RETAIL INDUSTRY

INTRODUCTION

RETAILING INCLUDES ALL ACTIVITIES INVOLVED IN SELLING GOODS OR SERVICES DIRECTLY TO FINAL CONSUMERS
FOR PERSONAL , NON -BUSINESS USE . A RETAILER OR RETAIL STORE IS ANY BUSINESS ENTERPRISE WHOSE SALES
VOLUME COMES PRIMARILY FROM RETAILING .

ANY ORGANIZATION SELLING TO FINAL CONSUMERS – WHETHER A MANUFACTURER , WHOLESALER OR RETAILER -

IS DOING RETAILING . I T DOES NOT MATTER HOW THE GOODS OR SERVICES ARE SOLD ( BY PERSON , MAIL ,
TELEPHONE , VENDING MACHINE OR INTERNET ) OR WHERE THEY ARE SOLD ( IN STORE, ON THE STREET , OR IN
CONSUMER 'S HOME).

THERE ARE 3 TYPES OF RETAILERS :

1. STORE RETAILER
2. NON STORE RETAILER
3. RETAIL ORGANIZATION

FROM THE VARIETY POINT OF VIEW , STORE RETAILERS ARE OF 5 TYPES:

1. SPECIALTY STORE
2. DEPARTMENTAL STORE
3. SUPER MARKET
4. CONVENIENCE STORE
5. DISCOUNT STORE

FROM CUSTOMERS SERVICE POINT OF VIEW :

1. SELF-SERVICE RETAILING : MANY CUSTOMERS ARE WILLING TO CARRY OUT THEIR OWN LOCATE -COMPARE-
SELECT PROCESS TO SAVE MONEY .

2. SELF-SELECTION RETAILING : C USTOMERS FIND THEIR OWN GOODS , ALTHOUGH THEY CAN ASK FOR
ASSISTANCE .

3. LIMITED SERVICE RETAILING : THESE RETAILERS CARRY MORE SHOPPING GOODS , AND CUSTOMERS NEED
MORE INFORMATION AND ASSISTANCE . T HE STORES ALSO OFFERS SERVICES SUCH AS CREDIT & MERCHANDISE -
RETURN PRIVILEGES .

4. FULL SERVICE RETAILING : SALESPEOPLE ARE READY TO ASSIST IN EVERY PHASE OF THE LOCATE-COMPARE -
SELECT PROCESS.

ALTHOUGH MAJORITY OF GOODS & SERVICES IS SOLD THROUGH STORES , NON -STORE RETAILING HAS BEEN
GROWING MUCH FASTER THAN STORE RETAILING .

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MAJOR NON-STORE RETAILER TYPES :

1. DIRECT SELLING: IT DEALS WITH DOOR -TO-DOOR OR AT HOME SALE PARTIES I.E. IT INVOLVES ONE-TO-ONE
OR ONE-TO -MANY SELLING .
EXAMPLE : EUREKA FORBES, A MWAY , MARY KAY COSMETICS .

2. AUTOMATIC VENDING : EXAMPLE : ATM

3. BUYING SERVICES: IS A STORE LESS RETAILER SERVING A SPECIFIC CLIENTELE -USUALLY EMPLOYEES OF LARGE
ORGANIZATIONS -WHO ARE ENTITLED TO BUY FROM A LIST OF RETAILERS WHO HAVE AGREED TO GIVE THEM
DISCOUNTS IN RETURN FOR MEMBERSHIP .
EXAMPLE : EBAY .COM

4. DIRECT MARKETING : IT INVOLVES DIRECT RESPONSE MARKETING . THE DIFFERENT FORMS OF DIRECT
MARKETING ARE : D IRECT MAIL , CATALOG MARKETING , TELEMARKETING , TELEVISION DIRECT RESPONSE
MARKETING AND ELECTRONIC SHOPPING .
EXAMPLE : DELL COMPUTERS

RETAIL ORGANIZATION MAINLY FALLS INTO 4 MAJOR CATEGORIES :

1. CORPORATE CHAINS: E XAMPLE : PANTALOONS, W ESTSIDE

2. RETAIL CO-OPERATIVE : EXAMPLE : AMUL, SAMAVAIKA , KHADI GRAM YUDOG
3. CONSUMER CO-OPERATIVE : EXAMPLE : APNA BAZAR
4. FRANCHISE ORGANIZATION : E XAMPLE : MONGINIS , CAFÉ COFFEE DAY .

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GLOBAL SCENARIO :

RETAIL STORES CONSTITUTE 20% OF US GDP & IS THE 3 RD LARGEST EMPLOYER SEGMENT IN USA. C HINA ON
THE OTHER HAND HAS ATTRACTED SEVERAL GLOBAL RETAILERS IN RECENT TIMES . RETAIL SECTOR EMPLOYS 7%
OF THE POPULATION IN CHINA. MAJOR RETAILERS LIKE WAL -M ART & CARREFOUR HAVE ALREADY ENTERED
THE C HINESE MARKET . IN THE YEAR 2003, W AL -M ART & CARREFOUR HAD SALES OF US $ 70.4 C RORE & US
$ 160 CRORE RESPECTIVELY .

THE GLOBAL RETAIL INDUSTRY HAS TRAVELED A LONG WAY FROM A SMALL BEGINNING TO AN INDUSTRY WHERE
THE WORLD WIDE RETAIL SALES IS VALUED AT $ 7 X 10 5 C RORE . RETAIL SECTOR AVERAGE GROWTH IS
SHOWING AN UPWARD PATTERN . T HE ASIAN ECONOMIES ( EXCLUDING J APAN ) ARE EXPECTED TO GROW AT 6%
CONSISTENTLY TILL 2005-06.

ON THE GLOBAL RETAIL STAGE , LITTLE HAS REMAINED SAME OVER THE LAST DECADE . ONE OF THE FEW
SIMILARITIES WITH TODAY IS THAT WAL -M ART WAS RANKED THE TOP RETAILER IN THE WORLD THEN & IT STILL
HOLDS THAT DISTINCTION . T HE GLOBAL ECONOMY HAS CHANGED , CONSUMER DEMAND HAS SHIFTED &
RETAILERS ' OPERATING SYSTEMS TODAY ARE INFUSED WITH FAR MORE TECHNOLOGY THAN WAS THE CASE SIX
YEARS AGO . 

GIVEN BELOW A LIST OF WORLD'S TOP 10 RETAILERS :

DT R ANK 04 COUNTRY OF ORIGIN COMPANY NAME

1 US WAL-MART

2 FRANCE CARREFOUR

3 US HOME DEPOT

4 GERMANY METRO

5 US KROGER

6 UK TESCO

7 US TARGET

8 NETHERLANDS AHOLD

9 US COSTCO

10 GERMANY ALDI EINKAUF

INDIAN SCENARIO
SCENARIO
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RETAILING IN INDIA IS THE LARGEST EMPLOYER AFTER AGRICULTURE. IT EMPLOYS ALMOST 7% OF THE TOTAL
WORK FORCE IN INDIA AND HAS A CONTRIBUTION OF 14% TO THE NATIONAL GDP. I N THE YEAR 2004 , THE
SIZE OF I NDIAN ORGANIZED RETAIL INDUSTRY WAS R S 28000 C RORE , WHICH WAS ONLY 3% OF THE TOTAL
RETAILING MARKET . O RGANIZED RETAILING IS PROJECTED TO GROW AT THE RATE OF 25%-30% P.A . AND IS
ESTIMATED TO REACH AN ASTOUNDING RS 1,00,000 C RORE BY 2010. T HE CONTRIBUTION OF ORGANIZED
RETAIL IS EXPECTED TO RISE FROM 3% TO 9% BY THE END OF THE DECADE . T HE PROJECTION FOR THE YEAR
2005 IS RS 35000 CRORE.

THOUGH WITH A POPULATION OF A BILLION AND A MIDDLE CLASS OF 300 MILLION (UPPER MIDDLE CLASS= 40,
MIDDLE CLASS =150 & LOWER MIDDLE CLASS = 110), ORGANIZED RETAILING IS STILL AT ITS INFANCY IN INDIA .
THE GREAT INDIAN MIDDLE CLASS IS ESTIMATED TO GROW TO OVER 60 CRORE BY 2010 MAKING INDIA ONE OF
THE LARGEST CONSUMER MARKETS OF THE WORLD . IT IS PROJECTED THAT BY THE YEAR 2010, 65% OF THE
INDIAN POPULATION WILL BE IN THE AGE GROUP OF 10-49 YEARS, WHICH MAKES THE SCENARIO EVEN MORE
ATTRACTIVE . INDIA HAS THE LARGEST RETAIL NETWORK WITH 1.2 C RORE OUTLETS BUT ONLY 4% OF THEM ARE
LARGER THAN 500 SQ . FEET IN SIZE . USA ON THE OTHER HAND HAS 9 L AKH OUTLETS CATERING TO MORE
THAN 13 TIMES THE TOTAL RETAIL MARKET SIZE OF I NDIA . T HUS I NDIA HAS THE HIGHEST NUMBER OF OUTLETS
PER CAPITA IN THE WORLD WITH A WIDELY SPREAD RETAIL NETWORK BUT WITH THE LOWEST PER CAPITA RETAIL
SPACE(@ 2 SQ.FT. PER PERSON). AT KEARNEY HAS RANKED INDIA AS THE 2ND MOST ATTRACTIVE RETAIL
MARKET AFTER R USSIA , IN ITS G LOBAL RETAIL DEVELOPMENT INDEX 2004 REPORT .

RETAILING , ONE OF THE LARGEST SECTORS IN THE GLOBAL ECONOMY , IS GOING THROUGH A TRANSITION PHASE
IN I NDIA . F OR A LONG TIME, THE CORNER GROCERY STORE WAS THE ONLY CHOICE AVAILABLE TO THE
CONSUMER , ESPECIALLY IN THE URBAN AREAS. T HIS IS SLOWLY GIVING WAY TO INTERNATIONAL FORMATS OF
RETAILING .

LET US LOOK AT THE EVOLUTION PROCESS:

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DETAILING REASONS WHY INDIAN ORGANIZED RETAIL IS AT THE BRINK OF REVOLUTION , THE IMAGES-KSA
(source: KSA Technopak (I) Pvt Ltd, the India operation of the US-based Kurt Salmon
Associates). REPORT SAYS THAT THE LAST FEW YEARS HAVE SEEN RAPID TRANSFORMATION IN MANY AREAS
AND THE SETTING OF SCALABLE AND PROFITABLE RETAIL MODELS ACROSS CATEGORIES . INDIAN CONSUMERS ARE
RAPIDLY EVOLVING AND ACCEPTING MODERN FORMATS OVERWHELMINGLY . RETAIL SPACE IS NO MORE A
CONSTRAINT FOR GROWTH . I NDIA IS ON THE RADAR OF GLOBAL R ETAILERS AND SUPPLIERS / BRANDS
WORLDWIDE ARE WILLING TO PARTNER WITH RETAILERS HERE. F URTHER , LARGE I NDIAN CORPORATE GROUPS
LIKE TATA , RELIANCE , R AHEJA , ITC, B OMBAY DYEING , M URUGAPPA & P IRAMAL G ROUPS ETC AND ALSO
FOREIGN INVESTORS AND PRIVATE EQUITY PLAYERS ARE FIRMING UP PLANS TO IDENTIFY INVESTMENT
OPPORTUNITIES IN THE I NDIAN RETAIL SECTOR . T HE QUANTUM OF INVESTMENTS IS LIKELY TO SKYROCKET AS
THE INHERENT ATTRACTIVENESS OF THE SEGMENT ATTRACT MORE AND MORE INVESTORS TO EARN LARGE
PROFITS. INVESTMENTS INTO THE SECTOR ARE ESTIMATED AT      INR 2000 - 2500 C RORE IN THE NEXT 2-3
YEARS, AND OVER INR 20,000 C RORE BY END OF 2010.

FEW OF INDIA'S TOP RETAILERS ARE:

1. BIG BAZAAR -PANTALOONS : BIG BAZAAR , A DIVISION OF PANTALOON RETAIL (INDIA) LTD IS ALREADY
INDIA'S BIGGEST RETAILER . IN THE YEAR 2003-04, IT HAD REVENUE OF R S 658.31 CRORES & BY 2010; IT IS
TARGETING REVENUE OF R S 8,800 C RORE.

2. FOOD W ORLD : FOOD WORLD IN INDIA IS AN ALLIANCE BETWEEN THE RPG GROUP IN INDIA WITH DAIRY
FARM INTERNATIONAL OF THE JARDINE MATHESON GROUP .

3. TRINETHRA : IT IS A SUPERMARKET CHAIN THAT HAS PREDOMINANT PRESENCE IN THE SOUTHERN STATE OF
ANDHRA PRADESH . THEIR TURNOVER WAS R S 78.8 CRORE FOR THE YEAR 2002-03.

4. APNA BAZAAR : IT IS A RS 140-CRORE CONSUMER CO -OPERATIVE SOCIETY WITH A CUSTOMER BASE OF

OVER 12 LAKH , PLANS TO CATER TO AN UPWARDLY MOBILE URBAN POPULATION .

5. MARGIN FREE : IT IS A KERALA BASED DISCOUNT STORE, WHICH IS UNIFORMLY SPREAD ACROSS 240
MARGIN FREE FRANCHISEES IN KERALA , TAMIL NADU AND KARNATAKA .

W HOLESALE TRADING IS ANOTHER AREA, WHICH HAS POTENTIAL FOR RAPID GROWTH. GERMAN GIANT METRO
AG AND SOUTH AFRICAN SHOPRITE HOLDINGS HAVE ALREADY MADE HEADWAY IN THIS SEGMENT BY SETTING
UP STORES SELLING MERCHANDISE ON A WHOLESALE BASIS IN BANGALORE AND M UMBAI RESPECTIVELY . T HESE
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 .

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SWOT A NALYSIS

A SWOT ANALYSIS OF THE INDIAN ORGANIZED RETAIL INDUSTRY IS PRESENTED BELOW :

STRENGTH:
1. RETAILING IS A " TECHNOLOGY-INTENSIVE " INDUSTRY . IT IS TECHNOLOGY THAT WILL HELP THE ORGANIZED
RETAILERS TO SCORE OVER THE UNORGANIZED RETAILERS . S UCCESSFUL ORGANIZED RETAILERS TODAY WORK
CLOSELY WITH THEIR VENDORS TO PREDICT CONSUMER DEMAND , SHORTEN LEAD TIMES, REDUCE INVENTORY
HOLDING AND ULTIMATELY SAVE COST .

EXAMPLE : W AL-MART PIONEERED THE CONCEPT OF BUILDING COMPETITIVE ADVANTAGE THROUGH

DISTRIBUTION & INFORMATION SYSTEMS IN THE RETAILING INDUSTRY . T HEY INTRODUCED TWO INNOVATIVE
LOGISTICS TECHNIQUES – CROSS-DOCKING AND EDI ( ELECTRONIC DATA INTERCHANGE ).

WEAKNESS:
1. LESS CONVERSION LEVEL : DESPITE HIGH FOOTFALLS , THE CONVERSION RATIO HAS BEEN VERY LOW IN
THE RETAIL OUTLETS IN A MALL AS COMPARED TO THE STANDALONE COUNTER PARTS . I T IS SEEN THAT
ACTUAL CONVERSIONS OF FOOTFALL INTO SALES FOR A MALL OUTLET IS APPROXIMATELY 20-25%. O N
THE OTHER HAND , A HIGH STREET STORE OF RETAIL CHAIN HAS AN AVERAGE CONVERSION OF ABOUT
50-60%. A S A RESULT , A STAND-ALONE STORE HAS A ROI (RETURN ON INVESTMENT ) OF 25-30%; IN
CONTRAST THE RETAIL MAJORS ARE EXPERIENCING A ROI OF 8-10%.

2. 2. CUSTOMER LOYALTY : RETAIL CHAINS ARE YET TO SETTLE DOWN WITH THE PROPER MERCHANDISE
MIX FOR THE MALL OUTLETS . S INCE THE STAND -ALONE OUTLETS WERE ESTABLISHED LONG TIME BACK ,
SO THEY HAVE STABILIZED IN TERMS OF FOOTFALLS & MERCHANDISE MIX AND THUS HAVE A HIGHER
CUSTOMER LOYALTY BASE .

OPPORTUNITY:

1. THE INDIAN MIDDLE CLASS IS ALREADY 30 C RORE & IS PROJECTED TO GROW TO OVER 60 CRORE BY 2010
MAKING INDIA ONE OF THE LARGEST CONSUMER MARKETS OF THE WORLD . T HE IMAGES-KSA PROJECTIONS
INDICATE THAT BY 2015, I NDIA WILL HAVE OVER 55 CRORE PEOPLE UNDER THE AGE OF 20 - REFLECTING THE
ENORMOUS OPPORTUNITIES POSSIBLE IN THE KIDS AND TEENS RETAILING SEGMENT .

2. ORGANIZED RETAIL IS ONLY 3% OF THE TOTAL RETAILING MARKET IN INDIA. IT IS ESTIMATED TO GROW AT
THE RATE OF 25-30% P .A . AND REACH INR 1,00,000 C RORE BY 2010.

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3. PERCOLATING DOWN : IN INDIA IT HAS BEEN FOUND OUT THAT THE TOP 6 CITIES CONTRIBUTE FOR 66% OF
TOTAL ORGANIZED RETAILING . WHILE THE METROS HAVE ALREADY BEEN EXPLOITED , THE FOCUS HAS NOW BEEN
SHIFTED TOWARDS THE TIER -II CITIES . T HE 'RETAIL BOOM ', 85% OF WHICH HAS SO FAR BEEN CONCENTRATED
IN THE METROS IS BEGINNING TO PERCOLATE DOWN TO THESE SMALLER CITIES AND TOWNS. T HE CONTRIBUTION
OF THESE TIER -II CITIES TO TOTAL ORGANIZED RETAILING SALES IS EXPECTED TO GROW TO 20-25%.
* TIER -II cities: Surat, Lucknow, Dehradun, Vijaywada, Bhopal, Indore, Bhubasehwar, Varanasi to name a few.

THREAT:

1. IF THE UNORGANIZED RETAILERS ARE PUT TOGETHER , THEY ARE PARALLEL TO A LARGE SUPERMARKET WITH
NO OR LITTLE OVERHEADS , HIGH DEGREE OF FLEXIBILITY IN MERCHANDISE , DISPLAY , PRICES AND TURNOVER .

2. SHOPPING CULTURE: SHOPPING CULTURE HAS NOT DEVELOPED IN INDIA AS YET. EVEN NOW MALLS ARE JUST
A PLACE TO HANG AROUND WITH FAMILY AND FRIENDS AND LARGELY CONFINED TO WINDOW -SHOPPING .

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CONCLUSION

TO CONCLUDE , IT CAN BE SAID THAT THOUGH THE GLOBAL RETAIL INDUSTRY HAS REACHED ITS MATURITY , THE
INDIAN RETAIL INDUSTRY IS STILL AT ITS INFANCY . BUT WITH THE HUGE POTENTIALITY EXISTING IN THE INDIAN
MARKET , IT IS EXPECTED TO GROW IN LEAPS AND BOUNDS IN THE NEAR FUTURE .

INSTEAD OF COMPARING THE TOTAL GLOBAL RETAIL INDUSTRY WITH THE INDIAN RETAIL INDUSTRY, LETS
COMPARE WAL -M ART ALONE WITH THE I NDIAN RETAIL INDUSTRY & PUT FORWARD FEW INTERESTING FACTS:

1. RETAIL SALES OF WAL-MART FOR THE YEAR 2003 WAS US $ 25,632.9 C RORE; HIGHER THAN THE SIZE OF
INDIAN RETAIL INDUSTRY .

2. THE SIZE OF ANY WAL-MART STORE IS MUCH HIGHER THAN THE SIZE OF ANY EXISTING SHOPPING MALL IN
INDIA.

3. WAL-MART HAS OVER 4,800 STORES, WHICH IS UNPARALLEL TO ANY OF THE INDIA'S LARGE FORMAT
STORE .

4. NEW STORES OPENED ANNUALLY BY WAL-MART ARE ABOUT 420, MUCH HIGHER THAN ALL ORGANIZED
INDIAN RETAILERS PUT TOGETHER .

5. THE SALES PER HOUR OF $2.2 CRORE ARE INCOMPARABLE TO ANY RETAILER IN THE WORLD.

6. WAL-MART HAS AROUND 30,000 SUPPLIERS THROUGHOUT THE WORLD AND MORE THAN 600,000 SKU' S
ON ITS WEB SITE, A NUMBER THAT CANNOT BE COMPARED .

7. DAILY CUSTOMERS ARE ABOUT 1.57 CRORE (ALMOST EQUIVALENT TO MUMBAI 'S ENTIRE POPULATION ).

8. TIME BETWEEN EACH BARBIE SALE AT WAL-MART IS JUST TWO SECONDS (SAME RATE AT WHICH BABIES ARE
PRODUCED IN I NDIA !)

OVERALL , IT CAN BE SAID THAT " RETAIL INDUSTRY" IN INDIA WILL EMERGE AS ONE OF THE BEST 5 BUSINESS
SECTORS IN THIS DECADE .

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