With the end of two days PMA Shopper Marketing Summit in Bloomington,
MN on 21st May, 2008, the heat is on for the new marketing medium "SHOPPER
MARKETING". It is becoming the growing focus of many retailers and the
manufacturers in the market. Even the leading marketing agencies are also
engaged in developing shopper marketing methodologies like Saatchi &
Saatchi, Marketing WEB, MSNBC, etc. A study conducted by Deloitte in US, the
share of the point of purchase activity in the marketing budget is increased
from 3% in 2004 to 6% in 2007 and expected to reach the mark of 8% by the year
2010. These figures are not astonishing as reaching masses through the
traditional media is becoming difficult, and the interruption marketing is
getting large numbers of customers annoyed and realization of the retailers and
the brands that the customer will arrive at the point of purchase to make its
ultimate purchase.
Shopper marketing is defined as the marketing actions conducted
in the retail outlet. It's different from the customer marketing which also
includes out of the store promotion.
The shopper marketing efforts are undertaken by retailers and
buyers through their verbal and non verbal communication in the store; wherein
the brands are making an effort to integrate their in-store activity with their
out of store activities. Like Cinthol repositioning itself in the market, by
revamping its website, making it more interactive and appealing for the youth,
with new tag line 'get ready-get close,'& brand ambassador of like Hrithik
Roshan leaving no stone unturned for their out of store promotion. The company
is also realizing importance of shopper marketing and initiating the brand
blocks in the Branded convenience store (Fresh, More, Dmart). Thus, they are
integrating their marketing moves with the in store activity.
To make shopper marketing effective, the marketers need to
understand the frame of mind with which the customer enter a store. Customer
with developed brand preference should easily find the product in the store and
then it's a crime to be out of stock at the time of purchase. As for the brands
which are not the category leaders, packaging plays an important role to grab
the attention of the customer apart from sales promotion undertaken by them.
The retailers also have a tendency to make the layout of the
store in a particular manner where their highest selling products are kept in
the last bays of the store, so a customer can go through other category
products while trying to reach the highest selling product. Also the store is
designed to appeal the customer through their creative form of Visual
Merchandising (layout, colors, presentation, lights) so the customer can stay
for a longer period in the store to shop. But the retailer needs to explore the
market more in order to be a market leader and need to innovate quickly. More
innovative tactics need to be introduced such as usage of kiosks, smart cards,
bin advertising or end-cap brand blocking, which is rarely seen to be employed.
Many of the companies find that this concept is for the brands
with deep pockets, but the growing numbers of retail stores are demanding
variety of products which is building platform for the small innovative firms
to come up. The future of shopper marketing is looking bright and we tend to
see a bigger form of its application in the marketing discipline. With many
brands and retailers have started acting on the concept, the phenomenon is here
to continue….
Retailing is
emerging as a sunrise industry in India and is presently the largest employer
after agriculture. In the year 2004, the size of Indian organized retail
industry was Rs 28,000 Crore, which was only 3% of the total retailing market.
Retailing in its present form started in the latter half of 20th
Century in USA and Europe and today constitutes 20% of US GDP. It is the 3rd
largest employer segment in USA. Organized retailing in India is projected to
grow at the rate of 25%-30% p.a. and is estimated to reach an astounding Rs
1,00,000 Crore by 2010. The contribution of organized retail is expected to
rise from 3% to 9% by the end of the decade. The projection for the current
year ie 2005 is Rs 35,000 Crore. In India it has been found out that the top 6
cities contribute for 66% of total organized retailing. With the metros already
been exploited, the focus has now been shifted towards the tier-II cities**.
The 'retail boom', 85% of which has so far been concentrated in the metros is
beginning to percolate down to these smaller cities and towns. The contribution
of these tier-II cities to total organized retailing sales is expected to grow
to 20-25%. In the year 2004, Rs 28,000 Crore organized retail industry had
Clothing, Textiles & fashion accessories as the highest contributor (39%),
where as health & beauty had a contribution of 2%. Food & Grocery
contributed to 18% whereas Pharma had a contribution of 2%.
** Tier-II cities: Surat, Lucknow, Dehradun, Vijaywada, Bhopal,
Indore, Bhubasehwar, Varanasi to name a few.
Introduction
Retailing includes
all activities involved in selling goods or services directly to final
consumers for personal, non-business use. A retailer or retail store is any
business enterprise whose sales volume comes primarily from retailing.
Any organization
selling to final consumers – whether a manufacturer, wholesaler or retailer- is
doing retailing. It does not matter how the goods or services are sold (by
person, mail, telephone, vending machine or internet) or where they are sold
(in store, on the street, or in consumer's home).
There are 3 types
of retailers:
1. Store retailer
2. Non Store
retailer
3. Retail
Organization
From the
assortment point of view, Store retailers* are of 5 types:
1. Specialty Store
2. Departmental
Store
3. Super market
4. Convenience
Store
5. Discount Store
* = Definition of
the store retailer types is provided in the glossary.
From customers
service point of view:
1. Self-service
retailing: Many customers are willing to carry out their own
locate-compare-select process to save money.
2. Self-selection
retailing : Customers find their own goods, although they can ask
for assistance.
3. Limited service retailing: These retailers carry more shopping goods,
and customers need more information and assistance. The stores also offer
services such as credit & merchandise-return privileges.
4. Full service
retailing: Salespeople are ready to assist in every phase of the
locate-compare-select process.
Although majority
of goods & services is sold through stores, non-store retailing has been
growing much faster than store retailing.
Major non-store
retailer types:
1. Direct Selling: It deals with door-to-door or at home sale parties i.e.
it involves one-to-one or one-to-many selling.
Example >
Eureka Forbes, Amway, Mary Kay Cosmetics.
2. Automatic
Vending: Example > ATM
3. Buying
services: Is a store less retailer serving a specific
clientele-usually employees of large organizations-who are entitled to buy from
a list of retailers who have agreed to give them discounts in return for membership.
Example >
Amazon.com
4. Direct
marketing: It involves direct response marketing. The different
forms of direct marketing are: Direct mail, catalog marketing, telemarketing,
television direct response marketing and electronic shopping.
Example: Dell
Computers
Retail
Organization mainly falls into 4 major categories:
1.Corporate chains: Example > Pantaloons, Westside
2.Retail Co-operative: Example > Amul, Samavaika, Khadi
Gram Yudog
On the global Retail stage, little has remained same over
the last decade. One of the few similarities with today is that Wal-Mart was
ranked the top retailer in the world then & it still holds that
distinction. Other than Wal-Mart's dominance, there's a little about today's
environment that looks like the mid-1990s. The global economy has changed,
consumer demand has shifted & retailers' operating systems today are
infused with far more technology than was the case six years ago.
Let us look at the evolution process:
Detailing reasons why Indian organized retail is at
the brink of revolution, the IMAGES-KSA report says that the last few years
have seen rapid transformation in many areas and the setting of scalable and
profitable retail models across categories. Indian consumers are rapidly
evolving and accepting modern formats overwhelmingly. Retail Space is no more a
constraint for growth. India is on the radar of Global Retailers and suppliers
/ brands worldwide are willing to partner with retailers here. Further, large
Indian corporate groups like Tata, Reliance, Raheja, ITC, Bombay Dyeing,
Murugappa & Piramal Groups etc and also foreign investors and private
equity players are firming up plans to identify investment opportunities in the
Indian retail sector. The quantum of investments is likely to skyrocket as the
inherent attractiveness of the segment lures more and more investors to earn
large profits. Investments into the sector are estimated at
INR 2000 - 2500 Crore in the next 2-3 years, and over INR 20,000 Crore by end
of 2010.
Few of India's top
retailers are:
1. Big
Bazaar-Pantaloons: Big Bazaar, a division of Pantaloon Retail (India) Ltd
is already India's biggest retailer. In the year 2003-04, it had revenue of Rs
658.31 crores & by 2010; it is targeting revenue of Rs 8,800 Crore.
2. Food World : Food World in India is an alliance between the RPG
group in India with Dairy Farm International of the Jardine Matheson Group.
3. Trinethra : It is a supermarket chain that has predominant
presence in the southern state of Andhra Pradesh. Their turnover was Rs 78.8
Crore for the year 2002-03.
4. Apna Bazaar : It is a Rs 140-crore consumer co-operative society
with a customer base of over 12 lakh, plans to cater to an upwardly mobile
urban population.
5. Margin Free : It is a Kerala based discount store, which is
uniformly spread across 240 Margin Free franchisees in Kerala, Tamil Nadu and
Karnataka.
Wholesale trading is another area, which has potential for rapid growth.
German giant Metro AG and South African Shoprite Holdings have
already made headway in this segment by setting up stores selling merchandise
on a wholesale basis in Bangalore and Mumbai respectively. These new-format
cash-and-carry stores attract large volumes from a sizeable number of retailers
who do not have to maintain relationships with multiple suppliers for all their
needs.
SWOT Analysis
A SWOT analysis of
the Indian organized retail industry is presented below:
Strength:
1.Retailing is a “technology-intensive" industry.
It is technology that will help the organized retailers to score over the
unorganized retailers. Successful organized retailers today work closely with
their vendors to predict consumer demand, shorten lead times, reduce inventory
holding and ultimately save cost. Example: Wal-Mart pioneered the concept of
building competitive advantage through distribution & information
systems in the retailing industry. They introduced two innovative logistics
techniques – cross-docking and EDI (electronic data interchange).
2. On an average a super market stocks up to 5000 SKU's against a few hundreds
stocked with an average unorganized retailer.
2.Weakness
1. Less Conversion
level : Despite high footfalls, the conversion ratio has been
very low in the retail outlets in a mall as compared to the standalone counter
parts. It is seen that actual conversions of footfall into sales for a mall
outlet is approximately 20-25%. On the other hand, a high street store of
retail chain has an average conversion of about 50-60%. As a result, a
stand-alone store has a ROI (return on investment) of 25-30%; in contrast the
retail majors are experiencing a ROI of 8-10%.
2. Customer
Loyalty: Retail chains are yet to settle down with the proper
merchandise mix for the mall outlets. Since the stand-alone outlets were
established long time back, so they have stabilized in terms of footfalls &
merchandise mix and thus have a higher customer loyalty base.
Opportunity
1. The Indian middle class is already 30 Crore & is projected to
grow to over 60 Crore by
2010 making India one of the largest consumer markets of the world. The IMAGES-KSA
projections indicate that by 2015, India will have over 55 Crore people under
the age of 20 - reflecting the enormous opportunities possible in the kids and
teens retailing segment.
2. Organized retail is only 3% of the total retailing market in India. It is
estimated to grow at the rate of 25-30% p.a. and reach INR 1, 00,000 Crore by
2010.
3. Percolating down: In India it has been found out that the top 6 cities
contribute for 66% of total organized retailing. While the metros have already
been exploited, the focus has now been shifted towards the tier-II cities. The
'retail boom', 85% of which has so far been concentrated in the metros is beginning
to percolate down to these smaller cities and towns. The contribution of these
tier-II cities to total organized retailing sales is expected to grow to
20-25%.
4. Rural Retailing: India's huge rural population has caught the eye of
the retailers looking for new areas of growth. ITC launched India's first rural
mall "Chaupal Saga" offering a diverse range of products from FMCG to
electronic goods to automobiles, attempting to provide farmers a one-stop
destination for all their needs." Hariyali Bazar" is started by DCM
Sriram group which provides farm related inputs & services. The Godrej
group has launched the concept of 'agri-stores' named "Adhaar" which
offers agricultural products such as fertilizers & animal feed along with
the required knowledge for effective use of the same to the farmers. Pepsi on
the other hand is experimenting with the farmers of Punjab for growing the
right quality of tomato for its tomato purees & pastes.
Threat
1. If the unorganized retailers are put together, they
are parallel to a large supermarket with no or little overheads, high degree of
flexibility in merchandise, display, prices and turnover.
2. Shopping Culture: Shopping culture has not developed in India as yet.
Even now malls are just a place to hang around with family and friends and
largely confined to window-shopping.
Conclusion
To conclude, it
can be said that though the global retail industry has reached its maturity,
the Indian retail industry is still at its infancy. But with the huge
potentiality existing in the Indian market, it is expected to grow in leaps and
bounds in the near future.
Instead of
comparing the total global retail industry with the Indian retail industry, let’s
compare Wal-Mart alone with the Indian retail industry & put forward few interesting
facts:
1. Retail Sales of
Wal-Mart for the year 2003 was US $ 25,632.9 Crore; higher than the size of
Indian retail industry.
2. The size of any
Wal-Mart store is much higher than the size of any existing shopping mall in
India.
3. Wal-Mart has over 4,800 stores, which is unparallel to any of the India's
large format store.
4. New stores opened annually by Wal-Mart are about 420, much higher than all
organized Indian retailers put together.
5. The sales per
hour of $2.2 Crore are incomparable to any retailer in the world.
6. Wal-Mart has around 30,000 suppliers throughout the world and more than
600,000 SKU's on its web site, a number that cannot be compared.
7. Daily customers are about 1.57 Crore (almost equivalent to Mumbai's entire
population).
8. Time between each Barbie Sale at Wal-Mart is just two seconds (same rate at
which babies are produced in India!)
Overall, it can be
said that “Retail Industry" in India will emerge as one of the best 5
Business sectors in this decade.
Glossary
Specialty Store: Narrow product line with deep assortment, viz apparel
stores, book stores etc. A clothing store would be a single line store, men's
clothing store would be limited line store & men's custom-shirt store would
be a super specialty store.
Example: The limited, The Body Shop.
Departmental
Store: Several product lines-typically clothing, household
goods, home furnishings- with each line operated as a separate department
managed by specialist buyers or merchandisers.
Example: Sears, Bloomingdale's.
Supermarkets: Relatively large, low-cost, low-margin, high volume,
self-service operation designed to serve total needs for food, laundry &
household maintenance products.
Example: Kroger, Safeway.
Convenience
Stores: Relatively small store located near residential area,
open long hours, seven days a week and carrying a limited line of high-turnover
convenience products at slightly higher prices.
Example: 7-Eleven, Circle K.
Discount Store: Standard merchandise sold at lower prices with lower
margins and higher volumes. True discount stores regularly sell merchandise at
lower prices and offer mostly national brands. Example: Wal-Mart, Kmart.
Off-price retailer: Merchandise bought at less than regular wholesale
prices & sold at less than retail; often-leftover goods, overruns and
irregulars obtained at reduced prices from manufacturers or other retailers.
Factory outlets
are owned and operated by manufacturers and normally carry the manufacturer's
surplus, discontinued or irregular goods.
Example: Mikasa (dinnerware),
Dexter (shoes)
Independent
off-price retailers are owned & run by entrepreneurs or by divisions of
larger retail corporations.
Example: T. J. Maxx, Filene's Basement.
Warehouse clubs (or
wholesale clubs) sell a limited selection of brand name grocery items,
appliances, clothing and other goods sold at deep discounts to members who pay
an annual membership fees. Warehouse clubs serve small businesses & group
members from government agencies, nonprofit organizations and some large
corporations. They operate in huge, low-overhead, warehouse like facilities
& offer few frills. They offer rock bottom prices- typically 20% to 40%
below super market and discount stores prices but make no home deliveries and
accept no credit cards.
Example: Sam's
Clubs, Max Clubs.
Superstore: Averages 35,000 square feet of selling space
traditionally aimed at meeting consumers' total needs for routinely purchased
food and non food items. Usually offer services such as laundry, dry cleaning,
shoe repair, check cashing & bill paying.
A new group called
"category killers" carries a deep assortment in a particular category
& a knowledgeable staff.
Example: Borders
books & Music, IKEA.
Combination stores
are a diversification of the supermarket store into the growing
drug-and-prescription field. Combination food & drug stores average 55,000
square feet of selling space.
Example: Jewel & Osco stores.
Hypermarkets range
between 80,000 and 220,000 square feet and combine supermarket, discount &
warehouse retailing principles. Product assortment goes beyond routinely
purchased goods & includes furniture, large & small appliances,
clothing items and many other items. Bulk display & minimum handling by
store personnel with discounts offered to customers who are willing to carry
heavy appliances and furniture out of the store. Hypermarkets originated in
France.
Example: Carrefour
and Casino (France), Pyrca, Continente and Alcampo (Spain), Meijer's
(Netherlands).
Retailing
consists of the sale of goods from a fixed location such as a departmental
store, hypermarket, supermarket or kiosk to the customers either in large or
small quantities. A retailer buys products in large quantities from
manufacturers or from wholesaler and in turn sells to the end-user. It is a
vital part of any manufacturer's distribution strategy and retailers are at the
end of the supply chain process who are Selling merchandise directly to the
consumer. Retailing began several thousand years ago with peddlers hawking
their wares at the earliest marketplaces. It is extremely competitive, and the
failure rate of retail establishments is relatively high. Price is the most
important arena of competition, but other factors include convenience of
location, selection and display of merchandise, attractiveness of the
establishment, and reputation. The diversity of retailing is evident in the
many forms it now takes, including vending machines, door-to-door and telephone
sales, direct-mail marketing, the Internet, discount houses, specialty stores,
department stores, supermarkets, and consumer cooperatives.
FUNCTIONS OF RETAILING
Retailing
is supposed to provide:
·Product
Utility
·Place
utility
·Time
Utility
·Ownership
Utility
It
provides final end products to the consumers, not raw materials, end products
in usable form to the consumers. Thereby it creates product utility.
Second
one, it is given in the place where it is required by the consumer. That is,
retailing outlets are open in the places according to the convenience of the
customer and also based on the demand of the consumer.
Third
One, it creates Time Utility i.e. the shops are open as per the requirement of
the consumer that is between 10 and 8 or 10 to 5. Whenever the consumers want
to go and shop they can go and shop at a particular period convenient to the
customer. Next one, when the product is sold finally it creates Ownership
Utility. So, we can conclude that retailing is a marketing intermediary which
creates Product Utility, Place Utility, Time Utility and Ownership Utility in
providing goods and services to the consumers
CLASSIFICATION OF RETAIL INDUSTRY
Retail
Sector can basically be classified in to two segments. One is organized segment
and another one is unorganized segment. As far as India is concerned this
organized segment contributes only to 3% of the retail trade and the
unorganized segment contributes to remaining 97% of the retail trade. Why is it
so?? Because all these days we have been purchasing only from the street
vendors and from the local shops and organized retailing was not in vogue in
India. Only after 1991, after opening up of economy and due to liberalization,
this organized sector has come to light and presently it exists in various
formats.
·Super
markets
·Hypermarkets
·Departmental
stores
·Specialty
stores
REASONS FOR RETAIL REVOLUTION
With
double salaries and nuclear families, disposable income in the hands of middle
income group people is high and that is one reason why retail revolution has
taken place. The second one is a very interesting feature. Now there is a
customer called New Age Customer.
The Indian Scenario:
In
2006 AT Kearney's Global Retail Development Index ranked Asia as the region
with the most promising prospects. Among 30 emerging countries worldwide, India
ranked number one and China ranked number five. India's retail sector is quite
fragmented with the top five retailers accounting for less than 2 percent of
the $350 billion market, one of the ten largest in the world. There are over
four million retail outlets in the country with one million located in urban
areas. Single-brand foreign retailers can now own 51% of an India operation.
Indian and foreign companies are making highly ambitious plans for large
multi-brand retail operations. Foreign retailers entered China some year ago
and today about 45 companies from Japan, Korea and the West operate in the country.
Challenges
The
industry is facing a shortage of middle management level professionals. Major
retailers are hiring aggressively from the similar and smaller organizations by
offering better packages. They are creating various levels of management and
hiring on a spree. Some of the areas such as technology, supply chain,
distribution, logistics, marketing, product development and research are
becoming very critical for the success of the organizations. All of these would
lead to the recruitment of highly professional people who specialize in these
fields. There is also a trend for hiring hotel management graduates, though now
many retail schools are coming up, and Pantaloon has set up links with major
business schools from where it would be selecting the right candidates. The
sector is likely to produce 2 million jobs in the coming 3 years. There also
exists a possibility that the retail sector would become a poaching ground once
a number of domestic and international players enter the industry.
Conclusion
India
is one of the fastest growing economies in the world today. Topping the Global
Retail Development Index for the third consecutive year as the most attractive
market for retail investment, India has one of the most vibrant retail sectors
in the world. Currently, there are 12 million retail outlets in India, which is
estimated to triple by 2015. As per the study conducted by the ICRIER, retail
sector is expected to contribute to 22 per cent of India's GDP by 2010 which
illustrates the strong fundamentals of the sector. Conservative steps taken by
the industry players have to an extent diminished the effects of recession
considerably on the Indian economy and kept it protected. However, gradual
changes and calculated risks are essential for India to realize its potential
and to come at par with leading economies.
