Retail Marketing

Retail industry in india

 $410bn by Oct. 2010
 Growing at 22% annually

 15 million retail outlets (32% in urban areas)

 Very high retail density (shops/ households)

 75% stores sell FMCG

 Food sales account for over 60% of total retail sales

Retail formats- classification

 Store- based vs. E-Tailing

 Ownership Based:
 Independents: mom-and-pop stores
 Chains
 Franchising:McDonald’s, Petrol Pump stores
 Leased department: Food courts, Cosmetics in stores
 Consumer Cooperatives: Apna Bazaar
 Store based formats
Retail Mix Elements
Type Example Location Assortment Services Prices &
Promotions
Traditional Shopper’s Business district, Extensive width & Good to excellent Average to high
departmental Stop, shopping centre, or depth, average to prices, heavy
store JCPenney isolated store good quality advertising
Full-line Wal-Mart, Business district, Extensive width & Slightly below Low prices, price
discount store Target shopping centre, depth, average to average to average oriented, moderate
isolated store or good quality sales force
strip centre
Specialty store Planet M Business district, Very narrow width, Average to high/ High prices,
shopping centre, or extensive depth excellent heavy use of
regional mall displays
Hypermarket Big Bazaar, Stand-alone Average Low Low
Carrefour

Supermarket Food Bazaar, Business district, Narrow width Average Average prices,
Subhiksha shopping centre, or (mainly groceries), self-service
regional mall extensive depth
Box (limited suburban shopping Few items, few customer brings Self-service, price
line) store strip, or isolated SKUs, Low priced bags lower than
store private label brands supermarkets
Convenience Kirana stores Every Average width and Personalized Average to above
store neighbourhood depth (fill-in service, home average prices
merchandise) delivery
 Store based formats
Variety store Dollar shop Business district, Good width and Below average Self service
shopping centre, or depth, below
isolated store average to average
quality
Off-price chain T.J. Maxx, Business district, Moderate width but Below average Newspaper
Filene’s suburban shopping poor depth, low advertising,
Basement strip, or isolated continuity brands not
store advertised
Factory outlet Out-of-the-way site Moderate width, Very low Little, self-service
or discount mall poor depth, some
irregular
merchandise
Membership Sam’s Club Isolated store or Moderate width, Very low Little
Club secondary site poor depth, low
(Warehouse continuity
stores)
Flea market Chor Bazaar Isolated site, race Extensive width, Very low Limited, self-
track or arena poor depth, service
variable quality
Drugstore Planet Health Stand alone, strip Very deep Average Average to high
centre
Home Lowe’s Stand-alone, power Very Deep Low to high Low
improvement strip centre
Centre
Choosing a retail format

Shoppers Retailer’s
Competitors
Objectives

Define Value Proposition

Find out the enablers and deterrents in the environment

Find out what it takes to deliver the value proposition

Location Size Merchandise Display Service Price

Decide on store or non-store format and their derivatives

RETAIL FORMATS - FUTURE GROUP’S FORMATS
Reasons for preference
 Proximity

 Merchandise

 Ambience

Determinants
 Positioning of the store

 Product categories

 Brands
Retailing and Brand Management
 A brand manager’s objectives
 Make sure the brand is present in the right retail channel
 Ensure visibility and shelf space at retail outlet
 Pricing and in-store experience in line with the brand’s
positioning
 Get data to monitor the brand and competition

 A retailer’s objectives
 Maximize profits from each product category
 Get maximum return on investment in space, goods
 Build a consistent brand image for the store itself
THE RETAILER’S PERSPECTIVE
 Money can be made from 3 sources
 Customers- The price that is charged
 Suppliers- bargaining power
 Operations- Efficiencies in SCM and store management

 The business model of a retailer reveals where it is

making money from:
 Walmart- Discount store, Suppliers & Operations
 High-end departmental stores: Premium pricing
Retail Pricing Strategies
Competition-oriented Pricing Retailer uses competitors’ price as a guide
Demand-oriented Pricing Retailer determines the range of prices acceptable to the target
market
Flexible Pricing The practice of offering the same products and quantities to
different customers at different prices

High-low Pricing
Leader Pricing
Everyday Low Pricing
(EDLP)
Use of high everyday prices and low leader specials on featured
items
Retailer advertises and sells selected items in its goods/ service
assortment at less than the usual profit margins
Retailer strives to sell its goods and services at consistently low
prices throughout the selling season

Prestige Pricing
Variable Pricing
Pricing based on the assumption that consumers will not buy
goods and services at prices deemed too low as they associate
quality with price
Altering prices to coincide with fluctuations in costs or consumer
demand

 EDLP is possible only for products having stable demand

 Fashion products have Hi-Lo pricing
 Luxury products have a constant high price, with only a clearance
sale to flush out stocks
Category Management
Sleepers
Products that don’t move fast
Need to be pushed
Optimize no. of items
Tie in promotions with winners
Questionables
No fit with store strategies and plans
Delete poorest performing items
Evaluate the options of increasing
prices
Winners
Cash Generators
High share, grow faster
Maximize cash generation, defend against
competitors
Morning Stars
High share of retailer’s sales
Steady or declining growth rate
Review pricing mix
Rejuvenate or milk the category

Assessing Economic Performance

 Gross Margin Return on Inventory (GMROI)
gross margin percentage X sales-to-stock ratio OR
gross margin/ average inventory
 Gross Margin Return on Floor Space (GMROF)

gross margin/ space provided

 Direct Product Profitability
Shopper Profiles
 The shopper profiles would vary according to the format, the
product categories carried and the positioning of the store.
 Shopper profile for an upgraded Kirana (viz.Subhiksha):

•Occasionally used items e.g.

cooking ingredients, packed food
etc
•Ease in finding the product in
store

•Variety – category & brands

• Repeat visit, loyal to store
• Purchase decision at store
• Variety displayed in shelf

• Pre-planned purchase
• Large use of coupons
• Long list – variety in category
might increase shopping basket
E-Tailing
 Major challenges
 Delivery- shipping, distribution and warehousing
 Customer acquisition cost
 Building Trust

 The most successful online ventures are those that do not involve
physical movement of goods. Eg. E-commerce, banking, ticket
booking and reservations

 A shopper will only buy those products online for which she is
ready to wait a day or more, because the delivery of the product
takes days

 Reducing prices is not a good option for an E-tailer. Customization

can provide value.
Customer Relationship Management
 Loyalty programs have to take into account the target
customer
 A database can help the retailer target well

 Targeted programs
 Give focus
 Enable targeted communication
 Reduce marketing spend
 Result in higher conversion

 Problems with card programmes: targetting during

purchase
Customer Relationship Management

A book-store’s customers

Behavioural (Patronage)
Hi Lo
Attitudinal Hi Tribes Wannabes
(Loyalty)
Lo Others Non-Customers

• Tribes: Most profitable customers. They should be

leveraged by involving them in events- say, a reading
session by an author
• Wannabes: Loyal, but do not spend much. Ask them to
volunteer for events to give them social gratification.
Thus, they can be used as ambassadors.
Store layout and design
 On entering a store, people usually move along walls and to their left.
 End-of-aisle promotions work the best.
 Destination categories are usually kept at the end of the store, so that
shoppers pass through the length of the store to get to them, thereby
increasing the chances of purchase of other categories.
 The arrangement of products on walls depends upon the product category
being displayed- for shoes, people like to compare different brands and
even pairs- hence shoes are placed next to each other on a wall. In case of
apparel, shoppers make stand-alone purchase decisions, hence they can be
stacked on top of each other.
 Fixtures, floor and ceiling materials, wall finishes, lighting, music and scent
all contribute are all important parts of the store layout.
 Exterior and interior signage(the store graphics) communicate the store’s
identity to the customer.
 Key trends … (1/4)

• Emergence of multiple franchisee model — This model is largely adopted by

companies offering products in value and semi-premium branded segments to enable greater
scale,limit dependence on a few players and leverage local hands-on knowledge of the market.
Jumbo King, the Mumbai-based snack major,and PepsiCo India are following this model.

• Rural retailing — Rural India accounts for more than 70 per cent of all Indian households
and close to two-fifths of the total consumption pie.Retail companies have realised the
importance of tapping the rural consumer base.For example, DCM Shriram's Hariyali Kisaan
Bazaar and ITC's Chaupal Sagar.

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 Key trends … (2/4)

• Collaborative model for international products — Joint ventures (JVs) are emerging as
the preferred model for new entrants,wherein foreign players leverage the knowledge of the
local player and focus on key issues such as quality,pricing,promotions and brand
management. Key examples include the Bharti Group JV withWal-Mart for retail and
wholesale retail and the Staples JV with Pantaloon Retail Ltd to launch its products in the
Indian market.

Sources: The Retailer, Ernst & Young, October 2009; Retail rivals close ranks to beat blues 'The Economic Times, August 10, 2009

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 Key trends … (3/4)

• Vertical integration — Retail companies are looking at integrating their business models
vertically to explore additional sources of revenues.For example,Dabur India Ltd’s retail foray
into health and beauty retail business through a retail chain known as‘NewU’,and Nokia
opening its concept stores.

• Collaboration in back-end resource sharing — Another interesting trend in the Indian

retail market is the collaboration of back-end resources by aligning their sourcing operations
and sharing private labels,logistics, warehouses and hiring details on a transactional payment
basis.For example,the Future Group, theAditya Birla Group, the RPG Group and the
Reliance Group have come together to reduce their operational costs and improve margins.

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 Key trends … (4/4)

• Increasing market reach — Retail companies now seek to increase their footprint inTier
II,III,IV cities and towns to capture the domestic demand.For example,the Raymond Group
has plans to open more than 200 stores across the country by mid-2011 and theTata Group's
retail venture,Westside,is planning to expand its franchisee base inTier II andTier III cities.

• Innovation in new retail formats — Retailers are not only investing in their
operations,but are also exploring the possibility of adopting new business models or formats.
For example,Reliance Retail has devised a new business model under which it will open small
employee-friendly retail outlets at the premises of large corporate organisations.The
Network18 group has ventured into online and on-air retail marketing and distribution
through HomeShop18.

Sources: Raymond to open 200 stores, The Hindu, January 10, 2010; Westside plans expansion via franchise route in small cities, The Economic
Times, May 22, 2008; Reliance Retail to open outlets at corporate, The Economic Times, January 10, 2010

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Key players* … (1/3)

Player Store brands (products)

Landmark (books and music),Croma (multi-brand electronics), World ofTitan (watches),

Tata Group Tanishq (jewellery), Titan Eye+ (eye wear), Westside (lifestyle retail store),Star Bazaar
(hypermarket chain), FashionYatra (family fashion store)

Central (shopping mall),Big Bazaar (hypermarket),Pantaloons (fashion outlet),Blue Sky

(sunglasses), Brand Factory (multi-brand readymade garment),KB's Fair Price (essential
products),Navaras (jewellery), Planet Store (multi-brand sports and lifestyle speciality retail),
aLL (fashion garments),Ethnicity (Indian ethnic wear), HomeTown (home needs), eZone
Future Group (electronics),Furniture Bazaar (home furniture),Electronics Bazaar (under Big Bazaar,
electronics stores), Home Bazaar (satellite version of HomeTown),Collection I (lifestyle
furniture),Gen M & One Mobile (mobile phones), M-Port (electronics),Shoe Factory
(footwear) and Depot (books and music)

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Key players* … (2/3)

Player Store brands (products)

Reliance Fresh (neighbourhood store),Reliance Mart (supermarket),Reliance Super (mini-
mart),Reliance Digital (consumer durables and information technology),RelianceTrends
(apparel and accessories),RelianceWellness (health,wellness and beauty),iStore (Apple
Reliance Group
products),Reliance Footprint (footwear),Reliance Jewels (jewellery),RelianceTimeOut (books,
music and entertainment),RelianceAutoZone (automotive products and services) and
Reliance Living (home ware,furniture,modular kitchens and furnishings)
Spencers (multi-format retail store),MusicWorld ( music and home video store) and Books &
RPG Group Beyond (book store)
Shopper's Stop (clothing,accessories,fragrances,cosmetics,footwear and home furnishing
store),Crossword (book store),Inorbit Mall (fashion,lifestyle,food and entertainment) and
K Raheja Group
Hyper City (hypermarket)

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 Key players* … (3/3)

Player Store brands (products)

Lifestyle (garments and accessories),Home Centre (household and furniture,garment and

Landmark Group
retail),Splash (high street fashion brand) and Funcity (family entertainment brands)

Bharti Group Field Fresh (fresh and processed fruits and vegetables — multiple-format store)

Mahindra Group Mom and Me (infant and maternity care)

Aditya Birla Group More (supermarket and hypermarket formats,earlier known as“Trinethra’)

Vishal Retail Vishal Mega Mart (multiproduct stores)

* This list is indicative

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