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  • 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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
  • 51. Challenges before Organized Retailing in India Government restrictions on FDI: Organised retailing in India is yet to get an industry status. The consequence is quite obvious. 100% Foreign Direct Investment (FDI) is not permitted in retailing in India. Ownership of retail chains is allowed only to the extent of 49%. The Food World chain is one such venture, with an ownership pattern of 51:49 between RPG and Dairy Farm International, Hong Kong. Foreign players can enter the wholesale sector, in the cash and carry format. The Metro chain has recently entered the country as a ‘cash and carry’ outlet. A branch has been opened in Bangalore and a second would be opened very soon in the same city. The fear that the small-scale retailers will be displaced is delaying the FDI approvals. On the other hand, without the FDI, the sector is deprived of access to foreign technologies that is imperative for faster growth. The Government has allowed FDI in direct marketing, but has reservations about extending it to the retail sector. Retailing is a ‘technology intensive’ industry. Under the liberalized regime of the WTO the ‘Protected nature’ of an industry may do more harm than good. In the short-run the Government may succeed in protecting the domestic industry, but in the long run we would be loosing too many opportunities and technological innovations. This, in addition would also block any attempt by the domestic industry to become competitive internationally. Lack of a uniform tax: The country requires a uniform tax system for the organized retailing. Due to lack of this, it stands as an obstruction to the setting up of a truly national chain. The present chains, in spite of claiming to be national chains are restricted to certain regions of the country. Players are confined to state barriers. Since retailing is essentially a business of supplying commodities to locations far from production units, a differential tax system in different states is surely turning to be a hindrance to faster development of this Industry. A central tax system becomes more imperative in a country like India where, the regional disparity in production of commodities is high. Lack of adequate infrastructure: Players are forced to set up their own infrastructure, as there are few independent logistics solution providers. Entrepreneurs to invest in infrastructure development for different stages of the supply chain are also limited. Dominance of the unorganized sector: The unorganized sector has dominance over the organized sector in India, especially because of the low investment needs. In India, organized retailing is only 2% of total retailing of worth US$ 180 billion. This is playing at multiple levels. For instance, the reason for low number of discount stores in India is an effect of the dominance of the 51 | P a g e
  • 52. unorganized sector. As a result of this small scale of operation of retailers, themanufacturers’ have high bargaining power in the pricing of products The lobbying bythe unorganized sector is also the main reason for the Government of India’srestrictions on 100% FDI in retailing in the country.Low operational size:The number of retail outlets in India is more than the number of outlets in most of theother countries; small size retail outlets dominate the Indian scene. 96% of the outletsare lesser than 500 sq ft. The retail chains of India are also smaller than those in thedeveloped countries. For instance, the superstore food chain, Food World is havingonly 52 outlets whereas ‘Carrefour- Promodes’ has 8800 stores in 26 countries. Thevolume of sales in Indian retailing is very low, which is only $180 billion. Even thelargest players have a turn over of only US $ 140 million, which is very small by theglobal standards. India with second largest population in the World and a fast growingeconomy has huge untapped potential of organized retailing, which is not given its dueweightage by the government.Labour employment problems:Organized retailing is a 24 X 7 active business. However, this is much restrictedcurrently in India because of the labour rules and regulation. The sector is unable toemploy retail staff on contract basis. This makes it difficult to efficiently manageemployee schedules especially for 365-day operations. The industry has to take specialclearance for extended working hours and even seven days working from the Labourdepartment. However, in the recent budget government has relaxed norms onemployment of contract labour, which is expected to benefit the industry.Government Initiatives for Improvement of the Sector: Apart from allowing FDI into the industry, Government should consider providingincentives and amending labour laws etc. Shortage and high cost of real estate, tenancylegislation and high property tax etc. are other areas to be concentrated by theGovernment. Government should relax such laws and make available property atreasonable prices. Government should introduce a Single Window System at the localGovernment level to clear the multiple numbers of licenses and complex regulations.Government should also introduce uniform taxation all over the country to relax thelaws that are restricting the inter-state flow of goods. 52 | P a g e
  • 53. SWOT Analysis of Organized MarketSTRENGTHS Organized retailing at US$ 3.31 billion, growing at 8%. Second largest contributor to GDP after agriculture at 20%. Pattern of consumption changing along with shopping trends. A Growing population will translate to move consumers. Consumer spending increasing at 11% annually. Almost 25 million sq. ft. retail space available. Paradigm shift in shopping experience for consumers pulling in more people. Most of the entrants to organized retail come from 3 main categories, and have ventured into retail as their business extension. Real Estate Developers Corporate Houses Manufacturers / ExportersWEAKNESSES Shortage of quality retail spaces at affordable rates. Government regulations on development of real estate(Urban Land Ceiling Act) Need to provide Value for Money-squeezing margins Lack of industry status. Retail revolution restricted to 250 million people due to monolithic urban-rural divide. Footfalls not a clear indicator of sales as actual consumers lower in number. Lack of huge investments for expansion.OPPORTUNITIES Increasing urban population-more participants in retail revolution. Increase in consuming middle class population. Social factors like dual household income have enhanced spending power. 53 | P a g e
  • 54. Spends moving towards lifestyle products and esteem enhancing products. Availability of old industrial lands-prime real estate locked in sick industrial units. Average grocery spends at 42% of monthly spends-presents a huge opportunity. Increase in use of credit cards.THREATS Rising lease/rental costs affecting project viability FDI restrictions in the retail sector Poor monsoons and low GDP Growth could affect consumer spending drastically. Archaic labour laws are a hindrance to providing 24/7 shopping experience Personalized service offered by Mom-&-Pop stores. Unavailability of qualified personnel to support exponential growth in retail. Differentiate taxation laws hindering expansionTop 10 Retailers in India1. Pantaloon Retail:It is headquartered in Mumbai with 450 stores across thecountry employing more than 18,000 people. It can boast oflaunching the first hypermarket Big Bazaar in India in 2001.An all-India retail space of 5 million sq. ft. which is expectedto reach 30 mn by 2010. It is not only the largest retailer in India with a turnover of overRs. 20 billion but is present across most retail segments - Food & grocery (Big bazaar,Food bazaar), Home solutions (Hometown, furniture bazaar, collection-i), consumerelectronics (e-zone), shoes (shoe factory), Books: music & gifts (Depot), Health &Beauty care services (Star, Sitara and Health village in the pipeline), e-tailing(, entertainment (Bowling co.)One of their recent innovations include e-commerce’ hybrid format of ’small’ shops , thearea for these stores will be 150 sq. ft. fitted with 40 digital screens. Customers will beencouraged to browse through the entire range of products on digital screen. They will beable to place the order, the delivery of which will be arranged by the shop to their homeswithin a few hours2. K Raheja GroupThey forayed into retail with Shopper’s Stop, India’s firstdepartmental store in 2001. It is the only retailer from India to becomea member of the prestigious Intercontinental Group of DepartmentalStores (IGDS). They have signed a 50:50 joint venture with theNuance Group for Airport Retailing. Shoppers Stop has 7, 52, 00 sq ftof retail space with a turnover of Rs 6.75 billion. 54 | P a g e
  • 55. The first Hypercity opened in Mumbai in 2006 with an area of 1, 20,000 sq. ft. clockinggross sales of Rs. 1 bn in its first year.Crossword brand of book stores, Homes stop a store for home solutions, Mothercare aconcept stocking merchandise related to childcare are also owned by them. Recently,Raheja’s have signed an MoU with the Home Retail Group of UK to enter into afranchise arrangement for the Argos formats of catalogue & internet retailing.The group has announced plans to establish a network of 55 hypermarkets across Indiawith sales expected to cross the US$100 million mark by 2010.3. Tata group:Established in 1998, Trent - one of the subsidiaries of Tata Group - operatesWestside, a lifestyle retail chain and Star India Bazaar - a hypermarket with alarge assortment of products at the lowest prices. In 2005, it acquired Landmark,Indias largest book and music retailer. Trent has more than 4 lakh sq. ft. spaceacross the country. Westside registered a turnover of Rs 3.58 mn in 2006.Tata’s has also formed a subsidiary named Infiniti retail which consists of Croma, aconsumer electronics chain. It is a 15000-17000 sq. ft. format with 8 stores as ofSeptember 2007.Another subsidiary, Titan Industries, owns brands like “Titan”, the watch of India has200 exclusive outlets the country and Tanishq, the jewellery brand, has 87 exclusiveoutlets. Their combined turnover is Rs 6.55 billion.Trent plans to open 27 more stores across its retail formats adding 1.5 mn sq ft of spacein the next 12 DLF malls.4. RPG group:One of the first entrants into organised food & grocery retail withFoodworld stores in 1996 and then formed an alliance with Dairy farmInternational and launched health & glow (pharmacy & beauty care) outlets.Now the alliance has dissolved and RPG has Spencer’s Hyper, Super, Dailyand Express formats and Music World stores across the country.RPG has 6 lakh sq. ft. of retail space and has registered a turnover of Rs 4.5 billion in2006.It is planning to venture into books retail, with the launch of its own bookstores “Booksand Beyond” by the end of 2007. An IPO is also in the offering, with expansion to 450+MusicWorld, 50+ Spencers hyper outlets covering 4 million sq. ft. by 2010. 55 | P a g e
  • 56. 5. Landmark group:were launched in 1998 in India. Lifestyle is spread across six cities,covering 4.6 lakh sq. ft. with a turnover of Rs 3.5 billion in 2005. A newdivision named Lifestyle International has emerged for their internationalbrands business comprising Bossino, Kappa and Springfield in theirportfolio.Their retail mix includes Home solutions (Home centre), fashion (lifestyle, landmarkInternational), value retailing (max retail), hypermarkets & supermarkets (Max), kidsentertainment (Funcity).They plan to invest Rs. 300 crores in the next two years to expand on Max chain, and Rs100 crores on Citymax 3 star hotel chain. They have already instituted a separatecompany christened Citymax Hotels (India).6. Piramal GroupIn September 1999, Piramal Enterprises announced their arrival into retail with thelaunch of three retail concepts: Indias first true shopping mall ofinternational standards, called Crossroads; a lifestyle department store namedPiramyd Megastore; and a family entertainment centre known as Jammin.Piramyd Megastore and Jammin were anchor tenants for Crossroads (recentlysold to Pantaloon for Rs 4 billion). In 2001, the group entered the business offood & grocery retail with the launch of TruMart supermarkets in Pune.They have around 18 TruMart stores covering 1.90 lakh sq. ft. registering aturnover of Rs 37.6 mn in 2005. Piraymd Megatsore’s contributes more than 70 % totheir retail mix with a turnover of Rs 112.8 mn. They plan to open 150 stores covering 75mn sq ft of retail space in the next 5 years.7. SubhikshaSubhiksha is a Chennai-based, decade old, no frills, food, grocery, pharma andtelecom, discount retail chain. ICICI Venture Capital holds 24% in the equitycapital of Subhiksha. It has more than 500 stores across the country covering aretail space of more than 1 million sq ft with a registered turnover of Rs 3.34 bnin 2006. It has a planned investment of Rs.300 crores to ramp up its operations to 1200stores by 2008.New but potential BIG players8. Bharti-Walmart:Their plans include US$ 7 bn investment in creating retail network in thecountry including 100 hypermarkets and several hundred small stores. 56 | P a g e
  • 57. They have signed a 50:50 percent joint venture agreement with Walmart. Wal-Mart willdo the cash & carry while Bharti will do the front-end.9. RelianceIndia’s most ambitious retail plans are by reliance, with investments to thetune of Rs. 30,000 cr ($ 6.67 bn) to set up multiple formats with expectedsales of Rs 90,000 crores ($20 bn) by 2009-10.There are already more than 300 Reliance Fresh stores and the firstReliance Mart Hypermart has opened in Ahmedabad. The next ones are slated to open atJamnagar, followed by marts in Delhi / NCR, Hyderabad, Vijaywada, Pune andLudhiana.10. AV Birla GroupThey have a strong presence in apparel retailing through Maduragarments which is subsidiary of Aditya Birla Nuvo Ltd. They own brandslike Louis Phillipe, Van Heusen, Allen Solly, Peter England, Trousertown.In other segments of retail, AV Birla Group has announced investmentplans of Rs 8000 - 9000 crores in the first 3 years till 2010.The acquisition of Trinethra (food & grocery) chain in the south has moved their tally to400 stores in the country. Their “More” range of 15 supermarkets are slated to open atNashik, Pune and other tier II cities in Western India in 2007.Chillibreezes disclaimer: The views and opinions expressed in this article are those of theauthor(s) and do not reflect the views of Chillibreeze as a company. Chillibreeze has astrict anti-plagiarism policy. Please contact us to report any copyright issues related tothis article. 57 | P a g e
  • 58. Malls: The New Face of Retail MarketThe latest trend in the corporate universe is of the emergence of the shopping malls.Shopping Malls are an emerging trend in the global arena. The first thing that comes inour mind about the shopping malls is that it is a big enclosed building housing a varietyof shops or products. According to historical evidences shopping malls came intoexistence in the Middle Ages, though it was not called so. The concept of departmentalstores came up in the 19th century with the IndustrialRevolution. Consumers wanted a better shoppingexperience and this demand gave rise to the emergenceof shopping malls in India.Originally the first of the shopping malls was opened inParis. Then the trend followed in the other metros overthe world, and there was a spree of shopping mallscoming up at various places. In this age of massproduction and mass consumption, the concept ofshopping malls is most modern method of attractingconsumers. The concept of shopping was alteredcompletely with the emergence of these shoppingmalls.Shopping was no longer limited to a mere buyingactivity - it has become synonymous with splurging time and money. People simply goabout roaming through the shopping mall in order to peep through the window of theshop and often ending up buying something they like. The consumers desire acombination of comfort and suitability which the shopping malls cater to, and so thisformat of shopping has become so popular all over the world, and especially so in India.The inclusion of amenities like restaurants, multiplexes, and car parks attract more andmore crowds to shopping malls that are considered family hangout zones.The new shopping malls that have been expanding their footprint across Indian cities arewell designed, built on international formats of retailing and integrated withentertainment and restaurants to provide a complete family experience. Over 300 mallsare expected to be built over the next two years and most Indian cities with over a millionpopulations will be exposed to this modern method of retailing.Shopping malls have existed in India since several decades but were designed and built tohouse several shops in a single facility. These malls also known as Shopping Arcadesoffered only rows of shops, most of which were small stores that promised bargains fortheir various wares. These Shopping Arcades tried to maximize on their store space anddid not offer any areas for recreation and entertainment.The present day malls are a creation of the past few years post 2000. They are designedprofessionally using a lot of international experience and combine shopping with a lot ofbrand building, recreation, food and entertainment. Malls also have a large format store 58 | P a g e
  • 59. that serves as their anchor for shopping and a prominent restaurant that anchors the foodneeds of visitors. Most malls also feature a multiplex cinema that offers entertainment tothe visitors of the mall. Finally the mall has large atria and open spaces to allow visitorsand families to hang-out.These new format malls are coming up in all the major cities of India. The cities that areseeing the first rush of malls are New Delhi, Noida, Gurgaon, Chandigarh, Mumbai,Pune, Bangalore, Ahmedabad, Chennai, Kochi, Hyderabad, and Kolkatta.The next run-up of the malls will be the second level cities of India that includesVisakhapatnam, Coimbatore, Trivandrum, Raipur, Bhopal, Surat, Jaipur, Kanpur,Lucknow, Ranchi, Cuttack, and DehraDun.The new malls are air-conditioned and have spacious areas and accesses which makethem a true breath of fresh-air from the earlier arcades and shop line streets that used tobe the available options for Indian customers.Advantages of shopping malls Increase in the growth of the organized retail sector Monumental increment in economic growth Employment generation by the organized retail sector Good competition means better products & services.Disadvantages of shopping malls The companies with superior resources would muscle out the ones inferior to them. Monopolization of the organized retail sectorIn India, the emergence of shopping malls has mostly altered the lifestyle of theconsumers. With the growth in income, changing attitudes, and also the demographicpatterns favor the emergence of shopping malls.The trends to follow in the future The shopping malls favor a growth in the Indian organized retail sector by 10% within 2010 There would be different formats of shopping malls depending on the region. 59 | P a g e
  • 60. Small is Big for Indian retailIts raining malls in small-town India. Whether its Kanpur, Ahmedabad, Indore, Agra,Baroda or Surat, the mall and multiplex culture has caught on in the countrys smallercities, powered by the burgeoning purchasing power of Indias middle-class. From ahandful of malls in the mid 90s, India today has nearly 200 malls spread across large andsmall cities. And 700 new malls are coming up all over India-40% of them concentratedin the smaller cities. Small-town India is the next big thing in the retail business. Consider these numbers: in2005, the contribution of smaller cities to total organized retailing sales was 15%. By theend of this year, that proportion is expected to grow to 25%. Organized retailing in small-town India is growing at a staggering 50-60% a year compared to 35%-40% in the largecities. The striking point is that it is the big names in the organized retail business that areeyeing these new opportunities.The Kishore Biyani-owned Future Group, Indias largest retailer, plans to invest Rs 3,600crore in 100 stores in 30 cities, increasing its retail space from 3.5 million square feet to30 million sq feet. The RPG group plans to open malls in all cities with a population ofover 8 lakh. Similarly, Wills Lifestyle, the garments and accessories retailing division of ITC Ltd,plans to increase its footprint by doubling the number of stores from 50 to around 100 inthe next two to three years, mostly in smaller cities. Even Sunil Mittals Bharti group hasannounced plans to get into food and farm products retailing. All these plans, however,are dwarfed by Mukesh Ambanis ambitions to do a Wal-Mart in India by investing $5.60billion (Rs 25,000 crore) and covering 1,500 cities and towns.The small-town retail boom could be considered a show-case of Indias free-marketprosperity. It is being powered by healthy economic growth that is making more Indiansmore prosperous. Organised retailers have understood this and are hoping to ride thewave, exploit the first-mover advantage and establish strong brand loyalties in theserelatively under-served markets.Indeed, this is probably the most compelling example of the trickle-down impact ofliberalization in India. Looking ahead, retail analysts suggest that the sustained success ofthe IT and ITeS industries in small towns is expected to create more jobs and enhancespending power. Typically, small cities offer a 15% to 30% cost advantage over larger cities, not just interms of employee costs but real estate costs as well, not to speak of the gains that accruefrom reduced staff attrition rates. This gap is expected to widen over the next few years,creating a pull for smaller towns that will, in turn, power the small-town retail revolution. 60 | P a g e
  • 61. At present, real estate costs present a major incentive for Indias organized retailers.Average rental values for ground-floor space are Rs 50-60 per square foot a month,against Rs 100-120 per sq foot a month in the bigger cities. However, a strong demandfor retail space has more than doubled rentals in cities like Jaipur, Chandigarh, Surat andLucknow. While in the metros, retailers are filling gaps by increasing more stores, insmall towns, these malls are way beyond the expectations of the consumers. These citiesare untapped markets and retailers find it important to establish their brands there.Smaller cities are seeing plenty of action. For instance, Ludhiana can already boastworldwide restaurant chains like KFC, McDonalds, Pizza Hut, Dominos Pizza, RubyTuesday and Subway. A new world-class, 25-acre commercial centre and some sevennew shopping malls-cum-entertainment centres are under construction.The Indian retail market is estimated at $350 billion. But organized retail is estimated atonly $8 billion. However, the opportunity is huge—by 2010, organized retail is expectedto grow to $22 billion. With the growth of organized retailing estimated at 40% (CAGR)over the next few years, Indian retailing is clearly at a tipping point. India is currently theninth largest retail market in the world. It is names like Dehradun, Vijayawada, Lucknowand Nasik that will power India up the rankings soon. 61 | P a g e
  • 62. The Retail Dictatorship V/s The Retail Democracy (The Unorganized Retail v/s The Organized Retail)SMALL v/s MALLIn 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 neighborhood “kirana stores” gets shriller.Those against opening the Indian market to foreign direct investment in the retail sectoruse a barrage of arguments but the most superficially potent one is the likely negativeimpact on the livelihood of the millions, currently eking a living from their small retailbusinesses.Even the most ardent supporters of liberalization in this sector become a bit uneasy whenfaced with the prospect of their causing misery to their fellow citizens.Is this really the way it will pan out in the Indian context when it comes to the fight forthe share of customer spending between the presumably powerful modern retailers andthe helpless, small traditional ones?As developments in modern retail begin to live up to the hype, a number of conflicts havestarted to emerge.There are four primary protagonists here. This list includes the small traders andwholesalers; the medium and large Indian business groups now entering retail with a bigbang; the major international retailers already in the country or have announced theirintention to be in India shortly notwithstanding the restrictions on FDI in this sector; andlastly, the medium and large FMCG and other consumer products suppliers whoseprimary channel of distribution is the millions of small, independent retail outlets.The prime conflict is between the large and the small retail. It has manifested through thevandalisation of Reliance Fresh stores in Ranchi, supposedly by small local fruit andvegetable vendors and local middlemen.While India has been seeing a rapid emergence of modern retail outlets in urban areas,with players like Foodworld, Subhiksha, Trinethra, Big Bazaar/Food Bazaar, Spinach,Spencers Hypermarkets, Shoppers Stop, and an isolated Shoprite and a Hypercity andsome others, for some reason the emergence of Reliance on the retail scene seems to haveacted as a catalyst for the emergence of this co nflict.It is called the Great Indian Retail Show. But, the "malling" of India could well end in the"mauling" of local grocery or Kirana (provision) stores. The mushrooming of big retailbazaars or malls in the country will take its toll on the neighborhood kirana store orbaniye ki dukaan (local traders), say industry watchers. Traders say that kirana stores are 62 | P a g e
  • 63. already feeling the heat with the arrival of malls in their immediate vicinity andregistering lower sales and revenues.Big supermarkets on residential high streets have replaced the local kirana stores. Witheverything from groceries and vegetables to footwear, clothes, cosmetics, furnishings andelectrical items available under one roof, a growing middle class with higher disposableincomes is heading for the malls in droves.According to estimates, the number of malls in India is expected to increase from 59 to astaggering 358. Spread over 87 million sq. ft, these malls are expected to be the next bigmoney spinners by 2010.E-tailing or people buying products on the net is "clearly another trend to watch out for inthe future." Of its total sales, global fashion house GAP sells products worth a shade lessthan $1 billion on the net alone. "E-tailing is at an inflation point in the country”. In theUS, the millions of Mom & Pop stores died slowly and painfully when organisedretailing took off. The local stores could not withstand the might of chain stores. In Indiaa similar process has been experienced. As the retail segment is getting more organised,the neighborhood kirana store will become an item of historical interest within ageneration. A recent study on retailing sector by US consulting firm A.T. Kearneypredicts that by 2010 organised retailing sector will gain more importance which willdefinitely impact the unorganized retailing.This means that if the current growth rates continue the organised retail chains will sellRs 16,000 crore of products out of the total retail sales of Rs 80,000 crore. The study alsopredicts that catalogue sales, teleshopping and electronic commerce will hold animportant share of the total sales. This implies that the physical location of a store willnot be as important as it is now.The retail revolution in India was heralded a few years ago, when the first of thesupermarkets were launched in metros like Delhi, Chennai, Mumbai and Bangalore. Butthey have not yet been able to make a significant dent on the retailing sector. What theyhave done, is to give a glimpse of things to come.Within two years, the study notes, India will have its first Rs 100 crore food retailer. Andwithin five years, Indian will have its first Rs 4000 crore retailer. This would put theretail store among the top ten companies in the country. ``There is a feeling that chainstores will never be able to match the personal service of neighborhood kirana store,says Simon Bell, principal at A.T. Kearney who made his presentation at the IndiaEconomic Summit organised by the World Economic Forum. ``But this is wrong.Consumers are fast realising that a supermarket offers better prices and gives a widerchoice of products. As the penetration of chain store outlets will increase, the kirana shopwill be eded out of the market. 63 | P a g e
  • 64. The following articles definitely indicate the inevitable battle between traditional andmodern retailing.The Fight Begins…Bid to Stop Big-Fish Entry in Retail 25 November 2007, SaturdayHAWKERS, STREET VENDORS and social activists have intensified their protestagainst the government’s decision to open up the retail sector for foreign directinvestment (FDI). In a protest march held earlier this month under the banner of IndiaFDI Watch, hundreds of protesters marched to Parliament to warn the UPA governmenton fallouts of allowing FDI in the retail sector.The issue of foreign direct investment (FDI) in retail has gathered fresh momentumamong small and marginal traders and trade bodies, following a recent statement byunion commerce minister Kamal Nath, indicating that FDI norms in the retail sector maybe further liberalized.The retailers fear that entry of foreign retail players in this sector would directly impactthe livelihood of approximately 40 million people who are dependent upon retail trade.The deep pockets of the foreigner retailers would lead to their large-scale displacementand unemployment, they fear. FDI would allow foreign companies to tie up with Indianfirms, who, given the quantum of allowed investment, would be minor stakeholders.They are particularly irked by the government’s inclination to allow FDI in real estate forthe construction of shopping malls. “India is seen as the next frontier of global capitalistexpansion, as can be witnessed daily in media reports and in the unprecedented rate andaggression by which government policies and laws are changing and corporate power isrising,’’ a keynote speaker said at the rally. Addressing the rally, India FDI Watch Campaign Organizer said, “Foreign and domesticretail giants like Wal-Mart and Reliance have developed a nexus with the UPAgovernment to open big malls.” Ha warned that it will lead to their monopoly andthreaten the livelihood of 4.5 crore Indian people employed in the retail sector.“Multinational and domestic corporate interests are dictating the UPA government’seconomic policies,” he alleged.Sardar Singh Kochar, general secretary, Urban Street Vendors Redi Pattri HawkersFederation said, “Local traders will not tolerate any injustice on this issue. I even fear thatthe ceiling drive in Delhi is a part of bigger game plan to pave the way for FDI in retail.Kamal Nath’s statement to liberalize FDI norms is a supplement that has been perfectlymatched with ceiling.”In his statement, Vijay Singh, leader of Hawkers Maulik Adhikar Suraksha Manch,observed, “How can the government propose such a move when retail employs such a 64 | P a g e
  • 65. large number of people, including a major chunk of uneducated masses who find it easyto open a kirana store and operate? They have not considered them at all.”Raising slogans against FDI in retail, Wal-Mart, Reliance and Bharati, protestorsmarched from Jantar Mantar to Parliament. The march was addressed by Sardar SinghKochar, general secretary, Urban Street Vendors Redi Pattri Hawkers Federation, VijaySingh, leader, Hawkers Maulik Adhikar Suraksha Manch, Arjun Singh, general secretary,Akhil Bharatiya Pawan Putra Indraprastha Redi Patri Theli, Dharmendra Kumar,campaign organizer, India FDI Watch, Rajesh Jaiswal, general secretary, Harit RecyclersAssociation, Dineshwar Tiwari, member, governing body, Hemlata, general secretary,Asangathit Shramik Panchayat and Prem Bahukhandi of Centre for Advancement ofVillage Economy (CAVE).This protest march brought hawkers, street vendors and social activists on a commonplatform. The protesters later submitted a memorandum to the prime minister and thecommerce minister.HLL teams up with kiranas to fight mallsAhmedabad grocers rebranded as Super Value Stores to woo mall-o-holics with freebies.AHMEDABAD: Mauled by competition from modern-format malls, the traditionalkirana stores are now fighting back. And helping them in this endeavour is none otherthan Hindustan Lever Ltd (HLL), the country’s largest fast-moving consumer goods(FMCG) major. HLL has tied up with nearly 175 neighborhood grocery stores inAhmedabad to convert them into “Super Value Stores” (SVS), offering products loadedwith freebies.What brings kirana stores and HLL together is a common enemy. While glitzy malls haveenticed customers away from traditional kirana stores, they have also undercut FMCGgiants with low-price store labels. This has robbed kirana stores of volumes and FMCGmajors of margins.The key to this unusual partnership between elephant and ant is common branding, lowerprices, higher discounts and special promotional offers that are exclusive to Super ValueStores. Under the deal worked out by HLL, kirana stores that opt to rebrand themselvesas SVSs get an additional 3% commission on monthly sales. Plus, there are promotionaloffers that are available nowhere else. An HLL spokesperson told DNA Money: “SVS isthe first and pioneering programme through which the company and trade havedeveloped a win-win partnership.”Sample this: Currently on offer is a free hair dryer worth Rs 175 for every Rs 200 worthof HLL shampoos bought. Only SVS distributors get this scheme. Based on the response,HLL reckons that it can use such lures across a range of more than 500 different productsin the cosmetics, fabric and personal wash, and food segments. HLL has also offered toinstall special cabinets in SVS stores for dispensing its products. 65 | P a g e
  • 66. “Tzhere are many schemes and free gifts through which we are able to offer attractiveschemes to loyal clientele who were drifting to malls,” says Ambalal Patel, an SVS shopowner in the Satellite area of Ahmedabad.“The company has many products, which if combined with attractive schemes, canensure a continuous flow of consumers,” adds Patel.According to Patel, special schemes enable ordinary shopkeepers to earn additional Rs50-100 daily by selling HLL products.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.“We have retained some customers because we provide home delivery no matter what thebill. Additional service combined with better promotional packages should help us winback some of our lost customers,” says Prakash Purohit, another kirana shopowner ofAhmedabad.To drum up business volumes, HLL is trying to create common branding for these stores,with boards painted in a tell-tale yellow colour (see picture). The company pays for theboard and the shopkeeper gains when customers start associating bargains with suchstores. The company also pays shopkeepers extra (around Rs 200-300 a month) fordisplay counters. The kirana owners, for their part, are trying to improve customer valueby repackaging loose grain and other products in different packages. Purohit, forexample, has started to supply grain in pack sizes from 200 gm to 1 kg.Local vendors throw the gauntlet to Reliance Fresh, Subhiksha Sunday, July 8th, 2007New Delhi, Jul 3 Fruit and vegetable vendors belonging to the unorganised sector in theCapital have taken the fight to organised fresh-produce retailers like Reliance Fresh andSubhiksha.Vendors in the unorganised sector are offering free home delivery and a one-week credit,which they get from traders in the wholesale vegetable market, to the customer.According to traders, the size of the unorganised fruit and vegetable market had fallendown to Rs 16 crore per day in February after the launch of Reliance Fresh stores andSubhiksha outlets in Delhi. Vegetable and fruit vendors were having trouble selling theirwares on any given day. However, the new strategy has helped them to revive flaggingsales and sell the entire procurement made for the day.On an average, 6,000 tonne of fruits and 7,000 tonne of vegetables is traded everyday inDelhi. The estimated size of the credit market in the unorganised fruit and vegetablemarket is Rs 22 crore per day. 66 | P a g e
  • 67. “The strategy was the need of the hour for small vendors. This has helped them inincreasing their sale volumes. Moreover, passing on the credit has meant that thecustomer is retained for the next time,” said MR Kriplani, pesident, camber of Azadpurvegetable and fruits traders.Joginder Singh, a vegetable vendor in South Delhi’s Kotla Mabarakpur vegetable market,has been able to sell off all his vegetables everyday for the past one month since headopted this system. Home delivery is offered for a minimum of order for 5 kgvegetables.The logistics have been worked out so that every scooter carries around 60 kg ofvegetables within a radius of 4 km, delivering multiple orders placed with the vendor.The credit period of one week has helped in getting re-orders from customers. Moreover,the transportation cost is met through the increase in the volumes of sale of fruits andvegetables.Organised resh-produce retailers are, however, unperturbed by the development. “It is abit premature to comment on the impact of this development on the organised retailing ofvegetables and fruits. It all depends on how fast these vendors can organise themselves,”Anil Chopra, AVP, agri and food supply chain, Reliance Retail Ltd, said.These vendors have associates spread over Delhi and the National Capital Region. Whena trader, sitting in the Azadpur Mandi, gets an order for delivery in Dwarka or even as faras Harola in Noida, he simply passes on the order to the vendor closest to the point ofdelivery.Supermarkets vs. Indian mom-and-pop shopsA major change is taking place in the Indian retailing landscape. The launch of a chain ofsuper and hypermarkets could bring about a complete switch in Indians consumptionhabits.Reliance Industries, an oil, petrochemicals and textiles group, is Indias biggest privatesector company. On 30th January it opened its first supermarket in Noida, a growing cityin the suburbs of Delhi, after having opened eight shops in and around Delhi and almostforty in Southern India in three months. These new, medium-sized shops herald thearrival of the supermarket era in India. This issomewhat of a revolution: India has over abillion people but no organised retailingnetwork. For centuries, Indians have boughtgroceries, stationery, clothing, appliances, andmedicine from small neighbourhood stores,where the quality and availability of goods isunpredictable. Today, Indians still buy 97percent of their goods from those 12 millionmom-and-pop shops. 67 | P a g e
  • 68. These small family-owned shops will probably suffer from this harsh competition.Reliance Fresh outlets, with air-conditioned aisles, shopping carts and automatic doorsoffer extremely competitive prices. Small businessmen obviously feel threatened, but thehead of Reliance Retail claimed that the new shops would create half a million jobs inthree years. The CEO, Mr. Sanjeev Asthana, commented that "The market is big enoughfor the organised players and the estimated 12 million traditional stores to co-exist. Ourventure will not affect the common kirana shops or the farmers."* Reliance intends toopen 100 stores in Delhi alone within the next two months. It also plans to invest 5.7billion dollars in 5,000 shops nationwide. Their claim that the traditional, owner-mannedlow-cost general stores will not be hurt clearly seems a trifle far fetched.The threat to the kirana shops is particularly evident when one considers that thepioneering example of Reliance Fresh could open the way for foreign companies toinvest in Indias retail industry. They had no right to do so until last year when new ruleswere introduced. So far, several foreign firms have taken 51% equity stakes in shops thatsell only their own brands. Foreign firms are also allowed to establish wholesaleoperations, which has led to several joint ventures in which Indian retailers will besupplied exclusively by foreign wholesalers.Naturally, the prospects are more than tempting: after 15 years of decent economicgrowth, Indias masses are ready to spend. India ranks as one of the ten largest emergingmarkets in the world; its middle class has been rising since the liberalisation of theeconomy in the 1980s and it has acquired a substantial purchasing power.This is just the very beginning for super and hypermarkets in India. Mom-and-pop-shopsbeware!Sources: *« Reliance to build focus on niche retail formats, » The Hindu Business Line29 January 2008. 68 | P a g e
  • 69. Survey AnalysisA customer normally prefers malls, supermarkets, department stores as against kiranastores for variety of reasons. To get a clear idea on why do customers favor shopping insupermarkets in opposition to Kiranas, a survey has been conducted with this objective.A questionnaire was prepared and reviews of consumers have been noted down and it ispresented in the form of following analysis: on Sundays/ holidays while dropping kids to school Never while dropping Sometimes kids to home Often while returning Always from office while going to office 0 20 40 60 80 100 Always Often Sometimes Neverwhile going to office 2 5 7 80while returning from office 1 14 10 71while dropping kids to home 1 2 14 76while dropping kids toschool 1 3 10 75on Sundays/ holidays 27 36 17 14 69 | P a g e
  • 70. The primary target audience is housewives. Hence most of them didn’t visited supermarkets while going to office or returning from office. Very few women have opted for this option. But most of them visited on Sundays and holidays with their friends family or many of them visited alone also. The strongest point to note here is that a major chunk of our sample population never visits supermarkets while going to or returning from office nor do they visit while leaving kids to school or taking them back from school. The major reason behind this is that these activities generally take place early morning or during afternoon which is the time not preferred by housewives for shopping.90807060 Supermarket504030 Kirana2010 0 purchase services relations with Range of Behaviour of products Special Ease of personnel Personal sales store Factor Supermarket Kirana store Range of products 85 13 Accessibility 46 41 Ease of purchase 58 38 Store timings 39 48 Behavior of sales personnel 53 33 Incentives 60 27 Special services 48 40 Facility to examine product 55 26 Personal relations with store 14 62 As far as the preference goes according the parameters listed, the range of products has been a major factor that attracts customers, to the supermarkets. But as far as the accessibility goes, most of the supermarkets are not centrally located which are easily accessible by the people. Hence, accessibility has been a limiting factor. Comparing the other factors of supermarkets with Kirana stores, only the store timings and personal relation with store keeper has been a limiting factor. Other factors score high as compared to Kirana stores. 70 | P a g e
  • 71. 18% Supermarkets 6% Kirana Stores Supermarkets 76 Others 76% Kirana Stores 18 Others 6 Comparing the overall features of supermarkets and Kirana stores in terms of discounts, free home delivery, offers etc, people prefer supermarkets over Kirana stores by a large margin. The reason being, that kirana stores have a limited turn over and generally cannot indulge into providing offers and hence looses out on the bargain. 0-100 199080 100-300 22 0-10070 100-300 301-500 5660 301-50050 501-1000 84 501-100040 1001-1500 1001-1500 4830 1501-2000 2001-3000 1501-2000 3420 Above 300010 2001-3000 120 Above 3000 4 Analyzing the amount spent by the people in supermarkets reveals that most of the people spent on average between 300 – 1500. One major inter relationship that needs to be highlight is that, a person who shops for say 300 in a supermarket, out of that every 100 rupees is spent on food items. Therefore, the amount spent on food products is directly related to the amount spent on items in supermarket. This amount remains proportional till a certain limit. 71 | P a g e
  • 72. 24% 16% Price 52 Service 46 14% Status 33 11% Good quality 78 10% Quantity 37 25% All products under one roof 76Price Service Status Good quality Quantity All products under one roofSupermarkets provide quality products. Hence this has been a major factor why peopleprefer supermarkets. The second most important factor preferred by the people is allproducts under one roof. One major important factor that most supermarkets have thatthey provide products goods at prices less than MRP. The other factors such as pricequantity and status do contribute to attract the customers. Special Offers Locality 51 Convenience 63 Status Symbol 23 Brand Name 37 37 Brand Name 63 Status Symbol 23 Locality Convenience Special Offers 510 20 40 60 80If the supermarket is centrally located, the people tend to visit more. Another factor thatsupermarkets contribute is special offers. There are many supermarkets that providespecial offers and discount schemes attract many customers towards them. The operationof kirana stores is very small so they cannot afford to introduce schemes and offers. 72 | P a g e
  • 73. More than 3 hours 2 hours – 3 hours Less than 1 hour 39 1 hour – 2 hours 1 hour – 2 hours 38 2 hours – 3 hours 14 Less than 1 hour More than 3 hours 2 0 10 20 30 40 50Most of the people spend on an average between 0 – 1000 and generally visit alone.Hence, the time spent by most of the people is less than 2 hours. People who generallyvisit with family and friends on Sundays and holidays tend to spend higher time in thesupermarkets. 21% 21% 22% 36% Personalized Service Credibility Home Delivery Proximity to marketOne major factor lacking in supermarkets is that supermarkets generally do not providehome delivery. Other factors include lack of credit facilities, personalized services andproximity to markets. All these factors are generally aspired by customers that are lackingin supermarkets. 73 | P a g e
  • 74. Branded 220 0 - 250 Unbranded 100 0 100 200 300People prefer more branded than unbranded products. Branded products would includechoice of candies, chocolates, noodles etc. Exotic vegetables and non leafy vegetables areleast preferred in the branded category. So, unbranded products may include vegetables,non leafy vegetables, pulses, fruits etc.Interrelation of Data Kirana Store Supermarket 0 20 40 60 80 100 20 - 35 36 - 50 51 & AboveThis graph shows the co-relationship between age and the preference of kirana stores orsupermarkets. From the chart, it is seen that supermarkets is generally preferred by theyounger generation between the age group of 20-35. Kirana stores on the other hand arepreferred by people generally above the age group of 50 and above. Most of the peopleabove the age group told us that they preferred buying from kirana stores and that too aparticular kirana store as a part of their culture. But now the trend is changing and we seethe younger generation prefers to buy more from supermarkets because of a whole lot ofadvantages that we have seen earlier. This shows that within a decade or so, kirana storeswill diminish and major retailing services will be provided by kirana stores. 74 | P a g e
  • 75. 24% 16% Price 48 16 Service 40 14 14% Status 30 10 11% 10% Quality 68 25 25% Quantity 21 11Price Service Status Good quality Quantity All products under one roof All products 70 24As mentioned earlier, people generally visit supermarkets because they tend to providequality goods and that too at reasonable prices. Hence, amongst all the parameters listed,people visit the supermarket mainly because of quality of the goods. This is followed byfactors such as price, status and quantity. With Family 55 12 With Family With Friends 6 With Friends With Spouse 27 55 Alone With Spouse 27 6 Alone 12This speaks about the co-relationship between time spent and how the person visits thesupermarkets. An important co-relation exists. Generally people who visit alone, out ofthem, around 50% tend to spent less than 1 hour and the remaining will spend more than1-2 hours. People who visit with their families generally on Sundays and holidays, out ofthem approximately 75-85% of the people spend more than 1 hour. This can than belinked to our 2nd finding which tells us about the amount spend. 75 | P a g e
  • 76. Screener Graphs 90 80 70 Food Bazaar 60 D Mart 50 Sahakari Bhandar 40 Food World 30 Foodland Apna Bazaar 20 Asmita Bazaar 10 0 Aware of Visited Supermarkets Aware of Visited Food Bazaar 82 63 D Mart 59 28 Sahakari Bhandar 82 64 Food World 23 15 Foodland 53 39 Apna Bazaar 88 70 Asmita Bazaar 18 8 76 | P a g e
  • 77. Benefit to Kirana Store Super Market Customers (Small Retail Store) (Large Retail Store)Personal service Offer a friendly personal service. Service will be efficient but Customers may be known to the impersonal. Self-service, but retailer, therefore allows small there may be queues credit. Self service, few queues Convenience The shop is located around the Are not convenient for a few locality and therefore offers a items: travelling and queuing convenient option - especially if mean that is only worthwhile if a few items are required in a hurry fair number of items are required. It has easy parking and access.Hours Is open for long hours and May open seven days a week. probably every day But does not have long hour facilities.Payment methods Only cash; no other system in use Requires immediate payment, but at present. will accept cash, cheque or credit card.Product range Tries to stock a wide range of items, Due to high turnover it will have a wide range of stock, including but has restricted choice. Essential own brands. items might be over by the evening.Quality Branded and unbranded goods. May Good quality - quick turnover suffer from being in the shop a long ensures freshness. time. However, this aspect depends from store to store.Price Lower prices. However, low Bulk buying means that cost of stock turnover, limited funds and restricted is lower, and high sales turnover storage space means that bulk- means that satisfactory profits can be buying and special discounts are not made with low mark-up. available. Sells at manufacturer’s recommended price. 77 | P a g e
  • 78. Kirana Stores v/s Supermarkets Who will Win the Kirana vs. Supermarket Battle?A new study by Technopak Advisors suggests that kiranas will not be beaten down byfancy supermarkets just yet. As Indian’s are becoming addicted to shopping and the retailenvironment, both traditional and modern outlets will benefit and are expected to grow by42% in the next five years. Modern retail outlets will account for 15% of that growth andgrow by 75% by 2011.While local stores located close to supermarkets and malls will be more affected thanothers, but there are several options for them to convert their stores into before going outof business. Chairman of KSA Technopak, Arvind Singhal says that "Telecom retailingoutlets can be put in mom and pop stores and some current retailers could become foodservice retailers and others could become cyber cafe owners."*Source:cnn-ibn-monday,october16,2007 78 | P a g e
  • 79. Case StudyOperating Challenges of a Department Store in a MallFosterfields, a department store retailing men’s, ladies’ and kids’ apparel, casuals andrelated accessories, operated in an area about 35000 sq ft in a mall that was around200000 sq ft. The mall had good customer entry, with an average of 20000 visitors a dayand Fosterfields was the anchor store of the mall.Founded in 1999, Fosterfields had the advantage of riding piggy-back on the reputationof the mall (which too was founded at the same time) that it had earned because of isstate-of-the-art architecture. The company, since it could attract customers who came tothe mall, spent very little on building its store brand and creating an identity for itself. Afew promotions were done for the brands, mainly through newspapers inserts. Thishappened only sporadically, as getting the brands to do promotions exclusively for thestore was difficult because they were present in other competitive retail outlets too andcould not support such exclusive often.In the beginning of the second year of operations, the mall management thought that theywere not getting the right profile of customers and that conversions from browsing tobuying in the entire mall was low. So they introduced entry conditions for customers suchas the possession of mobile phones, credit cards, ID cards, etc. Alternatively, an entry feeof Rs. 50 would be charged on weekends (the amount could be redeemed on purchases).This was to prevent ‘superfluous’ footfalls in the mall. This had an absolute negativeimpact on customers and the number of people visiting the mall dipped to an average of4000 per day. This reduced the number of consumers coming into Fosterfields as well. Itsbusiness dipped by around 30% from the previous year, and the store found it difficult topay the rent to the mall every month. Its payments to suppliers were delayed.The store management then came up with the following steps to help turn it around:In order to get high ‘conversions’, it introduced a loyalty programme with big benefits forcustomers - to the extent of 8% of the 30% average gross margins for gold card holders,5% for silver card holders and 3% for ordinary card holders. This, however, did not leadto any significant business increase, and raised expenditure considerably.To optimize space (as the store had to clear a lot of overdue payments), the store startedleasing some of it out to various brands from the store as a mall would do, adopting the‘landlord’ strategy rather than retailing merchandise and earning margins. Consequently,employees who were afraid of losing their jobs – by now rumors were afloat that the storeformat would change and hence resources may be outsourced – started leaving for othercompeting companies.Despites its financial troubles, the company opened another Fosterfields departmentalstore of the same kind in a neighboring town, investing a good amount of money. This 79 | P a g e
  • 80. was done in order to uphold the original plans of expansion and with the hope that scaled-up operations would give the company more bargaining power.Employees were now fleeing at a fast rate as the management could not initiate timelyperformance appraisals. As the second financial year came to an end, the frontlinemanpower turnover rose to 45%. Since the store was now buying less from suppliers itwas not able to bargain for large discounts from brands or avail of benefits on the agreedpurchase quantities. As payments were delayed, suppliers were reluctant to deliver thegoods and as a result pen-to-buys (OTBs) were mot followed. Markdowns too increasedon slow-moving items because the sore couldn’t afford dead inventories now.The ERP package that it had planned could not be bought and its plans to discipline itsMIS and effect auto replenishments also did not happen. As a consequence, the entireinventory management process and the supply chain were rendered dysfunctional.Managers who were heading various functions then left the organization. The store wasnow left with a few junior –and middle-level executives – a few department managers,category merchandisers and buyers, a marketing executive, a technology executive, awarehouse in-charge, a store accounting executive, etc. and they now reported directly tothe CEO.The organization is part of a financially strong business group and its desire to make asuccess of its diversification into retailing is poised for huge growth in India, as manyresearch agencies have reported. 80 | P a g e
  • 81. ConclusionKiranas and organised retail will co-exist. After analyzing the retail industry, it canconclude that the organized retail has opportunities to grow in India in spite of the kiranastores because these kirana shops will also get benefit of the growing economy. Theargument that the kirana shops will be affected by these malls is only myth. Theorganized retail is attracting more and more Indian as well as foreign players of the retailindustry. The boundaries between the offerings by malls and one-shop vendors aregradually breaking. Single shop-owners are becoming increasingly aware of customersneeds, hygiene factors and varied requirements. At the same time, retail chains areopening stores in residential areas and focusing on customer relationship management,with a hub and spoke model where one large store supports various smaller stores in thenearby residential areas. However, the key to success for organised retailers will alwaysbe their large size, variety and ambience on offer, and thus, the scale.As the study shows that a major portion of the organized retail will be developed in smallcities and towns, this opportunity has not been enchased by kirana stores and they areunable to meet the requirements of the customers. Therefore both the malls and kiranastores can play simultaneously in India so no need get afraid due to the malls.Here even I would like to add my view point from whatever I have learnt from theexperience gained while making this project. Most of the kirana stores have survived. Butgrowth has been very slow for them and no new kirana stores are opening up inneighborhoods where big retailers have opened shop. And secondly, big retail will haveto wait a long time before they can ‘invade’ small towns in India. Towns with less than amillion-half a million population will have to wait. And no big retailers will venture thereuntil they’ve gained some useful insights from the big cities. And the countryside will belargely left untouched which will be served by local Kirana Stores. “Big retail chainswon’t kill small shops”“Small is beautiful. Malls are all very good for one-day shopping, but the kirana storeis for the odd quantities in life. Like when you need one-fourth of a packet of rice.” 81 | P a g e
  • 82. AppendixQuestionnaire for interview with local Kirana Shop: 1. What kinds of products are sold at your shop? 2. What type of customers’ walk-in at your stores? Do you have any strategies to attract new customers? 3. How the stocking of goods are arranged? Do you consider customers preferences while stoking new goods? How the stock turnover takes place? 4. Trace out the reasons as to why customers prefer your shop in opposition to other local stores, supermarkets and malls? 5. Do you provide free home delivery to your customers? 6. For how long the store is open? What in case of holidays? 7. Do you provide credit period to your regular customers? If yes, then can you explain how the credit period is decided? 8. According to your opinion, does the local Kirana Stores face stiff competition from modern retailing formats like supermarkets, malls etc? 9. What are your future plans? 82 | P a g e
  • 83. Questionnaire for Survey1. Which is the most appropriate time when you would like to go out for shopping? While going to office while returning from office While dropping kids to schools while dropping kids to home On Sundays / holidays2. On the basis of following parameters, indicate your preference on the type of store for the various factors? (click on the format which you find provide best of services) Factor Supermarket Kirana store Range of products Accessibility Ease of purchase Store timings Behavior of sales personnel Incentives Special services Facility to examine product Personal relations with store3. What would be the average timings spend by you in the supermarkets? Less than 1 hr 1 hr- 2 hr 2 hr – 3 hr More than 3 hr4. What is the average amount of money spent by you on purchase while shopping at supermarkets? 0 – 100 100 – 300 301 – 500 501 – 1000 1001 – 1500 1501- 2000 2001 – 3000 Above 30005. According to you, which retailing format provides best services in terms of discounts, offers or free home delivery? Kirana supermarket others 83 | P a g e
  • 84. 6. While shopping which type of product will be mainly preferred by you? Branded Unbranded7. As per your liking, rate the factors below indicating your most important preference then going to least one as which factor mainly attracts you to go for shopping at supermarket? Price Service Status Good quality Quantity All products under one roof8. Who accompanies you maximum times while visiting to supermarket? With family With Friends With Spouse Alone9. Mention out of the supermarkets which are given below, how many you are aware of and also visited? Supermarkets Aware of Visited Food Bazaar D Mart Sahakari Bhandar Food World Foodland Apna Bazaar Asmita Bazaar10. Suggest any 5 factors which you feel that the supermarkets lack? 84 | P a g e
  • 85. BibliographyBooks: Retailing – K. Suresh Retail Management – Gibson C. Vedamani Marketing Management – Philip Kotler Retail Marketing Management – David GilbertNewspapers: The Economic Times DNAWebsites: 85 | P a g e