Tuesday, June 16, 2009

STRENGTH AND WEAKNESS OF RETAILING

STRENGTH:

1. Retailing is a "Technology-intensive" industry. It is technology that will help the organized retailers to score over the unorganized retailers. Successful organized retailers today work closely with their vendors to predict consumer demand, shorten lead times, reduce inventory holding and ultimately save cost. Example: Wal-Mart pioneered the concept of building competitive advantage through distribution & information systems in the retailing industry. They introduced two innovative logistics techniques – cross-docking and EDI (electronic data interchange)

2. On an average a super market stocks up to 5000 SKU's against a few hundreds stocked with an average unorganized retailer. This will provide variety in products(required breadth & depth for consumers)

3. As a consequence of high volumes, procurement will be direct from the Manufacturer. Hence, merchandise can be offered at lower costs.


WEAKNESS :


1. Less Conversion level : Despite high footfalls, the conversion ratio has been very low in the retail outlets in a mall as compared to the standalone counter parts. It is seen that actual conversions of footfall into sales for a mall outlet is approximately 20-25%. On the other hand, a high street store of retail chain has an average conversion of about 50-60%. As a result, a stand-alone store has a ROI (return on investment) of 25-30%; in contrast the retail majors are experiencing a ROI of 8-10%

2. Customer Loyalty: Retail chains are yet to settle down with the proper merchandise mix for the mall outlets. Since the stand-alone outlets were established long time back, so they have stabilized in terms of footfalls & merchandise mix and thus have a higher customer loyalty base.

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