(Source: Dartconsulting.co.in 2018)
Organized retailing has been hugely impactful in NCR, Mumbai Region and Southern Portion of India.
Figure 1: Ansoff Matrix
(Source: Hussain et al. 2014)
Diversification as per what the Ansoff Matrix states is a corporate strategy being used to enter a new market while also being into the product development. The stage can be challenging as the brand has no prior experience of the target market.
Diversification has not truly worked for the Indian retailers. With just a few exceptions it has mostly reeled. ITC is the one such name which has effectively managed its diversification. It started as a manufacturer of tobacco products; however, did eventually move to hotels, agri-business, paper & packaging and foods. ‘Cigarettes’ has been the most successful. The FMCG section is amongst the fastest growing segments of ITC. Hotels and agree-business have also been profitable (ETRetail.com 2018).
Unitech riding on the success of entertainment and malls business entered into telecom. However, it had to sell its entire stake in the partnership to Telenor, its foreign partner. ‘Videocon Industries’ has started as manufacturers of consumer durables. The success has encouraged the company to enter a variety of new market divisions like telecommunications, oil exploration, direct-to-home and financial services. The oil & gas has been quite successful for the company; however, it struggled in telecom and financial services. ‘UB Holdings’ and its diversification strategy has impacted its core businesses as well. The ambitious Mallya was the reason for the holdings to expand into other forays such as aviation, fertilizers, real estate and engineering. The highly successful Kingfisher Airlines is now stumbling from the pressure of bankruptcy. The troubles have now expanded over to its flagship liquor firms (ETRetail.com 2018).
‘Reliance Industries’ has been one of the most successful retailing names in India. The company has moved to an ample number of industries such as telecom, power generation, retail and fertilizers. It started as a telecom service provider. It recently had moved to the retail and putting an enormous focus on it. Unlike its peers Bharti and Aditya Birla, it seems to have played its strategies well. ‘Aditya Birla Nuvo’ is another big name in the retailing industry; however, not as successful as Reliance Industries and ITC in terms of diversification. It has its operations in many sectors such as metals, telecom, retail, financial services, cement, IT services and more. It is doing pretty well in telecom with Idea Cellular creating huge value. Metals and Cement have also been doing reasonably well. However, it could not make an impact on the retail sector. A number of its retail sectors was being closed in the wake of the recession (ETRetail.com 2018).
Downsizing can be defined as a corporate strategy which is used to trim down the size of stores. ‘Layoffs’ which is also a part of it can be done both for temporary and permanent basis. The strategy is used to cut down the total costing to stay afloat during the declining sales. The strategy can be used to sustain the business. As Indian Retailing giants are operating into multiple industries, it is necessary to use the ‘downsizing’ at times things are not turning up well for them. It can provide a temporary solution to the business. Some of the examples of downsizing in the Indian retail sector are as follows: (Ali and Dubey 2014)
- Aditya Birla Fashion and Retail Ltd (ABFRL), the licensed brand of American Forever21, had gone for downsizing by reducing the sizes of stores and considered opening new but rather smaller stores. The step was taken to mitigate the loss from declining sales and also to cut down the costs.
- Big-box India has considered closing half of its grocery hypermarkets stores to counter the loss from falling sales. The Big-box model that worked for the US and Europe could not help to reap benefits from the Indian retailing industry.
- Nike which is the US sportswear major has struggled to remain profitable in India. There could be many reasons for it like the pricing. Consequently, the company went on to reduce its operational costs to narrow the losses. It also slashed its sponsorship deals.
Cost-attainment is a process to acquire a control over the total operational cost (Hübner, Kuhn and Wollenburg 2016). Indian retailing industry has kept on evolving into various forms mainly to address a few issues and take the advantage from potential opportunities. This was the reason for their inclination towards the discounted scheme. However, traditional retailers were not so organized to be able to drive the sales of discounting formats. On the other hand, international retailers like McDonald, Nike, Reebok, Levis, Sony, Philips, Spencer and others were impressed with their established platforms and the infrastructure. Customers reacted to this new concept and the concept was later on followed by domestic retailers like Raymond’s, Woodland, Titan, CCD, Pantaloons, S. Kumar, Life Style, Shopper Stop and others (Chattopadhyay and Jain 2017). The developments are still there and the future can also see the likes of Walmart.
2.5 Value-driven retailing
Value-driven retailing is a way to add value to customers. It can be promoted through expertise, service, convenience, exclusivity and experience. Department and discount stores are better than unorganized retailers in terms of value-drive retailing. For example, ‘discounted rates’ on a broader scope is exclusive only to discount and the department-discount stores. The tendency to purchase products at cheaper rates, significant economic growth, changing demographics, changing consumer behavior and the elevating disposable incomes have favored the growth of department and discount stores in India (Misra and Singh 2016).
3. Future of retailing in 5-10 years of time
The future of the Indian retailing industry will be using the operating model-centric to consumers' needs. The model is expected to resolve the infrastructural challenges by means of digital transformation. In-store analytics like Wi-Fi is expected to enter the retailing sector. This will read the consumer behavior, paths being followed by them, dwell time etc. The future will also see the emergence of experience stores. Customers will just be needed to choose products from the e-commerce site and then make the purchase either from online or from the dedicated physical store. Mobile wallets will expectedly replace the physical wallets (Nimbrain and Kant 2015).
Conclusion and recommendation:
In summary, it can be concluded that the Indian retailing industry has kept on evolving from just being the unorganized retailers to the ‘organized’. The number of department and discount stores in India has constantly increased. Now, they need to focus on a few areas that are their weak zones such as managing the operational costs and taking the advantage of emerging future trends.
External factors like political instability and government policies in India are uncontrollable. Retailers need to keep on finding ways to remain profitable. With regard to the issue, it is advisable to work on the supply chain operation as this is not as competitive as those in the United States and other developed nations. Areas for improvement will be the forecast capability, logistics operations, wastage reduction and avoiding the over-stocking.
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