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Vishal Customer Relationship Management New (1) Vishal Customer Relationship Management New (1) Document Transcript

  • Customer relationship management Customer relationship management (CRM) consists of the processes a company uses to track and organize its contacts with its current and prospective customers. CRM software is used to support these processes; information about customers and customer interactions can be entered, stored and accessed by employees in different company departments. Typical CRM goals are to improve services provided to customers, and to use customer contact information for targeted marketing. While the term CRM generally refers to a software-based approach to handling customer relationships, most CRM software vendors stress that a successful CRM effort requires a holistic approach. CRM initiatives often fail because implementation was limited to software installation, without providing the context, support and understanding for employees to learn, and take full advantage of the information systems. CRM can be implemented without major investments in software, but software is often necessary to explore the full benefits of a CRM strategy. Other problems occur when failing to think of sales as the output of a process that itself needs to be studied and taken into account when planning automation Overview From the outside, customers interacting with a company perceive the business as a single entity, despite often interacting with a number of employees in different roles and departments. CRM is a combination of policies, processes, and strategies implemented by an organization to unify its customer interactions and provide a means to track customer information. It involves the use of technology in attracting new and profitable customers, while forming tighter bonds with existing ones. CRM includes many aspects which relate directly to one another: 1
  • • Front office operations — Direct interaction with customers, e.g. face to face meetings, phone calls, e-mail, online services etc. • Back office operations — Operations that ultimately affect the activities of the front office (e.g., billing, maintenance, planning, marketing, advertising, finance, manufacturing, etc.) • Business relationships — Interaction with other companies and partners, such as suppliers/vendors and retail outlets/distributors, industry networks (lobbying groups, trade associations). This external network supports front and back office activities. • Analysis — Key CRM data can be analyzed in order to plan target-marketing campaigns, conceive business strategies, and judge the success of CRM activities (e.g., market share, number and types of customers, revenue, profitability). Proponents of CRM software claim that it doesn't only allow more effective ways of managing customer relationships, but also more customer-centric ways of doing business[5]. Types/variations of CRM There are several different approaches to CRM, with different software packages focusing on different aspects. In general, Customer Service, Campaign Management and Sales Force Automation (SFA) form the core of the system (with SFA being the most popular[citation needed]). Operational CRM Operational CRM provides support to "front office" business processes, e.g. to sales, marketing and service staff. Interactions with customers are generally stored in customers' contact histories, and staff can retrieve customer information as necessary. The contact history provides staff members with immediate access to important information on the customer (products owned, prior support calls etc.), eliminating the 2
  • need to individually obtain this information directly from the customer. Reaching to the customer at right time at right place is preferable. Operational CRM processes customer data for a variety of purposes: • Managing campaigns • Enterprise Marketing Automation • Sales Force Automation • Sales Management System Analytical CRM Analytical CRM analyzes customer data for a variety of purposes: • Designing and executing targeted marketing campaigns • Designing and executing campaigns, e.g. customer acquisition, cross-selling, up- selling, addon-selling • Analyzing customer behavior in order to make decisions relating to products and services (e.g. pricing, product development) • Management information system (e.g. financial forecasting and customer profitability analysis) Analytical CRM generally makes heavy use of data mining and other techniques to produce useful results for decision-making Sales Intelligence CRM Sales Intelligence CRM is similar to Analytical CRM, but is intended as a more direct sales tool. Features include alerts sent to sales staff regarding: • Cross-selling/Up-selling/Switch-selling opportunities • Customer drift • Sales performance • Customer trends 3
  • • Customer margins • Customer alignment Campaign Management Campaign management combines elements of Operational and Analytical CRM. Campaign management functions include: • Target groups formed from the client base according to selected criteria • Sending campaign-related material (e.g. on special offers) to selected recipients using various channels (e.g. e-mail, telephone, SMS, post) • Tracking, storing, and analyzing campaign statistics, including tracking responses and analyzing trends Collaborative CRM Collaborative CRM covers aspects of a company's dealings with customers that are handled by various departments within a company, such as sales, technical support and marketing. Staff members from different departments can share information collected when interacting with customers. For example, feedback received by customer support agents can provide other staff members with information on the services and features requested by customers. Collaborative CRM's ultimate goal is to use information collected by all departments to improve the quality of services provided by the company. Consumer Relationship CRM Consumer Relationship System (CRS) covers aspects of a company's dealing with customers handled by the Consumer Affairs and Customer Relations contact centers within a company. Representatives handle in-bound contact from anonymous consumers and customers. Early warnings can be issued regarding product issues (e.g. item recalls) and current consumer sentiment can be tracked (voice of the customer). 4
  • Strategy Several CRM software packages are available, and they vary in their approach to CRM. However, as mentioned above, CRM is not just a technology but rather a comprehensive, customer-centric approach to an organization's philosophy of dealing with its customers. This includes policies and processes, front-of-house customer service, employee training, marketing, systems and information management. Hence, it is important that any CRM implementation considerations stretch beyond technology toward the broader organizational requirements. The objectives of a CRM strategy must consider a company’s specific situation and its customers' needs and expectations. Information gained through CRM initiatives can support the development of marketing strategy by developing the organization's knowledge in areas such as identifying customer segments, improving customer retention, improving product offerings (by better understanding customer needs), and by identifying the organization's most profitable customers CRM strategies can vary in size, complexity, and scope. Some companies consider a CRM strategy only to focus on the management of a team of salespeople. However, other CRM strategies can cover customer interaction across the entire organization. Many commercial CRM software packages provide features that serve the sales, marketing, event management, project management, and finance industries. From this perspective, CRM has for some time been seen to play an important role in many sales process engineering efforts. Implementation issues Many CRM project "failures" are also related to data quality and availability. Data cleaning is a major issue. If a company's CRM strategy is to track life-cycle revenues, costs, margins, and interactions between individual customers, this must be reflected in all business processes. Data must be extracted from multiple sources (e.g., departmental/divisional databases such as sales, manufacturing, supply chain, logistics, 5
  • finance, service etc.), which requires an integrated, comprehensive system in place with well-defined structures and high data quality. Data from other systems can be transferred to CRM systems using appropriate interfaces. Because of the company-wide size and scope of many CRM implementations, significant pre-planning is essential for smooth roll-out. This pre-planning involves a technical evaluation of the data available and the technology employed in existing systems. This evaluation is critical to determine the level of effort needed to integrate this data. Equally critical is the human aspect of the implementation. A successful implementation requires an understanding of the expectations and needs of the stakeholders involved. An executive sponsor should also be obtained to provide high-level management representation of the CRM project. An effective tool for identifying technical and human factors before beginning a CRM project is a pre-implementation checklist. A checklist can help ensure any potential problems are identified early in the process. Privacy and data security System One of the primary functions of CRM software is to collect information about customers. When gathering data as part of a CRM solution, a company must consider the desire for customer privacy and data security, as well as the legislative and cultural norms. Some customers prefer assurances that their data will not be shared with third parties without their prior consent and that safeguards are in place to prevent illegal access by third parties. 6
  • Overview Indian Retail: An Overview As organised retailers carve out a bigger piece of the retail pie for themselves it’s an exciting time for the retail sector. By Dominic K Emerging markets such as India and China are the final frontier for retail taking the focus away from saturated Western markets. Since 2001, 49 global retailers entered 90 new markets, but at the same time, 17 retailers left markets in 2005. The Indian retail industry in valued at about $300 billion and is expected to grow to $427 billion in 2010 and $637 billion in 2015. Only three percent of Indian retail is organised. Retailers of multiple brands can operate through a franchise or a cash-and-carry wholesale model. Retail is India’s largest industry, accounting for over 10 percent of the country’s GDP and around eight percent of employment. Retail in India is at the crossroads. It has emerged as one of the most dynamic and fast paced industries with several players entering the market. That said, the heavy initial investments required make break even hard to achieve and many players have not tasted success to date. However, the future is promising; the market is growing, government policies are becoming more favourable and emerging technologies are facilitating operations. Retailing in India is gradually inching its way to becoming the next boom industry. The whole concept of shopping has altered in terms of format and consumer buying behavior, ushering in a revolution in shopping. Modern retail has entered India as seen in sprawling shopping centres, multi-storeyed malls and huge complexes offer shopping, entertainment and food all under one roof. The Indian retailing sector is at an inflexion point where the growth of organised retail and growth in the consumption by Indians is going to adopt a higher growth trajectory. The Indian population is witnessing a significant change in its demographics. A large 7
  • young working population with median age of 24 years, nuclear families in urban areas, along with increasing working-women population and emerging opportunities in the services sector are going to be the key growth drivers of the organised retail sector. Initially, this was about Indian corporate houses rolling out malls and supermarkets, but with Wal-Mart coming into the Indian market, the era of the superstore is dawning. Unlike the kirana stores that served us for decades, this new breed of retail chains is heavily dependent on IT. Wal-Mart, the world’s largest retailer, and Bharti Enterprises have signed a Memorandum of Understanding (MoU) to explore business opportunities in the Indian retail industry. This joint venture will mark the entry of Wal-Mart into the Indian retailing industry. The biggest competitor for Bharti-Wal-Mart is likely to be Reliance Retail, the retail wing of Reliance, which had planned to establish 10,000 stores by 2010. It had already opened 11 pilot stores under the “Reliance Fresh” format in Hyderabad. All these trends and developments present a great business opportunity for software and hardware vendors from across the globe. Indian solution providers are targeting this segment have reason to rejoice. For while organised retail occupies a miniscule two to three percent of the overall Indian retailing industry, that is poised to change. In spite of the prospects being good things aren’t quite as rosy when it comes to awareness of IT systems. In most cases, organised retailers in India have installed solutions that help them automate transactional systems. With the retail sector in India undergoing a transformation due to the entry of large corporate houses, IT managers and CIOs are now looking forward to know how IT can help them achieve the business goals of their organisations. Standards-based architecture and software support all kinds of mission-critical IT applications for enabling greater efficiency, significant cost savings, and new business 8
  • value. The critical activities that can be handled by IT are finance and accounting, business intelligence, vendor development and management, supply chain management, merchandising and inventory management, facilities management, stores management, customer relationship management, branding, marketing, sales promotion and HR. Like any other vertical, retail also stands to benefit from elaborate IT set-ups. However, this is subject to the scale and size of the organisation, as well as an objective assessment of its requirements. Key common challenges that can be tackled through IT implementations include accurate merchandising, improved planning, increasing profitability, enhancing customer experience, strengthening store operations, improved workforce management, and improving the supply chain. This is in fact one of the key imperatives facing retailers in India, to have a robust and scalable supply chain that will facilitate rapid growth. Since a basic objective is to make data available to users and customers, proper IT implementation and superior IT infrastructure ensure that in spite of getting minimal details, the retailer captures the right information, which flows to everyone from the back office staff to the head office managers. The entire information flow must be seamless. A retail business works on a network environment because the stores connect to one another as well as to supplier sites. This is because in the retail business quick response is the key to success. Proper IT implementation also ensures that investment in retail reduces substantially. The CRM Best Practice Kit includes a superbly illustrated 63 foil presentation which introduces the key concepts and ideas behind successful CRM. It is ideal for both personal awareness or group workshop training. The following foils are intended to demonstrate the quality and depth of this offering: 9
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  • Services > Customer Relationship Management (CRM) Solution > How to implement CRM solution The success of any CRM solution is largely dependant upon the commitment of your organization. The benefits described above will not be realized by buying software and installing it. Here it is vital to get “buy-in” from the top down within these teams, and you might as well get the marketing folks involved too. Next you need to decide on the types of customer information you want to collect and what you plan to do with it. For example, many grocery stores keep track of customers' purchase history in order to market appropriate items likely to fit into their individual diets. Custom coupon packets can be mailed to customers with products specific to their buying habits. This results in 13
  • increased sales while at the same time giving the customer what they want. Next, you will need to identify all possible ways new and existing customer information can flow into your system. Where and how this information gets stored, as well as, how it will be used and by whom. Your company, for instance, may interact with customers in a variety of ways including mail campaigns, seminars, trade shows, electronic marketing, Web sites, call centers, help desks and sales forces. Your CRM solution will connect all of these customer “touch points” giving all of your various employees the same view of the data. Powerful analytical tools allow the data to be manipulated and reports generated that can provide a holistic view of customers and prospects. Armed with this customer knowledge allows you to take the necessary steps to keep that customer happy. Astir IT has trained specialists available to help with your deployment. We can help with your business process analysis and refinement, and customize and install Microsoft Dynamics CRM and train your staff. As CRM experts we bring a lot of value to whole implementation process and look forward to be a long term partner as your business grows. How much does CRM cost? The cost of implementation varies depending on your needs. Today there are hosted versions available for as little as $65/user per month to full-blown implementations that cost a few million dollars. If you are using an external agency to help you implement, you should expect the cost of their services to be at least equal to the cost of the software and hardware for a small implementation. For larger implementations, the cost of the services tends to be much higher. How do I ensure a successful CRM implementation? • First and foremost, get executive level buy-in and commitment to the project. Make certain that they understand the importance of their role in upholding that commitment and communicate it downwards through the organization. 14
  • • Make the project fun and rewarding. Give all key employees who will be using the system incentives for making it work. Involve them in the early planning and implementation stages. Take their feedback seriously. This will give them ownership in the project. • Break the entire project down into smaller manageable pieces with small milestones. Work with all departments to maintain a team methodology. • Use a robust database platform. CRM systems collect huge amounts of data very rapidly. Make sure your solution can grow and perform accordingly. • Keep in mind that your system is designed around the customer and prospect. Make sure that it is used to its potential in serving them well. What department should be responsible for CRM? This question comes up a lot. The simple answer is everyone. What we mean is try to spread project responsibilities across all departments that will have a hand in the success of the solution. Usually the IT department takes the lead in . This will ensure consistent buy-in across the organization and enforce team attitudes and ownership. Don’t forget that commitment needs to come from and be supported by the top execs! Can a CRM system be customized for my vertical? Microsoft CRM is open enough to allow even the most complex customization that can mold that CRM system to practically any vertical. Systems can easily be customized to work exactly the way your industry needs them to work, yet it will save countless hours of manual labor and frustration in dealing with customers and prospects. Many industry pundits see these custom vertical CRM systems as the real future of the application. 15
  • CRM Definition Customer Relationship Management (CRM) is an information industry term for methodologies, software, and usually Internet capabilities that help an enterprise manage customer relationships in an organized and efficient manner. In many cases, an enterprise builds a database about its customers. This database describes relationships in sufficient detail so that management, salespeople, and customer service reps can access information; match customer needs with product plans and offerings; remind customers of service requirements; know what other products a customer had purchased; etc. There are three parts of application architecture of CRM. 1. Operational CRM Operational CRM means supporting the so-called "front office" business processes, which include customer contact (sales, marketing and service). Tasks resulting from these processes are forwarded to employees responsible for them, as well as the information necessary for carrying out the tasks and interfaces to back-end applications are being provided and activities with customers are being documented for further reference. 2. Analytical CRM In analytical CRM, data gathered within operational CRM are analyzed to segment customers or to identify cross- and up-selling potential. Data collection and analysis is viewed as a continuing and iterative process. Ideally, business decisions are refined over time, based on feedback from earlier analysis and decisions. Business Intelligence offers some more functionality as separate application software. 3. Collaborative CRM Collaborative CRM facilitates interactions with customers through all channels (personal, letter, fax, phone, web, e-mail) and supports co-ordination of employee teams and 16
  • channels. It is a solution that brings people, processes and data together so companies can better serve and retain their customers. The data/activities can be structured, unstructured, conversational, and/or transactional in nature. Collaborative CRM provides the following benefits: • Enables efficient productive customer interactions across all communications channels. • Enables web collaboration to reduce customer service costs. • Integrates call centers enabling multi-channel personal customer interaction. • Integrates view of the customer while interaction at the transaction level. CRM has to two typical implementation methods: on-premise and on-demand/hosted. Each method has its advantages and disadvantages as described below. On-premise CRM is appropriate for: • Companies seeking to implement highly customized customer-management practices • Companies that need specialized data structures • Companies with complex or real-time integration requirements • Companies with available in-house IT resources and support systems • Companies who can afford the up-front capital investment and fixed costs • Companies who deal with sensitive data that don't want other parties to see On-demand/hosted CRM is appropriate for: • Customers seeking to implement standard processes from a variety of industries and companies • Companies that are able to use standard data structures • Companies with more basic integration requirements • Companies with limited technical resources and support personnel 17
  • • Companies seeking variable pricing and lower up-front costs • Companies dealing with non-proprietary data Definition: Customer Relationship Management (CRM) refers to the methodologies and tools that help businesses manage customer relationships in an organized way. For small businesses, customer relationship management includes: - CRM processes that help identify and target their best customers, generate quality sales leads, and plan and implement marketing campaigns with clear goals and objectives; - CRM processes that help form individualized relationships with customers (to improve customer satisfaction) and provide the highest level of customer service to the most profitable customers; - CRM processes that provide employees with the information they need to know their customers' wants and needs, and build relationships between the company and its customers. Customer relationship management tools include software and browser-based applications that collect and organize information about customers. For instance, as part of their CRM strategy, a business might use a database of customer information to help construct a customer satisfaction survey, or decide which new product their customers might be interested in. Also Known As: CRM; sometimes called customer service management. Common Misspellings: Customer relationship managment. 18
  • Examples: Using customer relationship management (CRM) tools, Termite Extermination Inc. was able to develop and implement a marketing plan that increased sales dramatically. CRM (customer relationship management) is an information industry term for methodologies, software, and usually Internet capabilities that help an enterprise manage customer relationships in an organized way. For example, an enterprise might build a database about its customers that described relationships in sufficient detail so that management, salespeople, people providing service, and perhaps the customer directly could access information, match customer needs with product plans and offerings, remind customers of service requirements, know what other products a customer had purchased, and so forth. Ask your CRM questions at ITKnowledgeExchange.com According to one industry view, CRM consists of: • Helping an enterprise to enable its marketing departments to identify and target their best customers, manage marketing campaigns and generate quality leads for the sales team. • Assisting the organization to improve telesales, account, and sales management by optimizing information shared by multiple employees, and streamlining existing processes (for example, taking orders using mobile devices) • Allowing the formation of individualized relationships with customers, with the aim of improving customer satisfaction and maximizing profits; identifying the most profitable customers and providing them the highest level of service. • Providing employees with the information and processes necessary to know their customers, understand and identify customer needs and effectively build relationships between the company, its customer base, and distribution partners. 19
  • Many organizations turn to CRM software to help them manage their customer relationships. CRM technology is offered on-premise, on-demand or through Software as a Service (SaaS) CRM, depending on the vendor. Recently, mobile CRM and the open source CRM software model have also become more popular. Services > Customer Relationship Management (CRM) Solution > How to implement CRM solution The success of any CRM solution is largely dependant upon the commitment of your organization. The benefits described above will not be realized by buying software and installing it. Here it is vital to get “buy-in” from the top down within these teams, and you might as well get the marketing folks involved too. Next you need to decide on the types of customer information you want to collect and what you plan to do with it. For example, many grocery stores keep track of customers' purchase history in order to market appropriate items likely to fit into their individual diets. Custom coupon packets can be mailed to customers with products specific to their buying habits. This results in increased sales while at the same time giving the customer what they want. Next, you will need to identify all possible ways new and existing customer information can flow into your system. Where and how this information gets stored, as well as, how it will be used and by whom. Your company, for instance, may interact with customers in a variety of ways including mail campaigns, seminars, trade shows, electronic marketing, Web sites, call centers, help desks and sales forces. Your CRM solution will connect all of these customer “touch points” giving all of your various employees the same view of the data. Powerful analytical tools allow the data to be manipulated and reports generated that can provide a holistic view of customers and prospects. Armed with this customer knowledge allows you to take the necessary steps to keep that customer happy. Astir IT has trained specialists available to help with your deployment. We can help with your business process analysis and refinement, and customize and install Microsoft Dynamics CRM and train your staff. As CRM experts we bring a lot of value to whole 20
  • implementation process and look forward to be a long term partner as your business grows. How much does CRM cost? The cost of implementation varies depending on your needs. Today there are hosted versions available for as little as $65/user per month to full-blown implementations that cost a few million dollars. If you are using an external agency to help you implement, you should expect the cost of their services to be at least equal to the cost of the software and hardware for a small implementation. For larger implementations, the cost of the services tends to be much higher. How do I ensure a successful CRM implementation? • First and foremost, get executive level buy-in and commitment to the project. Make certain that they understand the importance of their role in upholding that commitment and communicate it downwards through the organization. • Make the project fun and rewarding. Give all key employees who will be using the system incentives for making it work. Involve them in the early planning and implementation stages. Take their feedback seriously. This will give them ownership in the project. • Break the entire project down into smaller manageable pieces with small milestones. Work with all departments to maintain a team methodology. • Use a robust database platform. CRM systems collect huge amounts of data very rapidly. Make sure your solution can grow and perform accordingly. • Keep in mind that your system is designed around the customer and prospect. Make sure that it is used to its potential in serving them well. What department should be responsible for CRM? This question comes up a lot. The simple answer is everyone. What we mean is try to spread project responsibilities across all departments that will have a hand in the success of the solution. Usually the IT department takes the lead in . This will ensure consistent buy-in across the organization and enforce team attitudes and ownership. Don’t forget 21
  • that commitment needs to come from and be supported by the top execs! Can a CRM system be customized for my vertical? Microsoft CRM is open enough to allow even the most complex customization that can mold that CRM system to practically any vertical. Systems can easily be customized to work exactly the way your industry needs them to work, yet it will save countless hours of manual labor and frustration in dealing with customers and prospects. Many industry pundits see these custom vertical CRM systems as the real future of the application. Notes & References 1. ^ Malthouse, Edward C; Bobby J Calder (2005). "Relationship Branding and CRM". in Alice Tybout and Tim Calkins. Kellogg on Branding. Wiley. pp. 150–168. 22
  • 2. ^ Rigby, Darrell K.; Frederick F. Reichheld, Phil Schefter (2002). "Avoid the four perils of CRM". Harvard Business Review 80 (2): 101–109. doi:10.1225/8946. 3. ^ Paul H. Selden (April/May 1996). "SFA Myths Abound". Sales and Marketing Strategies & News 6 (3): 51 and 53. 4. ^ Paul H. Selden (November 2000). "The Power of Quality Thinking In Sales and Management". Quality Progress: 58-64. 5. ^ Interview with Dick Lee at Effective CRM 6. ^ Edwards, John (2007-11-29). "Get It Together with Collaborative CRM". insideCRM. Tippit. http://www.insidecrm.com/features/collaborative-crm-112907/. Retrieved on 2008-02-01. 7. ^ Bligh, Philip; Douglas Turk (2004). CRM unplugged – releasing CRM's strategic value. Hoboken: John Wiley & Sons. ISBN 0-471-48304-4. 8. ^ Paul H. Selden (1997). Sales Process Engineering: A Personal Workshop. Milwaukee, WI: ASQ Quality Press. p. 23. 9. ^ Dyche, 2002, Managing Your CRM Project 10. ^ Gartner, Inc (2008-09-12). Gartner Says Worldwide Customer Relationship Management Market Grew 23 Percent in 2007. Press release. http://www.gartner.com/it/page.jsp? id=715308. Retrieved on 2008-08-15. 11. ^ Gartner, Inc. (22 June 2007) Commonly Deployed CRM Application Vendors in 2006 12. ^ Datamonitor (22 August 2007). Datamonitor suggests Oracle, SAP likely to remain atop CRM market strategy cannot be implemented by simply installing and integrating a software package, a holistic approach is needed. It needs a lot more and a certain regimentation to make sure that it succeeds and gets incorporated well in the overall system. It require very close and careful implementation and monitoring by the entire management, including top management This Approach may include: • Training of Employees • A Modification of Business Processes based on customers' needs 23
  • • And an Adoption of Relevant IT Systems (including software and maybe hardware) and/or usage of IT service that enable the organization or company to follow its CRM strategy. Let us review each of the above three aspects: Employee training to begin with indeed, all employees and at all levels must be periodical trained with the concept of CRM and also kept updated regularly. No software or automation can replace human efforts and concept of CRM. Yes, they can come to aid its implementation, bit no where will it replace essential ingredients of human touch and service. Tainting of employees should include technical training on the use and benefits of software and IT application plus attitude and behavioral training towards customers and their problems and services. Obviously, with training of employees comes modification of processes and systems which goes to one make CRM easy and possible and secondly, to go to further aid employees. In implementation of CRM effectively CRM services can even replace the acquisition of additional hardware or CRM software licenses. The term itself is meant to describe the whole business strategy (or lack of one) oriented on customer needs. The main misconception of CRM is that it is only software, instead of a whole business strategy. To be effective, the CRM process needs to be integrated end-to-end across marketing, sales, and customer service. Customer Relationship Management Introduction The biggest management challenge in the new millennium of liberalization and globalization for a business is to serve and maintain good relationship with the 24
  • king – the customer. In the past producers took their customers for granted, because at that time the customers were not demanding nor had alternative source of supply or suppliers. But today there is a radical transformation. The changing business environment is characterized by economic liberalization, increasing competition, high consumer choice, demanding customer, more emphasis on quality and value of purchase etc. All these changes have made today’s producer shift from traditional marketing to modern marketing. Modern marketing calls for more than developing a product, pricing it, promoting it and making it accessible to target customer. It demands building trust, a binding force and value added relationship with the customers. The process of developing a cooperative and collaborative relationship between the buyer and seller is called customer relationship management shortly called CRM. According to Ashoka dutt head of Citi Bank “the idea of CRM is to know the individual customer intimately, so that the company has a customized product ready for him even before he asks for it.” 25
  • Aims of CRM The CRM is a new technique in marketing where the marketer tries to develop long term relationship with the customers to develop them as life time customers. CRM aims to make the customer climb up the ladder of loyalty. The company first tries to determine who are likely prospects i.e. the people who have a strong potential interest in the product and ability to pay for it. The company hopes to convert many of its qualified prospect into first time customers and then to convert those first time customers into repeat customers. Then the company tries to convert these repeat customers into clients – they are those people who buy only from the company in the relevant product categories. The next challenge for the company is to convert these client into advocates. Advocates are those clients who praise the company and encourage others to buy from it. The ultimate challenge is to convert these advocates into partners where the customers and the clients work actively together to discover ways of getting mutual benefit. Thus in CRM the key performance figure is not just current market share but share of life time value by converting customers into partners. In CRM the company tries to identify that small percentage (20%) of key account holders who’s contribution to the company revenues is high (80%). So 26
  • from this point of view, CRM is also known as KEY ACCOUNT MANAGEMENT. Why – customer relationship management Ø A satisfied customer in 10 years will bring 100 more customers to the company. Ø It costs 7 time more to attract a new customer than to serve an old one. Ø 20% of the company’s loyal customers account for 80% of its revenues. (Pareto’s principle). Ø The chances of selling to an existing customer are 1 in 2, the chances of selling to a new customer are 1 in 16. Eight ways to keep customers for life 1. Every part of the company’s marketing effort should be geared towards building lifetime relationships. 2. People want to do business with friendly people. To have effective relations a friendly attitude must permeate in the organization. 27
  • 3. Information technology developments should be positively used to serve the customers. 4. The company should always be flexible to bend its rules and procedures in the client’s favor. 5. The company should communicate with its customers even when it is not trying to sell something. 6. The company can communicate and develop stronger customer bonding by providing financial and social benefits. 7. The company should try to know all its customers including their lifestyles, hobbies, likes and dislikes etc. 8. The company should make it a point to deliver more than what is promised. 28
  • CRM in the Textile industry In textile industry one company sell its product to another company. For example a yarn manufacturing company sell to fabric manufacturing company. A fabric manufacturing company sell fabric to apparel company. The main customers of the companies in the textile industry are the wholesalers. And the final product is sold to the wholesalers and retailers. In this industry the customers are few and profit margins are high. So CRM is very much necessary and relevant in this industry. There is a high degree of uncertainty on the part of the buyers, the likelihood of customers seeking a relationship is increased. If the firm loses its customer it would be major loss to the firm. The product in the textile industry is complex and quality is an important factor. One of the major values the customer expects from vendors is quality. No customer will tolerate average quality. According to GE’s chairman John “quality is the best assurance of customer allegiance and strongest defense against competition and the only path to sustained growth and earnings.” If the product is not of good quality the customer will not be satisfied and the firm may lose its customer. Moreover there is a scope of customization in the product. The seller has to customize the product according to the need of the customer. Customization is changing the product according to the need of the customer in order to satisfy him. 29
  • How to introduce CRM in the company There are four key steps for putting one to one marketing program to work – Step 1 : Identify your customers To launch a one to one initiative the company must be able to locate and contact a fair number of customers or at least a substantial portion of its valuable customers. It is crucial to know the customer details as much as possible, not just their names or address, but their habits, preferences and so forth. Step 2 : Differentiating your customers Customers are different in two principal ways, they represent different levels of value and have different needs. Once the company identifies its customers differentiating them will help the company to focus its efforts to gain the most advantage with the most valuable customers. Step 3 : Interacting with the customer Interaction is also a crucial component of a successful CRM initiative. It is important to remember that interaction just not occur through marketing and sales channels, customer interact in many different ways with many different areas of the organization so to foster relationship all the areas of the organization must be accessible to the customer. 30
  • Step 4 : Customize your enterprise’s behavior Ultimately to lock a customer into a relationship a company must adapt some aspect of its behavior to meet customer’s individually expressed needs this might mean mass customizing a manufactured product or it might involve tailoring some aspect of the service surrounding the product. Significance of the study The CRM (customer relationship management) is an integrated effort to strengthen the network of relationship for the mutual benefit of both the parties. The biggest management challenge in the new millenium of liberalization and globalization for a business is to maintain good relationship with the king – the customer. This study is of great significance because Ø A 5% increase in the customer retention will increase the profit up to 125%. Ø It costs seven time more to attract a new customer than to serve an old one. Ø 20% of the company’s loyal customers account for the 80% of its revenues. Ø To study on customer relationship management would enable the researcher to know about the CRM practices adopted in the textile industry. 31
  • Review of the existing literature With the available literature we can summarize CRM in the words of various authors as follows- According to Shani and Chalarani – Relationship marketing can be defined as “ an integrated effort to identify, maintain and build up a network with the individual customers and to continuously strengthen the network for the mutual benefit of both parties, through interactive, individualized and value added contracts over a long period of time. In the words of Lekha “ CRM aims at delivering better products and value to the customers through better understanding of his needs.” Conceptualization A firm in textile industry has to maintain good relations with its customers. They have to retain the customers for a long time to avail the benefit of their relations. The customer relationship management is one of the effective tool to identify, establish and maintain relationship with the customers. With the help of this research we are going to identify the importance of CRM in textile industry. Focus of the problem The textile industry is basically manufacturing based industry. Through this study we are going to identify the importance of CRM in the textile industry. 32
  • How it is benefited from CRM? Is their any relevance of implementing CRM? And what role does information technology can play in CRM? Objectives 1. To study the current practices of CRM. 2. To find out the impact of CRM on the profitability of the organization. 3. To study the factors affecting the CRM practices. 4. To study the role of information technology in CRM. Analysis The customers of the COMPANY are the wholesalers. It is because the number of retailers is very large as compared to the wholesalers. So it is not possible for the company to approach to the retailers. Therefore the company sells to the wholesalers and then wholesalers sell to the retailers. Customers are encouraged to give suggestions and complaints so that the company can improve its working and services. If the customer’s complaints are not resolved the customers will be dissatisfied and the company may lose its customers. 33
  • Different customers have different requirements. So the company customize its product accordingly to satisfy the customers. It also gives more choice to the customers. To get the information about the customers and to measure the satisfaction the company conducts surveys. Because of the expertise needed in the research the company give this work to research agencies like AC NILSON. The company gives credit facility to its customers to increase the sales volume. If the company do not sell on credit the customers may switch over to other companies. The company maintains frequent communication with the customers. As soon as the product is ready or a new product is launched the information is provided to the customers. Communication is also necessary to maintain the interest of the customers in the company. The company gives concession to its regular customers so as to retain its most valuable and profitable customers. The company regularly reviews the business process in order to eliminate non value-adding activities, to reduce the cost and to make the whole work efficient and effective. If the internal customers are not satisfied and there is lack of coordination among the departments then it will affect the external customers also. 34
  • Conclusion From this study it can be concluded that the customer relationship management in Company is satisfactory. The company is using various CRM practices like customization of the product, maintaining interaction with the customers regularly and providing good quality product etc. Customer relationship management has a certain impact on the profitability of the company. Average sale per customer has increased 15% over the last two years. Customer response rate towards marketing activities is also improving. There are various factors affecting the customer relationship management like working environment of the company, support from top management and coordination among the departments of the company. Information technology is not used as much as it should be. The company is using traditional tools of CRM like quantitative research, personal interviews. The company should modern tools like data mining, contact center, e-CRM and web based survey tools. Suggestions • There should be more and more emphasis given by the company for satisfying the customer up to a apex limit and by providing the utility of every penny of his money. • There should be more use of information technology. • The company should be flexible to bend its rules and procedures in the clients favour. • The company can communicate and develop stronger customer bonding by providing social and financial benefits. 35
  • Retailing formats in India: 1. Malls: 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, Pyramid, Pantaloon. 2. Specialty Stores: 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. 3. Discount Stores: 36
  • 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. 4. Department Stores: 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 5. Department Stores: 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!. 6. Hypermarts/Supermarkets: 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. 37
  • 7. Convenience Stores: 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. 8. MBO’s : 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. SPECIALITY STORES: Food retail : Food dominates the shopping basket in India. The US$ 6.1 billion Indian foods industry, which forms 44 per cent of the entire FMCG sales, is growing at 9 per cent and has set the growth agenda for modern trade formats. Since nearly 60 per cent of the average Indian grocery basket comprises non-branded items, the branded food industry is homing in on converting Indian consumers to branded food. The mobile revolution: The retail market for mobile phones -- handset, airtime and accessories -- is already a US$ 16.7 billion business, growing at over 20 per cent per year. In comparison, the consumer electronics and appliance market is worth US$ 5.6 billion, with a growth rate that is half of the mobile market. 38
  • Kids retail: When it comes to Indian children, retailers are busy bonding--and branding:  Monalisa, the Versace of kids is coming to India.  Global lifestyle brand Nautica is bringing Nautica Kids.  International brand Zapp tied up with Raymond to foray into kids' apparel.  Disney launched exclusive chains which stock character-based stationery.  Pantaloon's joint venture with Gini & Jony will set up a retail chain to market kids' apparel.  Swiss kidswear brand Milou is collaborating with Tirupur-based Sreeja Hosieries.  Turner International India Pvt Ltd. will launch Cartoon Network Townsville and Planet POGO--two theme parks designed around its channels--in the National Capital Region.  Sahara One Television has also signed a Memorandum of Understanding to source content from Spacetoon Media Group, Middle East's largest kids' entertainment brand for animation and live action content. Leading the kids' retail revolution is the apparel business, which accounts for almost 80 per cent of the revenue, with kids' clothing in India following international fashion trends. According to research firm KSA Technopak, the branded segment comprises US$ 701.7 million of the total kids' apparel market- size of over US$ 3 billion. Industry experts say kids' retailing will touch annual growth of 30-35 per cent. Toys, stationary, sportswear, outerwear, tailored clothing, eyewear, watches, fragrance, footwear, theme parks, TV channels… the segment is growing rapidly at 10 per cent per annum. Margins are in the range of 20-25 per cent (for dealers 39
  • and distributors), while companies enjoy an average gross margin of about 10 per cent. Agricultural retail: Agriculture across India is heralding the country's second Green Revolution. 14 states, including Maharashtra, Punjab, Andhra Pradesh and Rajasthan amended the Agricultural Produce Marketing Committee (APMC) act this year, along the lines of the Model APMC Act, '02, which allows farmers to sell their produce directly to buyers offering them the best price. Agricultural sectors such as horticulture, floriculture, development of seeds, animal husbandry, pisciculture, aqua culture, cultivation of vegetables, mushroom under cultivated conditions and services related to agro and allied sectors are open to 100 per cent FDI through the automatic route. For its e-Choupal scheme, ITC built internet kiosks in rural villages so farmers can access latest information on weather, current market prices, foods-in- demand, etc. With a US$ 5.6 billion, multi-year investment in agriculture and retail, Reliance Retail will establish links with farms on several thousand acres in Punjab, West Bengal and Maharashtra. FieldFresh, planning to become India's first large-scale exporter of produce, will annually pay farmers over US$ 30,000 to lease land for vegetables, to hire tractors and to pay their workers. Besides a five-year program with the Punjab government to provide several hundred farmers with four million sweet-orange trees for its Tropicana juices by 2008, PepsiCo--with agriculture exports worth US$ 40 million--also introduced farmers to high-yielding basmati rice, mangoes, potatoes, chilies, peanuts, and barley for its Frito-Lay snacks. 40
  • Export potential and a rapidly growing domestic demand for reliable produce from new supermarket chains is driving change. With 77 per cent of India's population relying on agriculture for a living, improved efficiency and new markets can benefit a large number of people. International retailers : The Australian government's National Food Industry Strategy and Austrade initiated a test marketing food retail in India wherein 12 major Australian food producers have tied up with India-based distributor AB Mauri to sell their products directly at retail outlets. The largest-ever 150-member British business delegation in India committed investments in the areas of food processing, agri retail and manufacturing. It is also likely to press for the liberalisation of sectors like financial & legal services and retail. US-based home delivery and logistics company, Specialised Transportation Inc, will enter the Indian market through a strategic alliance with Patel Retail, a subsidiary of Patel Integrated Logistics. Among other big international players, Wal-Mart has announced its plans for India in partnership with Bharti, Tesco is sure to try again, and Carrefour too might finally find the right partner. Supermarkets: 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 41
  • 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. Supermarkets are relatively new entrants in the market. They are so called pioneers in organized food retailing and go by the western model in look and feel and format. This is what everybody means when they say organized food retailing. Franchise outlets: Like Tommy Hilfiger and Wal Mart, other US retailers are firming up their India entry strategies and if they are already in, they are undergoing rapid expansion. Fashion brands DKNY is also al set to foray into the Indian fashion Industry through a franchisee agreement with Indian company, S. Kumar Starbucks recently expressed their interest in entering Indian company Like Tommy Hilfiger and Wal-Mart, other US retailers are firming up their India entry strategies and if they are already in, they are undergoing rapid expansion. Fashion brand DKNY is also all set to foray into the Indian fashion Industry through a franchisee agreement with Indian company, S Kumar’s.Starbucks recently expressed their interest in entering India through the franchise route, like their AmericanF&B counterparts Pizza Hut, Subway, and the very successful McDonald’s. McDonald’s has major expansion plans lined up; in the next 3 years, it plans to open another 100 outlets in cities across India. Hypermarket: A very large commercial establishment that is a combination of departmental store and a supermarket. 42
  • The specific features of a hypermarket are the wide range of goods offered, quality service, quality display of goods on the shelves and complex systems providing for customers loyalty. Hypermarket is known for a wide range of goods offered. It consist of dozens of thousands of items, while similar goods can be offered in several forms. In order to work with such an assortment it is necessary to group it into categories and sub categories that would unite goods according to this or that criteria. Shopping Malls: The new shopping malls that have been expanding their footprint across Indian cities are well designed, built on international formats of retailing and integrated with entertainment and restaurants to provide a complete family experience. Over 300 malls are expected to be built over the next two years and most Indian cities with over a million populations will be exposed to this modern method of retailing. Shopping malls have existed in India since several decades but were designed and built to house several shops in a single facility. These malls also known as Shopping Arcades offered only rows of shops, most of which were small stores that promised bargains for their various wares. These Shopping Arcades tried to maximize on their store space and did not offer any areas for recreation and entertainment. The present day malls are a creation of the past few years post 2000. They are designed professionally using a lot of international experience and combine shopping with a lot of brand building, recreation, food and entertainment. Malls also have a large format store that serves as their anchor for shopping and a prominent restaurant that anchors the food needs of visitors. 43
  • Most malls also feature a multiplex cinema that offers entertainment to the visitors of the mall. Finally the mall has large atria and open spaces to allow visitors and families to hang-out. Major Industry Players: Nanz in North India, Nilgiris in the South, Pantaloon in the East and Crossroad in the West were the pioneers of the retail revolution in India. Nanz faced several obstacles (See Case Study) in their business and had to finally down their shutters. Nilgiris, due to some strange reason, did not see any logic to expand beyond the southern frontiers. Pantaloon went to scale up and become bigger and bigger to form the Future Group, that is now omnipresent in almost all formats right from small groceries to e-tailing. Crossroads in Mumbai imparted some valuable lessons to their parent, the Piramyd Group, who has since then gone on an expansion drive with other formats of retailing in different cities. The big players in Indian retail landscape now are the Future Group, Shoppers Stop, Westside, Subiksha and RPG Spencer. The newcomers who are knocking at the gates are Reliance Retail, Bharti Walmart and Aditya Birla Trinethra. Here, we intend to do a brief profiling of the major players in order to understand the retail business in a better manner. 1 The Future Group Pantaloon Retail India Limited (PRIL) The Future Group, which was earlier known as PRIL (Pantaloon Retail India Limited) began as a trouser manufacturer in the mid 1980s. The Future Group is divided into six verticals – Future Retail, Future Capital, Future Brands, Future Space, Future Media and Future Logistics. 44
  • The Future Group started operations in the mid 1987s by incorporating the company as Manz Wear Private Limited. The company went on to manufacture ready made trousers under the “Pantaloons” brand name. It came out with a public issue in 1991 and later changed their name to Pantaloon Fashions (India) Limited (PFIL). The first exclusive men’s store called Pantaloon Shoppe was inaugurated in 1992. Pantaloons went for a franchisee route to expand the number of retail outlets and by 1995, it had reached to a crucial number of 70. The first departmental store called Pantaloons was opened in Kolkata in 1997 with an investment of Rs 0.7 million. The store was a success and recorded revenues of Rs 100 million within the first year of operations. In 1999, the company’s name was changed to Pantaloon Retail (India) Limited (PRIL). The success of Pantaloons departmental stores encouraged PRIL to come up with other retailing formats such as “Big Bazaar” to retail low cost general merchandising, and “Food Bazaar” to retail food products. As of 2005, the Future Group has 3.5 million sq ft of retail space and over 100 stores across 25 cities in India. It employs more than 12,000 people and has a customer base of more than 120 million. Kishore Biyani, the promoter of the group who likes to address himself as “Chief Knowledge Officer” has plans to launch 18 formats and over 3,340 stores, thereby turning the Future Group into a US$7 billion company with over US$1 billion in profits by the year 2010. 45
  • 2 Shoppers Stop Shoppers’ Stop, promoted by the real estate group K Raheja, was one of the first movers to have set up a large retail outlet in New Delhi with international ambience. Shopper’s Stop Ltd now has a considerable presence all over the country with overr 7 lakh square feet of retail space and stocks over 200 brands of garments and accessories. The stores are spread all over India with presence in Mumbai, Delhi, Bangalore, Hyderabad, Jaipur, Pune , Kolkata, Gurgaon, Chennai & Ghaziabad. Shoppers’ Stop is also very well known for having pioneered several quality retailing concepts in India like CROSSWORD, HyperCITY and Mothercare. They are the only retailer from India to become a member of the prestigious Intercontinental Group of Departmental Stores (IGDS). Shoppers’ Stop is positioned as a family store delivering a complete shopping experience. With its wide range of merchandise, exclusive shop-in-shop counters of international brands and world-class customer service, Shoppers’ Stop brought international standards of shopping to the Indian consumer providing them with a world class shopping experience. Shoppers’ Stop’s core customers 46
  • represent a strong SEC A skew. They fall between the age group of 16 years to 35 years, the majority of them being families and young couples with a monthly household income above Rs. 20,000/- and an annual spend of Rs.1,50,000/-. A large number of Non - Resident Indians visit the shop for ethnic clothes in the international environment they are accustomed to. The stores offer a complete range of apparel and lifestyle accessories for the entire family. From apparel brands like Provogue, Color Plus, Arrow, Levi’s, Scullers, Zodiac to cosmetic brands like Lakme, Chambor, Le Teint Ricci etc., Shoppers’ Stop caters to almost every lifestyle need. Shoppers' Stop also retails its own line of clothing namely Stop, Life , Kashish, Vettorio Fratini and DIY. The merchandise at Shoppers’ Stop is sold at a quality and price assurance backed by its guarantee stamp on every bill. Shoppers’ Stop’s customer loyalty program is called “The First Citizen”. The program offers its members an opportunity to collect points and avail of innumerable special benefits. Currently, Shoppers’ Stop has a database of over 2.5 lakh members who contribute to nearly 50% of the total sales of Shoppers’ Stop. 47
  • The Organisation, in 2000, along with ICICI ventures also acquired the reputed bookstore, “Crossword”, which offers the widest range of books along with CD- ROM, music, stationery and toys. Services like Dial-a-book, Fax-a-book and Email-a-book enable customers to shop from their homes. Crossword currently has 18 Stores. Realising the role of IT way back in 1991, Shoppers’ Stop was among the first few retailers to use scanners and barcodes and completely computerize its operations. Today it is one of the few stores in India to have retail ERP in place, which is now being integrated with Oracle Financials and the Arthur Planning System, the best retail planning system in the world. With the help of the ERP, they are able to replicate stores, open new stores faster and get information about merchandise and customers online, which reduces the turnaround time in taking quick decision. Shoppers Stop has been very keen to understand the importance of distribution and logistics in ensuring that merchandise is available on the shop floors. This has led the retail chain o streamline its supply chain. The company has developed process manuals for each part of the logistics chain. These modules include vendor management, purchase order management, stock receiving systems, purchase verification and inventory build up, generation and fixing of price and store tags, dispatch of stocks to the retail floor and forwarding of bills for payment. Shoppers’ Stop has a grand ambition to position itself as a global retailer. The company intends to bring the world’s best retail technology, retail practices and sales to India. Currently, they are adding 4 to 5 new stores every year. 48
  • 3 Trent – Westside Established in 1998, Trent operates some of the nation's largest and fastest growing retail store chains. A beginning was made in 1998 with Westside, a lifestyle retail chain, which was followed up in 2004 with Star India Bazaar, a hypermarket with a large assortment of products at the lowest prices. In 2005, it acquired Landmark, India's largest book and music retailer. In a recently signed deal, Trent has agreed to anchor 12 malls set up by DLF Universal Ltd across the country, at its Westside, Landmark and Star India Bazaar outlets. This amounts to about 27 locations, totaling to about a million square feet of space. Trent retails garments and household accessories for men, women and children, cosmetics and perfumes at Westside, food, beverages, health and beauty products, vegetables, fruits, dairy products, consumer electronics and household items at Star India Bazaar and books, music and stationery at Landmark. Westside has 25 outlets across 17 cities in India offering a variety of designs and styles in garments, footwear and accessories, as table linens, artifacts, home accessories and furnishings. Well-designed interiors, sprawling space, prime locations and coffee shops enhance the customers' shopping experience. Trent also runs another chain of retail stores called Star India Bazaar. Launched in 2004, Star India Bazaar provides a large assortment of high quality products made available at the lowest prices coupled with a unique shopping experience. Star India Bazaar is located in Ahmedabad and offers a wide choice of staple food, beverages, health and beauty products, vegetables, fruits, dairy products, consumer electronics and household items at the most affordable prices. 49
  • Trent has also recently acquired a 76 per cent stake in Landmark, one of the largest books and music retail chains in India. Landmark commenced its operations in 1987 with its first store in Chennai, and now has nine stores in the major metros of the country. Earlier Landmark was focused on books, stationery and greeting cards. In 1996 it added music to its product portfolio and also started the trend of stocking curios, toys, music, CDs and other gift items. 4.Piramyd Piramyd Retail is part of the Piramal Group, which has presence in diverse sectors spanning Pharmaceuticals, Textiles, Real Estate, Engineering, Family Entertainment and Retail with manufacturing operations in 19 locations across five states and employing over 18,000 people. The promoters launched the apparel business in 1999 under Piramyd Retail and Merchandising Pvt. Ltd. (PRMPL) while its food; home & personal care businesses (FHPC) were housed under Crossroads Shoppertainment Pvt. Ltd. (CSPL). As the apparel and food businesses individually reached a critical mass the management merged the two companies into Piramyd Retail Ltd. due to 50
  • distant synergies in two businesses in March 2005. Pyramid also has a smaller format of stores called TruMart that caters to Food and Personal Care products. Piramyd Retail currently has 5 Mega stores and 8 TruMart stores mainly in Maharashtra . The company plans to increase these numbers to 17 Mega stores and 69 TruMarts by 2008. The floor space is expected to be 5 times on successful expansion. The FHPC (Food & Personal Care) business is volume driven while the Lifestyle store is a margin driven business. Piramyd Retail plans to increase the contribution of private labels from existing 7% to 18-20% of the revenues by 2010. Gross margins from private labels are over 40% and hence the company is planning to increase this business. Most of the stores are on the lease format and the company is prone to higher lease rentals due to the overall increase in real estate prices. This may bring the profit levels down substantially. Piramyd Retail did have a first mover advantage in many locations but it has actually failed to capitalise over this advantage. Its competitors like Pantaloon, Shoppers Stop and Trent gained larger benefits of their far more aggressive business & marketing strategy in the retail space. 51
  • 5. Subiksha The Chennai based Subiksha grocery chain runs around 200 outlets all over the country and it’s current turnover stands at Rs 224 crores. Their target customer is the middle income value conscious buyers. The main aim of Subiksha is to offer a functional and transactional shopping experience. This retail chain has no qualms and spends almost no money on creating a pleasant shopping experience, and all stores are non-air conditioned. There is no false roofing or sparkling vitrified tiles on the floor. A few years ago, Subiksha did not even offer shoppers self service. The customer had to place an order at a computerized teller and the goods were billed and delivered after cash is collected. Customers had to bring their own carrybags or pay to buy them from the store. Subiksha even attempted to charge the customers for home delivery. However, now Subiksha has slightly tweaked their business model in order to create a better appeal to customers who were defecting to the competitors. The store formats are still small and non-airconditioned. But customers have the option to pick from shelf spaces. They also get shopping bags and free home delivery. But the selling USP(unique selling proposition) remains the same --- Subiksha tries to be as close to the customer as possible and offers the lowest price and huge savings in comparison to competitors. It’s slogan happens to be --- bachat mera adhikar hain (saving is my fundamental right). 6. RPG Spencer 52
  • RPG’s Spencer presently has 125 stores across 25 cities covering a retail trading area of half a million square feet and with a clientele of 3 million customers a month. Spencer's has a national footprint with seven hypermarkets, three supermarkets and 70 daily use outlets, called Dailies. All the newly opened Spencer's stores stock every conceivable product that is required by a household on a daily basis. At Spencer's Daily shoppers can get fresh fruits, vegetables, fast-moving consumer goods, household items, groceries, with regular offers and discounts. Spencer's outlets are divided in to three retail formats. These are, Spencer's Hyper, the over 25,000-sq ft hypermarkets stocking over 25,000 items. The 8,000sq ft to 15,000-sq ft mini hyper stores, branded as Spencer's Super and the daily purchase 4,000-sq ft to 7,000-sq ft Spencer's Daily for groceries, fresh food, chilled and frozen products, bakery and weekly top up shopping. 7. Reliance Retail 53
  • On June 26, 2006, Mukesh Ambani, Chairman and Managing Director, Reliance Industries Limited, announced a Rs 25,000-crore investment in the retail sector. Reliance Retail started it’s retail operation with “Reliance Fresh”, a grocery store that sells vegetables, fruits, personal care items and other food products. Soon, these retail outlets will also be selling apparel and footwear, lifestyle and home improvement products, electronic goods and farm implements and inputs. They will also offer products and services in energy, travel, health and entertainment. In addition to this, partnerships would be developed to bring the best of global luxury brands to India as well. Reliance Retail plans to extend it’s footprint to cover 1,500 Indian cities and towns with outlets of a varied format, a mix of neighborhood convenience stores, supermarkets, specialty stores and hypermarkets. Reliance also plans to open restaurant outlets, financial services marts and tourism counters within it’s stores. Mukesh Ambani’s ultimate ambition seems to be to create the Indian equivalent of Wal-Mart by scaling up the business to unprecedented heights to reach every nook and corner of the country. With it’s retailing venture, Reliance expected a revenue target of US $20 billion through it’s retail operations by 2010. Over a span of five years, RRL expects a 20% return-on-investment. The first store christened “Reliance Fresh” opened in November 2006 at Hyderabad. Within a few months they have now opened stores in Mumbai, Pune and Ahmedabad and plans foray into other cities on a rapid scale. 8. Bharti Wal-Mart 54
  • Bharti Retail (Pvt.) Ltd. unveiled the roadmap for its retail venture on 19th February, 2007 envisaging an investment of $2.5 billion with expectation of revenue of $4.5 billion (about Rs. 20,000 crore) from this business by 2015. The first retail outlet is expected to open somewhere in the month of August . Bharti’s plan is to invest $2.5 billion by 2015 and open stores across all major cities. This investment would be only for setting up front-end stores. The modalities for its back-end linkage, including its joint venture with the world's largest retailer Wal-Mart, are in the process of being worked out. A high-level team from Wal-Mart was visited India in the later part of February to work out the details of the back-end chain. While Bharti would manage front-end of the retail venture, Wal-Mart would be involved in the back-end, including logistics, supply chain and cash-and-carry, he added. The JV was presently scouting for 10 million sq. ft. of retail space, which would include hypermarkets, supermarkets and convenience stores and would provide employment to about 60,000 people. The company would open multi-format retail outlets in all cities with a population of about one million. Bharti is now conducting a massive consumer survey to take a final decision on branding and promotional campaign. However, Bharti and Wal-Mart have been 55
  • facing stiff opposition from the left parties and other political outfits who fear that the entry of the Bentonville giant will make life difficult for the small grocers and create massive unemployment. They also expect Wal-Mart to take a tough stance on lowering prices and force farmers to sell their produce at lower rates. A lurking fear of monopolistic regime in the retail sector is also enhancing their fears. Both Bharti and Walmart are presently having a tough time in convincing the ministers, politicians, agriculturists, the NGOs and other pressure groups that their business model would serve to work in the best interests of all the stakeholders. 9. Aditya Birla – MORE The Aditya Birla Group is India's first truly multinational corporation. Global in vision, rooted in values, the Group is driven by a performance ethic pegged on value creation for its multiple stakeholders. A US$ 24 billion conglomerate, with a market capitalization of US$ 23 billion and in the League of Fortune 500, it is anchored by an extraordinary force of 100,000 employees belonging to over 25 different nationalities. 56
  • Over 50 per cent of its revenues flow from its operations across the world.” Our mission is to change the way people shop. We will give them more.” says Mr. Kumar Mangalam Birla, Chairman, Aditya Birla Group. The more. for you advantage: more. promises a world-class pleasurable shopping experience to Indian consumers in their very own neighborhood. more. Quality, more. variety, more. convenience and more. value are the four delivery cornerstones of the more. chain of supermarket stores. more. MORE. Value MORE. promises best in market pricing. Linking up directly with farmers to source fresh fruits, vegetables and staples ensure great quality as well as great price. Add to this, the membership program Club more. which provides convenience, customized shopping solutions and savings, and the more. value promise becomes all the more evident. More. Is an inspirational brand for an inspirational country. We have a bright and committed, enthusiastic team that represents the best experience from India and globally. MORE. also has a range of products from its own stable available across value, premium and select ranges. The products have been quality-checked and are available in attractive packaging at competitive prices. To avail additional benefits, at no extra charge, customers can also enroll for the membership program Club more. 10. VISHAL RETAIL : Vishal is one of fastest growing retailing groups in India. Its outlets cater to almost all price ranges. The showrooms have over 70,00 products range which fulfills all your household needs, and can be catered to under one roof. 57
  • It is covering about 1282000 sq. ft. in 18 state across India. Each store gives you international quality goods and prices hard to match. The cost benefits that is derived from the large central purchase of goods and services is passed on to the consumer. What started as a humble one store enterprise in 1986 in Kolkata(erstwhile, Calcutta) is today a conglomerate encompassing 51 showrooms in 39 cities. India’s first hyper-market has also been opened for the Indian consumer by Vishal. Situated in the national capital Delhi this store boasts of the singe largest collection of goods and commodities sold under one roof in India. The group’s prime focus is on retailing. The Vishal stores offer affordable family fashion at prices to suit every pocket. The group’s philosophy is integration and towards this end has initiated backward integration in the field of high fashion by setting up a state of the art manufacturing facility to support its retail endeavors. Company has already tied up for 5-lakh sq ft space and is looking for more. Company will come up with 32 new stores this year. Company is doing research on more formats. Company is looking for opportunities of expansion in the South. Contribution of apparels business at 53% may slightly come down to 50%. India is a big country and there is huge space for four-five big retail players. Vishal can always sustain growth in this big market. Company can sustain margins as it is going for backward integration. Currently manufacturing contributes 10% of the business, which in the next two to three years, will go up to 25%. Company is increasing its focus on the non-apparel and FMCG segment. 58
  • The current share of FMCG at 15% could go up to 20-25%. Apparel sales currently at 63% in the next 2-3 years should come down to 50% as the company is now also focusing on different segments. With growth in volumes, the cost of sourcing will come down in the near future. Company will venture wherever it gets real estate space. Currently, it has very little space in the south India. Eventually, it will have a pan-India set up. 11.METRO – CASH & CARRY INDIA METRO Group today, is the third largest trading and retailing group in the world. The company employs over 2,50,000 staff in 30 countries. In the year 2005 METRO Group had generated sales of over €55.7 billion; 53% of total sales came from outside Germany. METRO Cash & Carry started operations in India in 2003 with two Distribution Centres in Bangalore. With this METRO introduced the concept of Cash & Carry to India. These Centres offer the benefit of quality products at the best wholesale price to over 150,000 businesses in Bangalore. METRO offers assortment of over 18000 articles across food and non food at the best wholesale prices to business customers such as Hotels, Restaurants, Caterers, Food and Non-food Traders, Institutional buyers and professionals. METRO's Cash & Carry business model is based on a Business to Business (B2B) concept and focuses on meeting all the needs and requirements of business customers. It is a modern format of wholesale trading, catering only to business customers. 59
  • 12.Viveks- The Unlimited Shop Vivek Limited is a professionally managed public limited company carrying three retail brands - Viveks, Jainsons, Premier and continuously adding to the formidable strength of 1000 employees. Vivek Ltd is the largest consumer electronics & home appliances retail chain in India. Viveks popularized several brands by creating visibility and have the distinction of being market leaders and trendsetters with continuous support from the principal companies. Viveks evolved its strategies to suit the larger scene where there was a stigma attached to borrowing. Very few hire purchase options were available and hence Viveks started Vivek Hire Purchase and Leasing Ltd to finance consumer durables, which enhanced the core retailing business also.Viveks grew from 3 stores to more than 52 stores and turnover increased to over Rs. 350 crores (USD 80 million) and also become a public limited company from a family run enterprise. In this process, 14 store Jainsons was bought over in 1999, 2 store Premier in 2001 and Spencers in 2002 and have recently absorbed Spencers into the Premier brand. With the liberalization of economy and other changes in the 60
  • global scene, Viveks streamlined the marketing and advertising activities and shopping ambience was improved. THE GROWTH DRIVERS: Drivers of Retail Industry • The Demography Dynamics: Approximately 60 per cent of Indian population below 30 years of age. • Double Incomes: Increasing instances of Double Incomes in most families coupled with the rise in spending power. • Plastic Revolution: Increasing use of credit cards for categories relating to Apparel, Consumer Durable Goods, Food and Grocery etc. • Urbanization: increased urbanization has led to higher customer density areas thus enabling retailers to use lesser number of stores to target the same number of customers. Aggregation of demand that occurs due to urbanization helps a retailer in reaping the economies of scale. • Covering distances has become easier: with increased automobile penetration and an overall improvement in the transportation infrastructure, covering distances has become easier than before. Now a customer can travel miles to reach a particular shop, if he or she sees value in shopping from a particular location. DRIVERS FOR GROWTH: Indian consumers are rapidly evolving and accepting modern formats overwhelmingly. Retail Space is no more a constraint for growth. India is on the 61
  • radar of Global Retailers and suppliers / brands world-wide are willing to partner with retailers here. Further, large Indian corporate groups like Tata, Reliance, Raheja, ITC, Bombay Dyeing, Murugappa & Piramal Groups etc and also foreign investors and private equity players are firming up plans to identify investment opportunities in the Indian retail sector. The quantum of investments is likely to sky-rocket as the inherent attractiveness of the segment lures more and more investors to earn large profits. Investments into the sector are estimated at INR 20 – 25 billion in the next 2-3 years, and over INR 200 billion by end of 2010. Stocks in the retail sector are also becoming increasingly attractive from an investor's point of view. Successful development of value based concepts as well as development of retail space in smaller cities and towns shall drive the organized retail into the next levels of cities. Retailers have responded to this phenomenon by introducing contemporary retail formats such as hypermarkets and supermarkets in the new pockets of growth. Prominent ‘tier-II' cities and towns which are witnessing a pick-up in activity include Surat, Lucknow, Dehra Dun, Vijaywada, Bhopal, Indore, Vadodara, Coimbatore, Nasik, Bhubaneswar, Varanasi and Ludhiana among others. With consumption in metros already being exploited, manufacturers and retailers of products such as personal computers, mobile phones, automobiles, consumer durables, financial services etc are increasingly targeting consumers in tier II cities and towns. In addition, petro-retailing efforts of petroleum giants scattered 62
  • through out the country's landscape have also ensured that smaller towns are also exposed to modern retailing formats. On the supply side, mall development activity in the small towns is also picking up at a rapid pace, thereby, creating quality space for retailers to fulfill their aggressive expansion plans. Thus, the ‘retail boom', 85% of which has so far been concentrated in the metros is beginning to percolate down to smaller cities and towns. The contribution of these tier-II cities to total organized retailing sales is expected to grow to 20-25%. GROWING CONSUMER CLASS: Favorable demographic and psychographic changes relating to India's consumer class, international exposure, availability of increasing quality retail space, wider availability of products and brand communication are some of the factors that are driving the retail in India. Over the last few years, many international retailers have entered the Indian market on the strength of rising affluence levels of the young Indian population along with the heightened awareness of global brands and international shopping experiences and the increased availability of retail real estate pace. Development of India as a sourcing hub shall further make India as an attractive retail opportunity for the global retailers. Retailers like Wal-Mart, GAP, Tesco, JC Penney, H&M, Karstadt-Quelle etc stepping up their sourcing requirements from India and moving from third-party buying offices to establishing their own wholly owned / wholly managed sourcing & buying offices shall further make India as an attractive retail opportunity for the global players. Manufacturers in industries such as FMCG, consumer durables, paints etc are waking up to the growing clout of the retailers as a shift in bargaining power from the former to the latter becomes more discernible. 63
  • Already, a number of manufacturers in India, in line with trends in developed markets, have set up dedicated units to service the retail channel. Also, instead of viewing retailers with suspicion, or as a ‘necessary evil' as was the case earlier, manufacturers are beginning to acknowledge them as channel members to be partnered with for providing solutions to the end-consumer more effectively. The next level of opportunities in terms product retail expansion lies in categories such as apparel, jewellery and accessories, consumer durables, catering services and home improvement. These sectors have already witnessed the emergence of organized formats though more players are expected to join the bandwagon. Some of the niche categories like Books, Music and Gifts offer interesting opportunities for the retail players. Indian consumer goods market is expected to reach $400 billion by 2010. India has the youngest population amongst the major countries. There are a lot of young people in India in different income categories. In India they do not have to face this dilemma largely because rapid urbanization, increase in demand, presence of large number of young population, any number of opportunities are available . The bottom line is that Indian market is changing rapidly and is showing unprecedented consumer business opportunity. 64
  • COMPETITOR ANALYSIS The table below outlines some of the strategic moves being planned to change the competitive structure of Retail business in India. Future Outlook Retailing in India is gradually inching its way toward becoming the next boom industry. The whole concept of shopping has altered in terms of format and consumer buying behavior, ushering in a revolution in shopping in India. Modern retail has entered India as seen in sprawling shopping centers, multi- storied malls and huge complexes offer shopping, entertainment and food all under one roof. The Indian retailing sector is at an inflexion point where the growth of organized retailing and growth in the consumption by the Indian population is going to take a higher growth trajectory. 65
  • The Indian population is witnessing a significant change in its demographics. A large young working population with median age of 24 years, nuclear families in urban areas, along with increasing workingwomen population and emerging opportunities in the services sector are going to be the key growth drivers of the organized retail sector in India. Retail and real estate are the two booming sectors of India in the present times. And if industry experts are to be believed, the prospects of both the sectors are mutually dependent on each other. Retail, one of India’s largest industries, has presently emerged as one of the most dynamic and fast paced industries of our times with several players entering the market. Accounting for over 10 per cent of the country’s GDP and around eight per cent of the employment retailing in India is gradually inching its way toward becoming the next boom industry. As the contemporary retail sector in India is reflected in sprawling shopping centers, multiplex- malls and huge complexes offer shopping, entertainment and food all under one roof, the concept of shopping has altered in terms of format and consumer buying behavior, ushering in a revolution in shopping in India. This has also contributed to large-scale investments in the real estate sector with major national and global players investing in developing the infrastructure and construction of the retailing business. The trends that are driving the growth of the retail sector in India are • Low share of organized retailing • Falling real estate prices 66
  • • Increase in disposable income and customer aspiration • Increase in expenditure for luxury items (CHART) Technology – A Critical Tool Out-of-stocks are the most noticeable problem for consumers — during normal shopping experiences eight per cent of intended purchases are not on the shelf and when it comes to promotional offers, these out-of-stocks rise to 15 per cent. Faced with an empty shelf, consumers often do not substitute the same brand. They simply keep their money and leave the store in search of another product. Let's take the example of a $25-billion retailer: lost sales due to out-of-stocks added up to nearly 1 per cent of total sales — a mind-boggling figure of $1 billion! Retailers across the nation are unable to predict and master the demand-supply gap as a result of orthodox tools to measure changing consumer behavior. Considering the Indian retail industry grew by 300 per cent in the last 12 months and supply chain accounts for 50 per cent of costs, retailers are now looking at ways to enhance the supply chain and predict consumer-buying habits. High consumption patterns driven by disposable incomes, lifestyle shifts and availability of a wide range of brands are dictating the high-growth of different retail formats in India. No wonder, Indian retail players are under tremendous 67
  • pressure to make the supply chain more efficient in order to deliver quality, selection and service to consumers. Retailers are now looking at creating an efficient supply-chain via a concept popularly referred to as consumer driven replenishment. What this implies is placing the consumer in the centre of the replenishment process, to allow retailers to be able to use real-time data to sense and respond to changing consumer demands. To implement consumer driven replenishment, one needs to first collect and analyze pre-shopping signals, which often go unnoticed today. For example, consumers may speak to store associates or call centre agents to enquire on a particular product. As this often leads consumers to purchase products, retailers and supply chain partners can use existing consumer touch points to map consumers' buying preferences. For example, Spanish retailer Zara furnishes its store employees with PDAs to help them order out-of-stock items the minute the customer brings it to the assistant's attention. This information captured via the PDAs dictates next-day replenishments at the stores. In another instance, Wal-Mart leverages weather data for replenishment. When the world's largest retailer knows about an approaching hurricane or snowstorm, the stores in that area are doubly stocked up with essential items such as bottled water and batteries. This data helps Wal-Mart align inventory with increased demand to cover unnatural events and prevent out-of-stock situations. Consumer driven replenishment will change the way the industry handles forecasting and replenishment. The major business change will start at the business process level; to respond quickly to consumer demand, retailers and their supply chain partners must redesign the current business process. All supply chain partners will become part of a cohesive architecture, enabling information to flow freely from retail functions to suppliers. 68
  • Inevitably, consumer driven replenishment within the Indian retail sector will be reflected in rapid growth in sales of supermarkets, department stores and hypermarkets. And with this increased competition, retailers will look at various opportunities to maximize customer satisfaction. These will include initiatives to streamline internal back end costs so as to translate savings onto customers, maximizing mind share in a cluttered market and delivering the best in store experience. Keeping these deliverables in mind, some of the other key modules that the store of the future will look to implement will include: Store connectivity: Stores will invest in building wide-area networks (WANs) and virtual private networks (VPNs) to access information across various sites. With visibility into every resource, stores will take advantage of up-to-the-minute data at the right time for increased strategic flexibility and informed decision-making for managing inventory. RFID: Widely regarded as the key defining technology to hit the retail sector, RFID tags on each piece of merchandise will enable companies to monitor their inventory at a more detailed level than ever before. Executives will identify when problems occur by monitoring signal readers installed at key junctures, such as loading docks, receiving points, distribution centers, backrooms and store shelves. These readers in turn will be networked to a centralized monitoring system that would give companies information they could never imagine with current operations, allowing them to identify problems as shop lifting, inventory management, and even 'gray market’ sales that can erode profits and damage distribution relationships. Let’s see the actual benefits of using RFID in the supply chain. The biggest benefit is the total visibility across 69
  • the entire supply chain: What managers worry about the most? It is directly or indirectly related to uncertainty. Uncertainty is the mother of inventory and the father of stock-outs. Inventory Management • Maintain a real-time view of tagged inventory as it flows through the supply chain. • Track discrete movement of tagged inventory. • Trigger alerts around inventory movement based on business rules you construct. • Allowing just-in-time practices. Maximizing warehouse space With the high costs associated with storage real estate, the goal is to maximize warehouse space. This will improve utilization without undermining the ease with which goods can be moved in and out. Minimizing goods shrinkage Theft combined with imprecise inventory management can create a significant shortfall in actual versus expected goods available. Within the retail environment goods shrinkage is widely perceived to account for up to one per cent of stock, representing a significant dent in profit margin. 70
  • Benefits to Consumers, RFID can go beyond just intangible cost savings, as RFID can play a role in food safety, counterfeit control, and warranty programs. Businesses must avoid focusing too intently on the ways RFID tags can be used and instead stay focused on how RFID can improve consumer value and address complex business issues. Minimizing errors in delivery Misdirected deliveries or incorrect orders can immediately result in on-shelf out- of-stock situations leading to reduced sales and damaged customer relationships. Indeed, for organizations relying on the delivery of specific components to fulfill their own order schedule, such errors can have a serious impact on customer satisfaction. Store Mobility: Stores will use wireless technologies at the point of sale for faster checkout and real-time product information in the store to improve operations, and throughout the supply chain to reduce costs. IP Communications: Stores will converge their data and voice systems, providing instant communication throughout stores at significantly reduced costs. In conclusion, suffice to say that faced with poor supply chain management and a rapidly changing environment, today's retailers will most definitively look for consumer driven replenishment to simplify supply chain operations, control costs, and measure results. With networks that will enable real time updates to predict and replenish stocks, the Indian consumer will hopefully never find his shopping preferences out of stock. 71
  • The Indian retail market is booming, and there are numerous applications—both business and consumer—that can be built around radio frequency identification (RFID) to deliver operational efficiencies. For instance, if a retailer is able to track shipments and high-value assets in real-time, it can minimise losses. Apart from improved and enhanced accuracy, RFID can also lead up to 80 percent savings in time spent on scanning items. Explains Chamaria, “RFID is a transformational technology that has the potential to change the way business is conducted. Although at a nascent stage, we expect RFID will start gaining traction around 2010. The cost of tags and readers is fairly high today; once it comes down and ROI is established, it will surely be a boon for both retailers and CPG companies.” Aggarwal of BEA elaborates. “While RFID is at a nascent stage, there are several killer applications that can utilise RFID technology across verticals. Supply Chain Visibility and Reusable Asset Tracking will emerge as key solutions that have high applicability in the Indian market, especially in manufacturing, retail, government and healthcare." But as of now, RFID has hardly any presence in India. Laments Chopra, “Indian retailers are still to adopt bar-coding completely. The level of bar-code usage is also largely due to the retailers’ initiatives of printing these codes at their warehouses, unlike in developed countries, where suppliers print bar-codes. Most retailers do not have integrated IT systems today. Many retailers have few IT systems in the areas of supply chain management, vendor development, merchandising and inventory management. The annual expenditure on IT is quite negligible.” 72
  • Technology in Retail Over the years as the consumer demand increased and the retailers geared up to meet this increase, technology evolved rapidly to support this growth. The hardware and software tools that have now become almost essential for retailing can be into 3 broad categories. Customer Interfacing Systems • Bar Coding and Scanners Point of sale systems use scanners and bar coding to identify an item, use pre-stored data to calculate the cost and generate the total bill for a client. Tunnel Scanning is a new concept where the consumer pushes the full shopping cart through an electronic gate to the point of sale. In a matter of seconds, the items in the cart are hit with laser beams and scanned. All that the consumer has to do is to pay for the goods. • Payment Payment through credit cards has become quite widespread and this enables a fast and easy payment process. Electronic cheque conversion, a recent development in this area, processes a cheque electronically by transmitting transaction information to the retailer and consumer's bank. 73
  • Rather than manually process a cheque, the retailer voids it and hands it back to the consumer along with a receipt, having digitally captured and stored the image of the cheque, which makes the process very fast. • Internet Internet is also rapidly evolving as a customer interface, removing the need of a consumer physically visiting the store. • ERP System Various ERP vendors have developed retail-specific systems which help in integrating all the functions from warehousing to distribution, front and back office store systems and merchandising. An integrated supply chain helps the retailer in maintaining his stocks, getting his supplies on time, preventing stock-outs and thus reducing his costs, while servicing the customer better. • CRM Systems (Customer Relationship Management) The rise of loyalty programs, mail order and the Internet has provided retailers with real access to consumer data. Data warehousing & mining technologies offers retailers the tools they need to make sense of their consumer data and apply it to business. This, along with the various available CRM (Customer Relationship Management) Systems, allows the retailers to study the purchase behavior of consumers in detail and grow the value of individual consumers to their businesses. • Advanced Planning and Scheduling Systems 74
  • APS systems can provide improved control across the supply chain, all the way from raw material suppliers right through to the retail shelf. These APS packages complement existing (but often limited) ERP packages. They enable consolidation of activities such as long term budgeting, monthly forecasting, weekly factory scheduling and daily distribution scheduling into one overall planning process using a single set of data. Leading manufactures, distributors and retailers and considering APS packages such as those from i2, Manugistics, Bann, MerciaLincs and Stirling-Douglas. Strategic Decision Support Systems • Store Site Location Demographics and buying patterns of residents of an area can be used to compare various possible sites for opening new stores. Today, software packages are helping retailers not only in their locational decisions but in decisions regarding store sizing and floor-spaces as well. • Visual Merchandising The decision on how to place & stack items in a store is no more taken on the gut feel of the store manager. A larger number of visual merchandising tools are available to him to evaluate the impact of his stacking options. The SPACEMAN Store Suit from AC Neilsen and ModaCAD are example of products helping in modeling a retail store design. Investment Opportunities • Potential For Investment: The total estimated Investment Opportunity in the retail sector is around US$ 5-6 Billion in the Next five years. 75
  • • Location: with modern retail formats having made their foray into the top cities namely Hyderabad, Coimbatore, Ahmedabad, Mumbai, Pune, Chennai, Bangalore, Delhi, Nagpur there exists tremendous potential in two tier towns over the next 5 years. • Sectors with High Growth Potential: Certain segments that promise a high growth are g Food and Grocery F Clothing C Furniture and Fixtures F Pharmacy P Durables, Footwear & Leather, Watch & Jewellery • Fastest Growing Formats: Some of the formats that offer good growth potential are: o Speciality and Super Market S Hyper Market H Discount stores D Department Stores D Convenience Stores and E-Retailing • Supply Chain Infrastructure: Supply chain infrastructure in terms of cold chain and Logistics. • Rural Retail: Retail sector offers opportunities for exploration and investment in rural areas, with Corporates and Entrepreneurs having made a foray in the past. India's largely rural population has caught the eye of retailers looking for new areas of growth. 76
  • • ITC launched the country's first rural mall ' Chaupal Sagar', offering a diverse product range from FMCG to electronics appliance to automobiles, attempting to provide farmers a one-stop destination for all of their needs. There has been yet another initiative by the DCM Sriram Group called the ' Hariyali Bazaar', that has initially started off by providing farm related inputs and services but plans to introduce the complete shopping basket in due course. Other corporate bodies include Escorts and Tata Chemicals (with Tata Kisan Sansar) setting up agri-stores to provide products/services targeted at the farmer in order to tap the vast rural market. • Wholesale Trading: wholesale trading also holds huge potential for growth. German giant Metro AG and South African Shoprite Holdings have already made headway in this segment by setting up stores selling merchandise on a wholesale basis in Bangalore and Mumbai respectively. These new-format cash-and-carry stores attract large volumes from a sizeable number of retailers who do not have to maintain relationships with multiple suppliers for all their needs. • Cheap Consumer Credit Benefits of opening the Retail sector Improve competition Develop the market : Greater level of exports due to increased sourcing by major players Sourcing by Wal-Mart from China improved multifold after FDI permitted in China Similar increase in sourcing observed for Metro in India Provides access to global markets for Indian producers. Investment in technology Cold storage chains solve the perennial problem of wastage. Greater investment in the food processing sector technology Better operations in production cycle and distribution. 77
  • Better lifestyle Greater level of wages paid by international players usually More product variety Newer product categories Economies of scale to help lower consumer price. Increased purchasing capacity of consumers Manpower and skill development through retail training and Greater managerial talent inflow from other countries Tourism Development : A strong retailing sector boosts tourism as seen from the experience of Singapore and Dubai. Investment in whole supply chain Improved product basket from India for exports. Long term benefits,up-gradation of agriculture, development of efficient small and medium size industries. FDI would result in market growth and expansion. Employment generated at various levels, Increased consumer demand implies employment generation across the value chain does not need very high skill sets, needs high school graduates and other similar skill level. Currently this is a majorly unemployed demographic group Boom in employment similar to job generation in ITES industry. On a much larger scale But new jobs comparatively lower down the value chain Greater clarity and objectivity can be achieved if one looks beyond kiranas at the larger issue of employment, 78
  • Despite the entry of organized retail – domestic and foreign – in China, its retail still employs 6 percent of the total workforce ( only marginally smaller than India). The top 100 retailers in China employ 810,000 people, a figure growing at over 25 percent every year. But compared with the US, the percentage looks paltry. In the US, almost 15 million people or 11.7 of the workforce are employed in retail. This is almost double the retail workforce in China – and much higher than in India! Many believe that organised retail actually leads to job gains rather than job losses. This is not to say that the changeover will be painless. Shifting of jobs is bound to happen. “Supermarket chains will divert business from small vendors, but they also create many jobs,” argues retail expert Gale. One reason for that is growth of organised retail stimulates consumption. And increased consumption means more production and therefore more jobs.In India, owners of large and small stores will tell you that they face stockouts – products not available when a consumer asks for it. This is lost demand. And it is due to India’s rather inefficient supply chain. One could, therefore argue that India’s consumption is actually way below actual potential – and that there is inherent job loss of jobs that exists in the economy. Here poor distribution and below-par processes is another bottleneck. “If the economy grows at 6.5 percent or so every year, we will have 5-7 years. If you do not have an efficient distribution chain, the economy cannot grow… Such inefficiency will lead to job losses. If you do not have organized distribution, you won’t have employment growth,” argues Harsh Bahadur, managing director, Metro Cash & Carry, India. Finally, if the fear of kiranas being snuffed out is true, then the government ought to be equally concerned about Indian retailers as 79
  • well. Several large and influential business groups like the Tatas and Ambanis have ambitious plans that include setting up of hundreds of supermarkets and hypermarkets. Won’t these kill kiranas and lead to job losses. In reality; foreign retailers will be in a position to influence employment only several years after they enter India. But they will have an impact on the consumer almost immediately. Of course, in India the consumer is invariably forgotten when protectionist lobbies voice their concern. Conclusion: The productivity in retail depends on various factors such as * Demography Dynamics, Double Incomes, Plastic Revolution, Urbanization, Potential for Investment, Location, Sectors with High Growth Potential, Fastest Growing Formats, Supply Chain Infrastructure, Rural Retail, Wholesale Trading, Cheap Consumer Credit, retail hardware and technology. Big Retail is here to stay. Assuming that improvements in infrastructure and lower real estate costs become a reality, Big Retail still has a long way to go before satisfying the highly diverse needs of the Indian population. As a result, there will be a steady-state where Big Retail will co-exist with Small Retail. 80
  • References: Web Sites and Search Engines • www.indiabiznews.com • www.fashion2fibre.com • www.indiainfoline.com • www.equitymaster.com • www.economywatch.com • www.google.com • www.rediff.com • www.ibef.org Newspapers • The Times Of India • The Indian Express • The Economic Times • Financial Express • Business Standard • Business Line Books and Magazines • Business World • The Indian Dream • Business & Economy 81
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