Retailing:

Introduction

Unit #1
 Introduction to Retailing- Key
Topics
 Nature & scope of  Rise of Indian
Retailing Consumerism
 Retailing- Definition  Retail Formats
 Functions of a Retailer  Major Retail Players in
 Rise of a Retailer India
 The Retailing Concept  Retail in India-
 The Retail Strategy Evolution & drivers of
retail change
 Retailing Concept- Key
Issues
 Consumerism
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 Retailing- Definition
 Retailing encompasses the business
activities involved in selling goods and
services to consumers for their personal,
family or household use.
 It includes every sale to the final consumer
 It is the last stage in distribution process

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 Retail Functions in Distribution

Final
Manufacturer
Wholesaler Consumer
Retaile
r

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 Retailers- Key Functions
 Collect an assortment  Manufacturers and
from various sources, wholesalers get
buy in large quantity & information from
sell in small quantity- retailers on sale
the Sorting Process
forecasts, delivery
 Communicate both delays, customer
with customers &
manufacturers and complaints, defective
wholesalers items, inventory
turnover etc

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 Retailer’s role in Sorting Process
Customers
M-
Brand A Brand A
Wholesaler

M-
Brand B
Brand B
Brand C

M- Brand D
Brand C
Wholesaler Retailer
Brand E
M-
Brand D Brand F

M-
Brand E Wholesaler

M-
Brand F
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 Retailers- Some other Functions
 Shoppers (customers ) are  Retailers provide
provided information on assistance to small
availability and suppliers by transporting,
Characteristics of goods & storing, marking,
services, store hours, sales advertising & prepaying
etc from retailer ads and for products
displays
 Retailers complete
transactions with
customers

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 Special Characteristics of Retailing

Small Average Sale Impulse Purchases

Retailer’s
Strategy

Popularity of Stores

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 Retailing: Special Characteristics

1. The average amount of a sales transaction

for retailers is much less than for
manufacturers
2. Final consumers make many unplanned or
impulse purchases
3. Retail Consumers usually visit a store,
even though mail, phone and web-sales
have increased
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 Retail Strategy
 The overall plan guiding a retail firm
 It influences the firm’s business activities
and its response to market forces, such as
competition & economy

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 Developing & Applying Retail
Strategy: Six Steps
1) Define the type of business in 4) Devise an overall long run
terms of the goods /service plan that gives general
category and company’s specific direction to the firm & its
orientation (full service or no employees
frills)

2) Set long run & short run 5) Implement an integrated

objectives for sales and profit, strategy that combines
market share image and so on such factors as store
location, product
3) Determine the customer market assortment, pricing &
to target on the basis of its advertising and displays to
characteristics and needs achieve objectives

6) Regularly evaluate
performance and correct
weakness/when observed

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 The Retailing Concept- Underlying
Principles
Customer
Orientation

Retail Strategy
Coordinated Effort Retailing
Concept

Value- Driven

Goal Orientation

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 Retailing Concept: Three Issues
 The Total Retail Experience
 Customer Service
 Relationship Retailing

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 The Total Retail Experience
 Includes all the elements in a retail offering
that encourage or inhibit customers during
their contact with a retailer
 Number of salespeople, displays, prices,
brands carried, inventory on hand:
Controllable
 Adequacy of on street parking, sales tax etc:
Uncontrollable
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 Customer Service
 Refers to the identifiable
yet sometimes intangible
activities undertaken by a
retailer in conjunction
with the basic goods and
services it sells
 Has a strong impact on the
total retail experience
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 Key Elements
 Store hours, parking,
shopper friendliness of the
store layout
 Credit acceptance, sales
people, amenities such as
gift wrapping, rest rooms,
employee politeness
 Delivery policies, time
shoppers spend on
checking out lines and
customer follow up
15
 Relationship Retailing
 Seeking to establish & maintain long term
bonds with customers rather than act as if
each sale transaction is a new sales
encounter
 Concentrating on total retail experience,
monitoring satisfaction with customer
service and staying in touch with customers

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 Relationship Retailing- Key
Guidelines
1. Win- Win approach critical
2. Building & maintaining customer database

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 The Rise of the Retailer
 Proximity to the Customer
 The Rise of Consumerism
 The Introduction of the Private label
 Technology

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 Consumerism: what it means
 protection of consumers'
rights: the protection of
the rights and interests of
consumers, especially with
regard to price, quality,
and safety
 materialistic attitude: an
attitude that values the
acquisition of material
goods ( disapproving )
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 belief in benefits of
consumption: the belief
that the buying and selling
of large quantities of
consumer goods is
beneficial to an economy
or a sign of economic
strength
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 The Rise of the Indian
Consumerism/Consumer
 Indian income will triple over the next two decades.
 Over the next two decades, the country’s middle class will grow
from about 5 percent of the population to more than 40 percent
and create the world’s fifth-largest consumer market.

 In 2005 private spending reached about 17 trillion Indian

rupees($372 billion), accounting for more than 60 percent of
India’s GDP, so in this respect the country is closer to developed
economies such as Japan and the United States than are China
and other fast-growing emerging markets in Asia.
 India remains the least urbanized of the emerging Asian
economies. Today only 29 percent of Indians live in cities
Source: Mckinsey Consumer Research report 2008
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 India- Shining
 Extreme rural poverty has declined from 94 percent in
1985 to 61 percent in 2005
 In 1985 93 percent of the population lived on a household
income of less than 90,000 rupees a year,by 2005 that
proportion had been cut nearly in half, to 54 percent.

 The growth that has pulled millions of people out of

poverty is also building a huge middle class that will be
concentrated in India’s urban areas.

 If India can achieve 7.3 percent annual growth over the

next 20 years, 465 million more people will be spared a life
of extreme deprivation
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 Consumer Spending Projections-
Mckinsey Global Report
 Discretionary spending in India will rise from
52 percent of total private spending today
to 70 percent in 2025.

 By 2025 India’s wealthiest citizens will total

24 million, more than the current
population of Australia. By that year too,
India’s affluent class will be larger than
China’s comparable segment, projected at
about 19 million people
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 Some Other Projections
 Spending on purchases
that improve the
economic prospects and
quality of life of a person
or family—health,
education, transport, and
communications—will
soar and eventually
command a greater share
of consumption than they
do elsewhere.
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 Despite India’s
fondness for cricket
and “Bollywood”
movies, recreational
products and services
will take a smaller slice
of household spending
there than in other
countries
23
 Projections
 Transportation, already the largest category
of expense after food, will take a bigger
portion of household budgets in coming
years, exceeding its share in all of our
benchmark countries.
 The highest growth will come from car
purchases. Categories such as clothing and
household goods are expected to post
slower annual growth relative to overall
consumption
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 Implications for Marketers
 India will witness the rapid growth of its
middle class—households with disposable
incomes from 200,000 to 1,000,000 rupees
a year. That class now comprises about 50
million people, roughly 5 percent of the
population
 Today 57 percent of private spending is
spread across rural areas, but by 2025 cities
will command 62 percent of the country’s
spending power.
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 Implications
 In absolute terms the country’s urban
population will expand significantly, from
318 million today to 523 million in 2025.
 The shift in spending power from the
countryside to the cities will place the bulk
of India’s private consumption within easier
reach of major companies

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 Technology in Retail
 Customer Interfacing Systems
•
Bar Coding and Scanners
•
Payment
•
Internet
 Operation Support Systems
•
ERP System
•
CRM Systems
•
Advanced Planning and Scheduling Systems

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 Retailing in India
Retail the largest private industry globally, is still in its nascent
stages in India

Over 12 M
8 illion
Outlets in
India
#1
Global Retail
industry is of size Unorgani
zed
USD 8 Trillion Organize Retail
Fortune #1 d
“Wal-Mart” is Retail <
3%
a Retailer
50

Set to gro
Over 50 of the w to 8-10
201 0 % by
Fortune 500 25
companies are
retailers Organized
Retail exp
25 of the Asian around Rs ected to b
.110,000 e
Top 200 by 2010 Cr(USD 2
5 b)
companies, are
retailers

Source:12/07/21
CII Mckinsey, HSBC Unit #1: Introduction to Retailing 28
 Indian Retail- Some Statistics
 Market size (modern retail)
 Market size (total) 2006:
US$ 300 bn/annum 2006: US$ 9-12 bn/annum
 Market size (modern retail)
 Market size (total) 2010:
US$ 427 bn/annum 2011: US$ 60 bn/annum
 Annual rate of growth (modern
 Market size (total) 2015:
US$ 637 bn/annum retail): 35%
 Penetration (modern retail)
2006: 3 to 4%
 Penetration (modern retail)
2010: 10%
 Number of retail outlets (total):
12 million
Source: www.indiaretailbiz.com

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 Indian Retail Statistics
o New Investment by
2011: US$ 30 bn
 No. of persons
employed (total): 21
mn
 No. of new jobs in next
two years: 2 mn.
Source: www.indiaretailbiz.com
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 Retail Space
 Typical space per outlet: 100 to
500 sq.ft.
 Space occupied (modern retail):
35 mn sq.ft.
 Operating Malls 2007: 114 (35
mn sq.ft.)
 New Malls under construction:
361 (117 mn sq.ft.)
 New space distribution: 65%
(top 7 cities), 35% (tier II & III
cities)
 New space distribution (among
top 7 cities): NCR 34%, Mumbai
23%, Rest 43%
30
 Major Retail Formats in India
 Malls  Convenience Stores
 Specialty Stores  MBOs (Multi- Brand
 Discount Stores Outlets)
 Department Stores
 Hypermarts/Supermar
kets

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 Various Retail Formats
• Department store: Large retail store offering a variety of services and merchandise, organised in separate
departments. Occupy prominent positions in the heart of town or as anchor stores in out-of-town malls eg.
Shopper’s Stop.

• Supermarket: A store that sells a wide variety of goods including food, medicine and household products.
Often part of a chain that owns or controls other supermarkets in the same or other towns; thus going for
economies of scale. The chains are often supplied from the distribution centres of a larger business eg.
FoodWorld.

• Hypermarket (from the French term hypermarche) : A store that combines a supermarket and a department
store. A gigantic retail facility that carries a big range of products under one roof, including fresh groceries and
apparel. When planned, constructed and executed correctly, hypermart caters to all routine weekly shopping
needs in one trip eg. Big Bazaar.

• Category killers: Large format stores that specialise in a narrow line of merchandise eg. Vivek, Vijay Sales.

• Convenios: 24X7 convenience stores situated close to homes to generate high footprints. Convenios carry a
limited stock of daily use goods with a special focus on food products eg. In & Out petrol pump outlets.

• Specialty malls: Consortium of retailers that carry a certain category of products. They are usually situated
some distance from the city centre. Consumers have to make a special visit to pick up the goods. eg, Gold,
Wedding Souk.
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 Recent Trends

Retail Sales in India

 Retailing in India is witnessing a huge revamping
exercise as can be seen in the graph

 India is rated the fifth most attractive emerging

retail market: a potential goldmine.

 Estimated to be US$ 200 billion, of which

organized retailing (i.e. modern trade) makes up
3 percent or US$ 6.4 billion

 As per a report by KPMG the annual growth of

department stores is estimated at 24%

 Ranked second in a Global Retail Development

Index of 30 developing countries drawn up by
AT Kearney.

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 Recent Trends contd.
Traditionally three factors have plagued the retail industry:

1. Unorganized : Vast majority of the twelve million stores are small "father and
son" outlets
2. Fragmented : Mostly small individually owned businesses, average size of
outlet equals 50 s.q. ft. Though India has the highest number of retail outlets
per capita in the world, the retail space per capita at 2 s.q. ft per person is
amongst the lowest.
3. Rural bias: Nearly two thirds of the stores are located in rural areas. Rural retail
industry has typically two forms: "Haats" and “Melas". Haats are the weekly
markets : serve groups of 10-50 villages and sell day-to-day necessities. Melas
are larger in size and more sophisticated in terms of the goods sold (like TVs)

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 Recent changes:

Experimentation with formats: Retailing in India is still evolving and the sector
is witnessing a series of experiments across the country with new formats being
tested out. Ex. Quasi-mall, sub-urban discount stores, Cash and carry etc.
Store design : Biggest challenge for organised retailing to create a “customer-
pull” environment that increases the amount of impulse shopping. Research
shows that the chances of senses dictating sales are upto 10-15%. Retail chains
like MusicWorld, Baristas, Piramyd and Globus are laying major emphasis &
investing heavily in store design.
Emergence of discount stores: They are expected to spearhead the organised
retailing revolution. Stores trying to emulate the model of Wal-Mart. Ex. Big
Bazaar, Bombay Bazaar, RPGs.
Unorganized retailing is getting organized: To meet the challenges of organized
retailing such as large cineplexes, and malls, which are backed by the corporate
house such as 'Ansals' and 'PVR‘ the unorganized sector is getting organized. 25
stores in Delhi under the banner of Provision mart are joining hands to combine
monthly buying. Bombay Bazaar and Efoodmart formed which are aggregations
of Kiranas.
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 Major Retailers- India
 India’s top retailers are Leading Retailers
largely lifestyle, clothing and
apparel stores
 This is followed by grocery
stores
 Following the past trends and
business models in the west
retail giants such as
Pantaloon, Shoppers’ Stop
and Lifestyle are likely to
target metros and small cities
almost doubling their current
number of stores
 These Walmart wannabes
have the economy of scale to
be low –medium cost
retailers pocketing narrow
margin
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 Major Retailers – Formats
Adopted
Retailer Original formats Later Formats
Hypermarket (Spencer's)Specialty Store (Health
RPG Retail Supermarket (Foodworld)
and Glow)
Department Store (Piramyd
Piramal's Discount Store (TruMart)
Megastore)

Small format outlets (Shoppe)

Supermarket (Food Bazaar)
Pantaloon Retail Department Store
Hypermarket (Big Bazaar) Mall (Central)
(Pantaloon)

Department Store (shopper's

stop) Supermarket (TBA)
K Raheja Group
Specialty Store Hypermarket (TBA)
(Crossword)

Tata/ Trent Department Store (Westside) Hypermarket (Star India Bazaar)

Landmark Group Department Store (Lifestyle) Hypermarket (TBA)

12/07/21 Discount Store Unit #1: Introduction
(Subhiksha, Margin to Retailing 37
Free, Apna Bazaar), Supermarket (Nilgiri's),
Others
Specialty Electronics
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 Indian Organized Retail is set to explode with
Food & Lifestyle retail as major segments

Pharma
Entertainment Durable 2%
1% 10%
Home
3%

Clothing and Textile

36%
Food & Grocery
14%

Health & Beauty

1%

Books, Music & Gifts

3%
Footwear
Watch & Jewellery 13%
17%

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3 SBU’s covering 88% of market segment!!
 Drivers of Retail Change in India
 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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 Urbanization: increased urbanization
has led to higher customer density
areas thus enabling retailers to use
lesser number of stores to target the
same number of customers.
 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.
42
 Thank You

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