Retail

The Road less traveled

S.Shriram

My Retail Journey.com
Started scooping Ice-Cream at Baskin Robbins 1 st outlet in Chennai 1997
Pursued B.com, MBA in Marketing, PGD International Business
Executive Education from IIM Bangalore
RPG Retail Musicworld and Foodworld
The Future Group Central Malls
United Colors of Benetton
Bangalore International Airport Ltd.
Caf Coffee Day Set up over 140 cafes
Indiaplaza.com
Royal Enfield Set up over 160 retail stores
Visiting Faculty at B-Schools since 2005
Smiling Baby Retail store for new born babies
OyeThere.com Hyperlocal Marketplace

Welcome to the World of Retail

Swim upstream. Go the other way. Ignore the conventional wisdom.
If everybody is doing it one way, there's a good chance you can find
your niche by going exactly in the opposite direction.
- Sam Walton (1918-1992)

Definition
Retailing includes all the activities involved in selling goods or services
directly to final consumers for their personal, non-business use. A RETAILER
or RETAIL STORE is any business enterprise whose sales volume comes
primarily from Retailing.

Organized Retail

Some Important Facts

SKU - Stock Keeping Unit
Walk-ins / Footfalls
No. of Bills
Conversion Rate
Average Bill Value
Topline (Sales)
Bottomline (PBIT)

Retail Strategy

Strategy
The word Strategy comes from the Greek word meaning the art of the
general. In Retail, the term Strategy is used so often that it is often
confused with decision making. A Retail Strategy is a statement identifying
The Retailers Target Market
The Format(s) the Retailer plans to use to satisfy the target markets needs
The bases upon which the Retailer plans to build a sustainable Competitive
advantage

Target Segment
The Target Market is the market segment(s) toward which the Retailer plans to
focus its resources and retail mix. Successful Retailers satisfy the needs of
customers in the target market better than the competition does. The
selection of the target market focuses the Retailer on a group of consumers
whose needs it will attempt to satisfy.
The selection of a Retail format outlines the Retail Mix to be used to satisfy
the needs of those customers. The Retail Strategy determines the markets in
which the Retailer will compete.
Retail Market is not a specific place where buyers and sellers meet (like in
former times a Bazaar) but a group of consumers with similar needs and a
group of Retailers using a similar retail format to satisfy those consumer
needs.

Competitive Advantage
and Growth Strategies

Competitive Advantage
As the name implies, the Retailers need to build an advantage over their
Competitors. Most often, success can be replicated, as its is quite simple to
follow the leader. And over a period of time, smaller Retailers who follow
larger brands, simply co-exist in the same market, but operating across
different segments. To avoid competition eating up into its market share,
Retailers must build a strong layer for itself. The layer must be so strong that
it would be difficult for competition to break-in.
And even if they do, its strategies must be so different that the successful
Retailer always remains one-up. It is important hence to ensure that the
Retailers strategies are short-, medium- and long-term.
How?

Competitive Advantage
The following are opportunities by which Retailers can build a sustainable
competitive advantage over rivals in the market.
Location
Merchandise
Customer Service
Customer Loyalty
Vendor Relations
Distribution & Logistics
Human Resources Management
Example: Shoppers Stop, Caf Coffee Day

Growth Strategies
Market growth should be continuous and sustained, for the Retailers success.
This happens mainly through a focused approach and many other factors
falling in place. Growth is, and must be built over a period of time, so its
roots are strong to wither any kind of wind.
There are four main ways of pursuing growth in any market. They are;
Market Penetration
Market Expansion
Format Development
Diversification

Growth Strategies
Market Penetration
This involves directing efforts towards existing customers by using the present
retailing formats. The Retailer can achieve this by attracting customers in its
current target market who dont shop at its outlets or by devising strategies
that induce current customers to visit a store more often or to buy more
merchandise on each visit.
This could be done through opening more stores in the Target market and
keeping the stores open for longer hours. Another approach inside the store
could be through cross-selling or through aggressive in-store promotions.
Market penetration is usually a planned strategy and is normally undertaken
by Retailers who prefer to consolidate in a particular region, rather than
spreading all over at once.
Examples: Supermarkets

Growth Strategies
Market Expansion
This involves the Retailer spreading its stores across geographical locations,
due to limited exposure and opportunity in a Target Market. This is usually
done by Mono Brands who would prefer a presence all across a region (or
country) than focusing on just one city.
The main benefit of expanding the market is that the Brand is present in
more places/areas that brings in higher visibility. Also, when National
campaigns are undertaken, the cost advantages could be derived.
The disadvantage however, is that the Brand would never be able to
consolidate its position in any one market. Sooner than later, they have to
penetrate key markets.

Growth Strategies
Format Development
This involves offering a new format with a different retail mix to the same
target segment. It could be within the same location or elsewhere, but the
idea is to capitalize on the existing customer base and sell more products or
services under one roof. The span of managerial control is also another
reason that necessitates development/introduction of New Formats.
Formats must be developed in tune with the overall Strategy, Vision and
Purpose of the Retailer. They must complement the existing business and not
compete. New formats must always be tested in smaller markets, so as to
learn from the experience. Trying out new concepts alongside existing
successful businesses could prove to be challenging.

Growth Strategies
Diversification
Many Retailers worldwide as well as in India have diversified either into or
outside mainline Retail. While ITC and Reliance diversified into Retail, Dubai
based Landmark Group and Indias very own Future Group diversified outside
mainline Retail. Most often, the purpose of diversification could be;
Spreading the overall Risk element
Better usage of existing resources
At times, Retailers tend to lose focus and get into unrelated diversification,
that may divert the attention of the Senior Management, although the
venture may be profitable. Care must be taken to ensure this doesnt occur.
Many large Organizations that undertook this have would up without success.

Retail Mix

Retail Mix
Retail Mix is the combination of factors Retailers use to satisfy customer
needs and influence their purchase decisions. Elements in the Retail mix
include the types of merchandise and services offered, merchandise pricing,
advertising and promotional programs, store design, merchandise display,
assistance to customers provided by sales people, and convenience of the
stores location.

Retail Mix

The three most important factors

in Retail are
Location, Location & Location.

Retail Store Locations

Well begun is half-done, it is said. Similarly, the right location will reap rich
benefits to the Retailer. The choice of the Retail outlets location will have an
impact on everything the Retailer does. The difference between selecting the
wrong location and the right site could be the difference between business
failure and success.
Retailers work tirelessly to procure best locations for their businesses. While
conventional wisdom is the base, modern Retailers are willing to take higher
risks, that may result in higher returns.

In India, however, Retailers are

betting heavily on popular high-street locations and Malls, given the fact that
there are only a very few of them in major cities.

Factors Retail Location

Retailers must consider a few factors before deciding to venture into a new
location. Some of them are discussed below;
Vision of the Retailer
Span of Managerial Control
Type of goods to be traded
Target Segment(s)
Competition
Pricing strategy
Direct and Indirect Costs - Rent, Salary, Advertising
Retail Outlets exterior and interiors
Area Required for various activities Sales, Storage, Office space
Logistics, Transportation of goods and people
Viability of conducting business

Factors Retail Location

Vision of the Retailer
The choice of Location will depend largely on the vision and purpose of the
Retailer. This is normally undertaken by the Retailer at the time of formation
of the Company. Depending on the Organizations objectives, the Retailer
must then look for locations that would satisfy the need of itself and its
customers.
For example, The Future Group. Indias biggest retailer with turnover of more
than INR 12,500 Crores, has two business models The value format and the
lifestyle format.

The Vale Format includes Home Town, Big Bazaar, Food

Bazaar and Brand Factory whereas the Lifestyle format includes Central Malls
and other stand alone brand stores. Depending on the target segment and
availability of retail space, the most relevant format is chosen.

Factors Retail Location

Span of Managerial Control
Retailers tend to focus geographically, rather than nationally, while initiating
and expanding their business. Most often, the biggest cities of the country
and test-markets or in some cases, it could be cities where the Company is
headquartered. In India, Delhi, Mumbai and Bangalore are the most favorite
launch cities for Retailers.
Reliance Retail, however, went the unconventional way, by choosing
Hyderabad as its launch city for its Grocery business, whereas the technology
concept store Reliance Apple Store was launched in Bangalore, given the
popularity and large numbers of techies in Indias own Silicon Valley.

Factors Retail Location

Types of Goods to be traded
Large format stores need large back-end operations and hence, cities/areas
with best connectivity and infrastructure are relatively important for the
Retailer while choosing the location. India has one of the largest network of
railways and roadways in the world, and yet, more than 50% of our villages do
not have direct connectivity to major metro cities.
Reliance Retail will move its supplies and produce through its own Logistics
network whereas The Future Group, which was until recently using external
logistics management companies, has now created Future Logistics to take
care of its own as well as external logistics management.

Factors Retail Location

Target Segment
This is one of the most important factors, on the basis of which Retail
Locations are chosen. Ultimately, the business needs consumers and hence,
Retailers zero-in on such locations where there already exists a considerable
target segment. Established Retailers such as the Wal-Mart or Metro
internationally and our own Future Group and Reliance Retail, however
create market segments.
A classic example in the recent years is the consumer durable market. Both
operators, have created a new identity where-in the emerging middle class
has been targeted. Also, these Retailers are indeed experimenting newer
formats in newer locations, thereby creating new segments.

Factors Retail Location

Competition
In Retail, there are only two ways of managing Competition either let the
Competitors follow you or you follow the Competition. It takes a lot to lead
competition. However, it must be noted that Retailers are currently focusing
largely on Tier 1 and Tier 2 cities and thereby a larger part of the country is
often ignored. For example, the tope 10 Retailers in India have more than
50% of their revenues coming from the top 30 cities.
MNC Retailers are following the India market with keen interest and are often
dubbed as competitors. Whereas with the prevailing FDI guidelines and
restrictions, Indian retailers will lead the way in the years to come.

Factors Retail Location

Pricing Strategy
Possibly one of the most interesting factors, Pricing is becoming more
important and relevant these days in Retail India. Retailers are focusing on
Pricing aspects by carving niche formats and models for their business. A lot
also depends on other parallel factors such as Vision, Competition, Target
Segment, etc.

With various Retailers adapting Pricing techniques to pull more customers,

it will get better for customers who shop at these retail stores. A note of
caution is the efficiency of the Retailer to manage bottom lines more
effectively.

Factors Retail Location

Direct and Indirect Costs - Rent, Salary, Advertising
Associated Direct and Indirect costs will have an impact on the Retailer
while choosing the right location. These may vary from time to time and
could also be seasonal. For example, in India, we still do not have the best
infrastructure and connectivity for commuting for the employees and staff.
In the short run, transport costs may be higher but with better roads and
commuting systems such as the Metro, these may come down.

Factors Retail Location

Retail Outlets exterior and interiors
The Retailers image is very important while communicating to its
customers. Discount Retailers such as Auchan have gone for a very raw
version of the store interiors whereas fashion retailers such as Lifestyle &
Shoppers Stop go for chic and modern interiors designs and concepts.

Also, the way the Retailers projects its presence shall speak a lot in the
Retail districts. For example, WAL-MART and BIG BAZAAR have bold fonts
and huge cut-outs that is very difficult to miss.

Factors Retail Location

Area Required for various activities Sales, Storage, Office space
The Retailer must include space for other ancillary and related activities
while calculating the Retail space for its outlets. This is forgotten most
times and that is why a space constraint is always felt even among large
retailers.

Logistics, Transportation of goods and people

Retailers must consider the movement of goods and people in the medium
term, which choosing the right locations. For example, the transportation
costs are higher for moving goods in hill cities such as Manali or Kodaikanal.

Types of Location
High streets
Shopping Centers and Malls
Free Standing Locations
Office Complexes and CBD
Public Places

High Streets

High Street Areas

History has it recorded that people would congregate from different villages into a
common area and spend their leisure time for meeting family and friends, for
discussing public and political affairs, for attending fairs, for entertainment such as
theatre, trade shows, etc. and of course, for shopping goods and consuming services.
These areas later became to be known popularly as High Streets.
High street locations are one of the oldest for Retailers. Here, Retail outlets are
located in rows and share the same frontage for all their outlets. The walkway is
common but a shopper has to walk-in and out to access every outlet. Sizes of outlets in
such areas vary from each other and car parking facilities are common for outlets and
are scarce.
In todays modern Retail world, shopping at High Streets is still a favorite past time for
people across the world and needless to say, in India. Brigade Road in Bangalore,
Connaught Place in New Delhi, Linking Road in Mumbai, T. Nagar in Chennai are some
examples of the prevalent retail formats in such locations.

Shopping Centers and Malls

Shopping Centers and Malls

A Shopping Centre or a Mall is characterized by similar looking outlets under a
common roof, sharing common walkways, facilities such as parking lots and
rest rooms. Analysts also refer them as Vertical High Streets, but more
fashionable and trendy in their appearance. The most distinguishing factor of
Malls is that they create a sense of place and bring a large number of footfalls
due to the varied Retail formats and Brands that are present under one roof.
A Mall will have one or more Anchor Stores and a number of smaller retail
outlets also known as Vanilla Stores. The anchor store would be spread over
more than 10-15% of the total Mall size and hence would be dominating the
mind space of visitors. The smaller outlets typically benefit from the footfalls
that are brought into the Mall by the Anchors.

Free Standing Locations

Free Standing Locations

This type of retail location is basically any stand-alone building. It can be tucked away in
a neighborhood location or right off a busy highway. Retailers would always have a valid
reason to have chosen such a location, the most common being the rent paid and floating
traffic. The flipside could be traffic footfalls and thereby conversions, to ensure a steady
business in the short- and medium term.
Big-box Retail formats such as Hypermarts and Deep-Discount Retailers prefer to settle
away from the CBD, mainly because of higher rents. As the cost of operations are
relatively lower due to reasonably lower rental costs in the suburbs, they may offer heavy
discounts on their products to their customers and hence people wouldnt mind driving a
few extra miles.
Fast food chains are common to be seen on highways since they become a favorite spot for
travelers. A national chain may benefit more than smaller operators since they already
enjoy goodwill and popularity from their patrons.

Office Complexes and CBD

Its a common sight these days to see more and more Retailers, especially
Convenience
stores and Fast Food Operators, find a place for themselves at CBDs and
Offices. The reason is obvious: A captive audience and an inherent need that
exists among consumers, lack of time to go shopping and a positive intention
to spend. Many large Retailers have started to set-up their outlets here,
albeit with a bit of modification to suit the context that prevails.
As the Employers see the shopping facility as an extended service provided
to their employees, they do not charge very high rentals to the Retailers and
hence, the operator can manage to effectively make more profits and also
pass on some to its consumers.

Public Places
Retailing at Public places has been witnessing a phenomenal growth all over the world
in the past two decades. Increased travel is one of the most important factors for this
fledgling Industry. By pubic places, we mean Bus and Railway Stations, Airports,
Seaports, etc. Although a retail presence in these places has existed for a very long
time, Organized Retail has been fuelled in the past few decades.
From Convenience goods to Luxury, Fast food to Full Service Restaurants, one can find
all of them at these places. People shop not just on impulse goods, but also plan what
they need to buy when they travel to different cities/ countries. For example, one
would enjoy the benefits of duty free goods in the International Departure areas at
airports, as they have already emigrated from the country of travel. Similarly, Luxury
cruises also offer shopping on board, which could kill boredom for passengers.
In India, Organized Travel Retail is a very small percentage compared to the overall
Retail Industry. But it is growing at a very healthy rate and would play an important
role in main line Retail in the coming years.

Airports

Calculating Retail Selling Space

When planning a Retail store, the amount of selling space will be one of the
most important factors in selecting a location. It can also be one of the most
difficult to determine.
As with any new business, most of your assumptions will be based on industry
research and comparing similar stores operating in similar locations.
To get an estimate on how much selling space your store must have, divide
the planned sales volume by your industry's sales per square foot.

Calculating Retail Selling Space

One of the most important yet difficult tasks for a Retailer is to determine
how much of area is required to carry out its operations. Needless to say, this
would depend on the vision and purpose of the Organization in the Retail
business. Most often, Retailers begin with one format and later venture into
different ones. This is natural and one of the most preferred and successful
options for Retailers worldwide.
While determining space, The Retailer must think of the following;
Display and Sale of Products
Customer Service/ Complaints handling`
Billing and Check-out
Storage and sorting of Products
Office Room
Additional space for future needs or expansion

The Right Location

Convenience goods require easy access, allowing the customer to quickly
make a purchase. A mall would not be a good location for convenience goods.
This product type is lower priced and purchased by a wide range of customers.
Specialty goods are more unique than most products and customers generally
won't mind traveling out of the way to purchase this type of product. This
type of store may also do well near other shopping stores.
A Department Store must be located in a high-traffic area so that as many
people are able to use them. Also, other amenities such as Promotions,
Parking etc., would be needed and hence such areas require larger space.

Happy Retailing
www.myretailjourney.com
Twitter: @shri611
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