A REPORT ON

CONVENTIONAL RETAILING

PREPARED BY: AKHILESH KUMAR

ROLL NO : 2010010

Conventional retailing - It refers to the traditional formats of low-

cost retailing. for example hand cart and pavement vendors & mobile

vendors, the local kirana shops, owner manned general stores, paan/beedi shops,

convenience stores, hardware shop at the corner of your street selling everything

from bathroom fittings to paints and small construction tools or the slightly

more organized medical store and a host of other small retail businesses in

apparel, electronics, food etc.

Characteristics of unorganized (conventional) retailING

Small-store (kirana) retailing has been one of the easiest ways to generate

self-employment, as it requires limited investment in land, capital and

labour.

 It is generally family run business, lack of standardization and the

retailers who are running this store they are lacking of education,

experience and exposure.

Unorganized retail sector is still predominating over organized sector in

India, unorganized retail sector constituting 98% (twelve million) of total

trade, while organized trade accounts only for 2%

Reason behind the conventional retailing

1. In smaller towns and urban areas, there are many families who are

traditionally using these kirana shops/ 'mom and pop' stores offering a wide

range of merchandise mix. Generally these kirana shops are the family business

of these small retailers which they are running for more than one generation.

 2. These kirana shops are having their own efficient management system and

with this they are efficiently fulfilling the needs of the customer. This is one of

the good reasons why the customer doesn’t want to change their old loyal kirana

shop.

 3. A large number of working class in India is working as daily wage basis, at

the end of the day when they get their wage, they come to this small retail shop

to purchase wheat flour, rice etc for their supper. For them this the only place to

have those food items because purchase quantity is so small that no big retail

store would entertain this.

 4. Similarly there is another consumer class who are the seasonal worker.

During their unemployment period they use to purchase from this kirana store in

credit and when they get their salary they clear their dues. Now this type of

credit facility is not available in corporate retail store, so this kirana stores are

the only place for them to fulfil their needs.

 5. Another reason might be the proximity of the store. It is the convenience

store for the customer. In every corner the street an unorganized retail shop can

be found that is hardly a walking distance from the customer’s house. Many

times customers prefer to shop from the nearby kirana shop rather than to drive

a long distance organized retail stores.

 6. This unorganized stores are having n number of options to cut their costs.

They incur little to no real-estate costs because they generally operate from their

residences.

7. Their labour cost is also low because the family members work in the store.

Also they use cheap child labour at very low rates. As they are operating from

their home so they can pay for their utilities at residential rates. Even they

cannot pay their tax properly.

Impact of organized retailing on the unorganized sector

The retail industry is divided into organised and unorganised sectors. Over 12

million outlets operate in the country and only 4% of them being larger than

500 sq ft (46 m2) in size. Organised retailing refers to trading activities

undertaken by licensed retailers, that is, those who are registered for sales tax,

income tax, etc. These include the corporate-backed hypermarkets and retail

chains, and also the privately owned large retail businesses. Unorganised

retailing, on the other hand, refers to the traditional formats of low-cost

retailing, for example, the local kirana shops, owner manned general

stores, paan/beedi shops, convenience stores, hand cart and pavement vendors,

etc.

The organized retail market is growing at 35 percent annually while growth of

unorganized retail sector is pegged at 6 percent. Currently the value of the retail

market is estimated at around $ 270 billion with a growth rate of 5.7 per cent

per annum according to the Indian retail report which creates a big threat for the

small unorganized retailers. The well established organized retail sector in India

are Pantaloon Retail, Shoppers’ Stop, Spencer’s, Hyper CITY, Lifestyle,

Subhiksha  & newly emerging Reliance etc. Over 20,000 new retail outlets are

expected to open within this segment. Major corporate retail like Wal-Mart and

have started to try and take over the Indian retail sector. the share of organized

retailing overall is 4%-5%.the share in some of the metro is 14%-15%.estimated

employment is the next 2 year is about 2 million.

STRENGTH OF ORGANIZED RETAILING

The bulk of investment in this form of retailing

The entrance of corporate houses with experience and through knowledge

of what and how of Indian consumers

Greater product assortment across categories

Technological advantage with modernization at its best

Range of retail formats right from neighbourhood to hypermarkets

Contemporary professional retail practices offering the newer retail mix

to consumers

High street location attracting large no of customer foot-falls in to stores

Nationwide large retail chain offering similar assortment in most of the

categories

Higher degree of awareness among the target group

Consistent brand building measures and unique promotion offers in place

AREA OF CONCERN FOR CONVENTIONAL RETAILING

The lack of modernization in the operations

The lack of deeper variety/attractive display of product

The lack of space which restricts the possibilities of shopping experience

The lack of price advantage/special promotion offers

Lack of capital for expansion and modernization activities

The lack of professional affiliation to higher level trade associations

IMPACT OF E BUSINESS ON CONVENTIONAL RETAIL

Integration of E-Business on conventional retailing procedures has brought on a

panacea for all business problems. This impact as brought in by E-business, has

not only revolutionized traditional retailing experience, but has also brought in

new ways for customers and retailers to focus on.

One of the vital roles that E-Business seems to offer apart from traditional way

of carrying out the retail process is that, E-business has vicariously conquered

the heart of its consumers and thus its easy time with convenience and results

for the retailers. This virtual connectivity has not only assisted businesses to get

rid of the trite of carrying business procedures, but has also resulted in assisting

both the retailers and the consumers from the ennui way of carrying out

transactions. Retailers are not only adding this E-word so as to build in a

differential strategy, to lower down their transaction costs and increase profits,

but are also using this as an alternative way to target audience, that in the past

was considered of being impossible to reach. With such changes being taken

place where consumers are getting aware of the E-advantage day by day, the

impact that one can conclude upon is the transformation of retailing procedures

towards a new horizon and thus diversifying consumer perception in a

prominent manner.

E-Business has also seen to offer several of disadvantages for online

transactions. These disadvantages act as threats that restrict much of the online

activity and tend to create an uncertainty towards the virtual environment.

Whereas apart from what advantages/disadvantages online retailing may have

retailers and customers are still seen to have been undergoing transactions

electronically, where it’s just not the convenience that tends to expiate

consumers and retailers mind for online buying and selling, but it’s the legality

of the electronic transactions too. This legality of the electronic transaction

which the law enforces upon the exchange of goods through the online medium,

to some extent can also be regarded as to why the E-phenomena is growing year

after year, where electronic contracts that are regarded of as being legally

bound, according to the law itself, have in turn resulted in for much of the

retailers and customers  to change their perception from traditional to the E-

ways of doing things, where exchange of goods can now be done in a safer and

lawful manner.

By referring to these facts and by developing an intuition regarding the future of

E-business, one can conclude or predict the E–future for conventional retail to

turn out to be positive, where it's not just because of the changing customer

needs that prefer convenience but it's the advantages as offered by this medium

which would sooner or later force retailers and customers to stick to the E-way

of doing things which is practical, lesser time consuming, convenient and

accessible to all.

Comparison between online retailing and conventional retailing

Pricing is a key issue in both conventional and on-line retail channels. Indeed,

Pricing may be the most important differentiator between the two channels.

Online Retailers are claimed to enjoy lower costs than their bricks-and-mortar

counterparts, and hence can offer lower prices. In case of online retailing

internet act as a perfect market because information is instantaneous and buyers

can compare the offerings of sellers worldwide. The result is fierce price

competition, dwindling product differentiation, and vanishing brand loyalty.

Superficially, however, on-line markets appear to be much less

Competitive than conventional markets. In book retailing, the largest chain

Barnes and Noble has less than a 30% share of the conventional market. By

contrast, the largest on-line retailer Amazon has over 70% of the on-line market.

HOW TO PROMOTE CONVENTIONAL RETAILING

Establishment of Retailer co-operatives among retailers which is highly

required for the sustenance of the unorganized retail sector

Merger and buy-out of weak retailers by a stronger one that would give a

new horizon to the small retailer

Setting up of franchisee organization may also help in strengthening the

position of the retailers. The franchiser can exert a tremendous control

over the way retailing is done.

There must be good network connection between retail organizations, the

suppliers and other channel members to use compatible technology so

that they can build strong distribution set-up to satisfy the customers.

Setting up of more and more non-store retailing centres would also ensure

a strong retailing organization. Non-store retailing makes implementation

of modern principles easier and less costly.

Moreover there must be a change in the mindset of the unorganized

retailer. They have to understand the pulse of the trend. They have to

understand, come forward & lead this change management then only this

sector not only can exist but flourish.