INTRODUCTION

Retailing is one of the largest and biggest industries in India. Retailing is the biggest

source of employment all over the country'. The retailing industry has existed in our

country for many years, but it is only in the recent past that retailing has witnessed

tremendous growth in India. This has become possible due to the entry of corporate

sectors like- Pantaloons, Tata, Globus, Shopper’s Stop, McDonalds, PVR Cinemas

etc.

In this chapter we discussed about the concept and characteristics of retailing, factors

and various competitors of retailing with special reference to Madhya Pradesh.

1.1. DEFINITION OF RETAILING

The word ‘Retailing’ is derived from French word ‘retailer’, which means to ‘cut oft

piece”. Retailing can be defined as a set of business activities that adds value to the

products and services sold to the final consumers for their personal nesds, family or

household use. A retailer is a main player in the marketing process as he regularly

interacts with the end consumer1.

Marketing efforts are directed by a retailer only for the satisfaction of ultimate

consumer by providing goods and services. As per marketer’s point of view, retailing

is a set of marketing activities, structured to provide satisfaction to the end consumer.

The main goal of retailer is, to maintaining customer base by improving quality of

goods and services.

Book: Retail Management. The Federation ot Universities (PedUni), May 2003, Page no. 4
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1.2. CONCEPT OF RETAIL AND CHARACTERISTICS OF

RETAILING IN MADHYA PRADESH

1.2.1. THE CONCEPT OF RETAIL

Developing and implementing a strategy for the marketing, customer-centered

concept and company-wide approach is essential. Retailing provides the guidelines,

which should be followed by all retailers, including its size, channel design and its

selling medium. The concept of retailing mainly covers four types of broad areas

which is an important part of the retailing strategy in Madhya Pradesh*.

Customer orientation: A retailer has to make a careful study of the needs of the

customers and should try to fulfill their needs and satisfy them.

Goal orientation: Retailers must have clear-cut goals and devices and strategies to

achieve the goals.

Co-ordinated efforts: Every action or activity of the firm is based on achieving

goals. Organization’s goals are mainly designed to increase or maximize the

efficiency and deliver the value to the customer.

Value driven approach: Retailer tries to offer good value to the consumer, with

merchandise having the price and quality appropriate for the target market.

1.2.2. CHARACTERISTICS OF RETAILING IN MADHYA PRADSEH

Retailing can be distinguished in various ways from other business, such as

manufacturing. Retailing differs from manufacturing in the following ways:

2 Jain. J. N, Modern Retail Management Principles and Techniques, Delhi: Regal Publications,
2007, Page. No. 3
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1. Location is a major and critical factor in retail business.

2. In most retail industries, business services are as important as core products.

3. Sales at the retail level are generally in smaller unit size.

4. There is direct end-user interaction in retailing.

1. Point of purchase display and promotions: Retail stores sales generally comes

from an un-planned or un-deciding manner. As per based on research, a researcher

shows that customers do not carry a fixed shopping list for buying any product

Customers generally picks merchandise based product on impulsive or situational

appeal. Even some of the customers do not want to look ads before buying any

product. Many products related to retailing are having low involvement in nature.

Impulsive purchasing of the shopper is a vital area that every retailer must tap into.

For this, point-of-purchase merchandise, store layout, and catalogues become

■5

important characteristics of retailing in India .

2. Larger number of retail business units: The important characteristic of retailing

is location of retail stores. Location of retail store plays an important role compared

to other business units. The decision of choosing the right location is based on

availability of factors of productions and market. This decision is taken by

manufacturers. Retailers consider the various factors like potential demand and

supply of merchandise, and image of store -related factors in locating the retail

outlet.

3. Direct interaction with customers: Direct communication and interaction with

customers of goods or services in the value chain is known as Retail businesses.

3 Jain. J. N, Modern Retail Management Principles and Techniques, Delhi: Regal Publications,
2007, Page. No. 8
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Retailers are the bridge between customers and wholesalers (suppliers) or

manufacturers. Therefore, retailers always stand in the position to effectively handle

the response of end-users and they can change the preferences of the end-users to the

wholesalers or sales person of the company.

MADHYA PRADESH Microeconomc

competitiveness
Institutional support r<,ct0' conditions

financial
Supplier sophistication

Qelated and support­ Physical

ing industries
Per capita GDP
401
Business Communication
incentives

Cl and diversity Administrative

of firms

Context for strategy Human capac tv

innovation
ncome distribution and
spending pattern
Demographics Demand condtons

Graph - 1.1 Per Capita GDP in Madhya Pradesh

1.3. TYPES OF RETAILING AND COMPITITORS IN INDIA

1. Departmental stores: A departmental store is the onl) place where a customer

can get wide-range of product under one roof. Departmental store provide all types

of products (apparels, footwear, electronics, household items), where the consumer

can aspire to buy any kind of product, at one place only.

Merchandise: Footwear. Apparels, Electronics appliances. Jewelry, Cosmetics.

Example: Treasure Island at Indore, DB Mall at Bhopal, C21 Mall at Indore M.P.
 5

2. Discount stores: Discount stores are those, who offers heavy discount on wide-

range of products. The discount stores are little inferior as compared to the

departmental store.

3. Supermarket: A supermarket sales food products and household items. In

supermarket products are properly placed and arranged in specific manner and

categorized according to its types. A supermarket is an advanced from of the small

grocery store, which offers household needs of the customer.

Merchandise: Bakery products, medicines, vegetables, soft drinks, etc.

4. Warehouse stores: Warehouses stores are retail formats, which sell products in

bulk at discount and have limited stock. Such stores do not worry about looks and

interiors of the store. The products are not properly displayed in such stores.

5. Mom and Pop (Kiran a Stores): Mom and Pop stores are also known as ‘Kirana

Sores’, which runs by an individual at nearby locations. Such type of stores fulfills

the daily needs of the consumers. Kirana stores offer, selected items and are not at all

organized.

Merchandise: Eggs, stationary, pulses, cosmetics etc.

6. Malls: Malls are just like departmental stores. Malls operate various retail stores

at one place under one roof. Mall consists of different retail outlets. Each retail

outlets sells their own product or merchandise but at a common platform.

7. Demographics: Demographics are kind of retailers, those who aims to start a

retail outlet, at one fixed segment.

Woodland. Pantaloons showrooms at Madhya Pradesh

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Types of retailing

i
Organized ' Unorganized
L Corporate-backed stores L Local Kirana shops
2. Hypermarkets 2, Hawkers
3. Departmental stores 3, Chemist
4. Malls (T.L, C21 etc,) 4, Apparel shops,
5, Footwear shops

Picture 1.1 - Types of Retailing in India and Madhya Pradesh

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1.4. INTRODUCTION OF RETAIL SECTOR OF MADHYA

PRADESH

Retail sector plays a key role in Madhya Pradesh and is mainly concerned with the

following districts.

Bhopal: Bhopal is the capital of Madhya Pradesh, The economy of Bhopal is mainly

based on industrial area. Sources like cotton, electrical brands, chemicals and flour

mining are main retail businesses of economy of Bhopal. Zardori and embroidery are

famous retail businesses of Bhopal. Bhopal is a metropolitan city. Being a famous

city of Madhya Pradesh, technical sectors like Software and IT are also getting a

boost in the city4.

Gwalior: Gwalior has three main industrial areas- Sitholi, Banmore and

Malanpur. All these three sectors are situated on NH-75, Railroad, National

Highway 3 and NH-92 respectively, in which Malanpur is the largest industrial area.

Industries of Handicrafts work are also found in Gwalior. This city was having big

manufacturing industries like Gwalior Grasim’s and J.C Mills.

Indore: Indore is treated as the commercial capital of Madhya Pradesh. Indore has

bulk of small, middle and large scale manufacturing and services industries. These

industries range from medicals to automobiles and from software to Real estate.

Indore has major industrial area, which is known as Pithampur, and also known as

the Detroit of India.

4 “Economy of Madhya Pradesh”, Wikepedia- The free encyclopedia. Website: www.wikepedia.com

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Jabalpur: The Vindhyanchal ranges supply fresh water in Narmada River of

Jabalpur district, which based into an agrarian economy. Jabalpur district has

developed 60% of Kharif crops and 40% of Rabi crops, which occupies 71.4% of

area under food grain production.

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Copyr>ght © 2014 www mapaofindia.com
(Updated on 18th April 2014) State HQ

Picture 1.2 - Map of Madhya Pradesh

1.5. FUNCTIONS OF RETAILERS OF MADHYA PRADESH

• Provides two way information

• Provides personal services to all

• Undertake physical movement and storage of goods

• Assemble goods from various sources

• Stock goods for ready supply to buyers

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• Extended credit facilities

• Create demand by window display etc

• Facilitates standardization and grading

1.6. MAIN RETAILERS IN INDIA

1. Reliance ADAG retail- Reliance World

2. Shopper’s Stop

3. Nilgiri’s formats- Nilgiri supermarket chain

4. Lifestyle International- Home centre, Max, Fun city

5. Pyramid retailers- Format, Mega Stores Pyramid

6. Next Retail India PVT.LTD

7. Pantaloons Retail Industries Limited (PRIL)

1.7. FACTORS OF RETAILING

Higher GDP: The value that retailing can add to the economy, should not be

underestimated. Original retailing has huge potential, which could tod to higher

GDP growth and generate employment.

Tourism / out hand shopping: The best feature of any city is to attract a huge

number of tourists every year. Foreign countries like-London, Singapore, New York

are well developed shopping environment. Organized retailing is the best medium

through which our nation can also be developed and become a tourist s destination.

India can become a well marketed and managed tourist’s destination.

Real estate: The requirement of real estate in retail industry will be in millions of

square feet, to fulfill this requirement, productive use of large tracts of land tying is
 10

necessary, so the real estate retail industry works with various government agencies

like-the mills, lands, ports, railways, and so on.

Outsourcing opportunities: The value-capturing capacity and modernization of the

farming industry has been favorably affected in countries where retailing and

modernization has been progressed. The supply chain for all FMCG products has

been restricted, end-customers’ price has fallen down on a sustained basis. Both local

and national level employment has been generated significantly, and considerable

national wealth has been created.

1.8. CHAIN SELLING-ORIFLAMME AND AMWAY

Cosmetic leader Oriflamme relies on JDA to support its direct sales model

Oriflamme is one of the largest direct sales companies in the world. Oriflamme

(Luxembourg, Sweden) sell its beauty products through catalogs and a global

network of more than three million sales consultants. This company distributes

copies of its catalog in 40 different languages in more than 60 countries. The catalog

acts as Oriflamme’s global “Shop Window.”

The annual revenue of Oriflamme has increased rapidly since last 20 years. The rapid

and impressive growth of the company has placed pressure on its global production

and distribution network. The company re-launches 1000 of products annually and

replaces 450 of its products.

A new catalog of Oriflamme is published in every three weeks. This catalog is

published for customers with heavy discounts that are valid only for three-week

period. The demand of catalog can dip significantly, when a catalog expires, with the
 11

high level of fluctuation in demand, the company wants to determine exactly, how

much product to keep in stock? To ensure, it’s regular supply and not have its excess

inventory.

A very complex supply network is operating by Oriflamme, with internal and

external production facilities. Oriflamme has a global distribution center and a

network of regional distribution hubs. Oriflamme tries to transport its products in an

agile manner, whether it is very challenging.

1.8.1 FACING THE FUTURE WITH JDA

Oriflamme is now turned to JDA software for helping and managing its fast-growing

business. The company was conducting 95 percent of its work in Excel or via email.

The company also wanted to automate its stock planning processes because the

company wants to ensure its actual orders were connected to the forecast of demand.'

Oriflamme wants to improve its service levels, and creating direct alignment from its

suppliers through its multiple distribution channels, hubs and worldwide markets,

Oriflame selected JDA after evaluating three other software vendors.

JDA's future product development program impressed the company’s financial

strength, client references and the collaborative business relationship.

5 “Cosmetic leader Oriflame relies on JDA to supports its direct sales model” .Case study from “Real
Results Magazine” 2012. Website: www.realresultsmagazine.com
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ORIFLAME
--------fWlDI* ---------

Introduction to Oriflame
Revenues by Geography 2011
• Founded in 1967 in Sweden

• International cosmetics company selling

direct
• Sells direct in more than 60 countries’

• €1.5 billion in annual sales’

• #1 direct sales company and largest

cosmetics brand in the CIS Region

• 3.6 million active sales consultants'

• 7,900 full-time equivalent employees'

[€ nilir*i 2011 2010
jsdes 1 514]
• Portfolio of approx. 1000 products’ 1494
|Grossragn 67.9% 662%]
• Catalogues distributed in 40 languages’ jarroA 132 184]

Adjusted oper;tingprotit 12 154 168|

• Market Capitalization: app. €1.5 billion
Adjusted operatingrragn 12 11.0% 11,1%j
jcasti flow fromooeratng itlwtes 135 95

Net intered bear ngdebt 233 201

' Data as a! Dec 31.2011
• 20 to. Before restructuring costs m the E MBA rag.cn ot f0. 7m and the elect tram the Iran irrparrment at € 10.1m
2011:Before restructuring costs ot (5.9m

Graph 1.2. Introduction to Oriflame

1.8.2 AN IMPRESSIVE TRANSFORMATION

The collaborative team of Oriflamme is working with JDA software. The company

begins to re-check and recalculates the data manually and immediately began to see

dramatic results. This process hardly took a lull month to do it Now the company is

having daily distribution resource planning process. This process is based on weekly

cycle with its suppliers. This process reduces company’s lead timing and makes its
 13

suppliers free from manual work. This process also eliminates double-checking and

increased the confidence level of suppliers.

oritlame

Direct Selling Industry - Product categories

USDBinn

A $111 bn industry with 62 million independent consultants (2307). Source: WFDSA 2006.

Source: Orttaeeslmaton eased an Eaomontadata and other scuces ‘Seeded oroductt n raja imefe "Includes stun care, made up
and other cosnetcs “'Other includes )ewel«ry. gh items. 3Uto care, pet products, various services (e.g. Fower delwery) and otter corsumer
goods terns not accounted la eteewtiere

l JU pyCifcrm Gtr*n S A H

Graph 1.2. Direct selling industry- Product category of Oriflame

 14

The company promises to customers that the product will be available within two-

three days or in a week definitely. JDA gives more information to the company for

reducing lead times and optimizing inventory. Oriflamme is not only the company,

which is able to reduce inventory by 30 percent but, it also seen a high level of

internal satisfaction with JDA.

Employees of the company are quickly begun to see the benefits of JDA fulfillment.

Oriflamme improved the basic business process with JDA solutions. Various people

who uses Oriflamme are became more satisfied by using its products. The company

conducts some surveys for satisfying customers need. The satisfaction level of

Oriflamme’s customers increased up to 80 percent.

1.8.3. CHAIN SELLING OF AMWAY

Meeting global responsibilities of Amway

(i) Direct selling and supply chain of Amway

Supply chain of Amway contains set of links, which brings finished products to end

-consumers. Amway is a direct selling company. The company is having its own

distinct chain, which is able to focus on individual customers and their desires.

Amway manufactures its own brand products, because it’s manufacturing plant is

situated in Ada, Michican. After manufacturing the product, the company distributes

their products directly to the IBOs through a centralized warehouse in Venlo,

Netherlands.
 15

The supply chain of Amway is quite different from a more conventional supply

chain. Normally, the other conventional supply chains sell its goods to final

consumers through retail outlets. The working process of Amway depends on

building long-lasting connections with the consumer After this, customer gives

feedback to the company and IBOs helps to shape future changes in products and the

services provided.

Being as a global company, Amway builds up a strong regional structure around the

world. Amway gives best services to their customers. The regional structure of

Amway is responsible for

• forecasting (ensuring stocks are sufficient to meet demand)

• customer services

• efficient distribution: ensuring products reach IBOs on time and in top

condition

• Product promotion and IBO support e.g. supplying brochures to IBOs.

Amway maintains the regional standard in all over the nation. Amway sells its

products to IBO and then, IBO sells the product directly to friends. For this, it is

most important for IBO to provide best quality and high value for money products6.

Amway puts its efforts, spends lot of money and time for creating an appropriate

design and best appearance for its own products. The company also develops

campaigns that support the business and social aims of the company.

6 “Meeting global responsibilities of Amway, direct sellingand supply chain of Amway”. The Times
100, Business Case Studies. Website: www.thetimes 1 OObusiness com
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1. 9. TYPES OF COMPETITORS IN MADHYA PRADESH

The backbones of retail industry are called Competitors. They provide new concepts

and new marketing strategies. There are three types of competitors

1. Direct Competitors: Direct competitors are those who offer similar services and

product to the end-user. Competitors are also targeting a similar target market.

Suppose one person own a grocery store, and then his direct competitors will usually

open a grocery store.

(Example: Pantaloons, Globus, Apna Bakery at Indore)

2. Indirect competitors: Indirect competitors are those, who are alternately

available to the consumer, as compared to direct competitors. Indirect competitors

provide the same fundamental solution to the consumer. Such competitors always

think that their consumers have several different options in front of them

3. Potential competitors: Potential competitors are those, who are not meant to be

taken lightly. Such Competitors may appear at some point in the future as direct or

indirect competitors. The level of their business is based on that, how a consumer

may hold off in the business. Otherwise such competitors may change purchase

habits in result of their existence7.

Potential competitors hide actual products or services from the consumers. These

types of competitors can change themselves, as per changes in environment such as a

trend shift in the marketplace. Potential competitors are treated as business owner

7 Halim Peter, Uncategorized Blog: ‘Something we like’. February 23, 2010. Website:
www.somethingwelike.com
 17

and as owner of its own business, they needs to look c^efully too and identify all of

their competitors.

1.10. INTRODUCTION OF RELIANCE IN RETAIL SECTOR OF

MADHYA PRADESH

Reliance is one of the largest companies of India. It has been established in Madhya

Pradesh. It mainly deals with the methods of consumer interaction, satisfaction and

their needs and demands.

Reliance has opened Reliance fresh, Reliance petroleum in Madhya Pradesh at

higher level. Reliance Group provides various facilities like fresh food, groceries,

fresh vegetables etc for satisfying the customer needs and demands. The main aim of

Reliance Industries is to satisfy the public and nation by fulfilling their requirements.

Reliance Group mainly interacts with customers by various offers, discounts etc.

Reliance is committed to provide the highest standard of customer experience, to its

valued post paid subscribers.

1.11. MAIN DRIVERS OF RETAILING IN INDIA

1. Rising income: The India’s middle and high class population area growth has a

very rapid pace of over 10 percent per annum over the past decade. This growth has

become most evident in urban areas as well as occurred in rural markets. India is also

known as the second fastest growing economic country in the world.

2, Change in consumer behavior: In current position of the nation, women are

getting literate and employed. As per recent market position, a research was
 18

conducted in Bangalore. As per that research the share of nuclear families in India is

estimated to be as high as 70%. Factors like increase in variety, quality and

aVailability of products are increasing the popularity of supermarkets. Modem

retailing growth is folly based on consumer needs, their attitudes and behavior.

Because of this, buying and shopping habit of customers are increased day by day.

3, New Entrepreneurs: Attractiveness of retail business has going to attract new

entrepreneurs, new ideas and new ventures and also capitalists providing funds.

4, Explosion of Media: Over the past decades, media has boomed and explode.

During gulf-war there was an explosion in television cable, which was kick-started.

Television has accelerated (because of cable connection) more than telephones. (225

million v/s 23 million) and about 90 channels are being aired at all times. This media

bombardment has raised the living standard and lifestyle of consumers. The Indian

consumer has raised their experiences and expectations. Because of heavy explosion

in media customers are becoming more aware about choice, value, service,

experience and convenience.

5. Emergence of hubs of retail activity: - Major retail hubs like Chennai,

Bangalore, and Hyderabad has 77 percent of food sales, which flows through

supermarkets. Most of the consumer durable sales come from specialty chains.

6. Technological impact: The technological impact on customer’s life makes them

easy handling,8 the life of every customer is becoming easier by giving them debit

cards, smart cards and credit cards.

sOutlook Arena: Blog: Equity master.com, “ Retail: The key growih drivers”. Website:
www.equitvmaster.com