Retail mgmt. notes

TYPES OF RETAIL STORES-Both organized and unorganized retailing is found in most countries throughout the world.India and China are strong examples of countries in which unorganized retailing dominatedtheir markets. Today these countries have a growing economy because of the influx oforganized retailers into their markets.In any country, particularly in developing & underdeveloped countries, we can fine 3 typesof retail like1.Organized Retail- Owned by a private or Govt. sector based on certain systematicprinciples. Examples- Big bazaar, Wal-Mart etc. They have license to sell the products andabide by the rules and regulation of govt.2.Unorganized Retail-They are owned by a private individual & based on the principles,but not owned by any private company.3.Grey Marketers- These are unauthorized small stores which are owned by any privateindividual. They do not have a particular shop. These stores are a biggest threat to bothorganized & unorganized retailers. Exa-roadside small sellers.In the developed economies, organized retail is in the range of 75-80 per cent of total retail,whereas in developing economies, the unorganized sector dominates the retail business.The share of organized retail varies widely from just one per cent in Pakistan and 4 per centin India to 36 per cent in Brazil and 55 per cent in Malaysia (Table 2.2). Modern retailformats, such as hypermarkets, superstores, supermarkets, discount and conveniencestores are widely present in the developed world, whereas such forms of retail outlets haveonly just begun to spread to developing countries in recent years. In developing countries,the retailing business continues to be dominated by family-run neighborhood shops andopen markets. As a consequence, wholesalers and distributors who carry products fromindustrial suppliers and agricultural producers to the independent family-owned shops andopen markets remain a critical part of the supply chain in these countries..RETAIL IN INDIA-The origin of retailing in India can be traced back to the emergence of kirana stores &mom& pop stores. These stores used to cater local people. Eventually the Govt. of Indiasupported the rural retail & many retail shops come with the help of KHADI & VILLAGEINDUSTRIES COMMISSION. The first few companies come up with retail chains were intextile sector in the year 1980.The companies are Bombay Dyeing Kumar’s, Raymonds etc.Later Titan launched retail show rooms in organized sector.If you will follow the above examples, there are great changes occurring in retail sector. Theretail industry is moving from an unorganized one to a organized one.The growth of the retail trade in India is associated with the growth in the Indian Economy.Gross domestic product (GDP) grew by an annual rate of 8 per cent. The internationalconsulting firm, A.T. Kearney, annually ranks emerging market economies based on morethan 25 macroeconomic and retail-specific variables through their Global RetailDevelopment Index (GRDI). For the last three years (2005, 2006, and 2007) India has beenranked as number one indicating that the Country is the most attractive market for globalretailers to enter. The high economic growth during the last few years raising disposableincomes rapidly, favorable younger population with less dependency, and demographicsplacing incomes on urbanization are some of the major factors fueling the Indian retailmarket.

ORGANIZED VS UNORGANIZED RETAIL STORES (WITH SPECIAL REFERENCE TOINDIA)-A.Advantages of Organized Retail in India-1.Enhanced Welfare Gains for Consumers- The emergence of organized retailundoubtedly gives consumers a wider choice of goods, more convenience, and a bettershopping environment, among other benefits. This is feasible because organized retail cantake several formats, from small neighborhood stores in densely populated cities with highreal estate prices to large air-conditioned malls in the periphery where real estate ischeaper. Organized retail can appear small but spread in all local markets, providing theconvenience of a neighborhood kirana store but with procurement on a mass scale thatkeeps prices low and provides greater variety.2.Gains for Farmers- Organized retail will result in a complete revamp of the agriculturalsupply chain in the country. A recent study by CRISIL has estimated a current annual totalloss of about Rs. 1,000 billion in the agricultural supply chain, 57 per cent of which is due toavoidable wastage and the rest due to avoidable costs of storage and commissions (CRISILResearch, June 2007). Organized retailers have already started procuring fruit andvegetables from farmers directly bypassing the various intermediaries who add more coststhan value to the food chain. They are investing heavily on logistics in the form ofcentralized warehousing and distribution centers, transport and cold storage, either directlyor through engaging third party logistics companies. They are also employing a largenumber of unskilled workers for sorting, grading, packaging and labeling. All these willenhance farmer’s realizations, improve quality of products at the shop and reduce theultimate consumer price.3.Link with Manufacturing-The Planning Commission has identified four sectors as themajor employment generating sectors for the Eleventh Plan period, 2007-12. They are: (i)food processing industry; (ii) textiles and clothing; (iii) tourism; and (iv) construction. Ofthese sectors, all except tourism are getting a fillip with the growth of organized retail.Again, the small and medium industry (SMI) sector is getting advantages with theemergence of organized retailers by becoming their suppliers. Modern retail will catalyzethe development of the SMI sector in the country.4.Boost to Exports- Organized retail’s link with exports comes through foreign players.International retailers look for sources around the world and a country in which they operatebecomes a source for their global sales. Some of the international retailers that have plansfor India in the future have already developed suppliers in the country and have startedexporting from India. For example, Wal-Mart exported an equivalent of US$ 600 million, andIKEA about euros from India in 2006-07.5.Impact on Growth and Productivity- Organized retail will enhance the growth andproductivity of India by helping the farmers, consumers and other sectors by providing highquality products.organized retailing will remove various inefficiencies that characterize the present Indiandistribution system, which in turn will provide better price for the farmers and suppliers onthe one hand, and lower prices for consumers, on the other.6.Improvement of Government Revenues- Another significant advantage of organizedretailing is its contribution to government revenues. Unorganized retailers normally do notpay taxes and most of them are not even registered for sales tax, VAT, or income tax.Organized retailers, by contrast, are corporate entities and hence file tax returns regularly.

The growth of organized retail business will be associated with a steady rise in tax receiptsfor the central, state, and local governments.7.Impact on Employment and Prices- The growth of organized retail will enhance theemployment potential of the Indian economy. While providing direct employment in retail, itwill drive the growth of a number of activities in the economy which in turn will open upemployment opportunities to several people. It may adversely affect employment inunorganized retail and the trade intermediaries associated with the traditional supplychannels but the additional jobs created will be much higher than those that are lost. Animportant point to be noted is that while the jobs that organized retail displaces are the low-end, low-quality, underproductive ones, the new jobs created are the high quality,productive ones. It also generates a number of jobs for unskilled labour for the tasks ofsorting, grading, labeling, etc.B.Advantages of unorganized retail –1.Employment Impact- According to ECR report, unorganized retail outlets employ morefamily labour than hired labour; on an average they employ 1.5 persons per shop from thefamily, and hired employees of 1.1 persons in India. It is a way of livelihood for Indianpeople.2.Location Advantage for the Unorganized Retailers- Location is a comparativeadvantage for unorganized retailers as the mean distance to the residence for consumers atunorganized outlets is 1.1 km compared to 2.6 km for consumers at organized outlets. Amajority of consumers walk to traditional retailers because it is convenience to reach.3.Credit Facilities- Consumers get credit facilities in small unorganized retail stores andcan make a deferred payment which is not possible in organized retail stores.4.Purchase of small quantities- It’s a typical attitude of Indians to purchase in smallquantities of various goods which they can purchase from small shops than organized retailstores.l. However, the following measures can be taken to solve the paradigm of organized andunorganized retail.1.Liberalization policy for domestic retailers to become organized retail.2. More credit facilities for rural unorganized stores to develop their stores.3. Proper regulatory body for unorganized retailers for establishing retail shops.4. Ceiling on prices by the govt. to control price level of different organized retailers againstpredatory pricing.5. Educating rural people and improving their standard of living.So, Indian retail requires a balanced strategy for organized and unorganized retail storesthat may be called as REORGANIZATION OF RETAIL SECTOR.

Retail mgmt. notes

by Paridhi Garg

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