PROJECT REPORT

ON
CONSUMER BEHAVIOUR
IN THE INDIAN RETAIL
SECTOR
SUBMITTED BY
SUBMITTED TO
GAGAN JOT SINGH
SCHOOL
PGP-Retail (JUL2009-11BATCH)
Reg. No. 9208500032

IILM

BUSINESS
NEW DELHI

INTERNATIONAL INSTITUTE OF LEARNING IN

MANAGEMENT, NEW DELHI
LC CODE- 850
A project report submitted in partial fulfillment of the
requirements for the degree of PGP of IILM Business School, New
Delhi

IILM BUSINESS SCHOOL

1

B-II/66, MCIE, MATHURA ROAD, NEAR BADARPUR BORDER

NEW DELHI, 110044

ACKNOWLEDGEMENT
My sincere thanks to Faculty Guide under whose able guidance and kind cooperation I
was able to complete the project work titled "Consumer Behaviour in the Indian
Retail Sector" .

Also, I do thank and remember my friends for their effort and helping hand.
Every effort has been made to enhance the quality of work. However, I owe the sole
responsibility of the shortcoming, if any, in the study.

GAGAN JOT SINGH

TABLE OF CONTENTS
INTRODUCTION
REVIEW OF LITERATURE
Retailing in India
Unorganized Retailing
Organized Retailing
The macro picture of retailing
Present Indian scenario
Traditional retail scene in India
OBJECTIVES
SCOPE OF STUDY
RESEARCH METHODOLOGY
Methodology adopted
Sources of data collection
Sample size
Demographic profile of sample

RETAIL FORMATS
RETAIL SUMMARY CHART
POPULAR INDIAN RETAIL FORMATS
FUTURE PLANS OF VARIOUS RETAILERS
POPULAR RETAIL STORES IN INDIA
RETAIL AS AN EMPLYOMENT GENERATOR
EMERGING TRENDS IN MODERN RETAIL
DELHI/NCR CURRENT RETAIL SCENARIO
FACTORS FOR DEVELOPMENT OF RETAIL IN INDIA

CHALLENGES FOR RETAILING

For retailing industry
For Indian retail industry
QUESTIONNAIRE
FINDINGS AND ANALYSIS
FACTORS AFFECTING SHOPPERS BEHAVIOUR
KEY OBSERVATIONS
CONCLUSION
A COMPARISON CASE
Pantaloons v/s Westside
REFERENCES

INTRODUCTION

Retail Sector
The word "Retail" originates from a French-Italian word retaillier which means to break bulk.
Retailing is the set of activities that markets products or services to final consumers for their own
personal or household use. It does this by organizing their availability on a relatively large scale
and supplying them to customers on a relatively small scale.
Retailing is the last stage in the movement of goods and services to the consumer.
Retail therefore consists of all activities involved in the marketing of goods and services directly
to the consumers for their personal, family or domestic use.
Retailer is a person or Agent or Agency or Company or Organization who is instrumental in
reaching the goods or merchandise or services to the end user or the ultimate consumer.
Retailing involves all activities incidental to selling to ultimate consumer or the end user for their
personal, family and household use. It does this by organizing their availability on a relatively
large scale and supplying them to users on a relatively small scale. Retailer is any person or an
organization instrumental in reaching the goods or merchandise or services to the end users.
Retailer is a must in the process and cannot be eliminated.
The Indian retailing industry is becoming extremely competitive, as more and more players are
targeting 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 the Indian market. 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 growth
stage in 2008. India's retail market is expected to grow tremendously in next few years. Retail
market is expected to grow 10% a year, with modern retailing just beginning.
This window of opportunity is useful for executives who plan their market-specific strategies;
the four stages or the lifecycle of this industry are as follows:
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Introduction:
An introduction is the opening phase of a market and is one that is just entering Global Retail
Development Index (GRDI). This index is based on more than 25 macro-economic and retail
specific variables for instance, the country risk includes parameters like political risk, economic
risk, performance risk, financial risk and business risk. The market attractiveness covers retail
sales per capita, urban population, laws and regulations and business efficiency.
At this stage, retailers should monitor and performing high-level assessments, they should plan
for their entry strategies in the market. India in the late 1990's is a good example in the opening
stage, while in 2007; Kazakhstan was the country in introduction stage.
Strategy suggested: A rapid penetration strategy is suggested at this stage that is low price and
high promotion.

Growth:
In growth stage, the market is developing quickly and also is ready for modern retailing.
Countries, which are in Peaking stage such as India. Retailers who are 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.
Strategy suggested: The strategy of adopting quality and styled products with new models and
shift of advertising from product awareness to product preference .The idea behind adopting this
strategy is to strengthen against competitors.

Maturity:
In this stage the market is still big and growing, but the space for new entrants will become
tighter and retailers should act promptly at this stage because retailers at this stage have limited
time to explore, and also their margin for error is less. In general, they should act in accordance
to the established rules and should be open to face the competition from international retailers.
This stage generally lasts longer than the previous two stages.
Strategy suggested: Enter new market segments, that is, either enter new geographic areas or
introduce new and innovative products and offers.
Decline:
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 in2005.
Strategy suggested: Identifying weak segments, maintaining investment level selectively.

REVIEW OF
LITERATURE

RETAILING IN INDIA
Retailing is the most active and attractive sector of the last decade. While the retailing industry
itself has been present since ages in our country, it is only the recent past that it has witnessed so
much dynamism. The emergence of retailing in India has more to do with the increased
purchasing power of buyers, especially post-liberalization, increase in product variety, and
increase in economies of scale, with the aid of modern supply and distributions solution.
Indian retailing today is at an interesting crossroads. The retail sales are at the topmost point in
history and new technologies are improving retail productivity. Though there are many
opportunities to start a new retail business, retailers are facing numerous challenges.
India has witnessed a frenetic pace of retail growth over the past five years. Goldman Sachs has
estimated that the Indian Economic growth could actually exceed that of China by 2015. It is
believed that the Country has potential to deliver the faster growth
over the next 50 years. As we all know that India has been a nation of Dukandars, having
around 12 million retailers. Obviously retailing is in our blood either as a shopkeeper or as a
shopper. The Indian Retail market is estimated to grow from the current US $ 330 billion
to US $ 427 billion by 2010 & U. S. $ 637 by 2015. Retail which contributes 10% of our GDP is
the largest source of employment after agriculture. In the year 2004, ratio of organizedUnorganized retail was 3:97 which is expected to be 9:91 by 2010. (Annexure: 9 It is not just the
global players like Wal-Mart, Tesco and Metro group are eying to capture a pie of this galloping
market but also the domestic corporate behemoths like Reliance, NeelKamal, KK Modi, Aditya
Birla group, and Bharti group too are at the same stage of retail development...
There is augmented sophistication in the shopping pattern of customers, which has resulted to the
emergence of big retail chains in most metros; mini metros and towns being the next target.
Customer taste and preferences are changing leading to radical transformation in
lifestyles and spending patterns which in turn is giving rise to new business opportunities.

10

The generic growth is likely to be driven by changing lifestyles and by strong surge in income,
which in turn will be supported by favorable demographic patterns.
Development of mega malls in India is adding new dimensions to the booming retail sector.
There is significant development in retail landscape not only in the metros but also in the smaller
cities. Even ITC went one step ahead to revolutionize rural retail by developing
Choupal Sagar; a rural mall, for the Rural India. On one hand there are groups of visionary
corporate working constantly to improve upon urban shopping experience and on the other hand
some companies are trying to infuse innovative retail experience into the rural Set up. Given
the situation we can say that Indian Retailing is at boom.
India has sometimes also been called a nation of shopkeepers. This epithet has its roots in the
large number of retail enterprises in India, which totaled over 12 million in 2003. About 78% of
these are small family businesses utilizing only household labor. Even among retail enterprises
that employ hired workers, the bulk of them use less than three workers.
India's retail sector appears backward not only by the standards of industrialized countries but
also in comparison with several other emerging markets in Asia and elsewhere. There are only 14
companies that run department stores and two with hypermarkets. While the number of
businesses operating supermarkets is higher (385 in 2003), most of these had only one outlet.
The number of companies with supermarket chains was less than 10.
In a developing country like India, a large chunk of consumer expenditure is on basic necessities,
especially food related items. Hence, it is not surprising that food, beverages and tobacco
accounted for as much as 71% of retail sales in 2002. The remaining 29% of retail sales are nonfood items. The share of food related items fell over the review period, down from 73% in 1999.
This is to be expected as, with income growth, Indians, like consumers elsewhere, spent more on
non-food items compared with food products.
Sales through supermarkets and department stores are small compared with overall retail sales.
However, their sales grew much more rapidly (about 30% per year during the review period). As
a result, their sales almost tripled during this time. This high acceleration in sales through
11

modern retail formats is expected to continue during the next few years with the rapid growth in
numbers of such outlets in response to consumer demand and business potential.

The retail sector in India is witnessing a massive revamping exercise as traditional markets make
way for new formats such as departmental stores, hypermarkets, supermarkets and specialty
stores. Rated the fifth most attractive emerging retail market, India is being seen as a potential
goldmine. A recent McKinsey study titled Indias Retailing Comes of Age has predicted a
retail revolution in India. While India is the last among the large Asian economies to liberalize its
retail sector, the licensing raj has well and truly passed.
Hence, focusing on two aspects of retail marketing i.e. Store Retailing and Non-store Retailing.
Store Retailing as the departmental store, which is a store or multi brand outlet, offering an array
of products in various categories under one roof, trying to cater to not one or two but many
segments of the society and Nonstore Retailing as the direct selling, direct marketing, automatic
vending. Most of these stores believe in creating not just a marketing activity with its
customers, but rather favour relationship building with him so as to convert first time customers
into a client.
A number of Indian and international retailers are entering this nascent, though dynamic market.
Market liberalization and increasingly assertive consumers are sowing the seeds of a retail
transformation that will bring bigger Indian and multinational players on to the scene. Buoyed by
a strong increase in private consumption, retailing is one industry that is waiting to explode.
Though retail may well be our next sunrise industry after Information Technology, capitalizing
on the opportunities is still a formidable task for retailers. We may have made several forays into
the world of international retailing, but success has only been moderate. At about 2 per cent of
the total global retail market, we are still only scraping the surface. (Economic Times Knowledge
Series Changing Gears: Retailing in India, 2003).
Says B S Nagesh, CEO of Shoppers Stop, Indian retailing is on the threshold of growth early
leaders have to take their technology and current learning into much larger scales. Companies
12

like us will lead in creating retail experiences and retail brands, whereas mall developers will
lead in providing retail space. But it is for the government to make India a great shopping and
travel destination through right policy decisions and direction.
.
Retail industry is the largest industry in India, with an employment of around 8% and
contributing to over 10% of the country's GDP. Retail industry in India is expected to rise 25%
yearly being driven by strong income growth, changing lifestyles, and favorable demographic
patterns.
It is expected that by 2016 modern retail industry in India will be worth US$ 175- 200 billion.
India retail industry is one of the fastest growing industries with revenue expected in 2007 to
amount US$ 320 billion and is increasing at a rate of 5% yearly. A further increase of 7-8% is
expected in the industry of retail in India by growth in consumerism in urban areas, rising
incomes, and a steep rise in rural consumption. It has further been predicted that the retailing
industry in India will amount to US$ 21.5 billion by 2010 from the current size of US$ 7.5
billion.
Shopping in India have witnessed a revolution with the change in the consumer buying behavior
and the whole format of shopping also altering. Industry of retail in India which have become
modern can be seen from the fact that there are multi- stored malls, huge shopping centers, and
sprawling complexes which offer food, shopping, and entertainment all under the same roof.
India retail industry is expanding itself most aggressively, as a result a great demand for real
estate is being created. Indian retailers preferred means of expansion is to expand to other
regions and to increase the number of their outlets in a city. It is expected that by 2010, India
may have 600 new shopping centers.
In the Indian retailing industry, food is the most dominating sector and is growing at a rate of 9%
annually. The branded food industry is trying to enter the India retail industry and convert Indian
consumers to branded food. Since at present 60% of the Indian grocery basket consists of nonbranded items.
13

India retail industry is progressing well and for this to continue retailers as well as the Indian
government will have to make a combined effort.
Retailing in India can be categorized as:

Unorganized Retailing
Organized Retailing

14

Unorganized retailing in India

In India, the most of the retail sector is unorganized. In India, the retail business contributes
around 11 percent of GDP. Of this, the organized retail sector accounts only for about 3 percent
share, and the left over share is contributed by the unorganized sector which is mostly a family
owned business in India. The major challenge facing the organized sector is the competition from
unorganized sector. Unorganized retailing has been there in India for centuries, theses are named
as mom-pop stores. The major advantage in unorganized retailing is consumer familiarity that
runs from generation to generation. It is a low cost structure; they are mostly operated by owners,
has very low real estate and labour costs and has low taxes to pay.

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Organized retailing in India

In late 1990's the retail sector has witnessed a level of transformation. Retailing is being
perceived as a beginner and as an attractive commercial business for organized business i.e. the
pure retailer is starting to emerge now. Organized retail business in India is very small but has
tremendous scope.
Organized retailing will grow faster than unorganized sector and the growth speed will be
responsible for its high market share, which is expected to be $ 17 billion by 2010-11.
Retailing will show fine prospects in cities like Mumbai, Delhi, Chennai, Kolkata, Banglore and
Kanpur. After Dubai, Singapore and Hong Kong, In India Delhi will be the next big retail
destination, According to Confederation of Indian Industries whose findings have shown that
Delhi has the good resources and suitable conditions for the retail sector. Out of the total
earnings of the Government of Delhi Rs 11,000 crore, Rs 6,500 crore is achieved from the retail
sector.
The organized sector is expected to grow faster than GDP growth in next few years driven by
favourable demographic patterns, changing lifestyles, and strong income growth. This organized
retail sector mix includes supermarkets, hypermarkets discounted stores and specialty stores,
departmental stores.

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The Macro Picture:

Retailers inspired by the wall-mart story of growth in small town America, are tempted to
focus on smaller towns and villages in India. However, a careful analysis of the town
strata-wise population, population growth, migration trends of customer spending
analysis reveals a very different picture of India.
As per the NCAER estimates, the share of the 35 towns with a present population of greater than
1 million in Indias total population would grow much faster than their smaller counterparts,
from 10.2 % today to reach 14.4 % by 2025.
Simultaneously, the share of these towns in retail market would grow from 21 % today to 40 %
by 2025. Within these top 35 towns, an estimated 70 to 80 % of retail trade would be in the
organized sector. This is similar to the experience in China where in cities like Sanghai and
Beijing, the organized sector accounts for 70 to 80 % of overall retails trade in certain categories.
Retailers should therefore focus on top 37 towns in the next decade, as the opportunity in smaller
towns and rural India would be smaller and more fragmented as compared to the larger towns.
But again this is the one side of the coin. only.

Retail industry is the largest industry in India, with an employment of around 8% and
contributing to over 10% of the country's GDP. Retail industry in India is expected to rise 25%
yearly being driven by strong income growth, changing lifestyles, and favorable demographic
patterns.
It is expected that by 2016 modern retail industry in India will be worth US$ 175- 200 billion.
India retail industry is one of the fastest growing industries with revenue expected in 2007 to
amount US$ 320 billion and is increasing at a rate of 5% yearly. A further increase of 7-8% is
expected in the industry of retail in India by growth in consumerism in urban areas, rising
incomes, and a steep rise in rural consumption. It has further been predicted that the retailing
industry in India will amount to US$ 21.5 billion by 2010 from the current size of US$ 7.5
billion.
Shopping in India have witnessed a revolution with the change in the consumer buying behavior
and the whole format of shopping also altering. Industry of retail in India which have become
modern can be seen from the fact that there are multi- stored malls, huge shopping centers, and
sprawling complexes which offer food, shopping, and entertainment all under the same roof.
17

India retail industry is expanding itself most aggressively, as a result a great demand for real
estate is being created. Indian retailers preferred means of expansion is to expand to other
regions and to increase the number of their outlets in a city. It is expected that by 2010, India
may have 600 new shopping centers.
In the Indian retailing industry, food is the most dominating sector and is growing at a rate of 9%
annually. The branded food industry is trying to enter the India retail industry and convert Indian
consumers to branded food. Since at present 60% of the Indian grocery basket consists of nonbranded items.
India retail industry is progressing well and for this to continue retailers as well as the Indian
government will have to make a combined effort.

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PRESENT INDIAN SCENARIO

* Unorganized market: Rs. 583,000 crores
* Organized market: Rs.5, 000 crores
* 6X growth in organized retailing between 2005-2008
* Over 4,000 new modern Outlets in the last 3 years
* Over 5,000,000 sq. ft. of mall space under development
* The top 3 modern retailers control over 750,000 sq. ft. of retail space
* Over 400,000 shoppers walk through their doors every week
* Growth in organized retailing on par with expectations and projections of the last 5 Years: on
course to touch Rs. 35,000 crores (US$ 7 Billion)

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TRADITIONAL RETAIL SCENE IN INDIA

India is the country having the most unorganized retail market. Traditionally the retail business is
run by Mom & Pop having Shop in the front & house at the back. More than 99% retailers
function in less than 500Sq.Ft of area. All the merchandise was purchased as per the test & vim
and fancies of the proprietor also the pricing was done on ad hock basis or by seeing at the face
of customer. Generally the accounts of trading & home are not maintained separately. Profits
were accumulated in slow moving & non-moving stocks which were to become redundant or
consumed in-house. Thus profits were vanished without their knowledge. The Manufactures
were to distribute goods through C & F agents to Distributors & Wholesalers. Retailers happen
to source the merchandise from Wholesalers & reach to end-users. The merchandise price used
to get inflated to a great extent till it reaches from Manufacturer to End-user. Selling prices were
largely not controlled by Manufacturers. Branding was not an issue for majority of customers.
More than 99% customers are price sensitive & not quality or Brand Sensitive at the same time
they are Brand conscious also. Weekly Bazaar in many small tows was held & almost all the
commodities were on the scene including livestock. Bargaining was the unwritten law of market.
Educational qualification level of these retailers was always low. Hence market was controlled
by handful of distributors &/or Wholesalers. Virtually there was only one format of retailing &
that was mass retail. Retailer to consumer ratio was very low, for all the categories without
exception. Varity in terms of quality, Styles were on regional basis, community based & truly
very low range was available at any given single place. Almost all the purchases / (buying) by
mass population was need oriented & next turn may be on festivals, Marriages, Birthdays &
some specific occasions.
Impulsive buying or consumption is restricted to food or vegetables etc. Having extra pair of
trousers or Shirts or Casuals & Formals & leisure wear & sports wear & different pair of shoes
for occasions is till date is a luxury for majority population except for those living in Metros.
Purchasing power of Indian urban consumer is very low and that of Branded merchandise in
categories like Apparels, Cosmetics, Shoes, Watches, Beverages, Food, Jewellery, are slowly
seeping into the lifeline of Indian City folks. However electronic & electrical home appliances
do hold appropriate image into the minds of consumers. Brand name does matter in these white
goods categories. In the coming times also majority of organized retailers will find it difficult to
keep balance with rest of the unbranded retail market which is very huge.

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OBJECTIVES

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 To study the buying behaviour of Indian customers.

Understanding the present Indian Retail scenario with respect to emergence of big retail
chains in most metros, mini metros and towns according to change in customer taste,
preferences, lifestyle and spending patterns.

To study the reasons for buying from a particular retail store

Understanding the various factors such as price, quality, service, offers etc. which
influence the customers for buying from a particular retail store.

To study the nature and trends in buying patterns of customers.

Understanding the demographic segmentation and the respective buying patterns of the
customers according to the latest trends in the market.

Understanding the needs of customers

In a diverse culture of a country like India, it is important to understand that the needs of
the customers may differ from person to person and culture to culture.

To provide recommendations to serve customers quickly, efficiently and

conveniently.
Due to the highly competitive and nearly saturated market, only those retail stores will
survive in the long run which will provide better services quickly, efficiently and
conveniently.

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SCOPE OF STUDY

23

The scope of the study involved getting knowledge about the retail industry. The major
part of the study focused on understanding the buying behavior and patterns of Indian
customers.
My approach was to get a deep insight into the sector through a study which included a
comprehensive analysis of the following:

Present Indian retail scenario

Retail formats

Indian retail and plans of Indian retailers

Retail as an employment generator

Emerging trends in the retail sector

NCR/ Delhi current retail scenario

Factors responsible for the development of the retail sector

Challenges for the retail sector

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RESEARCH
METHODOLOGY

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Research Methodology adopted

The research methodology consisted of the following steps:
1. Familiarization with the retail concepts and retail industry in India
2. Collection of database from individuals through a questionnaire.
3. Analysis and interpretation of data.
4. Reaching at conclusions and suggestions based on analysis.

Sources of Data Collection

1. Primary Source

ONLINE QUESTIONNAIRE

2. Secondary sources

INTERNET

BOOKS

REPORTS

Sample Size
100 people

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Demographic Profile of Sample

22 years and above

Randomly selected people.

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RETAIL FORMATS

28

Prevalent Retail Formats

The following kinds of retail formats are found in India:

Mom-and-pop stores:

These are generally family-owned businesses catering to small sections of society. They are
small, individually run and handled retail outlets. Represent the small, individually owned and
operated retail outlet. In many cases these are family-run businesses catering to the local
community

Category killers:

Small specialty stores have expanded to offer a range of categories. They have widened their
vision in terms of the number of categories. They are called category killers as they specialize in
their fields, such as electronics (Best Buy) and sporting goods (Sport Authority).

Department stores:

These are the general merchandise retailers offering various kinds of quality products and
services. Large stores having a wide variety of products, organized into different departments
such as clothing, house wares, furniture, appliances, toys, etc. One stop shop catering to varied/
consumer needs.
These do not offer full service category products and some carry a selective product line. K
Raheja's Shoppers Stop is a good example of department stores. Other examples are Lifestyle
and Westside. These stores have further categories, such as home and dcor, clothing, groceries,
toys, etc.
These retailers are general merchandisers offering mid-to-high quality products and strong level
of services, though in most cases these retailers would not fall into the full-service category.
While department stores are classified as general merchandisers some carry a more selective
product line. For instance, while Sears carries a wide range of products from hardware to
cosmetics, Nordstroms focuses their products on clothing and personal care products.

Malls:

These are the largest form of retail formats. They provide an ideal shopping experience by
providing a mix of all kinds of products and services, food and entertainment under one roof.
29

Examples are Sahara Mall, TDI Mall in Delhi. An enclosure having different formats of in-store
retailers, all under one roof. Variety of shops available to each other.

Specialty Stores:

The retail chains, which deal in specific categories and provide deep assortment in them are
specialty stores. Examples are RPG's Music World, Mumbai's bookstore Crossword, etc. Focus
on a specific consumer need, carry most of the brands available. Greater choice to the consumer,
comparison between brands is possible

Discount stores:

These are the stores or factory outlets that provide discount on the MRP items. They focus on
mass selling and reaching economies of scale or selling the stock left after the season is over.
These retailers can be either general or specialty merchandisers but either way their main focus is
on offering discount pricing. Compared to department stores, mass discounters offer fewer
services and lower quality products.

Hypermarkets/ Supermarkets:

(3,500 - 5,000 sq. ft)

These are generally large self-service outlets, offering a variety of categories with deep
assortments. These stores contribute 30% of all food and grocery organized retail sales. Example:
Big Bazaar. Extremely large self-service retail outlets. One stop shop catering to varied consumer
needs

Convenience stores:

(7,50 - 1,000 sq. ft)

They are comparatively smaller stores located near residential areas. They are open for an
extended period of the day and have a limited variety of stock and convenience products. Prices
are slightly higher due to the convenience given to the customers.
As the name implies these general merchandise retailers cater to offering customers an easy
purchase experience. Convenience is offered in many ways including through easily accessible
store locations, small store size that allows for quick shopping, and fast checkout. The product
selection offered by these retailers is very limited and pricing can be high. Small self-service
formats located in crowded urban areas. Convenient location and extended operating hours

E- tailers:

These are retailers that provide online facility of buying and selling products and services via
Internet. They provide a picture and description of the product. A lot of such retailers are
30

booming in the industry, as this method provides convenience and a wide variety for customer.
But it does not provide a feel of the product and is sometimes not authentic. Examples are
Amazon.com, Ebay.com, etc.
Possibly the most publicized retail model to evolve in the last 50 years is the retailer that
principally sells via the Internet. There are thousands of online-only retail sellers of which
Amazon.com is the most famous. These retailers offer shopping convenience including being
open for business all day, every day. Electronic retailers or e-tailers also have the ability to offer
a wide selection of product since all they really need in order to attract orders is a picture and
description of the product.
That is, they may not need to have the product on-hand the way physical stores do. Instead an etailer can wait until an order is received from their customers before placing their own order with
their suppliers. This cuts down significantly on the cost of maintaining products in-stock.

Vending:

This kind of retailing is making incursions into the industry. Smaller products such as beverages,
snacks are some the items that can be bought through vending machines. At present, it is not very
common in India.
Within this category are automated methods for allowing consumers to make purchases and
quickly acquire products. While most consumers are well aware of vending machines allowing
customers to purchase smaller items, such as beverages and snack food, newer devices are
entering the market containing more expensive and bulkier products. These systems require the
vending machine have either Internet or telecommunications access to permit purchase using
credit cards.

Warehouse Stores

This is a form of mass discounter that often provides even lower prices than traditional mass
discounters. In addition, they often require buyers to make purchases in quantities that are
greater than what can be purchased at mass discount stores. These retail outlets provide few
services and product selection can be limited. Furthermore, the retail design and layout is as the
name suggests, warehouse style, with consumers often selecting products off the ground from the
shipping package. Some forms of warehouse stores, called warehouse clubs, require customers
purchase memberships in order to gain access to the outlet.

31

Retail Summary Chart

Below, we summarize each retail format by using the seven categorization characteristics.
The
characteristics identified for each format should be viewed as the most likely case for that
format and are not necessarily representative of all retailers that fall into this format.
For example, under distribution, clearly most retailers today have an online presence, however,
for many the predominant distribution methods is still selling through retail stores.

Format

Target Products Pricing

Market Carried Strategy

Mom-andPop

mass
general competitive advertising stand-alone assorted
specialty specialty
direct mail strip
center
shopping area
mass
general discount advertising stand-alone self
strip-center
mass
general discount advertising stand-alone self

individually
o/o

mass

corp. chain

Mass
Discounter
Warehouse
Store
Category
Killler
Department
Store
Boutique

Catalog
e-tailer

Franchise

Promotion Distribution Service Ownership

Emphasis
Level Structure

specialty discount advertising stand-alone assorted

competitive
strip center
specialty general competitve advertising shopping areaassorted
shopping mail
speciatly specialty Full
selling
stand-alone full
exclusive
strip
center
shopping area
mass
general discount direct mail direct
assorted
specialty specialty competitive
marketer
mass
general discount advertising online seller self
specialty specialty competitive
full
mass
specialty competitive advertising stand-along assorted
strip center

corp. chain
corp. chain

corp. chain
individuallly
o/o
chain
corp.
structure
corp.
structure
contractual

32

Convenience mass

general

Vending

specialty full

mass

full

advertising stand-alone

self

none

self

vending

individually
o/o
corp. chain
corp.
structure

33

Popular Indian Retail Formats

In modern retailing, a key strategic choice is the format. Innovation in formats can provide an
edge to retailers. Organized retailers in India are trying a variety of formats, ranging from
discount stores to supermarkets to hypermarkets to specialty chains.
Formats Adopted by Key Players in India

Retailer

Original formats

Later Formats
Hypermarket (Spencer's)Specialty Store
(Health and Glow)

RPG Retail Supermarket (Foodworld)

Piramal's

Department Store (Piramyd Megastore) Discount Store (TruMart)

Pantaloon
Retail

Small format outlets (Shoppe)

Department Store (Pantaloon)

K
Raheja Department Store (shopper's
Group
Specialty Store (Crossword)

Supermarket
(Food
Bazaar)
Hypermarket (Big Bazaar) Mall (Central)

stop) Supermarket
Hypermarket (TBA)

(TBA)

Tata/ Trent

Department Store (Westside)

Hypermarket (Star India Bazaar)

Landmark
Group

Department Store (Lifestyle)

Hypermarket (TBA)

Others

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

Specialty Electronics

34

Future Plans of Various Retailers

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 mn
sq.ft by 2010.

LIFESTYLE :
Investing Rs.400 crore-plus ($90 mn) 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 2015.

Piramyd Retail:
Aiming to occupy 1.75 million sq.ft retail space through 150 stores in next five years.

TATA (Trent Ltd.):

Trent to open 27 more stores across its retail formats adding 1 mn sq.ft of space in the
next 12 DLF malls. Titan industries to add 50-plus Titan and Tanishq stores in 2006.

35

SOME POPULAR RETAIL STORES IN INDIA

BIG BAZAAR

LIFESTYLE

MARKS & SPENCER

PANTALOONS

SHOPPER'S STOP

SPENCERS

RELIANCE

MORE...

SUBHIKSHA

VISHAL MEGA MART

WESTSIDE

6 TEN RETAIL STORE

36

RETAIL AS AN
EMPLOYMENT GENERATOR

37

The retail sector can generate huge employment opportunities, and can lead to job-led economic
growth. In most major economies, services form the largest sector for creating employment.
US alone have over 12% of its employable workforce engaged in the retail sector. The retail
sector in India employs nearly 21 million people, accounting for roughly 6.7% of the total
employment.
However, employment in organised retailing is still very low, because of the small share of
organised retail business in the total Indian retail trade. The share of organised retailing in India,
at around 2%, is abysmally low, compared to 80% in the USA, 40% in Thailand, or 20% in
China, thus leaving the huge market potential largely untapped. A modern retail/retail services
sector has the potential of creating over 2 million new (direct) jobs within the next 6 years in the
country (assuming only 8-10% share of organised retailing).
Retail can create as many new jobs as the BPO/ITES sector in India. A strong retail front-end can
also provide the necessary fillip to agriculture & food processing, handicrafts, and small &
medium manufacturing enterprises, creating millions of new jobs indirectly. Through its strong
linkages with sectors like tourism and hospitality, retail has the potential of creating jobs in these
sectors also.
Though the Planning Commission has identified retail as a prospective employment generator, in
order to strengthen the multiplier effect of the growth in organized retailing upon the overall
employment situation, a pro-active governmental support mechanism needs to evolve for
nurturing the sector. Issues like FDI in retail, allocation of government-controlled land on more
favorable terms, strong political and bureaucratic leadership, etc., need to be addressed
adequately.

38

EMERGING TRENDS
IN MODERN RETAIL

39

It is difficult to fit a successful international format directly and expect a similar performance in
India. The lessons from multinationals expanding to new geographies also point to this. For
example, Wal- Mart is highly successful in USA but the story is different in Asian countries like
China. Therefore, it is important for a retailer to look at local conditions and insights into the
local buying behavior before shaping the format choice. Considering the diversity in terms of
taste and preferences prevailing in India, the retailers may go for experimentation to identify the
winning format suited to different geographies and segments. For example, the taste in south is
different from that in north and this brings challenges to the retailers. Therefore, most of grocery
retailers are region centric at this point in time. The available research findings on retail indicate
the following trends in Modern Retail formats.
1)Trial & Error:
Now a number of retailers are in a mode of experimentation and trying several formats which are
essentially the representation of retailing concepts to fit into the consumer mind space. Apart
from geography even rural and urban divide poses different kind of challenge to the retailer.
Pantaloon Retail India is experimenting with several retail formats to cater to a wide segment of
consumers in the market.
2) Emergence of Wholesale Clubs:
Since retailers are trying to segment the market with the help of formats, they developed another
new format in the form of Wholesale Club to sell a segment of consumers, who purchase on bulk
and look out for substantial discounts and offers. The new format is going to be a kind of
wholesale club which is likely to be located close to Food Bazaar. Consumers who are interested
to purchase on bulk can take benefit from this format. Similarly the Land mark group also
operates multiple formats such as hypermarket (Max), departmental store (Lifestyle), Shoe mart
and Funcity etc. Such experimentation and identification of an appropriate format for the local
conditions would separate winners from losers in India, possibly implying multiple formats

40

could be the reality in the long run. Pantaloon Retail India Ltd is a live example of that in Indian
scenario.
.

3) Increasing Acceptance of Rural Markets:

Mall-mania is phenomenal in India and is spreading fast and entering even the second tier cities
in India. Real estate developers are jumping very fast to take this further from Metro cities to
smaller cities and corporate houses like ITC and Sriram group are making steady progress to
make this phenomena feasible in rural markets as well. There is no denying that the top notch
cities like Mumbai, Delhi, Bangalore, Hyderabad, Kolkata, Chennai and Pune are leading the
way but the second tier cities like Ludhiana,
Chandigarh, Nagpur and Surat are also catching the eye of allretailers. Retail developers are in
such a mood that they may over ride the requirement in a specific city.

4) Govt. is also promoting the Development of Modern Retail

Formats:
Large format malls are increasingly getting
prominence with adequate retail space allocated to leisure and
entertainment. Some states like Punjab have lifted entertainment
tax on multiplexes till 2009. This boosted the confidence of the
mall developers to accommodate entertainment players like PVR,
Waves, Adlab and Fun Republic in large malls.
5) Efficient Buying: Increasing Importance of Supermarkets
& Discount Stores:

41

Such a format provides the greatest selection of any general merchandize and very often serves
as the anchor store in shopping mall or shopping centre. In India, the number of department
stores is less as compared to other retail formats such as supermarkets and discount stores.
Shoppers' Stop is the first one to open a department store in the early 1990s and currently
operates 19 stores in 10 different cities in India.The store strongly focuses on lifestyle retailing
and mainly divides into five departments such as apparel, accessories, home dcor, gift ideas and
other services. Shoppers Stop is getting stronger and stronger year after year. It attracts more
than 12 million shoppers every year with a conversion rate of 38 per cent. Another operator
Lifestyle India began operations in 1998 with its first store in Chennai in 1999 and in March
2006 it opened one of the largest department stores in the same city. The store spreads over
75,000 sq. ft and store provides customers a great shopping experience with three floors of
apparel, footwear, products for children, household furniture and decor, health and beauty
products.
6) Hypermarkets: The Biggest Crowd Puller:
Hypermarkets have emerged as the biggest crowd pullers due to the fact that regular repeat
purchases are a norm at such outlets. Hypermarkets not only offer consumers the most extensive
merchandise mix, product and brand choices under one roof, but
also create superior value for money advantages of hypermarket shopping. With product
categories on offer ranging from fresh produce and FMCG products to electronics, value
apparels, house ware, do it yourself (DIY) and outdoor products, the
hypermarkets are emerging as one of the popular formats in India.. Number of players operating
hypermarket format are increasing day by day. One of the leading players in this format is
Pantaloon Retail India Limited which operates 32 Big Bazaars in twenty cities. In early 2006, the
K. Raheja Corp (C.L. Raheja Group) has introduced its value retail concept hyper city which is
the countrys largest hypermarket at 118000 sq ft. hyper city Retail plans to open 55
hypermarkets by 2015. As the market is expanding and consumers are in a mood to accept
changes, hypermarkets are getting overwhelming response from consumer. Currently there are
about 40 odd hypermarkets in India but this format holds a great potential for growth.

42

7) Customers still rely on traditional concepts:

A supermarket normally sells grocery, fresh, cut vegetables, fruits, frozen foods, toiletries,
cosmetics, small utensils, cutlery, stationery and Gift items. In India Food World, Food Bazaar,
Nilgiri (30 plus stores), and Adani are the leading super market
operators .One of the biggest super market operators in the western India is Adani Retail Limited
which operates Adani super market plans to continue its journey to reach total 19 cities with the
store strength of 60 plus in the state of Gujarat. ARL also
plans to expand its operation in the neighboring states of Rajasthan, Madhya Pradesh,
Maharashtra and Chhattisgarh. Subhiksha is one of the leading super market operators, who
largely operates in the southern part of India is expanding to western India. One more retailer
Reliance Retail is on the move and this retailer opened its Reliance Fresh-a super market chain
with 11 stores in Hyderabad and is planning to enter 70 more cities within 2 years.
8) Emergence of Private-Label Brands:
The private labels are offering flexibility to both the retailer and the consumer on price front. The
objective of the store is to offer variety at affordable price in each category. Food Bazaar have
made the transition from just a grocery retailer to developing emotional bonding with shoppers
by providing some value added services to the
shoppers. Some of these initiatives include :
( Jo Dikhta Hai wo hi Bikta Hai )
Live chakki: which allows customers to buy fresh wheat and have it grinded there at the store
Fresh Juice counter: This provides customer to have fresh juices.
Live dairy: This provides customers with fresh milk and milk products.

43

Live kitchen: Customers have the option of buying vegetables,getting them chopped, cooked
fully or partly. Soups, salads and sandwiches are also available at live kitchen.

9) Ease of Shopping & Customized Services: Order of the Day: To activate it a new format
has emerged in the name of Convenience Store.
A Convenience store offers locational advantage to the shoppers and provides ease of shopping
and customized service to the shoppers. It charges average to above average prices, depending on
the product category and carries a moderate number of stock keeping units (SKUs). Normally it
remains open for long hours and shoppers use it for buying fill-in merchandize and emergency
purchases. In India, Convenience
stores occupied 23 thousand sq. meter of retail space with sales of about Rs 1347 million in 2005
and are expected occupy 85 thousand square meter of selling space by 2010 .

10) Magnetic Effect: Discounters not Shopkeepers:

Wal-Mart, the largest retailer in the world is a discounter. Practically the discounters offer several
advantages such as lower price, wider assortment and quality assurance. The discounters like
Wal-Mart and Aldi were able to quickly build scale and pass on the benefits to the consumer.
However, in the long run success depends on the operational efficiency and consistent value
delivery to the consumer. The same retailer Wal-Mart struggles in Asian countries like China but
extremely successful in USA. It is believed that the average Indian consumer is highly
pricesensitive and looks for savings in term of money in their grocery purchase. So price-value
equation is a critical component in most of the grocery purchases.
11) Category Killer: A New Concept imported from U.S.:

44

The category killer concept originated in the U.S. due to abundance of cheap land and the
dominant car culture. Category Killer is a kind of discount specialty store that offers less variety
but deep assortment of merchandise. By offering a deep assortment in a
category at comparative low prices, category specialist can be able to kill that specific category
of merchandize for other retailers. Generally such kind of retailers uses a self service approach.
They use their buying power to negotiate low prices, excellent terms and assured supply when
items are scarce. In India this kind of retail stores are not prevalent at this point of time. But there
is scope for such kind of format. In India, MegaMart is one sort of category killer which sells apparel products.
12) Dollar Stores:
Dollar stores have their roots in America's homey five-and- dimes, the general stores that offered
a range of products at low prices. But modern dollar-store retailers are
having more sophisticated operations; leveraging their growing buying power to strike special
deals with vendors and continuously striving for unique advantage of both convenience and
price. Some chains sell all their goods at $1 or less. Others offer selected items at higher prices.
Most sell a combination of paper products, health and beauty supplies, cleaning products, paper
and stationery, household goods, toys, food and sometimes clothing. Both private-label and
brand-name goods fill the shelves. They are looking for employing technology to manage large
distribution networks. Store 99 is the example of it in Indian Scenario.

13)Retail Development in Rural India: A Market with Silver

lining:
Chennai based market research firm Francis Kanoi estimated the size of the rural market to be
INR 1, 08,000 crore annually. During the survey in 2002 the firm took into account four
categories - FMCG, durables, agri-inputs, and two- and fourwheelers
45

for their estimation. Rural incomes are growing steadily as well. NCAER data shows while the
number of middle-class households (with annual income between Rs 45,000 and Rs 2.15 lakh) is
at 16.4 million in urban India, the figure stands at 15.6million in the rural areas, data from.
Largely this rural market is untapped and there is huge opportunity for retailers.

14: e-Retailing:
The importance of internet retailing is growing all over the world. Some internet retailers such as
e Bay and rediff.com are providing a platform to vendors to sell their products online and they do
not take the responsibility of delivering the product to buyer.
They provide virtual shopping space to the vendors. On the other hand online retailers like
amazon.com and walmart.com have to maintain their warehouse to stock products and take the
responsibility of delivering products to the buyer. So, most of the brick and mortar stores are
entering into online retailing as they have physical infrastructure and they can use that to capture
additional consumer wallet. All the big retailers like Target, Sears and Kmart are operating online
shop and some manufactures also operate online. For example Apple Inc. operates through
apple.com and Dell Inc. sells
its products online Through dell.com. In India internet retailing is growing by 29% CAGR and
Euro-monitor report estimates that the a CAGR 48 per cent and in value term it
going to touch INR 27 billion by 2010 from INR 4 billion in 2005. The report also predicts that
the contribution of internet retailing to nonstore retailing to is likely to be 46 per cent by 2010.

Emerging recent developments in the Indian Mall Development scenario include the coming up
of so called Gen X Malls and Central which is a Seamless Mall. Gen X Malls have been defined
Chesterton Megharaj as greater than 5, 00,000 sq.ft and incorporate large entertainment area with
enough space for parking and excellent infrastructural benefit that shall be passed on to the
retailer . The target audience for the Gen X

46

malls is tourist /out of town visitor and the person from the city looking for entertainment
options. So, we can say that we are moving from a nation of Dukandars to a Nation that loves to
shop.
15. Emergence of discount stores

In 2002-03, Indians in some cities got the taste of discount stores for the first time. Thanks to
discount stores, the local kirana stores are under pressure and consumers are getting increasingly
aware of the advantages of buying in bulk at higher discounts. With perhaps every item of daily
use available at the discount stores like Big Bazaar and that too at wholesale prices, consumers
easily accepted this format over local kirana stores.

The discount stores emerged as class-less stores with consumers of all income-levels shopping at
these stores. We expect that there will be rapid expansion of discount stores to tier-2 and tier-3
cities and your company is already experimenting in them. The growth opportunities are highest
there.

16. Rapidly changing customer behaviour

From the early 1990s, the scenario in India was beginning to change. This change was coming
from two sources. First, the manufacturers, lured by the almost proverbial 200 million strong
Indian middle class, were continually adding to the range of products in the marketplace. Among
the faster moving consumer goods, while there were 57 core categories in India in 1990, an
additional 19 had entered the market by 1996 and the final figure stands at about 150+ as of now.
These new categories contributed to about 2500 brands and about 5000 stock keeping units
(SKUs). As the manufacturers produced more and more products and variants, focused on the
specific needs of more clearly segmented consumers, the shopkeepers ability to manage his
47

small shop was becoming increasingly complex.

Over the years, the increasing literacy in the Country and the exposure to developed nations via
satellite television or by way of the overseas work experiences, the consumer awareness has
increased on the quality and the price of the products/services that is expected. Today more and
more consumers are vocal on the quality of the products/services that they expect from the
market. This awareness has made the consumer seek more and more reliable sources for
purchases and hence the logical shift to purchases from the organized retail chains that has a
corporate background and where the accountability is more pronounced. The consumer also
seeks to purchase from a place where his/her feedback is more valued.
Indian customers are now more aware and discerning, had been exposed for some years to a
rapidly proliferating media, and were beginning to demand benefits beyond just availability of a
range of products that came from trusted manufacturers. In a retailing context this change in
consumer consciousness is reflected in their desire for:

1. the opportunity to see, evaluate and buy from a large assortment of products at one location;
2. a shopping experience, which is pleasurable, and if possible, even exciting; and
3. a shopping experience that is inexpensive, well presented and durable

In other words, the Indian consumer is beginning to accept shopping to be a pleasurable

experience, but is unwilling to pay a price premium.

48

DELHI/NCR
CURRENT RETAIL
SCENARIO

49

The retail sector in Delhi/NCR is witnessing a huge revamping exercise with traditional markets
making way for new, organized retailing formats like departmental stores, hypermarkets,
supermarkets and specialty stores.
By end-2009, NCR region is expected to witness an influx of about 19.5 mn.sq.ft. of additional
mall space. This will result in a cumulative stock of 23.2 mn.sq.ft. as against 3.7 mn.sq.ft.
available presently.
Of the total space being developed in the NCR and its surroundings, Gurgaon and Noida will
account for 35% of the additional retail space.
Land auctioning by DDA & MCD in prime residential and upcoming retail locations in Delhi has
released new space for mall developments.
Currently, only about 0.36 mn.sq.ft. of land is under new format retail activity in Delhi. A total of
31 new malls have been proposed that will add up to an estimated 6.0 mn.sq.ft. of organized
retail space.
The concept of destination shopping still remains popular in Delhi with Connaught Place and
South Delhi (Greater Kailash, South Extension & Lajpat Nagar) still being the hub of retail
activity.
Rentals in these locations range from Rs.125-300/sq.ft. per month, depending on location,
visibility and size. brought about an increase in income for the 20-25 year age group and this has
altered the expenditure and consumption patterns in the city.
Malls have emerged as a preferred development option for property developers due to better
returns on their real estate investment. Also, mixed-use developments ensure better land use,
diversification of risks and better rates for adjoining residential and commercial developments.
MMR will have an estimated 20 mn.sq.ft. of total retail space by end-2007. With such quantum
of new format retail space in the pipeline, innovation, striking the right tenant mix, effective mall
management and provision of ample parking space are components that will decide the future
success of mall developments.
With approximately 15 mn.sq.ft. on new retail space on the anvil, the demand for new retail
space is equally strong with most retail chains like Pantaloons and Shoppers' Stop having
aggressive expansion plans.

Hypermarkets have emerged as the biggest crowd pullers due to the fact that regular repeat
purchases are a norm at such outlets.

50

The lifestyle of the city residents directly affects the retail scenario in the city. The new
generation of consumers is increasingly becoming more discerning towards brands
and this is promising for the organized retail industry.

Distribution of current retail space in NCR

Gurgaon

43%

Delhi

21%

Faridabad

11%

Ghaziabad

21%

Noida

13%

Greater Noida
Total space :

12%
3.7 mn.sq.ft.

Large format retail space is not readily available in Connaught Place, South Extension, Greater
Kailash and no new malls are being planned in these locations.
North West Delhi is also undergoing considerable change in retail activity. Locations like Rohini,
Pitampura, Shalimar Bagh and Rajouri Garden have witnessed an influx of over 2.0 mn.sq.ft. of
additional retail space.
Emerging retail pockets of South Delhi like Saket and Vasant Kunj are also witnessing
substantial retail activity with a number of new developments being planned by real estate
developers like Sun City and the DLF Group. DLF Group has proposed a 0.95 mn.sq.ft. mall in
Vasant Kunj that will house an 11-screen
multiplex besides having retail and F&B segments.
In the recent times, Gurgaon has seen rapid real estate development (commercial, retail and
residential) chiefly on account of ready availability of comparatively cheaper land, increased job
creation and good a catchment of upwardly mobile population.
Gurgaons retail real estate supply, which currently stands at approximately 1.6 mn.sq.ft., is
expected to reach approximately 5.6 mn.sq.ft. by end-2008.
The completion of new malls like DLF Mega Mall (275,000 sq.ft.), Gold Souk (180,000 sq.ft.),
Regent Plaza (75,000 sq.ft.), and Galaxy Mall (80,000 sq.ft.) added a total of 0.60 mn.sq.ft. to
the existing retail stock in 2007. Presently, Gurgaon has 8 malls that are operational.

51

With more than 15 new malls coming onto the market, Gurgaon will account for 24% of the total
23.2 mn.sq.ft. of retail stock slated to be in NCR market by end-2008.
Over 70% of the space in the upcoming malls has already been leased out to retailers. Noida is
forecasted to see an exponential growth with the mall market increasing in size from the current
0.5 mn.sq.ft. to 2.5 mn.sq.ft. With 5 new malls entering the market, Noida will take up 11% of
the total new retail space scheduled to be in the NCR region.
The prime areas in Sector-18 command rentals of Rs.100-150/sq.ft. per month. The sale prices
range between Rs.8,000-15,000/sq.ft.
Other individual sector markets like Sector-27 & 29 have also been doing prolific retail business.
The rentals in these sectors range from Rs.20-35/sq.ft. per month (Grade-B properties) to Rs.5580/sq.ft. per month (Grade-A properties).
Greater Noida, Faridabad, and Ghaziabad together will have 40% of the total retail space
predicted to be added in the NCR region by the end of 2008.
With the Commonwealth Games scheduled to be held in Greater Noida in the year 2010,
tremendous construction activity is underway in this micro-market. From the present 0.06
mn.sq.ft., a cumulative 3.8 mn.sq.ft. of retail space is slated to be available in this market by end2008.
Presently, Faridabad has only three malls namely, Ansal Plaza, SRS World, and Destination
Point, which occupy 0.4 mn.sq.ft. of space.
It is predicted that Faridabad will have 8 malls occupying 1.2
mn.sq.ft. of retail space. Faridabad is going to house 7% of the total retail development in
Delhi/NCR by 2009.
Ghaziabad, which currently has about 0.8 mn.sq.ft. of new format retail space, has 9 upcoming
malls which will total to approximately 3.6 mn.sq.ft. of retail space by 2009.
Due to reasonable real estate costs, availability of land and low cost labour, developers are now
moving to Ghaziabad and it will have 16% of the additional retail space predicted for the entire
Delhi/NCR market. Rentals in Ghaziabad high street are around Rs.30/sq.ft. per month whereas
in malls it is as high as Rs.50/sq.ft. per month.
With more than 75 malls (total stock of 23.2 mn sq.ft.) slated to in the Delhi/NCR market by
2009, the developers are vying to differentiate their malls on the basis of product mix.
Amusement parks, convention centers, service apartments and hotels are some concepts which
are being combined with retail to present
a complete product offering.
Noida is forecasted to witness a dynamic retail market with demand being fueled both by Delhi
as well as Noida residents. Malls are expected to do well in Noida on account of its proximity
and better connectivity to Delhi.
52

Faridabad, Greater Noida and Ghaziabad are together going to have 25 malls by the end-2008,
thus lowering the gap between demand and supply. The rentals are expected to be stable till all
the new malls become operational.
High street retail in places like South Extension, Connaught Place, Greater Kailash, Vasant Kunj,
etc., would continue to command high prices due to lack of fresh supply. However, some micromarkets like Defence Colony will have addition to the existing stock.
A new trend of developing larger format malls (over 300,000 sq.ft.) will catch up with the new
mall developers and promoters. Kaushambi Mall (500,000 sq.ft.)

Distribution of retail space in NCR by 2009

Ghaziabad
26%
Gurgaon
45%
Noida
16%
Faridabad
15%
Delhi
25%
Greater Noida 17%
.
Delhi presently is witnessing growth of hypermarkets which are large sized retail formats
offering all kinds of products under one roof. Buyers find them attractive because they sell
products at heavy discounts. Hypermarkets are able to offer these reduced prices as they source
their supply in bulk directly from the manufacturer.
It is expected that as retail markets mature, real estate developers would enter into revenue
sharing arrangements instead of fixed rentals with retailers to increase the occupancy of their
malls, share the risk of operations and also benefit from positive consumer response.

53

FACTORS RESPONSIBLE FOR THE

DEVELOPMENT OF THE RETAIL
SECTOR IN INDIA

54

THE FACTORS RESPONSIBLE FOR THE DEVELOPMENT OF THE RETAIL SECTOR IN

INDIA CAN BE BROADLY SUMMARIZED AS FOLLOWS:

Rising incomes and improvements in infrastructure are enlarging consumer markets and
accelerating the convergence of consumer tastes.

Looking at income classification, the National Council of Applied Economic Research

(NCAER) classified approximately 50% of the Indian population as low income in 199495; this is expected to decline to 17.8% by 2006-07.

Liberalization of the Indian economy which has led to the opening up of the market for
consumer goods has helped the MNC brands like Kellogs, Unilever, Nestle, etc. to make
significant inroads into the vast consumer market by offering a wide range of choices to
the Indian consumers.

Shift in consumer demand to foreign brands like McDonalds, Sony, Panasonic, etc.

The internet revolution is making the Indian consumer more accessible to the growing
influences of domestic and foreign retail chains. Reach of satellite T.V. channels is
helping in creating awareness about global products for local markets. About 47% of
Indias population is under the age of 20; and this will increase to 55% by 2015. This
young population, which is technology-savvy, watch more than 50 TV satellite channels,
and display the highest propensity to spend, will immensely contribute to the growth of
the retail sector in the country.

As India continues to get strongly integrated with the world economy riding the waves of
globalization, the retail sector is bound to take big leaps in the years to come.

Favorable demographic and psychographic changes relating to Indias consumer class,

international exposure, availability of increasing quality retail space, wider availability of
55

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 space. 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 n attractive retail opportunity for the global
players.

56

CHALLENGES FOR
RETAILING

57

KEY CHALLENGES FOR RETAIL INDUSTRY

1) LOCATION:
"Right Place, Right choice"
Location is the most important ingredient for any business that relies on customers, and is
typically the prime consideration in a customers store choice. Locations decisions are
harder to change because retailers have to either make sustainable investments to buy and
develop real estate or commit to long term lease with developers. When formulating
decision about where to locate, the retailer must refer to the strategic plan:
* Investigate alternative trading areas.
* Determine the type of desirable store location
* Evaluate alternative specific store sites
2) MERCHANDISE:
The primary goal of the most retailers is to sell the right kind of merchandise and nothing
is more central to the strategic thrust of the retailing firm. Merchandising consists of
activities involved in acquiring particular goods and services and making them available
at a place, time and quantity that enable the retailer to reach its goals. Merchandising is
perhaps, the most important function for any retail organization, as it decides what finally
goes on shelf of the store.
3) PRICING:
Pricing is a crucial strategic variable due to its direct relationship with a firm's goal and
its interaction with other retailing elements. The importance of pricing decisions is
growing because today's customers are looking for good value when they buy
merchandise and services. Price is the easiest and quickest variable to change.
4) TARGET AUDIENCE:
"Consumer the prime mover"
"Consumer Pull", however, seems to be the most important driving factor behind the
sustenance of the industry. The purchasing power of the customers has increased to a
58

great extent, with the influencing the retail industry to a great extent, a variety of other
factors also seem to fuel the retailing boom.
5) SCALE OF OPERATIONS:
Scale of operations includes all the supply chain activities, which are carried out in the
business. It is one of the challenges that the Indian retailers are facing. The cost of
business operations is very high in India.

59

CHALLENGES FOR INDIAN RETAIL INDUSTRY

Retailing as an industry in India has still a long way to go. To become a truly flourishing
industry, retailing in India needs to cross the following hurdles:
The first challenge facing the organized retail sector is the competition from unorganized
sector.
Taxation, which favours small retail businesses.
Lack of trained work force.
Low skill level for retailing management.
Organized retail sector has to pay huge taxes, which is negligible for small retail business.
Cost of business operations is very high in India.
Automatic approval is not allowed for foreign investment in retail.
Regulations restricting real estate purchases, and cumbersome local laws.
Taxation, which favours small retail businesses.
Absence of developed supply chain and integrated IT management.
Intrinsic complexity of retailing rapid price changes, constant threat of product
obsolescence and low margins.

The retailers in India have to learn both the art and science of retailing by closely following how
retailers in other parts of the world are organizing, managing, and coping up with new challenges
in an ever-changing marketplace. Indian retailers must use innovative retail formats to enhance
shopping experience, and try to understand the regional variations in consumer attitudes to
retailing. Retail marketing efforts have to improve in the country - advertising, promotions, and
campaigns to attract customers; building loyalty by identifying regular shoppers and offering
benefits to them; efficiently managing high-value customers; and monitoring customer needs
constantly, are some of the aspects which Indian retailers need to focus upon on a more proactive basis.
60

Despite the presence of the basic ingredients required for growth of the retail industry in India, it
still faces substantial hurdles that will retard and inhibit its growth in the future. One of the key
impediments is the lack of FDI status. This has largely limited capital investments in supply
chain infrastructure, which is a key for development and growth of food retailing and has also
constrained access to world-class retail practices. Multiplicity and complexity of taxes, lack of
proper infrastructure and relatively high cost of real estate are the other impediments to the
growth of retailing. While the industry and the government are trying to remove many of these
hurdles, some of the roadblocks will remain and will continue to affect the smooth growth of this
industry.
Organized retailing in India is gaining wider acceptance. The development of the organized retail
sector, during the last decade, has begun to change the face of retailing, especially, in the major
metros of the country. Experiences in the developed and developing countries prove that
performance of organised retail is strongly linked to the performance of the economy as a whole.
This is mainly on account of the reach and penetration of this business and its scientific approach
in dealing with customers and their needs.

61

RETAIL: GOING BEYOND SURVIVAL

Globalisation is the buzzword in todays retail market. This is evidenced by the fact that a few
large retailers control global markets. Wal-Mart, the largest retailer in the world, now has
operations in 11 countries, with multiple formats, and is growing rapidly. Increasingly, the world
of retailing is becoming Wal-Marts world.

Consolidation
Consolidation and retrenchment are inevitable as department-store market shares continue to
decline. Department stores are caught between escalating competition from mass-channel,
lifestyle-focused specialty retailers and category-killer superstores. Supermarkets are expanding
their one-stop shopping appeal with the addition of fuel pumps, more non-food items and
mealtime options (often in partnership with other retailers) in order to become the new
convenience store, or at least a more convenient store. In essence, the lines between the different
formats are fast disappearing and the emphasis is now on consolidation.

Diversification
Consumer ecosystems are the emerging trend. These ecosystems address the inter-related
requirements of consumers for speed and efficiency; they also provide retailers with the
opportunity for growth. Retailers are using their negative working capital scenario (on account of
cash sales and deferred supplier payments) to get into finance, banking and insurance services.
In effect, what we are witnessing is Darwinism in the retail industry; this is a concern for all
players, large and small. Large retailers like Wal-Mart are putting smaller retailers out of
business through multiple formats, a larger range of merchandise, lower prices, and consistent
enhancement of the customers overall retail experience. Driving prices down is the key to WalMarts success. They achieve this through a passion for cutting down costs in all aspects of the
business. This is referred to as the EST model for growth and overall dominance of the retail
industry, the CPG manufacturers and various suppliers. Lets take a closer look at this model.

62

PROCESSES
Internal processes refer to processes within the four walls of the retailer in terms of operations
management, merchandising strategy, cost reductions, pricing discipline, human resources and
financials.
External processes are focused towards integrating operations between manufacturers, suppliers
and retailers to bring about cost reductions and better visibility throughout the retail supply chain
through inter-firm collaboration.

Before we explore some of the productivity measures that can help retailers
survive and grow, let us understand productivity and why it needs to be
measured What is productivity?
Simply put, productivity means quantifiable output derived from the application of a quantifiable
resource or input for a unit of time. To increase productivity one has to increase the output
derived from the same input or get the same output with decreased input. More for lessthat is
what retailing is all about now. Consumers want more variety, more payment options, more
convenience and more servicebut at reduced prices.
Higher productivity and its consistent increase not only ensures survival but also creates
opportunities for growth.

Why measure productivity?

In this era of more for less, the only way to really survive is to increase productivity, and to
increase productivity you have to measure it. To elaborate, what gets measured gets changed. In
order to bring about any change, it is necessary to know what the current metrics are, and then
compare them with the past. Having a map and not knowing your current position on it will not
really help.
What gets rewarded gets done. If you do not measure it, you cannot change it, and if you do not
reward change, it will not happen. Also, if the rate of change outside exceeds the rate of change
inside your company, disaster is imminent.

63

What should be measured?

There are quite a few things that retailers need to continually measure, monitor, report and
improve on. Some of them are

Average transaction value and spend range analysis.

Items per receipt.
Conversion rate.
GMROII.

The average transaction value, items per receipt and conversion rate, if monitored, tracked and
rewarded, can bring about an increase in sales and profits of at least 15 percent.

Average transaction value

The average transaction value is calculated by dividing the total revenues of a store by the total
number of receipts. It gives retailers an understanding of how much the average customer spends
in their stores. It is a critical indicator, and gives an idea of how retailers could sell more to
customers they already have. Promotions and pricing strategies need to be aligned with these
average numbers to increase the average basket-spend in the store. An example of how average
transaction value and spend range analysis can be used profitably is as follows.

Items per receipt

Items per receipt is a measure obtained by dividing the total number of items sold by the total
number of receipts. This gives an indication of how many items the average customer purchases.
It is highly co-related to the performance of suggestion and add-on selling.
Suggestions or add-on selling are definitely easier to do during the holiday season. It is possibly
the best time of the year to maximise every sale. Retailers need to make their shop floor and
customer service assistants aware that they have an advantage; the shoppers walking into the
store are not just lookingthey are looking to buy. What they dont know is how much they
will buy.
Adding on doesnt take much time. If a customer has selected a sweater for his sister, it takes
virtually no additional time for a sales person to suggest a perfectly coordinated scarf or a really
wild pair of earrings to enhance the look of the sweater. And no one should be allowed to sell a
pair of shoes without suggesting that the customer buy a tin of shoe polish or a matching pair of
socks.
64

As busy as it may get, retailers should never miss the opportunity to make the most of every sale
by adding on. These add-on sales must be measured, tracked and rewarded by store, sales person
and/or cashier.

Conversion rate
The conversion rate, also known as the conversion ratio, basically represents the number of
customers that make a purchase out of every 100 that walk into the store. Whilst footfall
represents the retailers ability to draw potential customers into the store, the conversion ratio
measures how well he converts shoppers to buyers. Higher conversion ratios translate into higher
sales. While footfall can be attributed to various marketing activities, the actual conversion ratios
depend on various factors like merchandise range, pricing, promotions, display, store layout,
suggestive selling, service and product availability. This key measure, if monitored, tracked,
analysed and acted upon, has the potential to deliver significant growth in sales and profits. An
example follows.

GMROII
GMROII (Gross Margin Return On Inventory Investment) measures how effectively the money
allocated for inventories is invested. It is the only return on investment (RoI) formula to show
returns as a currency value and not as a percentage, so its importance to retailers cannot be
overstressed. GMROII is often used to compare the performance of different categories for a
retailer. The buyers are allocated money for purchasing stock, and the money spent is measured
against the returns they have achieved on this investment. It effectively translates into identifying
the returns on every dollar invested in inventories. GMROII can be computed by dividing the
gross margin value by the average inventory value (stock on hand) at cost. It is very sensitive to
inventory turns and the gross margin. It helps in
Identifying profitable categories.
Identifying problem categories.
Making comparisons between categories.
The allocation and management of open-to-buy budgets.
GMROII figures, when compared across stores of a retailer, also give valuable insights into
potential areas of improvement in store operations, staffing and employee productivity.
So while Darwinism is really at play on the global scene, there are still opportunities for retailers
to not only survive but actually grow. They need to constantly improve in key areas by constant
monitoring and measurement. They have to set realistic targets, measure productivity, and
provide the right systems to bring about improvements in the same.
The author is practice head, Retail, at Zensar Technologies. He has extensive experience
planning and executing domain-led technology solutions for large and medium-size companies in
the retail, pharmaceutical and CPG industries.
65

The problem with Wal-mart is that they truly have colossal resources and when they make up
their mind to enter a market, they do so with gusto. Add to that their unbelievably large buying
power which drives their costs so low and allows them to sell everything at rock-bottom prices
and you have a very formidable opponent for the local folks.
That said, there are strategies that can be employed against them. You can look at Target as an
example. OK, I know Target is not a "mom & pop" store, but they are competing with Wal-mart
and the reason I think their strategy is effective is that they are still in the game (Wal-mart
competitors usually don't last long unless they are doing something right).
In Target's case, they have focused on retaining their customer base as much as possible and have
raised the bar on Wal-mart's "always the lowest price" strategy by focusing on Design and
Brands, which may be a little more expensive than Wal-mart's, but which are also more
fashionable. Target's advertising is always fresh, always cutting edge and has a very "feel-good",
as well as "design you can afford" quality to it.
I think the local merchants in India could adopt a similar attitude and undertake as massive a
campaign as they can muster to show their clientale what differentiates them from Wal-mart and
why the customers should remain loyal to them. Make no mistake, some people will be drawn to
"always the lowest price". However the acid test is to see how many customers will resist the
siren song and stick with the local merchants.

66

QUESTIONNAIRE

67

Respected Sir / Madam,

I here by, assure that the collected information will be used only for this project and will not be
disclosed.

Q1. Which outlets do you consider while shopping?

Visit

Visit

Rarely

Never

Frequently

Sometime

Big Bazaar

-----------

----------

----------

--------

Marks & Spencer

-----------

----------

----------

--------

Pantaloons

-----------

----------

----------

--------

Westside

-----------

----------

----------

--------

Shoppers Stop

-----------

----------

----------

--------

Lifestyle

-----------

----------

----------

--------

Other (please mention) --------------------------------------------------------------Q2. Why do you prefer to shop in Retail Outlet?
Brand Variety
Ambience
Location
Time Saving
Services

Q3. Are you a member of any Retail Outlet?

___Yes

___No

Q4. If yes, then why to chose to be its member?

Free parking facility
68

 Extra services
Special discounts
Others..

Q5. When do you prefer the most to visit Retail Outlet?

When there is fresh stock
When there are discounts
Weekend outings
Anytime

Q6. How many times in a month you visit a Retail Outlet?

Once
Twice
Thrice
More than this

Q7. Do you have any planned list before moving in to Retail Outlet?
Definitely
Mostly
Rarely

Never

Q8. Rank the following factors of retail shopping on a scale of 1 to 10 where 10

denotes the most important and 1 denotes the least important.
Quality

__________

Prices

__________

Brand availability

__________

Services

__________

Advertisements

__________
69

Member facilities

__________

Ambience

__________

Sales promotion offers __________

Q9. Does the recommendation of your family & friends influence your decision to
visit Retail Outlet?
Yes
No

Q10. Rank the retail outlets on the following factors on a scale of 1 to 10 where 10
denotes excellent and 1 denotes poor.
Quality Prices Brand

Services Advertisements Member Offers

availability

facilities

Big
Bazaar
Marks &
Spencer
Pantaloons
Westside
Shoppers
Stop
Lifestyle

Personal Information:

Name: _______________________________

Age:

__Below 21

___21-30yrs.

____31-40yrs.

____40yrs.& above
70

Gender:

____Male

____Female

Contact No. _____________________

Which Social status you fall into:

Unemployed
Receiving education
Professional
Business
Other..

To which income group you fall in: (monthly)

Below 10,000
10,000 to 20,000
20,000 to 30,000
30,000 to 40,000
40,000 & above

71

FINDINGS AND
ANALYSIS

72

Q1. Which outlets do you consider while shopping?

73

Q2. Why do you prefer to shop in Retail Outlet?

74

Q3. Are you a member of any Retail Outlet?

75

Q4. If yes, then why to chose to be its member?

76

Q5. When do you prefer the most to visit Retail Outlet?

77

Q6. How many times in a month you visit a Retail Outlet?

78

Q7. Do you have any planned list before moving in to Retail Outlet?

79

Q8. Rank the following factors of retail shopping on a scale of 1 to 10 where 10

denotes the most important and 1 denotes the least important.

80

Q9. Does the recommendation of your family & friends influence your decision to
visit Retail Outlet?

81

Q10. Rank the retail outlets on the following factors on a scale of 1 to 10 where 10
denotes excellent and 1 denotes poor?

82

FACTORS AFFECTING
SHOPPERS BEHAVIOUR

83

1. Greed

Drives a customer to purchase more than what he or she need.

A wide range of options, better products, and lower prices generate the increased
desire to purchase.

2. Fear to loose opportunity

Higher purchase is driven by the fear that current price offer may not be available
for long-time and thus the product has to be purchased at once.

3. Envy or Demonstration Effect

Envy sets in when a customer sees others buying and making the best out of deal.

4. Price-value Equation

It is believed that Average Indian customer is highly Price-Sensitive and looks for
savings in terms of money in their grocery purchase.

5. Private-Label Brands

In India the concept of Private-Label Brand is in its nascent stage and customers
still rely on branded product

84

KEY OBSERVATIONS

85

Key observations about customers shopping behaviour in Indian scenario among the modern
retail formats are:

Master and serving class employee, never shop at the same store, though lower middle
class visits hyper markets and discount stores, the upper middle class frequents
department stores, specialty chains and super market.

For lower income Indians, the clean and shiny environment of modern retail stores
creates the perception that such stores are too expensive and exclusive, so they are not
meant for them. They tend to feel alienated in the environment.

Lower income Indians move and find lot of comfort in crowds, so they normally hesitate
in visiting the stores having broader area coverage.

It is observed during the research that given the right environment and a correct
emotional connect with customers, anything is possible , as Big Bazaar did by celebrating
Sabse Sasta Din , on 26th January and attracted the unexpected crowd.

Customers feel conservative to buy fruits & Vegetable from air-conditioned

supermarkets. They still prefer to buy these kinds of products either from the local mobile
vegetables sellers or from the nearest sabji mandi. Probably this is working as deterrent
factor for the growth of Supermarkets in India in a sense that they are able to attract
visitors rather customers.

Customers looked into Price-Value equation. Most of the retailers report that customers
were very much conscious for the value, and they usually compared the value sacrificed
& received. It played a very key role in their buying decision process.

Retailers often overlook the schemes & offerings expected by the customers and tried to
impose their own offerings upon customers which ultimately cause the dissatisfaction.

Shopkeepers dealing in apparels, accessories, & other items reported that they were able
to attract the Customers but conversion rate is not more than 30-40% which is again very
alarming and a matter of high concern.

Shopkeepers dealing in food items & Vegetables report that:

86

o Customers for food items always expect hyper discounts & offers.
o Where as customers for vegetables still believe in the past notion that vegetables
sold in the open market are fresh.

Shopkeepers dealing in jewellery items reported that in case of unbranded jewellery items
Indian customers still rely on their traditional jewellery merchant only.

Shopkeepers in every category report that female customers proved to be great bargainers
than their male counterparts.

87

CONCLUSION

88

Conclusions & Implications:

1) Retailers need to think about shoppers not just about a format as understanding the
shoppers dynamics holds the key to such a business. Retailers would have to create new
delivery formats that can cater to the huge mass of consumers.
2) Retailers must understand what value shopper is looking for and how the retailers can
deliver that desired value to the customer. However, most retailers look for what they are
offering and how shoppers can fit into retailers scheme of offerings.
3) All the formats are profitable and each format is tailor made to fulfill customer need. It is
the value offering which makes Tesco so popular and profitable. Similarly in India
Pantaloon Retail runs several formats and for value retailing Big Bazaar is receiving
exceptional response from the customers.
4) Retailing in India is entirely different from western countries for that matter even from
Asian counterparts. Studies show that upgraded Kirana stores are growing at the same
rate as organized retailers.
5) It is also observed that in the changing retailing environment, understanding the psyche
of customer is critical to success in retailing. Aggregate level picture may be misleading,
as it averages the beats and the valleys. Hence, individual understanding is desirable.
6) Though, some Indians are behaving as sophisticated shoppers, tens of millions are still
novice but no less avid consumers are joining the fray every year. So, retailers have to
acknowledge this change and also stay a step a head of the evolution curve of the Indian
market.
7) Finally, it is not the format that gives business sustainability rather it is one of the
vehicles to deliver the value to the customer.
8) Indian consumers are still family-driven entities. Shopping, entertainment and eating out
are family events. Since these decisions are normally group decisions, hence a marketer
has to address family sensibilities more rigorously to woo Indian customers.
9) Indian customers have become more sensitive to quality, customer service and status.
She/he is ready to pay, sometimes, astronomical sums provided their needs are
satisfied. They are basically looking for an experience which is more of cognitive than
physical. In some cases, few Kirana store owners find no competition because they

89

understand what their customers want. So ultimately it can be said that for a retailer
understanding the customers is just like climbing the Greased Pole.

For a start, the retailers need to invest much more in capturing more specific market. Intelligence
as well as almost real-time customer purchase behavior information. The retailers also need to
make substantial investment in understanding/acquiring some advanced expertise in developing
more accurate and scientific demand forecasting models. Re-engineering of product sourcing
philosophies-aligned more towards collaborative planning and replenishment should then be next
on their agenda. The message, therefore for the existing small and medium independent retailers
is to closely examine what changes are taking place in their immediate vicinity, and analyze
Whether their current market offers a potential redevelopment of the area into a more modern
multi-option destination. If it does, and most commercial areas in India do have this potential, it
would be very useful to form a consortium of other such small retailers in that vicinity and take a
pro-active approach to pool in resources and improve the overall infrastructure. The next effort
should be to encourage retailers to make some investments in improving the interiors of their
respective establishments to make shopping an enjoyable experience for the customer.
As the retail marketplace changes shape and competition increases, the potential for improving
retail productivity and cutting costs is likely to decrease. Therefore, it will become important for
retailers to secure a distinctive position in the marketplace based on value, relationships or
experience.
Finally, it is important to note that these strategies are not strictly independent of each other;
value is function of not just price, quality and service but can also be enhanced by
Personalization and offering a memorable experience. In fact, building relationships with
customers can by itself increase the quality of overall customer experience and thus the
perceived value. But most importantly for winning in this intensely competitive marketplace, it is
critical to understand the target customer's definition of value and make an offer, which not only
delights the customers but also is also difficult for competitors to replicate.

90

A COMPARISON CASE

91

PANTALOON v/s WESTSIDE

A Comparison Case
Both opted for the large format retail outlet route.
Now the differences. At present, Kishore Biyani's Pantaloons is four times the size of the Tata
Group-owned Trent. It occupies eight times more retail space than Trent's Westside. And for
every Westside outlet in the country, there are nearly four owned by Pantaloons.
"Retailing is like riding a bicycle, you can't stop pedalling," Biyani, who is the managing director
of Pantaloons Retail.
And even as the first-generation businessman pedals at Olympic speeds, the Tatas have stuck to
their soft strategy, be it setting up new stores or entering new locations.
The organised retail industry in India is worth Rs 900 crore (Rs 9 billion) and counting. Who will
win the race to be No 1? Will Pantaloons' size breast the tape or can Trent's cautious optimism
survive the distance?
Margin for error
Do the numbers indicated in "Bare facts" mean that Pantaloons wins the war even before
battlelines are drawn? Not quite. According to industry experts, as players keep adding
floorspace, expansion has little meaning if the revenue per square foot added falls with every
foot added.

In 2007, with a floor space of 210,000 sq ft, Westside earned a revenue of Rs 50 a sq ft.
Currently with a marginal increase in floor space to 220,000 sq ft, it earns Rs 70 a sq ft.

92

On the other hand, Pantaloons' revenue per sq ft has declined from roughly Rs 76.7 to Rs 59 in
2007, while floor space has increased from 580,000 sq ft to 11 lakh (1.1 million) sq ft.
That's where the margin game comes into play. Westside was the first to recognise the advantage
of in-house labels. What's the advantage? Better margins, for starters. Private labels earn gross
margins of 25 to 30 per cent, compared with 5 to 15 per cent for branded apparel.
Besides, the store has better control on the brands and design and can develop unique positioning
for in-house brands.
Westside's leveraged its private labels well, appealing to more sophisticated, urban customers,
compared to Pantaloons, which was bogged down for several years by its middle-class, budget
store image (that's changed now, though).
Realising the importance of in-house labels, even Pantaloons has scaled up the number of inhouse labels from 20 to 40-odd private labels currently. In contrast, almost all the brands sold at
Westside are in-house, private labels.
Which means the chain has better margins, and therefore better revenues, per label.The impact
on operating profit margins is visible. Trent's OPMs have improved to 15.18 per cent in FY2007
from 13.27 per cent the previous year.
In comparison, Pantaloons' OPMs have remained sticky at 8.41 per cent in FY2007 from 8.17
per cent in FY2006. The implication is clear: higher OPMs mean the chain is managing costs
well and is better placed to build reserves, which will help future expansion.
But, says Arvind Singhal, managing director of retail consultancy KSA Technopak, margins may
vary because of the nature of business. He adds that it is the stock turnover that should be the
benchmark of superiority.
If that's the parameter, Pantaloons leads marginally: it has a stock turnover of five compared to
four for Trent.
Gain an extra inch
93

According to K K Iyer, partner at management consultancy Accenture, being the first mover in
new markets has its own advantages. The biggest plus is in grabbing the hot seat as far as
property is concerned.
Once a store enters a good catchment area, its competition loses that advantage.
When Westside first entered Mumbai in 2000, it opened shop in elite south Mumbai. At the time,
the suburbs were ruled out because Shoppers' Stop cast a long shadow over the western suburbs.
And even when Westside finally moved northwards into Andheri (where the first Shoppers' Stop
outlet is located.
In 2001, Pantaloons' marketing and promotion costs were 3.34 per cent of sales. As the number
of outlets went up from around 20 in 2005 to 44 in 2006, the chain's spends on advertising and
promotions were down to 2.84 per cent of total income in 2007.
In comparison, Trent advertising and promotion spends were 11.4 per cent of total income in
2007, compared to 12.3 per cent in 2006, for a relatively smaller scale of operations.

Too much, too soon?

Are Trent and Pantaloons growing too fast?
"When you grow rapidly, there is a small risk of over-extension."
For instance, it becomes difficult to manage manpower to ensure that quality employees are
present in all stores.
And it's not just about good front-end staff: expansion, especially in the multiple format model
preferred by Pantaloons, has to be accompanied by adequate depth and width of a core
management team.
"Pantaloons, as it rolled out, has visibly beefed up a senior management team. Trent, however,
has more or less stuck to a core team," says a competitor.
94

From a completely top-driven approach, it has delegated the management of categories and
formats to professionals.
Also, of the two, it is Trent that is tightening its belt on employee costs. Which is important,
considering even mammoth departmental store chains like the 8 billion Marks & Spencer has
stabilized its employee costs at 7 per cent of its total revenues.
Trent spent 6 per cent of its turnover on employee costs (the figure hasn't changed for two years,
even though the number of stores has increased from eight to 17). On the other hand, Pantaloons'
employee costs as a percentage of total income have gone up from roughly 3 per cent in 2007 to
4.17 per cent in 2007.
That's not too much, especially if you consider that the number of employees has doubled in FY
2007 to 3,500, from 1,700 in 2008. (By April 2008, Pantaloons had close to 6,000 employees,
mostly at the front end.).

Multiple formats
Do multiple formats have a clear advantage for Pantaloons?
If margins from apparel sales in Pantaloons (the lifestyle store) suffer, the company does have
the option of moving stock to the discount store, Big Bazaar.
Moreover, losses in margins in one category can be absorbed by profits in another.
Trent, too, has recognised the advantage of multiple formats. In end 2007, it launched Star India
Bazaar, a 50,000 sq ft hypermarket in Ahmedabad.
How does the stock market rate the strategies of the two players? Since 2007, Pantaloons' share
price has moved from Rs 30 to Rs 882 (April 25, 2007) currently.

95

Over the same period, Trent has climbed from Rs 71 to Rs 580.95. "Pantaloons' high reliance on
debt to finance its growth remains a cause of concern.
Pantaloons' debt-equity ratio was 1.86 as of 2006-07, compared to 2.17 in 2005-06. Trent's debtequity ratio has remained fairly stable at 0.001 per cent in the same period.
Consultants refuse to give their verdict on which player will be strongest in the long run. As
Biyani himself admits, "There is no ideal retailing strategy to follow."

The big debate in retailing circles these days concerns formats that can work in the marketplace.
India has seen the emergence of retail along the lines of the hypermarket (Big Bazaar, Spencers,
Star India Bazaar), supermarket (Subhiksha, Haiko in Mumbai, Sabka Bazaar, FoodWorld),
department store (Shoppers Stop, Piramyd, Lifestyle), speciality store (Provogue, Adidas,
Reebok, all branded outlets) and convenience store (Reliance petrol retail outlets). But whats
making business sense at the moment are the larger formats such as hypermarkets and
department stores.
For a hypermarket, where the overall investment is lower than a department store, whose accent
is on experience rather than discount shopping, the capital to output ratio is better, says , chief
executive officer, Piramyd
Worldwide, hypermarkets are a successful format as opposed to department stores, which are
only doing well in Japan and South East Asian countries such as South Korea, Singapore and
Malaysia. However, value-for-money shopping, which, according to analysts, is more about
affordable pricing of products as opposed to offering discounts on the maximum retail price is a
hit abroad.
We see this format rising in the country, says Chennai-based Lifestyle International, which has
nine stores (including eight department stores) in six cities taking its overall retail space to 4.5
lakh square feet. The company, backed by the Dubai-based Landmark Group, is looking at
exclusive value stores, hypermarkets, brand stores in addition to speciality stores targeting the
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home products, furniture and furnishings segment. The home segment is a big area for retailers
and we have ade a start with our Home Centre in Gurgaon. Pantaloons subsidiary Home
Solutions Retail already has a presence in the home segment with its Mela outlet in Mumbai.
If Lifestyle is now eyeing the value segment, Delhi-based Vishal Mega Mart, a hypermarket
chain, is well-entrenched in the space with its affordable range of clothing and allied products, all
produced in-house. Says , managing director, Vishal Mega Mart, Our USP is that we offer fresh
products at seconds (economical, that is) pricing. With a turnover of Rs 89 crore, the chain has
14 stores spread across 1.85 lakh square feet of space in 10 cities. Most of the products are
sourced directly from manufacturers around the country and internationally. A lot of the
garments, on the other hand, are manufactured at our facility in Gurgaon.
Meanwhile Subhiksha, the Chennai-based supermarket chain, which has a string of 1,500 square
feet neighbourhood grocery stores, views discounts on food products as a big driver for its
business. The company, which has 145 outlets, closed the last financial year at Rs 278 crore up
from Rs 100 crore in 2004-05. Investment in an outlet is roughly Rs 25 lakh, says R.
Subramanian, managing director of Subhiksha. However, if the stores are too close to each other
it can hit the revenue potential of the outlets.

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REFERENCES

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WEBSITES:

http://www.managementparadise.com/forums/articles/42292-retail-industry-indiaoverview.html

http://www.articlesbase.com/career-management-articles/an-introduction-to-indian-retailindustry-729290.html

http://www.fibre2fashion.com/industry-article/free-retail-industry-article/indian-retailindustry-its-growth-challenges-and-opportunities/indian-retail-industry-its-growthchallenges-and-opportunities1.asp

www.naukrihub.com/india/retail/overview/retail-formats/

www.axaptaretail.com/eng/formats

http://www.thehindubusinessline.com/catalyst/2004/10/28/stories/2004102800180200.ht
m

http://www.livemint.com/2007/12/09222808/Retail-special

http://www.indianmba.com/Occasional_Papers/OP95/op95.html

http://business.mapsofindia.com/india-retail-industry/challenges-facing-the-indianorganized-retail-sector.html

BOOKS:

Retail marketing, Philip Kotler

In Search of Excellence, Peters & Waterman (Pg.107 -172)

Retailing Management, Levy Weitz

OTHERS:
Excerpts from a report titled Emerging Trends in Modern Retail Formats & Customer Shopping
Behavior in Indian Scenario: A Meta Analysis & Review by Aditya P. Tripathi

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