Retail Marketing: An Empirical Study Introduction Retailing is one of the world’s largest industries. It is in a permanent state of change, and the pace of this change has been accelerating over the last decade. From the marketing perspective, retailers are, by definition, closer to the consumer than manufacturing companies. Retailers represent the culmination of the marketing process and the contact point between consumers and manufactured products. While retailing has long set buying decisions as its highest priority and was very focused on the product assortment, it now follows a more holistic approach to management and marketing and is seizing the opportunity to be consumer oriented, engage in the personal contact with customers, gather information on consumer behaviour and exploit insights into consumer behaviour and preferences. What was once a simple way of doing business is transforming into a highly sophisticated form of management and marketing. Annamalai University Page 1 1
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Retail Marketing: An Empirical Study
Introduction
Retailing is one of the world’s largest industries. It is in a permanent state
of change, and the pace of this change has been accelerating over the last
decade. From the marketing perspective, retailers are, by definition, closer to the
consumer than manufacturing companies. Retailers represent the culmination of
the marketing process and the contact point between consumers and
manufactured products. While retailing has long set buying decisions as its
highest priority and was very focused on the product assortment, it now follows a
more holistic approach to management and marketing and is seizing the
opportunity to be consumer oriented, engage in the personal contact with
customers, gather information on consumer behaviour and exploit insights into
consumer behaviour and preferences. What was once a simple way of doing
business is transforming into a highly sophisticated form of management and
marketing. Retail marketing consistently features more efficient, more meaningful
and more profitable marketing practices.
Today retail, which is derived into organized and unorganized, is emerging
rapidly as a big industry all over the world and hence, India is also not untouched
with this. So there is a need to know the current and the future trends of retail in
India. For the third year in a row, India has topped AT Kearney’s annual Global
Retail Development Index (GRDI). The Indian retail market is expected to grow
from the current US$ 350 billion to US$ 427 billion by 2010. This study will be
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based on the latest retail trends being adopted by the companies, why the big
fishes are showing their interest in this sector particularly. Of the current size,
organized retail – or modern retail – constitutes only 3 to 4 percent i.e. US $8
billion (36,000 crore INR approx). The rest of the retail pie is crowded with
unorganized retail – or the traditional shops. India’s retail market which is seen
as THE GOLDMINE by global players, has grabbed attention of the most
developed nations.
Current Position Position By 2010
Fig. 1.1
Market estimates say that by 2010, organised retail will form 10 percent of
the pie – up substantially from the current 3 to 4 percent. According to
Euromonitor International, the entire sector will grow – in value terms – by 39.6
percent between 2006 and 2011. This means that it will strike an average a
growth of rate of almost 7 percent annually. According to the Indian Brand Equity
Foundation (IBEF), “Driven by changing lifestyles, strong income growth and
favourable demographic patterns, Indian retail is expanding at a rapid place. The
country may have 600 new shopping centres by 2010. Mall space from a meager
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one million square feet in 2002, is expected to touch 40 million square feet by
end – 2008.”
Retail is the accumulation of various marketing practices directed towards
providing the best merchandise available. It consists of the sale of goods or
merchandise, from a fixed location such as a big department store or a small
store (the kirana shop), in small or individual lots for direct consumption by the
purchaser. Retailing may include subordinated services, such as delivery. 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 i.e., the consumer or the end-buyer. In the supply
chain, retailers come at the end, just before the consumer.
Manufacturer Wholesaler Retailer Consumer
Manufacturer Retailer Consumer
Fig. 1.2
“Retailing includes all activities involved in selling goods or services
directly to final consumers for personal, non-business use. A retailer or retail
store is any business enterprise whose sales volume comes primarily from
retailing.” Retail is India's largest industry, accounting for over 10 per cent of the
country's GDP and around eight per cent of the employment. Retail industry in
India is at the crossroads. It has emerged as one of the most dynamic and fast
paced industries with several players entering the market.
The presence of 15 million kirana stores brings into light the very fact that
the Indian retail industry is highly fragmented/ unorganized. Retailing in India is
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gradually inching its way toward becoming the next boom industry, organized
retailing in particular. The whole concept of shopping has altered in terms of
format and consumer buying behavior, ushering in a revolution in shopping in
India. Modern retail has entered India as seen in sprawling shopping centers,
multi-storied malls and huge complexes offer shopping, entertainment and food
all under one roof.
Fig. 1.3
India has one retail outlet per 90 people, one of the highest densities in
the industry in the world. India is the 9th largest retail market, with annual sales in
the organized segment at Rs. 35,000 crore in 2005 – with revenues doubling
every year. Food, groceries and general merchandise, apparel, consumer
durables, food services and home improvement are the top categories in the
organized sector. Overall revenues, including those of small shops, is expected
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to grow 5.5% a year to Rs. 28,70,000 crore by 2015 at current prices. The
organized segment is expected to grow faster, at 21.8%, to touch Rs. 420,000
crore by 2015.
The future of Indian retailing may even witness the concept of 24 hour
retailing and Gurgaon, Delhi and Bangalore have already started operations up
to 11 p.m. Even though this concept has been in existence in few retail segments
like pharmaceuticals and fuel, it still remains to be a challenge for other
segments like food and groceries, apparel etc to adopt this trend.
Although the organized retailing in India is coming up in a big way, it
cannot simply ignore the competition from the conventional stores because of
various factors like reach, extending credit facility and other intangible factors like
the human touch which are provided only by the conventional stores.
The urban retail market has been embracing various new formats and the
malls turned out to be the trend setters by promising the concept of
shoppertainment. The trends in the rural market also have been changing from
the old Haats and Melas to the rural malls like ‘Chaupal Sagar’ launched by ITC,
DCM Shriram Groups one-stop shopping destination called ‘Hariyali Bazaar’,
Godrej groups agri-store ‘Adhar’ etc.
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Indian Retail Development Phases
Fig. 1.4
In India’s retail Landscape, food dominates the shopping basket in India.
IBEF (Indian Brand Equity Foundation) says, “The US$ 6.1 billion Indian food
industry, which forms 44 per cent of the entire FMCG sales, is growing at 9 per
cent and has set the growth agenda for modern trade formats. The prospect for
growth of the branded segment is huge, as nearly 60 per cent of the average
Indian grocery basket still comprises non-branded items.”
What is India’s official, governmental position on retail – especially Foreign
Direct Investment (FDI) in retail? The Government allows 100 per cent FDI in
cash and carry through the automatic route and 51 per cent in single brand.
Besides, the franchise route is available for big operators. Now, the government
also proposes further liberalisation in the retail sector allowing 51 per cent FDI in
consumer electronics, sports goods, stationery and building equipment. The
doors are opening up – and it’s a good time to be in the sector!
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Some key players in India are – Pantaloon Retail (India) Limited, Reliance
Retail, Aditya Birla Retail, Bharti Retail, Shopper’s Stop and Lifestyle.
Pantaloon Retail (India) Limited : - This is India’s leading retailer that
operates multiple retail formats in both the value and lifestyle segment of
the Indian consumer market. Headquartered in Mumbai (Bombay), the
company operates over 5 million square feet of retail space, has over 450
stores across 40 cities in India and employs over 18,000 people. The
company’s leading formats include Pantaloons, a chain of fashion outlets,
Big Bazaar, a uniquely Indian hypermarket chain, Food Bazaar, a
supermarket chain, blends the look, touch and feel of Indian bazaars with
aspects of modern retail like choice, convenience and quality and Central,
a chain of seamless destination malls. Some of its other formats include
Depot, Shoe Factory, Brand Factory, Blue Sky, Fashion Station, aLL, Top
10, mBazaar and Star and Sitara. The company also operates an online
portal, futurebazaar.com. A subsidiary company, Home Solutions Retail
(India) Limited, operates Home Town, a large-format home solutions
store, Collection I, selling home furniture products and E-Zone focused on
catering to the consumer electronics segment. Pantaloon Retail was
recently awarded the International Retailer of the Year 2007 by the US-
based National Retail Federation (NRF) and the Emerging Market Retailer
of the Year 2007 at the World Retail Congress held in Barcelona.
Pantaloon Retail is the flagship company of Future Group, a
business group catering to the entire Indian consumption space. And, of
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course, Pantaloon’s Managing Director Kishore Biyani believes in
changing the rules of the game.
Reliance Retail : - Mukesh Ambani’s 15,000-people Reliance Retail has
already opened 250 convenience stores, branded as ‘Fresh’, across the
southern states. Reliance Retail plans to invest Rs 25,000 crore on
hypermarkets, supermarkets and specialty stores in the next four years.
This is what its website has to say: “Reliance is gearing up to revolutionize
the retailing industry in India. Towards this end, we are aggressively
working on introducing a pan-India network of retail outlets in multiple
formats. A world class shopping environment, state of art technology, a
seamless supply chain infrastructure, a host of unique value-added
services and above all, unmatched customer experience, is what this
initiative is all about. The retail initiative of Reliance will be without a
parallel in size and spread and make India proud. Ensuring better returns
to Indian farmers and manufacturers and greater value for the Indian
consumer, both in quality and quantity, will be an integral feature of this
project. By creating value at all levels, we will actively endeavor to
contribute to India’s growth. The project will boast of a seamless supply
chain infrastructure, unprecedented even by world standards. Through
multiple formats and a wide range of categories, Reliance is aiming to
touch almost every Indian customer and supplier.
Aditya Birla Retail : - The Company, owned by Mr. Kumar Mangalam
Birla, Chairman, Aditya Birla Group, with its mission – “Our mission is to
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change the way people shop. We will give the Indian consumers a
fundamentally better shopping experience. We will offer them More than
what they expect”. While unveiling the brand name ‘More’, he had this to
say about the vision of his company: “We believe that the Indian consumer
today is undeserved. Even though we have many shopping outlets in
India, many of them do not offer the kind of shopping experiences that
people in most other parts of the world are used to, and even take for
granted. As a result, spends by Indian consumers on their day-to-day
needs and special shopping occasions are much less than they ought to
be…” The Company operates under the brand ‘More’, has selected two
formats – hypermarkets and supermarkets – for its initial foray. The first
store has opened in Pune. Last January, the company acquired Trinethra
Super Retail, which has given it more than 5,00,000 sq ft and a strong
presence in four southern states of Andhra Pradesh, Karnataka, Tamil
Nadu and Kerala, where it is the No. 1 retailer. The Birlas’ outlay for the
business over the next three years is Rs 9,000 crore.
Bharti Retail : - The world’s largest retailer Wal-Mart, which usually has a
standalone presence in other parts of the world, is partnering with Sunil
Mittal’s Bharti Enterprises in India. The venture will start with the cash &
carry (wholesale) format, which could be extended to retail operations
once foreign direct investment is allowed in multi-brand retail – something
that is expected in due course. More about the company, Bharti Retail
(Pvt.) Limited, is a wholly owned subsidiary of Bharti Enterprises. As a part
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of its plans to provide a world-class retailing experience to consumers
across India, the company has planned an investment of US$ 2 to 2.5
billion by 2015. Bharti Retail plans pan-India operations and is looking at
approximately 10 million square feet of retail experience across all cities in
India with a population of over one million. The 60,000 people, it plans to
employ, will include ex-servicemen and women and provide multi faceted
career opportunities for youth of India.
Shopper’s Stop : - A menswear store owned by K. Raheja in the Mumbai
suburb of Andheri in 1991 has now transformed into Shopper’s Stop, with
27 departmental stores. The company entered airport retailing in a joint
venture with the Nuance Group. It also launched India’s largest
hypermarket, Hypercity. In 2005, it bought the Crossword book-store
chain.
Lifestyle : - Growing from one store in Bahrain in 1973, the NRI-led
Landmark Group today operates over 5 million sq ft in the Middle East and
India. The group’s first Lifestyle store in India opened in Chennai in 1999.
Now it has 325,000 sq ft in Chennai, Hyderabad, Bangalore, Gurgaon and
Mumbai.
There are several home-grown and international players like
Carrefour waiting in the wings. Expect a lot of action in this sector in next
five years!
We will discuss more players and brands in the next chapters.
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The retail and retailing is changing with a good pace and consumers are
shifting from the traditional retailing (unorganised) to the modern retailing
(organised). There are various factors: favourable demographics, growth in
income, raising aspirations: value added goods sales, increasing population
(working women) as well as the lifestyle of women, food and apparel industry
growth, online marketing or buying and selling, rural markets giving high
opportunities to retailers for investments and government is also allowing FDI in
the retail industry in India. Let’s see how it is changing: -
Factors of changing Consumer Behaviour in Retail
Fig. 1.5
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Now the picture will be more clear to you that why there is a need to study
the retail marketing. The above factors have affected the retail industry of India
and created threat among the unorganised small retailers for their existence. This
report will reveal the actual scenario of retail industry in India and also global.
Relevance of Food Retail Formats in 2010:
Relevance of Non-Food Retail Formats in 2010:
Fig. 1.6
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What is Retail?
Retail:
Retail comes from the French word “retaillier” which refers to "cutting off,
clip and divide" in terms of tailoring (1365). It first was recorded as a noun with
the meaning of a "sale in small quantities" in 1433 (French). Its literal meaning for
retail was to "cut off, shred, paring". Like the French, the word retail in both Dutch
and German, Detailhandel and Einzelhandel respectively, also refer to sale of
small quantities or items.
Retailing:
Fig. 2.1
Retailing practice of accumulation of various marketing practices directed
towards giving the best merchandise available and it consists of the sale of
Maspar was set up in the year 2002, as a step towards integrating
the parent company which has been manufacturing home furnishings for
the export market for over 35 years. Supplier to prominent furnishing
houses like Mark & Spencer, Ikea and Waverly, it brings its international
quality standards to the Indian market. The team behind Maspar believes
that Indian homes are becoming more and more contemporary. Ornate
curtains and lifetime investments and décor are a thing of the past. The
new generation of homemakers likes fresh and changing interiors to suit
their lifestyle and entertaining needs.
Current stores: 9
Upcoming stores: 1
Viveks
Vivek’s Ltd is a popular consumer electronics and home appliances
retail chain in India. The company grew from three stores to more than 53
stores and the turnover increased to over Rs 350 crore ($ 80 million). It
also became a public limited company from a family-run enterprise. CII
and Mckinsey raved about Viveks in these terms: ‘More trusted than the
brands it sells’.
Current stores: 53
Upcoming stores: 100
Adlabs
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Adlabs is the largest entertainment conglomerate in the country,
Started as a laboratory for processing ‘ad films’ over three decades ago.
Adlabs is the defining force in every sphere of the entertainment industry:
production, distribution, processing or in cinemas. In June 2005, Reliance
ADAG became a majority promoter shareholder of the company. In 2006,
Adlabs forayed into television content creation by becoming majority
stakeholders of Siddhartha Basu’s Synergy Communications. The new
entity, Synergy Adlabs, continues to create exciting new genres for the
exploding television industry in India. Management expertise and
resources acted as catalysts in synergising various interrelated
businesses: animation, distribution, radio and digital cinema to name a
few.
Current stores: 131
Upcoming stores: 30
Landmark
Established in 1998, Trent Ltd is part of the Tata Group that
operates ‘Westside’, one of India’s largest and fastest growing chains of
retail stores. Trent entered into hypermarket business in 2004 with ‘Star
Bazaar’. In 2005, Trent acquired ‘Landmark’ that offers a vast assortment
of books, music, movies and stationery. Launched in Chennai in 1987,
Landmark has, over the past 20 years, built its stores on the foundation of
providing customers the widest choice and great overall experience.
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Landmark stores offers exhaustive range of over one lakh titles in books
and music alone. Landmark’s USP is the range and depth of its stocks.
Current stores: 10
Ethos
Ethos Swiss Watch Studios is the India’s largest retail chain for
Swiss watches. Ethos entered the watch retail market in 2003, when it
opened a flagship store in the heart of Chandigarh. Within just three to
four years, Ethos has grown to a chain of nine stores around the country
spanning Bangalore, Chandigarh, Ludhiana, Mumbai, Pune and NCR and
offers more than 25 premium Swiss watch brands. The latest addition are
Breguet (a high end, most revered Swiss Brand in watches) and Maurice
Lacroix, one of the world’s most premium brands of complicated watches
with the rare ‘double retrograde’. Considering that over 30 per cent of
overall sales fall into gifting category, Ethos has recently established a
comprehensive institutional sales scheme.
Current stores: 15
Upcoming stores: 50
Koutons
Koutons established its operations in garment manufacturing and
exports in early 1991. The company moved up the value chain from a
garment manufacturer to a retailer by opening up its own stores in 2002.
The company owns two brands with unique positioning ‘Koutons’ and
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‘Charlie Outlaw’. Of these, 610 are exclusive shops while rest (537 stores)
is Charlie Outlaw shops.
Current stores: 621
Top Foreign Firms in Indian Retail
India is shining all the way and investing in India has become one of the
profitable businesses. For those who aspire to see their brand recognised and
known at the global circuit, India cannot be ignored any longer. With booming
economy and promising future, international players are coming onto the Indian
shores. The foremost in the league was the Wal-Mart-Bharti tie up. Since then,
there has been no looking-back and the retailing sector is on the way to
revolutionise itself. With the entry of foreign companies in India via joint venture
or cash-n-carry format, retailing is touching new heights.
After Walmart-Bharti tie up, joint ventures between other Indian and
international players have been catching up and the retail market of the country
has immense potential to grow further into a sector completely organised. The
following are the top five international retail companies: -
Wal-Mart
The Wal-Mart Stores, Inc. is an American public corporation that
runs a chain of large, discount department stores. According to the 2007
Fortune Global 500 reports, it is the world’s largest public corporation in
terms of revenues. Sam Walton founded the company in 1962,
incorporated in October 31, 1969 and listed on the New York Stock
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Exchange in 1972. Wal-Mart is the largest grocery retailer in the US, with
an estimated 20 per cent share of the retail grocery and consumables
business, as well as the largest toy seller in the US, with an estimated 22
per cent share of the toy market. The company’s operation primarily
comprises three retailing subsidiaries: Wal-Mart Stores Division US,
Sam’s Club and Wal-Mart International. It does business in nine different
retail formats: super centres, food and drugs, general merchandise stores,
bodegas (small markets), cash and carry stores, membership warehouse
clubs, apparel stores, soft discount stores and restaurants. In 2006, Wal-
Mart was the 67th most profitable corporation (profits divided by total
revenue), behind retailers such as Home Depot, Dell, and Target, and
ahead of Costco and Kroger. For the Fiscal year ended January 31, 2006,
Wal-Mart reported a net income of $ 12.178 billion (approximately Rs
51.12 billion) on $ 244.992 billion (approximately Rs 13,796.8 billion) of
sales revenue (3.5 per cent profit margin). For the same fiscal year, Wal-
Mart’s international operations accounted for about 20.1 per cent of total
sales. As of December 6, 2007, net sales for 43-week period ended
November 30, 2007 was $ 301.5 billion (approximately Rs 1,260 billion) up
8.6 per cent from the previous year’s results. Revenues are up 11 per cent
over last year, but profits grew less than one per cent, amid a slowdown in
same-store sales.
Wal-Mart India Plans: India’s Bharti Group has announced a deal
with US retail giant Wal-Mart to launch the first mega-retail store joint
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venture in the country. The Bharti-Wal-Mart venture would make as initial
investment of $ 100 million (approximately Rs 4 billon), which could further
increase to $ 1.46 billion (approximately Rs 58.4 billion).
Carrefour SA
Carrefour SA is a French international hypermarket chain with a
global network of outlets. After Wal-Mart, it is the second largest retail
group in the world in terms of revenues. Carrefour operates mainly in the
European Union, Brazil, Argentina and Columbia; but it also has shops in
North Africa and Asia. In French, Carrefour means crossroad. The first
Carrefour store was opened on June 3, 1957 in suburban Annecy near a
crossroad. Today, it is the smallest Carrefour location in the world. The
group was created by Marcel Fournier and Denis Defforey and grew into a
chain from this first sales outlet. In 1991, it got merged with Promodes,
known as Continent, one of its major competitors on the French market. In
the Americas, Carrefour has presence in four countries: Brazil, Argentina,
Columbia and the Dominican Republic. Active in three types of retail
distribution viz., hypermarkets, supermarkets and hard discounters,
Carrefour is entering the cash-n-carry market in Brazil, after purchase of
Atacadao. In 1989, the company became the first international retailer to
establish a presence in Asia when it entered Taiwan through a joint
venture with Uni President Enterprise Corporation. It leveraged the
experience it gathered in Taiwan to expand into other Asian markets.
Carrefour also operates in the UAE and Jordan with a joint venture with
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Majid al Futtaim. In March 2007, Carrefour opened a store in Kuwait in the
Avenues mall.
India plans: Carrefour has floated two separate units in India.
Carrefour WC & C India Pvt. Ltd will roll out fully-owned wholesale stores
and Carrefour India Master Franchise Co. Pvt. Ltd will enlist an Indian
company to open the French firm’s branded stores in the country.
Tesco
Tesco PLC is a British-based international grocery and general
merchandising retail chain. It is the largest British retailer in terms of both
global sales and domestic market share, and is the world’s third largest
retailer, just behind Wal-Mart and Carrefour. Tesco now controls over 30
per cent of the grocery market in the UK, approximating the combined
market share of its closest rivals, Asda and Sainsbury’s. in 2007, the
supermarket chain announced over £ 2.55 billion (approximately Rs 196
billion) in profits. Originally specializing in food, it has diversified into areas
such as discount clothes, consumer electronics, consumer discs and
music downloads, internet service, consumer telecoms, consumer health
insurance, consumer dental plans and budget software.
The first Tesco store was opened in 1929 in Burnt Oak, Edgeware,
Middlesex. The first self-service store was opened in St Albans in 1947
(still operational in 2007 as a Metro) and the first supermarket in Maldon in
1956. The Tesco brand first appeared in 1924 and the founder is Jack
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Cohen. Tesco’s UK stores are divided into five formats, differentiated by
size and the range of products sold: Tesco Extra, Tesco superstores,
Tesco Metro stores, Tesco Express stores and One stop. Britain’s biggest
retailer, the supermarket group Tesco, has announced record annual
profits of more than $ 3.5 billion (approximately Rs 140 billion), 13 per cent
higher than previous year’s. Tesco now operates in 13 nations, with over
three thousand stores and employs nearly half a million people.
India plans: Whilst Tesco is still in the look out for a Indian partner
to team up its much anticipated foray, it is believed that the company is
busy scouting for talent in the top B-schools in the country and also
seeking for manpower with retail background. Well, the official line is ‘it is
scouting for talent for its Tesco Hindustan Service Centre’ but the
unofficial talk is ‘the latest round of manpower scouting is for its retail
foray’. Tesco and Tata are in talks to create a joint venture in India.
Burger King
Burger King was founded in 1954 by James McLamore and David
Edgerton. Since then, it has been using franchise model to expand to just
over 11,200 stores in more than 65 countries around the globe. Burger
King Holdings is the parent company of Burger King. In the US, it operates
under the Burger King Brands title while, internationally, it operates under
the Burger King Corporation banner. By the end of fiscal year 2006,
Burger King has more than 11,220 outlets in 61 countries. The company
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has more than 37,000 employees who serve approximately 11.4 million
customers daily.
Revenues in 2006-2007: Burger King Holdings Inc., parent to the
No. 2 burger chain, posted a 41 per cent surge in its fiscal 2007 second-
quarter profit. For the quarter ended on December 31, Burger King earned
$ 38 million (approximately Rs 1,520 million), or 28 cents per share,
against $ 27 million (approximately Rs 1,080 million) or 24 cents per
share, a year ago.
India plans: Burger King is in talks with DLF for setting up a joint
venture (JV).
Starbucks
Starbucks was opened in Seatle, Washington, in 1971 by three
partners viz. English teacher Jerry Baldwin, history teacher Zew Siegel
and writer Gordon Bowker. Starbucks Corporation is multinational coffee
and coffeehouse chain company based in the Unites States. Starbucks is
the largest coffeehouse company in the world, with 15,011 stores in 42
countries. International journey of Starbucks began in 1996 with the first
coffeehouse in Tokyo and entered the UK market in 1998 with the
acquisition of the then 60-outlet-UK-based Seatle Coffee Company and
re-branding of its entire store at Starbucks. By November 2005, London
had more outlets than Manhattan, a sign of Starbucks becoming an
international brand. Starbucks serves a variety of beverages including
brewed coffee, hot chocolate, espresso, teas, Frappuccino. Also available
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are bottled beverages including Odwalla, Ethos water, San Pellegrino,
Izze soda, and Horizon Organic Milk. As of 2008, Starbucks was ranked
by Fortune magazine as the 7th best company to work for in the United
States, up from 16th in 2007. In 2006 and 2005, it was ranked 29 th and 11th
respectively. Revenues Starbucks earned $ 673 million (approximately Rs
26,920 million) in profit on $ 9.4 billion (approximately Rs 376 billion) in net
revenues for 2007.
India plans: Starbucks entered India through a distribution tie-up
with the country’s leading multiplex operator PVR Ltd for its select
products. PVR has started retailing Starbucks products at its select
multiplexes in Mumbai and Delhi.
Three Pioneering Brands
Shopper’s Stop
Shopper’s Stop Ltd is promoted by the K Raheja Corp Group
(Chandru L Raheja Group), which is one of the leading players in the
country in the business of real estate development and hotels. Pioneer of
organised retail in India, Shopper’s Stop Limited has been instrumental in
bringing about retail revolution in India. Since its inception in 1991,
Shopper’s Stop Ltd has introduced various retail formats in India. Apart
from the flagship business of department stores, there are also specialty
stores for books, home décor, cosmetics and maternity acre and infant
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care. Shopper’s Stop Ltd has also forayed in the food & beverages
business.
Current stores: 21
Upcoming stores: 28
Barista Coffee Company
Barista Coffee Company Ltd is a joint venture between the Turner
Morrison and Tata Coffee. Barista, India’s largest and fastest growing
retailer of fine coffees was established in 2000 by Barista Coffee
Company Limited, to recreate the ambience and experience of the typical
Italian neighbourhood espresso bars in India. Headquartered in Delhi,
Barista currently has over 160 espresso bars across India, Sri Lanka and
the Middle East. Barista traces its roots back to the old coffeehouses in
Italy – the hotbeds of poetry, love, music, writing, revolution and, of
course, fine coffee. Barista Coffee Company is also planning to make its
60 ‘Barista’ coffee retail chains wi-fi enabled. Italy’s Lavazza Group
acquired 100 per cent stake in Barista Coffee Company Ltd in the end of
first quarter 2007.
Current stores: 175
Upcoming stores: 35
Tanishq
Tanishq, started in 1995, is the jewellery business group of Titan
Industries Ltd promoted by the Tata Group, India’s most respected and
widely diversified business conglomerate. Tanishq is India’s largest, and
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fastest growing jewellery brand with 103 boutiques in 72 cities across the
country. Tanishq has recorded sales turnover of Rs 1,290 crore for the
financial year 2006-2007 growing at phenomenal rate of over 40 per cent
CAGR in an otherwise flat jewellery market.
Current stores: 103
Upcoming stores: 20
Leading Retail Suppliers (Shopping Malls)
City Mall, Kota, Rajasthan
Location Kota
Built up Area 3.0 lakh sq ft
Plot Size 412’ X 215’ sq ft
Site frontage 400 ft
Front Road width 200 ft
Architects Maithel & Associates, Jaipur
Table 4.1
Scottish City Centre, Jamnagar
Location Jamnagar
Built up Area 8 lakh sq ft
Plot Size 2.20 lakh sq ft
Site frontage 325 ft / 671 ft
Front Road width 100 ft
Architects Aakar Design Studio, Ahmedabad
Table 4.2
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Z Square, Kanpur
Location Kanpur
Built up Area More than 8 lakh sq ft
Plot Size 5 acres
Site frontage 130 meters
Front Road width 100 meters
Architects Structural – M/s Hafeez Contractor,
Interior – M/s Hafeez Contractor, Singapore
Table 4.3
The Grand Mall, Coimbatore
Location Coimbatore
Built up Area 1.4 million sq ft
Plot Size 6.56 acres
Site frontage 325’ 6”
Front Road width 100 feet
Architects Bentel Associates – South Africa
Table 4.4
Parsvnath Mall, Rohini
Location ROHINI
Built up Area 2.5 lakh sq ft
Plot Size 7,232.81 sq meter
Site frontage 16.97 meters
Front Road width 36 meters R/W
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Architects G.P. Mathur
Table 4.5
Viva Collage, Jalandhar
Location Jalandhar
Built up Area 6 lakh sq ft
Plot Size 3.314 acres
Site frontage 184’
Front Road width 74’ (NH-1)
Architects RSP Akitek, Malaysia;
Design Forum of Architects, Noida
Table 4.6
Omaxe, Connaught Place
Location Connaught Place, Greater Noida
Built up Area 19 lakh sq ft
Plot Size 15.42 acres
Architects Hafeez Contractor
Table 4.7
Promenade, Delhi
Location South Delhi
Total Area 4.5 lakh sq ft
Architects Mohit Gujral
Table 4.8
Vasant Square, Delhi
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Location Delhi
Built up Area 4.88 lakh sq ft
Land Area 19,800 meters
Net Leasable Area 2,95,000 sq ft
Table 4.9
Forum Value, Bangalore
Location Whitefield Road, Bangalore
Total Retail Area 3,00,000 sq ft
Architects Mr. Razack Sattar, Prestige Group
Table 4.10
Leading Retail Suppliers (IT Companies)
IT companies also play a very important role in providing various software
and application solutions for simplifying the working of big retail shops and
shopping malls. The following are some of the leading companies: -
JDA Software Group, Inc.
SAP India
PROTOCOL
HCL Infosystems Ltd
AGS Infotech Pvt. Ltd
Leading Retail Suppliers (Shop Fitting Companies)
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Shopworks
Safe Enterprises
BRV Retail Solutions
Four Dimensions
Shark Design Studio
Leading Retail Suppliers (Logistics Companies)
OM Logistics
SAFEXPRESS
DRS Logistics
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Retail Mix
India has indeed started shopping in malls and new malls are
mushrooming in every nook and corner of important cities in India. But it goes
without a second thought that if malls have made a huge difference in the ways
India shopped; they have also invited unnecessary worries and the foremost
being that of the tenant mix.
Brand, Retail Mix: Retail mix can be understood as the brand outlets in
malls catering to the interest of the target audience, which depends on factors
such as city and location. Mr. Astitva Sen, Vice President, Retail & Consumer
Goods, Technopark Advisors Pvt. Ltd, explains the basic difference between
retail and brand mix. He says Retail mix refers to the plan of category-specific
space allocation within a mall. For example what would be the break-up of space
allocated, say, to food and non-food? Brand mix refers to the space allocation
plan for various brands (national as well as local) within various categories.
Adding to the concept, Mr Pradeep Seth, CMD, Stadia Group, says, The brand
mix in a mall is the mixing of tenants depending on the market the mall is
targeting at. For a mall to succeed, it is very important to have an appropriate mix
and critical mass associated to its mix. A mall has to be conceived in such a way
that it targets its market with full support.
Zoning and right selection of tenants is as critical as merchandise planning
and category management is to retailers. They present the character of the mall
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and distinctiveness to the target consumer, critical for gaining customer loyalty in
a highly competitive scenario.
Zoning: zoning is placing the right tenant at the right place. Mall
developers, therefore, first identify their anchor tenants and build their tenant mix
around them. Malls are built around the three concepts of zoning, comparative
buying levels and adjacency.
Zoning is a criterion that is usually followed in larger scale developments.
This is done to facilitate the end consumer in the selection of goods by making
specific sections. Usually, zoning is product specific and / or consumer specific.
For example, one case of consumer-specific zoning would be separate areas for
men’s wear, women’s wear and accessories, kids section, electronics and home
products. Product specific zoning is usually placement-oriented.
Anchor tenants: The selection of anchor tenants is an important
ingredient of the success of a mall. Anchor tenants are considered to be the
crowd pullers and contribute immensely in making the mall a favourite shopping
destination. An anchor tenant is a larger format store (usually, a departmental
store) that supports the development to get more footfalls. The anchor stores are
placed in such a way that they even out the traffic movement and act as crowd
pullers and smaller tenants survive because of this traffic. It is critical for any mall
developer or owner to plan and finalise anchor tenants and, then, rest of the retail
mix. The advantage that anchor tenants have is they enjoy favourable terms from
the developer such as lower rentals, better conversion ratios and dedicated
parking space.
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Fig. 5.1
Selecting retail mix: ‘Complementary’ is a word of utmost importance
while choosing the tenants of a floor. For instance, a jewellery brand is located
next to a sari store. Stating the importance of right selection of retail mix, it is very
necessary for a mall developer to understand its audience. Zoning plays a vital
role in making the mall a successful venture. There are various factors that affect
a mall’s zoning. The most important of them is placement. Another major factor is
the placement of anchors. It’s very critical that a mall developer decides on its
audience, tenants and delivers what consumers expect for this helps in
generating footfalls in the long-run.
Success factor: To run a mall successfully, it’s of utmost importance to
study the consumer behaviour and follow a slightly different approach. For
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Consumer segment
First and foremost, it’s important to understand what type of consumer segment companies are targeting at. For this purpose they must find answers of these questions: -
Who are the consumers?
What do they prefer buying most?
Which retail brand is not available?
This will assist in determining the right mix.
Retail mix
Create a well-planned retail mix for each level.
Do not just fill space.
Have something for every age-group on the same floor.
Retail Marketing: An Empirical Study
instance, if a mall is big and spread over a large area, then splitting up the
anchor and key tenants can generate footfalls on every floor and push the
attention of consumers. Giving a few golden rules for being successful, some
critical success factors are:
1) Right-sizing the mall in accordance with the catchment’s projected
consumption capacity.
2) Creating distinctiveness.
3) Providing adequate infrastructure (circulation, parking, and loading and
unloading bays).
4) Partnership with key retail tenants.
Hence, the process undertakes researching on the pattern of shopping
behaviour and then planning the anchored and other tenant mix in a mall.
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Visual Merchandising
The art if ‘visual merchandising’ in India is still in its infancy. Visual
merchandising (VM) can be defined in many ways viz. from the point of view of
brand experience, creation of purchase triggers or overall store planning. The
definition of VM that can be best is a simple outcome statement ‘convert the
passerby to a browser, the browser to a spender, the spender to a bigger
spender and build customer loyalty’.
The essential question that one has to put to store planners is ‘Are you
providing, in your entire store design, a methodology of continuously providing
both space and physical approach towards customer interaction points.
Planograms, aesthetics, aisle widths etc. are parts of VM process. But, the first
step is to understand, anticipate and locate points within the store, which can be
earmarked for VM programme of the brand. Although visual merchandising is
wider in perspective, the quick common understanding is of doing up window
displaying. The difficulties commonly experienced by brands and retailers alike in
carrying out a VM programme are:
1. Lack of identification of physical points within the store individually for
each store from window to hot spots and zones.
2. Inability to adapt a common theme or design across 30/35 stores or more.
Many brands resort to making out a common kit and dispatching it with an
installation instruction and then hope for the best. This approach usually
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covers only the window. Many a time, brands and retailers who do not
have a system of identifying the sizes of windows or their multiple
numbers across pan-India. A lot of them are franchisee windows and got a
differential treatment. Hot spots and zones are rarely identified.
3. Ineffective planning of timing in getting the VM programme installed
across 100 stores or more in time for the theme or occasion. This mainly
because of the lack of two fundamentals:
a. The planning of annual VM calendar in detail with budgets.
b. The lack of a clear organisation structure with accountability for the
programme. A lot of knee-jerk reactions do happen because of this.
4. Decentralising a store VM programme and giving the responsibility to the
store manager often leads to inconsistency of customer experience across
company-owned stores and franchisee stores.
5. As the chain goes larger and the number of multiple formats increases,
execution becomes a nightmare. The aesthetics may be world class but
the execution is usually pathetic.
The state of affairs will change if the followings are observed and made to
happen:
1. Brands and retailers quickly realise the importance of VM as a continuous
communication to the customer of their broad brand objectives.
2. They work on an annual VM calendar with clear budgets and
responsibility.
3. They really carry out planning in advance.
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4. If there is a differentiation in budgets, use the criteria of store sales
whether the store is company owned or franchised.
5. Ensure that the design and the material used relate to costs short-term
windows or long-terms window. Complete a prototype store and tweak it
until satisfied before going national.
6. Try not involving store managers in deciding on the way the installation
pans out. Centralize it or appoint an agency.
7. Today’s retailers are expanding rapidly. Invest in a separate organisation
structure to control this very important communication. Do not led it be
only at store opening.
8. Develop an outside agency for design and execution unless you are
prepared to invest long terms in your own people. The advantage of an
agency is that the designs are more varied and exciting. An internal team
tends to produce similar stuff within a period of time.
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Findings and Suggestions
Findings: -
Fig. 7.1
1. Retailing in India is witnessing a huge revamping exercise as can be seen
in the graph.
2. India is rated the fifth most attractive emerging retail market: a potential
goldmine.
3. Estimated to be US$ 200 billion, of which organized retailing (i.e. modern
trade) makes up 3 percent or US$ 6.4 billion.
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4. As per a report by KPMG the annual growth of department stores is
estimated at 24%.
5. Ranked second in a Global Retail Development Index of 30 developing
countries drawn up by AT Kearney.
6. The final link with consumer for selling & feedback.
7. Impact on the economy.
8. Accessibility in various locations.
9. Avenue to study consumer preferences & buying habits.
10.Avenue for imaginative merchandising.
11.Buying thru touch, feel & comparison without dealer influence.
12.Buys in bulk, sells in smalls.
13. Induces impulse purchase.
14.Private Labels.
15.Focus on Small cities and towns.
16.Store design.
17.Multiple formats / New segments.
18.Bringing in Technology.
19.Farm to Fridge.
20.24 hr retailing.
21.Shoppertainment:
a. Changes in the lifestyle.
b. Variety.
c. Fun & Entertainment.
d. One Stop Shopping.
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Suggestions: -
• Key Success factors of Conventional retail:
– Reach.
– Credit facilities.
– Home delivery.
– Intangible factors.
• Is it viable for organized retail to emulate these factors?
• Probable opportunities for Conventional retailers:
– Renovation of the existing formats.
– Entry of B2B companies.
– Consortium (conglomerate).
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Conclusion
SWOT (Strengths, Weaknesses, Opportunities and Threats) Analysis:
Fig. 8.1
The above is the SWOT analysis of Indian Retail Industry. The ‘S’ shows
all of the strengths, ‘W’ shows the weaknesses, ‘O’ shows the opportunities and
the ‘T’ shows the threats which is faced by the existing players in the retail
industry. The following are the some of the future directions both positive and
concerns (negative) aspects of this industry.
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Future Direction: Positives: -
AT Kearney has estimated India’s total retail market at US$ 202.6 billion
which is expected to grow at a compounded 30 per cent over the next five
years.
With the organised retail segment growing at the rate of 25-30 per cent
per annum, revenues from the sector are expected to triple from the
current US$ 7.7 billion to US$ 24 billion by 2010.
The share of modern retail is likely to grow from its current 2 per cent to
15-20 percent over the next decade
Over next two years India will see several Indian retail businesses
attaining a critical mass as growth in the industry picks up momentum
driven by two key factors:
o Availability of quality real estate and mall management practices
o Consumer preference for shopping in new environments
Wal-Mart: huge plans for India. Moving a senior official from its
headquarters in Bentonville, Arkansas, to head its market research and
business development functions pertaining to its retail plans in India.
New York-based high-end fashion retailer Saks Fifth Avenue has tied up
with realty major DLF Properties to set up shop in a mall in New Delhi.
Tommy Hilfiger, retailer of apparels, expects to open one store each in
Delhi, Ahmedabad, Lucknow and Bangalore in the next four months.
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Future Directions: Concerns: -
68 million square feet of mall space is expected to be available by end of
2007, which might lead to over-capacity of malls.
Lack of differentiation among the malls that are coming up. One option
may be to look at specialization.
Poor inventory turns and stock availability measures - retailers clearly
need to augment their operations.
Operations of retailers and suppliers are not integrated. Efficient
replenishment practices practiced in the Indian auto and auto-component
industry can be leveraged to implement efficient supply chain
management techniques.
Supplier maturity, in terms of adherence to delivery schedules and
delivering the quantity ordered, is an issue.
Sales tax laws - lead to retailers having state-level procurement and
storage leads to Indian retailers having higher inventories. VAT has
helped alleviate this a bit.
Increased adoption of IT and shrinkage management will be a critical
area.
Supply chain and customer relations followed by merchandising, facilities
management and vendor development are areas which have significant
gaps and proactive training is a key imperative for overcoming these.
Government delayed decision of clearing FDI percentage.
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Additional burden on retailer in the form of service-tax.
The Political lobbying by unorganised sector to stop permitting FDI limits
in the name of their Protection.
Transformation of the Interface between Manufacturer and Retailer