Retail SectorsByS.Prakash

Introduction

Barter System was known as the first form of retail.

As time passed currency was exchanged with goods and services.

The Indian retail industry is the fifth largest industry in the world.

With growing market demand, the industry is expected to grow at the rate of 25-30 percent annually.

Organized retail in India is expected to grow 25-30 percent yearly and is expected to increase from Rs 35,000 cores in 2004-05 to Rs 109,000 cores by 2010.

Second Largest Employer after Agriculture(8%)

Overview

3

Importance

Largest and fastest growing sector in India.

Modern retailing forms one point stop for all shopping.

Consumer gets a large product variety of brands to choose from one roof.

First it was a sellers market and now its changing to buyers market.

By 2012 Indian retail sector would be generating 11 million employment opportunities.

Industry Description

Indian retail Industry is Fifth largest in the world.

The current penetration pegged at 5-7 per cent.

Accounts for 24% of country’s GDP and 8% of the total employment.

Food is the largest segment in terms of its.

5

Tax Impacts and Regulatory Environment

The retail sector has not been conferred an industry status till now. Hence, there are no specific rules and regulations governing the sector.

However, there are certain laws pertaining to the establishment of stores and conduct of activities, which retailers need to follow:

The Shop and Establishments Act The Standards of Weights and Measures Act The Provisions of the Contract Labor(Regulations and Abolition) Act The Income Tax Act The Customs Act The Companies Act

In addition to the above law: Retail companies have to follow certain regional rules and regulations on the basis of their stores location; different states have different laws to regulate the retail trade.

6

Reference: www.retailexecutive.com.au/industry_diversity/retail_industry_areas

Regulatory Environment

FDI Policy with regard to Retailing in India:

FDI up to 100% for cash and carry wholesale trading and export trading allowed under the automatic route.

FDI up to 100 % with prior Government approval (i.e. FIPB) for retail trade of Single Brand‘ products.

India allowed FDI of up to 51% in ―multi-brand sector.

Single brand retailers such as Apple and Ikea, can own 100% of their Indian stores, up from previous cap of 51%.

The retailers (both single and multi-brand) will have to source at least 30% of their goods from small and medium sized Indian suppliers.

Retail Growth In India

Porter‘s Five Force Model

Source:http://www.mindtools.com/pages/article/newTMC_08.htm

Threat of New Entrants Power of Suppliers

95% of the market is made up of small, uncomputerised family run stores.

The ability to establish favorable supply contracts, leases and be competitive is becoming virtually impossible.

The vertical structure and centralized buying gives chain stores a competitive advantage over independent retailers.

On the whole threat from new entrants in retail industry is high.

Historically, retailers have tried to exploit relationships with supplier.

In retail industry suppliers tend to have very little power.

Following example:

Wal mart places strict control on its suppliers.

Power of Buyers Availability of Substitutes

Customers have comparatively high bargaining power in unorganized sector than in organized sector.

As the customer will demand products from organized units he will be more focused towards quality aspect

The tendency in retail is not to specialize in one good or service, but to deal in wide range of products and services.

What one store offers is likely to be same as that offered by another store.

The threat from substitutes is high.

Competitive Rivalry

Retailers always face stiff competition and must fight with each other for market share and also with unorganized sector.

They have tried to reduce cut throat pricing competition by offering frequent flier points, memberships and other special services to try and gain the customer‘s loyalty.

Thus retailers give each other stiff but healthy competition which is evident from their aggressive marketing strategies and segment policies.

SWOT Analysis

StrengthsHigh Employment GeneratorLow Labor CostRising disposable incomeShopping convenienceChanging consumer habits and lifestylesHigh availability of quality retail space

Weakness Lack of industry status for retail. Numerous license, permits and registration requirement.Lack of detailed region specific customer data.Lack of Skilled LaborUnderdeveloped supply chain Underdeveloped logistics infrastructure &absence of national cold chain networks.Lack of basic infrastructure like power, transport and communication.

Opportunity Untouched rural market.

Investment opportunities

Fast evolving shopping mall formats

Upcoming international players

Threat The tax structure in India favors small retail business

Lack of adequate infrastructure facilities

High cost of real estate

Low retail management skill

Company Name Net Sales(Billion $)Pantaloon Ret 0.79

Shoppers Stop 0.37

Trent 0.16

Brandhouse 0.14

REI Six Ten 0.11

Provogue 0.11

Koutons Retail 0.10

Kewal Kiran 0.05

Cantabil Retail 0.03

Arunjyoti Enter 0.01Prozone Capital 0.00

Reference: Source Moneycontrol.com

EXAMPLE OF RETAIL STORES

Major Players

Reference: Source Moneycontrol.com

Pantaloon Ret43%

Shoppers Stop18%

Brandhouse8%

Trent7%

Others12%

Provogue6%

Koutons Retail6%

Pantaloons Retail India Ltd. is market leader with 43% of the market share in terms of turnoverFollowed by Shoppers stop, Brandhouse, Trent, Provogue

Cost Structure

Reference: Source Moneycontrol.com

Organized Retail Examples

Unorganized Retail Examples

Thank you !!!