Session 14

Retail Management

Review of concepts
Evolution of Retailing Industry
Indian Retail Data

What is retail?
Retailing is the last stage in the
movement of goods and services to
the consumer.
Retail consists of all activities
involved in the marketing of goods
and services directly to the
consumers for their personal, family
or household use.

Definition - contd.
It can also be termed as the set of
business activities that adds value to
the products and services sold to
individual customers / households.

Who is a retailer
Retailer: a person, agent, agency,
company or organization instrumental
in reaching the goods, merchandise,
or services to the ultimate consumer

Benefits of Retailing
To Customers Time utility, space utility,
form utility, additional services, credit etc.
To Manufacturers Bridging the various gaps.
Risk sharing.
Platform for local advertising and sales
promotion.
Feedback on product / service problems.
Source of market trends & competitive
information.

Typical
Customer Services provided by
Retailers
Credit
Delivery
Alterations/
Installations
Packaging/Gift
wrapping
Complaints/Retur
n handling

Gift certificates
Trade-ins
Trial purchases
Special sales
Extended store
hours
Mail and phone
orders

Retailing
The final frontier of distribution
channel
Direct interaction with end customers
Great influencing power on the
choice of the customers
Growing interest of companies in
managing this contact end better to
improve their sales & be closer to the
final customers

The increasing interest by

companies open their own retail
business
Getting closer to the customers to
have more control
Closest strategy to direct selling
Demand for better products and
services from the customers
Display the entire range and the
application as the company desires
Control the price
Check counterfeit products

Services Retailing
Selling primarily services rather than
merchandize
Airlines, Auto repairs, Education,
Health & beauty, Home maintenance,
Restaurants, Movie theatres etc.

Characteristics of
Service Retailing
Intangibility

No patent protection possible

Difficult to display/communicate service benefits
Service prices difficult to set
Quality judgment is subjective
Some services involve performances/experiences

Characteristics of
Service Retailing
Inseparability

Consumer may be involved in service production

Centralized mass production difficult
Consumer loyalty may rest with employees

Characteristics of
Service Retailing
Perishability

Services cannot be inventoried

Effects of seasonality can be severe
Planning employee schedules can be complex

Characteristics of
Service Retailing
Variability

Standardization and quality control hard to achieve

Services may be delivered in locations
beyond control of management
Customers may perceive variability
even when it does not actually occur

Evolution of Retailing
Industry
Urbanization The shift from agri-based
economies to industrialization has created
concentrated pockets of wealth and growth of
retail demand.
Desire of control Companies are aspiring to
get as close as possible to the final consumer
for controlling the market behaviour.
Growing diversity of retail formats
competition has lead the firms to look at gaps
in the service delivery landscape and evolve
new business models.

Evolution contd.
Rapid changes in consumer behaviour
demand patterns are continuously
changing.
Shorter PLCs and faster NPDs opportunity
for new retailers to emerge.
Growth in IT Last 40 years have
witnessed unprecedented pace of IT
development and retail is riding on it.
Globalization Maturing of domestic
markets, better Supply Chain management
skills & dilution of trade barriers have
fostered this phenomenon

Retail the industry

(worldwide) 2012 (Trillion $)

Retail The Biggest Industry

50 retail organizations in Fortune 500.
2000-10, Retail has generated 18%
shareholder returns; more than Banks (9),
Insurance (15.2), FMCG (11.2)
The largest corporation in the world by
sales turnover Wal Mart ( a retail chain)
Started in 1962, became no.1 on Fortune
in 2002. Turnover $ 473 billion in 2013.

Understanding the
difference
Unorganized
Mostly one outlet
Pop & Son for
generations
Even if multi-outlet,
no standardization
of merchandize &
processes
No store-branding
Unregistered with
low taxes
No bill given

Organized
2 or more outlets
Corporate backed
Standardization of
processes, products,
positioning etc.
Use of technology
Retail brand building
Fully compliant
Cut bill for every
transaction

Overall Retail in India

The retailing industry in India is largely
unorganised and predominantly consists of small
independent, owner-managed shops
There are also an unaccounted number of lowcost kiosks (tea stalls, snack centre, barbershops
etc,.) and pushcarts/mobile vendors
15 million+ retail outlets.
Total size: 38,93,425 crore ($650 billion app.) in
2014.
Expected to touch $1026 billion in 2017.
Growing at 16% p.a.
Second largest sector after agriculture.
Source: India Retail Report 2011

Kirana and independent stores

Contd....
Kirana, Mom and Pop, and family owned
bulk of the retail
retail shops represent
business in India
These are usually shops with a very small
area stocking a limited range of products,
varying from region to region according to
the needs of the clientele
About 78% of these retail stores are small
family-owned businesses utilising only
household labour
Highly competitive free land, cheap
labour, unregistered, zero-taxes
Able to give home-delivery & credit.

 Contd.

Contd.

These are low cost structures, mostly

owner-operated, with negligible real
estate and labour costs and little or no
taxes to pay
Branding is not the key decision
criteria for a majority of customers at
the traditional retail outlets
particularly in the small townships and
rural India
Conventionally, retailers source the
merchandise from wholesalers or
distributors and sell it to end-users

Modern Retail Forecasts for

India
Organized Retail Market touched Rs.
3,81,078 crore ($64 billion) in 2014.
This is roughly 9.8% of the overall retail
size.
Growth rate of about 30% compared to
about 16% for overall retailing in India.
Expected to reach $ 150 billion at
current prices by 2017 (15% of overall
retail at that time).
Will it happen?

Cooperatives and government

Birth of Modern
Retail in India:
bodies
Cooperative Movement
India has large number of
retail stores run by cooperative
societies and government
bodies across product
categories
Such initiatives were taken for
various socio-economic factors
primarily to promote industries
and employment in rural areas

Contd.
CSD, Super Bazaars and the Kendriya
Bhandars along with the administered
price Public Distribution System are
organized retailing formats
Examples:
Mother Dairy, Delhi and Fruit & Vegetable
Project
Public Distribution System
Central Cottage Industries Emporium

Evolution of Modern Retail

in India
60s: Initially Co-operative movements
KVIC, KB, Super Bazaar etc.
70s (Era of Tailor Made): Some
independent big retailers Akbarallys,
Chirag Din, Nallis
Pioneers in retail chains Raymonds, Bata,
Titan, Vimal (But still no pure retailers ;
activity being manufacturers driven.)

Growth of Modern Retail in

India (contd.)
90s ( Era of retail growth): Dept
Stores (Shoppers Stop, Pantaloons,
Viveks, McD, Pizza Hut)

Growth of Modern Retail in

India (contd.)
Late 90s (Era of Malls, Restaurant
chains, Multiplexes) combination of
shopping & entertainment

What is fueling the Retail Revolution

in India?
Favorable demography Young India. 54%
below 25 years of age.
Growing working population & disposable
incomes.
High GDP growth.
Proliferation of nuclear families. DINKS &
Empty Nestors growing.
Urbanization.
Consumption increasing. Absence of
expenditure guilt.

Factors contd.

Increase in working women

Easy credit availability
Profusion of brands
Power of media. Window to the world
Growing aspirations & awareness
Increased global travel by Indians
and foreigners coming to India

Overall Retail Pie

Organized Retail Pie

Challenges in retail business In

India
Challenges

Retail industry in India is in a phase

of transition and faces challenges
Deciding the right pace of expansion
is critical
Retailers in India face other
challenges in terms of
1. Real estate
2. Regulations
3. Manpower

These challenges have an impact on

the costs and efficiency of operations
of the retail business

Roadblocks to retail
development in India

Lack of recognition as an industry

High cost of real estate
Lack of adequate infrastructure
Taxation at multiple levels
Restrictions on FDI

GRDI Ranking
Country

2012
Rank

2011 Rank

Change

Brazil

Chile

China

+3

Uruguay

-1

India

-1

Georgia

Unranked

N/A

United Arab
Emirates

+1

Indian Retail sliding?

2013: GRDI rank 13
2014 GRDI rank 20

Performance Metrics

Footfalls
Conversion ratio
Average ticket size
SPSF
SSS
SPE
GMROI