Retail Management: Individual Assignment-II

KUNTAL KUMAR MONDAL

ROLL- 18202094
SEC- B
MBA-II
ORGANIZED RETAILING
IN INDIA
 Retail Management: Individual Assignment-II
'Organised Retailing in India'

INTRODUCTION: The retail sector has played a phenomenal role throughout the world in
increasing productivity of consumer goods and services. The retail industry in India has come
forth as one of the most dynamic and fast paced industries with several players entering the
market. It is also the second largest industry in US in terms of number of employees and
establishments. The Indian retail industry is the largest among all the industries, accounting
for over 10 percent of the country’s GDP and around 8 percent of the employment.
According to an estimate unorganized retailing sector has 97 per cent presence, whereas,
organized retailing accounts merely three percent. The main challenge facing the organized
sector is the competition from unorganized sector. Unorganized retailing has been there in
India for centuries, these are named as mom-pop stores. The main advantage in unorganized
retailing is consumer familiarity that runs from generation to generation. It is a low cost
structure; they are mostly operated by owners, have very low real estate and labour costs and
have low taxes to pay.
RETAIL IN INDIA – HISTORICAL PERSPECTIVE: The Indian retail industry is
divided into organized and unorganized sectors. Organized retailing refers to trading
activities undertaken by licensed retailers, that is, those who are registered for sales tax,
income tax, etc. These include the corporate-backed hypermarkets and retail chains, and also
the privately owned large retail businesses. Unorganized retailing, on the other hand, refers to
the traditional formats of low-cost retailing, such as the local kirana shops, owner manned
general stores, paan/beedi shops, convenience stores, hand cart and pavement vendors, etc.
(a) Evolution of organized retailing in India: Retailing, one of the largest sectors in the
global economy, is going through a transition phase in India. For a long time, the corner
grocery store was the only choice available to the consumer, especially in the urban areas.
This is slowly giving way to international formats of retailing. The traditional food and
grocery segment has seen the emergence of supermarkets/grocery chains, convenience stores
and fast-food chains.
The traditional grocers, by introducing self-service formats as well as value-added services
such as credit and home delivery, have tried to redefine themselves. However, the boom in
retailing has been confined primarily to the urban markets in the country. Even there, large
chunks are yet to feel the impact of organized retailing. There are two primary reasons for
this. First, the modern retailer is yet to feel the saturation’ effect in the urban market and has,
therefore, probably not looked at the other markets as seriously. Second, the modern retailing
trend, despite its cost-effectiveness, has come to be identified with lifestyles.
In order to appeal to all classes of the society, retail stores would have to identify with
different lifestyles. In a sense, this trend is already visible with the emergence of stores with
an essentially `value for money’ image. The attractiveness of the other stores actually appeals
to the existing affluent class as well as those who aspire to be part of this class. Hence, one
can assume that the retailing revolution is emerging along the lines of the economic evolution
of society.
It was only in the year 2000 that the economists put a figure to it: Rs. 400,000 crore (1 crore
= 10 million) which is expected to develop to around Rs. 800,000 crore by the year 2005 – an
annual increase of 20 per cent. Retailing in India is unorganized with poor supply chain

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management perspective. According to a recent survey by some of the retail consulting
bodies, an overwhelming proportion of the Rs. 400,000 crore retail market is
UNORGANISED. In fact, only a Rs. 20,000 crore segment of the market is organized. As
much as 96 per cent of the 5 million-plus outlets are smaller than 500 square feet area. This
means that India per capita retailing space is about 2 square feet (compared to 16 square feet
in the United States). India’s per capita retailing space is thus the lowest in the world (source:
KSA Techno Pak (I) Pvt Ltd, the India operation of the US-based Kurt Salmon Associates).
Currently the retail landscape is filled with Supermarket chains with over 1000 outlets all
over the country to increase to around 5000 by the 2005. The success of a couple of
Hypermart’s indicate the evolution of hypermarkets in the country prominent among them are
Giant, Metro, Big Bazaar models. While the average bill value at a supermarket is in the
range of Rs.300 per bill, the average bill amount at a Hypermarket is in the range of Rs.750-
1000, indicating that the model is in tune with the global models where the average spend is
increasing with the shopping experience.
While barter is considered to be the oldest form of retail trade, retail in India has evolved to
support the unique needs of our country given its size and complexity. Haats, Mandis and
Melas have always been a part of the Indian landscape. They still continue to be present in
most parts of the country and form an essential part of life and trade in various areas.
The PDS or the Public Distribution System would easily emerge as the single largest retail
chain existing in the country. The evolution of the public distribution of grains in India has its
origin in the ‘rationing’ system introduced by the British during the World War II. The
system was started in 1939 in Bombay and subsequently extended to other cities and towns.
By the year 1946, as many as 771 cities/towns were covered. The system was abolished post
war on attaining Independence, India was forced to reintroduce it in 1950 in the face of
renewed inflationary pressures in the economy. A detailed discussion forms a part.
Tracing the evolution of Indian retail would be incomplete without a mention of the canteen
Stores Department and the Post Offices in India.

The Khadi & Village Industries (KVIC) was also set up post-independence. Today, there are
more than 7,050 KVIC stores across the country. The co-operative movement was again
championed by the government, which set up Kendriya Bhandars in 1963. In Maharashtra,
Bombay bazaar, which runs stores under the Sahakari Bhandar and Apna Bazaars run a large
chain of co-operative stores.

In the past decade, the Indian marketplace has transformed dramatically. However, from the
1950’s to the 80’s investments in various industries was limited due to the low purchasing
power in the hands of the consumer and the government’s policies favouring the small scale
sector. Initial steps towards liberalization were taken in the period of 1985-90. It was at this
time that many restrictions on private companies were lifted, and in the 1990’s, the Indian
economy slowly progressed from being state led to becoming ‘market friendly’.

While independent retail stores like Akbarally’s, Vivek’s and Nalli’s have existed in India for
a long time, the first attempts at organized retailing were noticed in the textiles sector. One of
the pioneers in this field was Raymond’s, which set up stores to retail fabric. It also
developed dealer network to retail its fabric. These dealers sold a mix of fabrics of various
textile companies. The Raymond’s distribution network today comprises of 20,000 retailers
and over 429 showrooms across the country.

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Other textile manufacturers who also set up their own retail chains were Reliance which set
up Vimal showrooms and garden Silk Mills with Garden Vareli. It was but natural that with
the growth of textile retail, readymade branded apparel could not be far behind and the next
wave of organized retail in India saw the likes of Madura garments, Arvind Mills etc set up
showrooms for branded men’s wear. With the success of the branded men’s wear store, the
new age departmental store arrived in India in the early nineties.

Traditional formats:

1) Itinerant salesman
2) Haats
3) Moles
4) Mandis, etc

Established formats:

1) Kirana
2) Convenience / Department stores
3) Company / Multi brand showrooms
4) PDS / Fair Price shops
5) Co-operative stores
6) Pan / beedi shops

Emerging formats

1) Exclusive retail outlets

2) Hypermarkets
3) Internal retail
4) Malls / Specialty malls
5) Multiplexes
6) Rural oriented formats
7) Fast food outlets
8) Service galleries etc

This was in a sense, the beginning of a new era for retail in India. The fact that post
liberalization, the economy had opened up and a new large middle class with spending power
had emerged, helped shape this sector. The vast middle class market demanded value for
money products. The emergence of the modern Indian housewife, who managed her home
and work led to a demand for more products, a better shopping ambience, more convenience
and one stop shopping. This has fuelled the growth of departmental stores, supermarkets and
other specialty stores. The concept of retail as entertainment came to India with the advent of
malls. The development of malls is now visible not only in the major metros but also in other
parts of the country. With revolutionary changes taking place in the worldwide economy and
the growing importance of 24/7 operation of the business, the retail sector has been
undergoing a paradigm shift across the world. The world of today has turned into a global
village; consumerism is having a huge impact on the contemporary retail business, and
technological advancements have created opportunities as well as several challenges for the
retail industry. With the advent of the internet, the growth in the retail industry has been

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impressive due to the benefits of the economies of scale and also the expansion of business
across the geographical boundaries at B2B (Business to Business) and B2C (Business to
Consumer) levels.

Several studies have proven that the Indian Retail Market is one of the top emerging markets
in the world. For Indian Economy, the retail sector is one of the pillars, which contributes
towards a growth rate of approximately 10% of the total GDP and towards the total
employment around 8%. According to the latest studies, Indian retail market is ranked
amongst the top 5 retail markets worldwide estimated around 600 Billion US Dollars.

Indian Retail industry is expected to have a bright future and offers numerous opportunities
for progress and growth. According to GRDI reports, some favourable factors which support
the growth of retail business are: rise in fashion loving and brand conscious young
population, extensive urbanization, and expansion of opportunities for new investment in
retail sector. As per the report of FICCI (2011), a positive trend in the Indian retail sector can
be attributed to a sharp rise in the Middle-Income segment and growth in domestic
consumption. Moreover, studies suggest that with changes in the consumer buying
preferences, demographics composition and increasing preference for mall culture, there has
been a transition from the traditional retail formats to a more organized form of retailing, as a
result of which the Indian Retail market is expected to witness an optimistic trend in future as
well.

The retail sector in Indian context can be subdivided into Organized and Unorganized retail
sectors. Organized retailing constitutes licensed retailers registered under sales and income
tax, involved in carrying out their day-to-day trading functions. This may include large
hypermarkets, large-scale owned retail ventures owned privately or the retail chains as well.
On the other hand, unorganized retailing comprises of a sizeable proportion of small retailers
operating their own Kirana, paan, beedi shops, general stores, chemists, hawkers, etc. In
developed economies, organized retail enjoys a predominant share of around nearly 75-80%
as against traditional retailing, while in developing economies; unorganized sector enjoys a
predominant share in the retail market.

The retail sector in India is highly fragmented or distributed. Unorganized retail constitutes a
significant share of over 90%, while the organized retail segment is just in a start-up stage
and has witnessed an impressive growth over last few years. Retail in India originated with
the Mom and Pop Stores and Kirana Stores, which used to cater to the requirements of the
local population. Over a period, the government encouraged rural retail and provided support
for establishing Khadi & Village industries. During 1980’s, the retail scene in India changed
further with the opening up of the economy, as a result of which leading retail chains in
textile sector were established like Raymond’s, S Kumar’s and Bombay Dyeing.
Subsequently, Titan launched its retail showroom, and the organized retailing started
strengthening its grip in the Indian market. By 1995, major retail outlets such as Food World,
Music World, and Planet M, Crossword entered the Indian retail market. Large retail formats
and stores like shopping malls, hypermarkets and supermarkets came into operation for
providing best of the class experience to the customers. The retail sector evolution witnessed
improvements in the distribution set up, supply chain management, technological
innovations, back end operational support and excellence and increase in business alliances in
the form of collaborative ventures, mergers, acquisitions, joint ventures, etc.

Major players in the retail industry like Tata Group, Future Group, Bharti, and Reliance, etc.
have stepped forward with aggressive and ambitious investment plans in the retail sector as a

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part of their business expansion strategy across various verticals. Moreover, with the
introduction of retail reforms by the Government of India which allows FDI of 51% in multi
brand stores in India, organized retail sector is expected to capture a major share of the
market in the upcoming future. According to Assocham study, factors such as globalization
and liberalization of economies, increase in the purchasing power of the consumers, changing
lifestyle and infrastructural developments, have revolutionized the Indian retail market.
Studies reveal that organized retail market which was just at 7% of the total retail market
share in 2011-12, is expected to attain a total share of over 10% across the retail sector by
2016-17. The estimated growth rate of traditional retail is expected to be around 5% while for
organized retail it is expected to be around 25% by 2020.

Food & Grocery is the major contributor in the entire retail market in India with a total
contribution of almost around 60% of the total retail sector in 2012. This is followed by
Clothing (8%) and Telecom & Mobile (6%) and many others. In organized retailing,
Apparels is the major contributor which accounted for a total contribution of 33% in 2012 to
the retail industry followed by food and grocery (11%). Though, the share of Food & Grocery
segment in organized retailing has shown an impressive growth since last few years. E
Commerce and E Tailing in recent years have redefined the retail landscape and offer a lot of
opportunities to various stakeholders.

(b) Key drivers of organized retailing in India:

The major factors responsible for the growth of organised retailing in India are as
follows:

Retail Industry, one of the fastest changing and vibrant industries that, has contributed to the
economic growth of our country. Within a very sport span of time, Indian retail industry has
become the most attractive, emerging retail market in the world. Healthy economic growth,
changing demographic profile, increasing disposable incomes, changing consumer tastes and
preferences are some of the key factors that are driving growth in the organised retail market
in India.

1. Growth of middle class consumers: In India the number of middle class consumer is
growing rapidly. With rising consumer demand and greater disposable income has given
opportunity of retail industry to grow and prosper. They expect quality products at decent
prices. Modern retailers offer a wide range of products and value added services to the
customers. Hence this has resulted into growth of organised retailing in India.Growing
consumerism would be a key driver for organized retail in India. Rising incomes and
improvements in infrastructure are enlarging consumer markets and accelerating the
convergence (meeting) of consumer tastes.

2. Increase in the number of working women:

Today the urban women are literate and qualified. They have to maintain a balance between

home and work. The purchasing habit of the working women is different from the home

maker. They do not have sufficient time for leisure and they expect everything under one

roof. They prefer one-stop shopping Modern retail outlets therefore offers one store retailing.

3. Value for money:

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Organised retail deals in high volume and are able to enjoy economies of large scale

production and distribution. They eliminate intermediaries in distribution channel. Organised

retailers offer quality products at reasonable prices. Example: Big Bazaar and Subhiksha.

Opportunity for profit attracts more and more new business groups for entering in to this

sector.

4. Emerging rural market:

Today the rural market in India is facing stiff competition in retail sector also. The rural

market in India is fast emerging as the rural consumers are becoming quality conscious. Thus

due to huge potential in rural retailing organised retailers are developing new products and

strategies to satisfy and serve rural customers. In India, Retail industry is proving the

country’s largest source of employment after agriculture, which has the deepest penetration

into rural India.

5. Entry of corporate sector: Large business tycoons such as Tata’s, Birla’s, and Reliance etc.

have entered the retail sector. They are in a position to provide quality products and

entertainment. As the corporate – the Piramals, the Tatas, the Rahejas, ITC, S.Kumar’s, RPG

Enterprises, and mega retailers- Crosswords, Shopper’s Stop, and Pantaloons race to

revolutionize the retailing sector.

6. Entry of foreign retailers:

Indian retail sector is catching the interest of foreign retailers. Due to liberalisation

multinationals have entered out country through joint ventures and franchising. This further is

responsible for boosting organised retailing.

7. Technological impact:

Technology is one of the dynamic factors responsible for the growth of organised retailing.

Introduction of computerization, electronic media and marketing information system have

changed the face of retailing. Organized retailing in India has a huge scope because of the

vast market and the growing consciousness of the consumer about product quality and
services.

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One of the major technological innovations in organised retailing has been the introduction of

Bar Codes. With the increasing use of technology and innovation retailers are selling their

products online with the help of Internet.

8. Rise in income:

Increase in the literacy level has resulted into growth of income among the population. Such

growth has taken place not only in the cities but also in towns and remote areas. As a result

the increase in income has led to increase in demand for better quality consumer goods.

Rising income levels and education have contributed to the evolution of new retail structure.

Today, people are willing to try new things and look different, which has increased spending

habits among consumer.

9. Media explosion:

There has been an explosion in media due to satellite television and internet. Indian

consumers are exposed to the lifestyle of countries. Their expectations for quality products

have risen and they are demanding more choice and money value services and conveniences.

10. Rise of consumerism:

With the emergence of consumerism, the retailer faces a more knowledgeable and demanding

consumer. As the business exist to satisfy consumer needs, the growing consumer expectation

has forced the retail organizations to change their format of retail trade. Consumer demand,

convenience, comfort, time, location etc. are the important factors for the growth of organised

retailing in India.

The retail industry is divided into organised and un-organised sectors. Organised retailing

refers to trading activities undertaken by licensed retailers, that is, those who are registered

for sales tax, income tax, etc.

These include the corporate-backed hypermarkets and retail chains, and also the privately

owned large retail businesses. Un-organised retailing, on the other hand, refers to the

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traditional formats of low-cost retailing, for example, the local kirana shops, owner manned

general stores, paan/beedi shops, convenience stores, hand cart and pavement vendors.

It is important to understand how retailing works in our economy, and what role it plays in

the lives of its citizens, from a social as well as an economic perspective. India still

predominantly houses the traditional formats of retailing, that is, the local kirana shop,

paan/beedi shop, hardware stores, weekly haats, convenience stores, and bazaars, which

together form the bulk.

(c) Highlight the key developments and changing landscape of the Indian retail sector
and the need of hour for Indian retailers to cope up: Although organized retail is only a
decade old to India but the pace at which the retail scenario and practices are getting tried and
tested has been quite remarkable.
We have seen good adoptability to absorb some of the best practices with a touch of
appropriateness of local preferences and style. It has come a long way and Indian Retail
market has become the next frontier for most of the retail and brands practices.
Changes are good and need to be handled with care. Some of the prominent drivers in vogue
are:
Retail Experience: Stores are no more just buying and selling but also to provide unique
experience to customers. It’s a trend that has quickly become the pinnacle of retail success for
both the big brands and the smaller start-ups.
From customer experience perspective, bricks and mortar stores are still extremely relevant;
however, customer experience doesn’t rest entirely in the hands of physical retail.
In this digital era, it’s equally important to ensure that your brand resonates with the
consumer online. Digital marketing is often the beginning of the brand journey and is built to
assist with brand exposure; hopefully diving the in-store footfall.
Promotional features like use of technology, displays and in-store designs, personalization
along with service and operational excellence have been adopted and implemented by brands
to attract footfall at retail store. These help in building an important connect with the
consumers.
How?
One of the large apparel brands Raymond recently launched its flagship store with that boasts
of a double height ‘Live’ façade with LED curtains displaying digital content. This store has
a unique fitting room trial experience with ‘IPad’. The selection appears in the desired size
inside the trial room.
Confluence of online and offline retail: typically referred asOmni-channelphenomenon
where physical and digital channels merging, is fast catching up, shopping centres in India

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are encountering the need to complement physical ambience with online stores. E-commerce
and brick-and-mortar will co-exist and finally reach a level of maturity, translating into sound
business sense for Omni-channel players.
Example: One of the leading footwear brands in India has introduced endless-aisle
technology at one of their stores. This endless-aisle technology allows consumers to browse,
research and pick up their products with convenience. In addition to that, it also allows the
retailer to sell products that are not available in stores.(Adidas)
Research based investments: Big Data, fast data and the data deluge are taking the world of
digital businesses, especially the customer-focused ones, by storm. Retail is no exception as
more and more customers leave digital footprints with every transaction, interaction and
engagement at every retail touch-point — online, mobile, social channels, in-store and even
contact centres.
Technology is enabling businesses to collect shopper data from these touch-points, analyse it
and derive insights to make informed decisions, whether it is to provide a better customer
experience, run marketing promotions or decide product assortment or gain tighter stock
control.
Monitoring and measuring the impact of data-driven initiatives against company-specific
metrics such as gross profit, revenue and inventory carrying costs, can offer significant
benefits.
Example: Shoppers Stop studied the buying patterns of members of its loyalty program
called First Citizen. Based on the insights from it, they shortlisted 900,000 people for a
trouser promotion. The insight gained led to significant increase in the sales.
Brand visibility and communication: Focus on brand visibility is the way to make a brand
enter our subconscious mind by making it visible through out customer journey.
Brand visibility is the single, most powerful message that encourages and motivates the
customer to look at the product along with the brand attributes. Frequent advertising, and
brand activation can help increasing the brand to enter the subconscious mind.
Example: Lots of brands in the mobile space have vastly captured the consumer mind as they
are visible on the road as OOH, at the airports, at multi brand outlets as glow sign boards etc.
Digital transactions/Economy:
Unlike the West, Indians tend to deal majorly in cash, using debit cards if required with even
lesser reliance on credit cards. But post demonetization, consumers have been forced to use
digital channels across various walks of life.
The transition from traditional commerce to e-commerce and now m-commerce has been
driven by the retail segments. Mobile today is more than just a calling device as the internet-
enabled smartphone is becoming a point of commerce — it has transformed into a host of
retail outlets in customer hands. We see consumers now shopping across websites, apps and
in-store as per their convenience. The growth is fuelled by the availability of affordable smart
phones and mobile data plans backed by improving telecom infrastructure. Consumers are
split into two categories: those who shop online and those who don’t because they prefer
experiencing the look and feel of a product.
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The second type of consumer opts for cash transactions, being new to the concept of using
technology as an enabler for financial transactions. Demonetization has thus formalized the
process of going digital for financial transactions where concepts such as UPI (unified
payments interface) have become easily available to consumers with the regulatory and
policy push accelerating the process.
Example: Reliance Retail became the first organized retail chain in India to offer customers
the option of mobile-based UPI app payments at its stores. The new UPI Payments facility is
currently live across more than 200 Reliance retail stores across various formats, including
Reliance Fresh, Reliance Trends, and Reliance Digital, among others, in Mumbai. The pan-
India rollout of this offering at Reliance is also in the pipeline.
Retail sector is poised for substantial growth. Organized retailing will be growing at a rate of
more than 18-20% CAGR. E-tailing will form a significant part of the revenue for various
retailers. Apart from cashless transactions, changes in the regulatory environment with FDI,
GST and ease of doing business, will obviously augur well for the retail industry.
(d) Comparison of the current trends of organised retailing in India Vis-a Vis the global
scenario: India is a country having one of the most unorganized retail markets. 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% retailers function in less than 500 square feet of shopping
space. The Indian retail sector is estimated at around Rs 900,000 crore, 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 take advantage of this growth and aim to grow, diversify and introduce new
formats and 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, new age book stores, every-day-low-price stores,
computers and peripherals stores, office equipment stores and home/building construction
stores. Every retail category has been attacked, by the organized players today. 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.
To illustrate, the Indian lifestyle/fashion retail scene is already exhibiting the following
characteristics, which do not augur well for its future.

Lack of store differentiation: Leading retail stores like Shoppers Stop, Lifestyle, Ebony,
Globus, and Pyramid, offer common brands, similar ambience, and a commitment to
improved service. Where is the scope for differentiation and brand building?

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Merchandising muddle: Some retailers have still been able to maintain their ground in the
market in spite of the arrival of new entrants. This is because these retailers exploit what they
know best — what the customer wants with regard to product, selection and price — and
ensure their customers do not go back disappointed. Consumer insights built over their years
of Experience in business is helping them to hold the fort against the onslaught of the new
players on the horizon. India’s cultural diversity poses additional challenges to the
merchandisers requiring them to be aware of local tastes and to be able to compete with the
local retailer in terms of market knowledge and speed of response. While technology and
systems are no doubt enablers, there can be little substitute for experience and insight.

Lack of labels/suppliers: Organized Indian retailing has to face the situation of lack of
professional suppliers who are accustomed to deadlines, systematic in their production and
consistent with their quality. Often, the local suppliers do not have financial strength or
production infrastructure or discipline. Indian merchandisers are forced to compromise due to
a true lack of choice — which leads to huge unsold stocks and reduced profitability to the
retailers.

Discounting: Given widespread availability of the same brands, large retailers have to cope
with the phenomenon of discounts offered by the smaller retailers. In a middle class
dominated, price-sensitive market like India, price manipulation is a strong weapon in the
arsenal of the small independent retailer. The large retailers themselves further dilute the
strength of the retail market. Deep price cuts may not be the answer to maintain their
relevance against the small retailers nor does it auger well for the brand building of the store.

Limited margins and high real estate costs: Cost of prime land for the retail store is
prohibitive. Land prices in prime localities across the metros have themselves become a
major deterrent to sustaining a profitable retailing model for organized players. A number of
the new chains have therefore preferred to spread in smaller metros, hoping to offset lower
revenue potential with lower real estate costs.

‘Time abundant’ consumers: In recent years, it would seem that the consumer has thrown the
adage ‘time is money’ to the winds. The customer is willing to spend more time if he/she is
getting a better deal. Scarcity of time seems to be the prerogative only of a few consumers.

Challenges of Retailing in India

In India the Retailing industry has a long way to go, and to become a truly flourishing
industry, retailing needs to cross the following hurdles.
* The first challenge facing the organized retail sector is the competition from unorganized
sector.
* In retail sector, Automatic approval is not allowed for foreign investment.
* Taxation, which favours small retail businesses.
* Developed supply chain and integrated IT management is absent in retail sector.
* Lack of trained work force.
* Low skill level for retailing management.
* Intrinsic complexity of retailing- rapid price changes, threat of product obsolescence and

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low margins.

Growth drivers in India for retail sector

o Rising incomes and improvements in infrastructure are enlarging consumer markets and
accelerating the convergence of consumer tastes.
o Liberalization of the Indian economy
o Increase in spending Per capita Income.
o Advent of dual income families also helps in the growth of retail sector.
o Shift in consumer demand to foreign brands like McDonalds, Sony, Panasonic, etc.
o Consumer preference for shopping in new environs
o The Internet revolution is making the Indian consumer more accessible to the growing
influences of domestic and foreign retail chains. Reach of satellite T.V. channels is helping in
creating awareness about global products for local markets.
o About 47% of India's population is under the age of 20; and this will increase to 55% by
2015. This young population, which is technology-savvy, watch more than 50 TV satellite
channels, and display the highest propensity to spend, will immensely contribute to the
growth of the retail sector in the country.
o Availability of quality real estate and mall management practices
o Foreign companies' attraction to India is the billion-plus population.
Different Forms of Retailing: Emergence of new formats of retailing in India
Popular Formats
o Hyper marts
o Large supermarket
o Mini supermarkets
o Convenience store
o Discount/shopping list grocer
o Traditional retailers trying to reinvent by introducing self-service formats as well as value-
added services such as credit, free home delivery etc.

The Indian retail sector can be broadly classified into:

a) Food Retailers
b) Health and beauty Products
c) Clothing and Footwear
d) Home Furniture & Household goods
e) Durable goods
f) Leisure & Personal Goods

Malls in India:
Over the last 2-3 years, the Indian consumer market has seen a significant growth in the
number of modern-day shopping centres, popularly known as ‘malls’. There is an increased
demand for quality retail space from a varied segment of large-format retailers and brands,
which include food and apparel chains, consumer durables and multiplex operators.

Retail as an Employment Generator

The retail sector can generate huge employment opportunities, and can lead to job-led
economic growth. In most major economies, ‘services’ form the largest sector for creating

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employment. The retail sector in India employs nearly 21 million people, accounting for
roughly 6.7% of the total employment. However, employment in organized retailing is still
very low, because of the small share of organized retail business in the total Indian retail
trade. The share of organized retailing in India, at around 2%, is abysmally low, compared to
80% in the USA, 40% in Thailand, or 20% in China, thus leaving the huge market potential
largely untapped. A modern retail/retail services sector has the potential of creating over 2
million new (direct) jobs within the next 6 years in the country (assuming only 8-10% share
of organized retailing), according to Arvind Singhal, CMD, KSA Techno Pak. Retail can
create as many new jobs as the BPO/ITES sector in India. A strong retail front-end can also
provide the necessary fillip to agriculture & food processing, handicrafts, and small &
medium manufacturing enterprises, creating millions of new jobs indirectly. Through its
strong linkages with sectors like tourism and hospitality, retail has the potential of creating
jobs in these sectors also.

The Global Retail Scenario

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 world-wide. 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 V/s Indian Retail

Large format retail businesses dominate the retail landscape in the United States and across
Europe, in terms of retail space, categories, range, brands, and volumes. Indian retail industry
cannot hope to learn much by merely looking at the Western success stories in retail. Their
scales of operations are very huge, the profit margins that they earn are also much higher and
they operate in multiple formats like discount stores, warehouses, supermarkets, departmental
stores, hyper-markets, convenience stores and specialty stores. The economy and lifestyle of
the West is not in line with that of India and hence the retailing scene in India has not evolved
in the same format as the West nor can we learn valuable lessons from their style of
operations. In retailing, the conventional wisdom used to be, that, the critical success factor
was location. But precise location no longer matters and geo-demographics are increasingly
becoming irrelevant. The leading multiple chain retailers, superstores and malls create their
own centres of gravity, attracting customers by car, bus, train or even by plane to wherever
they are located. The following factors still pose a challenge for the Indian retailers:

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Geographic saturation
The end of the nineties has signified a turning tide of retailer power. The limit to retail
ambition is geographic saturation. Many retailers have started postponing their store
expansion plans. The track record of some of their international store expansions is also not
promising.

Category killer competition

The threat of saturation is accompanied by a new competition from the low cost category
killers. Specialist competition is eating away at the market share and forcing down the prices
and gross margins of the multiple chains.

Alternative shopping channels

The newest retail format that is showing growth and is more frightening for retailers than for
consumers, is the internet. The potential for on-line shopping which is growing questions
retailers’ investments in more physical sites and stores and makes it imperative that they too
explore the new agenda of ‘E-retailing’ or ‘e-tailing’.
(e) Summarize the project report by illustrating the opportunities and bottlenecks of
organised retailing in India:
This paper provides detailed information about the growth of retailing industry in India. It
examines the growing awareness and brand consciousness among people across different
socio-economic classes in India and how the urban and semi-urban retail markets are
witnessing significant growth. It explores the role of the Government of India in the
industry’s growth and the need for further reforms. 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. The
paper includes growth of retail sector in India, strategies, strength and opportunities of retail
stores, retail format in India, recent trends, and opportunities and challenges. This paper
concludes with the likely impact of the entry of global players into the Indian retailing
industry. It also highlights the challenges faced by the industry in near future. There is very
huge potential for the growth of organized Retailing in India. By following some of the
strategies it can rise tremendously and can reach each and every nock and corner. Open
communication should be established between functional departments. A balance should be
maintained between brand building and promotion. Non-marketing factors like gas prices,
weather etc. should be avoided and new schemes should always be launched. The Retail
Industry in India has come forth as one of the most dynamic and fast paced industries with
several players entering the market. But 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.

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