Retail Technology Management

MFM -II
Dr. Sushil Raturi
Professor- FMS , NIFT Mumbai
 Retailing
• Derived from French word RETAILLIER ( RE+TAILLIER =RE+CUT)

• Retailers are the final business in a distribution channel that link manufacturer to the

consumer

• In modern days it is viewed as sale of tangibles and intangibles to the consumer

through brick and mortar format as well non brick and mortar format for their

personal, family or household use

• Retail is the biggest industry in the world with sales of $ 30 trillion.

• 25 of the top 50 Fortune 500 companies are retail.

 Top 10 Retailers-Forbes 2022
Retailer Turnover

1-Walmart-US USD 573 bn

2-Amazon-US USD 213 bn
3-Costco-US USD-144 bn
4-Schwartz Group-Germany USD 130 bn
5-Kroger-US 124 bn
6-Walgreen Boot Alliance-US 114
7-Home Depot-US 108
8-Aldi-Germany 109
9-Carrefour-France 101
10-JD.com USD 94 bn
 Evolution of Indian Retail Modern Formats/
Historic Traditional Government
International
Supported

Exclusive Brand Outlets/

Shopping Malls

PDS Outlets
Khadi Stores
Cooperatives

Convenience Stores
Mom and Pop/Kiranas

Weekly Markets
Village Fairs
Melas
Availability/ Low
Source of Costs / Distribution
Neighborhood Shopping
Entertainment Stores/Convenience Experience/Efficiency
 Evolution of Fashion Retail in India

Pre 90s 1990-95 1995-2000 2000

onwards

Era of Tailor- Era of RMG Brand Retail

made introduced Flourish growth
Growing Indian Retail Market

2005 2010 2015 2017 2022

 Retail :Share of categories
Market Size $billion % Share 2022
2022
Food, Beverages and Tobacco 470 52.0
Personal Care 30
3.2
Apparel 200
22
Footwear 20
2.2
Furnishings 20
2.2
Consumer Durables & IT 30
3.2
Furniture 20
2.2
Jewellery & Watches 40
4.3
Medical Care and Health Services 20
2.2
Others 60
6.5
910
100
Growing Indian Apparel Retail Market

2010 2015 2017 2018 2022

 Current Channels : Organized Retail

• In India share of organized retail is 18% of the total

retail market
 Reasons for Retail Boom In India
• YOUNGISTAAN (40% of population is between 25-35
years) : Quality , design , fashion conscious , free
from hassles ,believe in spending )
• Kids becoming aware of external environment and
are becoming more demanding
• Influence of International travel and media (9 Mn
Indians Travelled abroad , 125 mn cable and satellite
homes)
• Emergence of new activities
• Credit friendliness
 Theories of Structural Changes in
Retailing
• Wheel of Retailing
• The Dialectic Process
• Natural Selection
• Central Place Theories
• Retail Gravity theory
• Index of Retail saturation
The Wheel of Retailing
 Theories of Structural Changes in
Retailing
• The Dialectic Process :New Retail formats
emerged by adopting characteristics from
other forms of retail.
• Natural selection : A retailer who adapt to
changes in Demographic ,social ,
technological, socio, economic , political , legal
environment are most likely to grow and
prosper.
 Theories of Structural Changes in
Retailing
• Central place theories :
Convenience Product : Close to place of residence
Shopping Products : Pockets designated for shopping
Specialty Products : Exclusivity to the consumers

• Retail Gravity Theory: Probability that a customer will come to

a store depends on size of the store and the distance one
travels or time one takes to reach the store.
• Index of Retail saturation : A location that has relatively higher
IRS compare to other location is less saturated and thus an
attractive location to start a business.
 Huff’s Gravity Model

Based on the premise that the probability that a

given customer will shop in a particular store
or shopping center becomes larger as the size
of store or center grows and distance or
travel time from customer shrinks
 Gravity Model Illustration
Store C (7000
sq.ft.)
3 miles
Store A 4 miles
(10000 Sq.ft.)

Institutional
Institutional
area Area

2 miles

Store B
(6000 Sq.ft.)
 calculations
• Pa = 10000/16

--------------------------------------------

10000/16 +7000/9+6000/4

= 625

------------------------

625+778+1500

=625/2903

=.21
 calculations
• Pb = 6000/4

--------------------------------------------

10000/16 +7000/9+6000/4

= 1500

------------------------

625+778+1500

=1500/2903

=.52
 Index of Retail Saturation
• It takes into account demand and supply aspect of the retail business and measures
the attractiveness of a retail market.

• IRS is the ratio of demand for a product (D) divided by available supply (S)

Where D= No. of Household in the geographic area (H) *annual retail expenditure for a
particular line of trade per household (RE).

S=Sq. footage of retail facility of a particular line of trade in a geographical area (RF)

IRS= H*RE/RF

Higher IRS value indicates demand is more and supply is less i.e. currently it is less
saturated hence attractive retail market.
 Numerical
Annu
al
Exp
per
No. of hous
Locatio Hous ehold Area (Sq.
n ehold (Rs.) Ft.) Demand IRS=D/S

A 500 40000 5000 20000000 4000

B 550 37000 4800 20350000 4239

 The Strategic profit Model
• The strategic profit model helps retailers to evaluate the financial
performance of their business.
• Two decision making areas profitability and productivity

• Profitability :States the profit that the retailer generates in terms of

returns on assets and net profit margin
• Productivity : State the profit that the retailer generates for each unit of
resource input: floor space, labor, and inventory investment
 Retailer Analysis
Particulars STORE A STORE B

Gross Sale(1) 200000000 200000000

Customer Returns(2) 100000 90000

Discount(3) 50000 75000

Net Sales=4=1-2-3 199850000 199835000

Cost of goods sold(5) 120000000 130000000

Gross Margin=6=4-5 79850000 69835000

Expenses(7) 20000000 20000000

Net Profit(Rs.) =8=6-7 59850000 49835000

Net Profit Margin=9=8/4 0.299474606 0.249380739

Assets(Rs.) (10) 10000000 9000000

5.537222222
ROA=11=8/10 5.985
 Store Analysis
Store A Store B
Gross Margin (Rs.) 10000000 10000000
Space (Sq. ft.) 1000 1200
Labor( Rs.) 100000 90000
Inventory(Rs.) 50000 55000
GMROS 10000 8333.333
GMROL 100 111.1111
GMROI 200 181.8182
 MAJOR TYPES OF RETAILERS BY PRODUCT
OFFERING
• Kirana
• Convenience
• Supermarket
• Department store
• Hypermarket
• Speciality stores
• Category Killers
• Off Price Retailers
 Kirana Stores
• Neighborhood / residential areas /
Independent retailers
• Food oriented
• Eased / personalized/ emergency purchase
• 2-3 times a week
• Convenience products
• Open for long hours
• Home delivery and monthly credit
 Convenience stores

• Neighborhood food oriented store open for long hours

• Moderate number of items (more than kirana )
• The store size is relatively larger than kirana and provides better
customer service in terms of ambience ,packaging , presentation and
quality.
• Prices are not as competitive as other formats like
supermarket ,department stores but certainly on the lower side than the
kirana stores.
• The ease of shopping at convenience store in terms of time and
impersonal nature of supermarket makes these stores more appealing .
• According to FMI : A small local store selling mostly grocery , open until
late at night or even 24 hours a day and is abbreviated as c store
• The store size is 3000-8000 sq ft
• Stores in petrol pumps like HP Speed mart, In and Out.
 Supermarkets
• Food store offering groceries and limited range of
non food items / general merchandise ie health and
beauty aids , gift items
• Large stores ,low cost , low margin , high volume ,
self service operations
• 85% food and grocery items
• Impulse buying
• 8000-20000 sq ft
• Food Bazaar , Reliance Fresh , More
 Departmental Store
• Large stores selling several product lines with each operating as a department under one
roof.
• Product mix is largely non food like apparel , accessories ,books , music , footwear .
• 20000- 40000 sq. ft.
• Target customers are not price conscious
• Ambience / VM plays important role.
• National brands as well private labels
• Merchandise return policy and loyalty programs
• Anchors in a shopping mall
• They help in attracting high traffic
• 30% conversion rates
• Atleast 50 employees
• 50000- 100000 SKU’s
• Shopper’s Stop , Pantaloon , Lifestyle , Westside , Globus
 Hypermarkets
• Derived from the French word Hypermarche which is a combination of a
economy supermarket and a discount department store .
• Also termed as supercentres
• Carrefour started first hypermarket in 1963
• A store with 80000-2,20000 sqft. with at least 35% of selling space
devoted to non grocery product like clothes , jewellery , hardware , sports
equipment , books , CD’S /DVD’S , Video’s , TV , electric equipments .
• One stop shopping
• Wal –Mart (the Wal-Mart supercentres), Carrefour, Target ( Super
Targets) , Tesco (Tesco Extra Stores), Big Bazaar , Star India Bazaar ,
Hypercity, DMart
 Specialty Store
• A retail store specializing in a particular type of merchandise or single
product line with deep assortments in that product line

• Such business model is characterized by high level of customer service or

product information

• Concentrate on apparel , jewellery ,drugs, fabrics , sporting goods , Car /

Scooters , furniture etc.

• 8000 sq.ft.

• Ikea , Proline fitness centre , Croma , Kings electronics

 Off Price Retailers

• Merchandise is sold at less than retail prices

• Buys manufacturers seconds , off seasons at a deep discount
• The merchandise may be in odd size ,unpopular colors or with
minor defects
• Company owned Single Brand Factory outlet like Adidas etc)
• Company owned Multi Brand Factory outlet like Megamart,
Brand Factory )
• Independent owned Multi Brand Factory outlet (The Loot)
• Parental company to expand their business
 Category Killers

• A specialty retailer who offers a very large

selection in the chosen product category and
economical prices
• Focus on one product category, they stock
deep , dominate the product category
• 20,000-1,20,000 sq.ft.
• Nalli’s in saris
 STORE LOCATION
• FREESTANDING STORES
• BUSINESS DISTRICTS
• STRING
• ANCHOR
• PARASITES
• FLEA
 Freestanding location
• An isolated store on a highway or a street
• Lack of direct competition.
• Generally lower rents.
• Freedom in operations and hours.
• Inexpensive parking.
• Better road and traffic visibility
• Advertising costs are very high
• Gas stations , Hotels , fast food restaurants .
• Lack of drawing power from complementary stores.
• Difficulties in attracting customers for the initial visit.
 Business districts

• A type of retail location where two or more stores are placed

together (or in close proximity )in such a way that the total
arrangement or mix of stores is not due to long range planning.

• There are Four kinds of such business districts

1. Central Business Districts
2. Secondary Business Districts
3. Neighborhood Business Districts
4. String
 Central Business Districts (CBD)
• Hub of retailing in a city
• The oldest shopping destination
• Also termed as downtown.
• Greater density of office building and stores.
• Both vehicular and pedestrian traffics are very high
• The core of a CBD 1-2 Km with cultural and entertainment facilities
surrounding them.
• Shoppers are drawn from urban area and include all class of people.
• Excellent product / service assortment
• Access to public transportation
• Inadequate parking
• Travel time is too high for those in suburban
• Connaught place , Colaba ,MG Road
 Secondary Business district
• A SBD is one which is relatively newer in a city with no
historical background and has evolve over a period of
time with the growth of population in a city.
• The SBD’s are closer to the residential areas.
• Smaller trading areas.
• High rentals
• Parking difficulties
• Less chain stores
• A city may have more than 1 SBD
• Central Market , South extension market , Karol Bagh ,
Bandra Linking Road , Vashi sec-17 ,Chembur(Sion –
Panvel Highway)
 Neighborhood Business district
• It appeals to the convenience shopping and service
needs of a single residential area
• It contains several small stores such as a drycleaner , a
stationary store ,, a barber shop / a beauty salon ,, liquor
store , restaurant .
• The leading retailer would be a supermarket or a
drugstore .
• Long hours ,less hectic atmosphere.
• One SBD can have multiple NBD
 String
• A shopping area comprising a group of retail stores with
similar or compatible product lines located along a street
or a highway .

• It starts with an isolated store , success than breeds

competitors

• Factory outlets in Mahipalpur (Delhi) and Chembur

(Mumbai) , marble / stone retailers (vasant kunj in Delhi)
, furniture market in Delhi, Fashion street in Mumbai ,
Janpath in Delhi
 Flea Market
• Make shift or temporary arrangements to
sell / Barter
• Discounted prices
• Chor Bazaar , Handloom / Handicraft Bazaar ,
weekly markets , melas , mandi
 Parasites

Parasite
Parasite stores
stores do
do not
not create
create their
their own
own
traffic.
traffic. They
They make
make money
money based
based onon their
their
proximity
proximity to to things
things that
that will
will draw
draw foot
foot
traffic
traffic // footfall.
footfall. (Bigger
(Bigger stores,
stores, train
train
stations,
stations, airports,
airports, office
office buildings)
buildings)
 Anchor Stores

A
A large
large store
store such
such asas aa department
department store
store or
or
supermarket,
supermarket, that
that is
is prominently
prominently located
located in
in aa
shopping
shopping mall
mall to
to attract
attract customers
customers who
who are
are
then
then expected
expected to
to patronize
patronize the
the other
other shops
shops
in
in the
the mall.
mall.
 Models of Experiential Marketing
• Schmitt’s Experiential Marketing Strategies

• Pine & Gilmore Experiential Marketing Strategies

 Schmitt’s Experiential Marketing
Strategies
• Sensory experiences (sense), in which the
consumer’s senses of sight, hearing, taste,
touch and smell are stimulated separately or
in combination
• Affective experiences (feel), which elicit
emotions and feelings in consumers
 Schmitt’s 5 Strategic Experiential
Activities
• Creative Cognitive experiences (think), which
involve consumers in creative problem-solving
tasks
• Physical experiences (act), which offer
consumers alternative behavior and lifestyle
models in a potent mix of commercial logic
and artistic/cultural expression
 Schmitt’s 5 Strategic Experiential
Activities
• Social-Identity experiences (relate), in which
the components of consumer experience are
enhanced by a social dimension based on
sharing and comparing experiences
Four experiences (4Es):(Pine & Gilmore, 1999)
Entertainment: watching the activities and/or
performances of others.
Educational: customer enhancement of skills and
knowledge through active participation in the
experience
Educational: customer enhancement of skills and
knowledge through active participation in the
experience
• Phillips lighting pop up
stores in Delhi,
Bangalore, Chennai,
Hyderabad, Kolkata
and Mumbai
• Learn about saving
energy with lighting
Esthetics: customer enjoyment of an enriched,
unique physical design. Enjoy passively or
appreciate “just being in a setting”
Escapism: customer shapes or contributes to
the experience, which offers the customer a way
of taking on a new character
Escapism: customer shapes or contributes to
the experience, which offers the customer a way
of taking on a new character