PROJECT REPORT

ON

"E-RETAILING IN INDIA"

In Partial Fulfillment of the requirement for award of

Master of Business Administration (MBA)

SESSION-2019-21

SUBMITTED TO: SUBMITTED BY:

Dr. Sofia Khan Sanjay Yadav
(AssistantProfessor) MBA (IV Semester)
S.M.S. College, Varanasi Rollno.1901060700105
 DECLARATION

I hereby declare that the information presented in this Project Report is correct

to the best of my knowledge and the analysis is as per the norms and guidelines

provided for the report. I have utilized the requisite concepts and applied the

required methodologies to analyze the data collected to reach the conclusion

present in the report.

I claim the report to be my indigenous work and has not been published anywhere
else.

Sanjay Yadav

MBA (IV Semester)

Roll No.1901060700105

2
 ACKNOWLEDGEMENT

A large number of individuals have contributed directly and indirectly in this

synopsis. I am thankful to all of them for their help and encouragement.

My sincere gratitude to Dr. Sofia Khan(Assistant Professor)and all the

MBA faculties for their support and guidance in completion of this Project
Report .

I express my sincere thanks to my parents & friends for the inconstant

support and suggestions to accomplish my goals.

Last but not the least I thank God for his love and grace that enabled me to
complete this Project report.

Sanjay Yadav

MBA (IV Semester)

Roll No.1901060700105

3
 TABLE OF CONTENTS
SR PAGE
NO. TITLE NO.

CHAPTER – I

1 INTRODUCTION 4-23

2 LITERATURE REVIEW 24-35

CHAPTER –II
RESEARCH METHODOLOGY AND DATA
3 COLLECTION 36-38

CHAPTER – III

4 ANALYSIS OF DATA 39-71

CHAPTER –
IV

5 OBSERVATIONS 72

CHAPTER – V

6 SUMMARY, FINDINGS AND SUGGESTIONS 73-75

CHAPTER VI

7 CONCLUSION 76

8 BIBLIOGRAPHY 78

9 APPENDIX 79-83

4
 List of tables

Table No. Content PAGE

1 Table showing percentage of age group

2 Table showing respondents mode to accessibility of the net

3 Table showing no. of respondents who have purchased on

Line
4 Table showing reasons why people are reluctant to buy on
Line
5 Table showing how respondents found on line buying
Table showing waiting time for the product ordered on line
6 to be delivered
Table showing the influencer of purchase decisions at
7 Home
Table showing web sites that respondents visit usually in
8 relation to shopping
Table showing the interest of respondents to shop online in
9 the future
Table showing overall rating of online shopping by the
10 Respondents

5
 List of Graphs

Page

Chart no. Content

1 Chart showing percentage of age group

2 Chart showing respondents mode to accessibility of the net

3 Chart showing no. of respondents who have purchased on

Line
4 Chart showing reasons why people are reluctant to buy on
line
5 Chart showing how respondents found on line buying
Chart showing waiting time for the product ordered on line
6 to be delivered
Chart showing the influencer of purchase decisions at
7 home
Chart showing web sites that respondents visit usually in
8 relation to shopping
9
chart showing overall rating of online shopping by the
10 respondents

6
 Chapter – 1
Introduction

7
1.1 Introduction to research topic

E- Retailing an overview

Electronic retailing (also called e-tailing and Internet retailing) is a retail format in which
the retailer and customer communicate with each other through an interactive electronic
network. After an electronic dialogue between the retailer and customer, the customer can
order merchandise directly through the interactive network or by telephone. The
merchandise is then delivered to the customer‟s address.

The World Wide Web can serve one or more of these roles for a retailer

• Project a retail presence.

• Generate sales as the major source of revenue for an online retailer or as a
Complementary source of revenue for a store-based retailer.
• Enhance the retailer‟s image.
• Reach geographically dispersed consumers including foreign ones.
• Provide information to consumers about the products carried, store locations, usage
Information, answers to common questions, customer loyalty programmes and so on.
• Promote new products and fully explain and demonstrate their features.
• Furnish customer service in the form of E-mail, “hot links”, and other communications.
• Be more personal with consumers by letting them point and click on topics they choose.
• Conduct a retail business in a cost efficient manner.
• Obtain customer feedback.
• Give special offers and send coupons to web customers.
• Describe employment opportunities.
• Present information to potential investors, potential franchisees and the media.

The role assigned to the web by a given retailer depends on whether it is predominantly a
traditional retailer that wants to have a web presence or a newer firm that wants to derive
most or all its revenues from web transactions.

8
In India Non-Store retailing represented by direct selling and etailing is estimated at Rs
1,100 crores. Only 19 percent of all retailers have an e-retailing initiative. The number of
retailers with plans to e-tail within one year and those with no plans are almost equal.
Significantly, 10 percent of the retailers have discontinued their e-retail initiatives. The
main reasons for retailers to stay away from e-tailing are predominantly non-viability of
business and resource constraints. It is estimated that 5 percent or more of retail sales of
goods and services such as apparel, banking, books, computer hardware and software,
consumer electronics, gifts, greeting cards, insurance, music, newspapers/magazines,
sporting goods, toys, travel and videos will be made online. In the case of products
where it is difficult to provide „touch and feel‟ information electronically, such as
clothing, perfumes, flowers and food electronic retailers may not be successful. Branding
may help overcome many of the uncertainties in purchasing merchandise without
touching and feeling it. For example, if customers purchase a size 30–inch waist / 32-inch
inseam pair of jeans, they know they will fit when bought from an electronic retailer. In
some products and services, such as traveling or hotels, electronic retailers might even be
able to provide superior information compared to store retailers. The critical issue related
to selling successfully for electronic retailers is whether they can provide enough
information prior to the purchase and make sure the customers will be satisfied with the
merchandise once they get it. There are many buying situations in which electronic
retailers can provide sufficient information, even though the merchandise has important
„touch and feel‟ attributes.

Started on venture capitalist (VC) or initial public offering (IPO) money, by 1999 there
was hype around e-tailing. Consumers were thought to be ready to make a deliberate
choice of buying from e-retailers rather than retailers. They seemed to fulfill the
consumer dream of no queues, no geographic barriers, low prices and unlimited selection
- what retail had failed to deliver. But e-tailing ended up disappointing and found that
traditional shopping was easier. Ernst & Young statistics for the 1999 Christmas season
revealed that US online buyers spent only 26% of their holiday spending (averaging
$1,080 per capita) online, while they devoted 67% of their total holiday expenditure to in-

9
store purchases, the remaining 7% they spent on catalogue products. By the end of the
2000 holiday season more than 90% of e-tailers closed down in the period to January
2001. E-commerce witnessed the collapse of several online grocers, drug stores, auto
dealerships, pet supply stores and other budding ecommerce ventures and hundreds of
dotcom investors abandoning their dreams of getting rich quick with e-commerce.
However, Retail e-commerce sales grew to $7.5 billion, up 24.7 percent in the second
quarter of 2001 compared with just under $6 billion in the second quarter of 2000,
according to an August report from the U.S. Commerce Department. Leading market
researchers suggest that U.S. markets for online retailers will cross $27 billion by 2007.
European Web shoppers are expected to spend more money online for groceries than
their American counterparts, according to Forrester Research. The report predicts that
Web grocery shopping in Europe will be $51 million –or five percent of Europe‟s total
grocery sales by 2007. Seven percent of the United Kingdom‟s grocery sales will go
online by 2007. The Nordic countries are expected to follow closely with six percent of
grocery sales taking place online. France and Germany will account for more than three
percent of sales online in 2007. The present players in the market are trying to learn the
lessons from the failures and success of extinct and surviving e-commerce pioneers.

1.2 An overview of industry in general

Powering the Reinvention of Retailing

Growth of e-retailing hinges on the last mile,

When looking at potential growth for online retailing, most analysts look at the number
of consumers who are online, what online merchandising they respond to and what
marketing it takes to make them repeat buyers. Chicago-based consultant Lauren
Freedman has one word for them: Fulfillment. “How do we grow this business if people
aren‟t home to receive their purchases when they are delivered?” says Freedman,
president of The E-Tailing Group Inc. “Not everyone can receive their deliveries at
work.”

10
E-retailing Myths:

The common myths earlier were that online selling required low investment and low cost
and hence had no entry barriers and it was easy to succeed. There are four B2C myths
that can be misleading while managing e-commerce operations.

1. Stickiness is good: Many sites aspire to keep customers on the site as long as possible
by adding features and design navigation. They have too many sequential clicks through
pages and save the best page for the last. On the contrary it is observed that when it
comes to e-commerce sites, the customers would rather complete their purpose than
unnecessarily waste a lot of time on a site when looking for a particular product.
Therefore, a site should have an introductory home page, offer speed navigation, vividly
describe product benefits, update displays regularly, provide expert information and price
competitively.

2. More is better: Some sites try to attract customers with flashy technology by
bombarding them with fancy graphics, animation and sound effects. But fancy visual and
sound effects slow sites to a crawl. A recent survey from Jupiter Media Metrix found that
visitors were twice as likely to return to a site with faster loading pages as they were to
sites that provide rich media. The Jupiter survey also found that 59 percent of those
surveyed would be more likely to return to a site that offered more product information.

3. Personalization drives profitability: Personalization was supposed to be the killer

application of B2C. But personalization is just one of the merchandising techniques that
e- commerce sites should consider for incremental sales improvement but per se it does
not help to complete sales. This is because customer actions don‟t always reflect their
interests. For example, a customer may have bought a book on baseball as a gift for his
brother-in-law, a sports fan. But the customer dislikes sports himself. However, that does
not stop the site from continually calling the customer‟s attention to books on baseball,
football, basketball and the like. It is recommended that instead of investing in expensive

11
personalization technology sites they would be better off devoting their energies to proper
merchandising by answering questions and having items logically arranged.

4. You can sell anything on the web: One can sell many products like CDs, books, gifts,
online. But certain products aren‟t a good fit for e-commerce sales, either due to legal
restrictions like in the case of alcohol, or the customers need to touch and feel the product
or try an expensive piece of apparel to make sure it fits. Sometimes the discounted price
shoppers‟ find on the Web may not offset the hefty shipping charges for large, heavy
items such as an oven or Jacuzzi. Although, in the case of such products one may not be
able to complete the transaction on the Web but it can assist the sale. The web-site can be
used to inform customers about these items and direct them to an appropriate sales
channel, like its stores or distribution network.

5. Some common myths now are that e-commerce entails high cost and hence is not
viable. E-commerce is undoubtedly a high investment business requiring substantial
investment to set up the web site, the software for data capture, records and interactive
systems for customer dialogue. These are sometimes underestimated and often cause
downfalls. But they are investments like any bricks and mortar business; only the heads
under which they are made are different.

6. Another myth is that e-commerce cannot make money. But e-commerce can be
made profitable by generating volumes to make money and given time to mature and
taking up the challenge to change customer behavior. However, it cannot be a gold mine.

7. According to the Ernst & Young “Global Online Retailing” report, the main reasons
that non buyers don‟t buy online are: they are uncomfortable sending credit card
information, preference for seeing the product before purchasing, no existence of credit
card, and insufficient information about products to make decisions, lack of confidence
with online merchants and limitation of talking to the sale person. In addition, the main
concerns of online buyers are overly high shipping costs; need to try for fit in the case of
apparel, high prices, inappropriate for large, perishable and luxury items, need to feel and

12
see and concern of privacy. The report also charted that 3 biggest “barriers” consumer‟s
feel hinder their online shopping experience is price, security and ease of navigation.

8. The e-tailers have high fulfillment of costs (which can be as high as US$16 an order
for most dotcom e-tailers) and lack of scale makes the business unprofitable.

9. Poor inventory management also causes major losses for many dotcoms. This fact
along with inexperienced merchandising teams, brutal price competition, inefficient
product return systems, result in poor gross margins for online –only players.

10. High marketing costs: Experienced offline brands spend about 18% less than
startups on establishing retail websites. E –tailer-marketing costs are high. Online “rent”,
a term for the price of time and space on media channels for on-and offline brand
marketing, has inflated hugely over the last decade of the twentieth century. According to
Thomas Weitzel Partners (August 1999) where a superstore spends an average of
US$2.50 promoting a product, e-retailers spend US $17.29 per product.

11. Online customer acquisition costs: Most consumers still need to be persuaded to go
online and at the same time almost all e-retailers lose money on every customer. Their
customers generate too few orders and too little profit per order to cover the costs of
winning them, which can be as high as 65% per order. According to a study by The
McKinsey Quarterly in July 2000, for e-tailers to achieve comfortable contributions on
each transaction, they would need efficient order fulfillment processes, average orders of
at least US$100 and gross margins of at least 25%.

Factors Affecting the Growth of Electronic Retailing

Three critical factors affecting the adoption of a new innovation such as shopping
electronically are (1) the ease with which customers can try the innovation, (2) the
perceived risks in adopting the innovation, and (3) the benefits offered by the innovation
compared to the present alternatives.

13
Trying Out Electronic Shopping:

In September 2002 about 605.60 million around the world had access to the Internet.
Majority of these web surfers were living in Europe, followed by Asia/Pacific, Canada &
USA, Latin America, Africa and the Middle East. According to the United Nations
Conference on Trade and Development (UNCTAD report) Internet usage is seeing an
annual rise of about 30-percent which is equivalent to about 2.5 percent of the global
population. A growing share of new internet users is in developing countries, which
accounted for nearly a third of all new Internet users worldwide in 2001. Already Asia,
excluding Japan and the Republic of Korea, added almost 21 million new users to the
Internet in 2001, more than North America. With 77 million people under 18 expected to
be online globally by 2007, teenagers and children constitute one of the fastest growing
Internet populations, Surfing the net is a highly regarded activity by this age group.
However, adults over 50 years old are one of the fastest growing markets on-line. A large
number of this age group has home access to the Internet. Studies have revealed that
older people are receptive to new technology and have time, money and enthusiasm to
surf the web regularly. Apart from staying in touch with far-flung family and friends, the
older people tend to purchase merchandise and services online because shopping in stores
can be difficult for them.

Perceived Risks in Electronic Shopping

Technological developments are reducing the risk of electronic shopping by enabling

secure transactions and increasing the amount and quality of information available to
electronic shopper. However, security of the credit card transactions remains one of the
major concerns, especially in developing economies. Entertainment and Social
Experience: All non-store retail formats are limited in the degree to which they can
satisfy these entertainment and social needs. In-store retail formats score high on this
account. They provide more benefits to consumers in terms of entertainment and social
experience than simply having merchandise readily available and helping them to buy it.

14
Even the most attractive and inventive web pages and video clips will not be as exciting
as the displays and activities in a Disney or Toys R Us store due to their interactivity.
In the case of store-based retail formats the delivery time of getting merchandise is
immediate. But in the case of non-store retail formats consumers usually have to wait
several days to get merchandise, especially when the goods are of a perishable nature and
bought prior to an occasion. Number of alternatives:

The biggest benefit of electronic retailing compared to other retail formats is the vast
number of alternatives that become available to consumers. For example, a person living
in India can shop electronically at Harrods‟s in London in less time than it takes to visit
the local supermarket. However, it does have limitations. Shoppers may visit all the sites
selling the product. This may be a time consuming exercise unless the consumer is
focused and finds a few items that they might like to study in detail. A more significant
potential benefit of electronic retailing is the ability to have an electronic agent to select a
small set for the customer to look at in detail. Service oriented retailers score higher on
this account as their salespeople know what their preferred customers want and help
indecision making by limiting the choice.

Cost of Merchandise:

Since electronic retailers do not have to spend money building and operating stores at
convenient locations, they have much lower costs, as much as 25 percent lower than in-
store retailers. But the electronic retailers or the customers will have higher costs to get
the merchandise to homes, deal with the high level of returns and attract customers to
their website. It is quite costly to deliver merchandise in small quantities to customers‟
homes. Customers presently incur these costs when they spend their time and money
going to stores to pick out and take home merchandise and then going back to the stores
to return the merchandise they don‟t want.

15
E-TAILING CHALLENGES

1. Zero error operations

A study by Boston Consulting Group in the United States and Canada in 1999 showed
that 57% of Internet users have shopped online and 51% actually purchased goods or
services online. The typical online purchaser completed ten transactions and spent $460
online over the previous twelve months. Yet 28% of all attempted online
purchases failed, and four out of five consumers who made purchases online experienced
at least one failed attempt over the same period. These failures resulted from technical
problems consumers encountered with the sites, difficulties in finding products and
logistical and delivery problems after the sale. Twenty eight percent of consumers who
suffered a failed purchase attempt stopped shopping online and 23 % stopped purchasing
at the site in question.

However, the study also showed that consumers who enjoyed a satisfying first purchase
experience online were likely to spend more time and money on the Net. The satisfied
first-time purchaser typically engaged in twelve online transactions and spent $500
during the previous twelve months. The dissatisfied first time purchaser spent only $140
on four online transactions. About 5% of users who had bad online shopping experiences
also stopped patronizing the retailer‟s physical store. There are a number of things in the
e-business environment that can impact the consumer‟s shopping experience negatively.
Primarily the e-tailers need to think about providing support for customers on two
subjects: problems with the website usage and questions or problems with the product.
Appropriate use of technology and people solutions will have to be defined in order to
support e-business initiatives by understanding, tracking and monitoring the online
behavior of customers. Normally, people have to spend a lot of time describing the
problem. The customer support team can see where the customer was at the time of
reporting the problem or what task was abandoned. Based on which they can efficiently
resolve this issue. This type of service will not only enhance a customer‟s experience on
the e-tailers website but also provide the organization with an opportunity to reduce costs.

16
E-tailers have several customers survive options ranging from real–time consumer
interactions to self-service options:

Frequently Asked Questions (FAQs): This is a self-service option that relies on

information stored in a database to assist customer transactions and provide answers to
common questions that are asked by customers. This database is continually built over
time and new customers and answers are added, based on knowledge gathered from
earlier customer interactions. Call Us Buttons: Call-us buttons appear on the website
pages, allowing the customer to call the customer support representative on a regular
phone via the web. PCs that are equipped with speakers and a microphone may take
advantage of voice-activated websites that send voice over Internet using VoIP
technology. Another variation to the same option is „call-me‟ buttons, where the customer
can request the customer representative to call back, though this may force the customer
to go offline.

Text Chat: Text chat over the net allows a client to send a question and receive a real –
time written response. This allows almost instantaneous communication with more than
one customer at a time or in a group. Depending on how it is implemented, it may appear
to be slow to some users. Collaboration/Co-browsing: Web collaboration technology
allows a customer support representative and the customer to share the same screen so
that the representative can see exactly what the customer is doing. This type of
interaction will help the support representative solve a problem if the customer is stuck at
a certain place on the website. On the other hand co-browsing offers the capability where
more than one person can browse a site together, with one of the users doing the „driving‟
while the other has secondary control. This type of interaction will provide the
representative with capability to handle a customer who seems lost on the website.

E-Mail Management: email systems should be fully automated using artificial

intelligence (AI) or other new technologies that help the e-tailer to deliver an instant
automatic reply based on key words or FAQs. E-mail systems can automatically route e-
mails to a call centre, where a customer support representative can review the suggested

17
computer-generated response or can prepare a new response before it is sent to the
customer.

Call Centers: Plain old call centers should be enhanced to support calls from online
customers as well as catalogue shoppers. Earlier, the call centers had to be confined to a
geographic area or country to provide the best support, with the Internet, the call centers
can be spread across multiple countries to provide the same, or better, quality of support
and reduce the cost of providing the support.

E-businesses are realizing that it is imperative to communicate with their customers

through a range of media options and that these technologies must work together
seamlessly for the customer. This places huge pressure on the customer service divisions
of the company. The online e-tailer will use multiple forms of customer service including
live interaction by telephone and chat, asynchronous communications using e-mail and
fax and computerized service using natural language-based help systems.

2. Increased Gross Margin:

Every retailer ideally wants to have high value, high margin and fast moving products.
But that is often not possible. The products that fetch the most money may not be the
products that the customer wants to buy. Therefore retailing is ultimately about being
able to find a balance. E-tailers need to pay attention to gross margin return on
investment. For example, if a 25 percent margin category sells six times a year and a 15
percent one sells 12 times a year, it is better to go with the latter. Therefore getting the
right product mix is critical to retailing. An e-tailer should also try to cut down the direct
costs by achieving distribution efficiencies. There are many factors like the product‟s
retail price, the physical requirements of the product to be shipped, and delivery speed
required for the product category that would influence the e-tailers, distribution
considerations. Price point is a crucial determinant in distribution and business viability
decisions. The fulfillment costs associated with FMCG products are so high that
merchandise with low price points fail to achieve break even. For almost all products,

18
packaging and/or shipment and same day fulfillment can be vital. In these cases the best
distribution centre is the retail outlet closest to the consumer, making personal collection
or speedy individual delivery possible. E-tailers should be, wherever possible, to adopt
the vendor shipping option that would enable it to cut down direct costs and hence
increase the realizable gross margin

3. Customer Acquisition:

Gaining information about customers and potential customers and converting such needs
into demand is more feasible in electronic commerce than any other marketing channel.
The Internet allows e-tailers to gather huge amounts of information about their customers
easily. They can use this information for personal pricing and customer specific targeted
promotions. It might also be used to directly offer customers related products, either in
real time during the on-line shopping process or by e-mailing them with special offers.
This possibility offers benefits for customers. It is a convenient opportunity to get to
know new products they would like to buy without having to look for information in
many places.
One way e-merchants attempt to lure new customers is through online coupons especially
in the case of grocery shoppers. Other categories such as toys, books and music are also
popular in terms of redemption of e-coupons. Majority of grocery shoppers use online
coupons and nearly half as many redeem online coupons. Toy e coupons witness the
highest online redemption rate at 87% followed by books at 83%. While the potential for
e-tailing seems boundless, challenges do exist to altering customers‟ expectations and
behavior. Changing customer behavior is the most complex task. The e-tailer can change
customer behaviour and increase their clientele by managing four key elements:

Educate: As a rule, the more potential customers know about the product or services the
e-tailer is selling, the more they‟re likely to buy. Education does not only have to be
about the product but also of the e-tailers‟ business, quality assurance and processes.

19
Guarantee: Any purchase represents a risk to the buyer. The risk may be of paying much
more than what its worth or the item may not look as good at home as it does on the web
site. The e-tailer should not only eliminate the risk but also reduce the customer‟s
perception of risk by having risk-free return or exchange policies.

Manage Expectations: The e-tailer will need to manage customers‟ expectations so that
they are not disappointed or frustrated by the shopping experience. The expectations may
be as simple as those about availability of the item or shipping time or the total cost.

Satisfaction: The e-tailer, after having educated its customers, hedged their risk and set
their expectations, needs to follow through with online customer service. A study in
found that U.S. businesses lost more than $6.1 billion in potential Internet sales in 1999
because of poor online customer service and estimated that an industry wide failure to
resolve the problem could lead to at least $ 173 billion in lost revenues through 2004.
Additionally, 7.8 percent of online transactions initiated by customers are abandoned
because of poor customer service. Thus, customer service must integrate seamlessly not
only with the company‟s existing Web site, but the company‟s entire operations Online
and offline.

4. Generating customer traffic:

E-tailers adopt one of two approaches to generate traffic: Impulse Driven and Serious
Shopper Approach. Impulse purchases are defined as purchases that signify with high
emotional activation, low cognitive control and largely reactive behavior. This occurs
when consumers experience a sudden and often powerful and persistent urge to buy
something immediately even though they she had no prior intention of doing so. Under
this approach the e-tailer generates high traffic. The more often a customer visits a site,
the more likely they are to spend an increasing amount of money and thus generate
profits for the e-tailer. For instance, in apparel, the average repeat customer spends 67%
more overall in the third year of shopping relationship with an online vendor than in the

20
first six months. And over three years, customers referred by online grocery shoppers
spent an extra 75% above what the original shopper spent. Products that are generally
bought on impulse purchases usually have several of the following characteristics:

➢ Their price is considered average or acceptably low enough by the consumers;

➢ They are low involvement goods;
➢ They are related to entertainment activities and hobbies;
➢ They are used as gifts to friends and relatives;
➢ They are considered “trendy” or popular items;
➢ They are personalized versions of common products;
➢ They are related to holidays or important festivals or occasions

In order to take advantage of such shopping online retailers should offer products that can
be bought on impulse. They also need to emphasis product presentation and placement to
reinforce the emotions that motivate consumer purchase decisions. They could choose
some of the following to generate higher traffic: Ease of access: Impulse purchases can
be made without requiring the customer to leave their home in order to see the product on
display.

Low touch: Most products likely to be bought on an impulse do not require “touching”
or “tying on” which makes them appropriate for on-line retailing. Dynamic displays:
customers can be presented with such products while navigating through the online shop;
different items can be shown on each page to maximize the likelihood of purchase; items
which are related or complimentary to those in the section of the catalogue currently
viewed can be displayed.

Personalized displays: on line technology allows personalizing the items advertised to

The customer during navigation which can be done based on the customer preferences or
demographic information (if membership is an option) or purchase history. Personalized
reminders: members or previous customers can be sent or presented reminders about

21
coming holidays or popular items (best sellers) in categories they have expressed interest
or made purchases in, in the past. Personalization opportunities: customers can easily be
presented with opportunities to personalize common products (e.g. print a name on a cup)
that can initiate impulse purchases.
Advanced visualization techniques: graphics technology (animation, sound / image
effects) gives many opportunities to present a product in a way that will impress the
consumer and motivate them to buy it. Purchase expediting: on line retailing allows on–
click purchasing (for registered customers or members) which leaves virtually no time for
second thoughts or reasoning about the purchase of product.
In case of the Serious Shopper Approach, the e-tailer builds a relationship based on
service levels and quality of products. The e-tailers have to proactively anticipate and
handle consumer expectations and ensure that what‟s being delivered is better than what
users expect. So retailers constantly need to analyze their product/service category‟s
relationship with consumers and ensure that their own business isn‟t becoming
disconnected from general expectations.

5. Customer Retention

E-business is redefining the way the e-tailers manage customer relationships and place
new demands for customer support throughout the sales cycle and thereafter. This task
has been made more complex by individualization of customers. The e-tailers cannot
afford to ignore even an individual customer because word -of- mouth spreads very fast
on the Internet. User groups, communities, web chat and e-mail each have enough
individual power to drain away revenues or create bad publicity. Only personalize
support and sophisticated customer interaction can help the e-tailer convert more
browsers‟ into buyers, resulting in higher revenues per customer. Also, it costs about five
to eight times more to acquire a new customer than to keep an existing one. Therefore, it
is essential for the e-tailers to build loyalty, aim to achieve zero error operation, to create
continuing excitement at the stores and have a mix of impulse and need based products to
induce customers to visit the site often. Some notable consumer-driven e-commerce site
content already in use:

22
I. Testimonial pages: Testimonials are a powerful tool to establish credibility, which is
especially important for a website in the early stages of existence and/or in the early
stages of developing any individual consumer relationship. A web site can also request
feedback for testimonials from happy customers and opinion leaders.
ii. Awards: This is another credibility tool as well as a tactic to increase traffic.
Iii. Extensive and useful links or resource pages.
iv. Contests, sweepstakes, sign-ups to get visitors to voluntarily opt for future marketing
Efforts targeting their specific consumer interests.
v. Information: according to an MSN Sidewalk survey, 74% of Internet users seek
Information
vi. Reviews/ Opinions, especially product related.
Vii. Learning networks/communities: through forums, chats, interactive software mailing
Lists and newsletters. This is particularly relevant to complex and/or non–
Commoditized products.
viii. A niche network of related sites: reciprocal links, banner ads, sponsorships. New
Releases and articles can be sent to publications focused on various products or
Product–user niches.

6. Earning Customer E-loyalty

Customer loyalty is a key driver of profitability for on line companies. Consumers are
motivated to buy more goods online when security features were enhanced and personal
information kept private. Increased loyalty can bring cost savings to a company in many
ways: lower marketing costs, lower transaction costs (such as contract negotiation and
order processing), customer turnover expenses and lower failure costs such as warranty
claims and so on. During the past decade, customer loyalty in general has been
decreasing. The introduction of electronic commerce accelerated this trend because
customers‟ ability to shop, compare and switch is extremely fast and inexpensive, given
the aid of search engines, mall directories and intelligent agents. A study found that 75%
of online customers who participated in loyalty programmes say that it is not the loyalty
factor that motivates them to make online purchases. Instead, e-commerce providers

23
should fill functionality gaps or face losing customers to competitors. Only 22% of 1,200
online consumers said loyalty programmes served as an incentive to buy online. The
survey highlighted that loyalty programmes must go beyond giving out points and should
reward loyalty with improved service such as priority service, personalized offers and e-
mail updates. 72% of the respondents said that customer service is a critical factor in
shopping satisfaction and only 41% indicated they were satisfied with the service they
had experienced. Managing privacy is an important issue in building loyalty. It is
becoming a major concern as technology gets better and companies collect large
customer data and start trading it in the market. As a business, e-tailers would need to
clearly communicate their privacy policies to build trust with customers.

7. Managing Technology

In e-tailing business, size is no longer a determining factor for success. The critical metric
is the speed of decision-making, customer service, response time, etc which are all
shortening, owing to the technological revolution. Up-to-date, intelligent and user-
friendly technology also communicates professionalism, a vital quality in building trust.
Indian retailers are gradually but steadily upgrading their IT infrastructure. Companies
are willing to increase their IT spending from 1 percent of sales at present to 5 percent
and expect clear benefits in vital areas like inventory management and customer
interfaces. In India, Shoppers Stop has one of the most advanced IT systems in place. In a
recent Economic Times survey the company was recognized as among the most IT-savvy
companies in India. It has already pumped in over 10 crores in to IT systems -
merchandise management systems, inventory management, CRM package etc, and have
futuristic plans to continue its spate of investments. The main aim of the company is to
see that the time spent by their merchandisers on mundane functions is minimized and
they can spend more time on strategy related issues. However, e-tailers should not fall
prey to becoming a slave to technology. In the aftermath of the dotcom blowout and the
downturn in the economy e-tailers are reviewing strategies, processes and questioning IT
spending as they strive to improve performance and boost profits in a difficult economic
climate. It is more critical to have a robust, reliable and scalable software platform than

24
have bells and whistles. Therefore e-tailers should not try to attract customers with flashy
technology with fancy graphics, animations and sound effects but should offer more
product information. A recent survey found that visitors were twice as likely to return to a
site with faster loading pages as they were to sites that provided rich media. It also found
that percent of those surveyed would be more likely to return to a site that offered more
product information.

Channel Comparison
Bricks-and- Catalog Retail e-Retail
Mortar Retail
Location and Physical Print materials Location is the
presence buildings Web address,
"Portable store"
branded and available globally
easily identified through any
Sent to targeted
and found Internet
mailing lists
connection
Most traditional
and oldest Can establish a
location for presence through
retail partnerships and
cross-promotions
Commands (links between
attention in the sites)
retail landscape
How Use of store Page layouts Web page layout
merchandising is space and "fix
Organization of Relationship
accomplished Turing"
catalog between product
Signage and and text
other product Relationship

information between product Signage and other

and text product
tools

25
 Bricks-and- Catalog Retail e-Retail
Mortar Retail
information tools

Category, search,
and sorting
mechanisms

Interactive
product locators
Options for Pricing Pricing Pricing strategies
promotional strategies and strategies and and campaigns
activity campaigns can campaigns can can be
be implemented be implemented implemented
on a daily basis only as "instantaneously,"
frequently as depending on
new catalogs are internal
distributed organizational
constraints
Options for Product must be Product is held Multiple
inventory available at at warehouse inventory
multiple store until ordered and ownership
locations to shipped to options, with
maximize customer most prominent
purchasing being traditional,
opportunities "just-in-time,"
(with the and a hybrid of
exception of the two
products
intended for
special order)

26
E-Retail + Traditional Retail Operations

Sites like macys.com and gap.com, as well as relative late comer‟s walmart.com and
jcpenney.com, are evolving into online branches of brick-and-mortar operations. This
kind of site is not limited to the rich, famous, and nationally well-branded. Many smaller
stores have used the Web to broaden their market by opening online branches, which
make available to Web shoppers goods that were once accessible only to people near the
store.

The inverse image of this model is also evident: businesses that started out as Web e-
retailers but have since added brick-and-mortar operations to their sales channels.
Gazoontite.com launched its Web site selling hypoallergenic products before opening its
flagship store in San Francisco. Additional stores have opened on both coasts and in the
Chicago area. Originally intended to reinforce the site's branding and credibility, the
brick-and-mortar operations have proven to be a huge success, even as the e-retail site
has stopped selling.

The concepts outlined in this book apply to traditional retail stores and e-retail sites. If
your site would benefit from a storefront, the same skills and metrics should guide your
decisions. For the purposes of this book, however, we focus on the e-retail component of
the business.

E-Retail + Catalog Operations

In this category are well-known catalog merchants like Lands' End, which has expanded
its popular direct merchant business through landsend.com. For catalog retailers,
expansion to the Web is a relatively easy development. They already conduct most of
their sales through remote media and are already equipped to handle customer service
and order fulfillment.

This model also has an inverse, in the form of dot-coms that have added print catalogs or
other print sales tools to their online site offerings. Print sales tools can serve as a
tangible reiteration of an e-retail brand and its product offerings. Garden.com, for

27
example, added a print catalog to the many merchandising techniques the company uses
to drive sales at its Web site.

The consistent, physical reminder of your name and brand can be an important aspect of
your marketing, regardless of whether you intend to achieve sales through both a print
catalog and your retail site.

E-Retail + Web Site Content

Selling goods is a complementary component of business for these sites, which may rely
on other sources of revenue for some portion of their business. Other components may
include community building, editorial and informational content, product reviews, and
recommendations or other features to draw users to the site.

The combination of targeted information and retail is a powerful one that cannot be easily
replicated offline. To be sure, many traditional retailers of all kinds offer their customers
print newsletters, loyalty programs, educational opportunities, and more. However, the
Web uniquely enables customization of that content, allowing customers to pull from the
site exactly the content they want and need, when they want it, and, many times, in the
form they want it. From the e-retailer's perspective, this customization is automated; the
company need not employ envelope stuffers to select and mail the appropriate materials
to a customer on a regular basis. From the customer's perspective, this feature creates the
experience of becoming a "market of one," with a direct relationship to the retailer.

Content and e-retail sites may mix their revenue streams in a variety of ways with any
number of tools such as membership programs, advertising, sponsorships, retail,
subscriptions, and syndication of content. Affiliate programs, which credit a referring
Web site for sales made through the site, can make almost any site a de facto e-commerce
site. For the purposes of this book, we considered sites that rely on product sales of 50
percent or more of their revenues.

28
FashionDish.com and Baby Center are both content-driven e-retail sites. Both sites rely
on targeted content (celebrity gossip, parenting information) to bring customers to the site
and keep them coming back.

What format best suits your business? What sales channels will prove successful for you?
The balance between Web sites, brick-and-mortar stores, and catalogs depends on your
retail strategy, goals, and budget. Although our focus throughout the book will be on the
Web-based retail operation, take some time to consider whether additional sales channels
make sense for your product, market, and unique selling proposition.

29
 CHAPTER 2:

Review of Literature

30
 REVIEW OF LITERATURE
Parikh, Darshan found that the demographic indicators such as age, gender,

income, and ethnicity are the accurate indicators of who shops online. He suggested that

due to low penetration of the Internet in India, the internet shopping is in its nascent stage

in India. He also studied the relationship between actual and intended online shopping

experience and various demographic indicators.

Li, Na & Zhang, Ping found that personal characteristics, vender/service/product

characteristics, and website quality significantly affect online shopping attitudes,

intention, and behavior. They implied that more appropriate consumer groups, improving

product and/or service quality, and improving website quality positively influence

consumer attitudes and behavior, potentially leading to increased frequency of initial

purchase and repeat purchases on the part of consumers.

Delafrooz, Narges et. al. found through a survey that the most significant

determinants of consumers‟ attitudes towards online shopping are utilitarian orientation,

convenience, price, and a wider selection of products.

Young Ha & Stoel, Leslie suggested how general innovativeness is related to

Internet shopping based on Rogers' innovation decision process. Due to the newness of

Internet shopping, consumers' general innovativeness may influence the adoption of

Internet shopping among young consumers. The results show that general innovativeness

is related to Internet usage for information search, but not to actual purchase.

Noort, Guda Van et. al. examined the impact of shopping context on consumers‟

risk perceptions and regulatory focus. They found that individuals perceive an online (vs.

31
conventional) shopping environment as more risky and that an online shopping

environment, by its risky nature, primes a prevention focus.

Samadi, Mansour & Yaghoob-Nejadi, Ali compared the perceived risk level

between Internet and store shopping, and revisited the relationships among past positive

experience, perceived risk level, and future purchase intention within the Internet

shopping environment. They revealed that consumers perceived more purchasing risk

from the Internet than from the store. A more positive online shopping experience led to

consumers‟ less perceived purchasing risk level in the Internet. And a higher perceived

risk led to less future purchasing intention from the Internet.

Shergill, Gurvinder S & Chen, Zhaobin found that website design, website

reliability/fulfillment, website customer service and website security/privacy are the four

dominant factors which influence consumer perceptions of online purchasing. They

categorized online buyers into four types; i.e., trial, occasional, frequent and regular

online buyers, who perceived the four website factors differently.

Rishi, Bikram Jit found that the use of Internet is catching up and online

shopping is considered as a relevant alternative channel for retailing in India, and it is

now important part of the retail experience. He highlighted that convenience,

accessibility, scope, attraction, reliability, experience and clarity are the important factors

considered by the online shoppers. He also found that factors affecting the online

shopping in India are similar to those of worldwide but some of them are specific as the

penetration of IT and its adoption in India have been slow such as scope and accessibility.

Seock, Yoo-Kyoung and Chen-Yu, Jessie H. through factor analysis identified

five website evaluation criteria for internet shopping (i.e. product information, customer

32
service, privacy/security, navigation, auditory experience/comparison shopping). Based

on shopping orientation factors, using cluster analysis they revealed three shopping

orientation clusters (i.e. hesitant in-home shoppers, practical shoppers, involved

shoppers). Their study showed that website evaluation criteria were signifi cantly

different among consumers with different shopping orientations and between online

information searchers and online purchasers.

San, Lim Ying; Jun, Wong Wan; Ling, Tan Nya and Hock, Ng Tuan

examined the perspective of Generation Y and reported that reliability/prompt responses,

ease of use and access are significantly correlated with perceived online shopping service

quality.

Yang, Ming-Hsien; Chandlrees, Natalyn; Lin, Binshan and Chao, Hung-Yi

(2009) investigated that trust is the key factor to success of e-commerce. They reported

that consumers trust the e-commerce vendor on the basis of the privacy policies it follows

and also the appropriate description of products it provides through the website.

Lee, Khai Sheang and Tan, Soo Jiuan reported that consumers‟ perceived risk

of products and services and the retail context utility are the important factors that affect

the consumer choice of shopping on-line or in-store. They also added that consumers

mostly shop for well known brand online and also prefer purchasing from reputable

retailers.

Sun Lu found that although convenience being an advantage of online stores,

consumer confidence in transactions, payment mechanisms and mode of receipt of

commodities can play an important role in disrupting the overall trust and thus affect the

online purchase process. He also found that two factors are operational in developing

33
confidence, which he termed as pre-factors (brand, safety) and post factors (after sales

service).

34
 Chapter – 3

Research of Methodology

35
2.1 STATEMENT OF THE PROBLEM

Even though the government of India has taken positive measures to facilitate the speedy
growth of E- retailing by the introduction of cyber laws, reduction of taxes on
infrastructure etc people are hesitating to buy on lines due to confusions on security and
payment methods. There are also frauds taking place in credit cards which can happen
while it on the internet. Inadequate infrastructure and excessive tariffs also make the
situation worse.

2.2 SIGNIFICANCE OF THE DESSERTATION

In India E-retailing is still a relatively unknown and unused entity, but with the
governments open attitude towards progression, lot of infrastructure is dedicated to this
area. The new economics of information can transform business definitions industry
definitions and competitive advantage. The most tables of industries, the most focused of
business models, and the strongest of brands can be blown to bits by new information
technologies. It can come from nowhere and demolish brands & business that have been
established for decades, ever centuries.

In India where the internet users are growing at an alarming rate it will be helpful for the
consumer as well as for the companies, to discuss on e-retailing models, payment
methods, security features, future trends and benefits etc. predictions made on this study
can be used as a basis to foresee the future level of business.

2.3 REVIEW OF LITERATURE

a. E-retailing business models for Indian retail chains(Anand Sriram)
This study gives an in-depth analysis of e-retailing in India and gives a clear picture,
where India stands in e-retailing. The study depicts that India has got lot of potential
to grab in this area. But we are still in the infancy stage due to infrastructure shortage
and security threats. This area has to be tapped properly for more foreign exchange.

36
 b. A study on electronic commerce(CCS-5th term study
It deals with the issues regarding electronic payments and the other legal issues in
e-commerce. It also deals with the internet strategy for Indian Brick and mortar
companies. It also depicts the imperatives imposed by e-commerce in apparel
industry and FMCG products.
C. e-business models and implementation strategies (Sunil Dutta)
It contains different internet business models, internet revenue generation models
and the success of different models. The article also depicts the prediction of the
growth of internet users in the coming three years.

2.4 OBJECTIVES OF THE STUDY

 To find the factors that amount to the growth of e- retailing in India.
 To find out the challenges of e-retailing in India.
 To find out the target group in on line selling.
 To find out some of the E- retailing myths

2.5 SAMPLING METHODS USED

 PROBABILITY APPROACH: - Since every unit in the sampling frame has an

equal chance of being included in the sample probability approach is used.

 PROCESS: - A rigorous random selection process is undertaken to rule out the

bias occurring on account of sampling. The sampling frame is serialized and then
subject to a random number table selection of the sampling units is made.

2.6 TOOLS FOR DATA COLLECTION AND ANALYSIS

Questionnaire method is used to collect the primary data. Simple random sampling is
used to collect primary data. Each unit in the population has an equal chance of being

37
included in the sample. The technique of exploratory data analysis is used to make
predictions till the year 2007 by finding the growth rate.

2.7 DESIGN OF THE STUDY

a) Secondary data collection
b) Analysis of secondary data
c) Find the gaps in information in the secondary data
d) Data collection through questionnaire method
e) Analysis of primary data
f) Prepare the final report

2.8 LIMITATIONS

➢ Time and cost constraints restricts the survey some extent.

➢ The findings of the study will be based on the information provided by

respondents and hence may be biased.

CHAPTER SCHEME

1. INTRODUCTION
2. RESEARCHN DESIGN
3. INDUSTRY PROFILE
4. ANALYSIS AND INTERPRETATION OF DATA
5. SUMMARY OF FINDINGS, CONCLUSION AND
RECOMMENDATIONS

38
 Chapter – 4

Industrial profile

39
INDIA AS AN EMERGING MARKET FOR GLOBAL RETAILERS
Standing on the threshold of a retail revolution and witnessing a fast changing retail
landscape, India is all set to experience the phenomenon of a global village. India
presents a grand opportunity to the world at large, to use it as a business hub. A 'Vibrant
Economy', India tops A T Kearney's list of emerging markets for global retailers. The 2nd
fastest growing economy in the world, the 3rd largest economy in terms of GDP in the
next 5 years and the 4th largest economy in PPP terms after USA, China & Japan, India
is rated among the top 10 FDI destinations.

With a stable Government with 2nd stage reforms in place, India can be reasonably proud
of having put in place some of the most widely accepted Corporate Ethics (Labour Laws,
Child Labour Regulations, Environmental Protection Lobby, Intellectual Property Rights,
and Social Responsibility) and major tax reforms including implementation of VAT, all
of which make India a perfect destination for business expansion.

India is the fastest-growing market in Asia Pacific for international tourist spending,
according to latest Visa Asia Pacific release. The economy is growing by over 8 per cent
a year and India's growth rate can actually exceed that of China by 2015. The Indian
economy is expected to grow larger than Britain's by 2022 and Japan's by 2032 to
become the third-largest economy in the world after China and US and finally become
the second largest economy after China by 2050.

40
The Retail Evolution

With escalating consumerism, unprecedented awareness, and a youth-heavy customer

base, India is the 'Promised Land' for the Global brands and retailers. Faced with fast
saturating Western markets they are beginning to recognize the Indian consumer mass as
the world's most probable unexplored gold mine.

A T Kearney's Global Retail Development Index' gives a clear message to global retailers
on India: Move now or forego prime locations and market positions that will become
saturated quickly. Global retailers that missed out on capturing first-mover advantage in
China can make up for it in India. The retail market is changing fast, along with the
lifestyles and buying habits of India's burgeoning population. As people look for ways to
spend their money, global retailers should be looking for prime locations

Investments

A report by investment banker Goldman Sachs, credits India with the potential to deliver
the fastest growth over the next 50 years. According to Standard & Poor's, foreign direct
investment (FDI) to India is likely to grow the fastest in next few years. As targeted FDI
is to hit $13 billion in the 12 months ending March 2007, more than double India's
previous best of $5.5 billion hit in the previous year.

India is investing over US $130 billion in infrastructure by the end of this decade. Indian
retail industry itself has attracted investment of over INR 200 billion (over $4 billion) in
creating infrastructure, systems & shop-fit. The additional retail space is expected to add
INR 300 billion ($ 6.67 billion) of business to organized retail.

India's stock market continues to rise at unprecedented levels and foreign investors are
flooding in. The quantum of investments is likely to skyrocket as the inherent
attractiveness of the segment lures more and more investors to earn large profits.

The Indian Consumer

41
With the largest young population in the world - over 890 million people below 45 years
of age! India is indeed a resplendent market. India has more English speaking people than
in the whole of Europe taken together. Its 300 million odd middle class, the "Real"
consumers, is catching the attention of the world. As the economy grows so does India's
middle class. It is estimated that 70 million Indians earn a salary of over INR 800,000
($18,000) a year, a figure that is set to rise to 140 million by 2011. The number of
effective consumers is expected to swell to over 600 million by 2010 - sufficient to
establish India as one of the largest consumer markets of the world.

Private Consumption & Retail

With the changing face of retail, the Indian consumer is in for a rapid transformation.
While the consumer spending continues to grow at double digit figures, leading retailers
have recorded an increase in sales between 50 to 100 percent in the calendar year 2006
over the previous year.

According to India Retail Report 2007, the total private consumption touched INR 20,000
billion (US $ 445 billion) at current prices in the calendar year 2006 with organized
sector accounting for INR55,000 crore ($12.4 billion) business increasing its share to 4.6
per cent of the total Indian Retail Value that stood at INR12,000 billion ($270 billion).
Moving forward, organized retailing is projected to grow at the rate of about 37 per cent
in 2007 and 42 per cent in 2008. Organized retail in India has the potential to add over
INR 2,000 billion ($45 billion) business by the Year 2010.

The consumer spending is ultimately pushing the economy into a growth-and-

liberalization mode. The Indian market is becoming bolder by the day, with the economy
now expected to grow at over 8 per cent and average salaries being hiked by about 15 per
cent, there will be lot more consumption.

Opportunity for Global Players

Favorable demographic and psychographic changes relating to India's consumer class,

international exposure, availability of quality retail space, wider availability of products

42
and brand communication are some of the factors that are driving the retail in India. Over
the last few years, many international retailers have entered the Indian market on the
strength of raising affluence levels of the young Indian population along with the
heightened awareness of global brands, international shopping experiences and the
increased availability of retail real estate space.

Development of India as a sourcing hub shall further make India as an attractive retail
opportunity for the global retailers. Retailers like Wal-Mart, GAP, Tosco, JC Penney,
H&M, Karstadt-Quelle, Sears (Kmart), etc stepping up their sourcing requirements from
India and moving from third-party buying offices to establishing their own wholly owned
/ wholly managed sourcing & buying offices shall further make India an attractive retail
opportunity for the global players.

Manufacturers in industries such as FMCG, consumer durables, paints etc are waking up
to the growing clout of the retailers as a shift in bargaining power from the former to the
latter becomes more discernible. Already, a number of manufacturers in India, in line
with trends in developed markets, have set up dedicated units to service the retail
channel. Also, instead of viewing retailers with suspicion, or as a 'necessary evil' as was
the case earlier, manufacturers are beginning to acknowledge them as channel members
to be partnered with for providing solutions to the end-consumer more effectively.

Though lucrative opportunities exist across product categories, food and grocery,
nevertheless, presents the most significant potential in the Indian context as consumer
spending is highest on food. Further, 'wet groceries' i.e. fresh fruits and vegetables is the
most promising segment within food and grocery as very few organized retailers have
tapped this opportunity in spite of wet groceries being the preferred choice of most Indian
households.

The next level of opportunities in terms of product retail expansion lies in categories such
as apparel, Jewellery and accessories, consumer durables, catering services and home
improvement. These sectors have already witnessed the emergence of organized formats

43
though more players are expected to join the bandwagon. Some of the niche categories
like Books, Music and Gifts offer interesting opportunities for the retail players.

Currently the fashion sector in India commands a lion's share in the organized retail pie.
This is in line with the retail evolution in other parts of the world, where fashion led the
retail development in the early stages of evolution and was followed by other categories
like Food & Grocery, Durables etc. Fashion across lifestyle categories makes up for over
50 per cent of organized retail and with the kind of retail space growth that India is
witnessing we can certainly foresee a very healthy prospect for the fashion industry.

As nations become richer, their people start appreciating luxury goods and fine dining.
India has over one million such people and this number is expected to triple by 2010. A
recent report divides consumers for luxury goods into four categories - luxuriated: source
of affluence is largely traditional and inherited; New rich: adequate spending power and
are acquiring orientation to luxury; Getting there: acquiring spending power and spend
mainly on education, housing and large automobiles; Mid-affluent: are also acquiring
orientation to luxury but unlikely to indulge beyond a limit.

The most important categories for luxury goods consumers are housing, travel, education,
higher end automobiles, electronics and other home improvement products besides
fashion, lifestyle and fine dining. The most important reason for luxury retail not taking
off in India so far has been the lack of luxury retail environment. The presence has been
primarily confined to luxury hotels' with shopping plazas.

Retail Formats

The retail format is the store „package‟ that the retailer presents to the shopper. A format
is defined as a type of retail mix, used by a set of retailers. Store Formats are formats
based on the physical store where the vendor interacts with the customer. It is the mix of
variables that retailers use to develop their business strategies and constitute the mix as
assortment, price, transactional convenience and experience. Therefore each retailer
needs to evaluate the enablers and deterrents in the retail marketplace. This primarily

44
involves identifying the key drivers of growth, the shoppers‟ profile and shopper
expectations .It also means evaluating the nature of competition and challenges in the
market place. Then the retailer decides the elements of the retail mix to satisfy the target
markets‟ needs more effectively than its competitors. The choice of retail mix elements
will enable it to decide the type of format or structure of business.
Classification of Formats
The term retail institution refers to the basic format or structure of a business.
Classification for Retail institutions is necessary to enable firms to better understand and
enact their own strategies: selecting an organizational mission, choosing an ownership
alternative, defining the goods/ service category and setting objectives. The classification
is not mutually exclusive; that is, an institution may be correctly placed in more than one
category. For example, a department store unit may be part of a chain, have a store-based
strategy, accept mail order sales, and have a Web site. These are commonly used
typographies. They are likely to vary between countries. For instance, a Kirana store in
India or car boot sales in the UK. Ownership Based Retailing is one of the few sectors in
our economy where entrepreneurial activity is extensive. Although retailers are primarily
small (80% of all stores are operated by firms with one outlet and over one-half of all
firms have two or fewer paid employees), there are also very large retailers. Retail firms
may be independently owned, chain owned, franchisee operated, leased departments,
owned by manufacturers or wholesalers, consumer owned. From a positioning and
operating perspective, each ownership format delivers unique value. Retail executives
must work on the strengths and weaknesses inherent in each of these formats to be
successful.

1. Independents

An Independent retailer owns a single retail unit. In the United States, they account for
nearly 80 percent of total retail establishments and firms generate just 3 percent of total
U.S. store sales. One half of all independents is run entirely by the owners and/or their
families and has no paid workers. The high number of independent retailers is associated
with the ease of entry into the marketplace, owing to low capital requirement, no or

45
relatively simple, licensing procedures. The ease of entry into retailing is reflected in the
low market shares of the leading firms in many goods /service categories as a percentage
of total category sales. For example, in the grocery store category where large chains are
quite strong, the five largest grocery retailers account for only about 22 percent of sales.
A similar large format in India contributed to less than 3% of total retail sales. The Indian
retail market has around 12 million outlets and has the largest retail outlet density in the
world. However, most of these outlets are basic mom-and-pop stores with very basic
offerings, fixed prices, and no ambience. These are highly competitive stores due to
cheap land prices and labour. Also, most of the time these stores save tax as they belong
to the small industry sector. Due to relative ease of entry into retailing, there is a great
deal of competition resulting in the high rate of retail business failures among new firms.
According to Small Business Administration estimates one-third of new U.S. retailers do
not survive their first year and two –thirds do not continue beyond their third year. Most
of the failures involve independents. These stores have a great deal of flexibility in
choosing retail formats and locations. They target smaller consumer segments rather than
mass markets. Since only one store location is involved, detailed specifications can be set
for determining best location, product assortments, prices, store hours, and other factors
consistent with their target segment. They have low investments in terms of lease,
fixtures, workers and merchandise. Thirdly, independents often act as specialists and
acquire skills in a niche for a particular goods/service category. Decision-making in these
stores is usually centralized as the owner operator is typically on the premises, which
have a strong entrepreneurial drive as they have personal investment in the business,
success or failure has huge implications, and there is a lot of ego involvement. They are
consistent in their efforts as they generally adopt just one strategy. There are some
disadvantages of independent retailing. They have limited bargaining power with
suppliers as they often buy in small quantities. Reordering may also be tough if minimum
order requirements are too high for them to qualify. To overcome this problem, a number
of independents form buying groups. Due to low economies in buying and maintaining
inventory, the transportation, ordering, and handling costs are higher. These stores often
have operations that are labour intensive, sometimes with little computerization.
Ordering, taking inventory, marking items, ringing up sales and bookkeeping may be

46
done manually as most independents tend to find investment in technology and training
not worthy. Compared to other formats, Independents incur high costs of advertising due
to limited access to advertising media and may pay higher fees compared to regular users.
There is often disruption when the owner is ill, on vacation, or retires. They also allocate
limited amount of time and resources to long term planning. To offset the disadvantage of
economies, these retailers offer complementary merchandise and services. Often while all
stores in the chain offer the same merchandise, independents can provide merchandise
compatible with local market needs.

2. Chains
A chain retailer operates multiple outlets (store units) under common. In developed
economies, they account for nearly a quarter of retail outlets and over 50 percent of retail
sales. Retail chains can range from two stores to retailers with over 1,000 stores. Some
retail chains are divisions of larger corporations or holding companies. The select large
retail chains in India are shown in Annexure-I Chain Retailers have several advantages.
They enjoy strong bargaining power with suppliers due to the volumes of purchases.
They generally bypass wholesalers. Many of them buy directly from the manufacturers.
Suppliers service the orders from chains promptly and extend a higher level of proper
service and selling support. New brands reach these stores faster. Most of these chains
sell private. Chains achieve efficiency due to the centralization of purchasing and
warehousing and computerization. Wider geographic coverage of markets allows chains
to utilize all forms of media. Most of the chains invest considerable time and resources in
long term planning, monitoring opportunities and threats. Chain retailers suffer from
limited flexibility, as they need to be consistent throughout in terms of prices,
promotions, and product assortments. Chain retailers have high investments in multiple
leases, fixtures, product assortments and employees. Due to their spread, these retailers
have reduced control, lack of communication and time delays. Thus, such retailers focus
on managing a specific retail format for a better strategic advantage and increased
profitability. Some chain retailers capitalize on their widely known image and adopt
flexibility to market changes.

47
3. Franchising

Franchising is a contractual agreement between a franchiser and a franchisee that allows

the franchisee to operate a retail outlet using a name and format developed and supported
by the franchiser. Approximately one –third of all U.S. retail sales are made by
franchisees. In a franchise contract the franchisee pays a lump sum plus a royalty on all
sales for the right to operate a store in a specific location. The franchisee also agrees to
operate the outlet in accordance with procedures prescribed by the franchisers. The
franchiser provides7 assistance in locating and building the store, developing the products
and/or services sold, management training and advertising. There are two types of
franchising: product/ trademark and business format. In product/ trademark franchising,
franchisees acquire the identities of the franchiser by agreeing to sell the latter‟s product
and/or operate under the latter‟s names. But they are independent in their operation. They
may draw certain operating rules in consultation with the franchiser. In a business format
franchising arrangement, the two parties have a synergetic relationship. The franchiser
provides assistance in strategic and operation issues besides the right to sell goods and
services. The franchisees can take advantage of prototype stores, standardized product
lines and cooperative advertising. Three structural arrangements are found in retail
franchising. (a) Manufacturer- Retailer; where a manufacturer the right to sell goods and
related services through a licensing agreement as in the case of automotive dealers and
petroleum products dealers. (b) Wholesaler- retailer; which may take the form of a
voluntary franchise system as in consumer electronic stores or co-operative where a
group of retailers set up a franchise system and share the ownership and operations of a
wholesaling organization. (c) Service sponsor retailer, where a service firm licenses
individual retailers to let them offer specific service package to consumers, such as auto
rental, hotels and fast food restaurants. This arrangement has several advantages.
Individual franchisees can own retail enterprises with relatively small capital
investments. Franchisers gain a national or, global presence quickly and with less
investment. It improves cash flow as money is obtained when goods are delivered rather
than when they are sold. Since franchisees are owners and not employees, they have a
greater incentive to work hard. Franchisees may also have to face certain disadvantages.

48
Over saturation could occur adversely affecting the sales and profits of each unit. They
may enter into contract provisions that give the franchisers undue advantage. They can
exclude franchisees from, or limit their involvement in, the strategic planning process.
Franchisers also face a lot of potential problems. Franchisees can harm a firm‟s overall
reputation and/ or customer loyalty if they do not adhere to company standards. Intra-
franchise competition is not desirable. Ineffective franchised units directly impact
franchiser profitability from selling services, materials, or products to the franchisees and
from royalty fees. Franchisees, in greater numbers, are seeking independence from
franchiser rules and regulations.

4. Leased Department

A Leased Department is a department in a retail store rented generally by a manufacturer.

The lessee is responsible for all aspects of business and pays the store a rent. The store
may impose operating restrictions for the leased department to ensure the overall
consistency. The leased departments choose to operate in categories that are generally on
the fringe of the store‟s major product lines, such as in-store beauty salons, banks,
photographic studios and food courts. Leased departments help the stores in generating
greater traffic and providing one stop shopping. They benefit from expertise of lessees in
personal management, merchandise displays, the recording of items, as store personnel
might lack the merchandising ability to handle and sell certain goods and services. This is
also a regular source of revenue and reduces costs as leased departments pay for
inventory and personal expenses. This may also be a source of conflict with lessees as
leased departments may use operating procedures which conflict with those of the stores.
The lessees may adversely affect stores‟ images and customers may blame problems on
the host stores rather than on the lessees. The leased department operator‟s benefit as the
main store generates immediate sales for leased departments. This arrangement reduces
expenses through economics of scale (like pooled advertising) and shared facilities (like
security equipment and display windows). Also lessees‟ images are aided by there
relationships with popular stores. However, there may be inflexibility due to the
restrictions imposed by the operations of the main store. There is always the fear that the

49
stores may raise the rent or may not renew leases when they expire even if lessees are
successful.

5. Vertical Marketing System

A Vertical Marketing System consists of all levels of independently owned businesses

along a channel of distribution. Goods and services are normally distributed through one
of these types of vertical marketing systems: independent, partially integrated, and fully
integrated.
In an independent firm vertical marketing system, there are levels of independently
owned firms: manufacturers, wholesalers and retailers. Such a system is most often used
when the manufacturers have to reach a wider market or retailers are small. Also when
company resources are low and channel members want to share costs and risks such an
arrangement is desirable. Independent retailers capitalize on their targeted customer base
and build loyalty by playing the role of a friendly shop-owner and build a good word –of
–mouth communication.
With a partially integrated vertical marketing system, two independently owned
businesses along a channel perform all production and distribution functions without the
aid of the third. The most common form of this system is when a manufacturer and
retailer complete transactions and shipping, storing and other distribution functions in the
absence of independent wholesalers. A partially integrated system is most appropriate if
manufacturers and retailers are large, selective or exclusive distribution is sought, unit
sales are moderate, company resources are high, greater channel control is desired, and
existing wholesalers are too expensive or unavailable. Through a fully integrated vertical
marketing system, a single Company performs all production and distribution functions
by eliminating the other channel members. The advantages to a firm are total control over
strategy, direct contact with final consumers, and higher retail mark-ups without raising
prices, self-sufficiency, and exclusivity over goods and services offered, and retention of
profits within the company. In the past, this system was usually employed only by
manufacturers, but now retailers have also moved upward in the chain. Some wholesalers
have bothered either way to deliver better value to their customers.

50
6. Consumer Co-operatives
A Consumer Cooperative is a retail firm in which a group of consumers invest in the
enterprise. The officers are elected. Consumer-members share the profits or savings that
accrue. Such retailers are many in umber but small in size and are most popular in food
retailing. They are started mainly to guard against the malpractice that many retailers
indulge in and either charge higher prices or offer inconsistent quality of merchandise.
The consumer co-operatives are limited because consumers are usually not expert in
buying, handling and selling goods and services and the cost savings and low selling
prices have not been as expected in many cases.

7. Store Based Retailer

Retail institutions may be classified by store based strategy mix and divided into food–
oriented and general merchandise.
8. Food- Oriented Retailers

Six major strategic formats are used by food oriented retailers: convenience store,
conventional supermarket, food based superstore, combination store, box (limited line
store) and warehouse store. These are discussed in the following subsections.

9. Convenience Stores
A convenience store is a well-located store. The ease of shopping and personalized
services are the major reasons for its patronage, even when it charges average to above
average prices, and carries a moderate number of items.. It stays open for long hours and
provides an average atmosphere and customer services. It is often also called the "mom–
and-pop" stores. It is useful for fill-in merchandise and emergency purchases. Many
customers shop at least two to three times a week at these stores. The convenience stores
face most competition from supermarkets that have started providing longer hours and
better stocks of non-food items. Conventional Supermarket a conventional supermarket is
a self-service food store offering groceries, meat, produce with limited sales of non-food
items, such as health and beauty aids and general merchandise at low prices. They are

51
large in size and carry 9,000 to 11,000 Items. They are chosen due to volume sales, self-
service, low prices and easy parking. The self-service nature allows supermarkets to cut
costs, as well as increase volume. The conventional supermarket was once the most
common format.8 Conventional supermarkets have to deal with intense competition from
other types of food stores. Convenience stores offer greater customer convenience; food
based superstores and combination stores have more product lines and greater variety, as
well as better gross margins; and box and warehouse stores have lower operating costs
and prices. Membership clubs, with their discount prices, also provide competition –
especially now that they have expanded food lines. Discount store chains are able to
undercut supermarket prices because their efficient distribution systems focus on
reducing inventory investments by selling fast moving items.

10. Food-based Superstores:

Superstores are large supermarkets ranging from 20,000 to 50,000 square feet. They cater
to consumer‟s grocery needs and offer them the ability to buy fill-in general merchandise.
The advantages of food-based superstores are that they are efficient, offer a degree of
one-stop shopping, stimulate impulse purchases and feature high profit general
merchandise. Other advantages are that it is easier and less costly to redesign and convert
supermarkets into food-based superstores than combination stores. Management expertise
is better focused in food-based superstores. Many consumers feel more comfortable
shopping in true food stores than combination stores. Most of the supermarket chains
have also started offering food to compete with these stores.

11. Combination Stores/ Supercentres

Combination stores are food-based retailers that unite supermarket and general
merchandise sales in one facility with the latter typically accounting for 25 to 40 percent
of total sales. They achieve operational efficiencies and cost savings through their large-
scale operations. Consumers like one-stop shopping and travel further to visit these
stores. Impulse sales are high. A super centre is a combination store blending an economy

52
supermarket with a discount department store. Traditional supermarkets are facing
serious new competitive challenges from supercentres at the price-conscious end of the
market and from "home meal replacement" providers at the convenience-oriented end.
Supercentres with an average size of about 150,000 sq.ft. Devote about 40% of their
space to grocery items and the rest to discount general merchandise.

12. Box (Limited-Line) Store:

The Box (Limited-Line) Store is a food based discounter that focuses on a small selection
of items, moderate hours of operation (compared to other supermarkets), few additional
services, and limited manufacturer brands. There stock usually less items, few or no
refrigerated perishables, and few sizes and brands per item. Items are displayed in cut
cases. Customers do their own bagging. Box stores depend on low – priced private-label
brands. They aim to price merchandise 20 to 30 percent below supermarkets.

13. Warehouse Store:

A warehouse club is a retailer that offers a limited assortment of food and general
merchandise, with limited services, at low prices to ultimate consumers and small
businesses. It appeals to price–conscious consumers, who must be members to shop
there. Its inventory turnover rate is several times that of a department store. Stores are
large and located in low–rent areas. They have simple interiors and concrete floors.
Aisles are wide to facilitate pick up pallets of merchandise. Specific brands and items
differ from time to time as the stores buy merchandise available on special promotions
from manufacturers. The clubs pass on these savings to shoppers through lower prices.
Most warehouse clubs have two types of members. Wholesale members who are small
business people and individual members who purchase for their own use.

53
The major retailing challenge faced by membership clubs is the limited size of their final
consumer market segment. The main limiting factor is the lack of brand continuity. Since
products are usually bought when special deals are available, brands may be temporarily
or permanently out of stock. In addition, many consumers do not like shopping in
warehouse settings. General Merchandise Retailers

14. Department Store

A department store is a large retail unit with an extensive assortment (width and depth) of
goods and services that are organized into separate departments for purposes of buying,
promotion, customer service and control. It has the greatest selection of any general
merchandise retailer and often serves as the anchor store in a shopping centre or district.
Department Stores are unique in terms of the shopping experience they offer, the services
they provide and the atmosphere of the store. They offer a full range of services from
altering clothing to home delivery. Over its history, the department store has been
responsible for many innovations, including advertising prices, enacting a one-price
policy (whereby all shoppers pay the same price for the same good or service.),
developing computerized checkouts, offering money back guarantees, adding branch
stores and decentralized management However, during the past few years, industry wide
sales growth of traditional department stores has lagged behind the full line discount
stores. They no longer have brand exclusivity for a lot of items they sell; manufacturer
brands are also available at specialty and discount outlets. Many firms, instead of creating
their own brands, have signed exclusive licensing agreements with fashion designers.
This perpetuates customer loyalty to the designer and not the store. There are more price
conscious consumers than before, and they are attracted to discount retailers. The
popularity of shopping malls has aided specialty stores since consumers can accomplish
one-stop shopping through several specialty stores in the same mall or shopping centre.
Some department stores are too big and have too much unproductive selling space and
low turnover of merchandise.

54
15. Full –line Discount Store

A full–line discount store targets the middle -class and lower- middle class shoppers who
looking for good value. It conveys the image of a high-volume, low cost and fast turnover
outlet. It sells a broad merchandise assortment for less than conventional prices. It is
likely to carry the range of product lines expected at department stores. Products are
normally sold via self-service with minimal assistance in any single department.
Centralized checkout service is provided. Buildings, equipment and fixtures are less
expensive; and operating costs are lower than for traditional department stores. To
respond to category specialists, full –line discount retailers are creating more attractive
shopping environments, placing more emphasis on apparel, developing private label
merchandise, and increasing store visits by offering easily accessible convenience store
merchandise.

16. Specialty Stores

A traditional specialty store concentrates on a limited number of complementary

merchandise categories and provides a high level of service. They are smaller in size.

17. Drugstores

Drugstores are specialty stores that concentrate on health and personal grooming
merchandise. Pharmaceuticals often represent over 50 percent of drugstore sales and an
even greater percentage of their profits. Drugstores are facing considerable competition
from discount stores and supermarkets adding pharmacies. In response, the major
drugstore chains are building larger stand-alone stores offering a wider assortment of
merchandise, more frequently purchased consumer products and drive through windows
for picking up prescriptions. To build customer loyalty, the chains are also changing the
role of their pharmacists from dispensing pills to providing health care assistance and
personalized service. For example, Planet Health, Subhiksha.

55
18. Category Killers

The category killer concept originated in the U.S. due to abundance of cheap land and the
dominant car culture. A category specialist is a discount store that offers a narrow variety
but deep assortment of merchandise. These retailers are basically discount specialty
stores. By offering a complete assortment in a category at low prices, category specialists
can “kill” a category of merchandise for other retailers. Most category specialists use a
self-service approach. They use their buying power to negotiate low prices, excellent
terms and assured supply when items are scarce. The category killers are facing reduced
profits as the competition is focusing on prices. They have difficulty differentiating
themselves on other elements of retail mix. All competitors in a category provide similar
assortments and the same level of service. According to a report in the European Retail
Digest, there are some that believe that the category killer format will burn out, leaving
only a few hardened experts, as happened with the warehouse club sector. In response to
this increasing competitive intensity, the category killers continue to concentrate on
reducing costs by increasing operational efficiency, acquiring smaller chains to gain
economies of scale and expanding into less competitive international markets. France,
Germany, Spain and the UK provide attractive markets for expanding category killers.
Interestingly, with the clampdown on out-of-town developments in the UK, homegrown
category killers that are typically located in town centers will benefit from legislative
changes in this area. Some out of town category killers are choosing to downsize their
format to make it fit small towns.

19. DIY Stores

A home improvement centre is a category specialist offering equipment and material

used by do-it–yourselfers and contractors to make home improvements. It focuses on

56
providing material and information that enables consumers to maintain and improve their
homes. While merchandise in these stores is displayed in a warehouse atmosphere,
salespeople are available to assist customers in selecting merchandise through
demonstrations and workshops. They are not facing the same level of competitive
intensity as other category specialists, because the merchandise varies considerably
across the country and there are opportunities for differentiation on customer service.

20. Off-Price Stores:

An off-price chain offers brand–names and designer labels and sells them at a low price
in an efficient, limited service environment. An off-price store buys other retailers‟
cancelled orders, manufacturers‟ irregulars and overruns and end-of–season items for a
fraction of their original wholesale prices. Due to this pattern of opportunistic buying, the
same type of merchandise may not be in stock when customers visit the store. Typically,
different bargains will be available on each visit. Their inventory turnover is far higher
than that of departmental stores. The most crucial aspect of the strategy for off-price
chains involves buying merchandise and establishing long-term relationships with
suppliers. Three special types of off-price retailers are outlet, closeout, and single-price
retail stores. Over the past few years, the sales growth of off-price retailers has slowed.
The challenge is from an increase in sales and promotion in department stores, consumers
being more fashionable, brand name merchandise in department stores at the same
discounted prices offered by off-price retailers. Also, more sophisticated inventory
management systems have reduced the amount of excess production that can be bought
by off-price retailers. Therefore the manufacturers have sought opportunities to apply this
successful format in foreign markets, particularly in the UK. By the early 1990s, the UK
market appeared to be attractive for the introduction of factory outlet centers for a variety
of reasons. First, the growth of retail formats in out of town locations (superstores, retail
parks, and regional centers) was conducive to a fourth wave of development. Second, this
trend to out of town shopping coincided with the rise of discounting formats, creating a
climate suitable for the growth of value retailing. Third, the relaxation of planning

57
guidelines in the 1980s and early 1990s allowed the development of new out of town
retail formats.

21. Factory Outlet Stores:

Outlet Stores are off-price retailers owned by manufacturers or by department or

specialty store chains and are frequently referred to as factory outlets. A factory outlet is
a manufacturer–owned store selling manufacturer closeouts, discontinued merchandise,
irregulars, cancelled orders, and sometimes, in season, first quality merchandise. They
closely resemble shopping centers, both in terms of size, layout, and in carefully
controlled tenant mix, with manufacturers operating separate units on a single co-
coordinated site. Additional amenities include car parking, restaurant and leisure
facilities. Factory outlet stores are located out of town, lowering development and
operating costs and the distribution channel for certain categories of merchandise is
shortened, cutting out the functions and profits of traditional retailers. The manufacturers
have various interests in outlet stores. 11 It helps in the disposal of surplus stock due to
unreliable accounts, late payers, and cancelled orders. It allows a manufacturer to control
where its discounted merchandise is sold. A manufacturer chooses out-of–the-way
locations, depressed areas, or areas with low sales penetration of the firm‟s brands,
whereby the factory outlet revenues are unlikely to affect the sales at manufacturers‟ key
specialty and department stores. A manufacturer can decide on store visibility, set
promotion policies, remove labels and be sure that discontinued items and irregulars are
disposed of properly.

22. Closeout Retailers:

Closeout Retailers are off-price retailers that sell a broad but consistent assortment of
general merchandise as well as apparel and soft home goods.

58
23. Single Price Retailers:

Single Price Retailers are closeout stores that sell all their merchandise at a single price.

24. Hypermarkets

Hypermarkets were created in France after World War II. A hypermarket is a very large
retail store offering low prices. It combines a discount store and superstore food retailer
in one warehouse like building. Hypermarkets can be up to 300,000 square feet and stock
over 50,000 different items. Hypermarkets are unique in terms of store size; low
operating margins, low prices and the size of general merchandise assortment. The store
sells a broad variety of basic merchandise ranging from food to consumer electronics. All
hypermarkets are based on three concepts of: one stop shopping, ample free parking and
a discount pricing strategy. The main limitation of hypermarkets is that many consumers
find that shopping in stores over 200,000 square feet is too time consuming. It is hard to
find merchandise and checkout lines can be very long.

25. Variety Store

A variety store handles a wide assortment of inexpensive and popularly priced goods and
services, such as stationary, gift items, women‟s accessories, health and beauty aids, light
hardware, toys, house ware and confectionery items. They do not carry full product lines,
may not be departmentalized and do not deliver products. Transactions are often on a
cash basis. There are often displays and few salespeople.

The challenge for variety stores has come from specialty stores, discount stores and
closeout chains often sell similar items to those sold in conventional variety stores, but in
plainer surroundings and much lower prices.

59
26. Flea Market

A flea market has many retail vendors offering a range of products at discount prices in
plain surroundings. It is rooted in the centuries old tradition of street selling - shoppers
touch, sample and haggle over the prices of items. Price-conscious consumers who find
that other retail formats have upgraded merchandise and customer service or raised prices
frequent them. Many flea markets are located in nontraditional sites not normally
associated with retailing: racetracks, stadiums and arenas. Others are at sites abandoned
by supermarkets and department stores. They may be indoor or outdoor. At a flea market,
individual retailers rent space on a daily, weekly or seasonal basis. The newest trend in
flea markets involves web-based flea markets such as eBay and Amazon.com with its
Shops. Flea markets are believed by some to misrepresent or overstate the quality of
merchandise. The can easily avoid taxes and their operating costs are quite low.

27. Non-Store Based Retailers

Non-store retailing is a form of retailing in which sales are made to consumers without
using physical stores. The non-store retailers are known by medium they use to
communicate with their customers, such as direct marketing, direct selling and vending
machines or e-tailing. Non store retailing is patronized to time conscious consumers and
consumers who can‟t easily go to stores, or compulsive buyers. Most non-store retailers
offer consumers the convenience of buying 24 hours a day seven days a week and
delivery at location and time of their choice. Non store sales are now growing at a higher
rate than sales in retail stores. The high growth rate is primarily due to the growth of
electronic retailing. The growth of catalogue retail sales and sales in other non store
retailing formats such as TV home shopping, direct selling, and vending machines are
slower.

60
28. Vending Machines

Vending machine is a retailing format involving the coin or card operated dispensing of
goods (such as beverages) and services (such as life insurance sales at airports). It
eliminates the use of sales personnel and allows for round the clock sales. Machines can
be placed wherever they are most convenient to the consumers –inside or outside a store,
in a hotel corridor, at a station, airport or a street corner. Although many attempts have
been made to „vend‟ other products, beverages and food items remain the largest
category. Hotels, restaurants and at train stations are highly visible spots for vending but
they account for a small proportion of sales. Higher priced items have not sold well in
vending machines because too many coins are required for each transaction and many
vending machines are not equipped with currency note changers. Many consumers are
reluctant to purchase more expensive items - they cannot see them displayed or have
them explained and there is the difficulty of returning unsatisfactory merchandise. In
evolved markets, vending machine sales have experienced little growth over the past five
years largely due to the changes in the workplace. Employment growth has been limited
and the largest growth in the work-force is white and pink collar employees rather than
the blue – collar workers who buy most heavily from vending machines. To improve
productivity and customer relations, vending machine retailers use microprocessors to
track consumer preferences, trace malfunctions and record receipts. The devices transmit
data back to the host computer. This data is analyzed and communications are sent to
route drivers informing them of stock outs and malfunctions. Some machines even have
voice synthesizers. Video kiosks enable consumers to assess the merchandise and also
use their credit cards to make a purchase. In India vending machines are at a very nascent
stage. Almost all of them are operated by an attendant. Even coffee machines are
operated with assistance. Companies like Cadbury‟s and Malayala Manorma (newspaper
publishing house) have installed them at places that attract a lot of traffic, such as the
airport. But the sales from these are limited.

61
Electronic Retailing

Electronic retailing (also called e-tailing and Internet retailing) is a retail format in which
the retailer and customer communicate which each other through an interactive electronic
network. After an electronic dialogue between the retailer and customer, the customer can
order merchandise directly through the interactive network or by telephone. The
merchandise is then delivered to the customer‟s address. The World Wide Web can serve
one or more of these roles for a retailer:

➢ Project a retail presence.

➢ Generate sales as the major source of revenue for an online retailer or as a
➢ Complementary source of revenue for a store-based retailer.
➢ Enhance the retailer‟s image.
➢ Reach geographically dispersed consumers including foreign ones.
➢ Provide information to consumers about the products carried, store locations usage
➢ Information, answers to common questions, customer loyalty programmes and so on.
➢ Promote new products and fully explain and demonstrate their features.
➢ Furnish customer service in the form of E-mail, “hot links”, and other
communications.
➢ Be more personal with consumers by letting them point and click on topics they
choose.
➢ Conduct a retail business in a cost efficient manner.
➢ Obtain customer feedback.
➢ Give special offers and send coupons to web customers.
➢ Describe employment opportunities.
➢ Present information to potential investors, potential franchisees and the media.
The role assigned to the web by a given retailer depends on whether it is predominantly a
traditional retailer that wants to have a web presence or a newer firm that wants to derive
most or all its revenues from web transactions. In addition, Forrester Research has
forecast that 13% of U.S. retailing will be conducted via the Internet by 2004. Non U.S.
markets account for about 30 percent of the ecommerce industry. In India Non-Store

62
retailing represented by direct selling and e-tailing is estimated at Rs 1,100 crores. Only
19 percent of all retailers have an e-retailing initiative. The number of retailers with plans
to e-tail within one year and those with no plans are almost equal. Significantly, 10
percent of the retailers have discontinued their e-retail initiatives. The main reasons for
retailers to stay away from e-tailing are predominantly non-viability of business and
resource constraints. It is estimated that 5 percent or more of retail sales of goods and
services such as apparel, banking, books, computer hardware and software, consumer
electronics, gifts, greeting cards, insurance, music, newspapers/magazines, sporting
goods, toys, travel and videos will be made online. In the case of products where it is
difficult to provide „touch and feel‟ information electronically, such as clothing,
perfumes, flowers and food electronic retailers may not be successful. Branding may help
overcome many of the uncertainties in purchasing merchandise without touching and
feeling it. For example, if customers purchase a size 30–inch waist / 32-inch inseam pair
of jeans, they know they will fit when bought from an electronic retailer. In some
products and services, such as traveling or hotels, electronic retailers might even be able
to provide superior information compared to store retailers. The critical issue related to
selling successfully for electronic retailers is whether they can provide enough
information prior to the purchase and make sure the customers will be satisfied with the
merchandise once they get it. There are many buying situations in which electronic
retailers can provide sufficient information, even though the merchandise has important
„touch and feel‟ attributes.
Started on venture capitalist (VC) or initial public offering (IPO) money, by 1999 there
was hype around e-tailing. Consumers were thought to be ready to make a deliberate
choice of buying from e-tailers rather than retailers. They seemed to fulfill the consumer
dream of no queues, no geographic barriers, low prices and unlimited selection - what
retail had failed to deliver. But e-tailing ended up disappointing and found that traditional
shopping was easier. Ernst & Young statistics for the 1999 Christmas season revealed
that US online buyers spent only 26% of their holiday spending (averaging $1,080 per
capita) online, while they devoted 67% of their total holiday expenditure to in-store
purchases, the remaining 7% they spent on catalogue products. By the end of the 2000
holiday season more than 90% of e-tailers closed down in the period to January 2001. E-

63
commerce witnessed the collapse of several online grocers, drug stores, auto dealerships,
pet supply stores and other budding ecommerce ventures and hundreds of dotcom
investors abandoning their dreams of getting rich quick with e-commerce. However,
Retail e-commerce sales grew to $7.5 billion, up 24.7 percent in the second quarter of
2001 compared with just under $6 billion in the second quarter of 2000, according to an
August report from the U.S. Commerce Department. Leading market researchers suggest
that U.S. markets for online retailers will cross $27 billion by 2005. European Web
shoppers are expected to spend more money online for groceries than their American
counterparts, according to Forrester Research. The report predicts that Web grocery
shopping in Europe will be $51 million –or five percent of Europe‟s total grocery sales by
2005. Seven percent of the United Kingdom‟s grocery sales will go online by 2005. The
Nordic countries are expected to follow closely with six percent of grocery sales taking
place online. France and Germany will account for more than three percent of sales
online in 2005. The present players in the market are trying to learn the lessons from the
failures and success of extinct and surviving e-commerce pioneers.

64
 Chapter – 5

Analysis & Interpretation

65
1. Table showing Percentage of Age group
Table No. 1

Age
group No. of Respondents Percentage

Below 30 41 41

31 - 40 32 32

41 - 50 16 16

Above 50 11 11

Total 100 100

5%
15%
33%

20%

27%

20-Oct 20 - 30 30 -40 40 - 50 More than 50

Interpretation

The above chart shows that 41% of the respondents are below 30 years, 32% of the
respondents are between 31 – 40 years, 16% of the respondents are between 41 – 50
years, 11% of the respondents are above 50 years. This gives us a feeling that it is
youngsters that prefer on line buying and the use of internet.

66
2. Table Showing Respondents Mode to Accessibility of
Net
Table No. 2

MODE NO. OF PERCENTAGE

RESPONDENTS
House 23 23
Office 31 31

Cyber 46 46
Café
Total 100 100

50 46 46
45
40
35 31 31
30
23 23 NO. OF RESPONDENTS
25
PERCENTAGE
20
15
10
5
0
House Office Cyber Café

Interpretation
From the above graph it is assumed that 23% of respondents browse in their own house,
31% of respondents browse in their office, 46% of respondents browse in cyber café,
which gives us a feeling that most of the respondents do not have browsing facility in
their house. This makes them depend on cyber café which is expensive.

67
3. Table showing the Number of respondents who have purchased on
line
Table No. 3

Have purchased on- No. of respondents Percentage

line

Yes 41 41

NO 59 59

Total 100 100

3. Graph showing the Percentage of people who have purchased on line

200
180
160 100
140
120 Percentage
100 59 No. of respondents
80 Have purchased on-
41 line
60 100

40 59
41
20
0 0 0
0
1 2 3 4

Interpretation

The above graph shows that 41% of Respondents have purchased on line and 59% of
respondents have not purchased. This draws light to the fact that there is still a lot to do to
make people buy on line.

68
4. Table showing the reason why people are reluctant to buy on line

Table No. 4

No. of
Reason respondents Percentage
Un aware of
the mode of
payment 4 6.78
Absence of
salesmanship 20 33.89
Absence of
personal touch 12 20.33
Fear of doing it
for the 1st time 23 38.98

total 59 100

3%
17%
UN aware of the mode of payment
Absence of salesmanship
Absence of personal touch
51% 10% Fear of doing it for the 1st time
Total
19%

Interpretation

The above chart 4 respondents are unaware of the mode of payment, 20 respondents feel
there is absence of salesmanship in on line buying, and 12 respondents feel that there is
absence of personal touch. This gives us a feeling that respondents vary in their opinion
about on line buying. Most of them are reluctant to take a decision for the first time to
buy.

69
 5. Table showing how respondents found on line buying

Table No. 5

Attribute No. of respondents Percentage

Convenient 12 29.26
time saving 3 7.31
Variety 5 12.2

Availability 17 41.46
Cost saving 4 9.76
total 41 100

5. Chart showing Attributes of on line buying

45 41.46

40

35
29.26
30

25
No. of respondents
20 17 Percentage

15 12 12.2
9.76
10 7.31
5
3 4
5

0
Convenient time saving Variety Availability Cost saving

Interpretation

From the above chart it is found that 12 respondents feel that it is convenient to buy on
line, 3 respondents feel that it is time saving, 5 respondents feel that it is a variety to buy
on line, 17 respondents feel products will be available when ordering on line and 4
respondents feel it is cost saving. Where in most of the respondents are of the opinion
that on line buying is advantageous due to the availability of the product.

70
6. Table showing the number of hours that respondents had to wait to
get the product they had ordered on line

Table No. 6

Time( In hours) No. of respondents Percentage

10 - 30 2 4.9
20 - 30 6 14.63
30 -40 8 19.51

40 - 50 11 26.83
More than 50 14 34.15
Total 41 100

5%
15%
33%
10 - 20
20 - 30
30 -40
40 - 50
20% More than 50

27%

Interpretation

From the above chart it is seen that 5% of respondents waited for 10 – 20 hours for the
delivery of the goods they had ordered on line, 15% of respondents waited for 20 -30
hours, 20% of the respondents waited for 30 -40 hours, 27% of the respondents waited
for 40 – 50 hours, 35% of respondents waited for more than 50 hours. This gives us a
feeling that different products and different sellers give the products ordered on line at
different time lag.

71
7. Table showing the influencer of purchase at home
Table No. 7

Influencer No. of respondents percentage

Father & Mother 06 14.63

Father 09 21.95

Mother 03 07.31

Children 17 41.46

All 06 14.63

Total 41 100

45 41.46
40
35
30
25 21.95
20 Percentage
14.63 14.63
15
10 7.31

5
0
Father & Father Mother Children All
Mother

Interpretation

The above graph shows that 15% of respondents feel that it is the Father and mother who
influence the buying behavior. For 22% of respondents it is the Father who influences
the buying behavior. For 7% of respondents it is the Mother who influences the buying
behavior. For 41% of respondents it is the children who influence the buying behavior
For15% of respondents it is the all together that influence the buying behavior.

72
8. Table showing the web sites that respondents usually visit in relation
to on line shopping
Table No. 8

Sites No. Of Respondents Percentage

Rediff.com 9 21.95

Yahoo.com 6 14.63

Hotmail.com 4 09.75

Fabmart.com 10 24.39

Homedel.com 7 17.07

Ecomart.com 5 12.19

Total 41 100

12%
22%

Rediff.com
17%
Yahoo.com
Hotmail.com
Fabmart.com
Homedel.com
15%
Ecomart.com

24% 10%

Interpretation

From the above chart it is assumed that 22% of the respondents visit rediff.com in
relation to shopping, 15% of the respondents visit yahoo.com in relation to shopping, 9%
of the respondents visit hotmail.com in relation to shopping, 24% of the respondents visit
fabmart.com in relation to shopping, 17% of the respondents visit homedel.com in
relation to shopping, 12% of the respondents visit ecomart.com in relation to shopping

73
9. Table showing the interest of Respondents to shop on line in future

Table No. 9

Attribute No. of Respondents Percentage

Yes 30 73.17

No 11 26.82

Total 41 100

100
26.82
90
80
70
60 No
50 Yes
73.17
40 11
30
30
20
10
0
No. of Respondents Percentage

Interpretation

The above graph shows that 73% of respondents are interested to shop again through the
Net and 27% of respondents are not interested shop again through the Net.

74
10. The Table showing the overall rating of online shopping by the
respondents
Table No. 10

Ratings No. of respondents Percentage

Highly satisfactory 17 41.46

Satisfactory 14 34.14

Dissatisfactory 10 24.39

Total 41 100

45 41.46
40
34.14
35

30
24.39
25 No. of respondents
20 17 Percentage
14
15
10
10

0
Highly satisfactory Satisfactory Dissatisfactory

Interpretation

From the above graph it is found that 41% of respondents are highly satisfied about on
line buying 34% of respondents are satisfied about on line buying 25% of respondents
are dissatisfied about on line buying This gives a feeling that more number of
respondents are highly satisfied or at least satisfied about on line buying. This increases
the scope for online selling.

75
 Chapter no. 6
Summary of findings,
Suggestions and Conclusion

76
Findings

Some of the findings from the study that might stimulate the degree of change from the
conventional strategy are given below.

1. The volumes in the Indian market lie in the middle and lower middle class. The growth
and impact of e-retailing in India would be directly proportionate to the penetration of the
internet in these categories. Currently access costs are very high. These access costs are a
function for two variables:
The cost of acquisition of computers would be a pre-requisite for internet penetration. It
is typically observed that the probability of customers making a purchase on the net from
a cyber café is very low. Cyber cafes are mainly used for checking mail and other
planned search activities. Thus it is necessary for customers to possess a computer with
an internet connection o improve the scope of e- business.
The cost of connectivity that basically refers to the expenses, incurred in the telephone
bill and internet subscription costs In order for the Internet levels of the internet to
improve, these costs have to reduce thus encouraging more customers to become net
savvy.

2. Average literacy rates are also an important factor though a large percentage of the
population watches TV and is able to appreciate the nuances and meaning of the
commercials that are aired, Literacy would be an important factor in increasing internet
penetration besides actually increasing the accessibility of the bet as a medium of
business.

3. The cultural factors and Indian traditions are a key impediment to the development of e
retailing shopping in India is not just a chore, it is an enjoyable experience. In the west
most of the families shop on the week end to shore up glossaries and provisions for the
coming week it is viewed as a task that has to be completed. In such a scenario, the
Internet with its apparent benefits of greater speed, convenience and information
provided those with an attractive option the situation in India however is completely

77
different. For the traditional Indian house wife purchase of vegetable/ Glossaries by
bargaining with the shop keeper is an important event in the day. Add to this the fact that
a large percentage of consumer purchases in India occurs in an around festivals. This
implies a lot of color fund and gaiety that would be missing in the case of on line
shopping.

4. All the above points have focused on the B2C model of e- business. In the B2B model
in India, the key driving factor is relationship. It would take a significant amount of time
to build the required level of trust in an online relationship. Thus, a large part of the B2B
volumes would be driven by establishing connectivity among existing business partners.

5. Only 23% of the respondents are accessing the net in their house it means that in India
Internet in house is not yet become common. But in course of time it will definitely
increase

78
Recommendations

The recommendations to improve the present situation of e-retailing are:

1. Buyers in fast-moving product categories should use electronic market place to save
money o the goods they buy, while sellers should seize the opportunity to reach new
customers and delay the development of a buyer controlled market place.
2. Third parties should act promptly to attract a critical mass of buyers and sellers to their
own market place.
3. Logistics systems ensure that the company delivers the product to the customer in the
shortest possible time.
4. IT infrastructure costs can be lowers through implementation of internet based
computing.
5. The following parameters may be taken care of, for the success of e-retailing.
➢ Loyalty
➢ Customer acquisition
➢ retentions
➢ per-transaction value
6. The sites must be made more users friendly.
7. There must be an e-relationship software that synchronize all of the customer contact
channels and prioritize means of conduct namely phone, Fax, Pager, or e-mail according
to individual customer preferences. The objective is to support people in the way they
want to do business and to be able to speak to customers through the devises most
appropriate to them.

79
Conclusion

There‟s little doubt that E- retailing is the future. But, that‟s just the point: it is the future.
The present clearly belongs to B2B. Realizing that future will require research,
introspection, learning and educated effort. Let‟s then conclude by compiling a „recipe
for success‟ for E- retailers the world over:

➢ Get your back-end systems into shape. Customers keep coming back only if
Earlier shopping experiences have been pleasant and successful. Quit gloating over the
75% success rate of on-line purchases.
Remember, you are competing with the neighborhood store, which, more often than not,
has a close-to- 100% record, and a smiling, friendly shop-keeper thrown in for good
measure.

➢ Integrate! Integrate! Integrate! Treat your E- retailing site as the customer-

Facing end of a supply chain, not as a stand-alone antenna for attracting Web-travelers.
Focus on building strong bonds between every link in the supply chain (order processing,
order status tracking, payment status, inventory level reporting, and procurement) and
build your B2C store-front.

➢ Build alliances. Many traditional brick-and-mortar firms have well-established

Supply chains but lack the easiness that you can bring in. You, in all probability, have
neither the inclination nor the resources to build a successful supply chain. It‟s a win-win
situation!
➢ Get help. You‟ve heard this before, but its worth repeating: e-retailing isn‟t just
About building a pretty website.
An established management consulting firm will bring in the requisite skills to evaluate
your business plan, check out revenue models, help identify potential alliances and
integrate supply chain processes with your eCommerce initiatives.
Go out there and create your future!

80
BIBLIOGRAPHY

81
 BIBLIOGRAPHY

E-retailing business models for Indian retail chains(Anand Sriram)

E business models and implementation strategies(Sumit Datta)
A managers guide to e commerce by kolakota
Frontiers of e commerce by kalakota
http://www.amzon.com
http://www.mindtree.com
http://www.fabmart.com
http://www.yahoo.com
http://www.homedel.com

82
Annexure

83
 Questionnaire

JOICE SEBASTIAN

Age below 30 yrs 31-40 yrs 41-50 yrs above 51 yrs

Family Income per annum (approximately)

Rs. 50000 - 100000 Rs.100000 - 150000

Rs. 150000 - 200000 Rs. 200000 & Above

Marital Status Single Married

1. Do you access the net? Yes No

2. Where do you access the net? House Office Cyber café

3. Have you ever purchased through on- line? Yes No

4. If No why?

UN aware of the mode of payment Absence of personal touch

Absence of salesman ship Fear of doing it for the first time

5. If yes, how did you find it?

Convenient Variety Availability

Time saving Cost saving

6. How long do you have to wait for the delivery of goods ordered?

10 – 20 hrs 20 – 30 hrs 30 – 40 hrs

40 – 50 hrs More than 50 hrs

84
7. Details of the purchasing process from the point of order till delivery.

8. Who influences the purchase of goods at home?

Father & mother Father Mother

Children All

9. Which web site do you visit to do shopping?

rediff.com yahoo.com hotmail.com

Fabmart.com homedel.com ecomart.com

10. Are you interested in shopping again through the net?

Yes No

11. If yes or no why?

12. Your over all rating of on line shopping

Highly satisfactory Satisfactory

85