“TRADITIONAL VS MODERN RETAILING IN INDIA”

7/30/2019 TRADITIONAL VS MODERN RETAILING IN INDIA

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PROJECT REPORT

ON

RETAIL MARKETING

(TRADITIONAL vs. MODERN) IN INDIA

SUBMITTED BY

Rahul Sawant

T.Y.BMS SEMESTER- V: 2010-11

PROJECT GUIDE

Mr. Parag Lathia

UNIVERSITY OF MUMBAI

SATHAYE COLLEGE

Vile Parle East Mumbai 57


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DECLARATION

I, RAHUL SAWANT , the student of SATHAYE College for

T.Y.BMS Semester V (2010-11) do hereby declare that I have

completed the project work titled

RETAIL MARKETING (TRADITIONAL V/S MODERN) IN

INDIA as a part of my academic Program .

The information contained in this Project work is true and

original to the best of my knowledge and belief.

Date Signature of student


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CERTIFICATE

I, Mr. PARAG LATHIA do hereby certify that Rahul Sawant is astudent of Sathaye College for T.Y.BMS -- Semester V (2010-11) she

has completed the project work on RETAL MARKETING

(TRADITIONAL VS. MODERN) IN INDIA as part of her academic

fulfillment, under my guidance.

The information contained in the Project work is original to the

best of my knowledge and belief.

_______________ ______________

Signature of Signature of

Project guide Principal

External Guide


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ACKNOWLEDGEMENT

I RAHUL SAWANT student of SATHAYE COLLEGE like to

express my sincere gratitude towards B.M.S. department

I would like to thank my project guide PARAG LATHIA for his

constant support during the project. Last but not least I thank all my

colleagues for being with me throughout the project, which leads to a

successful completion of my project

Nevertheless, it has a good gesture of the University of Mumbai in

Providing the student the opportunity to undergo such practical

Studies while preparing the project report


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Executive Summary Retailing consists of all activities involved in selling goods and services

to consumers for their personal, family or household use. It covers sales of goodsranging from automobiles to apparel and food products and services ranging from

hair cutting to air travel and computer education. Sales of goods to intermediaries

who resell to retailers or sales to manufacturers are not considered a retail activity.

The Indian retailing industry, which was traditionally dominated by small

and family-run stores, has come of age. The retail sector is the second largest

employer after agriculture in the country and also the second largest untapped

market after China. There are some 12 million retail outlets in India. Besides, thecountry is also dotted with low-cost kiosks and pushcarts. Organized retailing is

only 3% of the total retail industry. Over the past couple of years there have been

sweeping changes in the general retailing business.

India's Retail sector is going to transform and with a three-year

compounded annual growth rate of 46.64 percent, retail sector is the fastest

growing sector in the Indian economy. Traditional markets are transforming

themselves in new formats such as departmental stores, hypermarkets,

supermarkets and specialty stores.

Western-style malls have begun appearing in metros and near metro

cities, introducing the Indian consumer to a new shopping experience. These new

format of malls are

In the last few years, as modern retail concepts begin to make an

appearance across urban India, the debate on their impact on the traditional Indian

Retail businesses including the so-described "mom & pop" stores and the

neighbourhood kirana stores gets shriller.

Small Indian "Kirana" Shopkeepers Are Already Feeling the Heat from

the Malls. The opposition to large retail shops seems to be growing, and

broadening to take in domestic Retail chains as well as the International giants
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that want to enter the Indian market. Admittedly, such opposition flies in the face

of the received wisdom: studies based on extensive field surveys have concluded

that the spread of Organised Retailing will not hurt millions of small mom-and-

pop, or kirana, stores across the country. But the experience so far (and it is early

days yet) suggests that this may not be entirely true.

News reports, including those published in this newspaper, have cited

instances of small shops closing down or losing business in areas where large

retailers have set up shop. Analysts are still working out the odds on the Kirana

v/s Organized Retail major battle, vacillating between sayings that the two sets of

entities will co-exist happily, each serving different needs and predicting doom

for the kirana store, who perhaps would find the pace daunting. But only as longas the Indian consumer weighs his options in favor of the kirana paying MRP at

an outlet thats a stones throw away versus paying better price s, but at the cost of

a longer trip to the nearest retail outlet. In any case, most of India still prefers to

walk to the nearby kirana store for nearly everything! This will change if and

when the biggies set up outlets in every other street, in every neighborhood

which they will, if the numbers make sense.

However, Kiranas has opportunities to grow in India in spite of thegrowth of malls because these kirana shops will also get benefit of the growing

economy. The argument that the kirana shops will be affected by these malls is

only myth. Therefore both the malls and kirana stores can play simultaneously in

India.


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INDEX

Chapter No. TOPIC Page No

1. Introduction

1.1 Introduction to Retailing

1.2 Objective of the Study

1.3 Methodology

1-4

2. Evolution of retail in India

2.1 Growth phase from past to present of Retailing in

India

2.2 Explosion in retail industry2.3 Improvement and Growth of Retails Companies in

India

2.4 Success factor for Retail in India

2.5 Plans of large Retailers

2.6 key player in retail Industry

2.7 Retail formats worldwide have evolved in three

Phases

2.8 Growth of Retail outlets in India

5-16

3. Classification of retail sector

3.1 Unorganised / Traditional Retail in India

3.2 Features of Indian Kirana Stores

3.3 Traditional Format Retailers

3.4 Interview with Kirana Shop Owner

17-23

4. Organised / Modern Retail in India

4.1 Origin of Modern Retailing in India

4.2 Growth of Organised Retail in India

4.3 Factors responsible for the success of Organised

Retail in India

4.4 Indian Organized Retail :2006-07

24-39


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4.5 Modern format Retailers

4.6 Challenges before Organized Retailing in India

4.7 Malls: The new face of Retail Market

4.8 Advantages and Disadvantages of Shopping Malls

5. The Organized Retail v/s Unorganized Retail

5.1 Super Market v/s Indian Mom and Pop Shops

40-43

6. Survey Analysis and Observation 44-52

7. Kirana v/s Super market

7.1 Who will win Kirana or Super Market -battle?

53-54

8. Questionnaire 55-56

9. Annexure 57

10. Conclusion 58

11 Bibliography 60


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CHAPTER:1 1.1 Introduction to Retailing

The word retail is derived from the French word retailer ,

meaning to cut a piece off or to break bulk . In simple terms, it

implies a firsthand transaction with the customer.

Retailing involves a direct interface with the customer and the

coordination of business activities from end to end right from the

concept or design stage of a product or offering, to its delivery and post-delivery service to the customer. The industry has contributed to

the economic growth of many countries and is undoubtedly one of the

fastest changing and dynamic industries in the world today.

Retailing consists of all activities involved in selling goods

and services to consumers for their personal, family or household use.

It covers sales of goods ranging from automobiles to apparel and food

products and services ranging from hair cutting to air travel and

computer education. Sales of goods to intermediaries who resell to

retailers or sales to manufacturers are not considered a retail activity.

Retailing can be examined from many perspectives. A

manufacturer of white goods like washing machine and refrigerators

has many options to reach out to consumers. It can sell through

dealers, the company showrooms (Sony World, Videocon Plaza) or

hypermarkets (Big Bazaar).


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Retail outlets exist in all shapes and sizes from a Panwala

to a Big Bazaar . However, most of these outlets are basic mom-and-

pop stores the traditional Kirana shops in the locality, which aresmaller than 500 sq.ft. area with very basic offerings, fixed prices,

zero use of technology, and little or no ambiance. The number of

outlets in India has increased from 0.25 million in 1950 to

approximately 12 million today. This translates to a growth of 48

times over a certain period when the population has trebled.

Retailing in India is gradually inching its way to becoming

the next boom industry. The whole concept of shopping has altered in

terms of format and consumer buying behavior, ushering in a

revolution in shopping. Modern retail has entered India as seen in

sprawling shopping centers, multi-storeyed malls and huge complexes

offer shopping, entertainment and food all under one roof.


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1.2 Objective of the Study

The purpose and objective of this study is:

To understand the concept of retailing.

To understand the retail market

To understand what is organized and unorganized retailing

To study the current status of malls and kiranas

To study the effect of shopping malls on Kiranas To understand consumers preferences between shopping malls and

local stores.


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1.3 Methodology

This project consists of theoretical as well as practical knowledge. Also it

contains ideas and information imparted by the guide. In this research, data iscollected through two sources:

Primary sources

Secondary sources

Primary Source:

This includes the survey done in Mumbai for a sample population of 100

people. Also interviews of 1 kirana stores owner.

Secondary sources:

This includes the available information on the internet and data available

in books and journals. The data is collected from the following sources:

Internet sites:

www.hindubusinessline.com

www.atkearney.com www.economicoftimes.com

www.businessworldindia.com

The project started with sorting all the raw data and arranging them in

perfect order. To add value to the project and to understand the practicality, I have

visited some stores who are the best ones in retailing business.

Further, to understand the consumers better, a field survey was also

conducted to find out the tastes and preferences, purchasing habits and

expectations of the consumers etc. Analysis of this primary data has been done to

actually understand the survey in a better way.
http://www.hindubusinessline.com/http://www.atkearney.com/http://www.economicoftimes.com/http://www.businessworldindia.com/http://www.businessworldindia.com/http://www.economicoftimes.com/http://www.atkearney.com/http://www.hindubusinessline.com/


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CHAPTER 2: Evolution of retail in India

The origins of retailing in India can be traced back to local markets and

roaming traders. Whatever was available locally, entrepreneurs made an estimateof local demand and ventured to the marketplace to offer their wares to interested

people. The product range was restricted to whatever agricultural produce was

made possible by the regional climate and local manufacturing skills. Enterprising

and mobile traders ventured beyond, to peddle wares perceived by them to be in

demand elsewhere. This tribe of moving traders brought product variety to the

markets. This led to the emergence of Kirana stores and mom-and-pop stores.

These stores used to cater to the local people.

Eventually the government supported the rural retail and many

indigenous franchise stores came up with the help of Khadi & Village Industries

Commission. The economy began to open up in the 1980s resulting in the change

of retailing. The first few companies to come up with retail chains were in textile

sector, for example, Bombay Dyeing, S.Kumar's, Raymond, etc.

Growth of large scale retailers was fuelled by the rapid spread of mass production to more and more product categories. Rapid Industrialization ensured

replication of large volume production techniques to innovative areas such as

processes foods. Improving transport facilities enabled retailers to gun for volume

driven procurement.

Later Titan launched retail showrooms in the organized retail sector.

With the passage of time new entrants moved on from manufacturing to pure

retailing. Retail outlets such as Food world in FMCG, Planet M and Music world

in Music, Crossword in books entered the market before1995.


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Shopping malls emerged in the urban areas giving a world-class

experience to the customers. Eventually hypermarkets and supermarkets emerged.

The evolution of the sector includes the continuous improvement in the supply

chain management, distribution channels, technology, back-end operations, etc.

this would finally lead to more of consolidation, mergers and acquisitions and

huge investments.

The opening up of the economy only fueled this globalization. There are,

however, certain bottlenecks as well; the scarcity of space, coupled with the

stringent provisions of the Rent Control Act, act as a dissuasive factor for many

players to initiate operations in the main markets. This also explains why the

Rahejas forayed into their retail venture - Shoppers Stop.


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2.1 Growth phase from past to present of Retailing in India

Convenience stores, Mom-and-pop / Kirana shops

Source of entertainment and commercial exchange

Weekly markets, Village and rural Melas

Neighborhood stores/convenience

Traditional and pervasive reach

PDS outlets, Khadi stores, CooperativesGovernment supported

Availability/low costs/distribution

Exclusive brand outlets, hypermarkets and supermarkets, department stores

and shopping malls

Shopping experience/efficiency

Modern formats/international


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2.2 Explosion in Retail Industry

Retail industry has brought in phenomenal changes in the whole processof production, distribution and consumption of consumer goods all over the

world. In the present world most of the developed economies are using the retail

industry as their vital growth instrument. At present, among all the industries of

USA the retail industry holds the second place in terms of employment

generation. In fact, the strength of retail industry lies in its ability to generate large

volume of employment.

Not only US but also other developed countries like UK, Canada, Franceand Germany are experiencing tremendous growth in their retail sectors. This

boom in the global retail industry was in many ways accelerating by the

liberalization of retail sector.

Observing this global upward trend of retail industry, now the developing

countries like India are also planning to tap the enormous potential of the retail

sector. Wal- Marts, the worlds largest retailer have been invited to India. Other

popular brands like Pantaloons, Big Bazaar and Archies are rapidly increasing

their market share in the retail sector. According to a survey, within 5 years, the

Indian retail industry is expected to generate 10 to 15 million jobs by direct and

indirect effects. This huge employment generation can be possible because being

dependent on the retail sector shares a lot of forward and backward linkages.

India retail industry is the largest industry in India, with an employment

of around 8% and contributing to over 10 to 12% of the country's GDP. Retail

industry in India is expected to rise 25 to 30% yearly being driven by strong

income growth, changing lifestyles, and favorable demographic patterns.


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It is expected that by 2016 modern retail Industry in India will be worth

US$ 175- 200 billion. India retail industry is one of the fastest growing industries

with revenue expected in 2008 to amount US$ 330 to 340 billion and is increasingat a rate of 5% to 7% yearly. A further increase of 8% to 10% is expected in the

industry of retail in India by growth in consumerism in urban areas, rising

incomes, and a steep rise in rural consumption.

Shopping in India has witnessed a revolution with the change in the

consumer buying behavior and the whole format of shopping also altering.

Industry of retail in India which has become modern can be seen from the fact

that there are multi- stored malls, huge shopping centers, and sprawling

complexes which offer food, shopping, and entertainment all under the same roof.

India has over 12 million retail enterprises with more than 75%

belonging to small family businesses and basic necessities, especially food related

items. Strong fundamental changes including the changing lifestyles of Indian

people, rising incomes etc have fuelled the growth of modern retailing and has

attracted investment in this sector.

Business houses in the country are turning to retail. Modern retailers like

Trent, Shoppers Stop, Pantaloon, Piram yd, Globus, Vivek and Subhiksha,

Foodworld, Big bazaar, Food bazar have entered the market and are planning for

further expansion. Indias prominent business houses like Reliance industries,

Tata, Wadia, Godrej, Hero, Malhotras are also planning to enter retail sector

individually and also with foreign partners.


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2.3 Improvement and growth of Retail Companies in

India

Growth of Retail Companies in India exhibits the boom in the retail

industry in India over the years. The increases in the purchasing power of the

Indian middle class and the influx of the foreign investments have been

encouraging in the Growth of Retail Companies in India.

Growth of Retail Companies in India is still not yet in a matured stage

with great potentials within this sector still to be explored. Most of the retail

companies are sections of other industries that have stepped in the retail sector for

a better business.

The Growth of Retail Companies in India is most pronounced in the

metro cities of India; however the smaller towns are also not lagging behind in

this. The retail companies are not only targeting the four metros in India but also

is considering the second graded upcoming cities like Ahmedabad, Baroda,

Chandigarh, Quoimbatur , Cochin, Ludhiana, Pune, Trivanthpuram, Simla,

Gurgaon, and others.

The South Indian zone have adopted the process of shopping in the

supermarkets for their daily requirements and this has also been influencing other

cities as well where many hypermarkets are coming up day to day.


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2.4 Success factor for Retailing in India

The retail companies are found to be rising in India at a remarkable speed

with the years and these have brought a revolutionary change in the shopping

attitude of the Indian customers. The Indian Retail growth can be attributed to the

several factors including:

Demography Dynamics: Approximately 60 per cent of Indian population below

30 years of age.

Double Incomes: Increasing instances of Double Incomes in most families

coupled with the rise in spending power.

Plastic Revolution: Increasing use of credit cards for categories relating to

Apparel, Consumer Durable Goods, Food and Grocery etc.

Urbanization: Increased urbanization has led to higher customer density areas

thus enabling retailers to use lesser number of stores to target the same number of

customers. Aggregation of demand that occurs due to urbanization helps a retailer in reaping the economies of scale.

Potential for Investment: It is potential business for investment.

Location: With modern retail formats having made their foray into the top cities

namely Hyderabad, Ahmedabad, Mumbai, Pune, Chennai, Bangalore, Delhi,

Nagpur there exists tremendous potential in two tier towns over the next 5 years.
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Sectors with High Growth Potential: Certain segments that promise a high growth

are:

Food and Grocery (93 per cent)

Clothing (58 per cent)

Furniture and Fixtures (28 per cent)

Pharmacy (23 per cent)

Durables, Footwear & Leather, Watch & Jewellery (33 per cent)

Fastest Growing Retail stores: Some of the formats that offer good growth

potential are:

Specialty and Super Market (45 per cent)

Hyper Market (36 per cent) Discount stores (27 per cent)

Department Stores (18 per cent)

Convenience Stores and E-Retailing (9 per cent)

Retail in rural India: Retail sector offers opportunities for exploration and

investment in rural areas, with Corporate and Entrepreneurs having made a foray in

the past. India's largely rural population has caught the eye of retailers looking for

new areas of growth. ITC launched the country's first rural mall 'Chaupal Sagar',

offering a diverse product ranges from FMCG to electronics appliance to

automobiles, attempting to provide farmers a one-stop destination for all of their

needs. Other corporate bodies include Escorts and Tata Chemicals (with Tata Kisan

Sansar) setting up agri-stores to provide products/services targeted at the farmer in

order to tap the vast rural market.

Wholesale Trading: Wholesale trading also holds huge potential for growth. German

giant Metro AG and South African Shop rite Holdings have already made headway in

this segment by setting up stores selling merchandise on a wholesale basis in

Bangalore and Mumbai respectively. These new-format cash-and-carry stores attract
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large volumes from a sizeable number of retailers who do not have to maintain

relationships with multiple suppliers for all their needs.

2.5 Plans of Large Retailers:

Reliance Retail: investing Rs. 30,000 crore ($6.67 billion) in setting up multipleretail formats with expected sales of Rs. 90,000 crore plus ($20 billion) by 2009-10.

Pantaloon Retail: Will occupy 10 mn sq.ft retail space and achieve Rs.9,000crore-plus ($2 bn) sales by 2008.

RPG: Planning IPO, will have 450-plus Music World, 50-plus Spencer's Hyper covering 4 mn sq.ft by 2010.

LIFESTYLE :Investing Rs.400 crore-plus ($90 mn) in next five years on MaxHypermarkets & value retail stores, home and lifestyle centres.

Raheja's: Operates Shoppers' Stop, Crossword, Inorbit Mall, and 'Home Stop'formats. Will operate 55 "Hypercity" hypermarkets with US$100 million salesacross India by 2015.

Piramyd Retail: Aiming to occupy 1.75 million sq.ft retail space through 150stores in next five years.

TATA (Trent Ltd.): Trent to open 27 more stores across its retail formats adding 1mn sq.ft of space in the next 12 DLF malls. Titan industries to add 50-plus Titanand Tanishq stores in 2006.

Foreign Direct Investment Policy In Retail

Another cap to the retailing industry in India is allowing 51% FDI in single brand outlet.The government is now set to initiate a second wave of reforms in the segment byliberalizing investment norms further. This will not only favor the retail sector develop interms of design concept, construction quality and providing modern amenities but willalso help in creating a consumer-friendly environment. Retail industry in India is at thecrossroads but the future of the consumer markets is promising as the market is growing,government policies are becoming more favorable and emerging technologies arefacilitating operations in India. And this upsurge in the retail industry has made India a

promising destination for retail investors and at the same time has impelled investments

in the real estate sector. As foreign investors cautiously test the Indian Markets for investments in the retail sector, local companies and joint ventures are expected to bemore advantageously positioned than the purely foreign ones in the evolving India'sorganized retailing industry.

Foreign Direct Investment (FDI) to the extent of 100 per cent in Cash and CarryWholesale formats. Franchisee arrangements are also permitted in retail trade.
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Single Brand Products: FDI upto 51 per cent is permissible in the retail trade of single brand products subject to the following conditions.

o Products to be sold should be of a 'Single Brand' only.o Products should be sold under the same brand internationally.o 'Single Brand' product retailing would cover only products, which are

branded during manufacturing.


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2.6 Key Players in Retail Industry

The untapped scope of retailing has attracted superstores like Wal-Mart

into India, leaving behind the kiranas that served us for years. Such companies are

basically IT based. The other important participants in the Indian Retail sector are

Bata, Big Bazaar, Pantaloons, Archies, Cafe Coffee Day, landmark, Khadims,

Crossword and many more.

Some Major players in Retail sector:
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2.7 Retail formats worldwide have evolved in three phases:

Retailers decide on the category and quality of products and services,

differentiating them from other retailers. Retail formats in this phase are typically

supermarket, department stores and speciality stores.

During the second phase, retailers carve a niche for themselves based on a product

category and price. Competition intensifies because the products and services on

offer become virtually standardized and price becomes the main selling point.

This phase normally gives way to discount stores.

The third phase arrives when competition peaks. This is when hypermarkets begin

to evolve. Hypermarkets usually compete on price and a wider product range, but

the normally lack product depth and service components. Globally, retailing is

customer centric with an emphasis on innovation in products, processes and

services. In short, the CUSTOMER IS KING!


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2.8 Growth of Retail Outlets in India (in million)

Year Urban Rural Total

1978 0.58 1.76 2.34

1984 0.75 2.02 2.77

1990 0.94 2.42 3.36

1996 1.80 3.33 5.13

1999 2.40 3.60 6.00

2007 4.89 7.08 11.97

*Source: indiainfoline

The BMI India Retail Report for the third-quarter of 2010, forecasts that the total retail

sales will grow from US$ 353 billion in 2010 to US$ 543.2 billion by 2014. With the

expanding middle and upper class consumer base, there will also be opportunities in

India's tier II and III cities. The greater availability of personal credit and a growing

vehicle population to improve mobility also contribute to a trend towards annual retail

sales growth of 11.4 per cent. Mass grocery retail (MGR) sales in India are forecast to

undergo enormous growth over the forecast period. BMI further predicts that sales

through MGR outlets will increase by 154 per cent to reach US$ 15.29 billion by 2014.

This is a consequence of India's dramatic, rapid shift from small independent retailers to

large, modern outlets.


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BMI forecasts consumer electronic sales at US$ 29.86 billion in 2010, with over the

counter (OTC) pharmaceutical sales at US$ 3.28 billion. The latter is predicted to be the

fastest growing retail sub-sector and BMI forecasts that sales will reach US$ 6.18 billion

by 2014, an increase of 88.5 per cent.

China and India are predicted to account for almost 91 per cent of regional retail sales in

2010 and by 2014 their share of the regional market is expected to be more than 92 per

cent. Growth in regional retail sales for 2010-2014 is estimated by BMI at 72.2 per cent,

an annual average of 14 per cent. India should experience the most rapid rate of growth in

the region, followed by China. For India, its forecast market share of 13.9 per cent in

2010 is expected to increase to 14.3 per cent by 2014.

Moreover, for the 4th time in five years, India has been ranked as the most attractive

nation for retail investment among 30 emerging markets by the US-based global

management consulting firm, A T Kearney in its 8th annual Global Retail Development

Index (GRDI) 2009. India remains among the leaders in the 2010 GRDI and presents

major retail opportunities. India's retail market is expected to be worth about US$ 410

billion, with 5 per cent of sales through organised retail, meaning that the opportunity in

India remains immense. Retail should continue to grow rapidly up to US$ 535 billion in

2013, with 10 per cent coming from organised retail, reflecting a fast-growing middleclass, demanding higher quality shopping environments and stronger brands, the report

added. Bharti Retail strengthened its position in northern India by opening 59 stores,

Bharti Wal-Mart is expected to open 10 to 15 wholesale locations in the next three years,

and Marks & Spencer is considering plans to open additional outlets in the next few

years.


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Established retailers are tapping into the growing retail market by introducing innovative

store formats. Spencer's Retail, More (owned by Aditya Birla Group) and Shoppers Stop

(owned by K Raheja Group) already plan to expand.

According to a McKinsey & Company report titled 'The Great Indian Bazaar: Organised

Retail Comes of Age in India', organised retail in India is expected to increase from 5 per

cent of the total market in 2008 to 14 - 18 per cent of the total retail market and reach

US$ 450 billion by 2015.

Furthermore, according to a report titled 'India Organised Retail Market 2010', published

by Knight Frank India in May 2010 during 2010-12, around 55 million square feet (sq ft)of retail space will be ready in Mumbai, national capital region (NCR), Bengaluru,

Kolkata, Chennai, Hyderabad and Pune. Besides, between 2010 and 2012, the organised

retail real estate stock will grow from the existing 41 million sq ft to 95 million sq ft.

India continues to be among the most attractive countries for global retailers. Foreign

direct investment (FDI) inflows between April 2000 and April 2010, in single-brand

retail trading, stood at US$ 194.69 million, according to the Department of Industrial

Policy and Promotion (DIPP).

Leading watchmaker Titan Industries Limited plans to invest about US$ 21.83

million for opening 50 premium watch outlets Helios in next five years to attain a

sales target of US$ 87.31 million. "We are looking to open Helios outlets in

Mumbai, Delhi, Hyderabad, Kolkata, Chennai, Pune, Ahmedabad etc in next 12

months," said Ajoy Chawla, Vice President (Retail), Titan.

British high street retailer, Marks and Spencer (M&S) plans to significantly

increase its retail presence in India, targetting 50 stores in the next three years.

M&S currently operates 17 stores in India through a joint venture (JV) with

Reliance Retail.

Chinese retail major, Yishion has entered the Indian market and plans to have at

least 125 points of sales, including exclusive stores and multi-brand outlets,


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across India by 2012. It will open its first exclusive store in New Delhi by

September 2010.

Spain's Inditex, Europe's largest clothing retailer opened the first store of its

flagship Zara brand in India in June 2010. It further plans to open a total of five

Zara outlets in India.

Bharti Retail, owner of Easy Day store supermarkets and hypermarts plans to

invest about US$ 2.5 billion over the next five years to add about 10 million sq ft

of retail space in the country by then, according to a company spokesperson.

Raymond Weil plans to invest US$ 883,665 in India during 2010, according to

Olivier Bernheim, President and CEO, Raymond Weil.


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Policy Initiatives

FDI up to 51 per cent under the Government route is allowed in retail trade of SingleBrand products, according to the Consolidated FDI Policy document.

Road Ahead

According to industry experts, the next phase of growth is expected to come from rural

markets.

According to a market research report published in June 2008 by RNCOS titled,

'Booming Retail Sector in India', organised retail market in India is expected to reach

US$ 50 billion by 2011. The key findings of the report are:

Number of shopping malls is expected to increase at a CAGR of more than 18.9

per cent from 2007 to 2015

Rural market is projected to dominate the retail industry landscape in India by

2012 with total market share of above 50 per cent

Driven by the expanding retail market, the third party logistics market isforecasted to reach US$ 20 billion by 2011

Apparel, along with food and grocery, will lead organised retailing in India

Exchange rate used: 1 USD = 45.81 INR (as on June 2010)

Disclaimer: This information has been collected through secondary research

and IBEF is not responsible for any errors in the same.

http://www.ibef.org/industry/retail.aspx
http://www.ibef.org/industry/retail.aspxhttp://www.ibef.org/industry/retail.aspx


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CHAPTER 3: Classification of Retail Sector:

Unorganized / Traditional retailing:

On the other hand, it refers to the 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, etc.

Organized / Modern retailing:

It 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, retail chains, and also the privately owned large

retail businesses.

RETAIL

UnorganizedRetailin

Organised Retailing


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3.1 Unorganized/ Traditional Retail in India

Retail outlets exist in all

shapes and sizes from a Panwala to

a shoppers Stop. However, most of

these outlets are basic mom-and-pop

stores the traditional Kirana

shops in the locality, which are less

than 500 sq.ft. in area with very basic

offerings, fixed prices, zero use of

technology, and little or no ambiance.

Kirana and small stores

The small local stores have dominated Indian retailing over the decades

and are present in every village and local community, addressing the needs of the

population in the area and being the point of contact with the consumer. The

distribution networks of brands extend right up to this point to stay in touch withcustomer needs and preferences.

India like most other countries has a very large network of local stores.

The retail industry in rural India has typically two forms: "Haats" and "Melas".

You will find these in almost every village and locality. A lot of them function as

paan and cigarette outlets with tea and coffee sometimes also offered. Besides this

these stores stock and offer small eats and soft drinks including biscuits, soft

drinks, chocolate, sweets, bread and baked products. Many of them also sell fruits

like bananas and a range of toiletries and cosmetics like soaps, shampoos,

toothpastes and some creams.
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These small stores cater to the needs of their own local population and travelers

who stop by for a smoke or a snack. A little larger format is the neighborhood

grocery store that focuses on grains, foods, snacks and toiletries besides other

home essentials.

3.2 Features of Indian kirana stores

India has sometimes been referred to as a nation of shopkeepers. A high

density of population and the need for convenience has facilitated the operation of

over 12 million stores in India. Of these, nearly 78 per cent are small family-run

operations, which use only household labor. The key characteristics of these

stores are:

Small size: Such stores are small in size. They range in area from 200 square feet

or less to 1,500 square feet, depending on the area of operation.

Know customer personally: These shop owners know their customers personally

and have strong relationships with them. This helps them gauge likes and dislikes,and accordingly meet the individual needs of each household.

Locations to consumers: These shops are located within residential areas and

can be accessed by customers on foot. This makes it convenient for households to

buy items on a daily basis.

Low operating costs and overheads: These stores are run by family members

and thus, there are no labour costs involved. Little money is spent on lighting,

power, fuel and ambience.

Additional services: These small stores provide services like a month's credit,

which many customers find very useful. Such stores have also been concentrating


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on offering customers the additional convenience of home delivery and obtaining

a product on order.

3.3 Traditional Format Retailers:

Kiranas:

These are close-to-home stores where a household buys its daily use

goods. They range from the very small 200 sq ft stores to 1,500 sq ft

establishments. Often those running the stores know the households personally

and provide additional services like obtaining unstocked items on request,

delivering goods to the doorstep and granting a month's credit.

Paan shops:

These are unique to India. They are very small shops manned by a single

individual whose chief occupation is the making of paan (betel leaf with a few

additions). Such shops also stock tobacco, chocolates and some FMCG articles.

Cart vendor:

Cart vendors sell fresh fruits and vegetables in residential areas and

housewives buy from them on a daily basis. They sell their produce off a cart,

which allows them the freedom to move around from place to place

Haats:

A Haat is more of a village phenomenon. Once a week, a market is

organized in a particular location, where sellers from different areas gather to sell

their products. Buyers congregate to buy an assortment of goods, ranging fromfruits and vegetables to household goods, clothes and accessories like bangles,

etc.


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Mela:

A mela is organized once every few months generally around the time of

a festival. In addition to the sale of a variety of goods not easily accessible to

villagers, the mela also provides entertainment.

There is lot of things to be learn from kiranas..

According to a new study published in Economic times, Indian

consumers are still visiting local kirana stores (mom n' pop stores in India) while

they love the shopping experience of malls. Besides, the bulk shopping that they

do at these modern retails stores, there are the daily top-ups to do at the local

groceries (Kirana Stores) and the perishables that have to be bought daily. For

Kiranas the proximity is the major advantage. Considering the largest retailer,

Pantaloons (through Food Bazaar), does not think it a bright idea to compete with

them, discount retailer Subhiksha still fine- tuning its format. There is a huge

opportunity in home deliveries and the trick is to beat the kirana stores at their

own game.

Kiranas leads the organized retailer due to there reach in the market. In

order to increase the reach in the market the organized sector should include a

Hub and Spoke model in their supply chain. Instead of going for the centralized

warehouse.

The organized retail stores have to match with the consumer

expectations. Kiranas are already offering this programme which includes stock

rotation and loyalty programs, along with credit and discount policies. The

organized retail stores still have to learn a lot from the kiranas.


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3.4 Interview with Kirana Shop Owner-Mr.Mahavir

This store is the small, friendly neighborhood es, which have

been offering customized services to their customers. The shop, which has contributed to

this study, is situated at Vile Parle, Mumbai. The owner of this shop is Kantilalbhai

Savla. He has kept name of the shop as Mahavir Stores because his name is Mahavir---

Mahavir General Store ,Vile Parle East ,Mumbai

The information gathered through the interviews is given below

The store provides a wide range of varieties of products. In addition to groceries,

other items are also sold like stationary, imported food articles, cold drinks, ice

creams, medicines etc.

The owner said that the store had a higher percentage of regular customers than

walk-in customers. The regular customers were from the nearby areas, but he also

claimed to have customers from far off areas too. New customers are usually

generated through word-of-mouth.

The owner himself decides on which brands to stock according to the preferences

of their customers and estimated the amount of goods to stock according to their

periodic sales figures.

The owner expressed a desire to expand his stores if given the opportunity to do

so; however, he lacked finance and space to expand. He also said that he was

satisfied with his business volume and in addition, he has no time to look after a

bigger store.

When asked about why their regular customers chose to visit their store, the

owner listed availability of good quality and fresh products, customer satisfaction,


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prices and owner-customer relationship as the primary reasons for their

customers' loyalty.

o Mahavir Kirana stores provide free home delivery to their customers and had

a credit period ranging from 1 month to 2 month which depending upon the

worthiness of customers.

On an average, these stores remained open from 7 in the morning to 11:30 in the

night. The store also remained open on Sundays.

Do you think that the expansion of malls (modern retailing) is

becoming a barrier for the growth of local kirana shops? Do thestore owners have to fear from the development of malls? Give

your opinion.

(Translated in English)

The kiranas have evolved to cater to different segments of the market and

I feel that they are making enough profits which are why they continue to be in

the business. Till recently kiranas or neighbourhood stores were the only choiceavailable to the consumer, even in the urban areas. But slowly and gradually the

situation is changing. Over the last 2-3 year, there has been a significant growth in

the number of malls. There is an increased demand for quality retail space which

includes food & apparel chains, consumer durables & multiplex operators. Since

the consumers preference has been diverted towards malls, local kirana stores

have to suffer badly but I dont feel that existence of Supermarkets have affected

my Business at all, infact due to its existence we have become more customers

oriented. We have a specific customer base from long ago and the new customers

add on everyday. We just try our optimum to satisfy and maintain the customers

offering them discounts and moth watering rates in varied products. Initially it

was tough but now we are able to satisfy all the needs of the customer, infact we

end over providing the, augmented products.


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CHAPTER 4 : Organized/ Modern Retail in India

(Shopping Malls, Supermarkets, etc)

Indian organized retail market is growing at a fast pace due to the boomin the India retail industry. In 2005, the retail industry in India amounted to Rs

10,000 billion accounting for about 10% to the country's GDP. The organized

retail market in India out of this total market accounted for Rs 350 billion which

is about 3.5% of the total revenues.

Retail market in the Indian organized sector is expected to cross Rs 1000

billion by 2010. Traditionally the retail industry in India was largely unorganized,

comprising of drug stores, medium, and small grocery stores. Most of theorganized retailing in India have started recently and is concentrating mainly in

metropolitan cities.

The growth in the Indian organized retail market is mainly due to the

change in the consumers behavior. This change has come in the consumer due to

increased income, changing lifestyles, and patterns of demography which are

favorable. Now the consumer wants to shop at a place where he can get food,

entertainment, and shopping all under one roof. This has given Indian organized

retail market a major boost.

Retail market in the organized sector in India is growing can be seen

from the fact that 1500 supermarkets, 325 departmental stores, and 300 new malls

are being built. Many Indian companies are entering the Indian retail market

which is giving Indian organized retail market a boost. One such company is the

Reliance Industries Limited. It plans to invest US$ 6 billion in the Indian retail

market by opening 1000 hypermarkets and 1500 supermarkets. A pantaloon is

another Indian company which plans to increase its retail space to 30 million

square feet with an investment of US$ 1 billion.


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4.1 Origin of Modern Retailing in India

Retailing, which is one of the largest sectors in the global economy, is

going through a transition phase in India.. Organised retailing still contributes toonly about 2% of the total retailing in the country. Now a question that would

arise is what constitutes Organised Retailing. Mr. Raghu Pillai, the Managing

Director of Food World, which is one of the leading organised foods retailing

chain in India, says that, Organised Retailing presupposes a retailers ability to

manage or more importantly influence a set of supply chain variables in a

commercially viable and sustainable way. Efficient management of the supply

chain to ensure the profitability of the entire chain, large outlets with modern

ambiance and facilities, a wide product profile, self service facilities etc are

generally the features of a modern retail store. Organised retailing aims at

providing an ideal shopping experience for the consumer based on the advantages

of large-scale purchases, consumer preference analysis, excellent ambience and

choice of merchandise. However, there are no single formats, designs, facilities or

product portfolios that can be identified as the success formula and as a general

rule differentiation between chains is necessary to increase viability.

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.

Largely in the post independence period, Indian retailing has been

unorganized, to the most part untouched by corporate business principles. When

the economy started to be opened in the 1980s the situation began to change

slowly. Emergence of retail chains was at first witnessed in the textiles sector,

with companies like Bombay Dye ing, Raymond, S. Kumars and Grasim, opening

their own outlets. Titan then successfully created a retailing concept, by

establishing its series of elegant showrooms.


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4.2 Growth of Organised Retail in India

Organised retailing in India initially began in the south. The availability

of land at prime locations coupled with lower real estate prices (compared toMumbai and Delhi) made multi-storeyed shopping complexes possible. And now

south India notably Chennai and, to a lesser extent Bangalore and Hyderabad

has emerged as a centre of organized retailing. In fact, in Chennai, nearly 20% of

food sales now is accounted for by super markets and an equal share of consumer

durables is sold through specialty chains Viveks.

It took two years of recession for this concept of shopping to take root in

major cities like Mumbai and Delhi. Recession brought down property prices in

these cities, and it was during this slump that big business houses took notice of

the potential in retailing.

India is rapidly evolving into an exciting and competitive marketplace

with potential target consumers in both the niche and middle class segments.

Manufacturer owned and retail chain stores are springing up in urban areas to

market consumer goods in a style similar to that of malls in more affluentcountries. Even though big retail chains like Crossroads, Saga and Shoppers Stop

are concentrating on the upper segment and selling products at higher prices,

some like RPGs Food World and Bi g Bazaar are tapping the huge middle class

population. During the past two years, there has been a tremendous amount of

interest in the Indian retail trade from global majors as well. Over the years,

international brands like McDonalds, Swarovski, Lacoste, Dominos, Pepsi, and

Benetton among a host of others have come in and thrived in India.


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Retailing is one of the fastest growing industries in India, catering to the worlds

second largest consumer market. A sunrise industry, it offers tremendous

potential for growth and contributes 8 10% to overall employment. However,

this is still low as compared to 20% in the USA. As India moves towards being a

service-oriented economy, a rise in this percentage is expected. The number of

retail outlets is growing at about 8.5% annually in the urban areas, and in towns

with a population between 100,000 to 1 million the growth rate is about 4.5%.

With the increasing assertiveness of the Indian consumer, and a growing supply

base both from within Indian as well as from other countries

(With import becoming easier) The retail sector in India is poised for a

significant change in the coming decade.

However, the boom in retailing has been confined primarily to the urban

markets. There are two main reasons for this. Firstly, the modern retailer is yet to

exhaust the opportunities in the urban market and has therefore probably not

looked at other markets seriously. Secondly, 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 need 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 a part of it. Hence, one

can assume that the retailing revolution is emerging along the lines of the

economic evolution of society.


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With organized retail in India pegged at Rs 25,000 crore (Rs 250 billion) -- out of a total

of Rs 800,000 crore (Rs 8,000 billion -- and a double digit growth rate, marketing

companies are setting up shops to provide differentiated services to clients. Till now sales

people were the link between the retailer and the producer. But sales personnel are busy

selling a product and do not have a fair idea of what retailing is about. The focus is to

prioritise retail. That is, not only to sell a product to a consumer but to get the consumer

to interact with the product. Gone are the days when retailing meant mere availability of a

product. With competition becoming stiffer companies are looking at 'experiential'

marketing. Also the lack of proper metrics to measure marketing spends is a serious

issue.

In today's swiftly changing business environment, there is no option but to be in the know- to be constantly on the move, keeping tabs on the shifting trends in the market place and

maneuvering your strategy to stay on top. The retail arena today is very different - the

opportunities are incredible but exploiting them is extremely tough.

Super smart shoppers know all the rules of the game. They can instantly sense a good

buy and lap it up or sniff out a bad product and dismiss it. Their expectations are tough to

meet but for retailers aiming to make a big sale, there is not much of a choice but to find

ways to win customers over and keep them permanently happy.

In an environment, which is still restrictive in many ways and lacks adequate

infrastructure, this becomes a formidable task. So how are Indian retailers coping up and

how long will it be before organised retail becomes the primary way of selling.

As the corporates 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, retail as an industry in India is coming alive. Retail

sales in India amounted to about Rs.7400 billion in 2002, expanded at an average annual

rate of 7% during 1999-2002. With the upturn in economic growth during 2003, retail

sales are also expected to expand at a higher pace of nearly 10%. Across the country,

retail sales in real terms are predicted to rise more rapidly than consumer expenditure

during 2003-08. The forecast growth in real retail sales during 2003- 2008 is 8.3% per

year, compared with 7.1% for consumer expenditure. Modernization of the Indian retail


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sector will be reflected in rapid growth in sales of supermarkets, departmental stores and

hyper marts.

Sales from these large-format stores are to expand at growth rates ranging from 24% to

49% per year during 2003-2008, according to a latest report by Euro monitor

International, a leading provider of global consumer-market intelligence.

A. T. Kearney Inc. places India 6th on a global retail development index. The country has

the highest per capita outlets in the world - 5.5 outlets per 1000 population. Around 7%

of the population in India is engaged in retailing, as compared to 20% in the USA.

In a developing country like India, a large chunk of consumer expenditure is on basic

necessities, especially food-related items. Hence, it is not surprising that food, beverages

and tobacco accounted for as much as 71% of retail sales in 2002. The share of food

related items had, however, declined over the review period, down from 73% in 1999.This is not unexpected, because with income growth, Indians, like consumers elsewhere,

have started spending more on non-food items compared with food products. Sales

through supermarkets and department stores are small compared with overall retail sales.

Nevertheless, their sales have grown much more rapidly, at almost a triple rate (about

30% per year during the review period). This high acceleration in sales through modern

retail formats is expected to continue during the next few years, with the rapid growth in

numbers of such outlets due to consumer demand and business potential.


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Indian Retail- expanding the number of formats

In modern retailing, a key strategic choice is the format. Innovation in formats can provide an edge to retailers. Organized retailers in India are trying a variety of formats,ranging from discount stores to supermarkets to hypermarkets to specialty chains.

Formats Adopted by Key Players in India

Retailer Original formats Later Formats

RPGRetail

Supermarket(Foodworld)

Hypermarket(Spencer's)Specialty Store(Health and Glow)

Piramal's Department Store(Piramyd Megastore) Discount Store (TruMart)

PantaloonRetail

Small format outlets(Shoppe)Department Store(Pantaloon)

Supermarket (Food Bazaar)Hypermarket (Big Bazaar) Mall(Central)

K RahejaGroup

Department Store(shopper's stop)Specialty Store(Crossword)

Supermarket (TBA)Hypermarket (TBA)

Tata/Trent

Department Store(Westside) Hypermarket (Star India Bazaar)

Landmark Group

Department Store(Lifestyle) Hypermarket (TBA)

Others Discount Store (Subhiksha, Margin Free, Apna Bazaar),Supermarket (Nilgiri's), Specialty Electronics


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4.3 Factors Responsible for the success of Organized Retail in

India

Increased Purchasing Power: The National Council of Applied Economic Research classifies

households into five categories lower, lower middle, middle, upper middle and

high. The movement of households within these income categories reflects the

changing dynamics of the Indian market. 33% of Indian households are in the

middle- to high-income category in 2004. This is projected to increase to 49% by

2010. The impact of increasing income levels is reflected in the sales trend for

high involvement products like cars and multi-utility vehicles (MUVs) in theIndian market.

Changing Consumption Patterns :

The rapid pace of organized retailing is fueled by changing consumer

habits in both cities and large town by (DINKS) Double income no kids group

and increased aspirations caused by exposure to the satellite television, cable and

other channels. The growth for the changing habit patterns would be affected by

the mobile telephones (new product categories like ring tones estimated to 400

crores).

Young Indian Consumers:

The Indian consumer segment is the youngest in the world with a median

age of 24 as compared to other developed nations. With fertility rates at an

estimated three children per woman and a population growth rate at 1.6% pa, the

population is expected to continue to grow to 2050.


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More Available Retail Space:

The boom in the retail sector is also associated with the rise of mall all

across the country. There are 220 mall project in the pipeline till 2007, 139 in the

big 8 cities including the metros and 81 in other Tier II cities. Developers are

keeping in mind the astonishing pace with which the new supply is expected to

enter the market and are developing specialty malls and other propositions to

offer a different experience to the changing consumer.

Easier Financing:

Interest rates have dropped down over a couple of years making it much

easier for investors to develop a mall and economically viable for retailers to set

up shops. The fall in real-estate prices as well as lower borrowing rates stillensure that current rental yields are attractive for developers.

Improved Logistics and Better Infrastructure:

Infrastructure spending has improved the state of Indias roads and

transport system. Connectivity has enabled the faster movement of goods,

especially perishable goods, from one part of the country to another. Logistics has

improved, enabling more efficient retail operations. Retailers have benefited from

the improved infrastructure, and further improvements should only increase the

benefits to retailers


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The factors responsible for the development of the retail sector in India can be broadly

summarized as follows:-

* Rising incomes and improvements in infrastructure are enlarging consumer markets

and accelerating the convergence of consumer tastes.

* Looking at income classification, the National Council of Applied Economic Research

(NCAER) classified approximately 50% of the Indian population as low income in 1994-

95; this is expected to decline to 17.8% by 2006-07.

* Liberalization of the Indian economy which has led to the opening up of the market for

consumer goods has helped the MNC brands like Kellogg's, Unilever, Nestle, etc. to

make significant inroads into the vast consumer market by offering a wide range of

choices to the Indian consumers.

* Shift in consumer demand to foreign brands like McDonalds, Sony, Panasonic, etc.

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. 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. As India continues to get strongly integrated with the

world economy riding the waves of globalization, the retail sector is bound to take big

leaps in the years to come.

The Indian retail sector is estimated to have a market size of about $ 180 billion; but the

organised sector represents only 2% share of this market. Most of the organised retailing

in the country has just started recently, and has been concentrated mainly in the metro

cities. India is the last large Asian economy to liberalize its retail sector. In Thailand,

more than 40% of all consumer goods are sold through the super markets and

departmental stores. A similar phenomenon has swept through all other Asian countries.


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Organised retailing in India has a huge scope because of the vast market and the growing

consciousness of the Consumer about product quality and services.

A study conducted by Fitch, expects the organized retail industry to continue to grow

rapidly, especially through increased levels of penetration in larger towns and metros and

also as it begins to spread to smaller cities and B class towns. Fuelling this growth is the

growth in development of the retail-specific properties and malls. According to the

estimates available with Fitch, close to 25mn sq. ft. of retail space is being developed and

will be available for occupation over the next 36-48 months. Fitch expects organized

retail to capture 15%-20% market share by 2010.

A McKinsey report on India says organised retailing would increase the efficiency and

productivity of entire gamut of economic activities, and would help in achieving higher

GDP growth. At 6%, the share of employment of retail in India is low, even when

compared to Brazil (14%), and Poland (12%).

Current Status of Retail Marketing in India

Winds of change sweeping thr ough Retail I ndustry.

What is it that has made the Piramals, the Tatas, the Rahejas, ITC and scores of otherstake a plunge into mega retailing? Why is market research, space management, ERP,

promotions etc now a necessary tool in this industry?

Retail Economics in India

Traditionally retailing has not been a structurally organized industry in India. Organized

retail network was seen only in fabrics, with large mills building their own exclusive

stores e.g. Raymond's, Bombay Dyeing etc.

Currently there are about 5130000 retail outlets selling about Rs4790bn worth of

products. Retail universe in India comprises large, medium general stores, chemists and

pan-bidi (apart from accessories stores). Of these thanks to unemployment, the number

of pan-bidi outlets are steadily rising. On account of the fragmented nature of Indian


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retail industry the inhabitants to stores ratio in India is about 150:1, i.e. there is a store

catering to every 150 people . This ratio varies from country to country. In china the ratio

is similar to that of India where as incase of more developed countries the ratio would be

higher. For instance in Europe the inhabitant to stores ratio is 2000:1.As markets mature,

consumer expectations rise it would be a necessity for small retailers to come together

and form innovative and strong supply chain that will cut through distribution and

increase margins.

Turnaround times

In last couple of years this industry has made agile move from its nascent stages.

Organized retailing started picking up in Southern India. Availability of land at prime

locations coupled with cheaper real estate prices (compared to Mumbai & Delhi) made it

possible to have multi stored shopping complexes here. It took two years of recession to

get this concept of shopping to major cities like Mumbai & Delhi. Recession brought

property prices down in these cities. It was during this period of industry slump that big

business houses took notice of the potential in retailing. A classic example being- Lakme

Ltd. The company after selling off its cosmetic division to HLL, made an aggressive

foray into retailing. Its retail chain branded 'Westside' already comprises 4 stores- one

each in Bangalore, Hyderabad, Chennai and Mumbai. A cash hoard of Rs107bn willenable Lakme to roll out stores aggressively.


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Consumerism cycle

Consumer cycle starts with Industry Dictating the market. Eventually with time the

distributor gains control over the market. At this stage distributor becomes an important

link between manufacturer and customer. When markets start developing further

expanding its horizons, suddenly retailers turn out to be vital point in this supply chain.

In India we are entering into this third stage where retailers control the market. With

shopping attitudes of people changing, Indian markets today desires for value added

products and services with good ambience and brands, which only a retailer can provide.

Whereas developed countries have reached the final stage where customer dictates. US,

UK and other developed markets have now reached a stage wherein consumers arewilling to save on price by going to discount stores where ambience and services are low

and goods are unbranded.

It's a vicious cycle, but for the new aspect - Omnipresent net. Though it would be

sometime before e-commerce gears up in India. But all the same a merger of Internet,

catalogues, telephone and television is inevitable.

What makes it attractive?

Today the number of smaller retailers ($500pa) has shot up from 40% in 1990 to 54% in

1996, whereas the number of large stores (turnover of $3000pa) increased from 2.8% to

6.5%. Thus though large retailers are growing the smaller outlets are growing even faster.

However changing shopping attitudes of an average customer will make future growth

increasingly difficult for unorganized retail sector.

Currently in India, organized retailing accounts for 6% of the industry turnover,

comprising value-added foods (Rs770bn), music & entertainment (Rs40bn), colour

cosmetics (Rs12bn) etc. By 2005 organized retailing will account for 20% the total

retailing industry turnover (Rs8300bn).


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Big business houses today are in a position to provide Indian masses with shopping

satisfaction, entertainment, quality product, polite salesperson, product information and

discounts. Though margins currently are low due to high property cost and poor

infrastructure, this is the only business where one buys in credit and sells for cash.

Further the number of households earning more than Rs150000 per annum amounts to

30mn today and is expected to grow to 80mn by 2007.Additionally financial institutions

are encouraging such ventures. ICICI has recently sanctioned term loans to Vivek & co, a

mega-retailer, in Chennai to meet their expansion plans. Very shortly the market will also

witness IPO's for some of these Retail Ventures.

Proven success

In early 90's, K. Raheja Group started a mega Apparels stores in Mumbai- 'Shoppers

Stop'. Initially, the group was averse to start outlets at South Mumbai for various reasons

like low walk-ins, space constraints, narrowed target audience etc. However the success

of Crossroads, an ardent rival, has prompted them to start one at South Mumbai in near

future. The group has more of such stores, one each at Bangalore, Hyderabad and Jaipur.Within seven years of operations it has a yearly turnover of Rs1.30bn. The group has

plans of opening about 20 mega apparel stores in next 2 years. For this the company

plans to sell 25.1% stake for Rs559mn to Singapore based investor Warburg Pincus. The

success story of Shoppers Stop has convinced other business houses to take a leap.

Retailing, considered a sunrise industry today after InfoTech, is the most happening

industry with almost all the big players vying for a share of the coveted pie. Buoyed by a

strong increase in private consumption (see grap h), retailing is one industry that iswaiting to explode.


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Source: KSA Technopack

Today however, organised retailing is less than 2 per cent of the retailing industry inIndia, that is, about Rs 5,000 crore.( see table ) Therefore, there is no real retail revolutionin India; the industry is still in the stages of infancy.

Share of Organised Retail

1999 2002 2005

Total Retail (US $Bn)

150 180 225

Organized Retail (US $Bn)

1.1 3.3 7

% Share of OrganizedRetail

0.70% 1.80% 3.20%

Source: KSA Technopack

Organized retailing is bound to grow tremendously provided the right marketingstrategies are adopted. Retail businesses have broken rank and seem poised to surgeahead with renewed vigour, optimism, confidence and capability.


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Indian Organized Retail: (At current prices)

India Retail FactsPrivate Consumption, Total Retail and Modern Retail size

Latest Updates (2010) as per India Retail Report (initial estimates) :Private consumption (2009-2010) : Rs. 3,679,000 crore (Rs. 36,790 billion)Retail: Rs.2,000,000 crore (Rs.20,000 billion)Modern Retail Size: Rs.164,000 crore (Rs.1,640 billion) = 8.2% of Total RetailEmployment in modern retail = 10 direct employment in retail and 100 indirectemployment per Rs.1 crore(Rs.10 million) salesTotal employment in modern retail = 1.65 millionEstimated indirect employment in modern retail = 16.5 million

Total dependents in modern retail so far = Over 18 million people

India Snap Shots

Size (FY08) USD 511 bn (organized + unorganized)4Size (FY13 estimated) USD 833 bnProjected CAGR (FY18) 10 percentOrganized retail (FY13 estimated) USD 107 bnValue-wise India is fifth largest retail destination globallyRegulatoryCurrent FDI policies allow 100 percent foreign investment only in wholesale cash-n-

carryand 51 percent in single-brand retailingForeign players sourcing from India Levis-Strauss, Wal-Mart, Nike, Marks & Spencer,Metro AG, etcIndustry - snapshot1 IBEF, September 20092 Welspun Retail Limited, Indian Home Retail


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Retailing

Retail Segments India Retail Value

(Rs. Crore)

Organised Retail

(Rs. Crore)

% Organised

in 2006-2007

Clothing, Textiles & Fashion

Accessories113,500 21,400 18.9

Jewellery 60,200 1,680 2.8

Watches 3,950 1,800 45.6

Footwear 13,750 5,200 37.8

Health & Beauty care services 3,800 400 10.6

Pharmaceuticals 42,200 1,100 2.6

Consumer Durables,Home

Appliances/equipments48,100 5,000 10.4

Mobile handsets. Accessories

& Services21,650 1,740 8.0

Furnishings, Utensils,

Furniture-Home & Office40,650 3,700 9.1

Food & Grocery 743,900 5,800 0.8

Catering Services 57,000 3,940 6.9

Books, Music & Gifts 13,300 1,680 12.6

Entertainment 38,000 1,560 4.1

US$ 270 Billion US$ 12.4 Billion


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4.5 Modern Format Retailers

Designing a retail format depends on several factors product categories

stocked, target customers demographic profiles, real estate costs, brandconsistency and location being a few of them. For example groceries, teenage

crowd, affluent neighborhoods and niche products influence to a large extent the

kind of ambience and display to expect.

Convenience stores:

These are relatively small stores 400 to 2,000 sq. feet located near

residential areas. They stock a limited range of high-turnover convenience

products and are usually open for extended periods during the day, seven days a

week. Prices are slightly higher due to the convenience premium.

Supermarkets:

Large self service outlets, catering to varied shopper needs are termed as

Super markets. These are located in or near residential high streets. These stores

today contribute to 30% of all food & grocery organized retail sales. Super

Markets can further be classified in to mini supermarkets typically 1,000 sq ft to2,000 sq ft and large supermarkets ranging from a size of 3,500 sq ft to 5,000 sq

ft. having a strong focus on food & grocery and personal sales. The concept of

enabling a better shopping experience can be traced to the spread of supermarket

culture which attracted customers from a large geographic pocket. Nilgiris and

Food World are major Indian players operating in this way.

Department stores:

Department stores stock a deep collection of a wide range of product

categories in emerging and new product categories. Perceived higher value by

customers (unhurried shopping) and providing better ambience by retailers

brought about remarkable transformation in the way retailing went higher up the

value chain. These are large stores ranging from 20000-50000 sq. ft, catering to a


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variety of consumer needs. It can be further classified into localized departments

such as clothing, toys, home, groceries, etc. shoppers Stop, J C Penny, Lifestyle

and Sears with their assortment of products and services are prime examples of

national and international department stores.

Discount Stores:

Discount Stores are scaled down (stock less upmarket products) versions

of department stores, located in low-cost areas. They have relatively wider range

and smaller collection. While bulk buying aids them to sell at lesser prices,

recourse is also taken to source season- end products and manufacturers

seconds. As the name suggests, discount stores or factory outlets, offer discounts

on the MRP through selling in bulk reaching economies of scale or excess stock left over at the season. The product category can range from a variety of

perishable/ non perishable goods. Target and Kmart are examples of this format.

Hypermarkets:

Hypermarkets are a one-stop-for-all-needs kind of offering (with 400-600

SKUs), spread over a huge area and bridging the gap between FMCG and

durables outlets. They ar e typically large, starting from 40,000sq. ft plus are

usually located outside the city limits. This format comprises of a multiple

division layout, and usually has an industrial - look interior. Hypermarkets

generally provide daily necessities and grocery like items. Pricing is competitive

and they also offer volume discounts. Driven by bulk purchase and bulk selling,

everyone gained, with the exception of erstwhile trade partners of manufacturers.

Hypermarkets brought into focus the scale of operations volume driven

sustenance. Giant, promoted by RPG group, is a recent Indian initiative into this

format.


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Shopping Malls:

It is the largest form of organized retiling today. Shopping malls

popularity can be ascribed to a shift in the attitude towards shopping. Unlike the

disadvantage of sufficient travel demanded to reach out to a hypermarket, malls

sprang up at relatively nearer localities. Malls are located mainly in metro cities,

in proximity to urban outskirts, this format ranges from approximately 60,000 sq

ft to 7,00,000 sq ft and above. They lend an ideal shopping experience with an

amalgamation of product, service and entertainment, all under a common roof.

India's largest shopping arcade Spencer Plaza (600,000-sq-ft) in Chennai is an

example.

Specialty Stores:These formats focus on a specific product category, Medium sized layout

in strategic location. Specialty stores provide a large variety base for the

consumers to choose from. Despite the presence of the basic ingredients required

for growth of the retail industry in India, it still faces substantial hurdles that will

retard and inhibit its growth in the future. One of the key impediments is the lack

of FDI. This has largely resulted in limited capital investments in supply chain

infrastructure, which is a key for development and growth of retailing and has

also constrained access to world-class retail practices. Lack of proper

infrastructure and relatively high cost of real estate are the other impediments to

the growth of retailing. While the industry and the government are trying to

remove many of these hurdles, some of the

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