ISSUES IN RETAIL SECTOR

GUIDE NAME SUBMITTED BY

Mr M.SIVAKUMAR MCOM.,MPhil.,PHD ANUPRIYA S MBA.,MFC.,(PHD)

G.VENKATASWAMY NAIDU COLLEGE G.VENKATASWAMY NAIDU COLLEGE

KOVILPATTI KOVILPATTI
 ISSUES IN RETAIL SECTOR

Retail industry

Executive Summary

India is the fifth largest preferred retail destination globally. The country is among the
highest in the world in terms of per capita retail store availability. India’s retail sector is
experiencing exponential growth, with retail development taking place not just in major
cities and metros, but also in Tier-II and Tier-III cities. Healthy economic growth,
changing demographic profile, increasing disposable incomes, urbanisation, changing
consumer tastes and preferences are the other factors driving growth in the organised
retail market in India.
The Indian retail industry is one of the fastest growing in the world. Retail industry in
India is expected to grow to US$ 1,200 billion by 2021 from US$ 795 billion in 2017E.
India’s population is taking to online retail in a big way. Online retail sale is forecasted
to grow at the rate of 31 per cent to reach US$ 32.70 billion in 2018@. Revenue
generated from online retail is projected to grow to US$ 60 billion by 2020.Organised
retail penetration is expected to increase to 18 per cent in 2021 from an estimated nine
per cent in 2017.India is expected to become the world's third-largest consumer
economy, reaching US$ 400 billion in consumption by 2025. ^Increasing participation
from foreign and private players has given a boost to Indian retail industry. India’s price
competitiveness attracts large retail players to use it as a sourcing base. Global retailers
such as Walmart, GAP, Tesco and JC Penney are increasing their sourcing from India and
are moving from third-party buying offices to establishing their own wholly-
owned/wholly-managed sourcing and buying offices. The Government of India has
introduced reforms to attract Foreign Direct Investment (FDI) in retail industry. The
government has approved 51 per cent FDI in multi-brand retail and 100 per cent in
single brand retail under the automatic route which is expected to give a boost to ease
of doing business and Make in India, and plans to allow 100 per cent FDI in e-commerce.
India will become a favourable market for fashion retailers on the back of a large young
adult consumer base, increasing disposable incomes and relaxed FDI norms.

A Transitional year for retail

As retail collides with adjacent consumer-focused sectors, the industry continues to
undergo constant disruption. One thing remains consistent- Consumers are becoming
more powerful, with expectations of having it all.

2018 left the industry with a lot to digest, a strong US economy, a record-breaking
holiday season, mixed retail earnings, some high-profile bankruptcies, along with global
trade and economic tensions.

Bolstered by a strong labour market, growth in disposable personal income, and

elevated consumer confidence, 2018 experienced strong retail sales. But the economy
may face some headwinds in 2019, making the year one of transition for retailers, who
may need bold moves if they want to set themselves up for success in the future.
Strategies to help retailers navigate industry disruption

To stay competitive, many retailers have shifted their investment strategies over the
past 10-20 years. They have moved from growth via new stores to growth via big
investments in all areas of the business

Example- launching new digital sales models, acquiring other businesses, or

transforming their fulfillment processes. The cost to increase market share continues to
grow, and many retailers find themselves in a precarious position as they try to figure
out how to win battles on multiple fronts.

1. Loyalty: Emotional vs. transactional

Retailers should look beyond tiered programs built around traditional loyalty and
benefits—points, dollars off, gifts, mailers—that at best elicit “transactional”
loyalty. In an industry shifting toward experience-based models, retailers should
look to make emotional connections, not just transactional ones.

With a genuine approach to driving consumer loyalty, retailers can optimize loyalty
programs and make them even more valuable. Aligning the program with the
values and the consumer conversation is imperative. Recently, loyalty programs
have been expanding to focus on convenience (with home delivery or issue
resolution) and experience (with exclusive events and limited-edition products).

2. Digital startups and funding

Digital startups are no longer playing in the shadow.They are addressing chronic
issues faced by the retail industry through innovative offerings , personalization ,
authentic engagement,differentiated fulfilment,and more.And the amount of capital
flowing to retail tech startups is allowing these companies to realistically compete
with established players .

To help offset the early gains made by these startups, traditional retailers will have
to push ahead, blurring the lines between business development and corporate
strategy. To acquire the next big idea, they might have to seek out guidance from
specialists or through a scouting approach.

3. Emerging technologies
Gone are the days when IT strategy was limited to architecture,modernization,and
enterprise resource planning(ERP) systems,Investment ,options,technologies ,and
vendors number in the thousands,making it challenging to navigate and hone in on
the next big thing .

Ultimately, retailers should figure out how to scale these solutions and embed them
into their way of doing business. To leverage the true power of next-generation
technologies, retailers should make some significant changes. They should be able
to consistently mine the data they collect, transform their operations to deliver on
the brand promise, and adapt to the future of work.
4. Leadership lessons from China
To build a competitive advantage ,retailers should consider looking at global cross-
industry trends and build capabilities that can shape consumer experiances.

For example

In China, consumers and the retail market have skipped a generation of

technology: Next-gen technologies in the United States are yesterday’s technologies
in China.

Retailers should be looking at the leaders in China to better understand the art of
the possible in emergent areas such as online-to-offline, last-mile delivery, supply
chain as a service, social commerce, and the implications of advanced public and
private infrastructure.

5. Privacy by design

For retailers, consumer data is a must-have. For years, the industry struggled with
how to create and use data. Now companies are on the hook for what data they
have and what it says about individuals.
With regulation after regulation hitting the market, it’s time retailers had their
privacy compliance road maps in place. But compliance can also be a catalyst for
reinventing personalization and having honest conversations with consumers.
Integrity matters in creating loyalty, especially when it comes to dealing with
personal identity.

6. Supply chain as a differentiator

The supply chain is quickly becoming a way for retailers to offer consumers a
differentiated service. But making the supply chain faster, more predictable, and
cheaper is a difficult triad to manage simultaneously.

As retailers buckle down and prepare for potentially challenging times ahead,
supply chain improvements can be a significant growth driver. But rather than just
investing in trends like automation smart packaging in reaction to competitors,
retailers should think about accumulating long-term competitive advantages
through wider supply chain strategies.
 Retail Industry Problems

Top Ten reasons for failure, and what you can do to avoid them so that it will help you
to keep your business on the way to success.

The factors that affect retail sales include:

1.Neglect

Entrepreneurs are often visionaries, which is great for creating a company.

2. Disasters

Natural and man-made disasters often deal death-blows to companies, such as floods or
fires. While it’s difficult to avoid such disasters, company management can ensure the
business carries adequate disaster insurance and a plan is in place for emergency
scenarios.

3. Access to Capital

In business, finances are an often a paradox, it takes money to make money. While some
companies are able to start-up with little capital, they often reach a point where they
need additional financing to continue operations. Without those funds available, they
are unable to meet their day-to-day expenses. Securing access to capital before the
company needs it is often the difference between success and insolvency.

4. Overhead

High overhead costs (and failure to keep expenditures lean) can have a detrimental
effect to a new or struggling wholesale business. Some common overhead costs
include: Rent, supplies and goods, utilities bills, insurance, interest, Advertising,
Accounting fees, Legal fees, Labour burden, repairs, telephone bills, Travel
expenditures, and utilities.

5. Poor Sales

Sales, of course, are the lifeline of any business and without it, the business soon
struggles. Some causes of poor sales, such as disasters are out of the hands of company
leadership. However, many reasons for poor sales can be directly traced to
management. For instance, if changes in customer preferences and the market in
general are ignored, sales will suffer. While there is no way to guarantee sales,
managers can be proactive and responsive to sales trends.

6. Management/Leadership Problems

Of the 10 reasons listed here, this reason is the only one that is completely in the hands
of the company’s owner(s). While many people are great entrepreneurs, able to start a
company from just an idea, these same people sometimes aren’t ready for the
management issues they face as the company matures. Without prior experience or
simply because of incompetence, many wholesale retail store owners are the very
reason their company eventually fails. Of course, with more experience and the ability
to spot and address problems before they get out of hand, business owners are more
likely to avoid these challenges.

7. Economic Factors

The economy is cyclical, which means it periodically goes through low times.
Wholesalers who are unprepared for those times of economic recession are often
caught off-guard financially. While the economy isn’t something an individual company
can change, business owners can prepare for those difficult times through scenario
training and financial planning.

8. Overexpansion

Overexpansion is similar to the issue of excessive overhead. While it may make sense in
moderation, too much too quickly can often bankrupt a business. Supply problems,
logistic challenges, staffing issues, and financing concerns are potential obstacles in
expanding. Without adequate preparation and strategy, the attempt to capture more of
the market can quickly turn into a matter of survival.

9. Customer Problems

Customer problems can range from your primary buyer being unhappy with your
products (customer service issues). Preventive planning is the key. Maintaining clear
lines of communication, reviewing customer profiles, and being quick to address
customer concerns are all excellent ways to keep a minor problem from turning into a
major disaster.

10. Fraud

Fraud - by customers, employees, vendors, or partners, is an unfortunate part of any

industry. While there is a degree of due diligence a wholesaler can perform, no one is
able to avoid fraud altogether. Similar to disaster planning, the best course of action is
to have adequate insurance as well as policies (such as a check and balance system) in
place to avoid fraud and be ready to address it when it happens.

The important idea within this top 10 list is that all these reasons for a wholesale
retail store’s failure can be avoided. With adequate preparedness, as well as balancing
the short-term challenges against the long-term needs of the company, you can
successfully navigate these obstacles and achieve the full potential of your own
wholesale company.
 Top trends and issues for retail in 2019
From labor to brand, here are the issues to watch in retail

Retailers will face challenges and opportunities while they address a highly
competitive market as labour continues to tighten, and consumer buying
behaviours and expectations continue to evolve. Successful retailers will need to focus
on a variety of tensions pressuring the industry and their businesses.

Labour

Labour will continue to be a major challenge for retailers, as historically low

unemployment and competition from a more flexible demonstration economy make it
difficult to staff both brick-and-mortar locations and fulfilment centres. Many will
experiment with technologies to streamline processes and augment the labour pool.
Self-checkout and mobile-checkout will become more prevalent in brick-and-mortar
locations as they provide the dual benefit of reducing cashier hours and providing
flexibility to put more personnel on the sales floor to assist customers and provide a
better shopping experience. So retailers will need to find the appropriate balance of
technology and human interaction to connect with their customers and build brand
loyalty.

Real estate

To evolve site selection is becoming increasingly important. Brick-and-mortar locations

will continue to shrink in units and in footprint, as retailers cater to changing buying
behaviours. Efforts to revive regional malls will continue, but success will be
inconsistent depending on geography and demographics.

Regulatory environment

The regulatory environment will continue to challenge retailers in 2019 and beyond. As
online sales growth continues to overtake on premise sales, the implications of
the Wayfair court case will felt by more and more retail organizations. Retailers who
can manage their supply chain and operations to minimize the impact of the tariffs on
their customers will be most successful. New and creative sourcing strategies will
emerge and flexibility will ultimately prevail over time. Meanwhile, increased cost will
significantly affect unit sales of affected products and will also have an indirect impact
on other products as consumers are forced to make decisions about how to spend their
limited funds.

Buying behaviours and brand

Buying behaviours will continue to evolve as Generation Z becomes a larger part of the
consumer base. As the first truly digital generation, Gen Z will push retailers to new
digital platforms to connect with them. YouTube, Instagram and Snapchat accessed by
mobile are platforms of choice for Gen Z and they are the most likely group of
consumers to purchase on social media, making these platforms very important and
introducing a new dimension of Omni channel for many retailers. That said, brick-and-
mortar locations will continue to be an important channel for retail. Despite the growth
in online purchasing, recent studies suggest that millennials and Gen Z consumers also
enjoy the physical shopping experience. Enhancing that physical shopping experience
will be critically important. Creative and interactive technologies will continue to play
an important role in developing unique in-store experiences and knowledgeable staff
who embrace and promote the brand will help build connectivity and promote brand
loyalty.

Access to capital

2019 is likely to be a year of very selective capital investment by retailers. Margin

pressures brought by trade wars, rising interest rates and the apparent disinterest of
the private equity community will limit access to capital for investment. That said,
retailers will need to continue to invest in technologies that allow them to connect with
customers and streamline their operations. Physical store locations will need to be
right-sized to fit the new retail model, which in many cases will result in fewer and
smaller store locations, reducing occupancy costs and providing cash to fund capital
projects.

Conclusion
Hence the retail sector is globally emerged for the consumer to purchase. The buying
behaviour or the retailers to evolve the challenges of retail issues will resolve
automatically by facing retail industry factors .The retailer can expect to create buyer
experiences which can conflict the inconsistent nature of the modern consumer.To get
the balance right, the retailers can foster brand loyalty in an increasingly disloyal world.