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8/8/2019 I-1_The Future of Retail_sachin Bansal_ver1.1

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The Future of Retail

By- Sachin Bansal

Roll No: 04


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All businesses that sell goods and services toconsumers fall under the umbrella of retailing, butthere are several different formats.

For example, there are department stores,discount stores, specialty stores and even seasonalretailers.

The retail business, in India, was dominated bysmaller family-run or regionally-targeted stores,but this market is increasingly being taken over bybillion dollar multinational conglomerates like

Wal-Mart and Sears. The larger retailers have managed to set up huge

supply/distribution chains, inventory managementsystems, financing pacts and wide scale marketingplans.


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Different categories in retail

Hard - These types of goods include

appliances, electronics, furniture, sporting

goods, etc. Sometimes referred to as "hardline

retailers."

Soft - This category includes clothing, apparel,

and other fabrics.


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The gradual Shift

Till 1980s, India knew only kirana stores.

Things started to change slowly after that, withcompanies like Bombay Dyeing, Raymond's, S Kumar's

and Grasim opening their company owned outlets. Later on, Titan, maker of premium watches,

successfully created an organized retailing concept inIndia by establishing a series of elegant showrooms.

In recent years in line with the global retail scenario,India has seen different retail formats beingexperimented with.

They are as follows.


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Continued

Retail Formats

In-store Retailers: Operate through fixed point

of sale outlets located and designed to attracta high volume of walk-in customers. Also

referred to as brick-and mortar format.

Non-store Retailers: Reach out to the

customers at their homes or offices through

direct selling, tele marketing and e-commerce.


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Important factors to the success of a

retail store

Type of good

Convenience

Specialty Accessibility,

Visibility

Traffic

Competition

Location Costs


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Factors on which the future of Retail

sector in India Depends on.

Retail growth in the coming five years is expectedto be stronger than GDP growth.

This will be driven by changing lifestyles and by

strong income growth, which in turn will besupported by favourable demographic patterns.

Also on the extent to which organized retailerssucceed in reaching lower down the income scaleto reach potential consumers towards the bottomof the consumer pyramid.

Growing consumer credit will also help inboosting consumer demand.


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Problems

However, Distribution continues to improve, butit still remains a major inefficiency.

Poor quality of infrastructure, coupled with poor

quality of the distribution sector, results inlogistics costs that are very high as a proportionof GDP, and inventories, which have to bemaintained at an unusually high level.

Distribution and marketing is a huge cost inIndian consumer markets.

It's a lot easier to cut manufacturing costs than itis to cut distribution and marketing costs.


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Continued.

However, Distribution continues to improve, butit still remains a major inefficiency.

Poor quality of infrastructure, coupled with poor

quality of the distribution sector, results inlogistics costs that are very high as a proportionof GDP, and inventories, which have to bemaintained at an unusually high level.

Distribution and marketing is a huge cost inIndian consumer markets.

It's a lot easier to cut manufacturing costs than itis to cut distribution and marketing costs.


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Regulations in Retail Industry

The policy environment is currently seen to beunfavourable to organised retailing. Some of theimpediments to growth of retail include the following: -

Restrictions in FDI Creating Additional Jobs

Diminution of Kirana Shops and Retail Stores

Access to Larger Financial Resources

Benefit to Consumers

Supplier Quality Enhancements Enhanced Supply Chain

Increased Exports

WTOs Cross Retaliation


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Land and Property Laws. Only Indians can own property in India, which

complimenting the restrictions placed on FDI, restrict theentry of foreign players.

Stamp duties on property deals are significant. The leasealone 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 smallerplots 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 toexceptionally high property prices.


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Trends affecting the Indian Retailing

Industry Changing age profile & Disintegration of joint family

India is believed to have an average age of 24 years for its population asagainst 36 years for the USA and 30 years for China. A younger populationtends to have higher aspirations and spends more as it enters the earningphase. Also, nuclearisation of families has led to enhanced demand.

Growing disposable incomeMore Indian households are getting added to the consuming class withthe growth in income levels. Also, with declining interest rates, theaversion of domestic consumers to taking loans is also fast disappearing.

GlobalizationGrowing media penetration is leading to a convergence of aspirations ofvarious classes of consumers, bridging the rural-urban divide. The modernconsumer cannot be satisfied by any product or service that is lesser inquality than the best offered in any other place on the globe


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Modern Trends

Forecourt RetailingThis concept recently shot into limelight with oil companies trying to milk thisrevenue stream for more moolah. Apart from dispensing fuel, the stores offervalue added services to busy consumers. This strategy is currently aggressivelybeing pursued by IOC, BPCL, HPCL and Reliance.

Trade Parks

A new emerging concept in retailing is the establishment of business complexesparticularly for international trade. Some of the examples are India ExpositionMart set up by Handicraft Export Promotion Council in Greater Noida,International Home Deco Park (IHDP) set up by a group of private investors inNoida and World Trade Park coming up in Jaipur. IHDP will provide Internationalbuyers ready access to 60 world class exporters from India in the HomeFurnishings category. This would be beneficial to buyers as they would not have togo to remote towns (where the infrastructure is not good) to see the designs andsamples of exporters. Exporters apart from getting increased visibility will also getother facilities such as design library, design studio, forwarding services and so on.The parks are built to promote trade and are open to international buyers andbuying houses only.


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Retailer Formats Product Categories

Wal-Mart

Discount, Hypermarkets,

Warehouse Clubs,

Neighbourhood Stores,

Convenience Stores

Food & Grocery, Furniture &Furnishings, Auto Services,

General Merchandise,

Electricals, Financial Services,

Appliances, etc.

Tesco

Supermarkets,

Hypermarkets,

Neighbourhood Stores,Convenience Stores,

Internet, Catalogue

Food & Grocery, General

Merchandise, Clothing,Home Products, Fuel,

Automobile, etc.

CarrefourHypermarkets, Convenience

Stores, Supermarkets

Food & Grocery, Clothing,

General Merchandise, etc.

Comparison of the various formats

International Format


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Retailer Old FormatNew Format Experimented

With

Shoppers' Stop Department Store Quasi-mall

Ebony Department StoreQuasi-mall, smaller outlets,

adding food retail

Crossword Large Bookstore Corner shops

Piramyd Department Store Quasi-mall, food retail

Pantaloon Own Brand Store Hypermarket

Subhiksha SupermarketConsidering moving to self

serviceVitan Supermarket Suburban discount store

Foodworld Food SupermarketHypermarket, Foodworld

express

Globus Department Store Small fashion stores

In line with the global evolution, Indian Retailing has also

witnessed a series of experiments across the country with

new format being tested


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Other opportunities

The importance of the rural market isunderlined by the fact that the rural marketaccounts for close to 70 per cent of toilet-soap

users, 38 per cent of all two-wheeler, half ofall TV sets, fans, pressure cookers, bicycles,tea, salt and toothpowder sold.

What is more, the rural market for FMCGproducts is growing much faster than theurban counterpart


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The Revolution Ahead

The last few years have seen rapid transformationin many areas like: -

Scalable and profitable retail models are well

established for most of the categories. Indian consumers are rapidly evolving and

accepting modern formats overwhelmingly

Retail space is no more a constraint for growth

India is on the radar of global retailers Suppliers / brands are willing to partner with

retailers


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Digital Retailing

Future Group has some aggressive plans lined upfor FutureBazaar.com, the digital retailing arm ofthe group.

It is understood that the budget allocated for thecurrent multi-media campaign is estimated in therange of Rs 10-12 crore.

Supporting the campaign, FutureBazaar.com is

also the associate TV sponsor for the India-Australia Test and ODI series starting October 1,2010.


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The Home page Of Future bazaar


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The company has collaborated with leadingmobile phone brands in the country to offerdeals that are exclusive only to

Futurebazaar.com and thus providing themaximum value across any online or offlinemobile retailing network.

Purchases can be made either online or onphone (1800 200 9495), thereby giving theconsumer multiple purchase modes.


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To be seen in the futureMICROFINANCE PUSH Wal-Mart, Metro Cash & Carry and the Future Group have

forged partnerships with microfinance and financialinstitutions to sell merchandise on credit to rural kiranas.

The MFIs not only provide credit, but also double up as

valuable intermediaries that collect orders from the kiranas,source the merchandise from big retailers and deliver it atthe kiranas doorstep.

Whats more, the MFIs do not charge any interest on thecredit extended to the kiranas. I

nstead, they receive a commission from the retailers, forwhom this is a small price to pay in order to win newmarkets and grow faster.


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Future of retail in India The Indian retail sector is ready to take on challenges from

global retail players such as Wal-Mart because unlike them,they have a better understanding of the Indian consumers

psyche.

The Indian customer is looking for an emotional connection, a

sense of belonging. To be successful any retail outlet has to be localised.

The customer should feel that it is a part of his culture, his

perceived values, and does not try to impose alien values or

concepts on him.

The focus should be on the Indian horizon before looking for

retail opportunities in other countries because India itself is a

big retail market.

In the near future India will see a phenomenal growth of

shopping malls and speciality retail stores.


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Indian customer is not keen to buy something just because itis sold by an international company.

Ultimately, it boils down to how much localisation and

adaptation the company is willing to do for India.

Almost all large companies worldwide are looking to establisha base or stake in the Indian market.

In this scenario, the Indian retail sector itself must seize the

initiative to realise the dreams of contributing to a prosperous

and booming economy.

The focus should be on the Indian horizon before looking for

retail opportunities in other countries because India itself is a

big retail market.

In the near future India will see a phenomenal growth of

shopping malls and speciality retail stores.

Continued


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References

http://www.retailnu.wordpress.com

http://www.investopedia.com

http://www.about.com

http://www.allbusiness.com

http://www.coolavenues.com


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Thanks

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