elk asia pacific journal of marketing and retail management issn · pdf file ·...

ELK ASIA PACIFIC JOURNAL OF MARKETING AND RETAIL MANAGEMENT

ISSN 0976-7193 (Print) ISSN 2349-2317 (Online) Volume 2 Issue 1, January (2011)

………………………………………………………………………………………………………………………

GROWTH OF RETAIL IN INDIA

Richa Varma

I.T.I. Dadri,

Dharamshala, H.P.

ABSTRACT

Key words: Retailing, Shopping centres, Consumer behaviour, India.

Introduction

In India, organized retailing is undergoing radical transformation. There is a continuous increase in the number

of retail chains in the country. It shows that organized retailing in India is coming up as a profitable industry and will

grow tremendously in the future. Under the life cycle of retailing business, Indian customers are demanding various

products and average retail formats. India has got $180 billion prospect and till date only 2% of it has been met. However,

there are possibilities that this will increase by 20%, by the end of this decade.

In fact, organized retail is moving from novel experience to innovative scale as shown in Figure 1.

Source: HSBC/Research Figure 1: Organised retail scene

The research presented here aims to build a picture of the changes in retail taking place in India. India is

poised to become a retail power house. The paper looks at the changing scene in the retail sector in view of

many MNCs and large industries entering into this segment. Data were drawn from industry sources which

included national and international published sources from 1993-2006. The findings presented show that malls

in 2006 are more developed in the North and West part of India. Food, groceries and apparel purchase by

customers contributed to 52 percent. On average 75 percent of customers spend about 1-3 hours in the mall. Malls

with multiplexes such as cinema theatres, food courts, and play places for children are becoming the centre for family

outings. Small retailers have improved their service to cater to Indian consumers. Credit limits and home service are

helping them to hold on to their customers. Retailing focus is changing towards satisfying the different hierarchy of

needs of customers. All are from Indian perspectives which perhaps limit its usefulness elsewhere in the world.

A very useful source of information and review of this scenario which should help other retailers across the

world, especially in developing economies, to face big giants more aggressively and do better. This paper fulfils

an identified information/resources need and offers guidance to small retailers



………………………………………………………………………………………………………………………

The report declared by McKinsey & Co. in collaboration with Confederation of Indian Industry (CII), by 2010,

the retailing industry of India can generate 300 billion/year. Increase in population and in disposable incomes is offering

scope to this boom. Apparels and household groceries are recognized as the basic drivers for the growth of organized retail

industry. The current apparel segment is $1.8 billion. It will grow up to 9.5% per annum within next 3 years. The sector

of food retail is considered as the sunrise sector. There are possibilities that the food retail will grow by $1.6 billion within

next 5 years. This determines that big players have great scope in India. A number of factors such as income growth,

changing demographic profile due to more

Various factors like demographical changes due to urbanization, income growth and socio-economic

environment; have great impact on the current retail scene. Indian retail has been rated as the virgin territory or marketing

explorers. This is important in respect to the huge middle class population added by the disposable income in 25-35

years of age group. Goldman (2005) predicts that Indian economic growth will exceed Chinese status by 2015. It has been

assessed that in India, 95% more than a total of 12 million retail outlets within less than 500 square feet. The retail

growth by 2006 this increased up to 400 million square feet. It is in the figure 2, that we can see the share of Indian

organized retailing in comparison to other South Asian countries. Data show that about 21 million HR are utilized in

the retail industry. Under Kearney study (2006), Global Retail Development Index counted India to be in the fifth

position among 30 developing countries. The results further show that in foreign direct investment for retail

industry; soon India will take over China and Russia.

It is appropriate to declare that organized retail industry is playing a vital role in increasing nation’s

GDP. It also offers scopes for every kind of skilled employment. Countries like UK, USA, Mexico, Thailand, Brazil,

Hong Kong Malaysia, Dubai, Sri Lanka, and China exemplify this status well. The retail sector in India is still not

coming up as “industry.” This sector has got 12 million and more retail outlets. With highest retail density on

global scenario, India still has got ownership, that is more independent and basically owner managed shops.

Various traditional retail formats can be seen in the Indian retail market. These are identified as kirana stores those

only possess the basic groceries. Street carts, kirana stores and pavement shops exemplify current retailing format,

whereas public distribution system like weekly markets, kiosks, etc. too exists simultaneously. These formats are

unique to India and are preferred from primitive times.

Source: HSBC, India Retail Reports 2005 – KSA Technopak, E&Y and Rocsearch

Figure 2: Comparative penetration of organized retail

The modern large-scale formats like department stores, specialty stores, supermarkets, chain stores,

hypermarkets, discounters and factory outlets are contrast to the traditional format. Emergence of malls has



………………………………………………………………………………………………………………………

transformed the retailing environment in India and very possibly will soon bring in organized retailing on the

main track format.

As against the popularity of specialty stores, malls are gaining 90% of the total retail development in

the future. It will further grow at the rate of 35 to 40% per annum within next five years. According to industry

experts, as customers adopt retail culture, they will also push in the phenomenal growth of mall market. Many metro

cities like New Delhi, Mumbai, Bangalore and Chennai; with over two million populations, have absolute potential

for malls set up.

Amalgamations of retail marketing with entertainment centres are offering significant market trends. In the

recent past, number of shopping malls has erupted predominantly, and is growing to add leisure activities in the

future. Great numbers of multiplexes are added to the retail malls. These are comprised of facilities like video game

parlours, food courts, cinema halls, books stores and theatres.

Indians malls are unique as they are in combination with high-value outlet along with mass brands. On the

contrary, in overseas, the malls either prefer to cater mass category or some boutique type collections. As for

instance, in a city like Mumbai, we can see three types of malls.

Though malls are the basic sources for creating organized retail in future, yet their sustainability is still under

doubts. The concern will get under value proposition of mall in holding over market, in respect to the increasing

levels of competitions. Though lots of malls are coming up in the country, yet only those will sustain that can offer

the customers with value-for-money proposition.

India has got 11 retail shops against every 1,000 persons. This makes it a country with highest shop

density. That is 1 shop stands for 20to 25 families. In cities, the density is higher than other places. As for instance,

in Delhi, there are 45 shops per 1000 persons. Figure 3 shows KPMG Research (2005) results over share spent over

the urban and rural household.

Singapore, that s called shoppers’ paradise, has this kind of density. Napoleon once called UK, ‘a nation

of shopkeepers’; yet has got 5 shops for 1000 persons. FICCI declares that total retail trade in India, during 2003

was Rs. 11, 00,000 million. In fact, in India, there are many shops, but they are all very small. As shown in Figure

4, only 4% with big showrooms and retail chains, of total retail outlets are in organized sector.

Retailing is considered as the last stage for any distribution process. Retails responds to customers’

demands with the change in time. KSA Technopak (2005) declared that retail can increase to a margin of 16 to

18% of share that is $65 to75 billion; in next 5 years (Sinha, 2006). Organised retail share that are now only just in

4% will surely increase in future. Many players will enter the retail market. Soon India will have cash & carry,

hypermarkets and shopping convenience followed under organized retail format. As these will be appropriate for all

time-starved customers, it will soon get its hold. The following are the current retail formats popular in India.

Source: KPMG/Research Figure 3: Rural and urban spending



………………………………………………………………………………………………………………………

Figure 4: A nation of shopkeepers

Hypermarket

Hypermarkets are growing tremendously in India. Giant, Super Bazaar Big Bazaar and Subhiksha are the

rated as major players in this front. Patronage related to hypermarket is obviously going well. This can be

estimated as all the chain markets are having making cash profits and gaining good within a year from their launch.

It is here that the consumers get food, groceries, garments, durables, home appliances, toys, toiletries, cosmetics,

music and books at a price which is 5 to 50% lesser than the market price.

Departmental store

Next to hypermarkets are the departmental stores that are gaining immense popularity in India. In

India, people are preferring “one-stop” shopping stores. The consumers are looking for which places where they

can have all shopping needs in a very sophisticated way. For a better shopping experience, departmental stores are

offering variety, novelty and international ambience to the customers. They are also delivering convenience and

entertainment of all kinds and thus are gaining popularity.

Entry of big players in this field has changed the entire picture. RPG group Reliance, Big Bazaar, Vishal

Mega Mart, Tata’s Trent, Subhiksha and above all Wal-Mart has developed the retail sector immensely. With the

increase in competition it is important for all to realize and comprehend consumer behaviour. To exemplify, Wal-

Mart in Germany & Korea failed in spite of having strong financial backup. In the current market Pantaloon is

heading the retail industry in the fields of profitability and reach and turnover. During 1997, in Kolkata, Pantaloons

was having retail stores of 8,000 square feet and by now with 21.08 lakh square feet for 22 factory outlets; it has

grown to a level of national organized retailer.

Pantaloons

Pantaloons Retail India Limited operates Pantaloons superstores, and possess14 Pantaloon Family Stores

with 10 Pantaloon “Shoppes” all over the country. Moreover, they also are into 4 hypermarkets managed under the

brand of ‘Big Bazaar’. In terms of financial size, from the day of their first store in 1997, the company has established

itself as country’s biggest public ltd. retail giant by keeping their cost down. In current market, it has a turnover of 87

million USD. The company follows strategic plan of buying directly from manufacturers, to avoid middlemen; cash

purchases for discounts and maintenance of optimum stock management. This helps them in offering the customers

with price benefit and so is the brand. Pantaloons aim to become super retailer by 2008 with turnover of 217 million

USD. They are planning for 8 Big Bazaars (that is hypermarkets), 3 independent food stores, 4 new Pantaloon stores

and a mall in Bangalore (Pantaloon.com).



………………………………………………………………………………………………………………………

Landmark Group

Landmark Group owns 600 million USD and operates 170 stores globally. Its brand Lifestyle got into Indian

retail market in the year 1998. In 2002-2003, Lifestyle India had turnover of 29 million USD, with just five stores

under operation. As they were well experienced in running various retail chains, overseas, in India they sailed well.

Their plan to make everything available under one roof, gave them instant success. Added to this, Lifestyle possessed

own in-house label with 11% of total merchandise. Moreover, its parent company made bulk purchases in order to

sell the goods in cheaper rates to the stores. By next year, Lifestyle is planning to go for 6 more stores with an aim

to offer a shopping space 500,000 square feet. This will provide the company with a tentative turnover of US$50 million

(Landmarkretailgroup.com).

The brands of Pantaloons and Lifestyle are identified as the major players or the powerhouses in the retail

marketing platform of India. As per the data provided by the industrial sources, within a span of 12 to 18 months,

these superstores will come up with a total retail space of two million square feet.

RPG Group

The retail empire of RPG Group from South India has been recognised as the largest domain in India. It has

got more than 100 stores. These stores are inclusive of Food World that is in alliance with Dairy Farm International,

Jardine Matheson Group; Music World with a joint venture of 50-50 margins with Health & Glow (health products,

cosmetics and medicines), Dairy Farm International and Giant (the hypermarkets). The turnover of RPG’s Retail Empire

has been estimated as US$98 million and also accounts for 9% of the total group’s turnover.

K. Raheja Group

K. Raheja Group promoted the brand of Shoppers’ Stop and thereby credited the fortune of retail revolution

within India. It has been identified as the leader of entire department store format. In the current scenario,

Shoppers’ Stop has got ten stores in India. It also runs 13 bookstore chains called the “Crossword”; acquired 2

years ago. According to its future plans in next 2 years, it is aiming at own a turnover of US$66 million and will

come up with 24 new Shoppers’ Stop Stores. Moreover, by the end of this year, it is planning to have 12 more

Crossword stores. Unique operative feature of Shoppers’ Stop is its private labels, like Life, Kasish, Stop and Carrot;

that contribute 20% to its total turnover (Shopperstop.com).

Tata Group

Tata Group is of US$9.7 billion and it retail arm called Trent runs stores in Westside chain. Trent has got 11

Westside departmental stores that have been measured as 20,000 square feet each. These are in Bangalore, Pune,

Hyderabad, Mumbai, Chennai, New Delhi, Nagpur, Kolkata and Ahmedabad. With a similar kind of format these

stores are planning to offer a determined balance between price and style retailing. They are also looking forward to

establish Westside brand in towns that have got population more than 100,000 people. Trent in the future has planned to

get into food as well as grocery retailing by a hypermarket chain. Tata Coffee of Tata Group, has 32% in Barista

Coffee Company, and has targeted to get 160 espresso bars both in India and overseas.

Subhiksha, Globus, ITC Lifestyle, Cafe Coffee Day, Nilgiris, Quickys, Bata, Amoretto’s and Super Sabka Bazaar, etc. from

Indian retailing arena the main drivers in retailing apparel consumer durable, food and foot wear segments. This is

shown in Figure 5.

Food

In India's organized retailing venture food retailing is getting a good hold. According to the derivations of

Economic Times Intelligence group, food category in retailing represents only 10% of total possible marketing

options in organized retailing sector. This means to work out in the present marketing scenario of US$391 million and

further projected size of US$1.6 billion. Within a span of next five years, there is the chance of an aggregate growth

rate of 33%. Food retailing for more essential commodities is inclusive of pulses, grains and vegetables.

http://www.landmarkretailgroup.com/

http://www.shopperstop.com/



………………………………………………………………………………………………………………………

Source: HSBC, India Retail Report 2005 – KSA Technopak, E&Y and Rocsearch

Figure 5: Organised retail segments share

There is a frenetic activity in the South Indian food retail sector. This is especially in the organized grocery

segment. Stores are built under the Food world format and in this venture Nilgiris is leading southern part. It has

expanded into grocery markets that were extremely localized till date. In the provinces of western and northern India there is

equal opportunity for this food retailing sector. The hypermarkets or the discount stores along with supermarkets and fresh

produce store formats are very much complementing each of the formats and will flourish well in future.

With records from last 2 to 3 years, it can be stated that discounting is the way through which food retailing is

heading. As declared by the Industry experts, discount stores can have successful national chain (Srivastava, 2007). It is

important for the discounter to keep store overheads under lower range. As its growth is from sourcing, it can very well

leverage its scale in order to drive the determined merchandise costs down. Moreover, from the vendors; the stock

turns can increase and can further get better credit terms. The relevant study reveals that current chain stores should

actually account biggest share from the surging scopes of food retail. This surging will be not less than 95% from the

total size. This is further growing with 33%, that is to say, much faster than an amount of 20% growth of particular stores.

All the chain stores are reaching a height of US$32 million sales, on the contrary, the single stores around US$1.3

million.

Coffee house chains are derived as the primary drivers in the entire food as well as beverage sector. Cafe

Coffee Day and Barista together have got 223 outlets as a whole in India and are expected to increase by 464.

Apparel

The whole segment of organized apparel stores are worth US$1.8 billion and are expected to have a growth of

9.5% per annum. The multi-brand outlets are getting popular and soon will outrank all the manufacturer retailers in

its increased size. The large retailers like those of Shoppers’ Stop, Pantaloon Retail, RPG group and Trent have come

up with their retail models. These stores are growing in size with more stores. Retailers like, Trent and Shoppers’ Stop,

have incurred losses in retailing business, in past few years, yet are now having profitable margins. In retailers product mix,

Private labels are the key component. Private label are actually unique to specific retailer, and are subject to account for

20% of sales. These are however, expected to grow more. The case studies based on Indian retailers, Trent, Shoppers’

Stop and Pantaloon shows there back-end processes in order to offer exclusive products to the shoppers.

Through increased supply chain management and specific merchandising practices are mor e into

one apparel retailers and related function, as they are into collaborative efforts with relevant vendors.

Apparel and Accessories

38%

Food & Grocery11%

Consumer Durables

9%

Footwear 9%

Furniture & Furnishing

8%

Catering7%

Watches4%

Mobile Phones3%

Books, music and gifts3%

Jewellery3%

Health & beauty

products2%

Entertainment2%

Health & beauty care

services1%

Segment Share 2005



………………………………………………………………………………………………………………………

Merchandising concentrates over the process of yielding customer satisfaction with improved modes of

profitability. However, merchandising still needs to undergo systematize planning systems along with actively

useable tools.

The current retail marketing system is undergoing various experimentations. Retailing is still evolving and is

witnessing series of diversified experiments across various regions of country. Different new formats are tested to suit

customer oriented services. As for instance formats like sub-urban discount stores, quasi-mall, cash and carry, etc.

are all part of these experiments.

As an industry, retailing in India has a long way to go. To get recognized as a flourishing industry, it needs

to overcome diversified challenges. In India, automatic approval for foreign investment in the retailing market is restricted.

Restrictions on cumbersome local laws and real estate purchases need to get easier. Taxation favouring small retail

businesses needs to be eased out. Demands are now for developed supply chain added by integrated IT management.

India desperately needs trained work force, high skilled level of management, fundamental simplicity for retailing; that is

absolute hold over constant and rapid product as well as price changes and line extension (CII Report, 2006). Further

researches in this field are thus highly recommended. Factors affecting retail operations need to have more studies. To

control the cost of operation, it is thus important to have excessive amount of trained personnel at lower costs.

References:

CII Report (2006), Retail Market Analysis, Confederation of Indian Industry, New Delhi, March, pp. 30-45.

Goldman Sach (2005), “Retail market report”, Asia Pulse, February, pp. 1-175.

Kearney study (2006) Global Retail Market Index, September, pp. 275-7.

KPMG Research (2005) Retail Report, November.

KSA Technopak (2005) India Retail Report Images, pp. 333-5.

Sinha, S. (2006), “Retail turmoil”, Economic Times, December 3, p. 7.

Srivastava, R.K. (2007), “Bi-lingual approach in promotion”, Retail Bizz, August, pp. 19-21.

Further reading

HSBC/India (2005) Retail Report, December, pp. 1-135.

Web references (as seen on 30 December 2007) www.shopperstop.com

www.pantaloon.com

www.landmarkretailgroup.com

http://www.shopperstop.com/

http://www.pantaloon.com/

http://www.landmarkretailgroup.com/

elk asia pacific journal of marketing and retail management issn · pdf file ·...

Documents