Domain Study Retail

RETAIL DOMAIN STUDY
This report is submitted as part of Domain Study at PGPM Class of 2009, under the
guidance of Dr. Pallavi Mody, S P Jain Institute of Management & Research, Mumbai.
By
Sameer Dhamangaonkar PGPM508_07

Sivaram Gunavel PGPM508_12
Mihir Jana PGPM508_14
Chetan Mahindra PGPM508_23
Prashant Malviya PGPM508_59
 Retail Domain Study
EXECUTIVE SUMMARY
India's retail market has experienced enormous growth over the past decade. Retail
is one of India's largest industries, contributing to about 10 per cent of the GDP and
providing employment to 8 per cent of the nation's workforce. India's retail sector
revenues are estimated to touch US$ 460.6 billion and the organized retail sector is
projected to grow to US$ 43.8 billion by 2010-11.
Organized retail penetration is on the rise and offers an attractive proposition for
entry of new players both domestic and foreign, as well as scope for expansion for
existing players. With a number of domestic and international brands available in
stores, metros and smaller cities in addition to a wide range of product offerings
from food and grocery to furniture and fixtures, the Indian consumer is fast
embracing modern retail.
The report starts with the global outlook of retail industry, its functions and
formats. Evolution of retail in India as this gives a brief perspective of the trends in
the Indian retail market. The Government is progressively undertaking reforms and
liberalizing the retail sector; thereby attracting significant foreign investments. The
policy and regulations along with rural retail opportunities are also discussed.
Future of retail along with new business trends and information technology trends
and discussed in detail. IT in retail is described in depth, considering business
intelligence, SCM, CRM applications and new concepts like e-tailing, Global Data
Synchronization, Planograms etc. The changing business scenario of organized
retail is presented with case studies on Pantaloon and Wal-Mart.
The growing disposable incomes, the consuming class and the increasing standard of
living translate to opportunities across all the retailing formats and verticals. The
new shopping experience, retailer‘s new face, changing customer preferences are fast
catching up in India, with increase in internet connections, increased use of plastic
money and large base of young population that spends a considerable time online.
Future perspective on Indian Retail is presented to conclude.
 Page i
TABLE OF CONTENTS
Overview of Retail Industry ..................................................................................................... 1
Global Retail Industry .......................................................................................................... 3
Market Value Forecast .......................................................................................................... 4
Types of Retailers in the Retail Industry ............................................................................. 5
Retail Market Segmentation ................................................................................................. 6

Major Players ................................................................................................................ 6
Retail Opportunities.............................................................................................................. 7
Retail Formats .............................................................................................................................. 9
Retail Functions......................................................................................................................... 13
Demand Forecasting ........................................................................................................... 15
Procurement......................................................................................................................... 17
Logistics and Warehousing ................................................................................................. 18
Category Management ........................................................................................................ 20
Pricing ................................................................................................................................. 21
Pricing Strategy for Retailers..................................................................................... 21
Promotions ........................................................................................................................... 22
Retail Market in India .............................................................................................................. 24
Growth Across Segments .................................................................................................... 26
Future Outlook .................................................................................................................... 26
Advantage India .................................................................................................................. 27
Policy and Regulatory Framework ..................................................................................... 28
Market Entry Strategies For Foreign Retailers in India .................................................. 29
Risks and Challenges ................................................................................................................ 31
Living in Uncertain Times ................................................................................................. 32
Impact on Indian Economy ..................................................................................................... 40
Future of Retail .......................................................................................................................... 45
 Page ii
Retail Market Dynamics ..................................................................................................... 46
Future Retail Industry Scenario – A World of Extremes .................................................. 46
IT in Retail .................................................................................................................................. 49
Business Intelligence and Retailing ................................................................................... 50
Customer Relationship Management ................................................................................. 51
Supply Chain Management and Procurement .................................................................. 53
Alternate Sales Channel ..................................................................................................... 53
Finance and Asset Management......................................................................................... 54
Planograms.......................................................................................................................... 55
E-Tailing.............................................................................................................................. 57
Global Data Synchronization ............................................................................................. 58
Software Packages in Retail ............................................................................................... 59
Key Retail Priorities ............................................................................................................ 60
Retail Trends to Watch ............................................................................................................. 63
Trends in Indian Retail Industry ....................................................................................... 66
Retail Company Overview ....................................................................................................... 71
Pantaloon Retail.................................................................................................................. 72
Wall-Mart ............................................................................................................................ 77
Conclusion ........................................................................................................................... 80
References ............................................................................................................................ 81
 Page iii
LIST OF TABLES
Table 1 Global Retail Industry Group Value ........................................................................... 3
Table 2 Global Retail Industry Group Value Forecast.......................................................... 4
Table 3 Global Top 10 Retailers .................................................................................................. 6
Table 4 Economically Attractive Countries ............................................................................. 8
LIST OF FIGURES
Figure 1 Retail Processes ............................................................................................................. 2
Figure 2 Global Retail Industry Group Value ......................................................................... 3
Figure 3 Global Retail Industry Group Value Forecast ....................................................... 4
Figure 4 Global Retailing Industry Group Segmentation.................................................... 5
Figure 5 Global Retail Market Segment ................................................................................... 6
Figure 7 Window of Opportunity Analysis ............................................................................... 7
Figure 8 Top Emerging Market by Volume (May 08 - Nov 08)............................................. 8
Figure 9 Top Five Emerging Market by Value in $m (May 08 - Nov 08) ........................... 8
Figure 11 Organised Retail Mix ................................................................................................ 12
Figure 19 Retail Merchandise and Information Flow ......................................................... 14
Figure 12 Important Retail Functions .................................................................................... 15
Figure 14 Procurement - Leaders and Followers ................................................................. 17
Figure 15 Elements of Logistics Cost ...................................................................................... 18
Figure 15 Important Process Flow ........................................................................................... 19
Figure 16 Retail Supply Chain .................................................................................................. 19
Figure 17 Category Management ............................................................................................. 20
Figure 18 Point of Sale Operations .......................................................................................... 23
Figure 20 Indian Retail Growth................................................................................................ 25
Figure 21 Share of Verticals ...................................................................................................... 26
Figure 22 Future Growth ........................................................................................................... 27
Figure 10 Critical Success Factors for Global Retailers in Emerging Markets ........... 29
Figure 23 Moving ahead towards Customer Centric Model .............................................. 47
Figure 24 A Photographic Planogram for Apparels ............................................................ 55
Figure 25 PHOTOGRAPHIC PLANOGRAMS FOR FMCG PRODUCTS .......................... 56
Figure 26 Spending Shifts Across Retail Channels ............................................................. 61
 Page iv
Overview of
Retail Industry
 Page 1
The retail industry is a sector of the economy that is comprised of individuals and
companies engaged in the selling of finished products to end users in the general
public. Retail is the sale of goods to end users, not for resale, but for use and
consumption by the purchaser. The retail transaction is at the end of the supply
chain. Manufacturers sell large quantities of products to retailers, and retailers sell
small quantities of those products to consumers.
F IGURE 1 R ETAIL P ROCESSES
The global retailing industry group generated total revenues of $11,326.8 billion in
2008, representing a compound annual growth rate (CAGR) of 4.1% for the period
spanning 2004-2008. The specialty retail sector proved the most lucrative for the
global retailing industry group in 2008, generating total revenues of $9,066.7 billion,
equivalent to 80.1% of the industry group's overall value. The performance of the
industry group is forecast to accelerate slightly, with an anticipated CAGR of 4.8%
for the five-year period 2008-2013.
 Page 2
Year $ billion % growth

2004 9646.1 $ billion % Growth
2005 10199.5 5.70% 12000 0.08
2006 10794.2 5.80% 11500
0.06
11000
% Growth
$ billion
2007 11395 5.60%
10500 0.04
2008 11326.8 -0.60%
10000 0.02
T ABLE 1 G LOBAL R ETAIL I NDUSTRY G ROUP V ALUE 9500
0
9000
8500 -0.02
2004 2005 2006 2007 2008
Year
F IGURE 2 G LOBAL R ETAIL I NDUSTRY G ROUP V ALUE
G LOBAL R ETAIL I NDUSTRY

The following are some of the facts about the global retail industry:
Market Value The global retailing industry group

shrank by 0.6% in 2008 to reach a value of
$11,326.8 billion.
Market Value Forecast In 2013, the global

retailing industry group is forecast to have a value
of $14,347.3 billion, an increase of 26.7% since
2008.
Market Segmentation I Specialty retail sector

dominates the global retailing industry group,
with 80% of the industry group's value.
Market Segmentation II Europe accounts for

34% of the global retailing industry group's value.
 Page 3
M ARKET V ALUE F ORECAST

In 2013, the global retailing industry group is forecast to have a value of $14,347.3
billion, an increase of 26.7% since 2008. The compound annual growth rate of the
industry group in the period 2008-2013 is predicted to be 4.8%.
Year $ billion % Growth

2008 11326.8 -0.60%
2009 11708.6 3.40%
2010 12284.6 4.90%
2011 12944.4 5.40%
2012 13648 5.40%
2013 14347.3 5.10%
T ABLE 2 G LOBAL R ETAIL I NDUSTRY G ROUP V ALUE F ORECAST
$ billion % Growth
16000 6.00%
14000 5.00%
4.00%
12000
% Growth
$ billion
3.00%
10000
2.00%
8000
1.00%
6000 0.00%
4000 -1.00%
2008 2009 2010 2011 2012 2013
Year
F IGURE 3 G LOBAL R ETAIL I NDUSTRY G ROUP V ALUE F ORECAST
 Page 4
T YPES OF R ETAILERS IN THE R ETAIL I NDUSTRY

The global retailing industry group comprises of:
Internet & Catalog Retail – It consists of the total revenue from sale of retail
goods online, mail order, television and catalog channels.
Specialty Retail – It is made up of the apparel, computer and electronics,
home improvement, specialty stores, automotive and home furnishing retail
sectors
Multiline Retail – It covers revenues generated through the sale of retail
goods via department and general merchandise stores.
Broadly retailers can be divided into two types in the industry:
S T OR E R E T A I L E R S – Those engaged in the sale of products from physical

locations which warehouse and display merchandise with the intent of attracting
customers to make purchases on site.
N O N - S T OR E R E T A I L E R S – Those engaged in the sale of products using

marketing methods which do not include a physical location. Examples of non-store
retailing include
Infomercials
Direct response television advertising
Catalogue Sales
In-Home Demonstration
Vending Machines
E-Commerce
Multi level marketing
Multiline
Retail
14%
Catalog
Speciality and
Retail Internet
80% Retail
6%
F IGURE 4 G LOBAL R ETAILING I NDUSTRY G ROUP S EGMENTATION
 Page 5
R ETAIL M ARKET S EGMENTATION

Europe accounts for 34% of the global retailing industry group's value. In
comparison, Americas accounts for a further 32.6% of the industry group's revenue.
M A J OR P L A Y E R S
Major World Players are Wal-Mart, Carrefour, Home Depot, Costco and Target.
Rank Name of Company Country of

Rest of
Asia
World
Origin
Pacific 1 Wal-Mart US
6.9%
26.5% 2 Carrefour S.A France
3 The Home Depot US
4 Tesco UK
5 Metro AG Germany
6 The Kroger Co. US
Europe 7 Target Corp. US
34.0% 8 Costco Wholesale Corp. US
North &
South
9 Sears Holding Corp. US
America 10 Schwarz Unternehmens Germany
32.6%
Source: 2008 Global Power of Retailing (Deloitte)
F IGURE 5 G LOBAL R ETAIL M ARKET S EGMENT T ABLE 3 G LOBAL T OP 10 R ETAILERS
Wal-Mart accounts for 4.4% of the global retailing industry group's value. In
comparison, Home Depot accounts for a further 0.7% of the industry group's
revenue.
The global specialty retail industry remains fragmented despite the presence of
large players such as: Wal-Mart, Home Depot, Best Buy or Costco. Market players
include retailers in the apparel, computer and electronics, home improvement,
specialty stores, automotive and home furnishing retail segments.
 Page 6
R ETAIL O PPORTUNITIES
F IGURE 6 W INDOW OF O PPORTUNITY A NALYSIS
Opening: A market that is just beginning its modern retail story, in all major cities
Peaking: A market that is developing quickly and is ready for modern retail
Declining: A market that is still big and growing, but space for new entrants is
getting tighter
Closing: A market having small window of opportunity for new entrants; such
markets generally have a very high penetration of modern retail
Key Asian economies, viz. India and Vietnam are in the peaking phase. This means
that the next 1-3 years are the best time for foreign retailers to enter India and
other countries in peaking zone.
 Page 7
7.00, 11%
18.00, 28% China

7.00, 11%
India
Australia
Russian Federation
8.00, 12%
Poland
Turkey
14.00, 22%
10.00, 16%
F IGURE 7 T OP E MERGING M ARKET BY V OLUME (M AY 08 - N OV 08)
651.80,
9.12%
2301.00,
1147.10,
32.18% Russian Federation
16.04%
Republic of Korea
Brazil
Australia
1174.80, China
16.43%
1874.90,
26.22%
F IGURE 8 T OP F IVE E MERGING M ARKET BY V ALUE IN $ M (M AY 08 - N OV 08)
Risk by Market Market Time GRDI

country attractiveness saturation factor Indicator
2007 Country (25%) (25%) (30%) (20%)
1 India 67 42 80 74 92
2 Russia 62 52 53 90 89
3 China 75 46 46 84 86
4 Vietnam 57 34 76 59 74
5 Ukraine 41 43 44 88 69
Source: A T Kearney Global Retail Development 2007
T ABLE 4 E CONOMICALLY A TTRACTIVE C OUNTRIES
 Page 8
Retail Formats
 Page 9
Major retail formats are as follows:
Department Stores
A department store represents a retail outlet that stocks a wide variety of

merchandise ranging from apparel, toiletries, cosmetics, toys, and jewellery to
appliances and furniture. Department stores usually sell goods at fixed price with
guarantees and allow exchanges and refunds. They operate as a part of retail chains
with several outlets in different parts of the country or across several countries.
Supermarkets
The supermarket format is one that is departmentalized into self service stores and
offers a range of food and household articles. A typical supermarket is situated in a
convenient area preferably near residential localities. These stores generally occupy
a large area of space with parking lots. In India, the stores mainly focus on the price
proposition offering products at lower
prices to attract the customers.
Hypermarkets
The hypermarket format represents a

supermarket that has the features of both
a supermarket and a department store.
Hypermarkets are mainly located in the
outskirts of major towns and cities. These
stores operate on a very large set-up with
extensive parking lots. Hypermarkets offer
products ranging from fresh groceries to
clothes, jewellery, hardware, sports
equipment, motor accessories, books,
consumer durables, electrical equipment
and computers. A hypermarket can be
termed as a big discount store that stocks
about 60 per cent food and 40 per cent non-food items. The hypermarket formats are
also termed as 'Godzillas' of retailing due to their vast scale of operations. They
usually have an extremely complex supply chain offering value-for money to the
price conscious public.
 Page 10
Discount Stores
A discount store format is also a type of department store selling products at prices
lower than that in other retail outlets. The discount stores offer a wide assortment of
goods with quality assurance at competitive prices. They mostly have large scale set-
ups and purchase in bulk directly from the manufacturers at deep discounts, and as
such were able to pass on the benefits to their customers. The discount store concept
in India is quite new. It has gained much popularity among the middle class of
Bangalore, Hyderabad, Mumbai and Kolkata. Some popular discount stores are The
Loot, My Dollar.
Specialty Stores
Specialty stores are another retail format selling specific merchandise

with focus on a single category. These stores offer a large range of
selections within a single merchandise category. Prominent examples of
such stores in India include chains such as Planet M, Music World and
Crossword. Specialty stores mostly attract customers with a predefined
buying mindset that often lead to impulse sales too. These stores have
strong customer loyalty programmes. A recent trend is specialty malls
like Gurgaon's Gold Souk.
Convenience Stores
Convenience stores are those stores that are open 24x7. They stock
most essential and fast moving consumer goods like food items (both
grocery and packaged foods), beauty and personal care products and an array of
products of day-to-day use. In India these are mostly located at fuel retail stations.
Some well known players in this area are In&Out and My Mart.
Kiosks and Food Court Counters
Kiosks are usually retail outlet structures, which are open on all sides and mostly
engage in selling consumer goods like edibles and snacks, newspapers and
magazines, etc. Now another new dimension is getting added to the concept of
kiosks. A number of lifestyle products, fashion accessories stores and entertainment
kiosks are being added to the list. The concept of kiosks finds relevance as an
efficient medium of retail due to the space constraints. Most of the kiosks are located
in high streets, malls, multiplexes, etc.
 Page 11
Source: Technopak Edelweiss Research
F IGURE 9 O RGANISED R ETAIL M IX
 Page 12
Retail Functions
 Page 13
The following illustration gives an overview of the retail functions.
The following illustration depicts the flow of retail merchandise and information.
F IGURE 10 R ETAIL M ERCHANDISE AND I NFORMATION F LOW
 Page 14
The various important retail functions are illustrated as follows
F IGURE 11 I MPORTANT R ETAIL F UNCTIONS
D EMAND F ORECASTING
Modern demand-forecasting systems provide new opportunities to improve retail
performance. Although the art of the individual merchant may never be replaced, it
can be augmented by an efficient, objective and scientific approach to forecasting
demand.
Large-scale systems are now capable of handling the mass of retail transaction data
– organizing it, mining it and projecting it into future customer behavior.
This new approach to demand forecasting in retail will contribute to the accuracy of
future plans, the satisfaction of future customers and the overall efficiency and
profitability of retail operations.
Retailers face several challenges when it comes to forecasting:
 Scale of the problem (large number of stores and items to forecast)

 Intermittent demand (slow and erratic sales for many items at the store
level)
 Page 15
 Assortment instability (frequent new-item introductions and seasonal

assortment changes)
 Pricing and promotional activity
The following softwares are available for demand forecasting in retail:
SAS® Demand Forecasting for Retail
SAS Demand Forecasting for Retail uses SAS' unique high-performance forecasting
engine to automatically diagnose, model, execute and reconcile forecasts across
multiple merchandise levels and locations. It allows creation of forecast projects and
manages forecasts with a built-in forecast repository and versioning system. SAS
Demand Forecasting for Retail produces results at any level of the product and
location hierarchies down to the SKU/store level.
Oracle Retail Demand Forecasting for Retail
Oracle Retail Demand Forecasting uses time series forecasting algorithms and state-
of-the-art modeling techniques to create accurate forecasts with little human
intervention. The solution handles forecasting at a low level of detail (such as at the
item, by store, by day level), forecasting for new products, and forecasting for
products with sparse sales, highlighting the anomalies for review.
The various benefits associated with using these softwares for demand forecasting
are as follows:
 Highly accurate forecasts – It generates forecasts based on underlying trend,

seasonality promotions, inventory effects and other known causal factors
 Faster implementation – A retail-specific data model and workflow that
provide enhanced usability
 Business-driven results – By seamlessly integrating with existing planning
processes, it helps identify opportunities and improve profitability
 Soft lines ready – Includes models for fashion forecasting, short lifecycle
products and intermittent demand
 High scalability – Supports the entire organization down to the individual
store SKU level for all types of retailers
 Reduced workload – Automated exception-based forecast management
reduces the need for manual inputs and forecast updates.
 Page 16
P ROCUREMENT
Excellence in procurement, both merchandise and non-merchandise, can be key to
improving both top-line and bottom-line growth in the retail industry. As per the
study done by A.T. Kearney, they have seen that the leading companies in every
industry push their procurement function from a transaction-based business
necessity into a strategic weapon capable of delivering significant competitive
advantage.
When approached strategically, excellence in procurement is a key lever to create

value and competitive advantage for retailers. Now the question is, how are these
leaders doing it? How can they keep their advantage? What must other retailers do
to match their impressive performance in a challenging industry?
The study concludes that while revenue growth understandably remains at the top
of most retailers' agendas, industry leaders also consider cost management a high
priority. They employ a balanced approach to procurement to ensure that margins
remain high and operating costs low to shield against the very real possibility of
suppressed top-line growth. Leaders in procurement are also leaders in financial
performers.
F IGURE 12 P ROCUREMENT - L EADERS AND F OLLOWERS
 Page 17
L OGISTICS AND W AREHOUSING

In the Retail Supply Chain, efficient logistics services help organised retailers
streamline their operational dynamics, achieve business targets and attain higher
levels of customer satisfaction and profitability.
F IGURE 13 E LEMENTS OF L OGISTICS C OST
The warehousing is a crucial component of the Retail

Logistics value chain. Warehousing is typically used
for stockpiling for managing demand-supply gaps
over a long period. In modern retail set up,
traditional warehouses are being replaced by
Distribution Centers (DC) which are accurately
managed resulting in better ordering and free flow of
information and products in both directions.
Apart from storing the products, DCs carry out

various value added services which include MRP
tagging, repackaging, quality checking and bundling
with promotion items. Special care for perishable
products, hazardous products and products that
require specific conditions for transportation and
warehousing are also key components of the value
added services.
 Page 18
F IGURE 14 I MPORTANT P ROCESS F LOW
F IGURE 15 R ETAIL S UPPLY C HAIN
 Page 19
C ATEGORY M ANAGEMENT
Category Management lacks a single definition thus leading to some ambiguity even
among industry professionals as to its exact function. Three comparative
mainstream definitions are as follows:
 Category Management is a process that involves managing product

categories as business units and customizing them (on a store by store basis)
to satisfy customer needs (Nielsen)
 The strategic management of product groups through trade partnerships
which aims to maximize sales and profit by satisfying consumer and shopper
needs (Institute of Grocery Distribution)
 Marketing strategy in which a full line of products (instead of the individual
products or brands) is managed as a strategic business unit (SBU) (Business
Dictionary)
Basically ―Category Management‖ is a retailing concept in which the total range of

products sold by a retailer is broken down into discrete groups of similar or related
products; these groups are known as product categories. Examples of grocery
categories may be tinned fish, washing detergent, toothpastes, etc.
Each category is then run like a "mini business" (Business Unit) in its own right,
with its own set of turnover and/or profitability targets and strategies. An important
facet of Category Management is the shift in relationship between retailer and
supplier: instead of the traditional adversarial relationship, the relationship moves
to one of collaboration, exchange of information and data and joint business
building.
F IGURE 16 C ATEGORY M ANAGEMENT
 Page 20
Category Management is a philosophy for strategically

managing a retailer‘s or supplier‘s business that recognizes
categories as strategic business units for the purpose of
planning and achieving sales and profit goals. Inherent in
this philosophy is the belief that simply managing at the
department level does not provide adequate strategic focus.
The process of category management implies a change in the
way in which suppliers are viewed. The implication of
category management relies on collaborative and co-
operative supply partnerships.
Category Management requires a focus on team organization

that spans both suppliers and retailer‘s organizational boundaries. The reasons for
emergence of category management are:
 Consumer changes
 Competitive pressures
 Economy and efficiency considerations
 Advances in Information technology
P RICING
Setting the right price is the key for any retailer. The right price, on right product,
on right time in right market can boost the sales and profits of any retailer.
Therefore sound pricing strategies are important for a successful retail business.
From consumer‘s perspective, price is always a consideration as on important

feature of the entire offer in the purchase decision of a particular product.
Retailers should understand the characteristics of the people who shop at their
stores, reasons for why they shop at their stores and the degree of consistency
between the price perception of consumers and the stores price philosophy.
P R I C I N G S T R A T E GY FOR R ET AIL ER S
Different types of pricing strategies are adopted by different retailers based on
product, store format and timing in market. Some of the key pricing strategies are:
Market skimming: The products are priced high initially; then gradually the
retailer brings down the prices. Such type of pricing is effective for goods which have
a relatively inelastic demand
 Page 21
Market Penetration: The products are priced low; this is just the
opposite of market skimming. This is suitable for products which have
a high elasticity of demand
Price Bundling: Retailers bundle 2-3 products together. This is

useful for those products which have a high tendency of selling
together
Leader Pricing: In this type of pricing strategy deep discounts are

offered on a few items. For example the retailer sells eggs at a cheaper
rate, so when a customer purchases the groceries along with that
he/she is induced to purchase eggs.
Every Day Low Pricing (EDLP): In EDLP the retailer sells the
goods at relatively low prices at all times. The price offered may not be lowest but
remains more or less same throughout the year. For EDLP to work for any retailer
volumes are a must. EDLP is most famously practiced by Wal-Mart.
Odd Pricing: In this type of pricing the products are priced at odd prices like 199,
299, 399 etc. The main idea behind this type of pricing is to create a physiological
advantage. The consumers feel the prices are cheap and this induces more
purchases.
Single Pricing: In this type of pricing all the goods are priced at the same rate. The
Dollar Store is the classic example of this type of pricing.
P ROMOTIONS
Retail Promotions is broadly classified as all the communication that informs,
persuades and/or reminds the target market or the perspective segment about the
marketing mix of the retail form.
The retailers seek to communicate with customers to achieve a number of objectives.

These objectives include increasing store traffic by encouraging new shoppers to visit
the store, increasing share of wallet for all shoppers or specific group among them,
increasing sale of a given category, and developing the store image or the retail
brand.
The retailers communicate with customers through many vehicles: advertising,

sales, promotions, publicity and personal selling.
 Page 22
F IGURE 17 P OINT OF S ALE O PERATIONS
 Page 23
Retail Market in
India
 Page 24
The Indian retail market is the fifth-largest retail destination globally. It is

estimated to grow from the US$ 330 billion in 2007 to US$ 427 billion by 2010 and
US$ 637 billion by 2015. Retail contributes to 10 per cent of India‘s Gross Domestic
Product and provides employment to 8 per cent of India‘s working population.
Higher disposable incomes, easy availability of credit and high exposure to media
and brands has considerably increased the average propensity to consume over the
years.
Global Retail Development Index - GRDI
India ranked first for the third consecutive year on the Global Retail Development
Index – 2007, conducted by AT Kearney across 30 emerging economies. India is
ranked as the most preferred retail destination for international investors.
Global Consumer Confidence Index - GCCI
India ranked first for the fifth time on the Global Consumer Confidence Index –
June 2007, conducted by The Nielsen Company. Indians were judged as the world‘s
most optimistic consumers, with high financial confidence about their income for the
next 12 months.
Indian retail showed a

growth rate of 49.73 per cent
with a turnover of US$ 25.44
billion in 2007-2008 as
against US$ 16.99 billion in
2006-2007.
Organized retail segment is

expected to grow from five
per cent to about 14 to 18 per
cent by 2015.
F IGURE 18 I NDIAN R ETAIL G ROWTH
 Page 25
G ROWTH A CROSS S EGMENTS

In India, the food and beverages
segment accounts for the largest
share over 74 per cent of the total
retail pie. Traditional retail
dominates food, grocery and allied
products sector, with grocery and
staples largely sourced from the
―Kiranas‖ and push-cart vendors.
The apparel and consumer
durables verticals are the fastest
growing verticals.
F IGURE 19 S HARE OF V ERTICALS
F UTURE O UTLOOK
 Retail sector revenues pegged at US$ 460.6 billion by 2010-11
 Organized retail projected to grow to US$ 43.8 billion
 Modern retail is expected to adapt and imbibe from the traditional formats
 Unorganized formats converging from organized formats, in the form of
mushrooming village malls
 Page 26
F IGURE 20 F UTURE G ROWTH
A DVANTAG E I NDIA
Fastest Growing Economy GDP growth rate of 9.4 per cent posted in 2006-07 is
highest ever in last 18 years. With the first quarter growth rate for 2007-08
estimated at 9.3 per cent, the economy is well poised to continue its growth story.
Young India Two-thirds of India‘s population is under 35 years age and more than
60 per cent of the population will be in the working age group (15-60) till year 2050.
Potential Untapped Market Indian Retailing giant, Pantaloon Retail India

Limited, captures a mere 0.3 per cent of total market in India, compared to Tesco
Plc, England‘s 14.3 per cent and Wal-mart USA‘s 20 per cent, signaling out the large
untapped potential
 Page 27
Abundant Availability of Skilled Labour Over 37 million students were enrolled

in about 150,000 pre-college institutes and over 11.7 million in 14,000 higher
education institutions in 2005-06 and focussed courses on retail management
P OLICY AND R EG ULATORY F RAMEWORK

FDI up to 100 per cent is allowed under the automatic route for cash and carry
wholesale trading and export trading and FDI up to 51 per cent is allowed, with
prior government approval for retail trade in ‗Single Brand‘ products.
Value added tax (VAT) has been introduced and implemented in most states and
union territories, and across most industry verticals (except a few like textiles) to
resolve the multiple taxation issues and maintain uniform prices across the
countries. Octroi has been abolished in many states to further trade in the retail
sector.
The government is working towards reducing impediments by introducing a single-

window clearance mechanism. This would reduce the entry and establishment
timelines for new players in the market and facilitate timely and hassle free
approvals. The government is releasing large tracts of undeveloped land for retail
development in the Mumbai and National Capital Region (NCR).
 Page 28
The Agricultural Produce

Marketing Committee Act
(APMC), which curtails
direct sourcing of
agricultural produce
(grocery, food grains, etc), is
proposed to be amended
soon, with a Draft Model Act
being legislated by the
government. The new act
promotes direct marketing
to corporate by farmers,
setting up of
farmers‘/consumers‘ market
and contract farming.
M ARKET E NTRY S TRATEGIES F OR F OREIGN R ETAILERS IN

I NDIA
Positioning: There are two successful positioning planks for retailers in India – (1)
Value retailing and (2) Specialty
retailing.
Experience and research suggests

that the strongest proposition for
the Indian consumer is ―value for
money‖. Value retailing implies
pricing to be lower than existing
retail options for the consumer i.e.
local kirana stores for households,
wholesalers for small retailers, etc.
A value retailer must have anchor
categories that sell at significantly
lower price than competitive
formats.
For value retailing format to

succeed, the most critical factors are an efficient supply chain model, leadership in
sourcing and efficient store operations. While value retailing appeals to multi-
 Page 29
F IGURE 21 C RITICAL S UCCESS F ACTORS FOR G LOBAL

R ETAILERS IN E MERGING M ARKETS
category consumers, single-category consumers would be attracted to specialty

retailers. Such retailers would have the largest product range within a category,
offer the best deals and have the most educated sales staff on specialty categories
like electronics, apparel, medicine, etc. The success of specialty retailing is also
based on the ability to offer a customer a differentiated shopping experience, an
experience that is far superior to a multi-category large format store.
The most successful retail format in India for some time to come will be the kirana
store concept. Indianized store format will work the best for global retailers. The
GRDI study has shown that the adapted retail format concept is the key success
factor for most retailers in emerging markets. While the format can be anything
from a neighborhood store to a hypermarket, it is best decided by a bottoms-up
analysis of the infrastructure, consumer and geographic realities of the location.
 Page 30
Risks and
Challenges
 Page 31
There is no doubt that the organised retail industry is on a high growth trajectory.
Favourable demographics, steady economic growth (improving prosperity), higher
disposable incomes, and easy availability of credit are providing the necessary
impetus to the growth of modern retailing formats. However, there are several
challenges that continue to stifle this growth. There is agreement among most
players in the industry that the growth of organised retailing can be faster than
projected 35%, if some of these issues are addressed proactively.
L IVING IN U NCERTAIN T IMES

In the past few years, India‘s retail journey seemed
picture perfect with the most attractive ‗stops‘ still
unexploited and under-penetrated. This was the
scenario till a few months ago. Enter the global
meltdown and India did not find itself completely
insulated from its harsh effects. As per the
Cartesian survey, almost all key industries in India
have been negatively impacted by the slowdown and
retail is no exception. With the Q3 growth numbers
of FY2008-09 at 10-12 percent as against 35 percent
of the previous year, the ‗happy grins‘ are fast
turning into ‗nervous smiles‘. While the sector is still
registering decent growth, the heavy investments made during the boom period may
weigh the retailers down.
Disappointing Footfalls
Although retailers are trying their best to combat this slowdown through constant
promotional offers and deep discounts, consumers are expected to cut down on their
discretionary spending. With the global recession having no clear end in sight,
consumers see sense in saving for a rainy day.
Liquidity under pressure
The slowing sales are resulting in lower inventory turnover and increasing working
capital requirements for retailers. This in turn has resulted in liquidity pressures for
many retailers. To free the cash that has been locked, a large number of companies
have been trying to reduce the inventory on their books and shorten working capital
cycles.
 Page 32
Roll out delays to compound problems
The organized retail space was expected to

receive investments to the tune of USD 25
billion over the next 4-5 years5. However a
significant delay in retail real estate
development and opposition to organized retail
has resulted in delays in investment. A large
number of retailers have not been able to meet
their stated expansion plans. Currently, with
higher cost of funds and a slowdown in
demand, developers are likely to delay more
projects in the near future.
 Page 33
Real estate – Availability and high rental costs
The real estate costs for the Indian organised retailers are 8-20% of sales compared
to 3-4% for the retailers in other countries. This adversely affects the economics of
organised retailers, especially the relatively smaller retailers. This is a result of a
combination of several factors including the following: Most Indian cities suffer from
poor city planning that has not provided for enough commercial space, resulting in
high speculative real estate prices. The stamp duty rates in India (5-14%) are among
the highest in the world. For example, stamp duty rates in the UK range from 0-4%.
Archaic laws like the Urban Land Control Ceiling and Regulation Act and the Rent
Control Act complicate the usage of land and reduce transparency in transactions.
Over the last year, rentals in the key catchment areas have increased 80-100% due
to the mismatch between supply and demand for real estate; overall, rentals have
increased ~40-50%. The last budget has proposed levying 12% service tax on rental
payments, which is likely to adversely affect the retailers who are already battling
escalating rentals. This proposal is being disputed and the hearing on the same is
expected soon.
Crowding in unattractive locations
Another reason for slow growth in organized retail is poor choice of locations.
Clustering is a common theme in retail in India and retail malls appear wherever
real estate is available rather than where they are actually needed. This has
resulted in attractive city centers being devoid of malls and newly developed areas
having too many.
 Page 34
Inability to compete with traditional retail
Organized retailers have not been successful to provide services that match those of
kirana stores. The true reason of their troubles is that the business capacity of the
kirana shop owners and buyers is high in India. Mom and Pop stores already have a
model that is preferred by consumers and is also cost efficient. The big stores are
still trying to get their model right in providing an alternative to neighborhood
retailers who offer convenience, credit and personalized service.
Over reliance on debt funding
The rapid expansion in retail space in recent years was largely debt funded. This
has resulted in substantial leverage, which has added to retailers financing risks in
the recent scenario. The declining interest coverage clearly indicated that a large
number of retailers are highly leveraged and are battling high interest payments.
Whatever be the reason, we believe

that players who take immediate
strategic measures are likely to be the
dark horses. Be it store rationalization,
change of supply chain, consolidation
of operations, improvement in IT
infrastructure, retailers need to think
quick to protect their margins and
toughen up for more challenging times.
Improperly developed malls
Several industry players who attended the National Retail Summit were of the view
that quite a large percentage of malls, already developed or under construction, are
not designed keeping in mind the requirements of modern retail formats. Quite a
few of the malls are developed with the idea of selling off the retail space, rather
than managing it on a long-term basis. In most cases, the space is sold to the highest
bidder without paying much heed to the mix of retailers who will occupy the mall. As
a result, there is a fair possibility that such malls may not become destinations of
 Page 35
choice because of poor retailer mix. With the passage of

time, there is a good chance that the customer tastes and
preferences also change. However, since the ownership of
retail space in such malls is with several parties, changing
the retailer mix to suit customers‘ requirements becomes a
difficult task. As a result, such malls can fall out of favour
with the customers.
In several developed markets, the developer leases the

mall space on long-term contracts rather than selling the
space upfront. At regular intervals, the developer reviews
the tenancy mix to weed out retailers that are not able to
attract good footfalls. This helps the long-term
sustainability of the mall. The scenario, as discussed
above, is however quite different in India with the concept
of mall management not having caught up.
Most of the mall developers do not follow a scientific

method of selecting the retailer mix before the construction
begins. As a result, the level of utilities available in such
malls may be far lower than what is required by the traffic
generated by the retailers in these malls, resulting in
severe pressure on the mall infrastructure. On the basis of
the above-mentioned factors, several industry observers
are of the view that quite a few of the malls being developed will come up for re-
development in 5-6 years, as they may not be able to keep up with the changing
consumer tastes and preferences.
Underdeveloped supply chain
Efficiencies in supply chain will determine which retailers will succeed in the long
term; in view of this, it looks like that the bigger companies that have more financial
muscle to make significant investments will have a distinct competitive edge. The
supply chain infrastructure in India is however still quite underdeveloped. There
has been a lack of any meaningful investments by the existing retailers in
developing robust and scalable supply chain. Retailers of food and groceries have not
yet invested enough in setting up a cold chain system; hence, there is enormous
wastage. Moreover, there is a very low level of automation in the supply chain and
point of sale systems. There is little real-time link between suppliers, warehouses,
 Page 36
and retail stores. This results in cost inefficiencies in

the system, leading to increased delays and shortages.
The other reason for underdeveloped supply chain is the
inconsistency in tax regime among states. Non-uniform
VAT regime, multiple points of taxation, and taxes like
octroi, and entry tax in some states prevent
development of optimal supply chain models, acting as
deterrents for organised retailing.
Underdeveloped supply chains, lack of strong cold

chains, poor warehousing facilities, bad roads, etc. have
been contributing to increased logistic costs for the
retailers. Globally, the logistics cost component to the
total retail price is around 5 percent, while in India it is
as high as 10 percent.
Absence of a mature Third Party Logistics (3PL)

industry – Poor infrastructure (roads, communication
and power) makes logistics and transportation in India
extremely difficult. Further, internal operations of
retailers, such as warehouse processes and distribution,
are usually fairly ad hoc and inefficient. Retailers are
keen to outsource their logistics to 3PL. But there is an
absence of a mature 3PL player providing high service
levels at competitive prices.
Fragmented supply base – The supply base is highly

fragmented with a large number of intermediaries
squeezing the margins of all involved, which also
includes the retailer. This not only has an adverse affect on the margins but also
results in cases of mishandling, theft and increased instances of shrinkage.
Reliable and Integrated infrastructure
Large retail franchises depend on reliable and integrated infrastructure.

Telecommunications modernization has been a success story in India. The other
critical sectors, notably roads, ports, air cargo facilities, and electric power, are
seeing increased investment but are still well below international standards.
 Page 37
Policy and taxation hurdles
India suffers from several policy and taxation hurdles. If these issues are addressed
effectively, modern retailing could grow significantly. The government has still not
granted industry status to retail. This makes financing from banks difficult,
resulting in high interest rates, which ultimately pushes up capital costs.
Approximately 37-45 licenses are required to start a retail operation. This causes
considerable delay in starting a new store operation. Inconsistent agriculture and
fertilizer subsidies by states lead
to price anomalies and variation
for the same product, thereby
leading to supply chain
inefficiencies. The government
has only allowed 51% FDI in
retail and that too in single
brand retail. Further, talks to
bring in FDI in multi-brand
retail have met with severe
opposition. These factors have
restricted the entry of foreign
retailers into the country, who
could have otherwise
significantly contributed in
improving the supply chain and
level of technology usage in the
sector.
Inadequate human resources
The retail industry is manpower intensive. Countries with high penetration of

modern retail employ 10-12% of their workforce in retailing. Given India‘s large
working population, the issue is not shortage of manpower, but competency gaps
that exist because of absence of vocational training facilities for the organised retail
sector. Most industry players feel that there is a significant shortfall of resources
trained in retail specific skills sets, including supply chain management,
merchandising, vendor management, facilities management, customer relations, and
branding. This has resulted in high attrition rates and rising people expenses,
hindering aggressive ramp-up of most retailers.
 Page 38
Protests against organised retailers
In the past few months, there have been protests in Uttar Pradesh, and the
communist-ruled Kerala and West Bengal, including violent demonstrations last
September that forced Reliance Fresh, the food stores arm of Reliance Retail, to shut
their shops and lay off staff. Thousands of traders, hawkers, farmers, and workers
are protesting against the entry of large domestic corporations like Reliance,
Spencer‘s, and foreign players like Wal-Mart into the retailing space. These protests
are on the back of the belief that the entry of the corporations into the retail sector
will negatively impact the livelihood of the intermediaries and the traders, who form
a large share of the society currently. These protestors are demanding a national
policy that is agreeable to all the stakeholders including small traders, shopkeepers,
wholesalers, and vendors be put
in place, since retail is the
second-largest employer in the
country and the livelihoods of 40
mn people are likely to be
affected if the entry of big
players is allowed at such an
alarming pace. On the back of
these protests, the government
has deferred the proposal to
allow FDI in multi-brand retail
till a study is made to ascertain
the impact on traditional
retailers by the growth of
organised retail. In case of any
adverse decision on this front, the growth plans of organised retailers will be
severely hampered. The impact will be pronounced in the food and grocery space, as
most of the players are targeting this segment. In India, unlike in the industrialized
countries, labor is typically not the critical cost factor in establishing a business, and
this may make a business model based on replacing labor with technology
vulnerable.
 Page 39
Impact on
Indian Economy
 Page 40
The lure of India‘s retail sector lies not only in its size, but also in its vast potential.
The retail sector is expected to grow by 25 percent annually and hit the 400-billion-
dollar mark within the next few years. Retail growth in China is expected to be just
over half the rate in India, making India the next frontier in retail expansion. The
retail sector accounts for 7 percent of employment and 10 percent of the country‘s
GDP. Despite its size, it is still dwarfed by China‘s retail sector, which may be as
much as two-times larger than India‘s. Additionally, only
3 percent of Indian retail is organized. The other 97
percent consists of small shopkeepers and
hawkers running mom-and pop stores. This
unorganized portion accounts for much of
India‘s large informal economy. Today,
organized retail operations, chain stores,
and international investment are starting
to move in, leading at least part of the
retail sector to dramatically increase its
scale of operations and integrate itself more
closely into the international economy. This
move will produce significant gains for the
economy, potentially reducing farm-to-market
losses of agricultural products, encouraging
infrastructure improvement, and driving the training of
the middle segments of the labor force. It will also produce losers, notably those of
India‘s 50- plus million small shopkeepers and hawkers who will be displaced by the
modernized retail sector. More fundamentally, the growth of the retail sector will
create new dynamics and relationships in the Indian economy and between the
Indian and global economies.
FDI Regulation
As the retail sector continues to grow, the government is starting to liberalize its
protectionist policies. Foreign investors have long been limited to entering the
Indian market through franchising, licensing, or wholesaling. Using these methods,
Nike, Adidas, and Benetton have already become common names in India. As apart
of India‘s ongoing economic reforms, foreign retailers are allowed to own 51 percent
of single-brand outlets. Thus far, however, the world‘s largest retailers have had
mainly wholesale operations in India. The German firm Metro and Shoprite from
South Africa have opened wholesale operations. Wal-Mart has also signed a joint
 Page 41
venture with Bharti, under which it will provide the supply-chain and cash-and-
carry type of wholesaling for a new wave of Bharti retail stores. They have recently
opened their first cash-and-carry joint venture store in Amritsar on an investment of
$7 million, and they plan to open at least 15 outlets across the country in the next
three years. The stores will be run under the brand name of Best Price Modern
Wholesale.
Unemployment Concern
The concern about allowing these

major operators to move into retail
stems mainly from the concern that
large-scale liberalization will adversely
affect the large, unorganized retail
sector. In a country like India that is
struggling to find sufficient
employment for its ever-expanding
workforce, a retail model that relies on
replacing low-skilled labor with
technology inspires understandable
skepticism. Moreover, the contrast in
modernity between India‘s urban and
rural areas will become that much
more visible. As a result, any move to
bring in foreign investment in retail
will be controversial and emotional.
Modernization and new Job opportunities
The combined effort of foreign retailers and local firms to gain their piece of the
retail pie will bring some disruption to the existing small-scale retail sector,
including an estimated 12 million small shopkeepers and 40 million hawkers as well
as their families. The large operators, especially the foreign ones, have been looking
at ways to mitigate this impact. Wal-Mart, in anticipation of entering the retail
market directly, has outlined a plan to help compensate local retailers who might be
displaced through a three-month retraining program to convert small-shop owners
into sales workers. Modernization will also create demand for jobs staffing
warehouses, supply centers, and transportation routes. Such plans will not
eliminate the controversy surrounding foreign investment in retail. Wal-Mart‘s
 Page 42
reputation in the United States as a hard-nosed employer bent on minimizing

employee benefits will certainly influence the political response to any decision to
liberalize the retail sector.
Expansion of manufacturing sector
Currently, Wal-Mart sources between 70 and 90 percent of its goods worldwide from
China, providing a considerable boost to the Chinese manufacturing sector. In a
recent interview, Raj Jain, president of Wal-Mart operations in emerging markets,
estimated that Chinese and other international sourcing will account for less than
10 percent of the goods provided by Wal-Mart in India. India also has a low cost of
labor, and its manufacturing productivity is constantly improving. India could
therefore provide a legitimate alternative to Chinese manufacturing not just in India
but also throughout the world.
Benefits to Indian Agriculture
Potentially standing to gain the most from a more organized

and better-equipped retail sector is Indian agriculture,
especially perishable crops. Currently, 35 to 40 percent of
fruits and vegetables grown in India perish in transit because
of poor transportation methods and a lack of refrigeration. In
a recent study by the consulting firm CRISIL, it was
estimated that organized retailing could increase farmers‘
incomes by 37 percent. This would boost both GDP—CRISIL
estimates by 1.7 percentage points—and the standard of
living of a population that has gained relatively little from
India‘s two decades of faster growth. Foreign retail firms
could also help fund much needed improvements in
infrastructure. Food processing is underdeveloped in India, adding only 7 percent to
its value as opposed to 40 percent in China. Thus, the increased emphasis on food
processing holds great potential for further increasing employment rates in India.
Emergence of India as the retail sourcing hub
Riding on the back of a strong manufacturing industry, India is fast emerging as an

important global sourcing hub for top international brands India has had a
continued presence in the global scenario as one of the leading exporters of apparels
and textiles. The expiry of the Multi Fiber Arrangement has further widened the
global markets for apparel. Many international brands have identified India as one
 Page 43
of the important supply centres for procurement of textiles and apparels. Wal-Mart‘s
sourcing operations was estimated at US$ 1 billion, Tesco‘s around US$ 100 million
and Marks & Spencer around US$ 145 million from India for the year 2005- 06.
Unilever sources major portion of their fast moving consumer goods from its wholly
owned Indian subsidiary, Hindustan Unilever Limited. Adidas, Next and Calvin
Klein are expected to follow suit, with Adidas opening its first office in Bangalore.
Rural retailing
Rural retailing constitutes more than 95 per cent of total retail revenues, with more
than 70 per cent of India‘s population concentrated in the rural areas. Rural
hypermarkets are growing at a blistering pace meeting the unique requirements of
the rural consumer. The range of services provided by the rural retailers extends
from creating a platform to buy and sell farm produce, to banking services, to
restaurants etc.
One of the key players in the rural retail segment is ITC with
its Choupal Saagar initiative. ITC has 14 outlets in operation
presently and plans to increase the number to 700 over the
next 7-10 years. ITC‘s Choupal Saagar retails products and
also acts as a procurement hub for ITC‘s e-choupals where
farmers are offered better rates for their agriculture produce,
compared with the prevalent market rates for the same.
Other examples of players and their services in the rural retail

segment are DSCL‘s Hariyali Kisan Bazaar and Indian Oil
Corporation‘s Kisan Seva Kendra.
DSCL‘s Hariyali Kisan Bazaar has over 70 outlets presently and the company
proposes to operate a total of 200 outlets over the next 12 months. The outlets
provide a spectrum of offerings including agronomist-consultations, agri-inputs, and
financial services, apart from the conventional retailing services. Indian Oil
Corporation‘s Kisan Seva Kendra offerings extend over fuel, agri-produce, fast
moving consumer goods and other value added services. The company has a network
of over 1400 outlets presently. Reliance Retail and Pantaloon Retail India Ltd. are
expected to undertake more ventures to capture the vast untapped potential in the
rural retail segment.
 Page 44
Future of Retail
 Page 45
R ETAIL M ARKET D YNAMICS

In recent years a confluence of market forces has created an extremely challenging
environment for retailers.
F UTURE R ETAIL I NDUSTRY S CENARIO – A W ORLD OF

E XTREMES
 Page 46
In particular, these mega-trends are driving toward a world characterized by market

bifurcation.
Retailers must target their most profitable customer segments.
F IGURE 22 M OVING AHEAD TOWARDS C USTOMER C ENTRIC M ODEL
 Page 47
Customer-centric retailing is redefining business model and retailers will undergo

systematic changes. There is a shift in loyalty from Push to Pull platform.
Better store experience translates to improved business results for retailers.
 Page 48
IT in Retail
 Page 49
B USINESS I NTELLIGENCE AND R ETAILING

 Business Intelligence (BI) refers to the ability to collect and analyze huge
amount of data pertaining to the customers, vendors, markets, internal
processes, and the business environment.
 A data warehouse is the corner stone of an enterprise-wide business
intelligence solution; various analytical (OLAP) and data mining tools are
used to turn data- stored in the data warehouse - into actionable information.
 The information economy puts a premium on high quality actionable
information - exactly what Business Intelligence (BI) tools like data
warehousing, data mining, and OLAP can provide to the retailers.
 A close look at the different retail organizational functions suggests that BI
can play a crucial role in almost every function.
 It can give new and often surprising insights about customer behavior
thereby helping the retailers meet their ever-changing needs and desires.
 On the supply side, BI can help retailers identify their best vendors and
determine what separates them from not so good vendors.
 It can give retailers better understanding of inventory and its movement and
also help improve storefront operations through better category management.
 Through a host of analyses and reports, BI can also improve retailers'
internal organizational support functions like finance and human resource
management.
 Page 50
C USTOMER R ELATIONSHIP M ANAG EMENT

The Customer Relationship Management (CRM) strategy should include:
 Operational CRM: Automating interaction with the customers and sales force
 Analytical CRM: Sophisticated analysis of the customer data generated by
operational CRM and other sources like POS transactions, web site
transactions, and third-party data providers.
A typical retail organization has a huge customer base and often customer's needs
are fairly differentiated. Without the means to analyze voluminous customer data,
CRM strategy is bound to be a failure. Hence, Analytical CRM forms the core of a
retailer's customer relationship strategy.
Marketing and sales functions are the primary beneficiaries of Analytical CRM and
the main touch points from where the insights gained about the customer is
absorbed in the organization.
Following are some of the uses of Analytical CRM:
 Customer Segmentation Customer segmentation is a vital ingredient in a

retail organization's marketing recipe. It can offer insights into how different
segments respond to shifts in demographics, fashions and trends. Campaign/
Promotion
 Effectiveness Analysis Once a campaign is launched its effectiveness can
be studied across different media and in terms of costs and benefits; this
greatly helps in understanding what goes into a successful marketing
campaign.
 Page 51
 Customer Lifetime Value Not all customers are equally profitable. At the
same time customers who are not very profitable today may have the
potential of being profitable in future. Hence it is absolutely essential to
identify customers with high lifetime value; the idea is to establish long-term
relations with these customers.
 Customer Loyalty Analysis It is more economical to retain an existing
customer than to acquire a new one. To develop effective customer retention
programs it is vital to analyze the reasons for customer attrition. Business
Intelligence helps in understanding customer attrition with respect to various
factors influencing a customer and at times one can drill down to individual
transactions, which might have resulted in the change of loyalty.
 Cross Selling Retailers use the vast amount of customer information
available with them to cross sell other products at the time of purchase. This
effort is largely based on the tastes of a particular customer, which can be
analyzed using BI tools based on previous purchases. Retailers can also 'up
sell' - sell more profitable products - to the customer at the time of contact.
 Product Pricing Pricing is one of the most crucial marketing decisions
taken by retailers. Often an increase in price of a product can result in lower
sales and customer adoption of replacement products. Using data
warehousing and data mining, retailers can develop sophisticated price
models for different products, which can establish price - sales relationships
for the product and how changes in prices affect the sales of other products.
 Target Marketing Retailers can optimize the overall marketing and
promotion effort by targeting campaigns to specific customers or groups of
customers. Target marketing can be based on a very simple analysis of the
buying habits of the customer or the customer group; but increasingly data
mining tools are being used to define specific customer segments that are
likely to respond to particular types of campaigns.
 Page 52
S UPPLY C HAIN M ANAGEMENT AND P ROCUREMENT

Supply chain management (SCM) promises unprecedented efficiencies in inventory
control and procurement to the retailers. With cash registers equipped with bar-code
scanners, retailers can now automatically manage the flow of products and transmit
stock replenishment orders to the vendors. The data collected for this purpose can
provide deep insights into the dynamics of the supply chain. Some of the
applications of BI in supply chain management and procurement are:
 Demand Forecasting
 Product Movement and the Supply Chain
 Vendor Performance Analysis
 Store Front Operations
 Market Basket Analysis
 Out-of-Stock Analysis
A LTERNATE S ALES C HANNEL

The success of a retailer in future would depend on how effectively it manages
multiple delivery channels like the Internet, interactive TV, catalogs, etc. A single
customer is likely to interact with the retailer along multiple channels over a period
of time. This calls for an integrated strategy to serve the customer well, which
requires smooth flow of information across channels. To ensure smooth flow of
information customer data needs to be collected from different channels in one data
warehouse. Customer relationship strategy can then be built around this customer-
centric data warehouse. BI can be used for analysis of alternative sales channel in
the following ways:
 Web Log Analysis This involves analyzing the basic traffic information over
the e-commerce web site. This analysis is primarily required to optimize the
operations over the Internet. Typically such type of exercise will let analyze
the user navigation of a particular website, determination of popular
keywords and knowledge of referrer site.
 Web Housing This involves integration of web log data with data from other
sources like the POS transactions, third party data vendors etc.
 Channel Profitability Data warehousing can help analyze channel
profitability, and whether it makes sense for the retailer to continue building
up expertise in that channel. The decision of continuing with a channel would
also include a number of subjective factors like outlook of key enabling
technologies for that channel.
 Page 53
 Product - Channel Affinity Some product categories sell particularly well

on certain channels. Data warehousing can help identify hidden product-
channel affinities and help the retailer design better promotion and
marketing campaigns.
F INANCE AND A SSET M ANAG EMENT

Following are some of the uses of BI in finance:
 Budgetary Analysis Data warehousing facilitates analysis of budgeted

versus actual expenditure for various cost heads like promotion campaigns,
energy costs, salary, etc. OLAP tools can provide drill down facility whereby
the reasons for cost overruns can be analyzed in more detail. It can also be
used to allocate budgets for the coming financial period.
 Fixed Asset Return Analysis This is used to analyze financial viability of
the fixed assets owned or leased by the company. It would typically involve
measures like profitability per sq. foot of store space, total lease cost vs.
profitability, etc.
 Financial Ratio Analysis Various financial ratios like debt-equity, liquidity
ratios, etc. can be analyzed over a period of time. The ability to drill down and
join inter-related reports and analyses provided by all major OLAP tool
vendors can make ratio analysis much more intuitive.
 Profitability Analysis This includes profitability of individual stores,
departments within the store, product categories, brands, and individual
SKUs. A major component of profitability analysis is the costs incurred by
stores/ departments and the cost of acquiring, storing and allocating shelf
space to particular product categories, brands, or SKUs.
 Page 54
P LANOGRAMS
A planogram is a diagram of fixtures and products that illustrates how and where
retail products should be displayed, usually on a store shelf in order to increase
customer purchases. They may also be referred to as plano-grams, plan-o-grams,
schematics (archaic) or POGs.
F IGURE 23 A P HOTOGRAPHIC P LANOGRAM FOR A PPARELS
A planogram is often received before a product reaches a store, and is useful when a
retailer wants multiple store displays to have the same look and feel. Often times, a
consumer packaged goods manufacturer will release a new suggested planogram
with their new product, to show how it relates to existing products in said category.
Because the most basic planograms are little more than text-boxes stacked and
sorted, basic planograms can be created in any type of painting or word processing
program or even on the back of a napkin. The use of planogram software however,
enables a user to do much more advanced and detailed analysis. Most planogram
programs even automatically add product images to products, in addition to
providing dynamic shading and labelling to better show opportunities in the set.
Following are the few companies that offer planogram creation software:
 Mockshop: Mockshop automates the production of planograms for the fashion

industry.
 Intactix: JDA Intactix offers a variety of space management solutions.
 Logical Planning Systems: Shelf Logic®2000 planogram design software
vendor.
 Page 55
 MarketMAX: Provider of merchandise analysis, planning, and optimization

solutions. Their Planogram Manager is a PC-based application for developing
planograms.
 Apollo: Apollo is space management software that has been around for over
20 years. It is a product of Information Resources.
 Spacemate: Ingen Spacemate is software for creating, viewing and editing
planograms. Various rules can be applied to the products in order to produce
an optimal planogram.
F IGURE 24 PHOTOGRAPHIC
PLANOGRAMS FOR FMCG
PRODUCTS
The following are some of the major business benefits from planograms:
 Consumer driven store-specific planograms increases value leading to

lifetime customer loyalty.
 Targeted store-specific planograms lead to maximum in-store compliance
resulting in an accurate understanding of product distribution.
 Accurate store-specific planograms ensure optimum supply chain efficiency
that results in higher availability to consumers, maximum stock turn and the
most efficient use of space. Introducing focused store-specific planograms
leads to increased sales and profitability, reduction in stock and operational
costs and an overall improvement in bottom line contribution.
 Tailors assortments including product launches and group-specific go-to-
market strategies, so that you can improve cluster results and meet true local
demand.
 Increases movement at full retail value while lowering carrying costs and
decreasing out-of-stocks and excess inventory, so that you can enhance your
overall profitability
 Page 56
 Streamlines space and floor planning, so that you can increase your space
productivity and optimize your capital investment
 Translates merchandising strategy into tactics, so that you can drive
consistent store execution of your corporate strategic and assortment
decisions.
E-T AILING
Electronic retailing, or e-tailing, refers to the practice of selling goods and
services over an electronic medium like the Internet. Many traditional
brick-and-mortar firms like Toys 'R' Us and Barnes and Noble also sell
their wares via Web sites. Other companies, such as Amazon.com, rely
solely on the Web to conduct business. While books, CDs, and computer
software and hardware are the most common goods sold by e-tailers,
clothes, cosmetics, perfume, plants, toys, and other types of merchandise
also made their way to the Web in the late 1990s.
One of the first and most well-known e-tailers, Amazon.com got its start
in July of 1995. Because the business-to-consumer (B2C) model was
relatively new and unproven then, Amazon had to develop its own
architecture and manage its own site. As online shopping grew in
popularity—accounting for $3 billion in consumer spending in 1997 and
$7.1 billion in 1998—technology vendors like IBM Corp. moved into e-
commerce and began offering to build and even oversee sites for
companies wanting to launch an e-tailing venture.
Benefits of E-Tailing
 No real estate costs E-tailers do not have to maintain expensive showrooms

or warehouses in prime locations; they operate through their web sites and
thus save drastically on the real estate costs. The real estate costs in the
metropolitan cities are sky high. Besides this, the maintenance costs of a
virtual store vis-à-vis a physical store is much less.
 Easy and comfortable Easy and comfortably -obtained info is another
advantages that shopping on the Net offers. On the Internet, product
information is just a few clicks away, all accessed in the comfort of a home.
Traditional retailing stands out in stark contrast: the consumer searches
frantically, runs up and down, and grills a poorly trained store assistant who
is unable to help him out. In the bargain, valuable time is lost. Simply put,
shopping on the Internet for, say 15 minutes could save a two-hour trip to the
 Page 57
mall. Consumers prefer to save this time so that they can devote more time
for their professional and domestic priorities.
 Better interaction with the customers The greatest benefit of online
commerce is its ability to establish interaction en-masse. Interaction refers to
the ability of reaching the customers on an individual basis and reacting
appropriately to responses of individual customers. Interaction is a vital tool
for mass customization. Examples are many and include online marketing of
flowers, software books and education. This has also led to greater
satisfaction among the online buyers.
 Mass Media A supermarket has limited area of operation. It caters to
customers of a city (and/or its suburbs), but a web site can be accessed from
any part of the country or for that matter from any part of the world, thus
increasing the potential customer base.
G LOBAL D ATA S YNCHRONIZATION

Accurate data helps at all stages of the supply chain, from purchase order to
delivery, from storage to the retail shelf. Suppliers are finding that by synchronizing
data across their entire supply chain infrastructure, they can enjoy the following
benefits:
 Lower costs for shipping and logistics

 Fewer discrepancies in shipments to retailers
 Reduced number of invoice write-offs
 Improved outbound logistics processes
 Faster time to market with new products
 Page 58
S OFTWARE P ACK AGES IN R ETAIL
 Page 59
K EY R ETAIL P RIORITIES
Multichannel convergence
The number of shoppers crossing channels increased 8% from 2004 to 2005, bringing
the total in the US to nearly 40 million households. As cross-channel shoppers
become more mainstream, their demands will have more of an impact on retailers -
regardless of channel. But most retailers aren‘t organized to provide a holistic
experience to consumers, either because their eCommerce organizations are too
separate to mesh well with stores or because store systems and processes aren‘t
structured to handle meeting online shoppers‘ needs.
Customer service in stores
Retailers have been declaring each year the ―year of the customer‖ for decades, and
2007 will be no different as retailers continue to turn to customer service as a
differentiator. Multiple pressures drive renewed attention to customer service:
Cross-channel shoppers bring different expectations of what customer service really
means, and consumer centric retailing initiatives work to reshape stores to fit the
needs of shoppers specific to each location. Add in the other trends for 2007, like
supply chain data foundations that make it easier for retailers to tap into and use
expanded product data, and merchandising renewal that enables local market
assortments. Without technology to bring it all together and help manage the
increase in complexity, retailers will be hard pressed to make customer service
improvements stick.
Supply Chain Data Foundation
Global data synchronization (GDS) and the challenges of sharing clean data between
trading partners have put renewed focus on supply chain data foundations. Adding
to the interest is the potential for data proliferation as RFID adds more product and
location numbers to the mix and the pressure that consumer-centric retailing
initiatives are putting on customer data foundations. Retailers that don‘t take a
holistic approach to mastering their data risk perpetuating silos as different groups
build out their own solutions to increasingly interconnected data entities. Retailers
who learned the hard way about the importance of data cleanliness in recent data
synchronization efforts will turn back to master data management (MDM) and
product information management (PIM) as foundational efforts required to get the
most value out of GDS initiatives. Also, RFID will increasingly be wrapped into
 Page 60
these efforts, not from a tagging and reader infrastructure perspective but from a
data perspective so that MDM and PIM will be ready for RFID when it comes.
Merchandising renewal
Though users and vendors alike often refer to merchandising systems as if they were
a well-integrated suite, the reality is
that merchandising applications can be
as siloed as the worst tangle of best-of-
breed applications. But changes in the
pricing process, in demand forecasting
and demand management, and the
pressure of localized assortments have
forced a re-evaluation of existing
merchandising silos.
Optimization
Price optimization in particular has

been a hot topic in the past, and
adoption of all retail optimization
technologies doesn‘t look to be slowing
down in 2007. But implementation
efforts to date face challenges from data
cleanliness, cultural resistance, and
process implications. Retailers struggle
with organizational changes required to
support optimization technologies, as
adoption moves from a trial run that
tacks optimization on to the end of a
larger process to a commitment to an
integrated part within the overall
merchandising process.
F IGURE 25 S PENDING S HIFTS A CROSS R ETAIL C HANNELS
 Page 61
 Page 62
Retail Trends to
Watch
 Page 63
SALES GROWTH IS EXPECTED TO DECLINE IN MOST RETAIL SECTORS AS

CONSUMERS CUT BACK ON SPENDING IN 2009
The retail industry, as with all other industries is in the heart of a deep global
recession. The knock on effect of the credit crunch has left consumers struggling to
cover costs, shopping for essential items only and being very picky about product
and price. For many retailers, sales growth is declining. In 2009, the focus will be on
keeping afloat by being creative with minimal budgets to help cut costs and
maintain market share.
One area of consideration will be minimizing loss through theft. In tough economic
times, retailers are hit by rising shrink rates and falling retail sales, crime and theft
loss directly impacts on the bottom line. The hard business climate will inevitably
lead to higher levels of shrink and this will become increasingly more noticeable
 Page 64
against falling retail sales. Loss prevention at the checkout has increased in priority
over the last year, including in Nordics where it has not been a common issue prior
to the downturn, and is expected to continue to be an area of focus in 2009.
Retailers will be looking for other ways to reduce costs, such as ways that make it
cheaper and easier to communicate and share data as well as ways to reduce
inefficiencies in-store, the back office and throughout the supply chain. The biggest
cost to a retail business is its staff so inevitably staff cuts are often the first
consideration in a cost cutting exercise. Retailers will be seeking ways of making the
workforce more efficient so that the same levels of customer service are achieved
with fewer staff members.
CUSTOMER LOYALTY WILL BE CRITICAL FOR SALES GROWTH IN 2009; A FOCUS ON IMPROVING THE
OVERALL CUSTOMER EXPERIENCE IS KEY
Increasing sales revenue means increasing the return on footfall. To do this,

retailers will need to know their target market: know who their customers are and
know exactly what they want and expect from their shopping experience, from the
store design right through to the delivery method. To continue attracting loyal
customers the majority of the retail industry will be expected to cater for and
respond to the changes in their target market through personalizing the shopping
experience, online and in-store. Value retailers are partially exempt from this rule,
where other issues such as ensuring stock is on the shelf will be a focus.
Making certain that the correct products are in stock and on the store shelf, ensure
the POS system is in working order and having enough staff to handle queries in-
store will help retailers maintain market share. However, staff cuts and in some
cases, store closures are inevitable as retailers look to control costs. Retailers that
are faced with store closures will look for new ways to keep customers in store
closure areas by encouraging previous store customers to instead buy online in order
to maintain market share.
No matter what the customer‘s preferred shopping channel is, the retailer must offer
a joined-up experience, to encourage loyalty and repeat purchases. Consistent
branding and design, product offerings, gift card and loyalty schemes will help to
ensure the fickle customer has a positive experience.
 Page 65
INVESTMENTS THAT PROVIDE RETURNS IN LESS THAN 12 MONTHS WILL BE TOP PRIORITY, RATHER
THAN LENGTHY SYSTEM OVERHAULS
Investments in 2009 will be expected to positively contribute to the financial year

end. Retailers will be focusing on two areas in 2009:
 Technology and services which help to cut operational costs and provide a
return on investment in a short space of time, ideally within 3 – 6 months.
Due to rising crime rates, loss prevention will earn more attention in 2009.
Data mining applications are relatively cheap, quickly implemented and
provide proven returns. Advanced workforce management solutions will also
prove a cost effective and popular way of controlling staff costs.
 Cost effective technology that is implemented quickly and almost
immediately shows improvement to sales revenue. Improving the customer
experience in order to maintain or improve levels of loyalty is expected to be a
key issue in 2009. Kiosks, category management, BI and customer feedback
systems will play a key part in retailers‘ customers experience improvement
strategies in 2009.
LARGE SCALE AND LENGTHY PROJECTS WILL BE PUT ON THE BACK BURNER
As capex is cut in 2009, IT budgets will suffer. Minimal large scale IT contracts will
be signed in 2009, whereas those projects that are already underway will likely
experience delays as a result. Vendors managing costly systems and telecom
infrastructure upgrades will be the losers in this environment. A trend towards
large outsourced services contracts in retail could be these vendors saving grace.
T RENDS IN I NDIAN R ETAIL I NDUSTRY

The Indian Retail Sector is at an inflexion point, with changing demographics
driving growth of organized retailing and driving growth in consumption. With
changing demographic and economic profile of the Indian population, we believe that
India is expected to experience accelerated consumption over the next few years.
 Page 66
Further, we believe that increase in consumer spending would be driven by

nuclearisation of families, increasing population of working women and new job
opportunities in emerging service sectors such as IT Enabled Services. With
declining interest rates an average Indian is not averse to taking loans. Not only are
the demographic factors
becoming more favorable but
also the growing media
penetration is leading to a
convergence of aspirations of
various classes of consumers.
We believe a larger number of

households are adding to the
consuming class with growth in
income levels. The number of
households with income of over
Rs 45,000 per annum is
expected to grow from 58 million
in 1999-2000 to 81 million by
2005-06. Of this, 56% (44.8
million households) is expected
to be concentrated in Urban India. This large base of households with growing
disposable income is expected to drive demand for organized retail.
The changes in demographics are changing consumption pattern in the country.

Central Statistical Organization (CSO) estimated private final consumption of
consumers in India at about Rs.17,600 billion in FY04. Of the total private
consumption, retail sector accounted for approximately 60% at Rs. 8570 bn (source:
Images Retail). Of this, food and beverages, apparel and consumer durables are the
top three categories of consumer spend and form 87% of the total retail sales in
India.
G R OW T H I N OR G A N I Z E D R E T A I L
In sharp contrast to the global retail sector, retailing in India – though large in
terms of size – is highly fragmented and unorganized. With close to 12 million retail
outlets India has the largest retail density in the world.
 Page 67
However, most of these retail outlets belong to the unorganized sector. The inability
of the unorganized sector to offer a wide range of products along with artificially
inflated costs due to various factors have presented opportunities for growth in the
organized retail sector
Migration from unorganized to

organized retail has been visible
with economic development in most
economies. The Indian retail
industry is evolving in line with
changing customer aspirations
across product groups, with modern
formats of retailing emerging.
Organized retail derives its
advantages in generating
operational efficiencies while
simultaneously catering to rising
consumer aspirations. Size drives
economies on procurement, and
lowers logistics and marketing costs
while delivering better value to
customers in terms of lower price, better quality, greater selection, improved service
and in- store ambience.
D R I VE R S F OR R E T A I L T R A N S F OR M A T I O N I N I N DI A
A number of factors that drive transformation in retail – such as income growth,

changing demographic profiles and socio-economic environment – are already in
place in India. However, organized retail has to overcome significant challenges in
terms of regulations and infrastructural barriers in order to realize its full potential.
Availability of quality retail space has been one of the main constraints for
development of organized formats in India. In the past, negative yield spread on
leased property and lack of bank funding due to unorganized property market
resulted in a dearth of quality retail space in the country. The spread between yield
on property and its financing cost has turned positive with the fall in interest rates.
Attractive yields on investments have resulted in sharp increase in property
development.
 Page 68
Consumerism and brand proliferation has been another enabler for organized
retailing in India. Most of the world‘s leading brands are now present in India.
C H A L L E N GE S F OR O R G A N I Z E D R E T A I L
There exist differential sales tax

rates across states in India .This adds
to cost and complexity of distribution
as this necessitates multiple
warehouses and does not allow for
centralization of certain unorganized
sector to offer wide procurements
given the incidence of local levies. At
the same time, there is large-scale
sales tax evasion by smaller stores
who derive significant cost advantage
through such evasion.
The retail sector has not been granted

industry status, limiting funding from
banks and financial institutions. The
capital requirements for a retailer are
in real estate (which banks have
historically restricted lending to) and
for working capital requirements. While some of the leading retailers are still able to
get bank funding, the smaller ones are constrained for growth funding. Similarly,
equity options are also restricted with Foreign Direct Investment not being
permitted in the retail sector. FDI restrictions have also restricted entry of
international majors in retailing in India, which could have otherwise helped the
industry develop with funding as well as bringing in of best practices and systems.
The availability of trained manpower poses a key risk for the retail sector. With
growing opportunities in the emerging service sectors such as ITES, the ability of
the retail business to hire and retain quality people is under pressure.
Supply chain management efficiencies are essential to retailers to maintain and

improve margins. In India, both vendor management and logistics management are
still undeveloped. However, with growing size of operations, supply chain efficiencies
will become a key differentiator of profitability in retail.
 Page 69
V A L UE R E T A I L I N G
These stores primarily retail primarily food and house hold items. These are
primarily large stores with volume based discounted prices. The share of
expenditure on food and grocery in a consumer‘s wallet, availability of a wide variety
of products at a reasonable price are the main factors which have contributed to the
growth of this segment. The larger chains of supermarkets and hypermarkets
(namely Big Bazaar, Star India, Nilgiris, Food world) have presence in metros and
mini metros.
L I F E S T Y L E RE T A I L I N G
These stores retail primarily non-food

items such as apparel, footwear,
accessories, cosmetics and household
products. They stock multiple brands
across product categories, though some of
them focus on their in house store label
(on the lines of Marks & Spencer‘s and St.
Michael). These stores are found on high
streets and as Anchor Tenants of
shopping malls.
Several local department store chains

have opened shop in India in the past five
years. The convenience factor coupled
with the aspirational perception of
shopping in a department store has
contributed to their growth. The larger
chains of department stores (Namely
Pantaloons‘, Shoppers‘ Stop, Westside,
and Lifestyle) have presence in the metros
and mini metros.
 Page 70
Retail Company
Overview
 Page 71
P ANTALOON R ETAIL
Pantaloon Retail a part of the Future Group, operates retail chains. The company
operates retail chains including Pantaloon, a chain of fashion outlets; Big Bazaar, a
hypermarket chain; Food Bazaar, a supermarket chain; and Central, a chain of
malls. Its business lines also include Depot, Shoe Factory, Brand Factory, Blue Sky,
Fashion Station, aLL, Top 10, mBazaar and "Star and Sitara". The company
operates an online portal named "futurebazaar.com". The company is headquartered
in Mumbai, India and employs about 25,000 people.
The company recorded revenues of INR 34,685.6 million (approximately $787

million) in the financial year (FY) ended June 2007, an increase of 79.4% over 2006.
The operating profit of the company was INR 1,798.9 million (approximately $41
million) in FY2007, an increase of 49.6% over 2006. The net profit was INR355.4
million (approximately $8 million) in FY2007, a decrease of 33.8% over 2006.
M A J OR P R O D UC T S A N D S E R V I C E S
Pantaloon offers food products through retail

formats such as Brew Bar, Cafe Bollywood,
Chamosa, Food Bazaar, and Sports Bar. Brew Bar
offers 15 brands of domestic and imported beer.
Brew Bar also offers snacks and set meals. Cafe
Bollywood is a fast food retail chain offering
eateries in a bollywood ambience. It offers Indian
street food, burgers, pizzas, and juices. Chamosa
is a chain of Indian snack counters and is mostly
located in and around high traffic areas. Food
Bazaar is a chain of supermarkets, which offers
pre-packed commodities. Sports Bar is a "concept
bar" that focuses on the world of sports. Sports
Bar offers domestic and imported spirits, beers
and wines.
Pantaloon offers fashion related products under banners such as aLL, Big Bazaar,
Blue Sky, Brand Factory, Central, Etam, Fashion Station, and Pantaloons and Top
10. aLL is a fashion store for plus size men and women. It offers ready-to-wear
fashionable clothes and accessories in western wear, Indo-western or ethnic wear in
both formal and casual categories. Big Bazaar is a fashion and general merchandise
hypermarket. It offers fashion products, home furnishings, utensils, crockery,
 Page 72
cutlery, and sports goods. Blue Sky stores offer branded and private label sunglasses
and watches. Some of the private label watch brands which Blue Sky offers are
Cube, Koenig, RIG, Lombard and UMM. Brand Factory operates a chain of discount
stores that offer apparels for men, women, and infants, along with accessories,
cosmetics, footwear, sportswear, luggage, and home linen. These discount stores
stock fashion brands such as Levis, Pepe Jeans, Dockers, Wrangler, ProVogue,
Arrow, Nike, Adidas, Reebok, Louis Phillip, Allen Solly, Reid and Taylor, Gini and
Jony, amongst others.
Central, the mall concept of

Pantaloons offer over 300 brands
across categories such as apparel,
footwear and accessories for
women, men, children and infants,
and the product ranges such as,
music, books, coffee shops, food
courts, super markets (food
bazaar), fine dining restaurants,
pubs and discotheques. Central
also offers services such as travel,
finance, investment, insurance,
concert/cinema ticket booking and
bill payments. Etam is a French
lingerie brand. "Fashion Station"
stores offer apparel and accessories
for men, women and children in
the mass market. Pantaloon stores
offers fashion products such as casual, ethnic, formal, party and sportswear for men,
women and kids. "Top 10" is another fashion store that offers products like message
t- shirts, fashion t-shirts, cool t-shirts, casuals, cargoes, sportswear and skirts. It
also offers books, music albums, lip colors, nail paints and other cosmetic products.
In addition to these formats, in fashion retailing, the company also operates
Navaras, a jewelry store that offers branded jewelry in a hypermarket set-up.
In the general merchandise category, Pantaloons operates the retail formats such as
Big Bazaar, Big Bazaar Wholesale Club, Blue Sky, Brand Factory, Central, Navaras,
Pantaloon, Shoe Factory, and "Top 10". Big Bazaar is a retail store chain in a
hypermarket format that offer fashion products, home furnishings, utensils,
 Page 73
crockery, cutlery, and sports goods. Big Bazaar Wholesale Club, the membership
club, offers bulk deals at wholesale prices to its members. It offers merchandise
categories such as food, FMCG, and home linen. Shoe Factory, a footwear retail
store chain offers branded footwear and accessories to men, women and kids.
Pantaloon has its presence in the leisure and entertainment space through its
affiliate company Galaxy Entertainment. The company launched F 123, a gaming
and entertainment zone, which offers a range of gaming options ranging from
bowling, pool, interactive video games, bumper cars along with fun foods and
services for junior and adult banqueting. The company also operates concepts such
as Sports Bar Express in Mumbai, Indore and Bangalore. In a joint venture with
Blue Foods and Pan Foods, Pantaloon operates food courts, fine dine specialty
restaurants, thali restaurants, banquets and multiple kiosks with about 15 brands
such as Copper Chimney, Cream Centre, Bombay Blue, Noodle Bar, Spaghetti
Kitchen and The Spoon. The company operates few specialty stores in the wellness
and health retailing. It operates Health Village, Star Sitara, Tulsi, and Turmeric
outlets. Health Village offer allopathic, ayurvedic and homeopathic medicinal
products along with services such as "phone a doctor" for simple health consultations
on phone. "Star & Sitara" provides skin and hair related beauty services. "Tulsi" is a
medicine store offering specialty products such as equipment for diabetes care, BP
monitors, weighing scales, thermometers, test kits, protein supplements, minerals
and vitamins among others. "Turmeric" is a part of Health Village and Food Bazaar
stores which offers beauty products such as color cosmetics, fragrances, herbal and
specialty skin items, hair products and bath accessories.
Pantaloon operates "Depot" in this category. It offers books, music CDs and
cassettes, home videos, multimedia (CD-ROMs) products and gift items. In this
category, the company has recently launched its first set of private label products.
Home and electronics retailing
The company handles this product category through its subsidiary company, Home
Solutions Retail (India). It offers the furniture, furnishings and home accents
through the "Collection I" and "Furniture Bazaar" retail formats. Other retail
formats in this category are Electronics Bazaar, e-zone, Got It, Home Town, and Mr.
Right.
In this product category, the company offers products such as gadgets, mobile
phones, accessories, download kiosks, airtime recharges, landline instruments, blue
 Page 74
tooth accessories, and mobile trinkets. The retail store brands that offer these
products are Gen M, M Bazaar, and M Port.
General Home and

Products Fashion
Merchandise Electronics
•Accessories •Big Bazaar •aLL •Collection i
•Books •Big Bazaar •Big Bazaar •Electronics
•Clothes Wholesale Club •Blue Sky Bazaar
•Electronic •Blue Sky •Brand Factory •e-zone
products •Brand Factory •Central •Furniture
•Entertainment •Central •Fashion Bazaar
products •Navaras Station •Got It
•Food products •Pantaloon •Lee Cooper •Home Town
•Footwear •Shoe Factory •Navaras •Mr. Right
•Furniture •Top 10 •Pantaloon
•General •Top 10
merchandise
•Health and
beauty products
•Sports goods
Leisure and Wellness and

Telecom and IT Food Books & Music
Entertainment Beauty
•Gen M •Brew Bar •Bowling Co. •Health Village •Depot
•M Bazaar •Cafe •F 123 •Star Sitara
•M Port Bollywood •Tulsi
•Chamosa •Turmeric
•Food Bazaar
•Sports Bar
 Page 75
SWOT A N A L Y S I S OF P A N T A L O ON
Strenghts Weakness
•Strong brand equity •Low inventory
•Diversified business turnover
operations
•Strong revenues and
operating profits
•Multiple sales
channel
Opportunities Threats
•Booming retail •Increasing real
industry estate prices
•Online sales •Retail frauds
•Acquisitions and •Intense competition
joint ventures
 Page 76
W ALL -M ART
Wal-Mart Stores, headquartered in Bentonville, Arkansas operates retail stores in
various formats across the world. In the US, the retail formats operated by Mal-
Mart include discount stores, supercenters, neighborhood markets, market side, and
Sam's Clubs. Internationally, the company operates in Argentina, Brazil, Canada,
Chile, China, Costa Rica, El Salvador, Guatemala, Honduras, India, Japan, Mexico,
Nicaragua, Puerto Rico and the UK. Wal-Mart is headquartered in Bentonville,
Arkansas and employs 2.1 million people.
The company recorded revenues of $405,607 million during the

financial year (FY) ended January 2009, an increase of 7.1% over
2008. The growth in Wal-Mart‘s revenue is primarily attributable
to strong growth in comparable store sales, in the US. The
company‘s comparable store sales in the US increased 3.5% in
FY2009 as compared to 1.6% in 2008. The strong growth in
comparable store sales is due to an increase in customer footfall
and in the average transaction size per customer.
B US I N E S S S E G M E N T S
Wal-Mart is the largest retail company in the world. The company

operates retail stores in various formats worldwide. Wal-Mart offers a wide
assortment of merchandise at everyday low prices (EDLP) in its retail stores. In
addition, the company offers its products through various e-commerce websites
including walmart.com and samsclub.com.
Wal-Mart operates its business under three business segments:
 Wal-Mart Stores
 Sam's Club
 International segment
The company has a fourth, non-operating segment named 'Others' which comprises
of unallocated overhead items.
The Wal-Mart Stores segment operates three different retail formats in the US:
Discount stores The discount stores average 108,000 square feet in size. Discount
stores offer value priced general merchandise including: family apparel, automotive
products, health and beauty aids, home furnishings, electronics, hardware, toys,
sporting goods, lawn and garden items, pet supplies, jewelry, and household wares.
 Page 77
These stores differ in size as well as in the range of merchandise they offer. Besides
offering general merchandise and groceries, Wal-Mart Stores also offer financial
services such as money order sales, wire transfers, check cashing and bill payment.
The online retail format walmart.com also forms a part of this segment. Wal-Mart
operates more than 1,000 discount stores in 47 states in the US.
Supercenters The Company has over 2,447 Wal-Mart supercenters in 47 US states.

In addition to general merchandise, Wal-Mart supercenters offer bakery goods, deli
foods, frozen foods, meat and dairy products, and fresh produce. The supercenters
also feature a number of specialty shops such as vision centers, Tire & Lube
Expresses, Radio Grill, McDonald's or Subway restaurants, portrait studios and one-
hour photo centers, hair salons, banks, and employment agencies. These
supercenters average 187,000 square feet in size.
Neighborhood Markets Neighborhood Markets offer a full-line supermarket and a

limited assortment of general merchandise. The company has over 132 neighborhood
markets in about 15 US states. The neighborhood markets offer fresh produce, deli
foods, fresh meat and dairy items, health and beauty aids, one-hour photo and
traditional photo developing services, drive-through pharmacies, stationery and
paper goods, pet supplies, and household chemicals. Neighborhood markets average
42,000 square feet in size.
Sam’s Club The Company operates 591 Sam's Club

in 48 US states. Sam's Club is a membership
warehouse club, serving both individuals and
businesses. Sam's Club offers bulk displays of brand
name merchandise including hard goods, some soft
goods, institutional-size grocery items, and selected
private-label items under the Member's Mark,
Bakers & Chefs and Sam's Club brands. Most Sam's
Club warehouses have fresh departments which
include bakery, meat, produce, floral and Sam's
Cafe.
International Segment Wal-Mart operates in 12 countries and Puerto Rico. Wal-

Mart's international segment comprises the company's wholly-owned subsidiaries in
Argentina, Brazil, Canada, Puerto Rico and the UK. It also includes Wal-Mart's
majority-owned subsidiaries in Central America, Japan and Mexico and joint
ventures in China.
 Page 78
M A J OR P R O D UC T S A N D S E R V I C E S
Products Dry and wet grocery, Beverages, Frozen foods, Flowers, Health and
beauty products, Household products, Pet supplies, Fabrics and crafts Stationery
and books, Automotive accessories, Hardware and paint, Horticulture products,
Sporting goods, Apparel Shoes, Jewelry, Toys, Home furnishings, House wares,
Major and minor home appliances, Cameras, Cellular phones.
Services Photo processing services, Cellular service plan, Money order services,
Wire transfers.
Brands Wal-Mart, Great Value, Equate, Ol‘ Roy, Sam‘s Choice, Everstart, Faded
Glory, No Boundaries.
SWOT A N A L Y S I S OF W A L L -M A R T
Strenghts Weakness
•One Stop Retail Destination •Self Cannibalization
•Efficient Working Capital •Community Relations
Management Problems
•Strategic Business •Miscellaneous PR Problems
Programs such as everyday •Continuous PRODUCT
low pricing (EDLP) RECALL
strategy, offers products at
lowest possible price in the
industry
Opportunities Threats
•Global Food Safety •Price Matching Program by
Initiative Standards Target
•Foreign Currency
Fluctuation
 Page 79
C ONCLUSION
In an industry such as retail, having a durable competitive advantage is not easy.
The industry is not directly technology based and is easily imitable. The only way to
keep growing in such markets is by value addition and expanding one‘s product
range and reach.
Driving change will be a consumer zeitgeist unlike any other change. Retailing will
be a buyer‘s market where consumers will be more proactive and self reliant but also
more pragmatic. Compounding the challenge in the years ahead will be an
increasingly inscrutable consumer who will be more difficult to understand, much
less predict, then ever before.
Buying behaviour will be more complex. Each consumer will have many faces. This
multidimensional consumer will shop in different ways based on a range of
considerations that trigger store choice and purchase decisions.
Consumer‘s preference is shifting away from traditional supermarkets and discount

department stores toward supercenters. Retail Forward forecast supercentre sales to
nearly triple. The most promising position for malls will be value, entertainment,
upscale or lifestyle driven, with a much broader mix of retail and non retail tenants.
T HE S H O P P I N G P R O C E S S WI L L G E T S M A R T E R
E-kiosks, smart cards and RFID enabled checkout will be powerful tools for
customers in stores, while mobile devices are expected to be a major technological
change driver in consumer products. The internet will transform many aspects of
the shopping process, but the on-line action will include relatively few transaction.
Even though e-commerce sales are expected to continue to grow through they will
remain a relatively minor slice of overall retail sales in near future.
T HE C HA N G I N G F A C E O F R E T A I L E R
As retailer grow and become more global, they will seek alternative supply sources.
Retail Forward predicts that many suppliers will find their biggest competitors are
their retail customers. As retailers look for new ways to grow and differentiate their
offer, many will become brand managers, some will pursue innovative store within a
store or brand sharing – partnerships and still other will become ―uber retailers‖ –
leveraging their brand identities, customer relationships and scale to move from
share of market and share of wallet to share of life.
 Page 80
R EFERENCES
1. 2008 Global Power of Retailing - Report from Deloitte
2. Wal-Mart, Inc. Company Report by Datamonitor (May 2009)
3. Report on Sustainability and System Change - Wal-Mart‘s Pioneering
Strategy by Frank Dixon
4. Retail Foundation Data from Forrester
5. India Retail Report 2007
6. 2008 Trends to Watch: Retail by Datamonotor
7. A T Kearney Global Retail Development Index 2007
8. http://www.marketingteacher.com/
 Page 81

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RETAIL DOMAIN STUDY

Sameer Dhamangaonkar PGPM508_07

Overview of Retail Industry ..................................................................................................... 1

Global Retail Industry .......................................................................................................... 3

Market Value Forecast .......................................................................................................... 4

Types of Retailers in the Retail Industry ............................................................................. 5

Retail Market Segmentation ................................................................................................. 6

Retail Formats .............................................................................................................................. 9

Demand Forecasting ........................................................................................................... 15

Logistics and Warehousing ................................................................................................. 18

Category Management ........................................................................................................ 20

Retail Market in India .............................................................................................................. 24

Growth Across Segments .................................................................................................... 26

Future Outlook .................................................................................................................... 26

Advantage India .................................................................................................................. 27

Policy and Regulatory Framework ..................................................................................... 28

Market Entry Strategies For Foreign Retailers in India .................................................. 29

Risks and Challenges ................................................................................................................ 31

Living in Uncertain Times ................................................................................................. 32

Impact on Indian Economy ..................................................................................................... 40

Future of Retail .......................................................................................................................... 45

Retail Market Dynamics ..................................................................................................... 46

Future Retail Industry Scenario – A World of Extremes .................................................. 46

Business Intelligence and Retailing ................................................................................... 50

Customer Relationship Management ................................................................................. 51

Supply Chain Management and Procurement .................................................................. 53

Alternate Sales Channel ..................................................................................................... 53

Finance and Asset Management......................................................................................... 54

Global Data Synchronization ............................................................................................. 58

Software Packages in Retail ............................................................................................... 59

Key Retail Priorities ............................................................................................................ 60

Retail Trends to Watch ............................................................................................................. 63

Trends in Indian Retail Industry ....................................................................................... 66

Retail Company Overview ....................................................................................................... 71

F IGURE 1 R ETAIL P ROCESSES

Year $ billion % growth

F IGURE 2 G LOBAL R ETAIL I NDUSTRY G ROUP V ALUE

G LOBAL R ETAIL I NDUSTRY

Market Value The global retailing industry group

Market Value Forecast In 2013, the global

Market Segmentation I Specialty retail sector

Market Segmentation II Europe accounts for

M ARKET V ALUE F ORECAST

Year $ billion % Growth

F IGURE 3 G LOBAL R ETAIL I NDUSTRY G ROUP V ALUE F ORECAST

T YPES OF R ETAILERS IN THE R ETAIL I NDUSTRY

Broadly retailers can be divided into two types in the industry:

S T OR E R E T A I L E R S – Those engaged in the sale of products from physical

N O N - S T OR E R E T A I L E R S – Those engaged in the sale of products using

F IGURE 4 G LOBAL R ETAILING I NDUSTRY G ROUP S EGMENTATION

R ETAIL M ARKET S EGMENTATION

Rank Name of Company Country of

F IGURE 6 W INDOW OF O PPORTUNITY A NALYSIS

18.00, 28% China

F IGURE 7 T OP E MERGING M ARKET BY V OLUME (M AY 08 - N OV 08)

F IGURE 8 T OP F IVE E MERGING M ARKET BY V ALUE IN $ M (M AY 08 - N OV 08)

Risk by Market Market Time GRDI

Major retail formats are as follows:

A department store represents a retail outlet that stocks a wide variety of

The hypermarket format represents a

Specialty stores are another retail format selling specific merchandise

Kiosks and Food Court Counters

Source: Technopak Edelweiss Research

F IGURE 9 O RGANISED R ETAIL M IX