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  1. 1. The Retail Course: 201 • Intro/recap of Retail: – Size, structure, formats, – SWOT: Political, lobbies, Supplier cartels, Dist and logistics, mindsets and the challenges within. – Current players – The Indian experience
  2. 2. History, structure, size… • Retailing in India is quite dissimilar to the rest of the world: – The ubiquitous neighborhood ‘Kirana’ stores is a force to reckon with. – Caters to the customer’s convenience and top up needs. – Post 1995 onwards saw an emergence of shopping centers, – mainly in urban areas, with facilities like car parking – Started as large shopping centers-evolved to leisure centers and now Family/community centers. • Emergence of hyper and super markets trying to provide customer with 3 V’s – • Value, Variety and Volume • Expanding target consumer segment: The Sachet revolution - example of reaching to the bottom of the pyramid. • At year end of 2009 the size of the Indian organized retail industry is estimated at • Rs. 25,000 crore –which is still less than 5 % of all retail in India
  3. 3. Formats Malls: The largest form of organized retailing today. Located mainly in metro cities, on the outskirts . Ranges from 30,000 sq ft to 7,00,000 sq ft and above. They lend an ideal shopping experience with an amalgamation of product, service and entertainment, all under a common roof. Examples : Forum Mall, Garuda Mall, Gopalan’s Mall, Value Mall, Supermarkets Large self service outlets, catering to varied shopper needs. These are located in or near residential high streets. Contribute to 30% of all food & grocery organized retail sales. Can be further classified in to mini supermarkets typically 1,000 sq ft to 2,000 sq ft and large supermarkets ranging from of 3,500 sq ft to 5,000 sq ft. having a strong focus on food & grocery and Non food FMCG categories. Hypermarkets Large Supermarkets but with an accent on assortment, range of products, services…located on the outskirts or on high profile residential localities. Size ranges from 30000sq ft to 70000 sq ft.
  4. 4. More Formats… • Department Stores: Departmental Stores are expected to take over the apparel business from exclusive brand showrooms. Among these, the biggest success is K Raheja's Shoppers Stop, Mega Mart etc • Convenience Stores: These are relatively small stores 400-2,000 sq. feet located near residential areas. They stock a limited range of high-turnover convenience products and are usually open for extended periods during the day, seven days a week. Prices are slightly higher due to the convenience premium. • Specialty Stores: Chains such as the Bangalore based Kids Kemp, the Mumbai books retailer Crossword, RPG's Music World and the Times Group's music chain Planet M, are focusing on specific market segments and have established themselves strongly in their sectors. • MBO’s : Multi Brand outlets, also known as Category Killers, offer several brands across a single product category. These usually do well in busy market places and Metros. Eg: Titan’s Time Zone, Brand Factory, Reliance Footprint,  Discount Stores: As the name suggests, discount stores or factory outlets, offer discounts on the MRP through selling in bulk reaching economies of scale or excess stock left over at the season. The product category can range from a variety of perishable/ non perishable goods
  5. 5. Business Models • B2C: Any store that caters to individual customers in small retail packs – Foodworld, Reliance Fresh etc – FDI not allowed • B2B: any store that trades only in bulk packs to customers such as traders, caterers, hoteliers, small retailers etc – Metro Cash and Carry. – FDI allowed
  6. 6. SWOT…Politics etc • India is one of the few developing countries that has prevented entry of MNC multi-brand retail companies in the B2C format. – Touted as a protectionist measure; but can be seen as the measure of maturity or strength of the traditional retailer. • Challenges: – Real estate, Logistics, manpower, supplier cartels, lobbies-farmers, grocers etc • Redesigning retail for “Indian conditions”
  7. 7. The Course structure • Building a Store from ground up: – New Store Planning – Store Build up-layout, customer flow etc – Assortment, – Promotions – Expense Control – P&L Each of the above will be dealt in a max of 2 hours, with off-line exercises and cases.
  8. 8. The Store and its dependencies
  9. 9. The Retail anatomy • Approach retail from outside-in: • 4 Ps of marketing and its alignment in Retail • Physical – New Store identification » Site location-factors involved » Zeroing on type of store to be built » Layout-customer flow/merchandise flow • Physiological: – Product: » Assortment » Merchandise – Price
  10. 10. The Retail anatomy • Functionalities: – STORE OPERATIONS – Distribution & Logistics – IT – HR – Security and Loss Prevention – Commercial – Govt liaison • Identity: – Brand and the Consumer – Communication – Promotions
  11. 11. Physical • Physical • Site location-factors involved – Catchment analysis: Sizing the population in a radius of 2-2.5 km. Why? – SEC profiling – Proximity: To large traffic magnets such as temples, School, existing markets, residential complexes, existing Quick Service outlets – Probe for expected road/ city development plans such as flyovers, underpasses. – What if no site exists? – Flow of business decisions: Market Analysis Trading Area Analysis Site Analysis
  12. 12. New Store MARKET ANALYSIS During the process of market selection, management evaluates a variety of fact ors in the target regions. These include demographics, economic characteristics, the competitive environment, and the overall Potential of the area. 1) Population Characteristics · Total size · Age and income distribution · Growth trends · Education levels 2) Labour Availability · Availability of Store Operations personnel · Wage levels · Unions 3) Media Mix Issues · Type of media coverage · Media overlap · Costs
  13. 13. New store 4) Economic Characteristics · Number and types of industry · Dominant industry · Growth projections · Financial base 5) Competitive Characteristics · Saturation level · Number and size of competition · Competitive growth trends 6) Location Characteristics · Number and type of locations · Costs · Access to customers 7) Regulation Characteristics · Taxes · Licensing
  14. 14. IRS • One of the more commonly used measures of market attractiveness is the Index of Retail Saturation (IRS). • This index is based on the assumption that if a market has a low level of retail saturation, the likelihood of success is higher. • In the following formula, a higher IRS indicates a lower level of saturation, thereby increasing the likelihood of retail success. IRS = No. of consumers x Retail expenditures per consumer Square feet of retail selling space available
  15. 15. Index of Retail Saturation (IRS) For eg: 1000 consumers x Rs300 = Rs 150 per sq ft per day 2000 sq ft Based on above potential, a market share assessment is done at Y% of IRS If this Y % is sufficient to make the store profitable within a pre-decided time frame, then we can launch.
  16. 16. 4 Ps of Marketing and alignment in Retail • Product, price, place and promotion: – Have an inseparable and impactful role in retail – Of 4, • Product is central to the retail concept – Assortment, customer footfall driver, Store profitability. • Price dynamics are least understood by retailers- especially the merchandising function and the store operations team • Promotion-Food promotions are often knee jerk than aligned with brand building. Eg Foodworld promoting a discount on Apples.
  17. 17. Trading Area Analysis • The trading area analysis takes place after management has selected a specific geographic region or section of a city as a possible retail location. • “Trading area” or Catchment Analysis refers to the local geography from which a store attracts the majority of its customers. • This territory is sometimes broken down into the “primary trading area”, which includes the majority of customers living within a certain range of the store and having the highest per capita sales; and the “secondary trading area”, which includes almost all of the customers situated outside the primary area. • A typical shopping center may have a primary area that includes 3000 customers within 1.5 km walking distance, and a secondary area housing 5000 within 2-4km radius
  18. 18. Trading/Catchment Area analysis Population Characteristics • Population characteristics are even more critical when evaluating a trading area. – Such features as the • Population profile, density and growth trends in the target area. • Variables such as gender, occupation, education, age, family size and ethnic breakdown are also important. • If you sell young children's clothes, you’ll want to know the number of local preschoolers. A craft store, on the other hand, will want information about seniors.
  19. 19. SITE ANALYSIS • Site analysis and evaluation is the third and final step in the selection of a retail location. As a retailer, you have three basic choices for a site: – Shopping centers/malls – Downtown core – Free-standing location