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1. Industry Overview

2. Organized Retail Sector


3. Origin of retail

4. Indian Retail Industry


5. Retailing Formats in India


6. Specialty stores

7. Major Industry Players


8. The growth Drivers


9. Swot of the Market


10. Challenges

11. Location Planning


12. Competitor Analysis


13. Future Outlook


14. Merger and Acquisition

Growth of Retail Sector in India

15. Technology in retail


16. Government initiatives and regulation


17. Research methodology


18. Research analysis


19. Conclusion

20. Consumer survey questionnaire


21. References

Growth of Retail Sector in India


Industry analysis of the Indian retail sector:

Modern retailing has entered India in form of malls and huge

complexes offering shopping, entertainment, leisure to the consumer
as the retailers experiment with a variety of formats, from discount
stores to supermarkets to hypermarkets to specialty chains.
However, kiranas still continue to score over modern formats mostly
due to the convenience factor i.e. near to their house.

This organized segment typically comprises of a large number of

retailers, greater enforcement of taxation mechanisms and better
labour law monitoring system. It's no longer about just stocking and
selling but about efficient supply chain management, developing
vendor relationship quality customer service, efficient merchandising
and even the labour class is also in the working process timely
promotional campaigns. The modern retail formats are encouraging
development of well-established and efficient supply chains in each
segment ensuring efficient movement of goods from farms to
kitchens, which will result in huge savings for the farmers as well as
for the nation. The government also stands to gain through more
efficient collection of tax revenues. Network marketing has been

Growth of Retail Sector in India

growing quite fast and has a few large players today. Gas stations
are seeing action in the form of convenience stores, ATMs, food
courts and pharmacies appearing in many outlets.

In the coming years it can be said that the hypermarket route will
emerge as the most preferred format for international retailers
stepping into the country. Estimates indicate that this sector will have
the potential to absorb many more hypermarkets in the next four to
five years

List of retailers that have come with new formats:

Retailer Current Format New


Shoppers’ Stop Department Store Quasi-


Crossword Large Bookstore Corner


Piramyd Departmental Store Quasi-

mall, Food retail

Pantaloon Own brand store


Subhiksha Supermarket
considering moving to self service

Globus Department Store Small

fashion stores

Traditionally, the kirana retailing has been one of the easiest ways to
generate self-employment, as it required minimum investment in
terms of land, labour and capital. These store are not affected by the
modern format of retailing. In order to keep pace with the modern
formats, kiranas have now started providing more value-added
services like stocking ready to cook vegetables and other fresh
produce. They also provide services like credit, phone service, home
delivery etc.

The organized retailing has helped in promoting several niche

categories such as packaged fruit juices, hair creams, fabric
bleaches, shower gels, depilatory products and convenience and
health foods, which are generally not found in the local kirana stores.
Looking at the vast opportunity in this sector, big players like
Reliance has announced its plans to become the country's largest
modern retainers by establishing a chain of stores across all major

Apart from metro cities, several small towns like Nagpur, Nasik,
Ahmedabad, Aurangabad, Sholapur, Kolhapur and Amravati has
seen the expansion of modern retails. Small towns in Maharashtra

Growth of Retail Sector in India

are emerging as retail hubs for large chain stores like Pantaloon
Retail because many small cities like Nagpur have a student
population, lower real estate costs, fewer power cuts and lower
levels of attrition.

However, retailers need to adjust their product mix for smaller cities,
as they tend to be more conservative than the metros. In order for
the market to grow in modern retail, it is necessary that steps are
taken for rewriting laws, restructuring the tax regime, accessing and
developing new skills and investing significantly in India.

India is rated as the most attractive retail markets

Country Market Market Time

Risk Attractiveness Saturation Pressure Rank

Country 25% 25% 30% 20%

India 62 34 91 80 1st
Russia 52 58 71 92 2nd

China 68 40 53 90 4th

Turkey 51 56 66 65 9

Thailand 64 41 59 71 12

Malaysia 70 49 58 40 18

Egypt 51 35 85 30 25
Brazil 52 56 57 20 29
Rank 24th 14th 1st 7th 1st

Growth of Retail Sector in India

Socio demographic factors will lead to faster

growth of Organized retail in India:

100% 9% 10% 11%

9% 12%
80% 19% 19% 20% 22% 23%

60% 25% 24% 24% 26% 27%

47% 47% 45% 42%
20% 39%

1991 1996 2001 2006 2010E
0-19 Yrs 20-34 Yrs 35-54 Yrs 55+ Yrs

Growth of Retail Sector in India

Entertainment Durable 2%
1% 10%
Clothing and
Food & Grocery

Health & Beauty


Books, Music &

3% Footwear
Watch &

Growth of Retail Sector in India


Growth of Retail Sector in India

Emerging Retail Markets:

India, Russia, China and Vietnam top the list of the most attractive
emerging markets for retailers' investment in 2007, While India and
Russia have held the top two spots since 2004, China's booming
consumer spending, together with retailers moving into second-tier
cities, helped it rise to No. 3 from its No. 5 spot last year, according
to the 2007 Global Retail Development Index from management
consultant firm A.T. Kearney.

The study based its results on four variables: 'country risk',

measuring political risk, debt and credit ratings; 'market
attractiveness', encompassing retail sales per capita, population,
infrastructure and regulations; 'market saturation'; and 'time

The higher the ranking, the more urgency for retailers to enter the
market, according to the study, which ranks the top 30 emerging
countries for retail development and focuses on mass-merchant and
food retailers.

"If you want to be an international player in retail, these are the

markets that demonstrate the characteristics (where) you can be
successful," said Laura Gurski, a co-author of the study and partner
in A.T. Kearney's consumer and retail practice.

India has already attracted the attention of global retailers like Wal-
Mart Stores Inc., which is working with India's Bharti Enterprises to
set up a joint venture for a cash-and-carry business. In India, foreign
multiple-brand retailers, which sell diverse brands under one roof,
are limited to cash-and-carry and franchise or license operations.

"India's window of opportunity continues to be wide for retail

investment and development," the report said. "Once India's window
closes for grocery retailers, there will be little opportunity for market
domination in the main cities."

The country's growing population of young urban professionals with

disposable incomes and the nouveau riche has also made India
attractive for luxury retailers. India has attracted "the low end and the
high end because of the breadth of the consumer segments that are
available," said Gurski.

When variables stay constant, Gurski said, do-it-yourself, apparel

and electronics retailers usually enter emerging markets some two
years after international grocers establish themselves. Middle
Eastern countries are also represented on the list, with Saudi Arabia
ranking No. 10

India has emerged as the world's most attractive destination for

mass merchant and food retailing, maintaining its 2005 position in an
annual study of retail investment attractiveness among 30 emerging

India was given the top ranking in management consulting company

AT Kearney's 2006 Global Retail Development Index (GRDI). "The
Indian retail market is gradually but surely opening up, while China's

Growth of Retail Sector in India

market becomes increasingly saturated," said Fadi Farra, a principal

in AT Kearney's Consumer Industries and Retail Practice and leader
of the GRDI study. Much to the surprise of market observers, China
was ranked fifth in this year's tally, declining one more place since
2005. While China remains very attractive, the market is becoming
increasingly saturate as and United Arab Emirates No. 18. Gap Inc
announced last week it had struck a deal with two franchisees to
open Gap stores in Saudi Arabia starting at the end of this year.
Dubai has capitalized on consumer desire for a more Western
lifestyle and has established itself as a retail mecca, Gurski said.
Despite its focus on luxury, Dubai is "just beginning to be populated
by the bread-and-butter retailers of the United States and the
Western world," she said. Retailers that have already established a
presence in major Chinese cities like Shanghai and Beijing, or those
that have been slow to gain a foothold there, are now looking at less
developed markets in second-tier cities, the study found. "If the
markets are saturated, they're looking to make profits in the second-
tier cities," Gurski said.

But she cautioned that a separate strategy is needed for the smaller
markets since consumer tastes, ability to spend and willingness to
embrace new formats may be different than in larger urban areas.

International retailers rush to establish a presence and build market

share, the study reveals. According to the study, Asia with a large 40
per cent of the top 20 markets has surpassed Eastern Europe as the
'dominant region for global retail expansion.'

"The learning is that timing is the most important source of

competitive advantage for global and regional retailers in the
globalization race. Knowing when to enter emerging retail markets is
the key to success," said Farra. Powering Asia's charge are Vietnam,
which has risen five places to third place, and countries like Thailand,
South Korea and Malaysia, all of which are in the top 15, After
topping the ranking for two consecutive years in 2003 and 2004,
Russia slipped to second place behind India last year and remained
there in 2006 too.

Growth of Retail Sector in India

Origin of Retail

Growth of Retail Sector in India

Early Trade:

When man started to cultivate and harvest the land, he would

occasionally find himself with a surplus of goods. Once the needs of
his family and local community were met, he would attempt to trade
his goods for different goods produced elsewhere. Thus markets
were formed. These early efforts to swap goods developed into more
formal gatherings. When a producer who had a surplus could not find
another producer with suitable products to swap, he may have
allowed others to owe him goods. Thus early credit terms would have
been developed. This would have led to symbolic representations of
such debts in the form of valuable items (such as gemstones or
beads), and eventually money.


Peddlers and Producers:

The Retail Trade is rooted in two groups, the peddlers and

producers. Peddlers tended to be opportunistic in their choice of
stock and customer. They would purchase any goods that they
thought they could sell for a profit. Producers were interested in
selling goods that they had produced.

General Store:

Growth of Retail Sector in India

This division continues to this day with some shops specializing in

specific areas, reflecting their origins as outlets for producers (such
as Pacific Concord of Hong Kong), and others providing a broad mix,
known as General Store (such as Casey's in the Midwest of the
Although specialist shops are still with us, over time, the general
store has increasingly taken on specialist products. Customers have
found this to be more convenient than having to visit many shops -
thus the term "Convenience Store" has also been applied to these
shops. As the popularity of general stores has grown, so has their
size. This combined with the advent of Self-Service has lead to the
Supermarket, or Superstore.

Early Markets:

Over time, producers would have seen value in deliberately over-

producing in order to profit from selling these goods. Merchants
would also have begun to appear. They would travel from village to
village, purchasing these goods and selling them for a profit. Over
time, both producers and merchants, would regularly take their
goods to one selling place in the centre of the community. Thus,
regular markets appeared.The First Shop : Eventually, markets
would become permanent fixtures i.e. shops. These shops along with
the logistics required to get the goods to them were, the start of the
Retail Trade.

The Birth of Distance Retailing:

Defined as sales of goods between two distant parties where the

deliverer has no direct interest in the transaction, the earliest
instances of distance retailing probably coincided with the first
regular delivery or postal services. Such services would have started
in earnest once man had learned how to ride a camel, horse etc.

When individuals or groups left their community and settled

elsewhere, some missed foodstuffs and other goods that were only
available in their birthplace. They arranged for some of these goods
to be sent to them. Others in their newly adopted community enjoyed
these goods and demand grew. Similarly, new settlers discovered
goods in their new surroundings that they dispatched back to their
birthplace, and once again, demand grew. This soon turned into a
regular trade. Although such trading routes expanded mainly through
the growth of traveling salesmen and then wholesalers, there were
still instances where individuals purchased goods at long distance for
their own use. A second reason that distance selling increased was
through war. As armies marched through territories, they laid down
communication lines stretching from their home base to the front. As
well as garnering goods from whichever locality they found
themselves in, they would have also taken advantage of the lines of
communication to order goods from home.

Origins of Retail

It is likely that, as markets became more permanent fixtures they

evolved into shops. Although advantageous in many respects, this
removed the mobility that a peddler or traveling merchant may still
have enjoyed. For some shopkeepers, it made sense to obtain extra
stock and open up another shop, most probably operated by another

Growth of Retail Sector in India

family member. This would recover business from peddlers and

create new business and the greater volume would allow the
shopkeeper to strike a better deal with suppliers. Thus the retail
chain would have started. Its thought that this process would have
started in china over 2200 years ago with a chain of shops owned by
a trader called Lo Kass.

The First Self-Service Store:

This all changed in 1915 when Albert Gerrard opened the Groceteria
in Los Angeles, the first documented self-service store. This was
soon followed a year later by the Piggly Wiggly® self-service store,
founded by Clarence Saunders in Tennessee in the U.S.


This new type of shopping was more efficient and many customers
preferred it. Although personal service stores remain to this day, this
new concept started a rapid growth of self-service stores in the
United States. Other countries were slow to take up the idea, but
there has been a steady rise in the global amount of self-service
stores ever since.


These entrepreneurs noticed that their staff had to spend a great

deal of time taking grocery orders from customers. The groceries
were stacked on shelves allowing customers to walk around and
browse, collecting their shopping in a basket that was supplied. The
shopkeeper would only need to tot up the final bill at the end of the
process and transfer the goods from the basket to the customer and
receive payment.

From Family Business to Formal Structure:

Although retail chains would have been mostly run by families, as

some chains grew, they would have needed to employ people from
outside of their family. This was a limiting factor as there would have
been a limit to the amount of trusted non family members available to
help run the chain. Another, even more definite limiting factor was the
distance the furthest shop would have been from the original shop.
The greater the distance, the more time and effort would have been
needed to effectively manage outpost shops and to service them with
goods. There was, therefore, a natural barrier to expansion. That
was the case until transport and communications became faster and
more reliable. When this happened towards the end of the 19th
century, chains became much bigger and more widespread. Many of
these businesses became more structured and formalized, leading to
the retail chain that we see today.

Growth of Retail Sector in India

Growth of Retail Sector in India

Growth of Retail Sector in India

Indian Retail

Growth of Retail Sector in India


Today, retailing doesn’t involve just dealing or marketing from shops,

it includes analyzing the market in an effort to provide reasonable
prices together with an array of options and experience to customers.
The sole purpose of all this is retaining the brand loyalty of
customers. Indian retail is currently a US$ 245 billion market and is
anticipated to extend to almost US$ 385 billion mark by the next five
years. The Indian retail sector is currently sporting a brand new look
and together with a 46.64 per cent three-year Compounded Annual
Growth Rate (CAGR), Conventional marketplaces are paving way for
new shopping malls, the likes of superstores, shopping plazas,
supermarkets and brand label stores. International style shopping
centers have started dotting the skyline of cities and smaller towns,
acquainting the Indian customer to a unique shopping experience.
The retail industry in India is split up into the unorganized and
organized retail segments.

The unorganized retail sector includes the big, average and modest
grocery stores and the chemist shops. A changeover is taking place
from the conventional retail sector to organized retailing. But the
unorganized segment still dominates and leads the industry. By
2010, the Indian retailing sector is anticipated to become an Rs12.5
trillion market. The share of organized retailing is supposed to jump
to about 10 per cent from the existing three per cent. The anticipated
staggering growth in organized retailing provides an opportunity to
expand the market for both established and new players. According
to the latest report India Retail Sector Analysis (2006ñ07)I by
RNCOS, the total retail market is primarily focused in rural regions,
which makes up 55 per cent or US$ 165 billion of the overall retail
market as opposed to urban segment, which represents 45 per cent
or US$ 135 billion of the gross retail market. The rural market is
spread over 627,000 villages, even though its centre of attention is
focused around a core group of 100,000 villages that makes up 50
per cent of the rural population.

India represents the most compelling international investment

opportunity for mass merchant and food retailers looking to expand
overseas, according to management consulting firm AT Kearney's
2005 Global Retail Development Index (GRDI), an annual study of
retail investment attractiveness among 30 emerging markets. India is
rated as the fifth largest emerging retail market and is seen as a
potential goldmine. Driving global brands into India is the greatly
improved investment climate due to the recent relaxation of direct
ownership restrictions on foreign retailers. The country's retail market
totals $330 billion, is vastly underserved and has grown by 10 per
cent on an average over the past five years. The message for
retailers on India is clear – move now or forego prime locations and
market positions that will soon become saturated. Global retailers
that missed opportunities to capture first-mover advantage in China
will make up for it in India.

Growth of Retail Sector in India

Though India has more than five million retail outlets, they are greatly
unorganized. There is no supply chain management perspective. In
fact, out of the entire retail sector in India, the organized sector is
only 25 per cent and the rest is unorganized. 96 per cent of the retail
outlets are smaller in area than the standard norms. The retail
industry is divided into organized and unorganized sectors.
Organized retailing refers to trading activities undertaken by licensed
retailers who are registered for sales tax and income tax. These
include corporate backed hypermarket and retail chains and so on.
Unorganized retailing is the traditional low-cost shops, handcarts and
pavements and is by far the prevalent form of trade in India. The
efficiency of organized sector in retailing is manifested in some of the
newer supermarkets in urban/metropolitan India – the produce is
cleaner, fresher, well packed and often cheaper than the local
shopkeeper. This is possible because of the far more efficient
distribution system, which organized retail chains are employing, by
cutting the layers of middlemen involved. There are other benefits
too, of transforming the unorganized retail sector into an organized
sector. Firstly, a number of new jobs will be created, far better paid
than the underage labor working in the local shops. Secondly, the
benefits to the producer and consumer through better prices and
lesser wastage; throwing up exportable surpluses, which will also
benefit the economy as a whole. Thus one can see that allowing FDI
in retailing is beneficial to all the stakeholders involved

The Big Bazaars and Spencer’s, the huge unorganized retail sector
is finally beginning to see the merit of logging on, even if at a model

Taxation policies also push you to automate and the push is even
harder for those looking to expand beyond their single store

Though it’s early days yet to measure it penetration in the

unorganized retail industry, interest levels are surely raising fast. “It’s
good to at least answer their questions. Though the interest is more
with retailers who register good sales and volumes.

Software available to the retailers is ShawMan’s RetailMagiK, which

takes care of the front-end store needs, as well as the back-end
warehouse requirements. “It would surely help the unorganized
sector to get into technologies like bar-coding, which will make their
operations more efficient. Some other features are a user-defined
billing screen and discount with control mechanism from the head-
office, delivery order management, batch control and quick
information search, among others. The product is a simple to use.
The screen design and the functionality are designed in such a way
that the user need not press too many keys to get things done,” says
Khushroo Bagwadia, business development manager, Shawman

To begin with, most retailers look at decent entry-level solutions

starting at Rs 25,000. However, there are cheaper quick-fix solutions
available too. One can even deploy a computer and start with

Growth of Retail Sector in India

financial accounting programmers like Microsoft Excel, FoxPro and


Small retailers seem next in line and vendors are also warming up to
the opportunity. At the low-end however, smart inexpensive solutions
are the need of the hour. And solutions providers like Microsoft,
Polaris and Shawman are now working on developing smart tools for
the retail enthusiasts. For small players with just one store, the
investment on retail solutions go really low, anywhere between Rs
10,000 to Rs 25,000. Most of the time these solutions are developed
by local firms, who at times compete with the big names in the

According to Oberoi of Polaris, generally the mom-and-pop stores

like to go for technology, which will get their work done at a
reasonable cost. They avoid the high-end technology, and consider
these as frills. “They are not even bothered about upgrading, so the
cheap systems are more than welcome. These solutions might not
work for the mid-sized retailers with five stores, as then one need to
scale it up and take care of inventory and supply chain
management,” he says.

Comparing the case with China, Vedamani suggests India is on the

right track. “In China, we find the organized sector to be 20-23% of
the total industry. Here, the technology has advanced in phases, and
so is the case in India.

Format Description The Value Proposition

Complete range available for a

Exclusive showrooms either owned or franchised out
Branded Stores given brand, certified product
by a manufacturer.
Greater choice to the consumer,
Specialty Focus on a specific consumer need, carry most of
comparison between brands is
Stores the brands available
Large stores having a wide variety of products,
Department organized into different departments such as One stop shop catering to varied/
Stores clothing, house wares, furniture, appliances, toys, consumer needs.

Growth of Retail Sector in India

One stop shop catering to varied

Supermarkets Extremely large self-service retail outlets
consumer needs
Stores offering discounts on the retail price through
Discount Stores selling high volumes and reaping economies of Low Prices
Larger than a supermarket, sometimes with a Low prices, vast choice available
Hyper- mart warehouse appearance, generally located in quieter including services such as
parts of the city cafeterias.

Convenience Small self-service formats located in crowded urban Convenient location and extended
stores areas. operating hours.

Enclosure having different formats of in-store Variety of shops available to each

Shopping Malls
retailers, all under one roof. other.

Formats adopted by the Retail

Players in INDIA.

Growth of Retail Sector in India

Retailer Original formats Later Formats

RPG Retail Supermarket (Foodworld) Hypermarket (Spencer's)Specialty Store (Health and Glow)

Department Store (Piramyd

Piramal's Megastore)
Discount Store (TruMart)

Small format outlets (Shoppe) Supermarket(FoodBAZAR)

Pantaloon Retail Department Store (Pantaloon) Hypermarket (Big Bazaar) Mall (Central)

Department Store (shopper's

K Raheja Group stop) Hypermarket (TBA)
Specialty Store (Crossword)

Tata/ Trent Department Store (Westside) Hypermarket (Star India Bazaar)

Landmark Department Store (Lifestyle) Hypermarket (TBA)

Others Discount Store (Subhiksha, Margin Free, Apna Bazaar), Supermarket (Nilgiri's), Specialty Electronics

Growth of Retail Sector in India

Retailing formats
in India


The largest form of organized retailing today. Located

mainly in metro cities, in proximity to urban outskirts. Ranges from

Growth of Retail Sector in India

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, Pyramid, Pantaloon.

2. 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.

3. 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.

4. Department Stores:

Large stores ranging from 20000-50000 sq. ft, catering

to a variety of consumer needs. Further classified into localized
departments such as clothing, toys, home, groceries, etc

5. Department Stores:

Departmental Stores are expected to take over the apparel

business from exclusive brand showrooms. Among 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

6. Hypermarts/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.

7. 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.

Growth of Retail Sector in India

8. MBO’s :

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.


Growth of Retail Sector in India

Food retail :

Food dominates the shopping basket in India. The US$ 6.1 billion
Indian foods industry, which forms 44 per cent of the entire FMCG
sales, is growing at 9 per cent and has set the growth agenda for
modern trade formats. Since nearly 60 per cent of the average Indian
grocery basket comprises non-branded items, the branded food
industry is homing in on converting Indian consumers to branded

The mobile revolution:

The retail market for mobile phones -- handset, airtime and
accessories -- is already a US$ 16.7 billion business, growing at over
20 per cent per year. In comparison, the consumer electronics and
appliance market is worth US$ 5.6 billion, with a growth rate that is
half of the mobile market.

Kids retail:
When it comes to Indian children, retailers are busy bonding--and
 Monalisa, the Versace of kids is coming to India.
 Global lifestyle brand Nautica is bringing Nautica Kids.
 International brand Zapp tied up with Raymond to foray into
kids' apparel.
 Disney launched exclusive chains which stock character-
based stationery.
 Pantaloon's joint venture with Gini & Jony will set up a retail
chain to market kids' apparel.
 Swiss kidswear brand Milou is collaborating with Tirupur-
based Sreeja Hosieries.
 Turner International India Pvt Ltd. will launch Cartoon
Network Townsville and Planet POGO--two theme parks
designed around its channels--in the National Capital
 Sahara One Television has also signed a Memorandum of
Understanding to source content from Spacetoon Media
Group, Middle East's largest kids' entertainment brand for
animation and live action content.

Leading the kids' retail revolution is the apparel business, which

accounts for almost 80 per cent of the revenue, with kids' clothing in
India following international fashion trends. According to research

Growth of Retail Sector in India

firm KSA Technopak, the branded segment comprises US$ 701.7

million of the total kids' apparel market-size of over US$ 3 billion.

Industry experts say kids' retailing will touch annual growth of 30-35
per cent. Toys, stationary, sportswear, outerwear, tailored clothing,
eyewear, watches, fragrance, footwear, theme parks, TV channels…
the segment is growing rapidly at 10 per cent per annum. Margins
are in the range of 20-25 per cent (for dealers and distributors), while
companies enjoy an average gross margin of about 10 per cent.

Agricultural retail:

Agriculture across India is heralding the country's second Green

Revolution. 14 states, including Maharashtra, Punjab, Andhra
Pradesh and Rajasthan amended the Agricultural Produce Marketing
Committee (APMC) act this year, along the lines of the Model APMC
Act, '02, which allows farmers to sell their produce directly to buyers
offering them the best price.

Agricultural sectors such as horticulture, floriculture, development of

seeds, animal husbandry, pisciculture, aqua culture, cultivation of
vegetables, mushroom under cultivated conditions and services
related to agro and allied sectors are open to 100 per cent FDI
through the automatic route.
For its e-Choupal scheme, ITC built internet kiosks in rural villages
so farmers can access latest information on weather, current market
prices, foods-in-demand, etc.

With a US$ 5.6 billion, multi-year investment in agriculture and retail,

Reliance Retail will establish links with farms on several thousand
acres in Punjab, West Bengal and Maharashtra. FieldFresh, planning
to become India's first large-scale exporter of produce, will annually
pay farmers over US$ 30,000 to lease land for vegetables, to hire
tractors and to pay their workers.

Besides a five-year program with the Punjab government to provide

several hundred farmers with four million sweet-orange trees for its
Tropicana juices by 2008, PepsiCo--with agriculture exports worth
US$ 40 million--also introduced farmers to high-yielding basmati rice,
mangoes, potatoes, chilies, peanuts, and barley for its Frito-Lay

Export potential and a rapidly growing domestic demand for reliable

produce from new supermarket chains is driving change. With 77 per
cent of India's population relying on agriculture for a living, improved
efficiency and new markets can benefit a large number of people.

International retailers :

The Australian government's National Food Industry Strategy and

Austrade initiated a test marketing food retail in India wherein 12
major Australian food producers have tied up with India-based
distributor AB Mauri to sell their products directly at retail outlets.
The largest-ever 150-member British business delegation in India
committed investments in the areas of food processing, agri retail

Growth of Retail Sector in India

and manufacturing. It is also likely to press for the liberalisation of

sectors like financial & legal services and retail.

US-based home delivery and logistics company, Specialised

Transportation Inc, will enter the Indian market through a strategic
alliance with Patel Retail, a subsidiary of Patel Integrated Logistics.
Among other big international players, Wal-Mart has announced its
plans for India in partnership with Bharti, Tesco is sure to try again,
and Carrefour too might finally find the right partner.


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.

Supermarkets are relatively new entrants in the market. They are so

called pioneers in organized food retailing and go by the western
model in look and feel and format. This is what everybody means
when they say organized food retailing.

Franchise outlets:

Growth of Retail Sector in India

Like Tommy Hilfiger and Wal Mart, other US retailers are firming up their
India entry strategies and if they are already in, they are undergoing
rapid expansion. Fashion brands DKNY is also al set to foray into the
Indian fashion Industry through a franchisee agreement with Indian
company, S. Kumar Starbucks recently expressed their interest in
entering Indian company

Like Tommy Hilfiger and Wal-Mart, other US retailers are firming up

their India entry strategies and if they are already in, they are
undergoing rapid expansion. Fashion brand DKNY is also all set to
foray into the Indian fashion Industry through a franchisee agreement
with Indian company, S Kumar’s.Starbucks recently expressed their
interest in entering India through the franchise route, like their
AmericanF&B counterparts Pizza Hut, Subway, and the very
successful McDonald’s. McDonald’s has major expansion plans lined
up; in the next 3 years, it plans to open another 100 outlets
in cities across India.


A very large commercial establishment that is a combination of

departmental store and a supermarket.
The specific features of a hypermarket are the wide range of goods
offered, quality service, quality display of goods on the shelves and
complex systems providing for customers loyalty.

Hypermarket is known for a wide range of goods offered. It consist of

dozens of thousands of items, while similar goods can be offered in
several forms. In order to work with such an assortment it is
necessary to group it into categories and sub categories that would
unite goods according to this or that criteria.

Shopping Malls:

The new shopping malls that have been expanding their footprint
across Indian cities are well designed, built on international formats
of retailing and integrated with entertainment and restaurants to
provide a complete family experience. Over 300 malls are expected
to be built over the next two years and most Indian cities with over a
million populations will be exposed to this modern method of

Shopping malls have existed in India since several decades but were
designed and built to house several shops in a single facility. These
malls also known as Shopping Arcades offered only rows of shops,
most of which were small stores that promised bargains for their
various wares. These Shopping Arcades tried to maximize on their
store space and did not offer any areas for recreation and

Growth of Retail Sector in India

The present day malls are a creation of the past few years post
2000. They are designed professionally using a lot of international
experience and combine shopping with a lot of brand building,
recreation, food and entertainment. Malls also have a large format
store that serves as their anchor for shopping and a prominent
restaurant that anchors the food needs of visitors. Most malls also
feature a multiplex cinema that offers entertainment to the visitors of
the mall. Finally the mall has large atria and open spaces to allow
visitors and families to hang-out.

Growth of Retail Sector in India

Organized Retail

Growth of Retail Sector in India

Product Segments:

The organized retail business in India is very small. This is despite

the fact that India is one of the biggest markets. Retail business
contributes around 10-11 per cent of GDP. India also has the largest
number of retailers, about 12 million, though they are mostly small.
Most of the organized retailing in the country has just started
recently, and has been concentrated mainly in the metro cities.
Organized retailing in India has a huge scope because of the vast
market and the growing consciousness of the consumer about
product quality and services. Organized retail only accounts for 3%
of the total retail industry as yet and is estimated to grow to $64
billion by the year 2015. As a result, the retailing space in the country
will also rise by 15-20% by 2010. 50 million sq ft of quality space
under development 7 major cities to account for 41 million sq ft
development 300 malls, shopping centre and multiplexes under
construction To open 35 hypermarkets, 325 large department stores,
1500 supermarkets and over 10,000 new outlets To add US $ 10
billion of business to organized retail. ASSOCHAM president, Anil K
Agarwal says:” The organized sector retailing is all set to grow at
much faster speed than unorganized sector and the higher growth
speed will alone be responsible for its higher market share which has
been projected for $17 billion by 2010-11. Cities and metropolis in
which retailing will show booming prospects include Mumbai, Delhi,
Chennai, Kolkata, Bangalore and Kanpur, said Agarwal adding that
the popular mode adopted for building shopping malls in these cities
will be based on build, operate, lease and sell basis".

The 4 major organized retail sectors are Food & Grocery,

Clothing, Consumer Durables and Books & Music. In 2003-04,
private consumption expenditure in India amounted to Rs 1,690,000
crores (USD 375 billion) of which, retail sales constitute about 61%
(USD 230 billion).In terms of penetration by the organized retail
sector, footwear is the highest category, followed by clothing.
Footwear is driven by the dominance of home –grown players like
Liberty as well as the 15% market share that MNC retailer Bata
Commands. Foreign Presence, especially through the franchisee
route, e.g. Adidas, Reebok, Nike etc. adds to this slice of the pie.
Franchisee activity in this category, especially in Tier II Cities, is
pegged to rise.

Growth of Retail Sector in India

Estimated Growth in
Organized Retail

2004 2009 CAGR (%)

Large Segments 1,924 5,024 21%
Other Segments 1,315 2,645 15%
Non-store 239 422 12%
Total Organized 3,478 8,091 18%
The Four Large Segments:
Food 391 1,624 33%
-Chain Stores 326 1,462 35%
-Single Large 65 162 20%
Clothing 1,075 2,266 16%
-Manufacturer 293 590 15%
retailers 315 852 22%
-Chain stores 467 824 12%
-Single Large
Consumer 359 822 18%
durables 141 284 15%
- Manufacturer 98 298 25%
retailers 120 240 15%
-Chain stores
-Single Large
Book and Music 97 310 26%
-Chain Stores 54 202 30%
-Single Large 43 108 20%

Growth of Retail Sector in India

Retail is amongst the fastest growing sectors in the country.

Indiaranks First, ahead of Russia, in terms of emerging markets
potential in retail and is deemed a ‘Priority’ market for
International retail.

Growth of Retail Sector in India

Major Industry

Nanz in North India, Nilgiris in the South, Pantaloon in the East and
Crossroad in the West were the pioneers of the retail revolution in
India. Nanz faced several obstacles in their business and had to
finally down their shutters. Nilgiris, due to some strange reason, did
not see any logic to expand beyond the southern frontiers. Pantaloon
went to scale up and become bigger and bigger to form the Future
Group, that is now omnipresent in almost all formats right from small
groceries to e-tailing. Crossroads in Mumbai imparted some valuable
lessons to their parent, the Piramyd Group, who has since then gone
on an expansion drive with other formats of retailing in different

Growth of Retail Sector in India

The big players in Indian retail landscape now are the Future Group,
Shoppers Stop, Westside, Subiksha and RPG Spencer. The
newcomers who are knocking at the gates are Reliance Retail,
Bharti Walmart and Aditya Birla Trinethra. Here, we intend to do a
brief profiling of the major players in order to understand the retail
business in a better manner.

1 The Future Group

The Future Group, which was earlier known as PRIL (Pantaloon

Retail India Limited) began as a trouser manufacturer in the mid
1980s. The Future Group is divided into six verticals – Future Retail,
Future Capital, Future Brands, Future Space, Future Media and
Future Logistics. The Future Group started operations in the mid
1987s by incorporating the company as Manz Wear Private Limited.
The company went on to manufacture ready made trousers under
the “Pantaloons” brand name. It came out with a public issue in 1991
and later changed their name to Pantaloon Fashions (India) Limited

The first exclusive men’s store called Pantaloon Shoppe was

inaugurated in 1992. Pantaloons went for a franchisee route to
expand the number of retail outlets and by 1995, it had reached to a
crucial number of 70. The first departmental store called Pantaloons
was opened in Kolkata in 1997 with an investment of Rs 0.7 million.
The store was a success and recorded revenues of Rs 100 million
within the first year of operations. In 1999, the company’s name was
changed to Pantaloon Retail (India) Limited (PRIL).

The success of Pantaloons departmental stores encouraged PRIL to

come up with other retailing formats such as “Big Bazaar” to retail
low cost general merchandising, and “Food Bazaar” to retail food
products. As of 2005, the Future Group has 3.5 million sq ft of retail
space and over 100 stores across 25 cities in India. It employs more
than 12,000 people and has a customer base of more than 120

Kishore Biyani, the promoter of the group who likes to address

himself as “Chief Knowledge Officer” has plans to launch 18 formats
and over 3,340 stores, thereby turning the Future Group into a US$7
billion company with over US$1 billion in profits by the year 2010.

Growth of Retail Sector in India

2 Shoppers Stop

Shoppers’ Stop, promoted by the real estate group K Raheja, was

one of the first movers to have set up a large retail outlet in New
Delhi with international ambience. Shopper’s Stop Ltd now has a
considerable presence all over the country with overr 7 lakh square
feet of retail space and stocks over 200 brands of garments and
accessories. The stores are spread all over India with presence in
Mumbai, Delhi, Bangalore, Hyderabad, Jaipur, Pune , Kolkata,
Gurgaon, Chennai & Ghaziabad.

Shoppers’ Stop is also very well known for having pioneered several
quality retailing concepts in India like CROSSWORD, HyperCITY
and Mothercare. They are the only retailer from India to become a
member of the prestigious Intercontinental Group of Departmental
Stores (IGDS).

Shoppers’ Stop is positioned as a family store delivering a complete

shopping experience. With its wide range of merchandise, exclusive
shop-in-shop counters of international brands and world-class
customer service, Shoppers’ Stop brought international standards of
shopping to the Indian consumer providing them with a world class
shopping experience. Shoppers’ Stop’s core customers represent a
strong SEC A skew. They fall between the age group of 16 years to
35 years, the majority of them being families and young couples with
a monthly household income above Rs. 20,000/- and an annual
spend of Rs.1,50,000/-. A large number of Non - Resident Indians
visit the shop for ethnic clothes in the international environment they
are accustomed to.

The stores offer a complete range of apparel and lifestyle

accessories for the entire family. From apparel brands like Provogue,
Color Plus, Arrow, Levi’s, Scullers, Zodiac to cosmetic brands like
Lakme, Chambor, Le Teint Ricci etc., Shoppers’ Stop caters to
almost every lifestyle need.

Shoppers' Stop also retails its own line of clothing namely Stop, Life ,
Kashish, Vettorio Fratini and DIY. The merchandise at Shoppers’
Stop is sold at a quality and price assurance backed by its guarantee
stamp on every bill.

Growth of Retail Sector in India

Shoppers’ Stop’s customer loyalty program is called “The First

Citizen”. The program offers its members an opportunity to collect
points and avail of innumerable special benefits. Currently, Shoppers’
Stop has a database of over 2.5 lakh members who contribute to
nearly 50% of the total sales of Shoppers’ Stop.

The Organisation, in 2000, along with ICICI ventures also acquired

the reputed bookstore, “Crossword”, which offers the widest range of
books along with CD-ROM, music, stationery and toys. Services like
Dial-a-book, Fax-a-book and Email-a-book enable customers to shop
from their homes. Crossword currently has 18 Stores.

Realising the role of IT way back in 1991, Shoppers’ Stop was

among the first few retailers to use scanners and barcodes and
completely computerise its operations. Today it is one of the few
stores in India to have retail ERP in place, which is now being
integrated with Oracle Financials and the Arthur Planning System,
the best retail planning system in the world. With the help of the ERP,
they are able to replicate stores, open new stores faster and get
information about merchandise and customers online, which reduces
the turnaround time in taking quick decision.

Shoppers Stop has been very keen to understand the importance of

distribution and logistics in ensuring that merchandise is available on
the shop floors. This has led the retail chain o streamline its supply
chain. The company has developed process manuals for each part of
the logistics chain. These modules include vendor management,
purchase order management, stock receiving systems, purchase
verification and inventory build up, generation and fixing of price and
store tags, dispatch of stocks to the retail floor and forwarding of bills
for payment.

Shoppers’ Stop has a grand ambition to position itself as a global

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 stores every year.

3 Trent – Westside

Established in 1998, Trent operates some of the nation's largest and

fastest growing retail store chains. A beginning was made in 1998
with Westside, a lifestyle retail chain, which was followed up in 2004
with Star India Bazaar, a hypermarket with a large assortment of
products at the lowest prices. In 2005, it acquired Landmark, India's
largest book and music retailer.

In a recently signed deal, Trent has agreed to anchor 12 malls set up

by DLF Universal Ltd across the country, at its Westside, Landmark
and Star India Bazaar outlets. This amounts to about 27 locations,
totaling to about a million square feet of space.

Trent retails garments and household accessories for men, women

and children, cosmetics and perfumes at Westside, food, beverages,
health and beauty products, vegetables, fruits, dairy products,
consumer electronics and household items at Star India Bazaar and
books, music and stationery at Landmark.

Growth of Retail Sector in India

Westside has 25 outlets across 17 cities in India offering a variety of

designs and styles in garments, footwear and accessories, as table
linens, artifacts, home accessories and furnishings. Well-designed
interiors, sprawling space, prime locations and coffee shops enhance
the customers' shopping experience.

Trent also runs another chain of retail stores called Star India
Bazaar. Launched in 2004, Star India Bazaar provides a large
assortment of high quality products made available at the lowest
prices coupled with a unique shopping experience. Star India Bazaar
is located in Ahmedabad and offers a wide choice of staple food,
beverages, health and beauty products, vegetables, fruits, dairy
products, consumer electronics and household items at the most
affordable prices.

Trent has also recently acquired a 76 per cent stake in Landmark,

one of the largest books and music retail chains in India. Landmark
commenced its operations in 1987 with its first store in Chennai, and
now has nine stores in the major metros of the country. Earlier
Landmark was focused on books, stationery and greeting cards. In
1996 it added music to its product portfolio and also started the trend
of stocking curios, toys, music, CDs and other gift items.

4. Piramyd

Piramyd Retail is part of the Piramal Group, which has presence in

diverse sectors spanning Pharmaceuticals, Textiles, Real Estate,
Engineering, Family Entertainment and Retail with manufacturing
operations in 19 locations across five states and employing over
18,000 people.

The promoters launched the apparel business in 1999 under

Piramyd Retail and Merchandising Pvt. Ltd. (PRMPL) while its food;
home & personal care businesses (FHPC) were housed under
Crossroads Shoppertainment Pvt. Ltd. (CSPL). As the apparel and
food businesses individually reached a critical mass the
management merged the two companies into Piramyd Retail Ltd.
due to distant synergies in two businesses in March 2005. Pyramid
also has a smaller format of stores called TruMart that caters to Food
and Personal Care products.

Piramyd Retail currently has 5 Mega stores and 8 TruMart stores

mainly in Maharashtra . The company plans to increase these

Growth of Retail Sector in India

numbers to 17 Mega stores and 69 TruMarts by 2008. The floor

space is expected to be 5 times on successful expansion.

The FHPC (Food & Personal Care) business is volume driven while
the Lifestyle store is a margin driven business. Piramyd Retail plans
to increase the contribution of private labels from existing 7% to 18-
20% of the revenues by 2010. Gross margins from private labels are
over 40% and hence the company is planning to increase this
business. Most of the stores are on the lease format and the
company is prone to higher lease rentals due to the overall increase
in real estate prices. This may bring the profit levels down

Piramyd Retail did have a first mover advantage in many locations

but it has actually failed to capitalise over this advantage. Its
competitors like Pantaloon, Shoppers Stop and Trent gained larger
benefits of their far more aggressive business & marketing strategy
in the retail space.

5. Subiksha

The Chennai based Subiksha grocery chain runs around 200 outlets
all over the country and it’s current turnover stands at Rs 224 crores.
Their target customer is the middle income value conscious buyers.
The main aim of Subiksha is to offer a functional and transactional
shopping experience. This retail chain has no qualms and spends
almost no money on creating a pleasant shopping experience, and

Growth of Retail Sector in India

all stores are non-air conditioned. There is no false roofing or

sparkling vitrified tiles on the floor.

A few years ago, Subiksha did not even offer shoppers self service.
The customer had to place an order at a computerized teller and the
goods were billed and delivered after cash is collected. Customers
had to bring their own carrybags or pay to buy them from the store.
Subiksha even attempted to charge the customers for home delivery.

However, now Subiksha has slightly tweaked their business model in

order to create a better appeal to customers who were defecting to
the competitors. The store formats are still small and non-
airconditioned. But customers have the option to pick from shelf
spaces. They also get shopping bags and free home delivery. But the
selling USP(unique selling proposition) remains the same ---
Subiksha tries to be as close to the customer as possible and offers
the lowest price and huge savings in comparison to competitors. It’s
slogan happens to be --- bachat mera adhikar hain (saving is my
fundamental right).

6. RPG Spencer

RPG’s Spencer presently has 125 stores across 25 cities covering a

retail trading area of half a million square feet and with a clientele of
3 million customers a month. Spencer's has a national footprint with
seven hypermarkets, three supermarkets and 70 daily use outlets,
called Dailies.

All the newly opened Spencer's stores stock every conceivable

product that is required by a household on a daily basis. At Spencer's
Daily shoppers can get fresh fruits, vegetables, fast-moving
consumer goods, household items, groceries, with regular offers and

Spencer's outlets are divided in to three retail formats. These are,

Spencer's Hyper, the over 25,000-sq ft hypermarkets stocking over
25,000 items. The 8,000sq ft to 15,000-sq ft mini hyper stores,
branded as Spencer's Super and the daily purchase 4,000-sq ft to
7,000-sq ft Spencer's Daily for groceries, fresh food, chilled and
frozen products, bakery and weekly top up shopping.

Growth of Retail Sector in India

7. Reliance Retail

On June 26, 2006, Mukesh Ambani, Chairman and Managing

Director, Reliance Industries Limited, announced a Rs 25,000-crore
investment in the retail sector.
Reliance Retail started it’s retail operation with “Reliance Fresh”, a
grocery store that sells vegetables, fruits, personal care items and
other food products. Soon, these retail outlets will also be selling
apparel and footwear, lifestyle and home improvement products,
electronic goods and farm implements and inputs. They will also offer
products and services in energy, travel, health and entertainment. In
addition to this, partnerships would be developed to bring the best of
global luxury brands to India as well.

Reliance Retail plans to extend it’s footprint to cover 1,500 Indian

cities and towns with outlets of a varied format, a mix of
neighborhood convenience stores, supermarkets, specialty stores
and hypermarkets. Reliance also plans to open restaurant outlets,
financial services marts and tourism counters within it’s stores.

Mukesh Ambani’s ultimate ambition seems to be to create the Indian

equivalent of Wal-Mart by scaling up the business to unprecedented
heights to reach every nook and corner of the country. With it’s
retailing venture, Reliance expected a revenue target of US $20
billion through it’s retail operations by 2010. Over a span of five
years, RRL expects a 20% return-on-investment.

The first store christened “Reliance Fresh” opened in November

2006 at Hyderabad. Within a few months they have now opened
stores in Mumbai, Pune and Ahmedabad and plans foray into other
cities on a rapid scale.

Growth of Retail Sector in India

8. Bharti Wal-Mart

Bharti Retail (Pvt.) Ltd. unveiled

the roadmap for its retail venture on 19th February, 2007 envisaging
an investment of $2.5 billion with expectation of revenue of $4.5
billion (about Rs. 20,000 crore) from this business by 2015. The first
retail outlet is expected to open somewhere in the month of August .

Bharti’s plan is to invest $2.5 billion by 2015 and open stores across
all major cities. This investment would be only for setting up front-end
stores. The modalities for its back-end linkage, including its joint
venture with the world's largest retailer Wal-Mart, are in the process
of being worked out.

A high-level team from Wal-Mart was visited India in the later part of
February to work out the details of the back-end chain. While Bharti
would manage front-end of the retail venture, Wal-Mart would be

Growth of Retail Sector in India

involved in the back-end, including logistics, supply chain and cash-

and-carry, he added.

The JV was presently scouting for 10 million sq. ft. of retail space,
which would include hypermarkets, supermarkets and convenience
stores and would provide employment to about 60,000 people. The
company would open multi-format retail outlets in all cities with a
population of about one million. Bharti is now conducting a massive
consumer survey to take a final decision on branding and
promotional campaign.

However, Bharti and Wal-Mart have been facing stiff opposition from
the left parties and other political outfits who fear that the entry of the
Bentonville giant will make life difficult for the small grocers and
create massive unemployment. They also expect Wal-Mart to take a
tough stance on lowering prices and force farmers to sell their
produce at lower rates. A lurking fear of monopolistic regime in the
retail sector is also enhancing their fears. Both Bharti and Walmart
are presently having a tough time in convincing the ministers,
politicians, agriculturists, the NGOs and other pressure groups that
their business model would serve to work in the best interests of all
the stakeholders.

9. Aditya Birla – MORE

The Aditya Birla Group is India's first truly multinational corporation.

Global in vision, rooted in values, the Group is driven by a
performance ethic pegged on value creation for its multiple
stakeholders. A US$ 24 billion conglomerate, with a market
capitalization of US$ 23 billion and in the League of Fortune 500, it is
anchored by an extraordinary force of 100,000 employees belonging
to over 25 different nationalities. Over 50 per cent of its revenues
flow from its operations across the world.” Our mission is to change
the way people shop. We will give them more.” says Mr. Kumar
Mangalam Birla, Chairman, Aditya Birla Group. The more. for you

Growth of Retail Sector in India

advantage: more. promises a world-class pleasurable shopping

experience to Indian consumers in their very own neighborhood.
more. Quality, more. variety, more. convenience and more. value are
the four delivery cornerstones of the more. chain of supermarket
stores. more.

MORE. Value MORE. promises best in market pricing. Linking up

directly with farmers to source fresh fruits, vegetables and staples
ensure great quality as well as great price. Add to this, the
membership program Club more. which provides convenience,
customized shopping solutions and savings, and the more. value
promise becomes all the more evident.

More. Is an inspirational brand for an inspirational country. We have

a bright and committed, enthusiastic team that represents the best
experience from India and globally. MORE. also has a range of
products from its own stable available across value, premium and
select ranges. The products have been quality-checked and are
available in attractive packaging at competitive prices. To avail
additional benefits, at no extra charge, customers can also enroll for
the membership program Club more.


Vishal is one of fastest growing retailing groups in India. Its outlets

cater to almost all price ranges. The showrooms have over 70,00
products range which fulfills all your household needs, and can be
catered to under one roof. It is covering about 1282000 sq. ft. in 18
state across India. Each store gives you international quality goods
and prices hard to match. The cost benefits that is derived from the
large central purchase of goods and services is passed on to the
consumer. What started as a humble one store enterprise in 1986 in
Kolkata(erstwhile, Calcutta) is today a conglomerate encompassing
51 showrooms in 39 cities. India’s first hyper-market has also been
opened for the Indian consumer by Vishal. Situated in the national
capital Delhi this store boasts of the singe largest collection of goods
and commodities sold under one roof in India. The group’s prime
focus is on retailing.

Growth of Retail Sector in India

The Vishal stores offer affordable family fashion at prices to suit

every pocket. The group’s philosophy is integration and towards this
end has initiated backward integration in the field of high fashion by
setting up a state of the art manufacturing facility to support its retail
endeavors. Company has already tied up for 5-lakh sq ft space and
is looking for more. Company will come up with 32 new stores this
year. Company is doing research on more formats. Company is
looking for opportunities of expansion in the South. Contribution of
apparels business at 53% may slightly come down to 50%. India is a
big country and there is huge space for four-five big retail players.
Vishal can always sustain growth in this big market. Company can
sustain margins as it is going for backward integration. Currently
manufacturing contributes 10% of the business, which in the next two
to three years, will go up to 25%. Company is increasing its focus on
the non-apparel and FMCG segment. The current share of FMCG at
15% could go up to 20-25%. Apparel sales currently at 63% in the
next 2-3 years should come down to 50% as the company is now
also focusing on different segments. With growth in volumes, the
cost of sourcing will come down in the near future. Company will
venture wherever it gets real estate space. Currently, it has very little
space in the south India. Eventually, it will have a pan-India set up.


METRO Group today, is the third largest trading and retailing group
in the world. The company employs over 2,50,000 staff in 30
countries. In the year 2005 METRO Group had generated sales of
over €55.7 billion; 53% of total sales came from outside Germany.
METRO Cash & Carry started operations in India in 2003 with two
Distribution Centres in Bangalore. With this METRO introduced the
concept of Cash & Carry to India. These Centres offer the benefit of
quality products at the best wholesale price to over 150,000

Growth of Retail Sector in India

businesses in Bangalore. METRO offers assortment of over 18000

articles across food and non food at the best wholesale prices to
business customers such as Hotels, Restaurants, Caterers, Food
and Non-food Traders, Institutional buyers and professionals.
METRO's Cash & Carry business model is based on a Business to
Business (B2B) concept and focuses on meeting all the needs and
requirements of business customers. It is a modern format of
wholesale trading, catering only to business customers.

12. Viveks- The Unlimited Shop

Vivek Limited is a professionally managed public limited company

carrying three retail brands - Viveks, Jainsons, Premier and
continuously adding to the formidable strength of 1000 employees.
Vivek Ltd is the largest consumer electronics & home appliances
retail chain in India. Viveks popularized several brands by creating
visibility and have the distinction of being market leaders and
trendsetters with continuous support from the principal companies.
Viveks evolved its strategies to suit the larger scene where there was
a stigma attached to borrowing. Very few hire purchase options were
available and hence Viveks started Vivek Hire Purchase and Leasing
Ltd to finance consumer durables, which enhanced the core retailing
business also.Viveks grew from 3 stores to more than 52 stores and
turnover increased to over Rs. 350 crores (USD 80 million) and also
become a public limited company from a family run enterprise. In this
process, 14 store Jainsons was bought over in 1999, 2 store Premier
in 2001 and Spencers in 2002 and have recently absorbed Spencers
into the Premier brand. With the liberalization of economy and other
changes in the global scene, Viveks streamlined the marketing and
advertising activities and shopping ambience was improved.

Growth of Retail Sector in India


Growth of Retail Sector in India

Drivers of Retail Industry

• The Demography Dynamics: Approximately 60 per cent of

Indian population below 30 years of age.
• Double Incomes: Increasing instances of Double Incomes in
most families coupled with the rise in spending power.
• Plastic Revolution: Increasing use of credit cards for
categories relating to Apparel, Consumer Durable Goods,
Food and Grocery etc.
• Urbanization: increased urbanization has led to higher
customer density areas thus enabling retailers to use lesser
number of stores to target the same number of customers.
Aggregation of demand that occurs due to urbanization
helps a retailer in reaping the economies of scale.
• Covering distances has become easier: with increased
automobile penetration and an overall improvement in the
transportation infrastructure, covering distances has become
easier than before. Now a customer can travel miles to
reach a particular shop, if he or she sees value in shopping
from a particular location.


Indian consumers are rapidly evolving and accepting modern formats

overwhelmingly. Retail Space is no more a constraint for growth.
India is on the radar of Global Retailers and suppliers / brands world-
wide are willing to partner with retailers here. Further, large Indian
corporate groups like Tata, Reliance, Raheja, ITC, Bombay Dyeing,
Murugappa & Piramal Groups etc and also foreign investors and
private equity players are firming up plans to identify investment
opportunities in the Indian retail sector. The quantum of investments
is likely to sky-rocket as the inherent attractiveness of the segment
lures more and more investors to earn large profits. Investments into
the sector are estimated at INR 20 – 25 billion in the next 2-3 years,
and over INR 200 billion by end of 2010.

Stocks in the retail sector are also becoming increasingly attractive

from an investor's point of view. Successful development of value
based concepts as well as development of retail space in smaller
cities and towns shall drive the organized retail into the next levels of
cities. Retailers have responded to this phenomenon by introducing
contemporary retail formats such as hypermarkets and supermarkets
in the new pockets of growth. Prominent ‘tier-II' cities and towns
which are witnessing a pick-up in activity include Surat, Lucknow,

Growth of Retail Sector in India

Dehra Dun, Vijaywada, Bhopal, Indore, Vadodara, Coimbatore,

Nasik, Bhubaneswar, Varanasi and Ludhiana among others.

With consumption in metros already being exploited, manufacturers

and retailers of products such as personal computers, mobile
phones, automobiles, consumer durables, financial services etc are
increasingly targeting consumers in tier II cities and towns. In
addition, petro-retailing efforts of petroleum giants scattered through
out the country's landscape have also ensured that smaller towns
are also exposed to modern retailing formats.

On the supply side, mall development activity in the small towns is

also picking up at a rapid pace, thereby, creating quality space for
retailers to fulfill their aggressive expansion plans. Thus, the ‘retail
boom', 85% of which has so far been concentrated in the metros is
beginning to percolate down to smaller cities and towns. The
contribution of these tier-II cities to total organized retailing sales is
expected to grow to 20-25%.


Favorable demographic and psychographic changes relating to

India's consumer class, international exposure, availability of
increasing quality retail space, wider availability of products and
brand communication are some of the factors that are driving the
retail in India. Over the last few years, many international retailers
have entered the Indian market on the strength of rising affluence
levels of the young Indian population along with the heightened
awareness of global brands and international shopping experiences
and the increased availability of retail real estate pace.

Development of India as a sourcing hub shall further make India as

an attractive retail opportunity for the global retailers. Retailers like
Wal-Mart, GAP, Tesco, JC Penney, H&M, Karstadt-Quelle etc
stepping up their sourcing requirements from India and moving from
third-party buying offices to establishing their own wholly owned /
wholly managed sourcing & buying offices shall further make India as
an attractive retail opportunity for the global players.

Manufacturers in industries such as FMCG, consumer durables,

paints etc are waking up to the growing clout of the retailers as a shift
in bargaining power from the former to the latter becomes more
discernible. Already, a number of manufacturers in India, in line with
trends in developed markets, have set up dedicated units to service
the retail channel. Also, instead of viewing retailers with suspicion, or
as a ‘necessary evil' as was the case earlier, manufacturers are
beginning to acknowledge them as channel members to be
partnered with for providing solutions to the end-consumer more

The next level of opportunities in terms product retail expansion lies

in categories such as apparel, jewellery and accessories, consumer
durables, catering services and home improvement. These sectors
have already witnessed the emergence of organized formats though
more players are expected to join the bandwagon. Some of the niche

Growth of Retail Sector in India

categories like Books, Music and Gifts offer interesting opportunities

for the retail players.
Indian consumer goods market is expected to reach $400 billion by
2010. India has the youngest population amongst the major
countries. There are a lot of young people in India in different income

In India they do not have to face this dilemma largely because rapid
urbanization, increase in demand, presence of large number of
young population, any number of opportunities are available . The
bottom line is that Indian market is changing rapidly and is showing
unprecedented consumer business opportunity.

Indian consumer class can be classified according to the following


1. Income

2. Socio-Economic status

3. Age demographics

4. Geographical dispersion

1. Income Classification

Consumer Classes Annual Income in Rs. 1999 2004 2009 Change

The Rich Rs. 215,000 and more 1.2 2.0 6.2 416%
The Consuming Class Rs 45- 215,000 32.5 54.6 90.9 179%
The Climbers Rs. 22-45,000 54.1 71.6 74.1 37%
The Aspirants Rs. 16-22,000 44 28.1 15.3 -65%
The Destitute Below Rs. 16,000 33 23.4 12.8 -61%
Total 164.8 180.7 199.2 21%
Source: NCAER

2. Socio-Economic Classification:

In addition to income classification and consumer classification,

Indian households can also be segmented according to the
occupation and education levels of the chief earner of the household
(the person who contributes most to the household expenses). This
is called as Socio-Economic Classification (SEC), which is mainly

Growth of Retail Sector in India

used by market planners to target market before launching their new

products. SEC is made to understand the purchase behavior and the
consumption pattern of the households

3. Age Demographics:

India is a very young nation, if compared with some advanced and

developed countries. Nearly two- thirds of its population is below the
age of 35, and nearly 50 % is below 25.

Age distribution if Indian population (In Millions)

2006 2001 1996

Below 4 yrs 113.5 108.5 119.5

5-14 yrs 221.2 239.1 233.2

15-19 yrs 122.4 109.0 90.7

20-34 yrs 279.1 246.8 224

35-54 yrs 239.2 207.3 178.1

55 & above 118.7 101.7 88.7

Total 1094.1 1012.4 934.2

Marketers explain that the boom in the consumption level and leisure
related expenditure is because of this young population. It will have a
significant impact over the consumer goods market. In addition to
that, it is expected that this will generate trade opportunities and
continuous investment in the economy.

There is huge potential for further consumption of goods and

services due to the increased level of disposable income. The
expenditure on essential goods and services has a higher share in
developing countries as compared with that of developed countries.

Consumption Trends

Food Essentials 45.68%

Essential Services (water, power, rent, and
Clothing 4.9%
Footwear 0.63%
Medicare 4.25%
Transport & Communication 14.51%
Recreation, Education, and Culture Less than 4%
Home Goods 3.25%

4. Geographical Dispersion of market potential

Growth of Retail Sector in India

There is large difference in economic prosperity levels among

several states in India, linked to the wealth creation from trade,
industrial, and agricultural development. There are poor districts in
many states, classified according to their market potential. India has
500 districts, out of which 150 districts (category A) and next 150
districts (category B) account for 78% and 15% of the national
market potential respectively. Remaining 200 districts (category C)
are backward and account for only 7% of national market potential.
Category C districts have 40% of the geographical share.


Potential for all Formats to Thrive :

Most of the global powerhouses in the retailing sector such as Wal-

Mart, Carrefour, Tesco etc have adopted multi-format and multi-
product strategies in order to customize their product offering for
distinct target segments. Similar trends

Identifying the future

The important thing is to identify the 'future that has already

happened' - Peter Drucker

The important and distinctive are always the result of changes in

values, perceptions and goals of people. Identify the changes that
have already happened, exploit the changes that have already
occurred and use them as opportunities. Dr William T Wilson, Chief
Economist for Keystone India ñ a Chicago-based firm providing
cross-border trade facilitation and asset management services in US
are likely to be exhibited in India as all formats present prospects for
growth, the Report says.

Further, with the emergence of larger store formats like superstores

and hypermarkets in countries like UK, France, Germany, Spain
since the 1980s and Eastern Europe more recently, traditional food
retailers have been able to stock more extensive non-food ranges. In
fact, Tesco, UK's leading grocer, has become the number one
apparel retailer in the Czech Republic and also a major player in
Hungary apart from being one of the fastest growing clothing
retailers in the UK. Together with its rival, Wal-Mart-owned ASDA,
Tesco is one of the food sector's most successful exponents of
clothing in Europe


There is no point complaining, accusing or justifying that retailing

business is only for larger players and multinational retailing
companies. That's total rubbish and rather an assumed limitation.
Recent research finding is that by the year 2010, India will have at
least three million people with an annual income of over Rs
4,000,000. Mind you, this is the official, declared and straight income
meaning there will be a considerable number of consumers with
other sources of income! (I suppose). One could comfortably
presume that one fourth of the three millions would reside in
Bangalore. Considering the third successive year with great
economic growth in India, it is obvious that we shall have more

Growth of Retail Sector in India

people with higher disposable income. With higher disposable

income, the discerning Indian consumers are not going to be
conscious about price alone. This emerging consumers would want
something special, unique, different, better, customized and more.
Find the synonyms and transliterate these into value offerings in your
field of business and you have a gold mine, especially when you
manage to connect with the customers' value and perception and
India, said that after significant accelerations in economic growth
recently, India's economy is expected to equal or surpass Japan as
the world's third largest sometime in the year 2006. Dr Wilson also
added that India's economy measured in PPP (purchasing power
parity) terms will eclipse the US$ four trillion mark in 2006, making it
equal to or greater than Japan's. Indian consumers are getting richer
noticeably leading to higher disposable money.


Over the past deacde , India’s middle and High Income group has
grown at a rapid pace of over 10% per annum . Though this growth is
most evident in urban areas, it has also taken place in rural markets.
Further, the number of house holds earning above Rs.150,000 per
annum is about 30 million today and is expected to grow to 80 million
by 2007. This growing high-income population is triggering the
demand for consumer goods, leading to the proliferation of Higher
quality/higher priced products.


There has been an explosion in media as well during the past

decade . Kick-started by the cable-explosion during the gulf war,
television has accelerated to a pint where there are more cable
connections than telephones in Indian homes and more than 100
channels are being aired at all times .This media bombardment has
exposed the Indian consumer to the lifestyles of more affluent
countries and raised their aspirations from the shopping experience –
they want more choice , value , experience and convenience.

Private Labels

Brands, store labels, private label brands, store brands. These terms may
seem to be synonyms of each other. However, when it comes to retailing,
each of these terms has a different meaning. While we all know what a
brand is, a private label and a store label are different from any other
brand because they are product lines that are owned, controlled,
merchandised and sold by a specific retailer in its own stores. Among
Indian retailers, Stop, Life and Kashish by Shoppers' Stop, and ETC by
Ebony are private label brands. According to Synovate, is the market
research arm of global communications specialist Aegis Group, the
growth of private labels is about 2-3 times more than that of advertised
brands .Among the product lines launched by retailers, the ones whose
nomenclature is the name of the store itself are called store labels.
Foodworld and Nilgiris have launched their own brand of supermarket
products under the "Foodworld" and "Nilgiris" brand names.

There is a distinct advantage in naming the brand launched by the

retailer after the same name as that of the store. But at the same time,

Growth of Retail Sector in India

the store label also carries the burden of not only the success of the
brand, but also the failure, which may have a negative rub-off effect on
the retailer's image. A store brand on the other hand is a brand name the
retailer carries. Each retailer, because of its unique offering, is a brand in
itself, which is what the store brand signifies. Nallis, Modern Bazaar and
The Home Store are store brands since each of them stands for a certain
retail offering.

Retailers are now aggressively moving into developing their own private
labels as it not only makes economic sense in the form of retailers
achieving higher margins, it also helps them to plug gaps in their product
portfolio. For instance, in menswear, retailers say that gross margins on
branded products vary from 25-38 per cent. Compared to that, the
retailers can earn whopping margins of around 55-60 per cent on private
labels. Private label products contribute to a retail brands differentiation.
A retailer can achieve differentiation through a large (but not necessarily
exclusive) portfolio of private label products. Service adds to the
differentiation, and together with a unique product range, results in a
strong retail brand. They are not perceived as being interchangeable with
similar private label products launched by other retailers (unlike
manufacturers of branded products, which are the same regardless of the
retailer). Introduction of an in house brand of products helps the retailer
to have means with which they can compete head on with the other
branded products. An established private label brand provides the
retailers a platform to negotiate with suppliers, and the retailers are thus
self-sufficient in a certain category. They have more control over the
merchandise and are able to make the required changes and
modifications to suit the changing customer profile much quicker. This
brings about a more consistent and acceptable product portfolio, which
also helps reduce mark-downs. A retailer can create a stronger emotional
connect with the consumer as the experience is not just the store
experience but also the product experience. An outside brand could be
purchased from any outlet. This is not so in the case of private labels, so
the product experience keeps bringing the consumer back

The question is: why would retailers want to get into the trouble of
launching an own brand when there are "n" number of local, regional and
national brands for practically all kinds of products? The reasons are

Growth of Retail Sector in India


Growth of Retail Sector in India

Growth of Retail Sector in India


1) Organized retailing at US$ 3.31 billion, growing at 8%.

2) 2nd largest contributor to GDP after agriculture at 20%.

3) Pattern of consumption changing along with shopping trends.

4) A Growing population will translate to move consumers.

5) Consumer spending increasing at 11% annually.

6) Almost 25 million sq. ft. retail space available.

7) Paradigm shift in shopping experience for consumers pulling in

more people.

8) Most of the entrants to organized retail come from 3 main

categories, and have ventured into retail as their business


•Real Estate Developers

•Corporate Houses


1) Shortage of quality retail spaces at affordable rates.

2) Government regulations on development of real estate(Urban

Land Ceiling Act)

3) Need to provide Value for Money-squeezing margins

4) Lack of industry status.

5) Retail revolution restricted to 250 million people due to

monolithic urban-rural divide.

6) Footfalls not a clear indicator of sales as actual consumers lower

in number.

7) Lack of huge investments for expansion

Growth of Retail Sector in India


1) Increasing urban population-more participants in retail


2) Increase in consuming middle class population.

3) Social factors like dual household income has enhanced

spending power.

4) Spends moving towards lifestyle products and esteem

enhancing products.

5) Availability of old industrial lands-prime real estate locked in sick

industrial units.

6) Average grocery spends at 42% of monthly spends-presents a

huge opportunity.

7) Increase in use of credit cards.


1) Rising lease/rental costs affecting project viability.

2) FDI restrictions in the retail sector.

3) Poor monsoons and low GDP Growth could affect consumer

spending drastically.

4) Archaic labor laws are a hindrance to providing 24/7 shopping


5) Personalized service offered by Mom-&-Pop stores.

Growth of Retail Sector in India

6) Unavailability of qualified personnel to support exponential

growth in retail.

7) Differentiate taxation laws hindering expansion.


Growth of Retail Sector in India

Retailing in its traditional form has been existing in India for decades.
But retail management in the true sense (as retailing is known in the
west) is a relatively new discipline in India. It is unlike other forms of
marketing and the traditional marketing rules do not apply. In
retailing, as in service, there is a fifth P added to the existing 4 of
marketing, the People. Therefore the contact person (whom the
consumers interact with) becomes a doubly important entity. The
most important difference is that where marketing has the classic 4
Ps (Product, Promotion, Price and place), in retailing a fifth P, people
is added which is critical. They are critical to a service business like
retailing both as employees who execute the business and the
customers with whom retailers must interact.

The following are the key challenges of retailing:

• Large transactions: Retailers need to handle smaller transactions in

large numbers and still be able to make money.

• Low price strategy: The Indian consumer being value-conscious, a

to success for many retailers is the ability to attract customers by
offering low price guarantee.

• Aggressive sales, discount and collection schemes (say, credit

facilities.) and thus keep the enthusiasm going.

• Indian consumer behaviors - Retailers need to conduct MRs and

behavioral studies into the Indian psyche simply because he is so
different from those in the west and in fact, different from other Indian
consumers. His shopping patterns need to be analyzed in detail.

Growth of Retail Sector in India

• Location: A prime location in the city/town so a big plus. Things

such as
waiting and parking areas need to be taken care of.

• Use of information technology (IT) in developing a supply chain and

integrating all the retailing processes from procurement to after

As somebody rightly pointed out, India remains one of the last

frontiers of modern retailing. Conquering the retailing in India will be
a major challenge, given the complications that the unorganized
sector poses those of the supply chain and consumer behavior as
well as the glaring complexities of such a vast a market with all kinds
of consumer segments thrown in. A wise retailing hawk would set up
special cells; committees to track retailing industry throughout the
country. Benchmarking the best in the country and seeing oneself as
to where exactly he wants to be in the complicated perceptual map
would be a fine starter. Any retail chain needs to experiment and re-
orient to cater to the local needs and preferences. Given that these
chains come with huge asset bases and financing from their
international operations, this is not a difficult task. While Indian
markets still beckon a large retail chain, the success of anyone
foraying into the land of snake-charmers and maharajas ultimately
depends on how well and in-depth understanding they have of the
conditions, the people, the supply Retailing in India chain dynamics,
the poorer (but strong) unorganized cousins and of course, the local

HR… a critical business

The Industry is facing a severe shortage of talented professional,
especially at middle-management level. Areas gradually becoming
critical are technology, supply chain, business development,
marketing, product development and research. Successful Indian
retailers are creating a robust second and third level of management
by hiring aggressively for these key roles.
There is also an increase in number of retail management
programmes and institutes. This will bridge the gap in availability of
talented professionals at the middle and lower levels. There is also
an increasing trend towards hiring hotel management graduates in
the retail sector. The retail industry is expected to create 2 million
jobs between now and 2010.However, talented professionals will put
increased pressure on wage costs. Therefore, operating margins,
especially for mid-sized retailers will shrink. There is also a huge risk
for Indian retailers becoming a poaching ground for international
retailers once they enter India.

An agile and adaptive supply chain

is key

Logistical challenges, constant changes in consumer preferences

and patterns, crowded marketplaces, efficient customer
responsiveness and swiftly evolving retail environment in India.
These factors pose a huge challenge for that all important key to

Growth of Retail Sector in India

pushing growth in this kind of an environment- an efficient and

adaptable supply chain.

In the last 2-3 years ,several retailers ranging from F&B operators to
discount clothing, have implemented Supply chain management
(SCM) solutions to improve core business processes such as global
sourcing,distribution,logistics,innovation,transparency and visibility in
financials and inventory, compliance and management of point of
sale(POS) data. Going ahead, India’s FMCG and retail sectors are
likely to see an increase in adoption of SCM.

However, most Indian retail players are under serious pressure to

make their supply chains more efficient in order to deliver the levels
of quality and service that consumers are demanding.

As Indian and International retailers continue to grow their presence

regionally, there will be a pressing need for a single, enterprise-wide
IT platforms to manage operations, which will become increasingly

Fraud in retail is expensive

We feel that fraud in going to be one of the retail sector’s primary

challenges in the future.
Fraud and theft, including employee pilferage, shoplifting, vendor
frauds and inaccuracy in supervision and administration costs the
Indian retail industry about Rs 550-600 crores every year. This is
despite the fact that most large modern format retailers use standard
security features such as CCTV’s, POS systems and anti shoplifting
systems for greater control over fraud and theft. In financial terms,
cost of this fraud constitutes about 2% of the organized retail sector’s

We believe that the implications and size of this loss will be more
significant as retailers continue to scale up and increase product

Improvement in infrastructure and

logistics needed

India is a large and highly fragmented country, with 29 states and 18

officials’ languages. A bulk of its population, 66.1%, lives in rural retail
potential We feel that private logistics companies offering specialized

Growth of Retail Sector in India

services, refrigerated transport and ware house facilities across the

country, along with timely distribution of supplies to retail outlets will.


Growth of Retail Sector in India

A) High – Street Location:

a. Very busy with high customer traffic.

b. Has an array of retail stores in small sizes. areas. The lack of

adequate infrastructure makes it virtually impossible to reach this
virtually untapped market. Distribution, or lack of it, is a major
hindrance for retailers in India. The lack of quality infrastructure
across the country and a non- existent distribution sector results in
inefficient logistics systems. Infrastructure is the weakest link in
India’s path to progress and there is urgent need to address issues
plaguing this area. Urbanization is driving an increasing need to
upgrade or create infrastructure facilities. An indicator of the urgent
need for highway development, for instance, is the fact that average
daily traffic volume on highways of 39,000 Passenger car units
(PCU’s) far exceeds the highway capacity of 15,000 PCU’s.
Transport is a major concern, with a deteriorating railway system and
a limited highway network .In contrast to the global standards, the
average load carried by trucks in India around 7 tons_ is very low.
However, the Indian Government is presently investing heavily in the
state highway system. This will help in an overall decline in logistics
a cost which is currently 10-12% of total GDP. 10,000 MW of power
needs to be added every year for next decade. Growth in air
passenger traffic, estimated at 20% p.a. for next two years,
necessitates quadrupling of airport capacities. Ports will witness 38%
increase in tonnage in next -3 years and hence, port infrastructure
cannot be ignored.

b. Has stores that are generally found in clusters based on product


c. High real-estate rentals.

Eg: Linking road in Bandra, Brigade Road in Bangalore

(B) Destination / Freestanding Location

a. Does not have a high footfall rate (customer traffic needs to

be pulled I through the store’s marketing efforts or
products/services/process differentiations)

b. May not be a commercial retail area at all.

c. Low real-estate rentals.

d. May have a large parking area.

Eg :Phoenix Mills Compounds and Shopper’s Stop in Mumbai.

Growth of Retail Sector in India

(C) Shopping Centre/Mall Location

a .Has an Existing mall traffic.

b .Has a clean Environment.

c. Has a designated parking area.

d .Medium to High rental cost.

Eg: DLF Mall in Delhi, Crossroads in Mumbai

Location, store design and


Once a geographical market has been chosen, the next step in

formulating the retail business plan is to select a site for the store.
The importance of this decision is summarized by a favorite saying of
retailers: "There are three vitally important things in retailing -
location, location, and location."

In assessing the desirability of various available locations, note the

positive and negative aspects of each. Once again, analysis of
trends is important. No location is static; it is either improving or
declining in such things as traffic flow and potential market area.
Store design and layout of the store's interior and exterior
help determine the store's image and character. In planning a new
store or remodeling of an old one, there is plenty of room for
creativity. This part of the plan takes a lot of thought and
consideration. Some bad decisions made in the planning stage can
be corrected, but mistakes made in the area of store design and
layouts are usually quite costly to correct.
Retailers can get specialized assistance from merchandise
suppliers, local architects, and store planning consultants. Display
windows, fixtures, lighting, and storage are examples of areas
covered in this part of the retail business plan. Store layout involves
such considerations as allocation of space, customer traffic flow
throughout the store, and maximizing profit per square foot.

Planning a retail business has several advantages. A well

thought out plan not only makes the best of the present, but
also anticipates future contingencies

Retailing is a challenging and dynamic field. The retailer draws on

knowledge from such areas as marketing, psychology, finance,
accounting and management. From the field of management, we
learn that planning is one of the most important functions of the
retailer. It is a function often neglected under the pressure of day-to-
day business activity, but it is so important that the successful retailer
must give it top priority.

Retailers must decide how to make the best use of limited resources,
such as people, funds, and inventories. In order to use these
resources in the most productive way, the retailer plans for the future.

Growth of Retail Sector in India

The most important planning occurs before a retail store even opens
for business. Careful planning at this time can greatly enhance a
store's chances of success. By gathering and synthesizing the
relevant information into a retail business plan, the retailer can make
better decisions. A workable retail business plan should be detailed,
specific, and in writing. Indeed, a major advantage of planning is that
it forces the retailer to put ideas in writing.

Without planning, there is no predetermined course of action, and

with out some predetermined course of action, retailers do not know
what to do, where to do, or why it should be done. They waste their
own energies and the resources of the store. Planning involves
selecting objectives and developing specific program’s, policies, and
procedures for achieving them.

Steps in formulating the retail business plan:

Setting objectives-

Planning begins with objectives. Stores can have many different

objectives: survival, growth, market share increase, high return on
investment, and development of a good store image. Some
objectives are more important than others. Profit, of course, is a
primary objective for any retail organization. Social concerns,
however, must often be given consideration, too, if the store is to be
a "good citizen" of its business community

Objectives are difficult to apply to real situations and

decisions if they are stated in vague terms. An objective should
establish a measurable goal - a yardstick to compare results with
efforts. Goals or objectives such as "to increase sales by 18 per cent
this year" or "to break even in the first year of operation" are
examples of clearly defined and measurable objectives. They must
be supported with concrete plans that are specific for reaching these

In forming the retail business plan, be as specific as

possible. Remember to be customer-oriented while setting
objectives; it is one of the keys to successful retailing. Do not lose
sight of these objectives once they are formulated. Schedule
quarterly, or if appropriate, monthly reviews of progress. Revise and
update your objectives periodically as well.

Financial planning:

Financial planning is an important part of the retail business plan. In

fact, inadequate financial planning is a frequent cause of store

Financial statistics on the type of business under

consideration are often available from trade associations. This
information can be invaluable to the manager in the initial planning
stages. The retailer must make a sales forecast, calculate a break-
even point, and estimate the capital requirements of the business.
Asset planning, another essential part of financial planning, involves
inventory, accounts receivable, equipment and fixtures, and cash.
Often, these assets must be financed in part with funds obtained
from outside sources - banks, relatives, and so on.

Growth of Retail Sector in India

Assessing available resources:

What are the strengths and weakness of the business? By assessing

these factors, a retailer can maximize the use of all available assets
and can limit or eliminate the handicaps imposed by the inherent
weakness of these resources. Experienced, creative management is
a strong resource. Sufficient working capital to meet the costs of
doing business the first year is another.

At least as important as knowing the strengths of the

business is analyzing its weaknesses. Awareness of weak areas is
the first step in overcoming them. Some weaknesses can be
overcome by hiring an outside expert in areas in which the retailer's
knowledge and experience are limited. Additional training and
outside reading are other answers to many weak areas.

A retailer with general retailing experience but little

knowledge of, say, the shoe business, could benefit greatly by hiring
experienced shoe salespeople if she is planning to open a shoe
store. A retailer who is weak in the areas of financial planning and
control needs to work closely with a good accountant. Even during
the planning stage, an accountant can be helpful in setting up an
appropriate bookkeeping system.

Assessing market potential

What type of customer, or what segment of the market, does the

store cater to? Is there enough demand for the products to provide
sufficient sales volume? These are some of the main questions the
retailer tries to answer by assessing market potential.

The key factors in market assessment are: first, the number

of people living in the trade area, and second, the buying power of
these people. An extreme example of poor market assessment would
be trying to sell expensive fur coats in a poor mining town. Even the
age distribution of the population can affect a store's market

Assessing the competitive situation

Competition is a good thing. It leads to better products and services

at lower prices. It can inspire a retailer to do a better job. However,
numerous and / or aggressive competitors are costly to the retailer in
many ways. Price wars eat away profits. Too many similar stores
serving too few consumers cause the sales volume of each store to

For some types of stores, however, the best strategy can be to locate
as close as possible to the competition. Competing stores located in
the same area may increase customer traffic. Some cities, for
example, have an area with many antique shops. Customers are
drawn to the area because of this convenience, and each store's
traffic helps the other stores. Retailers should not be afraid of
competition, but they should try to find a market where there is an
unfilled demand for the type of store they are planning.

Growth of Retail Sector in India

Other assessments:

Local laws, tax rates, and the labour force are other areas that can
affect the retail store. The planner should investigate these
uncontrollable environmental factors.

In this preliminary work, be aware of trends as well. For

example, demand for the products may look very promising in a
certain area, but the population of this area might be declining. On
the other hand, an area with slightly lower market potential at present
could be growing very fast and provide a better long-run market for a
particular store. These assessments are often difficult to make, but
the effort put into planning at this stage will pay off handsomely when
store operations get under way.

Location, store design and layout:

Once a geographical market has been chosen, the next step in

formulating the retail business plan is to select a site for the store.
The importance of this decision is summarized by a favorite saying of
retailers: "There are three vitally important things in retailing -
location, location, and location."

In assessing the desirability of various available locations,

note the positive and negative aspects of each. Once again, analysis
of trends is important. No location is static; it is either improving or
declining in such things as traffic flow and potential market area.
Store design and layout of the store's interior and exterior
help determine the store's image and character. In planning a new
store or remodeling of an old one, there is plenty of room for
creativity. This part of the plan takes a lot of thought and
consideration. Some bad decisions made in the planning stage can
be corrected, but mistakes made in the area of store design and
layout are usually quite costly to correct.

Retailers can get specialized assistance from merchandise

suppliers, local architects, and store planning consultants. Display
windows, fixtures, lighting, and storage are examples of areas
covered in this part of the retail business plan. Store layout involves
such considerations as allocation of space, customer traffic flow
throughout the store, and maximizing profit per square foot.

Organization and supervision

Planning is an example of a management function. Other

management functions performed by the retailer are organizing,
staffing, leading, and controlling.

By organizing, the retailer establishes relationships among

people, materials, and other resources to get a job done. Labour is
organized and divided, and responsibility is delegated. Staffing
entails the recruitment and selection of employees. It is a vitally
important function because the employees of a store represent that
store to the public. People can really be the most important asset of
a retail firm.

Every retailer is in a leadership position. Leadership means

motivating employees to achieve their maximum potential, while at

Growth of Retail Sector in India

the same time accomplishing the goals of the organization. Because

leadership means understanding people, it is one of the most
creative and challenging aspects of a retailer's job. The retailer's
professionalism and attitudes set the tone for employees' attitudes
and performance.

Controlling is the follow-up function of retail management. Actual

performance is compared with planned performance to spot and
evaluate deviations.

Knowledge on buying

For established retail operations, past sales data are very helpful in
knowing how much to buy. For a new retail business, these past
data are not available. However, if a sales forecast and desired
inventory turnover rate have been determined, the beginning
inventory figure can be calculated. A balance between meeting
customers' needs and high inventory carrying costs must be found.
Knowing how much to buy goes hand in hand with knowing what to
buy. Successful retailing involves having the right merchandise in
the right place, at the right time, and at the right price for the

Information from store records is a valuable aid in knowing

what to buy. In the absence of this information, an understanding of
the target customer's shopping habits and motivations, is helpful.
Information from suppliers can provide valuable input for the store
buyer. Once the inventory has been obtained, a unit control system
must be set up to keep track of the stock.


The goals of retail pricing are fourfold. First, the goods must sell at a
satisfactory rate. Second, inventory costs and expenses must be
covered. Third, a desired profit must be made, and fourth, prices
should be fair to customers.

There are different pricing strategies for different types of stores,

from the discount store to the exclusive shop with quality
merchandise and expanded customer services. Pricing in retailing is
both a science and an art.

Retailers have special terms to describe various pricing

operations, such as markup, markdown, and psychological pricing.
Pricing is, naturally, closely related to financial planning.

Advertising and promotion

A store's location, layout, design, and product lines affect its overall
image. Advertising is another key element of the store's image in the
minds of customers. Advertising can be thought of as
communicating with customers. The objective of an advertisement is
to stimulate the customer to want what the retailer has to offer, and to
persuade the customer to take action to satisfy the stimulated want
or need.

Besides advertising, retailers send messages to customers

through personal selling, sales promotion, and packaging.
Information channels beyond the direct control of the retailer are
publicity and word-of-mouth communication.

Growth of Retail Sector in India

By giving careful consideration to defining who the

advertisement is directed at (the "target customer"), retailers can get
more mileage out of advertising spend. The content of an
advertisement should focus on benefits desired by the target

Sales promotion and display techniques are a major

promotional tool. Sales promotions can have various objectives,
such as generation of immediate sales, attracting customers to the
store, and building goodwill.

Window displays can serve to attract customers, to show

customers the kind of merchandise the store carries, and to project
the image of the store. Because window displays are so visible, they
should be given the attention, care, and creative input they deserve.
Interior displays can be informative, can stimulate impulse buying, or
can suggest uses of a product. In addition, they can enhance the
store's image. Other sales promotion strategies include special
events, sales, coupons, and trading stamps.

Employee selection and training

The salesperson is a communicator: This person translates product

features into benefits and satisfactions for the customer. But most
important, the salesperson is the representative of the store to its
The unique quality that distinguishes personal selling from
other promotion activities is the opportunity for feedback between
customer and salesperson. Good advertising and promotion can get
people into a store. Good salespeople and good value keep them
coming back.
The importance of employee selection and training cannot
be overstated. Many retailers are surprised to learn that monetary
compensation, although important to employees, is usually not their
most important concern. Fairness, security, honesty, and opportunity
are often more important than pay.


An enlightened retailer realizes that the customer is the pivot around

which all retailing activities revolve. This attitude is expressed to the
customer through shopping conveniences, services, employee
attitudes, and fair values. As part of the retail business plan,
decisions must be made about the types of services to be offered.
Services, and handling of credit policies and customer complaints,
deserve the ongoing attention of the manager.

Accounting and financial management

Information and control play an important role in the internal

operation of a retail business. Good records are the basis for guiding
and controlling a retail business. They are the tools a manager uses
to control inventory, expenses, and ultimately, profits.

Growth of Retail Sector in India

Financial statements, such as balance sheets and income

statements, are summaries of the financial strength and profitability
of the retail business. They tell how well a business is doing, and
give evidence about the quality of management decisions. Financial
planning in the form of budgets helps retailers to spot problems
before they occur.


One information tool in particular has been a real boon to retailers,

and that is the computer. More and better information is available to
the retailer now than ever before, because of computers. This means
that better and faster decisions can be made. Computers offer speed
and accuracy of information processing that is especially helpful in
inventory management.

Information is important for intelligent decision-making.

Much of this information evolves from basic store records or is
provided by a computer system. Another source of information for
the retailer is marketing research, such as the market assessment.
Most of the research involved in formulating the retail business plan
is in fact, marketing research. Research can also help answer
questions in such areas as pricing, promotion and distribution.

Growth of Retail Sector in India


The table below outlines some of the strategic moves being planned
to change the competitive structure of Retail business in India.

Early Birds

Retailer Brands Plans Strengths Challenges Threats

K Raheja Shopper’s 310 Shoppers’ Pulse on Keeping up brand Could get

Group Stop, Stop Outlets by customer loyalty bogged down
Crossword, 2010, 60-70 new tastes with positioning itse
Inorbit Mall Crossword vast local right
Hyper City, outlets within two retailing
Café Brio/Desi years, 100 Café experience
Café Brio/ Desi Café
and 14 new

Growth of Retail Sector in India

Future Group Pantaloon, Big A store a day for Can evolve on Expanding Straddling with
Bazaar, Food the next three to vast customer customer base, too many retai
Bazaar, four years – experience sourcing products formats
Fashion 3,300 planned by and existing at cheaper rates
Station, Blue 2010 models

Tata Trent Westside Looking to Already has Sprucing up It’s smaller ret
register it’s an established product offerings, operations
presence in brand like opening more
hypermarkets; Westside outlets, and
currently introducing new
operates 21 retail formats

RPG Spencer’s, Expansion into Still considered a Establishing

Music World other major cities southern brand itself into newe
at prime regions,
locations; B- sourcing
Cities next on list products at

Source : Indian Management, Volume 46, Issue 1, January 2007,

Page 16


Retailer Brands Plans Strengths Challenges Threats

Reliance Reliance Plans to set up a Strong back Getting the retail Product
Fresh range of end, portfolio right pricing,
different store nationwide for Indian tastes infrastructure,
formats, fuel retailing manpower,
convenience platform brands
stores and
hypermarkets as
well as create a
back-end retail-

Growth of Retail Sector in India

Bharti Field Fresh Pan-Indian Bharti’s local Wooing the price Product
Walmart operations expertise and sensitive Indian pricing, shelf
expected Wal-Mart’s consumer and overall
back-end offerings
make it a
lethal combo

In the Pipeline

Retailer Brands Plans Strengths Challenges Threats

Aditya Madura To roll out it’s Extensive Gaining a Building
Birla Garments, retail business experience in national retail formats
Birla Sun within the next supply-chain footprint from scratch
Life 7-8 months with management,
Insurance a combination of vendor
and Idea large and small development with
Cellular, stores premium brands
Planet like Louis
Fashion and Phillippe, Van
Trouser Heusen and Allen
Town Solly

Hero Easy Bill Floated Aero Strong Creating retail Little

Group Infrastructure background in operations experience in
Ltd announcing several from scratch everyday
foray into retail. manufacturing consumer
Currently sectors; sound retailing.
developing two financial base
industrial parks
at Haridwar and

Growth of Retail Sector in India


Retailing in India is gradually inching its way toward becoming the

next boom industry. The whole concept of shopping has altered in
terms of format and consumer buying behavior, ushering in a
revolution in shopping in India. Modern retail has entered India as
seen in sprawling shopping centers, multi-storied malls and huge
complexes offer shopping, entertainment and food all under one roof.
The Indian retailing sector is at an inflexion point where the growth of
organized retailing and growth in the consumption by the Indian
population is going to take a higher growth trajectory. The Indian
population is witnessing a significant change in its demographics. A
large young working population with median age of 24 years, nuclear

Growth of Retail Sector in India

families in urban areas, along with increasing workingwomen

population and emerging opportunities in the services sector are
going to be the key growth drivers of the organized retail sector in
India. 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.
Retail, one of India’s largest industries, has presently emerged as
one of the most dynamic and fast paced industries of our times with
several players entering the market. Accounting for over 10 per cent
of the country’s GDP and around eight per cent of the employment
retailing in India is gradually inching its way toward becoming the
next boom industry.

As the contemporary retail sector in India is reflected in sprawling

shopping centers, multiplex- malls and huge complexes offer
shopping, entertainment and food all under one roof, the concept of
shopping has altered in terms of format and consumer buying
behavior, ushering in a revolution in shopping in India. This has also
contributed to large-scale investments in the real estate sector with
major national and global players investing in developing the
infrastructure and construction of the retailing business. 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
• Increase in expenditure for luxury items (CHART)

Road Ahead; Plans of Large


• Reliance Retail: investing Rs. 30,000 crore ($6.67 billion) in

setting up multiple retail formats with expected sales of Rs.
90,000 crore plus ($20 billion) by 2009-10.
• Pantaloon Retail: Will occupy 10 mn sq.ft retail space and
achieve Rs.9,000 crore-plus ($2 bn) sales by 2008.
• RPG: Planning IPO will have 450-plus Music World, 50-plus
Spencer's Hyper covering 4 million sq.ft by 2010.
• LIFESTYLE: Investing Rs.400 crore-plus ($90 million) in
next five years on Max Hypermarkets & value retail stores,
home and lifestyle centres.
• Raheja's: Operates Shoppers' Stop, Crossword, Inorbit
Mall, and 'Home Stop' formats. Will operate 55 "Hypercity"
hypermarkets with US$100 million sales across India by
• Piramyd Retail: Aiming to occupy 1.75 million sq.ft retail
spaces through 150 stores in next five years.

Growth of Retail Sector in India

Merger and
acquisition activity

Growth of Retail Sector in India

India witnessed a record number of M&A deals in the first half of

2006, which were collectively worth USD 25.6 billion. A significant
number of deals have being carried out in the Indian retail sector in
the past few months in order to acquire a larger share in the growing
domestic market and to compete against the prospective global and
domestic players.13 The table below shows some recent deals that
have taken place in the Indian retail sector:

Acquired/ JV Company/
Year Acquirer Nature of Business Stake
(US$ million)
2005 Liberty Shoes Future group Retail (Footwear) 51% 3
2005 Indus - League Clothing Future group Retail clothing 68% 5
Leisure retail chain
Deccan Chronicle
2005 Odyssey India (books, music, 100% 14
Books, music,
2005 Landmark Tata Trent 74% 24
TGI Friday's (a
subsidiary of Carlson Restaurant (Food
2006 Bistro Hospitality 25% N/A
Restaurant World- retail)
Indus League clothing Lingerie and 50%
2006 Etam group, France women's wear 8
(Future group company) retailing (JV)

Source: Price water house Coppers, Asia-Pacific M&A

bulletin, mid year 2006.

Technology – A Critical Tool
Out-of-stocks are the most noticeable problem for consumers — during normal shopping experiences
eight per cent of intended purchases are not on the shelf and when it comes to promotional offers,
these out-of-stocks rise to 15 per cent. Faced with an empty shelf, consumers often do not substitute
the same brand. They simply keep their money and leave the store in search of another product. Let's
take the example of a $25-billion retailer: lost sales due to out-of-stocks added up to nearly 1 per cent
of total sales — a mind-boggling figure of $1 billion! Retailers across the nation are unable to predict
and master the demand-supply gap as a result of orthodox tools to measure changing consumer
behavior. Considering the Indian retail industry grew by 300 per cent in the last 12 months and supply
chain accounts for 50 per cent of costs, retailers are now looking at ways to enhance the supply chain
and predict consumer-buying habits. High consumption patterns driven by disposable incomes,
lifestyle shifts and availability of a wide range of brands are dictating the high-growth of different retail
formats in India. No wonder, Indian retail players are under tremendous pressure to make the supply
chain more efficient in order to deliver quality, selection and service to consumers. Retailers are now
looking at creating an efficient supply-chain via a concept popularly referred to as consumer driven
replenishment. What this implies is placing the consumer in the centre of the replenishment process,
to allow retailers to be able to use real-time data to sense and respond to changing consumer
demands. To implement consumer driven replenishment, one needs to first collect and analyze pre-
shopping signals, which often go unnoticed today. For example, consumers may speak to store
associates or call centre agents to enquire on a particular product. As this often leads consumers to
purchase products, retailers and supply chain partners can use existing consumer touch points to map
consumers' buying preferences. For example, Spanish retailer Zara furnishes its store employees with
PDAs to help them order out-of-stock items the minute the customer brings it to the assistant's
attention. This information captured via the PDAs dictates next-day replenishments at the stores.

In another instance, Wal-Mart leverages weather data for replenishment. When the world's largest
retailer knows about an approaching hurricane or snowstorm, the stores in that area are doubly
stocked up with essential items such as bottled water and batteries. This data helps Wal-Mart align
inventory with increased demand to cover unnatural events and prevent out-of-stock situations.

Consumer driven replenishment will change the way the industry handles forecasting and
replenishment. The major business change will start at the business process level; to respond quickly
to consumer demand, retailers and their supply chain partners must redesign the current business
process. All supply chain partners will become part of a cohesive architecture, enabling information to
flow freely from retail functions to suppliers.

Inevitably, consumer driven replenishment within the Indian retail sector will be reflected in rapid
growth in sales of supermarkets, department stores and hypermarkets. And with this increased
competition, retailers will look at various opportunities to maximize customer satisfaction. These will
include initiatives to streamline internal back end costs so as to translate savings onto customers,
maximizing mind share in a cluttered market and delivering the best in store experience.

Keeping these deliverables in mind, some of the other key modules that the store of the future will
look to implement will include:

Store connectivity:

Stores will invest in building wide-area networks (WANs) and virtual private networks (VPNs) to
access information across various sites. With visibility into every resource, stores will take advantage
of up-to-the-minute data at the right time for increased strategic flexibility and informed decision-
making for managing inventory.

RFID: Widely regarded as the key defining technology to hit the retail sector, RFID tags on each
piece of merchandise will enable companies to monitor their inventory at a more detailed level than
ever before. Executives will identify when problems occur by monitoring signal readers installed at
key junctures, such as loading docks, receiving points, distribution centers, backrooms and store
shelves. These readers in turn will be networked to a centralized monitoring system that would give
companies information they could never imagine with current operations, allowing them to identify
problems as shop lifting, inventory management, and even 'gray market’ sales that can erode profits
and damage distribution relationships. Let’s see the actual benefits of using RFID in the supply chain.
The biggest benefit is the total visibility across the entire supply chain:
What managers worry about the most? It is directly or indirectly related to uncertainty.

Uncertainty is the mother of inventory and the father of stock-outs.

Inventory Management
• Maintain a real-time view of tagged inventory as it flows through the supply chain.
• Track discrete movement of tagged inventory.
• Trigger alerts around inventory movement based on business rules you construct.
• Allowing just-in-time practices.

Maximizing warehouse space

With the high costs associated with storage real estate, the goal is to maximize warehouse
space. This will improve utilization without undermining the ease with which goods can be moved
in and out.

Minimizing goods shrinkage

Theft combined with imprecise inventory management can create a significant shortfall in actual
versus expected goods available. Within the retail environment goods shrinkage is widely
perceived to account for up to one per cent of stock, representing a significant dent in profit

Benefits to Consumers,
RFID can go beyond just intangible cost savings, as RFID can play a role in food safety,
counterfeit control, and warranty programs. Businesses must avoid focusing too intently on the
ways RFID tags can be used and instead stay focused on how RFID can improve consumer
value and address complex business issues.

Minimizing errors in delivery

Misdirected deliveries or incorrect orders can immediately result in on-shelf out-of-stock situations
leading to reduced sales and damaged customer relationships. Indeed, for organizations relying on the
delivery of specific components to fulfill their own order schedule, such errors can have a serious
impact on customer satisfaction. Store Mobility: Stores will use wireless technologies at the point of
sale for faster checkout and real-time product information in the store to improve operations, and
throughout the supply chain to reduce costs.

IP Communications: Stores will converge their data and voice systems, providing instant
communication throughout stores at significantly reduced costs.

In conclusion, suffice to say that faced with poor supply chain management and a rapidly changing
environment, today's retailers will most definitively look for consumer driven replenishment to simplify
supply chain operations, control costs, and measure results. With networks that will enable real time
updates to predict and replenish stocks, the Indian consumer will hopefully never find his shopping
preferences out of stock.

The Indian retail market is booming, and there are numerous applications—both business and
consumer—that can be built around radio frequency identification (RFID) to deliver operational
efficiencies. For instance, if a retailer is able to track shipments and high-value assets in real-time, it
can minimise losses. Apart from improved and enhanced accuracy, RFID can also lead up to 80
percent savings in time spent on scanning items.
Explains Chamaria, “RFID is a transformational technology that has the potential to change the way
business is conducted. Although at a nascent stage, we expect RFID will start gaining traction around
2010. The cost of tags and readers is fairly high today; once it comes down and ROI is established, it
will surely be a boon for both retailers and CPG companies.”

Aggarwal of BEA elaborates. “While RFID is at a nascent stage, there are several killer applications
that can utilise RFID technology across verticals. Supply Chain Visibility and Reusable Asset Tracking
will emerge as key solutions that have high applicability in the Indian market, especially in
manufacturing, retail, government and healthcare."

But as of now, RFID has hardly any presence in India. Laments Chopra, “Indian retailers are still to
adopt bar-coding completely. The level of bar-code usage is also largely due to the retailers’ initiatives
of printing these codes at their warehouses, unlike in developed countries, where suppliers print bar-
codes. Most retailers do not have integrated IT systems today. Many retailers have few IT systems in
the areas of supply chain management, vendor development, merchandising and inventory
management. The annual expenditure on IT is quite negligible.”
Technology in Retail
Over the years as the consumer demand increased and the retailers geared up to meet this increase,
technology evolved rapidly to support this growth. The hardware and software tools that have now
become almost essential for retailing can be into 3 broad categories.

Customer Interfacing Systems

• Bar Coding and Scanners

Point of sale systems use scanners and bar coding to identify an item, use pre-stored data to
calculate the cost and generate the total bill for a client. Tunnel Scanning is a new concept
where the consumer pushes the full shopping cart through an electronic gate to the point of
sale. In a matter of seconds, the items in the cart are hit with laser beams and scanned. All
that the consumer has to do is to pay for the goods.

• Payment

Payment through credit cards has become quite widespread and this enables a fast and easy
payment process. Electronic cheque conversion, a recent development in this area,
processes a cheque electronically by transmitting transaction information to the retailer and
consumer's bank. Rather than manually process a cheque, the retailer voids it and hands it
back to the consumer along with a receipt, having digitally captured and stored the image of
the cheque, which makes the process very fast.

• Internet

Internet is also rapidly evolving as a customer interface, removing the need of a consumer
physically visiting the store.

• ERP System

Various ERP vendors have developed retail-specific systems which help in integrating all the
functions from warehousing to distribution, front and back office store systems and
merchandising. An integrated supply chain helps the retailer in maintaining his stocks, getting
his supplies on time, preventing stock-outs and thus reducing his costs, while servicing the
customer better.
• CRM Systems

The rise of loyalty programs, mail order and the Internet has provided retailers with real
access to consumer data. Data warehousing & mining technologies offers retailers the tools
they need to make sense of their consumer data and apply it to business. This, along with the
various available CRM (Customer Relationship Management) Systems, allows the retailers to
study the purchase behavior of consumers in detail and grow the value of individual
consumers to their businesses.

• Advanced Planning and Scheduling Systems

APS systems can provide improved control across the supply chain, all the way from raw
material suppliers right through to the retail shelf. These APS packages complement existing
(but often limited) ERP packages. They enable consolidation of activities such as long term
budgeting, monthly forecasting, weekly factory scheduling and daily distribution scheduling
into one overall planning process using a single set of data.

Leading manufactures, distributors and retailers and considering APS packages such as
those from i2, Manugistics, Bann, MerciaLincs and Stirling-Douglas.

Strategic Decision Support Systems

• Store Site Location

Demographics and buying patterns of residents of an area can be used to compare various
possible sites for opening new stores. Today, software packages are helping retailers not only
in their locational decisions but in decisions regarding store sizing and floor-spaces as well.

• Visual Merchandising

The decision on how to place & stack items in a store is no more taken on the gut feel of the
store manager. A larger number of visual merchandising tools are available to him to evaluate
the impact of his stacking options. The SPACEMAN Store Suit from AC Neilsen and
ModaCAD are example of products helping in modeling a retail store design.

Investment Opportunities

• Potential For Investment: The total estimated Investment Opportunity in the retail sector is
around US$ 5-6 Billion in the Next five years.

• Location: with modern retail formats having made their foray into the top cities namely
Hyderabad, Coimbatore, Ahmedabad, Mumbai, Pune, Chennai, Bangalore, Delhi, Nagpur
there exists tremendous potential in two tier towns over the next 5 years.

• Sectors with High Growth Potential: Certain segments that promise a high growth are

Food and Grocery

Furniture and Fixtures
Durables, Footwear & Leather, Watch & Jewellery
• Fastest Growing Formats: Some of the formats that offer good growth potential are:
o Speciality and Super Market

Hyper Market
Discount stores
Department Stores
Convenience Stores and E-Retailing

• Supply Chain Infrastructure: Supply chain infrastructure in terms of cold chain and Logistics.

• Rural Retail: Retail sector offers opportunities for exploration and investment in rural areas,
with Corporates and Entrepreneurs having made a foray in the past. India's largely rural
population has caught the eye of retailers looking for new areas of growth. ITC launched the
country's first rural mall ' Chaupal Sagar', offering a diverse product range from FMCG to
electronics appliance to automobiles, attempting to provide farmers a one-stop destination for
all of their needs. There has been yet another initiative by the DCM Sriram Group called the '
Hariyali Bazaar', that has initially started off by providing farm related inputs and services but
plans to introduce the complete shopping basket in due course. Other corporate bodies
include Escorts and Tata Chemicals (with Tata Kisan Sansar) setting up agri-stores to provide
products/services targeted at the farmer in order to tap the vast rural market.

• Wholesale Trading: wholesale trading also holds huge potential for growth. German giant
Metro AG and South African Shoprite Holdings have already made headway in this segment
by setting up stores selling merchandise on a wholesale basis in Bangalore and Mumbai
respectively. These new-format cash-and-carry stores attract large volumes from a sizeable
number of retailers who do not have to maintain relationships with multiple suppliers for all
their needs.

• Cheap Consumer Credit

Government Initiatives & Regulations
There has always been a strong opposition to FDI in India’s retail sector (though 100
percent FDI is allowed in distribution companies that sell to the trade and not to the consumer). The
BJP was not too keen on it early on, though towards the end of Vajpayee’s government‘s term there
were noises that it would consider such a move.

These days, the left parties are orchestrating a passionate opposition to allowing FDI in retail. The
arguments are familiar – that global retailers will swamp the Indian markets, wipe out small kirana
stores and put millions of jobs in jeopardy. They also argue that giant global retailers will squeeze
suppliers and finish them off. “ The negative effects in terms of job losses and the displacement of
traditional supply chains by the monopoly/ monophony power of multinational retailers far outweigh the
supposed benefits…” the left observed in a recent seven-page note that summarized its arguments
against FDI. Given the political clout of the small trading community, because of their enormous
numbers, the government has barred FDI in retailing since 1997. Most of India’s home grown retailers
also oppose FDI, though for a different reason. “What is the hurry (to allow FDI)? For 10 years, China
allowed only one foreign store per province. I allowed domestic chains to build up good valuation
before opening FDI, “argues Kishore Biyani, managing director, Pantaloon Retail. “ The debate is not
‘whether or not to allow FDI, but ‘when and how’,” he clarifies. Biyani is also chairman of Confederation
of Indian Industry’s retail committee, which estimates that Rs.20, 000 crore will be needed in retail to
scale up to its potential. Indian companies need time to mobilize at least part of the capital before the
foreign players are allowed in, argues CII. In private some domestic retailers fear getting lower
valuations from their global counterparts if they sell out today. But five or 10 years later, when they
have built up larger business, they may get far higher valuations. Of course, the argument of asking for
more time to get even better valuation may not lose its appeal even a decade later, if the approach is
instinctively protectionist. INDIA’s retail industry – the fourth largest in the world – accounts for 11 per
cent of the country’s GDP and employs over 40 million people (about 7 per cent of Sector retailers
(Yes, they have retailing PSU’s!) had a 32 percent share and private sector retailers had 45 per cent.
total employment in the country). Now, a huge majority of the retail workforce is in kiranas.This sector,
in fact acts as an informal social security net – almost anyone without a job can set up a kirana. The
big worry is that global retailers will quickly put these kiranas out of business, leading to millions of job
losses. Is that fear justified? The answer can be found in the experience of othercountries that allow
FDI in retail. In Thailand and Malaysia, global retailers have spelt doom for the traditional mom and
pop stores. In fact the Thai government had to step step in to save local retailers from annihilation. It
set up Allied Retail Trade, a network of franchised stores, which brought small stores together to fight
the big chains.

But if the Thailand story is forbidding, then the China one is inspirational. Global chains have had a 13
year run in china. In 1992, China had one supermarket. Today it has 60, 000. (Supermarkets are
perceived to be kirana killers!). Four of the world’s 10 largest retailers, 35 of the top 50 and 78 of the
top 250 have already opened stores in China. Hypermarkets, supermarkets, discount stores, cash &
carry convenience stores every conceivable format operates in China. The globalization of china is

So what impact has this had?

The top 100 retailers (both domestic and foreign) in China had combined sales of $60 billion in 2004,
according to the China Chain Store & Franchise Association. These 100 companies have so far
opened 30,416 stores with a total area of 25.8 million square metres. But – and here’s the revelation
they have only 9.6 per cent share of China‘s $628- billion retail trade! That figure has grown from 2.9
per cent in 2000.

It must be mentioned that the global giants got unfettered access into China only in 2004. Therefore
their performance cannot be compared with rest of the country’s retail sector, but must be
benchmarked only against the top 100 firms. When seen thus, the foreign firms account for only 23
percent sales of the top 100 retailers. China’s public Now, the question is which theory is relevant to
India – China’s or Thailand’s? “India cannot be compared with Thailand and Malaysia as the scale is
much smaller and economic levels are dissimilar. The right comparison would be Germany 20-30
years ago or Brazil today.

China makes sense because of its similarities with India: large area, large chunk of underdeveloped
population, disparity in income levels,” says Arvin Singhal, chairman of consultancy KSA Technopak.

Or better still, one could also look at the US story. Its retailing industry is one of the most matures ones
in the world. It is also home to some of the world’s largest retailers. But there is a less understood
aspect of the US retail scene – 95 percent of all retailers in the US are single – store operations. They
may not be as the Indian Kirana, but they are still small ‘mom and pop’ operations on the US scale.
Despite over six decades of dominance by large chains, these small players have not find a lot of them
in the vicinity of a Wal- Mart or a target. They are also under pressure and their market share in on the
decline. But the fact is that the single- store operations still control a little less than 50 percent of US
retail trade.

Again, back home, in Chennai, where large and organised supermarket chains like FoodWorld and
Nilgiri’s have grabbed a 20 percent market share, the kiranas haven’t been slaughtered. They are
smarter, more efficient more customer- friendly than they were five years ago; they are matching the
chains’ prices and continue to do brisk business. Even stores in close vicinity of these large
supermarkets have survived. “Small businesses have their own competitive advantages. They are
local; they are usually in the same block that the customers are in; and they are very convenient. They
know their customers by name, so they offer great customer service. They have tailored their inventory
for their customers, so they have great inventory management, and many times they give credit. Small
businesses have their own model, offer a different product mix, and keep their customers happy. I think
small business can grow and prosper with Wal Mart, “Menzer had argued in an inclusive interview with
BW during his May visit.

Benefits of opening the Retail sector

Improve competition Develop the market :

Greater level of exports due to increased sourcing by major players Sourcing by Wal-Mart from China
improved multifold after FDI permitted in China Similar increase in sourcing observed for Metro in India
Provides access to global markets for Indian producers.

Investment in technology Cold storage chains solve the perennial problem of wastage. Greater
investment in the food processing sector technology Better operations in production cycle and

Better lifestyle Greater level of wages paid by international players usually More product variety Newer
product categories Economies of scale to help lower consumer price. Increased purchasing capacity of

Manpower and skill development through retail training and Greater managerial talent inflow from other

Tourism Development :

A strong retailing sector boosts tourism as seen from the experience of Singapore and Dubai.
Investment in whole supply chain Improved product basket from India for exports.

Long term benefits,up-gradation of agriculture, development of efficient small and medium size
FDI would result in market growth and expansion. Employment generated at various levels, Increased
consumer demand implies employment generation across the value chain does not need very high
skill sets, needs high school graduates and other similar skill level. Currently this is a majorly
unemployed demographic group
Boom in employment similar to job generation in ITES industry. On a much larger scale But new jobs
comparatively lower down the value chain Greater clarity and objectivity can be achieved if one looks
beyond kiranas at the larger issue of employment, Despite the entry of organized retail – domestic and
foreign – in China, its retail still employs 6 percent of the total workforce ( only marginally smaller than
India). The top 100 retailers in China employ 810,000 people, a figure growing at over 25 percent
every year. But compared with the US, the percentage looks paltry. In the US, almost 15 million people
or 11.7 of the workforce are employed in retail. This is almost double the retail workforce in China –
and much higher than in India!

Many believe that organised retail actually leads to job gains rather than job losses. This is not to say
that the changeover will be painless. Shifting of jobs is bound to happen. “Supermarket chains will
divert business from small vendors, but they also create many jobs,” argues retail expert Gale. One
reason for that is growth of organised retail stimulates consumption. And increased consumption
means more production and therefore more jobs.In India, owners of large and small stores will tell you
that they face stockouts – products not available when a consumer asks for it. This is lost demand.
And it is due to India’s rather inefficient supply chain. One could, therefore argue that India’s
consumption is actually way below actual potential – and that there is inherent job loss of jobs that
exists in the economy. Here poor distribution and below-par processes is another bottleneck. “If the
economy grows at 6.5 percent or so every year, we will have 5-7 years. If you do not have an efficient
distribution chain, the economy cannot grow…Such inefficiency will lead to job losses. If you do not
have organized distribution, you won’t have employment growth,” argues Harsh Bahadur, managing
director, Metro Cash & Carry, India. Finally, if the fear of kiranas being snuffed out is true, then the
government ought to be equally concerned about Indian retailers as well. Several large and influential
business groups like the Tatas and Ambanis have ambitious plans that include setting up of hundreds
of supermarkets and hypermarkets. Won’t these kill kiranas and lead to job losses. In reality; foreign
retailers will be in a position to influence employment only several years after they enter India. But they
will have an impact on the consumer almost immediately. Of course, in India the consumer is invariably
forgotten when protectionist lobbies voice their concern.
Objectives of study

• The overall purpose of this endeavor is to investigate empirically customers’ preference

towards exclusive and multi brand retail outlets and to determine the factors that influence the
satisfaction level of customers’ in retail sector especially in Lucknow city.

• This study is also aimed at finding out the relation between major demographic variables and
satisfaction level of customers’ and preference of retail formats.

• To study the preference given by consumers in term of quality, ambience, service, scheme
and location for retail purchase.

• What are the factors affects for the purchase?

Research Design:

Descriptive research design will be used.

• Type: Descriptive Study

• Scope: combination of theoretical study as well as Statistical Study

• Environment: Field Research

Data Sources:

Primary Data - Survey of Customers in Lucknow.

It will be collected with the help of Questionnaire Method and Survey Research.

As well as unstructured observation will also come in use at some part (topic) of study.

Secondary Data - It will be collected with the help of Internet, books, journals, articles of newspapers
& magazines and research papers related to booming organized retail sector.

Data Analysis:

Data will be analyzed with the help of certain statistical tools.

1. Questionnaire method
2. Method of observation

Sampling Design:

• Population: Consumers of Lucknow city

• Survey area: Consumer located in different area of Lucknow city

• Sampling method: Non-Probability Convenient sampling plan.

• Sample size: 100 consumers from Lucknow city

Significance of the Study:

• To know the awareness of people about different brands of retail sector.

• Result will be the knowledge about customer’s preference towards exclusive and multi-brand
retail outlet that will be helpful to find out the factors that influence the satisfaction level of

• It will be helpful to know the connection between demographic factors of consumer like age,
income, education and choice of people for different types of product.

Limitations of the Study:

• The present study is limited to the growth of retail sector in india only.

• The bias of respondents while responding cannot be eliminated.

• The study was limited to only in Lucknow city.

Delivery Method:

Two hard copies in form of booklets and two softcopies in form of CDs.

• First copy of project report will be submitted to project guide.

• Second copy is participant’s own copy.

This research analysis is based on the answers given by the sample customers of Lucknow city in the
above given consumer survey questionnaire.

• Average Monthly Shopping Budget of Consumers:

The below given was the interpretation of the average monthly shopping budget for the sample
size in the project survey. In the sample size most of the people (i.e. 38%)were able to do
shopping between Rs. 2000-5000.

7% 1% 23%
12% 2000-5000
38% 20000-50000
50000 & More

• Awareness about different brands of Retail Sector:

The store location, its customer services, discount schemes and offers, its quality are the
important factors for the awareness of the any retailing company or brand but apart from all these
the most important thing which influence the awareness of any particular brand is it’s advertising
and other promotional activities. Big Bazaar of future group in Lucknow is very well know brand
among the people of sample because of it’s pricing, attractive offers and discounts and its very
good promotional and marketing activities. The Vishal Mega Mart is also famous because of its
reach in the various areas of the city.


Big Bazar



• Which Retail chain Customers like to visit often:

Because of it’s attractive pricing and good schemes and offers people like to visit Big Bazaar most
often. Vishal Mega Mart is also giving attractive discount on formal wear so it is also known for
good footfall. Shoppers stop do not have discount offers and schemes but it is still liking of some
of people in sample size because of its ambience, shopping comfort and good customer services.

West Side

Stop Big Bazar
17% 36%

Mega Mart

• Customer Preferences for shopping from Retail chains:

The consumers of sample size were visiting the big retail outlets most because of their good
pricing and for their attractive schemes and discounts offers. After that they also going there for
the quality experience. The location of the store is also a big concern for the consumers.
Thereafter they are also looking for good customer services. They want to get well treated by the
sales persons of the stores. Ambience came in last for all of them.
Discount Schemes



Customer Service



The consumer’s preferences are changing rapidity and becoming

highly diversified. It is difficult for the retail stores to satisfy all the needs of the customers. The
most of the consumer’s want to get some attractive prices, good schemes and offers on every
purchases and a shopping comfort as well. Those who are able to purchase their needs and
want for a month in a bulk prefers to go to the retail chains. Because of competitions in the
market the branded formals are also became cheaper so the younger generation prefers to
purchase from the retail outlets of the brand the city. Only the big retail chains are able to
satisfy all these needs of the new age consumers whereas there is still some consumers
mostly of the old age are willing to purchase from the local kirana store. Some of them have
perception that these big stores are too costly to afford and some of them are not able to make
purchases in a bulk so they do not want to waste their time to go especially to the big store for
2-3 items purchase. In the case of other items like wristwatches, branded jewelry, mobiles, gift
items and other, they prefer to take it from where they are getting cheap prices, good after
sales services and the goodwill of the store.

After studying the customer survey questionnaire statistically and theoretically as well and
after observing the consumer’s mood and their preferences I can say that Big Retail is here to
stay. Assuming that improvements in infrastructure and lower real estate costs become a
reality, Big Retail still has a long way to go before satisfying the highly diverse needs of the
Indian population. As a result, there will be a steady state where Big Retail will co-exist with
Small Retail.
The objective of this survey is to collect tangible information about shopping
in Retail Chains. This questionnaire is being administered to people like you
who have visited and bought products in Retail Chains. Please let us know
your spontaneous response to the questions that pertain to your shopping
experience in Retail Chains. All information provided by you shall be kept
confidential and we shall only be publishing the outcomes. Please provide us
your unbiased and frank opinions.

1. What is your monthly shopping budget?

0-2K 2-5K 5-10K 10-20K 20-50K >50K

2. Which retail chains did you visit ?

Big Bazaar
Shoppers Stop
Vishal Megamart
Any other (Please specify) ________________________________

3. Which retail chains do you visit often?

Big Bazaar
Shoppers Stop
Vishal Megamart
Any other (Please specify) ________________________________
4. Which retail chain did you like most?

Big Bazaar
Shoppers Stop
Vishal Megamart
Any other (Please specify) ________________________________

5. Why did you like that particular retail chain?

Attractive Prices
Wide range of choices
Discount Schemes
Free Offers
Customer Service
Any Other (Please Specify) ___________________________________

6. Mark on a scale of -3 to +3 your perceptions about your shopping experience

in the following retail chains (where -3 indicates inferior and + 3 indicates
superior) :

Feature Big Vishal Westside Shoppers Landmark

Bazaar Megamart Stop

Ambience 15
Attractive Prices 70
Range of Choices 65
Price Discounts 80
Freebies 60
Salespeople Behavior 50
Parking Facilities
Home Delivery

7. Which products do you normally buy from retail chains?


8. Which products do you normally buy from your local grocery store?


9. Which products do you normally buy from your chemist shop?


10. Why do you like to buy from local grocery store?


11. Why do you like to buy from chemist shops?


12. How much time do you spend in the retail chain on every visit?

0-30 Minutes 30-60 Minutes 1-2 Hour 2-3 Hours

3-4 Hours 4-5 Hours <5 Hours

13. The emergence of retail chains will create unemployment problems:

Strongly Agree Agree Neither Agree Nor Disagree Disagree Strongly Disagree

14. The emergence of retail chains will destroy social harmony:

Strongly Agree Agree Neither Agree nor Disagree Disagree Strongly Disagree

15. The emergence of retail chains will cause monopolistic control over prices:

Strongly Agree Agree Neither Agree Nor Disagree Disagree Strongly


16. FDI in Retail Sector will contribute to the Growth Momentum:

Strongly Agree Agree Neither Agree Nor Disagree Disagree Strongly



1. Name: ______________________________________________________

2. Age: 15-20 20-30 30-40

40-50 50 & above

3. Occupation: Student Govt. Employee Private Employee

Businessman Any other (Pls specify) _______________

4. Income group: 5k-10k 10k-20k 20k-30k 30k-40k

40k-50k 50k & above

5. Education: Student Graduate Post-Graduate

MBA Any other (Pls specify) ___________________

6. Number of Family Dependants: Nil One Two Five

Any other (Pls specify)

7. Telephone Number / E-mail:___________________________________________

________________________________ Thank You______________________________


Web Sites and Search Engines



• The Times Of India

• The Indian Express
• The Economic Times
• Financial Express
• Business Standard
• Business Line

Books and Magazines

• Business World
• The Indian Dream
• Business & Economy