Retail Sector in India

Prepared By:
Shaikat Mallick PGDBM (2007-2009) Under the guidance of:
Prof. Nandita Mishra. Academic Chairperson ISB&M Kolkata

Submitted in partial fulfillment of the requirement for Post Graduate Program in Business Management

International School of Business & Media, Kolkata

CERTIFICATE

This is to certify that the present study “Retail Sector In India” has been carried out by Shaikat Mallick, Batch 07-09, under my direct supervision. I am glad to forward this for the partial fulfillment for PGPBM.

Project guide: Prof: Nandita Mishra

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Acknowledgement
I would like to heart fully acknowledge my gratitude and thanks to all the panelists who took active part in accomplishing my project. At the very outset, I wish to thank Prof. Nandita Mishra, who helped me to choose such an interesting topic to work upon as a full fledged project and guiding me at each step interacting with him gave me a completely different view to look at a subject, throughout its completion. I am also thankful to all the faculty of my institute, who helped me in giving all the required information in a very cooperative manner. The project would not have been possible without the help of my friends and colleagues who have been patient enough with me.

Shaikat Mallick
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Industry Overview 2.International School of Business & Media Kolkata TABLE OF CONTENTS 1. Technology in retail 14. Challenges in Retail location planning 10. The growth Drivers 9. Retail Formats in India 6. Organized Retail Sector – Product Segments 3. Future Outlook 12. Conclusion 16. Speciality stores 7. Consumer survey questionnaire 5 9 10 15 19 20 25 33 41 47 49 50 54 57 60 62 4 . Major Industry Players 8. Merger and Acquisition 13. Government initiatives and regulation 15. Indian Retail Industry 5. Competitor Analysis 11. Origin of retail 4.

They also provide services like credit. Network marketing has been growing quite fast and has a few large players today. phone service. home delivery etc. However. labour and capital. In the coming years it can be said that the hypermarket route will emerge as the most preferred format for international retailers stepping into the country. 5 . the kirana retailing has been one of the easiest ways to generate self-employment. The modern retail formats are encouraging development of well-established and efficient supply chains in each segment ensuring efficient movement of goods from farms to kitchens. near to their house. as it required minimum investment in terms of land. This organized segment typically comprises of a large number of retailers. Food retail Hypermarket considering moving to self service Small fashion stores Traditionally. which will result in huge savings for the farmers as well as for the nation. food courts and pharmacies appearing in many outlets. It's no longer about just stocking and selling but about efficient supply chain management. In order to keep pace with the modern formats. These store are not affected by the modern format of retailing. Gas stations are seeing action in the form of convenience stores.Industry Overview Industry analysis of the Indian retail sector: Modern retailing has entered India in form of malls and huge complexes offering shopping. from discount stores to supermarkets to hypermarkets to specialty chains. leisure to the consumer as the retailers experiment with a variety of formats. efficient merchandising and even the labour class is also in the working process timely promotional campaigns. entertainment. greater enforcement of taxation mechanisms and better labour law monitoring system.e. ATMs. kiranas have now started providing more value-added services like stocking ready to cook vegetables and other fresh produce. Estimates indicate that this sector will have the potential to absorb many more hypermarkets in the next four to five years List of retailers that have come with new formats: Retailer Shoppers’ Stop Crossword Piramyd Pantaloon Subhiksha Globus Current Format Department Store Large Bookstore Departmental Store Own brand store Supermarket Department Store New Formats Quasi-mall Corner shop Quasi-mall. developing vendor relationship quality customer service. The government also stands to gain through more efficient collection of tax revenues. kiranas still continue to score over modern formats mostly due to the convenience factor i.

restructuring the tax regime. fewer power cuts and lower levels of attrition. Nasik. Ahmedabad. India is rated as the most attractive retail markets Country Risk Country 25% Market Attractiveness 25% Market Saturation 30% Time Pressure 20% Rank India Russia China Turkey Thailand Malaysia Egypt Brazil India’s Rank 62 52 68 51 64 70 51 52 24th 34 58 40 56 41 49 35 56 14th 91 71 53 66 59 58 85 57 1st 80 92 90 65 71 40 30 20 7th 1st 2nd 4th 9 12 18 25 29 1st 6 . as they tend to be more conservative than the metros. Apart from metro cities. retailers need to adjust their product mix for smaller cities. which are generally not found in the local kirana stores. it is necessary that steps are taken for rewriting laws.The organized retailing has helped in promoting several niche categories such as packaged fruit juices. Looking at the vast opportunity in this sector. big players like Reliance has announced its plans to become the country's largest modern retainers by establishing a chain of stores across all major cities. Sholapur. fabric bleaches. accessing and developing new skills and investing significantly in India. Aurangabad. Kolhapur and Amravati has seen the expansion of modern retails. shower gels. In order for the market to grow in modern retail. Small towns in Maharashtra are emerging as retail hubs for large chain stores like Pantaloon Retail because many small cities like Nagpur have a student population. hair creams. several small towns like Nagpur. lower real estate costs. depilatory products and convenience and health foods. However.

Socio demographic factors will lead to faster growth of Organized retail in India: 100% 80% 60% 40% 20% 0% 9% 19% 25% 9% 19% 24% 10% 20% 24% 11% 22% 26% 12% 23% 27% 47% 47% 45% 42% 39% 1991 0-19 Yrs 1996 20-34 Yrs 2001 35-54 Yrs 2006E 55+ Yrs 2010E 7 .

Entertainment Durable 10% 1% Home 3%

Pharma 2%

Food & Grocery 14%

Clothing and Textile 36%

Health & Beauty 1% Books, Music & Gifts 3%

Watch & Jewellery 17%

Footwear 13%

ORGANIZED RETAIL:
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Emerging Retail Markets:
India, Russia, China and Vietnam top the list of the most attractive emerging markets for retailers' investment in 2007, While India and Russia have held the top two spots since 2004, China's booming consumer spending, together with retailers moving into second-tier cities, helped it rise to No. 3 from its No. 5 spot last year, according to the 2007 Global Retail Development Index from management consultant firm A.T. Kearney. The study based its results on four variables: 'country risk', measuring political risk, debt and credit ratings; 'market attractiveness', encompassing retail sales per capita, population, infrastructure and regulations; 'market saturation'; and 'time pressure'. The higher the ranking, the more urgency for retailers to enter the market, according to the study, which ranks the top 30 emerging countries for retail development and focuses on mass-merchant and food retailers. "If you want to be an international player in retail, these are the markets that demonstrate the characteristics (where) you can be successful," said Laura Gurski, a co-author of the study and partner in A.T. Kearney's consumer and retail practice. India has already attracted the attention of global retailers like Wal-Mart Stores Inc., which is working with India's Bharti Enterprises to set up a joint venture for a cash-and-carry business. In India, foreign multiple-brand retailers, which sell diverse brands under one roof, are limited to cash-and-carry and franchise or license operations. "India's window of opportunity continues to be wide for retail investment and development," the report said. "Once India's window closes for grocery retailers, there will be little opportunity for market domination in the main cities." The country's growing population of young urban professionals with disposable incomes and the nouveau riche has also made India attractive for luxury retailers. India has attracted "the low end and the high end because of the breadth of the consumer segments that are available," said Gurski. When variables stay constant, Gurski said, do-it-yourself, apparel and electronics retailers usually enter emerging markets some two years after international grocers establish themselves. Middle Eastern countries are also represented on the list, with Saudi Arabia ranking No. 10 India has emerged as the world's most attractive destination for mass merchant and food retailing, maintaining its 2005 position in an annual study of retail investment attractiveness among 30 emerging markets. India was given the top ranking in management consulting company AT Kearney's 2006 Global Retail Development Index (GRDI). "The Indian retail market is gradually but surely opening up, while China's market becomes increasingly saturated," said Fadi Farra, a principal in AT Kearney's Consumer Industries and Retail Practice and leader of the GRDI study. Much to the surprise of market observers, China was ranked fifth in this year's tally, declining one more place since 2005. While China remains very attractive, the market is becoming increasingly saturate as and United Arab Emirates No. 18. Gap Inc announced last week it had struck a deal with two franchisees to open Gap stores in Saudi Arabia starting at the end of this year. Dubai has capitalized on consumer desire for a more Western lifestyle and has established itself as a retail mecca, Gurski said. Despite its focus on luxury, Dubai is "just beginning to be populated by the bread-and-butter retailers of the United States and the Western world," she said. Retailers that have already established a presence in major Chinese cities like Shanghai and Beijing, or those that have been slow to gain a foothold there, are now looking at less

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developed markets in second-tier cities, the study found. "If the markets are saturated, they're looking to make profits in the second-tier cities," Gurski said. But she cautioned that a separate strategy is needed for the smaller markets since consumer tastes, ability to spend and willingness to embrace new formats may be different than in larger urban areas. International retailers rush to establish a presence and build market share, the study reveals. According to the study, Asia with a large 40 per cent of the top 20 markets has surpassed Eastern Europe as the 'dominant region for global retail expansion.' "The learning is that timing is the most important source of competitive advantage for global and regional retailers in the globalization race. Knowing when to enter emerging retail markets is the key to success," said Farra. Powering Asia's charge are Vietnam, which has risen five places to third place, and countries like Thailand, South Korea and Malaysia, all of which are in the top 15, After topping the ranking for two consecutive years in 2003 and 2004, Russia slipped to second place behind India last year and remained there in 2006 too.

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

HOW RETAIL DEVELOPED:
Peddlers and Producers:
The Retail Trade is rooted in two groups, the peddlers and producers. Peddlers tended to be opportunistic in their choice of stock and customer. They would purchase any goods that they thought they could sell for a profit. Producers were interested in selling goods that they had produced.

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

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The First Shop : Eventually. As armies marched through territories. as markets became more permanent fixtures they evolved into shops. Similarly. 11 . there were still instances where individuals purchased goods at long distance for their own use.Early Markets: Over time. Over time. they laid down communication lines stretching from their home base to the front. They would travel from village to village. horse etc. The First Self-Service Store: This all changed in 1915 when Albert Gerrard opened the Groceteria in Los Angeles. For some shopkeepers. Origins of Retail It is likely that. but there has been a steady rise in the global amount of self-service stores ever since. it made sense to obtain extra stock and open up another shop. Others in their newly adopted community enjoyed these goods and demand grew. Although such trading routes expanded mainly through the growth of traveling salesmen and then wholesalers.S. Such services would have started in earnest once man had learned how to ride a camel. this removed the mobility that a peddler or traveling merchant may still have enjoyed. most probably operated by another family member. the first documented self-service store. new settlers discovered goods in their new surroundings that they dispatched back to their birthplace. This soon turned into a regular trade. founded by Clarence Saunders in Tennessee in the U. They arranged for some of these goods to be sent to them. both producers and merchants. purchasing these goods and selling them for a profit. shops. Thus the retail chain would have started. Growth: This new type of shopping was more efficient and many customers preferred it.e. When individuals or groups left their community and settled elsewhere. These shops along with the logistics required to get the goods to them were. A second reason that distance selling increased was through war. and once again. some missed foodstuffs and other goods that were only available in their birthplace. the start of the Retail Trade. markets would become permanent fixtures i. producers would have seen value in deliberately over-producing in order to profit from selling these goods. Its thought that this process would have started in china over 2200 years ago with a chain of shops owned by a trader called Lo Kass. the earliest instances of distance retailing probably coincided with the first regular delivery or postal services. Thus. regular markets appeared. This would recover business from peddlers and create new business and the greater volume would allow the shopkeeper to strike a better deal with suppliers. Although personal service stores remain to this day. This was soon followed a year later by the Piggly Wiggly® self-service store. they would have also taken advantage of the lines of communication to order goods from home. As well as garnering goods from whichever locality they found themselves in. The Birth of Distance Retailing: Defined as sales of goods between two distant parties where the deliverer has no direct interest in the transaction. Although advantageous in many respects. Other countries were slow to take up the idea. this new concept started a rapid growth of self-service stores in the United States. Merchants would also have begun to appear. would regularly take their goods to one selling place in the centre of the community. demand grew.

The greater the distance. That was the case until transport and communications became faster and more reliable. even more definite limiting factor was the distance the furthest shop would have been from the original shop. as some chains grew. they would have needed to employ people from outside of their family. Another. 12 . the more time and effort would have been needed to effectively manage outpost shops and to service them with goods. The groceries were stacked on shelves allowing customers to walk around and browse.Efficiency These entrepreneurs noticed that their staff had to spend a great deal of time taking grocery orders from customers. From Family Business to Formal Structure: Although retail chains would have been mostly run by families. This was a limiting factor as there would have been a limit to the amount of trusted non family members available to help run the chain. There was. chains became much bigger and more widespread. a natural barrier to expansion. leading to the retail chain that we see today. When this happened towards the end of the 19th century. collecting their shopping in a basket that was supplied. Many of these businesses became more structured and formalized. therefore. The shopkeeper would only need to tot up the final bill at the end of the process and transfer the goods from the basket to the customer and receive payment.

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the organized sector is only 25 per cent and the rest is unorganized. out of the entire retail sector in India. of transforming the unorganized retail sector into an organized sector. a number of new jobs will be created. supermarkets and brand label stores. retailing doesn’t involve just dealing or marketing from shops. But the unorganized segment still dominates and leads the industry. The sole purpose of all this is retaining the brand loyalty of customers. by cutting the layers of middlemen involved. There is no supply chain management perspective. Global retailers that missed opportunities to capture first-mover advantage in China will make up for it in India.000 villages. These include corporate backed hypermarket and retail chains and so on. Thus one can see that allowing FDI in retailing is beneficial to all the stakeholders involved 14 . Unorganized retailing is the traditional low-cost shops. This is possible because of the far more efficient distribution system. The message for retailers on India is clear – move now or forego prime locations and market positions that will soon become saturated. fresher. A changeover is taking place from the conventional retail sector to organized retailing. Driving global brands into India is the greatly improved investment climate due to the recent relaxation of direct ownership restrictions on foreign retailers. The share of organized retailing is supposed to jump to about 10 per cent from the existing three per cent. Indian retail is currently a US$ 245 billion market and is anticipated to extend to almost US$ 385 billion mark by the next five years. which represents 45 per cent or US$ 135 billion of the gross retail market.000 villages that makes up 50 per cent of the rural population. the benefits to the producer and consumer through better prices and lesser wastage. The country's retail market totals $330 billion.Indian Retail Industry: UNORGANISED RETAIL SECTOR: Today. well packed and often cheaper than the local shopkeeper. according to management consulting firm AT Kearney's 2005 Global Retail Development Index (GRDI). The retail industry in India is split up into the unorganized and organized retail segments. The rural market is spread over 627. There are other benefits too. which will also benefit the economy as a whole. International style shopping centers have started dotting the skyline of cities and smaller towns.5 trillion market. throwing up exportable surpluses. Conventional marketplaces are paving way for new shopping malls. By 2010. According to the latest report India Retail Sector Analysis (2006ñ07)I by RNCOS. The retail industry is divided into organized and unorganized sectors. even though its centre of attention is focused around a core group of 100. India is rated as the fifth largest emerging retail market and is seen as a potential goldmine. shopping plazas. the Indian retailing sector is anticipated to become an Rs12. India represents the most compelling international investment opportunity for mass merchant and food retailers looking to expand overseas. far better paid than the underage labor working in the local shops. which makes up 55 per cent or US$ 165 billion of the overall retail market as opposed to urban segment. The anticipated staggering growth in organized retailing provides an opportunity to expand the market for both established and new players. handcarts and pavements and is by far the prevalent form of trade in India. acquainting the Indian customer to a unique shopping experience. the likes of superstores. average and modest grocery stores and the chemist shops. which organized retail chains are employing. the total retail market is primarily focused in rural regions. Secondly. Though India has more than five million retail outlets. an annual study of retail investment attractiveness among 30 emerging markets. Firstly. In fact. it includes analyzing the market in an effort to provide reasonable prices together with an array of options and experience to customers.64 per cent three-year Compounded Annual Growth Rate (CAGR). The Indian retail sector is currently sporting a brand new look and together with a 46. Organized retailing refers to trading activities undertaken by licensed retailers who are registered for sales tax and income tax. is vastly underserved and has grown by 10 per cent on an average over the past five years. they are greatly unorganized. The unorganized retail sector includes the big. The efficiency of organized sector in retailing is manifested in some of the newer supermarkets in urban/metropolitan India – the produce is cleaner. 96 per cent of the retail outlets are smaller in area than the standard norms.

One can even deploy a computer and start with financial accounting programmers like Microsoft Excel. To begin with. and so is the case in India. as then one need to scale it up and take care of inventory and supply chain management. among others. At the low-end however. Shawman Software. Vedamani suggests India is on the right track. Comparing the case with China. “It would surely help the unorganized sector to get into technologies like bar-coding.000 to Rs 25. And solutions providers like Microsoft. “In China.The Big Bazaars and Spencer’s. Polaris and Shawman are now working on developing smart tools for the retail enthusiasts. the technology has advanced in phases. delivery order management. and consider these as frills. Most of the time these solutions are developed by local firms. FoxPro and Tally. which will get their work done at a reasonable cost. However. Some other features are a user-defined billing screen and discount with control mechanism from the head-office. “They are not even bothered about upgrading.” he says. anywhere between Rs 10. so the cheap systems are more than welcome. we find the organized sector to be 20-23% of the total industry. These solutions might not work for the mid-sized retailers with five stores.000. which takes care of the front-end store needs. generally the mom-and-pop stores like to go for technology. which will make their operations more efficient. as well as the back-end warehouse requirements. business development manager. 15 . For small players with just one store.000. batch control and quick information search. interest levels are surely raising fast. Taxation policies also push you to automate and the push is even harder for those looking to expand beyond their single store existence. They avoid the high-end technology. who at times compete with the big names in the industry.” says Khushroo Bagwadia. Here. Small retailers seem next in line and vendors are also warming up to the opportunity. the huge unorganized retail sector is finally beginning to see the merit of logging on. Though the interest is more with retailers who register good sales and volumes. there are cheaper quick-fix solutions available too. smart inexpensive solutions are the need of the hour. “It’s good to at least answer their questions. The product is a simple to use. Though it’s early days yet to measure it penetration in the unorganized retail industry. Software available to the retailers is ShawMan’s RetailMagiK. According to Oberoi of Polaris. The screen design and the functionality are designed in such a way that the user need not press too many keys to get things done. the investment on retail solutions go really low. even if at a model scale. most retailers look at decent entry-level solutions starting at Rs 25.

Enclosure having different formats of in-store Variety of shops available to each retailers. quality Greater choice to the consumer. furniture. Extremely large self-service retail outlets One stop shop catering to varied consumer needs Specialty Stores Department Stores Supermarkets Discount Stores Stores offering discounts on the retail price through Low Prices selling high volumes and reaping economies of scale Larger than a supermarket. vast choice available warehouse appearance. generally located in quieter including services such as parts of the city cafeterias. consumer needs. sometimes with a Low prices. organized into different departments such as One stop shop catering to varied/ clothing. Small self-service formats located in crowded urban Convenient location and extended areas. all under one roof. appliances.Format Description The Value Proposition Branded Stores Complete range available for a Exclusive showrooms either owned or franchised out given brand.mart Convenience stores Shopping Malls Formats adopted by the Retail Players in INDIA. house wares. other. carry most of comparison between brands is the brands available possible Large stores having a wide variety of products. 16 . certified product by a manufacturer. operating hours. etc. Focus on a specific consumer need. toys. Hyper.

000 sq ft to 7.000 sq ft and above. Located mainly in metro cities. Pantaloon. Examples include Shoppers Stop.Retailer Original formats Supermarket (Foodworld) Department Megastore) Store (Piramyd Later Formats Hypermarket (Spencer's)Specialty Store (Health and Glow) Discount Store (TruMart) RPG Retail Piramal's Pantaloon Retail Department Store (Pantaloon) K Raheja Group stop) Tata/ Trent Landmark Group Others Small format outlets (Shoppe) Supermarket(FoodBAZAR) Hypermarket (Big Bazaar) Mall (Central) Department Store (shopper's Specialty Store (Crossword) Department Store (Westside) Department Store (Lifestyle) Supermarket Hypermarket (TBA) Hypermarket (Star India Bazaar) Hypermarket (TBA) Discount Store (Subhiksha. Pyramid. Margin Free. 17 . Specialty Electronics Retailing formats in India: 1. Supermarket (Nilgiri's). Ranges from 60. They lend an ideal shopping experience with an amalgamation of product. in proximity to urban outskirts. all under a common roof. service and entertainment. Apna Bazaar).00. Malls: The largest form of organized retailing today.

offer discounts on the MRP through selling in bulk reaching economies of scale or excess stock left over at the season. The US$ 6. Prices are slightly higher due to the convenience premium. the biggest success is K Raheja's Shoppers Stop. catering to a variety of consumer needs. catering to varied shopper needs are termed as Supermarkets.000 sq ft to 2. 3. 6. These usually do well in busy market places and Metros.2. The product category can range from a variety of perishable/ non perishable goods. which forms 44 per cent of the entire FMCG sales.000 sq. which started in Mumbai and now has more than seven large stores (over 30. Super Markets can further be classified in to mini supermarkets typically 1. is growing at 9 per cent and has set the growth agenda for 18 . Department Stores: Large stores ranging from 20000-50000 sq. 5. MBO’s : Multi Brand outlets. 7. toys. These are located in or near residential high streets. the Mumbai books retailer Crossword. Among these.000 sq ft and large supermarkets ranging from of 3. 8. SPECIALITY STORES: Food retail : Food dominates the shopping basket in India.000 sq. Discount Stores: As the name suggests. 4. having a strong focus on food & grocery and personal sales.1 billion Indian foods industry. discount stores or factory outlets. Specialty Stores: Chains such as the Bangalore based Kids Kemp.500 sq ft to 5. ft. Further classified into localized departments such as clothing. feet located near residential areas. Convenience Stores: These are relatively small stores 400-2. seven days a week. offer several brands across a single product category. are focusing on specific market segments and have established themselves strongly in their sectors. They stock a limited range of high-turnover convenience products and are usually open for extended periods during the day. Hypermarts/Supermarkets: Large self service outlets. etc Department Stores: Departmental Stores are expected to take over the apparel business from exclusive brand showrooms. ft) across India and even has its own in store brand for clothes called Stop!. home. These stores today contribute to 30% of all food & grocery organized retail sales.000 sq ft. groceries. RPG's Music World and the Times Group's music chain Planet M. also known as Category Killers.

The mobile revolution: The retail market for mobile phones -. Toys.6 billion. Punjab. fragrance.6 billion. eyewear. multi-year investment in agriculture and retail. current market prices. the branded food industry is homing in on converting Indian consumers to branded food. West Bengal and Maharashtra. Andhra Pradesh and Rajasthan amended the Agricultural Produce Marketing Committee (APMC) act this year. mushroom under cultivated conditions and services related to agro and allied sectors are open to 100 per cent FDI through the automatic route. Margins are in the range of 2025 per cent (for dealers and distributors). including Maharashtra. which allows farmers to sell their produce directly to buyers offering them the best price. In comparison. will annually pay farmers over US$ 30. pisciculture.  Global lifestyle brand Nautica is bringing Nautica Kids. cultivation of vegetables. stationary. Kids retail: When it comes to Indian children. Leading the kids' retail revolution is the apparel business. retailers are busy bonding--and branding:  Monalisa. Middle East's largest kids' entertainment brand for animation and live action content.is already a US$ 16. the Versace of kids is coming to India. outerwear. Agricultural sectors such as horticulture. For its e-Choupal scheme. development of seeds. '02. aqua culture. 14 states. animal husbandry. ITC built internet kiosks in rural villages so farmers can access latest information on weather. floriculture. Reliance Retail will establish links with farms on several thousand acres in Punjab. with a growth rate that is half of the mobile market. growing at over 20 per cent per year.7 billion business. Industry experts say kids' retailing will touch annual growth of 30-35 per cent. According to research firm KSA Technopak. tailored clothing.  Swiss kidswear brand Milou is collaborating with Tirupur-based Sreeja Hosieries. with kids' clothing in India following international fashion trends. planning to become India's first large-scale exporter of produce. along the lines of the Model APMC Act. which accounts for almost 80 per cent of the revenue. TV channels… the segment is growing rapidly at 10 per cent per annum. airtime and accessories -.7 million of the total kids' apparel marketsize of over US$ 3 billion. Agricultural retail: Agriculture across India is heralding the country's second Green Revolution. watches.  Pantaloon's joint venture with Gini & Jony will set up a retail chain to market kids' apparel. the consumer electronics and appliance market is worth US$ 5. Since nearly 60 per cent of the average Indian grocery basket comprises nonbranded items.  Turner International India Pvt Ltd.  Sahara One Television has also signed a Memorandum of Understanding to source content from Spacetoon Media Group. will launch Cartoon Network Townsville and Planet POGO-two theme parks designed around its channels--in the National Capital Region. FieldFresh. foods-in-demand.handset. With a US$ 5. sportswear. 19 . etc.000 to lease land for vegetables. the branded segment comprises US$ 701.  International brand Zapp tied up with Raymond to foray into kids' apparel. theme parks. footwear. to hire tractors and to pay their workers.  Disney launched exclusive chains which stock character-based stationery. while companies enjoy an average gross margin of about 10 per cent.modern trade formats.

agri retail and manufacturing. The largest-ever 150-member British business delegation in India committed investments in the areas of food processing. Wal-Mart has announced its plans for India in partnership with Bharti. improved efficiency and new markets can benefit a large number of people. will enter the Indian market through a strategic alliance with Patel Retail. It is also likely to press for the liberalisation of sectors like financial & legal services and retail. PepsiCo--with agriculture exports worth US$ 40 million--also introduced farmers to high-yielding basmati rice. Export potential and a rapidly growing domestic demand for reliable produce from new supermarket chains is driving change. mangoes. and barley for its Frito-Lay snacks. International retailers : The Australian government's National Food Industry Strategy and Austrade initiated a test marketing food retail in India wherein 12 major Australian food producers have tied up with India-based distributor AB Mauri to sell their products directly at retail outlets. and Carrefour too might finally find the right partner. potatoes. With 77 per cent of India's population relying on agriculture for a living. catering to varied shopper needs are termed as Supermarkets. peanuts. a subsidiary of Patel Integrated Logistics. chilies.Besides a five-year program with the Punjab government to provide several hundred farmers with four million sweet-orange trees for its Tropicana juices by 2008. Specialised Transportation Inc. These stores today contribute to 30% of all food & grocery 20 . Among other big international players. Tesco is sure to try again. These are located in or near residential high streets. US-based home delivery and logistics company. Supermarkets: Large self service outlets.

Hypermarket is known for a wide range of goods offered. This is what everybody means when they say organized food retailing. S Kumar’s. Hypermarket: A very large commercial establishment that is a combination of departmental store and a supermarket. Shopping Malls: The new shopping malls that have been expanding their footprint across Indian cities are well designed. having a strong focus on food & grocery and personal sales. It consist of dozens of thousands of items. like their AmericanF&B counterparts Pizza Hut.500 sq ft to 5. They are so called pioneers in organized food retailing and go by the western model in look and feel and format. The specific features of a hypermarket are the wide range of goods offered. The present day malls are a creation of the past few years post 2000. quality service. S. other US retailers are firming up their India entry strategies and if they are already in. they are undergoing rapid expansion. and the very successful McDonald’s.Starbucks recently expressed their interest in entering India through the franchise route. Super Markets can further be classified in to mini supermarkets typically 1. Malls also have a large format store that serves as their anchor for shopping and a prominent restaurant that anchors the food needs of visitors. built on international formats of retailing and integrated with entertainment and restaurants to provide a complete family experience. while similar goods can be offered in several forms. These malls also known as Shopping Arcades offered only rows of shops. Fashion brands DKNY is also al set to foray into the Indian fashion Industry through a franchisee agreement with Indian company. Most malls 21 . Fashion brand DKNY is also all set to foray into the Indian fashion Industry through a franchisee agreement with Indian company. Shopping malls have existed in India since several decades but were designed and built to house several shops in a single facility. Over 300 malls are expected to be built over the next two years and most Indian cities with over a million populations will be exposed to this modern method of retailing. quality display of goods on the shelves and complex systems providing for customers loyalty. in the next 3 years. Supermarkets are relatively new entrants in the market. McDonald’s has major expansion plans lined up. it plans to open another 100 outlets in cities across India. They are designed professionally using a lot of international experience and combine shopping with a lot of brand building. other US retailers are firming up their India entry strategies and if they are already in. recreation.000 sq ft and large supermarkets ranging from of 3. Subway.000 sq ft. These Shopping Arcades tried to maximize on their store space and did not offer any areas for recreation and entertainment.000 sq ft to 2. In order to work with such an assortment it is necessary to group it into categories and sub categories that would unite goods according to this or that criteria. most of which were small stores that promised bargains for their various wares. Franchise outlets: Like Tommy Hilfiger and Wal Mart.organized retail sales. food and entertainment. Kumar Starbucks recently expressed their interest in entering Indian company Like Tommy Hilfiger and Wal-Mart. they are undergoing rapid expansion.

though they are mostly small. the retailing space in the country will also rise by 15-20% by 2010. The 4 major organized retail sectors are Food & Grocery. Organized retailing in India has a huge scope because of the vast market and the growing consciousness of the consumer about product quality and services. Delhi. e. 50 million sq ft of quality space under development 7 major cities to account for 41 million sq ft development 300 malls.690. followed by clothing.000 crores (USD 375 billion) of which. adds to this slice of the pie. Most of the organized retailing in the country has just started recently. Footwear is driven by the dominance of home –grown players like Liberty as well as the 15% market share that MNC retailer Bata Commands. Organized Retail Sector – Product Segments: The organized retail business in India is very small. Adidas. Clothing. In 2003-04.In terms of penetration by the organized retail sector.000 new outlets To add US $ 10 billion of business to organized retail. lease and sell basis". about 12 million. Foreign Presence. footwear is the highest category. Cities and metropolis in which retailing will show booming prospects include Mumbai. Finally the mall has large atria and open spaces to allow visitors and families to hang-out. Anil K Agarwal says:” The organized sector retailing is all set to grow at much faster speed than unorganized sector and the higher growth speed will alone be responsible for its higher market share which has been projected for $17 billion by 2010-11.g. Retail business contributes around 10-11 per cent of GDP. private consumption expenditure in India amounted to Rs 1. Consumer Durables and Books & Music. 325 large department stores. Chennai. shopping centre and multiplexes under construction To open 35 hypermarkets. 1500 supermarkets and over 10. Nike etc. and has been concentrated mainly in the metro cities. said Agarwal adding that the popular mode adopted for building shopping malls in these cities will be based on build. As a result. Organized retail only accounts for 3% of the total retail industry as yet and is estimated to grow to $64 billion by the year 2015. Franchisee activity in this category. Bangalore and Kanpur. is pegged to rise. India also has the largest number of retailers.also feature a multiplex cinema that offers entertainment to the visitors of the mall. ASSOCHAM president. retail sales constitute about 61% (USD 230 billion). operate. especially through the franchisee route. especially in Tier II Cities. Reebok. Estimated Growth in Organized Retail: 22 . This is despite the fact that India is one of the biggest markets. Kolkata.

924 1. Indiaranks First.075 293 315 467 1.645 422 8.2002 Large Segments Other Segments 1.462 162 2. Major Industry Players: 23 . in terms of emerging markets potential in retail and is deemed a ‘Priority’ market for International retail.266 590 852 824 33% 35% 20% 16% 15% 22% 12% 359 141 98 120 822 284 298 240 18% 15% 25% 15% 97 54 43 310 202 108 26% 30% 20% ($) Retail is amongst the fastest growing sectors in the country. ahead of Russia.315 2007 5.091 CAGR (%) 21% 15% 12% 18% Non-store 239 Retailing Total Organized 3.024 2.624 1.478 retail The Four Large Segments: Food -Chain Stores -Single Large Stores Clothing -Manufacturer retailers -Chain stores -Single Large Stores Consumer durables Manufacturer retailers -Chain stores -Single Large Stores Book and Music -Chain Stores -Single Large Stores 391 326 65 1.

1 The Future Group The Future Group. Subiksha and RPG Spencer. As of 2005. the promoter of the group who likes to address himself as “Chief Knowledge Officer” has plans to launch 18 formats and over 3. that is now omnipresent in almost all formats right from small groceries to e-tailing. The success of Pantaloons departmental stores encouraged PRIL to come up with other retailing formats such as “Big Bazaar” to retail low cost general merchandising. the Future Group has 3. The first departmental store called Pantaloons was opened in Kolkata in 1997 with an investment of Rs 0. due to some strange reason.Nanz in North India. who has since then gone on an expansion drive with other formats of retailing in different cities. Westside. The newcomers who are knocking at the gates are Reliance Retail. Bharti Walmart and Aditya Birla Trinethra. Future Capital. thereby turning the Future Group into a US$7 billion company with over US$1 billion in profits by the year 2010. It employs more than 12. Future Brands. The Future Group is divided into six verticals – Future Retail. It came out with a public issue in 1991 and later changed their name to Pantaloon Fashions (India) Limited (PFIL). Pantaloons went for a franchisee route to expand the number of retail outlets and by 1995. The big players in Indian retail landscape now are the Future Group. which was earlier known as PRIL (Pantaloon Retail India Limited) began as a trouser manufacturer in the mid 1980s. Pantaloon in the East and Crossroad in the West were the pioneers of the retail revolution in India. Nanz faced several obstacles (See Case Study) in their business and had to finally down their shutters. The store was a success and recorded revenues of Rs 100 million within the first year of operations. The company went on to manufacture ready made trousers under the “Pantaloons” brand name. the Piramyd Group. Pantaloon went to scale up and become bigger and bigger to form the Future Group. it had reached to a crucial number of 70. 2 Shoppers Stop 24 . Shoppers Stop.000 people and has a customer base of more than 120 million.340 stores. Crossroads in Mumbai imparted some valuable lessons to their parent. Future Space. In 1999.7 million. and “Food Bazaar” to retail food products. The Future Group started operations in the mid 1987s by incorporating the company as Manz Wear Private Limited. did not see any logic to expand beyond the southern frontiers. Future Media and Future Logistics. Here. we intend to do a brief profiling of the major players in order to understand the retail business in a better manner. The first exclusive men’s store called Pantaloon Shoppe was inaugurated in 1992. the company’s name was changed to Pantaloon Retail (India) Limited (PRIL). Nilgiris in the South. Kishore Biyani. Nilgiris.5 million sq ft of retail space and over 100 stores across 25 cities in India.

Shoppers’ Stop has a database of over 2.. Le Teint Ricci etc. Color Plus. which offers the widest range of books along with CD-ROM. Vettorio Fratini and DIY. Delhi. open new stores faster and get information about merchandise and customers online. Fax-a-book and Email-a-book enable customers to shop from their homes. The stores are spread all over India with presence in Mumbai. Shoppers Stop has been very keen to understand the importance of distribution and logistics in ensuring that merchandise is available on the shop floors. which reduces the turnaround time in taking quick decision. Zodiac to cosmetic brands like Lakme. Shoppers' Stop also retails its own line of clothing namely Stop. exclusive shop-in-shop counters of international brands and world-class customer service. Pune . Shoppers’ Stop brought international standards of shopping to the Indian consumer providing them with a world class shopping experience. Shoppers’ Stop’s core customers represent a strong SEC A skew. Shoppers’ Stop’s customer loyalty program is called “The First Citizen”.and an annual spend of Rs. “Crossword”.000/-. promoted by the real estate group K Raheja.Resident Indians visit the shop for ethnic clothes in the international environment they are accustomed to. Arrow. The program offers its members an opportunity to collect points and avail of innumerable special benefits.5 lakh members who contribute to nearly 50% of the total sales of Shoppers’ Stop. Jaipur. Life . Levi’s.Shoppers’ Stop. Chennai & Ghaziabad. they are able to replicate stores. Shoppers’ Stop is positioned as a family store delivering a complete shopping experience. The Organisation. A large number of Non . in 2000. They are the only retailer from India to become a member of the prestigious Intercontinental Group of Departmental Stores (IGDS). which is now being integrated with Oracle Financials and the Arthur Planning System. the majority of them being families and young couples with a monthly household income above Rs. This has led the retail chain o streamline its 25 . Shoppers’ Stop was among the first few retailers to use scanners and barcodes and completely computerise its operations. Scullers. along with ICICI ventures also acquired the reputed bookstore. Shoppers’ Stop is also very well known for having pioneered several quality retailing concepts in India like CROSSWORD. Shopper’s Stop Ltd now has a considerable presence all over the country with overr 7 lakh square feet of retail space and stocks over 200 brands of garments and accessories. Kolkata. Crossword currently has 18 Stores. With the help of the ERP. Currently. Today it is one of the few stores in India to have retail ERP in place. They fall between the age group of 16 years to 35 years. music. Chambor. Hyderabad. Gurgaon. Realising the role of IT way back in 1991. stationery and toys. HyperCITY and Mothercare.1. Kashish. Services like Dial-a-book.000/. Bangalore. was one of the first movers to have set up a large retail outlet in New Delhi with international ambience. With its wide range of merchandise. From apparel brands like Provogue.50. Shoppers’ Stop caters to almost every lifestyle need. The stores offer a complete range of apparel and lifestyle accessories for the entire family. 20. the best retail planning system in the world. The merchandise at Shoppers’ Stop is sold at a quality and price assurance backed by its guarantee stamp on every bill.

at its Westside. vegetables. fruits. consumer electronics and household items at the most affordable prices. women and children. Earlier Landmark was focused on books. music and stationery at Landmark. In 2005. Currently. Westside has 25 outlets across 17 cities in India offering a variety of designs and styles in garments. a hypermarket with a large assortment of products at the lowest prices. as table linens. consumer electronics and household items at Star India Bazaar and books. Landmark and Star India Bazaar outlets. fruits. dairy products. A beginning was made in 1998 with Westside. The company has developed process manuals for each part of the logistics chain. it acquired Landmark. In a recently signed deal. 3 Trent – Westside Established in 1998.supply chain. dispatch of stocks to the retail floor and forwarding of bills for payment. Landmark commenced its operations in 1987 with its first store in Chennai. Star India Bazaar provides a large assortment of high quality products made available at the lowest prices coupled with a unique shopping experience. they are adding 4 to 5 new stores every year. beverages. dairy products. sprawling space. health and beauty products. prime locations and coffee shops enhance the customers' shopping experience. Trent has agreed to anchor 12 malls set up by DLF Universal Ltd across the country. toys. cosmetics and perfumes at Westside. health and beauty products. retail practices and sales to India. Trent also runs another chain of retail stores called Star India Bazaar. Star India Bazaar is located in Ahmedabad and offers a wide choice of staple food. vegetables. In 1996 it added music to its product portfolio and also started the trend of stocking curios. and now has nine stores in the major metros of the country. The company intends to bring the world’s best retail technology. music. Shoppers’ Stop has a grand ambition to position itself as a global retailer. stock receiving systems. purchase order management. 4. Launched in 2004. artifacts.Piramyd 26 . This amounts to about 27 locations. Trent retails garments and household accessories for men. India's largest book and music retailer. food. a lifestyle retail chain. totaling to about a million square feet of space. CDs and other gift items. generation and fixing of price and store tags. footwear and accessories. purchase verification and inventory build up. which was followed up in 2004 with Star India Bazaar. Trent operates some of the nation's largest and fastest growing retail store chains. Well-designed interiors. one of the largest books and music retail chains in India. These modules include vendor management. home accessories and furnishings. beverages. Trent has also recently acquired a 76 per cent stake in Landmark. stationery and greeting cards.

The FHPC (Food & Personal Care) business is volume driven while the Lifestyle store is a margin driven business. Piramyd Retail currently has 5 Mega stores and 8 TruMart stores mainly in Maharashtra . Pyramid also has a smaller format of stores called TruMart that caters to Food and Personal Care products. due to distant synergies in two businesses in March 2005. Textiles. Piramyd Retail plans to increase the contribution of private labels from existing 7% to 18-20% of the revenues by 2010. Family Entertainment and Retail with manufacturing operations in 19 locations across five states and employing over 18. The promoters launched the apparel business in 1999 under Piramyd Retail and Merchandising Pvt. 5. Subiksha did not even offer shoppers self service.Piramyd Retail is part of the Piramal Group. As the apparel and food businesses individually reached a critical mass the management merged the two companies into Piramyd Retail Ltd. Gross margins from private labels are over 40% and hence the company is planning to increase this business. which has presence in diverse sectors spanning Pharmaceuticals. Subiksha The Chennai based Subiksha grocery chain runs around 200 outlets all over the country and it’s current turnover stands at Rs 224 crores. Their target customer is the middle income value conscious buyers. The floor space is expected to be 5 times on successful expansion. Customers had to bring their own carrybags or pay to buy them from the store. Most of the stores are on the lease format and the company is prone to higher lease rentals due to the overall increase in real estate prices. The company plans to increase these numbers to 17 Mega stores and 69 TruMarts by 2008. The customer had to place an order at a computerized teller and the goods were billed and delivered after cash is collected. Its competitors like Pantaloon. A few years ago.000 people. This retail chain has no qualms and spends almost no money on creating a pleasant shopping experience. Piramyd Retail did have a first mover advantage in many locations but it has actually failed to capitalise over this advantage. Engineering. Ltd. Real Estate. and all stores are non-air conditioned. Shoppers Stop and Trent gained larger benefits of their far more aggressive business & marketing strategy in the retail space. (PRMPL) while its food. The main aim of Subiksha is to offer a functional and transactional shopping experience. There is no false roofing or sparkling vitrified tiles on the floor. (CSPL). This may bring the profit levels down substantially. Subiksha even attempted to charge the customers for home delivery. 27 . Ltd. home & personal care businesses (FHPC) were housed under Crossroads Shoppertainment Pvt.

Mukesh Ambani’s ultimate ambition seems to be to create the Indian equivalent of Wal-Mart by scaling up the business to unprecedented heights to reach every nook and corner of the country. chilled and frozen products. Mukesh Ambani.000-sq ft mini hyper stores. electronic goods and farm implements and inputs. 7.000sq ft to 15. They will also offer products and services in energy. They also get shopping bags and free home delivery.Subiksha tries to be as close to the customer as possible and offers the lowest price and huge savings in comparison to competitors. bakery and weekly top up shopping.000-crore investment in the retail sector. Spencer's outlets are divided in to three retail formats. Reliance Retail On June 26. These are. supermarkets. Spencer's Hyper. travel. Chairman and Managing Director.000 items. announced a Rs 25.000-sq ft hypermarkets stocking over 25. a grocery store that sells vegetables. Reliance Industries Limited. RPG Spencer RPG’s Spencer presently has 125 stores across 25 cities covering a retail trading area of half a million square feet and with a clientele of 3 million customers a month. It’s slogan happens to be --. fast-moving consumer goods.However.500 Indian cities and towns with outlets of a varied format. now Subiksha has slightly tweaked their business model in order to create a better appeal to customers who were defecting to the competitors. With it’s 28 . fresh food. specialty stores and hypermarkets. The 8. 2006. Reliance also plans to open restaurant outlets. At Spencer's Daily shoppers can get fresh fruits. Reliance Retail plans to extend it’s footprint to cover 1. But customers have the option to pick from shelf spaces. financial services marts and tourism counters within it’s stores. personal care items and other food products. In addition to this.000-sq ft to 7. these retail outlets will also be selling apparel and footwear. fruits.bachat mera adhikar hain (saving is my fundamental right). 6. lifestyle and home improvement products. partnerships would be developed to bring the best of global luxury brands to India as well. the over 25. Reliance Retail started it’s retail operation with “Reliance Fresh”. All the newly opened Spencer's stores stock every conceivable product that is required by a household on a daily basis. But the selling USP(unique selling proposition) remains the same --. Spencer's has a national footprint with seven hypermarkets. a mix of neighborhood convenience stores. household items. branded as Spencer's Super and the daily purchase 4. groceries. Soon. with regular offers and discounts.000-sq ft Spencer's Daily for groceries. The store formats are still small and nonairconditioned. health and entertainment. three supermarkets and 70 daily use outlets. called Dailies. vegetables.

ft. While Bharti would manage front-end of the retail venture. They also expect Wal-Mart to take a tough stance on lowering prices and force farmers to sell their produce at lower rates. unveiled the roadmap for its retail venture on 19th February.retailing venture. politicians. A high-level team from Wal-Mart was visited India in the later part of February to work out the details of the back-end chain. Pune and Ahmedabad and plans foray into other cities on a rapid scale. However. supply chain and cash-and-carry.) Ltd. including logistics. Within a few months they have now opened stores in Mumbai. Wal-Mart would be involved in the back-end. Both Bharti and Walmart are presently having a tough time in convincing the ministers. The JV was presently scouting for 10 million sq. The modalities for its back-end linkage. agriculturists.000 people. The first store christened “Reliance Fresh” opened in November 2006 at Hyderabad. Bharti Wal-Mart Bharti Retail (Pvt. The first retail outlet is expected to open somewhere in the month of August . 9. 8. he added. This investment would be only for setting up front-end stores. Bharti is now conducting a massive consumer survey to take a final decision on branding and promotional campaign. Bharti’s plan is to invest $2. 2007 envisaging an investment of $2.5 billion with expectation of revenue of $4.000 crore) from this business by 2015. are in the process of being worked out. 20. which would include hypermarkets. supermarkets and convenience stores and would provide employment to about 60. the NGOs and other pressure groups that their business model would serve to work in the best interests of all the stakeholders. Over a span of five years.5 billion (about Rs. RRL expects a 20% return-on-investment. The company would open multi-format retail outlets in all cities with a population of about one million.5 billion by 2015 and open stores across all major cities. A lurking fear of monopolistic regime in the retail sector is also enhancing their fears. including its joint venture with the world's largest retailer Wal-Mart. Bharti and Wal-Mart have been facing stiff opposition from the left parties and other political outfits who fear that the entry of the Bentonville giant will make life difficult for the small grocers and create massive unemployment. Reliance expected a revenue target of US $20 billion through it’s retail operations by 2010. of retail space. Aditya Birla – MORE 29 .

The group’s philosophy is integration and towards this end has initiated backward integration in the field of high fashion by setting up a state of the art manufacturing facility to support its retail endeavors.00 products range which fulfills all your household needs. The showrooms have over 70. more. It is covering about 1282000 sq. the Group is driven by a performance ethic pegged on value creation for its multiple stakeholders. it is anchored by an extraordinary force of 100. Is an inspirational brand for an inspirational country. Global in vision. value promise becomes all the more evident. Chairman. also has a range of products from its own stable available across value. premium and select ranges. The products have been quality-checked and are available in attractive packaging at competitive prices. enthusiastic team that represents the best experience from India and globally. customers can also enroll for the membership program Club more. Company is doing research on more formats. Company will come up with 32 new stores this year. Its outlets cater to almost all price ranges. more. MORE. vegetables and staples ensure great quality as well as great price. more. Situated in the national capital Delhi this store boasts of the singe largest collection of goods and commodities sold under one roof in India. promises best in market pricing. Kumar Mangalam Birla. Calcutta) is today a conglomerate encompassing 51 showrooms in 39 cities. We have a bright and committed. customized shopping solutions and savings. and can be catered to under one roof. variety.The Aditya Birla Group is India's first truly multinational corporation. chain of supermarket stores. Aditya Birla Group. Value MORE. in 18 state across India. Each store gives you international quality goods and prices hard to match. The cost benefits that is derived from the large central purchase of goods and services is passed on to the consumer. The group’s prime focus is on retailing. The Vishal stores offer affordable family fashion at prices to suit every pocket. Company has already tied up for 5-lakh sq ft space and is looking for more. We will give them more. Add to this. which provides convenience. convenience and more.” Our mission is to change the way people shop. A US$ 24 billion conglomerate.” says Mr. Linking up directly with farmers to source fresh fruits. Over 50 per cent of its revenues flow from its operations across the world. VISHAL RETAIL : Vishal is one of fastest growing retailing groups in India. What started as a humble one store enterprise in 1986 in Kolkata(erstwhile. more. MORE. India’s first hyper-market has also been opened for the Indian consumer by Vishal. with a market capitalization of US$ 23 billion and in the League of Fortune 500. and the more. The more. More. for you advantage: more. at no extra charge. rooted in values. the membership program Club more. 10.000 employees belonging to over 25 different nationalities. ft. To avail additional benefits. Quality. Company is looking for opportunities of 30 . promises a world-class pleasurable shopping experience to Indian consumers in their very own neighborhood. value are the four delivery cornerstones of the more.

Restaurants. In the year 2005 METRO Group had generated sales of over €55. Company will venture wherever it gets real estate space. It is a modern format of wholesale trading. METRO Cash & Carry started operations in India in 2003 with two Distribution Centres in Bangalore.Viveks. With this METRO introduced the concept of Cash & Carry to India. it will have a panIndia set up. Currently manufacturing contributes 10% of the business. Apparel sales currently at 63% in the next 2-3 years should come down to 50% as the company is now also focusing on different segments.The Unlimited Shop Vivek Limited is a professionally managed public limited company carrying three retail brands . 350 crores (USD 80 million) and also become a public limited company 31 .Viveks grew from 3 stores to more than 52 stores and turnover increased to over Rs. The company employs over 2. 53% of total sales came from outside Germany. METRO – CASH & CARRY INDIA METRO Group today. Currently.000 staff in 30 countries. which in the next two to three years.7 billion.000 businesses in Bangalore. Eventually.50. Viveks evolved its strategies to suit the larger scene where there was a stigma attached to borrowing. 11. The current share of FMCG at 15% could go up to 20-25%. Vishal can always sustain growth in this big market. which enhanced the core retailing business also. Contribution of apparels business at 53% may slightly come down to 50%. Premier and continuously adding to the formidable strength of 1000 employees. Caterers. Very few hire purchase options were available and hence Viveks started Vivek Hire Purchase and Leasing Ltd to finance consumer durables. Food and Non-food Traders. METRO offers assortment of over 18000 articles across food and non food at the best wholesale prices to business customers such as Hotels. is the third largest trading and retailing group in the world. These Centres offer the benefit of quality products at the best wholesale price to over 150. Vivek Ltd is the largest consumer electronics & home appliances retail chain in India. Viveks. Viveks popularized several brands by creating visibility and have the distinction of being market leaders and trendsetters with continuous support from the principal companies. Institutional buyers and professionals. METRO's Cash & Carry business model is based on a Business to Business (B2B) concept and focuses on meeting all the needs and requirements of business customers. Company can sustain margins as it is going for backward integration. Company is increasing its focus on the non-apparel and FMCG segment. will go up to 25%. 12. Jainsons. it has very little space in the south India.expansion in the South. the cost of sourcing will come down in the near future. With growth in volumes. India is a big country and there is huge space for four-five big retail players. catering only to business customers.

mobile phones. In addition. Vijaywada. 14 store Jainsons was bought over in 1999. DRIVERS FOR GROWTH: Indian consumers are rapidly evolving and accepting modern formats overwhelmingly. petro-retailing efforts of petroleum giants scattered through out the country's landscape have also ensured that smaller towns are also exposed to modern retailing formats. Coimbatore. Retail Space is no more a constraint for growth.from a family run enterprise. Further. Indore. covering distances has become easier than before. 32 . if he or she sees value in shopping from a particular location. 2 store Premier in 2001 and Spencers in 2002 and have recently absorbed Spencers into the Premier brand. Consumer Durable Goods. Viveks streamlined the marketing and advertising activities and shopping ambience was improved. Stocks in the retail sector are also becoming increasingly attractive from an investor's point of view. Nasik. Aggregation of demand that occurs due to urbanization helps a retailer in reaping the economies of scale. Urbanization: increased urbanization has led to higher customer density areas thus enabling retailers to use lesser number of stores to target the same number of customers. consumer durables. automobiles. Dehra Dun. Murugappa & Piramal Groups etc and also foreign investors and private equity players are firming up plans to identify investment opportunities in the Indian retail sector. Double Incomes: Increasing instances of Double Incomes in most families coupled with the rise in spending power. large Indian corporate groups like Tata. India is on the radar of Global Retailers and suppliers / brands worldwide are willing to partner with retailers here. Bhopal. Plastic Revolution: Increasing use of credit cards for categories relating to Apparel. Bombay Dyeing. Now a customer can travel miles to reach a particular shop. Vadodara. Bhubaneswar. The quantum of investments is likely to sky-rocket as the inherent attractiveness of the segment lures more and more investors to earn large profits. manufacturers and retailers of products such as personal computers. and over INR 200 billion by end of 2010. Varanasi and Ludhiana among others. In this process. Investments into the sector are estimated at INR 20 – 25 billion in the next 2-3 years. Retailers have responded to this phenomenon by introducing contemporary retail formats such as hypermarkets and supermarkets in the new pockets of growth. Covering distances has become easier: with increased automobile penetration and an overall improvement in the transportation infrastructure. Lucknow. Prominent ‘tier-II' cities and towns which are witnessing a pick-up in activity include Surat. THE GROWTH DRIVERS: Drivers of Retail Industry • • • • The Demography Dynamics: Approximately 60 per cent of Indian population below 30 years of • age. Reliance. With consumption in metros already being exploited. Food and Grocery etc. Raheja. ITC. financial services etc are increasingly targeting consumers in tier II cities and towns. With the liberalization of economy and other changes in the global scene. Successful development of value based concepts as well as development of retail space in smaller cities and towns shall drive the organized retail into the next levels of cities.

In India they do not have to face this dilemma largely because rapid urbanization. Indian consumer class can be classified according to the following criteria: 1. many international retailers have entered the Indian market on the strength of rising affluence levels of the young Indian population along with the heightened awareness of global brands and international shopping experiences and the increased availability of retail real estate pace. JC Penney. a number of manufacturers in India. The contribution of these tier-II cities to total organized retailing sales is expected to grow to 20-25%. international exposure. mall development activity in the small towns is also picking up at a rapid pace. thereby. increase in demand. The next level of opportunities in terms product retail expansion lies in categories such as apparel. Music and Gifts offer interesting opportunities for the retail players. the ‘retail boom'. There are a lot of young people in India in different income categories. Geographical dispersion 33 . availability of increasing quality retail space. Some of the niche categories like Books. Development of India as a sourcing hub shall further make India as an attractive retail opportunity for the global retailers. in line with trends in developed markets. instead of viewing retailers with suspicion. presence of large number of young population. Income 2. The bottom line is that Indian market is changing rapidly and is showing unprecedented consumer business opportunity. 85% of which has so far been concentrated in the metros is beginning to percolate down to smaller cities and towns. Over the last few years. Already. Indian consumer goods market is expected to reach $400 billion by 2010. Retailers like Wal-Mart. Socio-Economic status 3. GROWING CONSUMER CLASS: Favorable demographic and psychographic changes relating to India's consumer class. Age demographics 4. any number of opportunities are available . consumer durables. paints etc are waking up to the growing clout of the retailers as a shift in bargaining power from the former to the latter becomes more discernible. These sectors have already witnessed the emergence of organized formats though more players are expected to join the bandwagon. consumer durables. manufacturers are beginning to acknowledge them as channel members to be partnered with for providing solutions to the endconsumer more effectively. Thus. creating quality space for retailers to fulfill their aggressive expansion plans. jewellery and accessories. wider availability of products and brand communication are some of the factors that are driving the retail in India. Also.On the supply side. or as a ‘necessary evil' as was the case earlier. GAP. Karstadt-Quelle etc stepping up their sourcing requirements from India and moving from third-party buying offices to establishing their own wholly owned / wholly managed sourcing & buying offices shall further make India as an attractive retail opportunity for the global players. have set up dedicated units to service the retail channel. Tesco. catering services and home improvement. H&M. Manufacturers in industries such as FMCG. India has the youngest population amongst the major countries.

215.3 12. it is expected that this will generate trade opportunities and continuous investment in the economy.4 119. and nearly 50 % is below 25.8 2001 2.2 Change 416% 179% 37% -65% -61% 21% The Consuming Class Rs 45.9 74.2 90.0 246. In addition to that. 22-45. if compared with some advanced and developed countries. Rs. Age distribution if Indian population (In Millions) Year/ 2006 Age Below 4 yrs 5-14 yrs 15-19 yrs 20-34 yrs 35-54 yrs 55 & above Total 113.6 71.4 180.5 221.1 239.0 54.4 279.1 23.8 207.8 199. 215.1 109. Socio-Economic Classification: In addition to income classification and consumer classification. It will have a significant impact over the consumer goods market.7 1012.2 32.000 2.000 1996 1.1 15.1 88.7 2007 6. There is huge potential for further consumption of goods and services due to the increased level of 34 . which is mainly used by market planners to target market before launching their new products. Indian households can also be segmented according to the occupation and education levels of the chief earner of the household (the person who contributes most to the household expenses).000 Below Rs.000 Rs.7 1094.2 90.1 108. 16-22.2 2001 1996 Marketers explain that the boom in the consumption level and leisure related expenditure is because of this young population.3 101.1 44 33 164.7 224 178. 16. Age Demographics: India is a very young nation.2 118. SEC is made to understand the purchase behavior and the consumption pattern of the households 3.6 28. Income Classification Consumer Classes The Rich The Climbers The Aspirants The Destitute Total Source:NCAER Annual Income in Rs.5 233.5 239. This is called as Socio-Economic Classification (SEC).000 and more Rs.2 122.1.7 934.5 54. Nearly twothirds of its population is below the age of 35.

Wal-Mart-owned ASDA. Spain since the 1980s and Eastern Europe more recently. Carrefour. Similar trends Identifying the future The important thing is to identify the 'future that has already happened' . Geographical Dispersion of market potential There is large difference in economic prosperity levels among several states in India. Identify the changes that have already happened.Peter Drucker The important and distinctive are always the result of changes in values. with the emergence of larger store formats like superstores and hypermarkets in countries like UK. out of which 150 districts (category A) and next 150 districts (category B) account for 78% and 15% of the national market potential respectively. Tesco etc have adopted multi-format and multi-product strategies in order to customize their product offering for distinct target segments.51% Less than 4% 3. the Report says.1% fuels) Clothing Footwear Medicare Transport & Communication Recreation. rent. classified according to their market potential. France.9% 0.68% Essential Services (water. perceptions and goals of people. India has 500 districts. linked to the wealth creation from trade. power. The expenditure on essential goods and services has a higher share in developing countries as compared with that of developed countries. There are poor districts in many states. GROWING ECONOMY Potential for all Formats to Thrive : Most of the global powerhouses in the retailing sector such as Wal-Mart. Tesco. Category C districts have 40% of the geographical share. Consumption Trends Food Essentials 45.25% 14. traditional food retailers have been able to stock more extensive non-food ranges. In fact. exploit the changes that have already occurred and use them as opportunities. Education. Together with its rival. Further. Chief Economist for Keystone India ñ a Chicago-based firm providing cross-border trade facilitation and asset management services in US are likely to be exhibited in India as all formats present prospects for growth.25% 4. and agricultural development. and 10. Germany. UK's leading grocer.63% 4. Dr William T Wilson.disposable income. and Culture Home Goods 4. has become the number one apparel retailer in the Czech Republic and also a major player in Hungary apart from being one of the fastest growing clothing retailers in the UK. Remaining 200 districts (category C) are backward and account for only 7% of national market potential. industrial. Tesco is one of the food sector's most successful exponents of clothing in Europe DISPOSABLE INCOME 35 .

Find the synonyms and transliterate these into value offerings in your field of business and you have a gold mine. is the market research arm of global communications specialist Aegis Group. Stop. That's total rubbish and rather an assumed limitation. the ones whose nomenclature is the name of the store itself are called store labels. India will have at least three million people with an annual income of over Rs 4. RISING INCOMES Over the past deacde . store labels. making it equal to or greater than Japan's.150. customized and more.This media bombardment has exposed the Indian consumer to the lifestyles of more affluent countries and raised their aspirations from the shopping experience – they want more choice . There is a distinct advantage in naming the brand launched by the retailer after the same name as that of the store. Further. Indian consumers are getting richer noticeably leading to higher disposable money. A store brand on the other hand is a brand name the retailer carries. controlled. especially when you manage to connect with the customers' value and perception and India. which may have a negative rub-off effect on the retailer's image. unique. when it comes to retailing. the number of house holds earning above Rs. These terms may seem to be synonyms of each other. the store label also carries the burden of not only the success of the brand. India’s middle and High Income group has grown at a rapid pace of over 10% per annum . declared and straight income meaning there will be a considerable number of consumers with other sources of income! (I suppose).000. is a brand in itself. Kick-started by the cableexplosion during the gulf war. television has accelerated to a pint where there are more cable connections than telephones in Indian homes and more than 100 channels are being aired at all times . Foodworld and Nilgiris have launched their own brand of supermarket products under the "Foodworld" and "Nilgiris" brand names. Recent research finding is that by the year 2010.Among the product lines launched by retailers. experience and convenience. merchandised and sold by a specific retailer in its own stores. a private label and a store label are different from any other brand because they are product lines that are owned. private label brands. Considering the third successive year with great economic growth in India. This emerging consumers would want something special. 36 . store brands. this is the official. different. Though this growth is most evident in urban areas. India's economy is expected to equal or surpass Japan as the world's third largest sometime in the year 2006. Nallis. said that after significant accelerations in economic growth recently. But at the same time.000 per annum is about 30 million today and is expected to grow to 80 million by 2007.000. it is obvious that we shall have more people with higher disposable income. Dr Wilson also added that India's economy measured in PPP (purchasing power parity) terms will eclipse the US$ four trillion mark in 2006. Life and Kashish by Shoppers' Stop. leading to the proliferation of Higher quality/higher priced products. One could comfortably presume that one fourth of the three millions would reside in Bangalore. better. value . because of its unique offering. each of these terms has a different meaning. However.There is no point complaining. EXPLOSION OF MEDIA There has been an explosion in media as well during the past decade . According to Synovate. but also the failure. Each retailer. the discerning Indian consumers are not going to be conscious about price alone. accusing or justifying that retailing business is only for larger players and multinational retailing companies. it has also taken place in rural markets. Modern Bazaar and The Home Store are store brands since each of them stands for a certain retail offering. the growth of private labels is about 2-3 times more than that of advertised brands . which is what the store brand signifies. Among Indian retailers. and ETC by Ebony are private label brands. This growing high-income population is triggering the demand for consumer goods. While we all know what a brand is. Private Labels Brands. With higher disposable income. Mind you.

It is unlike other forms of marketing and the traditional marketing rules do not apply. in menswear. Therefore the contact person (whom the 37 . regional and national brands for practically all kinds of products? The reasons are multifold. as in service. retailers say that gross margins on branded products vary from 25-38 per cent. A retailer can create a stronger emotional connect with the consumer as the experience is not just the store experience but also the product experience. results in a strong retail brand. the People. Private label products contribute to a retail brands differentiation. This brings about a more consistent and acceptable product portfolio. But retail management in the true sense (as retailing is known in the west) is a relatively new discipline in India. In retailing. They are not perceived as being interchangeable with similar private label products launched by other retailers (unlike manufacturers of branded products. Introduction of an in house brand of products helps the retailer to have means with which they can compete head on with the other branded products.Retailers are now aggressively moving into developing their own private labels as it not only makes economic sense in the form of retailers achieving higher margins. Service adds to the differentiation. and together with a unique product range. which are the same regardless of the retailer). and the retailers are thus self-sufficient in a certain category. An established private label brand provides the retailers a platform to negotiate with suppliers. Compared to that. there is a fifth P added to the existing 4 of marketing. They have more control over the merchandise and are able to make the required changes and modifications to suit the changing customer profile much quicker. An outside brand could be purchased from any outlet. it also helps them to plug gaps in their product portfolio. A retailer can achieve differentiation through a large (but not necessarily exclusive) portfolio of private label products. This is not so in the case of private labels. CHALLENGES Retailing in its traditional form has been existing in India for decades. For instance. so the product experience keeps bringing the consumer back The question is: why would retailers want to get into the trouble of launching an own brand when there are "n" number of local. the retailers can earn whopping margins of around 55-60 per cent on private labels. which also helps reduce mark-downs.

• Low price strategy: The Indian consumer being value-conscious. • Location: A prime location in the city/town so a big plus. the people. Any retail chain needs to experiment and re-orient to cater to the local needs and preferences. While Indian markets still beckon a large retail chain. Things such as waiting and parking areas need to be taken care of. Benchmarking the best in the country and seeing oneself as to where exactly he wants to be in the complicated perceptual map would be a fine starter. The most important difference is that where marketing has the classic 4 Ps (Product. discount and collection schemes (say. the local Gods! HR… a critical business process: The Industry is facing a severe shortage of talented professional. committees to track retailing industry throughout the country. different from other Indian consumers. given the complications that the unorganized sector poses those of the supply chain and consumer behavior as well as the glaring complexities of such a vast a market with all kinds of consumer segments thrown in. There is also a huge risk for Indian retailers becoming a poaching ground for international retailers once they enter India. the poorer (but strong) unorganized cousins and of course.Retailers need to conduct MRs and behavioral studies into the Indian psyche simply because he is so different from those in the west and in fact. business development. especially at middle-management level. the success of anyone foraying into the land of snake-charmers and maharajas ultimately depends on how well and in-depth understanding they have of the conditions. especially for mid-sized retailers will shrink. credit facilities. Promotion. There is also an increasing trend towards hiring hotel management graduates in the retail sector. • Use of information technology (IT) in developing a supply chain and integrating all the retailing processes from procurement to after sales. A wise retailing hawk would set up special cells.However. Price and place). Successful Indian retailers are creating a robust second and third level of management by hiring aggressively for these key roles. product development and research. in retailing a fifth P. • Indian consumer behaviors . marketing. India remains one of the last frontiers of modern retailing. operating margins. This will bridge the gap in availability of talented professionals at the middle and lower levels. As somebody rightly pointed out. the supply Retailing in India chain dynamics. The following are the key challenges of retailing: • Large transactions: Retailers need to handle smaller transactions in large numbers and still be able to make money. a key to success for many retailers is the ability to attract customers by offering low price guarantee. They are critical to a service business like retailing both as employees who execute the business and the customers with whom retailers must interact. Conquering the retailing in India will be a major challenge.consumers interact with) becomes a doubly important entity. His shopping patterns need to be analyzed in detail.) and thus keep the enthusiasm going. talented professionals will put increased pressure on wage costs. Therefore. An agile and adaptive supply chain is key 38 . Given that these chains come with huge asset bases and financing from their international operations. this is not a difficult task. • Aggressive sales. Areas gradually becoming critical are technology. supply chain. people is added which is critical. There is also an increase in number of retail management programmes and institutes. The retail industry is expected to create 2 million jobs between now and 2010.

distribution. Improvement in infrastructure and logistics needed India is a large and highly fragmented country. most Indian retail players are under serious pressure to make their supply chains more efficient in order to deliver the levels of quality and service that consumers are demanding. shoplifting. cost of this fraud constitutes about 2% of the organized retail sector’s revenues. In financial terms. enterprise-wide IT platforms to manage operations. We believe that the implications and size of this loss will be more significant as retailers continue to scale up and increase product lines. with 29 states and 18 officials’ languages. refrigerated transport and ware house facilities across the country. Going ahead. In the last 2-3 years . Fraud in retail is expensive We feel that fraud in going to be one of the retail sector’s primary challenges in the future. POS systems and anti shoplifting systems for greater control over fraud and theft. However. have implemented Supply chain management (SCM) solutions to improve core business processes such as global sourcing. Fraud and theft. This is despite the fact that most large modern format retailers use standard security features such as CCTV’s. compliance and management of point of sale(POS) data. A bulk of its population. there will be a pressing need for a single.1%. LOCATION PLANNING – TYPES OF LOCATIONS A) High – Street Location: a.several retailers ranging from F&B operators to discount clothing.logistics. 66. India’s FMCG and retail sectors are likely to see an increase in adoption of SCM. which will become increasingly complex. including employee pilferage. constant changes in consumer preferences and patterns. efficient customer responsiveness and swiftly evolving retail environment in India.Logistical challenges.innovation. As Indian and International retailers continue to grow their presence regionally. These factors pose a huge challenge for that all important key to pushing growth in this kind of an environment.an efficient and adaptable supply chain. crowded marketplaces. 39 . vendor frauds and inaccuracy in supervision and administration costs the Indian retail industry about Rs 550-600 crores every year. along with timely distribution of supplies to retail outlets will. Very busy with high customer traffic. lives in rural retail potential We feel that private logistics companies offering specialized services.transparency and visibility in financials and inventory.

necessitates quadrupling of airport capacities. c. Low real-estate rentals. Brigade Road in Bangalore (B)Destination / Freestanding Location a. Ports will witness 38% increase in tonnage in next -3 years and hence. port infrastructure cannot be ignored.a. Growth in air passenger traffic. 40 ." In assessing the desirability of various available locations. The lack of adequate infrastructure makes it virtually impossible to reach this virtually untapped market. The lack of quality infrastructure across the country and a non. for instance. note the positive and negative aspects of each. and location. d . High real-estate rentals. with a deteriorating railway system and a limited highway network . it is either improving or declining in such things as traffic flow and potential market area.Medium to High rental cost. (C)Shopping Centre/Mall Location a . An indicator of the urgent need for highway development. is the fact that average daily traffic volume on highways of 39. 10. d. the average load carried by trucks in India around 7 tons_ is very low.location. areas. Has an array of retail stores in small sizes. May not be a commercial retail area at all. Eg: DLF Mall in Delhi. Store design and layout of the store's interior and exterior help determine the store's image and character.Has a clean Environment. Urbanization is driving an increasing need to upgrade or create infrastructure facilities. This will help in an overall decline in logistics a cost which is currently 10-12% of total GDP. The importance of this decision is summarized by a favorite saying of retailers: "There are three vitally important things in retailing . Infrastructure is the weakest link in India’s path to progress and there is urgent need to address issues plaguing this area. c. for next two years.000 PCU’s.000 MW of power needs to be added every year for next decade. store design and layout: Once a geographical market has been chosen.In contrast to the global standards. is a major hindrance for retailers in India. d. there is plenty of room for creativity. Has a designated parking area. but mistakes made in the area of store design and layouts are usually quite costly to correct. Eg: Linking road in Bandra. In planning a new store or remodeling of an old one.b. Does not have a high footfall rate (customer traffic needs to be pulled I through the store’s marketing efforts or products/services/process differentiations) b. May have a large parking area. b .Has an Existing mall traffic. Eg :Phoenix Mills Compounds and Shopper’s Stop in Mumbai. Has stores that are generally found in clusters based on product categories. c.000 Passenger car units (PCU’s) far exceeds the highway capacity of 15. location. However. the Indian Government is presently investing heavily in the state highway system. Transport is a major concern. This part of the plan takes a lot of thought and consideration. analysis of trends is important. the next step in formulating the retail business plan is to select a site for the store. Crossroads in Mumbai Location. or lack of it. Once again. Some bad decisions made in the planning stage can be corrected. estimated at 20% p. No location is static. Distribution.existent distribution sector results in inefficient logistics systems.

market share increase. policies. In forming the retail business plan. Planning involves selecting objectives and developing specific program’s. customer traffic flow throughout the store. too. be as specific as possible. finance. local architects. They must be supported with concrete plans that are specific for reaching these goals.a yardstick to compare results with efforts. Display windows. Revise and update your objectives periodically as well. In order to use these resources in the most productive way. where to do. and storage are examples of areas covered in this part of the retail business plan. must often be given consideration. lighting. and in writing. and inventories. 41 . A well thought out plan not only makes the best of the present. The retailer draws on knowledge from such areas as marketing. and procedures for achieving them. growth. if the store is to be a "good citizen" of its business community Objectives are difficult to apply to real situations and decisions if they are stated in vague terms. the retailer plans for the future. but also anticipates future contingencies Retailing is a challenging and dynamic field. monthly reviews of progress. inadequate financial planning is a frequent cause of store failure. Schedule quarterly. Stores can have many different objectives: survival. is a primary objective for any retail organization. a major advantage of planning is that it forces the retailer to put ideas in writing. or why it should be done. The most important planning occurs before a retail store even opens for business. An objective should establish a measurable goal . They waste their own energies and the resources of the store. Without planning. the retailer can make better decisions. high return on investment. Financial planning: Financial planning is an important part of the retail business plan. Remember to be customeroriented while setting objectives. retailers do not know what to do.Retailers can get specialized assistance from merchandise suppliers. Store layout involves such considerations as allocation of space. Social concerns. Goals or objectives such as "to increase sales by 18 per cent this year" or "to break even in the first year of operation" are examples of clearly defined and measurable objectives. Planning a retail business has several advantages. By gathering and synthesizing the relevant information into a retail business plan. fixtures. accounting and management. and with out some predetermined course of action. funds. Profit. psychology. It is a function often neglected under the pressure of day-to-day business activity. such as people. Indeed. From the field of management. Retailers must decide how to make the best use of limited resources. A workable retail business plan should be detailed. of course. and store planning consultants. however. we learn that planning is one of the most important functions of the retailer. or if appropriate. it is one of the keys to successful retailing. but it is so important that the successful retailer must give it top priority. specific. there is no predetermined course of action. and development of a good store image. Do not lose sight of these objectives once they are formulated. Some objectives are more important than others. Steps in formulating the retail business plan: Setting objectivesPlanning begins with objectives. Careful planning at this time can greatly enhance a store's chances of success. and maximizing profit per square foot. In fact.

An extreme example of poor market assessment would be trying to sell expensive fur coats in a poor mining town. could benefit greatly by hiring experienced shoe salespeople if she is planning to open a shoe store. Assessing the competitive situation Competition is a good thing. and so on. This information can be invaluable to the manager in the initial planning stages. the buying power of these people. and each store's traffic helps the other stores. Additional training and outside reading are other answers to many weak areas. 42 . Often. involves inventory. these assets must be financed in part with funds obtained from outside sources . numerous and / or aggressive competitors are costly to the retailer in many ways. the best strategy can be to locate as close as possible to the competition. relatives. and cash. but they should try to find a market where there is an unfilled demand for the type of store they are planning. Asset planning. Other assessments: Local laws. Even the age distribution of the population can affect a store's market potential. However. Some cities. Retailers should not be afraid of competition. tax rates. an accountant can be helpful in setting up an appropriate bookkeeping system. does the store cater to? Is there enough demand for the products to provide sufficient sales volume? These are some of the main questions the retailer tries to answer by assessing market potential. At least as important as knowing the strengths of the business is analyzing its weaknesses. a retailer can maximize the use of all available assets and can limit or eliminate the handicaps imposed by the inherent weakness of these resources. however. It can inspire a retailer to do a better job. Assessing market potential What type of customer. for example. accounts receivable. Awareness of weak areas is the first step in overcoming them. calculate a break-even point. Even during the planning stage. Assessing available resources: What are the strengths and weakness of the business? By assessing these factors. the shoe business. The key factors in market assessment are: first. A retailer with general retailing experience but little knowledge of. Experienced. have an area with many antique shops. and second.Financial statistics on the type of business under consideration are often available from trade associations. another essential part of financial planning. It leads to better products and services at lower prices. and estimate the capital requirements of the business. Sufficient working capital to meet the costs of doing business the first year is another. creative management is a strong resource. Price wars eat away profits. Customers are drawn to the area because of this convenience. or what segment of the market. For some types of stores. say. equipment and fixtures. Too many similar stores serving too few consumers cause the sales volume of each store to suffer. The planner should investigate these uncontrollable environmental factors.banks. Some weaknesses can be overcome by hiring an outside expert in areas in which the retailer's knowledge and experience are limited. Competing stores located in the same area may increase customer traffic. the number of people living in the trade area. and the labour force are other areas that can affect the retail store. The retailer must make a sales forecast. A retailer who is weak in the areas of financial planning and control needs to work closely with a good accountant.

local architects. store design and layout: Once a geographical market has been chosen. demand for the products may look very promising in a certain area. but the population of this area might be declining. materials. but the effort put into planning at this stage will pay off handsomely when store operations get under way. and storage are examples of areas covered in this part of the retail business plan. Controlling is the follow-up function of retail management. The importance of this decision is summarized by a favorite saying of retailers: "There are three vitally important things in retailing . Knowing how much to buy goes hand in hand with knowing what to buy.In this preliminary work. and store planning consultants. These assessments are often difficult to make. Retailers can get specialized assistance from merchandise suppliers. and location. leading. these past data are not available." In assessing the desirability of various available locations. Every retailer is in a leadership position. be aware of trends as well. Successful retailing involves having the right merchandise in the right place. and at the right price for the customer. On the other hand. Leadership means motivating employees to achieve their maximum potential. Because leadership means understanding people. but mistakes made in the area of store design and layout are usually quite costly to correct. No location is static. lighting. By organizing. Some bad decisions made in the planning stage can be corrected. The retailer's professionalism and attitudes set the tone for employees' attitudes and performance. Labour is organized and divided. Store layout involves such considerations as allocation of space. at the right time. Other management functions performed by the retailer are organizing. People can really be the most important asset of a retail firm. Actual performance is compared with planned performance to spot and evaluate deviations. Display windows. while at the same time accomplishing the goals of the organization. This part of the plan takes a lot of thought and consideration. note the positive and negative aspects of each. it is one of the most creative and challenging aspects of a retailer's job. and other resources to get a job done. the next step in formulating the retail business plan is to select a site for the store. 43 . and maximizing profit per square foot. and responsibility is delegated. Once again. if a sales forecast and desired inventory turnover rate have been determined. For example. analysis of trends is important. fixtures. and controlling. location. However. A balance between meeting customers' needs and high inventory carrying costs must be found. it is either improving or declining in such things as traffic flow and potential market area. the beginning inventory figure can be calculated. past sales data are very helpful in knowing how much to buy. Store design and layout of the store's interior and exterior help determine the store's image and character. an area with slightly lower market potential at present could be growing very fast and provide a better long-run market for a particular store. there is plenty of room for creativity. Location. For a new retail business. It is a vitally important function because the employees of a store represent that store to the public.location. the retailer establishes relationships among people. Knowledge on buying For established retail operations. Organization and supervision Planning is an example of a management function. staffing. In planning a new store or remodeling of an old one. Staffing entails the recruitment and selection of employees. customer traffic flow throughout the store.

retailers can get more mileage out of advertising spend. although important to employees. and building goodwill. There are different pricing strategies for different types of stores. and creative input they deserve. such as markup. and to persuade the customer to take action to satisfy the stimulated want or need. sales. Retailers have special terms to describe various pricing operations. Many retailers are surprised to learn that monetary compensation. Third. retailers send messages to customers through personal selling. Window displays can serve to attract customers. security. the salesperson is the representative of the store to its customers. Sales promotions can have various objectives. they can enhance the store's image. and opportunity are often more important than pay. they should be given the attention. can stimulate impulse buying. Pricing in retailing is both a science and an art. Other sales promotion strategies include special events. The unique quality that distinguishes personal selling from other promotion activities is the opportunity for feedback between customer and salesperson. layout. Good advertising and promotion can get people into a store. sales promotion. 44 . Good salespeople and good value keep them coming back. Interior displays can be informative. and fourth. Information from suppliers can provide valuable input for the store buyer. First. prices should be fair to customers. naturally. design. such as generation of immediate sales. Advertising can be thought of as communicating with customers. from the discount store to the exclusive shop with quality merchandise and expanded customer services. Sales promotion and display techniques are a major promotional tool. Fairness.Information from store records is a valuable aid in knowing what to buy. Employee selection and training The salesperson is a communicator: This person translates product features into benefits and satisfactions for the customer. an understanding of the target customer's shopping habits and motivations. The importance of employee selection and training cannot be overstated. Pricing is. But most important. the goods must sell at a satisfactory rate. By giving careful consideration to defining who the advertisement is directed at (the "target customer"). Besides advertising. Advertising is another key element of the store's image in the minds of customers. is usually not their most important concern. Second. to show customers the kind of merchandise the store carries. In addition. and packaging. and psychological pricing. Pricing The goals of retail pricing are fourfold. or can suggest uses of a product. Advertising and promotion A store's location. Once the inventory has been obtained. is helpful. and to project the image of the store. closely related to financial planning. care. The objective of an advertisement is to stimulate the customer to want what the retailer has to offer. attracting customers to the store. inventory costs and expenses must be covered. a desired profit must be made. markdown. coupons. honesty. and trading stamps. In the absence of this information. and product lines affect its overall image. Information channels beyond the direct control of the retailer are publicity and word-of-mouth communication. Because window displays are so visible. a unit control system must be set up to keep track of the stock. The content of an advertisement should focus on benefits desired by the target customers.

Another source of information for the retailer is marketing research. This attitude is expressed to the customer through shopping conveniences. Most of the research involved in formulating the retail business plan is in fact. employee attitudes. and give evidence about the quality of management decisions. decisions must be made about the types of services to be offered. and that is the computer. 45 . marketing research. and fair values. As part of the retail business plan. Information One information tool in particular has been a real boon to retailers. because of computers. expenses. COMPETITOR ANALYSIS The table below outlines some of the strategic moves being planned to change the competitive structure of Retail business in India. They tell how well a business is doing. promotion and distribution. and ultimately. Accounting and financial management Information and control play an important role in the internal operation of a retail business. Financial statements. services. More and better information is available to the retailer now than ever before. Much of this information evolves from basic store records or is provided by a computer system. Information is important for intelligent decision-making. and handling of credit policies and customer complaints. profits. Good records are the basis for guiding and controlling a retail business. such as the market assessment. Services. deserve the ongoing attention of the manager. such as balance sheets and income statements. Computers offer speed and accuracy of information processing that is especially helpful in inventory management.Services An enlightened retailer realizes that the customer is the pivot around which all retailing activities revolve. Financial planning in the form of budgets helps retailers to spot problems before they occur. This means that better and faster decisions can be made. They are the tools a manager uses to control inventory. are summaries of the financial strength and profitability of the retail business. Research can also help answer questions in such areas as pricing.

Volume 46. Fashion Station. Crossword.300 planned by 2010 Can evolve on vast customer experience and existing models Expanding customer base. Café Brio/Desi Café Plans 310 Shoppers’ Stop Outlets by 2010. currently operates 21 stores Already has an established brand like Westside Sprucing up product offerings. January 2007. Food Bazaar. Big Bazaar. and introducing new retail formats It’s smaller retail operations RPG Spencer’s. Page 16 Debutantes Retailer Brands Plans Strengths Challenges Threats 46 . 60-70 new Crossword outlets within two years. Issue 1. Music World Expansion into other major cities at prime locations. Inorbit Mall Hyper City. sourcing products at cheaper rates Straddling with too many retail formats Tata Trent Westside Looking to register it’s presence in hypermarkets. opening more outlets. sourcing products at competitive prices Source : Indian Management.Early Birds Retailer K Raheja Group Brands Shopper’s Stop. 100 Café Brio/ Desi Café and 14 new Hypercity Strengths Pulse on customer tastes with vast local retailing experience Challenges Keeping up brand loyalty Threats Could get bogged down in positioning itself right Future Group Pantaloon. Blue Sky A store a day for the next three to four years – 3. BCities next on list Still considered a southern brand Establishing itself into newer regions.

convenience stores and hypermarkets as well as create a back-end retailservices business Pan-Indian operations expected Strong back end. sound financial base Challenges Gaining a national footprint Threats Building retail formats from scratch Hero Group Floated Aero Infrastructure Ltd announcing foray into retail. manpower. The whole concept of shopping has altered in terms of format and consumer buying behavior. Currently developing two industrial parks at Haridwar and Uttaranchal Creating retail operations from scratch Little experience in everyday consumer retailing. ushering in a 47 . Future Outlook Retailing in India is gradually inching its way toward becoming the next boom industry. brands Bharti Walmart Field Fresh Bharti’s local expertise and Wal-Mart’s back-end make it a lethal combo Wooing the price sensitive Indian consumer Product pricing. Planet Fashion and Trouser Town Easy Bill Plans To roll out it’s retail business within the next 7-8 months with a combination of large and small stores Strengths Extensive experience in supply-chain management. Birla Sun Life Insurance and Idea Cellular. shelf and overall offerings In the Pipeline Retailer Aditya Birla Brands Madura Garments. vendor development with premium brands like Louis Phillippe. Van Heusen and Allen Solly Strong background in several manufacturing sectors.Reliance Reliance Fresh Plans to set up a range of different store formats. infrastructure. nationwide fuel retailing platform Getting the retail portfolio right for Indian tastes Product pricing.

ft by 2010. Modern retail has entered India as seen in sprawling shopping centers. The trends that are driving the growth of the retail sector in India are • • • • Low share of organized retailing Falling real estate prices Increase in disposable income and customer aspiration Increase in expenditure for luxury items (CHART) Road Ahead.ft retail space and achieve Rs.000 crore-plus ($2 bn) sales by 2008. and 'Home Stop' formats. As the contemporary retail sector in India is reflected in sprawling shopping centers. Piramyd Retail: Aiming to occupy 1. Accounting for over 10 per cent of the country’s GDP and around eight per cent of the employment retailing in India is gradually inching its way toward becoming the next boom industry. ushering in a revolution in shopping in India. one of India’s largest industries. entertainment and food all under one roof. has presently emerged as one of the most dynamic and fast paced industries of our times with several players entering the market. A large young working population with median age of 24 years. Will operate 55 "Hypercity" hypermarkets with US$100 million sales across India by 2015. multiplex. Retail. Pantaloon Retail: Will occupy 10 mn sq. And if industry experts are to be believed. The Indian retailing sector is at an inflexion point where the growth of organized retailing and growth in the consumption by the Indian population is going to take a higher growth trajectory.67 billion) in setting up multiple retail formats with expected sales of Rs.000 crore ($6.75 million sq. Raheja's: Operates Shoppers' Stop.9. the prospects of both the sectors are mutually dependent on each other. Crossword.revolution in shopping in India. 30. 50-plus Spencer's Hyper covering 4 million sq. 90. Plans of Large Retailers • • • • • • Reliance Retail: investing Rs.malls and huge complexes offer shopping. Inorbit Mall. LIFESTYLE: Investing Rs. RPG: Planning IPO will have 450-plus Music World. the concept of shopping has altered in terms of format and consumer buying behavior.400 crore-plus ($90 million) in next five years on Max Hypermarkets & value retail stores. Retail and real estate are the two booming sectors of India in the present times. multi-storied malls and huge complexes offer shopping. entertainment and food all under one roof.ft retail spaces through 150 stores in next five years.000 crore plus ($20 billion) by 2009-10. along with increasing workingwomen population and emerging opportunities in the services sector are going to be the key growth drivers of the organized retail sector in India. The Indian population is witnessing a significant change in its demographics. Merger and acquisition activity: 48 . nuclear families in urban areas. This has also contributed to large-scale investments in the real estate sector with major national and global players investing in developing the infrastructure and construction of the retailing business. home and lifestyle centres.

6 billion.13 The table below shows some recent deals that have taken place in the Indian retail sector: Consideration Nature of Business Stake (US$ million) Retail (Footwear) Retail clothing 51% 68% 3 5 14 24 Year 2005 2005 2005 2005 Acquired/ JV Company/ Acquirer Target Liberty Shoes Future group Indus . which were collectively worth USD 25. A significant number of deals have being carried out in the Indian retail sector in the past few months in order to acquire a larger share in the growing domestic market and to compete against the prospective global and domestic players. 49 . accessories 74% 2006 Bistro Hospitality Indus League clothing TGI Friday's (a subsidiary of Carlson Restaurant (Food Restaurant Worldretail) wide) Etam group. mid year 2006. music. Asia-Pacific M&A bulletin. 100% toys) Books.League Clothing Future group Odyssey India Landmark Deccan Chronicle Holdings Tata Trent Leisure retail chain (books.India witnessed a record number of M&A deals in the first half of 2006. France Lingerie and women's wear retailing 25% 50% N/A 2006 (Future group company) 8 (JV) Source: Price water house Coppers. music.

All supply chain partners will become part of a cohesive architecture. stores will take advantage of up-to-the-minute data at the right time for increased strategic flexibility and informed decisionmaking for managing inventory. department stores and hypermarkets. For example. This data helps Wal-Mart align inventory with increased demand to cover unnatural events and prevent out-of-stock situations. one needs to first collect and analyze preshopping signals. lifestyle shifts and availability of a wide range of brands are dictating the high-growth of different retail formats in India. They simply keep their money and leave the store in search of another product. To implement consumer driven replenishment. Inevitably. retailers and supply chain partners can use existing consumer touch points to map consumers' buying preferences. to allow retailers to be able to use real-time data to sense and respond to changing consumer demands. When the world's largest retailer knows about an approaching hurricane or snowstorm. These will include initiatives to streamline internal back end costs so as to translate savings onto customers. Spanish retailer Zara furnishes its store employees with PDAs to help them order out-of-stock items the minute the customer brings it to the assistant's attention. Faced with an empty shelf. retailers and their supply chain partners must redesign the current business process. enabling information to flow freely from retail functions to suppliers. Considering the Indian retail industry grew by 300 per cent in the last 12 months and supply chain accounts for 50 per cent of costs. consumer driven replenishment within the Indian retail sector will be reflected in rapid growth in sales of supermarkets. consumers often do not substitute the same brand. Wal-Mart leverages weather data for replenishment. retailers are now looking at ways to enhance the supply chain and predict consumer-buying habits. selection and service to consumers. In another instance. For example. RFID tags on each piece of merchandise will enable companies to monitor their inventory at a more detailed level than 50 . the stores in that area are doubly stocked up with essential items such as bottled water and batteries. Indian retail players are under tremendous pressure to make the supply chain more efficient in order to deliver quality.Technology – A Critical Tool Out-of-stocks are the most noticeable problem for consumers — during normal shopping experiences eight per cent of intended purchases are not on the shelf and when it comes to promotional offers. Consumer driven replenishment will change the way the industry handles forecasting and replenishment. retailers will look at various opportunities to maximize customer satisfaction. to respond quickly to consumer demand. No wonder. which often go unnoticed today. This information captured via the PDAs dictates next-day replenishments at the stores. RFID: Widely regarded as the key defining technology to hit the retail sector. And with this increased competition. The major business change will start at the business process level. these out-of-stocks rise to 15 per cent. As this often leads consumers to purchase products. Keeping these deliverables in mind. consumers may speak to store associates or call centre agents to enquire on a particular product. High consumption patterns driven by disposable incomes. What this implies is placing the consumer in the centre of the replenishment process. Retailers are now looking at creating an efficient supply-chain via a concept popularly referred to as consumer driven replenishment. some of the other key modules that the store of the future will look to implement will include: Store connectivity: Stores will invest in building wide-area networks (WANs) and virtual private networks (VPNs) to access information across various sites. maximizing mind share in a cluttered market and delivering the best in store experience. Let's take the example of a $25-billion retailer: lost sales due to out-of-stocks added up to nearly 1 per cent of total sales — a mind-boggling figure of $1 billion! Retailers across the nation are unable to predict and master the demand-supply gap as a result of orthodox tools to measure changing consumer behavior. With visibility into every resource.

Executives will identify when problems occur by monitoring signal readers installed at key junctures. This will improve utilization without undermining the ease with which goods can be moved in and out. Inventory Management • Maintain a real-time view of tagged inventory as it flows through the supply chain. allowing them to identify problems as shop lifting. RFID can go beyond just intangible cost savings. Let’s see the actual benefits of using RFID in the supply chain. such errors can have a serious impact on customer satisfaction. today's retailers will most definitively look for consumer driven replenishment to simplify supply chain operations. The Indian retail market is booming. Maximizing warehouse space With the high costs associated with storage real estate. Uncertainty is the mother of inventory and the father of stock-outs. Within the retail environment goods shrinkage is widely perceived to account for up to one per cent of stock. and throughout the supply chain to reduce costs. and warranty programs. For instance. Businesses must avoid focusing too intently on the ways RFID tags can be used and instead stay focused on how RFID can improve consumer value and address complex business issues. receiving points. suffice to say that faced with poor supply chain management and a rapidly changing environment. • Track discrete movement of tagged inventory. and there are numerous applications—both business and consumer—that can be built around radio frequency identification (RFID) to deliver operational efficiencies. These readers in turn will be networked to a centralized monitoring system that would give companies information they could never imagine with current operations. the Indian consumer will hopefully never find his shopping preferences out of stock. Benefits to Consumers. Store Mobility: Stores will use wireless technologies at the point of sale for faster checkout and real-time product information in the store to improve operations. for organizations relying on the delivery of specific components to fulfill their own order schedule. representing a significant dent in profit margin. Indeed. With networks that will enable real time updates to predict and replenish stocks. 51 . and measure results. • Allowing just-in-time practices. backrooms and store shelves. In conclusion. and even 'gray market’ sales that can erode profits and damage distribution relationships. as RFID can play a role in food safety. if a retailer is able to track shipments and high-value assets in real-time. Minimizing errors in delivery Misdirected deliveries or incorrect orders can immediately result in on-shelf out-of-stock situations leading to reduced sales and damaged customer relationships. distribution centers. RFID can also lead up to 80 percent savings in time spent on scanning items. control costs. it can minimise losses. inventory management. Apart from improved and enhanced accuracy. such as loading docks. providing instant communication throughout stores at significantly reduced costs. counterfeit control. Minimizing goods shrinkage Theft combined with imprecise inventory management can create a significant shortfall in actual versus expected goods available. the goal is to maximize warehouse space.ever before. IP Communications: Stores will converge their data and voice systems. The biggest benefit is the total visibility across the entire supply chain: What managers worry about the most? It is directly or indirectly related to uncertainty. • Trigger alerts around inventory movement based on business rules you construct.

Many retailers have few IT systems in the areas of supply chain management. “RFID is a transformational technology that has the potential to change the way business is conducted.Explains Chamaria. Supply Chain Visibility and Reusable Asset Tracking will emerge as key solutions that have high applicability in the Indian market. The cost of tags and readers is fairly high today. vendor development. where suppliers print barcodes. retail. “Indian retailers are still to adopt bar-coding completely. it will surely be a boon for both retailers and CPG companies. once it comes down and ROI is established.” 52 . The annual expenditure on IT is quite negligible. especially in manufacturing. merchandising and inventory management. Laments Chopra. RFID has hardly any presence in India. The level of bar-code usage is also largely due to the retailers’ initiatives of printing these codes at their warehouses. we expect RFID will start gaining traction around 2010. there are several killer applications that can utilise RFID technology across verticals. Most retailers do not have integrated IT systems today.” Aggarwal of BEA elaborates. unlike in developed countries. government and healthcare. “While RFID is at a nascent stage." But as of now. Although at a nascent stage.

processes a cheque electronically by transmitting transaction information to the retailer and consumer's bank. Customer Interfacing Systems • Bar Coding and Scanners Point of sale systems use scanners and bar coding to identify an item. all the way from raw material suppliers right through to the retail shelf. 53 . Tunnel Scanning is a new concept where the consumer pushes the full shopping cart through an electronic gate to the point of sale. All that the consumer has to do is to pay for the goods. weekly factory scheduling and daily distribution scheduling into one overall planning process using a single set of data. having digitally captured and stored the image of the cheque. • Advanced Planning and Scheduling Systems APS systems can provide improved control across the supply chain. • CRM Systems The rise of loyalty programs. the items in the cart are hit with laser beams and scanned. preventing stock-outs and thus reducing his costs. In a matter of seconds. The hardware and software tools that have now become almost essential for retailing can be into 3 broad categories. • ERP System Various ERP vendors have developed retail-specific systems which help in integrating all the functions from warehousing to distribution. Data warehousing & mining technologies offers retailers the tools they need to make sense of their consumer data and apply it to business.Technology in Retail Over the years as the consumer demand increased and the retailers geared up to meet this increase. a recent development in this area. • Internet Internet is also rapidly evolving as a customer interface. along with the various available CRM (Customer Relationship Management) Systems. getting his supplies on time. monthly forecasting. • Payment Payment through credit cards has become quite widespread and this enables a fast and easy payment process. This. allows the retailers to study the purchase behavior of consumers in detail and grow the value of individual consumers to their businesses. These APS packages complement existing (but often limited) ERP packages. Rather than manually process a cheque. Electronic cheque conversion. They enable consolidation of activities such as long term budgeting. An integrated supply chain helps the retailer in maintaining his stocks. removing the need of a consumer physically visiting the store. the retailer voids it and hands it back to the consumer along with a receipt. mail order and the Internet has provided retailers with real access to consumer data. while servicing the customer better. which makes the process very fast. technology evolved rapidly to support this growth. front and back office store systems and merchandising. use pre-stored data to calculate the cost and generate the total bill for a client.

Investment Opportunities • • Potential For Investment: The total estimated Investment Opportunity in the retail sector is around US$ 5-6 Billion in the Next five years. Footwear & Leather. Location: with modern retail formats having made their foray into the top cities namely Hyderabad. Rural Retail: Retail sector offers opportunities for exploration and investment in rural areas. attempting to provide farmers a one-stop destination for 54 . Today. Mumbai. Bangalore. Chennai. • Visual Merchandising The decision on how to place & stack items in a store is no more taken on the gut feel of the store manager. with Corporates and Entrepreneurs having made a foray in the past. Bann. The SPACEMAN Store Suit from AC Neilsen and ModaCAD are example of products helping in modeling a retail store design. Watch & Jewellery Fastest Growing Formats: Some of the formats that offer good growth potential are: o Speciality and Super Market     • • Hyper Market Discount stores Department Stores Convenience Stores and E-Retailing Supply Chain Infrastructure: Supply chain infrastructure in terms of cold chain and Logistics. Coimbatore. ITC launched the country's first rural mall ' Chaupal Sagar'. Nagpur there exists tremendous potential in two tier towns over the next 5 years.Leading manufactures. Delhi. Manugistics. Sectors with High Growth Potential: Certain segments that promise a high growth are •      • Food and Grocery Clothing Furniture and Fixtures Pharmacy Durables. distributors and retailers and considering APS packages such as those from i2. Ahmedabad. MerciaLincs and Stirling-Douglas. Strategic Decision Support Systems • Store Site Location Demographics and buying patterns of residents of an area can be used to compare various possible sites for opening new stores. software packages are helping retailers not only in their locational decisions but in decisions regarding store sizing and floor-spaces as well. India's largely rural population has caught the eye of retailers looking for new areas of growth. offering a diverse product range from FMCG to electronics appliance to automobiles. Pune. A larger number of visual merchandising tools are available to him to evaluate the impact of his stacking options.

Cheap Consumer Credit 55 . There has been yet another initiative by the DCM Sriram Group called the ' Hariyali Bazaar'. German giant Metro AG and South African Shoprite Holdings have already made headway in this segment by setting up stores selling merchandise on a wholesale basis in Bangalore and Mumbai respectively. Other corporate bodies include Escorts and Tata Chemicals (with Tata Kisan Sansar) setting up agri-stores to provide products/services targeted at the farmer in order to tap the vast rural market. • • Wholesale Trading: wholesale trading also holds huge potential for growth.all of their needs. that has initially started off by providing farm related inputs and services but plans to introduce the complete shopping basket in due course. These new-format cash-and-carry stores attract large volumes from a sizeable number of retailers who do not have to maintain relationships with multiple suppliers for all their needs.

This sector. The arguments are familiar – that global retailers will swamp the Indian markets. supermarkets. wipe out small kirana stores and put millions of jobs in jeopardy. China allowed only one foreign store per province. Today it has 60. but ‘when and how’. cash & carry convenience stores every conceivable format operates in China. managing director.9 per cent in 2000. “ The negative effects in terms of job losses and the displacement of traditional supply chains by the monopoly/ monophony power of multinational retailers far outweigh the supposed benefits…” the left observed in a recent seven-page note that summarized its arguments against FDI. In fact the Thai government had to step step in to save local retailers from annihilation. “argues Kishore Biyani. because of their enormous numbers. Biyani is also chairman of Confederation of Indian Industry’s retail committee. the left parties are orchestrating a passionate opposition to allowing FDI in retail. which estimates that Rs. “ The debate is not ‘whether or not to allow FDI. then the China one is inspirational. they may get far higher valuations.8 million square metres. Therefore their performance cannot be compared with rest of the country’s retail sector. leading to millions of job losses. a huge majority of the retail workforce is in kiranas. the foreign firms account for only 23 56 . INDIA’s retail industry – the fourth largest in the world – accounts for 11 per cent of the country’s GDP and employs over 40 million people (about 7 per cent of Sector retailers (Yes. The BJP was not too keen on it early on. Four of the world’s 10 largest retailers. total employment in the country). But if the Thailand story is forbidding. which brought small stores together to fight the big chains. according to the China Chain Store & Franchise Association. When seen thus. China had one supermarket. 000. In Thailand and Malaysia. discount stores.billion retail trade! That figure has grown from 2. But – and here’s the revelation they have only 9. a network of franchised stores. It must be mentioned that the global giants got unfettered access into China only in 2004. when they have built up larger business. (Supermarkets are perceived to be kirana killers!).20. Given the political clout of the small trading community. but must be benchmarked only against the top 100 firms. They also argue that giant global retailers will squeeze suppliers and finish them off. So what impact has this had? The top 100 retailers (both domestic and foreign) in China had combined sales of $60 billion in 2004. Hypermarkets. The big worry is that global retailers will quickly put these kiranas out of business. global retailers have spelt doom for the traditional mom and pop stores. In private some domestic retailers fear getting lower valuations from their global counterparts if they sell out today. But five or 10 years later. 35 of the top 50 and 78 of the top 250 have already opened stores in China. These days. 000 crore will be needed in retail to scale up to its potential. Is that fear justified? The answer can be found in the experience of othercountries that allow FDI in retail.416 stores with a total area of 25. These 100 companies have so far opened 30.6 per cent share of China‘s $628. “What is the hurry (to allow FDI)? For 10 years. though towards the end of Vajpayee’s government‘s term there were noises that it would consider such a move. Now. Pantaloon Retail. The globalization of china is complete.” he clarifies. in fact acts as an informal social security net – almost anyone without a job can set up a kirana. though for a different reason. It set up Allied Retail Trade. the government has barred FDI in retailing since 1997.Government Initiatives & Regulations There has always been a strong opposition to FDI in India’s retail sector (though 100 percent FDI is allowed in distribution companies that sell to the trade and not to the consumer). In 1992. they have retailing PSU’s!) had a 32 percent share and private sector retailers had 45 per cent. Most of India’s home grown retailers also oppose FDI. I allowed domestic chains to build up good valuation before opening FDI. Indian companies need time to mobilize at least part of the capital before the foreign players are allowed in. argues CII. Global chains have had a 13 year run in china. Of course. if the approach is instinctively protectionist. the argument of asking for more time to get even better valuation may not lose its appeal even a decade later.

percent sales of the top 100 retailers. in Chennai. needs high school graduates and other similar skill level. They are smarter.up-gradation of agriculture. chairman of consultancy KSA Technopak. Again. Small businesses have their own model. They are local. “Menzer had argued in an inclusive interview with BW during his May visit. and keep their customers happy. I think small business can grow and prosper with Wal Mart. so they have great inventory management.store operations still control a little less than 50 percent of US retail trade. one could also look at the US story. Even stores in close vicinity of these large supermarkets have survived. large chunk of underdeveloped population. But the fact is that the single.Mart or a target. They know their customers by name. FDI would result in market growth and expansion.friendly than they were five years ago. The right comparison would be Germany 20-30 years ago or Brazil today. back home. Employment generated at various levels. Better lifestyle Greater level of wages paid by international players usually More product variety Newer product categories Economies of scale to help lower consumer price. more efficient more customer. Long term benefits. Currently this is a majorly unemployed demographic group 57 . they are usually in the same block that the customers are in. “Small businesses have their own competitive advantages. Investment in whole supply chain Improved product basket from India for exports. They are also under pressure and their market share in on the decline. Or better still. Its retailing industry is one of the most matures ones in the world. these small players have not find a lot of them in the vicinity of a Wal. China’s public Now. Increased consumer demand implies employment generation across the value chain does not need very high skill sets. They have tailored their inventory for their customers. and many times they give credit. offer a different product mix. But there is a less understood aspect of the US retail scene – 95 percent of all retailers in the US are single – store operations.” says Arvin Singhal. Increased purchasing capacity of consumers Manpower and skill development through retail training and Greater managerial talent inflow from other countries Tourism Development : A strong retailing sector boosts tourism as seen from the experience of Singapore and Dubai. the kiranas haven’t been slaughtered. disparity in income levels. China makes sense because of its similarities with India: large area. Benefits of opening the Retail sector Improve competition Develop the market : Greater level of exports due to increased sourcing by major players Sourcing by Wal-Mart from China improved multifold after FDI permitted in China Similar increase in sourcing observed for Metro in India Provides access to global markets for Indian producers. where large and organised supermarket chains like FoodWorld and Nilgiri’s have grabbed a 20 percent market share. It is also home to some of the world’s largest retailers. so they offer great customer service. and they are very convenient. development of efficient small and medium size industries. Greater investment in the food processing sector technology Better operations in production cycle and distribution. Investment in technology Cold storage chains solve the perennial problem of wastage. They may not be as the Indian Kirana. they are matching the chains’ prices and continue to do brisk business. the question is which theory is relevant to India – China’s or Thailand’s? “India cannot be compared with Thailand and Malaysia as the scale is much smaller and economic levels are dissimilar. Despite over six decades of dominance by large chains. but they are still small ‘mom and pop’ operations on the US scale.

almost 15 million people or 11. On a much larger scale But new jobs comparatively lower down the value chain Greater clarity and objectivity can be achieved if one looks beyond kiranas at the larger issue of employment. Shifting of jobs is bound to happen. foreign retailers will be in a position to influence employment only several years after they enter India. 58 . If you do not have organized distribution. And increased consumption means more production and therefore more jobs. One could. a figure growing at over 25 percent every year. In reality. you won’t have employment growth.” argues Harsh Bahadur. If you do not have an efficient distribution chain. if the fear of kiranas being snuffed out is true. This is almost double the retail workforce in China – and much higher than in India! Many believe that organised retail actually leads to job gains rather than job losses.5 percent or so every year. its retail still employs 6 percent of the total workforce ( only marginally smaller than India). in India the consumer is invariably forgotten when protectionist lobbies voice their concern. the economy cannot grow…Such inefficiency will lead to job losses. therefore argue that India’s consumption is actually way below actual potential – and that there is inherent job loss of jobs that exists in the economy. Several large and influential business groups like the Tatas and Ambanis have ambitious plans that include setting up of hundreds of supermarkets and hypermarkets.” argues retail expert Gale. the percentage looks paltry.7 of the workforce are employed in retail. “Supermarket chains will divert business from small vendors. In the US. One reason for that is growth of organised retail stimulates consumption. And it is due to India’s rather inefficient supply chain. Won’t these kill kiranas and lead to job losses. But compared with the US.000 people. Here poor distribution and below-par processes is another bottleneck. The top 100 retailers in China employ 810. owners of large and small stores will tell you that they face stockouts – products not available when a consumer asks for it. But they will have an impact on the consumer almost immediately. we will have 5-7 years.Boom in employment similar to job generation in ITES industry. managing director. but they also create many jobs. “If the economy grows at 6. This is lost demand. Despite the entry of organized retail – domestic and foreign – in China. This is not to say that the changeover will be painless.In India. Of course. Metro Cash & Carry. then the government ought to be equally concerned about Indian retailers as well. India. Finally.

As a result. 59 .Conclusion Big Retail is here to stay. Big Retail still has a long way to go before satisfying the highly diverse needs of the Indian population. Assuming that improvements in infrastructure and lower real estate costs become a reality. there will be a steady-state where Big Retail will co-exist with Small Retail.

What is your monthly shopping budget? 0-2K 2-5K 5-10K 10-20K 20-50K >50K 2. Please let us know your spontaneous response to the questions that pertain to your shopping experience in Retail Chains. This questionnaire is being administered to people like you who have visited and bought products in Retail Chains. Which retail chain did you like most? Big Bazaar Shoppers Stop Westside Piramyd Vishal Megamart Any other (Please specify) ________________________________ 60 . Which retail chains do you visit often? Big Bazaar Shoppers Stop Westside Piramyd Vishal Megamart Any other (Please specify) ________________________________ 4.APPENDIX CONSUMER SURVEY QUESTIONNAIRE RETAIL CHAINS The objective of this survey is to collect tangible information about shopping in Retail Chains. 1. Please provide us your unbiased and frank opinions. All information provided by you shall be kept confidential and we shall only be publishing the outcomes. Which retail chains did you visit ? Big Bazaar Shoppers Stop Westside Piramyd Vishal Megamart Any other (Please specify) ________________________________ 3.

Mark on a scale of -3 to +3 your perceptions about your shopping experience in the following retail chains (where -3 indicates inferior and + 3 indicates superior) : Feature Ambience Attractive Prices Range of Choices Price Discounts Freebies Salespeople Behaviour Parking Facilities Convenience Home Delivery 7.5. Which products do you normally buy from your local grocery store? _______________________________________ _______________________________________ _______________________________________ _______________________________________ _______________________________________ Big Vishal Westside Shoppers Bazaar Megamart Stop Piramyd 61 . Why did you like that particular retail chain? Ambience Attractive Prices Wide range of choices Discount Schemes Free Offers Customer Service Any Other (Please Specify) ___________________________________ 6. Which products do you normally buy from retail chains? _______________________________________ _______________________________________ _______________________________________ _______________________________________ _______________________________________ 8.

How much time do you spend in the retail chain on every visit? 0-30 Minutes 3-4 Hours 30-60 Minutes 4-5 Hours 1-2 Hour <5 Hours 2-3 Hours 13. Which products do you normally buy from your chemist shop? _______________________________________ _______________________________________ _______________________________________ _______________________________________ _______________________________________ 10.9. The emergence of retail chains will destroy social harmony: Strongly Agree Agree Neither Agree nor Disagree Disagree Strongly Disagree 15. 62 . The emergence of retail chains will create unemployment problems: Strongly Agree Agree Neither Agree Nor Disagree Disagree Strongly Disagree 14. Why do you like to buy from local grocery store? _______________________________________ _______________________________________ _______________________________________ _______________________________________ _______________________________________ 11. The emergence of retail chains will cause monopolistic control over prices: Strongly Agree Agree Neither Agree Nor Disagree Disagree Strongly Disagree 16. FDI in Retail Sector will contribute to the Growth Momentum: Strongly Agree Agree Neither Agree Nor Disagree Disagree Strongly Disagree. Why do you like to buy from chemist shops? _______________________________________ _______________________________________ _______________________________________ _______________________________________ _______________________________________ 12.

Income group: 5. Telephone Number / E-mail:___________________________________________ ________________________________ Thank You______________________________ 63 . Education: ______________________________________________________ 15-20 40-50 20-30 50 & above 30-40 Student Govt. Number of Family Dependants: Nil One Two Any other (Pls specify) 7. Age: 3.Demographics 1. Employee Private Employee Businessman Any other (Pls specify) _______________ 5k-10k 40k-50k Student MBA 10k-20k 20k-30k 50k & above 30k-40k Graduate Post-Graduate Any other (Pls specify) ___________________ Five 6. Name: 2. Occupation: 4.

indiabiznews.indiainfoline.References: Web Sites and Search Engines • • • • • • • • www.economywatch.com www.com www.rediff.org Newspapers • • • • • • The Times Of India The Indian Express The Economic Times Financial Express Business Standard Business Line Books and Magazines • • • Business World The Indian Dream Business & Economy 64 .com www.google.equitymaster.com www.com www.com www.ibef.fashion2fibre.com www.

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