Evolution of Non- Store Retailing In India –

A Critical Analysis

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Authors:

1.S.Sandesh Rao MBA II year(marketing)- III semister.

E-mail:raosandesh9@gmail.com

Mobile: 91 9885552151

2. A.srinivas Rao MBA II year (marketing) - III semister.

E-mail:srinivasraoavirneni@gmail.com

Mobile: 91 9963431316

3. D.Anil Rao MBA II year (marketing) - III semister.

E-mail:aanilrao.d@gmail.com

Mobile: 91 9885566720

Sree Chaitanya PG College

LMD colony, Thimmapoor

Karimnagar, Andrapradesh-

Pin: 505 527

 Evolution of Non- Store Retailing In India –

A Critical Analysis

Abstract:

The present paper discusses Indian retail scenario and size of Indian retail business. It also
focuses on Indian retail structure like store and the viorious types of non-store retailing and their
prospects and challenges in Indian context. This article tries to give various aspects relating to
Indian Non -Store retiling and its relavance with Indian consumer and Indian retail market
dynamics.

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RETAILING:

Any organization selling to final consumer whether it is a manufacturer, whole seller or retailer
is doing retailing.Does not matter how the products /services are sold it may be by personal,
mail, telephone, vending machines or internet.

Retailing encompasses the business activates involved in the selling goods and services to the
consumer for there personal or family use. It does this by organizing thier availability on a
relatively large scale and supplying them to customers on a relatively small scale.

Defination:

Philip Kotler defined “retiling includes all the activities involved in selling goods or services to
the final consumer for personal and non business use “.

According to “North American Industry Classification System”. {NAICS}, the retail trade sector
compromises establishments primarily engaged in retiling, merchandised generally without
transformation, and rending services incidental to the scale of merchandise.
Retailing consists of the sale of goods or merchandise from a fixed location, such as a
department store, boutique or kiosk, or by mail, in small or individual lots for direct consumption
by the purchaser.

Retailing may include subordinated services, such as delivery. Purchasers may be individuals or
in commerce, thus a "retailer" buys goods or products in large quantities from manufacturers or
importers, either directly or through a wholesaler, and then sells in smaller quantities to the
consumer. Retail establishments are often called shops or stores. Retailers are at the end of the
supply chain. Manufacturing marketers see the process of retailing as a necessary part of their
overall distribution strategy. The term "retailer" is also applied where a service provider services
the needs of a large number of individuals, such as a public utility, like electric power.

Indian Retail Scenario:

In India retail business constitutes a significant segment in the economy, it accounts for 10
percent of country's G.D.P and 8 percent employment. The Indian retail industry is valued at
$300 bn and is expected to grow to $427 bn in 2010 and $637 bn in 2015.indian retail business
growing at 9 percent in value terms.

The share of the organized sector in retail trade in India is currently a mere 2 percent and
expected to reach 9-10 percent by 2010, indicating a huge opportunity for prospective new
players. Organized retailing is projected to grow at the rate of 25-30 percent per annum and is
estimated reach over an astounding Rs109, 000 Crores by 2010.

Evolution of the retailing in India:

The origins of retailing in India can be traced back to the emergence of Kirana stores and mom-
and-pop stores. These stores used to cater to the local people. Eventually the government
supported the rural retail and many indigenous franchise stores came up with the help of Khadi
& Village Industries Commission. The economy began to open up in the 1980s resulting in the
change of retailing. The first few companies to come up with retail chains were in textile sector,
for example, Bombay Dyeing, S Kumar's, Raymonds, etc. Later Titan launched retail showrooms
in the organized retail sector. With the passage of time new entrants moved on from
manufacturing to pure retailing.
Size of retailing in India:

Indian retailing industry registering phenomenal growth rate from the last decade. The organized
retailing growth and evolution in India was intensified with the liberalization of consumer goods
industry in the mid-nineties, combined with a growing consumerism driven by media and further
the paradigm shift in the marketing strategies and practices of the firms from Supply-led market
to Demand-led market fueled the growth of corporate retailing.

AT Kerney report ranked the India as the second most attractive retail market after Russia, in its
global development index-2004. A study by Mc Kinsey points out that India’s market for
consumer goods could reach a whooping $ 400 bn by 2010 making it one of the five largest
markets in the world. The KPMG in its recent report “Consumer markets in India-the next big
thing” has said India represents an economic opportunity on massive scale, both as a global base
and a domestic market. The report, however, finds that the next leap in the growth of consumer
market will be spear heeded by changing dynamics of retail sector.

As per the KSA Technopak India Retail Report-2005, the retailing industry in India estimated at
Rs 930,000 crore (2003-04) is expected to grow at 5% p.a. In line with predictions made in 2002,
organized retailing is well on its way to become an Rs 35,000 crore market by 2005. The size of
organized retailing market stands at RS 28,000 crore in 2004, thereby, making up a mere 3% of
the total retailing market. Moving forward, organized retailing is projected to grow at the rate of
25-30% p.a. and is estimated to reach over an astounding Rs 100,000 crore by 2010. Its
contribution to total retailing sales is likely to rise to 9% by the end of the decade.

TYPES OF RETALING

Mainly the business carried by retailing can be divided into two types

• Store based retailing: Stores consists of the sale of goods or merchandise from a fixed
location. Retail stores sell a variety of consumer goods in a number of different formats.
 Retailers purchase the goods from a middleman known as a distributor or directly from
the manufacturer. Stores may sell a wide variety of merchandise or specialize in certain
types of products. Retail stores may vary greatly in size.

• Non store based retailing: The selling of goods and services without establishing a
physical store is known as Non-Store Retailing. It includes such services as vending
machines, direct-to-home selling, telemarketing, catalog sales, mail order, and television
marketing programs.

Introduction to Non – store retailing:

The fast growing method used by retailers to sell products is through methods that do not have
customers physically visiting a retail outlet. In fact, in many cases customers make their purchase
from within their own homes. A large majority about 80% of retail transactions are made in
stores. However, a growing volume of sales is taking place away from stores. It is estimated that
non-store sales account for almost 20% of total retail trade.

The ultimate form of retailing directly to the consumer is non store retailing, a direct relationship
with the consumer is the basis of any kind of non store retailing venture. It may be broadly
classified as direct selling and direct response marketing. While direct selling involves direct
personal contact, in direct response marketing, the customer becomes aware of the product
/services offered through a non personal medium like mail, catalogues, phone, television or the
internet.
Non store retailing is patronized to time conscious consumers and consumers who can spot easily
go to stores, or compulsive buyers. Most non-store retailers offer consumers the convenience of
buying 24 hours and seven days a week and delivery at location and time of their choice. Non-
store retailing now accounts for more than 15% of all consumer purchases, and it may account
for over 1/3 of all sales by the end of the 2015.
Types of Non Store Retail Format:
Following are the various types of non store retailing:
• Direct selling,
• Tele marketing,
• Online retailing,
 • Automatic vending,
• Direct marketing, and
• Electronics retailing.
I. Direct Selling:
Direct selling is also defined as personal contact between a sales person and a consumer away
from a retail store. This type of retailing has also been called in home selling. Annual volume of
direct selling in India is growing fast from the beginning of the 21st century.
Like other forms of non-store retailing, direct selling is utilized in most countries. It is
particularly widespread in Japan, which accounts for about 35% of the worldwide volume of
direct selling. The U.S. represents almost 30% of the total and all other countries the rest.

The two kinds of direct selling are

• Door to door: The marketing of products to ultimate consumers through face-to-face sales
presentations at home or in the workplace.
• Party plan: Party plans: Hosting groups to view a product demonstration and encouraging
participants to purchase the products. Example: Eureka Forbes

Benefits of direct selling

Personal attention to customer.
Convenience of time and place of presentation.
Limitations of direct selling
High costs make it the most expensive form of selling.
Negative consumer view of direct selling.
Direct Marketing:
There are no consumers on the exact nature of direct marketing. In effect, it comprises all types
of non-store retailing other than direct selling, telemarketing, automatic vending and online
retailing. In the context of retailing, it has been defined as direct marketing as using print or
broadcast advertising to contact consumers who in turn, buy products without visiting a retail
store.
Direct-response marketing
In direct-response marketing, marketers use broadcast media to get customers to contact them
directly.It is direct-response marketing because the communications from the customer to the
marketer are direct, this differentiates it from simple direct marketing in which the
communications from the marketer to the customer are direct, but do not allow for instant
feedback.
Mail Order or Catalogue Marketing.
Direct selling method in which merchandise from several vendors, or several items from the
same vendor, are presented to prospective buyers via mail or internet
Direct Mail.
Material distributed via the postal service to a recipient’s home or business to promote a
product/service.
Direct mail - the advantages
Targeting - for example using the post code, targeted campaigns can be developed using
geographical / demographical criteria.
Personalization - large numbers of personalized mailings can be undertaken regularly.
Response rates can be high.
Flexibility of creative scope
Can hold attention of reader/recipient.

Tel e-marketing

Telemarketing (known as telesales in the UK and Ireland) is a method of direct marketing in

which a salesperson solicits prospective customers to buy products or services, either over the
phone or through a subsequent face to face or Web conferencing appointment scheduled during
the call.

Telemarketing can also include recorded sales spitches programmed to be played

over the phone via automatic dialing. Telemarketing has come under fire in recent
years, being viewed as an annoyance by many.

Teleshopping.

In this form of direct marketing the product is advertised on television, details about the product
features, price and things like guarantee/warranty are explained.

Phone numbers are provided for each city, where the buyer can call in a place the order for the
product. The products are then home delivered.
Automatic Vending:

The sale of products through a machine with no personal contact between buyer and seller is
called automatic vending.

The appeal of automatic vending is convenient purchase. Products sold by automatic vending are
usually well-known presold brands with a high rate of turnover. The large majority of automatic
vending sales comes from the "4 C's”: cold drinks, coffee, candy and cigarettes.

Online Retailing:
When a firm uses its website to offer products for sale and then individuals or organizations use
their computers to make purchases from this company, the parties have engaged in electronic
transactions (also called on line selling or internet marketing).
Many electronic transactions involve two businesses which focus on sales by firms to ultimate
consumers. Thus online retailing is one which consists of electronic transactions in which the
purchaser is an ultimate consumer.
E-Retailing:
Internet Retailing or e-retailing as is usually referred to as covers retailing using a variety of
different technologies or media. It may be broadly be a combination of two elements. Combining
new technologies with elements of traditional stores and direct mail models using new
technologies to replace elements of stores or direct mail retails. Internet retail also has some
elements in common with direct mail retailing. For example, e-mail messages can replace mail
messages and the telephone, that are used in the direct mail model as means of providing
information, communication and transactions while on-line catalogues can replace printed
catalogues.

E-mail marketing.

E-mail marketing is a form of direct marketing which uses electronic mail as a means of
communicating commercial or fundraising messages to an audience. In its broadest sense, every
e-mail sent to a potential or current customer could be considered e-mail marketing.

Advantages of e-Mail Marketing:

 Cost Savings Quick Response Cycles Generates Revenues Popular Medium

Effective Medium Results are Measurable Builds Customer Relations

Airport retailing

In past, the leading airport retailers were fast food outlets, tiny gift stores, and
newspaper/magazine stands. Today airports are a major mecca of retailing. At virtually every
large airport, as well as at every medium ones, there are full-blown shopping areas.

Some global Non store Retail companies are:

• The Home Depot, Inc.

• Dollar Tree, Inc.

• Forever 21, Inc.

• The Bon-Ton Stores, Inc.

• Costco Wholesale Corporation

• J. Crew Group, Inc.

• Army and Air Force Exchange Service

• Bass Pro Shops, Inc.

• Amazon.com, Inc.

• AutoZone, Inc.

Advantages of Non Store Retailing:

• Its freedom from a physical retail presence.

• The high fixed costs of operating retail outlets are eliminated.

 • The breadth of customer coverage is considerably wider than store based retailing.

• Companies do not have to spend large sums or dilute stock building new
locations, or acquiring them.

• This truly gives the non-store retailer a global market from a cheap, centralized
location.

Disadvantages of Non Store Retailing:

• There is also the fear of credit card abuse and mail fraud, both related to the sense
of detachment that not holding a prospective purchase brings.

• since most of the customers do not have the luxury of a high speed Internet connection,
and still deal with painfully slow connections.

Challenges ahead:

Today the Indian retail is moving a head with greater expectations over potentiality it is subject
to certain challenges as far its growth is concerned they are.

1. Rural background: Mostly Indian customers are belong to rural background, and 70%
of population resides in rural area ,most of the rural people are poor and uneducated.thus
reaching out these econamic bottom of the pyramid is bottleneck to any non store based
retailer.

2. Un education: in india still most of the population are un educated,no doubt this will be
a challenge for non store retail industry because the of these customer cant use non strore
retail formot with require education and knowledge of technology to buy products from
these formats.

3. Poor infrastructure and network: Infrastructure facilities like transport, postal,

banking, and telecommunication facilities nare very essencial for the succsess of non store
based retailing, but here in India we are still in the stage of development and networks is also
very poor, so it is difficult to capture over all market reach through out the country.
4. Fear of technology hacking: Technology can used in both ways positivly and
negatively, the usage of technology is high in non store based retailing compared to store
based retailing.in online retailing,e-tailing and even in tele marketing also there is no
gaurantee for customer data confidentiality, there is every possibility also there hackers
may misuse credit card information, and data thefet is always a big challenge.these is
reason why customers are avioding certain non store retail formats.

5. Consumer psychology: The psychology of customer may differ from one person to
another person for this purpose customers are willing to purchase product from store
basis and mostly like to want personal demonstration about product.indian consumer is
value concioues and traditional and conventional in buying behaviour,he needs physical
demonstration of product and he always love to touch ,smell, taste and feel the product
atributes personally, so it is extremly difficult for non store retailer to sell high value or
high priced products to him.

Prospects:

1. Young India: more than 55 percent of Indian population is under the age group of below
30years. this age group people are educated and willing to use technology.

2. Double income family: As we know India is a developing country and adapting

corporate lifestyle. In one family more than two people earning income for them time is a
precious and constriant, so they are mostly willing to purchase from non-store retailers so
that they can save time and reduce cost.

3. Emerging middle class: in India the middle inceme segment is emerging with much
prosperity, to day common Indian consumer demanding speed and in time delivary at his
place, so this is right oppurtunity to non store retailers to expand their business into huge
middle income consumer segments.

4. Supply chain efficiency and cost reduction: The product may be priced high for the
sake of middle men profit. Such as wholesaler, retailer this cost can be avoided through
non store based retailing.
5. Globalization: With the invention of new technologies the world is becoming global
village. This is a great advantage to the buyer and seller because they can contact from
any corner of the world.being a non store retailer he can sell his product to any customar
in the world.

Conclusion: in the present technological era non store retailing is gaining mumentum in the
form of online retailing, telemarketing with advente of mobile phones and e- tailing etc.but at
the same time lot of things to be happened in this area to compite with store based
retailing.reaching out every corner and every customer still a challenge as there is poor
infrastrure and technolgy and networks.

The non store based retaling is comparativly less cost of operation as there is no maintanace
of physical retail space and emplyees to operate it, in this way it is benificial to both
customer and retailer in terms of cost and price.The non-store retailing with technological
advancement along with economic devalopment in India in the future may be certainly a best
business model in retailing.

References:

1) AJ LAMBA, THE ART OF REATIALING, TATA MC GRAW PUBLISHING,

NEW DELHI, 2008.
2) SWAPNA PRDHAN, RETAILING MANAGEMENT, TATA MC GRAW HILL
EDUCATION ,NEWDELHI, 2009.
3) BARRY BERMAN, JOEL R. EVANS, RETAIL MANAGEMENT, PEARSON
EDUCATION , NEW DEHI 2009
4) MICHAEL LEVY, BARTON AWEITZ. AJAY PADIT, “RETAILING
MANAGEMENT , THE TATA MC GRAW HILL, NEW DELHI 2009
5) TARUN K.S LAKSMI CHOPRA,”BEYOND THE RETAILHYPE, INDIAN
MANAGEMENT, VOL46, ISSUE01, BUSINESS STANRAD PUBLICATIONS
NEW DELHI.
6) MAHESHWARI AND SHUSHMUK, INDIAN RETAIL SECTOR
OPPERTUNITIES AND CHALLENGES, CHARTED FINANCIAL
ANALYSIST, FEB 2007.
7) IMAGES K.S.A TECHONOPACK, INDIA RETAIL REPORT 2005,
8) AT KEARNEY, THE RETAIL REPORT TIMES OF INDIA 2005.
9) K.P.M.G RETAIL REPORTS.

10) WWW. WIKIPEDIA.COM