1. Retailing in India
INTRODUCTION
Retailing is the transaction between the seller and consumer for personal consumption .It
does not include transaction between the manufacturer, corporate purchase, government purchase
and other wholesale purchase. A retailer stocks the goods from the manufacturer and then sells
the same to the end user for a marginal profit. In the supply chain that also consists of
manufacturing and distribution, retailing is the last link before the product reaches the consumer.
Post liberalization the Retail sector in India is herald as one of the sunrise industries. It
has never been better for the retail sector in India. Today within the booming service sector,
retailing is the single biggest contributor in terms of GDP to the National Income.
According to a research report named „Retail Sector in India‟ by Research and Markets,
Indian retail sector accounts for 22 per cent of the country's gross domestic product (GDP) and
contributes to 8 per cent of the total employment. The report further highlighted that
hypermarkets (currently accounting for 14 per cent of mall space) will witness immense progress
in the Indian landscape.
Retailing itself can be further divided into organized and unorganized sector.
Organized Sector organized retailing came into its own in tandem with the retail boom.
It coincided with the high growth in the Indian economy, resulting in greater purchasing power
amongst the middle class, which in turn went on a purchasing spree. Other factors like consumer
awareness, investments by venture capitalists and private equity firms have also contributed to
the growth of organized retail. However, the process of acquiring license is still a bottleneck for
the development of Indian retailing.
Unorganized sector The unorganized sector is still dominant in India, since it has the
advantage of low investment need. Since retailing is the process of connecting the supplier and
consumer, pricing of products is very important in a price conscious market like India.
Unorganized retailers play an important
role in this regard and are a vital part of the supply chain. If unorganized retail segment positions
itself correctly, it can carve a niche for itself in India's booming retail sector.

2. The Retail Industry in India has come forth as one of the most dynamic and fast paced
industries with several players entering the market. However, all of them have not yet tasted
success because of the heavy initial investments that are required to break even with other
companies and compete with them.
The India Retail Industry is gradually inching its way towards becoming the next boom
industry. A large young working population with median age of 24 years, nuclear families in
urban areas, along with increasing workingwomen population and emerging opportunities in the
services sector are going to be the key factors in the growth of the organized Retail sector in
India. The growth pattern in organized retailing and in the consumption made by the Indian
population will follow a rising graph helping the newer businesspersons to enter the India Retail
Industry. In India, the vast middle class and its almost untapped retail industry are the key
attractive forces for global retail giants wanting to enter into newer markets, which in turn will
help the India Retail Industry to grow faster.
Indian retail is expected to grow 25 per cent annually. Modern retail in India could be
worth US$ 175-200 billion by 2016. The Food Retail Industry in India dominates the shopping
basket. The Mobile phone Retail Industry in India is already a US$ 16.7 billion business,
growing at over 20 per cent per year. The future of the India Retail Industry looks promising
with the growing of the market, with the government policies becoming more favorable and the
emerging technologies facilitating operations.
GROWTH OF INDIAN RETAIL INDUSTRY
The Indian retail industry has scaled impeccable growth over the last decade with an
amiable acceptance to organized retailing formats. The industry is maturing towards modern
concept of retailing, cornering the conventional unorganized family-owned businesses.
India has been ranked as the fourth most attractive nation for retail investment among 30
emerging markets by theUS-based global management-consulting firm, A T Kearney, in its
Global Retail Development Index (GRDI) 2011.
AT Kearney has also conducted a different study, which says that organized retailers
should follow hypermarket concept to penetrate through India‟ s US$ 435 billion industry.
According to the report, given the gigantic size of the Indian retail market, it is no surprise that

3. many Middle East retailers, most recently Lulu, have announced their interests to extend their
retail operations to India.
The Rs 18,673 billion (US$ 401 billion) Indian retail market entails only 6 per cent of
itself as organized retail segment as of 2010, according to Booz and Co (India) Pvt. Ltd. Hence,
there is a great potential to be explored by domestic and international players.
The Business Monitor International (BMI) India Retail Report for the fourth-quarter of
2011 forecasts that the total retail sales will grow from US$ 411.28 billion in 2011 to US$
804.06 billion by 2015. The report has underlined factors like economic growth, population
expansion, increasing wealth of individuals and rapid construction of organized retail
infrastructure as major drivers for the optimistic forecast figures.
In 2007, the retail trade in India had a share of 8-10% in the GDP (Gross Domestic
Product) of the country. In 2009, it rose to 12%. According to a research report named „Retail
Sector in India‟ by Research and Markets, Indian retail sector accounts for 22 per cent of the
country's gross domestic product (GDP) and contributes to 8 per cent of the total employment.
The report further highlighted that hypermarkets (currently accounting for 14 per cent of mall
space) will witness immense progress in the Indian landscape
Retail: Key Developments & Major Investments
According to a report by research firm CB Richard Ellis India, organized retailers added
over 6 million square feet of retail mall space across India in the first six months of 2011;
primarily due to aggressive expansion.
For instance, Kishore Biryani-controlled Pantaloon Retail added 2.26 million square feet (sq. ft.)
of retail space during the fiscal 2011 and booked over 9 million sq. ft of retail space to fructify its
expansion plans in future.
Cumulative foreign direct investment (FDI) inflows in single-brand retail trading during
April 2000 to June 2011 stood at US$ 69.26 million, according to the Department of Industrial
Policy and Promotion (DIPP).
Driven by changing consumption patterns, favorable demographics, expanding middle class and
greater government support, retailers are eagerly foraying into untapped avenues of Indian
markets by making huge investment plans. For instance-
Jubilant Food Works Ltd, which operates fast food chain of Dominos Pizza in India, will
invest over Rs 70 crores in the FY12 on new stores and commissaries.

4. Reliance Industries‟ Reliance Retail (that runs supermarket and hypermarket chains) is
planning massive expansion across the country by doubling the number of stores in
several specialty formats in 2011.
The brand „More‟ , operated by Aditya Birla Retail, will open 12 hypermarkets and 150
supermarkets in fiscal 2012. After the expansion, its supermarket stores tally will reach
715.
Shoppers Stop Ltd, which has 43 departmental stores and 10 hypermarkets under the
brand Hypercity, plans to open four more hypermarkets and 10 departmental stores in
2011.
Government Initiatives:
The government has moved a step closer to allow FDI in multi brand retailing in India
after the Committee of Secretaries (CoS) gave its nod to permit 51 per cent of FDI in the sector.
The recommendation will now head to the cabinet committee on economic affairs, which will
take a final decision on rules to be impose and the level of FDI to be allowed. It also increased to
100 per cent from a cap of 51 per cent the level of foreign direct investment allowed in single-
brand retailers. The regulation may soon pave way for foreign players like Wal-Mart, Carrefour
and Cheshunt, who have been vying for an opportunity to enter India.
Challenges
To become a truly flourishing industry, retailing needs to cross the following hurdles:
The industry is facing a severe shortage of talented professionals, especially at the middle
management level.
Most Indian retail players are under serious pressure to make their supply chains more efficient
in order to deliver the levels of quality and service that consumers are demanding.
Lack of adequate infrastructure has led to the impediment of a pan-India network of
suppliers. Due to these constraints, retail chains have to resort to multiple vendors for
their requirements, thereby, raising costs and prices.
Stringent labor laws govern the number of hours worked and minimum wages to be paid
leading to limited flexibility of operations and employment of part-time employees.
Further, multiple clearances are required by the same company for opening new outlets
adding to the costs incurred and time taken to expand presence in the country.

5. The retail sector does not have „industry‟ status yet making it difficult for retailers to
raise finance from banks to fund their expansion plans.
Even though India has well over 5 million retail outlets of different sizes and styles, it
still has a long way to go before it can truly have a retail industry at par with International
standards. This is where Indian companies and International brands have a huge role to
play.
Indian retailing is still dominating by the unorganized sector and there is still a lack of
efficient supply chain management. India must concentrate on improving the supply
chain management, which in turn would bring down inventory cost, which can then be
passed on to the consumer in the form of low pricing.
Most of the retail outlets in India have outlets that are less than 500 square feet in area.
This is very small by International Standards.
India's huge size and socio economic and cultural diversity means there is no established
model or consumption pattern throughout the country. Manufacturers and retailers will
have to devise strategies for different sectors and segments which by itself would be
challenging.
The drawbacks provide a huge opportunity for the retail industry. The entry of foreign
majors like Benetton, Dairy Farm and Levis underline the opportunity for the industry in
India.
Future of Retailing in India
The retail industry in India is currently growing at a great pace and is expect to go up to
US$ 833 billion by the year 2013. It is further expect to reach US$ 1.3 trillion by the year 2018
at a CAGR of 10%. As the country has a high growth rates, the consumer spending has also gone
up and is also expected to go up further in the future. In the last four year, the consumer spending
in India climbed up to 75%. As a result, the India retail industry is expected to grow further in
the future days.
By the year 2013, the organized sector is also expected to grow at a CAGR of 40%.
Industry experts predict that the next phase of growth in the retail sector will emerge from the
rural markets.

6. By 2012 the rural retail market is projected to have a total of more than 50 per cent
market share. The total number of shopping malls is expected to expand at a compound annual
growth rate of over 18.9 per cent by 2015. According to market research, report by RNCOS the
Indian organized retail market is estimated to reach US$ 50 billion by 2011.
Global consultancy firm PricewaterhouseCoopers (PwC) expects Indian retail sector to be worth
US$ 900 billion by 2014 in its report „Strong and Steady 2011‟ .
AT Kearney‟ s study on global retailing trend found that India is the least competitive as
well as least saturated of all major global markets. This implies that there are significantly low
entry barriers for players trying to setup base in India, in terms of the competitive landscape. The
report further stated that global players would take advantage of the more favorable FDI rules
that are likely in India and enter the country through partnerships or franchises with local
retailers.
A good talent pool, unlimited opportunities, huge markets and availability of quality raw
materials at cheaper costs is expected to make India overtake the world‟ s best retail economies
by 2042, according to industry players.
The retail industry in India will be a major employment generator in the future. Currently
the market share of organized modern retail is just 8 percent of the total retail industry, thereby
leaving a huge untapped opportunity.
Food and groceries is considered to be the largest segment in organized retail, followed
by apparel, footwear and consumer electronics. “Over the next five years, we expect organized
food retail (through convenience stores, supermarkets, and hypermarkets) to grow by over four
times from the current US$ 8 billion,” said Raghav Gupta, Principal, Booz and Co.( Exchange
Rate Used: INR 1 = US$ 0.021, (as on September 9, 2011) )
The cabinet decision allowing 51 percent FDI in multi-brand retail and 100 percent FDI
in single-brand retail is likely to catalyze joint ventures (JVs) between Indian and foreign
organized retailers. Depending on whether they buy into existing retail chains or set up new JVs,
the share of foreign retailers in multi-brand organized retail will remain moderate and is expected
to vary between 10-20 percent by 2015-16.
The FDI proposal offers good prospects for large established Indian retailers. FDI would
enable these players attract capital for driving their expansion plans and in addition, benefit from
scale, cost efficiencies and technology brought in by foreign retailers.

7. Positive effects of FDI:
By allowing FDI in retailing, agriculture sector will be benefited and at the same time
farmers can get better prices for their produce.
It results in increasing the employment opportunities and the consumers get the goods at
affordable prices. Competition among retailers increase, the customers get the quality goods at
cheaper prices.
Consumers have wide choice while purchasing the various products and services.
Introduction of FDI in single and multi brand retailing will lead to increase demand, which in
turn will catalyze more investment opportunities in organized retail.
The organized retail real estate market will spread more uniformly and more lucratively
for all concerned.
Adverse effects of FDI:
If retailing sector, the largest source of employment after agriculture, is to open FDI, the
indigenous retailers can‟ t sustain the tough competition as a result of their huge investments.
60%-65 % of the Indian population is directly or indirectly linked with retailing. If the
Government allows 100% FDI in retailing, majority of the population looses their self-
employment and leads to drop in their socio economic status.
With its failure to provide additional employment, manufacturing cannot be the alternative
source of employment for those who lose their employment in retailing.
FDI‟ s being able to invest crores of rupees and sells the products at cheaper prices
which is ruining the traditional markets but also culture. It influences the buying behavior of the
customers.
Substitution for FDI:
The best alternative for FDI is, Government may think of encouraging indigenous companies
into retailing. Tax holidays and other tax incentives can be used to lure leading corporate houses
into retailing.