Sunday, November 30, 2008


Another important development in the Indian retail industry is the emerging concept of Forecourt Retailing, a retail format having an unlimited growth potential in India.
With the rising fuel prices, the margins of the oil companies are being hit hard. More and more emphasis is being given to layout planning, visual appeal, customer service and providing value added services to the consumers. Since, fuel is a commodity and there exists no brand loyalty in the customer’s mind so the companies are trying to 32 woo customers to their fuel stations by providing other ancillary services. It is with this objective that more and more companies are entering into the concept of forecourt retailing. Although the industry is still in its infancy stage of its life cycle, unlike in other places like US and Europe where the industry has matured to quite an extent. In the Asia Pacific region, only the Japanese market has accepted the concept of Forecourt Retailing and in other parts including India, the industry has had a very dismal start.
There exists a strong synergy between Forecourt Retail business and Fuel Retail industry. The various aspects which provide strong linkages between the two industries are:

1. Network: The network of the fuel stations is very huge. They are present in each and every part of the country.
2. Location: owing to its ubiquitous presence, the fuel stations are located in almost every major locality and cater to all the economic segments with are in need of fuel.
3. Number of Footfalls: The number of footfalls in a typical fuel station is almost comparable to that of any big supermarket. Each day, lakhs of people visit these fuel stations to get their automobiles re-fuelled.
4. Space Availability: Most of the fuel stations have much idle space available within their premises. This space can be better utilized to conduct some sort of retailing business like coffee shop, convenience store etc.
5. Financial Backing: All the players operating in the fuel retail sector are very sound in terms of financial strength. This means that if they have the capability to venture into forecourt retail in a big way and scale up rapidly.

Indian Oil is planning to partner with existing retailers, such as Apollo, for pharmacies, Subhiksha, bookseller Crossword and Cafe Coffee Day. This' is similar in concept to the "In & Out" retail store format at competitor Bharat Petroleum Corp. Ltd, which has formed strategic alliances with major brand owners, retailers, and music stores Planet M and Music World, among others.
Globally, petrol pump-based convenience stores have developed into large businesses with companies such as Royal Dutch Shell Pic., Caltex Australia Petroleum Pty Ltd, and BP. Generating profits from convenience store chains. India's organized retail business is quite nascent, constituting 3%, or $6.4 billion, of an estimated $200 billion Indian retail business. Consultant KPMG estimates that the share of organized retailers will reach $23 billion by 2010. A KPMG survey says most large retailers expect to grow in excess of 40% per annum in the next three years. Indian Oil, which racks up losses on its core fuel sales at such stations, is hoping it can benefit from that growth and start generating profits from its essentially existing, sunk cost. To read the initiatives taken by Bharat Petroleum …………….

Thursday, September 11, 2008

Zooming ahead with Petro Retailing

Retail is one of India’s largest industries, accounting for over 10 per cent of the country’s GDP and around eight per cent of the employment. With a contribution of 12% to this industry, the petroleum retail sector is one of the largest segments of the industry. The petroleum retailing industry in India faces significant challenges in the deregulated environment with low product differentiation, lack of customer loyalty, coupled with intense competition, a downward pressure is exerted on margins forcing players to adopt new and innovative strategies .India has deregulated the pricing mechanism for retail petroleum in 2002, enabling new players to enter the market. The entry of new players like Reliance will increase the number of stations from existing 19,000 to over 30,000 in the next 4-5 years. This will also reduce the average throughput per station, and total fuel volumes per player. With a market determined pricing mechanism, prices will have to be lowered, thus reducing margins from fuel products. With limited growth in the number of vehicles, the retail fuel volumes will remain stagnant, thus offering little scope for further improving the overall revenues and margins. In such scenario, the petroleum retailers will need to develop differentiated value propositions, to improve revenues and their bottom lines, by adopting a customer focused approach and building strong brand equity.

To drive revenues and margins, the retailers will have to attract new customers or increase share of their existing customer’s wallet. The latter can be achieved by offering non-fuel products and services. Non-fuel products, which offer higher margins compared to petroleum products, enable companies to sustain themselves, especially during times when oil prices are high. However, keeping in mind that petroleum retailing is a retailing of product and service, with differentiation possible petro-retailers will have to take a look into the retail skills and accordingly have to make adjustments in that. Network optimization, proposition/brand management, dealer management, site operations management, partner management, customer relationship management etc. are some of the skills that should be incorporated to succeed in the changed scenario. Immense competition in this sector will make loyalty programs for every segment of consumers as an integral program of the day- to-day functioning of petro-retailing. Moreover, proper understanding of market forces and economics at state/territory level will be the most important factor which will help not only help in smooth functioning of business but also drive customers to the outlet.

Saturday, August 30, 2008

Retail Destinations

A.T. Kearney’s Global Retail Development Index (GRDI) ranks 30 emerging countries on the urgency for retailers to enter the country. The scores are based on 25 variables across four primary categories: economic and political risk, retail market attractiveness, retail saturation levels and time pressure (difference or addition between gross domestic product and modern retail area growth). Vietnam's leap from fourth in the 2007 GRDI to first place in 2008 was driven by strong GDP growth of 8%, changes to the country's regulatory structure favoring foreign investors, and increasing consumer demand for modern retail concepts. India, Russia and China, the top three countries in last year's GRDI, remain important retail investment destinations, but high real estate costs and growing competition have decreased their attractiveness relative to prior years and forced retailers to look for opportunities in tier II and III cities. According to GRDI 2008 report, the Middle East/North Africa region is clearly the world's hottest region for retail expansion. The strong Euro supporting investment in the region, consumer familiarity with modern retail concepts and petrodollar wealth are the primary factors making the region an attractive retail destination. Among the gulf countries, Saudi Arabia, with a robust 9 percent growth rate and low retail consolidation is among the most attractive global retail destinations.

While Eastern and Central Europe as a whole remain attractive for retail investment, the ‘window of opportunity’ for large-scale supermarket and convenience store build-outs will likely close over the next year or two, according to the GRDI. The opportunity for entry into Eastern Europe is for wave-2 retailers — do-it-yourself, consumer electronics and apparel retailers — as multi-level fashion malls and mixed-use centers are cropping up throughout the region. India continues to be one of the most attractive countries for global retailers today. The retail market opportunity is larger than ever at $510 billion and spending patterns and consumer maturity are growing faster than most global retailers had forecast. But challenges have emerged which could potentially slow the pace of growth for global entrants. Foreign players entering India today face stifling regulations, a clouded political atmosphere, soaring real estate costs and a fiercely competitive domestic retailer group. In China, the countryside has turned into the next retail battleground, despite China's drop to number four in this year's GRDI. China remains one of the fastest-growing economies in the world. Although its per capita GDP remains low given China's large population, consumer spending has more than doubled from the mid-1990s and continues to grow rapidly in the large southern and eastern cities.

Saturday, August 23, 2008

Stylish Retailing

There is a trend towards offering extended product ranges that are focused onto a particular customer type; this is called lifestyle retailing. It is a real understanding of how far a lifestyle can extend and formulating a product offer that reflects the approach to life and the choices a consumer would make. A lifestyle retailer can be a generalist or specialist. A generalist lifestyle retailer would offer a wide variety of product categories, with shallow but very specific orientation to the products. A specialist lifestyle retailer might offer both depth and variety, but targeted to very specific lifestyle needs. The introduction of lifestyle format is not an easy one to undertake as it involves lot of innovative activities. But the companies generally lose the ability to innovate as they develop and mature. To allow innovation to occur firm must acquire a dual mode of operation one made of the existing business and a very different approach for new embryonic business. Research findings highlight that recipe of success of lifestyle retailing not only lies in product and design but also in managing the customer relationship management and designing organizational structure to manage innovation. In Britain, there is no consensus on what the concept means and further there is no theoretical and empirical research on the concept as it means somewhat different things to different people.

Retailing in India in the lifestyle segment as well as the value retail segment is in the nascent stage. The opportunity is really big for any player in the retail sector. Lifestyle has been a trendsetter of sorts in the Indian retail industry. In India we have used international experience and expertise to redefine the retail environment which has reached new heights of customer delight. Today, there are five major lifestyle retailers in India; Lifestyle, Westside, Shoppers' Stop, Globus and Ebony which alone account for a little over 200,000 square feet of retail space. ITC’s Lifestyle Retailing Business Division has established a nationwide retailing presence through its Wills Lifestyle chain of exclusive specialty stores. Pantaloon also sees spurring further growth in lifestyle retailing focus. The most recent example is of Madura Garments Lifestyle Retail Company, a 100% subsidiary of AV Birla Nuvo, is working on setting up 12-14 stores to meet the fashion needs of the urban Indian man.

Friday, August 15, 2008

Midnight Retailing

It was close to midnight and the crowd wasn't showing any signs of letting up. The DJ was still spinning fast paced music and finger food and non-alcoholic energy drinks kept coming. And the hosts weren't complaining that the party was stretching into the wee hours. The "party", which kicked off at 10pm and lasted until 2 am, was hosted by denim marketer Spykar Lifestyle Pvt. Ltd and had already generated three times the revenue that a similar sale by the company during normal day-time hours at the Bandra store in Mumbai. The midnight-sale by Spykar has become one of the many retail innovations that stores are using to get more shoppers into their stores. In Midnight retailing, the retailer invites loyal customers, celebrities and media and much like a "happy hour" in a bar, retailers offer steep discounts during such "off" hours or on certain days when foot traffic is normally slow. This recent practice is result of weak sales in a slowing economy or as sales gimmicks to attract media attention-such.

Most midnight openings occur at the mall-based specialty stores and outlet malls that felt overshadowed by all the action and attention lavished on the discount chains and department stores for opening at dawn. The “midnight madness” trend is part of an effort by smaller retailers to steal consumers from their bigger counterparts in an increasingly crowded marketplace comprising traditional bricks-and-clicks stores, retail web sites, eBay and other alternative outlets. By keeping malls open all night, their hope is to lure shoppers away from the competition. There will be giveaways and sales, playing off the same kind of door-buster frenzies offered elsewhere. There also is an expectation that the novelty of shopping in the middle of the night will be an attraction. One goal of Midnight Madness is to put some of the fun back into an experience that, in some cases, has turned dangerous as there has been trampling and shoving at door-buster sales, and some shoppers were injured on their way into Wal-Mart stores last year.
“ Shoppers will come if you give them a fun, festive atmosphere.”

Thursday, August 7, 2008

Scented signals from consumers ...

Have you ever thought of the effect on your behaviour in a restaurant where lemon and lavender aromas were diffused and compared to a no-aroma control condition?
You’ll be surprised to know that odours have an effect on consumer behaviour. Experiments show that lavender—but not lemon aroma—increased the length of stay of customers and the amount of purchasing. The supposition is that lavender produces a relaxing effect is offered to explain the results. We can take this explanation as most probably correct because this is one of those behavioural aspects of humans on external factors which can’t be conclusively explained and justified with some numbers. Similarly various experimental studies have shown that aromas have a positive impact on human behaviour, emotions and cognition. It was also found that human behaviour is effected when diffusing a pleasant perfume and there increase in the performances of difficult cognitive tasks and there is also improved and rapid performance in computation task.

Scents appear to be relevant to two forms of consumption: product evaluation (for example scent products) and sale’s environment (for example ambient aroma). The scent that was appropriated with a product increased product evaluations. A pleasant ambient scent improved brand evaluations especially for unfamiliar brands while ambient scent increased recall of unfamiliar brand names. Helping behaviour is also positively affected by ambient aromas. Some researchers observed that people in a region of a mall with pleasant food odours (pastry, coffee shop) were more willing to accept a request for change from a male associate than persons in a zone with neutral odours (clothing shops, etc.). Research has shown that students agreed to spend more time on voluntary work when they were exposed to a vanilla or lavender odour before the request. Also, some other observers showed that people exposed to a pleasant odour during a learning task offered their collaboration more easily to the experimenter asking for help at the end of the task. Odours environment in a sales area seems to have a positive effect on consumers’ behaviour. The ambient aroma had a positive impact on the duration of time spent by consumers at a jewellery counter.

Ambient aromas also affect gamblers’ behaviour. During one weekend a slot-machine area in a Las Vegas Casino was odorized. The amount of money gambled in this area was compared to the amount of money gambled in the same area before and after odourization. The results showed that during the experimental weekend, the amount of money gambled was greater by an average of 45.1% compared to the weekend before and the weekend after the diffusion of the aroma. Researchers found no difference between the three weekends when comparing the amount of money gambled in a control slot-machine area which was non-odorized. The study also found that when the concentration was higher, larger amounts of money were gambled. As seen from various research results it is very clear how a consumer is unknowingly influenced by the aroma in his surroundings. Thus, pleasing scent can create a wonderful ambience and add to the customers’ shopping experience, particularly if it is sample of one of the products retailer is selling. In some cases, the best scent may be the absence of any noticeable scent at all, adding to the impression that the store and environment are clean. So make sure that you do notice the fragrance around you while visiting any place and figure out the behavioural changes you go throughout the course.

Sunday, August 3, 2008

Click n Buy: E-retail

Retail is one of the more visible market sectors on the Web. In retail, merchants sell products and services directly to a buyer. E-retail, also called e-tail, occurs when retailers use the Web to sell their products and services. E-retailers constantly challenge the old ways of conducting business as they bring new products and services to market. New software tools make it easy for consumers to compare and assess the quality, image, and price of products. The result of this might be the shrinking of the already diminishing profits of today's vendors. The crowded field of competitors in B2C e-commerce indicates that achieving long-term success in Web retailing requires e-vendors to adhere to traditional economic and marketing principles and apply traditional marketing strategies A customer (consumer) visits an online business at the Web equivalent of a showroom: the electronic storefront. An electronic storefront, also called an online catalog, is the Web site where an e-retailer displays its products. It contains description, graphics, and sometimes product reviews. After browsing through merchandise, the customer makes a selection and adds it to the shopping cart. The shopping cart is a software component on the Web that allows the customer to collect purchases; it is trolley/basket equivalent of the retail showroom. Items in the cart can be added, deleted, or even saved for a future visit. When ready to complete the sale, the customer proceeds to the checkout. At this time, the customer enters personal and financial data through a secure Internet connection. The transaction and financial data automatically are verified at a banking Web site. If the bank approves the transaction, the customer receives an online confirmation notice of the purchase. Then, the e-retailer processes the order and sends it to the fulfillment center where it is packaged and shipped. The e-retailer notifies the bank of the shipment, and payment is sent via electronic channels to the e-retailer. Inventory systems are updated. Shipping information is posted on the Web, so the customer can track the order. The customer typically receives the order a few days after the. E-retailing presents a new way to shop. The store is open 24 hours a day with a few clicks…….

Wednesday, July 23, 2008

Wal-mart's smart move towards India

Wal-Mart the $340 billion retail giant is looking forward at its long time partner P&G to learn the tricks of the Indian market as the company is set to get a foothold in India. Wal-Mart's fabled "efficiencies of scale" and modern distribution methods would be a breath of fresh air in India. So the deal with Wal-Mart is obviously going to lead to an inflow of management and technical know how, which will be extremely beneficial across the Indian economy as and when the practices to be introduced spread. It uses its strength to drive down costs internally and gets hard bargains from suppliers; to live up to its promise of keeping prices low everyday, becoming a formidable inflation-buster. While the joint venture will focus on B2B business, the Bharati group plans to launch small format retail stores shortly.

The Wal-Mart first cash and carry format retail store is expected to open by 2009. This will allow large buyers setting quality standards and demanding new products and would also prompt farmers to form co-operatives or work as employees of agribusinesses . It will also provide small retailers and business owners a wide range of quality products at competitive wholesale prices that will help them enhance their businesses and profitability. Right from SKU’s to product design, packaging and distribution, P&G is collaborating with retailers with the insight in point of sales data for supply chain, merchandising and category performance inside the store. However in India, the bazaar is an institution, a way of life. And, in the view of a growing number of people in India, it is endangered by Wal-Mart. There are 12 million people working in retail in India and all their jobs will be at stake with the advent of Wal-Mart in India. It would cause large scale displacement of small retailers and squeezing of domestic manufacturers and farmers. Expansion of the Wal-Mart chains has caused massive closure of small stores and pauperization of poor communities even in the United States. In the context of huge unemployment existing within the country, such employment displacing FDI is the last thing that the Indian economy needs at the moment.

Tuesday, July 15, 2008

Shop till you drop . . .

Modern retail formats have mushroomed in the metros and mini-metros, and over the last few years have also begun to establish a presence in the next rung of cities, exposing shoppers to varied shopping and entertainment options, all under one roof. Consumers are now seeking the convenience of one-stop shopping, speedy and efficient processing, for best utilization of time. Shopping needs are influenced by factors like family situation, disposable income, time pressure, the attitude towards shopping and the personality of the shopper. It is also said that all consumption activities involve the stimulation of thoughts and/or senses. Cognitive consumption is related to rational thinking and behavior to utilitarian values. Sensory consumption is associated with the intangible benefits that pertain to the emotive and experiential aspects of experience.

Retailers are aware of the importance of the consumer's store choice process. They realize that consumers can buy the same or similar merchandise in any number of outlets. Thus, they undertake a number of activities to attract and keep consumers coming back to their stores. Many retailers, however, are not as aware of the broader "shopping mode choices" of consumers. Retailers consider the store as a way to differentiate themselves and manufacturers see the point-of-sales as a platform for brand activation. However shopper behaviour turns out to be complex and unpredictable, which makes it a tough challenge to effectively address the shopper in-store. Thus, a unique retail outlet image can be one of a retailer’s most valuable marketing assets and is a strategic component in retail marketing.

Tuesday, July 8, 2008

Entry Routes of Foreign Players in Indian Market

In 1997, it was decided that FDI would not be allowed for mere trading since it will lead to outflow of foreign exchange , drive out the domestic unorganized retailers from business and increase unemployment. Although FDI is not allowed in retailing , many international players are operating in India if they set up domestic manufacturing facilities or source the product locally or enter into the market with franchising arrangements. India has been a hotbed for test marketing by global MNC’s with biggies like Nokia, entering India through that route. Foreign Investment Promotion Board allows foreign companies to test market their products for two years by the end of which they are required to set up their manufacturing facilities. The primary purpose certainly is risk mitigation-especially for new products or new variants before investment.

Another route through which large international retailers such as Germany’s Metro Cash and Carry and Shoprite Checkers of South Africa has entered the Indian market. Wholesale cash and carry operations are trading outlets where goods are sold at wholesale rates for retailing and business purposes. While there is protest at one end , different state government departments such as Punjab Agro-Industries corporation has signed a memorandum of understanding with the Metro Cash & Carry International for sourcing of food products for its international operations. It will bring in the required efficiencies in the supply chain for distribution of food within the country and also provide access to world markets. They have also made substantial investment in training up Indian farmers, fisherman etc. in the state of art technology. Over 90 per cent of the products sold are sourced locally even as each wholesale centre helps create, on an average, 300 direct jobs and another 150 indirect jobs. Although wholesale cash and carry is meant for purchase but there needs to be greater clarity in this definition and non-transparent policy as bulk trading does not clearly states the minimum quantity requirements.

Lets discuss more on these entry routes in the comments of the post.

Tuesday, July 1, 2008

"Once upon a time .." The Tale of Retail ...

Retailing consists of the sale of goods or merchandise from a fixed location, such as a department store or kiosk, or by post, in small or individual lots for direct consumption by the purchaser. 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.

This blog is a forum to discuss various issues in retail industry and explore it in depth. We'll post one or two topics of discussion every week and open it for user discussion through comments. Do pass the link of the blog to all your friends across the globe to get an all round view on retail.

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