RETAIL
Growing Importance of Retail Sector Large and increasing contribution to GDP Economic importance more visible Major employer Retailers diversifying their activities Organisations growing on an international scale Blurring of areas of retail to include wider areas of business activity • Size of operation allowing for supply chain control. • • • • • •
Characteristics of Retailing Characteristics • There is direct end-user interaction in retailing. • Sales at the retail level is generally in smaller unit sizes. • Location is a critical factor in retail business. • In most retail businesses services are as important as core product. • It is the only point in the value chain to provide a platform for promotions. promotions .
Modern Retail In Expansion Expansion Phase… Initiation Co Conceptualization nceptualization
I f o i
e z S
y r t s u d n I
II
Pure play Retailers, realizing the potential start to test waters,
Expansion and Entry of Global Retailers
Entry of large global retailers
III
Consolidation
IV
Large Scale Consolidation Stiff Competitio n
Movement to Smaller Cities and Rural Areas
More Aggression from International Internation al Players
Manufacturers opening their own outlets
Expansion by leading Product Brands
Large Investment Commitments by large Indian corporates
More than 5-6 Players with Revenues in excess of US $ 700 mn Specialty Formats based on finer segmentation of the market Private brands getting established
Pre 1995
1995 to 2005
2005 to 2010
2010 Onwards
Types of Retail Formats
Mom and Pop Stores (e.g. kiryana stores) Department stores ( Shopper’s stop)
Specialty store ( Pizza Hut)
Supermarkets (Wal-Mart,Big Bazaar)
Convenience stores (In & Out)
E-tailors (e-bay,amazon.com)
Discount stores (Koutons) Full-line discounters or mass
merchandisers
Specialty discount stores or category
killers
FUNCTIONS OF RETAILERS UNDERSTANDING CUSTOMER NEEDS & WANTS
PROVIDING SERVICES TO CUSTOMERS
HOLDING INVENTORY
PROVIDING ASSORTMENT OF GOODS SERVICES
BREAKING BULK
PROVIDING INFORMATION TO SUPPLIERS
e a
ar e r ea - p n 2008
Source: Technopak Analysis
India Retail Scenario •
The Indian retail market is expected to be about US $ 535 Billion by 2013. With an anticipated US$ 30 Billion in fresh investments over next 5 years, modern retail will show impressive CAGR >40%
Modern Retail
Retail
GDP 2,135 1,487
1,161 783 8
280
2003
755
535
410 73
18 2008
2013 (P )
170 2018 (P ) All Figs in US$ billion
8
Currently, Modern Retail Comprises a Currently, Small Percentage Percentage of Total Retail in India
Breakup of Modern and Traditional Retail
Breakup of categories within modern retail
Spending Shifting From Basic To Discretionary Food & Grocery
Rent, Utilities & Education
201 3
Fuel, Transport & Communication Savings & Investment Discretionary Expenditure
200 200 3
200 8 • The share of food and grocery in the consumer’s wallet continues to drop – releasing money for discretionary expenditure • F&G share expected to decline from 36% in 2008 to 32% in 2013
Source: India Consumer Trends ’07, Technopak analysis
, Opportunity Op portunity For Retail & Consumer Products Is Still Intact • Medium and long term prospects for the Indian economy continue to be enthusing with strong domestic consumption and reduction in commodity prices, inflation, and lowering interest rates. • Sect Sectors ors such as Consum Consumer er Products, Products, Food Food & Grocery, Grocery, Consumer Appliances Appliances & Durables, QSRs, Healthcare, Education,, etc. are still showing high growth prospects as Education reflected in their recent financial numbers. • Modern Indian retail is currently experiencing a steep learning curve and the current turbulence is not entirely unexpected or undesirable. • Retail will witness expansion, consolidat consolidation, ion, acquisition acquisition and further entry of international chains between 2009-2013 giving further fillip to the overall growth of modern retail. • Investment options will further increase as the Government will finally open up internationa internationall investment in the retail sector during 2009-2013 period.
DEFINITION OF RETAILING The term ‘retailing’ is derived from the old French word “retailler ” meaning ‘a piece of’ or ‘to cut up’. Retail is: “Any business that directs its marketing efforts towards satisfying the final consumer based upon the organisation of selling goods and services as a means of distribution”.
Classification of Retail Units Retail stores can be classified as per the following ownership: • Nature of ownership: - Sole proprietorship, Partnership, Joint Venture Limited Liability company.
• On the basis of Operational Structure : - Independent Unit, Retail Chain, Franchise, Leased (s-in-s) departments, Co-operatives (Fair price)
• On the basis of retail Location : - Free Standing Retailers, In Business-associated location, planned shopping centers
• On the basis of Merchandise Mix.
Method of Customer Interaction Type of Retailers
Store Retailers
Non-Stores Retailers
- Electronic Retailing - Catalogue & Direct Mail Retailing - Direct Selling Person to Person Party Plan or Person Selling Multilevel Network
- Vending Machines
Retail Marketing The Nature of Retail Marketing:
The key aspects of retail marketing is an attitude of mind.
In making retail marketing decisions, retailers must consider the needs of the customers.
Retail marketing decisions are driven by what the shoppers need and want
Cont… Retail
marketing is therefore a philosophy and is all about satisfying the customers What the customers regard as value and what w hat they buy is decisive. What the customers buy determines the nature of the retailer’s business The essence of retail marketing is developing merchandise and services that satisfy specific needs of customers, and supplying them at prices that will yield profits. Retailers must take the customers’ needs into consideration in retail operation.
Marketing • The retail marketing concept is the acceptance by the retailer that it is the “customer” and not “demand” that lie at the core of the retail organisation. • The retail marketing concept is a philosophy, not a system of retailing or retail structure. • It is founded on the belief that profitable retailing and satisfactory returns on investment can only be achieved by identifying, anticipating and satisfying customer needs and desires. • It is an attitude of mind that places the customer at the very centre of retailing activities.
Retail marketing is stimulating, quickpaced, and influential. It encompasses a wide range of activities including: – – – –
Environmental analysis Environmental Market research Consumer analysis Product planning etc.
Importance Of Marketing In Importance Retailing • Marketing is a vital tool for every retailer, as it identifies current, unfulfilled needs and wants, which it defines and quantifies. • Marketing determines which target groups the retailer should serve. • Marketing could be seen as delivering an acceptable standard of living. • Marketing can ensure complete satisfaction and sustained customer loyalty. • Marketing depends on the efficient co-ordination of consumer prediction, product development, packaging design and influencing demand through appropriate communication medium. • From these, a suitable mix is achieved.
Retail marketing objectives The retail marketing objective is a performance parameter which has been explicitly stated. It can be stated in quantifiable terms and time terms so that results can be measured against it. Three types of retail objectives include: 1. Basic objective objective – those which defines retailer’s retailer’s longterm purposes. 2. Goals – those which the retailer retailer must achieve to be successful 3. Targets – short-term short-term goals that require require immediate achievement.
Retail marketing mix • Retail marketing mix is the term used to describe the various elements and methods required to formulate for mulate and execute retail marketing strategy. • Retail managers must determine the optimum mix of retailing activities and co-ordinate the elements of the mix. • The aim of such coordination is for each store to have a distinct retail image in consumers’ mind. • The mix may vary greatly according to the type of market the retailer is in, and the type of product/services. of product/services.
The 3 P’s of Marketing (Extended Marketing mix)
elements • • • • • • •
Place Product Price Promotion People Process Physical Environment
Retail Marketing Mix Mix While many elements may make up a firm’s retail marketing mix, the essential elements may include:
• Store location, • merchandise assortments • Store ambience, • customer service, • price, • Communication with customers
Mix … • • • • • • •
Personal selling Store image Store design Sales incentives People Process Physical evidence
Theories of Retail Development Retail Development from the theoretical perspective: • No single theory can be universally applicable or acceptable. The application of each theory varies from market to market , depending on the level of maturity and the socio-economic conditions in that market. • The retail scenario keeps changing continuously. These changes are brought by ever changing customer requirement, economic development of the nation , falling borders, new technologies and by entrepreneurs.
• •
Growth in retail is a result of understanding market signals and responding to opportunities that arise ari se in a dynamic manner. Theories of retail development can broadly be classified as: as :
1.
Environmental: where a change in retail is attributed to the change in the environment in which the retailers r etailers operate.
2.
Cyclical : where change follows a pattern and phase can have definite identifiable attributes associated with them.
3.
Conflictual: where the competition or conflict between two opposite types of retailers, leads to a new format being developed.
• The Wheel Keeps On Turning And Department Stores, Supermarkets, And Mass Merchandise Went Through This Cycles e s a h p y t i l i b a r e n l u V
Mature retailer Top heavy Declining ROI
Innovative retailer Low status and price Minimum service Poor facilities Poor facilities Poor Limited product offering
Traditional retailer Elaborate facilities Higher rent More locations Higher prices Higher prices Higher Extended product offerings
Trading up phase T
E n t r y p h a s e
3. Conflict theory (dialectic Process) • Conflict always exit between operators of similar formats or within broad retail categories. • Retail innovation does not necessarily reduce the number of formats available to the consumer, instead , it leads to the development of more formats. • Retailing involves through a dialectic process, i.e. blending of two opposite to creates a new format. This can be applied to development in retailing like;
A.
Thesis: Individual retailers as corner shops all across the country.
B.
Antithesis: A position opposed to the thesis develops over a period of time . (department store, discount store). The antithesis is a challenge to the Thesis.
C.
Synthesis: There is a blending of the Thesis and antithesis. The result position between the thesis and antithesis. Supermarkets and hypermarkets flourish. This “synthesis”
for the next round of evolution .
Illustration Antithesis
Thesis
Discount Store
Department Store
Discount Department Store
