Introduction to Retail Industry

Introduction to Retail IndustryRetail Theories & Strategy

Theories of Retail DevelopmentWhat is Retailing?Retailing is the business where an organization directly sells its products and services to an end consumer and this is for his personal use. By definition whenever an organization be it a manufacturing or a whole seller sells directly to the end consumer it is actually operating in the Retail space.

Industrial DefinitionRetailis thesaleof goods and services from individuals or businesses to theend-user. Retailersare part of an integrated system called thesupply-chain. A retailer purchases goods orproductsin large quantities frommanufacturersor directly through awholesaler, and then sells smaller quantities to theconsumerfor a profit. Retailing can be done in either fixed locations or online. Retailing includes subordinated services, such as delivery. The term "retailer" is also applied where a service provider services the needs of a large number of individuals, such as apublic utility, likeelectric power.

Definition- ContinuedShops may be on residential streets, shopping streets with few or no houses or in ashopping mall. Shopping streets may be forpedestriansonly. Sometimes a shopping street has a partial or fullroofto protect customers fromprecipitation. Online retailing, a type ofelectronic commerceused forbusiness-to-consumer(B2C) transactions andmail order, are forms of non-shop retailing.

Book DefinitionPhilip Kotler;According to Kotler: Retailing includes all the activities involved in selling goods or services to the final consumers for personal, non business use

Theories-RetailingA better known theory of retailing wheel of retailing proposed by Maclcomb McNair says,

New retailers often enter the market place with low prices, margins, and status. The low prices are usually the result of some innovative cost-cutting procedures and soon attract competitors.

With the passage of time, these businesses strive to broaden their customer base and increase sales. Their operations and facilities increase and become more expensive.

Theories-Retailing-Continued By this time newer competitors as low price, low margin, low status emerge and these competitors too follow the same evolutionary process.

They may move to better up market locations, start carrying higher quality products or add services and ultimately emerge as a high cost price service retailer.The wheel keeps on turning and department stories, supermarkets, and mass merchandise went through this cycles.

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The retail accordionRetail development is linked to human habitation.Expands with a geographical expansion of the society.Starting with general stores neighboring localitiesTo specialist storesthings like gifts, restaurants, entertainment at a certain distanceTheses specialist retailers when mature start adding variety and become general storesSome become category killers

The Melting Pot Theory or the dialectic processA new value proposition by one retailer gives rise to two retailers with same value.E.g.Tesco always copied SainsburyIn Malaysia too the grocery sector is facing a price led dialectic processsome of them are sure to die

The Polarization theoryIn long term the industry would have mostly either large or small sized retailersThe medium size becomes unviable.Bermuda triangle Act small and set up big firm practices.

Conflict TheoryConflict always exists between operators of similar formats or within braid retail categories. It is believed that retail innovation does not necessarily reduce the number of formats available to the consumer, but leads to the development of more formats. Retailing thus evolves through a dialectic process, i.e. the blending of two opposites to create a new format. developments in retailing as follows:

Conflict Theory-Continued1) Thesis: Individual retailers as corner shops across the country2) Antithesis: A position opposed to the thesis develops over a period of time. These are the department stores. The antithesis is a challenge to the thesis.3) Synthesis: There is a blending of the thesis and antithesis. The result is a position etween the thesis and antithesis. Supermarkets and hypermarkets thrive. This synthesis becomes the thesis for the next round of evolution.

Industry DriverIt is an Industry which is heavily dependent on consumer spending . In this ecosystem consumers play the most important role. Retail sales is generally driven by peoples ability (disposable income) and willingness (consumer confidence) to buy goods and services.

South East Asian Retail Industry-IntroductionAny consumer looks for good value. And everybody looks for a relatively decent customer experience.Consumers are homogeneous in terms of how they identify themselves with value. ZARA is a significant example: there is no significant price difference between their products in ASEAN countries

Introduction to Malaysian Retail Industry-Global/Regional-RetailersMalaysiaCurrently trading:DaisoDebenhamsIsetanAEON- Previously named 'JUSCO'Marks & Spencer- Branches in1 Utama,Queensbay Mall,Sunway Pyramid,The GardensandSuria KLCC.MetrojayaMilimewaParksonPacificRobinsons- Flagship outlet inThe Gardens (Kuala Lumpur).SogoThe StoreTangs- Store inStarhillCenter, KL, closed down in 2004. Made their comeback debut at Pavilion KLTescoGiant

Overview of Sabahs Retail Market-Retail-MembersMetrojayaParksonGiant SurveyMillimewaDaisoAeonGardian

Overview of Sabahs Retail Market-Retail Members -ContinuedKFCMcDonald'sBurger kingStation OneShell-PETRONASEsso

How Different is Retail Industry in South East Asia?The difference comes in the price points, Some time what a Singaporean can afford would be slightly different from a Malaysian. For example. Singaporean would tend to buy the slightly higher range of the product line in Comparison with an Indonesian or Pilipino.The rest of the region is rather more or less homogeneous

South East Asia-Retail Format-DifferencesInfrastructure is slightly different between Singapore and Thailand or MalaysiaFor example, scopes of transportation are different. Also the quality of real estate is ahead in terms of planning and execution compared to the other places. In terms of way things are managed, in Malaysia, Indonesia deal with more entrepreneurs in Retail Segment.

South East Asia-Retail Format-Differences-ContinuedIn Singapore, corporatization has taken place, Retailers deal with bigger corporations. Vietnam is still at an infant stage in terms of infrastructure, and the retail sector is still in its very infant stage. Laos has not done yet enough to market itself high in Retail

South East Asia-Retail Format-Differences-ContinuedThere are talks about market becoming to rise in Cambodia. Indonesia has now very good in political stability, and retail consumption has started to shape there. For the Philippines, a very stable and mature market, greater political stability makes growth options beyond Metro Manila. Every countries in South East Asia ,there is possibilities of High Retail Market Growth

Evolution of Retail FormatRetail comes from the Old French wordtailer(compare modern Frenchretailler), which means "to cut off, clip, pare, divide" in terms of tailoring (1365). It was first recorded as a noun with the meaning of a "sale in small quantities.

Evolution of Retail Format-ContinuedAnother Eg. in 1433 (from the Middle Frenchretail, "piece cut off, shred, scrap, paring").[1]Like the French, the wordretailin both Dutch and German (detailhandelandEinzelhandel, respectively) also refers to the sale of small quantities of items.

Malaysian Retail market- Operational Mix Format- Motorola MalaysiaPETALING JAYA: Motorola Solutions Malaysia Sdn Bhd (Motorola Solutions) sees the country as a key market in the region as its retail industry is at the mid-maturity stage, says its retail vertical Asia Pacific director Mr.Anand Mehta.According to a forecast by Business Monitor International, the total retail sales locally would grow from RM200 billion this year to RM248 billion in 2016..

Malaysian Retail market- Operational Mix Format- Motorola Malaysia-ContWe see our self-scanning solution, catered for supermarkets and hypermarkets, will make a big hit among the technology-savvy consumers in Asia, such as Malaysia,Singapore and Indonesia, within the next 12 to 18 months.He said Motorola Solutions was already in discussions with prominent retailers to implement the technology.

Malaysian Retail market- Operational Mix Format- Motorola Malaysia-ContThis particular solution is already popular in Europe and growing rapidly in the US, because it benefits both retailers and customers by increasing sales of the retailers and enhancing the shopping experience of the customers, he added.

Malaysian Retail market- Operational Mix Format- Motorola Malaysia-ContAnand said companies should take advantage of the developing technology to achieve a seamless business operation.Our innovative solutions are designed to enable business agility, improve worker productivity, increase sales as well as enhancing customer experience.

Malaysian Retail market- Operational Mix Format- Motorola Malaysia-ContMeanwhile, its Radio Frequency Identification (RFID) solution, designed for clothing retailers, can reduce receive time for up to 91 per cent and increase sales from between four per cent and 21 per cent.Motorola Solutions has a complete suite of retail mobility solutions with a wide portfolio of customers, including Mydin, Tesco, Zara and Macys.

Evolution of B2C Retail Format Through Shopping MallsThe resurgence of international interest in Malaysian malls can be attributed to growing foreign tourist receipts amounted to RM56.5 billion, of which shopping accounted for almost 30% in 2010.

Evolution of B2C Retail Format Through Shopping Malls-ContinuedCurrently, there are 300 retail centers in Malaysia offering a total of 114 million sq ft of space and enjoying a healthy average occupancy of 80.2%. Of these, more than 40% consisting of 50.6 million sq ft of available space are located in the Greater Kuala Lumpur(GKL) area. Most of these are located within the city Centre, where they enjoy an average occupancy rate of 84.2%.

Social Development and its Impact on Retail IndustryGlobalizationOpen Market policy in retail industryOnline business expansionLocalization for price advantage.Free movement of Capital, labor and ResourcesMulti language and Global Hubs for Retailing

Industrial Revolution-WorldIndia, Poland, Brazil, and South Korea provide interesting case studies of markets evolving rapidly. Nodoubt, government regulation has played a significant role in promoting domestic retailers. But willthis trend continue? If foreign direct investment (FDI) restrictions are loosened or consumer purchasing power and shopping patterns change, which market evolution pattern will take hold and why?Lastly, we will discuss the core capabilities successful retailers will need in developing markets. Thegrowth of modern trade operatorswhether global or localwill depend on their ability to leveragerelevant capabilities while adapting to market conditions and changing consumer tastes.

Industrial Revolution-Asia and South East AsiaPart I: How Markets Modernize?According to a recent in-depth study, MVI research shows that retail markets tend to modernize from largely traditional trade to modern trade dominated along a predictable continuum.

Industrial Revolution-Asia and South East Asia-ContinuedAs markets modernize, the share of traditional trade as a percent of total trade declines slowly; suppliers, however, will continually need to adjust the amount of resources allocated to manage the traditional trade versus the modern trade

Industrial Revolution and Effects on Malaysian Retail IndustryDISCUSS GLOBALIZTION EFFECTLARGE OR SMALL SIZESURVIVAL OF MEDIUM SIZE RETAIL INDUSTRYMERGERS EXPANSIONFUTURE

Emergence of Self ServiceA leading Technological advancementWhether for retail POS systems, includingself check outandself service kiosks, bill payment or gift registry, depend on technology AdvancementFor eg. NCR self-service kiosk solutions raise the bar for speed, convenience and control in your retail operations. Retail POS systems are found worldwide in virtually every retail format.

Self Service Models-eg.NCR SelfServ Bill PaymentSelf service kiosks allow customers to make payments quickly with no staff assistance.zoomNCR SelfServ CheckoutNCR's self checkout systems feature intuitive interfaces and animated instructions so the customer always knows what to do next.zoomNCR SelfServ Order and PayKiosk solution that revolutionizes traditional ordering and payment transactions.zoomNCR SelfServ 60A flexible, advanced retail kiosk with powerful, next-generation architecture.zoomNCR SelfServ 70Retail kiosk allows customers to complete payment transactions quickly, simply.

Development of Supermarkets & Convenient StoresAmarketplaceis a location where goods and services are exchanged. The traditionalmarket squareis acity squarewhere traders set up stalls and buyers browse the merchandise. This kind of market is very old, and countless such markets are still in operation around the whole world.

Development of Supermarkets & Convenient Stores-ContinuedRetail is usually classified by type of products as follows:Food productsHard goods or durable goods ("hardline retailers") - appliances, electronics, furniture, sporting goods, etc. Goods that do not quickly wear out and provide utility over time.Soft goods or consumables - clothing, apparel, and other fabrics. Goods that are consumed after one use or have a limited period (typically under three years) in which you may use them

Development of Supermarkets & Convenient Stores-ContinuedIn some parts of the world, the retail business is still dominated by small family-run stores, but this market is increasingly being taken over by largeretail chains.

Types of retailers by marketing strategy:

Department stores- very large stores offering a huge assortment of "soft" and "hard goods; often bear a resemblance to a collection of specialty stores. A retailer of such store carries variety of categories and has broad assortment at average price. They offer considerable customer service.

Types of retailers by marketing strategy:-Continued

Discount stores- tend to offer a wide array of products and services, but they compete mainly on price offers extensive assortment of merchandise at affordable and cut-rate prices. Normally retailers sell less fashion-oriented brands.

Types of retailers by marketing strategy:-Continued

Warehouse stores- warehouses that offer low-cost, often high-quantity goods piled on pallets or steel shelves;warehouse clubscharge a membership fee;Variety stores- these offer extremely low-cost goods, with limited selection;Demographic - retailers that aim at one particular segment (e.g., high-end retailers focusing on wealthy individuals).

Types of retailers by marketing strategy:-Continued

Mom-And-Pop: is a retail outlet that is owned and operated by individuals. The range of products are very selective and few in numbers. These stores are seen in local community often are family-run businesses. The square feet area of the store depends on the store holder.

Specialty Stores, Malls & Convenient storesSpecialty stores: A typical speciality store gives attention to a particular category and provides high level of service to the customers. A pet store that specializes in selling dog food would be regarded as a specialty store. However, branded stores also come under this format. For example if a customer visits a Reebok or Gap store then they find just Reebok and Gap products in the respective stores.General store- a rural store that supplies the main needs for the local community

Specialty Stores, Malls & Convenient stores-ContinuedConvenience stores: is essentially found in residential areas. They provide limited amount of merchandise at more than average prices with a speedy checkout. This store is ideal for emergency and immediate purchases.Hypermarkets: provides variety and huge volumes of exclusive merchandise at low margins. The operating cost is comparatively less than other retail formats.

Specialty Stores, Malls & Convenient stores-ContinuedSupermarkets: is a self service store consisting mainly of grocery and limited products on non food items. They may adopt a Hi-Lo or an EDLP strategy for pricing. The supermarkets can be anywhere between 20,000 and 40,000 square feet (3,700m2). Example: SPAR supermarket.Malls: has a range of retail shops at a single outlet. They endow with products, food and entertainment under a roof.

Specialty Stores, Malls & Convenient stores-ContinuedCategory killersor Category Specialist: By supplying wide assortment in a single category for lower prices a retailer can "kill" that category for other retailers. For few categories, such as electronics, the products are displayed at the centre of the store and sales person will be available to address customer queries and give suggestions when required. Other retail format stores are forced to reduce the prices if a category specialist retail store is present in the vicinity.

Specialty Stores, Malls & Convenient stores-ContinuedE-tailers: The customer can shop and order through internet and the merchandise are dropped at the customer's doorstep. Here the retailers use drop shipping technique. They accept the 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 home shopping. However it is important for the customer to be wary about defective products and non secure credit card transaction. Example: Amazon, Pennyful and eBay.

Specialty Stores, Malls & Convenient stores-ContinuedVending Machines: This is an automated piece of equipment wherein customers can drop in the money in machine and acquire the products.Some stores take ano frillsapproach, while others are "mid-range" or "high end", depending on what income level they target.Other types of retail store include:

Specialty Stores, Malls & Convenient stores-ContinuedAutomated Retailstores are self service, robotic kiosks located in airports, malls and grocery stores. The stores accept credit cards and are usually open 24/7. Examples includeZoomShopsandRedbox.Big-box storesencompass larger department, discount, general merchandise, and warehouse stores.Convenience store- a small store often with extended hours, stocking everyday or roadside items;General store- a store which sells most goods needed, typically in a rural area;

An Examination on Malaysian Model of Retail IndustryRetailing is a commercial transaction in which a buyer intends to consume the good or services through personal, family or household use. Retailers are business firms engaged in offering goods and services directly to consumers.

An Examination on Malaysian Model of Retail Industry-ContinuedIn Malaysia, the supervision of the wholesale and retail sector falls under the supervision of theMinistry of Domestic Trade and Consumer Affairs(MDTCA) through the Committee on Wholesale and Retail Trade. The Committee was set up in 1995 to regulate and supervise the industry, including foreign participation in the sector. Approval from the Committee is needed for foreign companies wanting to set up wholesale or retail operations locally and for the opening and relocation of branches.

An Examination on Malaysian Model of Retail Industry-ContinuedFIC and MDTCA show flexibility on the shareholder structure. But exceptions are examined on a case by case basis. The other conditions on foreign investment in the industry include:Incorporation of their wholesale and retail operations locallyMinimum capital requirements of Malaysian Ringgit (MYR) 1 million for specialty outlets, MYR5 million for supermarkets and MYR50 million for hypermarkets and FIC guidelines on purchase of property by Malaysians and foreign interests.

Presence of Successful Retail Formats in the WorldTypes of store or shop:Anchor storeBig-box storeChain storeConfectionery storeConvenience storeDepartment storeDiscount storeGeneral storeGrocery storeHardware storeHealth food storeHobby store

ContinuedHypermarketLiquor storeNewsagentOnline shoppingOutlet storePet storePop-up retailSpecialty storeState storeStore-within-a-storeSupermarketSurplus store

ContinuedSurvival storeToy storeVariety storeWarehouse clubWarehouse store

Guidelines for Changing Retail Format Hypermarkets in MalaysiaEffective from April 2002, the government has approved a new set of guidelines for applications to open new hypermarkets in Malaysia:The minimum capital requirement has increased from MYR10 million to MYR50 million.Applications to build outlets should be submitted two years in advance.

Guidelines for Changing Retail Format Hypermarkets in Malaysia-ContinuedNew hypermarkets cannot be built within a 3.5 kilometer radius of a housing area or a city center.Operations should be free-standing, which means hypermarkets must operate in their own buildings and not as part of any other complexes.A socio-economic impact study has to be conducted by the local authorities in the proposed area before any application is considered. The cost of the study would be borne by the applicants.

Guidelines for Changing Retail Format Hypermarkets in Malaysia-ContinuedApplications will only be considered for locations with a population of 350,000 or higher.Floor space should not be less than 8,000 square meters and a counter must be set up in every 1,000 square meters.

Malaysia @ Retail IndustryNevertheless, the projected retail sales growth for 2012 will remain at six per cent translating into RM88.2 billion in value as the European debt crisis and job uncertainties linger and credit card spending reduces.Retail Group Malaysia (RGM) tabulated retail sales numbers on behalf of the Malaysia Retailers Association (MRA).The data did not take into account big ticket items like houses and cars.

Statistics On Malaysian Retail MarketMALAYSIAN retailers sold RM83.2 billion worth of items ranging from clothing to jewellery and food to souvenirs in 2011,As retail sales grew higher than the anticipated 8.1 per cent growth.

Trust/Loyalty and other beliefs in Retail IndustryMultinational Vs LocalRegional Vs LocalAsian vs Europian(continenatal)Chinese product line Vs Japanese ProductlineBrand LoyaltyTrusted Brand for DecadesDiscuss the above

21st Century- Challenges on Retail Industry - MalaysiaChallenges Ahead in the Retail Industry

GlobalizationMost Malaysian retailers are not geared up to meet the challenges of the effects of globalization in Asian countries. They have inadequate resources and insufficient knowledge to compete with International powerhouses. The meager financial resources and the inability to withstand the deflationary pressure of the market have put the local retail operators in a fix, whether to downsize, merge or exit the industry.

21st Century- Challenges on Retail Industry Malaysia-ContinuedTrade LiberalizationASEAN Free Trade Area (AFTA) allows local retailers to source for merchandises from countries such as Thailand and Indonesia. They do not have to rely on local distributors who have been imposing strict credit terms and trading conditions on them since the Asian financial crisis.

21st Century- Challenges on Retail Industry Malaysia-ContinuedOn the other hand, regional trade liberalization poses great threats to small and medium-size retailers in Malaysia. They include provision shops, sundry shops and mini-markets. Without the resources and bargaining power to source for cheaper food products in the region.These retailers will not be able to withstand the full impact of AFTA. They may be forced to close down eventually.

Future of Malaysian Retail IndustryThe Malaysia Retail Industry Report this year showed that retailers remained optimistic of businesses for the first quarter of 2012 after chalking 11.5 per cent growth in the fourth quarter of 2011.

Estimated Data- Retail Industry First QuarterFor the January to March 2012 period, retailers see sales rising by 12.1 per cent while RGM remains a little conservative and expects that retail sales will grow by a tenth.

SWOT Analysis on Retail Industry- SabahMetrojayaParksonGiantSurveyCksGardianCoswayMcdonaldKFC

Q&ARetail Industry IntroductionWorldAsiaSouth east AsiaMalaysiaSabah

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