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Unit 2: Structural Change in Retail Environment

According to NCAER, the 9.2 crore strong Indian middle class (whose annual income ranges Notes
between ` 2 lakh and ` 10 lakh) is expected to cross 15.3 crore by 2009. Undoubtedly, such healthy
trends corroborate that the retail sector boom is here to stay in India on sustained basis.
The Indian government allows 51 per cent Foreign Direct Investment (FDI) in single brand
retailing owing to which foreign multinationals like Reebok and Louis Vuitton can now operate
directly in the Indian markets instead of going through franchise route of earlier.
While Indian telecom major Bharti is all set to foray in the retail segment, a number of companies
from the US, England and Australia have laid plans to sell their products directly at the retail
outlets. As many as 12 Australian food producers have tied up with India-based distributor AB
Mauri for the same. World’s largest retailer Wal-Mart is also planning ambitiously to trade in
India. With this there lies an exciting times ahead for the Indian retail markets.

Toy Retailing

The toy retailing industry in India is poised for growth in leaps and bounds due to the
demographics of the country. In addition, the increase in purchasing power and greater propensity
to spend would lead to much greater growth in the industry. However, as is seen in developed
markets, toy retailing has not developed as a speciality retail format in spite of the development
of the merchandise category. In the list of the top ten toy retailers in the U.S. until very recently,
Toys R Us and KB toys were the major speciality toy retailers, whereas other store formats like
hypermarkets were the largest sellers of toys.
Industry analysts estimate the growth rate of the Indian toy market at around 15%. This figure
seems set to rocket upwards with the entry of speciality retailers who are targeting children. At
the forefront of this retail wave is Toys Kemp, an offshoot of Ravi Melwani’s Kemp Fort group.
Melwani is out to create India’s answer to Toys R Us, and is targeting a network of 500 stores in
the next two years. He has adopted the franchise route for this process, and has already set up
over 15 stores across several cities including Chennai, New Delhi, Bangalore, Mumbai, Indore
and Nasik. Moreover, on the drawing board are stores in Hyderabad, Bhubaneswar,
Vishakhapatnam, Pune and Ahmedabad, in addition to a 15,000 sq ft Toys Kemp store in New
Delhi. Toys are first tested at the 50,000 sq ft toy store at Kemp Fort in Bangalore. The retailer
tests around 100 toys each week and only around five make it through. Kemp Fort further
distributes it to the franchisee stores. Chennai-based Jus! Kidding, a unit of Kids Mart India (Pvt)
Ltd., which in turn is owned by real estate developer Mangal Thirth Estate is not an exclusive toy
store, toys are one of its major product lines.

The toy industry is a highly seasonal industry. A relatively small number of products accounts
for the bulk of industry toy sales. In addition, the identity of the top selling toys in the industry
changes substantially from year-to-year and is hard to predict. The strong seasonality in toy
sales and the hit-driven nature of demand contribute to frequent divergences between anticipated
and realised demand. The supply of toys, however, generally does not respond rapidly to
unanticipated demand due to the relatively long delivery cycles resulting from overseas
production and water borne international shipments. In view of this situation, at the retailing
end, the importance of supply chain management becomes important. Specifically, logistics – a
combination of inventory management and transportation becomes crucial. Management of
this aspect of marketing ensures that the service levels are high for the store. Merchandise
management also depends on the same. Stringent product control measures would have an
impact on the positive development of branded toys. This would help retailers, if in the future
there were a greater sensitiveness to issues of safety of toys.

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