PROJECT REPORT

SERVICE MANAGEMENT

INDUSTRY: Retail

Group Members:
Himanshu Johari 6104663
Himani Garkoti 6502924
Piyush Srivastava 6502915
Mayur Singhal 6502917
Ankit Garg 6502921

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 TABLE OF CONTENT

Chapter No. Topic Pg No.

Executive Summary 4

Chapter-1 Introduction

1.1 Basic Industry Analysis 5

1.2 Evolution / Growth of the industry

1.2.1 Global Perspective 5

1.2.2 Indian Perspective 7

1.2.3 Recent Trends 11

1.3 Target customers

1.3.1 Rural Focus 13

1.3.2 Urban Focus 14

1.3.3 Categorcal distribution 15

1.3.4 General Trends 17

1.4 Related Industries 19

Chapter-2 Industry Perspective

2.1 Global Industry Competitors 20

2.2 Global Industry functioning 28

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 2.3 Indian Industry Competitors 32

2.4 Indian Industry functioning 39

Chapter-3 Functional Perspective and Economic Impact

3.1 Functional Perspective 44

3.2Economic Impact 48

Chapter-4 Developing a Blueprint for Service Business

4.1 Customer Knowledge 56

4.2 Management issues in services 58

4.3 Competitive advantage 59

Chapter-5 Capacity Management in Service

5.1 Demand management or Creating Demand 62

5.2 Supply of service from different locations 65

5.3 Problems in managing demand 66

Conclusion 67

References 68

Annexure 69

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 Executive Summary

The retail industry has been showing a continuously growing trend since the past few decades. It is the
second largest industry in the U.S. The Indian retail industry is the fifth largest in the world.
Comprising of organized and unorganized sectors, India retail industry is one of the fastest growing
industries in India.

We in our project have analyzed the Retail Sector globally as well as in India in terms of the
functioning, economic aspects, competitors among others, focusing on the Service Management
perspective. As mentioned above, retail sector in India is one of the fastest growing sectors, showing
great expansion potential.

We also visited some of the leading retail outlets of India like Shoppers Stop, Big Bazaar etc. and tried
to practically analyze the various aspects including growth, trends and customer focus. With the retail
sector comprising a great share of the Indian GDP, our report has enormous present and future
relevance.

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 Chapter 1
Introduction

1.1 Definition :

Retail is the sale of goods directly to the consumers / 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.

Retailing began several thousand years ago with peddlers hawking their wares at the earliest
marketplaces. It is extremely competitive, and the failure rate of retail establishments is
relatively high. Price is the most important arena of competition, but other factors include
convenience of location, selection and display of merchandise, attractiveness of the
establishment, and reputation. The diversity of retailing is evident in the many forms it now
takes, including vending machines, door-to-door and telephone sales, direct-mail marketing,
the Internet, discount houses, specialty stores, department stores, supermarkets, and
consumer cooperatives.

1.2 Evolution / Growth of the industry

1.2.1 Global Perspective:

The retail industry has been showing a continuously growing trend since the past few decades.
It is the second largest industry in the U.S. (responsible for approximately 12% of all US
employment) with over $3.8 trillion in sales annually ($4.2 trillion if food sales are included).
Although the vast majority of all retail stores in the U.S. (approximately 90%) are single-store
businesses, however these single-store businesses account for substantially less than half of all
retail sales. Thus the majority of the revenue in the retail industry is generated by companies
that run retail "chains". The biggest retailer in the world is Wal-Mart, which generated over
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$344 billion in revenue in its last fiscal year. The growth of the industry is shown in the graph
below.

Fig 1. Growth of Retail Industry in US

Wal-Mart is by far the largest retailer (and company) in the U.S. and the world in terms of
revenue generated. The company operates a chain of discount wholesale stores that emphasize
incredibly low prices and efficiency that enables the company to offer such low prices. Wal-
Mart's successful business model has pushed down prices throughout the retail industry, forcing
companies to adapt their business models in order to effectively operate in the new landscape,
and forced small single-store businesses out of the markets which Wal-Mart enters.

Big box retail stores account for only a small percentage of the total number of stores in the
total 'General Merchandise Stores' sector in the US. In 2008 there were 35 big box retailers with
3,451 outlets. Despite this, the industry still generated revenue of approximately $335.0 billion
over the year which equates to more than half of total revenue in 'General Merchandise Stores'
sector in the US

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 Fig 2. Comparative Penetration of Organized Retail Sector

1.2.2 Indian Perspective:

The Indian retail industry is the fifth largest in the world. Comprising of organized and
unorganized sectors, India retail industry is one of the fastest growing industries in India,
especially over the last few years. Though initially, the retail industry in India was mostly
unorganized, however with the change of tastes and preferences of the consumers, the industry
is getting more popular these days and getting organized as well. With growing market demand,
the industry is expected to grow at a pace of 25-30% annually. The India retail industry is has
grown from Rs. 35,000 crore in 2004-05 to Rs. 109,000 crore by the year 2010.

Fig 3. Indian Retail Market

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The retail sector in India has a great long history and is very prominent as well. The major
traditional retail sectors include:

Traditional rural retail fairs are a very big attraction to foreign tourists. We have the Pushkar
fair in Rajasthan which brings in a lot of revenue both from domestic buyers and buyers from
abroad. In the Pushkar fair live stock like camels, horses, cows, goats, and sheep are sold as
well as bought. A range of exotic items are also available. The traditional items here are
handmade jewellry and other colorful memorabilia of Rajasthan.

Traditional family run convenience stores are too well established in India than to be wiped
out and besides there is uniqueness in the traditional items that represent the sub-continent. The
retail stores in India are essentially dominated by the unorganized sector or traditional stores.
Infact the traditional stores have taken up 98 percent of the Indian retail market. Now stores run
by families are primarily food based and the set up is as Kirana or the 'corner grocer' stores.
Basically they provide high service with low prices. If the stores are not food based then the
type of retail items available are local in nature.

The traditional family run convenience stores can take pride in the fact that the Kirana is the
most common outlet forms for the consumers. The tough competition for convenience stores is
coming from organized retail stores dealing in food items, like:

 Apna Bazaar
 Canteen stores
 Food World
 Subhiksha
 Food Bazaar

Modern retailing has entered India in form of sprawling malls and huge complexes offering
shopping, entertainment, leisure to the consumer as the retailers experiment with a variety of
formats, from discount stores to supermarkets to hypermarkets to specialty chains. However,
kiranas still continue to score over modern formats primarily due to the convenience factor.

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 Fig 4. Retail Formats available in India

The traditional grocers, by introducing self-service formats as well as value-added services such
as credit and home delivery, have tried to redefine themselves. However, the boom in retailing
has been confined primarily to the urban markets in the country. Even there, large chunks are
yet to feel the impact of organized retailing. There are two primary reasons for this. First, the
modern retailer is yet to feel the saturation' effect in the urban market and has, therefore,
probably not looked at the other markets as seriously. Second, the modern retailing trend,
despite its cost-effectiveness, has come to be identified with lifestyles.

The Indian Retail growth can be attributed to the several factors including

 Demography Dynamics: Approximately 60 per cent of Indian population below 30 years

of age.
 Double Incomes: Increasing instances of Double Incomes in most families coupled with
the rise in spending power.
 Plastic Revolution: Increasing use of credit cards for categories relating to Apparel,
Consumer Durable Goods, Food and Grocery etc.

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  Urbanisation: increased urbanisation has led to higher customer density areas thus
enabling retailers to use lesser number of stores to target the same number of customers.
Aggregation of demand that occurs due to urbanization helps a retailer in reaping the
economies of scale.
 Covering distances has become easier: with increased automobile penetration and an
overall improvement in the transportation infrastructure, covering distances has become
easier than before. Now a customer can travel miles to reach a particular shop, if he or
she sees value in shopping from a particular location.

Fig 5. Journey of Organized retail Industry in India

In the coming years it can be said that the hypermarket route will emerge as the most preferred
format for international retailers stepping into the country. At present, there are 50
hypermarkets operated by four to five large retailers spread across 67 cities catering to a
population of half-a-million or more. Estimates indicate that this sector will have the potential
to absorb many more hypermarkets in the next four to five years.

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List below shows retailers that have come with new formats:

Retailer Current New Formats. Experimenting with

Format
Shoppers' Department Quasi-mall
Stop Store
Ebony Department Quasi-mall, smaller outlets, adding
Store food retail
Crossword Large bookstore Corner shops
Piramyd Department Quasi-mall, food retail
Store
Pantaloon Own brand Hypermarket
store
Subhiksha Supermarket Considering moving to self service
Vitan Supermarket Suburban discount store
Foodworld Food Hypermarket, Foodworld express
supermarket
Globus Department Small fashion stores
Store
Bombay Aggregation of Kiranas
Bazaar
Efoodmart Aggregation of Kiranas
Metro Cash and carry
S Kumar's Discount store

1.2.3 Recent Trends Effecting Evolution And Growth:

 Increasing Importance of E-Commerce

In the past ten years the Internet has changed the landscape of the retail
industry. The Internet has enabled consumers to shop for and purchase goods
online from the comfort of their home. This type of E-Commerce has created
successful companies such as Amazon.com and eBay. Also, E-commerce has
added new dimensions to traditional retailers as nearly every major company
in the retail industry sells products through their own website (note that some
retailers choose to run E-commerce operations in-house while others
outsource the operations to E-commerce specialists). The profitable e-
commerce market has served as a launch pad for companies like GSI
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 Commerce (GSIC) that provide e-commerce services for retailers. These
companies design, create and manage e-commerce sales for retailers that do
not wish to run online sales in-house. E-commerce currently represents
approximately 2.7% of total retail industry revenue ($104 billion annually), a
number that has steadily grown in past years. As younger, Internet-savvy
customers mature and Internet-usage becomes more widespread over time
among consumers of all ages, E-commerce will become increasingly
relevant.

Product Cycles

One of the most influential growth factors for retailers is product cycles. In
many cases, newly innovated products (such as new flat-panel TVs or an
updated line of iPods are released with high prices to maximize profits early
on. Competition between consumer retailers and increased supply from
manufacturers drive down prices over time until each retailer makes little
profit by the end of a product's life cycle. How quickly product cycles mature
drives the profit a retailer makes. There are many product cycles co-
occurring at any given point in time, and these product cycles vary between
retail industry sub-sectors; for example, an important product cycle in
consumer electronics retail currently is flat panel HDTVs).

 Merger and acquisition activities in Indian market:

India witnessed a record number of M&A deals in the first half of 2006,
which were collectively worth USD 25.6 billion. A significant number of
deals have being carried out in the Indian retail sector in the past few months
in order to acquire a larger share in the growing domestic market and to
compete against the prospective global and domestic players. The table in the
next page shows some recent deals that have taken place in the Indian retail
sector:

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 Acquired/ JV Consideration
Nature of
Year Company/ Acquirer Stake
Business
Target (US$ million)
Retail
2005 Liberty Shoes Future group 51% 3
(Footwear)
Indus –
2005 League Future group Retail clothing 68% 5
Clothing
Deccan Leisure retail
2005 Odyssey India Chronicle chain (books, 100% 14
Holdings music, toys)
Books, music,
2005 Landmark Tata Trent 74% 24
accessories
TGI Friday’s
(a subsidiary
Bistro Restaurant
2006 of Carlson 25% N/A
Hospitality (Food retail)
Restaurant
World-wide)
Indus League
clothing Lingerie and 50%
Etam group,
2006 women’s wear 8
France
(Future group retailing (JV)
company)

1.3 Target customers / Users

1.3.1 Small Scale Retailers/ RURAL FOCUS :

 Mom-and-pop stores: they are family owned business catering to small
sections; they are individually handled retail outlets and have a personal
touch.
 Convenience stores: are located in residential areas with slightly higher
prices goods due to the convenience offered.

The traditional family run convenience stores serves the purpose of the
housewives who definitely wants to avoid traveling long distances to purchase daily
needs. The convenience factor in terms of items, among people in general can be
highlighted as follows:
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  Groceries
 Fruits
 Drug Store
 Necessary stationery

As such traditional family run convenience stores are here to stay and cannot be
oversized by the organized retail sector besides, it represents the variety of India.

1.3.2 Large Scale Retailers/ URBAN FOCUS :

Format Description The Value Proposition

Branded Exclusive showrooms either owned or Complete range available
Stores franchised out by a manufacturer for a given brand, certified
product quality
Specialty Focus on a specific customer need, carry most Greater choice to the
Stores of the brands available consumer, comparison
between the brands is
possible
Department Large stores having a wide variety of products, One stop shop catering to
Stores organized into different departments such as varied consumer needs
clothing, house wares, furniture, appliances,
toys etc.
Supermarkets Extremely large self- service retail outlets One atop shop catering to
varied consumer needs
Discount Stores offering discounts on retail price Low prices
Stores through selling high volumes and reaping
economies of scale
Hyper Mart Larger than a supermarket, sometimes with a Low prices, vast choice
warehouse appearance, generally located in available including
quieter parts of the city. services such as cafeterias
Convenience Small Self Service formats located in crowded Convenient location and
Stores urban areas extended operating hours
Shopping An enclosure having different formats of in Variety of shops available
Malls store retailers, all in one roof to each other

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1.3.3 Category Wise Target Customers

 Shopping malls: One of the biggest form of retail in India, malls offers
customers a mix of all types of products and services including entertainment
and food under a single roof.
 Target customers : These have varied shops and display immense
variety in choices hence they attract customers from all ages and
strata. The malls have now even come across as a recreational centre
for the Gen Y. It is found that frequent mall shoppers have higher
needs than others for ‗sense of belonging‘, ‗warm relationships‘, and
‗security‘. Their needs are also higher for ‗excitement‘. It is
hypothesized that needs for ‗self-fulfillment‘, ‗self-respect‘, and a
‗sense of accomplishment‘ are negatively related to mall-visit-
frequency.

 E-trailers: are retailers providing online buying and selling of products and
services. The e services caught pace earlier with many people getting
attracted to sites like
o Ebay
o Future Group
o Dell
o Make My Trip
o Bharat Matrimony
o Monster Jobs
 Target customers : These mainly target the people who prefer
convenience and are adaptive to new technology changes, though the
Indian mentality of consumers shows a liking for actually going and
purchasing the products still this sector is gradually gaining pace. The
e- booking for tickets (flights, trains, movies etc.) are getting very
common in urban India.

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 Discount stores: these are factory outlets that give discount on the MRP.
 Target customers : These stores are usually an attraction for the
youth and upper middle class families, who believe in travelling an
extra mile for buying discounted and branded clothes.

 Category killers: small specialty stores that offer a variety of categories.

They are known as category killers as they focus on specific categories, such
as electronics and sporting goods. This is also known as Multi Brand Outlets
or MBO's.
 Target customers : This usually targets the tech savvy youth of the
country who have are aware and want to avail the tremendous options
placed in front of them. E. g. Spice hotspot

 Specialty stores: are retail chains dealing in specific categories and provide
deep assortment. Mumbai's Crossword Book Store and RPG's Music World
are a couple of examples.
 Target customers : these are usually an attraction to kids who have a
very strong liking for music, video games, novels etc. Though it‘s the
upper middle class families only who intend taking their kids to such
stores. The ongoing piracy is the biggest threat to such specialty
stores.

 Departmental stores: are general retail merchandisers offering a variety of

quality products and services.
 Target customers : These stores because of their competitive prices
and availability of various brands attract women(of middle and upper
middle class families) who are always looking forward for a tradeoff
between quality and price. Because of the immense variety in choices
they now attract customers from all ages and strata.

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  Branded Stores : These are showrooms of a particular brand..
 Target customers : These stores have the products of only once
brand so target the customers who are brand conscious and brand
loyal. These can be usually seen in higher end brands as their
customers also serve the higher strata of society.

 Vending: it is a relatively new entry, in the retail sector. Here beverages,

snacks and other small items can be bought via vending machine.
 Target customers : These vending machines are mostly present at
office, college and other workplaces hence the target customers are
accordingly.

1.3.4 General Trends

Fig 6. Map of India’s economy class

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Most of the large scale retail shops are concentrated in the urban and
metropolitan India, seeking the aware and relatively wealthier families as target
customers. Though various discount options and competitive prices at many of
the retail shops are now trying to tap the middle class families for their monthly
grocery requirements.

The rural and the less developed cities still are customers to the local grocery
shops. As such traditional family run convenience stores are here to stay and
cannot be oversized by the organized retail sector besides, it represents the
variety of India.

In order to appeal to all classes of the society, retail stores would have to identify
with different lifestyles. In a sense, this trend is already visible with the emergence of
stores with an essentially `value for money' image. The attractiveness of the other
stores actually appeals to the existing affluent class as well as those who aspire to be
part of this class. Hence, one can assume that the retailing revolution is emerging
along the lines of the economic evolution of society.

Fig 7.
Spatial
distribution
of large
scale Retail
Stores in
India

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 Fig 7. Fastest Growing Formats in India

1.4 Related Industries

Fig 8. Fastest growing retail segments in India

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The large scale retail stores have created a WIN-WIN situation over the market. The malls
are giving a market to a diverse plethora of products, with both the companies and the
customers benefiting out of it. Some of the major benefitting industries include :

 Apparel Industry :
o Footwear, Leather, Jewelry, Textile & Clothing Industry:
Retail stores like Shoppers Stop and Pantaloons have clothes/accessories
of various brands like :
 Van Huesen
 Levi‘s
 Flying Machine
 Gili
 Peter England
 Arrow
 Louis Philippe
 Blackberry
 Reebok
 Nike
 And others
o Cosmetic Industry : Shoppers stop has a separate section for cosmetic
products all together to attract the female and now even a large portion of
male customers. Some of the common gainers are :
 Colorbar
 Versace
 Hugo Boss
 Charlie
 Calvin Klein
 Lakme etc.

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 Food Industry :
Most of the leading large and small food and sweet brands outlet can be found in
Malls and Food courts. Some of the common Companies benefitting are:
o Bikanerwala
o Haldirams
o Dominos
o Pizza Hut
o Mc Donald‘s
o Colonel‘s Kababs
o Sagar Ratna..etc
o
 Entertainment Industry :
To attract children and youth into the malls, they have come up with recreational
gaming centers and gyms. Some of them are :
o Blue O
o Ansal Plaza
o Gold Gym etc

 Music & Movie Industry :

With many of the multiplexes and music stores coming in Malls. This industry
earns a lion‘s share of its product from malls and music retail stores, some of
which are :
o PVR
o JAM
o Wave
o Music World
o Planet M etc.

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 Electronics Goods Industry :
Along with particular companies stores now there are small specialty stores that
offer a variety of categories. They are known as category killers as they focus on
specific categories, such as electronics and sporting goods. This is also known as
Multi Brand Outlets or MBO's. Examples include :
o Electronics Bazaar
o Spice Hotspot
o Nokia/Sony/Boss Showrooms in malls.

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 Chapter 2
Industry Perspective

2.1 Global Industry Competitors / Top Players :

The top retailers all over the world are:

Rank Retailer Home Country

1 Wal-Mart Store Inc. USA
2 Carrefour Group France
3 The Home Depot Inc. USA
4 The Kroger Co. USA
5 Royal Ahold Netherlands
6 Metro AG Germany
7 Target Corporation USA
8 Albertson’s Inc. USA
9 Sears, Roebuck and Co. USA
10 Kmart Corporation USA

Wal-Mart Stores, Inc. is an American public corporation that

runs a chain of large, discount department stores. It is the
world's largest public corporation by revenue, according to the 2007 Fortune Global 500.
Founded by Sam Walton in 1962, it was incorporated on October 31, 1969. It opened its home
office and first distribution center in Bentonville, Arkansas. It had 38 stores operating with
1,500 employees and sales of $44.2 million .Wal-Mart is the largest grocery retailer in the
United States, with an estimated 20% of the retail grocery and consumables business, as well
as the largest toy seller in the U.S., with an estimated 22% share of the toy market. Wal-Mart is

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the largest private user of electricity in the US. Owns a subsidiary electric company in Texas,
and will possibly move into the power business. It is also undertaking a number of
environmentally conscious initiatives to reduce energy usage and waste. Wal-Mart operates in
Mexico as Walmex, in the UK as ASDA, and in Japan as Seiyu. It has wholly-owned operations
in Argentina, Brazil, Canada, Puerto Rico, and the UK. Wal-Mart's investments outside North
America have had mixed results: its operations in South America and China are highly
successful, but it sold its retail operations in South Korea and Germany in 2006 after sustained
losses. On September 12, 2007, Wal-Mart introduced new advertising with the slogan, "Save
Money Live Better," replacing the "Always Low Prices, Always" slogan, which it had used for
the previous 19 years. Global Insight, which conducted the research that supported the
ads, found that Wal-Mart's price level reduction resulted in savings for consumers of $287
billion in 2006, which equated to $957 per person or $2,500 per household

Carrefour SA is a French international hypermarket chain, with a

global network of outlets. The group was created by Marcel Fournier and
Denis Deffore in 1957. It is the second largest retail group in the world
in terms of revenue after Wal-Mart. Carrefour operates mainly in Europe, Brazil, Argentina,
Dominican Republic and Colombia, but also has shops in North Africa and Asia. Carrefour
means cross-road in French. Carrefour is active in many types of retail distribution:
hypermarkets, supermarkets, Discount Store, Grocery Stores, Cosmetics, and Cash & Carry.
Recently The $130 billion French retail Carrefour has set up a 100 percent-owned arm to enter
the wholesale merchandise business in India and will opt for the franchising route to open
multi-brand retail stores in the country, Carrefour WC&C India will also enter these areas
where the Indian franchisee can get the same technical expertise that go into running the retail
trade stores of the French company across the globally.

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 The Kroger Co. is an American retail supermarket chain and parent company,
founded by Bernard Henry Kroger in 1883 in Cincinnati, Ohio. It reported over
US$66 billion in sales during fiscal year 2007 and is currently the second-
largest grocery retailer in the country by volume and third-place general retailer in
the country, with Wal-Mart and The Home Depot filling slots one and two, respectively. Kroger
operated, either directly or through its subsidiaries, 2,500 grocery stores, 579 of which had fuel
centers, nearly 800 convenience stores, 400-plus jewelry stores, and 42 manufacturing facilities
in 32 states; we employ a growing family of more than 290,000 associates coast-to-coast and
presently Kroger is active in many other Retail Distribution like Bakery, Banking, beer, dairy,
wine etc…. The slogan of Kroger co. is ―Right Store. Right Place‖. Kroger‘s recently launched
Perishable Donations Partnership will bring critically needed perishable food items into the
food bank process. The company-wide program will increase the number of stores in the
Kroger family that donate safe, perishable food to Second Harvest food banks that are equipped
to safely handle and distribute fresh food. Kroger‘s goal is to donate 50 million pounds
of nutritious, fresh food across the country.

The retail industry can be divided into a number of smaller sectors or "sub-industries". Some
of these have been discussed below with suitable examples.

Department Stores

There are those who continue to insist that the ―Age of Department Stores‖ is nearing its
end. In the past year, West Coast operators Mervyns and Gottschalks became extinct, and
Boscov‘s is in survival mode. Many chains are closing stores, laying off employees and
cutting costs anywhere they can.
Revenues are in decline; segment-wide, year-over-year same-store sales declined by double
digits. There are only 10 department store chains generating as much as $3 billion a year in
annual sales, and as a group their revenues total about $136 billion — one-third of Wal-
Mart‘s worldwide sales.

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  Wal-Mart
 Target
 Costco
 Sears
 Macy's
 Kohl's
 J.C. Penney
 Saks

Off-Price Retailers

Off-price retailers purchase retail merchandise directly from suppliers, taking advantage
of manufacture overruns and canceled orders to acquire retail goods at an opportunistic
discount. They also utilize "packaway", items purchased at discount at the end of a
season, then held in inventory until the next appropriate season for sale. The off-price
retail sector as a whole is growing faster than most other retail segments, with
a CAGR greater than 10% over the past five years.

 TJ Maxx and Marshall's

 Ross]

Apparel

With few exceptions, specialty store apparel retailers are going through another tough
year. The ―why‖ is no surprise: ―The largest shares of female shoppers are engaging in
ways to limit spending‖ on apparel, shoes and accessories, says Kelly Tackett, senior
consultant with Columbus, Ohio-based market research firm Retail Forward. ―Many

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women also are shifting to less expensive brands, styles and fabrics and changing how
and where they shop.‖
Retail Forward‘s ShopperScan survey found that nearly half (46 percent) of consumers
are ―shopping retailers across the soft goods sector less often than a year ago.‖
A glance at the apparel Power Players confirms these findings: Gap sales were down 7.8
percent; Limited — which still sells more apparel than H&BC — was off 10.8 percent.
There are exceptions to this gloomy scenario, including off-pricer Ross Stores, where
sales rose 8.6 percent last year, and Aéropostale, Forever 21 and Urban Outfitters remain
destinations where 18- to 25-year-old shoppers spend like they can‘t spell recession.

 The Gap
 Abercrombie & Fitch
 Guess? (GES)
 American Apparel (APP)

Some other examples from various sectors include:

Consumer Electronics Office Supplies

 Best Buy  Staples

 Circuit City  OfficeMax
 Radioshack  Office Depot
 Gamestop

Home Improvement Pharmaceuticals

 Home Depot  CVS

 Lowe's  Walgreen's
 Rite Aid
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Home Products Footwear

 Bed Bath & Beyond  Foot Locker

 Pier 1 Imports  Finish Line

Sporting Goods Jewelry

 Dick's Sporting Goods  Tiffany

 Cabela's Academy  Signet

2.2Global Industry functioning:

With the advent of technology, the working of the retail industry is almost similar everywhere.
The 3 broad categories into which functioning of any retail firm can be divided are:

 Customer interfacing System

 Operation Support Systems
 Strategic Decision Support System

Strategies Adopted By World Leaders:

Dependence on Imports from China and Vulnerability to Currency Rate Changes

Many big retailers depend heavily on China for manufacturing its merchandise- Wal-Mart
purchases approximately $27 billion of its inventory directly from China each year. Additionally,
many of the company's suppliers like Mattel (MAT) manufacture their products in China, which
in turn are sold in Wal-Mart stores. Wal-Mart's imports from China accounted for 15% of total
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U.S. consumer products imports in 2007, and accounted for 11% of the total U.S. trade deficit
with China between 2001 and 2006. Wal-Mart's imports are so substantial in fact, that if Wal-
Mart were a country, it would be China's sixth-largest export market. By outsourcing to China,
Wal-Mart is able to secure lower costs of inventory, which the company in turn passes on to low
prices for customers.

However, as a result of its dependency on Chinese manufacturing, these retailers are vulnerable
to fluctuations in the value of the dollar compared to the Chinese Yuan. In February 2010,
exchange rate was $1 = 6.8 Yuan, which was down from record levels of $1 = 8 Yuan in May
2006. If, for example, the dollar weakens compared to the Yuan, the price of Wal-Mart's
Chinese imports would rise. As a result, the company would either have to raise its prices or
would have to cope with narrowed gross margins, reducing its profitability. Additionally, the
company is vulnerable to adverse legislation, such as higher tariffs, that would raise the cost of
its Chinese imports.

Retailers Use Large Size to Maintain Low Cost Leadership

Wal-Mart is the largest retailer in the world by sales, with almost 50% higher sales than its 7
closest competitors combined, including Target (TGT), Sears Holdings (SHLD), and Macy‘s. In
fact, 7.5 cents of every dollar spent in any retail store in the U.S. (excluding auto parts stores) is
earned by Wal-Mart. The retail giant also earns 21 cents of every dollar spent on groceries in the
U.S., making Wal-Mart the most dominant retail and grocery chain in the world.

Wal-Mart uses its enormous size and buying power to pressure its suppliers into extremely low
prices, offering orders of high volumes of merchandise in exchange for low prices. Wal-Mart
then passes on these savings to its customers. Since many suppliers depend on Wal-Mart for a
majority of its business, companies often give in to Wal-Mart's cost cutting demands, narrowing
their margins or even redesigning their product offerings. For example, Dial Corporation sells
28% of its manufactured goods to Wal-Mart annually, and would have to double its sales to its
next nine customers to replace sales to Wal-Mart.

Wal-Mart's bargaining power has helped the company maintain its low price leadership despite
fluctuating commodities prices. For example, although prices of gasoline, grain, and dairy
29
products have increased significantly during 2007 and 2008, Wal-Mart has actually reduced its
prices on many food items by about 30% in 2008. Wal-Mart achieved this by pressuring
companies like General Mills (GIS) to shave its costs by implementing redesigns of its products
and packaging.

Too Many Stores Means Cannibalization Reduces Comparable Store Sales

The retailers long term sales and income growth depends, in large part, on the company‘s ability
to open new stores and expand into new markets. However, large sized stores run the risk of
cannibalizing its own sales figures, effectively competing with itself for market share. For
example, if Wal-Mart builds a store relatively close to an already existing store, the new store
might take away customers from the old store (a reason could be convenience) thus hampering
comparable store sales -- this is cannibalization. In 2009, Wal-Mart's comparable store sales
increased 3.5%, compared to 1.6% in 2008. The company attributes cannibalization for an
approximate 1.1% decrease of comparable store sales as the company had oversaturated the
domestic market with stores.

As a result of overexpansion domestically, Wal-Mart has transitioned to focusing on

international expansion to markets with little or no presence of Wal-Mart stores. For example,
75% of new stores in 2009 were opened internationally, with the most growth occurring in
Mexico, China, and Central America. Additionally, about 76% of Wal-Mart's planned stores for
2010 will be outside of the United States.

Tailoring Merchandise Offerings by Region

Many companies began a three-year plan to make its stores more relevant to customers and shift
away from its previous single-strategy model. The first phase of the plan involved the use of
several experimental stores to study specific customer demographics, such as Hispanics, baby
boomers, women, urban populations, and more affluent customers. The second year of the plan
falls in line with the company's remodeling plans, and largely involves changes in merchandise
assortment and store experience. This movement towards tailoring merchandise offerings by

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region, or even by store, is a marked change from Wal-Mart's previous, one-size-fits-all strategy.
This new model may work to bolster Wal-Mart's lackluster same store sales figures.

Low-Income Customers Turn to Stores in Weakened Economy

Major discount store‘s main customer base has an average annual income of $35,000, versus the
overall U.S. median of $48,200. Many companies found success using its price leadership to take
control of the low-end market and grow. However, its reliance on a poorer demographic makes
the company vulnerable to the same macroeconomic trends that threaten its low-income
customers, including rising health care costs, energy costs, interest rates, and a softening real
estate market. These macro factors impact a greater percentage of the retailers‘ customer's
income than they do the average American's, affecting the customer's buying power and,
therefore, the company's earning potential. Conversely, because of its position as a low-price
provider, many value-driven consumers navigate to these stores during tough economic times.
Programs like Wal-Mart's $4 Prescription Program attract consumers seeking a break from their
economic woes. Launched in September 2006, Wal-Mart offers $4 prescriptions of over 350
generic medications at over 4,000 Wal-Mart locations worldwide. As of May 2008, Wal-Mart's
$4 Prescription Program has saved its customers an estimated $1 billion. Wal-Mart's low price
proposition is particularly crucial because of lower levels of consumer dispensable income
following the 2007 Credit Crunch. As a result, consumers turned to cheaper options for their
shopping needs. For example, comparable store sales of Wal-Mart stores increased by 3.5% in
2009, while comparable store sales at rival competitor Target declined 0.4% during the same
period.

Legal risks and public perception

Many retailers have faced considerable pressure from a number of politicians, labor groups, and
lawsuits, attacking the company on issues such as employee wages and benefits, discrimination,
and negatively impacting communities and small business. These actions, which are often well-
reported by the media, affect the company‘s reputation, which in turn could affect the company's
ability to expand into new areas or attract new customers. The most prominent active lawsuit is

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Dukes v. Wal-Mart Stores, Inc., an $11 billion class action suit (the largest civil rights class
action suit in US history) accusing Wal-Mart of discrimination against 1.6 million female
employees. The lawsuit began in 2000 and as of July 2009 is still ongoing.

2.3 Indian Industry Competitors / Top Players

Big Bazaar is a chain of department stores in India,

currently with 75 outlets. It is owned by the Pantaloon
Retail India Ltd, Future Group. It works on the same
economy model as Wal-Mart and has considerable success in many Indian cities and small
towns. The idea was pioneered by entrepreneur Kishore Biyani, the CEO of Future Group.
Currently Big Bazaar stores are located only in India. It is the biggest and the fastest growing
chain of department store and aims at being 350 stores by the end of year 2010.
It offers all types of household items such as home furnishing, utensils, fashion products etc. It
has a grocery department and vegetable section known as the Food Bazaar and its online
shopping site is known as FutureBazaar.com. The real estate fund management company
promoted by the Future Group expects to develop more than 50 projects across India covering a
combined area of more than 16 million sq. ft. On April 1 2007, Big Bazaar had to shut its outlets
in Mumbai as the 120 retrenched employees called a strike with the support of Bhatia Kamgar
Sena (the trade Union wing of Shiv Sena). Later the management agreed to reinstate the sacked
workers

Pantaloon Retail India Ltd, is India‘s leading retail company with

presence across food, fashion, home solutions and consumer
electronics, books and music, health, wellness and beauty, general
merchandise, communication products, E-tailing and leisure and
entertainment.
Headquartered in Mumbai (Bombay), has over 450 stores across 30 cities in India and employs
over 18,000 people. Pantaloon was founded by Mr. Kishore Biyani. The company owns and
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manages multiple retail formats catering to a wide cross-section of the Indian society and its
width and depth of merchandise helps it capture almost the entire consumption basket of the
Indian consumer.
Founded in 1987, as a garment manufacturing company, Pantaloon Retail forayed into modern
retail in 1997 with the opening up of a chain of department stores, Pantaloons. In 2001, it
launched Big Bazaar, a hypermarket chain, followed by Food Bazaar, a supermarket chain. It
went on to launch Central, a first of its kind, seamless mall located in the heart of major Indian
cities. Some of its other formats include, Collection I (home improvement products), E-Zone
(consumer electronics), Depot (books, music, gifts and stationeries), all (fashion apparel for plus-
size individuals), Shoe Factory (footwear) and Blue Sky (fashion accessories). It has recently
launched its retailing venture, futurebazaar.com.
In India's chaotic markets, Kishore Biyani is the unchallenged king of retail. He has the knack of
catching rivals off-guard and striking where it hurts most. And now that he's set himself the task
of retaining control of the largest retail space in the country, he won't let anyone - suppliers or
international promoters included - catch him slacking. The latest to face the wrath of the 43-year-
old is South African hypermarket Shop rite, which opened shop in Mumbai last month through a
franchise agreement with local company Normal Lifestyle.

The hypermarket began retailing products from big boys Nestle,

Unilever and Procter & Gamble at consumer discounts of 20-30 per
cent, lower than even Biyani's purchase prices in his Big Bazaar
and Food Bazaar stores. Reliance Fresh is the retail chain division of Reliance Industries of
India which is headed by Mr.Mukesh Ambani. Reliance has entered into this segment by opening
new retail stores into almost every metropolitan and regional area of India. Reliance plans to
invest Rs 25000 cores in the next 4 years in their retail division and plans to begin retail stores in
784 cities across the country. The Reliance Fresh supermarket chain is RIL‘s Rs 25,000 crore
venture and it plans to add more stores across different g, and eventually have a pan-India
footprint by year 2011. The super marts will sell fresh fruits and vegetables, staples, groceries,
fresh juice bars and dairy products and also will sport a separate enclosure and supply-chain for

33
non-vegetarian products. Besides, the stores would provide direct employment to 5 lakh young
Indians and indirect job opportunities to a million people, according to the company. The
company also has plans to train students and housewives in customer care and quality services
for part-time jobs.
Reliance Fresh recently (24th Jan, 2007) opened several "Fresh" outlets in Chennai, New Delhi,
Hyderabad, Jaipur, Mumbai, Chandigarh, Ludhiana increasing its total store count to 40.
Reliance is still testing its retail concepts by controlled entry beginning in the southern states

Subhiksha is an Indian retail chain with more than 760 outlets

selling groceries, fruits, vegetables, medicines and mobile
phones. It was started and is managed by Mr. R.
Subramaniam, IIM Ahmedabad alumni. He also plans to invest Rs.500 crore to increase the
number of outlets to 2000 across the country by 2009.
Derived from the Sanskrit word, Subhiksham or "giver of all things good", It opened its first
store in Thiruvanmiyur in Chennai in March, 1997 with an investment of about Rs. 5 lakh. The
retail chain has seen a considerable growth by offering goods at cheaper rates and thereby
increasing its customer base. It is also dubbed as India's largest retail chain. Vision to deliver
consistently better value to Indian consumers, has guided Subhiksha to deliver savings to all
consumers on each and every item that they need in their daily lives, 365 days a year, without
any compromise on quality of goods purchased.
Subhiksha now has the pan Indian presence with stores across Delhi, UP, Punjab, Hariyana,
Gujarat, Maharashtra, AP, Karnataka and TN. It has recently commenced operation in Kerala
also. Today, it is a multi-location, professionally managed and vibrant organization. Subhiksha
now has even opened Specialized Mobile shops called Subhiksha Mobile where mobiles are sold
at a discounted price
Subhiksha is India's largest supermarket, pharmacy and telecom chain. Started in 1997 as a
single store entity in South Chennai, it is now present nationally across 1000 outlets and spread
across more than 90 cities. You can now locate the nearest Subhiksha store in your area with the
Store Locators. ICICI Venture Capital has a 24% stake in Subhiksha.

34
 Food world is a chain of supermarket stores. It was started in
May 1996 as a division of Spencer & Co, a part of the RPG Group. In August 1999 it became a
separate company. Currently it operates 89 stores in Bangalore, Chennai, Coimbatore, Erode,
Hyderabad, Kodai, Pondichery, Pune, Secunderabad, Salem, Trivandrum and Vellore

DLF Retail Developers Ltd. is one of the troikas of the DLF

Group. Besides being India's largest real estate developer, DLF is
also of the leaders in innovating shopping malls in India. It caught
public eye when it launched the 2, 50,000 sq ft. shopping mall in Gurgaon. It has brought a
dramatic change in the lifestyles and entertainment with its City Centers and DT Cinemas. DLF
has plans to invest Rs. 2000-3000 crore in all the emerging areas from metros to class cities in
the next two years. Till last year the company was involved in building 18 malls out of which 10
were in the NCR region. Future plans of DLF involve opening up of 100 malls (specialty malls,
big box retailing and integrated malls) across 60 cities in next 8-10 years. They are slowly
transforming into 'lease' and 'revenue share' models.
Local players like ITC, the A.V. Birla Group and Tatas have given the hints to enter organized
retail. France‘s Carrefour SA and Britain‘s Tesco too were recently in news for their future plans
to explore the Indian retail market

Bharti Retail, a wholly owned subsidiary of Bharti Enterprises. Has

announced two joint ventures (JV)with the international retailing
behemoth, Wal-Mart. The first JV ensures cash and carry business, in
which 100 percent FDI is permitted and it can sell only to retailers and distributors. The second
JV concerns the franchise arrangement. Sunil Mittal, Chairman of the Bharti Group assured that
the ventures will use ―low prices every day‖ and ―best practices for the satisfaction of the
customer‖. Processed foods and vegetables will be delivered by Bharti Field Fresh, Bharti's JV
with Rothschild. Bharti Retail aims to foray every city with a population exceeding 1 million. It
has plans to come up with an investment of more than $2 billion in convenience stores,
35
supermarkets and hypermarkets spread over an aggregate 10 million sq. ft. The expansion drive
looks ambitious but analysts are worried that Bharti may face stiff competition from Pantaloon
and Reliance as they too have sanguine plans to flood the markets with thousands of retail outlets
in the coming five years. Bharti Telecom also has plans to offer all its fixed and mobile telecom
products and services from a single window to the SMB (Small and Medium Business)
enterprises under the Bharti Infotel division...

Lifestyle is part of the Landmark Group, a Dubai-based retail

chain. With over 30 years‘ experience in retailing, the Group has become the foremost retailer in
the Gulf. Positioned as a trendy, youthful and vibrant brand that offers customers a wide variety
of merchandise at exceptional value for money, Lifestyle began operations in 1998 with its first
store in Chennai in 1999 and now has 13 Lifestyle stores, 5 Home Centers and 1 Baby shop store
across Chennai, Hyderabad, Bangalore, Gurgaon, Delhi, Mumbai and Ahmedabad.
Business World-IMRB Most Respected Company Awards Survey has rated Lifestyle as the Most
Respected Company in the Retail Sector in 2003 and 2004. Lifestyle has also been awarded the
ICICI-KSA Technopak Award for Retail Excellence in 2005, the Reid & Taylor Retailer of the
Year Award for 2006 and more recently, the Lycra Images Fashion Award for the Most Admired
Large Format Retailer of the Year in 2006

The foundation of Shopper's Stop was laid on October 27, 1991

by the K. Raheja Corp. group of companies Shoppers‘ Stop aims
to position itself as a global retailer. The company intends to bring
the world‘s best retail technology, retail practices and sales to India.
Currently, they are adding 4 to 5 new stores every year with an immense amount of expertise and
36
credibility, Shopper's Stop has become the highest benchmark for the Indian retail industry
Shopper's Stop in the only retailer from India to become a member of the prestigious
Intercontinental Group of Departmental Stores (IGDS).
With its wide range of merchandise, exclusive shop-in-shop counters of international brands and
world-class customer service, Shoppers‘ Stop brought international standards of shopping to the
Indian consumer providing them with a world class shopping experience. The stores offer a
complete range of apparel and lifestyle accessories for the entire family. From apparel brands
like Provogue, Color Plus, Arrow, Levi‘s, Scullers, Zodiac to cosmetic brands like Lakme,
Chambor, Le Teint Ricci etc., Shoppers‘ Stop caters to every lifestyle need. Shoppers' Stop
retails its own line of clothing namely Stop, Life, Kashish, Vettorio Fratini and DIY. The
merchandise at Shoppers‘ Stop is sold at a quality and price assurance backed by its guarantee
stamp on every bill. Their motto: ―We are responsible for the goods we sell‖.

Vishal Mega Mart is one of fastest growing retailing groups in

India. Its outlets cater to almost all price ranges. The showrooms
have over 70,000 products range which fulfills all your household
needs, and can be catered to less than one roof. It is covering about
1996592 lac sq. ft. in 18 states across India. Each store gives you international quality goods and
prices hard to match. The cost benefits that is derived from the large central purchase of goods
and services is passed on to the consumer the group had a turnover of Rs. 1463.12 million for
fiscal 2005, under the dynamic leadership of Mr. Ram Chandra Aggarwal. The group had of
turnover Rs 2884.43 million for fiscal 2006 and Rs. 6026.53 million for fiscal 2007.the group‘s
prime focus is on retailing. The Vishal stores offer affordable family fashion at prices to suit
every pocket.

Welspun Retail Limited (W.R.L.) was established in 2003 as a part of

Welspun Group, one of the fastest growing business conglomerates in
India. Welspun is a U.S. $1 billion group, into diverse businesses,

37
industries, regions and has six companies under the umbrella brand. Our International Home
Textiles Company; Welspun India Limited (W I L) launched its Indian retail division, WRL with
an aim to capture the Home Textiles market in 2003. The Retail brands, SPACES- Home &
Beyond has carved its niche with its fashion driven model in the country's major metros, while
Welhome targets a larger audience with its value for money model. The turnover of the Retail
division stands at 100 crore, expected to double in the next 5 years

Key Differentiating Attributes

 W.R.L. is the first Retailer of soft furnishing for "Home" in India.

 W.R.L. has two models that cater to both, the aspiration clientele and the value for money
conscious clientele.

 Launched Spaces -Home & Beyond and Welhome (Welspun Factory Outlet) in the same
year.

 Phenomenal growth anticipated in FY 2007-08.

 Design Studio ranks amongst the best in the country.

 Panel of International Designers for the new collections.

 Offer specialized products at affordable prices, Bed sheets starting at Rs. 199, towels starting
at Rs. 79 and Curtains starting at Rs. 99

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 Trent is the retail arm of the TATA group. Started in
1998, Trent operates Westside, one of the many growing
retail chains in India. The foresight of the TATA Group, which invested in retail relatively
early, is paying high dividends as retail is one of the booming sectors in India. The company has
a turnover of Rs. 357.6 crores (FY 2005-2006) and currently operates 22 stores in the major
metros and mini metros of India. An international shopping experience, a perception of values,
and offering the latest styles, has created a loyal following for Westside's own brand of
merchandise. Westside was named the 'Most Admired Large Format Retail Chain of the Year' by
the Lycra Images Fashion Awards 2005.Westside operates stores in Mumbai, Ahmedabad,
Bangalore, Delhi, Chennai, Kolkata, Hyderabad, Pune, Surat, Vadodara, Indore, Noida,
Gurgaon, Ghaziabad, Mysore, Jaipur, Lucknow, Nagpur.

2.4 Industry functioning in India

The basic model of functioning in India is same to the one being followed abroad. One of the
greatest influencers in the growth and development of the Retail industry in India is the
Technology boom, which makes the functioning process relatively simpler, cheaper and less time
consuming.

Over the years, as the consumer demand increased and the retailers geared up to meet this
increase, technology evolved rapidly to support this growth. The basic jobs, hardware & software
tools that have now become almost essential for retailing can be divided into 3 broad categories,
as shown below. All these categories need to be supplemented with an accordingly trained
manpower to allow proper execution

Customer Interfacing Systems

 Bar Coding and Scanners

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 Point of sale systems use scanners and bar coding to identify an item, use pre-stored data
to calculate the cost and generate the total bill for a client. Tunnel Scanning is a new
concept where the consumer pushes the full shopping cart through an electronic gate to
the point of sale. In a matter of seconds, the items in the cart are hit with laser beams and
scanned. All that the consumer has to do is to pay for the goods.

 Skill Set and Resource Requirement: The back end of these systems needs to be
handled by IT companies, which device the integrated system at the hardware and
software level. The front end however requires cheap labour with a basic
knowledge of computers. The can be trained on using the software and usually do
the mechanical work.

 Internet

Internet is also rapidly evolving as a customer interface, removing the need of a

consumer physically visiting the store.

 Skill Set and Resource Requirement: The back end of these systems needs to be
handled by web development based IT companies, which have to take care of the
online security of the entire payment process. There needs to be coordination with
the banks of whose credit card acceptance.

 Payment

Payment through credit cards has become quite widespread and this enables a fast and
easy payment process. Electronic cheque conversion, a recent development in this area,
processes a cheque electronically by transmitting transaction information to the retailer
and consumer's bank. Rather than manually process a cheque, the retailer voids it and
hands it back to the consumer along with a receipt, having digitally captured and stored
the image of the cheque, which makes the process very fast.

40
  Skill Set and Resource Requirement: The back end of these systems needs to be
handled by IT companies, which device the integrated system at the hardware and
software level. The front end however requires cheap labour with a basic
knowledge of computers. The can be trained on using the software and usually do
the mechanical work.

Operation Support Systems

 ERP System

Various ERP vendors have developed retail-specific systems which help in integrating all
the functions from warehousing to distribution, front and back office store systems and
merchandising. An integrated supply chain helps the retailer in maintaining his stocks,
getting his supplies on time, preventing stock-outs and thus reducing his costs, while
servicing the customer better.

 Skill Set and Resource Requirement: The decision making process in the
supply chain management is to be made by a Manager, who knows about
operations and supply chain management. A hierarchy of managers can also be
maintained for very large stores, with every manager taking care of his/her
department separately. Though the actual carrying of goods and placing in stack
requires less skilled labour, as their work requires just a mechanical input.

 CRM Systems

The rise of loyalty programs, mail order and the Internet has provided retailers with real
access to consumer data. Data warehousing & mining technologies offers retailers the
tools they need to make sense of their consumer data and apply it to business. This, along
with the various available CRM (Customer Relationship Management) Systems, allows
the retailers to study the purchase behavior of consumers in detail and grow the value of
individual consumers to their businesses.
41
  Skill Set and Resource Requirement: The decision making process in the CRM
is to be made by a Manager, who specializes in marketing and CRM. A hierarchy
of managers can also be maintained for very large stores, with every manager
taking care of his/her department separately.

 Advanced Planning and Scheduling Systems

APS systems can provide improved control across the supply chain, all the way from raw
material suppliers right through to the retail shelf. These APS packages complement
existing (but often limited) ERP packages. They enable consolidation of activities such as
long term budgeting, monthly forecasting, weekly factory scheduling and daily
distribution scheduling into one overall planning process using a single set of data.

Leading manufacturers, distributors and retailers and considering APS packages such as
those from i2, Manugistics, Bann, MerciaLincs and Stirling-Douglas.

 Skill Set and Resource Requirement : The systems need to be analyzed and
worked on by the Mangers at every level of the hierarchy. This aims at a
continuous process and is the life line of business. The lower level staff is
supposed to work on the recommendation suggested by managers after thoroughly
going through the APS.

Strategic Decision Support Systems

 Store Site Location

Demographics and buying patterns of residents of an area can be used to compare various
possible sites for opening new stores. Today, software packages are helping retailers not
only in their locational decisions but in decisions regarding store sizing and floor-spaces
as well.

42
  Skill Set and Resource Requirement: The store site locations are mainly a
concern of the Board or the top Management in the industry. A new store needs a
lot of resource allocation and legal obligations besides taking into consideration
the consumer needs. These are very strategically driven decisions and need a great
level of expertise, brainstorming and mutual cooperation of various departments
like finance, marketing, operations etc.

 Visual Merchandising

The decision on how to place & stack items in a store is no more taken on the gut feel of
the store manager. A larger number of visual merchandising tools are available to him to
evaluate the impact of his stacking options. The SPACEMAN Store Suit from AC
Neilsen and ModaCAD are example of products helping in modeling a retail store design.

Skill Set and Resource Requirement: The decision making process needs a
great deal of innovation so has to be handled by a manager specializing in
Consumer Behavior and there needs to be immense coordination with the
operations manager as well. The decisions made should be reviewed by the board
as it gets difficult to change the basic structure of the store once laid down.

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 Chapter 3

Functional Perspective and Economic Impact

3.1 Functional Perspective

The retail industry is a people as well as technology intensive industry.

Technology dependence

Retailing is a ―technology-intensive" industry. It is a well-known fact that the retail industry

always works on razor thin margins and the key to survival lies in optimization of resources both
in space and time dimensions as well as maximization of customer satisfaction. Successful
retailers today work closely with their vendors to predict consumer demand, shorten lead times,
reduce inventory holding and ultimately save cost. Access to timely and even real-time
information to a wide variety of channel and trading partners, sales personnel, line managers,
store managers etc. is the key to achieving this. Over the years as the consumer demand
increased and the retailers geared up to meet this increase, technology evolved rapidly to support
this growth. IT is technology that will help the retailers to score in such fierce competition. There
are hardware and software tools that have now become almost essential for retailing. Consumers
have come to expect more value and higher service levels. As a consequence, the technology
continues to grow and retailers search for ways to measure technical business value and to
balance the effective utilization of the technical resource. Retailers want to get more value out of
technologies and ensure they are spending their limited resources in ways that improve their over
al l offer to the customer. Technology has proven to be a competitive weapon in retail, which is a
dramatic shift from a decade ago. In response, retailers generally need to become more
disciplined in managing the IT function. Completing and delivering IT projects on time and on
budget is overwhelming enough without the project team considering their project‘s
interdependencies with other business initiatives and corporate goals.

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Technology has transformed the buying behavior of customers everywhere. Technology in the
store is all moving toward integration and more and more savvy customers. POS is undergoing
major changes because of broadband access, the need and ability for inventory visibility,
customers ordering on line, returns and pick-up in the store and also the movement toward an
ASP (application service provider) model.

Some of the recent trends shown are :

• Communication with customer‘s through media cart and new ways of marketing and
technology such as Text messages.

• Use of RFID :
o RFID helps improve inventory management RFID,
o Improving customer service
o Boosting customer loyalty
• SMART SHOPPING CARTS : Smart shopping carts have been around in one form or
another for about 20 years. The original idea was to include a bar code scanner on the
carts so shoppers could circumvent the checkout line. Then the focus shifted to
marketing. Smart shopping carts sporting book-sized computers that appeared in two
Safeway stores in California in 2002 required a customer to swipe his or her Safeway
card at which point the cart's brain would access the customer's shopping history. The
cart would then display four grocery items at sales prices available to them exclusively. It
also offered a guide to the customer's most frequently purchased items and, as the on-
board computer tracked the cart's movement down the aisles, radio frequency ID (RFID)
chips would prompt the processor to notify the customer of sale items and appropriate
promotions.
• PLASMA SCREEN TVs : Since the '70s, select supermarkets have been using in-store
TV programming (usually cooking demonstrations) to move product, but in the past five
years or so, in-store TV networks have popped up at Wal-Mart, Target and Borders,
among other places. It's easy to see the appeal: A captive audience in buying mode.

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• BI-DIRECTIONAL INFRARED SENSORS : In 2008, many analysts agree, there will
likely be some sort of industry standard metric for in-store media. That's thanks to the
efforts of Nielsen Co., in conjunction with The In-Store Marketing Institute and
P.R.I.S.M., a consortium of retailers, marketers and media agencies, measured store
traffic in 160 stores this year with bi-directional Infrared sensors, which sit on store
shelves. The technology, which has been around since the '70s, measures raw numbers
and is supplemented by old fashioned head counts. So far, it's the best approach. GPS
devices on shopping carts did not work.
• CELL PHONES : Using mobile phones to alert shoppers about complementary items,
sales and as a vehicle for coupons is a very attractive option for retailers. Partially, that's
because it's a lot cheaper than, say, a smart shopping cart. Most shoppers already have
cell phones, so that limp its the back-end investment. Third party companies are also
rushing in with solutions.
• ELECTRONIC SHELF LABELING Despite the inventory-clearing advantages of a store
sale, a retailer still takes in on the chin when it comes to the bottom line. In addition to
losing out on potential revenue, hours of employees' time are taken up painstakingly
changing prices on shelves (prices that usually have to get changed back a few days
later).
• CREDIT CARDS : Payment Payment through credit cards (plastic money) has become
quite widespread and this enables a fast and easy payment process. Electronic cheque
conversion, a recent development in this area, processes a cheque electronically by
transmitting transaction information to the retailer and consumer‘s bank. Rather than
manually processing a cheque, the retailer voids it and hands it back to the consumer
along with the receipt, keying digitally captured and stored the image of the cheque,
which makes the process very fast.
• ERP SYSTEMS: ERP system Various ERP vendors have developed retail-specific
systems which help in integrating all the functions from warehousing to distribution,
front and back office store systems and merchandising. An integrated supply chain helps
the retailer in maintaining his stocks, getting his supplies on time, preventing stock outs
and thus reducing his costs, while servicing the customer better.

46
 • CRM systems: The rise of loyalty programs, mail order and Internet has provided
retailers with real access to consumer data. Data warehousing & mining technologies
offers retailers the tools they need to make sense of their consumer data and apply into
business. This, along with the various available CRM systems, allows the retailers to
study the purchase behavior of consumers in detail and grow the value of individual
consumers to their business.
• Wi-Fi: As Wi-Fi technology has matured, retailers have begun to see it as a robust,
inexpensive option for in-store connectivity. The concurrent development of handhelds
has dramatically broadened retailers' options for application delivery. With Wi-Fi enabled
handheld devices, applications such as POS, inventory audit, item lookup, pricing and
labor scheduling can be used anywhere on the sales floor.

EEFECTS OF TECHNOLOGY:

• Increase in sales by targeting shoppers with text message based promotions.

• Delivering targeted promotions based on users" shopping behavior, redemption history,

in-store location tracking and previously scanned merchandise which would help to keep
customers track and help customer‘s to escape standing in the long cue‘s for paying the
bills for hours.

• Access for Improved decision making.

• RFID helps in Inventory management, improve customer service, customer loyalty.

• Using mobile phones to alert shoppers about complementary items, sales and as a
vehicle for coupons is a very attractive option for retailers.

47
Human Resource dependence:

Skill Set and Resource Requirement to handle these technological advancements: The
decision making process in the supply chain management is to be made by a manager, who
knows about operations and supply chain management. The decision making process in the CRM
is to be made by a manager, who specializes in marketing and CRM. The APS systems need to
be analyzed and worked on by the Mangers at every level of the hierarchy. A hierarchy of
managers can also be maintained for very large stores, with every manager taking care of his/her
department separately.

Also, according to Ernst &Young's report `The Great Indian Retail Story' this sector is expected
to create 2 million jobs by 2010 end. About 4 crore people are employed in retail trade, assuming
each person supports a family of 5, this, implies that about 20 crore people are dependent on this
sector. With foreign companies opening expanding in India, employees are being re-trained
according to international standards and practices that are being bought in. There is also an
increase in the number of retail management programmes and institutes. This will bridge the gap
in availability of talented professionals at the middle and lower levels. The companies are also
employing people who are physically handicapped. The next few years are expected will see the
sector offering new jobs to 50,000 young graduates and diploma holders.

3.2 Economic Impact of Retail Industry:

Global:

Facts relating to global retail market are as follows:

 Retailing is one of the biggest private industries in the world and total sales exceeded
US $ 8 trillion in 2002.
 It accounts more than 10% of GDP in western countries and India and 8% in China.
 High incidence of female employment and part time employment.
 Food and grocery constitute the largest segment of retailing

48
 Rapid urbanization, income growth, increased participation of women in labour force
and improvements in infrastructure in 1980s and 1990s led to organised retailing.
 Most countries liberalised policies for opening of FDI in retailing.
 FDI allowed in China (1992), Brazil, Mexico, Argentina (1994), South Korea (1996),
Thailand (1997) and Indonesia (1998).Total procurement by global retail chains from
India is estimated to be below US $ 3 billion out of which 1 billion by Wal-Mart
alone

Indian:

Growth trends: For the fourth time in five years, India has been ranked as the most
attractive nation for retail investment among 30 emerging markets by the US-based
global management consulting firm A T Kearney in its eighth annual Global Retail
Development Index (GRDI) 2009 published in June 2009. The retail sector in India is
worth USD 394 billion and is growing at the rate of 30% annually. According to a report
by Northbride Capita, the India retail industry is expected to grow to US$ 700 billion by
2010. By the same time, the organized sector will be 20% of the total market share. As
per study commissioned to Indian Council for Research on International Relations
(ICRIER) by the Department of Consumer Affairs, the size of Indian retail market has
been estimated as Rs.7,40,000 crore in 2002. Since then, the size of modern retail is about
US$ 8 Billion and has grown by 35% CAGR in last five years (KSA Technopak, June
2006). In modern retailing, a key strategic choice is the format; retailers are coming up
with various innovative formats to provide an edge to retailers.

GDP share: According to AT Kearney, India is given the top ranking as the next foreign
investment destination, as markets like China become increasingly saturated. India is the
4th largest economy as regards GDP (in PPP terms) and is expected to rank 3rd by 2010
just behind US and China. Over the past few years, the retail sales in India are hovering
around 33-35% of GDP as compared to around 20% in the US.

49
 In 2007, the retail trade in India had a share of 8-10% in the GDP (Gross Domestic
Product) of the country. In 2009, it rose to 12%. It is also expected to reach 22% by 2010.

Fig 9: Comparison of retail trade in India ,US and China

FDI in retail

Global retailers have already been sourcing from India; the opening up of the retail sector to the
FDI has been fraught with political challenges. With politicians arguing that the global retailers
will put thousands of small local players and fledging domestic chains out of business, the two
main FDI rules in India can be summarized as:

 FDI up to 51 per cent is allowed in retail trade of 'Single Brand': The only opening in the
retail sector so far has been to allow 51% foreign stakes in single brand consumer stores,
private labels, high tech items/ items requiring specialized after sales service, medical and
diagnostic items and items sourced from Indian small sector (manufactured with
technology provided by the foreign collaborations). Parties supporting the FDI suggest
that the FDI in retail should be opened in a gradual/ phased manner, such that it can
promote competition and contribute to the growth of the Indian economy. The policy of
permitting 51% FDI in single-brand product retailing has led to the entry of only a few
global brands such as Nike (footwear), Louis Vuitton (shoes, travel accessories, watches,
50
 ties, textiles ready-to wear), Lladro (porcelain goods), Fendi (luxury products), Damro
(knock-down furniture), Argenterie Greggio (silverware, cutlery, traditional home
accessories and gift items) and Toyota (retail trading of cars), into retail tradingThe

 100 per cent FDI is allowed in cash-and-carry wholesale formats: International retailers
see India as the last retailing frontier left as the China's retail sector is becoming
saturated. However, the Indian Government restrictions on the FDI are creating ripples
among the international players like Walmart, Tesco and many other retail giants
struggling to enter Indian markets. However, other international players are taking
alternative routes to enter the Indian retail market indirectly via strategic licensing
agreement, franchisee agreement and cash and carry wholesale trading (since 100% FDI
is allowed in wholesale trading).

Foreign direct investment (FDI) inflows between April 2000 and March 2010, in single-brand
retail trading, stood at US$ 194.69 million, according to the Department of Industrial Policy and
Promotion (DIPP).

Table below lists the pros and cons of allowing FDI into retail.

Benefits of FDI in retail Drawbacks of FDI in retail

Inflow of investment and funds. Would give rise to cut-throat competition rather
than promoting incremental business.
Improvement in the quality of employment.
Promoting cartels and creating monopoly.
Generating more employment.
Increase in the real estate prices.
Increased local sourcing.
Marginalize domestic entrepreneurs.
Provide better value to end consumers.
The financial strength of foreign players would
Investments and improvement in the supply

51
chains and warehousing. displace the unorganized players.

Franchising opportunities for local Absence of proper regulatory guidelines would

entrepreneurs. induce unfair trade practices like Predatory
pricing
Growth of infrastructure.

Increased efficiency.

Cost reduction.

Implementation of IT in retail.

Stimulate infant industries and other supporting

industries.

Seeing the benefits, it can be said that this investment boom could change the face of Indian
retail by offering quality goods at lower prices to the consumers. In addition to this, the presence
of global retailers will further enhance exports from India as they would also source Indian
goods for their international outlets in a big way leading to a remarkable increase in Indian
exports.

Due to the FDI restrictions the international players are looking for alternative avenues to enter
the Indian markets. The chart below shows the current formats permitted by the Government of
India for the international players.

52
 Fig 10: Current permitted retail formats

Sales growth trend:

 The BMI India Retail Report for the third-quarter of 2010, released in May 2010
forecasts that the total retail sales will grow from US$ 353.0 billion in 2010 to US$ 543.2
billion by 2014. The greater availability of personal credit and a growing vehicle
population to improve mobility also contribute to a trend towards annual retail sales
growth of 11.4 per cent.
 BMI predicts that sales through Mass grocery retail (MGR) outlets will increase by 154
per cent to reach US$ 15.29 billion by 2014.
 BMI forecasts consumer electronic sales at US$ 29.86 billion in 2010, with over the
counter (OTC) pharmaceutical sales at US$ 3.28 billion. The latter is predicted to be the
53
 fastest growing retail sub-sector over the forecast period. BMI forecasts that sales will
reach US$ 6.18 billion by 2014, an increase of 88.5 per cent.

Consumption trend:

According to a study by the McKinsey Global Institute (MGI), released in May 2007, India's
middle class will swell by more than ten times—from 50 million in 2007 to 583 million people
by 2025. By 2025, India will also become the 5th largest consumer market, moving up from the
12th position it occupied in 2007.

The revenue, growth and other parameters of different company is shown in the table below:

Revenu Growth% Growth Net Growth% Growth OPM% OPM% EPS CMP P/E
es % Profit %

(Rs mn) QoQ YoY (Rs QoQ YoY Q1FY06 Q1FY05 Q1FY06
mn)
(compared (compared
to to
correspondi correspondi
ng quarter) ng quarter)

243.7 875.0
3464.41 15.94 47.75 (1.35) 27.91 6.25 7.07 4.55 53.88
8 0
Trent
Shopper 271.0 604.6
6455.74 4.75 57.07 (4.94) 42.43 4.38 3.00 2.03 76.73
s' Stop 5 0
Pantalo 7.00 6.82 5.89
on
18677.7 641.5 1844. 120.4
(Retail) 26.28 72.30 (2.50) 66.42
1 8 (Q3FY0 (Q3FY0 (Q3FY0 85 2
India
Limited 6) 6) 6)

Pyramid
(74.7 114.8
Retail 991.99 (9.67) 0.00 3.20 0.00 (16.62) 0.00 (3.53) 0.00
6) 5
Limited

Road ahead:

Investments in the range of US$ 20+ Billion are expected in the next 5 years in Retail & its
Supply Chain alone. According to industry experts, the next phase of growth is expected to come
54
from rural markets. According to a market research report published in June 2008 by RNCOS
titled, 'Booming Retail Sector in India', organised retail market in India is expected to reach US$
50 billion by 2011.

 Number of shopping malls is expected to increase at a CAGR of more than 18.9 per cent
from 2007 to 2015
 Rural market is projected to dominate the retail industry landscape in India by 2012 with
total market share of above 50 per cent
 Driven by the expanding retail market, the third party logistics market is forecasted to
reach US$ 20 billion by 2011
 Apparel, along with food and grocery, will lead organised retailing in India.

55
 Chapter 4

Developing a Blueprint for Service Business

4.1 Customers Knowledge:

Everybody is unique. Each person has individual pressures and criteria. Moreover,
perceptions differ. The astute businessperson deduces and accepts the buying logic of
customers and serves them accordingly. A seller characterizes what customers are buying as
goods and services. But understanding of buyers starts with the realization that they purchase
benefits as well as products. Consumers don't select toothpaste. Instead. some will pay for a
decay preventive. Some seek pleasant taste. Others want bright teeth. Or perhaps any formula
at a bargain price will do. Customers buy when they want an offering and have the time and
money to purchase it. Buying patterns can often be discerned from an analysis of customers
and their purchases.

Identification of customers and prospects makes effective targeting possible. Small business
owners pride themselves on knowing their customers personally. In the industrial field,
understanding of each major customer and buying influence is essential. When dealing with a
large number of customers, however, individual familiarity is not feasible. Hence mass
merchandisers and others in this situation group their customers, whose reactions to offerings
are similar, into segments. Then they design a separate appropriate marketing program for
each segment.

The best source to learn about customers is personal interaction with them. At work, social
and civic activities, and chance encounters, people talk and reveal their attitudes and
motivation. Listen to customers.

56
Customer contact approach:

More than ever before retailers are under pressure to differentiate themselves from
competitors; make significant cost savings and find innovative ways of driving footfalls into
stores. Even traditional retailers need to find a creative way to raise their brand above the day
to day marketing noise, all without vast expense. This requires a fresh approach to customer
engagement that can be implemented cost effectively and efficiently.

The technology facilitates location-specific marketing through the appropriate channels, for
example, retailers will be able to contact customers in specific areas with relevant offers or
information about products that may be of interest. Marketing efficiency can be gauged and
subsequently increased. the retailer can track which campaigns engage which customers, and
the success rates.

For example, it would be possible for a supermarket to contact a customer by personal SMS
at lunchtime with an appropriate incentive (such as 10% off purchases, or extra loyalty
points). Once the individual is in the shop it is then possible to make further
recommendations that are likely to be of interest and draw through actual sales from the
initial communication. Marketing campaigns will become increasingly targeted and, as a
result, will yield higher conversion rates of communication to sale.

They can communicate them via e-mails, public hordings, advertisement on internet ,TV and
also by making call also. so that customer come to know what latest offer is going on.

Using customer as a resource:- All the companies are using customer as a resource. There is
a proper display in the stores so that customer have a full overview of the product and then
buy it according to their need so in this way even a single salesman can handle the customers

57
 efficiently. So in this way no of employees would be less and less expenditure will be there
in the form of salary.

By delivering the quality of the product now customer itself act as a resource to the company
means he himself promote the store by expressing his experience to the others

4.2 Management issues in services

Availability of skilled manpower: The non availability of trained manpower, especially at the
management level, poses a key risk for the retail sector. With growing opportunities in the
emerging service sectors, the ability of the retail business to hire and retain quality people is
under pressure.

Further, as organized retail grows rapidly, there will be pressure on existing players as new
entrants look for trained manpower at various levels.

Supply chain issues: The character and personality of an organization reflects the character
and personality of its top management. In the case of customer service, there are some real
advantages to achieving consistency and continuity in management. Customer-service
policies that change with every change in management or ownership are confusing to
employees and customers alike.

Supply Chain Management efficiencies are essential to retailers to maintain and improve
margins. SCM includes vendor management and logistics management. Vendor selection is
an important outcome of the sourcing process and a key to most efficient sourcing. Logistics
management aims to get the goods from the vendor to the store in the shortest possible time
thereby avoiding unnecessary stocking of goods. In India, both vendor management and
logistics management are still underdeveloped.

58
 However, with growing size of operations, supply chain efficiencies will become a key
differentiator of profitability in retail.

Growth in consumption: The changes in demographics are driving changes in consumption

pattern in the country.

Urban consumer‘s shopping basket is changing: Within the overall private final consumption
expenditure there are category shifts happening in urban consumption pattern that urban
consumers have increased their expenditure on eating out, movies and theatre, books and
music, clothing and personal care items even as they have reduced savings and investments.

Traditionally, the small store (kirana) retailing has been one of the easiest ways to generate
self-employment, as it requires minimum investments in terms of land, labour and capital.
These stores are not affected by the modern retailing as it is still considered very convenient
to shop.

4.3 Competitive advantage

A competitive advantage is an advantage over competitors gained by offering consumers

greater value, either by means of lower prices or by providing greater benefits and service
that justifies higher prices.competitive advantage is a key determinant of superior
performance and it will ensure survival and prominent placing in the market. Superior
performance being the ultimate desired goal of a firm, competitive advantage becomes the
foundation highlighting the significant importance to develop same.

a)With respect to price:- Price is the motivators for the common people means where they
will find that it is cheaper than the other one they start buying the things from there only .so
one who is offering the goods at the lower value would have an advantage than its
competitors. Also if there is some promotional scheme is going on then this motivates them
also to buy. So after understanding this concept,By removing inefficiencies from the
distribution chain ,stores like big bazaar are able to unleash attractive savings which are
59
passed on to the consumer. Big Bazaar provides more than 2,00,000 items- food, grocery,
utensils, kitchen needs, home needs, bath needs, toys, stationery, electronics and white goods
which are sold at a discount to the maximum retail price. Price is the principal value
proposition at these stores. there are so many slogans used by these stores like

Big Bazaar- ‗Isse Sasta aur accha kahin nahin‘

Gold Bazaar- ‗Sasta bhi shudh bhi‘

Food Bazaar- ‗Wholesale prices‘

b) With respect to service:- Now a days Services are acting as a motivator to shop. Retail
stores are providing some good services like while shopping u can have fun also means u can
play the games, watch the TV and can eat also. All the big name in retail sector are trying to
give better services so that customer would have the nice shopping experience. Services
would be like the variety of the products ,different brands ,each product of all the categories
according to the need of all the age group so that if a family comes for a shopping so every
one would find something for their interest no one feel bore and want to spent maximum
time while shopping.

In order to keep pace with the modern formats, kiranas have now started providing more
value-added services like stocking ready to cook vegetables and other fresh produce. They
also provide services like credit, phone service, home delivery etc.

The organized retailing has helped in promoting several niche categories such as packaged
fruit juices, hair creams, fabric bleaches, shower gels, depilatory products and convenience
and health foods, which are generally not found in the local kirana stores.

For example With it has been noticed that the sale of Basmati rice has gone up by four times
than it was a few years back; as a superior quality rice (Basmati) is now available at almost
the same price as the normal rice at a local kirana. Thus, the way a product is displayed and

60
promoted influences its sales. There is a misconception that if the thing is cheap it would not
be good but this is no true with the big stores.

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 Chapter 5

Capacity management in retail sector

Capacity management is the process ensuring that cost-efficient IT capacity is always available
based on the current and future requirements of the retail industry. In short, capacity
management makes sure we have enough processing power, storage capacity, and network
bandwidth to make business systems work as they should.

Capacity management programs are not just about building a basic capacity plan. Rather, best-in-
class capacity management programs include the following core capabilities:
• Understanding business requirements.
• Monitoring capacity against service obligations.
• Managing utilization.
Capacity management actually plays an important role in determining how effectively an
organization uses its assets to produce income i.e. how much is the return on investment. If
capacity management is lax and there are vast numbers of underutilized hardware and software
assets, then the business will have more assets than it needs to support the income level of the
business — resulting in a lower ROA.
The success of Capacity Management in retail industry depends on a number of key
indicators, including:
 Correct forecasting of capacity needs.
 Reducing costs associated with capacity.
 Higher levels of security and availability.
 Greater user and customer satisfaction.

5.1 Demand management or Creating demand

Demand management is the art or science of controlling economic demand to avoid a recession.
In retail sector it is used to describe the activities of demand forecasting, planning, and order
62
fulfilment. In economics the term is also used to refer to management of the distribution of, and
access to goods and services on the basis of needs.
A peak period is when the demand increases temporarily, returning to a normal level. During
this period demand has to be managed or fulfilled.

A lean or off peak period for a retail industry is defined as a period during which demand does
not exceed the capacity of the retailer. In order words the retailer can serve more customers
without additional resources and there is excess capacity in the system. In this case demand need
to be created.

Fig 11. Demand management during peak and lean periods

To match what can be produced with what is being demanded, essentially balancing the supply
chain with the demand chain demand forecasting and capacity planning becomes important. The
issue of inventory management is also faced by the retail industry, not as a means of foisting

63
inventories upstream in the supply chain to willing suppliers, but as a way to reduce the need for
the extraneous inventories in the supply chain system and to utilize capacity to the most effective
degree possible. The results are a matching of just-in-time deliveries with actual manufacturing
needs, and reduction of the buffer stocks by virtue of knowing what is truly being taken out of
the system at the customer end of the chain.

An important aspect of demand management is demand forecasting.

Forecasting
A big retailer may have thousands of items per shop. Since forecasting is an important yet
expensive task, the retailer cannot forecast for all goods it sells. Though it is infeasible to
manually forecast the demand of all the products, it is possible to use automated tools to do so. In
most cases, quality forecasts can be obtained from the automated tool and the expert analysts can
be employed to forecast few of the most important products. This reduces the burden from the
humans but requires lot of compute power available.
Forecasting aims at optimizing the total sale volumes, total revenue earned, total profits,
maximize margin. Creditability of such optimization decisions pivots on the ability to correctly
predict the sales. This is usually based on prior data about the same product or close substitutes.
It may also be based upon analysis done at another location with similar buyer patterns.
Another important aspect of forecasting is the when to restock. Slow moving goods may be
restocked leisurely compared to fast moving goods. It is important for retailers to provide the
customers the specific goods that the customer asks of the retailer. Under stocking would cause
unsatisfied customers who may quickly move to other stores. Over stacking may increase the
money locked up in inventory. Hence, the retailer should aim at a replenishment policy by which
the rack never gets empty and never overflows. When close substitutes are available for some
products, the retailer may compensate for a lower current stock in one good with another one.

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5.2 Distribution of service in Retail sector
The distribution sector provides the necessary link between producers and consumers, within and
across borders. The efficiency of the sector is crucial to ensuring that consumers have access to a
wide variety of goods at competitive prices. Failure of the distribution sector to perform its role
well – which can arise if government policies restrict competition – can lead to a significant
misallocation of resources and economic costs.

A distribution center for a set of products is a warehouse or other specialized building, often
with refrigeration or air conditioning, which is stocked with products (goods) to be re-distributed
to retailers, to wholesalers or directly to consumers. Distribution centers are the foundation of a
"supply network" as they allow a single location to stock a vast number of products. Some
organizations operate both retail distribution and direct-to-consumer out of a single facility,
sharing space, equipment, labour resources and inventory as applicable.

The way a typical retail distribution network operates is to have centers set up throughout a
commercial market. Each center will then serve a number of stores. Large distribution centers for
companies such as Wal-Mart serve 50–125 stores. Suppliers will ship truckloads of products to
the distribution center. The distribution center will then store the product until needed by the
retail location and ship the proper quantity.

Since a large retailer might sell tens of thousands of products from thousands of vendors, it
would be impossibly inefficient to ship each product directly from each vendor to each store.
Many retailers own and run their own distribution networks, while smaller retailers may
outsource this function to dedicated logistics firms that coordinate the distribution of products for
a number of companies. A distribution center can be co-located at a logistics center.

Distribution of services and expansion of business

Different companies are following different strategies to expand their business. For example
Pantaloon‘s is coming out with single price retailing to its line of business. It would retail
imported products across 23 categories for a single price point of 99. For Pantaloon, it would
65
mean adding another business vertical to its list as it can retail single price imported products
which still has a good demand in the market owing to its attractive pricing strategy.
Also a typical Wal-Mart model is to build more stores, make existing stores bigger, and to
expand into other sectors of retail. Every step of the way, it strives to make money and dominate
its competitors, to the point of putting some of them out of business. These are the different
strategies followed by the retail industries so as to expand.

Problems in managing demand and its solutions

The main problem in demand management is in forecasting demand. So the different challenges
faced by retail industry in forecasting demand are:

A small retailer may not need and afford a full-fledged demand forecasting analysis.
However, with increasing number of bigger retailers entering the market demand forecasting
becomes feasible. Firms face a multitude of challenges due to the following factors:

1. Scale of forecast (how many goods to include in the forecast?)

2. Sporadic demand (erratic sales for many items in the store)
3. Introduction of new goods
4. Changing prices and promotions

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 Conclusion

The Retail sector in India is growing at a magnificent pace and the increasing competition is
compelling retailers to use demand forecasting tools. Retailers who have their own brand labels
use the forecasting techniques of the kind we study in theory. This is because their prediction of
sales directly affects their manufacturing. For these retailers, forecasting is done for longer time
duration and involves substantial amounts of asset cost. On the other hand, small scale retailers
can employ qualitative techniques on the historical data and considering
the behaviour trends in the market. They can easily find substitutes to fill up their rack space.
Also, stakes involved in a product are lesser. They may find it easy to liquidate assets through
sales, direct contracts with other shops and the corporate sector. Demand forecasting, thus,
remains a critical tool that plays key roles in manufacturing, advertising, placement, allocation of
resources.

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 References

• http://www.indiainbusiness.nic.in
• www.indianmba.com
• http://retail.about.com/
• www.marketwatch.com/retail
• www.wikipedia.com
• www.wikinvest.com/industry/Retail
• http://www.researchandmarkets.com/
• www.globalretailtrends.com/

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 Annexure

Questionnaire

1. How has the market evolved in the past decade?

2. What is the organizational hierarchy of your store?
3. What are the skills required by your staff at different levels?
4. What are your target customers?
5. What is your strategy to attract your target customers?
6. How have the needs of customers changed in the past decade?
7. How do you cater to the dynamic customer requirements?
8. Who do you think are your potential competitors?

69