Friday, August 8, 2008



All around there is frequent focus on retail revolution with the MNCs and Indian business houses foraying into this sector. There is huge potential in this sector and this article deals with various pros and cons involved in retail revolution. There is widespread apprehension of the vanishing role of wholesalers and total annihilation of bulk suppliers. The article addresses the same from various perspectives. The tricks in retail operations along with the tricks in managing the fluctuation business, and the tips for successful retail business are dwelt at length. At the end, the article sums up with a token of advice to the traditional retailers to evolve and reinvent as per the changing retail business environment so as to survive and succeed.


KEY WORDS: Introduction, Role of Bulk Suppliers, Vanishing Wholesalers, Employment Opportunities in Retail, Co-petition in Trading, Tricks in Fluctuation Business, Tips for Successful Retail Business & Conclusion.


“This is a historical moment. This is a challenging moment. The market dynamics of the retail business is bound to change.” — Kishore Biyani, CEO Future Group and Managing Director, Pantaloon Retail India Ltd.

We have heard of various kinds of revolutions such as milk revolution, green revolution, white revolution etc., Of late, we have been hearing of retail revolution with the overseas multinationals entering into Indian market. Of course, at the domestic front also we have many retail giants Reliance Fresh, Big Bazaar, Futures Group, Subhiksha, Birla’s foray through More (Earlier Trinethra Super Retail) chain of retails establishments. Other business houses are also in the process of entering into the fray. What are the reasons behind all these developments?

“India, with a population of 1.1 billion and a middle class that is larger than the entire population of US, is one of the world’s largest untapped markets” – Satveer Chaudhary, Senator, Minnesota.

India’s middle class population is growing with handsome disposable incomes. As the economy has been opened up there are lot of opportunities for employment and also raising standard of living. Coupled with this, the media is also playing crucial role by bringing awareness among the Indian population. As the population grows there would be huge demand for products and services. There is a need to produce more and market the same through organized merchandize. Here, the role of retailer comes into the picture where every consumer wants the products and services that are properly branded and marketed with quality checks at competitive prices. With the growing internet and television the consumer awareness is rising and along with this, their expectations and aspirations to have everything at convenience and comfort under one roof and at competitive prices. It is indeed a Herculean task for the retailers. Besides mushrooming players into this sector there would be cut-throat competition.

In the context of retail revolution let us look at the role of intermediaries in the channels of distribution.


Bulk suppliers purchase goods in bulk quantity from the manufacturers and then sell to wholesalers on quantity basis at marginal profits. In brief, they do volume business with thin margins. In this, the bulk suppliers often book orders in advance from their immediate buyers and then goods are transported directly from the manufacturer to the immediate buyer. In this process, the time is saved, the transportation cost is saved, storage costs are removed and the interest burden is also minimized. The bulk suppliers’ role is hidden and is usually not felt by the retailers and customers. They are the hidden tigers doing volume business with thin margins. The manufacturers who do not have proper distribution network depend on bulk suppliers. In few cases, the manufacturers produce the stocks based on the commitment and requirement from the bulk suppliers. With the retail revolution is in the full swing it seems that the role of bulk suppliers will be eliminated gradually.


With the retail revolution in an aggression mode it looks like the role of wholesalers in the distribution will be limited. The retailers are directly sourcing the products from the manufacturers and directly selling at their counters with limited profits. It is highly beneficial to the customers as the benefits are directly passed on to them. In the traditional distribution we find the stocks coming from manufacturer to wholesaler, from wholesaler to retailer and from retailer to consumer. Every layer of distribution enjoys some profit and stocks are sold. When a particular layer like wholesaler is removed, the profits enjoyed until now by them are being passed on to the retailer directly. If we go little further even the role of retailers are limited fully when stocks are directly sold to consumers as the manufacturers are directly involved in door to door selling like Eureka Forbes. The wholesalers have to evolve themselves in the changing dynamics in distribution channel. But one thing is sure and certain that the retailers will survive the onslaught of organized retailing. In fact, the traditional kirana merchants are the bricks for the retail sector. In this context, Carlos Slim Helu quoted, “I think one of the big errors people are making right now is thinking that old-style businesses will be obsolete, when actually they will be an important part of this new civilization. Some retail groups are introducing e-commerce and think that the "bricks" are no longer useful. But they will continue to be important”


Apart from the rapid rise in the retail sector, there is another advantage of generating employment opportunities as well. Until recently youth treated as joining in the retail business is like working in another kirana shop. But the youth take pride in joining retail job bandwagon with the changing mindset. According to a white paper jointly by the CII and KSA Technopak, organized retailing has the potential to bring 100,000 new employees in the tax bracket in five years. Apart from providing employment it also enhances tax revenues for the government. It is yet another positive sign from the retail sector. Only thing constant in life is change. Everyone has to change with the changing times. Similarly the traditional retailers and decreasing wholesalers should learn to change and adjust with the realities. They should evolve and reinvent themselves with the revolutionary changes in the retail revolution.


Although business people compete with each other they also cooperate during business transactions. They have their own network and the network helps them for effecting smooth and successful functioning of business. For instance, if you go to travel agent for booking tickets there will be competition in selling the tickets at discounted prices. And usually we find all travel agents near the railway station or bus stand. You buy a ticket from a particular agent at a discounted price than their competitor. And when you have to board the bus you will be surprised to know that the passengers will be arranged and accommodated in the bus of his competitor in case if he is not in a position to mobilize sufficient strength to run his bus. It is the case of every travel agent.

Similarly in trading business, if a specific trader does not have a specific item requested by the customer then he arranges the specific product from his competitor to the customer. The intention of the trader is not only to provide all items under one roof but also to avoid his customer going to his competitor. For instance, if the trader bluntly says that the specific product is not there then the customer goes to his competitor and the competitor intentionally quotes lesser price to woo him. The customer will develop a strong feeling that his existing supplier is selling him stocks at higher price. If the customer is intelligent then he realizes that the business person is intentionally quoting lesser price to woo him. Like wise, traders deploy and employ various tricks in their trade to confuse their customers and also to woo new customers.

In few instances, the traders borrow the deficient stocks from their competitor in case if the trader is confident of returning the stocks with in the committed dates. By this way, he avoids paying cash and enjoys total benefit of sales. Similarly he reciprocates with a positive gesture when his competitor is in need of hand loan of stocks. Therefore, competition and cooperation go hand in hand in any business.


There is an element of risk in any fluctuation business. Of course, business itself is a risk but business is based on scientific calculation and evaluation of risk. There are certain products and services that are prone to fluctuation business. In such case, retailers adopt different tricks and tools to play safe and make profits. Usually the purchase is based on the intuition and gut feeling and sometimes based on the previous sales record. When they know that the price will shoot up then they buy and hold the stock for some time and start liquidating slowly by gradually jacking the prices. In case if the price falls, then they liquidate even for minor losses as it incurs storage costs and in some cases there is interest burden on the capital employed and deployed in business. They exit smartly and sharply in case if they predict that the price will fall steeply. Especially in perishable goods, the retailers do not mind selling in high losses as they earn higher profits as well. So is the case of seasonal businesses also.


“Basically we get confused a bit about what retail is. It is really just buying things, putting them on a floor and selling them.” Gerry Harvey

The retailing success mantra of Wal-Mart
The secret of successful retailing is to give your customers what they want. In fact, what the customer wants is more important than what you have. And really, if you think about it from your point of view as a customer, you want everything:

• a wide assortment of good-quality merchandise;
• the lowest possible prices;
• guaranteed satisfaction with what you buy;
• friendly, knowledgeable service;
• convenient hours; free parking;
• A pleasant shopping experience.
— Sam Walton, Founder Chairman, Wal-Mart (1918-1992)

‘More display, more sales’ is the slogan of the day in retail business. What the consumers demand now is the free and easy accessibility to the products and they expect the stocks to be displayed so as to recollect the items they want and they also want the products to be offered at cheaper, qualitative and quantitative manner. In a nutshell, they want more for less.

The retail giants must know the pulse of the people and should shed away from meeting the needs of affluent classes alone. There is lot of potential still left untapped i.e. middle class and lower middle class. This segment demands spacious malls, wider range of products i.e. from pin to plane (Of course, planes are not possible in malls), at cheaper prices, below the MRP prices by way of discounts, loyalty oriented purchases, right ambience, door delivery etc.

In order to succeed Indian retailers have to take a leaf out of the books of global retail giant Wal-Mart. They must concentrate on mass production or on mass procurements. The profits so saved can be passed on to the consumers directly. They must focus more on customer care and needs. They need to evolve creative methods of selling and pulling the customers and making them satisfied and happy. Because it is ultimately the satisfied customers who come again and give business back to the retailers.


“With 30% of the population under 30 years, malls have emerged as the temples of today.” said Kishore Biyani

There are certain hard facts that have to be kept in mind. The traditional kirana traders have to evolve and reinvent as per the changing retail industry. The retail revolution is yet to reach to rural areas as it is presently confined to urban areas only. It is high time government accorded industry status to retail sector.


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