One of the key determinants of a retailer’s success is the format they use to present their target customers. A retailer may choose a format based on the type of store layout it wishes to feature, the location it would like to establish, the various products and services it wishes 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 grocery stores. It is only in recent times that the multi-point, organized retail concept has gained acceptance and has since gained momentum. According to the study conducted by the Indian Council for International Economic Relations Research (ICRIER), on the topic ‘Impact of Organized Retail on Unorganized Sector’, it is estimated that 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 the 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 kirana or mom-and-pop 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 seen in the local community are often family owned businesses. The square footage area of the store depends on the store owner.
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 only finds Reebok and Gap products in the respective stores.
Department store: they often have a resemblance to a collection of specialty stores. 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 reduced 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 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 between 20,000 and 40,000 square feet. Example: SPAR™ supermarket.
Malls: it 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.
Category Assassins or Category 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 deal with customer inquiries and give suggestions when necessary. Other retail format stores are forced to cut prices if a specialty category retailer is present nearby. For example: Pai Electronics™ store in Bangalore.
Electronic retailers: The customer can shop and order over the Internet and the merchandise is left at the customer’s doorstep. Here retailers use technical drop shipping. They accept payment for the product but the customer receives the product directly from the manufacturer or from 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 that the customer beware of faulty products and unsecured credit card transactions. Example: Amazon and eBay.
Vending machines: This is an automated equipment where customers can deposit money into the machine and purchase the 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. A good format will help to display the products well and attract the target customers to generate sales.