International Journal of Business Management & Research (IJBMR) ISSN 2249-6920 Vol.

2 Issue 4 Dec 2012 91-96 TJPRC Pvt. Ltd.,

RETAIL IN INDIA: A SUNRISE OR SUNSET.

1,2

JAGADISH PATIL & 2RAJESH.KANTHE Assistant Professor, Bharati Vidyapeeth Deemed University, IMRDA, Sangli, Maharashtra, India

ABSTRACT
This paper provides broad in cycle about the growth of retailing industry in India. Sunrise sector in business is just a vernacular used for a new or emerging or business that is expected to be a strong sector in the future in terms of growth and profits. It examines the growing awareness about FDI and concept of retail among people in India and the growth of urban and semi-urban retail markets. It discovers the role of the government of India in the retailing growth and the need for further improvement. In India the middle class as an segment remains untapped and retail industry which is in introduction phase in these small urban towns plays an important and attractive forces for global retail giants wanting to enter into newer markets, which in turn boost retail industry to grow faster. This paper includes retail sector in India, strategies, growth and challenges ahead of retail industry to shine.

KEYWORDS: Retail, Globalization, Foreign Direct Investment, Challenges and Prospects INTRODUCTION
Indias growing retail boom is a triumph story. With strong essentials developing in the Indian economy in the liberalized environment since 1991 with changes in income levels, lifestyles, taste & habits of consumers with preference for superior quality and branded products, vast domestic market 1with a very competitive manufacturing base, India has also observed a major retail boom in recent years. Being encouraged by Indias growing retail boom many multinational companies also started making beeline to enter Indias retail market. Investment from abroad has also been hailed by Indian industry, by and large, as the same has been considered to be very vital for adding to domestic investment, addition to capacity, higher growth in manufacturing, trade, business, employment, demand, consumption and income with multiplier effects. India, like Britain, is also a nation of shopkeepers. With over 12 mn retail outlets, India has one of the highest densities of retail outlets in the world with one retail outlet for ~90 persons. No wonder India is the ninth largest retail market in the world with annual retailsales of ~USD 215 Bn in 2005. However, the share of organized trade in India is currently very low estimated at just Rs. 35,000 Cr. in 2005 (Rs. 28,000 in 2004). This accounts for less than 4% of the total retail trade in the country2. The term sunrise is used mainly because it signifies a start or beginning to a bright new day. Similarly, sunrise sector means the sector which is coming up and will be a major source for growth, investment and profit .It necessarily need not be a new business altogether, but also an existing business that is reviving like the radio industry. Everyone had thought radios were dead and gone with MP3 etc making it big in the music and entertainment industry, but radio industry has come back remarkably and was called the sunrise sector.

GROWTH OF RETAIL INDUSTRY IN INDIA

Till recently, Government of India allowed 51% FDI in single brand retail and 100% in cash & carry only. But FDI in multi brand retail has not yet been allowed. One of the major steps taken by the Government recently to encourage the organized retailing in the country was the recent decision of the cabinet to allow 51% FDI in multi brand retail and 100% in single brand retail in Nov 2011. The decision was delayed and held back for some time because of the absence of

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political consensus in the GAs a result of the liberalized policies & reform measures taken by the government since 1991, Indian Economy has achieved commendable growth rates over the last few years with many success stories in many fronts. commendable Indias growing retail boom is one such success story. With strong fundamentals developing in the economy with changes in income levels, lifestyles, taste & habits reflecting in strong consumerism with preference for superior quality and branded products, vast domestic market with a very competitive manufacturing base, India also observed a major retail boom in recent years3. Being encouraged by Indias growing retail boom many multinational companies also started making beeline to many enter Indias retail market. Indian Industry, by and large, has also hailed investment from abroad which has been considered to be very vital for adding to domestic investment, addition to capacity, higher growth in manufacturing, trade, business, employment, demand, consumption and income with multiplier effects. Government has also taken a number of pro-active policy measures in recent times for encouraging growth of retail business and other allied activities like creation active allied of the required infrastructure facilities, centers of manufacturing excellence, providing for a good network of production, marketing, storages, distribution and cold chain facilities for Spreading the effects of development to downstream level for d inclusive growth. Government has also allowed gradual increase of FDI in single brand retail only. the Indian consumer of today who wants the right price, ambience and good quality all under one roof. The lifestyle and mindset mindset-change of the Indian customer has led to a spur in the retail industry with the total private consumption in 2006 clocking Rs.20,000 billion according to the Indian Retail Report 2007. Cities like Mumbai, Bangalore, New Delhi, Hyderabad, and Pune have around 40 malls as of today, which is expected to touch 250 by 2010 (KPMG report). ls Till recently, Government of India allowed 51% FDI in single brand retail and 100% in cash & carry only. But FDI in multi brand retail has not yet been allowed. One of the major steps taken by the Government recently to encourage taken the organized retailing in the country was the recent decision of the cabinet to allow 51% FDI in multi brand retail and 100% in single brand retail in Nov 2011. Though the decision was hailed by a cross segment of the industries and business, it was delayed and held back for some time because of the absence of political consensus in the Government and controversies raised in the country5.

ORGANISED RETAIL
The Indian retail industry is valued at $270 billion, with organised retail cornering 4.5 %. The organized pie is with expected to see a growth at a CAGR of 37 % (India Retail Report 2007)

Source: India Retail Report

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The government has ultimately taken the bold decision and notified the much-awaited policy allowing 100 % FDI in single brand retail from the existing 51%. The government is yet to take final decision and notify 51% FDI in multibrand retail. The Confederation of Indian Industry (CII), while supporting the Government of Indias decision on opening of FDI in retail and the latest notification, urged on the government for earlier and speedier implementation of the decision in the light of the overall benefits for trade, business manufacturing, both large corporate and SMEs and a vast segment of the consumers in the country. In view of the above background, the Confederation of Indian Industry (CII) has recently undertaken a comprehensive survey on Foreign Direct Investment (FDI) in retail on SME sector, in particular to assess the impact of the governments decision to allow 51% foreign direct investment (FDI) in multi-brand retail and 100% in single brand retail on the Indian SME sector on different aspects of growth based on some select parameters. overnment and controversies raised in the country.

Source: viaworld.in

BENEFITS OF FDI AND COMPETITION IN ORGANIZED RETAIL IN INDIA

The changing structure and scale of retail can critically impact several industries in the short term the retail industry itself, manufacturing, and real-estate, to name a few. And in the long term,spill-over effects can be felt in other industries. The growth of retailing has the potential to impact the performance of interlinked sectors such as manufacturing of consumer goods and agriculture-based industries6. The potential benefits of allowing entry by large foreign discount retail chains on lowering inflation, improving distribution and warehousing technologies. We do so by comparing findings from US studies that examine the effects of Wal-Mart and other large chains entering the US retail sector and the upheaval in the retail landscape brought about in the US beginning in the early 1990s. The section concludes by describing a couple of policy Indian retail industry is one of the sunrise sectors with huge growth potential.

CHALLENGES
In India the retailing industry has a long way to go and to become a truly flourishing industry, Retailing needs to cross various hurdles.

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The first challenge facing the organized retail sector is the competition from unorganized sector. Needless to say, the Indian retail sector is tremendously crowded by the unorganized retailing with the dominance of small and medium enterprises in opposition to the presence of few giant corporate retailing outlets. The trading sector is also highly fragmented, with a large number of intermediaries who Operate at a strictly local level and there is no barrier to entry, given the structure and scale of these operations8 .The tax structure in India favors small retail business. Organized retail sector has to pay huge taxes, which is negligible for small retail business. Thus, the cost of business operations is very high in India. Developed supply chain and integrated IT management is absent in retail sector. This lack of adequate infrastructure facilities, lack of trained work force and low skill level for retailing management further makes the sector quite complex. Also, the basic complexity of retailing- rapid price changes, threat of product obsolescence, low Margins, high cost of real estate and dissimilarity in consumer groups are the other challenges that the retail sector in India is facing9. The position of the retail industry will depend mostly on external factors like Government rules and policies and real estate prices, besides the activities of retailers and demands of the customers also show impact on retail industry. Even though economy across the globe is slowly emerging from recession, tough times lie ahead for the retail industry as consumer spending still has not seen a consistent increase. In fact, consumer spending could contract.10 The first challenge is competition from the unorganized sector. Traditional retailing has been Traditional in India for many centuries, and is characterized by small, family-owned operations. Because of this, such businesses are usually very low-margin, are owner-operated, and have mostly negligible real estate and labor costs. Moreover, they also pay little by way of taxes. Consumer familiarity that runs from generation to generation is one big advantage for the traditional retailing sector. It is often said that the mom-and-pop store in India is more like a father-and-son enterprise.11 Such small shops develop strong networks with local neighborhoods. The casual system of acknowledgment adds to their charisma, Moreover, low labor costs also allow shops to employ delivery boys, such that consumers may order their grocery list directly on the phone. These advantages are significant, though hard to quantify. In contrast, players in the organized sector have to cover big fixed costs, and yet have to keep prices low enough to be able to compete with the traditional sector. Getting customers to switch their purchasing away from small locality shops and towards large-scale retailers may be a major challenge12. The experience of large Indian retailers such as Big Bazaar shows that it is indeed possible. unreliable evidence of consumers who return from such shops suggests that the wholesale model provides for major bargains something Indian consumers are always on the lookout for low cost products.13 The other major challenge for retailers in India, as opposed to the US, is the storage setup of households. For the large-scale retail model to work, consumers visit such large stores and return with supplies likely to last them for a few weeks. Having such easy access to neighborhood stores with whom, as discussed above, it is possible to have a line of credit and easy delivery service, congested urban living conditions imply that few Indian households might be equipped with adequate storage facilities.14 In municipal settings, real estate rents are also very high. Thus the opportunities in this sector are Limited to those retailers with deep pockets, and puts pressure on their margins. Conversely, for Retailers looking to set up large stores at a distance from residential neighborhoods may struggle to attract consumers away from their traditional sources of groceries and other products.

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CONCLUSIONS
Indias retail sector remains off-limits to large international chains especially in multi-brand Retailing. A number of concerns have been raised about opening up the retail sector to FDI in India.The first concern is the potential impact of large foreign firms on employment in the retail sector. A second related concern raised in the DIPPs report is that opening up FDI would lead to unfair competition and ultimately result in large-scale exit of incumbent domestic retailers, especially the small family-owned business. A third concern raised by domestic incumbent firms in the organized retail sector is that this sector is under-developed and in a nascent stage. In this paper we argue that the potential benefits from allowing large retailers to enter the Indian retail market may outweigh the costs. Evidence from the United States suggests that FDI in organized retail could help tackle inflation, particularly with wholesale prices. It is also expected that technical know-how from foreign firms, such as warehousing technologies and distribution systems, for example, will lend itself to improving the supply chain in India, especially for agricultural produce. Creating better linkages between demand and supply also has the potential to improve the price signals that farmers receive and by eliminating both waste and middlemen also increase the fraction of the final sales prices that is paid to farmers. An added benefit of improved distribution and warehousing channels may also come from enhanced exports. Thus, retailers are witnessing a rising task in terms of wooing consumers, despite offering big discounts.

REFERENCES
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13. Sarma, E.A.S, 2005, Need for Caution in Retail FDI, Economic and Political Weekly, Vol.40,No.46, pp.479598. 14. Volpe, R. J. and N. Lavoie, 2008. The Effect of Wal-Mart Supercenters on Grocery Prices in New England, Applied Economic Perspectives and Policies, Vol. 30, No. 1, pp. 4 - 26. http://www.tsmg.com/download/article/TSMG_Tata_Review-June_2006.pdf