A CASE STUDY ON RETAILING IN INDIA

Transcription

1 178 ABSTRACT A CASE STUDY ON RETAILING IN INDIA DR. B. ARCHANA* *Associate Professor, CVR College of Engineering, Affiliated to JNTUH, Hyderabad. The case examines in detail the changing dynamics in the Indian retailing industry in this 21 st century, driven by the growth of organized retailing sector and increased personal consumption of customers on account of increased exposure to foreign goods and growth in nuclear families and rising incomes. The case discusses in detail the emerging trends in the retailing industry. The case also observes the entry of global brands. It also throws light on the present retail scenario in India. In the light of this, the case discusses some customer-centric initiatives to be taken in future by retailers. The case finally explores the Strengths, Weaknesses, Opportunities and Threats of the top retail companies. INTRODUCTION With the liberalization and growth of the Indian economy, the Indian customer witnessed an increasing exposure to the spotlight of the retail industry. The entry of large players in the retail business has brought the variety of domestic and foreign products. Along with these, significant changes in the number of nuclear families and the increase in their spending powers are all contributing for the rapid growth of retailing industry. By the turn of 21 st century, the retailing industry faced a drastic growth in the organized sector with the entry of corporate groups such as Tata, RPG, ITC, Bennett Coleman & Company, etc. On the other hand, while supermarkets and departmental chains replaced traditional grocery and general store formats. The eating habits of Indian customers had also changed with the introduction of fast foods, packaged foods, vending machines and specialty beverage parlors that were introduced by the retailers. Also, the introduction of new product segments comprising of lifestyle/apparel/accessories/fashion/books/music/drugs & pharmacy and beauty resulted in new store formats. TRENDS IN RETAILING The new store formats: including hypermarkets, large supermarkets ( sq ft), mini supermarkets ( sq ft) and convenience stores ( sq ft). Penetration of organized retail into the lower income groups and increasing consumer demand for value-for-money has improved the development of retail format.

2 179 Modern retail formats: the growth of western style malls is changing the way customers shop. The size of these stores is about 50,000 sq ft. Shopper s Stop Department Store format Westside Emulated the Marks and Spencer model of 100 percent private label Giant and Big Bazaar - Hypermarket / cash and carry store Food World and Nilgiris Supermarket format Pantaloons and The Home Store Specialty retailing Tanishq has very successfully pioneered a very high quality organized retail business in fine Jewellery A new entrant in the retail environment is the discounter format. It is also known as Cash-and-Carry or Hypermarket. These formats usually work on bulk buying and bulk selling. RPG group has set up the first discounter in Hyderabad called the Giant. TABLE 1: MAJOR PLAYERS IN INDIA Retailer Current Revenues Pantaloon 7000 RPG 5500 (Rs. Millions) Shoppers Stop 4000 Lifestyle 2300 Westside 1200 Ebony 850 Piramyd 720 Source: Business World

3 180 TABLE 2: ENTRY OF GLOBAL BRANDS International Retailers Eyeing India Retailer Carrefour Auchan Shoprite Marks & Spencer Dairy Farm 7-eleven Wal-Mart Landmark Mango Type Multi format retailer Hypermarkets Supermarkets Lifestyle stores Multi format retailer Supermarkets Hypermarkets Lifestyles stores Apparel retailer Source: Business World FEATURES OF RETAIL SET UP IN INDIA Organized retailing in India is a more recent phenomenon. The low cost distribution system in India is suited for bulk products only and not for a variety of goods. The package sizes for FMCG goods are moving from big to small, so as to widen the customer base. High rentals make the low cost strategy an unviable option for Indian retailers. Local vendors are the preferred choice for Indian consumers despite the presence of organized retailers. Gaining bargaining power was one of the motivators for Indian retailers. But, due to the lack of depth in terms of the number of quality suppliers it took a down turn. High rentals and regulations like MRP (Maximum Retail Price) compel the retailers to operate on thin margins.

4 181 The efficient Supply Chain Management practices have not been achieved yet. However, the process of figuring it out on the basis of format type and store issues has begun. CUSTOMER CENTRIC INITIATIVES OF RETAILERS The following are the five new customer centric initiatives to be taken up by the retailers to survive in the challenging and dynamic retailing market: 1. SOCIAL MEDIA OPTIMIZATION: the efforts are to be redoubled to improve the effectiveness of social media marketing. This includes using social activities to support search engine optimization and also involves improving the effectiveness of all social media marketing, comprising gamification - the integration of game mechanics into marketing activities, to make them more fun and to drive in engagement and participation. 2. MULTI CHANNEL: Every business needs to be a multi channel publisher now. This includes mobile, as well. 3. THE RISE OF THE DATARATI: Datarati are companies that have the edge in consumer data insight. Data is ubiquitous and cheap, analytical ability is scarce. There has been and will be in continuity to be on an increased focus on data analysis, understanding customer value and modeling customer behavior. 4. CUSTOMER EXPERIENCE: Customers have more choices than ever, and are more frugal. This affords them the luxury of demanding more. In the future ahead, the CRM Marketer will be charged with offering a consistent experience across all company touch points and developing the infrastructure that allows for knowledge sharing and smart communication. Smart marketers will identify and capitalize on unmet expectations. Those retailers that understand where the strongest expectations exist will be those who will survive and prosper. 5. PERSONALIZATION AND CUSTOMIZATION: In order to be effective retailers will seek to know more about its customers and use that insight to talk, engage and interact with their customers more often and more meaningfully in new and innovative ways (including dynamic content, blogs to other social networking). SWOT ANALYSIS OF TOP RETAILERS IN INDIA SWOT Analysis is a strategic planning method used to evaluate the Strengths, Weaknesses, Opportunities and Threats involved in a project or a business venture. This analysis helps in pointing out the objective and flow of business under internal and external factors. The technique was first used by Stanford University in 1960 by Albert Humphrey. The SWOT Analysis of the top retailers of India is formulated based on the factors pertaining to them. PANTALOON RETAILING

5 182 The flagship company of Future Group, Pantaloons Retail operates over 16 million square feet of retail space, has over 1000 stores across 73 cities in India and employs over 30,000 people. It can boast of launching the first hypermarket Big Bazaar in India in The companies also operates in other retail segments such as - Food & grocery (Big bazaar, Food bazaar), Home solutions (Hometown, furniture bazaar, collection-i), consumer electronics (e-zone), shoes (shoe factory), Books: music & gifts (Depot), Health & Beauty care services (Star, Sitara and Health village in the pipeline), e-tailing (Futurbazaar.com), entertainment (Bowling co.) TABLE 3: SWOT ANALYSIS FOR PANTALOON RETAILING Strengths Weaknesses High brand equity Brand embosses Large variance under one roof EDLP ( Value pricing) Management uniform customer visits Multi diversified business No single platform for all the business needs No bargaining markets No interaction of customers for value pricing Opportunities Threats Increasing interest in organized retailing Changing consumer preference Demographical advantage Presence of 29 states, 12 different languages, 72 festivals Young country- 60% below 30 years of age Increasing competitors Government policies Unrecognized modern retailing Local policies Resistance from small retailer

6 183 Shut down of Subhiksha Source: SHOPPER S STOP The RPG group forayed into retail with Shopper s Stop, India s first departmental store in It is the only retailer from India to become a member of the prestigious Intercontinental Group of Departmental Stores (IGDS). They have signed a 50:50 joint venture with the Nuance Group for Airport Retailing. Shoppers Stop has a national presence, with over 2.05 million square feet area across 39 stores in 17 cities. It has also introduced new formats in the market viz., Home Stop the exclusive home furnishings, décor as well as furniture store and Hyper City a premium shopping destination for Foods, Home ware, Home Entertainment, Hi-Tech Appliances, Furniture, Sports, Toys & Fashion. Other format of the company includes -- Crossword Book Store, Mother Care & Early Learning Centre (ELC), Estee Lauder group, Airport Retailing, Time Zone Entertainment. TABLE 4: SWOT ANALYSIS FOR SHOPPER S STOP Strengths Weaknesses Variety Range Different brands Pioneer Loyal customer Low risk Good financial position Presence across various segments Very high prices Less schemes Less discounts Competition from stand alone stores Late entry into value retailing Store makeover expenditure

7 184 Opportunities Threats Awareness about the brands Quality Youngsters High disposable income Collaborate Private levels Tier 2 and tier 3 cities Government policies Entrance of new players High attrition Lesser consumer spending Entry of foreign players Unorganized sector Independent stores Enter new consumer goods segments TATA GROUP Source: s stop.com Established in 1998, Trent - one of the subsidiaries of Tata Group - operates Westside, a lifestyle retail chain and Star India Bazaar - a hypermarket with a large assortment of products at the lowest prices. In 2005, it acquired Landmark, India's largest book and music retailer. Tata s has also formed a subsidiary named Infiniti retail which consists of Croma, a consumer electronics chain. Another subsidiary, Titan Industries, owns brands like Titan, the watch of India and Tanishq, the Jewellery brand. TABLE 5: SWOT ANALYSIS FOR TATA GROUP Strengths Weaknesses Resources and capabilities Vast experience The business model Distribution Value chain innovation Macro environment Serving the global markets with high quality and low price

8 185 Opportunities Threats New markets India s recent mergers of global markets Exports Acquisitions Source: RELIANCE INDUSTRIES The company owns more than 560 Reliance Fresh stores and recently it has also launched Reliance Mart Hyper mart. The company further plans to launch its hyper mart in Delhi / NCR, Hyderabad, Vijay Wada, Pune and Ludhiana region. TABLE 6: SWOT ANALYSIS FOR RELIANCE INDUSTRIES Strengths Weaknesses Leading market position Operational efficiency in refining Increasing long term debt Problem with the FCCU Strong financial performance Opportunities Threats Joint venture with NOVA chemicals Acquisition of polyester assests of Hualon Corporation Increasing demand for transportation fuels Intense domestic competition Rising petrochemical supply in the Middle East Fluctuating crude oil prices Economic slowdown in India Growing demand for petroleum products

9 186 Source: ADITYA BIRLA GROUP The brand portfolio of this group includes brands like Louis Phillipe, Van Heusen, Allen Solly, Peter England, Trouser town. Also, Madura garments are subsidiary of Aditya Birla Nuvo Ltd. The recently acquired food and grocery chain of south, Trineth, has further increased their number of store to 400 stores in the country. The company also own More supermarkets and hypermarkets. Currently it runs 600 supermarket and nine hypermarkets across India TABLE 7: SWOT ANALYSIS FOR ADITYA BIRLA GROUP Strengths Weaknesses Strong brand recognition Internet sales Complexity of operation Lengthy processing chain Growing international presence Superior research and development department Strong financial returns Strong sense of culture in the working environment Successful experience being competitive Effective leadership Cost leadership Prestigious client base Customer loyalty Diversified business Product innovation capabilities

10 187 Technological excellence Good corporate image Opportunities Threats Growth of core sector industries Rapid interaction with global economy Booming construction business in Asia Growing e-commerce & business Increasing urbanization Entry of global players Take over possibilities Political threats The impact of foreign currency fluctuation and interest rates Loss of sales to substitutes Source: RETAILING AHEAD IN INDIA In the views of analysts, the retail industry is all set for the most exciting phase in the coming years. The burgeoning growth of the organized retailing in India also caught the attention of global retailers. However, as the FDI norms in India did not permit them to enter and many global retailers are waiting for a green signal from the government of India. As competition intensified in the retailing industry, players are focusing on devising new strategies to provide more value for customers. The growth in the organized retailing industry is also expected to make the traditional supply chain obsolete. Most of the retailers have started doing away with multiple level distribution formats and trying to cut down the levels of intermediaries between them and their end customers. REFERENCES 1. Retail World, November 22, Retailing in India: Trends and Opportunities, 3. Making Shoppers Stop, January 08, 2004.

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