Tuesday, June 16, 2009

TRENDS IN PRESENT RETAIL MARKET

New Product Categories:
For a long time, the corner grocery store was the only choice available to the consumer, especially in the urban areas. This is slowly giving way to international formats of retailing. The traditional food and grocery segment has seen the emergence of supermarkets/grocery chains (Food World, Nilgiris, Apna Bazaar), convenience stores (ConveniO, HP Speedmart) and fast-food chains (McDonalds, Dominos).
It is the non-food segment, however that foray has been made into a variety of new sectors. These include lifestyle/fashion segments (Shoppers' Stop, Globus, LifeStyle, Westside), apparel/accessories (Pantaloon, Levis, Reebok), books/music/gifts (Archies, MusicWorld, Crosswords, Landmark), appliances and consumer durables (Viveks, Jainsons, Vasant & Co.), drugs and pharmacy (Health and Glow, Apollo).

Increasing competition in the retail market:
New entrants such as Reliance, Bharti Enterprises and the AV Birla group will compete against well-established retailers, such as Pantaloon Retail, Shoppers’ stop, Trent, Spencer’s and Lifestyle stores. Foreign retailers are keenly evaluating the Indian market and identifying partners to forge an alliance with in areas currently permitted by regulations. With an estimated initial investment of USD 750 million, Reliance is planning to launch a nationwide chain of hypermarts, supermarkets, discount stores, department stores, convenience stores and speciality stores. These 5,500 stores will be located in 800 cities and towns in India.

Increase in Private Labels:
With the emergence of organized retail and modern retail formats, private labels have been gaining significance. They enhance the profitability levels of product categories, increase retailers’ negotiation powers and create consumer loyalty. More retailers are introducing their own brands in all categories including Food & Groceries, apparel, accessories, footwear. These own brands also do not have to manage intermediaries since retailers maintain oversight of the supply chain.

The label penetration is in a huge rise. Private Label penetration has been on a rise. It is mainly growing among FMCG products in most supermarkets with groceries accounting for 45.9%

Expanding to Tier II and III cities:
Indian retailers are planning to extend operations into Tier II and Tier III cities as heightened IT offshoring activity in these locations have increased consumers’ disposable income. The population in these cities is typically well educated and willing to purchase goods and services. Some major retailers, like Globus, Reliance Retail and Pantaloon, have already begun building a retail presence in Tier III cities before many retailers have finalized their Tier II retail operations.

Foray into Retail Agri-Business:
India’s most prestigious business houses and global retailers are planning to enter retail agri-business. Market entrants plan to invest in the entire value chain, moving goods “from the farm to the fridge at home.” Viewed as India’s next “Sunrise Sector,” retailers are employing contract farming as a means of boosting their ventures. Contract farming enables farmers to access land, manpower and farming skill without having to purchase land. Of the total Cultivable land of 400 million acres in India, contract farming represents 7 million acres thus indicating a tremendous opportunity. For pure corporate contracts between farmers and companies, only 2,00,000 acres are used.

Experimenting with formats:
Selecting the right retail format is essential in modern retailing. The difference between urban and rural customers is one of the reasons why multiple formats are required in India. Local conditions and insights into buying-behaviour shape the format choice. No single format will be suitable for an all India strategy and selecting the relevant format is the key success factor.

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