What ls Retailing?

Retailing is defined as a conclusive set of

activities or steps used to sell products or
services to consumers.

Retailer is the one who links the producers and the

ultimate consumers.

The word retail is derived from the French word

retallier , meaning to cut a piece off or to break
bulk.

Retailing is buying in large quantity from a whole

seller or directly from a manufacturer and selling
the goods services to consumer for personal
consumption.
THE UNORGANlSED RETAlLlNG
CHAlN
The !hain"
#anufacturer
$ntermediaries
Retailer
!onsumer
#anufacturer
ORGANlSED RETAlLlNG CHAlN
Retailer
!onsumer
EVOLUTlON OF ORGANlSED RETAlLlNG

%on #arche in &aris in '()* is said to be the first true

departmental store. $n the +.,., chain stores began
with the founding of
The -reat .tlantic / &acific Tea !ompany 0./&1 in
'()2.

Retailing in modern form started really in the '2*3s.

0./&, 4oolworth, +nited !igar in +,1. ,ome food
chains started selling meat, fruits, vegetables and
diary products under one roof.

The self service supermarket concept became

popular in the '253s

Technological advancement in packaging resulted in

prepackaging of meat, vegetables and grocery items.
This gave a boost to retailing because of the
convenience provided.
lMPORTANT CHARACTERlSTlCS OF
ORGANlSED RETAlL BUSlNESS

Positive characteristics
l. Choice of wide range from small (500 sq ft)
to very big (hyper market >l,00,000 sq. ft)
- Variety of business (products very large
(food items- restaurants/textile garments)
2. Franchisee option / own retail store choice.
3. Easy mobility because the principle and
concepts are the same everywhere.
4. People oriented industry.
5. Fairly stable and secure business many
retail businesses are least affected by
recession in the economy (like food).

lMPORTANT CHARACTERlSTlCS OF RETAlL
BUSlNESS
6. Not dependent on few vendors / customers.
7. Success / growth of organized retail sector is tried and
tested.
8. No scope of individual bargaining.
9. Constant growth and innovation opportunities
exist in retail business.
l0. Negative working capital requirement.

Negative characteristics
a) Low initial return.
b) Easy negative publicity.
c) Non-standard and long working hours.

POPULAR ORGANlSED RETAlL FORMATS

6ypermarket or ,uper centers: 7ffers highly

diversified merchandise grocery, toys, hardware
camera, electronics. ,pans more than ' lac sq ft
of space, sporting goods etc. 8ocated outside
city centre. 9g" 4al:#art, !arrefour %ig ba;aar,
,pencers hypermarket, Trent ,tar $ndia.

,upermarket: $t is focused on foods, grocery and

household items and is generally located in
residential areas.'3,333 to 53,333 sq ft. Food
world is an e<ample.

=epartmental ,tore: $t carries various

departments such as apparel, house ware,
furniture, >ewellery, appliances. #uch smaller
than a hypermarket in terms of space and ,?+s.
53,333 to ' lac sq ft.9g" ,hoppers ,top, 4est
side, 8ife style, 9bony.
POPULAR ORGANlSED RETAlL FORMATS

!onvenience ,tore: .ccessibility is what this

format offers. $t is conveniently located in crowded
neighbourhoods. 7pen long hours and @ days a
week. *333 to 5333 sq ft. 9g" !onvenio, @:9leven.

9<clusive 7utlet: These stock a single brand. !an

be company owned or franchised. 9g" Raymond,
Aimal, 8-, ,amsung, Titan.

=iscount ,tore: These provide no frill service.

These focus on providing items at a cheaper price.
,ubhiksha is an e<ample of this.

!ash:n:carry: This is a %*% format. 6ere the

retailer sells it to large institutional customers.
#etro 0in %angalore, 6yderabad, #umbai, ?olkata1
is an e<ample.
RETAlLlNG lN lNDlA

Retailing in lndia is one of the significant contributors

to the lndian economy and accounts for about l0% of
the GDP and employment of around 8%.

lt is expected to grow at a rate of 25% because rising

income, changing lifestyle and demographic patterns.

However this sector is in a highly fragmented state

as per estimates over l2 million outlets operate in the
country. But only 4% of these are larger than 500 Sq ft
in size.

As against l2 million outlets in lndia there are only

one million in USA but it caters to a retail market which
is almost l2 times larger.

Per capita retail space in lndia is 2 sq ft where as in

USA it is l6 sq ft.
RETAlLlNG lN lNDlA

The retail sale was around B5(3 billion in *33(, compared to B533
billion on *33@. .ccording to a study by the .ssociated !hambers
of !ommerce and $ndustry 0.,,7!6.#1, year:on:year growth will
remain between 53:5)C and is likely to reach more than BD)3
billion by the end of *3'3.

$T $, =$,TR$%+T9= ., F78874,"
Food / -roceryEEEEE. @@C
!lothesEEEEEEEEE @C
=urablesEEEEEEEE. DC
6ealth / %eautyEEEEE *C
6ome furnishingEEEEE *C
#edical servicesEEEEE *C
%ooks / #usicEEEEE.. 'C
FootwearEEEEEEEE 'C
ORGANlSED RETAlL lN lNDlA
ORGANlSED RETAlL lN lNDlA

%#$ 0 %+,$F9,, #7F$T7R $FT9RF.T$7F.81 R9&7RT

R9-.R=$F- 7R-.F$,9= R9T.$8$F- $F $F=$. ,T.T9,"
"The Q409 BMl lndia Retail Report predicts that total
retail sales will grow from US$357bn in 2008 to more
than US$7llbn by 20l3. Strong underlying economic
growth, population expansion, the increasing wealth of
individuals and the rapid construction of organised retail
infrastructure are key factors behind the forecast
growth. As well as an ever-expanding middle- and
upper-class consumer base, there will also be
opportunities in lndia's tier ll and tier lll cities. The
greater availability of personal credit and a growing
vehicle population that provides improved mobility also
contribute to a trend towards annual retail sales growth
of l5% in US dollar terms.
ORGANlSED RETAlL lN lNDlA
lndia's nominal GDP was US$l.l7trn in 2008. Average
annual GDP growth of 6.5% is predicted by BMl to
20l3.With the population forecast to increase from an
estimated l.l9bn in 2008 to l.27bn by 20l3, GDP per
capita is expected to expand by nearly 59% by the end
of the forecast period, to reach a projected US$l,563.
Our assumption of consumer spending per capita is for
a rise from US$594 in 2008 to US$l,l05 in 20l3. The
growth in the overall retail market will be driven, in large
part, by the explosion in the organised retail market. By
this, we mean the familiar Western concept of chain
outlets, department stores, supermarkets, etc.
According to lnvestment Commission of lndia (lCl)
data, this segment accounted for US$l2.lbn of sales in
2006, or 4.6% of the total retail segment. BMl forecasts
that organised retail sales will reach US$76.2bn by
20l3, representing l0.7% of the total".
ORGANlSED RETAlL PlE
- AS OF NOW
39
11
9
8
8
7
4
3
3 3
3
2
Clothing
food & groceies
consumer durables
furniture & furnishing
footwear
catering services
watch
books & music
moblie accessries
heath & beaut
!eweller
enterainment
MAJOR FACTORS THAT CONTRlBUTE TO
MORDERNlSATlON OF RETAlLlNG

Economic development

lmprovements in civic situation and

infrastructure

Proactive social changes.

lncrease in bargaining powers of the retailers.

Changes in supportive Govt policies.

lncreased investment in retailing.

Spread of lT.
SWOT ANALYSlS OF ORGANlSED RETAlL lNDlA
FAVORABLE FACTORS TO GROWTH OF
ORGANlSED RETAlL lN lNDlA

GDP growth has been 9% before melt down. lt is expected

to be 5 to 6% now.

lncreased disposable income leading to greater

purchasing power.

Big business houses have entered in retail sector.

Availability of quality retail space .

People seeking convenience and ambience: mall mania.

Quality, brand and fashion consciousness.

Upsurge in bank lending / credit card facilities.

Changing demographics: 60% of people below 35 years of

age . Growth in spending power of consuming segment.
Dual income families on the rise. lncrease in number of
women working.
FACTORS UNFAVOURABLE TO ORGANlSED RETAlL
SECTOR ln lNDlA

Barriers to financing: Lack of industry status.

Government has allowed 5l% foreign direct investment

(FDl) in the lndia retail sector to single brand shops only.
This has made the entry of global retail giants to
organized retail sector in lndia difficult. But the global
retail giants like Tesco, Wal-Mart, and Metro AG are
entering the organized retail sector in lndia indirectly
through franchisee agreement and cash and carry
wholesale trading.

Absence of many global players in pure retailing is

inhibiting technological growth and professionalism.
FACTORS UNFAVOURABLE TO ORGANlSED
RETAlL SECTOR lN lNDlA

Supply chain bottlenecks: Distribution logistics

constraints, wastages of farm produce up to 20%

They fail to match the certain services that Kirana

shops provide in lndia.

Lack of trained and skilled manpower. Severe

shortage of competent retail professionals.

Structural impediments: Low urbanization.

High cost of real estate and pro-tenant rental laws.

Complex taxation system.

RECENT SLOWDOWN lN ORGANlSED RETAlLlNG

lndia's organized retail sector will witness a slowdown

in 2009. The sales growth will go down to 8-l0 per cent
as against 34% in 2007.

As per KPMG report the country's retail sector saw a

sales decline of ll% due to adverse impact on
footfalls, low conversion ratio and working capital
availability, among others

As per the report the slow down in organized retail

might continue for l2-l8 months, whereby lndia will not
achieve her 20l2 target. Revised estimate of
Organized retail's share is l0.4 percent of the overall
retail market by 20l2, against an earlier estimate of l6
percent . ( Current share of organized retail is around 5
%)
RECENT SLOWDOWN lN ORGANlSED RETAlLlNG

'Slowing sales resulting in lower inventory turnover

and increasing working capital requirements to fuel
growth have resulted in liquidity pressures for many
domestic retailers,' KPMG official.

As a result of the slowdown in footfalls retailers are

taking alternative measures. "Be it store
rationalization, change of supply chain, consolidation
of operations, improvement in lT infrastructure,
retailers need to think quick to protect their margins,"
- Neil Austin, KPMG's Global Head of Markets.

As per the report, retailers are expected to focus more

on food and consumer goods rather than lifestyle
products. They may concentrate more tier ll and tier lll
cities as incomes in cities dries up.
RECENT SLOWDOWN lN ORGANlSED RETAlLlNG

The Future Group and Reliance Retail have put on

hold their cash & carry operations. Subhiksha have
halted operations. Aditya Birla Retail and Reliance
Retail have also closed several stores to conserve
cash. Cash-strapped Vishal Retail is closing stores and
has no plans to open more next year, but will expand
through the franchisee route, .

Global organized retailers - Wal-Mart, Tesco, Carrefour

have been waiting to enter the lndian market. But now
they are weary because large domestic retailers have
held back expansion plans .

But analysts are optimistic that retailers will re-

strategize and overcome the problem. Real estate
rentals (a high component of cost) have fallen which
will work in the retailers' favour.
Retailing Concept
Retail strategy

A retail strategy identifies the following:

"
The target market the segment of the market the
retailer wants to focus on.
"
The retail format which represents the retail mix
which comprises of the merchandise/ services,
pricing policy, advertising/ promotion programme,
location, store design/ visual merchandise. The retail
mix must be directed towards the needs of the
customer.
"
A sustainable competitive advantage which
enables the retailer to have an edge over its
competition with a futuristic approach.
Developing a Sustainable Competitive Advantage

To develop Sustainable Competitive advantage over its

competitors a retailer must address the following
important aspects of retail business:
"
Customer loyalty
"
Location
"
Human resource management
"
Merchandise and its display
"
Supply chain management and vendor relations
"
Customer service.
"
Retail store efficiency
"
lnformation system
Developing a Sustainable Competitive Advantage

!ustomer loyalty: This implies the presence of a customer

base that is committed to shopping in the retailer's
outlets. Loyalty just does not mean preference over other
competitors but an innate reluctance to switch over to
others. Loyal customers are the backbone of a business.
An important way to achieve customer loyalty is by
'positioning'. Positioning is creating a distinctive image
of the retailer in the customer's mind relative to its
competitors. A clear concise identity and image needs to
be built in the minds of the customers. This involves
branding the store. The brand name, logo, slogan are all
important considerations.
Loyalty (Frequent shopper) programs which are a part of
CRM are designed to enhance customer loyalty. Purchase
information, stored in a data bank (Data warehouse), are
used to design and build these programmes.
Developing a Sustainable Competitive Advantage

8ocation: This is one of the most important strategic

decisions in retail business, both for a stand alone
retail centre or a retail chain. The location decides the
coverage of the store in terms of customers who can
conveniently patronize the store on a regular basis. lt
can be a very vital competitive advantage .
Conformity with the positioning strategy, proximity,
accessibility, visibility, traffic flow etc are some of the
important considerations while selecting a store
location. The type of store also influences location
decision.

6uman Resource management: Retailing is essentially

service marketing. Hence the quality of employees
play a very important part. Need for efficient and
motivated team is essential. Sam Walton the founder
of Wal-Mart called his employees associates and
considered them as greatest assets of his company.
Developing a Sustainable Competitive Advantage

#erchandise and its display : To create a unique

merchandise may be difficult for a retailer because the
competitors also sell the same national or international
brands. Some retailers develop their own 'private label
brands' and thus be distinctive.
Category management relates to decision making
regarding the categories of the items which need to be
kept and prominently displayed.
By employing better visual management techniques a
retailer can gain competitive advantage.

,upply chain management and vendor relationship: This

covers the sourcing and buying decisions. The volume of
buying is one of the most important negotiating factor as
this determines the price (and the credit period) at which
the retailer can buy from the manufacture.
Developing a Sustainable Competitive Advantage
The benefits derived out of bulk buying can be passed on to the
customer and thus enable a retailer to have a competitive
advantage over its competitors.
Developing strong and special relationship with vendors can
enable retailers to gain exclusive rights to sell in a particular
region or to get scarce items which are in short supply.

!ustomer ,ervice" This can be a very significant competitive

advantage. There are two elements of customer service :
l. Expected customer service This is the service level that
customers demand from any retailer such as basic courtesy from
the retail staff.
2. Augmented customer service These are activities that
enhances shopping experiences and these are the special
customer services that give retailers competitive advantages.
Developing a Sustainable Competitive Advantage

Retail store efficiency " By achieving higher retail store

efficiency than its competitors a retailer can attain
competitive advantage.
The important parameters a retailer needs to
measure and monitor retail store efficiency are :
"
Space utilization factor this can be measured by
net return/ sq.ft. Space cost in most of the situations
is a major cost element, so effective space utilization
is vital.
"
'Margin to turn over ratio' - is a very obvious financial
indicator that needs to be monitored.
"
Employee productivity this is a ratio of sales to the
number of employees.
Developing a Sustainable Competitive Advantage

$nformation system: Superior lnformation system can

provide substantial competitive advantage to a retailer
over his competitors. Use of lT helps the retailers in
getting the customers what they want, when they want
in a cost efficient manner. For instance information
flows seamlessly from Wal-mart to its vendors to
facilitate quick and efficient merchandise
replenishment. lt results in better inventory
management reducing stock out and inventory cost.
Wal-marts huge database enables it to fine tune
merchandise assortment on a store-by-store,
categoryby category basis.