This document discusses retail and organized retail. It defines retail as the sale of goods for personal or household consumption from a fixed location. Organized retail is defined as trading by licensed large retail chains, which currently contributes around 4% of total retailing in India. The document also provides a basic overview of the manufacturing to retail process and differences between organized and unorganized retail.

1. Arindam Pal
arindam.bit@gmail.com
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2.  What is Retail?
◦ Sales of Goods/ Merchandise for personal or household
consumption
◦ Either from a fixed location such as a department store or
Kiosk or from fixed location and related subordinated
services
 What is Organized Retail?
◦ Trading activities undertaken by licensed large retail chains
◦ It contributes to roughly 4% of total retailing in India
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3. MANUFACTURING DISTRIBUTION CENTER
RETAIL OUTLET
CARRIER
CARRIER
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4. Although a bit outdated, this
gives a good picture of how
Consumption Spending
contribute to the GDP of India
Pantaloon Retail Annual Report 07-08
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5. A good representation of how
the Consumption Spending is
divided into the various buckets.
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6. Organized Retail Food and Grocery
Jewellery &
Business in
Modern Trade is
Catering
Watches Books, Music
Services
7% 7% and Gifts
3%
under-indexed
Furniture &
Mobile
Handsets
when compared
Furnishings
3% Others
to overall Retail
8%
4% Pool
Footwear
9%
Consumer
Durables
9%
Clothing and
Good & Textile
Grocery 39%
11%
ICICI white paper
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7.  Wider Assortment
 Fresh Products
 Assured Quality
 Better Pricing
 Convenience – under one roof
 Shopping Experience
◦ Ambience
◦ Self Service
◦ Family Time
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8.  Additional Consumer Touch Point
◦ Additional opportunity to understand their consumers
 Range Visibility
◦ Display of entire range of products
◦ Space available for hire to display range
 Branding/New Product or Category Introduction
◦ Enable consumers to experience the brand or new product
 Sampling
◦ Ensure that consumers are exposed to their product and try it out
 Premiumization
◦ Move consumers towards premium brands, hence ensuring higher
profits for manufacturers
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9.  Accurate collection of Taxes
◦ Organized retail eliminates the issue with ‘Sales without bill’
◦ Will increase collection of Taxes
 Increased Employment
◦ Retail is the largest employer for many of the Developed Economies
◦ Has significant employment potential
 Business for Local Players/ Entrepreneurs
◦ Organized retail can get additional business for local players, SMEs,
home and cottage industries
 Controlling Inflation
◦ By direct sourcing of goods, Organized Retail can help control infration
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12.  By Channel
◦ Brick and Mortar Store – Reliance Retail, More
◦ Online E-commerce – Flipkart, Jabong
 By Ownership
◦ Corporate – Spencer’s, Pantaloons, Big Bazaar
◦ Cooperatives – CO-OP in Europe
◦ Franchisee – Vishal Megamart
◦ Independent – Dorabjee’s in Pune
 By Assortment
◦ Wide Categories Covered - Hypermarkets
◦ Limited Line Retailing - Specialty Stores, Single Brand Outlets
 By Amount of Customer Service
◦ Self Service
◦ Limited Service
◦ Full Service
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13. Retail Formats can be classified based on the
following parameters
 Size
 Location
 Assortment
 Ambience
 Pricing
 Hours of Operation
 Min Quantity of purchase
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14.  500 – 2000 sft in size
 Usually located in societies, under  Size
apartments, right in the middle of residential  Location
areas  Assortment
 Limited Assortment  Ambience
 Less focus on ambience  Pricing
 Competitive pricing  Hours of Operation
 Quantity of purchase
 Long hours of operation
 Meant for smaller quantities of purchase
 In & Out, Spencers Daily, Arambag, 9 – 11
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15.  2000 – 20000 sft in size
 Central location, wider catchment
 Size
Extensive assortment of Foods, Grocery,

 Location
Health and Beauty
 Assortment
 Some representation of General Merchandise  Ambience
 Ambience is better than Convenience Stores  Pricing
 Discount pricing in core segments, extensive  Hours of Operation
promotions  Quantity of purchase
 Normal hours of operation
 Meant for Pantry loading of Foods, Grocery
and Health n Beauty (weeks purchase/ bi
weekly purchase)
 Food Bazaar, Reliance Super, Easy Day
© Arindam Pal

16.  Greater than 20000 sft in size
 Located in Major Hubs  Size
 Extensive assortment of Foods, Grocery,  Location
Health and Beauty, General Merchandise  Assortment
 Some representation of Apparels and  Ambience
Consumer Durables, Books, Accessories  Pricing
 Ambience depends on positioning  Hours of Operation
 Extensive promotions, combi packs,  Quantity of purchase
discounts on larger packs
 Normal hours of operation
 Meant for Monthly Purchase
 Big Bazaar, Spencers Hyper, Reliance Mart,
Spar, Hypercity, Total
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17.  Greater than 20000 sft in size
 Located in Major Hubs  Size
 Extensive assortment of Apparels,  Location
Accessories, Home Needs, Health and Beauty  Assortment
Products
 Ambience
 Some representation of Books, Consumer  Pricing
Durables
 Hours of Operation
Great focus on ambience, lighting, visual

 Quantity of purchase
merchandise
 Intermittent promotions
 Normal hours of operation
 Destination store for target categories
 Shoppers Stop, Westside, Globus, Lifestyle
© Arindam Pal

18.  Less than 5000 sft in size
 Located in Major Hubs, Malls  Size
 Extensive assortment of Single Product Line,  Location
Best assortment in that product line  Assortment
 Good on ambience, lighting, visual  Ambience
merchandise  Pricing
 Intermittent promotions  Hours of Operation
 Quantity of purchase
 Normal hours of operation
 Destination store for target categories
 Little Shop, Proline Fitness, Mom & Me, Steel
Junction
© Arindam Pal

19.  Typically greater than 1 lac sft in size
 Located in places where rentals are low  Size
 Extensive assortment of Foods, Grocery,  Location
Health and Beauty, General Merchandise  Assortment
 Good range of Apparels, Accessories,  Ambience
Perishable Products, Liquor, Home Needs.  Pricing
 Low on ambience  Hours of Operation
 Quantity of purchase
 Strong on pricing in bulk purchases
 Normal hours of operation
 Quantity Limitation is there, meant for
Retailers not Customers
 Walmart, Metro, Carrefour
© Arindam Pal

20. Experience says the convenience format is
struggling in India
 Rentals are high because of its location
 Cost / sft is highest for convenience stores
 Consumers expect prices to match hyper market rates
 MRP regime in India – retailers cannot charge for the
convenience
◦ In matured markets, since there is no MRP regime, retailers can
charge mark up for the convenience that they are providing. In India,
it is not possible, the max you can sell at is MRP.
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21.  Location – Location - Location
◦ Retail is all about choosing the
right location
 Types of Retail Locations
◦ Freestanding Location
◦ In the Business District
◦ In the Shopping Centre / Mall
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22.  It is very important to evaluate the market
potential before setting up a store
 There are various techniques that are available
for market evaluation
 Range
◦ Maximum distance a consumer is willing to travel for a
particular product or service
 Threshold
◦ Minimum amount of consumer demand that is necessary for a
product or service to be viable
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23. Range and Threshold are some considerations while doing
Market Evaluation
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24.  Herfindahl Herschman Index (HHI)
◦ Addition of squares of market shares of competitors
◦ HHI increases when
 Number of players in the market are low
 Disparity between the size of players
◦ HHI > 1800 – Concentrated
◦ HHI between 1000-1800 – Moderately Concentrated
◦ HHI < 100 – Not concentrated
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25.  Index of Retail Saturation
◦ IRS = H * RE / RF
 H – Number of Households in the area
 RE – annual retail expenditure per household
 RF – total square footage of retail available in the area
◦ Higher the IRS, the higher the chances of success for a new
entrant
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26.  Reilly’s Law of Retail Gravitation
◦ (Ba/Bb) = (Pa/Pb)*(Db/Da)2
◦ Gives the ratio of sales between two alternatives
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27.  Determination of Market Potential
◦ Demographic Profile
◦ House Hold analysis
◦ Competition
◦ Catchment area analysis
 Core Catchment
 Secondary Catchment
 Tertiary Catchment
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28.  Identification of a site for locating a store would be
based on the following parameters
◦ Footfalls of the neighborhood
◦ Accessibility
◦ Market Saturation
◦ Competition
◦ Available Amenities
◦ Intended Product Mix
◦ Concentration of stores with same Product Mix
 Studies have shown that when many stores are available with similar
product line at the same location, it tends to become the destination
market
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29. Thank You