EM P O R I O

September 2010

Vol. 1, Ed. 4

TABLE OF CONTENTS

The marvellous misadventures of Wal-Mart 2

Rise of Retail in China 3

Retailing to the Ten Rupees Man 4
Private Label Brands 5
ZARA! 7

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[1]
 The marvellous misadventures of Wal-Mart
- Rachit Kumar

In  1962  when  Sam  Walton  opened   have  a  much  shorter  buying  cycle  as  
by  acquisiDon  of  two  exisDng  retail  
the  first  Wal-­‐mart  discount  city  store   compared  to  their  American   chains  namely  Wertkauf  and  Spar.  
in  Rogers,  Arkansas  he  wouldn’t  have   counterparts.  They  value  the   The  acquisiDon  of  Spar  is  considered  
imagined  in  his  wildest  dreams  that   proximity  of  the  shopping  desDnaDon   by  many  to  be  a  strategic  blunder  as  
he  was  laying  the  foundaDon  for  what   over  lower  prices  and  they  are  fairly  
it  was  one  of  the  weakest  players  in  
would  go  onto  become  the  world’s   quality  conscious,  thereby  eliminaDng   the  highly  compeDDve  German  
largest  public  corporaDon  with   the  possibility  of  them  switching   market.  In  the  American  market,  Wal-­‐
operaDons  in  more  than  a  dozen   brands  for  lower  prices.        The  Wal-­‐
mart  is  strictly  a  non-­‐union  player,  
countries.  Bulk  purchases  ensured   mart  stores  in  Korea  were  not   something  that  it  tried  to  replicate  in  
that  Wal-­‐mart  could  deal  with   strategically  well  posiDoned  in  terms  
Germany  without  any  success  and  
manufacturers  directly  thereby   of  locaDon  and  as  a  result  could  not  
ended  up  being  branded  as  a  “union  
making  it  possible  for  it  to  woo  the   generate  sufficiently  large  customer   basher”.  It  could  not  live  up  to  its  
American  public  by  adopDng  the   traffic.  Also,  Customer  service,  which  promise  of  offering  the  lowest  prices  
EDLP  (Every  Day  Low  Price)  strategy.   is  a  strong  purchase  driver  in  the  case  
in  the  highly  compeDDve  German  
It  was  able  to  replicate  its  success  in  a   of  Korean  consumers,  is  something   retail  sector  which  operates  on  the  
number  of  countries  worldwide  with   that  Wal-­‐mart  did  not  offer.  Thus,  
concept  of  ultra  low  profitability.  
two  notable  excepDons  namely   Wal-­‐mart  could  not  sustain  sales   Also,  it  managed  to  garner  a  lot  of  
Germany  and  South  Korea. large  enough  for  it  to  conDnue   negaDve  publicity  because  of  its  
operaDng  in  the  country  and  had  to  
infringement  of  a  large  number  of  
Wal-­‐mart  suffered  losses  to  the  tune   make  an  early  exit. German  laws.  It  can  be  concluded  
of  $10  million  in  South  Korea  in  the   that  Germany  was  not  the  ideal  
year  2005  and  as  a  result  had  to  exit   Germany  is  another  country  where   market  for  Wal-­‐mart  to  launch  its  
the  Korean  market  by  selling  its   Wal-­‐mart’s  operaDons  ended  up  in  a   operaDons  because  it  already  had  a  
stores  in  May  2006.  This  failure,  in   major  fiasco.  A]er  an  eight  year   large  number  of  well-­‐established  and  
part,  can  be  aXributed  to  its  inability   struggle  in  the  German  market  it  had   highly  compeDDve  players  in  the  
to  understand  the  buying  preferences   exit  by  selling  its  85  supercenters  to   organised  retail  sector.    
of  the  Koreans.  Korean  consumers   Metro  AG.  It  had  entered  the  country  

[2]
 Rise of Retail in China
- Atreyi Bose

When  we  think  of  China  we  typically   These  global  giants  have  led  the  way   compeDDve.  Chinese  consumers  are  
think  of  export  with  all  the  cheap   in  opening  hypermarkets  across   increasing  brand  aware.  But  with  
Chinese  goods  flooding  the  market.   China.  As  this  form  of  retail  has  seen   growing  choices  they  are  not  brand  
However  with  the  global  economic   great  success  in  the  Der-­‐1  ciDes,   loyal  and  this  has  been  a  challenge  to  
slump  affecDng  demand  from   hypermarkets  are  now  being  built  in   the  retail  industry.
Western  markets,  the  Chinese   smaller  ciDes  as  well.  However  other  
government  is  now  looking  to  boost   types  of  stores  such  as  supermarkets,   Dissimilar  consumpDon  paXerns  in  
domesDc  demand  in  order  to  shield   departmental  stores,  convenience   the  domesDc  market  are  also  another  
itself  from  export  dependency.  The   stores  are  sDll  fragmented  and   key  challenge  faced  by  retailers.  
retail  appeDte  of  the  Chinese   dominated  by  domesDc  players.   China  is  the  fastest  growing  market  
consumer  has  also  grown  with  rise  in   Foreign  retailers  are  focusing  on   for  luxury  premium  goods.  Wealthy  
income  and  urbanizaDon.  The   discount  stores  in  Der-­‐1  ciDes  with   consumers  in  China  are  typically  20  
Chinese  middle  class  will  account  for   Carrefour  starDng  the  trend  in  2003. younger  than  their  counterparts  
33%  of  the  populaDon  by  2020,  and   across  the  world.  But  China  also  has  a  
60%  of  the  urban  populaDon  by  2016.   Only  5%  of  China’s  retail  currently  has   vast  segment  of  the  market  which  is  
This  middle  class  is  expected  to  drive   foreign  investment.  This  is  also  due  to   extremely  price  sensiDve  and  looks  
the  story  of  retail  in  China. China’s  government  policy  which   for  value  in  purchases.
lacks  clarity  as  well  as  changing  
With  the  signing  of  WTO,  foreign   regulaDons  to  suit  domesDc  retailers.   By  2015  China  is  supposed  to  be  the  
investment  in  the  retail  sector  was   The  Chinese  government  has  recently   third  largest  consumer  market,  a]er  
opened  up  in  China  from  2001  over  a   implemented  policy  decisions   USA  and  Japan.  It  already  houses  25  
period  of  5  years.  This  paved  the  way   requiring  most  enterprises  to  be   of  the  world’s  largest  retailers.  
for  giants  like  Carrefour,  Wal-­‐Mart,   majority  Chinese  owned.   Learning  from  the  successes  of  the  
Tesco  to  build  stores  across  the   retail  story  in  India  and  avoiding  its  
naDon.  These  companies  have   The  domesDc  retail  market  in  China   mistakes  would  be  criDcal  to  the  
modernized  the  retail  sector  in  China   needs   consolidaDon.   M any   o f   t he   success  of  Indian  retail.
through  well  managed  logisDcs  and   brands  are  regional  and  need  to  build  
technology. a  naDonal  presence  in  order  to  be  
Source:  BRIC  Spotlight  Report  –  Retail  Sector  in  China:  The  Next  Big  Thing?

[3]
 Retailing to the Ten Rupees Man
- Aditya Garg

There   has   been   a  lot   of   buzz   about   development.   The  per  capita  income   and  purchase  of  ferDlizers,  seeds  and  
the   entry   of   global   retail   giants  such   in  rural  India   has  grown  by   over  50%   tractors.  
as   Walmart,   Carrefour   and   Metro   in   the   last   10   years.   The   paXern   of  
Cash   and   carry   in   the   Indian   Retail   employment   in   rural   India   is   also   Various   corporate   houses   have  
Space.   Most  of   the  din   is  about   how   seeing   a   gradual   change.   With   the   approached   rural   retailing   along  
the   entry   of   these   ‘Needle  to   Home   conversion  of  rural  places  to  SEZs  and   these   lines.   ITC   has   launched   the  
theatre   system’   hyper   markets   is   development   of   industries   in   rural   country's   first   rural   mall   'Chaupal  
going   to   transform   the   face   of   areas,  more  rural  people  are  involved   Sagar',   offering   a   diverse   product  
shopping   experience   in   urban   India.   in  manufacturing   sector.  This  has  led   range   from   FMCG   to   electronic  
But   the   Indian   retail   story   is   not   to  higher  disposable  income.  Besides,   appliances   and   automobiles.   Godrej  
restricted  to  the  metros  and  Der   one   the  urban-­‐rural  road  connecDvity   has   Agrovet  is  in  the  process  of   seqng  up  
ciDes.   Various  corporate  groups  such   also   shown   improvement   which   has   1,000   Aadhar   stores   across   rural  
as   ITC,   Godrej,   Aditya   Birla   and   led  to  easier  retailing  to  rural  places.   India.   These   stores   sell   FMCG  
Mahindra   groups   have   aggressive   products,   ferDlisers  and   services   like  
plans   to   capture   the   rural   retail   In   order   to   understand   retailing   to   banking,   insurance,   pharmacy   and  
market,   which   is   expected   to   be   rural   India,   it   is   important   to   postal   services.   DCM   Hariyali   Kisaan  
around   half   of   the   overall   domesDc   understand   that   how   are   its   needs   bazaar   will   provide   access   to   bank  
retail   market   of   around   350   billion   different.   Contrary   to   popular   financing,   tractor   purchase   and  
dollars.  All  these  retailers  are  vying  to   percepDon,   rural   consumers   can   electronic  shops.
catch   the   aXenDon   of   an   average   prove  to   be  brand  loyal   provided  the  
right  value  is  provided   to   them.  They   The   much   touted   boom   in   Indian  
rural  consumer  whose  daily  earning  is  
do   not   want   swanky   gadgets,   retail   space   is   not   just   restricted   to  
barely  10  rupees.  
expensive  apparel  and   food   joints   in   urban   India.   It   is   not   too   difficult   to  
The   promise   shown   by   the   rural   these  retail  outlets,  rather  a  one  stop   imagine  how  these  rural  retail  outlets  
market   is   on   account   of   various   desDnaDon   for   all  their  needs  would   will   change   the  way   the   ten   Rupees  
factors  such  as  growing  aspiraDons  of   do  the  trick.  Thus  we  see  rural  retail   man  shops  for  his   groceries   and  farm  
rural   India,   access   to   satellite   outlets   acDng   as   a   hub   providing   needs.  
television   leading   to   more   informed   mulDtude   of   services   such   as   farm  
buyers   and   the   overall   economic   produce   insurance,   bank   financing  

[4]
 Private Label Brands
- Rahul Anand

Private   label   brands   are   retail   brands   fully   owned,   From  the  retailers’   perspecDve,   the  factors  which   have  
managed   and   controlled   by   the   retailer.   Earlier   these   given  a  high  boost  to  private  label  brands  (PLBs)  are:  -­‐
brands   were   considered   as   low   cost   alternaDves   to  
manufacturer   brands  and   were  the   hot   shot   products   1.   Change   in   consumers’   percepDon   towards  
for   a   recession   period   or   for   people   who   could   not   private   labels   –   Decrease   in   perceived  
afford  the  manufacturer  brands.   difference   between   private   label   and  
manufacturer  brands.
Owing  to  their  lower  prices  to  the  customers  and  higher  
margins  to  the  retailer,  these   brands  were  a  profitable   2.   Retailers’   gaining   higher   margins   from   private  
enDty  to  have  in  a  retail  chain.   labels.

However  over  the  last  4  decades,  the  retail  chains  have   3.   Private   labels   used   as   a   tool   to   improve  
grown   big   and   have   gained   the   trust   of   consumers.   consumers’  percepDon  of  the  retail  store  –   This  
Consumers’   percepDon   about   the  private   label  brands   improved   percepDon   enables   the   retailer   to  
have  changed   from   being   a  low   price  alternaDve   to   a   bring   the  customer  more  to   the     store   and   in  
high   quality   variety   offering   brand   provided   by   the   the   process   gain   a   greater   share   of   his/her  
retailer. wallet.  Research  shows  that  private  label  loyalty  
leads  to  store  patronage.

[5]
Specific   (addiDonal)   drivers   of   PLBs   in   the   Indian   retail   a.   For   instance,   an   Apollo   stamped   nail  
scenario:  -­‐ cuXer   would   appeal   to   me  as  much   as  
any   other   one.   This   is   a   case   in   which  
1.   In  India  modern  retail  has  set  its  ground  almost   the   product   is   not   highly   a   brand  
at  the  same  Dme   as  have  the   big   manufacturer   acknowledged   one.   In   such   categories,  
brands.   This  makes   it   possible   for   the   modern   the  retail  chain  itself  creates  a  brand.
trade   retailers   to   establish   themselves   as   a  
brand  as  big  as  a  manufacturer  brand. b.   Consider   the   Archies   case   again:   one  
more   reason   for   going   for   an   Archies  
a.   For   example   consider   a   box   of   chocolate   gi]   pack   might   be   variety  
chocolates   under   the   Archies   brand.   seeking   behavior   shown   by   the  
When  one   is  gi]ing   a  chocolate  box,   he   customers.   In   a   not   so   cluXered  
might  consider  this  opDon  as  good  as  a   category,   private   labels   provide   new  
Cadbury   CelebraDons   or   a   Ferrero-­‐ branded  opDons  to  the  customers!
rocher.   This  is  because  he  might  want  to  
gi]   a   premium   chocolate   to   his   Private  labels   offer   aXracDve  choices  in  various   product  
colleague   and  Archies  fits  that  premium   categories  like  apparels,  fast  food  etc.  With  private  labels  
image  as  much  as  a  Ferrero-­‐rocher! forming   40%   sales   of   Wal-­‐Mart   and   around   50%   for  
Tesco  (   approximately   USD   162  billion),   the  stage   is   set  
2.   There   are   several   product   categories   in   our   for   the  Indian   retail   to   witness   a  vast   range  of   private  
country,   where   branded   variety   is   limited.   In   label  shopping!
such  cases  the   chances  of   private  labels  gaining  
acceptance  is  higher.

[6]
 ZARA!
-Toshe Prasad

So  we  all  know  that  retail  margins  are   idenDfying   trends,   and   puqng   it   in   beneficial   effect   of   increasing   its  
high  when  it  comes  to  clothes.  But  in   store  within  30  days.  Zara  boasts  of   a   desirability.   In  fact,  it  is  directly  linked  
Zara’s  business  line,  when  you  are  not   chain   of   designers   keeping   a   sharp   with   profits   as   there   is   a   lower  
just  selling   clothes   but   fashion,   your   eye   for   the   hoXest   trends   as   they   chance   of   a   product   going   out   of  
goods   are   perishable!   One   season   make  it,  and  geqng  the  latest  fashion   fashion   when   there   are   only   a   few  
with   sales   deviaDng  from  your  plan  is   way  ahead  of  its  compeDtors.  A  quick   pieces   that   sell   quickly,   and   hence  
enough  to   move  your  financials.   It  is   and   lean   supply   chain   ensures   its   there  are  no  discounts.  Ever.
very   true  that   most   fashion  supplies   pioneering  posiDon.
get   sold   at   huge   discounts   because   DiversificaDon:  So  diversificaDon  does  
they  are  out   of  season.  So  what  does   The  scarce   good  trick:  Producing   low   not   just   work   on   your   financial  
Zara   do   to   keep   its   profitability   so   quanDDes   of   its   products   gives   the   poruolio;   more   the   number   of  
high  that  its  stock  skyrockets? double  advantage   to  Zara.   For  one,  it   designs,   the   higher   the   chance   of  
reduces   the   risk   of   loss   from   a   hiqng   the  bull’s  eye.     Zara  produces  
ZARA’S  MAGIC  MANTRAS parDcular   design/product   not  picking   more   than   12000   styles   every   year,  
up  in   popularity.  On  the  other   hand,   and   with   supplies   to   stores   twice  
Short   lead   Dmes,   leading   to   a   fresh   it  creates  an   arDficial   scarcity   of   the   every   week,   every   store’s   collecDon  
supply   of   fashion!  Zara   specializes   in   product,   which   has   the   singularly   looks  brand  new  every  4  days!  

[7]
COUNTER-­‐INTUITIVE  ZARA PredicDng   fashion   can   be   a   very   However,   it  has  not  been  immune  
erraDc   process,   and   Zara’s   shi]   to   to  criDcism.   Several  designers  are  
In   order   to   achieve   its  lean   machine  
reacDng   to   changes  in  fashion  rather   of   the   opinion   that   Zara  typically  
structure,  Zara  has  taken  some  rather  
than   trying   to   predict   it   gives   it   the   makes  rip-­‐offs  of   the  creaDons  of  
counter-­‐intuiDve  steps-­‐   differing  from   certainty   that   no   other   has.   Zara   is   the  top  line  of  designers,   thereby  
the   industry   in   general.   Firstly,   while  
hence,  never   wrong.  Coupled  with  in-­‐
most   compeDtors   rely   heavily   on   spending  much  less  on  design  and  
house   producDon,   these   synergisDc  
outsourcing   producDon   to   countries   sDll   geqng   creaDve   styles.   But  
ideas   help   Zara   execute   it   Mantras.  
it   is   cheaper   in   (typically   Asian   t h e n ,   Z a ra   c l a i m s   t o   o n l y  
E x te n s i ve   u s e   o f   i n fo r m aD o n  
countries),   Zara  keeps  all   producDon   technology   further   helps   keeping   ‘interpret’   fashion,   and  who  is  to  
to   itself.   Despite   the   much   higher  
extraneous  costs  at  bay. differenDate   between   creaDon,  
costs,  it  succeeds  in   what  its  business   interpretaDon  and  inspiraDon!?
model   requires-­‐   geqng   complete   VIEW-­‐COUNTERVIEW
flexibility   and  control.   Secondly,   Zara  
Editors:
has   not   employed   the   tradiDonal   There   is   no  debate  that   Zara  has   Saurab Vivek Nair
method   of   predicDng   the   fashion.   been   successful   as   a   brand.   Srikanteaswaran T K
Ayshwarya R. Vikram

[8]