RETAILING

ASSIGNMENT-1

Submitted by:

S.Mahendran (07mba059)

II MBA - A

1. List out the drivers that is changing the retail industry?

Introduction:

The retail sector in India is witnessing a huge revamping exercise as

traditional markets make way for new formats such as departmental stores,

hypermarkets, supermarkets and specialty stores. Western-style malls have begun

appearing in metros and second-rung cities alike introducing the Indian consumer

to a shopping experience like never before.

Drivers Changing Retail Industry:

The new value drivers for consumers today are quality and

contemporary design. While price was the predominant purchase determinant in

the pre-1980s, quality coupled with price assumed importance in the mid-1980s.

The 1990s witnessed an assortment of quality, range and price. Now it's

contemporary design coupled with quality that's determining purchase decisions

across some 30 million Indian consumers.

What is also favouring the domestic market to warm up to the retail

and apparel fashion industry, was the current demographic profile. The largest

number of population in India will be in the 20-44 year age group in the next few

years. This profile does not exist even in a huge market such as China.

The downside was that while the market was ready, and the customers

were willing to pay, there were not enough suppliers. Very few marketers have

pumped in sustained investments and efforts in their businesses. This needs to

change. Ms Simone Tata, Chairperson, Trent, the retail venture of the Tata Group,

called upon investments in technology, quality control and training as the required

focus areas for the industry. "Investments in superior and efficient technology, and

not fancy buildings, is what the industry needs. Also, manufacturing has to take a

leap jump to survive," she said.

Another issue was about streamlining of operations to improve

efficiencies. Mr H. Ramanathan, Managing Director, Landmark Group, said, "As

an industry, we have not been able to streamline our processes for supply chain

management completely. A whole lot of interaction is required between brand

managers and retailers for this. However, there has been improvement, and the

industry is gradually getting there.

Recent Facts :

• Retail, India’s largest industry and the country’s largest source of employment

after agriculture, has the deepest penetration into rural India, and generates more

than 11% of India’s GDP.

• The government allows 100% Foreign Direct Investment (FDI) in cash and carry

through the automatic route and 51% FDI in single brand retail through Foreign

Investment Promotion Board (FIPB).

• The Economic Survey 2007-08, has suggested a share for foreign equity in all

retail trade is 100% in respect of luxury brands and other specialised retail chains.

• The back-end costs without distribution centre costs, or what is called retail

administration costs in retail jargon, is around 2.5% to 3% of sales.

2. Elucidate the role of internet technology in retail industry in redefining

the entire value chain?

INTRODUCTION

Supply Chain Management has generated substantial interest in recent

years for a number of reasons. Managers in many industries now realize that

actions taken by one member of the chain can influence the profitability of all

others in the chain. Many international business researchers are of the opinion that

increased globalization of markets and increasing international competition imply

that firms in all nations will face similar, if not identical, competitive

environments. In India due to liberalization of economy, the companies are facing

acute competition in the international markets. Many manufacturing companies are

forced to improve the quality of their products and reduce their manufacturing

costs.

The e-Business applications are divided into three categories:

*E–Commerce

*E–Procurement

* E – Collaboration

Features of Supply Chain Management

* Customer focus

* Retaining existing customers

* Streamlining of operations

* Minimum Fixed Cost

* Elimination of paper work

* Just in time

* Transparency at all levels

* Developing multiple supply sources for a multiple components

* Customer value enhancement and cost reduction

E-COMMERCE

Buying and selling on the Internet is known by the generic term e-commerce, just

like e-mail, which is the way of sending mail through the net. Business on the net

is classified into B2B (Business to Business), B2C (Business to Consumer) and

C2C (Consumer to Consumer).

B2B transactions are largely between industrial manufacturers, partners, and

retailers or between companies.

B2C transactions take place directly between business establishments and

consumers.

B2B sites are essentially the net meeting points for buyers and sellers of the

industrial world. They serve a limited number of customers. The Turnover would

be many times that of the most B2C sites and most importantly they make profits.

B2C sites are offering low value items CDs, Cassettes, Food, Toys, Flowers, and

Cards etc because no complicated logistics are involved.

C2C sites don't form a very high portion of web-based commerce. Most visible

examples are the auction sites. Basically, if some one has something to sell, then he

gets it listed at an auction sites and others can bid for it.

E-PROCUREMENT

The Internet offers a natural platform to facilitate efficient procurement as

numerous buyers and sellers find each other and transact according to some pre-

specified protocols. The following are the procurement strategies available for a

manufacturer.

* Strategic Partnership

* Online Search Strategy

* Combined Strategy

1. Strategic Partnership Strategic partnership strategy is to develop a long-term supply relationship with a specific supplier.

2. Online Search Strategy Online Search Strategy is to shop online for a better price.

3. Combined Strategy The combined strategy is to combine both – sign a long-term purchase contract with a supplier upto a certain level, but if necessary additional quantity may be purchased online.

E-COLLABORATION

We define e-collaboration as business-to-business interactions facilitated by the

Internet. These include information sharing and integration, decision sharing,

process sharing and resource sharing. There are many new cases that examine

different elements of collaboration from information sharing and integration to

process and resource sharing.

Several cases have highlighted the impact of information integration on some

particular aspect of the supply chain. Some of the cases are focused on managing

supply while others are more focused on the customers.

3. Evaluate the changes experienced by particular product industries (FMCG,

Vegetable, Pharma). Types of retail formats employed in India over the

period.

Evolution of organized vegetable retailing in India:

For ages, Indians have been buying groceries from small unorganized Khirana (grocery)

stores. In fact, these stores have dominated the Indian retail market for centuries. Theses

traditional Khirana stores often operated in small dark areas with cereals, pulses and

other edible items lying open in the good company of rodents. Today the scenario has

changed; even the owners of small stores are conscious of how their shops look. They

have introduced bright colors in their sign boards; the lighting is now improved and

products are properly stocked in shelves. Further, in the past few years, there has been a

sudden emergence of organized retailing in various product categories. Several retail

chains have established a large number of outlets in many of Indians major cities

focusing on groceries and other goods of daily needs. In more recent times, they have

also extended in a big way into the marketing og perishables such as vegetables and

fruits.

The Indian retail market is the most fragmented market in the world with just 3% of the

entire retailing business being carried out by the organized sector. Of the reminder 97%

marketing much of the business is handled by local Khirana (grocery) stores.

In years to come, organized retailing is expected to grow 25 to 30% annually and also

extend its reach to the smaller cities. Lot of factors has contributed to growth of

organized retailing in India, including the entry of the organized sector into vegetables

retailing.

Stores like food world in Bangalore, Chennai and Hyderabad pioneered the concept of

organized retail and also introduced vegetable and fruits section in their stores. Although

the space allocated for vegetable and fruits was quite less compared and to groceries, the

idea of buying clean and well displayed/ packed fruits and vegetables was accepted very

well by young consumer who had no time or inclination to go to the often congested and

unsightly conventional market. The organized sector stores have now evolved into

acquiring vegetables and fruits straight from the farmers and they even book the future

harvest.

POPULAR RETAIL FORMATS:

Hypermarket:

This is the mother of all retail formats and offers everything from foods to dry grocery to

hardware to electronics. Typically, it would span more than 100,000sq.ft. of space and

located outside the city center. Pantaloons, Big Bazaar, Spencer’s hypermarket and

Trents star India fit this category.

Supermarket:

It is focused on foods, grocery and household items and location in residential areas.

Food world is an example of this.

Departmental stores:

Like this Name reveals, this format carries various “department” such as apparels, house

ware, furniture, jewellery and appliances, but is much smaller than a hypermarket in

terms of space and stock keeping units (SKU). Shoppers stop, Westside and lifestyle are

three such stores.

Convenience stores:

Accessibility is what this format offers and therefore, is conveniently located in crowded

neighborhoods. Eg. Nilgris in the south and 24/7 in Delhi.

Exclusive outlets:

It stocks a single brand, and could be either company owned of franchised. Everyone

from Raymond and Madura garments to LG and Samsung to Maruti and Hyundai have

it.

Discount store:

This formats proposition is that it offers no frills such as spacious, well lit and air-

conditioned retail stores, but makes up by marking down MRP. South subhiksha is the

best know example of it in India.

Cash-n-carry:

This is B2B format, where the retailer sells to shopping establishments and large

institutional customer. Metro in Bangalore is a cash-n-carry.

4. Identify a list of factors which differentiate the location decision of a

particular retailer of a readymade garments/apparel store/gift shop.

For several reasons, store location is often the most important decision made by a retailer.

First, location is typically the prime consideration in a customer’s store choice. For

instance, when choosing where you are going to have your car washed, you usually pick

the location closest to your home or work. Also, location decisions have strategic

importance because they can be used to develop a sustainable competitive advantage.

Now with more retailers entering the market there is a dearth for prime locations and as a

result the price getting higher.

Shopping goods:

Shopping goods usually imply products with a high unit price, which are

purchased infrequently and involve more intensive selling effort on the part of the store

owner. Price, quality and features of such products are compared across stores by

customers. Shopping products are often sold in only selected franchised outlets.

Examples of such products are men’s suits, automobiles, and furniture.

For store handling shopping goods, the quality of the traffic is more important.

Certain kinds of shopping goods are purchased by only certain segments of shoppers. It

is sometimes the character of the retail establishments that governs the selection of a site.

An apparel store retailer may prefer to locate in a suburb or in a mall, which is accessible

to car-owning consumers. An example of this is Westside, which sells mostly own brands

and has a middle-class clientele, prefers to locate in central business districts or major

secondary business districts frequented by its target customers.

An excellent site for a shopping goods store is next to a department store or

between two large department stores when there is heavy flow of traffic between them.

Another good site is the one between a major parking area and a department store.

Specialty goods:

Specialty goods usually imply products with high unit price (although price is not a

purchase consideration) which are bought infrequently, which require a special effort on

the part of the customer to make this purchase, for which no substitutes are considered,

and which are generally sold in exclusively franchised outlets.

Eg. Precious jewellery, expensive perfume, fine furs, and gifts.

Stores catering to this type of consumer may use isolated locations because they

generate their own consumer traffic. Stores carrying specialty goods that are

complementary to certain other kinds of shopping goods may desire to locate close to the

shopping goods stores. The specialty goods retailer should locate in the type of

neighbourhood where the adjacent stores and other establishments are compatible with

the specialty store’s operations.

5. List out the factor should a supermarket chain consider locating as a free

standing store on a main street or an upcoming mall.

A retailer has to choose among alternate types of retail locations available. It may locate

in an isolated place and pull the customers to the store on its own strengths, such as a

small grocery store or paan shop in a colony which attracts the customers staying close

by. Or, it may locate in a business district where there are a large number of retails

establishments. If it decides to locate its store in a business district, it may have a choice

ranging from the large shopping centres in the heart of the city or smaller shopping

complexes in a suburb.

Free-Standing Location:

Where there are no other retail outlets in the vicinity of the store and therefore, the store

depends on its own pulling power and promotion to attract customers.

So the factors that should be considered are

1. Vicinity: The corner of an intersection which offers two distinct traffic streams

and a large window display area is usually considered a better site than the one in

the middle of a block.

2. Quantity of traffic: For stores handling convenience goods, like a supermarket,

the quantity of traffic is most important.

3. Parking Facility: In general for any organized retail outlet the parking space is

important, so when considering the supermarket in the important street parking

facility is much needed.

4. Level of competition: There should not be a competitor to a free standing store so

one should have first mover advantage to be a free standing store or retailer.

5. Lack of variety to shoppers: Free standing store may provide lack of variety to the

shoppers and this should be taken in to account to provide a variety, as shoppers

may not have the option to get the same in neighbourhood shops.

6. Stock outs: If a product is out of stock then customer may not get it from others in

the case of is free standing retailer so stock out should be avoided to maintain

customer loyalty and satisfaction.

7. Store Layout: There should be enough space for both arrangement and moving

space for the customer to move freely.