Magazines Archives - 2009 October

India’s retailers face immense management challenges
Story 8 - Focus

Unlike retailers in developed countries, Indian retailers have very little bargaining power in the
face of big manufacturers. This is due in large part to their small size and fragmentation — in a country with over five million retail outlets.

Traditional formats for retailing (hawkers, grocers and paan shops) now co-exist with modern formats
(department stores, speciality shops, supermarkets and non-store channels, such as multi-level marketing and teleshopping). The structure of the retail sector has an enormous influence on
the stores’ marketing strategies and activities. Stores in modern formats have emerged in all cities, but the bulk of retail sales still takes place through traditional formats. The development
of modern retailing is making life complex for managers who know both the
old patterns, which still dominate, and the new ways.

To maximise sales psf, frontline retailers are restructuring their stores. Leading players like Future Group, Pantaloons Retail, Spencer’s Retail, Shoppers Stop and Vishal Retail are rightsizing their stores and replacing slow-moving categories with speciality formats under the “shop-inshop”
model.

According to Future Group’s CEO-Retail, Rakesh Biyani, retail managers believe a shop-in-shop
approach will help them improve gross margin returns psf in the present environment when same-store sales growth is quite weak. Biyani sees it as a good way to eliminate excess space while
reducing space for categories which are not doing well.

Future Group plans to offer a wider choice in large-format stores, such as its Big Bazaar, by setting up speciality zones under the shop-in-shop model. Biyani says he has “a similar model for the Pantaloons outlets in the east and we may replicate it elsewhere”. Shoppers Stop recently tied up with Cafe Coffee
Day to manage cafés within its stores. It is “an ongoing process to maximise returns”, says Shoppers Stop’s managing director, BS Nagesh.

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