RETAIL MANAGEMENT CASE STUDY NO.

2 STRATEGIC REALITIES IN RETAIL Major retailers in India, who had adopted a wait and watch policy till sometime back, are now back in action. The reason for this can be inferred from a comparison of consumer spending habits in 2003 with those in 2008, which revealed that the expenditure on food, clothing, personal care and entertainment has increased substantially. In terms of figures, the spending by all the Indian Households is around 60% of the countrys GDP. The changing demographic profile of the country is poised to push household consumption spending to $510 Billion over the next five years, from the current estimated level of $250 billion, says DSP Merril Lynch [DSPML] in its latest Report on the Indian Economy. In real terms, the report expects household consumption to grow at a compounded annual growth rate of 11.2% during this period as against seven per cent in the last seven years. The rising consumption level will double the Gross Domestic Product [GDP] to $ 5 Trillion by 2010, the report adds. Shopping habits of Indians are changing due to their growing disposable income, relative increase in the younger population, and the change in attitudes towards shopping. The emphasis has changed from price consideration to design, quality and price. The desire to look and feel good is also a guiding factor for the customers while making their purchase-decisions. Owing to these factors, retailing in India, which was earlier only five per cent organized is going towards a more organized outlook. Retailers hence seen an opportunity to pump in more capital in the retail projects. However, since the recent surfacing of economic meltdown, the developing trend in the Indian Retailing has taken a bit of turn. The growing level of disposable income is one of the major drivers of inflation, which has prompted the Government and RBI to increase rates as suggested by a recent CII Report. The world recession also had a major contagion effect on the Indian Economy leading to a major drop in the purchasing power of the consumers. This showed a temporary fall in the profit margins of most retailers. To stabilize the situation when there was a major price cut in most of the consumer goods, consumers acted smart. They are of the opinion that if the prices are falling, why not we wait longer till they fall further?

To come out of this problem, Indian Retailers are coming up with more and more lucrative offers in recent times. For example, Future Groups Big Bazaar went for the Great Indian Shopping Festival in the recent past providing high discounted offers to its customer. Another scheme Get Your Old Cloths, Get Upto 250 Discount offered for the first time by Pantaloons in select stores in Mumbai and in some parts of Maharashtra show how desperately Indian Retailers are trying to attract footfalls. The scheme comes at a time when customers are deferring purchases; companies are lying off workers, cutting salaries and halting production to combat a slowdown. Faced with dwindling demand, retailers are coming up with innovative marketing schemes, re-looking at Store Models, raising Sales Target for Employees, Shutting down Unviable Stores and Seeking Lengthier Credit Lines from Suppliers. Most Retailers have frozen their expansion plans and are having a re-look at their investments to beat the slowdown. Year 2015 is expected to be a year of consolidation for the Indian Retail Sector. As a result of adoption of the best practices and restructuring of business models by the retailers, organized retail is expected to realign itself to the market conditions and create new areas of growth. Retail giants are of the view that there is no reasons which can stop them to reach out to their customers and cheer them up when things are looking shaky on the financial and terror end. QUESTIONS: 1. Identify major environmental factors that can affect the demand for customers. 2. How can a Retailer seek to respond to the environmental changes as rapidly as possible