Liberalization of the Indian economy and rationalisation of business procedures have already ensured a high economic growth with a rapidly expanding base for the manufacturing and hi-end services sectors. Fresh avenues for gainful employment to a predominantly young and talented population have created high disposable incomes that translate in to higher consumption and thus better opportunities for all verticals of Retail to flourish.
Growth and Macroeconomic Factors
HEALTHY INVESTMENT CLIMATE :
A ‘Vibrant Economy’, India topped A T Kearney’s list of emerging markets for retail investments for three consecutive years and stood 2nd only behind Vietnam this year.
The 2nd fastest growing economy in the world, the 3rd largest economy in terms of GDP in the next 5 years and the 4th largest economy in PPP terms after USA, China & Japan, India is rated among the top 10 FDI destinations.
Growth and Macroeconomic Factors
THE RETAIL REVOLUTION :
Over the last few years Indian retail has witnessed rapid transformation in many areas of the business by setting scalable and profitable retail models across categories.
Indian consumers are rapidly evolving and accepting modern retail formats. New and indigenised formats such as departmental stores, hypermarkets, supermarkets, specialty and convenience stores, and malls, multiplexes and fun zones are fast dotting the retail landscape.
Retailing in India is witnessing a huge revamping exercise as can be seen in the graph
India is rated the fifth most attractive emerging retail market: a potential goldmine.
Estimated to be US$ 200 billion, of which organized retailing (i.e. modern trade) makes up 3 percent or US$ 6.4 billion
As per a report by KPMG the annual growth of department stores is estimated at 24%
Ranked second in a Global Retail Development Index of 30 developing countries drawn up by AT Kearney.
India’s top retailers are largely lifestyle, clothing and apparel stores
This is followed by grocery stores
Following the past trends and business models in the west retail giants such as Pantaloon, Shoppers’ Stop and Lifestyle are likely to target metros and small cities almost doubling their current number of stores
These Walmart wannabes have the economy of scale to be low –medium cost retailers pocketing narrow margin
FMCG companies, Dominos
Reliance, Airtel, TATA
Reliance retail, Apple Stores
Whole Foods Market Inc., Lilliput
Why they are positioned as a brand?
• It reduces promotional costs.
• It gives firm an instant recognition.
• Brand represent the promise of the firm.
• It Convey clear values to the customers as well as employees.
• Awareness among all people worldwide.
• Conveying the same message through a brand.
Why is it necessary??
• Changing life styles and tastes • Growing need for convenience • Increasing disposable income • Increasing numbers of working women • Globalization • Change in consumption patterns • Higher aspirations among youth • Impact of western lifestyle • Plastic Revolution – Increased use of credit cards and debit cards
THE 7 P’s
To find out what customers want & need & then develop a product to meet the need of the potential customers.
To keep analyzing if the current mix of products and services are appropriate and suitable for the market and the customers of today .
A product is only worth what a customer is prepared to pay for it.
The price needs to be competitive, but not necessarily the cheapest.
This can be Direct selling, mail order, telemarketing or in retail stores.
This is where the customers can buy the product, and is the means to get the product to the customer.
This is the way in which you communicate to your potential customers about your product.
This can be done in a number of ways, which includes your brand image, advertising, special offers.
This is the intangible part of the business mostly concerned with services as they cannot be seen.
Intangible is often used to describe services as they cannot be touched like a product can be.
This important because, fundamentally you are selling a product, but in order for you to be able to price your goods at the right the level, you will also be selling the service the buyer will receive.
The reputation of the brand rests in the people’s hands. You must therefore ensure that all your people are appropriately trained, well motivated and have the right attitude.
People does not only include the people in your business , but also the people that you use for your business.
The process that you go through and the behavior of those who deliver the products are crucial to customer satisfaction.
Issues such as waiting times , the information passed onto customers are vital factors when trying to maintain 100% satisfaction.
LEVELS OF RETENTION STRATEGIES
• Volume and Frequency Rewards:
In retailing ,various rewards are given for bulk purchasing.
e.g. Like in Big Bazaar and More Retail outlets if customer buys goods worth Rs.2500 he gets discount of Rs.250-500.This helps in attracting customers and providing them value for money.
• Bundling and Cross Selling :
various products are clubbed to sell more products at attractive prices.
e.g. In Big Bazaar various combo offers are provided at special offer prices, like get all types of pulses at Rs.200 in place of Rs.349.This type of strategy helps company to sell more and more products and also acts as retention tactics.
Continuous Relationships :
Customers are given loyalty cards to retain them by providing them discounts.
Retention by providing value for money by adding value to the product or service being offered.
E.g.customers are given loyalty cards and membership cards at Reliance fresh, Big Bazaar, More etc which helps in better understanding of customer needs and also builds a relationship with company.
The level of after sales support and advice provided by the retailer is one way of adding value to what is sold , and will give a competitive advantage over others sellers of similar product.
A sales or marketing method might stop working after sometime and it become essential to continually look for new improved ways to promote and market the product in front of the customer.
Always keep customers informed. This can be done at the store or through faxes and emails.
By keeping in contact with the customers the retailer can avoid problems of negative feedback etc.
Integrated Information Systems:
centralized information helps the retailer in providing best satisfaction level by avoiding demand fluctuations and maintaining adequate inventory level.
Variations on the strategies
McLaughlin and Fitzsimmons
Various strategies are :
Multisite and multicountry expansion
Following the customers
Beating the clock
Multisite and multicountry expansion
expansion often by franchising or with the effect of “cloning” the pattern of service in multiple locations.
Examples from the industry are
Reliance Retail, Wal Mart
unbundle the back office activities
make work easier and systematic
can focus on economies of scale and efficiency
Front office can focus on better service and premiuim locations.
Examples: Big Bazaar, Mc Donald’s
Strategies for globalization in the retail industry
Foreign Direct Investment
Foreign Direct Investment
Business Standard , India unlikely to allow FDI in multibrand retail:
India does not allow foreign investment in multi-brand retail, although it does permit 51 per cent foreign direct investment (FDI) in single brand segment. - September 17, 2009, 14:46 IST
World's biggest furniture
retailer IKEA of Sweden
recently dropped its $1 billion
investment plan to set up single-brand retail outlets in India after New Delhi showed no inclination to allow FDI beyond 51 per cent in that segment.
Direct Foreign Investment
Higher risk for both investors and customers
Common vehicle for globalization of retail services
Firms use FDI to gain access in the foreign markets
Why Global Retailers are Interested in India?
Strategic Location &
Vast growing Economy
Retailing: The Emerging
Indian Retailing: Opportunities Unexplored
India & China: A Comparison Retailer China India Wal- Mart 40 -------- Carrefour 53 --------- Tesco 30 ----------- Metro 21 02 KFC Over 1000 04 Starbucks 70 ------ McDonald’s 580 47 Pizza Hut 110 75 Louis Vuitton 06 2 Prada 10 -------- B&Q 20 ------- Hugo Boss 60 02
Arguments in favour of FDI in Retailing
advanced management know how
large low-cost retailers and adoption of integrated supply chain management is likely to lower down the prices.
quality of product, better shopping experience and customer services.
Joint ventures would ease capital constraints
modernisation of the sector.
Arguments against FDI in Retailing
upset the import balance
domestic retailers marginalised
FDI in Retailing in India - Policy and Entry Routes
Manufacturing and Local Sourcing
Wholesale Cash-and-Carry Operation
Some Existing Foreign Players and Prospective Entrants Retailers Type Status 7-Eleven Supermarket Evaluating Amway Direct selling Already in Auchan Hypermarket Evaluating Carrefour Multi-format retailer Wait and watch Dairy Farm Multi-format retailers Tied up with RPG JC Penny Product sourcing Already in Landmark Department Store Already in Lee Cooper Product sourcing Already in Levi's Product sourcing Already in Mango Apparel retailer Already in Marks & Spencer Department Store Already in Metro Cash & carry Already in Oriflame Direct selling Already in Reebok Oint venture Already in Shoprite Wholesale cash-and-carry and franchising Already in Sony Manufacturer Retailer Already in Wal-Mart Hypermarket Agreement with Bharti
The Bharti - Wal-Mart Retail Joint Venture
1. The retail shops will be owned by Bharti Enterprises under the Wal-Mart franchise.
2. The idea is to give Indians the lowest price everyday.
3. As part of the agreement, Bharti was expected to pay a royalty between 2 percent and 3 percent of sales to Wal-Mart for using the latter's brand name.
4. Wal-Mart's logistics skill and Bharti's execution capability will create a potent force in the Indian market."
Lee Cooper Joint Ventures With Pantaloon Retail (India) to market Lee Cooper's denim apparel in India
1. Lee Cooper Group Limited ("Lee Cooper") has formed a 50%-50% joint venture with Indus League Limited, a subsidiary of the Pantaloon Retail (India) Limited, ("Pantaloon")
2. license to market Lee Cooper's denim apparel products and accessories
3. The JV Lee Cooper India Limited, will engage in brand management, franchising, and wholesale and retail activities in India
Reliance Retail ties up with Pearle Europe
Reliance Retail Ltd has announced the signing of a joint venture with Pearle Europe for the launch of a chain of optical stores in India.
The chain will comprise independent stores, and stores within Reliance Retail’s Hypermart, Super and Wellness stores.
According to an official statement, the joint venture will bring world-class retail optical stores to India, with a range of private label frames, lenses, sunglasses and contact lenses and solutions.
Pearle Europe is a subsidiary of HAL Investments, the European investment subsidiary of HAL Holding NV an international investment company based in the Netherlands Antilles.
Staples, Inc. Enters India Through Joint Venture with Pantaloon Retail Limited.
The agreement establishes a platform for Staples to enter the $10 billion office products market in India and allows Pantaloon to benefit from the industry expertise and sourcing network of the world's largest office products company.
This partnership combines Pantaloon's local business knowledge and leading brand with Staples' best practices and global procurement strength.