RESEARCH PROJECT REPORT

ON

SUBMITTED IN FULFILLMENT OF THE REQUIREMENT FOR THE

AWARD OF DEGREE OF
MASTERS OF BUSINESS ADMINISTRATION
(UTTAR PRADESH TECHNICAL UNIVERSITY, LUCKNOW)
(2013-2015)

SUBMITTED TO: -

SUBMITTED BY: -

THE DIRECTOR

ANAND TIWARI

Dr.ROHIT GARG

MBA (4th Semester)

ROLL NO:-1313270007

GREATER NOIDA INSTITUTE OF TECHNOLOGY, (GNIOT)

GREATER NOIDA

(2013-2015)

RESEARCH PROJECT REPORT

ON

SUBMITTED IN
FULFILLMENT OF
THE REQUIREMENT FOR THE AWARD OF DEGREE OF
MASTER OF BUSINESS ADMINISTRATION
(UTTAR PRADESH TECHNICAL UNIVERSITY, LUCKNOW)
2013-15

UNDER THE GUIDANCE OF

SUBMITTED BY

MRS. RUCHI TRIPHATI

ANAND TIWARI

(ASST.PROF.)

MBA (4th Semester)

ROLL NO:-1313270007

GREATER NOIDA INSTITUTE OF TECHNOLOGY, (GNIOT)

GREATER NOIDA

(2013-2015)

Page 1

DECLARATION
I hereby declare that the Research report entitled Relationship Marketing in
Retail Industry is the product of my sincere effort. This Research Report is
being submitted by me alone, at GREATER NOIDA INSTITUTE OF
TECHNOLOGY (GNIOT), GREATER NOIDA, for the partial fulfillment of
the course MBA and the report has been not submitted to any other educational
institutions or for any other purpose whatsoever.

Page 2

PREFACE
MBA is a stepping-stone to the management carrier and to develop good
manager. It is necessary that the theoretical must be supplemented with
exposure to the real environment.
Theoretical knowledge just provides the base and its not sufficient to produce a
good manager thats why practical knowledge is needed.
Therefore the research product is an essential requirement for the student of
MBA. This research project not only helps the student to utilize his skills
properly learn field realities but also provides a chance to the organization to
find out talent among the budding managers in the very beginning.
Retailing has become such an intrinsic part of our everyday lives that it is often
taken for granted. The nations that have enjoyed the greatest economic and
social progress have been those with a strong retail sector. Why has retailing
become such a popular method of conducting business? The answer lies in the
benefits a vibrant retailing sector has to offer- an easier access to a variety of
products, freedom of choice and higher levels of customer service.
The distribution of consumers products begins with the producer and ends at
the ultimate consumer. A retailer is a person, agent, company, or organization
which is instrumental in reaching the goods, merchandise, or services to the
ultimate consumers.
A retailer or a retail store is a business enterprise which sells primarily to
the ultimate consumers for non-business use

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The Retail industry is one of the fastest growing industries over the past couple
of the years in the world as substantiated by the rankings achieved by Global
Retail Development Index.
In accordance with the requirement of MBA course I have Research project on
the topic Relationship Marketing in Retail Industry.
The Methods adopted to fulfill the objective of the study that included
collecting information by using Secondary data with the help of Internet, Books,
Journals and Newspapers. I conducted the search in order to gather the
Information from different sources for relevant to my dissertation topic.

Page 4

ACKNOWLEDGEMENT
Life is a journey; it's not the years in your life that count. It's the life in
your years.
But Life cant be completed without the support of many people.
As an amateur in the field of Marketing and Sales Management a good project
work requires sound knowledge of the subject concerned and skills to make
proper use of knowledge. Any accomplishment requires the effort of many
people and this work is not different. I am very grateful to all who equipped me
with the right frame of mind to makes me more receptive to such knowledge
and skill.
I am greatly indebted to MRS. PRIYANKA PARIKHmydissertation thesis
guide for availing me of her competent guidance under which I am able to
accomplish my dissertation report work successfully.
I am also thankful to my friends and colleagues who gave me timely help to
make the dissertation report in this form.
Last but not the least I also wish to thanks

to everybody who helped me

through the successful completion of the project. The learning from this
experience has been immense and would be cherished throughout my life.
It is good to have an end to journey toward; but it is the journey that
matters, in the end.

Page 5

CONTENTS
1. Introduction
2. Objective
3. Background of retail industry
4. Research Methodology( Descriptive Study)
5. Top Retailers in India
6. Modern Retailing Action
7. Retailing Formats in India
8. Major Formats of In-Store Retailing
9. Evolution of Organized Retailing
10.Technology in Retail Industry
11.Investment Opportunity
12.Scope of Rural Retail
13.FDI in Indian Retailing
14.The Trends in Retail
15.The Future in Retail Industry
16.Data Analysis and Interpretation
17.Suggestions and Conclusion
18.Bibliography
19. ANNEXURE

The Indian retail industry is divided into organized and unorganized sectors.
Organized 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.
Unorganized retailing, on the other hand, refers to the traditional formats of
low-cost retailing, for example, the local kirana shops, owner manned general
stores, pan /beady shops, convenience stores, hand cart and pavement vendors,
etc.

Page 6

Indias retail sector is wearing new clothes and with a three-year compounded
annual growth rate of 46.64 per cent, retail is the fastest growing sector in the
Indian economy. Traditional markets are making way for new formats such as
departmental stores ,hypermarkets, supermarkets and specialty stores. Westernstyle malls have begun appearing in metros and second-rung cities alike,
introducing the Indian consumer to an unparalleled shopping experience.
The Indian retail sector is highly fragmented with 97 per cent of its business
being ruby the unorganized retailers like the traditional family run stores and
corner stores. The organized retail however is at a very nascent stage though
attempts are being made to increase its proportion to 9-10 per cent by the year
2010 bringing in a huge Opportunity for prospective new players. The sector is
the largest source of Employment after agriculture, and has deep penetration
into rural India generating more than 10 per cent of Indias GDP.
India is the 4th largest economy as regards GDP (in PPP terms) and is expected
to rank
3rd by 2010 just behind US and China. On one hand where markets in Asian
giants like China are getting saturated, the AT Kearney's 2006 Global Retail
Development Index (GRDI), for the second consecutive year Placed India the
top retail investment destination among the 30 emerging markets across the
world.
Over the past few years, the retail sales in India are hovering around 33-35 per
cent of GDP as compared to around 20 per cent in the US.
The last few years witnessed immense growth by this sector, the key drivers
being changing consumer profile and demographics, increase in the number of
international brands available in the Indian market, economic implications of
the Government increasing urbanization, credit availability, improvement in the
infrastructure, increasing investments in technology and real estate building a
Page 7

world class shopping environment for the consumers. In order to keep pace
with the increasing demand, there has been a hectic activity in terms of entry of
international labels, expansion
plans, and focus on technology, operations and processes.
This has lead to more complex relationships involving suppliers, third party
distributors and retailers, which can be dealt with the help of an efficient supply
chain. A proper supply chain will help meet the competition head-on, manage
stock availability; supplier relations, new value-added services, cost cutting and
most importantly reduce the wastage levels in fresh produce.
Large Indian players like Reliance, Ambanis, K Rahejas, Bharti AirTel, ITC and
many others are making significant investments in this sector leading to
emergence of big retailers who can bargain with suppliers to reap economies of
scale. Hence, discounting is becoming an accepted practice. Proper
infrastructure is a pre-requisite in retailing, which would help to modernize
India and facilitate rapid economic growth. This would help in efficient delivery
of goods and value-added services to the consumer making a higher
contribution to the GDP. International retailers see India as the last retailing
frontier left as the Chinas retail Sector is becoming saturated. However, the
Indian Government restrictions on the FDI are creating ripples among the
international players like Walmart, Tesco and many other retail giants struggling
to enter Indian markets. As of now the Government has allowed only 51 per
cent FDI in the sector to one-brand shops like Nike, Reebok etc.
However, other international players are taking alternative routes to enter the
Indian retail market indirectly via strategic licensing agreement, franchisee
agreement and cash and carry wholesale trading (since 100 per cent FDI is
allowed in wholesale trading).

Page 8

CURRENT STATUS:Indias retail industry accounts for 10 percent of its GDP and 8 percent of the
employment to reach $17 billion by 2010.The Indian retail market is estimated
at US$ 350 billion. But organised retail is estimated at only US$ 8 billion.
However, the opportunity is huge-by 2010, organised retail is expected to grow
at 6 per cent by 2010 and touch a retail business of $ 17 billion as against its
current growth level of 3 per cent which at present is estimated to
be $ 6 billion, according to the Study undertaken by The Associated Chambers
of Commerce and Industry of India (ASSOCHAM). Indian retailing is clearly at
a tipping point. India is currently the ninth largest retail market in the world.
And it is names of small towns like
Dehradun, Vijayawada, Lucknow and Nasik that will power India up the
rankings soon.
Organised retail in India has the potential to add over Rs. 2,000 billion (US$45
billion)
business by the Year 2010 generating employment for some 2.5 million people
in various retail operations and over 10 million additional workforce in retail
support activities including contract production & processing, supply chain &
logistics, retail real estate development & management etc.It is estimated that it
will cross the $650-billion mark by 2011, with an already estimated investment
of around $421 billion slated for the next four years.
Challenges facing Indian retail industry
The tax structure in India favors small retail business
Lack of adequate infrastructure facilities
High cost of real estate
Page 9

 Dissimilarity in consumer groups

Restrictions in Foreign Direct Investment
Shortage of retail study options
Shortage of trained manpower
Low retail management skill
The Future: - The retail industry in India is currently growing at a great pace
and is expected to go up to US$ 833 billion by the year 2013. It is further
expected to reach US$ 1.3 trillion by the year 2018 at a CAGR of 10%. As the
country has got a high growth rates, the consumer spending has also gone up
and is also expected to go up further in the future. In the last four year, the
consumer spending in India climbed up to 75%. As a result, the India retail
industry is expected to grow further in the future days. By the year 2013, the
organized sector is also expected to grow at a CAGR of 40%.

OBJECTIVE
INDIAN SCENARIO
Demographics

Population
:
Population Growth :
Median Age
:
Urban Population :
GDP Per capita (approx)

1.15 billion
1.3%
24.3 years
29%
:
US$ 700

The spending pattern of the emerging middle class is

Page 10

Category (2004)

% Of Total

Food, Beverage and Tobacco

43%

Clothing and Footwear

5%

Gross Rent, Fuel and Power

12%

Furniture, Fixture and Appliances

4%

Medical and Healthcare Services

8%

Transport and Communication

15%

Recreation, Education and Cultural 3%

Miscellaneous

10%

INDIA RETAIL
Retail in India is still at a very nascent stage with an estimated market
size of approximately US$ 222 Bn

The organised retail market currently stands at US$ 7.7Bn a mere 3.5% as
of 2005

Asian economies have shown substantial penetration in the last 2 decades

and India has still to move up.

Page 11

Why I think to study the topic?

The industry recognizes its all about location but needs to address other
critical success factors as well:
Supply side chain management to increase productivity of
inventory
Overhead control which tends to balloon particularly in the early
stages of growth
Overcrowding as evidenced by mushrooming mall development in
metros and mini metros
Technology Implementation helping in real time or at least end of
day information transfer
Recent influx in the retail sector has resulted in shortage of skilled
and experienced manpower
Customer Retention
I will be taking care of all the factors in detail, in the study.

Page 12

BACKGROUND OF RETAIL TRADE

Early Trade
When man started to cultivate and harvest the land, he would occasionally find
himself with a surplus of goods. Once the needs of his family and local
community were met, he would attempt to trade his goods for different goods
produced

elsewhere.

Thus markets were formed. These early efforts to swap goods developed into
more formal gatherings. When a producer who had a surplus could not find
another producer with suitable products to swap, he may have allowed others to
Page 13

owe him goods. Thus early credit terms would have been developed. This
would have led to symbolic representations of such debts in the form of
valuable items (such as gemstones or beads), and eventually money.
Early Markets
Over time, producers would have seen value in deliberately over-producing in
order to profit from selling these goods. Merchants would also have begun to
appear. They would travel from village to village, purchasing these goods and
selling them for a profit. Over time, both producers and merchants, would
regularly take their goods to one selling place in the centre of the community.
Thus, regular markets appeared.
Eventually, markets would become permanent fixtures i.e. shops. These shops
along with the logistics required to get the goods to them were, the start of the
Retail Trade.

HOW RETAIL DEVELOPED

Peddlers and Producers
The Retail Trade is rooted in two groups, the peddlers and producers. Peddlers
tended to be opportunistic in their choice of stock and customer. They would
purchase any goods that they thought they could sell for a profit. Producers
were interested in selling goods that they had produced.
General Store

Page 14

This division continues to this day with some shops specializing in specific
areas, reflecting their origins as outlets for producers (such as Pacific Concord
of Hong Kong), and others providing a broad mix, known as General Store
(such as Casey's in the Midwest of the U.S.A.).
Although specialist shops are still with us, over time, the general store has
increasingly taken on specialist products. Customers have found this to be more
convenient than having to visit many shops - thus the term Convenience Store
has also been applied to these shops. As the popularity of general stores has
grown, so has their size. This combined with the advent of Self-Service has lead
to the Supermarket, or Superstore.
THE EVOLUTION OF INDIAN RETAIL INDUSTRY
For Indian retailing, things started to change slowly in the 1980s, when India
first began opening its economy. Textiles sector (which companies like Bombay
Dyeing, Raymond's, S Kumar's and Grasim) was the first to see the emergence
of retail chains. Later on, Titan, maker of premium watches, successfully
created an organized retailing concept in India by establishing a series of
elegant showrooms.
For long, these remained the only organized retailers, but the latter half of the
1990s saw a fresh wave of entrants in the retailing business. This time around it
was not the manufacturer looking for an alternative sales channel. These were
pure retailers with no serious plans of getting into manufacturing. These
entrants were in various fields, like - Food World, Subhiksha and Nilgiris in
food and FMCG; Planet M and Music World in music; Crossword and
Fountainhead in books.
As of the year ending 2000 the size of the Indian organized retail industry was
estimated at around Rs. 13,000 crore. The various segments that make up the
Page 15

organized retail industry along with their size are in table given below. Retail
growth is already gathering momentum and the organized retail industry is
expected to grow by 30 per cent in the next five years and is expected to touch
Rs. 45,000 crore in 2005. Thus, the growth potential for the organized retailer is
enormous.
Market

Segment

(Rs.

Crore)

Textiles and clothings

4050

Jewellery

2,000-2,500

Consumer Durables

1500

Footwear

1,300-7,500

Food and personal care

1000

Non-Store retail

900

Luggage,

Size

watches

tyre
Books and music

and

500
390

India is witnessing an unprecedented consumption boom. The economy is

growing between 7 and 8 percent and the resulting improvement in income
dynamics along with factors like favorable demographics and growth in
inspirational consumption are the drivers. Retailing in India is currently
estimated to be US$ 200 billion, of which organized retailing (i.e. modern trade)
makes up 3 percent or US$ 6.4 billion. Organized retail is expected to grow at
Page 16

25-30 percent p.a., and is projected to attain US$ 23 billion by 2010.1 At these
levels, organized retail would constitute up to 9 percent of overall retail sales.
INDIAN RETAIL THE RIGHT ENABLERS ARE FALLING TO
PLACE
There are multiple factors driving Indian retail growth. With roughly 60 percent
of the total population below 30 years of age, favorable demographics are
expected to drive consumption across categories. The purchasing power of a
young consuming middle class has been talked of since the time of economic
liberalization in 1991. However, it is only today that we are witnessing the
spending power associated with this consumer segment. For example, 50
percent of cellular phone purchases in the past year were by the under-30 age
group2. This consumption is expected to continue due to the inspirational nature
of spending associated with this consumer segment. The AC Nielsen Online
Omnibus Survey 2005 rates India in the highest category of Aspiration Index in
Asia, along with China, Indonesia and Thailand.

Page 17

The inspirational nature of consumption is underlined by the trends witnessed in

the consumer durables sector. While the overall refrigerator segment has been
growing at 6 percent, frost-free refrigerator sales have been growing at 61
percent; similarly, while the washing machine market grew at 17 percent in
FY2005, the sales of automatic washing machines grew by 63 percent. The
positive demographics and the Indian consumer's increasing disposable income
have been highlighted by several studies. Increasing double income families in
cities is another positive factor. Salary hikes in India are also expected to
increase at a faster pace than other developing countries. All these portend a
sustained growth in discretionary spending in India.

Page 18

THE INDIAN RETAIL BAZAAR

Indian consumerism, until the early 1990s remained a point of academic
discussion due its immense potential. Similarly, access to cheaper credit and
increased disposal incomes to enjoy their aspirations for private homes, cars,
and a plethora of other consumer durables was a distant dream. This however,
has changed dramatically over the past decade. The Indian economy has
evidenced an unprecedented resurgence, with the GDP growth averaging close
to 6% per annum placing India amongst the fastest growing economies in the
world. This growth has meant an empowerment of the consumer. The transition
from a protected economy to market driven regime is apparent as suspicions
regarding competition from global players dissipate progressively. With
domestic industries gaining confidence in their abilities, competition is no
longer the deterrent that it had been.
The following key aspects manifest and characterize India's resurgence:
Indian technology industry has grown by over 30% per annum for almost 2
decades starting in early 1990s.
55th round of the National Sample Survey states that the Indian middle class
(23% of total population) accounts for about 42% of the total consumption
expenditure of the country.
These, and several other factors, have created a burgeoning middle class which
are leading to a broad based demand for life-style products and services.
The retail landscape of the country is changing at a rapid pace with malls and
multiplexes mushrooming in all major cities1. In fact, having reached a
substantial capacity at Tier-I locations, the organized retail revolution is now
percolating to Tier II and III cities2. Retail has clearly been witnessing a
transformation from neighborhood-shopping to the concept of malls and family
Page 19

entertainment centers. Entertainment and experience are becoming integral parts

of shopping.
Global industry analysts have often confirmed the country's potential as one of
the most attractive emerging retail destinations in the world. It remains to be
seen whether this promise is translated to add further depth to the Indian
economy.

Page 20

Page 21

The Methods adopted to fulfill the objective of the study that included
collecting information by using Secondary data with the help of Internet, Books,
Journals and Newspapers. I conducted the search in order to gather the
Information from different sources for relevant to my dissertation topic.
RESEARCH OBJECTIVE
The objective is to find out the:
- To analyze strategies adopted by retail giants to lure Indian customers.
- To study recent trends in Indian retail industry
- To study pivotal factors which are going to define the future of Indian retail
industry
RESEARCH DESIGN
This study is conclusive in nature. Conclusive research is of two types.
Descriptive
Experimental.
This study is of descriptive type.
Type of data:

Secondary data

Type of Research: Descriptive Study

Scope of the Study:
The outcome of this study can be utilized to understand importance of strategies
and trends in sector like retail. This study will also figure out how global retail
companies are adopting to Indian retail industry to gain competitive advantage.

Page 22

Page 23

TOP RETAILERS OF INDIA

RPG Retail :The RPG retail was the first to get into the organized retailing business in India
and expand beyond the south the only region where organized retail flourished
with retailers like Nilgiris, subhiksha, viveks etc. RPG retail was the first to
venture into different formats and categories. Food world began as a division of
spencer and co a part of the RPG retail in may 1996 and opened its first
supermarket in Chennai. RPG Guardian private limited to launch the countrys
first retail chain Health and Glow in the pharmacy and beauty care segment.
In 1997 RPG launched yet another chain called music world which by 2003
grew to nearly 170 outlets covering nine cities in India operating in three
different formats- music world destination, music world express, music world
unplugged.
With its existing stores four spencers hyper, 49 stores across spencers super
daily and spencers fresh formats and 265 music world outlets, covering about
six lakh sq feet of retail space, RPG retail is expected to register a turnover of
INR 4.5 billion next march end.
RPG retail is planning to foray into books retail with the launch of its own
bookstores Books and Beyond by oct this year. Books and Beyond will follow
the music world strategy for its expansion. The outlets are to occupy spaces
between 15000-18000 sq ft and will also include the concept of Music World
and a caf.
Pantaloon Retail India ltd :Indias leading retailer with a turnover close to INR 11 billion for the financial
year ended June 2005. Pantaloon Retail India limited has presence across
multiple segments including food, fashion, and footwear, home solutions and
Page 24

consumer electronics, books and music wellness and beauty, general

merchandise, telecom and IT entertainment and financial products and services.
The company operates multiple retail formats catering to a wide cross-section of
the Indian society. In the lifestyle retailing segment it has Pantaloons (20
department stores) Central (three seamless malls) Blue sky (fashion accessories)
and all (10stores retailing plus fashion apparel ). The companies value retailing
ventures include Big bazaar (27 hypermarkets), food bazaar (43 supermarkets),
Fashion station (two fashion stores). Other segments are healthcare and beauty
services under the brand name Star and Stara and health village, kids wear
under the brand name Gini and Jony, and Depot for books, music and gifts,
stationery, etc. The health village brand will be targeted at the lower and middle
income segment and will use fair prizes, which will be lower than current
levels, as well as its variety of products and services to attract its customers.
Headquartered in Mumbai the company operates through 3.5 million sq ft of
retail space and has over 100 stores across 25 cities in the country. Till date
PRIL has secured about 10 million sq ft of additional retail space that will be
operational by end of 2008. PRIL employs over 12000 people and has a
customer base of over 120 million Indians.
Pantaloon retail India limited is part of Future group a diversified conglomerate
with presence in multiple consumer centric businesses. The Future group
operates through six verticals. Future retail, future capital, Future Brands,
Future space, Future media.
With the massive expansion plan to increase retail space to 30 million sq ft by
FY 2010.And its foray in insurance, real estate and consumer finance the
turnover is expected to touch INR 300 billion in FY 2009-10.

Page 25

K. Raheja Corp. :The Mumbai based K Raheja corporation group which has interests in property
development, retailing and hospitality, the department store format Shoppers
stop and books & music retailer crossword, recently launched its first home
solutions store Home Shop in Bangalore. The group also launched a hyper
market format named Hypercity which is recording INR 2.28 million per hour
worth of sales on peak days.
With a national network of 19 With a national network of 19 shoppers stop in
nine cities with an average floor area of 47000 sq ft and 31 cross word stores
across 10 cities, Shoppers stop ltd ended FY 05-06 with revenues of INR 6.75
billion a 35% increase over the previous year. Profits increased by 45 percent.
Shoppers stop unlike Pantaloon and Westside were the chuck of sales are driven
by private labels, houses a large number of external brands.
Shoppers stop which has also tied up with Mother care the global brands of
infants and children, will be opening 40 Mother care outlets over the next five
years. It has already opened four mother care shop-in-shops.
Food and beverages outlets will be spread such as Caf Brio and Desi caf have
also been launched with in its stores.
The group launched hyper city retail India pvt ltd in march 2005 In obit Malls
(India)Pvt ltd, IMPL. With the objective to expand its Retail business through
supermarket, hyper market and chain stores. IMPL is in the business of setting
up and running malls. Shoppers stop ltd, which has a majority stake in Shoppers
stop and cross word, may take over Hyper city retail to emerge as a larger player
in the organized retail industry.
Each hyper city outlet will be spread over 80,000-120000 sq ft resulting in a bill
of INR 1,300-1,500 per sq ft for the company.
Page 26

The group has announced plans to establish a network of 55 hypermarkets

across India. The retailer plans to open three hypermarkets in Mumbai,
Ahmadabad, and Pune by the end of 2007. a mega retailing complex like
Hypercity, next to INorbit , mumbais largest mall, will focus the spotlight on
Malad, which is fast emerging as Mumbais answer to Gurgaon, Hyper city has
already lined up plans to hit Ahmedabad in the 5,00,000 sq ft Iscon Mega mall
on Sarkhej in Gandhinagar which is slated for completion this year.
Lifestyle International Pvt Ltd :The Dubai based Landmark group operates nine Lifestyle stores in six cities
with an average store size 46000 sq ft, the largest of them in Chennai with an
area of 75000 sq ft. The turnover the group crossed INR 3.5 billion in FY 04-05.
Lifestyle international has announced investments to the tune of INR 4 billion in
the next five years to fund its expansion in India. This includes plans to bring in
its concept stores into the country, including the Max chain of value retail
stores, Home centers Max Hypermarkets and Lifestyle centers.
The Max range of value stores, two of which is already been opened in Indore
and Ahmadabad will target the mid market segment in major metros and mini
metros. These stores covering approximately 17000 sq ft each will be located in
malls and high streets and offer clothing, footwear and accessories sourced from
India and abroad.
The company has plans for 50 max stores in the next five years.
Lifestyle international well expertise in retail chains specializing in fashion and
home furnishings, has also set up a new division for the international brands
business for two labels-Bossini and Kappa.

Page 27

Subhiksha :Subhiksha, a leading Chennai based supermarket and pharmacy discount chain,
operates on a low-cost low-capital investment model. Its large number of stores
help Subhiksha leverages the high volume of purchases and deliver discounts to
consumers. It has taken several cost cutting initiatives such as setting up small
sized functional stores with an approximate area of 1500-2000 sq ft, retail
outlets taken on a 10 year lease period, using IT for inventory control system.
Subhiksha clocked sales of INR 3.4 billion from its 145 stores across 31 metros
and semi metros of Tamilnadu last fiscal. Setting its format through a hybrid
model that entails setting up display counters for self service. The company
plans to open 600 outlets in Delhi, Maharashtra, Gujarat, Andhra Pradesh, and
Karnataka by 2007 end, with an investment of INR 3 billion with expected sales
of INR 6 billion.
THE MODERN RETAILING ACTION IS IN THE URBAN AREAS
FOR NOW
A distinctive feature of organized retailing in India is that it is largely an urban
phenomenon so far. Organized retail has been more successful in cities, more so
in the south and west of India.
The reasons for this regional variation range from differences in consumer
buying behavior to cost of real estate and taxation laws.

Page 28

More than 80

percent of our

survey

respondents

indicated

that

opportunity
in

the

the

for

largest

modern retail is

urban

centers,

specifically

metros.

While

several

respondents

agreed that from

potential

retailing perspective, all regions had significant latent demand. However, the
adverse cost equation in serving rural markets is a key issue preventing rapid
retail growth in non-urban centers.

Nonetheless, the case for Indian retailers to explore rural markets is strong.
Factoring the size of the rural population and agricultural income growth in
rural India, the rural market is definitely an opportunity for retailers with an
innovative retail proposition. A clear indicator of this potential is the share of
the rural market across most categories of consumption.

Page 29

Key challenges in tapping this potential are the fragmentation of the market,
given the geographic spread, and infrastructure issues like lack of distribution
and logistics.

RURAL RETAILING IN THE EXPERIMENTATION PHASE

India is witnessing different experiments to tap this latent potential. ITC is
experimenting with retailing through its e-Choupal and Choupal Sagar rural
hypermarkets.1 HLL is using its Project Shakti initiative leveraging women
self-help groups to explore the rural market.2 Mahamaza is leveraging
technology and network marketing concepts to act as an aggregator and serve
the rural markets.3 A common theme that emerges is the need for business
model innovation to tap rural retail potential. India may not have the winning

Page 30

rural retailing model yet but players are experimenting and this is a step in the
right direction.
Mahamaza.com reaching the rural hinterland
A business model that sells INR15 million worth of Nokia phones in one month,
3000 bicycles in three months, 28 brands across 15 industries and services
275,000 dealers. The company in question, Mahamaza, ended the year with a
turnover INR1.2 billion. The Mahamaza model is quite simple. Any person
wishing to be a dealer can sign up with Mahamaza by making a one-time
payment (around INR5,000). Then the dealer gets orders from his town or
villages and places these orders with Mahamaza. The company further
consolidates orders and gets discounts from durables and FMCG companies due
to its bulk buying. A part of this discount is passed to the dealer as his
commission. People in rural areas like Medak in Andhra Pradesh and Abhohar
in Punjab are buying cell phones and inquiring about Plasma TVs!
Emerging channels increasing traction
India is also witnessing action in different non-store retailing channels.
Hindustan Lever Limited has initiated Sangam Direct, a direct to home service.
Network marketing has been growing quite fast and has a few large players
today. Gas stations are seeing action in the form of convenience stores, ATMs,
food courts and pharmacies appearing in many outlets. Information technology
is another tool that has been used by retailers ranging from Amazon.com to
eBay to radically change buying behavior across the globe. The e-tailing
channel is slowly making its presence felt in India. Companies in India are
using either their own web portal or are tying up with horizontal players like
Rediff.com and Indiatimes.com to offer their products on the web.2 A driver for
growth of the e-tailing channel is coming from the Indian Diaspora, which is
leveraging

these

web

sites

to

send
Page 31

gifts

home

(see

box

on

LGezbuy.com).3Another model, though in its infancy, may become a significant

channel in future. The m-Cash venture supported by ICICI Bank enables
purchases through cellular phones; one of the most commonly owned consumer
products in urban India. With the increased pace of cellular network rollout in
tier-two towns and rural areas, it could only be a matter of time before cellular
phone penetration becomes significant in these areas. Cellular phones could
eventually prove to be the medium that takes innovative retailers to places
where computers and e-commerce are yet to arrive.
LGezbuy.com an interesting case in e-tailing3
Lgezbuy.com is a leading e-tailing portal launched by LG Electronics, a key
player in the consumer durables space. Although the prices offered are 5-6
percent higher than the offline channel, this channel provides assured quality,
multiple payment options and free delivery. To avoid conflict of interest, with
their offline channels, LG appointed 125 existing distributors as online
distributors, routing all sales through them.
A major proportion of users of this channel are non-resident Indians who want
to give durables as gifts. In 2004, they accounted for 70-80 percent of sales on
LGezbuy.
LG maintains an online database of the users of these channels & uses it for
promotions, etc.
The portal accounts for approximately 0.5 percent of the total sales of the
company.
The future is bright but obstacles can sour the picture:The organized retailing industry is clocking up impressive growth in India.
More than 70 percent of the retailers KPMG in India surveyed expect to grow at
rates in excess of 40 percent per annum in the next three years. Many of the
Page 32

modern retailers in India have a regional footprint today. A key trend that can be
expected in the next three years is the emergence of national chains. All the
players we met have rapid ramp-up plans. If the plans of our survey respondents
bear fruit, India should see a doubling of retail outlets and retail space in the
next three years. However, the survey respondents cited potential roadblocks
that could sour the high-growth retail picture.
Real estate costs: Many of the retailers interviewed expressed concerns about
the high cost of real estate today. On the other hand, the average purchase ticket
size in India is still low. This could lead to a situation of high fixed costs, with
low contribution per sale for retailers. High footfalls would be a necessary
condition for success. Unless real estate costs become conducive to retail
growth, many retail businesses could take a long time to break-even.
Distribution costs: Another bottleneck mentioned by respondents is the absence
of distribution networks connecting tier-two towns with regional logistics hubs.
There is scope for organized logistics players like regional transport companies/
third party logistics (3PL) players to develop these distribution networks,
including warehouses, cold chains and truck and multi-modal services
connecting these locations. Investments are being made in warehouses and hubs
by Indian corporations. Outsourced logistics service providers are also emerging
McDonalds working with Radhakrishna Foodland is a case in point.
Regulatory aspects: A point that kept emerging in various discussions with
retailers was the dated regulations in the country. For example the Weights and
Measures Act expects all goods to be available in factory packed form in stores.
Similarly the Agricultural Produce Marketing Committee (APMC) Acts
consider even small volume purchases to qualify as wholesale deals. There are
also variations among states with respect to aspects like store timings. All these
are hindrances that can restrict rapid growth of retailing in India.
Page 33

Skilled retail personnel: A key concern raised by many respondents has been the
expected shortfall of trained manpower to meet expansion plans. With
increasing competition from the ITeS industry, retail manpower shortages could
become a critical bottleneck that limits players expansion plans. Individual
players are taking proactive measures like providing on-the-job training, setting
up retail academies, etc to help ensure availability of people with the right skill
sets. However, the industry as a whole would need to step forward and put in
place measures to deal with the critical gap.

OPPORTUNITIES ARE THERE FOR THE TAKING ARE RETAILERS

PREPARED?
While there are obstacles, there are clear opportunities in modern retailing in
India. In such a scenario, preparedness of Indian retailers in terms of having
appropriate formats, scalable processes, appropriate technology and relevant
organization capability would be crucial to success. As part of this retail survey,
KPMG in India explored these aspects and the results are documented in the
subsequent sections.

RETAILING FORMATS IN INDIA

Page 34

Malls:
The largest form of organized retailing today. Located mainly in metro cities, in
proximity to urban outskirts. Ranges from 60,000 sq ft to 7, 00,000 sq ft and
above. They lend an ideal shopping experience with an amalgamation of
product, service and entertainment, all under a common roof. Examples include
Shoppers Stop, Piramyd, Pantaloon.

Specialty Stores:
Chains such as the Bangalore based Kids Kemp, the Mumbai books retailer
Crossword, RPG's Music World and the Times Group's music chain Planet M,
are focusing on specific market segments and have established themselves
strongly in their sectors.
Discount Stores:
As the name suggests, discount stores or factory outlets, offer discounts on the
MRP through selling in bulk reaching economies of scale or excess stock left
over at the season. The product category can range from a variety of perishable/
non perishable goods.
Department Stores:
Large stores ranging from 20000-50000 sq. ft, catering to a variety of consumer
needs. Further classified into localized departments such as clothing, toys,
home, groceries, etc.
Department Stores:

Page 35

Departmental Stores are expected to take over the apparel business from
exclusive brand showrooms. Among these, the biggest success is K Raheja's
Shoppers Stop, which started in Mumbai and now has more than seven large
stores (over 30,000 sq. ft) across India and even has its own in store brand for
clothes called Stop!.
Hyper marts/Supermarkets:
Large self service outlets, catering to varied shopper needs are termed as
Supermarkets. These are located in or near residential high streets. These stores
today contribute to 30% of all food & grocery organized retail sales. Super
Markets can further be classified in to mini supermarkets typically 1,000 sq ft to
2,000 sq ft and large supermarkets ranging from of 3,500 sq ft to 5,000 sq ft.
having a strong focus on food & grocery and personal sales.
Convenience Stores:
These are relatively small stores 400-2,000 sq. feet located near residential
areas. They stock a limited range of high-turnover convenience products and are
usually open for extended periods during the day, seven days a week. Prices are
slightly higher due to the convenience premium.
MBOs :
Multi Brand outlets, also known as Category Killers, offer several brands across
a single product category. These usually do well in busy market places and
Metros.
Overview
India is witnessing an unprecedented consumption boom. The economy is
growing between 7 and 9 percent and the resulting improvements in income

Page 36

dynamics along with factors like favorable demographics and spending patterns
are driving the consumption demand.
Indian Retail Industry is ranked among the ten largest retail markets in the
world. The attitudinal shift of the Indian consumer in terms of "Choice
Preference", "Value for Money" and the emergence of organised retail formats
have transformed the face of Retailing in India. The Indian retail industry is
currently estimated to be a US$ 200 billion industry and organised Retailing
comprises of 3 per cent (or) US$6.4 Billion of the retail industry. With a growth
over 20 percent per annum over the last 5 years, organised retailing is projected
to reach US$ 23 Billion by 2010.
The Indian retail industry though predominantly fragmented through the owner
-run " Mom and Pop outlets" has been witnessing the emergence of a few
medium sized Indian Retail chains, namely Pantaloon Retail, RPG Retail,
Shoppers Stop, Westside (Tata Group) and Lifestyle International.
Given the attractiveness of the Indian retail sector, foreign retailers like WalMart, Carrefour SA, Europe's largest retailer and Tesco Plc, the UK's largest
retailer, were keen to enter this growing market, despite the Indian retail sector
being closed to foreign direct investment (FDI). In February 2006, the Indian
Government had announced its decision to allow FDI of up to 51% in single
brand retailing. Wal-Mart had said that India was high on its priority and that it
was closely monitoring the Government's policy on FDI in the retail sector.
In the last few years, Indians have gone through a dramatic transformation in
lifestyle by moving from traditional spending on food, groceries and clothing to
lifestyle categories that deliver better quality and taste. Modern retailing
satisfies rising demand for such goods and services with many players entering
the bandwagon in an attempt to tap greater opportunities.

Page 37

According to the 'Global Retail Development Index (GRDI) 2006' by the

management consulting firm 'A.T. Kearney', India has retained its topmost
position in the annual study of retail investment attractiveness among 30
emerging markets.
The index is based on more than 25 macro-economic and retail-specific
variables. For instance, the country risk includes parameters like political risk,
economic performance, debt indicators, credit ratings, access bank finance and
business risk. The market attractiveness covers retail sales per capita, urban
population, laws and regulations and business efficiency. Similarly, market
saturation captures share of modern retailing, number of international retailers
etc. and time pressure has been calculated as the sum of CAGR (2000- 2005) of
the retail sales and the retail sales area weighted by the CAGR of the GDP
between 2000-05. The study quotes: "The Indian retail market is gradually but
surely opening up, while China's market becomes increasingly saturated.
Similarly, Asia has dislodged Eastern Europe as the most attractive region.
Major Formats of In-Store Retailing

Format

The Value

Description

Proposition
Complete range

Branded
Stores

Exclusive showrooms either available for a

owned or franchised out by given brand,
a manufacturer.

certified product
quality

Specialty

Focus on a specific

Greater choice to

Stores

consumer need, carry most

the consumer,

Page 38

comparison
of the brands available

between brands is
possible

Large stores having a wide

variety of products,
Department
Stores

organized into different

One stop shop

departments such as

catering to varied/

clothing, house wares,

consumer needs.

furniture, appliances, toys,

etc.

Supermarkets

Extremely large self-service

retail outlets

One stop shop

catering to varied
consumer needs

Stores offering discounts on

Discount

the retail price through

Stores

selling high volumes and

Low Prices

reaping economies of scale

Larger than a supermarket,
sometimes with a
Hyper- mart

warehouse appearance,
generally located in quieter
parts of the city

Convenience
stores

Small self-service formats

located in crowded urban
areas.

Low prices, vast

choice available
including services
such as cafeterias.
Convenient
location and
extended
operating hours.

Page 39

Shopping
Malls

An enclosure having

Variety of shops

different formats of in-store available to each

retailers, all under one roof. other.

Indian Retail- expanding the number of formats

In modern retailing, a key strategic choice is the format. Innovation in formats
can provide an edge to retailers. Organized retailers in India are trying a variety
of formats, ranging from discount stores to supermarkets to hypermarkets to
specialty chains.
Formats Adopted by Key Players in India

Retailer

Original
formats

Later Formats

Supermarke Hypermarket
RPG Retail

(Spencer's)Specialt

(Foodworld y Store (Health and

)

Glow)

Department
Piramal's

Store

Discount Store

(Piramyd

(TruMart)

Megastore)
Pantaloon Retail

Small

Supermarket (Food

format

Bazaar)

outlets

Hypermarket (Big

(Shoppe)

Bazaar) Mall

Department (Central)
Page 40

Store
(Pantaloon)
Department
Store
(shopper's
K Raheja Group

stop)
Specialty
Store

Supermarket (TBA)
Hypermarket
(TBA)

(Crossword)
Department
Tata/ Trent

Store
(Westside)
Department

Landmark Group

Store
(Lifestyle)

Hypermarket (Star
India Bazaar)

Hypermarket
(TBA)

Discount Store (Subhiksha,

Others

Margin Free, Apna Bazaar),

Supermarket (Nilgiri's), Specialty
Electronics

Indias number of Domestic grocery chains and Early Foreign Entrants

Page 41

EVOLUTION OF ORGANIZED RETAILING

American mass retailing began in the late 1800s with Montgomery Ward
marketing its products through general merchandise mail order catalogs, which
was very effective at that time for reaching a largely rural society.
In the 1940s, the population began its movement to the suburbs as the economy
shifted from an agricultural base to an industrialized nation. The first shopping
center was opened, which would eventually be a significant factor in the decline
of downtown retailing in the 1960s and 70s. J.C. Penney and Sears began their
national mass retailing expansion, and the use of credit cards as major retail
chains began.
The 1950s witnessed the reaffirmation of the traditional family. The first
planned mall and franchised food restaurant opened. As people continued to
flock to the suburbs, the downtown areas began to decline. Larger suburban
Page 42

malls were created and anchored by traditional downtown department store

merchants. Freeways were expanded and the sales of private automobiles grew,
giving the consumer a wider accessible area in which to shop. Discounters were
born, Korvetta being one of the firsts.
The 1960s witnessed the growth of enclosed shopping centers, with department
stores anchors and specialty retail chains. The baby boomers were teenagers at
this point, leading to the growth of juniors-oriented stores and vendors. Women
became targets not just as mothers or wives as they entered the workforce and
consumers became more demanding in their expectation of quality and service.
In the 1970s, promotional pricing started to pick up the department stores as offprice retailer emerged. The growth of retail space slowed, as sales increase came
at the expense of competition, not of market growth. This competitive market
led to the under performance of several retailers as gross margins experienced
downtown pressure from increased competition. Retailers in large upscale
markets recognized the time shortage created by dual-career families and began
to offer more services to assist in saving time.
The 1980s witnessed the growth of off price retailing as a distinct, enduring
retail format. Retailers began to drop low profit lines. Acquisitions and mergers
were actively utilized as growth strategies, private brands were redeveloped to
enhance uniqueness and margins and offshore sourcing was developed to
compensate for margins.
Organized Retail - Some Myths Realities and Thoughts: It is the new El Doradothe veritable gold rush.the whos
who of India corporate titans are announcing entry plans virtually every
daythe debate on FDI or not to FDI has almost become a national
pastimeMedia is spewing stories and articles with astonishing
Page 43

frequency..Pundits of all manner and kind are essaying predictions and

projections which vary so widely and cover almost every conceivable scenario
that ultimately someone is going to be right and very famousRetail
is truly the hottest new game in town; it is one of Indias oldest and largest
sectors; and arguably one with the most impact on its population after
agriculture; already accounting for close to 38% of Indias GDP and the largest
employer after agriculture. And yet it is easily one of the least evolved of all
industry, if it can be considered an industry at all. Fifty years of restricting the
consumer goods industry, a national mindset which favored denial over
consumption, a fractured and archaic supply chain for agricultural products and
punishing taxation levels have all contributed to prevent the development of
modern formats based on scale, choice and consumer preference.
Many or most of the 12 mn odd retail outlets are largely operating at subsistence
level, providing basic sustenance to their operators/owners who essentially
survive because of a cost structure where both labor and land are largely free,
and government taxes nil. It is only now, that it is beginning to evolve in line
with trends and transformations that have taken place in most other developed
parts of the World. I have little or no doubt that like in many other
industries/sectors, organized or modern (for some reason as it is also called)
retail will accelerate rapidly and leapfrog phases and formats to quickly catch
up with the rest of the World and as it does, I do believe a lot of the myths
surrounding organized retail will be dispelled here.
Organized Retail means Big Stores;
A common myth..nothing can be further then the truth. In its very essence,
organized retailing is about aggregating value and what shape, size and
configuration your customer facing entity takes is largely a function of your
offer and proposition. You can have a 100,000 sq.ft. Store selling virtually
everything under the sun, and it may not qualify to be termed as organized
retailing and conversely an 800 sq.ft. Store selling the finest assortment of say
Page 44

apples in the city and giving the apple buying customer the best choice,
range, price and experience can easily qualify as an outstanding example of
modern retailing.
Like many other things in life, size in retail does not matter..unless you
want it to.
Less is More;
The common thought is that the more you keep, the more you will sell. Very
true. However it is the more relevant products you keep that holds true. Careful
assortment planning and ranging even if it means lesser varieties, lower width
and depth, if done smartly can actually help both the sales and profitability of a
category grow exponentially. The temptation will be to be everything to
everybody..but that both in Retail and real life it is simply not
possibleUnless of course, you are the indominatable and one and only
Lalu Prasad Yadav, who is now the darling of both the Wharton/Harvard
educated crowd on one hand, and the trusting millions in the villages of Bihar
on the other. Or is it for the teeming millions who thought that
every time the EVM beeps, it is a vote for Lalu and all will be well with the alu
in their samosas..not true.
Small guy will got killed;
The hottest debate in town. Unfortunately the nos. do not support it. At roughly
US$ 300+ bn and growing at at least 8% a year there is an incremental market
of US$ 25+ bn being created every year. Even the most optimistic of pundits
estimate Organized retail industry size to be around US$60/US$75 bn in the
next 5 years. The cumulative market growth in that period will be at least US$
125 bn. Organised retail will/could take or even be responsible for a large part
of that growth but even then a significant part of India will still shop at our
traditional outlets. Unlike the fable,. in modern India, both the Davids and
Goliaths will co-exist peacefullyfor a long long time to come.
Page 45

It is the Supply Chain.?!

It has been made fashionable by some doyens to claim that Indias supply chain
is the most efficient and cost effective in the World. The stark reality is that it is
the single biggest drag on this wonderful country of ours. Organized retail in
its fully blown avatar and size will necessarily entail huge investments in
modernizing Indias supply chain with enormous positive knock on effect both
for the economy as a whole and the Indian farmer in particular. It is often well
said India is not poor country; it is a rich country with a lot of poor people. A
modern efficient supply chain will go a long way in removing or substantially
reducing that reality.
So..its the priceis it?
A common myth and indeed fear is that all modern retail formats will compete
on price. While it is true that organised retail tends to have a dampening effect
on prices in general, price is only one of the elements of the value
proposition The hard reality is that there can be only one player playing
the price game. All others will have to compete on something else as the
primary element of the value proposition. One cannot wake up one day and
say I am going to match the lowest price being offered in the Market It is the
delivery model that has to be evaluated, the backend and how one wants the
customer experience to be. Your proposition must reflect consistently in your
structure .otherwise the only price game many will be playing, is negotiating
the sell off price to someone who has remained consistent to his value offering
and position.
And finally to conclude, as someone who has been with the industry for some
time now, the overwhelming reality is that India needs an Organised retail
industry, just as Organised retail industry needs India. I believe a well
capitalized and developed retail sector in India with a modern supply chain, will
do for the rural youth and the urban poor what I.T. did for the educated, young
urban Indian in the last 10 years. It can and will create considerable national
Page 46

wealth, more importantly of a kind and equity which our wonderful country so
desperately needs..and that is not a myth.
The growth of the Indian economy is now manifesting itself in the growing
purchasing power of its citizens. The demand for a variety of goods, both
consumables and durables, is expectedly growing significantly. Easier
availability of goods, consequent to lowering of import duties and liberalization
of trade regulations has also added to the appetite for purchases. A ten to twelve
per cent increase in the economys disposable income and a much higher one in
urban areas is also reflecting itself in the way goods and services are bought and
sold.
Modern retailing or organized retailing, in contrast to the traditional small &
stand-alone stores which dominate the Indian market, is growing today by over
25% annually. There are clear indications that this growth rate would be there
for several years to come, as the Indian middle-class continues to grow by 20 to
25 million annually. Though households falling in this category may not be
wealthy or rich, they constitute Indias aspiring class and given their
characteristics and age profile, bring considerable incomes to the market place.
It is a known phenomenon that the young tend to have a high propensity to
consume and do not save for the rainy day. Popularization of plastic money, i.e.
credit, debit & other basic cards and easier availability of credit, for durables as
well as many consumer goods, has added to the retail boom of the country. It is
this class, which is going to be propelling the Indian retail transformation for
some time to come.
There would be a real revolution in the Indian retail industry, if the changes
being witnessed in the metropolitan and other tier-one towns percolate to all the
784 urban settlements, with populations above 50,000 persons. This is likely to
happen as the real estate prices in the large metropolitan towns are increasingly
becoming prohibitive and consequently giving distinct advantage to those who
Page 47

are already in the business of retailing, viz., the traditional mom & pop stores.
Rural and semi-urban incomes are also expectedly to grow much faster in
future, once the agriculture growth rate pushes up. Our civic laws concerning
construction and property development also need to be re-looked, as the earlier
convenience-stores get replaced by shopping malls and other formats of
organized retail trade.
With the entry of many large Indian players into the retail trade, things are
certainly hotting-up and the consumer can look forward to having a much wider
choice and greater ease in shopping. The need, however, is to have a higher
degree of competition amongst the organized retailers so that the customer can
get value for his money and be the sovereign. This is, however, not to
undermine the role which the large players are likely to play in improved
logistics and bringing in state-of-the-art technology, both in their front-end as
well as the back-end operations which support the modern retail chain. The
positive effects on agriculture, particularly in post-harvest operations including
developing of cold chains are also being anticipated, with the entry of many
large players into organized retailing. As is widely known, less than one percent
of food & grocery retail in India is organized and herein lies the greatest
challenge for modern retail.
It appears that the Indian format of retailing is going to retain its own touch,
with numerous small retailers and other traders being located in the city centers
and the large organized retailers coming up in the suburbs of the metropolitan
cities. This way, benefits of both could be available to consumers, who would
have the choice of stocking up for a week or two by going to the suburbs, but at
the same time depending upon the next door shop for the daily household needs
of fresh fruits, vegetables and other knick-knacks. This might well be the happy
balance, which is being sought in our country.
THE GROWTH DRIVERS
Page 48

The Indian Retail growth can be attributed to the several factors including
Demography Dynamics:
Approximately 60 per cent of Indian population below 30 years of age.
Double Incomes:
Increasing instances of Double Incomes in most families coupled with the rise
in spending power.
Plastic Revolution:
Increasing use of credit cards for categories relating to Apparel, Consumer
Durable Goods, Food and Grocery etc.
Urbanization:
Increased urbanization has led to higher customer density areas thus enabling
retailers to use lesser number of stores to target the same number of customers.
Aggregation of demand that occurs due to urbanization helps a retailer in
reaping the economies of scale.
Covering distances has become easier: with increased automobile penetration
and an overall improvement in the transportation infrastructure, covering
distances has become easier than before. Now a customer can travel miles to
reach a particular shop, if he or she sees value in shopping from a particular
location.
TRADITIONALLY THREE FACTORS HAVE PLAGUED THE RETAIL
INDUSTRY
Unorganized:
Vast majority of the twelve million stores are small "father and son" outlets

Page 49

Fragmented:
Mostly small individually owned businesses, average size of outlet equals 50
s.q. ft. Though India has the highest number of retail outlets per capita in the
world, the retail space per capita at 2 s.q. ft per person is amongst the lowest.
Rural bias:
Nearly two thirds of the stores are located in rural areas. Rural retail industry
has typically two forms: "Haats" and Melas". Haats are the weekly markets:
serve groups of 10-50 villages and sell day-to-day necessities. Melas are larger
in size and more sophisticated in terms of the goods sold (like TVs).

TECHNOLOGY IN RETAILINDUSTRY
Over the years as the consumer demand increased and the retailers geared up to
meet this increase, technology evolved rapidly to support this growth. The
hardware and software tools that have now become almost essential for retailing
can be into 3 broad categories.
Customer Interfacing Systems
Bar Coding and Scanners
Point of sale systems use scanners and bar coding to identify an item, use prestored data to calculate the cost and generate the total bill for a client. Tunnel
Scanning is a new concept where the consumer pushes the full shopping cart
through an electronic gate to the point of sale. In a matter of seconds, the items
in the cart are hit with laser beams and scanned. All that the consumer has to do
is to pay for the goods.

Page 50

Payment
Payment through credit cards has become quite widespread and this enables a
fast and easy payment process. Electronic cheque conversion, a recent
development in this area, processes a cheque electronically by transmitting
transaction information to the retailer and consumer's bank. Rather than
manually process a cheque, the retailer voids it and hands it back to the
consumer along with a receipt, having digitally captured and stored the image of
the cheque, which makes the process very fast.
Internet
Internet is also rapidly evolving as a customer interface, removing the need of a
consumer physically visiting the store.

Operation support systems

ERP System
Various ERP vendors have developed retail-specific systems which help in
integrating all the functions from warehousing to distribution, front and back
office store systems and merchandising. An integrated supply chain helps the
retailer in maintaining his stocks, getting his supplies on time, preventing stockouts and thus reducing his costs, while servicing the customer better.
CRM Systems
The rise of loyalty programs, mail order and the Internet has provided retailers
with real access to consumer data. Data warehousing & mining technologies
offers retailers the tools they need to make sense of their consumer data and
apply it to business. This, along with the various available CRM (Customer
Relationship Management) Systems, allows the retailers to study the purchase
Page 51

behavior of consumers in detail and grow the value of individual consumers to

their businesses.
Advanced Planning and Scheduling Systems
APS systems can provide improved control across the supply chain, all the way
from raw material suppliers right through to the retail shelf. These APS
packages complement existing (but often limited) ERP packages. They enable
consolidation of activities such as long term budgeting, monthly forecasting,
weekly factory scheduling and daily distribution scheduling into one overall
planning process using a single set of data.
Leading manufacturers, distributors and retailers and considering APS packages
such as those from i2, Manugistics, Bann, MerciaLincs and Stirling-Douglas.

Strategic decision support systems

Store Site Location
Demographics and buying patterns of residents of an area can be used to
compare various possible sites for opening new stores. Today, software
packages are helping retailers not only in their location decisions but in
decisions regarding store sizing and floor-spaces as well.
Visual Merchandising
The decision on how to place & stack items in a store is no more taken on the
gut feel of the store manager. A larger number of visual merchandising tools are
available to him to evaluate the impact of his stacking options. The
SPACEMAN Store Suit from AC Neilsen and ModaCAD are example of
products helping in modeling a retail store design.
INVESTMENT OPPORTUNITIES
Page 52

Potential for Investment:

The total estimated Investment Opportunity in the retail sector is around US$ 56 Billion in the Next five years.
Location:
with modern retail formats having made their foray into the top cities namely
Hyderabad, Coimbatore, Ahmedabad, Mumbai, Pune, Chennai, Bangalore,
Delhi, Nagpur there exists tremendous potential in two tier towns over the next
5 years.
Sectors with High Growth Potential:
Certain segments that promise a high growth are
Food and Grocery (91 per cent)
Clothing (55 per cent)
Furniture and Fixtures (27 per cent)
Pharmacy (27 per cent)
Durables, Footwear & Leather, Watch & Jewellery (18 per cent).
Fastest Growing Formats: Some of the formats that offer good growth potential
are:
Speciality and Super Market (45 per cent)
Hyper Market (36 per cent)
Discount stores (27 per cent)
Department Stores (18 per cent)
Convenience Stores and E-Retailing (9 per cent)
Page 53

SUPPLY CHAIN INFRASTRUCTURE:

Supply chain infrastructure in terms of cold chain and Logistics.

Rural Retail:
Retail sector offers opportunities for exploration and investment in rural areas,
with Corporates and Entrepreneurs having made a foray in the past. India's
largely rural population has caught the eye of retailers looking for new areas of
growth. ITC launched the country's first rural mall ' Chaupal Sagar', offering a
diverse product range from FMCG to electronics appliance to automobiles,
attempting to provide farmers a one-stop destination for all of their needs. There
has been yet another initiative by the DCM Sriram Group called the ' Hariyali
Bazaar', that has initially started off by providing farm related inputs and
services but plans to introduce the complete shopping basket in due course.
Other corporate bodies include Escorts and Tata Chemicals (with Tata Kisan
Sansar) setting up agri-stores to provide products/services targeted at the farmer
in order to tap the vast rural market.
Wholesale Trading:
Page 54

Wholesale trading also holds huge potential for growth. German giant Metro
AG and South African Shoprite Holdings have already made headway in this
segment by setting up stores selling merchandise on a wholesale basis in
Bangalore and Mumbai respectively. These new-format cash-and-carry stores
attract large volumes from a sizeable number of retailers who do not have to
maintain relationships with multiple suppliers for all their needs.
FEW FACTS
Even though India has well over 5 million retail outlets of all sizes and
styles (or non-styles), the country sorely lacks anything that can resemble
a retailing industry in the modern sense of the term. This presents
international retailing specialists with a great opportunity.
It was only in the year 2000 a figure to it: Rs. 400,000 crores (1 crore =
10 million) which will increase to Rs. 800,000 crores by the year 2005
an annual increase of 20 per cent.
Retailing in India is thoroughly unorganized. There is no supply chain
management perspective. According to a survey, an overwhelming
proportion of the Rs. 400,000 crores retail marketsare UNORGANISED.
In fact, only a Rs. 20,000 crores segment of the market is organized.
As much as 96 per cent of the 5 million-plus outlets are smaller than 500
square feet in area. This means that India per capita retailing space is
about 2 square feet (compared to 16 square feet in the United States).
India's per capita retailing space is thus the lowest in the world.
Just over 8 per cent of India's population is engaged in retailing
(compared to 20 per cent in the United States). There is no data on this
sector's contribution to the GDP.
From a size of only Rs.20,000 crores, the ORGANISED retail industry
will grow to Rs. 160,000 crore by 2005. The TOTAL retail market,
Page 55

however, as indicated above will grow 20 per cent annually from Rs.
400,000 crores in 2000 to Rs. 800,000 crores by 2005.
Given the size, and the geographical, cultural and socio-economic
diversity of India, there is no role model for Indian suppliers and retailers
to adapt or expand in the Indian context.
The first challenge facing the organized retail industry in India is:
competition from the unorganized sector. Traditional retailing has
established in India for some centuries. It is a low cost structure, mostly
owner-operated, has negligible real estate and labor costs and little or no
taxes to pay. Consumer familiarity that runs from generation to
generation is one big advantage for the traditional retailing sector.

In contrast, players in the organized sector have big expenses to meet, and
yet have to keep prices low enough to be able to compete with the
traditional sector. High costs for the organized sector arises from: higher
labor costs, social security to employees, high quality real estate, much
bigger premises, comfort facilities such as air-conditioning, back-up
power supply, taxes etc. Organized retailing also has to cope with the
middle class psychology that the bigger and brighter a sale outlet is, the
more expensive it will be.
The above should not be seen as a gloomy foreboding from global retail
operators. International retail majors such as Benetton, Dairy Farm and
Levis have already entered the market. Lifestyles in India are changing
and the concept of "value for money" is picking up.
India's first true shopping mall complete with food courts, recreation
facilities and large car parking space was inaugurated as lately as in
1999 in Mumbai. (This mall is called "Crossroads").
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 Local companies and local-foreign joint ventures are expected to more

advantageously position than the purely foreign ones in the fledgling
organized India's retailing industry.
These

drawbacks

present

opportunity

to

international

and/or

professionally managed Indian corporations to pioneer a modern retailing

industry in India and benefit from it.
The prospects are very encouraging. The first steps towards sophisticated
retailing are being taken, and "Crossroads" is the best example of this
awakening. More such malls have been planned in the other big cities of
India.
An FDI Confidence Index survey, retail industry is one of the most
attractive sectors for FDI (foreign direct investment) in India and foreign
retail chains would make an impact circa 2007.

FDI IN INDIAN RETAILING

FDI policy in retail
The government of India recently permitted Foreign Direct Investment up to
51% for retail trade in Single Brand. FDI would be allowed with prior
approval of the government. This decision is subject to the following
conditions:
Products to be sold should be of a 'Single Brand' only.
Products should be sold under the same brand internationally.
'Single Brand' product-retailing would cover only products which are
branded during manufacturing.
100% FDI is already permitted in cash and carry wholesale trading. The
Government is of the opinion that permitting FDI in high-end retail or branded
and luxury goods would not displace Momand- Pop stores since these cater to
Page 57

a completely different segment of the market. The below mentioned points

would give fresh impetus to this sector.
The Government is reviewing the laws and regulations applicable to the
industry in order to ensure that there are no legal roadblocks in the growth of
the industry. Further to allay the apprehensions expressed by several sectors
about the growth of local retail, there have been assurances that the policy
would provide a mechanism to ensure that unfair competition would be avoided
for small retailers.

The Strategies: -The entry strategies used by existing retailers are:

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Challenges & Answers

The most important issue facing the Indian retail industry is that it has not been
recognized as an industry by the government. The main implications of this are:
Absence of a single nodal agency:
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Retail does not fall under the purview of any specified government ministry.
Operational Hurdles:
The industry players often need to comply with several requirements of
government agencies.
Dearth of established funding norms:
Small operators often access private money markets at substantially higher
rates. Even established developers need to access funds via tenuous process and
routes from financial institutions.
Most of the entry models described above poses problems like information
leakage, brand image concerns, non-adherence to standards etc.
Thus, international retailers like Wal-Mart, Carrefour, et al continue to await the
final approval to FDI in the sector to enter the Indian market on their own.
A SUMMARY ON FDI
Metro Group of Germany
o Cash-and-carry wholesale trading
o Proposal faced strong opposition
Entities established prior to 1997
o Allowed to continue with their existing foreign equity components.
o No FDI restrictions in the retail sector pre-1997
o Food world

51:49 JV between RPG and Dairy Farm International,

Leading food retailer in India now

o Mc Donalds

Benefits of FDI
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 Improve competition
Develop the market
Greater level of exports due to increased sourcing by major players
o Sourcing by Wal-Mart from China improved multifold after FDI
permitted in China
o Similar increase in sourcing observed for Metro in India
o Provides access to global markets for Indian producers
Investment in technology
o Cold storage chains solve the perennial problem of wastage
o Greater investment in the food processing sector technology
o Better operations in production cycle and distribution
Better lifestyle
o Greater level of wages paid by international players usually
o More product variety
o Newer product categories
o Economies of scale to help lower consumer price
o Increased purchasing capacity of consumers
Manpower and skill development
o Through retail training and
o Greater managerial talent inflow from other countries
Tourism Development
o A strong retailing sector boosts tourism as seen from the
experience of Singapore and Dubai
Investment in whole supply chain
o Improved product basket from India for exports
Long term benefits
o Up-gradation of agriculture
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o Development of efficient small and medium size industries

Benefits to the government

Greater Per
Capita Income

Greater Consumer
Spending due to
economic boom
GDP Growth

Employ Benefits Greater

ment
to Govt. Exports
Increasing
Tax Paying
Population

Increased Tax
Revenues

Greater
Sourcing
From India

Reduced Tax
Evasion

Increase employment levels

o FDI would result in market growth and expansion
o Employment generated at various levels

Increased

consumer

demand

implies

employment

generation across the value chain

o Does not need very high skill sets
Needs high school graduates and other similar skill levels

Currently this is a majorly unemployed demographic group

o Boom in employment

Similar to job generation in ITES industry

On a much larger scale

But new jobs comparatively lower down the value chain.

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RETAIL TRENDS
LONGING FOR LEISURE: More Money, Less Time
Materialism, though still in full swing, is losing its momentum. As Americans
spend more and more time working, theyre spending less time living. The
acquisition of status symbols, a bulging portfolio and all the personal perfection
that money can buy has become a treadmill that many are jumping off because
there is no time to enjoy those things and they are exhausted.
Counter Trend: Enjoying the Time of My Life
The desire to work harder to acquire more to enjoy is giving way to the desire to
work less to reclaim the time that is our lives. Working harder forever is being
replaced by a new mantra enjoying the time of my life.
MORPHING CULTURE: Forming New Family
Singles outnumber couples; legislators and courts are redefining "marriage;
oldsters are living together; long-married are getting divorced; legal living
contracts are in the offing; serial monogamy is one by-product of longevity;
older children living at home; more single mothers; acceptance of family
planning via adoption, science or surrogates; friends are like family or
preferred over family. A revolution is in full swing via a cultural splintering that
erases lines and should. The desire for home continues, but what home is
may change many times for individuals during their lives. Watch for a rapid
evolution in the way families take shape and new communities take root and
thrive, possibly resulting in dramatic effects on social, political, medical, and
economic infrastructures.
Counter Trend: Till Death Do Us Part

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Adherence to previously sanctioned life partnerships and lifestyles. Traditional

marriage vows, covenant marriages, abstinence until marriage, courtship,
renewal of wedding vows, focus on family activities, values, reunions.
Depending upon the satisfaction and success of a morphing culture, traditional
marriage/family views could lead to polarization.
INCREASING OPTIMISM: Life is Good
Upswing in volunteerism, grassroots groups; nations realizing significance of
collaboration; agencies working together; neighborhood improvement groups
taking back the streets; euphoria at routing out the bad guys in business;
belief that the good guys will win the war (i.e. America is the greatest country
on earth encompassing beliefs that things are getting better.) Look for this
renewed sense of optimism to translate into choices impacting lifestyle as well,
including automotive and product design, interiors and fashion. Look for an
upbeat approach to color and lively new color combinations.
Counter Trend: Deepening Cynicism
Who do you trust no one! Watch for upswing in national and global
skepticism. Whom can we trust? Or do we trust? Fallout from ongoing
corporate scandals recently exposed, a broken medical system (that both
providers and patients see as flawed and that politicians campaign on), growing
disparity between rich and poor, a tenuous global economy and the
understanding that safety and peace are not a given could result in people
becoming even more cynical. If everything is going to hell in a hand basket,
life becomes futile. Watch for a flattening of spirit, as people become less
enthusiastic and only mildly engaged in the world around them.

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TREND: Principles to Cement Customer Trust

Have you ever second-guessed yourself, on purpose? Imagine all of us have
from time to time. Sometimes it is about a decision we have made or those we
fail to make. Frequently, in our minds, we hold ourselves accountable. There are
times, I am sure, that every single one of us has said, "If I only had it to do all
over again", I would have done such and such differently.
But life does not allow us that option. I believe that everything happens for a
reason to allow us to grow and become the person we are to be, with our faults
and assets, failures as well as accomplishments. We are here "on purpose!"
My purpose in my business is to encourage organizations and people to find
a way to trust again. "Trust is probably the most basic human value," says Fred
Rogers,
Nothing is harder to regain, than lost trust.
I believe people do business with people they trust. I believe people do business
with people who are knowledgeable, efficient and will deliver what they
promise.
As the holiday season approaches, I am already hearing retailers questioning
what type of season it will be. The downfall of large corporations looms large
and the stock market is the fastest roller coaster ride I have ever seen. And even
Martha Stewart is starting to look a little tarnished. So the question is who the
consumer will plan to spend their carefully allocated holiday dollars with this
year.
I believe it will be with those businesses that have earned the customers trust.
How did those companies develop and cement that trust? They promised and
delivered the following principles of building and maintaining trust.
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T - Truth
Trust and solid relationships are built on telling the truth. Companies must
maintain this principle both with internal and external customers. It is
imperative that this value is represented in everything a company does. We have
seen how the lack of solid ethics can crumble even the largest of companies.
R - Responsibility
Trust is built when everyone within an organization realizes what their
responsibilities are and that they are held accountable for them. Choose to
schedule reviews quarterly for every member of the company to make sure they
are aware of their responsibilities. Take ownership of mistakes and be diligent to
find ways to make corrections.
U - Unselfishness
Trust is built when employees give of their time and talent in the workplace and
do it, unselfishly. Customers appreciate the employee who goes out of their way
to satisfy the customer. Customers don't appreciate hearing how badly the
employee wants to go home, or how they didn't get a break, or how awful their
schedule is.
S - Security
Trust is built on a feeling of security. Good lighting in the parking lot and store
entrance, fitting rooms with doors that lock, employees that handle ringing up a
sale with accuracy, and alarm systems that are visible are all ways to make the
customer feel safe in your place of business. Employees want to feel a sense of
job security and that they are appreciated for the job they do.
T - Teamwork
Trust is built when everyone within the organization feels a sense of ownership.
How well do your employees work together? Are they willing to go out of their
Page 66

way to help each other out? Do the managers roll up their sleeves to help when
the workload is overwhelming? Is there a reward system in place that
encourages employees to want to excel? Most importantly, are there
cheerleaders within the organization to keep the momentum going when times
are tough?
We are at a time when gaining a customers' trust is critical. It is a daily process,
on purpose. It is a time to maximize potential, ethically and to deal with conflict
and problems, with credibility.
It is a time not to look back but look forward. It is a time not to say, "if only",
but to daily say, "I am proud of what we did". And we achieved it, on purpose!
Recent changes:
Experimentation with formats:
Retailing in India is still evolving and the sector is witnessing a series of
experiments across the country with new formats being tested out. Ex. Quasimall, sub-urban discount stores, Cash and carry etc.
Store design:
Biggest challenge for organized retailing to create a customer-pull
environment that increases the amount of impulse shopping. Research shows
that the chances of senses dictating sales are upto 10-15%. Retail chains like
Music World, Baristas, Pyramid and Glob us are laying major emphasis &
investing heavily in store design.
Emergence of discount stores:
They are expected to spearhead the organized retailing revolution. Stores trying
to emulate the model of Wal-Mart. Ex. Big Bazaar, Bombay Bazaar, RPGs.
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Unorganized retailing is getting organized:

To meet the challenges of organized retailing such as large cineplexes, and
malls, which are backed by the corporate house such as 'Ansals' and 'PVR the
unorganized sector is getting organized. 25 stores in Delhi under the banner of
Provision mart are joining hands to combine monthly buying. Bombay Bazaar
and Efoodmart formed which are aggregations of Kiranas.
A SUMMARY
Multiple drivers leading to a consumption boom:
Growth in income
Favorable demographics
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.
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
ITC is experimenting with retailing through its e-Choupal and
Choupal Sagar rural hypermarkets.
HLL is using its Project Shakti initiative leveraging women selfhelp groups to explore the rural market.
Mahamaza is leveraging technology and network marketing
concepts to act as an aggregator and serve the rural markets.

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 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-tailing slowly making its presence felt.

Companies using their own web portal or tie-sups with horizontal players
like Rediff.com and Indiatimes.com to offer products on the web.

RETAIL STRATEGY
The retail landscape is a rapidly changing one. New entrants, new retail formats,
globalization, e-commerce and rise of consumerism have had a deep impact on
retailers. The retailer needs to find new and innovative ways to differentiate his

Page 69

offering to the target customers. The need for strategy formulation is more
pressing than ever before.
The process of strategy formulation in retail is the same as that for any other
industry. It starts with the retailer defining or stating the mission for the
organization. The mission is at the core of the existence of the retailer. The other
aspects of the strategy may change over a period of time or may vary for
different markets.
After defining the mission of the organization, an analysis of the internal
strengths and weaknesses and external threats and opportunities is then
undertaken to help the management decide on the best way to carry out the
organizations mission. The options which can be pursued are then examined.
Next, the management identifies the major strategic alternatives it could pursue.
Markets in which the retail organization chooses to compete are then
determined. Once this is determined, then the objectives. To be achieved are
determined, the resources are obtained and allocated to help achieve the
objectives. The strategy must then be implemented. Finally, results must be
measured and evaluated to ensure that the strategy is working and any changes
necessary must be effected.

STEP 1: ESTABLISH MISSION

It describes what the retailer wishes to accomplish in the markets in which it
chooses to compete. A retailers mission statement would normally highlight the
following elements:
Page 70

 The products and services that will be offered.

The customers who will be served.
The geographic areas that the organization chooses to operate in.
The manner in which the firm intends to compete in its chosen markets.
STEP 2: ANALYZE SITUATION
Once the mission has been defined, the retail organization needs to look inwards
and understand what its strengths and weaknesses are and at the same time, look
outwards and analyze the opportunities and threats, which may arise in the
environment. For this experts use SWOT analysis, BCG matrix and PEST
analysis.
Establish

Analyze Situation

Identify Options

Set Objectives

Obtain & Allocate Resources

Develop Implementation Plan

Monitor Progress & Control

STEP 3: IDENTIFY
ALTERNATIVES
For tapping a particular market the retailer needs to consider the various
alternatives available to him.
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STEP 4: SET OBJECTIVES

The objectives are a translation of the mission statement into operational terms.
The management normally sets both long-term and short term objectives. Two
areas, which are important for retailers, are market performance and financial
performance. Examples include:
Sales Volume Targets
Market Share Targets
Retail Expansion Targets
Profitability Targets
Liquidity Targets
Returns on Investment Targets

STEP 5: OBTAIN AND ALLOCATE THE RESOURCES

The resources that a retailer needs are human as well as financial. Financial
resources take care of the monetary aspects of the business, like shop rent,
Page 72

salaries and payments for merchandise. Human resources are just as vital to the
success of a retail operation as are financial resources and physical facilities.

STEP 6: DEVELOP THE STRATEGIC PLAN

At this stage, the retailer determines the strategy by which he will achieve the
objectives set forth. The target market is defined and the retail mix that will
serve the audience is finalized.

STEP 7: IMPLEMENTATION OF STRATEGY

The key to the success of any strategy lies in its implementation. To implement
a firms desired positioning effectively, every aspect of the store must be
focused on the target market. Merchandizing must be single-minded; displays
must appeal to the target market; advertising must talk to it; personal must have
empathy for it; and customer services must be designed with the target customer
in mind.
THE STRATEGIES
The distribution
Modern trade operates to a completely different set of rules. Given its superior
bargaining power, it can negotiate better margins, wider product ranges and
more frequent, speedier deliveries.
For manufacturers, then, it makes sense to have a separate team servicing these
outlets, working full-time to ensure both parties profit equally from the
transactions.

Page 73

One way of doing that is by persuading retailers to route their purchases through
suppliers' existing distribution networks. That's because for the supplier, selling
directly to the retailer works only if the order size is large enough.
To their credit, most large retailers are willing to accept such an arrangement.
Their only condition: orders must be filled on time. Modern stores maintain
lower inventories than traditional retail - nine days for Hypercity and less than
two weeks for Food Bazaar, compared to over three weeks for most kiranas and losses due to a stock out are far more significant, for both the manufacturer
and the retailer.
Retail analysts say on-time order replenishments will become even more critical
once the Wal-Mart/ Bharti combine begins operations - the American retailer
works almost entirely on cross-docking and is likely to demand higher service
levels, including potential levies for delays in shipment.
Meanwhile, manufacturers have to also keep their traditional distributors
satisfied - a tough task, considering they offer modern trade more concessions
and better promotions than their general trade partners.
Hindustan Lever is working around that by involving family grocers, chemists
and wholesalers in custom-made programmes that offer them targeted
promotions, value deals and also build relationships through training sessions,
newsletters and meetings. "General trade will continue to be the focus of all
FMCG companies that want to grow.
For its part, Cadbury India has changed the rules for all its customers (retailers).
It has created a menu-based approach - issues covered include prompt payment,
efficiency and business building initiatives - that is common to all retailers, big
and small.

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A couple of years ago, it also started the Purple Star programme for traditional
retailers, where it tailors promotions and schemes for selected stores. "There is
no differential treatment between retailers.
Jo dikhta hai, woh bikta hai
The earlier approach to marketing was simple enough: make sure the product is
visible - on store shelves and through mass media advertising - and it will more
or less sell itself. With the evolution of modern retail, though, the emphasis is
shifting to in-store displays and promotions - probably also because for the first
time, the space for such initiatives is available.
But manufacturers no longer have the last word on what will happen at the
store. Modern trade has a significant say in promotions, perhaps because it
offers far superior results with a much faster lead time.
Cadbury India's retailers are more open to brand promotions and displays including posters, gondolas and danglers - when manufacturers back up their
ideas with shopper insights. There will be a shift from traditional media to
increased communication at the point of purchase.
Initiatives that help grow the category as a whole are particularly welcome, say
analysts, since that boosts the retailers' revenue. And many FMCG companies
are predicting that spends on promotion, in-store and point of purchase displays
will increase significantly from the present 20-30 per cent share of the
marketing budget.
Consumer goods companies need to make several changes - in strategy and in
attitude - if they are to achieve the same level of success with organised retail as
they have with traditional formats. Printing barcodes on their products would
probably be a good place to start.
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Different strategies followed by different Retailers:Reliance:The much awaited entry of Reliance Industries into retail has finally happenedwith the opening of the first set of its pilot reliance fresh stores ,11 in
Hyderabad and 5 in Delhi-NCR region. This is the first step in their attempt to
build strong relation with millions of farmers and transform their relationship
with consumers.
Strategies:-

Providing fresh vegetables and fruits in very competitive price.

The main strategy that has been followed by Reliance is to open Reliance
fresh outlets within a radius of three to four Kms. In order to serve larger
section of the population.

Aggressive pricing is one of the major strategies followed by Reliance in

order to compete effectively against traditional mom-n-pop outfits.

Reliance retail is planning to provide parking space with car servicing

facility in the mall itself.
Shoppers stop: The main strategy that the shoppers stop is been following is that to gain
customer Delight is that they are offering Citizen card to the customers
who purchases above Rs 1000 and the points are been added to that card
which can be reimbursed in the further purchases.
All in one roof experience with hassle free experience.
The TATA Group: The TATA group with interest in various consumer product categories
has different companies to retail its brands. While in automobiles it

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operates through its distributor and dealer network, fashion and

lifestyle, it operates
Through its retail arm TRENT which operates 23 WESTSIDE store in
14 cities. With its positioning being lifestyle apparel and home
products.
Its strategy lies in differentiation means different companies for
different brands.
For lifestyle apparel it has opened Westside to provide the service.
For consumer durables it has opened and its been operating by the
name CROMA. It strategy is to provide all the consumer durable
brands in the same roof at the most competitive manner.

Subhiksha :Subhiksha a leading Chennai based supermarket and pharmacy discount chain
operates on a low cost, low capital investment model.
Low cost and low capital investment.
Leverage the high volume of purchases and deliver discounts to
consumers.
Strategy is to provide fresh vegetables at low prices.
Pharmacy store with in the same floor with its vegetables section.

RPG Retail:-

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RPG group was the first to get into the organized retailing business in India
and expand beyond the south. RPG retail was the first to venture in to
different formats and categories.
Strategy is to dominate the market with the presence in every field
food world and music world to attract the customers. Being present in
both entertainment and services part.
Spencer entered to operate cash and carry and discount stores.
In Spencer a day is fixed for the discount purchases, Wednesday. On
this day they offer fresh vegetables at heavy discounts.
TRENDS IN RETAIL
Design
In Retailing so many customers actually touch and experience the brand. For
instance in the UK, creating the experience of supermarket shopping in Tesco
helped establish it as the preferred supermarket. There are two aspects to
shopping one is the supply chain and the logistics which is the retailers
responsibility the second is how a retailer turns tins and packets in to an
exciting, memorable experience. Thats where design houses come in to the
picture. Design helps to create the in store experience. Design is not only how
things look but there is also a commercial aspect to measure the effectiveness of
design and the return on investment. In the Indian context there is long way to
go many stores in India have multi levels but not every retailer knows how to
plan the store and facilitate customer circulation .If the the store cannot get
shoppers to the third level of the store it is the waste of space any one can make
the front three meters of the store successful and choose pretty colors but to
make the back end and the top floor of the store

work retailers should

understand the customers view points and there convenience should be given
the most importance. About 95% of the stores in India are around 500sq ft and
Page 78

most of them look and feel the same. Design gives an advantage to small store
when it is better lit has an identity and looks better than its competitors, design
is as important for a small store as it is for a large format retail store. Retail
design is still nascent in India there are several challenges for the Indian design
industry. One would be to help new retailers understand what major retailing is
also, what makes for good design in west may not be good design in India.
Retailing is very special activity it is the only democracy in the world as it is all
about choice and the moment competition increases retailers have to do more
than just provide goods at a cheaper rate and put up posters its more than that
old fashioned thing. They need to work a lot harder have good presentation
skills and good design skills. There is more design in India than anywhere else
in the world. The visual and innovative culture of India is stronger than in most
other places in the world. This culture manifests itself in areas other than the
commercial area, lots of people can unlock this and put it to good commercial
use on the retail front .the ingredient of better and well designed formats are
present in the country, design is an integral part of any successful business in
the modern world.
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.
Page 79

INDIA VS. WORLD

Indian retail is fragmented with over 12 million outlets operating in the
country. This is in comparison to 0.9 million outlets in USA, catering to
more than 13 times of the total retail market size as compared to India
India has the highest number of outlets per capita in the world - widely
spread retail network but with the lowest per capita retail space (@ 2 sq.
ft. per person)
Annual turnover of Wal-Mart (Sales in 2001 were $219 billion) is higher
than the size of Indian retail industry. Almost 100 times more than the
turnover of HLL (India's largest FMCG company).
Wal-Mart - over 4,800 stores (over 47 million square meters) where as
none of India's large format store (Shoppers' Stop, Westside, Lifestyle)
can compare.
The sales per hour of $22 million are incomparable to any retailer in the
world. Number of employees in Wal-Mart are about 1.3 million where as
the entire Indian retail industry employs about three million people.
One-day sales record at Wal-Mart (11/23/01) $1.25 billion - roughly two
third of HLL's annual turnover.
Developed economies like the U.S. employ between 10 and 11 percent of
their workforce in retailing (against 7 percent employed in India today).
60% of retailers in India feel that the multiple format approach will be
successful here whereas in US 34 of the fastest-growing 50 retailers have
just one format
Inventory turns ratio: measures efficiency of operations. The U.S. retail
sector has an average inventory turns ratio of about 18. Many Indian
retailers KPMG surveyed have inventory turns levels between 4 and 10.
Global best-practice retailers can achieve more than 95 percent
availability of all SKUs on the retail shelves (translating into a stock-out
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level of less than 5 %).The stock-out levels among Indian retailers

surveyed ranged from 5 to 15 percent.

FUTURE DIRECTION: POSITIVES

AT Kearney has estimated Indias total retail market at US$ 202.6 billion
which is expected to grow at a compounded 30 per cent over the next five
years.
With the organised retail segment growing at the rate of 25-30 per cent
per annum, revenues from the sector are expected to triple from the
current US$ 7.7 billion to US$ 24 billion by 2010.
The share of modern retail is likely to grow from its current 2 per cent to
15-20 percent over the next decade
Over next two years India will see several Indian retail businesses
attaining a critical mass as growth in the industry picks up momentum
driven by two key factors:
Availability of quality real estate and mall management practices
Consumer preference for shopping in new environments
Wal-Mart : huge plans for India. Moving a senior official from its
headquarters in Bentonville, Arkansas, to head its market research and
business development functions pertaining to its retail plans in India.
New York-based high-end fashion retailer Saks Fifth Avenue has tied up
with realty major DLF Properties to set up shop in a mall in New Delhi.
Tommy Hilfiger, retailer of apparels, expects to open one store each in
Delhi, Ahmadabad, Lucknow and Bangalore in the next four months.
68 million square feet of mall space is expected to be available by end of
2007, which might lead to over-capacity of malls
Lack of differentiation among the malls that are coming up. One option
may be to look at specialization.
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 Poor inventory turns and stock availability measures - retailers clearly

need to augment their operations.
Operations of retailers and suppliers are not integrated. Efficient
replenishment practices practiced in the Indian auto and auto-component
industry can be leveraged to implement efficient supply chain
management techniques.
Supplier maturity, in terms of adherence to delivery schedules and
delivering the quantity ordered, is an issue
Sales tax laws - lead to retailers having state-level procurement and
storage leads to Indian retailers having higher inventories. VAT has
helped alleviate this a bit.
Increased adoption of IT and shrinkage management will be a critical
area.
Supply chain and customer relations followed by merchandising,
facilities management and vendor development are areas which have
significant gaps and proactive training is a key imperative for overcoming
these.

A CASE:
Chinese retailing
Page 82

I.

FDI permitted in 1992. 40 foreign retailers have secured approval

a. Retail sales have grown@13.5% CAGR since FDI was permitted

II.

FDI initially restricted to 6 major cities (including Beijing, Shanghai and

Guangzhou) and SEZs

III.

Foreign ownership initially restricted to 49%

IV.

US$ 22 bn of FDI attracted, 3.6% of total FDI

a. In 2003, FDI in wholesale and retail was US$ 1.1 bn (Around 30%
of our total FDI in 2003)

V.

Current restrictions on FDI will be phased out over 5 years as condition

of WTO entry.

CHINA: THE EFFECT OF FDI

Page 83

Type

No. of stores in 1996

No. of stores in 2001

Traditional

1,920,604

2,565,028

Supermarkets

13,079

152,194

Convenience

18,091

Hypermarkets

593

Chinese retailing
Wal-Mart
o Entered Chinese market in 1996
o Has 43 stores in 19 cities as on date
o Had sales of US$ 704 mn in 2003
o Has employed more than 20,000 people
o Has paid taxes of US$ 111 mn in total*
Carrefour
o Has 54 stores as on date
o Had sales of US$ 1.6 bn in 2003*
Lessons from China
Strong evidence in favor of FDI
o FDI improves the entire size of the industry
Retailing in China has grown at a compound rate of 15% per
annum after FDI inflow
o Employment growth
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o Evolution of modern formats

o Local players can survive and even beat foreign competition
Need for a strong retailing industry in India
o Scale is the key to success for local retailers
Recommendations
Grant industry status to retail
Permit FDI in Retail in phases
Invest in supply chain infrastructure
Ease distribution infrastructure creation, octroi
Ensure single window clearance for retail chains
Organize market for real estate
o Ensure proper rent laws
o Enforce zoning laws and city development plan
o Increase land supply
Ensure flexibility of labor laws.

THEFUTUREIN RETAIL INDUSTRY

Page 85

FROM PRODUCTS TO ECOSYSTEMS: RETAIL 2012

"Ecosystems" that cater to interrelated customer requirements may be the next
big thing in retailing. They could answer both the consumers desire for speed
and efficiency and the retailers need for growthperhaps at the expense of
other industries.

Buying a new house involves some of the most complicated and nervewracking tasks anyone could possibly undertake. In a short time, the typical
buyer must seek out and qualify for a mortgage, find a lawyer to handle the
closing, hire a moving firm, and engage a contractor to carry out renovations.
There are utilities to be turned on, security systems to be installed, and
appliances to be bought. And you have to arrange for insurance. What buyer
wouldnt prefer to do business with a single vendor that could make or guide
every choice and organize the countless details accompanying a change of
residence?
Many retailers, building on their core merchandising and customer relations
skills, may have the ability to pull all of these things together by offering a
broad array of products and services to groups of customers defined by their
common situation. In the case of a home purchaseor, for that matter, the
entire span of products and services that homeowners wantthe retailer might
be the do-it-yourself superstore Home Depot, a chain already valued by
customers for the home improvement advice its salespeople dispense. Further
examples spring to mind. To meet everyday needs, Wal-Mart, the worlds largest
retailer, could provide a range of goods and services from laundry detergent to
utility payments. Walgreens could go beyond selling personal and health
products to offer referrals to doctors, nutritional counseling, flu shots, and
health checkups.
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Some retailers are already taking the first steps in this direction (Exhibit 1).
Home Depot now offers design and installation services, home improvement
financing, and tool rentals. Carrefour, the worlds second-largest retailer (based
in France), provides insurance, telecom, and travel services. Meanwhile, the US
office supply retailer Staples, extending its products and services for small
businesses and home offices, provides insurance, telecom services, copying,
shipping, and payroll servicing.

In effect, such companies are looking for new sources of profitable growth by
shifting away from product lines and toward packages of interrelated products,
services, and information. To do so, they are leveraging their inherent product
strengths, brand identities, customer relationships, and scale. Ultimately, acting
like a biological ecosystem that nourishes and supplies its denizens, retailers
could fulfill |all the purchase needs of certain kinds of customers. Retail
ecosystems might concentrate on specific purchase occasions such as routine
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shopping for everyday needs, on lifestyle segments (young urban chic, for
example), or on life stages (such as care of the elderly).
These retail systems would be quite different from those that emerged from past
attempts at diversification. In the 1980s, Sears tried to benefit from its large
volume of customers by expanding into a series of new businesses, particularly
financial services. The company faced a number of challenges, however, in
tailoring its broad range of product and service offerings to specific customer
segments and in managing a diverse set of new businesses.
Kmart too diversified into unrelated specialties such as books, home
improvement products, and sporting goods by purchasing, respectively, Borders,
Builders Square, and Sports Authority. But these operations were run as discrete
portfolio holdings, with no apparent leveraging of common consumer interests
or integration of product lines.
This time around, retailers will have to avoid these pitfalls and go beyond
simply stretching brand names over unrelated product lines. They will also have
to master multichannel dynamics, partnering, and brand leverage while
defending themselves against other businessesinside and outside the retail
sectorthat seek to "own" the customer. The race will be impeded by obstacles,
but if retailers pass the finishing line they will have stronger top-line growth,
enhanced margins, and closer customer relationships.
A new race
Retailers wont be alone in their attempts to grow by providing interrelated
products, services, and information, and they could find their own customers
being poached by others. The sports broadcaster ESPN, for example, has
opened its ESPN Zone chain of sports-themed restaurants. The media
conglomerate Cablevision has bought Madison Square Garden, Radio City
Music Hall, and The Wiz (an electronics retailer). Banks, utilities, media
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organizations, and health care companies could all become competitorsor

partnersof retailers.
Even so, retailers begin with certain advantages. They have unparalleled levels
of customer penetration and customer visits. They have extensive national and
global networks combining bricks-and-mortar stores with World Wide Web sites
and other channels. Many have entrenched themselves in specific consumer
segments. In addition, retailers have long experience of taking diverse products
from many suppliers and creating a compelling experience for consumers
skills that rivals from other industries would find difficult to replicate quickly.
And though players in some industries claim that their products are too complex
to be sold by retailers, some of the latter have clearly shown a knack for
demystifying the experience of shopping for sophisticated wares, from mobile
telephones to custom paint colors.
Benefits for all
Starting with the consumer and working back to the supplier, the kind of
consumer ecosystems we envision could yield benefits for every participant in
the value chain.
The consumer
This new retail environments focus will be consumers and their shopping
occasions, life experiences, and lifestyles. To succeed with this approach, a
retailer would have to deliver a very tailored range of products and services,
increased convenience, a more satisfying overall shopping experience, and, in
general, lower costswhether the customer is a home buyer, a young urban
professional, or a sports enthusiast.
Studies suggest that consumers think retailers could branch out into
nontraditional product lines. A 1998 McKinsey survey assessing the strength of
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US brands and the extent to which they could be leveraged found that more than
60 percent of respondents believed that Wal-Mart had the skills to expand
successfully into new lines. More than half expected it to be at least as good as
traditional providers in areas ranging from insurance to airline travel (Exhibit
2). A similar McKinsey survey carried out in France, Germany, and the United
Kingdom this year showed even higher levels of confidence in retailers relative
to companies in other industries. Those polled thought that European retailers
were quite capable of providing financial services and telephone connections
and of selling cars (Exhibit 3).

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The new retail environment should also meet the needs of consumers more
rapidly and completelyan important value proposition in an age when
products and services are becoming increasingly complicated and leisure time
increasingly precious. Shopping for home electronics products offers an
example. Shoppers used to buy appliances, plug them in,
and turn them on. With the arrival of cable television, wireless telephones,
personal digital assistants, video players, satellite dishes, fax machines,
answering machines, and computersmany capable of communicating with
each otherthose days have departed forever. To ease the lives of consumers, a
home entertainment retailer could not only design and install a unified domestic
network in their houses but also help choose its content providers and provide
ongoing service for it. Convenience could go hand in hand with lower prices as
retailers replicate their cost advantages in areas such as purchasing, customer
acquisition, and labor efficiency and pass some of the savings on to consumers.
The retailer
In fact, the top-line benefits of providing an expanded range of products,
services, and information are obvious in the case of retailers, which must deliver
extraordinary growth to meet the expectations of the capital markets. Consumer
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expenditures are shifting from retail goods to entertainment, culture, and

education. Real prices are declining in many markets. Home markets, especially
in Europe, are becoming saturated. These changes mean that retailers can
generate entirely new revenue streams and capture larger shares of consumer
spending. In addition, the increased customer traffic these offerings attract
should help boost sales of traditional products.
There are bottom-line benefits as well. Many companies from other industries
companies that lack the benefit of broad physical-distribution networks, strong
brand names, or established customer basesmust spend a significant amount
of money acquiring new customers (Exhibit 4). But strong retailers, which do
have these assets, are well placed to entice existing customers to buy new
services and products, without incurring high marketing costs. In addition, labor
can be more productively employed by strong retailers, since stores generate
more traffic than do most other kinds of commercial locations. And overhead
costs already incurred can be spread over additional products and services.
(Expenses for a bank branch in a supermarket can be about two-thirds those of a
traditional bank branch.1 Profitability can be as much as two and a half times
higher.) Finally, the large volumes that national retailers buy help them acquire
products and services at very favorable rates. Companies such as Wal-Mart and
Home Depot are famous for extracting rock-bottom prices from their vendors.

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In short, consumer ecosystems offer a tempting opportunity for companies that

are now under pressure to satisfy shareholders expectations.
The supplier
Participating in retailers ecosystems will help different kinds of suppliers reap
different benefits. Some suppliersparticularly those in newly deregulated
industries, with little experience of retail competitionmay be happy to hand
over responsibility for the customer interface to experienced retailers, thus
allowing both parties to focus on their core competencies. Such alliances can
give a supplier access to new customer segments, help its distribution networks
expand rapidly, and give it access to merchandising expertise that is likely to
exceed its own (and at lower cost than it could achieve itself). But suppliers that
have a strong retail brand are more likely to use retail partnerships to extend
their reach. Sprints deal with Radio Shack, which gave Sprint a chance to build
its market share in wireless quickly, is a recent example of such a partnership.
The likely outcome of such alliances will be co-branded products that take
advantage of the partners strong reputations.

Page 93

Retailers will often have to round out their offerings for specific customer
segments by turning to private-label and second-tier branded suppliers, which
will benefit from access to established customer bases and distribution channels
(actual or virtual) and gain the ability to bask in the retail partners brand
credibility. These suppliers will also share in the cost savings that partnerships
with retailers generate for the whole value chain. For strong regional suppliers,
a retailers national or international marketing and distribution network might
be of interest. Suppliers with strong brand names, direct consumer marketing
abilities, and big distribution networks might develop their own ecosystems.
Suppliers that have already built themselves strong brand names, invested in
direct consumer marketing, and come to control large distribution networks
could stand in the retailers way and might even decide to develop their own
ecosystems. From tentative experiments to integrated systems
The retail landscape is littered with companies that have tried and failed to
implement bold growth strategies. To create a successful consumer ecosystem,
retailers must reach beyond their core skills and redefine the way they think
about themselves, their customers, and other companies.
A retailers ability to offer a broader range of products and services and to create
a profitable ecosystem rests on the strength of the brand and the ability to
leverage it. Despite the success of own-label retailers such as Gap, H&M, and
Zara, many retailers emphasize other companies brands in their overall
marketing strategies. Although manufacturers brands will continue to play a
key role in many categories, retailers that succeed in creating integrated systems
will shift from promoting other brands to building and leveraging their own
across a variety of product and service categories.

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Today, the authority of a retailer depends largely on the breadth and depth of its
product assortment and its ability to get products to the right place at the right
time. But to serve the diverse needs of a consumer segment, retailers must move
from a product mind-set and embrace a broader emphasis on service and
information. For example, Radio Shack, formerly a dealer only in goods, now
derives 35 percent of its earnings growth from services. Retailers must also be
where consumers expect to find them, which means that they must quickly
master at least three distribution channels: bricks and mortar, the Internet, and
mobile commerce.
Moreover, if retailers are to perform well in their new businesses, they will have
to acquire many a new operational skill. This requirement will inevitably force
them to form strong partnerships, for otherwise no retailer will be able to offer a
full range of distinctive products, services, and information efficiently. With
such partnerships, retailers will be able to concentrate on managing the
customer interface.
Finally, the creation of consumer ecosystems will introduce extra complexity
into the retailers organization. Besides developing a number of different
channels, retailers will have to build organizational skills to help them control
the process.
Consumer ecosystems could change the way consumers shop-indeed, the
whole retail landscaperapidly, though it is far from clear whether traditional
retailers or players in other industries will ultimately be the main owners of
ecosystems. To forward-looking retailers with strong brands and broad reach,
they offer, at the very least, an exciting growth prospect that should be explored.

Page 95

Page 96

Retail Sales in India

Organized retailing was worth Rs 23,000 crore in 2003 and is growing at a rate
of 25-30 per cent annually. By 2010, organized retailing will be valued at Rs
70,000 crore and will engage 10 per cent of the total retail market.
While discussing the opportunities of retail in India, SEC B has surpassed that
of SEC A and small towns are ready for change and growth.
Like in the case of clothing category, which holds 36 per cent share of the
organized retail basket, key players are widening their distribution outlets
besides using current retail outlets as a B2B avenue.
Arvind Brands plans to push the retail presence of Newport jeans, the once topselling mass-market denim brand priced at Rs 399, from 1,200 outlets across
480 towns to 3,000 outlets covering 800 towns by the end of this financial year.
Similarly, Ruf 'n Tuf, Arvind's entry-level jeans will ride piggyback on the retail
Page 97

boom spearheaded by Big Bazaar. Ruf 'n Tuf has an exclusive distribution
arrangement with Big Bazaar. Besides having a B2C arrangement in Big
Bazaars, Ruf 'n Tuf will also use this premise for B2B business where small
retailers in small towns can come and buy our apparel in bulk.
Moreover, premium apparel brands are playing by the ear. Even Pierce
Brosnan's own apparel brand is planning a retail foray to woo metropolitan
India. Reid & Taylor Retail Pvt Ltd currently has 40 exclusive stores and plans
to set up 70 such stores by 2007 end.
The scenario is fast changing. Given this scenario, retailing in fashion wear will
witness a high degree of specialization. Soon, there will be ready-to-wear coexisting with fabrics, and custom-tailoring would emerging in specialty men's
stores. So it will give rise to new segments like occasion-led specialty stores.
However, all is not hunky-dory with the show business of organized retail in
India. The taxation system still favors small retail business, even as there is
differential sales tax across the length and breadth of the country. Intrinsic
complexities of retailing such as rapid price changes, constant threat of product
obsolescence and low margins makes it a perennial white elephant.
The Government of India does not recognize retail in India, and that takes away
the much of the sheen from this sunrise industry. Retailing should feature as a
policy on Government's agenda. The Shops and Establishment Act has to be
effectively implemented in each stage, and the Government needs to recognize
retail as an industry s, while pointing out that in certain States property tax is as
high as 75 per cent of the rent.
The Government, however, took a slight shift from its zero tolerance stances
against retail players last week by proposing to allow FDI in retail of specific
brand of products. Though this may call for more competition, retail players felt
that it was a step in the right direction.
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It is a positive step and it will encourage international brands to set up shop in

India. On the other hand, this will also lead to competition among Indian
players. At the end, it will be the consumers who stand to gain.
Ask him about the looming competition from the international czars of retailing,
he says, this time around, when organized retail is just 2 per cent of the total
market, there is enough room to accommodate competition. "It is only when
organized retail touches around 25 per cent of the total market, key players will
feel the competition pinch," he added.
In case of deriving the perfect food retail model for India, procurement is a cog
in the wheel. The retailer has to fight issues like fragmented sourcing,
unpredictable availability, unsorted food provisions and daily fluctuating prices
as against consumer expectations of round-the-year steady prices, sorted and
cleaned food and fresh stock at all times.
Procurement impediments cause channel wastage due to ambient transportation
and unpredictable demand forecasts. This results in lower procurement prices to
the farmer and higher prices to the consumer.
RPG Retail's Food World has devised a procurement model by contracting
directly with nearly 400 farmers in Hoskote near Bangalore for procuring fresh
vegetables daily. The food chain also arranges finances, professional advice for
these farmers.
However, in the business of retail, HRD is as critical as procurement. There
aren't enough people around for multitudinous reasons. There is no regulation
that addresses employees of retail. Unlike other industries, not much is offered
in terms of remuneration and training.
Unlike their counterparts in the BPO industry, employees of retail undergo very
little training. The call centers in spite of its unearthly working hours offer
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better growth opportunities and remuneration. Unless key retail players address
the HRD aspect of their businesses, the industry will only draw a mediocre staff
force.
Nevertheless, like most industry-related seminars, India Retail Summit also
wound up with a positive outlook. The next two-three years will see $200
million investment for retail expansion nationwide, which will result in 15-20
hypermarkets, 25-30 large department stores, 25-30 large supermarkets, 750
small- and medium-sized supermarkets, and 1,500 brand chains.
The future of retail will depend on the right kind of policies, the right economic
environment, the right infrastructure, and the right people. Unless these things
happen retail in India would not be benefited.
By and large, retail players have been there and done that. But what most
players lack is sharpness to read the consumer mind, points out that many times
retailers turn a blind eye on gender-based shopping insights, in-shop procedures
that overlook customer convenience, and merchandise placement that does not
differentiate between a man and a child. Food chains allow people to see, feel
and sense their offerings unlike other retail categories. I do not understand why
other retail categories deny the customers from experiencing the product.
Well, in this age and time when the consumer is the king, retailers also need to
realize that they never can say, "I can't."
THE PULL FACTOR: WHO MOVED THE CHEESE!
Explosive growth in population - unmatched by lagging economic progress has always been the bane for India. Ironically, with increased financial
capabilities of younger generation (the 14-45 age group) off-late, the large urban
populace now presents itself as a viable consumer market. According to some

Page 100

estimates, within a decade, India may even have the largest number of people in
the world in the 14-45 age groups.
The proportion of nuclear families is on a rise, as is the trend of double income
households. A large section of urban population now joins workforce at
relatively lower ages. The net result of these dynamics is a remarkable increase
in disposable incomes. Further, with technological exposure and frequent
international travels, upper and middle classes have gained increased awareness
of western concepts of entertainment and shopping. Shopping is progressively
becoming a fun experience for the complete family unit. Furthermore, it is not
merely the size, but the way the consumer tastes and preference are evolving
that creates interest in the sector. A keen inspection of trends makes it evident
that the urban citizen is gradually metamorphosing into a compulsive consumer
- a significant departure from financial ways of the generation which brought
her up in 1960s-70s.

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FOOD AND APPAREL RETAILING LIKELY TO DRIVE GROWTH

With various factors impacting growth in retail, some segments are bound to
grow faster than others. For instance, increasing affluence is driving growth in
the watches and jewelry segment, while awareness of health is driving growth
in lifestyle pharmaceuticals. The retailers who participated in the survey expect
growth in retail segments across the board; however, food and grocery is
expected to see the highest growth, with clothing emerging as the second fastest
growing segment. Food and groceries 8 percent Clothing 2 percent

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An approach to growth
The age cohort of Silver Spenders (age group 60+ years) has been researched
in countries like Japan where the post retirement period is marked by affluence
and a willingness to spend on lifestyle products. In India, there is a generation
of people who have spent a substantial portion of their careers during the prePage 103

liberalization era and will retire in a few years. This category, flush with post
retirement funds and a lower dependency ratio, will spend on items like books,
holidays and music. So, while it might make sense to target the YULIC
(Young Urban Liberalized Indian Consumer), Silver Spenders are likely to
emerge as an attractive segment. Interestingly, some of the retailers we met are
planning to target this segment soon.
EMPLOYMENT IN RETAILING IS INCREASING

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Page 105

Suggestions
India, representing the world market with a population that is second only to
China, offers a complicated picture as to which both opportunities and threats
are assessed to the changing global market. This paper will examine India from
a global perspective to see what are perceived as the positive and negative
effects of globalization on the countrys fiscal and trade sectors, and draw
specific concentration on how the food retail industry in India is rapidly
changing with the effects of globalization.

The perceived gap between Indias potential and reality will be explained
through the through sources that have been observing the nations Gross
Domestic Product for many years, and have seen India lag behind other Asian
countries which have shown comparatively unparalleled economic growth.
Changing economic policies that lifted many Indian trade restrictions in the
Page 106

early 1990s will be assessed in terms of both the increased opportunities they
make for many individuals in the nation as well as, internally, the increased
weaknesses that are represented by political interference and what is seen by
many to be an increasing gap between rich and poor in the nation. The increased
gap of wealth amongst individuals of the nation will be explained through the
progression of the retail industries, giving preference to the rich, while the poor
are kept in deprivation of economic changes.
The increased gap of wealth amongst individuals of the nation will be explained
through the progression of the retail industries, giving preference to the rich,
while the poor are kept in deprivation of economic changes.
NEED OF: Structural Adjustment, Stabilization, and Globalization of India
When looking at structural adjustments of a country, terms such as meanings,
aims, problems, context, and positive and negative results play a great role as to
where changes need to be executed. In general terms, the aim of becoming a
global market is to increase the quality of productive resources, human and
physical and to increase productivity of physical and human resources through
global trading and technological advances.
For India, we can use a model presented by Kuznets, the Nobel Prize recipient
for economics. This model discusses specific structural adjustments, which
explains his theory that economic growth in developed nations includes six
factors, four of which are particularly relevant here:
1. High growth rate per capita output and population.
2. High increase in labor productivity.
3. High rate of structural transformation.
4. High rate of social and ideological transformation.
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These terms play a role of reference in the international comparison of a

country. India is often judged by the standards of similar nations that have large
populations and are seen to be developing. India is often compared to China in
terms of economic growth and development, and is as often seen to lag behind
the standards set by China in terms of annual increase in Gross Domestic
Both countries present to the world what is potentially a huge market of
consumers, but both countries also have internal problems with infrastructure
and issues with power-supply and telecommunications dissemination.
So if one were to sum up, it might encompass the following:
Exhibit flexibility to adapt and then re-adapt to change. The adaptation
can be in terms of modification/creation of new formats, or in the form of
adding new product categories for the same targeted customer, as also a
systematic and regular review of brands (and their price points) offered to
the target customer, so as to maintain the optimum "value" proposition
demanded by the customers.
Focus on core skills and capabilities.
Don't do one-size-fits all with all suppliers: strategic suppliers need
encouragement for investment in innovation for long-term gain; low cost
focus is more appropriate for commodity suppliers.
Look at every category with a microscope for revenue enhancement:
assortment tailored to key customer segments, pricing reflecting
competitive

environment

and

customer

buying

criteria;

visual

merchandising that stimulates rates of sale and reflects customer

behavior, selective promotions and markdowns that reflect both customer
and retailer needs.
Maximize returns from private label but drive brands for mutual benefit.

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 Increase space productivity: identify two or three key variables that

differentiate store performance and use them to create store clusters
around which concrete actions can be taken. Product allocation should b
such that the right product must be merchandised in the right store.
Redesign in-store layout for local customer profile.
Get your loyal customers coming back to you over and over again?
After all, to quote Pantaloon's Biyani: "Retail is like riding a bicycle. If you stop
pedaling, you'll fall." How do you ensure stability and growth? By setting up
new stores. By getting more customers. By introducing new retail formats. By
introducing new products. And by making no mistakes.

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Conclusions
The Indian retail is poised for a transformation owing to a plethora of changes
within and outside its marketplace. According to the India Retail Report 2005
the size of the organized retailing market (Rs. 35,000 crore in 2005) was
expected to reach the figure of Rs. 100,000 crore by 2012 at an average growth
rate of about 30 per cent. However, going by the current growth trend and
considering the fact that existing prominent players in organised retail have
stepped up their expansion drive with Reliance announcing big plans and other
Indian corporate houses too evincing keenness on investing heavily in this
sector as also the inking of the joint-venture between the world's largest retailer
Wal-Mart and Bharti - the expectation from organised retail will almost be
double now of what was estimated two years ago.
The Indian economy is integrating with the world, and yet it simultaneously has
its own dynamics, which cushion global shocks as in no other country. India had
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.

To understand the reasoning and implications of such moves it was vital to size
up the entire retail market in various segments and consumption levels across
product categories with share of the organized segment and it was just the right

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time for India Retail Forum to take the initiative of researching the scope of
retail businesses in India.
Retailers need to invest much more in capturing more specific market
intelligence as well as almost real-time customer purchase behavior
information. The retailers also need to make substantial investments in
understanding/acquiring some advanced expertise in developing more accurate
and scientific demand forecasting models. Re-engineering of product-sourcing
Philosophies - aligned more towards collaborative planning and replenishment
should then be next on their agenda. The message, therefore, for the existing
small and medium independent retailers is to closely examine what changes are
taking place in their immediate vicinity, and analyze whether their current
market offers a potential redevelopment of the area into a more modern multioption destination. If it does, and most commercial areas in India do have this
potential, it would be very useful to form a consortium of other such small
retailers in that vicinity and take a pro-active approach to pool in resources and
improve the overall infrastructure. The next effort should be to encourage
retailers to make some investment in improving the interiors of their respective
establishments to make shopping an enjoyable experience for the customer.

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Books:
Marketing Management 11th edition Phillip Kotler
Retail Management: A Strategic Approach, Ninth Edition: Books: Barry
Berman,Joel R. Evans by Barry Berman,Joel R. Evans

Magazines
1. Business World
2. Business Today
Newspapers:
1. The Economic Times.
2. The Indian Express.
3. The Business Standard.
Internet-search:
1. retailindustry.about.com
2. www.thehindubusinessline.com
3. www.the-infoshop.com
4. www.wikipedia.org
5. www.etretailbiz.com
6. www.icmr.icfai.org/casestudies
7. www.indiainbusiness.nic.in/india-profile
8. www.shoppersstop.com
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9. www.ficci.com
10.www.newswiretoday.com

ANNEXURE

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QUESTIONNAIRE
CONSUMER SURVEY
Personal Information:

Name

..................................................................................

Age

...................................................................................

Occupation

...................................................................................

All responses of the respondents shall be kept confidential and only be used for the research
purpose.
1. What is your average monthly spending on Retail items?
a) <2000
b) 2000-3000
c)3000-5000
d)>5000
2. How often do you visit local kirana store?
a) Daily
b) Weekly
c) Monthly
d) Occasionally
3. How often do you visit Malls and Retail stores?
a) Daily
b) Weekly
c) Monthly
d) Occasionally
4. What is the purpose of visiting these places?
a) Freak out
c) Window shopping

b) Planned shopping
d) Dating
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5. Do you think visiting these places instigates useless impulsive buying?

a) Yes
b) No
c) Cant say
6. Why do you prefer local kirana outlet over organized retail shops?
a) Easy accessibility
b) Affordability
c) Good relationship
d) Credit facility
7. Do you think ambience of big malls and retail stores affect the purchasing decision?
a) Yes
b) No
c) Cant say
8. Whenever you think shopping at organized retail outlets the cost you have to pay is:
a) Very high
b) High
c) Average
d) Cheap
9. Do you think there is any difference in the quality of product you find in kirana store
or malls?
a) Yes
c) Cant say

b) No

10. If you find products of similar prices and quality at malls and kirana store you would
like to visit?
a) Kirana store

b) Mall

11. Do you think that emergence of organized retail sector will have a negative impact on
shopkeepers?
a) Yes
c) Cant say

b) No

12. What changes in kirana stores according to you will prove to be beneficial for them in
the long run?
a) More variety
c) Cleanliness and hygiene consideration

b) Better display of products

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