Retail formats

Retailing is one of the pillars of the economy in India and accounts for 13% of GDP.[1]

The retail industry is divided into organised and unorganised sectors. Over 12 million outlets
operate in the country and only 4% of them being larger than 500 sq ft (46 m2) in size. Organised
retailing 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. Unorganised retailing, on the
other hand, refers to the traditional formats of low-cost retailing, for example, the local kirana
shops, owner manned general stores, paan/beedi shops, convenience stores, hand cart and
pavement vendors, etc.[2] In India, a shopkeeper of such kind of shops is usually known as a
dukandar.

Most Indian shopping takes place in open markets and millions of independent grocery shops
called kirana. Organized retail such supermarkets accounts for just 4% of the market as of 2008.
[3]
Regulations prevent most foreign investment in retailing. Moreover, over thirty regulations
such as "signboard licences" and "anti-hoarding measures" may have to be complied before a
store can open doors. There are taxes for moving goods to states, from states, and even within
states.[3]

Contents
[hide]

 1 Growth
 2 The Indian Retail Market
 3 Major Indian Retailers
 4 Entry of MNCs
 5 Challenges
 6 References

[edit] Growth
An increasing number of people in India are turning to the services sector for employment due to
the relative low compensation offered by the traditional agriculture and manufacturing sectors.
The organized retail market is growing at 35 percent annually while growth of unorganized retail
sector is pegged at 6 percent.[4]

The Retail Business in India is currently at the point of inflection. Rapid change with
investments to the tune of US $ 25 billion is being planned by several Indian and multinational
companies in the next 5 years. It is a huge industry in terms of size and according to management
consulting firm Technopak Advisors Pvt. Ltd., it is valued at about US $ 350 billion. Organised
retail is expected to garner about 16-18 percent of the total retail market (US $ 65-75 billion) in
the next 5 years.

India has topped the A.T. Kearney’s annual Global Retail Development Index (GRDI) for the
third consecutive year, maintaining its position as the most attractive market for retail
investment. The Indian economy has registered a growth of 8% for 2007. The predictions for
2008 is 7.9%.[5] The enormous growth of the retail industry has created a huge demand for real
estate. Property developers are creating retail real estate at an aggressive pace and by 2010, 300
malls are estimated to be operational in the country.[6]

With over 1,000 hypermarkets and 3,000 supermarkets projected to come up by 2011, India will
need additional retail space of 700,000,000 sq ft (65,000,000 m2) as compared to today. Current
projections on construction point to a supply of just 200,000,000 sq ft (19,000,000 m2), leaving a
gap of 500,000,000 sq ft (46,000,000 m2) that needs to be filled, at a cost of US$15–18 billion.[7]

According to the Icrier report, the retail business in India is estimated to grow at 13% from $322
billion in 2006-07 to $590 billion in 2011-12. The unorganized retail sector is expected to grow
at about 10% per annum with sales expected to rise from $ 309 billion in 2006-07 to $ 496
billion in 2011-12.[8]

[edit] The Indian Retail Market

Indian market has high complexities in terms of a wide geographic spread and distinct consumer
preferences varying by each region necessitating a need for localization even within the
geographic zones. India has highest number of outlets per person (7 per thousand) Indian retail
space per capita at 2 sq ft (0.19 m2)/ person is lowest in the world Indian retail density of 6
percent is highest in the world.[9] 1.8 million households in India have an annual income of over
45 lakh (US$97,650)[10].

Delving further into consumer buying habits, purchase decisions can be separated into two
categories: status-oriented and indulgence-oriented. CTVs/LCDs, refrigerators, washing
machines, dishwashers, microwave ovens and DVD players fall in the status category.
Indulgence-oriented products include plasma TVs, state-of-the-art home theatre systems, iPods,
high-end digital cameras, camcorders, and gaming consoles. Consumers in the status category
buy because they need to maintain a position in their social group. Indulgence-oriented buying
happens with those who want to enjoy life better with products that meet their requirements.
When it comes to the festival shopping season, it is primarily the status-oriented segment that
contributes largely to the retailer’s cash register.[11]

While India presents a large market opportunity given the number and increasing purchasing
power of consumers, there are significant challenges as well given that over 90% of trade is
conducted through independent local stores. Challenges include: Geographically dispersed
population, small ticket sizes, complex distribution network, little use of IT systems, limitations
of mass media and existence of counterfeit goods.[12]
[edit] Major Indian Retailers
Indian apparel retailers are increasing their brand presence overseas, particularly in developed
markets. While most have identified a gap in countries in West Asia and Africa, some majors are
also looking at the US and Europe. Arvind Brands, Madura Garments, Spykar Lifestyle and
Royal Classic Polo are busy chalking out foreign expansion plans through the distribution route
and standalone stores as well. Another denim wear brand, Spykar, which is now moving towards
becoming a casualwear lifestyle brand, has launched its store in Melbourne recently. It plans to
open three stores in London by 2008-end.[13]

The low-intensity entry of the diversified Mahindra Group into retail is unique because it plans
to focus on lifestyle products. The Mahindra Group is the fourth large Indian business group to
enter the business of retail after Reliance Industries Ltd, the Aditya Birla Group, and Bharti
Enterprises Ltd. The other three groups are focusing either on perishables and groceries, or a
range of products, or both.

 Next retail India Ltd (Consumer Electronics)(www.next.co.in)

 Vivek Limited Retail Formats: Viveks, Jainsons, Viveks Service Centre, Viveks Safe
Deposit Lockers
 PGC Retail -T-Mart India[2], Switcher , Respect India , Grand India Bazaar ,etc.,
 REI AGRO LTD Retail-Formats:6TEN Hyper & 6TEN Super
 RPG Retail-Formats: Music World, Books & Beyond, Spencer’s Hyper, Spencer’s Super,
Daily & Fresh
 Pantaloon Retail-Formats: Big Bazaar, Food Bazaar, Pantaloons, Central, Fashion
Station, Brand Factory, Depot, aLL, E-Zone etc.
 The Tata Group-Formats: Westside, Star India Bazaar, Steeljunction, Landmark, Titan
Industries with World of Titans showrooms, Tanishq outlets, Chroma.
 K Raheja Corp Group-Formats: Shoppers Stop, Crossword, Hyper City, Inorbit Mall
 Lifestyle International-Lifestyle, Home Centre, Max, Fun City and International
Franchise brand stores.
 Pyramid Retail-Formats: Pyramid Megastore, TruMart
 Nilgiri’s-Formats: Nilgiris’ supermarket chain
 Subhiksha-Formats: Subhiksha supermarket pharmacy and telecom discount chain.
 Trinethra- Formats: Fabmall supermarket chain and Fabcity hypermarket chain
 Vishal Retail Group-Formats: Vishal Mega Mart
 BPCL-Formats: In & Out
 Reliance Retail-Formats: Reliance Fresh
 Reliance ADAG Retail-Format: Reliance World
 German Metro Cash & Carry
 Shoprite Holdings-Formats: Shoprite Hyper
 Paritala stores bazar: honey shine stores
 Aditya Birla Group - more Outlets
 Kapas- Cotton garment outlets
[edit] Entry of MNCs
The world's largest retailer by sales, Wal-Mart Stores Inc and Sunil Mittal's Bharti Enterprises
have entered into a joint venture agreement and they are planning to open 10 to 15 cash-and-
carry facilities over seven years. The first of the stores, which will sell groceries, consumer
appliances and fruits and vegetables to retailers and small businesses, is slated to open in north
India by the end of 2008.[14]

Carrefour, the world’s second largest retailer by sales, is planning to setup two business entities
in the country one for its cash-and-carry business and the other a master franchisee which will
lend its banner, technical services and know how to an Indian company for direct-to-consumer
retail.[15]

The world’s fifth largest retailer by sales, Costco Wholesale Corp (Costco) known for its
warehouse club model is also interested in coming to India and waiting for the right opportunity.
[16]

Opposition to the retailers' plans have argued that livelihoods of small scale and rural vendors
would be threatened. However, studies have found that only a limited number of small vendors
will be affected and that the benefits of market expansion far outweigh the impact of the new
stores.[17]

Tesco Plc., plans to set up shop in India with a wholesale cash-and-carry business and will help
Indian conglomerate Tata group to grow its hypermarket business.(19)

[edit] Challenges
To become a truly flourishing industry, retailing needs to cross the following hurdles:[18]

 Automatic approval is not allowed for foreign investment in retail.

 Regulations restricting real estate purchases, and cumbersome local laws.
 Taxation, which favours small retail businesses.
 Absence of developed supply chain and integrated IT management.
 Lack of trained work force.
 Low skill level for retailing management.
 Lack of Retailing Courses and study options
 Intrinsic complexity of retailing – rapid price changes, constant threat of product
obsolescence and low margins.

To overcome some of the challenges faced by modern retail, the country is developing a support
infrastructure in form of specialised retail schools. One such skill development initiative has
been taken by TKWs Group. Its TKWs Retail School has already training over a thousand
students and retail professionals for different retail skills. TKWs Retail School is also associated
with government projects like enhancing retail experience of foreign tourists, improving retail of
handicraft and local produce, skill development of village youth.
Un organized retail formats

Indian unorganized retail sector & its challenge

India is the only one country having the highest shop density in the world, with 11 outlets per
1000 people (12 million retail shops for about 209 million households). Rather we can see the
democratic scenario in Indian Retail (because of low level of centralization, low capital input and
due to a good number of self organized retail).

India started its Retail Journey since ancient time.

In Ancient India there was a concept of weekly HAAT, where all the buyers & sellers gather in a
big market for bartering. It takes a pretty long times to & step to shape the modern retail.  In
between these two concepts (i.e. between ancient retail concept & the modern one there exist
modern kirana/ mom and pop shops or Baniya ki Dukan.

Still it is predominating in India

So the Indian retail industry is divided into two sectors- organized and unorganized.

Organized retail sector refers to the sectors undertaken by licensed retailers, that is, those who
are registered for sales tax, income tax, etc. These include the corporate retail formats of the
exclusive brand outlets, hypermarkets, supermarkets, departmental stores and shopping malls.

 Unorganized retailing, on the other hand, refers to the traditional formats of low-cost retailing,
for example, hand cart and pavement vendors, & mobile vendors,  the local kirana shops, owner
manned general stores, paan/beedi  shops, convenience stores, hardware shop at the corner of
your street selling everything from bathroom fittings to paints and small construction tools; or
the slightly more organized medical store and a host of other small retail businesses in apparel,
electronics, food etc.

Characteristics of unorganized retail-------

 
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 reason  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 98% (twelve million) of total trade, while organized trade accounts only for
2%.

The reasons might be-

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.

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 real-estate 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.

Currently the value of the retail market is estimated at around $ 270 billion with a growth rate of
5.7 per cent per annum according to the Indian retail report which creates a big threat for the
small unorganized retailers.

The well established organized retail sector in India are Pantaloon Retail, Shoppers’ Stop,
Spencers, HyperCITY, Lifestyle, Subhiksha  & newly emerging Reliance etc.

Over 20,000 new retail outlets are expected to open within this segment. Major corporate retail
like Wal-Mart and have started to try and take over the Indian retail sector.

But in India the unorganized retail is a source foods and other necessities of millions of Indians ,
major link between rural and urban societies. Not only that it is also act like a convenience store
for the customer offering right product at right time at right place. In a country with large
numbers of people, and high levels of poverty, this model of retail democracy is the most
appropriate

So these unorganized retail sector need to be promoted so that they can organize & supply food
to Indian consumer.
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