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NEW WAYS OF REACHING OUT TO END USERS

Retailing

©2007 Academic Paper 158 Pages

Summary

The author has highlighted important aspects of RETAILING. For the last ten years, retailing in India has been continuously expanding its horizons from a small haatdi, a filthy kirana store, to multi operational, well organised SUPERMARKETS. Today, the Indian retail industry is one the largest in the world and is estimated to be worth over 450 billion USD. Due to this rapid growth in Indian retailing, global giant retailers like WAL-MART, GAP, and TESCO are trying to penetrate the Indian market. This book is addressed to students enrolled for Marketing at undergraduate levels.

Excerpt

Table Of Contents



Foreword
This book deals with one of the five "M"s of an industry i.e. MAN, MACHINE,
MANAGEMENT, MONEY AND MARKETING. There is constant innovation in all these 5Ms.
In the following pages, the author has highlighted Important aspect of RETAILING. Retailing is
continuously expanding its horizons since last ten years from a small haatdi, a filthy kirana store
to multi operational, well organised SUPERMARKETS. Indian retail industry is one the largest
in the world and is estimated to be over 450 billion USD. Due to this rapid growth in Indian
retailing, global giant retailers like, WAL-MART, GAP, TESCO are trying to penetrate in the
Indian market.
These days, retailing is turned into online retailing which is done using internet for selling and
purchasing of good and services.
Dr. Gurudutta has written this project as part of syllabus of MBA for Adam Smith University.
This work will surely help students of marketing and management in gaining indepth knowledge
of RETAILING. Since the project was written in the year 2007, it does not contain details about
the latest low cost retail distribution channel i.e. ONLINE TRADING, but then CHANGE IS
THE ONLY CONSTANT. In coming days, something new will come up in retailing.
Dr Pravin R Patel
Principal
Gujarat Commerce College,
Ahmedabad
9


CHAPTER ONE
THE RETAIL INDUSTRY
AN INTRODUCTION
Retailing is the
final step in the
distribution
of
merchandise -
the last link in
the
Supply
Chain -
connecting
the bulk
producers
of
commodities
to the final
consumers.
Retailing covers
diverse products
such as food apparels
consumer
goods,
financial services and leisure.
A retailer, typically, is someone who does not effect any significant change in the
product execs breaking the bulk. He/ She is also the final stock point who makes
products or services available to the consumer whenever require. Hence, the value
proposition a retailer offers to a consumer is easy availabilities of the desired product in
the desired sizes at the desired times.
In the developed countries, the retail industry has developed into a full-fledged industry
where more than three-fourths of the total retail trade is done by the organized sector.
11

Huge retail chains like Wal-Mart, Carr four Group, Sears, K-Mart, McDonalds, etc. have
now replaced the individual small stores. Large retail formats, with high quality
ambiance and courteous, and well-trained sales staff are regular features of these
retailers.
Retailing is the world's largest private industry giving US$ 6.6 trillion sales annually.
12

z Indian retailing
z Largest employer after agriculture - 8%*(Source :
www.eretailbiz.com
Dec
2002) of population
z Highest outlet density in world
z Around 12 mn outlets
z Still evolving as an industry and still has to go a long way.
TOP TEN RETAILERS WORLDWIDE
Rank Retailer
No of stores
owned
Sales in FY-00 US$
Millions
1
Wall-Mart Stores Inc. (USA)
4178
$180,787
2 Carrefour
Group
(France) 8130
$61,047
3
The Kroger Co. (USA)
3445
$49,000
4
The Home Depot, Inc. (USA)
1134
$45,738
5 Royal
Ahold
(Netherlands) 7150
$45,729
6 Metro
AG
(Germany) 2169
$44,189
7
Kmart Corporation (USA)
2105
$37,028
8
Sears, Roebuck and Co.
(USA)
2231 $36,823
9 Albertson's,
Inc.
(USA) 2512
$36,726
10
Target Corporation (USA)
1307
$36,362
Broadly the organized retail sector can be divided into two segments,
13

Æ
In-Store Retailers, who operate fixed point-of-sale locations, located and
designed to attract a high volume of walk-in customers, like Big Bazaar,
pantaloons and the
Æ
Non-store
retailers, who reach out to the customers at their homes or offices. like
Eureka forbes etc.
Apart from using the internet for communication (commonly called e-tailing), non-store
retailers did business by broadcasting of infomercials, broadcasting and publishing of
direct-response advertising publishing of traditional and electronic catalogues, door-to-
door solicitation and temporary displaying of merchandise (stalls).
MAJOR FORMATS OF IN-STORE RETAILING HAVE BEEN LISTED IN TABLE
GIVEN BELOW:
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.
Speciality Stores
Focus on a specific consumer
need, carry most of the brands
available.
Greater choice to the consumer,
comparison between brands
possible
14

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.
15

THE GROWTH DRIVERS
The United States of America (USA) has been a forerunner in the evolution of retailing.
Today, the organised players handle 80% of the retail trade in the US. Wal-Mart alone
handles 6% of the total retail trade and the top 50 retailers control 36% of the organised
retail. The factors that contributed towards the growth and consolidation of organised
retailing in the US are described below:
Baby boomers
The single largest contributor to the growth of organised retailing was the boom in
consumer spending after the Second World War. This was caused largely due an
increasing population, when America witnessed 64 million births in an 18 year period.
Consumer preferences changed and spending patterns became significant drivers for
detail expansion thus making retailing an attractive business.
Increased per capita spending
The effect of population increase was further accentuated by an increase in per capita
spending. Per capita personal consumption expenditure in the US, rose form $1,796 in
1959 to $22,391 in 1999. Even after adjusting for inflation, the per Capita Expenditure in
1999, was more than double of that in 1959.
Dual income families
Advent of dual income families also helped in the growth of retail sector. A dual family
can spend more but has very little time available for shopping. Thus, convenience and
speed of service became crucial parameters.
16

Urbanisation
Increased urbanisation has led to high customer density areas thus enabling retailers to
use lesser number of stores to target the same number of customers. Aggregation of
demand that occurs due to urbanization helps a retailer in reaping the economies of
scale.
Covering distances has become easier
With increased automobile penetration and an overall improvement in the transportation
infrastructure, covering distances has become easier than before. Now a customer can
travel miles to reach a particular shop, if he/she sees value in shopping from there.
From the supply side also, a number of developments fueled the growth of the retail
industry. Retailers understood the needs of the customers and realised efficiencies
through investments in Technology Infrastructure and Employees. The outcomes were
improved supply chains, increased service levels and satisfied customers.
RETAIL DEFINITION :
Retailing is the sale of goods or commodities directly to consumers.
EVOLUTION OF ORGANISED RETAILING
The organized retailing started in America where the mass retailing began in the late
1800s with Montgomery Ward marketing its products through general merchandise mail
order catalogs, which was very effective at that time for reaching a largely rural society.
17

· In
the
1940s, the population began its movement to the suburbs as the economy
shifted from an agricultural base to an industrialized nation. The first shopping
center was opened, which would eventually be a significant factor in the decline
of downtown retailing in the 1960s and 70s. JCPenney and Sears began their
national mass retailing expansion, and the use of credit cards as major retail
chains began.
· The
1950s witnessed the reaffirmation of the traditional family. The first planned
mall and franchised food restaurant opened. As people continued to flock to the
suburbs, the downtown areas began to decline. Larger suburban malls were
created and anchored by traditional downtown department store merchants.
Freeways were expanded and the sales of private automobiles grew, giving the
consumer a wider accessible area in which to shop. Discounters were born,
Korvetta being one of the firsts.
· The
1960s witnessed the growth of enclosed shopping centers, with department
stores anchors and specialty retail chains. The baby boomers were teenagers at
this point, leading to the growth of juniors-oriented stores and vendors. Women
became targets not just as mothers or wives as they entered the workforce and
consumers became more demanding in their expectation of quality and service.
· In
the
1970s, promotional pricing started to pick up the department stores as off-
price retailer emerged. The growth of retail space slowed, as sales increase
came at the expense of competition, not of market growth. This competitive
market led to the under performance of several retailers as gross margins
experienced downtown pressure from increased competition. Retailers in large
upscale markets recognised the time shortage created by dual-career families
and began to offer more services to assist in saving time.
18

· The
1980s witnessed the growth of off price retailing as a distinct, enduring retail
format. Retailers began to drop low profit lines. Acquisitions and mergers were
actively utilised as growth strategies, private brands were redeveloped to
enhance uniqueness and margins and offshore sourcing was developed to
compensate for margins.
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 described into
3 broad categories.
1. 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
19

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.
2. 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.
20

· 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, MerciaLincs and Stirling-Douglas.
3. 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 Neilsen and ModaCAD are example of products helping in
modeling a retail store design.
21

Forward
This book deals with one of the five "M"s of an industry i.e. MAN, MACHINE,
MANAGEMENT, MONEY AND MARKETING. There is constant innovation in all these 5Ms.
In the following pages, the author has highlighted Important aspect of RETAILING. Retailing is
continuously expanding its horizons since last ten years from a small haatdi, a filthy kirana store
to multi operational, well organised SUPERMARKETS. Indian retail industry is one the largest
in the world and is estimated to be over 450 billion USD. Due to this rapid growth in Indian
retailing, global giant retailers like, WAL-MART, GAP, TESCO are trying to penetrate in the
Indian market.
These days, retailing is turned into online retailing which is done using internet for selling and
purchasing of good and services.
Dr. Gurudutta has written this project as part of syllabus of MBA for Adam Smith University.
This work will surely help students of marketing and management in gaining indepth knowledge
of RETAILING. Since the project was written in the year 2007, it does not contain details about
the latest low cost retail distribution channel i.e. ONLINE TRADING, but then CHANGE IS
THE ONLY CONSTANT. In coming days, something new will come up in retailing.
Dr Pravin R Patel
Principal
Gujarat Commerce College,
Ahmedabad
22

CHAPTER TWO
RETAILING SCENARIO IN INDIA
THE EVOLUTION OF INDIAN RETAIL INDUSTRY
For Indian retailing, things started to change slowly in the 1980s, when India first began
opening its economy. Textiles sector (which companies like Bombay Dyeing,
Raymond's, S Kumar's and Grasim) was the first to see the emergence of retail chains.
Later on, Titan, maker of premium watches, successfully created an organized retailing
concept in India by establishing a series of elegant showrooms.
For long, these remained the only organized retailers, but the latter half of the 1990s
saw a fresh wave of entrants in the retailing business. This time around it was not the
manufacturer looking for an alternative sales channel. These were pure retailers with no
serious plans of getting into manufacturing. These entrants were in various fields, like -
FoodWorld, Subhiksha and Nilgiris in food and FMCG; Planet M and Music World in
music; Crossword and Fountainhead in books.
As of the year ending 2000 the size of the Indian organized retail industry was
estimated at around Rs. 13,000 crore. The various segments that make up the
organised retail industry along with their size are in table given below. Retail growth is
already gathering momentum and the organized retail industry is expected to grow by
30 per cent in the next five years and is expected to touch Rs. 45,000 crore in 2005.
The retail market size in India is estimated to be around $180 billion. Retailing provides
jobs to almost 15 percent of employable Indian adults and it is perhaps the largest
contributor to India's GDP.
But the flip side of the coin is that the average size of each of the retail outlets in India is
only 50 square feet and though a large employer, the industry is very unorganized,
fragmented and with a rural bias.
23

MAJOR TRENDS
The Indian retail industry is unorganized
There are nearly twelve million retail outlets in India and the number is growing. Two thirds of
these stores are in rural location. The vast majority of the twelve million stores are small "father
and son" outlets. According to the "Retailing in India" report published by the PwC Global Retail
Intelligence Program, share of the unorganized sector is 98%.
The Indian retail industry is fragmented
Retail stores in India are mostly small individually owned businesses. The average size of an
outlet is 50 s.q. ft. and though India has the highest number of retail outlets per capita in the
world, the retail space per capita at 2 s.q. ft per person is amongst the lowest in the world.
The Indian retail industry has rural bias
Nearly two thirds of the stores are located in rural areas. The retail industry in rural India has
typically two forms: "Haats" and "melas". Haats are the weekly markets: they serve groups of
10-50 villages and sell day-to-day necessities. They are frequently used as replenishment point
for the small village retailer. Melas are larger in size and more sophisticated in terms of the
goods sold. Mela merchandise would include more complex manufactured products such as
televisions.
Even in urban areas, organized in India is restricted to the top few cities of the country as shown
in Table given below:
Cities
Top 6
Next 4
Top 6
Next 4
1999
2005
(Expected)
Distribution of organized retailing
88%
12%
66%
20%
24

Thus, the growth potential for the organized retailer is enormous.
Segment
Market Size (Rs. Crore)
Textiles and clothings
4050
Jewellery 2,000-2,500
Consumer Durables
1500
Footwear 1,300-7,500
Food and personal care
1000
Non-Store retail
900
Luggage, watches and tyre
500
Books and music
390
RETAILING FORMATS IN INDIA
Malls
Most malls give floor space out to individual shops on lease, and these are enticed by
the economies resulting from the sharing of costs. India's largest shopping arcade
Spencar Plaza (600,000-sq-ft) in Chennai is an example. In malls like these, the
combined brand pull of all outlets is used to create a pull for the mall.
25

Branded Stores
Exclusive showrooms run by premium brands have been the catalysts in pushing up the
Indian retail scenario. This concept is now being used to introduce organized retailing to
the second rung towns. Madura Garments has started setting up exclusive outlets in
cities like Trichy and Thanjavur.
Departmental Stores
Departmental Stores are expected to take over the apparel business from exclusive
brand showrooms. Among these, the biggest success is K Raheja's Shoppers Stop,
which started in Mumbai and now has more than seven large stores (over 30,000 sq. ft)
across India and even has its own in store brand for clothes called Stop!.
Speciality Stores
Chains such as the Bangalore based Kids Kemp, the Mumbai books retailer Crossword,
RPG's Music World and the Times Group's music chain Planet M, are focusing on
specific market segments and have established themselves strongly in their
sectors.Absence of discounting as a dominant format of retailing in India is a glaring
peculiarity. The reasons are two-fold. Unlike most Western countries, Indian retailers
have much less bargaining power. The other reason is that the retailers themselves
have no economies of scale to offer discounts on their own. However, the scenario is
now changing. Increased investments and the entry of big business houses in retailing
is leading to the emergence of bigger retailers, who can both bargain with the suppliers,
as well as, reap economies of scale. Hence, discounting is becoming an accepted
practice.
26

TRENDS IN RETAILING IN THE INDIAN CONTEXT
Retailing in India is at a nascent stage of is evolution, but within a small period of time
certain trends are clearly emerging which are in line with the global experiences.
Organised retailing is witnessing a wave of players entering the industry. These players
are experimenting with various retail formats. Yet, Indian retailing has still not been able
to come up with many successful formats that can be scaled up and applied across
India. Some of the notable exceptions have been garment retailers like Madura
Garments & Raymonds who was scaled their exclusive showroom format across the
country.
Store design
Irrespective of the format, the biggest challenge for organised retailing is to create an
environment that pulls in people and makes them spend more time shopping and also
increases the amount of impulse shopping. Research across the world shows that the
chances of senses dictating sales are as much as 10-15% for certain categories. This
reason is good enough for organised retailers to bring in professional designers while
developing a new property. And, that is why retail chains like MusicWorld, Baristal,
Piramyd and Globus and laying major emphasis & investing heavily in store design.
MusicWorld spent three months in college campuses and metros studying the market
and talking to youngsters before starting work. The brand identity was created after
extensive research: a logo was designed and the look of the stores across the country
was decided upon. Apart from the visual impact, the functionality of the store design
was also taken care of. Listening posts have been created for people to listen to their
favorite album and an area in the center of the stores has been earmarked for celebrity
visits and promotions.
27

Experimentation with formats
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.
Retailer
Current Format
New Formats. Experimenting With
Shoppers'
Stop
Department Store
Quasi-mall
Ebony Department
Store
Quasi-mall, smaller outlets, adding
food retail
Crossword Large
bookstore
Corner
shops
Piramyd
Department Store
Quasi-mall, food retail
Pantaloon Own
brand
store
Hypermarket
Subhiksha
Supermarket
Considering moving to self service
Vitan Supermarket Suburban
discount
store
Foodworld
Food supermarket
Hypermarket, Foodworld express
Globus
Department Store
Small fashion stores
28

Bombay
Bazaar
Aggregation of Kiranas
Efoodmart
Aggregation of Kiranas
Metro
Cash and carry
S Kumar's
Discount store
Emergence of discount stores
What does Subhiksha In Chennai, Margin Free in Kerala and recent entrants like
Bombay Bazaar in Mumbai, RPG's - Giant in Hyderabad, Big Bazaar in Kolkata,
Hyedrabad and Bangalore have in common? Their products are below MRP.
Discount stores have finally arrived in India and they are expected to spearhead the
revolution in organisation retailing. Though this segment is growing, it is small compared
to international standards where around 60 per cent of the business comes from this
format. Internationally, the largest retailer in the world Wal-Mart is a discounter. These
discount stores have advantages of price, assortment dominance and quality assurance
and have the ability to quickly build scale and pass on the benefits. However, the
success would be for retailers who are able to build the scale fast and manage their
operations efficiently while offering value to the customer consistently.
Unorganized retailing getting organized
To meet the challenges of organized retailing that is luring customers away from the
unorganized sector, the unorganized sector is getting organized. 25 stores in Delhi
29

under the banner of Provision mart are joining hands to combine monthly buying.
Bombay Bazaar and Efoodmart have also been formed which are aggregations of
Kiranas.
In a novel move, six Delhi based restaurants have come together and formed a
consortium: NFC, to promote New Friends Colony, a posh locality in the Capital, as a
branded place in town. The aim is to increase footballs in the area, which is fast losing
its sheen to its closest and upcoming destinations such as large cineplexes, and malls,
which are backed by the corporate house such as 'Ansals' and 'PVR'.
All ventures didn't achieve a success
So many businesses started up and had closed down, but all the ventures didn't do
well. A lot of activity is happening in retail and though we do have may success stories,
not all ventures have been successful. Shoppers' Stop, for example, implemented JD
Edwards ERP, but could not reap much benefit due to less than optimal number of
operating locations.
A few references of other such less successful ventures is given below:
· Franchising, as a way to grow has not worked out well for Vitan, the second oldest
food supermarket. More than two third of its 19 odds outlets have either folded up or
snapped up ties with the parent.
· The foray of organized retailing in the small towns of India has met with limited
success. The notable example being Shoppers' Stop foray in Jaipur. The retailers
are now focusing their energies on the top six cities.
· India's oldest food supermarket chain, the Bangalore based Nigliris has been up for
sale for a few months now but yet to find takers.
30

· In Delhi, the Escorts group-promoted Nanz, a food supermarket has shut down after
being unable to find a white knight.
Source: Pwc Analysis
These failures and limited successes have happened both due to a lack of experience
and understanding of issues.
REGULATION IN THE INDIAN RETAIL INDUSTRY
Despite the size and the phenomenal potential that exists, retailing is among the lesser-
evolved sectors of the Indian Industry. Retailing as an industry is yet to be recognised in
India. The policy environment is currently seen to be unfavourable to organised
retailing.
Given the huge investments that need to be made, a look on the Foreign Direct
Investment Policy in the sector might be needed. Complex sales tax rates, octroi and
excise structures are major deterrents. Other impediments to growth of retail include the
bureacuracy, inflexible labour laws and multiple licensing requirements. Real estate in
India is also not geared to facilitate organised retailing.
Restrictions on FDI
The Indian economy is highly regulated and the most significant regulation is the
restriction of foreign ownership.
A strong FDI presence in retail sector is expected to not only boost the retail scenario,
but also act as a driving force in attracting FDI in upstream activities as well. This will be
more prominent in food processing and packaging industries because many large retail
chains also promote their own brands by way of backward integration/contract
31

manufacturing. The status of orgnised retailing in some South East Asian countries that
allowed FDI in retailing has been given in Table below:
Country
Organised Retailing
Traditional Retailing
Malaysia
50%
50%
Thailand
50%
50%
Phillipines
35%
65%
Indonesia
25%
75%
South Korea
15%
85%
China
10%
90%
India
2%
98%
In view of the demands made by industry and the need to boost the retail trade, the
Government is actively considering removing the restrictions. A recent note circulated
by the Ministry of Commerce has proposed permission for FDI up to 100 per cent in
retail trade subject to Government approval on a case-to-case basis. However, this
permission, if it is given, will be with lots of strings attached . Besides following rules on
minimum capitalisation, the foreign entrants will be expected to neutralise the outflow of
foreign exchange (repatriation of dividends) by way of export earnings on a year-to-year
basis.
32

The biggest opposition to allowing 100% FDI is the feared exit of the small retailers.
Currently, moves are on to counter these apprehensions and the players are keenly
awaiting the final decision from the Government.
Land and property Laws
There is a shortage of good quality retail space and rents are high for what is available.
Compounding these shortages are the following problems.
·
One of the drivers of property prices is the high demand for space in the cities.
This demand is exasperated by the flow of black money (undeclared for tax
purpose) that is generally invested in the property sector.
· Only Indians can own property in India, which complimenting the restrictions
placed on FDI, restrict the entry of foreign players.
·
Stamp duties on property deals are significant (12.5% in Gujurat and 8% in Delhi).
The lease alone can cost up to 6-10 per cent of sales while it's just 3-5 per cent
globally.
·
The initial urban planning of cities was done with smaller plots in mind which along
with rigid building and zoning laws make it difficult for procurement of retail space.
·
The urban land ceiling act and rent control acts have distorted property markets in
cities, leading to exceptionally high property prices.
·
The presence of strong pro-tenancy laws make it difficult to evict tenants and make
people reluctant to give real estate on rent. The problem is compounded by
problems of clear titles to own
33

Labour laws
The labour laws instituted to protect store workers are not flexible enough to support the
modern formats of retailing. These rigidities in the law constrain the operations of
modern retail outlets.
Working hours are restricted, with shops required to close one day of the week and the
hiring of part-time employees is difficult, However, in Bangalore, the State Government
has permitted flexibility in the use of labour without doing away with the associated
benefits accruing to it.
Taxes
· Corporation tax is 38% and this would be even higher at 45% for a foreign business.
· Even
essential
basic
foodstuffs
are taxed (8% on milk).
· The varying sales tax rate across states make supply chain management an even
more difficult task for retailers.
With the expected introduction of Value Added Tax (VAT) in April 2003, some of the
sales tax anamolies in the supply chain could get correct over a period of time.
However, retailers might also be additionaly burdened as given below:-
Changing tax structure: Retailer margins to come under VAT net
In the tax regime contemplated from April 1 2003, VAT is being phase wise imposed at
every stage between the manufacturer and the final consumer. Thus, margin payable to
the distributor and the retailer will also be taxed.
34

As retailers and wholesalers would be taxed under VAT, their margins will decline .
Companies, in turn, will come under pressure to increase trade and distributors margins
to the extent of the tax being paid by them, thus pushing up the cost of the product. The
MRP could therefore increase in order to neutralise the impact of VAT on margins.
Goods with a long distribution chain between the manufacturer and final consumer,
such as FMCG items and consumer durable, would be the worst affected.
GROWTH IN ORGANISED RETAILING
THE INDIAN SCENARIO
Organised retail is rapidly consolidating its position as India Inc's fastest-growing sector.
The combined net sales and net profits of the top-three retail chains posted growths of
60% and 75%, respectively, for the quarter ended June `05. This growth is has been
driven by the proliferation of new outlets, growing footfall conversion ratio and macro
factors like increasing consumer spend and access to low-cost consumer credit.
Net sales at Pantaloon Retail India (PRIL), Trent and Shoppers' Stop jumped 73%, 58%
and 37% respectively.
Pantaloon reported net sales of Rs 370 crore for the quarter ended June, spurred
mainly by addition of new outlets and a 50% turnover growth in its value retailing stores.
Pantaloon divides its retail presence into value retailing and lifestyle retailing segments.
· The value-retailing segment consists of hypermarket discount stores like Big
Bazaar and supermarkets in wholesale format like Food Bazaar.
35

· The lifestyle segment comprises premium category apparel and accessory
stores like Pantaloon Lifestyle. The company has 12 Pantaloon stores, 20 Big
Bazaar stores and 32 Food Bazaar outlets, with plans to add 20 more stores by
the end of '05. While the value retailing segment grew by 90%, net sales in the
lifestyle segment doubled to Rs 113 crore.
· Pantaloon Retail claims to have converted an impressive 30% of footfalls into
sales. It reported net profit of Rs 11 crore in this period, a jump of 128% over last
year. But operating margins were at 6.1%, down 90 bps due to an increase in
fixed costs related to capacity creation. However, with the interest outgo falling,
margins rose to 3% of net sales, up 70 bps over the previous year.
Shoppers' Stop, which listed on during this financial, posted sales of Rs 119 crore
against Rs 87 crore in Q1 of FY05. Shoppers' stop reported improvements in all key
operational indicators, like customer entry, conversion ratio and transaction size. It is
present in 20 locations with a total store area of more than 950,000 sq feet. It offers a
range of known brands along with its in-house labels like Stop and Life.
Net profit rose 19% to Rs 3.6 crore while operating margins fell from 7.1% to 6.9%.
Shoppers' Stop operates on a relatively lower gross margin as most of its sales come
from a basket of big brands. Margins stood at 3%.
Trent posted net sales of Rs 74 crore for Q1 of FY06. Trent has 16 stores spread over
380,000 sq ft. It largely sells in-store brands, with sales from private labels having more
than 80% of value share. While gross margins on private labels are 45-50%, branded
apparel fetch 25-30%. Substantial improvements in operating efficiencies saw Trent
post a net profit growth of 60%. Net profit stood at Rs 5.2 crore for Q1 of FY06 with
margins at 7.1%.
36

CONCLUSION
The past 4-5 years have seen increasing activity in retailing. Various business houses
have already planned for few investments in the coming 2-3 years. Though the retailers
will have to face increasingly demanding customers and intensely competitive rivals,
more investments will keep flowing in and the share of organised sector will grow
rapidly.
Organised retailing in India is surely poised for a takeoff and will provide many
opportunities both to existing players as well as new entrants.
37

CHAPTER THREE
LIFESTYLE RETAILING
INTRODUCTION
CONSUMER'S EXPERIENCE IN LYFESTYLE -RETAILING
READYMADE
GARMENT
RETAILING
BETTING
ON
DOMESTIC
MARKET
GROWING
RETAIL
SPACE
EXPANDING NETWORK IN GARMENT RETAILING
38

CHAPTER THREE
LIFESTYLE RETAIL STORES
INTRODUCTION
Spearheading the retail boom is the concept of Lifestyle Retailing, the growth sector of
tomorrow. Until a decade ago, there were few national players in the apparel business
and consumers purchased goods based on their past experience with the product.
National brands were few and far between and moreover, customers purchased their
daily wares out of badly maintained and ill planned stores.
With the retail industry getting more organised, this has accelerated the desire of
customers to shop from spaces that are more in keeping with their lifestyle needs. More
emphases on developing customised products, good presentation and packaging,
inviting store environments and enhanced customer service have propelled lifestyle
retailing to new heights.
Lifestyle retailing basically means the retail stores, dealing with ready-made garments,
Jewellery, footwear, cosmetics, kids-wear, men's-wear, toys, all available under single
roof and are nowadays stealing the show.
Customer demands have changed with changing lifestyles. Like in clothes, casual wear
is now divided into partywear, outdoor wear, sportswear and lounge wear, something
that wasn't there earlier. Economy is on an all-time high, spending is in, saving is out.
Bank balances are not for security, but for paying up endless EMIs. As lifestyles
change, retailing is crystallizing from being an assortment-selling to a specific lifestyle
retailing phenomenon.
39

Details

Pages
Type of Edition
Originalausgabe
Year
2007
ISBN (PDF)
9783954899470
ISBN (Softcover)
9783954894475
File size
973 KB
Language
English
Publication date
2015 (June)
Grade
Third Year
Keywords
Retailing Supermarket Expansion India Retailer Commerce
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Title: NEW WAYS OF REACHING OUT TO END USERS
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