Pointers by Paco Underhill

1. If you were to note down a detailed account of someone who is shopping in a mall and if you asked him to write a dairy of what he did while shopping, it will not be the same.

2. With 2/3rd of purchases, you have no intention of coming back

3. Everyone�s eyes work differently when they shop. The eye of a person at the age of 60 operates differently than that of a person at the age of 20.

4. Visual displays are developing faster than writing skills

5. The CAD/CAM fellows who develop visual merchandising for shops are all below the age of 30, but they might be designing shops for all ages of people. Therefore the color viewed by them might be looked differently by the shoppers that it is intended for

6. Most of the dressing room for women is designed by men.

7. By the year 2010, the majority of professionals in NA and Europe will be women. Therefore female friendly stores/shopping malls is what will be required.

8. People inflate the time they spend in store by almost 50%. Average time spent in store is 30min for a hypermarket format and 21 min for time spent in a supermarket store. This time includes the time to walk insided a sotre, pay for your items and walk out

Success of Subhiksha (Small Store Format)

1. No frills and small retail size.
2. Focus on foods and grocery ( which constitutes 85% of sales)
3. Prices 9.5% cheaper than MRP
4. Majority of items sold are private labels, as margins on these are 3 times more than what FMCG offers
5. Indian customers prefer buying from neighborhood stores. Statistics show that 60 per cent of the grocery and food items that are bought are bought from hypermarkets, while the rest is bought from the local Kirana store.
6. While it is possible to have large spaces in global markets because there are many varieties available there, this might not be the case in India. So while you can have 4,000 sq ft for bakery in the US, you cannot have more than 500 sq ft in India as we don�t have that variety.

How kirana shops can beat the Big Retailers

Smaller companies can compete with big retailers but determination is key. Competing with them is hard work, however they can challenge them by

1. Offering deeper product range
2. Offering a real point of difference ( by offering something completely different)

FDI in China

China initially restricted FDI to 49% but gradually phased out restrictions after 1992. This lead to foreign retailers pumping in $3 billion into the country and setting up more than 2200 stores. Despite this foreign retailers make up less than 3.5% of retail sales in china underlining the strength and vibrancy of its thriving domestic retail industry. This could very well be the case in India.

China�s success story is a telling example of the domestic retail industry thriving in spite of large infusions of FDI.

Definition of Unorganized retailing

�Unorganized retailing� is defined as an outlet run locally by the owner or caretaker of a shop that lacks technical and accounting standardization. The supply chain and sourcing are also done locally to meet local needs. Its organized counterpart may not obtain its supplies from local sources.

Organized Retailing in India

Factors that favor the growth of Organized Retail in India

1. This market is among the most fragmented in the world, the combined market share of the top five retailers totals less than 2 percent.

2. India is also a powerhouse in terms of people. In fact, forecasts indicate that the country s population of more than 1 billion could overtake china�s by 2050. Although more than 30% of the populations falls below the poverty line, increasing mobility among the middle and uppers classes, coupled with greater urbanizations resulting in growing demand for retail goods, combined with a favorable background for retail market posed for growth.

3. The government has allowed for 51% FDI in single brand outlets. That means that companies like Nike, Louis Vuitton, Gucci or Reebok can come in as complete owners.

Factors that are unfavorable for the growth of Organized Retail in India
1. Inadequate infrastructure, for example, means that 40% of perishable food produced in the country rots during transportation due to a lack of refrigerated distributions networks.

2. India is not a homogenous market. With 28 different states and a plethora of languages customer and traditions, developing local market knowledge and choosing the best store locations will be critical.

3. India has more than 12 million mom and pop stores that are not likely to idly watch their businesses erode as foreign companies encroach on their territory

4. Other factors include FDI, multiplicity and complexity of taxes, and relatively high cost of real estate.

5. One of the biggest problems faced by companies in this sector is keeping track of the supply chain, as it helps them check stocks which in turn aids in issues such as pilfering and shelf life of products. So IT is still not big in Indian companies.