Retail: The evolution... - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Retail: The evolution...

Jun 6, 2007

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

SPENCERS RETAIL 2020-21 Annual Report Analysis (Annual Result Update)

Nov 18, 2021 | Updated on Nov 18, 2021

Here's an analysis of the annual report of SPENCERS RETAIL for 2020-21. It includes a full income statement, balance sheet and cash flow analysis of SPENCERS RETAIL. Also includes updates on the valuation of SPENCERS RETAIL.

SORIL INFRA RESOURCES 2020-21 Annual Report Analysis (Annual Result Update)

Nov 18, 2021 | Updated on Nov 18, 2021

Here's an analysis of the annual report of SORIL INFRA RESOURCES for 2020-21. It includes a full income statement, balance sheet and cash flow analysis of SORIL INFRA RESOURCES. Also includes updates on the valuation of SORIL INFRA RESOURCES.

AVENUE SUPERMARTS Announces Quarterly Results (2QFY22); Net Profit Up 110.4% (Quarterly Result Update)

Oct 20, 2021 | Updated on Oct 20, 2021

For the quarter ended September 2021, AVENUE SUPERMARTS has posted a net profit of Rs 4 bn (up 110.4% YoY). Sales on the other hand came in at Rs 78 bn (up 46.8% YoY). Read on for a complete analysis of AVENUE SUPERMARTS 's quarterly results.

Avenue Supermarts Hits Record High. Marketcap Tops Rs 2.75 Lakh Crore (Views On News)

Sep 18, 2021

Despite near term challenges, Dmart shares have stayed resilient and scaled new highs. Read on to know why...

Devyani International Shares Make a Strong Debut. Lists at 56% Premium (Views On News)

Aug 16, 2021

Devyani is well placed to benefit from growing industry trends as it has a strong portfolio of highly recognised global brands.

More Views on News

Most Popular

Infosys vs TCS: Which is Better? (Views On News)

Nov 26, 2021

In the post pandemic era, the top two IT companies in India are fighting to capture the growing demand for IT.

This Multibagger Stock Zooms 20% After Dolly Khanna Buys Stake (Views On News)

Nov 24, 2021

Shares of this edible oil company zoomed over 50% in three days after ace investor bought around 1% stake.

Don't Sell these Stocks if the Market Falls (Profit Hunter)

Nov 17, 2021

These are the 3 types of stocks that you should not sell in a market crash.

How to Find Your Next 10-Bagger in this Market (Profit Hunter)

Nov 19, 2021

The #1 make or break factor in your portfolio you shouldn't ignore.

6 Popular Stocks that Turned into Penny Stocks (Views On News)

Nov 27, 2021

A look at popular stocks that crashed big time and never recovered, i.e. which went from 'Multibaggers to Multibeggers'.

More

Become A Smarter Investor
In Just 5 Minutes

Multibagger Stock Guide 2022
Get our special report Multibagger Stocks Guide (2022 Edition) Now!
We will never sell or rent your email id.
Please read our Terms

COMPARE COMPANY

MARKET STATS