Introduction to Retail industry in India

INTRODUCTION

The India Retail Industry is the largest among all the industries, accounting for over 10 per cent of the
country’s GDP and around 8 per cent of the employment. The Retail Industry in India has come forth
as one of the most dynamic and fast paced industries with several players entering the market. But all
of them have not yet tasted success because of the heavy initial investments that are required to break
even with other companies and compete with them. The India Retail Industry is gradually inching its
way towards becoming the next boom industry.

The total concept and idea of shopping has undergone an attention drawing change in terms of format
and consumer buying behavior, ushering in a revolution in shopping in India. Modern retailing has
entered into the Retail market in India as is observed in the form of bustling shopping centers, multi-
storied malls and the huge complexes that offer shopping, entertainment and food all under one roof.

A large young working population with median age of 24 years, nuclear families in urban areas, along
with increasing workingwomen population and emerging opportunities in the services sector are going
to be the key factors in the growth of the organized Retail sector in India. The growth pattern in
organized retailing and in the consumption made by the Indian population will follow a rising graph
helping the newer businessmen to enter the India Retail Industry.

In India the vast middle class and its almost untapped retail industry are the key attractive forces for
global retail giants wanting to enter into newer markets, which in turn will help the India Retail
Industry to grow faster. Indian retail is expected to grow 25 per cent annually. Modern retail in India
could be worth US$ 175-200 billion by 2016. The Food Retail Industry in India dominates the
shopping basket. The Mobile phone Retail Industry in India is already a US$ 16.7 billion business,
growing at over 20 per cent per year. The future of the India Retail Industry looks promising with the
growing of the market, with the government policies becoming more favorable and the emerging
technologies facilitating operations.

THE INDIAN RETAIL SCENE

India is the country having the most unorganized retail market. Traditionally it is a family’s livelihood,
with their shop in the front and house at the back, while they run the retail business. More than 99%
retailer’s function in less than 500 square feet of shopping space. Global retail consultants KSA
Technopak have estimated that organized retailing in India is expected to touch Rs 35,000 crore in the
year 2005-06. The Indian retail sector is estimated at around Rs 900,000 crore, of which the organized
sector accounts for a mere 2 per cent indicating a huge potential market opportunity that is lying in the
waiting for the consumer-savvy organized retailer.

Purchasing power of Indian urban consumer is growing and branded merchandise in categories like
Apparels, Cosmetics, Shoes, Watches, Beverages, Food and even Jewellery, are slowly becoming
lifestyle products that are widely accepted by the urban Indian consumer. Indian retailers need to
advantage of this growth and aiming to grow, diversify and introduce new formats have to pay more
attention to the brand building process. The emphasis here is on retail as a brand rather than retailers
selling brands. The focus should be on branding the retail business itself. In their preparation to face
fierce competitive pressure, Indian retailers must come to recognize the value of building their own
stores as brands to reinforce their marketing positioning, to communicate quality as well as value for
money. Sustainable competitive advantage will be dependent on translating core values combining
products, image and reputation into a coherent retail brand strategy.

There is no doubt that the Indian retail scene is booming. A number of large corporate houses Tata’s,
Raheja’s, Piramals’s, Goenka’s have already made their foray into this arena, with beauty and health
stores, supermarkets, self-service music stores, new age book stores, every-day-low-price stores,
computers and peripherals stores, office equipment stores and home/building construction stores.
Today the organized players have attacked every retail category. The Indian retail scene has witnessed
too many players in too short a time, crowding several categories without looking at their core
competencies, or having a well thought out branding strategy.
 GROWTH OF RETAIL COMPANIES IN INDIA.

Growth of Retail Companies in India exhibits the boom in the retail industry in India over the years. The
increase in the purchasing power of the Indian middle classes and the influx of the foreign investments has
been encouraging in the Growth of Retail Companies in India.

Growth of Retail Companies in India : Overview

Growth of Retail Companies in India is still not yet in a matured stage with great potentials within this
sector still to be explored. Apart from the retail company like Nilgiri's of Bangalore, most of the retail
companies are sections of other industries that have stepped in the retail sector for a better business. The
Growth of Retail Companies in India is most pronounced in the metro cities of India, however the smaller
towns are also not lagging behind in this. The retail companies are not only targeting the four metros in India
but also is considering the second graded upcoming cities like Ahmedabad, Baroda, Chandigarh,
Coimbatore, Cochin, Ludhiana, Pune, Trivandrum, Simla, Gurgaon, and others. The South Indian zone have
adopted the process of shopping in the supermarkets for their daily requirements and this has also been
influencing other cities as well where many hypermarkets are coming up day to day.

Reasons for the fast Growth of Retail Companies in India:

The retail companies are found to be rising in India at a remarkable speed with the years and this have
brought a revolutionary change in the shopping attitude of the Indian customers. The Growth of Retail
Companies in India is facilitated by certain factors like -

1. existing Indian middle classes with an increased purchasing power

2. rise of upcoming business sectors like the IT and engineering firms
3. change in the taste and attitude of the Indians
4. effect of globalization
5. heavy influx of FDI in the retail sectors in India
Growth Factors in Indian Organized Retail sector

The growth factors in Indian organized sector are various but it is mainly due to the fact that India's
economy is booming.

Also, the rise in the working population which is young, pay- packets which are hefty, more nuclear
families in urban areas, rise in the number of women working, more disposable income and customer
aspiration, western influences and growth in expenditure for luxury items. All these are the factors for
the growth in Indian organized retail sector.

In fact, India retail industry is the fastest growing industry in India and it accounts for 10% of the
country's GDP. In 2006, the retail industry in India amounted to US$ 200 billion and out of this, the
organized retail sector in India amounted to US$ 6.4 billion. By 2010, the Indian organized retail sector
is expected to rise to US$ 23 billion. In 2003, the Indian organized retailing sector accounted for more
than 4.5 million sq. ft of space absorption by malls.

Many Indian companies have entered the retail industry in India and this is also a factor in the growth of
Indian organized retail sector. Reliance Industries Limited is planning to invest US$ 6 billion in the
organized retail sector in India by opening 1500 supermarkets and 1000 hypermarkets. Bharti Telecoms
is planning a joint venture worth £ 750 million with Tesco a global retail giant. Pantaloons is planning to
invest US$ 1 billion in order to increase its retail space to 30 million square feet. Such huge investments
is also a factor in the growth of the organized retail sector in India.

Global retail giants are also entering the retail industry in India and this is also one of the factors in the
growth of the organized retail sector in India. The global retail giants who are entering the organized
retail sector in India are:

 Wal- Mart
  Tesco
 Carrefour SA
 Metro AG

The factors for growth in Indian organized retail sector are many and thats the reason behind its massive
growth. But for this to continue both the Indian retailers and the government will have to work together.

Growth Phase of Indian Retail Sector to Continue

The phase of high growth of Indian retail sector is expected to Continue due to huge amounts of investments
and breaking up of traditional concepts in this sector. These are leading to various changes and are providing
further boost to the growth of the Indian Retail Sector. The Indian Retail Sector that includes the traditional
retail and the modern retail is estimated to grow at a very fast pace from US$ 336 billion, in 2006 to US$
590 billion, by 2011.

The traditional retail sector is expected to increase from US$ 324 billion, in 2006 to US$ 493 billion, by
2011. The share of the modern retail in the Indian Retail Sector is also estimated to increase from 4% in
2008, to 16% in the next five years. This exceptional growth is expected to take place in the retail sector due
to large amounts of investment which is estimated to be about US$ 35 billion in the next five years. The
"cash- and- carry" activities are expected to receive the majority of investments.

The maximum amount of growth in the Indian Retail Sector will be registered in the topmost 50 to 60
markets that are located in the urban areas. These markets would be mostly supermarkets and hypermarkets.
However, these supermarkets and hypermarkets will also witness fast erosions in their margins. Further, it is
estimated that in the longer run, the convenient stores that are located in the local neighborhood will
continue to survive.

A major focus area in the Indian retail sector is the supply chain management. In the western countries, the
retail sector has a highly developed system of supply chain. However developments in supply chain in
Indian retail sector has been quite slow.

Other areas that need attention for the growth of the Indian retail sector to continue includes duty and tax
structures, infrastructure, rising land prices and effective trend forecasting. Trend forecasting needs to be
done in the country especially in the segments of cosmetics, apparel and footwear for this will help the retail
companies to curtail their expenses substantially. Also another area that requires attention is manpower for it
is estimated that the Sector of Indian Retail will suffer from shortage of manpower by about a million
people, by 2012.

The chains in the Indian retail sector need to frequently change their stocks and also adopt concepts like
home delivery. If all these areas are given immediate attention then the growth phase of Indian retail sector
would continue at a very fast pace. The Indian retail sector would then witness the setting up of retail parks
that are flourishing in Europe. Further, the growth of the Indian retail sector would help in making the
country ready for big retailers by 2015- 2016.

RETAILING FORMAT IN INDIA (MAJOR RETAIL FORMATS)

Traditional Format :
1. Salesman

2. Haats

3. Mandies

4. Company/Multi Brand store etc

Established Formats :
 1. Kirana stores
2. The Indian Commerce Association 27-29 December, 2007, Hyderabad

3. Convenience/Departmental Store

4. Pan/Beedi Shop

5. Malls/Special Malls

6. Company/Multi Brand Store

Emerging Format :
1. Exclusive Retail Outlet

2. Hypermarket

3. International Retailer

4. Malls/Special Malls

5. Multiplexes

PESTEL ANALYSIS.
PEST analysis of any industry sector investigates the important factors that are affecting the
industry and influencing the companies operating in that sector. PEST is an acronym for
political, economic, social and technological analysis. Political factors include government
policies relating to the industry, tax policies, laws and regulations, trade restrictions and tariffs
etc. The economic factors relate to changes in the wider economy such as economic growth,
interest rates, exchange rates and inflation rate, etc. Social factors often look at the cultural
aspects and include health consciousness, population growth rate, age distribution, changes in
tastes and buying patterns, etc. The technological factors relate to the application of new
inventions and ideas such as R&D activity, automation, technology incentives and the rate of
technological change.
Synergyst's PEST Analysis is a perfect tool for managers and policy makers; helping them in
analyzing the forces that are driving their industry and how these factors will influence their
businesses and the whole industry in general. Our product also presents a brief profile of the
industry comprising of current market, competition in it and future prospects of that sector.

POLITICAL
1. Strong opposition to FDI in India’s retail
sector.
2. Taxation policy – VAT.
3. Low access to banking facilities

ECONOMIC
1.GDP Growth.
2.Foreign Investments.
3.Money Supply.
4.Inflation.

SOCIAL
1.Corporate Social Responsibility.
2.Environmental Safety.
3.Ease of shopping.

TECHNOLOGY
1.Online Shopping.
2.Retail media networks(RMN).
3.ERP System.
 4.CRM System.

SUPPORTIVE SECTORS
1.I T.
2.Media.
3.Real Estate.
4.To u r i s m .

INVESTMENT POLICY AND INITIATIVES

3.1 FDI Policy in the Retail Sector
India has kept the retail sector largely closed to outsiders to safeguard the livelihood of nearly 15 million small
storeowners and only allows 51 per cent foreign investment in single brand retail with prior Government
permission. FDI is also allowed in the wholesale business. Single-brand retailers such as Louis Vuitton, Fendi,
LLadro, Nike and Toyota can operate now on their own. Metro is already operating through the cash-and-carry
wholesale\ mode. The policy makers continue to explore areas where FDI can be invited without hurting the
interest of local retail community. Government is considering opening up of the retail\ trading for select sectors
such as electronic goods, stationery, sports goods, and building equipment.
Foreign direct investment (FDI) in retail space, specialized goods retailing like sports goods, electronics and
stationery is also being contemplated. The Government has to walk a tight rope to ensure a `level playing field'
for everyone. The policy of permitting 51 per cent FDI in single-brand product retailing has led to the entry of
only a few global brands such as Nike (footwear), Louis Vuitton (shoes, travel accessories, watches, ties, textiles
ready-to wear), Lladro (porcelain goods), Fendi (luxury products), Damro (knock-down furniture), Argenterie
Greggio (silverware, cutlery,\ traditional home accessories and gift items) and Toyota (retail trading of cars),
into retail trading. A 12-billion euro French luxury industry is also eyeing the domestic luxury segment to make
a presence through retailing directly.

OPPORTUNITIES AND CHALLENGES

1 Investment Opportunities in the Retail Sector

India is the least competitive as well as least saturated of all major global markets. This implies that there are
significantly low entry barriers for players trying to setup base in India, in terms of the competitive landscape.
The global retailers such as Wal-Mart, Carrefour, Tesco and Casino would take advantage of the more
favourable FDI rules that are likely in India and enter the country through partnerships with local retailers. Other
retailers such as Marks & Spencer and the Benetton Group, who operate through a franchisee model, would
most likely switch to a hybrid ownership structure.
A good talent pool, unlimited opportunities, huge markets and availability of quality raw materials at cheaper
costs is expected to make India overtake the world's best retail economies by 2042, according to industry
players. The retail industry in India, according to experts, will be a major employment generator in the future.
Currently, the market share of organised modern retail is just over 4 per cent of the total retail industry, thereby
leaving a huge untapped opportunity. The sector is expected to see an investment of over $30 billion within the
next 4-5 years, catapulting modern retail in the country to $175-200 billion by 2016, according to Technopak
estimates.
The Potential of the Indian Retail Sector
The high growth projected in domestic retail demand will be fuelled by:
1. The migration of population to higher income segments with increasing per capita incomes
2. An increase in urbanisation
3. Changing consumer attitudes especially the increasing use of credit cards
4. The growth of the population in the 20 to 49 years age band There is retail opportunity in most product
categories and for all types of formats
5. Food and Grocery: The largest category; largely unorganised today
6. Home Improvement and Consumer Durables: Over 20 per cent p.a. CAGR estimated in the next 10
years
7. Apparel and Eating Out: 13 per cent p.a. CAGR projected over 10 years Opportunities for investment
in supply chain infrastructure: Cold chain and logistics
8. India also has significant potential to emerge as a sourcing base for a wide variety of goods for
international retail companies
 9. Many international retailers including Wal-Mart, GAP, JC Penney etc. are already procuring from
India.
Corporate Catalyst India A report on Indian Retail Industry Of the total organised retail market of Rs 550
billion, the business of fashion accounts for Rs 300.80 billion, which translates into nearly 55 per cent of the
organised retail segment in the country.
Total fashion sector was estimated at Rs 1,914 billion and forms about 15 per cent of the country's retail market
of Rs 12,000 billion. Commanding such a large chunk of the organised retail business in India, fashion retailing
has indeed been responsible for single-handedly driving the business of retail in India.

The opportunities in Indian organized retail sector are many for this sector is witnessing a boom.

The retail industry in India amounted to US$ 200 billion in 2006, and out of this amount the Indian organized
retail sector amounted to US$ 6.4 billion. The opportunities in India organized retail sector can be judged from
the fact that by 2010 it is expected to rise to US$ 23 billion.

The various opportunities in the organized retail sector in India are mainly there for the Indian consumers
behavior pattern has changed. Now the Indian consumer gets more hefty pay- packages, is younger, a large
number of women are working, western influences, and more disposable income have opened a lot of
opportunities in Indian organized retail sector. The Indian consumer wants to shop, eat and get entertainment in
one place and is have also given Indian organized retail sector an opportunity to grow.

The Indian government in 2005 allowed foreign direct investment (FDI) in single brand retail to 51%. This have
opened up a lot of opportunities in India organized retail sector. In fact 325 departmental stores, 300 new malls,
and 1500 supermarkets are being built which shows the tremendous opportunities in the organized retail sector
in India.

Many Indian companies seeing the various opportunities in organized retail sector in India have entered it.
Pantaloons have decided to increase its retail space to 30 million square feet with an investment of US$ 1
billion. Reliance Industries Limited is targeting for annual sales of US$ 25 billion by 2011. It is planning to
invest US$ 6 billion in order to open 1,500 supermarkets and 1000 hypermarkets. Bharti Telecoms is planning a
joint venture with Telco a global retail giant worth £ 750 million.

The opportunities in the organized retail sector in India have also increased with the desire of many global retail
giants to set up shop here. The global retail giants who are entering the Indian organized retail sector are:

 Tesco
 Wal- Mart
 Metro AG
 Carrefour SA

The opportunities in Indian organized retail sector are varied and it must be fully exploited by the Indian
retailers.
4.2 Challenges in Retailing
The challenges facing the Indian organized retail sector are various and these are stopping the Indian
retail industry from reaching its full potential. The behaviour pattern of the Indian consumer
has undergone a major change. This has happened for the Indian consumer is earning more now,
western influences, women working force is increasing, desire for luxury items and better quality. He
now wants to eat, shop, and get entertained under the same roof. All these have lead the Indian
organized retail sector to give more in order to satisfy the Indian customer.

The biggest challenge facing the Indian organized retail sector is the lack of retail space. With real
estate prices escalating due to increase in demand from the Indian organized retail sector, it is posing a
challenge to its growth. With Indian retailers having to shell out more for retail space it is effecting
there overall profitability in retail.

Trained manpower shortage is a challenge facing the organized retail sector in India. The Indian
retailers have difficultly in finding trained person and also have to pay more in order to retain them.
This again brings down the Indian retailers profit levels.
 The Indian government have allowed 51% foreign direct investment (FDI) in the India retail sector to
one brand shops only. This has made the entry of global retail giants to organized retail sector in India
difficult. This is a challenge being faced by the Indian organized retail sector. But the global retail
giants like Tesco, Wal-Mart, and Metro AG are entering the organized retail sector in India indirectly
through franchisee agreement and cash and carry wholesale trading. Many Indian companies are also
entering the Indian organized retail sector like Reliance Industries Limited, Pantaloons, and Bharti
Telecoms. But they are facing stiff competition from these global retail giants. As a result discounting
is becoming an accepted practice. This too brings down the profit of the Indian retailers. All these are
posing as challenges facing the Indian organized retail sector. The challenges facing the Indian
organized retail sector are there but it will have to be dealt with and only then this sector can prosper.

The industry is facing a severe shortage of talented professionals, especially at the middle-management level.
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. Long intermediation chains would
increase the costs by 15 per cent. Lack of adequate infrastructure with respect to roads, electricity, cold chains
and ports has further led to the impediment of a pan-India network of suppliers. Due to these constraints, retail
chains have to resort to multiple vendors for their requirements, thereby, raising costs and prices.
The available talent pool does not back retail sector as the sector has only recently emerged from its nascent
phase. Further, retailing is yet to become a preferred career option for most of India’s educated class that has
chosen sectors like IT, BPO and financial services. Even though the Government is attempting to implement a
uniform value-added tax across states, the system is currently plagued with differential tax rates for various
states leading to increased costs and complexities in establishing an effective distribution network.
Stringent labor laws govern the number of hours worked and minimum wages to be paid leading to limited
flexibility of operations and employment of part-time employees. Further, multiple clearances are required by
the same company for opening new outlets adding to the costs incurred and time taken to expand presence in the
country. The retail sector does not have ‘industry’ status yet making it difficult for retailers to raise finance from
banks to fund their expansion plans. Government restrictions on the FDI are leading to an absence of foreign
players resulting into limited exposure to best practices. Corporate Catalyst India A report on Indian Retail
Industry .Non-availability of Government land and zonal restrictions has made it difficult to find a good real
estate in terms of location and size. Also lack of clear ownership titles and high stamp duty has resulted in
disorganized nature of transactions

The Hidden Challenges

Modern retailing is all about directly having "first hand experience" with customers,
giving them such a satiable experience that they would like to enjoy again and again.
Providing great experience to customers can easily be said than done. Thus challenges
like retail differentiation, merchandising mix, supply chain management and competition
from supplier's brands are the talk of the day. In India, as we are moving to the next
phase of retail development, each endeavor to offer experiential shopping. One of the
key observations by customers is that it is very difficult to find the uniqueness of retail
stores. The problem:retail differentiation.

The next problem in setting up organized retail operations is that of supply chain
logistics. India lacks a strong supply chain when compared to Europe or the USA. The
existing supply chain has too many intermediaries: Typical supply chain looks like:-
Manufacturer - National distributor - Regional distributor - Local wholesaler - Retailer -
Consumer. This implies that global retail chains will have to build a supply chain network
from scratch. This might run foul with the existing supply chain operators. In addition to
fragmented supply chain, the trucking and transportation system is antiquated. The
concept of container trucks, automated warehousing is yet to take root in India. The
result: significant losses/damages during shipping.

Merchandising planning is one of the biggest challenges that any multi store retailer
faces. Getting the right mix of product, which is store specific across organization, is a
combination of customer insight, allocation and assortment techniques.
The private label will continue to compete with brand leaders. So supplier's brand wiil
take their own way because they have a established brand image from last decades and
the reasons can be attributed to better customer experience, value vs. price,
aspiration, innovation, accessibility of supplier's brand.

4.0 Strategies

4.1: Right Positioning

The effectiveness of the mall developer's communication of the offering to the target
customers determines how well the mall gets positioned in their minds. At this stage, the
communication has to be more of relative nature. This implies that the message
conveyed to the target customers must be effective enough in differentiating the mall's
offering from that of its competitors without even naming them. The message should
also clearly convey to the target audience that the mall offers them exactly what they
call the complete shopping-cum-entertainment point that meets all their expectations.
The core purpose is to inform the target customers about the offering of the mall,
persuade them to visit the mall and remind them about the mall. The mall developer can
create awareness about the offering among the target customers in a number of ways.
Various communication tools available to the mall developer for this purpose may include
advertising, buzz marketing (WoM), celebrity endorsement, use of print media, press
releases and viral marketing .Once the message is being conveyed through these
channels, the mall developer must add a personal touch to his message by carrying out
a door-to-door campaign in order to reinforce the message.

4.2: Effective Visual Communication

Retailer has to give more emphasis on display visual merchandising, lighting, signages
and specialized props. The visual communication strategy might be planned and also be
brand positioned. Theme or lifestyle displays using stylized mannequins and props,
which are based on a season or an event, are used to promote collections and have to
change to keep touch with the trend. The merchandise presentation ought to be very
creative and displays are often on non-standard fixtures and forms to generate interest
and add on attitude to the merchandise.

4.3: Strong Supply Chain

Critical components of supply chain planning applications can help manufacturers meet
retailers' service levels and maintain profit margins. Retailer has to develop innovative
solution for managing the supply chain problems. Innovative solutions like performance
management, frequent sales operation management, demand planning, inventory
planning, production planning, lean systems and staff should help retailers to get
advantage over competitors.

4.4: Changing the Perception

Retailers benefit only if consumers perceive their store brands to have consistent and
comparable quality and availability in relation to branded products. Retailer has to
provide more assortments for private level brands to compete with supplier's brand. New
product development, aggressive retail mix as well as everyday low pricing strategy can
be the strategy to get edge over supplier's brand.

5.0 Conclusion:
In their preparation to face fierce competitive pressure, Indian retailers must come to
recognize the value of building their own stores as brands to reinforce their marketing
Positioning, to communicate quality as well as value for money. Sustainable competitive
advantage will be dependent on translating core values combining products, image and
reputation into a coherent retail brand strategy.

IN SHORT THE CHALLENGES FACING INDIAN RETAIL INDUSTRY

 The tax structure in India favors small retail business

 Lack of adequate infrastructure facilities
 High cost of real estate
 Dissimilarity in consumer groups
 Restrictions in Foreign Direct Investment
 Shortage of retail study options
 Shortage of trained manpower
 Low retail management skill

Retail formats in India

Hypermarts/supermarkets: large self-servicing outlets offering products from a variety of categories.

 Mom-and-pop stores: they are family owned business catering to small sections; they are
individually handled retail outlets and have a personal touch.
 Departmental stores: are general retail merchandisers offering quality products and services.
 Convenience stores: are located in residential areas with slightly higher prices goods due to
the convenience offered.
 Shopping malls: the biggest form of retail in India, malls offers customers a mix of all types of
products and services including entertainment and food under a single roof.
 E-trailers: are retailers providing online buying and selling of products and services.
 Discount stores: these are factory outlets that give discount on the MRP.
 Vending: it is a relatively new entry, in the retail sector. Here beverages, snacks and other
small items can be bought via vending machine.
 Category killers: small specialty stores that offer a variety of categories. They are known as
category killers as they focus on specific categories, such as electronics and sporting goods.
This is also known as Multi Brand Outlets or MBO's.
 Specialty stores: are retail chains dealing in specific categories and provide deep assortment.
Mumbai's Crossword Book Store and RPG's Music World are a couple of examples.

STRATEGIES USED BY SOME COMPANIES IN THAT INDUSTRY TO CONVERT THEIR

THREATS INTO OPPORTUNITIES:

Back ground

Pantaloon Retail (India) Limited is India’s largest leading retailers. It operates on multiple platforms

like Value and life style segment in the Indian consumers market. Company head quarters located in Mumbai.

As on Feb 2009 Company operates over 12 million square feet of retail space, 1000 stores in 71 cities with

employee strength of 30,000 people. The company is in aspect of giving retailing a modern looks with reachable

for middle and middle lower class people. Retailing includes retail formats like Pantaloons, Big bazaar, Food

bazaar, brand factory, Blue sky, and Top 10, Star & sitar and e zone. The company also operates on online
futurebazzar.com for upper class that can get internet connectivity. Home Town a large-format home solutions

store.

Pantaloon Retail is the flagship company of Future Group, a business group catering tothe entire

Indian consumption space. Future Group led by its founder and Group CEO, Mr.Kishore Biyani, is one of

India¶s leading business houses with multiple businesses spanningacross the consumption space. While retail

forms the core business activity of Future Group,group subsidiaries are present in consumer finance, capital,

insurance, leisure and entertainment,brand development, retail real estate development, retail media and

logistics.
1.2 Strategies

The company observes retail customer trend and changing consumption tastes. Organizationis customer

driven opposed to product driven .Company is very conscious about culture andregional consumption pattern.

Strategies change frequently due to orient to the customers needs.The continues of learning, unlearning and

relearning is applied to update the quick changingstrategies across the organization. As Kishore Biyani MD

Pantaloon retail India LTD says³Retail is like riding bicycle. In uphill if you stop pedaling you will slide down´.

The statement express the need of continues learning process to form the strategies. Based on analysis its

business strategies can be categorized in 3 major groups. They are

Diversification strategy

Classes destination strategy

Maximum market shares strategy

Diversification strategy

The company started its business as textile manufactures but growth in modernorganized retailing

attracted the company to switch diversify to the next consumption pattern.The company diversified and acquired

a large business in organic and inorganic way. Butcompany did not forget ripe its strategy and values in the

diversified company.
In every new business company started to rewrite the rules by retaining values. The
company in latter stage organized to support each other by physical material flow if required.
Diversification is done in two main categoriesRETAIL FORMATS and SPECIALIZED BUSINESs.
Classes destination strategy

Future group has diversified its business keeping the retiling as common goal. To set andconcentrate

on one stratum is main objective of this strategy. Each business is set to operate ondefined strata. Company has
divided Indian customers in three different groups. INDIA ONE,INDIA TWO, INDIA THREE. Each has

different values, products and quality requirements.

INDIA ONE or consuming class .The population of this constitutes only 14%.Till recenttimes the

modern retiling formats is offered for this class. According Maslow¶s theory ofhierarchy the 14% people are in

self actualization and Esteem needs in the pyramid. For thisclass pantaloon patterned Future bazaar, E zone,

Central, brand factory, Home town and starGalaxy entertainment.

INDIA TWO or the serving class it includes people like house hold helpers, office peonetc. This is the

people who make service INDIA ONE class. The population of this class is morethan 30%. In the needs

hierarchy they are located in for Social and security .Earning capacity ofthis class is 60% lesser than INDIA

ONE. For this class as the big bazaar, Food bazaar, Futuremoney and other retail formats are presented.

INDIA THREE or struggling class. The class led life on hand to mouth existence. Theycan¶t afford for

beater living style. This segment doesn¶t contribute much in the contributioncycle. The need of the segment is

local as they are finding it cheaper. The present business modelis not addressing this class.

Figure 3 shows change in consumption patter by different class in 2001-02 and 2007-08.INDIAONE has

changed from 25% to 35% normally the total profit in this segment will comparatively20% more than they are

sold in next segment. As ambiance is factor and other pleasuring nonvalue added services are necessary. INDIA

TWO has not changed it conception level. INDIATHREE has seen 10 % decline.
Maximum market shares strategy

The retail chain by pantaloon in all business patterns tries to achieve maximum marketshare in all the

products or service it provides .The Company does not bothers about short termprofit or loss by a strategy. This

are considered as learning. The business will sell at marginalprofit some times to attract the new customer who

will prove potential customers in future. Thestrategy achieved by focusing pricing factors in INDAI TWO and

on service and quality inINDIA ONE.

Pricing strategies

Pricing is strategy used by Pantaloon retail chain to attain maximum market shares. Thecompany

offers numerous schemes to attract the new customer as well as to retain the present customers. The company’s

schemes are categorized in following groups

1.VALUE PRICING

This approach is used where external factors such as recession or increasedcompetition force

companies to provide 'value' products and services to retain sales. Theproduct value will be associated with

external factors.
2.PROMOTIONAL PRICING
Pricing to promote a product is a very common application. The application of
this done by BOGO (Buy one Get One), BTGO (Buy Two Get One Free) etc.

3.BUNDLING
Bundling is marketing tool sell two or more complementary product as a package
with attractive price. The price is will lesser then individual selling price.
Example:
A Person needs one soap for a period of time
But bundling with attractive price with more than 3 soaps can attract them.

4.LOW INTEREST RATE FINANCING

Future money helps in asset purchase at 0% interest.

5.PHYSIOLOGICAL DISCOUNTING

In India this approach is called as Bata rating system. Organization utilizes thisapproach when product

has emotional value rather than rational value. Example a productis priced for 99 instead of 100.When board

shows price reduction from 100 to 99,Consumer looks at 3 digits to 2 digits rather than exact value.

6.TIME PRICING

The innovative way of attract the customer is Timely pricing it is known thatduring holidays rate of

customer is more. Reduction of profit margin with lot ofadvertisement will invite new customers. The company

has learnt it from strategy madeon public holiday 26-Feb. When the turnover of the day reached 30 cores where

averageis 5 cores.
With such experience crowded management is essential so to divert potential
customers ³Wednesday bazaar´ where it will offer less profit margin sales.

1.3 Levers issues

Human resource
Well trained staff, Appearance, Empowered individuals, Use scenario planning as a tool for quick decision
making, Brand ambassador Organization structure & controls .The entrepreneurial culture and spirit prevails in
the company, Appetite for taking risks is encouraged, learning while doing, No rigid organizational structure,
organization design approach, Balanced Score card approach Retail control Semi Centralized, Complex
Sourcing E-touch with supplier, Self production facilities with small number of suppliers, Short term contracts
(based on lowest bid) Process Modern hard technology, Devolved internally, Reduces cost, new strategies and
process innovations Facilities Special propose, Large, Capital driven, Placed in major cities.
 Why not e-retailing

The organization focused on mall base selling rather than e business in initial stages.Apart from having

so many advantages company had no focused on this pattern. The reasons fornot selecting this system is

probably

1 . Targeted on INDIA ONE initially , Who are away from internet services

2 . Supplier base and support was not so strong

3 . Absence of good software support in supplier management

4 . E business threat of cash jams in initial days

5 . Face to face communication is tradition of Indian retailing from many years

6 . The threat or cyber crime

2.8 Conclusion

Pantaloon retail India evolved its business strategy based on under studying customers.The

organization deploys the cultural and regional strategies to attract the customers. Thechanging emotions of

customers are tracked and they are linked with the power of modernretailing environment. But still the company

has introduce modern retailing malls to the socialclass people of India it has fear of threat of business decline

from the competitors like Reliancefresh and Aditya birla moreWho are potential competitor

5.0 Conclusion:

In their preparation to face fierce competitive pressure, Indian retailers must come to
recognize the value of building their own stores as brands to reinforce their marketing
Positioning, to communicate quality as well as value for money. Sustainable competitive
advantage will be dependent on translating core values combining products, image and
reputation into a coherent retail brand strategy.