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organized retail v/s unorganized retail.
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- 2. Introduction • Retail isthe sale of goods to end users, not for resale, but for use and consumption by the purchaser • It can also be defined as the timely delivery of goods and services demanded by consumers at prices that are competitive and affordable. • One of the world’s largest industry exceeding US $ 9 trillion. • Total retail contribution in World GDP is 27%. Organized retail in US accounts for 22% of GDP. The Share of organized retail in developing markets ranges between 20% to 55% • Dominated by developed countries. US, EU & Japan constitutes 80% of world retail sales.
- 3. Introduction : OrganizedRetail • Organized retail or modern retail is usually chain stores, all owned or franchised by a central entity, or a single store that is larger than some cut-off point. • The relative uniformity and standardization of retailing is the key attribute of modern retail. • Organized retailing, in India, refers to trading activities undertaken by licensed retailers, that is, those who are registered for sales tax, income tax, etc. These include the publicly traded supermarkets, corporate-backed hypermarkets and retail chains, and also the privately owned large retail businesses.
- 4. Difference in Organizedand unorganized retail.
- 5. Organized Retail in India •The organized retail market is growing at 3.5 percent annually. Rapid change with investments to the tune of US$25 billion is being planned by several Indian and multinational companies in the next 5 years. •It is huge industry in terms of size and according to management consulting firm Techno Park Advisors Pvt. Ltd., it is valued at above US$ 350 Billion.
- 6. • According tothe tenth report of Global retail Report Index (GRID) of AT Kearney, India is having a very favorable retail environment and it is placed at 4th spot in the GRDI. The main reasons behind that is the 9% real GDP growth in 2010, forecasted yearly growth of 8.7% through 2016, high saving and investment rate and increased consumer spending. • According to report, organized retail accounts for 7% of India’s roughly $435 billion retail market and is expected to reach 20% by 2020. Organized Retail in India
- 10. Scenario The Indian retailtrading has received Foreign Direct Investment (FDI) equity inflows totaling US$ 537.61 million during April 2000–March 2016, according to the Department of Industrial Policies and Promotion (DIPP). • International Finance Corporation (IFC), the investment arm of The World Bank, plans to invest up to Rs 134 crore (US$ 19.86 million) in Kishore Biyani's Future Consumer Enterprises Ltd, which is expected to aid the company in driving its growth plans. • IKEA, the world’s largest furniture retailer, plans to invest Rs 10,500 crore (US$ 1.56 billion) to set up 25 stores across India and hire over 15,000 permanent employees and 37,500 temporary employees to assist in running its stores. • Walmart India plans to add 50 more cash-and-carry stores in India over the next four to five years. • Aditya Birla Retail, a part of the US$ 40 billion Aditya Birla Group and the fourth-largest supermarket retailer in the country, acquired Total hypermarkets owned by Jubilant Retail. • US-based Pizza chain Sbarro plans an almost threefold increase in its store count from the current 17 to 50 over the next two years through multiple business models.
- 11. Government Initiatives The Governmentof India has taken various initiatives to improve the retail industry in India. • Government of India has allowed 100 per cent Foreign Direct Investment (FDI) in online retail of goods and services through the automatic route, thereby providing clarity on the existing businesses of e-commerce companies operating in India. • The Government of India has accepted the changes proposed by Rajya Sabha select committee to the bill introducing Goods and Services Tax (GST). Implementation of GST is expected to enable easier movement of goods across the country, thereby improving retail operations for pan-India retailers. • IKEA, the world’s largest furniture retailer, bought its first piece of land in India in Hyderabad, the joint capital of Telangana and Andhra Pradesh, for building a retail store. IKEA’s retail outlets have a standard design and each location entails an investment of around Rs 500–600 crore (US$ 74–89 million).
- 12. Benefit s • Organized retailwill bring in massive employment in organized sector with benefits to locals (China experienced employment growth rates of 9 million over 3 years) albeit with changed skill sets. • Massive Infrastructure up-gradation will come in increasing the overall efficiency in the economy, which will reduce the current huge amounts of wastage occurring to the economy. • Increased tax revenues and profits retained within the country for local portion. History in other countries negates critics • Will benefit end consumers in the area of price, convenience & quality of products & packaging.
- 13. Ahead • E-commerce isexpanding steadily in the country. Customers have the ever increasing choice of products at the lowest rates. • Both organized and unorganized retail companies have to work together to ensure better prospects for the overall retail industry, while generating new benefits for their customers. • Nevertheless, the long-term outlook for the industry is positive, supported by rising incomes, favorable demographics, entry of foreign players, and increasing urbanization.
- 15. GROWTH FACTORS IN RETAILINGIN INDIA
- 17. 10 MAJOR FACTORSRESPONSIBLE FOR THE GROWTH OF ORGANIZED RETAILING IN INDIA 1.Growth of middle class consumers 2.Increase in the number of working women 3. Value for money 4. Emerging rural market 5. Entry of corporate sector 6. Entry of foreign retailers 7. Technological impact 8. Rise in income 9. Media explosion 10. Rise of consumerism http://cbsmohali.org/img/journal_3-16-21.pdf
- 18. 1. GROWTH OFMIDDLE CLASS CONSUMERS: • Increase in number of middle class consumers • Rising consumer demand • Greater disposable income • Growth of organised retailing in India. • Growing consumerism would be a key driver for organized retail in india. • Rising incomes • Improvements in infrastructure • Convergence (meeting) of consumer tastes
- 20. 2. INCREASE INTHE NUMBER OF WORKING WOMEN: • Today the urban women are literate and qualified. They have to maintain a balance between home and work. The purchasing habit of the working women is different from the home maker. • They do not have sufficient time for leisure and they expect everything under one roof. They prefer one-stop shopping Modern retail outlets therefore offers one store retailing.
- 22. 3. VALUE FORMONEY: • Organised retail deals in high volume and are able to enjoy economies of large scale production and distribution. They eliminate intermediaries in distribution channel. • Organised retailers offer quality products at reasonable prices. • Example: Big Bazaar and Subhiksha. Opportunity for profit attracts more and more new business groups for entering in to this sector.
- 23. 4. EMERGING RURALMARKET: • Today the rural market in India is facing stiff competition in retail sector also. The rural market in India is fast emerging • Rural consumers are quality conscious. • Thus due to huge potential in rural retailing organised retailers are developing new products and strategies to satisfy and serve rural customers. • In India, Retail industry is proving the country’s largest source of employment after agriculture.
- 25. 6. ENTRY OFFOREIGN RETAILERS: • Non Controlling Interest: This approach is generally practised by Companies in their initial stages of expansion. When they do not have extensive experience in setting up international operations and when there is a lack of sufficient market intelligence as well as understanding of the foreign market, the international retailer might choose to invest in an established business in the foreign market and acquire a minority stake with no direct control over the management and operations. • Setting up International stores as a part of internal expansion: Merger or Takeover • Franchise Model
- 27. 5. ENTRY OFCORPORATE SECTOR: • Large business tycoons such as Tata’s, Birla’s, and Reliance etc. have entered the retail sector. They are in a position to provide quality products and entertainment. • As the corporate – the Piramals, the Tatas, the Rahejas, ITC, S.Kumar’s, RPG Enterprises, and mega retailers- Crosswords, Shopper’s Stop, and Pantaloons race to revolutionize the retailing sector.
- 28. 7. TECHNOLOGICAL IMPACT •Introduction of computerization • Electronic media • Marketing information system organized retailing in India • Introduction of bar codes • Increasing use of technology • Innovation retailers are selling their products online with the help of internet.
- 30. 8. RISE ININCOME: • Increase in the literacy level has resulted into growth of income among the population. Such growth has taken place not only in the cities but also in towns and remote areas. • As a result, the increase in income has led to increase in demand for better quality consumer goods. • Rising income levels and education have contributed to the evolution of new retail structure. Today, people are willing to try new things and look different, which has increased spending habits
- 32. 9. MEDIA EXPLOSION: •There has been an explosion in media due to satellite television and internet. • Indian consumers are exposed to the lifestyle of countries. • The expectation levels for quality products have risen and they are demanding more choice and money value.
- 34. 10. RISE OF CONSUMERISM: •The retailer faces a more knowledgeable and demanding consumer • The growing consumer expectation has forced the retail organizations to change their format of retail trade. • Consumer demand, convenience, comfort, time, location etc. are the important factors for the growth of organised retailing in India. • India still predominantly houses the traditional formats of retailing, that is, the local kirana shop, paan/beedi shop, hardware stores, weekly haats, convenience stores, and bazaars, which together form the bulk.
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- 37. Multichannel Retailing • Aretail channel is the way a retailer sells and delivers merchandise and services to its customers. • The most common channel used by the retailer is a store, however, today the retailers use a variety of non-store channels including the internet, catalogue, direct mail, television home shopping, automated retailing etc. • Multichannel retailers are retailers that sell merchandise or services through more than one channel.
- 38. Forms of Multichannel Retailing Brick and Mortar Internet Channel Catalogue Channel Direct Selling Televisio nHome Shopping Automated Retailing
- 39. Retailing 1. Brick andMortar/ Store Channel Stores offer several benefits to customers that they cannot get when they shop through non-store channels such as catalogues or the Internet. The benefits include: • Touch and feel products • Personal service • Risk reduction • Immediate gratification • Entertainment and social experience • Physical Browsing • Cash payment
- 40. Forms of MultichannelRetailing 2. Internet Channel Internet retailing, also called online retailing, electronic retailing and e-tailing, is a retail channel in which the offering of products and services for sale is communicated to customers over the Internet. The benefits of internet channel include: • Broader and deeper assortment • No time constraints • More timely information for evaluating merchandise • Personalization
- 41. Forms of MultichannelRetailing 3. Catalogue Channel • Catalogue channel is a non-store retail channel in which the retail offering is communicated to customers through a catalogue mailed to customers. • The merchandise categories with the greatest catalogue sales are drugs and beauty aids, computers and software, clothing and accessories, furniture and housewares, and books, music, and magazines.
- 42. Forms of MultichannelRetailing 4. Direct Selling • A retail channel in which salespeople interact with customers face-to-face in a convenient location, either at the customer’s home or at work. • Salesmen demonstrate merchandise benefits, explain services; take an order; and deliver the merchandise etc. • It is a highly interactive channel involving face-to-face discussions. • Two special types of direct selling are: Part Plan System: Here the salesmen encourage customers to act as hosts and invite friends/ coworkers to a party, where the merchandise is displayed and attendees place orders. Multilevel System: Here independent businessmen serve as master distributors, recruiting other distributors in their network.
- 43. Forms of MultichannelRetailing 5. Television Home Shopping • A retail channel in which customers watch a television program that demonstrates merchandise and then place orders for that merchandise, usually by telephone, via the Internet, or via the TV remote. • Three forms of TV home shopping retailing: Cable channels to television shopping Infomercials – 30 to 60 minutes programs, that mix entertainment with product demonstrations and solicit orders placed by telephone. Direct Response Advertising – 1 or 2 minute advertisements on television and radio that describe products and provide an opportunity for consumers to order them.
- 44. Forms of MultichannelRetailing • . 6. Automated Retailing (Vending machines) • A retail channel in which merchandise or services are stored in a machine and dispensed to customers when they deposit cash or use a credit card. • Vending machines are placed at convenient and high – traffic locations. • It is mainly used for cold beverages, candy and snacks.
- 45. Benefits of MultichannelRetailing 1. Overcoming Limitations of Existing Format • Increased Assortments By using a combination of channels, retailers can better satisfy their consumers’ needs by exploiting the benefits and overcoming the limitations of each channel. For example, one of the greatest constraints facing store-based retailers is the location and size of their stores. However, the number of products presented through an Internet channel is virtually unlimited. • Low-Cost, Consistent Execution Customers can get personalized information from sales associates in stores. Over time, sales associates can learn what customers like and want. However, customers can get this benefit only when the sales associates are present. Training and retaining knowledgeable sales associates is expensive. Internet channel can overcome this problem.
- 46. Benefits of MultichannelRetailing • Current Information Catalogue retailers also use electronic channels to overcome the limitations of their catalogues. Once a catalogue is printed, it cannot be updated economically with the latest price changes and new merchandise. Therefore, these retailers use its Internet site to provide customers with real- time information about stock availability and price reductions on clearance merchandise. • Touch and Feel Products Store channels provide opportunity for customers to use all five senses – touching, smelling, tasting, seeing and hearing.
- 47. Benefits of MultichannelRetailing 2. Increasing Customer Satisfaction and Loyalty By providing a greater array of benefits through multichannel offerings, retailers can increase their share of customers’ wallets —the percentage of purchases made from the specific retailer. 3. Personal Services Consumers in retail store can get personalized services and immediate feedback like an apparel is suiting them, a particular colour suits them more and so on. 4. Immediate Gratification Customers can get the merchandise immediately after they buy it from stores.
- 48. Benefits of MultichannelRetailing 5. Gaining Insights into Consumer Shopping Behavior An electronic channel provides valuable insights into how and why customers shop and are dissatisfied or satisfied with their experiences. 6. Expanding Market Presence Market for store-based retailers is limited to consumers living in close proximity to the retailer’s stores. By adding the Internet channel, retailers can expand their market without having to build new stores. 7. Building a Strategic Advantage Multichannel retailers have the opportunity to develop a strategic advantage over single-channel competitors
- 49. Issues in MultichannelRetailing 1. Providing an Integrated Shopping Experience • Multichannel retailers are struggling to provide an integrated shopping experience across all their channels because unique skills and resources are needed to manage each channel. 2. Cost of selling products through the different channels • When selling merchandise through the Internet channel, retailers do not incur the costs of building and operating stores and compensating employees working in those stores. • However, Internet retailers incur significant costs to design, maintain, and refresh a web site; attract customers to the site; maintain distribution systems and warehouses dedicated to fulfilling orders from individual customers; and deal with a high level of returns. • These overhead costs associated with operating an electronic channel may even be greater than the costs of operating physical stores.
- 50. Issues in MultichannelRetailing 3. Potential for Disintermediation • Disintermediation occurs when a manufacturer sells directly to consumers, bypassing retailers. • Retailers are concerned about disintermediation because manufacturers can get direct access to their consumers by establishing a retail site on the Internet. • Hewlett-Packard printers and accessories are sold both directly to consumers through its Web site (www.hewlettpackard.com) and, at the same time, indirectly through retail stores and its Web site • However most manufacturers lack the skills to sell directly to consumers. Retailers have considerably more expertise than manufacturers in distributing merchandise directly to customers, providing complementary assortments, and collecting and using information about customers.
- 51. Organizing for MultichannelRetailing Since each of the channels offers a unique set of benefits, the profiles of a retailer’s customers who use the different channels are not the same. Thus a critical decision facing multichannel retailers is the degree to which they should integrate the operations of the channels or have different organizations for each channel • Centralized Customer Database - complete history of each customer’s interaction with the retailer to provide a seamless experience • Brand Image - Retailers need to provide a consistent brand image of themselves and their private-label merchandise across all channels • Merchandise Assortment - Different assortments are appropriate for each of the channels
- 52. Organizing for MultichannelRetailing • Pricing - Customers expect pricing consistency across channels (excluding shipping charges and sales tax) • Reduction of Channel Migration - Retailers want customers to both search for information and complete the transaction through their channels, but the low cost of searching on the Internet increases the opportunity for channel migration
- 53. References 1. Michael Levy& Barton A Weitz, “Retailing Management”, 8th Edition, Tata Mc Graw Hill. 2. Swapna Pradhan, “Retailing Management – Text and Cases”, 5th Edition, Tata Mc Graw Hill. 3. Nagpal, Sharma “Retail Management”, TYBMS, Sheth Publishers 4. Nagpal, Sharma “Retail Management”, M. Com, Vipul Prakashan.