up to 30 percent are possible if the cost of long-distance telephone calls, data entry, timeserver operations, and error correction is reduced or eliminated and the cycle time between order and delivery is cut significantly. An integrated system with full ERP (enterprise resource planning) capabilities, for e g, can ensure that surges in demand don’t retard key fulfillment operations such as data entry, inventory, and packing.
Delivering the goods cost-effectively
At present, every single transaction challenges e-tailors to deliver the goods quickly, cheaply and conveniently. The existing model for home delivery works well for letters and flat packages but not for e-tailing’s high volumes and wide variety of package shapes and sizes. But this is largely a technical and logistical problem, and it will be possible (though perhaps expensive) to solve it by developing new sorting and scanning equipment and by deploying larger delivery vehicles.
The problem of returns is encapsulated in an old saying in the book business: “gone today, here tomorrow.” Nordstrom, Bloomingdale’s, L.L. Bear, and other companies have built their sterling reputations partly on the ease with which customers can return defective or unwanted merchandise and the graciousness with which it is received. Ecommerce retailers, with their emphasis on convenience and customization, must match this standard of service. At present, they do not.
Guide to E-Retailing Resources
To help e-retailers find the right solutions and service providers to take their Internet retail businesses to the next level, the publishers of Internet Retailer --the most trusted source of journalistic information on web-based retailing--comes the Guide to ERetailing Resources. This 248-page Guide contains business profiles and vital product and client details on more than 378 solutions providers in 17 different market segments that now define the multi-billion dollar market for e-retailing solutions. The Guide to ERetailing Resources provides strategic data on all competitors in the following segments of the solutions market: » Affiliate Marketing » Content Management » Customer Service » Delivery Services » E-Commerce Systems » Email Marketing » Fulfillment Services » Order Management » Payments Processing » Performance Monitoring » Research Studies/Books » Researchers / Consultants » Returns Processing » Search Engine Marketing » Site Search Solutions » Supply Chain Solutions » Web Analytics » Web Design / Hosting Combined Disciplines with E-Retailing
E-Retail + Traditional Retail Operations ("Clicks-and-Mortar")
Sites like macys.com and gap.com, as well as relative latecomers’ walmart.com and jcpenney.com, are evolving into online branches of brick-and-mortar operations. This kind of site is not limited to the rich, famous, and nationally well-branded. Many smaller stores have used the Web to broaden their market by opening online branches, which make available to Web shoppers goods that were once accessible only to people near the store. The inverse image of this model is also evident: businesses that started out as Web eretailers but have since added brick-and-mortar operations to their sales channels. Gazoontite.com launched its Web site selling hypoallergenic products before opening its flagship store in San Francisco. Additional stores have opened on both coasts and in the Chicago area.
E-Retail + Catalog Operations
In this category are well-known catalog merchants like Lands' End, which has expanded its popular direct merchant business through landsend.com. For catalog retailers, expansion to the Web is a relatively easy development. They already conduct most of their sales through remote media and are already equipped to handle customer service and order fulfillment. This model also has an inverse, in the form of dot-coms that have added print catalogs or other print sales tools to their online site offerings. Print sales tools can serve as a tangible reiteration of an e-retail brand and its product offerings. Garden.com, for example, added a print catalog to the many merchandising techniques the company uses to drive sales at its Web site. The consistent, physical reminder of your name and brand can be an important aspect of your marketing, regardless of whether you intend to achieve sales through both a print catalog and your retail site.
E-Retail + Web Site Content
Selling goods is a complementary component of business for these sites, which may rely on other sources of revenue for some portion of their business. Other components may include community building, editorial and informational content, product reviews, and recommendations or other features to draw users to the site. The combination of targeted information and retail is a powerful one that cannot be easily replicated offline. To be sure, many traditional retailers of all kinds offer their customers print newsletters, loyalty programs, educational opportunities, and more. However, the Web uniquely enables customization of that content, allowing customers to pull from the site exactly the content they want and need, when they want it, and, many times, in the form they want it. From the e-retailer's perspective, this customization is automated; the company need not employ envelope stuffers to select and mail the appropriate materials to a customer on a regular basis. From the customer's perspective, this feature creates the
experience of becoming a "market of one," with a direct relationship to the retailer. Content and e-retail sites may mix their revenue streams in a variety of ways with any number of tools such as membership programs, advertising, sponsorships, retail, subscriptions, and syndication of content. Affiliate programs, which credit a referring Web site for sales made through the site, can make almost any site a de facto e-commerce site. For the purposes of this book, we considered sites that rely on product sales of 50 percent or more of their revenues.
Retaining an e-tail customer
That is more than just a challenge. The primary aim of every e-tailer is to attract a prospective customer to his e-tail site. That calls for a large adspend. Naturally, there has been a surge in dot.com advertising in countries such as the United States. Dot.com adspends are so large that as much as two-thirds of the capital raised by dot.com companies are spent towards advertising. Adspends by dot.com companies are so huge that whatever savings achieved in the areas of real estate and inventory is more than offset. The question still remains: after all that ad-spend, will the customer remain loyal to the etailing site? Says Kumud Goel, managing director of KLG Systel which owns the site Jaldi.com: "The Internet customer is very hard to predict and is different from the normal customer. Retaining him is not so simple. While a retailer expects strong loyalty, such a loyalty on the Net is difficult to obtain. A customer may shift from the Internet if someone else offers him a better deal." That is why Jaldi.com will be using a mix of marketing tools such as public relations, advertising, promotions, direct marketing and Internet advertising to spread awareness among its target audience. Jaldi.com went a step ahead. Its offline promotions started with a successful consumer launch held at Priya PVR I theatre in New Delhi where 3,600 free Phir Bhi Dil Hai Hindustani tickets were given to every customer who logged on and registered at the site Jaldi.com. What all these tell you is one simple thing: customer retention is the toughest thing on the web. Says K Ramesh, vice president of i2inext.com: "First of all, it is difficult to get a consumer come to your site. After he comes in, the task is to retain him and get him frequently. Once he is confident about you, he will use his credit card to make his purchases at your site." On balance, retaining an e-tail customer is certainly a costly affair. For, in the world of the web there is nothing such as loyalty. Says Goel: "If you offer some freebies, a customer may keep on coming to your site, with the expectation everytime that there would be some freebies out there. The moment you stop freebies, you could simply lose the customer." So, managing e-tailing promotion through freebies could be a tricky affair.
Shopping on the Net
Fine. But, the question is why should anyone shop on the Net? What is the incentive to try a new medium of shopping? If anyone has to try this new medium of shopping, there should be overwhelming reasons for doing so. The benefits must go beyond mere convenience. For one, the consumer will certainly be interested if he gets things cheaper on the net. Says Ghose: "The Net being a new medium, we have to convince people to use this new medium to buy." Adds Vaitheeswaran: "For convincing a customer to use this new medium, one has to offer an incentive to buy on the Net. Otherwise, it would be very difficult to get a customer to
shop with you." According to consultants KSA, easier and faster shopping are the reasons for shopping on the Net. How? You can go to a brick-and-mortar retailer who could offer you 10,000 items in his store. Chances are that he might be 10 per cent out of stock. On the other hand, the Internet offers millions of products with no chances of an out of stock situation. Easy and comfortably-obtained info is another advantage that shopping on the Net offers. On the Internet, product information is just a few clicks away, all accessed in the comfort of a home. Traditional retailing stands out in stark contrast: the consumer searches frantically, runs up and down, grills a poorly trained store assistant who is unable to help him out. In the bargain, valuable time is lost. Simply put, shopping on the Internet for, say 15 minutes, could save a two hour trip to the mall. Consumers prefer to save this time so that they can devote more time for their professional and domestic priorties.
Is shopping on the Net really catching on in India? The Indian scenario is quite different from that of the West. For good reasons. Indians have always been great shoppers and enjoy shopping anywhere in the world. With malls and departmental stores springing up in India now, Indians are just beginning to get a taste of things to come. Internet shopping is one such taste which the Indians have begun to savour. There are hurdles here, however. One, need for a critical mass. This is vital for any successful e-commerce project. Consider: growth in e-commerce will come not from well-designed websites or web-marketing but from deeper penetration of the Internet. That is why a case has been made out for increasing broadband Internet connections which are faster than the dial-up connections. India is second largest user of internet after China. One estimate is that India has a mere 20 lakh Internet users, mostly concentrated in the metros. Web analysts feel that in many areas of retailing and commerce, Internet is unlikely to garner a sizable slice of the market. And that could be for several years to come. This is true, especially in businesses where margins are thin. Two, despite a higher Internet penetration, cities like Mumbai or New Delhi might not be a haven for an e-tailer. Reason: for things like grocery, there is a shop out there at every nook and corner. All that an individual has to do is just make a phone call and the goods are delivered at his doorstep. Thrown in along with free home delivery is a month's credit. In case of perishables such as fruits and vegetables, the Indian buyer prefers them farm-fresh. What does he do? While returning from work, they drop in at the vegetable market and complete their purchases. Three, cheap labour. Thanks to easy availability of domestics at an affordable wage bill, quite a few of the rich customers hire them for doing domestic chores which include shopping. Four, the usual Indian aversion to use credit cards. Thanks to low penetration
of credit cards and the lack of popularity of debit cards, e-tailing might find it an uphill task to catch on. It is not just the aversion to credit cards. Elder citizens are averse to using even the computer. However, they are at ease while using the remote control of a television set. That throws up an interesting solution. Accessing the Internet through a television in the near future might be something that an individual should be offered if e-tailing is to grow faster. The last and the most important hurdle to the growth of the e-tailing industry is the efficient management of logistics. Here the role of a courier company is extremely important. Most portals offering e-commerce have tied up with courier companies. For instance, Jaldi.com has tied up with Gati for taking care of their delivery logistics.
TRADITIONAL RETAIL APPROACH:
Indian Retail Industry is ranked among the ten largest retail markets in the world. The attitudinal shift of the Indian consumer in terms of "Choice Preference", "Value for Money" and the emergence of organised retail formats have transformed the face of Retailing in India. The Indian retail industry is currently estimated to be a US$ 200 billion industry and organised Retailing comprises of 3 per cent (or) US$6.4 Billion of the retail industry. With a growth over 20 percent per annum over the last 5 years, organised retailing is projected to reach US$ 23 Billion by 2010. The Indian retail industry though predominantly fragmented through the owner -run " Mom and Pop outlets" has been witnessing the emergence of a few medium sized Indian Retail chains, namely Pantaloon Retail, RPG Retail, Shoppers Stop, Westside (Tata Group) and Lifestyle International. Given the attractiveness of the Indian retail sector, foreign retailers like Wal-Mart, Carrefour SA, Europe's largest retailer and Tesco Plc, the UK's largest retailer, were keen to enter this growing market, despite the Indian retail sector being closed to foreign direct investment (FDI). In February 2006, the Indian Government had announced its decision to allow FDI of upto 51% in single brand retailing. Wal-Mart had said that India was high on its priority and that it was closely monitoring the Government's policy on FDI in the retail sector. In the last few years, Indians have gone through a dramatic transformation in lifestyle by moving from traditional spending on food, groceries and clothing to lifestyle categories that deliver better quality and taste. Modern retailing satisfies rising demand for such goods and services with many players entering the bandwagon in an attempt to tap greater opportunities. According to the 'Global Retail Development Index (GRDI) 2006' by the management consulting firm 'A.T. Kearney', India has retained it's topmost position in the annual study of retail investment attractiveness among 30 erging markets.
The Indian Retail growth can be attributed to the several factors including
• • • •
Demography Dynamics: Approximately 60 per cent of Indian population below 30 years of age. Double Incomes: Increasing instances of Double Incomes in most families coupled with the rise in spending power. Plastic Revolution: Increasing use of credit cards for categories relating to Apparel, Consumer Durable Goods, Food and Grocery etc. Urbanisation: increased urbanisation has led to higher customer density areas thus enabling retailers to use lesser number of stores to target the same number of customers. Aggregation of demand that occurs due to urbanization helps a retailer in reaping the economies of scale.
Potential For Investment: The total estimated Investment Opportunity in the retail sector is around US$ 5-6 Billion in the Next five years. Location: with modern retail formats having made their foray into the top cities namely Hyderabad, Coimbatore, Ahmedabad, Mumbai, Pune, Chennai, Bangalore, Delhi, Nagpur there exists tremendous potential in two tier towns over the next 5 years. Sectors with High Growth Potential: Certain segments that promise a high growth are o Food and Grocery o Clothing o Furniture and Fixtures o Pharmacy o Durables, Footwear & Leather, Watch & Jewellery Fastest Growing Formats: Some of the formats that offer good growth potential are: o Speciality and Super Market o Hyper Market o Discount stores o Department Stores o Convenience Stores and E-Retailing
Rural Retail: Retail sector offers opportunities for exploration and investment
in rural areas, with Corporates and Entrepreneurs having made a foray in the past. India's largely rural population has caught the eye of retailers looking for new areas of growth. ITC launched the country's first rural mall ' Chaupal Sagar', offering a diverse product range from FMCG to electronics appliance to automobiles, attempting to provide farmers a one-stop destination for all of their needs. There has been yet another initiative by the DCM Sriram Group called the ' Hariyali Bazaar', that has initially started off by providing farm related inputs and services but plans to introduce the complete shopping basket in due course. Other corporate bodies include Escorts and Tata Chemicals (with Tata Kisan Sansar) setting up agri-stores to provide products/services targeted at the farmer in order to tap the vast rural market.
Wholesale Trading: wholesale trading also holds huge potential for growth.
German giant Metro AG and South African Shoprite Holdings have already made headway in this segment by setting up stores selling merchandise on a wholesale basis in Bangalore and Mumbai respectively. These new-format cash-and-carry stores attract large volumes from a sizeable number of retailers who do not have to maintain relationships with multiple suppliers for all their needs.
Major Formats of In-Store Retailing Format Branded Description Exclusive showrooms either The Value Proposition Complete range
owned or franchised out by a manufacturer. Focus on a specific consumer need, carry most of the brands available Large stores having a wide variety of products, organized into different departments such as clothing, house wares, furniture, appliances, toys, etc.
available for a given brand, certified product quality Greater choice to the consumer, comparison between brands is possible One stop shop catering to varied/ consumer needs. One stop shop catering to varied consumer needs
Extremely large self-service Supermarkets retail outlets Discount Stores
Stores offering discounts on the retail price through selling high Low Prices volumes and reaping economies of scale Larger than a supermarket, sometimes with a warehouse appearance, generally located in quieter parts of the city Low prices, vast choice available including services such as cafeterias.
Convenience stores Shopping Malls
Convenient location Small self-service formats and extended located in crowded urban areas. operating hours. An enclosure having different formats of in-store retailers, all under one roof. Variety of shops available to each other.
Indian Retail- expanding the number of formats In modern retailing, a key strategic choice is the format. Innovation in formats can provide an edge to retailers. Organized retailers in India are trying a variety of formats, ranging from discount stores to supermarkets to hypermarkets to specialty chains. Formats Adopted by Key Players in India Retailer RPG Retail Original formats Supermarket (Foodworld) Later Formats Hypermarket (Spencer's)Specialty Store (Health and Glow) Discount Store (TruMart)
Department Store Piramal's (Piramyd Megastore)
Small format outlets Supermarket (Food Bazaar) Pantaloon (Shoppe) Hypermarket (Big Bazaar) Retail Department Store Mall (Central) (Pantaloon) Department Store K Raheja (shopper's stop) Group Specialty Store (Crossword) Tata/ Trent Department Store (Westside) Supermarket (TBA) Hypermarket (TBA) Hypermarket (Star India Bazaar) Hypermarket (TBA)
Landmark Department Store Group (Lifestyle) Others
Discount Store (Subhiksha, Margin Free, Apna Bazaar), Supermarket (Nilgiri's), Specialty Electronics
Road Ahead; Plans of Large Retailers
• • • •
Reliance Retail: investing Rs. 30,000 crore ($6.67 billion) in setting up multiple retail formats with expected sales of Rs. 90,000 crore plus ($20 billion) by 200910. Pantaloon Retail: Will occupy 10 mn sq.ft retail space and achieve Rs.9,000 crore-plus ($2 bn) sales by 2008. RPG: Planning IPO, will have 450-plus Music World, 50-plus Spencer's Hyper covering 4 mn sq.ft by 2010. LIFESTYLE :Investing Rs.400 crore-plus ($90 mn) in next five years on Max Hypermarkets & value retail stores, home and lifestyle centres. Raheja's: Operates Shoppers' Stop, Crossword, Inorbit Mall, and 'Home Stop' formats. Will operate 55 "Hypercity" hypermarkets with US$100 million sales across India by 2015. Piramyd Retail: Aiming to occupy 1.75 million sq.ft retail space through 150 stores in next five years. TATA (Trent Ltd.): Trent to open 27 more stores across its retail formats adding 1 mn sq.ft of space in the next 12 DLF malls. Titan industries to add 50-plus Titan and Tanishq stores in 2006.
Foreign Direct Investment Policy In Retail
Foreign Direct Investment (FDI) to the extent of 100 per cent in Cash and Carry Wholesale formats. Franchisee arrangements are also permitted in retail trade. Single Brand Products: FDI upto 51 per cent is permissible in the retail trade of single brand products subject to the following conditions.
o o o
Products to be sold should be of a 'Single Brand' only. Products should be sold under the same brand internationally. 'Single Brand' product retailing would cover only products, which are branded during manufacturing.
What will work: E TAIL or TRADITIONAL RETAIL
The most important question now is this: what kind of retailing model is going to deliver the goods in the Indian scenario?
For an answer, consider the following. The most important cost advantage of e-tailing comes from whittled down shopfront costs and elimination of intermediaries and economical distribution. For example, book e-tailing means dispensing with big shops replete with slow-moving stock. Consider the case of Amazon.Com, where the orders go straight to the wholesaler. That means the working capital costs are cut down drastically. Not just that, an e-tailer is paid before he pays his distributor. The implication: need for lower working capital. However, one has to compare these gains against certain web-related costs that have to be provided for. Running a website and servicing it to ensure that it is cent per cent reliable is not easy. Logistics and distribution are of utmost importance and that is where many etailers are known to have gone wrong. While it is true that many e-tailers have been able to cut costs, they have lost large sums of money in the process of offering goods at low prices. A few of them who have made profits have ploughed them back for financing customer acquisition or retention. All these do not mean an end to traditional retailing. E-tailing will have to co-exist with traditional retailing. Says Vaitheeswaran: "For things such as music and books, a whole new market will be created. This will increase the market manifold." E-tailers will have to work in combination with traditional retailers. Even the biggies in the business such as Amazon.com have realised this and are setting up distribution warehouses for the same. As the combination of retailing and e-tailing set to deliver the goods, the trend of using the Internet as another service medium will gradually catch up. E-tailers like Jaldi.com have already set up kiosks in various cities which have been successful. Tsnshop.com makes use of its teleshopping network franchisees in various cities for selling its products. Says Ghose: "It helps in gaining customers fast as individuals have the option of returning the goods purchased if they do not like it. They can just go across to the shop. This gives them a certain level of comfort and confidence." Such a comfort and confidence-level is a must for a successful e-tailing venture.
A shopping revolution is ushering in India where, a large population between 20-34 age groups in the urban regions is boosting demand by 11.1 percent in 2004-05 to an Rs 23,308 purchasing power. This has resulted in huge international retail investment and a more liberal FDI.
REFERENCE websources: 1 www.businessstd.com 2 www.etretailbiz.com 3 www.expressindia.com 4 http://pib.nic.in 5 http://dspace.umk.ac.in 6 www.itm.ac.in 7 http://tatawestside.com 8 http://nbcindia.com 9 www.iamai.in 10 www.ficci.com 11 www.fibrezfashion.com 12 www.pantaloon.com/etailing.htm 13 www.tcs.com/industries/retail&consumer goods
India's Consumer Markets: identifying a plausible market size for products
Point to note:
For companies with longterm marketing plans in India, the "consumers" (urban + rural), "climbers" (urban only) and "aspirants" (urban only) classes can be clubbed together to give a market size of around 57 million households (as at 1995-96) which can be said to be the "prime segment" of the Indian consumer market. Formulate your consumer product marketing strategy on an area-by-area basis rather than on an all-India basis.
This report is intended to assist consumer product companies in identifying a plausible market size for their product/s in India. The table below should be viewed in conjunction with the text that follows. India's consuming class
Table I Estimated households by annual income Table II Structure of the Indian consumer market (199596) Number of households (in million) Urban Rural Total
<25,000 25,00150,000 50,00177,000 77,001106,000 >106,000
80.7 50.4 19.7 8.2 5.8
<16,000 16,00122,000 22,00145,000
Destitutes Aspirants Climbers
33.0 44.0 54.1 32.5 1.2
Middle Classes in India India's Retailing Industry
45,001Consumers 16.6 15.9 215,000 >215,000 The rich 0.8 0.4
Total no. of households: 164.9 million
Total no. of households
46.6 118.2 164.8
Source: National Council of Applied Economic Research (NCAER). The above presentation has been slightly modified by IndiaOneStop.Com • Data on income distribution of households is insufficient in determining market size for different consumer products in India. 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, vegetables generally cost more in Mumbai than in Calcutta, hence vegetable-purchasing power for identical income groups would be different in the two places even though they are the two biggest cities in India with comparable populations. In other words, purchasing power is location-specific, not income specific. Consumption habits of households are therefore better determinants of consumer market size than income distribution. Of course, other factors are also to be considered and they are detailed below. While determining market size for a consumer product, the structure of the consuming class as seen in Table II above, can be both revealing as well as misleading depending on the kind of product. For example, any specific consuming class would be fit to be a market for consumer products like tea or soap, but a
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