Retail Marketing Strategies in India

 Advertising

 Merchandising

It is the practice of making products in stores available to consumers, primarily by stocking

shelves and displays. Types include: Creating attractive displays (ITC Bingo), Trade shows,
Visual display photo galleries.

 Private Branding

Products (or services) which are generally manufactured or provided by one company under
the retailer’s brand. Ex: Big Bazaar has its own line of towels and apparels.

While many elements may make up a firm’s retail marketing mix, the essential elements may
include:

 Store location

 Store image

 Store design

 Sales incentives

 Merchandise assortments

 Store ambience

 Customer service

 Price

 Communication with customers

 Personal selling

The retail marketing mix must be consistent with the expectations of customers and must be
responsive to competition. The important factors in retail marketing include:

Store location

 Target market

 Channel structure

 Channel management

 Retailer image

 Retail logistics

 Retail distribution
People element

 Staff capability

 Efficiency

 Availability

 Effectiveness

 Customer interaction

 Internal marketing

Retail Scene in India

Organised retail was hit by a huge setback in the wake of the economic crisis. There was
heavy expansion with a lot of foreign players showing interest and private players making
in grand entry into what remains one of the biggest, and largely unexplored markets
anywhere in the world — the $350 billion Indian retail market. Domestic players like reliance
Industries, Bharti Group, Aditya Birla Group, Mahindra & Mahindra and the Tatas have
expanded into this market. Even foreign players like Walmart and Carrefour have shown
interest in entering the Indian retail sector.

But, most of these plans have been put on the back burner and many are contemplating exit
strategies.South India-based retail major Subhiksha is busy denying media reports of its
selloff plans even as rumours of smaller retail chains looking for buyers flying thick and fast.
India Inc’s heavyweights in the organised retail — Reliance, Birla, Tata — are back to
drawing boards taking a relook at their strategies.

Most seem to be trudging cautiously on their multi-faceted plans in the face of the
continuous northbound march of property prices, soaring rates of interest and supply chain
challenges that have exposed them to unbearable pressures.
Verambitious expansion, squeezed profit margins, and unsustainable operational costs have
adversely affected India’s organized retail sector

Till recently, the government and the industry alike were betting big on the country’s
organized retail sector, touting it as the growth engine for job creation and economy.

However, the faltering of Subhiksha, which had 1,600 stores till December 2008, seems to
have shattered the hopes. Before Subhiksha’s debacle came into public glare, it was the
shining example of a successful retail venture. Its founder R Subramanian was the blue-
eyed boy of the industry. So what went wrong? Does it mean that the business model that
supports discounted small-stores format is flawed or is Subhiksha only an exception?

The retail scene

The Indian retail sector is largely dominated by nearly 12 million unorganized players, who
constitute nearly 90 to 95% of the sector, which is the highest in any country. On the other
hand, the organized retail sector accounted for only 5 to 7% in 2008. Of these, nearly 80% of
such outlets are small family-owned businesses. In 2008, the size of the retail industry was
pegged at US$ 353 billion in an ASSOCHAM-KPMG joint study. It estimated that the sector
would grow to $410 billion by 2010. The organized retail would value approximately $51
billion by 2010.

The retail sector can broadly classified into four major categories—food and groceries,
consumer durables, apparel, and pharmaceuticals. These together account for almost 60 to
70% of the total retail market. Of these four categories, food and groceries account for the
largest share of 74%, according to India Brand Equity Foundation (IBEF). The food and
groceries segment is estimated at $152 billion. However, organized retail in this sector is just
about 1% of the total share, which also indicates the lowest penetration level amongst other
major categories. This had prompted many big and small players to grab a pie in the
organized retail sector. The major players are Subhiksha, Spencer’s, Reliance Fresh, More
etc.

When the era of organized retail started in India, a lot of players entered this segment. In the
food and groceries section itself, players like Subhiksha, Reliance Retail, Big Apple, Sabka
Bazaar, Spencer’s, More etc started opening outlets and most of them adopted the
discounted small-store format. An industry insider says the model that these companies
adopted was flawed because their expenses far outstripped profit margins. Thus, more
money was seeping out in the form of discounts and operational costs, while less was
coming back into the kitty. Their expenses, which included rentals, employee salaries,
inventory, cost of monitoring etc, were higher than their margins.

Unmindful expansion strategy

This one seems to be the biggest demon of all. This is a factor that has impacted all
retailers. It is just that some have been impacted more and some less. The fact is that
almost everybody has grown far too soon too quickly.

Till recently discount store Subhiksha, which is currently neck-deep in debt of more than Rs
750 crore, was reportedly planning to add two million sq ft by the end of the fourth quarter of
2009. On the contrary, the company has closed its 1,600 stores across 110 cities, with R
Subramanian reportedly saying that his company owes Rs 45 crore to suppliers, Rs 20 crore
to employees and Rs 24 crore as rentals for various stores! Subhiksha’s troubles started
when it began expanding at a rate of 800 stores a year on debt capital. The situation is not
very different with Reliance Retail, with rumors afloat that a number of stores have been shut
and several employees have been sacked.

No localized approach
The business of retail (food and grocery) is very localized. The consumer behavior in a
particular area, for example Delhi, may not be the same as those of consumers in another
city such as Chennai. Thus, the consumer needs differ widely across the country. Therefore,
distinct strategies should have been adopted for different regions. What one must keep in
mind is that if you are opening a store such as a grocery store then you have a catchment
area. It is a very localized business that has to be built bottom up. It is not a business that
can be pushed from top to down. So, macro strategies may not work all the time.

Example1:

Nokia, in Jan 2007, has designed a new retail strategy that is based on the classification of
customers into 4 groups based on the income level.
The first of these segments Live, aimed a first time users whose basic need is to stay in
touch with voice as the main driver, would have basic handsets low on features and price.

These may be functional phones but the target group for these phones range from SEC C
(low socio-economic class) to SEC A1+ (very high socio-economic class) markets.ﾝ

The second segment Connect looks at more evolved users who look for more functionality
and features and connectivity. Accordingly, phones in this segment would have GPRS,
camera and music capabilities.

The next two categories, Achieve and Explore, are aimed at high-end users and have
Nokia’s top-end handsets. For example, Achieve segment looks at enterprise users who
need to have business functionalities in their phones. Nokia’s new E-series has been put
under this segment with handsets having QWERTY keyboards and full Internet capabilities.

Aimed at high-end lifestyle users, Explore would be the most prominent segment for the
company in the coming years. This segment would see the most vibrant growth in the
coming year. It will look at five different areas applications, imaging, mobile TV, music and
gaming.