INTRODUCTION

Retailing involves all activities incidental to selling to ultimate consumer

for their personnel family and household use. It does this by organizing
their availability on a relatively large scale and supplying them to
customers on a relatively small scale.
(Retail is a French word which means ‘To break a bulk’)
Retailers provide the tailored goods to the consumers.

Retailing is one of the biggest sectors and it is witnessing revolution in

India.
The organized sector is expected to grow faster than GDP growth in next
few years.

INDUSTRY EVOLUTION

India tops the AT Kearney's annual Global Retail Development Index

(GRDI) for the third consecutive year, maintaining its position as the most
attractive market for retail investment. Furthermore a report by
PricewaterhouseCoopers foresees India and China to continue as the top
sourcing hubs in retail and consumer sector in the coming years.

The Indian retail market, which is the fifth largest retail destination
globally, according to industry estimates is estimated to US$ 427 billion by
2010 and US$ 637 billion by 2015. Simultaneously, modern retail is likely
to increase its share in the total retail market to 22 per cent by 2010.

Continuing the robust growth of the organised retail in India, according to

the Credit Rating and Information Services of India, the industry raked in
US$ 25.44 billion turnover in 2007-08 as against US$ 16.99 billion in
2006-07, a whopping growth rate of 49.73 per cent.

India has one of the largest number of retail outlets in the world. Of the 14
million retail outlets present in the country, nearly 5 million sell food and
related products. Thought the market has been dominated by unorganised
players, the entry of domestic and international organised players is set to
change the scenario.

Organised retail segment has been growing at a blistering pace, exceeding

all previous estimates. According to a study by ASSCHAM organized retail
segment will reach US$22 bn by 2010. The fastest growing segments have
been the wholesale cash and carry stores (150 per cent) followed by
supermarkets (100 per cent) and hypermarkets (75-80 per cent). Further, it
estimates the organised segment to account for 25 per cent of the total sales
by 2011.

• Traditionally retailing in India can be traced to

 The emergence of the neighborhood ‘Kirana’ stores catering to
the convenience of the consumers
 Era of government support for rural retail: Indigenous franchise
model of store chains run by Khadi & Village Industries
Commission
• 1980s experienced slow change as India began to open up economy.
• Textiles sector with companies like Bombay Dyeing, Raymond's, S
Kumar's and Grasim first saw the emergence of retail chains

• Later Titan successfully created an organized retailing concept and

established a series of showrooms for its premium watches
• The latter half of the 1990s saw a fresh wave of entrants with a shift
from Manufactures to Pure Retailers.
• For e.g. Food World, Subhiksha and Nilgiris in food and FMCG;
Planet M and Music World in music; Crossword and Fountainhead
in books.
• Post 1995 onwards saw an emergence of shopping centers,
• mainly in urban areas, with facilities like car parking targeted to
provide a complete destination experience for all segments of
society
• Emergence of hyper and super markets trying to provide customer
with 3 V’s - Value, Variety and Volume
• Expanding target consumer segment: The Sachet revolution -
example of reaching to the bottom of the pyramid.
• At year end of 2000 the size of the Indian organized retail industry
is estimated at Rs. 13,000 crore

GROWTH:

In growth stage, the market is developing quickly and also ready for
modern retailing. Countries, which are in Peaking stage such as India.
Retailers entering this stage have the best chance for long-term success.
Retailers at this stage should enter through local representations, sourcing
offices and new stores.

Strategy suggested: The strategy of adopting quality and styled products

with new models and shift of advertising from product awareness to
product preference .The idea behind adopting this strategy is to strengthen
against competitors.

RETAILING FORMATS IN INDIA

RETAIL SALES IN INDIA

Unorganized : Vast majority of the 14 million stores are small "father and
son" outlets
Fragmented : Mostly small individually owned businesses, average size of
outlet equals 50 s.q. ft. Though India has the highest number of retail
outlets per capita in the world, the retail space per capita at 2 s.q. ft per
person is amongst the lowest.
Rural bias: Nearly two thirds of the stores are located in rural areas. Rural
retail industry has typically two forms: "Haats" and “Melas". Haats are the
weekly markets : serve groups of 10-50 villages and sell day-to-day
necessities. Melas are larger in size and more sophisticated in terms of the
goods sold (like TVs)

Traditionally three factors have plagued the retail industry:

Experimentation with formats: Retailing in India is still evolving and the

sector is witnessing a series of experiments across the country with new
formats being tested out. Ex. Quasi-mall, sub-urban discount stores, Cash
and carry etc.

Store design : Biggest challenge for organised retailing to create a

“customer-pull” environment that increases the amount of impulse
shopping. Research shows that the chances of senses dictating sales are
upto 10-15%. Retail chains like MusicWorld, Baristas, Piramyd and Globus
are laying major emphasis & investing heavily in store design.
Emergence of discount stores: They are expected to spearhead the
organised retailing revolution. Stores trying to emulate the model of Wal-
Mart. Ex. Big Bazaar, Bombay Bazaar, RPGs.
Unorganized retailing is getting organized: To meet the challenges of
organized retailing such as large cineplexes, and malls, which are backed
by the corporate house such as 'Ansals' and 'PVR‘ the unorganized sector is
getting organized.
 • 25 stores in Delhi under the banner of Provision mart are joining
hands to combine monthly buying.

• Bombay Bazaar and Efoodmart formed which are aggregations of

Kiranas.

LEADING RTAILRS

INDIA Vs WORLD

• Indian retail is fragmented with over 12 million outlets operating in

the country. This is in comparison to 0.9 million outlets in USA,
catering to more than 13 times of the total retail market size as
compared to India
• India has the highest number of outlets per capita in the world -
widely spread retail network but with the lowest per capita retail
space (@ 2 sq. ft. per person)
• Annual turnover of Wal-Mart (Sales in 2001 were $219 billion) is
higher than the size of Indian retail industry. Almost 100 times
more than the turnover of HLL (India's largest FMCG company).
• Wal-Mart - over 4,800 stores (over 47 million square meters) where
as none of India's large format store (Shoppers' Stop, Westside,
Lifestyle) can compare.
• The sales per hour of $22 million are incomparable to any retailer in
the world. Number of employees in Wal-Mart are about 1.3 million
where as the entire Indian retail industry employs about three
million people.
• One-day sales record at Wal-Mart (11/23/01) $1.25 billion - roughly
two third of HLL's annual turnover.

• Developed economies like the U.S. employ between 10 and 11

percent of their workforce in retailing (against 7 percent employed
in India today).
• 60% of retailers in India feel that the multiple format approach will
be successful here whereas in US 34 of the fastest-growing 50
retailers have just one format
• Inventory turns ratio: measures efficiency of operations. The U.S.
retail sector has an average inventory turns ratio of about 18. Many
Indian retailers KPMG surveyed have inventory turns levels
between 4 and 10.
 • Global best-practice retailers can achieve more than 95 percent
availability of all SKUs on the retail shelves (translating into a
stock-out level of less than 5 %).The stock-out levels among Indian
retailers surveyed ranged from 5 to 15 percent.

DEVELOPMENTS

• AT Kearney has estimated India’s total retail market at US$ 202.6

billion which is expected to grow at a compounded 30 per cent over
the next five years.
• With the organised retail segment growing at the rate of 25-30 per
cent per annum, revenues from the sector are expected to triple from
the current US$ 7.7 billion to US$ 24 billion by 2010.

• The share of modern retail is likely to grow from its current 2 per
cent to 15-20 percent over the next decade
• Over next two years India will see several Indian retail businesses
attaining a critical mass as growth in the industry picks up
momentum driven by two key factors:
• Availability of quality real estate and mall management practices
• Consumer preference for shopping in new environments
• Wal-Mart : huge plans for India. Moving a senior official from its
headquarters in Bentonville, Arkansas, to head its market research
and business development functions pertaining to its retail plans in
India.
• New York-based high-end fashion retailer Saks Fifth Avenue has
tied up with realty major DLF Properties to set up shop in a mall in
New Delhi.
• Tommy Hilfiger, retailer of apparels, expects to open one store each
in Delhi, Ahmedabad, Lucknow and Bangalore in the next four
months.

• ITC is experimenting with retailing through its e-Choupal and

Choupal Sagar – rural hypermarkets.
• HLL is using its Project Shakti initiative – leveraging women self-
help groups – to explore the rural market.
• Mahamaza is leveraging technology and network marketing
concepts to act as an aggregator and serve the rural markets.

INTERNATIONAL RETAILERS
 The world's largest retailer, Wal-Mart, has tied-up with Sunil Mittal's
Bharti Enterprises to enter Indian retail market.
• Microsoft's first shop-in-shop pilot has been launched with the Tata
Group subsidiary Infiniti Retail's multi-brand consumer durables
retail format, Croma.

• The Walt Disney Company, consumer product retailing arm of

global animation giant, will soon add 135 new stores to its existing
15 stores.

• World's leading coffee chain, Starbucks' enters India through a tie-

up with the country's leading multiplex operator PVR Limited.

• Apple Inc has entered into an exclusive marketing and distribution

deal with Reliance Retail through "iStore by Reliance Digital".
• Some of the international players that have already entered India
include McDonald's, Pizza Hut, Dominos, Levis, Lee, Nike, Adidas,
TGIF, Benetton, Swarovski, Sony, Sharp, Kodak, Medicine Shoppe
among others.

FUTURE DIRECTION: CONCERNS

Sales tax laws - lead to retailers having state-level procurement and storage
leads to Indian retailers having higher inventories. VAT has helped
alleviate this a bit.
Retail space a report by Images Retail estimates the number of operational
malls to more than double to over 412 with 205 million square feet by 2010
and further 715 malls by 2015.
Luxury retail Indian luxury retail market is estimated to leap-frog from
around US$ 3.5 billion to US$ 30 billion by 2015, according to a survey
done by AT Kearney. India's luxury market, estimated to be the 12th largest
in the world, has been growing at the rate of 25 per cent per annum.
Kids' retail Leading the kids' retail revolution is the apparel business,
which accounts for almost 80 per cent of the revenue, with kids' clothing in
India following international fashion trends. According to research firm
KSA Technopak, the branded segment comprises US$ 701.7 million of the
total kids' apparel market-size of over US$ 3 billion. Industry experts say
kids' retailing will touch annual growth of 30-35 per cent.
E-tailing The increase in the PC and internet penetration along with the
growing preference of Indian consumers to shop online has given a
tremendous boost to e-tailing-the online version of retail shopping. An
estimated 10 per cent of the total e-commerce market is accounted by e-
tailing .According to the Indian Marketing Research Bureau (IMRB) and
Internet and Mobile Association of India (IAMAI), the e-tail market is
estimated to grow by 30 per cent to US$ 273.02 million.
Rural retail is estimated to cross US$ 45.32 billion mark by 2010 and US$
60.43 billion by 2015, says a study by CII and YES BANK. And with 87
per cent of rural markets not having access to any sort of organised
marketing and distribution, this segment has tremendous potential for
growth.

RETAIL REFORM

The Government allows 100 per cent foreign direct investment (FDI) in
cash and carry through the automatic route and 51 per cent in single brand.
Besides, the franchise route is available for big operators. To further attract
global retailers, the economic survey 2007-08 has suggested a share for
foreign equity in all retail trade and 100 per cent in respect of luxury brands
and other specialised retail chains.

GROWTH DRIVERS IN INDIA FOR RETAIL SECTOR:

• Rising incomes and improvements in infrastructure are enlarging

consumer markets and accelerating the convergence of consumer
tastes.
• Liberalization of the Indian economy.
• Increase in spending per capita Income.
• Advent of dual income families also helps in the growth of retail
sector.
• Shift in consumer demand to foreign brands.
• Consumer preference for shopping in new environs.
• The Internet revolution is making the Indian consumer more
accessible to the growing influences of domestic and foreign retail
chains. Reach of satellite T.V. channels is helping in creating
awareness about global products for local markets.
• The increasing share of young population in total population of
India.
• Availability of quality real estate and mall management practices.
 • Foreign companies' attraction to India is the billion-plus population.

GENERAL RETAIL INDUSTRY TRENDS-CHANGE FACTORS

• The e-channel is still growing fast

• Experience is everything – Compelling cross-channel experiences
are driving product sales and loyalty
• Customer-centricity is driving business transformation
• Business innovation is being driven by creativity and design
• Disruptive innovations are lowering barriers to entry
• Buyer niches are changing (gender, age, generations 'Y' and ‘Z’)
• Trial before purchase is becoming expected"
• Social credentials are defining brands (eco, green, CSR & PSR)
• Rural markets emerging as a huge opportunity for retailers reflected
in the share of the rural market across most categories of
consumption.

3 DEEPENING TRENDS IN CONSUMER BEHAVIOUR:

• Customers are becoming more demanding – the Web 2.0 revolution

has provided a forum for sharing opinions to the point where
consumers really do call the shots. They expect choice and
convenience or will go elsewhere.

• Social Media online is exploding – and is becoming a key vehicle

for both strategic marketing and customer engagement.

• Premium products and services still sell well and Green is becoming
iconic – many of the less price sensitive consumers are still highly
style and status conscious, and consumers are going to increasingly
great lengths to boycott.

Ok, so that’s 3 consumer trends. How about the Retail Industry in general?

3 DEEPENING TRENDS IN THE BRANDS THAT HAVE POOR

ECO-CREDENTIALS RETAIL INDUSTRY:
 • The credit crunch is getting worse – and negatively impacting
retailer profits.

• The e-channel is still growing fast – online spending in July for

example reached £4.8 billion, up 80% on last year to a new all-time
high. Retailers are expecting a major shift to online this Christmas.

• The leaders are merging channels – and providing seamless brand

and customer experiences across them all. Consumers in return are
becoming rapidly less tolerant of pricing, availability or service
differentials online and offline.

CHALLENGES FOR RETAILING

• The first challenge facing the organized retail sector is the

competition from unorganized sector.
• In retail sector, Automatic approval is not allowed for foreign
investment.
• Taxation, which favours small retail businesses.
• Lack of trained work force.

• Low skill level for retailing management.

• Intrinsic complexity of retailing- rapid price changes, threat of
product obsolescence and low margins.
• Organized retail sector has to pay huge taxes, which is negligible
for small retail business.
• Cost of business operations is very high in India.

THREATS

2009 Retail Industry Predictions: Closing Stores, Going Out of

Business, and Getting Back to Basics

• In 2009 large and small retailers will be hosting going out of

business sales before closing their stores. This is predicted to
happen as many as 200,000 times by some retail industry analysts.
 While the numbers are as difficult to predict as the economy itself,
it is certain that there will be substantial retail casualties in 2009.

• There are many retail chains that will be forced out of business in
2009 by their own debt structure and the global credit crunch. There
are also many retail stores that will close storefronts in 2009
because a recessed economy demands a recessed retail industry.
That’s just the way the economy ebbs and flows.

• There will be some well-known retail companies that declare

bankruptcy in 2009 because their concept is indistinct and their
merchandise is redundant. It’s not enough to just show up any more.
Retailers need a compelling offer in order to justify their existence.

• At a boardroom level, many accountability discussions about

financial mismanagement, forecasting failures, same store sales
declines, merchandising missteps, and not so unique selling
propositions will be had this year. In 2009, employees at all levels
in the retail industry will need to learn and live the serenity prayer,
as they accept the things they can’t change, change the things they
can, and maintain disciplined focus in order to know which is
which.
• In 2009 retailers will realize that customers won't give second
chances after less than "fabulous" experiences because don't need
to.

• The retail industry crisis will bring out the best that some
retailers have to offer, they survive.
• The big winner in 2009 and beyond will be American consumers. A
forced discrimination will create conscious consuming habits that
will not only redefine the retail industry, but also reprioritize daily
existence. Unfortunately, elevated consciousness never comes at a
discounted price.

CONCLUSION:

Many agencies have estimated differently about the size of organized retail
market in 2010. The one thing that is common amongst these estimates is
that Indian organized retail market will be very big in 2010. The status of
the retail industry will depend mostly on external factors like Government
regulations and policies and real estate prices, besides the activities of
retailers and demands of the customers also show impact on retail industry.
As the retail market place changes shape and competition increases, the
potential for improving retail productivity and cutting costs is likely to
decrease. Therefore it is important for retailers to secure a distinctive
position in the market place based on values relationships or experience.
Finally it is important to note that these strategies are not strictly
independent of each other; value is function of not just price quality and
service but can also be enhanced by personalization and offering a
memorable experience.