GROWTH OF RETAIL SECTOR in INDIA – Review 2012Presentation by : Prof. Vijay Karmarkar, SIRT, BHOPAL A textile retail store in India A food staple retail shop in Pushkar, IndiaTraditional Retail is NOT a NEW THING at all.Retail touches our life almost everyday……..............Milkman, News Paper Boy, Sabjiwala, etc.And what will you call the Raddi paper wala ?........Reverse Retail?
A SABJI MANDI……..CAN ORGANIZED RETAIL CHANGE THIS?
What is Reatiling…….. General MeaningMost Indian shopping takes place in open markets or millions ofsmall, independent grocery and retail shops. Shoppers typicallystand outside the retail shop, ask for what they want, and can notpick or examine a product from the shelf. Access to the shelf orproduct storage area is limited. Once the shopper requests thefood staple or household product they are looking for, theshopkeeper goes to the container or shelf or to the back of thestore, brings it out and offers it for sale to the shopper. Often theshopkeeper may substitute the product, claiming that it is similaror equivalent to the product the consumer is asking for. Theproduct typically has no price label in these small retail shops;although some products do have a manufactured suggested retailprice (MSRP) pre-printed on the packaging. The shopkeeper pricesthe food staple and household products arbitrarily, and twoconsumers may pay different prices for the same product on thesame day. Price is sometimes negotiated between the shopperand shopkeeper. The shoppers do not have time to examine theproduct label, and do not have a choice to make an informeddecision between competitive products.
India’s Retail ScenarioIndias retail and logistics industry, organized and unorganized incombination, employs about 40 million Indians (3.3% of Indianpopulation). The typical Indian retail shops are very small. Over 14million outlets operate in the country and only 4% of them beinglarger than 500 sq ft (46 m2) in size. India has about 11 shopoutlets for every 1000 people. Vast majority of the unorganizedretail shops in India employ family members, do not have the scaleto procure or transport products at high volume wholesale level,have limited to no quality control or fake-versus-authentic productscreening technology and have no training on safe and hygienicstorage, packaging or logistics. The unorganized retail shopssource their products from a chain of middlemen who mark up theproduct as it moves from farmer or producer to the consumer.The unorganized retail shops typically offer no after-sales supportor service. Finally, most transactions at unorganized retail shopsare done with cash, with all sales being final.
Growth over 1997-2010• Retailing in India is one of the pillars of its economy and accounts for about 15% of its GDP. The Indian retail market is estimated to be US$450 billion and one of the top five retail markets in the world by economic value. India is one of the fastest growing retail market in the world, with 1.2 billion people.• Indias retailing industry is essentially owner manned small shops. In 2010, larger format convenience stores and supermarkets accounted for about 4 percent of the industry, and these were present only in large urban centers. Indias retail and logistics industry employs about 40 million Indians (3.3% of Indian population).• Until 2011, Indian central government denied foreign direct investment (FDI) in multi-brand retail, forbidding foreign groups from any ownership in supermarkets, convenience stores or any retail outlets. Even single-brand retail was limited to 51% ownership and a bureaucratic process.
In November 2011, Indias central government announced retail reformsfor both multi-brand stores and single-brand stores. These marketreforms paved the way for retail innovation and competition with multi-brand retailers such as Walmart , Carrefour and Tesco, as well singlebrand majors such as IKEA, Nike, and Apple. The announcementsparked intense activism, both in opposition and in support of thereforms. In December 2011, under pressure from the opposition, Indiangovernment placed the retail reforms on hold till it reaches a consensus.Customers inside a retail store in An organized retail store inKolkata (ca. 2011) Ahmedabad (ca. 2009)
In January 2012, India approved reforms for single-brandstores welcoming anyone in the world to innovate in Indianretail market with 100% ownership, but imposed therequirement that the single brand retailer source 30 percent ofits goods from India. Indian government continues the hold onretail reforms for multi-brand stores. IKEA announced inJanuary that it is putting on hold its plan to open stores inIndia because of the 30 percent requirement. It is believed thatthe 30 percent requirement is likely to significantly delay ifnot prevent most single brand majors from Europe, USA andJapan from opening stores and creating associated jobs inIndia. A spice market
• The worlds largest retailer by sales, Wal-Mart Stores Inc and Sunil Mittals Bharti Enterprises have entered into a joint venture agreement and they are planning to open 10 to 15 cash-and-carry facilities over seven years. The first of the stores, which will sell groceries, consumer appliances and fruits and vegetables to retailers and small businesses, is slated to open in north India by the end of 2008.• Carrefour, the world’s second largest retailer by sales, is planning to set up two business entities in the country one for its cash-and-carry business and the other a master franchisee which will lend its banner, technical services and know how to an Indian company for direct-to-consumer retail.• The world’s fifth largest retailer by sales, Costco Wholesale Corp (Costco) known for its warehouse club model is also interested in coming to India and waiting for the right opportunity.
• Tesco Plc., plans to set up shop in India with a wholesalecash-and-carry business and will help Indian conglomerateTata group to grow its hypermarket business. Checkout lanes, organized retail in Malad, MumbaiOpposition to the retailers plans have argued that livelihoodsof small scale and rural vendors would be threatened.However, studies have found that only a limited number ofsmall vendors will be affected and that the benefits of marketexpansion far outweigh the impact of the new stores.
• The low-intensity entry of the diversified Mahindra Group into retail is unique because it plans to focus on lifestyle products. The Mahindra Group is the fourth largest Indian business group to enter the business of retail after Reliance Industries Ltd, the Aditya Birla Group, and Bharti Enterprises Ltd. The other three groups are focusing either on perishables and groceries, or a range of products, or both.• REI AGRO LTD Retail: 6TEN and 6TEN kirana stores• Future Groups-Formats: Big Bazaar, Food Bazaar, Pantaloons, Central, Fashion Station, Brand Factory, Depot, all, E-Zone etc.• Raymond Ltd.: Textiles, The Raymond Shop, Park Avenue, Park Avenue Woman, Parx, Colourplus, Neck Ties & More, Shirts & More etc.• Fabindia: Textiles, Home furnishings, handloom apparel, jewellery
• RP-Sanjiv Goenka Group Retail-Formats: Spencer’s Hyper, Spencers Daily, Music World, Au Bon Pain (International bakery cafeteria), Beverly Hills Polo Club• The Tata Group-Formats: Westside, Star India Bazaar, Steel junction, Landmark, Titan Industries with World ofTitans showrooms, Tanishq outlets, Croma.• Reliance Retail-Formats: Reliance MART, Reliance SUPER, Reliance FRESH, Reliance Footprint, Reliance Living, Reliance Digital, Reliance Jewellery, Reliance Trends, Reliance AutoZone, iStore• Next retail India Ltd (ConsumerElectronics)• Vivek Limited Retail Formats: Viveks, Jainsons, Viveks Service Centre, Viveks Safe Deposit Lockers• PGC Retail -T-Mart India , Switcher, Respect India, Grand India Bazaar,etc.,
• Subhiksha-Formats: Subhiksha supermarket pharmacy and telecom discount chain.• Trinethra- Formats: Fabmall supermarket chain and Fabcity hypermarket chain• Vishal Retail Group-Formats: Vishal Mega Mart• BPCL-Formats: In & Out• German Metro Cash & Carry• Shoprite Holdings-Formats: Shoprite Hyper Paritala stores bazar: honey shine stores• Aditya Birla Group - "More" Outlets Kapas- Cotton garment outlets• Nmart Retails with 71 operating Stores till now and total 153 Stores in India and 1 to open in Dubai Shortly. (Expected to be 150 by the end of Aug-2012)• Reliance ADAG Retail-Format: Reliance WorldMart
• K Raheja Corp Group-Formats: Shoppers Stop, Crossword, Hyper City, Inorbit Mall• Nilgiri’s-Formats: Nilgiris’ supermarket chain• Marks & Spencer: Clothing, lifestyle products, etc.• Lifestyle International-Lifestyle, Home Centre, Max, Fun City and International Franchise brand stores.• Pyramid Retail-Formats: Pyramid Megastore, Tru Mart• AaramShop - a platform which enables hybrid commerce for thousands of neighborhood stores.• Gitanjali- Nakshatra, Gili, Asmi, Ddamas, Gitanjali Jewels, Giantti, Gitanjali Gifts, etc.• ITC Choupal Sagar• Godrej Aadhar
Challenges for retailing In India The organised retail sector in India has been witnessing various issues and challenges which are proving to be a hurdle for its fast- paced growth. Even though the organised retail sector is in a very nascent stage in India, it provides ample opportunities for retailers, and mitigation of a few challenges will help the sector attain higher economies of scale and growth. Elucidated below are the challenges and risks that the sector faces:• Global economic slowdown• Competition from the unorganized sector• Retail sector has no recognition as an industry• High real-estate costs• Lack of basic infrastructure• Supply-chain inefficiencies• Challenges with respect to human resources• Margin Pressure
To become a truly flourishing industry, retailing in India needsto cross the following hurdles:• Automatic approval is not allowed for foreign investment inretail.• Regulations restricting real estate purchases, and cumbersome local laws.• Taxation, which favours small retail businesses.• Absence of developed supply chain and integrated ITmanagement.• 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.
Organised retailers face immense competition from the unorganised retailers or kirana stores (mom-and-pop stores) that generally cater to the customers within their neighbourhood. The unorganised retail sector constitutes over 94% of India’s total retail sector and thus, poses a serious hurdle for organised retailers. If put numerically, the organised retailers are facing stiff competition from over 13 million kirana stores that offer personalized services such as direct credit to customers, free home delivery services, apart from the loyalty benefits. During the current economic slowdown, the traditional kirana stores adopted various measures to retain their customers, which directly affected organised retailers. Generally, it has been observed that customers shop impulsively and end up spending more than what they need at organised retail outlets; however, in kirana stores, they stick to their needs because of the limited variety. During a downturn, many customers may not like to spend more as is evident from the past few months’ trend that shoppers are increasingly switching from organised retail stores to kiranas.
As of January 2013Retail FDI fails to woo investors as doubts linger…….Policy uncertainties and a weak economy are holdingback investments in multi-brand retailINTERESTS RECEIVED :Investment proposals in singlebrand retail and their status• IKEA ~10,500 cr. Cleared by FIPB Awaiting CCEA nod• PAVERS ~100 cr. Cleared by FIPB• DECATHLON ~700 cr. FIPB set to discuss• FOSSIL ~22 cr. FIPB set to discuss
Going slowIndustry watchers are pretty certain that big internationalretail will not make significant investments in the Indianmarket till the 2014 general elections. The silence ofplayers like Walmart, Tesco and Carrefour about their Indiaplans even five months after 51 per cent FDI in multi-brandretail was allowed tells a story that is not quite in sync withthe governments expectations. That not a singleapplication has come from multibrand international chainsshows that they are not in a hurry. They would rather see ifthe next government is pro- or anti-FDI, in the backdrop ofstatements made by Opposition parties that they wouldreverse the decision if voted to power
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