Introduction to Retail Industry

Meaning of Retail:

Retail comes from the French word retailer word retailer, which refers to cutting off, clip and
divide in terms of tailoring (1365). It first was recorded as a noun with the meaning of a sale in
small quantities in 1433 (French). Its literal meaning for retail was to cut off, shred, paring.
Retail is the final stage of any economic activity. By virtue of this fact, retail occupies an
important place in the world economy. According to Philip Kotler, Retailing includes all the
activities involved in selling goods or services to final consumers for personal, non-business use.
A retailer or retail store is any business entities in a distribution channel that links manufacturers
to customers. Manufacturers typically make products and sell them to retailers or wholesalers.
Wholesalers resell these products to sell them to retailers or wholesalers. Wholesalers resell these
products to the retailers and finally, retailers resell these products to the ultimate consumers.

Any organisation selling to final consumers whether it is a manufacturer, wholesaler or retailer-is

doing retailing. It does not matter how the goods or services are sold. A retailer thus, provides
value creating functions like assortment of products and services to the consumers, breaking
bulk, holding inventory and provides services to consumers, manufacturers and wholesalers.

Retailing broadly involves:

Understanding the consumers demand

Developing good merchandise assortment
Display the merchandise in an effective manner so that shoppers find it easy and
attractive to buy.

Retailing thus, may be understood as the final step in the distribution of merchandise, for
consumption by the end consumers. Put simply, any firm that sells products to the final
consumer is performing the function of retailing. It thus consists of all activities involved in the
marketing of goods and services directly to the consumers, for their personal, family or
household use. In an age where customer is the king and marketers are focusing on customer
delight, retail may be redefined as the first point of customer contact.

Retail concept:

The retailing concept is essentially a customer oriented, company-wide approach to developing

and implementing strategy. The retailing concept covers the following four broad areas:

Customer orientation
Goal orientation
Value driven approach
Coordinated effort

Characteristics of retailing:

There is a direct end-user interaction in retailing

It is the only point in the value chain to provide platform for promotions.
Sales at the retail level are generally in small unit sizes.
Location is a critical factor in retail business.
In most retail business services are as important at core products.

Statistics of Retail Industry in India:

The Indian retail industry has emerged as one of the most dynamic and fast-paced industries due
to the entry of several new players. It accounts for over 10% of the countrys GDP and around
8% of the employment. India is the fifth-largest global destination in the retail space.

Indias retail market is expected to grow at a Compound Annual Growth Rate (CAGR) of 10% to
US $ 1.6 trillion by 2026 from US$ 641 billion in 2016. While the overall retail market is
expected to grow at 12% per annum, modern trade would expand twice as at 20% per annum and
traditional trade at 10%.
Types of Retail Stores:

Mom-and-pop store: These are generally family-owned businesses catering to small

sections of society. They are small, individually run and handled retail outlets.
Malls: These are the largest form of retail formats. They provide an ideal shopping
experience by providing a mix of all kinds of products and services, food and
entertainment under one roof eg: Galaxy Mall, Sahara Mall etc. in Delhi and NCR
regions.
Specialty stores: The retail chains, which deal in specific categories and provide deep
assortment in them are specialty stores. Examples are RPGs Music World, Mumbais
bookstore Crossword etc.
Discount stores: These are the store or factory outlets that provide discount on the MRP
items. They focus on mass selling and reaching economies of scale or selling the stock
left after the season is over.
Supermarkets: A predominantly self-service format offering a full line of groceries, meat
and produce with limited sales of non-food items, such as health and beauty aids and
general merchandise.
Supercenters: Supercenters is fastest growing retail category, are large stores (150000-
220000 sq.ft.) that combine a supermarket with a full-line discount store. By offering
broad assortments of grocery and general merchandise products under one roof,
supercenters provide a one-stop shopping experience. Wal- Mart, Kmart etc. are some of
the major supercenters of the world.
Hypermarkets: A very large retail unit that offers products at a low price. It is a
combination of a general merchandise store and the supermarket. These are characterized
by large store size, low operating costs and margins, low prices and comprehensive range
of merchandise.
Full-line Discount stores: These are retailers that offer a broad variety of merchandise,
limited service and low prices.
Recent trends in Indian Retail Industry:

The BMI (Business Monitor International) Indian Retail Report for the second quarter of2012
forecasts total retail sales will grow INR22.53trn in 2012 to INR27.73trn by 2016. Strong
underlying economic growth, population expansion, the increasing wealth of individuals and the
rapid construction of organized retail infrastructure are key factors behind the forecast growth.
As well as an expanding middle and upper class consumer base, there will also be opportunities
in Indias second and third-tier cities. The greater availability of personal credit and growing
vehicle population providing improved mobility also contribute to the trend of 6.9% annual retail
sales growth. Tourism is also a major contributor to the Indian retail sector. Tourist arrivals rose
by 8% in 2010 to 5.40mn, from 4.99mn in 2009. Foreign exchange earnings from tourism during
2010 were US$13.4bn, up 9.55% from US$12.08bn the year before.

Mass grocery retail (MGR) sales in India are expected to undergo enormous growth over the
forecast period. BMI predicts that sales through MGR outlets will increased by 111% to reach
US$69.23bn by 2016. This is a consequence of Indias dramatic, rapid shift from small
independent retailers to large, modern outlets, although it must also be noted that this growth is
forecast to come from a very low starting point.

Retail sales for the BMI grouping of Asian countries in 2012 are a forecast US$3.78 trn.China
and India are predicted to account for nearly 92%of regional retail sales in 2012, and by 2016
their share of the regional market is expected to be more than 92%. Growth in regional retail
sales for 2012-2016 is forecast by BMI at 31.2%, an annual average 9.0%. India should
experience the most rapid rate of growth, followed by Singapore. Indias forecast market share of
13.0%in 2012 is expected to increase to 14.9% by 2015.

According to the 10th Annual (2011) Global Retail Development Index (GRDI) of AT Kearney,
India retail industry is the most promising emerging market for investment offering a favorable
retail environment? With Organized retail accounting for 7% of Indias roughly $435 billion
retail market and is expected to reach 20% by 2020. India spots at the 4th position in the GRDI.

According to the report, smaller countries such as Brazil, Uruguay, Chile and Kuwait offer
attractive expansion opportunities for retailers. The GRDI has been in publication since 2002,
and ranks retail expansion attractiveness of emerging countries based on 25 variables.
India, last years GRDI destination, fell to fourth still India remains a hot market for retailers.
Foreign direct investment regulations opening up to 100% in single-brand retail may help India
to gear up its retail growth. Government policy-change discussions on multi-brand retailing
intensified recently, but whether or not there will be new rules remains uncertain.

Organized retail in India is expected to increase from 5% of the total market in 2008 to 14-18%
and reach US$ 450 billion by 2015, according to McKinsey & Company report titled The Great
Indian Bazaar : Organized Retail Comes of Age in INDIA .

By 2012, around 55 million square feet of retail space will be ready in the national capital region
(NCR). The retail organized retail real estate stock will therefore grow from the existing 41 sq.
ft. to 95 million square feet.

According to a report by KPMG, food retail sector in India is set to more than double to by 2025
to US$ 150 billion. This would be driven by growth of organized report coupled with changing
consumer habits.

The report confirms the rapid growth in consumer spending in tier 2 cities. Its findings revealed
that 2011, the modern trade sector grew 28% nationwide, but leapfrogged with 40% growth in
Jaipur, 39% IN Indore and 27% growth in Surat.as per Nielsen, the trend is seen to gain
momentum, and its share of the total Indian market has increased by 1% point to 9.2%.

Different Loyalty programs in Retail Industry:

Customer Loyalty programs take a number of forms. Some retailers use only one model, while
others may combine two or more.

Points: A tactic frequently used by grocery stores, the points-based customer loyalty
programs gives customers points for making purchases or completing other actions.
Tier: these track customers purchases. Once theyve made made enough qualifying
purchases, they are placed in a tier. This loyalty program works best for high
commitment and high priced business.
Non- Monetary program: Popular for certain target audiences. Understanding your
customers understanding their values and lifestyle.
 Reward partnership: This type of program see a brand partner with other brands to offer
their customer discounts with the associated brands.
Gamification: Adding a game to your loyalty program can be a compelling tool for
customer engagement.
Loyalty card program: Is an incentive plan that allows businesses to gather important
information about its customers such as, demographic and transactional information.
Gift card: Adding gift card functionally to retail store is a great method for ensuring
business for your store. Gift cards can encourage brand advocacy and assist customer
acquisition.

Major Retailers in India:

1. Pantaloons Retail: The flagship company of Future Group, Pantaloons Retail

operates 16 million square feet of retail space, has over 1000 stores across 73
cities in India and employs over 30000 people. It can boast of launching the first
hypermarket Big Bazaar in India in 2001.
2. K.Raheja Group: they forayed into retail with Shoppers Stop, Indias first
departmental store in 2001. They have signed a 50:50 joint venture with Nuance
Group for Airport Retailing.
3. Tata Group: Established in 1998 Indias largest book and music retailer. Tatas
has also formed a subsidiary named infiniti retail which consists of Chroma, a
consumer electronics chain.
4. RPG group: One of the first entrants into organized food & grocery retail with
Food world store in 1996 and then an alliance with Dairy farm International and
launched health & glow outlets.
5. Landmark group: Landmark group was launched in 1998 in India, the retail
ventures of Landmark Group includes- home center, shoe mart, SPAR
hypermarkets etc. it is 3.8 billon dollar company.
 6. Bharti-Walmart: Bharti have signed a 50:50 percent joint venture agreement with
Walmart which Wal-Mart will be taking care of cash & carry and Bharti will do
the front-end.
7. Reliance: Owned by Reliance Group. It has many brands like Reliance Fresh,
Reliance Footprint etc.
8. A V Birla Groups: Madura garments are a subsidiary of Aditya Birla Nuvo Ltd.
The company has also own More supermarkets & hypermarkets.
9. Metro: Metro Cash & Carry, the first company to introduce cash & carry
business, started its operations in India in 2003with two distribution centers in
Bangalore.
10. Viveks Ltd: Is the largest consumer electronics and home appliances retail chain
in India.

Customer Loyalty Programs in Big Bazaar:

Meaning:

A loyalty program is a rewards program offered by a company to customers who frequently

make purchases. A loyalty program may give a customer advanced access to new products,
special sales coupons or free merchandise. Customers typically register their personal
information with the company and are given a unique identifier, such as a numerical ID or
membership card, and use that identifier when making a purchase.

Customer loyalty measures are designed for the people within a company who dictate the
strategic direction of the company. These measures evaluate the performance of a companys
current customer base and drive the future direction of companys overall customer strategy. Big
Bazaars loyalty programs are comprised of:
 Membership card
Discount
Shop at home
Home delivery

Conclusion:

Retailing provides a crucial link between producers and consumers in modern market economy.
Retail in India is most dynamic industry and represents a huge opportunity both for domestic and
international retailers .Modern retailing has miles to go in India. The growth of modern formats
has been much slower in India as compared to other countries and the development of this sector
is restricted by the presence of regulatory and structural constraints.

Conceptual Framework
Customer loyalty:

Customer loyalty can be said to have occurred if people choose to use a particular shop or buy
one particular product, rather than use other shops or buy products made by other companies.
Customers exhibit customer loyalty when they consistently purchase a certain product or brand
over an extended period of time.

Today marketers are seeking information on how to build customer loyalty. The increased
profits from loyalty come from reduced marketing costs, increased sales and reduced operational
costs. Further, loyal customers provide strong word-of-mouth, create business referrals, provide
references and serve on advisory boards. Hence, customer loyalty has a powerful impact on
firms performance and is considered by many companies an important source of competitive
advantage (Lam et al.2004). Consistently high levels of customer loyalty not only create
tremendous competitive advantage but also boost employee morale and productivity. On the
other hand, persistent customer defection has a devasting impact on a companys performance
(Lee and Cunningham 2001). Further, the benefits of customer loyalty to a provider of either
services or products include lower customer price sensitivity, reduced expenditure on attracting
new customers, improved organizational profitability. Furthermore, loyalty can be towards a
brand, product or service outlet. Loyalty also leads to positive attitudes and behaviors, such as
repeat patronage and purchases and positive recommendations, which influence other actual or
potential customers. A loyal customer base is a valuable asset for an organisation. It reduces the
need to seek new customers and generates accurate feedback that the organisations products and
services are meeting the needs of particular group of people. Moreover, loyal customers buy
more; need less information as compared to non-loyal customers are less likely to switch even
because of slightly higher prices. They serve as an information source for other customers and
also act as part time employees. Customers can be loyal due to high switching barriers or lack of
available alternatives and also because they are satisfied and thus, want to continue the
relationship. As most barriers appear to be of limited durability, companies tend to approach
satisfaction as the only viable strategy in the long run. Another important element of loyalty is
the intended support of expressed in communicating ones experiences i.e. positive word of
mouth. Thus, one of the most powerful sources in persuasion is positive word-of-mouth. When a
companys customers recommend the product to others, this reflects a high degree of loyalty.
Further, customers who have not developed loyalty to the service provider are more likely to
perceive their exchange relationship as more short term, purely economic with lower
expectations for fairness beyond the one time encounter. Further Dick and Basu proposed 4
conditions related to loyalty:

Loyalty signifies a favorable correspondence between relative and repeat patronage.

Latent loyalty is associated with high relative attitude, but low repeat patronage.
Spurious loyalty occurs when a customer frequently purchases a brand but season
significant differences among brands.
No loyalty exists in a category when customers see few differences between alternative
brands and there are low repeat purchases.
Customer satisfaction:

Customer satisfaction is a marketing term that measures how products or services supplied by a
company meet or surpass a customers expectation. Customer satisfaction is important because it
provides marketers and business owners with a metric that they can use to manage and improve
their business.

Customer satisfaction has been long recognized in marketing thought and practice as a central
concept as well as important goal of all business activities. In fact, there are at least two different
conceptualizations of customer satisfaction, one is transaction-specific and other is cumulative.
Transaction-specific satisfaction provides specific diagnostic information about a particular
product or service encounter.

High customer satisfaction has many benefits for the firm, such as increased loyalty for
current suppliers, reduced price elasticities, insulation of current suppliers from competitive
efforts, lower costs of future transactions, reduced failure costs, lower costs of future
transactions, reduced failure costs, lower costs of attracting new customers and an enhanced
reputation for the firm. Moreover, it is believed that customer satisfaction is a good, if not the
best, indicator of firms future profits.

Further, Bontis, Booker, and Serenko found that customer satisfaction enhances reputation in
the service environment. Molina, Consuegra and Estaben showed that confidence benefits have a
direct, positive effect on the satisfaction of customers with their bank. Melnikas revealed that
price and quality are important factors for customer satisfaction revealed that services offered by
retail units have positive impact and are significant in building customer satisfaction.

Customer Satisfaction and Customer Loyalty:

Macmillan found that when satisfaction with services goes above a critical point, customer
loyalty also increases and Anderson and Sullivan found that repurchase intentions are positively
influenced by satisfaction across product categories. Jones and Sasser found that the relationship
between satisfaction and loyalty is neither linear nor simple whereas Hallowell showed that
higher customer satisfaction translates into higher than normal market share growth, the ability to
charge a higher price, improved profitability and lower transaction costs. Mittal and Laassar
examined that high degree of satisfaction does not translate into loyalty concluded that
customers satisfaction with dealers positively affects brand repurchase intentions. Meuter et al
found that customers are more likely to engage in positive word-of-mouth and repurchase when
satisfied. Bowen verified the non-linear and a symmetric relationship between customer
satisfaction and loyalty in hotel industry. Thyagarajan confirmed that a high degree of customer
satisfaction is the only immediate antecedent of customer loyalty. Passiante found that there
exists positive relationship between customer satisfaction and customer loyalty with regard to
agri-food products, Bontis, Brooker and Serenko found that reputation partially mediates the
relationship between satisfaction and loyalty as well as satisfaction and recommended by
customers.

Current Scenario of Retailing Industry in India:

The Retail sector of India is now among top five fastest growing markets globally and by 2015 it
is going to touch $637 bn. Most of it is going to be through Modern retail i.e. through shopping
malls, which is expected to increase by 22% by 2015 and the number of malls is going to touch a
promising figure of 500 approximately by 2015. The total mall area available in India is more
than 900 lacs sqft. The economic environment has changed and retailers are not confident of
developers ability to get enough foot all. Anchor tenants hesitation will make life difficult for
mall developers as they are already facing excess retail capacity.

The Retail sector in India is witnessing a huge revamping exercise as traditional markets make
way for next formats such as departmental stores, hypermarkets and specially stores. Western-
styles malls have begun appending in metros and second-running cities alike introducing the
Indian consumer to a shopping experience like never before.

Indias vast middle class and its almost untapped retail industry are key attractions for global
retail giants wanting to enter newer markets. The structure of retailing is developing rapidly with
shopping malls becoming increasingly common in large cities, and development plans beings
rapidly with shopping malls by 2008.the industry is rated as the fifth most attractive emerging
retail market, India is being seen as a potential goldmine.