Organized Retail – Meaning, Advantages and Examples
Organized
retail is a sector which consists of the companies which are associated with production
or sales of goods and
services that operates as private limited organizations which are governed by company’s
act.
The
organized retail sector can be characterized as follows
1.
The retail
setups are owned by companies.
2.
Few of the
employees are on the payroll of the organization whereas others are on
contract.
3.
The
employees are governed under the act of minimum wages.
Organized
retail is associated with customers walking into the stores for the showrooms
and buying their necessary products.
Huge quantities of goods are stocked up in the retail store and huge discounts
which are gained by the company are passed down to the customers.
E.g., Pantaloon Retail, TATA Group,
Reliance etc.
RETAIL CHAINS IN INDIA
The
retail sector of Indian economy is categorized into two segments such as
organized retail sector and unorganized retail sector. The latter holds larger
share of the retail market.
The
key drives of the growth in retail consumption in India are basically
i) Clothes, Textile & Fashion Accessories
ii)
Food, Grocery & General Merchandise
The
top companies which have the most shares in organized retail market of India are
1. Pantaloon Retail
Pantaloons,
Central, Brand Factory, Ezone, Hometown, Planet sports, Big bazar, Food bazar
2. K Raheja Group
Shoppers
stop, Crossword, In orbit, Hyper city
3. Tata Group
Croma,
Landmark, Poltroon Frau Group Design Centre, Star Bazaar, Tashi, Westside
4. RPG Group
Spencer’s,
Books and Beyond, Music World
5. Landmark Group
Centrepoint,
Baby shop, Splash, Shoe Mart, Lifestyle, Beauty bay, Iconic, Q Home Décor, Candle
lite, Max, Shoe press, Emax, Lifestyle Department Stores, SPAR hypermarkets,
Landmark International, Footwear Division
6. Reliance
Reliance
Fresh, Reliance Trends, Reliance Foot Print, Reliance Digital
Organized retail that has
arrived in different formats as follows;
Hyper
markets
Cash
and Carry
Supermarkets
Discount
Stores
Department
Stores
Convenience
Stores
Neighbourhood
stores
MBO
(Multi-Brand Outlets)
Organized
retailing in India has been largely explored in urban or in metro cities.
It’s largely successful in NCR and Mumbai Region and major parts of southern
portion of India. The entry of Malls, the largest form of organized retailing,
which are located mainly in metro cities, in proximity to urban outskirts
turned out to be a catalyst for organized retailing.
The following factors
influenced the boom in the retail industry in urban areas.
1.
Substantial growth in purchasing power (income) of middle-class people and
subsequent look out for luxury items.
2.
Increase in customer aspiration.
3.
Favourable Demographics.
Favourable
Demographics that stand in favour of people’s choice & their buying trends
to prosper the organized retails are as follows:
a.
Approximately 60 per cent of Indian population is below the age of 30.
b. Increasing instances of Double Incomes in most families coupled with the
rise in spending power.
c.
Increasing use of plastic money for categories relating to Apparel, Consumer
Durable Goods.
d.
Low share of organized retailing.
Advantages of the organized retail sector
1)
An economic win for customers
The
prominent advantage of having organized retail for customers is that they get a
wider selection of goods along with more convenience and an enhanced
shopping environment.
The organized retailer has several formats and presence write from a small neighbourhood
in small towns or cities to a high air-conditioned Mall where the real estate
is cheaper.
Major
advantage for customers is that these retail formats have huge discounts which
unorganized retail formats may not be able to provide. Since organized
retailers buy goods in huge quantities, they also able to reap the benefits of
huge discounts.
This
discount is passed on to the customer on all the goods that are purchased over
there and thus the customer is at the gain and it is a Win-Win situation for
both retailer as well as a customer.
2)
Big gains for farmers
Another
advantage of the organized retail sector is that it provides a big gain for
farmers. Since these retail formats buy in bulk from the farmers themselves it
is beneficial for farmers to deal with one customer rather than hundred
customers and also it provides greater convenience and ease of trade along with
better profits for both the customer as well as the farmer. The retail sector
has given a huge push to the farming sector.
3)
Growth of Mid-level customers
Because
of the organized retail number of middle-class people or
middle-income group, people are increasing and having a better lifestyle.
These mid-level customers indirectly help the industry and the economy to grow
and prosper which is why it turns out to be a cycle which benefits each other.
4)
Economies of scale for Organized Retailers
All
of the organized retail players preferred to buy the products in bulk at having
a discounted price. The purchases are frequent and masking is done in order to fulfil
the needs of
the customers. This helps the players to achieve economies of scale and
a part of the discount is passed on to the customers as well. Apart from that
they also enjoy cost advantage on
many factors such as advertising expenditures
purchases and a few other recurring costs.
5)
Minimization of risks
Another
advantage of organized retailing is that there are multiple stores
present and this reduces the distribution cost.
This also minimizes the risks associated and the possibility of losses is
reduced.
This
is advantages to the retailer’s sunset also avoids unnecessary costs which are
levied. Even in case of taxation, it is easier for the retailers to files for a
tax from one point rather than having multiple stores.
6)
Employment Opportunities
Retail
stores opening branches in multiple locations. This, in turn, has affected and
generated employment for many local people. Retail stores have constant job
opportunities for people from different backgrounds.
Right
from Cashier to store manager people from various backgrounds can apply in a
retail store without age restriction and get employed and start earning daily
wages have the employment opportunities increase more and more people get
employed and this results in the betterment of the economy overall.
As
more and more retail store is open more and more job opportunities are
surfaced. Thus, organized retail has opened and expanded opportunities of the
job for many people.
Disadvantages of organized retail
1)
Monopolistic Approach
A
major downfall of having a chain of retail stores is that they may have a
monopoly for a particular product. This monopolistic approach can affect the
customers severely and can compel them to buy the products at a higher price.
The
monopolistic approach can affect the competition and can impact the customers
economically in a negative way.
2)
Lower prices may be a Myth
Not
every retail store can afford to give all the products at a low price. Also, it
is true that the products are purchased by the retailers to having a discounted
price but there is no surety that the discount is passed on to the customers.
3)
Quality compromise
Owing
to the advantage of having economies of scale there may be a compromise on
quality terms. The storage of the products may present a big problem and
storage of department stores which is why that may be a compromise on quality.
Owing
to the fact of getting more and more business the stocks are piled up and not
taken care of which may cause the damage in the product internally and the
customer may realize this after the purchase and this may affect the brand image of the store.
4)
Stock Maintenance and Stock losses
From
the point of view of the retailer, maintaining such a huge stock is costly. Of
course, the retailer gets an enormous discounted price but stock maintenance
and storing and warehousing charges
reduced the discount and add up to the cost of the retailer.
There
may be times when the product is kept in stock but it is not required by the
customer and in such cases, there is also expiry of the product. In such cases,
the stock loss has to be Borne by the retailer. This also reduces profitability and
increases the cost.
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