MBA 09 M05 RETAIL MANAGEMENT

UNIT I

INTRODUCTION DEFINITION & SCOPE

Distribution of consumer products begins with producer & ends at ultimate consumer. Between producer & consumer, there is a middle man RETAILER. RETAILING is defined as a conclusive set of activities or steps used to sell a product / service to consumers for their personal /family use. Responsible for matching individual demands of consumers with supplies of all manufacturers. RETAIL INDUSTRY has contributed to economic growth of many countries & fastest changing and dynamic industries in world today. RETAILER is a person, agent, agency, company, or organization which is instrumental in reaching goods, merchandise, or services to ultimate consumers.

INTRODUCTION DEFINITION & SCOPE

Specific activities such as anticipating consumer wants, developing assortments of products, acquiring market information & financing. Assumption is that retailing involves only sale of products in stores. Includes sale of services like those offered at restaurant, parlour, or by car rental agencies. Selling through mail, internet, door-to-door visits any channel that could be used to approach the consumers. E.g., Dell computers sell directly to consumer i.e.., Retailing function. Cost & profit vary depending on type of operation & product line. More successful retailers attempts to combine characteristics of more than one type of retailing to differentiate themselves from existing competition.

INTRODUCTION DEFINITION & SCOPE

World over retail business is dominated by smaller family run chain stores & regionally targeted stores. Gradually more & more markets in western world are being taken over by billion dollar MNCs such as Wal-Mart, Sears, McDonald's, Marks and Spencer. Large retailers have managed to set up huge supply/distribution chains, Inventory Management systems, financing pacts & widescale marketing plans. In the backdrop of Globalization, Liberalization, & highly aware customers, a retailer is required to make a conscious effort to position himself distinctively to face the competition.

AN OVERVIEW OF RETAILING

Global Scenario
Retailing in more developed countries is big business & better organized than what it is in India. According to a report published by McKinsey & co., along with CII, Global retail business is worth a staggering US$ 6.6 Trillion. Organized sector has an up to 80% share of retail sales in U.S. Retail service sector accounts for a large share of GDP. According to US Department of labor, 22 million Americans are employed in Retailing Industry in more than 2 million retail sectors. As long as people need to buy, Retail will generate employment. Retailing is customer centric with an emphasis on innovation in products, processes & services.

AN OVERVIEW OF RETAILING

Indian Scenario
Retail scenario in India is Unique. Much of it is in Unorganized sector, with over 12 million retail outlets of various sizes & formats. Almost 96% of retail outlets are less than 500 Sq.ft in size. Per capita retail space in India being 2 Sq.ft. compared to US figure of 16 Sq.ft. & it is lowest in the world. Increasing number of nuclear families, working women, greater work pressure & increased commuting time, convenience has become a priority for Indian customers. Everything under one roof for easy access & variety of choice. This offers an excellent opportunity for organized retailers in India. Organized retailers account just 2% of estimated US$ 180 billion worth of goods that are retailed in India every year. This figure is equivalent to turnover of one single US based retail chain, WalMart.

AN OVERVIEW OF RETAILING

Two main factors for growth & development of organized retailing in India is Lower prices & benefits. Global major MNCs are showing keen interest in Indian retail market. International brands like Marks & Spencer, Samsonite, Lacoste, McDonalds, Swarovski, Dominos have come to India through the franchise route following the relaxation of FDI restrictions. Large Indian companies like Tata, Goenka & Piramal groups are investing heavily in this industry. Buying behaviour & lifestyles in India are changing & concept of value for money is fast catching on in Indian Retailing. According to report by Centre for Monitoring Indian Economy (CMIE), investments in Organized Retailing which include Shopping Malls, Retail Chains etc., - doubled from Rs. 1000 crores in January 2000 to Rs. 2000 crores in January 2001.

CHALLENGES IN RETAILING

Indian Retail Industry is in a phase of transition & face a whole new set of challenges. RPG group has started sourcing its fresh produce directly from farmers & about 350 farmers in Karnataka are doing contract for RPG. Food World can sell 15 20 % cheaper than market. Customers do not prefer to travel for more than 20 minutes to visit a store & building higher levels of traffic is a tough challenges. Indian Retailers face challenges in terms of Real estate, Legal, Work force & certain other issues. Indian Retailers have an impact on costs & efficiency of operations of the Retail Business.

CHALLENGES IN RETAILING

REAL ESTATE Location is considered to be a key component of Retail strategy of any store & Struggle because of shortage for new projects. Retail space is out of reach of Retailers due to Price & High demand. New Retail projects initiated by private houses are suffering because of lack of cooperation from local bodies in respect of security, hard infrastructure ( Power, Roads) & Public transportation facilities. WORK FORCE Traditional independent retailers practice child labour & come under stringent provisions of law forbidding child labour. Adult & experienced work force will increase cost of operations. Labour laws that protect store workers are not flexible enough to support organized formats of Retailing.

CHALLENGES IN RETAILING

OTHER ISSUES To survive, Companies must continually innovate ways to create stronger, more direct links with their customers. Retailers must focus on demanding customers who want customization, value & services. According to a Mc Kinsey report, if appropriate reforms are carried out, this sector is can create 8 million jobs in next 10 years, & can provide job opportunities for people transitioning from agriculture. FDI policy needs to be framed in such a way that it attracts foreign players to invest in India. FDI will bring in not only much needed capital to fuel growth but also sophisticated systems, know how & will shorten the learning curve. Challenges of urban & rural retailing will keep marketers busy for much of this millennium.

OPPORTUNITIES IN RETAILING

According to Associated Chambers of Commerce & Industry of India (ASSOCHAM), retail sector will create 50,000 jobs in next few years. Retail companies conduct Retail management courses in partnership with Management Institute, for developing comprehensive career growth & loyalty plans for existing employees. Top players like Pantaloon Retail (I) Ltd., Trent, Shoppers Stop, RPG group & Ebony are virtually on their toes. Pantaloon expects that in 2 years, it will not recruit any new managers from outside. estimated need is 1 lakh of employees till 2011 said Mr. Sanjay Jog, HR Head at Pantaloon Retail (I) Ltd. Pantaloon has a concept of partnership with 11 B schools including K.J. Somaiya, Welinkars, Narsee Monjre & IISWBM.

OPPORTUNITIES IN RETAILING

Students joins the course & they are given an appointment letter by Pantaloon to become Employees said Mr. Jog, Pantaloon. Pantaloon is planning to tie up with Ahmedabad based National Institute of Design to start a course in Visual Merchandising. Apex body of Indian Organized Retailers, Retailers Association of India (RAI) is also lending help hand to tide over shortage of employees in Organized Retail Sector. Trent has also started in-house learning programmes & now goes to Under Graduate colleges to recruit students. Job market is hugely receptive to this with more & more business schools focusing on the sector & large retailers setting up Retail academics.

RETAIL TRENDS IN INDIA

Indian Grocers were first in world to acquire professional Retail skills. Survey conducted by Federation of Indian Chambers of Commerce & Industry indicates that Indian retail sector will undergo a sea change in size as well as format in the next 10 years. According to survey, established players will reach saturation levels in metros by the year 2005 & shift their focus to other Class I cities. Though large retailers will control a substantial portion of market, small players will continue to survive on basis of personal relations with customers & proximity to homes. To compete with large retailers, small players will form cooperatives for purchasing, integrating with vendors at the source itself. Today, retailing provides jobs to roughly 15% of employable Indian adults & is biggest contributor to Indias GDP after agriculture.

RETAIL TRENDS IN INDIA

Growth potential of Industry in next 10 years, nearly one million new jobs will be created in the organized retail sector alone. Considering the opportunities, one needs to take a look at Organization & Institutes offering Retail education & training in India. Biggest task for Organized retail organizations is to locate & recruit knowledgeable, skilled & trained staff to handle their operations. To stay ahead of pack in todays competitive & challenging retail world, one must be properly equipped and trained. According to A.T. Kearney, windows of opportunities shows that Retailing in India was at opening stage in 1995 & now it is in peaking stage in 2006. In a developing country like India, a large chunk of consumer expenditure is on basic necessities, especially food related items.

RETAIL TRENDS IN INDIA

It is not surprising that food, beverages & tobacco accounted for as much as 71% of Retail sales in 2002. Remaining 29% of Retail sales are non food items sales through supermarkets & Department stores. High acceleration in sales through modern retail formats is expected to continue during next few years with rapid growth in numbers of such outlets in response to consumer demand & business potential. Retail sales are predicted to rise more rapidly than consumer expenditure during the years 2003 2008. Forecast growth in Retail sales during 2003 2008 is 8.3% per year. Modernization of Indian Retail sector will be reflected in rapid growth in sales of Supermarkets, Department Stores & Hypermarkets.

Socio economic and technological influences

REAL ESTATE

Retail Industrys real estate requirement will be in millions of Sq.Fts. This will release for productive use large area of land lying with Govt. agencies such as ports, railways, armed forces, mill land etc.

TOURISM / OUTBOUND SHOPPING

One of the features of any city that attracts a large number of tourists every year London, Singapore, Dubai, New York & so on is a well developed shopping environment. Organized Retailing will help significantly in developing our cities as tourist destinations. If well marketed & managed, it can enhance Govt. revenues, apart from spreading the word about Indian brands across the world.

Socio economic and technological influences

HIGHER GDP Organized retailing has huge potential, which could lead to higher GDP growth & generate employment. Organized Retailing could bring about transformation of agricultural supply chain, remove inefficiencies in distribution of consumer goods & improve productivity while providing consumers with a better range of products at better prices in a better ambience at same time.

Socio economic and technological influences

OUTSOURCING OPPORTUNITIES
Outsourcing opportunities for deals in retail processes & IT relating to Retailing will grow rapidly. Organized Retailing is a $200 billion industry & its outsourcing opportunities will be pretty big. In countries where retailing & modernization has progressed, it has favorably affected value capturing capacity & modernization of farming industry. Also reconstructed supply chain for all FMCG products, driven end customers prices down on a sustained basis, created employment. Been a source of considerable revenue for Govts both local & national, & in general been a catalyst for creating National Wealth.

Government of India policy implications on retails