There are various macro factors which will continue to drive growth in organized retail sector going forward. However, there are certain Qualitative and Quantitative parameters which one should look for while building success in organized retail companies. The Qualitative factors are as explained below,
Retail Real Estate Matters
One of the key factors for the growth and expansion of organized retail is availability of prime location. Real estate developers were first to establish malls which helped develop the concept of organized retail in India. With changing economy and consumer trend retailers have realized the importance of location, size and outlook of the mall to attract right kind of consumers retail developers not only concentrate on building the malls but also maintain the malls to provide right kind of ambiance to the customers.
Non-availability of retail space especially for larger formats in terms of
- desirable location
- acceptable scheme and access
- sustainable economics
can be a detrimental to the company
The Focus Vs The Fragmented Market Players
Focus approach means concentrating its resources on entering or expanding in a particular segment. It is generally used when company knows its segment and has products to competitively satisfy consumers need. A ‘Focus’ strategy can result in faster scale up of stores at lower costs.
To illustrate the above with an example, Shoppers Stop Ltd has adopted a “focus approach” while expanding its retail space in organized retail market. It has increased its presence in almost all the major cities and saturating it by further increasing the number of stores in same cities. Thus, this strategy reduces the costs of distribution, advertising and enable it to compete with other retail players.
Does High Market Share Really Matter ?
Modern retail stands on two pillars; one is market share (scale), and other is efficiency. Greater market share in limited formats helps retailers to enjoy operating leverages and better bargaining power. The other pillar is the efficiencies which is a function of how the retailer handles the scale and supply chain. We believe these are the two key differentiators which will separate one retailer from another.
Customer Centric Strategy
One of the key things on Retailers ToDo list is to develop a base of loyal customers club. It is a known truth in the world of marketing that acquiring a new customer is always more difficult than retaining an existing customer. From a value proposition point of view, one customer with a strong preference for company’s brand is worth at least 12 new or uncommitted customers. The committed or loyal customers are most profitable customers as they tend to buy the product at full price compared to uncommitted customers.
In the next article we’ll evaluate the Quantitative Factors that influence the success of Organized Retail in India.