INDIAN RETAIL SCENARIO

WHAT IS RETAIL ?

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is a distribution channel function, where one organization buys products from supplying firms or manufactures products themselves, and then sells these directly to consumers.

INTRODUCTION
The retail sector has been at the helm of Indias growth story. The sector has evolved dramatically from traditional village fairs, street hawkers to resplendent malls and plush outlets, growing from strength to strength. y According to the Indian Council for Research on International Economic Relations (ICRIER), India is the seventh-largest retail market in the world, and is expected to grow at a CAGR of over 13% till FY12. y Retailing is one of the pillars of the economy in India and accounts for 13% of GDP.
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The retail industry is divided into organized and unorganized sectors. Over 12 million outlets operate in the country and only 4% of them being larger than 500 sq ft in size.

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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 like FDI, becoming more favorable and the emerging technologies facilitating operations.

EVOLUTION OF RETAIL
During the sixties and seventies there were not many differences that one could point out between urban and semi urban India, that is the medium to large towns in the country . y The retail sector was predominantly unorganized, with small stores being the main retail channel whether it was in a small town or a large one for example Hindustan lever. y The nineteen eighties was a period of transaction in sense. While the traditional retail channel carried Indias retail sector forward, there started emerging new and different product categories and selling methods. This was when computers first started growing as a product and companies like HCL and Wipro started selling their computers aggressively.
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CONTD. CONTD.
India in the eighties was fairly active retail environment with several modern retail channels. y Nineties when India opened the doors of its economy to the world, and saw many international companies rushing to enter the Indian market and to get a piece of its vast market size. As a result many new brands emerged and started to co-exist with other brands in the unorganized sector across India. y Pepsi and Coca Cola fought for market share in the Cola wars, Hero Honda and Bajaj fought for share in two wheelers, Maruti had to face Hyundai, Philips had face LG and Samsung, Sony arrived on the scene.
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INDIAN RETAIL PICTURE

India is the land of most unorganized retail market. Traditionally it is a family managed retail operations or outlets having few systems or technology, low staffing, low funding etc. More than 99% retailers function in less than 500 square feet of shopping space. . The Indian retail sector is estimated at around Rs 900,000 crore, of which the organized sector accounts for a mere 2 % indicating a huge potential market opportunity that is lying in the waiting for the consumer-savvy organized retailer.

The organized sectors growth potential will increase due to globalization, high economic growth, and changing lifestyle.

CONTD.
High consumer spending over the years by the young population and sharp rise in disposable income are driving the Indian organized retail sectors growth. y Even small towns and cities are witnessing a major shift in consumer lifestyle and preferences, and have thus emerged as attractive markets for retailers to expand their presence. y With the entry of big foreign players, the Indian organized retail market has become more competitive in terms of implementing newer business models on the operational format, and pricing, and in terms of efficiency. y The organized retail sector will largely benefit in terms of productivity and growth if sectors like agriculture, food processing, and textile are encouraged further.
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CONTD.
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According to the 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. 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. Organized retail is expected to garner about 16-18 percent of the total retail market (US $ 65-75 billion) in the next 5 years. The organized retail market is growing at 35 percent annually while growth of unorganized retail sector is pegged at 6 percent.

RETAILING FORMATS IN INDIA

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Hypermarkets: Hypermarkets are big-box formats with

an average size that ranges between 60,000-120,000 square feet, and they stock multiple lines of products such as food and grocery, general merchandise, sports goods, and apparels. Hypermarkets are mammoth outlets that are fewer in number but cater to a larger area (3-5 kM). Big Bazaar, Aditya Birla More and Spar are some major players in this format. y Supermarkets: The average size of supermarkets range from 10,000-30,000 square feet. They are a smaller version of hypermarkets that holds multiple lines of merchandise but is limited in number when compared with supermarkets. Supermarkets are spread across the city, are greater in number, but cater to a smaller area (1-2 KM). Foodworld, Food Bazaar , Reliance fresh, Big apple and are some major players in this format

CONTD. Convenience stores offer easy y Convenience stores:

purchase experience through easily accessible store locations. The stores are basically small in size (5003,000 square feet), which allows quick shopping and fast checkouts. Subhiksha and Reliance Fresh are some major players in this format.

Cash-and-carry outlets: Cash-and-carry outlet is strictly not a retail format, but considering the business dynamics it follows it can qualify for a retail format. In a retail business usually a consumer has to purchase one or more products but under this format, the consumers have to buy a minimum volume of products or value specified by the cash-and-carry retailer. Walmarts alliance with Bharti and Tescos with Trent will also come under the cash-and-carry format. y Discount stores: The focus of these stores is to offer merchandise at a price that is lower than the market price, and to gain profit from volumes. These stores keep merchandise mainly on the basis of its sale ability. Usually these are no-frill stores with simple surroundings and less service. Big Bazaar and Subhiksha are some famous examples.
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CONTD.These stores usually specialize in one y Specialty stores:

line/category of merchandise. As these stores are concerned with only one type of merchandise, they are able to offer a wider range of products at a lower price. Examples: Next and Vijay Sales. y Department stores: These stores are typically lifestyle stores where most of the merchandise constitutes apparels and products other than food and grocery. These stores offer high quality service to consumers. These stores stock lesser merchandise than other formats since the merchandise is stored in a presentable manner. Notable examples are Shoppers Stop, Westside, Trent, and Globus. y Category killers: Many major retail chains have adapted small specialty store concepts and have expanded themselves to create large specialty stores. These expanded, large specialty stores are known as category killers. Ezone, which specializes in electronics, and Staples, which specializes in office stationery, are examples of category killers.

OPPORTUNITIES/CHALLENGES Opportunities
Rising disposable income of Indian middle-class. Changing consumer preferences and shopping habits. Increase in working population. The rapid growth in urbanization has facilitated organized retailing in India, and has caused the speedy migration of population into major tier I and tier II cities, which have a significant share in the retail sales of the country. Gates have been opened up for single brand retailers. In February 2006, the door was opened to some extent when the government allowed 51% FDI by single brand companies subject to government approvals.

CONTD.
Initially the retail revolution began in the big tier I cities in India; however, as tier I cities are relatively saturated now, retailers, especially value retailers, are finding their way to smaller tier II and tier III cities as well. The changing landscape of the Indian retail segment and the increasing competition has also forced retailers to tap growth opportunities in tier II and III cities in India. y According to industry sources, mall space in India has grown from 1.0 million square feet in 2002 to about 57.3 million square feet by the end of 2008; tier I cities are expected to account for around 73% of the mall space and the rest is likely to be equally divided between tier II and tier III cities.
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CHALLENGES
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Automatic approval is not allowed for foreign investment in retail. Regulations restricting real estate purchases, and cumbersome local laws. Taxation, which favors 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, and low margins.

SOME BIG PLAYERS IN INDIAN MARKET

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RPG Retail-Formats: Music World, Books & Beyond, Spencers Hyper, Spencers Super, Daily & Fresh.

Pantaloon Retail-Formats: Big Bazaar, Food Bazaar, Pantaloons, Central, Fashion Station, Brand Factory, Depot, 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

Vishal Retail Group-Formats: Vishal Mega Mart

Reliance Retail-Formats: Reliance Fresh, reliance hypermarket.

Aditya Birla Group - more Outlets

Lifestyle International-Lifestyle, Home Centre, Max, Fun City and International Franchise brand stores.