Introduction to Retailing

Retailing is a distinct, diverse and dynamic sector . It is an activity of enormous economic significance to most developed nations . It generates revenue and wealth for nation, encourages investments and brings technological advancements. Stated that it brings employment and creates wealth of the economy . It is a vibrant part of our changing society and a major source of employment Retailing performs activities at larger level so it requires massive manpower to handle and manage its operations. Retailing also helps society in general by providing goods and services in reasonable price and increasing their standards of living. Retailing activity can be viewed as a significant contributor to the economy in general . Retailing is the set of activities that markets, products or services to final consumers for their own personal or household use. It does this by organizing their availability on a relatively large scale and supplying them to consumers on a relatively small scale. Retailing makes products and services available in large quantities. Retailers produce or order the products/services in bulk so they can take advantage of economy of scale and thus they can formulate competitive pricing strategies. Products and services are generally sold through the store or on the internet.

Retail Industry The first decade of modern retail in India has been characterized by a shift from traditional kirana shops to new formats including department stores, specialty stores hypermarkets, and supermarkets and across a range of categories. Modern retail formats have mushroomed in metros and mini-metros. In the last few years, modern retail has also established its presence in the small cities, exposing residents to shopping options like never before. Some of these stores are branded stores(exclusive showrooms either owned or franchised out by a manufacturer) , specialty stores(greater choice to consumer, comparison between brands is possible) , department stores/supermarkets (one stop shop catering to varied consumer needs) , hyper-mart (low prices , vast choice available including services such as cafeterias.) , shopping malls (variety of shops available to each other ). The retail sector in India is highly fragmented with organized retail contributing toonly 2% of total retail sales. The retail sector in developed countries was also highly fragmented at the beginning of the last century but the emergence of large chains like WalMart, Sears, and Mc Donalds led to rapid growth of organized retail and growing consolidation of the retail industry in the developed countries. Today, in India we see a rise in the purchasing power and growth of middle class which follows the western lifestyle.

Hence, conditions are conducive for the rapid growth of organized retail in India.Organized retail is growing rapidly and we see the emergence of large organized retail chains like Shoppers Stop, LifeStyle and Westside. We also find retail mallsmushrooming all over the country. The opportunities in retail industry in India will increase since Indian retailing is on the threshold of a major change. However, with the rapid growth in organized retail and increased emphasis of manufacturers on understanding sales at the retail level, the study of retailing has become increasingly relevant. Although retailing does not enjoy the status of an Industry, the sheer size this behemoth will develop into, is grabbing attention. The origin of retail in India dates back to ancient times when the melas and mandis made heir presence felt. The changing socio economic patterns coupled with the consumption increase led to the emergence of the convenience stores, which became a par of the civic planning.

Concept of Retailing The distribution of consumer products begins with the producer and ends at the ultimate consumer. Between the producer and the consumer there is a middlemanthe retailer, who links the producers and the ultimate consumers. Retailing is defined as conclusive set of activities or steps used to sell a product or a service to consumers for their personal or family use. It is responsible for matching individual demands of the consumer with supplies of all the manufacturers. The word retail is derived from the French work retaillier, meaning to cut a piece off or to break bulk. A retailer is a person, agent, agency, company, or organization which is instrumental in reaching the goods, merchandise, or services to the ultimate consumer. Retailers perform specific activities such as anticipating customers wants, developing assortments of products,acquiring market information, and financing. A common assumption is that retailing involves only the sale of products in stores. However, it also includes the sale of services like those offered at a restaurant, parlour, or by car rental agencies. The selling need not necessarily take place through a store. Retailing encompasses selling through the mail, the Internet, doortodoor visitsany channel that could be used to approach the consumer. When manufacturers like Dell computers sell directly to the consumer, they also perform the retailing function. Retailing has become such an intrinsic part of our everyday lives that it is often taken for granted. The nations that have enjoyed the greatest economic and social progress have been those with a strong retail sector. Why has retailing become such a popular method of conducting business? The answer lies in the benefits a vibrant retailing sector has to offer an easier access to a variety of products, freedom of choice and higher levels of customer service. As we all know, the ease of entry into retail business results in fierce competition and better value for customer. To enter retailing is easy and to fail is even easier.Therefore, in order to

survive in retailing, a firm must do a satisfactory job in its primary role i.e., catering to customers. Retailers cost and profit vary depending on their type of operation and major product line. Their profit is usually a small fraction of sales and is generally about 9-10%. Retail stores of different sizes face distinct challenges and their sales volume influences business opportunities, merchandise purchase policies, nature or promotion and expense control measures. Over the last decade there have been sweeping changes in the general retailing business. For instance, what was once a strictly made-to-order market for clothing has now changed into a ready-to-wear market. Flipping through a catalogue, picking the right colour, size, and type of clothing a person wanted to purchase and then waiting to have it sewn and shipped was the standard practice in the earlier days. By the turn of the century some retailers set up a storefront where people could browse, while new pieces were being sewn or customized in the back rooms. Almost all retail businesses have undergone a similar transition over the years. CURRENT SCENARIO The Indian population is whooping 1 billion with 75% of the people living in villages and small towns. It is only natural that the agricultural sector is the biggest employer with its contribution to GDP pegged at 26.7%. Retail is Indias larges industry after Agriculture with around 20% of the economically active population engaged in it and generation 10% of our countrys GDP. The growth of the efficient small store culture can be attributed to the 6 million villages distributed across the length and breadth of the country. The 12 million retail outlets in India are the highest in the world, and cater to the purchase need of its pole. It is interesting to note, that the Urban Population although just 25% of the total, is an astounding 250 million in size and is growing at a healthy rate of 7% per annum. The chief driver of growth in the retail sector has been the consumer, with the spending increasing at an average of 11% per annum. The Core and the Lower middle have increased their share in the Growth. The Indian consumers shopping needs are and traditionally have been fulfilled by Kirana sores (corner stores), Kiosks, street vendors, weekly bazaars and high-street shops for consumer durables and luxury goods. To cater to this, each city developed its own identity and shopping cluster, for instance in Pune there is MG Road, Bangalore has Brigade Road and Commercial Street, Delhi has Connaught Place, Karol Bagh and South Extension. India has 358 shopping malls by 2007. Droves of middle-class Indians have broken off their love of traditional standalone shops that have no ACs, organized parking lots and other public amenities, according to a study by fashion magazine Image. In (September 23, 2005), In India we had 96 malls, covering an area of 21.6 million sq ft. And by year end the count was shot up to 158 malls. Which covered 34 million sq ft area. MAJOR RETAILER SPACE HOLDERS IN INDIA ORGANIZATION Area Sq. ft ORGANIZATION Area Sq.ft Bata 10,00,000 RPG 6,00,000

Raymond Pantaloon/Big Bazaar Spencer LifeStyle Globus Shoppers Stop Piramyd

5,42,000 5,00,000 2,80,000 2,50,000 1,75,000 2,00,000 1,50,000

DRIVERS OF CHANGE IN RETAILING ??Changing demographics and industry structure ??Expanding computer technology ??Emphasis on lower costs and prices ??Emphasis on convenience and service ??Focus on productivity ??Added experimentation ??Continuing growth of non-store retailing. SWOT of Retail Marketing STRENGTH 1. Organized retailing at US$ 3.31 billion, growing at 8%. 2. 2nd largest contributor to GDP after agriculture at 20%. 3. Pattern of consumption changing along with shopping trends. 4. A Growing population will translate to move consumers. 5. Consumer spending increasing at 11% annually. 6. Almost 25 million sq. ft. retail space available. 7. Paradigm shift in shopping experience for consumers pulling in more people. 8. Most of the entrants to organized retail come from 3 main categories, and have venturedinto retail as their business extension.

9 Real Estate Developers 10 Corporate Houses 11 Manufacturers/Exporters. WEAKNESSES 1. Shortage of quality retail spaces at affordable rates. 2. Government regulations on development of real estate(Urban Land Ceiling Act) 3. Need to provide Value for Money-squeezing margins 4. Lack of industry status. 5. Retail revolution restricted to 250 million people due to monolithic urban-rural divide. 6. Footfalls not a clear indicator of sales as actual consumers lower in number. 7. Lack of huge investments for expansion. OPPORTUNITIES 1. Increasing urban population-more participants in retail revolution. 2. Increase in consuming middle class population. 3. Social factors like dual household income has enhanced spending power. 4. Spends moving towards lifestyle products and esteem enhancing products. 5. Availability of old industrial lands-prime real estate locked in sick industrial units. 6. Average grocery spends at 42% of monthly spends-presents a huge opportunity. 7. Increase in use of credit cards. THREATS 1. Rising lease/rental costs affecting project viability 2. FDI restrictions in the retail sector 3. Poor monsoons and low GDP Growth could affect consumer spending drastically.

4. Archaic labour laws are a hindrance to providing 24/7 shopping experience 5. Personalized service offered by Mom-&-Pop stores. 6. Unavailability of qualified personnel to support exponential growth in retail. 7. Differentiate taxation laws hindering expansion. Some of the major factors hindering the growth of this sector are as follows: The non-industry structure and status ?The lack of adequate infrastructure FDI restrictions in this sector ?The huge investments required in expanding their markets, ?Problems associated with working Capital funding from lending Institutions. In today s competitive environment retailers have redefined their role in general, and in the value chain in particular. Retailers act as gatekeepers who decide on which new products should find their way to the shelves of their stores. As a result, they have a strong say in the success of the product or service launched by a business firm.A product manager of household appliances claimed, Marketers have to sell a new product several times, first within the company, then to the retailer and finally to the user of the product. CHARACTERISTICS OF RETAILING Retailing can be distinguished in various ways from other businesses such as manufacturing. Retailing differs from manufacturing in the following ways: ??There is direct end-user interaction in retailing. ??In is the only point in the value chain to provide a platform for promotions. ??Sales at the retail level are generally in smaller unit sizes. ??Location is a critical factor in retail business. ??In most retail businesses services are as important as core products. ??There are a larger number of retail units compared to other members of the value chain. This occurs primarily to meet the requirements of geographical coverage and population density.

Direct Interaction with Customers Retail businesses have a direct interaction with end-users of goods or services in the value chain. They act as intermediaries between end-users and suppliers such as wholesalers or manufacturers. Therefore, they are in a position to effectively communicate the response and changing preferences of the consumers to the suppliers or sales persons of the company. This helps the manufacturers and markets to redefine their product and change the components of its marketing strategy accordingly. Manufacturers require a strong retail network both for reach of the product and to obtain a powerful platform for promotions and point-of-purchase advertising. Realizing the importance of retailing in the entire value chain, many manufacturers have entered into retail business by setting up exclusive stores for their brands. This has not only provided direct contact with customers, but has also acted as advertisement for the companies and has provided the manufacturers with bargaining power with respect to other retailers who stocked their product. Retailing provides extensive sales people support for products which are information intensive, such as in the case or consumer durables. TRENDS IN RETAIL FORMATS Retail industry is continuously going through changes on account of liberalization, globalization and consumer preferences. While multinational retail chains are looking for new markets, manufacturers are identifying, redefining, or evolving new retail formats. The existing retail houses are also gearing up to face the emerging competition from the organized sector and the changing outlook of the consumers. For example, consumer spending is shifting from goods to services. Accordingly the retailers too are fast adjusting to the changing consumer preferences. Consumers are not only looking for the core products or functional benefits from the retailers but also the non-functional benefits, which need to be compatible with their lifestyles. For example, most of the traditional eating joints in India such as Haldiram, Bikaner and Sagar Ratna have revised their product offerings and atmospherics on the lines of the multinational chains to compete with them and to serve changed expectations of the consumers. Mom-and-pop Stores and Traditional Kirana Stores The retail sector is changing as new store categories have started dominating the marketplace. Mass merchandisers (Wal-Mart, Big Bazaar), discount clubs (Subhiksha), so-called category killers (Home Depot, Vishal chain), and speciality retailers (Time Zone, Tanishq) have all developed a successful retail models. At the same time, the small mom-and-pop stores and the traditional department stores, are finding the competition intense. In 2002, while Wal-Mart and Target saw revenues grow (by 12% and 10%, respectively), department stores such as Saks and Federated experienced decliningrevenues (down 3% and 1% respectively). But even in the massmerchandising segment, the competition is fierce, as is evidenced by Kmarts bankruptcy announcement in 2002. Small independent stores, across product categories, is a very common retail formats they are also undertaking large scale renovations to appeal and attract their target consumer segments.

E-commerce The amount of retail business being conducted on the Internet is growing every year. Indeed, Forrester Research Agency projects e-commerce revenue to rise to $123 billion in 2004, an increase of some 28% over the previous year and for e-tailing to comprise a bigger slice of the overall retail pie (5.6%, up from 4.5% in 2003). Many major retail organizations and manufacturers have online retail stores. Companies like Amazon.com and First and second.com, which helped pioneer the retail e-commerce concept, are now being followed by bricks-andmortar and catalogue retailers like J. Crew, which are expanding retail e-commerce into new markets. Department Stores A few years ago, names like Sears, J.C. Penney, Macys, and Montgomery Ward dominated malls and downtowns all over America. Over the last decade or so, however, these department stores have suffered badly. In part, this is a result of changing shopping patterns and increased competition from discount stores. It has also come from financial burdens incurred by companies that acquired competing companies and grew too fast. It is unlikely that these players will disappear from the market. However, they should be ready to expect more bumps as the strong get stronger and the weak get absorbed. Discount Stores These are giants such as Wal-Mart (the largest retailer in the world, with more than a million; employees), Target and Kmart, as well as membership warehouses, such as Costco. These, along with the category killers, have changed the landscape of both the retail industry and America. Where once mom-and-pop and department stores dominated retail, now the discount retailers and category killers are at the top of the heap. And where once shopping malls, anchored by at least one major department store, ;used to be the dominant retail presence lining the nations roads, now it is the behemoth Wal-Marts and Home Depots. Category Killers These are the giant retailers that dominate one area of merchandise (e.g., Office Depot, Tower Records and The Sports Authority). They are able to buy bathroom tiles, file cabinets, electronic goods or pet food in such huge volumes that they can then sell them at prices even fairly large competitors cannot match. The future of this category is better than that of many of the more general discounters, but the same employment caveats apply. For most job seekers, these companies offer earn-and-learn experiences with vendors and distributors before they move onward and upward. Speciality Stores These include Crate & Barrel, the Body Shop, and Victorias Secret. These stores concentrate on one type of merchandise and offer it in a manner that makes it special. Some are very high-end (Louis Vuitton) while others cater to the price-conscious masses (Old Navy).

Many are so successful that department stores have started to emulate their buying, marketing, and merchandise display strategies. Industry experts predict growth in this segment, particularly in home furnishings and home improvement, and it seems to attract many of the best and brightest in retail. Promotion and responsibility come quickly to those willing to work hard, and in many of these stores the hand of bureaucracy is not heavy. RETAIL ORGANIZATION The term retail organization refers to the basic format or structure of a retail business designed to cater to the needs of the end customer. Recently, some scholars have started referring to India as a nation of shopkeepers. This epithet has its roots in the huge number of retail enterprises in India, which were over 12 million in 2003. About 78% of these are small family businesses utilizing only household labour. Retail firms may ;be independently owned, parts of a retail chain, operated as a franchisee, leased departments, owned by manufacturers or wholesalers, consumersowned or co-operative society. A retail unit could be owned by: ??Manufacturer (e.g., company owned retail outlets) ??Wholesaler (e.g., Vastra outlet in Rajouri in New Delhi) ??Independent retailer (Chanakya Sweet Shop near Hazratganj in Lucknow) ??Consumer (consumer owned grocery stores in man y residential societies) ??Co-operative society (e.g., Mother Dairy milk booths in Delhi) ??Government (e.g., Cottage Emporia) ??Ownership shared among franchiser and franchisee (e.g., Archies Gallery) Although most Indian retailers fall in the category of small-scale units, there are also some very big retailers. Organized retail stores are generally characterized by large, professionally managed store formats providing goods and services that appeal to customers, in an ambience that is conducive for shopping and provides a memorable experience to customers. From positioning and operating perspectives, each ownership format serves a marketplace niche and presents certain advantages and disadvantages. Retail executives must not lose sight of this in playing up their strengths and working around their weaknesses. WHY DO PEOPLE SHOP? It has been suggested that consumer shopping activities are influenced by personal and social motives. Consumers motives are important and positively related to their pleasureand satisfaction while shopping in terms of retail choices.