Discussion on Retail trends and Technologies

The State of India’s Retail Market: Part II

2011-04-27T20:14:00.000+05:30

The State of India’s Retail Market: Part II

By Ramesh Sethuraman, Contributing Editor

April 19, 2011

Last week, we introduced the state of India’s retail market. In that article, we classified the varying retail formats in that country, and in particular, called out their vast differences from more Western retail formats. This week, we shall focus on the regional challenges and consumption patterns brought about by the country’s varying geographies.

The regional differences within the enormous country of India are profound. Unlike US or European retail markets, the regional differences between Indian states tend to be extreme – in addition to weather and language differences, food and clothing desires are significantly different across states. To further complicate matters, people from the same state living in varied urban and rural areas often have wildly different consumption patterns.

For example, a traditional Indian woman from Tamilnadu (Southern state) will typically wear a Saree, whereas women from Punjab (Northern state) more commonly wear ‘Salwar kameez’. In India, apparel’s color is highly important, and preference by geography varies significantly. Similarly, people from southern states predominantly have rice-based diets, whereas people from northern states will predominantly eat wheat-based foods. Further still, people from Andrapradesh (Southern state) prefer more spicy foods, whereas people from Gujarat (Western state) are far more inclined towards “sweet-tooth” foods. This creates a tremendous challenge for retailers hoping to sell across multiple regions.

India’s per capita income for last year was INR 46,492 (≈ USD $1030); over 75% of the population is earning $2 or less per day. While this understandably limits the individual’s spending capability, the lower-income customer segment makes significant contribution to the industry as a whole. This has forced CPG companies such as Unilever towards micro-level bulk-breaking of products, in order to have a greater degree of penetration. For example, a 5 ml Shampoo sachet from Unilever will sell for INR 2 (≈ 5 cents) across the country. Similarly, sweet candies are sold in single units, which helps keep the cost to a little over one cent. This is only made possible by a lean-supply chain network capable of overcoming a lack of nation-wide infrastructure.

In fact, the Indian retail market is extremely complex in nature due not only to regional and consumption differences, but also because recent economic dynamics are drastically changing any pre-existing consumer patterns that a retailer might have been able to determine just a few years ago:

a) Improvement in the basic education system has increased the % of educated population in India (especially women). Nuclear and single families are on the rise and with increased public awareness, families are now limiting their number of children.

b) With more business and job opportunities created by steady economic growth, both partners have started to earn in many families. As a result, the percentage of middle class families and their disposable income per-head is increasing.

Those earning between Rs45,000-Rs1.80 lakh per annum are considered middle income households, whose number surged to 140.7 million out of the total of 228.4 Indian million families at the end of 2009-10. As per NCAER report, 62% of Indian households belong to the middle class, which is the target for most retailers and consumer goods firms. (53% of all air conditioners are owned by middle class homes and nearly 46% of all credit cards are to be found in these households.)

c) The globalization of the economy has brought new consumer goods companies into the country and media has increased national brand awareness. By shrinking package size and quantity, consumer goods have become more affordable to the masses.

d) An increase in awareness on hygiene and personal health care among the public is leading to increases in consumer spend on such products.

e) Television channels, movies and media have brought better exposure to international cultures. Also Indians are getting increasingly influenced by western culture and would like to try new things such as pasta, pizza, and international fashion apparel and beauty cosmetics.

Retailers in the still-small segment of retail segment (which as we discussed in last week’s article stand to benefit from huge business potential going forward) were heavily impacted by the recent global economic slump. One of the earliest players in the Indian retail scenario came to a near standstill and required immediate liquidity. Even the top 5 national retail chains slowed their expansion plans and scaled down operations. However, as the country entered into year 2011, Q4 2010 inspired a bit more confidence to the organized retail market. Interestingly, small format retailers felt the pinch neither during the economic slump, nor during the hype cycle of organized retail. Instead, during this period, small mom & pop retailers were underdoing transformation to quickly adapt; the impact of competition from large format retail giants has been almost nullified.

When compared to leading south-east Asian countries, India has the lowest percentage of organized retail. The share of organized retailing in India is around 6%, whereas in China, this number is over 20%. Countries like Thailand, Malaysia and Singapore have markets where organized retail comprises between 40-50% of overall retail. This is primarily due to limitation of imposed by Indian government in Foreign Direct Investment (FDI) in the retail sector.

There have been widespread fears that the entry of global retail giants could hurt individual mom & pop retailers (kirana stores). These stores currently dominate the retail trade in India and employ 33.1 million people, the most outside of farming. The government has tried to defuse some of these concerns by suggesting that the retail sector be opened up to foreign firms in a “calibrated manner”. It has also pitched issues such as inflation and employment control in multi-brand retail. Today, global retail giants such as Walmart & Metro have setup cash & carry operations in India. All major global retailers are lobbying with the government to have complete control of their operations.

Currently, the top five companies in retail hold a combined market share of less than 2% due to their focus only in urban markets. With over 641,000 inhabited villages and 72% of the total population residing in these rural areas, significant growth of the organized retail sector can emerge only from the rural markets. It has been estimated that over 55% of the disposable income is from these rural areas. According to data from the National Council of Applied Economics Research, rural India now accounts for 70% of the nation’s soap users and 38% of the total sales of bicycles. By the end of this year, India’s organized retail market is estimated to reach $50 billion US, and by 2012 the rural retail market is projected to have a total of more than 50% market share.

The State of India’s Retail Market: Part I

2011-04-21T21:15:00.000+05:30

The State of India’s Retail Market: Part I

By Ramesh Sethuraman, Contributing Editor

April 19, 2011

As a part of any global expansion strategy, retailers based in the Western Hemisphere should be closely observing the market dynamics of the world's fastest growing - yet most challenging - emerging market.

The fifth largest retail market on earth, India is rapidly becoming one of the most attractive emerging opportunities for Western-based retailers to grow their brand and reach. Within India, the consumer industry is growing exponentially, estimated to reach $450B US by year 2015. The Indian government has sweetened the deal even further, offering multiple initiatives for new entrants to the retail game; the goal is to make the overall retail sector, which is still very much in disarray across this massive country (90% is currently categorized as “unorganized retail”), far more organized and consistent with Western Retailing standards.

The numbers tell it all: with 1.21 billion consumers to target (the second largest population in the world), a Western Retailer would be foolish to overlook the potential in India. Unlike China, whose population is still predominantly spread across rural areas, 80% of India’s population is already concentrated in large cities. Such concentration makes a Western Retailer’s objectives much more feasible.

Yet today, the Indian retail sector remains quite scattered. Apart from various hyper markets, large format stores and shopping malls, the majority of existing retail transpires in very different formats than what most Westerners are accustomed to. The following are a few examples of those formats, as well as how each targets customers from a particular economic class.

Individual Door-to-Door Sales

Salespeople carry their specific products (as specific as “the incense salesman”, or “the pickle vendor”) in various bags and baskets. They sell their wares from household to household. However, in the past couple of years, this type of retail is on sharp decline.

Push-through Carts (And Tricycles)

These human-powered retail stores carry a limited assortment of fruits, vegetables, ice cream, footwear, casual apparel – even cosmetics. Most such retailers average a US equivalent of $40 to $100 a day.

Buffalo Carts & Mini-Trucks

Farmers and vendors from the outskirts of the city bring limited varieties of fruits and vegetables to sell in a particular section of town. Their average sales per day will be between US $75 and $200. However, this type of retailing is more opportunistic (for example, at harvest time) than a highly-repeatable model.

Wholesale Fruits & Vegetables (“Sabzi Mandi”)

Comprised of wholesale and individual miniscule vendors selling fruits, vegetables, herbs and spices, these markets start as early as 5 AM and typically run until noon. Some of the vendors will also elect to open their stores again in the evening, usually between 4 PM and 9 PM.

Mom & Pop Stores (“Kirana” Stores)

These are primarily small-scale independent convenient stores located throughout urban streets. About 90% of these retailers have an operating space ranging from 80–500 sq.ft., selling such staples such as soap, shampoo, detergent, biscuits, newspapers, and tobacco. Their daily sales range from $50-$200. There are currently over 12 million Kirana retailers in India.

While organized large format retailers are struggling to sell their private label goods, Kirana retailers procure numerous non-branded / locally manufactured products (approx. 60% of the merchandise). These products sell without much difficulty, as in-store merchandise mixes are often determined by the preference of local, loyal consumers.

Pharmacies

In India, most pharmacies are owned and operated by a single pharmacist who has been certified by the government. Many are located next to a particular health clinic, and mainly sell the medicines most frequently prescribed by the doctors next door. Not even 1% of this particular segment is currently owned by retail chains. Further, no pharmacies exist inside of super-markets or hyper-markets as they do in Western countries.

Next week, we will look at the regional challenges and consumption patterns of retail in India.

About Alacrit

2011-04-21T15:04:00.000+05:30

Open publication - Free publishing - More ajay mehta

What Is A QR Code And Why Do You Need One?

2011-04-20T13:03:00.000+05:30

The newest trend in the industry today and the future of mobilized marketing

is the unleashing power of the QR code idea and its mass acceptance not jsut by the BRAND, PRODUCT and MARKETING MANAGERS of the world but also the consumers alike, especially the youth and the working executives

The thought therefore in to understand the concept and the technology that goes behind a successful QR code utilization. But before that do we all actually know what they are?

Well let me simplify that for you here in this post

The Origins of QR Codes

A QR code or a Quick Response code (as the creator intended it to be decoded at high speeds), is a specific two-dimensional bar-code, readable by dedicated QR bar-code readers and camera phones. It was created by Toyota’s, Denso-Wave in 1994, the QR code is one of the most popular types of two-dimensional bar-codes. QR codes can be used to display text, to open a URL or to compose an email or SMS.

How QR Codes Work?

A QR code uses the act of linking from physical world objects, known as a hardlink or physical world hyperlinks. Users with a camera phone equipped with the correct reader application can scan the image of the QR Code to display text, contact information, or open a web page.

How is a QR code structured?

Codes could be used:

Business card
Brochures and other marketing materials
The sides of trucks and trailers
Product tags and packaging
Point-of-sale receipts

QR Codes could link to:

Installation instructions
Sources for service
The process for hiring your professional services
Valuable coupons and special offers
Free mp3 downloads
Customer feedback forms

Examples of QR Codes and Mobilized Marketing

The biggest question of it all.... is QR code for me?

Well to be very honest, if you are targeting the young, educated, upwardly mobile, affluent and informed audience, you definitely need to think seriously about investing in a QR code. An independent research says that 40% of buying decisions are made through research on the internet and mobile. Now that is a huge number of audience considering we are a 120 billion citizen country.

Internationally, marketers are putting QR Codes on signs, business cards, flyers, practically everything to give potential audiences another option to network and find out more information. QR Codes really are marketers new best friend because it’s just an extended marketing tool and another way to promote yourself, your brand and your business. The great thing about QR Codes is that you can control and guide the “scanner” anywhere you’d like. You can take them to your website, your blog, a YouTube video, your virtual business card, or any other destination you would like your audiences to see about you.

The Indian side of QR. How these codes may prove advantageous to the marketers

QR codes—if promoted correctly—offer the potential of being very useful and popular in India. India has a very large number of mobile phones users, many of whose instruments are also camera phones. Almost 20% of these phones are GPRS connected. This number is expected to increase in the future. Also, India is a country of many languages and owing to its diverse challenges, throws up interesting opportunities. To give you an example, You may be looking at a poster at Ameerpet that is about an Ayurvedic Hospital somewhere in Andhra Pradesh. You may want to learn more about it, but are unable to do so as the text in the hoarding is in a language that you cannot read. But what if the bottom of the poster contained four distinct QR codes — one each for Hindi, Urdu, English and Tamil? Well, you would just need to point your phone towards the QR code and read the information in the language of your choice.

How do you get started?

There are thousands of QR Code generators out there that you can use for free. The only problem about the free generators is that you have no idea who is scanning them! One practice that I strongly believe in marketing is that in order for something to be successful, you need to be able to measure how effective it really is. Example: Google Analytics on a website. That will allow you to measure your entire website’s information. With QR Codes, the same thing applies. You need to be able to measure who is scanning them, where they’re scanning them, and how effective is this marketing tool.

An application that I’ve found to be far superior to the rest is iFlyMobi. This allows me to create QR Codes that lead to mobilized websites or mobilized business cards. The reason why I chose iFlyMobi is so I can track the information and see who is scanning my QR Codes. If I go to an event or a speak somewhere and hand out 50 brochures with a QR Code on it, I want to know who is seriously interested in those brochures and my services! Let’s say I did hand out those 50 brochures, iFlyMobi allows me to see who scanned the QR Code on the brochure, how many times they were scanned, and where they scanned it. If you don’t think that’s important marketing information, you’re crazy. This way you can find your target audience easier and provide them with more information to turn the inquiry into a sale. Learn more about iFlyMobi HERE!

Introduction to the blog

2011-04-19T22:52:00.000+05:30

Hello Guys,

This is my first attempt on writing a blog. I am not a pro at it but jsut trying my hand on it.

Through this blog, i intend to share various articles, insights, news and views from the dynamic world of retail.

Your views and comments are most welcome and would be appreciated. Do share them with me and the entire list of followers of the blog.

Thanks and regards

Ajay Mehta

Owner: Alacrit