Small v s-mall__2007


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Small v s-mall__2007

  2. 2. ACKNOWLEDGEMENTSuccess may be defied in many a ways as possible, but the main challenge lies inachieving it. In this road to success, many factors contribute, without which even the bestefforts would go in vain.Some call it luck, while the others call it fate. However, we would not call it just our luck.At this outset I would like to take pride to thank my respected project guide and thecoordinator (BMS department – NK College) Prof. Ms. MONA BHATIA and secondly,the principal of NK college Mrs. ANCY JOSE for their timely support who has inspiredus and motivated us to get this wonderful and brilliant work experience, without hervaluable guidance and support, the dream of making this project would never come true.Last but not the least; we extend our thanks to the almighty for all that happened withoutany hurdles or problems! 2|Page
  3. 3. Executive SummaryRetailing consists of all activities involved in selling goods and services to consumers fortheir personal, family or household use. It covers sales of goods ranging fromautomobiles to apparel and food products and services ranging from hair cutting to airtravel and computer education. Sales of goods to intermediaries who resell to retailers orsales to manufacturers are not considered a retail activity.The Indian retailing industry, which was traditionally dominated by small and family-runstores, has come of age. The retail sector is the second largest employer after agriculturein the country and also the second largest untapped market after China. There are some12 million retail outlets in India. Besides, the country is also dotted with low-cost kiosksand pushcarts. Organized retailing is only 3% of the total retail industry. Over the pastcouple of years there have been sweeping changes in the general retailing business.Indias retail sector is going to transform and with a three-year compounded annualgrowth rate of 46.64 per cent, retail sector is the fastest growing sector in the Indianeconomy. Traditional markets are transforming themselves in new formats such asdepartmental stores, hypermarkets, supermarkets and specialty stores.In the last few years, as modern retail concepts begin to make an appearance across urbanIndia, the debate on their impact on the traditional Indian retail businesses including theso-described "mom & pop" stores and the neighbourhood “kirana stores” gets shriller.Small Indian "Kirana" Shopkeepers Are Already Feeling the Heat from the Malls. Theopposition to large retail shops seems to be growing, and broadening to take in domesticretail chains as well as the international giants that want to enter the Indian market.Admittedly, such opposition flies in the face of the received wisdom: studies based onextensive field surveys have concluded that the spread of organised retailing will not hurtmillions of small mom-and-pop, or kirana, stores across the country. But the experienceso far (and it is early days yet) suggests that this may not be entirely true.News reports, including those published in this newspaper, have cited instances of smallshops closing down or losing business in areas where large retailers have set up shop.Analysts are still working out the odds on the kirana v/s organized retail major battle,vacillating between saying that the two sets of entities will co-exist happily, each servingdifferent needs and predicting doom for the kirana store, who perhaps would find thepace daunting. But only as long as the Indian consumer weighs his options in favor of thekirana – paying MRP at an outlet that’s a stone’s throw away versus paying better prices,but at the cost of a longer trip to the nearest retail outlet. In any case, most of India stillprefers to walk to the nearby kirana store for nearly everything! This will change if andwhen the biggies set up outlets in every other street, in every neighborhood – which theywill, if the numbers make sense. However, Kiranas has opportunities to grow in India inspite of the growth of malls because these kirana shops will also get benefit of thegrowing economy. The argument that the kirana shops will be affected by these malls isonly myth. Therefore both the malls and kirana stores can play simultaneously in India. 3|Page
  4. 4. IndexSr.No Contents Page No 1 Introduction 9 2 10-11 Evolution of Indian Retail Sector Phases in the Evolution of Retail Sector 12-13 3 Boom in Retail Industry 4 Growth of Retail Companies in India 14-17 The Growth Drivers 5 Key Players in Retail Industry 18-20 6 Retailing Scenario - Global 21-22 7 Retailing Scenario - India 23-27 8 Classification of Retail Industry 28 9 Traditional / Unorganized Retailing 29-40 Kirana / Small Local Stores Characteristics of Kirana Shops Significance of Kirana Stores Traditional Format Retailers Advantage of Kiranas SWOT Analysis of Kirana Stores Lots to learn from Kiranas Interview of Central Kirana Store Changing face of Kirana Unorganized Retailing is Getting Organized 4|Page
  5. 5. 10 41-57 Indian Organized Retail Market Origin of Modern Retailing in India Factors Estimated to propel the growth of the Organized Retailing Modern / Organized Retailing Formats Experimentation with Formats Challenges before Organised Retailing in India SWOT Analysis of Organized Market Top 10 retailers in India11 Malls – The new face of Retail Market 58-61 Advantages of Shopping Malls Disadvantages of Shopping Malls The trends to follow in future Small is Big for Indian Retail12 The Retail Dictatorship v/s Retail Democracy 62-6313 Articles Supporting the Inevitable Fight 64-68 Bid to Stop Big-Fish Entry in Retail HLL teams up with Kiranas to fight malls Local vendors throws the gauntlet to Reliance Fresh, Subhiksha Supermarkets v/s Indian mom-and-pop shops14 Survey Analysis 69-7715 Kirana Stores v/s Super Markets 7816 Case Study 79-8017 Conclusion 8118 Appendix 8219 Questionnaire for Survey 83-84 5|Page
  6. 6. Objective of the StudyThe purpose of this study is To understand the concept of retailing. To understand the retail market To understand what is organised and unorganized retailing To study the current status of malls and kiranas To study the effect of shopping malls on Kiranas To understand consumers’ preferences between shopping malls and local stores 6|Page
  7. 7. RESEARCH METHODOLOGYMarketing research is useful to: Launch a new product or service or Facility Determine marketing opportunities Solving the problem Effectiveness of ad-campaignThe success defines co-ordination between Research and management. The researchinvolves a no. of interrelated activities which overlap and do not rigidly follow aparticular sequence. The major steps involved in marketing research process are: 1. Formulation of problem:A problem well define is half solved. To identify research problems are of 3 types: Overt difficulties: are those which are not hidden. Latent difficulties: Which are not so hidden but if not checked would soon become evident. Unnoticed opportunities: once the 2 or more problems are identified the next is to decide which of the problem is to be selected.Formulation of problem: Unit of analysis: The study of small v/s mall as a business, its characteristics, problems, functional areas, growth etc. Time and space boundaries: The study of small v/s mall workings in India from its existence in India till today. Characteristics of Interest: to understand the workings and business practice of small v/s mall Environmental condition: SWOT analysis etc. 2. Choice of Research Design:It is a Descriptive Research which is undertaken to know and understand thecharacteristics of small v/s mall. The collected data are of secondary type. The collecteddata is framed in a presentable and analytical form. 3. Determining source of data:The data presented are both of primary and secondary type. 7|Page
  8. 8. 4. Designing Data Collection Forms:Observation: The data are collected through own observation. The observation and dataare recorded faithfully and accurately.Survey: The primary data are collected from fields survey through questionnaire from therespondents. 5. Determining sampling design and sample size:The project started with sorting all the raw data and arranging them in perfect order. Toadd value to the project and understand the practicality, I have visited some stores whoare the best ones in retailing Further, to understand the consumers better, afield survey was also conducted to find out the tastes and preferences, purchasing habits,expectations of the consumers etc. Analysis of this primary data has been done to actuallyunderstand the survey in a better way.Primary Source includes the survey done in Mumbai for a sample population of 100people. Also interviews of 1 kirana stores owner and viewpoint of general public havebeen taken.Secondary sources includes the available information on the internet and data available inbooks and journals. 6. Organising and conducting the field survey:The research is organized and conducted by interviewing the respondents. 7. Processing and analyzing the collected data:The collected data is presented in analyzing form through tabular form and pie digrams. 8. Preparing the Research report:The objectivity, coherence, charts and diagrams are used freely to express clarity in thepresentation of ideas and research. 9. Conclusion:The research proceeds from selection of project topic through the collection and analysisof data to the preparation and submission of report in presentable form. 8|Page
  9. 9. SMALL V/S MALL Introduction to RetailingThe word ‘retail’ is derived from the French word ‘retaillier’, meaning ‘to cut a piece off’or ‘to break bulk’. In simple terms, it implies a first hand transaction with the customer.Retailing involves a direct interface with the customer and the coordination of businessactivities from end to end – right from the concept or design stage of a product oroffering, to its delivery and post-delivery service to the customer. The industry hascontributed to the economic growth of many countries and is undoubtedly one of thefastest changing and dynamic industries in theworld today.Retailing consists of all activities involved inselling goods and services to consumers for theirpersonal, family or household use. It covers sales ofgoods ranging from automobiles to apparel andfood products and services ranging from haircutting to air travel and computer education. Salesof goods to intermediaries who resell to retailers orsales to manufacturers are not considered a retailactivity.Retailing can be examined from many perspectives. A manufacturer of white goods likewashing machine and refrigerators has many options to reach out to consumers. It cansell through dealers, the company showrooms (Sony World, Videocon Plaza) orhypermarkets (Big Bazaar).Retail outlets exist in all shapes and sizes – from a “panwala” to a shoppers’ Stop.However, most of these outlets are basic mom-and-pop stores – the “traditional “Kirana”shops in the locality, which are smaller than 500 sq.ft. area with very basic offerings,fixed prices, zero use of technology, and little or no ambiance. The number of outlets inIndia has increased from 0.25 million in 1950 to approximately 12 million today. Thistranslates to a growth of 48 times over a certain period when the population has trebled.Retailing in India is gradually inching its way to becoming the next boom industry. Thewhole concept of shopping has altered in terms of format and consumer buying behavior,ushering in a revolution in shopping. Modern retail has entered India as seen in sprawlingshopping centres, multi-storeyed malls and huge complexes offer shopping,entertainment and food all under one roof. 9|Page
  10. 10. Evolution of retailThe origins of retailing in India can be traced back to local markets and roaming traders.Whatever was available locally, entrepreneurs made an estimate of local demand andventured to the marketplace to offer their wares to interested people. The product rangewas restricted to whatever agricultural produce was made possible by the regional climateand local manufacturing skills. Enterprising and mobile traders ventured beyond, topeddle wares perceived by them to be in demand elsewhere. This tribe of moving tradersbrought product variety to the markets. This led to the emergence of Kirana stores andmom-and-pop stores. These stores used to cater to the local people.Eventually the government supported the rural retail and many indigenous franchisestores came up with the help of Khadi & Village Industries Commission. The economybegan to open up in the 1980s resulting in the change of retailing. The first fewcompanies to come up with retail chains were in textile sector, for example, BombayDyeing, S.Kumars, Raymond, etc.Growth of large scale retailers was fuelled by the rapid spread of mass production tomore and more product categories. Brisk industrialization ensured replication of largevolume production techniques to innovative areas such as processes foods. Improvingtransport facilities enabled retailers to gun for volume – driven procurement. This set theball rolling for organized retailing – targeting economies of scale through bulk purchaseand advertising led growth.Later Titan launched retail showrooms in the organized retail sector. With the passage oftime new entrants moved on from manufacturing to pure retailing. Retail outlets such asFoodworld in FMCG, Planet M and Musicworld in Music, Crossword in books enteredthe market before1995.Shopping malls emerged in the urban areas giving a world-class experience to thecustomers. Eventually hypermarkets and supermarkets emerged. The evolution of thesector includes the continuous improvement in the supply chain management, distributionchannels, technology, back-end operations, etc. this would finally lead to more ofconsolidation, mergers and acquisitions and huge investments.The opening up of the economy only fueled this globalization. There are, however,certain bottlenecks as well; the scarcity of space, coupled with the stringent provisions ofthe Rent Control Act, act as a dissuasive factor for many players to initiate operations inthe main markets. This also explains why the Raheja’s forayed into their retail venture-Shoppers’ Stop. 10 | P a g e
  11. 11. Phases in the Evolution of Retail Sector Convenience stores, Mom-and-pop / Kirana shops Source of entertainment and commercial exchange Weekly markets, Village and rural Melas Neighborhood stores/convenience Traditional and pervasive reach PDS outlets, Khadi stores, Cooperatives Government supported Availability/low costs/distribution Exclusive brand outlets, hypermarkets and supermarkets, department stores and shopping malls Shopping experience/efficiency Modern formats/international 11 | P a g e
  12. 12. Boom in Retail IndustryRetail industry has brought in phenomenal changes in the whole process of production,distribution and consumption of consumer goods all over the world. In the present worldmost of the developed economies are using the retail industry as their vital growthinstrument. At present, among all the industries of USA the retail industry holds thesecond place in terms of employment generation. In fact, the strength of retail industrylies in its ability to generate large volume of employment.Not only US but also other developed countries like UK, Canada, France and Germanyare experiencing tremendous growth in their retail sectors. This boom in the global retailindustry was in many ways accelerating by the liberalization of retail sector.Observing this global upward trend of retail industry, now the developing countries likeIndia are also planning to tap the enormous potential of the retail sector. Wal-Marts, theworld’s largest retailer have been invited to India. Other popular brands like Pantaloons,Big Bazaar and Archies are rapidly increasing their market share in the retail sector.According to a survey, within 5 years, the Indian retail industry is expected to generate10 to 15 million jobs by direct and indirect effects. This huge employment generation canbe possible because being dependent on the retail sector shares a lot of forward andbackward linkages.India retail industry is the largest industry in India, with an employment of around 8%and contributing to over 10% of the countrys GDP. Retail industry in India is expected torise 25% yearly being driven by strong income growth, changing lifestyles, and favorabledemographic patterns.It is expected that by 2016 modern retail industry in India will be worth US$ 175- 200billion. India retail industry is one of the fastest growing industries with revenue expectedin 2007 to amount US$ 320 billion and is increasing at a rate of 5% yearly. A furtherincrease of 7-8% is expected in the industry of retail in India by growth in consumerismin urban areas, rising incomes, and a steep rise in rural consumption. It has further beenpredicted that the retailing industry in India will amount to US$ 21.5 billion by 2010from the current size of US$ 7.5 billion.Shopping in India has witnessed a revolution with the change in the consumer buyingbehavior and the whole format of shopping also altering. Industry of retail in India whichhas become modern can be seen from the fact that there are multi- stored malls, hugeshopping centers, and sprawling complexes which offer food, shopping, andentertainment all under the same roof.India has over 12 million retail enterprises with more than 75% belonging to small familybusinesses and basic necessities, especially food related items. Strong fundamentalchanges including the changing lifestyles of Indian people, rising incomes etc havefuelled the growth of modern retailing and has attracted investment in this sector. 12 | P a g e
  13. 13. Business houses in the country are turning to retail. Modern retailers like Trent,Shopper’s Stop, Pantaloon, Piramyd, Globus, Vivek and Subhiksha, Foodworld, Bigbazaar, Food bazar have entered the market and are planning for further expansion.India’s prominent business houses like Reliance industries, Tata, Wadia, Godrej, Hero,Malhotras are planning to enter retail sector individually and also with foreign partners.With the government being in the process of determining the level of FDI in retail, anumber of foreign players including Wal-Mart Stores, the world’s largest retail chainhave evinced interest for entering India in a big way. Retail in India has grown beyondmere retailing and now encompasses sectors such as telecom, automobiles and finance.India retail industry is progressing well and for this to continue retailers as well as theIndian government will have to make a combined effort. 13 | P a g e
  14. 14. Growth of Retail Companies in IndiaAn increasing number of people in India are turning to the services sector foremployment due to the relative low compensation offered by the traditional agricultureand manufacturing sectors. The organized retail market is growing at 35 percent annuallywhile growth of unorganized retail sector is pegged at 6 percent.The Retail Business in India is currently at the point of inflection. Rapid change withinvestments to the tune of US $ 25 billion is being planned by several Indian andmultinational companies in the next 5 years. It is a huge industry in terms of size andaccording to management consulting firm Technopak Advisors Pvt. Ltd., it is valued atabout US $ 350 billion. Organised retail is expected to garner about 16-18 percent of thetotal retail market (US $ 65-75 billion) in the next 5 years.India has topped the A.T. Kearney’s annual Global Retail Development Index (GRDI) forthe third consecutive year, maintaining its position as the most attractive market for retailinvestment. The Indian economy has registered a growth of 8% for 2007. The predictionsfor 2008 is 7.9%. The enormous growth of the retail industry has created a huge demandfor real estate. Property developers are creating retail real estate at an aggressive pace andby 2010, 300 malls are estimated to be operational in the country.With over 1,000 hypermarkets and 3,000 supermarkets projected to come up by 2011,India will need additional retail space of 700,000,000 sq ft (65,000,000 m2) as comparedto today. Current projections on construction point to a supply of just 200,000,000 sq ft(19,000,000 m2), leaving a gap of 500,000,000 sq ft (46,000,000 m2) that needs to befilled, at a cost of US$15-18 billion.According to the Icrier report, the retail business in India is estimated to grow at 13%from $322 billion in 2006-07 to $590 billion in 2011-12. The unorganized retail sector isexpected to grow at about 10% per annum with sales expected to rise from $ 309 billionin 2006-07 to $ 496 billion in 2011-12. An increasing number of people in India areturning to the services sector for employment due to the relative low compensationoffered by the traditional agriculture and manufacturing sectors. The organized retailmarket is growing at 35 percent annually while growth of unorganized retail sector ispegged at 6 percent 14 | P a g e
  15. 15. 2009 - 2011 are estimates. F&S sources: CSO, NSSO and Technopak Advisers Pvt. Ltd.By 2012, the retail market is projected to grow to around $551.4 billion. In a country withover one billion inhabitants, consumer retail demand is growing rapidly as the regionmodernizes, paving the way for retail expansion. With swift industry development, themajority of retailers focus on improving loss prevention solutions that maximize growthand profitability.Organized retail consists of 4% of the total Indian retail market and is expected to grow to 15% by2011.Between 2003 and 2007 organized retail formats (characterized as chain stores and storesthat are subject to central ownership or franchisees) experienced a Compounded AnnualGrowth Rate (CAGR) of 19.5%. By 2012, the organized retail market expects to increaseat a more aggressive rate, projected at 44% CAGR -- prompting retailers to look foreffective and innovative loss prevention methods.According to the study, shoplifting in the Indian retail market accounted for over 50% ofloss, which remains the number one source of inventory loss. EAS is designed to helpretailers prevent losses due to external theft - Indias most significant challenge impactingretailer profitability and inhibiting future growth. Employee theft represented the secondlargest source of inventory loss at 20%. 15 | P a g e
  16. 16. The Growth Drivers The retail companies are found to be rising in India at a remarkable speed with the yearsand these have brought a revolutionary change in the shopping attitude of the Indiancustomers. The Indian Retail growth can be attributed to the several factors including: Demography Dynamics: Approximately 60 per cent of Indian population below 30 years of age. Double Incomes: Increasing instances of Double Incomes in most families coupled with the rise in spending power. Plastic Revolution: Increasing use of credit cards for categories relating to Apparel, Consumer Durable Goods, Food and Grocery etc. Urbanization: Increased urbanization has led to higher customer density areas thus enabling retailers to use lesser number of stores to target the same number of customers. Aggregation of demand that occurs due to urbanization helps a retailer in reaping the economies of scale. Potential for Investment: The total estimated Investment Opportunity in the retail sector is around US$ 5-6 Billion in the Next five years. Location: With modern retail formats having made their foray into the top cities namely Hyderabad, Coimbatore, Ahmedabad, Mumbai, Pune, Chennai, Bangalore, Delhi, Nagpur there exists tremendous potential in two tier towns over the next 5 years. Sectors with High Growth Potential: Certain segments that promise a high growth are Food and Grocery (91 per cent) Clothing (55 per cent) Furniture and Fixtures (27 per cent) Pharmacy (27 per cent) Durables, Footwear & Leather, Watch & Jewellery (18 per cent) Fastest Growing Formats: Some of the formats that offer good growth potential are: Specialty and Super Market (45 per cent) Hyper Market (36 per cent) Discount stores (27 per cent) Department Stores (18 per cent) Convenience Stores and E-Retailing (9 per cent) Supply Chain Infrastructure: Supply chain infrastructure in terms of cold chain and Logistics. 16 | P a g e
  17. 17. Rural Retail: Retail sector offers opportunities for exploration and investment in rural areas, with Corporate and Entrepreneurs having made a foray in the past. Indias largely rural population has caught the eye of retailers looking for new areas of growth. ITC launched the countrys first rural mall Chaupal Sagar, offering a diverse product ranges from FMCG to electronics appliance to automobiles, attempting to provide farmers a one-stop destination for all of their needs. Other corporate bodies include Escorts and Tata Chemicals (with Tata Kisan Sansar) setting up agri-stores to provide products/services targeted at the farmer in order to tap the vast rural market. Wholesale Trading: Wholesale trading also holds huge potential for growth. German giant Metro AG and South African Shop rite Holdings have already made headway in this segment by setting up stores selling merchandise on a wholesale basis in Bangalore and Mumbai respectively. These new-format cash-and-carry stores attract large volumes from a sizeable number of retailers who do not have to maintain relationships with multiple suppliers for all their needs.Plans of Large Retailers: Reliance Retail: investing Rs. 30,000 crore ($6.67 billion) in setting up multiple retail formats with expected sales of Rs. 90,000 crore plus ($20 billion) by 2009- 10. Pantaloon Retail: Will occupy 10 mn sq.ft retail space and achieve Rs.9000 crore- plus ($2 bn) sales by 2008.. Lifestyle: Investing Rs.400 crore-plus ($90 mn) in next five years on Max Hypermarkets & value retail stores, home and lifestyle centres. Rahejas: Operates Shoppers Stop, Crossword, Inorbit Mall, and Home Stop formats. It will operate 55 "Hypercity" hypermarkets with US$100 million sales across India by 2015. Piramyd Retail: Aiming to occupy 1.75 million sq.ft retail space through 150 stores in next five years. TATA (Trent Ltd.): Trent to open 27 more stores across its retail formats adding 1 mn sq.ft of space in the next 12 DLF malls. Titan industries to add 50-plus Titan and Tanishq stores in 2007. RPG: Planning IPO will have 450-plus Music World, 50-plus Spencers Hyper covering 4 mn sq.ft by 2010. 17 | P a g e
  18. 18. Key Players in Retail IndustryThe untapped scope of retailing has attracted superstores like Wal-Mart into India,leaving behind the kiranas that served us for years. Such companies are basically ITbased. The other important participants in the Indian Retail sector are Bata, Big Bazaar,Pantaloons, Archies, Cafe Coffee Day, landmark, Khadims, Crossword and many more.The top ten players in retail sector: 18 | P a g e
  19. 19. Major Indian RetailersIndian apparel retailers are increasing their brand presence overseas, particularly indeveloped markets. While most have identified a gap in countries in West Asia andAfrica, some majors are also looking at the US and Europe. Arvind Brands, MaduraGarments, Spykar Lifestyle and Royal Classic Polo are busy chalking out foreignexpansion plans through the distribution route and standalone stores as well. Anotherdenim wear brand, Spykar, which is now moving towards becoming a casualwearlifestyle brand, has launched its store in Melbourne recently. It plans to open three storesin London by 2008-end.The low-intensity entry of the diversified Mahindra Group into retail is unique because itplans to focus on lifestyle products. The Mahindra Group is the fourth large Indianbusiness group to enter the business of retail after Reliance Industries Ltd, the AdityaBirla Group, and Bharti Enterprises Ltd. The other three groups are focusing either onperishables and groceries, or a range of products, or both.Sr. No. Company Formats 1. Vivek Limited Retail Viveks, Jainsons, Viveks Service Centre, Viveks Safe Deposit Lockers 2. PGC Retail T-Mart India, Switcher , Respect India , Grand India Bazaar ,etc 3. REI AGRO LTD Retail 6TEN Hyper & 6TEN Super 4. RPG Retail Music World, Books & Beyond, Spencer’s Hyper, Spencer’s Super, Daily & Fresh 5. Pantaloon Retail Big Bazaar, Food Bazaar, Pantaloons, Central, Fashion Station, Brand Factory, Depot, aLL, E-Zone etc. 6. The Tata Group Westside, Star India Bazaar, Steeljunction, Landmark, Titan Industries with World of Titans showrooms, Tanishq outlets, Chroma 7. K Raheja Corp Group Shoppers Stop, Crossword, Hyper City, Inorbit 8. Lifestyle International Lifestyle, Home Centre, Max, Fun City and International Franchise brand stores. 9. Pyramid Retail Pyramid Megastore, TruMart 19 | P a g e
  20. 20. 10. Nilgiri’s Nilgiris’ supermarket chain11. Subhiksha Subhiksha supermarket pharmacy and telecom discount chain.12. Trinethra Fabmall supermarket chain and Fabcity hypermarket chain13. Vishal Retail Group Vishal Mega Mart14. BPCL In & Out15. Reliance Retail Reliance Fresh16. Reliance ADAG Retail Reliance World17. German Metro Cash & Carry18. Shoprite Holdings Shoprite Hyper19. Paritala stores bazar honey shine stores20. Aditya Birla Group more Outlets21. Kapas Cotton garment outlets 20 | P a g e
  21. 21. Global Retail Industry Facts about the Global Retail Industry Worldwide retail sales are estimated at US $7 trillion. The top 200 largest retailers account for 30% of the worldwide demand. The money spent on household consumption worldwide increased by 68% between 1980 and 1998. Retail sales are generally driven by people’s ability (disposable income) and willingness (consumer confidence) to buy. The 1998 UNDP Human Development Report points to the fact that global expenditures on advertising are (including in developing countries ) increasing faster than the world economy, suggesting that the sector is becoming one of the major players in the development process. becomingRetailing in more developed countries is big business and better organised than what it is inIndia. With total sales of US$ 6.6 trillion, retailing is the world’s largest private industry,ahead of finance (US$ 5.1 trillion) and engineering (US$ 3.2 trillion). Some of the lion).world’s largest companies are in this sector: Over 50 Fortune 500 companies and around 25of the Asian Top 200 firms are retailers. Wal Mart, the world’s second largest retailer, has a Wal-Mart,turnover of US$ 140 billion, almost one – third of India’s GDP. 3000 2500 2000 1500 0-3000 1000 500 0 INDIA CHINA UK FRANCE USARetail Sales in 2000 (in US$ billion)* (Source: A&M magazine, 26th February 2001)As many as 10% of the world’s billionaires are retailers. The industry accounts for over 8%of GDP in western countries, and is one of the largest employers. According to the U.S. AccordingDepartment of Labor, more than 22 million Americans are employed in the retailing industryin over 2 million retail stores – that is, one out of every five workers employed. In short, aslong as people need to buy, retail will generate employment. 21 | P a g e
  22. 22. 120 100 80 TRADITIONAL 60 ORGANISED 40 20 0 EUROPE MALAYSIA THAILAND INDIA Share of the Traditional and Organized Retail Sector (Source: The Economic Times, 15February 2001)Retailing in the developed world today is far more organized than in India. Up to 80% ofall retail sales in the United States is accounted for by the organized retail sector. Thecorresponding figure in Western Europe is 70%, while it is 40% in Brazil and Argentinaand 35% in Korea and Taiwan.Over the past few decades, retail formats have changed radically worldwide. The basicdepartment stores and cooperatives of the early 20th century have given way to massmerchandisers (Wal-Mart), hypermarkets ( Carrefour), warehouse clubs ( Sam’s Club,Makro), category killers (Toys ‘R’ Us, Sports Authority), discounters (Aldi) andconvenience stores (7 – Eleven).Organised retail formats worldwide have evolved in three phases: I. Retailers decide on the category and quality of products and services, differentiating them from other retailers. Retail formats in this phase are typically supermarket, department stores and speciality stores. II. During the second phase, retailers carve a niche for themselves based on a product category and price. Competition intensifies because the products and services on offer become virtually standardized and price becomes the main selling point. This phase normally gives way to discount stores. III. The third phase arrives when competition peaks. This is when hypermarkets begin to evolve. Hypermarkets usually compete on price and a wider product range, but the normally lack product depth and service components.Globally, retailing is customer – centric with an emphasis on innovation in products,processes and services. In short, the CUSTOMER IS KING! 22 | P a g e
  23. 23. Indian Retail Industry Facts about the India Retail Industry:.(Last Updated: September 2009)The Indian retail market, which is the fifth largest retail destination globally, has beenranked as the most attractive emerging market for investment in the retail sector by ATKearneys eighth annual Global Retail Development Index (GRDI), in 2009. The share ofretail trade in the countrys gross domestic product (GDP) was between 8–10 per cent in2007. It is currently around 12 per cent, and is likely to reach 22 per cent by 2010.A McKinsey report The rise of Indian Consumer Market, estimates that the Indianconsumer market is likely to grow four times by 2025. Commercial real estate servicescompany, CB Richard Ellis findings state that Indias retail market is currently valued atUS$ 511 billion. Further, CB Richard Ellis states that India has moved up to the 39thmost preferred retail destination in the world in 2009, up from 44 last year.Banks, capital goods, engineering, fast moving consumer goods (FMCG), softwareservices, oil marketing, power, two-wheelers and telecom companies are leading the salesand profit growth of India Inc in the fourth quarter of 2008-09. India continues to beamong the most attractive countries for global retailers. At US$ 511 billion in 2008, itsretail market is larger than ever and drawing both global and local retailers. Foreigndirect investment (FDI) inflows as on July 2009, in single-brand retail trading, stood atapprox. US$ 46.60 million, according to the Department of Industrial Policy andPromotion (DIPP).Indias overall retail sector is expected to rise to US$ 833 billion by 2013 and to US$ 1.3trillion by 2018, at a compound annual growth rate (CAGR) of 10 per cent. As a 23 | P a g e
  24. 24. democratic country with high growth rates, consumer spending has risen sharply as theyouth population (more than 33 percent of the country is below the age of 15) has seen asignificant increase in its disposable income. Consumer spending rose an impressive 75per cent in the past four years alone. Also, organised retail, which is pegged at aroundUS$ 8.14 billion, is expected to grow at a CAGR of 40 per cent to touch US$ 107 billionby 2013.The organised retail sector, which currently accounts for around 5 per cent of the Indianretail market, is all set to witness maximum number of large format malls and brandedretail stores in South India, followed by North, West and the East in the next two years.According to the report ‘Mall Realities India 2010’ by leading property consultants,Jones Lang LaSalle Meghraj and Cushman & Wakefield India in association withShopping Centres Association of India, over 100 malls of over 30 million sq feet of newshopping centre space are projected to open in India between 2009 and end-2010.Further, this sector is expected to invest around US$ 503.2 million in retail technologyservice solutions in the current financial year. This could go further up to US$ 1.26billion in the next four to five years, at a CAGR of 40 per cent.India has emerged the third most attractive market destination for apparel retailers,according to a study by global management consulting firm AT Kearney. It further saysthat in India, apparel is the second largest retail category and is expected to grow by 12-15 per cent per year. Apparel, along with food and grocery, will lead the organisedretailing in India.India has one of the largest numbers of retail outlets in the world. The sector iswitnessing exponential growth with retail developments taking place not only in majorcities and metros but even in tier-II and tier-III cities in India. • Marks & Spencer Reliance India is planning to open 35 more stores over the next five years, according to Mark Ashman, CEO of the company. The 51:49 joint venture between UK’s Marks and Spencer and Reliance Retail Ltd already has 15 stores in India. • Carrefour SA, Europe’s largest retailer, may start wholesale operations in India by 2010 and plans to set up its first cash-and-carry outlet in the National Capital Region. Currently, Carrefour exports goods worth US$ 170 million from India to Europe, UAE, Indonesia, Europe, Thailand, Singapore and Malaysia. • Jewellery manufacturer and retailer, Gitanjali Group and MMTC are jointly setting up a chain of exclusive retail outlets called Shuddi–Sampurna Vishwas. The joint venture, which plans to open around 60 stores across India by end of this year, will retail hallmarked gold and diamond jewellery. • Mahindra Retail, a part of the US$ 6.7-billion Mahindra Group, plans to invest US$ 19.8 million by 2010 to step up its specialty retail concept Mom and Me. • Pantaloon Retail India (PRIL) plans to invest more than US$ 103.3 million to expand its seamless mall Central and the value fashion format Brand Factory over 24 | P a g e
  25. 25. the next two years. • Bharti Retail has introduced eight Wal-Mart private labels—including two of its largest, ‘Great Value’ and ‘George’—in its supermarket chain Easyday, hoping to attract more consumers with their international design and packaging. • Italian sportswear brand Lotto will launch two new footwear brands Sabots and Calcetto in the country in the next few weeks. The plan is to have at least 50 exclusive outlets by March 2010. • Steel players such as JSW Steel and Essar Steel are increasing their focus on opening up more retail outlets pan India. JSW Steel currently has 50 such steel retail outlets called JSW Shoppe and is targeting to increase it to 200 by March 2010. Similarly, Essar Steel also has such retail outlets called Essar hypermarts. With a total 150 such outlets currently, this segment contributes to about 20-25 per cent to the Essar’s total revenue. • EBONY Homes, the home furniture retail arm of the US$ 3 billion DS Constructions, has plans to invest US$ 25.1 billion to set up a chain of 20-25 furniture stores styled Ebony Gautier across the country by March 2012. • Gujarat Co-operative Milk Marketing Federation (GCMMF), which owns and markets Asias largest dairy brand, Amul, plans to add 6,000 Amul retail parlours across the country in FY 2009. • With rentals dropping sharply, large retailers such as Aditya Birla Retail, Reliance Retail and Shoppers Stop, and food chains such as McDonald’s are also looking at metros and mini-metros for expansion. • Many major international brands are also looking for a foothold in India. The brands planning an India entry include The Pizza Company and Spicchio Pizza (both pizza chains from Thailand), Coffee Club from Australia, Japanese brand Lolita Fashion, Revive Juice Bars from the UK, Mrs Fields Cookies and Jamba Juice from the US, and French fashion brand Jules. • Retail brands such as United Colors of Benetton, Tommy Hilfiger and Puma are opening factory outlets to sell excess stock and woo the price-conscious buyers.Policy Initiatives • 100 per cent FDI is allowed in cash-and-carry wholesale formats. Franchisee arrangements are also permitted in retail trade. • 51 per cent FDI is allowed in single-brand retailing.Road AheadAccording to industry experts, the next phase of growth is expected to come from ruralmarkets, with rural India accounting for almost half of the domestic retail market, valuedover US$ 300 billion. Rural India is set to witness an economic boom, with per capitaincome having grown by 50 per cent over the last 10 years, mainly on account of risingcommodity prices and improved productivity.According to retail and consumer products division, E&Y India, basic infrastructure,generation of employment guarantee schemes, better information services and access to 25 | P a g e
  26. 26. funding are also bringing prosperity to rural households. The rural market, product designwill need to go beyond ideas like smaller sizes (such as single use sachets) to creategenuinely new products, according to Ramesh Srinivas, national industry director(consumer markets), KPMG India.According to a new market research report by RNCOS titled, Booming Retail Sector inIndia, organised retail market in India is expected to reach US$ 50 billion by 2011. • Number of shopping malls is expected to increase at a CAGR of more than 18.9 per cent from 2007 to 2015. • Rural market is projected to dominate the retail industry landscape in India by 2012 with total market share of above 50 per cent. • Organised retailing of mobile handset and accessories is expected to reach close to US$ 990 million by 2010. • Driven by the expanding retail market, third party logistic market is forecasted to reach US$ 20 billion by 2011.Exchange rate used:1usd = 47.9 inr (as on june 2009)1 usd = 48.41 inr (as on september 2009)ChallengesTo become a truly flourishing industry, retailing needs to cross the following hurdles: • Automatic approval is not allowed for foreign investment in retail. • Regulations restricting real estate purchases, and cumbersome local laws. • Taxation, which favours small retail businesses. • Absence of developed supply chain and integrated IT management. • Lack of trained work force. • Low skill level for retailing management. • Lack of Retailing Courses and study options • Intrinsic complexity of retailing – rapid price changes, constant threat of product obsolescence and low margins 26 | P a g e
  27. 27. Recent Trends in retailing Retailing in India is witnessing a huge revamping exercise as can be seen in the graph India is rated the fifth most attractive emerging retail market: a potential goldmine. Estimated to be US$ 200 billion, of which organized retailing (i.e. modern trade) makes up 3 percent or US$ 6.4 billion As per a report by KPMG the annual growth of department stores is estimated at 24% Ranked second in a Global Retail Development Index of 30 developing countries drawn up by AT Kearney Kearney. 27 | P a g e
  28. 28. Classification of Retail Sector: RETAIL Unorganized Organised Retailing Retailing Unorganized / Traditional retailing:On the other hand, it refers to the traditional formats of low-cost retailing, forexample, the local Kirana shops, owner manned general stores, paan/beedi shops,convenience stores, hand cart and pavement vendors, etc. Organised / Modern retailing:It refers to trading activities undertaken by licensed retailers, that is, those who areregistered for sales tax, income tax, etc. These include the corporate-backedhypermarkets, retail chains, and also the privately owned large retail businesses.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 thecountry’s gross domestic product (GDP). Of this total market, the organized sectoraccounted for Rs. 350 billion (about 3.5 % of the total) of the total revenues.According to AT Kearney, the organized retailing industry is expected to cross Rs. 1000billion revenue mark by 2010.Traditionally, the retail industry in India comprised of large, medium and small grocerystores and drug stores which could be categorized as unorganized retailing. Most of theorganized retailing in India had recently started and was mainly concentrated inmetropolitan cities.The retailing industry seems poised for a significant growth in the coming years owing tothe presence of a vast market, growing consumer awareness about product quality andservices, higher disposable income of consumers and the desire to try out new products. 28 | P a g e
  29. 29. Unorganized / Traditional retailing(Kirana / Small Local Stores)Retail outlets exist in all shapes and sizes – from a “panwala” to a shoppers’ Stop.However, most of these outlets are basic mom-and-pop stores – the “traditional “Kirana”shops in the locality, which are smaller than 500 sq.ft. in area with very basic offerings,fixed prices, zero use of technology, and little or no ambiance. The number of outlets inIndia has increased from 0.25 million in 1950 to approximately 12 million today. Thistranslates to a growth of 48 times over a certain period when the population has trebled. The small local stores have dominated Indian retailing over the decades and are presentin every village and local community, addressing the needs of the population in the areaand being the point of contact with the consumer. The distribution networks of brandsextend right upto this point to stay in touch with customer needs and preferences.India like most other countries has a very large network of local stores. The retailindustry in rural India has typically two forms: "Haats" and "Melas". You will find thesein almost every village and locality. A lot of them function as paan and cigarette outletswith tea and coffee sometimes also offered. Besides this these stores stock and offersmall eats and soft drinks including biscuits, soft drinks, chocolate, sweets, bread andbaked products. Many of them also sell fruits like bananas and a range of toiletries andcosmetics like soaps, shampoos, toothpastes and some creams. These small stores cater tothe needs of their own local population and travelers who stop by for a smoke or a snack.A little larger format is the neighborhood grocery store that focuses on grains, foods,snacks and toiletries besides other home essentials.Fruits and vegetables that are perishable are usually maintained and offered by exclusivevegetable stores and not by the normal groceries. Every fair sized village is likely to haveat least one grocery store, a fruit and vegetable shop and a paan and cigarette shop. Thenew addition of the past decade is to have a telephone booth that lets locals and travelersmake national and international telephone calls. 29 | P a g e
  30. 30. This network is very large and spread all across India. It is not really a network sinceeach store is individual or family owned and has no connection with the other. It doeshowever represent a network since large consumer product companies like Unilever,Procter & Gamble, Colgate-Palmolive, Cadbury, Coca Cola, Pepsi and ITC uses them astheir final point of retail to the consumer.While it is commonly believed that the new retail chains will drive these small stores outof business, reality points the other way and it is likely that these stores will continueeven in the next two decades of growth. These small stores are very personal and havestrong relationships with the local population. They are points of news and connection.They offer credit to the local population and help out in times of crisis. They also have avery good understanding of requirements of the local population and have very lowoverheads enabling them to offer the best price for their products.Characteristics of Kirana StoresIndia has sometimes been referred to as a nation of shopkeepers. A high density ofpopulation and the need for convenience has facilitated the operation of over 12 millionstores in India. Of these, nearly 78 per cent are small family-run operations, which useonly household labour. The key characteristics of these stores are: Small size: Such stores are small in size. They range in area from 200 square feet or less to 1,500 square feet, depending on the area of operation. Low operating costs and overheads: These stores are run by family members and thus, there are no labour costs involved. Little money is spent on lighting, power, fuel and ambience. Proximity to consumers: These shops are located within residential areas and can be accessed by customers on foot. This makes it convenient for households to buy items on a daily basis. Strong customer bond: These shop owners know their customers personally and have strong relationships with them. This helps them gauge likes and dislikes, and accordingly meet the individual needs of each household. Additional services: These small stores provide services like a months credit, which many customers find very useful. Such stores have also been concentrating on offering customers the additional convenience of home delivery and obtaining a product on order. Non-payment of taxes: Since such small stores do not normally generate bills, they manage to evade taxes. This saves them money, which they can re-invest and also makes it possible for them to offer lower prices to select customers 30 | P a g e
  31. 31. Significance of Kirana storesKirana stores are too well established in India than to be wiped out and besides there isuniqueness in the traditional items that represent the sub-continent. The retail stores inIndia are essentially dominated by the unorganized sector or traditional stores. Infact thetraditional stores have taken up 98 percent of the Indian retail marketBasically theyprovide high service with low prices. If the stores are not food based then the type ofretail items available are local in nature. The Kirana stores can take pride in the fact thatthe Kirana is the most common outlet forms for the consumers. The tough competitionfor Kirana stores is coming from organized retail stores dealing in food items, like: Apna Bazaar Canteen stores Food World Subhiksha Food BazaarKirana Stores are open for long hours and is one of the formats of the Indian retail storesthat cater to basic needs of the consumer. These stores are found in both residential aswell as commercial markets. The benefit of Kirana stores is that they give importance to: Personal touch Facilities of credit Quick home deliveryThe future of such stores as they face competition from organized sector, would dependon the following particulars: • Place and capacity • Diligent area coverage • Disciplined work schedule • Managing turnover • Revenue from assets • Customer service and satisfaction The Kirana stores serve the purpose of the housewives who definitely wants to avoid traveling long distances to purchase daily needs. The convenience factor in terms of items, among people in general can be highlighted as below: • Groceries • Fruits • Drug Store • Necessary stationeryAs such Kirana stores are here to stay and cannot be oversized by the organized retailsector besides; it represents the variety of India. 31 | P a g e
  32. 32. Traditional Format Retailers: Kiranas: These are close-to-home stores where a household buys its daily use goods. They stock a range of goods from staples to FMCG products and milk products, etc. They range from the very small 200 sq ft stores to 1,500 sq ft establishments. Often those running the stores know the households personally and provide additional services like obtaining unstocked items on request, delivering goods to the doorstep and granting a months credit. Paan shops: These are unique to India. They are very small shops manned by a single individual whose chief occupation is the making of paan (betel leaf with a few additions). Such shops also stock tobacco, chocolates and some FMCG articles. Cart vendor: Cart vendors sell fresh fruits and vegetables in residential areas and housewives buy from them on a daily basis. They sell their produce off a cart, which allows them the freedom to move around from place to place. They often give credit of a few days. Mandis: These are markets with a fixed place, where various sellers of a commodity gather. Buyers visit mandis to make weekly purchases at reasonable prices. Sabzi mandis specifically stock vegetables. Haats: A haat is more of a village phenomenon. Once a week, a market is organized in a particular location, where sellers from different areas gather to sell their products. Buyers congregate to buy an assortment of goods, ranging from fruits and vegetables to household goods, clothes and accessories like bangles, etc. Mela: A mela is organized once every few months generally around the time of a festival. In addition to the sale of a variety of goods not easily accessible to villagers, the mela also provides entertainment. 32 | P a g e
  33. 33. Advantage of KiranasKirana, having a wide reach and deep penetration, is poised for equal growth with thehelp of larger peer. Transportation, warehousing and distribution infrastructure inenigmatic India will continue to be managed by the Kirana. Low operating costs and overheads Proximity to consumers Long operating Additional services (like home delivery, credit Attractive ambience, convenience and customized products) Strong relationship with customers Non-payment of taxes 33 | P a g e
  34. 34. SWOT Analysis of Kirana storesSTRENGHTS: These stores are located in prime residential areas. The rentals in these areas and other logistics are mostly unviable for large stores. They enjoy a near monopoly in areas that are backward or do not have a population with sustainable purchasing power (like rural areas), since organized retailers are unlikely to enter such regions. It has Price advantage over its competitors for Branded goods and commodities. It has a wide product range catering to all types of customer needs. Kirana stores are reliable and have its own uniqueness.Kirana stores have another USP when it comes to malls. While malls offer home deliveryof goods provided the bill exceeds a certain minimum amount, kirana stores offer thesame service for any bill size.Since such small stores do not normally generate bills, they manage to evade taxes. Thissaves them money, which they can re-invest and also makes it possible for them to offerlower prices to select customers.WEAKNESS: Promoters do not possess adequate financial strength for expansion on their own. Storekeepers often do not provide quality assurance, especially of goods sold loose. However, with FMCG companies themselves branding various goods like flour, pickles, sugar, etc, this might check the problem. Small storekeepers are increasingly becoming conscious of hygiene issues. Variety in terms of quality, Styles is on regional basis and very low range is available at any given single place. 34 | P a g e
  35. 35. There is a large change in atmospherics of small shops due to competition from Big Retailers These stores have to face Job losses Since it provide job opportunities to semi-skilled and unskilled people Established Branded Retailers are price-competitiveOPPORTUNITIES: Low capital requirement (due to uncontrolled low rents and minimal operating overheads) helps them turn faster and increase in number with easy entry and exit. Proximity to consumers and strong relationships will help them to gauge customer needs and stock accordingly, thus gaining more business.THREATS: Long operating hours might be threatened with organized players and associations demanding 24 X 7 operating permissions. The additional services that were unique to them are now being replicated by all players. The increasing use of credit cards provides easy credit even otherwise. With huge stores coming up in catchments areas of 5-7 kilometers of approachable distance and large chains planning to set up hub-and-spoke smaller stores, the very existence of traditional stores is in danger. Traditional stores have low or no bargaining power due to their small scale of operations. Thus, the biggest threat they face from organised players is the latters ability to provide quality products at a discount. Due to their small size, traditional stores are unable to stock a variety of goods, which is what consumers are now demanding owing to increasing awareness. Traditional stores rarely invest in ambience. They also do not provide the customer the chance to look at various brands and varieties before making a choice. 35 | P a g e
  36. 36. Lots to LEARN From KIRANAS…According to a new study published in Economic times, Indian consumers are stillvisiting local kirana stores (mom n pop stores in India) while they love the shoppingexperience of malls. Besides, the bulk shopping that they do at these modern retailsstores, there are the daily top-ups to do at the local groceries (Kirana Stores) and theperishables that have to be bought daily. For Kiranas the proximity is the majoradvantage. Considering the largest retailer, Pantaloons (through Food Bazaar), does notthink it a bright idea to compete with them, discount retailer Subhiksha still fine-tuningits format. “There is a huge opportunity in home deliveries and the trick is to beat thekirana stores at their own game,” says R. Subramaniam, Managing Director, andSubhiksha Retail.Today home delivery services comprises a mere 5% of the leading food retailer turnoverbut the players like Wadhwan foods, pyramid retail’s True Mart, Subhiksha are expectingto generate more than 20% of their total revenue from the home delivery services.Having set up multi-channel distribution systems after buying Sangam Direct, the homedelivery channel of HUL, Wadhwan Foods would be exploiting the synergies between itsstore and non-store formats. For instance, it would now have the call centers operating onbehalf of Sangam Direct or to direct calls to its nearest Spinach outlets to servicecustomers. Sangam Direct was operating under central warehousing concept which istime consuming as well as it incurs more cost.Here Kiranas leads the organized retailer due to there reach in the market. In order toincrease the reach in the market the organized sector should include a Hub and Spokemodel in their supply chain. Instead of going for the centralized warehouse, small-sizedconvenience stores are likely to be the ones to crack the home delivery format.The organized retail stores have to match with the consumer expectations. Kiranas arealready offering this programme which includes stock rotation and loyalty programs,along with credit and discount policies. The organized retail stores still have to learn a lotfrom the kiranas. 36 | P a g e
  37. 37. InterviewKirana Stores: (Central Kirana Stores)This store is the small, friendly neighborhood stores, which have been offeringcustomized services to their customers. The shop,which has contributed to this study, is situated insmall locality at Kurar village, Malad (E). Centralstores have seven branches out of which five aresituated in Malad (E) itself; covering differentareas and the rest three are situated in Gorgon(W). These stores are of different sizes and hadbeen in existence right from 5-7 years. Theowner’s name is Mr. Rajesh Shah and he hasbeen quite successful in his field.The information gathered through the interviews is given below –The store provides a wide range of varieties of products. In addition to groceries, otheritems are also sold like stationary, imported food articles, cold drinks, ice creams,medicines etc.The owner said that the store had a higher percentage of regular customers than walk-incustomers. The regular customers were from the nearby areas, but he also claimed tohave customers from far off areas too. New customers are usually generated throughword-of-mouth.The owner himself decides on which brands to stock according to the preferences of theircustomers and estimated the amount of goods to stock according to their periodic salesfigures.The owner expressed a desire to expand his stores if given the opportunity to do so;however, he lacked finance and space to expand. He believed that a shop located on themain road would have more sales. He also said that he was satisfied with his businessvolume and in addition, he has no time to look after a bigger store.When asked about why their regular customers chose to visit their store, the owner listedavailability of good quality and fresh products, customer satisfaction, prices and owner-customer relationship as the primary reasons for their customers loyalty.Central Kirana stores provide free home delivery to their customers and had a creditperiod ranging from 15 to 30 days which may go upto 60 days depending upon theworthiness of customers.On an average, these stores remained open from 8 in the morning to 10 in the night. Thestore also remained open on Sundays, at least for half a day. 37 | P a g e
  38. 38. Do you think that the expansion of malls (modern retailing) is becoming a barrier for thegrowth of local kirana shops? Do the store owners have to fear from the development ofmalls? Give your opinion.(Translated in English) The kiranas have evolved to cater to different segments of themarket and I feel that they are making enough profits which is why they continue to be inthe business. Till recently “kiranas” or neighbourhood stores were the only choiceavailable to the consumer, even in the urban areas. But slowly and gradually the situationis changing. Over the last 5-6 year, there has been asignificant growth in the number of malls. There isan increased demand for quality retail space whichincludes food & apparel chains, consumer durables& multiplex operators. Since the consumer’spreference has been diverted towards malls, localkirana stores have to suffer badly but “I don’t feelthat existence of Supermarkets have affected myBusiness at all, infact due to its existence we havebecome more customers oriented. We have aspecific customer base from long ago and the newcustomers add on everyday. We just try our optimum to satisfy and maintain thecustomers offering them discounts and mothwatering rates in varied products. Initially itwas tough but now we are able to satisfy all the needs of the customer, infact we end overproviding the, augmented products. 38 | P a g e
  39. 39. Changing Face of KiranaThe Indian manufacturers and marketing companies have resorted to an aggressivepromotional activity in the kiranas by hiring exclusive shelves. Products of thesecompanies get captive shelf space, a win-win situation for both the parties. Certainly theaggressiveness has come in the wake of the arrival of foreign companies with cash-and-carry operations.While many of these companies are prospective suppliers to the larger formats, but at thesame time they are well aware of the negotiating power of the large formats. Every DayLow Price (EDLP) most prevailing strategy of large formats is again cause of worry. Thishas also given the Kirana a shot in the arm, in terms of improving their image. TheKirana are getting more organized coupled with more customer friendly environment.Kirana have also resorted to innovating ways of Customer Relation Management, largelybeing seen as domain of large corporate till now.The brand manufacturers need to walk the tight rope while planning their response tolarge formats to ensure that while they get to supply the retail giants, they also dontalienate the local Kirana. While dealing with the large buyers like Wal-Mart or RelianceRetail, they need to understand the relative power structure of the buyers and them willchange. National brands, such as Hindustan Lever and Procter & Gamble, should findinnovative ways to help Kirana with tailored services to ensure they also thrive and dowell.Kishore Biyani - face of Indian Retail Industry - says, "In India, no retailer has made bigmoney so far. The money is in the peripheral activities; its never in the retail itself. Itsthe power of retail that gets you the money; its never the transaction that gets you themoney." The ambivalent tone of the statement suggests that the underlying dynamics ofstand-alone retail are not attractive.Local Kirana is here to stay for ever, in its new avatar! 39 | P a g e
  40. 40. Unorganized Retailing is getting OrganizedTo meet the challenges of organized retailing that is luring customers away from theunorganized sector, the unorganized sector is getting organized. 25 stores in Delhi underthe banner of Provision mart are joining hands to combine monthly buying. BombayBazaar and foodmart have also been formed which are aggregations of Kiranas.Indias retail sector is going to transform and with a three-year compounded annualgrowth rate of 46.64 per cent, retail sector is the fastest growing sector in the Indianeconomy. Traditional markets are transforming themselves in new formats such asdepartmental stores, hypermarkets, supermarkets and specialty stores. Western-stylemalls have begun appearing in metros and near metro cities, introducing the Indianconsumer to a new shopping experience.KSA-Technopak, a retail consulting and research agency, predicts that by 2010,organized retailing in India will cross the US$ 21.5-billion mark from the current size ofUS$ 7.5 billion.The Indian retail market is of enormous size about US$ 350 billion. But organized retailis not so huge and it is at only US$ 8 billion. However, the opportunity for growth ishuge—by 2010, organized retail is expected to grow to US$ 22 billion. With the growthof organized retailing estimated at 40 per cent over the next few years, Indian retailing isclearly at a tipping point.This article is an attempt to analyze the areas where retail sector is growing and willgrow, what will be the target market segment for the retailers and how will they try toserve this segment. 40 | P a g e
  41. 41. Indian Organized Retail Market (Shopping Malls, Supermarkets)Indian organized retail market is growing at a fast pace due to the boom in the India retailindustry. In 2008, the retail industry in India amounted to Rs 10,000 billion accountingfor about 35% to the countrys GDP. The organized retail market in India out of this totalmarket accounted for Rs 350 billion which is about 4% of the total revenues.Retail market in the Indian organized sector is expected to cross Rs 1000 billion by 2010.Traditionally the retail industry in India was largely unorganized, comprising of drugstores, medium, and small grocery stores. Most of the organized retailing in India havestarted recently and is concentrating mainly in metropolitan cities. The growth in the Indian organized retail market is mainly due to the change in theconsumer’s behavior. This change has come in the consumer due to increased income,changing lifestyles, and patterns of demography which are favorable. Now the consumerwants to shop at a place where he can get food, entertainment, and shopping all under oneroof. This has given Indian organized retail market a major boost.Retail market in the organized sector in India is growing can be seen from the fact that1500 supermarkets, 325 departmental stores, and 300 new malls are being built. ManyIndian companies are entering the Indian retail market which is giving Indian organizedretail market a boost. One such company is the Reliance Industries Limited. It plans toinvest US$ 6 billion in the Indian retail market by opening 1000 hypermarkets and 1500supermarkets.Pantaloons is another Indian company which plans to increase its retail space to 30million square feet with an investment of US$ 1 billion. Bharti Telecoms an Indiancompany is in talks with Tesco a global giant for a £ 750 million joint venture. A numberof global retail giants such as Wal-Mart, Carrefour, and Metro AG are also planning toset up shop in India. Indian organized retail market is increasing and for this growth tocontinue, the Indian retailers as well as government must make a combined effort. 41 | P a g e
  42. 42. Origin of Modern Retailing in IndiaRetailing, which is one of the largest sectors in the global economy, is going through atransition phase in India. However the Indian retail sector is still in a nascent stage.Organised retailing still contributes to only about 2% of the total retailing in the country.Now a question that would arise is what constitutes Organised Retailing. Mr. RaghuPillai, the Managing Director of Food World, which is one of the leading organised foodsretailing chain in India, says that, “Organised Retailing presupposes a retailers’ ability tomanage or more importantly influence a set of supply chain variables in a commerciallyviable and sustainable way”. Efficient management of the supply chain to ensure theprofitability of the entire chain, large outlets with modern ambiance and facilities, a wideproduct profile, self service facilities etc are generally the features of a modern retailstore. Organised retailing aims at providing an ideal shopping experience for theconsumer based on the advantages of large-scale purchases, consumer preferenceanalysis, excellent ambience and choice of merchandise. However, there are no singleformats, designs, facilities or product portfolios that can be identified as the successformula and as a general rule differentiation between chains is necessary to increaseviability.For a long time, the corner grocery store was the only choice available to the consumer,especially in the urban areas. This is slowly giving way to international formats ofretailing. The traditional food and grocery segment has seen the emergence ofsupermarkets/ grocery chains.Largely in the post independence period, Indian retailing has been unorganized, to themost part untouched by corporate business principles. When the economy started to beopened in the 1980s the situation began to change slowly. Emergence of retail chains wasat first witnessed in the textiles sector, with companies like Bombay Dyeing, Raymond,S. Kumar‘s and Grasim, opening their own outlets. Titan then successfully created aretailing concept, by establishing its series of elegant showrooms. The later half of thenineties has been a witness to a fresh wave of entrants in the retailing business. The newchains have not been restricted to textiles and garment sellers but there have been entrantsfrom various fields of commerce. Foodworld and Subhiksha in food and Fast-MovingConsumer Goods; Musicworld and Music café in music; Vivek’s and Vijay sales in theconsumer durables etc were the beginners. Now the number of players and the variety offormats and product categories reflect variety. 42 | P a g e
  43. 43. Growth of Modern / Organised Retail in IndiaOrganised retailing in India initially began in the south. The availability of land at primelocations coupled with lower real estate prices (compared to Mumbai and Delhi) mademulti-storeyed shopping complexes possible. And now south India – notably Chennaiand, to a lesser extent Bangalore and Hyderabad – has emerged as a centre of organisedretailing. In fact, in Chennai, nearly 20% of food sales now is accounted for by supermarkets and an equal share of consumer durables is sold through specialty chainsVivek’s.It took two years of recession for this concept of shopping to take root in major cities likeMumbai and Delhi. Recession brought down property prices in these cities, and it wasduring this slump that big business houses took notice of the potential in retailing.India is rapidly evolving into an exciting and competitive marketplace with potentialtarget consumers in both the niche and middle class segments. Manufacturer – owned andretail chain stores are springing up in urban areas to market consumer goods in a stylesimilar to that of malls in more affluent countries. Even though big retail chains likeCrossroads, Saga and Shoppers’ Stop are concentrating on the upper segment and sellingproducts at higher prices, some like RPG’s Food World and Big Bazaar are tapping thehuge middle class population. During the past two years, there has been a tremendousamount of interest in the Indian retail trade from global majors as well. Over the years,international brands like McDonalds, Swarovski, Lacoste, Domino’s, Pepsi, and Benettonamong a host of others have come in and thrived in India.Retailing is one of the fastest growing industries in India, catering to the world’s second –largest consumer market. A sunrise industry, it offers tremendous potential for growthand contributes 8 – 10% to overall employment. However, this is still low as compared to20% in the USA. As India moves towards being a service-oriented economy, a rise in thispercentage is expected. The number of retail outlets is growing at about 8.5% annually inthe urban areas, and in towns with a population between 100,000 to 1 million the growthrate is about 4.5%. With the increasing assertiveness of the Indian consumer, and agrowing supply base – both from within Indian as well as from other countries ( withimport becoming easier) – the retail sector in India is poised for a significant change inthe coming decade.However, the boom in retailing has been confined primarily to the urban markets. Thereare two main reasons for this. Firstly, the modern retailer is yet to exhaust theopportunities in the urban market and has therefore probably not looked at other marketsseriously. Secondly, the modern retailing trend, despite its cost-effectiveness, has come tobe identified with lifestyles. In order to appeal to all classes of the society, retail storesneed to identify with different lifestyles. In a sense, this trend is already visible with theemergence of stores with an essentially ‘value for money’ image. The attractiveness ofthe other stores actually appeals to the existing affluent class as well as those who aspireto be a part of it. Hence, one can assume that the retailing revolution is emerging alongthe lines of the economic evolution of society. 43 | P a g e
  44. 44. Organised Retail in India( Wednesday, July 18, 2007)As India surges high with its growth story, the retail sector in the country is bound tocome across opportunities like never before. Till a few years back, the retail sector inIndia was more of an unorganized one with petty vendors dominating the chunk of theindustry but now the scenario has fast been changing. Finally, the sector is convertinginto what we call as organized retailing.Not only Indian corporate majors like Reliance, ITC and Pantaloon have entered into thesegment but more and more foreign players are also showing interest in USD 350 billionIndian retail markets.Today, we turn around and find huge shopping malls and multiplexes all the way.Perhaps that’s why the retail revolution is said to be spearheading the real estate boom inIndia.The retail sector boomWhile the Indian real estate markets boom with organized retailing, the segment ensures afluffy growth pad for itself. According to the estimations of KSA-Technopark, a retailconsulting and research firm, organized retailing in India will grow three-fold in the next3-years, achieving the size of USD 21.5 billion from the current one of USD 7.5 billion.Given the favourable growth patterns, expanding middle class and easing economicpolicies, India is ranked as the most attractive emerging markets for retail investment,even above Russia and China.KIT: Organised retail in India APRIL 21, 2009The organised retail market in India is about $18 billion (Rs 89,217 crore).It is estimated to grow more than 40 per cent year-on-year, considering the expectedinfusion of over $30 billion (Rs 148,995 crore) in the next five years.Over 20,000 new retail outlets are expected to open within this segment, givingemployment to over 150,000 people.By 2013, organised retail is likely occupy 500 million square feet of space.The total employment to be generated from growth over the next five years is estimatedat over 2 million. 44 | P a g e
  45. 45. Factors Estimated to Propel the Growth of the Organized Retailing: Increased Purchasing Power: The National Council of Applied Economic Research classifies households into five categories—lower, lower middle, middle, upper middle and high. The movement of households within these income categories reflects the changing dynamics of the Indian market. 33% of Indian households are in the middle- to high-income category in 2004. This is projected to increase to 49% by 2010. The impact of increasing income levels is reflected in the sales trend for high involvement products like cars and multi-utility vehicles (MUVs) in the Indian market. The Society of Indian Automobile Manufacturers registered growth in commercial vehicle segment a rate of 10%. While the M&HCV segment has grown by 4.5%, the LCVs grew by more than 19% during 2005-06 as compared to 2004-05. Changing Consumption Patterns: The rapid pace of organized retailing is fueled by changing consumer habits in both cities and large town by (DINKS) Double income no kids group and increased aspirations caused by exposure to the satellite television, cable and other channels. The growth for the changing habit patterns would be affected by the mobile telephones (new product categories like ring tones estimated at INR 400 crore) and increasing credit- card usage (estimated to reach 21mn the end of 2006). Young Indian Consumers: The Indian consumer segment is the youngest in the world with a median age of 24 as compared to other developed nations. With fertility rates at an estimated three children per woman and a population growth rate at 1.6% pa, the population is expected to continue to grow to 2050. There should also be a big surge in the 20-34 age group—up from 210m (25%of the total population) in 1991 to an estimated 312m (27% of the total population) by 2010. This increase in population would lead to acceleration of demand of personal care products and personalized financial services. More Available Retail Space: The boom in the retail sector is also associated with the rise of mall all across the country. There are 220 mall project in the pipeline till 2007, 139 in the big 8 cities including the metros and 81 in other Tier II cities. Developers are keeping in mind the astonishing pace with which the new supply is expected to enter the market and are developing ‘specialty malls’ and other propositions to offer a different experience to the changing consumer. 45 | P a g e
  46. 46. Easier Financing: Interest rates have dropped down over a couple of years making it much easier for investors to develop a mall and economically viable for retailers to set up shops. The fall in real-estate prices as well as lower borrowing rates still ensure that current rental yields are attractive for developers. Improved Logistics and Better Infrastructure: Infrastructure spending has improved the state of India’s roads and transport system. Connectivity has enabled the faster movement of goods, especially perishable goods, from one part of the country to another. Logistics has improved, enabling more efficient retail operations. Retailers have benefited from the improved infrastructure, and further improvements should only increase the benefits to retailers. As the retailers continue to grow their presence, there is going to be an imminent need for a single, enterprise-wide IT platform to manage operations. At the close, it may be considered that organized retailing in India is a sunrise sector. Despite being at a fairly nascent stage of its evolution and facing certain hindrances posed by socio- economic factors, it has a fine promise to emerge as a front runner in times to come.Indian Organized Retail Scenario 46 | P a g e
  47. 47. Organized Retailing FormatsDesigning a retail format depends on several factors – product categories stocked, targetcustomers’ demographic profiles, real estate costs, brand consistency and location being afew of them. For example – groceries, teenage crowd, affluent neighborhoods and nicheproducts influence to a large extent the kind of ambience and display to expect.“Evolving Retail Formats”, traces the origins of various retail formats such assupermarkets, department stores, discount stores, hypermarkets and many more. Theunderlying factors responsible for the acceptance and popularity of the formats give anidea about the way organized retail has kept pace with marketers’ requirements andcustomer’s expectations. Format choice determines to a large extent viability of retailenterprise, along with location.Wider product basket, broader brand choice, desire for better value, craving for acomfortable ambience, drive for a bargain price, one-stop shopping for a wide assortmentof products and narrow product category shopping – all played a role in evolution ofdifferent formats. While many formats were dictated by changing customer needs andperceptions, a professional approach by retailers themselves was responsible forexperimentation in formats. Some of the prevalent relating formats in India include: Convenience stores:These are relatively small stores 400-2,000 sq. feet located near residential areas. Theystock a limited range of high-turnover convenience products and are usually open forextended periods during the day, seven days a week. Prices are slightly higher due to theconvenience premium. MBO’s: Multi Brand outlets, also known as Category Killers, offer several brands across a single product category. These usually do well in busy market places and Metros. Supermarkets: Large self service outlets, catering to varied shopper needs are termed as Super markets. These are located in or near residential high streets. These stores today contribute to 30% of all food & grocery organized retail sales. Super Markets can further be classified in to mini supermarkets typically 1,000 sq ft to 2,000 sq ft and large supermarkets ranging from a size of 3,500 sq ft to 5,000 sq ft. having a strong focus on food & grocery and personal sales. The concept of enabling a better ‘shopping experience’ can be traced to the spread of supermarket culture – which attracted customers from a large geographic pocket. Nilgiris and Food World are major Indian players operating in this way. 47 | P a g e
  48. 48. Department stores:Department stores stock a deep collection of a wide range of product categories – inemerging and new product categories. Perceived higher value by customers (unhurriedshopping) and providing better ambience by retailers brought about remarkabletransformation in the way retailing went higher up the value chain. These are largestores ranging from 20000-50000 sq. ft, catering to a variety of consumer needs. It canbe further classified into localized departments such as clothing, toys, home, groceries,etc. shoppers’ Stop, J C Penny, Lifestyle and Sears – with their assortment of productsand services are prime examples of national and international department stores.Discount Stores:Discount Stores are scaled down (stock less upmarket products) versions of departmentstores, located in low-cost areas. They have relatively wider range and smallercollection. While bulk buying aids them to sell at lesser prices, recourse is also taken tosource season-end products and manufacturers’ ‘seconds’. As the name suggests,discount stores or factory outlets, offer discounts on the MRP through selling in bulkreaching economies of scale or excess stock left over at the season. The productcategory can range from a variety of perishable/ non perishable goods. Target andKmart are examples of this format.Hypermarkets:Hypermarkets are a one-stop-for-all-needs kind of offering (with 400-600 SKU’s),spread over a huge area and bridging the gap between FMCG and durables’ outlets.They are typically large, starting from 40,000sq. ft plus are usually located outside thecity limits. This format comprises of a multiple division layout, and usually has an”industrial- look” interior. Hypermarkets generally provide daily necessities and grocerylike items. Pricing is competitive and they also offer volume discounts. Driven by bulkpurchase and bulk selling, everyone gained, with the exception of erstwhile tradepartners of manufacturers. Hypermarkets brought into focus the scale of operations –volume driven sustenance. Giant, promoted by RPG group, is a recent Indian initiativeinto this format.Shopping Malls:It is the largest form of organized retiling today. Shopping malls’ popularity can beascribed to a shift in the attitude towards shopping. Unlike the disadvantage ofsufficient travel demanded to reach out to a hypermarket, malls sprang up at relativelynearer localities. Malls are located mainly in metro cities, in proximity to urbanoutskirts, this format ranges from approximately 60,000 sq ft to 7,00,000 sq ft andabove. They lend an ideal shopping experience with an amalgamation of product,service and entertainment, all under a common roof. Indias largest shopping arcadeSpencer Plaza (600,000-sq-ft) in Chennai is an example. 48 | P a g e
  49. 49. Specialty Stores:These formats focus on a specific product category, Medium sized layout in strategiclocation. Specialty stores provide a large variety base for the consumers to choose from.Despite the presence of the basic ingredients required for growth of the retail industryin India, it still faces substantial hurdles that will retard and inhibit its growth in thefuture. One of the key impediments is the lack of FDI. This has largely resulted inlimited capital investments in supply chain infrastructure, which is a key fordevelopment and growth of retailing and has also constrained access to world-classretail practices. Lack of proper infrastructure and relatively high cost of real estate arethe other impediments to the growth of retailing. While the industry and thegovernment are trying to remove many of these hurdles, some of the roadblocks willremain and will continue to affect the smooth growth of this industry. Examples includefoot ware, garments, consumer electronics, watches, food, Jewellery, books and music. 49 | P a g e
  50. 50. Experimentation with FormatsRetailing in India is still evolving and the sector is witnessing a series of experimentsacross the country with new formats being tested out; the old ones tweaked around or justdiscarded. Some of these are listed in Table below.Retailer Current Format New Formats. Experimenting WithShoppers Stop Department Store Quasi-mallEbony Department Store Quasi-mall, smaller outlets, adding food retailCrossword Large bookstore Corner shopsPiramyd Department Store Quasi-mall, food retailPantaloon Own brand store HypermarketSubhiksha Supermarket Considering moving to self serviceVitan Supermarket Suburban discount storeFoodworld Food supermarket Hypermarket, Foodworld expressGlobus Department Store Small fashion storesBombay Bazaar Aggregation of KiranasE food mart Aggregation of KiranasMetro Cash and carryS Kumars Discount storeRetailers are also trying out smaller versions of their stores in an attempt to reach amaximum number of consumers. A crossword bookstore is experimenting withCrossword Corner, to increase reach and business from their stores. Foodworld isexperimenting with a format of one-fourth the normal size called Foodworld Express. 50 | P a g e