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KOVILPATTI KOVILPATTI
ISSUES IN RETAIL SECTOR
Retail industry
Executive Summary
India is the fifth largest preferred retail destination globally. The country is among the
highest in the world in terms of per capita retail store availability. India’s retail sector is
experiencing exponential growth, with retail development taking place not just in major
cities and metros, but also in Tier-II and Tier-III cities. Healthy economic growth,
changing demographic profile, increasing disposable incomes, urbanisation, changing
consumer tastes and preferences are the other factors driving growth in the organised
retail market in India.
The Indian retail industry is one of the fastest growing in the world. Retail industry in
India is expected to grow to US$ 1,200 billion by 2021 from US$ 795 billion in 2017E.
India’s population is taking to online retail in a big way. Online retail sale is forecasted
to grow at the rate of 31 per cent to reach US$ 32.70 billion in 2018@. Revenue
generated from online retail is projected to grow to US$ 60 billion by 2020.Organised
retail penetration is expected to increase to 18 per cent in 2021 from an estimated nine
per cent in 2017.India is expected to become the world's third-largest consumer
economy, reaching US$ 400 billion in consumption by 2025. ^Increasing participation
from foreign and private players has given a boost to Indian retail industry. India’s price
competitiveness attracts large retail players to use it as a sourcing base. Global retailers
such as Walmart, GAP, Tesco and JC Penney are increasing their sourcing from India and
are moving from third-party buying offices to establishing their own wholly-
owned/wholly-managed sourcing and buying offices. The Government of India has
introduced reforms to attract Foreign Direct Investment (FDI) in retail industry. The
government has approved 51 per cent FDI in multi-brand retail and 100 per cent in
single brand retail under the automatic route which is expected to give a boost to ease
of doing business and Make in India, and plans to allow 100 per cent FDI in e-commerce.
India will become a favourable market for fashion retailers on the back of a large young
adult consumer base, increasing disposable incomes and relaxed FDI norms.
2018 left the industry with a lot to digest, a strong US economy, a record-breaking
holiday season, mixed retail earnings, some high-profile bankruptcies, along with global
trade and economic tensions.
To stay competitive, many retailers have shifted their investment strategies over the
past 10-20 years. They have moved from growth via new stores to growth via big
investments in all areas of the business
Retailers should look beyond tiered programs built around traditional loyalty and
benefits—points, dollars off, gifts, mailers—that at best elicit “transactional”
loyalty. In an industry shifting toward experience-based models, retailers should
look to make emotional connections, not just transactional ones.
With a genuine approach to driving consumer loyalty, retailers can optimize loyalty
programs and make them even more valuable. Aligning the program with the
values and the consumer conversation is imperative. Recently, loyalty programs
have been expanding to focus on convenience (with home delivery or issue
resolution) and experience (with exclusive events and limited-edition products).
Digital startups are no longer playing in the shadow.They are addressing chronic
issues faced by the retail industry through innovative offerings , personalization ,
authentic engagement,differentiated fulfilment,and more.And the amount of capital
flowing to retail tech startups is allowing these companies to realistically compete
with established players .
To help offset the early gains made by these startups, traditional retailers will have
to push ahead, blurring the lines between business development and corporate
strategy. To acquire the next big idea, they might have to seek out guidance from
specialists or through a scouting approach.
3. Emerging technologies
Gone are the days when IT strategy was limited to architecture,modernization,and
enterprise resource planning(ERP) systems,Investment ,options,technologies ,and
vendors number in the thousands,making it challenging to navigate and hone in on
the next big thing .
Ultimately, retailers should figure out how to scale these solutions and embed them
into their way of doing business. To leverage the true power of next-generation
technologies, retailers should make some significant changes. They should be able
to consistently mine the data they collect, transform their operations to deliver on
the brand promise, and adapt to the future of work.
4. Leadership lessons from China
To build a competitive advantage ,retailers should consider looking at global cross-
industry trends and build capabilities that can shape consumer experiances.
For example
Retailers should be looking at the leaders in China to better understand the art of
the possible in emergent areas such as online-to-offline, last-mile delivery, supply
chain as a service, social commerce, and the implications of advanced public and
private infrastructure.
5. Privacy by design
For retailers, consumer data is a must-have. For years, the industry struggled with
how to create and use data. Now companies are on the hook for what data they
have and what it says about individuals.
With regulation after regulation hitting the market, it’s time retailers had their
privacy compliance road maps in place. But compliance can also be a catalyst for
reinventing personalization and having honest conversations with consumers.
Integrity matters in creating loyalty, especially when it comes to dealing with
personal identity.
The supply chain is quickly becoming a way for retailers to offer consumers a
differentiated service. But making the supply chain faster, more predictable, and
cheaper is a difficult triad to manage simultaneously.
As retailers buckle down and prepare for potentially challenging times ahead,
supply chain improvements can be a significant growth driver. But rather than just
investing in trends like automation smart packaging in reaction to competitors,
retailers should think about accumulating long-term competitive advantages
through wider supply chain strategies.
Retail Industry Problems
Top Ten reasons for failure, and what you can do to avoid them so that it will help you
to keep your business on the way to success.
1.Neglect
2. Disasters
Natural and man-made disasters often deal death-blows to companies, such as floods or
fires. While it’s difficult to avoid such disasters, company management can ensure the
business carries adequate disaster insurance and a plan is in place for emergency
scenarios.
3. Access to Capital
In business, finances are an often a paradox, it takes money to make money. While some
companies are able to start-up with little capital, they often reach a point where they
need additional financing to continue operations. Without those funds available, they
are unable to meet their day-to-day expenses. Securing access to capital before the
company needs it is often the difference between success and insolvency.
4. Overhead
High overhead costs (and failure to keep expenditures lean) can have a detrimental
effect to a new or struggling wholesale business. Some common overhead costs
include: Rent, supplies and goods, utilities bills, insurance, interest, Advertising,
Accounting fees, Legal fees, Labour burden, repairs, telephone bills, Travel
expenditures, and utilities.
5. Poor Sales
Sales, of course, are the lifeline of any business and without it, the business soon
struggles. Some causes of poor sales, such as disasters are out of the hands of company
leadership. However, many reasons for poor sales can be directly traced to
management. For instance, if changes in customer preferences and the market in
general are ignored, sales will suffer. While there is no way to guarantee sales,
managers can be proactive and responsive to sales trends.
6. Management/Leadership Problems
Of the 10 reasons listed here, this reason is the only one that is completely in the hands
of the company’s owner(s). While many people are great entrepreneurs, able to start a
company from just an idea, these same people sometimes aren’t ready for the
management issues they face as the company matures. Without prior experience or
simply because of incompetence, many wholesale retail store owners are the very
reason their company eventually fails. Of course, with more experience and the ability
to spot and address problems before they get out of hand, business owners are more
likely to avoid these challenges.
7. Economic Factors
The economy is cyclical, which means it periodically goes through low times.
Wholesalers who are unprepared for those times of economic recession are often
caught off-guard financially. While the economy isn’t something an individual company
can change, business owners can prepare for those difficult times through scenario
training and financial planning.
8. Overexpansion
Overexpansion is similar to the issue of excessive overhead. While it may make sense in
moderation, too much too quickly can often bankrupt a business. Supply problems,
logistic challenges, staffing issues, and financing concerns are potential obstacles in
expanding. Without adequate preparation and strategy, the attempt to capture more of
the market can quickly turn into a matter of survival.
9. Customer Problems
Customer problems can range from your primary buyer being unhappy with your
products (customer service issues). Preventive planning is the key. Maintaining clear
lines of communication, reviewing customer profiles, and being quick to address
customer concerns are all excellent ways to keep a minor problem from turning into a
major disaster.
10. Fraud
The important idea within this top 10 list is that all these reasons for a wholesale
retail store’s failure can be avoided. With adequate preparedness, as well as balancing
the short-term challenges against the long-term needs of the company, you can
successfully navigate these obstacles and achieve the full potential of your own
wholesale company.
Top trends and issues for retail in 2019
From labor to brand, here are the issues to watch in retail
Retailers will face challenges and opportunities while they address a highly
competitive market as labour continues to tighten, and consumer buying
behaviours and expectations continue to evolve. Successful retailers will need to focus
on a variety of tensions pressuring the industry and their businesses.
Labour
Real estate
Regulatory environment
The regulatory environment will continue to challenge retailers in 2019 and beyond. As
online sales growth continues to overtake on premise sales, the implications of
the Wayfair court case will felt by more and more retail organizations. Retailers who
can manage their supply chain and operations to minimize the impact of the tariffs on
their customers will be most successful. New and creative sourcing strategies will
emerge and flexibility will ultimately prevail over time. Meanwhile, increased cost will
significantly affect unit sales of affected products and will also have an indirect impact
on other products as consumers are forced to make decisions about how to spend their
limited funds.
Buying behaviours will continue to evolve as Generation Z becomes a larger part of the
consumer base. As the first truly digital generation, Gen Z will push retailers to new
digital platforms to connect with them. YouTube, Instagram and Snapchat accessed by
mobile are platforms of choice for Gen Z and they are the most likely group of
consumers to purchase on social media, making these platforms very important and
introducing a new dimension of Omni channel for many retailers. That said, brick-and-
mortar locations will continue to be an important channel for retail. Despite the growth
in online purchasing, recent studies suggest that millennials and Gen Z consumers also
enjoy the physical shopping experience. Enhancing that physical shopping experience
will be critically important. Creative and interactive technologies will continue to play
an important role in developing unique in-store experiences and knowledgeable staff
who embrace and promote the brand will help build connectivity and promote brand
loyalty.
Access to capital
Conclusion
Hence the retail sector is globally emerged for the consumer to purchase. The buying
behaviour or the retailers to evolve the challenges of retail issues will resolve
automatically by facing retail industry factors .The retailer can expect to create buyer
experiences which can conflict the inconsistent nature of the modern consumer.To get
the balance right, the retailers can foster brand loyalty in an increasingly disloyal world.