Final Report Amrita

8/9/2019 Final Report Amrita

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Retail Marketing in India.

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CHAPTER: 1

INTRODUCTION


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1. INTRODUCTION

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

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 childrens 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 o apportions his time and

resources. The need for organization becomes essential as soon as he hires people o

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.


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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

In the entry stage, a new retailer enters with new price appeal, limiting product

offerings, Spartan 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.

1.2 Retail: A strongpillarofIndianeconomy

Retailing is the last mile infrastructure to access and deliver goods to consumers. Retail

forms the backbone of the nation's delivery system and its importance can be exemplified

by the network of 15,000 KVIC outlets which support 4 lakh plus small and medium

handicraft manufacturers across the country.

It also serves as the last mile infrastructure to the manufacturers as well as the

government for tax collection. For instance, the success of the VAT proposal depends on

its being able to be implemented at the retailer level, but nobody has consulted with them

as a body yet on this issue. Furthermore, retailing is also an important and large

contributor to the GDP and a major employment generator. In India, for the last four

years its contribution to the GDP was around 13%. The sector gainfully employs 6-7%

of the total workforce in India.


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1.3 ChangingRetailLandscape

Indian retail is fragmented with over 12 million outlets operating in the country and only4% of them being larger than 500 square feet in size. This is in comparison to 0.9 million

outlets in USA, catering to more than 13 times of the total retail market size as compared

to India. Thus India has the highest number of outlets per capita in the world with a

widely spread retail network but with the lowest per capita retail space (@ 2 sq. ft. per

person).

Recently, majority of store formats have hit India. Yet traditional format stores namely

the kirana shops, pan/bidi shop, hardware shops, weekly haats and bazaars form the bulk.Formats like department stores, malls, speciality stores as well as discounters are shaping

the burgeoning organized sector in India.

Though still in its infancy with less than 2% share of the retail sector, organized retail has

definitely struck its roots in India. What we are looking now are more corporate backed

organized retail operations. Till seven years back organized retail was largely restricted to

the southern India, barring the Bata chain. Organized retail has now shifted gears and is

moving ahead with accelerated speed throughout the country, without any direct

incentive provided by the government. Organized retail is growing at a rate of about 40%

per annum over the last three years.

With a size of Rs. 15,000 crore (USD 3 billion), organized retail is very much on track

according to KSA Technopak's projections made in 2003 based on in-house research.

The projections claimed that organized retail would grow to be a Rs. 35,000 crore (USD

7.1 billion) by 2008.


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CHAPTER: 2

REVIEW

OF

LITERATURE


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2. ReviewofLiterature

The literature base retail marketing has been growing with speed in recent years,though the attention devoted to these two areas is scant (for services) or largely

nonexistent (for retailing).

As Discuss by Creating a fit between competencies and functional strategies not only

provides the possibility of a sustainable competitive advantage but can lead to the

achievement of high levels of performance (Day & Wensley, 1988). Although the

literature contains research in the area of strategies that can impact upon retail

performance, most of the studies have often been concerned with retail structure (eg

Bates 1989), Although the literature contains research in the area of strategies that can

impact upon retail performance, most of the studies have often been concerned with retail

structure (eg Bates 1989).In general, few of the retail change theories have been given

unanimoussupport. All have been noted to suffer from one thing or another. The Wheel

ofRetailing has garnished the lions share of research interest and associated

scrutiny. The Wheel has been severely criticised as well as having been held up

as the best thing going that seems to do a reasonable job of explaining retail

change. Brown, Stephen (1990 ) are critical of the wheel of retailing. A review of the

changes brought about by the availability of novel modes of marketing communications

and purchase transaction databases on retail marketing has been conducted. The results

indicate the need for a reorientation of the role of retailers in the new marketing

environment. Retail establishments are advised to shift their concentration from

distribution activities towards integrated communications to better manage their

relationships with their clients,(eg. Mulhern, Francis J,1997,)A trend does increased

services research does seem to be growing (eg., Tax and Stuart 1997).Service orientation

(Homburg et al 2002) and a range of marketing mix strategies (e.g. Walters 1988;

Lowson, 2001; Lynch, Keller, & Ozment 2000; Palmer & Markus 2000; Radder 1996;).

Little or no study particularly in Australia has examined whether or not the marketing

competencies possessed by small to medium sized retial organizations can influence their

level of business performance. This study was designed to determine if there are


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significant differences in the competitive marketing competencies possessed by the high

level performing and low level performing small to medium sized retail businesses in

South East Queensland. Leszczyc & Timmermans, (1997) and Kim and Park, (1997)

revealed that the studies on store choice have mostly dealt with individual choices and the

studies have investigated the drivers of store choice taking individuals as the samples

(mostly housewives). Little research exists, which analyses the shopping behavior with a

family or household as a unit. Researchers have found that, store choice and shopping trip

timing decisions tend to differ for individuals and households as a result of personal

differences, household composition, and activity patterns. The need for a fresh

perspective while developing theories to explain the new developments has been stressed

by Bennett et al. (1998). The Indian retail environment is witnessing several changes on

the demand side due to increased per capita income, changing lifestyle and increased

product availability.

Sarma ,(2000) explained that because of their small size, Indian retailers have very

little bargaining power with manufacturers and perform only a few of the flows in

marketing channels unlike in the case of retailers in developed countries.

Fernandes et al. (2000) suggested the fact that modernization in retail formats is

likely to happen early in categories like dry groceries, electronics, men apparel, books,

music. Some reshaping and adaptation may also happen in fresh groceries, womens

apparel, fast food, and personal care products.

American Productivity & Quality Center, (2001) has proved in its studies that

benchmarking has a powerful impact on organizations. It has broken established

paradigms, created a readiness for action, and has provided models of excellence.

Nathan, (2001) reported that the traditional formats like hawkers, grocers and paan

shops co-exist with modern formats like supermarkets, and non store retailing channels

such as multilevel marketing and tele-shopping. Example of modern formats include

department stores like Akbarallys , supermarkets like Food World, franchise stores like

Van Heusen and Lee, discount stores like Subhiksha, shop-in-shops, factory outlets and

service retailers.


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Chapter: 3

RESEARCH

METHODOLOGY


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3. RESEARCH METHODOLOGY

Themethods adopted to fulfill the objective of the study that included collecting primaryand secondary data. I conducted the survey in order to gather the informations from the

knowledgeable person of retail stores on the issue reverent to my thesis topic.

3.1 SCOPE OF THE STUDY

The scope of my study restricts itself to analyze the retail marketing profitability drivers

on the basis of Garments, Gifts, Cards and Music Department where as in the recent trend

its seen that the key players in this Industry are more emphasizing on the Garments,

Personal Grooming, Home furnishings, Life style and Footwear Departments in their

Stores.

3.2 OBJECTIVES OF THE STUDYThe over all objective of the thesis is to throw light on PRESENT AND FUTURE PROSPECTOF RETAIL MARKETING IN INDIA

3.2.1 SUB OBJECTIVE

To study the current Retail scenario in India.

To give introduction about retail marketing.

To find out Future growth potential of Retail Marketing in India.

To find out the strategies adopted by Indian retailers to sell their products in Indian

market.

To find out the International retailers eyeing the Indian market.


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3.3 RESEARCH DESIGN

Research Type

Descriptive method is used in the research.

3.4 DATA COLLECTION METHODS

Data will be collected for the study.

Secondary Sources The secondary sources used are already in existence

in the form of books, internet periodicals and institutes brochures.

Magazines The Franchising World.

Journals Indian Management.

Websites: www.franchiseindia.com

www.ksatechnopak.com


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CHAPTER: 4

FINDINGS


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4.1 Retailingin India Past, presentandfuture

Retailing, considered a sunrise industry today after InfoTech, is the most happening

industry with almost all the big players vying for a share of the coveted pie. Buoyed by a

strong increase in private consumption (see raph), retailing is one industry that is waiting

to explode.

Today however, organized retailing is less than 2 per cent of the retailing industry in

India, that is, about Rs 5,000 crore. Therefore, there is no real retail revolution in India;

the industry is still in the stages of infancy.

Table: 4.1 Share of Organized Retail

2003 2006 2008

Total Retail (US $ Billion) 150 180 225

Organized Retail (US $ Billion) 1.1 3.3 7

% Share of organized Retail. 0.7 1.8 3.2

Source: KSA Techno pack

Organized retailing is bound to grow tremendously provided the right marketing

strategies are adopted. Retail businesses have broken rank and seem poised to surge

ahead with renewed vigour, optimism, confidence and cap-ability.

There is an incredible amount of activity in terms of creation of retail oriented space

across India. As per some estimates, there are over 200 retail mall projects under

construction or under active planning stage spanning over 25 cities. This may translate

into over 25 million sq. ft. of new retail space in the market within next 24 months.


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Huge retail formats, with high quality ambience and very courteous and ambivalent sales

staff, are the regular features of retail formats in most Asian countries. However, in India

except for a few big towns where modern retailing formats abound, these features are

grossly missing. ETIG expects organised retailing to slowly penetrate the second rung

and smaller towns which will catapult the growth rate for the sector.

Even though the big retail chains are concentrating on the upper segment and selling

products at higher prices like Crossroads, Akbarally's and Shopper's Stop, retail stores are

sprouting that cater to the needs of middle class. With a huge middle class population, the

retailers like RPG's

Food world are tapping this market. The market is flooded with products branded

and unbranded. The customers are in a dilemma as to pick which one. Simon Bell of AT

Kearney says "There is a close relation between the growth of brands and the growth of

the organized retailing. Companies selling branded products prefer to have big and

organized retail outlets such as supermarkets where they can be differentiated from

unbranded products"

Though doubts have been cast on the future of Indian retailing it is our belief that the

retail boom is yet to happen. While the industry is in the introduction stage in most

geographies, it has just entered the growth region in the metro cities. Today, the right

product mix, right sourcing strategy, and the right communications are the mantras for

success.

This paper begins by analyzing the retail formats in the present Indian scenario and

proceeds to outline the key strategic factors in retailing. In the last part the paper shows

the challenges facing retail and our recommendations for making organized retailing a

success.


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4.1.1 Organizedretailformats 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 of100 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 - speciality retailing

Tanishq has very successfully pioneered a very high quality organized retail business

in fine jewellery.

4.1.2 Structureoftheretailingindustryaccordingtoownership

patterns:-

An unaffiliated or independent retailer

A chain retailer or corporate retail chain

A franchise system

A Leased Department (LD)


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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.

4.1.3 Key Strategic Factors in Retailing

The key to success is identifying a superior value-promise and who is in a better

position to do it than retailers? Retailers are the closest to the point of purchase and have

access to a wealth of information on consumer shopping behavior. Retailers have some

unique advantages for managing brands such as continuous and actionable dialogue with

consumers, control over brand

Presentation at point-of-sale, control over shopping environment, display

location/adjacencies, and signage. And they have used this advantage with tremendous

success.


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Figure:4.1 The 3 stages of evolution of the trade channel are shown in the exhibit

below:-

EXTENDED LIMITED DIRECT

As seen, the role of the intermediary is being diminished gradually, which has

obvious implication of backlash of the trade channel upwards towards the suppliers. This

is more severe in countries such as India, where the channel economics in favour of the

middlemen is still strong enough given the fragmentation of the retail sector. Therefore

when Food World, the

Largest grocer in India has a direct supply contract with over 20% of its key suppliers;

it gives rise to conflict of interest with the distribution infrastructure that suppliers have

painstakingly built over the years. Thus companies like HLL have evolved a distinct

distribution channel altogether (called Modern Trade) to service the needs of such large

MANUFACTURER

DEPO/CNF

DISTRIBUTOR

RETAILER

SHOPPER

MANUFACTURER

DEPO/CNF

RETAILER

SHOPPER

MANUFACTURER

SHOPPER


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grocers. Even the mom and pop stores (known as kirana shops) are affected due to this

unfair back-end advantage extended by the supplier to its leading accounts (the

emerging supermarket chains).

The strategies adopted by the retailer to compete with branded goods are illustrated by

the following diagram. Branding the store and following a private label strategy is the

key strategy which helps the retailer to compete with branded products.

Figure: 4.2

Leverage Brands

Brand the

Store

StrongPrivateLevel

Maximize customer

traffic &Profitability.

Keep Formats

Constant.

DevelopNew

Formats.

ReinvigorateExistingF rOptimize

Assortment

Loyalty Cards.

Pricing &PromotionStrategy.

Onlineshopping.


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4.1.4 Challenges AheadForRetailing

The unorganized nature of retailing has stunted its growth over several years. "Lack ofindustry status affects financing prospects and stunts growth of the industry", says

Kishore Biyani, managing director, Pantaloon Retail India. In the current scenario, only

players with deep pockets have been able to make it big. In addition to the advent of

Internet, there are many other challenges which retailers have to address.

(a) Human Resources

Availability of trained personnel and retaining the human resources is a major challenge

for these big retailers. The bigwigs like Crossroads offer high compensation and create a

cohesive environment that makes an employee proud to be a part of such big retail

chains.

(b) SpaceandInfrastructure

To establish a retail shop / mall, the real estate and the infrastructure are very vital. The

expenditure and availability on both the accounts do hinder the growth of the retail chain.

The lack of secondary infrastructure also affects the logistics and supply chain

management for retail companies.

(c)Absenceofretailerfriendlylaws

India still does not have retail-friendly laws especially relating to the movement of

goods from one state to another. Retailers need to put in a whole lot of products from

different parts of the country at times from outside the country on the shelf. But question

of multiple tax levels is an issue. Then there are laws like shops cannot be open for all

seven days, shops have to be open after or close before a certain time which affects

operations.


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(d) Future perspective

We should see fundamental shifts in the way Indians shop in the very near future. The

Year 2003 could well be a landmark year for organised Indian retailing. According to a

recent study done by ETIG the organized retail industry is expected to grow by 30 per

cent in the next five years and is expected to touch Rs. 45,000 crore. Thus, the growth

potential for the organised retailer is enormous. In the next 2-3 years, India will finally

see operations of a number of very serious international players not withstanding the

current restrictions on FDI in retail. Metro from Germany is a very successful and

resourceful retailer and their cash & carry format should offer

a good run for money to others. Some others will also find perfectly legitimate ways to

operate in India, for example, Marks & Spencer, Mango and Shop rite.

(e) Change Accelerators

The following factors will be significant in driving growth in the retail sector:

Consumer factors

Increase in income\

Working women

Changes in lifestyle demand for global trends

Supply side factors

Growing importance of retailing in political and economic agenda

Real estate reforms to be undertaken in the next 24 months

Major restructuring of the manufacturing sector easing product

Supply constraints for efficient retailing

Reduction in import duties-offering more global sourcing options


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Which categories willgrow?

The single biggest opportunity in India in organized retailing is bound to be food and

groceries; it is in this sector that the largest amount of consumer spends is concentrated.

This sector has maximum opportunity for investments and entrepreneurs to come in and

try to make the supply chain a little more efficient.

Consumer durables are another promising sector because, with increasing purchasing

power, consumers tend to spend the most on this category. Also, there is nothing to

prevent a company from putting up shops outside the city limits, because consumer

durables are a premeditated purchase. Further-more, availability of finance options has

increased spending in this sector.

Third are home products with increasing private ownership of homes by relatively young

couples, across most major cities in India, national retail chains offering home furniture

(and accessories) have great potential.

Finally, personal care products, pharmaceutical products, and healthcare services have

tremendous growth potential. Recently, we have seen some interest from organised

healthcare players like Max, Fortis, Birlas and the Reliance group

Which formats willgrow?

KSA Technopak's research suggests the top four formats to emerge in the next five years

are:

* Shopping Malls

* Specialty Stores (in new categories such as office products, specialty food, optical and

travel)

* Departmental Stores

* Supermarket.


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4.2 FUTURE GROWTH POTENTIAL OFRETAIL MARKETING IN INDIA.

The overall retail market in India is likely to grow by 36% to touch Rs 8, 00,000 crore by

2012 from the current level of Rs 5, 88,000 crore, according to an Associated Chambers

of Commerce and Industry of India (Assocham) study.

The study points out that of the overall retail market, the organised sector in retail

marketing is expected to touch Rs 16,000 crore by 2012 from the present size of Rs 5,000

crore. The retail market at Rs 5,000 crore, includes the organised food and grocery (Rs

600 crore). Assocham president Mahendra K Sanghi said that initiatives from all the state

governments and the Centre are prime factors that will encourage the entry of the

organised sector into retailing in the next few years.

These initiatives include allocation of land at concessional rates, grants of loans at

liberalized interest rates to promoters of shopping malls, and rationalization of state

levies.

He pointed out that the expansion and diversification of the organised sector in retail

marketing is currently under way because of the demand factor.

The other reason which substantiates major foray of the organised sector into retail

marketing is the availability of real estate and infrastructure facilities in most of the states

for setting up retail stores.

Such laws will no longer be there in the near future as liberalization has already reached

its advanced stage and states are competing with one and another for attracting

investment. This will motivate and encourage the foray of organised sector into retailing,

particularly when the entry of FDIs into retailing is being strongly opposed by a section

of society and polity as well, according to the release.


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According to Assocham estimates, the retail sector will create 50,000 jobs annually in the

coming five years.

The retail sector is the second largest source of employment and job market is receptive

to retailing experience, with business schools focusing on the sector and large retailers

setting up retail academies.

4.2.1 GROWTH POTENTIAL

Our published results for 2008 show a sales decline of 6.7% on account of Discounting of

non value adding businesses and divestments. Our domestic FMCG business was flat

with the growth in Home & Personal Care being offset by a decline in Foods. This may

lead to a question on our growth potential. Indeed, there is a common misconception that

our categories are mature with little scope for growth. In fact, the very opposite is true.

Several of our categories still have low user ship levels. In addition, the actual amount

used per capita is far lower in India as compared to other countries, as shown below:

Table: 4.2.2 Per Capital Consumptions (Kgs)

Fabric Wash Personal Wash Toothpaste Shampoo Tea

India 2.63 0.50 0.07 0.04 0.64

Thailand 4.71 0.87 0.40 0.38 -

Brazil 9.03 1.46 0.61 0.72 -

UK 13.90 1.31 0.23 0.40 2.28

Also, the GDP growth of about 5% is driving up discretionary income of ourconsumers by about 8% per annum. Literacy levels are rising, creating higher aspirations

further fuelled by the world they see on television. There is no doubt that today's

consumer wants a better quality of life which is what our brands help realize.


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However, HLL is faced with the challenge that FMCG markets, after growing in strong

double-digits throughout the nineties are now declining in value for the last couple of

years. Why is this happening? In urban India, consumers are now being exposed to and

are trying several new categories, such as mobile phones, leisure, durables etc, and are,

therefore, down-trading their FMCG purchases. Rural demand has been dampened by

three unusually poor monsoons in the last four years. We believe that both these factors

are transitory in nature and FMCG markets will surely find a new growth equilibrium. Be

that as it may, we are leaders in many FMCG categories, and are taking active steps to re-

attract consumer spending to our brands. We are doing this by providing exciting, new

and differentiated benefits as well as greater value, thereby leading growth. We have

every confidence in the validity of this approach given our experience in recent

years, whereby several of our biggest brands, supported by such innovation, have

grown strongly, even in this very challenging context.

4.2.2 FOCUSSING THE COMPANY

With increased competition for the consumers wallet in todays market environment,

driving growth requires a much higher level of resource in all areas, be it technology,

media spend or people talent. A consumer brand in everyday life is our area of core

competence both in India and globally with Unilever and thus our area of focus. Two

years ago, the FMCG business accounted for 85% of HLL. Today, 95% of HLL is its

FMCG business, of which 86% is domestic, with 9% being exports of consumer brands.

Over the years, we had entered several non-FMCG businesses in line with national

priorities. These businesses were successful and created good value. However, with the

opening up of India, staying in these businesses would have required us to invest heavily

in accessing technology and achieving world-class competitiveness. In line with our

strategy, we have exited non-FMCG businesses like Animal Feeds, Seeds, Flavours &

Fragrances, Nickel Catalyst and Adhesives with total sales of over Rs.600 crores. In


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doing so, we have secured good value realising in all Rs.430 crores with a profit on

disposal of over Rs.260 crores.

We also had a very broad export portfolio covering several areas which also has

been restructured and focused. Going forward, the major thrust is on driving exports of

our consumer brands primarily to other Unilever companies from whom we receive

considerable support. This is an area where we see enormous potential for growth, given

our clear competitive advantage. Indeed we are already supplying Tea bags to Singapore,

Australia, Japan and the USA, Personal Products to the Middle East, Far East and African

countries and are marketing Pears globally. In all, such exports already constitute over

40% of our total exports of US $ 300 million. We are also driving exports in other chosen

areas where India has a competitive advantage, like Rice, Castor and Marine products.

Marine products, for example, have huge potential given Indias long coastline and

Sustainable fishing capability. We are the largest exporters of Marine products from India

and have already built up a leading position in shrimp exports to the demanding markets

of the USA and Europe. We also acquired Amalgam, a leader in value-added Marine

products, to drive further growth in this area. At the same time, we have discontinued a

number of non value-adding exports. Our continuing exports are now growing by about

15%.

4.2.3 TACKLING COMPETITIVE CHALLENGES

In pursuit of growth, we are acutely conscious of the challenge posed by

competition, especially the low price players. This phenomenon is not new to us in India

or indeed to other developed markets where low price local players and trade brands co-

exist with large branded players like ourselves. We are quite clear that we will be able to

sustain growth in the face of such competition as we have done in the past. In the

Laundry market where there are over a thousand local players, our brand Wheel is now

the clear market leader and the largest brand in HLL. What is more, this has not come at a

cost to our bottomline as it is strongly profitable. In Personal Wash also, we grew our

business by double-digits last year in the face of very aggressive low price competition.


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We will compete with low price competitors by playing to our strengths using our

strongest brands backed by superior technology and the lowest cost supply chain. We will

succeed in this by leveraging our unique combination of local and global scale.

4.2.4 LEVERAGING HLL SCALE FOR GROWTH

The power of HLLs scale is derived from its combined volume of about 4 million

tonnes, sales of Rs.10,000 crores and its presence across more than 20 distinct consumer

categories. HLL's brands are available in 3 million outlets and touch the lives of two out

of three Indians. We are leveraging this scale to derive competitive advantage and

sustainable growth.

(a) DeeperCommitmentto RuralIndia

Our scale also gives us the opportunity to build the deepest possible direct distribution

reach into rural India, where over 70% of our population lives. Interior villages are

difficult to access because of weak infrastructure. In addition, a large proportion is media

dark with no awareness of any brands. By consolidating our categories we are

establishing a single distribution channel for rural India. We have already appointed 6000

sub-stockiest for rural markets, and are now covering approximately 50,000 villages,

reaching about 250 million consumers. In addition, we have also embarked upon an

ambitious direct distribution programme called Project Shakti to reach the smallest of

villages. Our vision is to reach over 100,000 villages, thereby touching about 100 million

rural consumers. We have already piloted

this initiative in 5000 villages and are now extending this rapidly. Project Shakti provides

a unique micro-enterprise opportunity for under-privileged rural women. Armed with

micro-credit from banks, they become direct-to-home distributors in these small villages,

providing relevant products as well as improving the overall awareness of nutrition and

hygiene. In turn, they benefit through sustainable income, thereby creating a virtuous


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cycle of growth. Project Shakti uniquely combines our business interest with our ongoing

commitment to the development of rural India and women.

(b) PartneringModern Trade

In addition to our ongoing commitment to the traditional grocery trade, we are

building a special relationship with the small but fast emerging modern trade. Our scale

enables us to provide superior customer service including daily servicing, improving their

range availability whilst reducing inventories. We are using the opportunity of interfacing

more directly with our consumers in this retail environment through specially designed

communication and promotions. This is building traffic into the stores while yielding

high growth for our business.

4.2.5 BUILDING PROCESSED FOODS

There is a big opportunity to grow Processed Foods, which are still a very small

proportion of the overall largely commoditized foods market.

(a) Foods MarketStructure

Processed 6%

Semi Processed 16%

Unprocessed 78%

However, developing this market will require relevant and differentiated products which

cater to Indian tastes and habits as well as sustained and considerable investment and

time for market development. Over the years, we had grown our Foods and Beverages

business, organically and through acquisition to significant scale. However, it was

necessary for us to increase the inherent profitability profile in several areas in order to

generate the capacity to invest in market development. Over the last couple of years, our

gross margins have improved by 9%, albeit at the cost of some topline, thereby providing


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the fuel to invest in both innovation and differentiation. We have reduced our losses in

Ice-cream significantly, and considerably improved the performance of the recently

acquired Modern Foods. Going forward, our priority is to lead growth of this market

through innovation. We have recently launched Kissan Bistix, Kissan Mr. Fruit, Lipton

Ice, Modern Atta Bread and the Knorr Annapurna Culinary range, all of which have met

with an encouraging response.

4.2.6 TALENT FOR GROWTH

Finally, the most important determinant of our growth is the quality of our people.

We are deeply privileged to continue to attract the very best talent as the number one

preferred employer at leading campuses. We are also encouraging diversity in our talent

skills, especially for our newer businesses, and are also bringing in a large number of

talented women. Our training programmes have been revamped to expose entrants to

local and global business they spend time in Indian villages and international cities all

within a 12-month training programme. HLL's wide variety of categories and Unilever's

global operations provide enormous development opportunities through organized career

planning. A lot of emphasis has always been placed on skill development today we are

also concentrating on building individual and leadership capabilities. We offer an

energizing and empowering environment enabled by creating small teams focused on key

initiatives. We have found this the best way of combining both scale and speed. Deeper

in the company, in factories and offices, we are unleashing the talent and creative

potential of all employees through initiatives such as TPM.

In conclusion, let me say that HLL's most valuable assets are its brands and people.

Today's market is very dynamic and increasingly competitive. We have confidence in our

strategy and are learning to grow even in declining markets. We are putting in place key

enablers to build our capability for sustained high performance. We have brands with rich

heritage and strong consumer equity. We have people who bring the power of their ideas

and execution to exploit the full potential of our brands towards delivering continued

profitable growth for Hindustan Lever.


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4.3 HOW DO INDIAN RETAILERS SELL THEIR PRODUCT

This brings to broadly identify and categorize the types of retail marketing, which are

defined as follows:

11.. SSttoorree RReettaaiilliinngg

22.. NNoonnssttoorree RReettaaiilliinngg

Store Retailing:

DDeeppaarrttmmeennttaallSSttoorree

Convenience Stores

SSppeecciiaallttyy SSttoorreess

DDiissccoouunnttSSttoorree

CCaattaallooggSShhoowwrroooomm

Non Store Retailing:

DDiirreeccttMMaarrkkeettiinngg

AAuuttoommaattiicc VVeennddiinngg

DDiirreeccttSSeelllliinngg


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4.3.1 Store Retailing

Store retailing provides consumers to shop for goods and services in a wide variety of

stores and it also helps the Consumers to get all the needed goods and services from oneshop only. The different types of store retailing are given below:

((aa))DDeeppaarrttmmeennttaallSSttoorree

These stores are usually build 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.

(b)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.

((cc)) OOffff -- PPrriiccee RReettaaiilleerr

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.

((dd))SSppeecciiaallttyy SSttoorreess

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.


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(e) 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 % on sales and 10% on net

worth.

((ff)) DDiissccoouunnttSSttoorree

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 branchesall 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.

((gg)) CCaattaallooggSShhoowwrroooomm

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 theirshare of the retail market.


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(h) Agriculturalretail:

Agriculture across India is heralding the country's second Green Revolution. 14 states,

including Maharashtra, Punjab, Andhra Pradesh and Rajasthan amended the Agricultural

Produce Marketing Committee (APMC) act this year, along the lines of the Model

APMC Act, '02, which allows farmers to sell their produce directly to buyers offering

them the best price.

Agricultural sectors such as horticulture, floriculture, development of seeds, animal

husbandry, pisciculture, aqua culture, cultivation of vegetables, mushroom under

cultivated conditions and services related to agro and allied sectors are open to 100 per

cent FDI through the automatic route.

For its e-Choupal scheme, ITC built internet kiosks in rural villages so farmers can access

latest information on weather, current market prices, foods-in-demand, etc. With a US$

5.6 billion, multi-year investment in agriculture and retail, Reliance Retail will establish

links with farms on several thousand acres in Punjab, West Bengal and Maharashtra.

Field Fresh, planning to become India's first large-scale exporter of produce, will

annually pay farmers over US$ 30,000 to lease land for vegetables, to hire tractors and to

pay their workers.

Besides a five-year program with the Punjab government to provide several hundred

farmers with four million sweet-orange trees for its Tropicana juices by 2008, PepsiCo--with agriculture exports worth US$ 40 million--also introduced farmers to high-yielding

basmati rice, mangoes, potatoes, chilies, peanuts, and barley for its Frito-Lay snacks.

Export potential and a rapidly growing domestic demand for reliable produce from new

supermarket chains is driving change. With 77 per cent of India's population relying on

agriculture for a living, improved efficiency and new markets can benefit a large number

of people.


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44..33..22 NNoonn SSttoorree RReettaaiilliinngg

It is another type of retail marketing. Different types of nonstore retailing are

given below:(a)DDiirreeccttMMaarrkkeettiinngg

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.

((bb)) AAuuttoommaattiicc VVeennddiinngg

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).

(c)DDiirreeccttSSeelllliinngg

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.


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SShhooppppeerrssSSttoopp

Pioneers in organized retailing in India, Shoppers' Stop Ltd., was started by the

Rahejas, with the very first outlet being in Mumbai (a retail area of 4500 sq. ft.) in 1991.

It now holds around 1,95,000 sq. ft. of retail space from Shoppers' Stop alone. It also

has chain of stores in other formats, with Cross words and Shoppersstop.Com under its

wings.

Shoppers' Stop, is a specialty chain of garment and accessory retail stores with

outlets in Mumbai, Bangalore, Hyderabad, Jaipur, and New Delhi.

Crosswords is a specialty chain of books, music and gifts retail stores with outlets in

Mumbai, Bangalore, Ahmedabad, Delhi, Pune, Nasik, Goa and Vadodara.

Shoppersstop.Com (India) Pvt. Ltd is 100% subsidiary ofShoppers' Stop Ltd. It

has been floated with the intention of breaking down location barriers and helping

customers from around the world to "Feel the Shoppers' Stop shopping experience",

online.


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MMAARRKKEETTIINNGGMMIIXXOOFFSSHHOOPPPPEERRSSSSTTOOPP

(a) Product:

Shoppers Stop offers their customers a range of the finest national and

international brands, and a quality and price assurance that is backed by their guarantee,

stamped on every bill: "We are responsible for the goods we sell."

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. Shoppers Stop has gauged the changing trends and in response to

this it houses a variety of products under one roof thus providing the customers with

value for time in addition to value for money.

The product range includes the following items:

y Cosmetics

y Jewellery

y Perfumes

y Watches

y Sun glasses

y Bags

y Apparels for men, women and children

y Sports equipment

y Home furnishings

(b) Price

Pricing is not as important as convenience, todays consumer is more upbeat

about `money spending' and more conscious about `time spending', and the consumer

prefers shopping for most of their requirements from a single store.


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Most of the products at Shoppers Stop are branded. One of the prominent

features of branded products is the fact that they are available at the same prices within a

particular geographical region. Therefore, in terms of pricing its products Shoppers Stop

can exercise only a limited amount of control.

(c) Place

Shoppers' Stop's first outlet in Delhi opened in December last year that took the

total number of stores to seven. The company has two stores in Mumbai and one each in

Bangalore, Hyderabad, Jaipur and Chennai. The company is planning to open a store in

Kolkata.

Massive expansions have been planned for Delhi by opening four new centers. The

objective is to make state-of-the-art malls to "make shopping comfortable. Another

place where the company intends to sell its products in a big way is the internet.

(d) Promotion

Shoppers' Stop has been positioned as a store that offers its customers an

international shopping experience. In their efforts to provide this experience, they have

held, numerous path breaking events and promotions, which have got them both national

and international accolades besides the appreciation of their customers.

As already taken up earlier some of the hugely popular promotional schemes taken

by the company are:

o The Festival of India

o Parikrama

o The Disney Carnival

o DOTY - The Designer Of The Year

o Valentines Day

o Diwali

Here we should remember that the four Ps of marketing mix represents the

sellers view of the marketing tools available for influencing buyers. From a buyers


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point of view, each marketing tool is designed to deliver a customer benefit. The sellers

four Ps correspond to the customers four Cs.

Winning companies are those who can meet customer needs economically and

conveniently and effective communication.

SSWWOOTTAANNAALLYYSSIISSOOFFSSHHOOPPPPEERRSSSSTTOOPP

Strengths

Prime location

Experienced and competent management

Highly trained and motivated sales force

Brand equity

Large scale operations in various cities throughout the country allows them to

reap the benefits of economies of scale

Large floor space allowing for better visual merchandising

Large area also allows to stock a large variety of products under one roof

Financial backing by the Raheja Group

Weaknesses

A large organization structure leads to delayed decisions. This can prove fatal for

a business in the dynamic fashion industry. Shoppers Stop has a centralized

purchasing department in Mumbai, this fact sometimes results in delayed

decisions in adapting to changing market trends.

Large scale of operations sometimes acts as a barrier to personalized customer

relations.

Large scale operations lead to reduced flexibility by increasing the amount of

overheads and a huge commitment in terms of fixed costs


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Opportunities

According to the Consumer Outlook study, consumers are generally satisfied with

the service that organized retailers extend to them. More importantly, they are

increasingly regarding these organized retailers as providing `value-for-money.

These findings indicate that large retailers will capture most of the higher

consumer spending.

Apart from the metros, cities like Ahmedabad, Pune, Lucknow, Indore and

Coimbatore have shown substantial retail presence. Most sport modern retail

formats like supermarkets, department stores and specialty chains. These markets

are expected to show exponential growth in the next few years. Thus Shoppers

Stop has the opportunity to explore new markets

Threats

The time when retailers had to worry about competition only from their peers

down the street has come to an end. Shoppers Stop is now facing increased

competition in the form of international retail chains that are making a beeline

towards the highly potential Indian markets. Moreover many big Indian business

houses are also vying a space in the Indian retail scene


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44..33..33 RREETTAAIILL MMAARRKKEETTIINNGGPPRROOMMOOTTIIOONNIINNIINNDDIIAA

RROOLLEEOOFFAADDVVEERRTTIISSIINNGGAANNDD DDIIFFFFEERREENNTTMMEEDDIIAA

. The most efficient method of reaching method of reaching these potential

customers for most retail is the marketing tool known as advertising. For purposes of

definition:

Advertising is any paid form of non personal presentation and promotion of ideas,

goods, or services by an identified sponsor. The definition points out the true role of

advertising in the promotional mix of a store.

yyAAddvveerrttiissiinnggiiddnnoonn ppeerrssoonnaall::The retailer cannot expect advertising to do all the

selling. It will not replace personal selling effort where it is needed. Advertising and

personal selling must complement one another.

yyAAddvveerrttiissiinngg ccaann sseellll ssoommeetthhiinngg bbeessiiddeess aa pprroodduucctt:: The retailer should use

advertising to sell the service of the store. For many retailers, services are their only

differential advantage. For some retailers, selling ideas as also significant. If a retailer is

trying to promote a civic cause o a unique or different retailing image, this idea may be

presented through the stores advertising.

yyAAddvveerrttiissiinnggiissaa ppaaiiddffoorrmmooffpprroommoottiioonn::The retailer can control the placement

and content of the advertising for the store.

yyAAddvveerrttiissiinngg rreeqquuiirreessaann iiddeennttiiffiieedd ssppoonnssoorr::The retailer wants to be sure the

store is identified. A retailer should take extra care to insure that a potential customer has

no doubt as to the name of the store and where the store is located.

As a retailer studied the stores advertising program, factors to be considered

include.

Advertisings effect on the retail image

Characteristics of available media

Advertising schedule

Advertising budget


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Cumulative effect of advertising

Objective of advertising

Coordination of advertising with the other parts of the marketing program.

By examining these key factors, a retailer can improve his understanding of the

role and capabilities of advertising. This understanding should in turn results in a more

effective and more efficient advertising campaign. Each of these factors for effective

advertising are equally important to well-planned advertising. Although advertisings

effect on the retail image will be discussed first, non of the seven advertising areas in

many stronger than any other in the chain of advertising success.

VVAARRIIOOUUSSMMOODDEESSOOFFAADDVVEERRTTIISSIINNGG..

For an advertisement to be effective it must be noticed, read, comprehended, believed and

acted upon For one who has no objective, nothing is relevant.

It is very much important to set the objective of the ad to be delivered for any of the

product. The product is either of the FMCG, Consumer Durable, Service product, etc. but

even that the company is looking for the promotion activities which help them in

promoting the product. Advertising objectives, like organizational objectives, should beoperational. They should be effective criteria for decision making and should provide

standards with which results can be compared. Furthermore, they should be effective

tools, providing a line between strategic and tactical decision.

Knowledge of the various available advertising media and their various methods of

application for retail situation is a vital to a well-planned, successful advertising program.

For a given situation, there are particular media that would be appropriate for a retailer to

use.

Outdoor Advertising

Transit Advertising

Special Advertising

Direct Mail Advertising


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Donation Advertising

Newspaper Advertising

Magazine Advertising

Television Advertising

44..33..44 RREETTAAIILL MMAARRKKEETTIINNGGIINNIINNDDIIAA

RRetail 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:

y Company to distributor to wholesaler to retailer to consumer

y Company to salesperson to consumer

y 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 andbecome 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.


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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 12mn 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.

44..33..55 PPrreesseennttRReettaaiillSScceennaarriiooiinn IInnddiiaa

Retailexperts findIndianindustry promising

RetailSales To Touch Rs. 45,000 Cr. By 2012.

MallMania: The DevelopingMallCulture In India

The TraditionalRetailScene AndThe Challenge PosedBy The Internet.


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(a) Retailexperts findIndianindustry 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.

(b) RetailSales to Touch Rs. 45,000 Cr. By 2012

Retail is exciting, and action in the sector promises to hot up. KSA a leading

international consultancy believes the organized sector will grow six folds to almost Rs

45,000 crore by 2012. The share of organized sector in total retail sales will grow from


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one per cent now to six per cent by 2012.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, Indias

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 2012, 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.

(c) MallMania: The DevelopingMallCulture In India

Till late last year, there were just three international style shopping malls in India

Spencer in Chennai, Crossroads in Mumbai, Ansal Plaza in New Delhi and Srirams

Arcade in Kolkata. By the end of 2005, that number will have jumped to at least 20.

It looks like a virtual stampede. Fifteen 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.


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As the retail industry evolves, consumers want more variety before making their

purchase decision. A study on consumer outlook suggests that over 80% 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 - 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.

(d) The TraditionalRetailScene AndThe Challenge PosedBy The Internet

The Internet is changing the structure and definition of tradable services

worldwide, according to the World Trade Organizations report on Electronic Commerce.

It predicts that the Net will profoundly transform inter-organizational commerce, retail,

and Government procurement sectors worldwide.

The ripple-effect of these changes is affecting the sale of items like books, PCs,

apparel, tickets and music in advanced Internet economies like the U.S. and will soon

impact India as well.

Close to $7.8 billion worth of retail goods were sold via the Net in the U.S. in

2001. Deep product selection, easy shipping, and attractive online promotions made items

like books and apparel a favourite with Net shoppers.


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Leading online service America Online (AOL) reported that the majority of the

goods sold in the record-breaking Christmas '98 season (amounting to over $1 billion)

consisted of toys, apparel and books.

And it is actually in the business-to-business sector, and not the business-to-

consumer sector, that the Net is expected to have its most dramatic impacts as companies

hook up Intranets and Extranets to cut costs, improve efficiency, and create whole new

market spaces.

Such trends are becoming visible in the Asian context as well. For instance, the

site of trade information publisher AsianSources.com, a business-to-business trade

inquiry hub, is facilitating millions of dollars of international trade leads for Asian

companies in the manufacturing, pharmaceutical and apparel sectors.

From humble email messaging and real-time market research to online sourcing

and e-retailing, the Net has much to offer Indian businesses. Sectors like the apparel

industry have only recently begin to sit up and take notice of the potential of e-business

for a wide range of activities in apparel design and development, such as online brand

building, visual merchandising, and data warehousing.

Retailing will undergo tremendous change in India in the next decade, according

to Simon Bell, principal consultant for retail practice at A.T. Kearney (India).

One of the key global trends in the retail industry is the "battle of the formats"

between different kinds of outlets: value discounters, specialty stores, small

independents, mega-stores, and non-store retailing. In addition to catalogue and Tele-

shopping, a new but fast growing segment in the non-store category of outlets is the e-

retail center, or Web-based merchandising driven by e-commerce.

Online sales for the U.S. apparel industry amounted to $157 million in 2002, but

will shoot up to at least $650 million by year 2004.

These trends will soon be replicated in India as well. According to estimates by

the year 2010, more than 20 per cent of the apparel retail turnover in India would be

accounted for by organized chains, who will use sophisticated information technology to

cut costs, improve market responsiveness and manage customer loyalty programs.


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This new trend is best typified by Shoppers' Stop, which has invested heavily in

retailing technology such as an ERP system and has also launched a Web site

www.shoppersstop.com.

The company is "determining" integrated customer demographic and psycho

graphic information from multiple offline and online sources to better understand

customer buying habits, said Mr. Naveen Singh, marketing manager of Shoppers' Stop.

In fact, quite a few Indian apparel organizations are already online, with

"brochure ware" Web sites providing basic information - such as the Indian Apparel

Export Promotion Council, Balaji Garments, Polo India, Meenakhi Sarees, and

www.apprelindia.com.

There are hardly any examples of third-party business-to-business sites in India,

which could serve as online hubs for strengthening cooperation and information sharing

between apparel manufacturers and retailers for mutual growth and business

opportunities.

Sites like www.clothesnet.com and www.fashionwindows.com in the U.S. are

superb examples of online business communities geared towards the apparel sector. They

feature email newsletters, searchable business inquiry message boards, and directories of

companies offering services like visual merchandising and niche garment design.

E-retailing is moving into the accelerated growth stage in the U.S., but is still at

the early development stage in India. Leveraging Net-based technologies will be key for

apparel companies and brands wishing to operate at the "warp speed" of the information-

age economy. The Web will allow apparel stores to make more products more accessible

to more consumers. E-commerce in India is very much alive, of course, with sites

offering books for sale in Bombay, vegetables in Delhi, and movie tickets in Bangalore.

IDC (India) estimates that the value of sales over the Net in India will mushroom to

Rs.1,200 crore in year 2004, if the Internet user base takes off.

Sites like Rediff-on-the-Net already have about 20,000 registered users for their e-

commerce service, which was launched in August 2001. 90 per cent of the payments

occur via credit cards, and 10 per cent via cheques. The average purchase amount is Rs.

600. Online retailers must ensure smooth logistics, encourage repeat traffic, anticipate


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consumer needs, offer slick navigation, and build strong online relationships with Internet

users.

The Indian apparel sector however, faces other challenges in areas like urban land

market ceilings, lack of industry status, conservative consumer spending habits, neglect

of rural markets, lack of confidence from the financial community, and low levels of

professionalism.

Besides, the Indian fashion industry is just about a decade old, as compared to

more than a century for Western Counterparts. And as compared to other emerging

economies like Brazil and South-East Asian countries, India is 20 years behind in

adoption of large-scale retail models. However, efforts are on to clear these hurdles and

move ahead smoothly and swiftly. Some of these are as follows:

To better equip the Indian garment industry with nationwide market grasp, the

National Council of Advanced Economic Research (NCAER) will take on the

apparel industry as a major focus for a future study.

Educational institutes like NIFT are stepping up course offerings and internship

programs for students in areas like Internet marketing.

In terms of online assistance, more than a hundred Web solutions companies have

sprung up all over India, offering services ranging from basic Web page

publishing to international marketing and consulting strategies. Companies like

Polaris and Net Base Computing are already working on Web-based solutions for

the retail industry.

The drivers for creating an organized, modernized retail sector for Indian apparel

will thus be factors like economies of scale, time-to-market, and the use of

information technologies like the Internet.


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4.4 InternationalRetailers eyeingIndian Market.

Retailgiants headingtowards Indian stores.

An excess of International apparel brands and retail giants are waiting to capitalize on

the Indian market place in a big way. If you are thinking about the growing importance

attached to India, attribute it to the countrys rise as global business process outsourcing

(BPO) hub. Indian Gen Y, earning loads of disposable cash in the BPOs, has been

found to the single largest consumer for international apparel brands. International brands

and retailers have released that their brands have a high recall values amongst the urban

Indian youth, even when their products are not present in the world and now scouting for

opportunities. Tommy Hilfiger, the latest entrant in the market has decided to open seven

exclusive stores by October 2004 and three more by Feb 2005.

Table: 4.4.3 InternationalRetailers eyeingIndian Market.

Retailer Type Status

Wal-Mart Hypermarkets Wait & watch

Marks & Spencer Lifestyle stores Already in

7-Level Supermarkets Evaluating

Carrefour Multi-format retailer Postponed Entry

Auchan Hypermarkets Evaluating

Shop rite Supermarkets Opening in Mumbai.

Dairy Firm Multi-format retail Tied up with RPG

Metro Cash & Carry Already in

Mango Apparel retail Already in

Landmark Lifestyle stores Already in

*Source: The Franchising World.


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4.4.1 Internationalretailers

The Australian government's National Food Industry Strategy and Austrade initiated a

test marketing food retail in India wherein 12 major Australian food producers have tied

up with India-based distributor AB Mauri to sell their products directly at retail outlets.

The largest-ever 150-member British business delegation in India committed investments

in the areas of food processing, agri retail and manufacturing. It is also likely to press for

the liberalization of sectors like financial & legal services and retail.

US-based home delivery and logistics company, Specialised Transportation Inc, will

enter the Indian market through a strategic alliance with Patel Retail, a subsidiary of Patel

Integrated Logistics.

Among other big international players, Wal-Mart has announced its plans for India in

partnership with Bharti, Tesco is sure to try again, and Carrefour too might finally find

the right partner.


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Figure: 4.4.3 Retail formats

(a) Supermarkets:

Large self service outlets, catering to varied shopper needs are termed as Supermarkets.

These are located in or near residential high streets. These stores today contribute to 30%

of all food & grocery organized retail sales. Super Markets can further be classified in to

mini supermarkets typically 1,000 sq ft to 2,000 sq ft and large supermarkets ranging

from of 3,500 sq ft to 5,000 sq ft. having a strong focus on food & grocery and personal

sales.

Supermarkets are relatively new entrants in the market. They are so called pioneers in

organized food retailing and go by the western model in look and feel and format. This is

what everybody means when they say organized food retailing.


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(b) Franchiseoutlets:

Like Tommy Hilfiger and Wal Mart, other US retailers are firming up their India entry

strategies and if they are already in, they are undergoing rapid expansion. Fashion brands

DKNY is also al set to foray into the Indian fashion Industry through a franchisee

agreement with Indian company, S. Kumar Starbucks recently expressed their interest in

entering Indian company

Like Tommy Hilfiger and Wal-Mart, other US retailers are firming up their India entry

strategies and if they are already in, they are undergoing rapid expansion. Fashion brand

DKNY is also all set to foray into the Indian fashion Industry through a franchisee

agreement with Indian company, S Kumars.Starbucks recently expressed their interest in

entering India through the franchise route, like their American F&B counterparts Pizza

Hut, Subway, and the very successful McDonalds. McDonalds has major expansion

plans lined up; in the next 3 years, it plans to open another 100 outlets in cities across

India.

(c) Hypermarket:

A very large commercial establishment that is a combination of departmental store and a

supermarket.

The specific features of a hypermarket are the wide range of goods offered, quality

service, quality display of goods on the shelves and complex systems providing for

customers loyalty.

Hypermarket is known for a wide range of goods offered. It consist of dozens of

thousands of items, while similar goods can be offered in several forms. In order to work

with such an assortment it is necessary to group it into categories and sub categories that

would unite goods according to this or that criteria.


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(d) ShoppingMalls:

The new shopping malls that have been expanding their footprint across Indian cities are

well designed, built on international formats of retailing and integrated with

entertainment and restaurants to provide a complete family experience. Over 300 mallsare expected to be built over the next two years and most Indian cities with over a million

populations will be exposed to this modern method of retailing.

Shopping malls have existed in India since several decades but were designed and built to

house several shops in a single facility. These malls also known as Shopping Arcades

offered only rows of shops, most of which were small stores that promised bargains for

their various wares. These Shopping Arcades tried to maximize on their store space and

did not offer any areas for recreation and entertainment.

The present day malls are a creation of the past few years post 2000. They are designed

professionally using a lot of international experience and combine shopping with a lot of

brand building, recreation, food and entertainment. Malls also have a large format store

that serves as their anchor for shopping and a prominent restaurant that anchors the food

needs of visitors. Most malls also feature a multiplex cinema that offers entertainment to

the visitors of the mall. Finally the mall has large atria and open spaces to allow visitors

and families to hang-out.

4.4.2 Wal Martplans toenterIndia.

The Indian Retail sector may soon see the worlds biggest retailer, Wal-Mart Stores, Inc.

on its radar. The $245billion company has reportedly initiated studies on the Indian

market and is working on a big-bang entry, once FDI norms are relaxed. The company is

interested in India as a destination for stores of there own, exploring possible

opportunities for presence. However, for business reasons, Wal-Mart does not say much

about specific investment plans. The US-based gaint operates 1,494 stores in the

international market. Wal-Mart plans to open 120 to 130 additional stores in the existing

markets in current fiscal.


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Anglo-Dutch petroleumgiantShellis comingtoexpandits retailmarketingactivities

in India

Anglo-Dutch petroleum giant Shell is committing a sum of Rs 250 crore to expand its

retail marketing activities in India. Vikram Mehta, chairman of Shell group of companies

in India, said the petrol stations will be established in the South. Shell, which announced

the launch of its first petrol station in India at Bangalore after a gap of 28 years, intends

to launch these stations on its own. We are not willing to disclose how many stations

will be established for this amount. Our national roll-out will occur after the first phase is

completed, Mr. Mehta said. Shell is the single largest corporate investor in India, having

invested $825m (around Rs 3,500 crore), he added. It has the permission to launch as

many as 2,000 petrol stations. The giant got the Union governments nod for the retail

foray only in September this year. The group intends to adhere to the prescribed norms of

opening petrol stations in rural centers. The government norms stipulate that 5.5% of

each players petrol station network be in rural areas. The group has a MoU with MRPL

to lift the stock for petroleum. MRPL, which is now a part of the ONGC stable, runs a

12m tonne refinery in Mangalore. Each Shell station will stock petrol and diesel, besides

having a convenience store. Mr. Mehta said that Shell intended to stick to knitting and

was not looking at investing in any petro-chemical venture in India.


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CHAPTER: 5

CONCLUSION


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5.1 Conclusionfor

Howcanitbedone?(Past, Present& Future)

For a start, these retailers need to invest much more in capturing more specific market

intelligence as well as almost real-time customer purchase behavior information. The

retailers also need to make substantial investments in understanding/acquiring some

advanced expertise in developing more accurate and scientific demand forecasting

models. Reengineering of product-sourcing philosophies aligned more towards

collaborative planning and replenishment should then be next on their agenda. The

message, therefore, for the existing small and medium independent retailers is to closely

examine what changes are taking place in their immediate vicinity, and analyze whether

their current market offers a potential redevelopment of the area into a more modern

multi-option destination. If it does, and most commercial areas in India do have this

potential, it would be very useful to form a consortium of other such small retailers in

that vicinity and take a pro-active approach to pool in resources and improve the overall

infrastructure. The next effort should be to encourage retailers to make some investment

in improving the interiors of their respective establishments to make shopping an

enjoyable experience for the customer.


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5.2 CONCLUSION FOR GROWTH

Finally, the most

Documents

Final Report Amrita