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Submitted in the partial fulfillment of the degree of Master of Business Administration (2008-10)
PREFACE
Master of commerce (M.COM) Programme is one of the most reputed professional courses in the field of management. This course includes both theory & its applications as its content of Curriculum. The Research Project is an integral part of the curriculum and its purpose is to provide the practical exposure of business world in the changing scenario. In this way it helps the student in development of practical skills and analytical thinking process. It makes more aware about the perceptions and tastes of the people of the corporate world. Thus it helps in moulding the students according to the requirements of the market I was fortunate enough to have the opportunity to do a research project on MARKETING STRATEGIES ADOPTED BY RELIANCE MART & VISHAL MEGA MART. As a complementary to Project, every student has to prepare and submit a report. It is an attempt to present practical knowledge & observation gathered during the project.
ACKNOWLEDGEMENT
I wish to express my sincere esteemed thanks to our institution, which provided me this most awaited opportunity of undergoing training in the corporate world.
Along with the institution I also want to express my gratitude to my faculty members who help me with their immense knowledge and their experience.
Last but not least I want to express my immense heartly thanks to all the personalities who have been instrumental in making this project on MARKETING STRATEGIES OF RELIANCE MART & VISHAL MEGA MART possible and successful.
INDEX
CONTENT
PAGE NO.
CHAPTER-1
Introduction of the Project
CHAPTER-2
Objective, Scope & Limitations of the Study 29
CHAPTER-3
Research Methodology 37
CHAPTER-4
Data collection & Analysis 42
66
71 72
Appendix
Bibliography Questionnaire 76 73
If the retail industry is divided on the basis of retail formats then it can be split into the modern format retailers and the traditional format retailers. The modern format retailers comprise of the supermarkets, Hypermarkets, Departmental Stores, Specialty Chains and company owned and operated retail stores
The traditional format retailers comprise of Kiranas, Kiosks, Street Markets and the multiple brand outlets. The retail industry can also be subdivided into the organized and the unorganized sector. The organized retail sector occupies about 3% of the aggregate retail industry in India.
Firstly the organized retail sector in India has a very low contribution to the entire retail sector in the country. Hence there is ample scope for the new players to achieve success in the backdrop of soaring disposable income of the upcoming generation. Secondly, not only have the incomes increased but there has been a sea change in the preferences of the consumers. These factors have acted as a stimulus for the ushering of foreign players retailing in apparels, accessories, electronic appliances etc. Large shopping malls have already mushroomed in the metropolitan cities. There still lies untapped potential in the Indian Retail Market.
The size of retail industry in an economy depends on many factors and the level of consumer spending is the most important among these factors. The retail sector in India has grown by leaps and bounds in the last five years. The reason behind this growth has been the synergy of many propellants. However the growth is not always genuine as there are exaggerations as well. But these exaggerations also have benefits since they given a feel of growing competition all around. Secondly the present situation is just a depiction of nascent stage. The future of the trajectory may not be as steep as it is now or may be even slope downward. 'What will be the future size of the retail industry' is the mind boggling question. Another moot point that will gain importance in due time concerns the future of the unorganized retail market which constitute a significant proportion of the whole industry. The retail stores have proved to be a vantage point for the customers. This implies that the small farmers who used to sell their product in the sabji-mandis and on roadsides are going to lose a significant market share as they can't employ the two profit maximizers-economies of scale and economies of scope.
Country
Retail
Sector's
share
As can be clearly seen, retailing in India is superior to those of its contenders. Retail sector is a sunrise industry in India and the prospect for growth is simply huge. There are many factors that have stimulated the rise of the shopping centers and multiplex-malls in a jiffy. Some of them can be listed as follows: Rise in the purchasing power of Indians- the rise in the per capita income in the last few years has been magnificent. This has led to the generation of insatiable wants of the upper and middle class. The demand of new as well as second hand durables has risen throughout the country thus providing the incentive for taking up retailing.
Favorable to farmers- retailing has helped in removing the middlemen and has thus enhanced the remuneration to farmers. This is a new revolution in the agricultural sector
in India and will go a long way in amending the condition of agriculture, a major concern among policy makers. Use of credit- a typical Indian is most conversant with using credit cards than carrying money. These have led to a shift of the consumer base towards supermarkets and make the payments in the form of credit. Comfortable Atmosphere- a visit to a retail store appears to be more soothing for the generation-Y. People and kids prefer to shop in an air conditioned a tech savvy manner. The retail industry is the second largest employer in India. It currently employs about 7 percent of the total labor force in India. Finance Minister P. Chidambaram's recent statement salaries ought not to be legislated is a welcome move as most of the organized retail is in private hands. However only about 4.6% of the total retail trade is in organized sector. It generates about Rs.55, 000 crore ($12.4 billion). The major and minor players desperately need to work hard in this direction so that next time the figures look more decent. The government must also make an attempt to ameliorate the situation as political instability and infrastructure namely power and roads are the major roadblocks in the path of smooth functioning of the market.
The above table reinforces our view that India has done a great job in retailing. One noteworthy point here is that Japan in spite of being one of the most densely populated countries has fared poorly than India. But this euphoria loses its charm if we compare the percentage of organized retail in the total value generated by the retailing sector. According to international standards, a retail store is nominated as organized only when it features more than 10 employees. The above chart clearly portrays the miserable condition of India's organized retail A forecast of 40% annual growth in the organized retail sector seems sound. The number of shopping malls in India has grown from 1 in 2001 to 100 in 2005 but still more effort is needed to turn the predictions into reality.
Studies have further showed that non-urban areas account for only about 15% of organized retailing So it is high time that the retail industries pay importance to diversification and reach out to non-urban markets. If they remain confined to the metropolis then they will soon hit a ceiling and will be able to grow no more. But at the same time they must realize that the rustic people are sceptic about the urbane lifestyle habits. The mega retail players will have to drop their policy of full extraction of consumer surplus and will have to employ the local people to overcome the myth that entry of a branded retail will displace the millions of traders, shopkeepers and hawkers. Protests must be welcomed and meetings encouraged making life saner.
Retail markets in Germany, South Africa and many other countries allow 100% foreign investment in retail. This has helped in setting up of cash and in creating wholesale markets. However, in India, only 51% FDI is allowed in single-brand retail and that too with prior approval. In case of multi-brand retail, FDI is completely prohibited. This is a perfect beginning but foreign investment should be gradually liberalized to modernize farming and help farmers scale up. Moreover, restricting FDI for protecting mom-and-pop stores seems unjustifiable since Tata, Reliance and Bharti have already made a foray in the sector.
However, according to the survey conducted by KPMG for Federation of Indian Chamber of Commerce and Industry (FICCI), among these, the food and grocery is expected to witness the fastest growth followed by clothing as the second-fastest growing segment.
Marketing Strategies
Strategies based on market dominance - In this scheme, firms are classified based on their market share or dominance of an industry. Typically there are four types of market dominance strategies:
o o o o
Porter generic strategies - strategy on the dimensions of strategic scope and strategic strength. Strategic scope refers to the market penetration while strategic strength refers to the firms sustainable competitive advantage. The generic strategy framework (porter
1984) comprises two alternatives each with two alternative scopes. These are Differentiation and low-cost leadership each with a dimension of Focus-broad or narrow.
o o
Innovation strategies - This deals with the firm's rate of the new product development and business model innovation. It asks whether the company is on the cutting edge of technology and business innovation. There are three types:
o o o
Growth strategies - In this scheme we ask the question, How should the firm grow?. There are a number of different ways of answering that question, but the most common gives four answers:
o o o o
RELIANCE RETAIL LTD has launched its much-awaited hypermarket format (which also happens to be Indias largest hypermarket) called Reliance Mart at Iscon Mall,SG Highway, Ahmadabad on August 15. Supermarkets
After the successful launch of the supermarket format Reliance Fresh and the consumer electronics concept mega store Reliance Digital, the hypermarket is the third retail format launched by Reliance Retail. Spread across 165,000 square feet of shopping area, Reliance Mart will provide the shoppers a never-before-experienced shopping delight. The hypermarket will carry a range of over 95,000 products catering to the entire family. Shoppers will have the option to choose from a wide array of products in every category ranging from fresh produce, food & grocery, home care products, apparel and accessories, non-food FMCG products, consumer durables and IT, automotive accessories, lifestyle products, footwear and much more.
Commenting on the launch, Shri. Mukesh Ambani, Chairman and Managing Director, Reliance Industries Ltd, said: Organized retail has the potential to trigger socio-economic transformation on an unprecedented scale in our country and will bring about enormous spin-off benefits to the Indian economy and its various constituents. The launch of Reliance Mart is yet another step by Reliance Retail towards providing international shopping experience to all our customers at unmatched affordability, guaranteed quality and choice of products and services. Reliance Mart marks the achievement of another milestone in our effort to unleash a retail revolution in India. Shri Ambani added.
Reliance Mart offers some unique services to the shoppers like tailoring, shoe repair, watch repair, a photo shop, gift services and laundry services, all within the store. The store also houses its own fresh bakery, serving hot, off-the-oven bread and bread products throughout the day and local savouries, an ice-cream train for the kids, a chakki, ready-made batter and loose tea and pickle for the housewives. part of its lifestyle section. Reliance Mart will also sell fine jewellery and fashion jewellery as
Reliance Mart will also house a health and wellness store providing pharmaceutical drugs and other wellness products. For the shoppers convenience, the store has a cafeteria providing quality food and beverages for ready consumption, an ATM machine and a consumer service / membership desk to provide the customer a truly international shopping experience.
The hypermarket also launched a host of Reliances own brands in select categories with superior quality and affordable prices like First Class, Network, Netplay, Team Spirit and Sparsh in Mens and Womens Formal / Casual and Ethnic wear, DNM- X in the jeans category for men and women, Panda for kids clothing and Grip in the luggage section. The footwear category will carry Zig in formal wear. Hi Attitude for semi -formal, Tosco for party wear and Monza for the sports enthusiast. There are many products that will be exclusively available in Reliance Mart stores only.
Reliance Mart, with 61 check-out counters has for the first time in India introduced the Mobile POS system for faster check outs. This is aimed at reducing customer wait-time. The store planning, atmospherics and layout has been designed specifically to provide a complete solution to the customer. Reliance Mart will remain open from 10:00 a.m. to 10:00 p.m., seven days a week. The store has over 400 highly skilled and trained customer sales representatives. Reliance Mart will continue to offer all its customers Reliance One, a common membership and loyalty program across all its formats, which follows the philosophy of Earn Anywhere, Spend Anywhere. Reliance Mart will also provide easy and attractive finance options, including 0% financing for your purchases on select products. Reliance Retail plans to have a pan-India presence by opening over 30 Reliance Mart hypermarkets this year and over 500 by the end of 2010.
Services Offered
It offers some unique services to the shoppers like tailoring, shoe repair, watch repair, a photo shop, gifting services and laundry services all within the store under one roof and also it has its own bakery shop. Reliance Mart will also provide easy and attractive finance options, including zero per cent financing for the purchases on select products. Reliance Mart will continue to offer all its customers Reliance One, a common membership and loyalty programme across all its formats, which follows the philosophy of 'Earn Anywhere, Spend Anywhere'.
Future Plans
The next two hypermarkets are to be opened in Jamnagar in Gujarat and in the NCR by next month with plans to open 30 such marts by the year. Raghu Pillai, President and CEO (operations and strategy), Reliance Industries Limited (RIL) said the company is planning to set up 500 hypermarkets across 784 towns by 2010.
Strategy The hypermarket would be selling the products on EDLP (every day low price) basis at prices 15-20 percent lower than market prices. In order to grow faster and better in local markets with higher margins, it has focused largely on local brands instead of national brands or private labels. Local brands include Induben Khakrawalas Namkeens, Lijjat Papad, Wagh Bakri and Madhur (spices brand). This is in addition to 100 private labels that Reliance plans to display. Companys Sources says that the share of regional brands in the hyper marts would be over 10%.
Strengths Keeping local brands at the outlets is more profitable and also makes the supply chain more efficient. Being a bulk purchaser, Reliance Mart can offer products at very low prices. Also taking into consideration the local brands, the products at the outlets would be easily acceptable by the customers. And there would be comparatively less efforts needed by the marketer to explain the product to the consumers.
Weaknesses In some cases, few regional brands strongly liked by the consumers offer lower margins than that offered by the national brands. It has to face a tough competition by big shopping malls i.e. Big Bazaar, Spencer Hyper, Vishal Mega Mart and the upcoming Wall Mart.
Zeppelin :
Kitaan Studio : Mens Shirts & Trousers Blues & Khakis : Paranoia : Chlorine : Mens Trousers Mens Shirts & T-Shirts Mens Shirts
Zero Degree : Kids Boys Soil : Massa Bay : Mens Shirts Mens Trousers & Bermudas
Product Vishal Mega Mart offers a wide range of products which starts from apparels to food items, footwear to home furnishing, crockery to sport items, child care products to toys, watches, drinks etc. There are many in house brands promoted by Vishal Mega Mart. In pursuance of their business plan to diversify their portfolio of offerings, FMCG products play a key role. Price Vishal Mega Mart promises its consumers the lowest available price. The concept of psychological discounting (Rs. 99, Rs. 49, etc.) is used as promotional tool. Vishal Mega Mart also caters on Special Event Pricing (Close to Diwali, Christmas, New Year etc.). Selling combopacks and offering discount to customers. The combo-packs add value to customer. Through
Bundling, they also reduced the price of the products. In addition to VRPLs strategy to continue procurement of goods from small and medium size vendors and manufacturers which leads to cost efficiencies, VRPL intend to procure FMCG and apparels from low-cost production centers located outside India. Towards this objective, VRPLs propose to increase their procurement of finished and semi-finished goods from China and thereby realize economies of scale and pass on the benefits so accrued to their customers. Place Vishal Mega Mart stores are located in 110 cities with more than 180 outlets. Vishal Mega Mart has presence in almost all the major Indian cities. They are aggressive on their expansion plans. VRPL intend to increase their penetration in the country by setting up new stores in cities where they already have presence, as also entering into new areas in the country. In particular, they intend to focus on expansion in Tier II and Tier III cities. VRPL target locations with good infrastructural facilities such as easy accessibility, provision for water, electricity, parking, security and other basic amenities.
Promotion Advertising has played a crucial role in building of the brand. Vishal Mega Mart advertisements are mainly seen in print media i.e. newspapers, Television with Tina Parekh as there in advertisement, and sometime road-side bill-boards. VRPLs category management system is used to plan promotional schemes. They launch promotional schemes weekly. Apart from general sales promotion, the category manager formulates promotional plans for slow movers. In addition, to promote sales, they focus on layout of the stores and positioning, presentation and display of merchandise, in order to appeal to the customer. In addition, VRPL have introduced, in association with SBI Cards & Payment Services Private Limited, a co-branded credit card. VRPLs propose to continuously undertake such initiatives to increase the satisfaction of their customers. Some of the features of the co-branded card include Rs 250 discount voucher on signing up for the card and a process by which the cardholder earns five reward points on every Rs 100 spent. A cardholder accumulates points on the basis of purchases made and the points accumulated can be redeemed for gifts or purchases. In September 2005, VRPL entered into a
long term advertising agreement with Bennett, Coleman & Company Limited (BCCL). Under the agreement, they are entitled to fixed discounts for their advertisement in print publications of BCCL for a period of five years from the date of the agreement. As a part consideration, VRPL had issued 1,670,605 Equity Shares of Rs. 10 each and 384,190 Preference Shares of Rs. 146 each amounting to an aggregate of Rs. 300 million.
Strong understanding of the value retail segment VRPLs business plan involves implementation of the concept of the value retailing, targeting the middle and lower middle income groups, which constitute majority of the population in India. VRPL intend to provide quality products at competitive prices. VRPL sell a vast range of merchandise across apparels and accessories, FMCG products, food products and consumer durables. VRPLs emphasis has been to maximize the value that the customers derive in spending on goods bought in their stores. VRPL endeavor to continuously reduce their costs through a variety of measures, such as, in-house production of apparels, procurement of goods directly from the small and medium size vendors and manufacturers, efficient logistics and
distribution systems along with customized product mix at their stores depending on the regional customer behavior and preferences. Central to their value retail strategy is to pass on the benefits of cost reduction measures to their customers.
CRM policy of reliance mart can be divided into four major parts, namely; 1) Customer loyalty 2) Customer retention 3) Customer communication 4) Customer gratification
There exists a blanket customer relationship programme called the reliance one membership programme for the purpose of maintaining customer loyalty. The membership programme is a very simple one where a willing customer is required to fill a form giving personal information and he gets a temporary card which will be made permanent after six months. On each purchase of rs. 100 the customer gets one redeemable point on the production of card at billing counter. The collected points can be redeemed in form of discounts on future purchases on demand of the customer. The customers also get the opportunity of availing four different kinds of insurance on the payment of a nominal fee. For example a customer can get an accidental death insurance of rs six lacs on the payment of rs. 400 only. Other forms of insurances are disability, hospitalization and home insurances. The members of reliance one get the opportunity of taking part and winning prizes by the way of lucky draws on regular intervals.
Customer retention policy implementation is at the zonal level. Generally each state is
regarded as a zone and the offers and discounts in a zone are not available in other zones. Such policy helps reliance retail to understand and capture the local markets better.
The products which show improvement due to offers and discounts on them are repeated with these offers again so as to retain the sales of the customers who bought it the last time. Also such the days best offers are constantly announced in the store making the regular customers aware about them. Maintaining a good store ambiance is also a part of customer retention policy of reliance retail. Clean and hygienic environment with properly and well spaced products along with a uniform color theme attracts the existing customers to the store again and again. A fast billing system and good and easy grievance handling system which can be accessed thru customer service desk and company website, ensures that customers feel satisfied with the store management. Less harassment to customers means better customer retention.
Communication to existing customers takes the form of sms and e-mails, generally sent to reliance one members. They get information about ongoing offers and also information and latest news about their nearest stores and the company in general. Another source of customer database is the information collected during the organizing of special events in the stores. Customers participating in such events provide their contact information which are also used in form of database for communication purposes. Thank you and festive cards on special occasions are an innovative way of communicating with the customers.
Trained salespersons make customer gratification very easy. A simple thank you with a smile goes a long way for the store to keep the customers happy. The special events organized by the stores across india are also a way to gratify the customers by allowing them to play and win prizes. Gift vouchers and discount coupons are an attraction for the customers and give them the feel that the store cares about them and their money. Local customers many a times make limited personal contacts with the store staff just like that made at a kirana store and help the store to some extent to maintain a relationship with the customers.
The implementation of the policies brings out certain limitations in them. Few major ones are as follows The personal contact numbers of reliance one members are open to tele marketing calls from various marketers as they leak out of the reliance retails database, causing unnecessary harassment to customers. The customer communication policy is less followed in small towns and cities and is more concentrated towards the metro cities. There is a common crm policy for both reliance fresh and mart. This should not be the case as both the stores offer different kinds of merchandize and generally attract different kinds of customers. Reliance retail generally delays the processing of permanent membership cards to those customers who have not paid for such a card. Customers have been waiting for over three months for their card. Those who have paid the nominal fee of rs. 50 get their permanent card within 15 days but the rest who have optioned not to pay the fees do not receive the card until too late. Unmanned billing counters create long queues at the open counters. This creates impatiens in the customers as they expect faster billing at the stores and do not want to stand with too much of goods held in their hands while billing.
Customer profitability analysis (CPA) is done on the basis of transactions made through the future cards. o Platinum customers (most profitable). o Gold customers (profitable). o Iron customers (low profitability but desirable). o Lead customers (unprofitable and undesirable). Differentiate customers in terms of: (1) their needs and (2) their value to company.
Interact with individual customers to improve the knowledge about individual needs and to build stronger relationships. There are four type of analysis done for analysis of CRM o Periodic Surveys: Its done on quarterly, its an overall survey done by the future group authorities and CRM is a part of it. o Customer Loss Rate : o Mystery Shoppers: They pose as normal customers perform specific taskssuch as purchasing a product, asking questions, registering complaints or behaving in a certain way and then provide detailed reports or feedback about their experiences o Monitor Competitive Performance Complaint Handling Procedures: Screening And Logging -- The type of product or service; manufacturer/brand name; model name/number; date of purchase/contract; warranty expiration date; salesperson; cost of product/service; date problem occurred; and a description of the problem is listed. This allows organization to exercise control, and assure proper follow-through.
Investigating -- customer's explanation of a problem provides much information. Nevertheless, to assure they have all the information needed for a thorough review of the facts involved, by: o Researching in-house records on the customer; o Requesting receipts, or other records; o Inspecting the product, or service performed; and o Following-up with the customer for any necessary additional information.
Acknowledging -- When Vishal mega mart cannot resolve an issue immediately, it is important to let customer know that the matter is receiving attention. Customer is given information about how long it will take to complete action on the complaint. If
there is further delay, its made sure to advise customer why and when Big Bazaar expects to have an answer.
Formulating A Solution -- solution is made to be consistent with established customer relations policy and important criteria are taken into account: o Contractual and/or warranty obligations; o The customer's expectations; o expectations of the customer; o The cost/benefit of alternative solutions; o The probability and cost of customer seeking redress in some other way; o The comprehensiveness and fairness of solution; o ability to perform the solution; and o What to do if the customer rejects solution.
Responding -- The response is made clear and appropriate. The customer must understand the response, and the response must address the issues raised in the customer's original complaint.
An explanation of decision preserves the goodwill of customer, even if the decision itself is adverse
Following-Up Customer is contacted following response to verify whether or not the matter has been resolved satisfactorily. If customer is unhappy with response, organization refers the matter to a third party dispute resolution mechanism for assistance.
Steps Involved in customer Satisfaction through Service: o Seeing problems from the customers perspective o Managing customers' "moments of truth" o Communicating effectively through better listening o Analyzing how customer perceptions are formed
o Managing anger and other service behaviours o Dealing with long-term consequences of service breakdowns o Negotiating solutions o Generating an action plan for improved on-the-job effectiveness