RETAIL MANAGEMENT IN GLOBAL MARKET

TOPIC : IMPLICATION OF GLOBALISATION ON INDIAN RETAIL

MARKETING : ISSUES,CONCERN & CHALLENGES

ABSTRACT
We are living in the new millennium. The new millennium is going to be significantly
different from previous one. Liberalization, privatization & globalization (popularly
known as LPG model) has brought in increased competition. This competition is
going to increase in the days to come. The purpose behind introducing LPG model in
NIP 1991,was to put the country at the international level in commerce & industry &
thereby to enhance the industrial development, economy & modern strategies as
well as aspects of the governance of corporate sector.
Globalization means the dismantling of trade barriers between nations and the
integration of the nations economies through financial flow, trade in goods and
services, and corporate investments between nations. Globalization of the Indian
Industry took place in its various sectors such as steel, pharmaceutical, petroleum,
chemical, textile, cement, retail, and BPO. The revolution in retailing industry has
brought many changes and also opened door for many Indian as well as foreign
players.
This paper analyses the Indian Retail formats in the past and present, the Growth of
retailing in India, changing trends in Indian Retail industry, Opportunities &
challenges for Indian retail industry.

INTRODUCTION
The word Retailing refers to any activity that involves the direct sale to an individual
customer or end user. Retailing has been the most active and attractive sector of the
last decade. In India, the retail sector is the second largest employer after
agriculture. The retail industry in India is estimated to employ about 8% of the total
labor force. Retail Industry in India is going through transition phase. The retail
industry in India is enjoying boom time and job opportunities in retailing have been
increasing. In fact, retailing has emerged as a new stream of management
curriculum, providing new areas of employment.
The Indian retail industry is divided into organised and unorganised sectors:
Organised 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.
Unorganised retailing, on the other hand, refers to the traditional formats of low-cost
Retailing. Unorganised sector has been there in India for centuries, these are named
as Mom-Pop stores.for example, the local kirana shops, owner manned general
stores, paan/beedishops, convenience stores, hand cart and pavement vendors, etc.
Traditionally Indian retail market has been dominated to a large extent by the
unorganized sector. But the growth of the organized sector has been steadily
increasing especially after liberalization of the Indian economy, which has
encouraged large private sector players to invest in this sector. The process started
with the establishment of the Shoppers Stop outlet at Andheri, Mumbai in
1991.Then, other organized retailing stores like future groups Pantaloons, Kids
Kemp, Crossroads, RPGs Music world, Pyramids etc followed the trend.
Liberalization of the economy, rise in per capita income and growing consumerism
have encouraged large business houses and manufactures to setup retail formats,
real estate companies and venture capitalist are investing in retail infrastructure.
Many foreign retailers have also entered the market through different routes such as
wholesale, cash-and carry, local manufacturing, franchising, test marketing etc.
With the growth in organized retailing, unorganized retailers are fast changing their
business models and implementing new technologies and modern accounting
practice to face competition. For a long time corner grocery store was the only
choice available to the consumer, especially in urban areas. This is slowly giving way
to international formats of retailing. The traditional food & grocery segment has seen
the emergence of supermarket, convenience store & fast food chains.

AN OVEVIEW OF GLOBAL RETAIL INDUSTRY

Retailing is the worlds largest private sector contributing to 8% of the
GDP and it employs one Sixth of the labor force. The estimated retail trade is
expected to be 7 trillion US $. Many countries have developed only due to retailing
and presently we see there is a vast change in the retail industry.
Retail is more developed in big countries & is being more organized in those
courtiers. Organized sector is upto 85% is US, upto 81% in Taiwan, 50% in Malaysia,
40 % Thailand, 30 % in Indonesia. It is very poorly developed in the developing
countries like in India it is mere 3 % in.
According to Deloitte Report 2010, 9 of the top 20, 19 of the top 50 & 78 of the top
200 retail organization in the world were U.S. based companies.
Retail stores constitute 20% of US GDP & are third largest employer segment in
USA. According to the US department of Labour about 22 million Americans are
employed in retailing Industry in about 2 million stores i.e. one out of every five
employee is in retail store.
According to International consulting group Deloitte top 10 global retailer had
combined sales of $ 1.5.trillion in 2008, Leading the chart is US, followed by Japan,
Germany, the UK & France. China is in sixth place above Italy, Canada, Spain &
Korea.
Top 3 Global retailer are :
Wal Mart (USA)
Carrefour (France)
Metro AG (Germay)
China on the other hand has attracted several global retailer in recent times. Retail
sector employs 7% of the population in china.Major markets like USA and UK retail
spending is expected to decline, while emerging markets like China and India is
expected to grow in 2011.

AN OVEVIEW OF INDIAN RETAIL INDUSTRY

RETAIL FORMAT IN PAST & PRESENT
The Indian retail industry is the fifth largest in the world. Comprising of organized and
unorganized sectors, India retail industry is one of the fastest growing industries in
India, especially over the last few years. The retail Industry in India is undergoing a
major shake-up as the country is witnessing a retail revolution.
The old traditional formats are slowly changing into more complex and bigger
formats. Malls & Mega Malls are coming up in almost all the places be it metros or
smaller cities, across the length & Breadth of the country. Modern retail formats such
as Supermarkets, Specialty Stores, Chain Stores, Departmental Stores, Hyper
Markets & Western Style mall have begun appearing in metro. Even tier II cities like
Noida, Amritsar, Kochi, Gurgaon are emerging as favoured destination for the retail
sector with their huge growth & potential.
After the waves of globalization, marketing scenario ,particularly retailing has
changes radically. The significant trend in the market is development of a
combination of retail and entertainment centers. While the number of shopping malls
has been a spurt in the recent past, the future development is now increasingly being
focused on providing for leisure activities as well. A considerable number of
multiplexes are being developed as an integral part of retail malls along with facilities
such as food courts, and video games parlors, focused on providing leisure activities
as well.

GROWTH OF RETAILING IN INDIA

Indian retail industry is wearing new clothes & with the three year
compounded annual growth rate of 46.64 %, retail is the fastest growing
sector in Indian economy.

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 reached to around
22% in 2010.

Today Indias retail industry is the second largest sector, after agriculture,
which provides employment. It contributes to 8 % of employment.

Share of Organized retail in India which was only 3% during 2006, increased
to 6% in 2010. It has risen in a very short period mainly on Volumes and not a
value-driven growth.

From the handful of malls in mid 90s ,India today has large number of malls
spread across large & small cities & also good number of new malls are
coming up all over India, 40% of them concentrated in smaller cities.

For the 4th time in five years, India has been ranked as the most attractive
nation for retail Investment among 30 emerging markets by the US-based
global Management consulting firm, A T Kearney in its 8th annual Global
Retail Development Index (GRDI) 2009.India remains among the Leaders in
the 2010 GRDI and presents major retail Opportunities.

There is no doubt that the Indian retail scene is booming. A number of large
corporate houses Future Group,Tata's, Raheja's, Piramals's, Goenka's
have already made their foray into this arena, with beauty and health stores,
supermarkets, self-service music stores, new age book stores, every-day-lowprice stores, computers and peripherals stores, office equipment stores and
home/building construction stores.

The Indian retail scene has witnessed too many players in too short a time.
Indian firms like Future Group (pantaloons Retail & Big Bazar) Trents
Westside, Wills Life Stylestores, Caf Cofee Day are present in india in
different formats. Top players are Pantaloons, Trent, and ShoppersStop, RPG
Group. Today the organized players have attacked every retail category.
International retailers too have evinced interest in Indias retail market. The
latest entry is that of global retail giant Wall-Mart, tied up with Bharti Group &
Entry of Careefour by opening its store in New Delhi Shahadra.

The BMI India Retail Report for the third-quarter of 2010, the total retail sales
in India was US $ 353 billion in 2010. But share of organized retail is only US$
8 billion. It is forecasts that the total retail sales will grow from US$ 353 billion
in 2010 to US$ 543.2 billion by 2014.

Organised Retail Penetration (ORP) is highest in footwear with 22% followed

by clothing. Though food & grocery accounts for largest share of retail spend
by consumer at about 76%, only 1% of this market is in organized sector.
FMCG stores accounts nearly 75% of retail outlet.

India continues to be among the most attractive countries for global retailers.
Foreign direct investment (FDI) inflows between April 2000 and April 2010, in
single-brand retail trading, stood at US$ 194.69 million, according to the
Department of Industrial Policy and Promotion (DIPP).

FUTURE PROSPECT
Established retailers are tapping into the growing retail market by introducing
innovative store formats. Future Group, Reliance Retail, More (owned by Aditya Birla
Group) and Shoppers Stop (owned by K Raheja Group) already plan to expand.
Furthermore, according to a report titled 'India Organised Retail Market 2010',
published by Knight Frank India On May 2010 during 2010-12, around 55 million
square feet (sq ft) of retail space will be ready in Mumbai, national capital region
(NCR), Bengaluru, Kolkata, Chennai, Hyderabad and pune. Besides, between 2010
and 2012, the organised retail real estate stock will grow from the existing 41 million
sq ft to 95 million sq ft.
According to a market research report published in pune 2008 by RNCOS titled,
'Booming Retail Sector in India', organised retail market in India is expected to reach
US$ 50 billion by 2011. The key findings of the report are:
Number of shopping Malls is expected to increase at a CAGR (Compound
Annual growth Rate) of more than 18.9 per cent from 2007 to 2015.

The next phase of Growth is expected to come from rural markets.Rural

market is projected to dominate the retail industry landscape in India by 2012
with total market share of above 50 per cent

Driven by the expanding retail market, the third party logistics market is
forecasted to reach US$ 20 billion by 2011

Apparel, along with food and grocery, will lead organized retailing in India.

Spain's Inditex, Europe's largest clothing retailer opened the first store of its flagship
Zara brand in India in June 2010. It further plans to open a total of five Zara outlets in
India.
Bharti Retail, Owner of Easy Day storesupermarkets and Hyper martsplans to
invest about US$ 2.5 billion over the next five years to add about 10 million sq ft of
retail space in the country by then, according to a company spokesperson.
Chinese retail Major, Yishion has entered the Indian market and plans to have at
least 125 points of sales, including exclusive stores and Multi-brand outlets, across
India by 2012.
British high street Retailer, Marks and Spencer (M&S) plans to significantly Increase
its retail presence in India, targeting 50 stores in the next three years. M&S currently
operates 17 Stores in India through a joint venture (JV) with Reliance Retail.
Leading watchmaker Titan Industries Limited plans to invest about US$ 21.83 billion
for opening 50 premium watch outlets Helios in next five years to attain a sales
target of US$ 87.31 million. We are looking to open Helios outlets in Mumbai, Delhi,

Hyderabad, Kolkata, Chennai, Pune, Ahmedabad etc in next 12 months," said Ajay
Chawla, Vice President (Retail), Titan.
FDI IN RETAIL SECTOR
In spite of the recent developments in retailing and its immense contribution to the
economy, retailing continues to be are the least evolved industries and the growth of
organised retailing in India has been much slower as compared to rest of the world.
Foreign Direct Investment (FDI) in the retailing sector is not permitted yet, in order to
protect the interests of the small retailers.
Since 1997, the government has allowed 100 percent foreign participation in the
retail sector, for Cash-and-Carry wholesale route where wholesalers cannot open
retail shops to sell to consumers directly, and for franchising.
51 % FDI is permitted in one brand shops like Nike, Reebok etc.

OPPORTUNITIES
AT Kearneys study on Global Retailing Trend found that India is the least
competitive as well as least saturated of all major global market. The report further
states that Global retailers would take advantage of the most favourable FDI rules
that are likely in India & enter the country through partnership with local retailers.
Currently the market share of organized retail is 6% of total retail industry, thereby
leaving a huge untapped opportunity.
A good talent pool, unlimited opportunities, huge market & availability of quality
material at cheaper cost is expected to make India overtake the worlds best retail
economies by 2042, according to Indian industry players.
The retail Industry in India according to experts will be a major employment
generator in future.

CHALLENGES

Retail sector does not have Industry status yet making it difficult for retailer to
raise finance from the banks to fund their expansion plan.

Multiple clearance are required by the same company for opening new outlets
adding to the cost incurred & time taken to expand presence in the country.

The next problem in setting up organized retail operations is that of supply

chain logistics. India lacks a strong supply chain when compared to Europe or
the USA. The existing supply chain has too many intermediaries: Typical
supply chain looks like:- Manufacturer - National distributor - Regional
distributor - Local wholesaler - Retailer - Consumer. In addition to fragmented
supply chain, the trucking and transportation system is antiquated. The
concept of container trucks, automated warehousing is yet to take root in
India.

Lack of adequate infrastructure with respect to roads, electricity, cold chains

and ports has further led to many constraints. retail chains have to resort to
multiple vendors for their requirements, thereby, raising costs and prices.

The Industry is facing a severe shortage of talented professionals, especially

at the middle management level. Trained manpower shortage is a challenge
facing the organized retail sector in India. The Indian Retailer has difficulty in
finding trained persons & has to pay more in order to retain them.

The available talent pool does not back retail sector as the sector has only
recently emerged from its nascent phase. Further, retailing is yet to become a
preferred career option for most of Indias educated class that has chosen
sectors like IT, BPO and financial services.

Even though the Government is attempting to implement a uniform valueadded tax across states, the system is currently plagued with differential tax
rates for various states leading to increased costs and complexities in
establishing an effective distribution network.

The Indian Govt. has allowed 51% FDI in India Retail Sector to one brand
shop only. This has made the entry of global retail giants to organized retail
sector in India difficult. But the global retail giants like Tesco, Wal-Mart, Metro
AG are entering indirectly through franchisee agreement & cash & carry
wholesale trading. Many Indian Companies are also entering to Indian
organized sector like Reliance Industries Ltd., Pantaloons, Bharti Telecom.
But they are facing stiff competition from these global retail giants.

Emergence of organized sector &entry of global giants is adversely affecting

the business of unorganized sector.

RECOMMENDATIONS

If FDI is allowed into organized retail, it will allow more foreign players in
organized retail which will lead to increased competition & improvement in
performance & quality. It should be in the phased manner so as to allow time
for domestic retailer to adjust. Allowing 51 percent retail FDI in single brand
retailing is a welcome move in this direction. It is expected that the
government will create further opportunities for the organized retail to come
up as home grown investment is always sweeter than foreign Investment.

Information Technology is a major problem and India must act fast if it wishes
to create a smooth field for organized retailing. Digitization of services will
make transfer of goods easy and an improvement in supply chain management
will definitely play a significant role in attracting more consumers and less
consumer grievances. Besides, it will generate easier payments option for
customer and easier money movement for the CEOs of these highly
diversified malls.

Government should simplify the rules, regulation, & procedural formalities of

setting up & expansion of business plan by retail industry.

Growth of organized sector is adversely affecting unorganized & small

retailers. Hence there should be restricted Zone imposed by government for
the purpose of city planning. Eg. Supermarket/Hyper marts should be kept
away from the city centers to protect the unorganized & small retailers, who
operate in these areas.

Improvement in infrastructure, logistic & supply chain in needed.

CONCLUSION
In spite of the fast track growth of the retail industry, India is still undergoing through
the initial development phase of modern retail. The countrys dynamic retail
landscape presents a grand opportunity to investors from across the globe, to use
India as a strategic business hub.

BIBLIOGRAPHY

Retail.mht

Indian Retail Industry - Its Growth, Challenges And Opportunities Free

Retail Industry Articles Fibre2fashion_com.mht

Challenges before Indian Retail Industry Economy Watch.mht

Shoppers Stop Annual Report 2010

International consulting group Deloitte Report 2010

A T Kearney in its 8th annual Global Retail Development Index (GRDI)

The BMI India Retail Report for the third-quarter of 2010

Report of Department of Industrial Policy and Promotion (DIPP).

Report titled 'India Organized Retail Market 2010', published by Knight Frank India
On May 2010.

Market research report published in pune 2008 by RNCOS titled, 'Booming

Retail Sector in India 2010