03.04.2013indian Retail Market (GREEN)

2013
Indian Retail Industry: An Insight
RISHABH SATNALIKA
ROLL NO. : 0673
ROOM NO. :34
MENTOR : PROF.
SOUMMYA BANERRJEE
PROJECT GUIDE: PROFESSOR SOUMMYA BANERJEE
Acknowledgement
Preparation of this project has indeed been a great learning experience and has
been a very enriching exercise in my academic life.
I would like to express my heartfelt gratitude to my project guidance teacher,

Professor Soummya Banerjee, who has played a crucial role in completion of this
project by giving me valuable inputs and feedback from time to time.
I would also like to thank my Vice Principal. Father Dominic Savio, for his
constant motivation in making us strive harder.
RISHABH SATNALIKA /ROOM NO. - 34/ Roll 0673 Page 2

Contents
CHAPTER PARTICULARS PAGE
Chapter 1 INTRODUCTION
1.1 ABOUT THE PROJECT 5
1.1.1 AN INSIGHT INTO RETAILING 5
1.2 OBJECTIVES OF THE STUDY 6
1.3 RESEARCH METHODOLOGY AND ITS LIMITATION 6
1.4 OVERVIEW OF INDIAN RETAIL SECTOR 7
Chapter 2 AN OVERVIEW OF THE INDIAN RETAIL SECTOR
2.1 STRUCTURE OF INDIAN RETAIL SECTOR 9
SCENARIO OF THE UNORGANISED SECTOR BEFORE DEVELOPMENT
2.2 OF THE ORGANISED RETAIL MARKET 11
2.3 EVOLUTION OF THE INDIAN RETAIL MARKET 12
2.4 EVOLUTION OF INDIAN RETAIL 14
2.5 EMERGENCE OF THE INDIAN ORGANISED RETAIL MARKET 15
2.5.1 TRENDS IN RETAIL FORMATS 16
2.6 KEY DRIVERS OF GROWTH IN INDIAN RETAIL 21
2.7 OPPORTUNITIES OF RETAIL SECTOR 28
2.8 KEY CHALLENGES IMPEDING THE GROWTH OF ORGANISED RETAIL 30
2.9 IMPACT OF DEVELOPMENT OF THE ORGANISED RETAIL MARKET 32

2.10 FDI IN RETAIL INDUSTRY 34
Chapter 3
INDIAN RETAIL SECTOR: STRATIGIES ADOPTED BY SELECTED
3.1 PLAYERS 40
3.1.1 SUBHIKSHA 40
3.1.2 SHOPPERS STOP 41
3.1.3 TRENT LIMITED 43
3.1.4 PANTALOON RETAIL (INDIA) LIMITED 45
3.2 SWOT ANALYSIS OF THE RETAIL MARKET IN INDIA 46
FINDINGS FROM THE STUDY OF ABOVE COMPANIES - SWOT
3.3 ANALYSIS 47
3.4 CONCLUSION RELATING TO THE SCENARION OF SLOWDOWN 51
Chapter 4
4.1 CONCLUSION AND SUGGESTIONS 54
BIBLIOGRAPHY 56

CHAPTER 1
INTRODUCTION
1.1 ABOUT THE PROJECT

According to Wikipedia, retailing consists of sale of goods or merchandise from a fixed
location, such as a departmental store, boutique or kiosk, or by post in small or
individual lots, for direct consumption by the purchaser. Retailing consists of the
business activities involved in selling goods and services to consumers for their
personal, family, or household use. It includes every sales of goods and services to the
final consumer.
The book ‘Retail Management’ defines retailing as a set of business activities that adds
value to the products and services sold to final consumers for their personal, family or
household use. Retailing, according to this book involves:
Understanding the needs of consumers.
 Developing good assortment of merchandise.
 Displaying the merchandise in an effective manner so that consumers find it easy and
attractive to buy.
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).
1.1.1AN INSIGHT INTO RETAILING

The retail sector in India is highly
fragmented with organized retail
contributing to only 2% of total retail
sales. The retail sector in developed
countries was also highly fragmented at
the beginning of the last century but the
emergence of large chains like Wal Mart,
Sears, and Mc Donald’s led to rapid
growth of organized retail and growing

consolidation of the retail industry in the developed countries. Today, in India we see a
rise in the purchasing power and growth of a middle class which follows the western
lifestyle. Hence, conditions are conducive for the rapid growth of organized retail in
India.
Organized retailing in India, which account for less than 4%, is likely to grow four fold
in the next five years. That means it will grow from current size of around $4 bn (i.e. Rs.
17,000 Crores) to around $15 bn (i.e. Rs. 66000 Crores). Organized retail is growing
rapidly and we see the emergence of large organized retail chains like Shoppers’ Stop,
Lifestyle and Westside. We also find retail malls mushrooming all over the country.
The opportunities in retail industry in India will increase since Indian retailing is on
the threshold of a major change.
However, with the rapid growth in organized retail and increased emphasis of
manufacturers on understanding sales at the retail level, the study of retailing has
become increasingly relevant.
1.2 OBJECTIVES OF THE STUDY

PRIMARY OBJECTIVE:
1. To find the role and relevance of retailing for business and economy.
2. To search for the Role of Consumer behavior in retailing.
3. To find out the differentiating strategies of the retailers by making a Comparative
analysis.
4. To find out the nature of merchandise budgeting and unit planning.
SECONDARY OBJECTIVE:
1. To identify the activities associated with retailing

2. To find out the Customer’s expectation from the mall.
3. To Gather all the information about all the competitors.
4. To find out all details about the loyalty scheme in retail sector.

1.3 RESEARCH METHODOLOGY AND ITS

LIMITATION
Research methodology is a way to systematically solve research problem. In it we
study the various steps that are generally adopted by researcher in studying his
research problem along with the logic behind them. It is necessary for a researcher to
know not only the research methods/techniques but also the methodology. It may be
noted, in the context of planning & development, that the significance of research lies
in its quality and not in quantity. Researchers should know how to apply particular
research techniques, but they also need to know which of these methods or techniques,
are relevant and which are not, and what would they mean and indicate and why.
This project is the mixture of theoretical as well as practical knowledge. Also it

contains ideas and information imparted by the guide. The secondary data required
for the project was collected from various websites and books of reputed authors.
The project started with sorting all the raw data and arranging them in perfect order.
The secondary data was collected in the form of company profile and product profile
from the Web Site of Pantaloons, Shopper Stop and Subhiksha. Some other Web Sites
were also referred. The data has helped in ascertaining the strategies and approaches
of major players in market. Thus the study involved collection, analysis and
interpretation of a lot of data relating to this sector. The data is collected from various
sites, books, journals, etc.
To add value to the project and to understand the practicality of retailing business, I
have visited various 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, expectations of the consumers etc. Analysis of this
primary data has been done to actually understand the survey in a better way.
However, I have faced various problems and challenges while collecting the aforesaid
information. The said problems have been listed below as its limitation:
1 Time constraint - Due to time constraint, a deep research could not be conducted
which would have given more accurate result. However, nevertheless the results
and finding of the said study has given a brief understanding and status of the Indian
retail market.
2 No access to relevant information – Another important limitation to be noted is

that some relevant information which would have been very important for the
accurate result were not accessible by the general public. The said information
were accessible only to certain authorized person.
3 No response from the end consumers – At times, it was noticed that some of the
consumers were not willing to provide any feedback, hence this resulted for delay in
gathering information.
1.4 OVERVIEW OF INDIAN RETAIL SECTOR

The retail industry in India is largely unorganized & predominantly consists of small,
independent, owner-managed shops. Retailing is India’s largest industry in terms of
contribution to GDP & constitutes 13% of GDP. Total retail sales area in India was
estimated at 328 million sq.mt. in 2001, with an average selling space of 29.4sq.mt per
outlet. In India the per capita retailing space is about 2 sq. ft, which is quite low
compared to that of developed economies.
India is one of the largest and highly fragmented Retail markets globally with the
highest retail outlets in the world crossing over 12 million with unorganized players
accounting for around 5% of market share. Among this unorganized player, more than
80% of these run as small family businesses in small towns and cities in the form of
kirana stores‘, ‘push cart vendors‘, ‘melas’ and mandis’. In terms of employment the
retail outlet in the unorganized sector feeds a household of six to seven members. The
big retail players are beginning to realize the significance of this untapped market, by
entering these markets and are being accepted by these rural consumers.

CHAPTER 2
AN OVERVIEW OF INDIAN RETAIL
SECTOR
2.1 STRUCTURE OF INDIAN RETAIL SECTOR
The Indian retail industry can therefore be broadly divided into organized and
unorganized retailing. Unorganized sector constitutes of the local kiranas, hand cart,
the vendors on the pavement etc. Unorganized retailing is still the backbone of the
Indian retail industry contributing to over 95 per cent of total retail revenues. The
organized sector on the other hand is trading undertaken by the licensed retailers who
have registered themselves to sales as well as income tax. They constitute of corporate
backed hypermarkets and retail chains. This modern retail has entered India as seen
in sprawling shopping centres, multi-storeyed malls and huge complexes offer
shopping, entertainment and food all under one roof.
The organized retail sector occupies about 4.6% of the aggregate retail industry in
India. According to international standards, a retail store is nominated as organised
only when it features more than 10 employees.
Unorganized market; Rs. 583,000 crores.

Organized market; Rs. 5,000 crores.
5 x growths in organized retailing between 2000-2005.
Over 4000 new modern outlets in last 3 years.
Over 5,000,000 sq. ft. of mall space under development
The top 3 modern retailers control over 750,000 sq.ft of retail space.
Over 400,000 shoppers walk through their doors every week.
Growth in organized retailing on par with expectations and projection of the last
5 years

The below chart clearly portrays the miserable condition of India's organised retail.
TABLE
COUNTRY ORGANISED UNORGANISED

USA 85% 15%
TAIWAN 81% 19%
THAILAND 55% 45%
INDONASIA 30% 70%
CHINA 20% 80%
INDIA 3% 97%
(Source: Cygnus)
FIGURE
(Researcher’s Calculation)
The below chart clearly portrays the growth and composition of India's retail outlets:
GROWTH IN RETAIL OUTLETS (MILLIONS):
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
(Source: www.indiainfoline.com)

COMPOSITION OF URBAN OUTLETS:
Retail outlet Composition

Grocers 34.7%
Cosmetic stores 4.0%
Chemist 6.3%
Food stores 6.6%
General stores 14.4%
Tobacco, pan stores 17.0%
Others 17.0%
COMPOSITION OF RURAL OUTLETS:

Retail outlet Composition
Grocers 55.6%
General stores 13.5%
Chemist 3.3%
Others 27.6%
MAJOR RETAILER SPACE HOLDERS IN INDIA:

Organization Area Sq. ft.
Bata 10,00,000
RPG 6,00,000
Raymond 5,42,000
Pantaloon/Big Bazaar 5,00,000
Metro cash-n-carry 3,00,000
Spencer 2,80,000
Lifestyle 2,50,000
Shoppers Stop 2,00,000
Trent 2,00,000
Globus 1,75,000

2.2 SCENARIO OF THE UNORGANISED SECTOR

BEFORE DEVELOPMENT OF THE ORGANISED RETAIL
MARKET.
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 upto this point to stay in touch with customer 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. A little
larger format is the neighborhood grocery store that focuses on grains, foods, snacks
and toiletries besides other home essentials. Each store is individual or family owned
and has no connection with the other. It represent a network since large consumer
product companies like Unilever, Procter & Gamble, Colgate-Palmolive, Cadbury, Coca
Cola, Pepsi and ITC uses them as their final point of retail to the consumer.
While it is commonly believed that the new retail chains will drive these small stores
out of business, reality points the other way and it is likely that these stores will
continue even in the next two decades of growth. These small stores are very personal
and have strong relationships with the local population. They are points of news and
connection. They offer credit to the local population and help out in times of crisis.
They also have a very good understanding of requirements of the local population and
have very low overheads enabling them to offer the best price for their products.

2.3 EVOLUTION OF THE INDIAN RETAIL MARKET

The Indian retail sector has been undergoing a rapid
transformation in the past few years. The traditional
formats of kirana stores, hawkers, grocers, etc are being
gradually taken over by the modern formats of
department stores, discount stores, malls, supermarkets,
convenience stores, fast food outlets, specialty stores,
warehouse retailers, hypermarkets, etc. For example,
Pantaloon Retail started the 'Big Bazaar' discount stores
in 2002. Reliance opened its first supermarket named
'Reliance Fresh' outlet in Hyderabad and has since
fanned out to several States. Subhiksha outlets have
been fast spreading across the nation, RPG Retail,
Shoppers Stop, Westside (Tata Group) and Lifestyle
International. Thus, the current face of Indian retail
comprising the unorganized small and medium retailers
is slowly changing into a more organized form of
retailing.
Mapsofindia.com says, the transformation of the Indian

retail market from the unorganized sector into the
organized sector slowly and steadily took place as
follows-
The 1980’s experienced a slow change as India began to

open up as an economy. Textiles sector with companies
like Bombay dyeing, Raymonds, S kumars and Grasim
first saw the emergence of retail chains. Later Titan
successfully created an organized retailing concept and
established a series of showrooms foe its premium
watches. The later half of 1990’s saw a fresh wave of
entrants with a shift from manufacturers to pure
retailers. For e.g. Food world, Subhiksha and Nil iris in
food and FMCG, music world in music, crossword in
books etc. Post 1995, there came an emergence of
shopping centers in mainly urban areas with facilities
like car parking and food courts. These provided a
complete destination experience to all segments of society. This was followed by the

emergence of hyper and super markets trying to provide customers with the 3 V’s -
Value, Variety and Volume.
DIAGRAM SHOWING EVOLUTION OF INDIAN RETAIL MARKET OVER THE YEARS
Thus we can see how the Indian retail sector has been undergoing a rapid
transformation in the past few years. The traditional formats of kirana stores,
hawkers, grocers, etc are being gradually taken over by the modern formats of
department stores, discount stores, malls, supermarkets, convenience stores, fast food
outlets, specialty stores, warehouse retailers, hypermarkets, etc. The Indian retail
industry is expanding and diversifying across the country.
In 2000, the global management consultancy AT Kearney put retail trade at Rs 400,000
crores, which was expected to increase to Rs 800,000 crores by the year 2005—an
annual increase of 20%. According to a survey by AT Kearney, an overwhelming
proportion of the Rs 400,000 crores retail markets is unorganized. In fact, only a Rs
20,000 crores segment of the market is organized. There is no integrated supply chain
management outlook in the Indian traditional retail industry.
The retailers are looking at further expansion by chalking out new business plans.
Organised retail has provided the Indian economy with better quality products and
services that has led to stiff competition. In addition, it has witnessed an exponential
export growth over the past few years. The increase in the organised retail has also led
to a growth in employment generation in the country. Another noticeable trend seen
in recent times is the entry of international retail players in India. According to
industry analysts, this will force the domestic retail segment to match up to
international standards to retain their market share and adopt better management
practices.

2.4 EVOLUTION OF INDIAN RETAIL

The Organized Retail Industry in India was estimated to be around US $25.4bn at the
end of 2008, which was only around 5% of total retail market. Among the BRIC
countries only in India the share of organized retail is low. The share of organized
retail in other BRIC countries is, Brazil (36%), Russia (33%) and China (20%).
Globally, Organised Retail accounts for around 52% of total retail. Thus, it is seen that
the organized sector in India still has a long way to go because the unorganized retail
still continues to dominate the retail market.
But the organized retailing is growing at a fast pace. The organized retail market is
presently 7% of the total retail i.e. around Rs 94,310 Crores. The organized Share of
retail sector is expected to increase to 8-9 percent in 2011-12 as compared to 4
percent in 2007. However due to urban rural divide the growth is likely to concentrate
more on metros and large cities.
Mr. Kamal Nath, India‘s minister for Commerce & Industry

was quoted as saying ―“The India Retail Report 2009 is a
well researched and professionally presented document
that brings forth several opportunities that could benefit
the Indian consumers. I look forward to the Indian retail
sector continuing on its developmental growth path and
spreading its benefit to all”.
MR. KAMAL NATH
Organized Retail as a % of Total Retail Sales – 2008

The graph shows that the growth in the retail sector is assured and inevitable. In this
sense the retail industry does indeed spread its benefit to all. Today it contributes
around 15% to the GDP as compared to around 8-10% in 2007 and is likely to reach
22% by 2011 touching around US$ 416 billion. McKinsey report 'The rise of Indian
Consumer Market', estimates that the Indian consumer market is likely to grow four
times by 2025. That will be an incredible contribution in terms of employment. In the
present the Indian retail sector provides employment to 8 per cent of the nation's
workforce which is expected to augment in the future.
2.5 EMERGENCE OF THE INDIAN ORGANISED RETAIL

MARKET.
Organized retailing in India represents a small fraction of the total retail market. In
2001, organized retail trade in India was worth Rs 11,228.7 billion. The modern retail
formats are showing robust growth as several retail chains have established a base in
metropolitan cities, especially in south India and are spreading all over India at a rapid
pace. However, space and rentals are proving to be the biggest constraints to the
development of large formats in metropolitan cities since retailers are aiming at prime
locations.
A large young working population with median age of 24 years, nuclear families in
urban areas, along with increasing working women population and emerging
opportunities in the services sector are likely to be the key factors in the growth of the
organized retail sector in India. There has been a major shift in the demographic
patterns towards the younger generation .around 70% of India’s population is below
the age of 35 years. The new generation has preferences towards luxury commodities
which have been due to the strong increase in changing lifestyles and this in turn has
immensely added to the growth of the organized retail.
The main condition for organized retailing is that the retailer should be able to manage
and influence the supply chain variables in a commercially viable and sustainable
manner. The organized retailer should be able to, through diversified risks and volume
sales command huge concessions on prices from the manufacturers. He should then be
in a position to allow a trickle down of this advantage to consumers out of his saved
costs.
GROWTH OF NEW RETAIL FORMATS IN THE ORGANISED RETAIL SCENARIO

It is difficult to fit a successful international format directly and expect a similar
performance in India. The lessons from multinationals expanding to new geographies

too point to this. For example, Wal-Mart is highly successful in USA but the story is
different in Asian countries like China. Therefore, it is important for retailer to look at
local conditions and insights into the local buying behavior before shaping the format
choice. Retailers may go for experimentation to identify the winning format suited to
different geographies and segments. For example, the taste in south is different from
that in north and this brings challenges to the
retailers.
Now a number of retailers are in a mode of
experimentation and trying several formats which
are essentially representation of retailing concepts
to fit into the consumer mind space. Apart from
geography even rural and urban divide poses
different kind of challenge to the retailer.
Pantaloon Retail India is experimenting with
several retail formats to cater to a wide segment of
consumers in the market. Some of the new
formats are Fashion Station (popular fashion),
Blue Sky (fashion accessories), Collection i (home
furnishings), Depot (books & music) and E-Zone (Consumer electronics).
TABLE
Retailer Current New Formats Experimenting

Format With
Shoppers' Department Quasi-mall
Stop Store
Ebony Department Quasi-mall, smaller outlets, adding
Store food retail
Crossword Large Corner shops
bookstore
Pyramid Department Quasi-mall, food retail
Store
Pantaloon Own brand Hypermarket
store
Subhiksha Supermarke Considering moving to self service
t
Vitan Supermarke Suburban discount store
t
Foodworld Food Hypermarket, Foodworld express
supermarket
Globus Department Small fashion stores
Store

Bombay Aggregation of Kiranas

Bazaar
Efoodmart Aggregation of Kiranas
Metro Cash and carry
S Kumar's Discount store
THE TABLE GIVEN ABOVE SHOWS A LIST OF THE RETAILERS WHO HAVE COME UP WITH NEW
FORMATS IN THE INDIAN RETAIL MARKET
2.5.1 TRENDS IN RETAIL FORMATS

Retail industry is continuously going through changes on account of liberalization,
globalization and consumer preferences. While multinational retail chains are looking
for new markets, manufacturers are identifying, redefining, or evolving new retail
formats. The existing retail houses are also gearing up to face the emerging
competition from the organized sector and the changing outlook of the consumers. For
example, consumer spending is shifting from goods to services. Accordingly the
retailers too are fast adjusting to the changing consumer preferences.
Consumers are not only looking for the core products or functional benefits from the
retailers but also the non-functional benefits, which need to be compatible with their
lifestyles. For example, most of the traditional eating joints in India such as Haldiram,
Bikaner and Sagar Ratna have revised their product offerings and atmospherics on the
lines of the multinational chains to compete with them and to serve changed
expectations of the consumers.
The different types of retail formats which are gaining prominence in this changed
retail scenario may be summarized as follows -
Malls
Mall development is phenomenal in India. The mall
mania is spreading fast in India. Real estate
developers are jumping very fast to take this
further from Metro cities to smaller cities and
corporate houses like ITC and Sriram group are
making steady progress to make this phenomena
feasible in rural market also. Large format malls
are increasingly getting prominent with adequate
retail space allocated to leisure and entertainment.

Department Store
A department store offers an extensive assortment (width and depth) of goods and
services that are organised into separate departments for the purpose of efficient
buying, assortment, promotion and above all
ease of shopping for the consumer. Such a
format provides the greatest selection of any
general merchandize and very often serves as
the anchor store in shopping mall or shopping
centre. In India, the number of department
stores is less compared to other retail formats
such as supermarkets and discount stores.
Shoppers' Stop is the first one to open a
department store in the early 1990s.
Hypermarket
Hypermarkets have emerged as the biggest crowd pullers due to the fact that regular
repeat purchases are a norm at such outlets. Hypermarkets not only offer consumers
the most extensive merchandise mix, product and brand choices under one roof, but
also create superior value for money advantages of hypermarket shopping. With
product categories on offer ranging from fresh produce and FMCG products to
electronics, value apparels, house ware, do it yourself (DIY) and outdoor products, the
hypermarkets are becoming popular formats in India. One of the leading players in
this format is Pantaloon Retail India Limited.
Supermarket
Unlike western countries where
supermarkets are prominently visible, in
our country this is lacking. The
supermarkets largely concentrate on selling
food related products and are considerably
smaller in size compared to hypermarkets.
Their value proposition is also different
from the hypermarkets. The supermarkets
offer relatively less assortments but focus
on specific product categories. They do not
play the game on price rather use
convenience and affordability as their
salient features.

Convenience Stores
A Convenience store offers location advantage for the shoppers and provides ease of
shopping and customised service to the shoppers. It charges average to above average
prices, depending on the product category and carries a moderate number of stock
keeping units (SKUs). Normally it remains open for long hours and shoppers use it for
buying fill-in merchandize and emergency purchases. Twenty Four Seven a new
format of convenience store is operational in Delhi from June 2005.
Discounters
Wal-Mart, the largest retailer in the world is a discounter. Practically the discounters
offer several advantages such as lower price, wider assortment and quality assurance.
The discounters like Wal-Mart and Aldi were able to quickly build scale and pass on
benefits to the consumer. However, in the long run success depends on the operational
efficiency and consistent value delivery to the consumer. The same retailer Wal-Mart
struggles in Asian countries like China but extremely successful in USA. It is believed
that the average Indian consumer is highly price-sensitive and looks for savings in
term of money in her grocery purchase. Due to regulatory issues no such retailers are
allowed to sale their products directly to consumer. But they can sell in a cash and
carry format which is exclusively B2B context. In recent times WAL-MART has opened
such retail format.
Branded Store
Some of branded apparel stores prominent in India are Madura Garments, Weekender,
Benetton, Grasim, Wills Life style, Lee, Newport, Wrangler, John Players and Raymond.
International brands like Tommy Hilfinger are also present in India through franchise
arrangements with Arvind Murjani Brand Private Limited (AMBPL).
Category Killer
Category Killer is a kind of discount specialty store that offers less variety but deep
assortment of merchandise. By offering a deep assortment in a category at
comparative low prices, category specialist can be able to “kill’ that specific category of
merchandize for other retailers. Generally such kind of retailers uses a self service
approach. They use their buying power to negotiate low prices, excellent terms and
assured supply when items are scarce. In India this kind of retail stores are not
prevalent at this point of time. But there is scope for such kind of format. In India,
Mega-Mart is one sort of category killer which sells apparel products.

SECTORAL DISTRIBUTION OF THE ORGANISED RETAIL MARKET

The Indian retail sector can be broadly classified into:
a) FOOD RETAILERS
There are large number and variety of retailers in
the food-retailing sector. Traditional types of
retailers, who operate small single-outlet businesses
mainly using family labor, dominate this sector .In
comparison, super markets account for a small
proportion of food sales in India. However the
growth rate of super market sales has being
significant in recent years because greater numbers
of higher income Indians prefer to shop at super
markets due to higher standards of hygiene and
attractive ambience.
b) HEALTH & BEAUTY PRODUCTS

With growth in income levels, Indians
have started spending more on health
and beauty products. Here also small,
single-outlet retailers dominate the
market. However in recent years, a few
retail chains specializing in these
products have come into the market.
Although these retail chains account for
only a small share of the total market ,
their business is expected to grow
significantly in the future due to the
growing quality consciousness of buyers
for these products.
c) CLOTHING & FOOTWEAR

Numerous clothing and footwear shops in shopping centers and markets operate all
over India. Traditional outlets stock a limited range of cheap and popular items; in
contrast, modern clothing and footwear stores have modern products and attractive
displays to lure customers. However, with rapid urbanization, and changing patterns
of consumer tastes and preferences, it is unlikely that the traditional outlets will
survive the test of time.

d) HOME FURNITURE & HOUSEHOLD GOODS

Small retailers again dominate this sector. Despite the large size of this market, very
few large and modern retailers have established specialized stores for these products.
However there is considerable potential for the entry or expansion of specialized retail
chains in the country.
e) DURABLE GOODS
The Indian durable goods sector has seen the entry of a large number of foreign
companies during the post liberalization period. A greater variety of consumer
electronic items and household appliances became available to the Indian customer.
Intense competition among companies to sell their brands provided a strong impetus
to the growth for retailers doing business in this sector.
f) LEISURE & PERSONAL GOODS

Increasing household incomes due to better economic opportunities have encouraged
consumer expenditure on leisure and personal goods in the country. There are
specialized retailers for each category of products (books, music products etc.) in this
sector. Another prominent feature of this sector is popularity of franchising
agreements between established manufacturers and retailers.
FIGURE ABOVE SHOWS THE SECTORAL DISTRIBUTION OF THE ORGANISED RETAIL MARKET ACROSS
VARIOUS CATEGORIES

2.6 KEY DRIVERS OF GROWTH IN INDIAN RETAIL

The Indian retail industry has a size of $300 billion and its contribution to the Indian
economy has been enormous. As a result of improvement in income dynamics,
favorable demographics and spending patterns India has witnessed an unprecedented
consumption boom. The attitudinal shift of the Indian consumer in terms of "Choice
Preference", "Value for Money" and the emergence of organized retail formats have
transformed the face of Retailing in India. It has helped improve the standard of living
of most Indians and will continue to do so in the future. Policy makers are optimistic
about the growth prospects of the retail industry and its followed impact on the Indian
economy as a whole.
 70% of organised retail is concentrated in 6 major cities.
 Of 300 million Indian middle class, only 15% live in these 6 major cities, which
means there‘s huge buying power in India‘s tier 2 and 3 cities, location of several of the
Fund‘s developments (currently highly under serviced).
At present Organised Retail in India is at a blossoming stage but its growth is at a

scorching pace. The key drivers that will sustain this growth can be categorized as,
Consumer or Demand-side drivers
Retailer or Supply-side drivers.
Consumer or Demand-Side Drivers
a) Increasing Disposable Income of Indian Middle class
The Indian Middle class comprising Seekers and Strivers is the consuming class and
prime target segment for Retailers in India. These two categories together constituted
around 6.4% of Total Households in India in 2005 but accounted for 20% of the
disposable income.
 The increase in the consumer spending over the five consecutive years has been
above average from FYO4-FY08. The Indian Middle class is gaining weightage, both in
terms of volume as well as value.
 The middle class is estimated to constitute around 25% of Total Households by 2015
and 46% by 2025, controlling 44% and 58% of the total disposable income in the

country by 2015 and 2025, respectively.
 This growth in the Indian Middle class coupled with growth in their disposable
income levels which will drive future growth of Organised Retail in India. population
having incomes higher than Rs 90,000) is expected to reach 48 percent by 2009-10
from 20 percent in 1995-95.
 During FY2004-08, the real per capita income growth averaged around 7.3%, which
was higher than average Inflation of 5.1% during the period.
 This bodes well for Indian Retail as consumers are likely to spend more and stabilise
their savings for future big-ticket purchases.
 We believe that long-term growth in per capita income will induce consumption
Indian consumers that will result in growth of Indian Retail Industry.
b) Personal Consumption as a percentage of GDP

Personal consumption as a percentage of GDP India is second only to Vietnam in Asia
and a close fourth globally. Robust growth of Indian economy will result in increase in
personal consumption as a percentage of GDP. According to IMA, Asia, India had one of
the highest personal consumption as a percentage of GDP in Asia at around 55% in
2007. This portends well for Indian Retail as with per capita income growing, this
personal consumption would translate into higher Retail Sales. Hence, India with one
of the highest personal consumption as a percentage of GDP in Asia, seems to be a
better and more opportunistic bet in the Retail Sector compared to China (~35%),
Singapore (~45%), Hong Kong (~50%) and South Korea (~46%)
c) Population As a Growth Driver

Growing Working women population The propensity to spend in the case of
working women is higher by 1.3 times as compared by housewives. According to the
census report, the population of working women increased to 26 percent in 2001 as
compared to 22 percent in 1991.
Adoption of Nuclear Family culture The increase in per

capita income paved way to increase the nuclear-family
culture. The proportion of nuclear families as a percentage
of total household population has increased as shown by
fall in average household size from 5.57 in 1991to 5.36 in
2007, expected to fall further to 5.02 by 2011. This will fuel
the growth of organised retail.

Baby Boomer Effect The demographics of Indian population has a steep growth in
earning population (15-60 yrs). In 2000, 593 million people (58.3percent of total
population) constituted the age bracket of 15-60 yrs – growing from an unprecedented
level of 335 million people (54 percent of total population) in 1975 at a rate of 77
percent (CAGR of 2.3 percent) in contrast to a population growth of 64 percent (CAGR
of 2 percent) over the same period of 25 years. Over the next 15 years, the earning
population is expected to increase to 62.8 percent in 2015, translating into a
population of 782 million.
Growth in Urban Population

Urbanization has increased at a rate of 2.7 percent over the last 10 years (1990-2000).
In 2000, the urban population was estimated to be 281 million (27.7 percent of the
total population). This trend is likely to continue and urbanization is expected to grow
at 2.4.
d) Plastic Money becoming a greater Pie of credit

According to Euro monitor, India is the second fastest growing Financial Cards market
in the Asia - Pacific region. India's Credit Card base is estimated to grow at an annual
rate of 30-35% from 27mn cards in 2007. It is expected that Credit Card growth would
remain on high growth trajectory and fuel growth in Modern Retail on Credit. The
Indian Retail Market is estimated to be US $511bn at the end of CY2008 out of which
Credit Cards Sales are expected to contribute
around 1.2%, which is expected to be around
1.4% of the total Retail Sales in India at the
end of CY2010. Indian consumers are
increasingly using Credit Cards for purchasing
and shopping, dining, jewellery and durable
goods due to attractive and consumer friendly
schemes by various banks. A natural
progression for Retailers like Pantaloon and
Shoppers' Stop has been the Loyalty cards that
and either standalone or in collaboration with
banks and offer discounts and free purchases
to the cardholders. Also it is believed that
these Loyalty cards hold the key to future
growth of Modern Retail in India.

e) Internet Driving Awareness and Online Purchases

There has been a substantial increase in the number of Indians using the Internet.
Indians have started using the Internet not only for
increasing awareness but also to shop online. This,
along with the increase in Credit Cards and options
like cash-on-delivery have opened new avenues for
Indian consumers. Indian Retailers are missing out
on the opportunity that Amazon.com and EBay are
providing to the US consumer. Recently, Future
Group, the owner of Pantaloon, launched
futurebazaar.com to capture the ever-growing
Internet savvy Indians. Such web portals not only
provide the convenience of home shopping but also provide the advantage of savings
on costs managed by Organised Retailers. Since there will be demographic shift in
population growth, urbanization and migration due to transition in urban household
growth and income distribution. The total retail market in the top 67 cities in India in
2006 was Rs. 2.55 trillion, which is expected to increase to Rs. 3.91 trillion in 2011.
According to CRISIL, around 87 percent of the retail opportunity comes from top 25
cities compromising :
Metro: Delhi, Mumbai, Calcutta
Mini Metros: Hyderabad, Chennai, Bangalore, Ahmedabad and Pune
Tier I cities: Kanpur, Nagpur, Surat and Ludhiana
Tier II cities: Coimbatore, Chandigarh, Lucknow, Kochi, Jaipur
Tier III cities: Vadodara, Vizag, Indore, Vijaywada, Thiruvananthpura,Bhopal, Nashik

and Madurai.
Increase in Internet Usage in 2008
The above diagram shows a massive increase in internet usage among Indians, which in turn has
favored growth in the Indian retail market

f) Increasing technology adoption
 With modern retail store formats growing players are increasingly deploying
advanced Information Technology tools for managing their supply chain, warehousing
and logistics requirements.
 Retail sector constituted 8 per cent of the IT export revenuesin 2005-06. Apart from
the industry giants, the small scale retailers are also embracing IT solutions to optimise
their operational efficiencies. Big league IT firms like IBM India, Oracle and SAP are
developing solutions for smaller retailers‘ requirements.
 The Food & Grocery (F&G) segment enjoys dominant market share of 75% of the
Indian Retail Sector but has miniscule 1% penetration in Organised Retail Hypermarts
to lead the Future growth in Organised Retail.
Retailer or Supply-Side Drivers
a) Increased Investments in Retail
 According to the E&Y estimates investments in Organised Retail will possibly touch
US $25bn in 2010, up from US $3bn in 2006. Funds would essentially flow into the
sector through Private Equity, IPO route and infusion of funds through warrants.
 This will allow Organized players in Retail

to expand at a very high rate and play on
economies of scale in the Supply Chain and
procurement.
 Also it is believedthat due to the current

economic environment and delays on part
of Real Estate developers of around 18-24
months in terms of execution, around half of
US $25bn of investments would materialize
by FY2011E.
 At an average investment of Rs3,000 per

sq. ft. By Retailers, these investments would
translate to 175mn sq. ft. of Organized
Retail space by FY2011.
 All key Retailers in India have chalked out substantial investments over next 3-4
years to fuel their expansion plans.

 Pantaloon is expected to invest around Rs6,000 cr over the next four years to fuel its
three-fold expansion plan and take its total Retail space to 26mn sq. ft. by FY2012.
Vishal Retail is expected to invest Rs3,000cr to fuel its ambitious five-fold expansion
plan to take its total Retail space to 10mn sq. ft. by FY2011.
b)Shortened Supply Chain benefits consumers

A Traditional supply chain in India comprises 5-6 levels from Wholesaler to Sub-
Wholesaler to the Distributor to the Local Mom and Pop stores to the Consumers. Two
major disadvantages of this Supply Chain are as follows:
a) Cost of the product increases at every stage of the Supply Chain resulting in increase
in the price of the products due to cascading effect, and
b) Increase in shrinkage at every stage of the Supply Chain results in loss of goods for
consumption.
One of the biggest advantages of a Modern Retail Supply Chain has been elimination of
the middlemen thereby reducing the intermediaries to 2-3. This shortening of Supply
Chain favours the farmers (in case of agricultural goods) or manufacturers as they get
better price for their products and consumers benefit from the low prices that retailers
can afford to offer due to the savings arising out of shortening of the Supply Chain.
Both the Traditional and Modern Supply Chain work in tandem in the current Retail
environment in India.

Traditional v/s Modern supply chain

2.7 OPPORTUNITIES OF RETAIL SECTOR

India is going to be an attractive destination for global operations with leading retailers
seeking emerging markets overseas. India presents a significant market with a young
population just beginning to embrace lifestyle changes.
a) Rapid Economic Growth
 The fast and furious pace of the Indian economy is the driving force for the Indian
consumerism, confident about earnings , and also spending a large proportion of their
disposable incomes.
 Projections by various analysts suggest that India has the potential to be labelled the
fastest-growing economy and the developed economies by 2050. India, promises a
continued robust growth story.
b) The Young India
Growing Young Population
 India possesses theadvantage of having a largely young population. 35 percent of

India‘s population is under 14 years of age and more than 60 per cent of the population
is estimated to constitute the working age group (15-60) till 2050
 This trend is projected to continuefor the next decade, with the share set to reach its
maximum in 2010. The large proportion of the working-age population translates to a
lucrative consumer base vis-à-vis other economies of the world, placing India on the
radar as one of the most promising retail destinations of the world.

c) Potential Untapped Market
 India ranks first, ahead of Russia, in terms of emerging market potential.
 Organised retail penetration is on the rise and offers an attractive proposition for
entry of new players as well as scope for expansion for existing players. A steadily
rising percentage of rich and super rich population and impressive disposable incomes
offers a spectrum of opportunities, spanning from rural retailing to luxury retailing.
 Pantaloon Retail n I dia Limited, one of India‘s retail giants captures a mere 0.3 per
cent of total market; compared to Tesco Plc, which captures 14.3per cent of England‘s
market and Walmart which captures 20 per cent of USA‘s market; giving an insight into
the large untapped market potential.
d) Abundant Availability of Skilled Labour
 India has a vast resource base of talent and skilled labour. Over 37,000,000 students
were enrolled in about 150,000 pre-college institutes and over 11,700,000 in 14,000
higher education institutions in 2005-06
 With English being the language for business in India, the language skills of the
Indian workforce score higher than that of emerging economies.
 Retail Management is a sought after education stream amongst students, with over
15 premier institutes offering specialised courses in Retail Management.
e) Emergence of India as the Retail Hub
 Riding on the back of a strong manufacturing industry, India is fast emerging as an

important global sourcing hub for top international brands. India has had a continued
presence in the global scenario as one of the leading exporters of apparels and textiles.
 The expiry of the Multi Fiber Arrangement has further widened the global markets
for apparel. Many international brands have identified India as one of the important
supply centres for procurement of textiles and apparels
 The expiry of the Multi Fiber Arrangement has further widened the global markets
for apparel. Many international brands have identified India as one of the important
supply centres for procurement of textiles and apparels
 Wal-Mart‘s sourcing operations was estimated at US$ 1 billion, Tesco‘s around US$
100 million

2.8 KEY CHALLENGES IMPEDING THE GROWTH OF

ORGANIZED RETAIL
The key challenges facing Organised Retail in India are acceptance of Organised Retail
by the Traditional retailers (which is leading to tougher regulatory measures by the
government), supply chain inefficiencies, high real estate costs, increasing personnel
costs, high execution risks in terms of store rollouts and high shrinkage that hits
Retailers' Bottom-lines. We believe that these challenges would result in Margin
contraction for most players.
a) Obsolescence and Low Margins
 The retailers in India have to learn both the art and science of retailing by closely
following how retailers in other parts of the world are organizing, managing, and
coping up with new challenges in an ever-changing marketplace.
 Indian retailers must use innovative retail formats to enhance shopping experience,
and try to understand the regional variations in consumer attitudes to retailing.
Retailing marketing efforts have to improve in the country- advertising, promotions,
and campaigns to attract customers; building loyalty by identifying regular shoppers
and offering benefits to them; efficiently managing high-value customers; and
monitoring customer needs constantly, are some of the aspects which Indian retailers
need to focus upon on a more pro-active basis.
 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 was the lack of FDI status, which is now
allowed.
 There is a limited capital investment in supply chain infrastructure, which is a key for
development and growth of food retailing and also constrained access to world-class
retail practices. Multiplicity and complexity of taxes, 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 roadblocks will remain and will continue to affect the smooth growth of
this industry. Fitch believes that while the market share of organized retail will grow
and become significant in the next decade, this growth would, however, not be at the
same rapid pace as in other emerging markets. Organized retailing in India is gaining
wider acceptance.

 The development of the organized retail sector, during the last decade, has begun to
change the face of retailing, especially, in the major metros of the country. Experiences
in the developed and developing countries prove that performance of organized retail
is strongly linked to the performance of the economy as a whole.
 This is mainly on account of the reach and penetration of this business and its
scientific approach in dealing with customers and their needs. In spite of the positive
prospects of this industry, Indian retailing faces some major hurdles, which stymied its
growth.
 Early signs of organized retail were visible even in the 1970s when Nilgiris(food),
Viveks(consumer durables) and Nallis(sarees) started their operations. However, as a
result of the roadblocks, the industry remained in a rudimentary stage. While these
retailers gave the necessary ambience to customers, little effort was made to introduce
world-class customer care practices and improve operating efficiencies.
b) Acceptance of Organised Retail
 Growth of Organised Retail in India largely depends on acceptance of the Modern

Retail format in India. There exists the challenge of Traditional Retailers accepting co-
existence of Modern Retail in the ecosystem going ahead.
 It may be noted such opposition had also taken political overtones in recent times. A
case in point was the hurdles faced by retailers like Reliance and Spencers' in opening
their stores in UP and West Bengal, respectively. Another recent instance of Modern
Retail getting impacted by political influence was Metro AG. not being able to open its
Cash and Carry store in West Bengal due to cancellation of its APMC licence.
 At the end of it, the West Bengal government did allow the Metro AG shop.
Nonetheless, the chain of events has forced Retailers to re-think their strategies to be
in sync with the political bigwigs and trade unions before opening a store. Thus, even
though Modern Retail has tremendous growth potential in India, the key players face a
challenge from the local trade unions and political parties in the garb of upholding the
rights of the Traditional Retailers
 Real Estate costs still high compared to global benchmarks According to industry
experts, Real Estate costs are not in sync with sales and vary as much as 10% of sales,
which is too high compared to 3-4% for the global Retailers. For instance, Pantaloon
shelled out over 8.4% in Rents and Mall Management fees in 2007-08. Such high
Rental costs make the business model infeasible for most retailers as the current MRP

regime does not allow Retailers to charge consumers different prices for the same
product according to location, i.e., higher price for the up-market stores and lower
prices for downtown hypermarts.
 Moreover, many Retailers have moved out of prime destinations in various Malls in
Tier-I cities as they are not clocking Sales in proportion to the Rent that they are
paying, which is sometimes as high as Rs 50 lacs per month. Thus, it has become
imperative for Real Estate developers and Retailers to work out a revenue-sharing
model, which will result in a win-win situation for both. However, the final choice lies
with the strategy a Retailer chooses to adopt.
 Vishal Retail plays on volume growth inTier-II and III cities whereas Shoppers ‘Stop
and Pantaloon rely on big-ticket purchases in Tier-I cities.
 Lack of specialist workers and management personnel has led to Supply-Demand

imbalance in nascent sector.
c) High Personnel costs
 On an average, the Indian Organised Retail players shell out upwards of 7% of Sales
towards personnel costs. For instance, Wal-Mart spends around 17% of its Revenues
as Personnel costs. Given that ratio, Indian salary to US salary is less than 30%, this
means that the world's biggest Retailer, Wal-Mart spends around 5.1% of its Revenues
on employees.
 Such high HR costs are essentially the costs incurred on training the employees as
there's a huge deficiency of skilled labour in India. Attrition rates in the Industry are
also as high as 50%, which is high compared to other Sectors. Factors that contribute
to high rate of attrition in the Indian Organised Retail are change in career path,
employee benefits offered by competition, flexible and better working hours and
conditions.

2.9 IMPACT OF DEVELOPMENT OF THE ORGANISED

RETAIL MARKET
The big retail chains seem to be visible at virtually every street corner lately but the
question is what happens to the neighborhood grocer? The fact is that big retail chains
have a lot to offer both the farmer and the consumer. On the other hand, the vibrant
Indian trading community is going to be hard hit. Farmers are keen for big retailers to
come in as they help in both marketing and
processing of output without their having to
go to middlemen in the mandis. Consumers
similarly are reaping a bonanza as prices at
these shops are at rock bottom rates since
big retailers can afford to buy directly from
the farmers. Politicians, of course, are
entering the fray to oppose the entry of
large retail chains, but clearly economic
forces are now going to play a larger role.
The following factors can be considered as Boon and Banes of the development
of organized retail:-
EMPLOYMENT OPPERTUNITIES
Urban Employment:- Employment opportunities for youth, According to

PricewaterhouseCoopers (PwC) is that retailing will create additional eight million jobs
though retailing In India and will benefit population by employing local (Urban) youth
and others directly or indirectly. But it is feared that our friendly neighborhood kirana
shops where, one can make purchases in small quantities and return the goods if not
found good and many more friendly services, will be on the verge of disappearance
there by creating a vacuum which cannot be filled by the big organised one.
Rural Employment : - Contract Farming is the new mantra of organised retailing in

India. There is no doubt that the farmers are in some way benefited by contract faming
where in, the latest technology and equipment and scientific farming is done by
farmers with the help of retailers there by increasing the productivity in agriculture,
and uniform payment for their produce throughout the crop irrespective of
fluctuations in market price. But one should also focus on the freedom of farmers to
sell their produce at will. It is evident in India that rich farmers who possess vast lands
are the beneficiary but farmers who have little land and dependent on other trades are
marginally benefited by this kind of business. Ashok Rajgopal director (retail industry)

for Ernst & Young said, "By targeting the youth population in India, retailers will be
investing for the future as they will be able to influence and create loyalty from the
start."
COMPETITION:-
The organised retailers are financially sound in investing in Big Business promotion,
aesthetic looks, technology and Supply chain management etc. Its business principle
"the bigger the better". The Bigger retailers the better it can counter competition from
small retailers and sustain business. But the unorganised retailer cannot compete and
are trying to fight hard against organised retailers however they cannot afford to
invest heavy on technology and other inputs. Due to tough competition, Customer
have lot many opportunities and choices to go for, unless local retailers offer them
best prices they won’t be interested to come back, unorganised retailers stores are
finally waking up to become competitive and try to attract more consumers.
IMPACT ON CONSUMERS:- Customers are enjoying wide variety of green produce

under one roof, at the same time take pleasure in experiencing the way of shopping at
affordable prices. Making it a habit, the day is not far that organised retail outlets will
erupt in small tows and villages, influencing their purchasing behavior and their life
styles. "It's good value here, better than other supermarkets, but there are difficulties
with the quality, especially apples and papayas," says Rama Tibrewal, a middle-aged
Reliance shopper in Hyderabad.
Growing Economic Disparity:- In India more than 60% population is engaged in

farming, which is major chunk of income generated and it is the equivalent to half of
other sectors but disparities in income levels in India specifically rural India remain as
wide as ever. Nevertheless employment will grow in all sectors and which will be of
labour incentive. However, Work force of women in agricultural and services sector
will enhance pressure on rural jobs in near future. "Much of India is still mired in
poverty, but just over a decade after the Indian economy began shaking off its statistic
shackles and opening to the outside world, it is booming. The growth of the past
decade has put more money in the pockets of an expanding middle class, 250 million to
300 million strong, and more choices in front of them"
IMPACT ON SMALL RETAILERS:- There were reports from another city of small
retailers protesting in front of a Reliance Fresh showroom saying it was ruining their
business. "I've lost half my business," says Rajiv Das, who has been selling fruit and
vegetables for 18 years and now has to contend with a new Reliance store a three-
minute walk away. "I'm not able to fight, but I would if I could." Similarly, Selva
Kumar, who runs a kirana 100 meters from a Reliance outlet in Chennai, says, "We

have lost 40 percent of our business, and that's the future. We're not closing, but
there'll be no growth." The extraordinary role played by retail sector throughout the
world in increasing productivity of consumer goods and services are commendable.
And it is also becoming a major industry by creating millions of employment
opportunities to people directly and indirectly is greatly admired. Retailing industry
becoming one of the most dynamic sectors in India with numerous players jumping
into this market makes it competitive and lucrative. Though organised retail sector is
serving the needs and aspirations of high end and middle class customers but ignoring
the common man's needs and aspirations are lamentable. So, the organised sector
should look at the common mans needs, and his ability, affordability and go ahead, then
only the aim of giving world class quality products at affordable prices to common man
dream will come true, thereby contribution to the economic growth and up lifting the
standard of living there by serving humanity.
2.10 FDI IN RETAIL INDUSTRY

The Government of India was initially very apprehensive of the introduction of the
Foreign Direct Investment in the Retail Sector in India. The unorganised retail sector
as has been mentioned earlier occupies 97% of the retail sector and the rest 3% is
contributed by the organised sector. Hence one reason why the government feared the
surge of the Foreign Direct Investments in India was the displacement of labour. In
recent years the destination sectors in FDI have became more varied. FDI inflows have
shifted from infrastructure, natural resources and export driven manufacturing to
other areas such as retailing, tourism, construction and offshore services. In spite of
the recent developments in retailing and its immense contribution to the economy,
retailing continues to be the least evolved industries and the growth of organised
retailing in India has been much slower as compared to rest of the world.
After the waves of globalisation, liberalisation and privatisation marketing scenario

particularly retailing has changed radically. These changes have resulted in emergence
of new environment for buyers’ behaviour and purchasing habits. The upper and
upper middle strata of the society now prefers to purchase well established branded
goods from standard showrooms and it has transformed the entire picture and
perception not only in the metro cities but almost in all big cities of our country.
Therefore, there is emergence of global retailers in India, and hence the government
policy relating to FDI in retailing needs to be evaluated.

Why Global Retailers are Interested in India?

More specifically the global players are interested in India due to following reasons:
I) Strategic Location & Geography: India enjoys unique geographical advantage. It is

strategically located in Asia with access to all leading markets of the World. India
borders with six countries and so India becomes most promising destination for the
foreign direct investment.
II) Versatile Demographics: Demographically with a population of more than 1.15

billion and diverse culture, India is a land of all seasons. India presents a real
cosmopolitan population with diverse religions and culture. Besides, India has
versatile population of urban and rural nature. This versatility of population makes
India a readymade market for foreign retailers.
III) Vast growing Economy: On economic front, India is the largest democracy of the
world, and has a stable Government with robust programme of economic reforms.
India with an average GDP growth of more than 7% per annum, and with a rapidly
growing investment in infrastructure has all the ingredients of a emerging economic
super power. India is tipped to be third largest economy in terms of GDP by the year
2050. In such a scenario every multinational aims to set up a base in India, not to
participate in Indian growth story, rather to build their own future.
IV) Retailing: The Emerging Revolution: Retailing is the largest private industry in
India and second largest in providing employment after agriculture. The sector
contributes to around 10 percent of GDP. This sector witnessed significant
development in the past 10 years from small unorganised family owned retail formats
to organised retailing. Liberalization of the economy, rise in per capita income and
growing consumerism has encouraged large business and venture capitalist in
investing in retail infrastructure.
V) Indian Retailing Opportunities Unexplored: India is sometimes referred to as the

nation of shopkeepers. This is because the country has the highest density of retail
outlets - over 12 million. However, unlike most developed and developing countries,
Indian retail sector is highly fragmented and bulk of the business is in the unorganised
sector. India in such a scenario presents following facts to foreign retailers: There is a
huge, huge industry with no large players.
Some Indian large players have entered just recently like Reliance, Trent etc. The
transition will open multiple opportunities for companies and investors. In addition to
the above, improved living standards and continuing economic growth, friendly
business environment, growing spending power and increasing number of conscious

customers aspiring to own quality and branded products in India are also attracting to
global retailers to enter in Indian market.
Arguments in favour of FDI in Retailing

FDI in retailing is favoured on following grounds:
(1) The global retailers have advanced management know how in merchandising and
inventory management and have adopted new technologies which can significantly
improve productivity and efficiency in retailing.
(2) Entry of large low-cost retailers and adoption of integrated supply chain
management by them is likely to lower down the prices.
(3) FDI in retailing can easily assure the quality of product, better shopping experience
and customer services.
(4) They promote the linkage of local suppliers, farmers and manufacturers, no doubt
only those who can meet the quality and safety standards, to global market and this
will ensure a reliable and profitable market to these local players.
(5) As multinational players are spreading their operation, regional players are also
developing their supply chain differentiating their strategies and improving their
operations to counter the size of international players. This all will encourage the
investment and employment in supply chain management.
(6) Joint ventures would ease capital constraints of existing organised retailers; and
(7) FDI would lead to development of different retail formats and modernisation of the
sector.
Arguments against FDI in Retailing

According to the Land and Property laws only the Indians have the right to land and
property in India and this law has in a way inhibited the entry of the foreign players in
India. Again the labour laws are so designed that the store workers can be protected,
quite contrary to the requirements of the modern formats. The tax structure of India is
also unfavourable for the foreign players. The changing sales tax as well as the Value
Added Tax is also not favourable in the case of international companies. Many trading
associations, political parties and industrial associations have argued against FDI in
retailing due to following reasons:
(1) Indian retailers have yet to consolidate their position. The existing retailing

scenario is characterized by the presence of a large number of fragmented family

owned businesses, who would not be able to survive the competition from global
players.
(2) The examples of south east Asian countries show that after allowing FDI, the
domestic retailers were marginalised and this led to unemployment.
(3) FDI in retailing can upset the import balance, as large international retailers may
prefer to source majority of their products globally rather than investing in local
products.
(4) Global retailers might resort to predatory pricing. Due to their financial clout, they
often sell below cost in the new markets. Once the domestic players are wiped out of
the market foreign players enjoy a monopoly position which allows them to increase
prices and earn profits.
5) Indian retailers have argued that since lending rates are much higher in India,
Indian retailers, especially small retailers, are at a disadvantageous position compared
to foreign retailers who have access to International funds at lower interest rates. High
cost of borrowing forces the domestic players to charge higher prices for the products.
(6) FDI in retail trade would not attract large inflows of foreign investment since very
little investment is required to conduct retail business. Goods are bought on credit and
sales are made on cash basis. Hence, the working capital requirement is negligible. On
the contrary; after making initial investment on basic infrastructure, the multinational
retailers may remit the higher amount of profits earned in India to their own country.

TUG OF WAR IN FOREIGN DIRECT INVESTMENT

Foreign direct investment (FDI) has been a cause of much debate in the retail
organized the govt. passed the order to allow FDI in single brand retail, the
unorganized sector, largely constituting the 12 million neighborhood kiranawalas,
were up in arms staging dharnas and protests against what they considered an evil
design threatening to put them out of business. Simultaneously, several organised
retailers who stood to gain, both strategically and monetarily, with the entry of FDI in
the sector were lobbying long and hard with the government to ensure that it is
permitted. The tug of war between the two still continues.
While 51% FDI was finally permitted in single brand retail in 2006, FDI in multi-brand
retail still remained a no-no. then just recently the government modified the FDI rules
a tad in a bid to garner some pre-election favour, but quickly backtracked on this after
it faced severe criticism from the left parties. According to the new norms introduced

as long as a company is owned and controlled by Indians, it would be allowed to invest

in certain sectors which currently have FDI restrictions.
However a few days later, the govt. added a caveat. The revised norms would be
subject to the entry parameters of each industry. According to retailers this in effect
doesn’t change much. FDI in retail still remains a distant dream. But according to
newspaper reports it has spurred Kishore Biyani, founder of pantaloon retail to spin off
his most lucrative business-food bazaar and big bazaar-into a separate entity future
value retail. Meanwhile, several single brands like Louis Vitton, Gucci, Nike and many
more have set up shops in the country in collaboration with local partners. Gung ho
about the extensive opportunity the Indian retails cape offers they were on an
ambitious expansion spree, when the slowdown hit them. Sales have plummeted and
as a result brands like FCUK, ESPRIT etc. have gone on an extended sale to get rid of
their old inventory. The wholesale cash and carry sector isn’t doing that well either. It
was open to FDI entry from its early days but Metro AG was the only international
retailer to set up shop in 2004. Other large retailers such as Tesco, Wal-mart etc were
standing on the fringes since 2007, waiting for the government to open up the multi
brand sector. Finally fearing that they would miss out on the Indian retail party Tesco
and Wal-mart through their towel entered into the wholesale cash and carry business
in alliance with trent and bharti respectively.
But it’s no secret that they are just bidding their time before the government finally
opens the sector to FDI completely. And its only a matter of time before this happens.
Then the real Indian Retail party will begin.

CHAPTER 3
3.1 INDIAN RETAIL SECTOR : STRATIGIES ADOPTED
BY SELECTED PLAYERS
3.1.1 SUBHIKSHA
Subhiksha – the chennai based, no frills, discount retail chain, which recently hit the
500-stores mark, has catapulted itself into one of the country’s largest supermarket
chains, with over one million sq. ft. of retail space, spread across five states of the
country.
Speaking on the occasion, R Subramanian, MD, Subhiksha said, “With Maharashtra we

will complete our 600-store target, and we will shortly activate Phase 2 of our
expansion plans foraying into 5 more states including Chandigarh, Punjab, Madhya
Pradesh, Uttar Pradesh, Haryana and West Bengal.”
“Our goal of becoming India’s favorite neighborhood store is now well on its way. We
want to be able to provide customers from all segments of society, in all parts of the
country, with a viable smart shopping option,” added Subramanian.
Unlike Big Bazaar, its discount, food and grocery, retail counterparts, Subhiksha
believes in setting up non-air conditioned small neighbourhood stores (near the
community) measuring around 2,000 sq.ft. in retail space. As such, while Subhiksha
competes with big store chains on regular discounts, it competes with traditional
‘father and son’ kirana stores on close
proximity to its customers.
Subhiksha operates in four verticals — fruits

and vegetables, pharmaceuticals, FMCG and
telecom. Beside loyalty discounts and regular
discounts of 10% on medicines and 8 to 10%
on FMCG products. The retail chain also
makes the Every Day Low Price (EDLP) offer

to its customers, which is sustained through discounts obtained by the chain from
direct supply arrangements with manufacturers, along with bulk purchase and cash
transactions.
While the discount model of Subhiksha is based on world famous Wal-Mart strategy,
the carpet bombing model is based on the ‘Starbucks’ strategy, in which the coffee
retail chain opens a cluster of stores in close proximity to each other, in a geographical
area which has high population density with purchasing potential. This enables the
chain to cannibilise sales within its own network rather than allowing them to go to
other individual stores or retail chains. Even, Reliance, so far seems to have followed a
similar strategy having opened a Cluster of ‘Fresh’ stores in Hyderabad and Jaipur.
3.1.2 SHOPPERS STOP
Shoppers’ Stop Ltd. is a retail chain of branded and own label apparel, footwear,
perfumes, cosmetics, jewellery, leather products and accessories, home products,
books, music and toys. Shopper‘s Stop operates through 23 stores located in the cities
of Mumbai, Delhi, Kolkata, Chennai, Bangalore, Hyderabad, Pune, Jaipur and Gurgaon.
Apart from the retail store chain =Shoppers‘ Stop‘, the company has forayed into
specialty stores for books with =Crossword‘ Book Store having 41 outlets, home décor
with Home Stop having 2 stores and in cosmetics and maternal care through exclusive
retail agreements with international brands like M.A.C. and Mother care having 11
stores respectively. Shopper‘s Stop Ltd. also ventured in the Food & Beverages
business by opening Brio – the café bistro having 12 outlets and Desi Café. The
Company is occupying an aggregate area of 1,152,590 sq. ft. and Crossword Bookstores
Ltd. occupies additional 201,890 sq ft.
Investment Strategies
i. Aggressive store rollout

SSL has set for itself an aggressive retail expansion target of rolling out 79 stores from
the current 60, across its various store formats by FY09. It had raised Rs.1528m from
its IPO to part fund this expansion. This expansion will mark the entry of the company

into Tier II cities like Pune and Ghaziabad and also its foray into the bell weather value-
retailing segment with hyper city. The store rollout will broaden the company‘s target
customer group and widen its presence across retailing formats.
ii. Diversification of business to add value

SSL‘s initiative to expand into different retail formats like hypermarkets and specialty
stores in addition to its departmental store business will add significant value to the
company. Though the revenue contribution from these new formats will be small in
comparison to the existing business we expect the new divisions to add close to 30% to
the profits of the company from FY07.
iii. Strong loyalty base

SSL has one of the most successful loyalty programmes, which has resulted in its First
Citizen member‘s base increasing to 644,500, in Q1FY07 from around 400,000 in FY05.
Their contribution to sales has seen an upward spike from 50% in FY05 to 63%. This
loyalty group gives SSL a competitive advantage in terms of repeat business.
iv. The organized retail advantage

The Indian domestic market has become an economic powerhouse with its large young
working population, burgeoning disposable income levels, and emerging opportunities
in the services sector. Going forward, organized retailing is projected to grow at the
rate of 25-30% and is estimated to reach an astounding Rs.1, 000 bn by 2010.
v. International Affiliations
Shoppers ‘Stop is the only retailer from India to become a member of the prestigious
Intercontinental Group of Departmental Stores (IGDS). The IGDS consists of 29
experienced retailers from all over the world, which include established stores like
Selfridges (England), Karstadt (Germany), Shanghai No. 1 (China), Matahari
(Indonesia), Takashimaya (Japan), C K Tang (Singapore), Manor (Switzerland) and
Lamcy Plaza (Dubai). This membership is restricted to one member organization per
country/region.
Strategies Adopted Over Time to Tackle Competition

The way to the customer‘s mind (and therefore his wallet)
and the dynamics of maintaining the novelty in a relationship
have definitely changed and changed rather irrevocably.
However, the basic tenets of identifying a customer and
making him feel special have remained the same thus
providing some continuity to the old school of marketing‘.

Some of these basic rules or guidelines which Shopper‘s Stop follows are:
Rule No 1: Know thy customer!
Rule No 2: Divide and Lure (with apologies to the British Empire!)
Rule No 2.1: Pamper the best
Rule No 2.2: Honour the rest
Rule No 3: Rewards do build loyalty!
Rule No 4: Show that you care
Rule No 5: Designing products to make their customer’s life better
Rule No 6: Don’t look now; the customer is changing
Rule No 7: Put the customer in charge
Shoppers‘Stop is positioned as a
family store delivering a complete
shopping experience defined by its
mission, vision and values. The
customers fall between the range of
16 years to 35 years with an annual
spend of around 1,50,000. Shopper‘s
Stop also has an online store that puts them way ahead of the competition. It was not
to create an alternative revenue-source to the offline stores, but to develop an
extension to the present business. Shopper‘s Stop has launched co-branded credit
cards with Citibank with a meaningful proportion of sales already on credit cards, it
would only increase going forward
3.1.3 TRENT LIMITED
Acquisition of a London-based retail chain Littlewoods by the Tatas was followed by

the establishment of Trent Ltd. which is the parent company of Westside store, Star
Bazaar and Fashion Yatra store which are chains of retail outlets promising customers
an international shopping experience and value-for-money. Contemporary, high
quality designs and a plethora of products have been successfully balanced to create
the ultimate shopping experience for the consumers. Westside has chain stores in
Mumbai, Bangalore, Hyderabad, Chennai, Pune, New Delhi and Kolkata with several
departments to meet the varied shopping needs of customers including menswear,
womenswear, lingerie, kidswear, household accessories, cosmetics and perfumes
sections. Complementing the shopping ambience is a coffee shop, Cafe West, managed
by the Taj Group. Trent has 18 Westside stores and one Hyper-market in the year
2004-05.
Investment Strategies
i. Rapid Growth In Stores
Trent with a total square foot area of 600,000 square feet is adding another 1 million
square feet. This means that the company expects to be about three times its size
(aided with growth in same stores sales) over the next two or three years.
ii. Diversification strategy for business

In 2005, Trent Ltd. acquired Landmark, India's largest book and music retailer and
recently the stake has been increased to 79%.
Landmark in the last 3 years has expanded rapidly
with about 15 stores across the country. The
subsidiaries of the Trent Ltd. are Trent Brands Ltd and
Fiora Services Ltd. In the year 2004-05, the company
has acquired 100% of the share capital of Satnam
Developers and Finance Pvt. Ltd. This company is
engaged in the business of construction and
development of real estates. In 2006, Trent Ltd formed
a strategic alliance with DLF Universal Ltd through
either one or more of its brands of Westside,
Landmark and Star Bazaar has agreed to anchor the
next 12 DLF malls across various cities of India with
27 stores totaling to a million sq ft of space. Recently in February 2009, Trent Ltd.
announced a joint venture with Spain‘s fashion retailers ‘Inditex Group’ to develop and
promote ‘Zara’ stores in India with a 49% share in it.
Strategies Adopted By Trent Ltd. to Tackle Competition

Trent Ltd. has focused itself on a specific target segment that comprises of the youth.
With major brands of apparel and jewellery under their store roof, Westside and other

Trent Ltd. companies try to attract the younger lot.
Trent has also been focused on social marketing by focusing on socially

underprivileged children in order to provide them with a chance to have a better life
tomorrow. Activities and rollouts like ‘Light a Diya’ and Angel‘s Tree‘ are some of the
social causes that Trent works toward to get in the minds of the mass and remain
ahead of the competition.
Recently Trent has come out with various offers under its ClubWest customer schemes
like Gourmet west, KidsWest, Westside women stores etc. that provides consumers
with an all new value for money and differtiated services proposal to finally aid to the
company‘s interests.
3.1.4 PANTALOON RETAIL (INDIA) LIMITED
Pantaloon Retail (India) Limited (‘PRIL’), is India’s leading retailer that operates
multiple retail formats in both the value and lifestyle segment of the Indian consumer
market. Headquartered in Mumbai (Bombay), the company operates over 7 million
square feet of retail space, has over 1000 stores across 53 cities in India and employs
over 25,000 people.
The company’s leading formats include Pantaloons, a chain of fashion outlets, Big
Bazaar, a uniquely Indian hypermarket chain, Food Bazaar, a supermarket chain,
blends the look, touch and feel of Indian bazaars with aspects of modern retail like
choice, convenience and quality and
Central, a chain of seamless destination malls. Some of its other formats include,
Depot, Shoe
Factory, Brand Factory, Blue Sky, Fashion Station, ALL, Top 10, mBazaar and Star and
Sitara. The company also operates an online portal, futurebazaar.com.

A subsidiary company, Home Solutions Retail (India) Limited, operates Home Town, a
large-format home solutions store, Collection i, selling home furniture products and E-
Zone focused on catering to the consumer electronics segment .
The tremendous success of the 'Pantaloons,' 'Big Bazaar' and 'Food Bazaar' retailing
formats, easily made PRIL, the #1 retailer in India by the early 2004, in terms of
turnover and retail area occupied by its outlets. In the fiscal year ended June 30, 2010,
PRIL reported revenues of Rs 5,934 Crores and its net profits rose by 29% to Rs.
179.56 Crores in fiscal 2009-10, over the previous year i.e. 2008-09.
INTERNATIONAL & NATIONAL AWARDS

Pantaloon Retail was recently awarded as:
1. International Retailer of the Year 2007 by the US-based National Retail

Federation (NRF) and
2. The Emerging Market Retailer of the Year
2007 at the World Retail Congress held in
Barcelona.
3. Best of the BEST RETAILER 2006 & 2007, by
ASIA PACIFIC TOP 500, SINGAPORE. Business
Leadership Award in retail by NDTV,
4. Readers Digest Trusted Brands Platinum
Award.
5. CNBC AWAZ most preferred Large Food &
grocery Super market.
6. Hewitt international BEST 15 EMPLOYER in INDIA.
Pantaloon Retail is the flagship company of Future Group, a business group catering to
the entire Indian consumption space.
3.2 SWOT ANALYSIS OF RETAIL MARKET IN INDIA

Strengths:
 LoyalOrganized retailing at US$ 3.31 billion, growing at 8%
2nd largest contributor to GDP after agriculture at 20%
Pattern of consumption changing along with shopping trends

A Growing population will translate to move consumers
Consumer spending increasing at 11% annually
Almost 25 million sq. ft. retail space available
Paradigm shift in shopping experience for consumers pulling in more people
Weakness:
Shortage of quality retail spaces at affordable rates
Government regulations on development of real estate(Urban Land Ceiling Act)
Lack of industry status and huge investment for expansion
Footfalls not a clear indicator of sales as actual consumers lower in number
Opportunity:
Increasing urban population-more participants in retail revolution
Increase in consuming middle class population
Average grocery spends at 42% of monthly spends-presents a huge opportunity
Increase in use of credit cards and spending moving towards lifestyle products and
esteem enhancing products.
Threats:
FDI restrictions in the retail sector
Poor monsoons and low GDP Growth could affect consumer spending drastically
Rising lease/rental costs affecting project viability
Unavailability of qualified personnel to support exponential growth in retail
Differentiate taxation laws hindering expansion

3.3 SWOT ANALYSIS OF ABOVE COMPANIES
Subhiksha
For assessing the advantages and disadvantages shopper stop enjoys the SWOT
analysis of the company has been done as:
Strengths:
 Loyal customer base accounts for major portion of revenue
 Low risk and sturdy business model
 Healthy financial position with low gearing
 Low rentals due to long lease contracts
 Low Subhiksha is also migrating its existing backend InfoTech deployments to the
SAP platform to make scaling up operations easier
Weakness:
 Increased sizeof operation has the risk of execution and management
Opportunity:
While, the decade old, Rs. 340 crore in turnover, Subhiksha retail chain, has invested
about Rs. 300 crore on its first phase of expansion

 Unlike Big Bazaar, its discount, food and grocery, retail counterparts, Subhiksha
believes in setting up non-air conditioned small neighborhood stores (near the
community) measuring around 2,000 sq.ft. in retail space
 Entry into TIER I and II cities
 Collaborations with foreign players because of a national brand
Threats:
 Subhiksha competes with big store chains on regular discounts, it competes with
traditional ‘father and son’ kirana stores on close proximity to its customers.
 Opening up of economy for freeentry of foreign retail players
 Employee shortage due to rapid growth in retailing
 As it could be observed that percentage of sales dropped till 2006 but after that, the
company seems to be more stable and less risky.
 Revenue of the company is increasing over the years. This signifies that company is
trying to increase their market share and with the increasing consumption. It sales has
increased very steeply over the years.
Shopper’s Stop
For assessing the advantages and disadvantages shopper stop enjoys the SWOT
analysis of the company has been done as:
Strengths:
Pioneer in departmental format
 Loyalcustomer base accounts for 63%of revenue.
 Lowrisk and sturdy business model
 Presence across retail segments; lifestyle, value and specialty retailing
 Healthy financial position with low gearing
 Low rentals due to long lease contracts
Weakness:
 Late foray into value retailing with 51% stake in promoter owned company

 High spend on store makeovers and interiors to ensure pleasant shopping

experience
 Competition from standalone specialty stores
No standardization of product
Opportunity:
 30% CAGR in organized retailing to result in better footfallsand conversion rates
 Entry into TIER II and III cities
 Benefit from the 16% increase in discretionary spend in Indian consumers because
of presence across formats
 Collaborations with foreign players because of a national brand
Threats:
 Impact of slowdown in consumer spends tobe felt on department stores.
 Opening up of economy for free entry of foreign retail players
 Employee shortage due to rapid growth in retailing
 As it could be observed that percentage of sales dropped till 2006 but after that, the
company seems to be more stable and less risky.
 Revenue of the company is increasing over the years. This signifies that company is
trying to increase their market share and with the increasing consumption. It sales has
increased very steeply over the years.
Trent Limited
Strengths:
 Sold in house brand only – higher margins, more control over manufacturers
(quality,cost), no intermediary costs.
 Focus on 2 parameters– style and affordability
 Huge financial base is there at the company‘s disposal which amounts to around Rs 2
billion from sale of Lakme
 Adept at conducting marketing research often and has a good in house team for it.

 Reach is very good with continuous growth in the numberof stores at a rapid rate.
 Trent has a strong supply chain functioning
Weakness:
 The company is too focused only on apparels and jewellery which are seasonal in
nature and is not willing to diversify into other product types
 The company is still concentrating much on the renowned brands instead of own
brands with the ratio of 70:30. If own brands could be focused on, they could bring in
more loyalty, flexibility and high returns. (Source: Crisil)
 Trent invests very heavily in promotion and brand building but still suffers from
poor economies of scale
Opportunities:
 There is 10 billion dollar untapped market in India for Trentto capitalise on
 Trent could enter the food retail business as a study on food and grocery retail
market as the food retail sales make up for close to 63 per cent of total retail sales in
American retail chains (Source: KSA Technopak)
 Trent positions its products in Westside as value for money which could be further
enhanced by venturing into low cost product business to tap the lower middle class
market through a downward stretch
Threats:
Organised sector is open for other players and with new and new retailers improving
the competition in the market by mushrooming their retail outlets
Market share of the unorganised sector still is ranges to 95% and if not looked upon,
might increase further. (Source: Crisil)
Pantaloons Retail India Limited

Strengths:
 Presence of the Company and its group formats in almost all segments
 Specialized services give niche advantage to the Company to have better and faster
access to the customer needs.
 Cost control initiatives and frugal culture that is critical in a retail operations

business
 Periodical reviews of the various operations have been done on regular basis to
identify the any possible threat and address the same within time.
 Process of Enterprise Risk Management as a continuing process, in order to identify

the new risks and to define and establish the control process to mitigate the identified
risks
 Controls in SAP
Weakness:
 Increased size of operation has the risk of execution and management.
Opportunities:
 The Company has formats for various segments of the customers and capturing the
maximum customers from each segment by having appropriate locations for each
format.
 Competitive advantage over competitors and also ensuring that the Company‘s
expansion plans on track.
Threats:
 The organized retail business is evolving faster and with the availability of various
options from the Company as well as the competitors, the business risk has increased.
 In the current environment, for any company the cost of doing business, including
costs associated with energy, real estate, people etc and this can have an impact on the
margins.
 With the increase of the size of operation the Company will also have the risk of the
execution and management.

3.4 CONCLUSION RELATING TO THE SCENARIO OF

SLOWDOWN IN THE INDUSTRY AND SUGGESTIONS
THEREON
The problems faced by the retail industry during the economic slowdown are believed
to be just teething problems. The retail party isn’t over yet. Industry players
unanimously agree that the downturn was just a temporary phase. According to
Kishore Biyani, CEO, pantaloons Retail, “India’s consumption story is not yet over.
There are some retail formats which are doing badly. High value categories like
furniture and electronics are experiencing sluggishness, but that too will pass.”
The silver lining in India’s case is that though organized retail consumption growth
may slow down to 4-5 %, it is still a juicy chunk when considered in the context of the
total retail pie of $360 billion.
Moreover most of the problems faced by the industry are common to every country
undergoing an evolution in the retail lifecycle. Indian retail is still in the infancy stage.
Hence problems like low supplier margins, resistance from mom and pop stores etc are
part of the growing process that even other countries like china and the US have faced
in the past.
The impact of the slowdown is likely to last till the end of March 2011. Thereafter, the
storm should abate the retail industry is expected to face glory. Retailers believe that
the tide will finally begin to turn from the end of 2009 and consequently the payoffs
will begin to show up in the balance sheet by March 2011 and by April 2011 it will be
business as usual for the retail industry. Retailers however need to learn from this
slowdown, how to make money with small growth and ensure that they do not
compromise on their brand image during such phases.
What doesn’t break them will only make them stronger. Retailers who survive this
slowdown unscathed will emerge as the leaner and cleaner face of the modern Indian
Retail industry.

CHAPTER 4
4.1 CONCLUSION AND SUGGESTIONS
Although organised retail has paved new paths for growth in India, a section of the
unorganised retail segment feels that its business has been hit hard by the advent of
some of the big players in the industry. In order to survive in today’s competitive
market, traditional retailers need to upgrade themselves continuously and reinvent
their business model. They opine that their flexibility in certain areas such as credit
sales, consumer goodwill, ability to sell loose items, convenient timings, ability to
bargain and provision for home delivery have helped them attract more buyers.
India is making a landmark revolution in the retail space in the world and Asia in
particular. India's strong economic growth and rising disposable incomes of middle
class and lower middle class made big business houses venture in to this business,
many businesses are coming from US and Europe. The Government's decision to allow
foreign Direct Investment and businesses in to this sector has attracted foreign
companies to establish their businesses in India. Now foreign retailers will be able to
own their own stores in India for the first time as part of a major government
liberalization of business.
After analysing the retail industry, we can conclude that the organised retail has
opportunities to grow in India in spite of the kirana stores 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. The organised retail is attracting more and
more Indian as well as foreign players of the retail industry. Therefore both the malls
and kirana stores can play simultaneously in India so no need get afraid due to the
malls.
The convenience and personalized service offered by the unorganized sector holds its
future in good stead for the future. Organized retail of late has seen a tremendous
boom and is attracting more people to the malls. What is to be seen is how organized
retail can duplicate the same level of personalized customer service levels offered by
the unorganized sector to have a higher conversion ratio.
The target audience for both the organized and unorganized retail formats remains
relatively the same. When shopping in malls, people value the experience related to
the trip the most and return most frequently for the same. Besides, while enjoying the
experience they seem to buy high ticket and items of conspicuous consumption most
frequently.

BIBLIOGRAPHY
The term paper has been prepared by references from the following newspapers,
journals, business magazines and websites.
Books , Newspapers , journals, business magazines , Articles :
Annual Reports of all the selected companies.

The Telegraph, The Economic times, The Business Times, The Times of India,
Progressive Magazine, India Today Magazine, ICAI Student Journal.
The ET Realty Team, “Indian Retail has ‘Arrived’ ”, The Economic Times, December
15th, 2006.
“Retail in India – Getting Organized to drive growth.” CII-A.T. Kearney, Nov. 2006.
McKinsey Global Institute India Report-Retail Sector.
Web- Sites :
www.pantaloon.com.
www.relianceretail.com
www.vishalmegamart.com
www.indiaonestop.com/retailing.
www.thehindubusinessline.com.
www.domain-b.com/industry/retail.
www.hinduonnet.com/businessline/praxis.
www.indianeconomy.org
www.futurebazaar.com
www.wikipedia.com

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Indian Retail Industry: An Insight

PROJECT GUIDE: PROFESSOR SOUMMYA BANERJEE

I would like to express my heartfelt gratitude to my project guidance teacher,

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2.9 IMPACT OF DEVELOPMENT OF THE ORGANISED RETAIL MARKET 32

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1.1 ABOUT THE PROJECT

1.1.1AN INSIGHT INTO RETAILING

RISHABH SATNALIKA /ROOM NO. - 34/ Roll 0673 Page 4

1.2 OBJECTIVES OF THE STUDY

1. To identify the activities associated with retailing

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1.3 RESEARCH METHODOLOGY AND ITS

This project is the mixture of theoretical as well as practical knowledge. Also it

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2 No access to relevant information – Another important limitation to be noted is

1.4 OVERVIEW OF INDIAN RETAIL SECTOR

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Unorganized market; Rs. 583,000 crores.

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COUNTRY ORGANISED UNORGANISED

GROWTH IN RETAIL OUTLETS (MILLIONS):

Year Urban Rural Total

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COMPOSITION OF URBAN OUTLETS:

Retail outlet Composition

COMPOSITION OF RURAL OUTLETS:

MAJOR RETAILER SPACE HOLDERS IN INDIA:

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2.2 SCENARIO OF THE UNORGANISED SECTOR

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2.3 EVOLUTION OF THE INDIAN RETAIL MARKET

Mapsofindia.com says, the transformation of the Indian

The 1980’s experienced a slow change as India began to

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DIAGRAM SHOWING EVOLUTION OF INDIAN RETAIL MARKET OVER THE YEARS

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2.4 EVOLUTION OF INDIAN RETAIL

Mr. Kamal Nath, India‘s minister for Commerce & Industry

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2.5 EMERGENCE OF THE INDIAN ORGANISED RETAIL

GROWTH OF NEW RETAIL FORMATS IN THE ORGANISED RETAIL SCENARIO

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Retailer Current New Formats Experimenting

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Bombay Aggregation of Kiranas

2.5.1 TRENDS IN RETAIL FORMATS

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SECTORAL DISTRIBUTION OF THE ORGANISED RETAIL MARKET

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The Indian retail sector can be broadly classified into:

b) HEALTH & BEAUTY PRODUCTS

c) CLOTHING & FOOTWEAR

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d) HOME FURNITURE & HOUSEHOLD GOODS

f) LEISURE & PERSONAL GOODS

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2.6 KEY DRIVERS OF GROWTH IN INDIAN RETAIL

At present Organised Retail in India is at a blossoming stage but its growth is at a

Consumer or Demand-side drivers