contribution of retail to the indian economic environment

RETAIL ENVIRONMENT

Contribution of retail to the Indian economic Environment

STATUS OF RETAIL IN YEAR2007-08 Value of retail sales-Rs 12,00,000 crore. Annual growth rate-5.7% Value of organized market-Rs 55,000 crore. Share of organized market in the sector-

4.6% Forecasts (after 5 years) about size of

organized retail market-Over Rs. 2,00,000 crores.

Forecasts about growth rate of organized retail market-40%

. 1. India acquired No.1 position among

30 most attractive retailing destinations in the world according to the Global Retail Development Index of 2005 (by AT Kearney, India).

2.Among emerging markets, India holds the second position after China in the list of most favoured retail destinations.

The retail industry employs a huge share of the total workforce in India.

Presently 7 percent of the total labour force is employed in the retail sector.

According to available data it is also the largest employer in the services sector and maximum growth in the non-agricultural sector has been witnessed by retail trade.

According to market analysts 300 new malls, 1,500 supermarkets and 325 departmental stores are going to come up in India .

DEMAND DRIVERS OF RETAIL SECTOR INDIA

Increasing per capita Income leading to a larger share of disposable Income

shopping revolution . Growing Population. Favourable Government Policies(NIP-

1991) Interest rates

  Employment

SUPPLY DRIVERS

Competitors in the industry 

Size of the market 

Cost of the factors of production

CONTRIBUTION OF FDI IN RETAIL It can generate huge employment for

the semi-skilled as well as illiterate population

The retail sector is highly dependent on the rural sector. Thus it can facilitate the improvement of the standard of living of farmers by purchasing commodities at a reasonable cost.

stems out an indirect employment generation channel by training and employing people in the transportation and distribution sectors such as drivers, mechanics etc.

Provides Consumer with wide variety of choices under one roof with organized retail formats gaining momentum in the country.

Indirect benefits like better roads, online marketing expansion of telecom sector etc. will give a 'big push' to other sectors.

Huge tax revenue generated from these retail biggies and collected in government coffers will gradually wipe out the ugly looking fiscal and revenue deficits.

Besides the transaction in foreign currencies by these MNCs will create a balance in exchange rate and will bring in stable funds.

PRESENT FDI SCENARIO

1997-4% In 10th plan(2002-2007)GDP GROWTH -8%FDI LEVELS IN 2001-2002-$3.9 BILLION2002-2007---$8 BILLION

FDI SCENARIO OF RETAIL IN INDIA

FDI up to 51 per cent is permitted only in single-brand retail such as Nike and Louis Vuitton.

There are no restrictions on foreign investment in wholesale cash-and-carry formats.

AN INTERNATIONAL RETAILER CAN ENTER THROUGH THE FOLLOWING METHODS

Hi-tech items requiring specialized after sale service.

Social sector items. Medical and diagnostic items . Items sourced from the Indian small sector.

(manufactured with technology provided by the foreign collaborator)

Two year test marketing.(simultaneous commencement of investment in manufacturing facility required.

OTHER OPTIONS OF ENTRY

Franchising Joint Venture International retailer may also set up a

manufacturing facility retailers who have adopted this strategy are Bata & Benetton.

Companies may set up distribution offices in India and thereby, trade in the country through local Indian retailers .Metro cash carry has entered through wholesale retaling.

EVOLUTION OF RETAIL

Barter was the oldest form of trade. For centuries, most merchandise was

sold in marketplace or by peddlers. Medieval markets were dependent on

local sources for suppliers of perishable foods because journeys wee far too slow to allow for long distance transportation. However, customers did travel considerable distances for specialty item.

PRESENT FDI SCENARIO

1997-4% In 10th plan(2002-2007)GDP GROWTH -8%FDI LEVELS IN 2001-2002-$3.9 BILLION2002-2007---$8 BILLION

In most parts of the world, a flea market – typically a place where vendors come to sell their goods – could be the earliest forms of retail congregations.

Development of various modes of communication aided the development of Retail

In 1852, Bon Marche, the first departmental store set up in Paris.

The success of Bon Marche led to other department stores coming up across Europe and America, which continued to grow and flourish until World War II.

The following kinds of retail formats are found in India-

Mom-and-pop stores.-These are generally family-owned businesses catering to small sections of society. They are small, individually run and handled retail outlet

Category killers.-Small specialty stores have expanded to offer a range of categories. They have widened their vision in terms of the number of categories. They are called category killers as they specialize in their fields, such as electronics (Best Buy)

Department stores-These are the general merchandise retailers offering various kinds of quality products and services.

Malls: These are the largest form of retail formats. They provide an ideal shopping experience by providing a mix of all kinds of products and services, food and entertainment under one roof. Examples are CMR Central vsp

Specialty Stores: The retail chains, which deal in specific categories and provide deep assortment in them are specialty stores. Examples are RPG's Music World, Mumbai's bookstore Crossword, etc.

Discount stores: These are the stores or factory outlets that provide discount on the MRP items. They focus on mass selling and reaching economies of scale or selling the stock left after the season is over.

Hypermarkets/ Supermarkets: These are generally large self-service outlets, offering a variety of categories with deep assortments. These stores contribute 30% of all food and grocery organized retail sales. Example: Big Bazaar.

Convenience stores: They are comparatively smaller stores located near residential areas. They are open for an extended period of the day and have a limited variety of stock and convenience products. Prices are slightly higher due to the convenience given to the customers

E-tailers: These are retailers that provide online facility of buying and selling products and services via Internet. They provide a picture and description of the product.

Vending: This kind of retailing is making incursions into the industry. Smaller products such as beverages, snacks are some the items that can be bought through vending machines. At present, it is not very common in India.

CLASSIFICATION OF RETAIL FORMATS 1.Store based retailing (A)On the form of ownership (B) Merchandise Offered 2.Non store based retailing 3.Service retailing

STORE BASED RETAILING

Form of ownership Independent Retailer Chain Retailer Franchise Leased departments Consumer Cooperatives

Merchandise Offered Convenience stores Super Markets Hyper Markets Specialty stores Departmental stores Off price retailers Factory outlets Catalogue showrooms

NON STORE BASED RETAILING

Direct Selling Mail order Telemarketing Automated vending

CLASSIFICATION ON THE BASIS OF OWNERSHIP

Independent retailer1.Who owns and operates one retail

outlet2.Normally the owner and proprietor and

few family hands work as assistants.3.Many passed on from generation to

generation.Ex local baniya or kirana store

A CHAIN OR A CORPORATE RETAIL CHAIN 1.Two or more outlets under common

ownership. 2.Similiarity in merchandise offered to

the consumer ,store ambience and and promotions.

FRANCHISING

A contractual agreement between a franchiser and franchisee.

Allowing the franchisee to conduct business under an established name as per a particular business .

Sharing profits between the franchiser and the franchisee,,

Should be for a fee or compensation.

LEASED DEPARTMENTS

Section within a departmental store is leased / rented to an outside party.

Used normally for increasing the product line .

CONSUMER COOPERATIVES

Aims at providing essential commodities at a reasonable price.

A democratic institution owned managed and controlled by members.

Aims to ptotect the interest of common people.

Stabilizes prices.

CLASSIFICATION ON THE BASIS OF MERCHANDISE OFFERED.-CONVENIENCE STORE

Small stores located near residential areas.

Open for long hours Offer a limited line of convenience

products like egg bread milk etc.

SUPER MARKETS

Large stores Low cost low margin and high volume

of service operations designed to meet the needs of food and groceries and another non food items.

Format was at the forefront of the grocery revolution and today it controls more than 30% of the grocery market in many countries.

SUPER MARKET CONTD

Selling area between 400 sqm and 2500 sqm.

Selling atleast 70% of its merchandise comprising of food and every day commodities.

HYPER MARKET

Combination of a super market and departmental store,

Synonymous with one stop buying . Cheapest prices Key element of differentiation between

hypermarkets and other retail stores is that they are typically destination locations.

Designed to attract customer from large area with thheir low prices and unique range and offes.

HYPER MARKET SATISFIES THE FOLLOWING CHARACTERISTICS

Selling area between 5000 sqm and 15000 sqm.

Wide range of products including food and non good items

Discounted prices A destination offer.Ex-big bazar

SPECIALITY STORES

Specializing in a particular type of merchandise or a single product or durable goods.

High level of service and product information is made available to the customers.

Characterized by a narrow product line with deep assortments.

Ex soudarya electrical

DEPARTMENTAL STORES

Large scale retail outlet often multi levelled

Merchandise offers span a number of different product categories

Size averaging 7000 sqm Selling -fashion clothing, accessories,

cosmetics, household goods and often a much broader assortment from more or less separate departments on several floors.

DEPARTMENTAL STORE CONTD

Defined as those establishments depending on food clothing and home related items for atleast 10% but less than 70% of their sales.

These stores have at least 50 employees and a self serrvice ratio of less than 50%.

Size-20000 to 40000 square feet Stocks any where between 50000 to

100000SKU’s Ex-shoppers stop westside, life style etc.

THERE ARE FOUR BASIC LEGAL FORMS OF OWNERSHIP FOR RETAILERS

Sole proprietorship: – The vast majority of small businesses start out as sole proprietorships. These firms are owned by one person, usually the individual who has the day-to-day responsibility for running the business

Partnership: - A partnership is a common format in India for carrying out business activities (particularly trading) on a small or medium scale. In a partnership, two or more people share ownership of a single business

Joint venture: – A joint venture is not well defined in the law. Unless incorporated or established as a firm as evidenced by a deed, joint ventures may be taxed like association of persons, sometimes at maximum marginal rates. It acts like a general partnership, but is clearly for a limited period of time or a single project.

LEGAL CLASSIFICATION CONTD.

Limited liability Company (public and private):- The Limited Liability Company (LLC) is a relatively new type of hybrid business structure that is now permissible in most states. The owners are members, and the duration of the LLC is usually determined when the organization papers are filed.

CLASSIFICATION ON THE BASIS OF

OPERATIONAL STRUCTURES

Independent retail unit Retail Chain. Franchising. Leased Department . Co-operative Outlets

BASIS OF RETAIL LOCATION

Retailers in a free-standing location

Retailers in a Business-associated Location.

Retailers in Specialized Markets. Airport Retailing

RETAILERS IN A FREE-STANDING LOCATION

Retailers located at a site which is not connected to other retailers depend entirely on their store’s drawing power and on the various promotional tools to attract customers. This type of location has several advantages including no competition, low rent, better visibility from the road, easy parking and lower property costs.For ex-CMR central

RETAILERS IN A BUSINESS-ASSOCIATED LOCATION

In this case, a retailer locates his store in a place where a group of retail outlets, offering a variety of merchandise, work together to attract customers to their retail area, and also compete against each other for the same customers.

RETAILERS IN SPECIALIZED MARKETS we also have in India-retailers who

prefer specialized markets, particularly traditional independent retailers or chain stores. In India, most of the cities have specialized markets famous for a particular product category

AIRPORT RETAILING

For quite some time, duty-free shops and newsstands dominated the small amount of commercial space provided at airports. Lately, serious efforts are being made to design new airport facilities in order to incorporate substantial amounts of retail space.

THE KEY FEATURES OF AIRPORT RETAILING ARE:

Large groups of prospective shoppers Captive audience Strong sales per square foot of retail

space Strong sales of gift and travel items Difficulty in replenishment Longer operating hours Duty-free shopping possible

ACTIVITY

How can you non-traditionally sell the following: Fastfood Perfume Photocopying services School supplies Baby products.

Prepare a 10-min presentation (use your groupings) that will analyze your assigned retailer using the following dimensions: Brief Company Profile Type of Ownership Store-based Classification Nonstore-Based classification (if any) Strategy Mix

store location, operating procedures, goods/services offered, pricing tactics, store atmosphere, customer services, and promotional methods

TRADITIONAL BUSINESS MODELS IN INDIAN RETAIL

Mandis Haats Melas Local Baniya Kirana

INDIA SPECIFIC RETAIL MODELS

Public distribution system ITC’s E-Choupal Choupal Sagar Hariyali Kisan Bazar Godrej Adhaar

MANDIS

Mandis owe their development partly to the govemernment.

Mandis are agricultural market set up by state governments to procure agricultural produce directly from farmers.

Located in high production centers of differrent crops.

The se markets can be categorised on the basis of product they deal with ex-grain mandi,cotton mandis, soya mandis,vegetable mandis.

HAATS

These are unregulated markets A haat is a periodic market which exists

typically at a village level It’s a public gathering of buyers and

sellers of commodities fruits and vegetables ,clotes accessories etc.

MELAS

Melas can be classified primarily according to their nature

1. commodity fair 2.religious fairs

LOCAL BANIYA /KIRANA

Close to home retailer for basic needs. Stock the range of goods from staples

to FMCG and in some cases ready to eat snacks from small suppliers.

Size ranges from 300 to 500 sq feet.

INDIA SPECIFIC RETAIL MODELS-PUBLIC DISTRIBUTION SYSTEM

1. The Department of Public Distribution is charged with the prime responsibility of the management of the food economy of the country.

The twin objectives of the department are to ensure.Remunerative rates for our farmers The supply of food grains at reasonable prices to the consumers through the public distribution system

ITC’S E-CHOUPAL1. E-Choupal is a online initiative by-ITC2. Launched in year 2000 aims to removes3. Bottle necks present in the Indian

agriculture distribution chain characterised by fragmented firms weak infrastructure poor agricultural practices significant wastages low quality produce and involvement of numerous intermediaries

4. Helping farmers by using technology

E-CHOUPAL MODEL

Coupal Sanchalak Internet kiosks

Villages

THE BUISNESS MODEL

ITC has set up village internet Kiosks managed by Choupal Sanchalak who himself is a village local farmer.

Choupal Sanchalk acts as an interface between the computer and the other villages.

Kiosks provide the agricultural community with real time global information on the weather, prevailing market prices ,price trends, scientific farm practices ,risk management, facilitate the sale of farm inputs and purchase farm produce from the farmers door step.

E-CHOUPAL ASSISTS THE FARMERS IN THE FOLLOWING WAYS

UNETHICAL PRACTICES IN RETAILING

Customer related i. Charge full price for a sale item

without the customer’s knowledge. ii. Don’t tell the complete truth to a

customer about the characteristics of a product.

iii. Make excuses when merchandise is not ready for a customer to pick up.

v. Sell a more expensive product when a less expensive product would be better for the customer.

vi. Don’t offer information to the customer about an upcoming sales (which will include

merchandise the customer is planning to buy). vii. Make excuses to customers about unavailable

merchandise when merchandise is not yet in stock or is sold out. viii. Give preferential treatment to certain

customers

Peer related i. Pressure from fellow employees not

to report employee theft. ii. Offer to give a friend and employee

discount.

Work related i. Salesperson receives an unfair workload. ii. Sell merchandise that is not of good quality. iii. Sell the product as if it were an exclusive

when in fact it is available in other stores. iv. Perform your job with inadequate job

information or training. v. Use of sales contest for salespeople in

order to generate sales from customers.