Retail Marketing is the Most Important Part of the Entire Logistics Chain in a Business Especially in Consumer Related Products

7/31/2019 Retail Marketing is the Most Important Part of the Entire Logistics Chain in a Business Especially in Consumer Rela

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Retail marketing is the most important part of the entire logistics chain in a

business especially in consumer related products. Without proper retailing the

companies can't do their business. Retailing is the process of selling goods in small

quantities to the public and is not meant for resale. Retail is derived from the

French word retailer, meaning to cut a piece off or to break bulk.

There are various ways of making goods available to consumers like:

Company to distributor to wholesaler to retailer to consumer Company to salesperson to consumer Company to consumers (online/ phone/ catalog ordering)

These three are among the most common ways of making the goods available to

consumers. But in India the three layered system of distributor, wholesaler and

retailer, forms the backbone of the front-end logistics of most of the consumer-good companies.

In this system the company operating on all India basis appoints hundreds of

distributors across the country that supplies to various retailers and wholesalers.

Wholesalers in turn can either directly sell in the market or can supply to retailers.

The current retailing system prevalent across the country is highly fragmented and

unorganized. Anyone with some money and some real estate can open a small shop

and become a retailer catering to the locality in which he opens the shop.

There are a number of reasons behind this fragmented retail market. Some of themajor reasons being:

Poverty and lower literacy levels. Low per capita income. Savings focused and less indulgence mindset. Poor infrastructure facilities like roads etc. Restrictions on intra-state good movement. High taxes. No exposure to media. High import duties on imported goods. FDI in retailing is not allowed. Retailing is not considered as a business or industry by thegovernment.


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Hitherto none of the business schools in India were offeringspecialized courses on retailing.

Expensive supply chain.

Besides this there is other reasons too, which led to stifling of growth of organizedsegment of retailing sector and which instead led to highly fragmented market.

Today in India we have more than 12 million retail outlets and most of then are

family run and locally owned. There are very few nationally present retail stores.

In India the process of buying and selling at these unorganized retail outlets, is

highly characterized by bargaining and negotiations. But slowly with increasing

influence of media and urbanization the market is shifting towards organized

segment. Seeing the huge market size of retail business in the country and the

current level of organized segment, many players have jumped into the fray and

many are waiting for the right opportunity to enter it.

3.1Retailing in 1990s

On account of the liberalization drive in the 1990s, several structural and

demographic changes that are taking place are helping the industry to grow. The

GDP has grown by 6.6percent in the last decade resulting in increased income

levels and higher purchasing power for the population. Increasing literacy levels,

increasing number of working women, increasing urbanization, higherinternational travel by Indian population and increasing media penetration has

raised aspiration levels of the population, resulting in demand for better shopping

experience and larger variety of goods. India has close to 54percent of population

below the age of 25, which translates into higher prospects for increased

consumption levels in the future. Finally, interest rates have also declined in thepast few years further propelling the consumption demand.

These factors were the key drivers for the retail wave in the country. Notable

among the early entrants were players like Shoppers Stop, Pantaloon, Ebony,

Foodworld, Subhiksha, etc. Initially, the growth in organized retail was very slowand concentrated mainly in metros, with south India holding its ground as the

pioneer in organized retail growth, on account of the low cost of real estate. Due to

the high investments required in the early stages and the fact that real estate was

the key deciding factor for success of stores, real estate developers have been the

major players in the industry (see Table).


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Table 5:

Sponsors

Group Retail Business

Rajan RahejaReal Estate

Developer

GlobusChain of departmental

stores

K, Raheja - Real Estate Developer Shoppers Stop - Chain of

departmental stores

Hiranandani - Real Estate

Developer

Haiko supermarket, Loft shoe stores

and Hakone mall.

TataDiversified Business House Westsidechain of department

stores

DS Group - Real Estate Developer Ebony - chain of department storesRPGDiversified Business House Foodworld supermarkets, Giant

hypermarkets, Health & Glow

beauty and health stores.

DLFReal Estate Developer DLF malls

ITC - Diversified Business House Wills SportChain of apparel

stored.

Source: Fitch

In the early 1990s, as the players were lower down on the learning curve many

faltered in their models, and growth of the industry remained slow. The second half

of 1990s saw several players making losses and exiting from the business. The

worst years for the industry were 2000 and 2001, as the stock market downturn,

which reduced customer confidence and spending, had a direct impact on the

performance of the industry. The industry recovered starting 2002. It now appears

the efforts and learnings of the players in the last decade are beginning to pay off;the organized retail industry has established firm roots and is beginning to grow.

3.2Present Retail Scenario In India

Retail experts find Indian industry promising Retail sales to touch Rs. 30,000 crore by 2005 Mall Mania: The developing mall culture in India Emergence of region-specific formats


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Emergence of discount formats Entry of international players

Retail experts find Indian industry promising

The retail movement in India has acquired the critical mass that is required for

rapid acceleration in terms of industry growth as well as geographical spread. The

Indian retail industry can no longer be called nascent.

The spread of super stores to the northern cities such as Delhi, Chandigarh, Jaipur

and Kolkata is evidence of the fact that organized retailing in India has emerged

from its southern bastion.

The retailing boom is being driven by increased expectations as well as changingshopping behavior of the urban Indian consumer. With the increasing number of

nuclear families, working women, greater work pressure and increased commuting

time, consumers are looking for convenience. And, convenience is defined as

having everything under one roof, longer hours and multiplicity of choice.

On the supply side, the current inefficient supply chain in India, particularly for

food items has led a few players to consolidate their operations to take advantage

of economies of scale and match consumer expectations in terms of delivery as

well as space. So, we have a situation where both demand and supply side

dynamics are fuelling the growth of organized retailing in India, although

improvements in the supply chain are yet to fully match with consumer

expectations.

The future growth need not necessarily come only from the big metros, where

there already exists a good retail network. The fact that big Indian retail chains are

moving into places like Indore or Chandigarh is an important indicator of future

growth. For the Rs. 5000-crore organized retail industry it is, perhaps, time to tap

the relatively smaller cities. The share of organized sector in total retail sales will

grow from one per cent now to six per cent by 2005.While projections can be

slippery, hard facts point to exciting growth ahead for this sector.

According to KSA, organized retailing is focusing on only SEC-A cities, Indias

23 largest cities. That is where a large portion of the country's urban population


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exists. Today 82 per cent of organized retailing comes from the top six cities and

12 per cent from the next four. KSA says the top 10 cities provide 94 per cent of

organized retail sales in India.

By 2005, KSA projects the top six cities will account for 66 per cent of totalorganized retailing and the next four for 20 per cent. The top 10 cities will account

for 86 per cent of organized retail sales. There could be variations in growth

patterns in different segments. The second half of the top 10 cities will provide

large growth for food and groceries, while the top six would still be the growth

centers for consumer durables, believes KSA.

The spread of organized retailing is unlikely to be a national phenomenon yet. This

appears to be the case so far. South India, particularly Chennai, Hyderabad and

Bangalore, have seen the emergence of chain stores or large format stores. While

garment stores have been around for sometime, other segments like food and

groceries, consumer durables and even books and music have witnessed the

emergence of organized players in large cities in South India. The lack of trained

manpower or alternatively the tremendous scope the sector has to provide

employment is another issue.

Mall Mania: The Developing Mall Culture in India

Modern malls made their entry into India in the late 1990s, with the establishmentof Crossroads in Mumbai and Ansals Plaza in Delhi. By early 2001, several mall

projects were announced. According to market estimates, close to 12 million sq. ft.

of mall space is being developed across several cities in the country, of which 10

million sq. ft. is expected to be operational by end of 2003 (see Table below). With

this, rentals for retail properties have shown a marked decline, which has brought

down the break-even levels of the retail projects. Moreover, retailers would nowhave access to retail-specific properties, which will increase their efficiencies.

Table 6:

Mall Development in India

Mall Location Rate / Sq. ft.

Crossroads Tardeo, Mumbai 225-250

Ansals South Ex, Delhi 175-200


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Nirmal Lifestyle Mulund, Mumbai 75-90

Runweals Mall Mulund, Mumbai 75-90

Karnavat Mall Thane, Mumbai 65-85

Raheja Mind space Malad, Mumbai 60-80

Jogs Mall Andheri, Mumbai 55-75Cable Corporation Borevali, Mumbai 55-75

Ansals East Delhi 75

Sahara Gurgaon 50-70

MGF MallsMetroplitian & Plaza Gurgaon 65-85*

DLF Gurgaon 65-85

Shipra Noida 80-180

Forum KolKotta 100

City Center KolKotta 55

Rave 3 Kanpur 45-55

Inox Baroda 75

Forum Bangalore 70-90

Spencers Plaza Phase III Chennai 70

Indore, Nasik and Jaipur Malls 45-55

Hyatt, Mumbai & Leela, 175-300

Phoenix Malls Lower Parel, Mumbai 100-125

*average for the metropolitian is Rs. 60 per sq. ft..

source: Chesterten Meghraj. Industry Reports

Till some time back, there were only few international style shopping malls in

India --Spencer in Chennai, Crossroads in Mumbai, Ansals Plaza in New Delhi and

Srirams Arcade in Kolkata. By the end of2004, that number jumped to many.

It looks like a virtual stampede, major players with a cumulative investment of Rs

375 crore are set to change cityscapes across India. In the next one year, close to

40 lakh square feet of retail space will be developed. In three years, this will rise to

70-lakh sq ft.

As the retail industry evolves, consumers want more variety before making their

purchase decision. A study on consumer outlook suggests that over 80 percent of


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consumers want a wide range of products at hand while shopping. This signifies

that people are finally ready for multi-option complexes.

Many old-time corporates are seriously considering using their idle assets. It makes

sense for landowners to develop it and keep the returns rather than sell it outrightor even lease it, especially when there is opportunity here. It is perhaps the best

way to use an idle real estate asset.

The limited kitty of brands has yet another significant knock on effect on the

typical size of Indian malls. In the US and South-East Asia, malls are as large as 50

lakh sq ft. Spencer is by far the largest mall in India - it occupies 7 lakh sq ft and

even that is dwarfed by Asia's largest mall, the 4-million sq ft mega mall in

Malaysia. Even the 26 malls that are being planned are likely to measure between

50,000 sq ft and 2 lakh sq ft. The Indian mall cannot offer too many choices in

terms of brands. So, developing a very large mall can never be sustainable.

There's a flip side though -malls even as small as 80,000 sq ft, like Shopper's City

in Kolkata or the Esplanade Mall at Kochi, can be sustained.

Emergence of Region-Specific Formats

For the first time in 10 years, the industry is witnessing the development of region-

specific formats. With organized retail penetrating into B class towns, retailershave started differentiating in the sizes and formats of stores. For example, in

departmental store format, while most A class cities and metros have larger stores

of 50,000 plus sq. ft. sizes, stores in B class towns have stabilized in the 25,000-

35,000 sq. ft. range. Most players have started operating these two formats across

various cities, which has helped them to standardize the merchandise offering

across the chain.

Emergence of Discount Formats

Larger discount formats, popularly known as hypermarkets, are now emerging asmajor competitors to both unorganized and organized retailers. Penetration of

organized retail into the lower strata of income groups and consumer demand for

increased value-for-money has improved the prospects of these formats. These

formats span across the entire range of merchandise categories. Big Bazaar,

promoted by Pantaloon and Giant, promoted by the RPG Group, are examples of

this format.


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Entry of International Players

A large number of international retailers have evinced interest in India, despite the

absence of favorable government policy for foreign players (see Table below). A

number of the major brands have entered the country through licensing agreementswith Indian players to capitalize on the opportunities available in the sector.

Table 7:

International players

International Players Retail Ventures In India

Landmarc Group, Dubai Lifestyle Chain of Departmental Stores

Metro, Germany Hypermarket

Shoprite, South Africa Supermarket, Hypermarket

Nanz, Germany Supermarket

Marks & Spencer, UK Apparel Retailer

Mango, Spain Apparel Retailer

McDonalds, USA Food Retailer

Dominos USA Food Retailer

Tricon Restaurant, USA Food Retailer

Source: Industry ReportsVishal Mega Mart2


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Retail Marketing is the Most Important Part of the Entire Logistics Chain in a Business Especially in Consumer Related Products