RETAILING SCENARIO IN INDIA IN NEW...

CHAPTER II

RETAILING SCENARIO IN INDIA IN NEW MILLENNIUM

Amongst key contributors to Indian GDP, retailing has been one of the most dominant

sectors in the present scenario. With approximately 300 new malls, 1500 supermarkets

and 325 departmental stores across India, the sector contributed 14 per cent of the GDP

with a cumulative average growth rate (CAGR) of 9.5 per cent from 2004-05 to 2011-12

and is further expected to accelerate at 15-20 per cent per annum in the coming years

(Economic Survey, 2012-13)1.

However, this scenario was never so amusing in India. In the past times, only ‘Kirana’ or

‘Mom and Pop’ or ‘Friendly Neighbourhood’ stores selling products of daily needs were

visible in most parts of the country. It was at the outset of 1980s that manufacturer’s

retail chains like DCM, Gwalior Suitings, Bombay Dying, Calico, Titan etc. came

forward to open their outlets in metros as well as small towns whereas, multi brand

retailers came into the picture in the 1990s only. As such ‘shopping centres’ emerged

from 1995 onwards, ‘Margin Free’ markets established in Kerala, is a unique example of

such centres (Sinha and Kar, 2007). Food and FMCG sector retailers like Food Bazaar,

Subhiksha, Nilgris etc. also made entry in late 1990s. In ‘Music’ segment Planet M,

Music World and in ‘Books’ Crossword and Fountainhead were few names in the list.

Also, other players such as Archies, Bata India Ltd., MTR Foods Ltd., Ebony Retail

Holdings Ltd., Big Bazaar, Fabmall, Shoppers Stop, Health and Glow, Liberty Shoes

Ltd., Pantaloon Retail India Ltd., Globus Stores Pvt. Ltd., Lifestyle, Style SPA Furniture

Ltd, etc. have already made their places in the retail sector. However, new entrants like

Reliance Retail Ltd, Wal-Mart Stores, Carrefour, Tesco, Boots Group etc. are trying to

penetrate the market (Pandit and Tejani, 2011).

1 Economic Survey 2012-13 published by Government of India accessed from

http://indiabudget.nic.in/es2012-13 mentioned in chapter10, pp. 218.

Retailing Scenario in India in New Millennium

18

In India, retailing has been steadily inching its way towards becoming the next ‘boom’

industry. The emergence of this concept has not only altered the format and consumer

buying behaviour in India, but has also ushered a revolution in Indian shopping.

2.1 Background of Retailing in India

From the above discussion, it may clearly be stated that Indian retail sector has been

divided into organized and unorganized retail sector. Organized retailer refers to those

retailers who undertake their trading activities by procuring ‘license’ such as registration

for the purpose of paying VAT etc. Big hypermarkets, retail chains and large businesses

owned by private people fall under this category. On the other hand, unorganized retailers

refers to retailers doing their business in traditional format. Local Kirana stores, sole

proprietor manager general stores, handcart and roadside venders etc. fall under this

category.

As this unorganized retail sector has its presence in India since ages, it is certainly a

dominating sector. However, with emergence of organized retail format certain changes

in this sector have been witnessed.

2.2 Journey of Organised Retail in India

Ernest and Young (2005) report on ‘Indian Retail Development’ claimed Indian

organised retail sector to attain maturity by the end of year 2011 as shown in table 2.1.

Table 2.1

Journey of Organised Retail in India

Year Phase Function

2000 First Phase Entry, Growth, Expansion, Top line focus

2005 Second Phase Range, Portfolio, Former Options

2008 (E*) Third Phase End To End Supply Chain Management, Backend Operations, Technology, Process

2011 (E*) Fourth Phase M&A, Shakeout, Consolidation, High Investment

Source: Ernst & Young, 2005

*E=Expected


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However, due to stringent government regulations regarding FDI intervention, retail

sector could not grow with much speed. Although, the Government of India took

initiative to allow foreign players to own stake up to 51 per cent in multi-brand retailing

and 100 per cent in single brand retail, yet the countrywide opposition against the

Government’s decision has acted as a setback for growth in this sector. However, due to

the demographic factors such as being the second most populous country, continuous

growth in India’s GDP, highest shop density, increase in the earning capacity and the

standard of living of Indian citizens, local as well as foreign players are continuously

trying to explore opportunities in retailing in India. Wal-Mart’s entry in Indian market in

association with Bharti is a clear indication towards this development.

2.3 Path of Retail Growth in the New Millennium

Starting from year 2004, many consultancy companies projected India as one of the

promising countries in terms of growth in the retail sector. Supporting the projections of

Ernest and Young regarding Indian retail market, A.T. Kearney, another renowned

consultancy firm placed Indian market at second position amongst the 30 fastest growing

retail markets of the world. This place was given to India after its projection as

‘politically and economically stable economy’, ‘more attractive’ and ‘less saturated

market’ with ‘higher time pressure’ as evident from Table 2.2.

The report further claimed that despite of strict FDI regulations, many foreign retailers

were found to be interested in Indian retail market due to the same reasons as brought out

by the Ernest and Young’s report such as lower country risk, increase in the standard of

living, continuous growth in GDP (India’s GDP increased by 40 per cent during a five

year period of 1999-2003). Besides, the population growth (expected to cross China by

year 2020) and its composition (60 per cent of population still below 25 years of age) was

also found to be attracting force for foreign retailers towards Indian market. Thereafter,

from the year 2005 till 2007, A.T. Kearney in its report placed India at the top of the 30

fastest growing retail markets of the world. However, as compared to year 2004, Indian

markets were projected to be riskier, a bit saturated with plenty of opportunities and

bearing higher time pressure. The market was found to be more attractive as compared to

2004.


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Table 2.2

A.T. Kearney’s 2004 Global Retail Development Index (GRDI) of Top 30 Emerging

Markets across the Globe

Rank Country Region Country

Risk

Market

Attract-

iveness

Market

Saturation

Time

Pressure

GRDI

Score

Weight 25 per

cent

25 per

cent

30 per

cent

20 per

cent

1. Russia Eastern Europe 56 56 77 100 100

2. India Asia 62 34 92 72 88

3. China Asia 71 42 62 90 86

4. Slovenia Eastern Europe 83 60 43 76 84

5. Croatia Eastern Europe 61 53 55 93 83

6. Latvia Eastern Europe 64 55 54 89 82

7. Vietnam Asia 52 29 90 66 76

8. Turkey Mediterranean 50 58 67 65 75

9. Slovakia Eastern Europe 69 48 35 100 74

10. Thailand Asia 52 29 90 66 73

11. Ukraine Eastern Europe 43 32 83 79 73

12. Chile Latin America 73 56 62 41 72

13. Bulgaria Eastern Europe 59 38 70 67 71

14. South Korea Asia 74 80 32 53 70

15. Tunisia Mediterranean 63 44 80 39 70

16. Hungary Eastern Europe 74 52 39 75 70

17. Lithuania Eastern Europe 65 51 57 56 69

18. Morocco Mediterranean 58 36 80 46 67

19. Malaysia Asia 70 46 59 47 66

20. Egypt Mediterranean 51 36 84 46 65

21. Saudi Arabia Asia 66 48 72 30 65

22. Taiwan Asia 88 79 42 8 64

23. Philippines Asia 51 38 71 58 63

24. Romania Eastern Europe 55 32 57 81 63

25. Hong Kong Asia 86 81 41 4 62

26. Mexico Americas 69 73 41 32 61

27. Poland Eastern Europe 68 63 34 54 60

28. Indonesia Asia 45 45 84 18 54

29. Czech Republic Eastern Europe 72 60 15 65 52

30. Iran Asia 46 35 75 32 49

Source: A.T. Kearney, 2004


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Since 2008, India has continuously been losing its place in the tally as she was projected at

third place in 2008, fourth in 2010 and fifth in 2012 respectively following Brazil, Chile,

China and Uruguay (see Table 2.3 on next page). Although, the change in ranking of India

has been witnessed in the past few years, but from the point of view of potential in the market

and growth prospects, she has been projected way above other economies (See Figure 2.1).

Table 2.3

A.T. Kearney’s 2012 Global Retail Development Index (Top 30 Emerging Markets)

Rank Country Region Country

Risk

Market

Attract-

iveness

Market

Saturation

Time

Pressure

GRDI

Score

Weight 25 per

cent

25 per

cent

30 per

cent

20 per

cent

1. Brazil Latin America 100.0 85.4 48.2 61.6 73.8

2. Chile Latin America 86.6 100.0 17.4 57.1 65.3

3. China Asia 53.4 72.6 29.3 100.0 63.8

4. Uruguay Latin America 84.1 56.1 60.0 52.3 63.1

5. India Asia 31.0 66.7 57.6 87.9 60.8

6. Georgia Central Asia 27.0 68.7 92.6 54.0 60.6

7. UAE MENA 86.1 93.9 9.4 52.9 60.6

8. Oman MENA 69.3 98.3 17.4 50.4 58.9

9. Mangolia Asia 6.4 54.4 98.2 75.1 58.5

10. Peru Latin America 43.8 55.5 62.9 67.2 57.4

11. Malaysia Asia 56.7 98.1 18.9 54.8 57.1

12 Kuwait MENA 81.1 88.7 36.4 20.3 56.6

13 Turkey MENA 78.8 69.3 32.3 33.1 53.4

14 Saudi Arabia MENA 63.1 81.8 35.4 33.0 53.3

15 Sri Lanka Asia 12.7 68.3 79.0 51.3 52.8

16 Indonesia Asia 39.6 61.6 47.0 62.4 52.7

17 Azerbaijan Central Asia 19.2 41.5 93.6 53.2 51.9

18 Jordan MENA 45.8 65.3 69.5 23.8 51.1

19 Kazakhstan Asia 31.5 47.5 75.5 47.5 50.5

20 Botswana Sub-Saharan Africa 44.4 88.1 42.7 23.7 49.7

21 Macedonia Eastern Europe 34.6 46.5 55.9 56.6 48.4

22 Lebanon MENA 60.2 30.2 48.9 54.2 48.4

23 Colombia Latin America 47.8 70.1 36.7 36.6 47.8

24 Panama Latin America 53.4 68.8 42.0 25.2 47.4

25 Albania Eastern Europe 24.6 47.6 74.8 39.9 46.7

26 Russia Eastern Europe 80.2 53.6 19.6 32.2 46.4

27 Morocco Mediterranean 23.5 58.2 48.2 49.2 44.8

28 Mexico Latin Americas 71.9 70.0 15.1 20.3 44.3

29 Philippines Asia 28.3 54.6 52.5 38.3 43.4

30 Tunisia MENA 35.7 55.4 65.0 14.4 42.6

Source: AT Kearney, 2012


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Figure 2.1: GRDI Country Attractiveness, 2012


Despite this projection at fifth place, A.T. Kearney, 2012 in its report expected India to

remain in the list of the fastest growing economies in the world and further expected it to

be one of the top 5 economies of the world by 2030 in terms of GDP. Though, the report

estimated India’s retail market at US$ 470 Billion in 2011, accounting for 35 per cent of

GDP, yet it further anticipated it to grow to US$ 675 Billion by 2016 at a CAGR of 7.5

per cent (See figure 2.2). Furthermore, FICCI in its report presented in 2012 expected

Indian retail market to cross US$ 1.3 trillion by year 2020 from US$ 550 billion in the

year 2012 (FICCI, 2012). The position of Indian retail market can be understood from

figure 2.1, where size of bubble of an economy depicts its market potential against the

other countries in the world. Size of bubble of Indian economy is third largest after China

and Brazil which is in support of the projections made regarding the Indian retail market

by various consultancy agencies.


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As a democratic country with high growth rates, opportunity in the Indian retail market is

unchallenged. Consumer spending has risen sharply as significant increase in disposable

income with one third of population categorised as youth has been witnessed during the

past few years (A.T. Kearney, 2008). The NCAER in its Market Information Survey of

Households (MISH) also supported the claims made by A.T. Kearney as it reported an

increase in the consuming class in Indian society with annual household income of more

than Rs. 90,000 from 336 million in 2005-06 to 505 million un 2009-10. Due to this total

retail business in India was projected to grow at 13 per cent annually, from US $322

billion in 2006-07 to US $590 billion in 2011-12 and further US $1 trillion by 2016-17

(Technopak Analysis, 2011) (see figure 2.3). As Indian retail market touched US$ 550

billion level in 2012 (FICCI, 2012), the projections for 2016-17 are also expected to be

met.


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Source: Technopak Analysis, 2011

2.4 Share of Organised Retailing

Although, the share of organised retailing in India has remained at a level of 5 to 8 per

cent, yet it has been growing at the rate of 25-30 per cent per annum (Sharma, 2012).

Therefore, the share of organised retailing is expected to increase by six times from US$

27 billion in year 2011 to US$ 220 billion by the end of year 2020 (FICCI, 2012). India

Brand Equity Foundation in its report published in 2013 claimed organised retail sector to

be generating 8 per cent of the total retail market share (see figure 2.4). However, the

report further projected a significant increase in growth rate of organised retail in next 10

years.


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Source: IBEF, 2013

It is further supported by ICRIER which estimated organised retail to contribute 16

per cent to the total Indian retail sector by year 2020 (Joseph et al., 2008). Technopak,

2011 also estimated Indian organised retail market at US$ 26 billion accounting for 6

per cent of the overall retail market and further projected it to grow to US$ 84 Bn by

2016 at a compound annual growth rate of 26 per cent (refer to figure 2.5). Sharma,

2012 also projected Indian traditional retail sector to grow at 5 per cent level to reach

a size of US$ 650 billion (76 per cent of the total retail market), and further expected

organized retail to register a growth of 25 per cent and reach a size of US$ 200 billion

by 2020.


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Source: Technopak Analysis, 2011

Growth in service sector and availability of jobs for eligible Indian youth has been cited

as the main reasons for such growth in retail sector (Technopak Report, 2011).

NASSCOM, 2011 in its report projected the ratio of women to men in BPO industry to be

69:31. Supporting the same, Technopak Report, 2011 also projected significant increase

in the number of working women by approximately 40-50 million by year 2016. The

report further stated that average age of such women will fall between 20-40 years

leading to increase in expendable income of the families. Due to this increase in the

disposable income, spending of ‘self’ such as buying of cloths, items of personal care,

‘comfort’ such as dinning out, availing of services, buying personal conveyance,

‘children’ such as education, coaching, skill development and ‘enjoyment’ such as

buying digital gadgets, going on tours and trips etc. will increase. This will certainly

invoke sales volume of certain sectors within retail industry in India.


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2.5 Sectoral Trend of Retail Growth in India

Indian retail sector has always been able to survive during tough economic conditions

successfully and profitably. Although, some reduction in the footfall was registered

during global slowdown in 2008, yet this sector has been consistent in its contribution

towards overall growth of the country. In retail industry, food and grocery emerged as the

major sector with 60 per cent of the total retail sales in 2012 followed by others and

apparel sector contributing 11 per cent and 8 per cent respectively (see figure 2.6).

Source: Deloitte, 2013

A.T. Kearney and FICCI in their survey in 2012 also projected food, grocery and clothing

retail to be fastest growing retails in India. Other sectors such as healthcare, watches and

jewellery were also projected to register high growth rate. Although, share of food and

grocery sector is the largest in terms of sales, yet apparel sector has emerged as leader in

terms of its presence in the organised sector. In a report published by Deloitte in 2011

where 23 per cent of apparel sector was projected to be in organised retail form, only 1

per cent food stores were falling under this category (see figure 2.7). Again in 2013, same

agency reported increase in the share to 33 per cent and 11 per cent for apparel and food

respectively (see figure 2.8).


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Pandit and Tejani, 2011 also reported apparel sector to be dominating the other

sectors with a contribution of 38.9 per cent in total output surpassing food and

grocery retail. Kamboj, 2012 also projected apparel sector to be registering maximum


29

growth ahead of all other sectors (see figure 2.9). These projections were further

supported by Mckinsey, 2012 which claimed that due to increase in the disposable

income of the consumers, apparel emerged as the second largest consumption

category in malls. Moreover, Vikkraman and Sumathi, 2012 claimed that about 20 per

cent of Indians preferred shopping for textile and apparel over food. Such tremendous

growth in apparel industry can be attributed to its ability to cater to needs of the

consumers segmented on the basis of gender, age and occasion.

Source: Kamboj, 2012

Furthermore, Technopak Analysis, 2011 also projected total apparel market in India

to grow to US$ 50 Billion by 2016, with a CAGR of 7.5 per cent. On the other hand,

food and grocery sector has been projected to register a CAGR of 5.50 per cent only

which is definitely lesser than apparel segment (see table 2.4). The report also

projected organised apparel retail to grow to US$ 8 billion by the year 2016 as

compared to US$ 5.5 billion in 2011 at a CAGR of 8.5 per cent.


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Table 2.4

Sector Wise Retail Growth Rate

Category 2006 2011 2016 (E) CAGR (2011-16)

Food and Grocery 217 325 425 5.50 per cent

Apparel 25 35 50.2 7.50 per cent

Jewellery & Watches 16.5 25.6 44.2 11.50 per cent

Consumer Electronics & IT 16.5 22.7 42.8 13.50 per cent

Pharmacy 8 13.9 23.4 11.00 per cent

Furnishings & Furniture 6.5 9.1 17.1 13.50 per cent

Restaurants and Food Joints 4.6 8.8 15.8 12.50 per cent

Footwear 3.6 4.5 8.3 13.00 per cent

Beauty Services 0.6 1.3 3 18.00 per cent

Helath/Fitness Services 0.4 1 2.5 20.00 per cent

Others 11 23 42.5 13.10 per cent

Total (US$ Bn) 310 470 675 7.50 per cent

Source: Technopak Analysis, 2011 E= Expected

CAGR= Cumulative Average Growth Rate

These projections may prove true in near future as change in the behaviour of young

Indian consumers with respect to apparel quality, availability, comfort, environment,

different payment options, availability of trial rooms, option for exchanging/returning the

apparel and reasonable prices has been witnessed (Sinha and Kar, 2007). These

developments have certainly made a path for a rapid growth of organized apparel retail

stores in India.

Certain other important factors such as increase in the income of families, demographics

profile of the population (i.e. 50 per cent of population below 25 years of age), rapid pace

of urbanisation (expected to be 40 per cent by the year 2020 from present 28 per cent)

and easy credit availability can also be quoted as the main reasons for such projections.

Real income in the hands of people has increased considerably during the last decade due

to which disposable income with the consumers has also increased (see figure 2.10).

Sinha and Kar, 2007 also witnessed change in spending and buying pattern of customers

in India.


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Source: IBEF, 2013

This increase in the income of residents of India has been witnessed in a very short span.

A tremendous increase in the number of rich class families from 1 million in 1994-95 to 6

million in 2005-06 was observed. During the same period, where upper-middle class

increased with 46 million families, 30 million families added to the middle class level

(see figure 2.11). This huge increase in the incomes of the families resulted in increase of

organised retailing in metros and second tier cities.

Figure 2.11: Map of India’s Different Income Classes

Source: Ernest and Young, 2005


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Major reason for increase in the number of families in the rich and upper middle class can

be the growth in the proportion of families living in urban region due to migration of

rural population towards urban areas (see figure 2.12). As employment opportunities in

urban regions are expected to be more than rural areas, significant increase in the

earnings of families are ought to be there.

Source: IBEF, 2013

It is interesting to note that where during the last fifty years the population of India has

grown by two and a half times, the urban population has grown by nearly five times.

Joseph et al., 2008 projected 35 per cent of Indian population to be living in urban India

by 2016, contributing around 65 per cent to the GDP.

2.6 Trends for Retail Outlet in India

Considering these developments in the Indian economy, number of players aspiring to

open their retail outlets in urban India has increased tremendously. Almost in all the

segments like textile and apparel, food and beverages, consumer durables, home

solutions, jewellery and watches, books, music and gifts, pharma and other similar small

segments, private players have shown interest to operate. A list of the major Indian

companies operating in retail sector is given in table 2.5.


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Table 2.5

Major Indian Companies Operating in Retail Sector in India

Company Name Store Operated

Future Groups Pantaloons, Big Bazar, Central, Food Bazar, Depot, E-Zone, Brand Factory, Fashion Station, aLL

The Tata Group Titan, Tanshiq, Westside, Croma, Landmark, Star India Bazaar, Steel Junction

RP-Sanjiv Goenka Group

Music World, Spencer’s Hyper, Au Bon Pain (Bakery), Spencer’s Daily

Gitanjali Nakshatra, Gili, Asmi, D’damas, Gitanjali Jewels, Giantii, Gitanjali Gifts

Reliance Retail Reliance Mart, Reliance Fresh, Reliance Digital, Reliance Super, Reliance Footprint, Reliance Jewellery, Reliance Trends, Reliance iStore, Reliance Autozone

FabIndia Textiles, Home Furnishing, Apparel, Jewellery

K Raheja Corp. Group

Shoppers Stop, Crossword, Hyper City, Inorbit Mall

Lifestyle International Lifestyle, Home Centre, Max, Fun City

Aditya Birla Group More Stores

REI Agro Ltd. 6Ten Stores

Source: Competition Commission of India, 2013

Witnessing the potential in apparel segment, major players such as K. Raheja Group and

Future Group owing Shopper’s Stop and Pantaloon respectively opened a number of

stores in big and small cities of India. The most successful apparel retail chain Pantaloon

Retail India Ltd. opened around 30 stores in different parts of India in one year only,

increasing the total number of stores to more than 1000 in around 75 cities of the country

(ASSOCHAM Report, 2009).

Many International apparel brands have been operating in India since the beginning of

economic reforms. Few of these brands have been depicted in table 2.6. As the

government had intentions to stop the flow of foreign exchange to foreign countries and

also to protect local players, certain restriction on foreign players were imposed. To meet

such conditions as laid down by the government, these players adopted different modes

of entry in Indian market.


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Table 2.6

Foreign Player in Apparel Retailing in India

Company Country of Origin Year of Entry Entry Mode Adopted

1991 to 1997 (Trade Liberalization)

Lacoste France 1990s Licensing

Van Heusen US 1990s Licensing

Vanity Fair US 1990s Licensing

Adidas Germany 1990s Joint Venture

Benetton Italy 1991 Wholly Owned

Lee US 1993 Licensing

Arrow US 1993 Licensing

Levis US 1994 Wholly Owned

Nike US 1995 Licensing

Jockey US 1995 Licensing

Reebok Germany 1995 Joint Venture

1997 to 2005 (Trade Restriction in FDI)

Puma Germany 1999 Licensing

Aldo Canada 1999 Franchising

Versace Italy 1999 Franchising

Guess US 1999 Franchising

Hugo Boss Germany 1999 Franchising

Mango Spain 1999 Franchising

Marks & Spencer UK 2001 Franchising

Nine West US 2002 Franchising

Tommy Hilfiger US 2004 Franchising

Espirit US 2005 Franchising

Since 2006 (Trade Deregulation in Retailing)

Diesel Italy 2006 Joint Venture

Nautica US 2006 Joint Venture

Gucci Italy 2007 Franchising

DKNY US 2009 Licensing

Burberry UK 2009 Franchising

Zara Spain 2010 Joint Venture

Source: Mann and Byun, 2011


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Apart from the above mentioned players, many other International players have either

started operating in India or have already fulfilled the norms and are about to enter Indian

market in different segments. Whereas, Wal-Mart (in joint venture with Bharti Enterprises),

Carrefour, and Metro can be named as those which have started their operations, Tesco (in

association with Tata Group), and IKEA (single brand 100 per cent venture) are all set to

enter the market. Wal-Mart (an American multinational retail corporation) and Bharti

Enterprises entered into a joint venture with 50:50 stakes in Bharti Wal-Mart Private

Limited. The new company opened its first cash-and-carry store named ‘Best Price Modern

Wholesale’ in Amritar district of Punjab a state of India in May, 2009. Since then, the

company has opened its cash-and-carry outlets in 19 more cities.

Carrefour (a French retail chain) entered India in 2010 by opening its first cash-and-carry

wholesale retail store in Seelampur, New Delhi. The company eyeing on government’s

decision to open up retail sector for foreign players entered in fully owned cash-and-carry

retail stores. Till date, the company owns four cash-and-carry wholesale outlets one each in

Delhi, Jaipur, Meerut and Agra.

Metro (A German based fourth largest retail chain of Europe) entered Indian retail market

by forming Metro Cash & Carry India Pvt. Ltd. (MCCIPL). The wholesale business of the

company is operative at 15 different locations with 2 stores each in Hyderabad, Bangalore,

Mumbai and 1 store each in New Delhi, Kolkata, Ludhiana, Jalandhar, Zirakpur, Amritsar,

Vijaywada, Jaipur and Indore. The company owns 9 large stores with approximately

1,25,000 sq. ft. coverage and 6 small stores with 50,000 sq.ft. coverage in India. However,

the company has decided to focus on small stores with coverage of approx. 55,000 sq.ft.

The company also decided to shift its focus on limited products such as high-end fruits and

vegetables, stationary, cleaning solutions and packaged food and to forgo business in

textiles, footwear, luggage, open grocery and crockery (Business Standard, Jan. 17, 2014).

IKEA a Swedish furniture company is also planning to enter Indian market by setting up a

100 per cent venture in single brand retail format. Although the company has got clearance

from Indian government to invest € 1.5 billion in India, yet in the first phase it plans to start

its operations by opening 25 stores with € 600 million.


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Tesco a British multinational retail group also got approval from foreign investment

regulator to initially invest $110 million to set up a chain of supermarkets in India (Reuters,

Dec. 30, 2013). Tesco has already shown its intentions to enter into joint venture with Tata

Group by buying 50 per cent stake in Tata Group’s Trent Hypermarkets. Tesco has decided

to open only 2-3 hypermarkets per year.

Although, there has been mixed reaction from multinational companies operating in India,

yet almost all of them have held stringent government policies responsible for hampered

growth in retail sector. Despite such opinions, organised retail has been continuously

registering some growth every year as demand of area for setting up the organised stores

has been on a rise since 2001. Whereas, the area under distribution for malls was just 2

million square feet in 2001, it went up as high as 26 million square feet by the end of the

year 2005. Furthermore, IBEF, 2013 projected this demand to be around 45 million square

feet in four cities i.e. NCR, Mumbai, Kolkata and Chennai and around 21 million square

feet in Bangalore, Pune, Hyderabad and Ahmadabad respectively.

The report further found that out of the total space acquired by the organised stores,

hypermarkets accounted for 21 per cent, followed by apparel stores with 19 per cent share.

Departmental stores and fastfood outlets accounted for 10 per cent and 9 per cent

respectively (see figure 2.13). This further clearly depicts that although, food retail is the

largest sector in terms of volume yet apparel is the most preferred sector in terms of area

required for opening the stores.

Source: IBEF, 2013


37

From the above analysis, this can be predicted that India will remain most sought after

destination for retail in the times to come. Although, there are tremendous opportunities

in the Indian retail sector due to increased per capita disposable income, sharp rise in the

size of middle class and increased expectation of quality and variety among the Indian

consumers along with many other related factors, yet this sector has not been able to

convert this potential in sales. One of the biggest reasons is the opposition by people from

different segments of any decision taken by Government to open up this sector for

foreign and private players. However, in the present scenario, it can be said that the entry

of private as well as foreign players in the organised retail sector can only be resisted,

however cannot be avoided in any way. Although, in Indian retail market, food and

grocery retail has been dominant in terms of volume, yet apparel retail has emerged as a

promising and leading sector in terms of growth in output. Also, majority of the sales in

the organised retail sector have been reported to be emerging from big cities only.

Therefore, it becomes imperative to study the future of organised apparel retailing in

other parts of the country also. Furthermore, despite of introduction of FDI in retail is

going to allow foreign major player to enter Indian market, no threat to unorganised

sector in terms of growth has been projected. Therefore, to clearly understand the status

of organised apparel retail stores in Tier I and Tier II cities and predict the future of

unorganised apparel stores, scope for independent study automatically emerges in the

contemporary scenario.

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