Present Indian retail scenario Retail is clearly the sector that is poised to show the highest growth in the next five years. The sector is set for a revolution, as both the present players and new entrants are gearing up to explore the market. This sector contributes 10% of India's GDP and the current growth rate is 8.5%. The present size of the organized retailing sector is approximately 3% and is expected to grow to 25-30% by the year 2010. There are about 300 new malls, 1500 supermarkets and 325 departmental stores currently under construction. Many players are coming up with huge investments, due to which the present 12 million mom-and-pop shops and kirana stores fear losing their business. Most predictions say that the sector might reach to US$ 400-600 billion by the year 2010. Global retail giants such as Wal-Mart, Tesco, Germany's Metro AG and many others are ready to enter the retail markets. The rising demand of brand ed products and increase in purchasing power
have
lured
these
companies
to
enter
the
market.
Modern retail development in India is focused on the following cities: West y
Mumbai
y
Pune
y
Ahmedabad
North y
Delhi and the National Capital Region
South y
Chennai
y
Banglore
y
Hyderabad
East y
K olkata
Leading Indian retailer Holdings
Ltd., Food
Bata
Bazaar,
India Ltd,
Big Bazaar,
Crossword, Ebony Retail
Globus Stores Pvt. Ltd., Liberty shoes Ltd., Music
World Entertainment Ltd., Pantaloon Retail India Ltd., Shoppers Stop, Subhiksha, Titan Industries, Trent and the new entrants penetrating the market soon will include Reliance Retail Ltd, Wal-Mart Stores, Carrefour, Tesco, Boots Group, etc. Current
scenario
A glimpse of the International R etail y
One of the world's largest industries exceeding US$ 9 trillion
y
47 global fortune companies & 25 of Asia's top 200 companies are retailers retailers
y
Dominated by developed countries
y
US, EU & Japan constitute 80% of world retail sales.
y
Biggest
player
Percentage USA
in
India
is
Pantaloon
of
Retail
Organized
-
India
Limited. Retail 85%
Taiwan
-
81%
Malaysia
-
55%
Thailand
-
40%
Brazil
-
Indonesia Poland China
36% -
-
30% 20% 20%
India Key
-
3%
trends
The existing players like Big Bazaar, Shoppers' Stop, Piramyd a re expanding to smaller towns and cities. Many other business houses are planning to enter the retail sector either on their own or through partnerships. New entrants like Reliance Retail Ltd and Wal-Mart are going to enter the market soon. Even rural areas will provide a huge opportunity to be explored. Estimates y
and Predictions
The industry is estimated to be more than US$ 400 billion by a study of McKinsey.
y
The Economist Intelligence Unit (EIU) estimates the retail market in India to increase to US$608.9 billion in 2009 from US$394 billion in2005.
y
A KPMG report says that the organized retail would grow at a higher rate than GDP in the next five years.
y
The retail sector would generate employment for more than 2.5 million people by the year 2010, says an analysis by Ma Fo i Management Consultants Ltd. Benefits
of FDI in Retail Sector
y
Higher
competition would lead to higher qu ality in products and services.
y
Better
lifestyle as better products would be introduced.
y
Exports would increase due to greater sourcing of major p layers.
y
Investment in whole supply chain would increase.
y
Technology would be u pgraded in terms of logistics, production, and distribution channels.
y
The markets of the sector would flourish and develop.
y
Employment would increase and skills & manpower will develop.
y
A strong retailing sector would promote tourism.
y
Economies of scale would h elp lower consumer prices and increase the purchasing power of the consumer.
y
In the long term it will be beneficial in the up-gradation of agriculture and small scale & medium scale industries.
Indian Consumerism The Indian consumer behaviour is rapidly changing with a shift in new generation's preference towards luxury commodities Retail Space: A Scope for Real Estate Sector With new boom in the retail industry, the country has identified new scope for real estate development. The already revolutionizing urbanization and growing demand for finished products has necessitated development of new space for retail outlets.
formats of retailing in India Popular Formats
Hypermarts Large supermarkets, typically (3,500 - 5,000 sq. ft) Mini supermarkets, typically (1,000 - 2,000 sq. ft) Convenience store, typically (7,50 - 1,000 sq. ft) Discount/shopping list grocer Traditional retailers trying to reinvent by introducing self-service formats as well
as value-added services such as credit, free home delivery etc. The Indian retail sector can be broadly classified into: a) FOOD R ETAIL ERS There are large numb er and variety of retailers in the food -retailing sector. Traditional types of retailers, who o perate small single-outlet businesses mainly
using family labour, dominate this sector .In comparison, super markets account for a small proportion of food sales in India.
However
the growth rate of super
market sales has being significant in recent years because greater numbers of higher income Indians prefer to shop at super markets due to higher standards of hygiene and a ttractive ambience. b) H EAL TH & BEAU TY PRODU CTS With growth in income levels, Indians have started spending more on health and beauty products .Here also small, single-outlet retailers dominate the market .However in recent years, a few retail chains specializing in these products have come into the market. Although these retail chains account for only a small share of the total market , their business is expected to grow significantly in the future due to the growing quality consciousness of buyers for these products . c) CLO THING & FOO TWE AR Numerous clothing and footwear shops in shopping centers and markets operate all over India. Traditional outlets stock a limited range of cheap and popular items; in contrast, modern clothing and footwear stores have modern products and attractive displays to lure customers.
However,
with rapid urbanization, and
changing patterns of consumer tastes and preferences, it is unlikely that the traditional outlets will survive the test of time. d) H OM E FURNITUR E & HOUS EHOLD GOODS Small retailers again dominate this sector. Despite the large size of this market, very few large a nd modern retailers have established specialized stores for these products. However there is considerable potential for the entry or expansion of specialized retail chains in the country. e) DURA BLE GOODS The Indian durable goods sector has seen the entry of a large number of foreign companies during the post liberalization period. A greater variety of consumer
electronic items and household appliances became available to the Indian customer. Intense competition among companies to sell their brands provided a strong impetus to the growth for retailers doing business in this sector. f) LEISURE & P ERSONAL GOODS Increasing household incomes due to better economic opportunities have encouraged consumer expenditure on leisure and personal goods in the country. There are specialized retailers for each category of products (books, music products, etc.) in this sector. Another prominent feature of this sector is popularity of franchising agreements between established manufacturers and retailers.
Malls In India Over the last 2-3 years, the Indian consumer market has seen a significant growth
in the number of modern-day shopping centers, popularly known as malls. There is an increased demand for quality retail space from a varied segment of largeformat retailers and brands, which include food and apparel chains, consumer durables and multiplex operators. Shopping-centre development has attracted real-estate developers and corporate houses across cities in India. As a result, from just 3 malls in 2000, India is all set to have over 220 malls by 2005. Today, the expected demand for quality retail space in 2006 is estimated to be around 40 million square feet. While previously it was the large, organised retailers with their modern, up-market outlets, and direct consumer interface- who had been a key factor driving the growth of organised retail in the country, now it is the malls which are playing the role. Factors such as availability of physical space, population densities, city planning, and socio-economic parameters have driven the Indian market to evolve, to a certain extent, its own definition of a mall. For example, while a mall in USA is 400,000 to 1 million sq.ft. in size, an Indian version can be anywhere between 80,000 sq.ft. and 500,000 sq.ft.
By
Mumbai,
Chennai,
B angalore, Hyderabad,
2005, total mall space in the 6 cities of Kolkata,
and National Capital Region
(Delhi, Noida, Gurgaon) is expected to increase to over 21.1 million sq. ft. Compared to other big cities, K olkata and
Hyderabad
are relatively new entrants
in the mall segment, but are witnessing quick growth. Smaller cities like Pune, Ahmedabad, Lucknow, Ludhiana, Jaipur, Chandigarh and Indore, are also expected to see a formidable growth in the g rowth of malls in the near future. But malls in India need to have a clear positioning through the development of differential product assortment and differential pricing, in order to compete effectively in a growing mall market. Segmentation in malls, like up-market malls, mid-market malls, etc. , proper planning, correct identification of needs, quality products at lower prices, the right store mix, and the right timing, would ensure the success of the ma ll revolution in India.
Challenges
of Retailing in India
Retailing as an industry in India has still a long way to go. To become a truly flourishing industry, retailing needs to cross the following hurdles: Automatic approval is not allowed for foreign investment in retail. Regulations restricting real estate purchases, and cum bersome local laws. Taxation, which favours small retail businesses. Absence of developed supply chain an d integrated IT management. Lack of trained work force. Low skill level for retailing management. Intrinsic complexity of retailing rapid price changes, constant threat of product
obsolescence and low margins. The retailers in India have to learn both the art and science of retailing by closely following how retailers in other parts of the world are organizing, managing, and coping up with new challenges in an ever-changing marketplace. Indian retailers must use innovative retail formats to enhance shopping experience, and try to understand the regional variations in consumer attitudes to retailing. Retail marketing efforts have to improve in the country - advertising, promotions, and campaigns to attract customers; building loyalty by identifying regular shoppers and offering benefits to them; efficiently managing high-value customers; and
monitoring customer needs constantly, are some of the aspects which Indian retailers need to focus upon on a more pro -active basis. Despite the presence of the basic ingredients required for growth of the retail industry in India, it still faces substantial hurdles that will retard and inhibit its growth in the future. One of the key impediments is the lack of FDI status. This has largely limited capital investments in supply chain infrastructure, which is a key for development and growth of food retailing and has also constrained access to world-class retail practices. Multiplicity and complexity of taxes, lack of proper infrastructure and relatively high cost of real estate are the other im pediments to the growth of retailing. While the industry and the government are trying to remove many of these hurdles, some of the roadblocks will remain and will continue to affect the smooth growth of this industry. Fitch believes that while the market share of organised retail will grow and become significant in the next decade, this growth would, however, not be at the same rapid pace as in other emerging markets. Organised retailing in India is gaining wider acceptance. The development of the organised retail sector, during the last decade, has begun to change the face of retailing, especially, in the major metros of the country. Experiences in the developed and developing countries prove that performance of organised retail is strongly linked to the performance of the economy as a whole. This is mainly on account of the reach and p enetration of this business and its scientific approach in dealing with customers and their needs. In spite of the positive prospects of this industry, Indian retailing faces some major hurdles (see Table 1), which have stymied its growth. Early signs of organized retail were visible even in the 1970s when Nilgiris (food), Viveks (consumer durables) and Nallis (sarees) started their operations.
However,
as a result of the roadblocks
(mentioned in Table 1), the industry remained in a rudimentary stage. While these retailers gave the necessary ambience to customers, little effort was made to introduce world-class customer care practices and improve operating efficiencies. Moreover, most of these modern developments were restricted to south India, which is still regarded as a Mecca of Indian Retail.
Scope of Indian retail market The scope of the Indian retail market is immense for this sector is poised for the highest growth in the next 5 years. The India retail ind ustry contributes 10% of the countries GDP and its current growth rate is 8.5%. In the Indian retail market the scope for growth can be seen from the fact that it is expected to rise to US$ 608.9 billion in 2009 from US$ 394 billion in 2005. The organized retailing sector in India is only 3% and is expected to rise to 2530% by the year 2010. There are under construction at present around 325 departmental stores, 300 new malls, and 1500 supermarkets. This proves that there is a tremendous scope for growth in the Indian retail market. The growth of scope in the Indian retail market is mainly due to the change in the consumers behavior. For the new generation have preference towards luxury commodities which have been due to the strong increase in income, changing lifestyle,
and
demographic
patterns
which
are
favorable.
The scope of the Indian retail market have been seen by many retail giants and thats the reason that many new players are entering the India retail industry. The major Indian retailers are: y
Pantaloons Retail India Ltd
y
Shoppers Stop
y
Bata
y
Music World Entertainment Ltd
India Ltd
Judging the scope for growth in the India retail industry many global retail giants are also entering the Indian retail market. They are : y
Tesco
y
Metro AG
y
Wal- Mart
The scope for growth in the Indian retail market is seen mainly in the following cities: y
Mumbai
y
Delhi
y
Pune
y
Ahmedabad
y
Bangalore
y
Hyderabad
y
Kolkata
y
Chennai
The scope of the Indian retail market is very vast. And for it to reach its full potential the government and the Indian retailers will have to make a determined effort.
Strategic planning in retailing: The retail strategy can be defined as a clear and definite plan that the retailer outlines to tap the market and build a long-term relationship with the consumers. A retail strategy is fundamental to the existence of the retail organization. It helps the organization, it purpose and hoe the retailer will face v arious challenges in the environment and marketplace.
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i g i retail
efi e t e busi ess
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uct t e situati ¢
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Ste 1. Defi e t e busi ess missi §
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T e mission statement is a statement of t e long-term purpose of t e
organization . It describes what t he retailer wishes to accomplish in the markets in which it chooses to c ompete. It highlights the f ollowing elements
y
The products and services that will be offered.
y
The customers who will be served.
y
The ge ographic areas that organization chooses to op erate in.
y
The manner in which the f irm intends to compete in its chosen markets.
Ste 2. C
uct t e situati
au it:
Situation audit is an analysis of the opport unities and threats in the retail environment and the strengths and weaknesses of the retail business relative to its c ompetitors. In sit uation analysis oneconduct a researc h on f ollowing factors:
Market Fact rs
Size
gr owth,
seasonality,
and
Business
Cycles
C mpetiti ve Fact rs
Barriers to entry, bargaining power of vendors, and c ompetitive rivalry Barriers e try- institute conditions in a retail market t hat make it diff ic ult f o r
other f irms to enter the market, such as scale economics, cust omer loyalty, and
the Scale
ability ec
mics-
f or are
cost
advantages
great due
to
locations.
a
retailer s !
size.
Bargai i g power of ve "
"
"
#
ors- Markets are less attractive when only a fe w
vendors control the merc handise sold in it. In these situations, vendors have the opportunity t o dictate prices other ter ms (like delivery dates), reduc ing the
retailer s
prof its.
$
Comp etiti ve Rivalry- def ines t he fre uency and inte nsity of reactions t o %
actions undertaken by competitors. When rivalry is high, price wars erupt, employee raids occ ur, advertising and promotions expenses ni crease, and prof it pote nt ial falls. Conditions that may lead to rivalries are: large number of
competitors that are all about the same size, slow gr owth, high f ixed costs, and a lack of perceived di fferences between comp eting retailers. Envir onmental
Technology,
Fact ors
economic,
regulat ory,
and
social
Strengt s and weaknesses analysis- indicates how well the business can seize &
opportunities and avoid harm from threats in the environment.
Ste p 3. Ide ntify strategic plan: In this step the retailer consider the various alter natives available f or tapping the market. Igor Ansoff presented a matr ix, which looked at growth opport unities by
f ocusing on the f irms present and potential products in the existing and new markets. This matr ix, whic h is popul arly known as Ansoff s Matrix, helps us understand the option s avail able to a retailer. These alter natives avail able to the
retailer are:
Existing
New
Existing Market penetration: Increase
y
Market the
market size
New
market
segments
the
with
existing format
customers Increase
y
development
/Expansion y
Increase
y
Retail formats
the
y
New
customer
base
purchase frequency New
Retail
format Diversification
development y y
New retail formats
New format with
directed
at
new
existing customers
market segments
Market segments
Step 4. Evaluate the plan:
Formatted: Font:
This determines the retailers potential to establish a sustainable competitive advantage and reap long-term profits from the opportunities being evaluated. Retailer must focus on opportunities that utilize its strengths and its competitive advantage
Step 5.
Esta '
lish specific o jectives: '
Objectives are a translation of the mission statement into operational terms. They
indicate the results to be achieved. The purpose of setting objectives is to give direction and set standards for the measurement of performance. Management normally sets both long-term and short-term objectives. One-or two-year time
16 pt, Bold
frames for achieving specific targets are sho rt-term. Long-term objectives are less specific than short-term targets and reflect the strategic dimensions of the firm. Good objectives are measurable, are specific to time and indicate the priorities for the orga nization. Main organizational objectives are: Market performance objectives: Sales Objectives - Volume or growth goals are often seen Customer Traffic Objectives - Get new people into the store through promotions, sales, special services Customer Loyalty - Get customers for life. The sale is the beginning of customer contact not the end Market Share - sales goals stated in terms of share of ma rket in comparison to local competitors Retail Image - Re-identifying the target market and the future growth potential (e.g. Sears) Vendor relations - increase sales through better coordination with vendors Financial performance: objectivesTargeted Returns - Ratio of calculated net income to sales (R OS) or to total assets (R OA) or to equity (R OE) Earnings per share - Important consideration for publicly traded retail firms Stockholder dividends Labor productivity - Sales per employee is a common retail measurement Space productivity - Sales per square foot of space (or per square foot of selling space) is another common measurement
Merchandise productivity - Inventory turnover goals
Personal objectives: Self-Gratification - Owners, managers, and employees will probably choose working in a retail environment they enjoy Status and Respect - Managing a store or being an employee of the month adds to individuals status and self-respect Power and authority - Retail employment usually provides for more responsibility than factory employment
Societal objectives: Social responsibilities are becoming more important The amount of social responsibility that comes from a true concern for society (e.g. Ben & Jerrys) versus the amo unt that is triggered by the desire for positive publicity and promotion (Drug store health fairs) is unknown Societal concerns often are at the expense of financial objectives.
Step 6. Develop a retail mix: This is to develop a retail mix for each opportunity in which an investment will be made and control and evaluate performance
Step 7. Evaluate performance and make adj ustments: This step is to evaluate the results of the strategy and implementation program. If the retailer is meeting or exceeding the objectives, changes arent needed.
Introduction of the retail unit: The foundation of shoppers stop was laid on October 27,1991 by the Crop. group of companies.
Being
K.
Raheja
amongst Indias biggest hospitality and real
estate players, the group crossed yet another milestone with its lifestyle venture Shoppers stop. From its inception, shoppers stop has progressed being a single brand shop to becoming a fashion & lifestyle store for the family. Today,
Shoppers Stop is household name, known for its superior quality products, services and above all, for providing a complete shopping experience.
Retail location strategies: selecting the location for the store is in the hands of retailers because before selecting the location they have to check many factors like walking traffic, competitor, parking infrastructure etc. they also have to decide that they want to buy the site or they will take it on rent. So after deciding all these things they reach to the final decision. In jaipur after evaluating all the above things they select two places: 1. Triton mall, jhotvara 2. Gaurav tower, malviya nagar The retail location which we select for the survey is Shoppers stop at Malviya nagar. The factors considered for location selection are: 1. it is a centralized location which cover the consumers of Malviya Nagar, Jawahar Nagar, mansarover etc. areas so people reside there come to GT for shop. 2.
Huge
availability of transport like taxi, buses etc.
3. Facility of free and ample parking increased the number of footfall in GT . 4. Clientage for shoppers stop prefer to shop in malls and convince store rather than an individual store so a store in mall is good than an individual shop.
Customer
Profile:
Shoppers Stops customers fall between the age group of 16 years to 35 years, the majority of them being families and young couples with a monthly household income above Rs. 20000 and an annual spend of Rs.15000. A large number of Non - Resident Indians visit the shop for cultural clothes in the international environment they are used to which means people from abroad are also
interested in shopping in Shoppers stop. Their target customers are upper middle class and upper class. Customer
Rewards:
Shoppers Stops customer loyalty program is called The First Citizen. The program offers its members an opportunity to collect points and avail of special benefits. Currently, Shoppers Stop has a database of over 2.5 lakh members who contribute to nearly 65% of the total sales of Shoppers Stop. They also offer a cobranded credit card with Citibank for their members. SCM:
Understanding the importance of distribution and logistics in ensuring that merchandise is available on the shop floors has led Shoppers Stop to streamline its supply chain. The company has developed p rocess manuals for each part of the logistics chain. These modules include vendor management, purchase order management, stock receiving systems, purchase verification and inventory buildup, fixing of price and store tags, dispatch of stocks to the retail floor and forwarding of bills for payment. If we talk about various brands then the an swer is that they have a direct tie ups with different companies and companies deliver all the needed products to their door-step means deliver all the goods to every shoppers stop showroom.
But
there are some companies which do not provide
them these services so for those they have their own carrier. C RM
(customer relationship management) Strategies:
Retail chain Shoppers Stop Ltd, is eyeing over 50 per cent sales this year from its customer relationship management (CRM) initiatives. The company has also lined up an aggressive expansion plan targeting smaller towns and cities in the c ountry. BS
Nagesh, managing director and CE O of Shoppers Stop, told FE that the
company has given a new direction to its CRM initiatives after it acquired a business intelligence software called
Business
Solutions about eight months
ago. The new software helps generate intelligent data from Shoppers Stop customer base of about 2,30,000. The company then collects this data and touches base with customers via direct mailers informing them of all new
promotions that is currently on and also updates them about the upcoming events. Shoppers Stop claims that it has taken its CRM initiatives to a new height and now calls its loyalty programmes Customer Experience Management. If we find from the data that a customer had bought a pair of trousers, we tell him about a new range of shirts that we have just brought into our store, says Mr Nagesh. We are planning to open 35 outlets within the next three years. We have identified 21 new locations including
K anpur,
Amritsar, Jalandhar,
Ahmedabad and Indore, am ong others to set up these outlets, Mr Nagesh said. Use of IT in the store: Shoppers Stop was the first few retailers to use scanners and barcodes and completely computerise its operations. Today it is one of the few stores in India to have retail ERP (Enterprise resource planning) in place, which is the best retail planning system in the world. With the help of the ERP , they are able to o pen new stores faster and get information about merchandise and customers online, which reduces the time in taking quick decision. Major competitors of Shoppers stop: In India competitors for Shopper¶s Stop are mainly foreign players and also Individual stores. The na me of few co mpetitors is given below: Lifestyle Globus Central Pantaloons W estside E bony
The retail unit at malviya nagar the major c ompetitors for Shoppers Stop are:
