Food constitutes 62% of the total consumption expenditure of Indian

consumers, forming the single largest category spend. Considering the size,

opportunity and challenges in this segment, the company has outlined a

strategic roadmap for developing a formidable and profitable business in this

category. Leading the company’s presence in this category, Food Bazaar

witnessed healthy expansion during the year 2007-08, by adding 47 stores

during the year under review. The total count of Food Bazaars as on June

2008 stood at 136 stores. In order to build a dominant presence in the food

category, the company decided to explore both the premium and bottom-end

of the market, in addition to the mid-market presence through Food Bazaar. In

the premium segment, Food Bazaar piloted ‘Gourmet’ in Delhi for the

discerning customer seeking richer experience. This store celebrates lots of

impulse and destination categories packing in wide assortment of foods (both

local and imported). The store also presents fresh food experience with an

extensive assortment of bakery and customised snacking options.

Food Bazaar private brands have been very successful during the year 2007-

08 and have provided tough competition to established brands. Private brands

of Food Bazaar created a strong hold in the consumer mind-set, offering

better value for money proposition, and resulting in the company deriving

better margins in the business.

In order to cater to the very mass segment, a crucial development during the

financial year 2007-08 has been the launch of KB’s Fairprice and its

aggressive expansion plan. KB’s Fairprice is designed as a low-frills, small

format convenience store located in low-income neighborhoods in metros.

Similar to immensely successful Aldi chain in Germany, KB’s Fairprice stocks

1

only 300 SKUs, comprising of basic necessities, isn’t air-conditioned and

works on a very low operational cost structure. Launched in August 2007 in

Delhi, by June 2008, the company operated 101 stores in Delhi, Mumbai,

Hyderabad, Bangalore and Ahmedabad. Having met with a very enthusiastic

response from its target customer group, the company intends to have a very

aggressive expansion plan for the format with a planned opening of 20 stores

every month. The format is expected to garner a large share of the customer

segment, yet untouched by modern retail formats. Adding more value to the

food business is that the share of own brands as a percentage of total Food

Bazaar revenue has increased significantly and comprises nearly 60

merchandise categories with more than 320 SKUs across the FMCG

landscape. During the year under review, 14 new products with 32 SKUs

were launched, through private brands.

The buying teams of FMCG were re-structured around brand relationships to

exploit full potential of category growth initiatives in FMCG world. Perpetual

Inventory system was set up across all stores to regularize weekly stock take

of Top 100 high shrink articles. This has built rigour into the stock integrity of

the stores.

A number of new businesses and strategic steps taken at the group level is

helping the company derive more value in the food category. The most crucial

development has been the group’s acquisition of a controlling stake in Godrej

Adhar, a rural retail chain in 65 villages across India. This network not only

provides a channel to capture rural consumption but is also being scaled up

an efficient sourcing network for rural agri-produce that can serve Food

Bazaar. In addition, the group’s partnership with MyDollar Store franchise in

2

India is helping our network offer new, aspirational imported brands to

consumers. The group’s logistics arm, Future Logistics is also exploring tie-

ups with major international food brands for distribution in India.

The group, through its venture capital and private equity arms is exploring

opportunities to invest and partner with small and medium food brands and

manufacturers that will help build synergies for its food business. An

investment has already been made in Capital Foods, a company that markets

brands like Smith & Jones and Ching’s Secret.

In the forthcoming financial year, Futurebrands will significantly increase its

investments in the private brands in the food category. Thus, the critical

aspects of the food chain, sourcing logistics, brand development and supplier

engagement is helping the company build a more consolidated strategy

towards dominating the food consumption space.

Food Bazaar, the supermarket variant of Pantaloon Retail (India) Ltd, has

adopted the 'negotiated and predetermined' model to source vegetables and

fruit from farmers across states. The company uses the model to procure

potatoes from farmers in Uttar Pradesh where the quantity and quality of the

produce is predetermined. The company decides the price after the harvest to

give maximum benefit to the farmer. Of the 8,000 stock keeping units

available across the stores, 10% constitute the farm fresh segment, while the

international standard is around 12%. The company wants to push the former

to 15% in the next three years. In Maharashtra, the company has started

procuring Alphonso mangoes from farmers. It has tied up with the

Maharashtra State Agricultural Marketing Board (MSAMB) to buy directly from

3

RETAIL INDUSTRY

ORGANISED UNORGANISED

the farmers. The farmer and the retailer fix the price jointly. Almost 20% of the

cost is saved if the produce is procured directly from the farmers. The

company is already sourcing bananas and oranges from the state. They are

sourcing pineapples and potatoes from West Bengal.

PROFILE OF RETAIL INDUSTRY

Retailing is defined as a definite set of activities or steps used to sell a product

or a service to consumers for their personal or family use. It is responsible for

matching individual demands of the consumer with supplies of all the

manufacturers. Retail is India’s largest industry, accounting for over 10% of

the country’s GDP and around eight per cent of the employment.

Unorganized Retail

Counter stores, Kiosks, Street Markets and Vendors, where the ownership

and management rest with one person, are classified as traditional or

unorganized retail outlet. These formats typically require employees with low

skills and account for 97% of the sector’s output Unorganized Retail industry

constitutes about $320 million. These are highly competitive outlets, with

minimal rental cost (unregistered Kiosks or traditional property), cheap labour

(family members working) and negligible overheads and taxes.

4

LPG Revolution

But the scenario has been changed after the LPG revolution. In late 90’s,

government of India tried to create the bubble by allowing the Global players

in the Retail Arena. The Government allows 100 per cent foreign direct

investment (FDI) in cash and carry through the automatic route and 51 per

cent in single brand.

Government policies are becoming more favorable and emerging

technologies are facilitating operations. The whole concept of shopping has

altered in terms of format and consumer buying behavior, ushering in a

revolution in shopping

So because of favorable Government Policies, people are getting more

varieties and this has led to increase in spending power of consumers.

Following graph depicts this

5

Organized Retail

So to meet the needs of emerging India, there comes

‘The New Retail Landscape

Glimpses of the Organizational Challenges’

Modern retail has entered India as seen in sprawling shopping centers, multi-

storeyed malls and huge complexes offer shopping, entertainment and food

all under one roof. i.e. ORGANISED RETAILING CAME IN PICTURE.

6

But the story is set to change……

Retailing is going through a transition phase in India. For a long time, the

corner grocery store was the only choice available to consumers. But as the

corporate - the Piramals, the TATA, the Raheja’s, ITC, S.Kumar’s , RPG

Enterprises and mega retailers - crossroads, Shopper’s Stop and

Pantaloons race to revolutionize the retailing sector, retail as an industry in

India is coming alive. A small share of only 3% is generating 30% growth on

y-o-y basis.

Drivers of Organized Retailing

1. Favorable demographics

2. Changing attitude towards spending

3. Shifting customer preference towards organized retailers

4. Increasing/easier availability of quality mall space

The organized retail sector is driven by the factors like changing lifestyle,

income growth and favorable demographic pattern. And it is said, that

organized retailing in India is evolving as a star, and three-to-four years down

the-line will shine on the Indian markets.

Current Status

Retail Advancements: Fuelling the Boom

New formats meet the consumer requirements better

New needs enabled which otherwise could not be enabled

E.g. in the leisure and entertainment areas

Higher value addition in the retail chain e.g. food versus dining out

So there is fundamental shift in retail, a very significant change in organized

retail

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Retail Change: An impact beyond

Expectations

1. A widespread social and economic impact

2. An impact on consumers trends an consumption

3. A change in business opportunities for manufacturers.

TRANSFORMATION IN THE RETAIL SECTOR

So due to changing needs of consumers there are Key Challenges for

Manufacturers so this has led to a significant organizational impact which led

to the changing market dynamics.

1. New sales team and sales processes

Now the sales systems has been changed retailer purchases directly

from manufacturer or do contract farming with farmers so due to that

the distribution chain can be reduced and cost can be saved, but

previously long supply chain was there which increases the cost of

production.

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2. New logistics systems to deliver

New logistical systems help firms to reduce cost and thereby provide

customers products at the lowest cost

3. New products and competitive equation

Previously customers are getting only price and quality from a product

but due to competition the scenario has been change, now customer

not only want low price but also wants the following things given below.

Changing competitive Equation

Value = Price + Quality + Benefits + Convenience + Service +

Ambience

7 P’S IN RETAIL MARKETING

1. PRODUCT:

Product and merchandise management is a key activity in the management of

retail business. It drives the business strategy of the retailer and has immense

cost and profit implications. While product management deals with issues

related

Product management, in the context of retailing, may be

defined as a set of decisions related to the selection and removal of

products from the retailers’ portfolio, along with the related product and

market analysis.

The selection of the right quantity of the product and ensuring

its availability at the right place and time.

This involves a careful planning of products mix and its financial

implications are reflected in the products budget.

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To the kind of products sold by the retailer,

Following are the points every retailer will consider during planning of Product

Mix:

1. Variety: Variety is the very important point while planning the product mix

because variety creates the demand and which automatically attracts the

consumer towards the retail store. As consumers are of different kinds one

wants the products of a good quality and another wants the same at low

price. Companies are now extending their product lines to provide huge

verities to consumers.

E.g. In malls customer even can get a huge variety of a single product like

in case of fruits and vegetables, consumers can get different grades of

fruits and even imported fruits.

2. Quality: In organized sector consumer not only considers price but also

focus on the quality. A better quality provides the consumer satisfaction

while consuming the goods. As retail outlets provides lots of varieties in

products so consumer would able to judge the qualities in different

products.

E.g. For apparels, In spykar store, customer would find only apparels

(jeans) of spykar brands, but in Lifestyle (a MBO). Customer would find

various brands and types of apparels.

3. Packaging: Packaging gives more satisfaction to the customers towards

the quality of the products. In retail outlets the product packaging gives

more preference as it attracts the customer’s mindset.

E.g. When any kind of hyper markets, try to sell the Perishable goods like

grocery items then customer expecting more freshness in that items so

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that outlets provide a good and air tight packaging to satisfy the

consumers.

2. PLACE MIX:

Place mix is the very important aspect, a service provider has to consider

because if service provider don’t know where he has to serve than the target

people can’t be accessible. The two main important things service provider

has to consider while deciding place are Location and use of Distribution

Channel.

Retail is the thing where retailers serve the products to the customers and for

them location and distribution Channels are very important thing to consider,

as location helps to determine target customers accessibility of retailer to

serve them. Where as distribution channel helps to determine availability at

right time, place and right price.

1. Location: For deciding location retailer has to look after target customer.

As retail service is people based so there must be interaction between the

customer and provider. Apart from this retailer also has to look after upon

the strategies of competitors.

E.g. Today the organized retail has taken the footprint in cities across the

country but very few at negligible amount. There are many reasons but

infrastructure a facility, target customers and government policies

interrupts while deciding location. But now many retailers are going in rural

areas by different distribution channels that we will see in next point.

E.g. UP Government banned the retail stores.

2. Distribution Channel: After choosing the location the second important

decision is to decide the distribution channel. As the retailer’s main

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objective is to reduce the price of their products offering, it can be

achieved only by reducing the intermediates in the distribution channel.

There are types of distribution channels like

1. Franchising : In franchising, franchise sells the product of service firm

and gets a fixed percentage on the sell. E.g. Koutons, Reebok,

Addidas, and The Mobile Store Of Essar Group.

2. Agents and Brokers: In this big retailers use agents and brokers who

are having good contacts and distribution services in their location.

3. Cash and Carry: It is a form of trade in which goods are sold from

wholesale warehouse operated either on a self-service basis, or on the

basis of samples (with the customer selecting from specimen articles

using a manual or computerized ordering system but not serving

himself) or a combination of two. Customers (retailers, professional

users etc) settle the invoice on the spot and in cash, and carry the

goods away themselves. Biggest examples of cash and carry are as

follows:

1. Wal-Mart and Bharti

2. Metro in south

3. PRICING:

Retail service providers offer a range of service at different price levels to

cater to the needs of different target segments that may have different levels

of purchasing power. Setting the right price can influence the quantities of

various products or services that consumers will buy, which in turn determines

the total revenue and the profit of the retail store, in short, the right price for

the product or service is the price that the consume is willing to pay for it.

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A retailer needs to understand the price sensitivity of customers that form his

target segment. The price sensitivity of customers is based on various

personal, social or geographical factors and presents a major challenge for

retailers while setting prices.

Pricing objective:

A Retailer should frame the proper pricing objectives to keep in mind:

1. Competitive oriented

2. Growth in the market

3. Customer affordability

4. Maximise profit

5. Earn a good market share

6. Leadership in service quality

E.g. In Apparels, Brand named “PANTALOON” only caters the needs of high

income level of consumer segment and provides premium brands and sets

the prices according to the Apparel quality. Their pricing starts Rs.1000. So,

this would only target premium class.

On the other side, Brand named “GLOBUS”. They are targeting all income

groups their pricing starts from Rs. 200 to Rs. 20000 for an apparel. So this

pricing strategy gives customer more variety, flexibility and durability. And

helps the retailer to grab the larger pie of the cake.

Methods of pricing in retail services:

1. Demand based pricing: In retailing, service provider has to set the

objectives of pricing as per the demand situation in the market. This is

generally used where the services are price sensitive. In this cost is not

13

considered but the service providers allows the demand to determine

price.

E.G., In apparels segment, basically in summer season, prices of

apparels are very high as the demand is more of cotton cloths. But

as winter comes, the demand for cotton cloth is low so that retailer

sells that apparels at a discounted price.

2. Competition based pricing: In this method of pricing, the price is

determined on the basis of competitor’s price. Price under such

situation s may be used to gain short-term competitive advantage over

rivals.

E.G. BIG BAZAAR, Future group’s store, always provides a discount

offer of 50% on Independence Day and republic day. And from that

large revenue has bagged. And also helps to gain the competitive

advantage for the short and long term.

4. PROMOTION MIX:

The retail sector is one of the most competitive in India after LPG, and so

effective promotion strategy is needed in order to be successful. However,

many retailers get caught up in the day-today running of their companies and

don’t use all their business strategy expertise to push their business forward.

If you are in the retail business, then you need to wake up and think carefully

about your current promotion strategy.

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If you don’t then you could find yourself trailing behind the competition and

losing business to other retailers. If you want to improve your retail promotion

strategy, then here are some techniques to promote your business.

INDIRECT METHOD

Indirect method represents the indirect way of reaching to the consumers to

promote the products by using various communication vehicles like

advertising, internet, and broachers.

Advertisements

This the another way to reach to the great number of customers through a

single medium that is advertisements on television, radio, etc. advertising on

the television and radio, etc. reaches a huge audience (including people who

would be unlikely to be reached in any other way), and raises awareness of

the issues as well as attracting support.

15

RETAIL PROMOTION

INDIRECT METHOD

DIRECT OR P-O-P METHOD

Advertisement

Internet

In Store Advertising Media

Display

Broachers Incentives or Offers

Internet

With the Internet increasing in popularity all the time, it is extremely important

to use Internet marketing as a way to improve market share. In order to

improve your access to customers, create a web site where customers can

view your merchandise and possibly buy products online. Selling your

products online is a great way of expanding your business without having to

spend lots of money on new premises or retail locations. However, if you don’t

want to develop online business, then you can still advertise your business

online. Effective marketing strategy should use all mediums available to

improve business exposure, and with online advertising a low cost and

effective medium it makes sense to take advantage of the opportunity.

Broachers

This is another way to reach to customers it is basically used when new retail

store or new variety is introduced in the market, as it needs more

advertisement and it is very effective to reach the people of locality very

easily.

DIRECT OR P-O-P METHOD

The retail point of purchase represents the time and place at which all the

elements of the sale-the consumer, the money, and the product-come

together. By using various communications vehicles, including displays, sales

promotions, in-store advertising, the retailer hopes to influence the

consumer's buying decision which can provide them with a competitive edge.

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In-store advertising media

Retailers can use a number of innovative approaches for reinforcing brand

awareness and delivering advertising messages at the point of purchase.

These include:

1. Commercials broadcast over in-store sound systems.

2. Moving message display units with changeable electronic messages.

3. Customer-activated videotapes and video disks that show merchandise

such as furniture that are too bulky to be displayed on the department

floor; the videotapes can also be played in window displays to present,

for example, designer fashion shows.

4. Television sets installed over cash registers to show waiting customers

commercials for products that are usually available nearby.

5. Advertisements on carts used in supermarkets and other self-service

outlets.

6. Affordable change displays that use available air space rather than

limited floor space.

Display

For one thing, they can use well designed displays are as follows:

1. They attract consumer attention,

2. Facilitate product inspection and selection,

3. Allow the access of several customers at once,

4. Inform and entertain, and stimulate unplanned expenditures.

5. They reduce store labour costs by facilitating shelf stocking and

inventory control, minimising out-of-stock items, and lowering the

required level of back-room inventory

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As additional display space can expand sales without any change in retail

price, consumer goods retailers increased their spending on displays. Well-

designed displays respond to the needs of both the retailer and the consumer.

Incentives or Offers

To attract the customers and to motivate them to come again and again

retailer can offer various incentives or offers like:

1. Free samples might be mailed, delivered door-to-door, placed in bins

in retail stores, or attached to or inserted in another package.

2. Coupons are certificates which, when presented for redemption at a

retail store, entitle the bearer to a stated savings on the purchase of a

specific product.

3. Money-refund offers are propositions in which a sum of money

/occasionally the full purchase price) is returned by mail to participants

who mail in proof of purchase such as a box top.

4. Price-off deals offer consumers a certain amount of money off the

regular price of a product, and state the amount on the product's label.

5. Premiums are items of merchandise offered free or at a low cost as a

bonus to purchasers of a particular product.

6. Contests are also major consumer-oriented promotion devices. These

differ in that in a contest participants compete for a prize or prizes on

the basis of their skill in fulfilling a certain requirement, usually

analytical or creative.

7. Free-goods deal, an offer of a certain amount of a product to

customers at no cost to them but dependent on the purchase of a

stated amount of the same or another product.

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Demonstration (i.e., showing products in use) is another common consumer

promotion device.

5. PEOPLE:

In retail business, thus retailer has a good technology and all facilities but yet

it may not be able to provide satisfactory customer service due to lack of

interpersonal relationship between service provider and customer. That

means, retailer has to focus on improvement in internal staff so that they will

satisfy the customer in a better way.

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RETAILER

INTERNAL STAFF(FRONT LINE

STAFF: EMPLOYEES)

CUSTOMER OR CONSUMER

Good training, customer- oriented

attitude

Customer satisfaction

If customer satisfied, then customer would retain

In Retail, Customer wants more interaction with the employees to get the

knowledge regarding products which they are going to purchase. Although in

employer point of view there is only one method i.e.

Customer Contact Employees: They are known as front line staff as

they come in direct contact with the customers in the process of

service delivery

E.g. Front office staff in MBO’s these contact employees are very

important because they represent the organisation and can directly

influence the customer satisfaction by giving them a convenience. But

now comes that how much degree of personnel goes for customer

satisfaction level are as follows:

1. High contact personnel: They are required when the physical

presence and the interaction of the customer with the employees

for the longer time E.G. An orgnanisation, marketing their product

in the Hyper Market.

2. Low Contact Personnel: They are required when the physical

presence and interaction with the customer is for the lesser time.

E.g. Employees in an Retail outlet serving their customer only for

the product information, not for the product marketing. So they

spend very lesser time with customer.

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6. PROCESS:

Service process refers to how a service provided or delivered to customer.

For providing a services, there is one methodology or a process to give

convenience to customer by making a user – friendly and a simple process. In

retail sector, someone finds self service is a consumer friendly process and

another finds it hectic process for finding the things in the retail outlet.

Retailers always try to make the process more friendly and simple. For this

they provide trollies and hand-bag where consumer can shop very easily, but

in the peak time, retailer cannot satisfy the consumer by the payment making

process as consumers are in a larger cues. For making more convenient to

customer there are three different types of processes adopted by the retailers,

which are very usable now a days.

1. Emergence of Online Shopping: In this technological era, everybody

is friendly with latest communication technology i.e. Internet. Which is

fastest way of getting product information where consumer can get the

information. But the many IT companies make the online shopping

processes for the customer, and customer can purchase the product by a

click.

E.g. E-Bay, indiatimes online shopping and sify shop et al.

2. Customer Participation: In this process, where the customer

participation is exist in the shopping. From this productivity can be

increased and cost can be reduced.

E.g. Malls and super markets.

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3. Home delivery process: Now, the customer can get the products

easily by the process of Dial – a – Phone concept, where many retailers

are using

E.g. This process is used in the food and bewerages segment, like Mc

Donalds and domino’s pizza.

7. PHYSICAL EVIDENCE:

Physical evidence means “the environment in which the service is

delivered and where the firm and customer interact; and any tangible

commodities that facilitate performance communication of service.”

It includes all the efforts taken by the service provider to tangibles services

they include:

Ambient factors

Air conditioning

Excellent ventilation

Design factors

Uniform appearance

Extensive parking lot

Spacious interiors

Social factors

Well dressed employees

Courteous

friendly

Elite and up market crowd

Family atmosphere

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In retail sector as far as unorganized stores are concerned due to limited

margins they cannot afford these all services to their customer. These all

things you will find only in the organized retail shops. E.g.

1. MacDonald.

2. Cafe Coffee Day: The physical appearance of the outlet is very

attractive, so they every customer would like to go over there.

Due to lack of sufficient area in the metro cities it is very difficult to arrange for

the parking lots over there. Therefore they started multistorey building in

which parking facility is provided.

SEGMENTATION OF ORGANIZED RETAIL SECTOR IN INDIA

Specialty stores cater to a specific vertical, which is shown in SEGMENT I.

Two or more stores from segment one come together to form segment two

stores. Food and grocery and households goods from the segment one

together form supermarkets (SEGMENT II). Some super markets also stock

pharmaceuticals. Similarly a hypermarket stocks food and grocery, apparel,

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SEGMENT I

Food and GroceryFMCGApparelFootwearBeauty ProductsFashion Accessories Electronics Consumer DurableJewellery Home decor

SEGMENT II

Super Market

Hyper Market

Department store

SEGMENT III

MALLS

household items, durables, footwear, accessories, electronics, furniture, etc. A

department store stocks products with a lifestyle proposition and branded

clothes, footwear, home décor, durables, high end jewellery and watches.

SEGMENT III is made up of malls. These will have stores from both SEGMENT

I&II. In addition to these, malls also have beauty parlours, restaurants, and food

courts, entertainment zones and multiplexes with huge area.

Format Description The Value Proposition

Specialty Stores

Focus on a specific consumer need, carry most of the brands available

Greater choice to the consumer, comparison

between brands is possible

Department Stores

Large stores having a wide variety of products, organized into different

departments such as clothing, house wares, furniture, appliances, toys,

etc.

One stop shop catering to varied/ consumer needs.

Supermarkets Extremely large self-service retail outlets

One stop shop catering to varied consumer needs

Discount Stores

Stores offering discounts on the retail price through selling high volumes and reaping economies of scale

Low Prices

Hyper- mart

Larger than a supermarket, sometimes with a warehouse

appearance, generally located in quieter parts of the city

Low prices, vast choice available including services

such as cafeterias.

Shopping Malls

An enclosure having different formats of in-store retailers, all under one

roof.

Variety of shops available to each other.

CHARACTERISTICS OF RETAIL INDUSTRY

The spectrum of Retail Industry is quite wide in nature. Retail serves

consumers through a small grocery store to a huge departmental store. Retail

Industry is heavily dependent on consumer spending. In fact 2/3 of US GDP is

coming from Retail business. Retail is the second largest industry in US. It

has employed 23 Million people . During economic slow down consumer

spending decreases and it poses threat to the Retail industry. Consumers

confidence is one of the key drivers of the industry.

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Decline in Small Stores

It is observed that small independently owned stores are gradually loosing

their foothold in the market place. These stores are generally called “Mom and

Pop” stores and they offer limited merchandise to the consumer. These store

are facing stiff competition from the large departmental stores or superstores

and in this process they are closing down their shutters. In many locations the

arrival of a superstore has forced nearby independents out of business. In the

book selling business Barnes & Noble superstore or Borders Books and

music usually puts smaller bookstores out of business. This is a major

characteristic prevailing worldwide. But it is also true that many small

independent outlets still thrive by knowing their customers better and

providing them with more personalized service.

Internet and E-Commerce

Internet the ubiquitous medium has opened a new avenue in front of the

Retailers. It has offered an opportunity to the consumers to shop from the

home. As it stands today overall Retail sales through internet may not be that

significant but gradually it is gaining popularity amongst consumers.

Amazon.com is the company which is very successful in this E commerce

domain.

Repositioning of Departmental Stores

The appeal of big departmental store is in the wane and they are trying to

reposition themselves. They are repositioning their product lines to survive in

this highly competitive market eg. A departmental stores which is supplying

general merchandise to the consumer is changing themselves to a giant

apparel store.

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Rise in Discount stores

Supremacy of Discount store is also one of the distinct characteristics of

Retail Industry today. Discount stores offer money back guarantee, every day

low price etc to lure customers. They also provide floor help and easy access

to the merchandise to facilitate the consumer. Wal- Mart the worlds largest

Retailer comes under this category of Retail store.

Category Killers

There are Retailers who actually concentrate on one particular product

category and grab a lion’s share of that market and outperform their

competitors. They are called Category Killers. Toys R Us (Toy market ), Home

Depot (Home Improvement) , Staples (Office Supplies) are the examples of

such Retailers who have grabbed a major market share in that product

category and they have forced a reduction in the number of players in that

product segment. This is also a distinct trend observed in the current Retail

market. Ten years back there were number of players in the toy market and

no one was controlling more than 5% of market share but now the number of

players has come down to six and Toys R Us is enjoying 20% market share.

Direct Marketing

With the advancement of technology Retailers have found another sales

channel through which they can reach the consumer and this is direct

marketing. Direct marketing has their root in direct mail and catalog marketing

(Land’s End and LL Bean). It includes telemarketing, television direct

response marketing. (Home shopping network, QVC) . Although an

overwhelming majority of goods and services is sold through stores, non store

Retailing is also growing at a faster rate. Direct selling is $9 Billion industry

26

with around 600 companies selling door to door.

Avon ,Electrolux ,Southwestern company ,Tupperware and Mary key

cosmetics are the examples who have adopted this strategy successfully.

Demographic Changes

Retail industry is impacted by the demographic changes. As a result of this

change taste of the consumer is undergoing a change and it creates a

demand for certain products. World wide Retailers are keeping a close watch

on this change and they are trying to realign themselves with this change.

Mergers and Acquisitions

Retailers who want to dominate the market place have adopted the strategy of

mergers and acquisitions. This is also one of the distinct trends in Global

Retail Industry today. Instead of achieving an organic growth Retailers can

grow significantly with the help of mergers and acquisitions. This helps them

to occupy more shelf space in the market place. As the volume increases they

are establishing better control over their suppliers and they are reducing the

procurement cost and in that way they are boosting their profitability. This is

driven by the economic growth factors, size ,revenue pattern and the

customer demand. Sears and Land’s End merger is one of the significant

mergers which has happened in recent times. Another important example

would be Nikes acquisition of Hurley, a well known surfing brand. This has

helped Nike to enter in to a new market segment.

OPERATIONAL ISSUES

In order to survive in this Industry, which is driven by the consumer demand

Retailers need to successfully counter the operational issues. If the Retailers

27

fail to diagnose and address those operational issues their existence will be

jeopardized.

Supply Chain Management and Logistics

The process of getting goods to the customer has been traditionally known as

Physical Distribution. Physical Distribution starts at the factory and it ends at

the store. Nowadays the definition of Physical distribution is expanded and a

broader concept has come which is Supply Chain Management. Ideally

Supply Chain Management encompasses the material flow from supplier’s

suppliers to the final destination. Retailers need to have a grip on that whole

chain in order to control the procurement and delivery cost. This will help them

to choose the right supplier for the merchandise. Retailers need to come out

of the constricted view about the supply chain which is viewing the market as

a point to point destination, instead they need to consider the holistic picture

which is a part of Market Logistics. Market Logistics involves physical flow of

materials from point of origin to the point where it meets the customers

requirement.

This Demand Chain orientation can help them to cut down the procurement

cost to a great extent. IKEA the global furniture retailing giant has successfully

addressed this issue and they are able to sell quality furniture at a much lower

cost than his competitors.

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Pricing

In Retailing environment pricing has become a burning issue to the retailers.

Customer’s expectation from a Retail store has become very high and

customers are looking for more and more bargain prices. This situation can be

referred as Price drought . Price deflation is taking hold in the Retail

environment and any reduction in volume is complicating the scenario further.

This trend is quite evident in Apparel and Consumer goods market. Pricing

seems to be a key positioning factor and must be decided in relation to the

target market , Assortment mix and competition. Strategic pricing has become

an important strategic tool to the retailers. Airlines

Industry started this strategic pricing technique where the underlying

philosophy is not all consumers want a particular product at the same time

and the degree of demand will also vary. With this idea in mind different

consumers are charged different prices for the same product or service.

Retailers need to adopt the right pricing tactics in this environment of fierce

competition. Retail stores markdown the price for some items to attract

people, this is called traffic building. They also run storewide reduction sell.

It is observed that a shoe Retail outlet sells 50% of the product at normal

mark up , 25% of the product at 40% mark up and remaining 25% at cost.

Some Retailers have done away with sales pricing and they are resorting to

everyday low price (EDLP). It leads to lower advertising cost , greater pricing

stability and higher Retail profits. Wal- Mart uses this kind of pricing strategy.

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Sales Channels

Design of sales channel is also a key operational issue in today’s Retail

industry. Technology has become one indispensable business component

and Retailers need to make use of this successfully. Retailer needs to come

out from the mindset of traditional store retailing and they need to use all

available channels to reach a wider consumer community. Amongst Non store

Retail channels Internet and E commerce is gradually gaining popularity.

Consumers do not need to come to store for buying goods or service they can

do that over a click of a button from their drawing room. Retailers need to

derive benefit from that .

Marketing through call centre or catalogue marketing is also an emerging

trend .

Retailers need to choose sales channels carefully and need to use all those

channels effectively to acquire more customer centricity. Ultimate objective

here is to offer a consumer a tailor made shopping experience and to provide

more easy access to his product and service offering.

STRATEGIES IN RETAIL

A business firm can not travel in an unplanned way . To encounter the

business challenges in a highly competitive environment and to find out a

sustainable growth road map Retailers need to realize the importance of

strategic planning. Strategic planning can be viewed as a stream of decisions

and activities which lead to Effective business strategies which help the

organization to fulfill its objectives.

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Retail landscape is changing rapidly and in this changing economic

environment Retailers need to find out the right strategy which will help them

to cope up with this environment and empowers them to take right decisions

for the future. Adopting correct strategy will help the Retailers to optimize their

resources and also it will give an edge over its competitors. Margin and

Turnover are the two important parameters of Retail Industry and the Retail

operations can be classified into four groups/quadrants.

i) High Margin and High Turnover eg. a convenience food store

ii) Low Margin and High Turnover eg. a discount store

iii) Low Margin Low Turnover i.e .a dying business

iv) High Margin Low Turnover eg. an up market specialty store.

Retail business needs to formulate the suitable strategy after considering its

strengths and weaknesses. Hence SWOT analysis will be an effective tool in

determining the correct strategy for the particular category of retail business.

Some of the strengths and weaknesses of the Retail industry are outlined

below.

Strengths :

These are the areas on which success stories have been built and therefore

retailers need to capitalize on that.

i) Supremacy of Discount store

ii) Advancement in the area of Information Technology

iii) New sales channels like E-commerce and direct marketing.

iv) Availability of consumer credit. Explosion of financial institutions

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Weakness:

i) Slow performance of Chain Stores

ii) Advent of Category Killers.

Opportunities :

i) Brick and click : A combination of traditional store retailing along

with non store retailing like Internet and E commerce.

ii) Premium Priced Store : Premium priced stores are targeting the

high income group customers and earning healthy profits .

Tiffany and Co is an example of such premium priced store.

iii) Entertainment in Retail : Entertainment Industry and Retail

Industry are working hand in hand to attract larger section of

consumers. Sony Copr has opened some huge entertainment

complexes in USA and so many retail outlets are also housed in

the same building and they are complementing each other and

both are doing quite well.

Threats:

i) Demise of Independent small stores

ii) Demographic Changes

IT IN RETAIL

Information Technology has become a key business driver in today’s world.

Retailers are also trying to reap in the benefits of the technology. Thus

technology has become a critical and competitive tool for surviving in the

business. Retailers are using software systems to manage and plan their

inventory , to reduce the procurement costs , electronic ordering , electronic

fund transfer , e mail communication and for many other things. IT is poised to

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take a much bigger role in Retail Industry however the high implementation

cost of IT projects has restricted many Retailers to go for proper IT solution. IT

growth areas in Retail are mentioned below.

Supply Chain Management:

Supply chain is one of the focus areas for the Retailers and immense

opportunity of business process improvement and scope of technological

empowerment is there in this area. In today’s tough economic climate

customers have become price sensitive and there is a price draught in the

market . Retailers are struggling to control the cost and in this environment

effective Supply Chain Management can act as a big contributor. It helps

them to integrate with their suppliers and through collaborative planning

retailers can reduce the cost. SCM solutions will enable Retailers to track their

inventory movement from supplier’s premises to the point of sale. It gives a

better visibility in the area of demand planning, forecasting and inventory

management. Worlds largest Retailer Wal –Mart has adopted a state of the

art SCM system which not only tracks the inventory but also it increases the

efficiency of the process. Wal –Mart has also introduced the Radio Frequency

Identification (RFID) of merchandise.

CRM

CRM continues to be a growth area for IT in Retail sector. Advancement in

this field helps to maintain sophisticated customer database and systems that

can maximize multi channel returns. This helps the retailers to understand the

customers demand pattern and enables them to offer a tailor made shopping

experience.

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Internet

Internet has unfolded lot of opportunities to the Retailers. Retailers can do

business over internet. It can also be used as a communication medium.

Successful Retail community uses internet technology for reliable

communication between Retailers , customers and suppliers.

Business Intelligence

Business Intelligence is an effective analytical tool which helps the Retailers

to understand the eco system of retail business . It helps the business

community to take mission critical business decisions which will help them to

navigate in the right direction. In today’s world Retailers equipped with such

data mining or data warehousing tool can have the micro level understanding

of customer demand.

IT PLAYERS IN RETAIL FIELD

Retalix :

Retalix is one of the leading software providers in the Retail sector. It’s North

American headquarters is located in Dallas ,Texas. Retalix software is

designed to be modular, scalable to large transaction volumes ,capable of

handling rapid scanning with high reliability. The product is compatible with

multiple store format and hardware systems.

Retalix is fulfilling the role of a true strategic technology partner, helping their

clients to adapt to rapidly changing market requirements by using the multi

format Retail solution . With the help of constant industry interaction they fine

tune their solution portfolio continuously.

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The breadth of functionality and versatility of Retalix solutions has enabled

Retalix to achieve a sizeable market penetration. With installations in more

than 25,000 stores and quick service restaurants across 44 countries Reatalix

has emerged as a significant player in this market.

Oracle :

After a fierce battle with SAP ,Oracle has recently completed its acquisition of

Retek, one of the leading software product vendors in Retail sector. With the

help of this acquisition Oracle has gained a competitive edge in the market

place. Oracle’s Retail solution a combination of technology and

comprehensive business application helps the retailers to do their forecasting

and demand planning in a more accurate manner. It streamlines the supply

chain operation and helps the business to reduce the supply chain costs and

to accelerate the inventory turn over process. It has the capability of handling

different kinds of pricing and promotions. Effective supplier collaboration is

also possible through Oracle’s solution.

SAP :

SAP worlds most successful ERP vendor is also a front runner in the Retail

Industry segment. SAP’s Retail solution is an Industry specific solution that is

tailored to the specific standards, process and challenges of Retail industry. It

delivers rich functionality productivity building tools through out the

organization and they help the business to adopt the best business practices

that SAP has developed in over 30 years of working with industry leaders

worldwide. SAP’s solution is modular in nature and it gives the flexibility to the

business to select the building blocks and it ensures faster implementation.

SAP offers easy integration and virtually unlimited scalability.

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SAP has more than 2700 customers in the Retail industry worldwide.

SAP has recently completed the acquisition of Triversity. According to the

market analysts SAP will be able to extend its market leadership with the help

of this acquisition.

For nearly two decades, Triversity has been a leader in the worldwide retail

marketplace with solutions deployed in 32 countries. Triversity delivers

flexible, comprehensive, retail market-leading solutions that include traditional

and enterprise point-of-sale, store inventory management, POS loss

prevention, customer loyalty, stored value, store back-office and in-store and

multi-channel customer service. These solutions are highly complementary to

SAP’s existing retail solution offering, and SAP and Triversity already have a

strong list of joint customers including The Body Shop, Casa Ley, Indigo

Books, Wawa and Trader Joe’s.

RETAIL SCENARIO IN INDIA

Overview :

Economic liberalization has brought about distinct changes in the life of urban

people in India. A higher income group middle class is emerging in the Indian

society. Demographic changes have also made palpable changes in social

culture and lifestyle . In this environment Indian Retail Industry is witnessing

rapid growth . AT Kearney has ranked India as fifth in terms of Retail

attractiveness. The industry has got tremendous potential but it also requires

sufficient capital flow. Current Foreign Direct Investment policy of Indian

Government does not allow any foreign direct investment in this sector

however different global retail players are seriously eying this market.

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Industry Characteristics:

Indian Retail Industry is the largest employer after Agriculture (around 8% of

the population) and it has the highest outlet density in the world however this

industry is still in a very nascent stage. The whole market is mostly

unorganized and it is dominated by fragmented Kirana stores. A poor, supply

chain and backward integration has weakened the whole process. Organized

corporate retailers contribute only a negligible percentage of the overall retail

business. Organized and trained Retail workforce is not available in India and

the overall skill level is low mainly because of the low maturity level of the

Industry.

Business Opportunities

However India can unveil significant business opportunity to the Retailers.

Indian retail sector is estimated to have a total market size of $ 180 Billion. A

McKinsey report on India says organized retailing would increase the

efficiency and productivity of entire gamut of economic activities, and would

help in achieving higher GDP growth.

The factors responsible for the development of the Retail sector in India can

be broadly summarized as follows:

1. Rising incomes and improvements in infrastructure are enlarging

consumer markets and accelerating the convergence of consumer

tastes. Looking at income classification, the National Council of Applied

Economic Research (NCAER) classified approximately 50% of the

Indian population as low income in 1994-95; this is expected to decline

to 17.8% by 2006-07.

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2. Liberalization of the Indian economy which has led to the opening up of

the market for consumer goods has helped the MNC brands like

Kellogs, Unilever, Nestle, etc. to make significant inroads into the vast

consumer market by offering a wide range of choices to the Indian

consumers.

3. Shift in consumer demand to foreign brands like McDonalds, Sony,

Panasonic, etc.

Major Retail Players in India:

Retailer Current Turn Over in Rs. Crore

Pantaloon 700

RPG 550

Shopper Stop 400

Life style 230

Westside 120

Ebony 85

Piramyd 72

India’s retail market which is seen as THE GOLDMINE by global players has

grabbed attention of the most developed nations. This is no wonder to the one

who knows that the total Indian retail market is US $350bn. (16, 00,000 crore

INR approx.) of which organized retailing is only around 3 percent i.e. US

$8bn (36,000 crore INR approx).

“Retailing includes all activities involved in selling goods or 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.”

Retail is India's largest industry, accounting for over 10 per cent of the

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country's GDP and around eight per cent of the employment. Retail industry in

India is at the crossroads. It has emerged as one of the most dynamic and

fast paced industries with several players entering the market.

The presence of 15million kirana stores brings into light the very fact that the

Indian retail industry is highly fragmented/ unorganized. Retailing in India is

gradually inching its way toward becoming the next boom industry, organized

retailing in particular. The whole concept of shopping has altered in terms of

format and consumer buying behavior, ushering in a revolution in shopping in

India. Modern retail has entered India as seen in sprawling shopping centers,

multi-storeyed malls and huge complexes offer shopping, entertainment and

food all under one roof.

The future of Indian retailing may even witness the concept of 24 hour

retailing. Even though this concept has been in existence in few retail

segments like pharmaceuticals and fuel, it still remains to be a challenge for

other segments like food and groceries, apparel etc to adopt this trend.

Although the organized retailing in India is coming up in a big way, it cannot

simply ignore the competition from the conventional stores because of various

factors like reach, extending credit facility and other intangible factors like the

human touch which are provided only by the conventional stores.

The urban retail market has been embracing various new formats and the

malls turned out to be the trend setters by promising the concept of

shoppertainment. The trends in the rural market also have been changing

from the old Haats and Melas to the rural malls like ‘Chaupal Sagar’ launched

by ITC, DCM Shriram Groups one-stop shopping destination called ‘Hariyali

Bazaar’, Godrej groups agri store ‘Adhar’ etc.

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FINDINGS AND ANALYSIS

Food retailing in India is highly compartmentalized and predominantly consists

of small independent, owner-managed shops — consumers visit different

shops or open markets for different products. No one outlet supplies all the

shopper’s needs. Larger supermarkets are visited once or twice a month to

stock up on staples, while smaller outlets such as the local provisions shop

are visited on average every other day for odds and ends. Generally, the food

outlets fall in the following categories: fair-priced shops, grocery stores,

general merchants and vendors and, more recently convenience stores and

supermarkets. There are no hypermarkets or club warehouses.

Almost all retail stores sell products at the maximum allowed retail price

(MRP) printed by the manufacturers on every item and enforced by the

government. Very little price competition exists between the various types of

stores. The MRP often dictates the margin for not only the retailer but also the

distributor, wholesaler, and other middlemen. One important exception to this

rule is fair-price shops, government-sponsored outlets which sell medium-

quality staple products (mostly rice, wheat, cooking oil, and sugar) at prices

generally lower than the market. These stores offer no fresh produce and no

refrigerated or frozen foods. They are generally located in rural areas,

constituting an essential and one of the very few elements of the

government’s safety net for the poor. The number of stores outside the fair-

price shops is significant, and comprises most of the food retailers in India.

Small neighbourhood, family-owned grocery stores with an average size of

250 square feet mainly sell food commodities. Consumer loyalty is strong,

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based on convenience and added services such as credit and free home

delivery. These stores usually sell unbranded products, which are individually

weighed and packed. Such stores are often simply counters on the sidewalk

behind which owner/managers take orders.

General merchandise stores are similar to grocery stores but are somewhat

larger, with an average size of 500 square feet. They stock a wider range of

products as well as branded items, snack foods, and confections. Products

are generally prepackaged, and services such as home delivery and credit

are also available.

Convenience stores are also on virtually every street corner and range in size

from kiosks of 50 to 60 square feet to larger shops of 100 to 150 square feet.

They carry an impressive range of products, including imported jams,

confectionery products, snack foods, magazines, toiletries, and even frozen

seafood. However, these convenience stores cater to an extremely small

percentage of the population.

Vendors (hawkers) sell fresh fruits and vegetables on open stalls or

handcarts along every sidewalk in the city. Often the selection of fruits and

vegetables is limited and the quality poor.

Self-serve supermarkets are a more recent phenomenon in India, although

there are still no supermarkets in the Western sense of the word. Most are

large grocery “chains” operating in major cities in the south, resembling U.S.

supermarkets 40 years ago. These 3,000- to 5,000-square-foot, self-service

stores stock a wide range (by Indian standards) of groceries, snacks,

processed foods, confectionery items, and cleaning and personal care

products. Some have small bakery sections, and some sell fresh produce and

41

dairy products. The produce is either displayed in-store or immediately

outside the door, often this space is leased to another company. Frozen foods

are often available as well, although selection is very limited. Frozen foods are

relatively new to retailers, featured in small, top-loading freezers owned and

placed by the supplier. Products include small packs of frozen fish sticks and

patties, prawns, processed chicken patties, frozen chicken parts, chicken and

lamb samosas, pre-cut vegetables, and french fries. It’s estimated

supermarkets typically account for 1 to 2 percent of the sales of consumer

goods in a particular city.

Consumer response to supermarkets has been moderate because most do

not have access to transportation to a supermarket and are still in the habit of

buying fresh produce daily from local stores. This is mostly due to the

convenience (proximity to homes) personal service of local stores. Many

shoppers also have the perception that prices are higher at supermarkets

because they are large, brightly lit, and air-conditioned. Large retail formats

are also faced with high overhead costs (e.g., high rental prices for new

entrants) and the existing supply chain economies. Real estate prices are

high (compared to older, rent -controlled shops) and restrict new entrants from

opening large retail outlets in established markets. In addition, expansion in

this sector is hampered by the lack of reliable nation wide transportation,

complex taxation between states, and limited cold storage facilities.

Nevertheless, the number of supermarkets is expected to grow in coming

years, as higher-income consumers focus more on convenience and quality

and more foreign investors are attracted to this sector.

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Consumer Purchasing Behavior

Many Indians are vegetarian by tradition; moreover, many can only afford a

vegetarian diet. Meat may be regularly consumed by less than 30 percent of

the Indian population, due to its higher cost and a predominance of

vegetarianism and Hinduism. However, only 20 percent of the population is

strictly vegetarian. Non-vegetarians typically consume meat only once or

twice per week.

Higher income consumers rely almost entirely on domestic help for their

shopping. The domestic help buys staples, vegetables, and fresh foods from

local small grocers and vendors, and other products from a variety of general

merchants. The middle class has diverse purchasing habits. Many families on

the upper end use part-time domestic help to do their shopping, often

necessitated by a growing pattern of households with two working parents.

Many families at the lower end of the middle class continue to do their own

shopping. The poorer segments of the Indian population tend to buy basic

staples with the first part of their paychecks, which typically are distributed on

the first few days of each month. During the month, the poorer customers will

buy whatever fresh foods and consumer goods they can afford, often filling in

at the end of the month with some additional staples purchased on credit. In

all classes, women do most of the shopping and make most of the food

purchase decisions.

Most consumers prefer local shops to larger supermarkets because of

proximity, personal attention, and lower prices. Nearly 95 percent of

consumers purchase fresh fruits and vegetables from a local market or street

43

vendor. Additionally, traditional markets are considered the freshest source for

foods.

Indians have a strong preference for freshly prepared foods, and most have a

definite prejudice against packaged, branded, or processed foods, believing

them to be lower in flavor and nutrients. Many households will not even reheat

foods, and make only enough for one meal. This is mainly to avoid waste, but

also to ensure freshness since refrigeration is available only in wealthier

households. However, with urbanization, rising incomes, more working

women, the arrival of large food multinationals, and a proliferation of fast food

outlets, acceptance of packaged food products is increasing. Packaging of

imported goods is typically better than that of domestic goods.

Also, India has many regional differences in food tastes and preferences. For

example, residents of Mumbai (formerly known as Bombay) are more willing

to try new foods than those in other Indian cities. As Mumbai is home to a

more progressive and skilled labor force than other parts of India, many

multinational corporations test market new products in that city.

Food Distribution

India has both organized and unorganized channels for distributing goods.

The food distribution system is frequently inefficient and is complicated by a

number of factors, including lack of adequate refrigeration, packaging,

efficient transportation; and the presence of numerous independent

intermediaries.

A lack of modern refrigeration in both warehouse facilities and delivery trucks

is perhaps the most constraining factor in developing the market for fresh

fruits and vegetables. The costs of building cold storage facilities are very high

44

because many of the facilities are small by global standards and thus do not

take advantage of economies of scale. A typical frozen cold store in India, for

frozen food application, is 40,000 cubic feet, compared to the 200,000 cubic-

foot units typical of Westernized countries. In addition, Indian cold storage

firms tend to rely exclusively on storage revenue. In Western countries, cold

storage firms derive a good share of their revenue by offering a range of

services: handling, freezing, inventory management, delivery, palletizing,

labeling, load mixing, and so on. The lack of adequate cold storage facilities is

also due in part to the low demand for cold chain facilities. Many consumers

simply do not place an added value on refrigerated foods and often are not

willing to pay more for them. Also, the lack of refrigeration is in part due to the

high cost and limited availability of electricity.

Post-harvest produce losses (which can run as high as 35 percent) reportedly

are quite significant for imports as well. To overcome this problem, some of

the bigger retail operations are beginning to have their own cold storage

facilities and refrigerated trucks. However, once produce arrives at the retail

level, it is unlikely it will be kept under refrigeration.

While some produce, such as grapes and strawberries, is packed in modern

facilities in cardboard boxes or plastic clamshells, most produce is not

packaged. Often the produce is not packaged at all. Instead, it may be packed

in wood boxes with straw and old newsprint around the edges or between the

layers of produce.

Lack of adequate transportation infrastructure makes it extremely difficult to

move perishable agricultural items to cold storage in a timely manner.

Currently, it is illegal to use large refrigerated trucks (over 9 tons) in India.

45

Interstate movement is often unreliable due to the failure of shipping

companies devote attention and resources to product handling.

There are numerous intermediaries who have little appreciation of consumer

demands. The intermediaries lead to unnecessary handling waste, and an

inevitable drop in the quality of the product. For example, it is not uncommon

for there to be six or seven intermediaries in the fruit and vegetable sectors.

However, in spite of the number of intermediaries involved they are important

because they partially make up for the lack of infrastructure providing

functions normally performed by transport companies, commodity processors,

and cooperatives in other countries.

Fruits and vegetables are typically supplied to markets through wholesale

centers, better known as Agricultural Produce Market Committees (AMPC’s).

APMC’s are quasi-governmental organizations established to regulate

marketing of agricultural products at the wholesale level to create price

transparency. APMC’s are set up for growers to market their products and

usually represent an area that grows similar crops. In addition, they are

responsible for dissemination of market-related information, such as

production, storage, transportation, and movement of commodities.

Growers have the option of selling their produce not only through a local

APMC, but also through other APMC markets or directly to retailers.

Regardless of who buys the produce, the buyer has to pay the 1 percent

CESS tax, which goes back to the APMC. While wholesale markets are

important links in the distribution chain for domestic produce, they are less

likely to figure prominently in the distribution of imported produce. Some

importers have their own distribution networks delivering the produce from

46

their own cold storage facilities directly to the hotels, restaurants, and retail

outlets. Most of the produce imports are funneled through APMC’s for

distribution.

Despite the large number of intermediaries in the Indian retail market, typically

the retailer has the option of either buying food products from a wholesaler or

distributor, another retailer, an importer, or directly from overseas suppliers.

While wholesalers and distributors sell to stores of all sizes, licensed

importers are more likely to sell only to large retailers. The Indian importer

may also act as a wholesaler or distributor, and quite often the larger retailers

sell food products to the smaller retailers. However, established distribution

patterns are slowly giving way to more streamlined operations, with the larger

retailers increasingly buying directly from exporters and farmers.

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KEY FINDINGS

SIZE

India is one of the ten largest retail markets in the world

Retail sales were US$270 billion in 2006, over 30% of GDP

Organised Retail’ constitutes only 4.6% of total retail sales - about

US$12.4 billion p.a.

However, ‘organised retail’ has been growing at over 40% p.a. in the last

2 years

STRUCTURE

The Indian Retail sector is highly fragmented: mostly owner-run ‘Mom

and Pop’ outlets

Over 15 million retail outlets

Retail chains such as Pantaloon, Trent and RPG Retail have been

growing rapidly, while Reliance, Bharti and Aditya. Birla Group have

announced investments to the tune of US$9 billion in the sector

Dairy Farm, Metro, Shoprite and Marks & Spencer are some of the major

international retail chains in India

POLICY

100% FDI is allowed in Cash and Carry Wholesale formats. Franchisee

arrangements are also permitted in retail trade

51% FDI is allowed in single brand retailing

Government is examining further liberalisation of FDI in retail trade

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Top Players in the Retail Industry

Players Revenues for

2006-07in US$

millions

Retail Space as on May

2007 (Sq. ft.)

Format

Future Group (Pantaloon Retail) 704 6,630,000 F&G, Specialty

Raheja Group (Shoppers’ Stop) 220 1,590,000 F&G, Specialty

Tata Group (Trent, Infiniti Retail) 111 880,000

Speciality Retail, Electronics, Hyper Markets

RPG Retail 146 810,000 F&G, Specialty

Aditya V Birla 61 890,000 F&GSource: TSMG

OUTLOOK

The overall retail market is expected to grow from US$270 billion to

about US$660 billion by 2015, with organised retail at US$100 billion

(approximately 15% of total retail sales)

India is expected to be among top 5 retail markets in the world in 10

years. India identified as the most attractive destination for retail in AT

Kearney’s Global Retail Development Index

POTENTIAL

The high growth projected in domestic retail demand will be fuelled by:

  The migration of population to higher income segments with increasing per

capita incomes

  An increase in urbanisation

  Changing consumer attitudes especially the increasing use of credit cards

  The growth of the population in the 20 to 49 years age band

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There is retail opportunity in most product categories and for all types of

formats

  Food and Grocery: The largest category; largely unorganised today

  Home Improvement and Consumer Durables: Over 20% p.a. CAGR

estimated in the next 10 years

  Apparel and Eating Out: 13% p.a. CAGR projected over 10 years

Opportunities for investment in supply chain infrastructure: Cold chain and

logistics

India also has significant potential to emerge as a sourcing base for a wide

variety of goods for international retail companies

  Many international retailers including Wal-Mart, GAP, JC Penney etc. are

already procuring from India

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F&G Retail Projections For 2010-11

Reliance Fresh: To cover 70 cities, 784 urban towns and 6,000-odd

rural mandis

Future Group : 250 Food Bazaars with 2.5 million sq. ft. in 50 cities

RPG Group : 500 Spencer's Fresh, Daily, Super and Hyper

Wadhawan Group : 1,500 Spinach/S-Mart/Sabka Bazaar outlets in 100

cities

Subhiksha : 2,500 neighbourhood outlets across the nation

Other major players firming up Pan-India plans include  Bharti-

Walmart, AV Birla Group (Trinethra/More), Heritage Foods (Fresh @,

Hypercity, Dairy Farm, (Foodworld), Nilgiris, Radhakrishna Foodland,

Influx, Landmark Group (Spar), Mother Dairy & Safal & region specific

expansion by Jubilant Group (Jumbo Saver & Monday 2 Sunday),

Hopcoms & Margin Free in south, Adanis in east and Arambagh

Foodmart in East India among others.

Almost all major Indian & MNC retailers will foray in to cash and carry

model to structure backend and take full advantage of large scale

production, procurement, processing and also to put supply chain &

logistics mechanism in place.

 

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FOOD BAZAAR - FUTURE GROUP

Kishore Biyani led the company’s foray into organized retail with the opening

up of the Big Bazaar in the year 2001.

It is a unit of Pantaloon Retail (India) Ltd and caters to the Great Indian Middle

Class. It was started as a hypermarket format in Mumbai with approx. 50,000

sqft of space. Its values and missions are to be the best in Value Retailing by

providing the cheapest prices and hence goes the tag-line

“Is se sasta aur achcha kahin nahin”

It sells variety of merchandise at affordable rates, the prices of which it claims

are lowest in the city. Usually the items are clubbed together for offers as on

the lines of Wal-mart and Carrefour and it also offers weekend discounts. It

currently operates out of more than 100 stores and top 25 stores register a

cumulative footfall of 30 lakh a month on an average.

PRODUCT:

Big Bazaar offers the maximum variety for each category of product. The

product is the same in every store in the city but the brand options are more in

Big Bazaar. Also, the quantity for each product is not limited to large packs only.

The commodities sold by the retail chain also includes its “own products” which

get a ready distribution network. The own products of Big Bazaar include My

World fashion magazine which is not available anywhere else. So costs are low

for such products.

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PRICE:

Price is the critical point in a competitive industry. Big Bazaar works on a low

cost model. It considers its discounted price as its USP. There is an average

discount of 7-8% on all items in respect to their MRP. Prices of products are low

because it is able to secure stock directly from the manufacturer. There are huge

synergies in terms of bulk purchasing, central warehousing and transportation.

These all factors help the retailer to keep low prices.

PLACE:

Place means the location of the business. Big Bazaar has always worked on

low-cost locations. It targets semi-urban population with its placement. Its

strategy is to find a cheap location and it never goes for hot spots in the city. It

relied on promotional activities to make up for unattractive locations. Another

strategy used by Big Bazaar to overcome location disadvantage is use of

internet. It has launched a merchandise retailing website www.futurebazaar.com

which targets high-end customers ready to use credit cards. The promotion of

this website is done through advertisement on Google. The website is put as

sponsored link.

PROMOTION:

Big Bazaar has huge promotion budgets. The biggest idea behind all

advertisements is to make people do bulk shopping. There are 2 types of

promotional strategies of big bazaar. One is the holistic advertisement which

promotes the brand and creates awareness among people. It is not targeted at

promoting each store but only creates an image of Big Bazaar as low-cost

shopping option. The store has advertised through TV, road shows and also

started reality show-typed promotional campaign “The Big Bazaar Challenge.”

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Promotions like “Sabse Sasta Din” are a very successful strategy to get footfall.

In this products across categories such as apparels, furniture, electronics,

utensils and food products at the lowest possible prices, coupled with attractive

promotional schemes. Some of the most attractive offers being a 20-litre

branded microwave oven with grill for Rs 2,499, jeans and trousers for Rs 199

and HCL laptops for Rs 22,990.

Other type of promotion is the particular store oriented promotion which includes

speaking on the loudspeaker in nearby blocks. Leaflets are given in local

newspaper. There are promotional efforts even inside the store. Buy 2 Get 1

Free type of promotions are very common. Original prices are cut down and new

prices are shown, of which customer takes quick notice. There are loyalty

schemes which reward regular clients. Promotion is also done through co-

branded credit cards with ICICI bank.

Big Bazaar’s New Marketing Strategy:

Big Bazaar has launched new marketing strategy which is based on Guerrilla

Marketing. Guerrilla marketing warfare strategies are a type of marketing

warfare strategy designed to wear-down the enemy by a long series of minor

attacks, using principles of surprise and hit-and-run tactics. Attack, retreat,

hide, then do it again, and again, until the competitor moves on to other

markets. Herein guerrilla force is divided into small groups that selectively

attack the target at its weak points. In the world of cut throat competition,

corporate use extension of the same strategy in marketing. Corporate like

Coke, Pepsi, etc have been using the same for quite some time now and the

latest entrant is our very own ‘Future Group’- Big Bazaar, Pantaloons, Future

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Bazaar, eZone are all part of this group and they are taking on the biggies like

Shoppers Stop, Lifestyle, and Tata’s Westside.

In order to do the same, Future Group have come up with 3 catchy/cocky and

cheeky ad campaigns which surely do catch our eyes and surely one can’t

resist appreciating the same.

Keep West-aSide. Make a smart choice!

Shoppers! Stop. Make a smart choice!

Change Your Lifestyle. Make a smart choice!

Future Expectations:

Big Bazaar is planning to have 300 hypermarkets in the country by 2010-

11. The company may also increase its annual turnover to Rs. 13,000 crore

by 2010-11, up from Rs. 3,600 crore last fiscal on the back of its expansion.

The company has also gone on record saying that it would have another 35

stores by the end of its fiscal in June 2009 to take the total number to 135. To

achieve this they are targeting a turnover of Rs. 5,000 crore in the current

fiscal year and have formulated plans for reaching a figure of Rs. 13,000 crore

by 2010-11 fiscal. 

For the expansion, the company would be looking at both the metros and Tier

I cities, besides Tier II cities & smaller cities.

The marketing strategy seems to be perfectly on track as the Big Bazaar

hypermarkets had a footfall of 11 crore last fiscal and the company is aiming

for an increase in the numbers up to 14 crore this year. The average size of a

Big Bazaar hypermarket is 30,000 sq ft to one lakh sq ft. 

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Advertising:

The departmental store chain Big Bazaar has launched a commercial

sometime back to promote 'The Great Exchange Offer'. The commercial

portrays how customers can exchange any old and broken items (junk) and

get new products at a discounted price from Big Bazaar.

The 30 seconds film unfolds through the eyes of a cabbie in a busy city street,

he is intrigued by the disruptive visual of a well-dressed office executive

carrying a bundle of old newspaper and walking through a crowded place.

The cabby then notices a young office going lady in western wear carrying a

rusty bucket filled with broken utensils, the cabbie is absolutely confounded

but continues to follow her with a broken tyre in his hand and comes across

another absurd situation of a highly placed executive in a chauffeur driven car

with a broken commode on the top of the car.

Penultimate situation reveals everybody is heading towards Big Bazaar for the

exchange offer; the cabbie comes out of the store happy and excited after

getting an amazing deal for his junk tyre.

Moving images are interspersed with supers that hi-light the amazing prices a

consumer can get for his junk. The sound track uses a typical kabada guy's

shout as he walks through City Street calling for junk.

The month of January and February is generally a low-key affair in terms of

customer footfalls and revenue generation. Innovative, out of the box

promotions is one of the effective ways to draw customer attention and shore

up the revenue. Historically Exchange schemes have been used to induce

better sales, it also has a strong appeal with the Indian mindset of getting

value even for their junk, states an official release from Big Bazaar.

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Brand Ambassador:

A brand ambassador is a celebrity (or an attractive or interesting person) used

to help advertise a product or services.

Big Bazaar, has roped in cricketer Mahendra Singh Dhoni as the Brand

Ambassador for its new range of fashion apparel. Dhoni would feature in a

series of advertisements across all media. Dhoni and Big Bazaar have a lot of

synergies as the Indian one-day international team’s captain stands for the

aspirations of youths, while Big Bazaar is looked up to by millions of Indians to

fulfill their aspirations.

In this way, Big Bazaar make full use of the marketing mix for a new venture

which earlier belongs to the unorganized retail sector i.e. kirana stores.

Application of the best marketing practices helps Big Bazaar in a great way.

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FOOD BAZAAR

Life is all about good taste and food bazaar aims to ensure the same. With the

low prices, a wide selection of products and guaranteed freshness, you are

bound to find it irresistible. Food Bazaar invites you for a shopping

experience, unique by its ambience. At Food Bazaar you will find a hitherto

unseen blend of a typical Indian Bazaar and International supermarket

atmosphere.

Flagged off in April’02, Food Bazaar is a chain of large supermarkets with a

difference, where the best of Western and Indian values have been put

together to ensure your satisfaction and comfort while shopping.

The western values of convenience, cleanliness and hygiene are offered

through pre packed commodities and the Indian values of "See-Touch-Feel"

are offered through the “bazaar-like” atmosphere created by displaying

staples out in the open, all at very economical and affordable prices without

any compromise on quality.

The best of everything offered with a seal of freshness and purity will definitely

make your final buying decision a lot easier.

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STORES IN DELHI

Rohini

Address : Vikas Surya Shopping Mall, Manglam Place, Plot No. 18, Sector 3,

Near M2K Multiplex, Rohini, New Delhi

Inderlok :: With Big Bazaar  

Address : Parsvanath Metro Mall DMRC Station, Inderlok, New Delhi

Wazirpur :: With Big Bazaar  

Address : Netaji Subhash Place, Metro Station Ansal MGF Metro Plaza,

Wazirpur

Select City Walk :: Saket  

Address : Select City Walk, Plot No. A - 3 & P1B, District - Centre, Saket

Funcity Mall :: Shahadara :: With Big Bazaar  

Address : Funcity Mall, Plot No. 29 and 31, CBD Shahadara, Opp. Surajmal

Vihar

V3S Mall :: New Delhi  

Address : V3S Mall, 2nd Floor, Plot No.12, Laxmi Nagar, New Delhi

Vasant Square Mall :: New Delhi :: With Big Bazaar  

Address : Vasant Square Mall, Plot No. A, Community Centre, Vasant Kunj,

New Delhi

Rajouri Garden :: Delhi :: With Big Bazzar  

Address : Rajouri Garden, West Gate Mall, Shivaji Nagar

Shalimar Bagh :: New Delhi  

Address : 3rd Floor, DLF City Center Mall, AP Block, Shalimar Bagh Near

Petrol Pump

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7 P’s OF FOOD BAZAAR

Product

Fresh fruits and vegetables

Staples

Groceries

Fresh juices

Dairy products

Price

Not much discount on MRP of packaged goods like competitors

Place

10 stores in Delhi

Promotion

SMS

Leaflets

In-store visits

Word of Mouth

Others

Process

Farm-to-fork business model

Backward Integration

Physical Evidence

Layout

Store and shelves

Bill counters

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Shelves

Customer loyalty cards

People

People Philosophy

Profit Centers

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