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CASH-AND-CARRY RETAIL IN INDIAN CONTEXT; SCHEMA FOR FUTURE

Dr. Vikas Nath (Associate Professor) Nimit Gupta (Assistant Professor)


Jaipuria Institute of Management, Noida. Jaipuria Institute of Management, Noida.

ABSTRACT
Retailing in India is moving with steady pace across metros, urban areas as well as in rural
set up. It is the 2nd largest employer segment in India. Organized retailing in India is projected to grow
at the rate of 25%-30% p.a. and is estimated to reach an astounding Rs 1, 00,000 Crore by 2010. Indian
retail is characterized by dominance of big players operating with or without international players. All of
the players had started their retail operations with B2C Retail and with due passage of time, almost every
player is foraying into B2B Retail. Business-to-business or cash-and-carry retail format is a new turn in
the field of retailing. Retailers are eyeing at Cash-and-carry format as it has a huge demand base of
unorganized independent stores. In India, nearly 80 percent of $450 billion retail sector is run by small
shops or kiranas. It is characterized by world-class modern supply chain and back-end logistics
infrastructure with driving efficiencies across the supply chain. It will help minimize wastage and provide
small retailers quality merchandise at competitive wholesale prices. Cash and Carry is a format where
the goods and services are sold for cash and the customer carries it away which means there is no
delivery service. This paper is a modest attempt to study the scenario of cash and carry in Indian context.
It will lead to implications for big retailers as well as provides a direction for further research in the
similar area.

Retailing is not a 100m dash; its a marathon - Raj Jain - Wal-Mart India president

Indian Retail
Retailing includes all activities involved in selling goods or services directly to final consumers for
personal, non-business use. 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 in India has
expanded its horizons in the last few years offering ample amount of opportunities to Indian business
Diasporas. Reasons are simple; India has the youngest population in the world. Over 65 per cent of the
population is below 35 yrs old; 54 per cent of the population is below 25 years of age. So, due to its large
consumer base India provides an opportunity to the retailers of all over the world to sell their products in
India. India has the highest number of outlets per capita in the world with a widely spread retail network but
with the lowest per capita retail space (@ 2 sq.ft. per person). India is viewed as the 2nd most attractive retail
market in the world. (AT Kearney, 2009) India is on the radar of Global Retailers and suppliers / brands
worldwide are willing to partner with retailers here. As per a study conducted by the Indian Council for
Research on International Economic Relations (ICRIER), the retail sector is expected to contribute to 22 per
cent of India's GDP by 2010. India's overall retail sector is expected to rise to US$ 833 billion by 2013 and to
US$ 1.3 trillion by 2018, at a compound annual growth rate (CAGR) of 10 per cent. India has emerged the
third most attractive market destination for apparel retailers, according to a study by global management
consulting firm AT Kearney. India is predicted to account for almost 91 per cent of regional retail sales in
2010. Also it is expected that by 2014 their share of the regional market is expected to be more than 92 per
cent.
Growth in regional retail sales for 2010-2014 is estimated by BMI at 72.2 per cent, an annual average
of 14 per cent. According to the Department of Industrial Policy and Promotion report 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. Due to huge demand
and profits retail has became favourites business areas among corporate. Organisation belonging to India as
well as other country are marking their retail presence across various segments including food, fashion and
footwear, home solutions and consumer electronics, books and music, health beauty and wellness, general
merchandise, telecom and IT, E-tailing, leisure and entertainment and financial products and services.
Purchasing power of Indian urban consumer is growing and branded merchandise in categories like Apparels,
Cosmetics, Shoes, Watches, Beverages, Food and even Jewellery, are slowly becoming lifestyle products that
are widely accepted by the urban Indian consumer as shown in the fig.1. The growth in the organized retailing
has resulted in the establishment of departmental stores, supermarkets, rural retailing, e-retailing , luxury
retailing and the new way of retailing i.e. cash and carry retailing.
Figure 1: Indian Retail Business

Cash and Carry Retail in India


The cash and carry retailing format was started in 1958, Batleys and followed by Nurdin and Peacock
in 1960. In India it is still struggling to grow. 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. These players are now seeing a new opportunity in
the B2B retailing. Cash and Carry Retail is becoming the favourite choice of all retail players. There are number
of organizations which are looking at expanding to cash-and-carry format, interestingly not all of these
organizations were having experience even in B2C retail. Retailers are basically eyeing cash-and-carry format to
tap the huge unorganized retail sector. Cash & Carry retail outlets cater to the needs of B2B bulk customers,
who have registrations like VAT, with relevant authorities. With vast number of unorganized shops and bulging
demand patterns India has humongous potential in the cash-and-carry wholesale business in the country's
booming retail segment. The size of the wholesale or cash and carry business is expected to be wholesale
business would be approximately $50 billion. Cash and carry refers to business format in which organizations,
provides wholesale depot operation from which retail customers purchase goods and provide their own
transport. Cash and Carry operators buy goods in large quantities from the manufacturer or buying group and
then sell these goods to their retail customers. The US retail behemoth, which has presence in 13 countries, has
added India as its 14th destination after Britain, Canada, Japan, China, Brazil, Mexico, Guatemala, Honduras,
Costa Rica, El Salvador, Nicaragua, Argentina and Puerto Rico in the form of discount stores, supercenters,
neighbourhood markets and Sam's Club, based on the wholesale model. In India, the major players operating
and is planning to operate in cash and carry format are:

Metro Cash & Carry


Metro Cash & Carry, the bulk-buying multinational wholesaler who targets the business and professional buyer
rather than the end consumer, started its India operations in Bangalore in 2003.since then Metro is growing.
Metro Cash & Carry has a membership of over a lakh in Bangalore, its main customers being hoteliers and
restaurateurs (including bars), small food traders and retailers, and small business establishments. Metro is
already doing substantial business in fish, meat and dairy products, having set up a landing platform in
Mangalore and working directly with fish and meat suppliers. With huge growth and bright future, Metro Cash
& Carry India will start its Mumbai operations soon, followed by new openings in other states including West
Bengal and Punjab. Metro Cash and Carry India had also launched its exclusive loyalty program recently.
Positioned at re-iterating and strengthening Metros partnership with its customers, Metro Bandhan Card offers
a range of unique privileges and value added services to the members.

Bharti Wal-Mart Private Limited


Bharti Wal-Mart Private Limited had started their operations in Amritsar in May, 2009.
It is a joint venture between Bharti Enterprises and Wal-Mart Stores Inc for wholesale, Business to Business,
cash-and-carry and back-end supply chain management operations in India. This is the first cash-and-carry store
opened by the JV in India. Bharti Wal-Mart Private Limited is expecting to open 10 to 15wholesale cash-and-
carry facilities and employ approximately 5,000 people over the next three years. Their wholesale modern store
will offer an assortment of around 6,000 items, including food and non-food items, which are available at
competitive wholesale prices, allowing retailers and business owners to lower their cost of operations. Their
target market includes restaurant owners, hoteliers, caterers, fruit and vegetable resellers, kiranas, other retail
store owners, offices and institutions.
Tesco
UK retail giant Tesco is starting its wholesale cash-and-carry business in India in the year 2010, with an initial
investment of up to 60m in the first two years. Tesco already has presence in India through a joint venture
with Tatas. Tesco is planning to have their stores in Mumbai, Bengaluru, Ahmedabad and Chennai. They are
planning to have the unorganized small kiranas stores as their target group of customers. Apart from grocery,
Tesco is also planning to have its arms into books and other such stationery.

Carrefour
French retailer Carrefour is planning to enter into cash and carry format in India in 2010. The company will
open its first wholesale store in Seelampur in Delhi. Carrefour will fully own its cash-and-carry venture.
Carrefour is planning to have will have over 30,000 SKUs or products varieties

Reliance Industries Limited


Reliance Industries Limited (RIL's) retail arm, Reliance Retail, plans to enter into the cash-and-carry business
in 2010. Reliance would not enter into any foreign joint venture but go solo in the business of cash and carry
retailing. Under this formats sell goods such as soaps, biscuits and vegetables and contribute 70% to the total
sales of Reliance Retail. Reliance Retail is initially planning to open its stores at 15 locations, mostly tier-II
centres such as Jalandhar, Ludhiana, Rajkot and Salem. In Cash-and-carry format Reliance would sell goods
to those with a sale tax certificate such as modern retailers, fruits and vegetables re-sellers, restaurants and
hotels and small mom and pop and kirana stores.

Managerial implication
With organized retail contributing to only five per cent of the total sector, retailers are looking at
India as a key market for our future growth. They are assuming long-term profitability and marketability in
India. The time is right for retailers to invest in 'Cash and Carry' stores in India. Retailers have to pursue
aggressive efforts to gain a strong foothold in India's billion-plus consumer market. There are various
concerns on which retailers need to think upon as these concerns have huge implications on the survival and
growth of cash and carry retail in Indian context. The areas where retailers should concentrate and make future
policies include:

Unavailability of Experienced Manpower


Organized retailing is an emerging sector in India; there are not many executives with long and relevant
experience. KPMG report (2006) reveals that there is a skill-set gap in those manning the floors. In the context
of cash and carry, it becomes an important challenge for the retailers not only to have adequate experienced
manpower, but also to derive the ways to motivate them and train them for future. It becomes more essential if
retailers groom the local talents and nurture them. Bharti Wal-mart had taken a lead in this as, they had launched
Bharti Wal-Mart Training Centre, Indias first special skills training centre launched by Bharti Wal-Mart in a
public-private partnership with the Government of Punjab which will train the manpower.

Backend Supply chain management


In Indian context, retailers are required to have a solid tie up with the vendors. Since in India, majority of goods
retailed had predominance with agricultural based goods, there requires integration with the farmers and such
bodies. Not only are this retailers are supposed to train them to produce better in terms of quality and quantity.
Bharti Wal-Mart had tied up with 110 farmers in Punjab to source fresh vegetables for its stores. Also the firm is
teaching the farmers modern practices to get maximum yield with lesser investment. For Metro cash and carry,
this an important issue as they cannot buy produce directly from the farmer, which will no doubt hamper
economies of scale and increases the lead time, however they tied up with 45,000 sheep farmers from Karnataka
and Andhra Pradesh

Government legislation
The Department of Industrial Policy and Promotion, India had allowed 100-per cent FDI in wholesale trading
and 51 per cent in single-brand retail, while foreign investment is not allowed in multi-brand retail. The main
implication which is arising is that most of the wholesale or cash and carry retailers are selling goods to bulk
consumers. Although it is evident that wholesale trade customers are t hose who are buying other than for
personal consumption. Therefore cash and carry format requires business with those entities which holds VAT
registration, sales tax, and service tax and trade licenses. These will a major challenge for retailers in Indian
context as in India there are various unorganized shops that dont have all such legal business documents
having. Metro cash and carry trades only with such business entities that are registered with Metro after filling
up application form and possess Metro Cash and Carry Card.
Merchandise Assortment
Since the format of cash and carry is customers pick the goods themselves, pay in cash and transport their goods
with their own vehicles. The advantage as compared with conventional wholesale lies in the scope of the food
and non-food assortment. On an average 10, 000 varieties are being taken care by a wholesale retailer and for
maintaining smooth operations require much higher number of SKUs. This will lead to importance of
What is to be assorted and in how much of quantity. However most of the cash and carry retailers are focusing
on local demand pattern and assortment is done accordingly, it requires more correct research analysis and good
interpretation skills.

Discussion
The rise of organized retail does not mean the end of traditional retail, atleast in Indian context. Retailing
has seen such a transformation over the past decade that its very existence in terms of format had undergone a
sea change. 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 and because of much intense competition. For a cash and carry
retailer, scenario is much more challenging. In this stage the market is still big and growing, but the space for
new entrants will become tighter and retailers should act quickly at this stage because retailers at this stage have
limited time to explore, and also their margin for error is thin. Since Cash and Carry retailing is towards
business customers, therefore building of relationship and trust becomes much more relevant and required. 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 cash and carry retailers to secure a distinctive
position in the market place based on values relationships or experience in terms of more variety/SKUs or in
terms of better prices apart from other frills. 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.

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