What Lies in Store for the Retailing Industry in India

CASE STUDY REVIEW

Group 3 South Campus | FMS (Exec) 2018-2020

S013- Anita Chaudhary S018-Ashish Chawla

S014- Anuj Kumar S019-Ashish Kumar
S015- Anuj Kumar S020-Ashish Yadav
S016-Anuj Kumar Jha S021- Ashutosh Singhal
S017-Anupam Singh S022- Audhesh Tiwari

Brief of case:

India has highest number of retails outlets per capita in the world , estimated to be 5 million retail outlets
of all shapes and sizes , even few agencies estimates this figure to 15 million too. Although most of them
are small in sizes and occupying an average 500 square feet in size and managed by family members.
These are typically known as kirana Dukan or kirana Store (mom and pop store in the US or the Corner
grocery store in UK).Out of these retail shops organized sector constitute barely 7.5 of total retailing
industry in 2013 and was expected to rise to 10 % by 2018.

Market research agencies are very positive on prospects of the retail sector in India. For instance, A.T.
Kearney’s Global Retail Development Index ranked India at 1st position while ranking 30 emerging
countries on a 100 point scale in 2007 and it remained same for three consecutive years and in 2014 it
ranked 20th. Over all retailing industry contribute 18 percent to GDP and it is forecasted to grow from US$
520 billion in 2013 to US$ 950 billion by 2018.

Size of organized retailing industry was estimated at US$40 billion in 2013 and projected to grow at a
compounded growth rate of 19 per cent to US$ 95 billion by 2018. Due to high potential practically every
major Indian business group have been looking for opportunities in growth of retail industry. Big players
who have already entered in the sector are like, Aditya Birla group, Bharti, Godrej, ITC, Mahindras,
Reliance, R.P Goenka, Tatas and Wadia group.

COMPETETIVE SCENARIO

In Indian context small retail shops and organized retail store are running parallelly giving good
competition to each other. Although major corporate group have entered in the retail sector but small
kirana stores are able to give good competition due to their low operating cost and low overheads.

India is witnessing change in various socio economic conditions post liberalization and these factors are
influencing the preferences of customers which is evident from increasing market share of organized
sector day by day and if we analyzed this change based on Porter’s Five force of Competition frame work
i.e political, economic, sociological , technological, legal and environmental, dynamic equilibrium can be
visualized more clearly.
Changing socio economic condition are favoring organized retail sector because kirana stores have image
of paying little or no tax and present taxation system is discouraging every establishment which is not tax
compliant or where chances of tax evasion is more. In organized sector because every transaction is
recorded, tax collection is efficient this is preferred by tax authorities.

With the effect of entry of big corporate groups economic condition of whole sector is changing
dramatically. While old system small retail stores were run by family with least investment and technology
but big retails stores like Big Bazar, More, Easyday, or Walmart have big investment and have large space
and technology as a leverage. Their pricing is uniform and they are better placed to procure directly from
farm or manufacturer having economy of scale, hence have better leverages in pricing, quality and
variety. With latest technology bill is smooth and easy.

Changing demographic environment of Indian urban land scape is also driving change is consumer
preferences. Young generation like and nuclear families, double income families are giving preference for
better shopping experience with organized sector(like shopping malls or good retail chain) , than old
kirana store.

Because of trained/ skilled manpower, technology and transparent system organized sector is better
equipped for tax collection and other legal compliances. Whereas small kirana stores lags in these
compliances but have low overhead cost better customer relationship and easy connectivity.

Scenario is changing whether it is macro economic level or micro economic level and various changing
business favors organized retails store but these changing business environment are not so detrimental
to small retails stores that these will shut in near future.

Industry attractiveness to competitive advantage:

Here important question arise, what determines the level of profit in the industry and what is
attractiveness of market?

Here organized player is focusing on future market consolidation and capturing large market share.
International environment is favorable to organized retail stores and Various International and national
Single brand retailers are giving quality and variety of product which were available never before.

At present organized sector is witnessing very tough competition with small retailers and small retailers
are giving tough competition to the organized sector because of low capital employed and low overhead
cost of small retailers. Although everything is not favoring the small retailers, economy of scale give
benefit to organized sector, Organized sector has better bargaining power of products with their
suppliers, huge capital employed give power to manipulate the pricing and offering other various
attractive scheme, which small retailer can not.

CONCLUSION

Considering above analysis we can Indian retail sector is in transformation stage market share of small
retails store is going to fall which is obvious because occupying 90% market share is not sustainable and
it will reduce slowly but it is not going to vanish in any moment of time because of positive aspects of
small retail stores( Kiran shop) will always be available for any sudden requirement of personal relation
effect or credit facility are their USP and it will help them to survive.
On the other hand, Organized retail store have ample scope to flourish because of increasing population,
change in demographic and socio economic condition and young generation with nuclear families are
force behind their growth. Technological innovations, quality, hygiene, better shopping environment are
their added advantage. Both sector are going to survive.