CHAPTER 1 : INTRODUCTION 1.1: GENERAL INTRODUCTION Retailing consists of the sale of goods or merchandise from a fixed location, such as a department store , boutique or kiosk , or by post, in small or individual lots for direct consumption by the purchaser. Retailing may include subordinated services, such as delivery. Purchasers may be individuals or businesses. In commerce , a "retailer" buys goods or products in large quantities from manufacturers or importers , either directly or through a wholesaler , and then sells smaller quantities to the end-user . Retail establishments are often called shops or stores. Retailers are at the end of the supply chain . Manufacturing marketers see the process of retailing as a necessary part of their overall distribution strategy. The term "retailer" is also applied where a service provider services the needs of a large number of individuals, such as a public utility , like electric power . QuickTime™ and a decompressor are needed to see this picture. Shops may be on residential streets, shopping streets with few or no houses or in a shopping mall . Shopping streets may be for 1 RAMAIAH INSTITUTEOF MANGEMENT STUDIES Page 33
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CHAPTER 1 : INTRODUCTION
1.1: GENERAL INTRODUCTION
Retailing consists of the sale of goods or merchandise from a fixed location, such as a
department store, boutique or kiosk, or by post, in small or individual lots for direct
consumption by the purchaser. Retailing may include subordinated services, such as
delivery. Purchasers may be individuals or businesses. In commerce, a "retailer" buys
goods or products in large quantities from manufacturers or importers, either directly or
through a wholesaler, and then sells smaller quantities to the end-user. Retail
establishments are often called shops or stores. Retailers are at the end of the supply
chain. Manufacturing marketers see the process of retailing as a necessary part of their
overall distribution strategy. The term "retailer" is also applied where a service provider
services the needs of a large number of individuals, such as a public utility, like electric
power.
QuickTime™ and a decompressor
are needed to see this picture.
Shops may be on residential streets, shopping streets with few or no houses or in a
shopping mall. Shopping streets may be for pedestrians only. Sometimes a shopping
street has a partial or full roof to protect customers from precipitation. Online retailing, a
type of electronic commerce used for business-to-consumer (B2C) transactions and mail
order, are forms of non-shop retailing.
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Shopping generally refers to the act of buying products. Sometimes this is done to obtain
necessities such as food and clothing; sometimes it is done as a recreational activity.
Recreational shopping often involves.
DOES CONSUMPTION DRIVE RETAIL?? OR, DOES RETAIL FORCE CONSUMPTION??
The latter has perfect logic. The problem isn’t enough disposable income in this country. There are innumerable statistics to prove that there is. The problem really is that the disposable income isn’t being driven into modern retail as much as it should.
Why is that?
Perhaps we are not giving them compelling reasons to shop with. Perhaps our product innovation, or our retail experience, just lacks that extra something. Perhaps they don’t generate the mysterious “WOW!” emotion that all successful global retailers constantly aim at.
As we enter 2009, retailers across the country speak about the vision of change for the year ahead. It is evident that customer retention is top of mind for every retailer, regardless of format or size. It is clear that only by innovating on practices and services offers will retailers in India be able to not just retain customers, but also expand the consumer base.
Naturally, consumption needs to be pushed also for propelling manufacturing and overall economic prosperity of the country. Which in a macro environment, would result in higher disposable incomes and therefore, expenditures.
Bear in mind, however that growth in disposable incomes may not transfer proportionately to domestic retailers. If our retailers from the smallest to the largest do not offer experiences and services that match consumer expectations, the disposable income will be spent elsewhere. As more an more Indians travel overseas, more and more outflows of foreign exchange can be expected. That is, unless we offer these consumers compelling reasons to walk into our stores.
The trick is in continuous innovation. Innovation in product, in operations, in retail environment, in services, in everything.
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Retail is not only an important aspect of the economic structure but very much a part
of our lives . Although trading of goods have been in existence since the olden days .It
is only in the recent past that the buying and selling of goods have become more of
format and a brand dominated activity .The traditional form of independently owned
businesses co-exist along with the organized retail.
QuickTime™ and a decompressor
are needed to see this picture.
Organized retail has emerged in a big way since 2000 onward and with that we are
witnessing the emergence of new forms of retailing.
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1.2: INDUSTRY PROFILE
TYPES OF RETAIL FORMAT
Convenience store
Chain of stores
Franchise
Speciality store
Departmental store
Supermarket
Hypermarket
Shopping mall
Shopping plaza
Factory outlet
CONVENIENCE STORE
Ideally located close to residential areas to enable target customers have easy
accessibility and select convenient merchandise such as beverages ,ready to eat
snacks , grocery etc.
EX;- Friendly neighbour hood grocery stores
CHAIN OF STORES
A single retailer establishes a chain of stores with its exclusive store design, synergistic
merchandising plan, promotion and service strategy and so on.
EX;- Raymond chain
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FRANCHISE
Retail stores owned and operated by individual on behalf of and licensed by a big
supporting organization.
EX;- Pizza hut, NIIT, Mc Donald s
SPECIALITY STORE
Retail shops displaying merchandise which have narrow product lines specializing in a
particular type of merchandise and offering specialized services to customers.
EX;-Park Avenue (By Raymond ,it is a men speciality store)
DEPARTMENTAL STORE
A store having several departments such as clothing, personal care & cosmetics,
books and stationaries, house ware goods, electronics etc .All under a single roof,
although individually functioning as a strategic business unit (SBU).
EX;-Life style , Pantaloon
SUPERMARKET
A store which is departmentalized, with self service offering groceries, limited non-food
items such as health & beauty related items & general merchandise.
EX;- Food world outlets , Nilgiris
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HYPERMARKET
Hypermarket are very large in size, carry grocery , hardware ,appliances and other
general merchandise , with self service facilities usually located in warehouse type
structure with large parking facilities.
EX;- Big bazaar (Pantaloon Retail India)
SHOPPING MALL
A shopping mall is an arrangement of retail stores and providing the right mix of
shopping, food courts & entertainment & parking facilities.
EX;-In Bangalore The Forum , Central ,Sigma mall
SHOPPING PLAZA
The shopping plaza wil be a configuration of many tenants using space of 1000 sq. ft
as so far putting up stores within a single building.
EX;-Fountain Plaza
FACTORY OUTLETS
Factory outlets or stores are owned and operated by the manufacturers who sell
discounted merchandise or factory seconds or cancelled orders to consumer at low
price.
EX;- Bata factory outlet
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a: Origin and development of the industry
Retail is India's largest industry. It accounts for over 10 per cent of the India's GDP and
around eight per cent of the employment. Retail sector is one of India's fastest growing
sectors with a 5 per cent compounded annual growth rate. India's huge middle class
base and its untapped retail industry are key attractions for global retail giants planning
to enter newer markets. Driven by changing lifestyles, strong income growth and
favorable demographic patterns, Indian retail is expected to grow 25 per cent annually.
It is expected that retail in India could be worth US$ 175-200 billion by 2016.
The organized retail industry in India had not evolved till the early 1990s. Until then, the
industry was dominated by the un-organized sector. It was a sellers market, with a
limited number of brands, and little choice available to customers. Lack of trained
manpower, tax laws and government regulations all discouraged the growth of
organized retailing in India during that period. Lack of consumer awareness and
restrictions over entry of foreign players into the sector also contributed to the delay in
the growth of organized retailing. Foundation for organized retail in India was laid by
Kishore Biyani of Pantaloon Retails India Limited (PRIL). Following Pantaloon's
successful venture a host of Indian business giants such as Reliance, Bharti, Birla and
others are now entering into retail sector.
Retailing is the most active and attractive sector of last decade. While the retailing
industry itself has been present since ages in our country, it is only the recent past that
it has witnessed so much dynamism. The emergence of retailing in India has more to
do with the increased purchasing power of buyers, especially post-liberalization,
increase in product variety, and increase in economies of scale, with the aid of modern
supply and distributions solution.Indian retailing today is at an interesting crossroads.
The retail sales are at the highest point in history and new technologies are improving
retail productivity. though there are many opportunities to start a new retail business,
retailers are facing numerous challenges.
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A number of factors are driving India's retail market. These include: increase in the
young working population, hefty pay-packets, nuclear families in urban areas,
increasing working-women population, increase in disposable income and customer
aspiration, increase in expenditure for luxury items, and low share of organized
retailing. India's retail boom is manifested in sprawling shopping centers, multiplex-
malls and huge complexes that offer shopping, entertainment and food all under one
roof.
But there is a flip side to the boom in the retail sector. It is feared that the entry of
global business giants into organized retail would make redundant the neighbourhood
kiryana stores resulting in dislocation in traditional economic structure. Also, the growth
path for organized retail in India is not hurdle free. The taxation system still favours
small retail business. With the intrinsic complexities of retailing such as rapid price
changes, constant threat of product obsolescence and low margins there is always a
threat that the venture may turn out to be a loss making one.
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b. Growth & Present status of the industry .
Retailing is emerging as a sunrise industry in India and is presently the largest employer
after agriculture. In the year 2004, the size of Indian organized retail industry was Rs
28,000 Crore, which was only 3% of the total retailing market. Retailing in its present form
started in the latter half of 20th Century in USA and Europe and today constitutes 20% of
US GDP. It is the 3rd largest employer segment in USA. Organized retailing in India is
projected to grow at the rate of 25%-30% p.a. and is estimated to reach an astounding Rs
1,00,000 Crore by 2010. The contribution of organized retail is expected to rise from 3% to
9% by the end of the decade. The projection for the current year ie 2005 is Rs 35,000
Crore.
In India it has been found out that the top 6 cities contribute for 66% of total organized
retailing. With the metros already been exploited, the focus has now been shifted towards
the tier-II cities**. The 'retail boom', 85% of which has so far been concentrated in the
metros is beginning to percolate down to these smaller cities and towns. The contribution
of these tier-II cities to total organized retailing sales is expected to grow to 20-25%. In the
year 2004, Rs 28,000 Crore organized retail industry had Clothing, Textiles & fashion
accessories as the highest contributor (39%), where as health & beauty had a contribution
of 2%. Food & Grocery contributed to 18% whereas Pharma had a contribution of 2%.
Globally, the retail industry has grown at a brisk pace with a Compounded Annual
Growth Rate (CAGR) of 7.77% during the period 2001-2006. The growing expanse of
the top global retailers has ensured globalization of the industry; however the
opportunity for growth of organized retail is immense in countries such as India, S.
Korea, and Vietnam etc. where organized retailing is still at an ascent stage.
The Indian retail industry has witnessed a massive transition during the last
few decades. The Indian retail has grown at a CAGR of 11.2% during the period
FY04-FY07, with food and grocery accounting for the major share. Despite the
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industry being dominated by the unorganized retailers, the organised retailing
revenues have soared at a CAGR of 19.5% during the period FY04-FY07. The apparel
& footwear segment occupies the major share in the organised retail pie.
The Indian retail industry has strong linkages with the economic growth and
Development of the economy. It is primarily characterized by its hierarchical
growth structure, high working capital requirements etc. The factors such as
rising urbanization, growing consumer class, growing per capita expenditure,
greater interest evinced by the Venture capitalists / Private equity firms in
the industry etc. have been driving the growth of organised retail.
The growth of modern retailing has led to the emergence of varied formats such
as Departmental stores, Supermarkets etc. In addition, few other formats such as rural
retailing, E-retailing, luxury retailing etc. too have found favours with
the Indian retailers. Each format being distinct from the other, the viability
of their operations depends upon various factors such as average footfalls,
sales per sq.ft etc. However the numerous licensing requirements as compared to
other countries have proved to be a bottleneck in the growth of Indian
retailing.
We have identified further requirements, advantages and disadvantages associated
with the organised as well as unorganised retailing in India. On the basis of a detailed
analysis incorporating the experience of other retailing locations across the globe, We
feel that the co-existence of the organised and unorganized retailing in the Indian
context cannot be denied.
To estimate the size of the Indian retail industry and the penetration levels of
organized retail in the urban and rural Indian markets for the period FY08-FY11,
we have evolved an industry model incorporating three different scenarios i.e.
Optimistic , Most Likely & Pessimistic. We expect that with the growing reach of
modern retailers in the rural and urban areas, the penetration level of
organized retailing would continue to grow, thereby resulting in the organised10R A M A I A H I N S T I T U T E O F M A N G E M E N T S T U D I E S Page 33
retail growth, surpassing the growth of total Indian retail during the period
FY08-FY11.
Companies Mentioned:
* Pantaloon Retail India Ltd. (PRIL)
* Shoppers Stop Ltd.
* Vishal Retail Ltd (VRL)
* Koutons Retail India Ltd.
* Trent Ltd.
The Indian retail though largely dominated by the unorganized retailers has witnessed
a massive transition in the last decade. Of the total retail sales, the food & grocery
segment constitutes the major chunk. However in case of organised retail, the apparel
& footwear segment stands as the major contributor. With varied segments of retailing
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c. Future Of The Industry
India retail industry is the largest industry in India, with an employment of around 8%
and contributing to over 10% of the country's GDP. Retail industry in India is expected
to rise 25% yearly being driven by strong income growth, changing lifestyles, and
favorable demographic patterns.
It is expected that by 2016 modern retail industry in India will be worth US$ 175- 200
billion. India retail industry is one of the fastest growing industries with revenue
expected in 2007 to amount US$ 320 billion and is increasing at a rate of 5% yearly. A
further increase of 7-8% is expected in the industry of retail in India by growth in
consumerism in urban areas, rising incomes, and a steep rise in rural consumption. It
has further been predicted that the retailing industry in India will amount to US$ 21.5
billion by 2010 from the current size of US$ 7.5 billion. Shopping in India has witnessed
a revolution with the change in the consumer buying behavior and the whole format of
shopping also altering. Industry of retail in India which has become modern can be
seen from the fact that there are multi- stored malls, huge shopping centers, and
sprawling complexes which offer food, shopping, and entertainment all under the same
roof.
India retail industry is expanding itself most aggressively; as a result a great demand
for real estate is being created. Indian retailers preferred means of expansion is to
expand to other regions and to increase the number of their outlets in a city. It is
expected that by 2010, India may have 600 new shopping centers.
In the Indian retailing industry, food is the most dominating sector and is growing at a
rate of 9% annually. The branded food industry is trying to enter the India retail industry
and convert Indian consumers to branded food. Since at present 60% of the Indian
grocery basket consists of non- branded items.
India retail industry is progressing well and for this to continue retailers as well as the
Indian government will have to make a combined effort.The slowdown in consumer
spending cut many retail stocks in half in 2008, but retailers have seen a surprising
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rally recently. Many of the worst-performing stocks of 2008 — apparel chains,
department stores and Internet retail firms — have done best in the last several weeks.
For stock pickers , retail poses a dilemma: Based on recent data, there’s no simple
way to tell where consumer spending is headed. So, with the current outlook so
uncertain, one possible strategy for retail investors is to begin thinking very long term.
Major changes that could hit the retail industry between now and 2015.The aging of the
Baby Boom generation and coming of age of Generation Y will cause a change in
consumer demand and spending habits, the report says. Retail stores that are able to
adapt to the new consumer demographics will thrive while those unable to adjust will
fail.
To survive in the next decade, retailers must adapt to a number of changing factors:1.
The new generation of consumers contains a more tech-savvy and more diverse group
that holds different values than its parents. 2. The one-size-fits-all approach of the
mass chain store format will not be viable. Stores able to respond to individual tastes
will become dominant. 3. “The belief that bigger is better will break down—aggregation
of small will be the new big,” says the report.
The new consumer will be more intent on quality than quantity. Mass production
models will not succeed. 4. Ability to keep close contact with customers through mobile
devices will be important to maintain quality of service and product as well as receive
customer feedback.5. The still large group of Baby Boomers will remain active in the
economy. However, their demands will shift from goods to service and healthcare. 6.
Retailers may also expand in developing economies such as India and China. These
growing markets have much more room to expand along traditional modes than
developed nations. However, American companies will be “late to the game,” says the
report, and will need to compete with both European and local retailers.
Fast and quality service and the ability to attune to individual tastes will be vital.
Retailers must completely alter their business models. Retailing will become an 13R A M A I A H I N S T I T U T E O F M A N G E M E N T S T U D I E S Page 33
industry that realizes, more and more, that it must tailor its offerings to select
customers, as opposed to the mass appeal approach of the 1980s, in order to win over
customers and foster greater customer loyalty.
That means reacting more quickly to consumer trends. Realizing a trend as it happens
will be too late, the report argues.
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CHAPTER 2 : PROFILE OF THE ORGANISATION.
2.1 : ORIGIN OF THE ORGANISATION.
The year 2007, for organised retail has begun with a bang. Birlas, who were mulling
over their entry in multi format multi brand retail for quite some time, have finally
arrived. The Rs. 40,000 crore, Aditya Birla group, through unlisted Aditya Birla Retail,
in a single stroke, has acquired a bouquet of over 172 retail stores, operating in
southern India, with predominant presence in Andhra Pradesh, under popular brand
names of Trinethra and Fabmall. While most of the group stores operate under
Trinethra brand, stores located in Karnataka and Kerala operate under Fabmall brand,
although, 50,000 sq. ft. big hypermarket in Mysore is known as Fabcity.
Trinethra, prior to this acquisition, was aggressively pursuing its plan to set up new
stores in tier II cities such as Mysore, Coimbatore and Tirupur in southern region of the
country. Trinethra, which has adopted convenience and supermarket formats, is
focused on selling food and groceries in residential areas, although some of the stores
also offer pharmaceutical products. Trinethra also offers value-added services like
forex remittances and bill payments. A typical Trinethra store ad measures around
2,500 sq.ft. in retail space. The chain of stores are serviced by an infrastructure of
central warehouses in Andhra, Karnataka, Tamilnadu and Kerala, with a space of
about 50,000 sq ft each
Aditya Birla Retail Limited re-brands its Fabmall grocery supermarkets to more., a
name reflective of its commitment to offering consumers a more fulfilling retail
experience. The re-branding follows the acquisition of the Trinethra Super Retail that
includes the retail brands Fabmall, Trinethra and FabCity by Aditya Birla Retail in
January 2007.
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The two decades old, Rs. 250 crore, 2,500 employees strong, Hyderabad based,
Trinethra group, originally was founded by Mr Anjaneyulu Kakkera.
Aditya Birla Retail Limited is the retail arm of Aditya Birla Group, a USD 28 billion
Corporation. The Company ventured into food and grocery retail sector in 2007 with
the acquisition of a south based supermarket chain. Subsequently Aditya Birla Retail
Ltd. expanded its presence across the country under the brand "more." with 2 formats
Supermarket & Hypermarket.
Supermarket
more. for you - Conveniently located in neighbourhoods, more. supermarkets cater to
the daily, weekly and monthly shopping needs of consumers. The product offerings
include a wide range of fresh fruits & vegetables, groceries, personal care, home care,
general merchandise & a basic range of apparels. Currently, there are over 600 more.
supermarkets across the country.
Hypermarket
More .MEGASTORE - is a one-stop shopping destination for the entire family. Besides
a large range of products across fruits & vegetables, groceries, FMCG products,
more.MEGASTORE also has a strong emphasis on general merchandise, apparels &
CDIT.
Currently, two hypermarkets operate under the brand more.MEGASTORE in Mysore
and Vadodara.
Own label Food Brands
more., Feasters, Kitchen's Promise, and Best of India
Home & Personal care brands
more., Enriche, 110%, Pestex, Paradise, and Germex
With a vision is to be among the leading retail players in India, Aditya Birla Retail
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launched its first supermarket, more. for you in May, 2007. Since its launch, the more.
for you has an aggressive roll out, reaching a total count of over 600 stores across
India today.
more. for you is your neighborhood supermarket which takes care of your everyday
household needs and more. Spread across a wide range of products of food and non
food items, ranging from basic necessities such as, fruits and vegetables, staples,
personal care, home care, household care products, general merchandise, and dairy
products, more. for you provide a one stop solution for your grocery shopping needs.
Also in store are essentials such as, innerwear, kids essentials, and a pharmacy,
bakery and a mobile store. With a range of over 4,000 products, we are able to fulfill
your daily shopping needs all under one roof, at a convenient location close to you.
The more. for you promises a world class shopping experience, with a modern store
layout, easy to shop with friendly staff at hand to provide assistance, electronic billing
facilities and a colorful ambience. At more. for you we offer branded food and grocery
products sourced from the leading brands from all over India, along with private label
brands from our own portfolio - available in a broad selection for you, always giving you
the best possible value for your money.
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2.2 :GROWTH AND DEVELOPMENT OF ORGANISATION
.With the opening of first store in Pune and announcing its retail plans, the Aditya Birla
Group has finally joined the crowded retail space. And from the voices in the media, its
not far when the group has a pan-India retail presence.
Organised retailing is just 3% of total retail market but still a debatable point whether
the Birlas are an early or a late entrant. Since Pantaloons, Spencers, Subhiksha and
Reliance have already set up a good base, ‘More’ stores may find hard to invade the
territory which these stores have already captured in their respective locations.
But even then, key factors which may influence the buying pattern of consumers hinge
on convenience in terms of distance from home, pricing and giving the right product-
mix catering to different social and economic class. Since, organised retail has thin
margins and high costs of around 15% to the revenues (as compared to 5-6% of local
grocery stores), retail companies should promote more their in-house brands which
have a higher mark up.
Aditya Birla ‘More’ strategy to offer budget and high value private labels under ‘More
for you’ and ‘Select’ seems to be like successful UK’s Tesco model of having separate
labels with separate quality and prices for the same product category.
Till Bharti- Walmart enters the market, the key competitor for ‘More’ shall be Reliance
Retail as they have similar store formats and product offerings. But the real tough part
will be when these two companies launch their hypermarkets, in which Pantaloon’s Big
Bazaar still rules the space in terms of nationwide presence , and then differentiation
would play a key role.
But like telecom, when the markets get mature, there are not many differentiating
factors in terms of pricing and service quality, similarly once few big players get
established in retail market, each one would carve a separate niche of their own with
their own sets of customers and markets.
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