1. BY
KANIKA RUSTAGI (00924001809)
SANDEEP SACHDEVA (06724001809)
BBA(B&I) 2nd SHIFT 6th SEM

2.  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.
 India's 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. India's 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, India's central government announced retail reforms for both multi-brand stores
and single-brand stores. These market reforms paved the way for retail innovation and competition
with multi-brand retailers such as Walmart , Carrefour and Tesco, as well single brand majors such
as IKEA, Nike, and Apple. The announcement sparked intense activism, both in opposition and in
support of the reforms. In December 2011, under pressure from the opposition, Indian government
placed the retail reforms on hold till it reaches a consensus.
 In January 2012, India approved reforms for single-brand stores welcoming anyone in the world to
innovate in Indian retail market with 100% ownership, but imposed the requirement that the single
brand retailer source 30 percent of its goods from India. Indian government continues the hold on
retail reforms for multi-brand stores. IKEA announced in January that it is putting on hold its plan to
open stores in India because of the 30 percent requirement. Fitch believes that the 30 percent
requirement is likely to significantly delay if not prevent most single brand majors from
Europe, USA and Japan from opening stores and creating associated jobs in India.

3. FINAL
CONSUMERCHANNEL
OF
DISTRIBUTION
MANUFACTURER
WHOLESALER
RETAILER

4. Manufacturer
Brand A
Manufacturer
Brand B
Manufacturer
Brand C
Manufacturer
Brand D
Manufacturer
Brand E
Manufacturer
Brand F
Wholesaler
Wholesaler
Wholesaler
Retailer
Brand A
customers
Brand B
customers
Brand F
customers
Brand E
customers
Brand D
customers
Brand C
customers
RETAILER’S ROLE IN SORTING PROCESS

5.  Indian market has high complexities in terms of a wide geographic spread
and distinct consumer preferences varying by each region necessitating a
need for localization even within the geographic zones. India has highest
number of outlets per person (7 per thousand) Indian retail space per
capita at 2 sq ft (0.19 m2)/ person is lowest in the world Indian retail
density of 6 percent is highest in the world.1.8 million households in
India have an annual income of over 45 lakhs (US$ 85,500).
 While India presents a large market opportunity given the number and
increasing purchasing power of consumers, there are significant
challenges as well given that over 90% of trade is conducted through
independent local stores. Challenges include: Geographically dispersed
population, small ticket sizes, complex distribution network, little use of
IT systems, limitations of mass media and existence of counterfeit goods.

6.  Indian apparel retailers are increasing their brand presence overseas, particularly in developed
markets. While most have identified a gap in countries in West Asia and Africa, some majors
are also looking at the US and Europe.
 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, Spencer's 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 of Titans 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

7.  Next retail India Ltd (Consumer Electronics)(www.next.co.in)
 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)(www.nmart.co.in)
 Reliance ADAG Retail-Format: Reliance World
 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, TruMart

8.  The world's largest retailer by sales, Wal-Mart Stores Inc and Sunil Mittal's 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.
 Opposition to the retailers' plans have argued that livelihoods of small scale and rural
vendors would be threatened. However, studies have found that only a limited number of
small vendors will be affected and that the benefits of market expansion far outweigh the
impact of the new stores.
 Tesco Plc., plans to set up shop in India with a wholesale cash-and-carry business and
will help Indian conglomerate Tata group to grow its hypermarket business.

9.  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 unorganised 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

10. Challenges
For
retailing in
India
Global economic
slowdown impacting
consumer demand
Consumptions
declines in the
advanced economies
Competition from
the unorganized
sector
Retail sector yet to be
recognized as an industry
High real estate
costs
Lack of basic
infrastructure
Supply chain
inefficiencies
Challenges with
respect to human
resources
Shrinkage

11. The current contraction in overall growth has not been so severe ever since the one witnessed
during World War II. The sub prime-triggered crisis in the US during end of 2007 gradually
spread across other parts of the world; as a the fallout of this crisis, credit availability dropped
sharply in advanced economies and their GDP growth contracted incessantly during the last
quarter of 2008. The financial crisis continued to trouble advanced and developing economies
in spite of policymakers’ attempts to replenish liquidity in these markets.
The financial crisis and global economic slowdown resulted in job losses around the
world, which weakened consumer demand. The unemployment rate remained high in the US
during first quarter of 2009, Europe and emerging economies like Brazil; for instance, the
annual unemployment rate in the US reached 5.8% in 2008 from 4.6% in 2007, which further
went up to 9.4% in May 2009. In future, the rising unemployment rates in advanced economies
as well as economies that are heavily export-oriented will further dampen consumer spending;
as a result, the retail sectors growth will remain under threat. In the US, the retail trade sales
growth (both retail and food services) contracted by 0.7% in 2008 from 3.3% growth in 2007.
The downward trend in retail trade sales continued during the first six months of 2009 (Jan-
June), as it went down by 9.3%13 as compared with the previous year. In EU27 countries, the
total retail trade in volume terms continued to contract during the first five months of 2009; for
instance, during May 2009, the retail trade in volume terms in EU27 contracted by 3.1%
against the same period in the previous year.

13. Private consumption expenditure is an important indicator of overall economic growth. In the
last couple of quarters, the decline in consumption has further affected the global economic
downturn. Moreover, widespread financial crisis severely hit credit availability and household
disposable income. For instance, US households lost 20% (US$ 13 trillion)14 of their net
worth as a percentage of disposable income from the second quarter of 2007 to the fourth
quarter of 2008. The stock prices across the world started falling during the second quarter of
2007 and continued its losses throughout 2008; the global stock markets lost between 40-60%
in dollar terms that translated to a huge loss of global wealth in 2008. The personal disposable
income (at current prices) in the US registered negative growth (3.9% and 2.1%) during the
last two quarters of 2008, respectively. The consumer demand situation was aggravated further
by reduced capital availability and consequent fall in investments.

15. 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.

16.  The retail sector is not recognized as an industry by the government even though it is the
second-largest employer after agriculture. Lack of recognition as an industry affects the retail
sector in the following ways:
 Due to the lack of established lending norms and consequent delay in financing activity, the
existing and new players have lesser access to credit, which affects their growth and expansion
plans
 The absence of a single nodal agency leads to chaos, as retailers have to oblige to multiple
authorities to get clearances and for regular operations

17.  Even though the real estate prices have subsided recently due to the slowdown in economies
and the financial crises, these prices are expected to go up again in the near future. Presently
the sector faces high stamp duties, pro-tenancy acts, the rigid Urban Land Ceiling Act and the
Rent Control Act and time-consuming legal processes, which causes delays in opening stores.
 Earlier on the lease or rents on properties were very high (among the highest in the world) at
some prominent locations in major cities. The profitability of retail companies were affected
severely because real estate costs constituted a major part of their operating expenses. Now
companies are moving out from prominent malls of tier I cities and are re-negotiating the
rental agreements with landlords to reduce costs. Some are even focusing on setting up shops
in tier II and tier III cities.

18. Poor roads and lack of cold chain infrastructure hampers the development of food retail in
India. The existing players have to invest substantial amounts of money and time in building a
cold-chain network.

19.  Supply chain needs to be efficiently-managed because it has a direct impact on the company’s
bottomlines. Presently the Indian organised retail has an efficient supply chain but it appears
efficient only when compared with the unorganised sector. On an international level the Indian
organised retailers fall short of international retailers like Wal-Mart and Carrefour in terms of
efficiencies in supply chain. In the following paragraphs some key challenges that the retailers
face during procuring goods from suppliers to delivering the same to end-customers are
discussed.
 Inventory management is the first challenge that retailers face at the local store level as well as
at the warehouse level. Excess inventory often leads to an increase in inventory costs, and then
to lower profits, so retailers like Pantaloons and Shoppers Stop have IT systems in place for
inventory management. SCM-IT has helped retailers to plan their stock outs, replenish their
stock on time, move stock from warehouse to stores, maintain adequate stock at a store to
match consumer preferences etc. However, the retailer may still face a big challenge in terms
of efficiently implementing the supply-chain software across stores and integrating it with the
central warehouse, which can be a time-consuming process, requiring trained personnel.
 Logistics is another challenge related to the supply chain. It is imperative for any organised
food and grocery retailer to establish a robust cold chain. Amul is the best example of this
scenario, as it has developed a cold storage chain across India. Until and unless organised
retailers like Reliance and Food Bazaar fully develop integrated-cold chains, they would
continue to incur loss of considerable amount of money through wastages of perishable items
while moving huge quantities from one place to another.
 The third challenge related to the supply chain is procurement. Big organised retailers enjoy
economies of scale based on their size and expansion plans. The economical benefits of scale
in procurement are achieved when procurement is made in thousands or millions of units;
however, the main challenge here is to procure adequate amount of stock according to
customer requirements, failing which the resultant rise in inventory can affect bottomlines.

20. The Indian organised retail players shell out more than 7% of sales towards personnel costs.
The high HR costs are essentially the costs incurred on training employees as there is a severe
scarcity for skilled labour in India. The retail industry faces attrition rates as high as
50%, which is high when compared to other sectors also. Changes in career path, employee
benefits offered by competitors of similar industries, flexible and better working hours and
conditions contribute to the high attrition.

21. Retail shrinkage is the difference between the book value of stock and the actual stock or the
unaccounted loss of retail goods. These losses include theft by employees, administrative
errors, shoplifting by customers or vendor fraud. According to industry estimates, nearly 3-4%
of the Indian chain’s turnover is lost on account of shrinkage. The organised industry
playershave invested IT, CCTV and antennas to overcome the problem of shrinkage.