retail management_session 1

8/3/2019 Retail Management_Session 1

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Prof. Chhavi GuptaDec 08th, 2011

Retail Management

Session 1


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What is Retail?

Retail consists of all activities involved in the selling of

goods and services to the consumer for theirpersonal,

non-business use.

Thefinalstage of any economic activity


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y Derived from the French word retaillierretaillier: To cut a

piece off / To break Bulk.

y Retailer: A dealer/ trader who sells goods in small

quantities OR One who repeats or relates.

y Thus, a retailer can be any person, agent, agency,

company or organization that sells goods and

services to the ultimate consumer


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Retailing and the Marketing Mix

y Retailers are at the end of the supply chain; Last

stage in the movement of Goods and Services to

the consumer

y Marketers see retailing as part of their overall

distributiondistribution strategy.

y A retailer is a re-seller who obtains goods from

one party ( or manufactures it himself) to sell to

another (the end customer)


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Significance of Retailersy Conduit between manufacturers, wholesalers, suppliers

and consumers.


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Functions of Retailers

y Sorting

y Breaking bulk

y Holding stock

y Additional services (credit, home delivery, after-salesservices, information regarding new products etc. )

y Channel of communication,

y Storage


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Characteristics of Retailers

y Direct interaction with end-user

y Point-of-purchase display and promotions

y Lower average amount of sales transaction

y Larger number of retail business units (to meet geographicalcoverage and population density.)

y Location is a critical factor (potential demand, supply ofmerchandise and store image-related factors)

y In most retail businesses, services are as important as

core products


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Retail in India

y One of the most dynamic and fast paced sectors ofthe economy

y Contributes over 10 % of GDP

y Employs around 7- 8% of national workforce

y Total retail business in India around $ 385 bn (2007),est. to reach $1.52 trillion by 2025

y Expected Rates of growth:y Organized : 25-30% p.a in the next 5-6 years

y Retail as a sector : 5% p.a


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Only 5-6% of the Indian retail business is

organized ( 20% in China, 80% in USA !)

Organized Retailing refers

to trading activities

undertaken by licensed

retailers, i.e., those whoare registered for sales tax,

income tax etc.

These include the

corporate backed retailchains or hypermarkets

and also privately owned

large retail businesses


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y Mostly Unorganized Sector

y Activity not regulated by any legal

provisions

y Do not maintain regular accounts

y Kirana Store, Paanwala, Cobbler,

vegetable & fruit vendor etc.

y Highly Fragmented

y 12 mn retail outlets for a

population > 1000 mny 96% smaller than 500 sq ft.

y Per capita retailing space only 2 sq

ft


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Indias Retail Pie


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Retail Scenario - Global

y Retailing: Worlds largest private industry

y Total retail sales worldwide: $ 9 trillion

y

Top 200 largest retailers : 30% global demandy 2 main drivers of retail sales:

y Consumers ability to buy ( Disposable Income)

y Consumers willingness to buy ( Consumer confidence)

y BRIC nations, esp. China & India are witnessing strong GDPand income growth huge potential.


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The Global Retail Market

-- Issues and Challenges

y The Emergence of New Markets

y In the past the sheer size of China & India did not necessarily lead to

their having an impact on the market

y The technological, transportation, and industrial revolution, along with

urbanization, rising consumer incomes, changing consumer profiles have

made these nations attractive.

y India + China: Total GDP est. to touch $ 6 trillion by 2020

y Expected to become the worlds largest exporter of goods & services ( >25% share)y Expected to become the worlds largest consumers of natural resources ( 45-50%)

Few marketers and retailers can ignore such a market!


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y The Empowered Consumer

y Increase in spending power

y Increased choice in products and formats

y Technology useful in making better shopping decisions

y Competition on Multiple fronts: Consumers today demandmore for less from the shopping experience

QualityChoice

Consistency

Convenience

Service

MoneyTime

Effort

Risk


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y Technology Enabled Efficiencies

y Building efficiencies on the basis of the ability to

receive and transmit data at a fast speed

y In the near future retailer supplier, as well as

retailer- consumer relationships will depend heavily

on technologyy Managing Inventory

y Customer Relationship Management

y Electronic Retailing


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y Rise of the E-Age

y The emergence of Internet Retailing/ e-tailing is a key

driver of retail change globally

y

Increase in no. of internet usersy Online shopping and transactions

y Internet both enhances and competes with the brick-and-

mortar store

Comparison Shopping


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Trends in Global Retailing

1. Social Responsibility

Relatively affluent consumers in affluent

countries are increasingly concerned about the

impact that companies have on society

y Physical Environment

y Effects on workers in manufacturing/ supplying

countriesy Focus on product safety and social responsibility likely

to grow, esp. through increased awareness due to

mass media


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2. Global Consumer growth shifts away fromUSA

In the past decade, the extraordinary growth of

consumer spending in the US was a driving force forthe world economy

Not true any more!Not true any more!

India most attractive retail destination for global

players ( ATK GRDI Index 2007)


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3. Emerging Retail Hot-Spotsyy Asia, esp. India and ChinaAsia, esp. India and China are the emerging marketplaces

y The technological, transportation, and industrial revolution,

along with urbanization, rising consumer incomes, changingconsumer profiles have made these nations the new places

to be!

y Retailers are hence looking at emerging marketplaces to

provide their main source of growth


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4. Commoditization

y Takes place when consumers view products as essentially

undifferentiatedundifferentiated other than on the basis of price

y Traditionally basic products ( petrol, cooking oil, basic

apparel) considered commodities. However, improvementsin manufacturing efficiency enable the highest quality

products to be sold at amazingly low prices

y Avoiding commoditization is a key challenge for global

retailers

y Those that differentiate on the basis of somethingsomething otherother

thanthan priceprice will be the winners of the future


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5. Retail Investment in Services

y With increasing affluence of nations, consumer spending on

goods declines and that on servicesservices increases. Ex: EU, Japan,

US

y Retailers that can successfully sell services related to their

core merchandize or simply based on the strength of their

brand names, can increase their growth through expanded

share of the wallet.


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6. The rise of long tail retailing

Mass Market: Saturated, High levels of price competition

Consumer segments have become more fragmented in terms of incomeand buying behaviour

With improvements in IT, it is now possible to operate a portfolio of small

targeted businesses

Hence retailers seeking growth can invest in new businesses along the

long tail rather than expanding existing mass market formats

Incomelevel

Population

Mass

Market


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7. Emerging market investment in developedretailers

y Huge surpluses of key emerging nations

China: $1.4 trillion foreign currency reservesRussia & other middle east countries also have vast reserves.

y Earlier these funds were invested into low yielding govt.

securities

y Increasingly, countries diverting these reserves intoinvestment funds that purchase Western companies or

sizable interests in those companies


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8. Multi- Channel integration

y Store and Non-Store (Online) Bricks And Clicks

y Today, most retailers do not integrate their online

businesses with their store businesses. In addition, storeretailers are competing with non-store retailers who own a

sizable share of online retailing

y Going forward, the best retailers will focus on enriching the

brand experience for distinct customer segments acrossmultiple channels


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9. Focus on Customer Experience

y Differentiating the store by improving the experience of

customers in the store

y Includes not only superior customer service, but also:

y Store Design, layout, signage, lighting, service

y Ease and speed of transactions


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10. Retailers as world class marketers

y Earlier, FMCG cos. Considered leading marketers

y

However, with the rise in power of the retailers Asprincipal holders of consumer relationshipsprincipal holders of consumer relationships as well as

through the sale ofprivate labelprivate label goods, retailers have

become marketing powerhouses

y

Hiring top marketers away from FMCG cos.y Aim to build a strong brand identity to compete with

other retailers and branded suppliers


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Key Drivers of Retailing In India

1. Socio Economic Factors

y Fundamental to development

y Life Expectancy

y Primary Indicator of Socio-Economic Development

y 1991-92: 58 yrs, 2006-07: 66.8 yrs

y Increasing Literacy : 74% (2011 census)

y Spread of basic amenities like electricity and drinking water

With the basic necessities being taken care of, it is likely that thedemand for other products and services would increase!


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2. Demographic Factors

I. Age

India: A Young nation

y Age structure

y 65 years and over: 5.5 %

y 15 to 64 years : 64.9 %

y 0 to 14 years : 29.7 %

y Median age

y Total : 26.2 years

y Female : 26.9 years

y Male : 25.6 years

Figures as per Census 2011

Partially explains the boom in

consumption of Impulse products and

Leisure related expenditure

This large proportion of economically

active population leads to:

Increase in Overall purchasing

capacity in the country

Unlocks a new wave of

consumer demand


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II. Income Distribution

y Steady economic growth has fuelled the increase in

personal incomes in India

y The Middle class forms the backbone of the Indiamarket story

y The proportion of middle and upper middle class in

the total population is rising

y Widening of the countrys income distribution


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III. Changing Lifestylesy Increasing no. of working Indian Women

y Nuclear family Structure

y Double Income households with shortage of time

High demand forconvenience, greater choice,

everything-under-one-roof, Value-for-Money

y Emergence of specific sub segments Ex. Teenagers,

Pregnant Women


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IV. Changing Consumption Basket

y More no. of young people with more spending

power

y Easier acceptance of Luxury and an increased

willingness to experiment with new trends

y Results in higher discretionary spending


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3. Media Explosion

y The media bombardment has exposed the Indian

consumer to the lifestyles of more affluent countries

y Has raised their expectations from the shopping

experience

y Consumers now wan more choice, value, service,

experience and convenience


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4. Increased Credit Friendliness

y Radical shift in the consumers mind regarding credit

y Easy availability of finance: Personal/ Vehicle/ Home

Loans

y 1995: 2.5 mn Indian households with mortgage

y 2003: 20.5 mn households. CAGR of 29.4%

y Increasing no. of credit cards issued in India India 3rd

largest market for Visa after Japan & Korea


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5. The Emergence of the Rural Market

y The Combined purchasing power of those at the bottom

of the pyramid is substantial

y Products and marketing strategies specifically targetedat the rural consumers

y DSCLs Hariyali Kisan Bazar

y ITCs Chaupal Sagar

y The Sachet Revolution


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6. Expansion of Family Businesses and New

Entrepreneurs

y Viveks: The 40 yr old Chennai based consumer durableschain

y Nilgiris: Bangalore based food retailers- supermarket chainof over 90 stores.

y New Entrepreneurs

y The growing attractiveness of retail trade has begun to

attract new entrepreneurs with ideas.y Venture capitalists like ICICI Ventures and IL&FS are also

increasingly willing to invest in retail


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7. Impact of Technology

y Technology is perhaps the most dynamic change agent in

the retail industry

y Computerized store operations:

y Inventory management, billing, payment, customer database

management, bar coding, Point-of-sale terminals, electronic

surveillance for preventing theft and shop-lifting, Tele shopping, Net-

shopping, Internet & Mobile banking etc.

y Helps retailers by providing better and timely information

about their operations


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8. Foreign Retailers Looking for Entry Options

y With the increasing attractiveness of the sector and the

liberalized framework, many MNCs have entered theIndian retail arena though Joint Ventures, Franchisees

etc.

y Foreign retailers cannot start operations on their own

mainly because of FDI restrictions


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Top Trends in Retail

1. Modern retail will grow but traditional retail will survive

theres place for both

2. Consumption will shift to lifestyle categories

consumers shifting evaluation from MRP to EMI

3. New retail formats will emerge and grow small format

cash and carry, growth of super- speciality format

4. Modern Retail will witness enhanced equity infusion


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5. There will be creation of large retailer brands ( private

labels) own label branding trend on the rise , esp. ingroceries, home care and clothing; Provides margin

benefit to retailers

6. There will be an interplay between retailers andsuppliers branded firms will collaborate with top

retailers

7. Modern retail will face a few key bottlenecks talent,retail space and supplier base shortages. India will

witness a shortfall of almost one million people in the

retail sector by 2012


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8. New investments will happen in the back end enhanced focus on improving the supply chain, process

of storing and displaying food will be in focus

9. Modern retail will benefit customers and rural sector

rural retailing formats will ensure quality goods, easy

accessibility and low rates: Typical monthly shopping bill

will reduce by at least 10%

10. Consolidation will increase in the retail sector particularly through mergers and acquisitions.


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y Reference Books

Retailing Management: Text and Cases 3rd Edition

-- Swapna Pradhan

Retail Management 3rd Edition

-- Gibson G. Vedamani


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Questions?

retail management_session 1

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