Contents

INTRODUCTION TO RETAIL SECTOR .............................................................................................................. 2 INTRODUCTION TO RETAIL INDUSTRY IN INDIA ........................................................................................... 2 FUTURE OF RETAIL INDUSTRY IN INDIA ........................................................................................................ 3 MAJOR RETAILERS IN INDIA .......................................................................................................................... 4 Pantaloon: ................................................................................................................................................. 4 Tata Group: ............................................................................................................................................... 4 RPG Group:................................................................................................................................................ 5 Reliance: .................................................................................................................................................... 5 AV Birla Group:.......................................................................................................................................... 5 PROBLEMS FACED BY RETAIL INDUSTRY IN INDIA ........................................................................................ 5 CONSUMERS SHOPPING ORIENTATION........................................................................................................ 6 KEY PERFORMANCE INDICATORS (KPI) ......................................................................................................... 6 KPI FOR RETAIL SECTOR ................................................................................................................................ 7 CUSTOMER CENTRIC INDICATORS ............................................................................................................ 8 SALES METRICS.......................................................................................................................................... 9 OTHER METRICS: ..................................................................................................................................... 10 CONCLUSION............................................................................................................................................... 12 BIBLIOGRAPHY ............................................................................................................................................ 13

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INTRODUCTION TO RETAIL SECTOR

Retailing involves all activities incidental to selling to ultimate consumer for their personnel family and household use. It does this by organizing their availability on a relatively large scale and supplying them to customers on a relatively small scale. Retailer is any person/organization instrumental in reaching the goods or merchandise or services to the end users. Retailer is a must and cannot be eliminated.

Organized retailing refers to trading activities undertaken by licensed retailers, that is, those who are registered for sales tax, income tax, etc. These include the corporate-backed hypermarkets and retail chains, and also the privately owned large retail businesses. Unorganized retailing, on the other hand, refers to the traditional formats of low-cost retailing, for example, the local kirana shops, owner manned general stores, paan/beedi shops, convenience stores, hand cart and pavement vendors, etc.

INTRODUCTION TO RETAIL INDUSTRY IN INDIA

The Indian retail industry is the fifth largest in the world. Comprising of organized and unorganized sectors, India retail industry is one of the fastest growing industries in India, especially over the last few years. Though initially, the retail industry in India was mostly unorganized, however with the change of tastes and preferences of the consumers, the industry is getting more popular these days and getting organized as well. With growing market demand, the industry is expected to grow at a pace of 25-30% annually. The India Retail Industry is the largest among all the industries, accounting for over 10 per cent of the countrys GDP and around 8 per cent of the employment. The Retail Industry in India has come forth as one of the most dynamic and fast paced industries with several players entering the

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market. But all of them have not yet tasted success because of the heavy initial investments that are required to break even with other companies and compete with them. The India Retail Industry is gradually inching its way towards becoming the next boom industry. A large young working population with medium age of 24 years, nuclear families in urban areas, along with increasing working women population and emerging opportunities in the services sector are going to be the key factors in the growth of the organized Retail sector in India. The growth pattern in organized retailing and in the consumption made by the Indian population will follow a rising graph helping the newer businessmen to enter the India Retail Industry. In India the vast middle class and its almost untapped retail industry are the key attractive forces for global retail giants wanting to enter into newer markets, which in turn will help the India Retail Industry to grow faster. Indian retail is expected to grow 25 per cent annually. Modern retail in India could be worth US$ 175-200 billion by 2016. The Food Retail Industry in India dominates the shopping basket. The Mobile phone Retail Industry in India is already a US$ 16.7 billion business, growing at over 20 per cent per year. The future of the India Retail Industry looks promising with the growing of the market, with the government policies becoming more favorable and the emerging technologies facilitating operations.

FUTURE OF RETAIL INDUSTRY IN INDIA

The retail industry in India is currently growing at a great pace and is expected to go up to US$ 833 billion by the year 2013. It is further expected to reach US$ 1.3 trillion by the year 2018 at a CAGR of 10%. As the country has got a high growth rates, the consumer spending has also gone up and is also expected to go up further in the future. In the last four year, the consumer spending in India climbed up to 75%. As a result, the India retail industry is expected to grow further in the future days. By the year 2013, the organized sector is also expected to grow at a CAGR of 40%. According to a McKinsey & Company report titled 'The Great Indian Bazaar: Organized Retail Comes of Age in India', organized retail in India is expected to increase from 5 per cent of the

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total market in 2008 to 14 - 18 per cent of the total retail market and reach US$ 450 billion by 2015. Furthermore, according to a report titled 'India Organized Retail Market 2010', published by Knight Frank India in May 2010 during 2010-12, around 55 million square feet (sq ft) of retail space will be ready in Mumbai, national capital region (NCR), Bengaluru, Kolkata, Chennai, Hyderabad and Pune. Besides, between 2010 and 2012, the organized retail real estate stock will grow from the existing 41 million sq ft to 95 million sq ft.

MAJOR RETAILERS IN INDIA

Pantaloon:
Pantaloon is one of the biggest retailers in India with more than 450 stores across the country. Headquartered in Mumbai, it has more than 5 million sq. ft retail space located across the country. It's growing at an enviable pace and is expected to reach 30 million sq. ft by the year 2010. In 2001, Pantaloon launched country's first hypermarket Big Bazaar. It has the following retail segments:

Food & Grocery: Big Bazaar, Food Bazaar Home Solutions: Hometown, Furniture Bazaar, Collection-i Consumer Electronics: e-zone Shoes: Shoe Factory Books, Music & Gifts: Depot Health & Beauty Care: Star, Sitara E-tailing: Futurebazaar.com Entertainment: Bowling Co.

Tata Group:

Tata group is another major player in Indian retail industry with its subsidiary Trent, which operates Westside and Star India Bazaar. Established in 1998, it also acquired the largest book
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and music retailer in India Landmark in 2005. Trent owns over 4 lakh sq. ft retail space across the country.

RPG Group:
RPG Group is one of the earlier entrants in the Indian retail market, when it came into food & grocery retailing in 1996 with its retail Food world stores. Later it also opened the pharmacy and beauty care outlets Health & Glow.

Reliance:
Reliance is one of the biggest players in Indian retail industry. More than 300 Reliance Fresh stores and Reliance Mart are quite popular in the Indian retail market. It's expecting its sales to reach Rs. 90,000 crores by 2010.

AV Birla Group:
AV Birla Group has a strong presence in Indian apparel retailing. The brands like Louis Phillipe, Allen Solly, Van Heusen, and Peter England are quite popular. It's also investing in other segments of retail. It will invest Rs. 8000-9000 crores by 2010.

PROBLEMS FACED BY RETAIL INDUSTRY IN INDIA

The organized retail industry in India is faced with stiff competition from the unorganized sector. Opposition to Foreign Direct Investment from small traders affects retail industry. Very high stamp duties on transfer of property affect the industry. Shortage of retail space in central and downtown locations also hinders the growth of retail industry. Rigid building laws makes procurement of retail space difficult. Non residents are not allowed to own property except they are of Indian origin. Customs duties are levied on import of goods in India.

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CONSUMERS SHOPPING ORIENTATION

Social shopping: Most of the older generation Y consumer goes shopping with friends and family for the purpose of socializing. Idea shopping: The second significant motivational factor for visiting malls by generation Y consumer. They go shopping to keep up with trends, to keep up with new fashions, to see all the new products available and to experience new things.

Role shopping : The third significant factor, which reflects the enjoyment that shoppers derive from shopping for others, the influence that this activity has on the shoppers feelings and moods, and the excitement and intrinsic joy felt by shoppers when finding the perfect gift for others.

Adventure shopping: Adventure shopping, refers to shopping for stimulation, adventure, and the feeling of being in another world. A significant number of respondents reported that they go shopping for the sheer excitement.

Value shopping: Value shopping refers to shopping for sales, looking for discounts, and hunting for bargains. Gratification shopping: Gratification shopping, involves shopping for stress relief, shopping to alleviate a negative mood, and shopping as a special treat to oneself.

KEY PERFORMANCE INDICATORS (KPI)

Key Performance Indicators, also known as KPI or Key Success Indicators (KSI), help an organization define and measure progress toward organizational goals. Once an organization has analyzed its mission, identified all its stakeholders, and defined its goals, it needs a way to measure progress toward those goals. Key Performance Indicators are those measurements. Key Performance Indicators are quantifiable measurements, agreed to beforehand, that reflect the critical success factors of an organization. They will differ depending on the organization. A business may have as one of its Key Performance Indicators the percentage of its income that comes from return customers. A Customer Service Department may have as one of its Key Performance Indicators, in line with overall company KPIs, percentage of customer calls
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answered in the first minute. A Key Performance Indicator for a social service organization might be number of clients assisted during the year. Key Performance Indicators usually are long-term considerations. The definition of what they are and how they are measured do not change often. The goals for a particular Key Performance Indicator may change as the organization's goals change, or as it gets closer to achieving a goal. Categories of KPI: Quantitative indicators which can be presented as a number. Practical indicators that interface with existing company processes. Directional indicators specifying whether an organization is getting better or not. Actionable indicators are sufficiently in an organization's control to effect change. Financial indicators used in performance measurement and when looking at an operating index.

KPI FOR RETAIL SECTOR

Key performance indicators in Retail help to track individual performance. They tell us about trends, behaviors, opportunities to increase performance, and they forecast the short to medium term future enabling us to understand why and where we are heading. Statistical measurement of fundamental sales performance drivers for any retailer is a prime need. With all manner of spreadsheets, Dashboards and Scorecards, Key Performance Indicators (KPI) is used to communicate the strategy of the shareholders to the individuals in the company and we employ feedback systems to report the results. It is common practice to compare what we have forecast with what has actually taken place statistically to make judgments, changes and plans. Some of the areas where metrics can be applied to Retail are Sales & Profitability Analysis, Store Operations Analysis, Customer Analysis, Merchandise Management, Inventory Management, Supplier Performance Management, Marketing and E-commerce Analysis, Market Basket Analysis, Category Management, Brand & Marketing Research, Market Share Analysis, etc.

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CUSTOMER CENTRIC INDICATORS

Customer Gross Profit: Customer GROSS Profit = Customer Sales - Customer Cost of Goods Sold for a period Customer Lifetime Purchase Value: Monetary value of each customer's life time purchases from the retailer Customer profitability: Customer Profitability = Customer Sales - (Customer Returns Customer Cost of Goods Sold + Customer Promotion Expenses + Activity Based Cost of Servicing Customer) for a period Customer Purchase Freq Count: Count of customer purchases transactions over a period of time Customer Purchase Value: Monetary value of each customer purchase during a period with an average value for all purchases for the period Customer Reference question: A rating from 0 to 10 that indicates if the customer would recommend the store. Customer Sales by Segment: This formula is dependent upon defining customer segments (based on age, education, lifestyle, income and other factors) and associating individual customers to specific segments. Units sold per customer: Measures the average number of units sold by the store on a per customer basis. Customers per day: Measures the average number of customer the store manages to attract on a per day basis. Store loyalty: Measures the extent at which store customers are loyal, loyalty being defined based on several attributes, such as size of purchases, time spent in store, frequency of purchase etc. Frequency of store visits: Measures the average number of times a customer visits the store in period. Average Sale per Customer/Transaction: Total sales for a given period divided by the number of customers or transactions for the same period

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Units per Customer/Transaction: Total number of units sold in a given period divided by the number of customers or transaction for the same period Profit per Customer Visit: Profit obtained from each customer visit. This way you can easily set goals for your sales team in order to increase profits.

SALES METRICS
Visit to Buy Ratio: Sales Transaction Count per period / Visit Count Per Period Sales compared to last year (or any other period): Actual sales for a given period divided by actual sales for the period you want to compare to Average Sale: The average selling price of each individual salesperson compared to everyone else on the shift higher averages show a greater knowledge of product as the salesperson is able to sell higher ticket items. Low statistics reveal the salesperson lacks skill in either product knowledge or effective probing. Items per Sale: Tells us about the ability of the salesperson to add-on to a sale. Inventory to sales ratio (ISR): Measures the ratio between the retailer's inventory value and the sales volume. Sales per Square Foot: Actual sales for a given period (usually a month or a year) divided by the total floor area (in sq.ft.) of the store. Sales per hour: A statistic tells us about the speed at which each individual salesperson is selling or attending to customers compared to everyone else on the shift Sales per Hour (for store or associate) selling hours only: Actual sales for the store divided by the number of selling* hours during the same period*selling hours are used here rather than total labor hours.

Sales per Hour (for store or associate) total labor hours: Actual sales for the store divided by the number of labor hours used during the same period.

Wage to Sales Ratio: Compares a salespersons hourly wages to hourly sales. This KPI identifies your clear performers and underperformers and their value to you.

Average sales per customer or transaction: Total sales for a given period divided by the number of customers or transactions for the same period

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Sales per square foot / meter: Actual sales for a given period divided by the total floor area (in sq.ft. or meters) of the store. There are variants of this indicator in terms of sales per square foot of merchandisable area of choice (like walls and display units) percentage (%) of total stock that is not displayed to customers most applicable in certain retail sectors

Inventory Sales per selling hour: Actual sales for the store divided by the number of selling hours during the same period

OTHER METRICS:
Conversion rate: The number of transactions in a given period divided by the total number of customers who entered the store during the same period Time Spent in the Store: Average time spent by customers in the store can be measured through sophisticated techniques utilizing RFID and wireless technologies or manually. Reason for this measurement: There is a direct correlation between time customers spend in a store and how much they buy. Product lines sold per transaction: Measures the retail sales width, as the average number of items from different product lines sold on a per customer purchase basis. Stock lines out of stock: Measures the number of stock lines that were not available in the store during the period. Volume of purchase: Measures the average volume of a purchase made by store visitors in period, by type of product. Perishable items with past due date: Measures the proportion of perishable items in a store that are past due date. Inventory Turns: This KPI tells us how often the average inventory over a given period of time (usually a year) is sold in that same period of time Inventory Store conversion rate: The number of transactions in a given period divided by the total number of customers who entered the store during the same period Coupon conversion percentage: Percentage of coupons that have been used by customers Price premium : The relative price of a product compared to a benchmark price (average retail price) Promotion share: Share of promotion products in percentage (%) of total sales

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Sell-through percentage (%): Is a percentage of units sold during a period and it is calculated by dividing the number of units sold by the beginning on-hand inventory (for that same time period)

Scanning percentage in store: Indicates the % of products purchased is scanning properly in store Percentage of perishable items with past due date: Number of perishable items with past due date as a percentage of all items in store Product visibility on shelf: Measures the amount of frontal views of a single productpackage on a fully stocked shelf Sales Product share on shelf: Compares product visibility as a percentage to all products on shelf Sales Gross Margin Return on Inventory Investment: The GM ROII multiplies Inventory Turns (which tells us how healthy our stock is) by Gross margin (which tells us the percentage of profit we make on each sale)

Formula: GM ROII = Gross Margin % * Inventory Turns Inventory Turns = Sales / Average Inventory Gross Margin = Profit / Selling Price * 100 Or: Gross Margin = (Selling Price Buying Price) / Selling Price * 100 Break-even and depreciation scaling: To calculate break-even and depreciation scaling in function of time and obsolescence of products, especially to help fashion players to measure the effect of those actions. Compares selling of a particular item code in the normal period and during various periods, each one with a different percentage of discount, defining a ratio.

Must-Have Effect: To analyze the convenience of converting in continuative products, items that instead should last just one season, but that are so appreciated and successful to become must-have bestsellers. The success of an item in fact should be determined by measurable factors (such as the quality/price ratio) but also by non-tangible effects (i.e. advertisement, innovation, trendiness, VIPs wearing publicly the item etc.)

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CONCLUSION

The status of the retail industry will depend mostly on external factors like Government regulations and policies and real estate prices, besides the activities of retailers and demands of the customers also show impact on retail industry. As the retail market place changes shape and competition increases, the potential for improving retail productivity and cutting costs is likely to decrease. Therefore it is important for retailers to secure a distinctive position in the market place based on values relationships or experience with apt strategies in place to improve the efficiency and profit margins.

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BIBLIOGRAPHY
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11. "Starting a Retail Business - Retail Key Performance Indicators (KPI) Maximise Sales." Hillsorient - Design, Internet, Lifestyle, Business. Web. <http://www.hillsorient.com/articles/2006/07/121.html>.

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