retail (1)

I ntroduction If the size of the market determines the future opportunities, then retail is definitely an emerging job market in India. Be it the next-door departmental store, super malls or supermarkets, retail has thrown open one of the largest bouquet of career options in the non-conventional service sector.

Retailing in India is becoming increasingly important and organized retailing is poised to grow at an exponential rate. These growth opportunities have even attracted global majors who are setting up shop in India.

India’s retailing boom has acquired further momentum with international giants beginning to test the waters and the country’s big business groups taking bold news steps. At the same time, in a bid to fortify their existing presence amid growing steps and competition, the early entrants are re-tailoring their strategies to suit the new market landscape. Clearly, the next wave of the retail boom is upon us.

All these mega moves are, however, not without their own sets of problems, some of which already seem daunting. Skilled labour shortage, supply chain issues and adequate land for setting shop are proving to be major hurdles for these chains.

R ETAILING

What is retailing all about?

BLS INSTITUTE OF MANAGEMENT

The word ‘retail’ is derived from the French word ‘ retailer’ , meaning ‘to cut a piece off’ or ‘to break bulk’. In simple terms, it implies a first-hand transaction with the customer.

Retailing can be defined as the buying and selling of goods and services. It can also be defined as the timely delivery of goods and services demanded by consumers at prices that are competitive and affordable.

Retailing involves a direct interface with the customer and the coordination of business activities from end to end- right from the concept or design stage of a product or offering, to its delivery and post-delivery service to the customer. The industry has contributed to the economic growth of many countries and is undoubtedly one of the fastest changing and dynamic industries in the world today.

Retailing includes all the activities involved in selling goods and services directly to final consumers for personal, non-business use. Retailing consists of the sale of goods or merchandise, from a fixed location such as a department store or kiosk, in small or individual lots for direct consumption by the purchasers.

Retailing may include subordinated services such as delivery. Purchasers may be individual or businesses. In commerce, a retailer buys goods or products in large quantities from manufactures or importers, either directly or through whole sellers, and then sells smaller quantities to the end users. Retail establishments are often called shops or stores. Retailers are at the end of the supply chain. Manufacturing marketers see the process of retailing as a necessary part of their over all distribution strategy.


India's largest industry, the retail sector is valued at $200 billion accounting for over 10 per cent of the country's GDP and around eight per cent of the country's employment. It has emerged as one of the most dynamic industries with several players entering the market. In short, retail industry in India is at the crossroads.

Long ago the ‘FATHER OF NATION’---“MAHATMA GANDHI” realized importance of customer for retailer, he is in fact the first to emphasize the importance of ‘customer relationship management’ practices in INDIA……what he said about the importance of the customer is famous all over the world. It goes like this---

“The customer is the most important person in our premises

He is not dependent on us; we are dependent on himHe is not an interruption of our work; he is the purpose

of itHe is not an outsider to our business; he is a part of it

We are doing him a favour by serving him,He is doing us a favour by giving the opportunity to do

so”

…………………………

S YNOPSIS

The aim of this thesis is to understand the growth of

retail marketing and analyze the changing retail

scenario in the country in respect to the Global

environment.


Focus on different format that is being followed locally

and worldwide by retailers and the latest trends in malls

and the requirement of big retailers for setting up shops

in India.

The demographic profile of the population and the

economic scenario i.e. the emerging middle class that is

having its presence felt in all retail formats.

The role of information technology in retail to make it

more adaptable to the never-ending consumer demand

and its easy accessibility by the retailers to manage the

operation effectively and efficiently.

The challenges before organized retail and ways to

overcome it.

The roles of government in giving retail an industry

status and the impact of government policies on present

day retail.

To study how unorganized sectors are now trying to be

organized and its impact on market.

R ationale:

Despite the proliferation of malls and departmental stores in the metros, retailing in India is still in its infancy. It has to go a long way before it can be compared with countries like the U.S. and France where organized retailing takes a relatively higher proportion as compared to India (of market space). Yet, there is no denying how vital the retail sector is for the


country’s economy. Retail is a part of everyday life and it is one of the fastest changing and most dynamic industries in the world today. The diversity, variety, changes in society offer an opportunity for retailers to respond and succeed in this highly competitive market.

Scope:-

The scope of this study is to understand the concept of

retail marketing. This report will give an insight on the

nature of retail business; strategies used by retailers,

new trends in the market, problems associated with it

and innovative ways for higher footfall at the retailers

point. It will capture the current trend in the market and

new formats retailers are adopting to distinguish

themselves based on their services, product quality and

ambience.

R esearch M ethodology: -

Research methodology is to discover answer to

question through the application of scientific

procedures. The main aim of research is to find out the

truth which is hidden and which has not been

discovered yet. Marketing research is the careful

analysis of a business situation by scientifically

analyzing it and using various statistical applications to

the subject of study.


Research is the process of finding a solution with

scientific tools and techniques. Marketing research is a

methodical and purposeful study conducted to obtain

solution for specific marketing problem.

As far as method is concerned, I would prefer personal

interview or face-to-face meeting to ensure accurate

information and encourage frank response to questions.

At the same time telephone or mail, survey was not

possible.

RESESRCH INSTRUMENT :

The research instruments generally used to collect

primary data are questionnaires and mechanical

instrument. Some of these are;

Questionnaire: -

Questionnaire are formal sets of questions, prepare to

collect the require information. This is one of the most

effective and popular techniques used in survey.

Questionnaire is a tool, which provides right information.

Sampling:-


Proper sampling design is essential in marketing

research so the sample has to be collected in such a

way that it represents the entire population.

Collecting of data:-

In dealing with customers it is often found that data, at

hand are inadequate, and hence it became necessary to

collect data that are appropriate and adequate. There

are two way of collecting the appropriate data:-

1.By observation:

This method implies the collection of information by

investigator’s own observation, without interviewing the

respondents’. In survey, it is frequently observed that

the customer is interested to fill up the questionnaire or

is interested in the services, variety and brands

provided by retail industry.

2. Personal interview:

I have also collected my data through Personal

interview. I made a well-structured questionnaire and

asked them their awareness about brands, products.

Secondary data:

Secondary data is collected from the company internal

and external resources. While the internal resources


include the company literature, sales report, broachers,

pamphlets etc. and the external sources could be

included magazines, newspaper etc.

C lassification of R etailers:

Retailing is all the activities involved in selling goods

and services directly to final consumers for their

personal, non-business use.

Although most retailing is done in retail stores, in recent

years non-store retailing - selling by mail, telephone

(telemarketing), door-to-door contact, vending

machines, and numerous electronic means -- has grown

tremendously.

Store retailing: Retail stores come in a variety of

shapes and sizes, and new retail types keep emerging.

One or more of several characteristics can classify

them:

Retailers can be classified by one or more of several

characteristics:-

Amount of service

Product line

Relative prices

Control of outlets


Type of store cluster

A mount of service :

Different products require different amounts of service,

and customer service preferences vary:

(1) Self-service retailers increased rapidly in the US

during the Great Depression in the 1930's. Customers

were willing to perform their own "locate-compare-

select" process to save money. Today, self-service is

the basis of all discount operations, and typically is used

by sellers of convenience goods (such as supermarkets)

and nationally branded, fast moving shopping goods

(such as catalog showrooms).

(2) Limited service retailers, such as Sears and

JCPenney, provide more sales assistance because they

carry more shopping goods about which consumers

need information. Their increased operating costs result

in higher prices.

(3) Full service retailers, such as specialty stores and

first-class department stores, have salespeople to assist

customers in every phase of the shopping process. Full

service stores usually carry more specialty goods for

which customers like to be waited on. They provide


more liberal return policies, various credit plans, free

delivery, home servicing, and extras such as lounges

and restaurants.

P roduct line :

Retailers can also be classified by the depth and

breadth of their product assortments:

(1) Specialty stores carry a narrow product line with a

deep assortment within that line. Examples include

stores selling sporting goods, books, furniture,

electronics, flowers, or toys. Today, specialty stores are

flourishing, due to the increasing use of market

segmentation, market targeting, and product

specialization.

(2) A department store carries a wide variety of product

lines. Each line is operated as a separate department

managed by specialist buyers and merchandisers.

Department Stores, are large retail stores with a fashion

orientation that sell many types of merchandise

organized in separate departments. Found in virtually

every major city in the world, most department stores

today are part of larger retail organizations that operate

a flagship (or main) store, as well as branch stores in

shopping centers and malls. The biggest single segment

of their business is apparel and accessories, accounting


on average for more than two-thirds of sales. Most

department stores also offer a range of customer

services such as personal shopping assistance, fashion

shows, and charge accounts.

The organization of a modern department store is

complex because of the large number of goods and

services provided.

Typically, the operation of a store is conducted through

four principal divisions: -

(a) The merchandising division, responsible for the

planning, buying, and direct selling of merchandise;

(b) The publicity division, which handles advertising,

display, public relations, and other sales promotion

functions;

(c) The control division, which deals with credit,

accounting, and other financial matters;

(d) And the store management division, which covers

personnel, service, store security, maintenance, and

operational duties.

Within these four divisions are many subdivisions. The

heads, or managers, of the four principal divisions


report to the general management of the store. Many

variations of this organization plan exist;

(3) Supermarkets are large, low-cost, low-margin, high-

volume, self-service stores that carry a wide variety of

food, laundry, and household products. Large chains

such as Safeway, Kroger, Publix, Winn-Dixie, Jewel, and

Tops own most US supermarket stores. Chains account

for almost 70% of all supermarket sales. Supermarkets

departmentalized self-service stores that are the

predominant type of retail outlet for food products. An

average supermarket handles thousands of edible items

including meat, fresh fruits and vegetables, dairy

products, canned groceries, bakery items, delicatessen,

and frozen foods. Some also carry items such as

seafood and liquor. No edibles found in supermarkets

include household cleaners, paper products, health and

beauty aids, and house wares. The markets are located

in shopping centers, neighborhood areas, business and

centers, and along highways.

(4) Convenience stores are small stores that carry a

limited line of high-turnover convenience goods. These

stores located near residential areas and remain open

long hours, seven days a week. Convenience stores

must charge high prices to make up for higher operating


costs and lower sales volume, but they satisfy an

important consumer need.

(5) Superstores, combination stores, and hypermarkets

are all larger than the conventional supermarket. Many

leading chains are moving toward superstores because

their wider assortment allows prices to be 5-6% higher

than conventional supermarkets'. Combination stores

are combined food and drug stores. Examples are

A&P's Family Marts and Wal-Mart's Super centers.

Hypermarkets combine discount, supermarket, and

warehouse retailing, and operate like a warehouse --

products in wire baskets are stacked high on metal

racks, and forklifts move through aisles during selling

hours to restock shelves. They usually give discounts to

customers who carry their own heavy appliances and

furniture out of the store.

R elative prices:

Retailers can also be classified by the prices they

charge. Most retailers charge regular prices and offer

normal quality goods and customer service. Some offer

higher quality goods and service at higher prices.

Retailers that feature low prices include:


(1) Discount stores sell standard merchandise at lower

prices by accepting lower margins and selling higher

volume. Occasional discounts or a special does do not

make a store a discount store. A true discount store

regularly sells its merchandise at lower prices, offering

mostly national brands, not inferior goods.

In recent years, facing intense competition from other

discounters and department stores, many discount

retailers have "traded up" by improving their decor,

adding new lines and services, and opening suburban

branches. This, of course, has led to higher costs and

prices. With the discounters trading up, off-price

retailers have moved in to fill the low-price, high-volume

gap. They obtain a changing and unstable collection of

higher-quality merchandise, often-leftover goods,

overruns, and irregulars at reduced prices from

manufacturers or other retailers. The three main types

of off-price retailers are factory outlets, independents,

and warehouse clubs.

C ontrol of outlets :

About 80% of all retail stores are independents,

accounting for 2/3 of retail sales. Other forms of

ownership include the corporate chain, the voluntary


chain and retailer cooperative, the franchise

organization, and the merchandising conglomerate.

The chain store is one of the most important retail

developments of this century. Corporate chains appear

in all types of retailing, but they are strongest in

department, variety, food, drug, shoe, and women's

clothing stores. The size of corporate chains allows

them to buy in large quantities at lower prices, and

chains gain promotional economies because their

advertising costs are spread out over many stores and

over a large sales volume. Chain stores, are two or more

retail stores dealing in the same general kind of

merchandise and operated by the same firm. The outlet

is also known as a multiunit and is generally operated

by an employee-manager rather than an individual

owner. The manager of a chain store, unlike the

independent retailer, does not make policy decisions

and is responsible to the individual or company that

owns the store. Chain stores deal mainly in general

merchandise, food, drugs, and shoes; many variety and

discount stores are chains

The great success of corporate chains caused many

independents to band together under contractual

associations. The voluntary chain is a wholesaler-

sponsored group of independent retailers that engages


in-group buying and common merchandising. The

retailer cooperative is a group of independent retailers

that set up a jointly- owned central wholesale operations

and conduct joint merchandising and promotion efforts.

A franchise is a contractual association between a

manufacturer, wholesaler, or service organization (the

franchiser) and independent businesspeople (the

franchisees) who buy the right to own and operate one

or more units in the franchise system.

Franchising has been prominent in fast-food companies,

motels, gas stations, video stores, auto rentals, hair

cutting salons, real estate, and dozen of other goods

and services. The compensation received by the

franchiser may include an initial fee, a royalty on sales,

lease fees for equipment, and a share of the profits.

Merchandising conglomerates are corporations that

combine several different retailing forms under central

ownership and share some distribution and

management functions. Examples include Dayton-

Hudson and JCPenney.

T ype of store cluster :


Most stores today cluster together to increase their

customer pulling power and to give consumers the

convenience of one-stop shopping:

Central business districts were the main form of retail

cluster until the 1950's. Every large city and town had

a central business district with banks, department

stores, specialty stores, and movie theatres. When

people began to move to the suburbs, however, these

central business districts (with their traffic, parking, and

crime problems) began to lose business.

A shopping center is a group of retail businesses

planned, developed, owned, and managed as a unit.

All shopping centers combined account for about 1/3 of

all retail sales.


Non-Store Retailing: although most goods and services

are sold through stores, non-store retailing has been

growing much faster than store retailing.

Traditional store retailers are facing increasing sales

competition from catalogs, direct mail, telephone, home

TV shopping shows, and on-line computer shopping

services, home and office parties, and other direct

retailing approaches.

Non-store retailing includes direct marketing, direct

selling, and automatic vending:

Direct Marketing vehicles are used to obtain immediate

orders directly from targeted consumers. Although

direct marketing initially consisted mostly of direct mail

and mail order catalogs, it has taken on several

additional forms, including telemarketing, direct radio

and TV, and on-line computer shopping. Its growing use

in consumer marketing is largely a response to the

"demystification" of mass markets, which has resulted

in an increasing number of fragmented market

segments with highly individualized needs.

Trends that have increased the use of direct marketing

include -


(1) Number of women in the workforce;

(2) higher costs of driving, including traffic congestion

and parking problems

(3) shortage of retail help;

(4) longer checkout lines;

(5) toll-free telephone numbers;

(6) availability of credit through proliferation of credit

cards and

(7) growth of computer power & communication

technology.

Direct Selling, or door-to-door retailing, started

centuries ago with roving peddlers. Today, it has

grown into a huge industry, with more than 600

companies selling their products door-to-door, office-to-

office, or at home-sales parties. Although some direct

selling companies are thriving, door-to-door selling has

a somewhat uncertain future.

Trends working against this form of selling include-

(1) home-party companies are having difficulty finding

non- working women who want to sell product part-time;

(2) increases in crimes against individuals has made

consumers reluctant to invite strangers into their

homes; and

(3) recent advances in interactive direct-marketing


technology mean that the door-to-door salesperson may

be replaced by the telephone, the television, and the

home computer.

Automatic Vending is not new. In 215 B.C., Egyptians

could buy sacrificial water from coin-operated

dispensers. However, this method of selling soared

after World War II. There are now about 4.5 million

vending machines in the US -- one for every 55 people.

The expensive equipment and labour required to stock

and service vending machines makes this a costly

channel of distribution, and prices of vended goods are

often 15-20% higher than those in retail stores.

Therefore, the adage "there's no free lunch" still holds -

we have to pay for the convenience that vending

machines provide.

The Wheel of Retailing concept states that new types

of retailers usually begin as low-margin, low-price, low-

status operations, but later evolve into higher-priced,

higher-service operations, eventually becoming like the

conventional retailers they replaced.


L EVELS OF SERVICES:

Retailers can position themselves as offering one of four levels of services:

SELF-SERVICE: Self-service is the cornerstone of all discount operations. Many customers are willing to carry out their own locate-compare-select process to save money.

SELF-SELECTION: Customers find their own goods, although they can ask for assistance.

LIMITED SERVICE: These retailers carry more shopping goods, and customers need more information and assistance. The store also offers services such as credit and merchandise return privileges.

FULL SERVICE: Sales people are ready to assist in every phase of the locate-compare-select process.


T YPE OF MAJOR RETAILERS

SPECIALTY STORE: A clothing store would be a single line store; a men’s clothing store would be a limited line store. Example: The Body Shop.

DEPARTMENT STORE: Several product lines- Clothing, home furnishing & household goods, with each line operated as a separate department managed by specialist. Example: Big Bazaar.

SUPER MARKET: Relatively large, low cost, low margin, high volume, self-service operation design to serve total needs for food, laundry, and household goods.

CONVENIENCE STORE: Relatively small store located at near residential area, open long hours, seven days a week and caring a limited line of high turnover convenience products at slightly higher prices, plus takeout sandwiches, coffee, soft drinks.

DISCOUNT STORE: Standard merchandise sold at lower prices with lower margin and higher volumes. Discount retailing has moved into specialty merchandise store such as discount sporting goods stores, electronic stores and bookstore. Example: Wal-Mart.SUPER STORE:


About 35000 esq. of selling space aimed at meeting consumers’ total need for routinely purchased food and non food items, plus services such as laundry, dry cleaning, shoe repair, check clearing and bill paying.

HYPER MARKETS: Range between 80000 to 220000 sq. ft. area and combined super market, discount and warehouse retailing. They feature bulk display and minimum handling by store personnel, with discounts for customers who are willing to carry heavy appliances and furniture out of the store.

CATALOG SHOWROOM: Selection of high-markup, fast moving, brand name goods at discounts prices. Customers order goods from a catalog, and then pick these goods up at a merchandise pickup area in the store.

FRANCHISE ORGANIZATION: Contractual association between a franchiser and franchisees. Franchising has been prominent in dozens of product and services areas. Examples: McDonald’s, Pizza hut.

MERCHANDISING CONGLOMERATE: A free from corporation that combines several diversified retailing lines and forms under central ownership, along with some integration of distribution and management. Example: Baskin-Robbins.


INTRODUCTION:

The India Retail Industry is the largest among all the industries, accounting for over 10 per cent of the country’s GDP and around 8 per cent of the employment. The Retail Industry in India has come forth as one of the most dynamic and fast paced industries with several players entering the market. However, all of them have not yet tasted success because of the heavy initial investments that are required to break even with other companies and compete with them. The India Retail Industry is gradually inching its way towards becoming the next boom industry.

The total concept and idea of shopping has undergone an attention drawing change in terms of format and consumer buying behavior, ushering in a revolution in shopping in India. Modern retailing has entered into the Retail market in India as is observed in the form of bustling shopping centers, multi-storied malls and the huge complexes that offer shopping, entertainment and food all under one roof.

A large young working population with median age of 24 years, nuclear families in urban areas, along with increasing workingwomen population and emerging opportunities in the services sector are going to be the key factors in the growth of the organized Retail sector


in India. The growth pattern in organized retailing and in the consumption made by the Indian population will follow a rising graph helping the newer businesspersons to enter the India Retail Industry.

In India, the vast middle class and its almost untapped retail industry are the key attractive forces for global retail giants wanting to enter into newer markets, which in turn will help the India Retail Industry to grow faster. Indian retail is expected to grow 25 per cent annually. Modern retail in India could be worth US$ 175-200 billion by 2016. The Food Retail Industry in India dominates the shopping basket. The Mobile phone Retail Industry in India is already a US$ 16.7 billion business, growing at over 20 per cent per year. The future of the India Retail Industry looks promising with the growing of the market, with the government policies becoming more favorable and the emerging technologies facilitating operations.

T HE INDIAN RETAIL SCENE

India is the country having the most unorganized retail market. Traditionally it is a family’s livelihood, with their shop in the front and house at the back, while they run the retail business. More than 99% retailer’s function in less than 500 square feet of shopping space. Global retail consultants KSA Technopak have estimated that organized retailing in India is expected to touch Rs 35,000 crores in the year 2005-06. The Indian retail sector is estimated at around Rs 900,000 crores, of which the organized sector accounts for a mere 2 per cent indicating a huge potential market opportunity that is lying in the waiting for the consumer-savvy organized retailer.


Purchasing power of Indian urban consumer is growing and branded merchandise in categories like Apparels, Cosmetics, Shoes, Watches, Beverages, Food and even Jewellery, are slowly becoming lifestyle products that are widely accepted by the urban Indian consumer. Indian retailers need to advantage of this growth and aiming to grow, diversify and introduce new formats have to pay more attention to the brand building process. The emphasis here is on retail as a brand rather than retailers selling brands. The focus should be on branding the retail business itself. In their preparation to face fierce competitive pressure, Indian retailers must come to recognize the value of building their own stores as brands to reinforce their marketing positioning, to communicate quality as well as value for money. Sustainable competitive advantage will be dependent on translating core values combining products, image and reputation into a coherent retail brand strategy.

There is no doubt that the Indian retail scene is booming. A number of large corporate houses — Tata’s, Raheja’s, Piramals’s, Goenka’s — have already made their foray into this arena, with beauty and health stores, supermarkets, self-service music stores, newage book stores, every-day-low-price stores, computers and peripherals stores, office equipment stores and home/building construction stores. Today the organized players have attacked every retail category. The Indian retail scene has witnessed too many players in too short a time, crowding several categories without looking at their core competencies, or having a well thought out branding strategy.


STRATEGIES, TRENDSAND OPPORTUNITIES: 2007

Retailing in India is gradually inching its way toward

becoming the next boom industry. The whole concept of

shopping has altered in terms of format and consumer

buying behavior, ushering in a revolution in shopping in

India. Modern retail has entered India as seen in

sprawling shopping centres, multi-storied malls and

huge complexes offer shopping, entertainment and food

all under one roof. The Indian retailing sector is at an

inflexion point where the growth of organized retailing

and growth in the consumption by the Indian population

is going to take a higher growth trajectory. The Indian

population is witnessing a significant change in its

demographics. A large young working population with

median age of 24 years, nuclear families in urban areas,

along with increasing workingwomen population and

emerging opportunities in the services sector are going

to be the key growth drivers of the organized retail

sector in India.

GROWTH OF RETAIL SECTORIN INDIA :


Retail and real estate are the two booming sectors of India in the present times. And if industry experts are to be believed, the prospects of both the sectors are mutually dependent on each other. Retail, one of India’s largest industries, has presently emerged as one of the most dynamic and fast paced industries of our times with several players entering the market. Accounting for over 10 per cent of the country’s GDP and around eight per cent of the employment retailing in India is gradually inching its way toward becoming the next boom industry

As the contemporary retail sector in India is reflected in sprawling shopping centers, multiplex- malls and huge complexes offer shopping, entertainment and food all under one roof, the concept of shopping has altered in terms of format and consumer buying behavior, ushering in a revolution in shopping in India. This has also contributed to large-scale investments in the real estate sector with major national and global players investing in developing the infrastructure and construction of the retailing business. The trends that are driving the growth of the retail sector in India are

Low share of organized retailing Falling real estate prices Increase in disposable income and customer aspiration Increase in expenditure for luxury items (CHART)


Another credible factor in the prospects of the retail sector in India is the increase in the young working population. In India, hefty pay packets, nuclear families in urban areas, along with increasing working-women population and emerging opportunities in the services sector. These key factors have been the growth drivers of the organized retail sector in India, which now boast of retailing almost all the preferences of life - Apparel & Accessories, Appliances, Electronics, Cosmetics and Toiletries, Home & Office Products, Travel and Leisure and many more. With this the retail sector in India is witnessing rejuvenation as traditional markets make way for new formats such as departmental stores, hypermarkets, supermarkets and specialty stores.

The retailing configuration in India is fast developing as shopping malls are increasingly becoming familiar in large cities. When it comes to development of retail space specially the malls, the Tier II cities are no longer behind in the race. If development plans until 2007 is studied, it shows the projection of 220 shopping malls, with 139 malls in metros and the remaining 81 in the Tier II cities. The government of states like Delhi and National Capital Region (NCR) are very upbeat about permitting the use of land for commercial development


thus increasing the availability of land for retail space; thus making NCR render to 50% of the malls in India.

India is being seen as a potential goldmine for retail investors from over the world and latest research has rated India as the top destination for retailers for an attractive emerging retail market. India’s vast middle class and its almost untapped retail industry are key attractions for global retail giants wanting to enter newer markets. Even though India has well over 5 million retail outlets, the country sorely lacks anything that can resemble a retailing industry in the modern sense of the term. This presents international retailing specialists with a great opportunity. The organized retail sector is expected to grow stronger than GDP growth in the next five years driven by changing lifestyles, burgeoning income and favorable demographicoutline.

INDUSTRY EVOLUTION

Traditionally retailing in India can be traced to The emergence of the neighborhood ‘Kirana’ stores

catering to the convenience of the consumers


Era of government support for rural retail: Indigenous franchise model of store chains run by Khadi & Village Industries Commission

1980 has experienced slow change as India began to open up economy.

Textiles sector with companies like Bombay Dyeing, Raymond's, S Kumar's and Grasim first saw the emergence of retail chains

Later Titan successfully created an organized retailing concept and established a series of showrooms for its premium watches

The latter half of the 1990s saw a fresh wave of entrants with a shift from Manufactures to Pure Retailers. For e.g. Food World, Subhiksha, And Nilgiris in food and FMCG, Planet M and Music World in music;

Crossword and Fountainhead in books.

Post 1995 onwards saw an emergence of shopping centers

Mainly in urban areas, with facilities like car parking Targeted to provide a complete destination experience

for all segments of society Emergence of hyper and super markets trying to

provide customer with 3 V’s - Value, Variety and Volume .

RETAILING FORMAT IN INDIA

Malls:

The largest form of organized retailing today. Located mainly in metro cities, in proximity to urban outskirts. Ranges from 60,000 sq ft to 7,00,000 sq ft and above. They lend an ideal shopping experience with an amalgamation of product, service and entertainment, all under a common roof. Examples include Shoppers Stop,


Piramyd, and Pantaloon.

Specialty Stores: Chains such as the Bangalore based Kids Kemp, the Mumbai books retailer Crossword, RPG's Music World and the Times Group's music chain Planet M, are focusing on specific market segments and have established themselves strongly in their sectors.

Discount Stores:

As the name suggests, discount stores or factory outlets, offer discounts on the MRP through selling in bulk reaching economies of scale or excess stock left over at the season. The product category can range from a variety of perishable/ non-perishable goods.

Department Stores:

Large stores ranging from 20000-50000 sq. ft, catering to a variety of consumer needs. Further classified into localized departments such as clothing, toys, home, groceries, etc.

Departmental Stores are expected to take over the apparel business from exclusive brand showrooms. Among these, the biggest success is K Raheja's Shoppers Stop, which started in Mumbai and now has more than seven large stores (over 30,000 sq. ft) across India and even has its own in store brand for clothes called Stop.

Hyper marts/Supermarkets:

Large self-service outlets, catering to varied shopper needs are termed as Supermarkets. These are located in or near residential high streets. These stores today contribute to 30% of all food & grocery organized retail


sales. Super Markets can further be classified in to mini supermarkets typically 1,000 sq ft to 2,000 sq ft and large supermarkets ranging from of 3,500 sq ft to 5,000 sq ft. having a strong focus on food & grocery and personal sales.

Convenience Stores:

These are relatively small stores 400-2,000 sq. feet located near residential areas. They stock a limited range of high-turnover convenience products and are usually open for extended periods during the day, seven days a week. Prices are slightly higher due to the convenience premium

MBO’s:

Multi Brand outlets, also known as Category Killers, offer several brands across a single product category. These usually do well in busy market places and Metros.

INDIA’S NUMBER OF DOMESTIC GROCERY CHAINS AND EARLY FOREIGN ENTRANTS


RECENT TRENDS:

Retailing in India is witnessing a huge revamping exercise as can be seen in the graph above :


India is rated the fifth most attractive emerging retail market: a potential goldmine.

Estimated to be US$ 200 billion, of which organized retailing (i.e. modern trade) makes up 3 percent or US$ 6.4 billion

As per a report by KPMG the annual growth of department stores is estimated at 24%

Ranked second in a Global Retail Development Index of 30 developing countries drawn up by AT Kearney.

Retailing in India is gradually inching its way towards

becoming the next boom industry owing to a steady

increase in the disposable incomes of the middle class

households. The whole concept of shopping has altered

in terms of format and consumer buying behavior,

ushering in a retail revolution. Modern retail has entered

India as seen in sprawling shopping centers, multi-

storied malls and huge complexes offer shopping,

entertainment and food all under one roof. The key

growth drivers of the organized retail industry in India

are:-

Demographics - The Indian population is

witnessing a significant change in its demographics. A

large young working population with median age of 24

years, nuclear families in urban areas

Working Women – Increase in the numbers of working

women population


Services Sector - Emerging opportunities in the

services sector

Income – Increase in disposable incomes of customers

across various sectors

Customer - The customer today is far more discerning

than he was earlier.

Real estate prices – The consistent fall in the prices of

real estate

RETAIL SALES IN INDIA :


FDI IN RETAIL SECTOR

THE debate on foreign direct investment (FDI) in retail is hotting up. Once again, the ruling Government and its allies are in sharp disagreement. What is the debate about?

The opposition to FDI in retail rests on several planks.


One, the entry of large global retailers such as Wal-Mart would kill local shops and millions of jobs.

Two, the global retailers would collude and exercise monopolistic power to raise prices and monopsonistic (big buying) power to reduce the prices received by the suppliers.

Hence, both the consumers and the suppliers would lose, while the profit margins of such retail chains would go up.

Three, it would lead to lopsided growth in cities, causing discontent and social tension elsewhere.

Before evaluating these apprehensions, it should be recognized that even the Left is not against all kinds of FDI in retail. It is in favour of selectively allowing FDI in food, dairy and grocery segments of retail trade.

In other areas such as readymade garments and various industrial consumer goods, it would allow only big domestic retailers to compete with small local kiranas. Even when FDI is to be allowed in retail food and grocery sectors, it would like to put a cap on foreign ownership.

In other words, foreigners — if they want to enter — will have to take local partners to start with. Once the local partners and other local players learn by doing, the FDI cap can be raised gradually. Foreigners can be allowed to set up 100 per cent foreign-owned retail chains only after the local players are able to muster enough capital, experience and expertise to compete with established global giants.

It is interesting to note that the Left approach to the issue broadly follows the Chinese model. China first allowed FDI in retail in 1992. The initial FDI cap was 26 per cent. It took China 10 years to raise the limit to 49 per cent. The 100 per cent foreign-owned retail stores were allowed only from 2004.


Further, foreign chains were initially permitted to set up stores only in a few select cities. Local retailers were officially encouraged to become big by mergers and acquisitions so that they would be in a position to compete with big global players. In other words, China provided infant industry protection to domestic retailers, which was gradually reduced as the local players gathered strength.

The supporters of FDI in retail see many advantages.

The biggest benefit, according to them, would flow from higher exports. They point to the Chinese experience.

The global retailers taken together buy about $60 billion of goods each year from China for exports. Contrast this with India where global retailers (mostly metro dairy farm) account for less than $1 billion of exports. Clearly, the scope of exports through the global retailers is enormous, indeed.

However, one may ask: Cannot Wal-Mart or Carrefour source products be supplied in India, even if they are not allowed to set up stores here? However, in principle that is possible, in reality, things do not work out that way. A global chain would buy large quantities for exports on a sustained basis only when it establishes a close linkage with the local market and suppliers. This happens after they open local stores.

By being continuously close to local suppliers and customers, they are in a better position to control and monitor the entire supply chain including the designing of products, the quality of inputs, the manufacturing process, the quality of output, the standardisation, labelling and packaging, transportation, warehousing, the distribution network, changing product mix quickly in response to changing global fashions and establishing the right kind of captive suppliers who would not be selling to their competitors.


The supply chain and the infrastructure, which they would develop for their local stores, would yield significant cost economies when it is also used to procure supplies for their global needs. That is why Wal-Mart sources some $18 billion of goods from China for their global operations. But this happened only after it was allowed a substantial presence in the Chinese local retail market.

How about the potential job loss in local kiranas? True, small retail stores are an important source of jobs, providing about 7 per cent of the total employment in India. Moreover, they are providers of employment of the last resort. Anyone without a job can set up a local retail outlet. However, India is not an integrated homogeneous market; it is a hierarchy of markets catering to people of many different income levels and tastes. For example, both Sony and Santosh can coexist, catering to market segments.

Entry of sophisticated branded products affects the unbranded mass market only marginally in a vast poor country such as India. Moreover, in malls where the large retail chains set up their stores, typically, there will also be many small shops which will attract people.

Further, the street-corner shops will have some advantages over big stores located many miles away in shopping plazas. In India, transportation and parking are big problems for people who want to visit shopping malls.

For them, it is more convenient and cost-effective to purchase many of their daily requirements from the neighbourhood stores, especially as these establishments stock goods that are in particular demand in the locality. Hence, the pop-and-mom street corner shops can very well survive.

The benefits from greater exports would be particularly high in the farm sector. Right now, there is a tremendous amount of wastage and value loss of agricultural products due to lack of storage, refrigeration, transportation and processing


facilities. As a result, farmers' price realisation remains low while the consumers in the cities end up paying a high price. Given the fiscal problems of the government, it is too much to expect it to build the required infrastructure.

To the extent the large retailers establish a direct linkage with the farmers by cutting out many layers of middlemen, develop the processing facilities and export the products to meet their global requirements, farmers would get better prices and bigger markets while the consumers would benefit in terms of lower prices, better quality and greater variety. The resultant rural prosperity may open up markets for other industrial goods and help a more balanced regional development as also job creation in other sectors.

Similar gains would flow from higher exports when the global chains are allowed in other sectors such as readymade garments. As for monopolistic pricing practices, the best safeguard would be in permitting all global chains to set up shops. The competition among them (as has happened in the automobile industry) would ensure better prices for consumers and suppliers alike.

Thus, the benefits from higher exports are likely to offset any direct job loss in the local kiranas as result of competition from big global retailers. Anyway, if the domestic big players are allowed to operate, the job loss problem for the small shops would remain, while the benefits from larger exports would not be there. So, clearly, if big players are to be permitted in retail, this must extend to FDI. Otherwise, the full range of benefits will not be realised.

Of course, some lead time can be provided to the local players to consolidate their position before they face full-fledged competition from established global players. But, then, temporary protection should be really temporary. The Government must make a clear commitment to the time-frame over which protection from foreign competition would be removed gradually.


FDI in retail sector to benefit India, says World Bank

New Delhi , April 13 ,07

OPENING up the retail sector to foreign direct investment (FDI) would be beneficial for India in terms of price and availability of products, according to the World Bank.

At the launch of the Global Development Finance Report 2005 at a function, organised by the Federation of Indian Chambers of Commerce and Industry (FICCI), here, the World Bank Director, Development Prospects Group, Mr. Uri Dadush, said, "The retail sector in India today is a case of low core sector, both domestically and internationally."

Asked whether FDI or using foreign exchange reserves would benefit countries such as India, Mr. Dadush said the World Bank did not consider FDI as a primary investment source and one cannot see any trade-off between FDI and reserves.

Citing the report, he said the FDI inflow to India was estimated at $5.3 billion, higher than the $4.3 billion in 2003.


The World Bank has predicted that global growth will slow down to 3.1 per cent in 2005, as a result of the increase in US interest rates, fiscal tightening, and the effects of the 25-per cent real effective appreciation of the euro.

Further, 2006 may witness a slight deceleration in

growth.

The report has cautioned developing countries on the

need to make adjustments because of the risks posed

by ballooning global imbalances, particularly the US'

current account deficit.

It has embraced three key challenges:

Managing the vulnerability inherent in global

economic and financial imbalances,

Confronting the risks posed by the growing market

sensitivity of developing-country debt, and

Mobilizing and diversifying sources of finance for

low-income countries.

In order to minimise the risks, there is a need for

developing countries to avoid excessive accumulation of

debt, even when it is domestic debt, the report has

stated.


Wal-Mart chief seeks FDI in retail sector

The company hopes for policy change to enter India

WHAT'S IN STORE?: The Prime Minister, Manmohan Singh, with the President and Chief

Executive Officer, Wal-Mart International, John B. Menzer (third from left) during a meeting at

Parliament House in New Delhi

NEW DELHI: The President and CEO of Wal-Mart

International, John B. Menzer, met the Prime Minister,

Manmohan Singh, to discuss opening up of the retail

sector in this country for foreign direct investment (FDI).

He told newspersons after the meeting that Wal-Mart


sought to invest "significantly" in India both for opening

stores and outsourcing from the market.

He described it as a "good meeting" while expressing

the hope that there would be a change in the FDI policy

so that his company could enter the Indian market. As

for whether the world's largest retailer would be

prepared to invest in case 26 per cent FDI was allowed,

he said this would depend on the market and what the

Government offered. At the same time, he was

confident that opening up the retail sector would not

affect small players, as there was room for everyone in

the Indian economy.

At present, he said, India was the fastest growing export

market for the company. The sourcing from Indian was

around $1.5 billion last year and this was expected to

increase by 30 per cent this year. The low costs here

were a big attraction. In contrast, Wal-Mart bought

about $18-billion worth of goods from China. Mr. Menzer

said Wal-Mart was sourcing products from the textile

sector like apparel and home furnishing apart from

other products like jewellery. He also referred to farm

produce as an area where Wal-Mart could help by

providing a cold chain in the country. By having retail

here, he said the company would be close to the

market. Since much of fruit and vegetable production in


this country were now spoiled, he said it could investing

in things like cold chains.

Left protest

The Wal-Mart CEO's meeting has been preceded by

protests from the Left parties about proposals to allow

FDI in the retail sector. The Communist Party of India

(CPI) sent a letter on Tuesday to the Prime Minister to

reconsider any proposal to allow FDI in retail trade as it

would destroy employment and create monopolies.

Besides, it stressed that this would go against the

agreed principles of the UPA Government's Common

Minimum Programme.

The party expressed surprise that the Union Commerce

and Industry Minister, Kamal Nath, had in a recent TV

interview confirmed that the Government was

considering allowing FDI in retail in grocery, which in its

view would wipe out small retailers in the country.

In the letter, the CPI General Secretary, A. B. Bardhan,

recalled that Dr. Singh while being Leader of the

Opposition had opposed the proposal saying that such

reforms would destroy rather than create employment.

He also referred to the fact chief executive of Wal-Mart,

the world's largest retailer, was to meet the Prime

Minister and other concerned ministers and officials to

seek an entry into the Indian retail market.


"In our view, allowing FDI in retail trade will not only

destroy employment but is also not in the long-term

interests of consumers as it will create monopolies. We

believe this is also against the agreed principles of the

Common Minimum Programme", the letter stated.

CHALLENGES & OPPORTUNITIES

Retailing has seen such a transformation over the past decade that its very definition has undergone a sea change. No longer can a manufacturer rely on sales to take place by ensuring mere availability of his product. Today, retailing is about so much more than mere merchandising. It’s about casting customers in a story, reflecting their desires and aspirations, and forging long-lasting relationships. As the Indian consumer


evolves they expects more and more at each and every time when they steps into a store. Retail today has changed from selling a product or a service to selling a hope, an aspiration and above all an experience that a consumer would like to repeat.

For manufacturers and service providers the emerging opportunities in urban markets seem to lie in capturing and delivering better value to the customers through retail. For instance, in Chennai CavinKare’s LimeLite, Marico’s Kaya Skin Clinic and Apollo Hospital’s Apollo Pharmacies are examples, to name a few, where manufacturers/service providers combine their own manufactured products and services with those of others to generate value hitherto unknown. The last mile connect seems to be increasingly lively and experiential. Also, manufacturers and service providers face an exploding rural market yet only marginally tapped due to difficulties in rural retailing. Only innovative concepts and models may survive the test of time and investments. However, manufacturers and service providers will also increasingly face a host of specialist retailers, who are characterized by use of modern management techniques, backed with seemingly unlimited financial resources.

India's largest industry, the retail sector is valued at $200 billion accounting for over 10 per cent of the country's GDP and around eight per cent of the country's employment. It has emerged as one of the most dynamic industries with several players entering the market. Retail industry in India is at the crossroads.

It has emerged as one of the most dynamic and fast paced industries with several players entering the market. However, because of the heavy initial investments required, break even is difficult to achieve and many of these players have not tasted success so far. However, the future is promising; the market is


growing, government policies are becoming more favorable and emerging technologies are facilitating operations.

The size of the industry is estimated at Rs 16,000 crore

and is growing at the rate of about 18-20 per cent per

annum. The two areas that have seen action in

organized retail are apparel and food retailing with sales

of Rs 5,000 crore and Rs 1,800 crore, respectively.

Segments like consumer durables retailing, books, and

music have grown but not as anticipated.

RETAILING:

Considered a sunrise


[Executive

Summary]

Retail Industry today after InfoTech is the most

happening industry with almost all the big players vying

for a share of the coveted pie. Buoyed by a strong

increase in private consumption (see graph), retailing is

one industry that is on boom. (Source: KSA Techno pack)

Today however, organized retailing is less than 2 per

cent of the retailing industry in India, that is, about Rs

5,000 crore. (See table) Therefore, there is no real retail

revolution in India; the industry is still in the stages of

infancy.

Share of Organized Retails

1999 2002 2005

Total Retail (US $ Bn) 150 180 225

Organized Retail (US $ Bn) 1.1 3.3 7

% Share of Organized Retail 0.70% 1.80% 3.20

%

(Source: KSA Techno packs)

Organized retailing is bound to grow

tremendously provided the right marketing strategies

are adopted. Retail businesses have broken rank and


seem poised to surge ahead with renewed vigor,

optimism, confidence and cap.

There is an incredible amount of activity in terms

of creation of retail-oriented space across India. As per

some estimates, there are over 200 retail mall projects

under construction or under active planning stage

spanning over 25 cities. This may translate into over 25

million sq. ft. of new retail space in the market within

next 24 months.

Huge retail formats, with high quality ambience

and very courteous and ambivalent sales staff, are the

regular features of retail formats in most Asian

countries. However, in India except for a few big towns

where modern retailing formats abound, these features

are grossly missing. I expect organized retailing to

slowly penetrate the second rung and smaller towns,

which will catapult the growth rate for the sector.

Even though the big retail chains are concentrating on

the upper segment and selling products at higher prices

like Crossroads, Karalla’s and Shopper's Stop, retail

stores are sprouting that cater to the needs of middle

class. With a huge middle class population, the retailers

like RPG's Food world are tapping this market. The

market is flooded with products branded and

unbranded.


The customers are in a dilemma as to pick which one.

Simon Bell of AT Kearney says, "There is a close relation

between the growth of brands and the growth of the

organized retailing. Companies selling branded products

prefer to have big and organized retail outlets such as

supermarkets where they can be differentiated from

unbranded products".

Though doubts have been cast on the future of Indian retailing it is our belief that the retail boom is yet to happen. While the industry is in the introduction stage in most geography, it has just entered the growth region in the metro cities. Today, the right product mix, right sourcing strategy, and the right communications are the mantras for success.

This paper begins by analyzing the retail formats in the present

Indian scenario and proceeds to outline the key strategic factors in

retailing. In the last part the paper shows the challenges facing

retail and the recommendations for making organized retailing a

success.

RETAIL-ER

BRANDS PLANS STRENGTHS CHALLENGES THREATS


K.

RAHEZAGROUP

SHOPPERS STOP…

CROSSWORD...INORBIT…

MALL HYPER CITY…DESI

CAFE

310 SHOPPERS STOP BY 2010…

60-70 NEW CROSSWORD

OUTLETS WITHIN 2 YRS. & 14 NEW

HYPER CITY

PULSE ON CUSTOMER

TASTES WITH VAST LOCAL

RETAILING EXPERIENCE

KEEPING UP BRAND

LOYALITY

COULD GET BOGGED DOWN IN POSITIONING ITSELF RIGHT

FUTURE GROUP

PANTALOON BIG BAZAAR FOOD

BAZAAR FASHION STATION

BLUE SKY

A STORE ADAY FOR THE NEXT 3-

4 YRS.—3300 PLANNED BY

2010

CANEVOLVE ON

VAST CUSTOMER

EXPERIENCE & EXISTING MODELS

EXPANDING CUSTOMER

BASE, SOURCING

PRODUCTS AT CHEAPER

RATES

STRADDED DOWN TOO MANY RETAIL FORMATS

TATAGROUP

TRENT LOOKING TO REGISTER ITS PRESENCE IN

HYPER MARKETS…CURRENTLY

OPERATES IN 21 STORES

ALREADY HAS AN

ESTABLISHEDBRAND LIKE

WESTSIDE

SPRUCING UP PRODUCT

OFFERINGS, OPENING MORE

OUTLETS & INTRODUCING

NEW RETAIL FORMATS

ITS SMALLER RETAIL OPERATIONS


LAND

MARK

LANDMARK PLANS TO MOVE TO NEW REGIONS

PIONEERED BY THE CONCEPT

OF FAMILYCENTRIC…

MULTIPRODUCT LEISURE

STORES..STRONG ONLINE PRESENCE

EXPERIMENTING WITH NEW

PRODUCTS

COULD GET ENOUGH IN INDUSTRY CONSOLIDATION

RPG SPENCERSMUSIC WORLD

EXPANSION INTO MAJOR CITIES AT

PRIME LOCATIONS; B-CITIES NEXT ON

THE LIST

SUCCESSFUL FORMATS…

DIVERSIFIED PRESENCE..

STILL CONSIDERED A

SOUTHERN BRAND

ESTABLISHING ITSELF INTO NEWER REGIONS,SOURCING PRODUCTS AT COMPETITIVE PRICES


RELIANCE RELIANCE FRESH

PLANS TO SET UP A RANGE OF DIFFERENT STOREFORMATS…. CONVENIENCE STORES & HYPER MARKETS AS WELL AS CREATE A BACK-END RETAIL-SERVICE BUSINESS

STRONG BACK END…. ……NATION WIDE FUEL RETAILING PLATFORM

GETTING THE RETAIL PORTFOLIO RIGHT FOR INDIAN TASTES

PRODUCTPRICING.INFRASTRU-CTURE&MANPOWER……BRANDS. …

BHARTI-WAL-MART

FIELD FRESH

PAN-INDIAN OPERATIONS EXPECTED

BHARTI’S LOCAL EXPERTISE & WAL MART’S BACK END IT A LETHAL COMBO

WOOLING THE PRICE SENSITIVE INDIAN CONSUMER

PRODUCTPRICING…SHELF &OVER-ALLOFFERINGS.

ADITYABIRLA

MADURA GARMENTS. BIRLA SUN LIFE INSURANCE & IDEA CELLULAR.PLANET FASHION & TROUSER TOWN

TO ROLL OUT ITS RETAIL BUSINESS WITHIN THE NEXT 7-8 MONTHS WITH A COMBO OF LARGE & SMALL STORES

EXTENSIVE EXPERINCE IN SUPPLY-CHAIN MANAGEMENT

GAINING A NATIONAL FOOTPRINT

BUILDING RETAILFORMATSFROM SCRATCH


HERO GROUP

EASY BILL FLOATED AERO INFRASTRUCTURE LTD. ANNOUNCING FORAY INTO RETAIL...CURRENTLY DEVELOPINGTWO INDUSTRIAL PARKS AT HARIDWAR IN UTTARANCHAL

STRONG MANAGE--MENTIN SEVERAL MANUFAC--TURING SECTORS…SOUND FINANCIAL BASE

CREATING RETAILOPERATIONS FROM SCRATCH

LITTLEEXPERIENCEIN EVERY-DAY CONSUMERRETAILING

CARRE-FOUR

/TESCO

MULTI-FORMAT RETAILERS

STILL TO OPEN THEIR CARDS

SUCESSFULWORLDWIDEOPERATONS

FOLDING THE RIGHT LOCAL PARTNERS

CLUTTERED MARKET COULD STIFFLE PLANS


N0 MANS LAND

NO RETAILER HAS A PAN INDIAN PRESENCE …LIKELY ONLY BY 2010

INTERNATIONAL RETAILERS PREFERRINGTHE HYPERMARKETROUTE TO INDIA

INDIAN RETAILERS EXPERIMENTING WITH BOTH SMALLER DIFFERTIATING BY EXPANDING INTO B-CITIES

HYPERMARKETS,FOOD &LIFESTYLE STORES TO DOMINATE THE FIRST PHASE

PEOPLE PROBLEMS

1 MILLION PEOPLE EMPLOYED BY RETAIL SECTOR

3.25 MILLION REQUIRED BY 2008-09

RELIANCE ALONE TO RECRUIT 0.5 MILLION

ONLY 1-1.5 MILLION TRAINED PEOPLE EXCITED BY 2008

POACHING EXISTING SENIOR MANAGEMENT ON THE RISE

WOOING THE

CONSUMER

MORE VARIETY FOR THE CONSUMER

FOOD PERSONAL CARE PRODUCTS & APPAREL DOMINATE THE MARKET

BUT PREMIUM BRANDS SET TO GRAB A GREATER SHARE

HYPERMARKETS SHELFS TO REFLECT INDIAN PALATES

LOW PRICED APPAREL TO BE INTRODUCED TO INCREASE FOOTFALLS.

THE RETAIL LANDSCAPE


Demographics and consumer

Behavior

India is estimated to have a population of 1.04 billion as

of 2003. Population growth and is expected to stabilize

at approximately one and a half percent in the next few

years.

In recent years, there has been a trend in the

movement of population from rural areas to urban

areas, largely as a result of increased employment

opportunities in the cities

The percentage of population moving to Class I towns,

which are basically large cities with a population of over

1 million, has seen significant growth in recent years. As

a result of this trend, the percentage of population living

in urban areas has seen dramatic growth in the past two


decades. One of the important demographic trends in

recent times is the change in the age profile of the

population. The percentage of the population in the 15

to 59 year age group, which is largely the country’s

workforce, is expected to increase in coming years.

Census '91. Only one fourth of India's population is urban. Source Census '91


Top 8 metros constitute more than one fourth of India’s population.

.

The Global Retail industry-An overview

Retail has played a major role world over in increasing

productivity across a wide range of consumer goods and

services .The impact can be best seen in countries like

U.S.A., U.K., Mexico, Thailand and more recently China.

Economies of countries like Singapore, Malaysia, Hong

Kong, Sri Lanka and Dubai are also heavily assisted by

the retail sector. Retail is the second-largest industry in

the United States both in number of establishments and

number of employees. It is also one of the largest

worldwide. The retail industry employs more than 22

million Americans and generates more than $3 trillion in

retail sale annually. Retailing is a U.S. $7 trillion sector.


Wal-Mart is the world’s largest retailer. Already the

world’s largest employer with over 1million associates,

Wal-Mart displaced oil giant Exxon Mobil as the world’s

largest company when it posted $219 billion in sales for

fiscal 2001. Wal-Mart has become the most successful

retail brand in the world due its ability to leverage size,

market clout, and efficiency to create market

dominance. Wal-Mart heads Fortune magazine list of top

500 companies in the world. Forbes Annual List of

Billionaires has the largest number (45/497) from the

retail business.

GLOBAL RETAIL

1999 2002 2005

Total Retail (US$ Billion) 150 180 225

Organized Retail (US Billion 1.1 3.3 7

% Share of Organized retail 0.7 1.8 3.2

(Source: CSO, MGI Study)


The Indian retail sector can be broadly classified

into :-

a) FOOD RETAILERS

There are large number and variety of retailers in the

food-retailing sector. Traditional types of retailers, who

operate small single-outlet businesses mainly using

family labour, dominate this sector .In comparison,

super markets account for a small proportion of food

sales in India. However the growth rate of super market

sales has being significant in recent years because


greater numbers of higher income Indians prefer to

shop at super markets due to higher standards of

hygiene and attractive ambience.

b) HEALTH & BEAUTY PRODUCTS

With growth in income levels, Indians have started

spending more on health and beauty products. Here

also small, single-outlet retailers dominate the market.

However in recent years, a few retail chains specializing

in these products have come into the market. Although

these retail chains account for only a small share of the

total market, their business is expected to grow

significantly in the future due to the growing quality

consciousness of buyers for these products.

c) CLOTHING & FOOTWEAR

Numerous clothing and footwear shops in shopping

centers and markets operate all over India. Traditional

outlets stock a limited range of cheap and popular

items; in contrast, modern clothing and footwear stores

have modern products and attractive displays to lure

customers. However, with rapid urbanization, and

changing patterns of consumer tastes and preferences,

it is unlikely that the traditional outlets will survive the

test of time.


d) HOME FURNITURE & HOUSEHOLD GOODS

Small retailers again dominate this sector. Despite the

large size of this market, very few large and modern

retailers have established specialized stores for these

products. However there is considerable potential for

the entry or expansion of specialized retail chains in the

country.

e) DURABLE GOODS

The Indian durable goods sector has seen the entry of a

large number of foreign companies during the post

liberalization period. A greater variety of consumer

electronic items and household appliances became

available to the Indian customer. Intense competition

among companies to sell their brands provided a strong

impetus to the growth for retailers doing business in this

sector.

f) LEISURE & PERSONAL GOODS

Increasing household incomes due to better economic

opportunities have encouraged consumer expenditure

on leisure and personal goods in the country. There are

specialized retailers for each category of products


(books, music products, etc.) in this sector. Another

prominent feature of this sector is popularity of

franchising agreements between established

manufacturers and retailers.

Each of the retail stars has identified and settled into a

feasible and sustainable business model of its own.-

Shoppers' Stop - department store format

Westside - emulated the Marks & Spencer model of 100

per cent private label, very

Good value for money merchandise for the entire

family

Giant and Big Bazaar - hypermarket/cash & carry store

Food World and Nigeria – supermarket format

Pantaloons and The Home Store - specialty retailing

Tarnish has very successfully pioneered a very high

quality organized retail business in fine jeweler


Structure of the retailing industry according to

ownership patterns:-

An unaffiliated or independent retailer

A chain retailer or corporate retail chain

A franchise system

A Leased Department (LD)

Vertical Marketing System (VMS)

Consumer Co-operatives

Key Strategic factors


The changes in the nation’s social structure like,

improvement of the Indian economy, consumerism,

urbanization, profusion of brands have been the main

causal factor for the development of these modern

formats. Indian food buying behavior is gradually

changing in response to the changing social

structure .The increasing number of nuclear families,

double income households and working women, greater

work pressure and increased commuting time have put

the consumers under constant time pressure. The other

equally important factors in the changing Indian

landscape are the increasing influence of children,

gradual acceptance of frozen, semi-processed and

processed foods by the Indian consumer, the growing

influence of television in decision-making and

improvement in literacy rates. As the modern housewife

starts shopping for herself she appreciates and

welcomes:-

A pleasant shopping environment;

Convenience of one-stop shopping with wider product

portfolio at a single location;

Speed and efficiency in processing.

More information;

Better quality and hygiene; and

Discount too if possible.


The improved income and the increased purchasing

power of a larger section of the Indian population makes

the opening of outlets, which provide the whole bunch

of these improved services a viable opportunity.

The key to success is identifying a superior value-

promise and who is in a better position to do it than

retailers? Retailers are the closest to the point of

purchase and have access to a wealth of information on

consumer shopping behavior. Retailers have some

unique advantages for managing brands such as

continuous and actionable dialogue with consumers,

control over brand presentation at point-of-sale, control

over shopping environment, display

location/adjacencies, and signage. In addition, they

have used this advantage with tremendous success.

The 3 stages of evolution of the trade channel are

shown in the exhibit below:-


As seen, the role of the intermediary is being diminished

gradually, which has obvious

Implication of backlash of the trade channel upwards

towards the suppliers. This is more severe in countries

such as India, where the channel economics in favor of

the middlemen is still strong enough given the

fragmentation of the retail sector. Therefore when Food

World, the largest grocer in India has a “direct supply”

contract with over 20% of its key suppliers, it gives rise

to conflict of interest with the distribution infrastructure

that suppliers have painstakingly built over the years.

Thus, companies like HLL have evolved a distinct

distribution channel altogether (called “Modern Trade”)


to service the needs of such large grocers. Even the

mom and pop stores (known as kirana shops) are

affected due to this “unfair” back-end advantage

extended by the supplier to its leading accounts (the

emerging supermarket chains).

The following diagram illustrates the strategies adopted

by the retailer to compete with branded goods.

Branding the store and following a private label strategy

is the key strategy that helps the retailer to compete

with branded products?

T he current Scenario

The change in the social formats has led to the

development of modern retail outlets, mainly in the

southern parts of the country. Chennai, Bangalore and

Hyderabad are developing as the hub of organised retail

in India. The culture is spreading to the other parts of


the country too, with the western and northern parts of

the country too providing good opportunities currently.

Different players are trying out different formats. A

successful fully Indian or ‘swadeshi’ model in Indian

retailing is yet to be developed. The models, which are

highly successful in certain areas of the country, are

able to achieve only moderate success in certain other

areas.

Retail Realities:

Unorganized market: Rs. 583,000 crores

Organized market: Rs.5, 000 crores

5X growth in organized retailing between 2000-2005

Over 4,000 new modern retail outlets in the last 3 years

Over 5,000,000 sq. ft. of mall space under development

The top 3 modern retailers control over 750,000 sq. ft.

of retail space


Over 400,000 shoppers walk through their doors every

week

Growth in organized retail on par with expectations and

projections of the last 5years.

FOOD AND GROCERY

FASHION OTHERS

FOOD WORLD SHOPPERS STOP VIVEK’S

SUBHIKSHA WESTSIDE PLANET-M

NILGRIS LIFESTYLEMUSIC WORLD

ADANI-RAJIV’S

PYRAMIDCROSSWORD

NIRMA RADHEY

GLOBUS LIFESPRING

PANTALOON GAUTIER

Major players:

As many as 10% of the world’s billionaires are retailers. The industry accounts for over 8% of GDP in western countries, and is one of the largest employers.


According to the U.S.Department of Labor, more than 22 million Americans are employed in the retailing industry in over 2 million retail stores


Major players with yearly turnover:


Merchandising in Retail

The modern consumer is posing a challenging task for

Indian retail. More aware, more confident and much

more demanding, today's consumer wants the best

product at the best price. And that's not all. The manner

in which the product is presented to him has to be

perfect too. Retailers have, therefore, been busy trying

to keep pace with all these requirements at the same

time striving to remain profitable. A tough job indeed.

Not surprisingly, most of them are paying serious

attention to their products and focusing on the various

aspects of merchandise and supply chain management

to give customers what they desire - good quality at an

affordable price. However, there are plenty of areas that

will need the express attention of the retailers if they

want to derive the most out of their systems and

processes on merchandising and sourcing practices of

large retailers in India.

What does a carmaker have to do to succeed in his

business? The most important thing obviously is to

make good cars - cars that customers want to buy. This

holds true for any business really. Companies spend

enormous amounts of time, money and effort in

understanding the consumer to ensure that their


offering is just right - the right product attributes at the

right price and targeting the right need with the right

message.

Similarly, if you are a retailer, the first thing you want to

get right is your merchandise. All other aspects like

ambience and customer service are definitely important

but are still secondary to the kind of merchandise

offered. The decisions involved here can be quite

complex. A retail chain not only deals with thousands of

customers, it also offers a wide variety of SKUs, often

more than the product range of even the largest

companies. So matching products to customer needs is

not an easy task at the best of times for a retailer and

certainly the most important for long-term survival.

Importance of Supply chain in

retail

The modern retailing in India is booming and India can position itself as a lead player in Asia, if the


retail sector here attains the competitive strengths by responding to the Changing Markets. Spelling out the strategy for efficient management of Supply Chain, by 2010 the supply chain must be highly focused and differentiated. "In today's highly competitive environment, as companies are under intense pressure to reduce costs, expand into new markets and develop new products, every manufacturer's supply chain is expanding and becoming increasingly complex. However, complexity is not the enemy to the supply chain — effectively managing complexity can be a manufacturer's greatest asset," Experts from the retail business affirmed that the current retail boom in India can only sustain its momentum if supply chain Management is given the top priority by the retail players.

The supply chain has a key role to play in the

expansion and profitability of many companies, but it

has rarely been adapted to meet the new demands

placed upon it. The critical differentiating factors that

synchronize across the entire global supply chain

are Collaborating with customers, rather than only with

suppliers. Also, Undertaking customer profiling,

customer loyalty and customer segmentation initiatives

and increasing performance through managing products

and introducing new products are vital in the changed

scenario, he said.

In India the retail sector is the second largest employer

after agriculture and is highly fragmented. It

predominantly consists of small independent, owner

managed shops. There are some 12 million retail outlets


in India. Interestingly A. T Kearney Global Retail

Development Index 2004 places India as the second

amongst the emerging markets in the world. Studies

indicate that organized retail will grow from a 2% of the

total retail industry to a significant 20% by the end of

the decade the retail sector currently growing at a rate

of 8.5%.

It has been seen internationally that development of

modern retail formats is directly linked to the level of

development of local economies. In India this is

beginning to happen, but has a long way to go. There

are certain bottlenecks in the supply chain in Indian

retail segment that fragment the whole market are

structure of organization, Infrastructure lacuna and

absence of effective use of Information Technology.

These core issues are currently impeding the growth of

retail sector in India from reaching at par with the world-

class operations.

The Indian retail sector potential is too vast to be

ignored for long. The major challenges for retail sector

in India are manifold. To meet these growing challenges

the Terms and definitions related to trading such as

retailing, wholesaling, direct selling, multilevel

marketing etc should be aligned, with internationally

accepted norms.


Challenges before Organized

Retailing:

Retailing as an industry in India has still a long way to

go. To become a truly flourishing industry, retailing

needs to cross the following hurdles: -

Automatic approval is not allowed for foreign

investment in retail.

Regulations restricting real estate purchases, and

cumbersome local laws.

Taxation, which favors small retail businesses.

Absence of developed supply chain and integrated IT

management.

Lack of trained work force.

Low skill level for retailing management.

Intrinsic complexity of retailing – rapid price changes,

constant threat of product

Obsolescence and low margins.

The retailers in India have to learn both the art and science

of retailing by closely following how retailers in other parts

of the world are organizing, managing, and coping up with

new challenges in an ever-changing marketplace.


Indian retailers must use innovative retail formats to

enhance shopping experience, and try to understand the

regional variations in consumer attitudes to retailing. Retail

marketing efforts have to improve in the country –

Advertising, promotions, and campaigns to attract

customers;

Building loyalty by identifying regular shoppers and

offering benefits to them;

Efficiently managing high-value customers;

And monitoring customer needs constantly, are some of

the aspects, which Indian retailers need to focus upon

on a more pro-active basis.

Despite the presence of the basic ingredients required for growth of the retail industry in India, it still faces substantial hurdles that will retard and inhibit its growth in the future. One of the key impediments is the lack of FDI status. This has largely limited capital investments in supply chain infrastructure, which is a key for development and growth of food retailing and has also constrained access to world-class retail practices. Multiplicity and complexity of taxes, lack of proper infrastructure and relatively high cost of real estate are the other impediments to the growth of retailing.

While the industry and the government are trying to remove many of these hurdles, some of the roadblocks will remain and will continue to affect the smooth growth of this industry. Fitch believes that while the market share of organised retail will grow and become significant in the next decade, this growth would, however, not be at the same


rapid pace as in other emerging markets. Organised retailing in India is gaining wider acceptance.

The development of the organised retail sector, during the last decade, has begun to change the face of retailing, especially, in the major metros of the country. Experiences in the developed and developing countries prove that performance of organised retail is strongly linked to the performance of the economy as a whole. This is mainly on account of the reach and penetration of this business and its scientific approach in dealing with customers and their needs.

In spite of the positive prospects of this industry, Indian retailing faces some major hurdles, which have stymied its growth. Early signs of organized retail were visible even in the 1970s when Nilgiris (food), Viveks (consumer durables) and Nallis (sarees) started their operations. However, as a result of the roadblocks, the industry remained in a rudimentary stage. While these retailers gave the necessary ambience to customers, little effort was made to introduce world-class customer care practices and improve operating efficiencies. Moreover, most of these modern developments were restricted to south India, which is still regarded as a ‘Mecca of Indian Retail’.


ACKNOWLEDGEMENT

Any work of magnitude require inputs, efforts and

encouragement of people all sides. In compiling this report, I

have been fortunate enough to get active and kind

cooperation from many people without whom my endeavor

could not have been a success.

It gives me a great pleasure in submitting this Project entitled

“RETAIL IN THE PRESENT SCENARIO”RETAIL IN THE PRESENT SCENARIO”. I express my

overwhelming sense of gratitude and thankfulness to ‘Mr.

P.K.Aggrawal’ who helped me a lot in the completion of the

project.

It also gives me immense pleasure

to express my gratitude to ‘Dr. Ajay Kumar’ (Dir. BLSIM)

who gave me the opportunity to be under the guidance of Mr.

P.k.Aggrawal.

GURSAGAR SINGH


BBA (B&I) 2nd sem.

Enroll. No-

042171806.

CONCLUSION

The retail sector has played a phenomenal role

throughout the world in increasing productivity of

consumer goods and services. It is also the second

largest industry in US in terms of numbers of employees

and establishments. There is no denying the fact that

most of the developed economies are very much relying

on their retail sector as a locomotive of growth.

The India Retail Industry is the largest among all the

industries, accounting for over 10 per cent of the

country’s GDP and around 8 per cent of the

employment. The Retail Industry in India has come forth

as one of the most dynamic and fast paced industries

with several players entering the market. However, all

of them have not yet tasted success because of the

heavy initial investments that are required to break

even with other companies and compete with them. The

India Retail Industry is gradually inching its way towards

becoming the next boom industry...


BIBLIOGRAPHY

RETAIL MANAGEMENT— GIBSON G. VEDAMANI

RESEARCH METHODOLOGY —C.R. KOTHARI

www.pantaloon.com

www.hindubusinessline.com

www.hinduonnet.com

www.indiafdiwatch.org

WWW.IBEF.ORG/INDUSTRY/RETAIL

Contents

INTRODUCTION 01RETAILING 02SYNOPSIS 03RATIONALE 05


http://www.indiafdiwatch.org/

http://www.hinduonnet.com/

RESEARCH METHODOLOGY 06CLASSIFICATION OF RETAILERS 09LEVELS OF SERVICES 23TYPE OF MAJOR RETAILERS 24

RETAIL IN INDIA 26 THE INDIAN RETAIL SCENE 28

STRATEGIES, TRENDS AND OPPORTUNITIES 30 RETAILING FORMAT IN INDIA 35RECENT TRENDS 38CHALLENGES AND OPPORTUNITIES 41SHARE OF ORGANIZED RETAIL 44DEMOGRAPHICS AND CONSUMER BEHAVIOR 51GLOBAL RETAIL INDUSTRY-AN OVERVIEW 53CLASSIFICATION OF INDIAN RETAIL SECTOR 55THE CURRENT SCENARIO 63MAJOR PLAYERS 66MERCHANDISING IN RETAIL 67SUPPLY CHAIN IN RETAIL 69CHALLENGES BEFORE ORGANIZED RETAIL 71CONCLUSION 75

PROJECT REPORTPROJECT REPORTONON

“GROWTH OF RETAIL SECTOR”“GROWTH OF RETAIL SECTOR”ININ

‘INDIA’‘INDIA’

AN INTERNSHIP REPORT SUBMITTED IN PARTIALAN INTERNSHIP REPORT SUBMITTED IN PARTIAL FULFILLMENTFULFILLMENT

OF THEOF THE

REQUIREMENT FOR THE DEGREE OFREQUIREMENT FOR THE DEGREE OF


“BACHELOR OF BUSINESS ADMINISTRATION”“BACHELOR OF BUSINESS ADMINISTRATION”‘(BANKING & INSURANCE)’‘(BANKING & INSURANCE)’

GGSIPU….DELHIGGSIPU….DELHI

PROJECT GUIDE:PROJECT GUIDE: SUBMITTED BY:SUBMITTED BY:Mr. P.K AGGARWAL GURSAGAR SINGHMr. P.K AGGARWAL GURSAGAR SINGHLECTURERLECTURER BBA BBA (B&I) -----2(B&I) -----2NDND SEM SEMB.L.S.I.MB.L.S.I.M ENROLL. NO.-0421171806 ENROLL. NO.-0421171806 2006-092006-09

JULY 2007JULY 2007


retail (1)

Documents