ACKNOWLEDGEMENT It is pleasure to acknowledge those who have contributed to this project directly or indirectly, though it will be still an inadequate appreciation of their contribution, we here by acknowledge the names of the people to whom we shall always remain grateful. We would sincerely like to express our gratitude to Mr. Ravjibhai Patel who gave us the grand opportunity to have Grand Project at Adani Supermarket. We would especially like to thank Mr. Manish Christian, the Retailing Manager at ADANI for evincing keen interest in our work, continuous encouragement and guide us through out our survey.
Without his cooperation it was impossible to reach up to this stage. We are also very thankful to all the members of Adani Supermarket who shared their valuable knowledge with us & gave us opportunity to understand the field of competitive Retail industry. We are also very thankful to Prof. Rajeshwari Jain who performed as a guide for this project. We are thankful for her constant guidance, support and inspiration. We would also like to sincerely express our gratitude to our director Prof. S. Chinnam Reddy & all the faculty members who have been time & again directly or indirectly helped us in relation to the Grand Project.
Without the theoretical knowledge imparted by them during 4th Semester of M. B. A. course it was not possible to have it applied in practical life. We are thankful to the librarian at the SKPIMCS & at the AMA for extending their helpful hands as and when needed without any hesitation. Thanks to our parents, who always keep us from falling apart during endless hours of our project. They always keep our sprits up and our hamstring in working order. We eagerly look forward for the suggestions for improvement from the readers of this project. Dhaval Pandya Mayur Karavadara CERTIFICATE
This is to certify that Mr. Dhaval Pandya and Mr. Mayur Karavada, the students of M. B. A. 2nd Year of S. K. Patel Institute of Management & Computer studies, Gandhinagar have completed their grand project titled as “A STUDY OF CONSUMER PFERENCE IN GARMENT IN ADANI HYPERMARKET AT AHEMDABAD” in the year 2005-2006 in partial fulfillment of Gujarat University requirement for the award of degree of Master of business administration. Prof. S. Chinnam Reddy Prof. Siddarth Das Prof. Rajeshwari Jain Director Coordinator Grand Project Guide
Date:__/__/2006 DECLARATION We hereby, declare that the grand project on “A STUDY OF CONSUMER BEHAVIOR PATTERN WITH RESPECT TO PART OF PRODUCT MIX FOR UPCOMING HYPERMARKET IN AHMEDABAD” is our original work and has not published elsewhere. This has been undertaken for the purpose of partial fulfillment of Gujarat University requirement for the award of degree of Master of Business Administration. Date: __/__/2005 Place: Gandhinagar Uteshiya Dilip M. Thakrar Milan R. INDEX |SR. NO. |PARTICULARS |PAGE NO. |01 |EXECUTIVE SUMMARY |02 | |02 |PREFACE |03 | |03 |INTRODUCTION OF RETAILING |04 | |04 |INDUSTRIAL ANALYSIS |07 | |05 |PROBLEM OF THE INDUSTRY |10 | |06 |FUTURE SCENARIO OF THE INDUSTRY |12 | |07 |THE TIMES OF INDIA – HIGHLIGHTS |13 | |08 |A BRIEF HISTORY |15 | |09 |STORY OF THE TIMES |17 | |10 |SIZE AND FORM OF THE ORGANIZATION |19 | |11 |AWARDS AND ACHIVEMENTS IN ADVERTISING |20 | |12 |FUTURE PLANS OF THE COMPANY |22 | |13 |VARIOUS DEPARTMENTS OF THE BCCL |23 | |14 |RMD – RESULTS & MARKETING DEVELOPMENT |24 | |15 |PORTFOLIO OF BCCL |26 | |16 |THE TIMES OF INDIA |28 | |17 |THE ECONOMIC TIMES |32 | |18 |FEMINA |36 | |19 |FILMFARE |41 |20 |CURRENT TRENDS OF MAGAZINE INDUSTRY IN INDIA |47 | |21 |RESEARCH METHODOLOGY |50 | | |RATIONALE OF THE STUDY |50 | | |RESEARCH PROBLEM |50 | | |RESEARCH OBJECTIVE |51 | | |HYPOTHESIS |52 | | |STRATAS |52 | | |SAMPLING PROCESS |52 | | |SOURCES OF DATA |53 | | |RESEARCH INSTRUMENT |53 | | |LIMITATIONS OF THE STUDY |54 | | |TABLES & CHARTS OF THE RESEARCH STUDY |55 | | |CONCLUSION OF THE RESEARCH STUDY |61 | |22 |SALES PROMOTION OF FEMINA & FILMFARE |62 | |23 |PROCESS OF PENETRATION FOR FEMINA & FILMFARE |64 | |24 |SUGGESTIONS |70 | |25 |EXTRA ACTIVITIES |71 | |26 |BIBLIOGRAPHY |72 | |27 |QUESTIONNAIRE |73 | EXECUTIVE SUMMARY The grand project at ADANI HYPERMARKET, Ahmedabad was very informative and knowledge giving. We have done Research Study on the consumer preferences on garment. The Research Study was confined to Ahmedabad City with a sample size of 250. We have primary data through questionnaire. We have also used different retail magazine and web-site for require information in our secondary data.
At the end of the Research study we have come to the conclusion that ADANI HYPERMARKET have good potential to attract customer in store but they require to create more awareness in the garment selling at hypermarket. There were some limitations also of our Research study. All the suggestions and findings might prove important to ADANI RETAILING and helpful to find consumer preferences in garment department. PREFACE The business of retail in India has seen significant changes in last few years. We have seen the emergence of new formats and the application of global concepts and constructs albeit with modifications to suit the Indian environment. It not only provides the Indian consumers a wide choice, but also represents a very large employment opportunity for people with diverse skill sets.
India has largest retail density in the world with 12 million retail outlets for a population of over a 1000 million, though 96% of these are smaller than 500 sq. ft. A 2 percent share of organized retail in India is the way below the 80 per cent share in USA, 40 per cent in Thailand and 20 per cent in China. Organized retailing is growing very rapidly in India. In India we find Convenience store, Department store, Hypermarket, Supermarket, Specialty store etc. from where people purchase their requirement. All these stores can be differentiated based on size as well as the product mix available. Adani retailing India Ltd. is the group company of Adani group having nearly 61 supermarkets and 5 hypermarkets in Ahmedabad.
It has penetrated the Ahmedabad market and it is on the way of expansion in other cities of Gujarat. Adani want to improve there consumer promotion scheme in garment. So studying the consumer preferences and find what the people of Ahmedabad expect in garment preferences should be understood. Our questionnaire is based on the requirement of the company. Our study will provide some insight to the company in understanding consumer buying behavior and deciding the part of product mix requirement for upcoming hypermarket. 1. INTRODUCTION The first question that must be considered is: what is ‘retail’? The word retail is, in fact, derived from the French word RETAILER, which means to cut off a piece or break bulk.
A retailer may be defined as a ‘dealer or trader who sells goods in small quantities’ or’ one who repeats or relates’. Retailing can hence, be considered as the last stage in the movement of goods and or services to the consumers. put simply, any firm that sells products to the final consumer is performing the function of retailing . it thus consists of all the activities involved in the marketing of goods and services directly to the consumers, for their personal, family or household use. The past century has been witness to many changes occurring in our everyday world. Industrial and technological growth has made a significant impact on our lives as consumers. One such industry, which has made a phenomenal impact on our daily lives, is retail.
This industry touches our lives as end consumers, by providing us with the products or services that we need. Almost everything we use in our daily lives including the feed we eat, the clothes we wear, and the things we need for our homes or for ourselves, are bought from retail stores. Goods are manufactured all over the world but are ultimately sold to us through these retail stores. India has already proven its mettle as superpower in the arena of information technology. The retail industry offers to bloom to the same level if conductive environment and support is provided it. India’s one billion populations make the country the second largest in the world in terms of population which is the very basis for successful organized retailing.
We should take heart from the fact that most of the world’s successful retail stories in the developed as well as developing countries have shaped up in small towns and villages. Retailing is a green pasture not just for individuals or companies but also comes with job opportunities in all aspects of the operations. Professionalisms in retail while still in its infancy does show some promising future for those keen to make a career in this fascinating world. Talking about our project, the title of the project is “A STUDY OF CONSUMER BEHAVIOR PATTERNS WITH RESPECT TO PART OF PRODUCT MIX FOR UPCOMING HYPER MARKET IN AHMEDABAD”. For acquiring related data we have formed one questionnaire which contains 12 questions.
Basically all these questions are focused on the consumer’s behavior for visiting any outlet, purchase the product and frequent need of the products. We have also learned the theoretical knowledge which requires for completing this project. We have got the knowledge about the Retailing, as well as the consumer behavior. We have learned about the Retail industry in Indian context as well as in global context. AFTER STUDDING THESE ASPECTS OF RETAILING WE HAVE TRIED TO GIVE THE SUGGESTIONS AND THE RECOMMENDATIONS FOR STRENGTHENING THE FUTURE POLICIES OF THE ADANI HYPER MARKET IN THE AHMEDABAD. THIS PROJECT WILL HELPFUL TO THE ORGANIZATION FOR KNOWING WHAT IS
CONSUMERS’ BEHAVIOR REGARDING PRODUCTS AND SERVICES OFFERED BY LOCAL PROVISION STORE AND GENERAL STORE, AS WELL AS ABOUT THE PART OF THE PRODUCT MIX.. 2. RESEARCH METHODOLOGY 2. 1 TITLE OF THE PROJECT: “A study of consumer behavior patterns with respect to part of product mix for upcoming hyper market in Ahmedabad” 2. 2 OBJECTIVES: ? TO STUDY CONSUMER BEHAVIOR FOR PURCHASING PRODUCTS FROM DIFFERENT TYPES OF RETAIL FORMAT ? To analyze product requirement of consumers from provision store, superstore etc. with frequent use. ? To analyze product mix factor affecting switching of consumer from traditional retail formats to hypermarket. ? TO ANALYZE THE CONSUMER’S PERCEPTION ABOUT THE CONCEPT OF DISCOUNTED SALE. 2. 3 SCOPE: STUDY OF CONSUMER BEHAVIOR PATTERNS WHO PURCHASE THEIR HOUSEHOLD NECESSITY FROM PROVISION STORE AS WELL AS FROM THE SUPERMARKET AND THE STUDY WAS LIMITED TO 180 FT. RING ROAD, KALAWAD ROAD, RAIYA ROAD, GONDAL ROAD, NIRMALA CONVENT ROAD, 150 FT. RING ROAD. UNIVERSITY ROAD, YAGNIK ROAD KARANPARA, MANHARPLOT ETC. 2. 4 TIME SCOPE FOR COMPLETING THIS PROJECT WE HAVE TAKEN A TIME PERIOD OF THREE MONTH WITH OUR STUDY OF THE 4TH SEMESTER. 2. 5 SAMPLE DESIGN: 2. 5. 1 SAMPLING TYPE IN THIS PROJECT CONVENIENT SAMPLING METHOD IS USED FOR THE SELECTION OF CUSTOMER. 2. 5. 2 SAMPLING UNIT TO DEFINE SAMPLING UNIT, ONE MUST ANSWER THE QUESTION THAT WHO IS TO BE SURVEYED.
IN THIS PROJECT SAMPLING UNIT IS HOUSEHOLDS WHO ARE PURCHASING THERE HOUSEHOLD NECESSITY FROM THE SUPERMARKET AND THE CUSTOMERS WHO ARE PURCHASING THERE ROUTINE HOUSEHOLD ITEMS FROM THE PROVISION STORE OF AHMEDABAD CITY OF DIFFERENT AREAS. THE GEOGRAPHICAL UNIT IS AREA AND THE SOCIAL UNIT IS HOUSE HOLDS. 2. 5. 3 Sample size THE SAMPLE SIZE OF THE SURVEY WAS 200 CUSTOMERS. 2. 6 METHODS OF DATA COLLECTION 2. 6. 1 PRIMARY METHODS 1. QUESTIONNAIRE 2. 6. 2 SECONDARY METHODS 1. MAGAZINES. 2. NEWSPAPERS 3. WEBSITES 4. BOOKS 5. OTHER PROJECTS. 2. 7 FIELDWORK: In order to gather the primary data associated with our survey of consumers over a selected hub of areas in Ahmedabad, we have undergone an extensive fieldwork.
The basic purpose of the field work was, obviously, to record responses of target consumers. 2. 8 LIMITATIONS • THE TIME DURATION TO CARRY OUT THE SURVEY OF ALL THE AREAS OF AHMEDABAD WAS VERY SHORT. • Our survey was restricted to areas like 180 ft. Ring road, Kalawad road, Raiya road, Gondal road, Nirmala convent road, 150 ft. ring road. University road, Yagnik road Karanpara, Manharplot etc. • The sample size for the survey of customers was limited to 200 respondents, which might not be representative of all customers of Ahmedabad city. • The respondents are selected by convenience so they may not be representative of the analysis. • The results are totally derived from the respondent’s answers.
There might be a difference between the actual and projected results. • Research also depends on surveyors’ bias & his/her ability to analyze the data & draw conclusion. 3. INDUSTRY PROFILE 3. 1 GLOBAL RETAILING Retailing is the final step in the distribution of merchandise – the last link in the Supply Chain – connection the bulk producers of commodities to the final consumers. Retailing covers diverse products such as foot apparels, consumer goods, financial services and leisure. A retailer, typically, is someone who does not effect any significant change in the product execs breaking the bulk. He/ She is also the final stock point who makes products or services available to the consumer whenever require.
Hence, the value proposition a retailer offers to a consumer is easy availabilities of the desired product in the desired sizes at the desired times. Many retailers did globalize, and some succeeded. Yet many more retailers, especially U. S. -based retailers, struggled and failed to find the holy grail of globalization. Indeed, the retailing industry is littered with the charred remains of investments that drained cash from the bottom line. Retail behemoths were humbled by poorer, technically unsophisticated local companies that simply knew their customers better. They were sideswiped by financial crises in such disparate locations as Argentina, Indonesia, Russia, and Mexico.
So is there still hope for retail globalization? The answer is yes. Despite the many failures, there are also many successes. The factors that drove enthusiasm in the past have not disappeared. Emerging markets still represent the greatest hope for increased spending power, home markets are still laden with excess capacity and slow growth, and big retailers still have much to offer consumers in emerging countries. In the developed countries, the retail industry has developed into a full-fledged industry where more than three-fourths of the total retail trade is done by the organized sector. Huge retail chains like Wal-Mart, Carr four Group, Sears, K-Mart, McDonalds, etc. ave now replaced the individual small stores. Large retail formats, with high quality ambiance and courteous, and well-trained sales staff are regular features of these retailers Top Ten Retailers Worldwide |Rank |Retailer |No of stores owned |Sales in FY-00 US$ Millions | |1 |Wall-Mart Stores Inc. (USA) |4178 |$180,787 | |2 |Carrefour Group (France) |8130 |$61,047 | |3 |The Kroger Co. (USA) |3445 |$49,000 | |4 |The Home Depot, Inc. USA) |1134 |$45,738 | |5 |Royal Ahold (Netherlands) |7150 |$45,729 | |6 |Metro AG (Germany) |2169 |$44,189 | |7 |Kmart Corporation (USA) |2105 |$37,028 | |8 |Sears, Roebuck and Co. (USA) |2231 |$36,823 | |9 |Albertson’s, Inc. (USA) |2512 |$36,726 | |10 |Target Corporation (USA) |1307 |$36,362 |
Broadly the organized retail sector can be divided into two segments, In-Store Retailers, who operate fixed point-of-sale locations, located and designed to attract a high volume of walk-in customers, and the non-store retailers, who reach out to the customers at their homes or offices. Apart from using the internet for communication (commonly called e-tailing), non-store retailers did business by broadcasting of infomercials, broadcasting and publishing of direct-response advertising publishing of traditional and electronic catalogues, door-to-door solicitation and temporary displaying of merchandise (stalls). 3. 1. 2 Global 250 Highlights [pic] This year we have expanded our coverage of large retailers. The table presents the 250 largest retailers around the globe.
An additional 50 retailers were added, in part, because there are a large number of companies that have sales in the low- to mid-$2 billion range that in previous years were not being highlighted. Several of these companies are rising stars; others simply are solid performers whose status should be acknowledged. The retailers in the current list generally performed well in 2003. The global economic upswing gained momentum in 2003, which provided an important lift to retailers around the world. Importantly, many regions — North America, Asia, Latin America, Africa — exhibited growth in consumer demand for the year. This synchronous upturn underpinned the 3. 9 percent gain in inflation-adjusted global GDP in 2003.
It was the global economy’s strongest rate of increase since 2000. Only Western Europe did not experience acceleration in growth during the year. 2004 Results Retail sales for these 250 companies totaled $2. 6 trillion. With global retail sales of roughly $8 trillion, these 250 retailers are capturing about a third of the marketplace. Retail sales varied across a wide range — from a high of $256 billion for Wal-Mart to CBRL Group’s $2. 2 billion. (CBRL Group is known mostly for its Cracker Barrel Old Country Store Restaurants. ) However, at the bottom of the list, the race was much tighter. There were 58 retailers whose sales were within a very narrow band of $3 billion to $2. 2 billion.
There also were nearly a dozen more retailers with sales of slightly more than $2 billion who just missed making the list. The improved global economy, coupled with increased productivity from technology investments, has helped retail profitability. For those companies who report their results, only 5 retailers, or 6 percent, recorded a net loss in 2004. In last year’s report, 7 percent of the retailers had losses, and in the prior year, 13. 5 percent were unprofitable. For those who were profitable in 2004, the average net income figure represented 3. 3 percent of group sales. The largest retailers have, for the most part, retained their leadership roles.
Among the top 10 retailers, there were only small movements in the rankings. The top three companies — Wal-Mart, Carrefour and Home Depot — remained the same. Tesco and Aldi Einkauf moved up two slots, while Sears dropped from 10th to 13th largest global retailer. Sales from these 10 retailers reached $740 billion, representing 28. 4 percent of the total from these 250 companies. There are two new Chinese retailers that have joined the ranks of top retailers. Shanghai friendship, ranked 164 on the list, is the parent company of China’s largest supermarket Operator, Lianhau Supermarket. Beijing Gome Home Appliance is the 230th largest retailer on the list.
As the Chinese government continues to support efforts of consolidation among its retailers, the number of large retail conglomerates will continue to grow. China’s securities regulator in October 2004 approved a plan for Bailian Group to acquire major stakes in five other retailers, including Shanghai Friendship. The Chinese government is facilitating consolidation, in part, to allow its retailers to better compete against the growing presence of foreign retailers. At the end of 2004, China began allowing foreign retailers to set up wholly owned units, with no restrictions on the number of outlets or locations. 3. 2 RETAILING IN INDIA 3. 2. 1 RETAIL SALES The evolution of Indian retail industry
For Indian retailing, things started to change slowly in the 1980s, when India first began opening its economy. Textiles sector (which companies like Bombay Dyeing, Raymond’s, S Kumar’s and Grasim) was the first to see the emergence of retail chains. Later on, Titan, maker of premium watches, successfully created an organized retailing concept in India by establishing a series of elegant showrooms. For long, these remained the only organized retailers, but the latter half of the 1990s saw a fresh wave of entrants in the retailing business. This time around it was not the manufacturer looking for an alternative sales channel. These were pure retailers with no serious plans of getting into manufacturing.
These entrants were in various fields, like – Food World, Subhiksha and Nilgiris in food and FMCG; Planet M and Music World in music; Crossword and Fountainhead in books. As of the year ending 2000 the size of the Indian organized retail industry was estimated at around Rs. 13,000 Crore. The various segments that make up the organized retail industry along with their size are in table given below. Retail growth is already gathering momentum and the organized retail industry is expected to grow by 30 per cent in the next five years and is expected to touch Rs. 45,000 Crore in 2005. Thus, the growth potential for the organized retailer is enormous Retailing in India
The retail market size in India is estimated to be around $180 billion. Retailing provides jobs to almost 15 percent of employable Indian adults and it is perhaps the largest contributor to India’s GDP. But the flip side of the coin is that the average size of each of the retail outlets in India is only 50 square feet and though a large employer, the industry is very unorganized, fragmented and with a rural bias. 1. The Indian retail industry is unorganized There are nearly twelve million retail outlets in India and the number is growing. Two thirds of these stores are in rural location. The vast majority of the twelve million stores are small “father and son” outlets.
According to the “Retailing in India” report published by the PwC Global Retail Intelligence Program, share of the unorganized sector is 98%. 2. The Indian retail industry is fragmented Retail stores in India are mostly small individually owned businesses. The average size of an outlet is 50 sq. ft. and though India has the highest number of retail outlets per capita in the world, the retail space per capita at 2 sq. ft per person is amongst the lowest in the world. 3. The Indian retail industry has rural bias Nearly two thirds of the stores are located in rural areas. The retail industry in rural India has typically two forms: “Haats” and “melas”. Haats are the weekly markets: they serve groups of 10-50 illages and sell day-to-day necessities. They are frequently used as replenishment point for the small village retailer. Melas are larger in size and more sophisticated in terms of the goods sold. Mela merchandise would include more complex manufactured products such as televisions. Even in urban areas, organized in India is restricted to the top few cities of the country as shown in Table given below: Trends in Retailing Retailing in India is at a nascent stage of is evolution, but within a small period of time certain trends are clearly emerging which are in line with the global experiences. Organized retailing is witnessing a wave of players entering the industry.
These players are experimenting with various retail formats. Yet, Indian retailing has still not been able to come up with many successful formats that can be scaled up and applied across India. Some of the notable exceptions have been garment retailers like Madura Garments & Raymond’s who was scaled their exclusive showroom format across the country 1. Experimentation with formats Retailing in India is still evolving and the sector is witnessing a series of experiments across the country with new formats being tested out; the old ones tweaked around or just discarded. Some of these are listed in Table below. |Retailer |Current Format |New Formats.
Experimenting With | |Shoppers’ Stop |Department Store |Quasi-mall | |Ebony |Department Store |Quasi-mall, smaller outlets, adding food retail | |Crossword |Large bookstore |Corner shops | |Pyramid |Department Store |Quasi-mall, food retail | |Pantaloon |Own brand store |Hypermarket | |Subhiksha |Supermarket |Considering moving to self service | |Vitan |Supermarket |Suburban discount store |Food world |Food supermarket |Hypermarket, Food world express | |Globus |Department Store |Small fashion stores | |Bombay Bazaar | |Aggregation of Kiranas | |Efoodmart | |Aggregation of Kiranas | |Metro | |Cash and carry | |S Kumar’s | |Discount store | Retailers are also trying out smaller versions of their stores in an attempt to reach a maximum number of consumers.
Crossword bookstores are experimenting with Crossword Corner, to increase reach and business from their stores. Food World is experimenting with a format of one-fourth the normal size called Food World Express. 2. Store design Irrespective of the format, the biggest challenge for organized retailing is to create an environment that pulls in people and makes them spend more time shopping and also increases the amount of impulse shopping. Research across the world shows that the chances of senses dictating sales are as much as 10-15% for certain categories. This reason is good enough for organized retailers to bring in professional designers while developing a new property.
And, that is why retail chains like Music World, Barista, Pyramid and Globus and laying major emphasis & investing heavily in store design. Music World spent three months in college campuses and metros studying the market and talking to youngsters before starting work. The brand identity was created after extensive research: a logo was designed and the look of the stores across the country was decided upon. Apart from the visual impact, the functionality of the store design was also taken care of. Listening posts have been created for people to listen to their favorite album and an area in the center of the stores has been earmarked for celebrity visits and promotions. 3. Emergence of discount stores What does Subhiksha in Chennai, Margin Free in Kerala and recent ntrants like Bombay Bazaar in Mumbai, RPG’s – Giant in Hyderabad, Big Bazaar in Kolkata, Hyderabad and Bangalore have in common? Their products are below MRP. Discount stores have finally arrived in India and they are expected to spearhead the revolution in organization retailing. Though this segment is growing, it is small compared to international standards where around 60 per cent of the business comes from this format. Internationally, the largest retailer in the world Wal-Mart is a discounter. These discount stores have advantages of price, assortment dominance and quality assurance and have the ability to quickly build scale and pass on the benefits.
However, the success would be for retailers who are able to build the scale fast and manage their operations efficiently while offering value to the customer consistently. 4. Unorganized retailing is getting organized To meet the challenges of organized retailing that is luring customers away from the unorganized sector, the unorganized sector is getting organized. 25 stores in Delhi under the banner of Provision mart are joining hands to combine monthly buying. Bombay Bazaar and Efoodmart have also been formed which are aggregations of Kiranas. In a novel move, six Delhi based restaurants have come together and formed a consortium: NFC, to promote New Friends Colony, a posh locality in the Capital, as a branded place in town.
The aim is to increase footballs in the area, which is fast losing its sheen to its closest and upcoming destinations such as large cineplexes, and malls, which are backed by the corporate house such as ‘Ansals’ and ‘PVR’. 5. Not all stories are a success A lot of activity is happening in retail and though we do have may success stories, not all ventures have been successful. Shoppers’ Stop, for example, implemented JD Edwards ERP, but could not reap much benefit due to less than optimal number of operating locations. A few references of other such less successful ventures is given below: • Franchising, as a way to grow has not worked out well for Vitan, the second oldest food supermarket.
More than two third of its 19 odds outlets have either folded up or snapped up ties with the parent. • The foray of organized retailing in the small towns of India has met with limited success. The notable example being Shoppers’ Stop foray in Jaipur. The retailers are now focusing their energies on the top six cities. • India’s oldest food supermarket chain, the Bangalore based Nilgiris has been up for sale for a few months now but yet to find takers. • In Delhi, the Escorts group-promoted Nanz, a food supermarket has shut down after being unable to find a white knight. These failures and limited successes have happened both due to a lack of experience and understanding of issues.
VISION 2010 [pic] According to ICICI estimates, the share o organized retailing is set to increase from 20 percent in 2010. A share of Rs. 2900 Crore in 2004 will leap to Rs. 38,447 in 2010. [pic] The past 2-3 years have seen a number of developments in the retailing business in India. The entry of corporate houses like RPG, Tata and Piramals has increased the capital availability in the market. Bigger players like Shoppers Stop are in a position to take advantage of their sizes in dealing with the manufacturers. Despite a slowdown in the economy, customer queues at the stores are not decreasing. Retail sector is bound to grow in the coming years.
But how much and in what direction are the questions that need to be evaluated. Various agencies have made different estimates of the size of organized market in 2010. The one thing in common amongst these estimates is that the Indian organized retailing industry will be very big in 2010. The status of the industry will depend a lot on external factors like Government regulations and real estate prices, besides activities of the retailers and demands of the customers. Based on our analysis of present trends, and development of retailing elsewhere, we present our perspectives and snapshots of organized retailing, as it would exit in 2010. 1. Investment will increase
Retail sector will see huge investments in the next 4-5 years. Newer chains will come in and the present players will increase their penetration. By 2005, the established players would have reached saturation levels in metropolitans and will shift the focus of their investments to other Class 1 cities. By 2010, there will be little difference between the metros and the next 20 cities (the present million plus cities). However, the investments would largely be private investments, or at best secondary markets. This will happen because expansion will happen through investments by business houses that will not sell their stakes. If any purely retailing company exists, it will be an exception.
However, if the ban on foreign players holding a controlling stake is lifted, the sector could see drastic movements. The entry of foreign players will undoubtedly result in buying and selling and some businesses might withdraw their money in anticipation. The entry of foreign players, if allowed, will not only affect ownerships, but also change the basics of business. Huge investments in stores and their supply chains can transform the entire scenario. But the lifting of ban is a policy issue that cannot be predicted, and can only be decided by the government. 2. Demographics In the next 10 years, India population is expected to grow by about 14 per cent.
But this increase will not be even. Important trends that will affect retailers are listed below. The number of children (0-15 years) will remain stable at 30 million: This will mean a lesser growth for toys, games and some apparel segments. But given the current nascent stage of the growth, these sectors will still offer high growth rates. The number of people in 40-60 years of age will go up by 30%: Sales of cosmetics, skin care, hair dyes, and other youth inducing products will rise. More consumer resources would be spent on retirement planning and saving for retirement. Home improvement and financial services firms would benefit from this trend.
The number of households will increase by 25%: This would lead to a higher growth in the household-decor items vis-a-vis personal items as apparel and fashion accessories. 3. Regional differences will stay Although a few players will be able to form pan-Indian retail supply chains, the retail market is unlikely to be a single entity. For example, food retailing in Chennai, Kolkata and Chandigarh is vastly different in terms f shopping habits and consumer tastes. Many such differences will remain. Though a few national retail chains will develop, they would have to coexist with strong regional players, who would excel in their understanding of the customers and strong brand names. The national players would primarily be is sectors like Apparel, Fashion, Food and Music.
Importance of local supplies for grocery sector would ensure the regional chains would reign supreme in these sectors. The key to success for national players will to maintain the efficiencies that come from their large-scale operations while retaining the ability and the flexibility to satisfy different needs of different consumers. However, organized retailing, in some cases, will change and harmonize consumer habits, purchasing patterns and consumer behavior. McDonalds and Barista have already been successful in doing this. 4. Retailers would adapt more than one format Today, internationally all top-retailers (except Kmart and Aldi) operate 3-4different formats, with companies like Metro AG operating 13 formats.
This diversity of formats allows the company to utilize its brand value across different segments and categories of customers. Signs of such a development are visible in India as well. A movement towards Class-I cities necessitates modification of operating format5s to suit different needs. By 2010, top retailers would be operating at least 3-4 formats. The biggest challenge that the retailers will have to face would be of maintaining different brand images, and though clashing images would be formed, a few retailers would be able to use Brand Extensions to establish different images in different cities. 5. Dual focus on costs and time With more dual income families’ consumer ability to spend will increase, but the time available for shopping will go down.
Customers will become more demanding in terms of rapid and friendly service. Retailers would develop shopping as an entertaining experience, but the more successful ones will be the ones who provide faster service. On the other hand, increasing competition would push the prices down. Efficiencies in supply chain and economies of scale would allow retailers to reduce their prices without compromising either on the shopping experience or on their own profitability. 6. 24 hours retailing Time stressed consumers will also ask for round the clock retailing. As these consumers will be ready to pay a premium for service at odd hours, the timings of shopping will have to adapt to needs of these consumers.
A number of 24 hours retail stores would emerge to cater to this need. The assumption here is that the current administrative restrictions on running shops at nights will be lifted. It is expected that in the face of increasing demand from both the consumers and the industry fore, regulations regarding retailing will be eased. 7. Small retailer will coexist Within a decade; large organized retailers would be controlling a substantial portion of the retail trade. Yet, it is not to say that small, independent and unorganized retailers will disappear in large numbers. They will survive on their core strengths of personal relations with customers and closeness to residences.
The experiences of South East Asian countries has been that even after 10 to 15 years of allowing FDI in retailing, unorganized retailers still control a sizeable chunk of the retailing market. The Indian experience in retailing is expected to be no different. However, to compete with the big retailers on price, small retailers will form cooperatives for purchasing, just as the once in France, Spain and Italy have already done. This trend has also started in Delhi, and is only expected to increase. 8. Supply chain dynamics The balance of power between retailers and manufacturers will shift towards the retailers. The bigger retailers would be able to seek the lowest prices, require their suppliers to assume greater business risks, and collaborate with suppliers to achieve overall cost reduction in their operations.
Scale economics would help in operating optimized supply chains and logistics network with investments in information technology enabling process efficiencies and effectiveness. Increased volumes would enable investments in specialized equipment for transportation of goods. Retailers with large chains would negotiate and get central procurement but local dispatches from their suppliers. 9. Internet Internet retailing will thrive in the coming decade. It may not be apparent now because internet access is far behind the US and west, and high usage charges represent a serious impediment to frequent consumer usage. The Government has already shown intent to deregulate the telecommunications sector.
Deregulation would increase Internet usage in the country and also the trading on the net. However, it is expected that the bricks and mortar stores converting to clicks and mortar model would dominate the Internet sector. ? This is because of their already existing brand names and economies of operations that they would be able to reap. Conclusion The past 4-5 years have seen increasing activity in retailing. Various business houses have already planned for few investments in the coming 2-3 years. Though the retailers will have to face increasingly demanding customers and intensely competitive rivals, more investments will keep flowing in and the share of organized sector will grow rapidly.
Organized retailing in India is surely poised for a takeoff and will provide many opportunities both to existing players as well as new entrants. 3. 2. 2 MAJOR RETAIL PLAYERS Retailing in India is still evolving and the key players are working with newer formats in an attempt to grow at a fast rate. The table lists some of the important retailers in India at the present time: |Format |Brands |Group |No of Stores (Approximate) |Estimated Turnover | | | | | |(INR millions) | |Neighborhood stores |Margin Free |Margin Free |350 |5500 | |(Discounter) | | | | | |Safal |Mother – Dairy |279 |1000 | | |Subhiksha (Discounter) |Subhiksha |150 |1500 | |Supermarket |Foodworld |RPG |90 |3600 | | |Nilgiri’s |Nilgiri’s |30 |500 | | |Sabka Bazaar |Sabka Bazaar |19 |110 | | |Haiko |Lakewood Mall Pvt Ltd |1 |120 | | |Trinetra |Trinetra |19 |400 | | |Ravji’s |Adani |5 |150 | |Hypermarket |Giant (Discounter) |RPG |1 |850 | | |Big Bazaar |Pantaloons |5 |1800 | |Cash & Cary |Metro |Metro |1 |— | |Departmental store |Shoppers |K Raheja |13 |3,030 | | |Stop |Group-Real | | | | | |Estate | | | | | | | | |
The trend of large corporate groups entering the organized retail sector – looking for new business opportunities continues. Groups such as ITC, RPG, and Tata’s which entered the organized retail sector are expanding their operations in the country. Most of the players in organized retailing are in the initial stages of their business and expansion plans. Accordingly, most are not profitable businesses at the present time. Pantaloon and Westside (Trent) are listed on the capital markets and have shown net profitable in the last year. Most other players are hoping to break even and start making money only in the coming years. The presence of multinational retailers is still an exception with Dairy Farm, Marks & Spencer, already on the market.
Metro is expected to set up operations by the end of the year. 3. 2. 3 RETAIL & CONSUMER SECTOR CHALLENGES AND OPPORTUNITIES Hurdles faced by the Retail Sector The Indian Government is in the process of formulating a strategy to nurture and support the retail sector. Due to this, retailing in India is largely unorganized and fragmented. Lack of FDI (Foreign Direct Investment) is another reason why it remains so traditional. Policy makers continue to put barriers for the entry of foreign enterprises due into this sector. But the last decade has witnessed significant movements towards modern retailing, especially in the consumer durable products segment.
Products, marketed on ‘lifestyle’ platforms, experienced a dearth of appropriate retail outlets, which could fit their brand positioning. As a result, many brands began to set up their own retail outlets initially, thereafter expanding their modern retail network through franchise arrangements. In contrast, the grocery segment has been slow to take to modern retail. The grocery sector in India is estimated to be USD 90 billion. The organized retailing in this segment is still in its nascent stage and needs to develop in terms of its scale and share in the market, margins earned, labour productivity, and economic propositions like distinctive sourcing, development of private labels, technology, etc. But there are some modern retailing formats in grocery that have merged and are catching on with the increasing number of nuclear households in urban India, where both husband and wife may be working out of home or traveling. A large number of retail outlets in India still remain family owned. They offer limited Products and finance facilities. Banks are hesitant to provide these retail sector units with finance facilities due to their small size which is non viable for the banks. The supermarket format in India faces the difficulty of obtaining licenses, customer inhibition and the lack of suitable personnel. But organized retailing is likely to emerge in other categories like appliances, IT products and others. This kind of progress will depend largely on real estate, prices, supply chain bottlenecks and sourcing. Emerging Channel Conflicts
The relationship between manufacturers, wholesalers, middlemen and retailers need to improve so that business practices are smooth and stock outs in India become uncommon. In the grocery sector, for example, there are still no direct transactions between major owners and large retail chains-with local suppliers still being routed through the company’s distributors. Direct interaction through intermediation of the distributor could lead to conflicts for the larger part of the business of brand owners. However, with recent changes and growth in the retail segment, the supply chain relationship is also likely to undergo several changes in future years. Brand Competition
The Indian urban consumer is quite aware of international trends and most consumers are very value-conscious. Indian retailers need to be extremely efficient in their operations and design, as the value-conscious Indian consumers will not pay more for a superior shopping experience. What this means for international brands is that they need to clearly offer contemporary designs and provide value to the Indian consumer – even if this means adapting their international designs to suit local conditions. With the advent of global competition in the retail sector, domestic companies will have to learn to keep up with the trends of the market or face the consequences of shutting down.
But consumers have benefited from this competition as it provides them with a larger variety of choices and a better standard of living. Franchising Development Transnational retail giants have opened up stores in India through franchise arrangements with Indian promoters. Marks and Spencers have recently opened its store in New Delhi and Mumbai through the licensee route. 3. 2. 4 RETAIL & CONSUMER SECTOR EMERGING TRENDS/OUTLOOK An Emerging Middle-Class The income distribution of households has also undergone a sea change in recent years. The consolidated purchasing power of the country has gone up, and the trend is projected to continue. A significant share of population will move up the affordability and affluence ladder by 2006 – 07. — Market |Metros |Towns |Rural areas | |The Affluent |600000+ |480000+ |360000+ | |Upper middle |480000-600000 |3000000-480000 |180000-360000 | |Core middle |120000-480000 |96000-300000 |72000-180000 | |Low middle |48000-120000 |36000-96000 |30000-72000 | |Poor |15000-48000 |12000-36000 |9600-30000 | |Sub Poor |< 15000 |< 12000 |< 9600 | As the table above shows, the lower middle income segment is also expanding. While the affluent, upper middle and core middle segment taken together is 86 millions, the low middle segment itself is 204 million.
This segment could be an equally attractive proposition for retailers and they could target specific business models for this segment Growth of Organized Retail The sheer size and potential of India’s consumer market is enough for the big international retailers to have an interest in setting up stores in the country, despite the obstacles they might face. The growth prospects of this sector seem to be very positive. A large number of malls, entertainment complexes and eateries are being set up. The next few years is likely to see rapid growth in organized retailing with several leading international retailers establishing a presence in India. 3. 4 ENVIRONMENTAL ANALYSIS IN ORDER TO UNDERSTAND THE INDUSTRY WE UNDERTOOK TWO DIFFERENT ENVIRONMENTAL ANALYSES.
THE FIRST IS THE PEST ANALYSIS WHERE THE POLITICAL, ENVIRONMENTAL SOCIAL AND TECHNOLOGICAL ASPECTS ARE LOOKED INTO AND ANOTHER IS PORTER’S FIVE FORCES WHERE THE COMPETITIVE ENVIRONMENT OF THE INDUSTRY IS ANALYZED. 3. 4. 1 PEST Analysis Now, in a particular geographic region, the environment there affects the retailers in the region in various ways. We have studied the effects under the following heads: 1. Political environment 2. Economic Environment 3. Social (Socio-Cultural) Environment 4. Technological Environment 1. Political Environment With the opening up of the economy, more and more MNC’s have pervaded the Indian Business arena, through joint ventures, franchisees or even self-owned stores.
The very first MNC getting into the business was Spencer’s, a tie up between the RPG Group and the Dairy Farm International; a $ 10 billion Hong Kong based company, and a part of the Jardine Mathenson group. Government uses regulation to prevent development of monopolies, which results in restricted competition and fixed prices. (MRTPC). Government also propounds price competition laws and unfair trade practice laws. Retailers must understand what rights they have in pricing merchandise, what provision they should make for customer relations, what rights and responsibilities they possess when making a sales, what rights their employees have and what liabilities they may face while selling products to the consumers. 2. Economic Environment The type of economic system (capitalism or socialism etc. existing in a country has a direct bearing on the potential for and the development of the retailing industry in that country. A retailer cannot escape the effects of the factors in the macroeconomic environment, be it domestic or global that influences the local market. Inflation, unemployment, interest rates, tax levels, the GDP and the rate of real growth in GDP (Inflation adjusted) are some aspects of the economy which a retailer must cope with. Real growth makes more income available to people who then tend to spend more, leading to higher sales and more profits for the retailers. However growth also leads to higher competition in the long run.
As the economy expands, higher demand levels lead more firms into the market, trying to fulfill the consumers’ needs. The inflation (i. e. increase in price) leads to less goods being bought at higher prices. As the retailers’ cost of goods increases, they attempt to pass on this increase to the consumers. However, it is often not possible to pass on the entire amount to the consumer, hence resulting in cuts in the retailers’ profits. With the increase in Purchasing Power Parity (PPP) and the disposable income of the Indian consumer, retailing is catching up at a very fast space in the country. 3. Social Environment The demographic trend and lifestyle patterns, of the society that a retailer intends to serve, decide the retailer’s strategy.
Traditionally, children seldom accompanied their parents while grocery food shopping. Shopping for children was confined to that during festivals when dresses were brought for them. But, in the present day, due to scarcity of time, working parents prefer to spend as much time as possible with their children and this includes their shopping hours also. As the organization retail sector offers the option of entertainment along with shopping, the younger couples opt for these retail outlets for shopping Speaking at KSA Retail Summit, 2000, Peter Lau, Chairman of Giordans International, Hong Kong, said, “It is the format of consumer expectation that changes, not the goods or services they want. ”
KSA Techno Park conducted a study on consumer attitude towards shopping in association with the market research firm ORG- MARG in January and February 1999. The study was spread over the four zones of India viz. North, South, West and East and covered a random sample of 7300 respondents in twelve cities. The results of this study clearly reflect that the buying patterns do vary according to the customs and lifestyle of a region. In the south approximately seven hours are spent on shopping per week. This figure is the highest amongst the four zones, which probably explains the more spurt of new malls and supermarkets in the south than in the other zones.
Further, the study has attempted to find out what a customer expects out of a store. Here, the six attributes desired by most number of people (65% and above) are polite and courteous salespeople, quality of products, non intrusive sales persons, value for money, attractive displays and range of products. Although desired by a very low percentage of people (only 10%) yet the attribute of an entertainment centre for children has also figured in. That is to say, apart from quality and range of products, value for money and attractive displays, the human touch has a vital role to play. Smart, polite and courteous sales people might make all the difference for a store, which is like any other in terms of its Product offerings.
There is also emphasis on schemes and promotions, which, as the study ratifies, do pull customers. Further the trend is towards more convenience and flexibility in terms of exchange/ return policies, which play a vital role in encouraging the purchase. 4. Technological Environment Technology is probably the most dynamic change agent for the retailing industry. The computerization of the various operations in a retail store, including inventory management, billing and payments as well as database (of customers) management, widespread use of bar coding, point -of-sale terminals and Management Information System has changed the face of retailing drastically.
Apart from providing the retailers with better and timelier information about their operations, the technology also does the job of preventing theft, promoting the store’s goods and creating a better shopping atmosphere. These can be done with the help of closed circuit televisions, video walls, in-store video networks, kiosks and other forms of interactive applications ranging from CD-ROMs to virtual reality to let customers select and buy products. They make the customer’s life a lot easier by facilitating the use of developments like credit cards. Toll free 800 numbers have brought about a revolution in consumer’s ordering and feedback mechanisms. These also pave way for tele-shopping and net-shopping.
Emerging technologies will also facilitate just-in-time management of certain products within the store. These trends are already visible in the music and greeting card industries. 5. Legal Environment Despite the size and the phenomenal potential that exists, retailing is among the lesser-evolved sectors of the Indian Industry. Retailing as an industry is yet to be recognized in India. The policy environment is currently seen to be unfavorable to organized retailing. Given the huge investments that need to be made, a look on the Foreign Direct Investment Policy in the sector might be needed. Complex sales tax rates, octroi and excise structures are major deterrents.
Other impediments to growth of retail include the bureaucracy, inflexible labour laws and multiple licensing requirements. Real estate in India is also not geared to facilitate organized retailing. Restriction on FDI The Indian economy is highly regulated and the most significant regulation is the restriction of foreign ownership. A strong FDI presence in retail sector is expected to not only boost the retail scenario, but also act as a driving force in attracting FDI in upstream activities as well. This will be more prominent in food processing and packaging industries because many large retail chains also promote their own brands by way of backward integration/contract manufacturing.
The status of organized retailing in some South East Asian countries that allowed FDI in retailing has been given in Table below: |Country |Organized Retailing |Traditional Retailing | |Malaysia |50% |50% | |Thailand |50% |50% | |Philippines |35% |65% | |Indonesia |25% |75% | |South Korea 15% |85% | |China |10% |90% | |India |2% |98% | In view of the demands made by industry and the need to boost the retail trade, the Government is actively considering removing the restrictions. A recent note circulated by the Ministry of Commerce has proposed permission for FDI up to 100 per cent in retail trade subject to Government approval on a case-to-case basis. However, this permission, if it is given, will be with lots of strings attached.
Besides following rules on minimum capitalization, the foreign entrants will be expected to neutralize the outflow of foreign exchange (repatriation of dividends) by way of export earning on a year to year basis. The biggest opposition to allowing 100% FDI is the feared exit of the small retailers. Currently, moves are on to counter these apprehensions and the players are keenly awaiting the final decision from the Government. Land and Property laws There is a shortage of good quality retail space and rents are high for what is available. Compounding these shortages are the following problems. One of the drivers of property prices is the high demand for space in the cities. This demand is exasperated by the flow of black money (undeclared for tax purpose) that is generally invested in the property sector.
Only Indians can own property in India, which complimenting the restrictions placed on FDI, restrict the entry of foreign players. Stamp duties on property deals are significant (12. 5% in Gujarat and 8% in Delhi). The lease alone 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 smaller plots 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 to exceptionally high property prices. The presence of strong pro-tenancy laws makes it difficult to evict tenants and make people reluctant to give real estate on rent.
The problem is compounded by problems of clear titles to own Labour Laws The labour laws instituted to protect store workers are not flexible enough to support the modern formats of retailing. These rigidities in the law constrain the operations of modern retail outlets. Working hours are restricted, with shops required to close one day of the week and the hiring of part-time employees is difficult, However, in Bangalore, the State Government has permitted flexibility in the use of labour without doing away with the associated benefits accruing to it. Taxes • Corporation tax is 38% and this would be even higher at 45% for a foreign business. • Even essential basic foodstuffs are taxed (8% on milk). The varying sales tax rate across states make supply chain management an even more difficult task for retailers. • With the expected introduction of Value Added Tax (VAT) in April 2005, some of the sales tax anamolies in the supply chain could get correct over a period of time. However, retailers might also be additionally burdened as given below:- Changing tax structure: Retailer margins to come under VAT net • In the tax regime contemplated from April 1 2003, VAT will b