Conventional retailing


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Conventional retailing

  1. 1. A REPORT ON<br />CONVENTIONAL RETAILING<br />PREPARED BY: AKHILESH KUMAR<br /> ROLL NO : 2010010<br /> <br />Conventional retailing - It refers to the traditional formats of low-cost retailing. for example hand cart and pavement vendors & mobile vendors, the local kirana shops, owner manned general stores, paan/beedi shops, convenience stores, hardware shop at the corner of your street selling everything from bathroom fittings to paints and small construction tools or the slightly more organized medical store and a host of other small retail businesses in apparel, electronics, food etc.<br />Characteristics of unorganized (conventional) retailING<br />Small-store (kirana) retailing has been one of the easiest ways to generate self-employment, as it requires limited investment in land, capital and labour. <br /> It is generally family run business, lack of standardization and the retailers who are running this store they are lacking of education, experience and exposure.<br />Unorganized retail sector is still predominating over organized sector in India, unorganized retail sector constituting 98% (twelve million) of total trade, while organized trade accounts only for 2%<br /> Reason behind the conventional retailing<br />1. In smaller towns and urban areas, there are many families who are traditionally using these kirana shops/ 'mom and pop' stores offering a wide range of merchandise mix. Generally these kirana shops are the family business of these small retailers which they are running for more than one generation.<br /> 2. These kirana shops are having their own efficient management system and with this they are efficiently fulfilling the needs of the customer. This is one of the good reasons why the customer doesn’t want to change their old loyal kirana shop.<br /> 3. A large number of working class in India is working as daily wage basis, at the end of the day when they get their wage, they come to this small retail shop to purchase wheat flour, rice etc for their supper. For them this the only place to have those food items because purchase quantity is so small that no big retail store would entertain this.<br /> 4. Similarly there is another consumer class who are the seasonal worker. During their unemployment period they use to purchase from this kirana store in credit and when they get their salary they clear their dues. Now this type of credit facility is not available in corporate retail store, so this kirana stores are the only place for them to fulfil their needs.<br /> 5. Another reason might be the proximity of the store. It is the convenience store for the customer. In every corner the street an unorganized retail shop can be found that is hardly a walking distance from the customer’s house. Many times customers prefer to shop from the nearby kirana shop rather than to drive a long distance organized retail stores.<br /> 6. This unorganized stores are having n number of options to cut their costs. They incur little to no real-estate costs because they generally operate from their residences.<br />7. Their labour cost is also low because the family members work in the store. Also they use cheap child labour at very low rates. As they are operating from their home so they can pay for their utilities at residential rates. Even they cannot pay their tax properly.<br />Impact of organized retailing on the unorganized sector<br />The retail industry is divided into organised and unorganised sectors. Over 12 million outlets operate in the country and only 4% of them being larger than 500 sq ft (46 m2) in size. Organised retailing refers to trading activities undertaken by licensed retailers, that is, those who are registered for sales tax, income tax, etc. These include the corporate-backed hypermarkets and retail chains, and also the privately owned large retail businesses. Unorganised retailing, on the other hand, refers to the traditional formats of low-cost retailing, for example, the local kirana shops, owner manned general stores, paan/beedi shops, convenience stores, hand cart and pavement vendors, etc.<br />The organized retail market is growing at 35 percent annually while growth of unorganized retail sector is pegged at 6 percent. Currently the value of the retail market is estimated at around $ 270 billion with a growth rate of 5.7 per cent per annum according to the Indian retail report which creates a big threat for the small unorganized retailers. The well established organized retail sector in India are Pantaloon Retail, Shoppers’ Stop, Spencer’s, Hyper CITY, Lifestyle, Subhiksha  & newly emerging Reliance etc. Over 20,000 new retail outlets are expected to open within this segment. Major corporate retail like Wal-Mart and have started to try and take over the Indian retail sector. the share of organized retailing overall is 4%-5%.the share in some of the metro is 14%-15%.estimated employment is the next 2 year is about 2 million.<br />STRENGTH OF ORGANIZED RETAILING <br />The bulk of investment in this form of retailing<br />The entrance of corporate houses with experience and through knowledge of what and how of Indian consumers<br />Greater product assortment across categories<br />Technological advantage with modernization at its best<br />Range of retail formats right from neighbourhood to hypermarkets<br />Contemporary professional retail practices offering the newer retail mix to consumers<br />High street location attracting large no of customer foot-falls in to stores<br />Nationwide large retail chain offering similar assortment in most of the categories<br />Higher degree of awareness among the target group<br />Consistent brand building measures and unique promotion offers in place<br />AREA OF CONCERN FOR CONVENTIONAL RETAILING<br />The lack of modernization in the operations<br />The lack of deeper variety/attractive display of product<br /><ul><li>The lack of space which restricts the possibilities of shopping experience
  2. 2. The lack of price advantage/special promotion offers
  3. 3. Lack of capital for expansion and modernization activities
  4. 4. The lack of professional affiliation to higher level trade associations</li></ul>IMPACT OF E BUSINESS ON CONVENTIONAL RETAIL<br />Integration of E-Business on conventional retailing procedures has brought on a panacea for all business problems. This impact as brought in by E-business, has not only revolutionized traditional retailing experience, but has also brought in new ways for customers and retailers to focus on.<br />One of the vital roles that E-Business seems to offer apart from traditional way of carrying out the retail process is that, E-business has vicariously conquered the heart of its consumers and thus its easy time with convenience and results for the retailers. This virtual connectivity has not only assisted businesses to get rid of the trite of carrying business procedures, but has also resulted in assisting both the retailers and the consumers from the ennui way of carrying out transactions. Retailers are not only adding this E-word so as to build in a differential strategy, to lower down their transaction costs and increase profits, but are also using this as an alternative way to target audience, that in the past was considered of being impossible to reach. With such changes being taken place where consumers are getting aware of the E-advantage day by day, the impact that one can conclude upon is the transformation of retailing procedures towards a new horizon and thus diversifying consumer perception in a prominent manner.<br />E-Business has also seen to offer several of disadvantages for online transactions. These disadvantages act as threats that restrict much of the online activity and tend to create an uncertainty towards the virtual environment. Whereas apart from what advantages/disadvantages online retailing may have retailers and customers are still seen to have been undergoing transactions electronically, where it’s just not the convenience that tends to expiate consumers and retailers mind for online buying and selling, but it’s the legality of the electronic transactions too. This legality of the electronic transaction which the law enforces upon the exchange of goods through the online medium, to some extent can also be regarded as to why the E-phenomena is growing year after year, where electronic contracts that are regarded of as being legally bound, according to the law itself, have in turn resulted in for much of the retailers and customers  to change their perception from traditional to the E-ways of doing things, where exchange of goods can now be done in a safer and lawful manner.<br />By referring to these facts and by developing an intuition regarding the future of E-business, one can conclude or predict the E–future for conventional retail to turn out to be positive, where it's not just because of the changing customer needs that prefer convenience but it's the advantages as offered by this medium which would sooner or later force retailers and customers to stick to the E-way of doing things which is practical, lesser time consuming, convenient and accessible to all.<br />Comparison between online retailing and conventional retailing<br />Pricing is a key issue in both conventional and on-line retail channels. Indeed,<br />Pricing may be the most important differentiator between the two channels. Online Retailers are claimed to enjoy lower costs than their bricks-and-mortar counterparts, and hence can offer lower prices. In case of online retailing internet act as a perfect market because information is instantaneous and buyers can compare the offerings of sellers worldwide. The result is fierce price competition, dwindling product differentiation, and vanishing brand loyalty. Superficially, however, on-line markets appear to be much less<br />Competitive than conventional markets. In book retailing, the largest chain Barnes and Noble has less than a 30% share of the conventional market. By contrast, the largest on-line retailer Amazon has over 70% of the on-line market.<br /><ul><li>HOW TO PROMOTE CONVENTIONAL RETAILING</li></ul>Establishment of Retailer co-operatives among retailers which is highly required for the sustenance of the unorganized retail sector<br />Merger and buy-out of weak retailers by a stronger one that would give a new horizon to the small retailer<br />Setting up of franchisee organization may also help in strengthening the position of the retailers. The franchiser can exert a tremendous control over the way retailing is done.<br />There must be good network connection between retail organizations, the suppliers and other channel members to use compatible technology so that they can build strong distribution set-up to satisfy the customers.<br />Setting up of more and more non-store retailing centres would also ensure a strong retailing organization. Non-store retailing makes implementation of modern principles easier and less costly.<br />Moreover there must be a change in the mindset of the unorganized retailer. They have to understand the pulse of the trend. They have to understand, come forward & lead this change management then only this sector not only can exist but flourish.<br />