A REPORT ON
CONVENTIONAL RETAILING
PREPARED BY: AKHILESH KUMAR
ROLL NO : 2010010
Conventional retailing - It refers to the traditional formats of low-
cost retailing. for example hand cart and pavement vendors & mobile
vendors, the local kirana shops, owner manned general stores, paan/beedi shops,
convenience stores, hardware shop at the corner of your street selling everything
from bathroom fittings to paints and small construction tools or the slightly
more organized medical store and a host of other small retail businesses in
apparel, electronics, food etc.
Characteristics of unorganized (conventional) retailING
Small-store (kirana) retailing has been one of the easiest ways to generate
self-employment, as it requires limited investment in land, capital and
labour.
It is generally family run business, lack of standardization and the
retailers who are running this store they are lacking of education,
experience and exposure.
Unorganized retail sector is still predominating over organized sector in
India, unorganized retail sector constituting 98% (twelve million) of total
trade, while organized trade accounts only for 2%
Reason behind the conventional retailing
1. In smaller towns and urban areas, there are many families who are
traditionally using these kirana shops/ 'mom and pop' stores offering a wide
range of merchandise mix. Generally these kirana shops are the family business
of these small retailers which they are running for more than one generation.
2. These kirana shops are having their own efficient management system and
with this they are efficiently fulfilling the needs of the customer. This is one of
the good reasons why the customer doesn’t want to change their old loyal kirana
shop.
3. A large number of working class in India is working as daily wage basis, at
the end of the day when they get their wage, they come to this small retail shop
to purchase wheat flour, rice etc for their supper. For them this the only place to
have those food items because purchase quantity is so small that no big retail
store would entertain this.
4. Similarly there is another consumer class who are the seasonal worker.
During their unemployment period they use to purchase from this kirana store in
credit and when they get their salary they clear their dues. Now this type of
credit facility is not available in corporate retail store, so this kirana stores are
the only place for them to fulfil their needs.
5. Another reason might be the proximity of the store. It is the convenience
store for the customer. In every corner the street an unorganized retail shop can
be found that is hardly a walking distance from the customer’s house. Many
times customers prefer to shop from the nearby kirana shop rather than to drive
a long distance organized retail stores.
6. This unorganized stores are having n number of options to cut their costs.
They incur little to no real-estate costs because they generally operate from their
residences.
7. Their labour cost is also low because the family members work in the store.
Also they use cheap child labour at very low rates. As they are operating from
their home so they can pay for their utilities at residential rates. Even they
cannot pay their tax properly.
Impact of organized retailing on the unorganized sector
The retail industry is divided into organised and unorganised sectors. Over 12
million outlets operate in the country and only 4% of them being larger than
500 sq ft (46 m2) in size. Organised retailing refers to trading activities
undertaken by licensed retailers, that is, those who are registered for sales tax,
income tax, etc. These include the corporate-backed hypermarkets and retail
chains, and also the privately owned large retail businesses. Unorganised
retailing, on the other hand, refers to the traditional formats of low-cost
retailing, for example, the local kirana shops, owner manned general
stores, paan/beedi shops, convenience stores, hand cart and pavement vendors,
etc.
The organized retail market is growing at 35 percent annually while growth of
unorganized retail sector is pegged at 6 percent. Currently the value of the retail
market is estimated at around $ 270 billion with a growth rate of 5.7 per cent
per annum according to the Indian retail report which creates a big threat for the
small unorganized retailers. The well established organized retail sector in India
are Pantaloon Retail, Shoppers’ Stop, Spencer’s, Hyper CITY, Lifestyle,
Subhiksha & newly emerging Reliance etc. Over 20,000 new retail outlets are
expected to open within this segment. Major corporate retail like Wal-Mart and
have started to try and take over the Indian retail sector. the share of organized
retailing overall is 4%-5%.the share in some of the metro is 14%-15%.estimated
employment is the next 2 year is about 2 million.
STRENGTH OF ORGANIZED RETAILING
The bulk of investment in this form of retailing
The entrance of corporate houses with experience and through knowledge
of what and how of Indian consumers
Greater product assortment across categories
Technological advantage with modernization at its best
Range of retail formats right from neighbourhood to hypermarkets
Contemporary professional retail practices offering the newer retail mix
to consumers
High street location attracting large no of customer foot-falls in to stores
Nationwide large retail chain offering similar assortment in most of the
categories
Higher degree of awareness among the target group
Consistent brand building measures and unique promotion offers in place
AREA OF CONCERN FOR CONVENTIONAL RETAILING
The lack of modernization in the operations
The lack of deeper variety/attractive display of product
The lack of space which restricts the possibilities of shopping experience
The lack of price advantage/special promotion offers
Lack of capital for expansion and modernization activities
The lack of professional affiliation to higher level trade associations
IMPACT OF E BUSINESS ON CONVENTIONAL RETAIL
Integration of E-Business on conventional retailing procedures has brought on a
panacea for all business problems. This impact as brought in by E-business, has
not only revolutionized traditional retailing experience, but has also brought in
new ways for customers and retailers to focus on.
One of the vital roles that E-Business seems to offer apart from traditional way
of carrying out the retail process is that, E-business has vicariously conquered
the heart of its consumers and thus its easy time with convenience and results
for the retailers. This virtual connectivity has not only assisted businesses to get
rid of the trite of carrying business procedures, but has also resulted in assisting
both the retailers and the consumers from the ennui way of carrying out
transactions. Retailers are not only adding this E-word so as to build in a
differential strategy, to lower down their transaction costs and increase profits,
but are also using this as an alternative way to target audience, that in the past
was considered of being impossible to reach. With such changes being taken
place where consumers are getting aware of the E-advantage day by day, the
impact that one can conclude upon is the transformation of retailing procedures
towards a new horizon and thus diversifying consumer perception in a
prominent manner.
E-Business has also seen to offer several of disadvantages for online
transactions. These disadvantages act as threats that restrict much of the online
activity and tend to create an uncertainty towards the virtual environment.
Whereas apart from what advantages/disadvantages online retailing may have
retailers and customers are still seen to have been undergoing transactions
electronically, where it’s just not the convenience that tends to expiate
consumers and retailers mind for online buying and selling, but it’s the legality
of the electronic transactions too. This legality of the electronic transaction
which the law enforces upon the exchange of goods through the online medium,
to some extent can also be regarded as to why the E-phenomena is growing year
after year, where electronic contracts that are regarded of as being legally
bound, according to the law itself, have in turn resulted in for much of the
retailers and customers to change their perception from traditional to the E-
ways of doing things, where exchange of goods can now be done in a safer and
lawful manner.
By referring to these facts and by developing an intuition regarding the future of
E-business, one can conclude or predict the E–future for conventional retail to
turn out to be positive, where it's not just because of the changing customer
needs that prefer convenience but it's the advantages as offered by this medium
which would sooner or later force retailers and customers to stick to the E-way
of doing things which is practical, lesser time consuming, convenient and
accessible to all.
Comparison between online retailing and conventional retailing
Pricing is a key issue in both conventional and on-line retail channels. Indeed,
Pricing may be the most important differentiator between the two channels.
Online Retailers are claimed to enjoy lower costs than their bricks-and-mortar
counterparts, and hence can offer lower prices. In case of online retailing
internet act as a perfect market because information is instantaneous and buyers
can compare the offerings of sellers worldwide. The result is fierce price
competition, dwindling product differentiation, and vanishing brand loyalty.
Superficially, however, on-line markets appear to be much less
Competitive than conventional markets. In book retailing, the largest chain
Barnes and Noble has less than a 30% share of the conventional market. By
contrast, the largest on-line retailer Amazon has over 70% of the on-line market.
HOW TO PROMOTE CONVENTIONAL RETAILING
Establishment of Retailer co-operatives among retailers which is highly
required for the sustenance of the unorganized retail sector
Merger and buy-out of weak retailers by a stronger one that would give a
new horizon to the small retailer
Setting up of franchisee organization may also help in strengthening the
position of the retailers. The franchiser can exert a tremendous control
over the way retailing is done.
There must be good network connection between retail organizations, the
suppliers and other channel members to use compatible technology so
that they can build strong distribution set-up to satisfy the customers.
Setting up of more and more non-store retailing centres would also ensure
a strong retailing organization. Non-store retailing makes implementation
of modern principles easier and less costly.
Moreover there must be a change in the mindset of the unorganized
retailer. They have to understand the pulse of the trend. They have to
understand, come forward & lead this change management then only this
sector not only can exist but flourish.