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  • PROJECT REPORT<br />ON<br />Growth Analysis & future analysis in retail sector n india<br /> <br /> <br />SUBMITTED TO : SUBMITTED BY: <br />PROF. RavikeshDeepak kumar<br /> Radha Krishna jha<br /> Mayank partap singh<br /> Arpana (SEC –B) <br /> <br /> PGDM09-11 BATCH<br /> <br />(Galgotias Business School)<br />APPROVED BY AICTE, MİNİSTRY OF HRD, GOVT. OF INDİA 1, KNOWLEDGE PARK, phase II, GREATer NOida<br />The BMI India Retail Report for the third-quarter of 2010, forecasts that the total retail sales will grow from US$ 353 billion in 2010 to US$ 543.2 billion by 2014. With the expanding middle and upper class consumer base, there will also be opportunities in India's tier II and III cities. The greater availability of personal credit and a growing vehicle population to improve mobility also contribute to a trend towards annual retail sales growth of 11.4 per cent. Mass grocery retail (MGR) sales in India are forecast to undergo enormous growth over the forecast period. BMI further predicts that sales through MGR outlets will increase by 154 per cent to reach US$ 15.29 billion by 2014. This is a consequence of India's dramatic, rapid shift from small independent retailers to large, modern outlets.<br />BMI forecasts consumer electronic sales at US$ 29.86 billion in 2010, with over the counter (OTC) pharmaceutical sales at US$ 3.28 billion. The latter is predicted to be the fastest growing retail sub-sector and BMI forecasts that sales will reach US$ 6.18 billion by 2014, an increase of 88.5 per cent. <br />China and India are predicted to account for almost 91 per cent of regional retail sales in 2010 and by 2014 their share of the regional market is expected to be more than 92 per cent. Growth in regional retail sales for 2010-2014 is estimated by BMI at 72.2 per cent, an annual average of 14 per cent. India should experience the most rapid rate of growth in the region, followed by China. For India, its forecast market share of 13.9 per cent in 2010 is expected to increase to 14.3 per cent by 2014.<br />Moreover, for the 4th time in five years, India has been ranked as the most attractive nation for retail investment among 30 emerging markets by the US-based global management consulting firm, A T Kearney in its 8th annual Global Retail Development Index (GRDI) 2009. India remains among the leaders in the 2010 GRDI and presents major retail opportunities. India's retail market is expected to be worth about US$ 410 billion, with 5 per cent of sales through organised retail, meaning that the opportunity in India remains immense. Retail should continue to grow rapidly—up to US$ 535 billion in 2013, with 10 per cent coming from organised retail, reflecting a fast-growing middle class, demanding higher quality shopping environments and stronger brands, the report added. Bharti Retail strengthened its position in northern India by opening 59 stores, Bharti Wal-Mart is expected to open 10 to 15 wholesale locations in the next three years, and Marks & Spencer is considering plans to open additional outlets in the next few years.<br />Established retailers are tapping into the growing retail market by introducing innovative store formats. Spencer's Retail, More (owned by Aditya Birla Group) and Shoppers Stop (owned by K Raheja Group) already plan to expand.<br />According to a McKinsey & Company report titled 'The Great Indian Bazaar: Organised Retail Comes of Age in India', organised retail in India is expected to increase from 5 per cent of the total market in 2008 to 14 - 18 per cent of the total retail market and reach US$ 450 billion by 2015.<br />Furthermore, according to a report titled 'India Organised Retail Market 2010', published by Knight Frank India in May 2010 during 2010-12, around 55 million square feet (sq ft) of retail space will be ready in Mumbai, national capital region (NCR), Bengaluru, Kolkata, Chennai, Hyderabad and Pune. Besides, between 2010 and 2012, the organised retail real estate stock will grow from the existing 41 million sq ft to 95 million sq ft.<br />India continues to be among the most attractive countries for global retailers. Foreign direct investment (FDI) inflows between April 2000 and April 2010, in single-brand retail trading, stood at US$ 194.69 million, according to the Department of Industrial Policy and Promotion (DIPP).<br />Leading watchmaker Titan Industries Limited plans to invest about US$ 21.83 million for opening 50 premium watch outlets Helios in next five years to attain a sales target of US$ 87.31 million. "We are looking to open Helios outlets in Mumbai, Delhi, Hyderabad, Kolkata, Chennai, Pune, Ahmedabad etc in next 12 months," said Ajoy Chawla, Vice President (Retail), Titan.<br />British high street retailer, Marks and Spencer (M&S) plans to significantly increase its retail presence in India, targetting 50 stores in the next three years. M&S currently operates 17 stores in India through a joint venture (JV) with Reliance Retail.<br />Chinese retail major, Yishion has entered the Indian market and plans to have at least 125 points of sales, including exclusive stores and multi-brand outlets, across India by 2012. It will open its first exclusive store in New Delhi by September 2010.<br />Spain's Inditex, Europe's largest clothing retailer opened the first store of its flagship Zara brand in India in June 2010. It further plans to open a total of five Zara outlets in India.<br />Bharti Retail, owner of Easy Day store—supermarkets and hypermarts—plans to invest about US$ 2.5 billion over the next five years to add about 10 million sq ft of retail space in the country by then, according to a company spokesperson.<br />Raymond Weil plans to invest US$ 883,665 in India during 2010, according to Olivier Bernheim, President and CEO, Raymond Weil.<br />Policy Initiatives<br />FDI up to 51 per cent under the Government route is allowed in retail trade of Single Brand products, according to the Consolidated FDI Policy document.<br />Road Ahead<br />According to industry experts, the next phase of growth is expected to come from rural markets.<br />According to a market research report published in June 2008 by RNCOS titled, 'Booming Retail Sector in India', organised retail market in India is expected to reach US$ 50 billion by 2011. The key findings of the report are:<br />Number of shopping malls is expected to increase at a CAGR of more than 18.9 per cent from 2007 to 2015<br />Rural market is projected to dominate the retail industry landscape in India by 2012 with total market share of above 50 per cent <br />Driven by the expanding retail market, the third party logistics market is forecasted to reach US$ 20 billion by 2011<br />Apparel, along with food and grocery, will lead organised retailing in India<br />
    • Evolution of Indian retail Industry:
    • Indian Retail Industry is standing at its point of inflexion, waiting for the boom to take place. The inception of the retail industry dates back to times where retail stores were found in the village fairs , Melas or in the weekly markets. These stores were highly unorganized. The maturity of the retail sector took place with the establishment of retail stores in the locality for convenience. With the HYPERLINK "http://www.economywatch.com/business-and-economy/indian-retail-industry.html" t "undefined" government intervention
    • the retail industry in India took a new shape. Outlets for Public Distribution System, Cooperative stores and Khadi stores were set up. These retail Stores demanded low investments for its establishment.
    • The retail industry in India gathered a new dimension with the setting up of the different International Brand Outlets, Hyper or Super markets, shopping malls and departmental stores.
    • Key Players in the Indian Retail Sector:
    • The 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 IT based. The other important participants in the Indian Retail sector are Bata, Big Bazaar, Pantaloons, Archies, Cafe Coffee Day, landmark, Khadims, Crossword, to name a few.
    • Retailing in India: a HYPERLINK "http://www.economywatch.com/business-and-economy/indian-retail-industry.html" t "undefined" forecast:
    • Future of organized retail in India looks bright. According to recent researches it is projected to grow at a rate of about 37% in 2007 and at a rate of 42% in 2008. It will capture a share of 10% of the total retailing by the end of 2010.
    • According to the Union Minister of HYPERLINK "http://www.economywatch.com/business-and-economy/indian-retail-industry.html" t "undefined" Commerce & Industry, Shri Kamal Nath, the organized retail sector is expected to grow to a value of Rs. 2,00,000 crore (US$45 billion) and may generate 10 to15 million jobs in next 5 years. This can happen in two forms- 2.5 million of these people may be associated directly with HYPERLINK "http://www.economywatch.com/business-and-economy/indian-retail-industry.html" t "undefined" retailing and the rest 10 million people may be gainfully employed in related sectors that will be pulled up through the strong forward and backward linkage effects.
    • However to compete in this sector one needs to have up-to-date market information for planing and decision making. The second most important requirement is to manage HYPERLINK "http://www.economywatch.com/business-and-economy/indian-retail-industry.html" t "undefined" costs widely in order to earn at least normal profits in face of stiff competition.
    Top Companies in the Indian Retail Industry<br />
    • The Indian retail sector has been a euphoria over the last five years. India topped the A.T. Kearney's Global Retail Development Index for two consecutive years and this has infatuated Indian as well as foreign retail players to go gaga on the merchandising track. According to geographical expansion, Delhi/NCR and Mumbai are the felicitated regions as the top companies have rated the spending potential of consumers in the vicinity of the national capital and the financial capital as excellent. Other metros such as Kolkata, Chennai, Hyderabad and Bangalore have caught the sight of investors but their fortunes are yet to be illuminated. Companies like The Future Group, Reliance, Bharti-Walmart, DLF etc. have shown the way for other to enter. The country is expecting a surge in the growth sprint and let's hope for the best.
    • Top Companies: An analysis
    • Big Bazaar- Big Bazaar is a chain of department stores owned by the Pantaloon Group (Future Group)and headed by Kishore Biyani and headquartered at Mumbai. It offers all types of household items such as home furnishing, utensils, fashion products etc. It has a grocery department and vegetable section known as the Food Bazaar and its online shopping site is known as FutureBazaar.com. The real estate fund management company promoted by the Future Group expects to develop more than 50 projects across India covering a combined area of more than 16 million sq. ft. On April 1 2007, Big Bazaar had to shut its outlets in Mumbai as the 120 retrenched employees called a strike with the support of Bhartiya Kamgar Sena (the trade Union wing of Shiv Sena). Later the management agreed to reinstate the sacked workers.
    • Bharti Retail-, a wholly owned subsidiary of Bharti Enterprises. has announced two joint ventures (JV)with the international retailing behemoth, Wal-Mart. The first JV ensures cash and carry business, in which 100 percent FDI is permitted and it can sell only to retailers and distributors. The second JV concerns the franchise arrangement. Sunil Mittal, Chairman of the Bharti Group assured that the ventures will use “low prices every day” and “best practices for the satisfaction of the customer”. Processed foods and vegetables will be delivered by Bharti Field Fresh, Bharti's JV with Rothschild. Bharti Retail aims to foray every city with a population exceeding 1 million. It has plans to come up with an investment of more than $2 billion in convenience stores, supermarkets and hypermarkets spread over an aggregate 10 million sq. ft. The expansion drive looks ambitious but analysts are worried that Bharti may face stiff competition from Pantaloon and Reliance as they too have sanguine plans to flood the markets with thousands of retail outlets in the coming five years. Bharti Telecom also has plans to offer all its fixed and mobile telecom products and services from a single window to the SMB (Small and Medium Business) enterprises under the Bharti Infotel division..
    • Reliance Retail- Reliance claimed last year to start a retail chain that will be unique in size and spread, will lead to the welfare of one and all ranging from Indian farmers, manufacturers and ultimately consumers. It is known as Reliance Retail Ltd.(RRL) and is a 100 percent subsidiary of Reliance industries Ltd.(RIL). Soon after the Bharti-Wal Mart tie up, there was the news that RIL (Reliance Industries Ltd.) Chairman Mukesh Ambani met Commerce Minister Kamal Nath to discuss the apprehension of cheap imports from China. Reliance Retail has plans to open 4,000 outlets across 1,500 towns for an investment of $5.6 billion. Reliance is not away from agro-business. According to Buddhadeb Bhattacharjee, Chief Minister of West Bengal, “Reliance will hold demonstration farming, produce good quality seeds and give inputs to farmers”. Its most significant participation has been in the food procurement business in Madhya Pradesh and Punjab. This has in fact compelled the government to import wheat this year. Reliance Retail has also been reported to have entered into an agreement with footwear manufacturer Bata India Ltd. so that they will involve in selling each other's products.
    • DLF Shopping Malls- DLF Retail Developers Ltd. is one of the troikas of the DLF Group. Besides being India's largest real estate developer, DLF is also of the leaders in innovating shopping malls in India. It caught public eye when it launched the 2,50,000 sq ft. shopping mall in Gurgaon. It has brought a dramatic change in the lifestyles and entertainment with its City Centres and DT Cinemas. DLF has plans to invest Rs. 2000-3000 crore in all the emerging areas from metros to A class cities in the next two years. Till last year the company was involved in building 18 malls out of which 10 were in the NCR region. Future plans of DLF involve opening up of 100 malls(speciality malls, big box retailing and integrated malls) across 60 cities in next 8-10 years. They are slowly transforming into 'lease' and 'revenue share' models.
    • Local players like ITC, the A.V. Birla Group and Tatas have given the hints to enter organised retail. France’s Carrefour SA and Britain’s Tesco too were recently in news for their future plans to explore the Indian retail market.
    • In this section we may deal with the growth of the organized as well as the unorganized retail sector of India.
    • Due to the untapped potential that exists in the Indian retailing market, it is a very fast growing sector. One reason that can be attributed to this rapid entry of the foreign retail giants ,is that the Western Countries have reached a point of saturation in their retail sector. Another reason as already mentioned earlier is the change in the tastes and preferences or the psychographic of the consumers that is bent in their favour.
    • Although the retail sector in India contributes to about 10% in the GDP, it is the most underdeveloped sector in terms of investments that are made in this sector. The unorganized retail sector has recorded a growth of 5% per annum while the organized sector is growing at 25-30 % per annum. One should not be impressed by the figures of the organised retail markets since developed market in US, Taiwan, Malaysia is still a dream to the Indian retail market. They have registered a growth of 50% per annum.
    • The retail stores have mushroomed in the Tier II and Tier III cities. The participants in the HYPERLINK "http://www.economywatch.com/business-and-economy/indian-retail-sector-growth.html" t "undefined" retail market hold the presence of market in the cities as a signal to their growth.
    • It has been seen that the retail companies have invested in the IT sector for their growth and development. The IT sector has contributed greatly to the growth of the retail sector in India. The retail firms have made lumpy HYPERLINK "http://www.economywatch.com/business-and-economy/indian-retail-sector-growth.html" t "undefined" investments in Enterprise Resource Planning System as a strategy for their growth and development. SAP has also assumed a significant role in the growth and development of the organised retail industry.
    • The sudden growth of the organised retail sector can be attributed to the ushering of the domestic retail giants like Reliance, Pantaloons, ITC, RPG, Rahejas and the Bharti Group. The foreign companies continue to wait in the sidelines. These prominent retail chains have adversely affected the farmers in some states. Another viewpoint is that the farmers have rather benefited since they were eager on the market intervention of the buig retailers for the purpose of HYPERLINK "http://www.economywatch.com/business-and-economy/indian-retail-sector-growth.html" t "undefined" marketing and processing of their output. Since the big retailers reap the benefits of buying directly from the farmers , the consumers can purchase the products at minimal price rates. In places like Uttarakhand, the big retail chains are welcomed for the same purpose by the farmers. They have helped in putting
    • The report produced by HYPERLINK "http://www.economywatch.com/business-and-economy/indian-retail-sector-growth.html" t "undefined" HSBC shows that the FMCG retail sector is expected to grow by 60 % by 2010. leaving aside the packaging sectors, the other sectors that have registered rapid growth are hair care, household care, confectionery, chocolates etc.
    • Growth of Consumer Durables
    • The consumer growth HYPERLINK "http://www.economywatch.com/business-and-economy/indian-retail-sector-growth.html" t "undefined" industry is estimated to grow by 40% in the coming season. The television, refrigerator and washing machines sector has also witnessed a rapid growth. The market for Indian colour television is expected to reach the value of 10.5 million units by the next fiscal year. The refrigerator market is estimated to reach 4.5 million.Hence in a nut shell the HYPERLINK "http://www.economywatch.com/business-and-economy/indian-retail-sector-growth.html" t "undefined" retail industry in India has witnessed unprecedented growth in the past years. The organised sector is expected to make Quantum jumps in the coming years in terms of its contribution to GDP.
    Size of Indian Retail Industry and Present Scenario<br /> <br />The size of retail industry in an HYPERLINK "http://www.economywatch.com/business-and-economy/indian-retail-industry-size.html" t "undefined" economy depends on many factors and the level of consumer spending is the most important among these factors. The retail sector in India has grown by leaps and bounds in the last five years. The reason behind this growth has been the synergy of many propellants. However the growth is not always genuine as there are exaggerations as well. But these exaggerations also have benefits since they given a feel of growing competition all around. Secondly the present situation is just a depiction of nascent stage. The future of the trajectory may not be as steep as it is now or may be even slope downward. 'What will be the future size of the retail industry' is the mind boggling question. Another moot point that will gain importance in due time concerns the future of the unorganized HYPERLINK "http://www.economywatch.com/business-and-economy/indian-retail-industry-size.html" t "undefined" retail market which constitute a significant proportion of the whole industry. The retail stores have proved to be a vantage point for the customers. This implies that the small farmers who used to sell their product in the sabji-mandis and on roadsides are going to lose a significant HYPERLINK "http://www.economywatch.com/business-and-economy/indian-retail-industry-size.html" t "undefined" market share as they can't employ the two profit maximizers-economies of scale and economies of scope. <br />Retailing in India: the present scenario<br />The present value of the Indian retail market is estimated by the India Retail Report to be around Rs. 12,00,000 crore($270 billion) and the annual growth rate is 5.7 percent. Retail market for food and grocery with a worth of Rs. 7,43,900 crore is the largest of the different types of HYPERLINK "http://www.economywatch.com/business-and-economy/indian-retail-industry-size.html" t "undefined" retail industries present in India. Furthermore around 15 million retail outlets help India win the crown of having the highest retail outlet density in the world. The contribution of retail sector to GDP has been manifested below:<br />Country Retail Sector's share in HYPERLINK "http://www.economywatch.com/business-and-economy/indian-retail-industry-size.html" t "undefined" GDP (in %)<br />India <br />10 <br />USA<br />10<br />China<br />8<br />Brazil<br />6<br />Source:CII-AT Kearney Retail Study<br />As can be clearly seen, retailing in India is superior than those of its contenders. Retail sector is a sunrise HYPERLINK "http://www.economywatch.com/business-and-economy/indian-retail-industry-size.html" t "undefined" industry in India and the prospect for growth is simply huge. There are many factors that have stimulated the rise of the shopping centers and multiplex-malls in a jiffy. Some of them can be listed as follows:<br />Rise in the purchasing power of Indians- the rise in the per capita HYPERLINK "http://www.economywatch.com/business-and-economy/indian-retail-industry-size.html" t "undefined" income in the last few years has been magnificent. This has led to the generation of insatiable wants of the upper and middle class. The demand of new as well as second hand durables has risen throughout the country thus providing the incentive for taking up retailing.2. Favorable to farmers- retailing has helped in removing the middlemen and has thus enhanced the remuneration to farmers. This is a new revolution in the agricultural sector in India and will go a long way in amending the condition of agriculture, a major concern among policy makers.3. Use of credit- a typical Indian is most conversant with using HYPERLINK "http://www.economywatch.com/business-and-economy/indian-retail-industry-size.html" t "undefined" credit cards than carrying money. This has led to a shift of the consumer base towards supermarkets and make the payments in the form of credit.4. Comfortable Atmosphere- a visit to a retail store appears to be more soothing for the generation-Y. People and kids prefer to shop in an air conditioned a tech savvy manner.The retail industry is the second largest HYPERLINK "http://www.economywatch.com/business-and-economy/indian-retail-industry-size.html" t "undefined" employer in India. It currently employs about 7 percent of the total labor force in India. Finance Minister P. Chidambaram's recent statement “salaries ought not be legislated” is a welcome move as most of the organized retail is in private hands. However only about 4.6% of the total retail HYPERLINK "http://www.economywatch.com/business-and-economy/indian-retail-industry-size.html" t "undefined" trade is in organized sector. It generates about Rs.55,000 crore ($12.4 billion). The major and minor players desperately need to work hard in this direction so that next time the figures look more decent. The HYPERLINK "http://www.economywatch.com/business-and-economy/indian-retail-industry-size.html" t "undefined" government must also make an attempt to ameliorate the situation as political instability and infrastructure namely power and roads are the major roadblocks in the path of smooth functioning of the market.<br />Retail sectors in neighboring countries:<br />China- the total sales from retail market in China reached US$755 billion in 2005. However organized retailing in China accounts for only 20% of it. Also the fragmentation of China's retail market is so high that top 100 retailers make up for only 10.5% of the total market. The registered sales of department stores grew by 25.7% and that of convenience stores grew by 36.5% in 2005. The Chinese retail market is expected to reach new highs as the population of strong middle class is expected to double by 2020 and mergers and acquisitions among retailers are3 going in great guns. The WTO restrictions are also expected to have a favorable impact on its retail sector.<br />Japan- total annual sales for the Japanese retail industry for 2003 amounted to JPY 133,273 billion. Japan had 1.2 million retail establishments in June 2004 and there were 42,738 specialty superstores. Between 2002 and 2004 annual sales per store increased by 3.8%. The growth was mainly driven by the grocery superstores but the number of superstores specializing in clothes gradually came down. The organized retail sector in Japan couldn't perform at its full efficiency because of collapse of the 'bubble economy' in the early 90s.<br />Structure of the Retail Industry In India<br /> <br />The retail industry continued in India in the form of Kiranas till 1980. Soon, following the modernisation of the retail sector in India, many companies started pouring in the HYPERLINK "http://www.economywatch.com/business-and-economy/indian-retail-industry-structure.html" t "undefined" retail industry in India like Bombay Dyeing, Grasim etc. As has been mentioned earlier the retail sector in India can be widely split into the organised and the unorganized sector. The unorganized sector is predominant. We may discuss in detail the different divisions of the retail sector in India.<br />Unorganized Retail Sector <br />The unorganized retail sector basically includes the local kiranas, hand cart, the HYPERLINK "http://www.economywatch.com/business-and-economy/indian-retail-industry-structure.html" t "undefined" vendors on the pavement etc. This sector constitutes about 98% of the total retail trade. But Foreign Direct Investment in the retail sector is expected to shrink the employment in the unorganized sector and expand that in the organized one. <br />Organised Retail Sector <br />In the organised sector trading is undertaken by the licensed retailers who have registered themselves to HYPERLINK "http://www.economywatch.com/business-and-economy/indian-retail-industry-structure.html" t "undefined" sales as well as income tax. The organised retail sector have in their ambit, corporate backed hypermarkets and retail chains. The private large business enterprises are also included under the organised retail category.<br />The organised HYPERLINK "http://www.economywatch.com/business-and-economy/indian-retail-industry-structure.html" t "undefined" retail sector can be further subdivided into:<br />Instore Retailers <br />This type of retail format is also known as the brick and mortar format. These retail stores are in the form of fixed point sale outlets. They are specially designed to lure the customers. There are different types of stores through which the instore retailers operate. <br />Branded Stores appear in the form of exquisite HYPERLINK "http://www.economywatch.com/business-and-economy/indian-retail-industry-structure.html" t "undefined" showrooms. Here the total range of a particular brand is available and the quality of the product is certified by the government.<br />There are also multi brand specialty stores that sell a series of brands so that the consumer can choose from the wide array of brands.<br />Department stores have a large number of brands and products catering to all basic needs to luxurious items as well.<br /> HYPERLINK "http://www.economywatch.com/business-and-economy/indian-retail-industry-structure.html" t "undefined" Supermarkets are basically self service retail stores.Discount Stores offer commodities at reduced prices.In Hyper Marts customers have wide variety of products to choose from and they are also available at discounted rates.<br />Convenient stores are located in prominent places within the reach of majority of the customers and do not operate in stringent work hours.<br />Shopping HYPERLINK "http://www.economywatch.com/business-and-economy/indian-retail-industry-structure.html" t "undefined" Malls are a storehouse of a large variety of retail shops situated close to each other.<br />Retail Formats in India <br />The retail formats in India can be categorised into the traditional and the modern forms. The traditional format includes Kiranas, street markets, kiosks and multiple brand stores.<br />The modern format, on the other hand includes supermarkets, hypermarkets, department HYPERLINK "http://www.economywatch.com/business-and-economy/indian-retail-industry-structure.html" t "undefined" stores and specialty chains.<br />In discussing about the structure of the retail sector in India we cannot forgo forecourt retailing and trade parks. <br />Government policy and regulation to the retail industry in India.<br /> <br />“India's government seems to be on a gradual but definite path toward allowing foreign retailers into the country....” suggests the A.T. Kearney's Retail Development Index 2006. It is a common knowledge that the Union government has to face a number of hurdles both from it's opponents as well as it's allies before it could announce the final verdict. There have been demands from all corners regarding framing of rules to safeguard interests of the so-called small traders. Simultaneously economists have the consensus that industrialization is imperative for the growth of the economy and foreign investment has to play an inevitable role in it. With Lok Sabha elections to come in 2009, the Union government too seems a bit confused regarding decision in who's favor can provide it a political edge. So in this study let us compare the views for and against liberalization as is held by Indian Bureaucrats.<br />Entry of large players: stiff opposition from Left Parties <br />The recent outburst of fury among the Kerala's LDF(Left Democratic Front) Government has been noticeable. They have exacted for a three-pronged approach to prevent the retail giants from serving the Keralians. At the first stage, not only MNCs but also the local retail giants like Reliance will be shown the red signal. In fact a magnified CPI protest has compelled a Reliance Fresh outlet in Kochi to take police protection. The draft of a bill has been finalized to amend the Kerala Essential Commodities Act so that the state government can intervene in the retail market. <br />As a second step, local councils (70% of which is controlled by the Left) will deny licenses, that are mandatory to start a retail chain in the state. Kochi and Tiruvananthapuram corporations will be in fact commanded to reconsider the licenses of outlets that are already operating in the regions. This strategy grants more power to the state. However a ban on shopping in these outlets is still not clear. The third and the most revolutionary judgment is actually an outcome of the whole game. Government-controlled supermarkets and hypermarkets will be established in some of the key cities in the state. <br />This rigid legal wall not only in Kerala but across the country has been born out of a traditional mindset. Kerala claims to have a literacy rate of 90.92% and a sex ratio of 1058 females per 1000 males. The data speaks for the government's prudent commitment in the case of Kerala. So it is high time that the government opens up avenues for its people to let them grow and become self dependent. <br />But the government is still holding good, the conventional 'infant industry' outlook. The main worry is the negative impact on the already gloomy condition of employment. Let's make an attempt to understand the vicious circle of unorganized retailing and present employment scenario. Unorganized retailing has a share of about 96% in the Indian retail sector. But why should people work in such miserable situations if the manufacturing and services sector are booming is the overwhelming question. There has been a trend to migrate to cities in search of alluring bright city lights. But the consequences has been been even worse- earning lower than expected wages(Harris Todaro model of migration). The illiterate and unskilled people ultimately set up a grocery shop to earn a living. This gives birth to another unorganized retail shop in India and thus enlarges its share. So the unorganized retail market in India has born out of fate rather than selection. <br />The Actual Scene <br />Those opposing the expansion of organized retail in India must understand that the share of primary sector shrinks and that of the secondary and then the tertiary sector expands as an economy grows. This is the basic structural adjustment in case of any transforming economy. India is at a take off stage. A retardation in the agricultural sector is not permissible but inhibiting the growth of services on grounds of protection to agriculture is more irrational. A proof of this has been seen in a small town of North Bengal. The opening of a Big Bazaar (brand name for stores under Pantaloon) departmental store has seen a human deluge of about 7,000 people in the 35,000 sqft shopping mall by 3pm. This clearly indicates that people (even in remote places) have become fed up of monotonous marketing practices and demand nowadays is purely governed by choice. <br />The Ruling UPA government's outlook <br />The UPA government is rather clear in its aim of taking India to new highs. The commerce minister has repeatedly asserted that FDI will kill two birds with the same stone. It will generate substantial direct as well as indirect employment and at the same time will not tamper with the present scope of the unorganized retail market. The indirect employment includes jobs in transport, packaging and other logistic services. It will enhance competition in the country thus giving a virtual chance to face global challenges while operating at home. Mr. Nath is clearly focused on the utilization of FDI in acquiring benefits. It is true that such investments will bring in huge imports but this may also help in the Indian products reaching the foreign consumers. Foreign majors such as Wal-Mart, Tesco and Carrefour are ready to enter India. The UPA government has already permitted 51 percent FDI in Single-brand products without consulting its allies and it is expected that slowly but steadily the government will achieve its goal. <br />Different Segments in the Indian Retail Industry<br /> <br />The HYPERLINK "http://www.economywatch.com/business-and-economy/indian-retail-industry-segments.html" t "undefined" retailing sector of India can be split into two segments. They are the informal and the formal retailing sector. The informal retailing sector is comprised of small retailers. For this sector, it is very difficult to implement the HYPERLINK "http://www.economywatch.com/business-and-economy/indian-retail-industry-segments.html" t "undefined" tax laws. There is widespread tax evasion. It is also cumbersome to regulate the labour laws in this sector. As far as the formal retailing sector is concerned, it is comprised of large retailers. Stringent tax and labour HYPERLINK "http://www.economywatch.com/business-and-economy/indian-retail-industry-segments.html" t "undefined" laws are implemented in this sector.<br />If the retail industry is divided on the basis of retail formats then it can be split into the modern format retailers and the traditional format retailers. The modern format retailers comprise of the supermarkets, Hypermarkets, Departmental Stores, Specialty Chains and company owned and operated retail stores.<br />The traditional format retailers comprise of Kiranas, Kiosks, Street Markets and the multiple brand outlets.<br />The retail industry can also be subdivided into the organized and the unorganized sector. The organized retail sector occupies about 3% of the aggregate retail HYPERLINK "http://www.economywatch.com/business-and-economy/indian-retail-industry-segments.html" t "undefined" industry in India.<br />Size and contribution of the retail industry in India<br />In terms of value, the Indian Retail industry is worth $300 billion. Its contribution to the Gross Domestic Product is about 10% , the highest compared to all other Indian HYPERLINK "http://www.economywatch.com/business-and-economy/indian-retail-industry-segments.html" t "undefined" Industries. The retail sector has also contributed to 8% of the employment of the country. The organised retail sector is expected to triple its size by 2010. The food and grocery HYPERLINK "http://www.economywatch.com/business-and-economy/indian-retail-industry-segments.html" t "undefined" retail sector is expected to multiply five times in the same time frame. The major reason behind the low participation in the Indian retail sector is the need for lumpy investments that cannot match up their break even points. The government policies are being revised from time to time to attract HYPERLINK "http://www.economywatch.com/business-and-economy/indian-retail-industry-segments.html" t "undefined" investments in this sector.<br />The Indian Retail Industry—Sky is the limit<br />In terms of the retail development index India ranks fifth. In Asia it occupies the second position , next to China. Among all the HYPERLINK "http://www.economywatch.com/business-and-economy/indian-retail-industry-segments.html" t "undefined" global markets, the Indian retail market is the most expanding. This is owing to absence in restriction at the entry level. So the large foreign companies can reap the benefits of economies scale by entering the green retail fields of India. There are many reasons why the HYPERLINK "http://www.economywatch.com/business-and-economy/indian-retail-industry-segments.html" t "undefined" retail industry in India can reach the zenith.<br />Firstly the organised retail sector in India has a very low contribution to the entire retail sector in the country. Hence there is ample scope for the new players to achieve success in the backdrop of soaring disposable HYPERLINK "http://www.economywatch.com/business-and-economy/indian-retail-industry-segments.html" t "undefined" income of the upcoming generation. Secondly, not only have the incomes increased but there has been a sea change in the preferences of the consumers . These factors have acted as a stimulus for the ushering of foreign players retailing in apparels, accessories, electronic appliances etc. Large shopping malls have already mushroomed in the metropolitan cities. There still lies untapped potential in the Indian HYPERLINK "http://www.economywatch.com/business-and-economy/indian-retail-industry-segments.html" t "undefined" Retail Market. <br />FDI In Indian Retail Industry<br /> <br />The Government of India was initially very apprehensive of the introduction of the Foreign Direct Investment in the Retail Sector in India. The unorganized retail sector as has been mentioned earlier occupies 98% of the retail sector and the rest 2% is contributed by the organised sector. Hence one reason why the government was fearing the surge of the Foreign Direct HYPERLINK "http://www.economywatch.com/business-and-economy/indian-retail-industry-fdi.html" t "undefined" Investments in India was the displacement of labour.<br />The unorganized retail sector contributes about 14% to the GDP and absorbs about 7% of our labour force. Hence the issue of displacement of labour consequent to FDI is of primal importance. <br />There are different viewpoints on the impact of FDI in the HYPERLINK "http://www.economywatch.com/business-and-economy/indian-retail-industry-fdi.html" t "undefined" retail sector in India. According to one viewpoint , the US evidence is empirical proof to the fact that FDI in the retail sector does not lead to any collapse in the existing employment opportunities. There are divergent views as well. According to the UK Competition Commission, there was mass scale job loss with the entry of the hypermarkets brought about by FDI in the UK retail market. <br />According to another school of thought, there is undoubtedly labour displacement associated with FDI, but employment generation will occur in different dimensions. Varied skills would be specialised. <br />Taking into consideration the pros and cons of introducing FDI in India, ICRIER has recommended 49% of FDI . The opening up of FDI in India is also expected to be gradual so that the domestic HYPERLINK "http://www.economywatch.com/business-and-economy/indian-retail-industry-fdi.html" t "undefined" industries can tailor themselves according to the changes. At the formative stage , the idea was to start with 26% of FDI in this sector. But soon the idea changed as China's FDI moved up from 49% to 100% in the retail sector.<br />While the government is continuing its plans to liberalise FDI in the retail sector in India, foreign companies like Wal-Mart are waiting on the threshold. They basically wish to enter into partnership with various multinational chains. FDI would bring about modern infrastructure that would help to boost the productivity of the organised retail sector in India. <br />Malls have mushroomed in various locations. They are the centres of entertainment for the new generation.<br />FDI is not allowed in the retail sector and this is the reason why many prominent global players like Dominos, Levis, Lee, HYPERLINK "http://www.economywatch.com/business-and-economy/indian-retail-industry-fdi.html" t "undefined" Nike, Adidas, TGIF, Benetton, Swarovski, Sony, Sharp, Kodak etc are entering the retail market via licensee or franchisee. The opening up of the economy to FDI in the retail sector is also expected to generate employment. FDI can be a blessing instead of curse only if it produces backward linkages relating to production and manufacturing. It may also, in the process help to push up domestic production as well as exports.<br />In the present scenario, 51% HYPERLINK "http://www.economywatch.com/business-and-economy/indian-retail-industry-fdi.html" t "undefined" Foreign Direct Investment is permitted in India only through single brand retailing. The international retailers are entering the matket through licensees just as Wal-Mart has entered through the franchisee, Bharti Enterprises. <br />Recent News on FDI in India <br />Metro AG an Shorite are already in operation. Foreign retailers are in search of investing in wholesale. Wal-Mart as we have mentioned has already joined the HYPERLINK "http://www.economywatch.com/business-and-economy/indian-retail-industry-fdi.html" t "undefined" retail market<br />of India. Geant is also expected to start its retailing operations soon in Indiahence we may conclude that FDI in retailing in India would require the creation of additional jobs to compensate the resulting job loss. It would result in the reduction in the Kirana shops and Retail Stores. The consumers can benefit from such exposures, it would enhance quality, improve on the HYPERLINK "http://www.economywatch.com/business-and-economy/indian-retail-industry-fdi.html" t "undefined" supply chain, increase exports, so on and so forth. There are certain other issues that have discouraged FDI in India and they are discussed as under.<br />Bottlenecks to FDI in Retail Industry <br />According to the Land and HYPERLINK "http://www.economywatch.com/business-and-economy/indian-retail-industry-fdi.html" t "undefined" Property laws only the Indians have the right to land and property in India and this law has in a a way inhibited the entry of the foreign players in India. Again the labour laws are so designed that the store workers can be protected , quite contrary to the requirements of the modern formats. The tax structure of India is also unfavourable for the foreign players. The corporate HYPERLINK "http://www.economywatch.com/business-and-economy/indian-retail-industry-fdi.html" t "undefined" tax rate for the domestic companies is 36.59% whereas it is 41.82% for the foreign companies. The changing sales tax as well as the Value Added Tax is also not favourable in the case of HYPERLINK "http://www.economywatch.com/business-and-economy/indian-retail-industry-fdi.html" t "undefined" international companies<br />. <br />SWOT ANALYSIS OF INDIAN RETAIL INDUSTRY<br />Retailing consists of all business activities involving the sale of goods and services to<br />ultimate consumers. Retailing involves a retailers traditionally a store or a service<br />establishment, dealing with consumers who are acquiring goods and services for their<br />own use rather than for resale. Wal-Mart, The Limited, Best Buy and other familiar<br />organizations are retailers. Retailing is based more on whether the business deals directly<br />with public. Retail banking, service stations local coffee shops are also retailers with the<br />emergence of online retailing, retailers are no longer concerned about location of stores.<br />E-retailing has emerged. Consumers are always hungry for modern ways of shopping.<br />Indian retail sector is growing fast and its employment potential is growing fast. The<br />retail scene is changing really fast. Retailers are rethinking their approaches towards the<br />suppliers so that they can get the best pricing strategies for them. Retail sector in India is<br />also catalyst for the growth of staling tactics of below the line marketing used by major<br />retail players like Spencer, big bazaar, reliance fresh etc. For tapping customers by<br />creating points of sales displays. So we can say that India is a rising star and going to be<br />one of the fastest growing regions of the future<br />Retailing consists of all business activities involving the sale of goods and services to<br />ultimate consumers. Retailing involves a retailers traditionally a store or a service<br />establishment, dealing with consumers who are acquiring goods and services for their<br />own use rather than for resale. Wal-Mart, The Limited, Best Buy and other familiar<br />organizations are retailers. Retailing is based more on whether the business deals directly<br />with public. Retail banking, service stations local coffee shops are also retailers with the<br />emergence of online retailing, retailers are no longer concerned about location of stores.<br />E-retailing has emerged.<br />India has moved into 21st century and is showing marked changes to push the organized<br />retail development even further. India is rated as the fifth most striking emerging retail<br />market. India is on the threshold of a revolution in its retail industry.<br />Indian retail industry, which stands second in terms of employment generation after<br />agriculture. Indian retail industry has been broadly divided into organized and<br />unorganized sectors accounted for Rs.350 million of the total revenues.<br />Source: www.piramyd.com<br />CURRENT SCENARIO OF INDIAN RETAIL INDUSTRY<br />Marketers need to understand the existing scene in India before they invest in organized<br />retailing local kiryanas are incorporating changes with time, but people still prefer to buy<br />their goods from them. Organized retailing is concentrated only in the cities. Organized<br />retailing has been attacking the average middle class consumers in large cities. Retail<br />Trade, which is currently the largest contributor to our GDP, requires the current<br />marketing environment needs to be improved.<br />It is observed that the share of organized retailing in India is around 2%, compared to<br />80% in USA, 40% in Thailand and 20% in China approx. At Kearney’s global retail<br />development index shows India on the top of emerging retail market. Retailing through<br />non-traditional channels is becoming more popular. Retailing through supermarkets,<br />hypermarkets, department stores are increasing. Top business houses like Reliance, Tata,<br />and Rahejas are investing in this sector. The retail sectors also employ over 10% of<br />national workforce.<br />A report by KPMG predicts that organized retail is expected to grow stronger than<br />organized retail is expected to grow stronger than GDP growth in the next 5 years and<br />this is expected to be a result of changing lifestyles, consumption patterns and<br />demographics.<br />The face of grocery retailing in India is seeing the change because of the huge<br />investments by the corporate. To name the few are RPG Spencer, Future group, Food<br />Bazaar, Reliance, Subhiksha etc.<br />Retail sector is the fastest growing sector in the Indian economy. Traditional markets are<br />making way for few formats such as department stores, hypermarkets, books,<br />supermarkets and specially stores. International players like Tesco and Carryfour are<br />expected to enter India very soon.<br />The business sectors of banking and retail have always had close links. Finance should<br />also be made easily available to facilitate expansion and restructuring plans undertaken<br />by retailers.<br />MODERN RETAIL- SWOT ANALYSIS<br />SWOT analysis is a tool for analyzing modern retailing. In this analysis, a study can be<br />made regarding the strength, weaknesses, opportunities and threats of retail industry.<br />STRENGTH OF MODERN RETAIL<br />The benefits of larger organized retail segments are several. The consumers get a<br />better product at cheaper price. So consumers get value for their money.<br />Employment opportunities both direct and indirect have been increased. Farmers<br />get better prices for their products though improvement of value added food<br />chain.<br />A large young working population with median age of 24 years, nuclear families<br />in urban areas, along with increasing working women population and emerging<br />opportunities in the service sector are going to be the key growth drivers of the<br />organised retail sector in India.<br />It has also contributed to large scale investments in the real estate sector with<br />major national and global players investing in devolving the infrastructure and<br />construction of the retailing business.<br />The trends that are driving the growth of the retail sector in India are<br />low share of organised retailing and falling real estate prices.<br />Increase in disposable income and customer aspirations are important factors.<br />Increase in expenditure for luxury items is also vital.<br />The governments of states like Delhi and National Capital Region (NCR) are very<br />upbeat about permitting the use of land for commercial development thus increase<br />the availability of land for retail space.<br />The growth of sachet revolution emerges for reaching to the bottom of the<br />pyramid.<br />The annual growth of departmental stores is estimated at 24%.<br />The size of Indian organised retail industry reached at Rs.1,30,000 crore in 2006.<br />Ranked second in Global Retail Development Index of 30 developing countries<br />drawn up by AT Kearney.<br />WEAKNESS OF MODERN RETAIL<br />The rapid development of retail sector is the sharp improvement in the availability of<br />retail space. But the current rally in property prices, retail real estate rentals have<br />increased remarkably, which may render a few retailing business houses unavailable.<br />Retail companies have to pay high rentals which are blockage in the turn of profits.<br />Small size outlets are also one of the weaknesses in the Indian retailing. 96% of the<br />outlets are lesser than 500 sq.ft. The retail chains are also smaller than those in the<br />developed countries for instance, the superstore food chain, food world is having only 52<br />outlets where as Carrefour promotes has 8800 stores in 26 countries.<br />The volume of sales in Indian retailing is also very low. India has largest population in<br />the world and a fast growing economy.<br />OPPORTUNITIES OF MODERN RETAIL<br />Global retail giants take India as key market .It is rated fifth most attractive retail<br />market. The organised retail sector is expected to grow stronger than GDP growth<br />in the next five years driven by changing lifestyles, increase in income and<br />favourable demographic outline. Food and apparel retailing are key drivers of<br />growth.<br />Rural retailing is still unexploited Indian market.<br />It can become one of the largest industries in terms of numbers of employees and<br />establishments.<br />Indian retail industry has come forth as one of the most dynamic and fast paced<br />industry with several players entering the market.<br />THREATS OF MODERN RETAIL<br />One of the greatest barriers to the growth of modern retail formats are the supply<br />chain management issues. No major changes are needed in the supply chain for<br />FMCG products; these are well developed and efficient. For perishables, the<br />system is too complex. Government regulations, lack of adequate infrastructure<br />and inadequate investment are the possible bottlenecks for retail companies. The<br />supply chain for staples is less complicated than the net groceries. But staples<br />have a unique problem of non- standardization.<br />Organized retailing in India is yet to get an industry status.100% Foreign Direct<br />Investment (FDI) is not permitted in retailing in India. Ownership of retail chain<br />is allowed only to the extent of 49% but without FDI, the sector is deprived of<br />access to foreign technologies and faster growth.<br />Lack of uniform tax system for organized retailing is also one of the obstacles.<br />Inadequate infrastructure is likely to be an obstacle in the growth of organized<br />retails.<br />The unorganized sector has dominance over the organized sector in India because<br />of low investment needs.<br />Labour rules and regulation are also not followed in the organized retails. The<br />sector is unable to employ retail staff on contract basis.<br />Problem of car parking in urban areas is serious concern.<br />Difficult to target all segments of society.<br />Emergence of hyper and super markets trying to provide customer with –value,<br />variety and volume.<br />Heavy initial investment is required to break even with other companies and<br />compete with them.<br />Retail today has changed from selling a product or a service to selling a hope, an<br />aspiration and above all an experience that a consumer would like to repeat.<br />Retail chains are yet to settled down with proper merchandise mix for the<br />mall outlets. Retailing today is not about selling at the shop, but also about researching<br />and surveying the market, offering choice, competitive prices and retailing consumers as<br />well.<br />Contribution of Retail Industry<br />The effects of retail on Indian economy are:<br />Employment Generation<br />Retailing provides employment to making 8% workforce in India, because it is highly<br />labour intensive. It has also patented to generate an additional eight million jobs, direct<br />and indirect.<br />Development of small scale units.<br />Retailing also helps small scale units to easy access market. They provide a platform for<br />small scale unit’s goods. Retailing in India support 4 lakh plus medium handcraft<br />manufacturers.<br />Future prospect in retail business<br />FDI helps to meet the global economies, societies and domestic players to a closely<br />integrative traditional village i.e. one is for all and all for one.<br />By the end of 2010, 100 million sq.ft of small space is expected to be available.<br />Division of labour, specialization, developing competition and innovation lead to<br />economic growth.<br />Liberalization of trade and cross border merges and joint ventures have also driving<br />forces.<br />A significant size in the organized retail and is expected to grow from 3% to50% in<br />the coming year.<br />Technology, management, expertise, market intelligence are also some of the<br />opportunities to domestic business.<br />Conclusion<br />Consumers are always hungry for modern ways of shopping. Indian retail sector is<br />growing fast and its employment potential is growing fast. The retail scene is changing<br />really fast. Retailers are rethinking their approaches towards the suppliers so that they can<br />get the best pricing strategies for them. There is no surprise why from an Abani to Mittal,<br />Godrej to Birla, everybody is ready with them plans to kick start retail revolution in<br />India. Apart from above, retail sector in India is also catalyst for the growth of staling<br />tactics of below the line marketing used by major retail players<br />Like Spencer, big bazaar, reliance fresh etc. For tapping customers by creating points of<br />sales displays. So we can say that India is a rising star and going to be one of the fastest<br />growing regions of the future.<br />BIBLIOGRAPHY<br />1. Avneet and Singh, Ramanjeet “Research in management & technology”<br />Deep & deep publications, Delhi<br />2. Matching mastermind, ICFAI, Sept. 2006 “The route to revolutionary trends in the<br />Indian retail sector”.<br />3. Matching mastermind, ICFAI, March 2007 “ Opening retail trade for FDI on India-<br />A progressive measure”<br />4. Tikmund ,William G. and D`amico Michael “Marketing”<br />West publishing company New York<br />5. www. retailindia.typepad.com<br />6. http://icm.icfai.org/casestudies/catalogue/marketing .<br />7. www.indianmba.net.in<br />8. Varshney, R.L. and Gupta, S.L. “Marketing Management –An Indian Perspetive”<br />9. Shevan, M. A. “Marketing Management”<br />10. Grover, S.K. “Marketing – A Strategic Orientation”<br />