Modern Retailing...scope for India

1. An introduction to Modern Retail
Guest lecture for the students of Govt. College of Engineering & Textile
Technology, Berhampur, West Bengal, India.
By
Sumanranjan Palit
srpalit@gmail.com
August 8,2013

2. Retail ..defined in many ways..
• Retail comes from the French
word Retailer , which refers to
"cutting off, clip and divide”.
• According to Kotler: “Retailing
includes all the activities
involved in selling goods or
services to the final consumers
for personal, non business use”
• Modern Retailing is in its ability
to provide easier access to
variety of products, freedom of
choice and many services to
consumers.
Manufacturer
Wholesaler
Retailer
Consumer
Feedback

3. Weekly Markets
Village Fairs
Melas
Convenience Stores
Mom and Pop/Kiranas
PDS Outlets
Khadi Stores
Cooperatives
Exclusive Brand Outlets
Hyper/Super Markets
Department Stores
Shopping Malls
Traditional/Pervasive
Reach
Government
Supported
Historic/Rural
Reach
Modern Formats/
International
Evolution of Retail
Source of
Entertainment
Neighbourhood
Stores/Convenience
Availability/ Low
Costs / Distribution
Shopping
Experience/Efficiency

4. Evolution of Retail

5. Organized retail calls for performance…
Organized retail
• Range of retail formats right from
neighbourhood to hypermarkets
• Professionally managed &
technologically advanced - better
service and shopping experience
• High street location attracting large no
of customer foot-falls in to stores.
• Nationwide large retail chain offering
similar assortment in most of the
categories
• Higher degree of awareness among
the target group – offers great
platoforms for the smaller brands
Unorganized retail
• Melas/Mandies /Bazar or
Weekly Haat : selling different
or similar merchandise
• Small-store (kirana) : Mostly
Family Run,. Located in
neighbourhood.
• Lack of standardization and
professional approach
• No infrustructure for sourcing

6. Organized retail with larger scale of operation offers win-win-
win situation…
• Arranging Assortment: Manufacturers usually make one or a variety of products and
would like to sell their entire inventory to few buyers to reduce costs. Final consumers,
in contrast prefer a large variety of goods and services to choose from and usually buy
them in small units.
• Retailers are able to balance the demands of both sides, by collecting an assortment of
goods from different sources, buying them in sufficiently large quantities and selling
them to consumers in small units
• Breaking Bulk: to reduce transportation costs, manufacturer and wholesalers typically
ship large cartons of the products, which are then tailored by the retailers into smaller
quantities to meet individual consumption needs
• Holding stock: Retailers maintain an inventory that allows for instant availability of the
product to the consumers. It helps to keep prices stable and enables the manufacture
to regulate production.
• Promotional support: small manufacturers can use retailers to provide assistance with
transport, storage, advertising, and pre- payment of merchandise.
• Impulse Purchase : Need strong forecasting ability , also In store experience is the key
to take a share

7. Retail Formats can be classified on the basis of following:
Wedding mall
Khadi Plaza
Village mall
Kisan Bazar ( Choupal Sagar)
India
specific…

8. Each component will differ as per the store format…
Convenience Store : Petrol pump & Metro
stations, SPAR , Grocery
Hyper market : Wall-Mart, Carrefour , Hyper city,
Big Bazar
Supermarket : Spinneys, Food Bazar, More
Specialty Stores ( Multi brand) : Fab-India,
Metro, Sleek Kitchen, Paris Gallery
Departmental Stores : Lifestyle, Shopper Stop,
@Home
Discount Stores : Dollar Shop, Subhiksha, On
Line Stores
Factory outlet
On Line Stores : Group-on, E bay

9. • Product Mix – In-house n
reputed brands from
Local/International market
• Pricing – value Pricing,
Promotional Pricing, Time
pricing ( Weekend),
Bundling
• Place : Location of Stores
and efficient Supply Chain
7 Ps of Modern Retail ( Example)

10. • Promotions –
Advertisements, Loyalty ,
Brand endorsement, POP,
Outdoor branding, PR, Live
demo
• People – training,
Appearance,
empowerment, reward,
employee of the month
• Process – Customer service,
billing counter, Product
• Physical Evidence
7 Ps of Modern Retail…

11. Others
11%
Food &
Grocery
60%
Apparel
8%
Mobile
6%
Food Ser
5%
Jewellery
4%
Con Elect
3%
Pharma
3%
24%
11%
33%
11%
7%
6%
8%
The '8%'
India’s $500 billion retail industry..
Source : Deloitte, jan’13
92% of the sector is unorganized, those that fall under `mom & pop’ store.
Organized sector is dominated by retailers having multiple stores

12. Still a long way to go, enormous potential for Indian Retail
industry…
USA India
Contribution of
Retail to the GDP
27% 13%
Per capita Retail
Space in SQFT
16 2
% Population
engaged in Retail
20% 8%
% of Organized retail 80% 8%
Wal-Mart/ Future
Group
20% 0.3%
Average store size High Low
Role of wholesalers Limited Extensive
Infrastructure Extensive Limited
5th largest Retail destination in the
globe
Only 4% of the 12 million Stores are
bigger than 500 SQFT
Only 8% of Indian Retail is
`Organized’
Organized retail is poised to grow @
35~40% compared to only 6% to that
of `Unorganized’ retail
Very young population. Ready to
experiment & accept New
Six million rich Indians looking for
changing Shopping experience

13. Evolution of Luxury in India is at a nascent stage as compared to other Asian countries
India’s emerging economic growth has sparked initial stages
of luxury consumption
 Locked
into
luxury
habit
 Confide
nt
discerni
ng
buyers
Subjugation
Start of
money
Show
off
Fit in
Way of
life
 Authoritaria
n rule
 Poverty and
deprivation
 Economic
growth
 Masses
buy white
goods
 Elites start
consuming
luxury
 Acquire
symbols
of wealth
 Display
economic
status
 Large
scale
adoption
of luxe
 Fuelled
by need
to
conform
India
China
Taiwan, Korea
Hong Kong, Singapore
Japan
Source: Chada and Husband’s evolution of luxe model)
Stage I
Stage II
Stage III
Stage IV
Stage V

14. Earlier Classification Current Classification
Tier 1
Tier 2
Tier 3
Based on Geography and
Population
MEGACITIES – Largest cities in
terms of population and overall
consumer markets
BOOM TOWNS – Next set of big-
population cities with high
expenditure per household
NICHE CITIES – Smaller in terms
of overall population but still well
above their weight in spending per
household.
These twenty cities together account for
• 10% of Population,
• 55% of total urban income
• Boomtowns and niche cities today may
be much smaller in terms of their income
and spending weights, but they are
growing rapidly.
Megacities Boom Towns Niche Cities
Mumbai
Delhi
Kolkata
Chennai
Bangalore
Hyderabad
Ahmedabad
Pune
Surat
Kanpur
Jaipur
Lucknow
Nagpur
Bhopal
Coimbatore
Faridabad
Amritsar
Ludhiana
Chandigarh
Jalandhar
14
Evolved Urban Classification

15. Map of India’s income classes

16. In face of the evolving market characteristics, Retail
Industry need to work around three critical success factors
Developing a « product offering » catering to the
Indian preferences….
Managing the mandatory sourcing and
real estate is key to revenues/sq. ft in
« Operations »
Offering an exceptional
« Customer Service Experience »
will make for clear winners
Evolving consumer tastes and preferences
Tackling mandatory 30% sourcing- identifying right
partners
Offering much desired customer service experience and quality
Embracing Indianization of products
Managing real estate : revenues/sq.ft vs. rental costs
Identifying and hiring talent and investing in training

17. Indianization of their offerings….
Embracing ‘Indianness’ brand’ will definitely help players connect with Indian consumers,
however, it remains to be seen what the efforts will yield ….
Indianizing offerings
Saris by Hermes
 Indianized offerings visible in the watches, jewelry and apparel segments
– Ex-Keeping in mind the like for logos on luxury products by Indian
consumers, Salvatore Ferragamo launched an exclusive ‘Gancino’ collection
– Hermes offering Gold in its jewelry and accessories collection in India
– Tod’s silk satin clutches with rhinestones as part of “only for India” collection
 Indian inspired collections elsewhere create a connect in terms of brand image
and perception
– Ex-The Louis Vuitton Diwali collection
Gandhii Montblanc pen
Salvatore Ferragamo’s exclusive
India collection of Gancino bagsNawab collection by Roberto Canali
Product Offering
Source: http://www.cpp-luxury.com/en/the-real-challenges-of-india-s-luxury-retail-market_1633.html
http://in.reuters.com/article/2011/08/24/idINIndia-58939820110824
http://jllindia.wordpress.com/2011/02/14/india-luxury-retail-property/

18. Brands will need to define localized growth strategies
on smart investments
It is imperative for foreign players to shift focus to adding growth capital to gain scale, tackling the
mandatory 30% sourcing rider and investing on hiring and training talent
 Footfall versus rental cost a concern-Rentals varying from INR 450-550/sq.ft
for high street vs. INR 350-450/sq.ft for luxury malls
P&L Item Global India
Revenue/sqft/day (INR) 110-170 60-80
Gross margin 70% 55-60%
Rentals(% of revenue) 10-15% 25-30%
Others costs (% of revenue) 20-25% 15-20%
Talent  The luxury retail sector was estimated to face a shortage of 1,33,000
salesmen by 2010
Sourcing/production
 With the rider of mandatory 30% sourcing from SMEs in India, vendor
management, workmanship, quality of raw material and intellectual property
issues need to tackled
Operations
Real Estate
Source: http://www.cpp-luxury.com/en/the-real-challenges-of-india-s-luxury-retail-market_1633.html, http://in.reuters.com/article/2011/08/24/idINIndia-58939820110824, Joe Lang La Salle India, AT
kearney CII report

19.  Consumer
handling at
entrance
 Consumer
identification
 Consumer
orientation
 Ambiance
(lighting, sounds,
design…)
 Shop/counter
lay-out
 Signage
 Product…
 Staging
 Access
 Information
 Testing
 Needs and habits
inquiry
 Main product
choice
 Link selling
 Additional
services
 Customization
 Payment
 Delivery services
 Consumer
registering
 Satisfaction
check
Shopvisit
BeforeShopvisit
AfterShopvisit
Consumer
welcome
Atmosphere
discovery
Product
touch & feel
Advisory &
services
Check
out
 Purchase provoked
by need for
conformance, social
status
 After sales service
missing or
insufficient due to
high import duties
 Requests and
claims take time
Designing an exceptional “store-journey” is key to
connecting with Indian consumers
Indian consumers’ need for attention and respect is synonymous with the culture with class
consciousness and status symbolization : It is imperative to focus on the experience and after shop
visit
Source: First Retail workshop with Lancôme, Armani and YSLB DGAs
Shop journey
Customer Experience

20. … and creating brand awareness to capture the burgeoning
luxury consumption class in India
It is critical for luxury brands to decode the aspirational DNA in order to connect with the Indian
luxury consumer
Communicating luxury
 Newer affluent masses will need to be communicated the exclusivity and
prestige driven by a distance-
– Artistic and graphic visualisations
– Using India on global advertising campaigns
– Localized marketing material
 Press dominates the marketing budget of luxury brands as of now
– Social media to target young consumers through Face book, Twitter,
internet and mobile communication will be the trend in near future
– Over 300M users to have access to data-rich video through 3G and
4G capabilities on mobile by 2015
Role of digital media
Brand awareness
 Awareness is very high in rich class segment
– However, newly affluent lack sufficient knowledge and awareness. Here
bollywood can create the connect. As brand awareness is low, brand
loyalty too is low
Customer Experience
Source: Communicating luxury to the masses, JWT
http://sg.acnielsen.com/site/20080408.htm