The concept of "extension first, efficiency later" appears to be under scrutiny, as some retail giants are scaling back their plans for expansion despite healthy profit margins. The current retail market is characterized by intense competition among players, requiring even well-established stores to compete actively to retain or enhance their market share.

While there was once enthusiasm among retailers to expand the size of their retail formats and establish a nationwide presence, modern retail marketing trends emphasized the grandeur of stores, the number of cities covered, and the rapid expansion of retail formats. However, the trend is taking an unexpected turn as retailers are now giving less priority to the previously emphasized expansion strategy.

The retail 'u-turn' is driven by market saturation, regulatory constraints, and a lackluster market with stagnant growth, prompting a reevaluation of the focus and business strategy. Retailers are realizing that expansion, once a much-discussed strategy, may not be as essential as previously thought. They recognize that expanding into additional space does not necessarily guarantee increased sales and comes with additional costs, including higher rent, increased manpower, utility expenses, and inventory-related costs.

Issues associated with 'going big' in terms of expansion include grappling with various fraud challenges. As organized retail matures, traditional shoplifting practices evolve and take on new variations, posing a threat to expanded retail formats. Despite implementing control measures such as RFIDs, sensors, and security measures, retail fraud remains a concern, accounting for an estimated 3-4% of total sales, according to a survey.

Retail fraud manifests in various forms, including return fraud, where customers attempt to exchange products not purchased from the store. High-value items like apparel are particularly susceptible to this type of exchange. Sweethearting involves staff at the billing counter billing a high-value item for a lower-cost product to a partner posing as a customer. Additionally, tactics like slip-and-fall incidents, where customers deliberately fall and sue retailers for negligence or claim missing valuables, are becoming more prevalent, particularly in the United States.

Retailers therein, are in a situation to increase their emotional bonding with the consumers. They need to focus on their core business, and in terms of merchandising and operations. Retailing is a long gestation business, and needs heavy investments in the initial years. The managing costs involved in the scattered retail premises will minimize the profit margins of the retailers. The top level management will have to spend significant time travelling around and taking care of the business.


Retailers who have stepped in the business in a big way are likely to meet with serious challenges in the long run. Stores such as Reliance and Future Group have opened more number of formats, of which some of them have shut down and only a few are operating only at limited locations.


Retailers are withdrawing their expansion plans, only with an intention to grow. To them shrinking is only, a positive form of growing.

References:


1.      Images Retail, Dec 2010.

2.      Economictimes.indiatimes.com

3.      Businesss-standard.com

4.      Smartinvestor.in