retail presentation v1.2
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Modern Retailing...scope for IndiaTRANSCRIPT
An introduction to Modern Retail
Guest lecture for the students of Govt. College of Engineering & Textile Technology, Berhampur, West Bengal, India.
By
Sumanranjan [email protected]
August 8,2013
Retail ..defined in many ways..
• Retail comes from the French word Retailer , which refers to "cutting off, clip and divide”.
• According to Kotler: “Retailing includes all the activities involved in selling goods or services to the final consumers for personal, non business use”
• Modern Retailing is in its ability to provide easier access to variety of products, freedom of choice and many services to consumers.
Manufacturer
Wholesaler
Retailer
Consumer
Feedback
Weekly MarketsVillage FairsMelas
Convenience StoresMom and Pop/Kiranas
PDS OutletsKhadi StoresCooperatives
Exclusive Brand OutletsHyper/Super MarketsDepartment StoresShopping Malls
Traditional/Pervasive Reach
Government Supported
Historic/Rural Reach
Modern Formats/ International
Evolution of Retail
Source of Entertainment
Neighbourhood Stores/Convenienc
e
Availability/ Low Costs /
Distribution
Shopping Experience/Efficienc
y
Evolution of Retail
Organized retail calls for performance…
Organized retail
• Range of retail formats right from neighbourhood to hypermarkets
• Professionally managed & technologically advanced - better service and shopping experience
• High street location attracting large no of customer foot-falls in to stores.
• Nationwide large retail chain offering similar assortment in most of the categories
• Higher degree of awareness among the target group – offers great platoforms for the smaller brands
Unorganized retail• Melas/Mandies /Bazar or
Weekly Haat : selling different or similar merchandise
• Small-store (kirana) : Mostly Family Run,. Located in neighbourhood.
• Lack of standardization and professional approach
• No infrustructure for sourcing
Organized retail with larger scale of operation offers win-win-win situation…
• Arranging Assortment: Manufacturers usually make one or a variety of products and would like to sell their entire inventory to few buyers to reduce costs. Final consumers, in contrast prefer a large variety of goods and services to choose from and usually buy them in small units.
• Retailers are able to balance the demands of both sides, by collecting an assortment of goods from different sources, buying them in sufficiently large quantities and selling them to consumers in small units
• Breaking Bulk: to reduce transportation costs, manufacturer and wholesalers typically ship large cartons of the products, which are then tailored by the retailers into smaller quantities to meet individual consumption needs
• Holding stock: Retailers maintain an inventory that allows for instant availability of the product to the consumers. It helps to keep prices stable and enables the manufacture to regulate production.
• Promotional support: small manufacturers can use retailers to provide assistance with transport, storage, advertising, and pre- payment of merchandise.
• Impulse Purchase : Need strong forecasting ability , also In store experience is the key to take a share
Retail Formats can be classified on the basis of following:
Wedding mallKhadi PlazaVillage mallKisan Bazar ( Choupal Sagar)
Ownership
StandaloneChainFranchiseShop-in ShopOwned by Mfg.
Retail Strategy (Store Based)
Convenience StoreHypermarketSupermarketSpecialty storeDepartmental StoreDiscount StoreFactory outlet
Non-store
WWWDirect MarketingVending Machines
India specific…
Each component will differ as per the store format…
Location Price
Retail Exp Promotions
Merchandise
Convenience Store : Petrol pump & Metro stations, SPAR , Grocery
Hyper market : Wall-Mart, Carrefour , Hyper city, Big Bazar Supermarket : Spinneys, Food Bazar, More
Specialty Stores ( Multi brand) : Fab-India, Metro, Sleek Kitchen, Paris Gallery
Departmental Stores : Lifestyle, Shopper Stop, @Home
Discount Stores : Dollar Shop, Subhiksha, On Line Stores
Factory outlet
On Line Stores : Group-on, E bay
• Product Mix – In-house n reputed brands from Local/International market
• Pricing – value Pricing, Promotional Pricing, Time pricing ( Weekend), Bundling
• Place : Location of Stores and efficient Supply Chain
7 Ps of Modern Retail ( Example)
• Promotions – Advertisements, Loyalty , Brand endorsement, POP, Outdoor branding, PR, Live demo
• People – training, Appearance, empowerment, reward, employee of the month
• Process – Customer service, billing counter, Product
• Physical Evidence
7 Ps of Modern Retail…
Others11%
Food & Grocery
60%
Ap-pare
l8%
Mobile6%
Food Ser5%
Jeweller
y4%
Con Elect3%
Pharma3%
24%
11%
33%
11%
7%
6% 8%
The '8%'
India’s $500 billion retail industry..
Source : Deloitte, jan’13
92% of the sector is unorganized, those that fall under `mom & pop’ store.Organized sector is dominated by retailers having multiple stores
Still a long way to go, enormous potential for Indian Retail industry…
USA India
Contribution of Retail to the GDP
27% 13%
Per capita Retail Space in SQFT
16 2
% Population engaged in Retail
20% 8%
% of Organized retail 80% 8%
Wal-Mart/ Future Group
20% 0.3%
Average store size High Low
Role of wholesalers Limited Extensive
Infrastructure Extensive Limited
5th largest Retail destination in the globe
Only 4% of the 12 million Stores are bigger than 500 SQFT
Only 8% of Indian Retail is `Organized’
Organized retail is poised to grow @ 35~40% compared to only 6% to that of `Unorganized’ retail
Very young population. Ready to experiment & accept New
Six million rich Indians looking for changing Shopping experience
Evolution of Luxury in India is at a nascent stage as compared to other Asian countries
India’s emerging economic growth has sparked initial stages of luxury consumption
Locked into luxury habit
Confident discerning buyers
Subjugation
Start of money
Show off
Fit in
Way of life
Authoritarian rule
Poverty and deprivation
Economic growth
Masses buy white goods
Elites start consuming luxury
Acquire symbols of wealth
Display economic status
Large scale adoption of luxe
Fuelled by need to conform
IndiaChina
Taiwan, KoreaHong Kong, Singapore
Japan
Source: Chada and Husband’s evolution of luxe model)
Stage I
Stage II
Stage III
Stage IVStage V
14
Earlier Classification
Current Classification
Tier 1
Tier 2
Tier 3
Based on Geography and Population
MEGACITIES – Largest cities in terms of population and overall consumer markets
BOOM TOWNS – Next set of big-population cities with high expenditure per household
NICHE CITIES – Smaller in terms of overall population but still well above their weight in spending per household.
These twenty cities together account for• 10% of Population,
• 55% of total urban income
• Boomtowns and niche cities today may be much smaller in terms of their income and spending weights, but they are growing rapidly.
Megacities Boom Towns Niche Cities
MumbaiDelhi
KolkataChennai
BangaloreHyderabadAhmedabad
Pune
SuratKanpurJaipur
LucknowNagpurBhopal
Coimbatore
FaridabadAmritsarLudhiana
ChandigarhJalandhar
Evolved Urban Classification
Map of India’s income classes
In face of the evolving market characteristics, Retail Industry need to work around three critical success factors
Developing a « product offering » catering to the Indian preferences….
Managing the mandatory sourcing and real estate is key to revenues/sq. ft in « Operations »
Offering an exceptional « Customer Service Experience » will make for clear winners
Evolving consumer tastes and preferences
Tackling mandatory 30% sourcing- identifying right partners
Offering much desired customer service experience and quality
Embracing Indianization of products
Managing real estate : revenues/sq.ft vs. rental costs
Identifying and hiring talent and investing in training
Indianization of their offerings….Embracing ‘Indianness’ brand’ will definitely help players connect with Indian consumers,
however, it remains to be seen what the efforts will yield ….
Indianizing offerings
Saris by Hermes
Indianized offerings visible in the watches, jewelry and apparel segments– Ex-Keeping in mind the like for logos on luxury products by Indian
consumers, Salvatore Ferragamo launched an exclusive ‘Gancino’ collection – Hermes offering Gold in its jewelry and accessories collection in India– Tod’s silk satin clutches with rhinestones as part of “only for India” collection
Indian inspired collections elsewhere create a connect in terms of brand image and perception – Ex-The Louis Vuitton Diwali collection
Gandhii Montblanc penSalvatore Ferragamo’s exclusive India collection of Gancino bagsNawab collection by Roberto Canali
Product Offering
Source: http://www.cpp-luxury.com/en/the-real-challenges-of-india-s-luxury-retail-market_1633.htmlhttp://in.reuters.com/article/2011/08/24/idINIndia-58939820110824http://jllindia.wordpress.com/2011/02/14/india-luxury-retail-property/
Brands will need to define localized growth strategies on smart investments
It is imperative for foreign players to shift focus to adding growth capital to gain scale, tackling the mandatory 30% sourcing rider and investing on hiring and training talent
Footfall versus rental cost a concern-Rentals varying from INR 450-550/sq.ft for high street vs. INR 350-450/sq.ft for luxury malls
P&L Item Global India
Revenue/sqft/day (INR) 110-170 60-80
Gross margin 70% 55-60%
Rentals(% of revenue) 10-15% 25-30%
Others costs (% of revenue) 20-25% 15-20%
Talent The luxury retail sector was estimated to face a shortage of 1,33,000 salesmen by 2010
Sourcing/production With the rider of mandatory 30% sourcing from SMEs in India, vendor
management, workmanship, quality of raw material and intellectual property issues need to tackled
Operations
Real Estate
Source: http://www.cpp-luxury.com/en/the-real-challenges-of-india-s-luxury-retail-market_1633.html, http://in.reuters.com/article/2011/08/24/idINIndia-58939820110824, Joe Lang La Salle India, AT kearney CII report
Consumer handling at entrance
Consumer identification
Consumer orientation
Ambiance (lighting, sounds, design…)
Shop/counter lay-out
Signage
Product… Staging Access Information Testing
Needs and habits inquiry
Main product choice
Link selling Additional
services Customization
Payment Delivery services Consumer
registering Satisfaction
check
Shop
vis
it
Befo
re S
hop
visi
t
After
Sho
p vi
sit
Consumer welcome
Atmosphere discovery
Product touch & feel
Advisory & services
Check out
Purchase provoked by need for conformance, social status
After sales service missing or insufficient due to high import duties
Requests and claims take time
Designing an exceptional “store-journey” is key to connecting with Indian consumers
Indian consumers’ need for attention and respect is synonymous with the culture with class consciousness and status symbolization : It is imperative to focus on the experience and after shop
visit
Source: First Retail workshop with Lancôme, Armani and YSLB DGAs
Shop journey
Customer Experience
… and creating brand awareness to capture the burgeoning luxury consumption class in India
It is critical for luxury brands to decode the aspirational DNA in order to connect with the Indian luxury consumer
Communicating luxury Newer affluent masses will need to be communicated the exclusivity and
prestige driven by a distance-– Artistic and graphic visualisations– Using India on global advertising campaigns– Localized marketing material
Press dominates the marketing budget of luxury brands as of now– Social media to target young consumers through Face book, Twitter,
internet and mobile communication will be the trend in near future– Over 300M users to have access to data-rich video through 3G and
4G capabilities on mobile by 2015
Role of digital media
Brand awareness Awareness is very high in rich class segment
– However, newly affluent lack sufficient knowledge and awareness. Here bollywood can create the connect. As brand awareness is low, brand loyalty too is low
Customer Experience
Source: Communicating luxury to the masses, JWThttp://sg.acnielsen.com/site/20080408.htm