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What is Retail?

The everyday definition of retail can be described as the act of selling of goods and merchandise from a fixed location. In other words retailing is a
distribution channel function where the retailing organization will buy products from certain manufacturers and then sell it directly to consumers. A
retailer is a reseller from which a consumer purchases products. The origin of the word retail is considered to be from the French word retailer
which means to "cutting off, clip and divide" in terms of tailoring. To use the concept, retailing directly converts into the meaning that it is breaking
of products in larger consignments into smaller packages for general consumption. The Indian retail industry is divided into organized and
unorganized sectors. Organizedretailing refers to trading activities undertaken by licensed retailers, that is, those who are registered for sales tax,
income tax, etc. These include the corporate-backed hypermarkets and retail chains, and also the privately owned large retail businesses. Unorganized
retailing, on the other hand, refers to the traditional formats of low-cost retailing, such as the local kirana shops, owner manned general stores,
paan/beedi shops, convenience stores, hand cart and pavement vendors, etc. Perhaps the concept of retail exists from the times of established
currencies if not from the times when the barter system was prevalent. However, the irony of the Indian retailing industry is that even though it is one
of the basic financial activities carried out in an economy, it is considered to be the newest when taken in the form of an organized sector in it-self.
Retail industry can be broadly classified into two categories namely- organized and unorganized retail.

a. Organized retail - Organized traders/retailers, who are licensed for trading activities and registered to pay taxes to the government.
b. b. Unorganized retail It consists of unauthorized small shops - conventional Kirana shops, general stores, corner shops among various
other small retail outlets - but remain as the radiating force of Indian retail industry.


Retailing is one of the biggest sectors and it is witnessing revolution in India. The new entrant inretailing in India signifies the beginning of retail
revolution. India's retail market is expected to grow tremendously in next few years. According to AT Kearney, The Windows of Opportunity shows
that Retailing in India was at opening stage in 1995 and now it is in peaking stage in 2006. The origins of retailing in India can be traced back to the
emergence of Kirana stores and mom-and-pop stores. These stores used to cater to the local people. Eventually the government supported the rural
retail and many indigenous franchise stores came up with the help of Khadi & Village Industries Commission. The economy began to open up in the
1980s resulting in the change of retailing. The first few companies to come up with retail chains were in textile sector, for example, Bombay Dyeing,
S Kumar's, Raymonds, etc. Later Titan launched retail showrooms in the organized retail sector. With the passage of time new entrants moved on
from manufacturing to pure retailing.

Retail outlets such as Food world in FMCG, Planet M and Music world in Music, Crossword in booksentered the market before 1995. Shopping
malls emerged in the urban areas giving a world-class experience to the customers. Eventually hypermarkets and supermarkets emerged. The
evolution of the sector includes the continuous improvement in the supply chain management, distribution channels, technology, back-end operations,
etc. this would finally lead to more of consolidation, mergers and acquisitions and huge investments. India's retail market is expected to grow
tremendously in next few years. India shows US$330 billion retail market that is expected to grow 10% a year, with modern retailing just beginning.
In India, the most of the retail sector is unorganized. The main challenge facing the organized sector is the competition from unorganized sector.
Unorganized retailing has been there in India for centuries. The main advantage in unorganized retailing is consumer familiarity that runs from
generation to generation. It is a low cost structure; they are mostly operated by owners, have very low real estate and labor costs and have low taxes
to pay. Organized retail business in India is very small but has tremendous scope.


Since the retail industry covers a wide range of corporations, it can be classified in various formats. However the most popular format of
classification is by the type of business channel the retailer implements to do business. Some of the popular categories are:

a. Mom-and-Pop Stores: This is represented by the small, individually owned and operated retail outlet. It is often seen that these are family-run
businesses which cater to the local community and are capable to provide high level of service. However they often have a limited product selection.
b. Mass Discounters: These are the type of retailers who sell either general or specialty merchandise. But their forte is in offering discount pricing to
their customers. Compared to department stores, mass discounters offer fewer services and lower quality products.

c. Warehouse Stores: This is a form of mass discounter retailer. The prices offered by these types of retailers is even less than traditional mass
discounters. However, the constraint on buyers is that they need to make purchases in quantities that are greater the quantities that can be purchased
at mass discount stores. The level of service is often low and product selection can also be limited. Another form of warehouse stores is warehouse
clubs where customers need to be members to be able to make purchases.

d. Category Killers: Major retailers also focus on a concept of specialty stores wherein they service by providing multitude of options within that
product category. In Indian parlance, the concept of category killers is often found in the product categories as electronics (The E-Zone), office
supplies (Office Link) and Books (Crosswords).

e. Department Stores: These retailers offer mid-to-high quality products and strong level of service. However in most cases these retailers do not fall
into the fullservice category. Eventhough the Department stores are classified as general merchandisers; some retailers may opt to carry a more
selective product line. For instance, while Big Bazaar carries a wide range of products from grocery to electronics, Shoppers Stop focuses primarily
their products on apparel and lifestyle products.

f. Boutique: These are usually small stores catering very specialized or niche products which is often high-end merchandise. Also in all cases the
level of service is very high for this format. They often follow a fullpricing strategy and have prices which are more than the prices of merchandise
available in any of the other formats

. g. Catalogue Retailers: The concept of this form of retailing is that the customers will place orders after seeing products from a published catalogue.
Tata Sons retail venture Croma utilizes this business channel. Orders can either be delivered by in house logistics or a third-party shipper. The format
utilized by McDonalds and Pizza Hut outlets for their delivery model can be identified as this format.
h. E-tailers: In this format the retailer principally sells via the Internet. There are thousands of online-only retail sellers of which EBay is the most
famous in India. The benefit of this format for customers is that it is open 24X7 and for the retailer is that it does not need to stock the merchandise.

i. Franchise: This form of retailing comprises of a contractual channel where one part the franchisor controls the business activities of the other party
franchisee. The franchisee has access to the franchisors business methods and other important business aspects, such as the franchise name. In return
the franchisee shares a part of the revenue with the franchisor. The common examples are McDonalds and Pizza Hut.

j. Convenience Store: As the name implies these general merchandise retailers cater to offering customers an easy purchase experience. Convenience
is offered in many ways including through easily accessible store locations, small store size that allows for quick shopping, and fast checkout. The
product selection offered by these retailers is very limited and pricing can be high.

k. Vending: This form of retailing involves utilizing automated methods for customers to quickly purchase the desired product. This can be
interactive kiosks and vending machines. The presence of vending machines for purchase of smaller items, such as beverages and snack food, is
already common in case of products like beverages and magazines. However newer devices are entering the market which will be able to vend more
expensive and bulkier products. By access of either Internet or telecommunications link, these systems will enable customers to use credit cards.

Why unorganized Retail sector is dominating in India:

Small-store (kirana) retailing has been one of the easiest ways to generate self-employment, as it requires limited investment in land, capital and
labour. It is generally family run business, lack of standardization and the retailers who are running this store they are lacking of education,
experience and exposure. This is one of the reasons why productivity of this sector is approximately 4% that of the U.S. retail industry. Unorganized
retail sector is still predominating over organized sector in India, unorganized retail sector constituting 97% (twelve million) of total trade, while
organized trade accounts only for 3%.

The reasons for unorganized retail sector domination in India:

1. In smaller towns and urban areas, there are many families who are traditionally using these kirana shops/ 'mom and pop' stores offering a wide
range of merchandise mix. Generally these kirana shops are the family business of these small retailers which they are running for more than one
generation. 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% ORGANISED SECTOR UNORGANISED SECTOR Retail sector in India
Unorganised Retial sector 97% Organised Retail sector 3%

2. These kiran shops are having their own efficient management system and with this they are efficiently fulfilling the needs of the customer. This is
one of the good reasons why the customer doesn't want to change their old loyal kirana shop.

3. A large number of working class in India is working as daily wage basis, at the end of the day when they get their wage, they come to this small
retail shop to purchase wheat flour, rice etc for their supper. For them this the only place to have those food items because purchase quantity is so
small that no big retail store would entertain this.

4. Similarly there is another consumer class who are the seasonal worker. During their unemployment period they use to purchase from this kirana
store in credit and when they get their salary they clear their dues. Now this type of credit facility is not available in corporate retail store, so this
kirana stores are the only place for them to fulfill their needs.

5. Another reason might be the proximity of the store. It is the convenience store for the customer. In every corner the street an unorganized retail
shop can be found that is hardly a walking distance from the customer's house. Many times customers prefer to shop from the nearby kirana shop
rather than to drive a long distance organized retail stores.

6. This unorganized stores are having n number of options to cut their costs. They incur little to no realestate costs because they generally operate
from their residences. Their labour cost is also low because the family members work in the store. Also they use cheap child labour at very low rates.

As they are operating from their home so they can pay for their utilities at residential rates. Even they cannot pay their tax properly.


Some of the challenges faced by the unorganized retailers are as follows: Inefficient Supply Chain Management: Indian retailing is still dominated
by the unorganized sector and there is still a lack of efficient supply chain management. India must concentrate on improving the supply chain
management, which in turn would bring down inventory cost, which can then be passed on to the consumer in the form of low pricing. Cultural
Disparity: India's huge size and socio economic and cultural diversity means there is no established model or consumption pattern throughout the
country. Manufacturers and retailers will have to devise strategies for different sectors and segments which by itself would be challenging. Human
Resource Problems: Trained manpower shortage is a challenge facing the organized retail sector in India. The Indian retailers have difficulty in
finding trained person and also have to pay more in order to retain them. This again brings down the Indian retailers profit levels. Frauds In Retail: It
is one of the primary challenges the unorganized retailers would have to face. Frauds, including vendor frauds, thefts, shoplifting and inaccuracy in
supervision and administration are the challenges that are difficult to handle. This is so even after the use of security techniques, such as CCTVs and
POS systems. As the size of the sector would increase, this would increase the number of thefts, frauds and discrepancies in the system. Red Tape:
Getting various government approvals. This implies that the retailer would have to go through different layers of Government departments before
getting the go ahead. Political Risk: The largest opposition party in India has oppose FDI in retail and some of its leaders have indicated that they
will scrap the policy if their party comes to power. A political change in state and central governments puts a lot of political risk on investment in