INTRODUCTION The company was founded in 1962 as a single Discount Store in Rogers, Arkansas, by a visionary and by the time

legendary man, named Sam Walton. Since then the chain had beengrowing at an unrivalled rate, starting with 9 stores and total sales of $ 1.4 million, now about tofinish the fiscal year 1998 with total sales of US $118 billion and 2,136 stores. The company consists of discount stores, SAMs Wholesale Club (introduced in 1983, Midwest City, OK), Wal-Mart Supercenters (1988, Washington, MO) and deep discount warehouse outlets (BudsDiscount City). Having written a unique success story in the history of retail industry, thanks tothe rousing leadership of Sam Walton, the company internationally came off the ground by opening its first store abroad in Mexico City in 1991. Since then Wal-Mart has extended itsinternational presence to Puerto Rico (1992), Canada (1994), China (1996), Brazil (1995), Argentina (1995), South Korea (1996) and Germany (1998) (Wal-Mart History). Today Wal-Martoperates more than 600 stores in international arena with revenue of $7.5 billion. The majormerchandise lines include house wares, consumer electronics, sporting goods, lawn and gardenitems, health and beauty aids, apparel, home fashions, paint, bed and bath goods, hardware,automotive repair and maintenance items, toys and games, and grocery

Porters Five Forces Model Competition between the rival companies : The French retail industry is highly competitive and inthe past few years major acquisitions had taken place. The top retailers are Intermarche, the worlds 6 th largest retailer (1998 Sales: US$ 32.5 billion, Number of stores: 3,819, with presence inBelgium, Germany, Italy, Portugal and Spain), Promodes, number 7 worldwide (1998 Sales: US$28.6 billion, Number of stores: 4,921, with presence in Belgium, Dubai, Germany, Greece, Italy,Mauritius, Morocco, Taiwan, Turkey, Portugal and Spain), and Carrefour, which is the eighthlargest global chain (1998 Sales: US$ 28.3 billion, Number of stores: 4,921, with presence in Argentina, Brazil, China, Colombia, Hong Kong, Indonesia, Italy, Malaysia, Mexico, Poland,Portugal, Singapore, South Korea, Spain, Taiwan, Thailand and Turkey).Especially Carrefour and Promodes are considered to be close to being globalcompanies. Carrefour, for instance, has introduced its hypermarket (big stores with an averagearea of 250,000 square feet) concept to Spain as early as 1973. In 1997, Carrefour had total salesof USD 28 billion and a net income of USD 595 million. The return on equity for that year was 18.8%, the current ratio 0.69 and the quick ratio0.36. Carrefour strength is that it pursues international expansion with such strong determinationthan few other retailers. It operates 369 hypermarkets in 20 countries and 600 supermarkets.Carrefour also owns discount and convenience stores and frozen food outlets. Promodes hadtotal sales of USD 18.4 billion and a net income of 269 million. The return on equity was19.87%, the current ratio 0.82 and the quick ratio 0.53. Daniel Bernard, chairman of Carrefour,believes market share and volume are the keys to future success. Metro AG, a German company,the second largest retailer in the world, with $ 32.6 billion in sales, also has entered France. Foodretailer Promodes has been acquiring food chains for nearly two decades. A leading food retailerin France and Europe, it operates more than 4,700 hypermarkets, supermarkets, conveniencestores, and discount stores. \

Threat of new entrants: France is a big market experiencing significant growth in retailindustry in recent years. Strong economy, stable government, favourable government policies for foreign investment and well-developed infrastructure and with introduction of EURO as acommon currency and same international laws, makes France a very attractive place to be in. Butat the same time the entry and exit levels are high and it is getting mature quickly and have low profit margins. Substitute products: As the retail industry sells products of daily common use, there are nodirect substitutes; the only substitute products that can be threat are the products from gray market, which can harm the sales of branded products. Department and discount stores alsofaces stiff competition from specialized retail shops such as garments, electronics etc. Suppliers: Because of the diverse product range that is distributed by retailers there are many different suppliers. Suppliers include both domestic and international manufacturers and as theproducts are more or less standardized in nature, retailers and wholesalers have low switching costs, the powers of supplier are moderate to low. Buyers: The consumers are now more sophisticated and mature. As said by Carrefour,they want it now and they want it with the best service and the best quality. Consumers enjoy increasing choice of products and increased price competition, and they demand better and wider choices. They also exert pressure on manufacturers and retailers to give more relevantproduct information

FIVE FORCES ANALYSIS 12. VALUE CHAIN ANALYSIS Wal-Mart takes care of all the activities internally except partially outsourcing its logisticsrequirements. Its systems integration from inventory, to stores, to headquarters to suppliers isthe lifeline of its success. The core activity remains in its bulk buying and inventorymanagement which supports WalMarts competitive advantage of pricing and every element shows traces of cost leadership. Wal-Mart located its discount stores around regionalwarehouses allowing a streamlined and low cost physical distribution

Opportunities And Challenges For Wal Mart In India Marketing Essay

India is seen as an emerging market for retail by global retailers. A.T. Kearneys Global Retail Development Index (GRDI) of 2009 ranks India as the most emerging destination for retail ahead of Russia and China. However, to protect its own retail industry, the Government of India has permitted only 51 % FDI for single brand retail. This has deterred many multi-brand retailers to enter the retail business in India. However, these retailers can enter the wholesale business where 100 % FDI is permitted. In November, 2006, Wal-Mart entered into a 50:50 joint venture with Bharti Enterprises to enter the wholesale sector as well as back end partner. Several apprehensions are being raised about the success of Wal-Mart in India which has largely been dominated by traditional retailers. The case analyses the opportunities and challenges that Wal-Mart will face in India and concludes with discussion on the future of Wal-Mart with respect to the advantages and disadvantages that the global retailer will have in India.

Introduction
Since liberalization in 1991, the Indian market has a limited presence of global retailers such as McDonalds, Landmark, Dominos, Pizza Hut and few others. In January 2006, the Union Cabinet approved the policy on foreign direct investment (FDI) in retail to further simplify procedures for investing in India and to avoid multiple layers of approvals required in some activities. To facilitate easier inflow, FDI up to 100 % was allowed under the automatic route for cash and carry wholesale and export trading. However to protect the interests of Indian retailers, the FDI up to 51 % was permitted in single brand retail only. In 2006, Wal-Mart of US entered into a 50:50 joint venture with Indian retail major, Bharti Retail to foray into the wholesale business in India. The first Wal-Mart - Bharti store opened in Amritsar in late 2009. In the same year, A.T. Kearneys Global Retail Development Index (GRDI), ranked India as the most emerging destination for retail ahead of Russia and China. Global retailers like French based Carrefour and US based Starbucks were exploring opportunities in the Indian retail market while; Swedish retailer IKEA shelved its plans. A report by Northbridge Capital, UK based investment bank, revealed "Retail market size in 2009 is estimated to be of $450 billion, growing at the rate of 30 per cent per annum. It is expected to grow to $720 billion by the end of 2011" [1] .An analysis by AT Kearney revealed that organized retail in India accounted for only 6 % of the total retail market . Market analysts believe that India had traditionally been dominated by unorganized retail. They wonder whether global retailers can sustain in India considering the restrictions on FDI in retail and a strong competitive unorganized market.

About Wal-Mart of US
The retail chain Wal-Mart was established by Sam Walton in 1962 in the US. Over the years, the retail chain grew leaps and bounds to be the most successful retailer in the US. The retail chain operates in various formats such as discount stores, supercentres and warehouse clubs. Wal-Mart stores are huge stores with size varying from 42,000 sq. feet to more than 200,000 sq. feet. The business model of Wal-Mart is based on selling a wide variety of merchandize at always low prices often referred to as everyday low prices. Wal-Mart successfully expanded its operations to 14 countries which included Mexico, UK, China, Argentina, Brazil, Canada, Chile, India and Puerto Rico. By 2010, the chain operated 2,980 stores outside the US. Wal-Mart also ranks the topmost global retailer in the world with revenues of more than $ 400 billion from worldwide operations in 2009.

About Bharti Enterprises of India

Bharti Enterprises is an Indian business conglomerate established by Sunil Bharti Mittal. The group was founded in early 1990s. The group is involved in variety of businesses such as telecom, insurance, fresh foods, retail and realty. Outside India, the company has a presence in Bangladesh, Sri Lanka, Jersey, Guernsey and Seychelles. The group is in the process of establishing itself in countries like Burkina Faso, Chad, Congo Brazzaville, Democratic Republic of Congo, Gabon, Ghana, Kenya, Madagascar, Malawi, Niger, Nigeria, Sierra Leone, Tanzania,Uganda, and Zambia in the African sub-continent. The brand names Airtel and Beetel are household names in India. Its revenues for the year 2009 were estimated at $ 10 billion.

Bharti Wal-Mart Tie Up

After entering into discussions with Tesco of UK and Carrefour of France which did not materialize, Bharti Enterprises of India finally struck a deal with Wal-Mart of US in November 2006. According to the deal, Bharti would handle front end retail stores while Wal-Mart would act as a wholesale and back-end partner. However, Bharti would use the name Wal-Mart for its stores. The joint partnership planned to make investments in the retail sector to the tune of $100 millon which could go upto $1.46 billion. WalMart was already procuring goods from various Indian companies to the tune of $1.5 billion. Industry observers say that the Wal-Mart would benefit from Bhartis experience in India while Bharti would benefit from Wal-Marts experience in overseas markets. However, after tremendous opposition from local people and political parties, the first store opened in Amritsar in late 2009. Consumer Shopping Behavior in India Consumers in the west are accustomed to shopping at organized formats while in India such formats are still evolving. Various researchers analyzing consumer shopping

behavior in India made the following observations with respect to selection of stores by consumers: Traveling time : If the desired products are available in the neighborhood store, consumers would not visit the far away supermarket or hypermarket. Range of products offered : If the consumer shopping list is such that the required goods are not available in the neighborhood store, they would visit the supermarket or hypermarket. Services offered : The neighborhood stores offer personalized services such as credit facilities, free home delivery service, sms service and extended working hours. The organized retail formats offer good ambience, promotional offers and a good shopping experience. Socio Economic background : The socio-economic background of consumers determine their lifestyles and the kind of stores they would be comfortable to shop. Initially, the lower income group was hesitant to shop at organized retail formats as they felt that such stores were for the elite. However, over a period of time, the retailers adopted steps to change the perception of such consumers.

Opportunities
According to a report by McKinsey & Company, the rise in disposable income of Indian consumers would be a major factor in contributing to the growth of retail consumption. The factors contributing to the growth of organized retailing in India include growth in working population, double income households, one stop destination for all needs, changing consumer lifestyles and easy availability of credit. Data by Investment Commission of India, 2007 revealed that significant retail opportunities existed in product categories like food and beverage, consumer durables and home improvement. It further forecasted that home improvement and consumer durables would grow at a compounded annual growth rate of 20 % in 10 years time. It further mentioned that India had a significant potential to emerge as a sourcing base for a wide variety of goods for international retailers. Leading international retailers including Tesco, GAP and JC Penney are already sourcing from India. A report prepared by Ernst and Young for India Brand Equity Foundation (IBEF) reveals that there are significant opportunities for organized retailers in various cities of India. This is because these cities have households with tremendous spending power and lower penetration of organized retail compared to metro cities such as Delhi, Mumbai and Bangalore. The online retail business progressed in India with growth of internet connections and e-payment service users. Retailers such as ebay.in, indiatimes.com and rediff.com were early entrants. Many small retailers also had their portals for online sale of merchandize. 70 % of Indias population is in the rural areas which offer tremendous opportunity for retailers. Key players in the rural retail market includ Indian Tobacco Companys Choupal Sagaar, DCM Shriram group owned Hariyali

Kisan Bazaar and Indian Oil Corporations Kisan Seva Kendra among others. The main product categories marketed in rural areas include seeds, urea, FMCG goods and farm produce. Airport retailing is another emerging area for retailers. Raheja Groups Shoppers Stop partnered with Nuance Group, a leading Swiss global retailer to set up retail outlets at Bangalore and Hyderabad airports. Airport retailing offers opportunities in luggage, clothing and related accessories, food and beverage and souvenirs. The growing tourism industry has created significant demand for retailers dealing in artifacts.

Challenges
Logistics infrastructure in India has always been a cause of concern for global retailers. Lukas Ruecker, who oversaw emerging market business as vice president at Staples commented that the overall logistics is so much more difficult from a port in Chennai or a port in Shanghai to stores. Sumant Sinha, CEO, Aditya Birla Retail, is of the view that the logistics and supply chain infrastructure has to be built from scratch; it's really about creating a new industry. India's retail industry seems promising but "is tempered by the fact that the country is grappling with severe infrastructure and policy issues," says the CII in the report it produced with A. T. Kearney. Cold chains (distribution chains for perishable items), warehousing and logistics infrastructure will create problems for global retailers if the Indian government does not focus on infrastructure. The report also points at inadequate quality control and the lack of a skilled workforce in India. Global retailers would have to customize their formats to suit Indian conditions. The Government of India fears that entry of global retail giants could put many retailers in the unorganized sector out of business. However, discussions at various retail forums have often proved that there is enough space for organized and unorganized retail in the country. Inspite of repeated discussion on the issue at various government levels to further liberalize the retail sector, no headway had been made. Indian retailers in organized and unorganized sector had geared themselves to face global competition. The organized retailers have focused on mall space acquisition, store expansion and diversification into various formats in addition to above and below the line promotional activities. The unorganized sector has focused on value added services. A report by PriceWaterhouseCoopers and Confederation of Indian Industry mentioned that small retailers in India had inherent advantages. They were located next to the consumer, making it convenient for top-up purchases. They knew the consumers well, some even by name. The report further mentioned that fixed costs for small retailers was very low thereby reducing their breakeven point to as low as 46 % of sales. They were also focusing on re-organizing their stores and stocking new products.

The road ahead for Wal-Mart

Industry observers wonder whether the failure of Wal-Mart in three major countries can be taken as a backdrop to predict its future in India. Consumer Behaviour experts are of the view that global retailers would have to understand shopping behavior in India and provide answers to why should Indians consistently shop at foreign retail outlets? Asitava Sen, retail industry specialist, PricewaterhouseCoopers., sharing his views in an article mentioned, "Infrastructure is a significant challenge, especially while managing fresh produce, where producers are fragmented and there is multiple level of intermediation causing waste of up to 30% to 40% in the supply chain. Real estate is scarce and expensive in comparison to the quality being offered. An inadequate supply of skilled and trained people is another significant challenge."

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CHALLENGES AHEAD

FOR RETAILING IN INDIA & FOREIGN COUNTRIES: CHALLENGES AHEAD FOR RETAILING IN INDIA & FOREIGN COUNTRIES BY KANIKA RUSTAGI (00924001809) SANDEEP SACHDEVA (06724001809) BBA(B&I) 2 nd SHIFT 6 th SEM

What is Retailing?: What is Retailing? Retailing in India is one of the pillars of its economy and accounts for about 15% of its GDP. The Indian retail market is estimated to be US$450 billion and one of the top five retail markets in the world by economic value. India is one of the fastest growing retail market in the world, with 1.2 billion people. India's retailing industry is essentially owner manned small shops. In 2010, larger format convenience stores and supermarkets accounted for about 4 percent of the industry, and these were present only in large urban centers. India's retail and logistics industry employs about 40 million Indians (3.3% of Indian population). Until 2011, Indian central government denied foreign direct investment (FDI) in multi-brand retail, forbidding foreign groups from any ownership in supermarkets, convenience stores or any retail outlets. Even single-brand retail was limited to 51% ownership and a bureaucratic process. In November 2011, India's central government announced retail reforms for both multi-brand stores and single-brand stores. These market reforms paved the way for retail innovation and competition with multi -brand retailers such as Walmart , Carrefour and Tesco, as well single brand majors such as IKEA, Nike, and Apple. The announcement sparked intense activism, both in opposition and in support of the reforms. In December 2011, under pressure from the opposition, Indian government placed the retail reforms on hold till it reaches a consensus. In January 2012, India approved reforms for single-brand stores

welcoming anyone in the world to innovate in Indian retail market with 100% ownership, but imposed the requirement that the single brand retailer source 30 percent of its goods from India. Indian government continues the hold on retail reforms for multi-brand stores. IKEA announced in January that it is putting on hold its plan to open stores in India because of the 30 percent requirement. Fitch believes that the 30 percent requirement is likely to significantly delay if not prevent most single brand majors from Europe, USA and Japan from opening stores and creating associated jobs in India.

PowerPoint Presentation: FINAL CONSUMER CHANNEL OF DISTRIBUTION MANUFACTURER WHOLESALER RETAILER

PowerPoint Presentation: Manufacturer Brand A Manufacturer Brand B Manufacturer Brand C Manufacturer Brand D Manufacturer Brand E Manufacturer Brand F Wholesaler Wholesaler Wholesaler Retailer Brand A customers Brand B customers Brand F customers Brand E customers Brand D customers Brand C customers RETAILERS ROLE IN SORTING PROCESS

THE INDIAN RETAIL MARKET: THE INDIAN RETAIL MARKET Indian market has high complexities in terms of a wide geographic spread and distinct consumer preferences varying by each region necessitating a need for localization even within the geographic zones. India has highest number of outlets per person (7 per thousand) Indian retail space per capita at 2 sq ft (0.19 m 2 )/ person is lowest in the world Indian retail density of 6 percent is highest in the world.1.8 million households in India have an annual income of over 45 lakhs (US$ 85,500). While India presents a large market opportunity given the number and increasing purchasing power of consumers, there are significant challenges as well given that over 90% of trade is conducted through independent local stores. Challenges include: Geographically dispersed population, small ticket sizes, complex distribution network, little use of IT systems, limitations of mass media and existence of counterfeit goods.

MAJOR INDIAN RETAILERS: MAJOR INDIAN RETAILERS Indian apparel retailers are increasing their brand presence overseas, particularly in developed markets. While most have identified a gap in countries in West Asia and Africa, some majors are also looking at the US and Europe. The low-intensity entry of the diversified Mahindra Group into retail is unique because it plans to focus on lifestyle products. The Mahindra Group is the fourth largest Indian business group to enter the business of retail after Reliance Industries Ltd, the Aditya Birla Group, and Bharti Enterprises Ltd. The other three groups are

focusing either on perishables and groceries, or a range of products, or both. REI AGRO LTD Retail: 6TEN and 6TEN kirana stores Future Groups-Formats: Big Bazaar, Food Bazaar, Pantaloons, Central, Fashion Station, Brand Factory, Depot, all, E-Zone etc. Raymond Ltd.: Textiles, The Raymond Shop, Park Avenue, Park Avenue Woman, Parx, Colourplus, Neck Ties & More, Shirts & More etc. Fabindia: Textiles, Home furnishings, handloom apparel, jewellery RP- Sanjiv Goenka Group Retail-Formats: Spencers Hyper, Spencer's Daily, Music World, Au Bon Pain (International bakery cafeteria), Beverly Hills Polo Club The Tata Group-Formats: Westside, Star India Bazaar, Steel junction, Landmark, Titan Industries with World of Titans showrooms, Tanishq outlets, Croma. Reliance Retail-Formats: Reliance MART, Reliance SUPER, Reliance FRESH, Reliance Footprint, Reliance Living, Reliance Digital, Reliance Jewellery, Reliance Trends, Reliance AutoZone, iStore

PowerPoint Presentation: Next retail India Ltd (Consumer Electronics)( www.next.co.in ) Vivek Limited Retail Formats: Viveks, Jainsons, Viveks Service Centre, Viveks Safe Deposit Lockers PGC Retail -T-Mart India , Switcher, Respect India, Grand India Bazaar,etc., Subhiksha-Formats: Subhiksha supermarket pharmacy and telecom discount chain. Trinethra- Formats: Fabmall supermarket chain and Fabcity hypermarket chain Vishal Retail Group-Formats: Vishal Mega Mart BPCL-Formats: In & Out German Metro Cash & Carry Shoprite Holdings-Formats: Shoprite Hyper Paritala stores bazar: honey shine stores Aditya Birla Group - "More" Outlets Kapas- Cotton garment outlets Nmart Retails with 71 operating Stores till now and total 153 Stores in India and 1 to open in Dubai Shortly. (Expected to be 150 by the end of Aug2012)(www.nmart.co.in) Reliance ADAG Retail-Format: Reliance World K Raheja Corp Group-Formats: Shoppers Stop, Crossword, Hyper City, Inorbit Mall Nilgiris Formats: Nilgiris supermarket chain Marks & Spencer: Clothing, lifestyle products, etc. Lifestyle International-Lifestyle, Home Centre, Max, Fun City and International Franchise brand stores. Pyramid Retail-Formats: Pyramid Megastore, TruMart

ENTRY OF MNCs: ENTRY OF MNCs The world's largest retailer by sales, Wal-Mart Stores Inc and Sunil Mittal's Bharti Enterprises have entered into a joint venture agreement and they are planning to open 10 to 15 cash-and-carry facilities over seven years. The first of the stores, which will sell groceries, consumer appliances and fruits and vegetables to retailers and small businesses, is slated to open in north India by the end of 2008. Carrefour, the worlds second largest retailer by sales, is planning to set up two business entities in the country one for its cash-and-carry business and the other a master franchisee which will lend its banner, technical services and know how to an Indian company for direct-to-consumer retail. The worlds fifth largest retailer by sales, Costco Wholesale Corp (Costco) known for its warehouse club model is also interested in coming to India and waiting for the right opportunity. Opposition to the retailers' plans have argued that livelihoods of small scale and rural vendors would be threatened. However, studies have found that only a limited number of small

vendors will be affected and that the benefits of market expansion far outweigh the impact of the new stores. Tesco Plc., plans to set up shop in India with a wholesale cash-and-carry business and will help Indian conglomerate Tata group to grow its hypermarket business.

Challenges for retailing In india: Challenges for retailing In india The organised retail sector in India has been witnessing various issues and challenges which are proving to be a hurdle for its fast-paced growth. Even though the organised retail sector is in a very nascent stage in India, it provides ample opportunities for retailers, and mitigation of a few challenges will help the sector attain higher economies of scale and growth. Elucidated below are the challenges and risks that the sector faces: Global economic slowdown Competition from the unorganised sector Retail sector has no recognition as an industry High real-estate costs Lack of basic infrastructure Supply-chain inefficiencies Challenges with respect to human resources Margin Pressure

Global economic slowdown impacting consumer demand: Global economic slowdown impacting consumer demand The current contraction in overall growth has not been so severe ever since the one witnessed during World War II. The sub prime-triggered crisis in the US during end of 2007 gradually spread across other parts of the world; as a the fallout of this crisis, credit availability dropped sharply in advanced economies and their GDP growth contracted incessantly during the last quarter of 2008. The financial crisis continued to trouble advanced and developing economies in spite of policymakers attempts to replenish liquidity in these markets. The financial crisis and global economic slowdown resulted in job losses around the world, which weakened consumer demand. The unemployment rate remained high in the US during first quarter of 2009, Europe and emerging economies like Brazil; for instance, the annual unemployment rate in the US reached 5.8% in 2008 from 4.6% in 2007, which further went up to 9.4% in May 2009. In future, the rising unemployment rates in advanced economies as well as economies that are heavily export-oriented will further dampen consumer spending; as a result, the retail sectors growth will remain under threat. In the US, the retail trade sales growth (both retail and food services) contracted by 0.7% in 2008 from 3.3% growth in 2007. The downward trend in retail trade sales continued during the first six months of 2009 (Jan- June), as it went down by 9.3%13 as compared with the previous year. In EU27 countries, the total retail trade in volume terms continued to contract during the first five months of 2009; for instance, during May 2009, the retail trade in volume terms in EU27 contracted by 3.1% against the same period in the previous year .

Consumption declines in the advanced economies: Consumption declines in the advanced economies Private consumption expenditure is an important indicator of overall economic growth. In the last couple of quarters,

the decline in consumption has further affected the global economic downturn. Moreover, widespread financial crisis severely hit credit availability and household disposable income. For instance, US households lost 20% (US$ 13 trillion)14 of their net worth as a percentage of disposable income from the second quarter of 2007 to the fourth quarter of 2008. The stock prices across the world started falling during the second quarter of 2007 and continued its losses throughout 2008; the global stock markets lost between 40-60% in dollar terms that translated to a huge loss of global wealth in 2008. The personal disposable income (at current prices) in the US registered negative growth (3.9% and 2.1%) during the last two quarters of 2008, respectively. The consumer demand situation was aggravated further by reduced capital availability and consequent fall in investments.

Competition from the unorganised sector: Competition from the unorganised sector Organised retailers face immense competition from the unorganised retailers or kirana stores (mom-and-pop stores) that generally cater to the customers within their neighbourhood. The unorganised retail sector constitutes over 94% of Indias total retail sector and thus, poses a serious hurdle for organised retailers. If put numerically, the organised retailers are facing stiff competition from over 13 million kirana stores that offer personalized services such as direct credit to customers, free home delivery services, apart from the loyalty benefits. During the current economic slowdown, the traditional kirana stores adopted various measures to retain their customers, which directly affected organised retailers. Generally, it has been observed that customers shop impulsively and end up spending more than what they need at organised retail outlets; however, in kirana stores, they stick to their needs because of the limited variety. During a downturn, many customers may not like to spend more as is evident from the past few months trend that shoppers are increasingly switching from organised retail stores to kiranas .

Retail sector yet to be recognized as an industry : Retail sector yet to be recognized as an industry The retail sector is not recognized as an industry by the government even though it is the second-largest employer after agriculture. Lack of recognition as an industry affects the retail sector in the following ways: Due to the lack of established lending norms and consequent delay in financing activity, the existing and new players have lesser access to credit, which affects their growth and expansion plans The absence of a single nodal agency leads to chaos, as retailers have to oblige to multiple authorities to get clearances and for regular operations

High real estate costs : High real estate costs Even though the real estate prices have subsided recently due to the slowdown in economies and the financial crises, these prices are expected to go up again in the near future. Presently the sector faces high stamp duties, pro -

tenancy acts, the rigid Urban Land Ceiling Act and the Rent Control Act and timeconsuming legal processes, which causes delays in opening stores. Earlier on the lease or rents on properties were very high (among the highest in the world) at some prominent locations in major cities. The profitability of retail companies were affected severely because real estate costs constituted a major part of their operating expenses. Now companies are moving out from prominent malls of tier I cities and are re-negotiating the rental agreements with landlords to reduce costs. Some are even focusing on setting up shops in tier II and tier III cities.

Lack of basic infrastructure : Lack of basic infrastructure Poor roads and lack of cold chain infrastructure hampers the development of food retail in India. The existing players have to invest substantial amounts of money and time in building a cold-chain network.

Supply-chain inefficiencies: Supply-chain inefficiencies Supply chain needs to be efficiently-managed because it has a direct impact on the companys bottomlines. Presently the Indian organised retail has an efficient supply chain but it appears efficient only when compared with the unorganised sector. On an international level the Indian organised retailers fall short of international retailers like Wal-Mart and Carrefour in terms of efficiencies in supply chain. In the following paragraphs some key challenges that the retailers face during procuring goods from suppliers to delivering the same to end-customers are discussed. Inventory management is the first challenge that retailers face at the local store level as well as at the warehouse level. Excess inventory often leads to an increase in inventory costs, and then to lower profits, so retailers like Pantaloons and Shoppers Stop have IT systems in place for inventory management. SCM-IT has helped retailers to plan their stock outs, replenish their stock on time, move stock from warehouse to stores, maintain adequate stock at a store to match consumer preferences etc. However, the retailer may still face a big challenge in terms of efficiently implementing the supply-chain software across stores and integrating it with the central warehouse, which can be a time-consuming process, requiring trained personnel. Logistics is another challenge related to the supply chain. It is imperative for any organised food and grocery retailer to establish a robust cold chain. Amul is the best example of this scenario, as it has developed a cold storage chain across India. Until and unless organised retailers like Reliance and Food Bazaar fully develop integrated-cold chains, they would continue to incur loss of considerable amount of money through wastages of perishable items while moving huge quantities from one place to another. The third challenge related to the supply chain is procurement. Big organised retailers enjoy economies of scale based on their size and expansion plans. The economical benefits of scale in procurement are achieved when procurement is made in thousands or millions of units; however, the main challenge here is to procure adequate amount of stock according to customer requirements, failing which the resultant rise in inventory can affect bottomlines.

Challenges with respect to human resources : Challenges with respect to human resources The Indian organised retail players shell out more than 7% of sales towards personnel costs. The high HR costs are essentially the costs incurred on training employees as there is a severe scarcity for skilled labour in India. The retail industry faces attrition rates as high as 50%, which is high when compared to other sectors also. Changes in career path, employee benefits offered by competitors of similar industries, flexible and better working hours and conditions contribute to the high attrition.

Shrinkage : Shrinkage Retail shrinkage is the difference between the book value of stock and the actual stock or the unaccounted loss of retail goods. These losses include theft by employees, administrative errors, shoplifting by customers or vendor fraud. According to industry estimates, nearly 3-4% of the Indian chains turnover is lost on account of shrinkage. The organised industry playershave invested IT, CCTV and antennas to overcome the problem of shrinkage.