Retail Industry : Strategy

Stategy suggested:
A rapid penetration strategy is suggested at this stage i>e low price and high promotion.

Growth: In growth stage, the market is developing quickly and also ready for modern retailing. Countries, which are in Peaking stage, are India, Ukraine and Vietnam. Retailers entering this stage have the best chance for long-term success. Retailers at this stage should enter through local representations, sourcing offices and new stores. Wal-Mart success in china in the late 1990's and early 2000's gives us the importance of committing to a promising high-growth market at right time.

Strategy suggested: The strategy of adopting quality and styled products with new models and shift of advertising from product awareness to product preference Eg the big bazaar advt says surf exel is cheaper than the market price.The idea behind adopting strategy is to strengthen against competitors.
Maturity: In this stage the market is still big and growing, but the space for new entrants will become tighter and retailers should act quickly at this stage because retailers at this stage have limited time to explore, and also their margin for error is thin. In general , they should act according to the established rules and should be open to face the competition from international retailers. This stage generally lasts longer than the previous two stages.Strategy suggested: Enter new market segments that is either enter new geographic areas eg vishal megha mart has opened stores in smaller cities tier II and III citiesDecline: The window of opportunity is closing fast and modern retail share is reaching 40 to 60 percent.

Though the opportunity is closing the existing retailers can enter with new formats such as discount models or non-food formats such as consumer electronics and apparel. Window of opportunity ends for about 5 to 10years before a market enters the closing phase and reaches saturation level. India for example, was in the opening stage in 1995 and entered peaking stage in the year 2003 and reached number 1 rank in2005. Strategy suggested: Identifying weak segments, maintaining investment level selectively.Unorganized retailing in India In India, the most of the retail sector is unorganized. In India, the retail business contributes around 11 percent of GDP. Of this, the organized retail sector accounts only for about 3 percent share, and the remaining share is contributed by the unorganized sector.

The main challenge facing the organized sector is the competition from unorganized sector. Unorganized retailing has been there in India for centuries, theses are named as mom-pop stores. The main advantage in unorganized retailing is consumer familiarity that runs from generation to generation. It is a low cost structure, they are mostly operated by owners, has very low real estate and labor costs and has low taxes to pay. Organized retailing in India In late 1990's the retail sector has witnessed a level of transformation. Retailing is being perceived as a beginner and as an attractive commercial business for organized business i.e. the pure retailer is starting to emerge now. Organized retail business in India is very small but has tremendous scope. The total in 2005 stood at $225 billion, accounting for about 11% of GDP. In this total market, the organized retail accounts for only $8 billion of total revenue. According to A T Kearney, the organized retailing is expected to be more than $23 billion revenue by 2010. In organized retailing will grow faster than unorganized sector and the growth speed will be responsible for its high market share, which is expected to be $ 17 billion by 2010-11. Retailing will show good prospects in cities like Mumbai, Delhi, Chennai, kolkata, Banglore and Kanpur. After Dubai, Singapore and Hong Kong, In India Delhi will be the next big retail destination, According to Confederation of Indian Industries whose findings have shown that Delhi has the good resources and good conditions for the retail sector. Out of the total earnings of the Government of Delhi Rs 11,000 crore, Rs 6,500 crore is achieved from the retail sector.- Share of Organised Retail 1999 2002 2005 Total Retail (in billion INR) 7000 8250 10000 Organized Retail (in billion INR) 50 150 350 % Share of Organized Retail 0.70% 1.80% 3.5% The organized sector is expected to grow faster than GDP growth in next few years driven by favorable demographic patterns, changing lifestyles, and strong income growth.

This organized retail sector mix includes supermarkets, hypermarkets discounted stores and specialty stores, departmental stores. For example, Spencer network has 69 stores, which includes seven Spencer hypermarkets, three Spencer super markets and 49 Spencer Dailys. Now the company is planning to open 20 stores in 10 cities in six months. The top 10 retailers account only for 2% of total market, today modern retailing is expected to enter a boom phase, which has major players and these players might capture 10% of total market, within next five years. The retail sales in India for future are shown below (data from 2005-2008 is based on estimates): PRESENT INDIAN SCENARIO * Unorganized market: Rs. 583,000 crores* Organized market: Rs.5, 000 crores* 5X growth in organized retailing between 2000-2005 * Over 4,000 new modern Outlets in the last 3 years* Over 5,000,000 sq. ft. of mall space under development* The top 3 modern retailers control over 750,000 sq. ft. of retail space * Over 400,000 shoppers walk through their doors every week