The largest form of organized retailing today. Located mainly in metro cities, in proximity to urban outskirts. Ranges from 60,000 sq ft to 7,00,000 sq ft and above. They lend an ideal shopping experience with an amalgamation of product, service and entertainment, all under a common roof.Examples include Shoppers Stop, Piramyd, Pantaloon.
Chains such as the Bangalore based Kids Kemp, the Mumbai books retailer Crossword, RPG's Music World and the Times Group's music chain Planet M, are focusing on specific market segments and have established themselves strongly in their sectors.
As the name suggests, discount stores or factory outlets, offer discounts on the MRP through selling in bulk reaching economies of scale or excess stock left over at the season. The product category can range from a variety of perishable/ non perishable goods
Large stores ranging from 20000-50000 sq. ft, catering to a variety of consumer needs. Further classified into localized departments such as clothing, toys, home, groceries, etc.
Departmental Stores are expected to take over the apparel business from exclusive brand showrooms. Among these, the biggest success is K Raheja's Shoppers Stop, which started in Mumbai and now has more than seven large stores (over 30,000 sq. ft) across India and even has its own in store brand for clothes called Stop!.
Large self service outlets, catering to varied shopper needs are termed as Supermarkets. These are located in or near residential high streets. These stores today contribute to 30% of all food & grocery organized retail sales. Super Markets can further be classified in to mini supermarkets typically 1,000 sq ft to 2,000 sq ft and large supermarkets ranging from of 3,500 sq ft to 5,000 sq ft. having a strong focus on food & grocery and personal sales.
These are relatively small stores 400-2,000 sq. feet located near residential areas. They stock a limited range of high-turnover convenience products and are usually open for extended periods during the day, seven days a week. Prices are slightly higher due to the convenience premium.
Multi Brand outlets, also known as Category Killers, offer several brands across a single product
category. These usually do well in busy market places and Metros.
Retailing formats in India India’s number of Domestic grocery chains and Early Foreign Entrants
Unorganized : Vast majority of the twelve million stores are small "father and son" outlets
Fragmented : Mostly small individually owned businesses, average size of outlet equals 50 s.q. ft. Though India has the highest number of retail outlets per capita in the world, the retail space per capita at 2 s.q. ft per person is amongst the lowest.
Rural bias: Nearly two thirds of the stores are located in rural areas. Rural retail industry has typically two forms: "Haats" and “Melas". Haats are the weekly markets : serve groups of 10-50 villages and sell day-to-day necessities. Melas are larger in size and more sophisticated in terms of the goods sold (like TVs)
Traditionally three factors have plagued the retail industry:
Experimentation with formats: Retailing in India is still evolving and the sector is witnessing a series of experiments across the country with new formats being tested out. Ex. Quasi-mall, sub-urban discount stores, Cash and carry etc.
Store design : Biggest challenge for organised retailing to create a “customer-pull” environment that increases the amount of impulse shopping. Research shows that the chances of senses dictating sales are upto 10-15%. Retail chains like MusicWorld, Baristas, Piramyd and Globus are laying major emphasis & investing heavily in store design.
Emergence of discount stores: T hey are expected to spearhead the organised retailing revolution. Stores trying to emulate the model of Wal-Mart. Ex. Big Bazaar, Bombay Bazaar, RPGs.
Unorganized retailing is getting organized: To meet the challenges of organized retailing such as large cineplexes, and malls, which are backed by the corporate house such as 'Ansals' and 'PVR‘ the unorganized sector is getting organized. 25 stores in Delhi under the banner of Provision mart are joining hands to combine monthly buying. Bombay Bazaar and Efoodmart formed which are aggregations of Kiranas.
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
Indian retail is fragmented with over 12 million outlets operating in the country. This is in comparison to 0.9 million outlets in USA, catering to more than 13 times of the total retail market size as compared to India
India has the highest number of outlets per capita in the world - widely spread retail network but with the lowest per capita retail space (@ 2 sq. ft. per person)
Annual turnover of Wal-Mart (Sales in 2001 were $219 billion) is higher than the size of Indian retail industry. Almost 100 times more than the turnover of HLL (India's largest FMCG company).
Wal-Mart - over 4,800 stores (over 47 million square meters) where as none of India's large format store (Shoppers' Stop, Westside, Lifestyle) can compare.
The sales per hour of $22 million are incomparable to any retailer in the world. Number of employees in Wal-Mart are about 1.3 million where as the entire Indian retail industry employs about three million people.
One-day sales record at Wal-Mart (11/23/01) $1.25 billion - roughly two third of HLL's annual turnover.
Developed economies like the U.S. employ between 10 and 11 percent of their workforce in retailing (against 7 percent employed in India today).
60% of retailers in India feel that the multiple format approach will be successful here whereas in US 34 of the fastest-growing 50 retailers have just one format
Inventory turns ratio: measures efficiency of operations. The U.S. retail sector has an average inventory turns ratio of about 18. Many Indian retailers KPMG surveyed have inventory turns levels between 4 and 10.
Global best-practice retailers can achieve more than 95 percent availability of all SKUs on the retail shelves (translating into a stock-out level of less than 5 %).The stock-out levels among Indian retailers surveyed ranged from 5 to 15 percent.
AT Kearney has estimated India’s total retail market at US$ 202.6 billion which is expected to grow at a compounded 30 per cent over the next five years.
With the organised retail segment growing at the rate of 25-30 per cent per annum, revenues from the sector are expected to triple from the current US$ 7.7 billion to US$ 24 billion by 2010.
The share of modern retail is likely to grow from its current 2 per cent to 15-20 percent over the next decade
Over next two years India will see several Indian retail businesses attaining a critical mass as growth in the industry picks up momentum driven by two key factors:
Availability of quality real estate and mall management practices
Consumer preference for shopping in new environments
Wal-Mart : huge plans for India. Moving a senior official from its headquarters in Bentonville, Arkansas, to head its market research and business development functions pertaining to its retail plans in India.
New York-based high-end fashion retailer Saks Fifth Avenue has tied up with realty major DLF Properties to set up shop in a mall in New Delhi.
Tommy Hilfiger, retailer of apparels, expects to open one store each in Delhi, Ahmedabad, Lucknow and Bangalore in the next four months.
68 million square feet of mall space is expected to be available by end of 2007, which might lead to over-capacity of malls
Lack of differentiation among the malls that are coming up. One option may be to look at specialization.
Poor inventory turns and stock availability measures - retailers clearly need to augment their operations.
Operations of retailers and suppliers are not integrated. Efficient replenishment practices practiced in the Indian auto and auto-component industry can be leveraged to implement efficient supply chain management techniques.
Supplier maturity, in terms of adherence to delivery schedules and delivering the quantity ordered, is an issue
Sales tax laws - lead to retailers having state-level procurement and storage leads to Indian retailers having higher inventories. VAT has helped alleviate this a bit.
Increased adoption of IT and shrinkage management will be a critical area.
Supply chain and customer relations followed by merchandising, facilities management and vendor development are areas which have significant gaps and proactive training is a key imperative for overcoming these.