Retail Management

A Strategic Approach

S.PRASANNA VENKATESH
 What is Retail ?

“Retailing includes all the activities involved

in selling goods or services to the final
consumers for personal, non-business use”.
- Philip Kotler

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Role of Retailer in Business cycle

Manufacturer Wholesaler Retailer Consumer

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 Functions of Retailer
 Sorting
 Breaking bulk
 Holding stock
 Form utility
 Time utility
 Place utility
 Ownership utility
 Additional services
 Channel of Communication
 Transport and advertising function
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 Major Retail segments
 Food and grocery
 Clothing, Textile & Fashion accessories
 Jewellery
 Watches
 Footwear
 Health & Beauty care services
 Consumer durables
 Mobile handsets & accessories
 Furniture & Furnishings
 Catering services
 Books, Music & Gifts
 Entertainment
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 Global Retail Market
 Global industry classification standards (GICS)
 Global market size $ 10,500 billion (2006) 5.5%
growth.
 U.S – 32.3%
 Europe – 30.8%
 Asia pacific – 25.6%
 Others – 11.20%
 Industry forecast @ $12,104 billion by 2009
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Key players in the Global retail market
 Wal mart
 Carrefour
 Home Depot
 Metro
 Royal Ahold
 Tesco
 Kroger
 Target
 Costco wholesale
 Albertson’s
 Sear’s
 7 - Eleven
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Challenges of Global Retailers
 Emergence of New markets
 Empowered consumers
 Technology enabled efficiencies
 The rise of the e-age

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Retail as a career
 Buying and Merchandising
 Marketing
 Store operations
 Sales
 Finance
 Human Resources
 Technology and E-Commerce
 Visual Merchandising
 Supply chain management & Logistics
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 Retail in India
 Highly fragmented
 Nascent stage but growing fast (9 – 10%)
 12 million retail outlets (80% Kirana stores)
 USD 330 billion market.
 3% organized sector
 10% GDP (36% source: Technopak estimates)
 9% Employment
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 Evolution of Indian retail Modern Formats/
Historic/Rural Traditional/Pervasive Government
Reach Reach Supported International

Exclusive Brand Outlets

Hyper/Super Markets
Department Stores
Shopping Malls

PDS Outlets
Khadi Stores
Cooperatives

Convenience Stores
Mom and Pop/Kiranas

Weekly Markets
Village Fairs
Melas

Source of Neighborhood Availability/ Low Shopping

Entertainment Stores/Convenience Costs / Distribution Experience/Efficiency

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Journey of organized Retail in India

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 Key drivers for Growth
Economic Growth
 High disposable income
 Growing Middle class
Demographics
 More than 50% of population – less than 25 years of age
 Consumption growth
 More educated and working class population
Social Setup
 Change in family structure and women’s role in the family
 Growing role of children as influencers
 Gradual acceptance of frozen food as alternative to fresh food
 Growing influence of TV and other medias
 Lifestyle
 Standard of living
Urbanization
 40% of the population
Credit Availability

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Segments in Indian Retailing

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 Two-faced Indian Consumers…
 Seeking upgradation in some categories & value in the others!
 Key issue for any retailer is to identify the “upgrades” and
“value-focused” product categories to rationalize the product
mix and maintain healthy margins

Seeking cheaper options

Consumer Spends
Grocery Upgrading
Apparel
Eating Out Mobile phones
Housing
Automobiles
Durables
Education
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 Key Players – Indian Retail
 Shopper’s Stop,
 FoodWorld,
 Vivek’s,
 Nilgiris,
 Future Group
 Subhiksha,
 Ebony,
 Crosswords,
 Lifestyle,
 Globus,
 Barista,
 Qwiky’s,
 Café Coffee Day,
 Wills Lifestyle,
 Titan,
 Raymond,
 Bata Introduction to Retailing
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 Westside.
International Players in Indian Retail
 McDonald’s
 Pizza Hut
 Dominos
 Gautier
 Levis
 Lee
 Nike
 Adidas,
 Bennetton
 Swarovski’s
 Sony
 Sharp
 Kodak
 The Medicine Shoppe
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Current Policy on FDI
Present FDI regime and entry routes:
Allows India to have a presence of international brands, through different
routes as follows:

 Franchise
Joint venture
Manufacturing
 Distribution
Cash and carry*

51% FDI is allowed in ‘Single Brand Retail Outlets’

*100% FDI is allowed in Wholesale Trading
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 Foreign Ownership Restrictions
Foreign ownership in retail exist (in the longer term, restrictions are expected to be
removed)

DEFINITION EXAMPLE RESTRICTION POTENTIAL SOLUTIONS

SINGLE- Store selling The Gap Foreign Licensing / franchising

BRAND products under a Ikea companies
RETAILER single brand Gucci allowed to own Joint venture with:
name, e.g., a Tiffany at most 51%  Strategic partner
vertically The Body Shop  Private equity
integrated
specialty apparel
retailer

MULTI- Store selling Carrefour Traditional licensing / franchising

BRAND products under Costco Foreign
RETAILER multiple brand Walgreen's companies not “Hybrid” licensing / franchising:
names, e.g., Macy's allowed to own Overseas company owns and operates
• Supermarket Home Depot any equity a business that performs key functions
• Hypermarket Best Buy such as warehousing, distribution,
• Drug store store fit-out, sourcing and product
• Department development; Indian partner operates
store stores
• Multi-brand
consumer Wholesale-only business (selling to
electronics small businesses, not consumers), e.g.,
retailer club store / cash and carry format

Introduction to Retailing
Source: Technopak Advisors; KSA analysis S.PRASANNA VENKATESH
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FDI in retail- benefits and concerns
Benefits and impact on the country:
 Inflow of investment and funds
 Growth of infrastructure
 Knowledge base/ Technical know-how
 Reduced cost and increased efficiency
 Franchising opportunity for local entrepreneurs
 Investment in supply chain, cold chains and warehousing
 Implementation of IT in retail
 Stimulate infant industries and other supporting industries
 Increased local sourcing
 Increase number and improve quality of employment
 Provide better value to end customers.

Hence, it will lead to overall economic growth and create benchmarks.

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:

FDI in retail- benefits and concerns

Concerns regarding foreign investments

1. Foreign players would displace the unorganized retailers because of
their superior financial strengths
2. Induce unfair trade practices like predatory pricing, in the absence of
proper regulatory guidelines
3. Create monopoly and promote cartels
4. Increase in real estate prices and marginalize domestic entrepreneurs

Hence, checks are to be injected to ensure the overall growth of small and big
retailers and to create a level playing field for all

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 Most Common Arguments against FDI – (Myths)

• Many will lose employment – Retailers and

Employees, also Mom and Pop stores would be hit
by large players

• Farmers would loose bargaining power against retail

monopoly

• Prices of resources such as real estate will rise

Introduction to Retailing
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Myth 1 – Retail FDI will cause large scale
unemployment and may lead to closure of small shops..
Modern Retail will be financed by FDI, which will cause large scale
unemployment. This has two main assumptions

 FDI will drive Modern Retail :

 Which is not true as in the case of Reliance, Godrej, ITC, and ABG among
others. They are leading Retail now without FDI.

 Modern Retail will cause unemployment by causing small stores to close

 Not true again. Modern Retail will not only employ people to manage the
stores but will also help create new businesses which will feed on modern
retail.
 Also the impact will be primarily in the large towns and cities and that too
with retailers not willing to change as per the consumer demands.
 At the end of the day, if the small retailer is not responsive to the changing
requirements of the consumer, even the fanciest modern retail store will not work.

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Myth 2 - Farmers would lose bargaining power against
retail monopoly
 Currently the Farming who comprise more than 50% of the population, gets less
than ¼ of the price paid by the retail consumers.
 The Rest of the price goes in wastage (25%) and middlemen
 Retailers will bypass middlemen and directly go to farmers.
 To reduce wastages, they teach better farming practices and pay a premium to
farmers who take care of quality.
 Thus the farmers get more money
 This is already being experienced in certain pockets of India, where Modern
Retail is being experienced.
 Reliance fresh
 Heritage
 Bharathi Retail

Introduction to Retailing
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Significant Quality Drop and Value Loss..
Quantity drop through Food Supply Chain
Very High Wastage
100 •More Intermediaries add to the
inefficiency in the Chain :
80
•Leading to wastage in the Chain
60
40 •Drop in the quality of the
product
20
0

Price Increase through the Chain

400
Abnormal Cost 344
300 Addition
Source : KSA Analysis
196
200
125 131
100
100

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Myth 3 - Prices of Real Estate will Rise

 This is a function of rising incomes and land demand

and supply situation.

 Currently incomes are rising and land is limited.

 Hence prices will rise

 Retail FDI cannot affect this

Introduction to Retailing
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Retailing – Macro Environment
Macro – Economic Factors affecting Retailing

 Political & Legal: Customer rights, customer protection safety, wages,

corporate ethics and governance
 Economic: GDP, incomes, employment, interest rates, inflation, trade
deficit / surplus,
 Sociocultural :Social class, reference groups, culture, subculture
 Technological : products/services , processes, production, info
handling, management
 Demographic: Customer Age, sex, marital status, household size,
education, geographic location
 Physical: products/services availability, air and water quality, noise
pollution
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Retailing – Micro Environment
Micro – Economic Factors affecting Retailing
 Markets :

Segments, sizes, behaviours, trends, locations, level of

service demand
 Suppliers and intermediaries :
Supply channels, availability of goods, number of
alternatives, locations, geographical concentration, volume
concentration
 Competitors :
Number, strategies, potential new entrants, rivalry
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Retailing channels: types and functions

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Types of channels
 Exclusive Distribution
One or few retailers selling certain product lines ,mostly non-
competing brands

Reason : to ensure brand image, consistency, control etc

 Intensive Distribution – many retailers selling certain product
lines , could carry competing brands

Reason – reach, volume, etc

 Selective Distribution – moderate no. of retailers , a balance

between the above 2 types
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 Relationship among retailers & their suppliers

Suppliers can be manufacturers/producers or intermediaries

such as wholesalers

Retailers and/or Suppliers can be concerned about :

1. Coverage of the market by the retailer

2. Display caliber
3. Service caliber
4. Store hours
5. Number of competing retailers
6. Promotion
7. Trade terms eg. credit
In intensive distribution suppliers sell through as many
retailers as possible unlike exclusive
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Challenges facing today’s retailers
1. Competition
Type of Competition Formats and strategies Merchandise

Intertype Different Similar

Intratype Similar Similar

Type of Competition Channel Merchandise

Vertical Competition Same channel Same

(channel conflict)

Systems Competition Different channels Same Consumer’s money

Note: A vertical marketing system is a professionally managed and controlled marketing

Introduction to Retailing
channel designed to foster economies in theVENKATESH
S.PRASANNA production and distribution of
products/services
 Challenges of Indian Retailing
 Shortage of talents – Middle management
 Efficiency of Supply chain management
 Fraud and Theft in Indian retailing
 Infrastructural bottlenecks
 Low adoption and use of Technology
 Regulatory implications
 Rise in Fuel prices
 Supplier maturity and relations
 Disparities in culture and taste
 Real estate costs

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  List of a few licenses required for opening a 50000 sq.ft.retail store!
1 Shops & Establishments - Registration certificate , Trade License
2 Labour
3 Weights and Measures
4 Liquor
5 Chemist
6 Pollution Control
7 Generator / Electricity Board Clearence
8 Traffic Police Clearance
9 Contractor for Labour
10 Hoarding/ Outdoor media / Signages
11 Airport Authority - if tall building
12 Entertainment - from Police authorities if medium sized entertainment
13 Health - Health Deptt
14 Fire
15 Food license if ready-to-eat food items are sold and consumed Eg. bakery
16 Water & Drainage
17 Sales Tax - Central & State
18 Excise Registration
19 Import License (Import/Export Code Number)
20 Patents & Trade Marks
21 PF Registration
22 ESI Registration
23 Transportation Permits (Octroi)
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24 APMC licence for commodities S.PRASANNA VENKATESH
Roadmap to FDI – Future Outlook
 Encourage Industry consolidation – Expertise, processes,
Functions and Technology.
 Support for foreign Investment in Backend operations.
 Review the current Regulatory implications.
 Review the China, Thailand experience and lessons
 Phase I – Product category restrictions (26% stake)
 Phase II – Zonal restrictions (26% stake )
 Phase III – Raise the FDI up to 51% equity investment with
max 50 physical outlets.
 Phase IV – Open competition with restricted outflow
 Phase V – 100% FDI through automatic route.
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 India’s Emerging Retail Hierarchy
Maturing NCR/Delhi Mumbai

Transitional Bangalore Kolkata Hyderabad Chennai

Pune Ahmedabad
High Growth Chandigarh Ludhiana Jaipur Lucknow
Kochi Vadodara Surat
Emerging Indore Amritsar Jalandhar Managalore
Nashik Bhubaneswar Agra Vizag
Coimbatore Kanpur Nagpur Goa
Allahabad Mysore Jamshedpu Tiruvanandapura
r m
Nascent Jodhpur Patna Varanasi Meerut

Rajkot Aurangabad Bhopal Sonipet

Vijayawada Madurai Ranchi Guwahati

Jabalpur Asanol Dhanbad Panipat
Kolhapur Srinagar Solapur

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Special Characteristics of Retailing
 Average Sales
 Impulse Purchases
 Visit by the customer

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Special Characteristics of Retailing
Small
Impulse
Average
Purchase
Sale

Retailer’s
Strategy

Popularity
of
Stores
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 Retail Strategy
 Define the type of business in terms of the goods or service category and
the company’s specific orientation (such as full service or “no frills”)
 Set Long run and short run objectives for sales and profits, market share,
image so on.
 Determine the customer market to target on the basis of its characteristics
(such as gender and income level) and needs (product and brand
preferences)
 Devise an overall long run plan that gives general direction to the firm
and its employees.
 Implement an integrated strategy that combines such factors as store
location, product assortment, pricing, advertising and displays to achieve
objectives.
 Regularly evaluate performance and correct weakness or problem when
observed.
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Target stores - Strategy
 Growth Oriented Objectives
 Appeal to Prime Market
 Distinctive Company Image
 Focus – Value Driven
 Strong Customer service
 Multiple Points of Contact
 Employee Relations
 Innovation
 Commitment to Technology
 Community Involvement
 Constant Performance Monitoring
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“More for Less” at Big bazaar

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Aspects of Big bazaar‘s
Strategy
Biggest Shopping Experience
India’s Largest Hypermarket

 High value - pricing

 Good ambience
 Implicit Guarantees

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 Retail Concept

Customer Orientation

Coordinated Effort
Retailing Retail
Concept Strategy
Value driven

Goal Orientation

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Total Retail Experience

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Customer Service

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Relationship Retailing

• Win – Win Approach

• Technology & Customer Database

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