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Chapter 2

Retail Marketing.

Origin and History.

The word retail is derived from the old French word ‘retaillie’, which means to cut off a piece or

to break a bulk. A Retailer or retail store is any business enterprise whose sales volume comes

primarily from retailing. Retailing includes all activities involved in selling goods or services to

the final consumers for personal, non-business use. The origins of retail are as old as trade itself.

Barter is the oldest form of trade. For centuries, most merchandise was sold in market places or

by peddlers. In the medieval markets the peddlers traveled long distances to bring products to

locations which were in short supply. They could be termed as early entrepreneurs who saw the

opportunity in serving the needs of the consumers at a profit. The remains of major Greek cities

are witness to the fact that retailing existed even then-the agora, or the market, which existed

then, served the needs of the local population. In most parts of the world, a flea market-typically

a place where vendors come to sell their goods-could be the earliest form of the retail

congregations. The original flea market is likely to have existed as the Marche’ aux puce’s in the

suburbs of Paris in the 17th century. Over the years, these markets have existed across major

cities of the world, selling a diverse array of products.

In 1852, Bon Marche, the first departmental store, was set up in Paris. Bon Marche

revolutionized retail at that time by relying on volume rather than high mark ups, to make

money. The success of Bon Marche led to other departmental stores coming up across Europe

and America, which continued to grow and flourish until world war-II .

The industrial revolution saw the retailers evolving new methods of operations. The importance

of food for the working class consumers and the difficulties faced by them in procuring the food

products led to the emergence of co-operative societies in the united kingdom. The 1930 saw the

emergence of super markets. The end of world war-II reordered the retail scene. The first hyper

market that was developed was Carrefour in France on 1963. Shopping mall, a late 20th century

development, was created to provide for the consumer’s need in a single, self contained shopping

area. A large branch of a well known retail chain usually serves as a mall’s retail flagship, which

is the primary attraction for consumers.

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Evolution of retail formats

The evolution of retail formats worldwide has been largely influenced by a constantly changing

social and economic landscape. Consumer demand is the prime reason for the emergence of

various formats. The theories are developed to explain the process of retail development revolve

around the importance of competitive pressures, investment in organizational capabilities and the

creation of a sustainable competitive advantage, which requires the implementation of strategic

planning by retail organizations. (a) Environmental- where a change in retail is attributed to the

change in the environment in which the retailers operate.(b) cyclical-where changes follows a

pattern and phases can have definite identifiable attributes associated with them and (c)

conflictual- where the competition of conflict between two opposite types of retailers, leads to a

new format being developed. With the growth of industrialization and urbanization, the distance

between the manufacturer of a product and the actual consumer has increased. In our world,

many products are manufactured in one country and sold to a market in another. Most producers

no longer sell their products or services directly to the consumers, but instead use intermediaries

to get their product to the final consumers. Manufacturer or suppliers that offer products for

immediate consumption are known as direct manufacturers or suppliers. More traditional

manufacturers or suppliers are associated with delayed consumption. Companies which deal

primarily with immediate consumption are known as service providers, while those that deal

with delayed consumption are retailers.

Theories of Retail Development.

As the needs the consumers grew and changed, one saw the emergence of commodity

specialized mass merchandisers in the 1970s. The seventies were also witness to the use of

technology entering retail sector with the introduction of the barcode. Specialty chains developed

in the 80s as did the large shopping malls.

Shopping malls, a late 20th century development were created to provide for the consumer’s

need in single, self contained shopping area. Although they were first created for the

convenience of suburban populations, they are now found in many main city thoroughfares. A

large branch of a well known retail chain usually serves as a mall’s retail flagship, which is the

primary attraction for consumers. In Asian countries, many malls house swimming pools,

arcades and amusement parks.

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The world of retail changed yet again, when in 1995, Amazon.com opened its doors to a

worldwide market on the web. With the growth of the worldwide web, both retailers and

consumers can find suppliers and products from anywhere in the world. Thus, the evolution of

retail formats worldwide has been largely influenced by a constantly changing social and

economic landscape. One of the main reasons for new formats emerging is the consumer himself.

Today’s consumer when compared to the consumer of the earliest generation is definitely more

demanding and is focused on what he wants. Consumer demand is the prime reason for the

emergence of various formats.

The retailer on the other hand, has been influenced by factors like the availability of real estate

and the increase in its prices. He is faced with the challenge of adding on new services and the

need for differentiation. This has led to specialization and the emergence of specialists. Supply

chain complexities and the increasing pressure on margins have also forced retailers to look at

new formats.

Retail development can be looked at from the theoretical perspective. No single theory can be

universally applicable or acceptable. The application of each theory varies from market to

market, depending on the level of maturity and the socio-economic conditions in that market.The

theories developed to explain the process of retail development revolve around the importance of

competitive pressure, the investments in organizational capabilities and the creation of a

sustainable competitive advantage. This requires the implementation of strategic planning by

retail organizations. Growth in retail is a result of understanding market signals and responding

to the opportunities that arise in a dynamic manner. Theories of retail of retail development can

broadly be classified as:

1) Environmental – where a change in retail is attributed to the change in the

environment in which the retailers operate.

2) Cyclical – where change follows a pattern ad phases can have definite identifiable

attributes associated with them.

3) Conflictual – the competition or conflict between two opposite type of retailers leads

to a new format being developed.

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Environmental Theory: Darwin’s theory of natural selection has been popularized by the

phrase survival of the fittest. Retail outlets are economic entities and retailers confront an

environment, which is made up of consumers, competitors and changing technology. This

environment can alter the profitability of a single retail store as well as of clusters and centers.

The environment that a retailer competes in is sufficiently robust to squash any retail form that

does not adjust.

Thus, the birth, success or decline of different forms of retail enterprise is many a time attributed

to the business environment. For example the decline of department stores in the western

markets is attributed to the general inability of those retailers to react quickly and positively to

environmental change. Those retail outlets which are keenly aware of their operating

environment and which react without delay, again from the changes. Thus, following the

Darwinian approach of survival of the fittest, those retailers that successfully adapt

technological, economic, demographic and legal changes are the ones that are most likely to

grow and prosper. The ability to adapt to change, successfully, is at the core of this theory.

Cyclical Theory. The most well known theory of retail evolution is The Wheel of Retailing

theory. This theory helps us understand retail changes. This theory suggests that retail innovators

often first appear as low price operators with a low cost structure and low profit margin

requirements, offering some real advantages such as specific merchandise which enables them to

take consumers away from more established competitors.

As they prosper, they develop their business, offering a greater range or acquiring more

expensive facilities, but this can mean that they lose the focus that was so important when they

entered the market. Such trading up occurs as the retailer becomes established in his own right.

This in turn, leaves room for others to enter and repeat the process. They then become vulnerable

to new discounters and lower cost structures that take their place along the wheel. Scrambled

merchandising occurs as the retailer adds goods and services that are unrelated to each other and

the firm’s original business to increase overall sales and profit margins. This is termed as the

wheel of retailing . The theory of the wheel of retailing can be understood by taking the example

of department stores, which started as low cost competitors to the small retailers; they developed

and prospered; then they were severely undercut by supermarkets and discount warehouses.

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This theory does not explain the development of retail in all markets. In less developed markets,

introduction may not necessarily occur at a low price – here introduction may occur at a high

price. Hollander was a key observer of retail evolution and he used the analogy of an orchestra

comprised exclusively of accordion players to describe the dynamically shifting retail structure.

This so called accordion effect describes how general stores moved to specialize, but the

widened their range of merchandise again as new classes of products were added. Hollander

suggested that the players either have open accordions representing general retailers with broad

product ranges or closed accordions thus indicating a narrowing of the range, focusing on

specific merchandise. He suggested that at any point in time, one type of retailer would

outnumber the other, but that the situation would continually change through the arrival and

departure of different stores. This analogy illustrates the complexity of the retail scene, and the

way different attitudes to successful retailing will come in and go out of fashion at different

times. The Accordion theory and the Wheel of retailing are known as the cyclical theories.

Conflict Theory: Conflict always exists between operators of similar formats or within retail

categories. It is believed that retail innovation does not necessarily reduce the number of formats

available to the consumer, but leads to the development of more formats. Retailing thus evolves

through a dialectic process, i.e. the blending of two opposites to create a new format.

Concept of Life Cycle in Retail.

The concept of product life cycle is also applicable to retail organizations. This is because retail

organizations pass through identifiable stages of innovation, development, maturity and decline.

This is what is commonly termed as the retail life cycle. Attributes and strategies change as retail

outlets mature. The ‘Retail Life Cycle’ is a theory about the change through time of the retailing

outlets. It is claimed that the retail outlets show an s-shaped development through their economic

life. The s-shaped development curve has been classified into four main phases:

Innovation: A new organization is born, it improves the convenience or creates other advantages

to the final consumers that differ sharply from those offered by other retailers. This is the stage

of innovation, where the organization has a few competitors. Since it is a new concept, the rate of

growth is fairly rapid and the management fine tunes its strategy through experimentation.

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Levels of profitability are moderate and this stage can last up to five years depending on the

organization.

Accelerated Growth: The retail organization faces rapid increases in sales. As the organization

moves to stage two of growth, which is the stage of development, a few competitors emerge.

Since the company has been in the market for a while, it is now in a position to pre-empt the

market by establishing a position of leadership. Since growth is imperative, the investment level

is also high, as is the profitability. Investment is largely in systems and processes. This stage can

last from five to eight years. However, towards the end of this phase, cost pressures tend to

appear.

Maturity: The organization still grows but competitive pressures are felt acutely from newer

forms of retailing that tend to arise. Thus, the growth rate tends to decrease. Gradually as

markets, become more competitive and direct competition increases, the rate of growth slows

down and profits also start declining. This is the time when the retail organization needs to

rethink its strategy and reposition itself in the market. A change may occur not only in the format

but also in the merchandise mix offered.

Decline: The retail organization loses its competitive edge and there is a decline. In this stage,

the organization needs to decide if it is still going to continue in the market. The rate of growth is

negative, profitability declines further and overheads are high. The retail business in India has

only recently seen the emergence of organized, corporate activity. Traditionally, most of the

retail business in India has been small owner managed business. It is difficult to put down a retail

organization, which has passed through all the four stages of the retail life cycle. It is necessary

to keep in mind that a retailer need not always move from maturity to decline. By reworking the

marketing strategy or by changing the product or service offering, a retailer may succeed in

moving back to the growth phase after reaching a stage of maturity with a certain format and a

certain mix of products.

Business Models in Retail.

Every business has its distinctive way of organizing the very many activities that are involved in

delivering its product or service to the end consumer. In retail parlance, one would term it as the

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format adopted by the retailer to reach his end consumer. Over a period of time, as business

grows, changes occur in the environment, the consumer and the geographies in which business is

conducted. Companies are confronted with new information and communication technologies,

shorter product life cycles, global markets and tougher competition. Various retail models exist

in the world of retail. To start with, let us first understand what a business model in retail entails.

A business model is the manner in which a business chooses to serve its consumers and

stakeholders. In retail, a business model would dictate the product and / or services offered by

the retailer, the pricing policy that he adopts. The communication that follows to reach out to

consumers and the size looks at the location of Retailer’s retail store. This is termed in retail as a

format in which the retailer operates. It has to be borne in mind that a retail model is relevant

with reference to a particular time frame and the critical factors, which affect the Retail model

are:

1) Trends in market positioning

2) Competition and

3) The organizational capabilities.

These three factors jointly enable the understanding of the contexts and strategies adopted by

retailers over a period of time. The basic classification done is on the basis of store based

retailers and non-store retailers. The store based retailers can be further classified on the basis of

the merchandise that they offer, or by the manner of ownership. This section discusses some of

the prominent retail formats under each classification. The first type of classification that can be

done of the existing business models is on the basis of their ownership.

Classification of Retail Formats

A. Store Based Retailing

B. Non-store Retailing

C. Service Retailing

A. Store Based Retailing

I. Form of organization.

1) Independent retailer

2) Chain retailer

3) Franchise

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4) Leased departments

5) Consumers co-operatives

II. Form of Ownership

1. Government outlets.

2. Co-operative outlets

3. Private outlets.

III Merchandise offered

1) Convenience stores

2) Super markets

3) Hypermarkets

4) Specialty stores

5) Departmental stores

6) Off Price retailers

7) Factory outlets

8) Catalogue showrooms

B. Non – storing Retailing.

1) Direct selling

2) Mail order

3) Tele marketing

4) Automated Vending

C. Service Retailing.

1) Banks

2) Car Rentals

3) Service contracts

4) Providers of various services.

In India, a large number of retailers who operate are independent retailers. Stores like the local

baniya/kirana store and a paanwala, are examples of independent retailers as are stores like

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Benzer, In style, Premsons, Amarsons, etc. The ease of entry into the retail market is one of the

biggest advantages available to an independent retailer. Depending on the location and product

mix that he chooses to offer, he can determine the retail strategy. The independent retailer often

has the advantages of having a one to one rapport with most of his consumers. However, on the

flip side, the advantages of economies of scale and the bargaining power with the suppliers is

limited.

Retailing in the World and Asia.

Wal-Mart is still, by far, the largest retailer in the world. France’s Carrefour is still second.

Germany’s Metro AG overtook the United Kingdom’s Tesco chain and claimed the third

position on the list. The top retailers in the top countries managed to maintain relative stability

on the global retailing stage. There were a few big notable shifts in the world’s largest retailers,

however. Russia fell from the 15 position to the 107 position, the largest drop for any one

country. Spain, Finland, Chile, South Korea, and Brazil also had new retail companies assume

the position of being their country’s largest retailer.

Even though Asia has the countries with the largest populations, it is not the home to the world’s

largest retailers. There are three primary reasons for Asia’s lack of dominance in global retailing.

First, even though Asian countries contain the most people, those people are not the biggest

consumers. The reason they are not the biggest consumers because they do not possess the

greatest wealth. The third reason Asian retail companies are not dominating the global retail

landscape is because so much of their consuming is local and decentralized. There aren’t massive

national chains and franchises that are found in every city like in the United States. Between the

2009 list of World’s Largest Retailers and the 2010 list, Asian retailers have not grown larger,

and in the case of China, have actually dropped substantially in global retail rankings.

The growth of China's retail industry has been hindered somewhat by the traditional custom of

the Chinese people to make most of their purchases from neighborhood, family-run stores and

kiosks. China's most recent retail numbers show that this custom is changing, however.

According to the China Chain Store and Franchise Association, the number of stores of the 100

largest retailers in China increased 18.9% in 2009. The 100 largest retail chains also sold 11% of

all consumer goods in China, and experienced a 13.5% year-over-year growth in 2009. Global

retail companies see the potential in the Chinese retail market as well. More than 25 of the

world's largest retailers are conducting business in China, according to the U.S. Department of

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Commerce. Global retail stores seem to be particularly appealing to the younger generation.

Despite the influx of global retailers, however, Chinese retailers remain dominant and are

growing along with the growing Chinese economy. China now has the fourth largest economy in

the world, and is closing in on Japan, which had the third largest economy in 2010.

Retail Marketing In India.

Indian market has high complexities in terms of a wide geographic spread and distinct consumer

preferences varying by each region necessitating a need for localization even within the

geographic zones. India has highest number of outlets per person (7 per thousand) Indian retail

space per capita at 2 sq ft (0.19 m2)/ person is lowest in the world. India has topped the A.T.

Kearney’s annual Global Retail Development Index (GRDI) for the third consecutive year,

maintaining its position as the most attractive market for retail investment. The Indian economy

has registered a growth of 8% for 2007. The enormous growth of the retail industry has created a

huge demand for real estate. Property developers are creating retail real estate at an aggressive

pace and by 2013, 300 malls are estimated to be operational in the country. Retailing is one of

the pillars of the economy in India and accounts for 13% of GDP. The retail industry is divided

into organized and unorganized sectors. Over 12 million outlets operate in the country and only

4% of them being larger than 500 sq ft (46 m2) in size. Organised retailing refers to trading

activities undertaken by licensed retailers, that is, those who are registered for sales tax, income

tax, etc. These include the corporate-backed hypermarkets and retail chains, and also the

privately owned large retail businesses. Unorganized retailing, on the other hand, refers to the

traditional formats of low-cost retailing, for example, the local kirana shops, owner manned

general stores, paan/beedi shops, convenience stores, hand cart and pavement vendors, etc. In

India, a shopkeeper of such kind of shops is usually known as a dukandar.

Most Indian shopping takes place in open markets and millions of independent grocery shops

called kirana. Organized retail such supermarkets accounts for just 4% of the market as of 2008.

Regulations prevent most foreign investment in retailing. Moreover, over thirty regulations such

as "signboard licenses" and "anti-hoarding measures" may have to be complied before a store

can open doors. There are taxes for moving goods to states, from states, and even within states.

According to a McKinsey & Company report titled 'The Great Indian Bazaar: Organized Retail

Comes of Age in India', organized retail in India is expected to increase from 5 per cent of the

total market in 2009-10 to 14 - 18 per cent of the total retail market and reach US$ 450 billion by

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2015. Furthermore, according to a report titled 'India Organized Retail Market 2010', published

by Knight Frank India in May 2010 during 2010-12, around 55 million square feet (sq ft) of

retail space will be ready in Mumbai, national capital region (NCR), Bengaluru, Kolkata,

Chennai, Hyderabad and Pune. Besides, between 2011 and 2013, the organized retail real estate

stock will grow from the existing 41 million sq ft to 95 million sq ft. India's retail market is

expected to be worth about US$ 410 billion, with 5 per cent of sales through organized retail,

meaning that the opportunity in India remains immense. Retail should continue to grow

rapidly—up to US$ 535 billion in 2013, with 10 per cent coming from organized retail,

reflecting a fast-growing middle class, demanding higher quality shopping environments and

stronger brands, according to the report ‘Expanding Opportunities for Global Retailers’, released

by A T Kearney. India has been ranked as the third most attractive nation for retail investment

among 30 emerging markets by the US-based global management consulting firm, A T Kearney

in its 9th annual Global Retail Development Index (GRDI) 2010. Foreign direct investment (FDI)

inflows between April 2000 and October 2010, in single-brand retail trading, stood at US$

197.04 million, according to the Department of Industrial Policy and Promotion (DIPP).

Policy Initiatives: 100 per cent FDI is permitted under the automatic route for trading companies

for cash & carry trading wholesale trading/ wholesale trading. FDI up to 51 per cent under the

Government route is allowed in retail trade of Single Brand products, according to the

Consolidated FDI Policy document. The Consumer Affairs Ministry has given the green signal to

allow 49 per cent FDI in multi-brand retail. The Securities and Exchange Board of India (SEBI)

has notified the increase in the retail investment limit to US$ 4,391.19 in initial public offers

(IPOs).

Road Ahead: According to industry experts, the next phase of growth is expected to come from

rural markets.

• Rural market is projected to dominate the retail industry landscape in India by 2012 with

total market share of above 50 per cent

• Apparel, along with food and grocery, will lead organized retailing in India

The stationery retailing market in India is also witnessing steady growth due to the arrival of

organized players in the business. India‘s retail market, valued at US$ 353 billion in 2010, is

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projected to grow at a rate of 12 per cent per annum. India has one of the largest numbers of

retail outlets in the world. The organized Indian retail industry has also begun witnessing an

increased level of activity in the private label space, which is expected to grow further in the near

future. There are retail opportunities in most product categories and for all types of formats in

India. Organized retail formats, including departmental stores, hypermarkets, supermarkets and

specialty stores, are fast replacing traditional retail formats such as kirana stores (small mom-

and-pop‘ general stores) due to rising consumer expectations. Retail and fast-moving consumer

goods (FMCG) players have begun devising exclusive marketing strategies to tap the rural

consumer base. Rural India accounts for more than 70 per cent of all Indian households and close

to two-fifths of the total retail consumption pie. Retail companies have realized the importance

of tapping the rural consumer base.

I. Private sector.

(1). Pantaloon Retail: It is headquartered in Mumbai with 450 stores across the country

employing more than 18,000 people. It can boast of launching the first hypermarket Big Bazaar

in India in 2001.

(2). K Raheja Group: They forayed into retail with Shopper’s Stop, India’s first departmental

store in 2001.

(3). Tata group: Established in 1998, Trent - one of the subsidiaries of Tata Group - operates

Westside, a lifestyle retail chain and Star India Bazaar - a hypermarket with a large assortment of

products at the lowest prices.

(4). RPG group: One of the first entrants into organized food & grocery retail with Food world

stores in 1996.

(5). Subhiksha: Subhiksha is a Chennai-based, decade old, no frills, food, grocery, pharma and

telecom, discount retail chain.

(6). Bharti-Walmart: Their plans include US$ 7 bn investment in creating retail network in the

country including 100 hypermarkets and several hundred small stores. They have signed a 50:50

percent joint venture agreement with Wal-mart.

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(7). Reliance: India’s most ambitious retail plans are by reliance, with investments to the tune of

Rs. 30,000 Cr ($ 6.67 bn) to set up multiple formats with expected sales of Rs 90,000 crores ($20

bn) by 2009-10.

(8). AV Birla Group: They have a strong presence in apparel retailing through Madura garments

which is subsidiary of Aditya Birla Ltd.

II. Government sector.

Together with the private sector India has two other powerful streams, i.e., Government sector

and co-operative sector. All most all states have their own State civil supplies corporations. In

India their role is very important in stabilizing and controlling prices and helping, protecting the

consumers from the all bad practices like hoarding, black marketing, weight manipulations etc.

Activities of the Corporation

• Intervention in the market on behalf of the Government for stabilizing the price of essential

items including rice in the market.

• Retailing of FMCG items at price less than the open market price. The consumers will get a

price benefit of 3% -7% less than the open market price.

• Retailing of medicines by opening medical stores. Average 15% discount is allowed to the

consumers for medicine.

• Conducting special fairs for arresting the undue rise in prices in the open market during festival

seasons like Onam, Bakrid, Ramzan, vishu, Christmas etc.

• Issue of essential items at subsidized rates, sabari branded products and other FMCG items to

the sabari stores and Theera maithry super markets.

• Act as a nodal agency for the paddy procurement scheme of the Government and distribution of

Custom milled rice to the Ration retail dealers for issuing it to the cardholders.

• Arranging process of wheat and distribution of Fortified Atta through the Ration shops for the

Government.

• Supplyco is also a dealer of petroleum products like kerosene, Petrol, diesel and LPG with 13

petrol bunks, 3 LPG outlets and one kerosene whole sale depot.

• Retailing of own branded products named “Sabari”, Curry powders, coconut oil, tea, coffee,

spices are marketed under this brand name.

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The turnover of the Corporation increased to Rs. 1257 crores during 2007-08 from Rs 992 crores

in the previous year. The sales turnover during 2009-10 was Rs 2284 crores registering an

increase of 225.63 percent compared to 2005-06. Extended annual benefits of Rs.375 crores to

the consumers of the state against subsidy of Rs 82 crores. Supplyco maintained profit of around

Rs.18.25 crores in the year 2009-10.

III. Co-operative Sector.

The cooperative movement in India owes its origin to agriculture and allied sectors. Towards the

end of the 19th century, the problems of rural indebtedness and the consequent conditions of

farmers created an environment for the chit funds and cooperative societies. The farmers

generally found the cooperative movement an attractive mechanism for pooling their image

meager resources for solving common problem relating to credit, supplies of inputs and

marketing of agriculture produce. The experience gained in the working of such cooperatives led

to the enactment of the Cooperative Credit Societies Act, 1904. Subsequently a more

comprehensive legislation called the Cooperative Societies Act was enacted. This Act, inter alia

provided for the creation of the post of registrar of cooperative societies and registration of

cooperative societies for various purposes and audit. Under the Montague–Chelmesford Reforms

of 1919 cooperation became a provincial subject and the provinces were authorized to make their

own cooperative laws. Under the Government of India Act, 1935 cooperatives were treated as a

provincial subject. The item Cooperative Societies is a State Subject under entry No 32 of the

State List of the Constitution of India.

Today almost all states have state level consumer co-operative federations affiliated to a national

federation called national co-operative consumer’s federation of India ltd. The National

Cooperative Consumers’ Federation of India Limited (NCCF) is the apex federation of the

consumer cooperatives in the country. NCCF was set up on 16 October, 1965 and is

administered under the Multi State Cooperative Societies Act 2002. The present membership of

the NCCF is 136 comprising of Primary Co-op. Stores, Wholesale Societies, State level

Consumer Cooperative Federations, National Cooperative Development Corporation and the

Government of India. The commercial operations of the NCCF are handled through its

headquarters at New Delhi and 34 branches/ sub-branches located in the State Capitals and other

important procuring centers in different parts of the country. NCCF also run a dal processing unit

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at Bhiwani . It also runs two retail counters at Dak Tar Bhawan, Parliament Street, New Delhi

and at Nehru Palce, New Delhi. Grocery: The Grocery business increased from Rs.274.47

Crores in 2008-09 to Rs.398.87 Crores during the year under review. This was mainly due to

efforts made in the business of supply of Imported Pulses, domestic supply of foodgrains, and

other goods to the Cooperatives, State Agencies and other buyers. The Federation procured

sizeable stocks of Paddy in West Bengal during Khariff 2009-10 under Minimum Price Support

Scheme and is likely to expand it in the new financial year in other states also.

Types of Retail outlets.

The retailers are of different types. The retail trading organization can be broadly classified into

two (1). Itinerant retailers (2). Fixed shop retailers.

Itinerant Retailers.

Itinerant retailers are those retailers who have no fixed place of business. They move from place

to place and meet the consumers at their doors and sell the goods. They mainly deal in fruits,

vegetables, fish, clothing, glassware etc. They include hawkers, pedlars, market traders, cheap

jacks, street vendors etc.

Hawkers: Hawkers are those who carry their goods on their hands, carts or bicycles and sell

goods from door to door.

Pedlars: Pedlars are those who carry their goods on their heads or backs and sell goods from

door to door.

Market Traders: Market traders are those who sell their goods at different localities on certain

days known as market days. They sell their goods in front of the main shops when they are

closed for their weekly holiday.

Cheap Jacks: Cheap jacks are those who hire small shops in resident localities and sell their

goods. The shop is not of permanent nature.

Street vendors: Street vendors, who sell goods on the streets, are quite popular in India.

Through shouting out their wares, they draw the attention of consumers. Street vendors are found

in almost every city in India, and the business capital of Mumbai has a number of shopping areas

comprised solely of street vendors.

Fixed shop Retailers.

A majority of retail shops are fixed retail shops. As the name indicates, they have fixed business

premises. Fixed shop may be divided in to (1) Small shops and (2) Large shops.

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Small Shops. These shops are organized on small scale. The business is conducted from

properly established shops. But the turnover and capital are limited. These include Independent

unit stores, Kirana stores (Mom and Pop stores), Convenience and Discount stores etc

Independent unit stores- These stores are located on independent basis i.e., without any

branches and sell small collection of goods to the consumers and cater small sections of the

society.

Mom-and-pop Stores: These are small family-owned businesses, which sell a small collection

of goods to the consumers. They are individually run and cater to small sections of the society.

These stores are known for their high standards of customer service.

Convenience and Discount Stores: Convenience and Discount stores are those that offer their

products at a discount, that is, at a lesser rate than the maximum retail price and located at

convenient places accessible to the consumers. Convenience stores are essentially found in

residential areas. They provide limited amount of merchandise at more than average prices with

a speedy checkout. This store is ideal for emergency and immediate purchases.

Kiosks: Kiosks are box-like shops, which sell small and inexpensive items like cigarettes,

toffees, newspapers and magazines, water packets and sometimes, tea and coffee. These are most

commonly found on every street in a city, and cater primarily to local residents.

Large Scale Retailing.

Mass production of goods necessitated establishment of large scale retail trading houses. Some

of the important types of large scale retail establishments are department stores, multiple shops,

mail order business, consumer co-operative stores etc.

Department store.

A department store is a large scale retail establishment having in the same building a number of

departments each dealing in one particular type of product e.g., there will be stationery,

provisions, drug and cloth departments. Thus it is a combination or collection of many small

shops under one roof and one management. A department store offers a wide variety of articles

and the customer can buy his requirements from a ‘pin to piano’ under one roof.

Multiple shops or chain stores.

Multiple shops are a system of branch shops operated under a centralized management and

dealing in similar lines of goods. It is a form of branch retailing, where a large number of

branches are functioning in different localities under the direct control of the head office.

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Consumer co-operative stores.

These are retail stores owned by a group of consumers themselves on co-operative principles.

These are organized with a view to eliminate middleman and their profits. The capital is

subscribed by the members in the form of shares. These stores purchase goods directly from the

manufacturers and sell them on retail basis to members and non-members.

Supermarkets: A supermarket is a grocery store that sells food and household goods. They are

large, most often self-service and offer a huge variety of products. People head to supermarkets

when they need to stock up on groceries and other items.

Malls: One of the most popular and most visited retail formats in India is the mall. These are the

largest retail format in India. Malls provide everything that a person wants to buy, all under one

roof. From clothes and accessories to food or cinemas, malls provide all of this, and more.

Examples include Spencer’s Plaza in Chennai, India, or the Forum Mall in Bangalore.

E-tailers: The customer can shop and order through internet and the merchandise are dropped at

the customer's doorstep. Here the retailers use drop shipping technique. They accept the payment

for the product but the customer receives the product directly from the manufacturer or a

wholesaler. This format is ideal for consumers who do not want to travel to retail stores and are

interested in home shopping. However it is important for the customer to be wary about defective

products and non secure credit card transaction. Example: Amazon and E-bay.

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. It was common before the 1900s in

the United States and is more common in certain countries like India.

� Delivery, 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 19th and early

20th centuries. Ordering by telephone is now common, either from a catalog,

newspaper, television advertisement or a local restaurant menu, for immediate service.

� 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.

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� Self-service, where goods may be handled and examined prior to purchase.

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

consumers 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.

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, students, or senior citizens.

Customer service.

Customer service is the "sum of acts and elements that allow consumers to receive what they

need or desire from your retail establishment." It is important for a sales associate to greet the

customer and make himself available to help the customer find whatever he needs. When a

customer enters the store, it is important that the sales associate does everything in his power to

make the customer feel welcomed, important, and make sure he leave the store satisfied. Giving

the customer full, undivided attention and helping him find what he is looking for will contribute

to the customer's satisfaction.

Indian consumer changed over the years.

In the past few years the whole concept of shopping has been altered in terms of format and

consumer buying behavior. With the increasing urbanization, the Indian consumer is emerging as

more trend-conscious. Indians have grown richer and thus spending more on vehicles, phones

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and eating out in restaurants. The spending is focused more outside the homes, unlike in other

Asian countries where consumers have tended to spend more on personal items as they grow

richer. The mall mania has bought in a whole new breed of modern retail formats across the

country catering to every need of the value-seeking Indian consumer. An average Indian would

see a mall as a perfect weekend getaway with family offering them entertainment, leisure, food,

shopping all under one roof.

Indian consumer is also witnessing some changes in its demographics with a large working

population being under the age group of 24-35, there has been an increasing number of nuclear

families, increase in working women population and emerging opportunities in the service sector

during the past few years which has been the key growth driver of the organized retail sector in

India. The emergence of a larger middle and upper middle classes and the substantial increase in

their disposable income has changed the nature of shopping in India from need based to lifestyle

dictated.

Indian retail evolution is mirroring Maslow's Theory of need hierarchy

Maslow's theory maintains that a person does not feel a higher need until the needs of the current

level have been satisfied. This is exactly what happened in the Indian retail scenario. All of us

were so used to our local dingy kirana shops that we didn't feel a higher need, until Indians

started travelling abroad and saw the high end retail environment. That, accompanied by our

liberalizing economy, was the harbinger of modern trade in the Indian retail industry.

With the modern retail chains, in a relatively better, safer, well-lit environment, a customer felt

"safe & secure" to buy her groceries. That's the second level need as Maslow outlined. Safe in

the comfort of properly packaged, fixed price, daily use items. Reassured that they will get what

they pay for and secure in the thought that if wronged, they had the remedy of returning to the

retailer, as he was an institution now, not a petty trader. This phase was marked by the entry of

stores like Big Bazaar and others of their ilk. Recognizing this need, the retailers solicited

footfalls by building their retail outlets as recognizable brands and entire advertising and

marketing effort was to establish the brand and drive footfalls into the store, in this phase.

Once the lower need of safety & security was met, particularly for the urban consumer, just like

Maslow's theory says, the consumer in India was ready to move to the next need. That of "Love

& Belonging". To fulfill this need, the retail trade responded quickly. There was this phase

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where almost every retailer had a "loyalty programme" of some sort or the other. Eg. Lifestyle,

Shopper's Stop, Westside, Pantaloons.

These loyalty programs seldom gave any substantial material benefit to the consumer, except to

the really high end ones, but did give them acceptance, inclusion & affection, the three criteria

that typify this level in Maslow's hierarchy of needs. This came through the recognition and

perceived special treatment that the consumer received, more than from the measly points,

millions of which would be needed to even buy a half decent shirt. Advertising and marketing in

this phase highlighted the sense of belonging to a special club.

Entry of MNCs. The world's largest retailer by sales, Wal-Mart Stores Inc and Sunil Mittal's

Bharthi Enterprises have entered into a joint venture agreement and they are planning to open 10

to 15 cash-and-carry facilities over seven years. 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 has argued that livelihoods of small scale and rural vendors

would be threatened. 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.

Challenges.

To become a truly flourishing industry, retailing needs to cross the following hurdles:

� Absence of developed supply chain and integrated IT management.

� Lack of trained work force.

� Low skill level for retailing management.

� Lack of Retailing Courses and study options

� Intrinsic complexity of retailing – rapid price changes, constant threat of product

obsolescence and low margins.

To overcome some of the challenges faced by modern retail, the country is developing a support

infrastructure in form of specialized retail schools.

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Retailing in Kerala:

Although Kerala accounts for only 1 per cent of the total area of India, it contains about 3 per

cent of the country's population. The population density of the state is about 819 people per

square kilometers, three times the national average. Kerala is one of the densest States in the

country and it recorded a population (3,33,87,677 persons) as per 2011 census.

Retailing in Kerala is a subject too subtle and relevant as Kerala is known for more as a

consumer state rather than a producer state. Kerala depends on her neighbouring states for her

consumer needs. Due to the large number of intermediaries involved and the transportation costs,

the prices are high and there is a wide fluctuation in prices of groceries, fruits and vegetables.

Groceries and Fast Moving Consumer Goods are brought directly from the production units of

the neighboring states. In the process of direct purchase from farmers and manufactures, the

intermediaries are removed and a part of the margin or 'profits' earned is disbursed among the

consumers. It is concluded that the future of Retailing in Kerala looks bright and Marketing is

not a function, it is the whole business seen from the customer’s point of view. Urbanization

trend in the state of Kerala shows marked peculiarities. Generally, increase in urban population

growth rate is the result of over concentration in the existing cities especially metropolitan cities.

This is true in the case of urbanization in the other states of India. But in Kerala, the main reason

for urban population growth is the increase in the number of urban areas and also urbanization of

the peripheral areas of the existing major urban centers. The urban sector in Kerala comprise of

five Municipal Corporations and 53 Municipalities. 25.97% of the populations live in urban

areas.

The retailing in Kerala is concerned, the government and co-operative sector is very strong

enough with the private sector to meet the requirements of consumers. The public distribution

system headed with Kerala state civil supplies corporation (Supplyco) and Co-operative sector

with all consumer co-operative stores, Neethi stores (Associated with primary agricultural credit

societies-PACS) and The Kerala State Co-operatives Consumers’ Federation Ltd has gained

enormous consumer support in recent years. The private retail outlets with various retail format

especially supermarkets also catering the requirements of crores of consumers in Kerala. So

major retail outlets in Kerala are

� Government retail outlets (Supplyco & PDS)- The supplyco has 1266 retail outlets-969

Maveli stores, 9 Mobile maveli stores, 3 Mini mobile stores, 8 Super markets, 267

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Labham markets, 3 Hyper markets and 7 people’s bazaars. The Kerala State Civil

supplies Corporation (Supplyco) was set up in the state in 1974 with a mission of “food

security for Kerala” and acts as a second line of PDS in the State by distributing essential

commodities like rice, pulses and spices at reduced prices through a network of 3045

outlets spread all over the State. The intervention of Supplyco in the, market in respect of

essential commodities is of immense relief to the people of the state. The market share of

Supplyco, which was around 16% two years back has now increased to 33%. The

number of consumers visiting the Supplyco outlets, which was 52 lakh in 2006 has gone

up to above one crore per month during 2009-10. As per the Supplyco report, the

number of outlets have increased from 2955 in 2008-09 to 2997 in 2009-10.

� Co-operative retail outlets (Consumer co-operative stores, Neethi stores and

Consumerfed outlets)- The Consumerfed has 87 own retail outlets-85 Mega triveni/Little

triveni Supermarkets,1 Mobile triveni, 1Floating triveni, 22 triveni godowns, 14 Neethi

ware houses, 1 Triveni notebook unit, 1 Computer stationary unit and 1 Hurry curry

powdering unit. The Neethi scheme started with the assistance of government of Kerala

in 1997 has been successfully implemented through 1000 selected primary agricultural

credit societies in all the districts of Kerala for the distribution of consumer goods at the

lowest prices in rural areas. So the co-operatives have 1087 retail outlets.

� Private retail outlets-private sector has more number of retail outlets than government and

co-operative outlets in the form of Margin free supermarkets, Varkeys supermarkets, Big

Bazzars, Reliance super stores and other small/Big and Organized/Unorganized private

retail outlets scattered all over Kerala.

Consumers are very keen in selecting the grocery products and retail outlets. Consumers are

seeking fair goods/services for their hard earned money and scarce time. They want products or

service that meet their specific needs or wants and that are offered at competitive prices with

higher values.

The average Retail Prices of essential commodities during December from 2007 to 2010 (during

October) and its percentage variation over the previous years. While analyzing the prices of 18

essential commodities in 2010 (during October), it was observed that among cereals, rice

recorded the highest increase of 31.5 percent over the corresponding period of previous year.

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Dhall and greengram, registered a decrease of 18.7 percent and 0.5 percent respectively. The

retail prices of Blackgram and Redgram hiked by 18.3% and 3.9% respectively.

Under other food items the price of milk hiked by 15 percent and egg by 12.8 percent. Oil and

oil seeds experienced a heavy rise during October 2010 over the corresponding period of the

previous year i.e., Coconut oil by 59.6 percent, coconut by 42.3 percent, refined oil by 14.6

percent and ground nut oil by 6.1 percent. Among spices and condiments the price of

corriander decreased by 23.2% and Chillies by 10.1%. The price of Onion (small) increased by

5.7 percent. Under Tubers, potato recorded a decrease in price of 31.6 percent during October

2010 compared to the corresponding period of 2009.

Consumption Expenditure.

The Report of 64rd round of Sample Survey on ‘Household Consumer Expenditure in India,

2007-08 ' carried out by National Sample Survey Organization (NSSO) relates to the period

from July 2007 to June 2008. Monthly Per Capita Consumer Expenditure (MPCE) for a

household is the total consumer expenditure over all items divided by its size and expressed on a

per month (30 days) basis. A person’s MPCE is that of the household to which he or she

belongs. Bihar, Chattisgarh, Jharkhand, Madhya Pradesh, Orissa, Uttar Pradesh and West

Bengal, the average MPCE is below the national average, the lowest being in Orissa (Rs 559).

The All India average MPCE for urban sector as per the report is Rs 1472. State-wise analysis

reveals that Kerala had the highest MPCE of Rs. 1948 followed by Maharashtra (Rs. 1709),

Karnataka ( Rs 1668) and Punjab (Rs 1633). The average MPCE of urban sector is the lowest in

Bihar (Rs. 1080) preceded by Uttar Pradesh (Rs.1121), Madhya Pradesh (Rs.1190) and

Rajasthan (Rs 1265).

An analysis of the average consumer expenditure per person for a period of 30 days in various

National Sample Survey Rounds shows that the percentage variation of consumer expenditure in

Kerala over All India in the urban sector stood at 8.4 percent in 1983-84 while it was 29.5

percent in the rural sector. In 2000-01 it was 31.6 percent in urban areas and 70 percent in rural

areas. This percentage variation reached a peak level of 33.7 in urban areas during 2005-06 (62nd

Round) and 81.3 percent in rural during 2004-05 (61st Round). During 2007-08 (64th Round) the

percentage variation was 32.3 in urban areas and 79.1 in rural areas.

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Level of Consumption in Kerala

In Kerala, only 20 per cent of the rural population belonged to households with monthly per

capita consumption expenditure (MPCE) less than Rs 588 during 2007-08 and 60 percent

belonged to households with MPCE less than Rs. 1103. In urban Kerala, 20 percent of the

population belonged to households with MPCE less than Rs. 1659 and 60 percent belonged to

households with MPCE less than Rs. 1332. (Source: Economic Review 2010).

As per the latest NSS Round (64 rd Round) during 2007-08 the average expenditure on food

items per person for 30 days in the rural areas of Kerala was Rs.564.14 as against the All India

figure of Rs 404.33. In rural areas, the expenditure on non food items per person for 30 days was

Rs 818.77 in Kerala and Rs 368.03 at the All India level. In the urban sector, the average

expenditure on food items per person for 30 days during 2007-08 in Kerala was Rs 703.19 and

on non food items the expenditure was Rs 1244.77 against the All India figure of Rs 582.43 and

889.11 respectively. In the urban areas, both Kerala and India spends more on non food items

than on food items.

Wholesale Price Index (WPI) is the most popular measure of inflation in the country. The

Wholesale Price Index of agricultural commodities in Kerala in 2010 (Up to March) went up by

280 points compared to the corresponding period of 2009 registering an increase of 7.4 percent.

Among food crops, the highest price hike was recorded for molasses (38.9%) followed by

condiments and spices (21%) and rice (10.5%). The price of food crops increased by 10.8

percent. The price of plantation crops increased by 28.1 percent while oil and oil seeds

decreased by 8.5 percent. While analyzing the prices of commodities it can be seen that the price

of condiments and spices and also fruits and vegetables showed continuous increase during 2010.

The price of molasses and oil seeds decreased during the period under review.

Kerala- A food deficit State.

Only 15% of the food grains required is produced here. Rest of the requirement is met from

other States like Tamil Nadu, Andhra, MP, Bihar, Gujarat etc. Therefore, Public Distribution

System is very relevant for the State, where there is more than 75 % deficit in food grain

production. The Public Distribution System in the State came into existence from 1-7-1966 with

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the implementation of Kerala Rationing Order, 1966. The coverage of ration population is

nearly hundred percent.

The prime objective of the Civil supplies Department is to run the Public distribution System in

an effective manner and to ensure that rationed articles are made available to consumers at

subsidized price fixed by the Government. The department is also responsible for ensuring

availability of essential commodities in the market at reasonable prices as well as to prevent

unfair trade practices like hoarding undue profiteering and black-marketing.

Today the Civil Supplies Department has to administer a PDS that caters to the needs of 7055531

ration cardholders (as on June 2010) by making available rationed articles at subsidized price

through a network of 336 Authorized Wholesale Dealers, 295 Kerosene Wholesale Distributors

and 14246 Authorized Retail Dealers.

The Targeted Public Distribution system (TPDS) in the State has been implemented with effect

from 01.06.1997 as decided by the Govt. of India. Accordingly families under Above Poverty

Line and Below Poverty Line categories have been identified and distinctive ration cards under

each category have been issued and food grains distributed to the families under each category at

different prices