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Retailing in India

Retailing in India


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Study on Retailing in india
Study on Retailing in india

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Published by: Nathan on Aug 13, 2009
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Retailing in India

Retail means selling goods and services in small quantities directly selling to customers. Retailing consists of all activities involved in marketing of goods and services directly to consumer for their personnel family and household use. The Indian retailing industry is becoming intensely competitive, as more and more payers are Vying for the same set of customers. The major retail players are Pantaloon Retail, Shoppers Stop, Reliance,etc.., Retailing is one of the biggest sectors and it is witnessing revolution in India. The new entrant in retailing in India signifies the beginning of retail revolution. India's retail market is expected to grow tremendously in next few years. According to AT Kearney, The Windows of Opportunity shows that Retailing in India was at opening stage in 1995 and now it is in peaking stage in 2006. India's retail market is expected to grow tremendously in next few years. India shows US$330 billion retail market that is expected to grow 10% a year, with modern retailing just beginning. India ranks first in 2005. In fact, in 2005 and 2006, India is the most compelling opportunity for retailers, because now India is in peaking stage. This window of opportunity is useful for executives who plan their market-specific strategies; the four stages are as follows: Opening: An opening market is one that is just entering the GRDI, that is, in this stage all, which are outside the top 30 markets, falls in this stage. At this stage, retailers should monitor and performing high-level assessments, they should plan for their entry strategies. India in the late 1990's is a good example in the opening stage, while in 2006, Kazakhstan is the country in opening stage* See figure a. Peaking: In peaking stage, the market is developing quickly and also ready for modern retailing. Countries, which are in Peaking stage, are India, Ukraine and Vietnam. Retailers entering this stage have the best chance for long-term success. Retailers at this stage should enter through local representations, sourcing offices and new stores. Wal-Mart success in china in the late 1990's and early 2000's gives us the importance of committing to a promising high-growth market at right time. Declining: In this stage the market is still big and growing, but the space for new entrants will become tighter and retailers should act quickly at this stage because retailers at this stage have limited time to explore, and laso their margin for error is thin. In general , they should act according to the established rules and should be open to face the competition from international retailers. Closing: The window of opportunity is closing fast and modern retail share is reaching 40 to 60 percent. Though the opportunity is closing the existing retailers can enter with new formats such as discount models or non-food formats such as consumer electronics and apparel. Window of opportunity ends for about 5 to 10years before a market enters the closing phase and reaches saturation level. India for example, was in the opening stage in 1995 and entered peaking stage in the year 2003 and reached number 1 rank in 2005.

Unorganized retailing in India Most of the retail sector is unorganized. Spencer network has 69 stores.e. the pure retailer is starting to emerge now. In India. In India Delhi will be the next big retail destination. Out of the total earnings of the Government of Delhi Rs 11. It is a low cost structure. Increase in spending Percapita Income. within next five years. According to Confederation of Indian Industries whose findings have shown that Delhi has the good resources and good conditions for the retail sector. Sony. departmental stores. The total in 2005 stood at $225 billion. The main advantage in unorganized retailing is consumer familiarity that runs from generation to generation. the organized retail accounts for only $8 billion of total revenue. Organized retailing in India In late 1990's the retail sector has witnessed a level of transformation. Singapore and Hong Kong. accounting for about 11% of GDP.500 crore is achieved from the retail sector. For example. and the remaining share is contributed by the unorganized sector. Consumer preference for shopping in new environs. Unorganized retailing has been there in India for centuries. The organized sector is expected to grow faster than GDP growth in next few years driven by favorable demographic patterns. which is expected to be $ 17 billion by 2010-11. The main challenge facing the organized sector is the competition from unorganized sector. Delhi. Chennai. hypermarkets discounted stores and specialty stores. etc. . The top 10 retailers account only for 2% of total market. they are mostly operated by owners. Retailing is being perceived as a beginner and as an attractive commercial business for organized business i. In this total market. has very low real estate and labor costs and has low taxes to pay. Retailing will show good prospects in cities like Mumbai. the organized retail sector accounts only for about 3 percent share. today modern retailing is expected to enter a boom phase. the organized retailing is expected to be more than $23 billion revenue by 2010. Of this. kolkata. which has major players and these players might capture 10% of total market. Shift in consumer demand to foreign brands like McDonalds. In organized retailing will grow faster than unorganized sector and the growth speed will be responsible for its high market share. Rs 6. and strong income growth. the retail business contributes around 11 percent of GDP. Advent of dual income families also helps in the growth of retail sector. After Dubai. Organized retail business in India is very small but has tremendous scope. Banglore and Kanpur. theses are named as mom-pop stores. which includes seven Spencer hypermarkets. Reach of satellite T. three Spencer super markets and 49 Spencer Dailys. The Internet revolution is making the Indian consumer more accessible to the growing influences of domestic and foreign retail chains. changing lifestyles.V. According to A T Kearney. channels is helping in creating awareness about global products for local markets.Panasonic.000 crore. This organized retail sector mix includes supermarkets. Now the company is planning to open 20 stores in 10 cities in six months. The retail sales in India for future are shown below (data from 2005-2008 is based on estimates): Rising incomes and improvements in infrastructure are enlarging consumer markets and accelerating the convergence of consumer tastes. Liberalization of the Indian economy.

Welinkars. Shopper's Stop. said Mr. and this will increase to 55% by 2015. Automatic approval is not allowed for foreign investment. * Organized retail sector has to pay huge taxes. Pantaloon is also planning to tie up with Ahmedabad-based National Institute of Design to start a course in visual merchandising. * Low skill level for retailing management. Retail companies are starting retail manamgent courses in partnership with management institutes. Narsee Monjre and IISWBM. which provides employment. "The estimated need is 1 lakh of employees till 2011". Jog. According to Associated Chambers of Commerce and Industry of India (ASSOCHAM). RPG Group and ebony are virtually on their toes. Consider the plans of largest player. . Pantaloon has the concept of partnership with educational Institute to run retail courses across the entire chain. Top players like Pantaloon Retail India Limited. it will not recruit any new managers from outside. roping in talent from other sectors and developing comprehensive career growth and loyalty plans for existing employees.About 47% of India's population is under the age of 20. Challenges of Retailing in India In India the Retailing industry has a long way to go. * Intrinsic complexity of retailing. * In retail sector. The Pantaloon Retail India Ltd. * Developed supply chain and integrated IT management is absent in retail sector. Trent. Trent has also started inhouse learning programmes and now goes to under graduate colleges to recruit students. threat of product obsolescence and low margins. * Lack of trained work force. Since. "The students joins the course and they are given an appointment letter by Pantaloon to become employees" said Mr. Pantaloon. after agriculture. This young population. which is technology-savvy.and to become a truly flourishing industry. and display the highest propensity to spend. the retail sector will create 50. * Taxation. retailing needs to cross the following hurdles: * The first challenge facing the organized retail sector is the competition from unorganized sector. Availability of quality real estate and mall management practices Foreign companies' attraction to India is the billion-plus population. will immensely contribute to the growth of the retail sector in the country. Sanjoy Jog. watch more than 50 TV satellite channels. which favors small retail businesses. the job market is hugely receptive to this with more and more business schools focusing on the sector and large retailers setting up retail academics.000 jobs in next few years. where in it expects that in 2years. "The apex body of Indian organized retailers. the company has developed a comprehensive strategy. The company has tied up with 11-B schools including K J Somaiya . Retailers Association of India( RAI) is also lending help hand to tide over the shortage of employees in organized retail sector. Employment opportunities in retail sector in India India's retail industry is the second largest sector. which is negligible for small retail business.rapid price changes. HR Head at Pantaloon Retail India Ltd.

Organised retail is expected to garner about 16-18 percent of the total retail market (US $ 65-75 billion) in the next 5 years. camcorders.Growth An increasing number of people in India are turning to the services sector for employment due to the relative low compensation offered by the traditional agriculture and manufacturing sectors. dishwashers. microwave ovens and DVD players fall in the status category. Indulgence- . (9) 1. the retail business in India is estimated to grow at 13% from $322 billion in 2006-07 to $590 billion in 2011-12. and gaming consoles.000. iPods. leaving a gap of 500.000.9%.000 m2) as compared to today.000.000.T. purchase decisions can be separated into two categories: status-oriented and indulgence-oriented.000 m2) that needs to be filled.000. high-end digital cameras. CTVs/LCDs. Kearney’s annual Global Retail Development Index (GRDI) for the third consecutive year.000 sq ft (19.000 hypermarkets and 3.8 million households in India have an annual income of over 45 lakh (10) Delving further into consumer buying habits. washing machines.000 supermarkets projected to come up by 2011. Consumers in the status category buy because they need to maintain a position in their social group.000 m2).19 m2)/ person is lowest in the world Indian retail density of 6 percent is highest in the world. The predictions for 2008 is 7.. With over 1. The Indian economy has registered a growth of 8% for 2007. The enormous growth of the retail industry has created a huge demand for real estate. The unorganized retail sector is expected to grow at about 10% per annum with sales expected to rise from $ 309 billion in 2006-07 to $ 496 billion in 2011-12. India has highest number of outlets per person (7 per thousand) Indian retail space per capita at 2 sq ft (0. It is a huge industry in terms of size and according to management consulting firm Technopak Advisors Pvt. Current projections on construction point to a supply of just 200.000 sq ft (65. maintaining its position as the most attractive market for retail investment. The Indian Retail Market Indian market has high complexities in terms of a wide geographic spread and distinct consumer preferences varying by each region necessitating a need for localization even within the geographic zones. Property developers are creating retail real estate at an aggressive pace and by 2010.000 sq ft (46. Ltd. Indulgence-oriented products include plasma TVs. India will need additional retail space of 700.000. Rapid change with investments to the tune of US $ 25 billion is being planned by several Indian and multinational companies in the next 5 years. According to the Icrier report. The organized retail market is growing at 35 percent annually while growth of unorganized retail sector is pegged at 6 percent. India has topped the A. it is valued at about US $ 350 billion. refrigerators. state-of-the-art home theatre systems. The Retail Business in India is currently at the point of inflection. at a cost of US$15-18 billion. 300 malls are estimated to be operational in the country.

There are also an uncounted number of low cost kiosks (tea stalls. Retailing is INDIA’s largest industry in terms of contribution to GDP & constitutes 13% of GDP. .7% in 2001. When it comes to the festival shopping season. However the nonfood retailing sector registered faster year-on-year growth than the food sales sector. Challenges include: Geographically dispersed population.4sq. etc) & mobile vendors.owner-managed shops. There is no integrated supply chain management outlook in Indian traditional retail industry. besides the activities of retailers and demands of the customers also show impact on retail industry. The retail industry in India is largely unorganized & predominantly consists of small .800. complex distribution network.mt. with an average selling space of 29.oriented buying happens with those who want to enjoy life better with products that meet their requirements. little use of IT systems.4189. barber shops. while non food sales were worth Rs. The share was 62. ft. an overwhelming proportion of the Rs. In fact only a Rs20. which is quite low compared to that of developed economies. there are significant challenges as well given that over 90% of trade is conducted through independent local stores. Food sales constitute a high proportion of the total retail sales.in 2001. The trend to market private labels by specific retail store is catching on in India as it helps to improve margins.worth apprx.400. Conclusion Many agencies have estimated differently about the size of organized retail market in 2010. Total retail sales area in India was estimated at 328 million sq.2 billion.000 crore segment of market is organized. Rs 7032. which is expected to increase to Rs. The turnover from private labels by major retail chains was estimated at around Rs 1200 million in 2001. snacks centre. per outlet. limitations of mass media and existence of counterfeit goods.5 billion. According to the survey. The one thing that is common amongst these estimates is that Indian organized retail market will be very big in 2010. There are around 5 million retail outlets in India. The status of the retail industry will depend mostly on external factors like Government regulations and policies and real estate prices.000 crore . small ticket sizes. it is primarily the status-oriented segment that contributes largely to the retailer’s cash register. In India the per capita retailing space is about 2sq.mt.000 crore by year 2005 – an annual increase of 20%. the global management consultancy AT Kearney put retail trade at 400. While India presents a large market opportunity given the number and increasing purchasing power of consumers.000 crore retail market is norganized. In 2000. independent.

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