RM-I Unit I
THESE NOTES ARE ONLY FOR REFERENCE. YOU SHOULD READ THE
PRESCRIBED BOOKS & REFERENCE BOOKS. Since converted from ppt, many
portions may need explanations. In case you are not able to comprehend,
feel free to contact me.
What is retailing?
Retailing is the activity of selling goods or services to the end customers for personal , non business
use.
-retailer is one who sells to the final consumer – bet it an individual or a manufacturer, wholesaler or
retailer . Such selling can be in person, by mail, on telephone, through vending machines or online.
-ILO – retailing is the final step in the distribution process, where retailers sell merchandise in small
quantities to customers.
-Retailer thus can also be defined as the first point of customer contact
-Retail today refer to both goods and services.
RETAIL MARKET IN INDIA
•
ONE OF THE MOST DYNAMIC SECTOR HAVING OVE 30% YOY GROWTH
•
INDIAN RETAIL MKT IS PROJECTED TO REACH $1200 BILLION BY 2021.
•
ONLINE RETAIL IS EXPECTED TO CROSS $35 BILLION THIS YEAR
•
INDIA IS 5TH LARGEST RETAIL DESTINATION
•
10% INDIAS GDP & 8% OF EMPOYMENT GENERATION
Top 10 Retail Companies in India
•
Aditya Birla Fashion & Retail Ltd (Pantaloons)
•
Avenue Supermarts Ltd (D-Mart)
•
Future Enterprises Ltd.
•
Future Lifestyle Fashions Ltd.
•
Future Retail Ltd.
•
Reliance Retail Ltd.
•
Shoppers Stop Ltd.
•
Trent Ltd (Westside)
FUNCTIONS OF A RETAILER
•
1. As a Link between the producer and consumer
- retailer provides goods that satisfy customer needs in the required assortment at the required time
and place.
-
retailer provide value or utility to the customers by -providing finished goods that they want
( form utility )
-
Storing goods and various assortments
-
Keeping stores open at the customers convenience ( time utility )
-
Being present at a convenient location ( place utility )
-
Selling goods to customers ( ownership utility )
2. As a Channel Member
•
- last link in the distribution chain
•
- provide information to customers. For unbranded items it is critical . For the customers, the
information provided by the retailers become the basis of their purchase
•
- Cut short the distance from the manufacturer to customer ( today many products are
manufactured in one country and sold in another country )
•
- In case of direct marketing, producers act as retailers ( Eureka Forbes deploys door to door
selling ) – those providing immediate consumption are known as service providers – eg:
cinema)
•
- Most manufacturers use intermediaries – for delayed consumption – using retailers ( eg: a
video shop )
•
- act as a market research agent ( gather information about customers, competition and give
feedback )
•
3. As an Image Creator
•
- a retail store has to decide what kind of image they want to create in customers mind.
Accordingly they have to arrange the merchandise and marketing activities. ( eg:1. image of
a high end fashion store & that of a discount store.
Other functions
•
Provides contact efficiency – Customers don’t need to visit multiple places to see and feel
different brands, as the retailers make them available at a single place
•
Specialisation & division of labour – If each entity works based on their core competency,
they will be able to be more productive and efficient. The distributors ‘s and channels are in
the best position to carry out transportation and storing.
•
Manage discrepancies ( qnty, assortment, spacial, temporal, )
•
Bulk breaking , sorting, assortments ,accumulation
•
Risk bearing – investing money and keeping goods that are under the threat of spoilage, out
dates, obsolescence, shelf life expiry etc.
•
Logistics functions – transportation, storage
•
Facilitating functions – mkt research, financing
PRODUCT RETAILING & SERVICE RETAILING
Service is an act /deed /effort/performance to fulfill a need/want
Service sector is the dominant contributor to the economy and main employment provider in the
world .
•
Service can be a minor or major part of an offering
•
-1. a Pure tangible good ---
•
-2. a tangible good with accompanying service ..AC, car
•
-3. a hybrid offer –restaurant , cloth laundering
•
-4. a major service with minor goods and services – airline travel
•
-5. pure service …
Difference between Products ( Goods ) & Service
•
-Tangibility
•
-Perishability
•
-Inseperability
•
-Heterogenity
•
4Ps + 3Ps of mktg
•
People, Process & Physical evidence
Service Retailing
•
Eg. Of service retailing – car washing, pest control
•
Retail banking: refers to the bank dealings with customers – be it about saving accounts or
loans or credit card services etc.
•
Retail pie in the banking sector include housing loans, educational loans, auto loans, credit
cards and many more.
•
Inorder to tap this opportunity, banks need to upgrade their systems, offer more innovative
products, customisation, technology upgradation, marketing and prudent pricing.
EVOLUTION OF RETAIL IN INDIA
•
Trade & Retail existed in India for a long time. Kaudilya’s Artha Shastra has references to
this. ( 300BC)
•
In modern India, major shifts in retail segment happened in early 1990s. Traditional Kirana
shops gave way to department stores, speciality stores, super markets, hyper markets etc.
•
Kirana shops – small shops selling provisions and groceries and other items…… also used to
be called the neighbourhood shops.
•
One of the oldest retail markets that existed in India was “haats” – mandis /chantha. They
existed in villages where buyers and sellers used to meet on a weekly basis or monthly once
or during special festival seasons.
•
Fruits, vegetables, commodities, house hold items , cloths, accessories etc used to get sold
•
Bazars -
•
The oldest bazar ( covered bazar )in India is said to have been established in 17th century.
•
Remains of one of the oldest bazar – “ Meena Bazar” can still be found inside Red Fort. It
was a covered bazar for reasons – protection from climate and making privacy for royal
ladies.
•
The merchandise included house hold items, jewellery, stones, carpets, shawls, embroidery
items, gold/silver utensils etc.
•
Modern - Palika Bazar in Delhi.
•
Chandi chowk in Old Delhi , like the meena bazar also was started during Shah Jahans time.
It is even today one of the biggest market in India. Google India brought together 2500
sellers in Chandni Chowk under one web site.
•
(Chor Bazar in Mumabai )
•
We also had melas – attached to religious festivals. Village craftmen, artisans, farmers used
to bring their products for sale in such melas. Such melas still exists in some places, which is
an annual fair.
•
Indian trade dates back to many centuries.
•
Spices, Ivory, silk, fine cotton clothes, precious stones …
•
Traders from many countries traded with us.
•
British East India Co. too came here for trade, though eventually they colonised us.
Introduction of big trade centers
•
During the British rule many major trade places came up.
•
- Higgin Bothams oldest known book stall in India, in Chennai ( 1844)
•
Spencer Plaza – Chennai ( 1895)-
•
First department store style shop – Calcutta (1863)
•
During the same period many such markets came up in big cities – The Crawford market in
Mumbai, New Market in Calcutta, Army & Navy stores in Mumbai were some of them.
•
All these shops had imported British goods with minimum duty charged for it.
•
The Army canteen also was established.( grocery, liquor )
Growing period of retail in India
•
The retail trade in India grew with the arrival of Lever Brothers in the consumer goods mkt.
•
Many Indian companies also were extsblished in late 1800s – Dabur, Britania, Bombay
Fyeing, Raymonds, Century to name a few.
•
As a consequnce several Distributors and dealers too came into existence.
2 major initiatives in Pre- Independent India
•
- Co-operative Societies Act & Public Distribution System.
•
The cooperative society movement is a major potential for retailing today.
•
The PDS ( rationing system ) is the biggest retail chain in India , reaching out to millions of
people for food grains, kerosene etc. ( during WW II by the British )
•
The CSD ( Canteen stores deptt) is also introdued by British
Freedom Movement and Swadeshi concept
•
Leaders of freedom movement like Loka manya Tilak called for boycott of foreign goods.
•
The first retail co – Bombay Swadeshi Cooperative Store was listed in Bombay Stock
Exchange – 1906
•
Food, grocery and apparel segments started growing.
Akbarallys in Mumbai – 1897 was a fixed price shop
•
When retail started flourishing many other players came in
•
- Nilgiris ( 1905), MTR (1924 ), Nirulas ( 1934)
•
Smelling the potential of Indian market many others came in to the market
•
For eg: Bata ( 1931), Nestle, Johnson & Johnson, Glaxo , Tobacco Cos like Godfrey Philips
etc.
•
After Independence most British owned retail stores were either closed down or bought out
by Indians.
Post- Independence – Retail change in India
5 year plans laid the foundation of economic development. Sectors like Steel, mining, machine tools,
telecom, insurance, power etc were nationalised.
•
In the textile sector, Mafatlal’s Century, DCM, Raymond, Bombay Dyeing, CharaghDin and
many others entered the retail space.
•
In the 80s TATA entered the retail watch segment with their Titan brand, an industry that
was dominated by HMT till then.
•
Collapse of Soviet Union and the Gulf war in 90s forced India to reform its economic policies.
Liberalisation and globalisation fuelled the retail growth in India.
•
Raheja group started its dept store – shoppers stop.
•
Pantaloon also entered the mkt.
•
Soon several global brands too entered Indian mkt. Some of them are reebok, adidas,
Benetton, Levis, nike, McD …
•
Nike entered by signing license agreement, whereas reebok took franchising route
•
Food and apparel retail sector had the highest growth. KFC started in 1996, but had to shut
down due to regulatory issues and animal rights protection movement. They entered again
in 2005 with a changed strategy – also adding a veg menu.
•
One major Indian retailer, Subhiksha – which grew to 1000 storeshad to shut down Due to
mis management
•
In 1997 GOI allowed 100% FDI in cash and carry wholesale and thus the 1st such entity Metro
cash and carry came up in Bangalore.
•
Tata’s Trent , Westside , Landmark’s Books & music,vFashion yatra by Kamini sharaf Etc were
others who came in.
•
In late 80s the consumer durable market totally changed with the arrival of two Korean
giants – Samsung & LG. They have huge manufacturing facilities in India.
•
After 2005, more players entered the retail market
•
Reliance, Aditya Birla group, Bharati, Max retail, Carrefour, tesco, Zara to list a few.
Advent of Malls & Multiplexes
•
Started with Cross Roads in Mumbai in 1999. Initially a fine shopping destination But could
not handle the crowd Close down – but set an example For many others to come up. Thus
DLF Emporio, Palladium Mall, Gold Souk, Great India Palace…. A few
•
An estimated 500 Malls are now in India
•
In 2006 and subsequent years Reliance Industries entered into different formats of retail
•
Reliance Fresh – Super market
•
Reliance Digital
•
Reliance mart
•
& many speciality stores for apparel, footwear, jewellery, books, music, health & wellness
sectors
……………………………………………………………
The kirana shops were very popular/ In early 90s when the new model retail shops came in , it was
feared that the kirana shops will disappear.
However, we can see that may of them not only survived but many of them got themselves
upgraded too. They added some shelves allowing customer to do self service , they started giving
better service.
It may be possible that arrival of giant retailers may threaten their existence. ( like what happened in
ME )
INDIAN RETAIL SECTOR – UNORGANISED & ORGANISED
Major part of retail in India remain in the unorganised sector.
The small Kirana shops were easy to start for self employment – and mostly opertated from a house
hold.
* minimum investment
* most lack education and experience
* poor standardisation and low productivity
* Customer prefer them because
- its convenient, location, variety of merchandising mix, credit facilities…
- Most daily wagers buy small quantities from these stores.
•
Govt Of India allows 100% FDI in a single brand and 51% in multi brand retail – hence many
new retail players are looking to India.
•
Today retailing is at its peak.
•
Amazon is growing at 25%. New technologies add to their efficiency and scale of operation.
•
There are opportunities to get into this business – either to work for existing players or to
start a franchisee. One advantage of online business model is that they don’t need the
capital needed for store based retailing.
•
Many retailers are adopting Omni channel strategy
There are many challenges too
•
- More and more customers find little time to spare for shopping
•
- Some places there are too many retailers – they resort to price cutting
•
-Customer expectations of service levels are high, whereas more retailers are changing to
self service systems.
•
Retailers find it difficult to adapt their strategies with the latest technologies available on the
mobile and social media
•
Retailers have to resolve issues such as – how to retail customers, how best to serve
customers and same time earn decent profit, how to stand out among the stiff competition,
how to coordinate the pricing and service across different channels when their these
channels differ in cost, profit margins, segments etc.
Indian Retail market – Organised & Unorganised retail
•
Indian retail market is largely unorganised. They are not regulated by any statutory laws and
they don’t have any license.
•
Majority of these retailers are owned by individuals or house holds operated on a
proprietary or partnership basis. They don’t maintain any regular accounts.
•
Most of such retail sell veg, fruits, provisions and a number of low and medium priced
commodities. Unorganised sector will include all retailers from street peddlers to those
selling on a cycle or similar to those operating from a shop vendors and large number of
service providers.
•
The unorganised retailers – are also known as Independent retailers ( IR )
Characteristics of these retailers are
•
-less than 10 workers
•
-small scale of operation
•
-use lower technology
•
-Flexible pricing
•
-No brand name
•
-poor systems and storage facilities
•
-employees do not have job security or legal protection
•
As per 2016 data the unorganised retail sector in India was accounting for 92% ( presently
75% ). And Organised retail was a mere 8% in 2016 ( presently 18% ) and e commerce – 7%
•
The unorganised sector is facing the challenge of not having skills or technology of proper
inventory management, lack of standardisation, lack of capital and need of training and
knowledge.
•
Organised Retailers ( OR ) are those who are licensed retailers – registered for Sales
tax, Income tax , GST etc.
•
They may include privately owned large retail business, chain retail stores, large corporates
having hyper markets .
•
OR operate from one physical location or from many locations.
•
Their product offering include groceries, veg, fruits, veg, apparel, consumer durables and
non-durables, jewellery, footwear, furniture, books and so on.
•
Their format can be single product line stores, department stores, malls, super markets etc.
•
Due to their large scale of operations, they can obtain better cost from suppliers and may
even avoid the middle men, which enable them to offer lower prices to the customers.
•
OR are governed by many statutory requirements like shop and establishment act, essential
commodities act, weight and measures act, labour laws, ST/GST registrations, Income tax
laws etc.
•
OR provide better shopping experience by proper sorting and display of items and providing
better service. They follow more scientific and systematic inventory management. Regular
promotions are another attraction in OR.
Indian rural potential
•
70% of Indias population resides in villages -627000 nos. 17% of these villages account for
50% of rural population and 60% of rural wealth.
•
55% of private retail consumption is with rural mkt.
•
Consumer spending in urban – rural area is in the ratio 9:11.
•
DCM ( Hariyali Kissan Bazars, Pantaloon/Godrej’s Aadhaars, Tata’s Kissan Sansars, relaince
Fresh have all set up rural retail outlets.
TYPES OF RETAILERS – RETAIL FORMATS
•
In store retailers
•
Non store retailers
•
Service retailers
Store based retailers can be further classified on the basis of
•
product mix or price level they offer
Based on product mix
•
Over the last few years different formats of retailers have come up
–
•
1.Convenience stores:
relatively small in size . Located near residential areas. Open for long hours – some open 24
hours. Limited line of products that are needed by people around more frequently. Eg of
products: bread, eggs, fruits, grocery, beauty care items etc . It is a mini super mkt. Mostly
working 24 hours.
–
Evolved in 1920s.
–
Area – 3000 to 8000 sq ft.
–
Eg: 7- eleven, reliance mart,
2. Department stores:
•
Developed in late 18th century. When small towns grew to cities, many small stores also
became larger in size.
•
Carry wide assortment of goods. Fairly large in size having different depts. Each department
handling own sourcing and promotions.
•
However they all follow the central management policy for advertising, pricing,
•
credit offering, customer
•
service etc.
•
It is a mini super mkt.
Mostly working 24 hours
•
3. speciality stores: they cater to specific segments. Eg: book shops, jewellery shops, kids
wear outlets , toy shops, sports goods etc.
•
They carry limited assortments but will have long depth.
•
Some are independent and some are chain outlets ( tanishq ). Offer high level service. Price
is not the primary considerations. Usually not so big in area– under 8000 sq ft.
•
Eg: Tanishq, Asian Paints, Sangeetha mobiles, Oxygen digital shop, DC Books
•
4. Supermarkets:
•
Large departmentalised self service stores. Offer high assortments. May also carry own
private brands. Affordable price and large variety of items are the attractions. Offer loyalty
programmes. This type is growing in Indian mkt.
•
Early super markets can be traced to UK in 1920s. Tesco
•
Large in size, low cost, operating on low margin high volume. Provide ample
parking space.
•
Food, groceries and non food items.
•
8000 – 20000 sq ft in area. In India the size is around 2000 sq ft.
Eg: More, reliance fresh, Nilgris,
•
5. Hyper markets:
•
Bigger than super mkts. 80,000 to 220, 000 sq ft.
•
Product offering is even wider – include electronics, FMCG products, food items, fruits &
vegetables and Clothes, jewellery, books, stationary, TV, computers, food items so on. Offer
low price.
•
Its like a place for one stop shopping- large variety of products
•
Facilities like banks, pharmacies, photo studios etc. are also available.
•
Eg: Carrefour, reliance mart, More, Lulu…
•
6. Super Stores:
•
Not yet seen in India. In US, we can see such stores, which are bigger than super markets
and also offering more products range and other services. Like dry cleaning, shoe repair,
banking, photo processing, health restaurants, instore bakeries/flower shops etc. In short
they are one stop shopping for most requirements.
•
7. Drug stores:
•
Besides pharmacy related products they also carry other items from cosmetics, health and
beauty care, baby care and even items like greeting cards, food items and toys in a limited
way.
•
Some of them also offer health clinic facilities ( checking BP, sugar etc) and 24 hour service.
Some chain stores also have come up recently.( Appolo )
•
8. Discount stores: They are retailers operating at low price, high turnover.
•
*Full line discount stores – ( mass merchandisers )
•
offer wide variety of products. Eg: wall mart
•
*speciality discount stores – ( category killers )
•
Offer large selection of a single line. Eg: IKEA, staples
9. warehouse membership clubs: eg:
•
Metro cash & carry. CEHA products,
grocery items etc .
•
Offer only to members. –
10. Off price retailers ( mostly factory outlets )
•
They sell a portion of their stocks at an attractive discount. Sometime excess inventory or
export rejections. Eg: leather mnfctrs , apparel brands.
11. Restaurents: ( in between service establishments & retail stores ). They serve food and also sell
food items. Some are even speciality joints line “mainland china”
Non- Store retailers: Selling without having a store.
•
1-kiosks- small independent stand
alone store installed in airports,
inside stores etc. usually meant for
sales promo, and sometimes selling
a few items.
•
2.Automatic vending machines – selling
items like soft drinks, beer, chocolates,
magazines, etc. ( found inside stores,
airports etc)
•
Direct retailing: selling door to door – at home or office: cosmetics, jewellery, textiles, home
appliances … ( out of total sales people – women – 70%, couples – 20% & males -10% )
•
or through home get togethers. Eg: Amway
•
Direct marketing: prompting customers to make purchases from their home/office.
•
Eg: telemarketing ( credit cards ) , direct mails ( post cards, e mails), catalogue selling, Tele
shopping.
Airport retailing:
•
Many airports are attractive destination for retail shopping. Additional revenue for the
airport authorities & convenience and entertainment to travellers who have enough time at
their disposal.
•
Concept was started by British Airport Authorities.
•
Has many limitations – distant places for employees, strict security limited time for stock
handling etc.
•
Its popular because
–
Increase in the number of air travellers
–
Decline in the state control of airports
–
Some of the major airports for shopping – Qatar, Dubai
Franchisee:
•
A franchiser ( company/brand ) giving license to a franchisee ( private business people ) to
use their logo, brand name, systems etc for retail business.
•
The franchisee pay a license fee to the franchiser.
•
Store operates based on a mutual agreement.
•
In some cases the products are provided by the franchiser and other cases the franchisee
uses the product name, logo, specificaions and process. Soft drink bottling, tyre industries
are also franchisees.
•
Eg: Archies, Baskin & Robbins, subway, Mc D
DRIVERS OF RETAIL GROWTH IN INDIA
•
1.Overall economic growth
•
2. More disposable income – young population
•
3. Change in consumer taste
•
4. Growth of middle class
•
5. Increased working women
•
6. Economies of scale in production ( mass prod.)
•
7. Emerging rural market
•
8. Entry of corporate sector
•
9. Entry of foreign retailers
•
10. Technological impact …. Increase in online trade
•
11. Media explosion
•
12. Consumerism
•
13. Govt initiatives
•
14. Shortened product life cycle
•
1. Economic growth
•
Size of the population --- large market
•
Liberalisation/globalisation in 90s – many restriction on pvt Cos. Lifted. Allowing MNC to
start their operations in India.
•
Green revolution & white revolution in India – relf reliance in food & milk.
•
Consistent economic growth for the last 2 decades – though with ups & downs ( varying bet
8% to 4.7% )
•
Steady economic growth –means more domestic consumption – means growth in retail
sector too.
•
2. Growing middle class – some statistics ( based on national survey & house hold income &
expenditure 2013-14 )
•
63 mn ( 46%) households have 50% of Indias household income.
•
Only 44% of additional income generated bet 2005 & 2014 went to 20% richest. Whereas
50% of this went to the 60% below the richest group. Of this the top 20% are not gaining
much. 40% below then are real gainers. The poorest 20% retain their % share of total
household income – their absolute income had grown by more than 70%.
•
The poorest 20% spend more than what they earn. 20% just above them balance their
income & expenditure with difficulty. ( increased necessities )
•
Estimated 267m people will come under the middle class very soon. This segment will
provide demand for niche and branded products – boosting the retail.
•
3. Changing demographies:
•
India has more than 50% of its population below the age of 25 and more than 65% below the
age of 35. It is expected that, in 2020, the average age of an Indian will be 29 years,
compared to 37 for China and 48 for Japan.
•
This high young population is the key reason for the increased consumption and this
segment will have major impact on the future economic growth.
•
More than 50% of our population is bet 15 – 54 age, which is the largest spenders in general.
•
High birth rate means Indias young working population will grow for another 30 years. The
literacy rate is also increased to 74%.
•
While the prime age working population in most countries will fall, it will increase in India.
•
4. Change in family structure: Increase in the working women – increase in the family
income & increased demand for more products & services.
•
Also prefer one stop shopping and convenience…. A factor that will drive many new retail
formats.
•
Reduced size of family --- more and more nucleus families – reason for increased demand for
consumer durables, furnishings, FMCG items ..etc
•
5. Changes in consumer taste: Occupational changes and media expansion have brought in
tremendous changes in the spending pattern. There is increase in consumption of luxury
items – apparel, automobiles, electronic gadgets etc. Trends shows that as the income level
rise there is less tendency to spend on basic needs as compared to spending on discretionary
items.
•
6. GOI Initiatives: The Government of India has allowed 51 per cent foreign direct
investment (FDI) in multi-brand retail and 100 per cent FDI in single-brand retail
•
DIPP is likely to consider relaxing the sourcing norms for global retailers to establish shops in
India, as IKEA is asking for further relaxation of mandatory conditions
•
The Union Ministry of Finance has provided relief to software industry by replacing a multilevel structure of tax deducted at source (TDS) on distributors with a single TDS. ….etc
GLOBAL RETAIL MARKET
•
World over the retail industry is becoming more complex and finding it difficult to grow /
make profits. Reasons include
–
High operating expenses
–
Market saturation
–
Multi channel buying
–
Ageing population
–
Diminishing loyalty
–
Influence of Digital media
•
We will discuss about some select markets – selected on the basis of total revenue
generated and key retailers operating in that region.
•
Like the fortune 500 list – for the world trade and commerce , we have the global powers in
retailing…a list of top retailers on the basis of their revenue.
•
The Top 10 Fortune 500
Revenues ($M)
•
1Walmart
$514,405
•
2Sinopec Group
$414,649
•
3Royal Dutch Shell
$396,556
•
4China National Petroleum
$392,976
GLOBAL RETAIL MARKET – TOP PLAYERS
•
1. Wal-Mart Stores, Inc.
•
2. Costco Wholesale Corporation
•
3. Kroger Company
•
4. Walgreens Boots Alliance, Inc.
•
5. Tesco PLC
•
6. Carrefour SA
•
7. Amazon.com, Inc.
•
8. Metro Group AG
•
9. The Home Depot, Inc.
•
10. Target Corporation
•
Walmart remains no1. The list also shows dominance of US and Europe in the world of
global retail.
•
1. Wal-Mart Stores, Inc……US
•
Wal-Mart Stores, Inc. is the world's largest brick-and-mortar retailer by a substantial margin.
The company reported worldwide revenue of $485.7 billion for its 2015 fiscal year, a yearover-year increase of about 2%. It operates 11,453 store locations in 27 countries. About
$228 billion of its 2015 revenue, nearly 60% of the total, is attributed to operations in the
United States. Most of the company's store locations worldwide operating under the
Walmart brand
•
2. Costco Wholesale Corporation
•
Costco Wholesale Corporation (COST) is a membership-only warehouse retail chain with
operations in nine countries. The company reported worldwide revenue of $112.6 billion for
the fiscal year 2014, including more than $2.4 billion in revenue attributed to annual
customer membership fees. Year-on-year revenue growth amounted to about 7.1%. Costco
operates 671 warehouse locations around the world, including 474 locations in the U.S.
•
3. Kroger Company
•
Kroger Company (KR) is the third-largest retailer in the world by revenue and the largest
grocery retailer in the U.S. It reported total sales of $108.5 billion for the fiscal year 2014, an
increase of 10.2% over the prior year. Kroger operates 2,625 supermarkets and multidepartment stores, which combine to make up 93% of company revenue. The company also
operates 782 small-format convenience stores and 326 jewelry stores
•
4. Tesco PLC
•
Tesco PLC is a global grocery retailer headquartered in the U.K. For the fiscal year 2015, the
company reported revenue of £62.3 billion excluding value-added tax (VAT), equivalent to
approximately $101.3 billion at average exchange rates for the reporting period. This
represents a 2% decline in revenue compared to the prior year, making Tesco one of only
two companies on this list not experiencing sales growth. Tesco operates 6,814 stores in 11
countries. In addition to its grocery stores in the U.K. and Europe, Tesco has major
operations in Thailand, Malaysia, India, and China.
•
5. Carrefour SA
•
France's Carrefour SA reported sales of €74.7 billion excluding VAT, equivalent to
approximately $99.1 billion at average exchange rates for the period. Revenue growth
amounted to 2.9% on the year. At the close of 2014, Carrefour had 10,860 store locations in
33 countries. It operates stores in a variety of formats, including small convenience stores,
mid-size supermarkets and large-scale superstores offering both food and general
merchandise. Carrefour opened or acquired a total of 1,128 new stores during the 2014
year, adding more than 650,000 square meters of retail space
•
6. Amazon.com, Inc.
•
Amazon.com, Inc. (AMZN) is the world's top online retailer. It reported sales of
approximately $89 billion for the 2014 fiscal year, an increase of about 19.5% over the
previous period. The company operates 14 country-specific retail websites and ships
products to customers around the globe. About 62% of Amazon.com sales take place outside
the U.S. Both domestic and international sales figures have shown continued fast growth in
recent years.
•
7. Metro Group AG
•
Germany's Metro Group is a European retail giant with far-flung operations in Russia, China,
Japan, Thailand, Pakistan, and India. The company reported sales of €63 billion excluding
VAT, equivalent to approximately $85.5 billion at average exchange rates for the period.
Sales were down about 4% from the prior year. Metro Group operates 2,200 stores under
several brands, including the warehouse retail chain, Metro Cash & Carry, which is
responsible for more than 48% of the company's sales.
•
The Home Depot, Inc.
•
Home Depot, Inc. (HD) is the world's biggest home-improvement retailer. It reported sales of
$83.2 billion for the 2014 fiscal year, an increase of about 5.5% over the previous year. The
company operates 2,273 stores in total, including 1,977 in the U.S. and its territories, and
the remainder in Canada and Mexico.
Reach of global retailers
•
European retailers dominate the global retail world. Top ones have over 1/3 of their revenue
coming in from countries other than the home country.
•
55% of north American retailers are single country operators. 60% of Asia –Pacific region are
also operating in their home country only
•
Growth of retailers can be attributed to the purchase power of people in respective
countries. Many global giants are looking at countries that are emerging economic powers.
•
Due to the impact of mobile and internet in retail, many retailers are now opting for multi
format strategies.
•
The top players are operating in over 16 countries on an average
RETAIL IN NORTH AMERICA
•
USA is a major player in global retail industry. In US, retail is the second largest sector in
terms of number of establishments and no. of employees.
•
Total retail sales in US $4.53 trillion ( 2913). E commerce has a decent share in this total (
$40million).
•
As in 2013,, 27% of US GDP was accounted for retail. The in store retailers had $4,27 trillion
sales.
•
E commerce retail in US is over $300 billion. 20% of the increase in retail ( bet 2013 & 14) is
going to e commerce.
US as a major retail power
Top 10 retailers in US – of which 5 appear in global top10
•
(no of countries operating )
•
WallMart (28)
•
COSTCO (9)
•
KROGER Co.(1)
•
The Home Depot Inc (4)
•
Target Corp (2)
•
Walgreen Co (2)
•
CVS Caremark Corp (3)
•
Amazon.com (14)
•
Lowe’s Corp (4)
•
Best Buy Co. Inc (5)
Best US retail brands & their brand value ( in $m)
•
1. Wall mart ( 131,877)
•
2. Target ( 27,123)
•
3. The Home depot ( 25, 696)
•
4. Amazon ( 23, 620)
•
US have some of the biggest Retail giants and these brands have gained customer trust
across the world.
•
In the competitive market each one is trying to be more innovative – giving customers newer
experience.
•
CVS – operate health clinics focusing on cigrette-quitting.
•
Target is supposed to be a retailer giving strong competition to Walmart
RETAILING IN EUROPE
•
European Union has 27 member countries. ( Britain has exited ) Thus EU has diverse markets
of varied size and potential.
•
EU follow a common currency – EURO.
•
Many retailers in Europe have faced declining revenues. Tesco is focussing in home country,
Carrefour also is reducing its presence in Asia. German retailers had the strongest growth.
Top 10 retailers in Europe
Rank
Retailer Turnover
Headquarter
•
1
Schwarz
96
Germany
•
2
Aldi
73
Germany
•
3
Carrefour
62
France
•
4
Rewe
54
Germany
•
5
Edeka 53
Germany
•
6
Tesco
51
UK
•
7
Les Mousquetaires
46
•
8
E.Leclerc
43
France
•
9
Auchan 42
France
•
10
Sainsbury
39
France
France
Top 10 retail Brands in Europe
rank
1
2
3
4
retailer
H&M
IKEA
Zara
country
Sweden
Sweden
Spain
Carrefour
France
5
Tesco
UK
6
7
8
9
10
Marks & Spencer
Auchan
Boots
Aldi
Sephora
UK
France
UK
Germany
France
European retail mkt
•
Many of the European brands are popular across many countries, but US brands are much
popular. ( higher brand value )
•
Europe has well developed retail market. They are facing a challenge in the increase of
ageing population. Generally customers are well informed and sophisticated.
•
Many of the European retail markets are dominated by Grocery business. So many are
diversifying the product offering. Also many are developing online options for customers.
•
European retailers have tried to improve the efficiency, add new brands to their offering, try
out new formats of retailing.
•
Case study – Sephora : A French retailer who caused a change in cosmetic retaling:…
Asia-Pacific : retail mkt
•
Asia Pacific region is much different from other mkts – diversity in food habits, life style,
culture, language, traditions etc
•
Most markets are dominated by the traditional small independent retailers. Several modern
retail formats have also in prominence now.
•
Though the AP has very large population, there arent any top retailers from this area. It is
not the largest consuming population.
•
Highly potential market – why most global players are eyeing this mkt.
Select key markets in A-P
Japan: Some of the top Japanese brands are Seven Eleven, Acon, UNY, Daiei.
•
Post WW II, cities in Japan got developed revolving around railway stations, as trains were
the main means of transportation. Hence the commercial complexes came up attached to
railway stati
•
Japanese retail market is highly fragmented – large number of small sized retailers.
•
Convenience stores are a strong segment - also trying to integrate with e commerce
activities.
•
Over 36000 convenience stores – key role
•
7/Eleven has over 42000 stores across world. Very innovative
* first to introduce POS to analyse. Trends and giving feedback to mfctrs
*To come out with new products. Also they practised the system of replacing slow moving goods on
the shelf with the ones that are fast moving.
*Started collecting public utility payments, offered ticket booking facilities.
•
Thus they became key community centres.
Japan has many restrictions for the retailers.
•
Large scale retail law controls the hours of large scale retailers.
•
The Anti Monopoly Law prohibit private monopolies and unfair trade practices
•
Competition is restricted by regulating international agreements & contracts
•
Many retailers offer special services to the aged customers , even offered medical services.
•
Internet penetration is quite high, and so e commerce and m commerce are becoming more
and more popular and diverse segments of customers are opting for these.
Singapore retail market
•
Singapore has been a shopping destination in Asia for a long time for a large variety of
goods.
•
Well developed infrastructure, rapid transportation system, well planned shopping centres
attract foreign retailers as well as customers.
•
Competition Act and GST regulates the trade, though foreign investments are allowed in
retail.
•
NTUC Fair Price Cooperative, Robinson group, Cold storage Singapore…..major retailers.
•
Orchard Road – hub of retail…Malls, cafes, retaurents,
•
CK Tangs, Plaza Singapura, Mandariin Hotel, Tanglin Shopping Centre etc are major shopping
and entertainment centres.
•
Other shopping areas are – Marina Bay, Raffles City Shopping Centre, City Link Mall (
underground shops ), Marina Square, Suntec City Mall, Millenia Walk, China Town, Little
India, Mustafa Centre ( 24 hour open store ) are other famous shopping places.
Hong Kong
•
Another Asian shopping destination
•
Retailing grew – continuous expansion of transportation facilities, development of ne
townships- in pub/pvt sectors
•
Development of Ocean terminal
•
Till mid 60s – HK : dominated by street side stores, traditional dept stores.
•
Street side stores are still an attraction for tourists, but modern malls in organised sector
dominate the market now.
•
Causeway Bay – second most expensive retail location in the world (New York’s Fifth Avenue
-1st)
•
HK’s central shopping area seem to be having more international brands than NY’s fifth
avenue or London’s Oxford street or Paris’s Champs-Elysees.
•
In Asia-Pac -Most fashion conscious shoppers – for Luxury clothing & Jewellery
•
Some major retailers – AS Watson & Co, PARKnSHOP super mkts, Great Food Hall, Watson’s
Wine Cellar, AEON Stores, JUSCO $10 Plaza, and many more.
•
Due to Britain’s presence for long, KH mkt is influenced by the west as well as China.
•
GOME Electrical Appliances – chinese major retailer, China Resources Enterprises with 51
stores, UK’s Marks & Spencer, H& M, Louis Vuitton, SOGO of Japan are some other major
retailers.
China – Retail scene
•
Reasons for Retail expansion in China is attributed to
–
Population growth
–
Increasing wealth in the hands of individuals
–
Strong economic trends
–
Regulatory reforms since 2001 after WTO accession
–
Permitting foreign retailers to operate
–
Growth of urban population with high disposable income, interested in aspirational
purchasing
–
Relaxation FDI restrictions
–
Loosening of birth control policy
•
Inspite of foreign retailers presence, chinese retailers dominate the market.
•
Major retail operators are
–
Japanese firms like AEON, Family Mart, Lawson Inc, Seven & I Holdings
–
South Korean firm Lotte Group
–
Chinese firms like China Resources Vanguard, Metro Cash & Carry China, GOME,
Suning Appliance Co., China Resources Enterprise, Beijing Hualian group, Golden
Eagle etc etc.
–
US retailer – The Home Depot, The Gap Inc
–
European retailers – H&M, LVMH
–
Indian Jewellery Gitanjali
Retail sales in China - $5.3 Trillion; Online retail - $ 305 Bn
Retail in Australia
Retail market in Australia is more or less saturated.
Australian retail market – 3 main categories
1. Food 2. Personal & House hold 3. Motor vehicles
FDI is allowed. But Local Laws regulates..
- shopping hours
-Price surveillance Act –to monitor prices
- Trade Practices act – to check price discrimination, monopolies, abuse of market power..
UAE Retail market
•
UAE market is ranked 8th in size
•
Being one of the most attractive leasure tourist destinations, and with a strong expatriate
population, retail in UAE is expected to grow by more than 7%.
•
Dubai is the major hub for business in ME and Africa.
•
Some major retailers: Wal-Mart, Amazon Inc., Lulu Group, Carrefour, Spinneys, Choithram,
Al Maya, Al Safeer, Abu Dhabi Co-op, Sharaf DG,
•
In addition to local retailers investing in-country, many regional such as Majid Al Futtaim,
Landmark and Lulu, and international including Zara and IKEA, retailers are investing in both
brick-and-mortar and digital across these markets
•
Traditional markets called “ souks “ have completely given way to giants like Lulu, Carrefour
and the like. Independent retailers are losing ground.
•
Shopping events like DSS, DSF, DDF are helping the region to be major destination
•
Upcoming events like World Expo 2020 & FIFA 2022 will further contribute to the growth.
Latin America
•
Some of the key markets under Latin America are
•
Brazil, Chile, Uruguay, Cuba etc
•
Brazilian economy is showing remarkable growth ( prominent BRICS nation). In last decade a
record 75 million middle class consumers have been created.
•
Chile, is another emerging retail market in Latin America. Chilean customers prefer
convenience and affordability. Shopping centres are coming up many suburban towns.
Luxury goods markets, department stores, street markets cater to different economic
classes.
RETAIL LIFE CYCLE
•
Retail Life Cycle. A theory of retail competition that states that retailing institutions, like the
products they distribute, pass through an identifiable cycle. This cycle can be partitioned
into four distinct stages: (1) innovation, (2) accelerated development, (3) maturity, and (4)
decline
THEORIES OF RETAIL DEVELOPMENT
•
Researchers have come out with various theories of retail evolution. No theory can be said
to be universally acceptable. Each theory is from a different perspective.
•
They arrive at certain patters of evolution – and explain certain factors that retail
development evolves around. Such as pressure of competitiveness, organisational abilities,
and sustainable competitive advantage.
•
In fact the retail growth is due to understanding of market signals and responding to the
market opportunities
•
Retail development is described in different approaches.
•
1. Environmental theory:
•
Based on the approach of “ survival of the fittest”. Retailing is an economic activity that is
operating in an environment of elements such as customers, competitors and technology.
This environment can affect the profitability of a retailer. If retail do not respond to the
environmental changes in a positive way, they are likely to fail. Eg: why dept stores declined
in western markets.
•
Those parties who quickly adapt to the changes in technology, demography, economic
conditions will grow.
•
2. cyclical theory:
Also called the wheel of retailing theory. Put forwarded by Prof. Malcolm P Mc Nair.
This theory says that some retailers who are innovators take away customers from competition, by
making low priced offers for a specific item, that has definite advantages to customers.
When they grow, they acquire more facilities and also offer more range. But lose focus on the initial
factor. They move on having established their status.
To that focus area a new retailer enters and the same process is repeated.
•
Phase 1 - Entry phase -innovative retailer, low status & price, minimum service and poor
facilities, limited product offering.
•
Phase 2 – Trading up – traditional retailer, elaborate facilities, high rent, more locations,
extended product offerings, higher prices
•
Phase 3 – Vulnarability phase – Mature retailer – conservative, declining ROI
•
3. Conflict theory:
•
Suggests that among retailers of similar categories there will be conflict. Retail innovations
actually results in having more options to the customers. Or we can say that innovations
bring more formats of retailing – even by blending 2 different types of formats to create
new format.
•
•
Retailers open discount stores …. thesis
•
Over a period departmental stores come up, challenging the discount stores. …antithesis
•
New format of supermarkets come up in between above 2 formats ..synthesis
•
In next round the synthesis become new thesis.
Unit - II: Retail Sectors 20 Hrs
Size of Retail Market in India – Food & Grocery Sector – Clothing and Textiles Sector – Consumer
Durables Sector – Footwear Sector – Jewellery Sector – Books, Music & Gift Sector – Fuel Retail –
FDI in Retail.
Indian Retail Business
•
The Indian retail industry has emerged as one of the most dynamic and fast-paced industries
due to the entry of several new players.
•
It accounts for over 10 per cent of the country’s Gross Domestic Product (GDP) and around
8 per cent of the employment.
•
India is the world’s fifth-largest global destination in the retail space.
•
In FDI Confidence Index, India ranks 16th (after U.S., Canada, Germany, United Kingdom,
China, Japan, France, Australia, Switzerland and Italy).
•
Revenue of India’s offline retailers, also known as brick and mortar (B&M) retailers, is
expected to increase by Rs 10,000-12,000 crore (US$ 1.39-2.77 billion) in FY20.
•
India is expected to become the world’s fastest growing e-commerce market, driven by
robust investment in the sector and rapid increase in the number of internet users
Key Drivers:
•
FDI
Indian govt has allowed 100% FDI in single brand retail and upto 51% in multi brand retail – subject
to terms and conditions
•
The Indian retail trading has received Foreign Direct Investment (FDI) equity inflows totalling
US$ 1.85 billion during April 2000–June 2019, according to the Department for Promotion of
Industry and Internal Trade
•
Walmart Investments Cooperative U.A has invested Rs 2.75 billion (US$ 37.68 million) in
Wal-Mart India Pvt Ltd
•
Govt Initiatives
•
The Government of India may change the Foreign Direct Investment (FDI) rules in
food processing, in a bid to permit e-commerce companies and foreign retailers to
sell Made in India consumer products.
•
Government of India has allowed 100 per cent Foreign Direct Investment (FDI) in online
retail of goods and services
•
E-commerce is expanding steadily in the country. Customers have wide choices at the lowest
possible rates.
•
E-commerce is probably creating the biggest revolution in the retail industry, and this trend
would continue in the years to come. India's e-commerce industry is expected to go beyond
US$ 53 billion.
•
It is projected that by 2021 traditional retail will hold a major share of 75 per cent, organised
retail share will reach 18 per cent and e-commerce retail share will reach 7 per cent of the
total retail market
Brief Overview of selected sectors:
1. FOOD & GROCERY SECTOR
Food sector can be seen as two segments
1. Food and Grocery - Fresh & dry grocery, Branded packaged goods, cereals, pulses, oil etc,
personal & home hygiene products
2. Food services – catering services, restaurants, Fast food centres & others ( hospitals, clubs,
educational institutions, airlines, ….)
Key players in this sector are, RPG group, Future group, Reliance retail and Aditya Birla group
Food retail under future group is Food Bazar…a chain of super markets.
Food bazar- carry variety of items for daily consumption, and including, pulses, cereals, oils, biscuits
etc. Most players in this category have private labels. Big Bazar’s private labelled items are in the
section of atta, ghee, masalas,
Food World is another food retail co.- started as a JV between Spencers – a British firm and RPG
group. Now it is operated by RPG group after JV was terminated. Spencers stores offer an
assortment of products – fruits, veg, food and non- food consumer goods, Staples and frozen foods.
Some of their stores also offer baked and chilled foods besides other range of products.
More: AV Birla group entered the OR sector with the launch of chain super markets under the name
–” More”
•
The starting was by acquiring Hyd based chain super markets – Trinethra Super Retail and
also their online wing- Fabmall.
•
More has strong presence in AP, TN, Karnataka and Kerala. Operating in 2 formats – super
markets & hyper markets. The product offering include fruits, veg, groceries plus other
products like apparels, and other general merchendises
•
Reliance retail ltd., operates stores across the country as Reliance Fresh, Reliance Mart and
reliance super. Food and grocery section is present in all formats.
•
Nilgiris – another very old retail ( 1905) and still doing well. Started as a dairy farm. 98.97%
of stakes in Nilgiris was bought by Future consumer enterprise. They have a large
assortments of food products.
•
MTR, Adani agri fresh, Heritage foods etc are some of other players
•
Food Services: Include
•
1. cafes, restaurants, fast food joints – quick service restaurants, Street vendors
•
2. catering services.-pubs, restaurants, hotels, bars, retail locations
•
3. Others: Clubs, hospitals, educational institutions, sale in trains/air planes
•
Key players:
1.McDonalds India- Brand managed by 2 entities
•
-Connaught Plaza Restaurants P Ltd & North & East India Hard Castle Restaurants P Ltd.
•
India – First mkt where Mc Donalds menu was changed to suit local preferences, offering
non beef & non pork products. Most of the menu has been developed in India, with separate
sections for veg & non veg.
•
More than 300 McD outlets in India.
•
2. Domino’s Pizza : Franchisee- Jubilant Food works Ltd. – largest growing food service co.
•
-more than 800 restaurants operating in 170+ cities. Reported 70% share in India.
•
3. KFC: Yum Restaurants International ( YRI ), Texas is the parent co. KFC came to India in
1995 but had to exit following political pressures and re entered in 2003. It is the first Quick
Service Restaurant to come to India. KFC is growing rapidly in Indian cities. Have over 350
stores.
•
4.Pizza Hut – is another brand of YRI. Started their first outlet in Bangalore in 1996 and is
maintaining its growth @ 40% per annum.
•
Pizza Hut is in a transformation period from a QSR ( Quick Service Restaurant – another
name for Fast Food Joints ) to a more affordable casual dining restaurant, due to change in
consumer demands & preferences.
•
They feel that there is a demand for a dining experience with friends and family and with a
good ambience.
•
Their offering has increased from mere Pizzas to pasta, fried and non fried snacks, appetizers
, salads, soups, beverages, desserts….
•
50% of YRI from India come from Pizza Hut. They have been named as most trusted food
Service Brand. Brands under YRI in India are – KFC, Pizza Hut, Casual Dining, Pizza Hut Home
Service, Taco Bell.
•
In India YRI has over 180 casual dining restaurants and over 200 Home delivery locations.
•
Taco Bell – specialists in Mexican Style food, started in Bangalore in 2010 and has 4 outlets
there. Plans to have 2000 outlets by 2020.
•
5. Café Coffee Day:
is the largest café retail chain in India in organised sector.
•
Started in 1996 in Bangalore.
•
Has spread out to over 1500 coffee shops in India
•
Also have cafes in Vienna, & Karachi & exports coffee beans
•
Turnover - $610M, no of employees - 20000
Café Coffee Day's divisions include:
•
Coffee Day Fresh 'n' Ground, which owns 450 coffee bean and powder retail outlets
•
Coffee Day Square, a high-level coffee bar in Bangalore, Kolkata, Chennai, Mumbai and New
Delhi
•
Coffee Day Xpress, which runs 900+ Coffee Day kiosks
•
Coffee Day Beverages, which runs over 50,000 vending machines
•
Coffee Day Exports, its exporting wing
•
Coffee Day Perfect, its fast-moving consumer goods packaged coffee division
•
Coffee Day B2C Plant, coffee vending machine manufacturing division
Barista Lavazza started in Y 2000 & is based in Delhi. ( Lavazza – the Italian partner has 46.5% stake)
•
Have over 200 outlets in 30 cities
•
Outside India they operates in Srilanka, Oman & UAE
•
Barista Lavazza has the unique speciality of offering a true Italian flavour and an ambience
for customers to relax and unwind.
•
Gloria jeans Coffee: is an Australian based coffee Co, operating in many countries. In India
they entered in 2008, through Citymax ( Landmark group ) to set up chain of coffee shops
Costa Coffee, a UK based co came to India in 2005 through a master franchisee – Jaipuria
group. Over 75 shops have been established running profitably. In this industry Costa Coffee
•
•
•
•
has an average ticket size of Rs.150 per customer – highest in this industry. Average age of
its cust is 25-28 and are targeting even younger group. Launched a FB page.
BRU is yet another player, having set up chain of retail outlets – Bru world Cafes. Targetting
customers who are looking for a place to meet and socialise over a cup of coffee.
Starbucks – started in India in 2011.Starbucks Corporation and Tata Coffee have joined for
opening retail store as – Tata Star bucks Ltd. Starbucks operate over 63 outlets in India.
Tata Coffee owns 19 estates in South India. Its is the largest coffee plantation in Asia and is
the third largest exporter of instant coffee. They produce 10000 million tonne of shade
grown Arabica & Robusta coffee.
Saravana bhavan
•
the largest South Indian vegetarian restaurant chain in the world, founded in 1981 with
₹5,000 capital in Chennai
•
Presence: 39 (in india), 43 (outside india)- India, Australia, New Zealand, Malaysia, Oman,
Canada, France, Belgium, Germany, Singapore, Bahrain, UAE, UK, USA, Kuwait, Saudi Arabia,
Kenya, South Africa, Qatar, Hong Kong, Thailand, Netherlands, Sweden, New Zealand
Indian Coffee House
•
a restaurant chain in India, run by a series of worker co-operative societies. It has strong
presence across India with nearly 400 coffee houses
•
Very popular among the middle class.
•
Started in 1936 in Mumbai and has outlets in all major cities in India.
Intrusion of Online model in food industry
•
One of the Fastest growing businesses
Main players in online food delivery
•
Swiggy- 37%
•
Zomato -31%
•
Uber eats -17%
•
Ola – 15%
2. CLOTHING & TEXTILES ( APPAREL ) SECTOR
Ready Made Garments & clothing
RMG – 3 segments: Mens wear, womens wear, childrens wear
a. Shirts, T-shirts, Trousers, Jeans, Churidars, Kurtas, salwar kameez, sarees, baby &
kids wear, socks, inner wear and so on
Main players:
•
Mens wear in India has 43% share in apparel segment.
•
Key brands – Aravind Brands, Madura garments, Raymonds , Park Avenue
•
1990s – Adidas, Reebok, Levi’s
•
Post 1999 – Aldo, Burberry, Canali, Versace, Esprit, Gucci, Hugo Boss, Mango, Marks &
Spencer, Tommy Hilfiger, Zara….
•
ALDO Canadian retailer
•
Burberry, UK
•
Canali – Italy
•
Vesrase -Italian luxury brand
•
Hugo Boss-German luxury brand
•
Gucci - Italian fashion & leather goods
•
Madura Garments Louis Philippe, Van Heusen, Allen Solly, Peter England, People
•
They brought an international life style brand to India by signing up with Esprit – The
Collective
•
It is India’s first and the largest, luxury multi brand retail chain having over 100 of the world’s
best fashion brands
•
They also have set up a one stop destination for men apparels – Planet Fashion
•
Raymond Apparel Ltd – one of India’s largest
•
Own prestigious brands  Raymonds Premium, Park Avenue, Colour Plus, Parx, Manzoni,
Notting Hill
•
Mens formal wear & access.
•
Park Avenue & Colour plus –launched western women’s wear
•
Park Avenue women  range of business wear – for the working professionals
•
Colour plus women  smart casual clothing – for the independent multi-faceted ladies
•
ITC – a major business group ‘s Life Style Retailing Business Division – opened apparel shops
across India through
•
Wills Life Style
•
They are speciality stores for
•
Classic work wear,
•
Sports relaxed wear
•
Club life evening wear & accessories.
•
Wills signature wear – by leading fashion designers
•
Women’s wear – 70% womens wear are ethnic wear : sarees, salwar – kameez, dupatta,
churidar…This segment is mainly dominated by the unorganised sector.
•
Some of the organised brands with nation wide presence – FabIndia, W, Biba, Anokhi,
Bandhej
•
Retailers like, Westside, Shoppers stop, Life style, Reliance , Big Bazar, Max are some of the
major organised players in this segment.
•
FabIndia has 138 store in 58 cities & 4 countries abroad.
•
Children’s wear – Major brands are
•
Gini & Jony
•
Lilliput ( 260 stores )
•
Catmoss
•
First Cry
•
Kids wear market has also been tapped by
•
Benetton, Reebok, Bossini, Disney, Barbie etc
•
Mahindra Group – opened stores Mom& Me.
•
Pantaloons, westside, lifestyle – have own brands in kidswear category.
CONSUMER DURABLES
•
PRODUCTS – classification on durability
•
Durables – CE HA
•
CE- Consumer Electronics
•
•
HA – Home Appliances
•
•
TV, Music Systems, CD/DVD Players, Home Theatre, Audio Systems,…
Refrigerators, Washing Machines, A/C, Microwave Owens, Kitchen appliances, …
Large number of brands from Korea, Japan, US, Europe and China have entered Indian
market. These brands alongwith other Indian brands are fighting for a fair share.
Key Players:
•
Sony, Samsung, LG, Philips, Sansui, Haier, Electrolux, Kelvinator, Godrej, Whirlpool, Kenstar,
Videocon, Bluestar, ……
•
Durables / Shopping goods / white goods/ Brown goods
•
Each one is trying to establish a strong distribution network. Many of them do the retailing
through their own showrooms and through distributors & retailers at the same time.
•
Many popular regional multi brand retailers exist
•
Eg: Nandilath G Mart, Bismi, etc in Kerala
•
National Level retail chain – NEXT is very popular. Started in 2003, they carry wife
range of products from different brands – CE, HA, IT, Imaging, accessories , small
appliances
•
Toasters, mixer grinders, coffee makers, choppers..
•
They also sell MS products like X Box, LAPtops
•
NEXT is a multi-brand, multi-product retail chain which stocks an entire range of consumer
durables, right from Air-conditioners, FPDs (Flat Panel Displays), CTVs, Washing Machines,
Refrigerators, Microwaves, Home Theatre Systems to STBs (Set Top Boxes), Mobile Phones,
Gaming Consoles, small home appliances and much more! NEXT retails world’s most popular
brands such as Panasonic, Toshiba, Mitsubishi, LG, Samsung, Videocon, Sony, Electrolux,
Kelvinator, Whirlpool, Onida, Philips, Kenstar, Sansui and its own brand.[6]
•
Next Retail India Ltd is a subsidiary of the Videocon Industries Ltd and engages in retailing
consumer electronics in India.[3] It was founded in 2003 and currently has 600 showrooms
across 25 states of India.
•
Vivek’s ltd is another major retailer chain , mainly in TN & Karnataka having more than 45
stores. Started in 1994, they have a turnover of more than Rs.400 Cr. and have 1000+
employees.
•
Infiniti Retail ltd, which is a subsidiary of TATA Sons, operates a chain retail stores for CE &
HA under the name Croma.
•
Korean giants LG Electronics & Samsung have very strong presence in Indian market, in CE
HA products. Samsung has their factory in Noida.
•
LG seems to be leading in TV, A/C categories. They have set up 2 manufacturing facilities in
Noida & Pune.
•
Others to recon in the Durable products are Sony, Whirlpool, Haier, Voltas, Vedeocon etc.
Growth rate of consumer durables industry across India FY 2010 - FY 2020 Published by Statista
Research Department, Sep 23, 2019
This statistic illustrates the growth rate of consumer durables industry across India from fiscal year
2010 to fiscal year 2020.
The growth rate of consumer durables industry across India was estimated to be 15 percent from
fiscal year 2015 to 2020, up from about nine percent from fiscal year 2010 to fiscal year 2015.
FOOTWEAR – RETAIL
Segmenting footwear
•
Mens – womens - kids
•
Leather – non leather: plastic, rubber, form leather
•
Shoes – boots – over shoes - slippers –
•
Sports wear – non sports wear
•
Based on size
•
Based on price range
Main players
•
1. Bata India - first in numbers & second in revenue. Indias most trusted market leader in
footwear. Offer products for all in a family
•
2. Metro shoes: offer footwear & accessories. Presence in more than 40 cities and operates
more than 100 stores
•
3. Khadim India Ltd: Kolkata based . Established in 1965. Now have more than 325 show
rooms. 2019 turnover - Rs.8000 million
•
4. Lakhani India Ltd. Faridabad, Haryana, Dhar ( MP), Haridwar ( Uttranchal ) , Noida – 55 m
pairs/yr. Strong in sports shoes, leather shoes , canvas shoes. Manufactures for many other
brands – Adidas.
•
5. Liberty Footwear: started in 1954. based in Karnal. 50000 pairs manufactured per day,
from 6 factories.
One stop supplier for footwear for men, women, kids.
100+ Network of Distributors Worldwide. 25+ Countries including fashion driven mkts of Italy,
Germany & France
Have 12 Brands: AHA, COOLERS, FOOTFUN, FORCE10, FORTUNE, GLIDERS, HEALERS, LEAP7X,
PREFECT, SENORITA. 425 Exclusive Showrooms. INR 665 Cr Annual Turnover, 4000 Strong Team
•
Other players in this segment operating in India –
•
Adidas, Reebok, Nike, Puma, Woodlands, Redtape, Hush Puppies, Lee Cooper, Allen Solly, US
Polo
•
+ several home grown brands like Paragon, Rubco, ……….
•
Agra is one of the largest hub of footwear manufacturing in India
•
Kolhapuri chappals are a variety popular in many places
Jewellery Retail
India had a very long tradition of their love for jewellery. It is one of the biggest consuming market
for jewellery. Govt has allowed upto 51%FDI in single brand retail stores.
India holds gold for 600 Tonnes. Indian house holds is estimated to have accumulated 25000 tonnes
of gold.
•
Under Jewellery we have
•
Metals – Gold, Silver, Platinum
•
Precious & Semi – Precious stones
•
Pearl
Two major segments are gold & diamonds
Key players:
•
Indian market is dominated by a large number of small retailers. However there has been a
shift towards organised players in the recent past.
•
Traditionally Indians purchase gold during births, marriages, festivals. Gold is available in 22
karat, 24 karat & 18 karat. 916 is the standard for purity of 22 karat gold
•
Gitanjali Group – was rated as the biggest player. ( facing charges of Indias Biggest fraud –
PNB including Nirav Modi )
•
Gili India, Nakshatra , D Damas etc are its subsidiaries.
•
Another subsidiary – Maya is being positioned as a women centric chain store selling
jewellery, watches, silverware, apparels & footwear.
Tanishq from Tata group is another well known brand.
•
They introduced the non destructive form of checking purity… a matter based on trust till
then. Also introduced machine made jewellery – superior finish.
•
Titan Industries have introduced retail chain under “ Gold Plus” targeting semi urban and
rural customers. Operating around 30 stores in 6 states. ( largest in TN )
Introduced issue of Certificates endorsing the purity of gold and diamonds.
Diamonds : Surat is the centre for diamond polishing
Retail of Watches
•
Watches can be broadly classified as Mechanical ( winding type ) & Quartz ( Digital or Analog
)
•
90% of world watch mkt is with Quartz.
•
Till Titan was launched, Indian mkt was ruled by HMT.
•
Titan is 5th largest manufacturer of watches in the world.
Titan sub brands:
•
Titan edge – worlds slimmest watch
•
Raga – for women
•
Nebula – with 18k gold & precious stones
Titan enjoys 60% mkt share around 250 show rooms.
•
Timex is another brand in this category
•
Supported by wide distribution
•
Casio India is yet another name. in JV with Bharati Telecom. Parent Co Casio Computers,
Japan has 40% share
•
Casio India is also into calculators, wrist watches, digital cameras etc
•
SEIKO Watch India P Ltd, a subsidiary of SEIKO corp, Japan started operating from Bangalore
since 2007. They bring seikos latest products for this mkt. Also planning to open a flagship
store.
•
A prominent distributor of many brands of watches is Priority Mktg P Ltd. They have
international brands like, Kenneth Cole, D& G, Moschino, DKNY, Armani etc.
•
Watches have become an accessory or a fashion statement. Though a small market, several
luxury brands are in the mkt.
•
Omega, Rado, Longines, Tissot are leaders in the luxury segment.
•
Some other big names are – Cartier, Pierre cardin, Mont Blanc, Rolex, Bulgari. Omega is the
mkt leader in premium segment
•
Movado group has 40 outlets in India – selling in premium segment. Brands –Movado, Ebel,
Concord, Tommy Hilfiger
•
Titan has a premium brand of watches “ Laurent Collections”
•
One major threat to the watch industry is Mobile phones – which also can display time.
Retailing Pharmaceuticals
•
By volume India is third largest in the world and 14th in value terms
Main players:
•
Ranbaxy
•
Reliance Retail ( health & pharma )
•
Pantaloon ( Tulsi )
•
Appolo pharmacy
•
Zydus Cadillas
•
Guardian pharmacy
•
Med Plus
•
Planet health
•
Life Ken
•
…..
•
Guardian pharmacy : largest retail chain in north india…into pharmacy, well ness, beauty
care.
•
Present in 26 cities and have 200 outlets
•
Appolo pharmacy : 720 outlets spread in 17 states. Offer free health insurance, 24 hr service
etc.
•
Med- Plus: Hyd based pharmacy chain. 500 stores in AP & other 5 states.
•
Fortis Health world: owned by Ranbaxy. Operates directly & through franchisees.
(Ranbir & Gurbax)
FUEL RETAIL
•
Fuel retail is in the organised sector. Until a fe years back it was under the govt controlled
price.
•
The business include refining , stocking and distribution.
•
No 1 player is IOCL followed by HP & BPCL.
•
Retail include petro chemicals, gas, and other bye products.
•
IOCL is in the fortune 500 list. It has over 18600 petrol and diesel stations and 98 aviation
fuel stations and 88 LP gas bottling plants. Storage include 140 bulk storage terminals.
•
HPCL – also a fortune 500 co.
•
Operates 2 refineries.
•
Distribution facilities pipe line n/w, aviation stations, LPG bottling plants, retail depots and
lpg distribution n/w.
•
Have tied up with McDonalds to open outlets within the petrol stations
•
Also signed up with Nirulas to operate restaurents
Music, Books & Gifts
•
The Indian music industry is largely dominated by Indian film soundtracks, which account
for nearly 80% of the country's music revenue, followed by Indi-pop.
•
Structure of the Indian Music Industry
•
1. Live Industry
•
2. Recording Industry
•
3. Publishing Industry
•
the top-4 film music companies in India (namely Saregama, T-Series, Sony Music India,
and Zee Music Company)
•
Digital music sales in India, 2013-2018,
•
2018-$US 119 million
•
Source: Deloitte, IFPI
•
According to company statements, Gaana and JioSaavn, have each amassed 100
million users by April 2019
•
Recording industry revenues in India, 2013-2018, $US million.
•
2018 -$153M
•
Source: Deloitte, IFPI
•
Piracy is the biggest threat to the Music Industry in India. India’s piracy is the highest in the
world.
•
Books:
•
Indian book market to touch Rs 739 billion by 2020: Survey by economic times
•
Growing @20% YOY
•
Piracy is widespread, with virtually every street in the country home to stalls selling pirated
texts
India is the second largest English-language print book publisher in the world with over 9000
publishers. More than 70 per cent of publishers in India have digitised their content to produce ebook versions - smartphones and e-readers offer consumers opportunities to access digital content.
Gifts:
•
Personal gifting, Corporate Gifting, Celebration Gifting and Festive Gifting. These focus areas
will feature nine major segments - Home Decor and Handicrafts, Houseware and
Furnishings, Awards and Rewards, Gourmet Hampers, Office Supplies and Stationery, Gold
and Silver Gifts, Corporate Gifts , Electronic Appliances and Gadgets and Custom Branding
Machinery.
•
The gifting industry in the country is expected to touch
•
USD 84 Bn by 2024 ..
( Times of India/ Business time report )
•
( previous fig: $65m )…2017
The report launched by leading gift cards provider Qwikcilver said the market is growing in the
country by three times annually
Corporate gifting enjoys a lion's share of the market, accounting for more than 80 per cent of all
gifting items, with consumer gifting contributing 20 per cent.
The peer-to-peer gifting, which is still at a nascent stage, is slated to be the fastest growing segment
for gift cards in India in the next three to five years
The global gifting market is estimated to be USD 475 billion and India is expected to be one of the
strongest contributor ..
FDI IN RETAIL
•
IMF defines FDI as a category of international investment that reflects the objective of a
resident in one economy (the direct investor) obtaining a lasting interest in an enterprise
resident in another economy (the direct investment enterprise)
•
FDI aims to find a permanent interest in a resident entity. The balance of payment are as
mentioned in the IMF Balance of Payments manual. Transactions are recorded when
economic activities are held.( exchanged, transferred etc) The FDI transactions are supposed
to be recorded in the accrued value in the balance of payments.
•
However, due to practical difficulties, transactions are recorded at the time when the
payments are done.
•
Accrued income is income which has been earned but not yet received. Income must be
recorded in the accounting period in which it is earned. Therefore, accrued income must be
recognized in the accounting period in which it arises rather than in the subsequent period
in which it will be received.
•
Examples of accrued income – Interest on investment earned but not received, rent earned
but not collected, commission due to being received, etc.
•
The balance of payments, also known as balance of international payments and abbreviated
B.O.P. or BoP, of a country is the record of all economic transactions between the residents
of the country and the rest of the world in a particular period of time.
•
As per the FDI policy released by the ministry of commerce and industry ( GOI ), FDI means
investment by a non resident person/ entity ( residing outside India ) in the capital of an
Indian Co.
•
In other words, FDI is a method of allowing external finance into an economy. FDI also can
be transfer of knowledge, skills or technology.
In India, FDI is possible through two different ways.
•
1. Automatic route:
•
Such FDI do not require prior approval from the GOI or RBI.
•
Investors have to inform concerned regional office of RBI within 30 days of receipt of inward
remittances. And also file necessary documents with the same office within 30 days of issue
of shares to that foreign investors.
•
2. Prior Govt approval route:
Such sectors where prior govt approval is needed, proposals are to be submitted to the Foreign
Investment Promotion Board ( FIPB ), under department of economic affairs of Ministry Of
Finance
•
FIPB will scrutinise the proposal and submit their recommendations to the Min of Finance.,
based on which the approvals will be issued. ( FIPB was abolished in 2017 )
•
In 2012, FDI in Retail was modified to allow 100% FDI in single brand retail under govt
approval route, as per flg conditions
•
•
Products should be of single brand only
•
Same products also should be sold under same brand name in one or more
countries other than India
•
Products so sold should be only those branded at the time of manufacturing
•
The foreign investor should also be the brand owner.
Another condition that is stipulated for FDI proposals for more than 51% is that, minimum
30% of the products that they will sell should be sourced from India from Indian small
industries, village industries, cottage industries, artisans and craftmen.
How FDI policy in India changed in last 30 years
•
1991: Liberalisation – FDI upto 51% allowed through automatic route in select sectors
•
1997: FDI upto 100% permitted under automatic route in cash and carry.
•
2006: FDI upto 51% allowed with prior govt approval in single brand retail
2012: FDI in single brand increased to 100%. FDI for multi brand retail allowed upto 51%
subject to conditions
FDI in multi brand retailing:
Conditions for 51% FDI for multi brand retail traiding
1. Fresh agricultural products – fruits, veg, flowers, grains, pulses, poultry, fisheries, meat
products should be unbranded.
2. Minimum amount of FDI should be USD 100 million
3. At least 50% of the total FDI should be spent within first 3 years in back end infrastructure.
Eg: manufacturing, processing, distribution, quality control, packaging, logistics, warehouse,
storage etc. ( expenses incurred on land cost or rentals not included )
4. At least 30% ( in value terms ) of manufactured or processed products should be procured
from Indian small industries.
Other conditions:
Retail outlets will be set up only in cities with more than 10 lakhs ( as per 2011 census ).
Cover an area of 10KM around such city limits
Retail location should be confirming to zonal plans of respective cities.
Provisions should be made for facilities such as transportation and parking.
First right of procuring agricultural products will be with the govt.
States/ UT will have their freedom to implement the policy
Retail trading in the form of e commerce will not be allowed for such companies who have
FDI in multi brand retailing.
FDI in E-Commerce:
•
FDI is allowed upto 100% in e commerce , with conditions that
•
26% of their equity will be divested in favour of Indian public within 5 years, if they
are listed in other parts of the world.
•
They can engage only in B2B e commerce and not in retail trade
•
All restrictions applying to domestic trade will be applicable to e commerce too.
Other forms of entry by International retailers in India
•
1. Franchising: The parent co. permits its local partner ( franchisee ) to use their name, logo,
process, standards etc. and get royalty in return. Some cases a master franchisee is
appointed at national level. Eg: Nike, Marks & Spensor, Pizza Hut have taken this route.
•
2. Joint Venture ( JV ): The international player gives equity and support to its Indian
partner. The Indian partner will use its strength in local knowledge. Eg: Reebok , Mc Donalds
•
3. Setting up Manufacturing units: eg of retailers who have opted this method are Bata &
Benetton
•
4. Setting up distribution offices: Swaroski & Hugo Boss operates in India through their
distribution offices.
•
5. Whole sale trading : Metro cash & carry , Wal-Mart
Why FDI is needed in Indian Retail
• Like in any matter FDI also have many pros and cons.
• A large economy like India have several benefits of FDI in retail sector.
Countries like China, Brazil, Singapore, Argentina etc are getting
benefitted by opening their market to foreign investments.
• Farmers can get better prices for their produce through a value added
food chain. And an organised retail sector can provide this by mass
marketing of processed and packaged foods.
• India need substantial investment in infrastructure development. Lets
take fruits and veg, where India is the second largest producer.
• Indian produce are unable to reach distant markets because of following
reasons.
• 1. we do not have adequate facility for storage
• 2. the supply chain is too fragmented and a good portion of fruits and
veg are wasted.
• 3. India has very limited cold chain storage – 80% is used for potatoes.
• 4. Annual loss of fruits, veg and other perishable produce per annum is
estimated at Rs. 1 trillion. 50% of this can be avoided by having
adequate storage.
• 5. The FDI flow in cold chain storage is not enough, though 100% FDI is
allowed in automatic route.
• 6. Presence of multi layer intermediaries in the supply chain. Farmers get
only 12-15% of what customers pay for .
FDI – Fear & Apprehensions
• Many fear that, the global players are too strong that there wont be a
level playing ground for the local retailers. And it will result in large scale
exit of domestic retailers.
• Another fear is that some foreign retail chain would use Indian market to
dump their outdated or sub standard products.
• The benefits of FDI many times do not reach the markets and sectors the
way it should. Indian market is still not saturated and there is potential
for modern retailing formats to penetrate the mkt. To get max benefit
from FDI, we need to have a transparent and effective policy and
framework to implement it.
Benefits
• Organised retailing can generate direct and indirect employment. Which
include from producers to packaging, storing, transport and other
logistic services.
• Foreign co can source quality goods from Indian market and sell in other
countries, thereby benefiting from the export business.
• Transfer of technology, introduction of best global practices can be
beneficial for Indian market.
• Indian producers can thus be a part of global supply chain
In short FDI can result in following changes in Indian retail
• Improvements in supply chain
• Investment in new technology
• Skill development
• Benefits in GDP through higher tax income and employment
generation
• Opportunity for Indian retailers to grow nationally and
internationally.
FRANCHISING
• Franchising is a method used in a business for marketing and distribution
of products or services.
• A franchise is an agreement or license between 2 parties by which a
business – a person or groups of people ( franchisee ) get the right to
market a product / service using the trade mark or trade name or logo or
process of another business ( franchiser )
• The franchisee is obliged to pay the franchiser a fee ( royalty ) for
these rights
• The franchiser is obliged to give support to the franchisee like
training, advertisements, marketing
• A franchisee may be a single unit franchisee or a master franchisee. A
master franchisee may appoint unit franchisees.
• If the area is too large the master franchisee can appoint a few other
master franchisees.
• If operated correctly both the franchiser and franchisee can benefit from
the arrangement.
• Advantages of franchising:
• -Low risk: The franchiser has established the business. So he has
already gone through the learning curve. Therefore a franchisee
need not have to worry whether the business will succeed or not
• -Growth: A franchisee become a part of a larger network. Because
the franchiser will be in the process of expanding his business.
More the number of franchisees, greater is the opportunity for a
new franchisee to grow. The name is seen at many places. Larger
network also gives the feeling of a successful network.
Expanding the reach
• From the retailers side they would be looking at how to expand the
operation nationally. One of the ways usually adopted is franchising.
• Franchising route is taken up by several retailers for expanding
nationally and even internationally. We can find franchising in many
sectors like automobiles, food, financial services. Some examples of
retailers who have grown substantially in a short time are McDonalds
and Subway.
• Franchising is now proved as a successful method of business expansion
and as an opportunity for entrepreneurs to own a business which can
compete with other large entities.
• This model has been able to establish new partnerships and
relationships and to create employment opportunities and economic
growth.
• Some successful franchising:
• Subway
• Mc Donalds
• KFC
• Burger King
• 7 Eleven
• Pizza Hut
Unit - III: Typical Retail Organization & Structure 20 Hrs
Overview of each function with focus on core functions like
Merchandising, Store Operations-Key deliverables from each
function to the business- Components of Retail Business - Store,
Warehouse, Online Site, Call Center (Online & Physical), , etc.- Key
challenges to Retail in the Indian and International context - Typical
jobs and career paths in Retail
Creating Retail organisation structure
1. Firstly the tasks to be performed in a retail are to be listed. We can define
them as
Top management
Buying & merchandising
Store operations
Administration & HR
Advertising , marketing & PR
Accounts & Finance
These tasks will help in defining the roles that each person in the
retail has to perform
2. check what are the internal targets and other requirements to be
achieved
3. consider what are the requirements of target market and also the
internal employees needs.
Considering above factors, an organisational structure or chart
is prepared.
Organisational structure will help in enlisting the tasks to be
performed by each person.
Also see if any specialists in any place is needed.
HR function can now start selecting the right persons for each
job.
Define the responsibilities and authorities of each position and
also the reporting structure.
Well defined reporting structure ensure smooth operation of the
store
Stiff competition, increased costs, diminishing margins and ever
increasing demands of customers have forced many retail
organisations to go lean – ie., to cut down the hierarchy and go for a
flat structure – several persons / functions reporting to one manager.
Organisational structure of each retail store can be different – It
depends on
1. Size and scale of operation – local/regional/national/ international
2. Types of merchandise
3. Extend o
f departmentalisaton – functional / product wise
Organsational structure of Independent Retailers ( IR )
IR are mostly small / medium sized single stores
Majority of the retailers in our country fall under this category.
We can see many examples like shoe store, a boutique , book stall, a
textile shop, provision shop etc etc
Most of these shops are operated by one to 3 persons. PDS
There can also be such IR which are mid and large sized.
As the size grow, number of employees also go up. Duties and
responsibilities are delegated. Larger sized retailers may also take
service of external professionals like chartered accountants, legal
advisors etc.
Such retailers also will have other staff handling various functions
like accounting, data entry, raising PO, preparing pay roll etc.
The front end staff will be responsible for merchandise display,
selling, customer service and so on.
The owner / manager usually take care of price negotiations with
suppliers, selection of staff, publicity etc
ORGANISATIONAL STRUCTURE OF A CHAIN RETAIL STORE /
DEPARTMENT STORE
A retailer may run only one store or several of them. It may be at a
regional or national or even international level.
Managing a chain of such stores will be more complex as compared
to running a single store.
When the store size is large, it is usually divided into different
departments on the basis of functions or product lines.
 A well accepted organisational structure of such a retail store,
is known as “Mazur Plan” named after the person who
proposed it.
 He suggested four core functions that any retail store should
have, and responsible for various aspects.
 1. Control: functions like accounting, credit control etc
 2. Publicity: advertising, sales promotions, PR, publicity
 3. Operations: day to day running of the store –receiving goods,
inspection, maintaining records customer relations..
 4. Merchandising: merchandise planning, procuring, pricing..
 Subsequently other functions like HR SCM & Logistics got added
to the above functions.
Some retailers adopted product line based departmentalisation and
structure the organisation accordingly.
Geographic based departmentalisation also was followed by some
where a set of people were responsible for the business in a region.
Also a combination of all these types may also be followed.
Key components of retail
Store management
store is perhaps the most important section in retail
Responsibilities of store management can be listed in 4 categories
1. Managing store employees
2. controlling costs
3. managing merchandise
4. customer service
store is perhaps the most important section in retail
Retail store is the place where the customer takes a decision to go
for a purchase or move on to another option. So it is critical that the
retailer try the best to retain the customers. Success is when
Suspect -> prospect -> customer -> client -> advocate
Store operations
Key components of Retail Operations (Store Administration,
Inventory Management and Display, Managing Receipts, Customer
Service, Managing promotions, events, alliances and partnerships)
Store operations in retail include – 1.administration, 2.merchandising
jobs and 3.customer management
1. Administration & management of premises:
Store opening
Store closing
security ( of premises & stocks )
Staffing – effective utilisation of staff, time keeping, tracking shifts,
holidays and leave
Handling payments ( cash / card )
Shrinkage & pilferage , Events and promotions
Managing the premises – cleanliness of premises, display
Obtaining required permissions and licenses and also meeting other
legal requirements
Any decisions taken with regard to store running will affect its
performance.. Some of the areas may be
1. how to arrange shelves? Wht items to stock where? What
assortments? What is the return policy? What is sale of different
items?
2. How to utilise the manpower for max productivity and also to
meet customer traffic?
3. How to take care of payments?
4. What actions needed for proper maintenance of the store? How to
control energy cost?
5. How to manage the inventory. How much and how often to
order? To avoid over stocking & stock out.
6. How to balance between customer satisfaction and selection of
stocks. Satisfaction at what cost?
7. what measures to be taken for safety ( eg: fire extinguisher,
emergency exit..etc)
8. what types of insurance needed ( flood, theft, fire ?)
9. Staff training & incentives
10. Is there any need for temporary staff? Any functions need to be
outsourced
Operation blueprint ( manual /SOP) will list all functions to be
performed , their timing, who all are responsible etc ). Blueprints are
prepared for maintenance, inventory management, cash/credit
operations, displays..
A.Finalising timing ( opening & closing time ) and duration of store
operation …. Depends on
target customers, ( school/college students, elderly people ? )
type of product ( milk/groceries or life style products)
Location of the store. ( stand alone or within a shopping centre )
Assign the responsibility of opening an closing the store with specific
persons.
Who will open the store? At what time? In whose presence? What
are the steps – eg: turning off alarm, turning on power, setting up
the computers, checking alternate power like generator, inverter etc.
–Such tasks cannot be left to chance.
If the store need to operate for more than one shift, the additional
batch of employees are to be finalised. In such a case the persons on
duty need to hand over the duty to the next person – stock data,
cash in hand etc. ( eg: a convenient store operating 24 hours, petrol
pump )
Security – premises/stocks/payments
Security : Security of the premises & the stocks
Size of retail operation – If the store is small in size, one may not
need separate security arrangements. For a larger sized store it may
ne necessary.
needed to ensure the premises is not damaged
To check loss of material due to -1. pilferage / shrinkage – theft by
employees or customers ( shop lifting ) or 2. due to error in receipt or
in record keeping.
Shrinkage is the loss of inventory that can be attributed to factors
such as employee theft, shoplifting, administrative error, vendor
fraud, damage in transit or in store, and cashier errors that benefit
the customer.
Pilferage : means stealing – stealing in small quantities and repeating
it often
How to check & minimise:
1. Providing special tags attached to the products. Sensors installed
at the entrance and exit detect such tags if they are taken out – gives
alarm
2. Installing surveillance cameras to monitor movements of people
and products.
3. Install security mirrors
4. Separate entrance and exit for staff so that they can be properly
checked ( frisking )
5. Provide adequate lighting inside store, parking area etc.
6. Make bank deposits more frequently
Staffing
Retail industry employ large number of people – as sales persons,
clerks, customer service reps, cashiers, promoters, etc. Utilising the
manpower productively is essential for operational efficiency.
Factors to be considered:
High labour costs – controllable cost
High employee turnover – increase in recruitment, training cost
Poor skilled persons – mistreat customers, commit errors, lose
business and goodwill
Retailers that are labour intensive lose benefit of cost saving in
technology
Labour scheduling – more manpower in peak period and less during
slow periods.
Tactics to increase productivity:
Hiring process: carefully screen candidates before they are offered
job
Forecasting work loads: plan in advance the number of people
needed in each position during different time periods – be cost
effective & customer oriented
Job standardisation and cross training: as much as possible
standardise tasks in similar positions for interchangeability. Also train
persons in more than one job.
Maintain good communication: Employees productivity increases
when they are clear about the company obj and policies.
Compensation: remuneration, perks, career path, promotions,
recognitions etc motivate the employees.
Employment terms: people who are on full time jobs are more
productive than those on part time.
Providing the sales persons with tabs, smartphones will help to deal
with customers in a better way
Promotions/events/alliances
Promotions and events are critical activities for success of a retail
Promotions are time bound special offers to attract more customer
footfall.
Promotional offers are finalised well in advance to organise sufficient
stocks, printing and distribution of flyers and staffing and training. All
sales persons on the floor should be aware of the promotion offers
and its terms & conditions.
Sometimes a retailer tie up with a local partner to run the promo
offer. Such alliances are part of store operations.
Other related tasks are – arranging display – end cap/gondola/basket
etc. arranging POP materials – danglers, wobblers..
Promotions are usually attached to a theme.
Eg: Back to school, Diwali offers, Onam sale, X’mas offers etc.
Major promo themes in India are
Festival related : Dussra, Onam, Diwali, Pongal, XMas ….
Special Days: Mothers day, childrens day, valentines day,…
Annual clearence sales
Special events by the retailers – Wednesday sale, annual day offer …
Plan the necessary man power required during the promotion period
( engage temporary merchandisers / promotors )
Train all connected with the retail sale regarding the promo offers
Estimate the customer demand and stock needed for the promotion.
If needed additional stocks are to be procured. No sale to be lost for
want of stocks
Additional infrastructure – security, parking, power etc. ( sometimes
generators, fans etc are needed )
2. Inventory management and inventory control are important
areas to ensure customer satisfaction and store profitability
Coordinating handling of merchandise from different suppliers
How much inventory to be on floor and how much in back room
store & warehouse
How and when to move non moving inv to a selling area
What support can be taken from vendors for displays
Budgeting for breakages and damages
Ordering, receipt of supply, stocking, display, managing returns are
functions related to handling merchandise
1. receiving & inwarding goods:
2. check for any defects or damages
3. Use of hand held scanners
Display of goods is another key aspect of retailing.
The complexities of store operations and the expertise needed to
manage it largely depend on the type of merchandise and the type of
store.
Eg: a high end fashion boutique & a super market
In a super mkt – one need to know about a large number of business
lines. It has to deal with trends in consumer demand as well how to
preserve frozen food stuff. Stock control of perishable items will
have to be managed. And so on
Boutique : one industry…. Less complexities
The requirements of a bakery / dairy products will be entirely
different
Efficiency of store operation will impact the long term success of any
retail.
One such important task of a retail store is –stock taking &
reconciliation….
To find out if any discrepancies exist between book stock and
physical stock and if they do not tally, to find out the reason and
finally to reconcile the same.
This exercise will reveal the amount of shrinkage / loss of stocks in
the store. ( excess stocks ? )
Any amount lost is going to affect the profitaility.
Such exercises are a must at least once in an year – sometimes done
half yearly / monthly / at random.
100% physical check or random check
If same discrepancy exist in 3 or more consecutive stock taking –
may be written off…but auditable.
Inventory management and inventory control are important areas to
ensure customer satisfaction and store profitability
Some of the inventory related operational issues are
Coordinating handling of merchandise from different suppliers
Should drop shipping be opted for ( delivery of goods by vendor/WD
to customers based on retailer orders)
How much inventory to be on floor and how much in back room
store & warehouse
How and when to move non moving inv to a selling area
What support can be taken from vendors for displays
Budgeting for breakages and damages
3. Customer Service:
Customer service policy – usually a top down approach.
It is to be ensured that all customers who walk into a store goes back
with a pleasant experience.
A common area of customer irritation is standing in long queue for
billing and delivery. Stores need to handle such situations
During holidays, promotion period etc, additional temporary staff
need to be deployed if needed
Merchandising
Success of a retail
# location of store
# communication to the mkt
#
#No.1 - the merchandise
If a customer walks into a store, planning to buy a product, and the
desired model, size or colour is not available , and decides to move
to another store….. All other factors become irrelevant.
Job of a retailer is to ensure right type of products are delivered to
the customers at the right place at the right time and at a right price.
For this, right type of products are to be produced and procured…..
This is what merchandising job is .
Merchandising management include planning the mix of products,
sourcing them, distribution & allocation to stores, promotional
activities and finally selling them to customers.
Customers have changed. In the past customers would select a
product that best suits his need – based on his knowledge
Today, due to the advancement of information technology,
merchandising has become more scientific. Customer tastes are
changing, PLC are becoming shorter and retailers are changing from
product centric to customer centric.
concept of merchandising
retail merchandising is about planning, buying and selling of
merchandise.
It is an important and challenging task because “ goods well bought
is half sold”.
As the definition of retail goes….offering right products at a right
place………
It is almost impossible to do everything right.
7 RIGHTS OF MERCHANDISING
Right product , right quantity, right place, right time, right price,
right appeal, right service
Product - 4 elements – functional elements aesthetics , service
details, psychological features.
Quantity – as per consumer needs
Place – location is accessible for customers and possible for retailer
to make margins
Time – available when customers are ready to buy. Fast life- scarcity
of time, dispossible income
Price – value for money – competitive
Appeal – attractive to customers functionally, an element that can be
used to attract customers
Service – pre sales and post purchase
Reality
Seven rights --- desirable but difficult
To meet product, quantity, appeal, time, service levels and to avoid
stock out, if inventory is increased,
------ over stocking & mark down
Profitability goes down
To minimise mark downs --- inventory is reduced
--- lose business
& these occur same time
Grace Kunz-> merchandising - planning, developing, product lines to
a target market with regard to pricing, assorting, styling and timing.
Merchandise management – analysis, planning, acquisition, handling
and control of merchandise investments of a retail business.
Analysis:
Market, target customers, their profile, needs, wants, behaviour …
Planning:
Procurement is to be done in advance
Acquisition:
Goods are to be ordered and sourced from different sources
Handling:
Products are to be Sorted, displayed in proper order, for faster sale
Control:
Stocks / inventory is money being blocked & need to be controlled.
Merchandising is the core of retail. As goods get sold they are to be
replenished with fresh stocks and this process goes on to ensure rt
prod at rt place at rt time and at rt price…… for retail to be successful
Process of merchandise management:
Business strategy/store format 
Merchandise strategy 
Merchandise planning – product/price/ assortments / space 
Sourcing- make or buy, vendor selection, negotiation, placing order
Allocation to stores 
Performance monitoring & evaluation
When merchandising fn. Started
beginning of OR from IR.
More categories and more outlets
Work load on buyers increased
Delinking buying job from the store
Buyers could focus more on vendors
BUYING DECISIONS – FACTORS AFFECTING
IR or OR, small or big need to buy merchandise and sell them.
Merchandising fn depends on the retail format
Stand alone single store – buying by owner
Bigger size store – people involved in buying increases
Chain stores – centralised buying – negotiate harder
Market knowledge - Mail order selling / e –tailing – buyer needs to
plan well in advance. Also have to be clear about what products are
needed by the mkt. Uniqueness of products and attractive prices are
the key here.
basic/fashion/fad products:
A buyer is to be clear about these aspects and plan the merchandise.
Retailers stocks depends mainly on what the buyer decides to buy.
Basics – those products that has a continuous demand. Not much
variation in sales and so can be always kept in stock ( pulses, dhothi )
Fashion – depends on the seasonal preference of customers. May
not last for next season
Fads – very short life cycle. Demand peaks and dies suddenly.
Buyer of fashion items – mkt knowledge about trends, fashion
forecast etc
For a discount store the deciding factor will be price –
Size and structure of retail – small sized store – one person for
buying, merchandising etc
For larger stores usually roles of buyers nd merchandisers are
separate
Merchandising buying behaviour
By Prof. Jagdish N Seth
Says , a buyer is like a consumer about what he buys and like a
producer in how he buys.
According to him, merchandise buying is a function of certain inter
and intra organisational factors.
Inter organisational factors are – retail size, retail type, location &
management philosophy.
Intra orgn factors –type of merchandise, product positioning, other
regulatory constraints & type of decisions
Prof Seth’s theory does not explain how an individual manager in the
retail organization buys the merchandise. Rather, it describes and
explains the merchandise buying behavior of the retail organization.
It is, therefore, more an organizational buying behavior theory rather
than a consumer buying behavior theory
It consists of the following constructs: Merchandise Requirements,
Supplier Accessibility, Choice Calculus, Ideal Supplier/Product Choice,
and Actual Supplier/Product Choice.
Merchandising requirements:
Based on the inter & intra organisational factors. Influenced by
certain functional and non functional requirements.
Functional requirements – refer to what the target customers are
looking for in terms of merchandise. A buyer will know what their
customers need/ want and plan the merchandise requirements.
Non functional requirements are other purchase criteria like what
competition does, past traditions, arrangements with suppliers etc.
In many retailers, the buying decisions are more driven by such non
functional factors and are reasons for poor sales and resulting losses.
size (big vs. small), type (discount vs. department store, its location
orientation (national, regional or local) and its management
mentality (financially driven vs. merchandising driven company).
These factors account for the differences among various retail
establishments
Type of merchandise (white goods vs. brown goods), product
positioning (private label vs. national brand), type of merchandise
decision (first time vs. repeat order) and legal/regulatory restrictions
merchandise requirements:
Choice calculus supplier selection ….based on three criteria
1.Competitive structure – is the supplier a monopoly ( heavy
machinery)? Or too many suppliers ( eg. dry goods )
2. Corporate image: Suppliers image is another factor that influence
selection. Some companies have a positive image due to their
country of origin ( japan/germany )
3. Marketing effort: extent of marketing support that the supplier is
willing to offer to the retailer.
Merchandise buyer – to decide by matching merchandise
requirements and the chosen supplier/s, based on a choice criteria of
price, delivery, packaging /assortments
According to Prof Seth, the actual supplier and ideal supplier
selection do not always match due to some other intervening
factors.
Business climate: economic trends such as recess ion, inflation,
interest rates and unemployment
Business Negotiations: the buyer—seller interaction process
including the aspects of contractual agreements and procurement
process.
Company’s financial position - represents the profitability and
liquidity position of the retailer.
market disturbance. It includes totally unexpected but significant
events such as a strike, economic blockade, political turbulence or
some natural disaster which all have an impact on the buying
decision.
Seths model describes various factors & theories that influence
merchandise buying behaviour .
In reality there are others factors too that influence a retailers buying
decisions..
PLC stage of product retailer has and type of purchase needed – a
repeat purchase or a new product purchase
Technological capabilities of retailer and the supplier
Merchandising philosophy of retailer – eg. An apparel co. wants to
be design/fashion driven or price driven
Merchandising philosophy of a retailer depends on the type of its
target market
buying function starts with a sales forecast.
Forecasts can be for an year, may get refined in each quarter. It is
done for each product line and each SKU.
Person responsible for the merchandise procurement has to ensure
that he/she source them in right qty, right price and at right time.
This job is usually done by the buyer and the merchandiser together.
Role of merchandiser and buyer
A merchandiser is responsible – a line of products
Dept store – different merchandisers for different sections (
garments, footwear )
Main functions of merchandisers ( 4 areas)
:Planning, directing, coordinating, controlling
Planning:
study customer demand, forecasting sales, and prepare the budget,
formulate the policies, help the buyers in procurement
Directing:
Training buyers, guide them to go for mark downs for slow moving
items,
Co-ordinating:
coordinate the buying of different buyers ( usually several buyers will
be reporting to one merchandiser ). Coordination is needed to
ensure that all the buyers work on the same line of store image
Controlling:
Assess merchandise performance on the shop floor, assess buyers
performance.
Buyers performance net sales, maintained mark up, extend of mark
downs, gross margin, stock turns…
Visit to suppliers /manufacturers: to select goods ( usually alongwith
the buyers, to finalise price and other terms and conditions)
Work with the department managers to ensure proper visual
merchandising. Separate visual merchandisers in some cases
Store visits – to check responses to various merchandise.
A merchandiser should be
good in basic maths – sales analysis, budget preparation,
Able to understand customer needs and translate it into specific
products
A good team player – work closely with buyers
Good in forecasting sales with high degree of accuracy – industry
knowledge, trends, market conditions
Able to analyze merchandise performance and buyers performance
Good in visual merchandising
Merchandising field – changing as per the changes happening in
retail/format & customer behaviour/preferences.
Customers – willing to pay for products of their choice
Manufacturers started coming out with products that suit the life
style of customers.
Retailers offering the merchandise that meet the requirements of
target customers , based on their lifestyle – is called life style
merchandising.
Some of such product categories – furniture, cookware, watches,
bags, cosmetics, bodycare products …..
some restaurants offering food & beverages for a specific class of
society
Certain cooking shows using collection of cookware of a specific
brand
Solution merchandising – analysing lifestyle requirements of a
specific set of customers and creating product and services to meet
such demands
Allows retailers to create a niche.
In stiff competition LSM is advantageous to retailers
Merchandising in multi channel set up
Multi channel retailing - combination of physical store, online,
mobile, catalogue ….
Retailer- plan merchandise across the channels
Look and feel of the merchandise should be uniform across channels
If needed – expand the buying and merchandising team
Retailer – more advantage of negotiations
If buyers are separate for each channel inventory control can be an
issue
Customers – may walk in to a store - check for info online…
Retailers – to ensure there is no cross channel conflicts
They can test a product on line and based on the feedback – decide
to introduce in store /not
Principles of Merchandising
based on the seven rights of merchandising
1. understand target market
Understand the customers and their needs. The products in the store
should be a reflection of their needs
2. Build the merchandise plan:
Consider each store as different from the rest. Having certain
peculiarities taking into consideration about the local region and
building the merchandise accordingly
3. Source and keep what customers want & not want you want to
keep :
The sourcing team should act as a representative of target
customers.
4. Make the right assortment:
Customers always prefer to have a wider choice. Offering a variety
of right assortments create customer loyalty for the store.
5. Consistency:
Retailer should keep consistency in the quality of products that they
offer. Consistency in the type of brands in line with the store image
6. Offer value:
It is not the low price that customers look for. They want value for
their money. This is to be considered.
7. win-win with the vendors:
Buyer should study vendors and understand their strengths and
weaknesses and what motivates them. If vendors and store have
similar goals that much better
8. Share Information:
Retailer should give timely feedback about the products, customers
and the market to vendors. Helps in making a product or promotion
successful.
9. Accept mistakes:
When the some goods sourced with a plan don’t do well, accept the
reality and clear / liquidate them asap and make space for others.
10. Surprise customers:
Merchandise is main reason for customer walk in. If retailer can
procure and provide goods that excites customers and exceed their
expectations, take it for granted that they will keep coming back.
Buyer – roles & responsibilities
A key role in retail – responsible for sourcing/procuring products (
dept/store/chain of stores)
should be able to balance between the volume/value of inventory &
the budget agreed upon with the merchandising manager
Should be skilled to analyse the latest trends and take decisions reg
style, taste etc
Assistant buyers – responsible for a specific item, keep sales &
inventory records, coordinate with stores /depts etc
Resposibilities of a buyer:
Developing merchandising strategies: Depending upon the type of
store this job is to be done for a product line or for a store or for a
chain stores
Planning and selecting merchandise assortments:
Buyer should be updated about the economic conditions , market
trends. Should have clear understanding of target customers , their
requirements and should be able to translate them into specific
products.
Vendor selection, development. Management:
Should have the skills to locate the vendors, screen them, select the
right ones, negotiate and finalise terms and conditions, develop
business relationships, and maintain it.
Pricing the merchandise:
to finalise the pricing, based on the GM target of the retail
organisation.
Inventory management:
Procurement of inventory, controlling the inventory ( allocation to
different stores ). Has to see that no stores run out of stock. In the
case of slow moving inventory , action has to be taken either to
move such stocks to other stores or go for a mark down and clear
them.
Purchase agents: some retail organisations have this position (
usually for highvalue/vol business like steel, cotton, petroleum prod
)– job is to assist buyer in routine purchases. Often they are
specialising in some category of products and collect info about the
market / price trends, and future trends.
Buyers should be aware of general economic conditions-- customer
buying patterns procurement and stocking of goods. Need good
judgement skills and resourcefulness.
Ability to identify products that will sell is a desirable quality of a
buyer. Also ability to take quick decisions and willingness to take
risks.
Other attributes of a good buyer are
Getting updated on latest trends in industry, new fashions, other
retailers activities and a desire to achieve the sales targets.
According to Hirschman & Stampfl, all retail buyers perform three
roles.
Change agent: influence the buyers buying behaviour, by offering
new products, services and assortments.
Gate keeper: Goods from the mnfctr/supplier reach the consumers
through retailers
Opinion leader: By acting as a change agent, buyers influence
consumer opinion, if not induce purchases.
Buyers roles in different retail formats
Most buyers – like product managers in a consumer Co. – planning,
purchasing, managing prices , ensure achievement of sales
/profitability. Depending upon the size, buying function – centralised
/ decentralised.
BUYING FOR A SINGLE/INDEPENDENT STORE
Usually one person does the buying & merchandising. Should be
familiar with customer needs and purchasing process.
List of roles:
1.coordinating purchasing of different prod.
2.writing the orders
3.handling special orders as per requirement
4. deciding about merchandising returns
5.taking pricing decisions
6.visual merchandising, planning promos & events
7.customer contacts and selling
Buying for a chain store
Bigger stores / chain stores need specialists as buyers and
merchandisers
Centralised buying & centralised merchandising
If the store operates in different regions, buyers should know – what
kind of merchandise are preferred by customers in each regions
Buying for non- store retailers :
plan in advance, should know what types of products customers
would buy. Success depends on USP of products/ price
METHODS OF BUYING
Depends – types of merchandise , orgn structure
Methods – cooperative, centralised, decentralised, committee ,
resident office
Cooperative buying: small sized retailers coming together for
collective bargaining. They form an alliance and enjoy the economies
of scale enabling them to offer competitive price to customers. This
may be
- voluntary: organised by a wholesale dealer
-cooperative chains – organised by retailers
Centralised / decentralised :
Centralised – mostly large & multi store
Advantage – quantity discounts & support
Fulltime specialist – hard bargaining, close watch on latest
developments & trends
Decentralised – when local preferences are more important and
demanding
Buying committee:
Committee – buyer, merchandising manager, store manager, sales
promo mngr..
Buyer makes a proposal to add a product or to drop a product.
Its merits and demerits are discussed and decision taken
Resident buying offices:
Mostly used when products are to be sourced from international
markets.
Sometimes the same person represents several retailers who are in
the same line of products.
Retail theft & shrinkage – threat to profitability : global & Indian
context
Shrinkage and pilferages are a major challenge in managing retail
and ensuring profitability.
Mainly employee theft ( pilferages ) , customer stealing ( shop lifting
), errors in accounting are main causes.
Based on study in 24 countries –
Global retail theft - $ 128 Bn = 1.3% sales
Per house hold -$74 to $541
In US : av cost of shrinkage per house hold -$403
Lowest shrinkage reported – in Norway = 0.83% of sales
In US – total shrinkage is 1.48%
Highest is in Mexico -1.7%
China – 1.53%
India – 3.1% ?
Out of 24 countries , in 16 countries shop lifting is the main cause
In US: employee theft -42.9%, shop lifting -37.4%
In India: shop lifting-45.2%, employee theft-23.3% ( $83m)
( carrefour asking for free supply every quarter )
Apart from visible shrinkage, abuse of refund schemes, improper
accounting of returns, defects, discount coupons etc are also
reasons. Such acts are not revealed in security measures.
Losses during in transit also possible
How to control shrinkage inside store
Install cctv surveillance
Provide tags and sensors
Install security mirrors
Put up signages and posters of security messages
Design the store – small and high value items not to be kept near
entrance or exit
Have straight shelves
Provide adequate lighting
Create awareness among employees and customers
Key challenges to retail – Indian and International context
Some of the major challenges that retail in India are
1. retail not being recognised as an industry.
It is hampering availability of finance and adversely affecting growth
in retail
2. High real estate cost: real estate prices in prime locations of some
Indian cities are among highest in world
High lease /rentals affect retail profitability and is a major issue.
3. high duties and legal hurdles:
Transfer of property attracts high duty. Pro –tenancy laws ( difficult
to evict tenants ) and time consuming legal process to settle property
disputes are other challenges.
4. Lack of infrastructure – ( poor condition of road ), insufficient cold
chain storage ( for fresh fruits, veg ), exploitation by middle men etc
are also affecting retail business
Influx of foreign players, large format retailers are threatening
existence of independent small time retailers.
General economic condition is also a challenge
Failure in International retail:
preferences of local customers and local environment
Communication difficulties and cultural differences
Laws and regulations of host country
Religious restrictions
Retail model in one country may not work out in another.. Have to
face new types of competition, language, culture and customer
expectations.
STORE, WAREHOUSE, ONLINE SITE, CALL CENTRE
IN STORE & NON STORE (ONLINE SITE )
Larger sized retailers – min required inventory in store & balance in
warehouse.
Size of the W/H will vary depending upon the retail format. Hyper
markets will have huge warehouses due to the large no of
merchandise categories & SKUs.
Non store retailers too will have warehouses.
Multi channel / omni channel - likely to grow
Customer checking online and picking from store or customers
checking products at a store and ordering on line
Customers coming to stores have the advantage of they picking up
some extra items.
Strong systems ( soft ware ) needed to have proper inventory control
Eg: if an item is not found in a store but available online – can it be
blocked? An online customer may shop it in the mean time. Website
and inventory management system have to be in sync.
Products in store and warehouse could be merged as a single
inventory & made available to customers shopping via any channel.
Online info can even show how much available in store and how
much in warehouse. ( walmart )
Stores – back room – warehouse – ship from where? – matter of
cost, convenience, nearby customers, store staff getting disturbed ,…
Many use shipping from their partners as fulfillment centres. (
amazon )
Call centres:
Retailing has undergone revolutionary changes and are still
undergoing changes
From brick and mortar store to online shopping
Customer expectations also growing up.
They want service to be available in store, on mobile and online etc.
Retailers thus face ever increasing challenges – not from nearby
stores but from online and websites.
Retailers are outsourcing call centres to provide online and on
mobile services to customers who may even be beyond their
operating territories.
Why call centres are becoming important
1. need to increase presence
In todays multi channel approach retailers need to reach out to
customers to create awareness about ones presence and offers.
2. to provide better support:
To ensure customer satisfaction, retailers can use call centres to take
proactive action using multiple channels to provide better service
3. Addressing customer issues:
Customers want their complaints to be addressed immediately. To
match the level of service what e commerce companies are providing
retailers can take help of call centres .
4. Business focus:
Retail stores can focus on their products and operations and leave
the responsibility of customer service to an independent enity – call
centre
5. Cost effective:
Call centres would work out to be cost effective as compared to in
house service centres.
Career Path
Entry Level
Types of Roles: Assistant buyer, assistant store manager, pricing and
signing coordinator, merchandising representative
Associate's degree
Retail experience
Strong math and analytical skills
Job responsibilities
Build displays
Examine reports for selling trends
Maintain accuracy of pricing and signage
Monitor inventory
Perform repricing of merchandise
Prepare weekly sales and inventory reports
Recommend markdowns
Mid Level
Store manager, merchandise planner, buyer,
All entry-level requirements
Bachelor's degree, preferably in business
Exceptional customer service skills
Ability to motivate team of associates
Strong communication, negotiation, and organizational skills
Attend trade shows
Control receipts and store financial reporting
Devise product promotions
Establish strong relationships with vendors
Lead teams to meet sales goals
Manage inventory
Manage departmental budgets
Negotiate vendor terms
Organize product line reviews
Oversee implementation of store sales, merchandising and pricing
plans
Resolve customer complaints
Set prices
Senior Level
Store director, district manager, division merchandising manager
MBA Degree
Retail management experience
Proven leadership, strategic and operational abilities
Thorough understanding of retail business operations
Strong interpersonal skills
Ability to travel within a territory to call on store locations
Develop short- and long-term business plans
Ensure that stores are safe environments for customers and
employees
Lead company to revenue and profit goals
Oversee implementation of company strategy
Oversee product line reviews and promotion plans
Recruit and develops management teams
Track various financial metrics to ensure shelf space meets profit
potential
Unit - IV: Retail Formats 20 Hrs
Store-based Retailing (Convenience Store, Supermarket, Hypermarket,
Specialty Store, Departmental Store, Off Price Retailer, Factory Outlets,
Catalogue Showroom – Non-store Retailing (Direct Selling, Mail Order, Tele
Marketing, Automated Vending, E-Commerce) – Service Retailing
As per the report of Indian Chamber Of Commerce, Indian retail market
is expected to reach a size of $1.3 Trillion by 2020 from $62 Billion in
2017. Retail industry is contributing to around 10 - 11% of India’s GDP
and 8% of employment. The retail scene is ever changing as per
evolving consumer behaviour. The online retail is growing at a fast pace.
The major sectors contributing to the retail industry are food and
grocery, apparel and medical care and health services.
The retail industry can be broadly classified as store based and non
store based.
Under store based retail, we can find different formats or different types.
We can classify them on the basis of their size, type of merchandise etc
1. Convenience Stores
These are stores generally located near residential areas and are open
for long hours. They provide a limited variety and assortment of
merchandise . The size of such stores may vary from 3000 to 8000 sq ft
or even less. They target customers who wants to make quick
purchases, without having to search through a large store and stand in
long queue for check out.
Pricing at such stores may be higher than what supermarkets offer. Milk,
bread, eggs and other convenience goods for daily use are mostly
shopped from here. However in some countries, fuel and cigarette are
also contributing to the sales.
In Indian context, the provision stores that are so common in rural areas
can also be termed as convenience stores. Internationally well known
examples in this category are Seven eleven, SPAR etc. In India we can
take Reliance Mart, Twenty Four Seven as examples.
Convenience Stores are facing competition from other formats like
Super markets due to the comparatively lesser price and other
advantages they offer.
However convenience stores have advantages like opening for longer
hours – sometime even 24 hours, being closer to residential areas, quick
purchase and check out .
2. Department Stores:
As the name indicates these are retailers who organised the stores into
different departments for displaying the merchandise, offering a wide
variety and assortment of products. They attracted customers by
offering wide variety of items under one roof , a pleasing ambience and
attractive service.
In the middle of 18th century when small towns became cities, small
general stores also grew and thus emerged the department stores. The
standard store design that we are seeing today came from the
department stores.
Initially department stores sold apparel, furnishings, appliances, furniture
and consumer electronics. However most department stores now focus
mainly on soft goods – women’s, men’s, children’s wear, home
furnishings, cosmetics, kitchen wares and small appliances. Each of
these department will have specific selling area and sales people
attached to it. In fact it will look like a collection of many speciality shops.
We can say that department stores are those retail stores whose sales
from food, clothing and home related items contribute minimum 10% and
less than 70% of their total sales, employs minimum 50 employees and
a self service ratio of less than 50%.
In India average size of a department store may vary between 20,000 to
40,000 sq ft and carry 50,000 to 100,000 SKUs. Some of the retailers in
this category are Shoppers Stop, West side, Life Stye, Globus etc.
Many Department Stores also carry private brands. In abroad due to the
decreasing market share and profits many department stores have
changed the strategies taking actions such as –
Reducing labour costs, increase excusive merchandise, undertaking
marketing activities to build image for the stores, expanding online
presence etc.
Some of the well knows names in this category are Macy’s, Nordstrom,
Sears, ..
3. Speciality Stores
Speciality Stores handle durable goods of a specific type of merchandise
like home furniture, consumer electronics, appliances, electrical goods,
footwear, books, jewellery and like wise. Some of them may have a
range of complementary items. They offer high level of service. They
will have a limited product line but deep assortments. Most speciality
stores operate in an area of around 8000 sq ft. Some of these stores
carry products of large no of brands.
Some of the categories and well known stores are given below
1. Apparel : Wills Life style, Zodiac, Arrow, Fab India, Anokhi, Levi,
Polo,
2. Gifts / Electronics : Archies, Hall mark, Croma, Bose, Samsung,
LG,
3. Jewellery : Tanishq, D damas,
4. Shoes : Bata, Crocs, Woodlands,
Such stores well trained sales persons to assist customers. Spain’s
Zara and Swedish H & M are very popular speciality stores.
Category Killers ( also known as category specialists ): They are
speciality stores, who focus in a specific category and offer a very large
selection at an economic price. They buy and sell cheap and dominate
the market. Worldwide, these types of stores have an area between 20,
000 sq ft to 120, 000 sq ft. They are called category killers because the
price they offer are far less than what others can offer.
Some of the examples are Staples for office stationery, Nalli Silks in
Chennai for sarees, Toys Kemp in Bangalore.
4. Off Price Retailers:
Off price retailers offer inconsistent assortment of branded merchandise
at a price much lower than the manufacturers suggested price ( MRP ).
They are also known as close out retailers.
Off price retailers are able to sell at very low price because of their
unique buying practices. They opportunistically purchase stocks from
manufacturers that have overruns ( excess production ), cancelled
orders , export rejections, close outs, irregulars ( items with very minor
defects ). They may even buy excess stocks lying with other retailers at
a lower price. They are able to buy stocks at very low price because
they do not ask for any advertising support or stock returns or delayed
payments.
Close out – means, end of season stocks that will not be used in next
season.
Irregulars – means, products that have minor mistakes or defects , ( egdifferent length of sleeves of a shirt ). Some call it as “ seconds”……
meaning second quality.
Thus many of the merchandise may be in odd sizes, unpopular colours
or with minor defects.
Off price retail outlets owned by third party retailers may sell products
purchased from different sources.
For customers, it may not be possible to shop the same type of items
every time they visit the store. Each time it will be a different bargain and
experience…. Something like treasure hunting. Mostly these are self
service stores.
Factory Outlets: Some of these stores may be owned by the
manufacturer, in which case, only the company merchandise will be
sold. Examples are Pantaloon Factory outlets, Levis Factory outlets,
Reebok Factory outlets.
Many manufacturers take it as a way of selling the inventory that
otherwise cannot be sold at regular prices. However there is an
adverse effect on profitability.
For some it is just like another channel to sell their merchandise, from
where they sell the same items that they sell through other retailers.
Factory outlets also serve as a place to 1. Introduce new products to the
market, 2. Display full range of merchandise 3. Hold product launches
or promotional events such as lucky draws etc.
5. Catalogue Showrooms:
As is evident from the name, catalogue show rooms sell the
merchandise with the help of catalogues.
There are stores who adopt this style and there are also non store
retailers under this category.
Such stores do not display all the items. Also the items on display are
only for the customers inspection and feel and are not delivered to the
customers.
Customers walk into a show room, go through the product details in the
catalogue or from the displays, fill up an order form, mentioning the item
name and or product code and hand it over to the counter. A sales
person picks up the stocks from the warehouse and deliver to the
customer there itself or get it delivered as required by the customer,
upon payment. Customers can shop in this manner at IKEA.
Advantages of non store catalogue retailing is that customers can place
order as per their convenience from any where. For the retailers, they
don’t need to keep displays and carry stocks in expensive commercial
places. Heavy and bulky products or expensive products can be sold by
this form of retailing.
Reliability, quality of products , dependable logistics, excellent customer
service are some of the key factors that determine the success of
catalogue retailing.
In the west, especially in US & UK, catalogue selling is very popular.
One such well known retailer is Argos.
In India one successful name in catalogue retailing is Elvy, who is into
high end home décor products. They deliver products based on orders
and payments are collected at the time of delivery. No charges are
levied if the shipments are not accepted.
Croma, a popular retail chain get 10% of their sales through catalogue
selling.
6. Super Markets:
Conventional super markets are large self service retail outlets selling
food & groceries, meat , fish and non food items such as health and
beauty products and other general merchandise. Non packaged goods
contribute substantially to the supermarkets revenue and have higher
margin as compared to that of packaged items. Most of these stores
have an area of 4000 to 25000 sq ft. Kroger, Tesco are some of the well
known international players. However in India the average size of a
super market is around 2000 sq ft. or less. Indian players include More,
Reliance fresh, Food bazar, Nilgiris etc.
There is a category in supermarkets called Limited Assortment
Supermarkets. They carry only limited brands in each category. The
concept is lower costs and increased efficiency. For eg. They display
merchandise on the crates as they are shipped to save the cost of
unloading. Free bags or facility of card payments are not provided. They
are usually located in areas with lower rent. For these reasons such
stores are able to offer products at lower prices.
Another variation in this model are the super stores. They are much
bigger in size than super markets and carry more non food items such
as general merchandise and health and beauty care products. Some
have a full line pharmacy, laundry, photo processing, banking etc.
Super markets have threats from Super stores and warehouse clubs.
Because of their larger scale of operations they have better bargaining
power and for the same reason they are able to offer lower prices.
Inorder to compete with these formats, super markets have adopted
newer strategies as explained below.
1.Focussing on fresh perishables: Fresh merchandise include dairy
products, meat, fish, bakery items, deli such as salads, fresh fruit juice ,
fresh fruits and vegetables. Many such outlets also offer freshly cooked
meals at attractive prices, giving tough competition to restaurants.
2. Targetting health conscious customers:
By offering natural , organic and fair trade food products many super
markets are able to attract more customers who are health conscious
and environmentally conscious. ( Fair trade foods means those items
sourced from companies that pay their workers more than the stipulated
minimum wage and also give other benefits such as medical treatment
etc.)
Another trend is offering locally grown products. It has many positives –
1. Local farmers are benefitted 2. Customers get fresh produce 3.
Products are having less food miles. ( food miles means distance from
the farms to the plate ) It reduces the transportation cost and also
reduces the carbon footprint.
3. Private label merchandise:
Most supermarkets now leverage their reputation by offering more
private label products. It has advantages for both the customers as well
as for the retailers.
Customers are able to get competitive products at a lesser price as
compared to national brands. For retailers it is less promotional costs
and higher margins.
4. Improving shopping experience:
This is yet another approach that supermarket chains are adopting. They
maintain better store ambience and offer better customer service and
thus make the shopping a pleasant experience. Many retailers offer
services such as food tasting, baby sitting, live demonstrations, cooking
classes etc.
7. Hyper markets:
Hyper market is a French derivation meaning combination of super
markets and department store. It is supposed to be invented by the
French retailer – Carrefour.
Hyper markets are the biggest retailer format with an area between
80,000 and 220,000 sq ft. Further, at least 35% of the selling area
should be allocated to non grocery products. Hyper markets carry variety
of food and non food products such as clothes, jewellery, hardware,
sports items, stationery items, cosmetic products, consumer electronics
and home appliances and so on.
Most hyper markets also have other shops, food courts and other
facilities like ATM counters, pharmacies. In short, it is a place for one
stop shopping. Customers also have plenty of parking space too. Now a
days many hyper markets also have multiplex theatres attached to them.
Such retailers attract customers from a large area because of the low
price they offer, unique products range and regular offers. It becomes a
destination for shopping.
Well known names in this format are Carrefour, Lulu, Tesco, Big Bazar,
Reliance mart..
In some countries like Japan and US, such formats are not common for
various reasons. It is not possible to find large area to build Super
markets. And so they have to go for multi storied model which increases
the cost and also are inconvenient to customers. Furthermore in some
places there are opposing sentiments for such huge retailers and such
sentiments are based on the views that they drive other retailers in the
locality out of their business, they offer low wages and have unfair labour
practices etc.
There are a few other types of store formats, some of which are listed
below.
Warehouse Clubs: Large sized warehouses offer a variety of goods in
bulk at wholesale prices. Only customers with membership cards are
allowed. Eg: cosco wholesale, Metro cash and carry.
Super warehouse store: It is a hybrid version of warehouse and super
store. They offer high quality perishables at reduced prices.
Limited Assortment stores: Low priced stores offering limited service
and limited items. They also carry a number of private label products.
Super Centre: Large sized stores having mass merchandise of food
and drug category. They offer grocery items at loss leader prices.
NON STORE RETAILING
As the name indicates, these are retail ventures without a physical store.
There will be direct contact with customers - either as direct selling or as
direct response marketing. In direct selling, there is direct personal
contact. Whereas in direct response marketing, retailers use mediums
like mail, catalogues, phone, TV, or internet.
Non store retailers use various methods such as
Direct response advertising, electronic catalogues, door to door
campaigning, in-home demonstrations, selling from vending machines,
mobile vans, etc.
Some of the common non- store retail formats are
1. Catalogue Showrooms: Some of these retailers keep catalogues
with all details like features , price etc and allow customers to
choose the products and fill up an order form. The retailer staff
then brings the item from the warehouse for customers inspection
and purchase. Most of such retailers specialise in some hard
goods like houseware, consumer electronics etc. Some of the
popular names in this category are Argos, Hyper city. To an extent
IKEA also use this model.
2. Direct Selling: In direct selling model, sellers contact customers
at their home or office. Textiles, cosmetics, home appliances, food,
nutritional products, educational materials etc are mostly sold in
this manner. Study on direct selling shows that in India, 70% of
customers are women, 20% are couples and 10% men.
Aqua Guard and Dell used to be examples of direct selling Co.
Direct selling also sometimes assumes the forms of party selling
and multilevel networking. In party selling, the host invites a
group to a party at home or a hotel. Products are displayed and
demonstrated and buying and selling takes place. In multi level
networking, each customer acts like a distributor, and earns a
commission for the sales he or she makes to a customer and
sometimes for all the subsequent sales by his customers too.
Many MLM companies like Amway had been criticised for the
method they deploy and so people look at such companies with
scepticism.
3. Direct Marketing: It is a non personal form of communication with
customers to sell products. It can be by way of Mail Orders or
Television Shopping.
In mail order retailing, retailers use customer database and
prepare their catalogues directed towards a select customer base.
Suitable for speciality products. Eg: books – pre publication offers.
Television Shopping is gaining popularity. Products are advertised
on the TV screen, features , specifications, warranty terms etc and
explained and telephone numbers for different locations are
displayed. Customers can place orders on telephone and
products are delivered to home. Customers are able to see the
products in its three dimensions and mostly there is a price
advantage to the customers.
Naaptol is one of the biggest player in India in this category. They
receive 75000 calls and Rs.4 cr worth business in a day.
4. Electronic Shopping: Customers can evaluate products on line
and place orders electronically. Retailer delivers the products
directly to the customers. This format can succeed depending on
the type of products and also based on the efficiency of supply
chain delivery mechanism.
5. Automated Vending / Kiosks: this is quite popular outside India.
Cigarettes , softdrinks, beer, news papers, chocolates, coffee etc
are sold in this way. For customers the major advantage is that
they can shop at any time. In India, vending machines are popular
in airports, shopping malls, cinema theatres etc. Automated
vending machines are not so common in India, except in the case
of automated telling machines that banks are providing.
Kiosks in India are mostly used to provide information within a
large retail complex. However, Mc Donalds use them in some
places, for customers to key in the orders.
In India, there is a popular retail shop in Bangalore called Holii who
use the open kiosk format. They sell ladies bags and clutches.
Customers can easily move around the store and do the shopping.
6. Airport Retailing: Most airports in the world today are not just
transportation hubs. They are also a place for shopping and
entertainment.
There are many limitations for airport retailing. Airports do not have
the luxury of space that conventional retailer has. There is also
the risk that profile of customers cannot be guaranteed. Also there
is restriction of delivery timings. Employees have to travel long
distance and they have to manage heavy security checking and
remote parking. However, sales per sq ft is quite high. Main
reasons are
1. Steep increase in the number of travellers.
2. Liberalisation of trade and air travel and duty free prices
3. Increase in air port congestion.
Items that are sold in airports retail are mostly liquor, cigerettes,
chocolates and other confectionaries, electronic items, gaming
related products curios etc.
RETAILING OF SERVICES
Service retailers sell services rather than merchandise.
They are a substantial portion of retail industry
A service is a deed or an effort or a performance
Hospitals, Diagnostic centres, fitness centres : health care
Banks, Insurance companies: Finance
Architects, Lawyers, : professional
Schools, colleges: knowledge / education
Hotels, Travel agents: Travel & hospitality
Cinema Theatres, art galleries: entertainment
Libraries: Information
Security services: professional /personal ?
Freight /courier service: supply
Old age homes: Non profit services
Water, electricity, post office, police: Govt
Clubs, Golf courses : entertainment
Internet banking, ATM: value added services
Service industry can be seen everywhere
Govt. Sector: Courts, employment exch, hospitals, military
services,police force, fire services, postal services, schools ……..
Pvt Sector ( non- profit entities): museums, libraries, churches,
temples….
Pvt Sector( Business sector): Banks, Ins.Cos, airlines, hotels,
law/medical practitioners, consultancy firms, real estate firms,
service & repair centres
Even in Mfg industries, we can find service professionals like
accountants, legal advisers etc.
It’s an economic activity offered by one party to another
Employs time based performance to bring out the desired results
Customers normally do not take ownership of any elements but
expect to get value for their money from facilities, goods,
professional skills, labour , environment etc
IMPORTANCE OF SERVICE
• Present GDP of India - Current – 2.972 trillion USD
• Contribution of Service – 54.4% , Industry – 29.7%, Agri – 15.9%
• Employment in Service sector – 28.6% of total population
• Service sector is the dominant contributor to the economy and
main employment provider in the world .
Due to perishability, Unlike goods , supply and demand has to
be matched for services.
Most service retailers have capacity constraints. There is fixed
number of - seats in a class room., beds in a hospital , tables
in a restaurant.
Cost of service cannot be brought down as mass production is
not possible.
Customers have a tendency to avail a service to suit their
convenience. And for this reason there is considerable
fluctuation in demand. Eg: in theatres tickets are most likely to
be sold off in week ends. Or airlines get fully booked on
holidays.
Service retailers use various techniques to even out the
demand or to match demand and supply.
Eg: airlines increase the fair during holidays and reduce during
non- peak periods.
Hotels or resorts offer attractive price during off season.
Telephone tariff during night is less than during day time.
Wednesday offers by shopping malls.
This method of offering low price during non peak period and
raising prices during peak demand period is called “ Yield
Management System”. Utilising unused capacity to maximise
profits.
Some offer reservation system to ensure service delivery at
specific time. Restaurants may employ more staff in week ends
Researchers identified flg 5 parameters to determine quality in
service..in same order of importance
1. Reliability: Providing service right at the first time / at
promised time. Employees knowledge & skill , maintain error
free records
2. Responsiveness: Readiness to respond to customer
requests. Willingness to help customers – keeping customers
informed when service will be provided,
3. Assurance: Making customers feel safe in their transactions.
Employee looks and behaviour should instill confidence in
customers mind
4. Empathy: Employees to have customers interests at their
heart. Understand customer needs and deal with them with
care and attention.
5. Tangibles: Have a neat and professional appearance of
service area and should be visually appealing too. Use modern
equipments.
-----------------------------------------------------------------------
RM1 Unit 5
Unit - V:
Understanding Retail Consumer 20 Hrs
Consumer vs Customer – Factors influencing retail shopper (Range of
Merchandise, Convenience, Time to Travel, Socio-economic Factors, Stage of
Family Life Cycle) – Customer Decision Making Process – Significance of
Market Research.
“ Customer is always right “
…… But not always profitable.
If customers are not there retailers will cease to exist
Success of retail is ..
In understanding the target customers needs and converting this
understanding into the offering of products and services &
Customers respond favourably to the various marketing efforts of the
retailer.
It is important for a retailer to understand consumer buying behaviour ,
what factors influence them and what decision making process is
followed when the buying happens.
Customer vs Consumer
Customer s– those who buy the products not necessarily for personal
use or consumption
Consumer s– those who buy for own use or for their family
One who buys – customer
One who uses – consumer
Consumer behaviour – activities that people undertake while obtaining
and consuming products and services.
Schiffman & Kanuk –” the behaviour that customers exhibit in searching
for, purchasing, using, evaulating, disposing products that they expect to
satisfy their needs
Consumer Behaviour is understanding why a consumer makes a
purchase, when he/she buys, where does he/she buys, and how often
the purchase is done.
Y
Focus has shifted from seller to buyer. Or from push to pull
Inorder to create products that should do well in mkt, its important to
clearly understand consumer needs and buying behaviour
Also one should know what customers know about the products and
what they don’t.
Can reveal how the products are perceived by customers & how well
positioning is achieved.
Action can be then taken if any changes in positioning or in
communication is needed
Knowing the customers also mean – what all influence their purchase
decisions.
Like…
How the need of a product was decided
How customers seek information
How products are evaluated
Payment process
Post purchase behaviour
Understand customers as much as possible… through
Observation, electronic surveillance, interviews, experiments, sales
analysis,
Other factors to be studied are
Geo – demography
Group influences
Attitudes, beliefs, motivations,
How , when and where customers use products, …
Factors may keep changing – population trends, external influences,
competition, even co’s strengths & weaknesses
Not as easy task
Besides these retailer should do a SWOT analysis, and same for
competition. Also how competition is perceived by customers.
Lastly the market conditions like economical, political, technological
issues etc also are to be considered
Research also shows that majority of the purchase decisions are taken
on the shop floor.
Aspects like, store location, frontage, window and store displays,
Signages, colour, fixtures, space balancing, shelf position, and other
general ambience influence customers decisions.
FACTORS INFLUENCING RETAIL SHOPPER
As seen several factors can influence customers decisions.
While retail formats have more or less established in most developed
countries/mkts, in India OR is still in an early stage.
Customers who used to make purchases from traditional formats of retail
… are they continuing the same way or not?
What are the reasons for choosing a store?
Present Indian scene:
we have a mix of all types of formats. However types of products
available are more or less same.
While most brands in a category are available in multiple stores and
formats, these brands may also have own outlets too.
Indian consumers too are changing. In the past we had a very small
affluent class, a large middle class and an even larger class of people
who were economically disadvantaged.
Modern indian consumers are economically more empowered and value
conscious.
In the past the mid and lower segment didnt want to go for an
aspirational purchase. But today they wouldn’t mind even by taking
credit.
With this background we can see what are the factors influencing
customer’s decision making process.
FACTORS INFLUENCING CUSTOMERS DECISION –MAKING
1. Range of merchandise
Customers getting drawn to a retail – location, convenience, offers,
advertisements,….
How to retain customers inside the store?
How to ensure that they are converted as buyers?
Quality and range of merchandise - most imp aspect.
If many stores have the same types of merchandise – why customers
not switch?
The wider choice of merchandise is the key reason for customers to
shop from a store.
- apparels, furniture, appliances,….
2. Convenience of shopping:
Most people prefer to buy from the shops that are nearby. Convenience
is the reason why people shop from a particular store. – groceries, fruits,
medicines, convenience goods.
Why people prefer to buy medicines from a shop near to the doctor’s
place?
3. Distance & Time to Travel:
Time is money. People do not like to waste time. Time to travel is an
imp factor . Retailers located at far away places from customers disadvantage. Why many brands have multiple outlets, incl exclusive
stores at different locations?
4. Socio – Economic Factors:
Socio economic background of people defines the life style.
The life style influence the kind of stores that they like to shop from. It is
also influenced by the culture of the region.
In ME: Indians -> Lulu , Western people -> Sultan centre/ Spinneys
The level of needs in different markets can vary. Retailers who
understand this can arrange the right kind of merchandise and devise
the right type of communication strategy.
India is now having a huge middle class young population who love to
spend.
5. Stage of Family Life cycle:
Needs of people vary based on the demography.
Needs of a bachelor , that of a married couple with teen aged kids, that
of a elderly couple – are all different.
Retailers have to be updated about this data of the target segment.
6. Technology:
New technologies, penetration of internet, versatility of mobile handsets,
abundance of product choice…all are impacting the way customers are
shopping.
Online retailing has been growing and will be an indispensable channel
for retailers.
Results of a survey conducted in India :
# 7 out of 10 people searched online and knew what exactly they wanted
to buy even before entering a store.
# 40% respondents used online information to make purchase decisions.
Thus, technology is not just creating awareness, it is also impacting the
customer decision making.
Consumer Decision Making Process
Factors that affect customers buying decision making – merchandise
range, convenience, time to travel, socio economic factors, stages of
family life cycle, technology
What is the process of customer decision making?
Starts with a need – to fulfill the need customer need products / service.
Need – functional or psychological
Function of the product
personal gratification
Stage 1:
Identification of a Need for a Product / Service
A need is the difference between present and ideal situation
When a customer become aware of a need he thinks about what will
meet his need.
This may happen whenThe current product does not meet his expectations ….or
The current product is about to be over ….or
He sees a product ..or
He sees an advertisement
Stage 2:
Search for Information
Customer search about products now more than in the past, before
making a decision.
Customers may have certain information in his memory. If it is not
enough, customers look for other sources of information.
When customer recall information from the past experience, or
association with the products, its called Internal Search.
External Search is seeking information from external sources –
advertisements, packing, catalogues, sales persons, POPs, sales
promos ( marketing sources ) ,…..
External sources can also be non marketing sources like personal
experience, feedback from friends and relatives, internet, ..
Stage 3:
Evaluating Alternatives:
Customers may evaluate options on various basis
Location of the store, price, features , post warranty service, budget
available, ..
This decision depends on type of product and occasion of purchase
Stage 4:
Purchase Decision:
First the decision is made whether to buy or not to buy
Both decisions – many reasons
Eg: expected finance not come through, desired model not available,
special offer by the retailer, sales person influencing to choose a brand /
higher model,….
In short – several factors influence a customer in selecting the final
product.
Some of such factors are ……..
Personality:
Ones personality is a good indicator of his behaviour. Man is said to be
a social animal. Freudian theory says that social instincts are most
important factors in building ones personality and our behaviours are
directed to meet those needs.
The theory also says that human personality consists of id,ego and
superego.
Id – internal conflict between various basic desires – instinct /
unconscious decision
Ego – consciousness
Superego – morality and being a good person
Customers choose a brand that best matches their personality.
Marketers use this approach in marketing products. Malbro , boost
Life style:
Another aspect of ones behaviour ,
Refers to the way one spend his money or in general what one does
with his life…eg: type of vehicle / house owned, how vacation is spent,
how the leisure time is used,
Such info coupled with demographic data can create useful segment for
marketers to create products and promotions that suit such segments.
Culture:
Culture can influence and define how ( connected ) people lead their life
– even if many may not agree to the society defined standards.
Culture sets certain ground rules as to what is acceptable and what is
not. Several aspects of people are impacted by culture – how we
communicate, how we project ourselves, how we dress / eat, social and
family values, values/beliefs/attitudes, etc etc.
Culture impacts the way customers behave in their entire purchase
process –
Information seeking
Evaluation process
Type of store patronized.
Mode of payment ..
Social Class:
Different parameters that define the social class are education,
occupation and income. --- various combinations possible.
Target market can be divided on these basis , which defines different
social class. Products and services can be developed accordingly
Family Influence:
A major factor in customer buying behaviour.
Most products purchased in a family are meant for some or all members
- opinions of different members do matter. Working women and children
influence purchase choices.
Well researched advertisements, friendly staff, customer friendly return
policy etc can also influence buying decisions
Post purchase experience – satisfaction or dissatisfaction about store
Based on
Customers overall experience of shopping at the store
Opinions of friends and relatives
All factors put together influences a customer to patronise a store
Why is customer loyalty needed by retailers?
Customers are often have confusion about which product would suit
them best – esp when there are appreciable difference between
products and therefore they go for the search
Due to multiple factors life style of customers in India have changed in
the recent past –
Liberalisation
Technology
Economic growth
Retailers – to consider implications of these facts in their business
One major impact – customers prefer to shop less frequently for
convenience goods & so they like to have most items under one roof
Demand for organic products increased – more health conscious
Standard of living gone up – demand for variety of food & healthy eating
Significance of Market Research
Retail success
knowing their customers well enough to offer the kind
of merchandise that will satisfy them.
How to know your customers? How much should you know?
In a market where customers profile and their buying behaviour keep
changing it is important for the retailer to have updated information about
the mkt.– market intelligence
Mkt intelligence can be aquired by market research
What is market research?
Market Research is a continuous process for collecting, investigating
and interpreting information about a particular market a company
operates in or a product/service the company offers for selling in that
market, and also about potential and existing competitors and the past,
present and potential customers who purchase and consume the offered
product/service.
Conducting market research means making an analysis of all
information about the market, product/service, customers and
competitors in order to investigate possible ways for the company to
successfully operate in the market, sell the product/service, attract the
target audience and gain competitive advantages.
A continuous process
Collecting information
about the target mkt or
About products/service that retailer offer in that mkt or
About customers or and competitors
Analyse such information to –
Successfully operate in the mkt
Attract more customers
Gain competitive advantage
Importance of mkt research
# increased sales - knowing customer’s interests helps in deciding the
merchandise, pricing – results in sales
# better customer management : by knowing present and future needs
of customers , retailer can react and ensure better customer satisfaction
# business growth: achieving customer satisfaction results in customer
retention and steady business growth
Mkt research has three stages – collection of data, Analysis of data and
deriving conclusions
Research steps
1. define the research objective
2. research plan: to decide (A)Data sources, (B)research method /
techniques, (C)research instruments,(D) sampling method.
A) Data sources: Secondary data & Primary data
Secondary data – data already collected for some other purpose and
readily available.
Eg: Census data, IDC data
If researcher is able to solve the problem using secondary data, it can
save a lot of time and expenses.
These can be - a) internal data – annual reports, product testing
data..etc b) external data – published by the govt, trade associations …
Primary Data: - data collected afresh
will be more suitable to the issue on hand
Its an expensive exercise. Some Cos , to save cost may
- use internet
- or collect data for more than one project same time
B. Research Methods / Data collection techniques:
-Surveys, observations, experiments
Survey method is most common, where researcher interacts with
people.
Survey methods:
1. In home personal interviews:
2. Telephone interview: Most people are reluctant to answer
3. Mall intercept interviews: May not get a representative sample
population. wont be willing to spend time. Can be computer aided
4. Mail survey: anonymity of respondents is there and so likely to get
unbiased responses. Low rate of response
5. Executive interviews: for Industrial products. Executives identified,
appointments taken
6. Focus Groups: 8-10 people are selected at random and called to a
common place. can be used to get feedback about a product, or to get
ideas and suggestions
Observations / Behavioral Research ( more relevant in Retail )
Actual customer purchases reflects their preferences better than what
they may give to researchers. Therefore, without questioning them, by
observing the customers we can get more dependable info.
-One way mirror to observe customers ; mystery shoppers to study a
store and behaviour of store people.
- Behavioral targetting: Online customers are tracked to understand
which sites they usually visit and what info they browse.. And related
advertisements are posted for them.
- Ethnographic research - observing the behavior of target population to
understand their culture and habits.
- virtual shopping – to simulate and create a virtual shop - customers
can pick up items by touching the image. computer will track entire
purchase behavior – time taken to study a product, qty purchased…..
Experimental research:
C -Research Instruments:
D -Sampling plans/ procedure: Probability sampling : Non Probability
Sampling:
Sampling errors:
Data Collection:
Analysing data and preparing report
Market research for retail store
For retail business, mkt research is needed before setting up the store
as well as after setting up the store.
Purpose and the type of information needed in both the cases are quite
different.
Research prior to setting up a store
Objective would be to decide whether one should set up the store in a
location under consideration
Key information required would be
Demographic data & Consumer data
Demographic data: about the selected region
Overall population , age group data, gender bifurcation, literacy and
income data ,…
Such data gives a basic understanding to the retailer as to whether it
would be worth entering that mkt. , what would be the approx sales
based on the customer profile,
Main data that a retailer would like to gather are…
1. Population:
This data may be easily available as a secondary data.
However it doesn’t mean the population is customer base.
Eg: Indian population is 135 Cr. What would be the customer base for
42” mens shirts?
2. GDP & PPP ( Gross Domestic Product & Purchase Power Parity )
These are measures of economic health of a country.
GDP= C+I+G+(X-I)
PPP – relative strength of currency for a product
Per capita GDP
3. Disposable Income:
Rise of middle class, increase in the young working population and
women – added to increase in disposable income. All states wont be
equally prosperous and hence state level data need to be considered.
Level of urbanisation, literacy rate and per capita GDP are key factors
4. Agewise population:
India is at a major advantage in this factor
As compared to most other nations we have a young population ..
> 70% below 40
> 49% below 20
- reason for boom in consumption
- Increased purchase capacity of a growing young population and
change in their purchase behaviour – coupled with the governments
policy of continued economic liberalisation – will result in more retail
opportunities.
Consumer data:
It is important to Understand the spendingPatterns of households And
what type of products Customer are looking for.
Such data is collected by 3 agencies in India
1. National Council Of Applied Economic Research – They conduct
MISH ( Market Information Survey of Indian Households )
National Survey of Household Income and Expenditure (NSHIE)/Market
Information Survey of Households (MISH)
The National Council of Applied Economic Research (NCAER) initiated
the Market Information Survey of Households (MISH) in 1985-86 to
estimate market size, penetration of a variety of consumer goods and
most importantly, provide a profile of consumer households in terms of
income, occupation and location. These surveys are one of the few
consistent sources providing comparable household income data on a
regular basis. The MISH surveys have also generated valuable
demographic data on income. It has been suggested that these
databases could throw light on broader social trends in the economy
IMRB – for National Readership Survey
Indian Market Research Bureau
KANTAR IMRB is a market research, survey and business consultancy
firm. Headquartered in Mumbai, India with operations in over 15
countries
IRS ( India Readership Survey )is conducted by MRUC (Media
Research Users Council)
Such types of data reveal what changes are happening in Indian
market, about the income, urban rural divide etc.
Some of the useful findings of NCAER are
Indian middle class income group ( 2012 ) – 160 million
By 2015 – to grow to 267 million
Indian household earning over Rs.250,000 ( $5500 ) in 2010 to grow by
70% in 2015.
Households earning Rs.1,250.000 ( $27900 ) to double from 2010 to
2015.
Increase in disposable income and easy availability of loan – contributed
to consumer spending
New middle class – willing to spend on international quality goods, more
brand conscious : why global retailers entering
Increase in the millionaires in India – increased demand for luxury goods
–
{Overall, India had around 104 billionaires in 2019, and ranked fifth
globally in terms of its ultra-net-worth individuals.
India today report – 2018: India adds 7,300 new millionaires in one year,
18% billionaires women | 10 takeaways
A Credit Suisse report has revealed that the number of dollar millionaires
in India has gone up to 3,43,000 - an absolute increase of 3.04 lakh
people in the dollar-millionaire club.}
Govt initiatives – many global retailers entering India and many waiting.
# MISH – sample size-2,13,000 persons ( urban & rural )
NRS by IMRB – Socio- Economic Class ( SEC ) of Indian households:
On the basis of education and occupation of the chief wage earner (
CWE )
- 5 groups : A to E
( A1,A2,B1,B2 – most affluent class, C- middle class & D&E – low middle
income and low income groups )
Survey also - info on spending patterns of each class
C, D & E – found to be spending more and are relevant
Affluent class – saturated
Hence focus on B, C, D & E
Retailer s get insight into where to focus
Research after store is set up
Requiremnts change
Interetsed in knowing more about level of customer satisfaction.
Research is done mostly in areas such as
1. Finding customer satisfaction with the existing set of products
2. Generating ideas for new products
3. evaluating new products – price, acceptance,
4. understanding customer profiles – changes and when mkt expansion
5. Focus group discussions about how store layout shud be
6. Accompanied observation –
7. Profiling customers while they shop