An Assignment

On
Challenges to retail development in India

Submitted to-
Mr. Ankit Khare

Submitted by-
Praveen Kumar
Challenges to retail development in India
In India the Retailing industry has a long way to go, and to become a truly flourishing industry,
retailing needs to cross the following hurdles-
1. The first challenge facing the organized retail sector is the competition from unorganized
sector.
2. In retail sector, Automatic approval is not allowed for foreign investment.
3. Taxation, which favors small retail businesses.
4. Developed supply chain and integrated IT management is absent in retail sector.
5. Lack of trained work force.
6. Low skill level for retailing management.
7. Intrinsic complexity of retailing- rapid price changes, threat of product obsolescence and
low margins.
8. Organized retail sector has to pay huge taxes, which is negligible for small retail
business.
9. Cost of business operations is very high in India.
10. Regulations restricting real estate purchases, and cumbersome local laws.
11. Lack of Retailing Courses and study option.
12. Retail not being recognized as an industry in India.
13. In addition to the high cost of real estate, the sector also faces very high stamp duties on
transfer of property – it varies from state to state (12.5% in Gujarat and 8% in Delhi).
14. The presence of strong pro-tenancy laws makes it difficult to evict tenants. The problem
is compounded by problems of clear titles to ownership, while at the same time, land use
conversion is time consuming and complex, as is the legal processes for setting of
property disputes.
15. Lack of adequate infrastructure: Poor roads and the lack of a cold chain infrastructure
hampers the development of food and fresh grocery retail in India. The existing
supermarkets and food retailers have to invest a substantial amount of money and time in
building a food chain network.
16. India’s largest private sector company, Reliance Ltd. (RIL) has already opened stores in
Kerala and elsewhere but has been forced to scale back its plans for more retail openings
because of the protests.
17. Frauds in Retail is one of the primary challenges the companies 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.

The Hidden Challenges

Modern retailing is all about directly having "firsthand 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.