UNIT - II

RETAIL FORMATS

ORGANIZED & UNORGANIZED FORMATS

Retail industry in India is largely Unorganized & predominantly consists of small, independent, ownermanaged shops. There are around 5 million retail outlets in India. According to a survey by AT Kearney, an overwhelming proportion of Rs. 400,000 crore retail market is unorganized & only Rs. 20,000 crore segment of market is organized.

ORGANIZED FORMATS
Organized Retailing in India represents a small fraction of total retail markets. In 2001, Organized retail trade in India was worth Rs. 11,228.7 billion. Modern retail formats are showing healthy growth as several retail chains have established a base in metropolitan cities, especially in south India & are spreading all over India at a rapid pace. Space & rentals are providing to be biggest constraints to development of large formats in metropolitan cities since retailers are aiming at prime locations. Rising incomes has led to an increased demand for better quality products while lack of time has led a demand for convenience & services.

ORGANIZED FORMATS
Demand for frozen, instant, ready-to-cook, ready-to-eat food has been on rise, especially in metropolitan & large cities in India. There is also a strong trend in favour of one-stop shops like supermarkets & department stores. McKinsey report predicts that FDI will help retail businesses to grow to US$ 460-470 billion by 2010. Organized retail sector can be divided into two segments: In-store retailers & non-store retailers. In-store retailers operate in fixed point-of-sale locations, located & designed to attract a high volume of walk-incustomers. Non-store retailers reach out to customers at their homes or offices.

UNORGANIZED FORMATS
Traditional retail formats have long been part of retail landscape of India. Include independent stores that are typical of unorganized retail sector across product categories. In terms of professional management & efficiency of integration with value chain, traditional retail formats are better classified under unorganized retail sector. There are predominately two types of traditional retail formats namely: Kirana & independent stores Co-operative & government-owned stores.

UNORGANIZED FORMATS
Independent & Kirana stores Independent & kirana stores have emerged with spread & density of population. They are traced to generation of surplus in agriculture that needed to be sold to obtain other essential commodities by the producer. accompanied by emergence of trading class in India. co-operative & government owned stores Result of co-operative movement that can be traced to the pre-independence period. co-operative movement was strengthened after independence; yet it was largely successful in western India.

DIFFERENT RETAIL FORMATS

CHARACTERISTICS OF EACH FORMAT

Form of Ownership

A retail business like any other type of business, can be owned by a sole proprietor, partners or a corporation. A majority of retail business in India are sole proprietorships and partnerships. Independent Retailer operates one outlet and offers personalized service, a convenient location and close customer contact.
requires low investment and little technical knowledge. Most independent retailers fail because of the ease of entry, poor management skills and inadequate resources. results in a high degree of competition.

CHARACTERISTICS OF EACH FORMAT

Retail Chain involves common ownership of multiple units. purchasing and decision making are centralized. Chains often rely on, specialization, standardization and elaborate control- systems.

Retail Franchising
Is a contractual arrangement between a franchiser & a franchisee . Franchise agreement gives the franchiser much discretion in controlling the operations of small retailers. In exchange for fees, royalties & a share of the profits, the franchiser offers assistance & very often supplies as well.

CHARACTERISTICS OF EACH FORMAT

Cooperatives A retail cooperative is a group of independent retailers, that have combined their financial resources & their expertise in order to effectively control their wholesaling needs. They share purchases, storage, shopping facilities, advertising planning & other functions. The individual retailers retain their independence, but agree on broad common policies. Amul is a typical example of a cooperative in India.

CHARACTERISTICS OF EACH FORMAT

Store Strategy Mix classified by retail store strategy mix, which is an integrated combination of hours, location, assortment, service, advertising, & prices etc. Convenience Store generally a well situated, food oriented store with long operating house and a limited number of items. Consumers use a convenience store; for fill in items such as bread, milk, eggs, chocolates & candy etc. Super markets diversified store sells a range of food & non food items. carries small house hold appliances, some apparel items, bakery, film developing, jams, pickles, books, CDs etc.

CHARACTERISTICS OF EACH FORMAT

Department Stores usually sells a general line of apparel for the family, household linens, home furnishings and appliances. Large format apparel department stores include Pantaloon, Ebony & Pyramid. Others in this category are: Shoppers Stop & Westside. Specialty Stores Concentrates on the sale of a single line of products or services, such as Audio equipment, Jewellery, Beauty & Health Care, etc. Successful specialty stores in India include, Music World for audio needs, Tanishq for jewellery and McDonalds, Pizza Hut and Nirulas for food services.

CHARACTERISTICS OF EACH FORMAT

Hyper Markets

special kind of combination store which integrates an economy super market with a discount department store. generally has an ambience which attracts family as whole. Pantaloon Retail India Ltd. (PRIL) through its hypermarket Big Bazar, offers products at prices which are 25% 30% lower than the market price. Non Store Retailing do not go to a store to buy& is growing very fast. reasons are; ability to buy merchandise not available in local stores, increasing number of women workers, & presence of unskilled retail sales persons who can not provide information to help shoppers make buying decisions

 In Home Retailing sales transaction takes place in a home setting including door-door selling. gives the sales person an opportunity to demonstrate products in a very personal manner. Examples of in home retailing include, Eureka Forbes vacuum cleaners and water filters.

CHARACTERISTICS OF EACH FORMAT

Telesales/Telephone Retailing involves contact between the prospect and the retailer over the phone. large number of mobile phone service providers use this method. Other examples are private insurance companies, and credit companies etc.

 Catalog Retailing offers the merchandise in a catalogue, which includes ordering instructions and customer orders by mail. advantages include lover operating costs, lower rents, smaller sales staff and absence of shop lifting. MLM companies like Oriflame is also an catalogue retailing.

CHARACTERISTICS OF EACH FORMAT

Direct Response Retailing advertise products/ services in magazines, newspapers, radio & television offering an address or telephone number so that consumers can write or call to place an order. induce the customer to make an immediate and direct response to the advertisement to order now.
Telebrands is a classic example of direct response retailing.

 Automatic Vending sold directly to customers/buyers from machines. machines dispense products which enable customers to buy after closing hours. ATMs dispensing cash at odd hours represent this form. Electronic Retailing/E-Tailing retailers communicate with customers and offer products and services for sale, over the internet. rapid diffusion of internet access & usage, & perceived low cost of entry has stimulated creation of thousands of entrepreneurial electronic retailing ventures during last 10 years or so. Amazon.com, E-bay .etc, are some of the many e-tailers operating today.

CHARACTERISTICS OF EACH FORMAT

Emerging 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. Retailers are too fast adjusting to the changing consumer preferences.

Emerging trends in Retail Formats

Consumers are not only looking for the core products or functional benefits from the retailers but also the nonfunctional benefits, which need to be compatible with their lifestyles. For ex, most of traditional eating joints in India such as Haldiram, Bikaner and Sagar Ratna have revised their product offerings & atmospherics on lines of multinational chains to compete with them & to serve changed expectations of consumers. Mass merchandisers (Wal-Mart, Big Bazaar), discount clubs (Subhiksha), category killers (Home Depot, Vishal chain), & speciality retailers (Time Zone, Tanishq) have all developed a successful retail models.

Emerging trends in Retail Formats

Small independent stores is a very common retail formats they are also undertaking large scale renovations to appeal and attract their target consumer segments. Organized retail market in India is expected to reach US$ 50 Billion mark by 2011. Number of shopping malls is expected to increase at a CAGR of more than 18.9% from 2007 to 2015. Rural market is projected to dominate the retail industry landscape in India by 2012 with total market share of above 50%. Organized retailing of mobile handset and accessories is expected to reach close to Rs. 5000 Crore by 2010. Apparel, along with food and grocery, will lead the organized retailing in India.

Emerging trends in Retail Formats

MNC's role in organized retail formats

India has been ranked as the most attractive nation for retail investment among 30 emerging markets by USbased global management consulting firm A T Kearney. Due to FDI restrictions, International players are looking for alternative avenues to enter the Indian markets. With demographic changes like rising disposable incomes & rapidly expanding middle class, Indian retail sector is at an inflexion point where growth in consumption & growth of organized retailing are taking it towards higher growth. Market liberalization & an increasingly confident consumer population have attracted bigger Indian & multinational operations to make investments, but are yet to achieve success or reach break even.

MNC's role in organized retail formats

Indian consumption pattern & preference have undergone vast changes over years allowing foreign retailers to play. India has youngest population in the world, with large population between 20-34 age groups in urban regions boosting demand. All these factors have tempted the foreign firms such as Walmart, Tesco and Carrefour to enter India. Timing is most important source of competitive advantage for global & regional retailers in globalization race. Knowing when to enter retail markets is key to success.

MNC's role in organized retail formats

Global retailers such as Walmart, Carrefour, Tesco & Casino would take advantage of more favourable FDI rules that are likely in India & enter country through partnerships with local retailers. High taxes, poor infrastructure, bureaucratic hurdles & high cost of real estate are some of the challenges that overseas retailers may have to tackle in country. India has become the most attractive destination for retail investment for the fourth time in five years. Global retailers are continuing expansion plans as Indian consumers grow increasingly wealthy, brand-conscience and familiar with global retail formats.