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CHAPTER 1: Introduction to Retailing

The word retail is derived from the French word retailer, meaning to cut a piece off or to break bulk. In simple terms, it implies a firsthand transaction with the customer.

Retailing involves a direct interface with the customer and the coordination of business activities from end to end right from the concept or design stage of a product or offering, to its delivery and post-delivery service to the customer. The industry has contributed to the economic growth of many countries and is undoubtedly one of the fastest changing and dynamic industries in the world today.

Retailing consists of all activities involved in selling goods and services to consumers for their personal, family or household use. It covers sales of goods ranging from automobiles to apparel and food products and services ranging from hair cutting to air travel and computer education. Sales of goods to intermediaries who resell to retailers or sales to manufacturers are not considered a retail activity.

Retailing can be examined from many perspectives. A manufacturer of white goods like washing machine and refrigerators has many options to reach out to consumers. It can sell through dealers, the company showrooms (Sony World, Videocon Plaza) or hypermarkets (Big Bazaar).

Retail outlets exist in all shapes and sizes from a Panwala to a Big Bazaar. However, most of these outlets are basic mom-and-pop stores the traditional Kirana shops in the locality, which are smaller than 500 sq.ft area with very basic offerings, fixed prices, zero use of technology, and little or no ambiance. The number of outlets in India has increased from 0.25 million in 1950 to approximately 12 million today. This translates to a growth of 48 times over a certain period when the population has trebled. Retailing in India is gradually inching its way to becoming the next boom industry. The whole concept of shopping has altered in terms of format and consumer buying behavior, ushering in a revolution in shopping. Modern retail has entered India as seen in sprawling shopping centers, multi-storeyed malls and huge complexes offer shopping, entertainment and food all under one roof.

1.2 Objective of the Study

The purpose and objective of this study is:


To understand the concept of retailing. To understand the retail market. To understand what is organized and unorganized retailing. To study the current status of malls and kiranas. To study the effect of shopping malls on Kiranas. To understand consumers preferences between shopping malls and local stores.

1.3 Methodology
This project consists of theoretical as well as practical knowledge. Also it contains ideas and information imparted by the guide. In this research, data is collected through two sources: Primary sources Secondary sources

Primary Source: This includes the survey done in Mumbai for a sample population of 100 people. Also interviews of 1 kirana stores owner.

Secondary sources: This includes the available information on the internet and data available in books and journals. The data is collected from the following sources:

Internet sites: www.hindubusinessline.com www.atkearney.com www.economicoftimes.com www.businessworldindia.com

The project started with sorting all the raw data and arranging them in perfect order. To add value to the project and to understand the practicality, I have visited some stores who are the best ones in retailing business. Further, to understand the consumers better, a field survey was also conducted to find out the tastes and preferences, purchasing habits and expectations of the consumers etc. Analysis of this primary data has been done to actually understand the survey in a better way.

CHAPTER 2: Evolution of retail in India


The origins of retailing in India can be traced back to local markets and roaming traders. Whatever was available locally, entrepreneurs made an estimate of local demand and ventured to the marketplace to offer their wares to interested people. The product range was restricted to whatever agricultural produce was made possible by the regional climate and local manufacturing skills. Enterprising and mobile traders ventured beyond, to peddle wares perceived by them to be in demand elsewhere. This tribe of moving traders brought product variety to the markets. This led to the emergence of Kirana stores and mom-and-pop shops. These stores used to cater to the local people.

Eventually the government supported the rural retail and many indigenous franchise stores came up with the help of Khadi & Village Industries Commission. The economy began to open up in the 1980s resulting in the change of retailing. The first few companies to come up with retail chains were in textile sector, for example, Bombay Dyeing, S.Kumar's, Raymond, etc.

Growth of large scale retailers was fuelled by the rapid spread of mass production to more and more product categories. Rapid Industrialization ensured replication of large volume production techniques to innovative areas such as processes foods. Improving transport facilities enabled retailers to gun for volume driven procurement.

Later Titan launched retail showrooms in the organized retail sector. With the passage of time new entrants moved on from manufacturing to pure retailing. Retail outlets such as Food world in FMCG, Planet M and Music world in Music, Crossword in books entered the market before1995.

Shopping malls emerged in the urban areas giving a world-class experience to the customers. Eventually hypermarkets and supermarkets emerged. The evolution of the sector includes the continuous improvement in the supply chain management, distribution channels, technology, back-end operations, etc. this would finally lead to more of consolidation, mergers and acquisitions and huge investments.

The opening up of the economy only fueled this globalization. There are, however, certain bottlenecks as well; the scarcity of space, coupled with the stringent provisions of the Rent Control Act, act as a dissuasive factor for many players to initiate operations in the main markets. This also explains why the Rahejas forayed into their retail venture- Shoppers Stop.

2.1 Growth phase from past to present of Retailing in India

Convenience stores, Mom-and-pop / Kirana shops Source of entertainment and commercial exchange

Weekly markets, Village and rural Melas Neighborhood stores/convenience Traditional and pervasive reach

PDS outlets, Khadi stores, Cooperatives Government supported Availability/low costs/distribution

Exclusive brand outlets, hypermarkets and supermarkets, department stores and shopping malls Shopping experience/efficiency Modern formats/international

2.2 Explosion in Retail Industry


Retail industry has brought in phenomenal changes in the whole process of production, distribution and consumption of consumer goods all over the world. In the present world most of the developed economies are using the retail industry as their vital growth instrument. At present, among all the industries of USA the retail industry holds the second place in terms of employment generation. In fact, the strength of retail industry lies in its ability to generate large volume of employment. Not only US but also other developed countries like UK, Canada, France and Germany are experiencing tremendous growth in their retail sectors. This boom in the global retail industry was in many ways accelerating by the liberalization of retail sector. Observing this global upward trend of retail industry, now the developing countries like India are also planning to tap the enormous potential of the retail sector. Wal-Marts, the worlds largest retailer have been invited to India. Other popular brands like Pantaloons, Big Bazaar and Archies are rapidly increasing their market share in the retail sector. According to a survey, within 5 years, the Indian retail industry is expected to generate 10 to 15 million jobs by direct and indirect effects. This huge employment generation can be possible because being dependent on the retail sector shares a lot of forward and backward linkages. India retail industry is the largest industry in India, with an employment of around 8% and contributing to over 10 to 12% of the country's GDP. Retail industry in India is expected to rise 25 to 30% yearly being driven by strong income growth, changing lifestyles, and favorable demographic patterns.

It is expected that by 2016 modern retail Industry in India will be worth US$ 175- 200 billion. India retail industry is one of the fastest growing industries with revenue expected to amount US$ 330 to 340 billion and is increasing at a rate of 5% to 7% yearly. A further increase of 8% to 10% is expected in the industry of retail in India by growth in consumerism in urban areas, rising incomes, and a steep rise in rural consumption. Shopping in India has witnessed a revolution with the change in the consumer buying behavior and the whole format of shopping also altering. Industry of retail in India which has become modern can be seen from the fact that there are multi- stored malls, huge shopping centers, and sprawling complexes which offer food, shopping, and entertainment all under the same roof. India has over 12 million retail enterprises with more than 75% belonging to small family businesses and basic necessities, especially food related items. Strong fundamental changes including the changing lifestyles of Indian people, rising incomes etc have fuelled the growth of modern retailing and has attracted investment in this sector.

Business houses in the country are turning to retail. Modern retailers like Shoppers Stop, Pantaloon, Piramyd, Globus, Vivek and Subhiksha, Foodworld, Big bazaar, Food bazaar have entered the market and are planning for further expansion. Indias prominent business houses like Reliance industries, Tata, Wadia, Godrej, Malhotras are also planning to enter retail sector individually and also with foreign partners.

2.3 Improvement and growth of Retail Companies in India


Growth of Retail Companies in India exhibits the boom in the retail industry in India over the years. The increases in the purchasing power of the Indian middle class and the influx of the foreign investments have been encouraging in the Growth of Retail Companies in India.

Growth of Retail Companies in India is still not yet in a matured stage with great potentials within this sector still to be explored. Most of the retail companies are sections of other industries that have stepped in the retail sector for a better business.

The Growth of Retail Companies in India is most pronounced in the metro cities of India; however the smaller towns are also not lagging behind in this. The retail companies are not only targeting the four metros in India but also is considering the second graded upcoming cities like Ahmadabad, Baroda, Chandigarh, Coimbatore , Cochin, Ludhiana, Pune, Trivananthpuram, Simla, Gurgaon, and others.

The South Indian zone have adopted the process of shopping in the supermarkets for their daily requirements and this has also been influencing other cities as well where many hypermarkets are coming up day to day.

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2.4 Success factor for Retailing in India


The retail companies are found to be rising in India at a remarkable speed with the years and these have brought a revolutionary change in the shopping attitude of the Indian customers. The Indian Retail growth can be attributed to the several factors including: Demography Dynamics: Approximately 60 per cent of Indian population below 30 years of age. Double Incomes: Increasing instances of Double Incomes in most families coupled with the rise in spending power. Plastic Revolution: Increasing use of credit cards for categories relating to Apparel, Consumer Durable Goods, Food and Grocery etc. Urbanization: Increased urbanization has led to higher customer density areas thus enabling retailers to use lesser number of stores to target the same number of customers. Aggregation of demand that occurs due to urbanization helps a retailer in reaping the economies of scale. Potential for Investment: It is potential business for investment. Location: With modern retail formats having made their foray into the top cities namely Hyderabad, Ahmadabad, Mumbai, Pune, Chennai, Bangalore, Delhi, Nagpur there exists tremendous potential in two tier towns over the next 5 years.

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Sectors with High Growth Potential: Certain segments that promise a high growth are: o Food and Grocery (93 per cent) o Clothing (58 per cent) o Furniture and Fixtures (28 per cent) o Pharmacy (23 per cent) o Durables, Footwear & Leather, Watch & Jewellery (33 per cent) Fastest Growing Retail stores: Some of the formats that offer good growth potential are: o Specialty and Super Market (45 per cent) o Hyper Market (36 per cent) o Discount stores (27 per cent) o Department Stores (18 per cent) o Convenience Stores and E-Retailing (9 per cent) Retail in rural India: Retail sector offers opportunities for exploration and investment in rural areas, with Corporate and Entrepreneurs having made a foray in the past. India's largely rural population has caught the eye of retailers looking for new areas of growth. ITC launched the country's first rural mall 'Chaupal Sagar', offering a diverse product ranges from FMCG to electronics appliance to automobiles, attempting to provide farmers a one-stop destination for all of their needs. Other corporate bodies include Escorts and Tata Chemicals (with Tata Kisan Sansar) setting up agri-stores to provide products/services targeted at the farmer in order to tap the vast rural market.

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Wholesale Trading: Wholesale trading also holds huge potential for growth. German giant Metro AG and South African Shop rite Holdings have already made headway in this segment by setting up stores selling merchandise on a wholesale basis in Bangalore and Mumbai respectively. These new-format cash-and-carry stores attract large volumes from a sizeable number of retailers who do not have to maintain relationships with multiple suppliers for all their needs.

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2.5 Plans of Large Retailers:

Reliance Retail: investing Rs. 30,000 crore ($6.67 billion) in setting up multiple retail formats with expected sales of Rs. 90,000 crore plus ($20 billion) by 200910.

Pantaloon Retail: Will occupy 10 mn sq.ft retail space and achieve Rs.9,000 crore-plus ($2 bn) sales by 2008.

RPG: Planning IPO will have 450-plus Music World, 50-plus Spencer's Hyper covering 4 mn sq.ft by 2010.

LIFESTYLE: Investing Rs.400 crore-plus ($90 mn) in next five years on Max Hypermarkets & value retail stores, home and lifestyle centers.

Raheja's: Operates Shoppers' Stop, Crossword, Inorbit Mall, and 'Home Stop' formats. Will operate 55 "Hyper city" hypermarkets with US$100 million sales across India by 2015.

Piramyd Retail: Aiming to occupy 1.75 million sq.ft retail space through 150 stores in next five years.

TATA (Trent Ltd.): Trent to open 27 more stores across its retail formats adding 1 mn sq.ft of space in the next 12 DLF malls. Titan industries to add 50-plus Titan and Tanishq stores in 2006.

Foreign Direct Investment Policy In Retail

Another cap to the retailing industry in India is allowing 51% FDI in single brand outlet. The government is now set to initiate a second wave of reforms in the segment by liberalizing investment norms further. This will not only favor the retail sector develop in terms of design concept, construction quality and providing modern amenities but will also help in creating a consumer-friendly environment.

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Retail industry in India is at the crossroads but the future of the consumer markets is promising as the market is growing, government policies are becoming more favorable and emerging technologies are facilitating operations in India. And this upsurge in the retail industry has made India a promising destination for retail investors and at the same time has impelled investments in the real estate sector. As foreign investors cautiously test the Indian Markets for investments in the retail sector, local companies and joint ventures are expected to be more advantageously positioned than the purely foreign ones in the evolving India's organized retailing industry.

Foreign Direct Investment (FDI) to the extent of 100 per cent in Cash and Carry Wholesale formats. Franchisee arrangements are also permitted in retail trade.

Single Brand Products: FDI up to 51 per cent is permissible in the retail trade of single brand products subject to the following conditions.
o o o

Products to be sold should be of a 'Single Brand' only. Products should be sold under the same brand internationally. 'Single Brand' product retailing would cover only products, which are branded during manufacturing.

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2.6 Key Players in Retail Industry


The untapped scope of retailing has attracted superstores like Wal-Mart into India, leaving behind the kiranas that served us for years. Such companies are basically IT based. The other important participants in the Indian Retail sector are Bata, Big Bazaar, Pantaloons, Archies, Cafe Coffee Day, landmark, Khadims, Crossword and many more.

Some Major players in Retail sector:

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2.7 Retail formats worldwide have evolved in three phases:

Retailers decide on the category and quality of products and services, differentiating them from other retailers. Retail formats in this phase are typically supermarket, department stores and speciality stores. During the second phase, retailers carve a niche for themselves based on a product category and price. Competition intensifies because the products and services on offer become virtually standardized and price becomes the main selling point. This phase normally gives way to discount stores. The third phase arrives when competition peaks. This is when hypermarkets begin to evolve. Hypermarkets usually compete on price and a wider product range, but the normally lack product depth and service components. Globally, retailing is customer centric with an emphasis on innovation in products, processes and services. In short, the CUSTOMER IS KING!

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2.8 Growth of Retail Outlets in India (in millions)

Year

Urban

Rural

Total

1978

0.58

1.76

2.34

1984

0.75

2.02

2.77

1990

0.94

2.42

3.36

1996

1.80

3.33

5.13

1999

2.40

3.60

6.00

2007

4.89

7.08

11.97

*Source: indiainfoline The BMI India Retail Report for the third-quarter of 2010, forecasts that the total retail sales will grow from US$ 353 billion in 2010 to US$ 543.2 billion by 2014. With the expanding middle and upper class consumer base, there will also be opportunities in India's tier II and III cities. The greater availability of personal credit and a growing vehicle population to improve mobility also contribute to a trend towards annual retail sales growth of 11.4 per cent. Mass grocery retail (MGR) sales in India are forecast to undergo enormous growth over the forecast period.

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BMI further predicts that sales through MGR outlets will increase by 154 per cent to reach US$ 15.29 billion by 2014. This is a consequence of India's dramatic, rapid shift from small independent retailers to large, modern outlets. BMI forecasts consumer electronic sales at US$ 29.86 billion in 2010, with over the counter (OTC) pharmaceutical sales at US$ 3.28 billion. The latter is predicted to be the fastest growing retail sub-sector and BMI forecasts that sales will reach US$ 6.18 billion by 2014, an increase of 88.5 per cent. Established retailers are tapping into the growing retail market by introducing innovative store formats. Spencer's Retail, More (owned by Aditya Birla Group) and Shoppers Stop (owned by K Raheja Group) already plan to expand. According to a McKinsey & Company report titled 'The Great Indian Bazaar: Organised Retail Comes of Age in India', organised retail in India is expected to increase from 5 per cent of the total market in 2009 to 14 - 18 per cent of the total retail market and reach US$ 450 billion by 2015. Furthermore, according to a report titled 'India Organised Retail Market 2010', published by Knight Frank India in May 2010 during 2010-12, around 55 million square feet (sq ft) of retail space will be ready in Mumbai, national capital region (NCR), Bangalore, 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.

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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).
o

Leading watchmaker Titan Industries Limited plans to invest about US$ 21.83 million 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, Ahmadabad etc in next 12 months," said Ajoy Chawla, Vice President (Retail), Titan.

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.

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 store- supermarkets and hyper marts plans 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.

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2.9 Road Ahead


According to industry experts, the next phase of growth is expected to come from rural markets. According to a market research report published in June 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:
o

Number of shopping malls is expected to increase at a CAGR of more than 18.9 per cent from 2007 to 2015

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 organised retailing in India

Exchange rate used: 1 USD = 45.81 INR (as on June 2010) Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same. http://www.ibef.org/industry/retail.aspx

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CHAPTER 3: Classification of Retail Sector:

RETAIL

Unorganized Retailing

Organised Retailing

Unorganized / Traditional retailing: On the other hand, it 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.

Organized / Modern retailing: It 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, retail chains, and also the privately owned large retail businesses.

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3.1 Unorganized/ Traditional Retail in India


Retail outlets exist in all shapes and sizes from a Panwala to a shoppers Stop. However, most of these outlets are basic mom-and-pop stores the traditional Kirana shops in the locality, which are less than 500 sq.ft. in area with very basic offerings, fixed prices, zero use of technology, and little or no ambiance.

Kirana and small stores


The small local stores have dominated Indian retailing over the decades and are present in every village and local community, addressing the needs of the population in the area and being the point of contact with the consumer. The distribution networks of brands extend right up to this point to stay in touch with customer needs and preferences. India like most other countries has a very large network of local stores. The retail industry in rural India has typically two forms: "Haats" and "Melas". You will find these in almost every village and locality. A lot of them function as paan and cigarette outlets with tea and coffee sometimes also offered. Besides this these stores stock and offer small eats and soft drinks including biscuits, soft drinks, chocolate, sweets, bread and baked products. Many of them also sell fruits like bananas and a range of toiletries and cosmetics like soaps, shampoos, toothpastes and some creams.

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These small stores cater to the needs of their own local population and travelers who stop by for a smoke or a snack. A little larger format is the neighborhood grocery store that focuses on grains, foods, snacks and toiletries besides other home essentials.

3.2 Features of Indian kirana stores


India has sometimes been referred to as a nation of shopkeepers. A high density of population and the need for convenience has facilitated the operation of over 12 million stores in India. Of these, nearly 78 per cent are small family-run operations, which use only household labor. The key characteristics of these stores are: Small size: Such stores are small in size. They range in area from 200 square feet or less to 1,500 square feet, depending on the area of operation. Know customer personally: These shop owners know their customers personally and have strong relationships with them. This helps them gauge likes and dislikes, and accordingly meet the individual needs of each household. Locations to consumers: These shops are located within residential areas and can be accessed by customers on foot. This makes it convenient for households to buy items on a daily basis. Low operating costs and overheads: These stores are run by family members and thus, there are no labour costs involved. Little money is spent on lighting, power, fuel and ambience.

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Additional services: These small stores provide services like a month's credit, which many customers find very useful. Such stores have also been concentrating on offering customers the additional convenience of home delivery and obtaining a product on order.

3.3 Traditional Format Retailers:


Kiranas: These are close-to-home stores where a household buys its daily use goods. They range from the very small 200 sq ft stores to 1,500 sq ft establishments. Often those running the stores know the households personally and provide additional services like obtaining unstocked items on request, delivering goods to the doorstep and granting a month's credit.

Paan shops: These are unique to India. They are very small shops manned by a single

individual whose chief occupation is the making of paan (betel leaf with a few additions). Such shops also stock tobacco, chocolates and some FMCG articles.

Cart vendor: Cart vendors sell fresh fruits and vegetables in residential areas and

housewives buy from them on a daily basis. They sell their produce off a cart, which allows them the freedom to move around from place to place

Haats: A Haat is more of a village phenomenon. Once a week, a market is

organized in a particular location, where sellers from different areas gather to sell their products. Buyers congregate to buy an assortment of goods, ranging from fruits and vegetables to household goods, clothes and accessories like bangles, etc.

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Mela: A mela is organized once every few months generally around the time of

a festival. In addition to the sale of a variety of goods not easily accessible to villagers, the mela also provides entertainment.

There is lot of things to be learn from kiranas..


According to a new study published in Economic times, Indian consumers are still visiting local kirana stores (mom n' pop stores in India) while they love the shopping experience of malls. Besides, the bulk shopping that they do at these modern retails stores, there are the daily top-ups to do at the local groceries (Kirana Stores) and the perishables that have to be bought daily. For Kiranas the proximity is the major advantage. Considering the largest retailer, Pantaloons (through Food Bazaar), does not think it a bright idea to compete with them, discount retailer Subhiksha still fine-tuning its format. There is a huge opportunity in home deliveries and the trick is to beat the kirana stores at their own game. Kiranas leads the organized retailer due to there reach in the market. In order to increase the reach in the market the organized sector should include a Hub and Spoke model in their supply chain. Instead of going for the centralized warehouse.

The organized retail stores have to match with the consumer expectations. Kiranas are already offering this programme which includes stock rotation and loyalty programs, along with credit and discount policies. The organized retail stores still have to learn a lot from the kiranas.

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3.4 Interview with Kirana Shop Owner-Mr.Mahavir

This store is the small, friendly neighborhood, which has been offering customized services to their customers. The shop, which has contributed to this study, is situated at Vile Parle, Mumbai. The owner of this shop is Kantilalbhai Savla. He has kept name of the shop as Mahavir Stores because his name is Mahavir---Mahavir General Store, Vile Parle East, Mumbai

The information gathered through the interviews is given below


The store provides a wide range of varieties of products. In addition to groceries, other items are also sold like stationary, imported food articles, cold drinks, medicines etc. The owner said that the store had a higher percentage of regular customers than walk-in customers. The regular customers were from the nearby areas, but he also claimed to have customers from far off areas too. New customers are usually generated through word-of-mouth. The owner himself decides on which brands to stock according to the preferences of their customers and estimated the amount of goods to stock according to their periodic sales figures. The owner expressed a desire to expand his stores if given the opportunity to do so; however, he lacked finance and space to expand. He also said that he was satisfied with his business volume and in addition, he has no time to look after a bigger store.

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When asked about why their regular customers chose to visit their store, the owner listed availability of good quality and fresh products, customer satisfaction, prices and owner-customer relationship as the primary reasons for their customers' loyalty.

Mahavir Kirana stores provide free home delivery to their customers and had a credit period ranging from 1 month to 2 month which depending upon the worthiness of customers.

On an average, these stores remained open from 7:00 am to 11:00 pm in the night. The store also remained open on Sundays.

Do you think that the expansion of malls (modern retailing) is becoming a barrier for the growth of local kirana shops? Do the store owners have to fear from the development of malls? Give your opinion. (Translated in English) The kiranas have evolved to cater to different segments of the market and I feel that they are making enough profits which is why they continue to be in the business. Till recently kiranas or neighborhood stores were the only choice available, even in the urban areas. But gradually the situation is changing. Over the last 2-3 years, there has been a significant growth in the number of malls. There is an increased demand for quality retail space which includes food & apparel chains, consumer durables & multiplex operators. Since the consumers preference has been diverted towards malls, local kirana stores have to suffer badly but I dont feel that existence of Supermarkets have affected my Business at all, in fact due to its existence we have become more customers oriented. We have a specific customer base from long ago. We just try our optimum to satisfy and maintain the customers offering them discounts in varied products. Initially it was tough but now we are able to satisfy all the needs of the customer, in fact we end over providing the augmented products.

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CHAPTER 4 : Organized/ Modern Retail in India


(Shopping Malls, Supermarkets, etc) Indian organized retail market is growing at a fast pace due to the boom in the India retail industry. In 2005, the retail industry in India amounted to Rs 10,000 billion accounting for about 10% to the country's GDP. The organized retail market in India out of this total market accounted for Rs 350 billion which is about 3.5% of the total revenues. Retail market in the Indian organized sector is expected to cross Rs 1000 billion by 2010. Traditionally the retail industry in India was largely unorganized, comprising of drug stores, medium, and small grocery stores. Most of the organized retailing in India have started recently and is concentrating mainly in metropolitan cities. The growth in the Indian organized retail market is mainly due to the change in the consumers behavior. This change has come in the consumer due to increased income, changing lifestyles, and patterns of demography which are favorable. Now the consumer wants to shop at a place where he can get food, entertainment, and shopping all under one roof. This has given Indian organized retail market a major boost. Retail market in the organized sector in India is growing can be seen from the fact that 1500 supermarkets, 325 departmental stores, and 300 new malls are being built. Many Indian companies are entering the Indian retail market which is giving Indian organized retail market a boost. One such company is the Reliance Industries Limited. It plans to invest US$ 6 billion in the Indian retail market by opening 1000 hypermarkets and 1500 supermarkets. A pantaloon is another Indian company which plans to increase its retail space to 30 million square feet with an investment of US$ 1 billion.

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4.1 Origin of Modern Retailing in India


Retailing, which is one of the largest sectors in the global economy, is going through a transition phase in India. Organised retailing still contributes to only about 2% of the total retailing in the country. Now a question that would arise is what constitutes Organised Retailing. Mr. Raghu Pillai, the Managing Director of Food World, which is one of the leading organised foods retailing chain in India, says that, Organised Retailing presupposes a retailers ability to manage or more importantly influence a set of supply chain variables in a commercially viable and sustainable way. Efficient management of the supply chain to ensure the profitability of the entire chain, large outlets with modern ambiance and facilities, a wide product profile, self service facilities etc are generally the features of a modern retail store. Organised retailing aims at providing an ideal shopping experience for the consumer based on the advantages of large-scale purchases, consumer preference analysis, excellent ambience and choice of merchandise. However, there are no single formats, designs, facilities or product portfolios that can be identified as the success formula and as a general rule differentiation between chains is necessary to increase viability.

For a long time, the corner grocery store was the only choice available to the consumer, especially in the urban areas. This is slowly giving way to international formats of retailing. The traditional food and grocery segment has seen the emergence of supermarkets/ grocery chains.

Largely in the post independence period, Indian retailing has been unorganized, to the most part untouched by corporate business principles. When the economy started to be opened in the 1980s the situation began to change slowly. Emergence of retail chains was at first witnessed in the textiles sector, with companies like Bombay Dyeing, Raymond, S. Kumars and Grasim, opening their own outlets. Titan then successfully created a retailing concept, by establishing its series of elegant showrooms. 30

4.2 Growth of Organised Retail in India


Organised retailing in India initially began in the south. The availability of land at prime locations coupled with lower real estate prices (compared to Mumbai and Delhi) made multi-storeyed shopping complexes possible. And now south India notably Chennai and, to a lesser extent Bangalore and Hyderabad has emerged as a centre of organized retailing. In fact, in Chennai, nearly 20% of food sales now is accounted for by super markets and an equal share of consumer durables is sold through specialty chains Viveks.

It took two years of recession for this concept of shopping to take root in major cities like Mumbai and Delhi. Recession brought down property prices in these cities, and it was during this slump that big business houses took notice of the potential in retailing.

India is rapidly evolving into an exciting and competitive marketplace with potential target consumers in both the niche and middle class segments. Manufacturer owned and retail chain stores are springing up in urban areas to market consumer goods in a style similar to that of malls in more affluent countries. Even though big retail chains like Crossroads, Saga and Shoppers Stop are concentrating on the upper segment and selling products at higher prices, some like RPGs Food World and Big Bazaar are tapping the huge middle class population. During the past two years, there has been a tremendous amount of interest in the Indian retail trade from global majors as well. Over the years, international brands like McDonalds, Swarovski, Lacoste, Dominos, Pepsi, and Benetton among a host of others have come in and thrived in India.

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Retailing is one of the fastest growing industries in India, catering to the worlds second largest consumer market. A sunrise industry, it offers tremendous potential for growth and contributes 8 10% to overall employment. However, this is still low as compared to 20% in the USA. As India moves towards being a service-oriented economy, a rise in this percentage is expected. The number of retail outlets is growing at about 8.5% annually in the urban areas, and in towns with a population between 100,000 to 1 million the growth rate is about 4.5%. With the increasing assertiveness of the Indian consumer, and a growing supply base both from within Indian as well as from other countries (With import becoming easier) The retail sector in India is poised for a significant change in the coming decade.

However, the boom in retailing has been confined primarily to the urban markets. There are two main reasons for this. o Firstly, the modern retailer is yet to exhaust the opportunities in the urban market and has therefore probably not looked at other markets seriously. o Secondly, the modern retailing trend, despite its cost-effectiveness, has come to be identified with lifestyles. In order to appeal to all classes of the society, retail stores need to identify with different lifestyles. In a sense, this trend is already visible with the emergence of stores with an essentially value for money image. The attractiveness of the other stores actually appeals to the existing affluent class as well as those who aspire to be a part of it. Hence, one can assume that the retailing revolution is emerging along the lines of the economic evolution of society.

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Indian Retail- expanding the number of formats 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. Formats Adopted by Key Players in India Retailer RPG Retail Original formats Supermarket (Foodworld) Department Store (Piramyd Megastore) Small format outlets Pantaloon (Shoppe) Retail Department Store (Pantaloon) Department Store K Raheja Group (shopper's stop) Specialty Store (Crossword) Tata/ Trent Department Store (Westside) Hypermarket (Star India Bazaar) Supermarket (TBA) Hypermarket (TBA) Later Formats Hypermarket (Spencer's)Specialty Store (Health and Glow) Discount Store (TruMart)

Piramal's

Supermarket (Food Bazaar) Hypermarket (Big Bazaar) Mall (Central)

Landmark Department Store Group Others (Lifestyle)

Hypermarket (TBA)

Discount Store (Subhiksha, Margin Free, Apna Bazaar), Supermarket (Nilgiri's), Specialty Electronics

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4.3 Factors Responsible for the success of Organized Retail in India

Increased Purchasing Power: The National Council of Applied Economic Research classifies households into five categorieslower, lower middle, middle, upper middle and high. The movement of households within these income categories reflects the changing dynamics of the Indian market. 33% of Indian households are in the middle- to high-income category in 2004. This is projected to increase to 49% by 2010. The impact of increasing income levels is reflected in the sales trend for high involvement products like cars and multi-utility vehicles (MUVs) in the Indian market. Changing Consumption Patterns: The rapid pace of organized retailing is fueled by changing consumer habits in both cities and large town by (DINKS) Double income no kids group and increased aspirations caused by exposure to the satellite television, cable and other channels. The growth for the changing habit patterns would be affected by the mobile telephones (new product categories like ring tones estimated to 400 crores). Young Indian Consumers: The Indian consumer segment is the youngest in the world with a median age of 24 as compared to other developed nations. With fertility rates at an estimated three children per woman and a population growth rate at 1.6% pa, the population is expected to continue to grow to 2050.

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More Available Retail Space: The boom in the retail sector is also associated with the rise of mall all across the country. There are 220 mall project in the pipeline till 2007, 139 in the big 8 cities including the metros and 81 in other Tier II cities. Developers are keeping in mind the astonishing pace with which the new supply is expected to enter the market and are developing specialty malls and other propositions to offer a different experience to the changing consumer. Easier Financing: Interest rates have dropped down over a couple of years making it much easier for investors to develop a mall and economically viable for retailers to set up shops. The fall in real-estate prices as well as lower borrowing rates still ensure that current rental yields are attractive for developers. Improved Logistics and Better Infrastructure: Infrastructure spending has improved the state of Indias roads and transport system. Connectivity has enabled the faster movement of goods, especially perishable goods, from one part of the country to another. Logistics has improved, enabling more efficient retail operations. Retailers have benefited from the improved infrastructure, and further improvements should only increase the benefits to retailers

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Proven success
In early 90's, K. Raheja Group started a mega Apparels stores in Mumbai- 'Shoppers Stop'. Initially, the group was averse to start outlets at South Mumbai for various reasons like low walk-ins, space constraints, narrowed target audience etc. However the success of Crossroads, an ardent rival, has prompted them to start one at South Mumbai in near future. The group has more of such stores, one each at Bangalore, Hyderabad and Jaipur. Within seven years of operations it has a yearly turnover of Rs1.30bn. The group has plans of opening about 20 mega apparel stores in next 2 years. For this the company plans to sell 25.1% stake for Rs559mn to Singapore based investor Warburg Pincus. The success story of Shoppers Stop has convinced other business houses to take a leap. Retailing, considered a sunrise industry today after InfoTech, is the most happening industry with almost all the big players vying for a share of the coveted pie. Buoyed by a strong increase in private consumption (see graph h), retailing is one industry that is waiting to explode.

Source: KSA Techno pack

Today however, organised retailing is less than 2 per cent of the retailing industry in India, that is, about Rs 5,000 crore.(see table ) Therefore, there is no real retail revolution in India; the industry is still in the stages of infancy.

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Share of Organised Retail


1999 2002 2005

Total Retail (US $ Bn) Organized Retail (US $ Bn) % Share of Organized Retail Source: KSA Techno pack

150

180

225

1.1

3.3

0.70%

1.80%

3.20%

Organized retailing is bound to grow tremendously provided the right marketing strategies are adopted. Retail businesses have broken rank and seem poised to surge ahead with renewed vigour, optimism, confidence and capability.

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4.4 Indian Organized Retail: (At current prices)

India Retail Facts


Private Consumption, Total Retail and Modern Retail size Latest Updates (2010) as per India Retail Report (initial estimates) : Private consumption (2009-2010) : Rs. 3,679,000 crore (Rs. 36,790 billion) Retail: Rs.2,000,000 crore (Rs.20,000 billion) Modern Retail Size: Rs.164,000 crore (Rs.1,640 billion) = 8.2% of Total Retail Employment in modern retail = 10 direct employment in retail and 100 indirect employment per Rs.1 crore (Rs.10 million) sales Total employment in modern retail = 1.65 million Estimated indirect employment in modern retail = 16.5 million Total dependents in modern retail so far = Over 18 million people

India Snap Shots


Size (FY08) USD 511 bn (organized + unorganized)4 Size (FY13 estimated) USD 833 bn Projected CAGR (FY18) 10 percent Organized retail (FY13 estimated) USD 107 bn Value-wise India is fifth largest retail destination globally Regulatory Current FDI policies allow 100 percent foreign investment only in wholesale cash-ncarry and 51 percent in single-brand retailing Foreign players sourcing from India Levis-Strauss, Wal-Mart, Nike, Marks & Spencer, Metro AG, etc Industry - snapshot 1 IBEF, September 2009 2 Welspun Retail Limited, Indian Home Retail 38

Retailing
India Retail Value Organised Retail % Organised (Rs. Crore) 113,500 60,200 3,950 13,750 3,800 42,200 48,100 (Rs. Crore) 21,400 1,680 1,800 5,200 400 1,100 5,000 in 2007-2009 18.9 2.8 45.6 37.8 10.6 2.6 10.4

Retail Segments Clothing, Textiles & Fashion Accessories Jewellery Watches Footwear Health & Beauty care services Pharmaceuticals Consumer Durables, Home Appliances/equipments Mobile handsets. Accessories & Services Furnishings, Utensils, Furniture-Home & Office Food & Grocery Catering Services Books, Music & Gifts Entertainment

21,650

1,740

8.0

40,650 743,900 57,000 13,300 38,000 US$ 270 Billion

3,700 5,800 3,940 1,680 1,560 US$ 12.4 Billion

9.1 0.8 6.9 12.6 4.1

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4.5 Modern Format Retailers


Designing a retail format depends on several factors product categories stocked, target customers demographic profiles, real estate costs, brand consistency and location being a few of them. For example groceries, teenage crowd, affluent neighborhoods and niche products influence to a large extent the kind of ambience and display to expect. Convenience stores: These are relatively small stores 400 to 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. Supermarkets: Large self service outlets, catering to varied shopper needs are termed as Super markets. 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 a size of 3,500 sq ft to 5,000 sq ft. having a strong focus on food & grocery and personal sales. The concept of enabling a better shopping experience can be traced to the spread of supermarket culture which attracted customers from a large geographic pocket. Nilgiris and Food World are major Indian players operating in this way.

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Department stores: Department stores stock a deep collection of a wide range of product categories in emerging and new product categories. Perceived higher value by customers (unhurried shopping) and providing better ambience by retailers brought about remarkable transformation in the way retailing went higher up the value chain. These are large stores ranging from 20000-50000 sq. ft, catering to a variety of consumer needs. It can be further classified into localized departments such as clothing, toys, home, groceries, etc. shoppers Stop, J C Penny, Lifestyle and Sears with their assortment of products and services are prime examples of national and international department stores. Discount Stores: Discount Stores are scaled down (stock less up market products) versions of department stores, located in low-cost areas. They have relatively wider range and smaller collection. While bulk buying aids them to sell at lesser prices, recourse is also taken to source season-end products and manufacturers seconds. 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. Target and Kmart are examples of this format. Hypermarkets: Hypermarkets are a one-stop-for-all-needs kind of offering (with 400-600 SKUs), spread over a huge area and bridging the gap between FMCG and durables outlets. They are typically large, starting from 40,000sq. ft plus usually located outside the city limits comprising a multiple division layout, and usually has an industrial- look interior. Hypermarkets generally provide daily necessities and grocery like items. Pricing is competitive and they also offer volume discounts. Driven by bulk purchase and bulk selling, everyone gained, with the exception of erstwhile trade partners of manufacturers.

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Shopping Malls: It is the largest form of organized retiling today. Shopping malls popularity can be ascribed to a shift in the attitude towards shopping. Unlike the disadvantage of sufficient travel demanded to reach out to a hypermarket, malls sprang up at relatively nearer localities. Malls are located mainly in metro cities, in proximity to urban outskirts, this format ranges from approximately 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. India's largest shopping arcade Spencer Plaza (600,000-sq-ft) in Chennai is an example. Specialty Stores: These formats focus on a specific product category, Medium sized layout in strategic location. Specialty stores provide a large variety base for the consumers to choose from. Despite the presence of the basic ingredients required for growth of the retail industry in India, it still faces substantial hurdles that will retard and inhibit its growth in the future. One of the key impediments is the lack of FDI. This has largely resulted in limited capital investments in supply chain infrastructure, which is a key for development and growth of retailing and has also constrained access to world-class retail practices. Lack of proper infrastructure and relatively high cost of real estate are the other impediments to the growth of retailing. While the industry and the government are trying to remove many of these hurdles, some of the roadblocks will remain and will continue to affect the smooth growth of this industry. Examples include foot ware, garments, consumer electronics, watches, food, Jewellery, books and music.

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4.6 Challenges before Organized Retailing in India


Government restrictions on FDI: Organised retailing in India is yet to get an industry status. The consequence is quite obvious. 100% Foreign Direct Investment (FDI) is not permitted in retailing in India. Ownership of retail chains is allowed only to the extent of 49%. The Food World chain is one such venture, with an ownership pattern of 51:49 between RPG and Dairy Farm International, Hong Kong. Foreign players can enter the wholesale sector, in the cash and carry format. The Metro chain has recently entered the country as a cash and carry outlet. A branch has been opened in Bangalore and a second would be opened very soon in the same city. The fear that the small-scale retailers will be displaced is delaying the FDI approvals. On the other hand, without the FDI, the sector is deprived of access to foreign technologies that is imperative for faster growth. The Government has allowed FDI in direct marketing, but has reservations about extending it to the retail sector. Retailing is a technology intensive industry. Under the liberalized regime of the WTO the Protected nature of an industry may do more harm than good. In the short-run the Government may succeed in protecting the domestic industry, but in the long run we would be losing too many opportunities and technological innovations. This, in addition would also block any attempt by the domestic industry to become competitive internationally. Lack of a uniform tax: The country requires a uniform tax system for the organized retailing. Due to lack of this, it stands as an obstruction to the setting up of a truly national chain. The present chains, in spite of claiming to be national chains are restricted to certain regions of the country. Players are confined to state barriers. Since retailing is a business of supplying commodities to locations far from production units, a differential tax system in different states is surely turning to be a hindrance to faster development of this Industry.

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Lack of adequate infrastructure: Players are forced to set up their own infrastructure, as there are few independent logistics solution providers. Entrepreneurs to invest in infrastructure development for different stages of the supply chain are also limited. Dominance of the unorganized sector: The unorganized sector has dominance over the organized sector in India, especially because of the low investment needs. In India, organized retailing is only 2% of total retailing of worth US$ 180 billion. This is playing at multiple levels. For instance, the reason for low number of discount stores in India is an effect of the dominance of the unorganized sector. As a result of this small scale of operation of retailers, the manufacturers have high bargaining power in the pricing of products The lobbying by the unorganized sector is also the main reason for the Government of Indias restrictions on 100% FDI in retailing in the country. Low operational size: The number of retail outlets in India is more than the number of outlets in most of the other countries; small size retail outlets dominate the Indian scene. 96% of the outlets are lesser than 500 sq ft. The retail chains of India are also smaller than those in the developed countries. For instance, the superstore food chain, Food World is having only 52 outlets whereas Carrefour- Promodes has 8800 stores in 26 countries. The volume of sales in Indian retailing is very low, which is only $180 billion. Even the largest players have a turnover of only US $ 140 million, which is very small by the global standards. India with second largest population in the World and a fast growing economy has huge untapped potential of organized retailing, which is not given its due weightage by the government.

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Labour employment problems: Organized retailing is a 24 X 7 active business. However, this is much restricted currently in India because of the labour rules and regulation. The sector is unable to employ retail staff on contract basis. This makes it difficult to efficiently manage employee schedules especially for 365-day operations. The industry has to take special clearance for extended working hours and even seven days working from the Labour department. However, in the recent budget government has relaxed norms on employment of contract labour, which is expected to benefit the industry. Government Initiatives for Improvement of the Sector: Apart from allowing FDI into the industry, Government should consider providing incentives and amending labour laws etc. Shortage and high cost of real estate, tenancy legislation and high property tax etc. are other areas to be concentrated by the Government. Government should relax such laws and make available property at reasonable prices. Government should introduce a Single Window System at the local Government level to clear the multiple numbers of licenses and complex regulations. Government should also introduce uniform taxation all over the country to relax the laws that are restricting the inter-state flow of goods.

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4.7 Malls: The New Face of Retail Market


The latest trend in the corporate universe is of the emergence of the shopping malls. Shopping Malls are an emerging trend in the global arena. The first thing that comes in our mind about the shopping malls is that it is a big enclosed building housing a variety of shops or products. According to historical evidences shopping malls came into existence in the Middle Ages, though it was not called so. The concept of departmental stores came up in the 19th century with the Industrial Revolution. Consumers wanted a better shopping experience and this demand gave rise to the emergence of shopping malls in India. Originally the first of the shopping malls was opened in Paris. Then the trend followed in the other metros over the world, and there was a spree of shopping malls coming up at various places. In this age of mass production and mass consumption, the concept of shopping malls is most modern method of attracting consumers. The concept of shopping was altered completely with the emergence of these shopping malls. Shopping was no longer limited to a mere buying activity - it has become synonymous with splurging time and money. People simply go about roaming through the shopping mall in order to peep through the window of the shop and often ending up buying something they like. The consumers desire a combination of comfort and suitability which the shopping malls cater to, and so this format of shopping has become so popular all over the world, and especially so in India.

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The inclusion of amenities like restaurants, multiplexes, and car parks attract more and more crowds to shopping malls that are considered family hangout zones. The new shopping malls that have been expanding their footprint across Indian cities are well designed, built on international formats of retailing and integrated with entertainment and restaurants to provide a complete family experience. Over 300 malls are expected to be built over the next two years and most Indian cities with over a million populations will be exposed to this modern method of retailing. Shopping malls have existed in India since several decades but were designed and built to house several shops in a single facility. These malls also known as Shopping Arcades offered only rows of shops, most of which were small stores that promised bargains for their various wares. These Shopping Arcades tried to maximize on their store space and did not offer any areas for recreation and entertainment. The present day malls are a creation of the past few years post 2000. They are designed professionally using a lot of international experience and combine shopping with a lot of brand building, recreation, food and entertainment. Malls also have a large format store that serves as their anchor for shopping and a prominent restaurant that anchors the food needs of visitors. Most malls also feature a multiplex cinema that offers entertainment to the visitors of the mall. Finally the mall has large atria and open spaces to allow visitors and families to hang-out. The new malls are air-conditioned and have spacious areas and accesses which make them a true breath of fresh-air from the earlier arcades and shop line streets that used to be the available options for Indian customers.

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4.8 Advantages of Shopping Malls


Increase in the growth of the organized retail sector Monumental increment in economic growth Employment generation by the organized retail sector Good competition means better products & services.

Disadvantages of Shopping Malls


The companies with superior resources would muscle out the ones inferior to them. Monopolization of the organized retail sector In India, the emergence of shopping malls has mostly altered the lifestyle of the consumers. With the growth in income, changing attitudes, and also the demographic patterns favor the emergence of shopping malls.

The Trends to follow in the Future


The shopping malls favor a growth in the Indian organized retail sector by 10% within 2010 There would be different formats of shopping malls depending on the region.

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CHAPTER 5: The Traditional Retail vs. the Modern Retail


In the last few years, as modern retail concepts begin to make an appearance across urban India, the debate on their impact on the traditional Indian retail businesses including the so-described "mom & pop" stores and the neighborhood kirana stores gets shriller. Those against opening the Indian market to foreign direct investment in the retail sector use a barrage of arguments but the most superficially potent one is the likely negative impact on the livelihood of the millions, currently eking a living from their small retail businesses. Even the most ardent supporters of liberalization in this sector become a bit uneasy when faced with the prospect of their causing misery to their fellow citizens. Is this really the way it will pan out in the Indian context when it comes to the fight for the share of customer spending between the presumably powerful modern retailers and the helpless, small traditional ones? As developments in modern retail begin to live up to the hype, a number of conflicts have started to emerge. There are four primary protagonists here. This list includes the small traders and wholesalers; the medium and large Indian business groups now entering retail with a big bang; the major international retailers already in the country or have announced their intention to be in India shortly notwithstanding the restrictions on FDI in this sector; and lastly, the medium and large FMCG and other consumer products suppliers whose primary channel of distribution is the millions of small, independent retail outlets.

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The prime conflict is between the large and the small retail. It has manifested through the vandalism of Reliance Fresh stores in Ranchi, supposedly by small local fruit and vegetable vendors and local middlemen. While India has been seeing a rapid emergence of modern retail outlets in urban areas, with players like Foodworld, Subhiksha, Big Bazaar/Food Bazaar, Spinach, Spencer's Hypermarkets, Shopper's Stop, and an isolated Shoprite and a Hypercity and some others, for some reason the emergence of Reliance on the retail scene seems to have acted as a catalyst for the emergence of this conflict. Big supermarkets on residential high streets have replaced the local kirana stores. With everything from groceries and vegetables to footwear, clothes, cosmetics, furnishings and electrical items roof, a growing middle class with higher disposable incomes is heading for the malls in droves. According to estimates, the number of malls in India is expected to increase from 59 to a staggering 358. Spread over 87 million sq. ft, these malls are expected to be the next big money spinners by 2010. E-tailing or people buying products on the net is "clearly another trend to watch out for in the future." Of its total sales, global fashion house GAP sells products worth a shade less than $1 billion on the net alone. "E-tailing is at an inflation point in the country. In the US, the millions of Mom & Pop stores died slowly and painfully when organised retailing took off. The local stores could not withstand the might of chain stores. In India a similar process has been experienced. As the retail segment is getting more organised, the neighborhood kirana store will become an item of historical interest within a generation.ir small
retail businesses.

Even the most ardent supporters of liberalization in this sector become a bit uneasy when faced with the prospect of their causing misery to their fellow citizens.

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Is this "T55.15.1 Supermarkets vs. Indian Mom-and-Pop Shops Reliance Industries, an oil, petrochemicals and textiles group, is India's biggest private sector company. On 30th January it opened its first supermarket in Noida, a growing city in the suburbs of Delhi, after having opened eight shops in and around Delhi and almost forty in Southern India in three months. These new, medium-sized shops herald the arrival of the supermarket era in India. This is somewhat of a revolution: India has over a billion people but no organised retailing network. For centuries, Indians have bought groceries, stationery, clothing, appliances, and medicine from small neighbourhood stores, where the quality and availability of goods is unpredictable. Today, Indians still buy 97 percent of their goods from those 12 million mom-and-pop shops.

These small family-owned shops will probably suffer from this harsh competition. Reliance Fresh outlets, with air-conditioned aisles, shopping carts and automatic doors offer extremely competitive prices. Small businessmen obviously feel threatened, but the head of Reliance Retail claimed that the new shops would create half a million jobs in three years. The CEO, Mr. Sanjeev Asthana, commented that "The market is big enough for the organised players and the estimated 12 million traditional stores to co-exist. Our venture will not affect the common kirana shops or the farmers." Reliance intends to open 100 stores in Delhi alone within the next two months. It also plans to invest 5.7 billion dollars in 5,000 shops nationwide. Their claim that the traditional, owner-manned lowcost general stores will not be hurt clearly seems a trifle farfetched.

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The threat to the kirana shops is particularly evident when one considers that the pioneering example of Reliance Fresh could open the way for foreign companies to invest in India's retail industry. They had no right to do so until last year when new rules were introduced. So far, several foreign firms have taken 51% equity stakes in shops that sell only their own brands. Foreign firms are also allowed to establish wholesale operations, which has led to several joint ventures in which Indian retailers will be supplied exclusively by foreign wholesalers companies to invest in India's retail industry. They had no right to do so until last year when new rules were introduced. So far, several foreign firms have taken 51% equity stakes in shops that sell only their own brands. Foreign firms are also allowed to establish wholesale operations, which has led to several joint ventures in which Indian retailers will be supplied exclusively by foreign wholesalers.

Naturally, the prospects are more than tempting: after 15 years of decent economic growth, India's masses are ready to spend. India ranks as one of the ten largest emerging markets in the world; its middle class has been rising since the liberalization of the economy in the 1980's and it has acquired a substantial purchasing power. This is just the very beginning for super and hypermarkets in India. Momand-pop-shops beware!

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CHAPTER 6 : SURVEY
A customer normally prefers malls, supermarkets, department stores as against kirana stores for variety of reasons. To get a clear idea on why do customers favor shopping in supermarkets in opposition to Kiranas, a survey has been conducted with this objective. By this survey, it became easy to compare Traditional Retail vs. Modern Retail with the view of customers. A questionnaire was prepared and reviews of consumers have been noted down and it is presented in the form of following analysis:

1. Which is the most appropriate time when you would like to go out for shopping?

No of Option while going to office while returning from office while dropping kids to home while dropping kids to school on Sundays/ holidays consumers 8 15 24 10 43

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45 40 35 30 25 20 15 10 5 0 No of consumers

while going to office while returning from office while dropping kids to home while dropping kids to school on Sundays/ holidays

Observation
Most of them didnt visited super markets while going to office or returning from office. Very few consumers have opted for this option. But most of them visited on Sundays and holidays with their friends family or many of them visited alone also. The strongest point to note here is that a major chunk of our sample population never visits supermarkets while going to or returning from office nor do they visit while leaving kids to school or taking them back from school. The major reason behind this is that these activities generally take place early morning or during afternoon which is the time not preferred by consumer for shopping.

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2. On the basis of following parameters, indicate your preference to visit supermarket?

Factor Range of products Ease of purchase Store timings Behavior of sales personnel Discounts

No of consumers 28 18 15

18 21

30 25 20

Range of products Ease of purchase Store timings Behavior of sales personnel Discounts

15
10

5
0 No of consumers

55

Observation
More number of consumer visit super market because of range of product. All other factor is equal. By observing, it can be seen that consumer go for super market because of convenience and also discounts offered by super market.

3. What would be the average timings spend by you in the supermarkets?


60 50 40 30 20 10 0 No of consumers
Less than 1 hr 1 hr to 2 hr

2 hr to 3 hr
More than 3 hr

Average timing Less than 1 hr 1 hr to 2 hr 2 hr to 3 hr More than 3 hr

No of consumers 28 56 9 7

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Observation
From the above, it can be seen that majority people spent 1 hr to 2 hr in the supermarkets. This is basically because there are more range of product and selection of product become time consuming. There are also consumers who spend less than 1 hr because of busy time schedule of their daily work.

4. What is the average amount of money spent by you on purchase while shopping at supermarkets?
50
40 30 20 10 0 No of consumer
0 to 500 500 to 1000 1000 to 2000 More than 2000

Average amount (in Rs) 0 to 500 500 to 1000 1000 to 2000 More than 2000

No of consumer 18 47 19 16

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Observation
Analyzing the amount spent by the people in supermarkets reveals that most of the people spent on average between 500 1000. This is because in India majority of the people fall in the category of middle class in terms of income.

5. According to you, which retailing format provides best services in terms of discounts, offers or free home delivery?

Retailers Supermarkets Kirana Stores Others

No of consumers 76 18 6

80 70 60 50
Supermarkets Kirana Stores Others

40
30 20 10 0 No of consumers

58

Observation
Comparing the overall features of supermarkets and Kirana stores in terms of discounts, free home delivery, offers etc, people prefer supermarkets over Kirana stores by a large margin. The reason being, that kirana stores have a limited turn over and generally cannot indulge into providing offers and hence looses out on the bargain.

6. While shopping which type of product will be mainly preferred by you?

Branded Unbranded

68 32

59

70 60 50 40 30 20 10 0
Branded Unbranded

With Family With Friends With Spouse Alone

55 6 27 12

Observation
People prefer more branded than unbranded products. Branded products would include choice of candies, chocolates, noodles etc. people visit supermarket especially for branded products. Exotic vegetables and non leafy vegetables are least preferred in the branded category. So, unbranded products may include vegetables, non leafy vegetables, pulses, fruits etc.

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7. Who accompanies you maximum times while visiting to supermarket?

60 50 40 30 20 10
With Family With Friends With Spouse Alone

Observation
This speaks about consumer go to the supermarket more with their family. People mostly visit with their families on Sunday; it can be seen that on weekday in the malls. There are very few people who visit alone in the super market. People also like to go with their spouse because they can spend time with each other from their busy schedule.

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8. Mention out of the supermarkets which are given below, how many you have visited? Supermarkets Food Bazaar D Mart Sahakari Bhandar Food World Foodland Apna Bazaar Asmita Bazaar No of consumers 32 8 11 7 14 19 9

35 30 25 20
Food Bazaar D Mart Sahakari Bhandar Food World Foodland Apna Bazaar Asmita Bazaar

15 10
5 0

No of consumers

Observation
Basically people look for good brand name so this is the reason why majority people visit food bazaar and also for the day to day need. After the food bazaar consumer more like to visit apnea bazaar. Very few people are like to

visit in other super market because of less awareness and less number of retails shop 62

Chapter 7 : Kirana Store Vs. Supermarkets

Benefit to Customers

Kirana Store (Small Retail Store)

Super Market (Large Retail Store)

Personal service

Offer a friendly personal service. Service will be efficient Customers may be known to the but impersonal. Selfretailer, therefore allows small service, but there may be

credit. Self service, few queues. queues. Convenience The shop is located around the locality and therefore offers a Are not convenient for a few items: travelling and

convenient option - especially if queuing mean that is only few items are required in a hurry. worthwhile if a fair number of items are required. It has easy parking and access. Hours Is open for long hours and probably every day. May open seven days a week. But does not have long hour facilities. Payment methods Only cash; no other system in use at present. Requires immediate payment, but will accept cash, cheque or credit card. Product range Tries to stock a wide range of Due to high turnover it

items, but has restricted choice. will have a wide range of Essential items might be over by stock, including own the evening. Quality Branded and unbranded goods. May suffer from being in the brands. Good quality - quick turnover ensures

shop a long time. However, this freshness. aspect depends from store to store. 63

Price

Lower prices. However, low turnover, limited funds and restricted storage space means that bulk-buying and special

Bulk buying means that cost of stock is lower, and high sales turnover means that satisfactory

discounts are not available. Sells profits can be made with at manufacturers recommended low mark-up. price.

7.1 Who will Win the Kirana vs. Supermarket Battle?

A new study by Technopak Advisors suggests that kiranas will not be beaten down by fancy supermarkets just yet. As Indians are becoming addicted to shopping and the retail environment, both traditional and modern outlets will benefit and are expected to grow by 42% in the next five years. Modern retail outlets will account for 15% of that growth and grow by 75% by 2011.

While local stores located close to supermarkets and malls will be more affected than others, but there are several options for them to convert their stores into before going out of business. Chairman of KSA Technopak, Arvind Singhal says that "Telecom retailing outlets can be put in mom and pop stores and some current retailers could become food service retailers and others could become cyber cafe owners."

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Chapter 8 : Questionnaire
Name: _____________________________________ Occupation: ___________________ Age: _________
1. Which is the most appropriate time when you would like to go out for shopping? While going to office While returning from office While dropping kids to home While dropping kids to school On Sunday/ holidays

2. On the basis of following parameters, indicate your preference to visit supermarket? Range of products Ease of purchase Store timings Behaviors of sales personnel Discounts

3. What would be the average timings spend by you in the supermarkets? Less than 1 hr 1 hr to 2 hr 2 hr to 3 hr More than 3 hr

4. What is the average amount of money spent by you on purchase while shopping at supermarkets? (In Rs.) 0 to 500 500 to 1000 1000 to 2000 More than 2000 65

5. According to you, which retailing format provides best services in terms of discounts, offers or free home delivery? Super markets Kirana stores others

6. While shopping which type of product will be mainly preferred by you? Branded Unbranded

7. Who accompanies you maximum times while visiting to supermarket? With family With friends With spouse Alone

8. Mention out of the supermarkets which are given below, how many you have visited? Food bazaar D mart Sahakari bhandar Food world Food land Apna bazaar Asmita bazaar

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CHAPTER 9 : Annexure

Questionnaire for interview with local Kirana Shop: 1. What kinds of products are sold at your shop? 2. What type of customers walk-in at your stores? Do you have any strategies to attract new customers? 3. How the stocking of goods are arranged? Do you consider customers preferences while stoking new goods? How the stock turnover takes place? 4. Trace out the reasons as to why customers prefer your shop in opposition to other local stores, supermarkets and malls? 5. Do you provide free home delivery to your customers? 6. For how long the store is open? What in case of holidays? 7. Do you provide credit period to your regular customers? If yes, then can you explain how the credit period is decided? 8. According to your opinion, does the local Kirana Stores face stiff competition from modern retailing formats like supermarkets, malls etc? 9. What are your future plans?

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Chapter 10 : Conclusion
Kiranas and organised retail will co-exist. After analyzing the retail Industry, it can conclude that the organized retail has opportunities to grow in India in spite of the kirana stores because these kirana shops will also get benefit of the growing economy. The argument that the kirana shops will be affected by these malls is only myth. The organized retail is attracting more and more Indian as well as foreign players of the Retail Industry.

The Boundaries between the offerings by malls and one-shop vendors are gradually breaking. Single shop-owners are becoming increasingly aware of customers needs, hygiene factors and varied requirements. At the same time, Retail Chains are opening stores in residential areas and focusing on customer relationship management, with a hub and spoke model where one large store supports various smaller stores in the nearby residential areas. However, the key to success for Organised Retailers will always be their large size, variety and ambience on offer, and thus, the scale.

As the study shows that a major portion of the Organized Retail will be developed in small cities and towns, this opportunity has not been enchased by Kirana stores and they are unable to meet the requirements of the customers. Therefore both the Malls and Kirana stores can play simultaneously in India so no need get afraid due to the malls. Here even I would like to add my view point from whatever I have learnt from the experience gained while making this project. Most of the kirana stores have survived. But growth has been very slow for them and no new kirana stores are opening up in neighborhoods where Big Retailers have opened shop. And secondly, Big Retail will have to wait a long time before they can invade small towns in India.

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Towns with less than a million-half a million population will have to wait. And no big retailers will venture there until theyve gained some useful insights from the big cities. And the countryside will be largely left untouched which will be served by local Kirana Stores. Big Retail Chains wont kill small shops

Small is beautiful. Malls are all very good for one-day shopping, but the Kirana store is for the odd quantities in life. Like when you need one-fourth of a packet of rice.

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Chapter 11 : Bibliography

Books: Retailing K. Suresh Retail Management Gibson C. Vedamani Marketing Management Philip Kotler Retail Marketing Management David Gilbert Newspapers: The Economic Times DNA Websites: www.hindubusinessline.com www.atkearney.com www.businessworldindia.com www.wikipedia.com www.economictimes.com www.dnaindia.com www.retailangle.com www.ibms.com

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