Dissertation Report

On

Macro Analysis of Indian Organized

Retailing
By
HITESH JAIN
A0101908007
MBA Class of 2010

Under the Supervision of

Mr. YOGESH MEHRA
Lecturer
Department of Finance

In Partial Fulfillment of Award of Master of Business Administration

AMITY BUSINESS SCHOOL

AMITY UNIVERSITY UTTAR PRADESH
SECTOR 125, NOIDA - 201303, UTTAR PRADESH, INDIA
2010

DECLARATION

1
I, HITESH JAIN, student of Masters of Business Administration from Amity Business
School, Amity University Uttar Pradesh hereby declare that I have completed
Dissertation on “MACRO ANALYSIS OF INDIAN ORGANIZED RETAILING” as
part of the course requirement.

I further declare that the information presented in this project is true and original to the
best of my knowledge.

Date: 19/03/10 Name : HITESH

JAIN

Place: Noida Enroll. No :

A0101908007
Program : MBA (G)

2
 CERTIFICATE

I, Mr. Yogesh Mehra hereby certify that Hitesh Jain, student of Masters of Business
Administration at Amity Business School, Amity University Uttar Pradesh has completed
dissertation on “MACRO ANALYSIS OF INDIAN ORGANIZED RETAILING”
under my guidance.

Mr. Yogesh Mehra

Lecturer
Department Of Finance

3
 ACKNOWLEDGEMENT

The successful completion of any project is always the consequence of a number of

people involved. I had the good fortune of working with a wonderful group of people
whose varied experience and advice has been of immense help in the successful
completion of project.

I express my sincere thanks to my guide Mr. Yogesh Mehra, without whom the project
would not be possible. My heartfelt thanks for his unflagging support and invaluable
guidance.

I am grateful to Mr. Sanjay Srivastava the respected ADG, Amity Business School,
Amity University for her support. I express my sincere thanks to all who lent their
support in completion of the project.

Hitesh
Jain
MBA
2008-10

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 Chapter 1

Chapter 2

Chapter 3

Chapter 4

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 PREFACE
Why we choose the study?

The Retail Sector of India is one of the fastest growing sectors of the Indian Economy.
End of the year 2006 it was estimated to be around US$350 bn and it is expected in 2010
raise to US$400 bn. However the contribution of the organized sector in the above figure
is less than 4%. Hence there is a huge opportunity for it grow that is the reason behind
the organized sector, trying for different stages to increase it market share. Studying this
strategy is adopted by the organized sector would an excellent learning experience for us
as an M.B.A. students hence we have selected to study the organized retail industry of
India as a part of our Management Grand Project.

Objective of the study:-

Our objective of the study was to learn the “Indian organized retail industry” from
various macro point of view.

Research methodology:-
This project is based on the secondary data. we have made the most of finding on our
visit to the different malls. Data is based on disriptive research.

We have also studied and try to give the idea about the future of the India organized
retailing. The analysis part of this report includes the environmental analysis, SWOT
analysis, key success factor, BCG strategic environment matrix, 9-ps and porter’s five
forces competitive analysis .

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 Table of Contents
Sr. Topic Page no.
No
1 Certificate
2 Acknowledgement
3 Preface
4 World history of retail 1
5 How retail develops 2
6 History of Indian retailing 6
7 Types of retailing 7
8 Formats of retailing 8
9 World retailing 13
10 Current organized Indian retail industry 22
11 Development of Indian organized retail 26
12 Major areas of Indian organized retailing 37
13 Major players of Indian organized retailing 40
4 E-Tailing 50
15 Enviornmental analysis 60
16 Economic analysis 64
17 Technological analysis 67
18 Demographic analysis 69
19 SWOT analysis 71
20 P’s of organized retail industry 74
21 Key success factors of retail industry 79
22 Major findings & contribution 81
23 Limitations 82
24 Future of Indian organized retailing 83
25 Conclusion 86
26 Bibliography 87

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World History of Retail

Retail comes from the French word retaillier which refers to "cutting off , clip and
divide" in terms of tailoring (1365). It first was recorded as a noun with the meaning of a
"sale in small quantities" in 1433 (French). Its literal meaning for retail was to "cut off,
shred, paring".
When man started to cultivate and harvest the land, he would occasionally find himself
with a surplus of goods. Once the needs of his family and local community were met, he
would attempt to trade his goods for different goods produced elsewhere.
Thus markets were formed. These early efforts to swap goods developed into more
formal gatherings. When a producer who had a surplus could not find another producer
with suitable products to swap, he may have allowed others to owe him goods. Thus early
credit terms would have been developed. This would have led to symbolic
representations of such debts in the form of valuable items (such as gemstones or beads),
and eventually money.

Early Markets

Over time, producers would have seen value in deliberately over-producing in order to
profit from selling these goods. Merchants would also have begun to appear. They would
travel from village to village, purchasing these goods and selling them for a profit. Over
time, both producers and merchants would regularly take their goods to one selling place
in the centre of the community. Thus, regular markets appeared.

The First Shops

Eventually, markets would become permanent fixtures i.e. shops. These shops along with
the logistics required to get the goods to them were, the start of the Retail Trade.

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How Retail Develops

Peddlers and Producers

The Retail Trade is rooted in two groups, the peddlers and producers. Peddlers tended to
be opportunistic in their choice of stock and customer. They would purchase any goods
that they thought they could sell for a profit. Producers were interested in selling goods
that they had produced.

General Store

This division continues to this day with some shops specializing in specific areas,
reflecting their origins as outlets for producers (such as Pacific Concord of Hong Kong),
and others providing a broad mix, known as General Store (such as Casey's in the
Midwest of the U.S.A.).

Although specialist shops are still with us, over time, the general store has increasingly
taken on specialist products. Customers have found this to be more convenient than
having to visit many shops - thus the term “Convenience Store” has also been applied to
these shops. As the popularity of general stores has grown, so has their size. This
combined with the advent of Self-Service has lead to the Supermarket, or Superstore.

How did retail develop?

When individuals or groups left their community and settled elsewhere, some missed
foodstuffs and other goods that were only available in their birthplace. They arranged for
some of these goods to be sent to them. Others in their newly adopted community
enjoyed these goods and demand grew. Similarly, new settlers discovered goods in their
new surroundings that they dispatched back to their birthplace, and once again, demand
grew. This soon turned into a regular trade. Although such trading routes expanded
mainly through the growth of traveling salesmen and then wholesalers, there were still
instances where individuals purchased goods at long distance for their own use.

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A second reason that distance selling increased was through war. As armies marched
through territories, they laid down communication lines stretching from their home base
to the front. As well as garnering goods from whichever locality they found themselves
in, they would have also taken advantage of the lines of communication to order goods
from home.

Retail Chains

Origins of Retail Chains

It is likely that, as markets became more permanent fixtures they evolved into shops.
Although advantageous in many respects, this removed the mobility that a peddler or
traveling merchant may still have enjoyed. For some shopkeepers, it made sense to obtain
extra stock and open up another shop, most probably operated by another family member.
This would recover business from peddlers, create new business and the greater volume
would allow the shopkeeper to strike a better deal with suppliers. Thus the Retail Chain
would have started.

From Family Business to Formal Structure

Although retail chains would have been mostly run by families, as some chains grew,
they would have needed to employ people from outside of their family. This was a
limiting factor as there would have been a limit to the amount of trusted non family
members available to help run the chain. Another, even more definite limiting factor was
the distance the furthest shop would have been from the original shop. The greater the
distance, the more time and effort would have been needed to effectively manage outpost
shops and to service them with goods. There was, therefore, a natural barrier to
expansion. That was the case until transport and communications became faster and more
reliable. When this happened towards the end of the 19th century, chains became much
bigger and more widespread. Many of these businesses became more structured and
formalized, leading to the retail chains that we see today.

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Self Service

Background

Up until the introduction of self-service stores, customers would simply ask the
shopkeeper for their goods. The shopkeeper would price them (weighing them if
necessary), pack them in a bag or other container (often supplied by the customer), tot up
the bill and receive payment. There was a personal one-to-one relationship between
customer and shopkeeper.

The First Self-Service Store

This all changed in 1915 when Albert Gerrard opened the Groceteria in Los Angeles, the
first documented self-service store. This was soon followed a year later by the Piggly
Wiggly self-service store, founded by Clarence Saunders in Tennessee in the U.S.

Efficiency & Growth

These entrepreneurs noticed that their staff had to spend a great deal of time taking
grocery orders from customers. The groceries were stacked on shelves allowing
customers to walk around and browse, collecting their shopping in a basket that was
supplied. The shopkeeper would only need to tot up the final bill at the end of the process
and transfer the goods from the basket to the customer and receive payment.

This new type of shopping was more efficient and many customers preferred it. Although
personal service stores remain to this day, this new concept started a rapid growth of self-
service stores in the United States. Other countries were slow to take up the idea, but
there has been a steady rise in the global amount of self-service stores ever since.

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Décor

The way a retail outlet looks will usually inform customers and potential customers about
the type of store and type of products it sells.

Design

A store that sells high class goods will usually have high class décor. By contrast, a store
that sells basic goods may have basic décor. Retailers will typically want their stores to
be different from their competitors. This distinction allows the store to offer a shopping
"experience". A store offering distinct décor can score points over their competitors. This
dimension is important as it reduces the burden on product versus product and price
versus price competition

Frequency of Redecoration

Stores that sell fashion goods will often change their décor regularly to reflect the
changing nature of their products. For some well established stores, their décor may be
synonymous with their business and their product offer. Such stores may seldom change
their décor or only change it in minor ways.

Lighting

Food stores are usually well lit. This re-enforces an impression of hygiene and honesty. It
also allows customers to read labels and signs, some of which may be legally required.
The lighting in clothes and some specialist goods stores may vary across the store,
according to the products being lit. Such lighting may range from soft, or even dull, to
bright and occasionally colored.

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History of Indian Retail

The Indian Retailing sector has been largely unorganized in the post independence
period, to the most part untouched by corporate business principles. It was only in 1980s
when the economy started to be opened, the situation began to change. Companies like
Bombay Dyeing, Raymond and Grasim from the textiles sector were the first ones from
the corporate world to step into the retailing by opening their own outlets. Titan's is
another successful story of a corporate creating a great retailing concept, by establishing a
series of elegant watch showrooms across the country.

The post liberalization era witnessed new wave of entrants in the sector with large
conglomerates like Tatas, Reliance the RPG Group, Rahejas and the Piramals investing in
the sector. Various other behemoths of the Indian corporate sector like the Birlas, the
Hero Group and Reliance have expressed their intention of joining the Indian retail foray.

When countries grow, more people buy more things. More products become available.
They need more shelf space. The result: a retail revolution. That's what's happening in
India today. A new generation of retail outlets is emerging, which will change the
landscape of the country's cities.The revolution is fuelled by huge sums of money being
poured into real estate, modern logistics, and the creation of new retail brands.

13
 Types of Retailing

Three basic parts of retailing

There are three major types of retailing.

 The first is the market, a physical location where buyers and sellers converge.
Usually this is done on town squares, sidewalks or designated streets and may
involve the construction of temporary structures (market stalls).
 The second form is shop or store trading. Some shops use counter-service,
where goods are out of reach of buyers, and must be obtained from the seller. This
type of retail is common for small expensive items (e.g. jewelry) and controlled
items like medicine and liquor. Self-service, where goods may be handled and
examined prior to purchase, has become more common since the Twentieth
Century.
 A third form of retail is virtual retail, where products are ordered via mail,
telephone or online without having been examined physically but instead in a
catalogue, on television or on a website. Sometimes this kind of retailing
replicates existing retail types such as online shops or virtual marketplaces such as
E-Bay.

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Formats of retailing

Department stores

These large stores retail primarily non-food items such as apparel, footwear, accessories,
cosmetics and household products. They stock multiple brands across product categories,
though some of them focus on their own store label (on the lines of Marks & Spencer’s
and St. Michael).
Several local department store chains have opened shop in India in the past five years.
The larger chains of department stores (Namely Reliance fresh, Pantaloons’, Shoppers’
Stop, Westside, and Lifestyle) have presence in the metros and mini metros.

Supermarkets

A supermarket is a store which is more of a large self-service grocery store selling

groceries and dairy products and household goods that are consumed regularly. These
stores are often part of a chain that owns or controls (sometimes by franchise) other
supermarkets located in the same or other towns; increasing the opportunities for
economies of scale. These stores offer convenience of shopping by making available a
large variety of products at one place. Some of the well known supermarket chain
includes Food Bazaar, Nilgiris, Food World, Apna Bazaar, Trinethra etc.

Hypermarkets/Discount stores

A hypermarket is a store which combines a supermarket and a department store. The

result is a retail facility which carries an enormous range of products under one roof,
including full lines of fresh groceries and apparel. It is a large format store that aims at
retail consolidation by being a single point contact between the brand owners and
customers. They are planned, constructed, and executed in a manner that a consumer can
ideally satisfy all of their routine weekly shopping needs in one trip to the hypermarket..
Big Bazaar, Spencers, Star India Bazaar are examples of hypermarket formats.

15
Seamless Mall

Seamless mall is a format which is relatively new in India. In this format, various brands
operate their retail areas without any wall between them, providing a seamless shopping
experience. This makes it possible for shoppers to compare brands with ease while they
shop Central is an example of a seamless mall.

Specialty stores

Specialty stores as the name suggests are stores that specializes in a particular offering. A
specialty store carries a deep assortment within a narrow line of goods. Furniture stores,
florists, sporting-goods stores, and bookstores are all specialty stores. Examples of
specialty stores in India would include Planet Sports, aLL, Vijay Sales, Planet M, Music
world, Crossword etc.

Clothing and Accessory Store

Clothing and accessory stores sell apparel for all members of the family, as well as
luggage, leather goods, lingerie, jewellery, uniforms, and bridal gowns. Clothing and
accessory stores are often staffed with knowledgeable salespersons who can help in the
selection of sizes, styles, and accessories

Distance Retailing

Rather than visiting a store to make a purchase, a customer may order products from a
remote location. This may be done by mail, telephone, internet/email or other digital
device such as interactive television and even from a refrigerator. Retailers that practice
distance retailing may also have physical stores, such as Wal-Mart.

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Door-to-Door Retailing

This kind of retailing is as old as retailing itself and is still very common, although less so
in recent times. A door-to-door salesperson may be self-employed or employed by a
company and will usually specialize in a particular product group, often household items.
Although it is common for them to visit houses, they may also sell to businesses.

Party and Event Retailing

This is usually a form of franchising where the retailer invites people from the locality to
a common location. The event or the party will be a mix of socializing and retailing,
usually themed around the products on offer. Most commonly, the retailer will be a
franchisee to a wider organization. Although party and event selling can involve a variety
of goods, it is very common that cosmetics, small household goods, clothing and sex-aids
are sold.

Single Independent Non-Franchised Store

A single independent store may be run an individual, but is more typically run by a
family. They may be general stores, catering to a limited geographical range or may sell
specialized products to a wider area.

Street Market

The tradition of selling from market stalls goes back to the early days of retailing where
traders could gather in one area to sell their wares. Street markets, or open-air markets,
are common around the world and are particularly popular in temperate or warm
climates.

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Van Retailing

This is a cross between door-to-door sales and store sales. The retailer will typically keep
1 day’s stock in their van and visit an area where they will service regular customers.
They may occasionally visit an area that they do not usually go to in order to attract new
customers. Van sales are common in rural areas and in less developed economies. There
are two types of van sales. One is where the van is parked in a common area and is
visited by customers; ices and snacks are often sold this way. The other type of van sales
is, in effect, the same as door-to-door selling.

Warehouse Club

Warehouse club stores and super centers sell a mix of products (and services) in fixed
quantities at low prices. These stores typically include an assortment of food items, often
sold in bulk, along with an array of household and automotive goods, clothing, and
services that may vary over time.

Emergence of Multiple Formats

The organized retailing has called for different things being sold at different formats
differently. Many formats are coming up for the customer to differentiate as shop as he
/she wants. Hypermarket (Hypercity, Big bazaar, Shoprite), the largest format in Indian
retail so far is a one stop shop for the modern Indian shopper where you can get every
thing that may desire, from food grocery to clothing to sports goods to books to stationery
and what not!
format Size in sq.ft.
Hyper Market 50,000 sq ft
Super Market 5000+ sq ft
Convenience store 3000+ sq ft

It is a 50,000 sq ft 20000- 30000 SKU (Stock keeping Unit) of paradise for a shopper.
Then there are supermarkets like food world, a subdued version of a hypermarket. They
have 5000+ sq ft of space and house around 10000 SKUs.

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Convenience stores are further subdued version of a supermarket where grocery is pre
dominantly being sold in a 3000+ sq ft of space. Then there are discount stores which
stress on giving more stuff at less price e.g. Subhiksha. Departmental Stores like
Shopper’s Stop, Trent and West Side are also coming up. Specialty Stores like Bata have
expansion plans for the future. Cash n Carry formats such as METRO is also fast
emerging in the sector

World retailing

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Rank of the countries
India Tops Annual List of Most Attractive Countries for International Retail Expansion,
as Increasingly Saturated Chinese Market Continues to Decline
Vietnam ranks third, behind Russia, as Asia becomes most attractive region; Middle
Eastern retail sales soar, according to A.T. Kearney’s Global Retail Development Index
A.T. Kearney’s Global Retail Development Index ranks 10 emerging countries on the
urgency for retailers to enter the country.

Rank Country Region Countr Market Market Time GRD

y Risk Attractivene saturatio pressur I
25% ss n e Scor
25% 30% 20% e
1 India Asia 67 42 80 74 92
2 Russia Eastern 62 52 53 90 89
Europe
3 China Asia 75 46 46 84 86
4 Vietnam Asia 57 34 76 59 74
5 Ukraine Eastern 41 43 44 88 69
Europe
6 Chile Americ 80 51 42 43 69
a
7 Latvia Eastern 77 32 21 86 68
Europe
8 Malaysia Asia 70 44 46 54 68
9 Mexico Americ 83 58 33 33 64
a
10 Saudi A. Mid.Ea 65 40 66 35 64
st
2009 A.T. Kearney Global Retail Development Index

Overview of world retail market

Retailing is the world's largest private industry exceeding US $7 trillion and 47 of the
global Fortune 500 companies and 25 of Asia's Top 200 companies happen to be
retailers. The organized sector is generating about 18 percent shareholder returns on the

20
global plane, thereby outperforming sectors like banking and insurance. Nations that
have enjoyed the greatest economic and social progress have been those with a strong
and organized retail sector. In most western countries the retail sector enjoys the status
of a full fledged industry and the organized players account more than three-fourths of
the total retail trade. Large retailers such as Wal-Mart of US ($256 Billion), Carrefour of
France ($87 Billion), Ahold of Netherlands ($68 Billion), Metro Group of Germany ($65
Billion), Kroger of US ($53 Billion), and Tesco of UK ($50 Billion) now dominate the
global retail market and trends indicate towards a consolidation in the retail sector. The
top 30 retailers currently account for about 19 percent of the global retail sales.

The study also found Asia has overtaken Eastern Europe as the dominant region for
global retail expansion, with 40 percent of the top 20 markets, vs. 35 percent for Eastern
Europe. Powering Asia’s charge are Vietnam, which raised five places in the 2006
rankings, to third place, and Asian Tigers such as Thailand, South Korea and Malaysia,
all of which are in the top 15.

After ranking first in 2003 and 2004, Russia slipped to second place behind India in
2005 and remained there in 2006. Russia remains attractive, with a $180 million retail
market that grew 19 percent in 2005. But with many retailers entering the market and
regional players expanding beyond Moscow and St. Petersburg, the Russian window of
opportunity is beginning to close.

“The Indian retail market is gradually but surely opening up, while China’s market
becomes increasingly saturated,” said Mike Moriarty, a vice president in A.T. Kearney’s
Consumer Industries and Retail Practice and leader of the Global Retail Development
Index study. “Similarly, Asia has dislodged Eastern Europe as the most attractive region.
The learning is that timing is the most important source of competitive advantage for
global and regional retailers in the globalization race. Knowing when to enter emerging
retail markets is the key to success.”

Neighboring Vietnam, ranked third, enjoys one of Asia’s fastest growing economies,
with GDP growth of 7.5 percent and a population of 84 million people who spent 16

21
percent more on consumer goods in 2005 than in 2004. Modern retail sales grew by 20
percent last year.

“Vietnam today is similar to India five years ago,” said Moriarty. “It combines strong
economic growth with a highly fragmented retail market comprised largely of “mom and
pop: shops. Ninety percent of Vietnam’s retail outlets are neighborhood stores run by
local businesses”.

As in India, the biggest hurdles to entering Vietnam’s retail market are FDI regulations,
high import taxes and difficulties obtaining licenses to open more stores.

In a reversal of the past few years, Asian countries dominate this year's Index and
outrank those from Eastern Europe. Asian countries hold 40 percent of the top 20 GRDI
markets, while Eastern European countries hold 35 percent. Just last year, Asia
accounted for 30 percent while Eastern Europe captured 55 percent. This shift is not a
surprise. Asia has always been the largest region of emerging markets: It represents 26
percent of global GDP and 32 percent of global retail sales. Its annual retail sales grew at
a healthy rate of 7 percent in 2005. More important, modern retailers have tapped into
just 28 percent of the region, compared with 42 percent of the markets in Eastern
Europe.

Among the world’s fastest growing retail markets currently is the Middle East, led by
the United Arab Emirates and Saudi Arabia. Modern retail sales grew 38 percent in the
region from 2001 to 2005, second only to Central and Eastern Europe’s growth rates and
far ahead of other Asian markets, Latin America, Western Europe or the U.S.

Underscoring the opportunity for retailers, consumer spending has grown at a compound
annual rate of 10 percent since 2000 in the UAE, Saudi Arabia and Kuwait. While many

Modern retail globalization is accelerating, with more than 89 new markets entered by
more than 49 new retailers since 2001. But speed to market alone doesn’t equal success:
19 markets were exited in 2006 and many retailers still struggle to achieve profitability
in emerging markets in less than five years, if ever.

22
On a regional level, Asia reclaimed the lead position from the maturing markets of
Eastern Europe. As part of Asia, the Middle East posted the highest retail sales growth
globally, led by United Arab Emirates and Saudi Arabia. The Mediterranean held steady
with mixed results, while Latin America recovered from its economic crises and enjoyed
a strong return on the Index. Finally, Africa remains outside the game, but that is not
stopping retailers from entering this populous region. Figure 2 maps out the relative
market attractiveness of all countries on the Index. A closer look at each region follows:

Relative Market Attractiveness of all Major Countries

Asia Reclaims the Lead

In a reversal of the past few years, Asian countries dominate this year's Index and
outrank those from Eastern Europe (see figure 3). Asian countries hold 40 percent of
the top 20 GRDI markets, while Eastern European countries hold 35 percent. Just last

23
year, Asia accounted for 30 percent while Eastern Europe captured 55 percent. This
shift is not a surprise. Asia has always been the largest region of emerging markets: It
represents 26 percent of global GDP and 32 percent of global retail sales. Its annual
retail sales grew at a healthy rate of 7 percent in 2005. More important, modern
retailers have tapped into just 28 percent of the region, compared with 42 percent of the
markets in Eastern Europe.

Countries “on the radar screen” & “to consider”, by region 2003-07

The leading Asia markets are also getting hotter: India topped the 2006 Index and
Vietnam moved up five places to reach 3rd place. Three other Asian tigers—Thailand,

24
South Korea and Malaysia—also made it to the top 15. The following snapshots
provide insight into key markets:

China as a competitor of the world

China loses ground

Although China slipped one spot to number 5 on the Index, its retail market grew by
more than 12 percent in 2005 and remains very attractive. However, because
international retailers are fueling this growth, market saturation is also on the rise. More
than 40 foreign retailers have entered the market to date.

"Wave 1" retailers, such as grocers and convenience stores, entered the market in cities
along the east coast and have begun moving west. "Wave 2" companies—consumer
electronics, do- it-yourself and apparel retailers—is a few years behind, but is
following the same east-to-west path. This group includes Best Buy, Leroy Merlin and
Home Depot, which acquired Orient Home.

Success stories are on the rise. Do-it-yourself retailer B&Q entered China in 1999 and
has enjoyed double-digit growth every year since. Last year, sales grew by about 50
percent to nearly $550 million, and it purchased the China operations of Germany-
based home decor company OBI. Looking ahead, B&Q plans to open 100 stores in
China in the next five years.

Another example is Tesco. Although the U.K.-based retailer didn't move into China
until 2004—long after Wal-Mart and Carrefour entered in the mid-1990s—its
performance has been strong. With Wal-Mart and Carrefour firmly entrenched and
Tesco gaining ground, the retail market is poised for some interesting developments in
the next few months. However, saturation levels, especially in China's more attractive
tier-one centers, are increasing.

25
Vietnam: the little India.

Vietnam raised five places this year to number 3 on the Index. Vietnam has consistently
performed well over the past five years and has one of the fastest growing economies in
Asia. Its ever-increasing population is a big draw: Half of its 84 million people are
below age 30 and they like to shop. Consumer spending increased by about 16 percent
and modern retail sales rose by 20 percent from 2004 to 2005.

Potential for all Formats to Thrive:

Most of the global powerhouses in the retailing sector such as Wal- Mart, Carrefour, and
Tesco etc have adopted multi- format and multi-product strategies in order to customize
their product offering for distinct target segments. Further, with the emergence of larger
store formats like superstores and hypermarkets in countries like UK, France, Germany,
Spain since the 1980s and Eastern Europe more recently, traditional food retailers have
been able to stock more extensive non-food ranges. In fact, Tesco, UK's leading grocer,
has become the number one apparel retailer in the Czech Republic and also a major
player in Hungary apart from being one of the fastest growing clothing retailers in the
UK.

Together with its rival, Wal-Mart-owned ASDA, Tesco is one of the food sector's most
successful exponents of clothing in Europe. To illustrate further, the various formats and
categories operated by 5 of the largest retailers in the world are highlighted below

26
27
Consumption of goods by different types of format in the world

(All above source: Indian Retail Report – Images Retail and KSA Technopak)

The variation in the structure of the global retail industry across economies is striking.
The retail industry in the developed economies operates largely through the organized
retail channels. As can be seen from the table below, the share of organized retail is
above 80% in US and Taiwan, and is substantial in other emerging markets like
Malaysia and Thailand. In China organized retail constitute about 20% of total retail
sales. India, in comparison, is dominated by the traditional retailing channels, with
organized retail having a negligible share.

Organized retail trade in India is at an inflexion point. The share of organized retail in
the total retail pie is set to increase from about 3% in 2004 to about 8 – 10 % by 2010.

28
This growth is on the back of changing customer aspirations and improving retail real
estate infrastructure in the country.

Share of modern retail trade in different countries

Current organized INDIAN retail industry

Intr oduction of Or ganized Retail

Industr y in India
Retailing is the second largest industry in the US in terms of number of people employed.
Wal-Mart, the largest retailer in the world with annual sales of US$ 284 billion is also the
largest employer in the US The retailing industry in the US employs more than 22 million

29
Americans and generates more than $3 trillion in sales annually. Like the US, many
developed and developing economies rely on this sector for growth.

In India, the retail industry is broadly divided into the organized and unorganized sectors.
The total market in 2005 stood at Rs. 10,000 billion, accounting for about 9-10% of the
country’s gross domestic product (GDP). Of this total market, the organized sector
accounted for $350 billion (about 3.5 % of the total) of the total revenues.

Traditionally, the retail industry in India comprised of large, medium and small grocery
stores and drug stores which could be categorized as unorganized retailing. Most of the
organized retailing in India had recently started and was mainly concentrated in
metropolitan cities.

The retailing industry seems poised for a significant growth in the coming years owing to
the presence of a vast market, growing consumer awareness about product quality and
services, higher disposable income of consumers and the desire to try out new products.

Against a backdrop of accelerating modern retail globalization, India retained its position
as the world’s most attractive market for mass merchant and food retailers seeking
overseas growth, according to management consulting firm A.T. Kearney’s 2006 Global
Retail Development Index (GRDI), an annual study of retail investment attractiveness
among 30 emerging markets.

Composition of Organized Retail

A breakup of sales in organized retail shows lifestyle (clothing and textile, footwear,
home, watches and jewellery and health and beauty, entertainment) as the largest segment
accounting for 71% in value terms. This is followed by Food and Grocery accounting for
14% of the organized retail value

30
Organized retailing constitutes just 3 percent of the Rs.930000 crore Indian retail
markets. However, the scale of organized activity is not equally spread out across all
sectors. The
Watches sector is the most organized of all with almost 40 percent of the market being
controlled by branded and organized players.

The next most organized segment is that of Footwear (13%) followed by Clothing (36%).
As all of these three sectors constitute core “fashion”, it is rightly observed, “Fashion
drives Indian retail”. Much of the credit for having pioneered the organized retail
movement in India, and in these sectors in particular goes to brands like Titan, Bata and
Raymond, besides others.

Of all the retail sectors, the last organized one is Food and Grocery (14%), Jewellery and
Watches (17%) and Health and Beauty (1%). All three sectors are huge in size: F&G is
the largest of all sectors (worth Rs.615,000 crore); India is the world's biggest market for
gold and jewellery though there is hardly any retailer with a national presence in this
sector; Health and beauty consciousness among Indian consumers, especially the urban
youth, is on the rise and consumers will readily accept any quality offering in this
context, service as well as product. There exists huge potential in these and all other
sectors.

Break-up of consumer’s expenditure in organized retail

31
 ORGANIZED RETAILING

3% 3% 2%
1% Home
10% 1%
Pharma
Entertainment
13% Health & Beauty
Clothing & Taxtile
36%
Jewellery & Watches
Food & Grocery
14%
Footwear
Durables
17% Books Music & Gifts

Source: KSA Technopack research on Booming Retail Industry-2007

Rapid growth of organized retailing is expected in the food segment. This can be
attributed to the highly unorganized nature of the market currently, which thus presents
an attractive potential, and the growing preference of consumers to shop at modern retail
formats. Clothing is the other segment expected to show high growth potential.
India’s Retail Sector: Basic Facts

India’s relevant private final consumption expenditure (PFCE) is estimated to be about

US$221 (28% of GDP) billion as of F2006. Note we are excluding part of PFCE such as
rent, fuel & power from the relevant spending estimate.

 Currently, Indian retail distribution is completely fragmented with about 12 mn

players operating from small shops and handcarts.
 Organized retail sector is currently just about 3% of the total relevant PFCE
 Overall PFCE is estimated to have grown at 11.6% over the last three years.
 Organized retail sector is estimated to be growing at 15-20%.
 Wholesale and retail trade sector currently contributes to about 13% of GDP an
employs about 40 million people.

32
  Food and beverages account for 38% of the total retail spending.

Organized retail has huge opportunity for business in India. It will estimate 20% in 2010
and 64% in 2010.

ORGANIZED RETAIL OPPORTUNITY

For doing a business of organized retail there are two types of cost, direct and indirect.
Direct cost is that what you purchase goods from merchandise and indirect cost includes
Advertising & Promotion, Excise and Other Taxes, Warehousing, Freight, Man Power,
Packaging & Embellishments and Other Administrative Expenses. If your indirect cost is
minimum then your profit will increases. Indirect cost all companies try to rescue as
much as possible. Below list is indirect cost of Ebony Company, what is their indirect
cost for operating company.

World giants entry in India

33
World largest organized retail company, Wal-Mart has 40 stores in China and zero in
India. Carrefour and Tesco also not enter in Indian market. Above chart show the
comparison between India and China organized retail market.

Development of Indian Organized Retail

Indian retailing is undergoing a process of evolution and is poised to undergo dramatic
transformation. The retail sector employs over 8% of the national workforce but is
characterized by a high degree of fragmentation with over 5 million outlets, 96% of
whom are very small with an area of less than 50 m2. The retail universe more than
doubled between 1978 and 1996 and the number of outlets per 1000 people at an All
India level, increased from 3.7 in 1978 to 5.6 in 1996. For the urban sector alone, the
shop density increased from 4 per 1000 people in 1978 to 7.6 per 1000 people in 1996.
Because of their small size, Indian retailers have very little bargaining power with
manufacturers and perform only a few of the flows in marketing channels unlike in the
case of retailers in developed countries.
The corner grocer or the ‘kirana’ store is a key element in the retail in India due to the
housewife’s unwillingness to go long distances for purchasing daily needs. An empirical
No. of Stores in No. of Stores in
Section I.1 Retailer CHINA INDIA
Wal-Mart 40 -
Carrefour 53 -
TESCO 30 -
Metro 21 2
KFC Over1000 4
Star bucks 70 -
Mc Donald’s 580 47
Pizza Hut 110 75
Huyo Boss 60 2
Louis Vuitton 6 2
Prada 10 -
B&Q 20 -
study was carried out to identify factors that influenced consumers’ choice of a store.
Although convenience and merchandise were the two most important 5 reasons for
choosing a store, the choice criteria varied across product categories. Convenience was

34
indicated by consumers as the most important reason in the choice of groceries and fruit
outlets, chemists and lifestyle items while merchandise was indicated as the most
important in durables, books and apparel.

In recent years, there has been a slow spread of retail chains in some formats like
supermarkets, department stores, malls and discount stores. Factors facilitating the spread
of chains are the availability of quality products at lower prices, improved shopping
standards, convenient shopping and display, and blending of shopping with 6
entertainment, and the entry of industrial houses like Reliance, Goenkas, Rahejas, Piramals
and Tatas into retailing.

However formats are not easily scalable across the country. Several companies have found
that it is not easy to expand beyond some regions and cities as evident from the examples
of Margin Free Market and Foodworld, which are active only in a few states or cities.
Affordable real estate prices and availability of sufficient number of economically well off
households in the catchments area are critical requirements that will determine new store
viability and thus the possibility of further expansion.

Foreign direct investment in the retail sector in India, although not yet permitted by
government, is desirable, as it would improve productivity and increase competitiveness.
New stores will introduce efficiency. Customers also gain as prices in the new stores tend
to be lower. The consequences of modernization in India may be somewhat different due
to lower purchasing power and the new stores may cater to only to branded products aimed
at upper income segments.

The need for a fresh perspective while developing theories to explain the new
developments has been stressed. The Indian retail environment is witnessing several
changes on the demand side due to increased per capita income, changing lifestyle and
increased product availability.

35
The rapid growth of Big Bazaar (soon to be joined in by expansion of Giant, and a likely
entry of Bharti and Aditya Birla Group later this year in a similar format) testifies this,
and in turn, this will lead to many other major business houses in this sector very shortly.
The consumer appreciation has not only been limited to the national players.

According to this year’s Global Retail Development Index India is positioned as the
leading destination for retail investment. This followed from the saturation in western
retail markets and we find big western retailers like Wal-mart and Tesco entering into
Indian market. India’s retail industry accounts for 10 percent of its GDP and 8 percent of
the employment to reach $17 billion by 2010. There are about 300 new malls, 1,500
supermarkets and 325 departmental stores being built in the cities very soon.

A shopping revolution is ushering in India where, a large population between 20-34 age
groups in the urban regions is boosting demand by 11.1 percent in 2004-05 to an Rs
23,308 purchasing power. This has resulted in huge international retail investment and a
more liberal FDI.

Specialty players like Loft (footwear retailing), Vijay Sales and Vivek (consumer durable
retailing), Fabindia (clothing/accessories) and even local players (e.g. Bombay Selection
and Mehrasons in Delhi) have been able to draw consumers from the traditional high
streets to new swanky malls and/or modern, large footprint stand-alone stores. In case of
Delhi, we are now already beginning to see emergence of new "Lajpat Nagars" and
"Connaught Places" in malls such as DLF City Center and Metropolitan (both in
Gurgaon).

Hence, the growth in organized retail is no longer determined only by the growth plans of
the existing national players -- new entrants as well as local/regional players making
rapid expansion beyond their traditional markets will be actually driving the growth now.

The second significant change is that from the end of 2004 and through almost 2007,
India will see the coming to market of new, large shopping malls almost every week.

36
Next year alone is likely to have at least 330 new malls planning for opening.
The year 2006 may see another 100 or more ready for possession. This makes entry into
retailing far easier for almost all kinds of entrants, for almost all kinds of formats and
scale of operations. The rentals are likely to settle down at about Rs 40 -- Rs 60 per sq ft
per month making most retail businesses financially very viable.

Scaling up will also is easy for the new entrants once they have got their initial business
models right and resources (financial and human) put in place. The easier availability of
space will therefore encourage retail start-ups in high potential categories such as food
and grocery, consumer durables, furniture and furnishings, jewellery etc.

Financial resources themselves would be very easy from 2004 itself. The forthcoming
IPO of Subhiksha is likely set very encouraging benchmarks for raising capital from the
primary markets, and thereby attracting adequate interest of various categories of
investors including VCs to look at funding retail ventures at various stages.

The fourth significant change is the likely entrance of many leading international
brands/retail businesses in India initially through the franchising route, (Wal-Mart
coming with Bharati Group) and subsequently through direct retailing route when the
FDI policy on retail is liberalized (hopefully soon after the next general elections).

With the increased attractiveness of India, many top international brands are already
presence in India. These may include Calvin Klein, Tommy Hilfiger, Athlete's Foot,
Tiffany etc. and creating a multiplier effect in various formats and product categories
giving further stimulus to growth of organized retailing.

Factors underlying evolution of modern retail in India

The foregoing review has provided some information that enables the construction of a
framework for analyzing the retail development in India. The driving forces towards
Development can be broadly classified into categories shown in Table 1 below, which is
followed by a discussion on each of the driving forces.

37
Economic development
The development of the Indian economy is a necessary condition for the development of
the Indian retail sector. The example of Thailand shows that the impetus to modernization
of retail was provided by the economic boom in Thailand. Development increases the
disposable income in the hands of consumers and leads to an increase in the proportion of
spending on discretionary non- food items. Economic development also enfranchises new
households as potential customers for modern retail and leads to increased ownership of
personal transportation among consumers, which in turn can increase their willingness to
travel longer distances to shop in new format stores. The growth of the economy can also
provide gainful employment to those who would otherwise enter retailing in areas like
hawking, roadside vending and other similar low cost entries into the retail sector. Rapid
economic development may also positively influence the views of international retailing
companies about the business prospects and investment attractiveness in a country.

Improvements in civic situation

The civic situation includes factors like safety and security in the city and the various
municipal regulations governing the opening, location and operation of stores, and the
nature of public transport available. A safe and secure environment will encourage the
setting up of 24 hour convenience stores and the operation of shopping plazas and
encourage shopping expeditions for the whole family. The presence of adequate parking
facilities or excellent public transportation will encourage consumers to be more mobile in
their choice of store. City or state regulations on opening or closing hours, rent control
laws, availability of adequate electrical power and regulations relating to licensing will
affect both the time required to set up a new store as well as the cost of store operation and
its viability.
Changes in consumer needs, attitudes and behavior
The growth of modern retail is linked to consumer needs, attitudes and behavior.
Marketing channels including retailing emerge because they receive impetus from both the
supply side, and the demand side. On the demand side, the marketing channel facilitates
provides service outputs that consumers value. These service outputs may include but are

38
not limited to bulk-breaking, spatial convenience, waiting and delivery time and assort. In
Indian retailing, convenience and merchandise appear to be the most important factors
influencing store choice, although ambience and service are also becoming important in
some contexts. Modernization will have to address convenience issues while presenting
strong alternatives to the weaknesses of traditional formats in selection of merchandise
available for sale. Modern formats need not be expensive and can offer lower prices to
consumers. Lower prices in turn will increase the attractiveness of modern formats and
rapid growth in the preference for purchasing from new format stores.

Changes in government policies

The Indian government has clarified on a number of occasions that foreign direct
investment will not be permitted in India. Major international retailer organizations will be
watching for signals of policy change especially because China has permitted foreign
investment in retail. In opening up the retail sector, the government may consider various
approaches such as insisting on joint ventures, limiting the foreign stake, or specifying the
cities areas where investment is permitted. Thailand’s example shows that in case of joint
ventures, the local partner can play a significant role in the success of the joint venture.
The Brazilian experience shows that local retailing groups can successfully compete
against international chains if they adopt innovations and restructure operations in
accordance with market needs. Some policy protection can be given to consumer
cooperatives which have been providing value to their members and customers. This
protection can be in the form of allowing these organizations to access capital from the
local market and operate in a more professional manner. The government can also play a
positive role in simplifying or eliminating the plethora of regulations governing retailing.
Specific laws relating to franchising will also be desirable for foreign and Indian brand
owners to adopt the franchise route in a bigger way.
Increased investment in retailing
The prospects for significant modernization and development in retailing will depend on
the nature of investment in this sector. The investment will be of two types- foreign and
domestic. The quantum and nature of investment will depend on the factors outlined

39
earlier namely economic development; civic situation; consumer needs, attitudes and
behavior; and government policies.

Although FDI is not yet permitted in retailing, a number of global retailers are testing the
waters by signing technical agreements and franchises with Indian firms. Fast food chains
like McDonalds and Pizza Hut are already operating in the metros. A Marks and Spencer
store is already operational in Mumbai & in other cities. Several global retailers are
awaiting a change in policy. However, the development of the Indian retail sector is
dependent not just on foreign investment but on Indian investment as well. Since the
1980’s industrial groups such as Reliance and Raymond’s have been active in encouraging
development of well appointed exclusive showrooms for their textile brands. In the 1990’s
industrial houses like Rahejas, Piramals, and Tatas have entered retailing. Several Indian
and foreign brands have used franchising to establish exclusive outlets for their brands.

At present the new format stores cater mostly to households belonging to the higher
income families. The catchments area for these modern stores has to be fairly large as the
number of such households is small in relation to the total population. This limits the
number of stores and constrains the growth of chains. The modern stores have also been
plagued by low conversion in relation to the number of footfalls. This means that although
a large number of people visit the store, the number of buyers and the average bill amount
is small. Due to low sales, the bargaining power of the retailers with suppliers and
manufacturers is low and this restricts their average gross margin. On the other hand the
expenses involved in setting up and maintaining a modern format store tend to be much
higher than traditional store due to the additional expenses on larger size, better locations
and superior ambience. Therefore if the returns on investment in the new formats have to
be attractive, modern retailers have to develop a strong supply chain that provides them
significant gross margins while delivering merchandise at attractive prices to customers. In
order to do this, modern retailers will need to eliminate middlemen and buy directly from
suppliers and make use of technology to control inventory. These developments will
impact the survival and existence of middlemen such as wholesalers and agents who will

40
have to find new business models to survive. Manufacturing firms will also face pressure
from strong buyers on price, delivery and service terms.

Increase in power of organized retail

Bargaining power of organized retail translates directly into higher gross margins for the
retailers. At present there are a large number of independent retailers with little bargaining
power vis a vis manufacturers, distributors and wholesalers. Manufacturers have been
promoting their brands and generating consumer demand for branded products. This
makes it necessary for all varieties of stores especially in urban areas to stock branded
products. Manufacturers take advantage of the consumer pull to limit margins to the
retailers. Retailers manage their profitability by operating on a very low cost basis. This is
possible because of low rental expenses due to historical reasons and low labour costs due
to employment of family members in the store. The modern stores have somewhat higher
gross margins, but their net margins are not very significant for providing the cash flow
required to fuel rapid growth in outlets.

Retailers can increase their power in several ways. They can invest efforts in developing
their own store brands. The supermarket chain Food world has begun doing this in a
limited way with food grains and pulses. Secondly they can invest in supply chain, buy
directly from the sources and eliminate middlemen. Thirdly they can attempt to obtain
volumes in buying by aggregating the requirements of various stores, and bargaining for
better prices by placing large orders. Although this strategy suits chain stores, independent
grocers may also get together by forming a cooperative or buying club in order to benefit
from scale economies in purchasing. Retailers can also obtain several benefits from using
information technology. They can monitor their stocks and sales using IT and thus manage
their working capital more efficiently. They can also analyze data about customers and
their buying habits and be in a position to develop marketing strategies and promotional
offers to increase customer purchasing at the outlet.
Penetration
In the Indian Market the penetration of the organized retail is also taking place which is
given below.

41
Penetration of Organized Retail
2005 Estimate Total Retail Organized Retail
Mkt. size Mkt.shae Mkt. Size Mkt. Penetration(%)
Rs. Bn (%) Rs. Bn Share(%)
Food Beverages & 7,738 75.8 65 19 1
tobacco
Clothing 716 75.8 141 40 20
& textile
Consumer Durable 416 4.1 43 13 10
Jewellery 416 4.1 25 7 6
&Watches
Home Deco 300 2.9 25 7 8
& Furniture
Beauty Care Items 214 2.1 7 2 3
Footwear 104 1.0 32 9 31
Books Music 87 0.8 11 3 13
& Gifts
Total 9,990 100.0 349 100

Entry barrier for new player

Factors Descriptions Implications

FDI bottleneck Barriers to FDI not permitted in Absence of Global Players
FDI pure retailing limited exposure to best
Franchisee arrangement practices
all owned

42
Non Lack of Government does not Restricted availability of
recognized Industry recognize the industry. finance restrictions growth
industry status and scaling up.
Structural Structural Lack of urbanizations, 1. Lack of Awareness of
Impediments Impediments poor transportations, Indian consumers
Infrastructure, restricted retail growth of
Consumer habit of small, one store formats,
buying fresh food, with unmatchable cost
Administered Price. structure wastage of
almost 20-25% of farm
produce.
Costly Real High cost of Pro tenant rent laws, Difficult to find good real
Estate real estate non availability of estate in terms of locations
Government. Zoning and size
restrictions, lack of High land cost owing
clear ownership titles constructed supply.
high stamp duty. Disorganized nature
transactions.
Supply chain Supply chain 1. Several 1. Limited product range
bottlenecks bottlenecks segments like food makes scaling up difficult
for SSIs distribution, high cost and complexity
logistics, constrains. of sourcing and planning.
2. Restrictions of 2. Lack of value addition
purchase and and increase in costs by
movement of food almost 15%
grains.
3. Absence of cold
chain in
Infrastructure long
intermediations
chain.
Complex Complex 1. Differential Added cost and complexity of

43
taxation taxation sales taxations across distribution cost advantage for
system states. Multi points smaller sales through tax
control. evasion.
2. Sales tax
avoiding by smaller
stores.
Multiple Multiple 1. Stringent labor Limits flexibility in
Legislation Legislation laws governing hours operations irritant value in
of work minimum establishing chain operations
wage payments. adds to overall cost.
2. Multiple licenses
clearance required.
Customer Customer Local consumption 1. Leads to product
Diversity preference habit need for verity profile ration need to
cultural issues. stock..
2. Increase complexity
on sourcing & planning
mergers the cost of store
management.

Man Power Availability 1. Highly educated 1. Lack of trained

of Talent class does not personnel.
consider realty as a 2. Higher trial and
choice of profession managing retail
2. Lack of proper operations.
transaction. 3. Increase in personnel
costs.
Manufacturers Manufacturers No measures in Manufacturers refuse to
Backlash managing disintermediation and pass
on intermediary margins to
retailers.

44
Major Areas of Indian Organized

Retailing
In Indian Retail Industry there are so many sectors but we have selected major sectors
which are as follows

 Food & Grocery

 Footwear

 Apparel

 Consumer Durable

 Gems & Jewellary

 FMCG

45
Retailers look to corner unbranded food space
The message is clear. With modern food formats like Food Bazaar and Spencer's offering
to take the negative labour out of positive Indian home pleasures by setting up an in-
house chakki (flour mill), offering to knead the dough and cut vegetables free of charge,
retailers have their eye on the unbranded 'centre of the plate' in the Indian homemaker's
staple meal.

It’s an area where many Indian and multinational companies have failed miserably. The
attempt is to seek a share of the unbranded part of the consumers shopping basket, which
constitutes as much as 60% of the total purchases and growing sharply, say AC Nielsen
estimates. Retailers are offering a package of convenience and freshness, and have an
edge over manufacturers that focus mainly on packaged conveniences.

We are looking at taking the negative labor out of such positive Indian pleasures of life.
Incomes in India are going up and becoming interesting to build aspirational brands now.
But the media is already fragmented and expensive, and retail is getting consolidated.

With 60% of the grocery basket still unbranded, the opportunity for brand creation is
huge. In the new paradigm, however, the method of brand creation will have to be
different and in tune with the new reality. The retailers come with no baggage to this new
opportunity and therefore, will have a mindset advantage over traditional branded guys,
says Damodar Mall, president, Food Bazaar.

Food retailers are offering ˜live kitchenâ formats, which offer on-the-spot home-style
gravies, dals, cooked rice and kneaded dough with options like grinding coffee fresh at
store, idli batter, paneer, curd and cut vegetables. By cutting heavily through
intermediaries with a real drastic cut in the supply chain length, retailers are reducing the
shelf-life of products to less than a week.

46
Consumers like the touch, smell and feel of commodities like grains or flour they
purchase and retailers are trying to build their offerings around this need. Adapting to
Indian needs is the key. Some of our formats stock vegetarian and non-vegetarian stuff.

They also stock regional specialities, for instance, Gujarati, South Indian, Mangalorean or
Keralite items in areas dominated by people from these regions. But these are essential
investments in the long-term understanding of the Indian psyche and ensuring customer
pull, which is localising each format to suit the demands and sensitivities of the Indian
market.

Trumart is looking to tie up with vendors to make fresh batter for the idli or dosa in-
house and set up a bakery and offer fresh bread to consumers. Earlier consumers chose
fresh and pure products where there was a lot of drudgery involved. They shifted to
conveniences like packaged atta, but were unsatisfied with the quality and taste. Retailers
are entering the space and offering them the same conveniences, but with a lot of in your
eye freshness appeal. The Rs 27,258-crore Indian foods industry, which forms 44% of
entire FMCG sales, is growing at 9% and has set the growth agenda for modern trade
formats.

India's emergence as a leading producer of food items and particularly items like milk,
poultry saw the distribution of these through organized retail channel taking place along
with the traditional channel. This saw the emergence of discount grocers like Subhiksha
and supermarkets like FoodWorld. The organized retail is expected to benefit the
producers as well as the customers. There are some questions being posed regarding
manpower employed in the unorganized retail industry and in the processing of harvest
items. Will they be redundant with the growth of retail industry? There is no answer to
this question at present as only time will present an answer.

47
Major Players of Indian Organized

Retailing

Reliance

Reliance Fresh & Mall

Is the retail chain division of Reliance Industries of India which is headed by Mukesh
Ambani. Reliance has entered into this segment by opening new retail stores into almost
every metropolitan and regional area of India. Reliance plans to invest Rs 25000 crores in
the next 4 years in their retail division and plans to begin retail stores in 784 cities across
the country. The Reliance Fresh supermarket chain is RIL’s Rs 25,000 crore venture and
it plans to add more stores across different g, and eventually have a pan-India footprint by
year 2011. The super marts will sell fresh fruits and vegetables, staples, groceries, fresh
juice bars and dairy products and also will sport a separate enclosure and supply-chain for
non-vegetarian products.

Reliance Fresh recently (24th Jan, 2007) opened several "Fresh" outlets in Chennai,
New Delhi, Hyderabad,Jaipur, Mumbai, Chandigarh, Ludhiana increasing its total store
count to 40. While Reliance mall has been started the biggest mall in Ahmedabad &
looking forward to open it in other cities also. Reliance is still testing its retail concepts
by controlled entry beginning in the southern states.

According to Deccan Herald, the company is planning on opening new stores with store-
size varying from 1,500 sq ft to 3,000 sq ft, which will stock fresh fruits and vegetables,
staples, FMCG products and dairy products. Each store is said to be within a radius of 1-2
km of each other, in relation to the concept of a neighbour store. However, this is only the
entry roll-out that the company has planned. Bangalore is said to have 40 stores in all by
the end of the year.

48
In a dramatic change due circumstances prevaling in UP, West Bengal and Orissa, It was
mentioned recently in News Dailies that, Reliance Retail is moving out stocking.
Reliance Retail has decided to minimise its exposure in the fruit and vegetable business
and position Reliance Fresh as a pure play super market focusing on categories like food,
FMCG, home, consumer durables, IT, wellness and auto accessories, with food
accounting for the bulk of the business. The company may not stock fruit and vegetables
in some states, Orissa being one of them. Though Reliance Fresh is not exiting the fruit
and vegetable business altogether, it has decided not to compete with local vendors partly
due to political reasons, and partly due to its inability to create a robust supply chain. This
is quite different from what the firm had originally planned. When the first Reliance
Fresh store opened in Hyderabad last October, not only did the company said the store’s
main focus would be fresh produce like fruits and vegetables at a much lower price, but
also spoke at length about its “farm-to-fork’’ theory. The idea the company spoke about
was to source from farmers and sell directly to the consumer removing middlemen out of
the way. Reliance may exit some businesses If the business does not increases by March
2008.

Reliance Fresh, Reliance Mart, Reliance Digital, Reliance Trendz, Reliance Footprint,
Reliance Wellness, Reliance Jewels, Reliance Timeout and Reliance Super are various
formats that Reliance has rolled out.
In addition, Reliance Retail has entered into an alliance with Apple for setting up a chain
of Apple Specialty Stores branded as iStore, starting with Bangalore.

Pantaloon Retail

The company was incorporated on October 12, 1987 as Manz Wear Private Limited. The
Company was converted into a public limited company on September 20, 1991 and on
September 25, 1992 the name was changed to Pantaloon Fashions (India) Limited and in
the same year the Company made an initial public offering. Later changed name to
Pantaloon Retail (India) Limited on July 7 1999.

49
The company started its operations by selling branded garments under Pantaloon, Bare
and John Miller brands. We set up our first menswear Pantaloon Shoppe Outlet in 1993.
Our business has grown from one store in Kolkata in 1997 occupying an area of 8,000 Sq
ft to 72 stores, apart from our 22 factory outlets located in the multiple cities occupying
an aggregate area of 21,07,608 Sq. ft. Company focus on the Lifestyle segment through
14 Pantaloon stores, 3 Central Malls, 2 aLL, 2 Fashion Station and 1 MeLa store. In the
Value offering, we cater to the mass through our 21 Big Bazaar and 30 Food Bazaar
outlets.
Stores of Pantaloon Retail
 ALL

 Big Bazaar

 Blue Sky

 Central

 Fashion Station

 Gini & Jony

 Pantaloon

Shoppers Stop

Shoppers' Stop started professional, organized retailing in India. It was the only retailer to
hire graduates and place them in front line selling activities and was also one of the first
few retailers to recruit from business schools. In 1991, the first Shoppers' Stop outlet
opened in an area of 2,800 sq. ft., as a ready-to-wear men's wear store.In 1992, ladies
wear was added and in 1993 the kids' section and accessories including jewellery,
cosmetics and watches. Shoppers' Stop was now a complete department store.

In August 1993, institutional sales were introduced for corporate clients, sale of gift
hampers, gift vouchers and dress kits. 1994 saw the launch of 'STOP' - the first in-house
brand of merchandise.

50
In response to the ever-growing customer base, Shoppers' Stop launched the first retail
loyalty programme in April 1994. All buyers who became members of this programme
were entitled to special privileges and benefits.

Shoppers' Stop expanded operations outside Mumbai with its second store, at Bangalore
in 1995. This was followed by a store in Hyderabad in 1998. Shoppers' Stop next entered
the Northern markets of Jaipur and New Delhi in 1999.

Expansion was part of Shoppers' Stop original strategy for growth. Towards this end, by
2001, it had entered Chennai and Pune; and in Mumbai it had opened stores in Chembur
and Bandra. In 2002/2003, it added four new stores including those in Kandivli and
Mulund in suburb of Mumbai when the K. Raheja Corp Group (Chandru L. Raheja
Group) began executing its vision of providing an international shopping experience to
Indian customers.

Shoppers' Stop redefined the shopping experience in India by introducing the 'everything-
under-one-roof' format coupled with the convenience of cash & carry from a customer-
friendly display of merchandise. It is a strategy, which has made Shoppers' Stop into a
Rs. 4 billion (2003/04) organisation today.

Shoppers' Stop runs a chain of departmental stores offering apparel, accessories,

footwear, jewellery and home products. Currently 1,805 employees man its fourteen
departmental stores in Mumbai, Bangalore, Hyderabad, Chennai, Pune, Jaipur, Delhi,
Gurgaon and Kolkata. The stores are spread over 629,471 sq. ft of retailing space with an
average footfall of 50,000 customers per day across the chain.

The company has aggressive expansion plans and is expected to continue to lead the
growth of the organised retailing in India projected at Rs.13,500 billion (Industry
projections as per the India Retail Review by Knight Frank).

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Positioning
Shoppers’ Stop is positioned as a family store delivering a complete shopping experience
defined by its mission, vision and values.

Customer Profile

Shoppers’ Stop’s core customers represent a strong SEC A skew. They fall between the
age group of 16 years to 35 years, the majority of them being families and young couples
with a monthly household income above Rs. 20000 and an annual spend of Rs.15000. A
large number of Non - Resident Indians visit the shop for ethnic clothes in the
international environment they are accustomed to.

Future Plans
Shoppers’ Stop aims to position itself as a global retailer. The company intends to bring
the world’s best retail technology, retail practices and sales to India. Currently, they are
adding 4 to 5 new stores every year.

Tata Trent
The Westside stores have numerous departments to meet the varied shopping needs of
customers. These include Menswear, Women’s wear, Kid’s wear, Footwear, Cosmetics,
Perfumes and Handbags, Household Accessories, lingerie, and Gifts. The company has
already established 23 Westside departmental stores (measuring 15,000 - 30,000 square
feet each) in Mumbai, Bangalore, Hyderabad, Jaipur, Chennai, Pune, Delhi, Noida,
Gurgaon, Ghaziabad, Kolkata, Nagpur, Indore and Ahmedabad. The company hopes to
expand rapidly with similar format stores that offer a fine balance between style and price
retailing.

Trent ventured into the hypermarket business in 2004 with Star India Bazaar, providing
an ample assortment of products made available at the lowest prices, aptly exemplifying
its ‘Chota Budget, Lambi Shopping’ motto. Star India Bazaar, presently has one 50,000

52
square feet store in Ahmedabad and plans to extend its presence across all major metros.
This store offers customers an eclectic array of products that include staple foods,
beverages, health and beauty products, vegetables, fruits, dairy products, consumer
electronics and household items at the most affordable prices. Star India Bazaar also
includes a large range of fashionable in-house garments for men, women and children,
exclusively available at the store.

In addition, Trent recently acquired a 76% stake in Landmark, one of the largest books
music retail chains in the country. Landmark began operations in 1987 with its first store
in Chennai with a floor space of 5500 sq. ft. At present Landmark has 7 stores, varying in
size from 12,000 sq. ft. to 45,000 sq. ft, 3 in Chennai and 1 each in Bangalore, Kolkata,
Mumbai and Vadodara. Until 1996, Landmark’s product portfolio comprised books,
stationery, greeting cards. It was later that music was added to it. Landmark also sparked
the trend of stocking curios, toys, music, CDs and other gift items. What separates
Landmark from other stores of its kind is the range and depth of its stock.

Profile

Established in 1998, Trent operates Westside, one of India's largest and fastest growing
chains of retail stores. The company has a turnover of Rs 246.1 crore (FY 2004-2005)
and currently operates 21 stores in the major metros and mini metros of India.Promising
high-quality, the latest styles, an international shopping experience and value for money,
Westside has created a loyal following with its own brand of merchandise. Almost
everything at Westside is exclusively designed for Westside. Boasting of a variety of
designs and styles, the merchandise at the Westside stores are a mix of stylised clothes,
footwear and accessories for men, women and children, table linens, artifacts, home
accessories and furnishings.

The Westside stores have numerous departments to meet the varied shopping needs of
customers. These include Menswear, Women’s wear, Kid’s wear, Footwear, Cosmetics,
Perfumes and Handbags, Household Accessories, lingerie, and Gifts. The company has
already established 23 Westside departmental stores (measuring 15,000 - 30,000 square

53
feet each) in Mumbai, Bangalore, Hyderabad, Jaipur, Chennai, Pune, Delhi, Noida,
Gurgaon, Ghaziabad, Kolkata, Nagpur, Indore and Ahmedabad. The company hopes to
expand rapidly with similar format stores that offer a fine balance between style and price
retailing.

STAR INDIA BAZZAR

Trent ventured into the hypermarket business in 2004 with Star India Bazaar, providing
an ample assortment of products made available at the lowest prices, aptly exemplifying
its ‘Chota Budget, Lambi Shopping’ motto. Star India Bazaar, presently has one 50,000
square feet store in Ahmedabad and plans to extend its presence across all major metros.
This store offers customers an eclectic array of products that include staple foods,
beverages, health and beauty products, vegetables, fruits, dairy products, consumer
electronics and household items at the most affordable prices. Star India Bazaar also
includes a large range of fashionable in-house garments for men, women and children,
exclusively available at the store.

LANDMARK

In addition, Trent recently acquired a 76% stake in Landmark, one of the largest books &
music retail chains in the country. Landmark began operations in 1987 with its first store
in Chennai with a floor space of 5500 sq. ft. At present Landmark has 7 stores, varying in
size from 12,000 sq. ft. to 45,000 sq. ft, 3 in Chennai and 1 each in Bangalore, Kolkata,
Mumbai and Vadodara. Until 1996, Landmark’s product portfolio comprised books,
stationery, greeting cards. It was later that music was added to it. Landmark also sparked
the trend of stocking curios, toys, music, CDs and other gift items. What separates
Landmark from other stores of its kind is the range and depth of its stock.

54
Ebony
New Delhi & Mumbai, The Sensex may not be booming, but the cash outflow from
shoppers' pockets is zooming like never before. Swanky new shopping malls, with shiny
glass facades, roof-top parking, tube lifts, lifted straight out of Visit Dubai postcards,
have sprung up all over the country, delighting the hearts of incorrigible shoppers.

If the most happening place in Mumbai is Crossroads, in Delhi its suburban Noida's
Sector 18 market, in Thrissur, the Dubai-style City Centre, in Indore, the Singapore
Market... glitzy malls have sprung up in almost every city.

The fact that Crossroads has become an ordeal for Mumbai's traffic police since it opened
on August 29 says it all. India's economic capital is quite overwhelmed by the newest
place to put one's money. In Delhi, the newest Ebony store in Noida with four huge floors
of shopping, saw more than 10,000 shoppers blowing up their bucks in the first week of
its opening.
Crossroads, promoted by the Rs 1,500-crore Piramal group, spans a whopping 1,50,000
square feet of prime land at Haji Ali in South Mumbai. Its state-of-the-art facilities,
including the latest car elevators that lead to a roof-top parking lot, a video wall and a
spacious atrium, which were hyped up in the media before the opening, lured 20,000
curious onlookers on the first day itself. An estimated Rs 3 billion is said to have been
invested in the mall, and it is expected by its owners to break even in two years.
Crossroads encompasses the big names in style: Shyam Ahuja, Lacoste, Ensemble,
Swarovski, L'Oreal, Zegna, Hallmark, Ashley Shoes, Danabhai Jewellers, Aria Crystals,
Rohit Bal, Ritu's and J J Valaya. Mumbai's biggest bookstore, Fountainhead,also situated
here, is already making book lovers salivate. Apparel franchisee brands like Levi's, Planet
Kids, Lee Cooper, Adidas, Reebok, Nike and Benetton have all rented space at
Crossroads.

55
Provogue
The Company was incorporated on November 11, 1997 as Acme Clothing Private
Limited. Provogue stands for fashion and not pure apparel; this in itself makes it the
leader instantly. Its designs are cutting edge and radical, which epitomises its mantra
“Redefining Fashion”.

The Company launched the fashion brand ‘Provogue’ in March 1998 and within a short
span of seven (7) years; it has established a strong brand identity in the minds of the
urban consumer. The Company’s philosophy of ‘creating trends’ in fashion, an
aggressive marketing strategy, coupled with high profile promotional events and its
distribution strategy of retailing through selective stores and malls has resulted in
Provogue being now positioned as a leading fashion brand in India.

Recently, the Company acquired from Acme Global the entire business of export of
textile; textile machinery and textile related chemicals and operates these businesses as its
division under the name Acme Global.

The brand is retailed through selective stores in the country and leading National Chain
Stores like Shopper's Stop, Lifestyle, Globus, Westside etc. More importantly, Provogue
is also retailed through a chain of exclusive brand outlets called "Provogue Studio" at 70
locations which provide a unique retail environment to the consumer.

Provogue was launched in a unique style with the first ever “All Ladies Audience
Fashion Show” at one of the hippest night clubs ‘Three Flights Up’ in Mumbai.

Subsequently, the company has conducted over 40 high profile and successful fashion
events in the country. The major ones being the Fashion Nite in Delhi which featured the
then ambassador Hrithik Roshan walk the ramp in Provogue fashion wear. The “Live
your Dream” fashion show at the Gateway of India which featured CEOs of various
companies strut the ramp in Provogue outfits. Fashion show at Jodhpur in the ‘Umaid

56
Bhawan’ Palace which saw the models walks the ramp in provogue outfits in the starry
and truly royal night of Rajasthan. The Company has also conducted events in various
prominent night clubs involving the countries leading Dj’s. Supermodels and Mega stars
John Abraham, Hrithik Roshan and now Fardeen Khan are associated with Provogue as
its Brand Ambassadors.
Products of Provogue
 Shirts
 T-Shirts
 Trousers
 Denims
 Suits/Jackets
 Footwear
 Innerwear

57
 E-Tailing
From the mid 1990s, the retail industry started showing interest in selling products
online. And today, the best online selling products include flowers, gifts and greetings.
As per the 'COM Score media matrix' of the United States, in December 2003, the US
internet population totaled 152.1 million users who spent an average of 27.6 hours online,
an increase of 6 per cent when compared with the figures in November 2003. The reason
being consumers who were preparing for and celebrating the holidays.

E-retailing Basics

E-Retailing solutions that enable businesses and merchants to create, manage and run
full-fledged online businesses.

With e-Retailing Packaged Solution , you can establish your online storefront to sell
your products and services online. Your customers will have access to your storefront 24
hours a day, 7 days a week.

E-retailing offers the Storefront Service in its basic form or as part of a complete
package that has been carefully designed to accommodate all e-commerce requirements
including online payment, security and a range of other options which are a necessity to
run your e-business.
Storefront Service

Setting up your online business is easy with E-retailing storefront service that enables
you to design and build dynamic online shop fronts with a unique look and feel.

The Storefront comes with extensive pre-defined, customizable template-sets. These

templates include pre-designed page layouts, heavily tested and streamlined process-
sequences, and pre-programmed functionality for catalog presentation, product
presentation, member registration and checkout, member login and password verification,
search-engine interfaces, shopping baskets, promotions and special offer pages and more.

58
The Sites consists of:

The Store Front: This module is the customer side of the storefront where customers
can browse for products, put items in the shopping basket, register and buy online. The
look and feel of the storefront is completely customizable.

The BackOffice: This module is where the shop owner/ administrator manages the daily
online business. The back office consists of seven virtual managers which are the Catalog
Manager, Product Manager, Inventory Manager, Purchasing Manager, Customer
Manager, Order Manager, Settings Manager and System Administration. All these
managers work in unison.

Web Based Management: Managing your online business is done through a web
browser. All customer information, product information and order information, …etc.
required by a merchant can be accessed and updated from the storefront back office
through a web based interface.

E -retailing Usage

Source: TNS Interactive-Global E-Commerce Report 2002

Percent of Adults Using at Least Once in Prior Month

11. Denmark – 63%

22. United States – 62%
33. Netherlands – 61%
44. Canada – 60%
55. Finland – 59%
66. Norway 58%
77. Australia – 53%
88. Singapore – 52%
99. Korea – 52%
1010. Hong Kong – 50%

59
 1111. Ireland – 46%
1211. Taiwan – 46%
1313. Belgium – 44%
1414. Israel – 42%
1515. Germany – 41%
1616. Estonia – 39%
1717. Great Britain – 38%
1817. Italy – 38%
1919. France – 37%
2020. Spain – 29%
2121. Czech Republic – 28%
2222. Slovak Republic – 24%
2323. Malaysia – 21%
2424. Turkey – 20%
2525. Lithuania – 18%
2625. Mexico – 18%
2725. Poland – 18%
2825. Thailand – 18%
2929. Latvia – 17%
30 30. India – 16%

E-retailing Websites & key Findings

In this whole project the websites are taken by “convenient sampling” methods. Here
mainly six sites have taken to compare them on various aspects according to their needs.

This Task is so exciting that we can have an opportunity to evaluate the retailing sites of
India on the basis of below listed factors.

60
 Factor-1 (Product Categories)
Ebay Futurebazaar Pantaloon Magicbrics Yatra India
retail retailing
Apparel & -- -- -- ● ● --
Accessories
Books & -- -- -- ● --
Magazines
Cameras & -- -- -- ● ● --
optics
Cars&bikes -- ● ● ● ● ●
PCs and -- -- ● ● ● --
Peripherals
Electronics -- -- ● ● ● --
Fitness and -- -- -- ● ●
Health
Utensils -- -- ● ● ● ●
Tools & -- -- ● ● ● --
Hardware
Kitchenware ● -- ● ● ● ●
Beauty & -- -- -- ● ● --
Personnel
Care
Home décor -- -- ● -- ● --
& Furniture
Mobiles -- -- ● ● ● --
Movies & -- -- -- ● ● --
Music
Jewellery -- -- ● ● ● --
Toys & -- -- -- ● ● --
games
Travel -- ● ● -- -- ●
Watches -- -- -- ● ● --
( -- means “Yes” , ● means “No” )

4.3 Factor-2 (Payments System)

61
 ebay Futurebazaar Pantaloon Magicbrics Yatra India
retail retailing

Credit
Card Yes Yes Yes Yes Yes Yes

Online
Bank Yes Yes Yes Yes No No
Transfer

Cheque/ No No Not Yes Yes Yes

DD Known

Cheque
on No Yes Yes Yes No No
delivery

Factor-3 (No. of visitors of the day)-Exposure

ebay Futurebazaar Pantaloon Magicbrics Yatra India
retail retailing

Reach/ High High Low Low Low High

62
 Day

Factor-4 (Delivery Systems)

Ebay Futurebazaar Pantaloon Magicbrics Yatra India

retail retailing

Courier Yes Yes Yes Yes Yes Yes

Post No Yes Yes No No Yes

Sometimes

Door to At nearest Yes Yes Yes No Yes

door Place

Factor-5 (Layout of sites)

eba Futurebazaar Pantaloon Magicbrics Yatra India

y retail retailing

Excellent √ √

63
 Good √

Average √

Poor √ √

How to make and maintain E-retailing sites?

It Looks So Easy

“All I have to do is put up a web site that offers a good product, sit back, and watch the
money roll in! After all there must be enough people in a world wide market who want to
buy my product to make E-Retailing the direct route to wealth, free time, and early
retirement”. If it were that easy there would be a lot more people basking in the sun at a
beachfront condo (or wherever your dreams take you). Successful E-Retail companies
have a real story to tell. They will tell you that it takes years of hard work with a
combination of the entrepreneurial spirit, careful business planning, and maybe even a
little luck. In this publication you will explore your entrepreneurial skills, the preparation
requirements, the commitment, the costs, the scammers, and the reality of success. For
additional background information, request the SBDC guides, "Developing a Marketing
Plan”, “Web Site Creation: Design & Build Your Web Site”, “E-Marketing: Advertise
Your Web Site”, and “E-Commerce: Selling on the Web.”

Know Yourself

Owning your own business can be a rewarding experience; the profits, the independence,
and the lifestyle. From creating a vision for your business to the day to day operations
you have the ultimate authority in the decision making process. However, there are also

64
many challenges that come with the operation of a business, whether it is a brick and
mortar operation or a web-based E-Retail business. As an entrepreneur you must be able
to deal with the rigors of hard work, day to day stress, and the risk of failure. Johnny
Hart, author of the B.C. comic strip defines an entrepreneur as “a person who does
everything he can think of to keep from getting a job.”

Successful entrepreneurs typically have four main characteristics; need for achievement,
willing to take risks, self-confidence, and a passion for the business. A self-evaluation
will give you a good indication if you meet the initial requirements as an entrepreneur. Of
course, there are always exceptions to every rule but these are very good indicators. In
fact, the fourth characteristic, a passion for the business may be the most important. It
indicates a willingness to make the commitment to hard work and the tenacity to succeed.
The entrepreneurial process can be divided into a series of steps:

1. Deciding your are an entrepreneur

2. Deciding whether to buy or start a business

3. Define the business with a business plan

4. Operate the business

5. “Harvest” or sell the business

E-Retailing and e-commerce have distinct advantages and disadvantages for both the
seller and the buyer. The following chart highlights both:

Advantages for E-Commerce Seller Advantages for E-Commerce Buyer

Increased sales opportunities Wider product availability
Decreased transaction costs Customized and personalized
information and buying options
Ability to operate 24/7 Ability to shop 24/7
Ability to reach narrow market segment over Easy comparison shopping
a global market
Increased speed and accuracy of information Quick delivery of digital products

65
 exchange
Ability to maintain strong customer Ability to create a one-on-one
relationships with direct interaction relationship with the seller

Disadvantages for E-Commerce Seller Disadvantages for E-Commerce

Buyer
Rapidly changing technology Concern with transaction security
and privacy
Insufficient telecommunications capacity Lack of trust for unfamiliar sites
(bandwidth) in some areas
Difficulty integrating existing systems with e- Inability to touch and feel products
business software before purchase
Problems maintaining security and reliability Unfamiliar buying process using
electronic money
Global market issues of language, politics, and Complicated legal environment
currency conversion
Increased instances of failure to pay or fraud Return policies that are difficult to
understand

The first list includes some of the typical E-Retail business ideas. The second list
includes a number of things you can do with your web site. Hopefully both will give you
ideas to create a winning online business.

What to sell online

• Products that can sell cheaper

• Products that require consumer research

• Items that are hard to find (i.e., collectibles and specialty items)

66
• Products that appeal to tech-savvy users

What else can you do online?

• Increase brand or product awareness

• Enhancing corporate image

• Achieving market leadership

• Providing information and/or displaying samples of goods or services

• Generating a list of prospective customers

• Qualifying leads

• Building loyal relationships with customers

• Improving customer service

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• Gathering information about customer needs and preferences to guide future product
development

• Improving knowledge of customer demographics

• Testing consumer response to discounts or other special offers

• Finding strategic business partners, dealer, franchisees, or suppliers

• Recruiting employees, members, subscribers, or investors

• Saving money through automation, streamlined distribution channels, reduced cost or order
fulfillment, or smaller inventories

68
 Analysis
Environmental Analysis
The prerequisite for effective environmental analysis is to distinguish the vital from the
merely important. For the firm to make profit it must create value for customers. Hence, it
must understand its customers. Second, in creating value the firm acquires goods and
services from suppliers. Hence, it must understand its supplier and how to form business
relationship with them. Third the ability to generate profitability from value creating activity
depends on the intensity of competition among firm that vie for the same value-creating
opportunities. Hence, the firm must understand competition. Thus, the core of the firm’s
business environment is formed by its relationships with three sets of players: customers,
suppliers, and competitors. This is its industry environment.

The National / Demographic

International structure
economy
THE INDUSTRY
ENVIRONMENT

Suppliers
Competitors
Customers
Social Structure

Technology

Government and Politics

69
Government and Politics
FDI in retail: -
Even 50 years after the independents policy makers continue to be intolerant. Fears of
foreign imperialism have not yet drawn away and continuing to be a barrier for the entry of
foreign enterprises. Since 1991 a number of breakthrough were made in liberalizing the
policies for foreign investments every policy decision has been influenced by foreign
imperialism.

India has opened almost the entire manufacturing sector to FDI including the most sensitive
defense equipments.

Furthermore the recently constituted export committee on FDI has recommended further
opening up of such areas as real estate to FDI. But ironically a less sensitive and significant
contributor to economic growth retail trade has been excluded from the liberalization’s list.

The panels appeal is that foreign funds may affect the small firm’s existence endangering
employment opportunities. It looks as if there is a disconnect between policy makers
perceptions and global FDI trends as also the structural changes in the economy.

Accounting for over 8 percent of the GDP in the West, retail business is the largest private
industry ahead even of finance and engineering. Over 50 of the fortune 500 and about 25 of
the Asian Top 200 companies are retailers. Thailand and Indonesia, which were affected by
currency instability, pepped up the deregulatory measures to attract more FDI in retail
business. Japan under a prolonged recession and extended downfall in domestic investments
abolished its Large scale Retail Store Law to Attract FDI.

In contrast the organized retail business in India is very small. This is despite the fact that
India is number emerging market for retail business. Retail business contributes around 10-
11 percent of GDP. It amounts to about $350 billion market and Six times biggest than

70
Thailand and Four –Five times bigger than that in South Korea and Taiwan. India also has
the largest number of retailers, about 12 million though they mostly small.

The significance of the retail business has increased with the fast growth in the service sector.
There has been a dramatic change in the economy’s structure post liberalization.

It is ironic that while FDI has become an important instrument to revive sluggish economies
India opens up sectors with little potential for such flows. It must realize that FDI is a very
competitive market.

Much of the rapid growth in organized retail business in the developing countries is due to
the entry of global retailers. In Thailand, seven of the world’s top 10 retailers have made
significant investments Carr four, Casino, Marko, Royal Ahold, Jusco have set up shop in
Thailand. In China, three of the top 10-globle retailers have made investments. Such as Carr
four, Wal Mart, 7-Eleven and in Brazil three top global retailers share about 30 percent of the
retail market.

Competition is growing in the retail business and super stores are being set up, in the rural
areas, customers are entirely at the mercy of retailers. Things had begun to look up since the
late 1990s, with a boom in the consumer durable industry, and improved services. With
rising income and changes in life style, demand for better products became insistent.

Big industrial houses, such as Tatas, RPG group, Piramal group, Reliance group (Mukesh
Ambani), Aditya Birala group, Mr. Sunil Mittal (Bharti) realizing the potential of the retail
business, are now rushing for a place in this segment.

Over the last five years, these groups have set up a number of chain stores. For instance,
Westside by Tatas, Foodworld by RPG, Shoppers Stop (Rahejas), Future group and among
the entire players Reliance is leader in organized retail. Organized retailing is also emerging
as an important gateway for the sale of food products. In Chennai, about 17 percent of food

71
sales flow through supermarkets. In the metros, most women have shifted to supermarkets
from street corner grocers.

India offers vast potential in retail business and this potential must be fully realized by
exploited by making the country an attractive destination for FDI.

THE FOLLOWING WOULD BE THE BENEFITS OF FDI IN RETAILING:

 An important growth sector of the economy.
 Attract significant inflows of capital.
 Generate employment.
 Increase efficiency and competitiveness to the benefit of the consumer.
 Bring best management practices and access to world- class technologies.

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Economy

Per Capita Income

The per capita income of India in the year 2004-05 was $400 approximately, which has
increased to Rs. 29,382 in the year 2006-2007 on 31 may 2007. This is a positive sign of
India moving onwards a developed economy. Among with rise in per capita income of Indian
consumers the standard of living is also increasing. The purchasing power has also increased
considerably, leading to more spending to more spending on various products. It is the
mentally of Indians that they spend majority of their income in the food and hence the food
retail sector has seen at tremendous growth lover a period of time.

Dual working Families

It has been witnessed that the no of. Families where both husband and wife are working is
constantly increasing. In family where both husband and wife are earning will bring income
as compare to single working family. This would result in more spending on various goods
and services, which will make life convenient and easy.

Supporting Facilities
Nowadays banks are providing loan at very low interest rates and in some cases the interest
rates is nil. This helps consumers to buy the required products when ever they wants even if
they don’t have money ready in hand as a result of this people of this people do not hesitate
to spend small and big amounts on various products right from music system to a house. This
has resulted in fast buying decisions.

Social

Buying Habits
The buying habit have changed are still changing. Bulk buying and storming of goods is
becoming common now days. People have become aware about the availability of products.
Customers have now been able bifurcate different products suitable for its users i.e. for a
product like toothpaste customers are buying different toothpaste for kids and different

73
toothpaste for the elderly ones. Proper usage of product has also been understood and
applied. The customers have now become able to judge as to what price should be paid for a
particular product. i.e. whether a product is worth paying for the price asked. In the past
customers where more brand loyal towards products and the conditioning was such that they
would not even think about to change the brand of the product being used by them but now
things have changed. People are readily accepting new things and have not restricted to use
the same products.

Changing Culture and Preferences

The culture and the habits of the people are changing now a day. There has been a deep
impact of western culture in India. People now free adopting western culture, which is based
on, convince i.e. buying goods in bulk and then storing it, fast-food, nightlife, people have
started buying branded goods, customer do not hesitate to spend more for qualitative goods,
spending more on products which makes life easy-microwave, washing machine, eating out
in hotels and restaurants, people consider shopping as an experience, involvement on
selection of goods keeping in mind the quality, benefit and convince. All of the above
changes in cultural preferences have given a huge opportunity for the retail sector to grow.

Physic of Indian Consumer

The physic of Indian consumer, which had many barriers, is now braking up and people are
readily accepting things. Previously it was a psychological barrier in the minds of consumers
that the more big, decorated and very well lighted a store is the more costly it is but this
barrier has been broken by outlets like Big Bazaar, V Mart, Metro etc. Even people from
lower middle class have started visiting and buying from such outlets. Word-of-mouth has
increased the people influence & people more want the branded goods.

Standard Of Living
There has been a massive increase in the per capita income of the people of India. This has
ultimately resulted to an increase in the standard of living of Indians. Consumers are more
and more buying products, which make life convenient and easy. The sale of consumer
durables, spending on food and clothing etc. has increased to considerable extent. This has
resulted in an overall raise in the standard of living of Indians.

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Customer Centric Focus
Retailers have started being customer centric and are focusing more and more on consumer
needs and convince. Efforts are continuously being made to provide more and more facilities
to consumers to make shopping a convenient and a good experience changing trends, culture
and preferences of consumers are constantly being monitored to keep up with customers’
expectations. Home deliveries, shopping thought credit cards, buying on installments, easy
loans. Are fall efforts made in this direction?

Technological
Modern technology is one of the most powerful assets for a business. Moreover so for a
retailer dealing with multiple products, a chain of stores, various vendors, served warehouses,
hundreds of employees and thousands of customers with sophisticated systems., a retailer can
make each of its processes simpler, smoother and fast resulting in a super efficient enterprise
offering the best range of merchandise and superior service to its customers. Indian retailers
have been spending more and more in setting up IT systems and, importantly, plan to hike up
their investments in this area in the future. Retailers are also looking beyond basic expenses
to higher levels of it functionalities. This chapter presents the findings of the ‘State of Retail
Technology in India’
Behind every successful retail store there is a reliable and efficient information technology
system. Modern technology has the ability to improve and make more efficient each function
of the retail businesses. Retail needs IT for all core processes planning, ordering, sales,
finances, human resources and so on. The reason behind it is the complexity of issues
involved.
• Which good are moving and which are not
• Are the vendors supplying goods on time?
• Which goods are available at the warehouse and what needs to be ordered?
• What should be ordered in the next season?
• Whish customer is buying which products
• The financial performance of the company
• Managing the employees of the organization
• How provide fast and efficient customer service.

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  IT links the various areas of the retail businesses into an integrated structure
and helps the flow of information across he organization. After all, this is
what successful retail is all about-skillful managing several contact points
both at the front and the back end without integrated systems the retailer may
be unable to get timely information, which is the key to future purchases for
the store.
 Each of these challenges can be met by employing suitable software and
creating bridges between them to integrate the entire organization. The chief
software requirements of a retail enterprise are:
Merchandise planning and management software:
This is typically an ERP and business intelligence package that generates data on what is
moving at that store level, analyses the data and helps in the planning process. Typically, the
planning or business intelligence software mines the data generated by the ERP and helps in
the future planning process.
Vendor management software:
It deals with the entire process of vendor selection evaluation and transactions. This software
needs to be linked to the ERP for best results.
Outsourcing:
Like international retailers who resort to third party vendors for most of their maintenance
and enhancement work, RMC’s study seems to indicate that Indian retailers also have tried
bulk of their IT activities.
Companies are looking at outsourcing since it helps free up critical resources for core
functions. Lack of internal expertise is another reason.
Significantly, availability of standard applications is cited as one of the main reasons for
outsourcing. These points to the popularity of best –of-breed package applications among
Indian retailers.
Logistics and warehousing software:
It links the transporters and warehouses to the ERP. This software generates auto
replenishment notes, helps in storage of goods at the warehouse and also offers the best
logistics solution for goods transportation.

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Demographic
Age:
Product needs and interests often vary with consumer’s age. Different age of people have
different kind of product needs. Right now organized retail has mostly of young customers
(between 18-25 ages) and middle age customers (between 26-45 ages). Purchase of goods by
young and middle age customers are mostly different. Young customers buy apparel
accessories and footwear whereas middle age customers buy food and grocery products. In
case of kinds they demanded school bag, stationary and chocolate. So we can say that role of
age is very important for consumption of organized retail product.

Young population with high disposable income

India has the lowest median age of 24 years, for its over 1,000 million strong population,
among the other highly population countries. Thus India has the largest ‘young’ population in
terms of sheer size and this young segment is the major driver of consumption as they have
the ability (disposable income) and willingness (consumer confidence) to spend. Most of
such upwardly mobile consumers have little personal time and they seek greater variety and
availability of items under a single roof and give highest preference to convenience, which is
the basic proposition of modern retailing formats.
The brand-conscious young population forms the largest segment of demand for the majority
of retailers. This segment has grown 3.22% per annum over the past decade, compared to the
overall population growth of 2.13% per annum.
Gender:
Some products and services are quite naturally associated more or less with male or female.
For instance, women have traditionally habits of more shopping in comparison of the male.
Marital Status:
Single customers and married customers have different need of product. In organized retail,
married women buy a product for entire family so they buy number of products. Where as
single person buy a limited product. In today scenario, numbers of working couple are

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increases. So, they want to buy all products from one place. Because most of time they are
busy in their job. Working married women buy more number of products for their family. So,
marital status is important for organized retail.
Changing age demographics in India

Income:
Now a day’s income of Indian people is increases. So they consume more. Income have
directly related with purchasing power. More income means more purchasing power. Today
consumer mind set is totally changed, they spend more, and save less. So, more income of
consumers means more business of organized retail.
Education:
Educated people of big cities like to go for shopping in organized retail. Because good
shopping experience, and more variety available at organized retail outlets.
Occupation:

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 Professional and white collar level jobbers are mainly go to shopping at the end of the weeks
and they buy in the bulk. Actually they go for shopping as well as for the entertainment. So,
occupation factor affect the organized retail.

SWOT Analysis
S-W Analysis
The S-W analysis refers to Strengths and Weaknesses of the industry. Here we have compare
the Indian organization Industry with International Organized retailing Industry. The
comparison will give idea about where the Indian industry as compare to the World
organized retail industry. The S-W of the Indian Organized Retail Industry is discussed as
below:
5.2.1 STRENGTH
• Low Labor Cost:
The labor cost in India is one of the lowest in the world. Wage rates are very low for the
labors which make the production cost lower than the production cost in the other
country. Foreign players can’t afford the product at such lower cost, which will directly
affect to their profitability.
• High availability of space:
There is huge space available for setting the retailing sector in any place of India.
• Technology:
Though India has low technology than Europe still it is sufficient to make organize sector
booming.
• Developed Economy:
Due to highly developed economy, Indian retail have still biggest chance to capitalize the
market because increase in people spending.

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WEAKNESSES
• Access to the New Technology:
International organized retail is already grown and they are using the latest technology
for their operations. Where the Indian organized retail is at the introduction stage and it is
difficult to access the new technology. The technological expertise is also required to
access this technology.
• Untrained Workforce:
The most important asset of the organization is the workforce of the company. Trained
workforce is a precious asset of the company. As the Indian retail industry is at the
growth stage so the trained workforce will be required for this industry. International
industry has the train workforce. They are giving the training to their workforce.
• Poor infrastructure linkage:
The infrastructure in India is poor as compare to foreign industry. Good infrastructure is
required for any of successful industry. Foreign players are using the very infrastructure
in terms of technology and other facilities.

OPPORTUNITIES & THREATS

Huge potential to grow:
Even though India has well over 5 million retail outlets of all sizes and styles (or non-styles),
the country sorely lacks anything that can resemble a retailing industry in the modern senses
of the term. This presents international retailing specialists with a great opportunity. It was
only in the year 2000 that the global management consultancy AT Kearney put a figure to it:
Rs 400000 crore which will increase to Rs.800000 crore by the year 2005 an annual increase
of 20 percent. Retailing in India is thoroughly unorganized. There is no supply chain
management perspective. According to a survey by AT Kearney, an overwhelming
proportion of the Rs. 400000 crore retail markets are organized. As much as 96% of the 5
million-plus outlets are smaller than 500 square feet in area. This means that India per capita

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retailing space is about 2 square feet (compared to 16 square feet in the U.S.). India’s per
capita retailing space is lowest in the world.

Opportunity of business in Small Towns

A peculiar aspect of organized retail outlet retails can be seen is they are found in big citied
in a particular locality only their lies a huge opportunity for such organized retailer to
establish their business in small developing town where there is a dominants of only
unorganized retail shop in organized outlets just because they have no options as there is no
existence of such organized retail outlets in small towns and cities.
Exposure to international lifestyles
The Indian consumers are getting increasingly exposed to international lifestyles. This can be
attributed to the impact of globalization which has removed trade barriers and promoted
consumerism. As a result, there is greater acceptance and demand for renowned brands. Most
of the leading world brands like Levis, Pepe, Lee, Arrow, Nike, Reebok, Hugo Boss, Ray
Ban, and Parker are now available in India.
Drivers of Growth in Organized Retailing
The country is experiencing certain socio-economic changes which would fuel the growth in
organized retail. Some of the key enabling factors are higher affluence levels, increased
purchasing power of the average Indian consumer, changing demographic and aspiration
factors of the Indian population and real estate developments across the country.
Changing consumer requirements and lifestyles
Over the years, the consumer awareness has increased on the quality and the price of the
products/services expected owing to the increasing literacy in the country and the exposure to
developed nations via satellite television or by way of overseas work experience. Consumers
are more vocal about the quality of the products/services that they expect from the market.
This awareness has made the consumer seek more reliable sources for purchases and hence
the logical shift to purchases from the organized retail chains that have a corporate
background and where the accountability is more pronounced. The consumer also seeks to
purchase from a place where his/her feedback is more valued.

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P’s of Organized Retail Industry
Place:
Location is a crucial factor for success of retailing. This is because customers for the sake of
convenience often resort to purchasing from convenience shops in their locality. This is the
major challenge for the organized sector where they should aim to attract these customers to
attract these customers to their outlets. Facilities of parking should be appropriate so that
customers can park their vehicles and load the shopped items conveniently into vehicles .The
location selected should have enough space easily available so that if in future if the retailer
plans to expand his outlet he can do so without any hassle.
Personalization:
Service is a differentiator in the retail industry. It is essential to manage the customer better
and to keep him around for a longer period of time. The potentiality is that his basket size
could increase and also ensure a next visit. Knowing customer individually by name and
profession, identifying his needs, helping him get and select his products goes a long way in
procuring a customer, retaining him and converting him into a loyal and lifetime customer.
Therefore the need is to build a retail talent. Adequate investment has to be made by the
retailers in educating and training for development of managerial and skilled retail staff who
would win over customers simply by their conduct.
Product and product offering:
Customers look for a wide assortment of products-branded as well as non-branded. Quality
and other attributes of the product play a major role here. Hence the products should be in
accordance with the customer’s perceived quality. Further, they show preference for
freebies, discounts etc. this is one effective way through which a retailer can attract
customers. Therefore to generate interest and keep interest alive apart from the product,
various kinds of loyalty programs, festive offers, etc. should be introduced so that the
customers keeps visiting and shopping on a regular basis.

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Price and efficient management of the supply chain:
Though, drive towards spend is on rise, consumers do look forward for value for money. In
the current scenario Indian customer’s desire for an ideal location, slush interiors, but is not
willing to pay even a bit more. Whether it is the metros or the non-metros, customers are
found to be price conscious and look for value for money and weigh decision before
committing to purchase. There has been a very prominent incident of an international retailer,
which outsmarts other established retailers simply on the basis of price. This is the case of
Wal-Mart, which beat K-mart simply by varying their price as much as 25 percent.
It is utmost important for a retailer to reduce its costs as much as possible because at the end
it is the final consumer to whom the costs are transferred. Hence through effective supply
chain management, managing inventory levels and reducing other administrative costs helps
to reduce the selling price of the product, which is the major attractor for a customer.
Physical evidence:
In the age of product parity, ‘selling ambience’ has become a key strategic element for
effective differentiation, successful retailers have customer-centric approach in designing and
creating internal as well as external ambience. They explore the opinions to prolong the stay
of shoppers in their store or mall. The important idea is to make shopping a social
experience.
Hence to cope up with the differentiation strategy in context with ambience some of the
factors play an important role. They are good interiors where customers can get to see better
display of products, store space for convenience, attractive solours of the walls and furniture,
friendly approach of the staff, Illumination and lightning. Even the external ambience plays
an important role which includes window displays, convenient parking facilities, gaming
zones, food courts and ATM’s are also a part of external ambience.
Perceived quality:
Customers now a day have become more quality conscious and over a passage of time have
learnt to differentiate between various qualities of a product. Consumers do not hesitate to
pay more in return of goods with excellent quality.

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It has become a general perception among the consumers that the goods sold in organized
retail outlets are always qualitative and such outlets are bound to deliver qualitative goods
along with a qualitative service. The bigger the name and the outlet is the more qualitative it
is – this as become a generally acceptable statement now a day. Hence for organized retail
outlets this becomes a challenge as well as opportunity to attract and retain customers. The
moment a retail outlet fails to deliver qualitative product or services, the chances of it doing a
good business, reduces instantly. In the long run only the player, who has the ability to
provide qualitative goods and service consistently, wins.
Process management:
The importance of process management is that it assures product and service availability and
consistent quality. Without sound process management, balancing product and service
demand with product and service supply is extremely difficult. Some of the issues concerned
with process management are process planning and control, operations planning, facilities
design, scheduling, inventory planning and control, quality control, operations control,
forecasting and long term planning. All these issues are involved in organized retailing as the
qualitative to be dealt in generally large while on the other hand customer’s expectations
regarding product and service quality is also high. Hence it becomes extremely important to
design and work with a sound process management.
People:
“Employees represent the organization to the customers”. No matter how large a store is,
how branded goods it sell, how big its name is, unless it employees are not properly trained
its success would always be a questions mark. After all it is the employees with whom the
customers are going to react. Right knowledge about the products, good manners, helping
nature and smiling faces is what the customers expect in a retailing business. Based on these
qualities of employees an outlet would be able to bring in customers.
Private Label:
The big supermarkets in the country, offer the own private labels. The names sound like
they’ve been taken from a WWF programme sheet. There’s Vittorio Frattini, Kashish, John
Miller, Ventiuno and tough sounding Stone River Classic. They are private labels that are on
sale at the country’s major retail chains. The country’s fast-emerging retails chains have a

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cast cornucopia of established brands to choose from. Increasingly, however, they are filling
their shelves with in-store or private labels.

From Shopper’s Stop and pantaloon to RPG enterprises’ Giant, Food World, Ajay Piramal’s
Pyramid and Delhi based Ebony Retail; they are all readying with the private labels to jostle
with the giant brands on sale. One of the first to embrace private labels was Westside, run by
Tata Group of Companies.
Because of Private Label company profit margin increases if percentage sale of Private Label
is more in total sale. Private Label is cheaper for customers compare to branded product but
quality is question mark. But in case of good stores they offer good Private Label product
with value for money. In Private Label Company save advertising cost and good packaging
cost so they able to sell lower price compare to branded product.
Pros & Cons of Private Label
Advantages Disadvantages
To the Customer  A guarantee of the Same  Low quality product
quality for a serious Customers may have
price differentiation; prejudice to low price

 More Variety with in the equaling low quality;

category; and and

 A trusted retail name  Previous customer

equals trust in the failures could affect the

product whole private range in a

store, e.g. if their cereals
aren’t good, then their
jam will be the same
To the Retailer  reduce Producer (of  A negative backlash on
national brands) their image;
domination in the  Lack of Standardization
market place; of private labels between
 Create more dependence categories upsets the

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 on the retailer by the customers; and
consumer;  Low price equates to
 Customer sales increase; low quality.

 Customer loyalty in a
situation where you can
avoid comparisons;

 Positive image building;

 More freedom in pricing
strategy; and

 Better bargaining
position in a depressed
economy
Many company having its own Private Label for product, below table show the selling of
Private Label in total sales or their company.

Share of Private Label in Total

Sales (%)
Retailer
Nilgiris 50
Foodworld 20
Subhiksha 20
Lifestyle 20
Foodland 15
Ebony 25
Shopper Stop 22
Globus 60
Ebony 15
Life Style 8
West Side 94

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 Source:KSA technopack-2007

5.5 Key Success Factors of Retail

Industry

MRP Differential Private Label & Brand (Rs.)

Cost MRP (Private Label) MRP (Branded)
Shirt 375 750 1095
Trouser 450 950 1250

Here we develop more comprehensive analysis of competitive advantage. Our goal is to

identify those factors within the firm’s market environment that determine its ability to
survive and prosper-its Key Success Factors.

Prerequisites for
Success
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 How does the firm survive
What Do Customers Want? the competition?

 Low prices  Markets localized

 Convenient location  Intensity of Price competition
 Wide range of products depends on number and proximity
adapted to local preferences of competitors
 Fresh/Quality Produce;  Bargaining power a critical
Good Service; ease of parking; determinant of cost of bought-in
pleasant ambience goods

Key Success Factors

 Low cost operation requires
operational efficiency, scale
efficient stores, large aggregate
purchases to maximize buying
power, low wage costs

 Differentiation requires large

Our approach to identifying key success factors is straightforward and common sense. To
stores {to allow wide product
survive and prosper in an industry, a firm meets
range}, convenient two criteria:
location, easy first, it must supply what
parking
customer’s wants to buy; second, it must survive competition.
In answer the question of what do customers want? We need to identify who its customers
are, what are their needs, and how they choose between competing offerings. If the
consumers’ choice of supermarkets is based primarily on which charges the lowest prices,
convenient location, wide range of product adapted to local preferences, and fresh quality
produce; good service; ease of parking; pleasant ambience.

88
In answer the question of how does the firm survive competition? In this intensely
competitive market, survival requires-strong financial position and market localized,
intensity of price competition depends on number and proximity of competitors, and
bargaining power a critical determinant of cost of bought-in goods.

A basic framework for identifying key success factors in retail industry is low-cost
operation requires operational efficiency, scale efficient stores, large aggregate purchases to
maximize buying power, low wage costs, and differentiation requires large stores(To allow
wide product range), convenient location, easy parking.

Now it is necessary to depict the result of these analyses on figure formats. Next chapter will
show you the major findings in short & sweet.

Major Findings and Contribution

Indian Organized Retail Industry is like Mine. But From this we have chosen the Diamonds,
which means our findings are
From the Environmental Analysis we find that
¥ The government frames the policy of foreign direct investment up to 51% in
single brand retailing.
¥ In Demographic factor analysis we find that India has highest young
generation population in the world.

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 ¥ In Economic retail factor analysis we find that Indian Retail Industry grow 25-
30% annually.
¥ Indian Retail Industry Contributes 10% of the GDP
¥ Per Capita Income has increase so it affects people’ purchasing power.
o Retailers are promoting private labels for getting higher profit margins.
o From the BCG Strategic Environment Matrix analysis we find that in volume
type industry consist of super market.
o In Stalemate type of industry consists of convince store.
o In Fragmented type of industry consists of jewellary and apparel retail
o In specialization types consist of book and furniture retail
o From the porter 5 forces analysis it indicate that industry attractiveness is high
which is find from
¥ Rivalry among existing competition is moderate to high which is 3.40
¥ Potential entry of new entrants is below the moderate it is 2.85
¥ Substitute product availability force is moderate to low 2.60
¥ Supplier bargaining power is moderate to high which is 3.70
¥ Buyers bargaining power is moderate to high which is 3.50
o From the industry attractiveness key success factor analysis we have find the
retail industry’s key success factor are low cost operation, scale efficiency stores,
maximize buying power, low wages
o In differentiation requires large stores(which is allow wide product range) and
Convenient location ease parking

Limitation
The following are the Research limitations:
• The research was limited with time and resources
• A generalized assumption about the entire organized sector has been made, based on
the data and information available of some companies and cities.
• All facts and figures are totally dependent on the surveys made by KSA Technopak,
AT Kearney and KPMG.

90
• On the lack of availability of data we, on the base of suggestions by academicians and
professionals have made some assumptions.
• Due to limitations of time and source we have restricted the research, covering only,
the organized sector and there by including only the leading segments like food, apparel,
grocery etc.

Future of Indian Organized Retailing

 The organized retail industry in India is expected to grow 25-30 per cent annually and
would triple in size from Rs35,000 crore in 2004-05 to Rs109,000 crore ($24 billion)
by 2010. However CRISIL has cautioned that organized retail sector will slow down

91
 to single digit growth after five or six years unless the industry brings in an
innovative ''India specific'' approach through expansion of the network.

 Organized retail to grow to such proportions an investment of approximately Rs3,100

crore per year was required in the country. The food and grocery were the fastest-
growing segments in the country, with revenues expected to grow by five times over
the next five years.

 The slow down in sales' volume after five years would result mainly from saturation
of demand in major metros, currently witnessing an annual growth rate of 25-30 per
cent due to surplus income of the young generation.

 Metros and mini-metros offer maximum scope for growth with six times more in
sales volume, as compared to tier-II cities. Hence, it is not necessary to expand the
hypermarket super mall to mini-metros and tier-II cities in the immediate future.

 FDI in retail was necessary to sustain the investment-linked growth but felt that the
approval of FDI from the authorities would come by the end of 2006 as in the
meantime this would allow domestic players to improve their position in terms of
business expansion and financial growth.

 Though food and grocery stores account for the largest share of retail spent by the
consumer at about 76 per cent, and nearly 99 per cent of this market is in the
unorganized sector. But according to this may change in the next few years as it is
estimated that food and grocery revenue in the organized retailing market would
multiply five times, taking the organized shares of the market to 30 per cent.

 The organized retail sector has maintained its unrelenting growth pace, with the top
five retail majors notching up a combined net sales growth rate in excess of 50% for
the second successive year.

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 With Reliance Fresh having started its operations and Bharti and Aditya Birla group
soon to join the fray, the retail mania is clearly continuing unabated. A GDP growth
of around 8% and a spate of festivals during the quarter have helped the case for the
retail sector.
 The value retailing segment now accounts for around 72% of the company’s turnover.
However, the growth has come largely from new outlets as the like-to-like (LTL)
growth rate stands at 25%. On the other hand, the lifestyle segment reported an LTL
store growth rate of 33%, a vast improvement over a growth rate of 17% reported for
the quarter ended.

 The fast-paced expansion, however, seems to have taken a toll on the operating and
profit margins for the company, particularly for the lifestyle segment. While the PBIT
margin remained constant for the value retailing segment, the lifestyle segment saw a
drop of one percentage point from 14.7% to 13.7%. The overall operating margin fell
to 6.9%, a drop of 70 basis points from last year, on the back of 144% rise in staff
costs. Shoppers’ Stop clocked the lowest net sales growth rate (34%) among the retail
majors. However, the company backed it up by an impressive 81% growth in net
profits owing to a huge improvement in its operational efficiency.

 The company took up its LTL growth rate to 25% from 17% last year, with a volume
growth of 14%. It notched a double-digit growth in operational parameters like sales
per sq ft and average transaction size. A loyal customer base accounting for 62% of
revenues and a private label mix of 22% also has helped improve its profitability.

 From 95 currently operational shopping centers with approximately 22-million square

feet space, India tohave over 375 shopping centers/ Malls covering over 90 million
square feet by 2007 end.

 50 hypermarkets, 305 large department stores, 1500 supermarkets and over 10,000
new outlets under construction.

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 Conclusion
The Indian retail sector is largely traditional, but stores in modern format are emerging. The
contribution of organized retailing in the share of retail sales in India is currently very small.
Based on an analysis of retail developments in countries such as Thailand, Brazil and Greece,

94
and some experience in India, it is possible to conclude that modernization of retailing in India
would be influenced by some important factors.

These factors include economic development; improvements in civic situation; changes in

consumer needs, attitudes and behavior; changes in government policies; increased investment
in retailing and rise in the power of organized retail. The development of modern retail will
have several implications for managerial practice in manufacturing firms. Firms will need to
proactively review their sales structures, brand activities, logistics policy and price structure to
cope with pressures from powerful retailers.

New avenues have been developing in he organized retail sector by way of introduction of
new business methods, tie ups and using advanced technologies to reduce the costs and at the
same time to deliver the best products and services to the customers, on time.

Most of the organized retailers are adopting the trail and error method and learning form
mistakes to develop an ultimate strategy that could make a fortune for them.

Organized retailers are adopting the methods used in foreign countries to effectively collect
and use this database in order to provide maximum customer satisfaction. Even new methods
of finding new or latent opportunities are always under process.

The Indian organized retail industry is a very attractive industry with absence of larger players.
The organized retail is only 3 % of the total retail industry, which is growing at rate of 25-30%
annually. Analysis shows the attractiveness of the industries is high. With the entry of world
class players, competitiveness of the industry has been increased.

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 BIBLIOGRAPHY
Books
 Thompson Arthur A. Jr., Strickland A J III, Gamble John E., Jain Arun K, “Crafting
and executing strategy” 14th Edition, Tata McGraw-Hill Publish Company Limited,
New Delhi.
 Grant Robert M., “Contemporary Strategy Analysis” 5th Edition, Blackwill
Publication Australia.
 Pradhan Swapna, “Retailing Management Text & Cases”, Tata McGraw-Hill
Publishsing Company Ltd. India.
 Bajaj Chetan, Tuli Rajnish, Srivastava Nidhi V., “Retail Management” Oxford
University Press.

Websites
www.retailbiz.com/retailhistory
www.about.com/retail
www.piramyd.com
www.futurebiz.com
www.pantaloon.com/bigbazaar/htm
www.rpg.com/retail
www.fnbnews.com/retailnews/html
www.rediff.com/news/retail/
www.fiber2fashion.com
www.provogue.com
www.shoppersstop.com
www.indiainfoline.com/retail/news/
www.appliance magazine.com
www.retailyatra.com

Research Article
AT Kearney’s Research on Emerging of Organized Indian Retail Industry
KPMG Research on Retail Opportunities
KSA Technopack research on Booming Retail Industry

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