RETAILING basics

The remarkable world of retail

Retail is currently the biggest industry in the world with sales of $7.2 trillion Every 10th billionaire in the world is a retailer. 25 of the top 50 Fortune 500 companies are in retail.

The Indian Story

India has approx 12 million retail stores, more than rest of the world put together. But the per capita square feet area under retail is just 2 sq.ft or 0.2 sq. meters with fragmented keerana stores being the predominant players. Retailing in India has remained in the unorganized sector and largely untouched by corporates. Here are some factors that indicate the potential of retail in India:

At 271 million, one of the largest consuming base in the world, forming 27% of the total population
A high spending community below 45 years comprises 81 percent of the population

The Indian Story

A young population with 54% population below 25 years Increased literacy from 44% in 1965 to 70% in 2003 Increase in workingwomen from 1.3 million in 1961 to 4.8 million in 1998 Increase in media penetration to 38-million cable household and 80-million TV household in 2001

The Indian Story

India has topped AT Kearney's annual Global Retail Development Index (GRDI) for the third consecutive year, maintaining its position as the most attractive market for retail investment. The Indian retail market, according to industry estimates is estimated to grow from US$ 330 billion in 2007 to US$ 427 billion by 2010 and US$ 637 billion by 2015. Simultaneously, organized retail which presently accounts for 4 per cent of the total market is likely to increase its share to 22 per cent by 2010.

The Indian Story

Mall space, from a meager one million square feet in 2002, is expected to touch 40 million square feet by end-2007 and an estimated 60 million square feet by end-2008. The number of operational malls to more than double to over 412 with 205 million square feet by 2010 and further 715 malls by 2015 on the back of major retail developments even in tier II and tier III cities in India.

The Indian Story

The Indian luxury retail market is estimated to leapfrog from around US$ 3.5 billion now to US$ 30billion by 2015. India's luxury market, estimated to be the 12th largest in the world, has been growing at the rate of 25 per cent per annum.
http://www.ibef.org/industry/retail.aspx

Identifying Opportunities

What makes retailing grow and thrive? 1. Consumption:

In other words a sizeable population READY to consume.

India has such a size of population. Add to it the fact that 70% of our population (mera gaon mera desh)is just waking up to the experiences of consumption. This makes the retailers mouths water (50-60% growth in the next 5 yearsand after that? At least 30% for the next ten years)

Rural

Mega cities

Boom Towns

Urban Niche cities 0.7

Other Cities

Urban (Total)

All India

House Holds Popul.

69.3

8.1

1.9

20.1

30.7

100

70.5

7.4

1.8

0.7

19.7

29.5

100

Income
Expen.

56.0
63.9

24.6
16.4

4.5
3.4

1.7
1.3

13.1
15.0

44.0
36.1

100
100

Surplus Income

32.5

49.0

7.9

2.9

7.7

67.5

100

Expenditure in Rs./annum/household

Identifying Opportunities

What makes retailing grow and thrive? 2. Availability of goods:

There should be something to sell, products, services, anything.

Post liberalization (1991) and post WTO, we have whats available globally. Being an agrarian economy, food retailing has tremendous potential. Supported by a rapidly growing food processing industry. Liberalization of imports has been eliminating smuggled goods. Thus, uniformity of prices and quality assured. One of the largest and most diversified manufacturing base in the world, Indians are now manufacturing practically anything. And just like charity, marketing too begins at home.

Identifying Opportunities

What makes retailing grow and thrive? 3. Provide the right Goods at right Place and time: Utilities of time and space have to be created. Not just a channel, also systems are required. Though an industry may not be organized, its distribution system would be established with great business prudence. Unorganized retail outlets spread across the nation. Infusion of IT into logistics and distribution Variation in structure relatively easy compared even to many developed countries. (E.g. Japan)

Identifying Opportunities

What makes retailing grow and thrive? 4. Space and Money:

Organized retailing requires large spaces for outlets, whereby, experiences can be sold too. Larger facilities, huge stocks to carry, and strong technology-based systems and processes require money a lot of it!!!

Domestic capital formation might be a little less and a little slow. Foreign capital is welcome, but only up to 49 %.

Identifying Opportunities

What makes retailing grow and thrive? 5. Gaps in the market: Enough sustainable opportunities should exist. Food retailing totally unorganized=>huge potential.

Specialty stores yet to emerge (depends on enhanced and enriched lifestyles) Healthcare products yet to be marketed on a large scale. Shops with more than 1,00,000 SKUs exist in not more than 50 cities, catering to not more than 150 million people. Apparels, jewellery, food and beverage outlets, lifestyle outlets, category killers (e.g. intimate wear, footwear, home furnishings)

Evolution of Indian retail

Historic/Rural Reach
Traditional/Pervasive Reach

Government Supported

Modern Formats/ International

Exclusive Brand Outlets Hyper/Super Markets Department Stores Shopping Malls PDS Outlets Khadi Stores Cooperatives Convenience Stores Mom and Pop/Kiranas Weekly Markets Village Fairs Melas
Source of Entertainment Neighborhood Stores/Convenience Availability/ Low Costs / Distribution Shopping Experience/Efficiency

Indian Retail Evolution

The emergence of the neighborhood Kirana stores catering to the convenience of the consumers Era of government support for rural retail: Indigenous franchise model of store chains run by Khadi & Village Industries Commission

1980s experienced slow change as India began to open up economy. Textiles sector with companies like Bombay Dyeing, Raymond's, S Kumar's and Grasim first saw the emergence of retail chains Later Titan successfully created an organized retailing concept and established a series of showrooms for its premium watches The latter half of the 1990s saw a fresh wave of entrants with a shift from Manufactures to Pure Retailers.

For e.g. Food World, Subhiksha and Nilgiris in food and FMCG; Planet M and Music World in music; Crossword and Fountainhead in books. Post 1995 onwards saw an emergence of shopping centers - Mainly in urban areas, with facilities like car parking, Targeted to provide a complete destination experience for all segments of society Emergence of hyper and super markets trying to provide customer with 3 Vs - Value, Variety and Volume

Categories of Indian retail

Indian retail

Corporate Houses Tatas: Tata Trent RPG group: Food World, Health and Glow, etc ITC: Wills Life Style Rahejas(ShoppersStop), Hiranandani(Haiko), DLF(DT cinemas) etc. Dedicated brand outlets Nike, Reebok, Zodiac etc Multi-brand outlets Vijay Sales, Viveks etc Manufacturers/ Exporters Pantaloons, Bata, Weekender

Anticipated growth
Market size Current market size is roughly US$ 286 bn* 96% of the 12 Million stores are less than 500 Sq. ft. Forecast Growth rate for the retailing industry is roughly 8.3% for 2003-2008 Sales from large format stores would rise by 24-49%** Formal and modern format retailing would enjoy rapid growth

Anticipated growth

RETAILING

Retailing is the set of business activities that add value to the products & services sold to consumers for their personal/family use. Retailing does this by organizing their availability on a relatively large scale & supplying them to consumers on a relatively small scale. A retailer is a business that sells products & services to consumers for their personal/family use. Normally, this is not for resale.

The following points need to be noted:

Retailers sell to the final consumer. Retailers buy in large quantities & sell in small quantities to consumers. Retailers often buy products from a wide variety of sources and then resell them through a nearby store, mail order, television or the internet & organize the required delivery & collection services. Retailers can sell services. Retailers sell to many different customers, they are prepared to sell to whoever will buy their products.

FUNCTIONS OF RETAILING

ACCESSIBILITY OF LOCATION CONVINIENCE OF TIMING PROVIDING AN ASSORTMENT OF P/S. CONVINIENCE OF SIZE/BREAKING BULK HOLDING INVENTORY INFORMATION PROVIDING SERVICES LIFESTYLE SUPPORT : Most customers identify with a particular lifestyle that integrates their use of domestic equipment & appliances. Retailers make their selection of appropriate goods & services to support their consumers lifestyles. A successful retailer builds up a regular customer base & constantly renews the relationship through a combination of service, price & accessibility.

Retail Management Decision Process

Decision Variables for Retailers

Customer Service

Store Design and Display

Retail
Strategy

Merchandise Assortment

Pricing

Location

Communication Mix

Wal-Marts Retail Mix

Customer Service

Location

Store Design And Display

Retail Strategy

Merchandise Assortment

Communication Mix

Pricing

Wal-Marts Retail Mix

Location Strategy

Free-standing Stores

Customer Service Store Display And Design

Merchandise Assortment

Communication Mix

Pricing

Wal-Marts Retail Mix

Assortment Strategy

Customer Service

Location

Store Design and Display

Large Number of Categories Few Items in Each Category

Communication Mix

Pricing

Wal-Marts Retail Mix

Location

Pricing Strategy
Merchandise Assortment

Customer Service

Store Design and Display

Communication Mix

Low, EDLP

Wal-Marts Retail Mix

Customer Service Location

Communication Mix
Store Design and Display Merchandise Assortment

Pricing

TV and Newspaper Insert Ads

Wal-Marts Retail Mix

Store Design and Display

Customer Service

Location

Basic, Special Displays for Products

Communication Mix

Merchandise Assortments

Pricing

Wal-Marts Retail Mix

Customer Service
Limited
Location Merchandise Assortment Store Design and Display Communication Mix

Pricing

Types of Jobs in Retailing

Most entry level jobs are in store management or buying, but retailers also have staff specialists: --accounting and finance --real estate --human resource management --supply chain management

--advertising
--public affairs

FORMATS OF RETAILING

From a customer point of view, the sales appeal of a particular store is related to the way the retailer presents the store. The retail format is the store package that the retailer presents to the customer.

Types of Retailers
Food Retailers
Mom and Pop Stores Convenience Stores Supermarkets Supercenters

General Merchandise Retailers

Department Stores Specialty Stores Discount Stores Category Specialists Off-Price Retailers Warehouse Clubs

Characteristics of General Merchandise Retailers

GENERAL MERCHANDISE RETAILERS

1. 2.

3.
4. 5.

6.

DEPARTMENT STORES DISCOUNT STORES SPECIALITY STORES CATEGORY SPECIALISTS DRUG STORES OFF PRICE RETAILERS

DEPARTMENT STORES

Carry a broad variety & deep assortment, offer considerable customer service, & are organized into separate departments for displaying merchandise. It often resembles a collection of specialty stores. Some of the often seen depts: mens & womens apparel, childrens clothing, kitchen appliances, furniture & furnishings, etc.

DEPARTMENT STORES

SEARS

JCPenny

DISCOUNT STORES

They offer a broad variety of merchandise, limited service and low prices. They offer both private and national brands, but these brands are typically less fashion oriented than brands in department stores.

DISCOUNT STORES

WAL-MART

K-MART

DISCOUNT STORES

K-MART

WAL-MART

SPECIALTY STORES

Concentrates on a limited number of complimentary merchandise categories & provides a high level of service in an area typically under 8000 sq. feet.

SPECIALITY STORES

PIER I IMPORTS: America's largest importer of gifts and

home furnishings.

SPECIALITY STORES

SPECIALITY STORES
TOWER RECORDS: Speciality store for music

CATEGORY SPECIALIST

A DISCOUNT STORE THAT OFFERS A NARROW VARIETY BUT A DEEP ASSORTMENT OF MERCHANDISE, BASICALLY DISCOUNT SPECIALITY STORES.

E.g. HOME DEPOT, BEST BUY

CATEGORY SPECIALIST

OFFICE DEPOT:

CATEGORY SPECIALIST

DRUG STORES

Specialty stores that concentrate on health and personal grooming merchandise.

DRUG STORES

WALGREENS

DRUG STORES

RITE AID

OFF-PRICE RETAILERS

They offer an inconsistent range of brand-name, fashion oriented goods at low prices. They have unique buying and merchandising practices. Different bargains will be available on each visit. Don't call TJX a discounter. In fashion circles, discounters such as Wal-Mart -- whose apparel departments are wall-to-wall with no-name labels -- are not held in high regard. TJX, in contrast, calls itself an offprice retailer. In no-frills stores, it sells at lower prices the same fashionable brand names as department stores. When the price gap between TJX and department stores is wide, TJX flourishes. When that gap narrows, results can be less spectacular.

OFF PRICE RETAILERS

TJX

Types of Food Retailers

FOOD RETAILERS

Traditionally, only grocery shops sold food. Now, Even large discount stores like Wal-mart sell food. Wal-mart happens to be the worlds largest food retailer. Thus, consumer behavior vis--vis shopping of food items is changing due to the changing form of retail business.

FOOD RETAILERS

CONVENTIONAL SUPERMARKETS:

A conventional supermarket is a self-service food store offering groceries, meat, with limited number of non-food items. 70-90% of their stock - food. Size would be around 20,000-50,000 sq. ft. These supermarkets are promotion oriented. They adopt the highlow or sometimes the Everyday Low pricing (EDLP) promotional strategy.

SUPERMARKETS FOOD LION

BIG BOX FOOD RETAILERS

Larger in size, these retailing formats carry a broader variety of merchandise. 1. Supercenters:

30-40% food and 60-70% non food merchandise. They stock around 1,50,000 SKUs. They provide a one-stop shopping experience. The general merchandise has higher margins, enabling the super-centers to price food items more aggressively. E.g. Wal-mart & K-mart; Big Bazaar.

BIG BOX FOOD RETAILERS

2. Hypermarkets:

Smaller in size than super centers, stock around 60,000 SKUs. Normally on the out skirts of metropolitan areas. Sometimes, there is very little distinction between a hypermarket and a super center. Hypermarkets carry more of food items, particularly fresh food, whereas super centers carry more of dry food items.

HYPERMARKETS

CARREFOUR

AUCHAN

WAREHOUSE CLUBS

A retailer that offers a limited assortment of food and general merchandise with little service at low prices to ultimate consumers and small businesses. They have simple interiors and are located in low rent districts. Little service is offered. They reduce prices by using low cost locations and store designs. They reduce inventory by holding a limited assortment of fast selling food items. Small restaurants are wholesale customers.

WARE HOUSE CLUBS

COSTCO CLUB

Convenience Stores

Smaller in Size

Non-store Retail Formats

Electronic Retailing
Catalog and Direct Mail

Direct Selling
Television Home Shopping

Vending Machines

Merchandise/Service Continuum

Classifying Indian retail

Indian retail

Modern Format retailers Supermarkets (Foodworld) Hypermarkets (Big Bazaar) Department Stores (S Stop) Specialty Chains (Ikea) Company Owned Company Operated Traditional Format Retailers Kiranas: Traditional Mom and Pop Stores Kiosks Street Markets Exclusive /Multiple Brand Outlets

Large Indian retailers

Hypermarket

Big Bazaar Giants Shoprite Star Lifestyle Pantaloons Piramyds Shoppers Stop Trent Fame Adlabs Fun Republic Inox PVR

Department store

Indian retailers

Entertainment

Reliance Fresh