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The distribution of consumer products begins with the producer and ends at the ultimate consumer. Between the producer and the consumer there is a middleman---the retailer, who links the producers and the ultimate consumers. Retailing is defined as a conclusive set of activities or steps used to sell a product or a service to consumers for their personal or family use. It is responsible for matching individual demands of the consumer with supplies of all the manufacturers. The word ‘retail’ is derived from the French work retailer, meaning ‘to cut a piece off’ or ‘to break bulk’. A retailer is a person, agent, agency, company, or organization which is instrumental in reaching the goods, merchandise, or services to the ultimate consumer. Retailers perform specific activities such as anticipating customer’s wants, developing assortments of products, acquiring market information, and financing. A common assumption is that retailing involves only the sale of products in stores. However, it also includes the sale of services like those offered at a restaurant, parlour, or by car rental agencies. The selling need not necessarily take place through a store. Retailing encompasses selling through the mail, the Internet, door-to-door visits---any channel that could be used to approach the consumer. When manufacturers like Dell computers sell directly to the consumer, they also perform the retailing function. Retailing has become such an intrinsic part of our everyday lives that it is often taken for granted. The nations that have enjoyed the greatest economic and social progress have been those with a strong retail sector. Why has retailing become such a popular method of conducting business? The answer lies in the benefits a vibrant retailing sector has to offer—an easier access to a variety of products, freedom of choice and higher levels of customer service. As we all know, the ease of entry into retail business results in fierce competition and better value for customer. To enter retailing is easy and to fail is even easier. Therefore, in order to survive in retailing, a firm must do a satisfactory job in its primary
role i.e., catering to customers. Retailers’ cost and profit vary depending on their type of operation and major product line. Their profit is usually a small fraction of sales and is generally about 9-10%. Retail stores of different sizes face distinct challenges and their sales volume influences business opportunities, merchandise purchase policies, nature or promotion and expense control measures. Over the last decade there have been sweeping changes in the general retailing business. For instance, what was once a strictly made-to-order market for clothing has now changed into a ready-to-wear market. Flipping through a catalogue, picking the right colour, size, and type of clothing a person wanted to purchase and then waiting to have it sewn and shipped was the standard practice in the earlier days. By the turn of the century some retailers set up a storefront where people could browse, while new pieces were being sewn or customized in the back rooms. Almost all retail businesses have undergone a similar transition over the years.
CHARACTERISTICS OF RETAILING
Retailing can be distinguished in various ways from other businesses such as manufacturing. Retailing differs from manufacturing in the following ways: • There is direct end-user interaction in retailing. • In is the only point in the value chain to provide a platform for promotions. • Sales at the retail level are generally in smaller unit sizes. • Location is a critical factor in retail business. • In most retail businesses services are as important as core products. • There are a larger number of retail units compared to other members of the value chain. This occurs primarily to meet the requirements of geographical coverage and population density.
Direct Interaction with Customers Retail businesses have a direct interaction with end-users of goods or services in the value chain. They act as intermediaries between end-users and suppliers such as wholesalers or manufacturers. Therefore, they are in a position to effectively communicate the response and changing preferences of the consumers to the suppliers or sales persons of the company. This helps the manufacturers and markets to redefine their product and change the components of its marketing strategy accordingly. Manufacturers require a strong retail network both for reach of the product and to obtain a powerful platform for promotions and point-of-purchase advertising. Realizing the importance of retailing in the entire value chain, many manufacturers have entered into retail business by setting up exclusive stores for their brands. This has not only provided direct contact with customers, but has also acted as advertisement for the companies and has provided
Credit verification. Point-of-purchase Display and Promotions A significant relevant chunk of retail sales comes from unplanned or impulse purchases. Therefore. 4 . display. such as in the case or consumer durables. impulse purchases of the shopper is a vital area that every retailer must tap into. Hence. Due to lower disposable incomes. Retailing provides extensive sales people support for products which are information intensive. Many consumers buy products in small quantities for household consumption. Lower Average Amount of Sales Transaction The average amount of sales transaction at retail point is much less in comparison to the other partners in the value chain. Since a lot of retail products are low involvement in nature. Inventory management becomes a challenge for retailers as a result of the many minor transactions with a large number of customers.the manufacturers with bargaining power with respect to other retailers who stocked their product. some consumer segments in India even buy grocery items on a daily basis rather than a weekly or a monthly basis. order levels and the retailer has to keep a tight control on costs associated with each transaction in the selling process. gift-wrapping and promotional incentives all add up to the costs. snack foods and magazines can sell much more quickly if they are placed in a high visibility and high traffic location. point-ofpurchase merchandise. employment of personnel. retailers must take care of determining average levels of stock. One way to resolve this is for the retail outlets to be able to attract the maximum possible number of shoppers. Many do not look at ads before shopping. value-added activities like bagging. Studies have shown that shoppers often do not carry a fixed shopping list and pick up merchandise based on impulsive or situational appeal. Impulse goods like chocolates. store layou8t and catalogues become important.
The number of operation units in retail is the highest compared to other constituents of the value chain. supply of merchandise and store image-related factors in locating the retail outlet. Manufacturers decide the location on the basis of availability of factors of productions and market. primarily to meet the needs for geographic reach and customer accessibility. Similarly. 5 . retailers consider factors like potential demand.Larger Number of Retail Business Units Location of retail store plays an important role compared to other business units.
they specialize in types of assortment offered and the market to which the offering is made. buying them in sufficiently large quantities and selling them to consumers in small units. sizes and brands from just one location. Westside provides clothing and accessories. suppliers and consumers. in contrast. 15.000 different items from 500 companies. they perform various functions like sorting. Retailers are able to balance the demands of both sides. storage. If each manufacturer had a separate store for its own products. wholesalers. by collection an assortment of goods from different sources. as a channel of communication. The above process is referred to as the sorting process. while a chain like Nilgiris specializes in food and bakery items. advertising and certain additional services. SORTIONG Manufacturers usually make one or a variety of products and would like to sell their entire inventory to a few buyers to redu7ce costs. prefer a large variety of goods and services to choose from and usually buy them in small quantities. In this context. Supermarkets in the US offer. 6 . Shoppers’ Stop targets the elite urban class.FUNCTIONS OF RETAILING Retailers play a significant role as a conduit between manufacturers. Through this process. holding stock. breaking bulk. customers would have to visit several stores to complete their shopping. on and average. While all retailers offer an assortment. retailers undertake activities and perform functions that add to the value of the products and services sold to the consumer. while Pantaloons is targeted at the middle class. Final consumers. Customers are able to choose from a wide range of designs.
Retailers maintain an inventory that allows for instant availability of the product to the consumers. 7 . ADDITIONAL SERVICES Retailers ease the change in ownership of merchandise by providing services that make it convenient to buy and use products. meaning ‘to cut a piece off’. after-sales service and dealing with consumer complaints are some of the services that add value to the actual product at the retailers’ end. Retailers also offer credit and hire-purchase facilities to the customers to enable them to buy a product now and pay for it later. The word retailing is derived from the French word retailer. Retailers fill orders. which are then tailored by the retailers into smaller quantities to meet individual consumption needs. HOLDING STOCK Retailers also offer the service of holding stock for the manufacturers. It helps to keep prices stable and enables the manufacturer to regulate production. promptly process. Retail essentially completes transactions with customers. manufacturers and wholesalers typically ship large cartons of the product. Consumers can keep a small stock of products at home as they know that this can be replenished by the retailer and can save on inventory carrying costs. Salespeople are also employed by retailers to answer queries and provide additional information about the displayed products. The display itself allows the consumer to see and test products before actual purchase. Providing product guarantees.BREAKING BULK Breaking bulk is another function performed by retailing. To reduce transportation costs. deliver and install products.
The manufacturer can then modify defective or unsatisfactory merchandise and services. in their turn. This also works the other way round in case the number of retailers is small. shoppers learn about the characteristics and features of a product or services offered. TRANSPORT AND ADVERTISING FUNCTIONS Small manufacturers can use retailers to provide assistance with transport. The number of functions performed by a particular retailer has a direct relation to the percentage and volume of sales needed to cover both their costs and profits. As a result of these functions. advertising and pre-payment of merchandise. delivery delays. and customer complaints. retailers are required to perform the following activities: 8 . Manufacturers. From advertisements. learn of sales forecasts.CHANNEL OF COMMUNICATION Retailers also act as the channel of communication and information between the wholesalers or suppliers and the consumers. salespeople and display. storage.
g. layout and the level of compatibility between the existing merchandise. They should be distinguished on account of physical dimensions and attributes e. For example. deals in multiple product categories along with all possible variants of brands. on the other hand retailers from organized retailing depend on a detailed study of past trends and future projections. colour or flavour. a leading food supermarket positioned as a one-stop shopping centre. Retailers need to consider certain factors while devising assortment plans for their stores: profitability associated with particular merchandise mix. The small retailer takes assortment decision on the basis of his experience.ACTIVITIES PERFORMED BY RETAILERS Retailers undertake various business activities and perform functions that add value to the offerings they make to their target segments. Retailers have to select the combination of assortments from various categories. Retailers provide convenient location.. The assortments must include substitutable items of multiple brands and price points. stock keeping units. stock and appropriate mix of merchandise in suitable packages in accordance with the needs of customers. store image. FoodWorld. The four major activities carried out by retailers are: 1) Arrange for assortment of offerings 2) Breaking quantity 3) Holding stock 4) Extending services ARRANGING ASSORTMENT An assortment is a retailer’s selection of merchandise. and physical attributes in order to meet the expectations of their consumers and survive in the 9 . It includes both the depth and breadth of products carried.
in small towns of India most retailers have arrangements with the nearby warehouses to stock the goods. HOLDING STOCK To ensure the regular availability of the offerings retailers maintain appropriate levels of inventory. whereas. Consumers normally depend on the retailers directly to replenish their stocks at home. retailers receive large quantities of sacks and cases of merchandise from suppliers to reduce their transportation costs. BREAKING BULK Breaking bulk means physical repackaging of the products by retailers in small unit sizes according to customer’s convenience and stocking requirements. Retailers in the organized sector. Even in the earlier days of generic and commodity-based trading most of the retailers used to perform this important function in the value chain. Generally. such as FMCG and ready-to-wear apparel. a grocery chain in south India has impressive assortments of only the fast moving brands rather than all available variants in the market. Whereas. to a 10 . too little stock will hamper the sales volume. This entire function of the retailers adds value to the offerings not only for the end customers but also for the suppliers in the value chain. In order to meet their customers’ requirements retailers have to break or arrange the bulk into convenient units. Normally. size and store image of their stores. retailers. Retailers have to face the negative consequences of holding unwanted levels of stock —for instance. on periodic basis. maintain the required levels of stock to meet the regular or seasonal fluctuations in the demand. Their assortment plan is governed by location. Subhiksha. This function receives negligible attention from the retailers now due the introduction of new product categories. Retailers need to maintain equilibrium between the range or variety carried and the sales which it gives rise to.business. Therefore. Some are so small that they have to stock only on the shop floor. too much stock will increase the retailer’s cost of operation.
and information about the concerned target segment to the suppliers. reach to the ultimate customers. after-sales services and information regarding new products to their customers. EXTENDING SERVICES Retailing provides multiple services to immediate customers and other members of the value chain. home delivery.certain extent. the first organized retail chain of wristwatches in India. Retailers offer credit. At the same time. At the same time. they provide stocking place. started by leading watch manufacturers Titan. The set of services extended by particular retailers may be part of their core product offerings or it may be ‘add on’ to their product or service. For example. as after-sales service is considered to be an integral ingredient of the watch purchase. set up in all its stores. service centres with proper equipment and trained manpower. thereby making the shopping experience convenient and enjoyable. which reduces the burden of maintaining high levels of stocks. This has not only diluted the relevance of service providers in the unorganized sector but has also enhanced the confidence of the customers in the retai9l services provided by the particular retail chain. are using effective software packages for maintaining adequate levels of inventory. Time Zone. retailers avail of just-in-time deliveries with the help of efficient consumer response systems. 11 .
Because of their size. There is no universally accepted method of classifying a retail outlet.CATEGORIZING RETAILERS Categorizing retailers helps in understanding the competition and the frequent changes that occur in retailing. Some of these include classifying on the basis of • Number of outlets • Margin Vs Turnover • Location • Size. Small chains can use economies of scale while tailoring merchandise to local needs. to carry out 12 . Generally. a greater number of outlets add strength to the firm because it is able to spread fixed costs. chain stores account for nearly 95% of general merchandise stores. The number of outlets operated by a retailer can have a significant impact on the competitiveness of a retail firm. although many categorization schemes have been proposed. A chain store could have either a standard stock list ensuring that the same merchandise is stocked in every retail outlet or an optional stock list giving the outlets the advantage of changing the merchandise according to customer needs in the area. such as wholesalers. over a greater number of stores in addition to acquiring economies of purchase. chain stores are often channel captains of the marketing channel—captains can influence other channel partners. In the United States. Big chains operating on a national scale can save costs by a centralized system of buying and accounting. for practical purposes a chain store refers to a retail firm which has more than 11 units. such as advertising and managers’ salaries. for example. While any retailer operating more than one store can be technically classified as a chain owner.
huge buying power. Customer contact within the niche market must be characterized by ‘high-touch’ service. from inventory selection to store layout. and sophisticated forecasting and inventory systems. including regional or national reputation. Branding is important to them. While value is important. Pricing is often a key area of focus for these retailers. such as extended payment terms and special package sizes. 13 . They usually do not offer special services. the consistency in their products and services. price may be less important. Their prime locations. the fact that they are open when people can and want to shop and the clear consistent image and identity they develop and maintain challenge the abilities and resources of many small retailers. Staff turnover is extremely high.activities they might not otherwise engage in. are a must. The niche should be developed on the basis of new or unusual product offerings. However. They tend to stock a narrow range of inventory that sells well and maintain an extensive inventory of the fast selling products. Efficient operations. Big stores have many strengths. sales staff has minimal product knowledge. Big stores focus on large markets where their customers live and work. Independent retailers can co-exist and flourish in the shadow of the big chains by developing a niche within the diverse market. Perhaps their biggest advantage is their knowledge in every aspect of their business. They have competitive weaknesses that small retailers can exploit. large retailers are not perfect. They use technology to learn more about their customers and target them with point-of-sale machines interactive kiosks. including precise buying practices. The key factor is innovation: stores that do not change will perish. Most offer the same standardized assortments of products nationally. Often. Most large retailers have little connection with the community they serve. Local managers have little say in inventory selection. vast inventory and hassle-free return and exchange policies. superior service and overall quality. Larger companies are often slow to recognize and react to changes in their local markets.
• Maintain essential inventory. On the basis of this. a retailer sells his inventory. • Understand the significance of the Internet. • Provide extraordinary service. Gross margin and inventory turnover is another means of classifying retailers. • Charge regular prices and avoid discounting (ensure requisite mark-up). exemplified by Amazon. Inventory turnover refers to the number of times per year. • Move to a narrower niche market and stop competing directly with the big retailers. Gross margin is net sales minus the cost of goods sold and gross margin percentage is the return on sales. The successful independent retailers embrace the following principles: • Be prepared for change. • Learn more about customers and include best customers in a database. • Employ the best possible staff. A 30% margin implies that a retailer generates Rs 30 for every Rs 100 sales that can be used to pay operating expenses. on average. Jewellery stores and appliance stores are examples of high margin low turnover stores and only a few retailers achieve high margin high turnover. retailers are classified as low margin low turnover—those that cannot survive the competition—and low margin high turnover. • Buy with precision and search out specialty suppliers. • Focus on profit instead of volume (be ready to lose an occasional sale). • Invest appropriately in advertising and promotion.The road to success for the independent retailer lies in doing all the things those big chain stores cannot or will not do. These retailers are in the best position to combat competition because their high turnover allows 14 .com.
Retailers are no longer satisfied with traditional locations within a city’s business district but are on the constant lookout for alternate locations to reach customers. With the advent of the Internet. generally within a metropolitan area. One of the old means of classification of retailers is by location. this area of retailing is likely to undergo tremendous changes in the coming years. the Internet may make size an obsolete method of comparison. with big retailers having lower operational costs per dollar than smaller players. Size is often used as a yardstick to classify retailers because costs often differ on the basis of size. in this sphere too. However.them to withstand price wars. retailers are testing unorthodox locations to expand their clientele. The drawback of the classification by this method is that service retailers who have no inventory turnover cannot be encompassed. Besides renovating old stores. 15 .
there are also some very big retailers..2. A retail unit could be owned by: • Manufacturer (e.g. consumers owned or co-operative society. parts of a retail chain. RETAIL ORGANIZATION The term retail organization refers to the basic format or structure of a retail business designed to cater to the needs of the end customer..g. owned by manufacturers or wholesalers. 16 . leased departments. Organized retail stores are generally characterized by large. some scholars have started referring to India as a nation of shopkeepers. Mother Dairy milk booths in Delhi) • Government (e.g. From positioning and operating perspectives.g. About 78% of these are small family businesses utilizing only household labour. Retail firms may ..g. Vastra outlet in Rajouri in New Delhi) • Independent retailer (Chanakya Sweet Shop near Hazratganj in Lucknow) • Consumer (consumer owned grocery stores in man y residential societies) • Co-operative society (e. This epithet has its roots in the huge number of retail enterprises in India. professionally managed store formats providing goods and services that appeal to customers. Retail executives must not lose sight of this in playing up their strengths and working around their weaknesses. Recently. company owned retail outlets) • Wholesaler (e. which were over 12 million in 2003.be independently owned. Cottage Emporia) • Ownership shared among franchiser and franchisee (e. each ownership format serves a marketplace niche and presents certain advantages and disadvantages... Archies Gallery) Although most Indian retailers fall in the category of small-scale units. operated as a franchisee. in an ambience that is conducive for shopping and provides a memorable experience to customers.
usually the individual who has the day-to-day responsibility for running the business. retail units are classified on multiple of ownership. useful in the design of retailing strategy. This decision is likely to have long-term implications. It acts 17 .A joint venture is not well defined in the law.CLASSIFICATION OF RETAIL UNITS Conceptual classification of a business unit provides the marketers with strategic guidelines. geographical locations. Retailers Classified on the Basis of Ownership One of the first decisions that the retailer has to make as a business owner is how the company should be structured. so it is important to consult with an accountant and attorney to help one select preferred ownership structure. In a partnership. There are four basic legal forms of ownership for retailers: 1) Sole proprietorship: . 2) Partnership: . These firms are owned by one person. 3) Joint venture: . Besides.The vast majority of small businesses start out as sole proprietorships. Unless incorporated or established as a firm as evidenced by a deed. sometimes at maximum marginal rates. kind of customer interaction level of services provided etc.A partnership is a common format in India for carrying out business activities (particularly trading) on a small or medium scale. Therefore. retail businesses are extremely diverse and there are quite a few types of retail units. two or more people share ownership of a single business. joint ventures may be taxed like association of persons.
18 .The Limited Liability Company (LLC) is a relatively new type of hybrid business structure that is now permissible in most states. 4) Limited liability Company (public and private):. The owners are members.like a general partnership. and the duration of the LLC is usually determined when the organization papers are filed. but is clearly for a limited period of time or a single project.
Retail firms can be classified into five heads on the basis of their respective operational structures: 1) Independent retail unit: . About 78% of these are small family businesses utilizing only household labour. Usually this is done in case of department and specialty stores and also at times.Franchising involves a contractual arrangement between a franchiser (which may be a manufacturer. which allows the franchisee to conduct a given form of business under and establishments name and according to a given pattern of business. 3) Franchising: .The total number of retailers in India is estimated to be over 5 million in 2003. a wholesaler. it usually engages in some level of centralized (or coordinated) purchasing and decision making. 2) Retail Chain: . in discount stores.It refers to department in a retail store that are rented to an outside party. 4) Leased Department or Shop-in-shop:. Operational structure defines the key strategic decision of retail entity.A chain retailer operates multiple outlets (store units) under common ownership. 19 . or a service sponsor) and a retail franchisee. An independent retailer owns one retail unit.Classification of Retailers on the basis of Operational Structure Retail businesses are classified on the basis of their operational and organizational structure. whether to hire employees and manage the distributed sales function internally or to reach customers though franchised outlets owned and operated by local entrepreneurs.
Co-operative outlets are generally owned and managed by co-operative societies.5) Co-operative Outlets: . 20 . In this context the detailed example of Kendriya Bhandar in India.
T Nagar for ready-made garments. and also compete against each other for the same customers. particularly traditional independent retailers or chain stores.Classification of Retailers on the basis or Retail Location Retailers have also been also been classified according to their store location. Poo Kadia for food and vegetables.In this case. Classification of retailers on the basis of location is discussed below: 1) Retailers in a free-standing location: . Govindappan naicleen street for grocery. 3) Retailers in Specialized Markets: . in Chennai. 21 . better visibility from the road. For example. a retailer locates his store in a place where a group o retail outlets. Bunder treet for stationery products. Godown Street is famous for clothes. easy parking and lower property costs. This type of location has several advantages including no competition. low rent. work together to attract customers to their retail area. we also have in India-retailers who prefer specialized markets. For example the Haldiram’s outlet on the Delhi-Jaipur highway and the McDonald’s outlet on Delhi-Ludhiana highway. In India. offering a variety of merchandise. 2) Retailers in a Business-associated Location:.Besides the above location-based classification. Retailers can locate their stores in an isolated place and attract the customers to the store on their own strength—such as a small grocery store or paan shop in a colony.Retailers located at a site which is not connected to other retailers depend entirely on their sore’s drawing power and on the various promotional tools to attract customers. which attracts the customers staying close by. Usman street for jewellery. most of the cities have specialized markets famous for a particular product category.
duty-free shops and newsstands dominated the small amount of commercial space provided at airports. serious efforts are being made to design new airport facilities in order to incorporate substantial amounts of retail space. The key features of airport retailing are: • Large groups of prospective shoppers • Captive audience • Strong sales per square foot of retail space • Strong sales of gift and travel items • Difficulty in replenishment • Longer operating hours • Duty-free shopping possible.4) Airport Retailing: .For quite some time. Lately. 22 .
Tanishq) have all developed a successful retail models. discount clubs (Subhiksha). The existing retail houses are also gearing up to face the emerging competition from the organized sector and the changing outlook of the consumers. For example. redefining. consumer spending is shifting from goods to services.TRENDS IN RETAIL FORMATS Retail industry is continuously going through changes on account of liberalization. At the same time. Big Bazaar). Mass merchandisers (Wal-Mart. globalization and consumer preferences. is a very common retail formats they 23 . Consumers are not only looking for the core products or functional benefits from the retailers but also the non-functional benefits. so-called category killers (Home Depot. and speciality retailers (Time Zone. While multinational retail chains are looking for new markets. across product categories. the competition is fierce. Mom-and-pop Stores and Traditional Kirana Stores The retail sector is changing as new store categories have started dominating the marketplace. manufacturers are identifying. Bikaner and Sagar Ratna have revised their product offerings and atmospherics on the lines of the multinational chains to compete with them and to serve changed expectations of the consumers. are finding the competition intense. respectively). which need to be compatible with their lifestyles. Vishal chain). department stores such as Saks and Federated experienced declining revenues (down 3% and 1% respectively). For example. while Wal-Mart and Target saw revenues grow (by 12% and 10%. But even in the mass-merchandising segment. or evolving new retail formats. In 2002. as is evidenced by Kmart’s bankruptcy announcement in 2002. Accordingly the retailers too are fast adjusting to the changing consumer preferences. most of the traditional eating joints in India such as Haldiram. Small independent stores. the small mom-and-pop stores and the traditional department stores.
24 . Indeed. this is a result of changing shopping patterns and increased competition from discount stores. However. an increase of some 28% over the previous year and for e-tailing to comprise a bigger slice of the overall retail pie (5. Over the last decade or so. Companies like Amazon. which helped pioneer the retail e-commerce concept. Macy’s. Crew. names like Sears.com.com and First and second. E-commerce The amount of retail business being conducted on the Internet is growing every year. they should be ready to expect more bumps as the strong get stronger and the weak get absorbed. It has also come from financial burdens incurred by companies that acquired competing companies and grew too fast. are now being followed by bricks-and-mortar and catalogue retailers like J. Many major retail organizations and manufacturers have online retail stores. and Montgomery Ward dominated malls and downtowns all over America.are also undertaking large scale renovations to appeal and attract their target consumer segments. Penney. however. Forrester Research Agency projects e-commerce revenue to rise to $123 billion in 2004. up from 4. In part.C. these department stores have suffered badly.6%.5% in 2003). Department Stores A few years ago. which are expanding retail e-commerce into new markets. J. It is unlikely that these players will disappear from the market.
particularly in home furnishings and home improvement. and it seems to 25 . Industry experts predict growth in this segment. and Victoria’s Secret. these companies offer earn-and-learn experiences with vendors and distributors before they move onward and upward. Tower Records and The Sports Authority). Where once mom-and-pop and department stores dominated retail.g. And where once shopping malls. They are able to buy bathroom tiles. and merchandise display strategies. electronic goods or pet food in such huge volumes that they can then sell them at prices even fairly large competitors cannot match. Many are so successful that department stores have started to emulate their buying.Discount Stores These are giants such as Wal-Mart (the largest retailer in the world. These. used to be the dominant retail presence lining the nation’s roads. anchored by at least one major department store. with more than a million. have changed the landscape of both the retail industry and America. now the discount retailers and category killers are at the top of the heap. These stores concentrate on one type of merchandise and offer it in a manner that makes it special. The future of this category is better than that of many of the more general discounters. Category Killers These are the giant retailers that dominate one area of merchandise (e. file cabinets. but the same employment caveats apply. Specialty Stores These include Crate & Barrel. Some are very high-end (Louis Vuitton) while others cater to the price-conscious masses (Old Navy). Office Depot. For most job seekers. Target and Kmart. such as Costco. as well as membership warehouses. along with the category killers.. marketing. the Body Shop. employees). now it is the behemoth Wal-Marts and Home Depots.
Promotion and responsibility come quickly to those willing to work hard. such as Amazon. strictly online purveyors with no bricksand.attract many of the best and brightest in retail.com. hugely successful in their own right. and in many of these stores the hand of bureaucracy is not heavy. Traditional retailers like Wal-Mart and Starbucks. have generated enough business to cause top brick-and mortar competitors to come up with their own Internet sites. E-tailers While most retailers have online storefronts. Major players. 26 . have also set up online stores so as not to miss out on the revenue opportunities that the Interned offers.mortar counterparts are hoping to snare a percentage of the retail profit.
Specialty Stores: . In India. commonly part of a retail chain. Shoppers’ Stop and Westside. limited support from sales people etc. Ebony has 7 stores. furniture. offering a broad variety and depth of merchandise. Retail units.VARIETY OF MERCHANDISE MIX The retail merchandising has come a long way in India since the days when general stores (kirana) that stocked everything from groceries to stationery and small shops that sold limited varieties of products (such as clothes. supermarkets. brand stores and discount stores characterized by the variety of merchandise mix offered by a respective retail format. The leading fashion department stores in India are Ebony. LifeStyle.Retailers offering a broad variety of merchandise mix. Discount Stores: . All of them are multiproduct stores. Pantaloon. Globus has 4 stores.Specialty stores stress on one or a limited number of complementary product categories and extend a high level of service to their customers. There are many different retail stores in India—convenience stores. low investments on fixtures. hypermarkets. can be classified as follows: Department Stores: . the 27 . medicines) reigned supreme. limited or no service and low prices are characterized by low margins. on account of variety of merchandise mix. Globus. LifeStyle has 3 stores and there are 12 Pantaloon Family Stores. department stores are located within the planned shopping centres or traditional up market downtown centres. heavy advertising.It is a large retail store organized into a number of departments. department stores. Discount stores prefer shopping centres that provide space at lower rents as they attract customers from other adjoining stores in the shopping centre. Usually. The consumer can choose between different stores for different needs.
Hypermarkets are characterized by large store size.ft. bargain and image to the particular stores.A hypermarket is a very large retail unit offering merchandise at low prices. Supermarkets and Hypermarkets: . 28 . Superstores have a sales area of over 50.000sq.traditionally independent retailers in the specialized market centres operate in a particular product category. low prices and comprehensive range of merchandise. Such specialized retail operations provide expertise economies of scale. at these centres attract large crowds. low operating costs and margins.
g. which denotes the store and 29 . Location is a major cost factor because it • Involves large capital investment • Affects transportation costs • Affects human resources cost.3. The terms ‘location’ and ‘site’ are often used interchangeably but there is a distinct difference between the two. RETAIL LOCATION STRATEGY Location is the most important ingredient for any business that relies on customers. In India. It is also one of the most difficult to plan for completely. IMPORTANCE OF LOCATION DECISION The importance of the location decision is due to the following factors. salaries Location is a major revenue factor because it • Affects the amount of customer traffic • Affects the volume of business The traditional inclination of Indian retailers to own property further increases capital investment and this along with the penchant of Indian retailers to continue their business at the same location makes the location decision even more important. most retailers prefer to own the property rather than avail of the desired property through lease or rental. This makes the location decision even more critical. there is often little flexibility once a location has been chosen and the attributes of location have a strong impact on a retailer’s overall strategy. ‘Location’ is a broader concept. e. Choosing the wrong site can lead to poor results and in some cases insolvency and closure.. Location decisions can be complex. costs can be quite high.
30 . housed in an attractive building with adequate parking facilities. a designer men’s store located in an up market shopping centre or a mall near posh residential colonies. while a site refers to the specific building or part of the building where a store is located. For example. Location and site characteristics should interact in a positive and synergistic way with a store’s merchandising. operations and customer service characteristics.its trading area from where a majority of its customers originate.
LEVELS OF LOCATION DECISION AND ITS DETERMINING FACTORS A retailer has to take the location decision. The fast growth in purchasing power and its distribution among a large base of middle class is contribution to a retailing boom around major cities in India. 31 . A city’s trading area would comprise its suburbs as well as neighboring cities and towns. basing on three aspects: 1) Selection of a city 2) Selection of an area or type of location within a city 3) Identification of a specific site The factors which influence these decisions are discussed below: Selection of a City The following factors play a significant role in the selection of a particular city for starting or relocating an existing retail business: • Size of the city’s trading area: A city’s trading area is the geographic region from which customers come to the city for shopping. the greater the potential of the city as a shopping location. Cities like Mumbai and Delhi have a large trading area as they draw customers from far off cities and towns. • Population of population growth in the trading area: The larger the population of the trading area. • Total purchasing power and its distribution: The retail potential of a city also depends on the purchasing power of the customers and its distribution networks in its trading area. Cities with a large population of affluent and upper middle-class customers can be an attractive location for stores selling high-priced products such as designer men’s wear. A high growth n population in the trading area can also increase the retail potential.
size and quality of competition: The retailer also considers the number. 32 . size and quality of competition before selecting a city.• Total retail trade potential for different lines of trade: A city may b become specialized in certain lines of trade and attract customers from other cities. • Number. • Development cost: The cost of land. Moradabad has become an important retail location for brassware products while Mysore is famous for silk saris. rental value and other related cost.
• Nature of zoning regulations: The retailer should also consider the zoning regulations in the city. while small shopping centres located in colonies attract customers from immediate neighborhood. number of stores in the area. evaluation of the following factors is required. etc. • Direction of spread of the city: The retailer should consider the direction in which the city is developing while selection the location. • Customer attraction power of a shopping district or a particular store: Major shopping centres like Chandni Chowk in Delhi. before selecting the area. There should not be traffic jams and congestion MG Road in Bangalore provides easy access from different t parts of the city and hence has become popular. • Quantitative and qualitative nature of competitive stores: Retailers would like to evaluate the product lines carried by other sores. 33 . Colaba in Mumbai and Commercial Street in Bangalore attract customers from far off. • Availability of access routes: The area or shopping centre should provide easy access routes.Selection of an Area or Type of Location within a City In the selection of a particular area or type of location within a city.
The large stores in turn depend on attracting customers from the existing flow of traffic. 34 .Selection of a Specific Site The choice of a specific site is particularly important. Where sales depend on nearby settlements. selecting the trading area is even more important than picking the specific site. non-anchor sores depend on customers coming to the market and the traffic generated by anchor stores. In central and secondary shopping centre.
low rent. the store depends on its own pulling power and promotion to attract customers. This type of location has several advantages including no competition. They sell convenience products like groceries. such as a small grocery store or paan shop in a colony which attracts the customers staying close by. 35 . easy parking and lower property costs. the large shopping centres in the heart of the city or smaller shopping complexes in a suburb. If it decides to locate its store in a business district. Now. Kemp Fort and LifeStyle stores are free-standing stores in Bangalore away from major market of the city. For example. even the large organized sector stores. which pull customers from across the city. and often better visibility from the road. It may locate in an isolated place and pull the customer to the store on its own strength. it may have a choice ranging for. it may locate in a business district where ther3 are a large number of retail establishments.TYPES OF RETAIL LOCATION A retailer has to choose among alternate types of retail locations available. are also coming up in suburbs or away from major markets as free-standing locations. The various options available to a retailer in India are shown below: Free-standing Location Where there are no other retail outlets in the vicinity of the store and therefore. Neighborhood Stores Neighborhood stores are located in residential neighborhoods and serve a small locality. Or.
and have high rents. we may find four to five shoe stores. nearness to commercial and social facilities. • Regional Shopping Centres or Malls: Regional shopping centres or malls are the largest planned shopping centres. based on balanced tenancy and surrounded by parking facilities. serve a large trading area. often they are anchored by two or more major department store. but also compete against each other for the same customers. Major regional 36 .Highway Stores Highway stores are located along highways or at the intersections of two highways and attract customers passing through these highways. designed and operated as a unit. • Planned Shopping Centres: A planned shopping centre consists of a group of architecturally owned or managed stores. access to public transport. Thus. This type of location can be further classified as: • Unplanned Business Districts/Centres: An unplanned business district is a type of retail location where two or more retail stores locate together on individual considerations rather than on the basis of any long-range collective planning. services and prices. They attract customers from across the city and suburbs. have enclosed malls. An unplanned district generally provides certain advantages like availability of a variety of goods. three to four medical stores in a cluster but no grocery store. Business-associated Location These are locations where a group of retail outlets offering a variety of merchandise work together to attract customers to their retail area. and pedestrian traffic.
hypermarkets. Convenience goods are often purchased on impulse from easily accessible stores. the quantity of traffic is most important. The emergence of several 37 . SITE SELECTION ANALYSIS With the advent of new retail formats in India such as planned shopping centes and malls. and further development of traditional business districts and other unplanned shopping locations. The corner of an intersection. customer profile and overall business model presents an enormous challenge. the quality of the traffic is more important. emergence of free-standing department stores. Consideration of all the options keeping in view the product mix. Spencers Plaza n Chennai and Meropolitan Mall in Gurgaon. Ansal Plaza in Delhi.shopping centres or malls in India include Crossroads in Mumbai. a retailer is presented with a wider choice of locations. is usually a better site than the middle of a block. For stores dealing in shopping goods. which offers two distinct traffic streams and a large window display area. etc.. A retailer has to consider the following factors while selecting a site: • Kind of products sold • Cost factor • Competitor’s location • Ease of traffic flow and accessibility • Parking and major thoroughfares • Market trends • Visibility Kind of Products Sold For stores dealing in convenience goods.
apparel factory outlets within a short stretch on the Delhi-Jaipur highway. at Mahipalpur market in Delhi. is driven by this factor. 38 .
noting one-way streets. leasehold improvements. Intense competition in the area shows that new businesses will have to divide the market with existing businesses. Ease of Traffic Flow and Accessibility These two factors are more important to some businesses than others. is hence important. Consider the nature of the business you are planning to open and your potential customers. insurance and all related costs having a place to conduct business operations. 39 . The retailers operating in these periodic markets keep shifting from place to place and do not own any property. industrial parks. one might reconsider that particular location. franchisee chains and department stores should be noted. The presence of major retail centres. Competitor’s Location The type and number of competitors is another important factor.Cost Factor in Location Decision Location decision on cost considerations alone is risky. Studying the flow of traffic. instead they pay a small rental for their set-up in each market. Traditionally. This supports their model of selling goods at very low margins. Retailers selling convenience goods must attract business from the existing flow of traffic. there are many periodic retail markets in Indian which operate on particular days of the week. the retail community placed great importance on owning the place since this was considered prestigious in the business community. general decoration. security. utilities. street widths and parking lots. If one is not able to offer better quality and competitively priced products. Space cost is a combination of rent or mortgage payment. However. The following factors have to be considered: parking availability. An excellent location may be next or close to parallel or complementary businesses that will help to attract customers.
there are two considerations: parking capacity (the number of cars that can be parked). part of the block and neighbors. visibility no longer matters. and parking configuration (the way the parking lot is laid out.000 square feet of food store. When evaluating the parking that exists at a retail site. landscaping. Once the shopper has become a regular customer. which means that some part of a community’s population may be ‘shopping’ in a new store. futuristic perspective. Discussions with business owners and officials in the area can also help. Make use of information available through the Chamber of commerce. width of street. etc. traffic congestion. There are several ratios that are generally used to determine the adequacy of a parking lot. While different ratios exist for different types of retailers or service providers. the direction of the travel lanes and spaces. Market Trends Evaluate the community from a broad. Evaluate how accessible the site is for walk-in or drive-by traffic as well as the amount of pedestrian traffic and automobile traffic that goes by the proposed location. Local newspapers are a good source of information.distance from residential areas or other business areas. side of street. Visibility Visibility has a varied impact on a store’s sales potential. Parking and Major Thoroughfares Parking is another site characteristic that is especially a cause for concern in densely populated areas. It is important when a shopper is trying to find the sore for the first or second time. the ideal ratio for food stores is in the magnitude of 7-8 cars per 1.). 40 . But consider this fact: one in five families’ moves every year.
however. is grabbing attention. toilets and maintenance. The next step was the commercial plazas. There are. The opening up of the economy only fueled this globalization. The inconveniences caused by lack of parking place. certain bottlenecks as well. the sheer size this behemoth will develop into. RETAILING IN INDIA ORIGIN IN INDIA Although retailing does not enjoy the status of an Industry. act as a dissuasive factor for many players to initiate operations in the main markets. 41 . This also explains why the Raheja’s forayed into their retail ventureShoppers’ Stop. which became a part of the civic planning. The origin of retail in India dates back to ancient times when the melas and mandis made their presence felt. coupled with the stringent provisions of the Rent Control Act. which comprised merely shops offering a variety of goods and services clubbed together. ushered in the entry big international brands opening their exclusive showrooms. The changing socio economic patterns coupled with the consumption increase led to the emergence of the convenience stores.4. the scarcity of space.
000 crore. Total retail sales area in India was estimated at 328 million sq. an overwhelming proportion of the Rs 400.RETAIL IN INDIA The retail industry in India is largely unorganized and predominantly consists of small. snack centres. There are around 5 million retail outlets in India. There is no integrated supply chain management outlook in the Indian traditional retail industry.4 sq. However. In 2000. which is expected to increase to Rs 800. mt. independent. barber shops) and pushcarts mobile vendors. Retailing is India’s largest industry in terms of contribution to GDP and constitutes 13% of the GDP (Gross Domestic Product). which is quite low in comparison to the developed economies. The turnover from private labels by major retail chains was estimated at around Rs 1200 million in 2000. with an average selling space of 29. worth approximately Rs 7. mt. per outlet.000 crore by the year 2005—an annual increase of 20%.000 crore retail markets are unorganized. ft. while non-food sales were worth Rs4189. The share was 62.2 billion. in 2001. the per capita retailing space is about 2 sq. the non-food retailing sector registered faster year-on-year growth than the food sales sector. There are also an unaccounted number of low cost Kiosks (tea stalls. In India. 42 .000 crore segment of the market is organized. The trend to market private labels by a specific retail store is catching on in India as it helps to improve margins. only a Rs 20. owner-managed shops.039. In fact.7% in 2001. the global management consultancy AT Kearney put retail trade at Rs 400. According to a survey by AT Kearney.. Food sales constitute a high proportion of the total retail sales.5billion.
peeth and melas that come up at the same location at regular time intervals. Apart from this. Therefore.6 million outlets cater to more than 700 million inhabitants of rural India. The McKinsey report predicts that FDI will help the retail businesses to grow to US $ 460-470 billion by 2010. paan shops and ration shops are the most popular vehicles of retailing. there are periodic or temporary markets. which is adding to the family’s income and leading to better lifestyles rising incomes has led to an increased demand for better quality products while lack of time has led to a demand for better quality products while lack of time has led to a demand for convenience and services. especially in south India and are spreading all over India at a rapid pace. More and more women are taking up corporate jobs. There is also a strong trend in favour of one-stop shops like supermarkets and department stores. such as haats. Only 3. The demand for frozen. In urban India. organized retail trade in India was worth Rs 11.7 billion. ready-to-eat food has been on the rise. The modern retail formats are showing robust growth as several retail chains have established a base in metropolitan cities. However. especially in the metropolitan and large cities in India. space and rentals are proving to be the biggest constraints to the development of large formats in metropolitan cities since retailers are aiming at prime locations. instant. At 44 . provision stores. In 2001. Here.EMERGENCE OF ORGANIZED RETAILING Organized retailing in India represents a small fraction of the total retail market. families are experiencing growth in income but dearth of time. lead to the closure of many small trading businesses and result in largescale unemployment.228. government has discouraged FDI in the retail sector. Rural India continues to be serviced by small retail outlets. There has been a strong resistance to foreign direct investment (FDI) in retailing from small traders who fears that foreign companies would take away their business.
cash and carry operations (Giant) and licensing (Marks & Spencer’s). franchising/local manufacturing/sourcing from small-scale sector (McDonald’s. foreign retailers can enter the retailing sector only through restricted modes. Players that entered before the easing of restrictions on FDI in retail had to come through different modes. 45 . through diversified risks and volume sales command huge concessions on prices from the manufacturers. such as joint ventures where Indian partner is an export house (Total Health Care).present. Pizza Hut). Global players in the retail segment have been entering the market for a while now. He should then be in a position to allow a trickle down of this advantage to consumers out of his saved costs. The main condition for organized retailing is that the retailer should be able to manage and influence the supply chain variables in a commercially viable and sustainable manner. The organized retailer should be able to.
7%. Karol Bagh and South Extension. It is interesting to note. The 12 million retail outlets in India are the highest in the world.6 million sq ft. and cater to the purchase need of its pole. is an astounding 250 million in size and is growing at a healthy rate of 7% per annum. And by year end the count will shoot up to 158 malls. 46 . In India we have 96 malls. Bangalore has Brigade Road and Commercial Street. covering an area of 21. To cater to this. with the spending increasing at an average of 11% per annum. Delhi has Connaught Place. It is only natural that the agricultural sector is the biggest employer with its contribution to GDP pegged at 26. each city developed its own identity and shopping cluster. street vendors. The chief driver of growth in the retail sector has been the consumer. for instance in Pune there is MG Road. Kiosks. At present (September 23. Droves of middle-class Indians have broken off their love of traditional stand-alone shops that have no ACs. organized parking lots and other public amenities. India will have 358 shopping malls by 2007.CURRENT SCENARIO The Indian population is whooping 1 billion with 75% of the people living in villages and small towns. weekly bazaars and high-street shops for consumer durables and luxury goods. that the Urban Population although just 25% of the total. The growth of the efficient small store culture can be attributed to the 6 million villages distributed across the length and breadth of the country. It will cover 34 million sq ft area. Retail is India’s largest industry after Agriculture with around 20% of the economically active population engaged in it and generation 10% of our country’s GDP. 2005). The Indian consumer’s shopping needs are and traditionally have been fulfilled by Kirana sores (corner stores). according to a study by fashion magazine Image. The Core and the Lower middle have increased their share in the Growth.
Currently estimated at $205 billion to grow to $400-500 million. • • • • • • • • • • Smaller cities will have about 12. Apna Bazar. 47 . East region has 10% of India’s retail share.4 million sq ft. Gurgoan saw the largest development in terms of retail outlet. over the next 2-3 years. Government and co-operative sector is also making their steps in retailing. Ludhiana to account for 2. South region has 18% of India’s retail share. Mother Dairy. Delhi and Mumbai now have maximum number of shopping centres. Kendriya Bhandar.8 million sq ft of mall space by 2007. Super Bazar etc. For example. West region has 33% of India’s retail share. Ahmedabad about 3. North region has 39% of India’s retail share.5 million sq ft.
Retailers act as gatekeepers who decide on which new products should find their way to the shelves of their stores. The increasing numbers of product categories followed by multiple brands in each category complicate decision-making for both manufacturers and market intermediaries. and in the value chain in particular. and market profile in order to ensure a competitive edge.’ It is a well-established fact that manufacturers need to sell their products through retail formats that are compatible with their business strategy. then to the retailer and finally to the user of the product. In today’s competitive environment retailers have redefined their role in general. It is necessary for marketers of consumer products to identify the need and motivations of their partners in the marketing channel. brand image. This is especially true in the case or new products. The role of retailers in the present competitive environment has gained attention from manufacturers because external parties such as market intermediaries and supplying partners are becoming increasingly powerful. A product manager of household appliances claimed.DRIVERS OF CHANGE IN RETAILING • Changing demographics and industry structure • Expanding computer technology • Emphasis on lower costs and prices • Emphasis on convenience and service • Focus on productivity • Added experimentation • Continuing growth of non-store retailing. first within the company. 48 . ‘Marketers have to sell a new product several times. they have a strong say in the success of the product or service launched by a business firm. As a result.
training salespeople---these are just a few of the many functions that a retail manager has to perform on a perpetual basis. McDonald’s. • Selling space available is relatively fixed and must return maximum profits. Marks and Spencer. Therefore. The world over retail business is dominated by smaller family run chain stores and regionally targeted stores but gradually more and more markets in the western world are being taken over by billion dollar multinational conglomerates. The retailer may have to resort to substantial price reductions in order to get rid of the unsold stock. it will not result in profit. Retailers undertake risk in selecting a portfolio of products or brands to offer to their customers. Selecting target markets. the challenges for retail managers the world over are increasing---they must take decisions ranging from setting the price of a bag of rice to setting up multimillion dollar stores in malls. such as Wal-Mart. negotiating with suppliers. governed by their individual sales philosophy. financing pacts and widescale marketing plans. The larger retailers have managed to set up huge supply/distribution chains. Retail formats and companies that were unknown three decades ago are now major forces in the economy. In the backdrop of globalization. If such space is occupied by merchandise that is not moving. it will not result in profit. liberalization and highly aware customers. Sears. inventory management systems. The retailer may have to resort to substantial price reductions in order to get rid of the unsold stock. Retailers have to make optimum selection of goods to be sold given the following major concerns: • Selling space available is relatively fixed and must return maximum profits. a retailer is required to make a conscious effort to position himself 49 . determining what merchandise and services to offer.Retailers want of optimize sales within the limited shelf space. Retailing is a dynamic industry---constantly changing due to shifts in the needs of the consumers and the growth of technology. If such space is occupied by merchandise that is not moving.
This is determined to a great extent by the retail mix strategy followed by acompany to sell its products. 50 .distinctively to face the competition.
etc. Wal-Mart Stores.. Tesco. Titan Industries. Ebony Retail Holdings Ltd. 51 . Ltd.MAJOR RETAILER SPACE HOLDERS IN INDIA Bata India Ltd. Shoppers Stop. Subhiksha.. Big Bazaar. Carrefour. Pantaloon Retail India Ltd. Globus Stores Pvt. Liberty shoes Ltd. Food Bazaar. Crossword. Boots Group. Music World Entertainment Ltd.... Trent and the new entrants penetrating the market soon will include Reliance Retail Ltd.
Some of the major factors hindering the growth of this sector are as follows: • • • • • The non-industry structure and status The lack of adequate infrastructure FDI restrictions in this sector The huge investments required in expanding their markets. Problems associated with working Capital funding from lending Institutions. 52 . based on a GDP growth rate of 6-7% per annum.RETAIL VIABILITY As per the CII McKinsey report. by 2010 the retail sector is expected to be US $ 300 Billion industry.
5. SWOT OF THE MARKET 53 .
7) Lack of huge investments for expansion 54 . growing at 8%. retail space available. 6) Almost 25 million sq. ft.31 billion. 5) Consumer spending increasing at 11% annually. 2) 2nd largest contributor to GDP after agriculture at 20%. 2) Government regulations on development of real estate(Urban Land Ceiling Act) 3) Need to provide Value for Money-squeezing margins 4) Lack of industry status. 7) Paradigm shift in shopping experience for consumers pulling in more people. 3) Pattern of consumption changing along with shopping trends. 6) Footfalls not a clear indicator of sales as actual consumers lower in number.STRENGTH 1) Organized retailing at US$ 3. 4) A Growing population will translate to move consumers. 8) Most of the entrants to organized retail come from 3 main categories. and have ventured into retail as their business extension. • • • Real Estate Developers Corporate Houses Manufacturers/Exporters WEAKNESSES 1) Shortage of quality retail spaces at affordable rates. 5) Retail revolution restricted to 250 million people due to monolithic urban-rural divide.
55 . 2) Increase in consuming middle class population. 7) Differentiate taxation laws hindering expansion. 6) Unavailability of qualified personnel to support exponential growth in retail. 3) Social factors like dual household income has enhanced spending power. 4) Archaic labour laws are a hindrance to providing 24/7 shopping experience 5) Personalized service offered by Mom-&-Pop stores. 6) Average grocery spends at 42% of monthly spends-presents a huge opportunity. THREATS 1) Rising lease/rental costs affecting project viability 2) FDI restrictions in the retail sector 3) Poor monsoons and low GDP Growth could affect consumer spending drastically. 5) Availability of old industrial lands-prime real estate locked in sick industrial units. 4) Spends moving towards lifestyle products and esteem enhancing products.OPPORTUNITIES 1) Increasing urban population-more participants in retail revolution. 7) Increase in use of credit cards.
56 . 50% of the Indian population is under the age of 25. consumer durables and books & music sectors are the major retail sectors. unorganized small outlets largely control the sector. as the focus of the customer has changed. mobile phones and consumer durables. However.class population of today needs a feel good experience even if they have to spend a little more for that. category killers and discount chains. There is an increasing need of better apparels. There has been a transition from price consideration to quality and design. specialty stores.6. clothing. The food & grocery. INDIAN CONSUMERISM The lifestyle and profile of the Indian consumer is going through a rapid transformation. People are moving towards luxury and want to experiment with fashion and technology. supermarkets. The upper and middle. The population of India is young. cars. energetic and full of enthusiasm. Hence there is tremendous potential for the organized sector in various formats. such as hypermarkets.
FACTORS AFFECTING CONSUMER DECISION-MAKING A consumer’s purchase decision tends to be affected by the following four factors: 1) Demographic 2) Psychological 3) Environmental 4) Lifestyle 57 .
DEMOGRAPHIC FACTORS Demographic factors are unique to a particular person. They are objective, quantifiable and easily identifiable population data such as sex, income, age, marital status etc. It also involves identification of who is responsible for the decision-making or buying and who is the ultimate consumer. PSYCHOLOGICAL FACTORS Psychological factors refer to the intrinsic or inner aspects of the individual. An understanding of consumers’ psychology guides the marketers’ segmentation strategy. ENVIRONMENTAL FACTORS Environmental factors cover all the physical and social characteristics of a consumer’s external world, including physical objects, spatial relationships, the social factors , co customers, reference groups, social class . The environmental factors influence consumers’ wants, learning, motives, which in turn influence effective and cognitive responses and among other things the shopping behavior of the individual. LIFESTYLE Lifestyle refers to an individual’s mode of living as identified by his or her activities, interests and opinions. Lifestyle variables have been measured by identifying a consumer’s day-to-day activities and interests. Lifestyle is considered to be highly correlated with consumer’s values and personality. An individual’s lifestyle is influenced by, among other things, the social group he belongs to and his occupation. For example, double-income-no-kids (DINKS) families in metros shop very regularly at the super malls because of the limited time at their disposal and they also look for entertainment while shopping on weekends. At the same time, they are higher spenders than, for e.g., single-income families.
7. DIVISION OF RETAILERS IN INDIA
The retail sector in India can be divided into two major categories: 1) Organized 2) Unorganized
UNORGANIZED RETAIL IN INDIA Retailing in India is predominantly unorganized. According to a survey by AT Kearney, an overwhelming proportion of the Rs. 400,000 crore retail market is UNORGANISED. In fact, only a Rs. 20,000 crore segment of the market is organized. We are known as a nation of shopkeepers with over 12 million, the highest outlet density in the world in the world with an estimated turnover of $ 200 billion. However a disturbing point here is that as much as 96 per cent of them are smaller than 500 square feet in area. This means that India per capita retailing space is about 2 square feet (compared to 16 square feet in the United States). India's per capita retailing space is thus the lowest in the world. Another point to note is that only 8 % of our population is engaged in Retail whereas the global average is around 10-12%. Traditional retailing has established in India for some centuries. It is a low cost structure, mostly owner-operated, has negligible real estate and labour costs and little or no taxes to pay. Consumer familiarity that runs from generation to generation is one big advantage for the traditional retailing sector. However this is set to change with the entry of the corporate sector into the retail domain. The question that is being discussed, given the corporate onslaught with big bucks and deep pockets, what will be the impact on the traditional mom and pop store? Will they survive this or will they fold up and leave the field only to the major organized retail players? The answer could be a co-existence. The major advantage for the smaller players is the size, complexity and diversity of our Indian Markets. If we look at the organized retail players, most of them have opened shop in the Metros, Tier 1 and Tier 2 towns. Very rarely do we find organized players in the rural areas and we have more than 70% of the population living in the rural areas.
will sooner or later generate a demand for the same facility. the majors will step and service this need. 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. the Government has banned organized retail major based on the demands of the unorganized sector. For example. The superior purchasing power of the majors and the volume of business generated can result in lower prices thus moving the custom away from the traditional store to the organized retail. who having been exposed to top of line retail outlets in the foreign countries. The rising disposable income of the techies today. In other words. the more expensive it will be. in the long run the majors will come back and cannot be dislodged. While this may happen in the short run. Another factor that is to be considered is that data on income distribution of households is insufficient in determining market size for different consumer products in India. Given the above. it is too early to predict the erosion of the mom and pop stores in India. 61 . 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. vegetables generally cost more in Mumbai than in Chennai. purchasing power is location-specific. In UP. At this juncture. This fear has manifested itself in Metros.So what could be the scenario? One of the fallouts of the organized retail onslaught would be that the smaller stores in the areas where the majors operate could get squeezed out. Consumption habits of households are therefore better determinants of consumer market size than income distribution. not income specific. The customer loyalty today is towards the price. This is also proved by countries where Wal-Mart the world’s biggest retailer operates. Another factor in the favor of the unorganized retail in rural areas is our mindset. Organized retailing also has to cope with the middle class/rural psychology that the bigger and brighter a Sales outlet is. Tier 1 and Tier 2 towns by the unorganized retail staging strikes against the majors and trying to influence Government policy toward the retail majors and making it difficult for them to operate.
The smaller stores have a peaceful coexistence in these countries with the number one company in the fortune 500 list. 62 .
which is not possible with hypermarkets and supermarkets. Traditional family run convenience stores are too well established in India than to be wiped out and besides there is uniqueness in the traditional items that represent the subcontinent. If the stores are not food based then the type of retail items available are local in nature. provide a different environment where one can pick and choose from a variety of products. Supermarkets and Department stores like Subhiksha. Now stores run by families are primarily food based and the set up is as Kirana or the 'corner grocer' stores. has been inviting such people to join in its Dairy business as franchisees. like: • Apna Bazaar • Canteen stores • Food World • Subhiksha • Food Bazaar Convenience Stores are open for long hours and are one of the formats of the Indian retail stores that cater to basic needs of the consumer.TRADITIONAL v/s MODERN FORMAT RETAILERS The retail boom will face a strong competition from the 12 million mom-and-pop stores. The traditional family run convenience stores can take pride in the fact that the Kirana is the most common outlet forms for the consumers. These stores are found in both residential as well as commercial markets. The tough competition for convenience stores are coming from organized retail stores dealing in food items. Reliance Retail Ltd. Owing to the entry of such big players. Basically they provide high service with low prices. In fact the traditional stores have taken up 98 percent of the Indian retail market. The retail stores in India are essentially dominated by the unorganized sector or traditional stores. A good example of such would be Convenio. The 63 . These are easily accessible and provide services like free home delivery and goods at credit. etc. Marks & Spencers. the small shopkeepers fear losing their business. Buying from Malls.
among people in general can be highlighted as below: • • • • Groceries Fruits Drug Store Necessary stationery 64 . The future of such stores as they face competition from organized sector would depend on the following particulars: • • • • • • Place and capacity Diligent area coverage Disciplined work schedule Managing turnover Revenue from assets Customer service and satisfaction The traditional family run convenience stores serves the purpose of the housewives who definitely wants to avoid traveling long distances to purchase daily needs.food products of traditional family run convenience stores are comprised of branded as well as non-branded items. The convenience factor in terms of items. The benefits of family run convenience stores is that they give importance to: • Personal touch • Facilities of credit • Quick home delivery Non-food based stock comprises of multiple and varieties of local brands.
Currently. Chennai and Gugaon (Delhi). BIG BAZAAR: THE INDIAN WAL-MART (ORGANIZED RETAILER) Pantaloon Retail (India) Limited is today recognized as one of the pioneers in the business of organized retailing in the country with a turnover of over RS 400 crores in the financial year ending June 2003. The company is headquartered in Mumbai with zonal offices at Kolkata. 14 Pantaloon Family Stores. It began its retailing operations in India way back in 1987. which is targeted at the growing middle class segment. Bangalore and Gurgaon (Delhi). Pantaloon Retail India Limited is the flagship company of the Pantaloon group promoted by Mr. 7 Big Bazaar discount hypermarkets.5 lakh sq ft retail space across Kolkata. Kishore Biyani. This segment is very price conscious and always looks out for value for money.As such traditional family run convenience stores are here to stay and cannot be oversized by the organized retail sector besides. Ahmedabad. The company plans to double its retail space in the next couple of years. The company plans to diversify into the business of discounting in a big way. it manufactures and sells ready-made garments through its own retail outlets and two discounting stores. Bangalore. which forms the large chunk of Indian population. 8.01. Pantaloon has come up with an excellent revenue model. ft. 6 Food Bazaar Stores with over 6. Kanpur. It has India’s second largest retail chain with 17 retail outlets and two discounting stores branded as Big Bazaars across the country at an estimated retail space of 4. It has been one of the pioneers in organized retailing in India.300 sq. Bagpur. it represents the variety of India. CASE STUDY I. Mumbai. Pantaloon plans to target the upper middle and the middle class segment. focusing on ‘value for money’ segment. It has 4 kinds of stores. Hyderabad. 65 . Thane Pune.
which focus on high net-worth of individuals. This has enabled them to enlarge their basket of offerings. thus reducing the breakeven level of sales.Pantaloon successfully launched its discount store chain. Big Bazaar has diversified from apparels to household items in its discount stores. John Miller and Bare. The brands include Pantaloon. This is totally in contrast to the other organized retail players. which targets the large and growing upper-middle and middle class of Indian society. Higher percentage of ‘own brand’ sales improves margins. Big Bazaar has strong own brand names in its portfolio across product categories. 66 .
the small convenience stores in the region have not witnessed a decline in their revenues. He pointed out that there is an adjustment process leading to net gain in employment — the traditional workforce is being absorbed in layers of organised retailing and skilled workforce is being integrated at the front end. with 40 stores in Chennai alone. SEPTEMBER 13: Organised retail does not pose a threat to a large number of neighbourhood ‘mom n pop’ stores. wherever large malls or supermarkets have opened.” said Kumar.” said Spencer’s Retail Ltd vicepresident Satyaki Ghosh. Leading south Indian retail chain — RPG group’s Spencer’s Retail limited — has been operating in southern India for over a decade.II. 2007 at 0038 hrs IST NEW DELHI. “Our stores have existed alongside neighbourhood shops and kirana stores. On the contrary. BIG RETAIL WON’T HURT KIRANA SHOPS: Study Smita Aggarwal Indian Express Posted: Sep 14. and we have never faced problems with any traders group or association. reveals the preliminary findings of a study by the Indian Council for Research on International Economic Relations (Icrier) to be submitted to the Union Government by September-October 2007. The study also found out that despite the presence of large corporate retailers in southern India for much longer periods. Kumar added. “Modernisation of retail will not be at the 67 . “In such a scenario. said Icrier director and chief executive Rajiv Kumar. The issue is how credit can be made available at reasonable rates to these retailers so that they can compete more efficiently. credit from commercial banks is a constraint for unorganised retailers who want to expand. traditional format retailers are not only trying to hold their fort but also expand and upgrade.
Kumar said that the study does not recommend any such initiative.expense of labour. The committee constituted to frame a comprehensive retail policy by the Government will consider the findings of the Icrier study.” said Kumar. Icrier was given the task of studying the impact of the entry of organised retail on small neighbourhood and kirana stores by the Government in the wake of continued traders’ and farmers’ protests. 68 . The preliminary findings point out that there is no employment loss in unorganised sector. Categorically denying the levying of additional cess or any tax on modern retailers.
CONCLUSION The convenience and personalized service offered by the unorganized sector holds its future in good stead for the future. while enjoying the experience they seem to buy high ticket and items of conspicuous consumption most frequently. What is to be seen is how organized retail can duplicate the same level of personalized customer service levels offered by the unorganized sector to have a higher conversion ratio. 69 . When shopping in malls.9. Organized retail of late has seen a tremendous boom and is attracting more people to the malls. The target audience for both the organized and unorganized retail formats remains relatively the same. Besides. people value the experience related to the trip the most and return most frequently for the same.
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