Unit1 Introduction to Retailing

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Retailing:

Introduction

Unit #1



1/3/2011 Unit #1: Introduction to Retailing 2

Introduction to Retailing- Key Topics

Nature & scope of Retailing

Retailing- Definition

Functions of a Retailer

Rise of a Retailer

The Retailing Concept

The Retail Strategy Retailing Concept- Key

Issues

Consumerism

Rise of IndianConsumerism

Retail Formats

Major Retail Players inIndia

Retail in India-Evolution & drivers of

retail change




Retailing- Definition

Retailing encompasses the business

activities involved in selling goods and

services to consumers for their personal,family or household use.

It includes every sale to the final consumer

It is the last stage in distribution process




Retail Functions in Distribution

ManufacturerWholesaler

Retailer

Final

Consumer




Retailers- Key Functions

Collect an assortmentfrom various sources,buy in large quantity &

sell in small quantity-the Sorting Process

Communicate bothwith customers &

manufacturers andwholesalers

Manufacturers and

wholesalers get

information from

retailers on sale

forecasts, delivery

delays, customer

complaints, defective

items, inventory

turnover etc




Retailer·s role in Sorting Process

M-

Brand A

M-

Brand B

M-

Brand C

M-

Brand D

M-

Brand E

M-

Brand F

Wholesaler

Wholesaler

Wholesaler

Retailer

Brand A

Brand B

Brand C

Brand D

Brand E

Brand F

Customers




Retailers- Some other Functions

Shoppers (customers ) are

provided information on

availability and

Characteristics of goods &services, store hours, sales

etc from retailer ads and

displays

Retailers complete

transactions with

customers

Retailers provide

assistance to small

suppliers by transporting,

storing, marking,advertising & prepaying

for products




Special Characteristics of Retailing

Small Average Sale Impulse Purchases

Popularity of Stores

Retailer·s

Strategy




Retailing: Special Characteristics

1. The average amount of a sales transaction

for retailers is much less than for

manufacturers2. Final consumers make many unplanned or

impulse purchases

3. Retail Consumers usually visit a store,even though mail, phone and web-sales

have increased




Retail Strategy

The overall plan guiding a retail firm

It influences the firms business activities

and its response to market forces, such ascompetition & economy




Developing & Applying Retail Strategy:

Six Steps1) Define the type of business in

terms of the goods /servicecategory and companys specific orientation (full service or no

frills)

2) Set long run & short runobjectives for sales and profit,market share image and so on

3) Determine the customer market to target on the basis of its

characteristics and needs

4) Devise an overall long run plan that gives general direction to the firm & itsemployees

5) Implement an integrated strategy that combinessuch factors as storelocation, product assortment, pricing &advertising and displays toachieve objectives

6) Regularly evaluate performance and correct weakness/when observed




The Retailing Concept- Underlying

Principles

Retail StrategyRetailing

Concept

Customer Orientation

Coordinated Effort

Value- Driven

Goal Orientation




Retailing Concept: Three Issues

The Total Retail Experience

Customer Service

Relationship Retailing




The Total Retail Experience

Includes all the elements in a retail offering

that encourage or inhibit customers during

their contact with a retailer Number of salespeople, displays, prices,

brands carried, inventory on hand:

Controllable

Adequacy of on street parking, sales tax etc:

Uncontrollable




Customer Service

Refers to the identifiableyet sometimes intangibleactivities undertaken by aretailer in conjunction

with the basic goods and services it sells

Has a strong impact on thetotal retail experience

Key Elements

Store hours, parking,shopper friendliness of the store layout

Credit acceptance, salespeople, amenities such asgift wrapping, rest rooms,employee politeness

Delivery policies, timeshoppers spend onchecking out lines andcustomer follow up




Relationship Retailing

Seeking to establish & maintain long term

bonds with customers rather than act as if

each sale transaction is a new salesencounter

Concentrating on total retail experience,

monitoring satisfaction with customer

service and staying in touch with customers




Relationship Retailing- Key Guidelines

1. Win- Win approach critical

2. Building & maintaining customer database




The Rise of the Retailer

Proximity to the Customer

The Rise of Consumerism

The Introduction of the Private label Technology




Consumerism: what it means

protection of consumers'

rights: the protection of

the rights and interests of

consumers, especially withregard to price, quality,

and safety

materialistic attitude: an

attitude that values the

acquisition of material

goods ( disapproving )

belief in benefits of

consumption: the belief

that the buying and selling

of large quantities of consumer goods is

beneficial to an economy

or a sign of economic

strength




The Rise of the Indian

Consumerism/Consumer Indian income will triple over the next two decades.

Over the next two decades, the countrys middle class will growfrom about 5 percent of the population to more than 40 percentand create the worlds fifth-largest consumer market.

In 2005 private spending reached about 17 trillion Indianrupees($372 billion), accounting for more than 60 percent of Indias GDP, so in this respect the country is closer to developed

economies such as Japan and the United States than are Chinaand other fast-growing emerging markets in Asia.

India remains the least urbanized of the emerging Asianeconomies. Today only 29 percent of Indians live in cities

Source: Mckinsey Consumer Research report 2008




India- Shining

Extreme rural poverty has declined from 94 percent in1985 to 61 percent in 2005

In 1985 93 percent of the population lived on a householdincome of less than 90,000 rupees a year,by 2005 that

proportion had been cut nearly in half , to 54 percent.

The growth that has pulled millions of people out of poverty is also building a huge middle class that will beconcentrated in Indias urban areas.

If India can achieve 7.3 percent annual growth over thenext 20 years, 465 million more people will be spared a lifeof extreme deprivation




Consumer Spending Projections-

Mckinsey Global Report Discretionary spending in India will rise

from 52 percent of total private spendingtoday to 70 percent in 2025.

y By 2025 Indias wealthiest citizens willtotal 24 million, more than the current

population of Australia. By that year too,Indias affluent class will be larger thanChinas comparable segment, projected atabout 19 million people




Some Other Projections

Spending on purchasesthat improve theeconomic prospects and

quality of life of a personor familyhealth,education, transport, andcommunicationswillsoar and eventuallycommand a greater shareof consumption than theydo elsewhere.

Despite Indiasfondness for cricketand Bollywood

movies, recreationalproducts and serviceswill take a smaller sliceof household spendingthere than in othercountries




Projections

y Transportation, already the largest categoryof expense after food, will take a biggerportion of household budgets in coming

years, exceeding its share in all of ourbenchmark countries.

y The highest growth will come from car

purchases. Categories such as clothing andhousehold goods are expected to postslower annual growth relative to overallconsumption




Implications for Marketers

India will witness the rapid growth of itsmiddle classhouseholds with disposableincomes from 200,000 to 1,000,000 rupees

a year. That class now comprises about 50million people, roughly 5 percent of thepopulation

y

Today 57

percent of private spending isspread across rural areas, but by 2025 citieswill command 62 percent of the countrys

spending power.




Implications

In absolute terms the countrys urban

population will expand significantly, from

31

8 million today to 523 million in 2025. The shift in spending power from the

countryside to the cities will place the bulk

of Indias private consumption within easier

reach of major companies




Technology in Retail

Customer Interfacing Systems

Bar Coding and Scanners

Payment

Internet

Operation Support Systems

ERP System

CRM Systems Advanced Planning and Scheduling Systems




Retailing in India

Retail the largest private industry globally, is still in its nascent

stages in India

Source: CII Mckinsey, HSBC

Fortune #1 Wal-Mart is

a Retailer

#1

50

Over 50 of theFortune 500

companies areretailers

25

25 of the AsianTop 200

companies, areretailers

8

Global Retailindustry is of size

USD 8 Trillion




Indian Retail- Some Statistics

Market size (total) 2006:

US$ 300 bn/annum


US$ 427 bn/annum


US$ 637 bn/annum

Market size (modern retail)

2006: US$ 9-12 bn/annum

Market size (modern retail)

2011: US$ 60 bn/annum

Annual rate of growth (modernretail): 35%

Penetration (modern retail)

2006: 3 to 4%

Penetration (modern retail)

2010: 10%

Number of retail outlets (total):

12 millionSource: www.indiaretailbiz.com




Indian Retail Statistics

o New Investment by2011: US$ 30 bn

No. of personsemployed (total): 21 mn

No. of new jobs in nexttwo years: 2 mn.

Retail Space Typical space per outlet: 100 to

500 sq.ft.

Space occupied (modern retail):35 mn sq.ft.

Operating Malls 2007: 114 (35mn sq.ft.)

New Malls under construction:361 (117mn sq.ft.)

New space distribution: 65%(top 7 cities), 35% (tier II & III

cities) New space distribution (among

top 7 cities): NCR 34%, Mumbai23%, Rest 43%

Source: www.indiaretailbiz.com




Major Retail Formats in India

Malls

Specialty Stores

Discount Stores Department Stores

Hypermarts/Supermar

kets

Convenience Stores

MBOs (Multi- Brand

Outlets)




Various Retail Formats

Department store: Large retail store offering a variety of services and merchandise, organised in separate

departments. Occupy prominent positions in the heart of town or as anchor stores in out-of-town malls eg.

Shopper¶s Stop.

Supermarket: A store that sells a wide variety of goods including food, medicine and household products. Often

part of a chain that owns or controls other supermarkets in the same or other towns; thus going for economies of

scale. The chains are often supplied from the distribution centres of a larger business eg. FoodWorld.

Hypermarket (from the French term hypermarche) : A store that combines a supermarket and a department

store. A gigantic retail facility that carries a big range of products under one roof, including fresh groceries and

apparel. When planned, constructed and executed correctly, hypermart caters to all routine weekly shopping

needs in one trip eg. Big Bazaar.

Category killers: Large format stores that specialise in a narrow line of merchandise eg. Vivek, Vijay Sales.

Convenios: 24X7 convenience stores situated close to homes to generate high footprints. Convenios carry a

limited stock of daily use goods with a special focus on food products eg. In & Out petrol pump outlets.

Specialty malls: Consortium of retailers that carry a certain category of products. They are usually situated

some distance from the city centre. Consumers have to make a special visit to pick up the goods. eg, Gold,

Wedding Souk.




Recent Trends

Retailing in India is witnessing a huge revampingexercise as can be seen in the graph

India is rated the fifth most attractive emerging

retail market: a potential goldmine.

Estimated to be US$ 200 billion, of whichorganized retailing (i.e. modern trade) makes up3 percent or US$ 6.4 billion

As per a report by KPMG the annual growth of department stores is estimated at 24%

Ranked second in a Global Retail DevelopmentIndex of 30 developing countries drawn up byAT Kearney.

Retail Sales in India




1. Unorganized : Vast majority of the twelve million stores are small "father and

son" outlets2. Fragmented : Mostly small individually owned businesses, average size of outlet

equals 50 s.q. ft. Though India has the highest number of retail outlets percapita in the world, the retail space per capita at 2 s.q. ft per person is amongstthe lowest.

3. Rural bias: Nearly two thirds of the stores are located in rural areas. Rural retail

industry has typically two forms: "H

aats" and Melas".H

aats are the weeklymarkets : serve groups of 10-50 villages and sell day-to-day necessities. Melasare larger in size and more sophisticated in terms of the goods sold (like TVs)

1. Unorganized : Vast majority of the twelve million stores are small "father and

son" outlets2. Fragmented : Mostly small individually owned businesses, average size of outlet

equals 50 s.q. ft. Though India has the highest number of retail outlets percapita in the world, the retail space per capita at 2 s.q. ft per person is amongstthe lowest.

3. Rural bias: Nearly two thirds of the stores are located in rural areas. Rural retail

industry has typically two forms: "H

aats" and Melas".H

aats are the weeklymarkets : serve groups of 10-50 villages and sell day-to-day necessities. Melasare larger in size and more sophisticated in terms of the goods sold (like TVs)

Traditionally three factors have plagued the retail industry:T

raditionally three factors have plagued the retail industry:

Recent Trends contd.




Experimentation with formats: Retailing in India is still evolving and the sectoris witnessing a series of experiments across the country with new formats beingtested out. Ex. Quasi-mall, sub-urban discount stores, Cash and carry etc.

Store design : Biggest challenge for organised retailing to create a customer-pull environment that increases the amount of impulse shopping. Research

shows that the chances of senses dictating sales are upto 10-15%. Retail chainslike MusicWorld, Baristas, Piramyd and Globus are laying major emphasis &investing heavily in store design.

Emergence of discount stores: They are expected to spearhead the organisedretailing revolution. Stores trying to emulate the model of Wal-Mart. Ex. BigBazaar, Bombay Bazaar, RPGs.

Unorganized retailing is getting organized: To meet the challenges of organizedretailing such as large cineplexes, and malls, which are backed by the corporatehouse such as 'Ansals' and 'PVR the unorganized sector is getting organized. 25stores in Delhi under the banner of Provision mart are joining hands to combinemonthly buying. Bombay Bazaar and Efoodmart formed which are aggregationsof Kiranas.

Experimentation with formats: Retailing in India is still evolving and the sectoris witnessing a series of experiments across the country with new formats beingtested out. Ex. Quasi-mall, sub-urban discount stores, Cash and carry etc.

Store design : Biggest challenge for organised retailing to create a customer-pull environment that increases the amount of impulse shopping. Research

shows that the chances of senses dictating sales are upto 10-15%. Retail chainslike MusicWorld, Baristas, Piramyd and Globus are laying major emphasis &investing heavily in store design.

Emergence of discount stores: They are expected to spearhead the organisedretailing revolution. Stores trying to emulate the model of Wal-Mart. Ex. BigBazaar, Bombay Bazaar, RPGs.

Unorganized retailing is getting organized: To meet the challenges of organizedretailing such as large cineplexes, and malls, which are backed by the corporatehouse such as 'Ansals' and 'PVR the unorganized sector is getting organized. 25stores in Delhi under the banner of Provision mart are joining hands to combinemonthly buying. Bombay Bazaar and Efoodmart formed which are aggregationsof Kiranas.

Recent changes:Recent changes:




Major Retailers- India

Indias top retailers arelargely lifestyle, clothingand apparel stores

This is followed by grocerystores

Following the past trendsand business models in thewest retail giants such asPantaloon, Shoppers Stopand Lifestyle are likely totarget metros and smallcities almost doubling theircurrent number of stores

These Walmart wannabeshave the economy of scaleto be low medium costretailers pocketing narrowmargin

Leading Retailers




Major Retailers ² Formats Adopted

Retailer Original formats Later Formats

RPG Retail Supermarket (Foodworld)Hypermarket (Spencer's)Specialty Store

(Health and Glow)

Piramal'sDepartment Store (Piramyd

Megastore)Discount Store (TruMart)

Pantaloon Retail

Small format outlets

(Shoppe)

Department Store

(Pantaloon)

Supermarket (Food Bazaar)

Hypermarket (Big Bazaar) Mall (Central)

K Raheja Group

Department Store (shopper's

stop)

Specialty Store

(Crossword)

Supermarket (TBA)

Hypermarket (TBA)

Tata/ Trent Department Store (Westside) Hypermarket (Star India Bazaar)

Landmark Group Department Store (Lifestyle) Hypermarket (TBA)

Others Discount Store (Subhiksha, Margin Free, Apna Bazaar), Supermarket(Nilgiri's), Specialty Electronics













Indian Organized Retail is set to explode with Food &

Lifestyle retail as major segments

Home

3%

Health & Beauty

1%

Food & Grocery

14%

Books, Music & Gifts

3%

Watch & Jewellery

17%

Footwear

13%

Clothing and Textile

36%

Entertainment

1%Durable

10%

Pharma

2%

3 SBUs covering 88% of market segment!!




Drivers of Retail Change in India

Demography Dynamics:Approximately 60 per cent of Indian population below 30years of age.

Double Incomes: Increasing

instances of Double Incomes inmost families coupled with therise in spending power.

PlasticRevolution: Increasinguse of credit cards forcategories relating to Apparel,Consumer Durable Goods, Food

and Grocery etc.

Urbanization: increased urbanizationhas led to higher customer densityareas thus enabling retailers to uselesser number of stores to target the

same number of customers. Covering distances has become

easier: with increased automobilepenetration and an overallimprovement in the transportationinfrastructure, covering distances has

become easier than before. Now a customer can travel miles to

reach a particular shop, if he or shesees value in shopping from aparticular location.




Thank You

Documents

Unit1 Introduction to Retailing