MARKETING STRATIGIES ADOPTED IN

RETAIL INDUSTRY

Introduction to Retailing sector

Retailing sector of India can be split into two segments. They are the informal and the
formal retailing sector. The informal retailing sector is comprised of small retailers. For
this sector, it is very difficult to implement the tax laws. There is widespread tax evasion.
It is also cumbersome to regulate the labor laws in this sector. As far as the formal
retailing sector is concerned, it is comprised of large retailers. Stringent tax and labor
laws are implemented in this sector.

If the retail industry is divided on the basis of retail formats then it can be split into the
modern format retailers and the traditional format retailers. The modern format retailers
comprise of the supermarkets, Hypermarkets, Departmental Stores, Specialty Chains
and company owned and operated retail stores

The traditional format retailers comprise of Kiranas, Kiosks, Street Markets and the
multiple brand outlets. The retail industry can also be subdivided into the organized and
the unorganized sector. The organized retail sector occupies about 3% of the aggregate
retail industry in India.

Size and contribution of the retail industry in India

In terms of value, the Indian Retail industry is worth $300 billion. India retail industry is
the largest industry in India, with an employment of around 8%. Its contribution to the
Gross Domestic Product is about 10%, the highest compared to all other Indian
Industries. The retail sector has also contributed to 8% of the employment of the
country. The organized retail sector is expected to triple its size by 2010. The food and
grocery retail sector is expected to multiply five times in the same time frame. The major
reason behind the low participation in the Indian retail sector is the need for lumpy
investments that cannot match up their break even points. The government policies are
being revised from time to time to attract investments in this sector.

The Indian Retail Industry — Sky is the limit

In terms of the retail development index India ranks fifth. In Asia it occupies the second
position, next to China. Among all the global markets, the Indian retail market is the
most expanding. This is owing to absence in restriction at the entry level. So the large
foreign companies can reap the benefits of economies scale by entering the green retail
fields of India. There are many reasons why the retail industry in India can reach the
zenith.

Firstly the organized retail sector in India has a very low contribution to the entire retail
sector in the country. Hence there is ample scope for the new players to achieve
success in the backdrop of soaring disposable income of the upcoming generation.
Secondly, not only have the incomes increased but there has been a sea change in the
preferences of the consumers. These factors have acted as a stimulus for the ushering
of foreign players retailing in apparels, accessories, electronic appliances etc. Large
shopping malls have already mushroomed in the metropolitan cities. There still lies
untapped potential in the Indian Retail Market.

The size of retail industry in an economy depends on many factors and the level of
consumer spending is the most important among these factors. The retail sector in India
has grown by leaps and bounds in the last five years. The reason behind this growth
has been the synergy of many propellants. However the growth is not always genuine
as there are exaggerations as well. But these exaggerations also have benefits since
they given a feel of growing competition all around. Secondly the present situation is
just a depiction of nascent stage. The future of the trajectory may not be as steep as it is
now or may be even slope downward. 'What will be the future size of the retail industry'
is the mind boggling question. Another moot point that will gain importance in due time
concerns the future of the unorganized retail market which constitute a significant
proportion of the whole industry. The retail stores have proved to be a vantage point for
the customers. This implies that the small farmers who used to sell their product in the
sabji-mandis and on roadsides are going to lose a significant market share as they can't
employ the two profit maximizers-economies of scale and economies of scope.

Retailing in India: the present scenario

The present value of the Indian retail market is estimated by the India Retail Report to
be around Rs2,00,000 crore ($270 billion) and the annual growth rate is 5.7 percent.
Retail market for food and grocery with a worth of Rs. 7, 43,900 crore is the largest of
the different types of retail industries present in India. Furthermore around 15 million
retail outlets help India win the crown of having the highest retail outlet density in the
world. The contribution of retail sector to GDP has been manifested below:

Country Retail Sector's share

in GDP (in %)
India 10
USA 10
China 8
Brazil 6

As can be clearly seen, retailing in India is superior to those of its contenders. Retail
sector is a sunrise industry in India and the prospect for growth is simply huge. There
are many factors that have stimulated the rise of the shopping centers and multiplex-
malls in a jiffy. Some of them can be listed as follows:

• Rise in the purchasing power of Indians- the rise in the per capita income in the
last few years has been magnificent. This has led to the generation of insatiable
 wants of the upper and middle class. The demand of new as well as second hand
durables has risen throughout the country thus providing the incentive for taking
up retailing.
• Favorable to farmers- retailing has helped in removing the middlemen and has
thus enhanced the remuneration to farmers. This is a new revolution in the
agricultural sector in India and will go a long way in amending the condition of
agriculture, a major concern among policy makers.
• Use of credit- a typical Indian is most conversant with using credit cards than
carrying money. These have led to a shift of the consumer base towards
supermarkets and make the payments in the form of credit.
• Comfortable Atmosphere- a visit to a retail store appears to be more soothing for
the generation-Y. People and kids prefer to shop in an air conditioned a tech
savvy manner.
The retail industry is the second largest employer in India. It currently employs
about 7 percent of the total labor force in India. Finance Minister P.
Chidambaram's recent statement “salaries ought not to be legislated” is a
welcome move as most of the organized retail is in private hands. However only
about 4.6% of the total retail trade is in organized sector. It generates about
Rs.55, 000 crore ($12.4 billion). The major and minor players desperately need to
work hard in this direction so that next time the figures look more decent. The
government must also make an attempt to ameliorate the situation as political
instability and infrastructure namely power and roads are the major roadblocks in
the path of smooth functioning of the market.

Marketing Strategies

Marketing strategy is a method of focusing an organization's energies and resources

on a course of action which can lead to increased sales and dominance of a targeted
market niche. A marketing strategy combines product development, promotion,
distribution, pricing, relationship management and other elements; identifies the firm's
marketing goals, and explains how they will be achieved, ideally within a stated
timeframe. Marketing strategy determines the choice of target market segments,
positioning, marketing mix, and allocation of resources. It is most effective when it is an
integral component of overall firm strategy, defining how the organization will
successfully engage customers, prospects, and competitors in the market arena.
Corporate strategies, corporate missions, and corporate goals. As the customer
constitutes the source of a company's revenue, marketing strategy is closely linked with
sales.

Types of strategies

Marketing strategies may differ depending on the unique situation of the individual
business. However there are a number of ways of categorizing some generic strategies.
A brief description of the most common categorizing schemes is presented below:

• Strategies based on market dominance - In this scheme, firms are classified

based on their market share or dominance of an industry. Typically there are four
types of market dominance strategies:
o Leader
o Challenger
o Follower
o Nicher
• Porter generic strategies - strategy on the dimensions of strategic scope and
strategic strength. Strategic scope refers to the market penetration while strategic
strength refers to the firm’s sustainable competitive advantage. The generic
strategy framework (porter 1984) comprises two alternatives each with two
alternative scopes. These are Differentiation and low-cost leadership each with a
dimension of Focus-broad or narrow.
o Product differentiation
o Market segmentation
• Innovation strategies - This deals with the firm's rate of the new product
development and business model innovation. It asks whether the company is on
the cutting edge of technology and business innovation. There are three types:
o Pioneers
o Close followers
o Late followers

• Growth strategies - In this scheme we ask the question, “How should the firm
grow?” There are a number of different ways of answering that question, but the
most common gives four answers:
o Horizontal integration
o Vertical integration
o Diversification
o Intensification