Retail Marketing

Retail industry in india $410bn by Oct. 2010 Growing at 22% annually

15 million retail outlets (32% in urban areas) Very high retail density (shops/ households) 75% stores sell FMCG Food sales account for over 60% of total

retail sales

Retail formats- classification

Store- based vs. E-Tailing

Ownership Based: Independents: mom-and-pop stores Chains Franchising: McDonald’s, Petrol Pump stores Leased department: Food courts, Cosmetics in

stores Consumer Cooperatives: Apna Bazaar

Store based formats

Type ExampleRetail Mix Elements

Location Assortment Services Prices & Promotions

Traditional departmental store

Shopper’s Stop, JCPenney

Business district, shopping centre, or isolated store

Extensive width & depth, average to good quality

Good to excellent

Average to high prices, heavy advertising

Full-line discount store

Wal-Mart, Target

Business district, shopping centre, isolated store or strip centre

Extensive width & depth, average to good quality

Slightly below average to average

Low prices, price oriented, moderate sales force

Specialty store

Planet M Business district, shopping centre, or regional mall

Very narrow width, extensive depth

Average to high/ excellent

High prices, heavy use of displays

Hypermarket Big Bazaar, Carrefour

Stand-alone Average Low Low

Supermarket Food Bazaar, Subhiksha

Business district, shopping centre, or regional mall

Narrow width (mainly groceries), extensive depth

Average Average prices, self-service

Box (limited line) store

suburban shopping strip, or isolated store

Few items, few SKUs, Low priced private label brands

customer brings bags

Self-service, price lower than supermarkets

Convenience store

Kirana stores

Every neighbourhood

Average width and depth (fill-in merchandise)

Personalized service, home delivery

Average to above average prices

Variety store Dollar shop

Business district, shopping centre, or isolated store

Good width and depth, below average to average quality

Below average

Self service

Off-price chain

T.J. Maxx, Filene’s Basement

Business district, suburban shopping strip, or isolated store

Moderate width but poor depth, low continuity

Below average

Newspaper advertising, brands not advertised

Factory outlet

Out-of-the-way site or discount mall

Moderate width, poor depth, some irregular merchandise

Very low Little, self-service

Membership Club (Warehouse stores)

Sam’s Club

Isolated store or secondary site

Moderate width, poor depth, low continuity

Very low Little

Flea market Chor Bazaar

Isolated site, race track or arena

Extensive width, poor depth, variable quality

Very low Limited, self-service

Drugstore Planet Health

Stand alone, strip centre

Very deep Average Average to high

Home improvement Centre

Lowe’s Stand-alone, power strip centre

Very Deep Low to high Low

Store based formats

Choosing a retail format

Shoppers Retailer’s Objectives

Competitors

Define Value Proposition

Find out the enablers and deterrents in the environment

Find out what it takes to deliver the value proposition

Location

SizeMerchandis

eDisplay Service Price

Decide on store or non-store format and their derivatives

RETAIL FORMATS - FUTURE GROUP’S FORMATS

Reasons for preference

Proximity Merchandise Ambience

Determinants Positioning of the

store Product categories Brands

Retailing and Brand Management

A brand manager’s objectives Make sure the brand is present in the right retail

channel Ensure visibility and shelf space at retail outlet Pricing and in-store experience in line with the

brand’s positioning Get data to monitor the brand and competition

A retailer’s objectives Maximize profits from each product category Get maximum return on investment in space,

goods Build a consistent brand image for the store itself

THE RETAILER’S PERSPECTIVE

Money can be made from 3 sources Customers- The price that is charged Suppliers- bargaining power Operations- Efficiencies in SCM and store

management

The business model of a retailer reveals where it is making money from: Walmart- Discount store, Suppliers & Operations High-end departmental stores: Premium pricing

Retail Pricing StrategiesCompetition-oriented Pricing

Retailer uses competitors’ price as a guide

Demand-oriented Pricing

Retailer determines the range of prices acceptable to the target market

Flexible Pricing The practice of offering the same products and quantities to different customers at different prices

High-low Pricing Use of high everyday prices and low leader specials on featured items

Leader Pricing Retailer advertises and sells selected items in its goods/ service assortment at less than the usual profit margins

Everyday Low Pricing(EDLP)

Retailer strives to sell its goods and services at consistently low prices throughout the selling season

Prestige Pricing Pricing based on the assumption that consumers will not buy goods and services at prices deemed too low as they associate quality with price

Variable Pricing Altering prices to coincide with fluctuations in costs or consumer demand

EDLP is possible only for products having stable demand Fashion products have Hi-Lo pricing Luxury products have a constant high price, with only a

clearance sale to flush out stocks

Category Management

SleepersProducts that don’t move fastNeed to be pushedOptimize no. of items Tie in promotions with winners

WinnersCash GeneratorsHigh share, grow fasterMaximize cash generation, defend against competitors

QuestionablesNo fit with store strategies and plansDelete poorest performing itemsEvaluate the options of increasing prices

Morning StarsHigh share of retailer’s salesSteady or declining growth rateReview pricing mixRejuvenate or milk the category

Assessing Economic Performance Gross Margin Return on Inventory (GMROI)

gross margin percentage X sales-to-stock ratio OR

gross margin/ average inventory Gross Margin Return on Floor Space (GMROF)

gross margin/ space provided Direct Product Profitability

The shopper profiles would vary according to the format, the product categories carried and the positioning of the store.

Shopper profile for an upgraded Kirana (viz.Subhiksha):

Shopper Profiles

•Occasionally used items e.g. cooking ingredients, packed food etc•Ease in finding the product in store

•Variety – category & brands• Repeat visit, loyal to store• Purchase decision at store• Variety displayed in shelf

• Pre-planned purchase• Large use of coupons• Long list – variety in category might increase shopping basket

Major challenges Delivery- shipping, distribution and warehousing Customer acquisition cost Building Trust

The most successful online ventures are those that do not involve physical movement of goods. Eg. E-commerce, banking, ticket booking and reservations

A shopper will only buy those products online for which she is ready to wait a day or more, because the delivery of the product takes days

Reducing prices is not a good option for an E-tailer. Customization can provide value.

E-Tailing

Loyalty programs have to take into account the target customer

A database can help the retailer target well Targeted programs

Give focus Enable targeted communication Reduce marketing spend Result in higher conversion

Problems with card programmes: targetting during purchase

Customer Relationship Management

A book-store’s customers

Customer Relationship Management

Behavioural (Patronage)

Attitudinal (Loyalty)

Hi LoHi Tribes WannabesLo Others Non-

Customers

• Tribes: Most profitable customers. They should be leveraged by involving them in events- say, a reading session by an author

• Wannabes: Loyal, but do not spend much. Ask them to volunteer for events to give them social gratification. Thus, they can be used as ambassadors.

On entering a store, people usually move along walls and to their left.

End-of-aisle promotions work the best. Destination categories are usually kept at the end of the store,

so that shoppers pass through the length of the store to get to them, thereby increasing the chances of purchase of other categories.

The arrangement of products on walls depends upon the product category being displayed- for shoes, people like to compare different brands and even pairs- hence shoes are placed next to each other on a wall. In case of apparel, shoppers make stand-alone purchase decisions, hence they can be stacked on top of each other.

Fixtures, floor and ceiling materials, wall finishes, lighting, music and scent all contribute are all important parts of the store layout.

Exterior and interior signage(the store graphics) communicate the store’s identity to the customer.

Store layout and design

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Emergence of multiple franchisee model — This model is largely adopted by

companies offering products in value and semi-premium branded segments to enable greater

scale,limit dependence on a few players and leverage local hands-on knowledge of the market.

Jumbo King, the Mumbai-based snack major,and PepsiCo India are following this model.

Rural retailing — Rural India accounts for more than 70 per cent of all Indian households

and close to two-fifths of the total consumption pie.Retail companies have realised the

importance of tapping the rural consumer base.For example, DCM Shriram's Hariyali Kisaan

Bazaar and ITC's Chaupal Sagar.

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Key trends … (1/4)

• Collaborative model for international products — Joint ventures (JVs) are emerging as

the preferred model for new entrants,wherein foreign players leverage the knowledge of the

local player and focus on key issues such as quality,pricing,promotions and brand

management. Key examples include the Bharti Group JV withWal-Mart for retail and

wholesale retail and the Staples JV with Pantaloon Retail Ltd to launch its products in the

Indian market.

Sources: The Retailer, Ernst & Young, October 2009; Retail rivals close ranks to beat blues 'The Economic Times, August 10, 2009

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Vertical integration — Retail companies are looking at integrating their business models

vertically to explore additional sources of revenues.For example,Dabur India Ltd’s retail foray

into health and beauty retail business through a retail chain known as‘NewU’,and Nokia

opening its concept stores.

Collaboration in back-end resource sharing — Another interesting trend in the Indian

retail market is the collaboration of back-end resources by aligning their sourcing operations

and sharing private labels,logistics, warehouses and hiring details on a transactional payment

basis.For example,the Future Group, theAditya Birla Group, the RPG Group and the

Reliance Group have come together to reduce their operational costs and improve margins.

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Increasing market reach — Retail companies now seek to increase their footprint inTier

II,III,IV cities and towns to capture the domestic demand.For example,the Raymond Group

has plans to open more than 200 stores across the country by mid-2011 and theTata Group's

retail venture,Westside,is planning to expand its franchisee base inTier II andTier III cities.

Innovation in new retail formats — Retailers are not only investing in their

operations,but are also exploring the possibility of adopting new business models or formats.

For example,Reliance Retail has devised a new business model under which it will open small

employee-friendly retail outlets at the premises of large corporate organisations.The

Network18 group has ventured into online and on-air retail marketing and distribution

through HomeShop18.

Sources: Raymond to open 200 stores, The Hindu, January 10, 2010; Westside plans expansion via franchise route in small cities, The EconomicTimes, May 22, 2008; Reliance Retail to open outlets at corporate, The Economic Times, January 10, 2010

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Player

Tata Group

Future Group

Store brands (products)

Landmark (books and music),Croma (multi-brand electronics), World ofTitan (watches),

Tanishq (jewellery), Titan Eye+ (eye wear), Westside (lifestyle retail store),Star Bazaar

(hypermarket chain), FashionYatra (family fashion store)

Central (shopping mall),Big Bazaar (hypermarket),Pantaloons (fashion outlet),Blue Sky

(sunglasses), Brand Factory (multi-brand readymade garment),KB's Fair Price (essential

products),Navaras (jewellery), Planet Store (multi-brand sports and lifestyle speciality retail),

aLL (fashion garments),Ethnicity (Indian ethnic wear), HomeTown (home needs), eZone

(electronics),Furniture Bazaar (home furniture),Electronics Bazaar (under Big Bazaar,

electronics stores), Home Bazaar (satellite version of HomeTown),Collection I (lifestyle

furniture),Gen M & One Mobile (mobile phones), M-Port (electronics),Shoe Factory

(footwear) and Depot (books and music)

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Key players* … (1/3)

Player

Reliance Group

RPG Group

K Raheja Group


Reliance Fresh (neighbourhood store),Reliance Mart (supermarket),Reliance Super (mini-

mart),Reliance Digital (consumer durables and information technology),RelianceTrends

(apparel and accessories),RelianceWellness (health,wellness and beauty),iStore (Apple

products),Reliance Footprint (footwear),Reliance Jewels (jewellery),RelianceTimeOut (books,

music and entertainment),RelianceAutoZone (automotive products and services) and

Reliance Living (home ware,furniture,modular kitchens and furnishings)

Spencers (multi-format retail store),MusicWorld ( music and home video store) and Books &

Beyond (book store)

Shopper's Stop (clothing,accessories,fragrances,cosmetics,footwear and home furnishing

store),Crossword (book store),Inorbit Mall (fashion,lifestyle,food and entertainment) and

Hyper City (hypermarket)

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Player

Landmark Group

Bharti Group

Mahindra Group

Aditya Birla Group

Vishal Retail


Lifestyle (garments and accessories),Home Centre (household and furniture,garment and

retail),Splash (high street fashion brand) and Funcity (family entertainment brands)

Field Fresh (fresh and processed fruits and vegetables — multiple-format store)

Mom and Me (infant and maternity care)

More (supermarket and hypermarket formats,earlier known as“Trinethra’)

Vishal Mega Mart (multiproduct stores)

* This list is indicative

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Retail Marketing

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