Retail formats
One of the key determinants of a retailer’s success is the format they use to present to their target customers. A retailer can choose a format based on the type of store design they want to feature, the location they would like to establish, the various products and services they want to offer, and the approach taken to pricing. The most important aspect is that the format should be ideal for your target demographic.
In the past, the Indian retail sector has been dominated by small independent players such as traditional and small grocers. It is in recent times that the multi-point and organized retail concept has gained acceptance and has since gained momentum. According to the study carried out by the Indian Council for Research in International Economic Relations (ICRIER), on the subject of ‘Impact of Organized Retail on the Unorganized Sector’, it is estimated that the retail business will grow by 13% annually from US$ 322 billion in 2006-07 to US$590 billion in 2011-12.
A FICCI report on “Indian retail: on the fast track” shows that a number of organized retailers are currently experimenting with different retail formats. It is difficult to predict which format will have an advantage over all others in view of the fact that the Indian market has not yet matured.
The different types of retail formats that retailers could adopt are mom-and-pop or kirana stores, specialty stores, department stores, discount stores, convenience stores, hypermarkets, supermarkets, malls, category killers, e-retailers, and vending machines.
Mom-And-Pop or Kirana stores: is a retail outlet that is owned and operated by individuals. The range of products is very selective and few in number. These stores that you see in the local community are often family owned and operated. The square footage of the store depends on the owner of the store.
Specialized stores: A typical specialty store pays attention to a particular category and provides a high level of service to customers. A pet store that specializes in selling dog food would be considered a specialty store. However, brand stores also fall into this format. For example, if a customer visits a Reebok or Gap store, he or she only finds Reebok and Gap products in the respective stores.
Department store: they usually bear a resemblance to a specialty store collection. A retailer of such a store has a variety of categories and has a wide assortment at an average price. They offer considerable customer service. For example: Food World in Bangalore.
Discount Stores: offers a wide variety of products at affordable and discounted prices. Typically, retailers carry less fashion-oriented brands. However, the service is inadequate.
Convenience stores: it is found essentially in residential areas. They provide a limited amount of merchandise at above-average prices with a quick checkout. This store is ideal for emergency and immediate purchases.
Hypermarkets: offers variety and large volumes of exclusive merchandise at low margins. The operating cost is comparatively less than other retail formats. A classic example is the Metro™ in Bangalore.
Supermarkets: It is a self-service store consisting primarily of groceries and limited non-food items. They may adopt a Hi-Lo or EDLP strategy for pricing. Supermarkets can be anywhere from 20,000 to 40,000 square feet. Example: SPAR™ supermarket.
Malls: has a range of retail stores in a single outlet. They provide products, food and entertainment under one roof. Example: Sigma Mall and Garuda Mall in Bangalore.
Tier Killers or Tier Specialist: By offering a wide assortment in a single category at lower prices, a retailer can “kill” that category for other retailers. For some categories, such as electronics, products are displayed in the center of the store and sales staff will be available to answer customer inquiries and provide suggestions when needed. Other retail format stores are forced to cut prices if a category specialty retail store is present nearby. For example: Pai Electronics™ store in Bangalore.
Electronic retailers: The customer can buy and order over the Internet and the merchandise is delivered to the customer’s door. Here retailers use technical drop shipping. They accept payment for the product but the customer receives the product directly from the manufacturer or a wholesaler. This format is ideal for customers who do not want to travel to retail stores and are interested in shopping from home. However, it is important for the customer to beware of defective products and unsecured credit card transactions. Example: Amazon and eBay.
Vending machines: This is automated equipment where customers can deposit money into the machine and purchase products. This type of system is currently not widely used in India. For example: Selling soft drinks at Bangalore airport.
Retailers can opt for one format as each offers a different retail mix to their customers based on their customers’ demographics, lifestyle and buying behavior. Good formatting will help display products well and attract target customers to generate sales.
