Retail Business Simply retailing means, directly selling many goods or commodities and services to the consumer.

Retail business involves selling commodities from a retail store, online orders, through vendors and so many other polices. Retail Business is a global business. Retail business grew between 25% - 30% percent in India and 13 percent in fast growing economies China and Russia. Global retail industry has been expanding to new markets for a few years now. We offer brief information about global retail business that help you to understand and run your retail business better. It is not a secret that retail business is one of the most actively developing sectors of national economy. Besides territorial extension retail chain now tends to create new formats of retail outlets in order to gain more customers. With the increase in the purchasing power of the people the retail business is sure to flourish. Retail business is all about the study of the relationships of customer satisfaction, customer loyalty, and profitability: By retails business we mean a lot of things right from banks to a shop at the door step, no matter how big or small the business is, it all runs on the basic principles of customer satisfaction, customer loyalty, and profitability. Today, with the customers being provided with an array of choices, is the king. He can choose what to buy what not to buy and from where, so a good retailer will always strive to achieve the maximum customer satisfaction. After the customer satisfaction comes the loyalty to the customer, which plays a major role in bonding and cementing the relationship of the retailer and the customer. Last but not the least is the profit part, which without saying is the most important aspect of any business. As a matter of fact various studies and researches have shown that a retail business has been said to derive more profits than any other form of business, primarily because the cost involved is not very high. Probably that is one of the reasons why all the giants of any industry are going retail. We are covering here the global retail industry or global retailing area's.

Global retailing: Tempting trouble?

Huge markets await, but profit formulas often get distorted. What wont work: a standalone approach, inflexible purchasing, and 100% ownership. Three new expansion strategies.
FEBRUARY 1996 KAREN BARTH, NANCY J. KARCH, KATHLEEN MCLAUGHLIN, AND CHRISTIANA SMITH SHI

Trends in retailing reverberate far beyond the confines of the industry. Many commentators look to retail sector performance as an indicator of general economic well-being. The issues retailers face and what they do about them trickle down into almost every facet of any business that ultimately sells its products to consumers. At packaged goods, pharmaceutical, appliance, electronics, and apparel companies, key activities like category management, logistics, and new product development are all closely tied toand often designed in conjunction withthe strategies and processes of retailers. One of the most problematic trends in todays retail industry is globalization. Given the substantial productivity advantages enjoyed by the worlds best retailers, opportunities to move successful and innovative formats abroad would appear to be boundless. But experience suggests otherwise. The global arena has proven extraordinarily difficult for many retailers over the past two decades. The reality is that certain structural characteristics make it harder for retailing to operate across distinctive national markets in comparison with other industries such as car making, steel, or computers. As a result, few companies have succeeded in globalizing, and many barriers remain. All the same, the opportunity is sufficiently compelling to warrant further attention.

Challenges and hurdles

The challenge of global retailing begins with the consumer. Retailers performance in local markets will be highly sensitive to variations in consumer behavior. Entrants in such markets as Thailand and Indonesia will find pronounced differences in consumer tastes, buying habits, and spending patterns from one country to another. Accommodating these differences means tailoring the merchandise offering along dimensions such as color, fabric, and size for apparel; brand and sport for toys and leisure goods; and flavor for candy and snack foods. Yet the very changes that are needed to satisfy consumer preferences may hamper an entrants efforts to leverage its global sourcing scale and stay competitive on cost with local retailers. Other problems retailers will encounter when operating internationally include shortages of key resources such as land and labor; unfavorable tax and tariff structures; restrictions on trading hours and foreign ownership; and impenetrable established supplier relationships. Such hurdles will be only too familiar to any company that has attempted to compete outside its home market.

Market differences like these mean that a retail profit formula can get distorted overseas in all kinds of ways, to the point where it no longer resembles the original domestic formula. One US specialty retailer enjoyed superior sales productivity and gross margins in its new European stores, yet was unable to drop as much profit to the bottom line (Exhibit 1). It found that its productivity and margin gains were not high enough to cover greater operating expenses in areas such as real estate and labor and still deliver comparable profit levels.

As a result of these distortions, international value creation is difficult to achieve, and even more difficult to sustain. If we look at the return on capital for the foreign operations of three international retailers (Exhibit 2), we find it is below their estimated cost of capital (calculated as a corporate weighted average). Moreover, the foreign returns are fairly volatile, probably reflecting both the risks that come with operating across borders and the various financial tradeoffs that these companies have made over time.

Progress to date
Though these hurdles have slowed the globalization of the retail sector, many participants have ventured overseas in the past 20 or so years. Their experiences fall into two distinct "waves" of expansion, each with its own characteristics and players. Wave 1, in the 1970s and 1980s, consisted primarily of expansion within adjoining trade areas (for example, across Europe), with only limited forays further afield (from Japan to the United States, say). These moves were typically conducted via equity investments or acquisitions. The formats that expanded in this first wave included specialty retailers with proprietary brands, such as Benetton and Laura Ashley; luxury brands, like Herms and

Gucci; well-funded grocers and hypermarkets, including Tengelmann and Makro; and general merchandise retailers, such as Marks and Spencer and Sears. Many of these early movers encountered difficulties (for instance, C&A Brenninkmeyers with Orbachs, B.A.T with Saks Fifth Avenue, and Carrefour in the United States), and some were forced to pull out. Wave 2, which began in the late 1980s and is still under way, followed a different pattern, with movement beyond a retailers established trading bloc (from Europe to Asia, say), and greenfield expansion and joint ventures rather than acquisitions. Leading this global charge are efficient low-cost formats such as Wal-Mart and Carrefour, and large-scale categoryfocused retailers such as IKEA and Toys "R" Us. Specialty retailers have continued to expand into this second wave, with companies like The Disney Store, The Gap, and The Body Shop moving to establish international positions. Even in the wake of these two waves, however, few retailers are truly global. Indeed, global retailing is still in its infancy.

On the horizon
Nevertheless, the momentum is growing. Proof can be seen in some of the key indicators of market opportunity: currency convertibility, exchange control, stock exchange access, majority ownership rules, and repatriation of capital and earnings (Exhibit 3). In the last three years or so, barriers have crumbled around the world, freeing up access to more countries and allowing entrants to establish viable market positions.

At the same time, the attractions of global retailing have burgeoned. Many parts of the world are sustaining much higher rates of growth than the mature economies (Exhibit 4). Though growth is no guarantee of market attractiveness, where it exists, opportunity often follows. Moreover, many of these fast-growing markets still offer substantial "unstaked"

market share; in other words, only a relatively small proportion of demand is currently captured by organized retailers, which leaves ample room for new entrants (Exhibit 5).

As industry experience accumulates, we can begin to see how attractive the global arena may ultimately be for some retailers. Consider a few that do appear to be creating value overseas (Exhibit 6). The performance of The Body Shop, Carrefour, and McDonalds indicates the scope that exists for creating a global position that delivers attractive returns. The question is, how can other retailers build profitable international businesses for

themselves? The answer lies in taking a fundamentally new approach to international expansion.

An approach for each market

The reason for many of the difficulties encountered by retailers when they venture overseas is that they tend to export, wholesale and unchanged, a retail formula that is successful for them at home. This formula often features standalone business systems, static purchasing arrangements, and 100 percent ownership. While such an approach may work for a small number of retailers with truly unique and global concepts, it is not likely to succeed for the majority.
To win in international retailing, most players will need to reinvent competitive advantage in each new market

To win in international retailing, most players will need to position themselves so that they can reinvent competitive advantage in each new market. This means that the key success factors they have always relied onsuch as brand, skills, or productivitymust be critically reexamined as they expand. Two examples, viewed with the benefit of hindsight, illustrate the problems that can arise from a more traditional approach. Galeries Lafayette and Marks and Spencer both have elements at the heart of their retail concepts that they found very difficult to transfer overseas. Cautionary tales Galeries Lafayette attempted to export a high-end Parisian fashion concept to the United States. Perceived as French, but not exclusive enough for the highly competitive Manhattan market, the concept failed to find a sufficiently large customer base. When it entered in the 1970s, Marks and Spencer introduced a new retail concept to Canada: apparel plus food. Both downtown and in malls, it attempted to operate with its successful UK formula largely intact. As in Britain, it neither provided fitting rooms nor advertised heavily. In food, it offered such items as Scotch eggs, which few Canadians recognized or liked; in apparel, it maintained a traditional private-label stance against more fashionable competitors. Though M&S has since moved to address many of these cultural differences, it may have missed the chance to build something big in Canada.

Getting it right
In the global arena, the winners will be those retailers that are able to restructure their business systems, both locally and globally

The winners in the global arena will be those retailers that are able to restructure their business systems, both locally and globally. At the outset, they will assess their competitive strengths realistically and decide how best to reinvent advantage within and across country markets. They will use a mix of global, regional, and local processes to carry out key activities such as merchandising, logistics, and marketing.
They will go on to create new relationships with a range of vendors and manage webs of alliances and partnerships

They will go on to create new relationships with a range of vendors and manage webs of alliances and partnerships. They will outsource noncritical activities and build truly international management teams with deep bench strength. Finally, they will carefully adjust their concepts and profit formulas in every market to achieve sustainable levels of return. In effect, these retailers will reconfigure their entire retailing approach across and within individual markets. Take IKEA, which is beginning to change the retail game as it creates and maintains a superior global business. First, it has transformed its relationships with consumers. By "teaching" them to assemble furniture, it has cut its manufacturing and distribution costs. By intensely communicating its fashion perspective, it has built up a following across widely different markets for a relatively consistent line of Scandinavian-inspired furniture, thus boosting volume, which again reduces manufacturing costs. Second, it has transformed its relationships with suppliers. Its buying offices scan the globe for potential suppliers, and its engineering and business services groups coach them to help raise productivity, source raw materials, and achieve quality standards. This keeps manufacturing costs low and minimizes supply risk. Finally, IKEA has invested in global information systems to manage logistics across more than 120 stores, a dozen distribution centers, and 2,300 suppliers in nearly 70 countries. Among others, Wal-Mart, Makro, and Carrefour also show signs that they are starting to recognize and adopt this approach. They use a mix of global and local merchandising, take on local partners for such functions as distribution, and centralize operations where economies of skill or scale exist, as with information technology and vendor management.

Beyond business exporting

Once a retailer starts to approach globalization in this way, a broad range of strategic options emerge that go beyond the traditional business exporter approach. Three less familiar modelsthe superior operator, the concept exporter, and the skills exporterare now in the process of being adopted by retailers expanding abroad (Exhibit 7).

Superior operator. Tengelmanns acquisition and turnaround of A&P in the United States exemplifies this strategy. The company expanded internationally on the strength of its operating capability. After buying 52 percent of A&P in 1979, Tengelmann was able to restructure operations, launch new store formats, and acquire additional stores, transforming A&Ps net income from $3 million in 1979 to $128 million ten years later. Retailers pursuing such a strategy have to believe they can sustain a superior level of operations over the longer terma challenge that retailers such as Aldi have met more successfully than Tengelmann in recent years. Benettons strategy is to export a distinctive concept, but let someone else run it. Benettons strengths lie in its merchandise and brand image, which it controls closely. However, it does not see itself as a distinctive operator, and is therefore comfortable franchising that activity in each local market. A vital ingredient of such an approach, as The Body Shop attests, is effective control of franchise execution, something Benetton continues to struggle with. Skills exporter. Companies can export unique skills rather than entire business systems, as Price/Costco has done with Shinsegae in Korea. A large, diversified retail group, Shinsegae operates Seoul Price Club (SPC) under a ten-year agreement. Price/Costco is contributing a number of important assets and skills to this arrangement, including its brand name, its operating approach, its merchandising systems, and its access to low-cost suppliers, through which 25 percent of SPCs goods are imported. Shinsegae has provided capital, sites, staff, and sourcing. In return, it enjoys the benefit of access to global markets by having its products distributed in Price/Costco stores around the world.

Seizing opportunities
Retail formats that have had trouble globalizing in the past may find that this variegated approach allows them to participate selectively in attractive international opportunities. Marks and Spencer has achieved greater success in Asia than it did in Canada, for instance, because it has done a better job of reconfiguring its approach to suit individual markets. The Asia Pacific region has five of M&Ss 20 franchises (in the Philippines, Singapore, Indonesia, Malaysia, and Thailand). In Hong Kong, where M&S now has seven stores, it has been more flexible over key aspects of its retail concept, including store size and merchandise selection. Marks and Spencer also intends to open an office in Shanghai, from which it will explore the prospects for deeper development in mainland China and review its Asian supply chain. Similarly, Saks Fifth Avenue is putting in place a diverse international retailing business that may ultimately include direct marketing in South America, a store in Mexico, and, with local partner Seibu, in-store shops in Japan.

Many experts consider global retailing to be problematic and unprofitable. Retailing across borders is difficult at the best of times, and few industry players have managed to establish genuinely global businesses. But the prospects of long-term growth and tangible financial gains are too real to be ignored.
The prospects of long-term growth and tangible financial gains are too real to be ignored

Global retailing excellence demands a fundamentally different approach from that required to succeed in a domestic market. The winners will be those that assess their competitive strengths realistically, decide how best to export these advantages, and restructure their business systems accordingly. Executed well, such an approach should allow general merchandise retailers to participate in global markets even when their home formats do not travel well under a more conventional approach.