1 introduction to retail - pooja

8/8/2019 1 Introduction to Retail - Pooja

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Introduction to Retail

Unit IIntroduction to Retail: what is Retail,

The functions of retail, retailing inIndia. The evolution of retail in India,retail Change in India


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Introduction

The word retail has its origin in French wordretailerand means to cut a pieceor to breakbulk.

Retailing is the sale of goods and servicesto the ultimate consumer for personal,family or household use.

According to Kotler: Retailing includes all

the activities involved in selling goods orservices to the final consumers forpersonal, non business use


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Retailing may be understood as the final step in thedistribution of merchandise for consumption by the endconsumers.

Retailing is responsible for matching final consumer demand

with supplies of different marketers. Retailing is high intensity competition industry, The reasons for

its popularity lie in its ability to provide easier access to varietyof products, freedom of choice and many services toconsumers.

The Indian retail is dotted by traditionally market place called

bazaars or haats comprises of numerous small and largeshops, selling different or similar merchandise


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Wheel of Retailing

A better known theory of retailing wheel ofretailingproposed by Mac comb McNair says;

1.New retailers often enter the market place with

low prices, margins, and status. The low prices areusually the result of some innovative cost-cuttingprocedures and soon attract competitors

2.With the passage of time, these businesses

strive to broaden their customer base andincrease sales. Their operations and facilitiesincrease and become more expensive


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Wheel of Retailing

3. They may move to better up market locations,start carrying higher quality products or addservices and ultimately emerge as a high cost

price service retailer4. By this time newer competitors as low price,

low margin, low status emerge and thesecompetitors too follow the same evolutionaryprocess

5. The wheel keeps on turning and departmentstories, supermarkets, and mass merchandisewent through this cycles


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Functions of a Retailer

From the customer point of view, the retailerserves him by providing the goods that heneeds in the required assortment, at the

required place and time From an economic standpoint, the role of a

retailer is to provide real added value or utility

to the customer


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1. Form:The Form of a product that is acceptable to thecustomer:

The retailer does not supply raw material, but rather offersfinished goods and services in a form that customer wants

The retailer performs the function of sorting goods andproviding an assortment of product in various categories

1. Time: He creates TIME utility by keeping the store openwhen the consumers prefer to shop

Preferable shopping hours

1. Place: By being available at a convenient location, hecreates Place utility

2. Ownership: Finally, when the product is sold, Ownershiputility is created


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5. Arranging assortment:Manufacturers usually make one or a variety ofproducts and would like to sell their entire inventory to few buyersto reduce costs. Final consumers, in contrast prefer a large varietyof goods and services to choose from and usually buy them in smallunits

Retailers are able to balance the demands of both sides, by collecting anassortment of goods from different sources, buying them in sufficiently largequantities and selling them to consumers in small units

6. Breaking Bulk: to reducetransportation costs, manufacturer andwholesalers typically ship large cartons of the products, which arethen tailored by the retailers into smaller quantities to meet

individual consumption needs


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7. Holding stock: Retailers maintain an inventory thatallows for instant availability of the product to theconsumers. It helps to keep prices stable and

enables the manufacture to regulate production.8. Promotional support: small manufacturers can useretailers to provide assistance with transport,storage, advertising, and pre- payment ofmerchandise


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Major Type of Retail Stores There is no universally accepted method of

classifying retailer

Various schemes have been proposed tocategories retailers based on Number of outlets

Margin v/s turnover

Location

Size

Because of overlap of classification criteria,some stores may qualify as undertwo differentcategories


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1. General merchandise retailer: general merchandiseretailer carry a variety of product lines, withconsiderable depth. Some major types of thesestores include supermarkets and

hypermarkets , discount stores anddepartment stores.

o Super market: A supermarket is a large self service retailstore that carries a wide variety of consumer productsunder one roof , such as complete line of food products ,

laundry requirement, household maintenance items. InIndia cooperative have managed some supermarkets forquite sometime like super bazaar in Delhi, apna bazaarshakari bhandar etc.


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o Discount store: these stores are self service, standardgeneral merchandise retailers regularly offering brandname and private brand items at low price, earn lowermargins and push for high sales turnover. The

characteristics of true discount stores include Selling products at discounted price

Carry standard international , national, or store brand to buildimage

Self service stores to minimize operational costs

Preferred store location are low rent areas.Like best known discount store is Wal-Mart. InIndia almost all retail stores offer discounts,Subhiksha


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o Department store: a department store is larger retailstore organized into several departments, offering abroad verity and depth of product lines. The productmix may include food products, appliances, clothing,

furnishing and other household goods. Like Pantaloons, shoppers stop,

Department store only for kids is Kids Kemp.

Fashion related department stores in India are Ebony,Globus, pantaloons, lifestyles.


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2. Specialty Stores: specialty stores carry a narrow productmix with depth of assortment within the line. The emphasis is on a limited number of complimentary products

and high level of customer service

Specialty store often sell shopping goods such as Jewelry,apparel, computers, music systems, sporting goods.

Like; Tanishq, Titan watches, Van Heusen, Raymond's.

3. Shopping Malls: shopping malls typically deal with severalbases and product categories and provide a large

variety of merchandise abs service. There are 96operational malls in India and expected to grow 158 bythis current year. Ansal plaza (Delhi), Garuda mall (Bangalore) Sahara plaza

(Gurgaon), Spenser Plaza (Chennai)


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4. Retail chains: a retail chain operates multipleretail outlets under common ownership indifferent cities and towns.

To some extent the purchasing function and decisionmaking are coordinated or centralized.

Like Westside, Globus, Food world, McDonald's retailpetrol outlets. Etc.


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The Marketing: Retail Equation

Manufacturer

Retailer

Consumer

Manufacturer

Consumer

Manufacturer

Wholesaler

Retailer

Consumer

Feedba

ck


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Retailing in India

Retail is the new buzzword in India.

The global Retail development Index has rankedIndia first, among the top 30 emerging markets inthe world.

It is believed that India has the potential todeliver the fastest growth over the next 50 years.

While barter would be considered to be oldestform of retail trade, since independence , retail in

India has evolved to support the unique needs ofcountry, given its size and complexity


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Second largest sector after Agriculture. Contributes about 10 11% of the GDP

The estimated size of the organized retail industry in India is Rs.16,000 crores. This is 2 % of the total estimated retail trade.

Indian Retail trade increased from Rs. 2200 billion in 2000 to Rs3300 billion by the year 2005

India's first true shopping mall complete with food courts,recreation facilities and large car parking space was inauguratedas lately as in 1999 in Mumbai. (this mall is called "Crossroads")


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The Evolution of Retail in India

Retail in India has evolved to support the uniqueneeds of our country, given its size and complexityHaats, Mandis and Melas have always been a partof the Indian landscape. They still continue to be

present in most parts of the country and form anessential part of life and trade in Various areas.

The PDS (Public Distribution System) would easily asthe single largest retail chain existing in the

country. the evolution of the PDS of Grains in Indiahas its origin in the rationing systemintroduced by the British during world war II


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The system was started in 1939 in Bombay andsubsequently extended to other cities and towns. thesystem was abolished post war but howeverattaining independence India was forced toreintroduce it in 1950.

There was rapid increase in the ration shops ( beingincreasingly called the Fair Price Shop or FPSs)

The Canteen Stores Department and the Post Offices

in India are also among the largest network of outletsin the country reaching population across thecountry.


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The Khadi & Village industries (KVIC) was also set up postindependence. The cooperative movement was againchampioned by the government.

India's Largest retail Chains:1. PDS: 463,0002. Post offices: 160,0003. KVIC: 7,000

4. CSD Stores:3,400

(source business world marketing White book 2005)


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In the past decade, the Indian marketplace has transformeddramatically. However from the 1950s to the 80s,investment in various industries was limited due to lowpurchasing power in the hands of the consumer and the

governments policies favoring the small scale sector.

The first attempts at organized retailing were noticed in thetextiles sector. One of the pioneers in this field wasRaymonds which set up stores to retail fabric.


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Raymonds distribution network today comprises20,000 retailers and over 256 exclusive showroomsin over 120 cities of the country

Other textile manufacturing who set up their ownretail chains wee Reliance- which set up Vimalshowrooms and Garden Silk Mills, which set upGarden Vareli showrooms.


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The Evolution of Retail in India

Traditional

FormatsItinerant SalesmanHaatsMelas

Mandis etc.

Establishedformats

Kirana shopsConvenience/

department storesPDS/

fair price shops

Pan/ Beedi shops

EmergingFormats

Exclusive retail outletsHypermarketInternal retail

Malls / Specialty MallsMultiplexes

Fast food outletsService galleries


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Drivers of Retail change inIndiaMajor drivers :

1. Changing Income Profiles: Steady economic growth fuelledthe increase in disposable income in India. The averagemiddle class family's disposable income rose by more

than 20% between 1999-2003.2. Diminishing difference between Rural and urban India: Rural

India accounts for over 75% of India population and thisin itself offers a tremendous opportunity for generatingvolume driven growth. Tax benefit. In year 2002-03 LIC

sold 50% of its policies in rural India. Same BSNL alsosold its 50% connection in small towns


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3. Changes in Consumption patterns: Occupational changes andexpansion of media have caused a significant changein the way the consumer lives and spends his money.

o The changes in income brought about changes in the

aspirations and the spending patterns of theconsumers. the buying basket of the consumerchanged

4. The emergence of a young Earning India : Nearly 70% of theIndian population is below the age of 34. takingadvantages of employment opportunity in the

booming service sector these young Indians areredefining service and consumption patterns


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Prominent Sector in IndianRetail1. Clothing, textiles and fashion Accessories:

2. Food & food Services:

3. Consumer Durables:

4. Books & Music:

Other emerging sectors

5. Jewellery retail

6. Footwear retail

7. Time Wear Retail

8. Fuel Retail/ petro retail


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Challenges to RetailDevelopment in India

Retail not being recognized as an industry inIndia.

The high costs of real estate.

Lack of Adequate infrastructure.

Multiple and complex taxation system.


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Size of the Organized RetailMarket

2001-2002* 2007* CAGR (%)

Food 1800 7473 33

Clothing 4950 10423 16

ConsumerDurable

1650 3787 18

Books & Music 450 1426 26

Total 16000 37216 18

*Figs are in Rs. Cr.


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Share of Organized &Unorganized retail

85 15

81 19

55 45

40 60

36 64

30 70

20 80

3 97

1 99

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

USA

TAIWAN

MALASIA

THAILAND

BRAZIL

INDONESIA

CHINA

INDIA

PAKISTAN

Source: Ernst &Young, The Great Indian Retail Story, 20


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Retail Trade: India, US & ChinaTrade($ bn)

Employment(%)

Shops(mn)

Organisedsector share

(%)

India 180 7 12 3

China 360 12 2.7 20

US 3800 16 15.3 80

1 introduction to retail - pooja

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