The project would not have been possible without the support of Prof. Sharmishta
Ma’am in charge of Rural Marketing. Her sincere efforts in explaining the subject and the
related topics helped us to be acquainted with the subject and the management field easily.
We are thankful to her for the project she has given us since it not only enhances our ability
to work in groups, but also helps to collect and understand a particular topic well.
We would also like to thank Mr. Sudhir Kulkarni, Assistant Manager of Future Group
who gave us all the necessary information to us on Pantaloon Retailing.
SR NO. PARTICULARS PAGE NO.
1. Introduction to rural market 3
2. Organized v/s Unorganized retailing 4
3. Rural Retailing Potential 5
4. Problems in booming rural market 6
5. Significant Players in Organized rural retailing
ITC Choupal Sagar 8
Godrej Aadhar and Manthan 9
Tata Kisan Sagar 10
Delhi Shriram‘s Kisan Hariyali Bazaar 11
Mahindra‘s Subhlabh 12
Kisan Seva Kendras 13
6. Strategies Adopted by organised Rural retailers 15
7. Recommendations (Strategies we suggest) 17
8. Case study on Pantaloon Retail 19
9. Conclusion 25
10. Group Members 26
The Indian rural market with its vast size and demand base offers great opportunities to
marketers. Two-thirds of countries consumers live in rural areas and almost half of the
national income is generated here. It is only natural that rural markets form an important part
of the total market of India. Our nation is classified in around 450 districts, and
approximately 630000 villages, which can be sorted in different parameters such as literacy
levels, accessibility, income levels, penetration, distances from nearest towns, etc.
70 % of India's population lives in 627000 villages in rural areas. According to the NCAER
study, there are almost twice as many 'lower middle income' households in rural areas as in
the urban areas.
At the highest income level there are 2.3 million urban households as against 1.6
million households in rural areas.
Middle and high-income households in rural India are expected to grow from 80
million to 111 million by 2007.
In urban India, the same is expected to grow from 46 million to 59 million. Thus, the
absolute size of rural India is expected to be double that of urban India.
The above figures are a clear indication that the rural markets offer the great potential to help
the India Inc which has reached the plateau of their business curve in urban India to bank
upon the volume-driven growth.
The Indian rural market with its vast size and demand base offers a huge opportunity that
MNCs cannot afford to ignore. With 128 million households, the rural population is nearly
three times the urban.
As a result of the growing affluence, fuelled by good monsoons and the increase in
agricultural output to 200 million tonnes from 176 million tonnes in 1991, rural India has a
large consuming class with 41 per cent of India's middle-class and 58 per cent of the total
The importance of the rural market for some FMCG and durable marketers is underlined by
the fact that the rural market accounts for close to 70 per cent of toilet-soap users and 38 per
cent of all two-wheeler purchased.
The rural market accounts for half the total market for TV sets, fans, pressure cookers,
bicycles, washing soap, blades, tea, salt and toothpowder, What is more, the rural market for
FMCG products is growing much faster than the urban counterpart.
ORGANIZED AND UNORGANIZED RETAILING
Organized retail sector refers to the sectors undertaken by licensed retailers, that is, those
who are registered for sales tax, income tax, etc. These include the corporate retail formats of
the exclusive brand outlets, hypermarkets, supermarkets, departmental stores and shopping
Unorganized retailing, on the other hand, refers to the traditional formats of low-cost
retailing, for example, hand cart and pavement vendors, & mobile vendors, the local kirana
shops, owner manned general stores, paan/beedi shops, convenience stores, hardware shop
at the corner of your street selling everything from bathroom fittings to paints and small
construction tools; or the slightly more organized medical store and a host of other small
retail businesses in apparel, electronics, food etc.
Tug of war: organized vs. unorganized sector
Future of retail sector in India is swerving- on one side organized retail is marching into life
of urban consumers, while on the other our own neighborhood ‗kirana stores‘ are resisting
fiercely with their existing strong foothold. India today is at the crossroads with regard to the
retail sector. A shift between organized and unorganized retail sector is evident, which has
led to a number of speculations on the fate of Indian retail sector.
Unorganized sector cannot be ignored
In any newspaper or television channel, we find hordes of news about happening in
organized retail sectors, which is indeed fairly real situation. While the role of organized
retail sector in growth of economy cannot be denied, but one thing is also of extreme
importance that unorganized retail format is a support to a large chunk of population-
providing direct employment to 39,500,000 individuals. So there is no way that government
or anyone can discount these foundation stone of Indian economy.
Comparative Penetration of Organized Retail
USA Taiwan malaysia Indonesia Chaina India
RURAL RETAIL POTENTIAL
There is tremendous potential for organized rural retailing in rural areas because of the
• 70 % of India's population lives in 627000 villages in rural areas. 3 times more families live
in Rural India.
• Middle and high-income households in rural India is expected to grow from 80 million to
111 million by 2007.In urban India, the same is expected to grow from 46 million to 59
million. Thus, the absolute size of rural India is expected to be double that of urban India.
• Rural India has a large consuming class with 41 per cent of India's middle-class and 58 per
cent of the total disposable income.
• Young Population and middle aged population are rapidly increasing in rural India.
• There purchasing power is increasing.
• Exposure and increase in literacy rates will open market further.
• Government focus on agricultural policies will increase in rural earning.
• Population is increasingly becoming brand conscious.
PROBLEMS IN THE BOOMING RURAL MARKETING
Although the rural market does offer a vast untapped potential, it should also be recognized
that it is not that easy to operate in rural market because of several problems. Rural
marketing is thus a time consuming affair and requires considerable investments in terms of
evolving appropriate strategies with a view to tackle the problems.
The major problems faced are:
Underdeveloped People and Underdeveloped Markets:
The number of people below poverty line has not decreased in any appreciable manner.
Thus underdeveloped people and consequently underdeveloped market by and large
characterize the rural markets. Vast majorities of the rural people are tradition bound,
fatalistic and believe in old customs, traditions, habits, taboos and practices.
Lack of Proper Physical Communication Facilities:
Nearly fifty percent of the villages in the country do not have all weather roads. Physical
communication of these villages is highly expensive. Even today most villages in the
eastern parts of the country are inaccessible during the monsoon.
Media for Rural Communication:
Among the mass media at some point of time in the late 50's and 60's radio was
considered to be a potential medium for communication to the rural people. Another mass
media is television and cinemas. Statistics indicate that the rural areas account for hardly
2000 to 3500 mobile theatres, which is far less when compared to the number of villages.
Many Languages and Dialects:
The number of languages and dialects vary widely from state to state, region to region
and probably from district to district. The messages have to be delivered in the local
languages and dialects. Even though the number of recognized languages is only 16, the
dialects are estimated to be around 850.
Rural areas are scattered and it is next to impossible to ensure the availability of a brand
all over the country. Seven Indian states account for 76% of the country's rural retail
outlets, the total number of which is placed at around 3.7 million. Advertising in such a
highly heterogeneous market, which is widely spread, is very expensive.
Low Per Capita Income:
Even though about 33-35% of gross domestic product is generated in the rural areas it is
shared by 74% of the population. Hence the per capita incomes are low compared to the
Low Levels of Literacy:
The literacy rate is low in rural areas as compared to urban areas. This again leads to
problem of communication for promotion purposes. Print medium becomes ineffective
and to an extent irrelevant in rural areas since its reach is poor and so is the level of
Prevalence of spurious brands and seasonal demand:
For any branded product there are a multitude of 'local variants', which are cheaper, and,
therefore, more desirable to villagers.
Different way of thinking:
There is a vast difference in the lifestyles of the people. The choices of brands that an
urban customer enjoys are different from the choices available to the rural customer. The
rural customer usually has 2 or 3 brands to choose from whereas the urban one has
multiple choices. The difference is also in the way of thinking. The rural customer has a
fairly simple thinking as compared to the urban counterpart.
SIGNIFICANT PLAYERS IN ORGANISED RURAL RETAILING
Here are the examples of the corporate sector‘s involvement with organized retail for rural
India. Some of them have the model of company owned stores and some have moved from
company owned to franchise in order to save the cost. Some players are thinking to form
joint ventures with franchise in order to have the direct connect with the rural market.
ITC’S CHOUPAL SAGAR
The country‘s first rural mall known as ‗Choupal sagar‘ was established in Madya Pradesh at
Rafiqganj, which is not even a city, but a little village about 4kms from Sehore town. It
signaled the arrival of organized retailing in rural India.
It is located on the eight acre plot with a shopping area of 7000 sq ft. It has been set up at a
cost of Rs 4.5 crores and based on the learning from this experiment and evaluating its
success ITC is planning many more such like branded stores in rural India.
The shopping area is only a part of the vast Choupal sagar. At the back of the mall is a
godown where 10000 tones grain can be stored. It will also have entertainment area with
video games and swings, a diesel pump. Cafeteria, sale point of fertilizers and other farm
inputs and a soil testing laboratory everything is a part of the retail store.
A bank and insurance company office and a training centre for farmers will complete the set
up. Doctor would also be available there for farmers to consult and there is a plan to install
ATMs. It has parking space for 100-200 tractors and offer continuous service from 6:00am
Along with soap, Detergents and the toothpaste mall sells everything – TV, DVD players,
pressure cooker, sewing machine etc. Farmers can also buy motorbikes, or even tractors. ITC
has also launched its rural range of clothing and shoes, trousers at Rs 166 a pair tailored for
rural people is a value for their money. It was formally launched in the first week of October
and then only the sales were in the range of Rs 70,000 to Rs 80.000 daily on an average.
Choupal Sagar is an extension of ITC‘s warehouse. The farmers will be in a position to make
purchases for their entire requirement from a place where they sell their products. The ready
availability of cash after the sale and the transport facility in the form of emptied trolley or
cart would provide an opportunity to make bulk purchases for the coming season. It can lead
to better utilization of space along with proximity to the consumers. It will also act as an
information centre for market prices for the products.
ITC plans that the future scenario will be like: a farmer, with his family, drives into choupal
sagar in a tractor trolley with grains for sale. He parks tractor on a digital weighbridge close
to entry point. His grain weighed, he drives to godown where produce is unloaded and he
In the meantime kids enjoy swings and video games and the wife may be going around in the
shopping mall mentally drawing up the shopping list. With cash in hand farmer‘s family can
then make purchases and drive back by evening, with trolley loaded with purchases. Farmers
may even carry fertilizers and pesticide for the next crop and get his tractor fuelled up at the
diesel pump and eat something at cafeteria.
For the sustainability of this model it has already tied up with LG, Sansui. Agri-input
companies and other services organizations like bank and insurance company. Sansui has
even invested in infrastructures and manpower training for Choupal Sagar.
At initial stage, ITC plans to invest Rs 3 Cr for each Choupal Sagar but later to decrease the
investment burden, it intends to build the joint ventures and franchisee systems with
sanyojak who would pick equity and manage these malls as part owners. These sanyojak will
be responsible for the demand estimation. Just in time delivery, customer‘s management and
account management in assistance with four ITC salespersons.
GODREJ’S AADHAR AND MANTHAN
What started with a small animal feeds sub-division of the soap division in 1974 has become
a Rs 1,000 crore agribusiness for the Godrej Group, under its two companies Godrej Agrovet
and Goldmohur Foods. The company‘s products include natural pesticides, animal feed, oil
palm plantlets and other farming inputs. Godrej also acquired and merged HLL‘s agri-
business with its own. As a forward integration strategy it has entered the retail rural
The group is testing two concepts, Aadhar and Manthan. Manthan focuses on supplying
animal feeds for dairy and poultry. On the other hand Aadhar is a supermarket, which retails
agricultural inputs such as fertilizers, pesticides, animal feeds and small implements along
with FMCGs, appliance and also services. Services like soil analysis and veterinary care are
also offered to the farmers. Aadhar stores have been open in Maharashtra and Andhra
Pradesh to sell Godrej‘s brand as well as those of others.
Aadhar has a synergic link with Godrej‘s urban retail outlet ‗Nature‘s Basket‘ which retails
fruits and vegetables in the metros. Aadhar provides connectivity for sourcing fruits and
vegetables for urban markets. The company expanded the number of retail outlets from 14 to
18 during the September quarter of 2005 and targets to have a few other outlets over the next
TATA KISAAN SANSAAR
Till 2003, the TATA group‘s two companies TATA chemicals and Rallis India ran separate
rural retail initiatives. TATA Chemicals had a chain called Tata Kisaan Kendras in Uttar
Pradesh, Haryana and Punjab. The centers offered farmers a host of products and services
ranging from agri-inputs (seeds, fertilizers), financing to advisory services.
Rallis, another Tata company manufacturing chemicals for agriculture was running Kisaan
Kendras. It was involved in an integrated programme with select farmers of Madhya
Pradesh. The company partnered ICICI bank and HUL in offering solutions to farmers that
covered operations from pre-harvest stage to post-harvest stage. Farmers were first provided
with seeds, pesticides and other farm inputs, through Rallis, but mostly funded through loans
offered by ICICI bank. Once the crop was ready it was bought by HUL and ICICI. Bank loan
was repaid through the income from sale. But the experiment did not sustain for long.
In April, 2003, Rallis‘ operations were merged with TATA Chemical‘s TATA Kisaan
Kendras and on October 26. 2004 the company relaunched it Kisaan Kendras as TATA
kisaan sansar(TKS). These are planned to evolve as networks of one-stop shops for farmers
providing everything from onputs, loans to know-how. In December 2004 it comprised of
421 centres: all franchisee run stores in three states covering 14,000 villages.
The centres are linked to 20 hubs owned and managed by TATA Chemicals, TATA
Chemicals have three broad sources of income from these stores: sale of inputs, provision of
advisory services and fee charged on sale of partners‘ goods. TKS already had 15 partners in
December 2004 including ICICI Bank, ING, SBI and agri-input companies.
This comprehensive gamut of services available under one roof serve the needs of farmers in
an integrated manner. Not only solutions are available at these retail outlets but the banks as
enabling forces and insurance companies to cover the risks, risk are also available to make
the purchases feasible.
DELHI SHRIRAM’S KISAN HARIYALI BAZAAR
Setting up of chain of rural malls, Kisan Hariyali Bazaar promoted by Shriram Consolidated
Limited (DSCL) has created one stop shops offering sickles to technical advice as a forward
integration strategy. Utilizing its experience in the sugar, agrichemicals and seed business it
has set up 13 Kisan Hariyali Bazaar‘s or rural malls in four states: Punjab, Haryana,
Rajasthan, Uttaranchal and Uttar Pradesh. Each store has a customer base of 7000 to 10000
The first store came in western Uttar Pradesh. The malls are 6 acre large and caters to
farmer‘s needs by storing some 400 categories of products like stock feeds, seeds, fertilizers,
veterinary medicine and farm implements. All the needs of the farmers from farm
implements to crop finance are met under one roof. These 10000 sq. ft. departmental stores
in the countryside of north India offers farmers easy crop finance and vital crop linkages.
Three qualified agronomists would be available at the stores throughout the day and two
other would be in the field to get in touch with the farmers and guide them on the products
and services he should go in, at his doorstep.
These stores will not only save farmer from buying spurious material but will also provide
requisite quality assurance. Kisan Hariyali Bazaars offer multiple brands for each product
category to meet the farmers‘ preferences and choices. Although the retail ambience of the
store is modern, the manner in which service is offered is farmer friendly.
It also brings the contract farming opportunities to the farmers thereby they can now sow
new crops, sell their produce directly to the processors and get better prices. The idea is to
build a relationship with farmers and enhance their productivity. After evaluating the
response it is planning to have more outlets in the region. The stores would be set up in the
main agricultural districts of the northern region.
In order to sell farm inputs and equipment including M&M brands, Mahindras
established Shubhlabh, which is a chain of franchise stores for the rural market. It had 36
such franchisee stores in the states by the end of 2004.
It provides rural financing and borrowing support through these stores as Mahindra
Krishi Vihar, a platform for banks to provide loans to farmers with minimum documentation,
quick sanction and attractive interest rates. For banks, it‘s easy, safe to lend their money
without too many overheads. Farmers‘ access to funds get easier and for banks loan is
KISAN SEVA KENDRA
Faced with steadily declining margins from the urban markets as competition from private
marketers began to breathe down its neck, IndianOil was forced to look elsewhere for
growth. And it didn't take much long for the IOC mandarins to spot the way forward—head
to the goddammned hinterlands.
During the 2004-05 past fiscal alone, it pumped in Rs 91.06 crore into the rural retail
business, called Kisan Seva Kendra, the first of which came up in Haryana last fiscal. IOC is
so gung-ho about this venture that it plans to put in Rs 764 crore by the end of the next fiscal
and already around 100 such Kendras are up and running. What‘s more, it will add 1,000
more such outlets by this fiscal end.
General manager-marketing, Delhi and Haryana, Kuldeep Bery says the Kissan Seva Kendra
at Andhera near Karnal is a virtual supermarket. It sells pesticides, seeds, and fertilisers,
groceries and FMCG items, besides fuel and auto parts. That apart it has an ICICI Bank
counter to exclusively extend loans and insurance cover to farmers, he says adding these
outlets are run on franchise model. IOC meets over 50 percent of rural fuel demand and
controls close to 52 percent of total market.
Yes, a definitive beginning is already underway and what's needed is jacking up the numbers
and reaching out to more geographies and masses, as also inter-corporate collaboration
efforts, something like the Choupal Sagar model. In the long-run, the Levers' model may
perhaps lose out, as organised distribution is about making more brands available. For,
distribution to be meaningful, it has to be inclusive, not exclusive.
Paramount Trading Corp (Pvt.) Ltd is one of the renowned and largest exporter of Metal
handicrafts in India has launched 3A Bazaar and taken the initiative of uplifting and
empowering Rural India by enhancing reach of Information and quality products. 3A Bazaar
is a unique strategy to bring the 1st chain of rural retailing in India through mobile vans.
Unfortunately modern retail is only in cities of India. So if the citizens living in cities of
India are enjoying benefits of modern retail why should Rural India lag behind? This has
given birth to the idea of rural retailing under the banner of 3A Bazaar. 3A Bazaar is India's
first shop on wheels to start in different villages of Jyotiba Phule Nagar of Uttar Pradesh.
And it is sure to find its place in the books of history. ‗3A‘ represents the first letters of the
names of the three Shamsi brothers, all of whose names begin with ‗A‘.
3A Bazaar offers wide range of products from Grocery to FMCG, Cosmetics, Stationary
and Women Accessories. In the first phase company has started its operations with 5 mobile
vans in JP Nagar. Each van operates in villages with population of less than 10 thousand
people. Each van is assigned a different route and covers 1.00 Lac to 1.25 Lacs of Rural
consumers. The company plans to add another 20 vans by end of FY 2007-2008. Setting of
Fixed stores will follow this.
3A Bazaar helps consumers to buy authentic and Quality products at a cheaper price at their
own doorstep. 3A Bazaar will also work towards rural development by educating and
exposing new and genuine products to consumers.
Mr. Asad Shamsi MD, 3A Bazaar, said that we have been working for over a year and have
conducted numerous research and studies in the rural India. The mobile vans and their
products are a result of this research. The product offering has been very carefully selected
so that rural consumers will get value for money.
Beside this 3A Bazaar will also work for rural enlistment and empowerment by following
1. Organize Health camps
2. Provide technical expertise to farmers
3. Provide information on education
4. Enhance the savings.
He expressed Gist and Strength of 3A Bazaar by saying this....
STRATEGIES ADOPTED BY ORGANISED RURAL RETAILERS
In rural areas, customer‘s loyalty to his kiranavala is more than brand loyalty. Hence, it
becomes a challenge for operators of stores to get the customers away from traditional
retailer, who has been serving the needs of family for years together.
In order to overcome this problem, the stores can provide value added services to bring new
customers to their stores. Once the customers come in, stores can work on building long term
relationship with them.
During monsoon, a number of villages are cut off from neighboring villages. This blocks the
movement of people, thus creating financial burden for those big stores with less sales, in
In order to overcome this problem, organizations can set up stores in regions where
connectivity is relatively good.
Appropriate merchandising and integrating solution:
The wages earners get only small dues on daily bases because of seasonality of demand,
which poses other challenges.
In order to overcome this problem, appropriate merchandising and integrating solution can
be planned to serve the needs of poor.
Availability of credit:
The major threat that these stores have is availability of credit for rural customers. Organized
stores will not be able to give credit to customers like kirana stores. Most of the customers do
not pay after the month end, but after the harvest.
In order to overcome this problem, ITC is come up with a solution wherein farmers can sell
their products at the mall and the mall will make immediate payment to the farmers. Using
the same cash, the farmer can purchase other goods from the mall.
Tie ups with banks:
Some stores like those of Mahindra are developing tie ups with banks and insurance
companies, to make credit easily available to their customers.
Taking into consideration the price sensitive market, all products are priced in such a way
that they earn profits and customers are willing to pay the price of product.
Design store for sale:
These super markets involve themselves in lighting and creative display, so as to increase
impulsive sale. Videos are played in the super market to educate the customer on a product.
Recommendations (Strategies we suggest)
Supplementing government efforts and resources:
The corporate should supplement government effort and resources. They should assist the
government with all financial help to work for further infrastructure and development,
building quality education system generating proper and safe storage facilities for crops etc.
Building a network of retail stores:
Since these organised rural malls by big corporate guns have restrictions when it comes to
no. of outlets. They should open a chain of retail stores which should be rural in nature so
that rural masses identify themselves with these stores.
Promoting social causes in rural areas:
Companies campaigning against social causes such as child marriage, child labour, female
infanticide etc get very much popular amongst the rural people. Also some companies can
join hands with UNICEF India, Ministry of Health and Family Welfare etc to promote
awareness about AIDS and Polio get well recognised amongst the people.
Meaningful product strategies for rural market the rural consumers should be adopted. For eg
- new product designs that are sturdy and has bright flashy colours should be used so as to
connect with the rural people. The brand name and logo is also very important to the rural
consumers. It should be easy to remember and identify with.
Availability of small retail outlets:
The rural consumers do not have vehicles to go far to a retail mall and shop for their needs,
instead small brand outlets should be setup within the main area of the village. Also the
villagers look at a mall as a big expensive place, so if the stores are smaller and not in the
form of a mall they would go there more.
Help in agricultural productivity:
As India‘s major population lives in rural areas and agriculture being their main livelihood
we thought if the companies directly helped the farmers it would earn a lot of goodwill. Most
of the farmers suffer from loss due to inadequate marketing facilities like non availability of
inputs, lack of knowledge about seeds, hybrids, coordination problem between production,
transportation and storage facilities etc hence the company can educate these farmers by
having free talks during the panchayat etc.
Innovative and exciting initiatives such as village BPO should be given impetus to tap the
talent in rural India and also developing the rural parts as usually the educated people there
come to cities for work, instead BPO set up there would also encourage employment.
Promotion at highly populated areas:
Some areas in villages are highly populated such as melas, haats, aanganwadis, panchayats
and subzi mandi‘s where all the villagers are present hence if there could be advertisement
done there through wall paintings, posters, flashy banners, loudspeakers etc it would help the
Pantaloon Retail: A Domestic Organized Retailer Shows How It’s Done
Organized retail in India is simultaneously a promising and challenging prospect. New
entrants can learn a lot from those currently operating in the Indian organized retail sector.
This comprehensive case-study of a domestic organized retailer provides an in-depth view of
the levels of adaptation required to succeed in the Indian retail sector.
If there is one organized retailer in India that has recognized the potential of Indian retail
early, understood the unique characteristics of retail in India and built up itself to counter any
competition, both domestic and foreign, it is without a doubt, Pantaloon Retail. What started
as a small men‘s wear retailer has become one of the largest organized retail chains in India
with a presence in every retail sector imaginable and more!
Pantaloon‘s success and continuous growth in the Indian organized retail market can be
attributed to a number of factors, some of which mimic the strategies of large retailers in the
west and others that have been completely tailored to the Indian market. What is evident at
the outset is that Pantaloon has foreseen and understood the Indian retail roadmap better than
1) Ground-up Development
Pantaloon‘s major advantage over current and new competitors in the retail sector has been
its unique understanding of the Indian organized retail market with all its quirks,
shortcomings and challenges. By creating a retail business from the ground-up and
expanding rapidly, Pantaloon has followed a Wal-Mart-esque pattern of growth. However,
unlike Wal-Mart, Pantaloon‘s next step was not strengthening its supplier network and back-
office operations. Instead the company recognized that the inadequacies of Indian
infrastructure would greatly delay any returns or even results of investing in supply-chain
platforms. It decided to experiment with as many retail formats, product-mixes and brands as
was possible in order to gain maximum knowledge about the uncertain Indian organized
retail sector and get a leg-up on any possible competition. In fact, current entrants in the
organized retail market not only have to learn the ropes of the unique Indian organized retail
sector, but also have to find a way to combat Pantaloon‘s dominant market share in almost
all forms of organized retail-an uphill task for any competitor, regardless of size.
2) Multiple Formats, Multiple Brands
A Comprehensive Retail Experiment Pantaloon has experimented with every retail format
possible. They have opened supermarkets, hypermarkets, malls, department stores, fresh-
produce markets, single area shops-like sports shops, office supply shops and others. Most of
their experiments have proved successful and Pantaloon is continuously to experiment while
expanding current ventures.
However, success or not, what the real reward of these experiments is an enormous amount
of knowledge and experience about the organized retail in India, consumer preferences, and
operational strategies. This is knowledge that was most elusive in a previously untouched
and unknown organized retail sector. What‘s more impressive is the insight of the company
in recognizing the need for experimentation over expansion. This is an example of Pantaloon
adapting itself to the Indian market rather than attempting to copy a Macy‘s or a Wal-Mart
and follow a cookie-cutter model. The experimentation process has not ended with testing
different store formats alone. Pantaloon is also experimenting with a variety of products.
From men‘s wear the company has moved on to experiment with retailing furniture,
sportswear, kitchen appliances, food, electronics and children‘s apparel. Again, it knows
what works and doesn‘t work in the Indian market, something that would not have been
apparent as little as a decade ago.
Pantaloon has also gone a step further by experimenting with brands as well. It has
introduced a number of its own brands, a successful strategy that has worked in stores like
Target and Wal-Mart. For example, it has experimented with launching clothing lines based
on famous Indian Bollywood movies. It has also introduced a number of specialty fashion
stores where it has launched several clothing lines of its own. Within the brand retailing
space, Pantaloon has also tied up with some of India‘s most popular brands like Gini and
Jony to sell them in their stores. Rather than attempt to compete with existing popular brands
the company has decided to partner with major Indian brands and leverage the success of
these brands in the ambiguous Indian market. For whatever reason these brands have
achieved success and a loyal following; Pantaloon‘s move is sure to bring in more customers
and retain them.
With its comprehensive experimentation, Pantaloon has reached a stage where it can write
the book on Indian organized retail as well as be in the best position to criticize it. Sure,
Pantaloon‘s competitors have the opportunity to learn from the retail giant‘s experiences, but
the experience that comes with managing these diverse retail formats in the Indian scenario
with the sourcing, supply and real-estate challenges is something that new entrants will have
to learn on their own. With the pace at which Pantaloon is moving, it is likely by the time
new entrants figure out their strategy, Pantaloon would have made the several sectors of
organized retail in India out of anybody‘s reach.
3) The Right JV’s at the Right Time
In accordance with its experimentation policy and leveraging its unparalleled experience in
the organized Indian retail market, Pantaloon has moved to form key joint ventures with a
number of popular names like Staples and Starbucks. Rather than blindly throw these brands
onto the retail scene. One can be sure that Pantaloon will tailor and position these foreign
brands to cater to the Indian retail market. With its first- mover advantage Pantaloon is
actively closing doors for its competitors by snapping up major brands before other can get
4) Versatile Retailing
Rather than expand as a men‘s wear retailer alone, Pantaloon‘s policy of comprehensive
experimentation has given it an important advantage. Intentionally or unintentionally,
Pantaloon has developed a versatile retail presence. Indian consumers see Pantaloon as an
exclusive brand retailer, discount retailer, specialty retailer and food retailer all at once. The
company has managed to avoid retail stereotypes and the insular strategies that result from
catering to them. So while Wal-Mart is seen as a discount store, Safeway is considered a
food retailer and Ikea is known as a furniture seller, Pantaloon is all of these at once. One of
the reasons for this versatility is that the Pantaloon name has not been forced or even
associated with the different products and stores other than the original men‘s wear line.
Instead each store and product has been given its own identity and presence. While this has
proven to be a successful bet for the company, it is not entirely a blind one. In a country
where unorganized retailers, who have no co-ordination between themselves, control 98% of
the market, versatile retailing might be the best way to go. Pantaloon is essentially an
organized retailer in the disguise of a large number and variety of unorganized retailers. This
again represents the company‘s unique understanding of the Indian scenario.
5) Winning Team
While Pantaloon retail has achieved much of its success on the back of its experimentation
policy, it has also made some great recruiting decisions that have put the right people in
charge of the right departments. The company understood the absence of any real knowledge
or experience-base in the organized retail market. Instead of head-hunting people with pure
retail experience, the company has poached a number of highly experienced managers and
executives from a number of diverse and successful Indian companies. Their knowledge
about the Indian business environment and supply-chain dynamics as well as experience of
launching products in the country and adapting strategies to the unique tastes of the Indian
consumer have been key to Pantaloon‘s success. The company understood the core
competencies required to dominate in the untapped organized retail sector and made hiring
Pantaloon has continued its policy of comprehensive experimentation, but having achieved
significant scale in a number of sectors, the company has begun to implement the more
conventional strategies of organized retail to further improve its market-share and future
growth. Although capital was initially exclusively used for experimentation, the company is
now allocating resources in two major areas:
To cater to the Indian consumer that is used to shopping a few meters away from his house,
location is of prime importance for any retailer. Pantaloon‘s first-mover advantage has given
it access to some of the most exclusive and retail friendly real-estate in the major urban
centers. Yet, with the entry of a number of new and wealthy competitors, the company has
recognized the need to ramp up its efforts in acquiring and developing prime real-estate for
retail. Pantaloon has set up major real-estate funds, ―Kshitij‖ and
―Horizon‖ exclusively for the purchase and development of key real-estate for retail.34 It has
also begun to make strategic purchases in the smaller cities where the retail boom is
predicted to continue once it stagnates in the major cities. However, in a crowded India
where geographic proximity is most important, catering to a population that likes to shop
close-by is the single largest factor that will determine success in the future. Pantaloon has at
least recognized this and is preparing itself appropriately.
2) Supply-Chain and Behind-the-Scenes Operations
For major retailers like Pantaloon especially, that have established a name and market
presence through multi-format experimentation, the next step is the improvement of the
supply-chain and behind-the-scene operations. These factors serve as the backbone of a
successful organized retail chain in the long-run.
Pantaloon cleverly ignored these aspects due to the unique inadequacies of Indian
infrastructure and rightly favored experimentation over organization. But, to continue to
grow at the pace it has over the last five years it needs to pay attention to its sourcing
network, transportation system and other logistics. By developing these now, Pantaloon will
also be able to gain a leg-up on its competitors. Having lost the first mover advantage, new
entrants in the Indian retail sector are likely to start with back-end operations rather than
format experimentation. While this policy is a flawed one in the Indian market, the
disadvantages of this approach may be more than compensated for by achieving efficiency
and scale in back-end operations, both of which are very difficult in India. Ultimately giants
like Wal-Mart and Costco, no matter how they reached their market position, rely on solid
supplier-network and strategic back-end operation management to survive and continue to
grow. In this matter India is no different from any other country. What Pantaloon will have
to improvise though, is the absence of basic infrastructure like transportation and regulation
that the Wal-Marts and Safeways could make use of in their climb up the retail ladder. The
pace of expansion of the retail industry is likely to outstrip that of the development of the
country‘s infrastructure. Pantaloon will have to be innovative in how it compensates for
these inadequacies while efficiently managing its supplychain and logistics.
Pantaloon has the upper hand on the most potential foreign and domestic competition in the
organized retail sector. However the same characteristics that have made it an exclusive and
versatile retailer can find it a disadvantage.
1) Money: The Ultimate Differentiator
Much of Pantaloon‘s competition consists is either retail ventures of large Indian industrial
houses (Reliance Retail, Birla‘s retail venture) or foreign retail giants (Wal-Mart). In other
words, Pantaloon‘s competition is rich, very rich. While competitors may not have
Pantaloon‘s large and diverse experience and knowledge bank, they still have enough money
bank to potentially compensate for that. While the money versus experience competition is
yet to play itself out in the Indian organized retail sector, in most industries money is a pretty
good tool to compete with. Pantaloon, which is almost exclusively a retail body despite
scattered efforts to diversify its portfolio, might find it difficult to raise sufficient resources
to compete with the likes of Wal-Mart and Reliance. They might have a leg-up with their
early-bird advantage but how long that will last in the face of stiff competition is anyone‘s
guess. With capital intensive inputs like real-estate and supply chain development likely to
dictate success in the organized retail market, Pantaloon might find it difficult to compete on
an equal footing. Moreover competitors like Reliance will more than likely throw around
their financial weight in hopes of achieving a dominant market-share; especially if no other
One approach that the company has implemented is the formation of JV‘s with a number of
leading international companies and brands from which it may be able to derive additional
funding given it delivers strong results. Yet, there is no guarantee that JV‘s will be a
sufficient source of additional resources and Pantaloon‘s prosperous market position might
turn precarious if it doesn‘t address its lack of resources compared to its competitors.
2) Connections and Relationships
Pantaloon made the right decision by making supply-chain development secondary to
experimentation to gain dominance in the unknown organized retail market. Its recent
initiative to begin paying attention to back-end-operations would be successful if it weren‘t
faced with formidable competition. Companies like
Reliance that does business in a variety of sectors and locations in India might be better
suited to developing a strong supply-chain and back-end operation system. Leveraging their
diverse relationships across the board of Indian industry, Reliance might be able to quickly
develop a sourcing-network that is both efficient and cheap. This scenario has the potential
of robbing Pantaloon of the advantages it has enjoyed from its early presence and better
understanding of the market.
Through a policy of carefully executed and comprehensive multi-format experimentation
Pantaloon has managed to understand and take advantage of the compressed evolution of the
organized Indian retail industry to become the dominant player. Kishore Biyani has
successfully spearheaded pantaloon toward a point of ‗perennial renaissance‘ having high
flexibility and high focus. As far as industry knowledge, experience and skill are concerned,
Pantaloon with its dream team is looking in good shape. The company has also successfully
identified the next steps in terms of real-estate acquisition and supply-chain development to
further its growth. It has clearly won round one of organized retail in India.
Now Pantaloon is faced with stiff competition that is financially better-equipped. How it
takes advantage of its existing resources, accesses additional capital and competes with its
competitors in a race to develop an efficient supply-chain will determine the future of the
company. While the task is daunting,
Pantaloon has more than enough advantages and an enormous head-start compared to anyone
However, given past records elsewhere in Asia and Europe, it remains to be seen how
successful foreign retailers are in India. Unless they make corrective changes to their strategy
based on lessons learnt in other countries, they might find India a tough (coco) nut to crack!
High Flexibility and Focus are the corner stone‘s of Kishore Biyani‘s Pantaloon Retail
The Indian retail scenario is poised for a quantum leap. Not only are newer names set to dot
the retail landscape but also new and emerging retail formats will drive the diversity of the
fast-changing retail backdrop. 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. A growing population, a young
workforce and zooming consumer confidence will fuel the expansion of the retail sector. As
organized retail in rural India awaits the arrival of Reliance Retail, current majors like ITC,
Godrej and DSCL are expanding their retail operations by setting up more stores, entering
new states and offering newer product categories. A shift from selling agri-inputs will help
these stores target the non-farming segments. It is a little known fact that, while 25% of the
rural population is not engaged in agriculture, it earns 50% of the rural income. The retail
market is the next growth frontier for corporate India. It offers an opportunity for a large
player to build a Rs. 40,000 Cr retail business spanning multiple categories by 2015 (at
current prices). However, to capitalize on the opportunity, a player needs to be aggressive in
its outlook and build scale quickly.
Rohan Jhaveri (27)
Swastik Karnatki (30)
Gaurav Ladiwala (39)
Bijal Mehta (46)
Pariza Mehta (51)
Mohit Talreja (59)
Group no: 9