A project on retail industry in global environment with reference to retail outlets in the market
Projectsformba.blogspot.com PROJECT ON RETAIL INDUSTRY IN GLOBAL ENVIRONMENT (WITH REFERENCE TO RETAIL OUTLET IN THE MARKET) PROJECT SUBMITTED TO ANNAMALAI UNIVERSITY, IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTER OF BUSINESS ADMINISTRATION IN APPLIED MANAGEMENT By DIRECTORATE OF DISTANCE EDUCATION ANNAMALAI NAGAR 2008 Projectsformba.blogspot.com 1
Projectsformba.blogspot.com DECLARATIONI hereby declare that the project entitled “RETAIL INDUSTRY IN GLOBALENVIRONMENT” submitted for the Degree of Master of BusinessAdministration in Applied Management is my original work and the project hasnot formed the basis for the award of any degree, diploma, associate ship,fellowship or similar other titles. It has not been submitted to any otheruniversity or Institution for the award of any degree or diploma.Place:Date: Projectsformba.blogspot.com 2
Projectsformba.blogspot.com ACKNOWLEDGEMENT It is with real pleasure that, I record my indebtedness to my academicGuide, .................................... for his counsel and guidance during thepreparation of this project. I am grateful to Centre Head .................................... I wish to record my sincere and special thanks to ................................, My thanks are due to ...................................... to give me great andvaluable support.PlaceDate: Projectsformba.blogspot.com 3
Projectsformba.blogspot.com CERTIFICATECertified that the project is a work done by ............................... during theperiod of his study under my guidance, and that the project has not previouslyformed the basis for the award of any degree, diploma, associates hip,fellowship or similar other titles and that it is an independent work done by his.Place:Date: Projectsformba.blogspot.com 4
Projectsformba.blogspot.com TABLE OF CONTENTChapter Content Page No.Acknowledgement IIList of Tables VIList of Diagrams VII(1) Introduction 01-44 1.1 Retail Industry 02-19 • What is Retail Industry? 02-05 • Structure of Retail Industry 06-11 • Evolution of Retailing 12-13 • Indian Scenario of Retail Industry 14-16 • Retail Worldwide scenario 17-19 1.2 Objectives and Role of Retail Industry 20 1.3 Review of Literature 21-27 • Major / Minor Challenges in Industry 21-26 • Example of Some Published Issue’s 27 1.4 Hypothesis 28-39 • Past/ Present/ Future of Industry 28-35 • Impact of Retail Industry in India 36-39 1.5 Limitations of the Study 40-42 Projectsformba.blogspot.com 5
Projectsformba.blogspot.com 1.6 Methodology 43-44 • Source of Data 43 • Other Source 44(2) Significance of the study 45-48 2.1 Opportunities of the Western 46 Retailers in India 2.2 Contribution of ‘FDI’ In Retailing 47-48 2.3 Benefits To The Indian Consumer 48(3) Research and Analysis 49-69 3.1 Latest Trends in Retail Sector 50-53 3.2 Major Player of Retail Industry 54-69(4) Finding & Conclusion 70-73(5) Bibliography 74-76 Projectsformba.blogspot.com 6
Projectsformba.blogspot.comTable No. Title of the Table Page No. 1.1. Growth of Retail Industry08 1.2. Continuation of GDP14 1.3. World Organization Trade18 1.4. Comparison of Retail Industry 29 3.1. World-Wide Retail 66 Projectsformba.blogspot.com 7
Projectsformba.blogspot.comTable No. Title of the Diagram Page No. 1.1. Indian Retail Market 03 1.2. Map of Income Classes 05 1.3. Organized Retail Market 06 1.4 . Growing Format in India10 1.5 . Retailing Map in India11 1.6. Journey of Organized Retail 13 1.7. Total Retail Sales 2007 16 1.8. US Retailing Format 18 1.9 Penetration of Retail19 1.10 Challenges in Retail Market 21 1.11 Retail Challenge 25 3.1 Retail Analysis51 3.2 Retail Market52 3.3 Retail Segment 53 3.4 Retail Touches Economy 73 Projectsformba.blogspot.com 8
Projectsformba.blogspot.com Part-1.1 RETAIL INDUSTRY The word "Retail" originates from a French-Italian word. Retailer-someone who cuts off or sheds a small piece from something. Retailing is theset of activities that markets products or services to final consumers for theirown personal or household use. It does this by organizing their availability on arelatively large scale and supplying them to customers on a relatively smallscale. Retailer is a Person or Agent or Agency or Company or Organizationwho is instrumental in reaching the Goods or Merchandise or Services to theEnd User or Ultimate Consumer. Retail is Indias largest industry. It accounts for over 10 per cent of theIndias GDP and around eight per cent of the employment. Retail sector is oneof Indias fastest growing sectors with a 5 per cent compounded annual growthrate. Indias huge middle class base and its untapped retail industry are keyattractions for global retail giants planning to enter newer markets. Driven bychanging lifestyles, strong income growth and favorable demographic patterns,Indian retail is expected to grow 25 per cent annually. It is expected that retailin India could be worth US$ 175-200 billion by 2016. Emerging markets such as India and China are the final frontier for retailtaking the focus away from saturated Western markets. Since 2001, 49 global Projectsformba.blogspot.com 11
Projectsformba.blogspot.comretailers entered 90 new markets, but at the same time, 17 retailers left marketsin 2005. The Indian retail industry in valued at about $300 billion and is expectedto grow to $427 billion in 2010 and $637 billion in 2015. Only three percent ofIndian retail is organized. Retailers of multiple brands can operate through afranchise or a cash-and-carry wholesale model. The Indian retail environment has attained $ 210bn quiche, witnessing astrong development pace of five percent per year as per latest survey by PriceWaterhouse Coopers. As per the estimation 200 malls, presenting additional50mn sq ft of retail space will be ready in next two years. Existing retail spacein 160 malls is nearly 32mn sq ft 1.1 Indian Retail Market The analysts foresee bright future of the retail sector. A huge number ofshopping malls, nearly 100, have come up in the recent past, generating 20mnsq ft. retail space, extending more space of about 12mn sq ft to it. Nearly 60 Projectsformba.blogspot.com 12
Projectsformba.blogspot.commalls are on the verge of completion and may be operational by the end ofcurrent financial year. A forecasted number of nearly 200 malls, in a move tomake additional 50mn sq ft of retail space, will be completed within the nexttwo-years. India retail industry is expanding itself most aggressively, as a result agreat demand for real estate is being created. Indian retailers preferred means ofexpansion is to expand to other regions and to increase the number of theiroutlets in a city. It is expected that by 2010, India may have 600 new shoppingcenters. In the Indian retailing industry, food is the most dominating sector and isgrowing at a rate of 9% annually. The branded food industry is trying to enterthe India retail industry and convert Indian consumers to branded food. Since atpresent 60% of the Indian grocery basket consists of non- branded items. The global retail giants like Wal-Mart, Gap, Tesco, Versace, K-Mart/SEARS, Carrefour, ZARA, FCUK, Fendi, NEXT, Mother Care, lKEA,Trussardi, DKNY and Debenhams have made plans to march in the Indianmarket. ESPRIT, GUESS, Chanel, Mango and many other global marked theirpresence in India by implementing licensing and franchisee agreements. Theglobal retailers on the line of control, awaiting the green signal from Govt. toenter Indian retail market. However, the current scenario has encouragedIndian players to speed up retail expansion and fresh retail ventures. Projectsformba.blogspot.com 13
Projectsformba.blogspot.com Companies like Shoppers Stop, Trent, Reliance, Lifestyle, PantaloonsTanishq, Crossroads, Akbarallys and Tanishq already have planned to investover Rs 5,000cr. Trent is on the edge to take both its brands Star India Bazaarand Westside to new cities, meanwhile Shoppers Stop has recently geared upfor expansion of present ones and to add 11 new stores including twohypermarkets. Also, Pantaloon has planned to add eight Big Bazaar mallswithin the next 6 to 8 months. After partition, Reliance Industries Ltd (RIL) is substantially gettingready to enter in field of retailing. RIL is poised to emerge as the single largestplayer in this sector. On the other hand, Tosco’s, Wal-Marts or Safeway doesultimately enter in the country. So finally, Shoppers Stops, Westside,Pantaloons and West sides in coming years have will face stiff competition. 1.2 Map of Income Classes Projectsformba.blogspot.com 14
Projectsformba.blogspot.com STRUCTURE OF RETAIL INDUSTRY The retail industry continued in India in the form of Kiranas till 1980.Soon, following the modernization of the retail sector in India, many companiesstarted pouring in the retail industry in India like Bombay Dyeing, Grasim etc.As has been mentioned earlier the retail sector in India can be widely split intothe organized and the unorganized sector. Organized Retail Sector After 50 years of unorganized retailing and fragmented Kiranas stores,the Indian retail industry has finally begun to move towards modernization,Systematization and consolidation. Today, modernization is the catch phraseand the key to understanding retail in the next decade. Traditionally retailers 2006-07 1.3 Organized Retail MarketHave had localized operations. This localized nature of the industry is Changingas retailers face lower growth rates and threatened profitability in homeMarkets. New geographies help them sustain top line growth in Addition to Projectsformba.blogspot.com 15
Projectsformba.blogspot.comenabling global sourcing and encasing on global advantages of getting the bestproducts at optimum prices. There has been a boom in retail trade in India owing to a gradual increasein the disposable incomes of the middle class households, as a result of goodperformance of IT, Service and Infrastructure sectors. More and more playersare entering the retail business in India to introduce new formats like malls,supermarkets, discount stores, department stores and even changing thetraditional looks of bookstores, chemist shops, and furnishing stores.Organized retail formats prevalent globallySupermarkets: Self-service 4000-20000 sq ft stores with shopping cartstypically focused on regular groceries, household goods and personal careHypermarkets: Huge stores over 40000 sq ft situated outside the town withample parking space aimed for bulk purchases stocking electronics, furnitureand clothing. Carrefour is the global major in this format.Mass merchandisers: Large destination stores that sell everything atcompetitive prices. They have cross-country chain operations with centralizedsourcing and a hub-and-spoke distribution. Makro and Sams Club are leadingplayers in this format. Projectsformba.blogspot.com 16
Projectsformba.blogspot.comDiscounters: Aimed at bargain buyers offering less choice but deep discount onbulk sourcing deals through controlled inventory. Aldi is the world leader inthis format.Convenience Stores: Small stores located at convenient pointslike petrol stations workinground the clock. 1.1 Growth of Retail Industry Unorganized Retail Sector The unorganized retail sector basically includes the local Kiranas, handcart, the vendors on the pavement etc. This sector constitutes about 98% of thetotal retail trade. As 70% of the employment is generated in Agriculture sector,hence this form of retailing is widely seen in those areas and of course to someparts of the urban. There is a lot of hue and cry in the sector for opening ofsector for direct investment from the foreign players, but government can notneglect the interests of small players. One of main reason of not opening thissector to FDI is it may shrink the employment in the unorganized sector andexpand that in the organized. RETAILING FORMATS IN INDIA Projectsformba.blogspot.com 17
Projectsformba.blogspot.com Malls: The largest form of organized retailing today. Located mainly in metrocities, in proximity to urban outskirts. Ranges from 60,000 sq ft to 7,00,000 sqft and above. They lend an ideal shopping experience with an amalgamation ofproduct, service and entertainment, all under a common roof. Examples includeShoppers Stop, Pyramid, and Pantaloon Specialty Stores: Chains such as the Bangalore based Kids Kemp, the Mumbai booksretailer Crossword, RPGs Music World and the Times Groups music chainPlanet M, are focusing on specific market segments and have establishedthemselves strongly in their sectors. Discount Stores: As the name suggests, discount stores or factory outlets, offer discountson the MRP through selling in bulk reaching economies of scale or excess stockleft over at the season. The product category can range from a variety ofperishable/ non perishable goods • Department Stores: Departmental Stores are expected to take over the apparel business fromexclusive brand showrooms. Among these, the biggest success is K RahejasShoppers Stop, which started in Mumbai and now has more than seven largestores (over 30,000 sq. ft) across India and even has its own in store brand forclothes called Stop. Projectsformba.blogspot.com 18
Projectsformba.blogspot.com Hyper marts/Supermarkets: Large self service outlets, catering to varied shopper needs are termed asSupermarkets. These are located in or near residential high streets. These storestoday contribute to 30% of all food & grocery organized retail sales. SuperMarkets can further be classified in to mini supermarkets typically 1,000 sq ft to2,000 sq ft and large supermarkets ranging from of 3,500 sq ft to 5,000 sq ft.having a strong focus on food & grocery and personal sales. Convenience Stores: These are relatively small stores 400-2,000 sq. feet located nearresidential areas. They stock a limited range of high-turnover convenienceproducts and are usually open for extended periods during the day, seven days aweek. Prices are slightly higher due to the convenience premium. Mobs : Multi Brand outlets, also known as Category Killers, offer several brandsacross a single product category. These usually do well in busy market placesand Metros. 1.4 Growing Format in India Projectsformba.blogspot.com 19
Projectsformba.blogspot.com RETAILING MAP IN INDIA 1.5 Retailing Map Projectsformba.blogspot.com 20
EVOLUTION OF RETAILING Retailing, one of the largest sectors in the global economy, is goingthrough a transition phase in India. For a long time, the corner grocery storewas the only choice available to the consumer, especially in the urban areas.This is slowly giving way to international formats of retailing. The traditionalfood and grocery segment has seen the emergence of supermarkets/grocerychains, convenience stores and fast-food chains. The traditional grocers, by introducing self-service formats as well asvalue-added services such as credit and home delivery, have tried to redefinethemselves. However, the boom in retailing has been confined primarily to theurban markets in the country. Even there, large chunks are yet to feel the impactof organized retailing. There are two primary reasons for this. First, the modernretailer is yet to feel the saturation effect in the urban market and has, therefore,probably not looked at the other markets as seriously. Second, the modernretailing trend, despite its cost-effectiveness, has come to be identified withlifestyles. In order to appeal to all classes of the society, retail stores would have toidentify with different lifestyles. In a sense, this trend is already visible with theemergence of stores with an essentially `value for money image. Theattractiveness of the other stores actually appeals to the existing affluent class as
Well as those who aspire to be part of this class. Hence, one can assume that theretailing revolution is emerging along the lines of the economic evolution ofsociety.It was only in the year 2000that the economists put afigure to it: Rs. 400,000crore which is expecteddevelop to around Rs.800,000 crore by the year 1.6 Journey of Organized Retail2005 – an annual increase of 20 per cent. Retailing in India is unorganized withpoor supply chain management perspective. According to a recent survey bysome of the retail consulting bodies, an overwhelming proportion of the Rs.400,000 crore retail markets are UNORGANISED. In fact, only a Rs. 20,000crore segment of the market is organized. As much as 96 per cent of the 5million-plus outlets are smaller than 500 square feet area. This means that Indiaper capita retailing space is about 2 square feet in comparison to 16 square feetin the United States. Indias per capita retailing space is thus thelowest in the world.
INDIAN SCENARIO OF RETAIL INDUSTRY The present value of the Indian retail market is estimated by the IndiaRetail Report to be around Rs. 12,00,000 crore($270 billion) and the annualgrowth rate is 5.7 percent. Retail market for food and grocery with a worth ofRs. 7,43,900 crore is the largest of the different types of retail industries presentin India. Furthermore around 15 million retail outlets help India win the crownof having the highest retail outlet density in the world. The contribution of retailsector to GDP has been manifested below: Country Retail Sectors share in GDP (in %) India 10 USA 10 China 8 Brazil 6 1.2 Continuation to GDPAs can be clearly seen, retailing in India is superior to those of its contenders.Retail sector is a sunrise industry in India and the prospect for growth is simplyhuge. There are many factors that have stimulated the rise of the shoppingcenters and multiplex-malls in a jiffy. Some of them can be listed as follows:1. Rise in the purchasing power of Indians- the rise in the per capita incomein the last few years has been magnificent. This has led to the generation ofinsatiable wants of the upper and middle class. The demand of new as well as
second hand durables has risen throughout the country thus providing theincentive for taking up retailing.2. Favorable to farmers- retailing has helped in removing the middlemen andhas thus enhanced the remuneration to farmers. This is a new revolution in theagricultural sector in India and will go a long way in amending the condition ofagriculture, a major concern among policy makers.3. Use of credit- a typical Indian is most conversant with using credit cardsthan carrying money. This is led to shift of the consumer base towardssupermarkets and make the payments in the form of credit.4. Comfortable Atmosphere- a visit to a retail store appears to be moresoothing for the generation-Y. People and kids prefer to shop in an airconditioned. The retail industry is the second largest employer in India. Itcurrently employs about 7 percent of the total labor force in India. FinanceMinister P. Chidambarams recent statement “salaries ought not to belegislated” is a welcome move as most of the organized retail is in privatehands. Only 4.6% of the total retail trade is into organized sector. It generatesabout Rs.55,000 crore ($12.4 billion). The major and minor players desperatelyneed to work hard in this direction so that next time the figures look moredecent. The government must also make an attempt to ameliorate the situationas political instability and infrastructure namely power and roads are the majorroadblocks in the path of smooth functioning of the market.
PRESENT INDIAN SCENARIO* Unorganized market: Rs. 583,000 cores* Organized market: Rs.5, 000 cores* 5X growth in organized retailing between 2000-2005* Over 4,000 new modern Outlets in the last 3 years* Over 5,000,000 sq. ft. of mall space under development* the top 3 modern retailers control over 750,000 sq. ft. of retail space* Over 400,000 shoppers walk through their doors every week* 47 global fortune companies & 25 of Asias top 200 companies are retailers* Biggest player in India is Pantaloon Retail India Limited* Growth in organized retailing on par with expectations and projections of thelast 5 Years: on course to touch Rs. 35,000 corers (US$ 7 Billion) or more by2005-06 1.7 Total Retail Sales 2007
RETAIL : WORLDWIDE SCENARIOChina- the total sales from retail market in China reached US$755 billion in2005. However organized retailing in China accounts for only 20% of it. Alsothe fragmentation of Chinas retail market is so high that top 100 retailers makeup for only 10.5% of the total market. The registered sales of department storesgrew by 25.7% and that of convenience stores grew by 36.5% in 2005. TheChinese retail market is expected to reach new highs as the population of strongmiddle class is expected to double by 2020 and mergers and acquisitions amongretailers are3 going in great guns. The WTO restrictions are also expected tohave a favorable impact on its retail sector. Key Players Analyzed This sectioncovers the key facts about players currently operating in the China retailindustry including Shanghai Bailian Group, Beijing Gome Electric, Carrefour,Wal-Mart Stores, Wuhan Zhongbai Group, and China Paradise ElectronicsRetail.Japan- total annual sales for the Japanese retail industry for 2003 amounted toJPY 133,273 billion. Japan had 1.2 million retail establishments in June 2004and there were 42,738 specialty superstores. The year 2002 to 2004 the annualsales per store increased by 3.8%. The growth was mainly driven by the grocerysuperstores but the number of superstores specializing in clothes graduallycame down. The organized retail sector in Japan couldnt perform at its fullefficiency because of collapse of the bubble economy in the early 90s
Spain- Spain Energy Industry Spain energy consumption is estimated to havereached 165 Million Tons of Oil Equivalent in 2006. Fossil fuels are the majorsources for energy in Spain especially Oil (49.5%) & Natural Gas (19.9%).With the Spanish objective of energy security & diversity, and clean energysources, renewable sources are expected to grow at rapid pace. Key Findings §Spain is a net energy importer, with imports accounting for 99% of its totalannual oil and natural gas consumption and 50% of its coal consumption keyplayers in Spain energy such as Gas Natural Group, CEPS Group, Repsol YPF,Endesa S.A. and Gamesa. 1.3 World Trade OrganizationUnited State- Retail is thesecond-largest industry in the U.S.by number of businesses andnumber of employees. Retail salesin the U.S. (total retail sales 1.8 US Retailing Format
include the categories of gasoline, automobiles, and food service) were upabout 3.8% in 2007, to $4.49 trillion (Plunkett Research estimate). The 2007growth was driven partly by higher gasoline costs as well as by deep pricediscounting during the Christmas season by mass merchandisers and year-longdiscounting by automobile dealers.Brazil- Emerging as one of the worlds largest retail markets. The sales in theindustry have been growing strongly since 2003 and are expected to continue atthis momentum only over the next few years as constantly declining inflationrate allows for continued expansion of real incomes (increasing demand for nondurable consumer goods) and credit conditions ease (sustaining demand fordurable goods). A process of consolidation of the retail industry has beenunderway but overall, the market remains relatively fragmented, indicatingsubstantial scope for the larger players to grow their market share in future. Thetop five supermarket chains account for approximately 40% of total sales.. Allthe market values have been converted to US$ at May 2007 exchange ratewhere, 1 Brazil Real (BRL) = US$ 0.494 (Approx). 1.9 Penetration of Retail
Part 1.2 OBJECTIVES & ROLE OF RETAIL INDUSTRY Retail is clearly the sector that is poised to show the highest growth inthe next five years. The sector is set for a revolution, as both the present playersand new entrants are gearing up to explore the market. This sector contributes10% of Indias GDP and the current growth rate is 8.5%. The present size of theorganized retailing sector is approximately 3% and is expected to grow to25-30% by the year 2010. There are about 300 new malls, 1500 supermarketsand 325 departmental stores currently under construction. Many players arecoming up with huge investments, due to which the present 12 million mom-and-pop shops and Kiranas stores fear losing their business. Most predictionssay that the sector might reach to US$ 400-600 billion by the year 2010 The retail sector has played a phenomenal role throughout the world inincreasing productivity of consumer goods and services. It is the second largestindustry in the United States of America in terms of numbers of employees andestablishments. Wal-Mart, the largest retailer in the United States is also thelargest employer in the United States with annual sales over $ 284 Billion.There is no denying the fact that most of the developed economies are verymuch relying on their retail sector as a locomotive of growth. Analysts, CEOs,and others are using consumer spending and consumer confidence dataoriginating from the retail sector as an indicator to gauge the status of the economy
Part 1.3 CHALLENGES OF RETAIL INDUSTRY The big challenge for the Indian retailing industry is the heterogeneity ofthe market. It is up to us retailers to evolve with consumers, predict where andwhat they will spend on, be there and take the highest share of their wallet anduse this last leg of the economic chain to build India. At Panta-loon, through ourdelivery formats, we touch 52% of the customer’s wallet. My vision is tocapture where this new, young and emergent India is going to spend and captureas close to 100% of their shopping.So far, modern-formatretail has scaled up itspresence in the metros anda few cities. However, thefuture will see tier-II and, 1.10 Challenges in Retail Marketmaybe, even tier-III cities attractmore retail outlets. Consumer mindset and behavior is changing in these cities.A growing base of affluent, upwardly mobile consumers have similar needs anddesires as their urban counterparts and they are looking for instant gratification.With satellite television, internet and mobile communication available insmaller cities, people are increasingly exposed to how the ‘West’ lives. Tier-II
and tier-III cities present an enormous growth potential over the next five years and arethe future of modern retail in IndiaMAJOR CHALLENGES1. Amalgamation or Confusion- According to TATA Strategic ManagementGroup, India has a high density retail structure of 1 retail outlet per 90 peopleand is the 9th largest retail market in the world. But the structure of the retailindustry in India is in utter jumble. The parallel operation of conveniencestores, supermarkets, hypermarkets and specialty stores in the economy isbewildering. According to the Wheel of Retailing Theory, certain loopholes inone of the forms of marketing can get communicated to other forms also.2. What to sell- Another bemusement is the category of items to be offered.According to researches, 41 percent of total consumption expenditure goes tothe segment of food and groceries and it accounts for 77 percent of total retailsales. So it is obvious that this is the most preferred section of retailers. Butunfortunately the foible taste bias for wet market (i.e. fresh food availablethrough hawkers) has marred this prospect also. Therefore supply chainmanagement, storage of fresh perishable foods and persuading the customersthat the food is inexpensive despite being fresh are genuine challenges to thenewcomers. Diversifying the product base to consumer products such asreadymade garments, furniture’s, mobiles and computers can mitigate thelosses, if any from food marketing and also broaden the reach to consumers.
3. Nostalgia- Indian shopping habits are no different. People tend to attachqualities like honesty, fair price, good behavior etc. to shopkeepers with whomthey have been dealing right from childhood. They find no reason to go to adistant megaspore without any genuine reason. This problem is difficult to dealwith as it demands a change in long-formed mindset. Organized retail outletscan overcome this problem by employing eligible local peoples who caninteract in vernacular language and win the confidence of people.4. Information Technology- This is a major problem and India must act fast ifit wishes to create a smooth field for organized retailing. Digitization ofservices will make transfer of goods easy and an improvement in supply chainmanagement will definitely play a significant role in attracting more consumersand less consumer grievances. Besides, it will generate easier payments optionfor customer and easier money movement for the CEOs of these highlydiversified malls.MINOR CHALLENGES1. Human resource crunch- the concern for insufficient manpower in theindustry has been in news for the last few months. This fear is somehowunfounded. The retail industry according to recent reports is growing at a rate of
100 percent. Kishore Biyanis Future Group i.e. the Big Bazaar chain of retailoutlet alone provides employment to more than 18,000 people and is planningto expand its employment base to 34,000 by June 2008. If we add to this theforay by mega players like Reliance and Bharti-Walmart then the fear cansurely turn into a misperception. Retailing mainly deals with hard-selling ofspace, trade of stocks and building of relationships. Since most of the openingsare for front line shop people, a graduation will suffice. Nowadays manyinstitutes also provide post-HSC and post-graduate retail-specific courses.2. Hindrances from government- Some political parties want the governmentto amend laws and improve curbs so that the mega players cant openlydecimate the unorganized retail sector. This is a conclusion based on a myopicoutlook and must be amended for a long term strategy. The fear is baselessbecause of the reasons mentioned above. The mega stores will no doubt provideemployment to the less educated masses. Also taking business away especiallyfrom small food vendors is more easily said than done. Instead the limitingmove will send wrong signals to the investors and will ward off investmentswhen the states need it most. Allowing 51 percent retail FDI in single brandretailing is a welcome move in this direction. It is expected that the governmentwill create further opportunities for the organized retail to come up as homegrown investment is always sweeter than foreign investment.
OTHER CHALLENGES:(1) LOCATION:"Right Place, Right choice"Location is the most important ingredient for any business that relies oncustomers, and is typically the prime consideration in a customers store choice.Locations decisions are harder to change because retailers have to either makesustainable investments to buy and develop real estate or commit to long termlease with developers. When formulating decision about where to locate, theretailer must refer to the strategic plan:* Investigate alternative trading areas.* Determine the type of desirable store location* Evaluate alternative specific store sites 2) MERCHANDISE: The primary goal of the most retailers is to sell the right kind of merchandise and nothing is more 1.11 Retail Challengecentral to the strategic thrust of the retailing firm. Merchandising consists ofactivities involved in acquiring particular goods and services and making themavailable at a place, time and quantity that enable the retailer to reach its goals.
Merchandising is perhaps, the most important function for any retailorganization, as it decides what finally goes on shelf of the store.3) PRICING:Pricing is a crucial strategic variable due to its direct relationship with a firmsgoal and its interaction with other retailing elements. The importance of pricingdecisions is growing because todays customers are looking for good valuewhen they buy merchandise and services. Price is the easiest and quickestvariable to change.4) TARGET AUDIENCE:"Consumer the prime mover""Consumer Pull", however, seems to be the most important driving factorbehind the sustenance of the industry. The purchasing power of the customershas increased to a great extent, with the influencing the retail industry to a greatextent, a variety of other factors also seem to fuel the retailing boom.5) SCALE OF OPERATIONS:Scale of operations includes all the supply chain activities, which are carriedout in the business. It is one of the challenges that the Indian retailers arefacing. The cost of business operations is very high in India.
SOME PUBLISHED ISSUE OF RETAIL INDUSTRY The retail industry is expected to grow into a USD 427 billion industry by 2010- FICCI India’s retail industry, which is in the middle of rapid growth, has already scripted success stories fit to be the subject of a Bollywood film-Business Standard The impact of organized retailers that have seen swarming of malls lately, on the “mom-n-pop stores” in 20 Indian cities- Indian Council of Research in International Economic Relations (ICRIER) Modern Retailing Comprehensive policy vital- The Hindu Retail boom triggers ancillary industry growth- The Times of India
Part 1.4 PAST/ PRESENT/ FUTURE OF RETAIL INDUSTRY Before the decade of eighties, India with hundreds of towns and citieswas a nation striving for development. The evolution was being witnessed atvarious levels and the people of India were learning to play different roles asbusinessmen and consumers. Retail-which literally means to put on the market, is a very importantaspect of every city. Without a well organized retail industry we would not haveour necessities and luxuries fulfilled. Be it our daily groceries or fashionaccessories and everything in between, retail industry brings us the blissfulexperience of shopping. Though organized retailing industry began muchearlier in the developed nations, India had not actively participated. Howeverwith its vast expanse and young population, India in the 21st century emergesas a highly potential retail market. The journey of retailing in India has beenriveting and the future promises further growth. Here is a complete picturedeciphering the past, present and future trends of Indian Retail Market. It is widely accepted that the retail industry has undergone a drasticchange in last five years and there is yet more to come. Let us compare theimage of Indian retailing in 2004-05 to that of its status in 2007-08 in thefollowing table:
Magnification of the Indian Retail Industry Yardstick Situation in 04-05 Situation in 07-08Value of retail sales Rs. 10,20,000 crore Rs 12,00,000 croreAnnual growth rate 5% 5.7%Value of organized market Rs 35,000 crore Rs 55,000 croreShare of organized market in the 3.4% 4.6%sectorForecasts (after 5 years) about Over Rs. 1,00,000 Rs. 2,00,000 croresize of organized retail market croreForecasts about growth rate of Around 30% Around 40%organized retail market 1.4 Comparison of Retail IndustryThe above table clearly shows that the retail market as well as the mindsetrequired for it has experienced a thorough revisal in the last three years. This isjust the beginning and Indians are sanguine that the sector will see rosy days inthe future. This confidence has helped India acquire the No.1 position among30 most attractive retailing destinations in the world according to the GlobalRetail Development Index of 2005 (by AT Kearney, India). Among emergingmarkets, India holds the second position after China in the list of most favoredretail destinationsPast – Retail Industry in India Before the decade of eighties, India with hundreds of towns and cities
was a nation striving for development. The evolution was being witnessed atvarious levels and the people of the nation were learning to play different rolesas businessmen and consumers. The foundation for a strong economy werebeing laid, youth were beckoning new awareness in all spheres. And thisbrought in an opportunity for retail industry to flourish. First in the metros andmajor cities later to impact sub urban and rural market as well.Retailing in India at this stage was completely unorganized and it thrived asseparate entities operated by small and medium entrepreneurs in their ownterritories. There was lack of international exposure and only a few Indiancompanies explored the retail platform on a larger scale. From overseas onlycompanies like Levis, Pepe, Marks and Spencer etc. had entered targetingupper middle and rich classes of Indians. However as more than 50 %population was formed by lower and lower middle class people, the market wasnot completely captured. This was later realized by brands like Big Bazaar andPantaloons who made their products and services accessible to all classes ofpeople and today the success of these brands proves the potential of Indianretail market. A great shift that ushered in the Indian Retail Revolution was theeruption of Malls across all regional markets. Now at its peak, the mall cultureactually brought in the organized format for Retailing in India which was absentearlier.To your surprise there was not a single mall in India a decade before andjust a few years ago only a handful of them were striving, today there are more
than 50 malls across different cities and 2 years from now around 500 malls arepredicted to come up.Present – Retail Industry in India At present the Retail industry in India is accelerating. Though India isstill not at an equal pace with other Asian counterparts, Indian is geared tobecome a major player in the Retail Market. The fact that most of the developednations are saturated and the developing ones still not prepared, India secures agreat position in the international market. Also with a highly diversedemography, India provides immense scope for companies brining in differentproducts targeting different consumers.According to the Global Retail Development Index, India is positioned as theforemost destination for Retail investment and business development. Thefactor that is presently playing a significant role here is the fact that a largesection of Indian population is in the age group of 20-34 with a considerablyhigh purchasing power; this has caused the increase in the demand in the urbanmarket resulting in consistent growth in the Retail business. And though the metros and other tier 1 cities continue to sustain Retailgrowth, the buzz has now shifted from these great cities to lesser known ones.As the spending power is no longer limited to metros, every tier 2 city in thecountry has good market for almost every product or service. Due to this, tier 2cities like Chandigarh, Coimbatore, Pune, Kolkatta, Ahmedabad, Baroda,
Hyderabad, Cochin, Nagpur, Indore, Trivandrum etc. provide a good platformfor a brand to enter Indian market.However there are a few precautions for every brand that explores Indianmarket. As Indian consumers are very curious and have a broad perspective,they respond well to a new product or concept and there are very fair chances ofa brand surviving well, but every Indian consumer be it an urbanite or a smalltown dweller needs a feeling of value for money. Although labeled as tightfisted, Indian consumers are great spenders once they realize that they aregetting value for their money. Also new product /service concepts from thewestern world are better adopted first by the urban Indians, the smaller marketsrespond well to the need based retailing rather than luxury concepts. As the Indian retailing is getting more and more organized various retailformats are emerging to capture the potential of the market.* Mega Malls* Multiplexes* Large and small supermarkets* Hypermarkets* Departmental stores are a few formats which flourishing in the both big and small regional markets.As the major cities have made the present retail scenario pleasant, the future ofthe Indian Retailing industry lies in the rural regions. Catering to theseconsumers will bring tremendous business to brands from every sector.
However as the market expands companies entering India will have to be morecautious with their strategic plans.Future – Retail Industry in India According to a study the size of the Indian Retail market is currentlyestimated at Rs. 704 crores which accounts for a meager 3 % of the total retailmarket. As the market becomes more and more organized the Indian retailindustry will gain greater worth. The Retail sector in the small towns and citieswill increase by 50 to 60 % pertaining to easy and inexpensive availability ofland and demand among consumers. Growth in India Real estate sector is also complementing the Retailsector and thus it becomes a strong feature for the future trend. Over a period ofnext 4 years there will be a retail space demand of 40 million sq. ft. Howeverwith growing real estate sector space constraint will not be there to meet thisdemand. The growth in the retail sector is also caused by the development ofretail specific properties like malls and multiplexes. According to a report, from the year 2003 to 2008 the retail sales aregrowing at a rate of 8.3% per annum. With this the organized retail whichcurrently has only 3% of the total market share will acquire 15-20 % of themarket share by the year 2010. Factors that are playing a role in fuelling the bright future of the IndianRetail are as follows:
The income of an average Indian is increasing and thus there is a proportional increase in the purchasing power. The infrastructure is improving greatly in all regions is benefiting the market. Indian economy and its policies are also becoming more and more liberal making way for a wide range of companies to enter Indian market. Indian population has learnt to become a good consumer and all national and international brands are benefiting with this new awareness. Another great factor is the internet revolution, which is allowing foreign brands to understand Indian consumers and influence them before entering the market. Due to the reach of media in the remotest of the markets, consumers are now aware of the global products and it helps brands to build themselves faster in a new regionHowever despite these factors contributing to the growth of Indian retailIndustry, there are a few challenges that the industry faces which need to bedealt with in order to realize the complete scope of growth in Indian market.Foreign direct investment is not allowed in retail sector, which can be a concernfor many brands. But Franchise agreements circumvent this problem. Alongwith this regulations and local laws and real estate purchase restrictions bringup challenges. And with Good Planning, Timely Implementation and a mediacampaign that touches Indian consumers any brand can go far ahead in theIndian Retail Revolution.
IMPACT OF RETAIL INDUSTRY IN GLOBAL WORLD Organized retailing is spreading and making its presence felt in differentparts of the Country. The trend in grocery retailing however, has been slightlydifferent with a Growth concentration in the South. Though there wastraditional family owned retail Chains in South India such as Nilgiri’s as earlyas 1905, the retail revolution happened With the RPG group starting the Foodworld chain of food retail outlets in South India With focus on Chennai,Hyderabad and Bangalore markets, preliminarily. The Experiment has reapedrich dividends and the group is now foraying into other Territories as well as.Owing to the success of Food world model of RPG group, several new modelssuch as Trinethra, Subhiksha, Margin Free and others have made their forayinto this sector albeit at regional levels. Today the food retail sector in India isabout Rupees Ten Lakh Crores (USD 200 billions) of which the organized foodretail segment is about 1 per cent and increasing at a pace of over 20% year toyear. To be successful in food retailing in India essentially means to drawaway shoppers from, the roadside hawkers and Kiranas stores to supermarkets.This transition can be achieved to some extent through pricing, so the successof a food retailer depends on how best he understands and squeezes his supplychain. The other major factor is that of Convenience shopping which thesupermarket has the edge over the traditionalKiranas Stores. On an average a
supermarket stocks up to 5000 SKU’s against few hundreds stocked at anaverage Kiranas stores. Though with excellent potential, India poses a complex situation for aretailer, as this is a Country where each State is a mini-Country by itself. Thedemography’s of a region Vary quite distinctly from others. In order to appealto all classes of the society, retail Stores would have to identify with differentlifestyles. Hence we may find more of Regional players and it would takeenormously long time before nation wide successful Retail chains emerge. Thisis the main reason as to why the successful retail chains in the Countries todayoperate at regional segments only and are not aiming at nation wide Presence, atleast for the time being. In the organized retail industry, the gestation periods are long,institutional funding is Difficult, and there is none or little Government support.But the belief among top Retailer chains in the country is that the industry willsee large investments coming once. The current ban on foreign directinvestment is lifted. But that could be two-three years Away. Food and groceryretailing is a tough business in India with margins being very Low andconsumers not dissatisfied with existing shops where they buy. For example,the next-door grocery shopkeeper is smart and delivers good customer service,though not value.
As of now, while Chennai has about five organized food and grocery retailchains, other big cities such as Delhi, Bangalore, and Mumbai average onlytwo-three such chains. Almost all food retail players have been region-specific as far as geographical presence is concerned in the country. Toillustrate with examples, the RPG Groups Food World, Nilgiri’s, Margin Free,Giant, Varkeys and Subhiksha, all of which are more or less spread in theSouthern region; Sabka Bazaar has a presence only in and around Delhi; namessuch as Haiko and Radhakrishna Food-land are Mumbai-centric; while Adani isAhmedabad-centric. Industry topography in India is such that spreadingpresence across cities is a tough call. As pointed out by many experts,organized food and grocery retailing chains going national requires significantinvestments. Retailing within this sector is not just about the front-end, butinvolves complex supply chain and logistics issues as well. The trend and mindset of the present retailer chains in India can be bestunderstood by studying Food-World as an example, which came in first in thefood and grocery retailing sector. The chain has no plans to venture beyond theSouthern region just yet. Current plans are to focus on the Southern markets andachieve saturation. The intention is that by 2005, they could look at the otherregions. Subhiksha, a Chennai based discount chain, too wants to be theprincipal store of purchase for at least 40 per cent of all consumers living within
500-750 meters of the store, that is, within walking distance. This makes thepoint very clear that the strategy among most existing retail chains of variousformats is to completely saturate the markets where they are already establishedplayers and then move on to virtually untouched areas where the challenge ofsourcing resources and extending their supply chain model to best suit the sizeand expanse of the market would be a challenging task. Meanwhile, the RPG group plans to take its new formats such as GiantHypermarkets national over the next three years. Grocery is a large componentof this format, but not the only one. To elaborate on the hurdles of going pan-Indian, fundamentally, the way a basic grocery retailing model works is that thehigh set-up costs in terms of setting up buying/ distribution infrastructure isgradually amortized over a larger number of stores. The back-end costs withoutdistribution centre costs, or what in retail jargon is called retail administrationcosts, should stabilize at around 2.5 per cent to 3 per cent of sales.
Part-1.5There are many problems face by Retail industry in Indian Market. They arefollowing:-The format does not suit rural India: While the format suits the urban areas,it does not suit the rural areas in a country like India. Today, in Indian,organized retailing is confined to class A cities, the 23 largest cities. About 82per cent of organized retailing comes form the top six cities and another 12percent from the next four. Thus, the top 10 cities account for 94 per cent of allorganized retailing in India. The scattered location of consumers has been themain deterrent to the rapid spread of the idea in the rural areas.Purchasing patterns not very conducive: Even in urban centers, thepurchasing patterns of the Indian consumers differ form those of westerners.Whereas in the west, the purchases are spread better over the month, in India.Purchases are by and large made in the first week of the month. Theirs perhapshas a correlation to patterns of payment of wages; Purchasing patterns differalso because of the difference in the eating habits of people.Inadequate growth of brands: Inadequate growth of brands is another factor,In India, branding was almost not-existent in convenience products untilrecently; this has naturally inhibited retailing through sophisticated chains.Supply chain problems: As suppliers are not properly organized in the country,replenishment of stock poses problems for large chains. Source developmentalso poses special problems.
Being family businesses, retailing enterprises have limitation in expansion;Yet another reason for the slow pick up of mega retailing idea in India is that allalong retail enterprises have been family concerns. And, family businessesusually have a limitation in expansion,Example of Vivek’s; The Vivek’s (Formerly Vivek’s & Co. ) of Chennai, is anexample. For the past several years, it remained rather small because of itsfamily character. During the three decades from 1965 to 1995, it had just threeshowrooms. It was a family concern and remained for a long time, a single storeoutfit, managed by the father and assisted by his three sons. Once the fathergrew old, the sons started managing the business, and because there were threesons engaged in the business, the enterprise went in for three showrooms. Inrecent years, however, it has emerged as a major chain, as it has shed its familybusiness character, now it is actually the largest consumer durable chain in thecountry. It has big sales volumes and multiple locations.Real estate problems; Real estate is an integral requirement of large scalechain store operation. One needs a large number of stores in each city toachieve optimum scale. Also, big chains have to operate in several cities. Realestate thus becomes crucial. That is why groups that have been in real estateand hotel businesses are more comfortable in branching off into retailing. Froother firms, real estate development are a problem; they don not commandproperty in prime locations.
Other Limitation of Retail Industry The organized retail industry in India is faced with stiff competition from the unorganized sector. There is a shortage of quality real estate and infrastructure requirements in our country. Opposition to Foreign Direct Investment from small traders affects retail industry. A very high stamp duty on transfer of property affects the industry. Shortage of retail space in central and downtown locations also hinders the growth of retail industry. Presence of strong Pro-tenancy laws makes it difficult to evict tenants and this is posing problems. Land-use conversion is time consuming and becoming complex. For settling property disputes, it consumes lot of time. Non residents are not allowed to own property except they are of Indian origin. Inadequacies in infrastructure such as lack of high quality road networks, power shortages and insufficient storage spaces The retail industry loses to the tune of US$120 to US$130 million every year in frauds ,thefts and employee pilferage, shop lifting, vendor frauds or inacc
urate supervision despite using standard and modern security features. Part 1.6 SOURCE OF DATAData’s are the useful information or any forms of document designed in asystematic and standardize manner which are used for some furtherproceedings. One of the important tools for conducting marketing research isthe availability of necessary and useful data. Some time the data are availablereadily in one form or the other and some time the data are collected afresh. Thesources of Data fall under two categories, Primary Source and SecondarySources.Primary Data- the primary data was collected through the followingactivities:Filled the Retail Industry related questionnaire to managers of a select group ofcompanies And Paper ConversationSecondary Data- the secondary data was collected through the following:Online Research material of the Various Institution/Outlets directly orindirectly involved with Retail Industry, Secondary Data used in ExternalSource of Information Like internet, magazine, paper cutting
OTHER SOURCE Information Sources Information has been sourced from namely, books, newspapers, trade journals, and white papers, industry portals, government agencies, trade associations, monitoring industry news and developments, and through access to access to more than 3000 paid databases. Analysis Method The analysis methods include the following: Ratio Analysis, Historical Trend Analysis, Linear Regression Analysis using software tools, Judgmental Forecasting and Cause and Effect Analysis etc.
Part 2.1 OPPORTUNITIES OF THE WESTERN RETAILERS IN INDIA The retail industries in the western countries have reached a point ofsaturation and there is no way of expanding. In this backdrop the retail giantsare trying to make their mark in the retail market of countries that still haveuntapped potential of expansion. India happens to be one of them. AT Kearneyhas constructed the Global Retail Development Index which has helped thewestern retailers to identify the countries in which investments could be made.Opportunities in India have attracted the western retailers like Wal-Mart,Euroset, and Supervalu who have plans to enter as single branded retailers. Ingauging whether to enter, the companies keep into account the timing factorthat is whether the consumers are ready to accept the products that are offeredby them. It is highly possible that there are potentials in the market but theconsumer preferences are skewed against the products that are offered.
Part 2.2 CONTRIBUTION OF ‘FDI’ IN RETAILING Permitting Foreign Direct Investment in the retailing sector can have immense benefits. It can generate huge employment for the semi-skilled as well as illiterate population which otherwise cant be employed in the already confined rural and organized sector. The retail sector is highly dependent on the rural sector. Thus it can facilitate the improvement of the standard of living of farmers by purchasing commodities at a reasonable cost. It also stems out an indirect employment generation channel by training and employing people in the transportation and distribution sectors such as drivers, mechanics etc. It is also evident that real estate is a genuine challenge for organized retailing. Traditional retailers can use this situation in their favor by taking franchisees of the mega players of this industry. On the other hand, the consumer gains from the wide variety of choices and a more diversified basket of prices available under one roof. Secondly the indirect benefits like better roads, online marketing, expansion of telecom sector etc. will give a big push to other sectors including the rural one itself. Last but not the least the huge tax revenue generated from these retail biggies and collected in government coffers will gradually wipe out the ugly looking fiscal and revenue deficits. Besides the transaction in foreign currencies by these MNCs will create a balance in exchange rate and will
bring in stable funds in the economy as opposed to FIIs hot money. This will in turn act as a boost to the developing (or transforming, as suggested by the USAID) economy of India. Part 2.3 BENEFITS TO THE INDIAN CONSUMER: One has to agree that the entrance of big players will ensure the higherquality of service and produce being sold to the consumers. There are otherindirect benefits in terms of choice and pricing that will be passed along to theconsumers as the big retailers will compete with each Other for greater share ofthe market.
Part 3.1 LATEST TRENDS IN RETAIL SECTOR Today, retail in India is huge, close to $200 billion, of which organizedretail accounts for just $6 billion. This $200 billion should become $300 billionin the next five to six years. This is a time when organized retailing is justgetting into full steam and the opportunity is huge. Organized retail in India isexpected to grow at 40% for the next five years, thanks to the nascent stage ofmodern retail and the ‘malling’ of India. It is expected that by 2016 modern retail industry in India will be worthUS$ 175- 200 billion. India retail industry is one of the fastest growingindustries with revenue expected in 2007 to amount US$ 320 billion and isincreasing at a rate of 5% yearly. A further increase of 7-8% is expected in theindustry of retail in India by growth in consumerism in urban areas, risingincomes, and a steep rise in rural consumption. It has further been predicted thatthe retailing industry in India will amount to US$ 21.5 billion by 2010 from thecurrent size of US$ 7.5 billion. The retail sector would generate employmentfor more than 2.5 million people by the year 2010, says an analysis by Ma FoiManagement Consultants Ltd. And A KPMG report says that the organizedretail would grow at a higher rate than GDP in the next five years
Recent Trends & Changes• Retailing in India is witnessing a huge revamping exercise as can be seen in the graph• India is rated the fifth most attractive emerging retail market: a potential goldmine• Multiple drivers leading to a consumption boom: • Favorable demographics • Growth in income • Increasing population of women • Raising aspirations : Value added goods sales 3.1 Retail Analysis• Organized retailing in India has been largely an urban phenomenon with affluent classes and growing number of double-income households.
• Rural markets emerging as a huge opportunity for retailers reflected in the share of the rural market across most categories of consumption. • Companies using their own web portal or tie-sups with horizontal players like Rediff.com and Indiatimes.com to offer products on the web • Spencers is also planning to set up 500 more stores by June 2008 with an investment of nearly US$ 125.89 million • DLF plans to invest US$ 4.02 billion over four years to develop about 20 large shopping malls across the country •Israeli mall developer Plaza Center NV plans to invest US$ 1.25 billion over the next five-seven years to set3.2 Retail Market up 50 malls in India.Size • Reliance Retail is going ahead with plans worth an investment of US$ 3.77 billion for setting up 205 stores • IT is a tool that has been used by retailers ranging from Amazon.com to eBay to radically change buying behavior across the globe • Experimentation with formats: Retailing in India is still evolving and the sector is witnessing a series of experiments across the country with new
formats being tested out. Ex. Quasi-mall, sub-urban discount stores, Cash and carry etc• Unorganized retailing is getting organized: To meet the challenges of organized retailing such as large cineplexes, and malls, which are backed by the corporate house such as Ansals and PVR‘ the unorganized sector is getting organized. 25 stores in Delhi under the banner of Provision mart are joining hands to combine monthly buying. Bombay Bazaar and E-food mart formed which are aggregations of Kiranas.• Emergence of discount stores: They are expected to spearhead the organized retailing revolution. Stores trying to emulate the model of Wal- Mart. Ex. Big Bazaar, Bombay Bazaar, RPGs 3.3 Retail Segments
Part 3.2 MAJOR PLAYER OF RETAIL INDUSTRY The Indian retail sector has been euphoria over the last five years. Indiatopped the A.T. Kearneys Global Retail Development Index for twoconsecutive years and this has infatuated Indian as well as foreign retail playersto go gaga on the merchandising track. According to geographical expansion,Delhi/NCR and Mumbai are the felicitated regions as the top companies haverated the spending potential of consumers in the vicinity of the national capitaland the financial capital as excellent. Other metros such as Kolkata, Chennai,Hyderabad and Bangalore have caught the sight of investors but their fortunesare yet to be illuminated. Companies like the Future Group, Reliance, Bharti-Walmart, DLF etc. have shown the way for other to enter. The countries areexpecting a surge in the growth sprint and let’s hope for the best.Top Companies: An analysis Big Bazaar is a chain of department stores in India, currently with 75 outlets. It is owned bythe Pantaloon Retail India Ltd, Future Group. It works on the same economymodel as Wal-Mart and has considerable success in many Indian cities and
small towns. The idea was pioneered by entrepreneur Kishore Biyani, theCEO of Future Group. Currently Big Bazaar stores are located only in India.It is the biggest and the fastest growing chain of department store and aims atbeing 350 stores by the end of year 2010.It offers all types of household items such as home furnishing, utensils, fashionproducts etc. It has a grocery department and vegetable section known as theFood Bazaar and its online shopping site is known as FutureBazaar.com. Thereal estate fund management company promoted by the Future Group expectsto develop more than 50 projects across India covering a combined area ofmore than 16 million sq. ft. On April 1 2007, Big Bazaar had to shut its outletsin Mumbai as the 120 retrenched employees called a strike with the support ofBhatia Kamgar Sena (the trade Union wing of Shiv Sena). Later themanagement agreed to reinstate the sacked workers Pantaloon Retail India Ltd, is India’s leading retail company with presence across food, fashion,home solutions and consumer electronics, books and music, health, wellnessand beauty, general merchandise, communication products, E-tailing and leisureand entertainment.Headquartered in Mumbai (Bombay), has over 450 stores across 30 cities inIndia and employs over 18,000 people. Pantaloon founded by Mr. KishoreBiyani. The company owns and manages multiple retail formats catering to a
wide cross-section of the Indian society and its width and depth of merchandisehelps it capture almost the entire consumption basket of the Indian consumer.Founded in 1987, as a garment manufacturing company, Pantaloon Retailforayed into modern retail in 1997 with the opening up of a chain of departmentstores, Pantaloons. In 2001, it launched Big Bazaar, a hypermarket chain,followed by Food Bazaar, a supermarket chain. It went on to launch Central, afirst of its kind, seamless mall located in the heart of major Indian cities. Someof its other formats include, Collection I (home improvement products), E-Zone(consumer electronics), Depot (books, music, gifts and stationeries), all (fashionapparel for plus-size individuals), Shoe Factory (footwear) and Blue Sky(fashion accessories). It has recently launched its retailing venture,futurebazaar.com.In Indias chaotic markets, Kishore Biyani is the unchallenged king of retail. Hehas the knack of catching rivals off-guard and striking where it hurts most. Andnow that hes set himself the task of retaining control of the largest retail spacein the country, he wont let anyone - suppliers or international promotersincluded - catch him slacking. The latest to face the wrath of the 43-year-old isSouth African hypermarket Shop rite, which opened shop in Mumbai last monththrough a franchise agreement with local company Normal Lifestyle.The hypermarket began retailing products from big boys Nestle, Unilever andProcter & Gamble at consumer discounts of 20-30 per cent, lower than evenBiyanis purchase prices in his Big Bazaar and Food Bazaar stores.
Reliance Fresh is the retail chain division of Reliance Industries of India which is headed byMr.Mukesh Ambani. Reliance has entered into this segment by opening newretail stores into almost every metropolitan and regional area of India. Relianceplans to invest Rs 25000 cores in the next 4 years in their retail division andplans to begin retail stores in 784 cities across the country. The Reliance Freshsupermarket chain is RIL’s Rs 25,000 crore venture and it plans to add morestores across different g, and eventually have a pan-India footprint by year2011. The super marts will sell fresh fruits and vegetables, staples, groceries,fresh juice bars and dairy products and also will sport a separate enclosure andsupply-chain for non-vegetarian products. Besides, the stores would providedirect employment to 5 lakh young Indians and indirect job opportunities to amillion people, according to the company. The company also has plans to trainstudents and housewives in customer care and quality services for part-timejobs.Reliance Fresh recently (24th Jan, 2007) opened several "Fresh" outlets inChennai, New Delhi, Hyderabad, Jaipur, Mumbai, Chandigarh, Ludhianaincreasing its total store count to 40. Reliance is still testing its retail conceptsby controlled entry beginning in the southern states
Subhiksha is an Indian retail chain with more than 760 outlets selling groceries, fruits,vegetables, medicines and mobile phones. It was started and is managed by Mr.R. Subramaniam, IIM Ahmedabad alumni. He also plans to invest Rs.500 croreto increase the number of outlets to 2000 across the country by 2009.Derived from the Sanskrit word, Subhiksham or "giver of all things good", Itopened its first store in Thiruvanmiyur in Chennai in March, 1997 with aninvestment of about Rs. 5 lakh. The retail chain has seen a considerable growthby offering goods at cheaper rates and there by increasing its customer base. Itis also dubbed as Indias largest retail chain. Vision to deliver consistently bettervalue to Indian consumers, has guided Subhiksha to deliver savings to allconsumers on each and every item that they need in their daily lives, 365 days ayear, without any compromise on quality of goods purchased.Subhiksha now has the pan Indian presence with stores across Delhi, UP,Punjab, Hariyana, Gujarat, Maharashtra, AP, Karnataka and TN. It has recentlycommenced operation in Kerala also. Today, it is a multi-location,professionally managed and vibrant organization. Subhiksha now has evenopened Specialized Mobile shops called Subhiksha Mobile where mobiles aresold at a discounted priceSubhiksha is Indias largest supermarket, pharmacy and telecom chain. Startedin 1997 as a single store entity in South Chennai, it is now present nationallyacross 1000 outlets and spread across more than 90 cities. You can now locate
the nearest Subhiksha store in your area with the Store Locators. ICICI VentureCapital has a 24% stake in Subhiksha. Food world is a chain of supermarket stores. Itwas started in May 1996 as a division of Spencer & Co, a part of the RPGGroup. In August 1999 it became a separate company. Currently it operates 89stores in Bangalore, Chennai, Coimbatore, Erode, Hyderabad, Kodai,Pondichery, Pune, Secunderabad, Salem, Trivandrum and Vellore DLF Retail Developers Ltd. is one of the troikasof the DLF Group. Besides being Indias largest real estate developer, DLF isalso of the leaders in innovating shopping malls in India. It caught public eyewhen it launched the 2, 50,000 sq ft. shopping mall in Gurgaon. It has brought adramatic change in the lifestyles and entertainment with its City Centers andDT Cinemas. DLF has plans to invest Rs. 2000-3000 crore in all the emergingareas from metros to class cities in the next two years. Till last year thecompany was involved in building 18 malls out of which 10 were in the NCRregion. Future plans of DLF involve opening up of 100 malls (specialty malls,big box retailing and integrated malls) across 60 cities in next 8-10 years. Theyare 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 organized retail. France’s Carrefour SA and Britain’s Tesco too wererecently in news for their future plans to explore the Indian retail market Bharti Retail, a wholly owned subsidiary of Bharti Enterprises. Has announced two joint ventures (JV)withthe international retailing behemoth, Wal-Mart. The first JV ensures cash andcarry business, in which 100 percent FDI is permitted and it can sell only toretailers 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, BhartisJV with Rothschild. Bharti Retail aims to foray every city with a populationexceeding 1 million. It has plans to come up with an investment of more than$2 billion in convenience stores, supermarkets and hypermarkets spread over anaggregate 10 million sq. ft. The expansion drive looks ambitious but analystsare worried that Bharti may face stiff competition from Pantaloon and Relianceas they too have sanguine plans to flood the markets with thousands of retailoutlets in the coming five years. Bharti Telecom also has plans to offer all itsfixed and mobile telecom products and services from a single window to theSMB (Small and Medium Business) enterprises under the Bharti Infoteldivision...
Lifestyle is part of the Landmark Group, a Dubai-based retail chain. With over 30 years’experience in retailing, the Group has become the foremost retailer in the Gulf.Positioned as a trendy, youthful and vibrant brand that offers customers a widevariety of merchandise at exceptional value for money, Lifestyle beganoperations in 1998 with its first store in Chennai in 1999 and now has 13Lifestyle stores, 5 Home Centers and 1 Baby shop store across Chennai,Hyderabad, Bangalore, Gurgaon, Delhi, Mumbai and Ahmedabad.Business World-IMRB Most Respected Company Awards Survey has ratedLifestyle as the Most Respected Company in the Retail Sector in 2003 and2004. Lifestyle has also been awarded the ICICI-KSA Technopak Award forRetail Excellence in 2005, the Reid & Taylor Retailer of the Year Award for2006 and more recently, the Lycra Images Fashion Award for the Most AdmiredLarge Format Retailer of the Year in 2006 The foundation of Shoppers Stop was laid on October 27, 1991 by the K. Raheja Corp. group of companies Shoppers’ Stop aims to position itself as aglobal retailer. The company intends to bring the world’s best retail technology,retail practices and sales to India. Currently, they are adding 4 to 5 new storesevery year with an immense amount of expertise and credibility, Shoppers Stop
has become the highest benchmark for the Indian retail industry Shoppers Stopin the only retailer from India to become a member of the prestigiousIntercontinental Group of Departmental Stores (IGDS).With its wide range of merchandise, exclusive shop-in-shop counters ofinternational brands and world-class customer service, Shoppers’ Stop broughtinternational standards of shopping to the Indian consumer providing them witha world class shopping experience. The stores offer a complete range of appareland lifestyle accessories for the entire family. From apparel brands likeProvogue, Color Plus, Arrow, Levi’s, Scullers, Zodiac to cosmetic brands likeLakme, Chambor, Le Teint Ricci etc., Shoppers’ Stop caters to every lifestyleneed. Shoppers Stop retails its own line of clothing namely Stop, Life, Kashish,Vettorio Fratini and DIY. The merchandise at Shoppers’ Stop is sold at a qualityand price assurance backed by its guarantee stamp on every bill. Theirmotto: “We are responsible for the goods we sell”. Vishal Mega Mart is one of fastest growing retailing groups in India. Its outlets cater to almost allprice ranges. The showrooms have over 70,000 products range which fulfills allyour household needs, and can be catered to less than one roof. It is coveringabout 1996592 lac sq. ft. in 18 states across India. Each store gives youinternational quality goods and prices hard to match. The cost benefits that isderived from the large central purchase of goods and services is passed on to
the consumer the group had a turnover of Rs. 1463.12 million for fiscal 2005, under the dynamic leadership of Mr. Ram Chandra Aggarwal. The group had of turnover Rs 2884.43 million for fiscal 2006 and Rs. 6026.53 million for fiscal 2007.the group’s prime focus is on retailing. The Vishal stores offer affordable family fashion at prices to suit every pocket. Welspun Retail Limited (W.R.L.) was established in 2003 as a part of Welspun Group, one of the fastest growing business conglomerates in India. Welspun is a U.S. $1 billion group, into diverse businesses, industries, regions and has six companies under the umbrella brand. Our International Home Textiles Company; Welspun India Limited (W I L) launched its Indian retail division, WRL with an aim to capture the Home Textiles market in 2003. The Retail brands, SPACES- Home & Beyond has carved its niche with its fashion driven model in the countrys major metros, while Welhome targets a larger audience with its value for money model. The turn over of the Retail division stands at 100 crore, expected to double in the next 5 years Key Differentiating Attributes W.R.L. is the first Retailer of soft furnishing for "Home" in India. W.R.L. has two models that cater to both, the aspiration clientele and the value for money conscious clientele. Launched Spaces -Home & Beyond and Welhome (Welspun Factory Outlet) in the same year.
Phenomenal growth anticipated in FY 2007-08. Design Studio ranks amongst the best in the country. Panel of International Designers for the new collections. Offer specialized products at affordable prices, Bed sheets starting at Rs. 199, towels starting at Rs. 79 and Curtains starting at Rs. 99 Trent is the retail arm of the TATA group. Started in 1998, Trent operates Westside, one of the many growing retail chains in India. The foresight of the TATA Group, which invested in retail relatively early, is paying high dividends as retail is one of the booming sectors in India. The company has a turnover of Rs. 357.6 crores (FY 2005-2006) and currently operates 22 stores in the major metros and mini metros of India. An international shopping experience, a perception of values, and offering the latest styles, has created a loyal following for Westsides own brand of merchandise. Westside was named the Most Admired Large Format Retail Chain of the Year by the Lycra Images Fashion Awards 2005.Westside operates stores in Mumbai, Ahmedabad, Bangalore, Delhi, Chennai, Kolkata, Hyderabad, Pune, Surat, Vadodara, Indore, Noida, Gurgaon, Ghaziabad, Mysore, Jaipur, Lucknow, Nagpur.
Wal-Mart Stores, Inc. is an Americanpublic corporation that runs a chain of large, discount department stores. It isthe worlds largest public corporation by revenue, according to the 2007 FortuneGlobal 500. Founded by Sam Walton in 1962, it was incorporated on October31, 1969. It opened its home office and first distribution center in Bentonville,Arkansas. It had 38 stores operating with 1,500 employees and sales of $44.2million .Wal-Mart is the largest grocery retailer in the United States, withan estimated 20% of the retail grocery and consumables business, as well as thelargest toy seller in the U.S., with an estimated 22% share of the toy market.Wal-Mart is the largest private user of electricity in the US. Owns a subsidiaryelectric company in Texas, and will possibly move into the power business. It isalso undertaking a number of environmentally conscious initiatives to reduceenergy usage and waste. Wal-Mart operates in Mexico as Walmex, in the UK asASDA, and in Japan as Seiyu. It has wholly-owned operations in Argentina,Brazil, Canada, Puerto Rico, and the UK. Wal-Marts investments outside NorthAmerica have had mixed results: its operations in South America and China arehighly successful, but it sold its retail operations in South Korea and Germanyin 2006 after sustained losses. On September 12, 2007, Wal-Mart introducednew advertising with the slogan, "Save Money Live Better," replacing the"Always Low Prices, Always" slogan, which it had used for the previous 19years. Global Insight, which conducted the research that supported theads, found that Wal-Marts price level reduction resulted in savings for
consumers of $287 billion in 2006, which equated to $957 per person or $2,500per household 3.1 World-Wide Retailers Carrefour SA is a French international hypermarket chain, with a global network of outlets. The groupwas created by Marcel Fournier and Denis Deffore in 1957. It is the secondlargest retail group in the world in terms of revenue after Wal-Mart. Carrefouroperates mainly in Europe, Brazil, Argentina, Dominican Republic andColombia, but also has shops in North Africa and Asia. Carrefour means cross-road in French. Carrefour is active in many types of retail distribution:hypermarkets, supermarkets, Discount Store, Grocery Stores, Cosmetics, andCash & Carry. Recently The $130 billion French retail Carrefour has set up a100 percent-owned arm to enter the wholesale merchandise business in Indiaand will opt for the franchising route to open multi-brand retail stores in the
country, Carrefour WC&C India will also enter these areas where the Indianfranchisee can get the same technical expertise that go into running the retailtrade stores of the French company across the globally. The Kroger Co. is an American retail supermarket chain and parent company, founded by Bernard Henry Kroger in 1883 in Cincinnati, Ohio. It reported over US$66 billion insales during fiscal year 2007 and is currently the second-largest grocery retailerin the country by volume and third-place general retailer in the country, withWal-Mart and The Home Depot filling slots one and two, respectively. Krogeroperated, either directly or through its subsidiaries, 2,500 grocery stores, 579 ofwhich had fuel centers, nearly 800 convenience stores, 400-plus jewelry stores,and 42 manufacturing facilities in 32 states; we employ a growing family ofmore than 290,000 associates coast-to-coast and presently Kroger is active inmany other Retail Distribution like Bakery, Banking, beer, dairy, wine etc….The slogan of Kroger co. is “Right Store. Right Place”. Kroger’s recentlylaunched Perishable Donations Partnership will bring critically neededperishable food items into the food bank process. The company-wide programwill increase the number of stores in the Kroger family that donate safe,perishable food to Second Harvest food banks that are equipped to safelyhandle and distribute fresh food. Kroger’s goal is to donate 50 million poundsof nutritious, fresh food across the country.
Latest News of Retail Market in India Israeli Giants Enter Indian Retail Sector Israeli mall giants, owners of retail-linked realty assets across the world,are buying into India’s money minting retail sector. Tel Aviv-based mall giantGazit Globe has tied up with one of the HDFC funds to pump in $150 millioninto developing assets, including supermarket anchored retail play. BigShopping Group, of Israel’s biggies has teamed up with Lehman Brothers RealEstate Private equity to set up ‘open malls’ in tier I and tier II cities.Israeli tycoons and families, which raked in money from core real estatedevelopments in the US, have turned their attention to retail assets from SaoPaulo to Macedonia, as mall ownership and management provides attractive20% plus annualised returns in developing markets. Billionair eChaimKatzman, at the helm of Gazit Globe, is no exception as he went on acquiringshopping centers from market to marketUs Retail Major Kroger Plans Entry into Indian Real Estate The $66-billion US based grocery giant, Kroger is all set to enter intoReal Estate India. According to reports, the company representatives havealready met 3-4 prominent real estate companies of India for joint ventures.Some prominent sources said that Kroger is primarily interested in jointlydeveloping new FDI-compliant commercial projects or buying into existing
ones. Interestingly, America No. 3 general retailer behind Wal-Mart and TheHome Depot runs all its nearly 2,500 supermarket stores in the US Reliance Retail plans to turn Adani outlets into specialtyStores Reliance Retail will be changing the format of its recently purchasedAdani Retail stores into specialty stores for jewelry, medicines, eyeglasses,home furnishings, telecom and consumer electrical stores. The company hasalso taken in some of the executives onto its own team. According to a seniorexecutive, the stores cannot be converted to Reliance Fresh stores as they aretoo small, ranging from 2,000-3,000 sq ft, while most Reliance Fresh stores arearound 4,000 sq ft in size.Source: The Economic Times Pantaloon Retail pulls out from Gini & Jony Pantaloon Retail India Ltd (PRIL) has officially pulled out of Gini & Jony, a children’s wear brand and one of the first brands that Kishore Biyani, MD of Pantaloon had invested in. Sources report that while the financial arrangement with Gini & Jony will continue, it will break off all operational ties. Pantaloon had invested in the company with the thought that it would “drive business on its own” but unfortunately, it has not been able to work in a cohesive manner with Pantaloon and become dependant on it. Ultimately Pantaloon had to even depute top management, including the
CFO to take care of its functioning.Source: The Economic Times
MAJOR FINDINGS (1) The Retail Sector in India can be split up into two, the organized and the unorganized. The organized sector whose size is expected to triple by 2010 can be further split up into departmental stores, supermarkets, shopping malls. (2) In terms of value the size of the retail sector in India is $300 billion. The organized sector contributes about 4.6% to the total trade. (3) The retail sector in India contributes 10% to the Gross Domestic Product and 8% to the employment of the country. (4) In terms of growth the FMCG retail sector is the fastest growing unit and the retail relating to household care, confectionery etc, have lagged behind. (5) The foreign retail giants were initially restricted from making investments in India. But now FDI of 51% is permitted in India only through single branded retail outlets. Multi brand outlets are still beyond their reach. Again they can only enter the market through franchisees,. This was how Wal-Mart had entered joining hands with Bharti Enterprises. (6) On line retailing is still to leave a mark on the customers due to lacunae that we have already mentioned. (7) Cultural and regional differences in India are the biggest challenges in front of retailers. This Factor deters the retailers in India from adopting a single retail format.
(8) Hypermarket is emerging as the most favorable format for the time being in India CONCLUSION For a start, these retailers need to invest much more in capturing morespecific market. Intelligence as well as almost real-time customer purchasebehavior information. The retailers also need to make substantial investment inunderstanding/acquiring some advanced expertise in developing more accurateand scientific demand forecasting models. Re-engineering of product sourcingphilosophies-aligned more towards collaborative planning and replenishmentshould then be next on their agenda. The message, therefore for the existingsmall and medium independent retailers is to closely examine what changes aretaking place in their immediate vicinity, and analyze Whether their currentmarket offers a potential redevelopment of the area into a more modern multi-option destination. If it does, and most commercial areas in India do have thispotential, it would be very useful to form a consortium of other such smallretailers in that vicinity and take a pro-active approach to pool in resources andimprove the overall infrastructure. The next effort should be to encourageretailers to make some investments in improving the interiors of their respectiveestablishments to make shopping an enjoyable experience for the customer. As the retail marketplace changes shape and competition increases, thepotential for improving retail productivity and cutting costs is likely to
decrease. Therefore, it will become important for retailers to secure a distinctiveposition in the marketplace based on value, relationships or experience.Finally, it is important to note that these strategies are not strictly independentof each other; value is function of not just price, quality and service but can alsobe enhanced by Personalization and offering a memorable experience. In fact,building relationships with customers can by itself increase the quality ofoverall customer experience and thus the perceived value. But most importantlyfor winning in this intensely competitive marketplace, it is critical to understandthe target customers definition of value and make an offer, which not onlydelights the customers but also is also difficult for competitors to replicate. 3.5 Retail Touches Economy