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RETAILING
3. Retail marketing
4. Retailing in India
7. Bibliography
RETAILING – THE SUNRISE INDUSTRY
Introduction
India has some 12 million retail outlets, but many of these act merely as subsistence
providers for their owners and survive on a cost structure where labor and land is
assumed to be free and taxes nil. Compare this with the global retail industry, which is
one of the world’s largest organized employers, is at the cutting edge of technology,
and which leverages scale and scope to offer value-added services to its customers.
However, only recently has there been an awakening in this sector, with more
organized retailers starting to make an impact. The liberalization of the consumer
goods industry, initiated in the mid-80s and accelerated through the 90s has begun to
impact the structure and conduct of the retail industry. Backed by changing consumer
trends and metrics, liberalization in mindsets driven by media, new opportunities and
increasing wealth, retailing in India, presents a vast opportunity for a variety of
businesses - real estate, store design & operations, visual merchandising logistics and
communications, B2C service providers, and FMCG companies who can add to their
offers by partnering this revolution.
The Indian Retailing Industry stands poised to take off into the 21st century. It is one
of the fastest growing sectors in the nation that caters to the world's second largest
consumer market. Retail boom is unabating. India has five million retailers with a
business volume of $180 million growing at 5 to 7 per cent a year. The middle class
drives retailing anywhere in the world and this segment should have reasonable
income. The next driver is availability of variety of goods, products and brands. The
third one is “sense of awareness”.
Retailing consists of the sale of goods or merchandise from a very fixed location, such
as a department store, boutique or kiosk, or by mail, in small or individual lots for
direct consumption by the purchaser.[1] Retailing may include subordinated services,
such as delivery. Purchasers may be individuals or businesses. In commerce, a
"retailer" buys goods or products in large quantities from manufacturers or importers,
either directly or through a wholesaler, and then sells smaller quantities to the end-
user. 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.
Shopping generally refers to the act of buying products. Sometimes this is done to
obtain necessities such as food and clothing; sometimes it is done as a recreational
activity. Recreational shopping often involves window shopping (just looking, not
buying) and browsing and does not always result in a purchase
Etymology
Retail comes from the French word retailler, which refers to "cutting off, clip and
divide" in terms of tailoring (1365). It first was recorded as a noun with the meaning
of a "sale in small quantities" in 1433 (French). Its literal meaning for retail was to
"cut off, shred, paring".[2] Like the French, the word retail in both Dutch and German
(detailhandel and Einzelhandel respectively), also refers to the sale of small quantities
of items.
Merchandising (merchandizing)
Retail pricing
The pricing technique used by most retailers is cost-plus pricing. This involves adding
a markup amount (or percentage) to the retailer's cost. Another common technique is
suggested retail pricing. This simply involves charging the amount suggested by the
manufacturer and usually printed on the product by the manufacturer.
In Western countries, retail prices are often called psychological prices or odd prices.
Often prices are fixed and displayed on signs or labels. Alternatively, when prices are
not clearly displayed, there can be price discrimination, where the sale price is
dependent upon who the customer is. For example, a customer may have to pay more
if the seller determines that he or she is willing and/or able to. Another example
would be the practice of discounting for youths or students
Transfer mechanism
There are several ways in which consumers can receive goods from a retailer:
• Counter service, where goods are out of reach of buyers and must be obtained
from the seller. This type of retail is common for small expensive items (e.g.
jewelry) and controlled items like medicine and liquor. It was common before
the 1900s in the United States and is more common in certain countries.[which?]
• Delivery (commerce), where goods are shipped directly to consumer's homes
or workplaces. Mail order from a printed catalog was invented in 1744 and
was common in the late 1800s and early 1900s. Ordering by telephone is now
common, either from a catalog, newspaper, television advertisement or a local
restaurant menu, for immediate service (especially for pizza delivery). Direct
marketing, including telemarketing and television shopping channels, are also
used to generate telephone orders. Online shopping started gaining significant
market share in developed countries in the 2000s.
• Door-to-door sales, where the salesperson sometimes travels with the goods
for sale.
• Self-service, where goods may be handled and examined prior to purchase,
has become more common since the 1920s..
Some shops sell second-hand goods. In the case of a nonprofit shop, the public
donates goods to the shop to be sold. In give-away shops goods can be taken for free.
Another form is the pawnshop, in which goods are sold that were used as collateral
for loans. There are also "consignment" shops, which are where a person can place an
item in a store and if it sells, the person gives the shop owner a percentage of the sale
price. The advantage of selling an item this way is that the established shop gives the
item exposure to more potential buyers.
Discount stores
Discount stores offer a wide range of products, although they mainly offer value
goods, such as housewares, clothes, kitchen-wares, gifts and healthcare products.
These are sold at reduced prices, because many of them are either brand name or
clearance products
Sales techniques
Behind the scenes at retail, there is another factor at work. Corporations and
independent store owners alike are always trying to get the edge on their competitors.
One way to do this is to hire a merchandising solutions company to design custom
store displays that will attract more customers in a certain demographic. The nation's
largest retailers spend millions every year on in-store marketing programs that
correspond to seasonal and promotional changes. As products change, so will a retail
landscape. Retailers can also use facing techniques to create the look of a perfectly-
stocked store, even when it is not.
A destination store is one that customers will initiate a trip specifically to visit,
sometimes over a large area. These stores are often used to "anchor" a shopping mall
or plaza, generating foot traffic, which is capitalized upon by smaller retailers.
Customer service
Retail Sales
The Retail Sales report is published every month. It's a measure of the consumer
spending, an important indicator of the US GDP. Retail firms provide data on dollar
value of their retail sales and inventories. 12000 firms in the final survey and 5000 in
the advanced one. The advanced estimated data is based on a sub sample from the US
CB complete retail & food services sample.
In the last 10 years, all Southeast Asian countries like Indonesia, Malaysia, Taiwan
and Korea have gone through similar phases. China, with a per capita income of
$650-700 per annum, is going through the same phase what India is also facing now.
Europe went through this phase of retail revolution about 40-50 years ago. It is
believed that when a country’s per capita income reaches the level of $1,200 per
annum, organized retailing begins to takeover. Though India has a per capital income
of $ 400, on the basis of purchasing power parity (PPP) it has already hit the $1200
level. This does strengthen the belief that probably, the right time for organized
retailing to click in India has come.
Retail, with total sales of $ 6.6 trillion, is the world’s largest private industry ahead of
financial industries $ 5.1 trillion. It is also home to a number of the world’s largest
enterprises. Over 50 of the Fortune 500 companies, and around 25 of the Asian top
500 companies, are retailers. The industry accounts for over 8 percent of the GDP in
western economies.
A Study by Mc Kinsey states that organized retail accounts for just around 2 percent
(out of which modern retail formats account for 7 percent of trade) presently is set to
grow at exponential exceeding 35 percent. Fitch estimates the current share of
organized retail to grow from 2percent presently to around 15 to 20 percent by 2010.
Table 1:
Grocery, electronics are examples of categories that compete on the strength of better
pricing, which in turn is driven by superior sourcing and merchandising and cost-
efficient operations. Wal-Mart, Home Depot and Kingfisher are benchmark retailers
in these fields.
In apparel, home furnishings and furniture, the advantage is driven by the marketers’
ability to provide better products in a comfortable ambience at affordable prices. In
these cases sourcing capability has to be backed by strong design capability and store
management. IKEA and GAP are good examples of this model of retailing.
Over the last few decades, retail formats have changed radically. The basic
department stores and co-operatives of the early 20th Century have given way to mass
merchandisers, hypermarkets, warehouse clubs, category killers, discounters and
convenience stores. Each of these formats has been driven by marketer’s need to offer
relevant, distinctive and economic propositions to an evolving consumer base.
Global retailers have also reached a position of strength that enables their brand to be
leveraged across a wide range of services. Many of them have expanded their
offering, over the years to include fuel retail, car retail, convenience services and
personal financial services. This has put them in a position where they are not only
beginning to capture growth from geographical expansion, but are also entering large
new areas of business.
The recent evolution of the Internet has helped further broaden the scope of
operations of large retailers. Further, a large number of retailers are pursuing
innovative aggregation and supply chain-streamlining initiatives using B2B
technology.
By 2010, the list of India's top 10 retailers will have at least 5 Indian corporate. Retail
Marketing will go through a tremendous change in India this millennium. It will
change India's cities, its people, and its households. The Indian consumer is reportedly
the largest spender in Singapore and London. It is, therefore, strange that there have,
so far, been few efforts to present the product in the right kind of environment in
India. Indeed, the right shopping experience does induce Indian consumers to spend
more. This is evident from the experiences of retail-outlets like Shoppers' Stop, Music
World, Food World, Crosswords, The Home Store, Ebony, Bigjo’s, Saboos, Standard,
Vijay Store and Janaki Das & Sons, Westside etc.
The laws governing retail real estate should also be looked into, so that it is possible
to develop retail-estate beyond the city-limits.
Apart from providing entertainment and retail opportunities, this will also decongest
the city center and facilitate the development of suburbs. The relevant rules should
also be amended to allow retail-stores to operate 7 days a week, 12 hours a day. Given
the hours most urban consumers keep at work, and keeping in mind the increase in the
number of nuclear families, this may, indeed, make sense. This will also help people
enjoy their evenings, out at malls.
Another area of concern is the way in which developers sell their space. The only
consideration is the price, not the usage pattern or the nature of the product that is to
be sold. In contrast, internationally, mall-management is treated as a specialized
discipline of retail management. This is what we have to focus on in this millennium.
The third constituency that has a role to play in the fortunes of organized retail this
century is the education-sector. Retail is a people-intensive business, and there is a
huge opportunity for retail institutes in India.
A glimpse of the last 2 decades of the previous century proves illuminating. Large-
format retailing started with outlets like Vivek's and Nalli's in Chennai and Kidskemp
in Bangalore, and, at another level, with manufacturer-retail brands like Bata,
Bombay Dyeing, and Titan. The last decade of the millennium witnessed the
emergence of lifestyle brands and the plastic culture. Liberalization and increasing
awareness of the world around us created the Indian yuppie, who aspired to own
everything we saw on TV, or in shops during jaunts abroad. New lifestyle brands
offered traditional retail-outlets an opportunity to convert themselves into exclusive
stores, franchised or otherwise. And even as these developments were taking place,
the Indian consumer became more mature. Customer-expectations zoomed
Thus, at the beginning of the New Millennium, retailers have to deal with a customer
who is extremely demanding. Not just in terms of the product-quality, but also in
terms of service, and the entire shopping experience. Today, the typical customer who
shops in a retail outlet compares the time spent at the check-out counter with that at an
efficient petrol station, and the smile of the counter-person to that decorating the face
of a Jet Airways' crew member. To cope with the new customer, manufacturers have
to focus on product quality and brand building. And retailers, in turn, have to focus on
the quality of the shopping experience.
Studies by consulting firms like A.T. Kearney, KSA Technopak, and McKinsey &
Co. in India have indicated a huge potential for retailing in the country. Drawn by the
magic number of Rs 1, 60, 000 crore that is expected to be the size of the retail
industry by the end of the first decade of this millennium, several companies from the
organized sector have also jumped into the fray.
In this millennium, like in the last, customers will want to spend time with their
family and friends. They may like to visit malls on weekends where everything will
be available under one roof. India will benefit from these developments because of
increased consumption through retailing and the corresponding increase in
employment created by retailing.
Retail Marketing
Retail Marketing includes all the activities involved in selling goods or services
directly to final consumes for personal, non-business use. Any organization
selling to final consumers -- whether a manufacturer, wholesaler, or retailer – is
doing retailing. It does not matter how the goods or services are sold (by Person,
Mail, Telephone, Vending Machine, or Internet) or where they are sold (in a store,
on the street, or in the consumer’s home).
There are many approaches to understanding and defining retail marketing; most
emphasize retail marketing as the business activity of selling goods or services to
the final consumer, but what we emphasized upon is defined as follows:
“Any business that directs its marketing efforts towards satisfying the final
consumer based upon the organization of selling goods and services as a means of
distribution”
The concept assumed within this definition is quite important. The final consumer
within the distribution chain is a key concept here as retailers are at the end of the
chain and are involved in a direct interface with the consumer.
A retailer or retail store is any business enterprise, whose sales volume comes
primarily from retailing. Retail organizations exhibit great variety and new forms
keep emerging. There are store retailers, non-store retailers, and retail organizations.
Consumers today can shop for goods and services in a wide variety of stores. The
best-known type of retailer is the department store. Japanese department stores such
as Takashimaya and Mitsukoshi attract millions of shoppers each year. These stores
feature art galleries, cooking classes, and children’s playgrounds.
A retailer is at the end of the distributive channel. He provides goods and service to
the ultimate consumers. This he does through his small organization, with the help of
a few personnel. In an individual retail store there is not much scope for organization
except in the sense that the shopkeeper has to organize and apportion his time and
resources. The need for organization becomes essential as soon as he hires people and
enters into partnership or takes the help of members of his family in running his store.
A retailer deals in an assortment of goods to cater to the needs of consumers. His
objective is to make maximum profit out of his enterprise. With that end in view he
has to pursue a policy to achieve his objective. This policy is called retailing mix. A
retailing mix is the package of goods and services that store offers to the customers
for sale. It is the combination of all efforts planned by the retailer and embodies the
adjustment of the retail store to the market environment. Retailing mix, a
communication mix and a distribution mix. The maximum satisfaction to the
customers is achieved by a proper blend of all three.
The success of the retail stores, therefore, depends on customers’ reaction to the
retailing mix which influences the profits of the store, its volume of turnover, its share
of the market, its image and status and finally its survival.
There are three main phases in the life of a retailing institution. These are: -
Ø Innovation (Entry)
Ø Trading Up
Ø Vulnerability.
In the entry stage, a new retailer enters with new price appeal, limiting product
offerings, Sparton Stores & Limited services. Its monopoly power over the others is
its price advantage, which means that it offers products at low prices so as to get a
competitive edge over its competitors.
In the trading up stage, the retailer starts expanding. It expands in terms of product
offering, better services, and improved interiors. With all these, it starts charging a bit
higher prices.
In the vulnerability stage, there is a gap in the market leaving some space for the new
players to come in. this is due to increase in the prices by the retailer.
I have already explained the three stages in life of a retail institution.
Normally these stages are there in the life of a retail institution. But all these
may not be necessarily there in every retail institution. For instance, any
retail institution targeting the upper class may start itself with a large variety
& high price.
This brings to broadly identify and categorize the types of retail marketing, which are
defined as follows:
1. Store Retailing
Store Retailing
Store retailing provides consumers to shop for goods and services in a wide variety of
stores and it also help the Consumers to get all the needed goods and services from
one shop only. The different types of store retailing are given below:
Specialty Stores
These stores focus on leisure tastes of different individuals. They have a narrow
product line with deep assortment such as apparel stores, sporting goods stores,
furniture stores, florists and bookstores. These stores are usually expensive and satisfy
the needs of selected consumers who have liking or preference for exclusive things.
Departmental Store
These stores are usually built in large area and keep variety of goods under one shed.
It is usually divided into different sections like clothing, kids section, home
furnishings, electronic appliances and other household goods. In a departmental store
a consumer can buy variety of goods under one shed.
Supermarket
These stores are relatively large, low cost, low margin, high volume, self service
operations designed to serve total needs for food, laundry and household maintenance
products. Supermarkets earn an operating profit of only 1 percent on sales and
10percent on net worth.
Convenience Stores
These are relatively small stores located near residential area, open for long hours
seven days a week, and carrying a limited line of high turnover convenience products
at slightly higher prices than departmental stores. Many such stores also have added
takeout sandwiches, coffee and pastries.
These stores sell goods at low price with lower margins & higher volumes. These
stores sell goods with deteriorated quality. The defects are normally minor. This target
at the persons belonging to the lower income group, though some have a collection of
imported goods aimed to target the younger generation. The company owned
showroom selling the seconds products is a typical example of off - price retailer.
Discount Store
In recent years, many discount retailers have “traded up”. They have
improved decor, added new lines and services, and opened suburban
branches—all of which has led to higher costs and prices and as some
department stores have cut their prices to compete with discounters.
Not only that, discount stores have moved beyond general merchandise into
specialty merchandise stores, such as discount sporting goods stores,
electronics stores, and bookstores.
Catalog Showroom
India has some sometimes been called a nation of shopkeepers. This epithet
has its roots in the huge number of retail enterprises in the country totaling
12 million, about 78 percent of these are small family owned businesses
utilizing only household labour. even among retail enterprises that hire
workers the bulk of them hire less than 3 workers .India’s retail sector
appears backwards not only by standards of industrialized countries but also
in comparison to several other emerging markets in Asia and elsewhere.
There are only 14 companies that run departmental stores and mere two with
hypermarket operations. While the number of businesses operating
supermarkets is higher ( 425 in 2004 ) most of these had only 1 outlet, the
number of companies with supermarket chains was less than 10.
Major formats of In-Store Retailing have been listed in Table given below:
Table 3:
Non-store Retailing
Direct Selling
Direct selling which started centuries ago with itinerant peddlers has
burgeoned into a $9 billion industry, with over 600 companies selling door
to door, office to office, or at home sales parties. A variant of direct selling
is called multilevel marketing, whereby companies such as Amway recruit
independent businesspeople who act as distributors for their products, who
in turn recruit and sell to sub distributors, who eventually recruit others to
sell their products, usually in customer homes.
Direct Marketing
Direct marketing has its roots in mail-order marketing but today includes
reaching people in other ways than visiting their homes or offices, including
telemarketing, television direct response marketing, and electronic
shopping.
Automatic Vending
Each of the retail stars has identified and settled into a feasible and sustainable
business model of its own.
• Westside - Emulated the Marks & Spencer model of 100 per cent
private label, very good value for money merchandise for the entire
family
• A franchise system
• Consumer Co-operatives
A new entrant in the retail environment is the 'discounter' format. It is also is known
as cash and-carry or hypermarket. These formats usually work on bulk buying and
bulk selling. Shopping experience in terms of ambience or the service is not the
mainstay here. RPG group has set up the first 'discounter' in Hyderabad called the
Giant. Now Pantaloon is following suit.
1. The small retailer. For example, a customer of Giant could be a dhabawala who
needs to buy edible oil in bulk.
2. The regular consumer who spends on big volumes (large pack sizes) because of a
price advantage per unit.
Retailing in India is still evolving and the sector is witnessing a series of experiments
across the country with new formats being tested out; the old ones tweaked around or
just discarded. Some of these are listed in Table below.
Table 4:
Retailers are also trying out smaller versions of their stores in an attempt to reach a
maximum number of consumers. Crossword bookstores are experimenting with
Crossword Corner, to increase reach and business from their stores. FoodWorld is
experimenting with a format of one-fourth the normal size called FoodWorld Express.
At this point, I can summarize the main development retailers and manufacturers need
to take into account as they plan their competitive strategies.
In India the trends are mainly in three sectors. These sectors are:
Even old retail forms are reappearing: In 1992 Shawna and Randy Heniger
introduced peddler’s carts in the Mall of America. Today three-fourths of
the nation’s major malls have carts selling everything from casual wear to
condoms. Successful carts average $ 30,000 to $ 40,000 a month in sales
and can easily top $ 70,000 in December. With an average start-up cost of
only $3,000, push carts help budding entrepreneurs test their retailing
dreams without a major cash investment. They provide a way for malls to
bring in more mom-and-pop retailers, showcase seasonal merchandise, and
prospect for permanent tenants.
2. New retail forms are facing a shorter life span. They are rapidly copied
and quickly lose their novelty.
3. The electronic age has significantly increased the growth of non store
retailing, consumers receive sales offers in the mail and over television,
computers, and telephones, to which they can immediately respond by
calling a toll-free number or via computer.
5. Today’s retailers are moving toward one of two poles, operating either as
mass merchandisers or as specialty retailers. Superpower retailers are
emerging. Through their superior information systems and buying power,
these giant retailers are able to offer strong price savings. These retailers are
using sophisticated marketing information and logistical systems to deliver
good service and immense volumes of product at appealing prices to masses
of consumers. In the process, they are crowding out smaller manufacturers,
who become dependent on one large retailer and are therefore extremely
vulnerable, and smaller retailers, who simply do not have the budget of the
buying power to compete. Many retailers are even telling the most powerful
manufacturers what to make; how to price and promote; when and how to
ship; and even how to reorganize and improve production and management.
Manufacturers have little choice: They stand to lose 10 to 30 percent of the
market if they refuse.
9. There has been a marked rise in establishments that provide a place for
people to congregate, such as coffeehouses, tea shops, juice bars,
bookshops, and brew pubs. Denver’s two Tattered Covered bookstores host
more than 250 events annually, from folk dancing to women’s meetings.
Brew pubs such as New York’s Zip City Brewing and Seattle’s Trolley man
Pub offer tasting and a place to pass the time. The Discovery Zone, a chain
of children’s play spaces, offers indoor spaces where kids can go wild
without breaking anything and stressed-out parents can exchange stories.
There are also the now-ubiquitous coffeehouses and espresso bars, such as
Starbucks, whose numbers have grown from 2,500 in 1989 to a forecasted
13,000 by 2001. And Barnes & Noble turned a once-staid bookstore
industry into a fun-filled village green.
Retail marketing is the most important part of the entire logistics chain in a business
especially in consumer related products. Without proper retailing the companies can't
do their business. Retailing is the process of selling goods in small quantities to the
public and is not meant for resale. Retail is derived from the French word retailer,
meaning to cut a piece off or to break bulk.
These three are among the most common ways of making the goods available to
consumers. But in India the three layered system of distributor, wholesaler and
retailer, forms the backbone of the front-end logistics of most of the consumer-good
companies.
In this system the company operating on all India basis appoints hundreds
of distributors across the country that supplies to various retailers and
wholesalers. Wholesalers in turn can either directly sell in the market or
can supply to retailers. The current retailing system prevalent across the
country is highly fragmented and unorganized. Anyone with some money
and some real estate can open a small shop and become a retailer catering
to the locality in which he opens the shop.
There are a number of reasons behind this fragmented retail market. Some of the
major reasons being:
Ø High taxes.
Ø No exposure to media.
Besides this there is other reasons too, which led to stifling of growth of
organized segment of retailing sector and which instead led to highly
fragmented market.
Today in India we have more than 12 million retail outlets and most of then
are family run and locally owned. There are very few nationally present
retail stores. In India the process of buying and selling at these unorganized
retail outlets, is highly characterized by bargaining and negotiations. But
slowly with increasing influence of media and urbanization the market is
shifting towards organized segment. Seeing the huge market size of retail
business in the country and the current level of organized segment, many
players have jumped into the fray and many are waiting for the right
opportunity to enter it.
These factors were the key drivers for the retail wave in the country. Notable among
the early entrants were players like Shoppers Stop, Pantaloon, Ebony, Foodworld,
Subhiksha, etc. Initially, the growth in organized retail was very slow and
concentrated mainly in metros, with south India holding its ground as the pioneer in
organized retail growth, on account of the low cost of real estate. Due to the high
investments required in the early stages and the fact that real estate was the key
deciding factor for success of stores, real estate developers have been the major
players in the industry (see Table).
Table 5:
Sponsors
In the early 1990s, as the players were lower down on the learning curve many
faltered in their models, and growth of the industry remained slow. The second half of
1990s saw several players making losses and exiting from the business. The worst
years for the industry were 2000 and 2001, as the stock market downturn, which
reduced customer confidence and spending, had a direct impact on the performance of
the industry. The industry recovered starting 2002. It now appears the efforts and
learning’s of the players in the last decade are beginning to pay off; the organized
retail industry has established firm roots and is beginning to grow.
credit.
Pantaloon Retail (India) Limited is India's leading retailer that operates multiple retail
formats in both the value and lifestyle segment. Pantaloon has ushered a retail
revolution in India and its founder Kishore Biyani is known as India's "King of
Retail". Pantaloon's headquarter is in Mumbai. The company currently operates over
5 million square feet of retail space and has plans to increase it to 30 million sq. ft by
2011. Pantaloon has plans to open over 3000 new stores by 2010.
Pantaloon's origin can be traced to 1987 when the company was incorporated as Manz
Wear Private Limited. The company launched Pantaloons trouser, India's first formal
trouser brand. In 1992, Pantaloon launched its IPO. In 1994, The Pantaloon Shoppe -
exclusive menswear store in franchisee format was launched across the country.
Pantaloon started distribution of distribution of branded garments through multi-brand
retail outlets across the nation. In 2001, Big Bazaar, India's first hypermarket chain
was launched. In 2002, Food Bazaar, the supermarket chain was launched. In 2006,
Future Capital Holdings, the company's financial arm launched real estate funds,
"Kshitij" and "Horizon" and private equity fund "Indivision". The company is also
planning forays into insurance and consumer.
Pantaloon Retail is the flagship company of Future Group. The lines of business of
Future Group are:
E-commerce:
Pantaloon's website Futurebazaar.com has revolutionized the e-commerce business in
India. It offers a wide range of products at affordable prices. It has been named as
Best Indian Website 2007 in the Shopping category by PC World.
Food:
In food business, the group offers a host of options. Food Bazaar - a chain of large
supermarkets; Brew Bar - a beer bar; café Bollywood - a national chain of eateries;
Chamosa - a pan-Indian chain of snack counters, and Sports Bar - a bistro focused on
the world of sports.
Fashion:
The group offers a variety of options in fashion. Its brands include aLL, Blue Sky,
Central, Etam, Fashion Station, Gini & Jony, Navaras, Pantaloons, and Top 10.
The spread of super stores to the northern cities such as Delhi, Chandigarh, Jaipur and
Kolkata is evidence of the fact that organized retailing in India has emerged from its
southern bastion.
On the supply side, the current inefficient supply chain in India, particularly for food
items has led a few players to consolidate their operations to take advantage of
economies of scale and match consumer expectations in terms of delivery as well as
space. So, we have a situation where both demand and supply side dynamics are
fuelling the growth of organized retailing in India, although improvements in the
supply chain are yet to fully match with consumer expectations.
Challenges
To become a truly flourishing industry, retailing needs to cross the following hurdles:[
In organized retailing will grow faster than unorganized sector and the growth speed
will be responsible for its high market share, which is expected to be $ 17 billion by
2010-11.
Retailing will show good prospects in cities like Mumbai, Delhi, Chennai, kolkata,
Bangalore and Kanpur. After Dubai, Singapore and Hong Kong, In India Delhi will
be the next big retail destination, According to Confederation of Indian industries
whose findings have shown that Delhi has the good resources and good conditions for
the retail sector. Out of the total earnings of the Government of Delhi Rs 11,000 crore,
Rs 6,500 crore is achieved from the retail sector.
- Share of Organized Retail
* The first challenge facing the organized retail sector is the competition from
unorganized sector.
* In retail sector, Automatic approval is not allowed for foreign investment.
* Taxation, which favors small retail businesses.
* Developed supply chain and integrated IT management is absent in retail sector.
* Lack of trained work force.
* Low skill level for retailing management.
* Intrinsic complexity of retailing- rapid price changes, threat of product obsolescence
and low margins.
* Organized retail sector has to pay huge taxes, which is negligible for small retail
business.
Retailing involves all activities incidental to selling to ultimate consumer for their
personnel family and household use. It does this by organizing their availability on a
relatively large scale and supplying them to customers on a relatively small scale.
Retailer is any person/organization instrumental in reaching the goods or merchandise
ore services to the end users. Retailer is a must and cannot be eliminated.
The Indian retailing industry is becoming intensely competitive, as more and more
payers are Vying for the same set of customers. The major retail players are Pantaloon
Retail, Shoppers Stop, Reliance, etc..,
Retailing is one of the biggest sectors and it is witnessing revolution in India. The new
entrant in retailing in India signifies the beginning of retail revolution. India's retail
market is expected to grow tremendously in next few years. According to AT
Kearney, The Windows of Opportunity shows that Retailing in India was at opening
stage in 1995 and now it is in peaking stage in 2006. India's retail market is expected
to grow tremendously in next few years. India shows US$330 billion retail market
that is expected to grow 10% a year, with modern retailing just beginning. India ranks
first in 2005. In fact, in 2005 and 2006, India is the most compelling opportunity for
retailers, because now India is in peaking stage.
What does this mean for your business? While you can implement and pursue staff
retention programs – and it makes good sense to do so – you're going to have new
employees coming through your doors on a regular basis. Getting them trained on
your systems rapidly and cost-effectively is critical so that they can become
productive members of your team as soon as possible.
Columbus IT has you covered.
First, our retail systems, led by our flagship product Retail Chain manager, are easy
to learn, easy to use, and easy to train others on.
Second, we train as we go. While we're developing and implementing your retail
solution, we'll be training your staff at the same. As soon as your retail solution is
finished, they're ready to use it – no downtime.
Third, we can integrate with your existing third-party systems – such as a POS
system. Existing employees don't have to retrain on a new system, and since we can
retain your best-of-breed components, new employees are more likely to have
experience with them.
It's simply a fact of life that your staff turnover is going to be higher than in other
industries. The good news is that Columbus IT Retail solutions help you manage that
turnover sensibly, with training and easy-to-use systems, from the start.
Shrinkage
Lack of Information
Future Uncertainty
The customer is fickle. Global market situations can also change the demand for your
products. And unexpected problems at your warehouse or stores can also affect what
you need to supply - and who may be buying it.
Retail is built on uncertainty - but victory goes to the business who knows how to
manage that uncertainty and make allowances for it.
You need to be able to learn from the past so that you can plan for the future.
Columbus IT Retail solutions provides you with sophisticated reporting and data
mining about every aspect of your retail operation so you can make sensible choices
about where your customers, suppliers, and your business are going.
Retail Chain Manager enables you to gather and analyze your past sales information
so you can make the right decisions about what products to carry, where to sell them,
and what price they should be.
Columbus IT Retail solutions give you that power. By integrating your retail
processes and systems into one comprehensive solution, we make sure that all of the
information about your business is captured, measured, and available for you in
flexible, powerful, yet easy-to-use reporting features.
Complex Pricing
It's no longer enough to be able to stamp a product's price and forget about it. Modern
retailers are changing prices on goods daily, if not hourly. The benefit of flexible
pricing is to be able to respond to changes in the market as they happen. Want to set a
higher price for rush-hour customers and a lower price for off-hour ones? Or maybe
you'd like to be able to run a test on a new campaign for one day and see how it
compares to the sales results from the previous day. Columbus IT Retail solutions
make it happen.
Whether you want to set prices for one shop or all of your retail outlets, you can do so
quickly and consistently. It's all handled automatically, from the central office.
NEW DELHI: Food, agriculture and consumer affairs minister Sharad Pawar on( 15
Mar 2008, 0017 hrs IST,TNN )said that the government was not considering any
proposal to allow foreign direct investment in the retail sector.
Replying to supplementaries during question hour in Rajya Sabha, he said the
International Council for Research on International Economic Relations (ICRIER)
was examining the impact of domestic organised (corporate) retail sector on
unorganised retail sector. Only after the report comes in would the government be in a
position to take a clear decision. But he said that the government was not allowing
FDI in retail as it wanted to protect this sector. "There is no proposal to allow FDI in
retail (and) government is not thinking of it because it wants to protect the interest of
retailers," he said.
The annual market for consumer durables in India (excluding computers and
communication products) is currently of the order of Rs. 25,000 cr. In recent years,
intense competition has led to a decline in prices. Consequently, market growth has
mainly been in terms of quantity, rather than value. Further, the increase in quantity is
propped up by consumer financing, promotions and discounts. Distribution is
fragmented, and there are 40,000 consumer durable dealers in India.
Organized retailing is catching on, but has overheads due to expensive real estate, air
conditioning and higher manpower costs. One tries to offset this by negotiating lower
prices with durable manufacturers. The Indian consumer is brand-conscious, but not
necessarily brand-loyal, and might even pick up a reliable private label if it offers
good price and quality values. Retailers such as Reliance, Future Group, Hyper City
and E-Mart, therefore, plan to launch low-priced private labels by importing in large
quantities from China and Thailand. Domestic durable manufacturers are responding
by expanding their product range to ensure higher bargaining and shelf power with
the trade. They are also exploring the possibility of cross-category tie-ups with non-
competing partners from other industries to tap each others' points of influence,
particularly in smaller/rural markets. Consumer durable penetration is one of the
lowest in India and the untapped potential is evidently enormous. However, as Indian
consumers continue to attach a high degree of importance to value for money, both
manufacturers and traders would be compelled to explore every conceivable method
to improve operational efficiencies, in order to achieve substantial and profitable
business growth.
Conclusion:
In India, the most of the retail sector is unorganized. In India, the retail business
contributes around 11 percent of GDP. Of this, the organized retail sector accounts
only for about 3 percent share, and the remaining share is contributed by the
unorganized sector. The main challenge facing the organized sector is the competition
from unorganized sector. Unorganized retailing has been there in India for centuries,
theses are named as mom-pop stores. The main advantage in unorganized retailing is
consumer familiarity that runs from generation to generation. It is a low cost structure,
they are mostly operated by owners, has very low real estate and labor costs and has
low taxes to pay. The retail sales in India for future are shown below (data from 2005-
2008 is based on estimates):
Many agencies have estimated differently about the size of organized retail market in
2010. The one thing that is common amongst these estimates is that Indian organized
retail market will be very big in 2010. The status of the retail industry will depend
mostly on external factors like Government regulations and policies and real estate
prices, besides the activities of retailers and demands of the customers also show
impact on retail industry.
As the retail market place changes shape and competition increases, the potential for
improving retail productivity and cutting costs is likely to decrease. Therefore it is
important for retailers to secure a distinctive position in the market place based on
values relationships or experience.
Finally it is important to note that these strategies are not strictly independent of each
other; value is function of not just price quality and service but can also be enhanced
by personalization and offering a memorable experience
India’s robust macro and microeconomic fundamentals such as its GDP growth,
higher income levels, increasing personal consumption, etc will accelerate the growth
of the retail sector, according to a joint thought leadership study by
PricewaterhouseCoopers (PwC) and Retailers Association of India (RAI) titled
“Strategic Issues for Retail CEOs”. The study looks at top-of-mind issues affecting
retail CEOs.
NV Sivakumar, Leader, Consumer and Industrial Products, PricewaterhouseCoopers
said, “Retail CEOs' top-of-mind issues pertain to supply chain and operations,
strategy and innovation, private labels, tax issues, workforce management, and
sustainability and green marketing. Our study addresses the current thinking and
practices on these issues."
The study, based on interviews with 20 CEOs and MDs at leading Indian and global
organizations, secondary research and internal insights, explores six discussion
themes mentioned below and presents relevant case studies for each of these themes:
-- Supply chain and operations:
Improving supply chains and operations will enable retailers in India to enhance
competitiveness and successfully deploy growth initiatives.
-- Strategy and innovation:
Strategy and innovation is a holistic concept involving the launch of new products,
the creation of unique marketing strategies, the development of new distribution
channels, the customization of products, etc. Retailers are now embarking on
innovative practices such as creating India-inspired product lines, offering private
label products and selecting, and accordingly, customizing the global product
assortment for the Indian market.
-- Private label offerings:
Retailers are launching a range of private labels products to meet the demands of
value conscious consumers, to develop product portfolios and to improve margins in
an environment where efficiency and competitiveness are imperative.
-- Tax issues:
Goods and Service Tax (GST) is likely to benefit retailers. The nation-wide
implementation of a dual GST signals the next generation of tax reforms designed to
address the barriers to trade and expand the tax base.
-- Workforce management:
Workforce management practices are in the nascent stages of being developed in the
Indian retail sector. Hiring in the retail sector is projected to increase in the future due
to several new global and domestic entrants and the range of formats they plan to
offer. Growth in the Indian retail sector and the corresponding demand for talent has
highlighted the need for effective workforce management systems.
-- Sustainability and green marketing:
Sustainability and green marketing initiatives will need to be addressed, as influences
(such as government mandates, consumer awareness, competitor actions, etc.)
converge and heighten. Green marketing and other sustainability practices are in the
initial stages of being incorporated into modern trade.
Kumar Rajagopalan, Chief Executive Officer, RAI said, “While every top business
house in India has recognized retail as the big sector to invest in and be a big player in
this sector, retail CEOs are working with great enthusiasm to meet the exacting detail
requirements of this challenging business. Opportunities are apparent; however the
pitfalls are just as possible.”
Rajagopalan further added, “In a business wherein the competitive landscape changes
every day and customer preferences are re-defined often, retailers have to keep
perfecting their capabilities around place, people, price, product, communication,
supply chain, vendors and processes. Every CEO knows that there are lots of areas for
strategic investments and many are making active trade-offs to achieve supremacy on
some of the aspects of retail business. Our study shows the various aspects that
retailers are trying to master and win in the market place.”
Retail is exciting, and action in the sector promises to hot up. KSA a leading
international consultancy believes the organized sector will grow six folds to almost
Rs 30,000 crore by 2005. The share of organized sector in total retail sales will grow
from one per cent now to six per cent by 2005.While projections can be slippery, hard
facts point to exciting growth ahead for this sector.
By 2005, KSA projects the top six cities will account for 66 per cent of total
organized retailing and the next four for 20 per cent. The top 10 cities will account for
86 per cent of organized retail sales. There could be variations in growth patterns in
different segments. The second half of the top 10 cities will provide large growth for
food and groceries, while the top six would still be the growth centers for consumer
durables, believes KSA.
The spread of organized retailing is unlikely to be a national phenomenon yet. This
appears to be the case so far. South India, particularly Chennai, Hyderabad and
Bangalore, have seen the emergence of chain stores or large format stores. While
garment stores have been around for sometime, other segments like food and
groceries, consumer durables and even books and music have witnessed the
emergence of organized players in large cities in South India. The lack of trained
Modern malls made their entry into India in the late 1990s, with the establishment of
Crossroads in Mumbai and Ansals Plaza in Delhi. By early 2001, several mall
projects were announced. According to market estimates, close to 12 million sq. ft. of
mall space is being developed across several cities in the country, of which 10 million
sq. ft. is expected to be operational by end of 2003 (see Table below). With this,
rentals for retail properties have shown a marked decline, which has brought down the
break-even levels of the retail projects. Moreover, retailers would now have access to
retail-specific properties, which will increase their efficiencies.
Table 6:
Inox Baroda 75
yet another significant knock on effect on the typical size of Indian malls. In the US
and South-East Asia, malls are as large as 50 lakh sq ft. Spencer is by far Till some
time back, there were only few international style shopping malls in India --Spencer
in Chennai, Crossroads in Mumbai, Ansals Plaza in New Delhi and Sriram’s Arcade
It looks like a virtual stampede, major players with a cumulative investment of Rs 375
crore are set to change cityscapes across India. In the next one year, close to 40 lakh
square feet of retail space will be developed. In three years, this will rise to 70-lakh sq
ft.
As the retail industry evolves, consumers want more variety before making their
purchase decision. A study on consumer outlook suggests that over 80 percent of
consumers want a wide range of products at hand while shopping. This signifies that
people are finally ready for multi-option complexes.
Many old-time corporates are seriously considering using their idle assets. It makes
sense for landowners to develop it and keep the returns rather than sell it outright or
even lease it, especially when there is opportunity here. It is perhaps the best way to
use an idle real estate asset.
The limited kitty of brands has the largest mall in India - it occupies 7 lakh sq ft and
even that is dwarfed by Asia's largest mall, the 4-million sq ft mega mall in Malaysia.
Even the 26 malls that are being planned are likely to measure between 50,000 sq ft
and 2 lakh sq ft. The Indian mall cannot offer too many choices in terms of brands.
So, developing a very large mall can never be sustainable.
There's a flip side though -malls even as small as 80,000 sq ft, like Shopper's City in
Kolkata or the Esplanade Mall at Kochi, can be sustained.
For the first time in 10 years, the industry is witnessing the development of region-
specific formats. With organized retail penetrating into B class towns, retailers have
started differentiating in the sizes and formats of stores. For example, in departmental
store format, while most A class cities and metros have larger stores of 50,000 plus
sq. ft. sizes, stores in B class towns have stabilized in the 25,000-35,000 sq. ft. range.
Most players have started operating these two formats across various cities, which has
helped them to standardize the merchandise offering across the chain.
A large number of international retailers have evinced interest in India, despite the
absence of favorable government policy for foreign players (see Table below). A
number of the major brands have entered the country through licensing agreements
with Indian players to capitalize on the opportunities available in the sector. The
world's largest retailer by sales, Wal-Mart Stores Inc and Sunil Mittal's Bharti
Enterprises have entered into a joint venture agreement and they are planning to open
10 to 15 cash-and-carry facilities over seven years. The first of the stores, which will
sell groceries, consumer appliances and fruits and vegetables to retailers and small
businesses, is slated to open in north India by the end of 2008.
Carrefour, the world’s second largest retailer by sales, is planning to setup two
business entities in the country one for its cash-and-carry business and the other a
master franchisee which will lend its banner, technical services and know how to an
Indian company for direct-to-consumer retail.
The world’s fifth largest retailer by sales, Costco Wholesale Corp (Costco) known for
its warehouse club model is also interested in coming to India and waiting for the
right opportunity.
Opposition to the retailers' plans have argued that livelihoods of small scale and rural
vendors would be threatened. However, studies have found that only a limited number
of small vendors will be affected and that the benefits of market expansion far
outweigh the impact of the new stores Tesco Plc., plans to set up shop in India with a
wholesale cash-and-carry business and will help Indian conglomerate Tata group to
grow its hypermarket business.
Table 7:
International players
Over the years as the consumer demand increased and the retailers geared up to meet
this increase, technology evolved rapidly to support this growth. The hardware and
software tools that have now become almost essential for retailing can be divided into
3 broad categories:
Point of sale systems use scanners and bar coding to identify an item, use pre-stored
data to calculate the cost and generate the total bill for a client. Tunnel Scanning is a
new concept where the consumer pushes the full shopping cart through an electronic
gate to the point of sale. In a matter of seconds, the items in the cart are hit with laser
beams and scanned. All that the consumer has to do is to pay for the goods.
· Payment
Payment through credit cards has become quite widespread and this enables a fast and
easy payment process. Electronic cheque conversion, a recent development in this
area, processes a cheque electronically by transmitting transaction information to the
retailer and consumer's bank. Rather than manually process a cheque, the retailer
voids it and hands it back to the consumer along with a receipt, having digitally
captured and stored and image of the cheque, which makes the process very fast.
· Internet
· ERP System
Various ERP vendors have developed retail-specific systems which help in integrating
all the functions from warehousing to distribution, front and back office store systems
and merchandising. An integrated supply chain helps the retailer in maintaining his
stocks, getting his supplies on time, preventing stock-outs and thus reducing his costs,
while servicing the customer better.
· CRM Systems
The rise of loyalty programs, mail order and the Internet has provided retailers with
real access to consumer data. Data warehousing & mining technologies offers retailers
the tools they need to make sense of their consumer data and apply it to business.
This, along with the various available CRM (Customer Relationship Management)
Systems, allows the retailers to study the purchase behavior of consumers in detail
and grow the value of individual consumers to their businesses.
Leading manufactures, distributors and retailers and considering APS packages such
as those from i2, Manugistics, Bann, Mercial incs and Sterling-Douglas.
· Visual Merchandising
The decision on how to place & stack items in a store is no more taken on the gut feel
of the store manager. A larger number of visual merchandising tools are available to
him to evaluate the impact of his stacking options. The SPACEMAN Store Suit from
AC Nielsen and Modacad are example of products helping in modeling a retail store
design
Customer value in its most basic form is merely the difference between the benefit
receive from a product and the cost associated with that product. Of note, is that
today's consumers are much more educated and informed due to the power of the
internet. As such, they will tend to purchase products they feel are worth the cost
needed to obtain such product. Consumers tend to know exactly what they want to
purchase and will not waste time with unsuitable products.
It is important to have something unique that is not readily available anywhere else.
This s will make your product perceived as very profitable. A higher price would thus
be favorable. In their quest to communicate information about products and services
sales professionals often oversells and overlook the customer's needs. Consequently,
the solution presented becomes unsuitable and of little value to the customer.
Reducing price dramatically or changing price too often will erode your products
value. To maintain customer value refrain from volatile price changes and embrace
cost. Clearly demonstrating that the benefits of your products far outweigh the costs
associate with the product will work wonders in wining customers over. Think of a
time you purchased a product that you found completely valuable ad that solved a
need you had. Strive to provide this same feeling of satisfaction to your customers and
you will be rewarded for doing so.
The fact that retailers feel they fare as poorly as manufacturers suggests a
significant opportunity for greater collaboration exists.
Indeed, in the cases studied for this report, we found a consistent set of
breakdowns that erode the performance of customization programs.
Why do so many projects go wrong? Most of the problems stem either from
insufficient communication or insufficient commitment – problems that tend to
become exacerbated over time as complexity grows
On the retailer side, short lead times for customized program development often
leads to rushed design-to-deliver timelines and higher costs on such elements
as graphics. Poor forecasting also sets projects on the wrong path. Failure to
maintain volume commitments, especially for exclusive merchandise, leads
some programs to fall short, as does non-compliance with agreements to set-up
on-floor displays and promotions or to keep displays up for a certain time period
– a problem often traceable to labor shortages or poor communications.
On the manufacturer side, there are similar problems. Often, there are
ineffective selection criteria for customization programs, including a lack of
attention to hurdle requirements. A lack of collaboration within the manufacturer
itself is another source of expensive mistakes, as many companies have
customer teams that don’t interact well enough with marketing, finance and
the supply chain. Inadequate service levels from co-packers and suppliers
also compromises many projects, as do product returns and products that are
unsaleable because they were damaged en route.
These are symptoms of a bigger issue. The underlying driver of these
breakdowns is that customization programs are too often managed at the
event level, rather than as a strategic capability that is well integrated into the
overall set of capabilities that are being developed in collaboration with retailers.
Indeed, while customization heavily intersects a broad array of capability areas
— for example, category management, trade promotions, shopper marketing
and supply chain integration — customization programs are typically not
elevated to the same strategic level as these other capabilities.
The ad hoc nature of customization management is evident from the way
most programs are initiated. As Exhibit 9 shows below, the vast majority of
customization requests flow “bottom up” out of a myriad of interactions with
customers, often through customer teams. Our survey shows that between half
and two-thirds of manufacturers’ customization programs originate from either a
retailer or a customer team making a request as opposed to a more “top-down”
planning process or strategy.
The lesson is clear: to create mutually positive, sustainable results, strategies
for collaboration need to be shelf-centered. By shelf-centered, we mean
programs that encourage both shelf-forward consumer response and greater
shelf-back efficiencies. Part of that holistic view is learning to see customization
not as an exceptional event, but as a regular activity, and just one tool in a
larger tool kit that manufacturers can use to create shared value with their retail
partners.
This is far from how most customization programs are executed today
Typically,
customization efforts are either shelf-forward, focused on a market opportunity,
or shelf-back, in which case the supply chain is the main concern. Only rarely
are the two considered in a single context, although almost every serious
customization program must have an impact on the other side of what
is ultimately, after all, a single program.
There are a number of reasons this tends to be the case. Manufacturers’
customer teams, the place where many customization requests originate, often
lack the depth of supply chain expertise to assess a request’s impact on the
supply chain. Often, capability programs – projects within which customization
is a supporting strategy or which address key issues that intersect with
customization choices – are typically managed by distinct groups within the
organization, such as the trade promotion or category management teams.
Also, company-to-company dialogs typically still occur along functional lines,
with category managers meeting retail merchandisers, or retail supply chain
teams meeting manufacturer’s supply chain teams.
Finally, true cross-functional, Shelf-Centered Collaboration is simply hard to
do in a large organization, for analytical, political, and staffing reasons. The
analytical challenges are daunting, in that Shelf-Centered Collaboration requires
building a new and more precise fact base. It requires creating more precise
metrics, such as ensuring that an SKU is not marked “in-stock” when its really
sitting on a pallet in the back room. It requires more careful hurdle rates and it
demands more systematic research to assess whether a program is meeting its
objective, whether to encourage trials, up-sells, or up-selling or cross-selling.
Politically, cross-functional management involves prescribing the decision rights
of various departments. Staffing challenges are not insignificant either, since
executives in a truly cross-functional organization need to be available to weig the
facts and make the right decision. Especially at first, reaching a useful level
of insight requires a number of people to step back from day-to-day pressures
and focus solely on the issue at hand.
Fortunately, although the problems consumer product manufacturers and
retailers face might seem daunting, addressing these challenges yields
significant benefits. In a cross-industry study of 50 product and service
companies, Booz Allen found that the set of companies we identified as “Smart
Customizers” outperformed industry peers two-to-one in revenue growth and
had profit margins five to 10 percent above competitors.
In our experience, the most critical choice for creating shared value is what
to customize rather than where to provide a given form of product or service
customization or how to manage the complexity in an existing program more
efficiently. As with any investment, much of the outcome in a customization
program is determined by the initial decision of where to invest. Unsurprisingly,
such strategic decision-making turns out to be a much better strategy than
accommodating ad hoc demands and then struggling to manage the resulting
complexity.
Clearly, performance benefits from well executed programs, but only if the
economics of customization are already in place. Manufacturers must first
understand the true cost impact from customization, such as whether a custom
display substantially raises the program cost base or cannibalizes open
stock. Once manufacturers determine what to customize, as well as what
not to customize, they can then drive improved value from efforts to improve
execution.
Introduction:
This white paper is really interesting even though it is written primarily for larger
corporate retailers. There is much to learn from this kind of thinking, or at least an
opportunity to re-consider what you already know. Make sure you've got a cuppa and
a comfy seat for this one as its hefty reading...(MB)
The topic for this White Paper was debated by the KPMG/SPSL Retail Think Tank in
October 2007 during a period of increasing pressure on retailers. For Quarter 4 2007,
the RTT decided that the outlook was more pessimistic compared to Q3, with
downward pressure expected in all three areas considered; Demand, Margins and
Costs.
This is the first time since the RTT first sat in April 2006 that the members consider
that movements in all three drivers will have a negative impact on the overall state of
health of UK retail. This is underlined by the latest BRC-KPMG Retail Sales Monitor
figures, which show like-for-like growth of just 1% in October, the weakest rise for
11 months.
Therefore the issue debated was, ?What are the secrets of successful retailing and how
can retailers survive and prosper in a downturn?' is considered to be very timely.
Key observations:
? The single most important element of successful retailing is for retailers to know
and understand their target customers, how those customers perceive them, what their
wants and needs are, and what those customers expect;
The launch of, and on-going commitment to, the Clubcard provides telling evidence
of this switch in business focus. Tesco was driven by the desire to gather as much
information as possible about the behaviour of its shoppers, harnessing the new found
capabilities in EPoS (Electronic Point of Sale) and IT. The "Pile it high; sell it cheap"
philosophy of ex-market-stallholder Jack Cohen rapidly gave way to the "Customer is
king" mentality. At the time very few would have marked this as a tipping point in
British retailing, but hindsight shows us otherwise. Putting the customer at the heart
of the business is now accepted as a necessity; 15 years ago in British retailing it was
visionary.
Keeping abreast of your customer's needs on a regular basis is simply not enough now
though, particularly as they are so much more knowledgeable than they used to be.
The customer and the way he or she relates to individual retailers is evolving
continually and the pace of change is ever accelerating. Regular feedback has now
been replaced by ongoing, continuous tracking among leading retailers. Complacency
about your customer knowledge is ruinous warns the RTT. There is little loyalty in
retailing. If customers don't like what you are selling today and you don't spot it by
tomorrow, they'll be voting with their feet the day after.
Retailers need to remain on top of the game, putting ever more effort into
understanding the continuous changes in their customers' attitudes, desires and
behaviour. Sporadic analysis of EPoS data, mystery shopping and holding focus
groups with customers was, perhaps, as sophisticated as it got a decade ago. Now, the
need to continuously track and understand customers' experiences is a business
requisite. The RTT advises that they also need to be acutely aware that segmenting
customers in more transient ways, for instance, by lifestyle and by occasion, are just
as relevant, if not more so, now than by conventional ways of grouping customers (by
socioeconomics etc).
The RTT discussed a number of new trends in consumer behaviour, not least the
swelling interest in ethical and green issues. It also highlighted another attitudinal
trend: "Understanding that the customer wants to be treated with more respect is one
of the subtler and yet important recent refinements in the shopper's psyche",
commented retail psychologist Tim Denison of SPSL, "Top of the respect agenda is
respecting their time. Time is the new money; convenience becomes paramount.
Being able to provide easy to reach locations (both bricks and clicks), offer opening
hours to suit the modern work-life balance, easy and intuitive navigation around the
store/website and quick to pay solutions must all be very carefully considered."
It's far from true to say, however, that there's a ?one size fits all' solution in terms of
the retail proposition; "Look at Sports World/Sports Soccer," comments Paul Clarke
of Barclays Retail & Wholesale Sectors. "Despite Mike Ashley upsetting a lot of
people in the city, he does understand his customers. They appreciate the image of it
being cheap. It feels cheap. It looks cheap. It is cheap. Not only does that not matter to
them, it's a positive attractor. That is brilliant, because it came at a time when that
sector was moving relentlessly up market." However, the RTT believes that it is those
retailers who connect with their customers both on a rational basis (product,
price/value) and on an emotional level (environment, service, channel, brand) that are
invariably examples of successful retailers. Richard Hyman of Verdict Research said;
"If you don't connect with the customer, you don't sell much. You have to be good at
understanding demand - your customers' demand, which is both explicit and implied."
Invariably, part of the proposition surrounds price and value, but its role, like every
other part of the mix, is always changing. Nick Bubb, of Pali International explains;
"People are sated by bargains. They will not buy things in 2007/8 that they don't need,
simply because they're cheap. Retailers who are successful now and will be successful
in a downturn are not necessarily the slash and burn discounters. The rules are
changing and it's foolish sometimes to simply discount in a belief that it will add
value. Far better to find exactly what your customers want, which may be items with
added perceived value, and then having sourced them, actually add price to match that
different perception of value." The RTT acknowledges that price policy is more about
fair pricing than low pricing amongst the leaders. It concludes that there is a
considerable psychological cost to retailers if customers discover subsequently that a
"bargain" is not the bargain they thought it was when they bought it.
The RTT feel that as customer behaviour is becoming more and more segmented, so
there is a growing need to develop multiple formats to their proposition to
accommodate the growing disparity. Tesco, yet again, was named as one British
success that has achieved this platform, with its various formats - Metro, Express,
Extra, - that respond to the various calls of its customers.
Key to success though is developing an enabling structure that puts customer insight
right at the heart of the business; both in a strategic and operational sense. Part of a
winning formula is about short decision chains of command. Too much bureaucracy
and complexity can strangle the ability to understand and respond quickly enough to
the changing needs of the customer.
The RTT also acknowledges that a structure which incorporates financial soundness,
checks and balances is key too to success. According to Paul Clarke, good
management requires a strong relationship with its bank, good financial disciplines
and decision-making that focuses on cash generative opportunities and optimisation,
rather than pure profit. This, he suggests, allows investment in the future, too. Richard
Hyman adds that "Investing in demand, in the top line, is how the model and
proposition is sustainable".
Integral to the organisational structure is the supply chain management process and
infrastructure, which must be able to support quick response and flexibility. RTT
members believe collaboration with suppliers is more sustainable than ?muscle'. With
the growing importance that customers place on ethical and green issues, good supply
chain management processes, accountability and traceability have never been more
important to retailers. It is not just a question of efficient logistics, the RTT states; it
goes much further and deeper into the being of great retail businesses. Furthermore,
the RTT acknowledges that suppliers usually have a very good understanding and
appreciation of the customer, and can contribute to a retailer's knowledge of the
market, if encouraged and supported to do so.
RTT members note that size is not necessarily a success factor: small, nimble, non-
traditional retailers (niche, internet, etc) can thrive if they target a specific sector. ?
Success is about understanding the target customer and offering a proposition that
connects with those needs, whether they be product, price, position or experience-led.
Many successful retailers have spotted a particular segment of customer need and
created a business and structure to serve it", says Sian Davies of Henley Centre
HeadlightVision. Richard Hyman notes that the kind of niche success can be most
unexpected too; "Look at the White Company. It's a superb business, but it came from
what seemed like a totally barmy idea. It's been beautifully put together and is very
sympathetic to its core target market - a real left-field winner." The RTT feels that
perhaps one of the greatest challenges faced by all successful small retailers is how to
add scale without losing the ability to deliver the proposition and without losing
contact with its life-blood; the customer.
Leadership and empowerment are also at the core of a successful business culture.
Whilst much is often and rightly made of the pivotal role of CEOs, the RTT also point
to the fact that the most successful retailers treat their staff with as much respect as
they treat their customers. Motivated and inspired staff lead to lower churn rates, in
turn leading to more experienced and knowledgeable staff members and to lower
training overheads - a virtuous circle. John Lewis's turnover of staff, for example, is
half that of other retailers.
Innovation is hugely important to today's retail arena, and goes hand in hand with
vision and leadership as a key aspect of culture, argues the RTT. The fact is that
retailers today need to permanently evolve in all areas of the business to reflect the
ever changing needs of their customers. Thus the discipline of change management
practices needs to be incorporated into the culture of the business. It is a matter of
embarking on a journey, but never arriving at your final destination. Critical to
success though is insuring that a business doesn't abandon its core values, as
perceived by its customers, as it proceeds.
Innovation and the confidence to innovate, both in the proposition and the business
model is important to the customer too and vital for any retailer wishing to keep ahead
of competitors who share that customer. The RTT could bring forth a roll-call of
many once-great-names who failed to adapt or adapted too slowly and lost market
share and impetus and either disappeared or now limp on forlornly, mere shadows of
their former selves. The most successful retailers don't wait, either until it's too late or
it's almost too late to change their structure, proposition or philosophical orientation.
The RTT acknowledges the likes of Tesco and Zara which, "are prepared to ?do
things in a different way' which has given them ongoing benefits", states Sian Davies.
Successful retailers have to allow for bravery in their culture too, points out Nick
Bubb. They must be able to be aggressive with stores, channels, staff or formats that
don't perform and cut them back speedily and efficiently. Similarly they must invest
in stores and channels which do perform. Once again, Tesco provides a peerless
example of single-mindedly undertaking its due diligence and then wasting no time in
trying new locations, new formats or new lines, underwritten by constant evaluation,
refinement and evolution of its ?proposition'.
Of all the factors that the RTT considered in its deliberations, members feel that
having the right culture to encourage constant re-evaluation of the business model and
the fine-tuning of the proposition, to enable the business to evolve seamlessly and
effortlessly is of pivotal importance in a downturn.
RTT members also believe that during a downturn, any retailer's proposition might
have to be edited more than usual to take into consideration the changing nature of the
retail environment and the impact of financial pressures on the target customer. RTT
members hold, however, that cutting back on product or service quality in the
proposition, is not the way to keep valued customers, and their custom, when markets
become more challenging. "It's certainly not a matter of switching out some lights to
save on electricity", comments Mark Teale of CBRE.
This is where the right structure and culture, enabling the business to act innovatively
and quickly upon new information, facilitating flexible and speedy response to the
market is a driver of success. Again, the customer should be at the centre of any
choices or changes made: "When in doubt, voting on behalf of the customer has
always been the right decision", adds Sian Davies.
Beyond the cultural dimension, the RTT also point to certain aspects of organisational
structure that are important in a market downturn. Opportunities to improve cash flow
and working capital to allow more flexibility in the operating model will, the RTT
believes, help to ride out the expected downturn with the customer base intact when
prospects improve. To some extent it's about keeping faith with customers, giving
them what they want at prices they'll pay, without compromising your basic
proposition, whatever that might be.
RTT members also consider that retailers need to take a hard look at their senior
management and staff, and assess whether or not incumbents are both willing and able
to respond to changing market conditions. If not, hard decisions may have to be taken
by leadership to correct this in order to continue to deliver a successful proposition to
the target customer. A shorter decision chain is no bad thing anyway in a downturn so
retailers can potentially make some reductions in management which may have four
or more positive effects; getting rid of resistance to change, reducing the payroll,
shortening the decision chain and, as a bonus, giving younger management an
opportunity to prove themselves.
Although the RTT encourages successful retailers to take a long-term view in the face
of a downturn, members strongly felt that any major projects including big IT systems
programmes, international or regional expansion and entering new market segments
should best be avoided if they are felt by management to be defensive moves or ?
knee-jerk reactions" as Helen Dickinson calls them. Nothing should in any way take
the organisation's attention away from that vital customer relationship.
However, determining whether or not all channels are being fully maximized- and
indeed whether or not the right channels are in place or need different emphasis - may
be an important consideration. Nick Bubb says; "On line / internet business may be
something to be embraced if traditional store footfall declines, though it's not without
its cost implications." If the Internet as a channel is a supplement, rather than the main
channel to market, RTT members note that it must be consistent with the traditional
proposition and all it entails.
RTT members believes that successful retailers are savvy enough to understand that
competitors may be feeling the pressure too, and recognise that some will prosper at
the expense of others in a down market. There is no magic pill which will get each
retailer through to the other side unscathed and what works for one may well not work
for all, however what is vital is the constant measurement, management and evolution
of a retailer's offer. Happily many retailers will have the customer-focus, relevance of
proposition and business model to succeed. Others, sadly, will fall and perish.
Wherever they fall in the great retail forest, new saplings will grow and flourish in the
clearings made. Who knows what original propositions they will have, what new
retail DNA guides them, what exciting innovations will, literally, be in store?
How has internet changed the way consumers shop for some of the
products?
Online shopping is the process whereby consumers directly buy goods, services etc.
from a seller interactively in real-time without an intermediary service over the
Internet. If an intermediary service is present the process is called electronic
commerce. An online shop, eshop, e-store, internet shop, webshop, webstore, online
store, or virtual store evokes the physical analogy of buying products or services at a
bricks-and-mortar retailer or in a shopping mall.
The metaphor of an online catalog is also used, by analogy with mail order catalogs.
All types of stores have retail web sites, including those that do and do not also have
physical storefronts and paper catalogs. Online shopping is a form of electronic
commerce used for business-to-business (B2B) and business-to-consumer (B2C)
transactions.
Online Shopping pre-dates the IBM PC, Microsoft,Apple Inc., and the Internet/www.
In 1979 Michael Aldrich, an English inventor, connected a modified 26" colour
domestic TV to a real-time transaction processing computer via a domestic telephone
line and invented online shopping. The first recorded B2B online shopping was
Thomson Holidays 1981 The first recorded B2C online home shopping was
Gateshead SIS/Tesco in 1984. The world's first recorded online home shopper was
Mrs Jane Snowball,72, of Gateshead, England in May 1984. During the 1980s
Aldrich sold many systems mainly in the UK to large corporations, including Ford,
Peugeot{ then trading as Talbot Motors], General Motors and Nissan. Case studies of
some of these systems have survived. The Nissan system of 1984/85 was
revolutionary. It enabled a car buyer on a dealer's lot to buy both car and finance
online including credit check. Aldrich was copied and his ideas were plagiarised. His
1980s systems were as fast as 2010 internet shopping systems but they worked only
on dial-up and leased telephone lines. There was no broadband at the time. He never
patented his shopping system and his ideas are the basis of internet home shopping.
In 1990 Tim Berners-Lee created the first World Wide Web server and browser. It
opened for commercial use in 1991. In 1994 other advances took place, such as online
banking and the opening of an online pizza shop by Pizza Hut. During that same year,
Netscape introduced SSL encryption of data transferred online, which has become
essential for secure online shopping. In 1995 Amazon expanded its online shopping,
and in 1996 eBay appeared. More recently Overstock has also become one of the
world largest and reliable online shopping stores.
.
Webshop
The term 'webshop' has a number of meanings. An online retailer may be called a
'webshop'. Web development, hosting and other web-related activities can be called
'webshops.' Buying online grew because, over time, transportation costs went up and
telecom costs went down and access to the Internet became commonplace. Online
shopping offers a larger selection of goods and services and thus greater choice at
optimal prices. The problems with online shopping are that you can not smell, touch,
taste or try what you are buying.
Customers
In general, shopping has always catered to middle class and upper class women.
Shopping is fragmented and pyramid-shaped. At the pinnacle are elegant boutiques
for the affluent; a huge belt of inelegant but ruthlessly efficient “discounters” flog
plenty at the pyramid’s precarious middle. According to the analysis of Susan D.
Davis, at its base are the world’s workers and poor, on whose cheapened labor the rest
of the pyramid depends for its incredible abundance. Shopping has evolved from
single stores to large malls containing many stores that most often offer attentive
service, store credit, delivery, and acceptance of returns. These new additions to
shopping have encouraged and targeted middle class women.
In recent years, online shopping has become popular; however, it still caters to the
middle and upper class.[citation needed] In order to shop online, one must be able to
have access to a computer, a bank account and a debit card. Shopping has evolved
with the growth of technology. According to research found in the Journal of
Electronic Commerce, if we[who?] focus on the demographic characteristics of the in-
home shopper, in general, the higher the level of education, income, and occupation
of the head of the household, the more favourable the perception of non-store
shopping. An influential factor in consumer attitude towards non-store shopping is
exposure to technology, since it has been demonstrated that increased exposure to
technology increases the probability of developing favourable attitudes towards new
shopping channels.
Online shopping widened the target audience to men and women of the middle class.
At first, the main users of online shopping were young men with a high level of
income and a university education. This profile is changing. For example, in USA in
the early years of Internet there were very few women users, but by 2001 women
were 52.8% of the online population. Sociocultural pressure has made men generally
more independent in their purchase decisions, while women place greater value on
personal contact and social relations.[citation needed]
Trends
One third of people that shop online use a search engine to find what they are looking
for and about one fourth find websites by word of mouth. Word of mouth has become
a leading way by which people find shopping websites. When an online shopper has a
good first experience with a certain website, sixty percent of the time they will return
to that website to buy more.
Books are one of the things bought most online. However, clothes, shoes, and
accessories are all very popular things bought online. Cosmetics, nutrition products,
and groceries are increasingly being purchased online. About one fourth of travelers
buy their plane tickets online because it is a quick and easy way to compare airline
travel and make a purchase. Online shopping provides more freedom and control than
shopping in a store.
From a sociological perspective, online shopping is arguably the most predictable way
to shop. One knows exactly what website to go to, how much the product will cost,
and how long it will take for the product to reach them. Online shopping has become
extremely routine and predictable, which is one of its great appeals to the consumer.
Logistics
Consumers find a product of interest by visiting the website of the retailer directly, or
do a search across many different vendors using a shopping search engine.
Once a particular product has been found on the web site of the seller, most online
retailers use shopping cart software to allow the consumer to accumulate multiple
items and to adjust quantities, by analogy with filling a physical shopping cart or
basket in a conventional store. A "checkout" process follows (continuing the physical-
store analogy) in which payment and delivery information is collected, if necessary.
Some stores allow consumers to sign up for a permanent online account so that some
or all of this information only needs to be entered once. The consumer often receives
an e-mail confirmation once the transaction is complete. Less sophisticated stores may
rely on consumers to phone or e-mail their orders (though credit card numbers are not
accepted by e-mail, for security reasons).
Payment
Online shoppers commonly use credit card to make payments, however some systems
enable users to create accounts and pay by alternative means, such as:
Debit card
Various types of electronic money
Cash on delivery (C.O.D., offered by very few online stores)
Cheque
Wire transfer/delivery on payment
Postal money order
Reverse SMS billing to mobile phones
Gift cards
Direct debit in some countries
Some sites will not allow international credit cards and billing address and shipping
address have to be in the same country in which site does its business. Other sites
allow customers from anywhere to send gifts anywhere. The financial part of a
transaction might be processed in real time (for example, letting the consumer know
their credit card was declined before they log off), or might be done later as part of the
fulfillment process.
While credit cards are currently the most popular means of paying for online goods
and services, alternative online payments will account for 26% of e-commerce
volume by 2009 according to Celent.
Product delivery
Once a payment has been accepted the goods or services can be delivered in the
following ways.
Download: This is the method often used for digital media products such as software,
music, movies, or images.
Shipping: The product is shipped to the customer's address.
Drop shipping: The order is passed to the manufacturer or third-party distributor, who
ships the item directly to the consumer, bypassing the retailer's physical location to
save time, money, and space.
In-store pickup: The customer orders online, finds a local store using locator software
and picks the product up at the closest store. This is the method often used in the
bricks and clicks business model.
In the case of buying an admission ticket one may get a code, or a ticket that can be
printed out. At the premises it is made sure that the same right of admission is not
used twice.
Shopping cart systems
Simple systems allow the offline administration of products and categories. The shop
is then generated as HTML files and graphics that can be uploaded to a webspace.
These systems do not use an online database.
A high end solution can be bought or rented as a standalone program or as an addition
to an enterprise resource planning program. It is usually installed on the company's
own webserver and may integrate into the existing supply chain so that ordering,
payment, delivery, accounting and warehousing can be automated to a large extent.
Other solutions allow the user to register and create an online shop on a portal that
hosts multiple shops at the same time.
Open source shopping cart packages include advanced platforms such as Interchange,
and off the shelf solutions as Avactis, Satchmo, osCommerce, Magento, Zen Cart,
VirtueMart, Batavi and PrestaShop.
Commercial systems can also be tailored to ones needs so that the shop does not have
to be created from scratch. By using a framework already existing, software modules
for different functionalities required by a web shop can be adapted and combined.
Design
Why does electronic shopping exist? For customers it is not only because of the high
level of convenience, but also because of the broader selection; competitive pricing
and greater access to information.. For organizations it increases their customer value
and the building of sustainable capabilities, next to the increased profits.
Information load
Designers of online shops should consider the effects of information load. Mehrabian
and Russel (1974) introduced the concept of information rate (load) as the complex
spatial and temporal arrangements of stimuli within a setting. The notion of
information load is directly related to concerns about whether consumers can be given
too much information in virtual shopping environments. Compared with conventional
retail shopping, computer shopping enriches the information environment of virtual
shopping by providing additional product information, such as comparative products
and services, as well as various alternatives and attributes of each alternative, etc.
Two major sub-dimensions have been identified for information load: complexity and
novelty. Complexity refers to the number of different elements or features of a site,
which can be the result of increased information diversity. Novelty involves the
unexpected, suppressing, new, or unfamiliar aspects of the site. A research by Huang
(2000) showed that the novelty dimension kept consumers exploring the shopping
sites, whereas the complexity dimension has the potential to induce impulse purchases
Consumer expectations
The main idea of online shopping is not in having a good looking website that could
be listed in a lot of search engines and it is not about the art behind the site. It also is
not only just about disseminating information, because it is all about building
relationships and making money. Mostly, organizations try to adopt techniques of
online shopping without understanding these techniques and/or without a sound
business model. Rather than supporting the organization’s culture and brand name,
the website should satisfy consumer's expectations. A majority of consumers choose
online shopping for faster and more efficient shopping experience. Many researchers
notify that the uniqueness of the web has dissolved and the need for the design, which
will be user centered, is very important. Companies should always remember that
there are certain things, such as understanding the customer’s wants and needs, living
up to promises, never go out of style, because they give reason to come back. And the
reason will stay if consumers always get what they expect. McDonaldization theory
can be used in terms of online shopping, because online shopping is becoming more
and more popular and website that wants to gain more shoppers will use four major
principles of McDonaldization: efficiency, calculability, predictability and control.
Organizations, which want people to shop more online for them, should consume
extensive amounts of time and money to define, design, develop, test, implement, and
maintain website. Also if company wants their website to be popular among online
shoppers it should leave the user with a positive impression about the organization, so
consumers can get an impression that the company cares about them. The
organization that wants to be acceptable in online shopping needs to remember, that it
is easier to lose a customer then to gain one. Lots of researchers state that even when
site was a “top-rated”, it would go nowhere if the organization failed to live up to
common etiquette, such as returning e-mails in a timely fashion, notifying customers
of problems, being honest, and being good stewards of the customers’ data.
Organizations that want to keep their customers or gain new ones try to get rid of all
mistakes and be more appealing to be more desirable for online shoppers. And this is
why many designers of webshops considered research outcomes concerning consumer
expectations. Research conducted by Elliot and Fowell (2000) revealed satisfactory
and unsatisfactory customer experiences.
User interface
It is important to take the country and customers into account. For example, in Japan
privacy is very important and emotional involvement is more important on a
pension’s site than on a shopping site. Next to that, there is a difference in experience:
experienced users focus more on the variables that directly influence the task, while
novice users are focusing more on understanding the information.
There are several techniques for the inspection of the usability. The ones used in the
research of Chen & Macredie (2005) are Heuristic evaluation, cognitive walk through
and the user testing. Every technique has its own (dis-)advantages and it is therefore
important to check per situation which technique is appropriate.
When the customers went to the online shop, a couple of factors determine whether
they will return to the site. The most important factors are the ease of use and the
presence of user-friendly features.
Market share
E-commerce product sales totaled $146.4 billion in the United States in 2006,
representing about 6% of retail product sales in the country. The $18.3 billion worth
of clothes sold online represented about 10% of the domestic market.
For developing countries and low-income households in developed countries,
adoption of e-commerce in place of or in addition to conventional methods is limited
by a lack of affordable Internet access.
Advantages-
Convenience
Online stores are usually available 24 hours a day, and many consumers have Internet
access both at work and at home. Other establishments such as internet cafes and
schools provide access as well. A visit to a conventional retail store requires travel
and must take place during business hours.
Searching or browsing an online catalog can be faster than browsing the aisles of a
physical store. One can avoid crowded malls resulting in long lines, and no parking.
Consumers with dial-up Internet connections rather than broadband have much longer
load times for content-rich web sites and have a considerably slower online shopping
experience.
Some consumers prefer interacting with people rather than computers because they
find computers hard to use. Not all online retailers have succeeded in making their
sites easy to use or reliable. On the other hand, a majority of stores have made it easy
to find the style one is looking for, as well as the price range that is acceptable making
the shopping experience quick and efficient. The internet has made shopping an
almost effortless task.
In most cases, merchandise must be shipped to the consumer, introducing a significant
delay and potentially uncertainty about whether or not the item was actually in stock
at the time of purchase. Most successful sites will say whether or not a product is in
supplyBricks and clicks stores offer the ability to buy online but pick up in a nearby
store. Many stores give the consumer the delivery company's tracking number for
their package when shipped, so they can check its status online and know exactly
when it will arrive. For efficiency reasons, online stores generally do not ship
products immediately upon receiving an order. Orders are only filled during
warehouse operating hours, and there may be a delay of anywhere from a few minutes
to a few days to a few weeks before in-stock items are actually packaged and shipped.
Many retailers inform customers how long they can expect to wait before receiving a
package, and whether or not they generally have a fulfillment backlog. A quick
response time is sometimes an important factor in consumers' choice of merchant.
Customers can choose the type of shipping they want from overnight, to a few days.
The quicker the delivery the higher the shipping cost. A weakness of online shopping
is that, even if a purchase can be made 24 hours a day, the customer must often be at
home during normal business hours to accept the delivery. For many professionals
this can be difficult, and absence at the time of delivery can result in delays, or in
some cases, return of the item to the retailer. Automated delivery booths, such as
DHL's Packstation, have tried to address this problem. When shopping in a retail
store, customers can handle and inspect the actual product before they purchase it.
In the event of a problem with the item - it is not what the consumer ordered, or it is
not what they expected - consumers are concerned with the ease with which they can
return an item for the correct one or for a refund. Consumers may need to contact the
retailer, visit the post office and pay return shipping, and then wait for a replacement
or refund. Some online companies have more generous return policies to compensate
for the traditional advantage of physical stores. For example, the online shoe retailer
Zappos.com includes labels for free return shipping, and does not charge a restocking
fee, even for returns which are not the result of merchant error. (Note: In the United
Kingdom, Online shops are prohibited from charging a restocking fee if the consumer
cancels their order in accordance with the Consumer Protection (Distance Selling) Act
2000.[23])
Information and reviews
Online stores must describe products for sale with text, photos, and multimedia files,
whereas in a physical retail store, the actual product and the manufacturer's packaging
will be available for direct inspection (which might involve a test drive, fitting, or
other experimentation).
Some online stores provide or link to supplemental product information, such as
instructions, safety procedures, demonstrations, or manufacturer specifications. Some
provide background information, advice, or how-to guides designed to help
consumers decide which product to buy.
Some stores even allow customers to comment or rate their items. There are also
dedicated review sites that host user reviews for different products.
In a conventional retail store, clerks are generally available to answer questions. Some
online stores have real-time chat features, but most rely on e-mail or phone calls to
handle customer questions.
Price and selection
One advantage of shopping online is being able to quickly seek out deals for items or
services with many different vendors (though some local search engines do exist to
help consumers locate products for sale in nearby stores). Search engines, online price
comparison services and discovery shopping engines can be used to look up sellers of
a particular product or service.
Shipping costs (if applicable) reduce the price advantage of online merchandise,
though depending on the jurisdiction, a lack of sales tax may compensate for this.
Shipping a small number of items, especially from another country, is much more
expensive than making the larger shipments bricks-and-mortar retailers order. Some
retailers (especially those selling small, high-value items like electronics) offer free
shipping on sufficiently large orders.
Disadvantages
Fraud and security concerns
Given the lack of ability to inspect merchandise before purchase, consumers are at
higher risk of fraud on the part of the merchant than in a physical store. Merchants
also risk fraudulent purchases using stolen credit cards or fraudulent repudiation of
the online purchase. With a warehouse instead of a retail storefront, merchants face
less risk from physical theft.
Secure Sockets Layer (SSL) encryption has generally solved the problem of credit
card numbers being intercepted in transit between the consumer and the merchant.
Identity theft is still a concern for consumers when hackers break into a merchant's
web site and steal names, addresses and credit card numbers. A number of high-
profile break-ins in the 2000s has prompted some U.S. states to require disclosure to
consumers when this happens. Computer security has thus become a major concern
for merchants and e-commerce service providers, who deploy countermeasures such
as firewalls and anti-virus software to protect their networks.
Phishing is another danger, where consumers are fooled into thinking they are dealing
with a reputable retailer, when they have actually been manipulated into feeding
private information to a system operated by a malicious party. Denial of service
attacks are a minor risk for merchants, as are server and network outages.
Quality seals can be placed on the Shop web page if it has undergone an independent
assessment and meets all requirements of the company issuing the seal. The purpose
of these seals is to increase the confidence of the online shoppers; the existence of
many different seals, or seals unfamiliar to consumers, may foil this effort to a certain
extent. A number of resources offer advice on how consumers can protect themselves
when using online retailer services. These include:
Sticking with known stores, or attempting to find independent consumer reviews of
their experiences; also ensuring that there is comprehensive contact information on
the website before using the service, and noting if the retailer has enrolled in industry
oversight programs such as trust mark or trust seal.
Before buying from a new company, evaluate the website by considering issues such
as: the professionalism and user-friendliness of the site; whether or not the company
lists a telephone number and/or street address along with e-contact information;
whether a fair and reasonable refund and return policy is clearly stated; and whether
there are hidden price inflators, such as excessive shipping and handling charges.
Ensuring that the retailer has an acceptable privacy policy posted. For example note if
the retailer does not explicitly state that it will not share private information with
others without consent.
Ensuring that the vendor address is protected with SSL (see above) when entering
credit card information. If it does the address on the credit card information entry
screen will start with "HTTPS".
Using strong passwords, without personal information. Another option is a "pass
phrase," which might be something along the lines: "I shop 4 good a buy!!" These are
difficult to hack, and provides a variety of upper, lower, and special characters and
could be site specific and easy to remember.
Although the benefits of online shopping are considerable, when the process goes
poorly it can create a thorny situation. A few problems that shoppers potentially face
include identity theft, faulty products, and the accumulation of spy ware. Whenever
you purchase a product, you are going to be required to put in your credit card
information and billing/shipping address. If the website is not secure a customers
information can be accessible to anyone who knows how to obtain it. Most large
online corporations are inventing new ways to make fraud more difficult, however,
the criminals are constantly responding to these developments with new ways to
manipulate the system. Even though these efforts are making it easier to protect
yourself online, it is a constant fight to maintain the lead. It is advisable to be aware of
the most current technology and scams out there to fully protect yourself and your
finances. One of the hardest areas to deal with in online shopping is the delivery of
the products. Most companies offer shipping insurance in case the product is lost or
damaged; however, if the buyer opts not to purchase insurance on their products, they
are generally out of luck. Some shipping companies will offer refunds or
compensation for the damage, but it is up to their discretion if this will happen. It is
important to realize that once the product leaves the hands of the seller, they have no
responsibility (provided the product is what the buyer ordered and is in the specified
condition).
Lack of full cost disclosure
The lack of full disclosure with regards to the total cost of purchase is one of the
concerns of online shopping. While it may be easy to compare the base price of an
item online, it may not be easy to see the total cost up front as additional fees such as
shipping are often not be visible until the final step in the checkout process. The
problem is especially evident with cross-border purchases, where the cost indicated at
the final checkout screen may not include additional fees that must be paid upon
delivery such as duties and brokerage. Some services such as the Canadian based
Wishabi attempts to include estimates of these additional cost, but nevertheless, the
lack of general full cost disclosure remains a concern.
Privacy
Privacy of personal information is a significant issue for some consumers. Different
legal jurisdictions have different laws concerning consumer privacy, and different
levels of enforcement. Many consumers wish to avoid spam and telemarketing which
could result from supplying contact information to an online merchant. In response,
many merchants promise not to use consumer information for these purposes, or
provide a mechanism to opt-out of such contacts.
Many websites keep track of consumers shopping habits in order to suggest items and
other websites to view. Brick-and-mortar stores also collect consumer information.
Some ask for address and phone number at checkout, though consumers may refuse to
provide it. Many larger stores use the address information encoded on consumers'
credit cards (often without their knowledge) to add them to a catalog mailing list. This
information is obviously not accessible to the merchant when paying in cash.
Product suitability
Many successful purely virtual companies deal with digital products, (including
information storage, retrieval, and modification), music, movies, office supplies,
education, communication, software, photography, and financial transactions. Other
successful marketers use Drop shipping or affiliate marketing techniques to facilitate
transactions of tangible goods without maintaining real inventory.
Some non-digital products have been more successful than others for online stores.
Profitable items often have a high value-to-weight ratio, they may involve
embarrassing purchases, they may typically go to people in remote locations, and they
may have shut-ins as their typical purchasers.[citation needed] Items which can fit
through a standard letterbox — such as music CDs, DVDs and books — are
particularly suitable for a virtual marketer.[citation needed]
Products such as spare parts, both for consumer items like washing machines and for
industrial equipment like centrifugal pumps, also seem good candidates for selling
online. Retailers often need to order spare parts specially, since they typically do not
stock them at consumer outlets—in such cases, e-commerce solutions in spares do not
compete with retail stores, only with other ordering systems. A factor for success in
this niche can consist of providing customers with exact, reliable information about
which part number their particular version of a product needs, for example by
providing parts lists keyed by serial number.[citation needed]
Products less suitable for e-commerce include products that have a low value-to-
weight ratio, products that have a smell, taste, or touch component, products that need
trial fittings — most notably clothing — and products where colour integrity appears
important. Nonetheless, Tesco.com has had success delivering groceries in the UK,
albeit that many of its goods are of a generic quality, and clothing sold through the
internet is big business in the U.S. Also, the recycling program Cheapcycle sells
goods over the internet, but avoids the low value-to-weight ratio problem by creating
different groups for various regions, so that shipping costs remain low.[citation
needed.
Aggregation
1. WEBSITES:-
a). google.com
b). management paradise.com
2). BOOKS:-
a). marketing management
3). AUTHORS:-
a). Philip Kotler
b). Ramaswami Namakumari