Chapter-Iii Problems and Prospects of Retail Industry in Maharashtra State

CHAPTER-III
PROBLEMS AND PROSPECTS OF RETAIL INDUSTRY

IN MAHARASHTRA STATE
The third chapter deals with the Problems and prospects of retail
industry in Maharashtra state , it also highlights on Introduction to Retail,
Functions performed by retailers, Types of Retail Organization,
Classification based on ownership, Classification on the basis of
merchandise offered, Strategy- The Retail Perspective, Competitive
Marketing Strategy, Approaches for gaining competitive advantage,
Concept of Value Chain, Competitive advantage, Customer value,
Modern Format retailers and Unorganized Retail Scene in India,
Problems, Prospects and Growth of Retail Industry in Maharashtra state
and Problems, prospects and Growth of Unorganized retail industry in
Maharashtra state.
Introduction to Retail
Levy and Weits in their book Retailing Management defines

“Retailing is the set of business activities that adds value to the products
and services sold to consumers for their personal or family use”1.They
further write that Often people think of retailing only as the sale of
products in stores. But retailing also involves the sale of services: which
can be lodging in a hotel, a Doctors service, a haircut, or a free home
delivered pizza. The writer Chetan Bajaj & Rajnish Tuli in their book
“Retail Management” also define Retailing on the similar way, according
to them, “Retailing is a conclusive set of activities or steps used to sell a
product or service to consumers for their personal or family use” Patrick,
Robert and David in their Book “Retailing” writes about retailing as
“Retailing consists of the final activity and steps needed to place a
product in the hands of the consumer or to provide services to the
Problems and prospects of retail industry in Maharashtra State Page 61

consumer. That means that Retailing is the last link in the chain of
production, which begins at the extractive stages, moves through
manufacturing and ends in the distribution of goods and services to the
final consumer. Retailing is also the last step in the channel of
distribution. Therefore any firm that sells a product or provides services
to the final consumer is performing the retail function, Regardless of
whether the firm sells to the consumer in store, through the mail, over the
telephone, through a television, over the internet, door to door, or through
a vending machine. It is involved in Retailing. The consumer who buys
the goods and services use it for his personal or family purpose. We just
can’t think our life without Retailers. They are an intrinsic part of our
everyday lives that is often taken for granted. The set of business
activities which these definitions are emphasizing may involve activities
like anticipating customer’s wants, developing assortments of products,
acquiring marketing information and financing. It is only because retailers
perform these activities the consumers can lead a convenient life, because
today time and quality of life are becoming relatively important than
money, and we need these retailers to help us lead a comfortable life. The
word Retail is derived from the French word Retailer, meaning to cut a
piece off or to break bulk. Breaking bulk is the most important activity or
function of the retailer which brings ease to the consumers. If it were not
for retailers we would be forced to go from manufacturers to
manufacturers to purchase goods that we need daily. Retailers act as
buying agents for the consumers and give them variety in convenient
sizes and quantity. Thus they offer us benefits of easy access to large
variety of products, freedom of choice, and make us feel like a king by
giving us customer service.

Functions performed by retailers:
1) Buying and Assembling:
A retailer deals in different variety of goods which he purchases

from different wholesalers for selling to the consumers. He tries to locate
best and economical source of the supply of goods.
2) Warehousing or Storing:
After assembly of goods from different suppliers, the retailers preserve

them in stores and supply these goods to the consumers as and when
required by them. The goods are kept as reserve stocks in order to ensure
uninterrupted supply to the consumers.
3) Selling:
The end objective of the retailer is to sell the goods to consumers. He

undertakes various methods to sell goods to the ultimate consumers.
4) Credit Facilities:
He caters to the needs of the customers even by supplying them goods on

credit. He bears the risk of bad debts on account of non-payment of
amount by the customers.
5) Risk Bearing:
A retailer has to bear different type of risks in relation to goods. While in

stores, goods are exposed to various risks like deterioration in quality,
spoilage and perish ability etc. The products are confronted to natural
risks viz; fire, flood, earthquake and other natural calamities. Other type
of risks like change in customer’s tastes also adversely affects the sales.
6) Grading and Packing:
The retailer grades the goods which are left ungraded by the
manufacturers and the wholesalers. He packs the goods in small packages
and containers for the convenience of the customers.

7) Collection and Supply of Market Information:
The retailers are in direct touch with the consumers. They gather
invaluable information with regard to likes dislikes tastes and demands of
the consumers and pass on this information to the wholesalers and the
producers which are very helpful to them.
8) Helps In Introducing New Products:
Without the services of retailers, new products cannot be

introduced properly in the market. This is so because a retailer has a
direct link with the consumer. He can explain nicely about the utility and
the characteristics of a new product to the customer.
9) Window Display and Advertising:
The retailer displays the products in show windows in order to attract the
customers. This leads to immense publicity for the product.
Services Performed By Retailers:
Retailers provide important services to both the wholesalers and

the consumers.
These can be explained as under:
(I) Services To Wholesalers:
a) They supply invaluable information with regard to tastes,

preferences, fashions and demands of the customers to the
wholesalers who in turn transmit the same to the producers which
is of immense utility to them.
b) By taking over the function of retailing from the wholesalers and

manufacturers, retailer’s relive them from selling goods in small
quantities to the consumers.
c) Many retailers usually place orders in advance with the

wholesalers which is very helpful in planning the purchases of the
wholesalers.
d) Sometimes retailers make advance payments for the goods to be
received from the wholesalers. In this manner, they help in
financing the wholesale trade.
e) Without the services of the retailers a new product cannot be

introduced in the market supplied to him by the wholesalers.
II) Services to Consumers:
a) The retailers assemble variety to produces from the wholesaler and

place them at the doorstep of the consumers and provide them a
convenience of choice.
b) They provide credit facilities to the consumers thereby helping

them in times of difficulty.
c) They extend personalized service to the consumers and try to give

them maximum satisfaction.
d) They introduce new products to the consumers and also guide

them as to their uses.
e) They extend free home delivery and after sales service to the
consumers.
f) They allow cash discount to the consumers on the products sold.
g) They buy and stock products best suited to the consumers.
h) They give valuable advice regarding the use and maintenance of

the products delivered by them.
i) They cater to the needs of every type of consumer by keeping in

view their paying capacity.
j) They supply fresh products to the consumers.
k) They usually take back the goods which do not suit to the
consumers and replace them.

Types of Retail Organization
Traditional Format Retailers
• Kiranas: Traditional Mom and Pop Stores
• Kiosks
• Street Markets
Classification based on ownership
• Independent Retailer: An independent retailer is one who owns

and operates only one retail outlet. The owner and few other local
hands or family members working as assistants in the shop
manages such an outlet. Many independent stores tend to be passed
on from generations to generations.
• A chain retailer or a corporate retail chain: When two or more

outlets are under a common ownership it is called a retail chain.
These stores are characterized by similarity in merchandise offered
to the consumers, the ambience, advertising and promotions.
• Franchising: A franchise is a contractual agreement between the

franchiser and franchisee which allows the franchise to conduct
business under an established name as per a particular business
format in return for a fee or compensation. Franchising can be a
product or trademark where the franchise sells the products under
franchiser's name.
• Leased Department: They are also termed as shop in shops.

When a section of a department in a retail store is rented to an
outside party, it is termed as a leased department.
• Consumer co-operative: A consumer co-operative is a retail

institution owned by its member customer. These many arise
largely because of dissatisfied consumer whose needs are not
fulfilled by the existing retailers.

Classification on the basis of merchandise offered
• Convenience store: They are relatively small stores located near

residential areas. They are open for long hours, seven days a week
and offer a limited line of convenience products like bread, eggs,
mil k etc.
• Department store: It is large scale retail outlet, often multileveled

whose merchandise offer spans a number of different product
categories. They are defined as those establishments depending on
good, clothing and home related items.
• Super markets and hyper markets: Super markets are large, low
cost, low margin, high volume, self service operations designed to
meet the needs for food, groceries and other non food items like
health and beauty care products. Hyper markets are a combination
of super markets and departmental stores. A retail store with a
sales area of over 2500 square meter, with at least 35 per cent of
selling space devoted to non-grocery products like clothes,
jewellery, hardware etc. are called hyper markets.
• Specialty stores: A stores specializing in a particular type of
merchandise or single product goods categories is termed as a
specialty store. Specialty stores are owing to their unique designs
and patterns. There is dramatic increase in the availability of
apparel products due to consumers rising demand and higher
disposable income. These are characterized by a narrow product
line with deep assortments in that product line. Specialty stores
usually concentrate on apparel, jewellery, fabrics, furniture etc.
• Off-price retailers: They buy products from manufactures in off
seasons as a deep discount and sell them at less than retail prices.
The merchandise may be in odd sizes, unpopular colors or with
minor defects. They may be manufacturer owned and care called
factory outlets.

• Catalogue showroom: Catalogue retailers usually specialize in
hard good such as house wear, jewellery, and consumer
electronics. A customer walks into this retail show room, goes
through the catalogue of the products that he would like to
purchase.
Strategy- The Retail Perspective:
A strategy in commercial parlance means to plan or a method by

which an organization wishes to achieve its objectives. Therefore, a retail
strategy can be defined as a clear and definite plan that the retailer
outlines to tap the market and build a long-term relationship with the
consumers. Retail strategy helps in defining the organization, its purpose
and the approach of the retailer to face various challenges in the
environment and market place.
The first strategy of retailer is to select store location and it should

be depend on the business model. The second factor that is influenced by
the strategy is the type of merchandise to be stocked. If the retailer
chooses to dominate the market place on the basis of product selection, he
need to be ensure that he has the largest and widest selection of product
category imaginable, and that is so unique, people will seek out the store.
Elements of retail price
Price is an internal part of retail marketing mix. It is the factor, which is

the source of revenue for the retailer. The price of the merchandise also
communicates the image of the retail store to the customers. Various
factors like the target market, store policies, competition and the
economic conditions need to be taken in to consideration while arriving at
the price of a product.

Retail Marketing Strategies
Some of the best retailing strategies to decide the target market and
then select the appropriate combination of product, price, place and
promotion are as follows: A retailer needs to decide as to what it wants
to achieve for its customers. It has to decide the target market and then
select the appropriate combination of product, price, place and promotion.
Retail positioning:
This involves choice of target market and differential advantage.

Targeting allows retailers to tailor the marketing mix which includes
product assortment, service levels, store locations, prices and promotion,
to the needs of their chosen customer segments. Differentiation provides a
reason to the customer to shop at one store rather than at another. The
customer should have distinct expectations from the store when he walks
into it which should be different from the expectations that he has when
he walks into another store. Retail positioning comes from novelty in the
processes of shopping offered to the customers and novelty in the product
assortment or both.
Novelty in the process offered to the shopper:
The way a store facilitates a shopper to make his choice of

products and brands, the way he is able to access the items in the store,
and the way he makes his payments, determine a customer’s satisfaction
with a store. But a customer does not want a similar treatment for all his
purchases and on all occasions when he visits the store. For some
products, his choice of brand may be very clear, and a salesperson’s
attempt to help him would only irritate him. But for some other products,
the same customer would solicit help of salespersons in making a choice
among brands and would welcome a salesperson’s attempt to influence
his purchase. For some purchases, the customer would like his favourite
brand to be placed prominently on the shelf. But when he does not have a

clear brand choice, he would not mind some clutter on the shelves
because he wants all the brands to be available. Most customers would
prefer to be allowed to pay their bills as early as possible but on some
occasions they would be more tolerant of delays than on others.
Customers would be finicky about delays in making payments when they
are rushing home after office but they would be more relaxed during their
weekend shopping trips. While it is not easy to distinguish between
customers and their purchase occasions, the retailer will have to make
judgments about the expectations of a customer when he walks into the
store. It will be a good idea to allocate a particular salesperson to a
customer, i.e., when a customer walks in he is always served by a
particular salesperson rather than different salespersons depending on
what he proposes to buy. Such salespersons specialize in a product
category and assist any customer who is interested in the category. Under
the new arrangement, all salespersons would have to know enough about
all the product categories but would know more about the purchasing
behavior of a set of customers allocated to them.
Novelty in the product/product assortment offered to the shopper:
A retail shop has to be known for being of a certain type. A store

may be famous for being very prompt in stocking the latest or the most
fashionable product. Another may be known for stocking all possible
variety in a category and yet another may be famous for stocking the most
premium brands. A store would become too unwieldy if it tries to have
too many different types of assortments. A store which stocks the latest
products in a category will also be able to stock the most premium brands
of the category but the attention of the company will be divided and it
will be difficult to handle relationships with diverse suppliers whose
business philosophies are different. Such a strategy will also send
conflicting signals to customers as to what the store really stocks well.

Location of the retail store:
For some products like groceries, consumers do not like to go to a

far away store. Therefore, store location has great influence on sales
performance of such products. A retailer has to decide whether it will be a
standalone store in a city, or will it open stores to cover a designated area
like a city, state or country. A retailer may decide to open one store in
each city. The retailer has to buy from distributors to replenish its stocks.
Or it decides to open as many stores as a city can sustain, and moves to
another city and again opens as many stores as that city can sustain.
Therefore, it covers cities one by one, instead of opening one store in each
city. It opens a distribution centre in each city.
The distribution centre receives supplies for all the stores in the
city in a single truck from each supplier. Smaller lots of each of these
supplies are loaded on trucks bound for each store. The retailer buys from
the manufacturer directly, and does not have to buy from distributors. A
retailer’s choice of a city depends upon factors like its congruence with its
chosen target market, the level of disposable income, the availability of
suitable sites and level of competition. A retailer’s choice of a particular
site in a city depends on level of existing traffic passing the site, parking
facilities, presence of competitors and possible opportunities to form new
retailing centers with other outlets. When two or more non-competing
retailers agree to site outlets together, the retailing centre can draw more
customers than what each individual store would have been able to do.
More than proximity to customers, the location of a store is
important in terms of how often the target customers are likely to visit the
site as they live their lives. The lifestyle of the target customers, and the
goods and services that they buy will decide whether they will visit the
site or not, and how often. Being in the place which the customer will
visit in pursuance of his lifestyle will ensure that the customer will walk
into the store. This aspect is important because customers are combining

purchases of different genre of goods and combining purchases of goods
and pursuance of entertainment.
Product assortment and services:
A retailer has to decide on the breadth of its product assortment, and also
its depth. A retailer may have a broad product assortment, but within each
product line, it can stock a shallow product range. Or it can have a narrow
product assortment, but within each product line, it can stock a deep
product range. Therefore, a retailer’s choice of product assortment ranges
from stocking one deep product line to stocking a broad range of products
including toys, cosmetics, jewellery, clothes, electrical goods and
household accessories. A retailer begins with one or limited product lines
and gradually broadens product assortment to be able to sell more
products to customers who come to its store. Petrol stations start out as
fuel providers, and expand by adding provision stores or food outlets to
maximize the revenue that can be obtained from the customer. Some
stations on the highway may also add a Cineplex to make their retail
outlet a one-stop entertainment and utility centre for the customer. By
expanding its product assortment, a retailer reduces price sensitivity of
customers because a traveler stops at a petrol station as he can buy an
assortment of products, and not because its fuel cost is low. A retailer’s
decision of the product assortment that he will stock will depend on its
positioning strategy; the expectation that its customers have come to have
of it, and also on the profitability of product lines that it carries. It may be
prompted to drop slow moving unprofitable lines unless they are
necessary to conform to the range of products expected by its customers.
A retailer also has to decide whether it will sell only manufacturer brands,
or it will have its own label or store brands. Most manufacturers may sell
own label brands products to compliment manufacturer brands. Retailers
need to consider the nature and degree of customer service. Degree of
service can vary from customers being expected to search for their items

to elaborate displays and suggestions from sales personnel. Retail outlets
for expensive items like cars provide elaborate services in the forms of
product displays, test drives and arrangement of loans, whereas in a
discount store, customers would have to select their items, sometimes
from heaps of merchandise.
Service levels have to be higher when customer knowledge levels

are low, expertise is required to buy the right product (that the customer
lacks), the products are expensive (money spent in relation to customer’s
disposable incomes are high).The retailer can also use service levels as a
means of differentiating his offer when the product assortment is similar
to those of competitors. For instance, a cosmetics store can employ its
personnel as grooming advisors to help a customer choose relevant
products from the store.
Price:
A retailer may choose to compete purely on price, but price can be

a differential advantage only when a retailer has immense buying power,
and has been able to control cost. A retailer may favor everyday low
prices rather than higher prices supplemented by price discounts. Such a
retailer is patronized by customers who prefer predictable low prices
rather than occasional price discounts. A retailer may sell no-frill
products, which are basic commodities such as bread and soft drinks that
are sold in rudimentary packaging at low prices. It appeals to the price
conscious shopper who wants standard products at low prices. Some retail
items may be priced very competitively to generate more demand for
other items. Such products may often be sold below cost and are called
‘loss leader’. The idea is that the customers get attracted to the low price
of the ‘loss leader’ and walk in the store to buy the item but may end up
buying many more items. The items chosen for inclusion should be
widely known and bought on frequent basis.

Promotion:
Retail promotion includes advertising, public relations, publicity

and sales promotion. The goal is to position the store in consumers’
minds. Retailers design ads, stage special events and develop promotions
aimed at their markets. A store’s opening is a carefully orchestrated blend
of advertising, merchandising, goodwill and glitter. All the elements of an
opening—press coverage, special events, media advertising and store
displays—are carefully planned. Retail advertising is carried out at the
local level, although retail chains can advertise nationally. Local
advertising by retailers provides specific information about their stores,
such as location, merchandise, hours, prices and special sales. In contrast,
national retail advertising generally focuses on image. A popular retail
advertising practice is cooperative advertising. Under cooperative
advertising, manufacturers pay retailers to feature their products in store
mailers or the manufacturer develops a TV or print ad campaign and
includes the name of the retailers carrying the product at the end. Many
retailers are avoiding media advertising in favor of direct-mail or frequent
shopper programmes. The frequent shopper programmes offer perks
ranging from gift certificates to special sales for most frequent shoppers.
Direct-mail and catalogue programmes may be a cost effective method of
increasing store loyalty and spending by core customers.
Store atmosphere:
Store atmosphere is created by the design, color and layout of a

store. A retailer works on both exterior and interior designs to create an
appropriate store atmosphere. The store atmosphere should prompt target
customers to visit the store and stimulate them to buy once they are in the
store. External designs include architectural design, signs, window
display and use of color that create identity for a retailer. The image
which is projected should be consonant with the ethos of the store. For
instance, a kids’ store is usually bright, vibrant (may be in the shape of
Mickey Mouse) and colorful to attract the child and make him want to
buy things in the store. Such a store should generally have lots of space
for the child to move around and explore his world. Even the salespeople
should match the child’s temperament. They should be playful. Interior
design like store lighting, fixtures and fittings as well as layout, affect
store atmosphere. If a store has narrow aisles, it appears congested and
unclean; the customers may not like to spend too much time in such an
environment. A poorly lit store is uninviting. Color, sound and smell
affect mood of customers, and customers stay longer in stores which are
colorful, plays good music and smells good. People attribute different
meanings to different colors, and a retailer uses colors to create the
desired atmosphere in the store. Music can be used to create a relaxed
atmosphere, and make the customers linger on in the store.
Competitive Marketing Strategy
Strategic planning has different purposes at different levels of

the organization. At the Corporate level, the central purpose is
planning for growth. At the level of the Business Unit or Division, the
purpose of planning is to identify strategic opportunities for future
investment. Once those business opportunities are identified in terms of
the organization’s key product lines and markets served, the real planning
for a sustainable competitive advantage can begin. Market Value
Solutions’ Value-Based Planning Process is designed to answer the key
question posed at each level of business planning. At the Corporate level,
the selected growth options are informed by the tools of customer value
analysis. At the Business Unit level, we work with the management team
to develop a Product/Market Matrix in order to achieve strategic focus.
And at the Product/Market level, we work with a cross-functional team to
identify value-based, market-driven strategies for a sustainable
competitive advantage. We engage a cross-functional team from the
organization in development of the actual competitive marketing plans for

two important reasons. First, the value-based market opportunities
typically require changes to the product or service itself, new methods for
marketing communications, changes in operations, and/or changes in
pricing. Managers from each of those functional areas need to be directly
involved with the development of strategies, objectives, and actions, for
which they will, ultimately, be responsible. Second, the goal of MVS is to
teach our way out of the consulting relationship. We do that by providing
the planning tools and techniques, then teaching your organization’s
managers how to use them so that they can develop future competitive
marketing plans independently.
Approaches for gaining competitive advantage
Unlike big brands, small businesses generally do not have the

resources to track their competition without spending a lot of money and
time. But if you make a regular process of it, there are many ways to track
your competitors easily and effectively. Here are six places to start:
1. Sign up for Google Alerts. Getting updates on your competitions'

activity online is absolutely free via Google Alerts, and it couldn't
be easier to set up. Just insert your competitors' names into the
search query and select what results you want to be notified of --
including news, blogs, video and discussion. You can have those
notifications sent to you as they happen, every day or weekly.
2. Connect with competitors on social media. "Like" and "follow"

your competition on Face book, Twitter and other social media
channels. Make sure you track both the brand and its key leaders to
get a sense of what they are doing. For example, as a restaurant
owner, you may want to follow the names of restaurants you
compete with as well as the chefs and restaurateurs to get a full
picture of their activity.

3. Enroll in your competition's mailings and promotions. Sign up
for your competitors' e-mail and direct marketing campaigns,
commonly known as Customer Relationship Marketing (CRM)
programs. Become a regular "customer" and you'll quickly see
what kind of offers they provide and how they stack up to yours.
4. Become a secret shopper. Conduct shopping trips to try out your

competitors' customer experience, both online and in-store.
Purchase your competitors' products to see what the process feels
like. Take notes on the customer service techniques you are seeing,
as well as how the assortment of products are sourced,
merchandised and priced.
5. Visit their trade show booths. When you go to trade shows, be

sure to pick up your competitor's materials. For example, if you are
in the home furnishing industry, attending a local home show is a
great place to pick up competitive brochures; pricing and product
line information so that you can stay current to industry trends.
6. Monitor your competitors' websites. You can learn a lot about

your competition by keeping an eye on their website. Keep up with
the new functionalities they add and see what kind of traction they
may be getting. If you are in the floral business, for example, being
familiar with your competitors' websites will allow you to track
what information they are offering customers and what trends in
floral design, party planning and flower selection they are
following. The goal here is to make sure all the marketing
elements that form your brand experience are better than those of
your competitors. If you see something that doesn't seem to be
working, could the same be said of your marketing? Adjust
accordingly. Determine the most effective ways to engage your
customers. It's very easy to identify those other brands that offer
exactly what you do. Look beyond the obvious and follow your
indirect competitors as well. Who are the competitors that can
draw time, attention and money away from your brand? For
example, if you run a local gift shop, other gift shops are not your
only competition. You are competing for shoppers at other local
stores, movie theaters, florists and restaurants in the area as well as
online gift shoppers. Many small businesses see online brands as
their biggest competition, regardless of location.
Looking at your competition more broadly will help you

understand all the marketing messages directed at your customers.
Only then can you stay on top of your game.
Concept of Value Chain:
The idea of a value chain was first suggested by Michael Porter

(1985) to depict how customer value accumulates along a chain of
activities that lead to an end product or service. Porter describes the value
chain as the internal processes or activities a company perform “to design,
produce, market, deliver and support its product.” He further states that “a
firm’s value chain and the way it performs individual activities are a
reflection of its history, its strategy, its approach to implementing its
strategy, and the underlying economics of the activities themselves.”
Porter describes two major categories of business activities: primary
activities and support activities. Primary activities are directly involved in
transforming inputs into outputs and in delivery and after-sales support.
These are generally also the line activities of the organization. They
include:
• inbound logistics—material handling and warehousing;
• operations—transforming inputs into the final product;
• outbound logistics—order processing and distribution;
• marketing and sales—communication, pricing and channel

management; and
• Service—installation, repair and parts. Support activities support
primary activities and other support activities. They are handled by
the organization’s staff functions and include:
• procurement—purchasing of raw materials, supplies and other

consumable items as well as assets;
• technology development—know-how, procedures and

technological inputs needed in every value chain activity;
• human resource management—selection, promotion and

placement; appraisal; rewards; management development; and
labor/employee relations; and
• Firm infrastructure—general management, planning, finance,

accounting, legal, government affairs and quality management.
John Shank and V. Govindarajan (1993) describe the value chain in

broader terms than does Porter. They state that “the value chain for any
firm is the value-creating activities all the way from basic raw material
sources from component suppliers through to the ultimate end-use
product delivered into the final consumer’s hands.” This description
views the firm as part of an overall chain of value-creating processes.
According to Shank and Govindarajan, the industry value chain

starts with the value-creating processes of suppliers, who provide the
basic raw materials and components. It continues with the value-creating
processes of different classes of buyers or end-use consumers, and
culminates in the disposal and recycling of materials.

Chart No:-3.1
Porter's Value Chain
The idea of the value chain is based on the process view of

organizations, the idea of seeing a manufacturing (or service)
organization as a system, made up of subsystems each with inputs,
transformation processes and outputs. Inputs, transformation processes,
and outputs involve the acquisition and consumption of resources -
money, labour, materials, equipment, buildings, land, administration and
management. How value chain activities are carried out determines costs
and affects profits.
Most organizations engage in hundreds, even thousands, of

activities in the process of converting inputs to outputs. These activities
can be classified generally as either primary or support activities that all
businesses must undertake in some form.
According to Porter (1985), the primary activities are:
1. Inbound Logistics - involve relationships with suppliers and

include all the activities required to receive, store, and disseminate
inputs.

2. Operations - are all the activities required to transform inputs into
outputs (products and services).
3. Outbound Logistics - include all the activities required to collect,

store, and distribute the output.
4. Marketing and Sales - activities inform buyers about products

and services induce buyers to purchase them, and facilitate their
purchase.
5. Service - includes all the activities required to keep the product or

service working effectively for the buyer after it is sold and
delivered. Secondary activities are:
1. Procurement - is the acquisition of inputs, or resources, for the

firm.
2. Human Resource management - consists of all activities

involved in recruiting, hiring, training, developing, compensating
and (if necessary) dismissing or laying off personnel.
3. Technological Development - pertains to the equipment,

hardware, software, procedures and technical knowledge brought
to bear in the firm's transformation of inputs into outputs.
4. Infrastructure - serves the company's needs and ties its various

parts together, it consists of functions or departments such as
accounting, legal, finance, planning, public affairs, government
relations, quality assurance and general management.
Competitive advantage and Customer value
In order to survive and prosper in an industry, firms must meet two

criteria: they must supply what customers want to buy, and they must
survive competition. A firm’s overall competitive advantage derives from
the difference between the value it offers to customers and its cost of
creating that customer value. Competitive advantage in regard to products

and services takes two possible forms. The first is an offering or
differentiation advantage. If customers perceive a product or service as
superior, they become more willing to pay a premium price relative to the
price they will pay for competing offerings. The second is a relative low-
cost advantage, which customers gain when a company’s total costs
undercut those of its average competitor.
Modern Format retailers
• Supermarkets (Food world)
• Hypermarkets (Big Bazaar)
• Department Stores (Shoppers Stop)
• Specialty Chains (IKEA)
• Company Owned / Company Operated
• Exclusive/Multiple Brand Outlet
• Convenience Stores
• Branded Stores
• Category Killer
• Cash and Carry
• Dollar Stores
• Company Owned Company Operated
Unorganized Retail Scene in India
India is the country having the most unorganized retail market. It

was predominantly controlled by traditional and unorganized format of
retailing. These formats have emerged and developed with the growth of
population in the country in rural and semi urban areas. Traditionally the
retail business was run by Mom & Pop stores having Shop in the front &
house at the back. More than 99% retailers function in less than 500Sq.Ft

of area. All the merchandise was purchased as per the test & vim and
fancies of the proprietor also the pricing was done on ad-hoc basis or by
seeing at the face of customer. Generally the accounts of trading & home
were not maintained separately. Profits were accumulated in slow moving
& non-moving stocks which were to become redundant or consumed in-
house. Thus profits were vanished without their knowledge. The
Manufactures were to distribute goods through C & F agents to
Distributors & Wholesalers. Retailers happen to source the merchandise
from Wholesalers & reach to end-users. The merchandise price used to
get inflated to a great extent till it reaches from Manufacturer to End-user.
Selling prices were largely not controlled by Manufacturers. Branding
was not an issue for majority of customers. More than 99% customers
were price sensitive & not quality or Brand Sensitive at the same time
they were Brand conscious also. Weekly Bazaar in many small tows was
held & almost all the commodities were on the scene including livestock.
Bargaining was the unwritten law of market. Educational qualification
level of these retailers was always low. Hence market was controlled by
handful of distributors or Wholesalers. Virtually there was only one
format of retailing & that was mass retail. Retailer to consumer ratio was
very low, for all the categories without exception. Varity in terms of
quality, Styles were on regional basis, community based & truly very low
range was available at any given single place. Almost all the purchases
and buying by mass population was need oriented & next turn would
come on festivals, Marriages, Birthdays & some specific occasion. In
those days impulsive buying or consumption was restricted to food or
vegetables etc. Having extra pair of trousers or Shirts or Casuals &
Formals & leisure wear & sports wear & different pair of shoes for
occasions was luxury for majority population except for those living in
Metros. Purchasing power of Indian urban consumer was very low and
that of Branded merchandise in categories like Apparels, Cosmetics,

Shoes, Watches, Beverages, Food, Jewellery, was slowly seeping into the
lifeline of Indian City folks. However electronic & electrical home
appliances do hold appropriate image into the minds of consumers. Brand
name does matter in these white goods categories. In the coming times
also majority of organized retailers will find it difficult to keep balance
with rest of the unbranded retail market which is very huge8
Fundamentals of Retail Industry:
Features of Retail Market:
The retail market size in India is estimated to be around $180

billion. Retailing provides jobs to almost 15 percent of employable Indian
adults and it is perhaps the largest contributor to India's GDP. But the flip
side of the coin is that the average size of each of the retail outlets in India
is only 50 square feet and though a large employer, the industry is very
unorganized, fragmented and with a rural bias.
• The Indian Retail Industry is Unorganized
• The Indian Retail Industry is Fragmented
• The Indian Retail Industry has Rural Bias
Retailing Formats:
Retail Management is a very important part of the distribution process. It

is the last link in the chain and is the direct interface of the process with
the customer. In India, retailing has caught up in a big way. Today one
finds the presence of huge retail stores like Crossroads, Shoppers Stop etc
who are doing well. It has a bright future and looks all set to grow.
Currently it is an urban phenomenon, present in the metropolises like
Mumbai, Delhi and Bangalore etc. However this trend is moving into the
smaller towns and these present the market of the future.

There are two types of retailing formats: -
1) Store Form Of Retailing
2) Non-Store Form Of Retailing
Store Form of Retailing:
Store retailing is the traditional form of retailing wherein a

customer physically goes to the store to buy goods or services. Some of
the types of store retailing are:
Malls:
Most malls give floor space out to individual shops on lease, and
these are enticed by the economies resulting from the sharing of costs.
India's largest shopping arcade Spencer Plaza (600,000-sq-ft) in Chennai
is an example. In malls like these, the combined brand pull of all outlets is
used to create a pull for the mall. Spencer Plaza is one of Chennai's finest
& largest shopping mall and covers over a million square feet. In Spencer
Plaza complex, leading names like food world, music world, health &
glow, vummidiars, van heusen, proline, arrow, American express, Allen
solly besides a lot of retailers dealing with Jewellery, domestic
appliances, leather goods and handicrafts are housed
In Spencer Plaza other comforts like central air-conditioning,

smooth-moving escalators to the first and second floors, glass capsule
lifts to all the seven floors, well-lit atriums, and info-desks are available.
The shopping area spreads across ground, first and second floors.
Office units are spread between fourth and seventh floors. An exclusive
car park is located partially in the second floor, and fully in the third
floor.
BRANDED STORES
Exclusive showrooms run by premium brands have been the

catalysts in pushing up the Indian retail scenario. This concept is now
being used to introduce organized retailing to the second rung towns.
Madura Garments has started setting up exclusive outlets in cities like
Trichy (Tamil Nadu) and Thanjavur (Tamil Nadu). Madura Garments,
IRIL's garments division, is a market leader in branded apparel. It offers a
wide range of ready-to-wear clothes to cater to every market segment. Its
power brands are Van Heusen, Louis Philippe and Allen Solly. Its
popular brand is Peter England, and its youth brand is San Frisco.
Madura Garments' key brands include:
Louis Philippe's range of superbly crafted garments makes an

exclusive fashion statement that is accepted as a status symbol,
recognized by its distinctive icon - 'The Upper Crest'. Van Heusen has
redefined corporate attire through continuous product innovation and
exclusive collections. "Van Heusen has redefined the way clothes are
looked at in India. They are not just about looks. Today technology
allows scientists to enhance fabric with treatment, microprocessors and
sensors; this in turn opens up a whole world of possibilities. The new
fabric development technology is being introduced for the first time in the
country through Van Heusen. Allen Solly popularized the Friday dressing
concept in India. It has won the International Fertilizer Industry
Association (IFA) Images 2001 'Best Brand Award' in the readymade
men's wear apparel category. With the launch of its women's wear in
December 2001, Allen Solly has made a successful foray into the growing
women's work and casual wear market.
Peter England:
This mid-segment shirt has effectively penetrated the mini metros.

It has won several awards, including 'Shirt of the Year 2000' and 'India's
most admired men’s wear brands 2001'. Positioned as the 'bad boy of
denim' with a slew of radically different designs and fits, SF Jeans is
targeted at the 18 to 21-year-old youth. SF Jeans are available in multiple
styles such as the 'Oil and Grease Collection' – a line of denim that takes
its inspiration from the garage mechanic's overalls – and the 'Permanently
Creased Collection' – which has wrinkles and creases that normally
appear after years of wear. These jeans are available in boot cut, low
waist and belt less frayed styles.
Departmental Stores:
Departmental Stores are expected to take over the apparel business

from exclusive brand showrooms. Among these, the biggest success is K.
Raheja's Shoppers Stop, which started in Mumbai and now has more than
seven large stores (over 30,000 sq. ft) across India and even has its own in
store brand for clothes called Stop!
The foundation of Shoppers' Stop was laid on October 27, 1991 by

the K. Raheja Corp. group of companies. Being amongst India's biggest
hospitality and real estate players, the Group crossed yet another
milestone with its lifestyle venture - Shoppers' Stop.
Specialty Stores:
Chains such as the Bangalore based Kids Kemp, the Mumbai

books retailer Crossword, RPG's Music World and the Times Group's
music chain Planet M, are focusing on specific market segments and have
established themselves strongly in their sectors.
Planet M:
Planet M is an Indian music retail store founded by The Times

Group (BCCL). It was sold to Next Retail India Ltd. of Mumbai, the retail
arm of Videocon, in Nov 2007.[1][2] It is present in many cities (140-plus
locations) all over India. These stores are mainly known for selling music
and movies and related accessories. They also sell gaming consoles and

handhelds like PlayStation Portable, PS2, PS3 and Xbox 360. Planet M is
also a new entrant in the mobile retail business. They offer a wide range
of mobile handsets with lucrative schemes.
Discount Stores:
A discount store sells products at a lower price by reducing its own

margins. This type of stores target high volumes to ensure profitability.
Supermarkets:
These are similar to department stores but with a focus on food and
household maintenance products. This is more of a self-service operation
wherein a customer just goes and picks what he wants. Food Bazaar’s
core concept is to create a blend of a typical Indian Bazaar and
International supermarket atmosphere with the objective of giving the
customer all the advantages of Quality, Range and Price associated with
large format stores and also the comfort to See, Touch and Feel the
products.
Non-Stores Kind of Retailing:
• Direct Selling
• Direct Marketing
• Television Shopping
• Cataloguing
• Net Marketing
• Trends In Retailing
Experimentation with Formats:
Retailing in India is still evolving and the sector is witnessing a

series of experiments across the country with new formats being tested

out; the old ones tweaked around or just discarded. Some of these are
listed in Table below.
Table No. 3.1
Retailer Current Format Experimenting With New Formats
Shoppers' Department Store Quasi-mall

Stop
Ebony Department Store Quasi-mall, smaller outlets, adding

food retail
Crossword Large bookstore Corner shops
Pyramid Department Store Quasi-mall, food retail
Pantaloon Own brand store Hypermarket
Subhiksha Supermarket Considering moving to self service
Vitan Supermarket Suburban discount store
Food world Food supermarket Hypermarket, Food world express
Globus Department Store Small fashion stores
Bombay Aggregation of Kiranas

Bazaar
Efoodmart Aggregation of Kiranas
Metro Cash and carry
S Kumar's Discount store
Retailers are also trying out smaller versions of their stores in an

attempt to reach a maximum number of consumers. Crossword
bookstores are experimenting with Crossword Corner, to increase reach
and business from their stores. Food World is experimenting with a
format of one-fourth the normal size called Food World Express.

Emergence Of Discount Stores:
What does Subhiksha in Chennai, Margin Free in Kerala and

recent entrants like Bombay Bazaar in Mumbai, RPG's - Giant in
Hyderabad, Big Bazaar in Kolkata, Hyderabad and Bangalore have in
common? Their products are below MRP. Discount stores have finally
arrived in India and they are expected to spearhead the revolution in
organization retailing. Though this segment is growing, it is small
compared to international standards where around 60 per cent of the
business comes from this format.
Internationally, the largest retailer in the world Wal-Mart is a

discounter. These discount stores have advantages of price, assortment
dominance and quality assurance and have the ability to quickly build
scale and pass on the benefits. However, the success would be for
retailers who are able to build the scale fast and manage their operations
efficiently while offering value to the customer consistently.9
Unorganised Retailing Is Getting Organised :
To meet the challenges of organized retailing that is luring

customers away from the unorganized sector, the unorganized sector is
getting organized. 25 stores in Delhi under the banner of Provision mart
are joining hands to combine monthly buying. Bombay Bazaar and
Efoodmart have also been formed which are aggregations of Kiranas.
Technology in Retail:
Over the years as the consumer demand increased and the retailers
geared up to meet this increase, technology evolved rapidly to support
this growth. The hardware and software tools that have now become
almost essential for retailing can be into 3 broad categories.

1) Customer Interfacing Systems:
Bar Coding & Scanners:
Point of sale systems use scanners and bar coding to identify an

item, use pre-stored data to calculate the cost and generate the total bill
for a client. Tunnel Scanning is a new concept where the consumer
pushes the full shopping cart through an electronic gate to the point of
sale. In a matter of seconds, the items in the cart are hit with laser beams
and scanned. All that the consumer has to do is to pay for the goods.
Payment:
Payment through credit cards has become quite widespread and

this enables a fast and easy payment process. Electronic cheque
conversion, a recent development in this area, processes a cheque
electronically by transmitting transaction information to the retailer and
consumer's bank. Rather than manually process a cheque, the retailer
voids it and hands it back to the consumer along with a receipt, having
digitally captured and stored and image of the cheque, which makes the
process very fast.
Internet
Internet is also rapidly evolving as a customer interface, removing

the need of a consumer physically visiting the store.
Operation Support Systems:
Enterprise Resource Planning (Erp) Systems:
Various ERP vendors have developed retail-specific systems

which help in integrating all the functions from warehousing to
distribution, front and back office store systems and merchandising. An
integrated supply chain helps the retailer in maintaining his stocks,
getting his supplies on time, preventing stock-outs and thus reducing his
costs, while servicing the customer better.

CRM Systems:
The rise of loyalty programs, mail order and the Internet has
provided retailers with real access to consumer data. Data warehousing &
mining technologies offers retailers the tools they need to make sense of
their consumer data and apply it to business. This, along with the various
available CRM (Customer Relationship Management) Systems, allows
the retailers to study the purchase behavior of consumers in detail and
grow the value of individual consumers to their businesses.
Advanced Planning & Scheduling Systems:
APS systems can provide improved control across the supply

chain, all the way from raw material supplier’s right through to the retail
shelf. These APS packages complement existing (but often limited) ERP
packages. They enable consolidation of activities such as long term
budgeting, monthly forecasting, weekly factory scheduling and daily
distribution scheduling into one overall planning process using a single
set of data. Leading manufacturers, distributors and retailers and
considering APS packages such as those from i2, Manugistics, Bann,
MerciaLincs and Stirling-Douglas.
3) Strategic Decision Support Systems :
Store Site Location -
Demographics and buying patterns of residents of an area can be

used to compare various possible sites for opening new stores. Today,
software packages are helping retailers not only in their location decisions
but in decisions regarding store sizing and floor-spaces as well.
Visual Merchandising:
The decision on how to place & stack items in a store is no more

taken on the gut feel of the store manager. A larger number of visual
merchandising tools are available to him to evaluate the impact of his

stacking options. The SPACEMAN Store Suit from AC Nielsen and
ModaCAD are example of products helping in modeling a retail store
design.
Growth of Retail industry Maharashtra:
An increasing number of people in Maharashtra are turning to the

services sector for employment due to the relative low compensation
offered by the traditional agriculture and manufacturing sectors. The
organized retail market is growing at 3.5 percent annually while growth
of unorganized retail sector is pegged at 6 percent. The Retail Business in
Maharashtra is currently at the point of inflection. Rapid change with
investments to the tune of US $ 25 billion is being planned by several
Maharashtra and multistate companies in the next 5 years. It is a huge
industry in terms of size and according to management consulting firm
Techno Park Advisors Pvt. Ltd., it is valued at about US $ 350 billion.
Organized retail is expected to garner about 16-18 percent of the total
retail market (US $ 65-75 billion) in the next 5 years. According to the
tenth report of GRDI of AT Kearney, Maharashtra is having a very
favorable retail environment and it is placed at 4th spot in the GRDI. The
main reasons behind that is the 9% real GDP growth in 2010, forecasted
yearly growth of 8.7% through 2016, high saving and investment rate and
increased consumer spending. According to report, organized retail
accounts for 7% of Maharashtra’s roughly $435 billion retail market and
is expected to reach 20% by 2020. Food accounts for 70% of Maharashtra
retail, but it remains under penetrated by organized retail. Organized retail
has a 31% share in clothing and apparel and continues to see growth in
this sector. A report by Boston Consulting Group has revealed that the
country’s organized retail is estimated at US $ 28 billion with around 7%
penetration. It is projected to become a US $ 260 billion business over the
next decade with around 21% penetration. The analysts believe that the
sector is likely to show significant growth of over 9% over the next ten

years and also see rapid development in organized retail format with
proportion likely to reach more
Respectable 25%by 2018. The BMI Maharashtra Report for the

first quarter of 2012 released forecasts that total retail sales with growth
from US $ 422.09 billion in 2011 to US $ 825.46 billion by 2015.The
report highlights strongly underlying economic growth, population
expansion, increasing disposable income and rapid emergence of
organized retail infrastructure as major factors behind the forecast growth.
According to department of Industry Policy and Promotion Cumulative,
FDI inflows in single brand retail trading stood at US$ 44.45 million
during April 2000 to September 2011. Maharashtra retail sector is
wearing new clothes and with a three year compounded annual growth
rate of 46-64%, retail is the fastest growing sector in the Maharashtra
economy. The sector is the second largest employer after agriculture,
employing more than 35 million people with wholesale trade generating
an additional employment to 5.5 million crore. The enormous growth of
retail industry has created a huge demand for real estate. Property
developers are creating retail real estate at an aggressive pace. According
to report titled “Maharashtra Organized Retail Market 2010”, published
by Knight Frank, during 2010-12, around 55 million square feet of retail
space will be ready in Mumbai, Nasik, Aurangabad and Pune. Besides
between 2010 and 2012 the organized retail real estate will be grown
from existing 41 million square feet to 95 million square feet. The total
no. of shopping mall is expected to expand at CAGR of 18.9% by 2015.
Hypermarket, currently accounting for 14% of mall space is expected to
witness high growth. Industry experts predict that the next phase of
growth in the retail sector will emerge from the rural market. By 2012, the
rural retail market is projected to have a total of more than 50% market
share.

Maharashtra's retail market is expected to be worth about US$ 410
billion, with 5 per cent of sales through organized retail, meaning that the
opportunity in Maharashtra remains immense. Retail should continue to
grow rapidly—up to US$ 535 billion in 2013, with 10 per cent coming
from organized retail, reflecting a fast-growing middle class, demanding
higher quality shopping environments and stronger brands, according to
the report ‘Expanding Opportunities for Global Retailers’, released by A
T Kearney.
Table No:-3.2
Share of Retail Trade in Gross Domestic Product (G.D.P.) in

Maharashtra
Year % age share of Retail Sector

2007 8%
2009 12%
2011 22%
Challenges Faced by the Retail Industry in Maharashtra
Interstate Standards:
Even though Maharashtra has well over 5 million retail outlets of

different sizes and styles, it still has a long way to go before it can truly
have a retail industry at par with Interstate standards. This is where
Maharashtra companies and Interstate brands have a huge role to play.
Inefficient supply chain management:
Maharashtra retailing is still dominated by the unorganized sector

and there is still a lack of efficient supply chain management.
Maharashtra must concentrate on improving the supply chain
management, which in turn would bring down inventory cost, which can
then be passed on to the consumer in the form of low pricing.

Lack of Retail space:
Most of the retail outlets in Maharashtra have outlets that are less
than 500 square feet in area. This is very small by Interstate Standards.
Cultural Diversity:
Maharashtra's huge size and socio economic and cultural diversity

means there is no established model or consumption pattern throughout
the country. Manufacturers and retailers will have to devise strategies for
different sectors and segments which by it would be challenging.
Real estate issues:
The enormous growth of the retail industry has created a huge

demand for real estate. Property developers are creating retail real estate
at an aggressive pace. With over 1,000 hypermarkets and 3,000
supermarkets projected to come up by 2011, Maharashtra will need
additional retail space of 700,000,000 sq ft (65,000,000 m2) as compared
to today.
Human resource problems:
Trained manpower shortage is a challenge facing the organized

retail sector in Maharashtra. The Maharashtra retailers have difficulty in
finding trained person and also have to pay more in order to retain them.
This again brings down the Maharashtra retailers profit levels.
Frauds in Retail:
It is one of the primary challenges the companies would have to

face. Frauds, including vendor frauds, thefts, shoplifting and inaccuracy
in supervision and administration are the challenges that are difficult to
handle. This is so even after the use of security techniques, such as
CCTVs and POS systems. As the size of the sector would increase, this

would increase the number of thefts, frauds and discrepancies in the
system.
Challenges with Infrastructure and Logistics:
The lack of proper infrastructure and distribution channels in the

country results in inefficient processes. This is a major hindrance for
retailers as a non-efficient distribution channel is very difficult to handle
and can result in huge losses. Infrastructure does not have a strong base in
Maharashtra. Urbanization and globalization are compelling companies to
develop infrastructure facilities. Transportation, including railway
systems, has to be more efficient. Highways have to meet global
standards. Airport capacities and power supply have to be enhanced.
Warehouse facilities and timely distribution are other areas of challenge.
To fully utilize Maharashtra's potential in retail sector, these major
obstacles have to be removed.
Future Prospects of Organized Retail Sector in Maharashtra:
Maharashtra has been ranked as the third most attractive state for
retail investment among 30 emerging markets by the US-based global
management consulting firm.
AT Kearney’s study on Global Retailing Trends Found that Maharashtra

is the least competitive as well as least saturated of all major Global
markets. This implies that there are significantly low entry barriers for
players trying to setup base in Maharashtra, in terms of competitive
landscape. The report further stated that Global Retailer such as Wal-
Mart, Carrefour, Tesco and Casino would take advantage of more
favorable FDI rules that are likely to be introduced in Maharashtra. A
good talent pool, unlimited opportunities, huge markets and availability
of quality raw material at cheaper cost is expected to make Maharashtra
overtake the world best retail economies by 2042. The sector is expected
to see an investment of over $30billion within next 5 years and putting

modern retail in the country to $175-200 billion, according to Techno
park estimates. Interstate retailers see Maharashtra as the last retailing
frontier left as the Chinas retail sector is becoming as saturated. Domestic
players are selectively growing in Maharashtra-postponing aggressive
expansion plans, adding stores judiciously and shifting gears to tier 2 and
3 cities.
Challenges faced by the unorganized retailers in Maharashtra State
Some of the challenges faced by the unorganized retailers are as

follows:
Inefficient Supply Chain Management:
Indian retailing is still dominated by the unorganized sector and

there is still a lack of efficient supply chain management. India must
concentrate on improving the supply chain management, which in turn
would bring down inventory cost, which can then be passed on to the
consumer in the form of low pricing.
Cultural Disparity:
India's huge size and socio economic and cultural diversity means
there is no established model or consumption pattern throughout the
country. Manufacturers and retailers will have to devise strategies for
different sectors and segments which by itself would be challenging.
Human Resource Problems:
Trained manpower shortage is a challenge facing the organized

retail sector in India. The Indian retailers have difficulty in finding trained
person and also have to pay more in order to retain them. This again
brings down the Indian retailers profit levels.
Frauds in Retail:
It is one of the primary challenges the unorganized retailers would

have to face. Frauds, including vendor frauds, thefts, shoplifting and

inaccuracy in supervision and administration are the challenges that are
difficult to handle. This is so even after the use of security techniques,
such as CCTVs and POS systems. As the size of the sector would
increase, this would increase the number of thefts, frauds and
discrepancies in the system.
Red Tape:
Getting various government approvals. This implies that the

retailer would have to go through different layers of Government
departments before getting the go ahead. Political Risk: The largest
opposition party in India has opposed FDI in retail and some of its leaders
have indicated that they will scrap the policy if their party comes to
power. A political change in state and central governments puts a lot of
political risk on investment in retail.
Opportunities for Unorganized retail in Maharashtra State
India’s booming economy is a major source of opportunity. It is

the third largest in the world in terms of purchasing power. India is the
second fastest growing major economy in the world.
a. Maharashtra huge population has a per capita income of Rs.44,

345.
b. The proportionate increase in spending with earnings is another

source of opportunity.
c. With the Maharashtra economy now expected to grow at over 8%

and with average salary hikes of about 15%, manufacturers and
retailers of consumer goods and services can expect a major boost
in consumption.
d. The Demography Dynamics are also favorable as approximately

60 per cent of Maharashtra population is below the age of 30.

e. Increasing instances of Double Incomes in most families coupled
with the rise in spending power.
f. Increased urbanization 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.
g. With increased automobile penetration and an overall

improvement in the transportation infrastructure, covering
distances has become easier than before. Now a customer can
travel miles to reach a particular shop, if he or she sees value in
shopping from a particular location.
There is ample growth for unorganized retail sector though some

tough challenges exist such as inefficient supply chain management,
getting approvals from government, adoption of new technologies and E-
commerce. b. Some of the main concerns of the unorganized retail sector
were variety, special offers, home delivery, ambience and price. c. So
finally we can say that there is ample growth for retail sector though some
tough challenges exist. Retail can overcome these challenges by grabbing
the opportunities available.
Concluding Remark:-
Acceptance of cosmetics for frequent use has been on the rise

among Indian male consumers. The process of evaluating and selecting
the most appropriate or suitable types and brands in male cosmetics
cannot be very simple. It is because such products have been bought with
a lot of expectations and there is always a risk of dissatisfaction and
dissonance and sense of uncertainty. Cosmetics, as specially targeted for
male members in India are used for enhancing the social value in terms of
outwardly appearance of the individuals. According to industry sources,

the total size of the Indian retail beauty and cosmetics market is currently
estimated at $1.5 billion, with fragrance comprising the largest
component. Color cosmetics account for 14%, fragrances - 21%, hair care
- 19%, skin care - 17%, beauty services - 13%, herbal products - 9%,
others - 7%. If the overall beauty and wellness market is considered,
which includes beauty services, the market is estimated to be around
$2.68 billion. The cosmetics market in India is growing at 15-20%
annually, twice as fast as that of the United States and European markets.
The growth rate in the cosmetics market reflects an increasing demand for
beauty care products in India. Premium global brands are gaining sales as
Indian consumers gain exposure to the global media and move from
functional items to the advanced and specialized cosmetic products. Even
with a good growth rate, however, penetration of cosmetic and toiletries is
very low in India. Current per capita expenditure on cosmetics is
approximately $11.00 as compared to $40.00 in other Asian countries.

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Chapter-Iii Problems and Prospects of Retail Industry in Maharashtra State

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Chapter-Iii Problems and Prospects of Retail Industry in Maharashtra State

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CHAPTER-III

PROBLEMS AND PROSPECTS OF RETAIL INDUSTRY

Levy and Weits in their book Retailing Management defines

Problems and prospects of retail industry in Maharashtra State Page 61

Problems and prospects of retail industry in Maharashtra State Page 62

1) Buying and Assembling:

A retailer deals in different variety of goods which he purchases

After assembly of goods from different suppliers, the retailers preserve

The end objective of the retailer is to sell the goods to consumers. He

He caters to the needs of the customers even by supplying them goods on

A retailer has to bear different type of risks in relation to goods. While in

6) Grading and Packing:

Problems and prospects of retail industry in Maharashtra State Page 63

8) Helps In Introducing New Products:

Without the services of retailers, new products cannot be

9) Window Display and Advertising:

Services Performed By Retailers:

Retailers provide important services to both the wholesalers and

These can be explained as under:

(I) Services To Wholesalers:

a) They supply invaluable information with regard to tastes,

b) By taking over the function of retailing from the wholesalers and

c) Many retailers usually place orders in advance with the

e) Without the services of the retailers a new product cannot be

II) Services to Consumers:

a) The retailers assemble variety to produces from the wholesaler and

b) They provide credit facilities to the consumers thereby helping

c) They extend personalized service to the consumers and try to give

d) They introduce new products to the consumers and also guide

f) They allow cash discount to the consumers on the products sold.

g) They buy and stock products best suited to the consumers.

h) They give valuable advice regarding the use and maintenance of

i) They cater to the needs of every type of consumer by keeping in

j) They supply fresh products to the consumers.

Problems and prospects of retail industry in Maharashtra State Page 65

Traditional Format Retailers

• Kiranas: Traditional Mom and Pop Stores

Classification based on ownership

• Independent Retailer: An independent retailer is one who owns

• A chain retailer or a corporate retail chain: When two or more

• Franchising: A franchise is a contractual agreement between the

• Leased Department: They are also termed as shop in shops.

• Consumer co-operative: A consumer co-operative is a retail

Problems and prospects of retail industry in Maharashtra State Page 66

• Convenience store: They are relatively small stores located near

• Department store: It is large scale retail outlet, often multileveled

Problems and prospects of retail industry in Maharashtra State Page 67

Strategy- The Retail Perspective:

A strategy in commercial parlance means to plan or a method by

The first strategy of retailer is to select store location and it should

Elements of retail price

Price is an internal part of retail marketing mix. It is the factor, which is

Problems and prospects of retail industry in Maharashtra State Page 68

This involves choice of target market and differential advantage.

Novelty in the process offered to the shopper:

The way a store facilitates a shopper to make his choice of

Problems and prospects of retail industry in Maharashtra State Page 69

Novelty in the product/product assortment offered to the shopper:

A retail shop has to be known for being of a certain type. A store

Problems and prospects of retail industry in Maharashtra State Page 70

For some products like groceries, consumers do not like to go to a

Problems and prospects of retail industry in Maharashtra State Page 71