RETAIL MANAGEMENT
Anant Dhuri
RETAIL MANAGEMENT 100 Marks
Course Content 1. Place of Retailing in the Marketing Mix. 2. Trends in retailing 3. Retail Economics 4. Retail Merchandising and Shop Displays 5. Retail Advertising and Sales Promotions 6. Managing People at Work - Recruitment and Motivation 7. Communication and Customer Relations. 8. Inventory control and Financial Management 9. Retail Strategies 10. Retail Marketing 11. Retail Management Information Systems :- Use of New Technology 12. Super Market / Departmental Stores /Chain store Management 13. Comparative retailing across the World. 14. Role of personal selling in retailing. 15. Store layout. 16. Relationship Marketing 17. Supply Chain Management 18. Retail Research including Retail Audits and Consumer Research at the point of purchase 19. On-line retailing 20. Trends in retailing should include the Indian as well as the international context.
Reference Text: 1. 2. 3. 4. 5.
Retailing Management – Michael Levy Retail Management – Barry Berman & Joel Evans Retailing Management – Text & Cases – Swapna Pradhan Retail Management – Lusch, Dunne Retail Management – Gibson Vedamani
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Chapter 1 PLACE OF RETAILING IN THE MARKETING MIX
Retail consists of the sale of physical goods or merchandise from a fixed location, such as a department store, boutique or kiosk, or by mail, in small or individual lots for direct consumption by the purchaser.[1] Retailing may include subordinated services, such as delivery. Purchasers may be individuals or businesses. In commerce, a "retailer" buys goods or products in large quantities from manufacturers or importers, either directly or through a wholesaler, and then sells smaller quantities to the end-user. Retail establishments are often called shops or stores. Retailers are at the end of the supply chain. Manufacturing marketers see the process of retailing as a necessary part of their overall distribution strategy. The term "retailer" is also applied where a service provider services the needs of a large number of individuals, such as a public utility, like electric power. Shops may be on residential streets, shopping streets with few or no houses or in a shopping mall. Shopping streets may be for pedestrians only. Sometimes a shopping street has a partial or full roof to protect customers from precipitation. Online retailing, a type of electronic commerce used for business-to-consumer (B2C) transactions and mail order, are forms of non-shop retailing. Shopping generally refers to the act of buying products. Sometimes this is done to obtain necessities such as food and clothing; sometimes it is done as a recreational activity. Recreational shopping often involves window shopping (just looking, not buying) and browsing and does not always result in a purchase. What is Retailing? • Retailing – a set of business activities that adds value to the products and services sold to consumers for their personal or family use. • A retailer is a business that sells products and/or services to consumers for personal or family use. Examples: • Retailers: -Sears, Holiday Inn, McDonalds, Amazon.com, Jiffy Lube, AMC Theaters, American Eagle Outfitter, FAO Schwartz, Kroger • Firms that are retailers and wholesalers that sell to other business as well as consumers: -Office Depot, The Home Depot, United Airlines, Bank of America, Sams Clubs How Retailers Add Value Breaking Bulk -Buy it in quantities customers want Holding Inventory -Buy it at a convenient place when you want it Providing Assortment -Buy other products at the same time Offering Services -See it before you buy, get credit, layaway Marketing & Manufacturer‟s Perspective
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Decision Variables for Retailers/ Retail Mix
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Chapter 2 TRENDS IN RETAILING General Trends in Retailing • New Types of Retailers • Increased Concentration • Globalization • Growth In Services Retailer • Demise of Pure Electronic Retailers (Webvan, eToys, etc) • Growth in Use of Multi-Channel Retailing by Traditional Retailers • Increase Use of Technology to Reduce Cost, Increase Value Delivered Types of retail outlets A marketplace is a location where goods and services are exchanged. The traditional market square is a city square where traders set up stalls and buyers browse the merchandise. This kind of market is very old, and countless such markets are still in operation around the whole world. In some parts of the world, the retail business is still dominated by small family-run stores, but this market is increasingly being taken over by large retail chains. Retail is usually classified by type of products as follows: • Food products • Hard goods ("hardline retailers") - appliances, electronics, furniture, sporting goods, etc. • Soft goods - clothing, apparel, and other fabrics. There are the following types of retailers by marketing strategy: 1) Department stores – very large stores offering a huge assortment of "soft" and "hard goods; often bear a resemblance to a collection of specialty stores. A retailer of such store carries variety of categories and has broad assortment at average price. They offer considerable customer service. 2) Discount stores – tend to offer a wide array of products and services, but they compete mainly on price offers extensive assortment of merchandise at affordable and cut-rate prices. Normally retailers sell less fashion-oriented brands. 3) Supermarkets - sell mostly food products; 4) Warehouse stores – Warehouses that offer low-cost, often high-quantity goods piled on pallets or steel shelves; warehouse clubs charge a membership fee; 5) Variety stores – these offer extremely low-cost goods, with limited selection; 6) Demographic - retailers that aim at one particular segment (e.g., high-end retailers focusing on wealthy individuals). 7) Mom-And-Pop : is a retail outlet that is owned and operated by individuals. The range of products are very selective and few in numbers. These stores are seen in local community often are family-run businesses. The square feet area of the store depends on the store holder. 8) Specialty stores: A typical speciality store gives attention to a particular category and provides high level of service to the customers. A pet store that specializes in selling dog food would be regarded as a specialty store. However, branded stores also come under this format. For example if a customer visits a Reebok or Gap store then they find just Reebok and Gap products in the respective stores. 9) General store – Usually a rural store that supplies the main needs for the local community; 10) Convenience stores: is essentially found in residential areas. They provide limited amount of merchandise at more than average prices with a speedy checkout. This store is ideal for emergency and immediate purchases.
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11) Hypermarkets: provides variety and huge volumes of exclusive merchandise at low margins. The operating cost is comparatively less than other retail formats. 12) Supermarkets: is a self service store consisting mainly of grocery and limited products on non food items. They may adopt a Hi-Lo or an EDLP strategy for pricing. The supermarkets can be anywhere between 20,000 and 40,000 square feet (3,700 m2). Example: SPAR supermarket. 13) Malls: has a range of retail shops at a single outlet. They endow with products, food and entertainment under a roof. 14) Category killers or Category Specialist: By supplying wide assortment in a single category for lower prices a retailer can "kill" that category for other retailers. For few categories, such as electronics, the products are displayed at the centre of the store and sales person will be available to address customer queries and give suggestions when required. Other retail format stores are forced to reduce the prices if a category specialist retail store is present in the vicinity. 15) E-tailers: The customer can shop and order through internet and the merchandise are dropped at the customer's doorstep. Here the retailers use drop shipping technique. They accept the payment for the product but the customer receives the product directly from the manufacturer or a wholesaler. This format is ideal for customers who do not want to travel to retail stores and are interested in home shopping. However it is important for the customer to be wary about defective products and non-secure credit card transaction. Example: Amazon, Pennyful and Ebay. 16) Vending Machines: This is an automated piece of equipment wherein customers can drop in the money in machine and acquire the products. Some stores take a no frills approach, while others are "mid-range" or "high end", depending on what income level they target. Other types of retail store include: 1) Automated Retail stores are self-service, robotic kiosks located in airports, malls and grocery stores. The stores accept credit cards and are usually open 24/7. Examples include ZoomShops and Redbox. 2) Big-box stores encompass larger department, discount, general merchandise, and warehouse stores. 3) Convenience store - a small store often with extended hours, stocking every day or roadside items; 4) General store - a store which sells most goods needed, typically in a rural area; Retailers can opt for a format as each provides different retail mix to its customers based on their customer demographics, lifestyle and purchase behaviour. A good format will lend a hand to display products well and entice the target customers to spawn sales. Retail pricing The pricing technique used by most retailers is cost-plus pricing. This involves adding a markup amount (or percentage) to the retailer's cost. Another common technique is suggested retail pricing. This simply involves charging the amount suggested by the manufacturer and usually printed on the product by the manufacturer. In Western countries, retail prices are often called psychological prices or odd prices. Often prices are fixed and displayed on signs or labels. Alternatively, when prices are not clearly displayed, there can be price discrimination, where the sale price is dependent upon who the customer is. For example, a customer may have to pay more if the seller determines that he or she is willing and/or able to. Another example would be the practice of discounting for youths, students, or senior citizens.
Transfer mechanism There are several ways in which consumers can receive goods from a retailer: • Counter service, where goods are out of reach of buyers and must be obtained from the seller. This type of retail is common for small expensive items (e.g. jewelry) and controlled items like medicine and liquor. It was common before the 1900s in the United States and is more common in certain countries like India.[which?] • Delivery, where goods are shipped directly to consumer's homes or workplaces. Mail order from a printed catalog was invented in 1744 and was common in the late 19th and early 20th centuries. Ordering by telephone is now common, either from a catalog, newspaper, television advertisement or a local restaurant menu, for immediate service (especially for pizza delivery). Direct marketing, including telemarketing and television shopping channels, are also used to generate telephone orders. started gaining significant market share in developed countries in the 2000s. 5
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Door-to-door sales, where the salesperson sometimes travels with the goods for sale. Self-service, where goods may be handled and examined prior to purchase
Challenges To achieve and maintain a foothold in an existing market, a prospective retail establishment must overcome the following hurdles: Regulatory barriers including - Restrictions on real estate purchases, especially as imposed by local governments and against "big-box" chain retailers; - Restrictions on foreign investment in retailers, in terms of both absolute amount of financing provided and percentage share of voting stock (e.g., common stock) purchased; Unfavorable taxation structures, especially those designed to penalize or keep out "big box" retailers (see "Regulatory" above); Absence of developed supply chain and integrated IT management; High competitiveness among existing market participants and resulting low profit margins, caused in part by - Constant advances in product design resulting in constant threat of product obsolescence and price declines for existing inventory; and Lack of properly educated and/or trained work force, often including management, caused in part by - Lack of educational infrastructure enabling prospective market entrants to respond to the above challenges. Sales techniques Behind the scenes at retail, there is another factor at work. Corporations and independent store owners alike are always trying to get the edge on their competitors. One way to do this is to hire a merchandising solutions company to design custom store displays that will attract more customers in a certain demographic. The nation's largest retailers spend millions every year on in-store marketing programs that correspond to seasonal and promotional changes. As products change, so will a retail landscape. Retailers can also use facing techniques to create the look of a perfectly stocked store, even when it is not. A destination store is one that customers will initiate a trip specifically to visit, sometimes over a large area. These stores are often used to "anchor" a shopping mall or plaza, generating foot traffic, which is capitalized upon by smaller retailers. Customer service Customer service is the "sum of acts and elements that allow consumers to receive what they need or desire from your retail establishment." It is important for a sales associate to greet the customer and make himself available to help the customer find whatever he needs. When a customer enters the store, it is important that the sales associate does everything in his power to make the customer feel welcomed, important, and make sure he leave the store satisfied. Giving the customer full, undivided attention and helping him find what he is looking for will contribute to the customer's satisfaction.
MAJOR TRENDS
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Chapter 3 RETAIL ECONOMICS Retail economics Much has been made of the recent changes in the competitive and economic landscape for retailers. Consolidation, increasing competition, market saturation, increasing customer demands and accelerating product cycles are among the things retailers now have to navigate to remain successful. Despite today‘s complexities however, the fundamentals of retail economics remain the same. In fact, the most basic principles of retail economics have not changed since the th Venetian merchants of the 13 century. An admittedly simplified, but potent view of retail economics holds as true today as it did in ancient Venice: • Develop a concept that appeals to customers such that goods can be bought for less and sold for more • Add locations • Cover overhead Accepting this basic view of retail economics, the primary task for a successful retailer is to get the ―economics of the box‖ (store) working. If the retail concept is working, each store produces acceptable gross margins on product sold. These margins cover the cost of store labor and other store overhead, and the store overall contributes margin to cover corporate overhead. This is the fundamental building block of healthy retail economics, and without it, all other strategies will eventually wither. If the economics of the box work, the next question is one of profitable scale. How many stores are required to support the corporate overhead? How fast can the store base grow? When and how are investments made to streamline corporate overhead and make it scale more efficiently? If all three concepts are working, a retailer‘s economics are sound. If one aspect isn‘t working, it is sometimes possible to temporarily cover up for it using the other levers: Adding more stores can cover up for declining margins. Reducing overhead can cover up for slow growth. Having an exceptionally good year at picking merchandise covers up for excesses in overhead expenses. But none of these cover-ups lasts forever. Only the retailer that successfully manages its economics holistically can expect to win in the long run.
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Chapter 4 RETAIL MERCHANDISING AND SHOP DISPLAYS
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Chapter 5 RETAIL ADVERTISING AND SALES PROMOTIONS
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Chapter 6 MANAGING PEOPLE AT WORK - RECRUITMENT AND MOTIVATION
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Chapter 7 COMMUNICATION AND CUSTOMER RELATIONS
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Chapter 8 INVENTORY CONTROL AND FINANCIAL MANAGEMENT
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Chapter 9 RETAIL STRATEGIES
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Chapter 10 RETAIL MARKETING
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Chapter 11 RETAIL MANAGEMENT INFORMATION SYSTEMS: USE OF NEW TECHNOLOGY
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Chapter 12 SUPER MARKET / DEPARTMENTAL STORES /CHAIN STORE MANAGEMENT
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Chapter 13 COMPARATIVE RETAILING ACROSS THE WORLD
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Chapter 14 ROLE OF PERSONAL SELLING IN RETAILING
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Chapter 15 STORE LAYOUT
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Chapter 16 RELATIONSHIP MARKETING
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Chapter 17 SUPPLY CHAIN MANAGEMENT
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Chapter 18 RETAIL RESEARCH INCLUDING RETAIL AUDITS AND CONSUMER RESEARCH AT THE POINT OF PURCHASE
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Chapter 19 ON-LINE RETAILING
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Chapter 20 TRENDS IN RETAILING SHOULD INCLUDE THE INDIAN AS WELL AS THE INTERNATIONAL CONTEXT
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PPT Content FORMATS • • • • • • •
Supermarket - Means a large food store with at least 4000 sq. ft.(5000 in Europe) where bulk of the sale is under self-service system. Hypermarket - Is larger version of Super Market with at least 25 check-outs, wider aisles, large parking, better customer service and deep discount. Discount Store - everything is cheaper. „C‟ Store - is miniature supermarket. Super Center - Huge store (3 lakh sq.ft), huge parking and selling almost everything. Warehouse Club - means a sort of wholesaler who sells in bulk at the cheapest possible rate only to members. Department Store - Non- Food outlet of at least 10,000 sq ft, with 5 different product categories and the trust is garments
Specialty Store 1 Single Brand, Single Product category 2 Single Brand, Multiple Product category 3 Multiple Brand, Single Product category 4 Multiple Brand, Multiple Product category Mall 1. A conglomerate of retailer were certain common services like parking, security, elevators, lifts, toilets, drinking water, seating arrangement etc are given by the developer of a mall. 2. It is not a retail format but format in which retailing is done 3. Anchor Tenants 4. Retail Mix Non Store Retailing 1. Tele- shopping 2. e shopping – Internet Shopping 3. Direct selling 4. Catalogue Shopping] 5. Vending Machines World of Retailing Largest industry in the world (6.6 trillion dollars) Largest industry in ALL countries FORTUNE 500 is dominated by Retailers Almost HALF of the richest men of the world are Retailers Four of the TOP TEN richest people are from one retail family Retailers are the BIGGEST employers Darling of the STOCK MARKET Top 5 retailers in the developed countries control 50 % to 60 % of Food Retailing WAL - MART The biggest company of the world. No.1 in fortune 500. Sale $ 263 Billion More than 25 times bigger than Tata & Reliance More than 5000 stores in 13 countries and 4 continent. Biggest Employer – More than 15 lakh employees. Net profit more than 12000 crores Smallest store is 40000 sq.ft & bigger stores are 300000 sq.ft In one store number of trolleys are more than what we have in domestic and international airport Huge parking 35 to 70 acres Godown- bigger than 9 football fields put together It has the largest flee of vehicles of Aero planes, Jets Its sale is more than the total sale of all FMCG companies put together It‘s purchase of P&G products is more than what P&G sells in whole of Japan Sale of undergarment is more than double the USA 25
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CASE STUDY: METRO - CASH & CARRY AN ORGANIZED B2B Some of the major countries with their Top retailers 1. United States – Wal-Mart Stores (Fortune 1): Cash and Carry/Warehouse Club, Discount Department Store, Hypermarket/Supercenter/Superstore, Supermarket. The top retailer in the U.S. is also the largest retailer in the world, using total annual revenue as the measure. 2. Australia – Woolworths Ltd.: Convenience/Forecourt Store, Cash & Carry, Discount Department Store, Electronics Specialty, Other Specialty, Supermarket. 3. Brazil – Comanhia Brasileira de Distribuicao SA Grupo Pao De Acucar: Convenience/Forecourt Store, Electronics Specialty, Cash & Carry, Hypermarket/Supercenter/Superstore, Supermarket. 4. Canada – Loblaw Companies Ltd.: Cash & Carry/Warehouse Club, Discount Store, Hypermarket/Supercenter/Superstore, Supermarket. 5. China – Bailian Group: Convenience/Forecourt Store, Department Store, Cash & Carry, Home Improvement, Hypermarket/ Supercenter/ Superstore, Supermarket. 6. France - Carrefour (Fortune 33): Cash and Carry/Warehouse Club, Discount Department Store, Hypermarket/ Supercenter/ Superstore, Supermarket, convenience/forecourt store. 7. Germany - Metro AG (Fortune 56): Apparel/Footwear Specialty, Cash & Carry/Warehouse Club, Department Store, Electronics, Specialty, Hypermarket/ Supercenter/ Superstore, Other Specialty, Supermarket. 8. Russia – X5 Retail Group N.V.: Convenience/Forecourt Store, Cash & Carry, Discount Store, Hypermarket/ Supercenter/ Superstore, Supermarket. 9. South Africa – Pick „n Pay Stores Ltd.: Apparel/Footwear Specialty, Convenience/Forecourt Store, Drug Store/Pharmacy, Home Improvement, Hypermarket/ Supercenter/ Superstore, Other Specialty, Supermarket. 10. United Kingdom – Tesco: Convenience/Forecourt Store, Cash & Carry, Department Store, Discount Department Store, Hypermarket/ Supercenter/ Superstore, Super market
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Cash-and-Carry Wholesale Trading 100 per cent FDI is allowed in wholesale trading which involves building a large distribution infrastructure to assist local retailers and manufacturers. Joint Ventures International firms can enter into agreements with domestic players, and set up base in India. The share of the multinational is restricted to 49 per cent in this route. Manufacturing International retailers can set-up manufacturing units for their products in India. Entry through this route entails the company the rights to retail the products in India through individual retailing outlets. METRO IN INDIA Metro AG of Germany has a presence in India at Bangalore, Kolkatta & Mumbai. It opened its first Indian outlet in Yeshwanthpur, Bangalore in 2003 on a sprawling 6,500 square metres area and added one more centre there. Mission Statement "METRO is a Cash & Carry self-service wholesaler for businesses and professionals. METRO provides quality products and business solutions at the lowest possible prices". "As worldwide No. 1 in self-serve wholesale, we systematically address the needs of our customers. In keeping with our motto "From professionals for professionals," we offer an extensive range of high-quality food and nonfood products at competitive prices. With efficient logistics and a business concept that can be adapted flexibly to the requirements of diverse markets and locations, we are actively setting the stage for sustainable growth."- CEO METRO Cash & Carry The METRO Cash & Carry success story began in 1964 with the opening of the first wholesale outlet in Germany. Today the company is represented in 30 countries with METRO and MAKRO Cash & Carry stores at 544 locations - and offers its commercial customers up to 50,000 different products from a single source. METRO Cash & Carry International GmbH in Duesseldorf, Germany, is the Management Holding Company steering the global business. The METRO Group was created in 1996 through the merger of leading trading companies. The corporate group is composed of high-performance, operationally independent companies and businesses. All under one roof The business concept of METRO Cash & Carry is specially tailored to the needs of commercial customers, such as small and mediumsize retailers, restaurants, cafeterias, hotels and other service providers as well as institutions. The Cash & Carry principle is that the customers themselves select the purchases from the wholesale store shelves, then pay and take the goods with them. The innovative METRO Cash & Carry concept of self-service wholesale was introduced to Germany more than 40 years ago by Professor Dr. Otto Beisheim: in 1964 he opened the first Cash & Carry wholesale outlet in the city of Mülheim, in the Ruhr area. Then as well as now, the Cash & Carry concept is characterized by outstanding depth and breadth of product range,a consistently customer-oriented approach as well as a favorable cost-benefit ratio. Business Concept: A broad range of products at competitive prices Customers can always expect to find a comprehensive product range at METRO Cash & Carry stores. Depending on size and type, the outlets offer as many as 20,000 different food products and up to 30,000 nonfood products. METRO Cash & Carry maintains a large stock of all products in its range, in a selection of formats, all at competitive wholesale prices and in excellent quality. In addition, restaurants, hotels, caterers and food retailers profit from a large range of fresh goods. Specific store architectures to meet professional standards
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METRO Cash & Carry operates in various countries with three store formats: Classic, Junior and ECO. The sales area of a Classic wholesale outlet is 10,000 to 16,000 square meters. This format is mainly used in Western European countries. In Eastern Europe and Asia, smaller Classic stores so called Junior stores of 7,000 to 9,000 are generally built. ECO stores – for example, in France and Italy – have sales areas of 2,500 to 4,000 square meters. While the Classic outlets offer a comprehensive range of up to 50,000 food and nonfood products, ECO stores are concentrated on food, especially perishables. With ranges comprising 90 percent food products, ECO stores are mainly geared toward hotel and catering industry customers requiring large amounts of fresh, high-quality food on a daily basis. Corporate Culture:The 10 METRO Cash & Carry principles The success of the company is based on the following principles: • Focused on professional customers • Efficient store concept designed for professional needs • One-stop shopping • Advanced customer service • Enhanced customers‘ competitiveness • Excellence in supply chain and quality management • Strengthening of local suppliers • Development of national infrastructures • Career opportunities • Internationally transferable concept Internationalization Business principle and success factors In advance of market entry - A team of specialists analyzes all aspects relevant to operations, such as purchasing, sales and marketing, laws, human resources and logistics. Local staff a priority - The objective is to staff a new store as quickly as possible with local employees Expanding the business concept in Europe - continued to expand in Southern and Western Europe. A leap across the Mediterranean - jump across the Mediterranean was successfully carried out with stores in Turkey and Morocco. Development in Eastern Europe - Hungary, Poland, Romania, Czech Republic, Bulgaria and Slovakia. Expansion into the Far East - first international wholesaling company to receive a license for nationwide expansion in China Sails set for further emerging markets - And now focus on Asia METRO (INDIA) METRO Cash & Carry started operations in India in 2003 with two Distribution Centres in Bangalore. With this METRO introduced the concept of Cash & Carry to India. These Centres offer the benefit of quality products at the best wholesale price to over 150,000 businesses in Bangalore. Launch Plan Mumbai Metro did a launch plan of their retail store in Bhandup on 8th May 2008 and it is 2 yrs now Soft Launch HoReCa (Hotels, Restaurants, and Cafes ) : May 5th 2008 200 premium outlets were invited for the soft launch where they were displayed with the best quality products like meat, Grocery products, METRO in-house brands like Quality & ARO, cold chain at the METRO store. The store Manager – Mr. Swen Betzing interacted personally with all the General Managers & Chefs of the premium 5-star hotels & deluxe properties across Mumbai city. The guests had a first-hand look of all the 18000 SKUs displayed at the METRO store at Bhandup (West). It is a replica of the METRO group across the world. All the stores look alike to each other. 10 Advantages Here are the Top 10 reasons to partner with METRO: 1) Best Prices - With huge purchasing power & efficient operations, we make sure to provide you quality products at the best prices. 2) It's your Warehouse - With our computerized goods management system, you are assured about availability of the products, in quantities you need. Meaning you need not tie up your money in stock that does not sell quickly. 3) Everything under One roof - 18,000 different Food & Non-food items to meet all your different needs under one roof. This will save your time as compared to purchasing from a variety of sources. 4) Extended business hours - To make sure that you are always served, we are open 7 days a week, from 6 a.m. to 10 p.m. 5) Quality guaranteed - Strict quality checks and modern storage technology including cold storage ensures that you get the best quality 6) Free parking - Hassle free parking space for around 450 two wheelers & 270 four wheelers, to make sure that you are free of parking problems. 7) After sales Service - We do not just make a sale, our Customer Service Team is available to you for resolving your queries, and problems, if any. 8) Offers at your fingertips - Every two weeks you receive our catalogue, METRO Mail with over 300 offers for your business at the best wholesale prices. Also receive instant alerts through e-mail and SMS. 9) Clear and easy invoice - Our detailed invoice makes it easy for you to monitor your purchases. All your purchase information is available on a single invoice, enabling you to manage your stocks better.
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10) Great value for money - A wide range of our own brand products offers high quality at the lowest price, which adds to your profits even more. Get your METRO Card in 4 Easy Steps • Fill in the application form. • Present your business license and your Photo ID along with a copy at the Distribution Centre. (Value Added Tax Registration (VAT), Central Sales Tax, Excise license, Service/ Professional tax, Shops & Establishments registration (Labour License), Health/Trade (Corporation) License, Liquor license, Food license (PFA), Drug license, Weight & Measures license, Government fair Price shop, Kerosene license, Registrar of Cooperative societies, Gas agency license, Electricity board contractor license, Small scale industries license, Licenses issued by Reserve Bank of India, Registration Certificate Indian Medical Council (Practicing Doctors), License issued under essential commodities act (selling pesticides, agro seeds), Entertainment license.). • Immediately you will receive your temporary METRO Card • Our customer consultant would personally visit you and introduce you to the concept and hand over your METRO card to you. About the Card Personalised cards are issued to the representative of the business to facilitate business purchases at any of the METRO Distribution Centre across the globe. Product Variety Available 1. Food – The store offers a wide array of over 8000 food items. These include among other things: Cheese, Butter, Eggs, Milk, Yogurt, Chilled Ready Meals, Drinks, Ice Cream, Frozen Vegetables & Fruits, Bread and Bakery Products. Whole Fresh Fish & Fish Cuts - Pomfret, Seer, Mackerel, Sardines, Rohu, Catla etc., Crab, Lobster and other Sea Food (some live fish also) Fresh Poultry, Pork, Sheep, Lamb, Goat, Goat Kid. Other meats and Meat Products - Sausages, Ham, Bacon etc. General Grocery:Canned Goods Fruit, Vegetables, Meats & Meat Products, Pet Foods Edible Grocery - Oils, Cereals, Coffee, Tea, Biscuits, Spices, Seasonings, Sugar, Sauces, Pickles, Noodles, Soups etc. Confectionary: Sweets, Candies (hard boiled - lollipops, orange candy etc.), Chocolates, Crisps (mixture, farsan), Snacks & Nibbles 2. Non Food – The store offers a wide array of over 10,000 non-food items. These include, among other things: Health & Beauty: Cosmetics, Perfumes, Personal Care, Oral, Hair, OTC Medicines (Disprin etc.) Tobacco Cigarettes Detergents & Cleaning Materials: Laundry Detergents (Washing powders, Bars etc.), Cleaning agents (Cleaning bars, powders etc.), Household Products, Paper Goods (Paper Plates, Tissues, Cups etc.) Office equipment: Office Supplies & Machines, Computers & Accessories, Cash Registers, Phones, Fax Machines etc . Media / Accessories: Portable Audio, Music Systems, TV Sets, Entertainment Accessories, Cameras, Car Radio, etc. Home Electrics / Improvement: Refrigerator, Washing Machines, Microwaves, Mixer Grinders, Toasters, Lamps & Bulbs, Hand Tools, Power Tools, etc. Home Decoration / Seasonal: Gifts, Artificial Flowers, Furniture, Aluminium Ladders, Arts & Crafts, Candles, etc. Home Textiles / Ladieswear / Menswear / Childrenwear: Bed Linen, Towels, Table Linen, Curtains, Carpets, Shoes, Apparel Men's, Apparel - Ladies & Kids etc. Sports / Toys / Luggage / Shoes / Leather Goods: Sports Clothing, Swimwear, Toys & Gifts, Sports Shoes, Bikes & Accessories, etc. Exclusive at METRO - Private Labels ARO: A value for money brand, consistent specification & availability. METRO offers to its customers the Aro line for all categories of products. Quality: Guaranteed quality at a very attractive price. Products under this brand primarily cater to Hotels, Restaurants and Caterers. Lambertarrie: An exclusive collection of leather products that includes luggage, shoes, belts and other accessories. Sigma: For all your office requirements. Quality, wide range and the best price in the market. Guarantee and Warranty If you change your mind METRO will give you cash or credit refund for the products returned within 7 days from the date of purchase in the original packaging. For any problems, please contact customer entrance at our Distribution Centres. We will be happy to assist you. All your purchases at METRO come with a Warranty that entitles you to free services, repairs or exchanges. METRO strives at all times to ensure the best services. Transport Solutions To help you with the delivery of your purchases to your business premises we have partnered with Relogistics. There are various delivery solutions at competitive rates that you can avail of at the delivery counter at our distribution centres. Now pay in installments! Because you are paying in cash, we can keep our prices low. At METRO you always know what you pay. There is no need to negotiate. We do not hide credit charges in our selling prices. However, if you like to finance your purchase, now CitiFinancial offers at METRO, EMI at competitive rates. Choose from a variety of financing option from 12 upto 24 monthly installments. 30
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Swot Analysis
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B2B MARKETING
TYPES OF INDUSTRIAL CUSTOMERS Industrial customers are generally classified into four groups, i) Commercial enterprises ii) Government customers iii) Institutional customers iv) Cooperative societies BUYING CENTRE (OR DECISION MAKING UNIT) The buying center is sometimes referred to as the decision making unit (DMU) or buying group. The buying center or decision making unit is a useful tool which answers the question—Who are involved in buying decision in an industrial organisation? It is defined as a body of all the individuals or groups participating in the buying decision process and who have interdependent objectives and share common risks. Before identifying the individuals and groups involved in the buying-decision process. it is important to understand the roles of buying-center members. Understanding the buying centre roles helps industrial marketers to develop an effective promotion strategy.
Buying Centre Roles There are six roles of buying centre members. These are: Initiators: This category includes individuals who first recognise a problem or a need, which could be resolved by purchase of a product or a service. The initiators could be any individuals in the buying firm. Often, the users of a product/service play the role of the initiators. Buyers: The major roles or responsibilities of buyers are (a) obtaining quotations (or offers) from suppliers, (b) supplier evaluation arid selection, (c) negotiation, (d) Processing purchase orders, (e) expediting deliveries, and generally, (f) implementing purchasing policies of the organisation. Usually, they are the purchase (or materials) officers and executives.
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Users: This includes individuals who use the product or service that is to be purchased. Often users play the role of the initiators. The influence of the users in purchasing decisions may vary from minor to major. They may define the specifications of the needed product. They may be shop floor workers, maintenance engineers, or R&D engineers. Influencers: They are the individuals who could influence the buying decision. Generally, technical people (such as design engineers, quality control engineers) have a substantial influence on purchase decisions. Sometimes individuals outside the organisation, who are experts or consultants, play the role of influencers by drawing specifications of products or services. Deciders The actual buying decisions are made by the deciders. The deciders may be one or more individuals involved in the buying decision. It ¡s very important to identify the deciders, although at times it may be a difficult task. Generally, for routine purchases the buyer (or purchase executive) may be the decider. But, for high-value and technically complex products, senior executives are the deciders. Gatekeepers: They are the individuals who could control (or filter) the flow of the information regarding products and services to the members of the buying center. Sometimes the gatekeepers may control sales people‘s meetings with the members of the buying center. Gatekeepers are often the assistants or junior persons attached to purchase (or materials) manager. Industrial marketers, after understanding the roles of the buying-center members, must identify the individuals and groups who are the members of buying center. The emphasis in the buying ccntcr is on the organisational groups, that is, the functional areas, which participate in the buying decision process. These areas are explained in the following section.
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DISTRIBUTION CENTRE - A EFFECTIVE ALTERNATIVE TO B2B DC Inventory Flow 1) Put away method 2) Flow through method 3) Cross Docking Types of Distribution Centers (DC) Dry DC Wet DC Staple DC Fresh Food ( Cutlets/ Bakery/ Juices/ Cheese) DC Life – Style DC Jewelry DC High Value DC Consumer Durables DC DC Planning and Parameter Infrastructure Layout Staffing Equipment IT MIS Location & Infrastructure of DC Nearness to City /Cities Octroi Nearness to the city / cities Weighing Bridges / Petrol pumps Power / Electricity – Gen set Communication – landlines/Mobile/VSAT Water for (Wet DC) Layout
- Distribution Centers (DC) Pallets v/s Bins Grid Layout Flooring / Height / lights / Ventilation / Docks Other planning – Office/Security/Staff Welfare/Genset Food v/s Non- Food Out bound / Inbound staging areas Area for flow through / cross docking Other areas – Scarp/Damage/Expiry/Batch mgt/zzz &999ares
Staffing in (DC) 3PL v/s Own Staff KAM/DC Mgr/OB/IB/Inventory/Transportation 3PL – KAM/ Supervisor/DEO/Checkers/Pickers/Helpers/Crane O‘tors Shifts / Breaks / Over time Security Equipment & IT in (DC) Pickup Trolleys Fork Lifts Reach Trucks Battery charging section RFID – Chips/RF Gun / Wi-Fi for RFID Bar-coding – IB & OB Bin Location 34
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STORE Item Space Allocation • High Margin/ High Profit • Demand Merchandise • Impulse items • Related items • Seasonal Stock • High frequency Items • New Departments • Item Arrangement • Adjacencies Space performance measures & Indicators of Floor Profitability • Space productivity ratios • Model Stock Approach • Floor & Shelf Management • Housekeeping and facilities planning Operational Tools for management efficiency • Store meeting • Area of responsibility map • Maintenance schedule • Question and answer logs • Planning effective meetings • Store meeting planner
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IMPORTANCE OF LOCATION DECISION Location is a major cost factor because it Involves large capital investment Affects transportation costs Affects human resources cost e.g. Salaries Location is a major revenue factor because it Affects the amount of customer traffic Affects the volume of business LEVELS OF LOCATION DECISION & ITS DETERMINING FACTORS 1. Selection of a city 2. Selection of an area within city 3. Identification of a specific site 1. Selection of a city Population & growth trends - Current population - Population dynamics – apartments v/s homes, population density, likelihood of growth, decline, their income level, seasonal changes / periodical incomes, age groups & sexual composition Size of the city‟s trading area - primary, secondary, tertiary Purchasing power & its distribution - disposable income Trade potential Number, size, quality of competition 2. Selection of an area within city • Customer attraction of shopping district • Quantitative & qualitative competition • Traffic and traffic patterns • Nature of zoning regulation • Direction of the area expansion • Visibility of the store 3. Identification of a specific site • Adequacy and potential traffic • Complementary nature of adjacent store • Adequacy of parking • Tenancy mix – if mall / shopping centre • Ownership or lease OWNERSHIP V/S LEASE 1. Ownership Advantages • Increase in real estate value can be solely enjoyed by the Owner • Physical Changes in the property can be done • Liberty to rent a store • No Interference of Landlord Disadvantages • Huge Initial Investment • Heavy Interest • Maintenance costs • Decrease in real estate value has to be borne by the Owner 2. Lease Advantages • No Initial Investment except Deposit (if any) • No Initial Interest • Opportunity to move elsewhere at the expiration of the lease
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Ability to concentrate on merchandising instead of on real estate
TYPES OF LOCATION 1) Free standing locations - neighborhood stores, HIGHWAY STORES 2) Unplanned cbd‟s • neighbourhood- business – district • downtown or central business district • suburban business district • secondary business district 3) Planned shopping centres • regional shopping centres of malls • neighborhood / community • specialty market • periodic markets / weekly TYPES OF LOCATION - BROADER CLASSIFICATION RELEVANT IN INDIA • Designed (main) • Emerged (main) • Not main – either emerged or designed • Designed by builder/ developer • Shopping malls • Emerged from peculiar need • Area which can be converted • Low rent district
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SUPPLY CHAIN MANAGEMENT IN RETAIL SUPPLY CHAIN MANAGEMENT • The Supply Chain is a network of facilities and distribution options that performs the functions of procurement of materials, transformation of these materials into intermediate and finished products and the distribution of these products to the customers. • SUPPLY CHAIN consists of all parties involved, directly or indirectly in fulfilling a customer request. • The Supply Chain not only includes the manufacturer and supplier, but also transporters, a warehouses, retailers and customer. • SCM involves 4 basic processes – PLAN, SOURCE, MAKE, and DELIVER. • Broadly define these efforts, which include managing supply and demand, sourcing raw materials and parts, manufacturing and assembly warehousing and inventory tracking, order entry and order management, Distribution across all channels and delivery to the customer. TYPICAL SUPPLY CHAIN MANAGEMENT
SUPPLY CHAIN MANAGEMENT PROCESSES
Responsiveness v/s Efficiency • Supply chain Responsiveness: It includes supply chain ability to do the following a) Meets short Lead time b) Respond to wide ranges of quantities demanded c) Handles high uncertainty d) Meets high service level •
Supply chain Efficiency: It is the cost of making and delivering product to the customer
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Drivers of Supply Chain Performance
Obstacles of Supply Chain Performance • Increasing variety of Products • Decrease in Product Lifecycles • Increasing Demanding Customers • Fragmentation of Supply Chain ownership • Globalization , Global Sourcing MACRO SCM PROCESSES
Fit between Competitive & Functional Strategies 1. Competitive strategy 2. Supply Chain Strategy • Manufacturing • Inventory • Lead Time • Purchasing • Transportation 3. Information Technology Strategy 4. Finance Strategy 5. HR Strategy
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Process view of SUPPLY CHAIN
Suppliers can be classified into • Fresh produce • Dry Grocery (unbranded) • FMCG products One has to study the market practices with reference to these categories • Fruits & Vegetable may be purchased from Farmers • FMCG products may be purchased from the Distributors/ Wholesalers • There may be Backward Integration or Outsourcing • Mutton, Chicken, Beef etc from Abttoir • Fish from Landing Jetty • Large Retailers may have Backward Integration SUPPLY CHAIN MANAGEMENT
DESIGNING A B2B DISTRIBUTION NETWORK Factors influencing Distribution Network Design Two Dimensions of performance is based on 1. Customer needs that are met 2. Cost of meeting customer needs Customer Service (main components) 1. Response Time 40
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Product variety Product availability Customer experience Order visibility Returnability
Manufacturer Storage with Direct Shipping (Drop Shipping)
In Transit Merge Network
Manufacturer Warehouse Storage with Customer pickup
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Retail Storage with Customer‟s pickup
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SALES MIX SALES MIX IN A SUPERMARKET
CUSTOMER MIX IN A SUPERMARKET
10% to 15% of customer contributes to 50% to 60% of sale. SALES / TIME MIX IN A SUPERMARKET
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TOP 100 SKU IN A SUPERMARKET
MARGIN = S.P. – C.P. X 100 S.P. MARK UP = S.P. – C.P. X 100 C.P. MARK UP = MRP 1.XX MARK UP of HLL (LUX) Soap = 8 % if MRP is Rs 19/MARK UP = Rs 19 = Rs 17.59 1.08
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RECEIPT OF GOODS • • •
Stock received should match Purchase order Receipt of goods to be signed by 2 employees Check list for NON - FMCG Sample Check of goods No Entry in Godown till sample check Weigh before Note the shortage if any Name / marka Return, Exchange, replacement
Receipt of goods • Check list for FMCG • Billing as per Company‘s markup policy • Discounts, Schemes as per PO • Modern Trade discounts are given • Date of Manufacturing, Expiry, Best before • Free gifts if any • Quantity, GALA • Bar code if any • Not rejected goods from other Retailer • Return, Exchange, replacement
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PURCHASE AND INVENTORY CONTROL PRINCIPLES OF PURCHASE
FIVE „R‟ 1) Right Quantity 2) Right Quality 3) Right Price 4) Right Source 5) Right Time Carrying cost is more than the additional Margin • • •
PURCHASE SHOULD FOLLOW SALE & NOT VICE VERSA NOTE THE MONTHLY DEMAND OF SKU‟s 2 IMPORTANT FACTORS – LEAD TIME & SAFETY STOCK WEEKLY SALE:
• • •
•
ST
1 WEEK – ND 2 WEEK – RD 3 WEEK – TH 4 WEEK –
40% 30% 10% 20%
SOURCES OF PURCHASE Bigger stores purchase directly from companies What is correct? Cut the coat according to your cloth Koopra / sabudana – Salem/cochin Alponso mangoes – Konkan growers Grapes – Nasik As you grow big follow – backward integration
RIGHT TIME Planning according to the demand PURCHASE REVIEW & CONTROL 1) No stockout or no over stocking 2) Purchase & retail prices are competitive 3) Sale is not more than purchase 4) Stock level as per stock holding policy & stock turn rate 5) Quality of goods maintained 6) Trade creditor payable according to norms 7) Old & damaged goods are returned 8) Purchase for seasonal demand 9) Schemes availed or not availed for best advantage of the store
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SUPPLIER LIST NAME / ADDRESS / TEL..:! MOB: / EMAIL ID COMPANIES / BRANDS / SKUs TERMS OF PAYMENTS, EXTRA CREDIT DAYS SHOP CLOSED ON / TIMING EXTRA SCHEMES IF ANY NÆN1E OF THE OWNER NAI\IE OF TSI NAME OF ASM NAME OF ASDM Guidelines • company scheme • new products and consignment arrangement • goods well purchased means half sold • buy what you sell • buy that much you can sell • 2% saving in purchase is equal to • 16% increase in sale PURCHASE OF AGRICULTURAL COMMODITIES • Every State has Agriculture Produce Market Act – Market Yard • Dalals or Brokers • Minimum Quantity • Credit Facilities • Quality Assessment - Foreign Material, Moisture, Damaged Grains, Insects • Adulteration - Offence under Prevention of Food Adulteration Act • Harvest Season Purchase • Cold Storage Suppliers can be classified into • Fresh produce • Dry Grocery(unbranded) • FMCG products One has to study the market practices with reference to these categories • Fruits & Vegetable may be purchased from Farmers • FMCG products may be purchased from the Distributors! Wholesalers • There may be Backward Integration or Outsourcing • Mutton, Chicken, Beef etc from Abttoir • Fish from Landing Jetty • Large Retailers may have Backward Integration • Markup Structure • Discrimination • Advertisement I Display Charges • Credit Period • Return I Exchange — (RepIacement) • Schemes • Taxation INVENTORY CONTROL • What is stock? • What is inventory? • Inventory has inherent tendency to grow • Cost of inventory or carrying cost - payment of interest insurance godown / warehousing charges High stock holding is bad stock-out is worse INVENTORY CONTROL • Lead time • Ordering cost • Safety stock 47
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Just in time (JIT)
TECHIQUES OF INVENTORY CONTROL Minimum maxmum re-order level Fixed frequency ordering system Fixed quantity ordering system Fixed frequency & fixed ordering system ABC analysis Rule of 10 No entry technique Economic order quantity (EOQ)
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MEDICINES Medicines Are Sold Like Grocery Indian Economic Survey Report - 2% of the Consumption Expenditure on the Medicines Statutory Requirement 240 Sq.ft area 100 Sq.ft storage area Appointment of Pharmacist with Degree or Diploma Shelf display with glass doors Refrigerator Green PLUS & not Red PLUS Right place Near Hospitals Near Dispensaries and Clinics In Supermarket - at the entrance In Hypermarket - can be inside Stock Turn 6 to 8 times can be achieved Few successful medical stores have achieved 12 to 15 times Sales Mix Allopathy Medicines: 90 % Ayurvdeic Medicines: 5 % Surgical: 5 % Margin Mix Allopathy Medicines: 16 % Ayurvdeic Medicines: 25 % Surgical: 50 % Top Ten Pharmaceutical Companies 1) Cipla 2) Pfizer 3) Glaxo 4) Ranbaxy 5) Nicholas Piramal 6) Aventis 7) Sun Pharma 8) Wockhardt 9) Dr Reddy‘s Lab 10) Torrent OTHER IMPORTATNT POINTS IN SUPERMARKET Racks Height 8 Ft No other local taxes are charged in supermarket Normal discount 2 % in supermarket OTHER IMPORTATNT POINTS Purchase are made only from authorized distributors Separate cash memos for Schedule Drugs Few drugs to be Refrigerated Glass Counter for general medicine sale Credit facility from 15 days to 1 month Yearly inspection by FDA authorities Liberty to keep open for 16 hrs for day night shop 24 hrs Return / Exchange facility No Sales Promotion
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RETAIL STORE PLANNING & ATMOSPHERICS EXTERNAL ATMOSPHERICS storefront marquee entrances display windows size of building visibility parking accessibility INTERIOR ATMOSPHERICS flooring lighting odour fixtures walls and colour temperature aisles trial room dead/shadow area personnels cleanliness STORE LAYOUT • floor space allocation • traffic flow • department location • merchandise category • signage Commodity Indicator Directional Signs Instructional Signs Courtesy Signs TYPES OF LAYOUT Grid layout Race track layout Mouse trap layout Block layout Express layout Free form
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Main Items: Gondola Gondola end Wall Rack Checkouts Dump Bins (Wall) Browsers
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INDIA – A VIBRANT ECONOMY -
TH
4 Largest economy in the World in Purchase Power Parity Average GDP growth rate between 7% to 8.2% (earlier 6 %) nd 2 Fastest growing economy in the World. rd To be 3 Largest economy in terms of GDP in next 5 yrs nd 2 most attractive developing market, ahead of China ( AT Kearney 2004) 52% of the GDP comes from Service Sector which includes Retailing, IT, Telecomm, Healthcare etc. nd India is 2 in the list of the Preferred Destinations in the World - UNCTAD‘s World Investment Report 2004 FDI Inflow grew by 24% - USD 3.44 Bn - 2002 USD 4.26 Bn – 2003 USD 6.60 Bn – 2004
Category-wise Private Final Consumption Expenditure
RETAIL INDUSTRY GROWTH By 2010 Rs 12,00,000 cr Growth Rate is 5% ORGANISED RETAIL GROWTH By 2010 Rs 1,00,000 cr 9% of Total Retail Industry Growth Rate is 30% CHANGING CONSUMER LIFESTYLE & PREFERENCES Demographic & Psychographic Change • Per Capita Income! GDP is slated to double by 2014 • Second fastest growing Economy in the World • Discretionary spending increased to 16% inurban middle class • From 1995 to 2004 High Income Household Increased by 60% to reach 44 million • One of the Youngest Populations of the World • Highest paid Managers in the World Change – Share of Population by Age Group Design & Quality Acquiring Significance Increase in Number of Working Women
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Kids becoming more aware Of External Environment & more Demanding Increased Effort to Look Good & Feel Good Influence of International Travel & Media Easier Acceptance of Luxury Willingness to Experiment More Nuclear Families Increased Propensity towards Disposability Rise in Urban Self Employment Pragmatism in Consumption & Preference for Value Increased Credit Friendliness
WHY INDIAN ORGANISED RETAIL IS AT THE BRINK OF REVOLUTION? 1. Scalable & Profitable Retail Model well established for most of the Categories • Large Indian Corporate groups kin to enter in Retailing • Investment in this sector is estimated at INR 20,000 cr by end of 2010 (Now Reliance Retail, alone is estimated to invest Rs 25,000 cr by 2010) • Foreign investors are equally kin e.g. Wal-Mart, Tesco, Targets, Darling of Stock Exchange (PIE Ratios are High in Trent & Pantaloon) • Value based concepts will drive organized retailing (such as Big Bazaar, Spensers,& Vishal Mega Mart) BY YEAR 2007 • 50 million sq.ft. of Quality Space under development • 6 Major cities to account for 41 million sq.ft. • 300 malls, shopping centers & multiplexes to come • To open 35 Hypermarkets 325 Large department Stores 1500 Supermarkets 10,000 quality outlets 2. Retail Space no longer a Constraint • India‘s DAZZLING new Malls — Emerging Economic Superpower • A Decade ago not a single Mall • 6 yrs Ago less than half a dozen Malls • By end of 2006 there will be 200 new Malls covering 35-40 million sq.ft. (50 % will be in 6 Metros — 65 in Mumbai & NCR) • And by 2010 there will be 600 new Malls covering 120 million. sq.ft. (Anticipated to spread over 60 Cities) 3. Retail Space no longer a Constraint • Manufacturer & Retailers are targeting Tier II Cities (Expected to grow to 20 -25 %) • Mall Development activity in Tier Il Cities are picking up at rapid pace • NRI‘s are renewing relationship with it‘s roots • Specialty Malls — Emerged as one stop destinations in chosen Category (GOLD SOUK, WEDDING MALL, AUTO, TOY, HOME AND FACTORY OUTLET) • Disturbing Trends, Clustering (20 new Malls in Gurgaon operational in 1 yr) • Malls will be prime drivers of Organized Retailing & not High Streets (Not like 5th Avenue in NY, Oxford Street in London, Causeway Bay in HK • Lack of maintenance, Encumbrances, Multiple ownerships, • Parking Hassle, Lack of civic sense 4. India on the Radar of Global Retailers Many International retailers have entered For most India is sourcing HUB (Wal-Mart, GAP, Tesco, JC Penny etc.) Buying Volume of these players already more than Rs 1000-2000 cr/yr
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5. Supplier/ Brand willing to partner Shift in Bargaining power from Manufacturers to Retailers Now Retailer is no longer “unnecessary evil”. They have started acknowledging as channel member 6. Rapid evolution of New-age Young Indian Consumers • Indian population Youngest in the World — median age 24 • Spends on lifestyle oriented products & services • Spends on non-conventional products categories (Cell-phone ring tone INR 500 Cr, Valentine‘s gifts 1500 Cr. Etc) • More youth travel abroad, more exposure to International Formats, hence they demand compatible formats • Increase number of Foreign Tourist visit India forming an important target for global retailers in India Some Challenges still need to be overcome • Regulatory Barriers • Labour Legislation (Shop & Estb. Act, Minimum Wages, Maternity Benefits Act etc.) • Differential Tax System (VAT, Sales Tax, Octroi, Entry Tax) • Stringent compliance of APMC • Skilled Human Capital • Fragmented Suppliers • Lack of Industry Status CRITICAL SUCCESS FACTOR • To Define a Distinct & Sustainable Retail Proposition — For Value-Conscious Indian Consumer • Significant Investment to Achieve excellence in SCM • To acknowledge regional & Cultural differences to align Merchandise mix • Offer Indian Centric Strategies with the Benchmarked with Global Standards like: VaIue proposition, Service, Experience, Efficiency, Hygiene etc. • Effective Private Label Strategy • Indulge in Backward Integration
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FROM FARM TO FORK More than 1,300,000 tonnes of food grain – worth millions of dollars – went rotten in storage over the past decade in India, Food Corporation of India (FCI) officials admit. Surprisingly, of the total wastage almost 50% of the food grain was damaged in Punjab, one of the leading states in agricultural production. and there's no history of floods or natural calamities in Punjab. More than 72 per cent of the vegetable and Fruits are wasted in the absence of proper retailing. The sector is constrained by widespread fragmentation in the supply chain, low productivity levels, and huge postharvest losses arising out of inadequate storage, cold chain and transport infrastructure, logistics and supply chain management. India‘s Food grain wastage is more than UK‘s Total consumption. India stands No 1 in Production of Fruits and Vegetable together It contributes to 10% of the world‘s Fruit production & 14 % of the Vegetable production of every 10 fruits 1 is from India of every 7 vegetables 1 is from India Of every 4 Fruits and Vegetables produced 3 are wasted / thrown / rotten or not consumed. India has 5 to 6 middlemen in fruits and vegetable trade, while all developed counties has 2 to 3 middlemen in the supply chain. FARMER RETAILER CUSTOMER • • • •
• •
ln bridging the farm gate to the dinner plate, more and more Indian retailers are now adopting the farm to fork model. Most of the retailers are in the process of putting up elaborate logistical chains to enable a smooth transition of goods from the farm to the consumer. ‗Farm to fork‘, as this model is known, aims at minimizing the steps from the farmer to the retail store. A farm-to-fork model either sets up a logistical chain owned by the Retail Company or outsourcers it to a logistics company. The chain includes small wholesale markets, or mandis, where the farmer can come and get a good price for his produce. This produce is then carried directly to the nearest supermarket of the chain, or the warehouse from where it is shipped to the cities. There is an imperative need for synergy in the pre-harvest, harvest and post-harvest process to bring in value addition to the efforts of the farmers. Actual Grower Farm collector Regional Conglomerate Local Market Yard APMC Broker Semi-Wholesaler Customer
• • • •
In order to successfully run the Farm to form model the elimination of middlemen like farm collector, regional conglomerate and semi-wholesaler is essential. The farmer brings the produce to the collection centre where the generally payment is in cash. The produces are graded / sorted / peeled / cleaned / cut / de-husked / chopped etc. Then transported to the stores via Distribution Centre (DC) through APMC market Actual Grower Farm collector Regional Conglomerate Collection Centre Wet Distribution Centre Semi-Wholesaler Customer Actual Grower Reliance C. Centre Reliance DC
Reliance Store Reliance Customer
Reliance Fresh Collection Centers Pan India (148) as on Dec 2009 Some Challenges still need to be overcome. • The volume of the produce, inconsistency in terms of availability, size, shape, color and clearness (spotlessness). • Stringent rules in most of the APMC (Agriculture Produce Market Committee) or commonly known as Market yard, long waiting period in Octroi nakas • Non-standardized and expensive packing material • Unskilled human capital • Fragmented suppliers • An inconsistent and unpredictable weather condition makes this model‘s attempt unsuccessful. A survey reveals that a farmer or a grower gets 1/15th to 1/10th of the value paid by the consumer (exceptions are Alphonso Mangoes, Grapes, exotic vegetables etc; where the grows earns 1/4th to 1/5th of the consumer‘s purchase price) The fast moving SKUs in fruits are 20 to 25, while the veggies have around 30 to 40 (except onion, potato and tomato) When we purchase Tomatoes at Rs 20 per kg from a hawker, the grower gets meager value of Rs 0.75 to Rs 2.00, while a retailer earns around Rs 2.00 to Rs 4.00. Major amount is swiped by the transportation and middlemen. If a farm to fork model if successful there will be a win-win situation for both the growers and the retailers. In Tomatoes, 55
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assuming the grower-retailer consortium, further assuming that there is no contract farming and not air lifted, average selling price for the grower will be to the tune of Rs 2.50 to Rs 3.50. While landing cost of the retailers will be Rs 11.00 to Rs 14.00 (depending on the distance). In such situation retailers can safely mark down and can adopt a leadership pricing. • The gist of this model is based on the backward integration of the retailer. • Taking into consideration the constraints like of widespread fragmentation in the supply chain, low productivity levels, and huge post-harvest losses arising out of inadequate storage, cold chain and transport. The model can be successfully only if a retailer has 1) Pan –India‘s penetration of 3000 to 4000 stores of around 3000 sq ft, with a dedicated F&V sections of 300 sq.ft in each store 2) A strong quality conscious grower- retailer consortium. 3) Catering to not more than 15 to 20 fruits and vegetables.
Some Challenges still need to be overcome • Regulatory Barriers • Labour Legislation (Shop & Estb. Act, Minimum Wages, Maternity Benefits Act etc.) • Differential Tax System (VAT, Sales Tax, Octroi, Entry Tax) • Stringent compliance of APMC • Skilled Human Capital • Fragmented Suppliers • Effective Private Label Strategy
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CUSTOMER Who is a CUSTOMER? Customer: One who buys goods or services Is every Customer is a Consumer? Is every Consumer is a Customer? Consumer: One that consumes, especially one that acquires goods or services for direct use or ownership rather than for resale or use in production and manufacturing. MASLOW'S HIERARCHY OF NEEDS
BUYING MOTIVES · No one buys a product · People ―buy‖ satisfaction for their needs Five types of NEED 1) Physical Need - Grocery, edible oil, Masala 2) Security Need - Bulk purchase for whole year 3) Social Need - Tea, Biscuits, Farsan 4) Status Need - Expensive Soaps, dry fruits 5) Self-Actualization - Exclusive items (a wall costing Rs 1.00 Lakh) BUYER‟S BEHAVIOR • Need identification • Information gathering • Evaluation of alternatives • Store selection • Purchase decision • Post purchase evaluation TYPES OF CUSTOMERS 1) Age Group – Children, Youth, Adolescence, Mid-aged, Old-aged 2) Ethnicity - TAMIL, PUNJABI, MARATHI, BENGALI, GUJARATI 3) Purchase Occasion – CEREMONIAL, ANNUAL, SEASONAL, FESTIVAL, ROUTINE TYPES OF CUSTOMERS: From Buying motive and Purchase Psychology factor Regular Loyal New Cherry Pickers Pre-Sold Nervous Indifferent VIP, Ego-sensitive Window shoppers TYPES OF CUSTOMERS: from Satisfaction point of view Apostles Loyalist Defectors Mercenaries Hostages Terrorist 57
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Customer Satisfaction Measures (CSM) Infra-structural Comfort Convenience Sales After Sale VALUE OF A CUSTOMER (LTV – Lifetime value) For a Shopkeeper: Purchase per month - Rs. 2,200/Gross Profit @10% per year - 2,640/Profit earned in 25 / 35 years - 66,000/- to 92,400/WHY CUSTOMERS LEAVE A SHOP 1% Die 3% leave the catchment area 5% establish new relation 9% offers and schemes in other shops (cherry picker) 14% not satisfied with goods and services 68% not satisfied with the behavior of the owner/ staff Customer is the biggest asset you have to retain her for your own survival & growth. KNOW YOUR CUSTOMER BETTER Maintain Name – • Address • Phone data • Use caller Id phone • Greet by Name • Maintain Shopping List of Customers • Remember Special brand preferences Special, Odd items requests Be Generous with small help Give Change ―Can I leave this bag here‖? ―I am sending my maid. I will pay later‖ Consumption Pattern Categories in Food: TOTAL 73.5 % Categories in Non – Food: TOTAL 26.5 % Customer Mix Analysis • 24.28 % of the Customers give 78.23 % of Sale • 14.24 % of the Customers give 64.02 % of Sale • 10 % to 15 % of the Customers contribute to 50 % to 60 % of the Sale
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