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					INDIAN RETAIL MARKETS

       By the turn of the 21st century, the face of the Indian retailing industry

had changed significantly. The retailing industry, which, until the early 1990‟s

was dominated by the unorganized sector, witnessed a rapid growth in the

organized sector with the entry of corporate groups into the retailing market.


      The retail sector in India is witnessing a huge revamping exercise as

traditional markets make way for new formats such as departmental stores,

hypermarkets, supermarkets and specialty stores. Rated the fifth most attractive

emerging retail market, India is being seen as a potential goldmine. A recent

McKinsey study titled “India‟s Retailing Comes of Age” has predicted a retail

revolution in India. While India is the last among the large Asian economies to

liberalize its retail sector, the „licensing raj‟ has well and truly passed.


        Hence, two aspects of retail marketing are Store Retailing and Non-store

Retailing. Store Retailing as the departmental store, which is a store or multi

brand outlet, offering an array of products in various categories under one roof,

trying to cater to not one or two but many segments of the society and Non-

store Retailing as the direct selling, direct marketing, automatic vending. Most

of these stores believe in creating not just a marketing activity with its
customers, but rather favor relationship building with him so as to convert first

time customers into a client.


        A number of Indian and international retailers are entering this nascent,

though dynamic market. Market liberalization and increasingly assertive

consumers are sowing the seeds of a retail transformation that will bring bigger

Indian and multinational players on to the scene. Buoyed by a strong increase in

private consumption, retailing is one industry that is waiting to explode. Though

retail may well be our next sunrise industry after Information Technology,

capitalizing on the opportunities is still a formidable task for retailers. We may

have made several forays into the world of international retailing, but success

has only been moderate. At about 2 per cent of the total global retail market, we

are still only scraping the surface. (Economic Times Knowledge Series –

Changing Gears: Retailing in India, 2003).


        According to B S Nagesh, CEO, Shoppers Stop, “Indian retailing is on

the threshold of growth – early leaders have to take their technology and current

learning into much larger scales. Companies like us will lead in creating retail

experiences and retail brands, whereas mall developers will lead in providing

retail space. But it is for the government to make India a great shopping and

travel destination through right policy decisions and direction.”


       The retail sector in India is witnessing a huge revamping exercise as

traditional markets make way for new formats such as departmental stores,
hypermarkets, supermarkets and specialty stores. Retail is India‟s largest

industry, accounting for over 10 per cent of the country‟s GDP and around eight

per cent of the employment. It has emerged as one of the most dynamic and fast

paced industries with several players entering the market. Western-style malls

have begun appearing in metros and second-rung cities alike introducing the

Indian consumer to a shopping experience like never before. India‟s vast middle

class and its almost untapped retail industry are key attractions for global retail

giants wanting to enter newer markets. The relationship and services offered by

the retailer has emerged as another important issues which were given due

consideration and scored better in their preference list. The importance of

recognition of consumers‟ value system and the discount offered by the retailer

are another important factor which respondent has considered in selecting the

retail showroom. The organized retail sector is expected to grow stronger than

GDP growth in the next five years driven by changing lifestyles, strong income

growth, better products and shopping options, and favourable demographic

patterns. 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. Adding one more feather in cap, notably,

organized retail market has also registered very rapid growth in India. ETIG

(Economic Times Intelligence Group) estimated the size of the organized retail

industry at about Rs. 16,000 cr in 2001-02.
        Due to increased number of retailers and new entrants in retail business,

the management of the business has become of paramount importance for

individual growth of businessmen and also in economic planning of country.

Retail management can orient the efforts of business in right direction and at

depth pace. For this a complete knowledge of basic facts and environmental

changes is necessity of the day to run, develop and maintain the retail business

in Indian circumstances.


       The distribution of consumer products begins with the producer and

ends at the ultimate consumer. Between the producer and the consumer there is

a middleman- the retailer, who links the producers and the ultimate consumers.

Retailing is defined as a conclusive set of activities or steps used to sell a

product or a service to consumers for their personal or family use. It is

responsible for matching individual demands of the consumer with supply of all

the manufacturers.


      Retailers perform specific activities such as anticipating customer‟s

wants, developing assortments of products, acquiring market information, and

financing. A common assumption is that retailing involves only the sale of

products in stores. However, it also includes the sale of services like those

offered at a restaurant, parlour, or by car rental agencies. The selling need not

necessarily take place through a store. Retailing encompasses selling through

mail, the internet, door visits- any channel that could be used to approach the
consumer. Manufacturers like Dell Computers sell directly to the consumers

and also perform the retailing function.


       The India Retail Industry is the largest among all the industries,

accounting for over 10 per cent of the country‟s GDP and around 8 per cent of

the employment. The Retail Industry in India has come forth as one of the most

dynamic and fast paced industries with several players entering the market. But

all of them have not yet tasted success because of the heavy initial investments

that are required to break even with other companies and compete with them.

The India Retail Industry is gradually inching its way towards becoming the

next                               boom                                industry.

         The total concept and idea of shopping has undergone an attention

drawing change in terms of format and consumer buying behaviour, ushering in

a revolution in shopping in India. Modern retailing has entered into the Retail

market in India as is observed in the form of bustling shopping centres, multi-

storied malls and the huge complexes that offer shopping, entertainment and

food               all               under              one                roof.

         A large young working population with median age of 24 years,

nuclear families in urban areas, along with increasing workingwomen

population and emerging opportunities in the services sector are going to be the

key factors in the growth of the organized Retail sector in India. The growth

pattern in organized retailing and in the consumption made by the Indian
population will follow a rising graph helping the newer businessmen to enter the

India                               Retail                              Industry.

          In India the vast middle class and its almost untapped retail industry

are the key attractive forces for global retail giants wanting to enter into newer

markets, which in turn will help the India Retail Industry to grow faster. Indian

retail is expected to grow 25 per cent annually. Modern retail in India could be

worth US$ 175-200 billion by 2016. The Food Retail Industry in India

dominates the shopping basket. The Mobile phone Retail Industry in India is

already a US$ 16.7 billion business, growing at over 20 per cent per year. The

future of the India Retail Industry looks promising with the growing of the

market, with the government policies becoming more favourable and the

emerging technologies facilitating operations.


Retail importance in India

        Retail is India‟s largest industry, accounting for over 10 per cent of the

country‟s GDP and around eight per cent of the employment. Retail industry in

India is at the crossroads. It has emerged as one of the most dynamic and fast

paced industries with several players entering the market. But because of the

heavy initial investments required, break even is difficult to achieve and many

of      these    players     have      not       tasted   success      so     far.

          However, the future is promising, the market is growing, government
policies are becoming more favourable and emerging technologies are

facilitating operations.


          Retailing in India is gradually inching its way toward becoming the

next boom industry. The whole concept of shopping has altered in terms of

format and consumer buying behaviour, ushering in a revolution in shopping in

India. Modern retail has entered India as seen in sprawling shopping centres,

multi-storied malls and huge complexes offer shopping, entertainment and food

all under one roof. The Indian retailing sector is at an inflexion point where the

growth of organized retailing and growth in the consumption by the Indian

population is going to take a higher growth trajectory. The Indian population is

witnessing a significant change in its demographics. A large young working

population with median age of 24 years, nuclear families in urban areas, along

with increasing working-women population and emerging opportunities in the

services sector are going to be the key growth drivers of the organized retail

sector in India.


        Retailing is one of the pillars of the economy in India and accounts for

35% of GDP. The retail industry is divided into organized and unorganized

sectors. Over 12 million outlets operate in the country and only 4% of them

being larger than 500 sq ft (46 m²) in size. 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,

paan/beedi shops, convenience stores, hand cart and pavement vendors, etc.


Growth of retail in India

       An increasing number of people in India are turning to the services sector

for employment due to the relative low compensation offered by the traditional

agriculture and manufacturing sectors. The organized retail market is growing at

35 percent annually while growth of unorganized retail sector is pegged at 6

percent.

           The Retail Business in India is currently at the point of inflection. Rapid

change with investments to the tune of US $ 25 billion is being planned by

several Indian and multinational companies in the next 5 years. It is a huge

industry in terms of size and according to management consulting firm

Technopak Advisors Pvt. Ltd., it is valued at about US $ 350 billion. Organized

retail is expected to garner about 16-18 percent of the total retail market (US $

65-75 billion) in the next 5 years.


           India has topped the A.T. Kearney‟s annual Global Retail Development

Index (GRDI) for the third consecutive year (5), maintaining its position as the

most attractive market for retail investment. The Indian economy has registered
a growth of 8% for 2007. The prediction for 2008 is 7.9%. (6) The enormous

growth of the retail industry has created a huge demand for real estate. Property

developers are creating retail real estate at an aggressive pace.


       With over 1,000 hypermarkets and 3,000 supermarkets projected to come

up by 2011, India will need additional retail space of 700,000,000 sq ft

(65,000,000 m²) as compared to today. Current projections on construction

point to a supply of just 200,000,000 sq ft (19,000,000 m²), leaving a gap of

500,000,000 sq ft (46,000,000 m²) that needs to be filled, at a cost of US$15-18

billion.


       Organized retail at present comprises merely 3% of the total     market in

India, and is likely to grow from its current 3% to 15-20 % over the next 10

years analysts feel. The contribution of retail industry to India‟s GDP is more

than 13%. The organized retail sector is expected to grow at a higher rate than

GDP growth in the next five years, says KPMG report titled ‘Consumer

Market in India’. FDI Confidence Index survey done by AT Kearney showed

that the retail industry is one of the most attractive sectors for FDI‟s in India.

Opening the door partly – 51% FDI permitted to Single Brand Retail. Very

shortly the market will also witness IPO‟s for some these Retail Ventures.


According to the 8th Annual Global Retail Development Index (GRDI) of AT

Kearney, India retail industry is the most promising emerging market for

investment. In 2007, the retail trade in India had a share of 8-10% in the GDP
(Gross Domestic Product) of the country. In 2009, it rose to 12%. It is also

expected            to             reach        22%              by        2010.

According to a report by Northbride Capita, the India retail industry is expected

to grow to US$ 700 billion by 2010. By the same time, the organized sector will

be 20% of the total market share. It can be mentioned here that, the share of

organized sector in 2007 was 7.5% of the total retail market.


Indian Retail Scenario

In 2004 about 12 million sq feet space was occupied by the organized retail

industry and by the end of 2006 it crossed 40 million sq feet.


Indian retail industry spreads over more than 6 million outlets (2.4 million

urban and 3.6 million in rural).


Just over 8 per cent of India‟s population is engaged in retail (compared to 25

per cent in the United States).


The Indian Retail Market

        Providing good growth potential for global retailers amid economic

slowdown, India has emerged as most alluring market for investment in the

retail sector, surpassing China, Russia and the United Arab Emirates.


       According to New York, Press Trust of India, India is top retail

destination for investors.
       India has been ranked as the most attractive nation for retail investment

among 30 emerging markets by US-based global management consulting firm

AT Kearney.

      According to the entity‟s Global Retail Development Index (GRDI), India

is followed by Russia (2), China (3), United Arab Emirates (4) and Saudi

Arabia (5).


Improved ranking

      India was placed at the second spot last year. Similarly, the other four

countries in the top five have improved their ranking, with the United Arab

Emirates jumping 16 places from previous year‟s 20th rank. Noting that “larger,

resilient developing countries sit atop the 2009 GRDI as they are most likely to

lead the economic recovery,” the report said India has become the most

attractive destination for retail investment for the fourth time in five years.


        Indian market has high complexities in terms of a wide geographic

spread and distinct consumer preferences varying by each region necessitating a

need for localization even within the geographic zones. India has highest

number of outlets per person (7 per thousand) Indian retail space per capita at 2

sq ft (0.19 m²)/ person is lowest in the world Indian retail density of 6 percent is

highest in the world. 1.8 million Households in India have an annual income of

over 45 lakh. Delving further into consumer buying habits, purchase decisions

can be separated into two categories: status-oriented and indulgence-oriented.
CTVs/LCDs, refrigerators, washing machines, dishwashers, microwave ovens

and DVD players fall in the status category. Indulgence-oriented products

include plasma TVs, state-of-the-art home theatre systems, iPods, high-end

digital cameras, camcorders, and gaming consoles. Consumers in the status

category buy because they need to maintain a position in their social group.

Indulgence-oriented buying happens with those who want to enjoy life better

with products that meet their requirements. When it comes to the festival

shopping season, it is primarily the status-oriented segment that contributes

largely to the retailer‟s cash register.


          The break-up of organized retailing sales into various product

categories Books, Music & Gifts: 3% Mobile Handsets: 3% Clothing & Textile:

39% Food & Grocery: 11% Consumer Durables: 9% Footwear: 9% Furniture &

Furnishings: 8% Catering Services: 7% Jewellery & Watches: 7% Others: 4%.


Major Indian Retailers

      Indian apparel retailers are increasing their brand presence overseas,

particularly in developed markets. While most have identified a gap in countries

in West Asia and Africa, some majors are also looking at the US and Europe.

Arvind Brands, Madura Garments, Spykar Lifestyle and Royal Classic Polo are

busy chalking out foreign expansion plans through the distribution route and

standalone stores as well. Another denim wear brand, Spykar, which is now
moving towards becoming a casual wear lifestyle brand, has launched its store

in Melbourne recently. It has also opened many stores in London.


         The low-intensity entry of the diversified Mahindra Group into retail is

unique because it plans to focus on lifestyle products. The Mahindra group is

the fourth large Indian business group to enter the business of retail after

Reliance Industries Ltd, the Aditya Birla Group, and Bharti Enterprises Ltd. The

other three groups are focusing either on perishables and groceries, or a range of

products, or both.


Pantaloon

Pantaloon is one of the biggest retailers in India with more than 450 stores

across the country. Headquartered in Mumbai, it has more than 5 million sq. ft

retail space located across the country. It's growing at an enviable pace and is

expected to reach 30 million sq. ft by the year 2010. In 2001, Pantaloon

launched country's first hypermarket „Big Bazaar‟. It has the following retail

segments:


      Food & Grocery: Big Bazaar, Food Bazaar

      Home Solutions: Hometown, Furniture Bazaar, Collection-I

      Consumer Electronics: e-zone

      Shoes: Shoe Factory

      Books, Music & Gifts: Depot
      Health & Beauty Care: Star, Sitara

      E-tailing: Futurebazaar.com

      Entertainment: Bowling Co.


Tata Group

Tata group is another major player in Indian retail industry with its subsidiary

Trent, which operates Westside and Star India Bazaar. Established in 1998, it

also acquired the largest book and music retailer in India „Landmark‟ in 2005.

Trent owns over 4 lakh sq. ft retail space across the country.

RPG Group

RPG Group is one of the earlier entrants in the Indian retail market, when it

came into food & grocery retailing in 1996 with its retail Food world stores.

Later it also opened the pharmacy and beauty care outlets „Health & Glow‟.

Reliance

Reliance is one of the biggest players in Indian retail industry. More than 300

Reliance Fresh stores and Reliance Mart are quite popular in the Indian retail

market. It's expecting its sales to reach Rs. 90,000 crores by 2010.

AV Birla Group

AV Birla Group has a strong presence in Indian apparel retailing. The brands

like Louis Philippe, Allen Solly, Van Heusen, and Peter England are quite

popular. It's also investing in other segments of retail. It will invest Rs. 8000-

9000 crores by 2010.
Retail formats in India


Malls

Today malls are the largest form of organized retailing. 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, and 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.
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.

MBO’s

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.

Mom-and-pop stores
They are family owned business catering to small sections; they are

individually handled retail outlets and have a personal touch.


E-trailers


These are retailers providing online buying and selling of products and services.


Vending


It is a relatively new entry, in the retail sector. Here beverages, snacks and

other small items can be bought via vending machine.


Category killers


These are small specialty stores that offer a variety of categories. They are

known as category killers as they focus on specific categories, such as

electronics and sporting goods. This is also known as Multi Brand Outlets or

MBO's.


Specialty stores


These are retail chains dealing in specific categories and provide deep

assortment. Mumbai's Crossword Book Store and RPG's Music World is a

couple of examples.


Entry of MNCs
       The world's largest retailer by sales, Wal-Mart Stores Inc and Sunil

Mittal's Bharti Enterprises, have entered into a joint venture agreement and they

are planning to open 10 to 15 cash-and-carry facilities over seven years. The

first of the stores, which will sell groceries, consumer appliances and fruits and

vegetables to retailers and small businesses, is slated to open in north India.

Carrefour, the world‟s second largest retailer by sales, is planning to setup two

business entities in the country one for its cash-and-carry business and the other

a master franchisee which will lend its banner, technical services and know how

to an Indian company for direct-to-consumer retail.


        The world‟s fifth largest retailer by sales, Costco Wholesale Corp

(Costco) known for its warehouse club model is also interested in coming to

India and waiting for the right opportunity.

       Opposition to the retailers' plans has argued that livelihoods of small

scale and rural vendors would be threatened. However, studies have found that

only a limited number of small vendors will be affected and that the benefits of

market expansion far outweigh the impact of the new stores.


Emerging Markets

       It pointed out that unlike most developed markets, GDP in emerging

markets is expected to continue to grow, albeit at a slower rate, and populations

in many countries are younger, increasingly urban and showing a growing

interest in modern retail formats. A report by Indian Council of Research in
International Economic Relations submitted last year said the nation‟s Indian

retail market was estimated to be of US$322 billion in 2007 and is expected to

reach a figure of US$590 billion by 2011-12. It said emerging markets continue

to represent attractive investment opportunities for global retailers and the

economic downturn has made entry to many of these markets more critical and

relevant.


      The Indian retail market is the fifth largest retail destination all across the

globe. It has been ranked as the most attractive emerging market for investment

in the retail sector in 2009. In the entire Gross Domestic Product of India, the

share of retail trade was between 8-10% in 2007, where presently it has touched

around 12%, and in all probability will touch 22% by the end of 2010.


      Consumerism is on the rise with the rising trend of middle class segment

in the country. The Indian consumer (retail) market, in all probability, will grow

four times by 2025. The value of India's retail market has touched US$ 511

billion in 2008. India has escalated up to the 39th most preferred retail

destination globally in 2009 (in 2008, they ranked 44th).


Components of the Indian retail Market

Banks, capital goods, engineering, fast moving consumer goods (FMCG),

software services, oil marketing, power, two-wheelers and telecom companies -

they are the main driving force in the retail growth of India. Global retailers still

now find India to be among the most attractive destination. On July 2009, the
foreign direct investment (FDI) inflows, in single-brand retail trading, touched

approximately US$ 46.60 million.


Size of Indian retail market

India's retail sector is estimated to touch US$ 833 billion by 2013 and US$ 1.3

trillion by 2018, with a compound annual growth rate (CAGR) of 10% - which

is quite lucrative. Al these estimations are due to the fact that the consumer

spending has seen a rise of around 75%, in the past four years. The organized

Indian retail market is slated to grow at a CAGR of 40%, touching US$ 107

billion by 2013.

      5% of the Indian retail market is occupied by the organized retail sector,

which is all slated to witness the majority number of large format malls and

branded retail stores. The increase in the number of such malls would be first

seen in South India, followed by North, West and the East over the coming two

years. Another latest research shows that more than 100 malls spanning a space

of over 30 million sq feet is estimated to open in India between 2009 and 2010

end. Investment in the organized retail market would be around US$ 503.2

million in 2009. This could go further up to US$ 1.26 billion in the next four to

five years, at a CAGR of 40%.

       India has emerged as the third most attractive market destination for

apparel retailers over the years. In India, apparel is the second largest retail

category and will have a 12-15% growth rate every year. Apparel, food and
grocery are expected to lead the organized retail sector in India.

         The Indian retail market has been witnessing exponential growth with

developments taking place not only in major cities and metros but tier-II and

tier-III cities in India are also on the focus.


Developments in the Indian retail market

        Marks & Spencer Reliance India has plans to open 35 stores over the

next five years. The 51:49 joint ventures between UK's Marks and Spencer and

Reliance Retail Ltd. already have 15 stores spanning India.


      Carrefour SA, the largest retailer of Europe, is expected to start wholesale

operations in India by 2010 and also has shared its plan for setting up the first

cash-and-carry outlet in the National Capital Region. The present status looks

alluring with Carrefour exporting goods valued US$ 170 million from India to

Europe, UAE, Indonesia, Europe, Thailand, Singapore and Malaysia.


       Jewellery manufacturer and retailer, Gitanjali Group and MMTC will set

up a chain of exclusive retail outlets jointly known as Shuddi-Sampurna

Vishwas. This joint venture will see 60 stores across India by end of 2009. They

will retail hallmarked gold and diamond Jewellery.


      Mahindra Retail, a part of the Mahindra Group, is hopeful about its

investment plans to the tune of US$ 19.8 million. This investment will help

them come out with a specialty retail concept by 2010 known as 'Mom and Me'.
Pantaloon Retail India (PRIL) has investment plans of more than US$ 103.3

million for expanding its seamless mall Central and the value fashion format

Brand Factory in the next two years.


     Bharti Retail has launched eight Wal-Mart private labels-including two

large labels 'Great Value' and 'George'- in its supermarket chain Easy day. It is

all set to attract more consumers because of their international design and

packaging.


     Italian sportswear brand Lotto is all set to launch two new footwear brands

Sabots and Calcetto in India very soon. By March 2010, they will have at least

50 exclusive outlets.


    Steel players such as JSW Steel and Essar Steel are focusing on opening up

more retail outlets across the Indian market. JSW Steel presently has 50 steel

retail outlets known as JSW Shoppe and the target is to increase the number to

around 200 by March 2010. Similarly, Essar Steel has retail outlets known as

Essar hypermarts. With around 150 such outlets, this segment is responsible for

about 20-25% to the Essar's total revenue.


     Expansion mode for the large retailers - Aditya Birla Retail, Reliance

Retail and Shoppers Stop, and food chains like McDonald's as the rentals are

dropping sharply.
     Few of the major international brands are aiming to establish a strong

foothold in India. Few of such brands are The Pizza Company and Spicchio

Pizza (from Thailand), Coffee Club from Australia, Japanese brand Lolita

Fashion, Revive Juice Bars from the UK, Mrs Fields Cookies and Jamba Juice

from the US, and French fashion brand Jules.


    Retail brands like United Colors of Benetton, Tommy Hilfiger and Puma

have been opening up factory outlets for selling excess stock. This step is

always an interesting method for wooing the price-conscious buyers.


Retail Sector in India

     Post liberalization the Retail sector in India is heralded as one of the

sunrise industries. It has never been better for the retail sector in India. Today

within the booming service sector, retailing is the single biggest contributor in

terms of GDP to the National Income. Retailing itself can be further divided

into organized and unorganized sector.

Organized Sector

       Organized retailing came into its own in tandem with the retail boom.

Indian corporate like Reliance, ITC and Pantaloon have made foray into this

segment along with several foreign brands changing the landscape of retailing

in India. It coincided with the high growth in the Indian economy, resulting in

greater purchasing power amongst the middle class, which in turn went on a

purchasing spree. Other factors like consumer awareness, investments by
venture capitalists and private equity firms have also contributed to the growth

of organized retail. The growth in the organized retailing has resulted in the

establishment of departmental stores, supermarkets, rural retailing, e-retailing

and luxury retailing. Each one of these formats has a unique advantage and the

scale of operation depends upon factors like average footfalls, sales per sq ft etc.

However the process of acquiring license is still a bottleneck for the

development of Indian retailing.

Unorganized sector

          The unorganized sector is still dominant in India, since it has the

advantage of low investment need. Since retailing is the process of connecting

the supplier and consumer, pricing of products is very important in a price

conscious market like India. Unorganized retailers play an important role in this

regard and are a vital part of the supply chain. If unorganized retail segment

positions itself correctly, it can carve a niche for itself in India's booming retail

sector.


Challenges Faced By the Industry


      Even though India has well over 5 million retail outlets of different sizes

       and styles, it still has a long way to go before it can truly have a retail

       industry at par with International standards. This is where Indian

       companies and International brands have a huge role to play.
   Indian retailing is still dominated by the unorganized sector and there is

    still a lack of efficient supply chain management. India must concentrate

    on improving the supply chain management, which in turn would bring

    down inventory cost, which can then be passed on to the consumer in the

    form of low pricing.

   Most of the retail outlets in India have outlets that are less than 500

    square feet in area. This is very small by International Standards.

   India's huge size and socio economic and cultural diversity means there is

    no established model or consumption pattern throughout the country.

    Manufacturers and retailers will have to devise strategies for different

    sectors and segments which by itself would be challenging.

   The tax structure in India favours small retail business

   Lack of adequate infrastructure facilities

   High cost of real estate

   Dissimilarity in consumer groups

   Restrictions in Foreign Direct Investment

   Shortage of retail study options

   Shortage of trained manpower

   Low retail management skill
       The drawbacks provide a huge opportunity for the retail industry. The

entry of foreign majors like Benetton, Dairy Farm and Levis underline the

opportunity for the industry in India.


Future trends

       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%.


      Organized retailing is dominated by large conglomerates like TATA's,

       ITC, RPG group, Piramals and Rahejas apart from the various MNC's.

       This trend is expected to continue in future.

      Textile and Garment companies like Raymond, Madura Garments and

       Arvind Denims have achieved forward integration by opening their own

       retail outlets for their branded garments. This gives them a huge

       advantage by reducing the role of intermediaries, increase profit margin

       and enables them to be close to the end user.
   Inflation and the global meltdown have had an effect on the growth of

    retailing in India. Experts believe the retail industry should focus on

    distinction, branding, after sales service, exploring commoditization,

    share of purchasing power and innovation to tide over the crisis.

   The year 2009 is seen as a year of consolidation for Indian retail sector.

    By ushering in best practices and restructuring business models, the retail

    industry in India is expected to adjust to the changing market conditions

    and ensure new opportunities for growth.

   The retail sector is expected to grow at 8 to 12 per cent in 2009-2010.