Changing Face Of Retailing: Historical Development Of Department And Discount Stores In India

Retail Management

The changing face of retailing: How department stores and discount stores are evolving. This report should cover the historical development of department stores and discount stores in any country of choice. Obviously you would start by defining both of these types of retail institutions and then describe what merchandise they carry and how they market to distinct types or market segments of retail customers. You may like to discuss mergers, diversification and downsizing in your assignment, as well as cost containment and value driven retailing being driving forces behind the evolution of these institutions into the retail outlets of tomorrow. Do you think retailing will be different in 5 years’ time, or in 10 years’ time? Why – what do you think will make these types of store different? Do you think there will be other types of stores that will open up in different markets? Use examples wherever possible to substantiate your opinions in the report.

In your answer you also need to refer to the wheel of retailing concept, and the retail life cycle. You will also discuss ways in which shops assemble their merchandise for consumers, such as scrambled merchandising.

Assessment Criteria:
• Report structure, format, presentation and layout 
• Application of knowledge and course concepts 
• Critical analysis and research demonstrated in country retailing trends 
• Overall conclusion and strength of arguments/recommendations 
• Research quality and referencing 

Understanding what department and discount stores are

India is undergoing a dynamic transformation in retailing as it has not just shown the sign of transformation but has also emerged as one of the retailing powers of the world. It is one of the sectors to employ millions of people in different job roles and responsibilities. It all has started in the 1980s when few textile sectors such as Bombay Dyeing, S Kumar’s, Raymond’s and Grasim started to emerge as the retail chains. Titan, the maker of premium watches, did, later on, popularise the concept of elegant showrooms (Miotto and Parente 2015). The sector kept on evolving ever since the 1980s and is becoming bigger and better as days passes on. Therefore, the main purpose of this assignment is to understand the changing face of retailing in India.

Department stores & Discount stores: On a broader aspect, there is not much of a difference between the two; however, they both are different from each other in many regards. Discounted pricing is one of the basic differences between the discounted and department stores. Discount stores offer the discounted price. Department stores mean that one would get a maximum of its daily needs under one roof. Discount stores can both have a limited or wider range of products. For example, a department store can also come as a discounted department store where few selected goods will be sold at discounted rates. On the other hand, the independently owned discount stores can also offer the wider merchandise. Low-profit margin and high-volume are the strategies which the discount stores commonly follow (Basu 2015).

Both discount and department stores offer a more or less the similar merchandise; however, they can differ from each other in regards to the product range. Department stores include products but are not limited to, sporting goods, food, clothing, furniture, home appliances, cosmetics, toys, gardening, toiletries, stationery, electronics etc. These products may or may not be offered at discounted rates. There are many department stores which offer the discounted rates (Trebbin 2014).

Like any other sectors in India, the retailing sector uses a variety of marketing strategies to boost its daily footfalls and increase the total revenue. One of such strategies is the store layouts. They use it to guide customers in the ways they want customers to visit. The entire journey of shopping should be exciting to customers, so that, a strong word-of-mouth publicity is generated. Store layout should look attractive and easy to be used, so that, customers have enough reasons to stay loyal to their chosen brand. Few of the famous store layouts are ‘Grid’, ‘Free Form Layout’ and ‘Racetrack’. A grid is mainly used in large supermarkets whereas Racetrack is used in huge fashion brands. On the other hand, ‘Free Form Layout’ is used in smaller stores (Verhoef, Kannan and Inman 2015).

“Scrambled Merchandising” is another strategy which is used to influence the operational efficiencies. It means accumulating those products also which are not exclusive to the parent brands. This is done to enhance the product base and thereby attracting a wider customer base. However, the strategy can still be criticised because few customers have a tendency to involve in products’ discussion with the floor support executives (Herhausen et al. 2015). For example, customers seeking to buy a Samsung laptop would most certainly visit a Samsung store. In the Samsung store, an ample amount of queries can be asked from the professionally trained executives. They can, of course, handle such queries better than those who work for other brands.

Forces driving these institutions

‘Mergers’ have been one of the key features of the Indian retailing industry. It has helped department and discount stores to grow and acquire a substantial market share. Indian retailing industry can be broadly classified into two categories such as organized and unorganized sectors. Unorganized sectors are comprised of kirana and smaller stores and hold the maximum market shares (Dorathy 2015). Organized sectors are broadly comprised of department and discount stores. Mergers have boosted the market shares of reputed firms. Few of the most reputed firms are Pantaloon Retail, Tata Group, RFG Group, K Raheja Group, Parimal Group, Landmark Group and Reliance. The below table will indicate how firms have succeeded to mark an impact by merging with required third party service providers:

                                                                               Table 1: Mergers

                                                                    (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).

Mergers

‘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.     

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).

Diversification

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.  

References:

Ali, S.S. and Dubey, R., 2014. Redefining retailer's satisfaction index: A case of fmcg market in india. Procedia-Social and Behavioral Sciences, 133, pp.279-290.

Basu, R., 2015. Are they really different? A study on apparel shoppers’ retail format perception in USA and India. Global Business Review, 16(1), pp.123-136.

Chattopadhyay, P. and Jain, R., 2017. Prospects and Hindrances in Retailing in the Promising Business milieu: Indian Context. Global Journal of Management and Business Studies, 7(1), pp.15-22.

Dartconsulting.co.in. 2018. Top 10 Retail Chains in India; Success Stories of Organized Retailing and Stories of Organised Retail Failure in India - DART Consulting. Retrieved from https://www.dartconsulting.co.in/market-news/top-10-retail-chains-in-india-success-stories-of-organized-retailing-and-stories-of-organised-retail-failure-in-india/

Dorathy, M.B.C., 2015. One Person Company (OPC)-The new business format for small retailers in India. Management: journal of contemporary management issues, 20(1), pp.173-181.

ETRetail.com. 2018. Investing in non-core businesses: Has diversification worked for India Inc? - ET Retail. Retrieved from https://retail.economictimes.indiatimes.com/news/food-entertainment/personal-care-pet-supplies-liquor/investing-in-non-core-businesses-has-diversification-worked-for-india-inc/22089855

Herhausen, D., Binder, J., Schoegel, M. and Herrmann, A., 2015. Integrating bricks with clicks: retailer-level and channel-level outcomes of online–offline channel integration. Journal of retailing, 91(2), pp.309-325.

Hübner, A., Kuhn, H. and Wollenburg, J., 2016. Last mile fulfillment and distribution in omni-channel grocery retailing: A strategic planning framework. International Journal of Retail & Distribution Management, 44(3), pp.228-247.

Hussain, S., Khattak, J., Rizwan, A. and Latif, A., 2014. Interactive Effects of Ansoff Growth Strategies And Market Environment on Firm’s Growth. British Journal of Business and Management Research, 1(2), pp.68-78.

Miotto, A.P. and Parente, J.G., 2015. Retail evolution model in emerging markets: apparel store formats in Brazil. International Journal of Retail & Distribution Management, 43(3), pp.242-260.

Misra, H. and Singh, S., 2016. Do Retail Stores have Personality?: An Empirical Investigation into the Store Personality of Four Indian Retailers. Splint International Journal of Professionals, 3(6), p.100.

Nimbrain, N. and Kant, S., 2015. Future Prospects of Indian Retail Industry in India. International Journal of Research in Finance and Marketing, 5(10), pp.37-45.

Trebbin, A., 2014. Linking small farmers to modern retail through producer organizations–Experiences with producer companies in India. Food policy, 45, pp.35-44.

Verhoef, P.C., Kannan, P.K. and Inman, J.J., 2015. From multi-channel retailing to omni-channel retailing: introduction to the special issue on multi-channel retailing. Journal of retailing, 91(2), pp.174-181.