Retail – Top 3 Factors Influencing Retail
Factor
# 1. Customers:
Customers
are the most important element for the retailers. To be successful retailer
must know its customers. Why customers shop, how they select a shop and how
they select among that stores merchandise.
These
can be:
Convenience-
of hours, of location, of shopping ease-
(i)
Assortment of merchandise- whether a wide variety or limited
(ii)
Quality and fashion level of goods
(iii)
Price- Generally important at the lower end
(iv)
Services- such as credit, delivery, courteous sales staff, assistance in
selection, after sales services, return-goods privileges.
(v)
Excitement- Such as promotional efforts.
If
retailer really understands their customers, they can position themselves and
plan their merchandise and services accordingly. To a large extent the various
combinations of merchandise and services are controllable by the retailer.
Stores
can stay open in the evenings and on Sundays; retailer can decide to stock
low-priced or expensive goods, to offer many services or bare minimum; to have
frequent sales, style, shows and other excitement-creating events or none.
Factor # 2. Competition:
A
retailer’s competition does not only come from those competitors who are using
the same retail format but also from new competitors who are coming up from new
formats.
The
competition between retailers using the same type of retail format is known as intra-type
competition. Examples of this type of competition are- A department store
competing with other department stores; a discount store competing with other
discount stores; a supermarket competing with other supermarkets; etc.
Competition
between retailers that have similar merchandise but are using different formats
is known as inter-type competition. For example- competition between
department and discount stores.
To
provide one stop shopping and to attract a broader group of consumers,
retailers offer a broader variety of merchandise, some of it typically not
associated with the store type. This is called scrambled merchandising.
For example- grocery shops keeping clothes, sports goods in a drug store, etc.
Increased
inter-type competition and scrambled merchandising has made it harder to
identify and monitor competition for retailers. In a way all retailers are
competing against each other for the money spent by the consumer on goods and
services. However, the intensity of competition is greatest among retailers
when customer view them having the similar retail mix.
The
competition to the retailers may come from same retailer located within the
vicinity of the target market or a similar kind of business in that locality.
For example- a retailer located in a suburb selling video and music cassettes
would have competition with the cable TV and the movie theatre located in that
suburban area.
The
retailer may also face tough competition from the scrambled stores, which in
addition to their merchandising products also provide videocassettes on rent. Therefore,
the retailer has to identify, assess the strengths and weaknesses of his /her
competitor while designing the strategy for marketing its products.
Factor
# 3. Environmental Trends:
This is the third core element of retailing.
The environmental factors surrounding the customers and the competition is a
major factor confronting retailers.
These environmental factors are:
a. Changing customer’s needs,
b. Changes in demographic composition of
customers,
c. Changes in technology,
d. Changes in business environment,
e. Legal framework.
i. Economic Factors:
The rate of growth in India has gradually
picked up in last two decades. In the eighties it breached the so called ‘Hindu
rate of growth’ and reached 5 percent levels. Throughout the nineties the
growth has remained above this level even crossing 7 percent levels. This has
resulted in increased buying power and disposable income in the hands of Indian
consumers.
Apart from growth, India’s large middle class
has led to introduction of organized retail formats. You can see many types of
retail formats in India now, for example, department stores, specialty stores,
manufacturer-owned retail chains etc.
As Indian economy gets integrated in the world
economy, global trends start affecting Indian economy such as global recession.
This gets reflected in consumers buying patterns. Last year (2001) saw drop in
sales of leading retailers in India due to the economic slowdown.
ii. Demographic Factors:
There has been significant growth in number of
towns and significant increase in population of urban India due to migration
from rural areas. Rising prosperity and population have driven the population
of many cities over 10 lakhs. This has created interest in large retailers. Many
retailers have opened their stores in number of cities now. Prominent among
them are Shoppers Stop, Food World, Westside, Ebony Piramyd, Pantaloon,
Lifestyle, Globus etc.
iii. Social Factors:
Nuclear small family is becoming a norm in
India with increasing number of women working outside the four walls of home.
Thus, there is increase in disposable income of families, however there is
paucity of time as in many families both (husband and wife) work.
iv. Psychological Factors:
Consumerism is on increase in India. Media and
cable TV proliferation has given exposure to Indian consumers to new ideas, new
life style and new desires. This has fuelled consumer demand. Even in last four
years when the economy was not doing as well, consumer durables sales was
growing at about 20%.
Similarly, there is increased emphasis on
health, personal hygiene, etc. Therefore, many retailers carry low sodium salt,
cholesterol free oil, diet coke etc.
v. Brand Profusion:
Compared to early eighties, India has seen
brand explosion in almost all goods. Earlier there was only one brand of salt,
namely, Tata Salt, now there are number of brands available. Many goods were
sold in loose earlier, now there exists number of established brands, Numerous
brands in consumer durables, automobiles, household items, garments etc, have
appeared in the Indian retail horizon.
vi. Psychographic Change:
There has been a perceptible change in the
mental attitude of the people at large. People specially in cities have become
health conscious. Hygiene is a prerequisite for any investment related to
consumption and food items. Due to change in earning, the concept of marketing
has also changed.
vii. Demographic Change:
The people at large live-in big apartments and
isolated suburban areas. There is a growth of clusters of population in
identified geographical locations. A particular geographic location is
populated by people with distinct characteristics of demand and consumption.
This indicate that the requirement of different clusters may be different
depending upon the type of families living together.
viii. Technological Changes:
Last decade saw tremendous change in
technology specially information technology. Information Technology has
provided ways to network and increase market share with profitability. There is
a possibility of mutual growth and business with collaborations.
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