Ms 612 2013 Second Sem Assignments

MS – 612 - Retail Management

1. (a) What do you understand by the term Retailing? Discuss the major activities performed by a retailer in the Indian Context.

(b) Explain “Wheel of Retailing” with suitable illustrations

2. (a) Who is an retail customer? Briefly list out the characteristics of a retail customer and the various consumer behavior patterns that you are familiar with

(b) Explain the process of choosing a store location and elaborate the various criteria for evaluating location aspects in the following situation

(a) a chain of hair dressing salon for the elite.

(b) Multibrand footwear retailer

(c) PDS for lower income group by the government

3. (a) What constitute Retail Mix? Discuss various considerations to be kept in mind which planning for store merchandise

(b) Explain the term sourcing and discuss the challenges associated in sourcing merchandise by the following retailers

1. Grocery Retailer2. Multibrand Woman garments.

4. (a) Enumerate and discuss the various issues that impact retail business in India.

(b) What are the reasons for growth in non-store retailing? Discuss.

1. (a) What do you understand by the term Retailing? Discuss the major activities performed by a retailer in the Indian Context.

1. Retailing 4. Definitions Retailing All activities involved in selling goods or

services directly to final consumers for their personal, nonbusiness use. Retailer Business whose sales come primarily from retailing.

Retailing Specialty Stores

-Department Stores

-Supermarkets

-Discount Stores

-Convenience Stores

-Off-Price Retailers

The word retailer has been derived from the French word "Retail" which means to sell in small quantities, rather than in gross. A retailer is a person who purchases a variety of goods in small quantities from different wholesalers and sell them to the ultimate consumer. He is the last link in the chain of distribution from the producer to the consumer.

Characteristics

The followings are some of the essential characteristics of a retailer:

He is regarded as the last link in the chain of

distribution.

He purchases goods in large quantities from the

wholesaler and sell in small quantity to the

consumer.

He deals in general products or a variety of

merchandise.

He develops personal contact with the consumer.

He aims at providing maximum satisfaction to the

consumer.

He has a limited sphere in the market.

Functions

Retailers perform a number of functions. These are:

The retailer buys a variety of products from the

wholesaler or a number of wholesalers. He thus

performs two functions like buying of goods and

assembling of goods.

The retailer performs storing function by stocking

the goods for a consumer.

He develops personal contact with the consumers

and gives them goods on credit.

He bears the risks in connection with Physical

Spoilage of goods and fall in price. Besides he

bears risks on account of fire, theft, deterioration

in the quality and spoilage of goods.

He resorts to standardization and grading of goods

in such a way that these are accepted by the

customers.

He makes arrangement for delivery of goods and

supply valuable market information to both

wholesaler and the consumer.

Service of a Retailer

A retailer provides a number of services to the customer and to the wholesaler.

To Customers:

1.He provides ready stock of goods and as such he

sells and quantity of goods desired by the

customers.

2.He keeps a large variety of goods produced by

different producers and thereby ensures a wide

variety of choice to the customers.

3.He relives the consumers of maintaining large

quantity of goods for future period because he

himself holds large stock of goods.

4.He develops personal relationship with the

customers by giving them credit.

5.he provides free-home delivery service to the

customers.

6.He informs the new product to the customers.

7.he makes arrangement for replacement of

goods when he receive complaints.

To the Wholesaler:

1.He gives valuable market information with

regard to taste, fashion and demand for the

goods to the wholesaler.

2.The retailer maintains direct contact with the

customers and so he relieves the wholesaler

with regard to maintenance of direct contact.

3.He helps the wholesaler in getting their goods

distributed to the consumer.

4.He is regarded as an important link be tween the

wholesaler and the consumer.

5.He creates demand for the products by

displaying the goods to the consumers.

1. Buying:

A retailer buys a wide variety of goods from different wholesalers after estimating customer demand. He selects the best merchandise from each wholesaler and brings all the goods under one roof. In this way, he performs the twin functions of buying and assembling of goods.

2. Storage:

A retailer maintains a ready stock of goods and displays them in his shop.

3. Selling:

The retailer sells goods in small quantities according to the demand and choice of consumers. He employs efficient methods of selling to increase his sales turnover.

4. Grading and Packing:

The retailer grades the goods which are not graded by manufacturers and wholesalers. He packs goods in small lots for the convenience of consumers.

5. Risk-bearing:

A retailer always keeps stock of goods in anticipation of demand. He bears the risk of loss due to fire, theft, spoilage, price fluctuations, etc.

6. Transportation:

Retailers often carry goods from wholesalers and manufacturers to their shops.

7. Financing:

Some retailers grant credit to customers and provide the facility of return or exchange of goods. In some cases, home delivery and after sale service are provided by retailers.

8. Sales promotion:

A retailer displays goods. He carries out publicity through shop decoration, window display, etc. He maintains direct and personal contacts with consumers. He persuades consumers to buy goods through personal selling.

9. Information:

Retailers provide knowledge to consumers about new products and uses of old products. They advise and guide consumers in better choice of goods. They also provide market information to wholesalers and manufacturers.

10.Buying and Assembling:

It has been said that a retailer stocks wide variety of products to meet the requirements of a large number of customers. For this purpose, the retailer has to assemble products of different manufacturers from different wholesalers through the process of buying. In buying these products he has to be cautious. He has to find out the best and cheapest source of supply. Then he has to select only such of the goods offered which would suit the need of his customers. He must purchase only in quantities enough to meet the demands of his customers.

11.Warehousing

Products thus assembled have to be stored by the retailer so that they are held in reserve stocks out of which consumers requirements are met without any interruption by selling in small quantities.

12.Additional Services

Retailers ease the change in ownership of merchandise by providing services that make it convenient to buy and use products. Providing product guarantees, after-sales service and dealing with consumer complaints are some of the services that add value to the actual product at the retailers’ end. Retailers also offer credit and hire-purchase facilities to the customers to enable them to buy a product now and pay for it later. Retailers fill orders, promptly process, deliver and install

products. Salespeople are also employed by retailers to answer queries and provide additional information about the displayed products. The display itself allows the consumer to see and test products before actual purchase. Retail essentially completes transactions with customers.

13.Channel of Communication

Retailers also act as the channel of communication and information between the wholesalers or suppliers and the consumers. From advertisements, salespeople and display, shoppers learn about the characteristics and features of a product or services offered. Manufacturers, in their turn, learn of sales forecasts, delivery delays, and customer complaints. The manufacturer can then modify defective or unsatisfactory merchandise and services.

14. Introduction of New Goods :-Retailer introduces new items and also explains the merits of that product to consumer.

15. Credit Facility :-A retailer also provides the credit facility to the consumer. Generally consumer purchases the goods all the month on credit from the nearest shopkeeper and pays him at the end of month.

16. Delivery Services :-Some retailers also provide delivery services to the consumer. It is an additional duty.

17. Guidance to Consumer :-At the time of purchase, consumers rely on the advice and guidance of a retailer. For example one consumer goes to the shop of T.V. where the product of various firms is available. Now retailer will explain the qualities of the various products and generally consumer is impressed and acts upon the advice of a retailer.

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(b) Explain “Wheel of Retailing” with suitable illustrations

Most of the retail businesses start on low cost, low price and low margins but as their sales start increasing they quickly shift to a high cost, high revenue model.

Example

A restaurant started in a temporary location would be offering a limited number of items at low price. It looks to develop its client base but as soon as the construction is completed

or final, it starts providing a lot more variety and introduces a number of new services (free home deliver y, boarding , and lodging ) it also starts increasing its prices on its earlier items. This is done to recover its fixed cost quickly and have an early breakeven so that it can start generating some profit since it is operating in a virgin market it will look to increase its market share.

However with passage of time when a new restaurant comes up in its vicinity and starts offering the same items at a lower price in order to retain its customers it will bring down its prices back to where its earlier ones.

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2. (a) Who is an retail customer? Briefly list out the characteristics of a retail customer and the various consumer behavior patterns that you are familiar with

An individual at an retail outlet , who is there with the intention of buying .

Five Specific Retail Consumer Categories

Pleasure Seekers Focused Fulfillers General Browsers Time Killer Product Groupie

Time Killers : A person most likely to be waiting for a partner or on a lunch break, quickly passing through the store, had the least probability of buying something, and was also the least likely to be converted into a buyer.

Time Killers Move around the stores at speed. Cover a lot of the store. Spend relatively short amounts of time in the store. Typical of someone waiting for a friend or partner, or on a lunch break. Low probability of interacting with the product. Conversion Rate: 0 % ====================

The pleasure Seeker : It is the most important consumer, as he/she is the

easiest to influence. They spend the longest time in store, slowly move through the department, and touch more than 40 products compared to an average of 13 products of other consumer types.

Pleasure Seeker Spends a long time in the store. Will slowly move through departments that interest them. Will touch a lot of items. Easily influenced by staff interaction. There is an urgency about them, as if they have to buy within a certain time. Typical behaviour of people after payday. Conversion Rate : 79 %

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Focused Fulfiller and Product Groupies, they know exactly what they want, whereas women can be found across all five groups, but particularly across the pleasure seekers. They are much more likely to touch the products, whereas men spend less than 50 per cent of the time women spend in store.

Focused Fulfillers Will move quickly through a store until they get to a specific product. Likely to have previewed the product. Once in the area will only interact with products that meet their specific criteria. Conversion Rate: 82%

Product Groupies Will walk into the store and head for a specific department or category Once in the target area of the store will slow down and browse with the purpose. Will touch many products but focused on the target product group. Conversion Rate : 37%

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General Browsers Cover large areas of the store. Move slower than time Killers. Likely to interact with product, but not in a focused way. Conversion Rate : 2 %

Sub Category of Buyer Personality Type

The Apathetic Buyer This type of buyer represents about 5 % of the total. She is the kind of person who is not going to buy

anything, no matter how good it is. She is usually pessimistic, cynical and often depressed or uninterested. They have usually have a lot of problems in their own personal and business lives. Even if you are offering an apathetic buyer a Rs. 1000 price for Rs. 50 , she wouldn’t take it.

The Self-Actualizing Buyer These kind of buyer is opposite to the apathetic buyer. These buyers also represent about 5 % of the customer market. She knows exactly what she wants, exactly the features and benefits he is seeking, and exactly what price he is willing to pay for it. She is positive, pleasant and a pleasure to deal with. The buyer are rare. In dealing with them always sell them exactly what they say they want. Don’t try to talk them into something other than what they have their heart set on.

The Analytical Buyer This person represents about 25% of the market. She is self-contained and task oriented. She is not particularly outgoing, but she is quite concerned about accuracy and detail. The primary motivator of such analyzer is

accuracy. Slow down and be exact, avoid generalization. Be specific and Clear. Be prepared to prove, on paper, everything you say. Such customers do not make decisions in a hurry. They will often come back to you with a series of questions for clarification. Don’t RUSH this people.

The Relater Buyer This is the relationship oriented buyer. These represents approximately 25 % of the customer market, depending on what you sell. They tend to be self-contained and not particularly exuberant or expressive. Relaters are very concerned about people. They are sensitive to how people think and feel about various subjects. They are concerned about how people might react or respond to their choices. They are often hypersensitive to the opinions of other people.

The Driver Buyer She is more task oriented than any other kind. She has the personality profile of the director. She is direct, impatient, and wants to get straight to the point. She is businesslike and practical. Her greatest concern is getting RESULTS. She doesn’t like

small talk, and she has no interest in developing a warm relationship with the sales person. She want to get to the bottom line quickly and make a decision yes or no. They are people who get the job done fast and do it well. They are busy and preoccupied. They only want you to answer the question, “What’s in it for me?”

The Socializer Buyer This person is outgoing and extroverted. He likes working with and through people to get results. He is often called the “integrated buyer” in that he operates with a nice balance between people orientation and task orientation. They are achievement oriented. Her extroverted, socializer-type mature. The chief concern of this person is himself and other people. He like to talk about you as wll as himself. He likes to talk about achievement and results. Put it on paper while dealing with them. They represents about 25 % of the customer market.

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(b) Explain the process of choosing a store location and elaborate the various criteria for evaluating location aspects in the following situation

Location is the most important ingredient for any business that relies on customers. It is also one of the most difficult to plan for completely. Location decisions can be complex, costs can be quite high, there is often little flexibility once a location has been chosen and the attributes of location have a strong impact on a retailer’s overall strategy. In India, most retailers prefer to own the property rather than avail of the desired property through lease or rental. This makes the location decision even more critical. Choosing the wrong site can lead to poor results and in some cases insolvency and closure.

Importance of Location Decision in retail Business

The importance of the location decision is due to the following factors. Location is a major cost factor because it

Involves large capital investment Affects transportation costs Affects human resources cost, e.g., salaries

Location is a major revenue factor in retail business because it

Affects the amount of customer traffic Affects the volume of business

The terms ‘location’ and ‘site’ are often used interchangeably but there is a distinct difference between the two. ‘Location’ is a broader concept, which denotes the store and its trading area

from where a majority of its customers originate, while a site refers to the specific building or part of the building where a store is located. Location and site characteristics should interact in a positive and synergistic way with a store’s merchandising, operations and customer service characteristics. For example, a designer men’s store located in an up market shopping centre or a mall near posh residential colonies, housed in an attractive building with adequate parking facilities.

Levels of Location Decisions and its Determining Factors

A retailer has to take the location decision, basing on three aspects:

1. Selection of a city2. Selection of an area or type of location within a city3. Identification of a specific site

The factors which influence these decisions are discussed below:

1. Selection of a City

The following factors play a significant role in the selection of a particular city for starting or relocating an existing retail business:

Size of the city’s trading area: A city’s trading area is the geographic region from which customers come to the city for shopping. A city’s trading area would comprise its suburbs as well as neighboring cities and towns. Cities like Mumbai and Delhi have a large trading area as they draw customers from far off cities and towns.

Population of population growth in the trading area: The larger the population of the trading area, the greater the potential of the city as a shopping location. A high growth n population in the trading area can also increase the retail potential.

Total purchasing power and its distribution: The retail potential of a city also depends on the purchasing power of the customers and its distribution networks in its trading area. Cities with a large population of affluent and upper middle-class customers can be an attractive location for stores selling high-priced products such as designer men’s wear. The fast growth in purchasing power and its distribution among a large base of middle class is contribution to a retailing boom around major cities in India.

Total retail trade potential for different lines of trade: A city may b become specialized in certain lines of trade and attract customers from other cities. Moradabad has become an important retail location for brassware products while Mysore is famous for silk saris.

Number, size and quality of competition: The retailer also considers the number, size and quality of competition before selecting a city.

Development cost: The cost of land, rental value and other related cost.

2. Selection of an Area or Type of Location within a City

In the selection of a particular area or type of location within a city, evaluation of the following factors is required.

Customer attraction power of a shopping district or a particular store: Major shopping centres like Chandni Chowk in Delhi, Colaba in Mumbai and Commercial Street in Bangalore attract customers from far off, while small shopping centres located in colonies attract customers from immediate neighborhood.

Quantitative and qualitative nature of competitive stores: Retailers would like to evaluate the product lines carried by other sores, number of stores in the area, etc. before selecting the area.

Availability of access routes: The area or shopping centre should provide easy access routes.

Nature of zoning regulations: The retailer should also consider the zoning regulations in the city.

Direction of spread of the city: The retailer should consider the direction in which the city is developing while selection the location.

3. Selection of a Specific Site

The choice of a specific site is particularly important. In central and secondary shopping centre, non-anchor sores depend on customers coming to the market and the traffic generated by anchor stores. The large stores in turn depend on attracting customers from the existing flow of traffic. Where sales depend on nearby settlements, selecting the trading area is even more important than picking the specific site.

Where you choose to locate your retail business will have a major impact on everything your shop does. The difference between selecting the wrong location and the right site could be the difference between business failure and success.

Before choosing a retail store location, define how you see your business, both now and in the future.

What do your customers look like? Can you visualize your building? Do you know what you want to sell and what you

want your business to be known for? Have you determined how much retail space,

storage area, or the size of the office you need?

Without the answers to these basic questions, it will be hard to find the perfect location for generating the maximum amount of profit for your retail store.

Type of Goods

Examine what kind of products you sell, as some goods will require certain types of locations. Would your store be considered a convenience store, a specialty shop or a shopping store?

Convenience goods require easy access, allowing the customer to quickly make a purchase. A mall

would not be a good location for convenience goods. This product type is lower priced and purchased by a wide range of customers.

Specialty goods are more unique than most products and customers generally won't mind traveling out of the way to purchase this type of product. This type of store may also do well near other shopping stores.

A shopping store usually sells items at a higher price which are bought infrequently by the customer. Furniture, cars and upscale clothing are examples of goods found at a shopping store. Because the prices of theses items are higher, this type of customer will want to compare prices before making a purchase. Therefore, retailers will do well to locate their store near like stores

Population and Your Customer

If you are choosing a city or state to locate your retail store, research the area thoroughly before making a final decision. Read local papers and speak to other small businesses in the area. Obtain location demographics from the local library, chamber of commerce or the Census Bureau. Any of these sources should have information on the area's population, income and age. You know who your customers are, so make sure you find a location where your customers live, work and shop.

Accessibility, Visibility and Traffic

Don't confuse a lot of traffic for a lot of customers. Retailers want to be located where there are many shoppers but only if that shopper meets the definition of their target market. Small retail stores may benefit from the traffic of nearby larger stores.

How many people walk or drive past the location. Is the area served by public transportation? Can customers and delivery trucks easily get in

and out of the parking lot? Is there adequate parking?

Depending on the type of business, it would be wise to have somewhere between 5 to 8 parking spaces per 1,000 square feet of retail space.

When considering visibility, look at the location from the customer's view point. Can the store be seen from the main flow of traffic? Will your sign be easily seen? In many cases, the better visibility your retail store has, the less advertising needed. A specialty retail store located six miles out of town in a free standing building will need more marketing than a shopping store located in a mall.

Signage, Zoning and Planning

Before signing a lease, be sure you understand all the rules, policies and procedures related to your

retail store location. Contact the local city hall and zoning commission for information on regulations regarding signage. Ask about any restrictions that may affect your retail operation and any future planning that could change traffic, such as highway construction.

Competition and Neighbors

Other area businesses in your prospective location can actually help or hurt your retail shop. Determine if the types of businesses nearby are compatible you're your store. For example, a high-end fashion boutique may not be successful next door to a discount variety store. Place it next to a nail or hair salon and it may do much more business.

Location Costs

Besides the base rent, consider all costs involved when choosing a retail store location.

Who pays for lawn care, building maintenance, utilities and security?

Who pays for the upkeep and repair of the heating/air units?

If the location is remote, how much additional marketing will it take for customers to find you?

How much is the average utility bill?

Will you need to make any repairs, do any painting or remodeling to have the location fit your needs?

Will the retailer be responsible for property taxes?

The location you can afford now and what you can afford in the future should vary. It is difficult to create sales projects on a new business, but one way to get help in determining how much rent you can pay is to find out what sales similar retail businesses are making and how much rent they're paying.

Personal Factors

If you plan to work in your store, think about your personality, the distance from the shop to home and other personal considerations. If you spend much of your time traveling to and from work, the commute may overshadow the exhilaration of being your own boss. Also, many restrictions placed on a tenant by a landlord, management company or community can hamper a retailer's independence.

Special Considerations

Your retail shop may require special considerations. Make a list of any unique characteristic of your business that may need to be addressed.

Will the store require special lighting, fixtures or other hardware installed?

Are restrooms for staff and customers available? Is there adequate fire and police protection for

the area? Is there sanitation service available? Does the parking lot and building exterior have

adequate lighting? Does the building have a canopy that provides

shelter if raining? What is the crime rate in the area? Are there restrictions on Sunday sales?

Don't feel rushed into making a decision on where to put your retail store. Take your time, research the area and have patience. If you have to change your schedule and push back the date of the store's opening, than do so. Waiting to find the perfect store location is better than just settling for the first place that comes along. The wrong location choice could be devastating to your retail business.

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SELECTION OF THE CITY

Size of the city’s trading area: A city’s trading area is the geographic region from which customers come to the city for shopping.

Population of population growth in the trading area: The larger the population of the trading area, the greater the potential of the city as a shopping location.





Customer attraction power of a shopping district or a particular store: Major shopping centres like Chandni Chowk in Delhi, Colaba in Mumbai and Commercial Street in Bangalore attract customers from far off, while small

shopping centres located in colonies attract customers from immediate neighborhood.






If you are choosing a city or state to locate your retail store, research the area thoroughly before making a final decision. nd shop.




Other area businesses in your prospective location can actually help or hurt your retail shop. Determine if the types of businesses nearby are compatible you're your store.

Location Costs


Personal Factors



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Total purchasing power and its distribution: The retail potential of a city also depends on the purchasing power of the customers and its distribution networks in its trading area.

Total retail trade potential for different lines of trade: A city may b become specialized in certain lines of trade and attract customers from other cities.





Customer attraction power of a shopping district or a particular store: Major shopping centres like Chandni Chowk in Delhi, Colaba in Mumbai and Commercial Street

in Bangalore attract customers from far off, while small shopping centres located in colonies attract customers from immediate neighborhood.








Don't confuse a lot of traffic for a lot of customers. Retailers want to be located where there are many

shoppers but only if that shopper meets the definition of their target market. Small retail stores may benefit from the traffic of nearby larger stores.


Other area businesses in your prospective location can actually help or hurt your retail shop. Determine if the types of businesses nearby are compatible you're your store.

Location Costs


Personal Factors



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Nature of zoning regulations: The retailer should also consider the zoning regulations in the city.







Location Costs


Personal Factors



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3. (a) What constitute Retail Mix? Discuss various considerations to be

kept in mind which planning for store merchandise

The retail mix helps a business meet the needs of its customers.

Retail mix refers to the various features of retail strategy planning. Also often called "the 6 Ps," retail mix details a retail business' approach to its

-products,

-promotion efforts,

-personnel,

-presentation,

-place and

-price.

Retail mix helps a business define its strategy and carry out operations according to its goals.

Address Customer Needs

Be definition, a retail business deals with identifying and meeting the needs of end consumers of products or services. As such, the business has to plan its strategy based on the needs of its target market. In developing the retailing mix, the business has to define its customers and find out how to anticipate and satisfy their needs. In this way, the retailing mix approach forces a business to place its customers in the center of its strategy development.

Formulate Strategy

When developing a strategy based on the retailing mix approach, business managers have to consider all the significant factors that define the business, including products, personnel, promotion, presentation, place and price. Retailing mix provides a structure that retail business managers can use in planning business strategy, so they don't overlook any of the six features. The retailing mix approach helps business managers consider how to use each of these factors in meeting the needs and desires of customers.

Coordinate Operations

By developing the retailing mix before carrying out business operations, business managers provide a plan for all employees to follow. This way, the different parts of the business don't work haphazardly without following a definite plan. The retailing mix helps coordinate the efforts in all departments and at all levels of the business, so every person works toward the same goal, targeting their products and services at the same market segment.

Respond to Competition

When developing the retailing mix, a business may consider other companies working in the same industry and targeting the same market segment. The business may analyze how its competitors address each factor of the retailing mix and compare its strategy to the competitors. This way, the business can fashion its retailing mix in response to the strategies of its competitors. For example, if a competitor reduces its price points for certain products, the business may consider providing discounts to compete with the other company.

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Considerations in Devising Merchandise Plans

Forecasts

Forecasts are projections of expected retail sales for given periods* Components:

• Overall company projections• Product category projections• Item-by-item projections• Store-by-store projections (if a chain)

Types of Merchandise

Assortment merchandise Fashion merchandise Seasonal merchandise Fad merchandise Staple merchandise

Staple Merchandise

Regular products carried by a retailer* Grocery store staple examples

• Milk• Bread• Canned soup

Basic stock lists specify inventory level, color, brand, style, category, size, package, etc.

Assortment Merchandise

Apparel, furniture, auto, and other products for which the retailer must carry a variety of products in order to give customers a proper selection

Decisions on Assortment* Product lines, styles, designs, and colors are projected* Model stock plan

Fashion and Seasonal Merchandise

Fashion Merchandise: Products that may have cyclical sales due to changing tastes and life-styles

Seasonal Merchandise: Products that sell well over nonconsecutive time periods

Factors to Bear in Mind When Planning Merchandise Innovativeness

FACTOR RELEVANCE for PLANNING

Target market(s) Evaluate whether the target market is conservative or innovative

Goods/ service growth potential

Consider each new offering on the basis of rapidity of initial sales, maximum sales potential per time period, and length of sales life

Fashion trends Understand vertical and horizontal fashion trends, if appropriate

Retailer image Carry goods/ services that reinforce the firm’s image


ACTOR RELEVANCE for PLANNING

Competition Lead or follow competition in the selection of new goods/services

Customer segmenFts Segment customers by dividing merchandise into established-product displays and new-product displays

Responsiveness to consumers

Carry new offerings when requested by the target market

Amount of investment Consider all possible investment for each new good/service: product costs, new fixtures, and additional personnel



Profitability Assess each new offering for potential profits

Risk Be aware of the possible tarnishing of the retailer’s image, investment costs, and opportunity costs

Constrained decision making Restrict franchisees and chain branches from buying certain items

Declining goods/ services Delete older goods/services if sales and/or profits are too low

Structured Guidelines for Pruning Products

Select items for possible elimination on the basis of declining sales, prices, and profits, appearance of substitutes

Gather and analyze detailed financial and other data about these items Consider nondeletion strategies such as cutting costs, revising promotion

efforts, adjusting prices, and cooperating with other retailers

After making a deletion decision, do not overlook timing, parts and servicing, inventory, and holdover demand

A Selected Checklist for Predicting Fashion Adoption

Factors to Consider When Planning Merchandise Quality


Target market(s) Match merchandise quality to the wishes of the desired target market(s)

Competition Sell similar quality or different quality

Retailer’s image Relate merchandise quality directly to the perception that customers have of retailer

Store location Consider the impact of location on the retailer’s image and the number of competitors, which, in turn, relate to quality



Profitability Recognize that high quality goods generally bring greater profit per unit than lesser-quality goods; turnover may cause total profits to be greater for the latter

Manufacturer versus private brands

Understand that, for many, manufacturer brands connote higher quality than private brands

Customer services offered Know that high-quality goods require personal selling, alterations, delivery, and so on

Personnel Employ skilled, knowledgeable personnel for high-quality merchandise



Perceived goods/ service benefits

Analyze consumers. Lesser quality goods attract customers who desire functional product benefits; High-quality goods attract customers who desire extended product benefits

Constrained decision making

Face reality. Franchises or chain store managers have limited or no control over products; Independent retailers that buy from a few large wholesalers are limited to the range of quality offered by those wholesalers

Retail Assortment Strategies

Brands

1.MANUFACTURER NATIONAL

2.PRIVATE [ STORE ]

3.GENERIC

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CATEGORY MANAGEMENT

Man ufacturer

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(b) Explain the term sourcing and discuss the challenges associated in sourcing merchandise by the following retailers

3. Grocery Retailer4. Multibrand Woman garments.

Sourcing refers to the value added process of selecting suppliers and the respective cooperation scheme and it must be supported by advanced analytics & market intelligence, supplier performance information and a concrete and well-developed strategy. On the other hand, procurement refers to the transactional of the relationship and should be streamlined as much as possible in order to achieve efficiency.

integrated approach incorporating spend analysis, strategic sourcing, supplier management as well as procurement optimization.

Spend Analysis

Before implementing any sourcing / procurement initiatives, it is very important to analyze past, current & projected spending patterns. The analysis must span the entire enterprise and include data that is often collected from various departments and locations and must also identify

sourcing barriers & limitations (i.e. single / sole source, legal / contract restrictions etc). Such an analysis of direct and indirect spend gives the company the information and decision-support required to develop supply strategies that are aligned with the objectives of the organization and to identify and prioritize sourcing & procurement improvement initiatives.

Key business Issues

• What is the savings potential in each commodity / material category?

• In what commodity / material categories should we focus first? How should we prioritize our efforts? What should be our first actions?

• In which areas is there the highest potential for e-enabling?

Strategic Sourcing

The overall goals of strategic sourcing is to achieve large and sustainable cost reductions, long-term supply stability and minimization of supply risk. The strategies to achieve such goals can be as wide as rationalizing supplier base, leveraging spending across departments, business units and geographical regions, reconfiguring supply specifications, and / or developing strategic partnerships / alliances with selected suppliers.

However, the task of strategic planning within sourcing is often not performed properly despite the fact that supply-base management processes contribute extensively to business-unit and company-wide goals. This results in “disconnected” sourcing from company goals. Furthermore, when no clear directions and formalized / standardized processes exist to develop and apply a sourcing strategy, buyers commonly apply their own way of thinking and patterns of buying often resulting in sub-optimal use of company’s resources.

Key Business Issues

• How we should manage each commodity/ material category depending on spend and supply characteristics?

• What is the optimal portfolio of suppliers that satisfies our supply requirements per commodity / material category?

• What our outsourcing / make or buy strategy should be?

Supplier Management

Active supplier management is an integral part of strategic sourcing. Organizations are increasingly moving away from the traditional approach of selecting the “lowest cost supplier” to a “total cost of ownership” approach. This approach

presupposes extensive knowledge of supplier performance and its impact on enterprise operations, knowledge that can be acquired only through institutionalized processes that capture and analyze supplier performance data. This data need to be incorporated into the selection and negotiation process to arrive at sourcing decisions that actually ensure the lowest total cost.

Key Business Issues

• How do we measure supplier performance? What criteria & performance targets should we use? Are we taking steps to improve it?

• How do we develop, manage and control approved supplier lists?

• How can we use supplier performance knowledge in our selection procedures?

Procurement Optimization

In procurement optimization, the main focus is on transactional efficiency and on squeezing process-related costs and inefficiencies throughout the purchasing cycle that begins with the identification of the need for the material and end with its receipt.

The blur between the concepts of sourcing and procurement has lead some organizations, especially those operating under strict regulatory

restrictions, to burden the procurement process with controls and supplier selection tasks that normally belong to the sourcing process, thus increasing supply lead times, process cost and inventory levels. Best practices suggest that the procurement process should be as simple as possible or even non-existent, as in Vendor-Managed-Inventory environments.

Key Business Issues

• How can we decrease the cycle time of the procurement process? Are there low-value-added controls, paperwork and delays?

• Do we scale process complexity based on the material to be purchased? How the process cost is compared to the material cost?

• How do we leverage available technology in optimizing procurement processes?

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THE SOURCING DECISION IS CRITICAL TO THE RETAILERSFOR THE FOLLOWING REASONS:-suppliers reputation[to satisfy the target market ]-suppliers location

[easy / faster movements of goods]-quality products[to save time / cost in replacement ]-suppliers operational excellence[to reduce time / complaints ]-suppliers financial stability[to remove the possibility of breakdown in supply]-cost of products[to minimize the landed warehouse cost ]-transportation cost[to minimize the landed warehouse cost ]-reduced cycle time[to reduce the uncertainty in delivery of goods]-standardized product / service[to improve efficiency in procurement ]---------------------------------------------------------------------THESE DECISION ARE REQUIRED -to keep customers satisfied.-to enable the customers to make repeat purchase.

-to increase sales.-to reduce wastages.-to improve efficiency in retail operation.-to improve the productivity-to improve profit making.AND HENCE IMPROVE THE PROFITABILITY OF THE RETAIL OPERATION.=============================================================

FOR BOTH RETAILER GROUP NEED

A SOURCING SYSTEM WHICH provides the rich set of capabilities required to execute a closed-loop planning process that synchronizes performance objectives with downstream planning processes. which include: A robust multi-dimensional planning framework that can support end-to-end planning (both dollar and unit) including strategic planning, merchandise (product) planning, store planning, options planning (as an input to downstream assortment planning

process) Alignment of strategic merchandise, store, and options plans with a flexible framework for top-down, bottom-up, middle-out, or combination planning Management global enterprises at the right level of detail, as the solution is designed to handle plans of almost unlimited scale Visibility into exceptions, enabling retailers to focus on having the right information at the right time Flexible exceptions handling combined with sophisticated viewing capabilities provide visibility into business-specific exceptions Buying and Assortment Managementwhich provides a comprehensive assortment planning solution for the top retailers.

Determining how to cater to target customers, at the local level, with a compelling product selection, pricing, and promotions Inability to plan down to detailed style-

color levels Buying process not integrated with local market needs Receipts-driven planning philosophy as opposed to sales-driven Difficulty managing assortments in-season based on point-of-sale performance Difficulty managing seasonal transitions Inability to manage assortment breadth in a manner that’s consistent with top-down guidance

Leveraging the SYSTEM this highly interactive solution enables buying and planning from the early conceptual stage to the final creation of market-tailored store assortments. WHICH provide retailers with the ability to: Bring science to the art of preseason sales forecasting with “pattern-after” intelligence and seasonal sales profiling Plan by store cluster using multidimensional attributes and performance measures

Conduct the buying process in parallel with assortment planning from early concept stage through to receipt planning Support constraint-based optimization of receipt flow with respect to an entire supply chain Support the complexity of managing assortment down to the style-color or SKU at the local market level Plan pricing promotions and markdowns to shape demand, managed inventory, and exploit opportunities

THIS SYSTEM ALSO include: Profile discovery process in conjunction with sophisticated techniques allows for a robust scientific basis for sales forecast The buyer’s worksheet is the repository of style-color attributes and sourcing information, providing both historical and current (real and dummy) style-colors that are available for inclusion in the assortment plan Store-group assortments captures the richness of product, store, and shelf attributes required to build an effective, targeted range by store group, together with readily-

interpreted summary information for effective reconciliation to the merchandise plan Choice of interactive or fully automated in-season planning process using adaptive smoothing forecasting algorithms Analytical support helps identify key assortment planning parameters, such as assortment breadth History summarization and in-line views support informed decision making on planning the distribution and options using historical “pattern-after” workflows Plan different price points across locations by time period Include dummy style-colors for “what-if” planning with supporting workflow Receipt planning—provides the logic required to generate the receipt flow required to support the sales and inventory requirements dictated by the assortment What-if" analysis—ability to make changes and run rapid incremental what-if scenarios User-friendly and interactive interface

Key benefits of the system include:

Improved customer centricity by offering targeted assortments tailored to local market conditions Improved plan execution through integrated allocation/replenishment Automatic reconciliation to open-to-buy/open-to-receive Improved ability to account for seasonality and the buyer’s knowledge of market preferences Store sales plans drive receipts that are optimized to minimize inventory in the retail extended supply chain while achieving target turns/sell-through percentage/weeks-of-cover Improved targeted markdown decisions to maximize margin and minimize leftover inventory Allocation and Replenishment ManagementAllocation and Replenishment Management provides the rich set of capabilities required to tackle today’s challenges and provide a leading edge to retailers so they can better serve their customers and compete effectively.which include:

Time-phased demand and replenishment plans that provide visibility into inventory investment and product flow over time, enabling effective collaboration within the organization and with vendors (connected model to support direct-store delivery, vendor-DC-store, vendor-XDock DC-store) Highly scalable, multi-period allocation and replenishment planning for both solids/eaches and case-packs/mix-packs Inventory analysis and optimization—segmentation of products, order policy/target service-level determination and “what-if” scenarios, calculation of optimal levels, multi-echelon strategy Simulation capabilities—based on financial investment, service level, and safety stock interplay Support for both hard supply chain constraints (such as item availability; shipping, receiving, and location calendars; effectivity dates; and pack multiples) as well as soft constraints (such as handling and storage capacity at distribution centers and stores, and vendor minimums), with a restricted subset available for interactive plan

overrides Advanced techniques (in batch mode) for replenishing slow-moving SKUs, including calculating replenishment parameters based on average rate of sale, presentation stock, lead time, and review times Integrated planning for turn and promotional items (in batch mode) to ensure coordinated flow and adequate supply for promotions Multiple replenishment policies to cater to diverse product segments—reorder point/reorder quantity, reorder point/up-to level, reorder point-to-future target level, min/max, min on hand for different product segmentations Item linking and substitutions—one way, two way, phase out, multiple linking, sudden death, effective date End-of-season “must-ship” logic to push excess inventory Automated purchase order approval based on business rules Prioritization can be made on which orders, locations, or customers receive inventory first

Robust exception-management framework with decision support for expedite candidates, increase supply, increase capacity, and potential stockouts Benefits include: Consistency in managing inventory levels holistically across the supply chain across multiple time periods Better in-stock positions resulting in higher customer service levels and better promotional effectiveness Reduced inventory levels with optimal inventory investments Increased inventory turns Reduced stock-outs and markdowns Efficiency in logistics and distribution costs by better planning around constraints involving storage, handling, container load building, and vendor capacity Overall business/productivity improvements due to managing by exceptions and rapid re-planningCycle Time Optimization First, it optimizes the procurement spend across the supplier base. Second, it minimizes

the concept-to-store cycle time. This is enabled by: Establishing a collaborative design and product development process between merchants and the sourcing teams Enabling a pre-positioning of material and factory capacity to product that is synchronized with in-store dates Creating a differentiated flow of product to the store, driven by product and location segmentation Strategic partnerships with retail and branded product industry leaders These are the key benefits:• Average product cost savings of 11-25%• Shortened negotiation cycles and improved productivity by 30-50%• Streamlined sourcing processes achieving process and administrative cost savings of up to 60%• Gross margin improvements of up to 4% or more

Retailers implementing this sourcing solutions are also able to leverage these internal synergy

benefits:• Ability to aggregate demand across the entire organization• Development of standardized sourcing best practices• An improved capability to evaluate new global supply sources• Strengthened supplier relationships and communication• Improved ability to share sourcing information and collaborate throughout the organization• Ability to apply online sourcing to wider range of spending• Enhanced expertise and productivity of sourcing professionals

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4(a) Enumerate and discuss the various issues that impact retail business in India.

India has some sometimes been called a nation of shopkeepers. This epithet has its roots in the huge number of retail enterprises in the country totaling 12 million, about 78 percent of these are small family owned businesses utilizing only household labour. even among retail enterprises that hire workers the bulk of them hire less than 3 workers .India’s retail sector appears backwards not only by standards of industrialized countries but also in comparison to several other emerging markets in Asia and elsewhere. There are only 14 companies that run departmental stores and mere two with hypermarket operations. While the number of businesses operating supermarkets is higher most of these had only 1 outlet, the number of companies with supermarket chains was less than 10.

Major Formats of Retailing

Major formats of In-Store Retailing have been listed in Table given below:

Table

Format Description The Value Proposition

Branded Stores

Exclusive showrooms either owned or franchised out by a manufacturer.

Complete range available for a given brand, Certified product quality.

Specialty Stores

Focus on a specific consumer need; carry most of the brands available.

Greater choice to the consumer, comparison between brands possible

Department Stores

Large stores having a wide variety of products, organized into different departments, such as clothing, house wares, furniture, appliances, toys, etc.

One stop shop catering to varied consumer needs.

Supermarkets Extremely large self-services retail outlets.

One stop shop catering to varied consumer needs.

Discount Stores

Stores offering discounts on the retail price through selling high volumes and reaping the economies of scale.

Low prices.

Hyper-mart Larger than a Supermarket, sometimes with a warehouse appearance, generally located in quieter parts of the city

Low prices, vast choice available including services as cafeterias.

Convenience Stores

Small self-service formats located in crowded urban areas.

Convenient location and extended operating hours.

Shopping Malls

An enclosure having different formats of in-store retailers, all under one roof.

Variety of shops available close to each other.

Non-store Retailing

It is another type of retail marketing. Different types of non-store retailing are given below:

Direct Selling

Direct selling which started centuries ago with itinerant peddlers has burgeoned into a $9 billion industry, with over 600 companies selling door to door, office to office, or at home sales parties. A variant of direct selling is called multilevel marketing, whereby companies such as Amway recruit independent businesspeople who act as distributors for their products, who in turn recruit and sell to sub distributors, who eventually recruit others to sell their products, usually in customer homes.

Direct Marketing

Direct marketing has its roots in mail-order marketing but today includes reaching people in other ways than visiting their homes or offices, including telemarketing, television direct response marketing, and electronic shopping.

Automatic Vending

Automatic vending has been applied to a considerable variety of merchandise, including impulse goods with high convenience value (cigarettes, soft drinks, candy, newspaper, hot beverages) and other products (hosiery, cosmetics, food snacks, hot soups and food, paperbacks, record albums, film, T-shirts, insurance policies, and even fishing worms).

2.4 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 - Emulated the Marks & Spencer model of 100 per cent private label, very good

value for money merchandise for the entire family Giant and Big Bazaar - Hypermarket/cash & carry store Food World and Nilgiris – Supermarket format Pantaloons and The Home Store - Specialty retailing Tanishq has very successfully pioneered a very high quality organized retail business in fine jewellery.

Structure of the retailing industry according to ownership patterns:

An unaffiliated or independent retailer A chain retailer or corporate retail chain A franchise system A Leased Department (LD) Vertical Marketing System (VMS) Consumer Co-operatives

A new entrant in the retail environment is the 'discounter' format. It is also is known as cash and-carry or hypermarket. These formats usually work on bulk buying and bulk selling. Shopping experience in terms of ambience or

the service is not the mainstay here. RPG group has set up the first 'discounter' in Hyderabad called the Giant. Now Pantaloon is following suit.

Two categories of customers visit these retail outlets.

1. The small retailer. For example, a customer of Giant could be a dhabawala who needs to buy edible oil in bulk.

2. The regular consumer who spends on big volumes (large pack sizes) because of a price advantage per unit.

Retailing in India is still evolving and the sector is witnessing a series of experiments across the country with new formats being tested out; the old ones tweaked around or just discarded. Some of these are listed in Table below.

Table

Retailer Current Format

New Formats

Shoppers' Stop

Department Store

Quasi-mall

Ebony Department Store

Quasi-mall, smaller outlets, adding food retail

Crossword Large bookstore

Corner shops

Pyramid Department Store

Quasi-mall, food retail

Pantaloon Own brand store

Hypermarket

Subhishka Supermarket Considering moving to self service

Vitan Supermarket Suburban discount storeFoodworld Food

supermarketHypermarket, Foodworld express

Glob us Department Store

Small fashion stores

Bombay Bazaar

Super market Aggregation of Kiranas

Efoodmart Food super market

Aggregation of Kiranas

Metro Departmental store

Cash and carry

S Kumar's Departmental store

Discount store

Retailers are also trying out smaller versions of their stores in an attempt to reach a maximum number of consumers. Crossword bookstores are experimenting with Crossword Corner, to increase reach and business from their stores. FoodWorld is experimenting with a format of one-fourth the normal size called FoodWorld Express.

Trends in Retail Marketing

At this point, I can summarize the main development retailers and manufacturers need to take into account as they plan their competitive strategies.

In India the trends are mainly in three sectors. These sectors are:

Trends in retail marketing

1. New retail forms and combinations continually emerge. Bank branches and ATM counters have opened in supermarkets. Gas stations include food stores that make more profit than the gas operation. Bookstores feature coffee shops.

Even old retail forms are reappearing: In 1992 Shawna and Randy Heniger introduced

peddler’s carts in the Mall of America. Today three-fourths of the nation’s major malls have carts selling everything from casual wear to condoms. Successful carts average $ 30,000 to $ 40,000 a month in sales and can easily top $ 70,000 in December. With an average start-up cost of only $3,000, push carts help budding entrepreneurs test their retailing dreams without a major cash investment. They provide a way for malls to bring in more mom-and-pop retailers, showcase seasonal merchandise, and prospect for permanent tenants.

2. New retail forms are facing a shorter life span. They are rapidly copied and quickly lose their novelty.

3. The electronic age has significantly increased the growth of non store retailing, consumers receive sales offers in the mail and over television, computers, and telephones, to which they can immediately respond by calling a toll-free number or via computer.

4. Competition today is increasingly intertype, or between different types of store outlets. Discount stores, catalog showrooms, and department stores all compete for the same

consumers. The competition between chain superstores and smaller independently owned stores has become particularly heated. Because of their bulk buying power, chains get more favorable terms than independents, and the chains’ large square footage allows them to put in cafes and bathrooms. In many locations, the arrival of a superstore has forced nearby independents out of business. In the book selling business, the arrival of a Barnes & Noble superstore or Borders Books and Music usually puts smaller bookstores out of business. Yet the news is not all bad for smaller companies. Many small independent retailers thrive by knowing their customers better and providing them with more personal service.

5. Today’s retailers are moving toward one of two poles, operating either as mass merchandisers or as specialty retailers. Superpower retailers are emerging. Through their superior information systems and buying power, these giant retailers are able to offer strong price savings. These retailers are using sophisticated marketing information and logistical systems to deliver good service and immense volumes of product at appealing

prices to masses of consumers. In the process, they are crowding out smaller manufacturers, who become dependent on one large retailer and are therefore extremely vulnerable, and smaller retailers, who simply do not have the budget of the buying power to compete. Many retailers are even telling the most powerful manufacturers what to make; how to price and promote; when and how to ship; and even how to reorganize and improve production and management. Manufacturers have little choice: They stand to lose 10 to 30 percent of the market if they refuse.

6. Marketing channels are increasingly becoming professionally managed and programmed. retail organizations are increasingly designing and launching new store formats targeted to different lifestyle groups. They are not sticking to one format, such as department stores, but are moving into a mix of retail formats.

7. Technology is becoming critical as a competitive tool. Retailers are using computers to produce better forecasts, control inventory costs, order electronically

from suppliers, send e-mail between stores, and even sell to customers within stores. They are adopting checkout scanning systems, electronic funds transfer, and improved merchandise-handling systems.

8. Retailers with unique formats and strong brand positioning are increasingly moving into other countries. McDonald’s, The Limited, Gap, and Toys “R” Us have become globally prominent as a result of their great marketing prowess. Many more Indian retailers are actively pursuing overseas markets to boost profits.

9. There has been a marked rise in establishments that provide a place for people to congregate, such as coffeehouses, tea shops, juice bars, bookshops, and brew pubs. Denver’s two Tattered Covered bookstores host more than 250 events annually, from folk dancing to women’s meetings. Brew pubs such as New York’s Zip City Brewing and Seattle’s Trolley man Pub offer tasting and a place to pass the time. The Discovery Zone, a chain of children’s play spaces, offers indoor spaces where kids can go wild without breaking anything and

stressed-out parents can exchange stories. There are also the now-ubiquitous coffeehouses and espresso bars, such as Starbucks, whose numbers have grown from 2,500 in 1989 to a forecasted 13,000 by 2001. And Barnes & Noble turned a once-staid bookstore industry into a fun-filled village green.

Retail marketing is the most important part of the entire logistics chain in a business especially in consumer related products. Without proper retailing the companies can't do their business. Retailing is the process of selling goods in small quantities to the public and is not meant for resale. Retail is derived from the French word retailer, meaning to cut a piece off or to break bulk.

There are various ways of making goods available to consumers like:

Company to distributor to wholesaler to retailer to consumer Company to salesperson to consumer Company to consumers (online/ phone/ catalog ordering)

These three are among the most common ways of making the goods available to consumers. But in India the three layered system of distributor, wholesaler and retailer, forms the backbone of the front-end logistics of most of the consumer-good companies.

In this system the company operating on all India basis appoints hundreds of distributors across the country that supplies to various retailers and wholesalers. Wholesalers in turn can either directly sell in the market or can supply to retailers. The current retailing system prevalent across the country is highly fragmented and unorganized. Anyone with some money and some real estate can open a small shop and become a retailer catering to the locality in which he opens the shop.

ISSUES

There are a number of reasons behind this fragmented retail market. Some of the major reasons being:

Poverty and lower literacy levels.

Low per capita income. Savings focused and less indulgence mindset. Poor infrastructure facilities like roads etc. Restrictions on intra-state good movement. High taxes. No exposure to media. High import duties on imported goods. FDI in retailing is not allowed. Retailing is not considered as a business or industry by the government. Hitherto none of the business schools in India were offering specialized courses on retailing. Expensive supply chain.

Besides this there is other reasons too, which led to stifling of growth of organized segment of retailing sector and which instead led to highly fragmented market.

Today in India we have more than 12 million retail outlets and most of then are family run and locally owned. There are very few nationally present retail stores. In India the process of buying and selling at these unorganized retail outlets, is highly

characterized by bargaining and negotiations. But slowly with increasing influence of media and urbanization the market is shifting towards organized segment. Seeing the huge market size of retail business in the country and the current level of organized segment, many players have jumped into the fray and many are waiting for the right opportunity to enter it.

On account of the liberalization drive in the 1990s, several structural and demographic changes that are taking place are helping the industry to grow. The GDP has grown by 6.6percent in the last decade resulting in increased income levels and higher purchasing power for the population. Increasing literacy levels, increasing number of working women, increasing urbanization, higher international travel by Indian population and increasing media penetration has raised aspiration levels of the population, resulting in demand for better shopping experience and larger variety of goods. India has close to 54percent of population below the age of 25, which translates into higher prospects for increased consumption levels in the future. Finally, interest rates have also

declined in the past few years further propelling the consumption demand.

These factors were the key drivers for the retail wave in the country. Notable among the early entrants were players like Shoppers Stop, Pantaloon, Ebony, Foodworld, Subhiksha, etc. Initially, the growth in organized retail was very slow and concentrated mainly in metros, with south India holding its ground as the pioneer in organized retail growth, on account of the low cost of real estate. Due to the high investments required in the early stages and the fact that real estate was the key deciding factor for success of stores, real estate developers have been the major players in the industry (see Table).

Table 5:

Sponsors

Group Retail BusinessRajan Raheja – Real Estate Developer

Globus – Chain of departmental stores

K, Raheja - Real Estate Developer

Shopper’s Stop - Chain of departmental stores

Hiranandani - Real Estate Developer

Haiko supermarket, Loft shoe stores and Hakone mall.

Tata – Diversified Business House

Westside – chain of department stores

DS Group - Real Estate Developer

Ebony - chain of department stores

RPG – Diversified Business House

Foodworld supermarkets, Giant hypermarkets, Health & Glow beauty and health stores.

DLF – Real Estate Developer

DLF malls

ITC - Diversified Business House

Wills Sport – Chain of apparel stored.

Source: Fitch

In the early 1990s, as the players were lower down on the learning curve many faltered in their models, and growth of the industry remained slow. The second half of 1990s saw several players making losses and exiting from the business. The worst years for the industry were 2000 and 2001, as the stock market downturn, which reduced customer

confidence and spending, had a direct impact on the performance of the industry. The industry recovered starting 2002. It now appears the efforts and learning’s of the players in the last decade are beginning to pay off; the organized retail industry has established firm roots and is beginning to grow.

Present Retail Scenario In India

Retail experts find Indian industry promising Retail sales to touch Rs. 30,000 crore by 2005 Mall Mania: The developing mall culture in India Emergence of region-specific formats Emergence of discount formats Entry of international players

The retail movement in India has acquired the critical mass that is required for rapid acceleration in terms of industry growth as well as geographical spread. The Indian retail industry can no longer be called nascent.

The spread of super stores to the northern cities such as Delhi, Chandigarh, Jaipur and

Kolkata is evidence of the fact that organized retailing in India has emerged from its southern bastion.

The retailing boom is being driven by increased expectations as well as changing shopping behavior of the urban Indian consumer. With the increasing number of nuclear families, working women, greater work pressure and increased commuting time, consumers are looking for convenience. And, convenience is defined as having everything under one roof, longer hours and multiplicity of choice.

On the supply side, the current inefficient supply chain in India, particularly for food items has led a few players to consolidate their operations to take advantage of economies of scale and match consumer expectations in terms of delivery as well as space. So, we have a situation where both demand and supply side dynamics are fuelling the growth of organized retailing in India, although improvements in the supply chain are yet to fully match with consumer expectations.

The future growth need not necessarily come only from the big metros, where there already exists a good retail network. The fact that big Indian retail chains are moving into places like Indore or Chandigarh is an important indicator of future growth. For the Rs. 5000-crore organized retail industry it is, perhaps, time to tap the relatively smaller cities. The share of organized sector in total retail sales will grow from one per cent now to six per cent by 2005.While projections can be slippery, hard facts point to exciting growth ahead for this sector.

According to KSA, organized retailing is focusing on only SEC-A cities, India’s 23 largest cities. That is where a large portion of the country's urban population exists. Today 82 per cent of organized retailing comes from the top six cities and 12 per cent from the next four. KSA says the top 10 cities provide 94 per cent of organized retail sales in India.

By 2005, KSA projects the top six cities will account for 66 per cent of total organized retailing and the next four for 20 per cent. The top 10 cities will account for 86 per cent of organized retail sales. There could be

variations in growth patterns in different segments. The second half of the top 10 cities will provide large growth for food and groceries, while the top six would still be the growth centers for consumer durables, believes KSA.

The spread of organized retailing is unlikely to be a national phenomenon yet. This appears to be the case so far. South India, particularly Chennai, Hyderabad and Bangalore, have seen the emergence of chain stores or large format stores. While garment stores have been around for sometime, other segments like food and groceries, consumer durables and even books and music have witnessed the emergence of organized players in large cities in South India. The lack of trained manpower or alternatively the tremendous scope the sector has to provide employment is another issue.

The Developing Mall Culture in India

Modern malls made their entry into India in the late 1990s, with the establishment of Crossroads in Mumbai and Ansals Plaza in Delhi. By early 2001, several mall projects were announced. According to market

estimates, close to 12 million sq. ft. of mall space is being developed across several cities in the country, of which 10 million sq. ft. is expected to be operational by end of 2003 (see Table below). With this, rentals for retail properties have shown a marked decline, which has brought down the break-even levels of the retail projects. Moreover, retailers would now have access to retail-specific properties, which will increase their efficiencies.

Table 6:

Mall Development in India

Mall Location Rate / Sq. ft.Crossroads Tardeo,

Mumbai225-250

Ansals South Ex, Delhi

175-200

Nirmal Lifestyle Mulund, Mumbai

75-90

Runweals Mall Mulund, Mumbai

75-90

Karnavat Mall Thane, Mumbai

65-85

Raheja Mind space Malad, 60-80

MumbaiJog’s Mall Andheri,

Mumbai55-75

Cable Corporation Borevali, Mumbai

55-75

Ansals East Delhi 75Sahara Gurgaon 50-70MGF Malls – Metroplitian & Plaza

Gurgaon 65-85*

DLF Gurgaon 65-85Shipra Noida 80-180Forum KolKotta 100City Center KolKotta 55Rave 3 Kanpur 45-55Inox Baroda 75Forum Bangalore 70-90Spencers Plaza Phase III

Chennai 70

Indore, Nasik and Jaipur Malls

45-55

Hyatt, Mumbai & Leela,

175-300

Phoenix Malls Lower Parel, Mumbai

100-125

Till some time back, there were only few international style shopping malls in India --

Spencer in Chennai, Crossroads in Mumbai, Ansals Plaza in New Delhi and Sriram’s Arcade in Kolkata. By the end of 2004, that number jumped to many.

It looks like a virtual stampede, major players with a cumulative investment of Rs 375 crore are set to change cityscapes across India. In the next one year, close to 40 lakh square feet of retail space will be developed. In three years, this will rise to 70-lakh sq ft.

As the retail industry evolves, consumers want more variety before making their purchase decision. A study on consumer outlook suggests that over 80 percent of consumers want a wide range of products at hand while shopping. This signifies that people are finally ready for multi-option complexes.

Many old-time corporates are seriously considering using their idle assets. It makes sense for landowners to develop it and keep the returns rather than sell it outright or even lease it, especially when there is opportunity here. It is perhaps the best way to use an idle real estate asset.

The limited kitty of brands has yet another significant knock on effect on the typical size of Indian malls. In the US and South-East Asia, malls are as large as 50 lakh sq ft. Spencer is by far the largest mall in India - it occupies 7 lakh sq ft and even that is dwarfed by Asia's largest mall, the 4-million sq ft mega mall in Malaysia. Even the 26 malls that are being planned are likely to measure between 50,000 sq ft and 2 lakh sq ft. The Indian mall cannot offer too many choices in terms of brands. So, developing a very large mall can never be sustainable.

There's a flip side though -malls even as small as 80,000 sq ft, like Shopper's City in Kolkata or the Esplanade Mall at Kochi, can be sustained.

Emergence of Region-Specific Formats

For the first time in 10 years, the industry is witnessing the development of region-specific formats. With organized retail penetrating into B class towns, retailers have started differentiating in the sizes and formats of stores. For example, in departmental store format, while most A class cities and metros have larger stores of 50,000 plus sq. ft. sizes,

stores in B class towns have stabilized in the 25,000-35,000 sq. ft. range. Most players have started operating these two formats across various cities, which has helped them to standardize the merchandise offering across the chain.

Emergence of Discount Formats

Larger discount formats, popularly known as hypermarkets, are now emerging as major competitors to both unorganized and organized retailers. Penetration of organized retail into the lower strata of income groups and consumer demand for increased value-for-money has improved the prospects of these formats. These formats span across the entire range of merchandise categories. Big Bazaar, promoted by Pantaloon and Giant, promoted by the RPG Group, are examples of this format.

Entry of International Players

A large number of international retailers have evinced interest in India, despite the absence of favorable government policy for foreign players (see Table below). A number of the major brands have entered the country

through licensing agreements with Indian players to capitalize on the opportunities available in the sector.

Table 7:

International players

International Players

Retail Ventures In India

Landmarc Group, Dubai

Lifestyle Chain of Departmental Stores

Metro, Germany HypermarketShoprite, South Africa

Supermarket, Hypermarket

Nanz, Germany SupermarketMarks & Spencer, UK

Apparel Retailer

Mango, Spain Apparel RetailerMcDonalds, USA Food RetailerDominos USA Food RetailerTricon Restaurant, USA

Food Retailer

INFORMATION TECHNOLOGY IN RETAIL

Over the years as the consumer demand increased and the retailers geared up to meet this increase, technology evolved rapidly to

support this growth. The hardware and software tools that have now become almost essential for retailing can be divided into 3 broad categories:

Customer interfacing systems

Bar coding and scanners

Point of sale systems use scanners and bar coding to identify an item, use pre-stored data to calculate the cost and generate the total bill for a client. Tunnel Scanning is a new concept where the consumer pushes the full shopping cart through an electronic gate to the point of sale. In a matter of seconds, the items in the cart are hit with laser beams and scanned. All that the consumer has to do is to pay for the goods.

Payment

Payment through credit cards has become quite widespread and this enables a fast and easy payment process. Electronic cheque conversion, a recent development in this area, processes a cheque electronically by transmitting transaction information to the retailer and consumer's bank. Rather than

manually process a cheque, the retailer voids it and hands it back to the consumer along with a receipt, having digitally captured and stored and image of the cheque, which makes the process very fast.

Internet

Internet is also rapidly evolving as a customer interface, removing the need of a consumer physically visiting the store.

Operation support systems

ERP System

Various ERP vendors have developed retail-specific systems which help in integrating all the functions from warehousing to distribution, front and back office store systems and merchandising. An integrated supply chain helps the retailer in maintaining his stocks, getting his supplies on time, preventing stock-outs and thus reducing his costs, while servicing the customer better.

CRM Systems

The rise of loyalty programs, mail order and the Internet has provided retailers with real

access to consumer data. Data warehousing & mining technologies offers retailers the tools they need to make sense of their consumer data and apply it to business. This, along with the various available CRM (Customer Relationship Management) Systems, allows the retailers to study the purchase behavior of consumers in detail and grow the value of individual consumers to their businesses.

Advanced Planning and Scheduling Systems

APS systems can provide improved control across the supply chain, all the way from raw material suppliers right through to the retail shelf. These APS packages complement existing (but often limited) ERP packages. They enable consolidation of activities such as long term budgeting, monthly forecasting, weekly factory scheduling and daily distribution scheduling into one overall planning process using a single set of data.

Leading manufactures, distributors and retailers and considering APS packages such as those from i2, Manugistics, Bann, Mercial incs and Sterling-Douglas.

Strategic decision support systems

Store Site Location

Demographics and buying patterns of residents of an area can be used to compare various possible sites for opening new stores. Today, software packages are helping retailers not only in their locational decisions but in decisions regarding store sizing and floor-spaces as well.

Visual Merchandising

The decision on how to place & stack items in a store is no more taken on the gut feel of the store manager. A larger number of visual merchandising tools are available to him to evaluate the impact of his stacking options. The SPACEMAN Store Suit from AC Nielsen and Modacad are example of products helping in modeling a retail store design.

Chapter 5 : FOREIGN TOUCH IN INDIAN RETAIL

The chief of Marks & Spencer has been making trips to India over the past year. Global investment bank Warburg Pincus is awaiting the Indian government's clearance to

pick up a 25.1 per cent stake, worth $13 million, in Shoppers Stop.

Dairy Farm International and Jardine Matheson are present here, through tie-ups with the RPG Group. Fast food major McDonalds have already made a dent in the marketplace and in Indian palates.

The Dubai-based Landmark group is making its presence felt in Chennai through its Lifestyle mega store of over 30,000 sq ft. Landmark is owned by Mukesh Jagtiani, a non-resident Indian. Lifestyle International Private Limited, formed in India recently, is a wholly-owned subsidiary of the Mauritius-based Lifestyle International which, in turn, is wholly-owned by the Landmark group. In India, according to Lifestyle International's marketing manager, Roshan Mathew, the target is to "have 12 to 16 stores by 2005." These stores will sell all lifestyle products, barring furniture, under one roof.

Immediate plans include opening a 46,000 sq ft store in Hyderabad, which Mathew terms "The Millennium Store". The Hyderabad store will have additional sections for books and music, unlike the Chennai store. Besides,

as soon as Lifestyle gets a keenly awaited Foreign Investment Promotion Board clearance for a Rs 100 crore investment, it will create outlets in Bangalore, Pune, Mumbai, Delhi and Ahmedabad.

The Hong Kong-based Dairy Farm International, a 125 year old retail major with around 1,300 outlets across nine countries, recently converted its technical tie-up (since 1996) with the RPG group's Spencer & Company for Foodworld into a 49:51 joint venture. The new venture is called Foodworld Supermarkets Limited. DFI also has a 50:50 joint venture with the Indian group in RPG Guardian. DFI is the retail arm of Jardine Matheson.

In Western markets, a familiar sight is the McDonalds golden arch. In India too McDonalds has maintained its unique selling proposition -- providing the same quality of food and the same ambience as anywhere in the world. Its raw material requirements are totally out-sourced. But what it has taken care of is world class quality in all its raw material sourcing, with specifications ensured strictly. The chain has been smart enough to tailor its

products to the Indian environment, adding fare for the large number of vegetarians who love fast food, and avoiding certain beef and pork in deference to social sensitivities. In a market place where Kentucky Fried Chicken failed to make an impact, McDonalds seems to be finding its place slowly but surely.

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(b) What are the reasons for growth in non-store retailing? Discuss.

Nonstore retailing is a form of retailing in which sales are made to consumers without using physical stores. The non-store retailers are known by medium they use to communicate with their customers, such as direct marketing, direct selling and vending machines or e-tailing. Non store retailing is patronised to time conscious cons umers and consumers who can't easily go to stores, or compulsive buyers. Most non-store retailers offer consumers the convenience of buying 24 hours a day seven days a week and delivery at location and time of their choice. Nonstore sales are now growing at a higher rate than

sales in retail stores. Non-store retailing now accounts for more than 15% of all consumer purchases, and it may account for over 1/3 of all sales by the end of the century. The high growth rate is primarily due to the growth of electronic retailing. The growth of catalogue retail sales and sales in other nonstore retailing formats such as TV home shopping, direct selling, and vending machines are slower.

Non-store retailing is merchandising products directly to final customers outside the boundaries of a concrete store or shop. There are around 5 various types of non-store retailing: direct selling, online retailing, vending machines, telemarketing and direct marketing.

Advantages of Non Store Retailing: Its freedom from a physical retail presence.The high fixed costs of operating retail outlets are eliminated.The breadth of customer coverage is considerably wider than is possible with an individual retail location.Companies do not have to spend large sums or dilute stock building new locations, or acquiring them.This truly

gives the non-store retailer a global market from a cheap, centralized location.

1.Direct

Direct selling involves personal contacts between the sellers and the buyers such as door to door selling.

2.Online

Online retailing involves selling of products and services online. Seller or enterprises usually advertise or promote their products on websites.

3.Vending

Automated vending has the absence of personal contacts between the seller and the buyer such as coffee vending machines.

4.Telemarketing

Telemarketing is selling products and services via the means of a phone such as outbound callings done in call centers from some countries in Asia like Philippines and India.

5.Direct Marketing

Direct Marketing refers to using advertising to promote or sell products and services like direct mail, catalog retailing, televised shopping and the comprised all types of non-store retailing other than the listed above.

Non-store retailing has grown high due to the chances that it has given to so many entrepreneurs especially those who do not have the budget to build a concrete store. Anyone can make money from non-store retailing, just a few smart selling scripts and creativity. Not much emotion to invest,

no hurry for product delivery and more convenient for the customers.

If the non-store retailing is online, you can offer more ease to your customers. It is time and cost effective, you do not need to travel and visit several stores just to check a certain product, compare the prices and descriptions and then finally buy. Online buying can skip several hassles, in just a few clicks; your customer can already browse the product descriptions, compare prices and hit the buy button. You can also already display the amount of stocks available per product.

The only thing that a non-store retailing cannot provide compare to store retailing is the presence of a concrete physical store set up. Non-store retailing can even provide a more reliable sales and technical person especially if it is a direct selling, you can also request for discounts. Product presentation is also more focused in direct selling and more informative in online retailing.

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Ms 612 2013 Second Sem Assignments

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Transcript of Ms 612 2013 Second Sem Assignments