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This research is basically done to find out the training needs of the sales people in the
retail industry and how they are being fulfilled. The retail industry in our country is at
boom and getting organized day by day, the demands of customers are not just great
products but also great shopping experience and to make this possible a retail outlet
should have well trained sales people. This study is made to know how well the sales
people of retail industry in INDIA are trained to meet the customer expectations and
global standards.

The retail sales people demonstrate how items work and explain details of items to
customers; they give information about various models, colors, and brands of an item.
Sometimes they give special information about very expensive or complex items. They
help customers to find items in the store, they try to convince customers to buy those
items. Retail sales people compute the amount of the total sale and received cash,
cheque or credit card payments. Sales people also handle returns or exchanges of

The above mentioned are the very basic and important duties of sales people and they
require great skills and knowledge to perform well. And this high level performance can
only be seen if the sales people are provided with training as and when required.

Retailers are increasingly stressing the importance of providing courteous and efficient
service in order to remain competitive. The direct link between the customers and the
company is the sales people who are expected to provide this courteous and efficient
service to the customers. Sales people are periodically given training to update and
refine their skills for providing the best customers.
A sales persons gain experience and seniority; they usually move to positions of greater
responsibility and may be given their choice of departments. This often means moving
to areas with potentially higher earnings and commissions. The highest earnings
potential is usually found in big-ticket items. This type of positions often requires the
most knowledge of the product and the highest talent for persuasion. So training is the
most important aspect in recent trend which increases the potential of sales people to
meet the organizational and personal objectives

The retail industry in INDIA has changed its face and approach. Sales people working in
this industry play major role in handling the customers effectively. This study is done to
evaluate the training system used by the retail industry in INDIA and also to understand
training aspects which keeps the sales force of retain industry fit and ready to face any
kind of challenges, particularly due to increasing domestic and international competition.


Retail and real estate are the two booming sectors of India in the present times. And if
industry experts are to be believed, the prospects of both the sectors are mutually
dependent on each other. Retail, one of India’s largest industries, has presently
emerged as one of the most dynamic and fast paced industries of our times with several
players entering the market. Accounting for over 10 per cent of the country’s GDP and
around eight per cent of the employment retailing in India is gradually inching its way
toward becoming the next boom industry.
As the contemporary retail sector in India is reflected in sprawling shopping centers,
multiplex- malls and huge complexes offer shopping, entertainment and food all under
one roof, the concept of shopping has altered in terms of format and consumer buying
behavior, ushering in a revolution in shopping in India. This has also contributed to large
scale investments in the real estate sector with major national and global players
investing in developing the infrastructure and construction of the retailing business. The
trends that are driving the growth of the retail sector in India are
• Low share of organized retailing
• Falling real estate prices
• Increase in disposable income and customer aspiration
• Increase in expenditure for luxury items

Another credible factor in the prospects of the retail sector in India is the increase in the
young working population. In India, hefty pay-packets, nuclear families in urban areas,
along with increasing working-women population and emerging opportunities in the
services sector. These key factors have been the growth drivers of the organized retail
sector in India which now boast of retailing almost all the preferences of life - Apparel &
Accessories, Appliances, Electronics, Cosmetics and Toiletries, Home & Office
Products, Travel and Leisure and many more. With this the retail sector in India is
witnessing a rejuvenation as traditional markets make way for new formats such as
departmental stores, hypermarkets, supermarkets and specialty stores.
The retailing configuration in India is fast developing as shopping malls are increasingly
becoming familiar in large cities. When it comes to development of retail space specially
the malls, the Tier II cities are no longer behind in the race. If development plans till
2007 is studied it shows the projection of 220 shopping malls, with 139 malls in metros
and the remaining 81 in the Tier II cities. The government of states like Delhi and
National Capital Region (NCR) are very upbeat about permitting the use of land for
commercial development thus increasing the availability of land for retail space; thus
making NCR render to 50% of the malls in India.

India is being seen as a potential goldmine for retail investors from over the world and
latest research has rated India as the top destination for retailers for an attractive
emerging retail market. India’s vast middle class and its almost untapped retail industry
are key attractions for global retail giants wanting to enter newer markets. Even though
India has well over 5 million retail outlets, the country sorely lacks anything that can
resemble a retailing industry in the modern sense of the term. This presents
international retailing specialists with a great opportunity. The organized retail sector is
expected to grow stronger than GDP growth in the next five years driven by changing
lifestyles, burgeoning income and favorable demographic outline.
Another cap to the retailing industry in India is allowing 51% FDI in single brand outlet.
The government is now set to initiate a second wave of reforms in the segment by
liberalizing investment norms further. This will not only favor the retail sector develop in
terms of design concept, construction quality and providing modern amenities but will
also help in creating a consumer-friendly environment. Retail industry in India is at the
crossroads but the future of the consumer markets is promising as the market is
growing, government policies are becoming more favorable and emerging technologies
are facilitating operations in India. And this upsurge in the retail industry has made India
a promising destination for retail investors and at the same time has impelled
investments in the real estate sector. As foreign investors cautiously test the Indian
Markets for investments in the retail sector, local companies and joint ventures are
expected to be more advantageously positioned than the purely foreign ones in the
evolving India's organized retailing industry.

The word retail is derived from the French word ‘retailer’, meaning ‘to cut a piece off’ or
‘to break bulk’. Retailing involves a direct interface with the customers and the
coordination of business activities from end to end.

The retail scenario in India is unique. Much of it is in the unorganized sector. With over 12
million retail outlets of various sizes and formats. Almost 96% of these retail outlets are less
than 500sq.ft. In the size and the percapita retail space in India being 2 sq.ft compared to
the U.S. figure of 16sq.ft. India’s percapita retailing space is the lowest in the world.

With more than 9 outlets per 1000 people, India has the largest number in the world. Most
of them are independent and contribute as much as 96% to total retail sales. There is an
incredible amount of activity in terms of creation of retail-oriented space across India. As
per some estimates, there are over 200 retail mall projects under construction or under
active planning stage spanning over 25 cities. This may translate into over 25 million sq. ft.
of new retail space in the market within next 24 months.

Present Indian Scenario

• Unorganized market: Rs. 583,000 crores
• Organized market: Rs.5, 000 crores
• 5X growth in organized retailing between 2000-2005
• Over 4,000 new modern retail outlets in the last 3 years
• Over 5,000,000 sq. ft. of mall space under development
• The top 3 modern retailers control over 750,000 sq. ft. of retail space
• Over 400,000 shoppers walk through their doors every week
• Growth in organized retail on par with expectations and projections of the last 5
Years on course to touch Rs. 35,000 crores (US$ 7 Billion) or more by 2005-06
Organized retail formats in India

Each of the retail stars has identified and settled into a feasible and sustainable business
model of its own:

• Shoppers' Stop Department store format

• Westside Marks & Spencer model of 100%
private label
• Giant and Big Bazaar Hypermarket/cash & carry store
• Food World and Nilgiris Supermarket format
• Pantaloons and The Home Store Speciality retailing
• Tanishq High quality organized retail business

The retail business in India in the year 2000 was Rs. 4000,000 crore and is estimated to go
to Rs. 800,000 crore by the year 2005,an annual increase of 20%. The contribution of the
organized retail industry in the year 2000 was Rs.20, 000 crore and is likely to increase to
Rs. 160,000 crore by 2005.

According to the survey conducted by Federation Of Indian Chambers Of Commerce &

Industry [FCCI] and price water house coopers indicates that the Indian retail sector will
under go a sea change in size as well as formats in the next 10 yrs. It also expects that by
2010 the country’s top retailers will operate at least 3 to 4 format, all scalable to size,
location and providing value to their target customers.

Change Accelerators
The following factors will be significant in driving growth in the retail sector:
• Consumer factors
• Increase in income
• Workingwomen
• Changes in lifestyle – demand for “global” trends
• Supply side factors
• Growing importance of retailing in political and economic agenda
• Real estate reforms to be undertaken in the next 24 months
• Major restructuring of the manufacturing sector easing product supply constraints for
efficient retailing
• Reduction in import duties-offering more global sourcing options

Human Resource Issues And Concerns In Retail Industry:

• Manpower planning
• Recruitment
• Motivation and retention and building reward system that ensure performance


Retail is India’s largest industry, accounting for over 10 per cent of the country’s GDP and
around eight per cent of the employment. Retail industry in India is at the crossroads. It has
emerged as one of the most dynamic and fast paced industries with several players entering the
market. But because of the heavy initial investments required, break even is difficult to achieve
and many of these players have not tasted success so far. However, the future is promising; the
market is growing, government policies are becoming more favorable and emerging technologies
are facilitating operations.
Retailing in India is gradually inching its way toward becoming the next boom industry. The
whole concept of shopping has altered in terms of format and consumer buying behavior,
ushering in a revolution in shopping in India. Modern retail has entered India as seen in
sprawling shopping centres, multi-storeyed malls and huge complexes offer shopping,
entertainment and food all under one roof. The Indian retailing sector is at an inflexion point
where the growth of organized retailing and growth in the consumption by the Indian population
is going to take a higher growth trajectory. The Indian population is witnessing a significant
change in its demographics. A large young working population with median age of 24 years,
nuclear families in urban areas, along with increasing working-women population and emerging
opportunities in the services sector are going to be the key growth drivers of the organized retail
sector in India.

Retailing today is not only about selling at the shop, but

also about surveying the market, offering choice and
experience to consumers, competitive prices and
retaining consumers as well.
The Indian retail industry is no more nascent today. There
has been a significant change in retail trading over the
years, from small kiranawalas in the vicinity to big super
markets; a transition is happening from the traditional retail
sector to organized retailing. The unorganized sector still
holds a dominant position in this industry. The organized segment holds just about 1.2% of the
current US$ 245 billion retail market, which is expected to reach about US $ 385 billion by the
middle of this decade.
With consumers looking at convenience with multiplicity of choice under one roof and
expectations evolving over time, consumer demand is truly the driving force for organized
retailing in the country. Food and beverages form the main chunk of the retail market. They are
followed by apparel and footwear.

The Indian textile industry, the backbone of the apparel segment, has a large share of the Indian
economy, accounting for over 20% of industrial production as well as providing direct and
indirect employment to around 65 million people.
Despite the retail store density in India with regard to population being the largest, it is estimated
that over 90% of the stores are less than 500 sq. ft in size. Industry estimates put the number of
retail outlets at 12 million. This is clearly indicative of small-shop ownership crowding the
unorganized segment of retailing. While this fragmented market structure does pose significant
challenges for organized retailing, potential does exist if modern information and supply chain
management systems are deployed to support the development of convenience shops that match
customer expectations.

Growth in Organized Retailing

The organized segment of the retail industry has grown past
the 1% share during the year, from 0.6% of the market three
years back. The establishment of supermarkets and convenience stores has been a great effort to
communicate the advantages of organized retailing to customers. With supermarkets like Apna
Bazaar, Sahakari Bhandar, 9 to 9, Food World and Margin Free shops providing easy access to
goods at reduced prices, with few even providing a constant supply of foreign goods, the
organized sector does attract the bargain hunter's attention.
Food and clothing still account for the largest proportion of consumer spending. Together they
account for about 60% of the estimated US$ 275 billion household expenditure. With the
hospitality sector expected to grow at a compounded annual growth of about 13% during the
next three years, the food retailing ventures can certainly be looked at to spread further across
Apart from the food segment, home improvement stores are the upcoming segment. Outlets like
Gautier, Wonder Living, Bombay Bazaar, etc. have penetrated across metropolitan areas and
leading Class A cities of the country. Research estimates that the total space for shopping malls is
likely to go up from 50 lakh sq ft to 75 lakh sq ft during the year. India's per capita retail space is
the lowest in the world at just about 2 sq. ft. Compare this with the US figure of 16 sq. ft.
Therefore, the industry's need for real estate, which is on the rise, could well be justified. A
significant fallout of the emergence of malls will be the trend of smaller retailers upgrading their
establishments and emulating practices from the `mall experience'.
The growth in the organized segment is evident from the plans of the current players. Ventures
like Food World and Music World are set to more than double their network, while Shoppers'
Stop is gearing up for an expansion of 15 to 17 outlets all over the country. Pantaloon is expected
to build about 11 super stores, moving ahead of its current store and franchise model of business.
Regional retailers like Vivek's too are planning to expand the network across their region.
Players like Crossword, Nilgiris, Vitan, Kemps Chain and Landmark are also planning
Though there exists adequate opportunities for organized retailing, the unorganized sector does
cash in on the tax advantage. The fragmented and unstructured segment makes it difficult, if not
impossible, to administer the tax system. The other hurdle is to change the mind block of
customers, who tend to perceive organized retailers to be far more expensive than unorganized
ones with no specific distinction between the two in terms of the apparent value. While the
former is a macro issue, the latter is being addressed by organized retailers through relationship
marketing, where customer preference and customer satisfaction play a key role.
Customer relationship management tracks down loyal customers and focuses on their
satisfaction. A rapid transformation from traditional to organized retailing would occur only on
account of a change in consumer expectation and behaviour. To tackle this factor, retailers are
focusing on retaining customers through various marketing strategies.
Payment through card facilities is now available in most supermarkets and multi-storied
shopping arcades, providing convenience and comfort to customers. Multi-brand outlets like
Cross Roads, Globus and Shoppers' Stop have membership cards for frequent customers
providing special offers and discounts.

The demand perspective in India highlights some key changes in consumer demographics
driving organized retailing. These include:
• Income and consumption growth
• Increasing literacy levels
• Changes in family structure and women’s role in the family
• Growing role of children as influencers
• Gradual acceptance of frozen goods as a viable alternative to fresh produce
• Growing influence of TV.

Household income levels are expected to rise, with the lowest

income group to comprise only 24% in 2004 from its current
level of 31.5%. The cumulative growth of the other income groups is likely to be about 7%,
meaning growth in consumers who favour the emerging trends in retailing.
Households in the top 4 income categories (over a lakh of annual income) account for about 53%
of the total household consumption expenditure. On an average the expenditure on consumables
- food, clothing and consumer durables, by the lower income category is as high as 74% while in
the higher income category this forms only 57% of their expenditure. Though the percentage
contribution of consumables is relatively higher by the lower class, the purchase location is
predominantly traditional outlets, as compared to the higher income category, which prefer to
shop through organized outlets to a greater extent.
Technology Advantage
Technology in the retailing industry has provided a new dimension. The introduction of point of
sale equipment, bar codes and huge storage capacity for billing and payment database has
facilitated the management of large set-ups with ease. Operations can be recorded in a structured
and systematic manner, providing detailed analysis of the sales and volume of transactions.
Electronic transactions have increased the volume of sales in the country. Flexibility in the mode
of payment and cashless transactions have helped in driving sales. Communication assists in
maintaining a competitive advantage in retaining and attracting customers.
The introduction of new technology may be intricate for retailers, but the convenience and cost
effectiveness create the need for new advancements. Large stores need to monitor inventories
and expenses of establishments. With automated machines and high-end computers making the
task simpler, the focus of retailers can stay on retaining customers with new strategies. Security
systems also do help for a safer shopping, for retailers as well as customers, providing immense
mental relief. Such technological advancements are only now coming into India and the need for
it has been acknowledged. The point of sale (POS) applications will provide for quicker
consumer check-out and multiple payment options like credit cards.
Solutions ranging from simple Point of Sale (PoS) systems to complex retail ERPs have been
implemented mainly by large, mid-sized and manufacturer-retailers in India. Using ERP
packages and solutions like Retail Pro, higher-end solutions like JDA, SAP IS Retail or Retek
facilitate backend operations.

Along with business optimization

software, mobile computing and B2C concept
assist retailers to cut cost and increase efficiency, but these solutions are mainly targeted at big
retail stores with chains in India. Though these solutions have been implemented, returns on
these investments take a longer period.
The emphasis of retailers are now in utilizing IT solutions like CRM, OLAP, CPFR tools to
carryout the behavioral analysis to stay in the competitive market. Retail ERP packages have
been implemented by large retailers but today they are experiencing difficulty in utilizing it fully,
one of the key reasons could be the lack of adequate training. But it is expected that the demand
and utilization of these packages will grow in the near future.
It is estimated that about 400 to 500 mega bytes of data are transmitted daily between point-of-
sales counters and corporate headquarters of retail chains in developed countries. Relay of
transaction data in such volumes helps to maintain a close working relationship between retailers
and vendors to predict consumer demand, shorten lead times, reduce inventory holding and
thereby save cost. Retailing database also helps in tracking purchase behaviour through
demographic and psychographic information. This clearly is an indication of technology serving
as an effective means to build the retail business and not just restricted to supporting and
improving the operational efficiency.
Use of electronic communication like e-marketing could well be a cost-effective form of
attracting and retaining customers. With internet penetration and awareness on the rise in the
country, e-marketing does prove to be a good communication tool. Use of technology could
further be extended to home shopping, direct mails and telemarketing. It can also facilitate
growth in newer applications like kiosks, intelligent vending machines, PC net shops, etc.
Retail as an Investment Option
Despite the huge presence of the unorganized sector, the Indian retail industry is attractive for
international players. It is favoured over China's among the developing countries due to a slew of
laws in the communist country at various levels. Though the market hasn't seen big time players
of the developed nations yet, the fact that Indian per capita retail space is among the lowest, is
expected to provoke people to look at retail as a potential business arena. The growth of
integrated shopping malls, retail chains and multi-brand outlets is evidence of consumer
behaviour being favourable to the growing organized segment of the business. Space, ambience
and convenience are beginning to play an important role in drawing customers.
With the Indian per capita income on the rise and the distribution of consumption expenditure
expected to remain fairly stable, the current segments of food and apparel is likely to remain
attractive. Upgradation of traditional grocery stores to present quality food products in ways and
methods adopted in North America and Europe can help in communicating value and attracting
Though the Indian retail industry is still a "protected industry" from the stand point of foreign
direct investment (FDI), the government is expected to provide some flexibility on this front.
Though FDI can help generate employment in this sector, it is likely to pose stiff competition for
existing small businesses. Unlike the country's FDI investment objective of technology transfer
and export promotion of the 1980s, today's infusion of capital - specifically in the retail segment
-- can bring to the table issues on size of investment, actual inflows and domestic company take-
overs. Given the constraints, FDI should be viewed as a developmental resource that can help in
restructuring the industry. It should be aimed at filling up the resource and technology gaps in the
retail segment.
While the differing tax and licensing systems across states could raise some issues when
organized retailers expand nationally, this could well protect the interests of regional retailers.
But the key to success is to build a fairly extensive network of stores across the country to enable
e-commerce transactions. This in the emerging scenario would help retailers to target a wider
audience and maximize returns. Strength in physical distribution will remain the backbone of any
retail arrangement; however, ongoing investment in bandwidth, development of internet
facilities, and increasing awareness of IT among the literate and educated population is expected
to create a large base of shoppers.
The minimal contribution of the organized sector is a profitable direction for potential investors.
The movement of more and more people up the income brackets also indicates a good market
potential. Labour cost differential, the removal of investment restrictions and the rationalization
of the tax structure can bring about best practices and the latest offerings to the Indian retail
industry. Growth opportunities for the organized sector can be propelled through land reforms as
well as uniformity in tax structure, which reduces the cost advantage of the unorganized sector.
These measures, if rightly implemented, would provide a competitive environment for the Indian
retail industry.

MEASURING UP Managing any business, whether brick-and-mortar, catalogue, or on the Web,

requires measuring what matters - the business performance. From these, one derives key metrics
to measure and analyze the firm's business performance. The need for the measurement of these
metrics stems from three primary sources:
• Sales and revenue targets.
Simply put, retail, like any other business, must make a profit. Retail performance
measures not only aid in analyzing the sales performance in greater detail but also are an
invaluable aid in defining sales and revenue targets.
• Historic performance.
The ability to compare a retail store's present performance relative to its past performance
provides valuable trend information.
• Benchmarking.
It is not enough to know your own business' performance; it is also critical to know the
performance of your competitors. Revenues may be less than expected, but if competitors
have faired worse, it may change your interpretation of the situation. Apart from
comparison within a sector, structured performance measurement also enables across-
sector comparisons and learning..
The following are some of the performance measures in the retail sector:
Walk-ins and Conversion
Walk-ins is the measure of number of people who walk into the stores within a pre-determined
period of time (daily, hourly, monthly). Conversion is the percentage of customers who actually
buy from the store.
Conversion = (No. of Customers who make a transaction) * 100/ walk-ins
The conversion figure is the benchmark of stores performance when evaluated along with the
Average Transaction Value. There could be a scenario wherein due to high value of merchandise
in a store, the conversion is low but the average transaction value is high. Eg: jewelry stores
Average Transaction Value
Average Transaction Value means the value worth of goods purchased by the customers.
It is calculated as:
Avg. Transaction Value= Avg. Sales per day/ (Avg.daily walk in * Avg.
Conversion %)
The ratio gives an indication of how much each customer on an average spends in the store.
Useful for comparison and analysing if this needs to be increased.
Display to stock ratio
The display to stock ratio means the amount of backroom inventory maintained as a backbone to
that displayed in the store. It is calculated as follows:
Display to stock ratio = No of pcs of an SKU on display/ No of pcs of the SKU in
backroom stock
Typically this ratio is maintained higher for the "Fast-moving" SKUs(those with higher sales and
experience more stock outs). This ratio should be kept at an optimum level after considering the
sales trend of the SKU, the minimum coverage levels required for an item, display rules, so that
unnecessary investment in Inventory is avoided. It should also not be kept too low or else there
would be a scenario of frequent stock outs for the SKU
Sales per sq. ft.
Sales per square foot is a very important retail performance benchmarking ratio. It is the sales
revenue generated per square foot of Retail space.
It is calculated as:
Sales per Sq.ft = Gross Sales/ Retail space in sq. ft
Since cost of Retail space is a significant cost element in the retail business, this ratio is
instrumental in gauging the store sales performance.
Sales per employee
Sales per employee is indicative of the performance of the sales staff. This would in turn enable
the decision making for their appraisals and further training. It would further indicate whether or
not the store is adequately staffed.
Sales per employee = Gross Sales / Strength of sales staff
A motivated sales team is one of the keys to better conversion in the outlet. This ratio therefore
benchmarks the sales team performance and also aids in fixing their sales targets.
Inventory turnover rate
Inventory Turnover: The inventory turnover ratio measures the number of times during a year
that a company replaces its inventory. The turnover is only meaningful when comparing other
firms in the industry or a company's prior inventory turnover. Differences in turnover rates result
from product characteristics and differing operating characteristics within an industry. The
inventory turnover rate is calculated as follows:
Inventory Turnover = Cost of goods sold/ (Average inventory at cost
OR = Sales / Average inventory at sales
The higher the inventory turnover rate means the more efficiently a company is able to grow
sales volume. There are several things to keep in mind when calculating turnover rates:
1) Only consider cost of goods sold from stock sales filled from warehouse inventory. Do not
include on-stock items and direct shipments. Sure, these sales are important, but don't involve
your warehouse stock (your investment in inventory). 2) The cost of goods sold figure in the
formula includes transfers of stocked products to other branches and quantities of these products
used for internal purposes such as repairs and assemblies.
3) Inventory turnover is based on the cost of items (what you paid for them) not sales dollars
(what you sold them for).
Inventory turnover depends on the average value of stocked inventory. To determine your
average inventory investment: 1) Calculate the total value of every product in inventory (quantity
on hand times cost) every month, on the same day of the month. Be consistent in using the same
cost basis (average cost, last cost, replacement cost, etc.) to calculate both the cost of goods sold
and average inventory investment.
2) If your inventory levels fluctuate throughout the month, calculate your total inventory value
on the first and 15th of every month.
3) Determine the average inventory value by averaging all inventory valuations recorded during
the past 12 months.
Gross margin per sq. ft.
Gross Margin per square ft is indicative of the profitability of the Retail space. It is calculated as:
Gross margin per sq ft = Gross margin / Area of retail space
In simple terms GMROI(Gross Margin Return On Inventory) tells us how many times over a
year we get our stock investment returned with a given margin . In simple terms it may be
defined as 'how hard the inventory is working for the profitability of the business'. It is calculated
as follows:
GMROI = (Gross MArgin% / (100% -Gross Margin%)) x (52/weeks cover)
So a product with a gross margin of 50% and an average 26 weeks cover would give us a
G.M.R.O.I of 2.0
(50/50) x (52/26) = 1 x 2 = 2.0
If we compare this with a product with a gross margin of 40% but an average of 17 weeks cover
we see that the G.M.R.O.I. is also 2.0
(40/60) x (52/17) = 2/3 x 3.01 = 2.0
Simple gross margin measurement would indicate that the first of these products was a better
investment. GMROI shows us a fuller picture that shows that the second product provided an
equal return on stock invested. We can see from this that we can use G.M.R.O.I. as a powerful
measure of historical performance, but it has an equally powerful application in merchandise
In this instance we might well apply the measure at a summary level, perhaps sub product group
by branch, to give us an indication of those sub product groups that have greater potential than
others in specific branches. From this we can make better informed decisions as to which should
have more space allocated to them, be better supported by stock or have ranges expanded or
contracted. For example, products with low cover and high gross margin will probably have
experienced stock outs and fragmentation of ranges, and were therefore not fully exploited in
terms of their ability to generate profit. This combination would result in a relatively high
G.M.R.O.I.. Assuming that this performance were not the result of a fashion "blip", it would
make sense to increase the stock support for this area and maybe increase the space allocated to
it. We might also look at increasing the number of options available.
Conversely a product with high cover and a low gross margin was obviously over supported with
stock, and failed to generate a reasonable return in spite of this. It would therefore make sense to
reduce its space allocation ,and to channel the stock investment to a more appropriate area,
maybe reducing range width at the same time. In extreme cases we might decide to remove the
product area from the range altogether.
Conclusion The adoption and analysis of the illustrated measures enable in-depth sales analysis
not only at the overall level but also at the category and sub-category levels. This "drill-down"
analysis can be effectively used to evaluate the performance of retail outlets, product categories,
promotions as well as the human resources thereby assessing the performance at a micro level
Organized retail formats prevalent globally
Supermarkets: Self-service 4000-20000 sq ft stores with shopping carts
typically focused on regular groceries, household goods and personal care
products. Tesco, Ahold and Safeway are key players in this format.

Hypermarkets: Huge stores over 40000 sq ft situated outside the town with
ample parking space aimed for bulk purchases stocking electronics, furniture
and clothing. Carrefour is the global major in this format.

Mass merchandisers: Large destination stores that sell everything at

competitive prices. They have cross-country chain operations with centralized
sourcing and a hub-and-spoke distribution. Makro and Sam's Club are
leading players in this format.

Discounters: Aimed at bargain buyers offering less choice but deep discount
on bulk sourcing deals through controlled inventory. Aldi is the world leader
in this format.

Convenience Stores: Small stores located at convenient points like petrol

stations working round the clock.

Specialties Stores: These stores offer consultative shopping experience

with skill that cannot be duplicated.

Mom-and-Pop Stores: Traditional small family owned format.

Indian Retail Sector: Business Analysis
During the last 10 years, many retail start-ups promised a lot. A few folded
up even before they really got started, a few others struggled and then burnt
out before they could develop a sustainable business model and others are
still evolving. However, a significant number of new (and some not so new)
retail businesses have broken rank and seem poised to surge ahead with
renewed vigor, optimism, confidence and capability. Shoppers' Stop,
Lifestyle, Westside, Giant and Tanishq are the current torch-bearers of the
modern Indian retail sector, flanked creditably by FoodWorld, Nilgiris, Big
Bazaar and Pantaloon, and The Home Store.

Business Opportunities in the Indian Retail Sector

The current players have just touched the tip of the total potential of over Rs
8, 50,000 crore of annual consumer spending in India through various retail
channels. There is an outstanding opportunity in other product categories, in
new formats, and in new geographical territories. For example, let us
consider new product categories that are under-represented in India in terms
of reach of efficient, organized retail channels.
Market Trends
Change in consumer behavior

The whole concept of shopping has altered in terms of format and consumer
buying behavior, ushering in a revolution in shopping in India. Rising income
levels, falling real estate costs and a greater exposure to media and
international trends have fuelled retail growth. Consumer spending in India is
estimated to have grown at an average rate of 11.5% per year over the past
decade. While retailers have improved their offerings, many attribute their
better fortunes to a change in consumer behavior.

Forces that could make or break the industry

1. Challenges facing the industry

The unorganized nature of retailing had stunted its growth over several
years. Lack of industry status affects financing prospects and stunts growth
of the industry. In the current scenario, only players with deep pockets have
been able to make it big. In addition to the advent of Internet, there are
many other challenges that retailers have to address.

Human Resources

Availability of trained personnel and retaining the human resources is a

major challenge for these big retailers. The bigwigs like Crossroads offer high
compensation and create a cohesive environment that makes an employee
proud to be a part of such big retail chains.

Space and Infrastructure

To establish a retail shop / mall, the real estate and the infrastructure are
very vital. The expenditure and availability on both the accounts do hinder
the growth of the retail chain. The lack of secondary infrastructure also
affects the logistics and supply chain management for retail companies.

Labor Laws

Existing labor laws in India forbid employment of staff on contractual basis

that makes it difficult to manage employee schedules especially 365-day

Types of retailers:

Departmental store: Several product lines with each line operated as a separate department
managed by specialist buyers or merchandisers.

Specialty store: These stores usually stock narrow product lines with a deep assortment.

Supermarket: Relatively large, low cost, low margin, high-volume, self services designed to
serve total needs for food, laundry, and household maintenance products.

Convenience store: Relatively small store located near residential area, open long hours seven
days a week, and carrying a limited line of high-turnover convenience products at slightly higher
Discount store: Standard merchandise sold at lower prices with lower margins and higher

Off-price retailers: Merchandise bought at less than regular wholesale prices and sold at less
than retail often leftover goods, overruns, and irregulars obtained at reduced prices from
manufacturers or other retailers.

Superstore: It is traditionally aimed at meeting consumers’ total needs for routinely purchased
food and nonfood items.

Catalog showroom: Broad selection of high-markup, fast moving, brand name goods at discount
prices. Customer order goods from a catalog in the showroom then pick these goods up at a
merchandise pickup area in the store.

Push and pull strategy:

The promotional mix is heavily influenced by whether the company chooses a

push or pull strategy to create sales. A push strategy involves the manufacturer using sales force
and trade promotion to induce intermediaries to carry, promote, and sell the product to end users.
Push strategy is especially appropriate where there is low brand loyalty in a category, brand
choice is made in the store, the product is an impulse item, and product benefits are well

A pull strategy involves the manufacturer advertising and using consumer

promotion to induce consumers to ask intermediaries for the product, thus inducing the
intermediaries to order it. Pull strategy is especially appropriate when there is high brand loyalty
and high involvement in the category, people perceive differences between brands, and people
choose the brand before they go to the store. Companies in the same industry may differ in their
emphasis on push or pull.

Communicating to the customers:

Consumer marketers spend on sales promotion, advertising, personal selling,

and public relations in that order, to communicate to the customers.

Whereas advertising offers a reason to buy, sales promotion offers an incentive to

buy. Personal selling can also make a strong contribution in consumer goods marketing. An
effectively trained consumer company sales force can make four important contributions:
increased stock position, enthusiasm building, and missionary selling, key account management.

Manufacturers also use a number of trade-promotion tools. A decade ago, the

advertising-to –sales promotion ratio was about 60:40. Today in many consumer- packaged-
goods companies, sales promotion accounts for 65 to 75 percent of the combined budget.
Surprisingly, a higher proportion of the promotion pie is devoted to trade-promotion tools than to
consumer promotion, with media advertising capturing the remaining.

Manufacturers award money to the trade for four reasons:

1. To persuade the retailer or wholesaler to carry the brand: Shelf space is so scarce that
manufacturers often have to offer prices off, allowances, buyback guarantees, free goods, or
outright payments (called slotting allowances) to get on the shelf, and once there, to stay on
the shelf.

2. To persuade the retailer or wholesaler to carry more units than the normal amount:
Manufacturers will offer volume allowances to get the trade to carry more in warehouses and
stores. Manufacturers believe the trade will work harder when they are “loaded” with the
manufacturer’s product.
3. To induce retailers to promote the brand by featuring, display, and price reductions:
Manufacturers might seek an end-of-aisle display, increased shelf facings, or price reduction
stickers and obtain them by offering the retailers allowances paid on “proof of performance”.

4. To stimulate retailers and their sales clerks to push the product: Manufacturers compete for
retailer sales effort by offering push money, sales aids, recognizing programs, premiums, and
sales contests.

Major trade promotion tools:

Price-off (off-invoice or off-list): A straight discount off the list price on each case purchased
during a stated time period. The offer encourages dealers to buy a quantity or carry a new item
that they might not ordinarily buy. The dealers can use the buying allowance for immediate
profit, advertising, or price reductions.

Allowance: An amount offered in return for the retailer’s agreeing to feature the manufacturer’s
products in some way. An advertising allowance compensates retailers for advertising the
manufacturer’s products. A display allowance compensates them for carrying a special product

Free goods: Offers of extra cases of merchandise to intermediaries who buy a certain quantity or
who feature a certain flavor or size. Manufacturers might offer push money or free space-
advertising items to retailers that carry the company’s name.
Manufacturers spend more on trade promotion than they want to spend. The
growing power of large retailers has increased their ability to demand trade promotions at the
expense of consumer promotion and advertising. These retailers depend on promotion money
from the manufacturers. No manufacturer could unilaterally stop offering trade allowances
without losing retailer support.

Industry Profile

Introduction to the FMCG industry:

The Fast Moving Consumer Goods (FMCG) sector is the fourth largest sector in
the economy with a total market size in excess of Rs. 60,000 crores. This industry essentially
comprises Consumer Non Durable (CND) products and caters to the everyday need of the
The fast moving consumer goods business is characterized by two pillars - strong
brand equity and a wide distribution network. Brand equities are built over a period of time by
technological innovations, consistent high quality, aggressive advertisement and marketing.
Availability near the consumer through a wide distribution network is another crucial success
factor, as products are of small value, frequently purchased daily use items.
Product Characteristics:
Products belonging to the FMCG segment generally have the following characteristics:
• They are used at least once a month
• They are used directly by the end-consumer
• They are non-durable
• They are sold in packaged form
• They are branded

Industry Segments:

The main segments of the FMCG sector are:

• Personal Care: Oral care, hair care, skin care, personal wash (soaps), cosmetics
and toiletries, deodorants, perfumes, paper products (tissues, diapers, sanitary), shoe care.
Major companies active in this segment include Hindustan Lever, Godrej Soaps,
Colgate-Palmolive, Marico, Dabur and Procter & Gamble.

• Household Care: Fabric wash (laundry soaps and synthetic detergents),

household cleaners (dish/utensil cleaners, floor cleaners, toilet cleaners, air fresheners,
insecticides and mosquito repellants, metal polish and furniture polish).
Major companies active in this segment include Hindustan Lever, Nirma and Reckitt
& Colman.
• Branded and Packaged Food and Beverages: Health beverages; soft drinks;
staples/cereals; bakery products (biscuits, bread, cakes); snack food; chocolates; ice
cream; tea; coffee; processed fruits, vegetables and meat; dairy products; bottled water;
branded flour; branded rice; branded sugar; juices etc.
Major companies active in this segment include Hindustan Lever, Nestle, Cadbury
and Dabur.
• Spirits and Tobacco: Major companies active in this segment include ITC,
Godfrey Philips, UB and Shaw Wallace.
An exact product-wise sales break up for each of the items is difficult. The size of
the fabric wash market is estimated to be Rs 4500 crore, of household cleaners to be Rs 1100
crore, of personal wash products to be Rs 4000 crore, of hair care products to be Rs 2600 crore,
of oral care products to be Rs 2600 crore, of health beverages to be Rs 1100 crore, of bread and
biscuits to be Rs 8000 crore, of chocolates to be Rs 350 crore and of ice cream to be Rs 900
In volume terms, the production of toilet soap is estimated to have grown by four
per cent in 1999-2000 from 5,30.000 tonnes from 5,10,000 tonnes in 1998-99. The production of
synthetic detergents has grown by eight per cent in 1999-2000 to 2.6 million tonnes. The
cosmetics and toiletries segment has registered a 15 per cent growth in 1999-2000 as against an
annual growth of 30 per cent recorded during the period 1992-93 to 1997-98.
In the packaged food and beverage segment, ice cream has registered a negligible
growth and the soft drink industry has registered a six per cent growth in 1999-2000.

The size of the Indian fast-moving consumer goods (FMCG) sector is close to Rs
600 bn. The northern and the western regions of the country account for more than half of the
market for consumer goods. Barring the fastest-growing personal care segment, no other product
segment has seen the entry of so many players.
In the past decade, the personal care industry has witnessed a consumer boom.
This has been due to liberalization, urbanization, and an increase in the disposable incomes, and
altered lifestyles, especially a heightened level of awareness among the rural community,
consequent to the onslaught of satellite television. Furthermore, the boom has also been fuelled
by the reduction of excise duties, dereservation from the small-scale sector and the concerted
efforts of personal care companies to woo the burgeoning affluent segment of the middle class
through product and packaging innovations.
Unlike in the past, when domestic companies were not perceived as competitive
vis-à-vis multinational corporations (MNCs), the scenario is gradually changing, with some
domestic companies, like Nirma, Marico and Jyothi Labs, standing up to their MNC
counterparts. Also, competition amongst the MNCs has intensified, leading to shrinkage of
The personal and home care segment has very low entry barriers of technology
and capital requirements. This attracts new players and has resulted in intensifying competition.
Despite this, the strong distribution networks and heavy investments needed for brand building
remain key deterrents to new players.
Low margins and high volumes characterize the industry. While the level of
disposable incomes determines the overall sector growth, the market has already been segmented
and sub-segmented. Companies have launched products at a number of price points to drive up
volumes. New products are being launched in niche segments, and old products re-launched.
Brand equity drives the customer’s purchase decisions, and is the key to gaining market share.
Also, competitive pressures have hiked the advertising budgets of most players. Besides, a
profusion of promotional schemes are being offered. Most players, including Hindustan Lever
Ltd (HLL), are struggling to maintain top line growth, despite the heavy advertising and sales
promotion (ASP) expenditure.
A lower price differential between the organized and the unorganized sectors from
reducing excise duties allows the former to grow at the expense of the latter. The organized
sector also has a superior distribution reach. Although most of the product categories are still in
the growth phase, a few broad categories, like detergents, have reached a mature phase only in
the urban market. According to industry sources, the affluent segment in the rural sector is
growing at a faster rate than the urban one. For the past three years, the organized sector has been
focusing on the rural markets, which are perceived to drive growth in the industry and which, to
a very large extent, are dominated by unorganized players.

Industry characteristics:

• Branding: Creating strong brands is important for FMCG companies and they devote
considerable money and effort in developing bands. With differentiation on functional attributes
being difficult to achieve in this competitive market, branding results in consumer loyalty and
sales growth.
• Distribution Network: Given the fragmented nature of the Indian retailing industry and the
problems of infrastructure, FMCG companies need to develop extensive distribution networks to
achieve a high level of penetration in both the urban and rural markets. Once they are able to
create a strong distribution network, it gives them significant advantages over their competitors.
• Contract manufacturing: As FMCG companies concentrate on brand building, product
development and creating distribution networks, they are at the same time outsourcing their
production requirements to third party manufacturers. Moreover, with several items reserved for
the small scale industry and with these SSI units enjoying tax incentives, the contract
manufacturing route has grown in importance and popularity.
• Large unorganised sector : The unorganised sector has a presence in most product categories
of the FMCG sector. Small companies from this sector have used their locational advantages and
regional presence to reach out to remote areas where large consumer products have only limited
presence. Their low cost structure also gives them an advantage.
• Brand Equity: Brand equities are built over time by technological innovations, consistent
quality, aggressive advertising and marketing.
Key players in the FMCG industry:

There is a strong MNC presence in the Indian FMCG market and out of the top 10
FMCG companies, four are multinationals while two others have significant MNC
shareholdings. Unlike several other sectors where multinationals have entered after 1991, MNCs
have been active in India for a long time. The top five listed FMCG companies on the basis of
their sales turnover in the last financial year (either year ended December 31, 1999 or March 31,
2000) are:

Company Name Month & year sales Profit After Tax

(finance year) Rs. Crores Rs. Crores
Hindustan Lever Ltd. 12 / 1999 10978.31 1073.73
I T C Ltd. 03 / 2000 7971.94 792.44
Nirma Ltd. 03 / 2000 1717.88 234.1
22Nestle India Ltd. 12 / 1999 1546.43 98.47
Britannia Industries Ltd. 03 / 2000 1169.84 51.02
Colgate-Palmolive (India) Ltd. 03 / 2000 1123.53 51.79
Godfrey Phillips India Ltd. 03 / 2000 1082.63 42.1
Dabur India Ltd. 03 / 2000 1046.28 77.67
Smithkline Beecham Consumer12 / 1999 743.38 97.61
Healthcare Ltd.
Godrej Soaps Ltd. 03 / 2000 714.74 61.89
Marico Industries Ltd. 03 / 2000 649.05 35.73
Cadbury India Ltd. 12 / 1999 511.08 36.7
Procter & Gamble Hygiene &06 / 2000 492.85 75.03
Health Care Ltd.
Reckitt & Colman Of India Ltd. 12 / 1998 435.33 31.47
I S P L Industries Ltd. 03 / 1999 21.57 0.04

Among the major companies, Hindustan Lever has a strong presence in the food,
personal care and household care (detergents) sectors, ITC is the market leader in cigarettes,
Nirma has a strong presence in the detergent market, Nestle and Britannia are active in the food
sector and Colgate has a strong presence in the oral care segment.

Salient features of the FMCG industry:

The FMCG sector is a key component of India’s GDP and is a significant direct
and indirect employer. It is the fourth largest sector in the economy and is responsible for five
per cent of total factory employment in the country. The sector also creates employment for three
million people in downstream activities, much of which is disbursed in small towns and rural

Unlike the perception that the FMCG sector is a producer of luxury items targeted
at the elite, in reality the sector meets the every day needs of the masses, across the country.
Low-priced products contribute the majority of the sales volume and lower income and lower
middle income groups account for over 60 per cent of the sector’s sales. Moreover, rural markets
account for 56 per cent of total domestic FMCG demand and FMCG outlets reach more villages
than any other basic facility such as primary schools or bus facilities.

The FMCG sector has several other salient features. It has strong links with
agriculture and 71 per cent of sales come from agro-based products, it is a significant value
creator with a market capitalisation second only to the IT sector and it is a key contributor to the
exchequer. In 2000-01, it accounted for eight per cent of total corporate tax, six per cent of
central excise revenue and seven per cent of state tax revenues.

Pricing: The Indian consumer is very price sensitive. In the personal care sector, branding
allows companies to partially pass on the cost increases to the customers. Most players have
introduced products with mass-market pricing, so as to build volumes. The increased
promotional activity that is taking place amongst players has relegated brand loyalty to the
backseat. Moreover, the increased competition has restricted not only growth rates, but also the
ability to absorb frequent price increases, thus benefiting the consumer. With the rise in
disposable incomes of consumers, players in the premium-product categories will be able to
increase volumes.

SWOT analysis of the FMCG industry:

• Well-established distribution network extending to rural areas.
• Strong brands in the FMCG sector.
• Low cost operations
• Low export levels.
• Small scale sector reservations limit ability to invest in technology and achieve
economies of scale.
• Several “me-too” products.
• Large domestic market.
• Export potential.
• Increasing income levels will result in faster revenue growth.
• Imports.
• Tax and regulatory structure.
• Slowdown in rural demand.

Fabric wash market:

The fabric wash market has three segments, laundry bars, synthetic detergents and
powders. The 3-mn tonne market, valued at Rs 45 bn, is amongst the world's largest, after China
and USA. Laundry soaps accounts for 20 per cent of the total volumes and 15 per cent of the
Consumer preferences have been changing in the past few years. In the urban
markets, people prefer to use washing powder and detergents, instead of bars, on account of
convenience of usage, increased purchasing power, aggressive advertising and increased
penetration of washing machines. The demand for detergents has been growing at an annualized
growth rate of 10-11 per cent in the past five years, while the laundry bar market has witnessed a
negative growth. In the fabric wash market, the rural growth is at a higher rate of 13-14 per cent,
compared to the urban growth rate of 8-9 per cent. The major players in the detergent market are
HLL (Surf), Nirma (Nirma Super, Nima), Proctor & Gamble (Ariel, Gain, Tide) and Henkel-Spic
(Henko), with the rest of the market being fragmented amongst a large number of players.

Personal wash market:

The Indian soap industry is a mature market, which is valued at Rs 45 bn, and can
be classified into popular and premium categories. While the growth rate for the overall personal
wash market is only 7-8 per cent, premium and middle-end soaps are growing at a rate of 10 per
cent. Positioning of the product is very important in this market. The leading players in this
market are HLL (Lux, Lifebuoy, Breeze, Rexona), Nirma (Nima), Godrej Soaps (Cinthol,
FairGlow, Shikakai, Nikhar), and Reckitt & Colman (Dettol). The rest of the market is highly
fragmented, with companies having strong presence in select segments or a regional presence
only. Brand loyalty is very low, except at the premium end. Key factors to success are
distribution (in rural markets) and advertising (in urban markets).

Dish Wash market:

The total size of the dish wash market, estimated at Rs 3.4 bn, recorded a 40 per
cent growth over last year. Over 60 per cent of the market is dominated by bars, while dish wash
powders accounts for 32 per cent. The penetration levels are, however, still very low. Estimates
show that nearly 50 per cent of the urban population and 80 per cent of the rural one still use
proxy products like ash and other cheap detergents for dishwashing purposes. HLL is the leading
player, with its Vim Bar.

Repellants market:

The estimated market for insecticides and repellants is around Rs 8 bn, which is
growing at 15 per cent annually. It includes mosquito coils, mats and other insecticide products.
The leading players are Godrej Sara Lee (Goodknight), which has a 38.1 per cent share followed
by RCI (Mortein), with a 23.5 per cent market share. Godrej Sara Lee is the world's largest
manufacturer of mosquito mats, with an all-India market share of 66 per cent. The organized
sector is trying to increase penetration levels by higher brand visibility.

Agarbatti (incense sticks) market:

The agarbatti market is estimated at Rs.1,000 crore (Rs 10 billion). It is an

industry where about 1,000 brands are fighting it out. Cycle, the biggest brand in the agarbatti
industry, has only a 5 per cent market share. The manufacture of agarbattis (incense sticks) is a
traditional cottage industry emanating from the Thanjavur region of Tamil Nadu. It has
increasingly taken on a national character and is now spread over the states of Karnataka (which
is the dominant producer), Andhra Pradesh, Gujarat, Kerala, Orissa and Bihar.

Fabric whitener market:

The fabric whitener market is estimated at Rs. 250 crore. Robin Blue fabric
whitener was the dominant market leader in the fabric whitener segment until local player Jyoti
Laboratories stormed the market with the launch of a superior liquid whitener Ujala. Robin Blue
has been unable to regain market share as consumers have shifted to using liquid whiteners.

FMCG outlook:

The FMCG sector has traditionally grown at a very fast rate and has generally out
performed the rest of the industry. Over the last one year, however the rate of growth has slowed
down and the sector has recorded sales growth of just five per cent in the last four quarters.
The outlook in the short term does not appear to be very positive for the sector.
Rural demand is on the decline and the Centre for Monitoring Indian Economy (CMIE) has
already down scaled its projection for agriculture growth in the current fiscal. Poor monsoon in
some states, too, is unlikely to help matters. Moreover, the general slowdown in the economy is
also likely to have an adverse impact on disposable income and purchasing power as a whole.
The growth of imports constitutes another problem area and while so far imports in this sector
have been confined to the premium segment, FMCG companies estimate they have already
cornered a four to six per cent market share. The high burden of local taxes is another reason
attributed for the slowdown in the industry
At the same time, the long-term outlook for revenue growth is positive. Give the large market
and the requirement for continuous repurchase of these products, FMCG companies should
continue to do well in the long run. Moreover


➢ The retailers should be educated about the various brands ofproduct and about their use.
➢ The retailers should be taken seriously and the company should give more attention to them.

➢ The company should work at making a good name for itself in the market.

➢ The company should advertise its products well to keep the customers well informed about
the products.

➢ The newly launched product of the company should be advertised as soon as possible so that
the customers get informed about the product. This would also lead to more customer
enquiries for the product.

➢ Since most of the retailers are buying their stocks from the company’s distributors the
company should work at giving better service to the retailers.

➢ The company’s distributors should regularly visit the shops and should be courteous with the

➢ The company’s distributors should work at maintaining better relations with the retailers.

➢ The company should keep its products in display at the retail shops in order to increase sales
of its products.

➢ There should be more advertisements of products so that the customers are well informed
about the products.

➢ For the retailers to start suggesting the products to the customers there should be more
customer enquiries and more sales for these products. For this there should be more ads for
the products.

➢ The company should work at maintaining good quality of its products.

➢ The retailers should be given some incentives in the form of either more profit or more
schemes or better service or cash discounts on huge purchases or schemes or credit facility or
commissions, regular supply etc..

➢ The company should try to do something regarding the imitationto the brands by shops

➢ The company should continue the sales promotion activities. so it is able to capture a good
market share for itself.

➢ The company should go for poster ads and hoardings in addition to the TV and radio ads.