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8/8/2019 Unit1 Introduction to Retailing
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Retailing:
Introduction
Unit #1
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Introduction to Retailing- Key Topics
Nature & scope of Retailing
Retailing- Definition
Functions of a Retailer
Rise of a Retailer
The Retailing Concept
The Retail Strategy Retailing Concept- Key
Issues
Consumerism
Rise of IndianConsumerism
Retail Formats
Major Retail Players inIndia
Retail in India-Evolution & drivers of
retail change
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Retailing- Definition
Retailing encompasses the business
activities involved in selling goods and
services to consumers for their personal,family or household use.
It includes every sale to the final consumer
It is the last stage in distribution process
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Retail Functions in Distribution
ManufacturerWholesaler
Retailer
Final
Consumer
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Retailers- Key Functions
Collect an assortmentfrom various sources,buy in large quantity &
sell in small quantity-the Sorting Process
Communicate bothwith customers &
manufacturers andwholesalers
Manufacturers and
wholesalers get
information from
retailers on sale
forecasts, delivery
delays, customer
complaints, defective
items, inventory
turnover etc
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Retailer·s role in Sorting Process
M-
Brand A
M-
Brand B
M-
Brand C
M-
Brand D
M-
Brand E
M-
Brand F
Wholesaler
Wholesaler
Wholesaler
Retailer
Brand A
Brand B
Brand C
Brand D
Brand E
Brand F
Customers
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Retailers- Some other Functions
Shoppers (customers ) are
provided information on
availability and
Characteristics of goods &services, store hours, sales
etc from retailer ads and
displays
Retailers complete
transactions with
customers
Retailers provide
assistance to small
suppliers by transporting,
storing, marking,advertising & prepaying
for products
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Special Characteristics of Retailing
Small Average Sale Impulse Purchases
Popularity of Stores
Retailer·s
Strategy
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Retailing: Special Characteristics
1. The average amount of a sales transaction
for retailers is much less than for
manufacturers2. Final consumers make many unplanned or
impulse purchases
3. Retail Consumers usually visit a store,even though mail, phone and web-sales
have increased
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Retail Strategy
The overall plan guiding a retail firm
It influences the firms business activities
and its response to market forces, such ascompetition & economy
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Developing & Applying Retail Strategy:
Six Steps1) Define the type of business in
terms of the goods /servicecategory and companys specific orientation (full service or no
frills)
2) Set long run & short runobjectives for sales and profit,market share image and so on
3) Determine the customer market to target on the basis of its
characteristics and needs
4) Devise an overall long run plan that gives general direction to the firm & itsemployees
5) Implement an integrated strategy that combinessuch factors as storelocation, product assortment, pricing &advertising and displays toachieve objectives
6) Regularly evaluate performance and correct weakness/when observed
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The Retailing Concept- Underlying
Principles
Retail StrategyRetailing
Concept
Customer Orientation
Coordinated Effort
Value- Driven
Goal Orientation
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Retailing Concept: Three Issues
The Total Retail Experience
Customer Service
Relationship Retailing
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The Total Retail Experience
Includes all the elements in a retail offering
that encourage or inhibit customers during
their contact with a retailer Number of salespeople, displays, prices,
brands carried, inventory on hand:
Controllable
Adequacy of on street parking, sales tax etc:
Uncontrollable
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Customer Service
Refers to the identifiableyet sometimes intangibleactivities undertaken by aretailer in conjunction
with the basic goods and services it sells
Has a strong impact on thetotal retail experience
Key Elements
Store hours, parking,shopper friendliness of the store layout
Credit acceptance, salespeople, amenities such asgift wrapping, rest rooms,employee politeness
Delivery policies, timeshoppers spend onchecking out lines andcustomer follow up
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Relationship Retailing
Seeking to establish & maintain long term
bonds with customers rather than act as if
each sale transaction is a new salesencounter
Concentrating on total retail experience,
monitoring satisfaction with customer
service and staying in touch with customers
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Relationship Retailing- Key Guidelines
1. Win- Win approach critical
2. Building & maintaining customer database
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The Rise of the Retailer
Proximity to the Customer
The Rise of Consumerism
The Introduction of the Private label Technology
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Consumerism: what it means
protection of consumers'
rights: the protection of
the rights and interests of
consumers, especially withregard to price, quality,
and safety
materialistic attitude: an
attitude that values the
acquisition of material
goods ( disapproving )
belief in benefits of
consumption: the belief
that the buying and selling
of large quantities of consumer goods is
beneficial to an economy
or a sign of economic
strength
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The Rise of the Indian
Consumerism/Consumer Indian income will triple over the next two decades.
Over the next two decades, the countrys middle class will growfrom about 5 percent of the population to more than 40 percentand create the worlds fifth-largest consumer market.
In 2005 private spending reached about 17 trillion Indianrupees($372 billion), accounting for more than 60 percent of Indias GDP, so in this respect the country is closer to developed
economies such as Japan and the United States than are Chinaand other fast-growing emerging markets in Asia.
India remains the least urbanized of the emerging Asianeconomies. Today only 29 percent of Indians live in cities
Source: Mckinsey Consumer Research report 2008
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India- Shining
Extreme rural poverty has declined from 94 percent in1985 to 61 percent in 2005
In 1985 93 percent of the population lived on a householdincome of less than 90,000 rupees a year,by 2005 that
proportion had been cut nearly in half , to 54 percent.
The growth that has pulled millions of people out of poverty is also building a huge middle class that will beconcentrated in Indias urban areas.
If India can achieve 7.3 percent annual growth over thenext 20 years, 465 million more people will be spared a lifeof extreme deprivation
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Consumer Spending Projections-
Mckinsey Global Report Discretionary spending in India will rise
from 52 percent of total private spendingtoday to 70 percent in 2025.
y By 2025 Indias wealthiest citizens willtotal 24 million, more than the current
population of Australia. By that year too,Indias affluent class will be larger thanChinas comparable segment, projected atabout 19 million people
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Some Other Projections
Spending on purchasesthat improve theeconomic prospects and
quality of life of a personor familyhealth,education, transport, andcommunicationswillsoar and eventuallycommand a greater shareof consumption than theydo elsewhere.
Despite Indiasfondness for cricketand Bollywood
movies, recreationalproducts and serviceswill take a smaller sliceof household spendingthere than in othercountries
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Projections
y Transportation, already the largest categoryof expense after food, will take a biggerportion of household budgets in coming
years, exceeding its share in all of ourbenchmark countries.
y The highest growth will come from car
purchases. Categories such as clothing andhousehold goods are expected to postslower annual growth relative to overallconsumption
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Implications for Marketers
India will witness the rapid growth of itsmiddle classhouseholds with disposableincomes from 200,000 to 1,000,000 rupees
a year. That class now comprises about 50million people, roughly 5 percent of thepopulation
y
Today 57
percent of private spending isspread across rural areas, but by 2025 citieswill command 62 percent of the countrys
spending power.
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Implications
In absolute terms the countrys urban
population will expand significantly, from
31
8 million today to 523 million in 2025. The shift in spending power from the
countryside to the cities will place the bulk
of Indias private consumption within easier
reach of major companies
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Technology in Retail
Customer Interfacing Systems
Bar Coding and Scanners
Payment
Internet
Operation Support Systems
ERP System
CRM Systems Advanced Planning and Scheduling Systems
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Retailing in India
Retail the largest private industry globally, is still in its nascent
stages in India
Source: CII Mckinsey, HSBC
Fortune #1 Wal-Mart is
a Retailer
#1
50
Over 50 of theFortune 500
companies areretailers
25
25 of the AsianTop 200
companies, areretailers
8
Global Retailindustry is of size
USD 8 Trillion
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Indian Retail- Some Statistics
Market size (total) 2006:
US$ 300 bn/annum
Market size (total) 2010:
US$ 427 bn/annum
Market size (total) 2015:
US$ 637 bn/annum
Market size (modern retail)
2006: US$ 9-12 bn/annum
Market size (modern retail)
2011: US$ 60 bn/annum
Annual rate of growth (modernretail): 35%
Penetration (modern retail)
2006: 3 to 4%
Penetration (modern retail)
2010: 10%
Number of retail outlets (total):
12 millionSource: www.indiaretailbiz.com
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Indian Retail Statistics
o New Investment by2011: US$ 30 bn
No. of personsemployed (total): 21 mn
No. of new jobs in nexttwo years: 2 mn.
Retail Space Typical space per outlet: 100 to
500 sq.ft.
Space occupied (modern retail):35 mn sq.ft.
Operating Malls 2007: 114 (35mn sq.ft.)
New Malls under construction:361 (117mn sq.ft.)
New space distribution: 65%(top 7 cities), 35% (tier II & III
cities) New space distribution (among
top 7 cities): NCR 34%, Mumbai23%, Rest 43%
Source: www.indiaretailbiz.com
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Major Retail Formats in India
Malls
Specialty Stores
Discount Stores Department Stores
Hypermarts/Supermar
kets
Convenience Stores
MBOs (Multi- Brand
Outlets)
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Various Retail Formats
Department store: Large retail store offering a variety of services and merchandise, organised in separate
departments. Occupy prominent positions in the heart of town or as anchor stores in out-of-town malls eg.
Shopper¶s Stop.
Supermarket: A store that sells a wide variety of goods including food, medicine and household products. Often
part of a chain that owns or controls other supermarkets in the same or other towns; thus going for economies of
scale. The chains are often supplied from the distribution centres of a larger business eg. FoodWorld.
Hypermarket (from the French term hypermarche) : A store that combines a supermarket and a department
store. A gigantic retail facility that carries a big range of products under one roof, including fresh groceries and
apparel. When planned, constructed and executed correctly, hypermart caters to all routine weekly shopping
needs in one trip eg. Big Bazaar.
Category killers: Large format stores that specialise in a narrow line of merchandise eg. Vivek, Vijay Sales.
Convenios: 24X7 convenience stores situated close to homes to generate high footprints. Convenios carry a
limited stock of daily use goods with a special focus on food products eg. In & Out petrol pump outlets.
Specialty malls: Consortium of retailers that carry a certain category of products. They are usually situated
some distance from the city centre. Consumers have to make a special visit to pick up the goods. eg, Gold,
Wedding Souk.
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Recent Trends
Retailing in India is witnessing a huge revampingexercise as can be seen in the graph
India is rated the fifth most attractive emerging
retail market: a potential goldmine.
Estimated to be US$ 200 billion, of whichorganized retailing (i.e. modern trade) makes up3 percent or US$ 6.4 billion
As per a report by KPMG the annual growth of department stores is estimated at 24%
Ranked second in a Global Retail DevelopmentIndex of 30 developing countries drawn up byAT Kearney.
Retail Sales in India
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1. Unorganized : Vast majority of the twelve million stores are small "father and
son" outlets2. Fragmented : Mostly small individually owned businesses, average size of outlet
equals 50 s.q. ft. Though India has the highest number of retail outlets percapita in the world, the retail space per capita at 2 s.q. ft per person is amongstthe lowest.
3. Rural bias: Nearly two thirds of the stores are located in rural areas. Rural retail
industry has typically two forms: "H
aats" and Melas".H
aats are the weeklymarkets : serve groups of 10-50 villages and sell day-to-day necessities. Melasare larger in size and more sophisticated in terms of the goods sold (like TVs)
1. Unorganized : Vast majority of the twelve million stores are small "father and
son" outlets2. Fragmented : Mostly small individually owned businesses, average size of outlet
equals 50 s.q. ft. Though India has the highest number of retail outlets percapita in the world, the retail space per capita at 2 s.q. ft per person is amongstthe lowest.
3. Rural bias: Nearly two thirds of the stores are located in rural areas. Rural retail
industry has typically two forms: "H
aats" and Melas".H
aats are the weeklymarkets : serve groups of 10-50 villages and sell day-to-day necessities. Melasare larger in size and more sophisticated in terms of the goods sold (like TVs)
Traditionally three factors have plagued the retail industry:T
raditionally three factors have plagued the retail industry:
Recent Trends contd.
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Experimentation with formats: Retailing in India is still evolving and the sectoris witnessing a series of experiments across the country with new formats beingtested out. Ex. Quasi-mall, sub-urban discount stores, Cash and carry etc.
Store design : Biggest challenge for organised retailing to create a customer-pull environment that increases the amount of impulse shopping. Research
shows that the chances of senses dictating sales are upto 10-15%. Retail chainslike MusicWorld, Baristas, Piramyd and Globus are laying major emphasis &investing heavily in store design.
Emergence of discount stores: They are expected to spearhead the organisedretailing revolution. Stores trying to emulate the model of Wal-Mart. Ex. BigBazaar, Bombay Bazaar, RPGs.
Unorganized retailing is getting organized: To meet the challenges of organizedretailing such as large cineplexes, and malls, which are backed by the corporatehouse such as 'Ansals' and 'PVR the unorganized sector is getting organized. 25stores in Delhi under the banner of Provision mart are joining hands to combinemonthly buying. Bombay Bazaar and Efoodmart formed which are aggregationsof Kiranas.
Experimentation with formats: Retailing in India is still evolving and the sectoris witnessing a series of experiments across the country with new formats beingtested out. Ex. Quasi-mall, sub-urban discount stores, Cash and carry etc.
Store design : Biggest challenge for organised retailing to create a customer-pull environment that increases the amount of impulse shopping. Research
shows that the chances of senses dictating sales are upto 10-15%. Retail chainslike MusicWorld, Baristas, Piramyd and Globus are laying major emphasis &investing heavily in store design.
Emergence of discount stores: They are expected to spearhead the organisedretailing revolution. Stores trying to emulate the model of Wal-Mart. Ex. BigBazaar, Bombay Bazaar, RPGs.
Unorganized retailing is getting organized: To meet the challenges of organizedretailing such as large cineplexes, and malls, which are backed by the corporatehouse such as 'Ansals' and 'PVR the unorganized sector is getting organized. 25stores in Delhi under the banner of Provision mart are joining hands to combinemonthly buying. Bombay Bazaar and Efoodmart formed which are aggregationsof Kiranas.
Recent changes:Recent changes:
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Major Retailers- India
Indias top retailers arelargely lifestyle, clothingand apparel stores
This is followed by grocerystores
Following the past trendsand business models in thewest retail giants such asPantaloon, Shoppers Stopand Lifestyle are likely totarget metros and smallcities almost doubling theircurrent number of stores
These Walmart wannabeshave the economy of scaleto be low medium costretailers pocketing narrowmargin
Leading Retailers
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Major Retailers ² Formats Adopted
Retailer Original formats Later Formats
RPG Retail Supermarket (Foodworld)Hypermarket (Spencer's)Specialty Store
(Health and Glow)
Piramal'sDepartment Store (Piramyd
Megastore)Discount Store (TruMart)
Pantaloon Retail
Small format outlets
(Shoppe)
Department Store
(Pantaloon)
Supermarket (Food Bazaar)
Hypermarket (Big Bazaar) Mall (Central)
K Raheja Group
Department Store (shopper's
stop)
Specialty Store
(Crossword)
Supermarket (TBA)
Hypermarket (TBA)
Tata/ Trent Department Store (Westside) Hypermarket (Star India Bazaar)
Landmark Group Department Store (Lifestyle) Hypermarket (TBA)
Others Discount Store (Subhiksha, Margin Free, Apna Bazaar), Supermarket(Nilgiri's), Specialty Electronics
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Indian Organized Retail is set to explode with Food &
Lifestyle retail as major segments
Home
3%
Health & Beauty
1%
Food & Grocery
14%
Books, Music & Gifts
3%
Watch & Jewellery
17%
Footwear
13%
Clothing and Textile
36%
Entertainment
1%Durable
10%
Pharma
2%
3 SBUs covering 88% of market segment!!
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Drivers of Retail Change in India
Demography Dynamics:Approximately 60 per cent of Indian population below 30years of age.
Double Incomes: Increasing
instances of Double Incomes inmost families coupled with therise in spending power.
PlasticRevolution: Increasinguse of credit cards forcategories relating to Apparel,Consumer Durable Goods, Food
and Grocery etc.
Urbanization: increased urbanizationhas led to higher customer densityareas thus enabling retailers to uselesser number of stores to target the
same number of customers. Covering distances has become
easier: with increased automobilepenetration and an overallimprovement in the transportationinfrastructure, covering distances has
become easier than before. Now a customer can travel miles to
reach a particular shop, if he or shesees value in shopping from aparticular location.
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Thank You