Rural Retailing and E tailing- Rural Retailing

Scenario , Franchising- Types , Advantages &

Limitations, E tailing – Advantages and Limitations
Emerging trends and careers in Retail Industry-
Mergers and Acquisitions , Private Brands , Services
Retailing , Cash and Carry Concepts , Careers in retail
Industry

Unit – 4
 Rural Retailing
DEFINING RURAL INDIA:
Census of India defines rural settlements as:
• Population lower than 5000 persons
• Population density lower than 400 persons/ sq. Km.
• At least 75% of male population engaged in agricultural
activities.
INDIAN RURAL SCENARIO:
• Rural India accounts for roughly 70% of the population. 6,
27,000 villages are home to 790 million Indians today.
• Two-thirds of country’s consumers live in rural areas.
• Half of the national income is generated here.
 RURAL RETAIL POTENTIAL
INDIAN RURAL RETAIL MARKET:
• Rural retailing growing at 7% p.a.
• Shift in rural consumption from basic food grains to FMCG
products.
• 46% - soft drink sales
• 49% - motorcycle sales
• 59% - consumer durable sales
• 53% - FMCG sales
• 50% - BSNL mobile connections
THE RURAL CONSUMER:
• THE RURAL CONSUMER Is a value seeker , Seeks comforts and
amenities , Does not wish to be seen as the deprived cousin
• Does not experiment easily but this does not mean that “he
would not change”
• Growing purchasing power
• Changing consumption patterns
• Increased access to information and communication
technology and improved infrastructure.
• Govt has initiated rural development programs which
provide employment opportunities to rural poor.
• Infrastructure is developing.
• Roads are being built which connect villages to
nearby towns.
 Features of Rural retailing
• Rural malls purchase directly from manufacturers and sell
them directly to the consumers. High quality products are
sold at discounted prices and this helps to bind the
consumers to them.
• Majority of these malls act as two way supply chain .
Farmers not only offload their harvest but also make their
purchases .
• Customers are assured of genuine products.
• Known and new brands are sold side by side.
• Have a great potential from the tourism point of view as it
combines shopping , entertainment and good food .
 Issues
• Underdeveloped infrastructure
• Lack of storage facilities
• Lack of literacy
• Limited impact of Govt. programs
• Stagnating rural poverty rates
• Stranglehold of the middlemen
Are deterrents to the growth of these shopping
centres.
 Features of rural market
• Large and scattered market
• Major income from agriculture
• Low standard of Living
• Traditional outlook
• Diverse socio economic backwardness
• Poor infrastructure facilities
• 87% of rural markets do not have any sort of
organized marketing and distribution
 SIGNIFICANT PLAYERS
• ITC launched the country’s first rural mall “Chaupal Sagar”, Place
where farmer could come in with his harvest laden vehicle
accompanied by his family, get his produce weighed & off loaded at
a fair price while the female could have her pick of the packaged
food ,cereals , clothes , spices etc.
• Young ones tried their hands at the various games & toys displayed.
• The mall houses a soil testing lab , pathology lab ( collaboration with
Apollo hospitals),a diesel pump & a cafeteria.
• New brands of tractors displayed, farm implements , fertilizers,
motorbikes etc.
• They provide training, investment advice, agricultural expertise and
even facilities like banking.
 ITC- e choupal
• ITC Limited has provided computers and Internet access in rural areas
across several agricultural regions of the country, where the farmers
can directly negotiate the sale of their produce with ITC Limited.
Online access enables farmers to obtain information on mandi prices,
and good farming practices, and to place orders for agricultural inputs
like seeds and fertilizers. This helps farmers improve the quality of
their products, and helps in obtaining a better price.
• ITC Limited kiosk with Internet access is run by a sanchalak — a
trained farmer. The computer is housed in the sanchalak's house and
is linked to the Internet via phone lines or by a VSAT connection. Each
installation serves an average of 600 farmers in the surrounding ten
villages within about a 5 km radius. The sanchalak bears some
operating cost but in return earns a service fee for the e-transactions
done through his e-Choupal. 
 SIGNIFICANT PLAYERS
• TATA chemicals and Rallis India combine to come up with TATA
kissan Sansar – a network of one stop shops providing agri inputs to
loans to knowledge.
• Mahindra Shubhlabh & Mahindra krishi Vihar operate in 11 states
offering a range of products & services to increase farm
productivity.
• Godrej Agrovet & Gulmohar Foods part of the Godrej group have
based the rural initiative on two concepts called Aadhar and
Manthan .
• DCM Shriram is into consumer finance and insurance and has 101
outlets in rural areas called Hariyali Kisan Bazars which provide not
only agri inputs but also consumer durables & FMCG products
• Triveni Engineering has set up 44 Triveni
Khushali Bazaars in four states.
• The MP govt has proposed to set up rural
shopping malls across the states to serve the
area outside the retail distribution network of
manufacturing companies
 Franchising
• The term ‘franchise‘ is understood as an
exclusive right conferred by the parent
organisation to an individual or enterprise to
use the former’s successful business model, in
stipulated areas. Franchising is a business
relationship; wherein the owner authorises
another party to use their brand, product,
business system and process in return for
adequate consideration.
 Types of Franchising
• Product Franchising/Trade name:
This is the earliest type of franchising. Under this,
dealers were given the right to distribute goods for a
manufacturer. For this right, the dealer pays a fee for
the right to sell the trademarked goods of the
producer. Product franchising was used, perhaps for
the first time, by the Singer Corporation during the
1800s to distribute its sewing machines. This
practice subsequently became popular in the
petroleum and automobile industries also.
•  Manufacturing Franchising:
Under this arrangement, the franchisor gives the dealer
the exclusive right to produce and distribute the product
in a particular area.
• Business-format Franchising
A business format franchise is a franchising arrangement
where the franchisor provides the franchisee with an
established business, including name and trademark, for
the franchisee to run independently. Fast food
restaurants such as McDonald's and Burger King are
examples of such franchises.
 Variations in franchising agreements

• Territorial franchise
• Mobile franchise
• Distributorship
• Co ownership
• Co management
• Leasing
• Licencing
• Service
 Franchisor revenue sources
• Initial franchise fee
• Royalty fees
• Advertising fee
• Sale of products
Maintaining uniformity across the franchisee
chain
• Standard Formats
• Detailed processes and Procedures
• MIS
• Field audits
• Mystery shopper
 Selection of Franchisee
• The Financial standing
• Infrastructure
• Reputation and Experience
• Compatibility in working styles
 Issues considered by Franchisee before
selecting a Franchisor
• Franchisor having a successful proven business
model in similar business environment
• Level of support extended in running the
business. This includes upgradation of product
and services & ongoing promotion support
• Reputation of the Franchisor
• Ensure territorial rights so that there are
limited number of franchises in a region
 Advantages and Disadvantages of Franchising

Advantages to Franchisors
• Firstly, franchising is a great way to expand a business without incurring
additional costs on expansion. This is because all expenses of selling are
borne by the franchise.
• This further also helps in building a brand name, increasing goodwill and
reaching more customers.
Advantages to Franchisees
• A franchise can use franchising to start a business on a pre-established brand
name of the franchisor. As a result, the franchise can predict his success and
reduce risks of failure.
• Furthermore, the franchise also does not need to spend money on training
and assistance because the franchisor provides this.
• Another advantage is that sometimes a franchisee may get exclusive rights to
sell the franchisor’s products within an area.
• Franchisees will get to know business techniques and trade secrets of brands.
 Advantages of Franchising
• Access to quality training and ongoing support;
• Established concept with reduced risk of failure;
• Access to extensive advertising;
• Access to lower cost and possibly centralised
buying;
• Few start-up problems;
• Possibly easier to finance; and
• Use of well-known trademark or trade name.
 Disadvantages
•  Costs of supplies or materials may be more expensive;
• Possible exaggeration of franchisor advantages
• Franchisor may saturate franchisee territory
• Cost of franchise and other fees may reduce franchisee profit
margins;
• Termination policies of franchisors may allow little security
• Troublesome reporting requirements
• Inflexibility due to restrictions imposed by franchisor.
• Poor performance of a few franchisee may effect the goodwill
• Not easy to maintain standards through out a large chain
 Etailing
• The word E-tail has its roots in the word ‘retail’. Here the
letter E stands for ‘electronic’ since the shopping process
happens through the electronic media (internet). With
the use of a web-space a virtual shop is created and the
products are displayed through images in this space with
the features and price tags. By accessing this shopping
site a customer can choose his/her products into a cart.
The payment to this product can be done in various
modes as mentioned by the shopping site. The product
would be delivered to the address specified by the
customer.
 Steps involved in E-tailing:-
• Customer visit
• Choice of product
• Payment online
• Product delivery
• Customer feedback
 Advantages of Electronic Retailing

• Through electronic retailing, customers can save both the

efforts and time.
• The wide range of products is available online, so the
comparison can be made easily before the purchase.
• The customer can shop anytime and from anywhere, the facility
is available 24*7
• The huge discounts can be availed while shopping online.
• The detailed information about the product is available online;
that helps the customer to make the purchase decision.
• The electronic retailing offers the easy payment terms such as
payment on delivery that instigate the customer to shop online.
 Benefits of e-tailing
• It reduces the space occupied by retail outlets in the
real world.
• It gives quick and easy access to a shopping space at
any time and from any place where there is access to
internet.
• It saves time of the customer that is spent on
travelling to a shopping place in real world.
• It creates a new platform for goods from different
parts of the world which could be imported by placing
an order.
• Easy access to market - in many ways the access to market for
entrepreneurs has never been easier. Online marketplaces such as
eBay and Amazon allow anyone to set up a simple online shop and sell
products within minutes.
• Reduced overheads - selling online can remove the need for
expensive retail premises and customer-facing staff, allowing you to
invest in better marketing and customer experience on your e-
commerce site.
• Widen your market / export - one major advantage over premises-
based retailers is the ability expand your market beyond local
customers very quickly. You may discover a strong demand for your
products in other countries which you can respond to by targeted
marketing, offering your website in a different language, or perhaps
partnering with an overseas company..
• Customer intelligence - ability to use online marketing tools to target
new customers and website analysis tools to gain insight into your
customers’ needs.
 Advantages

• Easy and comfortable

• No real estate cost
• No maintenance charges
• Better interaction with customers
• Large coverage
 Disadvantages of Electronic Retailing
• The customers may not be sure of the quality of the products
offered online.
• It is the tendency of every individual to bargain before making the
final purchase, but this quotient is missing in electronic retailing.
• Also, the customers may not trust on the payment gateways and
fear the misuse of credit cards or any other mode of payment.
• Every customer wants to see and feel the product that he
purchases, but it is not possible in case of electronic retailing where
the customer makes the decision just by looking at the image.
• The product is not readily available; the customer has to wait for
some time to get the product in his hands.
• The customer misses the emotional attachment with the seller that
leads to less faith on the offerings.
 Disadvantages of online retail

• Website costs - planning, designing, creating, hosting, securing and

maintaining a professional e-commerce website isn’t cheap, especially
if you expect large and growing sales volumes
• Infrastructure costs - even if you aren’t paying the cost of customer-
facing premises, you’ll need to think about the costs of physical space
for order fulfillment, warehousing goods, dealing with returns and
staffing for these tasks.
• Security and fraud - the growth of online retail market has attracted
the attention of sophisticated criminal elements. The reputation of
your business could be fatally damaged if you don’t invest in the latest
security systems to protect your website and transaction processes.
• Legal issues - getting to grips with e-commerce and the law can be a
challenge and you’ll need to be aware of, and plan to cope with, the
additional customer rights which are attached to online sales.
• Advertising costs - while online marketing can be
a very efficient way of getting the right customers
to your products, it demands a generous budget.
This is especially true if you are competing in a
crowded sector or for popular keywords.
• Customer trust - it can be difficult to establish a
trusted brand name, especially without a
physical business with a track record and face-to-
face interaction between customers and sales
staff. You need to consider the costs or setting up
a good customer service system as part of your
online offering.
 Emerging trends: Mergers & Acquisitions

• Mergers – Two organizations coming together to form

a combined entity.
• Acquisition – One organization acquiring another one.
It is taking over a small company by a big
company .e.g Shopper’s stop acquiring the bookstore
chain Crossword
• M&A are a quick way to grow the business. Mergers
enable retailers to enter into new markets ,add new
formats or scale up fast .e.g Birla group acquired
Trinetra and Fab mall to grow its grocery business
rapidly.
 Private Brands
• This is a distributors or retailers brand. They
develop a private brand by buying from
manufacturer in bulk & putting its own name
on the product.
• It is so called because their availability is
limited generally to the outlets owned by the
retail chain.
 Why Private brands
• Reduce the manufacturers dominance
• Develop customer loyalty
• Differentiate it from others by providing an
exclusive product
• Developed as per customer requirement
• Enable retailers to have better bargaining power
with manufacturers.
• Enable freedom in pricing strategy
• Better value proposition for customers
• Private Labels and its Entry in E-commerce
• Few years back, 2016, to be precise India’s homegrown Flipkart
launched its first private label brand named as Smart Buy. This
brand basically spans across multiple categories starting from
household items to consumer durables. In 2008, Flipkart’s
subsidiary Myntra launched Roadster Go, which is basically the
first exclusive store of its private label Roadstar.
• On the other hand, Amazon is also catching up the game of
private label with brands like AmazonBasics that sells everything
ranging from stationary to power bank, Echo which is basically a
smart speaker barnd, Solimo for dry fruits, Myx the women’s
clothing brand, and a budget smartphone brand named 10.or.
 Rise of Private Labels

• Flipkart owned Myntra started its private label business back in 2015, and
now this is a fast growing category for the organization. Last year the
company announced that its private label portfolio has posted 5% profit. The
company is now targeting to achieve $2 billion in order to achieve
profitability.
• Just like Flipkart, Bigbasket is also a big player in the arena of private labels.
As per the data, Bigbasket has multiple private labels named as Fresho,
Tasties, Royal, and Popular. As per data, the organization earned revenue of
Rs 3500 crore in the last fiscal, also the company is eyeing as much as 40
percent revenue from its 36 percent if private label category is considered.
• Also according to various global watchdogs, Amazon can earn as much as
$25 billion of revenue by the end of 2022 from its private label business.
Also in the Subcontinent, the US based company is ramping up its private
label business with the aim to bridge the gap in every category.
 Article for reading
• https://www.insightssuccess.com/how-private
-labels-are-changing-indian-ecommerce-scene
/
 Services retailing
• Services retailing refers to retailing that
focuses on services rather than goods. While
services are intangible, products are not.
• Service retiling occurs when the main product
is a service itself , such as hotel
accommodation travel services etc.
 Key Differences Between Services and Products

• Products are tangible – they are physical in nature such that they can be
touched, smelled, felt and even seen. Services are intangible and they can
only be felt not seen.
• Need vs. Relationship– a product is specifically designed to satisfy the
needs and wants of the customers and can be carried away. However, with
a service, satisfaction is obtained but nothing is carried away. Essentially,
marketing of a service is primarily concerned with creation of customer
relationship.
• Perishability- services cannot be stored for later use or sale since they can
only be used during that particular time when they are offered. On the
other hand, it can be seen that products are perishable. For example, food
products are perishable and these can also be stored for later use or sale.   
• Quantity- products can be numerically quantified and they come in
different forms, shapes and sizes. However, services cannot be numerically
quantified. Whilst you can choose different service providers, the concept
remains the same.
• Inseparability- services cannot be separated from their
providers since they can be consumed at the same time
they are offered. On the other hand, a product can be
separated from the owner once the purchase has been
completed.  
• Quality- quality of products can be compared since these
are physical features that can be held. However, it may be
difficult to physically compare the quality of the services
rendered by different service providers.
• Returnability- it is easier to return a product to the seller if
the customer is not satisfied about it. In turn, the
customer will get a replacement of the returned product.
However, a service cannot be returned to the service
provider since it is something that is intangible.
 Retailing as a career
• Growth of retail and retail revolution by indian media.
• Retailing is manpower intensive. It is in penetrating stage
in our country and needs a large workforce to meet the
demand.
• Plenty of job opportunities at all levels
• Demand for trained professionals.
• Industry is facing a severe shortage of talented
professionals .The areas that are experiencing a series of
gradual changes and becoming critical are technology in
retailing, SCM , Business development ,expansion,
marketing , product development & research
• The unleashed demand for the trained
professionals needed by retail industryhas led
many institutions to launch programs in retail
management .
 Reasons for choosing retail as career

• Job opportunities in diverse areas

• Lucrative career choice
• International Industry
• Rewarding choice
 Areas of opportunities in Retail
• Customer service and retail sales
• Store operations
• Sourcing
• Merchandising
• SCM
• Visual merchandising
• IT in retailing
• Design
• Marketing (Research, Advertising)
• HRM
• Staff at all levels
• Franchising
• Retail Banking
• Retail Advertising
• Retailing equipment suppliers
• Customer service and retail sales –Communicating with
customers, help them buy the right product(Good convincing
& communication)
• Store operations – Focus is efficient operations and service,
attracts footfall ,ensure conversions ,avoid stock outs .(Team
management and leadership skills are required.)
• Sourcing –Identifying and developing appropriate vendors and
working with them to develop and procure a product range
which meets customer satisfaction and profitable also .
(negotiating skills )
• Merchandising – ensure availability of right product in right
quantities ,at the right place in right time and in right
assortment as per customer requirement.(analytical skills &
good communication )
• SCM- Involves coordinating with merchandising and buying
functions to ensure efficient planning , ordering , stocking/
warehousing & receiving of merchandise, developing
efficient transportation system and warehousing facilities.
(focus is on efficiency ,inventory mgmt. and faster cycle
times) .
• Visual communication- This needs deep understanding of
customers , ,what they want and why they come to the
store.(understanding customer needs , creativity)
• Information technology- The abilities required are the
knowledge of the right technology processes and solutions )
• Design- provide information on latest trends prevailing in
market in advance . (creative mind , degree in textile ,dress
or fashion designing
• Marketing – responsible for building store
brand and promote the store & products
through effective use of media. It is a
creative ,dynamic and exciting field which
demands high degree of commitment & smart
work.
• HR – Manpower planning ,
recruitment ,selection , training ,development
& compensation ,Retaining staff
 Prerequisites for success
• Hard Work
• Analytical skills
• Creativity
• Decisiveness
• Flexibility
• Initiative
• Leadership
• Organisation
• Risk Taking
• Stress tolerance