RETAIL MARKETINGIn the growing market, retail marketing has become one of the major emerging trends in the entire economical cycle. It is the retail market only which provides the consumer a basic platform to encounter with goods and a shop keeper for the first time. Retail market consists of a fixed location like boutique, store, departmental store etc, here in these location consumers meets the shop keeper and purchase goods in return of certain value. Maintaining a certain profit margin, these shop keepers sell goods to their consumers. The basic motive of these shopkeepers is to satisfy the consumers and fulfill their needs and demands.

Retail marketing strategy has become one of the basic elements of marketing strategy which includes a lot of planning and proper execution of this planning. Now let us first focus on the basic nature of retail. Firstly in retail, a marketer needs to focus primarily on the needs and desires of the customers.

Retail marketing even focuses on satisfying the customers, maintaining a proper profit margin for the owner of the goods. Customer needs are the basic key factors of retail. Retail marketing consists of 5 basic pillars, first is saving the precious time of the customers. Second is setting the right prices of the goods, third is creating a proper connection with the emotions of the customers, fourth pillar is paying the right respect to the customers and lastly solving the problems of the customer is another pillar of retail.

Creating customer loyalty is the basic function of retail, as once you create customer loyalty towards your brand it will be easier for you to stay in the market for a longer period of time. Creating customer loyalty is not a very easy task, as it takes years for a brand to create customer loyalty.You can only create customer loyalty if you have a retail marketing plan, some of such marketing plans are the sales promotional activities .

Reward program includes special gifts on purchase of bulk goods and loyalty cards are special privileged cards which are offered to customers in order to provide them huge discounts and free gifts. These sorts of special sales promotional activities not only increase the sales target but at the same time increase customer loyalty also.

With so many new sales promotional programs promoted by the retail marketing strategies, now it is possible to create a healthy relationship with the customers. Previously creating emotional bonding with the customers was not taken into consideration, and thus customers were only treated as customers who were just supposed to pay the price of the goods. Thus, this resulted in lower customer loyalty and it gave rise to huge number of product switching.

Retail Marketing is the range of activities undertaken by a retailer to promote awareness and sales of the company’s products. This is different from other types of marketing because of the components of the retail trade, such as selling finished goods in small quantities to the consumer or end user, usually from a fixed location. Retail marketing makes use of the common principles of the marketing mix, such as product, price, place and promotion. A study of retail marketing at university level includes effective merchandising strategies, shopping and consumer behavior, branding and advertising. Retail marketing is especially important to small retailers trying to compete against large chain stores.

ProductThe cornerstone of the retail marketing definition is the product. In the retail environment, merchandise is classified according to the category into which it falls. These categories include hard or durable goods such as appliances, furniture, electronic goods and sports equipment; food; and soft goods or consumables. Soft goods include clothing, furnishings, cosmetics, paper goods and other items with a typical life span of three years or less. For example, in a small business selling handmade crafts, the products would likely all fall under a single category.

PlaceThe place where retail marketing occurs helps to define the process. A retail operation can be store-based retail or non-store, according to the Internal Revenue Service’s Retail Industry Handbook. More than 90 percent of U.S. retail stores are small, single-store, owner-managed operations; however, these generate less than 50 percent of sales from retail stores countrywide. A definition of retail marketing includes the places where it occurs, such as in-store, online and points of sale. This

also applies to non-store operations such as retail sales taking place from the business owner's home.

PricePricing is a major aspect of any retail marketing strategy. The price of merchandise helps to define the methods of retail marketing employed, as well as the target market, store location and retail format used to sell it. Pricing in the retail environment is based on fulfilling objectives such as covering the cost of sales and overhead, and in accordance with the four basic retail pricing strategies. These are everyday low pricing, high/low pricing, competitive pricing and psychological pricing. In a small retail business such as selling handcrafts, pricing may be based purely on the cost of sales, because overhead costs, if they exist, are minimal.

PromotionRetail marketing relies heavily on the promotional aspect of the marketing mix, as can be seen by the number of print advertisements for consumer goods such as clothing, food and furniture. Promotions take place in both traditional media such as television, print, outdoor billboards and radio, as well as new media such as the Internet. The choice of promotional channels is influenced by factors such as the competitive retail environment, the profit margin on sales and the budget available for promotion purposes. The success of retail marketing is defined by the success of the business in selling its merchandise. Promotion may be more difficult for small businesses, because of their lower advertising budgets, but social media provides a low-cost method of promotion.

Types of Retailers

There are 7 main types of retailers which can be defined by the size of their business and the way they in which they sell their products.

The 7 main types of retailers are-

1. Department Store – This type of retailer is often the most complex offering a wide range of products and can appear as a collection of smaller retail stores managed by one company. The department store retailers offer products at various pricing levels. This type of retailer   adds high levels of customer service by adding convenience enabling a large variety of products to be purchased from one retailer.

2. Supermarkets – Generally this type of retailer concentrates in supplying a range of food and beverage products. However many have now diversified and supply products from the home, fashion and electrical products markets too. Supermarkets have significant buying power and therefore often retail goods at low prices.

3. Warehouse retailers – This type of retailer is usually situated in retail or Business Park and where premises rents are lower. This enables this type of retailer to stock, display and retail a large variety of good at very competitive prices.

4. Speciality Retailers – Specialising in specific industries or products, this type of retailer is able to offer the customer expert knowledge and a high level of service. They also add value by offering accessories and additional related products at the same outlet.

5. E-tailer – This type of retailer enables customers to shop on-line via the internet and buy products which are then delivered. This type of retailer is highly convenient and is able to supply a wider geographic customer base. E-tailers often have lower rent and overheads so offer very competitive pricing.

6. Convenience Retailer – Usually located in residential areas this type of retailer offers a limited range of products at premium prices due to the added value of convenience.

7. Discount Retailer – This type of retailer offers a variety of discounted products. They offer low prices on less fashionable branded products from a range of suppliers by reselling end of line and returned goods at discounted prices.

Types of Retail outlets

Department Stores

A department store is a set-up which offers wide range of products to the end-users under one roof. In a department store, the consumers can get almost all the products they aspire to shop at one place only. Department stores provide a wide range of options to the consumers and thus fulfill all their shopping needs.

Merchandise:Electronic AppliancesApparelsJewelleryToiletriesCosmeticsFootwearSportswearToysBooksCDs, DVDs

Examples - Shoppers Stop, Pantaloon

Discount Stores

Discount stores also offer a huge range of products to the end-users but at a discounted rate. The discount stores generally offer a limited range and the quality in certain cases might be a little inferior as compared to the department stores.

Wal-Mart currently operates more than 1300 discount stores in United States. In India Vishal Mega Mart comes under discount store.

Merchandise:Almost same as department store but at a cheaper price.

Supermarket

A retail store which generally sells food products and household items, properly placed and arranged in specific departments is called a supermarket. A supermarket is an advanced form of the small grocery stores and caters to the household needs of the consumer. The various food products (meat, vegetables, dairy products, juices etc) are all properly displayed at their respective departments to catch the attention of the customers and for them to pick any merchandise depending on their choice and need.

Merchandise:Bakery productsCerealsMeat Products, Fish productsBreadsMedicinesVegetablesFruitsSoft drinksFrozen FoodCanned Juices

Warehouse Stores

A retail format which sells limited stock in bulk at a discounted rate is called as warehouse store. Warehouse stores do not bother much about the interiors of the store and the products are not properly displayed.

Mom and Pop Store (also called Kirana Store in India)

Mom and Pop stores are the small stores run by individuals in the nearby locality to cater to daily needs of the consumers staying in the vicinity. They offer selected items and are not at all organized. The size of the store would not be very big and depends on the land available to the owner. They wouldn’t offer high-end products.

Merchandise:EggsBreadStationeryToysCigarettesCerealsPulsesMedicines

Speciality Stores

As the name suggests, Speciality store would specialize in a particular product and would not sell anything else apart from the specific range.Speciality stores sell only selective items of one particular brand to the consumers and primarily focus on high customer satisfaction.

Example -You will find only Reebok merchandise at Reebok store and nothing else, thus making it a speciality store. You can never find Adidas shoes at a Reebok outlet.

Malls

Many retail stores operating at one place form a mall. A mall would consist of several retail outlets each selling their own merchandise but at a common platform.

E Tailers

Now a days the customers have the option of shopping while sitting at their homes. They can place their order through internet, pay with the help of debit or credit cards and the products are delivered at their homes only. However, there are chances that the products ordered might not reach in the same condition as

they were ordered. This kind of shopping is convenient for those who have a hectic schedule and are reluctant to go to retail outlets. In this kind of shopping; the transportation charges are borne by the consumer itself.

Example - EBAY, Rediff Shopping, Amazon

Dollar Stores

Dollar stores offer selected products at extremely low rates but here the prices are fixed.Example - 99 Store would offer all its merchandise at Rs 99 only. No further bargaining is entertained. However the quality of the product is always in doubt at the discount stores .

Retail in India: Industry Structure

The retail industry in India is highly fragmented and unorganised. Earlier on retailing in India was mostly done through family-owned small stores with limited merchandise, popularly known as kirana or mom-and-pop stores. In those times, food and grocery were shopped from clusters of open kiosks and stalls called mandis. There were also occasional fairs and festivals where people went to shop. In the twentieth century, infusion of western concepts brought about

changes in the structure of retailing. There were some traditional retail chains like Nilgiri and Akbarallys that were set up on the lines of western retail concepts of supermarkets. The government set up the public distribution system (PDS) outlets to sell subsidised food and started the Khadi Gram Udyog to sell clothes made of cotton fabric. During this time, high streets like Linking Road and Fashion Street emerged in Mumbai. Some manufacturers like Bombay Dyeing started forward integrating to sell their own merchandise. Shopping centres or complex came into existence, which was a primitive form of today’s malls.

Since liberalisation in early 1990s, many Indian players like Shoppers Stop, Pantaloon Retail India Ltd (PRIL), Spencer Retail ventured into the organised retail sector and have grown by many folds since then. These were the pioneers of the organised Indian retail formats. With the opening up of foreign direct investment in single-brand retail and cash–and-carry formats, a new chapter unfolded in the retail space. Many single-brand retailers like Louis Vuitton and Tommy Hilfiger took advantage of this opportunity. The cash-and-carry format has proved to be an entry route for global multichannel retailing giants like Metro, Wal-Mart and Tesco.

Booming Indian economy spurs consumptionThe Indian economy posted a remarkable CAGR growth of 8.9% during FY04-FY08, which increased the per capita income and in turn, the disposable income of a large section of the population. Growth in the retail trade depends on the fundamentals of an economy. The Indian economy grew at a robust rate over the last five years, riding high on the high growth in the service sector (10.5%) and the manufacturing sector (9.4%) as compared with 7.4% and 4.1% during FY99-FY03. The rise in per capita income and the resultant rise in disposable income stimulated consumption during this five-year period, thereby resulting in a spurt in retail trade. Furthermore, according to the Mckinsey Global Institute (MGI), the average real household disposable income is likely to grow by 5.3% during 2005-2025 and reach Rs 318,896 per annum as compared with 3.6% in the

previous 20 years, which indicates the huge potential for the retail sector in India.

CASE STUDY

Pantaloons – A Success Story in Organized Retail

Retail plays a major role in increasing circulation and sales for all kinds of consumer goods and services. Countries like USA, U.K. and China are successful examples of the same. Consumer retail is the second-largest industry in the United States, both by the number of establishments and by the number of employees. Wal-Mart, the world’s largest retailer, is also the world’s

largest employer. It has become the most successful retail brand in the world due to its ability to leverage size, market segmentation, and its efficacy in assuming market dominance. Wal-Mart heads the Fortune magazine list of top 500 companies in the world.

Retail Scenario in India:

In India over 94% of the retail sector consists of traditional mom-and-pop stores and street-vendors. With no large players, infrastructure being far from adequate and a tiny part of the population being able to afford it, , Indian retail never attracted large business houses and majorly focused on niche product segments and luxury goods.. This was till they realized that retail in India is a USD $353 billion  industry[BMI India Retail Report 2010] growing at a CAGR of 10% and contributing more than 25% to the country’s GDP. Today it might seem implausible that this important sector of the country’s economy had been overlooked by Corporate giants. However they cannot be squarely blamed too. Indian retail has traditionally been an unorganized sector, where retailers lacked the means as well as the will to develop or expand. Retail could also never enjoy the support of the Indian consumer, who is  famous for being miserly and treated shopping as a form of leisure than a necessary evil, thus enjoying the thrill of discovering bargains and discount deals on his own.

Small gains, lack of infrastructure, an unattractive Indian consumer and absence of regulation never provided opportunities for retail giants to capitalize. Meanwhile, the Government preferred to remain silent while the unorganized retail sector provided a meager standard of living to millions in the country. Poverty plagued a majority of the population and the corporate giants preferred to spend their resources in areas like power and telecom where large-scale opportunities were abundant. Today the retail industry has witnessed a remarkable transformation.

The New Story

The country’s towering economic growth of around 8% has resulted in major shifts in the Indian economic class, with higher incomes leading to the growth of the Indian middle-class. This middle-class is aware of the standards of living in other countries, thanks to exposure through the tools of Globalization – the Media & the Internet. They have decided to thus adopt a “Spending” approach to improve their standard of living rather than the traditional “Saving” approach. The currently estimated value of organized Indian retail’s target population is larger than that of the entire United States. Voted the most attractive retail destination in the world for two years in a row, India is expected to witness 10% growth in its retail sector over the next few years (Source: “Retail in India – Getting Organized to drive growth.” CII-A.T. Kearney, Nov. 2006, Assocham

Press Release). Recognizing the short-term and long-term growth of retail in India, a number of domestic business giants have entered the retail industry. We focus on the factors that have led to the success of Kishore Biyani’s Pantaloon Retail.

Pantaloon’s Story

Pantaloon’s success and continuous growth in the Indian organized Retail market can be attributed to a number of factors, some of which have been derived from the strategies of large retailers in the west, while others are completely tailor-made for the Indian market. What is evident at the outset is that Biyani has foreseen and understood the Indian retail roadmap better than anyone else.

Pantaloon’s major advantage over its competitors in the retail sector has been its unique understanding of the Indian organized retail market with all its quirks, shortcomings and challenges. By creating a retail business from the ground-up and expanding rapidly, Pantaloon has followed a Wal-Mart-like pattern of growth. However, unlike Wal-Mart, it decided to experiment with as many retail formats, product-mixes and brands as was possible in order to gain maximum knowledge about the uncertain Indian mindset. In fact, newer entrants in the organized retail market would learn the ways of the unique Indian organized retail sector as well as find a way to combat Pantaloon’s dominant market share in almost all forms of organized retail a daunting task.

What did it do Right ?

The Retail Experiment – Multiple Formats, Multiple Brands

Pantaloon has experimented with every retail format possible. Most of their experiments have proven to be successful and Pantaloon continues to experiment while expanding existing ventures. However, the real reward of these experiments is the knowledge and experience gained- This was most elusive in a previously untouched and unknown organized retail sector. This is an example of Pantaloon adapting itself to the Indian market rather than attempting to copy a Wal-Mart. The experimentation process did not end with testing different store formats alone: Pantaloon is also experimenting with a variety of products. From men’s wear the company has moved on to introduce furniture, sportswear, kitchen appliances, food, electronics and children’s apparel. Again, it seems to know what works and what doesn’t in the Indian market, something that would not have been this apparent even 1 decade ago.

Pantaloon has also introduced a number of private brands. For example, it has experimented with launching clothing lines based on famous Bollywood blockbusters.. Within the brand retailing space, Pantaloon has also tied up with some of India’s most popular brands like Gini and Jony to sell them at their stores. Rather than attempt to compete with existing popular brands the company has decided to partner with them and leverage them  in the ambiguous Indian market. These brands have achieved success and a loyal fan following; Pantaloon’s move has brought in more customers then they could retain.

The competitors do have the opportunity to learn from the experiences of India’s largest retailer, but the experience that comes with managing these diverse retail formats in the Indian scenario is something that new entrants will have to learn on their own. Due to the pace at which Pantaloon had moved, it has made several sectors of organized retail out of anybody’s reach.

The Right Joint Ventures at the Right Time

In accordance with its experimentation policy Pantaloon has formed key joint ventures with a number of popular names like Staples and Starbucks. With its first-mover advantage, it actively shut doors for the competition by snapping up major brands before others could get to them.

Versatile Retailing

Rather than expand as a menswear retailer alone, Pantaloon’s policy of comprehensive experimentation has given it an important advantage – a versatile retail presence. Consumers see Pantaloon as an exclusive brand retailer, discount retailer, specialty retailer and food retailer: all at once. One of the reasons for this versatility is that the brand name has not been forced on, or even associated with the different products and stores other than the original menswear line. Instead, each store and product has been given its own identity and presence. Pantaloon is essentially an organized retailer in the guise of a large number and variety of unorganized retailers. This again represents the company’s unique understanding of the Indian scenario – consumers often feel threatened in a monopolistic environment, and are thus allowed to choose between multiple brands, all of which essentially belong to the same parent !!

Strengthening Back End Operations: Supply-Chain

A robust Supply chain serves as the backbone of a successful retail chain in the long-run. Although the company ignored these aspects in initial phases due to the inadequacies in infrastructure, it rightly favored experimentation over organization. But to continue to grow at the pace it had acquired in the first few years, it needed to pay attention to its sourcing network, transportation system and other logistics.. What Pantaloon is and will always have to improvise on is the absence of basic infrastructure like transportation and regulation. The pace of expansion of the retail industry is likely to outstrip that of development of the country’s infrastructure. Pantaloon will have to be innovative in deciding as to how it compensates for these inadequacies while efficiently managing its supply chain.

Money: The Ultimate Differentiator

Pantaloon has the upper hand as compared to most potential foreign and domestic competitors. However the same characteristics that have made it an exclusive and versatile retailer can prove to be a disadvantage. Much of Pantaloon’s competition comes from either retail ventures of other large Indian industrial houses (Reliance Retail, Birla’s retail venture) or foreign retail giants (Wal-Mart). In other words, Pantaloon’s competition is rich, very rich. While the competition

may not have made inroads into the Indian market as thoroughly as Pantaloon, it  still has enough money to compensate for this shortcoming.

Summary

Through a carefully executed policy of comprehensive multi-format experimentation, Pantaloon has managed to understand and take advantage of the compressed evolution of the organized Indian retail industry (mentioned earlier) to become the dominant player. As far as industry knowledge, experience and skill are concerned, Pantaloon with its dream team is looking in good shape. Now it is facing stiff competition that is financially better-equipped. How it takes advantage of its existing resources, accesses additional capital and competes with its competitors in a race to develop an efficient supply-chain will determine the future of the company. While the task is daunting, Pantaloon has more leeway and an enormous head-start compared to anyone else.