AN UNDERSTANDING OF HARD AND SOFT DISCOUNTERS DURING BOOM AND RECESSIONARY PHASE Saba Azeem, Indian Institute of Technology, Kanpur, INDIA R.R.K.Sharma, Indian Institute of Technology, Kanpur, INDIA ABSTRACT Organizations react differently to the changes that occur in the environment that they compete in. Their survival depends on how efficiently they align their strategy to the changes occurring around them. This paper examines the change that occurred in the retailing sector as a result of change in the external business environment and how it brought about an Introduction and consecutive growth in the hard and soft discount retailers. This paper deals with the conceptual exploration of hard and soft discounters and discusses their strategies and explores the reasons for their growth and success. It discussed the strategies of the hard discounters as compared to the other formats of retail and also suggests some future research in terms of changing business strategies of discounters owing to the change in the external business environment. Key Words: External environment, Discounters, Hard and Soft discounters, Retailing Formats 1. INTRODUCTION Retailing States back to the advent of human civilization, when man traded his surplus produce to others; he was involved in a certain kind of retail activity, where he was in direct touch with the person consuming whatever he sold. We have seen how retail has emerged from neighbourhood stores to hyper markets and super markets. New and innovative formats of retailing are coming up these days. This is the best example of change resulting out of the changing external environment in the form of changes in consumer preferences, government regulation, technologies and economic conditions. Today we can classify retailing into shopping malls, convenience stores, departmental stores, dollar stores, e-tailing and the likes. Retailing has been one of the fastest growing sectors and has been showing a very promising rate of growth all over the globe. A large number of retailers have been in the business with their own different formats. Retailing today has become one of the major contributors to the GDP of some of the major economies. In this fast changing environment and an era of cut throat competition, survival for business is getting difficult day by day. It is evident from a large number of retailers shutting down or suffering losses because of their inability to compete in the uncertainty and increasing cost of operations (Business Week, 2004) (Datamonitor, 2008). The ones that are not able to adapt are dying. Different stores are adopting different strategies like mergers, acquisitions and finding a niche to survive (Bergmann, 1996). However the changing business environment and consumer tastes also provides opportunities for growth as well. This is evident from the growth of discounters especially the deep discounters that emerged as a result of change in the economic conditions following the world war and the financial crisis (Burt & Sparks, 1994) 2. THE EMERGENCE OF DISCOUNTERS The retail sector has ever been changing. Discounters emerged as a result of crisis following the World War II (1939 – 1945), and the accompanying hardships in the form of rising prices and demand, that gave an opportunity to the retailers to diversify into a new format of doing business that not only provides the customers with the best bargain ever but at the same time delivered value to them as well. This new breed of retailers came to be known as ‘Discounters’. The discounters continued to grow rapidly during the 1950s and a large number of existing and new businesses houses eyed this potential and began to expand rapidly into the format. (Colla, 1994) There are a large number of reasons for the growth of discount retailers. The first being the after effects of the second world-war. It left a lot of families in jeopardy with no money and resources. This was followed by a changing economic background of the customers when the economy started to recover from the great depression, this was characterised by an increase in the disposable income of the consumers and better offerings from the retailers. Then there were operational and corporate changes in the organizations. People began to change the way they consumed (Burt & Sparks, Structural change in grocery retailing in Great Britain: a discount reorientation, 1994). After a span of a decade or two the economy was again in the clutches of economic crisis that again reoriented the customers towards discounters.