IMPACT OF GLOBALIZATION ON INDIAN RETAILING INDUSTRY

Introduction

                 

                  Retailing is the world’s largest private sector contributing to 8% of the GDP and it
employs one Sixth of the labor force. The estimated retail trade is expected to be 7 trillion US $.
Many countries have developed only due to retailing and presently we see there is a vast change
in the retail industry. As far as India is concerned it contributes to 14% of our GDP and it is the
second largest sector next to agriculture which provides employment to more number of persons.
Now according to a survey, India is classified in to the fifth most attractive retail destination and
Second among the countries in Asia. Worldwide it is ranked as fifth most attractive retail
investment destination. Topping the Global Retail Development Index for the third consecutive
year, Before proceeding further,let me tell you the functions of retailing.

Functions

                     Retailing-function includes all activities involved in providing goods and services
to the ultimate consumers. So it provides final end products to the consumers, not raw materials,
end products in usable form to the consumers. Thereby it creates product utility. Secondly, it is
given in the place where it is required by the consumer. That is, retailing outlets are open in the
places according to the convenience of the customer and also based on the demand of the
consumer. And third, it creates Time Utility. In the sense that, the shops are open as per the
requirement of the consumer that is between 10 and 8 or 10 to 5. Whenever the consumers want
to go and shop they can go and shop at a particular period convenient to the customer. Towards
the end, when the product is sold finally it creates Ownership Utility. So, we can conclude that
retailing is a marketing intermediary which creates Product Utility, Place Utility, Time Utility
and Ownership Utility in providing goods and services to the consumers

Retailing is supposed to provide:

• Product Utility • Place utility • Time Utility • Ownership Utility.

Classification

                      Retail Sector can be basically classified in to two segments. One is organized
segment and another one is unorganized segment. As far as India is concerned this organized
segment contributes only to 3% of the retail trade and the unorganized segment contributes to
remaining 97% of the retail trade. It is because all these days we have been purchasing only from
the street vendors and from the local shops and organized retailing was not in vogue in India.
Only after 1991, after opening up of economy and due to liberalization, this organized sector has
come to light and presently it exists in various formats.

• Super markets

• Hypermarkets

• Departmental stores

• Specialty stores

 
                       First one is, presently there are Supermarkets. E.g. Food world, Reliance Fresh.
Basically these outlets operate on low Price and low margin basis. These are called as
Supermarkets.

                        The next important one, which is coming up in a very big way is Hyper Markets.
Big Bazaar is one example for Hyper Markets. The important characteristic of Big Bazaar is they
provide a variety of things right from food and non food things and they provide them in a very
large area. The Best example - 'Walmart' is presently the market leader in the world retail trade
and it is followed by 'Carrefour'. Walmart is USA based company and Carrefour is a France
based company. Both of them will be entering in to retail trade in India shortly.

                    The third format in which it exists is Departmental stores. These are large scale
retail outlets. Shoppers, Pantaloons, Globus are some of the examples for this Departmental -
retail outlets. Next type of outlet is, they exist as specialty stores for sales of books and sales of
music cassettes. We all know that in previous years we have never heard of Music world or some
stores selling especially books. But presently we have MTV outlet, Book world, Music World,
and Planet M which are these specialty kinds of stores selling respective things, either books or
cassettes. Now under this unorganized sector we have, Mom and Pop stores and Street Markets,
these are sometimes called as Kiosks. All these days, until economic liberation, all the shops
were in the form of mom and pop stores, street markets and kiosks. Now also along with this
organized sector most of the stores in retailing are unorganized and they exist in these formats.
With all these unorganized and organized sectors, retail industry has seen a phenomenal growth
in the last 5 years.

Sales Operation and Management

 
                   Retailing includes all the activities involved in selling goods and services directly to
final consumers for personal, non-business use. A retailer or retail store is any business
enterprise whose sales volume comes primarily from retailing. Any organization 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 (by person, mail, telephone, vending machine, or
internet) or where they are sold (in a store, on the street, or in the consumers home).

Types of retailers

                       Consumers today can shop for goods and services in a wide variety of retail
organizations. These are store retailers, non-store retailers, and retail organization. Perhaps the
best – known type of retailer is the departmental store. Retail – store types pass through stages of
growth and decline that can be described as the retail life cycle. A type emerges, enjoys a period
of accelerated growth, reaches maturity, and then declines.

Levels of service

                      Conventional retail stores typically increase their services and raise their prices to
cover the costs. These higher costs provide an opportunity for new store forms to offer lower
prices and less service. New store types meet widely different consumer preferences for service
levels and specific services. Retailers can position themselves as offering one of the four levels
of following services.

 
1. Self-service: Self – service is the cornerstone of all discounts operations. Many customers are
willing to carry out

their own locate – compare – select process to save money.

2. Self-selection: Customers find their own goods, although they can ask for assistance.

3. Limited service: These retailers carry more shopping goods, and customers need more
information and assistance.

The stores also offer services (such as credit and Merchandise – return privileges).

4. Full service: Salespeople are ready to assist in every phase of the locate-compare-select
process.

                            Customers who like to be waited on prefer this type of store. The high staffing
cost, along with the higher proportion of specially goods and slower-moving items and the many
services, results in high-cost retailing. By combining these different service levels with different
assortment breadths, one can distinguish the four broad positioning strategies available to
retailers. Although the overwhelming bulk (97 per cent) of goods and services are sold through
stores, non-store retailing has been growing much faster than store retailing.

Non-store retailing falls into four major categories like:

Direct selling, Direct marketing (which includes telemarketing and

Internet selling), Automatic vending, and buying services.

1. Direct selling is also called multi-level selling or network marketing. Well known one-to-one
selling in Indian Context is started by Unilever, Denim brands, Tupper ware etc. In one-to-many,
a salesperson goes to the home of a host who has invited friends; the salesperson demonstrates
the products and takes orders. Pioneered by Amway, the multilevel (network) marketing sales
system consist of recruiting independent businesspeople who act as distributors. The distributors’
compensation includes a percentage of sales of those the distributor’s recruits as well as earnings
on direct sales to customers. These direct selling firms, now finding fewer consumers at home,
are developing multi-distribution strategies.

2. Direct marketing has roots in direct mail and catalog marketing. It includes telemarketing,
television direct-response marketing (Tele shopping network - TSN), and electronic shopping (E-
Bay, Amazon.com.Autobytel.com). Of these, electronic shopping experienced a major take off in
the late 1990’s as consumers flocked to dot-com sites to buy books, music, toys, electronics, and
other products.

3. Automatic vending is used for a variety of merchandise, including impulse goods like Cola,
cigarettes, noodles, tea, fruit juice, soft drinks, coffee, candy, newspapers, magazines, and other
products. Recently Indians are witnessing large scale automated vending services

4. Buying service is a store less retailer serving a specific clientele – usually employees of large
organizations – who are entitled to buy from a list of retailers that have agreed to give discounts
in return for membership Eg: Travel agents and hoteliers, Tour operators & transportation sector
are examples of such clientele.
 

Corporate Retailing

                         Although many retail stores are independently owned, an increasing number are
part of some form of corporate retailing. Corporate retail organizations achieve economies of
scale, greater purchasing power, wider brand recognition, and better-trained employees.

Categories of customers

Generally the customers can be grouped into three main categories. These are:

1. Bargain hunters visit retail store, pick over last years’ holiday inventory, and then disappear
for months.

2. Casual shoppers chat up with sales staff and buy sometimes.

3. Devoted customers, loyal clientele, love the store, buy often, and refer their friends to you.

Marketing Decisions

                       In the past retailers held customers by offering convenient location, special or
unique assortments of goods, greater or better services than competitors, and store credit cards.
Today, national brands are found in department stores, in their own shops, in merchandise
outlets, and in off-price discount stores. In their drive for volume, national– brand manufacturers
have placed their branded goods everywhere. The result is that retail – store assortments have
grown more alike.

                          Customers have become smarter shoppers. They do not want to pay more for
identical brands, especially when service differences have diminished; nor do they need credit
from a particular store, because bank credit cards are almost universally accepted. Retailers
marketing decisions can be examined through target market, product assortment and
procurement, services and store atmosphere, price, promotion, and place.

Target market

                           A retailer’s most important decision concerns the target market. Until the target
market is defined and profiled, the retailer cannot make consistent decision on product
assortment, store décor, advertising messages and media, price, and service levels.

Product assortment and Procurement

                            The retailer’s product assortment must match the target markets shopping
expectations. The retailer has to decide on product assortment breadth and depth. Thus a
restaurant can offer a narrow and shallow assortment (small launch counters), a narrow and deep
assortment (delicatessen), a broad and shallow assortment (cafeteria) or a broad and deep
assortment (large restaurant). The real challenge begins after defining the stores product
assortment, and that is to develop a product differentiation strategy. After deciding on the
product-assortment strategy, the retailer must establish procurement sources, policies, and
practices.

                             Retailers are rapidly improving their skills in demand forecasting, merchandise
selection, stock control, space allocation, and display. Stores are using direct product profitability
(DPP) to measure a product’s handling costs (receiving, moving to storage, paperwork, selecting,
checking, loading, and space cost) from the time it reaches their warehouse until a customer buys
it in their retail store.

Services and store atmosphere

Retailers must also decide on the services mix to offer customers:

• Pre-purchase services include accepting telephone and mail orders, advertising, window and
interior display, fitting rooms, shopping hours, fashion shows, trade – ins.

• Post-purchase services include shipping and delivery, gift-wrapping, adjustments and returns,
alterations and tailoring, installations, engraving.

• Ancillary services include general information; check cashing, parking, restaurants, repairs,
interior decorating, credit, rest rooms, and baby-attendant service.

                        The services mix is a key tool for differentiating one store from another, so is
atmosphere. Atmosphere is another element in the store arsenal. Every store has a physical lay
out that makes it hard or easy to move around. Every store ‘has a look’. The store must embody a
planned atmosphere that suits the target market and draws consumers towards purchase.
 

Pricing decision

                            Prices are a key positioning factor and must be decided in relation to the target
market, the product-and service assortment mix, and competition. All retailers would like to
achieve high volumes and high gross margins, but the two usually do not go together. Most
retailers fall into the high-mark up, lower volume group (fine specialty stores) or the low-mark
up, higher volume group (mass-merchandisers and discount stores). Retailers must also pay
attention to pricing tactics. Most retailers will put low prices on some items to serve as traffic
builders or loss dealers. They will run storewide sales. They will plan markdowns on slower-
moving merchandise.

Promotion decision

                           Retailers use a wide range of promotion tools to generate traffic and purchases.
They place ads, run special sales, issue money saving coupons, and run frequent shopper-reward
programmes, in-store food sampling, and coupons on shelves or at checkout points. Each retailer
must use promotion tools that support and reinforce its image positioning.

Place decision

                           Retailers are accustomed to saying that the three keys to success are location,
location, and location.Customers generally choose the nearest bank and gas station. Department-
store chains, oil companies, and fast food franchisers exercise great case in selecting locations.
The problem breaks down into selecting regions of the country in which to open outlets, then
particular cities, and then particular sites.

                         Retailers can locate their stores in the central business district, a regional
shopping center, a community shopping center, a shopping strip, or within a large store.

In view of the relationship between high profits and high rents,, retailers must decide on the most
advantageous locations for their outlets. They can use a variety of methods to assess location,
including traffic counts, surveys of consumer shopping habits, analyses of competitive locations.

Retailers can assess a particular’s stores sales effectiveness by looking at 4 indicators.

1. Number of people passing by on an average day.

2. Percentage who entered the store.

3. Percentage of those entering who buy.

4. average amount spent per sale.

Trends in retailing

Following are the main development; the retailers and manufacturers need to take into account,
in planning competitive strategies.

1. New retail forms and combinations.

2. Growth of intertype competition.

3. Growth of giant retailers.

4. Growing investment in technology.

5. Global presence of major retailers.

6. Selling an experience, not just goods.

7. Competition between store based and non-store based retailing.

Marketing campaign for retail business

There are five major steps. These are:

1. Gather customer information.

2. Target the “Right” customers.

3. Create effective communication.

4. Host an event.

5. Follow up with guest.

Retail Marketing in India