22 ZIJMR Vol2 Issue5 May 2012

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International Journal of Multidisciplinary Research Vol.2 Issue 5, May 2012, ISSN 2231 5780
RETAIL SECTOR IN INDIA: ISSUES & CHALLENGES

MS. VIDUSHI HANDA*; MR. NAVNEET GROVER**
*Assistant Professor, Marketing. **District Manager, Mankind, New Delhi.
ABSTRACT This paper provides detailed information about the growth of retailing industry in India. It examines the growing awareness and brand consciousness among people across different socio-economic classes in India and how the urban and semi-urban retail markets are witnessing significant growth. It explores the role of the Government of India in the industries growth and the need for further reforms. 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. The paper includes growth of retail sector in India, strategies, strength and opportunities of retail stores, retail format in India, recent trends, and opportunities and challenges. This paper concludes with the likely impact of the entry of global players into the Indian retailing industry. It also highlights the challenges faced by the industry in near future. KEYWORDS: Retailing, Unorganized Sector, Organized Sector, Traditional Retail, Modern Retail. ______________________________________________________________________________ 1. INTRODUCTION India is the second fastest growing economy in the world. It is third largest economy in the world in terms of GDP and fourth largest economy in terms of Purchasing Power Parity. India presents a huge opportunity to the world at age, to use as a hub. Standing on the threshold of a retail revolution and witnessing a fast changing retail landscape, India is all set to experience the phenomenon of global village. India is the promised land for global brands and Indian retailers A Vibrant economy. India tops in the list of emerging market for global retailer and Indias retail sector is expanding and modernizing rapidly in line with Indias economic growth. The future is promising; the market is growing, government policies are becoming more favorable and emerging technologies are facilitating operations. Retailing in India is gradually inching its way toward becoming the next boom industry. The whole concept of shopping has altered in terms of format and consumer buying behavior, ushering in a revolution in shopping in India. Modern retail has entered India as seen in sprawling shopping centers, multi-storied malls and huge complexes offer shopping, entertainment and food all under one roof. The Indian retailing sector is at an inflexion point where the growth of organized retailing and growth in the consumption by the Indian population
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is going to take a higher growth trajectory. The Indian population is witnessing a significant change in its demographics. A large young working population with median age of 24 years, nuclear families in urban areas, along with increasing working-women population and emerging opportunities in the services sector are going to be the key growth drivers of the retail sector in India. Retailing in India is evolving rapidly, with consumer spending growing by unprecedented rates and with increasing no of global players investing in this sector. Organized retail in India is undergoing a metamorphosis and is expected to scale up to meet global standards over the next five years. Indias retail market has experienced enormous growth over the past decade. The most significant period of growth for the sector was between year 2000 & 2006, when the sector revenues increased by about 93.5% translating to an average annual growth of 13.3%.The sectors growth was partly a reflection of the impressive Indian economic growth and over all rise in income level of consumers. Apparels and consumer durables are the fastest growing vertical in the retail sector. Mobile phone as a product category has witnessed the highest growth in the consumer demand amongst all retail products offering, with increasing penetration of telecommunication in towns and villages. The telecommunication sector has been adding on an average 5 million new users every month. The other product categories are gaining traction predominantly in the urban areas and emerging cities, with increasing average income and spending power of young urban India. India remained as the most attractive market for third year in a row in an index prepared by At Kearney. Retail sector is the largest contributing sector to countrys GDP.
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A COMPARATIVE PICTURE OF GDP CONTRIBUTION BY RETAIL SECTOR OF YEAR 2010 IS SHOWN BELOW: - TABLE 1 Sr. No. Country Contribution of retail sector to GDP
1 2 3 4
USA India China Brazil
12% 12% 8% 10% 6%
With all these features and advantages, the opportunity for structural changes from unorganized retail industry format to organized format has made the Indian markets as a Permissible ground for global and domestic private players to fetch their goods and fuel the economy to grow. 1.1 DEBATE OVER ENTRY OF ORGANISED SECTOR IN RETAIL INDUSTRY The Retail Sector of Indian Economy is going through the phase of tremendous transformation. The retail sector of Indian economy is categorized into two segments such as organized retail sector and unorganized retail sector with the latter holding the larger share of the retail market. At present the organized retail sector is catching up very fast. The impact of the alterations in the format of the retail sector changed the lifestyle of the Indian consumers drastically. The evident increase in consumerist activity is colossal which has already chipped out a money making recess for the retail sector of Indian economy. The debate over the future of India's retail sector has arisen because people are questioning whether the public land used for these malls, the ultimate symbol of consumerism, is being put to good use.
The crucial sectors of the economy are on a self trajectory. The IT industry, telecommunication industry and many other industries have seen unprecedented growth during the last couple of yeas. but one industry that has caught the eye of the common man at almost every turning on the road is the Booming Retail Industry. There is a hue and cry over the entry of private organized retailers entry in Indian retail industry. The sector faced quite a few hurdles such as controversy over the involvement of FDI in MultiBrand Retail and the national wide protest by small traders against the bigger fishes .Instances are : Entry of reliance fresh and RPG Spencers which faced nationwide protests. Critics argue they have done nothing to change many people's lives.
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In fact, because the malls are offering attractive prices, they are squeezing out the small traders who can no longer afford to compete - thereby sharpening the divide between the rich and poor in India. But according to report of ICRIER, organized and unorganized retail will not only coexist but also grow substantially. the reason is the retail sector is growing on an overall basis hence the benefit of this growth will go to both the sectors and both sectors will progress though the share of organized sector will gradually increase . With the onset of a globalized economy in India, the Indian consumer's psyche has been changed. People have become aware of the value of money. Nowadays the Indian consumers are well versed with the concepts about quality of products and services. These demands are the visible impacts of the Retail Sector of Indian Economy. Despite the protests of the local Bania the mighty W is finally here. Wal-Mart will be setting malls in India in association with Sunil Mittal Bahrti Group. other international big players like Carrefour, Tesco and Auchan have also shown interest in the industry. 2. INDIAN RETAIL SECTOR: AN OVERVIEW India represents an economic opportunity both as a global base and as a domestic market. The real GDP is expected to grow at 8-10 percent per annum in the next five years and consuming class with annual Household incomes above Rs. 90,000 is expected to rise from about 370 million in 2006-07 to 620 million in 2011-12. Indias vast middle class and its almost untapped retail industry are key attractions for global retail giants wanting to enter newer markets. 2.1 MEANING OF RETAIL The word retail is derived from the French word retailer, meaning to cut a piece off or to break bulk. In simple terms, it implies a first-hand transaction with the customer. Retailing can be defined as the buying and selling of goods and services. It can also be defined as the timely delivery of goods and services demanded by consumers at prices that are competitive and affordable. Retailing involves a direct interface with the customer and the coordination of business activities from end to end- right from the concept or design stage of a product or offering, to its delivery and post-delivery service to the customer. The industry has contributed to the economic growth of many countries and is undoubtedly one of the fastest changing and dynamic industries in the world today. 2.2 CURRENT SCENARIO OF INDIAN RETAIL MARKET The size of Indian retail industry is more than US $350 billion but it is highly unorganized. The organized sector has started developing in the past few years. Many International brands have entered the market. With the growth in organized retailing, unorganized retailers are fast changing their business models.
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According to study conducted by ICRIER, total retail business in India will grow at 13% annually, from US $322 billion in 2006-07 to US $590 billion in 2011-12 and further US $1 trillion by 2016-17. CHART 1
Size of Indian Retail (in US$ bn)

1200 1000 800 600 400 200 0 2006-07 2011-12 2016-17 322 600 1011
Source: Technopak Analysis, CSO and other sources. 2.3 FDI NORMS Regulatory controls on FDI have been relaxed considerably in recent years. Currently the government allows 51% FDI in single brand retailing and 100% in cash-n-carry business. However, the governments plan to further open up the retail sector has hit the roadblock after facing strong political opposition and nationwide protests by small traders against the proposal to allow FDI in multibrand retailing.
2.4 FACTORS DRIVING THE GROWTH OR RETAIL SECTOR:Indian economy is growing at the rate of 8%, indicating a prosperous future. The consistent economic growth resulted in a decent rise in income level of the middle class. The thickening of the pocket of the consumer resulted in a revolution of the retail industry. Many International brands have entered the market. With the growth in organized retailing, unorganized retailers have brought drastic changes in their business models, many factor are responsible for the growth of retail sector. These are:
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1)
INCREASING DISPOSABLE INCOME: Rising disposable incomes in middle class and lower middle class with increase in employment opportunities for young adults in IT & IT enabled sectors are the major cause of retail growth in India. INCREASING NO. OF DUAL INCOME NUCLEAR FAMILIES: In India, hefty pay packets, nuclear family along with increasing working women population and dual income in family are the factors contributing to prosperous retail sector. CHANGING LIFESTYLE AND CONSUMER BEHAVIOR: Due to increasing working population, comfortable life, travel and leisure are given importance. These key factors are growth drivers of retail sector in India which now boast of retailing almost all the preferences of life apparel and accessories, Appliances, Electronics, cosmetics & Toilets cries etc. EXPERIMENTATION WITH FORMATS: Due to competition in the market, retailing is still evolving and the sector is witnessing a series of experiments with new formats being tested out. STORE DESIGN: Shopping malls and super markets are growing at a very faster rate. Improvements in infrastructure and enhanced availability of retail space, store design are the factors increasing the share of organized retail ad thereby contributing to growth of Indian retail sector. CHART 2
2)
3)
4)
5)
Source: Technopak Analysis, CSO and other sources
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2.5 BOOM OF RETAIL IN NCR The retailing configuration in India is fast developing as shopping malls are increasingly becoming familiar in large cities. When it comes to development of retail space specially the malls, the Tier II cities are no longer behind in the race. If development plans till 2007 is studied it shows the projection of 220 shopping malls, with 139 malls in metros and the remaining 81 in the Tier II cities. The government of states like Delhi and National Capital Region (NCR) are very upbeat about permitting the use of land for commercial development thus increasing the availability of land for retail space; thus making NCR render to 50% of the malls in India. CHART 3
Source: Technopak Analysis, CSO and other sources 2.6 ISSUES BEFORE RETAIL RECTOR IN INDIA: ENTRY OF ORGANIZED RETAIL PLAYERS In Indian retail sector organized retail is a recent phenomenon. It is a zero-sum game between 2 players:a) b) organized sector & unorganized sector
Indias retail is dominated by a large number of small retailers consisting of the local kirana shops, owner manned general stores, chemists, footwear shops, apparel shops, paan & beedi shops, hand-cart hawkers, pavement vendors etc. which together make up the so-called Unorganized retail.
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Organized retail is reflected in sprawling shopping centers, multiplex-malls & huge complexes which offer shopping, entertainment and food all under one roof. The last 3-4 years have witnessed the entry of a number of organized retailers Opening stores in various modern formats in metros and other important cities. Organized retailing has begun to tap the enormous market but its share is small. A number of large business houses have entered the retail business with very ambitious expansion plan. However, opinions are divided on the impact of growth of organized retail in the country. Concerns have been raised that growth of organized retail may have an adverse impact on retailers in the unorganized sector. It has also been that growth of organized retailing will yield efficiencies in supply chain, enabling better success to markets to producers (including farmers and small producers) and enabling higher prices, on the one hand and, lower prices to consumers, on the other. In India, organized retail contributed roughly 4% of the total Indian retail 2006-07, which is very small even compared with most of the emerging market economics. However. During the coming 9 years. It is projected to grow at a compound rate of 40-45 percent per annum and is estimated to contribute 16% to total Indian retail by 2011-12. CHART 4 PROJECTION OF THE SHARE OF ORGANIZED RETAIL
2006-2007
organized 4%
2011-2012
organized 4%
unorganized 96%
unorganized 96%
Total Retail: US$ 322 billion
Total Retail: US$ billion
Source: - Technopak Analysis
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Interestingly, this huge growth in organized retail does not involve a decline in the business of unorganized retail, the sales of the unorganized retail, the sales of the unorganized sector is expected to grow by 10% p.a., from US$ 308.8 billion 2006-07 to US $ 495.6 billion in 2011-12. 3. UNORGANISED RETAIL SECTOR IN INDIA Undeniably, around 96% of Indian retail sector is unorganized and hence majority of sales take place through unorganized stores popularly known as kirana or mom-and-pop stores. The unorganized retail sector is expected to grow at about 10% per annum with sales rising from 309 billion in 2006-07 to reach US $ 496 billion in 2011-12. Despite the steady expansion of organized retailers. Though organized sector is growing a faster rate, unorganized sector is still preferred by the customers as they are more convenient and easy to approach. The kirana shop owner knows that the buyer buys place first. They offer that utility. Total number of traditional retailers is estimated to be 13 million by Technopak Advisers Pvt. Ltd. The classification of the unorganized retail universe by category is shown below: 3.1 CATEGORIES OF TRADITIONAL RETAILERS

Fruit & vegetable sellers Sells fruits and vegetables. Food stores Non-Vegetable Store Kirana I Kirana II Apparel Footwear Result of bakery products. Also sells dairy and processed food and beverages. Sells chicken and mutton. Sells bakery products, dairy and processed food, home and personal care and beverages. Sells categories available at a kirana I store plus cereals, pulses, spices and edible oils. Sells mens wear, womens wear, innerwear, kinds & infant wear.
Sells mens wear, womens wear, kids wear
Customer durables & IT- Sells electronics, durables & IT products. Furnishing Hardware General mechanize Sells home lines & upholstery. Sells sanitary ware, door fitting, tiles. Includes lighting, stationery, toys, gifts & crockery.
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3.2 FUTURE TRENDS UNORGANISED SECTOR 1. The unorganized sector will grow @10% per annum but given the relatively weak financial of the unorganized sector and the space constraints on their compansion prospects, this sector alone will not be able to meet the growing demand. The unorganized sector will expand further due to its proximity, goodwill, credit sales, bargaining, loose items, convenient timings and romedelivery.
2.
4. ORGANISED RETAIL SECTOR IN INDIA The Indian retail sector is highly fragmented, consisting predominantly of small, independent, and owner managed shop. The domestic organized retail industry is at a nascent stage. India got started with organized chain retailing just a few years ago. There are just very few categories, the most prominent being apparel, where organized retail chains have had a significant presence for more than 3-4 years. Indian retailers have done very well. Particularly after taking into account the various obstacles and hindrances like real estate costs, lack of trained manpower etc. Growth of organized sector of retailing will yield efficiencies in the supply chain, enabling better access to markets, to producers and to customers. The strength of organized retail lies in resource availability. It can translate into efficient supply chain management, leading to faster inventory turnaround, resulting in improved button lines. It is anticipated that the further belongs to organized sector in India. Indias organized sector is all set to explode. While the existing players such as future group, Bharti, Reliance Retail, Essar, Shoppers stop and Aditya Birla group are endeavouring to consolidate their markets, others such as Mohindra & Mohindra, Parsavnath & DLF, Hero Honda & Indiabulls have announced plans to enter the retail sector. Organised sector is going to grow at a much faster rate of 45-50 percent per annum and quadruple its share in total retail to 16% by 2011-12. Government is also apprehensive about the uncertain future of this sector considering the vote bank attached to retail, political environment is quite willing to take the risk of 100% FDI in retail. The Major challenge facing the organised sector is competition from unorganised sector Traditional retailing has been established in India for some centuries. It is a low cost structure, mostly owner-operated, negligible real estate & labour costs & little or no taxes to pay.
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CHART 5
Source: Economics times retail knowledge series 4.1 SHARE OF ORGANISED SECTOR IN RETAIL SECTOR
The increasing growth of retail sector is going to affect organised sector positively. Presently the organised sector does not enjoy a significant chunk of market share. When compared with developed countries, it is very low, a meager 4%.
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TABLE 2 SHARE OF ORGANIZED RETAIL IN SELECTED COUNTRIES, 2006 Country Total Retail Sales (US$ bn) USA Japan Chinba United kingdom France Germany India Brazil Russia Korea, south Indonesia Poland Thailand Pakistan Argentina Philippines Malaysia Czech republic Vietnam Hungary 2,983 1,182 785 475 436 421 322 284 276 201 150 120 68 67 53 51 34 34 26 24 85 66 20 80 80 80 4 36 33 15 30 20 40 1
Share of Organized Retail (%)
40 35 55 30 22 30
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Source: Planet Retail and Technopak Advisors Pvt. Ltd. 4.2 MODERN RETAIL FORMATS IN INDIA The face of India retail sector is changing, new & innovative business models are being adopted. The formats prevalent in retail sector are:1. HYPER MARKET Hypermarket offer a large basket of products, ranging from grocery. Fries & processed food, beauty & healthcare products etc. Example Spencers, Big Bazaar 2. CASH & CARRY These are large B2B focused retail formats, buying & selling in bulk for various commodities and carry several thousand stock-keeping. Example Mito, a Germany based C&G. 3. DEPARTMENT STORES - Department stores have a large layout with a wide range of merchandise mix, usually in cohesive categories, such as showed towards garments. Example:- Ebony, Shoppers stop, Westside 4. SPECIALITY STORES Speciality stores are single category, focusing on individuals and group clusters of the same class with high product loyalty. Examples Footwear stores, gift stores etc. Examples- Archies, Woodlannd etc. 5. DISCOUNT STORE A discount store is a retail store offering a wide range of products, mostly branded, at discounted prices or apparel or footwear brands. Example Subhiksha, Koutons, Nike, Levis 6. CONVENIENT STORE A convenience store is a relatively small retail store located near a residential area (closer to consumer), open long hours, 7 days a weak and carrying a limited range of staples and groceries. Example In & Out, Safal, 6ten. 4.3 MAJOR PLAYERS IN ORGANISED SECTOR AND THEIR BUSINESS STRATEGIES High population density in the Metropolitan cities and surrounding tier I towns is driving the geographic penetration of modern retail. Typically, firms are positioning themselves in one or both of the segments: Lifestyle & value retailing under multiple retail formats. Retail firms are adopting a combination of formats:Mega Medium (hyper and / or super) (deptt. and / or speciality)
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Small
(convenient and / or discount)
It does not make any difference that what route is being followed by the retailer, the domestic retail industry of India has benefitted in terms of Investment Technical know how an expertise Improvements in supply chain and logistics Demand for store brand private labels.
Business strategy of organised retail players are explained below:TABLE 3: ORGANISED RETAIL MODEL Retailer Subhiksha Segment Value Business Strategy Low-price high-volume fancy frills front-end intermediary at the back on discounted prices on payments. strategy: by keeping no and by becoming an end, Subhiksha leverages bulk purchases and cash
Trent Limited
Lifestyle & value
Single- brand strategy: leverages on high margins in private labels, and targets consumers in socioeconomic class B and C. Strategic JVs and subsidiaries around retail has enabled PRIL to develop retailing across age-groups, all product categories, the entire customer segments under multiple retail formats. Backward integration through IT-based business model: leverages by building direct relationship with the supply service, the fanners, to sell as well as purchase products and services. The "duck and the duckling" model: by having twoor three- value segment stores, backed by a cluster of small-sized Fresh, Daily, and Express stores, to leverage, on economies of scale at back-end value chain. Operates on a co-operative model with the objective of increasing farmers' welfare, Has a strong
Future Group: PRIL
Lifestyle & value
Spencers Retail
Value
NDDB: Mother
Value
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ITC Choupal Sagar & Choupal Fresh
Value
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Dairy
presence in Delhi's NCR region. Strategically located in residential areas and follows a low-price strategy for fruit and vegetables.
5.IMPACT OF ORGANISED SECTOR ON OTHER SECTORS Report of ICRIER published in Sept.-08 has concluded that the growth of organised retail headed by large corporate houses does not significantly impact small mom-n-pop retailers. ICRIER Director and CEO Rajiv Kumar elucidated that the turnaround occurs as the unorganised sector adapts to new challenges and formulative their own strategies in firms of technology upgrade & improvement in the supply chain. The organised retailing has created a niche for itself by successfully overcoming drawbacks of unorganised retailing such as poor inventory management insensitivity to customer expectations, and reluctance to invest or human capital.
Impact of organised sector
Impact on consumer Impact on unorganised sector Impact on employment Impact on manufactures Impact on Technology
Impact on Government Revenue Impact on Investment
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5.1 IMPACT ON CONSUMERS Consumers have gained on multiple counts. The impact is i. ii. iii. Consumer spending has increased with the entry of organised retail. Consumers are provided with wider variety under one roof at competitive prices. All income groups have gained through organised retail purchases but the lower income consumers saved more.
5.2 IMPACT ON UNORGANISED SECTOR The unorganised sector is affected in the following manner:1. 2. 3. Unorganised sector has not lost due to entry of organised sector. It has rather gained in terms of business as the overall retail economy is growing. It has also gained in terms of its quality enhancement due to competition given by organised sector. Some businesses have closed. The closure rate is 4.2% p.a. which is much lower than international rate of closure of small business, out of which only 1.7% closure is due to organised sector. Small retailers have adopted the policy of extending more credit to customers to attract and retain customers. They have become competitive by adopting improved business practices & technology upgradation.
4. 5.
5.3 IMPACT ON EMPLOYMENT Employment potential of the Indian economy has increased. By providing direct employment to people in various sectors like small manufacturing sector especially food processing, textiles & apparel the unemployment rate will be reduced besides this construction packing, IT, transfer & other infrastructure sectors will also offer employment opportunities. Besides giving employment to Professionals & skilled labour organized retail sector also generates a number of jobs for unskilled labour for the tasks of sorting, grading, labeling etc. It may adversely affect employment in unorganized retail and the trade intermediaries associated with traditional supply channels but the additional jobs created will be much higher than those that are lost
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5.4 IMPACT ON MANUFACTURERS The impact on manufacturers is:(i) (ii) (iii) Large manufacturers have started feeling the competitive impact of organized retail through price and payment pressures. Entry of organized retail is transforming the logistics industry. This will create significant positive externalities across the economy. Manufacturers have started building and responding their brand strength and set up dedicated teams to deal with modern retailers.
Thus, the overall impact of organized sector on other sectors is positive. According to a report prepared by FCRIER, unorganized retailers in the vicinity of organized retailers experienced a decline in sales and profit in initial years of the entry of organized sectors. The adverse impact, however, weakens over time. 5.5 IMPACT ON GLOBAL PLAYERS It will help global players by providing them with the avenues for investments. Favorable demographic and psychographic changes in Indias consumer class and the rising affluence of young India population is an important attraction that is attracting the global players to enter in Indian market 5.6 IMPACT ON RURAL POPULATION Rural population is also going to be benefited by retail revolution i.e. organized retail. Retail market is estimated to cross US$ 45.32 BILLION ON MARK BY 2010 and US 60.43 mark by 2012 according to a study by CII and YES bank The entry of organized sector into rural areas will provide them with experience of urban lifestyle, quality, producers, and employment opportunities. ITC Champal sagar (Indias first rural mall), DCM shriram groups maryali bazaar, retail giants like reliance, spencers and subhiksha are already expanding and semiurban and rurak areas. 5.7 IMPACT ON TECHNOLOGY Retailing is a technology intensive industry. Successful retailers are using their distribution and information systems work closely with their vendors to predict consumer demand, shorten lead time, and reduce inventory holding and thereby saving cost .today online system link point of sales terminals to the main office .where detailed analysis on sales by item, classification stores or vendor are carried out online. Data warehousing, data base retailing help in tracking information on existing and potential customers. Thus the development and use of technology is also an important benefit or organized retailing. The technological facilities used by organized
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retailers e.g. computerized accounting/ inventory control. Air conditioning also help the customers in time saving at the purchase point. 5.8 IMAPCT ON GOVERNMENT REVENUE Another significant advantage of organized retailing is its contribution to government revenue .unorganized retailers doesnt normally pay taxes and most of them are not even registered for sales tax, vat and income tax. Organized retailers by contrast, are corporate entities and hence fill tax returns regularly .the growth of organized retail has contributed in steady rise in tax receipts for the central , state and local government. 5.9 IMPACT ON INVESTMENTS Organized retail is attracting inward both at domestic level and global level and several support industries like IT industries, cold chain infrastructure and logistics and warehouse distribution services in order to strengthen the supply chain . thus overall investment in retail sector is increasing and it helps in economic growth of the country. 6. RECENT TRENDS Retailing in India is witnessing a huge revamping exercise as can be seen in the graph India is rated the fifth most attractive emerging retail market: a potential goldmine. Estimated to be US$ 200 billion, of which organized retailing (i.e. modern trade) makes up 3 percent or US$ 6.4 billion As per a report by KPMG the annual growth of department stores is estimated at 24% Ranked second in a Global Retail Development Index of 30 developing countries drawn up by AT Kearney. Multiple drivers leading to a consumption boom:
o o o o
Favorable demographics
Growth in income Increasing population of women Raising aspirations: Value added goods sales
Food and apparel retailing key drivers of growth Organized retailing in India has been largely an urban Phenomenon with affluent classes and growing number of double-income households.
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More successful in cities in the south and west of India. Reasons range from differences in consumer buying behavior to cost of real estate and taxation laws. Rural markets emerging as a huge opportunity for retailers reflected in the share of the rural market across most categories of consumption
o
ITC is experimenting with retailing through its e-Choupal and Choupal Sagar rural hypermarkets. HLL is using its Project Shakti initiative leveraging women self-help groups to explore the rural market. Mahamaza is leveraging technology and network marketing concepts to act as an aggregator and serve the rural markets.
IT is a tool that has been used by retailers ranging from Amazon.com to eBay to radically change buying behavior across the globe. E-retailing slowly making its presence felt. 6.1 CHALLENGES BEFORE ORGANIZED RETAIL SECTOR. Organized sector has only recently emerged from its nascent stage and yet has to become a preferred career option for most of Indias educated class. The roadblocks in the success of organized sector are:1. 2. 3. 4. 5. Talent shortage & lack of trained manpower. Supply chains are not yet so efficient and the kind of quality that customers demand is not being provided yet. There are too many intermediaries. These long intermediaries chains are in turn driving up their costs. A plethora of clearances are required for setting up retail outlet. It limits the expansion of retail outlets at a faster pace. Inadequate infrastructure, such as roads, electricity, cord chains and posts, hampers going for a pan-India network of supplies. Due to this, retailers have to resort to multiple vendors for their requirements which is raising their costs and prices. Organized sector does not have industry status. It is further making it difficult for the players to raise funds for their expansion plans. Government restrictions on FDI limit are resulting in limited exposure to international best practices.
6. 7.
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7. FUTURE ROADMAP Indian Government seems determined to go ahead and gradually liberalize the retail sector despite continuing opposition from the Left parties. The tortoise-like slowness with which the retail sector is being opened up is due to objections by the Communists, but the amazing fact is that some movement is taking place. This seems to be due to Prime Minister Manmohan Singh's conviction that bringing in the big retail chains will unleash a wave of employment in rural and urban areas. The fears of the Left, on the other hand, are that the entry of retail giants will mean job losses as small mom-and-pop retailers get pushed out of existence. The fact is there is merit in both arguments. On the plus side, it is clear that agriculture is not providing enough jobs for the economy and there is an unprecedented wave of migration to urban areas. The entry of retail chains, which buy straight from the farmer, is bound to bring about greater purchasing power as the producer will get much better prices. This has already been felt in parts of the country like Jharkhand where farmers have held demonstrations protesting the withdrawal of Reliance Retail by the state government. Similarly, this gives a bonanza to the consumer who gets food products sourced directly from the farmer without having to pay the middleman's commission. Clearly, a win-win situation for all. But the Agitators have a point too. They are worried that the 15 million small retailers in the country may be forced out of existence. India has the largest retail economy in the world, according to a study by the CII (Confederation of Indian Industry) and A.T. Kearney. It pegs the size of the retail industry currently at about $270 billion with the Closure of the countless tiny retail outlets that dot the countryside can mean severe hardship for the families working in them. At the same time, as the saying goes, no one can stop an idea whose time has come. And the time has certainly come for retail chains to enter this country. The process has been gradual, as mentioned earlier, but even so large retail has made a dramatic impact in the areas where it has been allowed to make an entry. In the long run, it is clear that the entry of large retail chains will benefit the agricultural sector, which is in dire need of resuscitation. They will also have a long-term effect on agricultural unemployment, which is the big worry for policymakers right now. Besides, Indian consumers are not likely to desert heir neighborhood grocers en masse immediately. Therefore the hue and cry over loss of jobs is somewhat premature. domestic retail chains have already been allowed to set up business and it is now merely a matter of allowing bigger foreign players into the country Multinational giants like Walmart and Carrefour also have deep pockets and their huge investible funds are meant for sourcing products from rural areas, which in turn will provide more jobs. The thinking in the commerce ministry right now seems to be that the existing policy of allowing only single brand retailing can be extended in a phased manner to multi-brand retailers. Incidentally, as much as 96 percent of the Indian retail economy remains in the unorganized sector. 8 CONCLUSION India at the crossroads with regard to the retail sector. Several emerging market economics have gone ahead and reaped the benefits of modern retail. Politics is an unfortunate reality that has been coming in the way of success of organized sector and ultimately the overall retail sector. The hue and cry created by unorganized sector against Reliance Fresh, Wal-Mart especially in U.P., Jharkhand etc. is not appreciable, it is the major hindrance in the growth of
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retail sector. There is need of balanced approach to retail & govt. has to play a very vital role in shaping the future course. Though tradition retail has been performing a vital function in the economy, but it has to shed off its shortcomings and inefficiencies and this is actually happening. Thus, the organized sector is not only impacting the other sectors positively but also it has benefited its own competition i.e. unorganized sector. So, organized sector becomes the growth mantra of Retail sector. 9 REFERENCES A.T. Kearneys Report on Indian Retail, 2008 Agarwal Pulkit, Tyagi Esha, Foreign Direct Investment In retail Sector- An Analysis, 2010 Indian Retail sector, Dec 2010 http://www.cci.in/pdf/surveys_reports/indias_retail_sector Krafft M and Mantrala, Murali K (eds), (2010), Retailing in the 21st Century: Current and Future Trends, US Dhanabhakyam M, Shanthi A Indian Retail Industry Its Growth, Challenges and Opportunities, 2010 Sanjeev Kumar Retail Industry: Where does India Stand? at http://www.coolvenues.net/forum/viewforum.php? F=9
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22 ZIJMR Vol2 Issue5 May 2012

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ZENITH

RETAIL SECTOR IN INDIA: ISSUES & CHALLENGES

USA India China Brazil

12% 12% 8% 10% 6%

Size of Indian Retail (in US$ bn)

Source: Technopak Analysis, CSO and other sources

Total Retail: US$ 322 billion

Total Retail: US$ billion

Source: - Technopak Analysis

Sells mens wear, womens wear, kids wear

Share of Organized Retail (%)

(convenient and / or discount)

Lifestyle & value

Future Group: PRIL

Lifestyle & value

ITC Choupal Sagar & Choupal Fresh

Impact of organised sector

Impact on Government Revenue Impact on Investment

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