Description
The Indian retail industry is now beginning to evolve in the line with the transformation that has swept other large economies
Project Report on Retail Marketing in India
Executive Summary
The Indian retail industry is now beginning to evolve in the line with the
transformation that has swept other large economies. It witnesses
tremendous growth with the changing demographics and an improvement
in the quality of life of urban people. The growing affluence of India‘s
consuming class, the emergence of the new breed of entrepreneurs and a
flood of imported products in the food and grocery space, has driven the
current retail boom in the domestic market.
The concept retail which includes the shopkeeper to customer interaction,
has taken many forms and dimensions, from the traditional retail outlet and
street local market shops to upscale multi brand outlets, especially stores
or departmental stores. Though at this moment, it is still premature to say
that the Indian retail market will replicate the success stories of names such
as Wal-Mart stores, Sainsbury and Tesco but at least the winds are blowing
in the direction of growth.
Hence, focusing on two aspects of retail marketing i.e. Store Retailing and
Non-store Retailing. Store Retailing as the departmental store, which is a
store or multi brand outlet, offering an array of products in various
categories under one roof, trying to cater to not one or two but many
segments of the society and Nonstore Retailing as the direct selling, direct
marketing, automatic vending.
Therefore, this concept of retail marketing through departmental stores,
which is coming up in a big way in India was decided to be studied in detail,
through an exploratory and conclusive research.
The objective being to assess the various parameters that influences a
buyer to visit or shop at departmental store thereby contributing to its
turnover (in terms of sales and profits) hence leading to its overall success.
The extensive research brought me to conclude that departmental stores
are soon emerging on the top priority lists, amongst the shopping spree in
Delhi, as they seem to derive immense pleasure of convenience and
exposure to variety under one roof, in their extremely busy lives, when they
don‘t have time for things.
Though some of the customers perceive departmental stores to be
expensive and only high income category‘s cup of tea, the stores make
constant efforts to induce them to at least visit the store at once during the
sale period, or discount offers.
Most of these stores believe in creating not just a marketing activity with its
customers, but rather favor relationship building with him so as to convert
first time customers into a client.
Hence this document entails me through these aspects in great detail,
helping me to understand the concept of retail marketing through
departmental stores in Delhi.
Chapter 1 : RETAILING – THE SUNRISE INDUSTRY
1.1 Introduction to the Project Report :
The word ?retail‘ means to sell or be sold directly to individuals. Retail is
India‘s largest industry, and arguably the one with the most impact on the
population. It is the country‘s largest source of employment after
agriculture, has the deepest penetration to rural India, and generates more
than 10percent of India‘s GDP. However, retailing in India has so far, been
mostly in the hand of small disorganized entrepreneurs. It is also India‘s
least evolved industries. In fact, it is not even considered a real industry.
The industry suffers from lack of management talent, poor access to
capital, unfavorable regulation and denial of access to best practices. The
Indian retail industry is only now beginning to evolve in line with the
transformation that has swept other large economies. Fifty years of
restricting the consumer goods industry, a national mindset which favored
denial over indulgence, and a fractured supply chain for agricultural
products have all contributed to prevent the development of modern
tenants based on scale advancements and consumer preferences.
India has some 12 million retail outlets, but many of these act merely as
subsistence providers for their owners and survive on a cost structure
where labor and land is assumed to be free and taxes nil. Compare this
with the global retail industry, which is one of the world‘s largest organized
employers, is at the cutting edge of technology, and which leverages scale
and scope to offer value-added services to its customers.
However, only recently has there been an awakening in this sector, with
more organized retailers starting to make an impact. The liberalization of
the consumer goods industry, initiated in the mid-80s and accelerated
through the 90s has begun to impact the structure and conduct of the retail
industry. Backed by changing consumer trends and metrics, liberalization in
mindsets driven by media, new opportunities and increasing wealth,
retailing in India, presents a vast opportunity for a variety of businesses -
real estate, store design & operations, visual merchandising logistics and
communications, B2C service providers, and FMCG companies who can
add to their offers by partnering this revolution.
The Indian Retailing Industry stands poised to take off into the 21st century.
It is one of the fastest growing sectors in the nation that caters to the
world's second largest consumer market. Retail boom is unabating. India
has five million retailers with a business volume of $180 million growing at
5 to 7 per cent a year. The middle class drives retailing anywhere in the
world and this segment should have reasonable income. The next driver is
availability of variety of goods, products and brands. The third one is
?sense of awareness?.
In other developing economies, this transformation has already begun. In
many of these countries, organized retail already has a 40 percent share of
the market, compared to India‘s current levels of 2 percent. As India goes
through this transformation, new businesses with sales of 1billion – 2 billion
US $ will be created in grocery and of 250million - 500million US $ in
apparel. Smaller but still interesting opportunities will be created in other
sectors like books, electronics, and music. This transformation will also
impact the supply chain in agriculture, the tax collections from trade and the
way people shop.
In the last 10 years, all Southeast Asian countries like Indonesia, Malaysia,
Taiwan and Korea have gone through similar phases. China, with a per
capita income of $650-700 per annum, is going through the same phase
what India is also facing now. Europe went through this phase of retail
revolution about 40-50 years ago. It is believed that when a country‘s per
capita income reaches the level of $1,200 per annum, organized retailing
begins to takeover. Though India has a per capital income of $ 400, on the
basis of purchasing power parity (PPP) it has already hit the $1200 level.
This does strengthen the belief that probably, the right time for organized
retailing to click in India has come.
This report aims at providing an insight into the emerging trends in the
industry and the barriers to change and a perspective on what this industry
could become, using the global industry as the backdrop.
1.2 Overview of the Global Retail Industry
Retail: world largest industry
Retail, with total sales of $ 6.6 trillion, is the world‘s largest private industry
ahead of financial industries $ 5.1 trillion. It is also home to a number of the
world‘s largest enterprises. Over 50 of the Fortune 500 companies, and
around 25 of the Asian top 500 companies, are retailers. The industry
accounts for over 8 percent of the GDP in western economies.
Retail: Largest private industry in the world economy
A Study by Mc Kinsey states that organized retail accounts for just around
2 percent (out of which modern retail formats account for 7 percent of
trade) presently is set to grow at exponential exceeding 35 percent. Fitch
estimates the current share of organized retail to grow from 2percent
presently to around 15 to 20 percent by 2010.
Table 1:
Retail Consumption areas US $ billion Existing Companies in the organized sector
Food Retailing 130 Food Bazaar (Pantaloon) Food World
Subhishka.
Clothing & Apparel 12 Pantaloon Westside, Shoppers Stop
Jewelry, Watches 7 Tanishq, Titan, Gold Bazaar (Pantaloon)
Home Furnishing 5 Home Store, Arcus (Pantaloon)
Foot wear 1.7 Bata, Woodland
Beauty Care 3.6 VLCC, Health & Glow
Source: economic time‘s industry report
Traditionally, most retailers have had very localized operations. This
localized nature of the industry is changing as retailers face low rates of
growth and threatened profitability at home. New geographies will help
them sustain top-line growth as well as permit global sourcing. Profits in
retail have steadily been rising and have generated 18 percent shareholder
returns between 1994 and 1999. Significantly, retail is also one of the
world‘s largest employers, accounting for instance 16 percent of the US
workforce, Poland 12 percent, China 8percent, India 10 percent and Brazil
6percent. Factors such as scale in sourcing, merchandising, operational
effectiveness and ambience have driven the spread of organized retail.
Grocery, electronics are examples of categories that compete on the
strength of better pricing, which in turn is driven by superior sourcing and
merchandising and cost-efficient operations. Wal-Mart, Home Depot and
Kingfisher are benchmark retailers in these fields.
In apparel, home furnishings and furniture, the advantage is driven by the
marketers‘ ability to provide better products in a comfortable ambience at
affordable prices. In these cases sourcing capability has to be backed by
strong design capability and store management. IKEA and GAP are good
examples of this model of retailing.
Over the last few decades, retail formats have changed radically. The basic
department stores and co-operatives of the early 20th Century have given
way to mass merchandisers, hypermarkets, warehouse clubs, category
killers, discounters and convenience stores. Each of these formats has
been driven by marketer‘s need to offer relevant, distinctive and economic
propositions to an evolving consumer base.
Global retailers have also reached a position of strength that enables their
brand to be leveraged across a wide range of services. Many of them have
expanded their offering, over the years to include fuel retail, car retail,
convenience services and personal financial services. This has put them in
a position where they are not only beginning to capture growth from
geographical expansion, but are also entering large new areas of business.
The recent evolution of the Internet has helped further broaden the scope
of operations of large retailers. Further, a large number of retailers are
pursuing innovative aggregation and supply chain-streamlining initiatives
using B2B technology.
Chapter 2 : THE RETAIL MARKETING REVOLUTION
By 2010, the list of India's top 10 retailers will have at least 5 Indian
corporate. Retail Marketing will go through a tremendous change in India
this millennium. It will change India's cities, its people, and its households.
The Indian consumer is reportedly the largest spender in Singapore and
London. It is, therefore, strange that there have, so far, been few efforts to
present the product in the right kind of environment in India. Indeed, the
right shopping experience does induce Indian consumers to spend more.
This is evident from the experiences of retail-outlets like Shoppers' Stop,
Music World, Food World, Crosswords, The Home Store, Ebony, Bigjo‘s,
Saboos, Standard, Vijay Store and Janaki Das & Sons, Westside etc.
However, the development of organized retail is dependent on the efforts of
several agencies and institutions. The first among these is the
government. In a country as big as India and with as many states as ours, it
is imperative that the Central government and all state governments bring
in Value Added Taxation or a unified taxation system to ensure that the tax-
regimes are the same across the country.
The laws governing retail real estate should also be looked into, so that it is
possible to develop retail-estate beyond the city-limits.
Apart from providing entertainment and retail opportunities, this will also
decongest the city center and facilitate the development of suburbs. The
relevant rules should also be amended to allow retail-stores to operate 7
days a week, 12 hours a day. Given the hours most urban consumers keep
at work, and keeping in mind the increase in the number of nuclear
families, this may, indeed, make sense. This will also help people enjoy
their evenings, out at malls.
The second group, whose participation is essential in making retail a boom-
sector in this millennium, comprises developers. Most properties are
developed without considering the end user; thus, we sometimes find high-
ceilinged offices and low-ceilinged retail stores. Often, the shopper's
convenience is not taken into consideration while the property is
constructed.
Another area of concern is the way in which developers sell their space.
The only consideration is the price, not the usage pattern or the nature of
the product that is to be sold. In contrast, internationally, mall-management
is treated as a specialized discipline of retail management. This is what we
have to focus on in this millennium.
The third constituency that has a role to play in the fortunes of organized
retail this century is the education-sector. Retail is a people-intensive
business, and there is a huge opportunity for retail institutes in India.
For manufacturers, retailing will present an attractive opportunity.
Organized retail allows them to expose their products to a large volume of
customers in an environment conducive to buying. Already, several
transnational retail giants have established their presence in India; others,
notably Chinese retailers, have visited India and studied the Indian market.
There's a lot at stake here: even so early in the 21st Century, India is too
large a market to be ignored by transnational retail giants.
From the manufacturing company's perspective, the focus should be on
producing good products, and forging relationships with organized retail.
Manufacturers need to draw a plan of producing quality products and tie in
with retailers. Indeed, the birth of organized retail will also engender the
creation of private labels and store-brands. Thus, if a manufacturing
company lacks the resources to build a brand, it can supply to a retail-chain
that has the resources to create a brand of its own.
A glimpse of the last 2 decades of the previous century proves illuminating.
Large-format retailing started with outlets like Vivek's and Nalli's in Chennai
and Kidskemp in Bangalore, and, at another level, with manufacturer-retail
brands like Bata, Bombay Dyeing, and Titan. The last decade of the
millennium witnessed the emergence of lifestyle brands and the plastic
culture. Liberalization and increasing awareness of the world around us
created the Indian yuppie, who aspired to own everything we saw on TV, or
in shops during jaunts abroad. New lifestyle brands offered traditional retail-
outlets an opportunity to convert themselves into exclusive stores,
franchised or otherwise. And even as these developments were taking
place, the Indian consumer became more mature. Customer-expectations
zoomed
Thus, at the beginning of the New Millennium, retailers have to deal with a
customer who is extremely demanding. Not just in terms of the product-
quality, but also in terms of service, and the entire shopping experience.
Today, the typical customer who shops in a retail outlet compares the time
spent at the check-out counter with that at an efficient petrol station, and
the smile of the counter-person to that decorating the face of a Jet Airways'
crew member. To cope with the new customer, manufacturers have to
focus on product quality and brand building. And retailers, in turn, have to
focus on the quality of the shopping experience.
Internationally, retailing is a large business; you find at least one retailer
amongst the top 10 companies in every country. In the US, it is Wal-
Mart with a turnover in excess of $ 120 billion. In the UK, it is Marks and
Spencer's with close to £ 10 billion; and, in Germany, it is Karstadt with a
turnover in excess of dm 10 billion.
Table 2:
Top 10 Retailers Worldwide
Rank Retailer No of stores
owned
Sales in US$
Millions
1 Wall-Mart Stores Inc. (USA) 4178 $180,787
2 Carrefour Group (France) 8130 $61,047
3 The Kroger Co. (USA) 3445 $49,000
4 The Home Depot, Inc. (USA) 1134 $45,738
5 Royal Ahold (Netherlands) 7150 $45,729
6 Metro AG (Germany) 2169 $44,189
7 Kmart Corporation (USA) 2105 $37,028
8 Sears, Roebuck and Co. (USA) 2231 $36,823
9 Albertson's, Inc. (USA) 2512 $36,726
10 Target Corporation (USA) 1307 $36,362
Source: economic times industry report
Studies by consulting firms like A.T. Kearney, KSA Technopak, and
McKinsey & Co. in India have indicated a huge potential for retailing in the
country. Drawn by the magic number of Rs 1, 60, 000 crore that is
expected to be the size of the retail industry by the end of the first decade
of this millennium, several companies from the organized sector have also
jumped into the fray.
In this millennium, like in the last, customers will want to spend time with
their family and friends. They may like to visit malls on weekends where
everything will be available under one roof. India will benefit from these
developments because of increased consumption through retailing and the
corresponding increase in employment created by retailing.
2.1 Retail Marketing
Retail Marketing includes all the activities involved in selling goods or
services directly to final consumes for personal, non-business use. Any
organization selling to final consumers -- whether a manufacturer,
wholesaler, or retailer – is doing retailing. It does not matter how the goods
or services are sold (by Person, Mail, Telephone, Vending Machine, or
Internet) or where they are sold (in a store, on the street, or in the
consumer‘s home).
There are many approaches to understanding and defining retail marketing;
most emphasize retail marketing as the business activity of selling goods or
services to the final consumer, but what we emphasized upon is defined as
follows:
?Any business that directs its marketing efforts towards satisfying the final
consumer based upon the organization of selling goods and services as a
means of distribution?
The concept assumed within this definition is quite important. The final
consumer within the distribution chain is a key concept here as retailers are
at the end of the chain and are involved in a direct interface with the
consumer.
A retailer or retail store is any business enterprise, whose sales volume
comes primarily from retailing. Retail organizations exhibit great variety and
new forms keep emerging. There are store retailers, non-store retailers,
and retail organizations. Consumers today can shop for goods and services
in a wide variety of stores. The best-known type of retailer is the
department store. Japanese department stores such as Takashimaya and
Mitsukoshi attract millions of shoppers each year. These stores feature art
galleries, cooking classes, and children‘s playgrounds.
A retailer is at the end of the distributive channel. He provides goods and
service to the ultimate consumers. This he does through his small
organization, with the help of a few personnel. In an individual retail store
there is not much scope for organization except in the sense that the
shopkeeper has to organize and apportion his time and resources. The
need for organization becomes essential as soon as he hires people and
enters into partnership or takes the help of members of his family in running
his store. A retailer deals in an assortment of goods to cater to the needs of
consumers. His objective is to make maximum profit out of his enterprise.
With that end in view he has to pursue a policy to achieve his objective.
This policy is called retailing mix. A retailing mix is the package of goods
and services that store offers to the customers for sale. It is the
combination of all efforts planned by the retailer and embodies the
adjustment of the retail store to the market environment. Retailing mix, a
communication mix and a distribution mix. The maximum satisfaction to the
customers is achieved by a proper blend of all three.
The success of the retail stores, therefore, depends on customers‘ reaction
to the retailing mix which influences the profits of the store, its volume of
turnover, its share of the market, its image and status and finally its
survival.
There are three main phases in the life of a retailing institution. These are: -
? Innovation (Entry)
? Trading Up
? Vulnerability.
In the entry stage, a new retailer enters with new price appeal, limiting
product offerings, Sparton Stores & Limited services. Its monopoly power
over the others is its price advantage, which means that it offers products
at low prices so as to get a competitive edge over its competitors.
In the trading up stage, the retailer starts expanding. It expands in terms of
product offering, better services, and improved interiors. With all these, it
starts charging a bit higher prices.
In the vulnerability stage, there is a gap in the market leaving some space
for the new players to come in. this is due to increase in the prices by the
retailer.
I have already explained the three stages in life of a retail institution.
Normally these stages are there in the life of a retail institution. But all these
may not be necessarily there in every retail institution. For instance, any
retail institution targeting the upper class may start itself with a large variety
& high price.
This brings to broadly identify and categorize the types of retail marketing,
which are defined as follows:
1. Store Retailing
2. Non store Retailing
2.2 Types OF Retail Marketing
Store Retailing
Store retailing provides consumers to shop for goods and services in a
wide variety of stores and it also help the Consumers to get all the needed
goods and services from one shop only. The different types of store
retailing are given below:
Specialty Stores
These stores focus on leisure tastes of different individuals. They have a
narrow product line with deep assortment such as apparel stores, sporting
goods stores, furniture stores, florists and bookstores. These stores are
usually expensive and satisfy the needs of selected consumers who have
liking or preference for exclusive things.
Departmental Store
These stores are usually built in large area and keep variety of goods under
one shed. It is usually divided into different sections like clothing, kids
section, home furnishings, electronic appliances and other household
goods. In a departmental store a consumer can buy variety of goods under
one shed.
Supermarket
These stores are relatively large, low cost, low margin, high volume, self
service operations designed to serve total needs for food, laundry and
household maintenance products. Supermarkets earn an operating profit of
only 1 percent on sales and 10percent on net worth.
Convenience Stores
These are relatively small stores located near residential area, open for
long hours seven days a week, and carrying a limited line of high turnover
convenience products at slightly higher prices than departmental stores.
Many such stores also have added takeout sandwiches, coffee and
pastries.
Off - Price Retailer
These stores sell goods at low price with lower margins & higher volumes.
These stores sell goods with deteriorated quality. The defects are normally
minor. This target at the persons belonging to the lower income group,
though some have a collection of imported goods aimed to target the
younger generation. The company owned showroom selling the seconds
products is a typical example of off - price retailer.
Discount Store
These stores sell standard merchandise at lower prices by accepting lower
margins and selling higher volumes. The use of occasional discounts or
specials does not make a discount store. A true discount store regularly
sells its merchandise at lower prices, offering mostly national brands, not
inferior goods.
In recent years, many discount retailers have ?traded up?. They have
improved decor, added new lines and services, and opened suburban
branches—all of which has led to higher costs and prices and as some
department stores have cut their prices to compete with discounters.
Not only that, discount stores have moved beyond general merchandise
into specialty merchandise stores, such as discount sporting goods stores,
electronics stores, and bookstores.
Catalog Showroom
Catalog showrooms generally sell a broad selection of high-markup, fast-
moving, brand-name goods at discount prices. These include jewelry,
power tools, cameras, luggage small appliances, toys, and sporting goods.
Catalog showrooms make their money by cutting costs and margins to
provide low prices that will attract a higher volume of sales. Catalog
showrooms have been struggling in recent years to hold their share of the
retail market.
RETAIL SCENE IN INDIA
India has some sometimes been called a nation of shopkeepers. This
epithet has its roots in the huge number of retail enterprises in the country
totaling 12 million, about 78 percent of these are small family owned
businesses utilizing only household labour. even among retail enterprises
that hire workers the bulk of them hire less than 3 workers .India‘s retail
sector appears backwards not only by standards of industrialized countries
but also in comparison to several other emerging markets in Asia and
elsewhere. There are only 14 companies that run departmental stores and
mere two with hypermarket operations. While the number of businesses
operating supermarkets is higher ( 425 in 2004 ) most of these had only 1
outlet, the number of companies with supermarket chains was less than 10.
2.3 Major Formats of Retailing
Major formats of In-Store Retailing have been listed in Table given below:
Table 3:
Format Description The Value Proposition
Branded Stores Exclusive showrooms either
owned or franchised out by a
manufacturer.
Complete range available
for a given brand, Certified
product quality.
Specialty Stores Focus on a specific consumer
need; carry most of the brands
available.
Greater choice to the
consumer, comparison
between brands possible
Department Stores Large stores having a wide
variety of products, organized into
different departments, such as
clothing, house wares, furniture,
appliances, toys, etc.
One stop shop catering to
varied consumer needs.
Supermarkets Extremely large self-services
retail outlets.
One stop shop catering to
varied consumer needs.
Discount Stores Stores offering discounts on the
retail price through selling high
volumes and reaping the
economies of scale.
Low prices.
Hyper-mart
Larger than a Supermarket,
sometimes with a warehouse
appearance, generally located in
quieter parts of the city
Low prices, vast choice
available including services
as cafeterias.
Convenience Stores Small self-service formats located
in crowded urban areas.
Convenient location and
extended operating hours.
Shopping Malls An enclosure having different
formats of in-store retailers, all
under one roof.
Variety of shops available
close to each other.
Source: India info line
Non-store Retailing
It is another type of retail marketing. Different types of non-store retailing
are given below:
Direct Selling
Direct selling which started centuries ago with itinerant peddlers has
burgeoned into a $9 billion industry, with over 600 companies selling door
to door, office to office, or at home sales parties. A variant of direct selling
is called multilevel marketing, whereby companies such as Amway recruit
independent businesspeople who act as distributors for their products, who
in turn recruit and sell to sub distributors, who eventually recruit others to
sell their products, usually in customer homes.
Direct Marketing
Direct marketing has its roots in mail-order marketing but today includes
reaching people in other ways than visiting their homes or offices, including
telemarketing, television direct response marketing, and electronic
shopping.
Automatic Vending
Automatic vending has been applied to a considerable variety of
merchandise, including impulse goods with high convenience value
(cigarettes, soft drinks, candy, newspaper, hot beverages) and other
products (hosiery, cosmetics, food snacks, hot soups and food,
paperbacks, record albums, film, T-shirts, insurance policies, and even
fishing worms).
2.4 Organized Retail Formats in India
Each of the retail stars has identified and settled into a feasible and
sustainable business model of its own.
? Shoppers' Stop - Department store format
? Westside - Emulated the Marks & Spencer model of 100 per
cent private label, very good value for money merchandise for the
entire family
? Giant and Big Bazaar - Hypermarket/cash & carry store
? Food World and Nilgiris – Supermarket format
? Pantaloons and The Home Store - Specialty retailing
? Tanishq has very successfully pioneered a very high quality
organized retail business in fine jewellery.
Structure of the retailing industry according to ownership patterns:
? An unaffiliated or independent retailer
? A chain retailer or corporate retail chain
? A franchise system
? A Leased Department (LD)
? Vertical Marketing System (VMS)
? Consumer Co-operatives
A new entrant in the retail environment is the 'discounter' format. It is also is
known as cash and-carry or hypermarket. These formats usually work on
bulk buying and bulk selling. Shopping experience in terms of ambience or
the service is not the mainstay here. RPG group has set up the first
'discounter' in Hyderabad called the Giant. Now Pantaloon is following suit.
Two categories of customers visit these retail outlets.
1. The small retailer. For example, a customer of Giant could be a
dhabawala who needs to buy edible oil in bulk.
2. The regular consumer who spends on big volumes (large pack sizes)
because of a price advantage per unit.
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 4:
Retailer Current Format New Formats
Shoppers' Stop Department Store Quasi-mall
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
Subhishka Supermarket Considering moving to self service
Vitan Supermarket Suburban discount store
Foodworld Food supermarket Hypermarket, Foodworld express
Glob us Department Store Small fashion stores
Bombay Bazaar Super market Aggregation of Kiranas
Efoodmart Food super market Aggregation of Kiranas
Metro Departmental store Cash and carry
S Kumar's Departmental store Discount store
Source: India info line
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. FoodWorld is experimenting with a format of one-fourth the
normal size called FoodWorld Express.
2.5 Trends in Retail Marketing
At this point, I can summarize the main development retailers and
manufacturers need to take into account as they plan their competitive
strategies.
In India the trends are mainly in three sectors. These sectors are:
Trends in retail marketing
1. New retail forms and combinations continually emerge. Bank branches
and ATM counters have opened in supermarkets. Gas stations include food
stores that make more profit than the gas operation. Bookstores feature
coffee shops.
Even old retail forms are reappearing: In 1992 Shawna and Randy Heniger
introduced peddler‘s carts in the Mall of America. Today three-fourths of the
nation‘s major malls have carts selling everything from casual wear to
condoms. Successful carts average $ 30,000 to $ 40,000 a month in sales
and can easily top $ 70,000 in December. With an average start-up cost of
only $3,000, push carts help budding entrepreneurs test their retailing
dreams without a major cash investment. They provide a way for malls to
bring in more mom-and-pop retailers, showcase seasonal merchandise,
and prospect for permanent tenants.
2. New retail forms are facing a shorter life span. They are rapidly copied
and quickly lose their novelty.
3. The electronic age has significantly increased the growth of non store
retailing, consumers receive sales offers in the mail and over television,
computers, and telephones, to which they can immediately respond by
calling a toll-free number or via computer.
4. Competition today is increasingly intertype, or between different types of
store outlets. Discount stores, catalog showrooms, and department stores
all compete for the same consumers. The competition between chain
superstores and smaller independently owned stores has become
particularly heated. Because of their bulk buying power, chains get more
favorable terms than independents, and the chains‘ large square footage
allows them to put in cafes and bathrooms. In many locations, the arrival of
a superstore has forced nearby independents out of business. In the book
selling business, the arrival of a Barnes & Noble superstore or Borders
Books and Music usually puts smaller bookstores out of business. Yet the
news is not all bad for smaller companies. Many small independent
retailers thrive by knowing their customers better and providing them with
more personal service.
5. Today‘s retailers are moving toward one of two poles, operating either as
mass merchandisers or as specialty retailers. Superpower retailers are
emerging. Through their superior information systems and buying power,
these giant retailers are able to offer strong price savings. These retailers
are using sophisticated marketing information and logistical systems to
deliver good service and immense volumes of product at appealing prices
to masses of consumers. In the process, they are crowding out smaller
manufacturers, who become dependent on one large retailer and are
therefore extremely vulnerable, and smaller retailers, who simply do not
have the budget of the buying power to compete. Many retailers are even
telling the most powerful manufacturers what to make; how to price and
promote; when and how to ship; and even how to reorganize and improve
production and management. Manufacturers have little choice: They stand
to lose 10 to 30 percent of the market if they refuse.
6. Marketing channels are increasingly becoming professionally managed
and programmed. retail organizations are increasingly designing and
launching new store formats targeted to different lifestyle groups. They are
not sticking to one format, such as department stores, but are moving into a
mix of retail formats.
7. Technology is becoming critical as a competitive tool. Retailers are using
computers to produce better forecasts, control inventory costs, order
electronically from suppliers, send e-mail between stores, and even sell to
customers within stores. They are adopting checkout scanning systems,
electronic funds transfer, and improved merchandise-handling systems.
8. Retailers with unique formats and strong brand positioning are
increasingly moving into other countries. McDonald‘s, The Limited, Gap,
and Toys ?R? Us have become globally prominent as a result of their great
marketing prowess. Many more Indian retailers are actively pursuing
overseas markets to boost profits.
9. There has been a marked rise in establishments that provide a place for
people to congregate, such as coffeehouses, tea shops, juice bars,
bookshops, and brew pubs. Denver‘s two Tattered Covered bookstores
host more than 250 events annually, from folk dancing to women‘s
meetings. Brew pubs such as New York‘s Zip City Brewing and Seattle‘s
Trolley man Pub offer tasting and a place to pass the time. The Discovery
Zone, a chain of children‘s play spaces, offers indoor spaces where kids
can go wild without breaking anything and stressed-out parents can
exchange stories. There are also the now-ubiquitous coffeehouses and
espresso bars, such as Starbucks, whose numbers have grown from 2,500
in 1989 to a forecasted 13,000 by 2001. And Barnes & Noble turned a
once-staid bookstore industry into a fun-filled village green.
Chapter 3 : RETAIL MARKETING IN INDIA
Retail marketing is the most important part of the entire logistics chain in a
business especially in consumer related products. Without proper retailing
the companies can't do their business. Retailing is the process of selling
goods in small quantities to the public and is not meant for resale. Retail is
derived from the French word retailer, meaning to cut a piece off or to
break bulk.
There are various ways of making goods available to consumers like:
? Company to distributor to wholesaler to retailer to consumer
? Company to salesperson to consumer
? Company to consumers (online/ phone/ catalog ordering)
These three are among the most common ways of making the goods
available to consumers. But in India the three layered system of distributor,
wholesaler and retailer, forms the backbone of the front-end logistics of
most of the consumer-good companies.
In this system the company operating on all India basis appoints hundreds
of distributors across the country that supplies to various retailers and
wholesalers. Wholesalers in turn can either directly sell in the market or can
supply to retailers. The current retailing system prevalent across the
country is highly fragmented and unorganized. Anyone with some money
and some real estate can open a small shop and become a retailer catering
to the locality in which he opens the shop.
There are a number of reasons behind this fragmented retail market. Some
of the major reasons being:
? Poverty and lower literacy levels.
? Low per capita income.
? Savings focused and less indulgence mindset.
? Poor infrastructure facilities like roads etc.
? Restrictions on intra-state good movement.
? High taxes.
? No exposure to media.
? High import duties on imported goods.
? FDI in retailing is not allowed.
? Retailing is not considered as a business or industry by the
government.
? Hitherto none of the business schools in India were offering
specialized courses on retailing.
? Expensive supply chain.
Besides this there is other reasons too, which led to stifling of growth of
organized segment of retailing sector and which instead led to highly
fragmented market.
Today in India we have more than 12 million retail outlets and most of then
are family run and locally owned. There are very few nationally present
retail stores. In India the process of buying and selling at these
unorganized retail outlets, is highly characterized by bargaining and
negotiations. But slowly with increasing influence of media and urbanization
the market is shifting towards organized segment. Seeing the huge market
size of retail business in the country and the current level of organized
segment, many players have jumped into the fray and many are waiting for
the right opportunity to enter it.
3.1 Retailing in 1990s
On account of the liberalization drive in the 1990s, several structural and
demographic changes that are taking place are helping the industry to
grow. The GDP has grown by 6.6percent in the last decade resulting in
increased income levels and higher purchasing power for the population.
Increasing literacy levels, increasing number of working women, increasing
urbanization, higher international travel by Indian population and increasing
media penetration has raised aspiration levels of the population, resulting in
demand for better shopping experience and larger variety of goods. India
has close to 54percent of population below the age of 25, which translates
into higher prospects for increased consumption levels in the future. Finally,
interest rates have also declined in the past few years further propelling the
consumption demand.
These factors were the key drivers for the retail wave in the country.
Notable among the early entrants were players like Shoppers Stop,
Pantaloon, Ebony, Foodworld, Subhiksha, etc. Initially, the growth in
organized retail was very slow and concentrated mainly in metros, with
south India holding its ground as the pioneer in organized retail growth, on
account of the low cost of real estate. Due to the high investments required
in the early stages and the fact that real estate was the key deciding factor
for success of stores, real estate developers have been the major players
in the industry (see Table).
Table 5:
Sponsors
Group Retail Business
Rajan Raheja – Real Estate Developer Globus – Chain of departmental stores
K, Raheja - Real Estate Developer Shopper‘s Stop - Chain of departmental
stores
Hiranandani - Real Estate Developer Haiko supermarket, Loft shoe stores and
Hakone mall.
Tata – Diversified Business House Westside – chain of department stores
DS Group - Real Estate Developer Ebony - chain of department stores
RPG – Diversified Business House Foodworld supermarkets, Giant
hypermarkets, Health & Glow beauty and
health stores.
DLF – Real Estate Developer DLF malls
ITC - Diversified Business House Wills Sport – Chain of apparel stored.
Source: Fitch
In the early 1990s, as the players were lower down on the learning curve
many faltered in their models, and growth of the industry remained slow.
The second half of 1990s saw several players making losses and exiting
from the business. The worst years for the industry were 2000 and 2001,
as the stock market downturn, which reduced customer confidence and
spending, had a direct impact on the performance of the industry. The
industry recovered starting 2002. It now appears the efforts and learning‘s
of the players in the last decade are beginning to pay off; the organized
retail industry has established firm roots and is beginning to grow.
3.2 Present Retail Scenario In India
? Retail experts find Indian industry promising
? Retail sales to touch Rs. 30,000 crore by 2005
? Mall Mania: The developing mall culture in India
? Emergence of region-specific formats
? Emergence of discount formats
? Entry of international players
Retail experts find Indian industry promising
The retail movement in India has acquired the critical mass that is required
for rapid acceleration in terms of industry growth as well as geographical
spread. The Indian retail industry can no longer be called nascent.
The spread of super stores to the northern cities such as Delhi,
Chandigarh, Jaipur and Kolkata is evidence of the fact that organized
retailing in India has emerged from its southern bastion.
The retailing boom is being driven by increased expectations as well as
changing shopping behavior of the urban Indian consumer. With the
increasing number of nuclear families, working women, greater work
pressure and increased commuting time, consumers are looking for
convenience. And, convenience is defined as having everything under one
roof, longer hours and multiplicity of choice.
On the supply side, the current inefficient supply chain in India, particularly
for food items has led a few players to consolidate their operations to take
advantage of economies of scale and match consumer expectations in
terms of delivery as well as space. So, we have a situation where both
demand and supply side dynamics are fuelling the growth of organized
retailing in India, although improvements in the supply chain are yet to fully
match with consumer expectations.
The future growth need not necessarily come only from the big metros,
where there already exists a good retail network. The fact that big Indian
retail chains are moving into places like Indore or Chandigarh is an
important indicator of future growth. For the Rs. 5000-crore organized retail
industry it is, perhaps, time to tap the relatively smaller cities. The share of
organized sector in total retail sales will grow from one per cent now to six
per cent by 2005.While projections can be slippery, hard facts point to
exciting growth ahead for this sector.
According to KSA, organized retailing is focusing on only SEC-A cities,
India‘s 23 largest cities. That is where a large portion of the country's urban
population exists. Today 82 per cent of organized retailing comes from the
top six cities and 12 per cent from the next four. KSA says the top 10 cities
provide 94 per cent of organized retail sales in India.
By 2005, KSA projects the top six cities will account for 66 per cent of total
organized retailing and the next four for 20 per cent. The top 10 cities will
account for 86 per cent of organized retail sales. There could be variations
in growth patterns in different segments. The second half of the top 10
cities will provide large growth for food and groceries, while the top six
would still be the growth centers for consumer durables, believes KSA.
The spread of organized retailing is unlikely to be a national phenomenon
yet. This appears to be the case so far. South India, particularly Chennai,
Hyderabad and Bangalore, have seen the emergence of chain stores or
large format stores. While garment stores have been around for sometime,
other segments like food and groceries, consumer durables and even
books and music have witnessed the emergence of organized players in
large cities in South India. The lack of trained manpower or alternatively the
tremendous scope the sector has to provide employment is another issue.
Mall Mania: The Developing Mall Culture in India
Modern malls made their entry into India in the late 1990s, with the
establishment of Crossroads in Mumbai and Ansals Plaza in Delhi. By early
2001, several mall projects were announced. According to market
estimates, close to 12 million sq. ft. of mall space is being developed
across several cities in the country, of which 10 million sq. ft. is expected to
be operational by end of 2003 (see Table below). With this, rentals for retail
properties have shown a marked decline, which has brought down the
break-even levels of the retail projects. Moreover, retailers would now have
access to retail-specific properties, which will increase their efficiencies.
Table 6:
Mall Development in India
Mall Location Rate / Sq. ft.
Crossroads Tardeo, Mumbai 225-250
Ansals South Ex, Delhi 175-200
Nirmal Lifestyle Mulund, Mumbai 75-90
Runweals Mall Mulund, Mumbai 75-90
Karnavat Mall Thane, Mumbai 65-85
Raheja Mind space Malad, Mumbai 60-80
Jog‘s Mall Andheri, Mumbai 55-75
Cable Corporation Borevali, Mumbai 55-75
Ansals East Delhi 75
Sahara Gurgaon 50-70
MGF Malls – Metroplitian & Plaza Gurgaon 65-85*
DLF Gurgaon 65-85
Shipra Noida 80-180
Forum KolKotta 100
City Center KolKotta 55
Rave 3 Kanpur 45-55
Inox Baroda 75
Forum Bangalore 70-90
Spencers Plaza Phase III Chennai 70
Indore, Nasik and Jaipur Malls 45-55
Hyatt, Mumbai & Leela, 175-300
Phoenix Malls Lower Parel, Mumbai 100-125
*average for the metropolitian is Rs. 60 per sq. ft..
source: Chesterten Meghraj. Industry Reports
Till some time back, there were only few international style shopping malls
in India --Spencer in Chennai, Crossroads in Mumbai, Ansals Plaza in New
Delhi and Sriram‘s Arcade in Kolkata. By the end of 2004, that number
jumped to many.
It looks like a virtual stampede, major players with a cumulative investment
of Rs 375 crore are set to change cityscapes across India. In the next one
year, close to 40 lakh square feet of retail space will be developed. In three
years, this will rise to 70-lakh sq ft.
As the retail industry evolves, consumers want more variety before making
their purchase decision. A study on consumer outlook suggests that over
80 percent of consumers want a wide range of products at hand while
shopping. This signifies that people are finally ready for multi-option
complexes.
Many old-time corporates are seriously considering using their idle assets.
It makes sense for landowners to develop it and keep the returns rather
than sell it outright or even lease it, especially when there is opportunity
here. It is perhaps the best way to use an idle real estate asset.
The limited kitty of brands has yet another significant knock on effect on the
typical size of Indian malls. In the US and South-East Asia, malls are as
large as 50 lakh sq ft. Spencer is by far the largest mall in India - it
occupies 7 lakh sq ft and even that is dwarfed by Asia's largest mall, the 4-
million sq ft mega mall in Malaysia. Even the 26 malls that are being
planned are likely to measure between 50,000 sq ft and 2 lakh sq ft. The
Indian mall cannot offer too many choices in terms of brands. So,
developing a very large mall can never be sustainable.
There's a flip side though -malls even as small as 80,000 sq ft, like
Shopper's City in Kolkata or the Esplanade Mall at Kochi, can be sustained.
Emergence of Region-Specific Formats
For the first time in 10 years, the industry is witnessing the development of
region-specific formats. With organized retail penetrating into B class
towns, retailers have started differentiating in the sizes and formats of
stores. For example, in departmental store format, while most A class cities
and metros have larger stores of 50,000 plus sq. ft. sizes, stores in B class
towns have stabilized in the 25,000-35,000 sq. ft. range. Most players have
started operating these two formats across various cities, which has helped
them to standardize the merchandise offering across the chain.
Emergence of Discount Formats
Larger discount formats, popularly known as hypermarkets, are now
emerging as major competitors to both unorganized and organized
retailers. Penetration of organized retail into the lower strata of income
groups and consumer demand for increased value-for-money has improved
the prospects of these formats. These formats span across the entire range
of merchandise categories. Big Bazaar, promoted by Pantaloon and Giant,
promoted by the RPG Group, are examples of this format.
Entry of International Players
A large number of international retailers have evinced interest in India,
despite the absence of favorable government policy for foreign players (see
Table below). A number of the major brands have entered the country
through licensing agreements with Indian players to capitalize on the
opportunities available in the sector.
Table 7:
International players
International Players Retail Ventures In India
Landmarc Group, Dubai Lifestyle Chain of Departmental Stores
Metro, Germany Hypermarket
Shoprite, South Africa Supermarket, Hypermarket
Nanz, Germany Supermarket
Marks & Spencer, UK Apparel Retailer
Mango, Spain Apparel Retailer
McDonalds, USA Food Retailer
Dominos USA Food Retailer
Tricon Restaurant, USA Food Retailer
Source: Industry Reports
Chapter 4 : INFORMATION 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 divided into 3 broad categories:
Customer interfacing systems
Bar coding and 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
ERP System
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 and Scheduling Systems
APS systems can provide improved control across the supply chain, all the
way from raw material suppliers 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 manufactures, distributors and retailers and considering APS
packages such as those from i2, Manugistics, Bann, Mercial incs and
Sterling-Douglas.
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 locational 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.
Chapter 5 : FOREIGN TOUCH IN INDIAN RETAIL
The chief of Marks & Spencer has been making trips to India over the past
year. Global investment bank Warburg Pincus is awaiting the Indian
government's clearance to pick up a 25.1 per cent stake, worth $13 million,
in Shoppers Stop.
Dairy Farm International and Jardine Matheson are present here, through
tie-ups with the RPG Group. Fast food major McDonalds have already
made a dent in the marketplace and in Indian palates.
The Dubai-based Landmark group is making its presence felt in Chennai
through its Lifestyle mega store of over 30,000 sq ft. Landmark is owned by
Mukesh Jagtiani, a non-resident Indian. Lifestyle International Private
Limited, formed in India recently, is a wholly-owned subsidiary of the
Mauritius-based Lifestyle International which, in turn, is wholly-owned by
the Landmark group. In India, according to Lifestyle International's
marketing manager, Roshan Mathew, the target is to "have 12 to 16 stores
by 2005." These stores will sell all lifestyle products, barring furniture, under
one roof.
Immediate plans include opening a 46,000 sq ft store in Hyderabad, which
Mathew terms "The Millennium Store". The Hyderabad store will have
additional sections for books and music, unlike the Chennai store. Besides,
as soon as Lifestyle gets a keenly awaited Foreign Investment Promotion
Board clearance for a Rs 100 crore investment, it will create outlets in
Bangalore, Pune, Mumbai, Delhi and Ahmedabad.
The Hong Kong-based Dairy Farm International, a 125 year old retail major
with around 1,300 outlets across nine countries, recently converted its
technical tie-up (since 1996) with the RPG group's Spencer & Company for
Foodworld into a 49:51 joint venture. The new venture is called Foodworld
Supermarkets Limited. DFI also has a 50:50 joint venture with the Indian
group in RPG Guardian. DFI is the retail arm of Jardine Matheson.
In Western markets, a familiar sight is the McDonalds golden arch. In India
too McDonalds has maintained its unique selling proposition -- providing
the same quality of food and the same ambience as anywhere in the world.
Its raw material requirements are totally out-sourced. But what it has taken
care of is world class quality in all its raw material sourcing, with
specifications ensured strictly. The chain has been smart enough to tailor
its products to the Indian environment, adding fare for the large number of
vegetarians who love fast food, and avoiding certain beef and pork in
deference to social sensitivities. In a market place where Kentucky Fried
Chicken failed to make an impact, McDonalds seems to be finding its place
slowly but surely.
doc_318316982.docx
The Indian retail industry is now beginning to evolve in the line with the transformation that has swept other large economies
Project Report on Retail Marketing in India
Executive Summary
The Indian retail industry is now beginning to evolve in the line with the
transformation that has swept other large economies. It witnesses
tremendous growth with the changing demographics and an improvement
in the quality of life of urban people. The growing affluence of India‘s
consuming class, the emergence of the new breed of entrepreneurs and a
flood of imported products in the food and grocery space, has driven the
current retail boom in the domestic market.
The concept retail which includes the shopkeeper to customer interaction,
has taken many forms and dimensions, from the traditional retail outlet and
street local market shops to upscale multi brand outlets, especially stores
or departmental stores. Though at this moment, it is still premature to say
that the Indian retail market will replicate the success stories of names such
as Wal-Mart stores, Sainsbury and Tesco but at least the winds are blowing
in the direction of growth.
Hence, focusing on two aspects of retail marketing i.e. Store Retailing and
Non-store Retailing. Store Retailing as the departmental store, which is a
store or multi brand outlet, offering an array of products in various
categories under one roof, trying to cater to not one or two but many
segments of the society and Nonstore Retailing as the direct selling, direct
marketing, automatic vending.
Therefore, this concept of retail marketing through departmental stores,
which is coming up in a big way in India was decided to be studied in detail,
through an exploratory and conclusive research.
The objective being to assess the various parameters that influences a
buyer to visit or shop at departmental store thereby contributing to its
turnover (in terms of sales and profits) hence leading to its overall success.
The extensive research brought me to conclude that departmental stores
are soon emerging on the top priority lists, amongst the shopping spree in
Delhi, as they seem to derive immense pleasure of convenience and
exposure to variety under one roof, in their extremely busy lives, when they
don‘t have time for things.
Though some of the customers perceive departmental stores to be
expensive and only high income category‘s cup of tea, the stores make
constant efforts to induce them to at least visit the store at once during the
sale period, or discount offers.
Most of these stores believe in creating not just a marketing activity with its
customers, but rather favor relationship building with him so as to convert
first time customers into a client.
Hence this document entails me through these aspects in great detail,
helping me to understand the concept of retail marketing through
departmental stores in Delhi.
Chapter 1 : RETAILING – THE SUNRISE INDUSTRY
1.1 Introduction to the Project Report :
The word ?retail‘ means to sell or be sold directly to individuals. Retail is
India‘s largest industry, and arguably the one with the most impact on the
population. It is the country‘s largest source of employment after
agriculture, has the deepest penetration to rural India, and generates more
than 10percent of India‘s GDP. However, retailing in India has so far, been
mostly in the hand of small disorganized entrepreneurs. It is also India‘s
least evolved industries. In fact, it is not even considered a real industry.
The industry suffers from lack of management talent, poor access to
capital, unfavorable regulation and denial of access to best practices. The
Indian retail industry is only now beginning to evolve in line with the
transformation that has swept other large economies. Fifty years of
restricting the consumer goods industry, a national mindset which favored
denial over indulgence, and a fractured supply chain for agricultural
products have all contributed to prevent the development of modern
tenants based on scale advancements and consumer preferences.
India has some 12 million retail outlets, but many of these act merely as
subsistence providers for their owners and survive on a cost structure
where labor and land is assumed to be free and taxes nil. Compare this
with the global retail industry, which is one of the world‘s largest organized
employers, is at the cutting edge of technology, and which leverages scale
and scope to offer value-added services to its customers.
However, only recently has there been an awakening in this sector, with
more organized retailers starting to make an impact. The liberalization of
the consumer goods industry, initiated in the mid-80s and accelerated
through the 90s has begun to impact the structure and conduct of the retail
industry. Backed by changing consumer trends and metrics, liberalization in
mindsets driven by media, new opportunities and increasing wealth,
retailing in India, presents a vast opportunity for a variety of businesses -
real estate, store design & operations, visual merchandising logistics and
communications, B2C service providers, and FMCG companies who can
add to their offers by partnering this revolution.
The Indian Retailing Industry stands poised to take off into the 21st century.
It is one of the fastest growing sectors in the nation that caters to the
world's second largest consumer market. Retail boom is unabating. India
has five million retailers with a business volume of $180 million growing at
5 to 7 per cent a year. The middle class drives retailing anywhere in the
world and this segment should have reasonable income. The next driver is
availability of variety of goods, products and brands. The third one is
?sense of awareness?.
In other developing economies, this transformation has already begun. In
many of these countries, organized retail already has a 40 percent share of
the market, compared to India‘s current levels of 2 percent. As India goes
through this transformation, new businesses with sales of 1billion – 2 billion
US $ will be created in grocery and of 250million - 500million US $ in
apparel. Smaller but still interesting opportunities will be created in other
sectors like books, electronics, and music. This transformation will also
impact the supply chain in agriculture, the tax collections from trade and the
way people shop.
In the last 10 years, all Southeast Asian countries like Indonesia, Malaysia,
Taiwan and Korea have gone through similar phases. China, with a per
capita income of $650-700 per annum, is going through the same phase
what India is also facing now. Europe went through this phase of retail
revolution about 40-50 years ago. It is believed that when a country‘s per
capita income reaches the level of $1,200 per annum, organized retailing
begins to takeover. Though India has a per capital income of $ 400, on the
basis of purchasing power parity (PPP) it has already hit the $1200 level.
This does strengthen the belief that probably, the right time for organized
retailing to click in India has come.
This report aims at providing an insight into the emerging trends in the
industry and the barriers to change and a perspective on what this industry
could become, using the global industry as the backdrop.
1.2 Overview of the Global Retail Industry
Retail: world largest industry
Retail, with total sales of $ 6.6 trillion, is the world‘s largest private industry
ahead of financial industries $ 5.1 trillion. It is also home to a number of the
world‘s largest enterprises. Over 50 of the Fortune 500 companies, and
around 25 of the Asian top 500 companies, are retailers. The industry
accounts for over 8 percent of the GDP in western economies.
Retail: Largest private industry in the world economy
A Study by Mc Kinsey states that organized retail accounts for just around
2 percent (out of which modern retail formats account for 7 percent of
trade) presently is set to grow at exponential exceeding 35 percent. Fitch
estimates the current share of organized retail to grow from 2percent
presently to around 15 to 20 percent by 2010.
Table 1:
Retail Consumption areas US $ billion Existing Companies in the organized sector
Food Retailing 130 Food Bazaar (Pantaloon) Food World
Subhishka.
Clothing & Apparel 12 Pantaloon Westside, Shoppers Stop
Jewelry, Watches 7 Tanishq, Titan, Gold Bazaar (Pantaloon)
Home Furnishing 5 Home Store, Arcus (Pantaloon)
Foot wear 1.7 Bata, Woodland
Beauty Care 3.6 VLCC, Health & Glow
Source: economic time‘s industry report
Traditionally, most retailers have had very localized operations. This
localized nature of the industry is changing as retailers face low rates of
growth and threatened profitability at home. New geographies will help
them sustain top-line growth as well as permit global sourcing. Profits in
retail have steadily been rising and have generated 18 percent shareholder
returns between 1994 and 1999. Significantly, retail is also one of the
world‘s largest employers, accounting for instance 16 percent of the US
workforce, Poland 12 percent, China 8percent, India 10 percent and Brazil
6percent. Factors such as scale in sourcing, merchandising, operational
effectiveness and ambience have driven the spread of organized retail.
Grocery, electronics are examples of categories that compete on the
strength of better pricing, which in turn is driven by superior sourcing and
merchandising and cost-efficient operations. Wal-Mart, Home Depot and
Kingfisher are benchmark retailers in these fields.
In apparel, home furnishings and furniture, the advantage is driven by the
marketers‘ ability to provide better products in a comfortable ambience at
affordable prices. In these cases sourcing capability has to be backed by
strong design capability and store management. IKEA and GAP are good
examples of this model of retailing.
Over the last few decades, retail formats have changed radically. The basic
department stores and co-operatives of the early 20th Century have given
way to mass merchandisers, hypermarkets, warehouse clubs, category
killers, discounters and convenience stores. Each of these formats has
been driven by marketer‘s need to offer relevant, distinctive and economic
propositions to an evolving consumer base.
Global retailers have also reached a position of strength that enables their
brand to be leveraged across a wide range of services. Many of them have
expanded their offering, over the years to include fuel retail, car retail,
convenience services and personal financial services. This has put them in
a position where they are not only beginning to capture growth from
geographical expansion, but are also entering large new areas of business.
The recent evolution of the Internet has helped further broaden the scope
of operations of large retailers. Further, a large number of retailers are
pursuing innovative aggregation and supply chain-streamlining initiatives
using B2B technology.
Chapter 2 : THE RETAIL MARKETING REVOLUTION
By 2010, the list of India's top 10 retailers will have at least 5 Indian
corporate. Retail Marketing will go through a tremendous change in India
this millennium. It will change India's cities, its people, and its households.
The Indian consumer is reportedly the largest spender in Singapore and
London. It is, therefore, strange that there have, so far, been few efforts to
present the product in the right kind of environment in India. Indeed, the
right shopping experience does induce Indian consumers to spend more.
This is evident from the experiences of retail-outlets like Shoppers' Stop,
Music World, Food World, Crosswords, The Home Store, Ebony, Bigjo‘s,
Saboos, Standard, Vijay Store and Janaki Das & Sons, Westside etc.
However, the development of organized retail is dependent on the efforts of
several agencies and institutions. The first among these is the
government. In a country as big as India and with as many states as ours, it
is imperative that the Central government and all state governments bring
in Value Added Taxation or a unified taxation system to ensure that the tax-
regimes are the same across the country.
The laws governing retail real estate should also be looked into, so that it is
possible to develop retail-estate beyond the city-limits.
Apart from providing entertainment and retail opportunities, this will also
decongest the city center and facilitate the development of suburbs. The
relevant rules should also be amended to allow retail-stores to operate 7
days a week, 12 hours a day. Given the hours most urban consumers keep
at work, and keeping in mind the increase in the number of nuclear
families, this may, indeed, make sense. This will also help people enjoy
their evenings, out at malls.
The second group, whose participation is essential in making retail a boom-
sector in this millennium, comprises developers. Most properties are
developed without considering the end user; thus, we sometimes find high-
ceilinged offices and low-ceilinged retail stores. Often, the shopper's
convenience is not taken into consideration while the property is
constructed.
Another area of concern is the way in which developers sell their space.
The only consideration is the price, not the usage pattern or the nature of
the product that is to be sold. In contrast, internationally, mall-management
is treated as a specialized discipline of retail management. This is what we
have to focus on in this millennium.
The third constituency that has a role to play in the fortunes of organized
retail this century is the education-sector. Retail is a people-intensive
business, and there is a huge opportunity for retail institutes in India.
For manufacturers, retailing will present an attractive opportunity.
Organized retail allows them to expose their products to a large volume of
customers in an environment conducive to buying. Already, several
transnational retail giants have established their presence in India; others,
notably Chinese retailers, have visited India and studied the Indian market.
There's a lot at stake here: even so early in the 21st Century, India is too
large a market to be ignored by transnational retail giants.
From the manufacturing company's perspective, the focus should be on
producing good products, and forging relationships with organized retail.
Manufacturers need to draw a plan of producing quality products and tie in
with retailers. Indeed, the birth of organized retail will also engender the
creation of private labels and store-brands. Thus, if a manufacturing
company lacks the resources to build a brand, it can supply to a retail-chain
that has the resources to create a brand of its own.
A glimpse of the last 2 decades of the previous century proves illuminating.
Large-format retailing started with outlets like Vivek's and Nalli's in Chennai
and Kidskemp in Bangalore, and, at another level, with manufacturer-retail
brands like Bata, Bombay Dyeing, and Titan. The last decade of the
millennium witnessed the emergence of lifestyle brands and the plastic
culture. Liberalization and increasing awareness of the world around us
created the Indian yuppie, who aspired to own everything we saw on TV, or
in shops during jaunts abroad. New lifestyle brands offered traditional retail-
outlets an opportunity to convert themselves into exclusive stores,
franchised or otherwise. And even as these developments were taking
place, the Indian consumer became more mature. Customer-expectations
zoomed
Thus, at the beginning of the New Millennium, retailers have to deal with a
customer who is extremely demanding. Not just in terms of the product-
quality, but also in terms of service, and the entire shopping experience.
Today, the typical customer who shops in a retail outlet compares the time
spent at the check-out counter with that at an efficient petrol station, and
the smile of the counter-person to that decorating the face of a Jet Airways'
crew member. To cope with the new customer, manufacturers have to
focus on product quality and brand building. And retailers, in turn, have to
focus on the quality of the shopping experience.
Internationally, retailing is a large business; you find at least one retailer
amongst the top 10 companies in every country. In the US, it is Wal-
Mart with a turnover in excess of $ 120 billion. In the UK, it is Marks and
Spencer's with close to £ 10 billion; and, in Germany, it is Karstadt with a
turnover in excess of dm 10 billion.
Table 2:
Top 10 Retailers Worldwide
Rank Retailer No of stores
owned
Sales in US$
Millions
1 Wall-Mart Stores Inc. (USA) 4178 $180,787
2 Carrefour Group (France) 8130 $61,047
3 The Kroger Co. (USA) 3445 $49,000
4 The Home Depot, Inc. (USA) 1134 $45,738
5 Royal Ahold (Netherlands) 7150 $45,729
6 Metro AG (Germany) 2169 $44,189
7 Kmart Corporation (USA) 2105 $37,028
8 Sears, Roebuck and Co. (USA) 2231 $36,823
9 Albertson's, Inc. (USA) 2512 $36,726
10 Target Corporation (USA) 1307 $36,362
Source: economic times industry report
Studies by consulting firms like A.T. Kearney, KSA Technopak, and
McKinsey & Co. in India have indicated a huge potential for retailing in the
country. Drawn by the magic number of Rs 1, 60, 000 crore that is
expected to be the size of the retail industry by the end of the first decade
of this millennium, several companies from the organized sector have also
jumped into the fray.
In this millennium, like in the last, customers will want to spend time with
their family and friends. They may like to visit malls on weekends where
everything will be available under one roof. India will benefit from these
developments because of increased consumption through retailing and the
corresponding increase in employment created by retailing.
2.1 Retail Marketing
Retail Marketing includes all the activities involved in selling goods or
services directly to final consumes for personal, non-business use. Any
organization selling to final consumers -- whether a manufacturer,
wholesaler, or retailer – is doing retailing. It does not matter how the goods
or services are sold (by Person, Mail, Telephone, Vending Machine, or
Internet) or where they are sold (in a store, on the street, or in the
consumer‘s home).
There are many approaches to understanding and defining retail marketing;
most emphasize retail marketing as the business activity of selling goods or
services to the final consumer, but what we emphasized upon is defined as
follows:
?Any business that directs its marketing efforts towards satisfying the final
consumer based upon the organization of selling goods and services as a
means of distribution?
The concept assumed within this definition is quite important. The final
consumer within the distribution chain is a key concept here as retailers are
at the end of the chain and are involved in a direct interface with the
consumer.
A retailer or retail store is any business enterprise, whose sales volume
comes primarily from retailing. Retail organizations exhibit great variety and
new forms keep emerging. There are store retailers, non-store retailers,
and retail organizations. Consumers today can shop for goods and services
in a wide variety of stores. The best-known type of retailer is the
department store. Japanese department stores such as Takashimaya and
Mitsukoshi attract millions of shoppers each year. These stores feature art
galleries, cooking classes, and children‘s playgrounds.
A retailer is at the end of the distributive channel. He provides goods and
service to the ultimate consumers. This he does through his small
organization, with the help of a few personnel. In an individual retail store
there is not much scope for organization except in the sense that the
shopkeeper has to organize and apportion his time and resources. The
need for organization becomes essential as soon as he hires people and
enters into partnership or takes the help of members of his family in running
his store. A retailer deals in an assortment of goods to cater to the needs of
consumers. His objective is to make maximum profit out of his enterprise.
With that end in view he has to pursue a policy to achieve his objective.
This policy is called retailing mix. A retailing mix is the package of goods
and services that store offers to the customers for sale. It is the
combination of all efforts planned by the retailer and embodies the
adjustment of the retail store to the market environment. Retailing mix, a
communication mix and a distribution mix. The maximum satisfaction to the
customers is achieved by a proper blend of all three.
The success of the retail stores, therefore, depends on customers‘ reaction
to the retailing mix which influences the profits of the store, its volume of
turnover, its share of the market, its image and status and finally its
survival.
There are three main phases in the life of a retailing institution. These are: -
? Innovation (Entry)
? Trading Up
? Vulnerability.
In the entry stage, a new retailer enters with new price appeal, limiting
product offerings, Sparton Stores & Limited services. Its monopoly power
over the others is its price advantage, which means that it offers products
at low prices so as to get a competitive edge over its competitors.
In the trading up stage, the retailer starts expanding. It expands in terms of
product offering, better services, and improved interiors. With all these, it
starts charging a bit higher prices.
In the vulnerability stage, there is a gap in the market leaving some space
for the new players to come in. this is due to increase in the prices by the
retailer.
I have already explained the three stages in life of a retail institution.
Normally these stages are there in the life of a retail institution. But all these
may not be necessarily there in every retail institution. For instance, any
retail institution targeting the upper class may start itself with a large variety
& high price.
This brings to broadly identify and categorize the types of retail marketing,
which are defined as follows:
1. Store Retailing
2. Non store Retailing
2.2 Types OF Retail Marketing
Store Retailing
Store retailing provides consumers to shop for goods and services in a
wide variety of stores and it also help the Consumers to get all the needed
goods and services from one shop only. The different types of store
retailing are given below:
Specialty Stores
These stores focus on leisure tastes of different individuals. They have a
narrow product line with deep assortment such as apparel stores, sporting
goods stores, furniture stores, florists and bookstores. These stores are
usually expensive and satisfy the needs of selected consumers who have
liking or preference for exclusive things.
Departmental Store
These stores are usually built in large area and keep variety of goods under
one shed. It is usually divided into different sections like clothing, kids
section, home furnishings, electronic appliances and other household
goods. In a departmental store a consumer can buy variety of goods under
one shed.
Supermarket
These stores are relatively large, low cost, low margin, high volume, self
service operations designed to serve total needs for food, laundry and
household maintenance products. Supermarkets earn an operating profit of
only 1 percent on sales and 10percent on net worth.
Convenience Stores
These are relatively small stores located near residential area, open for
long hours seven days a week, and carrying a limited line of high turnover
convenience products at slightly higher prices than departmental stores.
Many such stores also have added takeout sandwiches, coffee and
pastries.
Off - Price Retailer
These stores sell goods at low price with lower margins & higher volumes.
These stores sell goods with deteriorated quality. The defects are normally
minor. This target at the persons belonging to the lower income group,
though some have a collection of imported goods aimed to target the
younger generation. The company owned showroom selling the seconds
products is a typical example of off - price retailer.
Discount Store
These stores sell standard merchandise at lower prices by accepting lower
margins and selling higher volumes. The use of occasional discounts or
specials does not make a discount store. A true discount store regularly
sells its merchandise at lower prices, offering mostly national brands, not
inferior goods.
In recent years, many discount retailers have ?traded up?. They have
improved decor, added new lines and services, and opened suburban
branches—all of which has led to higher costs and prices and as some
department stores have cut their prices to compete with discounters.
Not only that, discount stores have moved beyond general merchandise
into specialty merchandise stores, such as discount sporting goods stores,
electronics stores, and bookstores.
Catalog Showroom
Catalog showrooms generally sell a broad selection of high-markup, fast-
moving, brand-name goods at discount prices. These include jewelry,
power tools, cameras, luggage small appliances, toys, and sporting goods.
Catalog showrooms make their money by cutting costs and margins to
provide low prices that will attract a higher volume of sales. Catalog
showrooms have been struggling in recent years to hold their share of the
retail market.
RETAIL SCENE IN INDIA
India has some sometimes been called a nation of shopkeepers. This
epithet has its roots in the huge number of retail enterprises in the country
totaling 12 million, about 78 percent of these are small family owned
businesses utilizing only household labour. even among retail enterprises
that hire workers the bulk of them hire less than 3 workers .India‘s retail
sector appears backwards not only by standards of industrialized countries
but also in comparison to several other emerging markets in Asia and
elsewhere. There are only 14 companies that run departmental stores and
mere two with hypermarket operations. While the number of businesses
operating supermarkets is higher ( 425 in 2004 ) most of these had only 1
outlet, the number of companies with supermarket chains was less than 10.
2.3 Major Formats of Retailing
Major formats of In-Store Retailing have been listed in Table given below:
Table 3:
Format Description The Value Proposition
Branded Stores Exclusive showrooms either
owned or franchised out by a
manufacturer.
Complete range available
for a given brand, Certified
product quality.
Specialty Stores Focus on a specific consumer
need; carry most of the brands
available.
Greater choice to the
consumer, comparison
between brands possible
Department Stores Large stores having a wide
variety of products, organized into
different departments, such as
clothing, house wares, furniture,
appliances, toys, etc.
One stop shop catering to
varied consumer needs.
Supermarkets Extremely large self-services
retail outlets.
One stop shop catering to
varied consumer needs.
Discount Stores Stores offering discounts on the
retail price through selling high
volumes and reaping the
economies of scale.
Low prices.
Hyper-mart
Larger than a Supermarket,
sometimes with a warehouse
appearance, generally located in
quieter parts of the city
Low prices, vast choice
available including services
as cafeterias.
Convenience Stores Small self-service formats located
in crowded urban areas.
Convenient location and
extended operating hours.
Shopping Malls An enclosure having different
formats of in-store retailers, all
under one roof.
Variety of shops available
close to each other.
Source: India info line
Non-store Retailing
It is another type of retail marketing. Different types of non-store retailing
are given below:
Direct Selling
Direct selling which started centuries ago with itinerant peddlers has
burgeoned into a $9 billion industry, with over 600 companies selling door
to door, office to office, or at home sales parties. A variant of direct selling
is called multilevel marketing, whereby companies such as Amway recruit
independent businesspeople who act as distributors for their products, who
in turn recruit and sell to sub distributors, who eventually recruit others to
sell their products, usually in customer homes.
Direct Marketing
Direct marketing has its roots in mail-order marketing but today includes
reaching people in other ways than visiting their homes or offices, including
telemarketing, television direct response marketing, and electronic
shopping.
Automatic Vending
Automatic vending has been applied to a considerable variety of
merchandise, including impulse goods with high convenience value
(cigarettes, soft drinks, candy, newspaper, hot beverages) and other
products (hosiery, cosmetics, food snacks, hot soups and food,
paperbacks, record albums, film, T-shirts, insurance policies, and even
fishing worms).
2.4 Organized Retail Formats in India
Each of the retail stars has identified and settled into a feasible and
sustainable business model of its own.
? Shoppers' Stop - Department store format
? Westside - Emulated the Marks & Spencer model of 100 per
cent private label, very good value for money merchandise for the
entire family
? Giant and Big Bazaar - Hypermarket/cash & carry store
? Food World and Nilgiris – Supermarket format
? Pantaloons and The Home Store - Specialty retailing
? Tanishq has very successfully pioneered a very high quality
organized retail business in fine jewellery.
Structure of the retailing industry according to ownership patterns:
? An unaffiliated or independent retailer
? A chain retailer or corporate retail chain
? A franchise system
? A Leased Department (LD)
? Vertical Marketing System (VMS)
? Consumer Co-operatives
A new entrant in the retail environment is the 'discounter' format. It is also is
known as cash and-carry or hypermarket. These formats usually work on
bulk buying and bulk selling. Shopping experience in terms of ambience or
the service is not the mainstay here. RPG group has set up the first
'discounter' in Hyderabad called the Giant. Now Pantaloon is following suit.
Two categories of customers visit these retail outlets.
1. The small retailer. For example, a customer of Giant could be a
dhabawala who needs to buy edible oil in bulk.
2. The regular consumer who spends on big volumes (large pack sizes)
because of a price advantage per unit.
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 4:
Retailer Current Format New Formats
Shoppers' Stop Department Store Quasi-mall
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
Subhishka Supermarket Considering moving to self service
Vitan Supermarket Suburban discount store
Foodworld Food supermarket Hypermarket, Foodworld express
Glob us Department Store Small fashion stores
Bombay Bazaar Super market Aggregation of Kiranas
Efoodmart Food super market Aggregation of Kiranas
Metro Departmental store Cash and carry
S Kumar's Departmental store Discount store
Source: India info line
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. FoodWorld is experimenting with a format of one-fourth the
normal size called FoodWorld Express.
2.5 Trends in Retail Marketing
At this point, I can summarize the main development retailers and
manufacturers need to take into account as they plan their competitive
strategies.
In India the trends are mainly in three sectors. These sectors are:
Trends in retail marketing
1. New retail forms and combinations continually emerge. Bank branches
and ATM counters have opened in supermarkets. Gas stations include food
stores that make more profit than the gas operation. Bookstores feature
coffee shops.
Even old retail forms are reappearing: In 1992 Shawna and Randy Heniger
introduced peddler‘s carts in the Mall of America. Today three-fourths of the
nation‘s major malls have carts selling everything from casual wear to
condoms. Successful carts average $ 30,000 to $ 40,000 a month in sales
and can easily top $ 70,000 in December. With an average start-up cost of
only $3,000, push carts help budding entrepreneurs test their retailing
dreams without a major cash investment. They provide a way for malls to
bring in more mom-and-pop retailers, showcase seasonal merchandise,
and prospect for permanent tenants.
2. New retail forms are facing a shorter life span. They are rapidly copied
and quickly lose their novelty.
3. The electronic age has significantly increased the growth of non store
retailing, consumers receive sales offers in the mail and over television,
computers, and telephones, to which they can immediately respond by
calling a toll-free number or via computer.
4. Competition today is increasingly intertype, or between different types of
store outlets. Discount stores, catalog showrooms, and department stores
all compete for the same consumers. The competition between chain
superstores and smaller independently owned stores has become
particularly heated. Because of their bulk buying power, chains get more
favorable terms than independents, and the chains‘ large square footage
allows them to put in cafes and bathrooms. In many locations, the arrival of
a superstore has forced nearby independents out of business. In the book
selling business, the arrival of a Barnes & Noble superstore or Borders
Books and Music usually puts smaller bookstores out of business. Yet the
news is not all bad for smaller companies. Many small independent
retailers thrive by knowing their customers better and providing them with
more personal service.
5. Today‘s retailers are moving toward one of two poles, operating either as
mass merchandisers or as specialty retailers. Superpower retailers are
emerging. Through their superior information systems and buying power,
these giant retailers are able to offer strong price savings. These retailers
are using sophisticated marketing information and logistical systems to
deliver good service and immense volumes of product at appealing prices
to masses of consumers. In the process, they are crowding out smaller
manufacturers, who become dependent on one large retailer and are
therefore extremely vulnerable, and smaller retailers, who simply do not
have the budget of the buying power to compete. Many retailers are even
telling the most powerful manufacturers what to make; how to price and
promote; when and how to ship; and even how to reorganize and improve
production and management. Manufacturers have little choice: They stand
to lose 10 to 30 percent of the market if they refuse.
6. Marketing channels are increasingly becoming professionally managed
and programmed. retail organizations are increasingly designing and
launching new store formats targeted to different lifestyle groups. They are
not sticking to one format, such as department stores, but are moving into a
mix of retail formats.
7. Technology is becoming critical as a competitive tool. Retailers are using
computers to produce better forecasts, control inventory costs, order
electronically from suppliers, send e-mail between stores, and even sell to
customers within stores. They are adopting checkout scanning systems,
electronic funds transfer, and improved merchandise-handling systems.
8. Retailers with unique formats and strong brand positioning are
increasingly moving into other countries. McDonald‘s, The Limited, Gap,
and Toys ?R? Us have become globally prominent as a result of their great
marketing prowess. Many more Indian retailers are actively pursuing
overseas markets to boost profits.
9. There has been a marked rise in establishments that provide a place for
people to congregate, such as coffeehouses, tea shops, juice bars,
bookshops, and brew pubs. Denver‘s two Tattered Covered bookstores
host more than 250 events annually, from folk dancing to women‘s
meetings. Brew pubs such as New York‘s Zip City Brewing and Seattle‘s
Trolley man Pub offer tasting and a place to pass the time. The Discovery
Zone, a chain of children‘s play spaces, offers indoor spaces where kids
can go wild without breaking anything and stressed-out parents can
exchange stories. There are also the now-ubiquitous coffeehouses and
espresso bars, such as Starbucks, whose numbers have grown from 2,500
in 1989 to a forecasted 13,000 by 2001. And Barnes & Noble turned a
once-staid bookstore industry into a fun-filled village green.
Chapter 3 : RETAIL MARKETING IN INDIA
Retail marketing is the most important part of the entire logistics chain in a
business especially in consumer related products. Without proper retailing
the companies can't do their business. Retailing is the process of selling
goods in small quantities to the public and is not meant for resale. Retail is
derived from the French word retailer, meaning to cut a piece off or to
break bulk.
There are various ways of making goods available to consumers like:
? Company to distributor to wholesaler to retailer to consumer
? Company to salesperson to consumer
? Company to consumers (online/ phone/ catalog ordering)
These three are among the most common ways of making the goods
available to consumers. But in India the three layered system of distributor,
wholesaler and retailer, forms the backbone of the front-end logistics of
most of the consumer-good companies.
In this system the company operating on all India basis appoints hundreds
of distributors across the country that supplies to various retailers and
wholesalers. Wholesalers in turn can either directly sell in the market or can
supply to retailers. The current retailing system prevalent across the
country is highly fragmented and unorganized. Anyone with some money
and some real estate can open a small shop and become a retailer catering
to the locality in which he opens the shop.
There are a number of reasons behind this fragmented retail market. Some
of the major reasons being:
? Poverty and lower literacy levels.
? Low per capita income.
? Savings focused and less indulgence mindset.
? Poor infrastructure facilities like roads etc.
? Restrictions on intra-state good movement.
? High taxes.
? No exposure to media.
? High import duties on imported goods.
? FDI in retailing is not allowed.
? Retailing is not considered as a business or industry by the
government.
? Hitherto none of the business schools in India were offering
specialized courses on retailing.
? Expensive supply chain.
Besides this there is other reasons too, which led to stifling of growth of
organized segment of retailing sector and which instead led to highly
fragmented market.
Today in India we have more than 12 million retail outlets and most of then
are family run and locally owned. There are very few nationally present
retail stores. In India the process of buying and selling at these
unorganized retail outlets, is highly characterized by bargaining and
negotiations. But slowly with increasing influence of media and urbanization
the market is shifting towards organized segment. Seeing the huge market
size of retail business in the country and the current level of organized
segment, many players have jumped into the fray and many are waiting for
the right opportunity to enter it.
3.1 Retailing in 1990s
On account of the liberalization drive in the 1990s, several structural and
demographic changes that are taking place are helping the industry to
grow. The GDP has grown by 6.6percent in the last decade resulting in
increased income levels and higher purchasing power for the population.
Increasing literacy levels, increasing number of working women, increasing
urbanization, higher international travel by Indian population and increasing
media penetration has raised aspiration levels of the population, resulting in
demand for better shopping experience and larger variety of goods. India
has close to 54percent of population below the age of 25, which translates
into higher prospects for increased consumption levels in the future. Finally,
interest rates have also declined in the past few years further propelling the
consumption demand.
These factors were the key drivers for the retail wave in the country.
Notable among the early entrants were players like Shoppers Stop,
Pantaloon, Ebony, Foodworld, Subhiksha, etc. Initially, the growth in
organized retail was very slow and concentrated mainly in metros, with
south India holding its ground as the pioneer in organized retail growth, on
account of the low cost of real estate. Due to the high investments required
in the early stages and the fact that real estate was the key deciding factor
for success of stores, real estate developers have been the major players
in the industry (see Table).
Table 5:
Sponsors
Group Retail Business
Rajan Raheja – Real Estate Developer Globus – Chain of departmental stores
K, Raheja - Real Estate Developer Shopper‘s Stop - Chain of departmental
stores
Hiranandani - Real Estate Developer Haiko supermarket, Loft shoe stores and
Hakone mall.
Tata – Diversified Business House Westside – chain of department stores
DS Group - Real Estate Developer Ebony - chain of department stores
RPG – Diversified Business House Foodworld supermarkets, Giant
hypermarkets, Health & Glow beauty and
health stores.
DLF – Real Estate Developer DLF malls
ITC - Diversified Business House Wills Sport – Chain of apparel stored.
Source: Fitch
In the early 1990s, as the players were lower down on the learning curve
many faltered in their models, and growth of the industry remained slow.
The second half of 1990s saw several players making losses and exiting
from the business. The worst years for the industry were 2000 and 2001,
as the stock market downturn, which reduced customer confidence and
spending, had a direct impact on the performance of the industry. The
industry recovered starting 2002. It now appears the efforts and learning‘s
of the players in the last decade are beginning to pay off; the organized
retail industry has established firm roots and is beginning to grow.
3.2 Present Retail Scenario In India
? Retail experts find Indian industry promising
? Retail sales to touch Rs. 30,000 crore by 2005
? Mall Mania: The developing mall culture in India
? Emergence of region-specific formats
? Emergence of discount formats
? Entry of international players
Retail experts find Indian industry promising
The retail movement in India has acquired the critical mass that is required
for rapid acceleration in terms of industry growth as well as geographical
spread. The Indian retail industry can no longer be called nascent.
The spread of super stores to the northern cities such as Delhi,
Chandigarh, Jaipur and Kolkata is evidence of the fact that organized
retailing in India has emerged from its southern bastion.
The retailing boom is being driven by increased expectations as well as
changing shopping behavior of the urban Indian consumer. With the
increasing number of nuclear families, working women, greater work
pressure and increased commuting time, consumers are looking for
convenience. And, convenience is defined as having everything under one
roof, longer hours and multiplicity of choice.
On the supply side, the current inefficient supply chain in India, particularly
for food items has led a few players to consolidate their operations to take
advantage of economies of scale and match consumer expectations in
terms of delivery as well as space. So, we have a situation where both
demand and supply side dynamics are fuelling the growth of organized
retailing in India, although improvements in the supply chain are yet to fully
match with consumer expectations.
The future growth need not necessarily come only from the big metros,
where there already exists a good retail network. The fact that big Indian
retail chains are moving into places like Indore or Chandigarh is an
important indicator of future growth. For the Rs. 5000-crore organized retail
industry it is, perhaps, time to tap the relatively smaller cities. The share of
organized sector in total retail sales will grow from one per cent now to six
per cent by 2005.While projections can be slippery, hard facts point to
exciting growth ahead for this sector.
According to KSA, organized retailing is focusing on only SEC-A cities,
India‘s 23 largest cities. That is where a large portion of the country's urban
population exists. Today 82 per cent of organized retailing comes from the
top six cities and 12 per cent from the next four. KSA says the top 10 cities
provide 94 per cent of organized retail sales in India.
By 2005, KSA projects the top six cities will account for 66 per cent of total
organized retailing and the next four for 20 per cent. The top 10 cities will
account for 86 per cent of organized retail sales. There could be variations
in growth patterns in different segments. The second half of the top 10
cities will provide large growth for food and groceries, while the top six
would still be the growth centers for consumer durables, believes KSA.
The spread of organized retailing is unlikely to be a national phenomenon
yet. This appears to be the case so far. South India, particularly Chennai,
Hyderabad and Bangalore, have seen the emergence of chain stores or
large format stores. While garment stores have been around for sometime,
other segments like food and groceries, consumer durables and even
books and music have witnessed the emergence of organized players in
large cities in South India. The lack of trained manpower or alternatively the
tremendous scope the sector has to provide employment is another issue.
Mall Mania: The Developing Mall Culture in India
Modern malls made their entry into India in the late 1990s, with the
establishment of Crossroads in Mumbai and Ansals Plaza in Delhi. By early
2001, several mall projects were announced. According to market
estimates, close to 12 million sq. ft. of mall space is being developed
across several cities in the country, of which 10 million sq. ft. is expected to
be operational by end of 2003 (see Table below). With this, rentals for retail
properties have shown a marked decline, which has brought down the
break-even levels of the retail projects. Moreover, retailers would now have
access to retail-specific properties, which will increase their efficiencies.
Table 6:
Mall Development in India
Mall Location Rate / Sq. ft.
Crossroads Tardeo, Mumbai 225-250
Ansals South Ex, Delhi 175-200
Nirmal Lifestyle Mulund, Mumbai 75-90
Runweals Mall Mulund, Mumbai 75-90
Karnavat Mall Thane, Mumbai 65-85
Raheja Mind space Malad, Mumbai 60-80
Jog‘s Mall Andheri, Mumbai 55-75
Cable Corporation Borevali, Mumbai 55-75
Ansals East Delhi 75
Sahara Gurgaon 50-70
MGF Malls – Metroplitian & Plaza Gurgaon 65-85*
DLF Gurgaon 65-85
Shipra Noida 80-180
Forum KolKotta 100
City Center KolKotta 55
Rave 3 Kanpur 45-55
Inox Baroda 75
Forum Bangalore 70-90
Spencers Plaza Phase III Chennai 70
Indore, Nasik and Jaipur Malls 45-55
Hyatt, Mumbai & Leela, 175-300
Phoenix Malls Lower Parel, Mumbai 100-125
*average for the metropolitian is Rs. 60 per sq. ft..
source: Chesterten Meghraj. Industry Reports
Till some time back, there were only few international style shopping malls
in India --Spencer in Chennai, Crossroads in Mumbai, Ansals Plaza in New
Delhi and Sriram‘s Arcade in Kolkata. By the end of 2004, that number
jumped to many.
It looks like a virtual stampede, major players with a cumulative investment
of Rs 375 crore are set to change cityscapes across India. In the next one
year, close to 40 lakh square feet of retail space will be developed. In three
years, this will rise to 70-lakh sq ft.
As the retail industry evolves, consumers want more variety before making
their purchase decision. A study on consumer outlook suggests that over
80 percent of consumers want a wide range of products at hand while
shopping. This signifies that people are finally ready for multi-option
complexes.
Many old-time corporates are seriously considering using their idle assets.
It makes sense for landowners to develop it and keep the returns rather
than sell it outright or even lease it, especially when there is opportunity
here. It is perhaps the best way to use an idle real estate asset.
The limited kitty of brands has yet another significant knock on effect on the
typical size of Indian malls. In the US and South-East Asia, malls are as
large as 50 lakh sq ft. Spencer is by far the largest mall in India - it
occupies 7 lakh sq ft and even that is dwarfed by Asia's largest mall, the 4-
million sq ft mega mall in Malaysia. Even the 26 malls that are being
planned are likely to measure between 50,000 sq ft and 2 lakh sq ft. The
Indian mall cannot offer too many choices in terms of brands. So,
developing a very large mall can never be sustainable.
There's a flip side though -malls even as small as 80,000 sq ft, like
Shopper's City in Kolkata or the Esplanade Mall at Kochi, can be sustained.
Emergence of Region-Specific Formats
For the first time in 10 years, the industry is witnessing the development of
region-specific formats. With organized retail penetrating into B class
towns, retailers have started differentiating in the sizes and formats of
stores. For example, in departmental store format, while most A class cities
and metros have larger stores of 50,000 plus sq. ft. sizes, stores in B class
towns have stabilized in the 25,000-35,000 sq. ft. range. Most players have
started operating these two formats across various cities, which has helped
them to standardize the merchandise offering across the chain.
Emergence of Discount Formats
Larger discount formats, popularly known as hypermarkets, are now
emerging as major competitors to both unorganized and organized
retailers. Penetration of organized retail into the lower strata of income
groups and consumer demand for increased value-for-money has improved
the prospects of these formats. These formats span across the entire range
of merchandise categories. Big Bazaar, promoted by Pantaloon and Giant,
promoted by the RPG Group, are examples of this format.
Entry of International Players
A large number of international retailers have evinced interest in India,
despite the absence of favorable government policy for foreign players (see
Table below). A number of the major brands have entered the country
through licensing agreements with Indian players to capitalize on the
opportunities available in the sector.
Table 7:
International players
International Players Retail Ventures In India
Landmarc Group, Dubai Lifestyle Chain of Departmental Stores
Metro, Germany Hypermarket
Shoprite, South Africa Supermarket, Hypermarket
Nanz, Germany Supermarket
Marks & Spencer, UK Apparel Retailer
Mango, Spain Apparel Retailer
McDonalds, USA Food Retailer
Dominos USA Food Retailer
Tricon Restaurant, USA Food Retailer
Source: Industry Reports
Chapter 4 : INFORMATION 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 divided into 3 broad categories:
Customer interfacing systems
Bar coding and 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
ERP System
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 and Scheduling Systems
APS systems can provide improved control across the supply chain, all the
way from raw material suppliers 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 manufactures, distributors and retailers and considering APS
packages such as those from i2, Manugistics, Bann, Mercial incs and
Sterling-Douglas.
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 locational 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.
Chapter 5 : FOREIGN TOUCH IN INDIAN RETAIL
The chief of Marks & Spencer has been making trips to India over the past
year. Global investment bank Warburg Pincus is awaiting the Indian
government's clearance to pick up a 25.1 per cent stake, worth $13 million,
in Shoppers Stop.
Dairy Farm International and Jardine Matheson are present here, through
tie-ups with the RPG Group. Fast food major McDonalds have already
made a dent in the marketplace and in Indian palates.
The Dubai-based Landmark group is making its presence felt in Chennai
through its Lifestyle mega store of over 30,000 sq ft. Landmark is owned by
Mukesh Jagtiani, a non-resident Indian. Lifestyle International Private
Limited, formed in India recently, is a wholly-owned subsidiary of the
Mauritius-based Lifestyle International which, in turn, is wholly-owned by
the Landmark group. In India, according to Lifestyle International's
marketing manager, Roshan Mathew, the target is to "have 12 to 16 stores
by 2005." These stores will sell all lifestyle products, barring furniture, under
one roof.
Immediate plans include opening a 46,000 sq ft store in Hyderabad, which
Mathew terms "The Millennium Store". The Hyderabad store will have
additional sections for books and music, unlike the Chennai store. Besides,
as soon as Lifestyle gets a keenly awaited Foreign Investment Promotion
Board clearance for a Rs 100 crore investment, it will create outlets in
Bangalore, Pune, Mumbai, Delhi and Ahmedabad.
The Hong Kong-based Dairy Farm International, a 125 year old retail major
with around 1,300 outlets across nine countries, recently converted its
technical tie-up (since 1996) with the RPG group's Spencer & Company for
Foodworld into a 49:51 joint venture. The new venture is called Foodworld
Supermarkets Limited. DFI also has a 50:50 joint venture with the Indian
group in RPG Guardian. DFI is the retail arm of Jardine Matheson.
In Western markets, a familiar sight is the McDonalds golden arch. In India
too McDonalds has maintained its unique selling proposition -- providing
the same quality of food and the same ambience as anywhere in the world.
Its raw material requirements are totally out-sourced. But what it has taken
care of is world class quality in all its raw material sourcing, with
specifications ensured strictly. The chain has been smart enough to tailor
its products to the Indian environment, adding fare for the large number of
vegetarians who love fast food, and avoiding certain beef and pork in
deference to social sensitivities. In a market place where Kentucky Fried
Chicken failed to make an impact, McDonalds seems to be finding its place
slowly but surely.
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