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September 2010 Vol. 1, Ed. 4
September 2010
Vol. 1, Ed. 4

TABLE OF CONTENTS

The marvellous misadventures of Wal-Mart

Rise of Retail in China

Retailing to the Ten Rupees Man

Private Label Brands

ZARA!

misadventures of Wal-Mart Rise of Retail in China Retailing to the Ten Rupees Man Private Label

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Private Label Brands ZARA! 2 3 4 5 7 [1] Guess all the ads in this

[1]

Guess all the ads in this newsletter and the theme of the newsletter to win early bird prizes!

Last month’s winners are Movin Jain (PGP- II) and Arvind R (PGP - II)

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The marvellous misadventures of Wal-Mart - Rachit Kumar
The marvellous misadventures of Wal-Mart - Rachit Kumar
The marvellous misadventures of Wal-Mart - Rachit Kumar
The marvellous misadventures of Wal-Mart - Rachit Kumar
The marvellous misadventures of Wal-Mart - Rachit Kumar

The marvellous misadventures of Wal-Mart

- Rachit Kumar

The marvellous misadventures of Wal-Mart - Rachit Kumar
The marvellous misadventures of Wal-Mart - Rachit Kumar
The marvellous misadventures of Wal-Mart - Rachit Kumar
The marvellous misadventures of Wal-Mart - Rachit Kumar
The marvellous misadventures of Wal-Mart - Rachit Kumar
The marvellous misadventures of Wal-Mart - Rachit Kumar In#1962#when#Sam#Walton#opened#

In#1962#when#Sam#Walton#opened#

the#first#Wal7mart#discount#city#store#

in#Rogers,#Arkansas#he#wouldn’t#have#

imagined#in#his#wildest#dreams#that#

he#was#laying#the#foundaDon#for#what# over#lower#prices#and#they#are#fairly#

would#go#onto#become#the#world’s# largest#public#corporaDon#with# operaDons#in#more#than#a#dozen# countries.#Bulk#purchases#ensured#

that#Wal7mart#could#deal#with#

manufacturers#directly#thereby#

making#it#possible#for#it#to#woo#the#

American#public#by#adopDng#the#

EDLP#(Every#Day#Low#Price)#strategy.#

It#was#able#to#replicate#its#success#in#a# of#Korean#consumers,#is#something#

number#of#countries#worldwide#with#

two#notable#excepDons#namely#

Germany#and#South#Korea.

have#a#much#shorter#buying#cycle#as#

by#acquisiDon#of#two#exisDng#retail#

chains#namely#Wertkauf#and#Spar.#

The#acquisiDon#of#Spar#is#considered#

compared#to#their#American#

counterparts.#They#value#the#

proximity#of#the#shopping#desDnaDon# by#many#to#be#a#strategic#blunder#as#

it#was#one#of#the#weakest#players#in#

quality#conscious,#thereby#eliminaDng# the#highly#compeDDve#German#

the#possibility#of#them#switching#

brands#for#lower#prices.####The#Wal7

mart#stores#in#Korea#were#not#

strategically#well#posiDoned#in#terms#

of#locaDon#and#as#a#result#could#not#

generate#sufficiently#large#customer#

traffic.#Also,#Customer#service,#which#

market.#In#the#American#market,#Wal7

mart#is#strictly#a#non7union#player,#

something#that#it#tried#to#replicate#in#

Germany#without#any#success#and#

ended#up#being#branded#as#a#“union#

basher”.#It#could#not#live#up#to#its#

promise#of#offering#the#lowest#prices#

is#a#strong#purchase#driver#in#the#case# in#the#highly#compeDDve#German#

that#Wal7mart#did#not#offer.#Thus,#

Wal7mart#could#not#sustain#sales#

large#enough#for#it#to#conDnue#

operaDng#in#the#country#and#had#to#

make#an#early#exit.

Germany#is#another#country#where#

Wal7mart’s#operaDons#ended#up#in#a#

major#fiasco.#A]er#an#eight#year#

struggle#in#the#German#market#it#had#

Metro#AG.#It#had#entered#the#country#

retail#sector#which#operates#on#the# concept#of#ultra#low#profitability.# Also,#it#managed#to#garner#a#lot#of# negaDve#publicity#because#of#its# infringement#of#a#large#number#of# German#laws.#It#can#be#concluded# that#Germany#was#not#the#ideal#

market#for#Wal7mart#to#launch#its#

operaDons#because#it#already#had#a#

large#number#of#well7established#and#

highly#compeDDve#players#in#the#

organised#retail#sector.##

Wal7mart#suffered#losses#to#the#tune#

of#$10#million#in#South#Korea#in#the#

year#2005#and#as#a#result#had#to#exit#

the#Korean#market#by#selling#its#

stores#in#May#2006.#This#failure,#in#

part,#can#be#aXributed#to#its#inability#

to#understand#the#buying#preferences# exit#by#selling#its#85#supercenters#to#

of#the#Koreans.#Korean#consumers#

[2]

Rise of Retail in China - Atreyi Bose
Rise of Retail in China - Atreyi Bose
Rise of Retail in China - Atreyi Bose
Rise of Retail in China - Atreyi Bose

Rise of Retail in China

Rise of Retail in China
Rise of Retail in China - Atreyi Bose
Rise of Retail in China - Atreyi Bose
Rise of Retail in China - Atreyi Bose
Rise of Retail in China - Atreyi Bose

- Atreyi Bose

Rise of Retail in China - Atreyi Bose
Rise of Retail in China - Atreyi Bose
Rise of Retail in China - Atreyi Bose
Rise of Retail in China - Atreyi Bose
Rise of Retail in China - Atreyi Bose
Rise of Retail in China - Atreyi Bose When#we#think#of#China#we#typically# think#of#export#with#all#the#cheap#

When#we#think#of#China#we#typically# think#of#export#with#all#the#cheap# Chinese#goods#flooding#the#market.# However#with#the#global#economic# slump#affecDng#demand#from# Western#markets,#the#Chinese# government#is#now#looking#to#boost# domesDc#demand#in#order#to#shield# itself#from#export#dependency.#The# retail#appeDte#of#the#Chinese# consumer#has#also#grown#with#rise#in# income#and#urbanizaDon.#The# Chinese#middle#class#will#account#for#

33%#of#the#populaDon#by#2020,#and#

60%#of#the#urban#populaDon#by#2016.#

This#middle#class#is#expected#to#drive#

the#story#of#retail#in#China.

With#the#signing#of#WTO,#foreign# investment#in#the#retail#sector#was#

opened#up#in#China#from#2001#over#a#

period#of#5#years.#This#paved#the#way#

for#giants#like#Carrefour,#Wal7Mart,#

Tesco#to#build#stores#across#the#

naDon.#These#companies#have#

modernized#the#retail#sector#in#China#

through#well#managed#logisDcs#and#

technology.

These#global#giants#have#led#the#way# in#opening#hypermarkets#across# China.#As#this#form#of#retail#has#seen#

great#success#in#the#Der71#ciDes,#

hypermarkets#are#now#being#built#in# smaller#ciDes#as#well.#However#other# types#of#stores#such#as#supermarkets,# departmental#stores,#convenience# stores#are#sDll#fragmented#and# dominated#by#domesDc#players.# Foreign#retailers#are#focusing#on#

discount#stores#in#Der71#ciDes#with#

Carrefour#starDng#the#trend#in#2003.

compeDDve.#Chinese#consumers#are#

increasing#brand#aware.#But#with#

growing#choices#they#are#not#brand#

loyal#and#this#has#been#a#challenge#to#

the#retail#industry.

Dissimilar#consumpDon#paXerns#in# the#domesDc#market#are#also#another# key#challenge#faced#by#retailers.# China#is#the#fastest#growing#market# for#luxury#premium#goods.#Wealthy#

consumers#in#China#are#typically#20#

younger#than#their#counterparts#

across#the#world.#But#China#also#has#a#

Only#5%#of#China’s#retail#currently#has# vast#segment#of#the#market#which#is# foreign#investment.#This#is#also#due#to# extremely#price#sensiDve#and#looks#

China’s#government#policy#which#

lacks#clarity#as#well#as#changing#

regulaDons#to#suit#domesDc#retailers.#

The#Chinese#government#has#recently#

implemented#policy#decisions#

requiring#most#enterprises#to#be#

majority#Chinese#owned.#

third#largest#consumer#market,#a]er#

By#2015#China#is#supposed#to#be#the#

for#value#in#purchases.

USA#and#Japan.#It#already#houses#25#

of#the#world’s#largest#retailers.#

Learning#from#the#successes#of#the#

The#domesDc#retail#market#in#China#

needs#consolidaDon.#Many#of#the#

brands#are#regional#and#need#to#build#

a#naDonal#presence#in#order#to#be#

retail#story#in#India#and#avoiding#its#

mistakes#would#be#criDcal#to#the#

success#of#Indian#retail.

Source:#BRIC#Spotlight#Report#–#Retail#Sector#in#China:#The#Next#Big#Thing?

[3]

Retailing to the Ten Rupees Man - Aditya Garg
Retailing to the Ten Rupees Man - Aditya Garg
Retailing to the Ten Rupees Man - Aditya Garg
Retailing to the Ten Rupees Man - Aditya Garg

Retailing to the Ten Rupees Man

Retailing to the Ten Rupees Man

- Aditya Garg

Retailing to the Ten Rupees Man - Aditya Garg
Retailing to the Ten Rupees Man - Aditya Garg
Retailing to the Ten Rupees Man - Aditya Garg
Retailing to the Ten Rupees Man - Aditya Garg
Retailing to the Ten Rupees Man - Aditya Garg
Retailing to the Ten Rupees Man - Aditya Garg There# has# been# a#lot# of# buzz# about#

There# has# been# a#lot# of# buzz# about# development.# The#per#capita#income# and#purchase#of# ferDlizers,#seeds#and# the# entry#of# global# retail# giants#such# in#rural#India#has#grown#by#over#50%# tractors.# as# Walmart,# Carrefour# and# Metro# in# the# last# 10# years.# The# paXern# of#

Various# corporate# houses# have# approached# rural# retailing# along# these# lines.# ITC# has# launched# the# country's# first# rural# mall# 'Chaupal# Sagar',# offering# a# diverse# product# range# from# FMCG# to# electronic# appliances# and# automobiles.# Godrej# Agrovet#is#in#the#process#of# seqng#up# 1,000# Aadhar# stores# across# rural# India.# These# stores# sell# FMCG# products,# ferDlisers#and# services# like#

In# order# to# understand# retailing# to# banking,# insurance,# pharmacy# and# rural# India,# it# is# important# to# postal# services.# DCM# Hariyali# Kisaan#

understand# that# how# are# its# needs# bazaar# will# provide# access# to# bank# different.# Contrary# to# popular# financing,# tractor# purchase# and# percepDon,# rural# consumers# can# electronic#shops. prove#to#be#brand#loyal#provided#the#

right#value#is#provided#to# them.#They# do# not# want# swanky# gadgets,#

barely#10#rupees.#

expensive#apparel#and# food# joints#in# The# promise# shown# by# the# rural# these#retail#outlets,#rather#a#one#stop# market# is# on# account# of# various# desDnaDon# for# all#their#needs#would# factors#such#as#growing#aspiraDons#of# do#the#trick.#Thus#we#see#rural#retail# rural# India,# access# to# satellite# outlets# acDng# as# a# hub# providing# television# leading# to# more# informed# mulDtude# of# services# such# as# farm# buyers# and# the# overall# economic# produce# insurance,# bank# financing#

The# much# touted# boom# in# Indian# retail# space# is# not# just# restricted# to# urban#India.# It# is# not# too# difficult# to# imagine#how#these#rural#retail#outlets# will# change# the#way# the# ten# Rupees# man#shops#for#his#groceries#and#farm# needs.#

plans# to# capture# the# rural# retail# market,# which# is# expected# to# be# around# half# of# the# overall# domesDc# retail# market# of# around# 350# billion# dollars.#All#these#retailers#are#vying#to# catch# the# aXenDon# of# an# average# rural#consumer#whose#daily#earning#is#

Cash# and# carry# in# the# Indian# Retail# employment# in# rural# India# is# also# Space.#Most#of# the#din# is#about#how# seeing# a# gradual# change.# With# the# the# entry# of# these#‘Needle# to# Home# conversion#of#rural#places#to#SEZs#and# theatre# system’# hyper# markets# is# development# of# industries# in# rural# going# to# transform# the# face# of# areas,#more#rural#people#are#involved# shopping# experience# in# urban# India.# in#manufacturing# sector.#This#has#led# But# the# Indian# retail# story# is# not# to#higher#disposable#income.#Besides,# restricted#to#the#metros#and#Der#one# the#urban7rural#road#connecDvity# has# ciDes.#Various#corporate#groups#such# also# shown# improvement# which# has# as# ITC,# Godrej,# Aditya# Birla# and# led#to#easier#retailing#to#rural#places.# Mahindra# groups# have# aggressive#

[4]

Private Label Brands - Rahul Anand
Private Label Brands - Rahul Anand
Private Label Brands - Rahul Anand
Private Label Brands - Rahul Anand

Private Label Brands

Private Label Brands
Private Label Brands - Rahul Anand
Private Label Brands - Rahul Anand
Private Label Brands - Rahul Anand
Private Label Brands - Rahul Anand

- Rahul Anand

Private Label Brands - Rahul Anand
Private Label Brands - Rahul Anand
Private Label Brands - Rahul Anand
Private Label Brands - Rahul Anand
Private Label Brands - Rahul Anand
Private Label Brands - Rahul Anand Private# label# brands# are# retail# brands# fully# owned,# managed# and#

Private# label# brands# are# retail# brands# fully# owned,# managed# and# controlled# by# the# retailer.# Earlier# these# brands# were# considered# as# low# cost# alternaDves# to# manufacturer# brands#and#were# the# hot# shot# products# for# a# recession# period# or# for# people# who# could# not# afford#the#manufacturer#brands.#

Owing#to#their#lower#prices#to#the#customers#and#higher# margins#to# the#retailer,#these# brands#were#a#profitable# enDty#to#have#in#a#retail#chain.#

However#over#the#last#4#decades,#the#retail#chains#have#

grown# big# and# have# gained# the# trust# of# consumers.# Consumers’# percepDon# about# the#private#label#brands# have#changed# from# being# a#low# price#alternaDve# to#a# high# quality# variety# offering# brand# provided# by# the# retailer.

[5]

From#the#retailers’#perspecDve,# the# factors#which# have#

given#a#high#boost#to#private#label#brands#(PLBs)#are:#7

1.# Change# in# consumers’# percepDon# towards# private# labels# –# Decrease# in# perceived# diffe rence# be tween# p riva te# label# and# manufacturer#brands.

2.# Retailers’# gaining# higher# margins# from# private# labels.

3.# Private# labels# used# as# a# tool# to# improve# consumers’#percepDon#of#the#retail#store#–# This# improved# percepDon# enables# the# retailer# to# bring# the#customer#more# to# the# # store#and#in# the# process# gain# a# greater# share# of# his/her# wallet.#Research#shows#that#private#label#loyalty# leads#to#store#patronage.

Specific# (addiDonal)# drivers# of# PLBs# in# the#Indian# retail# scenario:#7 1.#

Specific# (addiDonal)# drivers# of# PLBs# in# the#Indian# retail#

scenario:#7

1.# In#India#modern#retail#has#set#its#ground#almost# at# the#same#Dme#as#have#the# big#manufacturer# brands.# This#makes#it# possible# for# the# modern# trade# retailers# to# establish# themselves# as# a# brand#as#big#as#a#manufacturer#brand.

a.# Fo r# example# conside r# a# box# o f# chocolates# under# the# Archies# brand.# When#one#is#gi]ing#a#chocolate#box,# he# might#consider#this#opDon#as#good#as#a# Cadbury# CelebraDons# or# a# Ferrero7 rocher.#This#is#because#he#might#want#to# gi]# a# premium# chocolate# to# his# colleague#and#Archies#fits#that#premium#

image#as#much#as#a#Ferrero7rocher!

2.# There# are# several# product# categories# in# our# country,# where# branded# variety# is# limited.# In# such#cases#the#chances#of# private#labels#gaining# acceptance#is#higher.

[6]

a.# For# instance,# an# Apollo# stamped# nail# cuXer# would# appeal# to#me#as#much# as# any# other# one.# This# is# a# case# in# which# the# product# is# not# highly# a# brand# acknowledged# one.# In# such# categories,# the#retail#chain#itself#creates#a#brand.

b.# Consider# the# Archies# case# again:# one# more# reason# for# going# for# an# Archies# chocolate# gi]# pack# might# be# variety# seeking# behavio r# shown# by# the# customers.# In# a# not# so# cluXered# category,# private# labels# provide# new# branded#opDons#to#the#customers!

Private#labels#offer#aXracDve#choices#in#various#product# categories#like#apparels,#fast#food#etc.#With#private#labels# forming# 40%# sales# of# Wal7Mart# and# around# 50%# for# Tesco# (# approximately# USD# 162#billion),# the# stage#is# set# for# the#Indian# retail# to#witness# a#vast# range#of# private# label#shopping!

Z A R A ! -Toshe Prasad
Z A R A ! -Toshe Prasad
Z A R A ! -Toshe Prasad
Z A R A ! -Toshe Prasad
Z A R A ! -Toshe Prasad

ZARA!

Z A R A ! -Toshe Prasad
Z A R A ! -Toshe Prasad
Z A R A ! -Toshe Prasad
Z A R A ! -Toshe Prasad

-Toshe Prasad

Z A R A ! -Toshe Prasad
Z A R A ! -Toshe Prasad
Z A R A ! -Toshe Prasad
Z A R A ! -Toshe Prasad
Z A R A ! -Toshe Prasad
Z A R A ! -Toshe Prasad So#we#all#know#that#retail#margins#are# idenDfying# trends,# and# puqng# it# in#

So#we#all#know#that#retail#margins#are# idenDfying# trends,# and# puqng# it# in# beneficial# effect# of# increasing# its#

high#when#it#comes#to#clothes.#But#in# store#within#30#days.#Zara#boasts#of#a# desirability.#In#fact,#it#is#directly#linked# Zara’s#business#line,#when#you#are#not# chain# of# designers# keeping# a# sharp# with# profits# as# there# is# a# lower# just#selling# clothes#but# fashion,# your# eye# for# the# hoXest# trends# as# they# chance# of# a# product# going# out# of# goods# are# perishable!# One# season# make#it,#and#geqng#the#latest#fashion# fashion# when# there# are# only# a# few# with#sales#deviaDng#from#your#plan#is# way#ahead#of#its#compeDtors.#A#quick# pieces# that# sell# quickly,# and# hence# enough# to#move#your#financials.# It#is# and# lean# supply# chain# ensures# its# there#are#no#discounts.#Ever. very# true# that# most# fashion#supplies# pioneering#posiDon.

DiversificaDon:#So#diversificaDon#does# The#scarce#good#trick: #Producing# low# not# just# work# on# your# financial# quanDDes# of# its# products# gives# the# poruolio;# more# the# number# of# double#advantage#to#Zara.#For#one,#it# designs,# the# higher# the# chance# of# reduces# the# risk# of# loss# from# a# hiqng# the#bull’s#eye.# # Zara#produces# parDcular# design/product# not#picking# more# than# 12000# styles# every# year,# up#in#popularity.#On#the#other# hand,# and# with# supplies# to# stores# twice# it#creates#an# arDficial# scarcity# of# the# every# week,# every# store’s# collecDon# product,# which# has# the# singularly# looks#brand#new#every#4#days!#

Short# lead# Dmes ,# leading# to# a# fresh# supply# of# fashion!#Zara# specializes#in#

Z ARAS& M AGIC&M ANTRAS

get# sold# at# huge# discounts# because# they#are#out#of#season.#So#what#does# Zara# do# to# keep# its# profitability# so# high#that#its#stock#skyrockets?

[7]

C OUNTER "I NTUITIVE& Z ARA In# order# to# achieve# its#lean#machine# structure,#Zara#has#taken#some#rather#

C OUNTER "INTUITIVE& Z ARA

In# order# to# achieve# its#lean#machine# structure,#Zara#has#taken#some#rather# counter7intuiDve#steps7#differing# from# the# industry#in# general.# Firstly,# while# most# compeDtors# rely# heavily# on# outsourcing# producDon# to# countries# it# is# cheaper# in# (typically# Asian# countries),# Zara#keeps#all# producDon# to# itself.# Despite# the# much# higher# costs,#it#succeeds#in#what#its#business# model# requires7# geqng# complete# flexibility# and#control.# Secondly,#Zara# has# not# employed# the# tradiDonal# method# of# predicDng# the# fashion.#

PredicDng# fashion# can# be# a# very# erraDc# process,# and# Zara’s# shi]# to# reacDng# to# changes#in#fashion# rather# than# trying# to# predict# it# gives# it# the# certainty# that# no# other# has.# Zara# is#

hence,#never#wrong.#Coupled#with#in7

house# producDon,# these# synergisDc# ideas# help# Zara# execute# it# Mantras.# Ex te n sive# u se# o f# i n fo rmaD o n# technology# further# helps# keeping# extraneous#costs#at#bay.

V IEW "C OUNTERVIEW

There#is #no#debate#that# Zara #has# been# successful # as # a# brand.#

[8]

However,#it#has #not#been#immune# to#criDcism.# Several#designers#are# of# the# opinion# that# Zara# typically# makes#rip7offs #of# the #creaDons #of# the#top#line#of#designers,# thereby# spending#much#less #on#design#and# sDll# geqng# creaDve# styles.# But# t he n,# Za ra# c l a im s # t o# o n l y# ‘interpret’# fashion,# and#who#is# to# differenDate # between# creaDon,# interpretaDon#and#inspiraDon!?

Editors:

Saurab Vivek Nair Srikanteaswaran T K Ayshwarya R. Vikram