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Retailing Condition In India

Indian Retailing scenario is very different from global one. India’s retailing sector is mostly unorganized and scattered all over the country. India’s per capital retailing space is lowest in the world. There are about 12 million retail outlets in India of various size and formats. There are only 9 retails outlets per 1000 persons in India. They contribute 94% to the total retails sales in India. Due to increasing nuclear families, less time available for people to actually go to various shops to purchase different items. They want everything under single roof to save their time in purchasing products. India is a great marketplace with potential customers in the niche and the middle class segment. The growth and development of organized retail segment is driven by two main factors- low prices and benefits the consumer gets. Big Indian companies like Reliance Retail, A.V. Birla Retail, Essar Telecom Retail, Future Group, Shoppers’ Stop Group, Tata, Goenka have started to invest heavily in this sector as they saw a great potential in this industry. Some of the organized retailing units in India are Future Group’s Big Bazaar , Reliance Fresh, Subhiksha and in value apparel retailing, Vishal Megamart. It has been expected by 2020 share of organized retailing sales in India would be 20% of total retails sales in India.

Potential in Retail Growth

Retail Sales Projected 2025

Retail Sales 2007

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History of Organized Retailing in India

It emerged in 19th Century in Calcutta (now known as Kolkatta). The Hogg Market, popularly known as New Market is one of the kolkatta earliest shopping centres. It was started by East Indian Railway company and named after the then municipal commissioner of Calcutta Sir Stuart Hogg. Till today the New Market is a premier shopping area in Kolkatta. Its red brick Gothic clock tower bears testimony of being the first shopping centre of India. Today it has product ranging from linen to cakes and fruits to fishes at a reasonable price and this has made to sustain its popularity till today among the metro customers of Kolkatta.

Drivers of Retailing in India

Consumer Pull Behavior

In traditional time it was a supply dominant market. Customer has to purchase what the manufacturers provided them. Now in today scenario it is the customer who decides what a manufacture should produce i.e. products must fulfill customer’s need. Due to liberalization of the consumer good industry which started in mid eighties let to a great evolution Indian Consumer. It had a major impact in the metros but also affected consumers of small towns

Increase in Earnings

In the last decade India’s middle and high income populations has grown very high at a rate of over 10% per annum. The growing high income population led to increase in demand for consumer good, leading to the proliferation of high quality/ priced products.

Media Exposure

The media has exposed the Indian consumers to various different lifestyles of other countries which raise their aspirations and expectations about the shopping- they want more choice, service, variety and a pleasant experience while shopping as compared to their traditional shopping style.

Indian Consumer Behavior Change

Due to change in family structure of India i.e. nuclear families becoming more significant there has been a significant change in the Indian Consumer Behavior. Now a Indian consumer has very little time to go to various markets and purchase good. Instead what they prefer to have everything under one roof at best price. In Earlier days children’s were never a part of shopping. But in a modern day where nuclear parents have very less time to spend with their children’s they prefer spending as much as time they can with their children even while shopping also. As the supermarkets combine two elements i.e. food and entertainment together in a single pack, it attracts a large youngsters and couples to come and shop there.

Waking up of Rural Market

One of the most emerging markets of India is the rural market. Over one third of demands of key consumer durable and non durable items come from rural India. Manufactures after noticing this factors had started to develop new products i.e. shampoo sachets, Ruf ‘n Tuf Jeans) and marketing strategies with rural consumer in mind.

Improvement in Supply Chain

With the increased liberalization, continuous reduction in custom duty consumer good sectors has changed a lot. Entry restrictions for multinationals have been removed. All these factors have enabled retailers to source a large range of products and also get a better improved margin. A study says there are more than 18000 stock keeping units while most of the Indian retailers have the space for at most 5000-7000 units. Seeing a opportunity here, a number of real estate companies and other corporate have started to invest into investing in malls and other retail formats.

Expansion of Family Owned Business

Some of the successfully expansion of Family Owned Business includes The 450 crore Viveks (40 year old Chennia consumer durable chain), The 3,558 crore Pantaloon’s apparel retail business and Bangalore’s food retailer Nilgiris. With the new development retail scenario in India, traditional ‘bania’ shops will have a hard time to survive with their old business model. The new generation of traditional business families is far more aware of the cost of the real estate and of higher margins in retailing business.

New Emerging Entrepreneurs

The tremendous opportunity in the retail segment has attracted new entrepreneurs with ideas and venture capitalists with funds to invest in this business. Subhiksha, a discount grocery store in Chennai has soon expanded it stores with a total of 50 in less than three years and till 2007 over 700 across India. Banks such as ICICI are also now willingly to invest in retail business.

Foreign Retailers eye on Indian Retail Market

Seeing a great opportunity in Indian Retail market many foreign retail giants like Wal Mart are planning to enter Indian Retail Market. But due to FDI restrictions foreign retailers cannot start their operations on their own but still a number of companies such as Tesco, Kingfisher, Metro, Carrefour and Ahold are exploring entry options into the market. Spencer was the first MNC to get into business which is a tie up between the RPG Group and Dairy Farm International, a $10 billion Hong Kong base company, and a part of the Jardine Matheson group.

Advancement in Technology

Introduction of technology in various retail operations in a retail store which includes inventory management, bills and payments, database to manage customer information and their feed back details, used of bar coding, point of sale terminals and Management Information Systmes has changed the whole way to doing retail business in India.

Hidden Challenges in Indian Retail Industry

Retail Differentiation:

Jack Trout in his book “Differentiate or Die” said unique selling preposition is a critical mission in a business activity. In traditional retailer business competitors were very less. Now in today scenario retail is very rough. There is very little difference between competitors. Differentiation could be in the service, products, locations, way of delivery or the combination of all these. Price cannot be a differentiation factor any one can reach that price level. A good Unique Selling Preposition will not require an advertising campaign to communicate to the customer. By a very good Unique Selling Preposition your product would be noticed and will drive an excellent word of mouth and success for the business.

Supply Chain Management:

India lacks a strong supply chain as compared to other countries like United States of America or Europe. The supply chain in India is very long. There are many intermediaries in the whole chain. A typical supply chain looks like Manufacturer, National Distributor, Regional Distributor, Local wholesaler, retailer and finally consumer. If a global retailer such as Wal Mart decides to setup in their operations in India they need to start the whole supply chain from scratch. This change will affect the current supply chain and will not adjust with the current system. Other than fragmented supply chain there are other many areas such as transportation which is a major area of concern for retail business. The concept such as automated warehousing is still very new to India. The result of poor transportation facility results in significant loss or damage to the product during shipping.

Retailers tackling the challenges of establishing efficient supply chain:

Tanishq

Tanishq is a part of Titan Industries Ltd., India’s largest watch maker. It is only fine jewellery brand in India with a national presence and is a market leader in branded jewellery market segment. Tanishq has it own company controlled retail with over more than 108 boutiques stores spread over 61 cities. They have a network of 32 CFA (Clearing and forwarding Agents). With this network of Clearing and Forwarding Agents they need to increase the visibility in their supply chain system. They tied up with Wipro InfoTech, India third largest software’s solution company to put together the solution. Wipro designed a web based solution for them Goldmine to facilitate the flow of information between various distribution network. It became a integration platform which integrate various exiting information system in the company such as SAP/ Oracle, DOS based point of sales system without any modifications, Wipro developed Goldmine using .NET framework with an ASP .NET presentation layer.

With the use of Goldmine in their supply chain tanishq addressed many challenges. The area included reducing the cycle time, decreasing cost and increasing efficiency in areas of tracking of movement of goods and sales, order status, order visibility and communication.

Tracking the status of Goods in Transit

The new system provided information to CFA of the goods starting from when it gets dispatches from factory till it reaches boutiques. This system is very helpful incase of return cases from the boutiques to CFA and from CFA to factory. This helped the organization to keep a track of records of goods in transit and no of goods getting defected during transition.

Online Placing Order

Goldmine solution made the ordering of the goods by the boutiques automated. System keeps the track of status of every raw material and as soon as the status of any raw material goes down system refers to online product catalogs and price lists before placing the order and after deciding the supplier automatic mail is sent to the supplier regarding the details of the order. Goldmine

Status of the order

The web based system provides visibility of the order placed by the boutique at every stage. This is done through a very good synchronization between the Oracle database used in the factory and the web based solution. Boutiques users now need to call up to the factory and sent them email in case of late delivery of the order. They can check the status of the order through online solution from anywhere

Sales Visibility

With the sales information flowing from boutiques in to Goldmine management can now analyze the effectiveness of a particular marketing programmes and promotions at boutique level according to product category and price category. Bestseller information for all boutiques is easy available in case customer asks for bestseller for the month.

Communication and Exception Reporting

Information related to local gold market, current market situation, product catalogues are transmitted in real time. System has the capabilities such as content uploads and bulletin boards. The company is having more than 40,000 product variants, so the capability of the system is also very crucial. System has also the capability to discuss the queries raised by customers regarding producing and modifying new and existing products. Discussion between factory user and boutique user is tracked and if customer case query is not being handled properly a alert is sent to them .

Future Group:

Future Group is the India largest retails business group led by Kishor Bhiyani. The firm’s leading company is Pantaloon’s Retail (India) Limited has over 450 stores in around 40 countries of India including New Delhi, Mumbai, Ahemdabad and many more. Some of it retailing formats include Big Bazaar, Pantaloons, Food Bazaar and an online retails format www.futurebazaar.com. Future group has joint ventures with some the world giants such as Italian insurance major Genrali, French Retailor ETAM Group, UK based Lee Cooper and many more.

Supply Chain and Logistics

Future Group has identified 40 anchor vendors to achieve their economies of sales of around US$45 million. It has also assured that its small vendors reach the turnover of around US$ 1 million with a annual growth of 40 percent. They are also making efforts to bring their vendors online for easy trade transactions. Future Group launched Future Logistics programme to improve their logistics department. But seeing a huge opportunity in this area company is looking to offer this service to all of its vendors targeted to reach a turnover of Rs 700 Crore by 2010. Initial stage of this programme will be focused on surface modes of transport i.e. road and rail and on later stages sea and air may be taken into considerations. Future Group believes in making strong supplier relationship through partnership mode thus avoiding exploitative supplier buyer philosohphy. Future Group has a very a strong IT setup for back end operations which increases reliability of their retail business. Future Group is also taking various measures to reduce its warehouse cost as the in the country like India where most of the retails stores are located in the main area of the city , where the rent is rising very high and storage space is very less this factor plays a major role. Future Group adopts the methodology of vertical integration in their supply chain to implement the concept of zero defects in their whole supply chain system right from raw material, production, wholesale and retail.

Big Bazaar

Big Bazaar is chain of hypermarkets in India with over 100 stores located all over India in cities like Mumbai, New Delhi, Ahmadabad and many more. It is subsidiary unit of Future Group. It was founded in 2001 with headquarters in Jogeshwari Mumbai. Core Competency of Big Bazaar is it best pricing which it provides throughout the year to its customers and number of products which it provides and all at best prices in the market. They are combing two important factors i.e Quality at best price. Their product ranges from categories electronics, fashion and jewellery, furniture, children toys, apparels and many more.

Pricing Strategy:

EDLP (Everyday Low Pricing) or Value Pricing

It is a Pricing Strategy which assures consumers the lowest price available to them without discount promotions or comparison shopping. It helps big bazaar to survive periodic market breakdowns, saves distributing and processing cost of manufactures coupons.

Promotional Pricing

It includes three strategies. First one is financing at low interest rates, Second is psychological Discounting and third one is special event pricing. Psychological discounting is advertising a product with heavy price such as “was Rs 2395 now only Rs1800”. Special event pricing is reducing prices in a retail store at some special event in a year for eg just after Christmas, or at Gudi Padva to attract the customers to come to retail showrooms for shopping.

Differential Pricing

Big Bazaar employs differential pricing strategy which means for the same products they charge differently depending on the type of consumers and time of purchase.

Reliance Retail

Reliance Retail has setup new retail trends in India. Reliance aims at making a strong and healthy partnership with the millions of India farmers and takes this relationship with farmers with end-consumer to a new level. Reliance is creating a viscous circle which includes millions of Indian farmers, small shopkeepers and consumers which will create a win win situation for them Reliance has already spend over Rs .25000 Crore to create a art of retail infrastructure in India. Reliance in planning launch hypermarkets, supermarkets, seamless malls/ department stores and many other stores in around 1500 towns and cities in India. This will create huge jobs for unemployed in India and will also generate various indirect employment. Reliance entered into retails market in India with its launch of convenience store format knows as “Reliance Fresh”. The stored was opened in November 2006 in Hyderabad. Till 2007 it expanded to 96 stores covering cities like Jaipur, Chennai, NCR, Guntur, Vijayawada and Visakhapatnam. Reliance opened their first consumer durables and digital product store known as ‘Reliance Digital’ at the Shirpa Mall in Faridabad. Reliance is planning to make this digital store a one stop solution for all technological requirements with all brands and products ranging from home appliances, consumer electronics, information technology and telecommunication. Reliance has also launched India’s largest hypermarket named ‘Reliance Mart’ at iskon Mall in Ahmedabad in August 2007. It has more than 95000 products ranging from various categories such as FMCG foods products, Non FMCG food products, home care products, apparels, IT, automotive accessories, lifestyle products, foot wear and more. The store also offers various servies of these products also such as tailoring, shoe repair, watch repair, gifting services and laundry services all within the store. Currently there are 435 reliance fresh stores in India in over 45 towns. Apart from these formats reliance is also planning to open retails business in many other formats in India.

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