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Introduction
India has often been called a nation of shopkeepers. Presumably the reason for
this is; that, a large number of retail enterprises exist in India. In 2004, there were
12 million such units of which 98% are small family businesses, utilizing only
household labour. Even among retail enterprises, which employ hired workers, a
majority of them use less than three workers.
Retailing is the combination of activities involved in selling or renting consumer
goods and services directly to ultimate consumers for their personal or household
use. In addition to selling, retailing includes such diverse activities as, buying,
advertising, data processing and maintaining inventory.
While sales people regularly call on institutional customers, to initiate and
conclude transactions, most end users or final customers, patronize stores. This
makes store location, product assortment, timings, store fixtures, sales
personnel, delivery and other factors, very critical in drawing customers to the
store.
Final customers make many unplanned purchases. In contrast those who buy for
resale or use in manufacturing are more systematic in their purchasing.
Therefore, retailers need to place impulse items in high traffic locations, organize,
store layout , trains sales people in suggestion , and place related items next to
each other, to stimulate purchase.
RETAILING DECISIONS
There are many factors for retailers to consider while developing and
implementing their marketing plans. Among the major retailing decisions are
these related to (a) Target markets (b) Merchandise management (c) Store
location (d) Store image (e) Store personnel (f) Store design (g) Promotion, and
(h) Credit and collections. This is shown diagrammatically in Figure 1.6.
Target Markets: Although retailers normally aim at the mass market, a growing
number are engaging in marketing research and market segmentation, because
they are finding it increasingly difficult to satisfy everyone. Through a careful
definition of target markets, retailers can use their resources and capabilities to
position themselves more effectively and achieve differential advantage. The
tremendous growth in number of speciality stores in recent years is largely due to
their ability to define precisely the type of customers, they want to serve.
Merchandise Management: The objective here is to identify the merchandise
that customers want, and make it available at the right price, in the right place at
the right time. Merchandise Management includes (i) merchandise planning (ii)
merchandise purchase, and (iii) merchandise control. Merchandise planning
deals with decisions relating to the breadth and depth of the mix, needed to
satisfy target customers to achieve the retailers return on investment. This
involves sales forecasting, inventory requirements, decisions regarding gross
margins and mark ups etc. Merchandise buying involves decisions relating to
centralized or decentralized buying, merchandise resources and negotiation with
suppliers. Merchandise Control: deals with maintaining the proper level of
inventory and protecting it against shrinkage (theft, pilferage etc.).
Store Location: Location is critical to the success of a retail store. A store's
trading-area is the area surrounding the store from which the outlet draws a
majority of its customers. The extent of this area depends upon the merchandise
sold. For example some people might be willing to travel a longer distance to
shop at a speciality store because of the unique and prestigious merchandise
offered. Having decided on the trading area a specific site must then be selected.
Factors affecting the site include, traffic patterns, accessability, competitors'
location, availability and cost and population shifts within the area.
Store Image: A store image is the mental picture, or personality of the store, a
retailer likes to project to customers. Image is affected by advertising, services;
store layout, personnel, as well as the quality, depth and breadth of merchandise.
Customers tend to shop in stores that fit their images of themselves.
Store Personnel: Sales personnel at a retail store can help build customer
loyalty and store image. A major complaint in many lanes of retailing, is the poor
attitude of a salesperson. There is a growing trend now, to provide training to ,
these sales clerks to convert them from order takers to effective sales
associates.
Store Design: A store's exterior and interior design affect its image and profit
potential. The exterior should be attractive and inviting and should blend with the
store's general surroundings. The term "Atmospherics" is used to refer to the
retailer's effort at creating the right ambience. Merchandise display is equally
important. An effective layout guides the customer though the various sections in
the store and facilitates purchase.
Promotion: retail promotion includes all communication from retailers to
consumers and between sales people and customers. The objective is to build
the stores image, promote customer traffic, and sell specific products. It includes,
both, personal and non personal promotion. Personal communication is personal
selling - the face to face interaction between the buyer and the seller. Department
stores and speciality stores, emphasize this form of promotion. Non personal
promotion is advertising. The media used are TV, Radio, Newspapers, Outdoor
displays and direct mail, other forms of promotion include, displays, special
sales, give always and contests etc.
Credits & Collections: Retailers are generally wary of providing credit, because
of additional costs-financing accounts receivables, processing forms and bad
debts etc. But many customers prefer some form of credit while purchasing. This
explains the popularity of different types of credit cards and debit cards.
The solution is likely to make available real-time information on price points of various
commodities stocked in the store. It may also be used for real time data capture and
coordination between the store and the supply chain.
The company is also working on strengthening its business intelligence solution and is
developing it in-house. A separate team is using internal data on price points, stock
movement and purchase patterns to build a company-specific solution.
The company's recent customer loyalty programmes are based on some of this data and
it is putting in place solutions that will directly impact the supply chain.
Subhiksha is also migrating its existing backend InfoTech deployments to the SAP
platform to make scaling up operations easier.
Subhiksha – the chennai based, no frills, discount retail chain, which recently hit the 500-
stores mark, has catapulted itself into one of the country’s largest supermarket chains,
with over one million sq. ft. of retail space, spread across five states of the country.
“Our goal of becoming India’s favorite neighborhood store is now well on its way. We
want to be able to provide customers from all segments of society, in all parts of the
country, with a viable smart shopping option,” added Subramanian.
Unlike Big Bazaar, its discount, food and grocery, retail counterparts, Subhiksha believes
in setting up non-air conditioned small neighbourhood stores (near the community)
measuring around 2,000 sq.ft. in retail space. As such, while Subhiksha competes with
big store chains on regular discounts, it competes with traditional ‘father and son’ kirana
stores on close proximity to its customers.
While the discount model of Subhiksha is based on world famous Wal-Mart strategy, the
carpet bombing model is based on the ‘Starbucks’ strategy, in which the coffee retail
chain opens a cluster of stores in close proximity to each other, in a geographical area
which has high population density with purchasing potential. This enables the chain to
cannibilise sales within its own network rather than allowing them to go to other
individual stores or retail chains. Even, Reliance, so far seems to have followed a similar
strategy having opened a Cluster of ‘Fresh’ stores in Hyderabad and Jaipur.
While, the decade old, Rs. 340 crore in turnover, Subhiksha retail chain, has invested
about Rs. 300 crore on its first phase of expansion, the total outlay for 1,000 stores will
be around Rs. 500 crore. It may be recalled that ICICI Venture Capital holds 24% of the
equity in the company. The company is mulling over making Initial Public Offering (IPO)
in the second half of 2007.
Retail as we know it today is but only a trailer of the real full-length movie that is due to
unfold on the Indian market-scope. Today, organized retail comprises 3.6 per cent of the
total pie in terms of volume share of trade. The rest is run by small mom-and-pop stores
in every category, whether it be apparel, food and grocery or whatever.
Except for petroleum, organized retail in India is still in a nascent stage in every
category. Therefore, the face of emerging retail in India is likely to be very different from
the face it sports today.
For one, ‘New Retail’ in India is going to be about brand ubiquity in the future. The brand
will stare back at you every 300 yards in the market you will tend to walk in. And there
will be options in every category that will flummox you. So much so that reach and
convenience in terms of distance will start dictating your franchise of a particular retail
outlet. In many ways, it is back to the days of kirana retail when you bought groceries
from the grocer closest to you.
There will also be several models at play. The mom-and-pop outlets will morph in to a
retail segment of their own. Each store will reinvent itself and offer relevance, originality
in merchandise stocking and innovation in the offers.
In addition to the traditional mom-and-pop store in the morph mode, there will be the 7-
11 formats that will be of a chain origin. Add to that the larger format departmental stores
a la Subhiksha. Add further still to this mélange the supermarket of a Wal-Mart origin.
Add the hypermarket that caters to retail and the superstore that caters only to the B2B
business.
There is going to be plenty on offer. In the Indian market, each of these will co-exist with
one another with little method and a lot of madness.
The first couple of years will decide the winners and the losers. It is then that we will
enter a consolidation phase where the biggies will grow bigger and many will fall by the
wayside. Emerging Indian retail will also be about clonal offerings.
The moment a Croma Zip store at Mumbai airport makes an impression, there will many
‘me-toos’ that will want a piece of the action. At the end of the day of course, a form of
retail Darwinism will prevail and the fittest will survive. The fittest in terms of offerings,
deep pockets to survive wafer-thin margins, and the fittest in terms of the tenacity to fight
competition that is irrational in its attack.
Of the total retail space, 3.6 per cent valued at $330 billion is in the hands of organised
retail. India therefore remains a nation of small shop-keepers.