A Project Report on

RETAIL SECTOR
IN
INDIA
 F.Y.B.COM.-SECTION-3

GROUP: 7

ROLL NO. GROUP MEMBERS

245 Niyati Parekh
246 Gaurav Parihar
247 Binoy Parikh
248 Drashti Parikh
249 Isha Parikh
250 Nirmal Parikh
251 Romsha Parikh
252 Yatri Parikh
253 Nilesh Parmar
254 Paresh Parmar

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 ACKNOWLEDGEMENTS

This report is a collection of many insights gained from the

tremendous pool of knowledge subsisting on the internet,
the pin-pointed information from which is obtained through
the devotion and clear thinking of the students forming part
of this group. We, the students of GROUP: 7 (F.Y.B.COM-3),
would like to acknowledge the following group of people who
have transformed this abstract idea into reality:
 Our respected professors, Parag Patel sir, Abhishek
Shah Sir and Vaibhav Kadia Sir, for guiding us
through the process of building the base of the
project report to the reviewing the report and
helping us draft the final report.
 G.K.Choksi & Co. which has provided us with the
hard copies of the project report, well spiral-
bound.
 Lastly, the group members, ourselves, who have
devoted precious time to this project.

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 INDEX

SR. NO. CONTENTS PAGE NO.

1 RETAIL SECTOR IN INDIA:AN OVERVIEW 5
2 SCOPE OF RETAIL SECTOR IN INDIA 7
3 THE GROWTH SO FAR… 8
4 OPERATING ENVIRONMENT-RETAILING FORMAT 13
5 GOVERNMENT POLICY FOR RETAIL SECTOR 15
6 MAJOR PLAYERS IN THE RETAIL FIELD 16
7 THE ROAD AHEAD… 18
8 CONCLUSION 20
9 BIBLIOGRAPHY 25

RETAIL SECTOR IN INDIA: AN OVERVIEW

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The Indian Retail Industry is the largest among all the industries, accounting
for over 10 per cent of the country’s GDP and around 8 per cent of the
employment. Many players entered this sector but have not yet tasted
success because of the heavy initial investments that are required to break
even with other companies and compete with them. The total concept and
idea of shopping has undergone an attention drawing change in terms of
format and consumer buying behavior, ushering in a revolution in shopping
in India.

The retail industry is divided into organised and unorganised sectors. Over
12 million outlets operate in the country and only 4% of them being larger
than 500 sq ft (46 m2) in size. Organised retailing refers to trading activities
undertaken by licensed retailers, that is, those who are registered for sales
tax, income tax, etc. These include the corporate-backed hypermarkets and
retail chains, and also the privately owned large retail businesses.
Unorganised retailing, on the other hand, refers to the traditional formats of
low-cost retailing, for example, the local kirana shops, owner manned
general stores, paan/beedi shops, convenience stores, hand cart and
pavement vendors, etc.

Most Indian shopping takes place in open markets and millions of

independent grocery shops called kirana. Organized retail such supermarkets
accounts for just 4% of the market as of 2008.

A large young working population with median age of 24 years, nuclear

families in urban areas, along with increasing workingwomen population

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and emerging opportunities in the services sector are going to be the key
factors in the growth of the organized Retail sector in India. The growth
pattern in organized retailing and in the consumption made by the Indian
population will follow a rising graph helping the newer businessmen to enter
the India Retail Industry. In India the vast middle class and its almost
untapped retail industry are the key attractive forces for global retail giants
wanting to enter into newer markets, which in turn will help the India Retail
Industry to grow faster. Indian retail is expected to grow 25 per cent
annually. Modern retail in India could be worth US$ 175-200 billion by
2016. The Food Retail Industry in India dominates the shopping basket. The
Mobile phone Retail Industry in India is already a US$ 16.7 billion business,
growing at over 20 per cent per year. The future of the India Retail Industry
looks promising with the growing of the market, with the government
policies becoming more favorable and the emerging technologies facilitating
operations.

India is the country having the most unorganized retail market. Traditionally
it is a family’s livelihood, with their shop in the front and house at the back,
while they run the retail business more than 99% retailer’s function in less
than 500 square feet of shopping space. The Indian retail sector is estimated
at around Rs 900,000 crore, of which the organized sector accounts for a
mere 2 per cent indicating a huge potential market opportunity that is lying
in the waiting for the consumer-savvy organized retailer

India has highest number of outlets per person (7 per thousand) Indian retail
space per capita at 2 sq ft (0.19 m2)/ person is lowest in the world Indian

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retail density of 6 percent is highest in the world. 1.8 million households in
India have an annual income of over 45 lakh .

SCOPE OF RETAIL SECTOR IN INDIA

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The scope of the Indian retail market is immense for this sector is poised for
the highest growth in the next 5 years. The organized retailing sector in
India is only 3% and is expected to rise to 25- 30% by the year 2010. There
are under construction at present around 325 departmental stores, 300 new
malls, and 1500 supermarkets.

The growth of scope in the Indian retail market is mainly due to the change
in the consumer’s behavior. For the new generation have preference towards
luxury commodities which have been due to the strong increase in income,
changing lifestyle, and demographic patterns which are favorable.

Judging the scope for growth in the India retail industry many global retail
giants are also entering the Indian retail market. They are :

 Tesco
 Metro AG
 Wal- Mart

The scope for growth in the Indian retail market is seen mainly in the
following cities:

 Mumbai
 Delhi
 Pune
 Ahmedabad
 Bangalore

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 Hyderabad
 Kolkata
 Chennai

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 THE GROWTH SO FAR…

EVOLUTION OF THE SECTOR

 Traditionally retailing in India can be traced to the emergence of the

neighborhood ‘Kirana’ stores catering to the convenience of the
consumers
 Era of government support for rural retail: Indigenous franchise model of
store chains run by Khadi & Village Industries Commission
 1980s experienced slow change as India began to open up economy.
 Textiles sector with companies like Bombay Dyeing, Raymond's, S
Kumar's and Grasim first saw the emergence of retail chains
 Later Titan successfully created an organized retailing concept and
established a series of showrooms for its premium watches
 The latter half of the 1990s saw a fresh wave of entrants with a shift from
Manufactures to Pure Retailers.
 For e.g. Food World, Subhiksha and Nilgiris in food and FMCG; Planet
M and MusicWorld in music; Crossword and Fountainhead in books.
 Post 1995 onwards saw an emergence of shopping centers,
 Mainly in urban areas, with facilities like car parking
 Targeted to provide a complete destination experience for all segments of
society
 Emergence of hyper and super markets trying to provide customer with 3
V’s - Value, Variety and Volume
 Expanding target consumer segment: The Sachet revolution - example of
reaching to the bottom of the pyramid.

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 At year end of 2000 the size of the Indian organized retail industry is
estimated at Rs.13000 crore

Modern
Historic/Rura Traditional/Perv Government Formats/
l Reach asive Reach Supported International

Exclusive Brand
Outlets
Hyper/Super
Markets
Department Stores
PDS Outlets Shopping Malls
Khadi Stores
Cooperatives

Convenience
Stores
Mom and
Pop/Kiranas
Weekly
Markets
Village Fairs
Melas
Availability/
Source of Neighborhood
Low Costs / Shopping
Entertainme Stores/Convenienc
Distribution Experience/Efficiency
nt e

Retail and real estate are the two booming sectors of India in the present
times. And if industry experts are to be believed, the prospects of both the
sectors are mutually dependent on each other.

The trends that are driving the growth of the retail sector in India are
 Low share of organized retailing
 Falling real estate prices
 Increase in disposable income and customer aspiration

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 Increase in expenditure for luxury items (CHART)

Another credible factor in the prospects of the retail sector in India is the
increase in the young working population. In India, hefty pay packets,
nuclear families in urban areas, along with increasing working-women
population and emerging opportunities in the services sector. These key
factors have been the growth drivers of the organized retail sector in India
which now boast of retailing almost all the preferences of life - Apparel &
Accessories, Appliances, Electronics, Cosmetics and Toiletries, Home &
Office Products, Travel and Leisure.etc.. When it comes to development of
retail space specially the malls, the Tier II cities are no longer behind in the
race. If development plans till 2007 is studied it shows the projection of 220
shopping malls, with 139 malls in metros and the remaining 81 in the Tier II
cities. The government of states like Delhi and National Capital Region
(NCR) are very upbeat about permitting the use of land for commercial
development thus increasing the availability of land for retail space; thus
making NCR render to 50% of the malls in India.

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RECENT TRENDS

 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.
 Estimated to be US$ 200 billion, of which organized retailing (i.e.

modern trade) makes up 3 percent or US$ 6.4 billion

 As per a report by KPMG the annual growth of department stores is
estimated at 24%
 Ranked second in a Global Retail Development Index of 30 developing

countries drawn up by AT Kearney.

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 Multiple drivers leading to a consumption boom:
• Favorable demographics
• Growth in income
• Increasing population of women
• Raising aspirations: Value added goods sales
 Food and apparel retailing key drivers of growth
 Organized retailing in India has been largely an urban phenomenon with

affluent classes and growing number of double-income households.

 More successful in cities in the south and west of India. Reasons range

from differences in consumer buying behavior to cost of real estate and

taxation laws.
 IT is a tool that has been used by retailers ranging from Amazon.com to

eBay to radically change buying behavior across the globe.

 ‘E-tailing’ slowly making its presence felt.

 Following figure shows penetration of organized retail across categories:

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 OPERATING ENVIRONMENT-RETAILING FORMAT

Malls:
This is the largest form of organized retailing today, located mainly in metro
cities, in proximity to urban outskirts. Ranges from 60,000 sq ft to 7,00,000
sq ft and above. They lend an ideal shopping experience with an
amalgamation of product, service and entertainment, all under a common
roof. Examples include Shoppers Stop, Piramyd, and Pantaloon.

Specialty Stores:
Chains such as the Bangalore based Kids Kemp, the Mumbai books retailer
Crossword, RPG's Music World and the Times Group's music chain Planet
M, are focusing on specific market segments and have established
themselves strongly in their sectors.

Discount Stores:
As the name suggests, discount stores or factory outlets, offer discounts on
the MRP through selling in bulk reaching economies of scale or excess stock
left over at the season. The product category can range from a variety of
perishable/ non-perishable goods

Department Stores:
Large stores ranging from 20000-50000 sq. ft, catering to a variety of
consumer needs. These are further classified into localized departments such
as clothing, toys, home, groceries, etc. Departmental Stores are expected to
take over the apparel business from exclusive brand showrooms. Among

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these, the biggest success is K Raheja's Shoppers Stop, which started in
Mumbai and now has more than seven large stores (over 30,000 sq. ft)
across India and even has its own in store brand for clothes called Stop.

Hyper marts/Supermarkets:
Large self-service outlets, catering to varied shopper needs are termed as
Supermarkets. These are located in or near residential high streets. These
stores today contribute to 30% of all food & grocery organized retail sales.
Super Markets can further be classified in to mini supermarkets typically
1,000 sq ft to 2,000 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 near residential
areas. They stock a limited range of high-turnover convenience products and
are usually open for extended periods during the day, seven days a week.
Prices are slightly higher due to the convenience premium.

MBO’s OR MULTI BRAND OUTLETS:

Multi Brand outlets, also known as Category Killers, offer several brands
across a single product category. These usually do well in busy market
places and Metros. Example:- Promart

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 GOVERNMENT POLICY FOR RETAIL SECTOR

Current Government policy prohibits foreign direct investment in retail

trading except for single brand retail that fulfils the following conditions:
 Foreign equity does not go beyond 51 percent
 Foreign Investment Promotion Board (FIPB)/Department of Industrial
Policy & Promotion (DIPP) approval has been issued
 Products to be sold are of a ‘single brand (branded during

manufacturing)’ only
 Products are sold under the same brand internationally

 Additions to the product categories to be sold under ‘single brand’ require

fresh Government approval. Intense debate currently centres on what

percentage of foreign ownership should be allowed and whether further
liberalisation of the FDI rules should occur, particularly in the retail
sector.

The Government’s stance has vacillated for years. In 1993, in the first flush
of economic reforms, the law was changed to permit foreign-owned
operations, but no big player secured the requisite approvals. Three years
later the restriction was re-imposed and maintained when the Hindu
nationalists won power in 1998 with the support of many small shopkeepers.
Hypermarkets planned by groups such as Reliance and Bharti would be
directly affected by a regime along these lines. These retailers would only be
allowed to operate in specified catchment areas, minimising the scope of
competition between them and local stores.

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Franchise agreements have not escaped similar scrutiny. The Foreign
Investment Promotion Board (FIPB) is currently examining the entire
franchise sector to ensure that multi-brand retailers are not entering India
under jointly-owned franchise agreement.

Regulations prevent most foreign investment in retailing. Moreover, over

thirty regulations such as "signboard licences" and "anti-hoarding measures"
may have to be complied before a store can open doors. There are taxes for
moving goods to states, from states, and even within states

There is no other significant policy for the retail sector apart from that
relating to FDI. Apart from that, the local entrepreneurs wishing to enter this
sector have to undergo the normal licensing procedure as prescribed and
required by various statutes

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 MAJOR PLAYERS IN THE RETAIL FIELD

Indian apparel retailers are increasing their brand presence overseas,

particularly in developed markets. While most have identified a gap in
countries in West Asia and Africa, some majors are also looking at
the US and Europe. Arvind Brands, Madura Garments, Spykar Lifestyle and
Royal Classic Polo are busy chalking out foreign expansion plans through
the distribution route and standalone stores as well.

The low-intensity entry of the diversified Mahindra Group into retail is

unique because it plans to focus on lifestyle products. The Mahindra
Group is the fourth large Indian business group to enter the business of retail
after Reliance Industries Ltd, the Aditya Birla Group, and Bharti
Enterprises Ltd. The other three groups are focusing either on perishables
and groceries, or a range of products, or both.

 Vivek Limited Retail Formats: Viveks, Jainsons, Viveks Service

Centre, Viveks Safe Deposit Lockers
 REI AGRO LTD Retail-Formats:6TEN Hyper & 6TEN Super
 RPG Retail-Formats: Music World, Books & Beyond, Spencer’s
Hyper, Spencer’s Super, Daily & Fresh
 Pantaloon Retail-Formats: Big Bazaar, Food Bazaar, Pantaloons,
Central, Fashion Station, Brand Factory, Depot, aLL, E-Zone etc.
 The Tata Group-Formats: Westside, Star India Bazaar, Steeljunction,
Landmark, Titan Industries with World of Titans showrooms, Tanishq
outlets, Chroma.

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 K Raheja Corp Group-Formats: Shoppers Stop, Crossword, Hyper
City, Inorbit
 Lifestyle International-Lifestyle, Home Centre, Max, Fun City and
International Franchise brand stores.
 Pyramid Retail-Formats: Pyramid Megastore, TruMart
 Subhiksha-Formats: Subhiksha supermarket pharmacy and telecom
discount chain.
 Vishal Retail Group-Formats: Vishal Mega Mart
 Reliance Retail-Formats: Reliance Fresh
 Reliance ADAG Retail-Format: Reliance World
 Aditya Birla Group - more Outlets

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 THE ROAD AHEAD….

According to industry experts, the next phase of growth is expected to come

from rural markets, with rural India accounting for almost half of the
domestic retail market, valued over US$ 300 billion. Rural India is set to
witness an economic boom, with per capita income having grown by 50 per
cent over the last 10 years, mainly on account of rising commodity prices
and improved productivity.

According to retail and consumer products division, E&Y India, basic

infrastructure, generation of employment guarantee schemes, better
information services and access to funding are also bringing prosperity to
rural households. The rural market, product design will need to go beyond
ideas like smaller sizes (such as single use sachets) to create genuinely new
products, according to Ramesh Srinivas, national industry director
(consumer markets), KPMG India.

According to the Investment commission of India, the overall retail market

is expected to grow from US$ 262 billion to about US$ 1065 billion by
2016, with organised retail at US$ 165 billion (approximately 15.5 per cent
of total retail sales). India is expected to be among the top 5 retail markets in
the world in 10 years.

According to new market research report by RNCOS titled, "Booming Retail

Sector in India", organised retail market in India is expected to reach US$ 50
billion by 2011.

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  Number of shopping malls is expected to increase at a CAGR of more
than 18.9 per cent from 2007 to 2015.
 Organised retailing of mobile handset and accessories is expected to
reach close to US$ 990 million by 2010.
 Driven by the expanding retail market, third party logistic market is
forecasted to reach US$ 20 billion by 2011.

While India presents a large market opportunity given the number and
increasing purchasing power of consumers, there are significant challenges
as well given that over 90% of trade is conducted through independent local
stores. Challenges include: Geographically dispersed population, small
ticket sizes, complex distribution network, little use of IT systems,
limitations of mass media and existence of counterfeit goods.

To become a truly flourishing industry, retailing needs to cross the following

hurdles:

 Automatic approval is not allowed for foreign investment in retail.

 Regulations restricting real estate purchases, and cumbersome local
laws.
 Taxation, which favours small retail businesses.
 Absence of developed supply chain and integrated IT management.
 Lack of trained work force.
 Low skill level for retailing management.
 Intrinsic complexity of retailing – rapid price changes, constant threat
of product obsolescence and low margin

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 CONCLUSION

The following figure represents the story so far and the story
imagined/expected!

India’s retail sector is truly one of the basic pillars towards India’s
development. It is an indispensable sector that will earn the economy the
desired returns to support development. Looking at the current trend, this
sector is set to grow and grow behemoth-ly so as to provide the required

23
push to the economy. The rural areas will also flourish due to development
and establishment of such stores in these areas. This development will surely
attract the foreign giants to invest in India and the growth of this sector will
be unimaginable mainly due to the changing thought patterns in the young
generation and the craze for the foreign brand. Surely the small retailers will
face an unfair competition and the government will have to protect them but
the government should also see to it that the money which the foreign brands
will earn and the benefit received from the same will be larger than that of
protecting the small retailers. The Indian retail market has to e rought out of
the protectionist cocoon so that India can flourish under the retail umbrella.

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 BIBLIOGRAPHY

1. www.wikipedia.org
2. www.fibre2fashion.com
3. An Indian retail outlook report-2005-06
4. www.scribd.com-retail project
5. www.siadipp.nic.in/policy
6. www.naukri.com
7. www.cii.in
8. www.retaildigest.uk
9. www.commerce.gov.in
10. www.pantaloon.com

NOTE:
All the search material was obtained through www.google.com

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