1511. consumer behaviour in the indian retail sector


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1511. consumer behaviour in the indian retail sector

  2. 2. ACKNOWLEDGEMENTMy sincere thanks to Faculty Guide under whose able guidance and kind cooperation Iwas able to complete the project work titled "Consumer Behaviour in the IndianRetail Sector" .Also, I do thank and remember my friends for their effort and helping hand.Every effort has been made to enhance the quality of work. However, I owe the soleresponsibility of the shortcoming, if any, in the study. GAGAN JOT SINGH 2
  3. 3. TABLE OF CONTENTS INTRODUCTION REVIEW OF LITERATURE • Retailing in India • Unorganized Retailing • Organized Retailing • The macro picture of retailing • Present Indian scenario • Traditional retail scene in India OBJECTIVES SCOPE OF STUDY RESEARCH METHODOLOGY • Methodology adopted • Sources of data collection • Sample size • Demographic profile of sample RETAIL FORMATS RETAIL SUMMARY CHART POPULAR INDIAN RETAIL FORMATS FUTURE PLANS OF VARIOUS RETAILERS 3
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  7. 7. Retail SectorThe word "Retail" originates from a French-Italian word “retaillier” which means to break bulk.Retailing is the set of activities that markets products or services to final consumers for their ownpersonal or household use. It does this by organizing their availability on a relatively large scaleand supplying them to customers on a relatively small scale.Retailing is the last stage in the movement of goods and services to the consumer.Retail therefore consists of all activities involved in the marketing of goods and services directlyto the consumers for their personal, family or domestic use.Retailer is a person or Agent or Agency or Company or Organization who is instrumental inreaching the goods or merchandise or services to the end user or the ultimate consumer.Retailing involves all activities incidental to selling to ultimate consumer or the end user for theirpersonal, family and household use. It does this by organizing their availability on a relativelylarge scale and supplying them to users on a relatively small scale. Retailer is any person or anorganization instrumental in reaching the goods or merchandise or services to the end users.Retailer is a must in the process and cannot be eliminated.The Indian retailing industry is becoming extremely competitive, as more and more players aretargeting for the same set of customers. The major retail players are Pantaloon Retail, ShoppersStop, Reliance, etc..,Retailing is one of the biggest sectors and it is witnessing revolution in the Indian market. Thenew entrant in retailing in India signifies the beginning of retail revolution. Indias retail marketis expected to grow tremendously in next few years. According to AT Kearney, The Windows ofOpportunity shows that Retailing in India was at opening stage in 1995 and now it is in growthstage in 2008. Indias retail market is expected to grow tremendously in next few years. Retailmarket is expected to grow 10% a year, with modern retailing just beginning.This window of opportunity is useful for executives who plan their market-specific strategies;the four stages or the lifecycle of this industry are as follows: 7
  8. 8. Introduction:An introduction is the opening phase of a market and is one that is just entering Global RetailDevelopment Index (GRDI). This index is based on more than 25 macro-economic and retail –specific variables for instance, the country risk includes parameters like political risk, economicrisk, performance risk, financial risk and business risk. The market attractiveness covers retailsales per capita, urban population, laws and regulations and business efficiency.At this stage, retailers should monitor and performing high-level assessments, they should planfor their entry strategies in the market. India in the late 1990s is a good example in the openingstage, while in 2007; Kazakhstan was the country in introduction stage.Strategy suggested: A rapid penetration strategy is suggested at this stage that is low price andhigh promotion.Growth:In growth stage, the market is developing quickly and also is ready for modern retailing.Countries, which are in Peaking stage such as India. Retailers who are entering this stage havethe best chance for long-term success. Retailers at this stage should enter through localrepresentations, sourcing offices and new stores.Strategy suggested: The strategy of adopting quality and styled products with new models andshift of advertising from product awareness to product preference .The idea behind adopting thisstrategy is to strengthen against competitors. 8
  9. 9. Maturity:In this stage the market is still big and growing, but the space for new entrants will becometighter and retailers should act promptly at this stage because retailers at this stage have limitedtime to explore, and also their margin for error is less. In general, they should act in accordanceto the established rules and should be open to face the competition from international retailers.This stage generally lasts longer than the previous two stages.Strategy suggested: Enter new market segments, that is, either enter new geographic areas orintroduce new and innovative products and offers.Decline:The window of opportunity is closing fast and modern retail share is reaching 40 to 60 percent.Though the opportunity is closing the existing retailers can enter with new formats such asdiscount models or non-food formats such as consumer electronics and apparel.Window of opportunity ends for about 5 to 10years before a market enters the closing phase andreaches saturation level. India for example, was in the opening stage in 1995 and entered peakingstage in the year 2003 and reached number 1 rank in2005.Strategy suggested: Identifying weak segments, maintaining investment level selectively. 9
  11. 11. RETAILING IN INDIARetailing is the most active and attractive sector of the last decade. While the retailing industryitself has been present since ages in our country, it is only the recent past that it has witnessed somuch dynamism. The emergence of retailing in India has more to do with the increasedpurchasing power of buyers, especially post-liberalization, increase in product variety, andincrease in economies of scale, with the aid of modern supply and distributions solution.Indian retailing today is at an interesting crossroads. The retail sales are at the topmost point inhistory and new technologies are improving retail productivity. Though there are manyopportunities to start a new retail business, retailers are facing numerous challenges.India has witnessed a frenetic pace of retail growth over the past five years. Goldman Sachs hasestimated that the Indian Economic growth could actually exceed that of China by 2015. It isbelieved that the Country has potential to deliver the faster growthover the next 50 years. As we all know that India has been a nation of Dukandars, having –around 12 million retailers. Obviously retailing is in our blood – either as a shopkeeper or as ashopper. The Indian Retail market is estimated to grow from the current US $ 330 billionto US $ 427 billion by 2010 & U. S. $ 637 by 2015. Retail which contributes 10% of our GDP isthe largest source of employment after agriculture. In the year 2004, ratio of organized-Unorganized retail was 3:97 which is expected to be 9:91 by 2010. (Annexure: 9 It is not just theglobal players like Wal-Mart, Tesco and Metro group are eying to capture a pie of this gallopingmarket but also the domestic corporate behemoths like Reliance, NeelKamal, KK Modi, AdityaBirla group, and Bharti group too are at the same stage of retail development...There is augmented sophistication in the shopping pattern of customers, which has resulted to theemergence of big retail chains in most metros; mini metros and towns being the next target.Customer taste and preferences are changing leading to radical transformation inlifestyles and spending patterns which in turn is giving rise to new business opportunities. 11
  12. 12. The generic growth is likely to be driven by changing lifestyles and by strong surge in income,which in turn will be supported by favorable demographic patterns.Development of mega malls in India is adding new dimensions to the booming retail sector.There is significant development in retail landscape not only in the metros but also in the smallercities. Even ITC went one step ahead to revolutionize rural retail by developing‘Choupal Sagar’; a rural mall, for the Rural India. On one hand there are groups of visionarycorporate working constantly to improve upon urban shopping experience and on the other handsome companies are trying to infuse innovative retail experience into the rural Set up. Giventhe situation we can say that Indian Retailing is at boom.India has sometimes also been called a nation of shopkeepers. This epithet has its roots in thelarge number of retail enterprises in India, which totaled over 12 million in 2003. About 78% ofthese are small family businesses utilizing only household labor. Even among retail enterprisesthat employ hired workers, the bulk of them use less than three workers.Indias retail sector appears backward not only by the standards of industrialized countries butalso in comparison with several other emerging markets in Asia and elsewhere. There are only14 companies that run department stores and two with hypermarkets. While the number ofbusinesses operating supermarkets is higher (385 in 2003), most of these had only one outlet.The number of companies with supermarket chains was less than 10.In a developing country like India, a large chunk of consumer expenditure is on basic necessities,especially food related items. Hence, it is not surprising that food, beverages and tobaccoaccounted for as much as 71% of retail sales in 2002. The remaining 29% of retail sales are non-food items. The share of food related items fell over the review period, down from 73% in 1999.This is to be expected as, with income growth, Indians, like consumers elsewhere, spent more onnon-food items compared with food products.Sales through supermarkets and department stores are small compared with overall retail sales.However, their sales grew much more rapidly (about 30% per year during the review period). Asa result, their sales almost tripled during this time. This high acceleration in sales through 12
  13. 13. modern retail formats is expected to continue during the next few years with the rapid growth innumbers of such outlets in response to consumer demand and business potential.The retail sector in India is witnessing a massive revamping exercise as traditional markets makeway for new formats such as departmental stores, hypermarkets, supermarkets and specialtystores. Rated the fifth most attractive emerging retail market, India is being seen as a potentialgoldmine. A recent McKinsey study titled “India’s Retailing Comes of Age” has predicted aretail revolution in India. While India is the last among the large Asian economies to liberalizeits retail sector, the ‘licensing raj’ has well and truly passed.Hence, focusing on two aspects of retail marketing i.e. Store Retailing and Non-store Retailing.Store Retailing as the departmental store, which is a store or multi brand outlet, offering an arrayof products in various categories under one roof, trying to cater to not one or two but manysegments of the society and Nonstore Retailing as the direct selling, direct marketing, automaticvending. Most of these stores believe in creating not just a marketing activity with itscustomers, but rather favour relationship building with him so as to convert first time customersinto a client.A number of Indian and international retailers are entering this nascent, though dynamic market.Market liberalization and increasingly assertive consumers are sowing the seeds of a retailtransformation that will bring bigger Indian and multinational players on to the scene. Buoyed bya strong increase in private consumption, retailing is one industry that is waiting to explode.Though retail may well be our next sunrise industry after Information Technology, capitalizingon the opportunities is still a formidable task for retailers. We may have made several forays intothe world of international retailing, but success has only been moderate. At about 2 per cent ofthe total global retail market, we are still only scraping the surface. (Economic Times KnowledgeSeries – Changing Gears: Retailing in India, 2003).Says B S Nagesh, CEO of Shoppers Stop, “Indian retailing is on the threshold of growth – earlyleaders have to take their technology and current learning into much larger scales”. Companies 13
  14. 14. like us will lead in creating retail experiences and retail brands, whereas mall developers willlead in providing retail space. But it is for the government to make India a great shopping andtravel destination through right policy decisions and direction.”.Retail industry is the largest industry in India, with an employment of around 8% andcontributing to over 10% of the countrys GDP. Retail industry in India is expected to rise 25%yearly being driven by strong income growth, changing lifestyles, and favorable demographicpatterns.It is expected that by 2016 modern retail industry in India will be worth US$ 175- 200 billion.India retail industry is one of the fastest growing industries with revenue expected in 2007 toamount US$ 320 billion and is increasing at a rate of 5% yearly. A further increase of 7-8% isexpected in the industry of retail in India by growth in consumerism in urban areas, risingincomes, and a steep rise in rural consumption. It has further been predicted that the retailingindustry in India will amount to US$ 21.5 billion by 2010 from the current size of US$ 7.5billion.Shopping in India have witnessed a revolution with the change in the consumer buying behaviorand the whole format of shopping also altering. Industry of retail in India which have becomemodern can be seen from the fact that there are multi- stored malls, huge shopping centers, andsprawling complexes which offer food, shopping, and entertainment all under the same roof.India retail industry is expanding itself most aggressively, as a result a great demand for realestate is being created. Indian retailers preferred means of expansion is to expand to otherregions and to increase the number of their outlets in a city. It is expected that by 2010, Indiamay have 600 new shopping centers.In the Indian retailing industry, food is the most dominating sector and is growing at a rate of 9%annually. The branded food industry is trying to enter the India retail industry and convert Indianconsumers to branded food. Since at present 60% of the Indian grocery basket consists of non-branded items. 14
  15. 15. India retail industry is progressing well and for this to continue retailers as well as the Indiangovernment will have to make a combined effort.Retailing in India can be categorized as: • Unorganized Retailing • Organized Retailing 15
  16. 16. Unorganized retailing in IndiaIn India, the most of the retail sector is unorganized. In India, the retail business contributesaround 11 percent of GDP. Of this, the organized retail sector accounts only for about 3 percentshare, and the left over share is contributed by the unorganized sector which is mostly a familyowned business in India. The major challenge facing the organized sector is the competitionfrom unorganized sector. Unorganized retailing has been there in India for centuries, theses arenamed as mom-pop stores. The major advantage in unorganized retailing is consumer familiaritythat runs from generation to generation. It is a low cost structure; they are mostly operated byowners, has very low real estate and labour costs and has low taxes to pay. 16
  17. 17. Organized retailing in IndiaIn late 1990s the retail sector has witnessed a level of transformation. Retailing is beingperceived as a beginner and as an attractive commercial business for organized business i.e. thepure retailer is starting to emerge now. Organized retail business in India is very small but hastremendous scope.Organized retailing will grow faster than unorganized sector and the growth speed will beresponsible for its high market share, which is expected to be $ 17 billion by 2010-11.Retailing will show fine prospects in cities like Mumbai, Delhi, Chennai, Kolkata, Banglore andKanpur. After Dubai, Singapore and Hong Kong, In India Delhi will be the next big retaildestination, According to Confederation of Indian Industries whose findings have shown thatDelhi has the good resources and suitable conditions for the retail sector. Out of the totalearnings of the Government of Delhi Rs 11,000 crore, Rs 6,500 crore is achieved from the retailsector.The organized sector is expected to grow faster than GDP growth in next few years driven byfavourable demographic patterns, changing lifestyles, and strong income growth. This organizedretail sector mix includes supermarkets, hypermarkets discounted stores and specialty stores,departmental stores. 17
  18. 18. The Macro Picture:Retailers inspired by the wall-mart story of growth in small town America, are tempted tofocus on smaller towns and villages in India. However, a careful analysis of the townstrata-wise population, population growth, migration trends of customer spendinganalysis reveals a very different picture of India.As per the NCAER estimates, the share of the 35 towns with a present population of greater than1 million in India’s total population would grow much faster than their smaller counterparts,from 10.2 % today to reach 14.4 % by 2025.Simultaneously, the share of these towns in retail market would grow from 21 % today to 40 %by 2025. Within these top 35 towns, an estimated 70 to 80 % of retail trade would be in theorganized sector. This is similar to the experience in China where in cities like Sanghai andBeijing, the organized sector accounts for 70 to 80 % of overall retails trade in certain categories.Retailers should therefore focus on top 37 towns in the next decade, as the opportunity in smallertowns and rural India would be smaller and more fragmented as compared to the larger towns.But again this is the one side of the coin. only.Retail industry is the largest industry in India, with an employment of around 8% andcontributing to over 10% of the countrys GDP. Retail industry in India is expected to rise 25%yearly being driven by strong income growth, changing lifestyles, and favorable demographicpatterns.It is expected that by 2016 modern retail industry in India will be worth US$ 175- 200 billion.India retail industry is one of the fastest growing industries with revenue expected in 2007 toamount US$ 320 billion and is increasing at a rate of 5% yearly. A further increase of 7-8% isexpected in the industry of retail in India by growth in consumerism in urban areas, risingincomes, and a steep rise in rural consumption. It has further been predicted that the retailingindustry in India will amount to US$ 21.5 billion by 2010 from the current size of US$ 7.5billion.Shopping in India have witnessed a revolution with the change in the consumer buying behaviorand the whole format of shopping also altering. Industry of retail in India which have becomemodern can be seen from the fact that there are multi- stored malls, huge shopping centers, andsprawling complexes which offer food, shopping, and entertainment all under the same roof. 18
  19. 19. India retail industry is expanding itself most aggressively, as a result a great demand for realestate is being created. Indian retailers preferred means of expansion is to expand to otherregions and to increase the number of their outlets in a city. It is expected that by 2010, Indiamay have 600 new shopping centers.In the Indian retailing industry, food is the most dominating sector and is growing at a rate of 9%annually. The branded food industry is trying to enter the India retail industry and convert Indianconsumers to branded food. Since at present 60% of the Indian grocery basket consists of non-branded items.India retail industry is progressing well and for this to continue retailers as well as the Indiangovernment will have to make a combined effort. 19
  20. 20. PRESENT INDIAN SCENARIO* Unorganized market: Rs. 583,000 crores* Organized market: Rs.5, 000 crores* 6X growth in organized retailing between 2005-2008* Over 4,000 new modern Outlets in the last 3 years* Over 5,000,000 sq. ft. of mall space under development* The top 3 modern retailers control over 750,000 sq. ft. of retail space* Over 400,000 shoppers walk through their doors every week* Growth in organized retailing on par with expectations and projections of the last 5 Years: oncourse to touch Rs. 35,000 crores (US$ 7 Billion) 20
  21. 21. TRADITIONAL RETAIL SCENE IN INDIAIndia is the country having the most unorganized retail market. Traditionally the retail business isrun by Mom & Pop having Shop in the front & house at the back. More than 99% retailersfunction in less than 500Sq.Ft of area. All the merchandise was purchased as per the test & vimand fancies of the proprietor also the pricing was done on ad hock basis or by seeing at the faceof customer. Generally the accounts of trading & home are not maintained separately. Profitswere accumulated in slow moving & non-moving stocks which were to become redundant orconsumed in-house. Thus profits were vanished without their knowledge. The Manufactureswere to distribute goods through C & F agents to Distributors & Wholesalers. Retailers happento source the merchandise from Wholesalers & reach to end-users. The merchandise price usedto get inflated to a great extent till it reaches from Manufacturer to End-user. Selling prices werelargely not controlled by Manufacturers. Branding was not an issue for majority of customers.More than 99% customers are price sensitive & not quality or Brand Sensitive at the same timethey are Brand conscious also. Weekly Bazaar in many small tows was held & almost all thecommodities were on the scene including livestock. Bargaining was the unwritten law of market.Educational qualification level of these retailers was always low. Hence market was controlledby handful of distributors &/or Wholesalers. Virtually there was only one format of retailing &that was mass retail. Retailer to consumer ratio was very low, for all the categories withoutexception. Varity in terms of quality, Styles were on regional basis, community based & trulyvery low range was available at any given single place. Almost all the purchases / (buying) bymass population was need oriented & next turn may be on festivals, Marriages, Birthdays &some specific occasions.Impulsive buying or consumption is restricted to food or vegetables etc. Having extra pair oftrousers or Shirts or Casuals & Formals & leisure wear & sports wear & different pair of shoesfor occasions is till date is a luxury for majority population except for those living in Metros.Purchasing power of Indian urban consumer is very low and that of Branded merchandise incategories like Apparels, Cosmetics, Shoes, Watches, Beverages, Food, Jewellery, are slowlyseeping into the lifeline of Indian City folks. However electronic & electrical home appliancesdo hold appropriate image into the minds of consumers. Brand name does matter in these whitegoods categories. In the coming times also majority of organized retailers will find it difficult tokeep balance with rest of the unbranded retail market which is very huge. 21
  22. 22. OBJECTIVES 22
  23. 23. • To study the buying behaviour of Indian customers. Understanding the present Indian Retail scenario with respect to emergence of big retail chains in most metros, mini metros and towns according to change in customer taste, preferences, lifestyle and spending patterns.• To study the reasons for buying from a particular retail store Understanding the various factors such as price, quality, service, offers etc. which influence the customers for buying from a particular retail store.• To study the nature and trends in buying patterns of customers. Understanding the demographic segmentation and the respective buying patterns of the customers according to the latest trends in the market.• Understanding the needs of customers In a diverse culture of a country like India, it is important to understand that the needs of the customers may differ from person to person and culture to culture.• To provide recommendations to serve customers quickly, efficiently and conveniently. Due to the highly competitive and nearly saturated market, only those retail stores will survive in the long run which will provide better services quickly, efficiently and conveniently. 23
  24. 24. SCOPE OF STUDY 24
  25. 25. The scope of the study involved getting knowledge about the retail industry. The majorpart of the study focused on understanding the buying behavior and patterns of Indiancustomers.My approach was to get a deep insight into the sector through a study which included acomprehensive analysis of the following: • Present Indian retail scenario • Retail formats • Indian retail and plans of Indian retailers • Retail as an employment generator • Emerging trends in the retail sector • NCR/ Delhi current retail scenario • Factors responsible for the development of the retail sector • Challenges for the retail sector 25
  27. 27. Research Methodology adoptedThe research methodology consisted of the following steps: 1. Familiarization with the retail concepts and retail industry in India 2. Collection of database from individuals through a questionnaire. 3. Analysis and interpretation of data. 4. Reaching at conclusions and suggestions based on analysis. Sources of Data Collection 1. Primary Source • ONLINE QUESTIONNAIRE 2. Secondary sources • INTERNET • BOOKS • REPORTS Sample Size 100 people 27
  28. 28. Demographic Profile of Sample • 22 years and above • Randomly selected people. 28
  29. 29. RETAIL FORMATS 29
  30. 30. Prevalent Retail FormatsThe following kinds of retail formats are found in India:• Mom-and-pop stores:These are generally family-owned businesses catering to small sections of society. They aresmall, individually run and handled retail outlets. Represent the small, individually owned andoperated retail outlet. In many cases these are family-run businesses catering to the localcommunity• Category killers: Small specialty stores have expanded to offer a range of categories. They have widened theirvision in terms of the number of categories. They are called category killers as they specialize intheir fields, such as electronics (Best Buy) and sporting goods (Sport Authority).• Department stores:These are the general merchandise retailers offering various kinds of quality products andservices. Large stores having a wide variety of products, organized into different departmentssuch as clothing, house wares, furniture, appliances, toys, etc. One stop shop catering to varied/consumer needs.These do not offer full service category products and some carry a selective product line. KRahejas Shoppers Stop is a good example of department stores. Other examples are Lifestyleand Westside. These stores have further categories, such as home and décor, clothing, groceries,toys, etc.These retailers are general merchandisers offering mid-to-high quality products and strong levelof services, though in most cases these retailers would not fall into the full-service category.While department stores are classified as general merchandisers some carry a more selectiveproduct line. For instance, while Sears carries a wide range of products from hardware tocosmetics, Nordstroms focuses their products on clothing and personal care products.• Malls:These are the largest form of retail formats. They provide an ideal shopping experience byproviding a mix of all kinds of products and services, food and entertainment under one roof. 30
  31. 31. Examples are Sahara Mall, TDI Mall in Delhi. An enclosure having different formats of in-storeretailers, all under one roof. Variety of shops available to each other.• Specialty Stores: The retail chains, which deal in specific categories and provide deep assortment in them arespecialty stores. Examples are RPGs Music World, Mumbais bookstore Crossword, etc. Focuson a specific consumer need, carry most of the brands available. Greater choice to the consumer,comparison between brands is possible• Discount stores: These are the stores or factory outlets that provide discount on the MRP items. They focus onmass selling and reaching economies of scale or selling the stock left after the season is over.These retailers can be either general or specialty merchandisers but either way their main focus ison offering discount pricing. Compared to department stores, mass discounters offer fewerservices and lower quality products.• Hypermarkets/ Supermarkets:(3,500 - 5,000 sq. ft)These are generally large self-service outlets, offering a variety of categories with deepassortments. These stores contribute 30% of all food and grocery organized retail sales.Example: Big Bazaar. Extremely large self-service retail outlets. One stop shop catering tovaried consumer needs• Convenience stores:(7,50 - 1,000 sq. ft)They are comparatively smaller stores located near residential areas. They are open for anextended period of the day and have a limited variety of stock and convenience products. Pricesare slightly higher due to the convenience given to the customers.As the name implies these general merchandise retailers cater to offering customers an easypurchase experience. Convenience is offered in many ways including through easily accessiblestore locations, small store size that allows for quick shopping, and fast checkout. The productselection offered by these retailers is very limited and pricing can be high. Small self-serviceformats located in crowded urban areas. Convenient location and extended operating hours• E- tailers:These are retailers that provide online facility of buying and selling products and services viaInternet. They provide a picture and description of the product. A lot of such retailers are 31
  32. 32. booming in the industry, as this method provides convenience and a wide variety for customer.But it does not provide a feel of the product and is sometimes not authentic. Examples areAmazon.com, Ebay.com, etc.Possibly the most publicized retail model to evolve in the last 50 years is the retailer thatprincipally sells via the Internet. There are thousands of online-only retail sellers of whichAmazon.com is the most famous. These retailers offer shopping convenience including beingopen for business all day, every day. Electronic retailers or e-tailers also have the ability to offera wide selection of product since all they really need in order to attract orders is a picture anddescription of the product.That is, they may not need to have the product on-hand the way physical stores do. Instead an e-tailer can wait until an order is received from their customers before placing their own order withtheir suppliers. This cuts down significantly on the cost of maintaining products in-stock.• Vending:This kind of retailing is making incursions into the industry. Smaller products such as beverages,snacks are some the items that can be bought through vending machines. At present, it is notvery common in India.Within this category are automated methods for allowing consumers to make purchases andquickly acquire products. While most consumers are well aware of vending machines allowingcustomers to purchase smaller items, such as beverages and snack food, newer devices areentering the market containing more expensive and bulkier products. These systems require thevending machine have either Internet or telecommunications access to permit purchase usingcredit cards.• Warehouse StoresThis is a form of mass discounter that often provides even lower prices than traditional massdiscounters. In addition, they often require buyers to make purchases in quantities that aregreater than what can be purchased at mass discount stores. These retail outlets provide fewservices and product selection can be limited. Furthermore, the retail design and layout is as thename suggests, warehouse style, with consumers often selecting products off the ground from theshipping package. Some forms of warehouse stores, called warehouse clubs, require customerspurchase memberships in order to gain access to the outlet. 32
  33. 33. Retail Summary ChartBelow, we summarize each retail format by using the seven categorization characteristics.The characteristics identified for each format should be viewed as the “most likely” case for thatformat and are not necessarily representative of all retailers that fall into this format.For example, under distribution, clearly most retailers today have an online presence, however,for many the predominant distribution methods is still selling through retail stores.Format Target Products Pricing Promotion Distribution Service Ownership Market Carried Strategy Emphasis Level StructureMom-and- mass general competitive advertising stand-alone assorted individuallyPop specialty specialty direct mail strip center o/o shopping areaMass mass general discount advertising stand-alone self corp. chainDiscounter strip-centerWarehouse mass general discount advertising stand-alone self corp. chainStoreCategory mass specialty discount advertising stand-alone assorted corp. chainKilller competitive strip centerDepartment specialty general competitve advertising shopping areaassorted corp. chainStore shopping mailBoutique speciatly specialty Full selling stand-alone full individuallly exclusive strip center o/o shopping area chainCatalog mass general discount direct mail direct assorted corp. structure specialty specialty competitive marketere-tailer mass general discount advertising online seller self corp. structure specialty specialty competitive fullFranchise mass specialty competitive advertising stand-along assorted contractual strip center 33
  34. 34. Convenience mass general full advertising stand-alone self individually o/o corp. chainVending mass specialty full none vending self corp. structure 34
  35. 35. Popular Indian Retail FormatsIn modern retailing, a key strategic choice is the format. Innovation in formats can provide anedge to retailers. Organized retailers in India are trying a variety of formats, ranging fromdiscount stores to supermarkets to hypermarkets to specialty chains.Formats Adopted by Key Players in IndiaRetailer Original formats Later Formats Hypermarket (Spencers)Specialty StoreRPG Retail Supermarket (Foodworld) (Health and Glow)Piramals Department Store (Piramyd Megastore) Discount Store (TruMart)Pantaloon Small format outlets (Shoppe) Supermarket (Food Bazaar)Retail Department Store (Pantaloon) Hypermarket (Big Bazaar) Mall (Central)K Raheja Department Store (shoppers stop) Supermarket (TBA)Group Specialty Store (Crossword) Hypermarket (TBA)Tata/ Trent Department Store (Westside) Hypermarket (Star India Bazaar)Landmark Department Store (Lifestyle) Hypermarket (TBA)Group Discount Store (Subhiksha, Margin Free, Apna Bazaar), Supermarket (Nilgiris),Others Specialty Electronics 35
  36. 36. Future Plans of Various Retailers • Reliance Retail: Investing Rs. 30,000 crore ($6.67 billion) in setting up multiple retail formats with expected sales of Rs. 90,000 crore plus ($20 billion) by 2009-10. • Pantaloon Retail: Will occupy 10 mn sq.ft retail space and achieve Rs.9,000 crore-plus ($2 bn) sales by 2008. • RPG: Planning IPO, will have 450-plus Music World, 50-plus Spencers Hyper covering 4 mn sq.ft by 2010. • LIFESTYLE : Investing Rs.400 crore-plus ($90 mn) in next five years on Max Hypermarkets & value retail stores, home and lifestyle centres. • Rahejas: Operates Shoppers Stop, Crossword, Inorbit Mall, and Home Stop formats. Will operate 55 "Hypercity" hypermarkets with US$100 million sales across India by 2015. • Piramyd Retail: Aiming to occupy 1.75 million sq.ft retail space through 150 stores in next five years. • TATA (Trent Ltd.): Trent to open 27 more stores across its retail formats adding 1 mn sq.ft of space in the next 12 DLF malls. Titan industries to add 50-plus Titan and Tanishq stores in 2006. 36
  39. 39. The retail sector can generate huge employment opportunities, and can lead to job-led economicgrowth. In most major economies, ‘services’ form the largest sector for creating employment.US alone have over 12% of its employable workforce engaged in the retail sector. The retailsector in India employs nearly 21 million people, accounting for roughly 6.7% of the totalemployment.However, employment in organised retailing is still very low, because of the small share oforganised retail business in the total Indian retail trade. The share of organised retailing in India,at around 2%, is abysmally low, compared to 80% in the USA, 40% in Thailand, or 20% inChina, thus leaving the huge market potential largely untapped. A modern retail/retail servicessector has the potential of creating over 2 million new (direct) jobs within the next 6 years in thecountry (assuming only 8-10% share of organised retailing).Retail can create as many new jobs as the BPO/ITES sector in India. A strong retail front-endcan also provide the necessary fillip to agriculture & food processing, handicrafts, and small &medium manufacturing enterprises, creating millions of new jobs indirectly. Through it’s stronglinkages with sectors like tourism and hospitality, retail has the potential of creating jobs in thesesectors also.Though the Planning Commission has identified retail as a prospective employment generator, inorder to strengthen the multiplier effect of the growth in organized retailing upon the overallemployment situation, a pro-active governmental support mechanism needs to evolve fornurturing the sector. Issues like FDI in retail, allocation of government-controlled land on morefavorable terms, strong political and bureaucratic leadership, etc., need to be addressedadequately. 39
  41. 41. It is difficult to fit a successful international format directly and expect a similar performance inIndia. The lessons from multinationals expanding to new geographies also point to this. Forexample, Wal- Mart is highly successful in USA but the story is different in Asian countries likeChina. Therefore, it is important for a retailer to look at local conditions and insights into thelocal buying behavior before shaping the format choice. Considering the diversity in terms oftaste and preferences prevailing in India, the retailers may go for experimentation to identify thewinning format suited to different geographies and segments. For example, the taste in south isdifferent from that in north and this brings challenges to the retailers. Therefore, most of groceryretailers are region centric at this point in time. The available research findings on retail indicatethe following trends in Modern Retail formats.1)Trial & Error:Now a number of retailers are in a mode of experimentation and trying several formats which areessentially the representation of retailing concepts to fit into the consumer mind space. Apartfrom geography even rural and urban divide poses different kind of challenge to the retailer.Pantaloon Retail India is experimenting with several retail formats to cater to a wide segment ofconsumers in the market.2) Emergence of Wholesale Clubs:Since retailers are trying to segment the market with the help of formats, they developed anothernew format in the form of Wholesale Club to sell a segment of consumers, who purchase on bulkand look out for substantial discounts and offers. The new format is going to be a kind ofwholesale club which is likely to be located close to Food Bazaar. Consumers who are interestedto purchase on bulk can take benefit from this format. Similarly the Land mark group alsooperates multiple formats such as hypermarket (Max), departmental store (Lifestyle), Shoe martand Funcity etc. Such experimentation and identification of an appropriate format for the localconditions would separate winners from losers in India, possibly implying multiple formats 41
  42. 42. could be the reality in the long run. Pantaloon Retail India Ltd is a live example of that in Indianscenario..3) Increasing Acceptance of Rural Markets:Mall-mania is phenomenal in India and is spreading fast and entering even the second tier citiesin India. Real estate developers are jumping very fast to take this further from Metro cities tosmaller cities and corporate houses like ITC and Sriram group are making steady progress tomake this phenomena feasible in rural markets as well. There is no denying that the top notchcities like Mumbai, Delhi, Bangalore, Hyderabad, Kolkata, Chennai and Pune are leading theway but the second tier cities like Ludhiana,Chandigarh, Nagpur and Surat are also catching the eye of allretailers. Retail developers are insuch a mood that they may over ride the requirement in a specific city.4) Govt. is also promoting the Development of Modern RetailFormats:Large format malls are increasingly gettingprominence with adequate retail space allocated to leisure andentertainment. Some states like Punjab have lifted entertainmenttax on multiplexes till 2009. This boosted the confidence of themall developers to accommodate entertainment players like PVR,Waves, Adlab and Fun Republic in large malls.5) Efficient Buying: Increasing Importance of Supermarkets& Discount Stores: 42
  43. 43. Such a format provides the greatest selection of any general merchandize and very often servesas the anchor store in shopping mall or shopping centre. In India, the number of departmentstores is less as compared to other retail formats such as supermarkets and discount stores.Shoppers Stop is the first one to open a department store in the early 1990s and currentlyoperates 19 stores in 10 different cities in India.The store strongly focuses on lifestyle retailingand mainly divides into five departments such as apparel, accessories, home décor, gift ideas andother services. Shopper’s Stop is getting stronger and stronger year after year. It attracts morethan 12 million shoppers every year with a conversion rate of 38 per cent. Another operatorLifestyle India began operations in 1998 with its first store in Chennai in 1999 and in March2006 it opened one of the largest department stores in the same city. The store spreads over75,000 sq. ft and store provides customers a great shopping experience with three floors ofapparel, footwear, products for children, household furniture and decor, health and beautyproducts.6) Hypermarkets: The Biggest Crowd Puller:Hypermarkets have emerged as the biggest crowd pullers due to the fact that regular repeatpurchases are a norm at such outlets. Hypermarkets not only offer consumers the most extensivemerchandise mix, product and brand choices under one roof, butalso create superior value for money advantages of hypermarket shopping. With productcategories on offer ranging from fresh produce and FMCG products to electronics, valueapparels, house ware, do it yourself (DIY) and outdoor products, thehypermarkets are emerging as one of the popular formats in India.. Number of players operatinghypermarket format are increasing day by day. One of the leading players in this format isPantaloon Retail India Limited which operates 32 Big Bazaars in twenty cities. In early 2006, theK. Raheja Corp (C.L. Raheja Group) has introduced its value retail concept hyper city which isthe country’s largest hypermarket at 118000 sq ft. hyper city Retail plans to open 55hypermarkets by 2015. As the market is expanding and consumers are in a mood to acceptchanges, hypermarkets are getting overwhelming response from consumer. Currently there areabout 40 odd hypermarkets in India but this format holds a great potential for growth. 43
  44. 44. 7) Customers still rely on traditional concepts:A supermarket normally sells grocery, fresh, cut vegetables, fruits, frozen foods, toiletries,cosmetics, small utensils, cutlery, stationery and Gift items. In India Food World, Food Bazaar,Nilgiri (30 plus stores), and Adani are the leading super marketoperators .One of the biggest super market operators in the western India is Adani Retail Limitedwhich operates Adani super market plans to continue its journey to reach total 19 cities with thestore strength of 60 plus in the state of Gujarat. ARL alsoplans to expand its operation in the neighboring states of Rajasthan, Madhya Pradesh,Maharashtra and Chhattisgarh. Subhiksha is one of the leading super market operators, wholargely operates in the southern part of India is expanding to western India. One more retailerReliance Retail is on the move and this retailer opened its Reliance Fresh-a super market chainwith 11 stores in Hyderabad and is planning to enter 70 more cities within 2 years.8) Emergence of Private-Label Brands:The private labels are offering flexibility to both the retailer and the consumer on price front. Theobjective of the store is to offer variety at affordable price in each category. Food Bazaar havemade the transition from just a grocery retailer to developing emotional bonding with shoppersby providing some value added services to theshoppers. Some of these initiatives include :( Jo Dikhta Hai wo hi Bikta Hai )Live chakki: which allows customers to buy fresh wheat and have it grinded there at the storeFresh Juice counter: This provides customer to have fresh juices.Live dairy: This provides customers with fresh milk and milk products. 44
  45. 45. Live kitchen: Customers have the option of buying vegetables,getting them chopped, cookedfully or partly. Soups, salads and sandwiches are also available at live kitchen.9) Ease of Shopping & Customized Services: Order of the Day: To activate it a new formathas emerged in the name of Convenience Store.A Convenience store offers locational advantage to the shoppers and provides ease of shoppingand customized service to the shoppers. It charges average to above average prices, depending onthe product category and carries a moderate number of stock keeping units (SKUs). Normally itremains open for long hours and shoppers use it for buying fill-in merchandize and emergencypurchases. In India, Conveniencestores occupied 23 thousand sq. meter of retail space with sales of about Rs 1347 million in 2005and are expected occupy 85 thousand square meter of selling space by 2010 .10) Magnetic Effect: Discounters not Shopkeepers:Wal-Mart, the largest retailer in the world is a discounter. Practically the discounters offerseveral advantages such as lower price, wider assortment and quality assurance. The discounterslike Wal-Mart and Aldi were able to quickly build scale and pass on the benefits to theconsumer. However, in the long run success depends on the operational efficiency and consistentvalue delivery to the consumer. The same retailer Wal-Mart struggles in Asian countries likeChina but extremely successful in USA. It is believed that the average Indian consumer is highlypricesensitive and looks for savings in term of money in their grocery purchase. So price-valueequation is a critical component in most of the grocery purchases.11) Category Killer: A New Concept imported from U.S.: 45
  46. 46. The category killer concept originated in the U.S. due to abundance of cheap land and thedominant car culture. Category Killer is a kind of discount specialty store that offers less varietybut deep assortment of merchandise. By offering a deep assortment in acategory at comparative low prices, category specialist can be able to “kill’ that specific categoryof merchandize for other retailers. Generally such kind of retailers uses a self service approach.They use their buying power to negotiate low prices, excellent terms and assured supply whenitems are scarce. In India this kind of retail stores are not prevalent at this point of time. But thereis scope for such kind of format. In India, Mega-Mart is one sort of category killer which sells apparel products.12) Dollar Stores:Dollar stores have their roots in Americas homey five-and- dimes, the general stores that offereda range of products at low prices. But modern dollar-store retailers arehaving more sophisticated operations; leveraging their growing buying power to strike specialdeals with vendors and continuously striving for unique advantage of both convenience andprice. Some chains sell all their goods at $1 or less. Others offer selected items at higher prices.Most sell a combination of paper products, health and beauty supplies, cleaning products, paperand stationery, household goods, toys, food and sometimes clothing. Both private-label andbrand-name goods fill the shelves. They are looking for employing technology to manage largedistribution networks. Store 99 is the example of it in Indian Scenario.13)Retail Development in Rural India: A Market with Silverlining:Chennai based market research firm Francis Kanoi estimated the size of the rural market to beINR 1, 08,000 crore annually. During the survey in 2002 the firm took into account fourcategories - FMCG, durables, agri-inputs, and two- and fourwheelers 46
  47. 47. for their estimation. Rural incomes are growing steadily as well. NCAER data shows while thenumber of middle-class households (with annual income between Rs 45,000 and Rs 2.15 lakh) isat 16.4 million in urban India, the figure stands at 15.6million in the rural areas, data from.Largely this rural market is untapped and there is huge opportunity for retailers.14: e-Retailing:The importance of internet retailing is growing all over the world. Some internet retailers such ase Bay and rediff.com are providing a platform to vendors to sell their products online and they donot take the responsibility of delivering the product to buyer.They provide virtual shopping space to the vendors. On the other hand online retailers likeamazon.com and walmart.com have to maintain their warehouse to stock products and take theresponsibility of delivering products to the buyer. So, most of the brick and mortar stores areentering into online retailing as they have physical infrastructure and they can use that to captureadditional consumer wallet. All the big retailers like Target, Sears and Kmart are operatingonline shop and some manufactures also operate online. For example Apple Inc. operatesthrough apple.com and Dell Inc. sellsits products online Through dell.com. In India internet retailing is growing by 29% CAGR andEuro-monitor report estimates that the a CAGR 48 per cent and in value term itgoing to touch INR 27 billion by 2010 from INR 4 billion in 2005. The report also predicts thatthe contribution of internet retailing to nonstore retailing to is likely to be 46 per cent by 2010.Emerging recent developments in the Indian Mall Development scenario include the coming upof so called Gen X Malls and Central which is a Seamless Mall. Gen X Malls have been definedChesterton Megharaj as greater than 5, 00,000 sq.ft and incorporate large entertainment area withenough space for parking and excellent infrastructural benefit that shall be passed on to theretailer . The target audience for the Gen X 47
  48. 48. malls is tourist /out of town visitor and the person from the city looking for entertainmentoptions. So, we can say that we are moving from a nation of Dukandars to a Nation that loves toshop.15. Emergence of discount storesIn 2002-03, Indians in some cities got the taste of discount stores for the first time. Thanks todiscount stores, the local kirana stores are under pressure and consumers are getting increasinglyaware of the advantages of buying in bulk at higher discounts. With perhaps every item of dailyuse available at the discount stores like Big Bazaar and that too at wholesale prices, consumerseasily accepted this format over local kirana stores.The discount stores emerged as class-less stores with consumers of all income-levels shopping atthese stores. We expect that there will be rapid expansion of discount stores to tier-2 and tier-3cities and your company is already experimenting in them. The growth opportunities are highestthere.16. Rapidly changing customer behaviourFrom the early 1990s, the scenario in India was beginning to change. This change was comingfrom two sources. First, the manufacturers, lured by the almost “proverbial 200 million” strongIndian middle class, were continually adding to the range of products in the marketplace. Amongthe faster moving consumer goods, while there were 57 core categories in India in 1990, anadditional 19 had entered the market by 1996 and the final figure stands at about 150+ as of now.These new categories contributed to about 2500 brands and about 5000 stock keeping units(SKUs). As the manufacturers produced more and more products and variants, focused on thespecific needs of more clearly segmented consumers, the shopkeepers’ ability to manage his 48
  49. 49. small shop was becoming increasingly complex.Over the years, the increasing literacy in the Country and the exposure to developed nations viasatellite television or by way of the overseas work experiences, the consumer awareness hasincreased on the quality and the price of the products/services that is expected. Today more andmore consumers are vocal on the quality of the products/services that they expect from themarket. This awareness has made the consumer seek more and more reliable sources forpurchases and hence the logical shift to purchases from the organized retail chains that has acorporate background and where the accountability is more pronounced. The consumer alsoseeks to purchase from a place where his/her feedback is more valued.Indian customers are now more aware and discerning, had been exposed for some years to arapidly proliferating media, and were beginning to demand benefits beyond just availability of arange of products that came from ‘trusted’ manufacturers. In a retailing context this change inconsumer consciousness is reflected in their desire for:1. the opportunity to see, evaluate and buy from a large assortment of products at one location;2. a shopping experience, which is pleasurable, and if possible, even exciting; and3. a shopping experience that is inexpensive, well presented and durableIn other words, the Indian consumer is beginning to accept shopping to be a pleasurableexperience, but is unwilling to pay a price premium. 49
  51. 51. The retail sector in Delhi/NCR is witnessing a huge revamping exercise with traditional marketsmaking way for new, organized retailing formats like departmental stores, hypermarkets,supermarkets and specialty stores.By end-2009, NCR region is expected to witness an influx of about 19.5 mn.sq.ft. of additionalmall space. This will result in a cumulative stock of 23.2 mn.sq.ft. as against 3.7 mn.sq.ft.available presently.Of the total space being developed in the NCR and its surroundings, Gurgaon and Noida willaccount for 35% of the additional retail space.Land auctioning by DDA & MCD in prime residential and upcoming retail locations in Delhi hasreleased new space for mall developments.Currently, only about 0.36 mn.sq.ft. of land is under new format retail activity in Delhi. A totalof 31 new malls have been proposed that will add up to an estimated 6.0 mn.sq.ft. of organizedretail space.The concept of destination shopping still remains popular in Delhi with Connaught Place andSouth Delhi (Greater Kailash, South Extension & Lajpat Nagar) still being the hub of retailactivity.Rentals in these locations range from Rs.125-300/sq.ft. per month, depending on location,visibility and size. brought about an increase in income for the 20-25 year age group and this hasaltered the expenditure and consumption patterns in the city.Malls have emerged as a preferred development option for property developers due to betterreturns on their real estate investment. Also, mixed-use developments ensure better land use,diversification of risks and better rates for adjoining residential and commercial developments.MMR will have an estimated 20 mn.sq.ft. of total retail space by end-2007. With such quantumof new format retail space in the pipeline, innovation, striking the right tenant mix, effective mallmanagement and provision of ample parking space are components that will decide the futuresuccess of mall developments.With approximately 15 mn.sq.ft. on new retail space on the anvil, the demand for new retailspace is equally strong with most retail chains like Pantaloons and Shoppers Stop havingaggressive expansion plans.Hypermarkets have emerged as the biggest crowd pullers due to the fact that regular repeatpurchases are a norm at such outlets. 51
  52. 52. The lifestyle of the city residents directly affects the retail scenario in the city. The newgeneration of consumers is increasingly becoming more discerning towards brandsand this is promising for the organized retail industry.Distribution of current retail space in NCRGurgaon 43%Delhi 21%Faridabad 11%Ghaziabad 21%Noida 13%Greater Noida 12%Total space : 3.7 mn.sq.ft.Large format retail space is not readily available in Connaught Place, South Extension, GreaterKailash and no new malls are being planned in these locations.North West Delhi is also undergoing considerable change in retail activity. Locations likeRohini, Pitampura, Shalimar Bagh and Rajouri Garden have witnessed an influx of over 2.0mn.sq.ft. of additional retail space.Emerging retail pockets of South Delhi like Saket and Vasant Kunj are also witnessingsubstantial retail activity with a number of new developments being planned by real estatedevelopers like Sun City and the DLF Group. DLF Group has proposed a 0.95 mn.sq.ft. mall inVasant Kunj that will house an 11-screenmultiplex besides having retail and F&B segments.In the recent times, Gurgaon has seen rapid real estate development (commercial, retail andresidential) chiefly on account of ready availability of comparatively cheaper land, increased jobcreation and good a catchment of upwardly mobile population.Gurgaon’s retail real estate supply, which currently stands at approximately 1.6 mn.sq.ft., isexpected to reach approximately 5.6 mn.sq.ft. by end-2008.The completion of new malls like DLF Mega Mall (275,000 sq.ft.), Gold Souk (180,000 sq.ft.),Regent Plaza (75,000 sq.ft.), and Galaxy Mall (80,000 sq.ft.) added a total of 0.60 mn.sq.ft. tothe existing retail stock in 2007. Presently, Gurgaon has 8 malls that are operational. 52
  53. 53. With more than 15 new malls coming onto the market, Gurgaon will account for 24% of the total23.2 mn.sq.ft. of retail stock slated to be in NCR market by end-2008.Over 70% of the space in the upcoming malls has already been leased out to retailers. Noida isforecasted to see an exponential growth with the mall market increasing in size from the current0.5 mn.sq.ft. to 2.5 mn.sq.ft. With 5 new malls entering the market, Noida will take up 11% ofthe total new retail space scheduled to be in the NCR region.The prime areas in Sector-18 command rentals of Rs.100-150/sq.ft. per month. The sale pricesrange between Rs.8,000-15,000/sq.ft.Other individual sector markets like Sector-27 & 29 have also been doing prolific retail business.The rentals in these sectors range from Rs.20-35/sq.ft. per month (Grade-B properties) toRs.55-80/sq.ft. per month (Grade-A properties).Greater Noida, Faridabad, and Ghaziabad together will have 40% of the total retail spacepredicted to be added in the NCR region by the end of 2008.With the Commonwealth Games scheduled to be held in Greater Noida in the year 2010,tremendous construction activity is underway in this micro-market. From the present 0.06mn.sq.ft., a cumulative 3.8 mn.sq.ft. of retail space is slated to be available in this market byend-2008.Presently, Faridabad has only three malls namely, Ansal Plaza, SRS World, and DestinationPoint, which occupy 0.4 mn.sq.ft. of space.It is predicted that Faridabad will have 8 malls occupying 1.2mn.sq.ft. of retail space. Faridabad is going to house 7% of the total retail development in Delhi/NCR by 2009.Ghaziabad, which currently has about 0.8 mn.sq.ft. of new format retail space, has 9 upcomingmalls which will total to approximately 3.6 mn.sq.ft. of retail space by 2009.Due to reasonable real estate costs, availability of land and low cost labour, developers are nowmoving to Ghaziabad and it will have 16% of the additional retail space predicted for the entireDelhi/NCR market. Rentals in Ghaziabad high street are around Rs.30/sq.ft. per month whereasin malls it is as high as Rs.50/sq.ft. per month.With more than 75 malls (total stock of 23.2 mn sq.ft.) slated to in the Delhi/NCR market by2009, the developers are vying to differentiate their malls on the basis of product mix.Amusement parks, convention centers, service apartments and hotels are some concepts whichare being combined with retail to presenta complete product offering.Noida is forecasted to witness a dynamic retail market with demand being fueled both by Delhias well as Noida residents. Malls are expected to do well in Noida on account of its proximityand better connectivity to Delhi. 53
  54. 54. Faridabad, Greater Noida and Ghaziabad are together going to have 25 malls by the end-2008,thus lowering the gap between demand and supply. The rentals are expected to be stable till allthe new malls become operational.High street retail in places like South Extension, Connaught Place, Greater Kailash, Vasant Kunj,etc., would continue to command high prices due to lack of fresh supply. However, some micro-markets like Defence Colony will have addition to the existing stock.A new trend of developing larger format malls (over 300,000 sq.ft.) will catch up with the newmall developers and promoters. Kaushambi Mall (500,000 sq.ft.)Distribution of retail space in NCR by 2009Ghaziabad 26%Gurgaon 45%Noida 16%Faridabad 15%Delhi 25%Greater Noida 17%.Delhi presently is witnessing growth of hypermarkets which are large sized retail formatsoffering all kinds of products under one roof. Buyers find them attractive because they sellproducts at heavy discounts. Hypermarkets are able to offer these reduced prices as they sourcetheir supply in bulk directly from the manufacturer.It is expected that as retail markets mature, real estate developers would enter into revenuesharing arrangements instead of fixed rentals with retailers to increase the occupancy of theirmalls, share the risk of operations and also benefit from positive consumer response. 54
  56. 56. THE FACTORS RESPONSIBLE FOR THE DEVELOPMENT OF THE RETAIL SECTOR ININDIA CAN BE BROADLY SUMMARIZED AS FOLLOWS: • Rising incomes and improvements in infrastructure are enlarging consumer markets and accelerating the convergence of consumer tastes. • Looking at income classification, the National Council of Applied Economic Research (NCAER) classified approximately 50% of the Indian population as low income in 1994- 95; this is expected to decline to 17.8% by 2006-07. • Liberalization of the Indian economy which has led to the opening up of the market for consumer goods has helped the MNC brands like Kellogs, Unilever, Nestle, etc. to make significant inroads into the vast consumer market by offering a wide range of choices to the Indian consumers. • Shift in consumer demand to foreign brands like McDonalds, Sony, Panasonic, etc. • The internet revolution is making the Indian consumer more accessible to the growing influences of domestic and foreign retail chains. Reach of satellite T.V. channels is helping in creating awareness about global products for local markets. About 47% of India’s population is under the age of 20; and this will increase to 55% by 2015. This young population, which is technology-savvy, watch more than 50 TV satellite channels, and display the highest propensity to spend, will immensely contribute to the growth of the retail sector in the country. • As India continues to get strongly integrated with the world economy riding the waves of globalization, the retail sector is bound to take big leaps in the years to come.Favorable demographic and psychographic changes relating to India’s consumer class,international exposure, availability of increasing quality retail space, wider availability ofproducts and brand communication are some of the factors that are driving the retail in India. 56
  57. 57. Over the last few years, many international retailers have entered the Indian market on thestrength of rising affluence levels of the young Indian population along with the heightenedawareness of global brands and international shopping experiences and the increased availabilityof retail real estate space. Development of India as a sourcing hub shall further make India as anattractive retail opportunity for the global retailers. Retailers like Wal-Mart, GAP, Tesco, JCPenney, H&M, Karstadt-Quelle etc stepping up their sourcing requirements from India andmoving from third-party buying offices to establishing their own wholly owned/wholly managedsourcing & buying offices shall further make India as n attractive retail opportunity for the globalplayers. 57
  59. 59. KEY CHALLENGES FOR RETAIL INDUSTRY 1) LOCATION: "Right Place, Right choice" Location is the most important ingredient for any business that relies on customers, and is typically the prime consideration in a customers store choice. Locations decisions are harder to change because retailers have to either make sustainable investments to buy and develop real estate or commit to long term lease with developers. When formulating decision about where to locate, the retailer must refer to the strategic plan: * Investigate alternative trading areas. * Determine the type of desirable store location * Evaluate alternative specific store sites 2) MERCHANDISE: The primary goal of the most retailers is to sell the right kind of merchandise and nothing is more central to the strategic thrust of the retailing firm. Merchandising consists of activities involved in acquiring particular goods and services and making them available at a place, time and quantity that enable the retailer to reach its goals. Merchandising is perhaps, the most important function for any retail organization, as it decides what finally goes on shelf of the store. 3) PRICING: Pricing is a crucial strategic variable due to its direct relationship with a firms goal and its interaction with other retailing elements. The importance of pricing decisions is growing because todays customers are looking for good value when they buy merchandise and services. Price is the easiest and quickest variable to change. 4) TARGET AUDIENCE: "Consumer the prime mover" "Consumer Pull", however, seems to be the most important driving factor behind the sustenance of the industry. The purchasing power of the customers has increased to a 59
  60. 60. great extent, with the influencing the retail industry to a great extent, a variety of otherfactors also seem to fuel the retailing boom.5) SCALE OF OPERATIONS:Scale of operations includes all the supply chain activities, which are carried out in thebusiness. It is one of the challenges that the Indian retailers are facing. The cost ofbusiness operations is very high in India. 60
  61. 61. CHALLENGES FOR INDIAN RETAIL INDUSTRYRetailing as an industry in India has still a long way to go. To become a truly flourishingindustry, retailing in India needs to cross the following hurdles:• The first challenge facing the organized retail sector is the competition from unorganizedsector.• Taxation, which favours small retail businesses.• Lack of trained work force.• Low skill level for retailing management.• Organized retail sector has to pay huge taxes, which is negligible for small retail business.• Cost of business operations is very high in India.• Automatic approval is not allowed for foreign investment in retail.• Regulations restricting real estate purchases, and cumbersome local laws.• Taxation, which favours small retail businesses.• Absence of developed supply chain and integrated IT management.• Intrinsic complexity of retailing – rapid price changes, constant threat of productobsolescence and low margins.The retailers in India have to learn both the art and science of retailing by closely following howretailers in other parts of the world are organizing, managing, and coping up with new challengesin an ever-changing marketplace. Indian retailers must use innovative retail formats to enhanceshopping experience, and try to understand the regional variations in consumer attitudes toretailing. Retail marketing efforts have to improve in the country - advertising, promotions, andcampaigns to attract customers; building loyalty by identifying regular shoppers and offeringbenefits to them; efficiently managing high-value customers; and monitoring customer needsconstantly, are some of the aspects which Indian retailers need to focus upon on a more pro-active basis. 61
  62. 62. Despite the presence of the basic ingredients required for growth of the retail industry in India, itstill faces substantial hurdles that will retard and inhibit its growth in the future. One of the keyimpediments is the lack of FDI status. This has largely limited capital investments in supplychain infrastructure, which is a key for development and growth of food retailing and has alsoconstrained access to world-class retail practices. Multiplicity and complexity of taxes, lack ofproper infrastructure and relatively high cost of real estate are the other impediments to thegrowth of retailing. While the industry and the government are trying to remove many of thesehurdles, some of the roadblocks will remain and will continue to affect the smooth growth of thisindustry.Organized retailing in India is gaining wider acceptance. The development of the organized retailsector, during the last decade, has begun to change the face of retailing, especially, in the majormetros of the country. Experiences in the developed and developing countries prove thatperformance of organised retail is strongly linked to the performance of the economy as a whole.This is mainly on account of the reach and penetration of this business and its scientific approachin dealing with customers and their needs. 62
  63. 63. RETAIL: GOING BEYOND SURVIVALGlobalisation is the buzzword in today’s retail market. This is evidenced by the fact that a fewlarge retailers control global markets. Wal-Mart, the largest retailer in the world, now hasoperations in 11 countries, with multiple formats, and is growing rapidly. Increasingly, the worldof retailing is becoming Wal-Mart’s world.ConsolidationConsolidation and retrenchment are inevitable as department-store market shares continue todecline. Department stores are caught between escalating competition from mass-channel,lifestyle-focused specialty retailers and category-killer superstores. Supermarkets are expandingtheir one-stop shopping appeal with the addition of fuel pumps, more non-food items andmealtime options (often in partnership with other retailers) in order to become the newconvenience store, or at least a more convenient store. In essence, the lines between the differentformats are fast disappearing and the emphasis is now on consolidation.DiversificationConsumer ecosystems are the emerging trend. These ecosystems address the inter-relatedrequirements of consumers for speed and efficiency; they also provide retailers with theopportunity for growth. Retailers are using their negative working capital scenario (on account ofcash sales and deferred supplier payments) to get into finance, banking and insurance services.In effect, what we are witnessing is Darwinism in the retail industry; this is a concern for allplayers, large and small. Large retailers like Wal-Mart are putting smaller retailers out ofbusiness through multiple formats, a larger range of merchandise, lower prices, and consistentenhancement of the customer’s overall retail experience. Driving prices down is the key to Wal-Mart’s success. They achieve this through a passion for cutting down costs in all aspects of thebusiness. This is referred to as the EST model for growth and overall dominance of the retailindustry, the CPG manufacturers and various suppliers. Let’s take a closer look at this model. 63
  64. 64. PROCESSESInternal processes refer to processes within the four walls of the retailer in terms of operationsmanagement, merchandising strategy, cost reductions, pricing discipline, human resources andfinancials.External processes are focused towards integrating operations between manufacturers, suppliersand retailers to bring about cost reductions and better visibility throughout the retail supply chainthrough inter-firm collaboration.Before we explore some of the productivity measures that can help retailerssurvive and grow, let us understand productivity and why it needs to bemeasured What is productivity?Simply put, productivity means quantifiable output derived from the application of a quantifiableresource or input for a unit of time. To increase productivity one has to increase the outputderived from the same input or get the same output with decreased input. More for less—that iswhat retailing is all about now. Consumers want more variety, more payment options, moreconvenience and more service—but at reduced prices.Higher productivity and its consistent increase not only ensures survival but also createsopportunities for growth.Why measure productivity?In this era of more for less, the only way to really survive is to increase productivity, and toincrease productivity you have to measure it. To elaborate, what gets measured gets changed. Inorder to bring about any change, it is necessary to know what the current metrics are, and thencompare them with the past. Having a map and not knowing your current position on it will notreally help.What gets rewarded gets done. If you do not measure it, you cannot change it, and if you do notreward change, it will not happen. Also, if the rate of change outside exceeds the rate of changeinside your company, disaster is imminent. 64
  65. 65. What should be measured?There are quite a few things that retailers need to continually measure, monitor, report andimprove on. Some of them are • Average transaction value and spend range analysis. • Items per receipt. • Conversion rate. • GMROII.The average transaction value, items per receipt and conversion rate, if monitored, tracked andrewarded, can bring about an increase in sales and profits of at least 15 percent.Average transaction valueThe average transaction value is calculated by dividing the total revenues of a store by the totalnumber of receipts. It gives retailers an understanding of how much the average customer spendsin their stores. It is a critical indicator, and gives an idea of how retailers could sell more tocustomers they already have. Promotions and pricing strategies need to be aligned with theseaverage numbers to increase the average basket-spend in the store. An example of how averagetransaction value and spend range analysis can be used profitably is as follows.Items per receiptItems per receipt is a measure obtained by dividing the total number of items sold by the totalnumber of receipts. This gives an indication of how many items the average customer purchases.It is highly co-related to the performance of suggestion and add-on selling.Suggestions or add-on selling are definitely easier to do during the holiday season. It is possiblythe best time of the year to maximise every sale. Retailers need to make their shop floor andcustomer service assistants aware that they have an advantage; the shoppers walking into thestore are not ‘just looking’—they are ‘looking to buy.’ What they don’t know is how much theywill buy.Adding on doesn’t take much time. If a customer has selected a sweater for his sister, it takesvirtually no additional time for a sales person to suggest a perfectly coordinated scarf or a reallywild pair of earrings to enhance the look of the sweater. And no one should be allowed to sell apair of shoes without suggesting that the customer buy a tin of shoe polish or a matching pair ofsocks. 65
  66. 66. As busy as it may get, retailers should never miss the opportunity to make the most of every saleby adding on. These add-on sales must be measured, tracked and rewarded by store, sales personand/or cashier.Conversion rateThe conversion rate, also known as the conversion ratio, basically represents the number ofcustomers that make a purchase out of every 100 that walk into the store. Whilst footfallrepresents the retailer’s ability to draw potential customers into the store, the conversion ratiomeasures how well he converts shoppers to buyers. Higher conversion ratios translate into highersales. While footfall can be attributed to various marketing activities, the actual conversion ratiosdepend on various factors like merchandise range, pricing, promotions, display, store layout,suggestive selling, service and product availability. This key measure, if monitored, tracked,analysed and acted upon, has the potential to deliver significant growth in sales and profits. Anexample follows.GMROIIGMROII (Gross Margin Return On Inventory Investment) measures how effectively the moneyallocated for inventories is invested. It is the only return on investment (RoI) formula to showreturns as a currency value and not as a percentage, so its importance to retailers cannot beoverstressed. GMROII is often used to compare the performance of different categories for aretailer. The buyers are allocated money for purchasing stock, and the money spent is measuredagainst the returns they have achieved on this investment. It effectively translates into identifyingthe returns on every dollar invested in inventories. GMROII can be computed by dividing thegross margin value by the average inventory value (stock on hand) at cost. It is very sensitive toinventory turns and the gross margin. It helps in • Identifying profitable categories. • Identifying problem categories. • Making comparisons between categories. • The allocation and management of open-to-buy budgets.GMROII figures, when compared across stores of a retailer, also give valuable insights intopotential areas of improvement in store operations, staffing and employee productivity.So while Darwinism is really at play on the global scene, there are still opportunities for retailersto not only survive but actually grow. They need to constantly improve in key areas by constantmonitoring and measurement. They have to set realistic targets, measure productivity, andprovide the right systems to bring about improvements in the same.The author is practice head, Retail, at Zensar Technologies. He has extensive experienceplanning and executing domain-led technology solutions for large and medium-size companiesin the retail, pharmaceutical and CPG industries. 66
  67. 67. The problem with Wal-mart is that they truly have colossal resources and when they make uptheir mind to enter a market, they do so with gusto. Add to that their unbelievably large buyingpower which drives their costs so low and allows them to sell everything at rock-bottom pricesand you have a very formidable opponent for the local folks.That said, there are strategies that can be employed against them. You can look at Target as anexample. OK, I know Target is not a "mom & pop" store, but they are competing with Wal-martand the reason I think their strategy is effective is that they are still in the game (Wal-martcompetitors usually dont last long unless they are doing something right).In Targets case, they have focused on retaining their customer base as much as possible andhave raised the bar on Wal-marts "always the lowest price" strategy by focusing on Design andBrands, which may be a little more expensive than Wal-marts, but which are also morefashionable. Targets advertising is always fresh, always cutting edge and has a very "feel-good",as well as "design you can afford" quality to it.I think the local merchants in India could adopt a similar attitude and undertake as massive acampaign as they can muster to show their clientale what differentiates them from Wal-mart andwhy the customers should remain loyal to them. Make no mistake, some people will be drawn to"always the lowest price". However the acid test is to see how many customers will resist thesiren song and stick with the local merchants. 67
  68. 68. QUESTIONNAIRE 68
  69. 69. Respected Sir / Madam, I here by, assure that the collected information will be used only for this project and will not bedisclosed.Q1. Which outlets do you consider while shopping? Visit Visit Rarely Never Frequently Sometime  Big Bazaar ----------- ---------- ---------- --------  Marks & Spencer ----------- ---------- ---------- --------  Pantaloons ----------- ---------- ---------- --------  Westside ----------- ---------- ---------- --------  Shopper’s Stop ----------- ---------- ---------- --------  Lifestyle ----------- ---------- ---------- --------  Other (please mention) ---------------------------------------------------------------Q2. Why do you prefer to shop in Retail Outlet? ▫ Brand Variety ▫ Ambience ▫ Location ▫ Time Saving ▫ ServicesQ3. Are you a member of any Retail Outlet? ___Yes ___NoQ4. If yes, then why to chose to be its member? ▫ Free parking facility 69
  70. 70. ▫ Extra services ▫ Special discounts ▫ Others………………..Q5. When do you prefer the most to visit Retail Outlet? ▫ When there is fresh stock ▫ When there are discounts ▫ Weekend outings ▫ AnytimeQ6. How many times in a month you visit a Retail Outlet? ▫ Once ▫ Twice ▫ Thrice ▫ More than thisQ7. Do you have any planned list before moving in to Retail Outlet? ▫ Definitely ▫ Mostly ▫ Rarely ▫ NeverQ8. Rank the following factors of retail shopping on a scale of 1 to 10 where ‘10’denotes the most important and ‘1’ denotes the least important. Quality __________ Prices __________ Brand availability __________ Services __________ Advertisements __________ 70
  71. 71. Member facilities __________ Ambience __________ Sales promotion offers __________Q9. Does the recommendation of your family & friends influence your decision tovisit Retail Outlet? ▫ Yes ▫ NoQ10. Rank the retail outlets on the following factors on a scale of 1 to 10 where 10denotes ‘excellent’ and 1 denotes ‘poor’. Quality Prices Brand Services Advertisements Member Offers availability facilitiesBigBazaarMarks &SpencerPantaloonsWestsideShopper’sStopLifestylePersonal Information: Name: _______________________________ Age:__Below 21 ___21-30yrs. ____31-40yrs. ____40yrs.& above 71
  72. 72.  Gender: ____Male ____Female Contact No. _____________________ Which Social status you fall into: ▫ Unemployed ▫ Receiving education ▫ Professional ▫ Business ▫ Other……….. To which income group you fall in: (monthly) ▫ Below 10,000 ▫ 10,000 to 20,000 ▫ 20,000 to 30,000 ▫ 30,000 to 40,000 ▫ 40,000 & above 72
  74. 74. Q1. Which outlets do you consider while shopping? 74
  75. 75. Q2. Why do you prefer to shop in Retail Outlet? 30 25 20 15 Series1 10 5 0 1 2 3 4 5 75
  76. 76. Q3. Are you a member of any Retail Outlet? yes no 76
  77. 77. Q4. If yes, then why to chose to be its member? ▫    Free parking facility ▫    Extra services ▫    Special discounts Others 77
  78. 78. Q5. When do you prefer the most to visit Retail Outlet? 40 35 30 25 20 Series1 15 10 5 0 ▫    When there ▫    When there ▫    Weekend Anytime is fresh stock are discounts outings 78
  79. 79. Q6. How many times in a month you visit a Retail Outlet? 35 30 25 20 15 Series1 10 5 0 ▫    Once ▫    Twice ▫    Thrice ▫    More than this 79