Retail Industry

INDIAN RETAIL INDUSTRY

INTRODUCTION:

TAKING a leaf out of Adam Smith’s Wealth of Nations, India may very aptly be described as a‘nation of shopkeepers’. With over 10 million retail outlets of varying sizes and sophistication,from the neighbourhood panwalla (who often stocks some daily necessities) to the city-centresupermarket, India might easily replace the Britain in Adam Smith’s definition.With the retail trade accounting for over 10 per cent of GDP and employing approximately 8 per cent of the workforce, that is about 25 million people, this sector cannot be short-changed. Andthough organized retail accounts for a miniscule 2 per cent of the total retail market in thecountry, projections hold wholesale promise.For instance, the organised retail players now account for around Rs 5,500 crore of the total retailmarket, but consultancy KSA Technopak in its Retail Vision 2005 forecasts that this segmentalone will, by 2005, account for Rs 29,842 crore. Analysts also expect the organised players togenerate a couple of million jobs every year. And for a country such as India, with large-scaleunemployment, these are surely heartening projections.RETAIL in India is undoubtedly a growth story. In various global rankings, India has emerged asone of the most favored retail destinations. The considerable investments made by large-scaledomestic and international players have accelerated the development of large, modern storechains gradually superseding the 12 million or so traditional family-run retail outlets. Today,organized retail is estimated to represent only about 5-7% of Indian retail and yet is estimated togrow to about a quarter of sales in two to three years.Organized, western-style retailing has brought with it efforts to effectively address the marketand retailers have been trying out a variety of product mixes and store formats—super markets,hyper markets, malls etc. The early entrants have tried, occasionally erred and then tweaked their systems to improve their business models. The time is right for Indian players to take advantageof this high growth phase by leapfrogging the more gradual evolution of retail optimization seenoverseas. By learning from the most successful retailers in advanced economies, Indian retailerscan benefit from the latest scientific study of consumer behavior.

CURRENTSCENARIO: OrganizedRetail

The Indian consumer is changing rapidly. The average consumer today is richer, younger andmore aspirational in his/her needs than ever before. Consumers now value convenience andchoice at par with getting value for their hard-earned money. A range of modern retailers areattempting to serve the needs of the ‘new’ Indian consumer. The last few years have witnessed anexplosion of organized retail formats like supermarkets and hypermarkets in an otherwisefragmented Indian retail market.In fact, even the Government seems to be waking up to the potential of the retail sector.Therefore, its intention to open the retail sector to foreign direct investment (FDI). With theGroup of Ministers reassessing the policy, closed doors may open for foreign investment inretail, eventually. This, say the proponents of organized retail, will give Indian retailing themuch-needed funds to offer even better and cheaper products and services. Not to forget thehundreds of jobs.But will all this happen? Or is it a case of putting the cart before the horse? Skeptics point to thelackluster performance of several of the country’s leading organized, modern-format retailers,including pioneers such as Shoppers’ Stop, and the collapse of another of the pioneers – theDelhi-based Nanz chain of department stores. Organized retail, they argue, is just another bubble.While the jury is still out on this issue, undeniably modern retailing techniques have done thissector in India a world of good in the last 10- odd years. Consider the street-corner store, often

called the kirana. With the entry players such as FoodWorld, the demise of the kirana wasforetold! But this has not happened. The kirana stores struck back, offering personalized service,credit facility and even stocking up on products they wouldn’t have earlier. And all this at thecustomer’s doorstep. Indeed, competition is a wonderful thing!Many neighborhood stores have reinvented themselves. In New Delhi, for instance, several smallretailers have set up common sourcing systems to get the advantages of scale; others are workingat leveraging their long-standing relationships with customers and still others, at offering all thatmodern retailers offer. The beneficiary of all this is, of course, the consumer.Perhaps the most compelling argument for the organized retail sector is the role it has played,and can play, in employment generation. Consider the example of the RPG group company,FoodWorld, which employs a few hundred young men and women, many of whom have never been to college and never had a hope of finding a job. Or consider Shoppers’ Stop whichemploys those with a college degree. Not surprisingly, FoodWorld and Shoppers’ Stop have become the poaching ground for new retail chains. And with almost all the modern organizedretailers talking of expansion, the number of jobs in this sector should only increase.Comments an analyst who’s been tracking the sector for a while: “Yes, there has been some hypeand those who are in retail for making a quick buck will probably go under. But for those in for the long haul, things are not so bad. After all, modern large-format retail is only about a decadeold in India.” Surely there will be a shakeout, with the not-so-serious players falling by thewayside. Food and grocery retailing, for instance, has huge potential given that over 40 per centof the spending by the Indian consumer is on this. So those who offer value in this segment arelikely to have greater success. The other stamp of a successful organized retailer is scalability.Pundits are almost unanimous that retailers who hit upon the right format and whocan customize its size to suit the requirements of different geographic locations, will be around.Above all, successful retailing is about getting right the nitty-gritty of retailing – merchandising,forecasting, the supply chain, training and recruitment, branding, category management and soon. Or simply about getting the detail right.

Role of ServiceScape in Marketing of Services

Category:	Uncategorized.
Rating:
Upload Date:	07/01/2009
Copyright:	Attribution Non-commercial
Tags:	This document has no tags.

Documents

People