X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Retail: The evolution... - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • Jun 6, 2007

    Retail: The evolution...

    There are four different phases in the evolution cycle namely (1) the new entrant phase leading to the introduction of products and services (2) the strong growth phase led by consumer demand (3) the mature stage, and (4) the saturation to decline stage that leads to the search of new avenues to explore. We shall take a look at this evolution cycle in context of the retail sector.

    The first stage - Introductory stage: The new entrants create awareness about products manufactured, sold and services rendered by them and raise consumer expectations. In this stage, consumers are typically introduced to new products developed and services offered, which triggers consumption. During the introductory stage the primary goal is to establish markets and build up demand. Hence, during this stage firms incur higher set up costs, which coupled with low sales volume, makes it a period of negative profits.

    The second phase - Growth stage: This is the period of rapid revenue growth as customers become aware of products. This leads to strong growth led by strong demand by the consumers. During the growth stage, the goal is to increase consumer base, cater to customer preferences and increase sales and profitability.

    The third phase - Mature stage: This is the most profitable stage. While sales continue to increase there is a slowdown in the growth rate. At times, the competition is immense at this point due to which product differentiation becomes a problem. Competition may lead to a decrease in market share or stable to low prices. Intense competition also forces suppliers to invest in back-end operating efficiencies. Thus, during this stage the primary goal is to maintain market share and extend the life cycle.

    The fourth phase - Saturation to decline: This is the stage where sales decline as the markets become saturated, customer preferences change and technology becomes obsolete. This is a stage where profitability is generally impacted on account of declining sales or no growth and high costs. Firms who have achieved strong brand loyalty may be able to maintain profitability or at least are not affected as compared to their peers. Thus, this is the stage where firms generally discontinue the products or explore new markets by way of inorganic growth opportunities.

    In the same way organised retailing in most economies especially the developed economies have passed through these 4 different phases and have reached a saturation point. This has led them to scout for new opportunities in the developing economies where organised retailing is at a burgeoning stage.

    Although retailing has been around for millennia, the organised retailing concept evolved in India when the country began opening up its economy. Organised retailing in India entered the first phase of evolution during the 1980s as awareness among consumers was created by the textile sector with the set up of retail chains e.g. Bombay Dyeing, Raymond. However, they were not the pure form of retailers as they engaged in manufacturing and retail sales. But in the latter half of the 1990s, the pure retailers, who were not interested in manufacturing, entered the markets introducing the concept of discount stores in India. Organised retailing in India is developing with the emergence of modern formats such as department stores, discount stores, supermarkets, convenience stores, fast food outlets, speciality stores, warehouse retailers and hypermarkets. The organised retailing gained momentum as retail stores or retail chains were built such as Crossroads, Food World, Planet M and the like.

    Currently, in India, the organised sector is entering the second phase of evolution as customers have been introduced to the concept of increased availability of shopping opportunities provided by the retailers. Indian consumers are becoming more demanding with rising income levels, changing lifestyle, increasing population of working women, new job opportunities in emerging services sector such as IT enabled services and shift in the composition of the Indian population (the age group of 20-49 i.e. the working population with high purchasing power).

    As the sector enters the third phase namely the mature stage, players will have to strengthen the supply chain management, as quick response to changing customer preferences will be the key growth driver. Excellent retail supply chain management revolves around understanding and balancing three key dimensions of availability, inventory and cost, while reaching out to end users. Managing these trade-offs efficiently can result in supply chains that will improve business performance. Apart from this, retailers may also need to resort to cost cutting on account of fierce competition, maintain supplier relations, provide value added services, maintain brand image, retain customer base and attract more customers. Going forward, retailers will need to concentrate more on supply chain management while expanding reach, as it will be a strategic differentiator that will provide a competitive edge.

     

     

    Equitymaster requests your view! Post a comment on "Retail: The evolution...". Click here!

      
     

    More Views on News

    Titan: Jewellery Business Lights up the Quarter (Quarterly Results Update - Detailed)

    Aug 10, 2017

    However, growth at these levels are unlikely to be sustainable.

    Avenue Supermarts Ltd. (IPO)

    Mar 7, 2017

    Equitymaster analyses Initial Public Offering (IPO) of Avenue Supermarts Limited.

    Titan: Beating the Demonetisation Blues (Quarterly Results Update - Detailed)

    Feb 14, 2017

    Titan Industries declared its results for the third quarter of financial year 2017 (3QFY17). While topline growth was 14.7% YoY, net profit grew by 13.1% YoY during the quarter. Here is our analysis of the results.

    Titan: Margin Improvement Saves the Day (Quarterly Results Update - Detailed)

    Nov 16, 2016

    Titan Industries declared its results for the second quarter of financial year 2017 (2QFY17). While topline growth was flat, net profit grew by 23.5% YoY during the quarter. Here is our analysis of the results.

    Titan: High Gold Prices Spoil the Show (Quarterly Results Update - Detailed)

    Aug 9, 2016

    Titan Industries declared its results for the first quarter of financial year 2017 (1QFY17). The company reported 3.3% YoY increase in sales, while net profit fell by 16.3% YoY during the quarter.

    More Views on News

    Most Popular

    This Small Cap Can Drive Chinese Players Out of India (and Make a Fortune in the Process)(The 5 Minute Wrapup)

    Aug 17, 2017

    A small-cap Indian company with high-return potential and blue-chip-like stability is set to supplant the Chinese players in this niche segment.

    The Most Important Innovation in Finance Since Gold Coins(Vivek Kaul's Diary)

    Aug 10, 2017

    Bill connects the dots...between money and growth, real money and real resources, gold and cryptocurrencies...and between gold, cryptocurrencies, and time.

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    Bitcoin Continues Stellar Rise(Chart Of The Day)

    Aug 10, 2017

    Bitcoin hits an all-time high, is there more upside left?

    5 Steps To Become Financially Independent(Outside View)

    Aug 16, 2017

    Ensure your financial Independence, and pledge to start the journey towards financial freedom today!

    More
    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407
     

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms

    COMPARE COMPANY

    MARKET STATS