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  1. 1. A Project Report On “TO STUDY THE EFFECTIVENESS OF CONSUMER LOYALTYPROGRAMME ON SALES PERFORMANCE IN RELIANCE FRESH STORES IN JAIPUR’’ (RELIANCE) Submitted in partial fulfilment for the Award of degree of Master of Business Administration 2011-2012Submitted to: Submitted by:MS. Jaya Pareek Gaurav SharmaMs. Nidhi Tak MBA IV Semester Poornima Group of Institution, Jaipur (An Autonomous Institute of Govt. of Rajasthan) 1
  2. 2. CERTIFICATEThis is to certify that GAURAV SHARMA of MBA IV Semester of “POORNIMASCHOOL OF MANAGEMENT”, Jaipur has completed his project report on “TOSTUDY THE EFFECTIVENESS OF CONSUMER LOYALTY PROGRAMME ONSALES PERFORMANCE IN RELIANCE FRESH STORES IN JAIPUR’’ Underthe supervision of MS. JAYA PAREEK, MS. NIDHI TAK & MS. SAVITAPANWAR, DMS,PGC.To the best of my knowledge, the report is original and has not been copied orsubmitted anywhere else. It is an independent work done by him. DR. VANDANA SHARMA DIRECTOR POORNIMA SCHOOL OF MANAGEMENT 2
  3. 3. DECLARATIONI hereby declare that the project report entitled “To Study the Effectiveness ofConsumer Loyalty Programme on Sales Performance in Reliance FreshStores in Jaipur’’ submitted for the degree of MBA is my original work and theproject report has not formed the basis for the award of any diploma, degree,associate ship or similar titles. It has not been submitted to any other university orinstitution for the award of any degree or diploma. GAURAV SHARMA MBA IV Semester 3
  4. 4. PrefaceThis project is related with the retail industry. Retail according to concise oxfordEnglish dictionary, is “the sale of goods to the public for use and consumptionrather than resale.”The founder chairman of reliance group was Dhirubhai H.Ambani. The managing director is Mr. Mukesh Ambani.Reliance retail limited is concern with “growth through value creation” the relianceindustry firstly opened their retail as named “reliance fresh” in Hyderabad.The aim of this project is to analyse the percentage of loyalty programme ofreliance fresh among the customers. The loyalty is one of the important factorswhich give birth to retention of customers in stores, the frequency in the purchaseand faith in the customer. The project study is not only restricted in store but alsoit is opened its wings for outside world. For starting the project the questionnaireis to be prepared and then this will be filled by respondents. The sample size willbe taken as 150 respondent as convenience.The data will be analysed based on suitable tables by using mathematicaltechnique. The project is mainly analysed by using bar charts. 4
  5. 5. AcknowledgementI express my sincere thanks to my project guide by, MS. JAYA PAREEK, MS.NIDHI TAK & MS. SAVITA PANWAR, DMS,PGC for guiding me right from theinception till the successful completion of the project. I sincerely acknowledge himfor extending their valuable guidance, support for literature, critical reviews ofproject and the report and above all the moral support he had provided to me withall stages of this project.I would also like to thank the supporting staff of “POORNIMA SCHOOL OFMANAGEMENT” for their help and cooperation throughout our project. GAURAV SHARMA 5
  6. 6. TABLE OF CONTENTSS. No. Particulars Pages 1. Introduction to the industry 7-30 2. Introduction to the organization 31-47 3. Introduction to the topic 48-73 4. Research methodology 73-81 4.1 Title of the project 74 4.2 Duration of the project 74 4.3 Objective of study 74 4.4 Type of research 75 4.5 Sample size and method of selecting sample 75 5. Facts & Findings 81 6. Analysis and interpretation 87-96 7. Conclusion 97 8. Recommendation and suggestions 98 9. Appendix 99-101 10. Bibliography 102 6
  7. 7. INTRODUCTION OF THE INDUSTRY INTRODUCTION OF THE INDUSTRY 7
  8. 8. Evolution of Retail Retail, according to Concise Oxford English Dictionary,is “the sale of goods to the public for use or consumption rather than for resale”.The barter system was first known retail form; then the currency changed hands;we had the handcart vendor selling goods in the streets; of late we have a pop &mom stores which compliment the neighbourhoods stores. The first retailer inIndia includes Bata, Pantaloon, Bombay Dyeing, Spencer’s, and Nilgiris &Higginbotham. The current retail scenario is controlled by the likes of Shoppers’Stop, Brand Outlets, Big Bazaars etc. The top 4 world players include Wal-Mart,Carrefour, Tosco and Metro. The opportunities as mentioned are aplenty withclose to15000000 sq.feet of retail space is under construction for various malls &shopping centres across the country.Retailing consists of the sale of goods or merchandise, from a fixed location suchas a department store or kiosk, in small or individual lots for direct consumption bythe purchaser. Retailing may include subordinated services, such as delivery.Purchasers may be individuals or businesses. 8
  9. 9. In commerce, a retailer buys goods or products in large quantities frommanufacturers or importers, either directly or through a wholesaler, and then sellssmaller quantities to the end-user. Retail establishments are often called shops orstores. Retailers are at the end of the supply chain. Manufacturing marketers seethe process of retailing as a necessary part of their overall distribution strategy.What is retailing  The sale of goods or commodities in small quantities directly to consumers.  Buy, Sell & MoveBuy, Move & SellHaving gone through some of the terminologies in retail and having seen a broadoutline of retail now let’s look into the 3 basic things, which govern the retailmarket. 9
  10. 10. 1. BuyBuying would involve the following activities, which would mean setting theguiding principles for all the merchandise decisions that a retailer makes. It shouldreflect target market desires, retailer’s institutional type, market place positioning,defined value chain, supplier capabilities, costs, competitors & product trends.2. MoveIt can be easily said but the processes that are involved in the “move” part arecomplex but simple. From the product stage through the processing stage to thepacked ones the move stage would continue.Various levels that involves in “move” part are: The buyer shortlists the product,places the order. The vendors receives the order, process the same, packs andsend it to the distribution centre from where it reaches the store for the customerto buy.One of the fast picking up aspects of the logistic in India is the COLD CHAIN.More and more organizations are looking for various aspects of cold chain toensure that the products where temperature plays a vital role is maintained andsustained till such time the sale happens.The Merchandising and Category management is another important function ofthe retail industry. In this we have to opt for right product, place, quantity, quality,mix, price and time. Each of the stores would operate on certain basic businessprojection and all others will follow a typical pattern. For this pattern to be arrived,the merchandise management plays a big role. The merchandise can make orbreak an organization of its profitability.When we say category management, it would amply the assortments of productsthe customer sees as reasonable substitutes for each other with similarcharacteristics. It also covers the process of managing merchandise in a retailbusiness with the objective of maximizing sales and profits of a category. Thecategory manager is also responsible for developing assortment plans for theentire category, buying pricing and coordinating promotion. 10
  11. 11. 3. SellFinally of the Buy, Move & Sell comes the selling part of it which involves arunning of a retail stores. Operations as it is known are the crucial functions,which derive its strength from various other faculties.The beginning of the day is done with the store being opened by the competentperson. The first activity to happen will be the housekeeping activities followed bythe staff scheduling. The morning’s meetings happen chaired by the head of thestore. The stock outs are established and the replenishments happen as the dayprogresses, though it is suggested that replenishments of the stock should alwayshappen when the customer is not there. The head of the store usually inspectsany one or all the departments of the store, which is otherwise called the “FLOORWALK”.The cashier would ensure that all the cashiers have enough and correct floatcash, whether the POS role, card swap machine and pen is in place or not. Instarting of the day head cashier gives all cashiers a sum of Rs.1500 as loan.Having set everything in place, the store would then be opened for the customers.The department’s heads in turn would brief their team on the achievements of theprevious day and set target of the day. During this brief any incidents worthmention would also be discussed and the promotion offers, which are current, willalso be taken up. Orders will be placed for all the stock out SKU follows up willalso be done for those articles, which are delivered during the day. Cleaning ofthe self and also ensuring that the stocks are kept as per the planogram arechecked. It’s just not the duties mentioned above but selling also happensimultaneously.At the end of day the process of concluding the activities is called the “END OFTHE DAY” activities. As the person who is in charge of closing the store goesaround checking whether the locks are in place or not; the high valuemerchandise counters are properly secured; check for any person hidden in thechange rooms or cloaks rooms; the cashier would ensure that all the money that 11
  12. 12. has been given as float tallies apart from the money that need to be submitted bythe respective cashiers.There will be a checklist that needs to sign off together by the security as well asthe in charge for having checked for conformity at the end of the dayEVOLUTION OF RETAILING IN INDIAIn the early eighties “retailing’’ in India was synonymous with peddlers, vegetablevendors, neighbourhood kirana stores (small grocery stores) or sole clothing andconsumer durable stores in a nearby town. These retailers operated in a highlyunstructured and fragmented market.Very few retailers operated in more than one city. Before1990, organized retailing in India was led by fewmanufacturer owned retail outlets, mainly from the textileindustry, for example, Bombay Dyeing, Raymond’s,S Kumar’s and Grasim. But, the Indian retail scenariostarted changing in the nineties.This was further augmented by the changing profile of the Indian consumers, whowere being greatly influenced by western lifestyles. Increasing wages of theemployees working in Greenfield sectors gave rise to a completely new group ofbuyers with higher purchasing power.Moreover, the entry of multinational brands also generated considerableenthusiasm and interest among domestic retailers. This encouraged setting up ofretail chains by domestic retailers like Cotton World (Mumbai), Nirula’s (Delhi) andthe Viveks and Nilgiris in the south. THE CONCEPT OF RETAILING 12
  13. 13. Retailing is the interface between the producer and the individual consumer,buying for personal consumption. This excludes direct interface between themanufacturer and institutional buyers such as the government and other bulkcustomers. The distribution of consumer products begins with the producer andends at the ultimate consumer. Between the producer and the consumer there isa middleman---the retailer, who links the producers and the ultimate consumers.A retailer is one who stocks the producer’s goods and is involved in the act ofselling it to the individual consumer, at a margin of profit. As such, retailing is thelast link that connects the individual consumer with the manufacturing anddistribution chain.Retailing is defined as a conclusive set of activities or steps used to sell a productor a service to consumers for their personal or family use. It is responsible formatching the demands of individual consumers with supplies of all themanufacturers. A retailer is a person, agent, agency, company, or organizationwhich is instrumental in reaching the goods, merchandise, or services to theultimate consumer. Retailers perform specific activities such as anticipatingcustomer’s wants, developing assortments of products, acquiring marketinformation, and financing.A common assumption is that retailing involves only the sale of products availablein stores. But, it also includes the sale of services like those offered at arestaurant, parlour, or by car rental agencies. The selling need not necessarilytake pl ace through a store. Retailing encompasses selling through mail, theInternet, door-to- door visits; any channel that could be used to approach theconsumer.Retailing has become such an intrinsic part of our everyday lives that it is oftentaken for granted. The nations that have enjoyed the greatest economic andsocial progress have been those with a strong retail sector. 13
  14. 14. Why has retailing become such a popular method of conducting business? Theanswer lies in the benefits a vibrant retailing sector has to offer – an easier accessto a variety of products, freedom of choice and higher levels of customer service.To enter retailing is easy and to fail is even easier. Therefore, in order tosurvive in retailing, a firm must do a satisfactory job in its primary role i.e., cateringto customers. Retailers’ cost and profit vary depending on their type of operationand major product line. Their profit is usually a small fraction of sales and isgenerally about 9-10%. Retail stores of different sizes face distinct challenges andtheir sales volume influences business opportunities, merchandise purchasepolicies, nature or promotion and expense control measures.In today’s competitive environment retailers have redefined their role in general,and in the value chain in particular. Retailers act as gatekeepers who decide onwhich new products should find their way to the shelves of their stores. As aresult, they have a strong say in the success of the product or service launchedby a business firm. A product manager of household appliances claimed,‘Marketers have to sell a new product several times, first within the company, thento the retailer and finally to the user of the product.’It is a well-established fact that manufacturers need to sell their products throughretail formats that are compatible with their business strategy, brand image, andmarket profile in order to ensure a competitive edge. The role of retailers in thepresent competitive environment has gained attention from manufacturersbecause external parties such as market intermediaries and supplying partnersare becoming increasingly powerful. It is necessary for marketers of consumerproducts to identify the need and motivations of their partners in the marketingchannel. This is especially true in the case of new products. The increasingnumbers of product categories followed by multiple brands in each categorycomplicate decision-making for both manufacturers and market intermediaries.Retailers want to optimize sales within the limited shelf space, governed by theirindividual sales philosophy. 14
  15. 15. They undertake risk in selecting a portfolio of products or brands to offer to theircustomers. Retailers have to make optimum selection of goods to be sold giventhe following major concerns: • Selling space available is relatively fixed and must return maximum profits. If such space is occupied by merchandise that is not moving, it will not result in profit. The retailer may have to resort to substantial price reductions in order to get rid of the unsold stock. • There is always the risk of non-performance in terms of quality, supplies etc., which in turn harms the image of the retail outlet.Retailing is a dynamic industry---constantly changing due to shifts in the needs ofthe consumers and the growth of technology. Retail formats and companies thatwere unknown three decades ago are now major forces in the economy.Therefore, the challenges for retail managers the world over are increasing---theymust take decisions ranging from setting the price of a bag of rice to setting upmultimillion dollar stores in malls. Selecting target markets, determining whatmerchandise and services to offer, negotiating with suppliers, trainingsalespeople---these are just a few of the many functions that a retail manager hasto perform on a perpetual basis. The world over retail business is dominated bysmaller family run chain stores and regionally targeted stores but gradually moreand more markets in the western world are being taken over by billion dollarmultinational conglomerates, such as Wal-Mart, Sears, McDonald’s, Marks andSpencer. The larger retailers have managed to set up huge supply/distributionchains, inventory management systems, financing pacts and wide-scalemarketing plans.In the backdrop of globalization, liberalization and highly aware customers, aretailer is required to make a conscious effort to position himself distinctively toface the competition. This is determined to a great extent by the retail mix strategyfollowed by a company to sell its products. 15
  16. 16. CHARACTERISTICS OF RETAILINGRetailing can be distinguished in various ways from other businesses such asmanufacturing.Retailing differs from manufacturing in the following ways: • There is direct end-user interaction in retailing. • It is the only point in the value chain to provide a platform for promotions. • Sales at the retail level are generally in smaller unit sizes. • Location is a critical factor in retail business. • In most retail businesses services are as important as core products. • There are a larger number of retail units compared to other members of • the value chain. This occurs primarily to meet the requirements of geographical coverage and population density.Direct Interaction with CustomersRetail businesses have a direct interaction with end-users of goods or services inthe value chain. They act as intermediaries between end-users and supplierssuch as wholesalers or manufacturers. Therefore, they are in a position toeffectively communicate the response and changing preferences of theconsumers to the suppliers or sales persons of the company. This helps themanufacturers and markets to redefine their product and change the componentsof its marketing strategy accordingly. Manufacturers require a strong retailnetwork both for reach of the product and to obtain a powerful platform forpromotions and point-of-purchase advertising. Realizing the importance ofretailing in the entire value chain, many manufacturers have entered into retailbusiness by setting up exclusive stores for their brands. This has not only 16
  17. 17. provided direct contact with customers, but has also acted as advertisement forthe companies and has provided the manufacturers with bargaining power withrespect to other retailers who stock their product. Retailing provides extensivesales people support for products which are information intensive, such as in thecase of consumer durables.Lower Average Amount of Sales TransactionThe average amount of sales transaction at retail point is much less incomparison to the other partners in the value chain. Many consumers buyproducts in small quantities for household consumption. Due to lower disposableincomes, some consumer segments in India even buy grocery items on a dailybasis rather than a weekly or a monthly basis. Inventory management becomes achallenge for retailers as a result of the many minor transactions with a largenumber of customers. Hence, retailers must take care of determining averagelevels of stock, order levels and keep a tight control on costs associated with eachtransaction in the selling process. Credit verification, employment of personnel,value-added activities like bagging, gift-wrapping and promotional incentives alladd up to the costs. One way to resolve this is for the retail outlets to be able toattract the maximum possible number of shoppers.Point-of-purchase Display and PromotionsA significant relevant chunk of retail sales comes from unplanned or impulsepurchases. Studies have shown that shoppers often do not carry a fixed shoppinglist and pick up merchandise based on impulsive or situational appeal. Many donot look at ads before shopping. Since a lot of retail products are low involvementin nature, impulse purchases of the shopper is a vital area that every retailer musttap into. Therefore, display, point-of-purchase merchandise, store layout andCatalogues become important. Impulse goods like chocolates, snack foods andmagazines can sell much more quickly if they are placed in a high visibility andhigh traffic location. 17
  18. 18. FUNCTIONS IN RETAILING PROCESSRetailers play a significant role as a conduit between manufacturers, wholesalers,suppliers and consumers. In this context, they perform various functions likesorting, breaking bulk, holding stock, as a channel of communication, storage,advertising and certain additional services.SORTINGManufacturers usually make one or a variety of products and would like to selltheir entire inventory to a few buyers to reduce costs. Final consumers, incontrast, prefer a large variety of goods and services to choose from and usuallybuy them in small quantities. Retailers are able to balance the demands of bothsides, by collecting an assortment of goods from different sources, buying them insufficiently large quantities and selling them to consumers in small units.The above process is referred to as the sorting process. Through this process,retailers undertake activities and perform functions that add to the value of theproducts and services sold to the consumer. Supermarkets in the US offer, onand average, 15,000 different items from 500 companies. Customers are able tochoose from a wide range of designs, sizes and brands at just one location. Ifeach manufacturer had a separate store for its own products, customers wouldhave to visit several stores to complete their shopping. While all retailers offer anassortment, they specialize in types of assortment offered and the market towhich the offering is made. Westside provides clothing and accessories, while achain like Nilgiris specializes in food and bakery items. Shoppers’ Stop targets theelite urban class, while Pantaloons is targeted at the middle class.BREAKING BULKBreaking bulk is another function performed as part of retailing. The word retailingis derived from the French word retailler, meaning ‘to cut a piece off’. To reduce 18
  19. 19. transportation costs, manufacturers and wholesalers typically ship large cartons ofthe product, which are then tailored by the retailers into smaller quantities to meetindividual consumption needsHOLDING STOCKRetailers also offer the service of holding stock for the manufacturers. Theymaintain an inventory that allows for instant availability of the product to theconsumers. It helps to keep prices stable and enables the manufacturer toregulate production. Consumers can keep a small stock of products at home asthey know that this can be replenished by the retailer and can save on inventorycarrying costs.ADDITIONAL SERVICESRetailers ease the process of change in ownership of merchandise by providingservices that make it convenient to buy and use products. Providing productguarantees, after-sales service and dealing with consumer complaints are someof the services that add value to the actual product at the retailers’ end. Retailersalso offer credit and hire-purchase facilities to the customers to enable them tobuy a product and pay for it later. Retailers fill orders, promptly process, deliverand install products. Sales people are also employed by retailers to answerqueries and provide additional information about the displayed products.The display itself allows the consumer to see and test products before actualpurchase. Retail essentially completes transactions with customers.CHANNEL OF COMMUNICATIONRetailers also act as the channel of communication and information between thewholesalers or suppliers and the consumers. From advertisements, salespeople 19
  20. 20. and display, shoppers learn about the characteristics and features of a product orservices offered. Manufacturers, in turn, learn of sales forecasts, delivery delays,and customer complaints. The manufacturer can then modify defective orunsatisfactory merchandise and services.TRANSPORT AND ADVERTISING FUNCTIONSSmall manufacturers can use retailers to provide assistance with transport,storage, advertising and pre-payment of merchandise. This also works the otherway round in case the number of retailers is smallCLASSIFICATIONS OF RETAIL FORMATS 20
  21. 21. A.B. 21
  22. 22. TRENDS IN RETAIL FORMATS 22
  23. 23. On account of liberalization, globalization and consumer preferences the retailindustry is continuously going through changes. While multinational retail chainsare looking for new markets, manufacturers are identifying, redefining, or evolvingnew retail formats. The existing retail houses are also gearing up to face theemerging competition from the organized sector and the changing outlook of theconsumers. For example, consumer spending is shifting from goods to services.Accordingly the retailers too are fast adjusting to the changing consumerpreferences.Consumers are not only looking for the core products or functional benefits fromthe retailers but also the non-functional benefits, which need to be compatible withtheir lifestyles. For example, most of the traditional eating joints in India such asHaldiram, Bikaner and Sagar Ratna have revised their product offerings andatmospherics on the lines of the multinational chains to compete with them and toserve better, the changed expectations of the consumers.Retailers can be classified according to their selling processes as store basedretailers or non-store retailers.1. Store Based Retailers :Store based retailers operate at fixed point-of-sale locations. Their stores arelocated and designed to attract a high volume of walk-in customers. In general,store based retailers offer a wide variety of merchandise and use mass-mediaadvertising to attract customers. They typically sell merchandise for personal orhousehold consumption, but sometimes they also serve business and institutionalclients.Store based retailers can be further classified on the basis of various parameterslike: 23
  24. 24. (A) Ownership (B) Strategy mix (C) Service vs. Goods retail mixRETAIL IN DETAILThe Indian Retail market is worth a whooping 930000 crores. If one has to dividebetween the organized and unorganized sectors the major contribution comesfrom the unorganized sector, which contributes close to 98% of the total retailmarket. The balance of 2% amounts anywhere between 18-2000 cores.The difference between organized and unorganized sectors in the US & some ofthe Far East Asian countries are pretty low unlike in India. With the advent ofseasoned players in the field of retail in India, the gap is likely to be abridged inthe coming years.The difference between them is 85:15 in favour of organized sector in the US and81:19 in the favour of the organized sector in Taiwan.The employment opportunities in retail are pretty high. But again the ratio oforganized and unorganized is skewed towards the unorganized sector. While theorganized retail sectors deploys 500000 people & the unorganized sector deploysclose to 80 times the workforce.Factors that influence the growth in retail:The DINK/HINK families, working women, working parents and the risingdisposable income has contributed to the growth of Retail across. The middle-income group is the fastest growing segment in the country today. Further theelectronic media is also aiding the growth of the Retail industry.To summarize the top 6 factors that drive the growth of the retail industry in Indiawould be as follows:  The Demographics 24
  25. 25.  Lifestyles  Needs and Desires  Shopping Attitudes and Behaviour  Retailers action  Environmental FactorThese six factors clubbed with a co-coordinated logistics make the sale happen.As in any industry there is a social commitment also to be fulfilled. These can berecapitulated as under:  Quality products  Competitive prices  Wide range to choose from  Employment opportunities that are created  The economy would experience sea of change and  Would mean a WIN - WIN situation to everyone.Support Functions:The entire operation is possible with the help of a support team. This supportteam consists of the following:Human Relation-Involves itself in recruitment, training and welfare apart fromtheirregular activitiesGood Receiving-This department is responsible not just for the receipt of goodsbut also checking for their conformity and returns goods to the suppliers as needarises.Maintenance-The entire stores furniture and fixtures are taken care of by themaintenance teamAccounts- the department, which receives all the cash, charge slips and othertypes of tenders; keeps a tag on the local store expenditure and also monitors anydeviation in the transactions. 25
  26. 26. Housekeeping- Mostly it’s an outsourced agency, which does the work. Theykeep the premises clean and tidy at all levels.Security-They are responsible for safeguarding men and material of theorganization.VM-This department maintains the displays and the signage across the stores.CSD-Otherwise known as the customer service desk takes care of the customercomplaints and issuance of merchandise credit and taking care of the loyalty.RETAIL TERMINOLOGIES-Alike any other industry the retail industry also has a wide range of terminologies,which are in use on a day-to-day basis. Few samples of them would include thefollowing:Till - The cash pointTender - The type of payment the customer is makingSKU - Stock keeping unitMerchandise Credit - Credit noteAssortment - Range of products and so forthMaximum Bay Quantity - It is the maximum quantity of each product, which canbe placed on each shelf.Maximum Display Quantity – It is the number of SKUs, which can be directlyseen by the customer in the front side. 26
  27. 27. Retail types-There are three major types of retailing. The first is the market, a physical locationwhere buyers and sellers converge. Usually this is done on town squares,sidewalks or designated streets and may involve the construction of temporarystructures (market stalls). The second form is shop or store trading. Some shopsuse counter-service, where goods are out of reach of buyers, and must beobtained from the seller. This type of retail is common for small expensive itms(e.g. jewelry) and controlled items like medicine and liquor. Self-service, wheregoods may be handled and examined prior to purchase, has become morecommon since the Twentieth Century. A third form of retail is virtual retail, whereproducts are ordered via mail, telephone or online without having been examinedphysically but instead in a catalog, on television or on a website. Sometimes thiskind of retailing replicates existing retail types such as online shops or virtualmarketplaces such as eBay or Amazon.Retail pricingThe pricing technique used by most retailers is cost-plus pricing. This involvesadding a markup amount (or percentage) to the retailers cost. Another commontechnique is suggested retail pricing. This simply involves charging the amountsuggested by the manufacturer and usually printed on the product by themanufacturer.In Western countries, retail prices are often so-called psychological prices or oddprices: a little less than a round number, e.g. $6.95. In Chinese societies, pricesare generally either a round number or sometimes a lucky number. This createsprice points.Often prices are fixed and displayed on signs or labels. Alternatively, there can beprice discrimination for a variety of reasons. The retailer charges higher prices tosome customers and lower prices to others. For example, a customer may haveto pay more if the seller determines that he or she is willing to. The retailer mayconclude this due to the customers wealth, carelessness, lack of knowledge, or 27
  28. 28. eagerness to buy. Price discrimination can lead to a bargaining situation oftencalled haggling — a negotiation about the price. Economists see this asdetermining how the transactions total surplus will be divided into consumer andproducer surplus. Neither party has a clear advantage, because the threat of nosale exists, whence the surplus vanishes for both.Retailers who are overstocked, or need to raise cash to renew stocks may resortto "Sales", where prices are "marked down", often by advertised percentages -"50% off" for example.” Sales" are often held at fixed times of the year, forexample January sales, or end-of-season sales, or Blue Cross Sale.Top Retailer WorldwideRank Retailer Home Country1 Wal-Mart Stores, Inc. U.S.A.2 Carrefour Group France3 The Kroger Co. U.S.A.4 The Home Depot, Inc. U.S.A.5 Metro GermanyRETAIL SECTOR IN INDIAAs the corporate – the Piramals, the Tata, the Rehears, ITC Ltd, S.Kumar’s, RPGEnterprises, Shopper’s Stop, Pantaloons, Reliance Retail, Vishal Mega Mart,Aditya Birla Group, Landmark Group, True Mart race to revolutionize the retailingsector, retail as an industry in India is coming alive.Across the country, retail sales in real terms are predicted to rise more rapidlythan consumer expenditure during 2003-08. The forecast growth in real retailsales during 2003- 2008 is 8.3% per year, compared with 7.1% for consumerexpenditure. Modernization of the Indian retail sector will be reflected in rapidgrowth in sales of supermarkets, departmental stores and hyper marts. Salesfrom these large-format stores are to expand at growth rates ranging from 24% to 28
  29. 29. 49% per year during 2003-2008, according to a latest report by Euro monitorInternational, a leading provider of global consumer-market intelligence.A. T. Kearney Inc. places India 6th on a global retail development index. Thecountry has the highest per capita outlets in the world - 5.5 outlets per 1000population. Around 7% of the population in India is engaged in retailing, ascompared to 20% in the USA.The factors responsible for the development of the retail sector in India canbe broadly summarized as follows:  Rising incomes and improvements in infrastructure are enlarging consumer markets and accelerating the convergence of consumer tastes.  Looking at income classification, the National Council of Applied Economic Research (NCAER) classified approximately 50% of the Indian population as low income in 1994-95; this has declined to 17.8% in 2006-07.  Liberalization of the Indian economy which has led to the opening up of the market for consumer goods has helped the MNC brands like Kellogg, Unilever, Nestle, etc. to make significant inroads into the vast consumer market by offering a wide range of choices to the Indian consumers.  Shift in consumer demand to foreign brands like McDonalds, Sony,Panasonic, etc.The internet revolution is making the Indian consumer more accessible to thegrowing influences of domestic and foreign retail chains. Reach of satellite T.V.channels is helping in creating awareness about global products for local markets.About 47% of India’s population is under the age of 25; and this will increase to55% by 2015.This young population, which is technology-savvy, watch more than 50 TVsatellite channels, and display the highest propensity to spend, will immenselycontribute to the growth of the retail sector in the country. As India continues to 29
  30. 30. get strongly integrated with the world economy riding the waves of globalization,the retail sector is bound to take big leaps in the years to come.The Indian retail sector is estimated to have a market size of about $ 180 billion;but the organized sector represents only 3% share of this market. Most of theorganized retailing in the country has just started recently, and has beenconcentrated mainly in the metro cities.India is the last large Asian economy to liberalize its retail sector. In Thailand,more than 40% of all consumer goods are sold through the super markets anddepartmental stores. A similar phenomenon has swept through all other Asiancountries. Organized retailing in India has a huge scope because of the vastmarket and the growing consciousness of the consumer about product quality andservices.A study conducted by Fitch, expects the organized retail industry to continue togrow rapidly, especially through increased levels of penetration in larger townsand metros and also as it begins to spread to smaller cities and B class towns.Fuelling this growth is the growth in development of the retail-specific propertiesand malls. According to the estimates available with Fitch, close to 25mn sq. ft. ofretail space is being developed and will be available for occupation over the next36-48 months. Fitch expects organized retail to capture 15%-20% market shareby 2010.RETAILING FORMATS IN INDIAMalls: The largest form of organized retailing today. Located mainly in metrocities, in proximity to urban outskirts. Ranges from 60,000 sq ft to 7, 00,000 sq ft 30
  31. 31. and above. They lend an ideal shopping experience with an amalgamation ofproduct, service and entertainment, all under a common roof. Examples includeShoppers Stop, Pyramid, and Pantaloon.Specialty Stores: Chains such as the Bangalore based Kids Kemp, the Mumbaibooks retailer Crossword, RPGs Music World and the Times Groups music chainPlanet M, are focusing on specific market segments and have establishedthemselves strongly in their sectors.Discount Stores: As the name suggests, discount stores or factory outlets, offerdiscounts on the MRP through selling in bulk reaching economies of scale orexcess stock left over at the season. The product category can range from avariety of perishable/ non perishable goods.Department Stores: Large stores ranging from 20000-50000 sq. ft, catering to avariety of consumer needs. Further classified into localized departments such asclothing, toys, home, groceries, etc.Department Stores: Departmental Stores are expected to take over the apparelbusiness from exclusive brand showrooms. Among these, the biggest success isK Rahejas Shoppers Stop, which started in Mumbai and now has more thanseven large stores (over 30,000 sq. ft) across India and even has its own in storebrand for clothes called Stop!.Hyper marts/Supermarkets: Large self service outlets, catering to variedshopper needs are termed as Supermarkets. These are located in or nearresidential high streets. These stores today contribute to 30% of all food & groceryorganized retail sales. Super Markets can further be classified in to minisupermarkets typically 1,000 31
  32. 32. INTRODUCTION TO THE ORGANIZATION INTRODUCTION TO THE ORGNIZATIONReliance group-Founder Chairman of Reliance Group"Growth has no limit at Reliance. I keep revising my vision. Only when you candream it, you can do it." 32
  33. 33. Dhirubhai H. AmbaniFounder Chairman Reliance GroupDecember 28, 1932 - July 6, 2002Shri Dhirubhai Ambani was an exceptional human being and an outstandingleader. He dared to dream on a scale unimaginable before in Indian industry. Hislife and achievements prove that backed by confidence, courage and conviction,man can achieve the impossible. From a humble beginning, he went on to createan enviable business empire within a span of just 25 years. The US$ 54 billionReliance Group is a living testimony to his indomitable will, single-mindeddedication and an unrelenting commitment to his goals.The Groups track record of consistent growth is unparalleled in Indian industryand perhaps internationally too. Today, the Groups turnover represents nearly 3percent of Indias GDP.The corporate philosophy he followed was short, simple and succinct - "Think big.Think differently. Think fast. Think ahead. Aim for the best". He inspired theReliance team to do better than the best - not only in India but in the world. Hewas probably the first Indian businessman to recognize the strategic significanceof investors and discover the vast untapped potential of the capital markets andcanalise it for the growth and development of industry. He was supremelyconfident that finance 33
  34. 34. would never be a constraint in executing his projects because, as he said proudly,Indian investors would provide him with the necessary resources. For him, hispeople were his most important asset.He scouted around for the best and most talented professionals, nurtured themand continuously propelled them to aim for still higher goals. These highlymotivated people comprise the core of what he named: "The Reliance Family".Shri Dhirubhai Ambani visualized the growth of Reliance as an integral part of hisgrand vision for India. He was convinced that India could become an economicsuperpower within a short period of time and wanted Reliance to play animportant role in realizing this goal.The Bhagavad-Gita states, "The actions of a great man are an inspiration forothers. Whatever he does becomes a standard for others to follow." This certainlyapplies to Shri Dhirubhai Ambani.The Reliance Group is Indias largest private sector enterprise, with businesses inthe energy and materials value chain.Groups annual revenues are in excess of USD 22 billion. The flagship company,Reliance Industries Limited, is a Fortune Global 500 company and is the largestprivate sector company in India.Backward vertical integration has been the cornerstone of the evolution andgrowth of Reliance. Starting with textiles in the late seventies, Reliance pursued astrategy of backward vertical integration - in polyester, fibber intermediates,plastics,petrochemicals, petroleum refining and oil and gas exploration and production - tobe fully integrated along the materials and energy value chain.The Groups activities span exploration and production of oil and gas, petroleumrefining and marketing, petrochemicals (polyester, fibber intermediates, plasticsand chemicals), textiles and retail. 34
  35. 35. Reliance enjoys global leadership in its businesses, being the largest polyesteryarn and fibber producer in the world and among the top five to ten producers inthe world in major petrochemical products.The Group exports products in excess of USD 7 billion to more than 100 countriesin the world. There are more than 25,000 employees on the rolls of GroupCompanies. Major Group Companies are Reliance Industries Limited (includingmain subsidiaries Reliance Petroleum Limited and Reliance Retail limited), IndianPetrochemicals Corporation Limited and Reliance Industrial Infrastructure Limited.Mr. Mukesh AmbaniChairman & Managing DirectorMr. Mukesh D. Ambani, age 49, is a Chemical Engineer from the University ofBombay and pursued MBA from Stanford University, USA. He is the son of LateMr. Dhirubhai H. Ambani, Founder Chairman of the Company. 35
  36. 36. Mukesh Ambani is the chairman, managing director and the largest shareholderof Reliance Industries, Indias largest private sector company and a Fortune 500Company. His personal stake in Reliance Industries is 48%. His wealth is US$20.1 billion as of March 2007, making him the worlds 14th richest person and thesecond richest person in India. Mukesh and younger brother Anil are sons of thelate founder of Reliance Industries.Mukesh Ambani joined Reliance in 1981 and initiated Reliances backwardintegration from textiles into polyester fibers and further into petrochemicals. Inthis process, he directed the creation of 60 new, world-class manufacturingfacilities involving diverse technologies that have raised Reliances manufacturingcapacities from less than a million tones to twelve million tones per year.Mukesh Ambani is also steering Reliances initiatives in a world scale, offshore,deep water oil and gas exploration and production program, a pan-Indiapetroleum retail network involving 5,800 outlets and a research-led life sciencesinitiative covering medical, plant and industrial biotechnology.Mr. Mukesh D. Ambani joined Reliance in 1981, initiated Reliance’s backwardintegration from textiles into polyester fibbers, and further into petrochemicals. Inthis process, he directed the creation of several new and large world-classmanufacturing facilities involving diverse technologies that have raised Reliancespetrochemicals manufacturing capacities from less than a million tones to overthirteen million tones per year. He directed and led the creation of the worldslargest grassroots petroleum refinery at Jamnagar, India, with a present capacityof 660,000 barrels per day(33 million tones per year) integrated with petrochemicals, power generation andport and related infrastructure. He had set up the Reliances communicationstechnology initiative that is the largest and most complex information andcommunications technology initiative in the world.Mr. Ambani is steering Reliances initiatives in a world scale, offshore andonshore oil and gas exploration and production program, creation of a pan-Indiapetroleum retail network and setting up of a new export oriented refinery through 36
  37. 37. RILs subsidiary Reliance Petroleum Limited (RPL) with a capacity ofapproximately 580,000 barrels per stream day integrated with a 0.9 MMTPApolypropylene plant.Mr. Ambanis Achievements include: • Conferred ET Business Leader of the Year Award by The Economic Times (India) in the year 2006.Had the distinction and honour of being the co-chair at the World Economic Forum Annual Meeting 2006 in Davos, Switzerland. • Ranked 42nd among the Worlds Most Respected Business Leaders and second among the four Indian CEOs featured in a survey conducted by Price water house Coopers and published in Financial Times, London, November 2004. • Conferred the World Communication Award for the Most Influential Person in Telecommunications in 2004 by Total Telecom, October 2004. • Chosen Telecom Man of the Year 2004 by Voice and Data magazine, September 2004. • Ranked 13th in Asias Power 25 list of The Most Powerful People in Business published by Fortune magazine, August 2004. 30 Growth is Life • Conferred the Asia Society Leadership Award by the Asia Society, Washington D.C., USA, May 2004. • Ranked No.1 for the second consecutive year, in The Power List 2004 published by India Today, March 2004. • Mr. Mukesh D. Ambani is the Chairman of Indian Petrochemicals Corporation Limited, Reliance Petroleum Limited and Reliance Retail Limited. He is member of the Shareholders/ Investors Grievance Committee of the Company.Major Subsidiaries & Associates:-The Reliance Industries Limited is the flagship company of Reliance Group whichhas ownership interest in the following subsidiaries & associates 37
  38. 38. Major Subsidiaries-Reliance Petroleum LimitedReliance Netherlands BV (including Trevira)Reliance Retail LimitedRanger Farms Private LimitedRetail Concepts and Services Private LimitedReliance Retail Insurance Broking LimitedReliance Dairy Foods LimitedReliance Retail Finance LimitedRESQ LimitedReliance digital Retail LimitedReliance Service Solutions LimitedReliance Jamnagar Infrastructure LimitedReliance Haryana SEZ LimitedReliance Industrial Investment & Holdings LimitedReliance Ventures LimitedReliance Strategic Investments LimitedReliance Exploration & Production - DMCCReliance Industries (Middle East) DMCCRELIANCE RETAIL LIMITED-Growth through Value Creation Reliance is gearing up to revolutionize theretailing industry in India. Towards this end, they are aggressively working onintroducing a pan-India network of retail outlets in multiple formats. A world classshopping environment, state of art technology, a seamless supply chaininfrastructure, a host of unique value-added services and above all, unmatchedcustomer experience, is what this initiative is all about.The retail initiative of Reliance will be without a parallel in size and spread andmake India proud. Ensuring better returns to Indian farmers and manufacturersand greater value for the Indian consumer, both in quality and quantity, will be an 38
  39. 39. integral feature of this project. By creating value at all levels they will activelyendeavour to contribute to Indias growth.The project will boast of a seamless supply chain infrastructure, unprecedentedeven by world standards. Through multiple formats and a wide range ofcategories, Reliance is aiming to touch almost every Indian customer andsupplier.The magnitude and strategy of RILs retail foray is sure to have far reaching socialand economic implications by directly influencing the lifestyles of hundreds ofmillions of consumers, besides indirectly impacting the livelihood of tens ofmillions. This indirect impact will be on those engaged in a wide range ofeconomic activities including farming, consumer goods manufacturing, and a hostof myriad other services that bring hundreds of categories of goods and servicesfrom the producers to the final consumers.Business analysts feel that Mukesh Ambanis advantage is his huge financialstrength coupled with a track record of implementing mega projects in recordtime, at globally competitive capital costs. Mukesh Ambani has learned to dreambig from his great visionary father, the late Dhirubhai H Ambani, who isacknowledged as one of Indias tallest, most ambitious and successful businessleaders for his sharp business acumen and skilled people management ability.The announced retail project is any indication; Mukesh Ambani has indeedinherited all these skills from his father. Re-writing the rules of business has beenthe forte of Dhirubhai and Mukesh is attempting the same in retail.Quite clearly,RIL is now all set and ready to conquer the organized retail domain. The Indianretail scene is now going to witness some real fast-paced action, with theconsumer – as always – having the best deal. So, as they say, let the actionbegin!Reliance Digital: 39
  40. 40. Mukesh Ambanis Reliance Industries Ltd launched a second group of retailstores called RELIANCE DIGITAL, which will sell consumer electronics and otherhousehold appliances. Reliance Digital Store has been launched five months afterthe company first introduced its fresh food format outlets, Reliance Fresh, thatstock its own label of groceries under the brand, Reliance Staple.The first of the stores was unveiled at the Shipra Mall at Indirapuram inGhaziabad on the outskirts of the national capital New Delhi April 24 RelianceRetail Ltd, the mega retail venture from the Mukesh Ambani stable, marked itsforay into speciality retail with the launch of its first consumer durable outlet,Reliance Digital, in the NCR region. Reliance is planning to open a total of 150Reliance Digital stores across 70 cities with investment of Rs 1,000 corer over thenext three to four years.One-stop shops: The stores size approx 15,000-30,000 sq. ft, will function asone-stop shops for all technological solutions in the consume durables and ITtelecommunications segment to cater to the tastes and requirement of customers.Reliance Digital stores would sell everything from TV sets, home theatres,refrigerators, cooking ranges, dishwashers to computers and mobile phones fromacross brands. Each store would be set up at an investment of Rs4 to Rs7 croreand also provide after-sales services On private labels, RELIANCE DIGITAL hason offer of more than 4,000 products from over 150 brands. As part of their overallbusiness strategy they will have their own consumer durable private labels, butnot immediately. With its own labels in the Consumer durables segment, RelianceRetail will be fighting for a share of the $5.6-billion domestic market, which isdominated by South Korean brands LG and Samsung and Japans Sony.The domestic consumer electronics market is growing by 10 per cent annuallyand is split between imported South Korean brands such LG and Samsung andJapan’s Sony on the one hand and Indian market leaders like Videocon and BPL. 40
  41. 41. The prices being offered at the Reliance Digital stores will be most competitiveand if any consumer finds a cheaper product in the market within 30 days they willnot hesitate to match the offer. Besides, the stores will also provide pre- and postsales services through its in-house Reliance cares Q vertical. The stores will alsooffer finance schemes for consumers for which the retail majors are in talks for tie-ups with several financial institutions, City Financial being one of them.Reliance Industries launched its first retail format called Reliance Fresh inHyderabad. Spread over 2,000-5,000 sq ft, 11 such Reliance Freshneighbourhood convenience stores were come up in the city. These stores sellfresh fruit and vegetables besides staples (dal, atta, rice) as well the company’sin-house brand Reliance Select and Reliance Value.Reliance is gearing up to revolutionize the retailing industry in India. Towards thisend, we are aggressively working on introducing a pan-India network of retailoutlets in multiple formats. A world class shopping environment, state of arttechnology, a seamless supply chain infrastructure, a host of unique value-added 41
  42. 42. services and above all, unmatched customer experience, is what this initiative isall about.The retail initiative of Reliance will be without a parallel in size and spread andmake India proud. Ensuring better returns to Indian farmers and manufacturersand greater value for the Indian consumer, both in quality and quantity, will be anintegral feature of this project. By creating value at all levels, we will activelyendeavour to contribute to Indias growth.The project will boast of a seamless supply chain infrastructure, unprecedentedeven by world standards. Through multiple formats and a wide range ofcategories, Reliance is aiming to touch almost every Indian customer andsupplier.The Fresh stores at Hyderabad are part of a pilot project, which will help companyunderstand customer needs. The pilot for this format will be taken too many othercities over the next few months. Next on the company’s list are bigger citiesincluding Delhi and Mumbai.RIL intends to invest close to Rs 25,000 crore overthe next five years in the retail business. The company plans to establish 4,000retail outlets across various formats by then, and is eyeing sales of Rs 1, 00,000crore over the 5-year period from the retail business.Besides Reliance Fresh, the company also plans to launch larger format storescalled “Feel Fresh Plus” which will be spread over 10,000-15,000 sq ft. The FreshPlus stores will stock fruit and vegetables as Well as apparel, consumerelectronics, FMCG items and even medicines. From Hyderabad, these stores willtravel to Mumbai and Delhi where Reliance has identified up to 80 locations each.But even as the retail debut kicks off with fruit and vegetables, it seems thecompany is doing a rethink on whether to get into the larger formats such ashypermarkets and supermarkets. These two formats require over 1 lakh sq ft ofspace and may not come up at prime city locations. Instead, Reliance iscontemplating tapping alterative sites such as the SEZs for opening hypermarket. 42
  43. 43. The strategy is to open one Reliance Fresh store in a radius of three to four km toserve 1,000-2,000 families. This means about 30-40 stores in the major metros.Reliance Fresh is selling vegetables and fruits sourced from farmers through thecompany’s agri hubs.Reliance Fresh would carry fresh fruits and vegetables, staples, top-up grocery,non-food items and dairy products and a whole lot of other categories at verycompetitive prices. All the stores opened have an average area of about 1,800 sqft and an average of about 20 sales associates attending to customers in eachstore open from 8 a.m. to 10 p.m. on all seven days of the week.A targeted sales turnover of Rs 90,000 crore (US$ 20 billion) by 2010 with aplanned investment of Rs 30,000 crore over the next five years – thats the retailvision of Mukesh Ambani and his RIL retail team. RILs retail venture seems allset to achieve the status of being the flag-bearer of India Retail Inc, and that too inrecord time!Culling information from all possible sources, Images F&R Research attempts toput the Reliance Retail jigsaw in order and see how the concept and strategydifferentiates from the existing competition, how it impacts the intermediaries andconsumers, and more interestingly, how will it stand up to the real competitionfrom global retail powerhouses like Wal-Mart, Carrefour, Target, Metro, Sears andTesco that are eager to enter the Indian retail arena once the FDI barrier is lifted.Read on for the full story…Its been in the news for quite some time now. Earlier,about a year ago, it was only whispered in close industry circles. Slowly thewhispers become louder, and the word gained ground that Indias largest privatesector company, Reliance Industries Limited (RIL), is entering the Indian retailsector in a real big way. But with virtually nothing coming from anyone in the knowinside RIL about their retail plans, this has to be one of the most closely guardedsecrets of Indias corporate story. 43
  44. 44. Amidst all sorts of speculations in the media circles about RILs intended retailforay, the word finally came out on January 23, 2006, when the Mukesh Ambani-controlled Reliance Industries Limited presented the mega retail initiative plans toits board of directors who subsequently gave their consent to pursue the retailbusiness through a wholly-owned subsidiary of the company – likely to bechristened Reliance Retail Limited. The Reliance Retail blueprint envisagesnation-wide chains of hypermarkets, supermarkets, discount stores, departmentstores, convenience stores and specialty stores, in about 800-odd cities andtowns across the length and breadth of India. The RIL board of directors approvedthe initial phase of the retail foray at an estimated cost of Rs 3,350 crore (US$750 million).That was big news for both the national and international media, which went allagog again with intense speculation. Giving full respect to the importance of thisannouncement, more than one leading international daily – chiefly, The FinancialTimes – gave this news a front-page treatment, speculating (like many others)that this investment could just be an initial trance of a much larger commitmentfrom Reliance Industries towards the retail project.Just how big and grand this investment is for the Indian retail sector can begauged by the simple fact that the entire Indian retail sector is estimated to be atRs 1050,000 crore (US$ 233 billion) – growing at five per cent annually – and theestimated share of organised retail is only Rs 36,000 crore (US$ 8 billion), atpresent, albeit growing at over 30 per cent every year.That makes Reliance Retails proposed investments equivalent to about 10 percent of Indias organised retail market – such a level of investment in the Indianretail arena has been unprecedented in the countrys most promising sunriseindustry – retail So much so, projections by the Images-KSA India Retail Report2005 of an organised retail market of Rs 100,000 crore (US$ 22 billion) by 2010now appears conservative, likely to be achieved much earlier than 2010. 44
  45. 45. If Indian retail was lacking a whole-hearted and full-blooded thrust from a big andlarge corporate house (apart from the lukewarm investments made by the Tatasand ITC), it is now all set to change. Mukesh Ambani, who has been nourishingretail ambitions for quite some time now, has clearly positioned himself in to therole of redefining the entire landscape of Indian retail.RIL Set To Become WorldsLargest Real Estate Property Owner. What is even more interesting is thatReliance Industries Limited will far out-surpass the Catholic Church in becomingthe worlds largest owner of real-estate property by virtue of its mega Retail andSatellite Township plans, in the next two to three years!Now what exactly does this mega retail plan portend for the Indian retail sector?In fact, what exactly are RILs plans, in terms of retail strategy? How will RILdifferentiate its stores and concept from existing players who have already movedinto the retail space earlier, and have already established a good foothold? Howwill this impact the existing retail majors – the likes of Pantaloon Retail, TrentIndia, Shoppers Stop, RPG, etc? How will the consumer benefit from RILsventure and how will intermediaries like traders, suppliers and farmers all alongthe supply chain network benefit? What will be the USP of Reliance Retail?And, more significantly, how will this impact the major international retailers whoplan to enter the Indian retail market? Reliance Retail is in fact giving India for thefirst time a real feel of the scale at which these global retail powerhouses actuallyoperate, it is preparing India to stand up to the ensuing competition and in theprocess, allow consumers the full benefits of modern retail.Retail Will Become Core Business of RIL-Reliance Industries Limited is the largest and one of the fastest growing privatesector companies in India, with business activities encompassing almost all major 45
  46. 46. growth sectors of the Indian economy. The company manufactures and markets awide range of products with market Leadership in almost all its businesses.All of Reliance Group production and services ventures have one common feature– global scale operations employing state-of-the-art technology in all fields. Thecompany is truly emerging as a well diversified conglomerate with globalcompetence in technology, management and financial capabilities to meet theneeds of a rapidly growing Indian market. With domestic market shares rangingfrom 40-80 per cent, RIL is also ranked among the top 10 producers globally, forall its major product segments. It is one of Indias largest business Conglomerateswith total revenues of Rs 1, 00,650 crore (US$ 22.6 billion).It is being speculated within the industry that the ROIs made by RIL in the retailspace will far out-shadow its existing core flagship businesses – and very soonretail will become the core business for the Mukesh Ambani-controlled RelianceEmpire.Future Planning:-Company plans to have a pan-India presence by opening stores in 784 cities and600 small towns and achieve a target of Rs.10 billion revenue by 2010 by whichtime it hopes to complete Phase 1. In the first phase company plans to employ500,000 people. It is following an all-inclusive model giving the right affordabilityacross all income groups. Company is aggressively partnering farmers byfollowing a farm-to-fork strategy in its supply chain management model andensures that it delivers fresh fruits and vegetables at affordable prices toconsumers. Currently, Reliance Fresh has over 100 stores across the country.Reliance Fresh also offers a membership and loyalty programme - Reliance One -to deliver customized benefits to frequent shoppers. Currently, it has 200,000loyalty customers across Hyderabad, Jaipur and Chennai.Reliance Retail, the 100% subsidiary of Reliance Industries, on October 28unveiled Reliance Fresh, the first of its multi-format retail foray involving an 46
  47. 47. investment of Rs 25,000 crore.Reliance Fresh is the company’s brand forneighbourhood fresh-food outlets. It will also sell kitchen equipment and otheredibles.Besides, it has planned hypermarkets, supermarkets, discount stores,department stores, convenience stores and specialty stores, to be unveiledshortly.The Reliance Fresh supermarket chain is RIL’s Rs 25,000 crore venture and itplans to add more stores across different geographies, and eventually have apan-India footprint by year 2011.The super marts will sell fresh fruits and vegetables, staples, groceries, fresh juicebars and dairy products and also will sport a separate enclosure and supply-chainfor non-vegetarian products.Currently, selling through company-owned stores currently totals just $8 billion inIndia. Industry estimates say that the country’s retail industry is worth $300 billion,that is about Rs 13, 50,000 crore. This stands a chance to blossom to $427 billionin the next four years. Organized retail accounts for just over Rs 35,000 crore.Reliance Fresh bids to tap the potential for organized retail in the country.Point of Sale Software System-Retail Shoreline is an open-standards, fully integrated and cross-functional Pointof Sale (POS) and store management software system. Its uniqueness is in thefunctionality, world-wide install base, and hardware independence.Multi-Concept Functionality that delivers a fully integrated POS solution to meetall of your business needsOpen by Design supports industry standards and is hardware independent plusintegration with other third-party retail applications is straightforward, affordableand low riskAdvanced Promotion Features enable a single point of update for pricing andpromotions across all retail formatsGraphical, Easy to Use flexible intuitive user interface, touch-screen capabilitiesand even graphical customer screens, means that cashier training is minimal andcustomer interaction is effortless 47
  48. 48. Quick Service Deli, provides a powerful method of managing fresh-madesandwiches and deli items. Fuel provides full support for operating an onsite fuelstation, supporting a full range of fuel station and supermarket servicesRetalix BackOffice is tightly integrated with Retalix Store Line, and offers POSitem management and reporting, DSD receiving, label and sign printing, handheldRF communications, host communications and in-store orderingRetalix Pocket Office is a mobile platform that enables users to manage storeoperations anywhere in the store, taking the application to the business decisionpoint, while on the sales floor or receiving dock.Retalix Store Line is installed in more than 250,000 POS terminals worldwide,and is the selected POS solution of top-tier retailers such as Tesco, Publix,Sainsburys, Woolworths Australia, Delhaize Group, Hy-Vee, and the A.S. WatsonGroup.Supply Chain ManagementA supply chain is a network of facilities and distribution options that performs thefunctions of procurement of materials, transformation of these materials intointermediate and finished products, and the distribution of these finished productsto customers. Supply chains exist in both service and manufacturingorganizations, although the complexity of the chain may vary greatly from industryto industry and firm to firm. 48
  49. 49. Farmers Collection centreReliance Fresh Distribution centre 49
  50. 50. INTRODUCTION TO THE TOPIC INTRODUCTION TO THE TOPICReliance Fresh Loyalty ProgrammeNowadays it is important to earn loyalty of investors, employees and customers. 50
  51. 51. The essence of customer loyalty, dimensions of customer loyalty, mission, goals,tasks of customer loyalty as well as disputes a process of developing customerloyalty programmed: choice of a target group, grounding the structureimplementing customer loyalty programmed, registration of participants and typeof the programmed, collection of information about customers and Storing, waysto communicate with customers, establishment of privileges to participants of theloyalty programmed and evaluation of the programmed success.IntroductionLoyalty demonstrates person’s disposition to brand of goods (service),supermarket, category of goods, a certain activity. An enterprise seeks loyalty ofinvestors, employees and customers in order to consolidate its position in themarket.There is a linkage between these participants of the business. The growth ofrevenues and share of the market enables to attract potential customers orcustomers of competitors. The growth of the market share stimulates more rapidexpansion of the enterprise and its competitive advantage. It makes attracting ofinvestors easier.A prosperous enterprise can offer personnel good pays for their job and createconditions for their career. It helps to keep the best employees who affect theresults of reducing costs, improving quality, and increasing productivity. Thehigher productivity is one of the conditions to pay larger salaries to theemployees, to bankroll trainings or other programmers stimulating loyalty ofemployees. Enterprises create loyalty programmers in order to develop loyaltyand to reward.It is effective marketing instrument helping to create such a situation where allinterested sides win. Customer loyalty programmers are more frequent. Loyaltyprogrammes allow enterprises to understand Their customers better as well as tosatisfy their needs and expectations.Customer loyalty programmes relate enterprise and customers, initiate permanent 51
  52. 52. dialogue between them, and increase satisfaction of customers also they are asource of different information about customers, they mitigate potential shift of thebest customers to competitors, and help to cooperate with partners and to keepterms with competitors .The studies of loyalty programmes got activated in Western countries in the lastdecade of the XX century. Effect of loyalty programmes and factors of successwere analyzed in fields of automobile, packer goods, finance, airlines, retail, andtelecommunication services.In Lithuania there are not many scientific publications related with methodology ofdeveloping loyalty programmes, their application advantages, and arisingproblems yet. We can pontifically assume that practice of developing loyaltyprogrammes is more advanced than theory. Therefore, it is necessary to find ananswer to the question how Customer loyalty programme should be developingthat it will be useful for both enterprise and customer.Dimensions of customer loyalty-Customer loyalty means the trust that enterprise gains making and developingmutual useful relationships with customer. Referring to Lovelock and Wright(1999), loyalty is customer’s voluntary decision to maintain long-term relationswith the enterprise. Successful long-term relations that lead to loyalty help toreduce a risk and uncertainty arising from the consumption that nowadays getsmore and more complex. Customer will be loyal if he or she gains more benefitthan other enterprise can offer. If enterprise, its goods or services disappointcustomer or suggestion of other enterprise is more valuable to customer, theprobability that customer will give 52
  53. 53. Preference to competitor of the enterprise will increase. Discussions on differentcustomer loyalty dimensions bringing influence on its management take place inthe scientific literature. The source of loyalty studies was a form of customerbehaviour Hard-core loyalty is distinguished for devotion to the enterprise,repeated purchase probability, staying with the current provider andrecommendations for the enterprise to friends, colleagues, family members, etc.By now some scientists accept such approach to loyalty. But scientists more oftenaccent attitudinal loyalty as other dimension of the loyalty now. Customer’s loyalattitude shows a conscious effort to evaluate competing brands, customer’spreferences and willingness to purchase goods or services. Lee, distinguishcustomer’s responsibility and preferences to brand as the features of loyalattitude. Loyal behaviour and loyal attitude influence the enterprise in differentways. Loyalty based on customer attitude could be more vulnerable when loyalty isbased on behaviour. According to them, it is necessary to estimate that behaviourand attitude are changing over time, so loyalty is changing, too. Without above-mentioned dimensions of the behaviour and the attitude, accent cognitive loyaltyemphasizing complexity of the loyalty. Calls cognition-based or cognitive loyalty as rational because customer makesdecisions recognizing the processes in the enterprise, thinking, handlinginformation, estimating the technology, etc.The scientist points other important dimension of loyalty – emotional loyalty. It is aresult of customer feelings, expectations, and interpersonal relationships withemployees. Distinguish the importance of expectations and experience, butdistinguish the importance of customer interpersonal relationships withemployees. Interpersonal relationship and mutual trust determine social comfort,greater attention, and sometimes growth into friendship. It becomes switchingbarriers to other provider of goods or services. What determines customerloyalty? Scientists often point customer satisfaction assume that different level of 53
  54. 54. satisfaction matches up to different level of loyalty. The scientists classify customers into four groups considering satisfaction andloyalty relation: loyalist/apostle (high satisfaction -high loyalty), defector/terrorist(low satisfaction - low loyalty), mercenary (high satisfaction - low loyalty), andhostage (low satisfaction - high loyalty). Do not deny dependence betweencustomer satisfaction and loyalty. But they notice that low customer satisfaction(sometimes even dissatisfaction) not always become the reason of making abreak of relations with enterprise. It happens when enterprise has a dominantposition in the market; its brand of goods (services) is well-known, offering goods(services) is a bit different, it is high switching costs to other provider, etc.Mission, goals and tasks of loyalty programme-Loyalty programmes are especially popular in the end customer market.Nowadays it is difficult to imagine the activity of supermarkets, gas stations,airlines, insurance companies and other companies without them. For example, inUSA 70% of households, in Holland 80% of households have at least one loyaltycard. The goals of loyalty programmes can be different. Distinguishes mission,goals, main and secondary tasks. Everyyalty programme is created in order tostrengthen the positions of the enterprise in the market – increase of marketshare, income and profitability of activity. In order to implement the goal of theloyalty programme, the enterprise should deal with five key tasks as following: 54
  55. 55. 1) To develop and strengthen loyalty of present customers. The enterprise seeksthis by undertaking to meet customers needs better than other participants of themarket during all period of relationship with customers;2) To attract new customers. The enterprise can seek it in two different costlyways, namely: 1) Suggesting attractive privileges stimulating to become a participant of the loyalty programme, and 2) Attracting these who have heard good responses of participating in the loyalty programme. In our opinion, in the first case the enterprise needs more effort and resources. When participants of loyalty programme advertise the programme, it depends on how the enterprise reminds them about the loyalty programme and its objectives, benefit for participants, how they value receivable benefit, etc.;3) To create a database of customers. Without the database customerrelationship management is Impossible. In the database not only demographicaldata of customers should be, but also information about their behaviour should bestored, for example, preferences of consumption, acceptance of brands,periodicity and quantity of purchase, the change of the brand, etc.4) To provide maintenance to departments of the enterprise implementingfunctions of development and Research of goods (services). The data aboutcustomers help to communicate with them directly and to find out difficulties ofconsumption, what attributes of goods (services) should be improved, to get ideasfor creating new goods (services). The obtained information of qualitativeresearch does not reflect the opinion of all consumers. But referring toconsumer’s live word is essential in preparing to comprehensive quantitativeresearch of the market;5) To provide possibilities to communicate between participants of theprogramme. It will help Service provider or agent, who initiates or controls theprocess of communication, to communicate with Customers regularly and directly. 55
  56. 56. 56
  57. 57. The process of loyalty programme development-The developing of loyalty programme requires the following sequence:1) To identify a target group of the loyalty programme,2) To decide what kind of structure will implement the programme,3) To decide how customers will be registered and what kind of the programme it willbe,4) To decide how data about customers will be got and stored,5) To chose in what way it will be communicated with participants of the programme,6) To decide what privileges will be as a reward for customer loyalty,7) To evaluate a success of the programme.Target group of loyalty programme. Before developing loyalty programme theenterprise should find out What customer is good? The value of different segments ofcustomers is not the same to enterprise. So it is required to define what kind ofcustomers the enterprise wants to attract and what their behaviour is desired. Theenterprise needs to divide customers into categories and determine what basis ofloyalty is: rationality or emotions.The most attracting group is customers who often purchase goods and/or services orcontinually retain relations with enterprise. The customers who seldom purchasegoods and/or services are less attractive but they consider the enterprise as theirown. An active part of the customers can join the loyalty programme. Besides, theyare willing to recommend the enterprise to members of referent groups they arebelonging to. Casual customers rarely purchase goods and/or service of theenterprise; their decision is affected by offered benefit. Analysis of disposableinformation helps to distinguish features of good customers. They can be emotionallydevoted, important to the enterprise very much; they can value brand of goods(services), etc.According to the scientists, it is important to determine the customers who will bevaluable in the future and seek for their loyalty. Structure implementing loyaltyprogramme. From the point of organizational view the difficult structure, consisting ofemployees, participants and external partners, implements loyalty programme. 57
  58. 58. Plenty and variety of tasks of loyalty programmes obligate enterprise to decide howthe programme will be organized and implemented – by its own resources or by helpof specialized service provider. the key tasks should be implemented by enterpriseitself but secondary tasks should be given to specialized service providers.Mission of loyalty programme:1. To establish a stable turnover basis; it means that customer loyalty is likeassumption of future profit. So it is counted in the value that will be gained in thefuture;2. To calculate lifetime-value indicators;3. To increase the customer’s value, notably through additional sales;4. To write off costs of investing in the customer’s acquisition;5. To cut transactional operational costs, for example, loyal customers more thanothers understand their Responsibilities and functions are more tolerant to failures,etc.6. To attract new customers through positive responds of loyal customers.We have considered two points of view to mission and tasks of loyalty programme.We can claim that the goal of the loyalty programme is the same but tasks realizingthe mission are different and changing. They depend on activity, size, popularity,strategy of the enterprise and other factors. Despite diversity of loyalty programmes,they deal with tasks of getting and storing information, marketing efficiency, brandacceptance, service development and tasks helping to improve internal processes. 58
  59. 59. The enterprise can use different means to implement the tasks of loyalty programme.In our opinion, they can be divided into groups of organizational (e.g., providing toll-free telephone access and automated attendant telephone answering non-businesshours, publishing home telephone number on business cards, providing an e-mailaddress of customers, providing right, clear and easy-to-read bills, providingadditional service and offering a guarantee, etc.), communicational (e.g., preparinganswers to FAQs, communication with customers continually, promising only whatcan be really implement, listening customers, individualizing communication withcustomers, etc.) and composite (e.g., awarding for customer loyalty in many ways,responding quickly to needs, requests and complaints of customers, distinguishingfrom other enterprises offering similar goods (services), introducing customers tosomething new, making suggestions how to save money, etc.) means. Some of themeans is labelled as strategic means (e.g., identifying long-term customers,distinguishing from other enterprises offering similar goods (services), offering aguarantee, etc.) 59
  60. 60. Why Is Loyalty Important For retail sector?• Hyper competitive environment.• Low differentiation due to standard sku• Leading to low customer stickiness• Increasing awareness about the brandSome Public Facts about Loyalty Programs• 76% of US retailers and 75% of US shoppers are engaged inloyalty programs• Shopper ’s Stop claims more than 60% of• sales from loyalty members• Subhiksha claims 80% of sales comes from loyalty membersHow Can a Loyalty Program Benefit retail?• Build a long lasting relationship with the customer• Go beyond product satisfaction to overall brand experience 60
  61. 61. 1. What is Loyalty Membership? Loyalty Membership is a program devised by Reliance Industries Limited for Reliance Fresh to retain the customers visiting their stores. It is a program by which Reliance Fresh store issues a Loyalty Membership Card to its customers to encourage them to shop at the store regularly. Each time they buy something they collect points which will allow them to redeem cash vouchers to shop at store in future. Followings are the features of the program:--• An electronic method of identifying customer purchases and translating that information to reward customers based on their shopping habits.• There is a reward point system by which customers receive reward points on every purchase made at the store.• For every purchase of Hundred Rupees customer will receive one reward point.• Customer should accumulate minimum of 25 points to get a reward voucher by which he can make purchase at the store equivalent to Rupees 25.• Customers can also retain these points and receive reward voucher whenever they want.• Members will also receive accidental insurance of Rupees 50,000 under this program.• Customer will be issued a permanent membership card after 180 days of issuing of temporary card. 2. How Loyalty Membership Program benefit retailers?• The program data help retailers to adjust their product assortment to customer demands.• Retailers remove or cut back slow-moving items and devote more shelf space to the products that program members buy.• Identify their most loyal customers. 61
  62. 62. • Learn more about their best customers buying habits. • Offer the products and services according to their best customers demand. 3. How do Loyalty-Membership Program works?• To enrol, customers typically complete an application form asking for their Name, address, gender, phone number, e-mail address, income etc.• Each time cardholders make a purchase; the store scans their membership card, tracks the sale and converts this data into useful information.• Loyalty Membership programs give customers points that accrue with their purchases and can be redeemed for rewards. 4. How can food retailers help consumers and manage operations with the data they collect? Analyze shopping habits, refine marketing programs and fine-tune the product mix at the chain or individual store level. Stores use data gleaned from loyalty-marketing programs to:• Identify the promotions that appeal most to various customer groups, e.g., discounts or rebates for price-conscious shoppers; home delivery services for busy shoppers.• Reduce the shelf space devoted to slow-moving items in order to stock the products that customers prefer.• Reveal when products were sold and whether they were sold on or off promotion, and the profit margin on each sale.• Improve speed-to-shelf and decrease out-of-stocks.• Determine how product deletions affect their best customers, and take steps to keep those customers from taking their business elsewhere. 62
  63. 63. 5. What are the advantages of this Loyalty? Following are the advantages of Loyalty Program:• Loyalty Program gives customers the sense that the retailer values them personally and respects them.• This program has an inbuilt system of giving discount over the competitive prices of the goods, if compared from general retailers.• Besides this it also offers an accidental insurance of rupees 50,000. 6. How we can make Loyalty Program more effective?• We can make it effective by introducing various types of schemes which can attract customers.• We can issue prepaid cards in different denominations to our customers and provide additional discounts and offers in addition to our normal reward point system.• We can also categories the cards as Platinum, Gold and Silver based on purchasing capacity/trend of different segments of customers. The advantages can be increased with the upgraded membership.• Card can be made attractive by issuing a plastic or a laminated card in place of the present paper card so that it can be retained for a long time.• Increase level of personalized service/interactive approach with the customers. Through interaction and personalize service the front line staff should ensure to make the customers feel that they are the valued clients.• Cashier should request and enlighten the customers to use their cards.• Regular announcement should be made to encourage customers to use their loyalty cards to redeem reward points. 63
  64. 64. • There can be additional rewards depending on the frequency of usage of card or can be based on their visit to the store.• The Loyalty Program form can be bilingual and should be of one page so that customers find it easy to fill.• The form at present is very lengthy and it becomes irritating for the customer when too much information is being asked. Therefore, it is suggested that the form should be made simple and some irrelevant questions, if any, may be removed.• If need be in order to facilitate the customers, a separate person may be assigned the task for filling up the forms.• Customers need instant answers to their queries. So store staff can be trained about this Loyalty Program so that they can also assist customers.• The FDM should ensure optimum utilization of available manpower. 7. Can Loyalty be bought?• Yes, it can be bought by winning the faithfulness of the customers by giving them quality services without interruption. Meeting the changing expectations of the customers will help strengthen a lasting relationship and ensure that the customers no longer feel like going elsewhere. 8. What is the percentage of customers using loyalty card?• On an average every Reliance Fresh is issuing 80-120 loyalty cards per day.• The ratio of customers using this card floats between 50%-60%.• Educated people are giving more attention to the loyalty card. 9. How many customers are having more then one card and why?• Customers are not able to retain existing paper card for a long time so customers can be issued a new card with the same number if the exiting card cannot be scanned by machine properly. 64
  65. 65. • 10% cards cannot be scanned as these are paper cards and get distorted. 10. How we can build our product awareness?• The advantages of a customer card must be actively conveyed from the management to the customer via the staff.• We can utilize the time of customers by making them aware about the reward program when they are waiting for billing.• Regular announcements can be made by the MSR’s regarding the benefits of the Loyalty Card and asking customers to use the benefits of the program.• Clippings about the product may be flashed through the electronic media.• Details of the Loyalty Program may also be circulated through pamphlets in newspapers. 11. What are the problems being faced by customers? How can work on it?• Token system should be introduced; as yet customers are facing problems as their belongings are not safe outside the store.• Customers have to wait for a long time for billing so we can introduce a system of separate queues for ladies and senior citizens and can also increase number of cash counters.• Customer is coming in Reliance Fresh due to a brand name and thinking its product would be of good quality, but sometimes there are rotten fruits and vegetables with the bunch of fresh ones this leads to a wrong impression on customers. So, there should be proper sorting to maintain the consistency in there quality.• Proper availability of stock should be maintained to cater to the needs of customers. 65
  66. 66. • Sometimes store staff are ignorant and don’t pay much attention to customers and this frustrates the customers. So store staff should be trained to assist the customers in a proper way.• Facility of drinking water should be provided at the store which is not available at present• Toilets for customers should be made available.• There should be counting of items purchased by a customer at the billing point to prevent misplacement. 12. How to increase efficiency of employees?• Providing refreshments like tea, coffee at least in two intervals so that the employees feel energetic and work more efficiently.• Orientation program can be conducted for the employees to make them aware of the targets to be achieved.• The employees should be kept in high state of morale. This could be achieved by the effective leadership.• Career progression of the employees should be chalked out. 66

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