An Assignment on

Indian Retail sector

Submitted to: Prof. Veena Dutta

Subject: Retail Management

By

Swati Gupta

PGP/FW/09-11

THE INDIAN INSTITUTE OF PLANNING AND MANAGEMENT

JAIPUR

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Indian Retail Sector
Retailing is considered the world's largest industry with US $ 6.6 trillion sales annually. In India,
retailing is considered the largest employer after agriculture employing over 8% of the
population. India has the highest outlet population in the world with over 12 million outlets.
The Indian Retail Industry is still evolving as an 'Industry', and it has a long way to go. The
evolution of the Indian Retail market is quite interesting to be studied. It has its origins in the
village weekly markets and melas, the convenience stores, the Khadi stores and the Co-
operative stores before graduating to the present day forms of retailing. The retail sector in
India can be broadly classified into the formal and the informal retail sectors. The informal retail
sector typically consists of small-time retailers with tax evasions and non-conformance to labor
laws. The formal retail sector, which typically consists of large retailers, ensures greater
measures of tax enforcements and also a high level of labor usage monitoring. The retail market
size in India is estimated to be around $180 billion. Retailing provides jobs to almost 15 percent
of employable Indian adults and it is perhaps the largest contributor to India's GDP. But the flip
side is that the average size of each of the retail outlets in India is only 50 square feet and
though a large employer, the industry is very unorganized, fragmented and with a rural bias.
India's status as a good IT hub for outsourcing by U.S. companies has led to young Indians
between 20 to 24 years old taking up call center jobs straight out of college. This is a consumer
base that typically lives at home, with the family. They have disposable income that is totally
discretionary and about 20 to 30 percent higher than prevailing wages.

The major players in the Indian retail sector are:

 Nilgiris
 Marginfree
 FoodWorld
 Food Bazaar

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Nilgiris
Nilgiris is the oldest and leaders in the series of supermarkets, since its inception. The chain of
hypermarket was established in 1905 for the promotion of the products, the company deals
with and gave “Nilgiris 1905” name to the brand. Nilgiris, located in the South part of India is
well-known to the locals for its high-quality services and products. "Quality products at
competitive rates all under one roof" was what that drove Mr. Chenniappan. He also reinforced
what already existed — a very clear code of conduct, which guides the entire family when they
come together to run Nilgiris, India's first supermarket with self-service facilities. 

In September–October 2006, Actis, a UK-based private equity investor, invested US$65 million
in the Nilgiris Group in order to strengthen the group's manufacturing and franchising
operations in South India. This investment has given Actis a controlling interest (more than 51%
stake) in the Nilgiris group.

4 P’s of Nilgiris:

Product Price
Dairy Competitive in the industry
Bakery Quality pricing
Staples

Place Promotion
South India Well known website
More than 90 stores Social networking sites like Facebook & twitter
Print Media

Pricing Strategy of Nilgiris is set up to target customers who are looking for good quality
product and are willing to pay a marginal premium for it.

Promotional strategies of Nilgiris are superior. They have a well knit website. It has very user-
friendly interface. One can easily locate nearest Nilgiris Store, browse through the history of
Nilgiris, and get to know about the wide range of products available.

They also do internet marketing via social networking websites like Facebook and Twitter.
Good quality consistent content spread around the web pointing to Nilgiris is all it takes to build
a massive traffic network. It helps in increasing the brand visibility and awareness and thereby
results in increase in sales.

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SWOT analysis:

Strengths Weaknesses
o Regional advantage. o Inefficient supply chain.
o Legacy of being in the market for past o Unable to fulfil increasing demand in
more than 100 years. the market.
o Brand name and trust among customer
base.
o Wide presence in the market.

Opportunities
o Try and move towards northern part
of India.
o Focus more on Rural Market.
Threats
o Increasing number of local retail
outlets coming up.
o Lot of international retail stores
coming up with every day low price
strategies.

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Margin free
Margin Free Markets is the largest retail chain in the state of Kerala and one of the leading
retail chains in India. The first outlet of this chain started functioning on 26th January 1994 at
Thiruvananthapuram. There are currently more than 275 franchisees of Margin Free Markets
spread all over south India. The outlets are franchises and are not actually owned by the chain.
The Consumer Protection & Guidance Society currently controls margin free markets, which is a
registered charitable institution that started functioning in 1993. The consumers are assured of
quality, quantity and the fair price of the goods sold through the Margin Free Markets. Any
retailer can upgrade his shop into a Margin Free outlet, by sending in an application to this
society. If his application is accepted, he has to make the necessary investment required. These
shops deal in the entire gamut of goods required by a home for its monthly consumption, viz.,
grocery, food and non-food FMCG items, fruits and vegetables, consumer goods & household
articles. Margin Free outlets are typical discount stores, offering one-stop-shop convenience
and self-service facility at significant discount to its customers. Most of these customers, in time
turn out to be its permanent customers, by taking discount cards, which permit them to obtain
larger discounts than the non-card holders. The necessity to offer protection against the rising
prices gave birth to the idea of 'Margin Free Markets'. An enthusiastic entrepreneur named Mr.
N. Ravikumar conceived the idea. The idea turned out to be an instant success in Kerala
especially because Kerala is more of 'consumer' state than a 'producing' state.

During the past six years, a price increase of essential commodities by 100 to 200% became a
regular feature in Kerala. Some of the citizens in Trivandrum City thought of organizing a forum
which could help the consumers in their day to day needs. This is the background of the
formation of Consumer Protection & Guidance Society registered in the year 1993. It is the
policy of the Society to give full support to the Government, in controlling the price of essential
commodities. Amongst other things, the Society has given importance to open a venue where
the consumers can get products at reasonable rates. The idea of "Margin Free" programme
came up as a first step, based on these ends in view. The Margin Free Market is a co-operative
venture of the Consumer Protection & Guidance Society and the management, which came
forward to take up the responsibility of launching it.

Charitable deeds like providing help to physically handicapped inmates of Cheshire Home,
Orphanages etc. are also undertaken.

Product Offered at MarginFree are Provisions, Toiletries, Gift Articles, Kitchenware, plastic
goods, fans, mixers, pressure cookers etc. are being sold at reduced rates varying from 1 to 40%
less than the maximum retail price fixed by the companies.

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MFREEM brings an opportunity for calculated food intake with MFREEM Calorie Food. An
average person requires 1600 to 2300 calories a day. MFREEM has plans to sell MFREEM
Calorie Food kits through the chain of 350 franchisee shops. Each kit comes with food items
with required calorie count.

MarginFree follows a franchisee model where each of the MarginFree shops is a franchisee of
Consumer Protection & Guidance Society.

The pricing strategy followed at MarginFree is that the prices of all items sold are less than that
of MRP. While the ordinary buyer gets a discount of 7-10% on all buys. MarginFree cardholders
are eligible to get a further discount.

The concept of giving so high discount is successful due to the efforts of Consumer Protection &
Guidance Society as CGPS ensures a certain minimum degree of quality of the products sold
through the MarginFree outlets, negotiates the prices of the various items with the suppliers,
tries to ensure that the outlets remain financially viable and also provides the franchisees free
consumer education about various products and prices.

Customer orientation is very high in MarginFree market as it was started as a result of

consumers demand for products at reasonable price and it is targeted at the lower end of the
society contrary to most of the other food & grocery chains.

SWOT analysis

Strengths
 Extremely low prices
 Regulated by Consumer Protection &
Guidance Society
 Focused on rural sector
Weaknesses
 Less financially viable
 Limited market coverage

Opportunities Threats
 Try and move towards northern part of  Lot of international retail stores
India. coming up with every day low price
 Provide high quality products to upper strategies.
end of the society

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FoodWorld
Food World is one of the biggest retail chains in India. The RPG group opened the first Food
World outlet on May 9 1996 at Chennai, which was a 2400 square feet store. It is the only
national chain, having Foreign Direct Investment to the extent of 49% that is permitted in India.
Now Food World operates as a 51:49 joint venture with Dairy Farm International of the Jardine
Matheson Group, a US $ 4.5 billion retail giant operating in the Asia-Pacific markets with the
requisite experience.

Food World has decided to concentrate more on local areas rather than to go for a nationwide
presence in its expansion plans at the beginning. South India was chosen, with focus on
Bangalore and Chennai and later in Hyderabad. They identified areas within the city with more
than 4000 households in a 2-kilometer radius with an average monthly income more than Rs.
4000. The important variables considered while setting up an outlet are choosing the right
location, sourcing the merchandise and recruiting a trained workforce. A typical store is
between 3000-3500 sq. ft. in size and carries about 5500 items. Food world handles on average
600 customers per day per store, which translates to 1.5 million transactions per month. It is
estimated that the chain serves more than three lakh families.

Product Portfolio includes grocery of all kinds, fresh foods viz., fruits and vegetables in
fresh/chilled/frozen form, food that can be directly consumed, food and non-food FMCG
products, general merchandise required in homes like buckets, cups, shelves etc. Indian Made
Foreign.

Pricing strategy followed at FoodWorld is to sell around 100-120 items at any point of time at
below Maximum Retail Price (MRP) rates. These are generally the key necessary items or the
items for which the customer attaches more value. In addition there are also lots of schemes
and offers to attract and retain customers.

For procurement they follow a strategy of 'Hub and Spoke". The purchasing for each state is
done collectively to reduce costs. The distribution to each outlet is done by Food World in such
a way as to reduce the total handling costs.

To source its daily requirement of fruits and vegetables, Food World participates in the early
morning auctions at the major wholesale markets and has a set of suppliers who then grade,
clean, pack and label the products in time for early morning dispatch to the stores. At peak
season, the Fruit & Vegetable shelf in a Food World store stocks around 125 items; making it
the widest range available under one roof in this category.

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Talking about future prospects; Food World's share of the organized retail market in the cities
in which it operates is 62%, clearly a dominant share. The firm expects the number of Food
World stores to increase to 125 by the end of 2005. A smaller version, Food World Express is
also planned to be launched in future.

Retail Location of FoodWorld is very unique as it is a chain of supermarkets located in

residential high streets, sized between 3000 sq.ft. to 5000 sq.ft. Offer a range of food/non-food
lines comprising of 3500 skis priced at par with local grocer’s; offering a clean, bright,
functional, self service format and running continual promotions based on the philosophy of
value shopping.

STP analysis

FoodWorld’s target market segment is the population having family income at least 10000-
15000 p.m. as it is positioned as a chain of stores that offer a convenient and comfortable
shopping experience, for the consumable needs of a family’s monthly requirements, which are
always available and which meets the expectations of the consumers at such prices, range and
quality without a price penalty; thus making it a most preferred destination for food & grocery
shopping.

SWOT Analysis

Strengths Weaknesses
 Importance to product quality  Range and assortment of products is
 Access to international retail less
technology  Poor supply chain management
 Increasing Shoplifting & pilferage

Opportunities Threats
 Lots of potential customers in rural  Lots of international retail stores are
sector emerging with a strategy of everyday
low prices

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Food Bazaar
Food Bazaar is a chain of large supermarkets. Food bazaar is a blend of both Western and
Indian cultures put together to give complete satisfaction to customers.

Based on the company’s in-house consumer data and research, and in cognizance with
Observations on customer movements and the shopping convenience factor, Food Bazaar has
initiated certain refurbishments and layout design across all stores. The intention is to
continuously change with the times and demands of the evolving Indian consumer.

Food Bazaar also witnessed healthy expansion during the year 2006-07, making its presence felt
in nearly 26 cities and adding 40 stores during the year under review. The total count of Food
Bazaars as on 30th June 2007 stood at 86 stores. The year under review witnessed the
company’s private label programmed gaining significant traction. The brands have been very
competitive vis-à-vis the established brands in quality and price terms, and have in fact scored
better than national or international players in certain categories.

The shares of private labels as a percentage of total Food Bazaar revenues has increased
significantly and comprise nearly 50 merchandise categories.

While Fresh & Pure brand entered categories like cheese slices, frozen peas, honey, packaged
drinking water and packaged tea, the Tasty Treat brand received a very favorable response in
new categories like namkeens and wafers. In the home care category Caremate launched
aluminum foil and baby diapers while Cleanmate launched detergent bars and scrubbers.

A new format ‘BB Wholesale Club’ was launched and 4 such stores have been opened so far. To
be managed by Food Bazaar from the ensuing financial year, this format sells only multipacks
and bulk packs of a select range of fast moving categories and caters to price sensitive
customers and smaller retailers.

The company has also forged tie-ups with established companies like ITC, Adanis, DCM Group,
USAID and other farm groups in Maharashtra and Madhya Pradesh to source directly from
them. These alliances are expected to drive efficiencies as well as bring better products to
consumers. By the end of FY 07-08, the total number of Food Bazaar stores is expected to be
200.

Pricing strategy of Food Bazaar follows policy of Everyday low prices. The organization
concentrates mainly on customer’s attitude and their buying pattern.

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Marketing strategies

 Food bazaar is planning to launch its private labels for high margins and price sensitive
products such as tea, salt, oil and prices so as to reduce the overhead costs.
 They are also planning to provide private labeled low sodium salt at par with other
branded iodized salts.
 Focused on strong Indian brands across categories such as FMCG, household consumer
durables, electronics and apparels.

The promotional activities are carried out through mass media like television, radio, newspaper
etc. and also company is undertaking promotion by exhibitions, sponsorship activities, public
relations and sales promotions like giving freebies with goods, trade discounts given to dealers
and customers, reduced price offers on products, giving coupons which can be redeemed later
etc.

SWOT analysis:

Strengths Weaknesses
 Leading brands  Customer retention
 Distribution channels  Management
 Customer loyalty/relationship
Opportunities Threats
 Liberalisation of geographic markets  Change in customer tastes
 Technological advancement  Changing govt. policies
 New distribution channels

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