Retail Challanges

Retail Marketing- Opportunities & Challenges

A retailer is one who stocks and sells the producer's goods to the individual consumers, at a profit.

Popular retail format:

1. Hypermarket: This is the mother of all retail formats and offers everything from foods to dry grocery to hardware to electronics. Typically, would span more than 100,000 sq ft of space, and located outside of the city center. Pantaloon's Big Bazaar, Spencer's Hypermarket and Trent's Star India fit this category.

2. Supermarket: It is focused on foods, grocery and household items, and located in residential areas. Food World is an example of this.

3. Departmental Store: Like the name reveals, this format carries various "departments" such as apparel, house war, furniture, jewelers and appliances, but is much smaller than a hypermarket in terms of space and SKUs (stock keeping units) Shoppers' Stop, Westside and Lifestyle are three such stores.

4. Convenience Store: Accessibility is what this format offers and therefore, is conveniently located in crowded neighborhoods. Think Niligiri's in the South, and 24/7 in Delhi.

5. Exclusive Outlet: It stocks a single brand, and could be either company-owned or franchised. Everyone from Raymond and Madure Garments to LG and Samsung to Maruti and Hyundai have it.

6. Discount Store: This format's proposition is that it offers no frills such as spacious, well-lit and air-conditioned retail space, but makes up by marking down MRP (maximum retail price). South's Subhiksha is the best-known example of it in India

7. Cash-n-Carry: This is B2B format, where the retailer sells to shopping establishments and large institutional customers. Metro in Bangalore is a cash-n-carry.

Key drivers:

Growth of the consuming class

India has emerged with the impressive middle class with the size being estimated at 300 million people at the start of 1999.

India is all set to be the youngest country in the world with more than 50% of the population being less than 25 years of age. It, therefore, holds tremendous potentials as a market with exponential growth for the retail sector

Increase in the Use of Credit & Debit Card

According to an "Instant Incite - research" by ICICI bank in ten cities, credit card spend in 2003 was Rs. 984 cr per month, up from Rs. 721 cr per month in 2002, indicating a growth of around 37% from more than 90 lakh national users resulting in a per annum spend on cards to the tune of Rs. 12,000 cr of this Rs. 9600 cr was spend for retail. This include 1080 cr spend in malls.

Challenges

Over supply, fierce competition, high rentals, poor infrastructure and shoddy marketing are just some of the problems.

Store Positioning

Some of the retail shops got fail due to their wrong positioning. The example of this is Nanz because they are not located at suitable location. But today players like Subhiksha and Big Bazaar are effectively winning the hearts, minds and market share of target segments through "value proposition" positioning.

Human Resource Problems

According the retail association of India the total employee base in the organize retail sector is currently 1 million, while personal requirement at the front end alone is 1.25 million which is expected to go 3.25 within next few years. Many retailers are actively training people on the job while other trying up with institutes of repute to groom students for the future. Many institutes has already introduced 18 month course on retail management.

Real Estate Issue

It is difficult to find suitable properties in the central and down town location for large format store. This is primarily because private holdings are fragmented and auctioning of the govt. owned big vacant plots is rare. This has led to shift towards the suburbs of the metropolitan cities. A hypermarket need not necessarily be in city centre, it has to be at least in the suburbs within a short distance from its target customer. If it is located to far from the city, the customer may not come and it is difficult to achieve the break even, let alone make profits.

Existing Player's Expansion Plans

Store's name No. of stores/Retail space (sq.ft./No. of cites covered) Nature of Stores Expansion Plan

(by 2008)

Pantaloon 19/6lakh/13 Apparel To add 21 stores

Big Bazaar 30/13lakh/18 Hypermarket Expand to 80 stores

Food Bazaar 42/7lakh/18 Grocery & foods To up count to 200.

Shopper's stop 19/9.5lakh/10 Departmental Grow to 39 stores

Central